Option Investor

Daily Newsletter, Sunday, 11/21/1999

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The Option Investor Newsletter            Sunday  11-21-99  1 of 6
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Entire newsletter best viewed in COURIER 10 font for alignment
        WE 11-19         WE 11-12         WE 11-05         WE 10-29
DOW     11003.89 +234.57 10769.32 + 64.84 10704.48 - 25.38  +259.61
Nasdaq   3369.25 +148.10  3221.15 +119.95  3102.29 +135.86  +149.88
S&P-100   749.30 + 18.21   731.09 + 12.29   718.80 +  1.77  + 31.40
S&P-500  1422.00 + 25.96  1396.04 + 25.84  1370.23 +  7.30  + 61.28
RUT       461.27 + 11.58   449.69 +  7.28   442.41 + 13.77  + 10.22
TRAN     2976.50 -113.07  3089.57 + 85.58  3003.99 - 54.99  +195.83
VIX        19.63 -  2.05    21.68 -   .38    22.06 -  2.50  -  0.33
Put/Call     .47              .51              .51              .55

Nasdaq spell subdues the double witch.

It was just last Sunday that we were concerned about the Fed meeting
and the possible rate increase. It seems like weeks ago to me. The
undercurrent of tension in the market is rising and traders eyes are
glazing over. The record Nasdaq run continues to defy gravity and
logic. Traders on the floor are finding it harder every day to find
something that has not jumped +20% in the last two weeks. But, the
buying continues. Even when a dog of the Dow barked out an earnings
warning Friday and dropped -12%, the blue chip tech leader, IBM, 
soared $7.00 and held the Dow to only a minor loss. More to the point
the Dow held 11,000 when the advance/decline line was severely
negative all day long. The buyers came off the bench on every dip
and while volume was not heavy it was strong.


The Nasdaq continued it's vertical climb with no hint of being
tired. There was a small drop at the open and again shortly after
the morning rally but the outcome was never in doubt. This rolling
rotation could be taking the pressure off as we move forward.
The rally is moving on a different set of leaders every day.
This is a good sign but it only prolongs the future and eventual
correction. When I was writing about the Nasdaq's +700 point
gain on Thursday and the lack of substantial profit taking,
I neglected to paint the picture in its entirety. First, I
did not say the Nasdaq was going to crash. I only said we were
due for some profit taking. You know I like to point to
historical trends to forecast future events. The chart below
contrasts the Nasdaq from this period in 1998 to the same
period today. You can see we have had an identical rally this
year compared with 1998. There are some differences. In 1998
we were coming off the lows from October disaster. The Nasdaq
had dropped -33% (-660)from the July high of +2000. The Dow had 
only dropped -21% in the same period. There had been significant 
and complete capitulation. This year there was only a -300 point
drop from the October high. Also note that the angle of ascent
is steeper this year. You can see from the charts that we started
later this year and moved faster but both appear to have arrived
at Thanksgiving week with the same +700 point gains. Also you
can see the Nasdaq hit 2000 and went sideways for the first couple
weeks of December as prices equalized from the big gains. Also,
this week in 1998 we did not have Y2K only 28 trading days away. 


Now to be fair to the historical picture, the Nasdaq did continue
on up to a high of 2510 on Feb 1st for an astounding +1163 point
gain from the October lows. After the rocky December period 
beginning with Thanksgiving week, the index really did not have
any serious problems until mid January with a -200 point drop.


History never repeats itself exactly but as you can see by the
dual charts above the trends are scary. If the trend continues
then next week could be a challenge. If you were a fund manager
would you place large bets next week? The volume on the Nasdaq
was the ninth heaviest on record again Friday with 1.4 bln shares. 
The index is now up +53% YTD. The divergence between the Nasdaq
and its 200 day moving average now exceeds 25%. Only twice this
year has the Nasdaq passed this threshold. In July and February
and both times it dropped over 10% in the next two weeks. 

The double witching options expiration Friday could have been
choreographed by the tooth fairy for as little volatility as it
brought. The money continued to flow into the blue chips but 
the small caps slowed somewhat. The conventional wisdom going 
forward has less and less money going into smaller stocks with 
unknown Y2K risks and moving more into larger stocks due to 
their apparent liquidity and safety. Even though the Dow was
only down slightly the negative adv/decl line could be an omen.

The Caterpillar earnings warning was ignored by the market in
general. CAT lost -6.75 but it was a yawner in the broader
market. IBM however energized the techs with comments to a
Soundview analyst that their troubled PC division may be
profitable in the fourth quarter. IBM soared +7 on the news
and that was on top of large gains Thursday as well. 

The telecom sector got another boost from the Vodaphone deal.
They went hostile with a +$130 billion offer after they were
turned down by the Mannesmann board. The combination of the
two companies would give Vodaphone over 42 million customers
and make it the eleventh largest company in the world. The
deal is being rejected by German workers who fear layoffs
and cutbacks if Vodaphone is successful. The merger of the
two companies would provide a more united front and actually
increase the number of cell phone users through better pricing
and service. Companies like Motorola and Qualcom would benefit
from standardization and increased volume.

Here is the list of the other top ten companies and their
market cap.

General Electric (NYSE:GE) 463.1 bln conglomerate
Microsoft (NASDAQ:MSFT) 438.6 bln software
Exxon-Mobil (NYSE:XON) 277.3 bln energy
Cisco Systems (NASDAQ:CSCO) 277.2 bln communications
NTT (TOKYO:9432) 270.6 bln telecom
MCI WorldCom-Sprint (NASDAQ:WCOM) 264.7 bln telecom
Wal-Mart (NYSE:WMT) 262.0 bln retail
Intel (NASDAQ:INTC) 249.7 bln semiconductor
Lucent (NYSE:LU) 241.2 bln communications
BP Amoco-Arco (ISEL:BPA) 231.1 bln energy
VODAFONE-MANNESMANN 225.6 bln telecom
Royal Dutch/Shell (AMS:RD) (ISEL:SHEL) 225.3 bln energy
Pfizer-Warner Lambert (NYSE:PFE) (NYSE:WLA) 206.8 bln health

One of today's market events that will eventually bite us is the 
oil price increases. With oil trading over $26 a bbl it is hard 
to remember the $10 oil from earlier in the year. The tech buyers
may be ignoring oil prices but the transportation sector is
beginning to crumble. Oil is the second biggest expense airlines
have and oil futures contracts are now showing strong odds for
even higher prices next quarter. The higher oil prices will
eventually show up in the inflation numbers and $28-29 oil will
not win any friends at the Fed. 

One of the market movers for Monday will be MSFT. The judge 
in the Microsoft case, after discussing with both sides, 
appointed a mediator to help resolve issue. This is a huge 
step forward. By appointing a mediator and pushing back 
until February the next phase of the trial, the judge is 
giving both parties time for a peaceful resolution before 
the next phase begins. Judge Jackson does not want the MSFT 
trial to take the rest of his life. He realizes that the 
best way out is a compromise instead of a judicial ruling
that will be appealed for the next decade. There is now light
at the end of the Microsoft tunnel. Bill Gates may not like
what he sees but at least he has an opportunity to control 
some of the outcome. MSFT was up strong after the close and
should rebound next week even though a resolution could be
months away.

