Option Investor
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Daily Newsletter, Thursday, 11/18/1999

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The Option Investor Newsletter         Thursday 11-18-99
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)
*****************************************************************
       11-18-99            High     Low    Volume Advances Decline
DOW    11035.70 + 152.60 11054.30 10886.10 1,022,810k 1,508  1,525
Nasdaq  3347.11 +  77.72  3347.11  3288.68 1,585,102k 2,326  1,733
S&P-100  749.11 +   9.94   749.98   740.40    Totals  3,834  3,258
S&P-500 1424.94 +  14.23  1425.27  1412.61            54.0%  46.0%
$RUT     462.04 +   4.97   462.04   457.07
$TRAN   3018.16 +  14.03  3020.13  2968.64
VIX       20.10 -   0.97    21.99    19.99
Put/Call Ratio       .47
*****************************************************************

Thank you Hewlett-Packard !

The markets soared today on the back of HWP. It was really hard
typing those words. I can't remember when HWP has done anything
good for the markets with an earnings announcement. They have 
often been the spoiler, not the charger. After beating reduced
estimates last night by +.02, which was not a barn burner quarter,
they had a fairly upbeat outlook. That coupled with the spin-off
IPO of Agilent this morning sent HWP stock up +13.31. The biggest
driver here was the Agilent IPO. HWP sold about 13% of the company
and the share price soared this morning after being priced above
expectations already. The single character IPO, "A" is the symbol,
hit $50 at the open and settled to $42.44 at the close. This values
the 452 million shares HWP kept at almost $20 billion. This was
a huge windfall for HWP and their shareholders. 

The Dow had actually opened with some weakness but after HWP
began trading the Dow jumped to +125. After two attempts to sell
off during the day the last hour disconnected from bonds and soared
to close over 11,000 for the first time since Sept-13th.


 

On the surface the markets look like there is no upper limit.
The Nasdaq set yet another record day with only a couple of
minor pull backs which were meaningless. The Russell-2000 is
setting the world on fire. The small cap rally is keeping pace
with the Nasdaq in consecutive higher closes.


  

The Nasdaq volume today was the second largest in history again.
Market wisdom has always held that rallies on strong volume are
the holy grail of investing. There is a catch. Yes, we have had
a flood of volume but not in the normal historical perspective.
The volume we are experiencing is due mainly to new market factors.
The Internet IPO effect is pumping hundreds of millions of shares
into the market each week. In recent weeks we have had over 20
IPOs per week. The minimum shares for each ranging around 5 mil
and the upper limit 170 million in the Charter IPO. Considering 
most IPO traders flip their shares in the first week and some 
shares are flipped several times, the 100+ million new shares
per week could amount to 300 million or more in new volume. The
second cause is the China effect from the last two weeks. With
the admission of China to the WTO, stocks that were trading 100k
per day in volume are now trading 5-8 million shares per day.
Yes there is volume but it is not volume in the historical sense.
The high volume rallies give the impression that the train is
leaving the station without you on it and investors are racing
to throw money at anything that is moving. The China effect is 
also impacting the small cap rally as well since most of the 
China stocks are very low dollar. Nasdaq volume has increased 
+35% in the last month alone.

The Fed bears met, raised rates and disappeared into the forest
again until spring, right? It appears this is not so. Did anyone
notice the disconnect between the bond and the stock market today?
With yields rising to 6.17% today analysts were finally reacting 
to the parting shot in the Fed report. "growth in excess of
what the economy can sustain" OOPS! Maybe they are not done.
Maybe they really will raise rates in February without any look
and see. The bond futures are slowly indicating an expected rate
increase. How much longer until the market stops for a breath and
sees the cloud forming over its head again? 

The Nasdaq was up strong again. The S&P set another new record
high. The Dow closed over 11,000 again with a strong +152
performance. Or did it really? Inquiring minds will want to 
know that 114 of the 152 points was due to only four stocks.
The rest were only along for the ride. The four stocks were
HWP +13.31, IBM +4.25, INTC +3.75, HD +3.06. We all know why
HWP was up strong and IBM was up on a combination of the HWP
outlook and the Intel news that PC sales were so strong they
could not make enough chips. Home Depot was up on their split
announcement. Only four stocks represented over 2/3 of the
gains on news events. What happens tomorrow?

Who knows? I surely don't but based on historical norms I would
say we are real close to some profit taking and possibly serious
profit taking. At the risk of boring you with too many charts
tonight I will state my case. The Dow, which had been range
bound and dormant for weeks suddenly ran up +490 points in the
last five days. By itself that would cause some alarm but we
are also approaching some heavy resistance. The first at 11,100 
then 11,200 then 11,325. This will be a tough obstacle course to
overcome without building a base here or better yet pulling
back some to get a better run at the next level.


 


 

You know the Nasdaq story. We had a 10% pull back in October
then ran for +717 points in four weeks with NO PROFIT TAKING.
You can't call the minor stops this week profit taking, they
were totally inconsequential. Any way you look at the Nasdaq
chart there is no support at this level. We are here on faith
alone and the day of reckoning will come. 


 

The Russell-2K has been blazing a trail the last three weeks.
Investors, believing the year end rally had begun, simply bought
anything with a pulse. The China effect also helped keep the
small cap rally alive the last two weeks. Don't look now but
we are entering a period of high turbulence. Fasten your seatbelts
when we hit 465. We have failed to penetrate that level three
of the last four attempts.


 

You knew I would get to the VIX eventually. The VIX fell below
20 today for only the third time since Oct 1998. This is a
dangerous level. Every time we hit this in the past there was
a corresponding market top. Remember the VIX does not mean the
markets will blow off tomorrow but it does indicate the pressure
is building. In reality it indicates a lack of pressure. A total
complacency. Everybody is bullish. When everybody is bullish
there is nobody left to buy. They have already bought. We all
know what happens when the buyers dry up.


 

What is going to happen tomorrow? Who knows. History has a
way of repeating itself and those who can't read are doomed
to repeat it as well. I am not saying sell everything and
take two weeks off. The only point I am trying to make is
WE ARE IN NOSEBLEED TERRITORY and, as QCOM proved this week,
the law of gravity has not been repealed. Just keep those
stop losses close and don't buy every dip. The next one could
be a killer.

Speaking of QCOM, those of you who were not able to react fast
enough to the special trading alert we issued when QCOM reached
$330 on Wednesday, had another chance at a killer entry point
today. After a +$20 rally off the low yesterday, QCOM gave in
to pressure again this morning and touched $330 again. Two 
perfect chances in two days. It just does not get any better 
than this. +$20 on Wed and then +$25 on Thursday from the lows.


 

Futures are flat as of 9:00 and tomorrow's direction is still
up for grabs. My GUESS would be a follow through rally at the
open followed by a slow fade in the afternoon as traders lock
in their profits.

Good Luck, Sell Too Soon.

Jim Brown
Editor



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

Hewlett-Packard Wins Back Wall Street
By  S.P. Brown

What a week it's been for Hewlett-Packard (HWP):  A makeover, 
an earnings announcement, an IPO, and a soaring stock price 
all within a four-day span.  One can only wonder what the 
company will announce tomorrow to finish off the week. 

Head to our website for the rest of this article.

/members/stocknews/111899_1.asp

****


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

As of Market Close - Thursday, November 18, 1999 

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

DOW Industrials   10,750  11,320  11,036    Neutral  11.12
SPX S&P 500        1,315   1,385   1,425    BULLISH  11.12
OEX S&P 100          675     725     750    BULLISH  11.12
RUT Russell 2000     425     445     462    BULLISH  11.12
NDX NASD 100       2,320   2,520   3,003    BULLISH  10.28
MSH High Tech      1,120   1,250   1,566    BULLISH  10.28

XCI Hardware       1,000   1,095   1,149    BULLISH  11.11
CWX Software         770     800   1,166    BULLISH   9.03
SOX Semiconductor    475     525     650    BULLISH  10.29
NWX Networking       550     615     783    BULLISH  10.28
INX Internet         495     525     599    BULLISH  11.05

BIX Banking          645     690     665    Neutral  10.28
XBD Brokerage        395     450     468    BULLISH  11.12
IUX Insurance        610     650     643    Neutral  11.09

RLX Retail           875     910     926    BULLISH  11.12
DRG Drug             375     390     390    BULLISH  11.04
HCX Healthcare       750     790     779    Neutral  11.09
XAL Airline          180     190     147    BEARISH   5.21
OIX Oil & Gas        285     305     315    BULLISH  11.16

 
Posture Alert    
The Nasdaq continues to blaze, setting another new record and 
once again, on very heavy volume.  Leaders for Thursday included 
Software (+5.55%), Hardware (+3.73%), Networking (+3.51%), and 
Internet (+3.32%). On the downside is the Airline sector, which 
continues to be stagnant as the price of crude oil jumped to over 
$26 barrel. There are no current changes in posture.   



