Option Investor

Daily Newsletter, Sunday, 10/31/1999

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The Option Investor Newsletter            Sunday  10-31-99  1 of 5
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 10-29         WE 10-22         WE 10-15         WE 10-8
DOW     10729.86 +259.61 10470.25 +450.54 10019.71 -630.05 +376.76 
Nasdaq   2966.43 +149.88  2816.52 + 84.69  2731.83 -154.74 +149.72 
S&P-100   717.03 + 31.40   685.63 + 33.88   651.75 - 46.70 + 28.14  
S&P-500  1362.93 + 61.28  1301.65 + 88.12  1247.41 - 88.61 + 53.21 
RUT       428.64 + 10.22   418.69 +  3.99   414.70 - 13.01 +  4.18 
TRAN     3058.98 +195.83  2863.15 +  7.67  2855.58 -226.13 +213.37  
VIX        22.56 -  0.33    22.89 -  8.59    31.48 + 10.28 -  5.26 
Put/Call             .51      .55             1.05             .67             

October Ends on a High Note

Wow! On the 70th anniversary of the 1929 stock market crash in 
which the Dow dropped 30 points, which was 12% at the time, 
stocks made a major move upward. For the second consecutive day 
stocks soared higher on very heavy volume, signaling a big change 
in market sentiment. Even a week ago many were saying the market 
was headed lower and interest rates were going to hit at least 
6.5%. Both of those things may still happen but right now it 
looks like a renewed bull market for both stocks and bonds. 

Alan Greenspan, who in the past seems to have tried to keep 
stocks from getting too high, made comments Thursday night that 
helped fuel the huge gains seen on Friday. He made some comments 
about the changing economy that to many seemed fairly dovish and 
made some traders hopeful that the Fed will leave rates alone in 
November. Currently most expect a rate hike. These comments came 
day after the GDP and ECI reports indicated very high 
productivity with relatively low price pressures and ignited a 
strong rally. Greenspan virtually guaranteed a continuation of 
the rally on Friday.  It did not hurt that new home sales dropped 
over 12% to a 2-year low, indicating a cooling economy, which 
the Fed wants to see. 

Like yesterday the rally started right out of the gate, with the 
Dow rising about 130 points in the first half-hour of trading. It 
held on to most of those gains until some late afternoon profit 
taking brought the indexes down a little, but the Dow still 
finished with another triple digit gain.  The magnitude of the 
rally came as a surprise to most everyone who follows the market. 
The NASDAQ easily pushed to a new record high and the Dow is up 
over 7% since October 18 when the Dow dropped below 10,000 for 
the first time since April.

Closing figures show the Dow at 10729.86, finishing up 107.33 
points, or 1.01%. Friday was the last trading day for the Dow in 
which Sears, Goodyear Tire, Chevron, and Union Carbide will hold 
it back. On Monday Intel, Microsoft, Home Depot, and SBC 
Communications take their places. By booting some of the laggards 
(dogs of the Dow) and adding these high growth, high performance 
type stocks the Dow will be more competitive with the NASDAQ, 
which has outperformed the Dow lately. 

Speaking of the NASDAQ outperforming the Dow, the NASDAQ tripled 
the Dow's percentage gain, rising 3.17%, or 91.21 points, to close 
at an all-time closing high of 2966.43. It was the sixth highest 
point gain ever for the NASDAQ, and now it looks like it won't 
take long for the NASDAQ to hit 3,000, its next milestone. The 
S&P 500 also had a strong day pushing its way up to 1,362.93, 
up 20.49, or 1.53%. The follwing chart shows that for the past 
six months, the NASDAQ has risen 15% while the Dow is at break-


The main weakness the market had shown recently, both in rallies 
and sell-offs, was poor market internals. If it wasn't weak volume 
it was an awful advance decline line. For the past two days the 
internals could not have looked better. Friday's volume was huge, 
with over 1.09 billion shares trading hands on the NYSE, in spite 
of some traders taking some time off to go outside and watch the 
Yankee parade. The NASDAQ had an even better volume day, trading 
1.43 billion shares making it the second highest volume day ever 
for the OTC market. Advancing stocks outnumbered decliners 21 to 9 
on the NYSE and 23 to 17 on the NASDAQ. In what might be the 
telling sign of the strength of the rally was the new high / new 
low line. On the NYSE new highs beat new lows 120 to 90. It was 
the first time new highs won out since July. On the NASDAQ, which 
has held up better, new high more than doubled new lows 205 to 99. 
These figures show that most stocks are off of their lows and 
pushing higher. 

Like Thursday, it is difficult to find entire sectors that showed 
any weakness today. The only exception was the financial services 
sector, which had been soaring and suffered from profit taking 
and the feeling that the rally in financial stocks may be 
overdone. The PHLX/KBW bank index fell 0.5% and the AMEX Broker/
Dealer index declined 1.2%. The financial sector, however, is not 
a weak sector and will benefit if interest rates continue to 
decline. Most of the big banks like Citigroup, American Express, 
and JP Morgan are just slightly off their 52-week highs.

The strongest sectors were in technology fields, which again 
seem to have assumed the leadership position in the market. 
Semiconductors in particular had a good day, with the PHLX 
Semiconductor index rising an attention-grabbing 6.3%, led by 
Intel and Applied Materials. Along with chips, software makers 
rose 4.9% and the hardware index gained 3.9%. One sector that had 
a very sharp rise was the paper products group. Riding on some 
analysts' bullish comments about Boise Cascade, the PHLX Forest 
and Paper Products index gained an amazing 7.8% in one day, 
shaming the Internet sector, which rose only 4.3%. 

It was a good day to take a tech company public, which is just 
what Akamai Technologies did. Shares of Akamai, a maker of 
computer software designed to speed up Web page delivery, soared 
over 450% from its initial offering price of 26. It finished the 
day at $145.20. They are already in a position to declare a stock 

At this point it is easier for technicians to call a market 
bottom. With the NASDAQ at all-time highs that sounds ridiculous 
but a lot of traders were running scared only a few days ago. 
Bond yields also may have bottomed, with the 30-year Treasury 
bond finishing the day with a yield of 6.15%. The yield has 
dropped a quarter percent since Monday and sentiment has improved 
tremendously. A week ago it was hard to find an analyst who did 
not see at least a yield of 6.5%. 


The huge volume and strong price moves would indicate that there 
is some pretty strong support now, and while support does not 
necessarily mean the market will shoot through the ceiling, the 
downside seems more limited than it did just a week ago. It should 
also be noted, however, that on Thursday and Friday the markets 
gapped up on the major indexes, and some technicians would way 
that those gaps have to be filled before going a whole lot higher.

It should be noted that nothing fundamental has changed - only 
sentiment and expectations. Earnings have been very strong but 
they were strong during the market decline. The easing of 
interest rates has helped but a quarter point move one way or 
another does not make a huge difference to stock prices. 
Fundamentals drive the market long term, but investor sentiment 
and forward-looking expectations drive it in the short term. If 
investors expect good things to happen, they are willing to put 
their money in the market. Thursday and Friday a lot of money 
that had been on the sideline poured into stocks, so obviously 
expectations are getting higher. As long as those expectations 
are met the market should be in good shape going into next year.

An old market axiom states that the market drops twice as fast as 
it rises. That was definitely not the case with this rally. Some 
profit taking early in the week would be expected so Monday and 
Tuesday there will likely be some weakness, but barring really 
bad news it would be just a few percentage points. It is important 
to note that the Nasdaq closed just 34 points from 3000 and 
investors may be holding off on selling as they figure traders 
will take the stocks to that level.  Everyone likes to see a 
milestone hit and it may come early on Monday.  October has 
historically been a month for market bottoms and judging by the 
last two days of the month that could very well be the case this 
year as well. For all of us involved in the stock market, 
Halloween will not be as scary as it could have been this year. 
So unless you have short positions causing you horror, enjoy 
your Halloween weekend.

Chad Poulson
Research Analyst


There is no Jim's Plays secti
on this weekend because Jim is in 
attendance of the Money Show in San Francisco.. 


The Federal Reserve's Numbers Game

By S.P. Brown

Market watchers are speculating over what the Federal Reserve
will do November 16 at the next Federal Open Market Committee
(FOMC) meeting.  In a speech given to some corporate bigwigs on
Thursday, Fed Chairman Alan Greenspan may have done a little
foreshadowing by expressing his concerns over what could happen
to inflation if the recent upswing in productivity should
suddenly falter and tight labor markets begin to push wage
demands higher.



Sunday, October 31, 1999

Caught off Guard!

Friday capped off an extremely positive week for the bulls, and 
ended October in phenomenal fashion. The identical signs from this 
current market are exactly like the ones we witnessed last October 
of 1998. Investors Intelligence was extremely bearish, put/call 
ratios were bearish, market technicals looked poor, cash reserves 
were at their highs; corporate earnings were good yet were not 
rewarded, etc. The only difference, that can be alleviated very 
soon, is the fear of multiple interest rate hikes equivalent to 
1994. These fears are starting to subside, especially after these 
most recent economic indicators, and the bears are paying the 

Below, we have a chart of the Nasdaq composite, and have 
highlighted the 4-month run made after October. With the most 
recent Investors Intelligence survey in (41.1% bullish, 38.4% 
bearish), the undertone is still heavily bearish. Granted, we are 
sure the statistics next week will reflect a more positive note, 
but they are still a very-long way from being positive, which 
correlates into a major market run!


However, looking at the week ahead, we may have run up a little 
too much, too quick; and may be due for some profit taking. But 
then again, if you are looking out a little longer than 48 hours, 
which we hope you are, then look again at the chart of the Nasdaq 
above and you can easily have visions of Nasdaq 3500!

One thing that we always watch is the volatility index. We have 
been consistent buyers at 32-33, and sellers at 20-22. We now 
stand at 22.32 which would indicate lightening up some positions 
for our clients, however, never take-for-granted the power of a 
bull run. The VIX has run down to 17 before, and can do it again 
very easily! We just want you to be prepared either way.

Finally, we have very few major high-technology companies who have 
yet to release their numbers. We do have Dell, Cisco Systems, and 
Qualcomm. We will highlight Dell and Cisco next week, and below is 
the Pinnacle Index for Qualcomm.

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

Qualcomm  223    QCOM      9.72     +.87        +.97      11/2

As a side note, the short interest for QCOM is 14.2 million shares 
(based upon 10/15), and the put/call ratio is also .75. The amount 
of short interest has decreased several million shares over the 
last couple of months (highly bullish sentiment).

However, based upon the Pinnacle Index for QCOM, and the whisper 
number that is a dime higher, we would be very hesitant to start 
any new bullish positions before numbers. We would not be 
surprised to see a nice sell off after earnings, however; after 
Thursday & Friday, the shorts are very hesitant to hold any 
outstanding positions, and the bulls are starting to use their 
cash & buying power. Either way, you will not get caught off guard.


Bears have quick triggers:
After being beaten up for many years, bears are quick to 
run & hide, and will cover short positions in a flash.

The results are in, with exception from a few stragglers, and the 
quarter ended up very solid.

Investor Intelligence:  
As a contrarian indicator, we may have witnessed the bottom in 
pessimism, and should this prove right, this market has a lot more 
upside in the months ahead.

Mixed Signs: 

Volatility Index:
The VIX continues to prove that 32-33 is a great buying 
opportunity, and also shows that the low 20's have been a good 
exit point. 

Interest Rates:
The yield on the 30-yr Treasury is now off the 52 week high, but is 
still in the danger territory.

Advance/Decline Line:
The A/D line is showing signs of basing out.


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.

OTM Call Analysis

As we move closer to the November expiration cycle, Pinnacle is 
tracking the level of call buying (OTM) between 680-780 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%
Friday, October 29        75,022       +92.0%

The Power of Sentiment Analysis

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

OEX Pinnacle Index              Friday
Benchmark                       (10/29)

Overhead Resistance (720-740)    14.60

OEX Close                       717.03

Underlying Support (700-715)      0.21

Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Based on 10/29. Option speculators have really gotten caught off-
guard by this latest up-move as evidenced by the lack of open 
interest above 700. But based on the data, resistance is building 
at 720+, and support is light 700-715.

Put/Call Ratio                  Friday
Strike/Contracts                (10/29)

CBOE Total P/C Ratio             .69    
CBOE Equity P/C Ratio            .42            
OEX P/C Ratio                   1.51

Peak Open Interest (OEX)  Friday
Strike/Contracts          (10/29)

Puts                    670 / 11,886
Calls                   690 /  7,626
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 29, 1999                        22.32 

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. 13, 1999           Bottom?           39.2        37.5
Oct. 27, 1999                             41.1        38.4


As of Market Close - Friday, October 29, 1999 

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

DOW Industrials   10,750  11,320  10,730    BEARISH   9.23
SPX S&P 500        1,350   1,420   1,363    Neutral  10.29  *
OEX S&P 100          690     725     717    Neutral  10.28
RUT Russell 2000     440     465     429    BEARISH   9.14
NDX NASD 100       2,320   2,500   2,637    BULLISH  10.28
MSH High Tech      1,120   1,250   1,310    BULLISH  10.28

XCI Hardware       1,000   1,090   1,060    Neutral  10.15
CWX Software         750     800     970    BULLISH   9.03
SOX Semiconductor    450     525     556    BULLISH  10.29  *
NWX Networking       525     615     641    BULLISH  10.28
INX Internet         450     525     499    Neutral  10.15

BIX Banking          660     690     674    Neutral  10.28
XBD Brokerage        410     440     423    Neutral  10.28
IUX Insurance        645     660     618    BEARISH   7.23

RLX Retail           915     960     892    BEARISH   7.23
DRG Drug             365     390     389    Neutral  10.19
HCX Healthcare       720     785     767    Neutral  10.19
XAL Airline          180     190     152    BEARISH   5.21
OIX Oil & Gas        280     315     295    Neutral  10.21

Posture Alert    
The bears continued to run and hide, as Friday ended an extremely 
volatile October. A combination of positive comments from 
Greenspan and Intel helped all sectors across the board. Brokerage 
and Banking were down very slightly, after having huge gains 
Thursday, while Semi's led the way today with a 6.34% gain. Other 
leaders Friday include Software (+4.88%), Hardware (+4.40%), and 
the NDX. With Friday's action, we have upped Semiconductors to 
Bullish from Neutral, and the S&P 500 to Neutral from Bearish.