Y2K melt up? This is the phrase that is being used repeatedly
by analysts to describe the lack of a Y2K sell off. According
to the Fed only 39% of the public now plans to withdraw extra
cash before year end for emergencies. This is down from 62%
last march. This represents the dwindling Y2K fears and is
setting the tone for the markets. The Fed is out of the way
and investors see no Y2K disasters building in the market and 
purse strings are easing. Investors that had planned to sit on
cash for the great buying opportunity in December are now not
sure it will happen. This cash is coming back into the market
and is not showing signs of fading. We will need to keep close
watch on the money flows in/out of mutual funds over the next
four weeks to see if the sentiment changes. Funds however are
now faced with a dilemma. Many have large gains of 30-50% or
better in many tech stocks and there is still uncertainty
ahead. Should they move some cash to the sidelines to lock
in their gains and prepare for some withdrawals or just sit
tight and hope the run continues through December. When you
consider the large bonuses that ride on their yearly percentage
returns, some may opt for the conservative stance and safety
of cash. The next five weeks will be very interesting in
the market as each money manager executes his Y2K plan.

The VIX closed at 19.63 and is now solidly under 20. This is
like waving a red flag at an angry bull. Anything under 22 is
cause for concern and under 20 is dangerous. Cautious traders
should be moving to the sidelines until it moves back up into
at least the 21-22 range. Aggressive traders should continue 
to examine the market internals before making every trade to 
determine market direction. If the advances are being beat
by the decliners and the ticks are negative then you should
be very cautious about going long.


Next week is typically light in terms of volume as traders
close positions early and prepare for the long weekend. Thin 
volume could increase the volatility and any directional changes
could be magnified. To recap, oil prices are up and fueling
inflation. Bond yields were up to 6.18% intraday. Decliners
beat advancers. The Dow, S&P-100, S&P-500 were all down slightly
but held right at support. The Wilshire Total Market Index for
all stocks was down but only slightly at 13,126, -22 for the day.
The VIX is at it's lowest level since July-19th, the day before
the July correction. Market internals are deteriorating but the
major indexes are holding. Caution should be the watchword for 
the week. Economic reports are very light this week with only 
Durable Goods on Tuesday and Personal Income/Spending on Friday.
The week after Thanksgiving is a problem with nine reports 
including the critical Nonfarm Payrolls closing the week on Friday. 

News alert: The famous Wall Street saying, "Buy low, sell high",
has been replaced with, "Buy high, sell higher." 

My educational article this week is called "Pay Check or Lottery
Ticket." This is the third in the series. Look for it on the 

Have a safe week in the market. Pick you entry points VERY
CAREFULLY and sell too soon.

Jim Brown

Beginning tonight we have a new column written by a highly
successful option trader, who is also a woman. You probably
saw her scorching comments to Janar last week in the readers
write section. Renee is tired of seeing the investment world
presented in male terms and she is coming out to fight. Renee
will be writing about options trading from a female viewpoint
and will contrast the macho Marine views put forth by Janar
in the Traders Corner. Check out Womans World. Give her your 
support and let her know how you feel about her columns. 
Good Luck Renee, and welcome aboard! Jim

(catch her article in section two of the email)


This was a really exciting week for me but in reality I could
almost rename this section as "Jim's Play" since QCOM was almost
my total focus for the entire week. I did make a few other plays
on the OEX, AOL, EXDS and JDSU but they paled in comparison to
the QCOM moves.

OEX - Puts

At the end of Tuesday's trading the market was up strongly and
closed at the high of the day. The Vix was falling to almost
21 and I decided to play the OEX-750 puts for the Wednesday
morning open. Wednesday did drop some after the open but good 
news was still powering the market and I closed the position
for a -.50 loss. On Thursday at the close the Vix was even lower
and the possibility of a Friday sell off on profit taking was
again on my mind. I bought the NOV-750 puts again for $2.88
and sold them late Friday morning for $4.00. Not a big gain
but eventually this puppy is going to roll over and I want to
be there when it does. As you can see by the chart above we
seem to have hit the ceiling at 750. Next week should be 
interesting. I did not buy puts at Friday's close because I
did not want to get caught in the premium evaporation on
Monday morning as December options become current month.  

AOL - Calls

When AOL dropped back to $148 on Tuesday after the big run on
Friday I was watching to see if it would recover. When it passed
$152 moving back up I bought the Nov-150 calls for $6.00. I 
planed to hold them for several days and capture the final split
run. After the jump to $160 near the close on the market surge
I decided to take a quick profit in case the market did pull back
on Wednesday. I sold for 9.38 and a quick 50%. I tried to play
the same position again on Thursday but the drive died shortly
after the open and I bailed for a -.25 loss. I did not want to
be in AOL on Friday as split traders started leaving the play.

EXDS - Calls

Exodus caught my attention on Tuesday with the big gain but it
was too late to make a play. After the sharp drop on profit 
taking on Wednesday I watched it recover quickly and bought the 
NOV-100 calls for $5.13. When it neared the $110 high again on
Thursday I sold for $8.13 and watched it drop moments later to
only $105. I was VERY LUCKY. My reasoning that $110 could prove
resistance was correct and had I sold only ten minutes later I
would have gotten $4.50 instead of $8.13. I guess I would rather
be more lucky than good anytime. 

JDSU - Calls  (OUCH!)

I had been watching JDSU for a recovery from the recent weakness.
When it appeared to bottom on Mon/Tue I bought the Nov-190 calls
for $8.00. When it started sliding on Thursday I was afraid $203
had become resistance and we were going to range trade some more.
I sold for $11.63 and took a quick $3.63 profit. I had Nov calls
which expired on Friday so I did not think twice about selling.
I DID think twice on Friday when JDSU jumped +10.75 and the
calls traded as high as $28. Unbelievable. Hindsight is 20:20
but in retrospect I would do the same thing again. Never fail
to take a profit when one is offered and never risk a profit
in options expiration week.

MSFT - Calls

If you remember from last week, I had purchased Nov-95 calls
and Nov-85 puts just before the trial announcement. MSFT did
not move as far as I expected and even though I sold the puts
for a profit I was stuck with Nov-95 calls that were worthless.
I even bought more to average down my cost in case MSFT did
a quick recovery. The news continued to be bad and I felt the
$95 calls would never regain value. Last week I had sold $90
calls against them to break even on the trade. This week started
out bad for MSFT and I bought the $90 calls back and sold $85
calls against my $95 calls for another $2.13. When MSFT bottomed
at $85 on Thursday and started moving up on Friday I bought them
back for $.50 giving me a profit on the trade of $1.63. It was
a lot of work but I was able to turn a losing trade into a 
profitable trade by following the stock price down with lower
strikes and using my "worthless" options as collateral. Options
are never worthless until the Saturday after expiration.

QCOM - The play of the week

The law of gravity was not repealed. As I had been commenting
on for a week, QCOM had to correct and it was going to be fast
and ugly. I lived this stock this week and was rewarded well.
When it spiked to $400 on Monday I sold naked calls NOV-400 calls
for $20. I bought them back later for $11. I shorted QCOM at
$394 and covered at $375 for $19 gain. I sold naked $360 calls
at $24 and bought them back at $15. This was just Monday!! I
was up +$37 per share and it is only Monday. 