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

Thursday, November 18, 1999

The Pendulum!

Just when you thought it couldn't go any higher, they slap you in 
the face and continue marching on. Whether it is a benchmark 
Index, call option, your favorite technology stock, or your Visa 
bill after your spouse goes shopping, gravity seems to be non-
existent. Anything and everything seems to be rocketing-to-the-
moon, or at least waking up with all the new-money inflows.  

This week has also been witness to random speculation. We have 
seen many stocks trading in the $1-$3 range, that never trade 
size, all-of-a-sudden trade record breaking volume on no news. We 
witnessed the 48-hour love affair with those Chinese stocks, where 
one issue went from $1 to $80 during two trading sessions. The 
speculation is running rampant, and most likely, will continue for 
the near-term.

In the past, speculation like we have witnessed recently, would 
indicate that we have reached the top in the market. Our 
interpretation of these last two weeks continues to be the same, 
too many dollars chasing too few stocks. Combine this with the 
fact that short-sellers are now gun-shy, and won't dare short 
anything, and you get our current market environment.

During Wednesday's trading session, where the Nasdaq actually 
closed down, we noticed that put buyers were coming into the 
market, most likely trying to call the top on the market. The put 
buying continued today, as was most evident in our Pinnacle Index 
for the S&P 100. The Pinnacle Index for this range on Tuesday was 
over 14, and now stands just above 2. What this tells us is that 
support is building from the put buyers, and that a continuation 
in the rally is most prevalent. 

Another interesting development on Wednesday occurred with options 
on Hewlett-Packard. During yesterday's trading session, 
speculators were bearish heading into the earnings report. During 
the trading day, total put open-interest rose by about 8,950 
contracts, while call open-interest increased by about 2,100 
contracts. This suggested extremely negative sentiment, which was 
dominated by bears in a highly bullish market. Needless to say, 
anyone who took a contrarian stand on HP reaped big rewards today.  
  
In sum, this market is like a giant pendulum. When it swings, it 
swings to both extremes. When stocks are heading down, they 
usually go a lot further than you ever would have imagined. When 
the market is running up, stocks usually go significantly higher 
than ever expected. Hopefully, everyone is taking full advantage 
of the up-move on the pendulum while it lasts!


BULLISH Signs: 

Cash Flow:
The amount of money being poured into this market is phenomenal. 
The trading volumes on the exchanges is a good example of this, as 
well as last weeks 2 IPO's of UPS and CHTR which brought in over 
$10 billion in new money. 

Volume:
There is an old saying, that volume precedes price, and it 
couldn't be better exemplified that the last two weeks.

Short Interest:
Short interest for the Nasdaq is at an all-time high, and 
increased over 5% from the preceding month.

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 and the quarter ended up 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, 
and is getting close to being under the 6% benchmark, which is a 
key psychological number.

Advance/Decline Line:
The A/D line is looking significantly better than the past 6 
months.


Mixed Signs: None.


BEARISH Signs: 

Volatility Index (20.32):
The VIX continues to prove that the low 20's have been a good exit 
point. The low close for the VIX was on July 16, when it closed at 
18.13, so should its current level not hold, we could be in for 
more upside in the market.


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%
Friday, November 05       89,143      +128.1%
Friday, November 12       94,610      +142.1%

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       Thurs
Benchmark                       (11/12)    (11/16)     (11/18)

Overhead Resistance (740-750)    N/A         14.56      2.68

OEX Close                       731.12      742.89    749.71

Underlying Support (720-735)     N/A          2.25      1.25


What the Pinnacle Index is telling us:
During the last two sessions, the put buyers have come racing in. 
The Pinnacle Index dropped dramatically for 740-750, and is 
indicating that further upside is probable.



Put/Call Ratio                  Friday     Tues       Thurs
Strike/Contracts                (11/12)   (11/16)     (11/18)

CBOE Total P/C Ratio             .68        .69        .69
CBOE Equity P/C Ratio            .51        .36        .39
OEX P/C Ratio                   1.53       1.57       1.30


Peak Open Interest (OEX) Friday           Tues            Thurs
Strike/Contracts         (11/12)          (11/16)         (11/18)

Puts                    700 / 12,420     700 / 14,304    660 / 12,337
Calls                   740 / 10,728     740 /  8,814    740 /  8,232
Put/Call Ratio            1.16             1.62             1.49


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 18, 1999                       20.32 


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

November 11, 1999                         44.4        35.9



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

Daily Results

Index      Last    Mon    Tue    Wed    Thu   Week
Dow     11035.70  -8.57 171.58 -49.24 152.61 266.38
Nasdaq   3347.11  -1.61  73.51 -26.13  77.72 123.49
$OEX      749.71  -2.33  14.13  -3.12   9.94  18.62
$SPX     1424.94  -1.65  25.64  -9.32  14.23  28.90
$RUT      462.04   3.28   3.91   0.19   4.97  12.35
$TRAN    3018.16 -24.97  35.07 -95.54  14.03 -71.41
$VIX       20.10   1.17  -1.43  -0.35  -0.97  -1.58

Calls              Mon    Tue    Wed    Thu  Week

VRTS      138.13   4.06  10.81  -1.44   8.63 22.06  Dropped
YHOO      213.88   8.06   7.56  -6.38   7.69 16.94  Yahoo indeed!
NOK       137.00  -2.06   5.19   1.81   9.81 15.38  Excellent!
CMVT      135.25   1.88   7.63   1.81   2.69 14.00  Clock ticking
HLIT       69.75   5.06   2.63   0.31   2.75 10.75  New
AOL       159.43   2.94   9.88  -5.00   3.81 10.69  Strong rally
SFE       122.94   4.00   8.75  -4.19   1.88 10.44  Needs volume
EMC        89.31  -1.81   2.06   0.88   6.13  6.63  Gets a boost
SUNW      125.75   0.19   7.13  -1.69   0.81  6.44  Trending higher
NT         78.44   2.44   1.69  -1.75   3.50  5.88  Smokin'!
GMST      104.88   4.38   1.25  -3.13   2.00  4.50  New
LVLT       78.25   0.63   3.31  -2.88   3.25  4.31  Still bullish
BVSN       92.25   0.88  -0.19  -1.19   4.25  3.75  Still going...
LSCC       46.75  -1.22   1.34   0.88   0.75  1.75  Slow & steady
SLR        88.50  -2.19  -0.94   0.75   3.00  0.63  Confidence!
SNE       176.75   2.56   1.88  -3.00  -1.19  0.25  Possible entry
MXIM       87.00  -2.81  -0.44  -2.06   4.94 -0.38  Stock split!
CNCX       32.81   0.44   0.25  -1.50  -0.06 -0.88  Short term bull
AAPL       89.63  -1.19   1.75  -0.94  -0.63 -1.00  Dropped
LSI        64.50  -1.94   0.44  -2.25   2.75 -1.00  Good sentiment
TMX        98.00   0.19  -0.88  -1.88   0.56 -1.00  Dropped
JPM       138.19  -0.94   4.13  -2.50  -1.56 -1.13  Watch and wait
QCOM      355.81 -10.00  -4.75 -20.38  12.94-22.19  Hello entry! 

Puts

RMBS       82.94  -1.06   0.56  -4.00  -0.56 -5.06  New
EL         42.06  -0.75  -0.81  -0.25   0.50 -1.31  Still ugly
NKE        47.00   1.19  -3.00  -0.06   2.75  0.88  Upgrade
RMDY       37.63   2.31  -0.88  -2.25   2.13  1.31  Under 10-dma
CSC        65.31  -0.06  -1.56   0.13   3.19  1.69  Dropped



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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 
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The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.


The Option Investor Newsletter         Thursday 11-18-99
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:
*****

TMX $98.00 +0.56 (-1.00) We were excited about the proposed 2:1 
stock split announced by the Board of Directors on Nov 10th 
and the new 52-week high at $102.50 that followed.  However 
after watching Monday's promising performance, TMX has sagged 
below the 10-dma (now at $98.19) for the past two trading 
sessions.  This bearish sign has put us on edge.  Plus we saw 
a block trade of 394,400 units at $99.06 on Wednesday that 
crossed Salomon Smith Barney and this didn't seem to help 
matters.  It's still possible TMX could rise in the near-term 
and break above the $100 mark, but time is money - there are 
more lucrative plays in our future.  We're exiting the play 
this evening.