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



For the week of November 1, 1999


Construction Spending    Sep    Forecast:  0.4%  Previous: -0.4%
NAPM Index	             Oct    Forecast: 55.0%  Previous: 57.8%


Personal Income          Sep    Forecast: 0.5%  Previous:  0.5%
Mitsubishi Index         10/30  Forecast: --    Previous: -0.8%
LJR Redbook              10/30  Forecast: --    Previous:   0.2%


Factory Orders           Sep    Forecast: -0.1%  Previous:   1.3%
Leading indicators       Sep    Forecast: Unch   Previous:  -0.1%
NAPM Services            Oct    Forecast: --     Previous:  61.0%


Jobless Claims           10/30  Forecast: --     Previous:  278K
M2                       10/25  Forecast: --     Previous:  7.1B


Average Workweek         Oct    Forecast: 34.6  Previous: 34.4
Hourly Earnings          Oct    Forecast: 0.2%  Previous:  0.5%
NonFarm Payrolls         Oct    Forecast: 320K  Previous:   -8K
Unemployment Rate        Oct    Forecast: 4.2%  Previous:  4.2%
Consumer Credit          Sep    Forecast$8.5B   Previous  10.8B


Follow the Money

At the beginning of the month, I wrote that by Nov 1, we would 
know the perfect plan, but that it would be too late to execute 
it. Now, of course, we can clearly see the perfect plan for 
October. Play calls in the first week (unless you wanted to day 
trade the Oct 5 Fed announcement). Play puts in the second week. 
Sit out the third week. Wait until the last hour spike on 
Wednesday of the fourth week to enter call positions. Thankfully, 
the month is over, and we are within 2 weeks of the mid November 
Fed decision, which should be a positive for the market 
regardless of the outcome. Perhaps the most telling statistic for 
me is the amount of new money flowing into mutual funds. Second 
is the volume on Thursday & Friday. My net assessement is that 
buying will continue to be strong, though there will be normal 
cyclical dips which provide good entry points into rallies.

My comparative advantage in this environment is discipline & 
patience. Easier said than done, though. My plan for the upcoming 
week was to make 3 trades on 3 days. I am adjusting that because 
I think we are at the start of a pretty major move up as 
investors, following last year's pattern, put money back to work 
with October behind us. I am sticking with my plan of only 
initiating 3 new positions, but these are going to be positions 
which I intend to hold for a few weeks, with targets focused on 
splits (eg, SEBL, AOL), or specific profit targets. With the VIX 
down around 21 - 22 again, I think we are due for normal technical 
pullbacks. I want to be very disciplined about watching the market 
through qcharts at 9:30 - 10:00 am, EST; 1 - 2pm; and 2:45 - 4:15. 
I will resist watching the market longer, and I am ignoring CNBC. 
At those junctures, I will target shoot entries into call plays 
from the newsletter. I want at least 1, maybe 2, December calls, 
and a November play too. I plan on commitming about 40% of my 
trading capital to these plays.

Last Wednesday, I caught the last hour spike, though I missed the 
first 30 minutes of it. Fortunately, I exited a OEX put position, 
and made a small profit on an OEX call position. Not knowing why 
the market was spiking, I closed the OEX Nov 680 Call position at 
18.25, and it subsequently went to 45 by Friday. Ouch. I was 
disciplined on Thursday & Friday in not jumping in, but, as I am 
sure you can understand, I was angry that I didn't just jump in. 
The newsletter had awesome picks that I was monitoring on my play 
list -- SEBL, VSTR & others. I had planned on just 3 trading days 
last week, and, unfortunately, "used them up" by Wednesday. I did 
target shoot SEBL and AOL calls for the last half of the day 
Friday. No fills, as the contracts continued to move up. So, I 
went ahead and moved my limit up on the AOL calls, and got filled, 
but I left the SEBL's for another day. With AOL's split set for 
Nov 22, and Holiday etailing upon us (not to mention a broadband 
strategy hovering in the wings), I expect my AOL Dec calls to move 
ahead of the market for the next few weeks. On the bright side, 
one of my longer term plays -- SCH Mar 35 Calls -- had a terrific 
few weeks, going from my entry price of 4.5 to 8 by the close 
Friday. The play is in the money, and I have 5 months to let it 
run. I have another newsletter writer, S.P. Brown, to thank for 
pointing me towards that play. As interest rate fears subside, Y2K 
becomes a non-event, and money flows back into the market, I 
expect SCH to benefit from increased trading activity, and to 
distinguish itself from online brokers which do not have the same 
amount of assets under management as Charles Schwab.

Janar Wasito


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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              10-31-99
Sunday                        2 of 5


Sunday, October 31, 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.


We had a very good meeting last Monday at the Sandy Springs 
Library in which we had a presentation by Ed Hecht on Long Options 
versus Covered Calls. It was a very informative meeting that 
covered Leaps (also recommended the book Leaps by Harrison Roth) 
by doing bull call spreads and bull puts spreads. He primarily 
sells a call, buys a put. More on these as we have a member who 
is going to the "Money Show" in California and I have requested 
examples that the newsletter and editors are going to present at 
the Money Show.

First off, we are only going to have one meeting a month from now 
on. It will be the Monday night after the Options expire each 
month (3rd Friday). The next meeting will be November 22nd at the 
Sandy Springs Library at 6:00 PM. 

My sons and I are studying Rolling Stocks that we will add to our 
group come January. 

Happy Haunting (it's almost Halloween)!
Your Covered Call Buddy,
Tom - (removed)


Daily Results

Index      Last   Week
Dow     10729.86 259.61
Nasdaq   2966.43 149.88
$OEX      717.03 146.58
$SPX     1362.93  61.28
$RUT      428.64  10.22
$TRAN    3058.98 195.83
$VIX       22.56  -1.29


EMLX      155.94  16.69  It just keeps going and going and...
VRTS      107.88  13.69  +18.06 from our suggested re-entry point
SEBL      109.81  13.31  Good earnings and a 2:1 stock split
KIDE       73.13  13.13  Dropped, recent decline means bed time
VSTR       98.75   9.88  Rumors of a buyout for VoiceStream
IMNX       63.00   9.06  New, investors reward stock for earnings
AOL       129.38   9.00  New, they announced a stock split!
CMVT      113.50   8.69  The stock was added to the S&P 500!
ADIC       37.25   7.00  New, positive news makes for a breakout
QCOM      222.75   7.00  Dropped, earnings time is here again
LVLT       68.38   6.00  It gets positive comments from analysts
GMST       86.88   5.00  A new 52-week high and earnings run
RATL       42.75   4.75  New, e-development strategy lifts stock
SYMC       47.75   4.44  This momentum play is picking up steam
PCS        82.94   4.06  A leader in its sector put it at the top
DELL       40.13   0.25  It's on a springboard ready to fly
WMT        56.31  -0.75  Pullbacks provide solid points of entry


VISX       62.56 -10.56  New, competition is hurting its eyes
BBY        55.75  -3.56  Moneystream remains weak for wounded stock
GT         41.31  -2.38  The stocks being removed from the DJIA
INKT      101.44  -1.56  Downgrades and wider losses are expected
PBI        45.56  -0.94  Analysts are concerned on future profits
LTD        41.00  -0.19  The stock is up in a cloud of fluff
ALD        56.94   1.31  It found support, but now poised to fall
LTR        70.88   2.00  Dropped, lawsuit is favorable 



AOL  - America Online
ADIC - Advanced Digital Information 
IMNX - Immunex Corp.
RATL - Rational Software Corporation


VISX - Visx 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.


QCOM $222.75 (+7.00) QCOM was a pure and simple momentum play 
driven into an earnings' run.  The profits can be measured on a 
grand scale.  Since it's inception on September 23rd QCOM has 
made incredible advances topping a best profit of $39.75, or 
+21.3%!  We're exiting the play this weekend ahead of scheduled 
earnings on Tuesday, November 2nd after the bell.  We rarely 
hold over any stock's announcement due to the high risk of a 
decline.  There's still a bit to chew on though.  Recall that at 
present there aren't enough shares authorized for another split 
this year; however QCOM has been trading way above historical 
split-levels ($160) for quite a while now.  It's possible the 
company could announce a stock split during its earnings' 
report.  Keep your fingers crossed!  We'd love to pick it up 
again on a split run.

KIDE $73.13 (+13.13) Well, at last it is time to put KIDE to 
bed.  It is possible that KIDE is going to make a bounce off 
of the 10-dma at $68.53 and make an earnings run, but we feel 
that at this point the risk is too great.  We are grateful for 
the fantastic run that KIDE has provided and do not want to 
push our luck.  We were looking for KIDE to close right around 
at $75, where it had been trading throughout most of the day 
however, KIDE made a plunge at the end of the day to close just 
above $73.  With the market making such a bull run last week, 
there are a number of other stocks to catch the eyes of investors, 
stocks that have not been trading at huge premiums and are "on 
sale" in comparison to KIDE.  And thus we bid a very fond 
farewell to Pikachu and his gang.


LTR $70.88 (+2.00) It was reported at the end of the week 
that LTR would be reporting there earnings this week, but
the day would not be announced.  That means the earnings
could come at anytime.  We try not to hold any plays over
an earnings report.  Also on Monday there will be a jury
decision coming that will have an effect on the Tobacco 
industry as a group.  A Florida jury will have a decision
on the class action suit against the industry that could
lead to an estimate of $300 billion in punitive damages.
In other news a court in New York reported favorable for
U.S. tobacco companies, in a ruling to dismiss five class
action suits brought against them.  This positive news
woke up the value players for a trade that had LTR bouncing
back to as high as $71.44, before closing very close to our
resistance level of $71, at $70.88.  We will choose to
close out this play at these levels, and wait to see what
happens this week after Monday's ruling.


CMVT - Comverse Technology

Split candidates that are not current plays
CHKP - Check Point Software
MEDI - MedImmune
QCOM - Qualcomm
DCLK - CoubleClick
MXIM - Maxim Intergrated


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

Symbol - Stock         Splits/Date  

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
SAPE - Sapient         2:1 11-05-99 ex-date 11-08
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
AOL  - America Online  2:1 11-19-99 ex-date 11-22
AMGN - Amgen           2:1 11-19-99 ex-date 11-22
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:

IMNX - Immunex Corp. $63.00 (+9.06)

See details in sector list

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


CMVT - Comverse Technology $113.50 (+8.69)(+9.56)

See details in sector list

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

Put play of the day:

VISX - Visx Inc  $62.56 (-10.56)

See details in put list

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


ADIC - Advanced Digital Information $37.25 (+7.00)

Advanced Digital makes and sells automated tape libraries for 
computer systems to back up data.  They purchase the drives 
from companies like Sony, Quantum and Hewlett Packard and 
outfit them with robotic arms.  This arm switched the tapes 
to capture, add and access data from the computer's hard 
drive.  It has capabilities for small to large computers 
with tape sizes varying from 4mm, 8mm to digital linear 
tapes (DLT).  Most sales are to large corporations looking 
to back up the massive amounts of information need for the 

After a period of consolidation, ADIC is making a breakout 
on a string of positive news.  The positive news is really 
nothing new, but traders have obviously rekindled their love 
for ADIC.  Here is a recap on where this stock has been during 
the last couple months.  They fell out of favor in late 
September after a long run up during the summer that included 
a great earnings report in August and a 2:1 split.  The selloff 
began on September 26th as the company finalized a secondary 
offer.  Although it was heavily subscribed by institutions, 
it took awhile for the dilution to be digested.  After staying 
in this rut for a month, ADIC came to life with the IPO of 
Crossroads Inc.   ADIC owns 2.6 million shares of CRDS that 
they purchased for $1.63.  This is more than HWP and INTC's 
stake combined.  With the incredible opening for CRDS, it turned 
their few million dollar investment into over $180 mln dollars 
at last count.  This goes along with other strategic investments 
like @Backup.com.  Not to mention ADIC's own business is growing 
by leaps and bounds.  They beat earnings estimates last quarter 
by $0.03 with a $0.22 profit (vs. $0.04 cents last year).  This 
is important because ADIC's Q4 ends on October 31.  Because it 
is a year-end, earnings aren't out until early December but 
you can see from the chart that traders have already returned 
to participate in the anticipation.  We like the entry point 
the market makers gave us Friday near the close.  ADIC had 
been rolling along with the market this week and hit a new 
52-week high at $41 when the market-makers hit the stock near 
the close.  It dropped quickly to support at $37 on light 
volume.  We want to see the $36-$37 range hold on Monday and 
the stock to begin up once again.  Resistance is at $41 and 
more support will be at $34 if we get so lucky.  