On Tuesday I gave back $7 with several attempts at trying to 
anticipate tops to short again. Still up +$30 for the play.

On Wednesday I shorted QCOM again at the open for $360 and covered
at $343 for a $17 gain. When it bounced at $330 I went long at
$331 and sold naked $330 puts for $10. I bought them back later
at $4 for a $6 gain. I sold QCOM at the close for $343 for a
$12 gain. Again I gave back about $8 jumping in and out during
the day but ended up +$37. Now up +$67 for the week.

On Thursday I bought QCOM on the dip at the open for $333 and 
sold it later for $350. Again I gave back $9 trying to daytrade
the stock. I sold the $350 covered calls at $40 and bought them
back on the Friday morning dip for $35. I decided QCOM was looking
like $400 again and did not want to be locked into only a $40 gain.
Net gain for the day +$13, +$80 for the week.

On Friday I went long QCOM stock again on the morning dip at
$350.69. I traded it several times finally closing out at the 
close for $365. Total for the stock move after trading losses
from moving in and out was +$11. On expiration morning I sold
naked Nov-$350 puts for $4.63 and bought them back for $1.63
for a $3 profit. As QCOM moved up I also sold the $360 Nov
puts for $8.50 and bought them back for $5.00. I would have
let both of these expire worthless but with QCOM volatility
and the possibility of a significant drop at any time I elected
to take small profits and be safe. Late in the afternoon I 
sold $370 naked puts for $8.00 with the hopes that QCOM would
squeak over $370 at the close and they would expire. QCOM
dipped slightly just before the close and scared me out of them 
as well at $5.50 but I still made $2.50 profit. I did close
the stock position at the close for $365 even though it was
trading at the high of the day. The trend for the last three
days was a dip at the open and with the VIX under 20 I did 
not want to risk a -$10 gap down on Monday. 

My profit for the week on QCOM - $100 a share, give or take
some fractions and commissions. I had 237 fill reports on the
stock trades alone, plus the option trades. THIS IS NOT AN

These gains were made possible by living and breathing the 
stock over the last two weeks. I watched every tick, plotted
resistance and support dozens of times. Made many mistakes
in trying to predict tops and bottoms exactly but I did get
close enough to make a handsome profit. If you only acted
on the trading alert on Wednesday then you had a great play.
If you missed it on Wednesday then you got another chance on

Based on the nice "higher low" pattern we have now, I expect
QCOM to gain speed soon, assuming the market cooperates. 
With the 4:1 split coming I am hoping for another run like 
we had the week before. 

Please do not trade QCOM if you cannot place stop orders or
cannot watch your trades. 

Recap: A very successful and stressful week. I am totally out
of the market and waiting for confirmation of the market direction
on Monday. I plan to go long QCOM on any dip and sell covered
calls when/if it hits $400.

I do not plan to trade as much this week. I need to recover
mentally from the stress of last week. I have no targets other
than to continuously monitor and trade QCOM. 

I am concerned about the VIX and the Thanksgiving correction
possibilities and do not want to give back my gains from last

Remember, my trading plan is to trade "only when profitable"
and yours should be also.



From fiber-optics to lasers to conglomerates, we hit four charts 
you might want to keep an eye on.
Welcome to OIN's "Ask the Analyst".  You send in the stock symbols 
and we apply some simple but effective technical analysis.
Remember, our goal is educational. Hopefully, you'll be able to 
pick up on some of the ideas discussed and begin to apply them to 
your own research. If this is your first time, be sure to check out 
our previous columns for ASK OIN as well.



Return From the Great Beyond
By  S.P. Brown

Continuing a comeback that would put Lazarus to shame, National
Semiconductor (NSM) surged ahead another $2.50 Friday to close
at $40.63.  For the week, the once moribund NSM stock tacked on
an additional 15 percent of shareholder value. 

Remarkably, it was only seven short months ago that NSM was in
the midst of its death throws with its stock languishing at
$9.00 a share.



Sunday, November 21, 1999

More Highs Coming Soon?

The last several weeks have brought a daily dose of record-
breaking highs for many sectors. It is almost becoming an expected 
event to hear that the Nasdaq closed at another new high on record-
breaking volume. 

If the general investing public starts expecting record closings 
daily, this market may have seen a top. If investors say that this 
market can't go any higher, it probably will go a lot higher. 
Anyone can gauge sentiment; all you have to do is ask you 
coworkers, friends, relatives, whoever, the simple question of 
where they believe the market is going? If the consensus states 
that this market is going significantly higher, you may want to 
run the opposite direction. If they state that they are waiting for 
a pullback or are negative on the market, watch out above!

Our market stance here at Pinnacle Capital remains bullish, but 
the increased likelihood of profit taking increases every day. The 
one compelling argument for a pullback soon would be the 
Volatility Index. The VIX closed Friday at 19.63, suggesting that 
at overbought condition exists and that lightening up on positions 
would be prudent. The lowest close for the VIX this year was back 
on July 16, when the VIX closed at 18.13. This also happened to 
be the short-term peak of the market.
However, rules and records are meant to be broken, and with all 
the inflows of new money, it wouldn't surprise us to see a new 
record low for the VIX. Another probable situation would be where 
the market takes a breather, yet doesn't retrace significantly, 
and the VIX settles back into the 20's. We have seen this many 
times, and this may be the most likely scenario, especially ahead 
of a long holiday weekend.

Below is a small list of specialty sectors and their respective 
put/call ratios. Many of these sectors have had incredible runs 
over the last month, yet their put/call ratios are still highly 
pessimistic. From a contrarian stance, this may indicate further 
upside in these respective sectors and the equities that fall 
below the index.

Disk Drive          0.72
Hardware            0.75	
Internet            0.62	
Network             0.60	
Oil                 0.69	
Semiconductor       0.76	
Software            0.72	
Telecommunications  0.65	
Finally, the NYSE released their short-interest statistics for the 
month ending November 15. Short interest is a very good gauge of 
sentiment, especially from a contrarian viewpoint. This last month 
saw an increase by 72 MILLION SHARES to a total of 4,061,057,060 
shares. What this tells us is that many professionals think this 
market can't go any higher, even in the face of a strong run-up on 
huge volume. This is very pessimistic, and will most likely help 
further upside in the weeks ahead, and bring about more closing 


Cash Flow:
The amount of money being poured into this market continues to be 

There is an old saying, that volume precedes price, and it couldn't 
be better exemplified that the last two weeks, where the Nasdaq has 
broken record after record.

Short Interest:
Short interest for the Nasdaq is at an all-time high, and increased 
over 5% from the preceding month. Short interest on the New York 
Stock Exchange rose 72,007,030 shares in the month ending Nov. 15 
to a total of 4,061,057,060 shares.

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

The results are in 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 

Mixed Signs: None.


Volatility Index (19.63):
The VIX continues to prove that the high teens and low 20's are a 
good exit point for bullish positions. The low close of 18.13 was 
back on July 16, which was the top of the market at that time.