AAPL $89.63 -0.63 (-1.00) AAPL was on probation this week while 
we watched for a sign of definitive upward movement to confirm 
that its momentum was indeed intact.  Well, on one hand trading 
volume did pick up speed, but unfortunately on AAPL's two-day 
decline.  This is certainly not what we wanted to happen.  At 
this point too, the stock is under its 10-dma ($90.91) indicator 
and with AAPL's oblivious response to today's rallying market 
we have no choice but to drop the play tonight. 


PUTS:
*****

CSC $65.31 +3.19 (+1.69) CSC broke out and spent the day trading 
above its 10-dma of $64.50.  CSC also closed near the high of 
the day indicating renewed and continuing investor interest.  It 
looks as though CSC has found it's legs and is prepared to make 
a run for it.  Therefore, it is time for us to close our play 
on CSC.  CSC announced that they have finalized the merger with 
Nichols as the shareholders voted their approval at the special 
meeting held on the 16th.  The Federal Trade Commission approved 
the merger last week.  It was announced this morning that 
Andersen Consulting plans to sue CSC for $10 million worth of 
unpaid invoices.  The bottom line is the hardware sector is 
heating up and CSC could stand to benefit.  



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

Scoreboard!

In the last quarter of high school sporting events, winning 
crowds are often heard to chant, "Scoreboard, Scoreboard, 
Scoreboard," in response to any insulting cheers from the 
opposite side of the stadium. That's how I feel, halfway 
through November, as I tally my trades. In the back of a
graduate school portfolio management class, I was doing 
what passes for doodling -- calculating the compound returns 
on my different portfolios over 1, 5, 10, and 25 years on my 
financial calculator. 

Portfolio A. My 403b (like a 401k, but for teachers). I figure 
that I can expect 10% a year. So, after 25 years, this boring 
financial instrument will finally equal where my short term 
option portfolio is today. 

Portfolio B. My Long Term stock holdings. I calculated returns 
for 15%, 20%, and 25%, and these differences make a huge 
difference. After 10 years, my LT port will be twice as large 
if I return 25% vs. 15%. Right now, this is the bulk of my 
financial assets, weighing in at 57%. 

Portfolio C. My Short Term Option Trading Portfolio. Now 38% 
of my assets, up from 15% at the beginning of the year. Return 
for the year: 300+%. I started my career as an option trader 
in Jan99. I calculated returns for 250% and 750% a year, and, 
needless to say, the numbers grew ridiculous after 5 years. 
Which lead me to some of the following musings...

What will happen after 3 years? Until now, I had planned to 
end my short, glorious career as an option trader in the Summer 
of 2000, when I would probably take a job as some type of 
professional barred from active trading. But I've already made 
more this year in trading than I would in some entry level 
professional jobs. Therefore, I need to reevaluate career choices 
-- I need to take a hard look at working in a start up company 
(and really rolling the financial dice) or another job that 
allows me to continue to trade actively. 

Portfolio Management. I am planning on systematically transferring 
1% of my ST Option portfolio to my LT Stock portfolio each month, 
and using that cash to buy LEAP positions in stocks that I think 
are poised for continued growth. The downside of this strategy is 
expressed in books like Tony Perkins, The Internet Bubble, which 
argue that Internet stocks are due for a shakeout. The counter 
argument, expressed by Venture Capitalist John Doerr, is that the 
Internet is UNDERhyped. Other books, like the Long Boom and The 
Roaring 2000s, make the case that continued technological
development and the spending habits of baby boomers will cause 
a continued stock market boom until 2009. Weighing these 
perspectives together, and tending to be bullish (I am, after 
all, writing this email from a wireless modem equipped lap top 
at a little cafe in Palo Alto), I plan to dollar cost average 
into LEAP positions in my LT Stock portfolio over the course of 
the next 6 to 12 months. My rationale is that, over the long term, 
this program will increase the annual return on my LT Stock 
portfolio by at least 10% a year. As well, this makes me eligible 
for LT capital gains taxation, and gives me the ability to defer 
my taxes by purchasing the underlying, if I decide to do that in 
certain cases. 

As the portfolio class ends, the professor makes a telling point: 
the reason that young people should take riskier positions is that 
they have career flexibility -- if they take large losses, they 
have the ability to work harder or longer, or to get more education.
This makes sense, but the flip side of this, for me, is that if I 
build up a good amount of capital now, I have the flexibility to 
work as I choose to. As another of my professors put it, the 
biggest career risk of being an entrepreneur is that you become 
terminally unemployable, except to work for yourself. And, to some 
degree, every trader out there is an entrepreneur, accountable to
ourselves, for our wins & losses. Success in this line of work 
represents real freedom.

Anyway, my trades. Earlier this week, I closed out my "truckload" 
of AOL Nov 140 Calls at 12, 14, and 15 for 100%+ profits on all 
of them (cost basis = 6). I also closed out open Nov call 
positions on AAPL, SUNW and BVSN for overall gains in my ST 
Option Account; open Jan & Mar call positions on SCH and CSCO 
for 100%+ gains in my LT Stock Account; open Jan and Jan '02 
LEAP Calls on MSFT for 10 - 20% losses in my LT Stock Account.
I made a bad play on some OEX Calls immediately after the Fed 
decision, and realized that I was not making good decisions, so 
I decided to take my monthly break from ST Option Trading 
beginning on Tuesday this week, instead of next week. On Monday/ 
Tuesday, I almost target shot NOK calls when the underlying 
dipped to the support level of 121 that the newsletter suggested; 
damn! Going into Thanksgiving, I am almost completely in cash,
except for some Dec OEX puts, which I purchased because I think 
that the market is overdue for a short term top. My overall gain 
for Nov Trading in my ST Option Account is 59%, though it could 
have been 74% without that blown day trade right after the Fed 
decision. The other vital statistic is that I spent 16 days in 
open trades, which are tiring and will wear down your ability 
to make good decisions. Now, I am in what I consider to be a
vital monthly re-building/ maintenance phase. In the next few 
weeks, I plan to enter some Jan plays and LEAPS in my LT Stock 
Account, get authorization to write spreads and naked calls/ 
puts in my accounts, study some of the advanced strategies, plan
a trip to Disneyland, and ignore the day to day movement of the 
markets until after Thanksgiving. Tonight, our local club will 
meet and hear from representatives from Preferred Trade, as well 
as celebrate the success of a few members who were playing QCOM 
LEAPS(!). Any successful trader will tell you the same thing -- 
what you do in the time you are not in the markets is just as 
important as what you do when you are deep into a trade with 
blinders on.

Good Luck

Janar Joseph Wasito
janar@OptionInvestor.com



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

CMVT $135.25 +2.69 (+14.00) The clock is now ticking more loudly 
on our play of CMVT.  We have had such a spectacular run and 
have benefited from plenty of time to be patient for new entry 
points but that luxury is running out.  Speaking of the great 
run, CMVT bolted northward on Wednesday, tagging $140 in the 
first hour.  It then melted back towards $130, which is support.  
Strangely, it briefly went through $130 this morning to hit 
$128.13 for the day-low but quickly returned to trend higher 
for the rest of the session.  If you have been following this 
play, then you know these brief dips are standard procedure 
for CMVT.  Anyway, with today's close over $135, everything 
looks good.  If the market keeps going, we are likely to retest 
$140 again.  The earnings report is due out on Nov 30th and 
that is why the clock is ticking.  We will be closing out of 
the play ahead of the earnings release to avoid any surprises 
but we do think a stock split is likely.

SNE $176.75 -1.19 (+0.25) A few days of consolidation for 
Sony is certainly not unreasonable considering Sony has given 
us over $25 so far this month.  It looks as though a 
breakthrough of the psychological resistance of $180 may have 
triggered this recent sell-off.  SNE did not even test support 
at it's 10-dma of $174 before the bulls resurfaced and pulled 
SNE back up to close up over a dollar from the low of the day.  
Sony posted volume roughly three times the average, another
good indication of continuing investor interest.  This current 
trading level offers potential as a possible area of entry for 
a new play, something that has not been easy to come by as of 
late.  Once SNE confirms a reclamation of its positive momentum, 
it may be time to hop on board.  

LSCC $46.75 +0.75 (+1.75) It was a strong day in the market for 
the majority of the Semis and LSCC was no exception.  LSCC 
maintained a slow and steady upward trend toward its current 
52-week high of $48.  LSCC traded up to $47.25 early in 
Wednesday's session before making a late day pullback to close 
at $46.  This level held up well throughout trading today as 
LSCC made several bounces right around this point.  As we 
mentioned in Sunday's write-up, we were looking for LSCC to 
have some intraday pullbacks for possible entry points.  LSCC 
has done a nice job of providing these for us this week, 
offering a trading range of nearly $4.  Going forward, LSCC 
looks good heading into Friday's session with a close today 
near the high and strong volume.  Look for $46 to hold support.  
LSCC's 10-dma is at $44 which could hold as further support if 
needed.  We want to see a breakout soon though to justify 
keeping LSCC around with so many other hot plays out there 
right now.

