Option Investor
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Daily Newsletter, Tuesday, 11/02/1999

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The Option Investor Newsletter         Tuesday  11-2-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        11-2-99           High     Low    Volume Advances Decline
DOW    10581.80 - 66.70 10751.90 10572.70   906,760k 1,651  1,348
Nasdaq  2981.63 + 13.98  3014.84  2971.68 1,244,140k 2,073  1,879
S&P-100  707.82 -  4.39   720.40   706.87    Totals  3,724  3,227
S&P-500 1347.74 -  6.38  1369.44  1346.49            53.5%  46.5%
$RUT     432.39 +  0.57   435.34   431.64
$TRAN   2968.08 -  8.42  3005.12  2962.26
VIX       23.94 +  1.71    24.03    21.34
Put/Call Ratio      .57
*************************************************************

NASDAQ 3,000 - Easy Come, Easy Go

It appears that stocks have finally lost a little of the momentum 
that pushed the Dow and NASDAQ up so strongly since the marketlow 
on October 18. Most stocks had a lot of trouble holding on to 
morning gains and sold off in the afternoon. 

This morning the Dow rose on comments from Alan Greenspan and 
much-improved market sentiment for both bonds and stocks. At one 
point this morning the Dow traded up about 98 points, but as the 
afternoon progressed a wave of selling forced the major indexes 
off of their highs, and pushed them to their session lows. It 
was reported that at least part of the reason for the afternoon 
sell-off was comments made by a JP Morgan analyst who predicted 
no less than 3 Fed rate hikes over the next 9 months. If that 
alone could cause a market decline, some traders must be begging 
for a reason to sell their stocks and take some profits off of 
the table. 

Greenspan's comments are more closely watched, but more ambiguous 
than any analyst's. This morning the Fed chairman addressed 
another group of bankers and essentially said that rising real 
estate prices have contributed to America's collective spending 
spree more than soaring stock prices. How we translate that into 
anything useful is anyone's guess. It seems Mr. Greenspan and 
many of the other Fed governors enjoy having every economist, 
analyst, and trader hang on every word they say, hoping every 
small piece of economic data pleases the wise, father figure. 
I'm sure Freud had some sort of theory to describe that behavior. 

The Dow ended the trading day down 66.67 points, or .63%, at 
10,581.84. With an intra-day range of about 170 points it's fair 
to say it was another volatile day, although triple-digit moves 
don't even raise eyebrows any more. Even with its newly realigned 
index, the Dow underperformed the NASDAQ and S&P 500 for the 
second day in a row. The following chart show's the Dow's 
relative underperformance.


 

The NASDAQ set yet another record high today, but, like the Dow, 
saw the bulk of its gains melt away in the afternoon. After 
trading as high as 3,014.84 and spending most of the day well 
above the psychologically important 3,000 level, the NASDAQ 
settled off its highs and closed up only 13.96, or 0.3%, at 
2,976.50. After running so hard it is natural that the NASDAQ 
would eventually begin to struggle a little while trying to push 
to new highs. The S&P 500 also had an afternoon sell-off, closing 
more than 20 points off its highs. It finished at 1,347.74, down 
6.38 points, or .47%. 


 

Today's volume was very strong again, with about 1.15 billion 
shares trading hands on the NASDAQ and 878 million on the NYSE. 
In spite of the negative afternoon, advancing stocks beat 
decliners 17 to 15 and 16 to 13 on the NASDAQ and NYSE 
respectively. 

Chip stocks were again among the best performing in the market 
today. Shrugging off yesterday's earthquake in Taiwan, many chip 
stocks rallied to all-time highs. The widely followed SOX index 
hit a new all-time high today at 571.57, up 2.9%, but off of the 
day's highs. Chemical and banking stocks also had a good day, as 
both indexes rose 0.5%. Those were the only mainstream sectors 
outside technology who put in a good day today.

As hard as it is to believe, HMO stocks were probably the 
strongest in the market today, with the HMO index rising 6.6% 
today. The index has risen about 20% during the past five 
trading sessions, which is a strong move, but when you consider 
that it is still about 30% off of its 52-week high, it still has 
a long way to go. With such a strong, quick move in HMO stocks, 
one would think that would be a cue for Hillary Clinton to start 
clamoring for socialized medicine again.

The Internet sector continued to struggle today, as TheStreet.Com 
Internet index fell 1.2%. Internet stocks have been languishing 
in the wake of earnings season as investors have been trying to 
decide if they are still willing to wait indefinitely for good 
earnings. Several Internet stocks, such as eBay, who merely met 
but did not exceed expectations, have suffered as a result and 
the rich premiums many Internet stocks have commanded may be 
causing some investors to balk. There are indications that 
traders of Internet stocks are becoming more selective and 
requiring more of the companies they invest in.

The 30-year Treasury bond had another respectable day. The 
benchmark rose 10/32 and brought the yield down to 6.14%. We have 
been getting mixed messages about the future direction of interest 
rates, with some seeing a resumption of the yearlong decline in 
prices and others pointing to last Monday as a bottom. Nothing 
fundamental has changed and it appears that a 25 basis point hike 
is priced into the market. We will probably see the yield trade 
in a range until something substantial gives us some direction. 
The following chart shows the yield on the 30-year Treasury, 
which is currently sitting at a long-term support level. If it 
is broken it could signal a top in bond yields.


 

Friday's employment reports for October will be another 
indication of inflationary pressures, and this week's only real 
piece of potentially market-moving data. Analysts are currently 
expecting earnings growth to slow a little and the unemployment 
rate to remain steady with September's data. 

The overall sentiment for the market has turned more bullish than 
it was a few weeks ago. That alone should cause us to be a little 
more cautious. A lot is being made of the NASDAQ reaching the 
3,000 level. CNBC is planning a 2 1/2-hour extravaganza show when 
it has a close above that level. While in the "Information Age" it 
may not be quite as bearish as it once was when your shoeshine boy 
gives you a stock tip, it can be dangerous to trade based solely 
on news. NASDAQ 3,000 has only psychological significance, which 
can drive the market temporarily, but can also be very fickle.

It would not be surprising to see the market a little weaker 
tomorrow morning, based on today's sloppy close. Even with the 
big rally in the stock market there are still a lot of good plays 
for both value and momentum investors. Look for pullbacks to 
either initiate or add to positions. Good luck and happy trading.

Chad Poulson
Research Analyst




**********
STOCK NEWS
**********

Show Me the Money

By S.P. Brown

"In the long-run we're all dead," so said famed British 
economist John Maynard Keynes.  Some investors in Internet 
retailer Amazon.com (AMZN) are beginning to wonder if Keynes' 
simple declarative sentence will eventually hold true for 
their investment. 

http://www.OptionInvestor.com/stocknews/110299_1.asp

****

Legislation Beams New Competition to Cable Operators

By Cindy Christ

Congress is ready to dish up legislation that could send satellite 
TV subscriptions into orbit, CNN reported today.

On Monday sources close to negotiations said that congressional 
lawmakers have reached tentative agreement on a bill that would 
allow direct satellite television companies to offer local 
programming. 

http://www.OptionInvestor.com/stocknews/110299_2.asp

****

Shooting for the Stars: IPO Watchers Look For High Flyers

By Cindy Christ

Tech stocks helped power the Nasdaq Composite Index above 3,000 
for the first time today, a scenario which bodes well for a burst 
of new issues slated for November.