OTM Call Analysis

As we move closer to the November expiration cycle, Pinnacle is 
tracking the level of call buying (OTM) between 720-810 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%

December Expiration Cycle
OEX OTM Call Analysis (Open Interest December 720-810)
Date                 Open Interest     Change %    Alert

Friday, November 19       36,165          -

The Power of Sentiment Analysis

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

OEX Pinnacle Index              Friday
Benchmark                       (11/19)

Overhead Resistance (750-760)    8.93

OEX Close                       749.30

Underlying Support (730-745)     1.03

What the Pinnacle Index is telling us:
Based on 11/19, overhead is heavy due to the levels of call 
activity at 760. What this tells us is that we have a good chance 
of rallying up to this next resistance level (760) before bouncing 
back. Support is still light, but is picking up.

Put/Call Ratio                  Friday 
Strike/Contracts                (11/19)

CBOE Total P/C Ratio             .69
CBOE Equity P/C Ratio            .33
OEX P/C Ratio                   1.41

Peak Open Interest (OEX) Friday
Strike/Contracts         (11/19)

Puts                    680 / 5,980
Calls                   780 / 4,889
Put/Call Ratio            1.22

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 19, 1999                       19.63 

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


As of Market Close - Friday, November 19, 1999 

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

DOW Industrials   10,750  11,320  11,004    Neutral  11.12
SPX S&P 500        1,315   1,385   1,422    BULLISH  11.12
OEX S&P 100          675     725     749    BULLISH  11.12
RUT Russell 2000     425     445     461    BULLISH  11.12
NDX NASD 100       2,320   2,520   3,029    BULLISH  10.28
MSH High Tech      1,120   1,250   1,575    BULLISH  10.28

XCI Hardware       1,000   1,095   1,168    BULLISH  11.11
CWX Software         770     800   1,175    BULLISH   9.03
SOX Semiconductor    475     525     654    BULLISH  10.29
NWX Networking       550     615     797    BULLISH  10.28
INX Internet         495     525     598    BULLISH  11.05

BIX Banking          645     690     660    Neutral  10.28
XBD Brokerage        395     450     464    BULLISH  11.12
IUX Insurance        610     650     637    Neutral  11.09

RLX Retail           875     910     918    BULLISH  11.12
DRG Drug             375     390     391    BULLISH  11.04
HCX Healthcare       750     790     780    Neutral  11.09
XAL Airline          180     190     146    BEARISH   5.21
OIX Oil & Gas        285     305     310    BULLISH  11.16               

Posture Alert    
With large inflows of new money, record breaking volume and higher 
highs continue for technology sectors across the board. Leaders 
this past week were led by Software, which was up +9.6% for the 
week alone; followed by Networking (+9.0%), Internet (+8.7%), 
Morgan Stanley High Tech (+7.0%), and the Nasdaq 100 (+5.0%).  
Sectors that had a negative week were limited to Banking (-2.5%) 
and Airlines (-3.0%), which was not helped by the fact that crude 
oil hit $27 barrel. There are no current changes in posture.


For the week of November 22, 1999


None scheduled


Durable Goods Orders     Oct    Forecast: 0.3%   Previous: -1.3%


Real GDP                 Q3-pre Forecast: 4.7%   Previous:  4.8% 
Jobless Claims           11/20  Forecast: --     Previous:  287K
Help Wanted Index        Oct    Forecast: --     Previous:  83     
Univ Michigan Sentiment  Nov-F  Forecast: --     Previous:  107.7 


None scheduled


Personal Income          Oct    Forecast: 0.5%   Previous:  unch
Personal Spending        Oct    Forecast: 0.3%   Previous:  0.4%

Week of 11/29

11/29 Existing Home Sales - Oct
11/30 Chicago PMI - Nov
11/30 Consumer Confidence - Nov
11/30 Leading Indicators - Oct
12/01 Construction Spending - Oct
12/01 NAPM Index - Nov
12/02 New Home Sales - Oct
12/03 Nonfarm Payrolls - Nov
12/03 Unemployment Rate - Nov
12/03 Factory orders - Oct


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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
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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 
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The Option Investor Newsletter              11-21-99  
Sunday                        2 of 6

Womans World

Beginning tonight we have a new column written by a highly
successful option trader, who is also a woman. You probably
saw her scorching comments to Janar last week in the readers
write section. Renee is tired of seeing the investment world
presented in male terms and she is coming out to fight. Renee
will be writing about options trading from a female viewpoint
and will contrast the macho Marine views put forth by Janar
in the Traders Corner. Check out Womans World. Give her your 
support and let her know how you feel about her columns. 
Good Luck Renee, and welcome aboard! Jim 

November 20, 1999

Why I Sometimes Burn His Toast

Hi Ladies! I know I'm supposed to be quiet, demure, laugh at 
all of their jokes and only speak when spoken to, but I just 
couldn't take it any longer. I have a hard time relating to 
the locker room, or the military style of trading. Ahhhh, Men! 
Don't you just love them?  

"I'm gonna huff, and I'm gonna puff, and I'm gonna blow your 
house down", the Big Bad Wolf said to Little Red Riding Hood. 
Did you ever wonder why she got scared and ran away? What 
would have happened if she had laughed and said, "Fine. Then 
I'll collect my insurance and go buy myself another house. I'm 
financially independent and this house is paid for anyway." ? 
If  Little Red Riding Hood had known how to trade options, 
fairy tales would have been different and the woman's movement 
may have occurred 30 years earlier. 

Have you ever wondered why society tends to brainwash women 
into believing they aren't capable, or good with numbers, or 
they're not supposed to be risk takers or independent? We are 
taught we shouldn't be assertive or outspoken. 

As an option trader, I can't deny any longer that I am 
assertive, independent, good with numbers, money, AND I can 
proudly say I am a risk taker. I evaluate my own odds and I 
profit or loose my own money. Although part of me is still 
hiding behind my professional shell, this too is changing. 
With each winning trade, I become more and more confident. 
I've learned my lessons the hard way. I have come to feel, 
that if I tune in to that "woman's intuition" side of me, 
I can tap in on more winning plays. Also, I found that I 
learned more from my loosing trades, than I ever did from the
ones that tripled....and boy, did I learn a lot last spring & 
summer!! What a humbling experience! I had just been to a 
seminar where they stressed to me to start taking money off 
the table. I didn't want to pull money out, I wanted trade 
with it. Well, 3/4th of an account LESS later, I finally 
learned what they meant. I'm well back in the black now, but 
I promise, I'll never have to learn that lesson twice!

As a child, I was always so frightened to be on stage, like 
giving a speech, or being in a recital or a play. I came to 
terms with that, studying medicine, where one is forced to 
read voluminous amounts of material and present on a daily 
basis. I almost remember the moment I felt I had developed 
confidence, due solely to the preparation expected of me. 
Twenty years later, I've rediscovered that feeling, learning 
to trade options. The reading and studying required to put 
the odds in your favor, to generate a successful play, take 
an awesome amount of time. I know I have so much to learn, 
but now as before, I'm feeling the difference of being 
prepared. The payoff is obvious. 

I think more and more women will be discovering option 
trading. I believe we have an edge, with our sense of 
intuition, coupled with a little studying. The financial 
freedom it can create is hard to achieve in another 
profession in the same time span. 