MXIM $87.00 +4.94 (-0.38) Our anticipated split play on MXIM 
got a shot in the arm today, which is just what the doctor 
ordered.  MXIM announced today that its Board of Directors 
has authorized a 2:1 split for shareholders of record on
November 30th.  The ex-date for MXIM will be December 22nd.  
MXIM declined yesterday a little more than we would like to 
have seen making an intraday low of $81.50 late in the day.  
This morning with the shareholder's meeting underway MXIM 
started the day in plus territory and never looked back.  
MXIM hit the $87.75 mark and fell back to close at $87.00 up 
$4.94 for the day.  MXIM gave us lots of good entry points  
today.  The volume today was a bit better than average at 
1.6 mln shares, but still nothing to write home about.  MXIM 
is faced with the same challenge we mentioned Tuesday and that 
is the resistance found in the $88 area.  A breakout through 
the $88 level will now be the key to our split run.  It would 
appear that MXIM has the momentum to continue higher.  If it 
can't push through the overhead resistance then our play could 
be in jeopardy.  If you re-entered a play in MXIM keep your 
stops close.  If you are considering a new play, wait for MXIM 
to break above the $88 level on a closing basis.   

EMC $89.31 +6.13 (+6.63) Thank you Hewlett-Packard.  The Dow and 
the computer hardware sector got a boost today from the strength
in HWP.  HWP accounted for approximately 80-90 points of the
Dow move today and probably accounted for a good portion of the
move in EMC.  Analysts rewarded HWP for their earnings efforts
yesterday and the jump in revenues.  Although the picture for 
1st quarter of 2000 could be somewhat cloudy, investors heard
just what they needed or wanted to hear, driving shares of HWP
over 16 percent higher for the session.  EMC and most of the 
stocks in the hardware sector jumped on HWP's back and enjoyed
the ride.  EMC made a new high at $90.38 in the last 15 minutes
of the trading day.  Volume was a solid 6.4 mln., indicating 
there is probably more room to go on the upside.  We would
view continued strength as an opportunity to buy calls, however
some traders are apparently beginning to talk about the "bubble"
on the Nasdaq and when it may burst.  That's always the $64,000
question.  Should we see a retracement in EMC, initial intraday
support lies in the $87-$88 area, followed by $83.  In looking  
for a new play we would like to see these support levels hold 
on a consolidation or a retracement prior to entering a new play.  
If we see continued strength in EMC, we would consider adding 
to already established positions and then keep your stops close, 
as traders who bought EMC earlier in the week when it was
trading at the near $80 may decide to take some of their money 
to the bank.

JPM $138.19 -1.56 (-1.13) JPM could be setting up to give us a 
great entry point for our call play.  After the FED decision
to raise interest rates JPM jumped $4.13 on Tuesday.  Wednesday
and today gave it back.  Concerns over the price of oil and 
potential inflation have crept back into the market.  The 
banking sector has given back more than what it gained Tuesday.
So all things considered JPM has held up pretty well.  As we
said JPM COULD be setting up for a good entry point.  It bounced
off the bottom of its near term channel today.  We would like to 
see some solid movement trough the $139-$140 area accompanied by
strong volume before entering a new position.  We are honestly 
looking for a pullback or retracement to begin in the major
indices as they are strong, but have got more and more overbought
and need some time to backfill and consolidate.  The VIX closed 
at 20.10 indicating a drop could come soon.  Whether or not it 
happens, and the extent to which the banking stocks will join 
in is obviously yet to be seen.  We believe that JPM could be 
an outstanding play, it may just take a little time to develop 
so we will need to have patience.

YHOO $213.88 +7.69 (+16.94) After a strong opening yesterday, 
YHOO retraced to the $205 range, a level that could be evolving 
as near-term support.  The downdraft effectively offered solid 
entry points into this split-candidate play.  In the past, 
Yahoo! has announced stock splits when the share price reaches 
$200 to $220.  Presently there aren't enough shares authorized 
for another split and therefore a Shareholder Meeting would 
be required.  Today this potential splitter rallied again on 
holiday momentum and new coverage giving HIGH-RISK Internet 
players $7 to $8 in immediate profit.  The company announced 
Yahoo! Gift Registry, a service that provides a place for users 
to develop a "wish list" of goods from its over 7500 merchants 
and then e-mail choices to friends and family.  And today First 
Union Securities started coverage with a Strong Buy rating and 
issued a bullish price target of $240.  On the international 
news front, Yahoo stands to benefit over time in light of the 
recent landmark agreement between the US and China.  Yahoo! 
already has presence in the China economy with its Yahoo! China, 
a Chinese-language site launched in September.  It's predicted 
that Chinese Internet users will increase from the anticipated 
8 mln in year 2000 to over 30 mln by 2003 putting this Internet 
content provider in quite a lucrative position.  

AOL $158.63 +3.00 (+10.69) AOL has rallied strong ahead of its 
2:1 stock split scheduled for Monday, after the bell.  Just this 
week alone, AOL has tallied almost $10 in profits in moderate 
trading activity.  For those players holding open positions, 
please consider exiting your play by Monday (the very latest) 
to avoid the risk of any post-split decline.  Short-term 
resistance is at yesterday's daily high of $161 and honestly 
any exit in that proximity should have provided lucrative 
returns.  Otherwise there's a good chance Greed could deal you 
a nasty hand quickly pulling those profits right out from under 
you.  Concerned parents were glad to hear of AOL's recent 
commitment to provide ratings on all its computer games played 
on its sites.  Also Microsoft (MSFT) announced it's backing 
down from the fierce battle over instant messaging it's had 
with AOL in recent months.  In good spirit, Microsoft released 
a new version of its free instant messages (IM) that no longer 
gives access to AOL's competing AIM system.  

SLR $88.50 +3.00 (+0.63) As you know, SLR consolidated in the 
neighborhood of its near-term support at $85 and the 10-dma 
($85.71) indicator since last Friday.  This respite provided 
lots of opportunities for entries into this momentum play.  
Today our patience was rewarded and SLR pumped up $3 in 
robust trading activity.  The 52-week high (set last Thursday) 
is just overhead at $90, but another strong day should propel 
the stock right through this mark as $87-$88 was the real  
opposition.  Don't be alarmed if we get a slight pull-back with 
the broad market tomorrow.  Unless there is some unforeseen 
event SLR is poised to go higher on investor confidence 
resulting from recent acquisitions, analyst comments, and 
upcoming earnings confirmed for December 13th.

LVLT $78.25 +3.25 (+4.31) The trading pattern for LVLT has
remained consistent with our repeated strategy.  If you 
have been buying on the pullbacks and selling into strength,
you have been making money every other day.  Yesterday the 
stock closed at the lower end of the range, trading to as
low as $74.25, before closing at $75.  Incidentally we
had recommended in Tuesday's letter to look for a bounce 
at the $74.25 level, and that is exactly what happened.  
Today it retraced the drop in price to close the day at the 
high end of the range at $78.25.  Once again the volatility 
remained consistent, the buying on dips strategy has worked 
now three or four different times.  The technicals remain 
consistent with our bullish sentiment on the stock and this 
hot telecommunications sector continues to see inflows of 
money from Wall Street.  Look for more of the same with 
LVLT, volatility, buy on dips, sell on strength, and higher
prices.  Going forward look to enter on a confirmation of 
the trend above $78.38 or wait for a pullback to support 
levels near $75.  Keep in mind past performance does not 
future results, but it is hard to deny this trading pattern.

SUNW $125.75 +0.81 (+6.44) After reaching an intraday high
on Wednesday of $131.31, the shares of SUNW began to give 
back some of the gains as the Nasdaq decided to pullback for
only the third time in over twelve trading sessions.  Today
with the Nasdaq returning to record highs, the tech bell-
wethers pushed higher as well.  SUNW is still trending higher,
but caution is in the wind.  A lot of the volume is profit-
taking, but there are still new buyers, buying ahead of the
stock split.  Just a reminder the stock will split 2 for 1
on 12/09.  We have had a nice run, and want to protect the
gains, so keep your stops tight.  There is still over two
weeks of trading before the stock split takes effect, so we
do not believe the split run has ceased, but protect yourself
at these levels.  There seems to be a since of complacency in 
the market, which could be dangerous.  The seasoned veterans 
of Web application platforms like SUNW remain steady, but money 
is also moving into the smaller cap companies as well.  There 
has been a broad based rally in the Internet names.  Look for 
support near the $124 level, aggressive traders could use this 
level for a possible entry point.  