More than 70 IPOs are scheduled to debut this month, according to 
Thomson Financial Securities Data, who reports that the success of 
recent deals has netted more than $1 billion in issuances for six 
straight weeks.

http://www.OptionInvestor.com/stocknews/110299_3.asp

****

A Value Play in Cyberspace

By S.P. Brown

"Buy on bad news, sell on good" is a cliché as old as the 
stock market itself.  For investors who believe in this old 
axiom, and who are adventurous, there's an Internet company 
that may be of interest.

http://www.OptionInvestor.com/stocknews/110299_4.asp



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

As of Market Close - Tuesday, November 2, 1999 

                   Key Benchmarks
Broad Market       Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
DOW Industrials   10,750  11,320  10,582    BEARISH   9.23
SPX S&P 500        1,350   1,420   1,348    Neutral  10.29
OEX S&P 100          690     725     708    Neutral  10.28
RUT Russell 2000     440     465     432    BEARISH   9.14
NDX NASD 100       2,320   2,500   2,627    BULLISH  10.28
MSH High Tech      1,120   1,250   1,322    BULLISH  10.28

XCI Hardware       1,000   1,090   1,062    Neutral  10.15
CWX Software         750     800     984    BULLISH   9.03
SOX Semiconductor    450     525     572    BULLISH  10.29
NWX Networking       525     615     639    BULLISH  10.28
INX Internet         450     525     495    Neutral  10.15

BIX Banking          660     690     669    Neutral  10.28
XBD Brokerage        410     440     425    Neutral  10.28
IUX Insurance        645     660     606    BEARISH   7.23

RLX Retail           915     960     884    BEARISH   7.23
DRG Drug             365     390     380    Neutral  10.19
HCX Healthcare       720     785     756    Neutral  10.19
XAL Airline          180     190     147    BEARISH   5.21
OIX Oil & Gas        280     315     289    Neutral  10.21



Posture Alert    
Profit taking continued Tuesday, even though the Nasdaq broke the 
3000 barrier midday.  Sectors were mixed across the board, with 
real strength only in Semiconductors (+2.89%). Losers were lead 
by the Drug sector (-2.01%), followed by Internet (-1.79%), 
Oil & Gas (-1.59%), and Networking (-1.39%). As a side note; even 
with last week's rally; the Dow never broke into Neutral territory, 
and as such, could be indicating a failed rally for the broad 
market.


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

/members/marketposture




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

Tuesday, November 02, 1999

This was Expected!

After last week's monster gains, the start of this week has been 
quite lackluster. This momentary stall should come as no surprise, 
considering we just ran the equivalent of one mile in 3 minutes, 
so taking a breather was only due.

The initiation of the new Dow stocks (INTC, MSFT, SBC, HD) has 
been a non-event, as the Dow has given back 150 points to start 
the week off. One thing that bothers us about current market 
conditions is that the DJIA failed to break above previous 
highs set many weeks ago. Granted, it is still early, but this 
could be the start of a failed rally. We've had leadership in 
technology, which is expected, but we need confirmation for this 
latest up-move with participation from the DOW. If we don't get 
confirmation, we could be back to a trading range market. 

We had mentioned in Sunday's letter that the Volatility Index 
(VIX, 22) was at the low end of its 52 week range. Historically, 
we mentioned that this number was a good exit for selling some 
positions. So far this week, it has proven again to be a good 
selling point. It now stands at 23.94. 

Lastly, the 30-year treasury continues its rally, closing at a 
yield of 6.136%. This bodes extremely well for the market, and 
should it hold, may help propel this market into new territory for 
the new century. However, as quick as everyone is to pull the 
trigger, we need to make it through this upcoming Fed meeting, so 
be patient.

As a side note, we would like to thank all of the OI subscribers 
who made it to the San Francisco Money Show. Your intelligent 
input and positive feedback is greatly appreciated!

    
BULLISH Signs: 

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.

Earnings: 
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.

Interest Rates:
The yield on the 30-yr Treasury is now safely off the 52-wk high.


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. 

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

BEARISH Signs:

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      Tues
Benchmark                       (10/29)     (11/2)

Overhead Resistance (720-740)    14.60        9.08

OEX Close                       717.03      707.82

Underlying Support (700-715)      0.21        1.46


                     
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Based on 11/2/1999, support is still light, and overhead resistance 
is heavy.


Put/Call Ratio                  Friday     Tues
Strike/Contracts                (10/29)    (11/2)


CBOE Total P/C Ratio             .69       .57  
CBOE Equity P/C Ratio            .42       .46  
OEX P/C Ratio                   1.51      1.33


Peak Open Interest (OEX)  Friday           Tues
Strike/Contracts         (10/29)          (11/2)


Puts                     670 / 11,886     670 / 10,895
Calls                    690 /  7,626     740 /  8,223
Put/Call Ratio             1.56              1.33


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

November 2, 1999                        23.94 


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



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

Daily Results

Index      Last    Mon     Tue    Week
Dow     10581.84 -81.35  -66.67 -148.02
Nasdaq   2981.63   1.22   13.98   15.20
$OEX      707.82  -4.82   -4.39   -9.21
$SPX     1347.74  -8.81   -6.38  -15.19
$RUT      432.39   3.18    0.57    3.75
$TRAN    2968.08 -82.48   -8.42  -90.90
$VIX       23.94  -0.33    1.71    1.38

Calls              Mon     Tue    Week

SEBL      119.56   7.88    1.88    9.75  SEBL continues to reward
ORCL       53.00   3.63    1.81    5.44  New, momentum is back
ADIC       41.75   7.38   -2.88    4.50  Waiting for a bounce
AOL       133.13   4.69   -1.13    3.56  AOL keeps moving on up
ADPT       48.06   1.81    1.25    3.06  New, the comeback kid
MXIM       81.50  -0.56    3.13    2.56  New, split candidate
LVLT       69.88  -0.25    1.75    1.50  LVLT goes a few rounds
GMST       88.00   0.25    0.88    1.13  GMST continues to sparkle
DELL       41.19   0.63    0.44    1.06  Slow and steady
WMT        56.13  -0.06   -0.13   -0.19  Never discount earnings
SYMC       47.00   0.13   -0.88   -0.75  A gallant break through
CMVT      112.38  -3.88    2.75   -1.13  A break through resistance
RATL       41.25  -1.19   -0.31   -1.50  Providing possible entry
PCS        81.00   1.75   -3.69   -1.94  A new spin on old news
VRTS      104.75  -1.88   -1.25   -3.13  Testing new territory
IMNX       59.44  -1.06   -2.50   -3.56  A tough day for Biotechs
VSTR       91.69  -3.75   -3.31   -7.06  VSTR-reality takes over
EMLX      144.19  -4.94   -6.81  -11.75  Guilty by association

Puts

BBY        50.88  -4.19   -0.69   -4.88  Future earnings concerns
INKT       96.94  -3.63   -0.88   -4.50  Are we back on track?
GT         39.25  -2.00   -0.06   -2.06  The smell of burning rubber
LTD        39.13  -1.19   -0.69   -1.88  The clouds begin to clear
ALD        56.06   0.81   -1.69   -0.88  Sending mixed signals
PBI        44.75   1.19   -2.00   -0.81  Risk reward in our favor
VISX       65.50  -1.69    4.63    2.94  Blinded by the light?



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


The Option Investor Newsletter         Tuesday  11-2-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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


CALLS:
*****

No dropped calls today.

PUTS:
*****

No dropped puts today.