I feel fortunate that Jim has asked me to connect with our 
female audience. How insightful of him to offer us our own 
voice. I never even thought about it myself. That says a 
lot about him, don't you think? Hopefully with my articles, 
we can develop a network of women, who no longer feel like 
they are out there all alone. Finally, I'll have someone to 
share with, when my plays go better than I ever dreamed 
(Qualcomm & AOL) or cry with, when I hold too long (AOL last 
spring). Perhaps too, I can share my map on land mines.

Thanks for the support Jim. Maybe the times really are changing. 


Tuesday: Losing Money on Vacation


Guide to the Newsletter for New Traders

In the last few months, the newsletter has picked up many new 
subscribers due to presentations at the Money Show and a 
reinvigorated Bull Market. Here are some pointers for getting 
maximum value out of OptionInvestor.com:

1. Read the Market Wrap for general direction, especially when 
Jim notes a powerful point like the inverse relationship between 
the VIX and the overall markets. For an example of where this 
kind of call paid off, see the 7/18/99 Market Wrap. 

2. Read the Market Sentiment section for important information 
on internal indicators such as put/ call ratio, the VIX, and 
bullishness indicators. Realize that these indicators have 
particular value at reversals.

3. Read the Market Posture section for general market and sector 
direction, but realize that this is an indicator that often trails 
the market by a day or two, especially at reversals. If all the 
indicators are pegged "bullish," the market might be primed to 
turn around, at least temporarily.

4. Read the specific section for your play strategy. I usually 
play naked calls. I note the support levels that the write ups 
specify, and load the stock symbols and the options symbols into 
different quote sheets in qcharts (www.qcharts.com). I put the 
support levels in a comment column next to the stock price, and 
wait for the stock to drop to support before initiating a play on 
the option. I will be experimenting with using Preferred Trade's  
"buy to open" with a market order for the option with a "stop on 
stock" at the target support price. See Jim's write up in last 
Sunday's newsletter for more information on Preferred. 

5. Make Money. Sounds simple. Many traders become obsessed with 
calculations, formulas, procedures. You make money by taking 
profits, when you have them, and doing it again. Compounding is 
magic. Sometimes I set limit sells at 33% profits, sometimes at 
100%, and I often change my limit order when I think that a play 
will not make my limit sell price. I have "seller's remorse" when 
I take profits at 50% and the play goes to 150%, but I have 
trained myself emotionally to get over this. I also take losses 
when the newsletter drops a stock, or it becomes clear that the 
play is not going anywhere. Sometimes I suffer greater losses, but 
I try to keep those losses to 15 or 25%. 

6. Take Time Off. I shoot for 1 week a month, though this month, 
it will be 1.5 weeks. I paper trade the short term newsletter 
plays. I sleep in, I spend some of the money I have made. I learn 
advanced option trading strategies. I pay bills I have ignored. I 
get ready to get into the cockpit again. 

7. Join a local Optioninvestor Club. Our Bay Area club is 
invaluable for advice, camaraderie, support, and ideas. 

8. Read the 10 rules (left side of home page at the bottom). When 
you break a rule, know that you are breaking it and make sure you 
are justified. 

9. Have Fun. I like beating the market, finding an edge, feeling 
like I am taking advantage of my opponent with the newsletter as 
my trusted local guide in the jungle of option trading. If you 
are not having fun, you won't succeed, regardless of what you are 

10. Be Humble. You will make your worst plays, your biggest 
mistakes, your most terrible bonehead plays right after your 
biggest successes. If you make some money, keep it, hang up the 
gloves for a week, and come back with some respect for Mr. 
Market... then beat him again.

Right now, I am long some OEX Dec Puts, which I think will be 
profitable next week. I am also long a AMZN Jan Call that I 
entered in Oct; I am hoping cyber Santa delivers on that play. 
Otherwise I am all cash. I am planning on target shooting some 
longer term Jan 2K, and LEAP plays next week. I will also paper
trade the Newsletter's short term call plays. But otherwise, I am 
planning, developing, and enjoying my success as a option trader. 

PS -- To put my last "Scoreboard!" column in context, I LOST 50% 
of my ST Option Trading Portfolio in October. But I took a very 
important week off in the third week of Oct, got back in the game 
in the 4th week, and had a terrific first half of November. Stay 
in the game!

Janar Joseph Wasito


The Tale of Two Readers

Dear Jim,

Reading your Market Wrap, Thursday, 11/4, was like having a 
religious experience... Just like going to church and having 
the pastor's sermon hit totally home.

I've been involved in option trading for 10 months. My spouse 
encouraged me to attend the local Wade Cook Seminar to learn 
the techniques for trading options. I had been successful in 
trading stocks, so why not try this. I admit I was lured by 
the promise of "easy money" and we were just going through a 
real rough and rocky financial time with a business investment 
we had absolutely no business even being involved with. 
(Already two strikes against success--a buy and hold mentality 
and being motivated by deep financial insecurity.)

Like many of the new readers you interviewed, I didn't understand
the real meaning of time decay and the importance that volatility
plays in option pricing. I also didn't have a grasp on the real 
importance of a good entry.

I also was doing this alone. None of my friends trade options 
and are clueless as to what I'm talking about. I would log on 
to the Wealth Information Network, but got very frustrated 
because it was full of what HAD been done and not much 
explanation as to WHY those positions were opened at that level. 
I was paper trading and when I'd feel good about the success I
was having on paper, I'd commit real money and it would go bad. 
I was about to quit. I had lost a significant amount of money 
and my self-esteem was pretty shot. I kept telling myself that 
I'm an intelligent person. Why can't I figure this out?

Luckily I happened to come along a link to the Option Investor 
Newletter site. I won't say that things improved immediately for 
me. I have still made very stupid mistakes that have been rather 
costly. I've been a subscriber for about the last 6 months. I 
admit that I don't understand all the technical information 
presented, but I'm anxious to learn. I am just now begining to 
figure some things out.

1. I find that I am much more comfortable in quick trades...in 
and out in a day. I really am not comfortable holding overnight. 
As I am understanding the reason a stock is moving and knowing 
the effect is has on the option, I'm getting more comfortable 
on the overnighters. Learning one's own tolerance for risk is 
not easy.

2. I found that after 4 successful trades, the next one was a 
disaster and lost more than I had made on the 4 before. I think 
I was sucked in by the success and got careless. I now approach 
each new trade as though it will so south. It has made me much 
more careful as to entry point and I've walked away from trades 
that did indeed go south...of course I've missed some opportunities 

3. As a beginner keep it simple. I'm only in one open position 
at a time. Most of that is due to lack of serious trading capital, 
but is serving me well. I'm hopeful that as I get better my scope 
will increase.

Although I'm in a major financial hole for the year, I'm up 330% 
since Sept. 10, on 7 consecutive successful trades. My "trading 
nut" got extremely small due to my mistakes, but because of those 
mistakes I'm seeing some success. I'll be taking a sizable loss 
on my taxes this year, but I'm chalking that up to the cost of 
education. (About the cost of a years tutition in a college) I 
would love to attend your Seminar (and take a friend with me so 
I'll have someone to discuss this stuff with!) but due to my 
trading losses this year it's not in the cards...ironic huh? 
I've been in contact with Leslie of OI regarding a trading club 
in my area. Currently there is none but I'm interested in getting
the dialogue started.