Here is some of the good news we were referring to above.  On 
Tuesday the 19th, ADIC announced that along with Veritas they 
would be demonstrating a new high performance Storage Area 
Network (SAN) at the Storage Networking World during the week.  
ADIC is continually being seen with the strongest players 
in the industry.  On the Oct 26th, ADIC was named by Forbes 
magazine as one of the "The Hot Ones - Ten Supercharged 
Companies Poised for Growth" in Forbes's piece on the top 200 
best small companies in America.  

BUY CALL NOV-35 QXG-KG OI=315 at $4.00 SL=2.50
BUY CALL NOV-40 QXG-KH OI=144 at $1.88 SL=0.75
BUY CALL DEC-35*OQG-LG OI=124 at $5.38 SL=3.50
BUY CALL DEC-40 OQG-LH OI=122 at $3.50 SL=1.75

Picked on Oct 31st at  $37.25    P/E = 100
Change since picked     +0.00    52-week high=$114.44
Analysts Ratings    2-3-0-0-0    52-week low =$ 24.50
Last earnings 08/99 est= 0.19    actual= 0.22
Next earnings 12-08 est= 0.19    versus= 0.09
Average Daily Volume =  458 K
Chart = http://quote.yahoo.com/q?s=ADIC&d=3m 


DELL - Dell Computer Corp $40.13 (+0.25)(-2.93)(-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.  And 
honestly, we've been waiting longer than anticipated for a 
significant resurgence.

DELL has been trading in a tight stance between firm support at 
$38 and strong near-term resistance of $41 since October 19th.  
This narrow range is essentially creating a springboard.  In 
other words, when DELL does break out the move will likely be 
sharp and swift.  Of course the question is WHEN.  Thursday's 
market provided an ideal environment for a rebound and we were
disappointed in the stock's lack of participation.  We held the 
play over in the event DELL was simply lagging behind.  The 
stock's $1.63 gain on strong volume and the $40.75 daily high on 
Friday prompted us to keep DELL on our call list going into next 
week.  As a conservative player, it's obviously very important 
to confirm stock direction with a show of volume before opening 
a new position.  Earnings are expected in a couple weeks on 
November 11th.  Recall Dell did release an earnings' warning on 
October 18th citing the sharp rise (25%) in chip components 
would hurt their bottom line.  However the following week, 
Warburg Dillon Read came out with news that instead of a 
shortfall Dell could actually "post significant upside surprise 
in revenue growth" referring to preliminary September PC 
shipment data.  So we're now looking for momentum ahead earnings 
to help revitalize this technical play.  There was lots of good 
news surrounding Dell this week.  On Tuesday it hit the press 
that for the first time in history, Dell surpassed rival Compaq 
computers (CPQ) as the leading PC maker in the US!  For the 3Q 
Dell claimed 17.1% of the PC market while CPQ slipped to 15.3%.  
The next day it was also reported that Dell took the #1 position 
of PC sales in the US educational industry away from Apple 
computer, capturing 21% of the market share.  Then Dell 
announced it had completed its first ever acquisition (in its 
15-year history) of privately held ConvergeNet Technologies. 
According to the terms, 6.9 million shares of Dell common stock 
were exchanged for all outstanding shares and options of 
ConvergeNet - the deal is valued at approximately $340 mln.  

BUY CALL NOV-35 DLQ-KG OI=12972 at $5.50 SL=3.75
BUY CALL NOV-40*DLQ-KH OI=33060 at $1.88 SL=0.75
BUY CALL NOV-45 DLQ-KI OI=47887 at $0.31 SL=0.00 High Risk!

Picked on Oct 17th at     $42.81    P/E = 53
Change since picked        -2.69    52 week high=$55.00
Analysts Ratings     12-13-7-0-0    52 week low =$24.25
Last earnings 07/99    est= 0.17    actual= 0.19 surprise +11.8%
Next earnings 11-11    est= 0.20    versus= 0.14
Average daily volume =  26.3 mln
Chart = http://quote.yahoo.com/q?s=DELL&d=3m


LVLT - Level 3 Communications $68.38 (+6.00)

Level 3 Communications, Inc. is a communications and 
Information services company that is building the first 
upgradeable international network optimized for Internet
protocol technology.  The Level 3 network combines local, 
long distance, and undersea networks, connecting customers 
end-to-end across the U.S. and in Europe and Asia.  The 
company expects to complete its planned network construction 
in phases beginning in the first quarter of 2001.

Level 3 was the talk of Wall Street this past week, after the
earnings report on Oct 22nd, the shares began to trade up 
nicely behind very positive comments from analysts.  Currently
the shares are sitting at $68.38, after pulling back at the 
end of trading on Friday in what looks like a minor round of 
profit-taking after hitting a intra-day high of $71.38.  The
technical picture could not look more promising for a short-
term uptrend.  The volume, moneystream, and relative strength
are all converging at the same time.  This should trigger 
higher prices for the stock in the short-term.  Going forward
it will be important to confirm the upward trend, the profit-
taking might not be over, with the price increases this past
week of over 10 points from the intraday high to intraday
low we should be cautious, but bullish when looking for an
entry point.  Look at any pullbacks as a buying opportunity.
There is major support at the $64.50 level.

Current price targets on Wall Street sit at the $80 a share.  
Keeping in mind that this stock is bouncing back from a 52-week 
high of $100.13.  The analysts seem to be buying the story that 
LVLT is selling.  

BUY CALL NOV-65*QHN-KM OI=1862 at $6.13 SL=4.38
BUY CALL NOV-70 QHN-KN OI=2784 at $3.13 SL=1.63
BUY CALL DEC-65 QHN-LM OI= 987 at $8.25 SL=6.38
BUY CALL DEC-70 QHN-LN OI=1108 at $5.75 SL=4.50

Picked on Oct 28th at    $68.63     P/E = N/A
Change since picked       -0.25     52 week high=$100.13
Analyst Ratings       5-3-1-0-0     52 week low =$ 29.88
Last earnings 10/22   est=-0.51     actual=-0.43
Next earnings 02-18   est=-0.65     versus=-0.11
Average daily volume = 1.80 mln 
Chart = http://quote.yahoo.com/q?s=LVLT&d=3m  


EMLX - Emulex Corp. $155.94 (+16.69)(+11.25)(+28.13)

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

It just keeps going and going and...  We really like this stock! 
Emulex has been one of those plays you wait all year long to 
catch.  We started this play at $128 and saw it rocket to $161.  
It pulled back from there to support at $137 before taking off 
again.  This week we saw another awesome $25.50 swing as Emulex 
returned to its high.  Thursday, EMLX put on a great performance 
as the market soared on the good economic news.  The stock added 
$5.75 confirming that support was solid.  Friday saw the stock 
open at Thursday's close and run an impressive $17.53 in the 
first hour of trading.  By midday, EMLX bottomed at $148 before 
putting in a nice move up by the close.  This may indicate that 
the sellers are done and that a retest of its high is forthcoming.  

The shareholder meeting on Nov 18th will include a vote to 
increase the authorized shares to accommodate the split.  The 
payable date will be set as well.  As that day gets closer, 
look for increased volatility and keep in mind that the stock 
is prone to large price swings.  Initiate trades accordingly.  
Enjoy the ride! 

BUY CALL NOV-150 UMQ-KJ OI= 85 at $16.25 SL=12.00
BUY CALL NOV-155*UMQ-KK OI=128 at $13.38 SL=10.00
BUY CALL NOV-160 UMQ-KL OI=421 at $11.13 SL= 8.25
BUY CALL NOV-165 UMQ-KM OI= 85 at $ 9.25 SL= 7.00

Picked on Oct 17th at  $128.00	P/E = 76
Change since picked     +27.94      52-week high=$161.75
Analysts Ratings     3-3-0-1-0      52-week low =$  6.00
Last earnings 10/99  est= 0.14      actual= 0.19 surprise +35.7%
Next earnings 01-31  est= 0.17      versus= 0.05
Average daily volume =   418 K
Chart = http://quote.yahoo.com/q?s=EMLX&d=3m


AOL - America Online Inc $129.38 (+9.00)

AOL is the world's #1 provider of online services with over 
17 million subscribers.  It's acquisitions in 1998 and 1999 
have given the company a 60% market share and diversity.  
CompuServe, an online service geared more to professionals, 
added its 2 million users to the AOL portfolio in 1998.  
This year AOL brought the Web navigator, Netscape, to its 
organization and is also using DIRECTV to launch an interactive 
TV service.  The recent announcement of a proposed merger 
between EarthLink (ELNK) and MindSpring (MSPG) and the new 
wave of companies offering free Internet access is certainly 
heating up the competition for AOL.

After a fantastic earnings' run with over 10% in gains and 
reaching newer near-term highs on the momentum, we adhered to 
our rule not to hold over an earnings' announcement and exited 
the play the evening before the scheduled release.  On October 
20th AOL reported Q1 earnings at more than triple when compared 
at $0.15 p/s versus $0.04 p/s, the same quarter last year and 
topped First Call consensus by $0.02.  However in our closing 
write-up, we alerted our readers one last time that we were 
still anticipating a split announcement for the following 
reasons.  First off, AOL had been trading in the proximity of 
historical split levels ($120) since early October and second, 
there was an upcoming Shareholders' Meeting on October 28th to 
vote on increasing the number of authorized shares from 1.8 bln 
to 6 bln.  And Bingo! Thursday evening AOL announced a 2:1 stock 
split!  This is the second time the stock has split this year 
and the 7th time since the company went public in March of 1992.  
Shares will reflect the split next month on Nov 22nd.  We 
expect lots of momentum and excitement in the upcoming weeks 
driving AOL's share price up, up, up!  

Looking for an entry into this split play?  Technically short-
term support is just below the 10-dma at $119.94, however a 
reasonable entry is in the range of $123 and $126 - a likely  
level of consolidation on a pullback assuming AOL shows 
strength.  Take a look at a 10-day chart for visual 
comprehension - these marks represent the latter daily highs.  
But if all goes according to plan and the stock doesn't take 
a breather then it'll be inevitable to target shoot a daily 
bottom for an entry.  In related news this week, AOL executives 
sold about $158 mln shares of stock to diversify their personal 
portfolios and according to AOL's Chairman Steve Case, the 
stock sales were routine.  Happy Trading!  

BUY CALL NOV-125*AOO-KE OI=22973 at $ 8.25 SL=6.50
BUY CALL NOV-130 AOO-KF OI=22570 at $ 5.50 SL=3.75
BUY CALL NOV-135 AOO-KG OI=11146 at $ 3.50 SL=1.75
BUY CALL DEC-130 AOO-LF OI= 2581 at $10.00 SL=7.50
BUY CALL DEC-135 AOO-LG OI= 1727 at $ 7.88 SL=6.25

Picked on Oct 31st at   $129.38    P/E = 183
Change since picked       +0.00    52-week high=$175.50
Analysts Ratings    23-15-3-1-0    52-week low =$ 20.63
Last earnings 09/99   est= 0.13    actual= 0.15 surprise +15.4%
Next earnings 01-27   est= 0.14    versus= 0.08
Average Daily Volume = 18.6 mln
Chart = http://quote.yahoo.com/q?s=AOL&d=3m


The Option Investor Newsletter          10-31-99
Sunday                        3 of 5



RATL - Rational Software Corporation  $42.75 (+4.75)

Rational Software Corporation, the e-development company,
helps organizations develop and deploy software for 
e-business, e-infrastructure, and e-devices through a 
combination of tools, services and software engineering
best practices.  Rational's e-development solution helps
organizations overcome the e-software paradox by accelerating
time to market while improving quality.  Rational's integrated
solution simplifies the process of acquiring, deploying and 
supporting a comprehensive e-software development platform,
reducing total cost of ownership.  RATL is one of the world's 
largest Internet software companies.

It was recently announced that the e-development company drove
80 percent of the record second quarter revenue of $128 
million, making it one of the largest Internet-focused 
software companies in the world.  Based on the recent company
success of the e-development strategy and the formidable 
market opportunities that are foreseen for the future, RATL
feels that they have the potential to accelerate the growth
rate during Fiscal 2001.  The Internet economy has impacted
there sales in such a positive way that there expectations
have been exceeded.  The stock has been hitting new 52-week
highs this week trading as high as $43.38.  Currently the
stock sits just slightly off of those highs in a minor wave
of profit-taking on Friday at $42.75.  The stock has been on
a nice uptrend for about three weeks, tacking on about 13
points.  At current levels some profit-takers should present
themselves, but look at any pullback as an entry point.  We
are bullish on the shares as long as the technical picture 
remains strong with moneystream, volume, and prices converging
nicely to the upside.  Always confirm the current technicals 
before entering a new position.

This recent breakout comes on the back of the company posting
earnings that came in 40% better than expected and a 50% 
increase over the year ago period.  This sparked two upgrades
from Credit Suisse First Boston and SG Cowen.  Price targets
were raised to $47 a share in the near-term.  