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

LVLT $69.88 +1.75 (+1.50) After a few rounds of profit-taking
in the shares of LVLT, the momentum players resurfaced today
pushing the shares as high as $72.19.  Late in the day after
an announcement out of J.P. Morgan that they expect the Fed
to raise interest rates three more times, this spooked the
overall market and caused the pullback in LVLT.  From a 
technical standpoint, it looks as though the recent profit- 
taking pullback just filled the gap, between $67-$69.  The 
moneystream and volume still remain strong.  This should 
continue to trigger higher prices, although you should remain 
cautious in these current market conditions.  Continue to look 
for buying opportunities on any pullbacks to support levels.  
Current short-term trading support is at the $67.25 level and 
then again major support at the $64.50 level.  In the news 
this week Juno Online Inc announced a relationship with LVLT.  
Juno will use LVLT's fiber network.   

RATL $41.25 -0.31 (-1.50) After two big volume days last week, 
and with some stocks following through this week to the upside, 
pushing the Nasdaq above the 3,000 level intra-day, today's 
closing pullback in most stocks should not come as a big 
surprise.  RATL in particular suffered from some profit-taking
after recent 52-week highs at the $43.38 level.  The positive
technical picture remains in place with the volume and 
moneystream still bullish.  These pullbacks should provide us 
with some possible entry points at current levels.  The stock 
hit an intra-day low of $40.63, before bouncing back to close 
at $41.25.  We warned in Sunday's write up to confirm the upside
trend before entering a position.  The street remains positive 
on the shares going forward.  On Monday Hambrecht & Quist
analyst Chris Galvin came out with positive comments on the 
software sector in general and specifically RATL.  We remain 
bullish at this point, and find trading support at the $40.38, 
and major support at the $39.50 level.    

CMVT $112.38 +2.75 (-1.13) Here we are again on CMVT.  It is 
flattening out on light volume.  We saw this happen last week 
before CMVT rattled off $8 to the upside.  The sellers have 
been on light volume on any pullbacks thus far.  This gives us 
time to plan an entry point before the next move.  The move I 
am talking about looks like it may have began at 3:00pm EST as 
the stock took off despite the market declining.  There was no 
news to spur the rally but rather just part of the trend that 
CMVT has been following for the past 2 weeks.  We closed today 
above resistance at $112 thanks to the final spurt.  That puts 
the next resistance at $115, which is the old high from last 
week.  Support is at $110, followed by support at the 10-dma 
at $107.50.

ADIC $41.75 -2.88 (+4.50) Watch out above!  That is what ADIC 
screamed as it headed out of the gates on Monday.  We mentioned 
on Sunday about the late Friday sell-off that provided us with 
a great entry point.  ADIC opened at $39 and never looked back 
by hitting $46 at the end of the first hour of trading.  From 
there it was consolidation that pulled it back below $42 for 
just a moment and slowly trended up for the rest of the day.  
Tuesday saw a new 52-week high at $47 early before trending 
down for the rest of the session.  We haven't seen any fresh 
news this week it trade on.  From here it is a matter of finding 
another good entry point for the next move.  We have support 
at $41.50 which held today and then again at $40.  The market 
may be a factor too with the fresh economic numbers due on 
Thursday and Friday.  If ADIC wants to drift lower, we will 
let it show us a bounce off support before initiating a new 
play.   

VRTS $104.75 -1.25 (-3.13) It tested new territory but fell with 
the markets.  Veritas is holding the line at $104 and even took 
a stab at a new high of $110.63 today.  Everything was looking 
good after VRTS took Monday off to rest.  This morning VRTS shot 
out of the gate but when the NASDAQ topped out at 3014 and sold 
off, VRTS was taken with it as investors started to lock in 
profits from a three day run.  If you recall on Sunday, we said 
to watch for a pullback and today it appears to have stated.  
Should the selling continue VRTS looks to have support at $100 
price or 10-dma.    

EMLX 144.12 -6.81 (-11.75) Guilty by association.  Even though 
EMLX has been a stellar performer, it could not hold up to the 
market pressure and has sold off for the past two days.  Where
will it stop you might ask?  Support is at $137 and strong support
at that.  Watch for volume as sellers can tend to over react with 
market forces.  Emulex is still on track for a nice run into 
their shareholder vote on the 18th but is capable of large price 
swings in either direction.  Volume was slightly below average and 
the decline today was slow and steady. Balance of power continues
to remain peaked and the selling was primarily small amounts of 
shares indicating the big players are still in for the long haul.
When the markets return to strength you can be sure EMLX will be 
out in front.  Watch your positions close over the next couple days 
and plan for good entry points if  the $137 level holds.

GMST $88.00 +0.88 (+1.13) Our star continues to shine as GMST 
traded up to another new 52-week high.  GMST picked up the 
pace early on in trading today, set a fairly solid support at 
$88 and continued all the way up to a high of $90.41.  GMST 
pulled back with the market in the afternoon and settled in 
right around $88.  Being that this is an earnings run, a new 
entry is still possible, however it will be imperative to 
close your positions out by next Wednesday, as GMST is set to 
announce after the bell.  Should the $88 support hold, it 
would make for a nice entry point tomorrow.  If GMST opens 
down tomorrow, the next support is at $87.  The only resistance
is the new high of $90.41.  Today, it was announced that TV 
Games Network, a subsidiary of TV Guide, entered into a ten 
year marketing alliance agreement with EchoStar to convert its 
C-band customers to its DISH Network.  EchoStar has also agreed 
to broadcast TVG's live horse racing and interactive wagering 
network.  As you know, TV Guide entered into a merger agreement 
with GMST at the beginning of October.   

VSTR $91.69 -3.31 (-7.06) We are waiting for VoiceStream to 
settle back into it's channeling pattern as the takeover rumors 
die down.  VSTR made a solid bounce at $90 in afternoon trading 
and should this support hold, could make for solid entry 
tomorrow.  VSTR has further support at the 10-dma, currently at 
$88.  VSTR traded all the way up to $102.94 on Monday, a new 
all time high.  We see resistance at $100 though as VSTR 
demonstrated yesterday, it has no fear of trading above that 
level.  Obviously, you will want to make sure VSTR has finished 
the takeover rumor pullback and see a return of positive 
momentum before entering a new play.  

WMT $56.13 -0.13 (-0.19) Wal-Mart has had a few rather flat 
days in the market, but we are not ready to discount it just 
yet.  WMT has set and repeatedly tested support at $56.  It 
closed just $0.13 above this level and being that Wal-Mart is 
on an earnings run, could provide a solid entry point to take 
advantage of the current earnings run.  WMT has further 
support at its 10-dma of $55.  We are nearly $2.50 below 
resistance, of which WMT should have no problem reaching and 
possibly breaking through as it enters into the final days of 
it's earnings run.  Be prepared to close out your positions by 
next Monday, as Wal-Mart is set to announce before the bell on 
Tuesday.  Wal-Mart announced today that they plan to test the 
new Wal-Mart Neighborhood Market, a full service grocery, in 
Texas by the end of next year.  A panel of various financial 
gurus gathered at The Money Show in San Francisco this last 
weekend and discussed the future of the DOW.  WMT was named 
as one of the best places to have your money as the majority 
of panel participants see the DOW heading toward 13,000. 