I am looking forward to your "lecture" series starting this Sunday.
I AM READY TO LEARN. Thanks Jim, and keep up the good work.

Best Regards, LJ


Jim-- Amen. 
I've been a subscriber for about a year now and I believe your 
article(The Tale of Two Readers) will strike home with MANY of
us. I've never written in before but this article REALLY got my 
I have seen my account up 100% and I've seen it down 90%. 
Currently I'm dead even for the year. I feel extremely lucky 
to have survived my first year(and part of the learning curve) 
with my funds still intact. Over the past year I have broken 
most every rule - and am learning from it. (Entry points, not 
chasing, holding over earnings, not sticking with stop losses, 
not taking profits when up even huge amounts, trading against 
the sector/market, forcing trades, wishing stocks up/down, etc.) 
I've felt the excitement/elation of huge winners and the despair 
of total losses(which DO affect your mindset drastically). Sellers
remorse ALSO affects your trading decisions in a REAL BAD way!! 
(was in both CMGI and NetB@nk the days of their initial runs and 
sold WAY too soon!) For me, sellers remorse affected me more than 
a worthless expiration. Atleast I knew the maximum amount I would 
lose on expiration. With sellers remorse, I kept being subjected 
to a growing amount of missed profits left on the table --almost 


They were MY bad decisions. MY learning curve. I had to experience 
it all firsthand. (Hard-headed). I'm still here.... but much more 
humbled, cautious, disciplined, and open minded to the lessons 
being taught in each newsletter. I trade when the opportunity 
presents itself-- I don't force trades. I wait for the entry 
points. I am much quicker to take profits and losses. And I find 
myself only trading a few days out of the week. 

Over the past 2-3 months, I've found myself paying much more 
attention to the lessons in each newsletter than the plays. So 
you see why the last paragraph of your article really struck 
home with me. I've been playing "hooky" from school for the 
past year -- but am back now to get my degree...... 
Many thanks---James


Subject: The Student Was Ready, And The Teacher Did Appear!

Dear Mr. Jim Brown,
I must write this to let you know, what an impact your one 
article "The Tale of Two Readers" have on my life.
I only have about 7 months and total of 5 trades experience 
in investing in the stock market. 3 stock trades with more 
than 50% loss of capital, and two options trades in last two 
weeks, recovering all my losses and well into the black. All 
I did was pick option from your listings, waited for proper
entry point like you mentioned in your article, read everything 
posted on your websight and adjusted my position accordingly. 
I have tried many other sources, but for options trading there 
is nothing batter than yours. I read everything over and over 
again until I grasp the meaning. I was only on trial offer, 
I will be subscriber for long time to come and hope to meet 
you in person someday, Until then Thank You Very Very Much.


Thanks for sending out the trading alert on qcom. I wasn't 
watching it because it was getting too rich for my blood but I 
took advantage of the pullback and made out like a bandit. I 
bought calls in my cash account and bought the stock and sold 
calls in my ira as you suggested.



Dear Janar

I regularly read your columns in the OIN letter and find them
interesting, informative and, above all, well written!

I was struck by your What will happen in 3 years musings in the 
Thursday letter. You wrote about becoming a professional and 
giving up trading in the middle of next year, after you finish 
graduate school (I assume). I am a professional (international 
business lawyer) and have often thought about giving up the 
profession in order to be a trader. Perhaps fortunately for me, 
my trading efforts have never been particularly successful, so 
I've never given up my day job. However, your columns indicate 
that you have done very well trading this year and you might 
indeed make more money as a trader than as a professional. Of 
course, you'd be by yourself a lot of the time, which may not 
be much fun. And the stress level of trading for me exceeds 
that of being a lawyer.

Keep up those columns. Wish I could trade like you.



Dean Janar

Scoreboard was both encouraging and depressing at the same time. 
I may have just set some sort of record as I have managed 6 
straight losing trades. That takes skill especially with so many 
stocks going up. I believe that I need to go back over ENTRY 
POINTS in options 101. Losing trades take the wind out of your 
sails in a hurry and it's hard to get a good attitude back. I 
think I need to regroup and go after it again.I lost on a VRTS 
trade a few days ago and I see it's up about 13 this morning . 
I think this is what hurts so much in trading options. So , it's 
back to the ENTRY POINTS for me as I can't believe that I can't 
eventually make money trading options. Have you had bad times 
trading? Thanks for listening, JK


Hi Jim, 
a few nights ago I sent you an e-mail saying I almost dropped 
the OIN newsletter because I'm just not that active an option 
trader. I told you I came to my senses and stayed with OIN 
because it has so much to offer. A perfect example revolves 
around your alert on QCOM....it got me thinking....I've made 
a killing recently in my IRA with PSFT, NITE, and PRGN, all 
of which I bought at bargain prices when no other buyers were 
around. All have experienced a lot of inflation in the option 
premiums because of the run up over the last couple weeks...your 
discussion of inflated premiums got me thinking, so I sold covered 
calls against NITE and PRGN for January 2000 and LEAPS against 
PSFT for Jan 2001 and made a killing because of the inflated 
premiums....even if I get called out my gains will be HUGE! It 
was like free money and since I'm talking about few thousand 
shares of stock...it is what I consider to be REAL money. 
Thanks for the idea. E.B.W.


 I've been a subscriber for some months now and have been wanting 
to tell you that I have not found a better source of stock and 
option information anywhere. OptionInvestor would be a value at 
many times what you charge. But what prompted me to write today 
was your alert on QCOM. Many times I have agonized over when to 
get in on one of these big movers. Am I too late? Are the large 
gains already behind me? If it goes down a bit, how far down do 
I watch it go before I jump in? A few patches of ripped-out hair 
and a couple of headaches later, I try to either get an entry 
point in mind or I get so stressed out, I just give up and turn 
my attention to other plays. I have been watching QCOM closely, 
and we did buy some stock for my husband's IRA, but I've been
trying to figure out the best time to buy some calls. THANK YOU 
VERY MUCH for the alert! If you could regularly send out brief 
alerts on good opportunities, I know that I, for one, would be 
deeply appreciative. As I said before, your newsletter is 
fabulous. The fact that you are able to publish three of them a 
week, along with two updates, is nothing short of amazing to me. 
Perhaps sending out routine alerts is more than you care to get 
into. For the record, I, for one, would be perfectly willing to 
pay an additional fee for this service. Free would be nice--but 
the alerts could prove so valuable they would be well worth
the extra charge. Thanks again for the alert today.

Sincerely, CB


Date: Saturday, November 20, 1999 11:47 AM
Subject: Should this happen ?