BUY CALL NOV-40*RAQ-KH OI=240 at $4.38 SL=2.63
BUY CALL NOV-45 RAQ-KI OI=  8 at $1.88 SL=0.88 low OI
BUY CALL DEC-40 RAQ-LH OI=156 at $5.75 SL=4.50
BUY CALL DEC-45 RAQ-LI OI= 19 at $3.38 SL=1.63 low OI

Picked on Oct 31st at    $42.75     P/E = 49
Change since picked       +0.00     52-week high=$43.38
Analyst Ratings       6-3-1-0-0     52-week low =$18.81
Last earnings 10/14   est= 0.19     actual= 0.21
Next earnings 01/00   est= 0.25     versus= 0.19
Average daily volume = 1.16 mln 
Chart = http://quote.yahoo.com/q?s=RATL&d=3m


SYMC - Symantec Corp $47.75 (+3.75)(+0.69)

Symantec is one of the two leading providers of utility software 
for the security market.  Its fierce competitor is Network 
Associates and the two companies are continually striving to 
be in the #1 position.  Symtanec's software is designed for 
business and personal computing with three distinct business 
segments: security and assistance, remote productivity 
solutions, and Internet tools.  The distributor company, Ingram 
Micro, accounts for 33% of its sales revenue.

For those readers just coming aboard, we picked up this momentum 
play last Tuesday as we saw no post-earnings meltdown, but 
instead a growing intensity.  On October 20th, they unveiled 
their Q2 results of fiscal 2000 beating of $0.42 cents by 
reporting a $0.45 per share profit, a $0.03 cent upside 
surprise!  This is significant for a company that typically only 
beats estimates by a penny.  For more details regarding the 
company's earnings please refer to Tuesday's write-up.  Overall 
SYMC has been climbing steadily since leaving the $33 mark at 
the end of September despite the rocky October market.  Now we 
did see the effects of the market weakness in mid-October as 
SYMC was stuck at resistance at $40, but that is history. 
Together with a strong Internet sector and growing momentum, 
SYMC continues to move forward advancing daily into new 

Support is firmly established at $40 and this was certainly a 
target entry point mid-week.  However SYMC has claimed new 52-
week highs for the past four consecutive days with the newest 
record at $48.50 hit during active trading on Friday afternoon.  
This pattern made it a challenge to get your foot in the door.  
A pullback next week to just above the 10-dma ($42.57) followed 
by another surge would be ideal however, still be prepared to 
look for an intraday bottom.  Most likely there will be investors 
taking cash off the table after these gains providing the 
opportunity for a variety of entry points into this momentum 
play.  In the news on Thursday, Banc of America started coverage 
with a Buy rating and issued a target price of $60.

BUY CALL NOV-40 SYQ-KH OI=504 at $8.25 SL=6.50
BUY CALL NOV-45*SYQ-KI OI=351 at $4.50 SL=2.75
BUY CALL NOV-50 SYQ-KJ OI= 15 at $1.75 SL=1.00
BUY CALL DEC-45 SYQ-LI OI= 81 at $6.13 SL=4.50
BUY CALL DEC-50 SYQ-LJ OI=  0 at $3.38 SL=1.75 **New Strike**
BUY CALL JAN-50 SYQ-AJ OI= 10 at $4.75 SL=3.00

Picked on Oct 26th at   $44.00    P/E = 25
Change since picked      +3.75    52-week high=$48.50
Analyst Ratings      6-0-0-0-0    52-week low =$ 8.69
Last earnings 09/99  est= 0.42    actual= 0.45
Next earnings 01-14  est= 0.49    versus= 0.42
Average daily volume =  918 K 
Chart = http://quote.yahoo.com/q?s=SYMC&d=3m


VRTS - Veritas Software Corp $107.88 (+13.69)(+3.10) 

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.

Vacations, vacations, where do you want to go next!  With moves
like this, you can see the world.  VRTS put on a respectable
$18.06 from our suggested re-entry point, at the 10-dma, in 
Tuesday's update.  Each day the volume increased as investors 
loaded up the truck for a very profitable split run.  On Thursday, 
VRTS broke through resistance like a hot knife going through 
butter.  Then on Friday there was no stopping this winner as 
it charged ahead and closed at a new all time high!  Both days 
the volume was strong and steady.  There were no intraday dips 
indicating investors are confident higher prices are coming.  
Even in after-market hours on Friday, VRTS continued to see 
large numbers of shares being bought.  

Monday should see a continued increase in share price but a 
word of caution here.  The price has increased steady and 
strong for three days and investors will lock in profits on 
any perceived upset in the market.  If you entered this trade 
on Thursday you will have a nice cushion to fall back on, so 
keep a trailing stop in to ride any bumps in the road.  The 
split is still three weeks away on Nov 22nd and this gives time 
for dips and nice entry points for more profits.  At this pace 
we could see this stock reach even higher as the markets continue 
to rally.  VRTS will split its stock after the next expiration 
date of November 19th so plan your exits and new entries 
accordingly as we get close.  We are in new territory now that 
the previous 52-week high has been taken out.  Watch for VRTS to 
dip this week and test its new found territory.  Enjoy the ride 
as this play has turned out spectacular to say the least!

BUY CALL NOV-95  VUQ-KS OI=350 at $15.00 SL=$11.25
BUY CALL NOV-100*UQJ-KT OI=417 at $11.38 SL=$ 8.50
BUY CALL NOV-105 UQJ-KA OI=  0 at $ 8.13 SL=$ 6.00 New Strike 
BUY CALL NOV-110 UQJ-KB OI=  0 at $ 5.62 SL=$ 4.25 New Strike 

Picked on Oct 21st at	 $91.09	P/E = N/A
Change since picked	 +16.78	52-week high=$107.88 
Analysts Ratings     6-10-3-0-0	52-week low =$ 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 = 2.00 mln
Chart = http://quote.yahoo.com/q?s=VRTS&d=3m


SEBL - Siebel Systems Inc $109.91 (+13.31)(+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' 
has been sizzling.  Share prices have skyrocketed $25.06, or 
29.6% setting a new 52-week highs 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 analysts 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 further fueled the 
fire under SEBL.  With the stock split forthcoming in a couple 
weeks we expected the investor's excitement to elevate share 
prices in the near-term and it sure has!  

SEBL was on simmer the first part of this week effectively 
offering traders entry points into this split play.  The 
consolidation period didn't push the stock below its 10-dma 
(then @ $89) or its firm support at $85 demonstrating strength 
at the higher price levels.  For those who read the writing 
on the wall and entered positions, the rewards were abundant. 
SEBL tacked on $6.44 on Thursday and another $9.50 during 
Friday's rally!  The 52-week record now stands strong at $110.  
Two firms, SoundView Technology and Banc of America reiterated 
Strong Buy ratings and the latter also issued a $135 price 
target.  A pullback to near-term support at $95 would be an 
optimum entry point, however if there's no reprieve next week 
it's likely you have to look for an intraday bottom to get a 
solid entry into this powerful split play.  The split date 
is scheduled for November 12th, after the bell.

**Presently there are no strikes above 110**

BUY CALL NOV-100*SGQ-KT OI=1736 at $12.13 SL=9.75
BUY CALL NOV-105 SGQ-KA OI=  13 at $ 8.63 SL=6.50 low OI
BUY CALL NOV-110 SGQ-KB OI=   0 at $ 5.88 SL=4.25 No OI yet

Picked on Oct 21st at    $94.88    P/E = 110
Change since picked      +14.93    52 week high=$110.00
Analysts Ratings      9-5-0-0-1    52 week low =$ 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 = 1.65 mln
Chart = http://quote.yahoo.com/q?s=SEBL&d=3m


VSTR - VoiceStream Wireless $98.75 (+9.88)

VoiceStream Wireless is a provider of wireless communication 
services.  These services are available in the western United 
States.  VoiceStream has an aggressive marketing plan, boasting 
more minutes, more features and more service.  Jamie Lee Curtis 
is the always on-the-go spokeswoman for VSTR and her famous 
"hello" sign off is helping to make VoiceStream a household 

Hel-lo!!  What a great day for VoiceStream!  VSTR set a new 
52-week high at $100.75.  With VSTR working its way up 
steadily throughout the day while offering a trading range 
of $13.63, entry points were not difficult to come by.  VSTR 
spiked up briefly in afternoon trading before settling back 
and continuing on with its positive momentum/takeover rumor 
driven run.  VSTR closed just $2 dollars shy of the high for 
the day and looks to be right on course to keep going.  VSTR 
made two bounces at $95 on Friday, which should serve as 
support heading into next week.  The only resistance is the 
new 52-week high of $100.75.  Use caution if entering a new 
play on VSTR as this run is based on rumor and rumor alone.  
VSTR has a long way to fall before being caught by it's 10-dma 
which is currently all the way down at $83.83.  This play is 
recommended for a High Risk Profile only!  If you are making 
a play or plan to enter a new one, it is imperative that you 
use your stops and of course, confirm continuing positive 
momentum before doing so.

It appears as though this 13% gain on Friday was a result of 
takeover rumors.  As VSTR prepares to acquire Omnipoint and 
Aerial Communications, it has become an even more attractive 
takeover target.  So who is interested?  Perhaps the better 
question would be, who isn't?  The Baby Bell companies have 
always got their eyes open for just such prey and many of them 
are either looking to either launch or expand their wireless 
operations.  SBC's ears are piqued as well.  Oddly enough, no 
one was available for comment on Friday, so we will just have 
to wait and enjoy the ride in the meantime. 

BUY CALL NOV- 85 UVT-KQ OI=398 at $16.13 SL=13.00
BUY CALL NOV- 90 UVT-KR OI=248 at $12.63 SL=10.00
BUY CALL NOV- 95 UVT-KS*OI=276 at $ 9.25 SL= 6.75
BUY CALL NOV-100 UVT-KT OI= 26 at $ 6.75 SL= 4.75 low OI

Picked on Oct 28th at    $85.75      P/E = 81                           
Change since picked      +13.00      52-week high=$100.75 
Analysts Ratings     13-4-1-0-0      52-week low =$ 16.38                  
Last earnings 10/99  est= -0.85      actual= 0.90                             
Next earnings 01/00  est= -1.02      versus=-1.03                            
Average Daily Volume = 1.63 mln
Chart = http://quote.yahoo.com/q?s=VSTR&d=3m


PCS - Sprint PCS $82.94 (+4.06)(+8.13)

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.

As wireless communications become a bigger part of your daily 
life, Sprint PCS will be striving to provide its users 
information at the next level.  PCS will be 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.  PCS added 720K 
new subscribers last quarter and expects to add over 1 mln 
more by the end of this quarter.  This new technology and 
growth potential has excited investors, which in turn have 
rewarded the stock with some steady gains.  PCS remains at 
the head of the class and managed to post yet another 52-week 
high at $83.44, which is just above the closing price on 
Friday.  Like current investors, we too remain bullish on PCS 
and foresee higher prices in the near-term.  Now that we broke 
our previous resistance at $79-$80, it's just a matter of time 
before we hit $90.  With positive momentum going into Monday's 
trading, let's see if we can narrow the gap.  For those 
investors entering new trades, watch for slight pullbacks 
during intraday trading.  It's tough picking exact entry points 
because of lack of technical data at these new levels.  If the 
stock pulls back, the old high at $82 should act as support, 
but of course you would want to confirm a bounce first.  When 
PCS reaches new highs, increase your stops to protect your gains.     

In the news Alamosa PCS Holdings, a provider of wireless 
personal communications services in the Midwest and southwest 
and an affiliate of Sprint PCS Group, filed on Friday to raise 
as much as $185 million in an initial public offering.

BUY CALL NOV-75 PCS-KO OI=1478 at $9.13 SL=6.75
BUY CALL NOV-80*PCS-KP OI=1696 at $5.38 SL=3.25
BUY CALL NOV-85 PCS-KO OI= 124 at $2.75 SL=1.75
BUY CALL DEC-80 PCS-LP OI= 195 at $7.50 SL=5.75
BUY CALL DEC-85 PCS-LQ OI= 111 at $4.88 SL=3.25

Picked on Oct 24th at    $78.88     P/E = N/A
Change since picked       +4.06     52-week high=$81.96
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


CMVT - Comverse Technology $113.50 (+8.69)(+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. 

Now that's more like it!  You may recall from Thursday's write 
up that we were biting our nails a little over the fact that 
CMVT didn't participate much on Thursday.  Well it must be a 
late bloomer because on Friday we got a decent rally.  The 
stock rose 4.84% and finished up $8.69 on the week.  The bonus 
is that the stock really came alive late in the day on Friday 
and hit a new 52-week high of $114.44.  This may carry over 
into next week.  The big announcement for the week was about 
CMVT's addition into the S&P 500 which took place on Tuesday 
and would thus explain the monster volume that day.  We are 
also looking forward to earnings at the end of the month.  We 
think CMVT may also announce a stock split.  Besides these 
catalysts, we saw no fresh news to report for the second half 
of the week.  Technically, we are looking strong as CMVT is 
setting higher highs and higher lows.  At this point it is 
just a guess to how high CMVT may take us but we can define 
the support.  $108 looks solid followed by the 10-dma at $104 
but confirm the bounce first.

We reported last Sunday that First Albany analyst Herbert 
Tinger had raised his price target from $93 to $105.  Great 
call, Herbert!  Now if he could just set a target maybe a 
touch higher so that CMVT doesn't knock it out a week later.  
I guess if you pick your points so close, you are less likely 
to be wrong.  At an all-time high, we aren't going to guess 
at how high the momentum might go.  Let's just go with the 
flow and see what unfolds.