CNCX $32.81 -0.19 (-0.88) It seems as those ISP's, to be 
specific the ISP's that have recently announced stock splits 
in the Internet sector, have gotten the most attention lately, 
with the likes of AOL, VIGN, BRCD to name a few have been 
surging ahead of these upcoming splits.  Some of the smaller 
ISP's have been rolling over.  CNCX falls into that category.  
After starting the week with prices reaching $35.25, the momentum 
has fizzled somewhat to fill the gap.  Filling the gap is not 
always a bad thing.  Sometimes when a stock retraces recent 
levels, it is gearing up for another leg up that will take the 
stock to higher-highs.  CNCX, trading as low as $31 today, before 
bouncing to close near the $33 level.  This is encouraging and 
we look to see if the volume and moneystream can converge with 
the bounce and take the stock to new levels.  We look to add 
to current positions above the $35.25 level.  Aggressive traders 
should keep this one on the radar screen for a retracement and 
a bounce off of the $30-$31 level for a possible entry point.  
The overall bullish sentiment remains with the sector and we 
expect higher prices, but keep stops tight and take your profits 
accordingly.  The stock remains in the recent relative strength 
channel, this is also bullish over the short-term. 

LSI $64.50 +2.75 (-1.00) The semiconductor stocks as a group
bounced back today from recent consolidations.  Stocks like
TXN, NSM, STM, and other broad-line semiconductor stocks 
helped to push the $SOX index up over 18 points today.  Also
on the back of good earnings from AMAT, although AMAT sold 
off today, it helped to remind Wall Street about the earnings
that are anticipated from the sector overall.  This overall
positive sentiment helped stocks like LSI push forward to
slightly higher prices for the day.  We still are looking for
the stock to trade above recent 52 week highs of $65.50 for
another entry point and we possibly could see that level 
tomorrow in a volatile option expiration trading session.  We 
had mentioned in Tuesday's newsletter to look for a possible 
trading entry point at the $61.75 level for a buy on a bounce.
That is exactly what happened, and if you entered a position
at the end of the trading day on Wednesday, you now have a 
profitable trade.  Protect those profits going forward.  If
today's rotation of funds into the sector was serious, you 
will see higher-highs, look to ride the wave above $65.50.
In recent news, LSI reported that its single chip CDMA 
baseband processor has been approved by system operators 
for use in the Japanese market.  This is good news for the 
overall profit picture going forward for LSI.   

BVSN $94.25 +4.25 (+3.75) So much for running out of steam.  
It never happened.  While we were getting a bit twitchy about 
the declining volume earlier in the week.  Volume doubled today 
over yesterday's 1.3 mln shares, taking BVSN easily through $92 
resistance to close up $4.  As long as volume remains in the 
issue, the next likely test of resistance is at its all-time 
high of $95.94.  Friday will be a bit tricky with options 
expiration serving to hold prices up, while profit-taking could 
force these big gainers down.  Well folks, over the last three 
weeks, we've been given a demonstration that liquidity manifested 
in volume will overcome intelligence 12 out of 15 times.  While 
we keep thinking that NASDAQ is due for a breather after such 
strong gains, there just is no substitute for volume in keeping 
prices on the move.  Support is at $90, $88, $86.  Target shoot 
to your risk profile at these levels and remember to protect 
your profits with trailing stop losses if you are already in 
a position.

NT $78.44 +3.50 (+5.88) Forget groovin' up slowly.  Nortel is 
smokin' up quickly to become the number one producer of optical 
networking equipment, by a margin of 32% market share compared 
to Lucent's 27%, according to a new study released by California 
consulting firm, RHK.  While yesterday gave us some profit-
taking, today was a textbook chart as NT ascended all day, and 
finished the final hour with a strong surge of volume.  Remember 
to protect those profits with trailing stops.  Support is pretty 
good at $75 both historically and in the channel.  The channel 
resistance is at $82.  By the way, today was a new high for NT.  
Watch for volume increase if NT breaks out again, or wait for 
the dip to take a position.  With the VIX so low at 20.10, we 
can't help but think, investors are just a bit too comfy for 
this market.

SFE $122.94 +1.88 (+10.44) Did you use a trailing stop to 
protect your profits as SFE traded as high as $127.75 today?  
Unfortunately, profit-taking ensued shortly thereafter, testing 
support at $120 before bouncing into a strong rally at the 
close.  At least the theory held that old resistance becomes 
new support.  There is no news driving the price right now, just 
momentum.  (of course, the momentum is borne of this incubator 
company taking its babies public or spinning them off in IPO's)  
That said, volume is only average telling us that SFE may need 
to base a bit before moving up to the next level.  There could 
be some market wide profit-taking in the meantime, which would 
likely take SFE with it.  If you are going to take a position, 
we suggest target shooting at $120, market willing.  And keep 
your eye on the volume.  Just "average" (ADV) won't keep it 
moving up with conviction.  There is still the possibility of 
a split, but we don't think its likely any time soon, since 
the next earnings date isn't until February, which would be a 
likely time for the announcement.

NOK $137.63 +10.44 (+15.38) Wahoo!  Party hats and horns!  
Careful.  That's about the time somebody puts the lampshade 
on their head and the police show up.  Nonetheless, this was 
a fantastic move (ain't momentum great?), but subject to some 
correction should the market do some backing and filling from 
such a strong run.  Intraday support is at $134.  Channeling 
support is at $125 with channeling resistance between $135 and 
$138 (we're there now).  Historical support is way back at $120.  
Honestly, today was a great day to own this (then sell it), but 
a bit tougher to buy since we never got the opportunity for a 
good entry.  Patience will pay off here.  Don't chase it.  Wait 
for a better entry.  What likely sparked today's big move was 
Merrill Lynch's price target revision from $120 to $180.  That 
always looks good.  It doesn't hurt that NOK traded up into 
historical split announcement territory either ($130-$140).  
With a big gap up, a move outside the channel, and a profit-
taking Friday staring us in the face, those in the play will 
want to have a trailing stop in place.

QCOM $355.81 +12.94 (-22.19) Anybody catch that buying alert 
yesterday as QCOM touched $328?  Or how about this morning as 
moved down to $330 in amateur hour?  Either way, it had "buy" 
written all over it.  With earnings handily beating street 
estimates, a 4:1 split (shareholder meeting scheduled for 
Dec 20th), wire line networks being chucked in favor wireless 
in developing countries and QCOM's plan to spin off or sell its 
handset division, the future of this company is great.  Support 
is in the $330 range; on a bad day it could get to $300.  But 
we doubt that will happen as volume over the past few weeks 
indicates that funds have been doing the buying and are not 
likely to part with it soon.  That said, selling volume was a 
bit high yesterday; buying volume a bit low today.  At least 
nobody seems interested in dumping at this price (that may 
change if the market decides to take profits tomorrow).  The 
next big event for QCOM is the split, which will likely be set 
for late December.  And as that date gets closer, we should 
start to see the volume pick up again and move the price back 
up.  Until then pick your entry carefully as QCOM had a hard 
run to $406 and may still have some backing and filling to do.  
That's especially important now that the time value of the 
options is astronomical.  By way of example, we note the DEC-400 
($45 out of the money) at $19.75 ask.  This is no bargain.  
Again, pick your entry carefully.


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





The Option Investor Newsletter          Thursday 11-18-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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

RMDY $37.63 +2.13 (+1.31) Despite a late surge in the RMDY, 
the basis for our play is still in tact.  We have suggested 
that the 10-dma be our guide as resistance.  RMDY has bounced 
off that level with each rally in the for the past two weeks.  
This has made a good entry point for new put plays.  The 10-dma 
is currently at $38.  We are concerned with the spike up late 
in the day because it had volume to back it up.  There is no 
news on the wire but somebody got interested in RMDY during 
the last hour of trading.  Because of this, we would recommend 
holding off on new plays until we see a definitive bounce off 
resistance.  We had a good play Wednesday as RMDY dropped back 
to support at $35.  Eventually, either the 10-dma or support 
at $35 is going to have to give.  These two indicators will 
tell us whether to continue searching for puts in RMDY or to 
look elsewhere.
 
NKE $47.00 +2.75 (+0.88) Help, our play is walking dangerously 
close to the edge.  Hopefully today was just a head fake or 
NKE may fall on to the drop list.  Today's rally probably had 
something to do with the Lehman Bros Buy rating established 
yesterday.  This brought buyers into the market as volume came 
back from the dead.  A look at a one-week chart shows what 
may be a bottom pattern on Wednesday after the announcement.  
We want to give NKE one more day though to prove itself.  You 
will probably want to avoid any new plays right now until NKE 
re-establishes its downtrend.  It is right at resistance and 
support is now at the weekly-lows at $44.  So use caution after 
the upgrade From Lehman. 