I look forward to all your commentary. You seem very market savvy 
and well disciplined. I am a new trader to options and doing very 
well up until Thursday. I have grown my ST option acct from 
$5000.00 to $14,000 to two months ( with a lot of help from the 
newsletter). I have stayed away from the high flyers and trying 
the minor leagues to gain the experience need to trade the big 
boys. I have been trading gblx, qwst, awre,covd, ntpa with 
success. I have missed some great opportunities in nok,sebl, orcl 
because I was trying to split the bid/ask with limit orders. I 
have even sat on the ask without a fill. The broker said that you 
may just want to place a market order so you don't miss the market. 
She also said that some of the quotes may be wrong and that is why 
I did not get filled (my data comes from qcharts).Ok, we per see 
if that works. Thursday mourning, amateur hour (my first mistake) 
Citrix Systems was upgraded to a strong buy. Opened up 10 points to 
90. I watches for 20 minutes,91,92,93. Lets try a little play, 
nov95 calls were @ 2.25 x 2.5. I placed a market order for 10 
contracts. The stock begin to really run 95,96,97,100,105 no fill. 
the stock runs to 110. 10 minutes later I get a fill on the order 
@ $10.5 on 10 contracts. What the @#&%. I look up, those same 
contracts are now @ $8.00. The stock drops from 110 to 105 to 100. 
This can't be real. I try to call my broker for 45 minutes and 
can't get through. Finally, I get somebody and they transfer me to 
the option desk. I ask, "what the hell happened here", the broker 
says," this must be a misprint, Let me call down to the floor.(the 
pacific) and see what happened". I had no idea what to do. Oh I 
still have these 10 contracts @ $10.5. Maybe I should unload this 
position. Citrix is now @ 95 and the contracts are @ $3.00. I 
submitted my sell order and they filled my order in 5 seconds @ 
$3.00. Thats ok, I will get a better fill from my broker and 
possible break even and move on. One hour later I get a call from 
them and still do not have the answer to why I got filled @ $10.5, 
10 minutes after my order was placed. 3 hours later I get a call 
from a manager over there. "I  talked to our floor broker and he 
did the best job he could with this execution". Wait, my order was 
only 10 contracts and should be processed electronically. He says, 
"no, it was a fast market and all orders are executed by hand". 
Great, but 10 minutes later is not acceptable " He was really 
busy, we can give you a fill of $8.5 and that will come out of my 
pocket". I said that won't work, I had a potential profit of 
$8000+ if the order was executed properly. Now I have a loss of 
$5500. That is a $13,000 turn around. "Sorry, but that is all I 
can do", he says. I said let me call somebody and get back to you. 
I have no idea of my options and think I should get some advice. 
I will call you back. Bye. 

Is this my fault or did I get e-screwed. Please help with any 
advice. My acct is now in reg T and frozen. Another opportunity 
cost. Janar, if you can help, great. Thank you in advance for any 
help. (name witheld)


Unfortunately you just found out why you should not place market 
orders during amateur hour.

I pulled a time&sales report on the option and it was trading 
"fast". The price went from $2.88 at 9:43 to $13 at 9:53 and there 
were hundreds of orders due to the spike in CTXS. What you got was 
real and it was not the fault of your broker. 

When a stock opens up +$10 nobody should buy the call options at 
the open. The premiums inflate so fast and the traffic is so heavy 
that the chances of getting filled during amateur hour at the high 
of the day are 100%.

If a stock spikes at the open - don't buy it. When a stock spikes 
the premium sellers jump in to capture the hype. They are selling 
calls during amateur hour to capture novice traders making market 
buys. A couple hours later when the excitement wears off they can 
then buy them back at half price.

Your is a textbook example. I am sorry but there is nothing 
anybody can do.

As for sitting on the ask without a fill, there are any number of 
factors that can cause this. First Qcharts option data is 15 min 
delayed and that is old news. Second, there may be several 
exchanges where the option is traded and the exchange with the 
price you are watching is an old price. The other exchanges, with 
heavier volume, may have moved on and the first exchange just has 
not updated their prices yet. The exchanges are not always prompt 
on updating bid/ask data, especially in a fast market when they 
are trying to fill orders, not update prices.

Jim Brown

OPTIONS 101 - 1 of 1

Paycheck or Lottery Ticket
By Jim Brown

Which will you have a better chance of paying your mortgage
payment with next week? The paycheck of course. 

Many people come into options investing with a lottery ticket
mentality. They want the big payoff. They open a brokerage
account with their life saving of $2,000 and start dreaming.
They lose it all on two or three deep out of the money plays
and then complain the rest of their life that options are too
risky. You know 85% of options expire worthless! That is a
common misconception and even if it were true it is not 
necessarily bad. How many people write covered calls in their
IRAs? Millions? These people want the options to expire worthless.
Option trading is not risky if done right. Yes, you can lose 
money but ask Caterpillar or Xerox shareholders if stock
ownership is risky. 

Back to the topic. If you were budgeting your bills for the
next six months you would count up the number of paychecks
you were going to receive in that period. You would not count
the number of lotteries you were going to win.

We need to focus on options trading as though it was a weekly
paycheck. If you want long-term appreciation then buy stock.
If you want short-term income then use options. There is a
perfectly good method to turn options trading into cash flow.

You know what is coming....Sell Too Soon. But that is not the
whole story. Option trading requires research, effort on your
part and timing. All the best research in the world is worthless
if you are too impatient to wait for the correct entry point.
As I have shown before, in any ten day period in a stock cycle
there are probably five days that option buyers will be profitable
and five days that option buyers will lose money. This is not
rocket science. It is simply applying proven principles at
the right time.

In options trading "cheaper" is not always "better." Nobel prize
winners developed the theory for pricing options. They were not
dummies and some options are cheap for a reason. Just because
a basket of tomatoes costs $10 does not mean a basket of rotten
tomatoes is a better buy for only $1.

In the money (ITM) options are not cheap but have a high value. 
They have a very low time premium but higher stock value. At the 
money (ATM) options are the most expensive. Surprise! At the money 
options have the most time premium and no stock value. Out of 
the money (OTM) options are cheap and expensive at the same time.
You have the time premium and you also have the distance out
of the money. A $2 option that is $10 out of the money has
a relative value of $12. A $7 option on the same stock that 
is $5 in the money has the same $2 premium where an at the 
money option may be $5 and be all premium. 

When you buy calls you have to be right about all the factors.
Timing, direction, speed and distance. A $2 call, $7 out of the 
money on a stock that is moving +$2 a week with three weeks to 
go is not cheap. It is a donation to the covered call writer 
that sold it. You can have the direction right but the speed
and distance will bleed you broke. You can have the speed and
distance right and the timing can kill you. 


JC, I love you man but I am going to use you as an example again!

A very good friend of mine was in the office last week. After 
eight winning trades in a row he has hit a losing streak. I
was talking to him about his trades and what he was buying.
He said, I bought this XYZ call for $.44 and I thought if it
would go to $.75 I could make a lot of money. Stop right there!
Does anybody else see the problem? For an option to be $.44
it has to be so far out of the money you would have to take
a cab to see it. But I can buy a lot of them. SO WHAT? A lot
of nothing is still nothing. We had a heart to heart about
in the money vs out of the money. Traders that have lost a large
part of their bankroll tend to then concentrate on the cheap
OTM options because they need a homerun to get back into the
game. Sorry, it is a proven fact that homerun hitters strike 
out more than base hitters. If you only have a small amount of
capital you should protect it with high quality plays instead
of squandering it on lottery plays.

DISTANCE: When you buy an option how far does the stock have 
to move to get the return you want? Only you know. For an ITM
buyer the stock only has to move $3-4 for a good return. For
an OTM buyer the stock has to move much farther AND much faster
to accomplish the same return. 