PCS $81.00 -3.69 (-1.94) Did you protect those profits with stop 
loss orders?  Good!  Though up yesterday, PCS got bush-whacked 
today for a $3.69 loss as a result of a news story noting that 
Comcast Cable was selling its holdings in PCS.  Our question is 
"what took you so long?"  This is actually old news re-spun to 
the negative.  All of the founding partners of Sprint PCS have 
already sold their interest back to Sprint Communications, PCS's 
parent, in an agreement reached and announced last year.  Comcast 
opted to HOLD part of their position and resell in the open 
market at a later date.  Besides, PCS doesn't play strategically 
well with Comcast's plans for the future.  The point here is have 
no fear - there is no collapse coming.  In fact in the last 10 
minutes of trade, volume came in strong, causing the issue to 
close just shy of its high of the day.  For those wanting the 
numbers, 4.5 mln shares traded after the bell at $81 - can you 
say "support"?  This could be a great buying opportunity so long 
as the rest of the market cooperates.  Historical support is at 
$80 intraday, $78 at the next level down.  Resistance is at $85, 
so there's room to run.  Confirm market direction and keep your 
stops set just in case the market isn't as cooperative as we'd 
like.

IMNX $59.44 -2.50 (-3.56) Stocks in the biotech and drug sector
had a tough day for the most part.  The index lost over 3% today
mostly on the heels of Gilead Science(GILD).  Yesterday a FDA 
panel nixed a Gilead drug, recommending the FDA not approve the
company's antiviral drug adefovir.  Adefovir is a drug that would
be used in the treatment of HIV patients.  With the decline the 
past two days in the price of IMNX we are waiting for a bounce
as an opportunity to buy calls.  Sunday we mentioned support for 
IMNX is in the $59-$60 area and then again at $55-$56.  Volume 
on the pullback at this point has been light, suggesting what 
we are seeing is probably profit-taking.  Remember IMNX was up 
$9 last week so a pullback of $4-6 would not be out of line and 
may provide us with a great opportunity to jump in later this 
week.  If investors can't shake off the GILD news and the sector 
continues to be weak, our chances for a profitable play on IMNX 
will be diminished.  The mood in the broader markets became 
somewhat uneasy late in the day today with investors becoming 
skittish again concerning interest rates.  Before entering a new 
play consider the movement in the broader markets as well as 
IMNX.  As always consider your risk profile prior to entering 
any new play.  

SEBL $119.56 +1.88 (+9.75) SEBL investors continued to be 
rewarded this week with an abundant 8.9% gain!  The intensity 
behind this powerful split play has propelled the stock to new 
52-week highs for the past four consecutive trading days.  
Yesterday SEBL advanced a whopping $7.88 and today the stock 
edged even higher, peaking at $124.38 on double the normal 
volume levels!  After the huge gains be prepared for natural 
consolidation - this would present opportunities for a variety 
of lower entry points.  Near-term support is firm at $95, but 
a downdraft below the 10-dma ($101.19) should raise warning 
signals.  SEBL will split 2:1 on Friday, November 12th after 
the bell.

SYMC $47.00 -0.88 (+0.13) Once again SYMC has advanced into new 
territory.  Today it gallantly broke through the $50 mark during 
an uninterrupted climb from the open.  Before the profit-takers 
came charging in to take some cash off the table SYMC set its 
latest 52-week high at $50.25.  Trading volume was double the 
ADV (918 K) with over 2 mln shares exchanging hands.  Even 
with the afternoon sell-off, SYMC held firm not dipping below 
yesterday's daily low.  Near-term support may be evolving in the 
proximity of the 10-dma ($44.36) and any dip to this level would 
be an excellent entry point into this momentum play.  In the 
news yesterday, Prudential Securities reiterated a Strong Buy 
rating and issued a 12 to 18-month price target of $60. 
Remember it's important to confirm SYMC's volume and the 
general market sentiment before opening any new positions. 

DELL $41.19 +0.44 (+1.06) Finally, DELL broke through stubborn 
overhead resistance at $41 and closed smack on its daily high at 
$41.19!  Things are beginning to look up ahead of earnings 
scheduled for next week on November 11th.  For those following 
this technical play, you know we've been disappointed in DELL's 
slow recovery however we've kept it on our call list 
anticipating an earnings run.  For the past four days DELL has 
made small, but steady gains on moderate volume.  Technically 
the stock is now positioned above its 10-dma ($39.71) and this 
is a good sign.  Of course you'll want to confirm the continued 
upward movement before beginning a play on DELL.

AOL $132.88 -1.13 (+3.50) AOL just kept stepping on up this 
week advancing $4.88 in Monday's moderate trading activity.  The 
momentum on this split play is intact and even today, AOL broke 
yesterday's daily high hitting $136.50 before pulling back with 
the markets in the afternoon.  Near-term support is firm at $120 
just below the climbing 10-dma ($124.13).  Keep this technical 
indicator in mind when planning your strategy.  Historically AOL 
trails above the 10-dma during its run ups and always suffers a 
downdraft after it slips below this mark; therefore it can  be 
used as a gauge for entry/exit points.  AOL will split 2:1 on 
November 22nd so that gives traders a couple weeks of profit 
opportunities. 



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

PBI $44.75 -2.00 (-0.81) The current market conditions have
remained somewhat subdued.  Shares of PBI have bounced off of 
the 52-week low $42.50, after positive news last week concerning 
an internet infrastructure that is in development for the company.  
We had discussed the oversold bounce in the Sunday report, a 
bounce that actually went through our resistance point intraday 
on Monday, which looks to be strictly a movement of momentum, 
but weak volume and moneystream.  The stock quickly retreated 
off of the highs and continued the downtrend, after the momentum 
dried up.  There was no follow through and the shares should 
remain bearish until the volume and moneystream returns.  Going 
forward the price surges were not accompanied by strong volume, 
so we remain bearish and look for lower prices.  Our new target 
for resistance is $47.38 and support is $43.

BBY $50.88 -0.69 (-4.88) After a bounce from the recent sell-off, 
today stocks turned mixed late in the day on Tuesday as investors 
took profits once again when the Dow reach that short-term 
resistance level around 10,750.  BBY is still being hit because 
of the questions that are still in place concerning BBY's future 
earnings.  We started the week looking for the shares to remain 
bearish below the $58.13 level and so far this week the shares 
have not disappointed us.  The volume picked up to the downside, 
as the downtrend re-established itself.  The stock traded as 
low as $50.19 today, before closing the day at $50.88.  In 
current market conditions we expect the selling pressure to 
continue.  The overall retail sector remains weak although it 
was reported today that strong spending patterns for consumers 
are not at risk.  With profits being made so far this week in 
current market conditions, keep stops tight to protect gains.  
A bounce off of the $54.25 level looks good for a possible 
trading entry point if there is an oversold bounce.  Confirm 
the downtrend followed by nice volume before entering a new 
trade.

LTD $39.13 -0.69 (-1.88) Apparently, the clouds of good 
tidings have begun to clear as LTD has once again settled
back into its downward trend.  Monday, LTD lost $1.19, closing
just pennies above the low for the day.  LTD also violated its 
10-dma on Monday and continues to trade below it by $0.75.  
LTD did make two small bounces at $39 and therefore, you will 
want to see a breakthrough of this level to confirm continuing 
negative momentum before entering a new play.  Should LTD drop 
below $39, it looks to possibly fall down to $36, the next 
formidable support.  Earnings are set to be announced on Tuesday, 
November 16th so we will want to keep our stops close in case 
of an earnings rally.  As we mentioned in Sunday's write-up, we 
don't see anything specifically tied to The Limited to keep it 
moving up.  As economic fears continue to plague the market, 
we expect to see continuing weakness in much of the retail 
sector.  Also retail sales for the month of October will be 
released on Thursday.  