EL $42.06 +0.50 (-1.31) Come on, is that the best EL could 
do in a market like this?  Rather then be concerned about a 
day El went up, we view this as more of a testimony as the 
continuing weakness of EL.  EL is trading more than a dollar 
below it's 10-dma and until we see a breakthrough of this level, 
we are not convinced that EL's momentum has changed direction.  
EL's next support is still all the way down at $40 but we are 
looking for EL to make the plunge to the 52-week low of $35.50.  
Before entering any new plays, we obviously want to see a 
reclamation of EL's negative momentum.  Once we see this turn, 
this could very well be a good place for a new entry. 


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

GMST - Gemstar International $104.88 +2.00 (+4.50 this week)

Gemstar International Group makes videorecording 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.

The last month has been very, very good to the shareholders of 
GMST stock.  After consolidating between $70 and $80 from late 
September until the third week of October, GMST began a nice 
earnings run.  On October 8th with the price of GMST trading 
near $86, GMST reported decent earnings of $0.19, beating the
street by a penny.  The next day GMST broke through the $90 mark
and began another run up, in anticipation of a split announcement.
Traders received the news yesterday that GMST had declared a 2:1 
for shareholders of record November 29th.  The ex-date is 
scheduled for December 13th.  This is the second split for the
Audio and Visual Equipment company.  GMST split 2:1 back on
May 17th.  Today GMST suffered a bit of a post announcement 
depression early in the session, but recovered late in the day  
bouncing off its low of $101.00 to close +2.00 on the session.
Technically GMST has solid support between $100-$101.  We are
looking for the strength in GMST to continue as many of the 
technical indicators are in positive territory.  One negative
is the volume as it has been a little light this week.  If we 
see new buyers enter the market on GMST and continued strength 
we would look to buy calls.  We would urge caution not so much 
in GMST, as in the broader markets.  They are over due for a 
pullback and consolidation.  If we see that occur, GMST may not
be able to avoid the selling.  On the bright side it could 
provide a better entry point for our play.  Before entering our
split play watch the major indices and the movement of GMST,
before placing an order.

In other news, the analysts recently showed their approval of 
GMST's earnings with 3 different firms last week reiterating 
Buy recommendations and raising their 2000 target estimates. 
Most now finally approve of GMST's acquisition of TV Guide back 
in early October and believe the merger will only strengthen
the company.

BUY CALL DEC-100 GST-LT OI= 507 at $11.88 SL=9.50
BUY CALL DEC-105*GST-LA OI= 723 at $ 9.38 SL=7.25
BUY CALL DEC-110 GST-LB OI= 314 at $ 7.00 SL=5.25
BUY CALL DEC-115 GST-LC OI=2661 at $ 5.25 SL=3.75

Picked on Nov 18th at   $104.88    P/E = 138
Change since picked       +0.00    52 week high=$110.63
Analysts Ratings      6-0-0-0-0    52 week low =$ 25.31
Last earnings 09/99   est= 0.18    actual= 0.19 surprise +2.5%
Next earnings 02-10   est= 0.21    versus= 0.17
Average daily volume = 1.22 mln
Chart = http://quote.yahoo.com/q?s=GMST&d=3m

****

HLIT - Harmonic Inc.  $69.75 +2.75 (+10.75 this week)

Harmonic designs, manufactures and markets digital and fiber
optic systems that deliver video, voice and data over cable,
satellite, telcom and wireless networks.  These advanced 
solutions enable cable television and other network operators
to provide a range of interactive broadband services that 
include high-speed Internet access, telephony and video-on-
demand.  The company also operates its Harmonic Data Systems
subsidiary and an R&D center in Israel.

HLIT is one of the companies in this Telecom equipment sector 
that is on fire.  Stocks like JDSU, ADCT, TLAB, just to name 
a few of these high flyers are seeing prices surging towards 
higher-highs almost on a daily basis.  Traders are rushing into 
the sector in search of the next Qualcomm.  HLIT specifically 
has recently split its stock back in the middle of October.  
After a split you normally have a post-split dip that takes 
your prices down for a period of time as profit takers step in.  
Then you will see the stock start to trace higher if the positive 
earnings picture still remains intact.  It seems that HLIT's 
positive picture remains intact as the stock has traded up 
with the sector up over 10 points this week.  HLIT currently 
sits at the $69.75 level which is at the high end of the recent 
trading range on stronger than average volume.  We like the
shares at current levels and look to add to positions, and 
then again above recent highs near the $71 level.  The stock 
has trading support at $67, if there is a pullback due to a 
volatile session or market breather, look for a possible entry 
point at this level.  Resistance is at the 52-week high at $80.

CE Unterberg Towbin has recently upgraded the stock from a 
Buy to a Strong Buy.  They have also recently been on the 
acquisition trail to strengthen there overall business.  
They have entered into an agreement to acquire the Divicom 
business of C-Cube Microsystems.  The combination will
position HLIT as a leading supplier of open-systems solutions
for delivering video, voice, and data over a variety of 
networks.

BUY CALL DEC-65 LQL-LM OI= 402 at $10.13 SL= 7.63
BUY CALL DEC-70*LQL-LN OI= 314 at $ 7.63 SL= 5.63
BUY CALL JAN-65 LQL-AM OI= 188 at $13.88 SL=11.38
BUY CALL JAN-70 LQL-AN OI=  85 at $11.63 SL= 9.50 low OI

Picked on Nov 18th  at   $69.75     P/E = 372
Change since picked       +0.00     52 week high=$79.00
Analyst Ratings       4-4-0-0-0     52 week low =$ 5.50
Last earnings 11/13   est= 0.15     actual= 0.23
Next earnings 01-19   est= 0.22     versus= 0.03
Average daily volume = 1.00 mln 
Chart = http://quote.yahoo.com/q?s=HLIT&d=3m


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

RMBS - Rambus Inc $82.88 -0.63 (-5.06 this week)

Rambus Inc. develops and licenses high-performance, chip-
to-chip interface technology that enables semiconductor memory 
devices to keep pace with faster generations of processors and 
controllers.  Rambus technology is incorporated onto dynamic 
random access memory (DRAM) chips and the logic devices that 
control them to deliver more than ten times the performance of 
conventional DRAMs.  A single Rambus(R) DRAM, referred to as 
RDRAM(R), transfers data at speeds up to 800MHz over the Rambus 
Channel to Rambus-compatible ICs.

Rambus began November with great positive momentum, gaining 
nearly $31 between November 1st and November 4th.  RMBS 
continued to maintain this momentum until right around the 
10th, when RMBS began to roll and settle into a fairly steady 
downward trend.  Rambus licenses designs to Intel, and was 
specifically cited as a factor in the downgrade of Intel on 
November 11th by Merrill Lynch analyst Joe Osha.  He stated 
concern in regards to Intel's support of Rambus Memory 
Technology.  Intel was delayed in releasing their 820 chipset, 
which is essential in making Rambus memory work on desktop PCs.  
All of this has caused major setbacks for Rambus as continuing
glitches, setbacks and mistakes in marketing continue to plague 
the introduction of Rambus memory.  So when we get down to it, 
this is a play fueled by the continuing negative momentum of 
Rambus and the not so Midas touch of Intel.  RMBS is currently 
trading $5 below it's 10-dma. Support looks to be holding right 
around $80 and should RMBS break through this level, could 
be cleared for a healthy fall.  Rambus posted weak volume in 
today's session, indicating a lack of investor interest heading 
into tomorrow.  Look for brief rallies for possible points of 
entry.  The 10-dma should act as resistance and is currently 
at $88

BUY PUT DEC-85 BNQ-XQ OI= 309 at $9.00 SL=6.75
BUY PUT DEC-80*BNQ-XP OI=3428 at $6.63 SL=4.75 

Average Daily Volume = 1.80 mln
Chart = http://quote.yahoo.com/q?s=RMBS&d=3m



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

CMVT - Comverse Technology $135.25 +2.69 (+14.00 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

The action has returned in our play of CMVT.  A week ago we 
talked about how trading had really quieted down as CMVT was 
only up a quarter for the week.  But we also noticed that 
the lows were getting higher, forming an ascending bullish 
triangle pattern that usually signals a move to the upside.  
In fact, Jim outlined this in his Options 101 article last 
Sunday if you want to go back to see the pattern to compare 
with the result.  The result was a strong move up starting at 
the beginning of the week.  CMVT ended over $120 on Monday 
and hit $130 by the close on Wednesday.  The beauty to this 
play is the intraday pullbacks that CMVT offers as entry 
points.  In has routinely come off the highs and back to 
support before going higher once again.  As you know, we are 
playing this on the earnings run, which are due Nov 30th after 
the close.  We are seeing an increased intensity in the run 
due to the high probability of a split announcement.  Like 
always, we will drop the play ahead of earnings to avoid the 
inherent risks associated with holding over earnings.  But 
we will consider bring CMVT back depending on the timing of 
the ex-date.  For now, a dip back to $120 could be considered 
for an entry point.  You may want to use caution ahead of 
the FOMC on Tuesday though.  Resistance is the new high set 
at $130.  CMVT has never broke the 10-dma (currently $117.50) 
and any close below it would be a bad development.  Place 
your stops accordingly.  