BUY CALL NOV-100 CQV-KT OI= 488 at $14.50 SL=11.50
BUY CALL NOV-105 CQV-KA OI=1020 at $10.25 SL= 7.75
BUY CALL NOV-110*CQV-KB OI= 301 at $ 6.25 SL= 4.50
BUY CALL DEC-100 CQV-LT OI=  61 at $ 9.50 SL= 7.00

Picked on Oct 21st at  $102.13    P/E = 62
Change since picked     +11.38    52-week high=$114.44
Analysts Ratings     8-3-0-0-0    52-week low =$ 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 = 1.2 mln
Chart = http://quote.yahoo.com/q?s=CMVT&d=3m  


WMT - Wal-Mart $56.31 +0.56 (-0.75)(+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.

Wal-Mart set a new 52-week high in early trading today, spent 
the majority of the day trading right around $58 and made an 
afternoon move down to close up just under a point.   WMT set 
solid support at $55 on Thursday, which WMT traded well above 
all day on Friday.  WMT has further support at the 10-dma of 
$54.50.  Should the market back off a bit on Monday, a pullback 
and bounce at this level should create a solid point of entry.  
Should the market continue to run, wait for a breakthrough WMT's 
new 52-week high of $58.50, which now serves as resistance. 
Confirm positive momentum before entering any new plays.  Either 
way, a new entry should be a safe bet with an upcoming earnings 
announcement on November 9th and all of the recent good news.     

Retail in general has had a strong week as consumer confidence 
has recovered a bit thanks to a positive GDP report and 
employment data released on Thursday which helped to ease the 
fears in regards to an upcoming rate hike.  This positive 
momentum carried into trading on Friday and we look for it to 
continue into next week as well.  On Friday, it was announced 
that Wal-Mart was named as one of the "The Best of the Century" 
retailers by Lebhar-Friedman, a publisher and provider of 
information for retail and foodservice communities.  Wal-Mart 
was the winner in the Discount Category.  Wal-Mart was also 
added to the Goldman Sachs recommended list last week. 

BUY CALL NOV-50 WMT-KJ OI= 7384 at $7.50 SL=5.75
BUY CALL NOV-55*WMT-KK OI=14091 at $3.25 SL=1.50
BUY CALL NOV-60 WMT-KL OI= 2076 at $0.88 SL=0.00 High Risk!

Picked on Oct 24th at    $57.06      P/E = 50                           
Change since picked       -0.75      52-week high=$58.50 
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 = 5.96 mln
Chart = http://quote.yahoo.com/q?s=WMT&d=3m


GMST - Gemstar International Group $86.88 (+5.00)(+7.69)

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. 

Gemstar opened up nearly $1 on Friday and held a fairly tight 
range until the afternoon when it made a brief run up to hit 
a new 52 week high of $89.19.  GMST burned out quickly and shot 
down to close just above the low of the day.  GMST looked to 
have established solid support at $87 on Friday, however 
closed just below that level.  The next support holds at $86.  
Before entering any new plays, it is important to confirm 
GMST's direction.  On Friday, GMST met late day resistance at 
$88.50.  If GMST manages to break through this level a new 
entry may be considered.  This is now an earnings run play so 
GMST could have no problem making it through resistance and 
hitting another new 52-week high next week.  GMST continues to 
trend up and post nice consistent gains.  We are looking for 
this trend to continue through to the announcement.  

Gemstar is scheduled to announce earnings on November 10th 
(confirmed).  Also the option volume continues to remain 
extremely active as it has been all month.  We noted this 
before and there could be some other surprise lingering 
that we are unaware of.  Sometimes this indicator is a 
difficult one to pin down but we wanted to make you aware.  

BUY CALL NOV-75 QLF-KO OI=2246 at $13.63 SL=11.00
BUY CALL NOV-80*QLF-KP OI=4637 at $ 9.75 SL= 7.00
BUY CALL NOV-85 QLF-KQ OI=1066 at $ 6.38 SL= 4.25

Picked on Oct 21st at    $79.06    P/E = N/A
Change since picked       +7.81    52-week high=$89.19
Analysts Ratings      6-0-0-0-0    52-week low =$20.44
Last earnings 08/99   est= 0.00    actual= 0.17
Next earnings 11-10   est= 0.18    versus= 0.15
Average Daily Volume = 1.18 mln
Chart = http://quote.yahoo.com/q?s=GMST&d=3m


IMNX - Immunex Corp. $63.00 (+9.06)

Their primary products include Enbrel, for treating rheumatoid
arthritis, Lukine, which is used in the treatment of bone-marrow
transplant patients and Novantrone, used to treat acute non-
lymphocytic leukemia and to ease pain associated with prostate 
cancer.  Immunex develops biopharmaceutical products aimed at
treating cancer, auto-immune disorders, and infectious diseases.
They are in the developmental stages of developing other drugs
to treat asthma, leukemia, and certain other cancers.  Immunex
competes in the marketplace with heavy weight Amgen, Bristol-
Meyers Squibb and Merck.  54% of Immunex stock is owned by 
American Home Products through its subsidiary American Cyanamid.
IMNX is popular with the institutions as well with over 270 
holding stock in the company. 

Prior to announcing earnings, shares of IMNX were the trading
near $42. Since reporting better than expected earnings on 
Oct 18th, IMNX has been headed higher.  The market has been
able to shrug off several analysts downgrades as well.  The day
after earnings came out Salomon Smith Barney downgraded the 
biopharmaceutical company from a Buy to an Outperform based on
lower product revenue and a higher expense outlook with a price
target of $58.  Others feel the $110 million sales estimate
for their drug Enbrel is too high, with a new estimate of $102
mln.  On Monday Immunex was rated a near-term Sell at Gilmour
and Associates.  Since the downgrades the price of the stock has
climbed over $15.  We are not picking on the analysts or the
brokerage houses as they all do their work and call them as 
they see them.  However, what we are trying to point out is the 
investing public and traders many times will buy or sell with
little or no regard to analysts, brokerage firms or yes, even 
Internet Newsletter recommendations.  This past week IMNX gained
over $9.00 primarily on the heels of the strength in the broader
markets and an announcement that several biotech companies, 
including IMNX, are successfully moving their products for 
treating secondary-progressive multiple sclerosis(MS) through 
clinical trials.  Many times, information showing there may be 
a breakthrough or a new treatment for an illness or a disease 
is all it takes to drive the price of a company's stock through 
the roof.  If you see continued strength in the price of IMNX 
we would jump on board, but keep your stops close, as IMNX has 
gained over 50% since Oct 15th.  Should we get a pullback, 
intraday support for IMNX is between $59-$60, and then between 
$55-$56 and a bounce off those levels might prove to be a good 
entry point as well.  As always, consider your potential rewards 
versus risk prior to entering a position in IMNX.

BUY CALL NOV-50 IUU-KJ OI=673 at $13.75 SL=11.50
BUY CALL NOV-55 IUU-KK OI=723 at $ 9.50 SL= 7.25
BUY CALL NOV-60*IUU-KL OI=389 at $ 5.88 SL= 4.25
BUY CALL DEC-60 IUU-LL OI=470 at $ 8.00 SL= 6.25

Picked on Oct 31st at    $63.00    P/E = 252
Change since picked       +0.00    52-week high=$73.50
Analysts Ratings      3-7-8-0-0    52-week low =$16.61
Last earnings 10/99   est= 0.10    actual= 0.12 surprise +20.0%
Next earnings 02-03   est= 0.09    versus= 0.06
Average daily volume = 1.61 mln
Chart = http://quote.yahoo.com/q?s=IMNX&d=3m


The Option Investor Newsletter             10-31-99
Sunday                4  of  5

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.


GT - Goodyear Tire and Rubber Co. $41.31 (-2.38)

Goodyear has helped most of us keep our grip at one time or 
another.  After all, they are the world's largest tire maker.  
They also own the Dunlop and Kelly-Springfield brand.  
Headquartered in Akron, Ohio, the company manufacturers 
engineered rubber products and chemicals too in more than 90 
facilities in 30 countries.  It has marketing operations in 
almost every country around the world.  Goodyear, with the 
recent addition of its Dunlop tire joint ventures, employs 
more than 105,000 people worldwide.

Friday was another stellar day for the markets as investors 
continued to purchase shares of their favorite stocks.  
Subdued inflation fears and falling bond yields were the 
motivating factors behind these movements.  Unfortunately 
this euphoria seeped into our put play on GT.  After trading 
flat most of the day, late afternoon buyers stepped in and 
closed the stock slightly higher.  Despite this slight setback 
we remain bearish with this position.  We originally started 
this play because of readjustments within the DJIA.  GT will 
be removed from the list of thirty stocks and more worthy 
opponents will take its place among the elite.  The problem 
that ensues from this type of restructuring is every DJIA and 
"Dogs of the DOW" index fund must now begin the process of 
selling its GT holdings, then buying its replacements.  The 
selling has already started but it could be just a drop in the 
barrel compared to what lies in the near future, so watch for 
continued distress.  When placing new trades, wait for 
confirmed weakness in the stock.  A good entry point would be 
at current trading levels at $40-$41.  We know that $40 is not 
an established support level because it was broken on Friday, 
however GT managed to bounce at $38.50.  The nearest resistance 
level is $45, which shouldn't be a factor if all goes well.  
However, because broader market sentiment has turned positive, 
use the recommended stops just to be safe.

BUY PUT NOV-45*GT-WI OI=1004 at $4.38 SL=2.50
BUY PUT NOV-40 GT-WH OI=1332 at $1.25 SL=0.00 High Risk!

Average Daily Volume = 767 K
Chart = http://quote.yahoo.com/q?s=GT&d=3m


ALD - Allied Signal $56.94 (+1.31)

Allied Signal makes a wide variety of products for industries 
in aerospace, automotive, pharmaceutical, fibers, and plastics. 
Aerospace products by AlliedSignal include airborne weather-
radar systems, wind-shear detection systems, and radar systems 
for avoiding traffic collisions.  Through its performance 
polymers segment, the company produces specialty fibers and 
films such as Spectra, used in body armor. Other segments 
produce aircraft and marine engines, and consumer automotive 
products such as Fram filters, Autolite spark plugs, and 
Prestone antifreeze.  

Tuesday we added ALD to our play list as a put.  Since that time
shares of ALD have jumped over $4 to the $57 area.  If we make 
a bad play selection we will always be the first to admit it, 
drop it, take our loss and lick our wounds.  We decided to keep 
ALD on our list for several reasons.  First the intermediate trend
is and has been down since the Oct 11th high at $64.25.  At this 
point, ALD has never given us a good entry point as the stock has 
bounced back primarily on the strength of the broader markets. 
There has no company or industry news that would lend any support
to the price of the company's stock.  So why do we have buyers at
these levels?  Probably traders and investors are bottom fishing, 
or traders covering short positions.  Another reason ALD is still
on our put list is the lack of follow through during Friday's 
session.  ALD gapped up $0.94 at the open on the strength of the
major indices and then really went nowhere.  New Buyers?, we 
don't think so.  With the broader markets going from oversold to 
approaching overbought in the matter of a week, we are due for a 
pullback.  If we get it early in the week ALD may provide us with
an excellent entry point for a put play.  Given that scenario, a 
play in ALD may be a quick in and out type of play, or it could 
test the lows made earlier last week near $52.38.  If you are 
considering a new play in ALD, the $55.75 area on an intraday 
chart could provide support.  If ALD breaks that level with 
any conviction then the next support for the stock is near 
$53.50.  Please consider not only your risk profile, but the 
potential rewards before entering a play in ALD.

In the news Wednesday, brokers at Ladenburg Thalmann did 
reiterate ALD as a Strong Buy, suggesting long-term investors 
buy on weakness. 

BUY PUT NOV-65 ALD-WM OI=2550 at $9.25 SL=7.00
BUY PUT NOV-60*ALD-WL OI=2543 at $4.50 SL=2.75 
BUY PUT NOV-55 ALD-WK OI= 583 at $1.44 SL=0.00 High Risk!

Average Daily Volume = 1.75 mln
Chart = http://quote.yahoo.com/q?s=ALD&d=3m


PBI - Pitney Bowes Inc $45.56 (-0.94)(-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).

The shares of PBI continued to hit 52-week lows the past week
trading as low as $42.50 on steady and increasing volume.  The
momentum continued to the downside, with continued questions
from analyst concerning the company's profitability in the 
future.  Stocks that continue to hit lower prices over a 
consecutive period of time, normally will have a bounce to 
support levels and then begin to retreat again, as the 
downtrend firms up after the oversold bounce has ceased.  Such
is the case in the shares of PBI at this point, we had a 
resistance level set on our radar screen at the $46.69 level.  
This was the high of the day on Friday, before the stock 
settled in to end the trading day at $45.56.  As we look 
forward to this week's trading we believe the trend downward 
will continue below the resistance level at $46.69.  Look for
the momentum to the downside to remain in place, keeping stops
tight to protect gains.  If this is more than an oversold 
bounce it should be evident from higher prices above our 
resistance level, backed by strong volume.  We currently 
remain technically bearish on the shares of PBI. 

BUY PUT NOV-50*PBI-WJ OI=285 at $5.00 SL=3.25
BUY PUT NOV-45 PBI-WI OI= 31 at $1.69 SL=0.88

Average Daily Volume = 912 K 
Chart = http://quote.yahoo.com/q?s=PBI&d=3m


LTD - The Limited $41.00 +2.25 (-0.19)

The Limited is a distributor of men's, women's and children's 
clothing.  LTD owns and operates an approximate 3,700 stores 
across the U.S. under the names The Limited, Express, Lerner 
New York, Lane Bryant, Structure, and Gaylan's Trading Company.   
The Limited also owns 84% of Intimate Brands which operates 
Victoria's Secret and Bath and Body Works.  