GT $39.25 -0.06 (-2.06) Sniff.  Sniff.  Ahhhhhh...there's 
nothing quite like the smell of burning rubber to get your 
attention, as we all watch Goodyear go up in smoke.  Poor 
earnings and a delisting from the DJIA have caused the price to 
drop as index funds rebalance their portfolios, which means they 
must now sell GT.  Even the "Dogs of the Dow" funds (a theory 
that has fund managers picking the highest yielding DOW-30 stocks 
for the best appreciation potential in the coming 12 month 
period) have to sell it, thus driving the price lower yet.  
Though it closed at its low of the day (a good negative technical 
sign), volume has been decreasing, indicating that the selling 
momentum may be losing speed, or perhaps it's just a slow market 
in comparison to the last 4 days of trading.  Anyway, there 
appears to be some support at $39, so tighten up your stops to 
protect any profits and wait for a clear descent under $39 with 
volume, or a bounce south of $41 (if GT should happen to spike 
up with the market) before taking anew position.  Be prepared 
to exit if GT gets any traction.

VISX $65.50 +4.53 (+2.94) Blinded by the light?  While we can 
find no news on this laser vision equipment manufacturer, volume 
remains high.  However, it tapered off from the extreme level of 
5.6 mln shares yesterday (ADV = 1.8 mln).  There is a good chance 
that some of today's gain resulted from short traders attempting 
to cover.  Aside from yesterday's descent to the basement ($57), 
support can be found in the $62-$64 range.  We want to be a bit 
careful here.  This is still a volatile play, which has climbed 
straight up from yesterday morning, not giving us much an entry 
point.  The fact is that in a show of strength, VISX held steady 
today as the rest of the market fell.  Technically, we could make 
a case for VISX going either direction.  It could continue to 
move up from this support to test the low $70's, or it could roll 
over should the market succumb to more profit taking.  Confirm 
the direction before making a play.

ALD $56.06 -1.69 (-0.88) Monday ALD made an attempt to move 
higher right out of the gate.  It did manage to hit $57.88 
before traders got tired of playing.  ALD traded in an extremely 
narrow $0.50 range for the balance of the session.  Many times 
this kind of trading is a good indication that a trending stock 
is about ready to explode or fall apart as the volume was a bit 
better than the ADV at 1.95 mln shares.  Traders came back to 
work ready to send shares ALD lower.  As far as our put play is 
concerned, we aren't out of the woods yet but at this point 
things are beginning to shape up.  Depending on your risk profile 
ALD gave us a good opportunity to ease our way into a play late 
this afternoon.  Again after trading in a $0.38 range until 
2 pm ET shares of ALD started to rollover.  Check out an intraday 
chart for ALD and it looks pretty weak at this point.  The 10-dma 
at $55.35 could provide support for ALD.  If you entered today 
keep your stops close because as we said we are not out of the 
woods yet.  If the interest rate concerns that came up late in
the session today carry over into tomorrow then we could be off 
to the races with our put play.  In the news ALD did announce 
yesterday it would acquire Tristar Aerospace Corp, a fasteners 
provider for the aerospace industry for about $291 million in 
cash and debt.  In considering a new play, we would still like 
to see ALD break  the $55.75 mark with conviction before jumping 
in with both feet.

INKT $96.94 -0.88 (-4.50) With the action the past two days, 
we may be back on track with our put play in INKT.  Again we 
say "may be back on track".  INKT gave us a good entry point 
Monday morning just after the first hour of trading.  Yes we're 
$4.50 lower than at the close of business Friday, which is 
certainly what we like to see for our play.  However the combined 
volume in the last two days is about equal to one average day, 
which basically means the downturn could dry up at any minute.  
Fundamentally things don't look all that hot for the Web services 
provider either.  Investors are starting to question whether 
INKT can hold its share of business in the market place.  As for 
entering a new play in INKT watch the $95.50 and $93.81 areas as 
we need to see INKT be able to trade below those levels to keep 
it as a viable play.  The psychology in the broader markets 
turned somewhat sour late in the day today and if it continues 
in the morning INKT could head lower, however as always assess 
your risk profile before entering or adding to a position.


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

ADPT - Adaptec Inc.  $48.06 +1.25 (+3.06 this week)

Adaptec, Inc is a market leader with host I/O, RAID, and CD
recording software products that transfer, manage, and protect
data.  Adaptec empowers customers with high performance, 
reliable access to data stored on Internet, database, ERP, 
and other Windows NT servers.  Adaptec also makes host adapter 
cards that plug into powerful computers and speed the transfer
of data to and from devices like disk drives, scanners and 
CD-ROM drives.  It's also the No. 1 maker of software for
recordable compact-disc drives.  Adaptec is an S&P 500 and 
Nasdaq 100 company.

ADPT is your classic case of a stock out of favor on the 
Street a year ago and came through on the promises that 
were made.  Adaptec fired 975 employees, sold unprofitable
businesses, and replaced three top executives in the last 
18 months.  They also focused on improving there products, 
which has resulted in sales increasing.  The recent second
quarter earnings report exceeded all expectations, which 
caused analyst to up there ratings and increase there future
earnings targets.  From a technical standpoint we like the
price surges that are supported by positive moneystream.  The
only question at this point is the volume, it is not as strong
as we would like it to be, but the pattern is starting to 
converge.  With the shares today hitting a 52-week high at 
$48.75, before pulling back in an overall market sell-off to 
close the day at $48.06, the average volume is understandable.
In current market conditions any pullbacks to support levels
would provide us a possible buying opportunity.  Current 
support is at $45.75 and then again at $44.38.  The stock is
volatile, but the momentum is to the upside.  After the first
hour of trading the trend should be confirmed.  Look for the  
higher highs when the volume joins the current party.

Bear Stearns on Tuesday raised there price target for ADPT to
$55 from $45.  They feel that ADPT is now taking a more proactive 
stance on the high-growth fibre channel market.  This upgrade 
and comments came on the back of the company's plans to buy 
privately held Distributed Processing Technology for $235 mln 
in a deal that would strengthen Adaptec's efforts to provide 
hardware and software for backing up computer storage systems.  

BUY CALL NOV-45*APQ-KI OI=319 at $4.00 SL=2.50
BUY CALL NOV-50 APQ-KJ OI= 40 at $1.38 SL=0.88 low OI
BUY CALL DEC-45 APQ-LI OI=115 at $4.88 SL=3.38
BUY CALL DEC-50 APQ-LJ OI= 10 at $2.75 SL=1.63 low OI

Picked on Nov 2nd at     $48.06     P/E = 31
Change since picked       +0.00     52-week high=$48.75
Analyst Ratings       2-3-2-0-0     52-week low =$15.50
Last earnings 10/21   est= 0.41     actual= 0.45
Next earnings 01-24   est= 0.47     versus= 0.24
Average daily volume = 2.14 mln 
Chart = http://quote.yahoo.com/q?s=ADPT&d=3m



NEW PLAYS CONTINUED IN SECTION THREE
*****************************
SEE DISCLAIMER IN SECTION ONE




The Option Investor Newsletter         Tuesday  11-2-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

MXIM - Maxim Integrated Products $81.50 +3.13 (+2.56 this week)

Maxim Integrated Products designs, develops, and manufactures
linear and mixed-signal integrated circuits.  These circuits
detect, measure, amplify and convert "real world" signals, 
such as temperature, pressure or sound into digital signals
necessary for computer processing.  They make over 1,500 kinds 
of linear and mixed-signal integrated circuits.  The company
owns manufacturing facilities in the U.S. and the Philippines. 
About one-fourth of their sales come from overseas.  MXIM's
primary competition comes from Analog Devices, Linear Tech
and National Semiconductor.