In typical CMVT fashion, the news is light.  In fact, there 
was only one article on the newswire this week relating to 
Comverse.  On Monday, it was announced that Norstan Inc will 
incorporate CMVT's Infosys' Ultra and Mentor products.  Terms 
of the agreement were not disclosed and this kind of news has 
relatively little impact on CMVT's stock price. 

Thursday's Write Up

The clock is now ticking more loudly on our play of CMVT.  We 
have had such a spectacular run and have benefited from plenty 
of time to be patient for new entry points but that luxury is 
running out.  Speaking of the great run, CMVT bolted northward 
on Wednesday, tagging $140 in the first hour.  It then melted 
back towards $130, which is support.  Strangely, it briefly 
went through $130 this morning to hit $128.13 for the day-low 
but quickly returned to trend higher for the rest of the session.  
If you have been following this play, then you know these brief 
dips are standard procedure for CMVT.  Anyway, with today's 
close over $135, everything looks good.  If the market keeps 
going, we are likely to retest $140 again.  The earnings report 
is due out on Nov 30th and that is why the clock is ticking.  
We will be closing out of the play ahead of the earnings release 
to avoid any surprises but we do think a stock split is likely.

BUY CALL DEC-120 CQV-LD OI=885 at $19.00 SL=15.00
BUY CALL DEC-125 CQV-LE OI=576 at $15.25 SL=12.00
BUY CALL DEC-130*CQV-LF OI=812 at $12.75 SL= 9.75
BUY CALL DEC-135 CQV-LG OI= 32 at $10.38 SL= 7.50 low OI

Picked on Oct 21st at  $102.13    P/E = 75
Change since picked     +33.13    52-week high=$139.75
Analysts Ratings     8-3-0-0-0    52-week low =$ 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 = 1.3 mln
Chart = http://quote.yahoo.com/q?s=CMVT&d=3m  



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

Nowhere To Go But Up?!?

Wednesday, November 17

Equity markets consolidated Wednesday as crude oil prices moved
to new highs, renewing inflation fears that have plagued stocks
for the past few months. The Dow Jones Industrial Average closed
49 points lower at 10,883 and the Nasdaq composite ended down 26
points at 3,268. It was the technology market's busiest day ever
as 1.65 billion shares were exchanged. The S&P 500 index slipped
9 points to 1,410. Declining stocks outpaced advances 3 to 2 on
heavy volume of 944 million shares on the NYSE. The 30-year U.S.
Treasury bond moved to its highest level in two weeks, with the
closing yield at 6.07%.

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

Able Telecom  ABTE   MAR10C/DEC10C   $1.00   debit   calendar 
Cybercash     CYCH   MAR15C/DEC15C   $1.12   debit   calendar
Peoplesoft    PSFT   JAN15-CC        $14.12  debit   covered-call
Tut Systems   TUTS   FEB17C/FEB25C   $0.00   debit   bull-call  
Tut Systems   TUTS   FEB20C/FEB25C   $0.00   debit   bull-call

Our two new speculation plays traded in different directions as
Cybercash quickly moved higher while Able Telecom started lower
and failed to recover during the session. CYCH did not meet our
recommended target however, $1.12 is a reasonable price for the
position. ABTE finished $0.81 lower and there were opportunities
to achieve the suggested debit in the first hour of trading. PSFT
moved up at the open and climbed gradually throughout the day. The
covered-call play was available (at a slightly higher cost basis)
but the bullish debit spread offered no favorable entries. Tuts
was a mysterious position as the quoted prices appeared to be in
error. We double-checked the CBOE and they were listed at one of
the exchanges briefly but, it's obvious they were incorrect. We
did find a new disparity at a slightly higher strike price but
both of the original plays were unavailable.

Portfolio plays:

Investors moved carefully among the market leaders as fears of
inflation remained a concern despite the Fed's recent rate hike.
The FOMC said the 25-basis point interest rate increase will cut
the risk of inflation but the central bank warned that the tight
jobs market may present another problem over the next few months.
The Labor Department offered more economic news, reporting the
October Consumer Price Index rose 0.2%, matching forecasts. One
issue that worried analysts was the fact that the price of crude
oil closed near a three year high, increasing the possibility of
inflation among consumer goods and services requiring petroleum
products.

Oil stocks closed higher after the world's top producers agreed
to maintain supply curbs until next year and that moved one of
our long-term positions into profitable territory. Exxon (XON),
a Dow 30 component, closed near $81 and our LEAPS/CC's play is
now favorable with a $1.50 profit at the $80 strike. We plan to
roll forward at the end of the week and the next two days will
determine our outlook. There was little activity with the rest
of the JAN-2001 positions but the recent rally in Motorola (MOT)
appears to be gaining support near $115. Our current portfolio
spread (LJAN105C/DEC105C) has a cost basis of $14.50, but the
profit will decrease significantly if the stock moves higher. A
roll-up to the $110 call may be the best move as it would yield
a $1.12 return on $3.88 invested for the month of December. The
downside margin would be approximately $105 and a transition to
the (bullish) diagonal spread would limit upside losses if the
underlying issue moves higher in the coming months. Sun Micro
(SUNW) is the other issue that continues to move higher without
any signs of an upside limit. A move to the $115 strike (on the
short side), added $8.50 to our current debit of $28.25.

In the big-cap technology issues, CMGI Incorporated (CMGI) rocked
our portfolio with a $21 gain after their chief executive said
they expect to become the second-largest Internet firm in terms
of revenues by the end of the fiscal year. Prudential Securities
and Goldman Sachs upgraded the stock and moved target prices up
to the $180 range. Another technology issue that moved up in the
consolidating market was our old favorite JDS Uniphase (JDSU).
The stock price gained $5 in a rally to recent resistance near
$200. A few mid-cap stocks also made favorable gains. Aware (AWRE)
and 3Com (COMS) both moved to new highs as communications issues
continue to dominate the growth stock market. Bell Atlantic (BEL)
also moved higher, finishing at our sold strike in the long-term
(neutral) calendar position. The current price offers a perfect
opportunity for the move into December options with a credit of
$1.88 for the DEC-$65 call.

Lower-priced issues are the current focus of the Spreads/Combos
portfolio and as the new year approaches, we should notice the
seasonal transition to these growth stocks. MessageMedia (MESG)
was one of the big gainers today, moving $1.50 to a recent high
near $16. Our bullish debit spread is now profitable and we will
look for a favorable opportunity to close the play. Other rising
issues included Network Associates (NETA), up $2.75 to a 26-week
high near $28 and Nividia (NVDA) which traded at a new all-time
high of $37.50 during the session. Apollo group (APOL) rebounded
to $23.68 and our bullish debit position moved back to positive
territory (don't let that one get away). One of our newer plays
on Loral Space and Communications (LOR) is recovering nicely as
the stock price moved up another $0.87 to the recent resistance
area near $19.

Some of the recent bullish plays fell on profit-taking and this
activity prompted us to move one of the at-the-money positions
forward to next month. The (bullish) diagonal spread on Youth
Networks (NETS) is now a FEB22C/DEC25C at $2.88 debit. There is
no upside break-out protection with the current cost-basis thus
the play will have to be monitored daily or managed with trading
stops. One issue that fell in our favor was Multex.com (MLTX).
The stock price consolidated after recent big gains and just as
we mentioned in Tuesday's narrative, the volatility in December
options fell slightly, allowing a favorable exit of the diagonal
position. A credit of $4.00 was available during the session.

Thursday, November 18

Stocks rallied again Thursday as investors tossed aside fears of
inflation and plowed new profits back into market-leading issues.
The Dow ended up 152 points at 11,035 and the Nasdaq index rose
77 points to 3,347, its 12th record close in 15th sessions. The
S&P 500 index climbed 14 points to 1,424, also setting a record.
In the broader market, declining stocks edged out advances 1,526
to 1,512 on active volume of more than 1 billion shares on the
New York Stock Exchange. The 30-year U.S. Treasury bond weakened
15/32 to yield 6.17%.