You may wondering just why we are continuing to play LTD as a 
put.  We feel that LTD is up in a cloud of fluff, a cloud that 
may very well dissipate next week.  With the positive GDP report 
and an initiation of coverage by Goldman Sachs at Market 
Outperform, LTD was given a reprieve from its downward trend.  
We are betting that it was a brief pardon from the LTD's long 
time course and see LTD pulling back early next week.  LTD 
has a history of making a quick run up, attaining a lower high 
and then turning around and sinking to lower lows.  Right now, 
LTD has support at its 10-dma of $40.23 however, should LTD 
violate this level the next support, which is weak at best, 
is at $38.50.  Watch for a violation of the 10-dma before 
entering a new play.  Once LTD picks up the negative momentum 
to propel down through that first support, $36 could be easily
attainable.  It is imperative to exercise caution with this
play and confirm negative momentum as LTD has an upcoming 
earnings announcement on November 16th (we will be confirming 
this date with the company next week.)

BUY PUT NOV-45*LTD-WI OI= 50 at $6.50 SL=4.75
BUY PUT NOV-40 LTD-WH OI=518 at $1.13 SL=0.50

Average Daily Volume =  853 K
Chart = http://quote.yahoo.com/q?s=LTD&d=3m


BBY - Best Buy Company Inc. $55.75 (-3.56) 

The US's #1 consumer electronics specialty retailer, Best Buy
sells home office products, consumer electronics, entertainment 
software and appliances.  Ahead of rivals Circuit City and 
Tandy in sales but not store count, Best Buy has more than 
310 stores in about 40 states coast to coast, with heavy 
concentrations in the Midwest, Texas, California, and Florida.

Remarks from the Chairman of the Federal Reserve Alan Greenspan
raised hopes on Friday that the central bank may not see the
need for repeated additional rate hikes to keep the economy
from overheating.  Interest rates tumbled on the inflation
sensitive government bond, and this had stocks bouncing back 
from recent sell-offs.  The retail sector was brighter, but
not flourishing after a separate report suggested that 
consumer confidence has moderated.  Shares of BBY bounced 
back somewhat after a "Business Week" article said that 
the Internet should help better electronic retailer BBY's
stock and give it a lift.  The company is set to launch there
Internet unit in February.  From a technical standpoint, this
news did not make much of a difference.  The volume remained
average, but not strong.  The Moneystream remained weak, with
the time segmented moving average showing some signs of life, 
but nothing special.  We will remain bearish at current levels
$55.75.  The key resistance level still remains at $58, at
this levels, with the convergence of price surges and volume
we will question the trend.  Look for selling pressure to 
return this week, with most analyst still questioning there 
Christmas performance.  Continue to look at these bounces as 
possible trading opportunities.  

BUY PUT NOV-60 BBY-WL OI=2682 at $6.25 SL=4.50
BUY PUT NOV-55*BBY-WK OI=2514 at $3.13 SL=1.63

Average Daily Volume = 2.18 mln
Chart = http://quote.yahoo.com/q?s=BBY&d=3m


INKT - Inktomi Corp. $101.44 (-1.63)

Inktomi Corp. provides fast Web search services, which can be
customized. One of the top sites on the Web, Yahoo uses the 
Inktomi search application.  Inktomi's Traffic server is a 
large scale network caching application licensed to Internet 
service providers.  INKT also makes online shopping software. 
They have operations in the UK as well as in the United States.
Inktomi competes in the market place with Compaq, Excite@Home,
and Infoseek.  San Mateo, CA is where Inktomi calls home.

As option traders we all know it can be tricky.  When trading
puts, it can be especially tricky as timing can be everything.
We added INKT to our put list Thursday night.  We added INKT
based on the recent down turn in the price off the stock, 
along with Merrill Lynch analyst Henry's Blodget's downgrade
and his report citing projected wider losses for the company.
Well, Friday morning one of Inktomi's competitors, a company
called Akamai, had its IPO.  You may have heard of it Friday.
Akamai, had expected to sell 8 mln shares somewhere between
$18 and $22.  Well, by the end of the day Akamai's shares had
traded as high as $145.19.  For a company that had no revenue
last year, Akamai now has a market value of 13.3 billion. 
That's a 458% gain in one day, the fourth biggest gain
for a U.S. stock in first day trading.  INKT jumped over $7
on the strength of Akamai's IPO, finally settling at $101.44
up $4.88 for the session.  We are leaving INKT on our play 
list for now because the fundamentals for the company have not
changed.  INKT could still struggle.  Once reality sets in for
Akamai, we would expect shares of INKT to continue their 
downward slide.  We could still see shares of INKT move higher
first.  The initial area of resistance for INKT is between $105
and $106, followed by $108.  For you technicians there is a huge 
gap between $118 and $108, created a week ago when Mr. Blodget
released his report on INKT.  Our outlook, for now we will just
wait and see how long it takes for the "Akamai Effect" to wear
off.  INKT could fall off from here, or it could hit the 
resistance levels first, followed by a return to lower prices.
As we said TIMING can be everything.  If you are going to consider
a position in INKT, wait for a down turn with solid volume and 
choose your entry points carefully.    

BUY PUT NOV-105 QYK-WA OI=1246 at $8.00 SL=6.25
BUY PUT NOV-100*QYK-WT OI= 693 at $5.00 SL=3.25 
BUY PUT NOV- 95 QYK-WS OI=1041 at $3.00 SL=1.50

Average Daily Volume = 2.13 mln
Chart = http://quote.yahoo.com/q?s=INKT&d=3m


VISX - Visx Inc  $62.56 (-10.56)

Visx is engaged in the design, marketing, and sales of its 
Star S2 excimer laser correction unit.  This was the first FDA 
approved laser eye surgery machine that is used to correct 
near-sightedness, astigmatism, and far-sightedness.  Surgeons 
to correct other defects and diseases of the cornea in an 
outpatient procedure also use this machine.  

A steady decline associated with above average volume paints 
the perfect picture for our latest put play, VISX.  The stock 
has run across some tough times lately and it's apparent by 
its current price, which as fallen over 22 percent since 
posting its earnings back on October 13.  Even though the 
company posted earnings of $0.36 per shares beating estimates 
by $0.02, investors were expecting Visx's bottom-line growth 
to be higher.  BancBoston Robertson Stephens analyst Wade 
King said investors also expected more of Visx's revenue to 
be generated by an increase in the number of surgery 
procedures performed.  Another worry haunting the company and 
its investors is competition beginning this quarter from 
others such as Bausch & Lomb and LaserSight.  With increased 
competition on the horizon and a pending verdict in its 
patent-infringement suit against Japan's Nidek, expect more 
of the same in terms of decreasing share values.  When placing 
trades look for slight spikes in the stock price, fluctuations 
should be available considering the strength of the broader 
market influences.  A good entry point is at current price 
levels however, for more conservative investors you may want 
to wait until the stock breaks $60, it nearest support level.  
The closest resistance point is $70, which we're hoping won't 
be a factor in the near-term.  There was no recent news on 
VISX that would alter our play at this time. 

BUY PUT NOV-65*VFS-WL OI=416 at $6.25 SL=3.50  
BUY PUT NOV-60 VFS-WL OI=468 at $3.13 SL=1.50

Average Daily Volume = 1.70 mln
Chart = http://quote.yahoo.com/q?s=VISX&d=3m


Index Spreads: Hedging and Arbitrage..Part II

The Combos editor is attending the MoneyShow in San Francisico so
today we'll continue our discussion on the methods of stock index
spreaders and the mechanics of intra-market arbitrage. Before we
begin, it is important to understand that the spreader's trading
philosophy differs from the hedger's because the spreader never
assumes a position in the underlying instrument; rather he tries
to combine a long contract with an offsetting short contract to
achieve profits on market price differences.


Stock indexes are portfolios which are composed of many different
company's shares. Different indexes have different values because
of the composite shares' performance and the way they are weighted
in the index. The S&P 500 Index for example, is a value weighted
combination of 500 different companies, representing approximately
80% of the value of all the shares traded on the New York Stock
Exchange. Each company's weight in the index is determined by its
relative market importance and their values are then computed by
multiplying each company's number of outstanding shares of common
stock by the share's current cash market price. These values then
are summed and compared to a 1941-1943 base period to determine
the final cash value. The cash market values of the S&P 500 Index
represent the interaction between a market-wide rate of return
and the average growth rate in earnings (and dividends) and will
accurately reflect the overall market supply and demand factors.


In addition to acting as general market indicators, indexes have
been widely adopted as underlying instruments for futures. The
underlying interest may be anything from grain to gold and silver
or Treasury bonds. In the case of a futures contract, the seller
agrees to provide an underlying commodity (or instrument) at a
specified price and time while the buyer of the futures contract
agrees to buy the product on the same terms. Historically, the
need for futures grew out of America's agricultural economy of
the early 1900's. Farmers would agree to sell their crops, when
harvested, at some specific future date, at a profitable price.
Speculators would purchase these contracts with the expectation
of reselling the crops at even higher prices, thereby making a
profit for themselves. In addition to market speculators, food
processors and wholesale manufactures would purchase futures
to guarantee the cost of raw materials for future production.

In time, the futures contract has become a trading vehicle of
its own and it is now offered on a host of underlying interests,
including stock indexes. The problem with index futures is the
actual delivery of the underlying instrument in the event the
seller decides to "exercise" the contract. In reality, only a
small percentage of futures are exercised, so physical delivery
is not likely. Nevertheless, when a contract is exercised, the
seller's duty is to deliver the commodity; wheat, orange juice,
or pork bellies etc.. to the buyer. In the case of an index
future, cash is the actual method of payment.

The most common index futures traders in the market today are
institutions (insurance companies, banks, and brokerage firms)
that need to protect large positions in stocks and mutual funds.
The portfolios for these types of investors generally include
positions in many different instruments. By diversifying their
stock holdings, they hedge the risk of loss if one issue drops
in value. The gains on other components in the portfolio are
used to offset such a loss. The problem with this practice is
the lack of protection for a market-wide or across-the-board
loss, in which the majority of the securities in a portfolio
are affected by a major downturn. This is where index futures
are most useful. Institutions purchase futures contracts on
the indexes whose composition resembles the mix of stocks in
their portfolio. The futures contract provides the necessary
downside protection without exposing the stock portfolio to
excessive risk and is used as a hedge against the loss of
inventory value. In addition to the institutional "insurance"
buyers, speculators and other position traders will attempt to
profit by taking outright long or short positions in futures
contracts. This type of activity helps maintain a mechanism of
risk transfer for investments in farming, industry, and other
financial instruments.
Options On Futures..

The first derivatives were based on stocks but today options are
traded on a number of instruments such as government securities,
currencies, and indexes. While options are very different from
futures in many ways, they are also used by portfolio managers
to hedge market risk. Most options involve the delivery of the
underlying interest but with indexes, the exercise of the option
results in a cash payment. Trading options on futures, including
index futures is much more complicated. When a futures option is
exercised, the buyer takes delivery of the futures contract. To
take delivery of the cash, the owner has to exercise the futures
contract. To protect their holdings against risk, institutional
investors must maintain large and often complex positions in the
index futures and their options. These portfolios are difficult
to manage without the aid of computerized trading programs. The
term "Program Trading" refers to the process where a computer is
used to manage the specific needs of the portfolio (the size of
the required options/futures positions along with the prices at
which the contracts should be exercised) by entering the orders
necessary to exercise the options and their underlying contracts.

These sophisticated trading programs have created a stock market
phenomenon known as the "witching hour". This period is generally
near the physical expiration of the options and futures; at which
time the contracts must be exercised or be allowed to expire. The
volume of exercised contracts has increased significantly in the
computer trading age and this surge creates excess volatility and
affects market values of the underlying stocks and indexes. There
is an even greater event known as the "triple witching hour", when
the expiration dates of options, indexes and futures coincide. The
resultant volatility represents such a threat to fair and orderly
markets that regulatory requirements have been implemented to stem
the flow of orders generated by these computerized systems.

Index Arbitrage.. 

In the current economic system, stock market values depend on the 
interaction between the required rate of return (an interest rate
adjusted for risk) and the long-term growth rate in dividends and
earnings. The cash values of stocks will also reflect the overall
supply and demand factors of the current market and the sentiment
of the investing public. Futures prices for a given commodity are
also affected by supply and demand along with being subject to an
additional influence, carrying costs. Carrying costs are incurred
by someone who buys a commodity and carries it until the physical
delivery occurs. This cost includes the fees for storing, insuring,
and transporting the commodity, as well as the interest that could
have been earned on the money that was used to buy the commodity.

The arbitrage concept is easily explained in relation to physical
commodities. If a commodity's futures contract price is greater
than the sum of its current price and carrying charges, then the
trader will buy the commodity in the cash market and sell it for
the higher price by shorting the futures contract. Purchasing and
carrying the physical commodity will be financed by borrowing. At
delivery, the commodity will be sold for the higher futures price.
The difference between the revenue from the sold futures positions
and the carrying cost (interest fees included) of the commodity is
an arbitrage profit since it was guaranteed by the higher price of
the futures contract. This process is sometimes called a "cash and
carry" transaction.