Our interest in MXIM is three fold.  Number one we think its a 
great stock right now as its in an sector that has new found
strength.  For most of the summer MXIM had been stuck in a 
trading range between $60 and $75, and has held up very well
during the recent declines in the semiconductor industry.
Friday we saw MXIM break through the top of its four month
trading range.  MXIM took out the $75 mark that had provided 
some tough resistance with a very solid move, on strong volume.
This which would indicate the company's stock has more room to
go on the upside.  Our other interest in MXIM is for a potential
stock split.  The annual shareholders meeting is scheduled for
11/18/99, and the board of Directors has requested a vote to 
increase the authorized shares from 240M to 480M.  With this 
kind of news and a chart that looks like this one we believe
there is a great potential for profits.  In looking for an
entry point keep in mind MXIM was trading just under $70 last
Thursday and closed at $81.50 today.  We could see somewhat of
a pullback near the $77-$78 levels.  $75 should provide solid
support if MXIM were to pullback that far.  If MXIM continues
its climb to new highs we would view that as an opportunity to
buy calls as well.  As always assess your risk profile prior 
to entering a new play.
   
No other news at this time.

BUY CALL NOV-75*XIQ-KO OI=1052 at $8.63 SL=$6.50
BUY CALL NOV-80 XIQ-KP OI= 318 at $5.13 SL=$3.25
BUY CALL DEC-80 XIQ-LP OI= 391 at $7.75 SL=$5.75
BUY CALL DEC-85 XIQ-LQ OI=1007 at $5.00 SL=$3.25

Picked on Nov 2nd at     $81.50    P/E = 59
Change since picked       +0.00    52-week high=$82.25
Analysts Ratings      7-5-1-0-0    52-week low =$34.50
Last earnings 09/99   est= 0.35    actual= 0.37 surprise +5.70%
Next earnings 01-27   est= 0.40    versus= 0.31
Average daily volume = 1.49 mln
Chart = http://quote.yahoo.com/q?s=MXIM&d=3m

****

ORCL - Oracle Corporation $53.00 +1.81 (+5.44 this wk)

Oracle is world's largest producer, seller, and supporter of 
database management systems.  If you need the ability to 
simultaneously access the same data for different applications 
all at the same time from mainframes to wireless handsets, Oracle 
has your software.  Oracle's most eligible billionaire bachelor 
and CEO, Larry Ellison has developed the latest versions to 
support Internet appliances and PC's using Web-based programs.  
Despite spending millions on toys, including the coolest 
airplanes, boats, automobiles, and the authentic replication of 
a Japanese mansion in which he lives, he still owns about 24% 
of the company.

The news is the story here.  With other big software firms 
holding steady (a.k.a. Microsoft), but not producing stellar 
gains in this market, ORCL is moving rapidly up the charts, 
thanks in part to CEO, Larry Ellison keeping his promise to 
shareholders that this quarter will be better than the last.  
Yesterday, following a meeting with ORCL's CFO, Merrill Lynch's 
analyst left the meeting "with a reaffirmed confidence that 
Oracle is very well positioned for 2000, especially with a new 
applications product cycle and an increasing shift of data-base 
sales to e-commerce drivers".  He upped his price target to $60, 
indicating Y2K is not an issue for the current quarter and that 
pipeline growth would be "explosive", as relayed by ORCL's CEO.  
ORCL noted in their meeting that database growth of 20% is 
sustainable.  Technically, ORCL set new highs yesterday and today 
on strong volume.  The chart looks great, but has spiked slightly 
high for our liking.  We'd encourage you to target shoot at 
numbers commensurate with your risk profile.  Support is back at 
$48, but you won't likely be filled there if volume remains high.  
Conversely, note that over 3 mln shares were sold at the bid 
price of $53 after the bell.  We won't know for sure if $53 will 
act as support from here on out, or if it will become resistance 
acting as a catalyst for others to throw in the towel on the 
coattails of that 3 mln. share sale at the bid.  Confirm 
direction before playing.  The buzz is better than the technicals 
right now, which should keep the volume moving.

In the news, following Merrill's kind words, Volpe Brown upped 
their target to $60 as well noting that leading Internet 
companies are ramping up their infrastructure in which ORCL will 
be the beneficiary.  Also, ORCL is expected to announce an e-
commerce venture with Ford.  It has already announced deals with 
Veritas and Siemens.

BUY CALL NOV-45 ORQ-KI OI=9171 at $8.38 SL=6.25
BUY CALL NOV-50*ORQ-KJ OI=9953 at $4.00 SL=2.50
BUY CALL NOV-55 ORQ-KK OI=2890 at $1.56 SL=0.75
BUY CALL DEC-50 ORQ-LJ OI=7329 at $6.00 SL=4.25
BUY CALL DEC-55 ORQ-LK OI=3776 at $3.50 SL=1.75

Picked on Nov 2nd at   $53.00     P/E = 57
Change since picked     +0.00     52-week high=$53.88
Analysts Ratings  11-15-6-0-0     52-week low =$19.69
Last earnings 09/99 est= 0.16     actual= 0.16
Next earnings 12-10 est= 0.22     versus= 0.19
Average Daily Volume =  11.9M
Chart = http://quote.yahoo.com/q?s=ORCL&d=3m



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

No new puts today.


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

CMVT - Comverse Technology $112.38 +2.75 (-1.12 this week)

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

Sunday's Write Up

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.

Tuesday's Write Up

Here we are again on CMVT.  It is flattening out on light volume.  
We saw this happen last week before CMVT rattled off $8 to the 
upside.  The sellers have been on light volume on any pullbacks 
thus far.  This gives us time to plan an entry point before the 
next move.  The move I am talking about looks like it may have 
began at 3:00pm EST as the stock took off despite the market 
declining.  There was no news to spur the rally but rather just 
part of the trend that CMVT has been following for the past 2 
weeks.  We closed today above resistance at $112 thanks to the 
final spurt.  That puts the next resistance at $115, which is 
the old high from last week.  Support is at $110, followed by 
support at the 10-dma at $107.50.

BUY CALL NOV-100 CQV-KT OI= 446 at $13.25 SL=10.50
BUY CALL NOV-105 CQV-KA OI=1010 at $ 9.13 SL= 6.75
BUY CALL NOV-110*CQV-KB OI= 546 at $ 5.75 SL= 3.75
BUY CALL DEC-100 CQV-LT OI=  65 at $15.75 SL=12.00

Picked on Oct 21st at  $102.13    P/E = 61
Change since picked     +11.38    52-week high=$115.00
Analysts Ratings     8-3-0-0-0    52-week low =$ 24.50
Last earnings 08/99  est= 0.49    actual= 0.52
Next earnings 11/30  est= 0.53    versus= 0.41
Average Daily Volume = 1.2 mln
Chart = http://quote.yahoo.com/q?s=CMVT&d=3m  


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

Technology Issues Reach Record Levels..

Friday, October 28

Stocks rocketed Friday, with the technology sector climbing to
record territory following a drop in interest rates. The Dow
ended up 107 points at 10,729 while the Nasdaq composite was up
an incredible 91 points at 2,966. The S&P 500 index finished 20
points higher at 1,362. In the broader market, advancing issues
swamped declines 2,165 to 971 with volume over a billion shares
on the NYSE. The benchmark 30-year Treasury bond soared 1-5/32,
cutting the yield to 6.17%, the lowest since early October.