Portfolio plays:

Excite@home (ATHM) made a nice move today, rising $4.19 to close
at a recent high near $49. The bullish debit position should now
be exited at a $3.75 credit. The long-term (diagonal) spread has
also moved into a favorable range and the DEC-$50 options traded
at $4.12 bid, moving the debit for the overall price of the play
(JAN40C/DEC50C) to $3.88. The technology rally was widespread and
included many of our recent positions. Cisco Systems (CSCO), 3Com
(COMS), Etrade Group (EGRP), Gemstar (GMST), MessageMedia (MESG), 
Netbank (NTBK), Peoplesoft (PSFT) and Pixar (PIXR) all joined the
party.

Motorola (MOT) and Solectron (SLR) topped the LEAPS/CC's section
and both continue to rally to new highs now that they have moved
above recent trading ranges, Medtronics (MDT) is another issue
that appears to be making a stand near $38 and support at that
level should propel it to a new, post-split high during the next
bullish move. If the market offers a reasonable consolidation in
the near term, we will search for some new candidates for this
strategy.

One of our older positions, a very profitable (bullish) calendar
spread on Peoplesoft (PSFT) finally had to be adjusted today. The
new character of the underlying issue suggested that we move to a
diagonal spread to protect profits. The cost of rolling-up to the
DEC-$20 calls was $0.88. The play is no longer on the credit side
but we have great upside potential with a $2.12 maximum profit on
$0.38 invested. Other plays that may need attention before Friday
at the close (expiration) are Computer Associates (CA), Echelon
(ELON), Exxon (XON), Medtronics (MDT), Micron Electronics (MUEI),
and Toys-R-us (TOYS). We also have to make decisions on C.R. Bard
(BCR) and Monsanto (MTC), our short-term volatility positions.

QLT PhotoTherapeutics (QLTI) gave us a big scare today as Federal
advisers announced support of a new drug that may prevent serious
vision loss from one of the leading causes of blindness in the
elderly. Visudyne, developed by QLTI and Swiss firm Novartis AG,
treats age-related macular degeneration, a disease with very few
available treatments. Members of an FDA advisory panel said they
thought Visudyne was safe and effective for treating severe forms
of the disease. The stock jumped $8 but then fell quickly and a
conservative exit was available (near 11 AM) with a closing debit
of $0.25.

Straddles:

Not much to report in this section with the market cycling back
and forth over the past few days. There was one stand-out in the
lower priced issues. Mylan Laboratories (MYL) has made the turn
and is now comfortably bullish after breaking through resistance
near $19. The APR-$17 straddle is now trading at $1.43 profit and
we suggest you consider closing the bearish position to lock-in
some of the positive returns. This type of early exit technique
can be a more profitable strategy for experienced traders but it
involves additional risk and solid knowledge of basic technical 
analysis. The most common approach to this method is to monitor
the underlying issue for a breakout or key reversal through a
technical support or resistance level. When the trend has been
positively identified, the lower priced options are sold along
with half of the higher priced options. The remaining options
are held until a reasonable profit target is met (and downside 
protection is maintained with trailing stops). Advanced traders
favor this follow-up technique because it is based on technical
trends and the action usually occurs near the play's break-even
points. When one of these points is reached, two simple trades
lower the overall cost basis while retaining a high probability
of eventual profit.
 
Friday will be as exciting investors move to lock-in profits and
option traders unwind (and roll forward) this month's positions. 
Fortunately, we have made the majority of necessary adjustments
for November's expiration period and the list of new positions
for December will be posted in Tuesday's edition.

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


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

With the "out of control" market rallying to record highs and
Friday's options expiration expected to be similar to a World
Wrestling Federation "free-for-all", we thought it might be a
good time to offer a brief discussion on Calendar Spreads.

We have received lots of favorable email regarding this simple
strategy and the more I participate in it on a personal basis,
the better it becomes. The premise is simple; time will erode
the value of the near-term option at a faster rate than it will
the far-term option. Using this concept, it is also possible to
establish a directional (bullish) bias, constructing aggressive
out-of-the-money positions to take advantage of upward movement
and short-term option disparities. As the stock price nears the
sold strike price, theoretical value increases in both options
but the time premium falls in the short position, adjusting the
spread differential in your favor. It is often possible to close
these positions early if stock moves up in a reasonably stable
manner and the original pricing disparity can make the spread
profitable as the options return to theoretical value. 

To the average trader, it would appear that this technique can't
lose. One would simply buy the longer-term option and sell the
shorter-term option. As both time values decayed, the spread
would gain value. In reality, it's rarely that easy because the
the underlying stock does not remain constant but the strategy
hinges on the fact that most of the losses will be small and the
infrequent large profits will able to overcome those losses. The
risk in a calendar spread is limited to the original debit spent
to establish the position and thus the trader is always aware of
the potential loss.

It is generally best to establish this type of spread at least
2 - 3 months before the long option expires, capitalizing on the
ability to sell another option against the longer-term position.
That is the basic idea in this spread play; selling time value
in the options when they are overpriced (high implied volatility)
and buying it back (if necessary) when they return to intrinsic
value. Ideally, the spreader would like to have the stock finish
just below the sold strike when the near-term option expires. If
the short options are in-the-money at expiration, he will have
to buy them back to preserve the long-term position.

Covered-Calls With LEAPS:

I have had some new requests for LEAPS/Covered-call positions in
the past few weeks but I am hesitant to offer any plays in this
category with the current (overbought?) market levels. However,
I have found two candidates that may quench your demand in the
short-term. Proctor and Gamble (PG) is a market bellwether with
a relatively conservative (and stable) bullish outlook and Adobe
Systems (ADBE) is a leading-edge technology issue that appears to
have no limit to future potential. Each play has its own merits.

Proctor and Gamble (PG) offers the conservative investor a high 
probability of limited profit through the sale of at-the-money
(and slightly out-of-the-money) options on a well known industry
conglomerate. Adobe (ADBE) provides a high volatility candidate
with incredible potential for investors who want to speculate on
a proven technology leader. Both of these plays will also allow 
new investors to learn successful trend-trading techniques with
a small margin of safety (LEAPS have incredible resilience) while
managing the short positions for upside profit and downside risk.

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on these
positions so review each play individually and make your own
decision about the future outcome of the stock price.


PG - Proctor And Gamble  $109.50  *** A New High! ***

Procter & Gamble manufactures and markets a broad range of
consumer products in many different countries throughout the
world. Their products fall into many segments: Laundry and
Cleaning, Paper, Beauty Care, Food and Beverage, and Health
Care. Some of the company's other products include commercial
services and pharmaceuticals along with well-known brands such
as Tide, Ariel, Crest, Crisco, Vicks, Noxema and Max Factor.

PLAY (conservative - neutral/Covered-Calls with LEAPS):

BUY  CALL JAN01-100 ZPG-AT OI=1025 A=$21.50
SELL CALL DEC99-110 PG-LB  OI=959  B=$3.12
INITIAL NET DEBIT TARGET=$18.00 TARGET ROI=100% (13 months)

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

****

ADBE - Adobe Systems  $76.13     *** Where Will The Run End? ***

Adobe Systems develops, markets, and supports computer software
products and technologies that enable users to express and use
information across all print and electronic media. The company
offers a market-leading line of application software and type
products for creating and distributing communication materials.
The company licenses its industry-standard technologies to major
hardware manufacturers, software developers & service providers.
The company's software works with Microsoft Windows, Apple and
UNIX platforms.

PLAY (aggressive - bullish/Covered-Calls with LEAPS):

BUY  CALL JAN01-80 ZAE-AP OI=69 A=$16.75
SELL CALL DEC99-85 AEQ-LQ OI=10 B=$1.93
INITIAL NET DEBIT TARGET=$14.50 TARGET ROI=150% (13 months)

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

****

SATH - Shop-At-Home  $13.00   *** Break-Out? ***

Shop-at-home sells and distributes consumer products through
live, customer interactive retail sales programming that is
transmitted via satellite to cable television systems,
television broadcast stations and satellite dish receivers.
They sell a variety of consumer products, including sports
collectibles and sports related products, rare coins,
collectible cutlery, electronics, jewelry, and health and
beauty, personal care, household and lifestyle products,
and other select merchandise and collectibles such as dolls
and figurines.

We follow this company regularly in the covered-calls section
and today's move out of the previous range produced a favorable
disparity in the listed options. The issue has excellent upside
potential to an area near the sold strike, perfect for this type
of strategy. 

PLAY (aggressive - bullish/calendar spread):

BUY  CALL FEB-15 SQR-BC OI=322 A=$2.38
SELL CALL DEC-15 SQR-LC OI=345 B=$1.00
INITIAL NET DEBIT TARGET=$1.19 TARGET ROI=25%

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



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

DISCLAIMER

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

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

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