Stock Index futures contracts are based on financial instruments,
thus they can also be arbitraged via a cash and carry process. The
basic transaction is very similar to that of a physical commodity
but the carrying charges are composed entirely of interest, or the
net cost of financing the position in the instrument. Since an S&P
500 stock portfolio provides cash inflows in the form of dividends,
these returns have an important effect on the price of the futures
contracts. The relation of the financing rate to the portfolio's
percentage returns will determine if there is a positive carrying
cost. A favorable net carry will occur when the current financing
rate is less than the underlying instrument's inflow yield.
It is important to realize that the S&P 500 "cash and carry" is a
difficult transaction, much more complex than those using physical
commodities because the equity index cash instrument is harder to
purchase. For example, the cash position in soybeans is initiated
by simply purchasing 5,000 bushels of soybeans in the spot market
whereas an S&P 500 cash position is constructed by purchasing the
component stocks in the same proportion as their inclusion in the
index. The composition of this position requires the purchase of
many odd lots in a timely manner, at share prices that will result
in a cash value consistent with successful arbitrage. Without the
availability of sophisticated software and real-time electronic
trading, it would be almost impossible to accomplish this task.
That is one of the reasons why the strategy is difficult for most
retail investors; they do not have the capability to execute large
simultaneous trades in the necessary instruments. Another obstacle
is the necessary collateral to finance the futures contracts at a
favorable interest rate. In reality, S&P 500 index futures rarely
trade outside of parity because there are plenty of institutions
that do participate in this type of arbitrage when the opportunity

Good Luck!


The Option Investor Newsletter             10-31-99
Sunday                        5 of 5


Covered-Call Strategies...

One of our new subscribers asked us to describe the basic method
for playing a covered-call.

The ideal covered call offers reduced risk and a good probability
of making an acceptable profit. With the recent volatile market,
our current focus is on ITM plays with average returns of 3% to 5%
per month. We expect you to open our positions at or near the cost
basis that is quoted in the play narrative. That's the one way you
can guarantee (initially) the overall return-on-investment we are
offering. One of the best ways to open these positions is with a
buy-write. We don't recommend legging-in to these plays because in
many instances, the premium is greatly reduced when you eventually
sell the call option. You may choose to buy the stock now and sell
the call later but that generally requires the stock price to move
higher after you have purchased it, a more aggressive technique.

The easiest way to utilize this section is to take our wide range
of candidates and narrow them down through your own due diligence
until you find plays that meet your risk/reward tolerance. Always
research the company and the calendar (upcoming events, earnings
dates, scheduled announcements etc.). When you have good knowledge
of a stock and its industry, you are way ahead of most investors
and with the research tools on the Internet, there is no excuse
for not being well informed about any company or industry group.

After a candidate has been selected, you must decide how many
shares of stock to buy. Most traders plan to purchase a minimum
of 500 to 1000 shares (so commissions don't significantly affect
the ROI) and they place both sides of the order with the broker
as a net-debit or buy-write. After your order is filled, stay
informed by monitoring all the news and announcements affecting
your play until the sold call expires or the position is closed
for other reasons.

The most important lesson an investor must learn is when to exit
a losing position to preserve capital. Because this is painful to
do (admitting "I made a bad decision" or "I was wrong") and the
psychological/emotional tendency is to ride the trade/investment
down, hoping for redemption (been there, done that!), we suggest
you identify a target exit point before you enter the position.
This play-closing limit for covered-call positions should be a
specific percentage loss (10% to 20%) or a technical level near
price (or trend) support areas. The key is to establish a system
that removes you (and your emotions) from the decision-making
process. It's difficult to learn to close-out losing plays early
but the simple fact is: there is no reason to hold on to losing
plays when there are so many other profitable positions that
deserve your time and money. Not only do you continue to accrue
losses by staying in a losing play, you forego potential profit
in other positions while your trading capital is invested. Accept
your losses, learn from your mistakes (evaluate them critically),
then move on! Successful traders earn their distinction by using
proven money management techniques to minimize the cost of losing
positions. More information on this complex subject is available
in "Trading for a Living," by Dr. Alexander Elder.

Good Luck!


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

SATH   11.06  10.69   NOV  10.00  2.31  *$  1.25  14.3%  12.4%
LIPO    7.56   7.88   NOV   7.50  0.75  *$  0.69  10.1%  11.0%
PILL   13.88  12.50   NOV  12.50  2.75   $  1.37  12.3%   8.9%
MRVT   11.38  10.94   NOV  10.00  2.13  *$  0.75   8.1%   8.8%
ITIG    8.06  10.00   NOV   7.50  1.25  *$  0.69  10.1%   8.8%
LTXX   15.19  15.81   NOV  15.00  1.25  *$  1.06   7.6%   8.3%
ZIXI   33.00  39.75   NOV  25.00  9.88  *$  1.88   8.1%   7.1%
COOL    8.53   8.31   NOV   7.50  1.88  *$  0.85  12.8%   6.9%
CNCX   26.50  25.63   NOV  22.50  5.25  *$  1.25   5.9%   6.4%
RRRR   11.44  14.75   NOV  10.00  2.25  *$  0.81   8.8%   5.5%
PILT   12.69  11.75   NOV  10.00  3.38  *$  0.69   7.4%   5.4%
NPIX   23.25  28.00   NOV  17.50  6.75  *$  1.00   6.1%   5.3%
COOL    9.06   8.31   NOV   7.50  2.06  *$  0.50   7.1%   5.2%
LCBM   14.06  12.50   NOV  12.50  2.50   $  0.94   8.1%   5.0%
BNYN    8.72  10.38   NOV   7.50  1.63  *$  0.41   5.8%   5.0%
ASMI    8.50   8.41   NOV   7.50  1.56  *$  0.56   8.1%   5.0%
ELON    8.91   7.88   NOV   7.50  1.88  *$  0.47   6.7%   4.8%
ABTL   15.13  14.06   NOV  12.50  3.13  *$  0.50   4.2%   4.5%
PILL   14.88  12.50   NOV  12.50  2.88   $  0.50   4.2%   4.5%
DRYR   17.13  17.06   NOV  15.00  3.13  *$  1.00   7.1%   4.4%
MAPX    9.06   8.50   NOV   7.50  2.06  *$  0.50   7.1%   4.4%
EGGS    9.38   9.31   NOV   7.50  2.31  *$  0.43   6.1%   4.4%
NPIX   23.00  28.00   NOV  17.50  6.50  *$  1.00   6.1%   4.4%
GBLX   35.38  34.63   NOV  30.00  6.75  *$  1.37   4.8%   4.2%
NVDA   22.63  22.13   NOV  20.00  4.62  *$  1.99  11.0%   4.0%
NPNT   22.13  26.81   NOV  17.50  5.25  *$  0.62   3.7%   4.0%
LCBM   14.88  12.50   NOV  12.50  3.00   $  0.62   5.2%   3.8%
IRF    17.44  19.44   NOV  15.00  3.00  *$  0.56   3.9%   3.4%
PAIR   13.44  12.25   NOV  12.50  1.81   $  0.62   5.3%   3.3%
BNBN   20.00  18.38   NOV  17.50  3.38  *$  0.88   5.3%   3.3%
PRGY   21.75  25.38   NOV  17.50  4.88  *$  0.63   3.7%   3.2%
NEM    23.25  21.94   NOV  22.50  2.25   $  0.94   4.5%   2.4%
CS     16.69  16.69   NOV  15.00  2.38  *$  0.69   4.8%   2.1%
EGHT    5.00   4.25   NOV   5.00  0.88   $  0.13   3.2%   1.7%

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

Comments/Observations on Open Positions:

Lifecore Biomedical Inc (LCBM) rebounded this week and offered
a favorable early exit. A break below last Friday's low ($11.88), 
on a closing basis, may again warrant an early exit. Monitor the
Proxymed Inc (PILL) position as it moves towards support and
Newmont Mining Corp (NEM), if gold weakens further.

Positions Closed: Youbet.Com Inc (UBET); Beyond.Com Corp (BYND). 

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

Sequenced by Return Not Called

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

CYOE    5.56  NOV  5.00  QTO KA  1.06  1530   4.50  11.1%  11.1%
FLAS    9.63  NOV  7.50  UFL KU  2.63  35     7.00   7.1%   7.1%
SFSK    8.44  NOV  7.50  FQK KU  1.25  805    7.19   4.3%   4.3%

ITIG   10.00  DEC  10.00  ITU LB  1.25  13    8.75  14.3%  14.3%
RRRR   14.75  DEC  12.50  RRU LV  3.25  117  11.50   8.7%   8.7%
DRIV   22.75  DEC  20.00  DQI LD  4.25  65   18.50   8.1%   8.1%
PRGY   25.38  DEC  22.50  PUY LX  4.50  581  20.88   7.8%   7.8%
LTXX   16.00  DEC  15.00  UXT LC  2.06  40   13.94   7.6%   7.6%
TOPP    9.81  DEC   7.50  TOQ LU  2.75  395   7.06   6.2%   6.2%

Company Descriptions

CYOE - Coyote Network Systems $5.56 *** Volatility Play ***

Coyote Network is engaged in the sale of telecommunications
equipment, international long distance services and network 
services, primarily to entrepreneurial carriers, competitive 
local exchange carriers and Internet service providers. The
high call volume on Friday (669 contracts) and the inflated 
premium with no corresponding news make this interesting 
speculation. The issue has moved quickly back above the July -
August lows on heavy volume and looks ready to challenge the
September high. A reasonable cost basis on a volatile issue. 

NOV 5.00 QTO KA Bid=1.06 OI=1530 CB=4.50 RC=11.1% RNC=11.1%  

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


FLAS - FlashNet Communications  $9.63 *** What's Up? ***

FlashNet is a nationwide provider of consumer Internet access
and business services, offering high speed Internet access and
related services that enable customers to outsource Internet 
and electronic commerce activities. Flashnet announced record 
new subscribers for the third quarter though earnings are not 
due until November 4. There is no news to explain the jump in
price on Tuesday though there are plenty of "take-over" rumors.
Something appears to be brewing. Three week speculation with a
favorable cost basis. 

NOV 7.50 UFL KU Bid=2.63 OI=35 CB=7.00 RC=7.1% RNC=7.1%

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


SFSK - Safeskin Corporation  $8.44 *** Stage I Base ***

Safeskin is a leading developer and manufacturer of high-quality, 
powder-free, disposable latex and synthetic gloves for the 
healthcare, high-technology, scientific industries and consumer 
markets. Safeskin missed earnings estimates by a penny as it 
struggled with lower selling prices. The disappointment already
appears to have been priced in the issue as the stock has been
forming a base for 8 months. Safeskin is forecasting a better 
bottom line in Fiscal 2000. Favorable, short-term speculation.

NOV 7.50 FQK KU Bid=1.25 OI=805 CB=7.19 RC=4.3% RNC=4.3%

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


DRIV - Digital River  $22.75   *** On The Rebound ***

Digital River is the largest online source of software and a
leading outsource provider of Web-based commerce solutions. The
company provides software publishers and online retailers with
its proprietary technology for Internet delivery of more than
100,000 digital products, including 30,000 software products
and applications. DRIV is building on the underlying strength
of their core business; electronic software delivery and also
is developing a complementary array of e-business initiatives
that will contribute to future growth and competitive advantage.
Sales were up 27% in the third quarter and analysts expect new
revenues to increase exponentially.

DEC 20.00 DQI LD Bid=4.25 OI=65 CB=18.50 RC=8.1% RNC=8.1%

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


ITIG - Intelligroup, Inc.  $10.00 *** Next Leg Up? ***

Intelligroup provides a wide range of information technology 
services, including enterprise-wide business process solutions,
Internet applications services, systems integration and custom 
software development based on leading technologies. The company
provides information technology services to develop and implement
cost-effective client/server business solutions on a timely basis
by combining its expertise in a wide range of technologies and 
business processes with its proprietary implementation methodology
and development tools. Intelligroup reported record revenue for 
the third quarter and though net income was lower than last year,
they did beat estimates. They also announced an alliance with 
Compaq and an agreement with FirePond. We favor the cost basis
as an entry point as Intelligroup consolidates for the next move.

DEC 10.00 ITU LB Bid=1.25 OI=13 CB=8.75 RC=14.3% RNC=14.3%

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


LTXX - LTX Corporation  $16.00 *** 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 LTXX is exiting a lateral
consolidation to the topside. Earnings should be announced near
the third week of November.

DEC 15.00 UXT LC Bid=2.06 OI=40 CB=13.94 RC=7.6% RNC=7.6%

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


PRGY - Prodigy  $25.38 *** 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 reported a 3Q EPS loss of -$0.38 on revenues of 
$48.9 million (beating estimates) and reported subscriber growth
up 181%, to 1.2 million users. With its Telmex relationship intact
and a great third quarter, Prodigy is bringing out the advertising
guns with TV spots featuring music legend Aretha Franklin and 
Basketball Hall of Famer Larry Bird. The chart looks great. 

DEC 22.50 PUY LX Bid=4.50 OI=581 CB=20.88 RC=7.8% RNC=7.8%

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


RRRR - Rare Medium Group, Inc. $14.75 *** Upside Break Out! ***

Rare Medium Group is an Internet business services firm, helping 
clients develop Internet strategies, improve business processes 
and develop interactive content using Internet-based technologies.
Rare Medium develops Internet and web-based solutions primarily 
for large and medium-sized corporations, including Microsoft, The
New York Times, Epson, Pfizer, Hotel Reservation Network and the 
Federal Reserve Bank, among other leading companies. Lots of news
out on Rare Medium since we ran this October 3. Just closed at a
five month high (may challenge the April highs) and the downtrend
has been broken.