Portfolio plays:

For the week, stocks finished higher after the latest economic
numbers reflected a favorable economy with low inflation. The
Employment Cost Index rose less than 0.8% in the third quarter
after a steep increase in the previous quarter while the gross
domestic product rose at the fastest pace this year. Among the
other reports, the Commerce Department said the number of new
single family homes sold last month dropped to the lowest pace
since December 1997. The market was also relieved that Federal
Reserve Chairman Alan Greenspan avoided controversial comments
in what analysts viewed as a balanced speech on Thursday night.
Some experts now believe that U.S. industrial productivity can
sustain higher growth rates without triggering an increase in
inflation.

Today's rally affected the majority of the plays in our Combos
portfolio but technology issues and smaller stocks led the way.
The best performer of the day was JDS Uniphase (JDSU), up $14
to $166, a $36 gain since the bullish position was initiated
two weeks ago. Broadcom (BRCM) was runner-up, climbing $9 to a
recent high near $127 in the semiconductor rally. Our current
combination position (a credit-spread strangle) can be closed
for a favorable profit. Those who trade aggressively may also
consider using the new rally to profit on the bullish side of
the spread, closing the short position in the short-term and
hoping for a continued upward movement on the break-out. Many
of our spreads are candidates for early exit. Issues that have
performed very well include CMG Inc. (CMGI) and Gemstar (GMST).
Both of these plays are trading near maximum profit and should
be closed to protect gains. In the group of small-cap stocks,
Apollo Group (APOL), Allied Waste (AW), Aware Inc. (AWRE), IDT
Corp. (IDTC), Network Associates (NETA), 3dfx (TDFX), and 3Com
Corp. (COMS) all made favorable moves.

The long-term portfolio benefited from the bullish activity and
Sun Microsystems (SUNW) was the leader in that section. As we
said last week, our diagonal position was in need of an upside
adjustment and Friday's market provided a perfect opportunity.
Our new spread is LJAN75C/DEC90C at $16.25 debit. Other stocks
in the LEAPS/CC's category are starting to recover from recent
losses. Cabletron Systems (CS), Computer Associates (CA), The
Limited (LTD), and Solectron (SLR) were among the rebounding
issues. We also have two recently bullish issues that may need
to be rolled-up and forward, due to downside adjustments during
last month's slump. Those of you the participating in the plays
on Motorola (MOT) and General Motors (GM) should be pleased the
stocks have successfully rebounded, bringing those positions to
profitable territory. In the tracking portfolio, we will adjust
these spreads back to neutral positions as the stocks approach
the (current) sold strikes. Motorola (MOT) is the most bullish
and today's gap-up (at the open) through recent resistance may
be signaling the beginning a new trading range. The transition
to a $100 strike was the first step in maintaining a favorable
position in this issue. General Motors (GM) has also moved into
an old trading range near $70 and the character change prompted
another other upward adjustment in the long-term portfolio. Our
new spreads both have DEC-$70 calls as the sold (short) option.

There were some disappointing issues in today's market. Global
Crossing (GBLX) fell $2.38 on news that it is in the process of
completing a billion dollar aggregate liquidation of cumulative 
convertible preferred stock. The CPS will be convertible into
common stock of GBLX at $45 per share and is expected to issue
on November 5, 1999. Global Telesystems (GTS) fell $1.56 to the
middle of a recent range near $23, but the issue appears to be
holding above its short-term (bullish) moving average. Twinlab
(TWLB) and Proxymed (PILL) have not performed as expected, with
both issues falling through near-term support and testing the
bottom of their respective ranges. Electronic Data Systems (EDS)
jumped $3 at the open after posting third-quarter earnings of
$0.51 a share, beating the 18-analyst estimate of $0.49 a share.
The trend reversal started in the middle of the week and today's
move to the old trading range was on heavy volume and increased 
institutional buying. The closing prices for the short position
(OCT-$60 Call) opened significantly higher on the new volatility
but faded with the stock later in the day. Those of you choosing
a credit spread roll-out should have achieved a debit near $1.62
for the short option (OCT-$60 call). An exit target of $0.50 for
the long option (OCT-$65 Call) would close the position with a
small loss (almost break-even). There is a fair chance that the
stock will fill the gap and offer a profitable exit before the
expiration date.


Monday, November 1

A new week and a new look for the Dow produced mixed results as
traders sold blue-chips for profit and bought technology issues
to a new record. The Dow closed down 81 points at 10,648 on the
first day of trading with its new technology issues. The Nasdaq 
composite finished relatively unchanged after rallying early in
the day to a high of 2,997. The S&P 500 index was down 8 points
at 1,354. In the broader market, advancing issues led declines
1,535 to 1,522 on the New York Stock Exchange, with 838 million
shares traded. The 30-year Treasury bond was down 7/32, pushing
its yield up to 6.18%.

Portfolio plays:

Today's economic report came from the National Association of
Purchasing Management. The NAPM provides a measure of business 
conditions in the manufacturing sector and their index fell to
56.6 in October from 57.8 in September. Economists had expected
a reading of only 56.4 but investors reacted modestly after the
report showed that price pressure in manufacturing was slightly
higher than anticipated. Recent favorable data on inflation and
comments from Fed Chairman Greenspan have placated analysts but
there are still concerns of another rate hike at the November 16
meeting of the Federal Reserve's policy-setting committee.

News of another earthquake in Taiwan (where a majority of chips
are made) started a panic in technology stocks but the affected
issues recovered most of their losses after a lack of damage was
reported. Luckily, none of our major positions were affected and
lower-priced technology and telecom issues continued to lead the
way. Global Telesystems (GTS) recovered over $1 of Friday's loss
to finish near the middle of a symmetrical pattern forming near
$25 and for the now the trend appears slightly bullish. E*trade
Group (EGRP) gained $2 to close just short of $26 after a recent
slump to support near $22. Our April diagonal spread is near the
break-even range but we expect the stock price to move higher in
the coming months. Pixar Animation (PIXR) recovered nicely with
a $2 gain to $40.12 on a perfect technical bounce from a 60-day
price support line. The strong buying interest at $37 suggests
it should easily remain above our cost basis for the next month.

In the calendar spreads section, 3dfx (TDFX) continues to rally
over the short-term, up almost $1.50 since our pick a week ago.
The long-term bullish issue is approaching our ATM position and
should be monitored for further upside potential. Talk.com (TALK)
is consolidating near $15 and with the shrinking volatility, our
recent calendar spread is now trading at a $0.25 profit (in just
one week). Other stocks in this section that continue to exceed
expectations are Bell Atlantic (BEL), LG&E Energy (LGE), Zoltek
(ZOLT), Occidental Petroleum (OXY), and Peoplesoft (PSFT).

Our debit spreads portfolio is performing very well and many of
this month's positions have already been closed for favorable
profits. There are a few plays that have yet to produce positive
returns including IDT Corp. (IDTC), MessageMedia (MESG), Network
Associates (NETA) and Twinlabs (TWLB). All of these issues are
long-term and have plenty of time to make favorable recoveries.

Motorola (MOT) led the way in our LEAPS's/CC"s portfolio, up $5
to a recent high near $102. This rally is exactly what we hoped
would follow the technical change of character on Friday. Those
of you in the static position at $105 should be well ahead and
our adjusted position at the $100 strike will be profitable if
the stock remains in a small range near the new price. Cabletron
(CS) has also recovered nicely over the past few days, moving up
to its old range near $17. You may want to use the current rally
to roll-out into (ATM) December options for downside protection.