DEC 12.50 RRU LV Bid=3.25 OI=117 CB=11.50 RC=8.7% RNC=8.7%

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


TOPP - Topps Company, Inc.  $9.81 *** Pokemon Mania! ***

TOPP is marketer of collectible picture products. TOPP also 
distributes Bazooka brand bubble gum, novelty candy products, 
branded lollipops, collectible toys, comic books, and sticker 
and album collections. Mom...Dad, can I get some "MORE" Pokemon
cards?!? TOPPS said it expects sales of Pokemon products to be
in the range of $80 million to $100 million for the fiscal year,
based on orders for cards featuring the Pokemon movie. Not to 
mention the Pokemon Lollipop shipments! When Topps reported
earnings this quarter they beat estimates by $0.06 and said 
$0.05 a share can be attributed to the distribution of Pokemon
cards. Where to enter? We favor a conservative entry point below
the 150 dma that offers a monthly return of 4% (8% using Margin)
and about 30% downside protection. Just in case this is a 
demonstration of irrational exuberance...

DEC 7.50 TOQ LU Bid=2.75 OI=395 CB=7.06 RC=6.2% RNC=6.2%

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


Option Trading Mechanics: The Exchange...

This week, the OptionInvestor staff is in sunny California at the
1999 San Francisco MoneyShow. The Bay area is home to one of the
country's major option exchanges; the Pacific Options Exchange
(PCX). The location of the event offered a great opportunity to
visit the professionals and learn more about the most common
trading techniques used by market makers on the exchange floor.

The PCX and the Chicago Board of Options Exchange (CBOE) both
utilize a competitive market maker system, while the American
(AMEX) and Philadelphia (PHLX) exchanges are specialist markets.
These specialists are thought to have an exclusive franchise in
the maintenance of a market, subject to the specialist's capital
and inventory. At most exchanges, there are also traders referred
to as locals that are funded by individuals or institutions. They
buy and sell options for private accounts and are prohibited from
executing orders on behalf of public customers. Since there is
always a buyer for each option sold (option purchases and sales
must match at the end of each day), these locals help maintain 
liquidity in the options market.

Option markets that use competitive systems are consensual, where
the liquidity and capital is spread around to those in the crowd.
The PCX and the CBOE place certain market makers (The Lead Market
Maker at PCX and the Designated Primary Market Makers at CBOE) in
a quasi-specialist role. In exchange for assuming more marketing
and customer service responsibilities, these market makers enjoy
a guaranteed order flow participation. The result is increased
accountability with greatly enhanced customer convenience and the
traditional benefits of the competitive system are maintained. All
trading posts in the PCX options market are staffed by LMMs and
the seat prices are subject to supply and demand just as options 
prices. The current market for a seat on the PCX is $220,000 bid 
at $280,000 offered.

The risk management strategies and floor mechanics are the most
difficult part of the learning curve. Mistakes are expensive and
repeat offenders are short-lived. Implied volatility and option
pricing theory are the mathematical principles that a specialist
must understand to be successful. Most floor traders participate
in neutral combinations that don't require a specific movement in
the underlying security to be profitable. They utilize the GAMMA
in options to create profitable positions. This type of trading
is much different than our retail style of buying/selling options
(or spreads) to profit from directional moves in the underlying
stock. The concept involves being long or short GAMMA in a class
of options at the right time. GAMMA is the ratio of a change in
the option DELTA to a small change in the price of the asset on
which the option is written. You might think of it as a desire to
own options when there is a demand for them or be short options
when they are in great supply and inexpensive to repurchase. The
most unique tool of the professional trader is the electronic,
hand-held terminal that brings computer support to specialists on
the trading floor. These unique, state-of-the-art devices provide
market makers with automated trading data, maintaining intra-day
positions with real-time risk assessment. The computers store all
of the theoretical values and profit equations and offer portfolio
management ability to the associated clearing firm.

The specialists that I spoke with were very friendly and I highly
recommend a visit to one the major exchanges. The lessons learned
are a basic requirement for any option trader who is interested in
becoming a successful, long-term participant in the complex market
of derivatives. Those of you interested in more information on the
PCX should go to:


Good Luck!


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

NVX     7.94   5.31   NOV   5.00  0.56  *$  0.56  26.0%  16.2%
DUSA   14.94  13.50   NOV  12.50  0.50  *$  0.50  12.4%  13.4%
SUPG   26.56  28.13   NOV  22.50  0.75  *$  0.75  10.3%  11.1%
ENMD   24.75  24.00   NOV  20.00  0.75  *$  0.75  12.7%  11.0%
NPIX   23.00  28.00   NOV  15.00  0.81  *$  0.81  15.0%  10.8%
PRGY   21.63  25.38   NOV  17.50  0.50  *$  0.50  10.0%  10.8%
NSPK   12.44  11.94   NOV  10.00  0.44  *$  0.44  14.8%  10.7%
TALK   14.94  15.94   NOV  12.50  0.38  *$  0.38   9.7%  10.5%
USIX   35.00  33.31   NOV  25.00  0.75  *$  0.75   9.7%  10.5%
DUSA   14.38  13.50   NOV  10.00  0.44  *$  0.44  13.3%   9.6%
NPIX   23.25  28.00   NOV  15.00  0.56  *$  0.56  10.7%   9.3%
LTXX   15.56  15.81   NOV  12.50  0.38  *$  0.38  10.7%   9.3%
SUPG   24.38  28.13   NOV  20.00  0.63  *$  0.63  10.5%   9.1%
KIDE   40.44  73.13   NOV  25.00  1.13  *$  1.13  12.3%   8.9%
NEWZ    9.47  10.88   NOV   7.50  0.31  *$  0.31  14.1%   8.7%
SPGLA  12.00  14.50   NOV  10.00  0.38  *$  0.38  11.9%   8.7%
VERT   39.75  56.00   NOV  30.00  1.25  *$  1.25  13.6%   8.4%
BNYN    9.91  10.38   NOV   7.50  0.31  *$  0.31  13.5%   8.4%
CNCX   26.50  25.63   NOV  20.00  0.44  *$  0.44   7.7%   8.3%
RMDY   29.00  43.00   NOV  22.50  0.50  *$  0.50   7.9%   6.9%
SUPG   22.50  28.13   NOV  17.50  0.56  *$  0.56  11.1%   6.9%
TALK   12.63  15.94   NOV  10.00  0.31  *$  0.31  10.9%   6.8%
NPIX   23.88  28.00   NOV  15.00  0.31  *$  0.31   6.1%   6.6%
ZOMX   34.63  27.88   NOV  25.00  0.69  *$  0.69   9.1%   6.6%
ZIXI   33.00  39.75   NOV  20.00  0.50  *$  0.50   7.0%   6.1%
LGE    22.44  22.00   NOV  20.00  0.56  *$  0.56   7.9%   5.7%
TUTS   34.69  33.38   NOV  25.00  0.38  *$  0.38   5.2%   5.6%
NPIX   19.13  28.00   NOV  12.50  0.38  *$  0.38   9.0%   5.6%
HRBC   17.00  15.94   NOV  12.50  0.31  *$  0.31   8.4%   5.2%
CPTH   44.19  45.75   NOV  30.00  0.56  *$  0.56   6.0%   5.2%

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

Comments/Observations on Open Positions:

Theglobe.Com Inc (TGLO) did not rally with the Market and has
been moved to the closed list.  

Positions Closed: Ardent Software (ARDT); Theglobe.Com Inc (TGLO).

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

Sequenced by ROI  

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

HELX   40.31  NOV 35.00  HHQ WG  1.00  255   34.00   8.5%
DRIV   22.75  NOV 20.00  DQI WD  0.56  176   19.44   8.1%
IRF    19.63  NOV 17.50  IRF WW  0.38  13    17.12   6.2%
RMDY   43.00  NOV 35.00  LRQ WG  0.50  59    34.50   5.2%
EXTR   80.31  NOV 60.00  EUT WL  0.75  192   59.25   4.5%

STRX    7.63  DEC  5.00  TQQ XA  0.44  0      4.56  22.4%
MLTX   16.19  DEC 12.50  UXM XV  0.50  0     12.00  13.4%
IONA   21.38  DEC 15.00  YWQ XC  0.56  7     14.44  11.6%

Company Descriptions

DRIV - Digital River  $22.75   *** On The Rebound ***

Digital River is the largest online source of software and a
leading outsource provider of Web-based commerce solutions. The
company provides software publishers and online retailers with
its proprietary technology for Internet delivery of more than
100,000 digital products, including 30,000 software products
and applications. DRIV is building on the underlying strength
of their core business; electronic software delivery and also
is developing a complementary array of e-business initiatives
that will contribute to future growth and competitive advantage.
Sales were up 27% in the third quarter and analysts expect new
revenues to increase exponentially.

NOV  20.00  DQI WD  Bid=0.56  OI=176  CB=19.44  ROI=8.1%

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


EXTR - Extreme Networks  $80.31   *** Extremely Favorable ***

Extreme Networks designs, develops, manufactures and sells high
performance LAN solutions that adapt swiftly to change and enable
future applications for the new enterprise. The company's family
of stackables and modular switching systems combine Ethernet and
the Internet Protocol with wire speed layer three switching to
increase the flow of information and allow for future network
growth. A recent upgrade with increased estimates from Robertson
Stephens after the company reported solid earnings results. The
upside in the quarter was driven by excellent revenue growth in
both of the company's product lines.

NOV  60.00  EUT WL  Bid=0.75  OI=192  CB=59.25  ROI=4.5%

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


HELX - Helix Technology  $40.31   *** Still Going Strong! ***

Helix Technology is a global leader in the development and
application of innovative solutions in the field of vacuum
technology. They provide a broad range of critical components
and subsystems key to the performance of semiconductor, flat
panel and data storage manufacturing facilities along with new
information solutions and ongoing operational support services
to semiconductor device producers throughout the world. Posted
strong order bookings and revenues in the quarter with excellent
performance gains expected in the year ahead. Solid technicals
and a bullish trend with some support near the cost basis.

NOV  35.00  HHQ WG  Bid=1.00  OI=255  CB=34.00  ROI=8.5%

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


IRF - International Rectifier  $19.63  *** A New High! ***

International Rectifier designs, manufactures and markets power 
semiconductors that refine or condition electricity from wall 
outlets or batteries into a more usable form. IRF reported solid
earnings this month, beating estimates by a penny. Their revenue
increase reflected strong telecom and PC demand while total unit
shipments increased 45% year-to-year and 11% sequentially. The
price continues to move higher and now the issue is near a two
year high with only one remaining technical hurdle at $25. Lehman
Brothers recently upgraded IRF from NEUTRAL to BUY with a 12-month
price target of $35 per share based on accelerating revenue growth
and expanding gross margins.

NOV  17.50  IRF WW  Bid=0.38  OI=13  CB=17.12  ROI=6.2%

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


RMDY - Remedy  $43.00     *** Up, Up And Away! ***

Remedy develops, markets and supports highly adaptable, client to
server applications software for support and business processes.
They are a leading provider of adaptable enterprise applications
and the fastest solutions available for IT Service Management,
Customer Relationship Management & Employee Workplace Automation. 
Remedy is the #2 enterprise applications vendor worldwide and the
industry is growing rapidly. More information on this issue is
available in the "calls" section of the OIN.

NOV  35.00  LRQ WG  Bid=0.50  OI=59  CB=34.50  ROI=5.2%
Chart = http://quote.yahoo.com/q?s=RMDY&d=3m


IONA - Ionay  $21.38     *** Unique Technicals ***

Ionay provides software products that enable the development,
integration and management of network-based applications. They
help organizations build and deploy enterprise portals, Internet
commerce sites, and other large-scale distributed applications.
The IONA iPortal addresses the problems in developing, deploying
and managing a specific class of business applications commonly
referred to as enterprise portals. IONA iPortal Suite unifies the
members of an e-business project team and allows them to deploy
and manage an enterprise portal that integrates with existing
enterprise applications. We favor the bullish technical outlook.

DEC  15.00  YWQ XC  Bid=0.56  OI=7  CB=14.44  ROI=11.6%

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


MLTX - Multex.com  $16.19   *** Bottom Fishing ***

Multex.com is a provider of online investment research and
other information services designed to meet the needs of 
individual and institutional investors, investment banks, 
brokerage firms and corporations. Their services enable online
access to over 900,000 research reports and other investment 
information on over 15,000 companies from more than 400 
investment banks, brokerage firms and third-party research 
providers worldwide. We favor the technicals and you can learn 
more about Multex at multex.com.

DEC  12.50  UXM XV  Bid=0.50  OI=0  CB=12.00  ROI=13.4%

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


STRX - Star Telecommunications  $7.63   *** Telecom Mergers ***

Star Telecom is an international long-distance provider offering
highly reliable, low-cost, switched-voice services on a wholesale
basis, primarily to U.S long-distance carriers. They provide long
distance service to foreign countries through a flexible network
of resale arrangements with long distance providers, termination
relationships, international gateway switches and leased or owned
transmission facilities. Recent speculation on the outright sale
of the company or a division, possibly to German interests. The
cost basis appears to be a fair price for the issue.

DEC  5.00  TQQ XA  Bid=0.44  OI=0  CB=4.56  ROI=22.4%

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



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