Our straddles section is going to be included in the regular part
of the narrative until we have something major to report on any
of the neutral positions. Internet issues continue to lead that
section and American Online (AOL) is currently the best performer.
Our new AOL straddle traded as high as $22.00 credit (a $4 profit)
during the session. Optionetics positions (from Tom Gentile) have
done very well in recent weeks and the newest standout is Go2Net
(GNET). The Internet community builder skied to new highs on good
earnings last week and produced a $5 profit in just five days. If
you want to learn how to find those issues on a consistent basis,
consider attending one of Tom's (Optionetics) seminars next year.


Tuesday, November 2

Blue-chip stocks closed lower Tuesday as investors followed the
Nasdaq rally through the 3,000 barrier. The index of technology
stocks was up 13 points at 2,981 after a midday rally to a new
high at 3014. The Dow Jones industrial average slipped 66 points
to 10,581 after climbing more than 100 points. The S&P 500 index
was down 6 points at 1,347. In the broader market, advancers led
declines 1,652 to 1,350 with more than 903 million shares traded
on the NYSE. The 30-year U.S. Treasury bond was up 17/32 with the
yield slipping to 6.15%, well below its recent highs.

Portfolio plays:

Technology issues continue to lead the market, even in the wake
of today's profit-taking, and many of the stocks in our portfolio
moved higher. Global Telesystems (GTS) broke-out through a recent 
resistance area to close at the upper end of its trading range at
$26.62. This calendar spread has performed better than expected
(directionally) but the time frame was too short and we may need
to exit the short option early to maintain a profitable position.
In any case, our risk is low (initial debit was $0.62) while the
probability of profit is very high. 3dfx (TDFX) is another issue
that appears to be breaking-out to the upside and we will treat
that position in the same manner. This bullish calendar spread
also has a very low (initial) cost with a large margin for error
in future adjustments. Data Broadcasting (DBCC) has successfully
tested a short-term bottom near $10 and this issue is ready to
continue higher. Our December diagonal spread will need slightly
more upside movement to become profitable. Message Media (MESG)
was also a big gainer today, up $1.12 and above our sold strike
at $12.50. We suspect this bullish diagonal position will offer
another (profitable) early exit in the coming weeks.
 
Electronic Data Systems (EDS) came back to earth today, offering
a second exit opportunity for those of you closing the bearish
credit spread early. The stock price finished near session lows
at $58.50 and the spread (closing) debit was at $1.18 at the end
of the day. It appears this stock still has a bullish outlook in
the short-term but that opening gap from last Friday's session
has a unique gravitational effect. Broadcom (BRCM) has surprised
even the most bullish analysts, climbing another $7 to a midday
high near $145. The bullish portion of the neutral position is
now ITM but we expect the issue to consolidate soon. We hope that
most of you took the early profits or used the recent change in
character to extend gains in the bear-call portion of the play.
Apollo Group (APOL) also made an unexpected move today, falling
$2.38 to a recent low near $23. The position previously traded
in the profitable zone and we had planned to let it expire ITM
(for maximum return). Now well will have to manage the play to
protect against any potential losses.

There is certainly more to discuss in the LEAPS/CC's & Straddles
portfolios but for now, most of those positions are doing fairly
well. Unfortunately, we must move on to the "new play" research
and revisit those sections at a future date. On another subject,
I want to personally thank those of you that attended the OIN's
welcome banquet at the San Francisco Money Show. It was a great
event and a wonderful way to meet our subscribers and share new
strategies and trading ideas. We look forward to meeting you at
the next show at Lake Buena Vista in Walt Disney World, January
26-28, 2000.

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


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

Today's positions are based on a request I received at the Money
Show for bullish, limited risk plays that combine the advantages
of in-the-money debit spreads and calendar (horizontal) positions.

CSCO - Cisco Systems $73.50    *** Techs Are Leading The Way! ***

Cisco Systems develops, manufactures, markets and supports high
performance, multiprotocol internetworking systems that link
geographically dispersed local-area and wide-area networks to
form a single, seamless information infrastructure. Products
include a wide range of routers, local-area networks and
Asynchronous Transfer Mode switches, dial-up access servers,
and network management software solutions.

October was a month of consolidation for the market (and for
CSCO) but institutions held fast to their positive outlook for
the company. Each time the stock hit short-term lows, another
brokerage would offer an upgrade or "buy" rating. Look at this
list of recommendations in the last three weeks:

10/15/99 Morgan Stanley Dean Witter reiterates strong buy,
         optimistic about near term business trends, expect new
         acquisitions in next couple of months
10/25/99 First Boston reiterates strong buy, target $75 - $80,
         use weakness as buying opportunity.
10/25/99 Morgan Stanley Dean Witter reiterates strong buy
10/25/99 Prudential reiterates strong buy, SBI and select list,
         target $80, fundamentals strong.

Technology continues to lead the market and this issue is fairly
bullish with a recent close at an all-time-high. The short-term
indicators reflect a positive outlook for this widely known stock
and support from institutional buyers appears to be at $65. That
should offer a favorable range for the issue in the event of any
near-term correction.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL DEC-65 CYQ-LM OI=1049  A=$10.12
SELL CALL NOV-75 CYQ-KO OI=29770 B=$1.75
INITIAL NET DEBIT TARGET=$8.25 ROI(upside max)=21%

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

****

PGEX - Pacific Gateway  $24.38   *** Solid Earnings ***

Pacific Gateway is an international telecommunications carrier,
which provides international telecommunications services to its
target customers; long distance service providers worldwide as
well as retail buyers. As a "facilities-based" carrier, they own
or leases an international network facilities including: digital
undersea fiber optic cable, international switching facilities
and operating agreements with foreign carriers.

The earnings run for PGEX started in late September and today
they reported favorable revenue and sales for the third quarter
of 1999. Strong revenue growth was at the core of the report, up
22% over last quarter to $170 million. Gross profits were up 39%
from last quarter to $25 million and achievements in the retail
segment were huge with 85% growth. Earnings were $3.5 million or
$0.18 per share, compared to $2.6 million or $0.13 per share for
the previous quarter.

So the announcement was favorable (and well managed) and the
future looks bright with significant growth expected in their
voice business along with an expanding portfolio of services
that includes bandwidth and data offerings. The company also
signed a new letter of commitment for $100 million in credit
with Deutsche Bank Securities and Bank of America to fund the
expansion.

We rarely open new positions after earnings but this issue is
favorable in the short-term and the chart is very strong. We
will try to initiate the conservative spread at a slightly
lower price (than quoted) but if the stock moves higher, the
aggressive play may be our only alternative.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JAN-15.00 QAE-AC OI=1111 A=$10.00
SELL CALL NOV-22.50 QAE-KX OI=373  B=$2.88
INITIAL NET TARGET=$6.88 ROI(upside max)=12%

PLAY (aggressive - bullish/diagonal spread):

BUY  CALL JAN-15.00 QAE-AC OI=1111 A=$10.00
SELL CALL NOV-25.00 QAE-KE OI=1383 B=$1.56
INITIAL NET DEBIT TARGET=$8.31 ROI(upside max)=20%

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

****

CYOE - Coyote Network  $6.38     *** Cheap Speculation ***
 
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.
 
We found this play while searching for covered-calls but it may
now be played as a spread. Implied volatility remains high and
volume is heavy as more traders speculate on this issue with call
options. Merger rumors have driven this stock in the past and the
current technicals are very bullish. The issue has moved quickly
above the July-August lows on heavy volume and appears ready to
challenge the September high. The disparity in front month option
pricing offers a great opportunity to speculate.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL DEC-5.00 QTO-LA OI=0   A=$2.12
SELL CALL NOV-7.50 QTO-KU OI=429 B=$0.50
INITIAL NET TARGET=$1.50 ROI(upside max)=66%

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



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

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