SPEED:  When you buy an ITM option the speed of movement in the
stock price is not critical. If the stock goes flat or turns 
into a snail the ITM option will never lose its stock value and 
the time value decays at a much slower rate than an OTM option. 
If you have ever owned an OTM option when the fast rising stock
corrected then you know the speed of premium decay increases
expotentially with the decrease in stock price. You can't sell
them fast enough.

DIRECTION: This is the simple part but I never cease to be 
amazed at how many people buy call options on stocks that are
going down. Really. The line of thought goes something like this:
Last week these option on XYZ were $10.00 and I got them for $1.00.
SO? If the stock dropped -$15 in that week and is showing no signs
of a rebound, why would you want to buy the calls? 

TIMING: This is the hardest part. You can have the best stock 
in the world, moving in the right direction at the speed of light
and buy calls at the open on a $10 spike and never see the price
you paid for them again. (read the mailbag article tonight and
you will see what I mean) 

Timing stocks is easy compared to options. Stocks are one
dimensional compared to options. Stocks go up or down or stay
the same. Time has no real importance. Investment horizons are
measured in years. Watch option premiums this Monday on any stock
that is flat. The premiums will be evaporating before your eyes. 
Time passes, options decay.

The actual formulas for determining the value of options include
several greek terms like Delta, Gamma, Theta, etc. The one I am
most concerned with is Delta.

Delta is the rate of change in the option price for every dollar
change in the stock price. Deeper ITM options have higher Deltas
and OTM options have lower Deltas.

Assume for this example a stock trading at $50.
The Delta of an ITM strike price of $45 is .75
The Delta of an ATM strike price of $50 is .50
The Delta of an OTM strike price of $55 is .25

The Delta is the rate of change. For the ITM strike of $45
the option will rise in price +.75 for every dollar the stock
price rises. Deeper in the money options have higher Deltas.

The OTM strike of $55 will only rise $.25 for every dollar
of stock price rise. 

Sounds simple but in practice many investors fail to estimate
what will happen to the option price based on stock price and
time passage.

Assume a $4 option, $6 out of the money with four weeks to go.
(just am example)

The premium decay will cost you about $1 per week. 
($4 divided by 4 weeks) Actually it is faster than that and
accelerates the closer you get to expiration.

If the stock goes up +$2 in one week with a Delta of .25 then
the option will increase in price +.50 because of the Delta and
lose -$1 because of time decay. Your option is now $3.50 and the
stock went up. 

A week later with another $2 move your option will only be worth
$3.00. You see where I am going here. The option can lose value
while the stock is still moving up.

Paycheck Mentality

Option traders need to develop a paycheck mentality. An ITM 
option will go up 75% of the time as long as there is life 
in the stock. If it is moving +$2 a week the ITM option will 
increase. If the stock stops moving the ITM option will lose 
premium much slower than the OTM option. 

A $5 ITM option which costs $6 will rise +1.50 for a $2 stock 
move in one week. $1.50 divided by $6.00 equals 25% return. 

A $5 OTM option will lose $.50 with the same move because of
the lower Delta and time decay.

Yes, two traders using options on the same stock in the same
week can have totally different results. One can gain +25%
and the other lose -25%. Trust me, I see it every day.

The trader with the paycheck mentality will buy the ITM options
and hold them as long as the stock continues moving upward. The
farther the stock moves the more Delta the trader gets. They
will follow the option price up with stop losses and even 
liquidate some of their positions as the value increases. This
minimizes the risk of a news disaster. Cash flow, cash flow, cash
flow. Try this experiment. Calculate what your option capital 
would be if you compounded only 25% returns every two weeks 
for a year.

The Lottery mentality buys "cheap" OTM options and then holds
them for weeks waiting for the premiums to just get back to 
what they paid for them even when the stock continues to move
up slowly.

Which investor would you rather be?

Critical points:

Yes, your return percentage will be greater IF your deep OTM
option is successful. However, your percentage of successes will
be much lower. 

Yes, because the Delta is much higher on deep ITM options the
leverage works both ways. If the stock drops sharply the premium
will also drop sharply. This is why we use stop losses.

No, I am not saying "never" buy deep OTM options. I do it all
the time but only as speculation plays. Maybe only 1 in 20 and
then only with very small amounts of money relative to my total
capital. I like the thrill of the possible big payoff too. Most
are news related plays like takeover rumors. In every lottery 
somebody has got to win eventually. Just don't bet with money
you really can't afford to lose.

Next week:  Exit Strategies, Escaping with a Profit

Jim Brown


The Option Investor Newsletter          11-21-99  
Sunday                        3 of 6


Sunday, November 21, 1999


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Index      Last    Week
Dow     11003.89  234.57
Nasdaq   3369.25  145.63
$OEX      749.30   18.21
$SPX     1422.00   25.96
$RUT      461.27   11.58
$TRAN    2976.50 -113.07
$VIX       19.63   -2.05

Calls              Week

CMGI      124.88   23.38  New, an exciting week for shareholders
YHOO      218.75   21.81  Yahoo has some e-holiday spirit!
CMVT      142.44   21.19  This play just gets better and better
JDSU      213.81   13.81  New, this could be your big break
HLIT       72.06   13.06  A continuing trend; HLIT on fire!
SFE       124.00   11.50  This is a stock that wants to go up
NOK       133.50   11.25  What a hard run for Nokia last week
SUNW      129.56   10.25  Shares of SUNW pick up some steam
AOL       158.19    9.25  Dropped, at last the time has come
BVSN       97.50    9.00  New records and extraordinary volume
NT         81.25    8.69  The money managers are flocking to NT
ICGE      166.94    7.63  New, a firm and steady uptrend
EMC        89.38    6.69  Hardware sector has enjoyed nice moves
VRTY       99.13    5.81  New, splitting on Dec 3rd
GMST      104.63    4.25  Our star is on a nice split run!
LVLT       78.06    4.13  Dropped, LVLT has leveled off
GTW        78.75    2.50  New, hardware is back in fashion
LSCC       46.00    1.00  Dropped, inches toward its 10-dma
LSI        66.44    0.94  A great sector, a great stock
SNE       176.63    0.13  The bulls are ready to run!
JPM       138.63   -0.69  Dropped, who let all of the air out?
MXIM       86.38   -1.00  Dropped, time to step aside from MXIM
CNCX       32.13   -1.56  Dropped, a hard week for the ISPs
SLR        86.13   -1.75  Dropped, a slight decline is one thing
MSFT       86.00   -3.19  New, a new deal in the works
QCOM      376.06  -10.94  Voila! An instant 20% correction!


KIDE       57.00  -19.94  New, investors have found other "toys"
RMBS       82.13   -5.88  The descent continues for Rambus!
AMR        57.75   -4.25  New, a negative flight pattern
EL         43.13   -0.25  Dropped, EL is getting too pretty
CI         83.75    0.38  New, looks to have run out of buyers
RMDY       38.31    2.00  Dropped, could not resist resistence
NKE        49.25    3.13  Dropped, NKE gets kicked off the list



ICGE - Internet Capital Group
JDSU - JDS Uniphase 
MSFT - Microsoft Corp.
VRTY - Verity Inc.
GTW  - Gateway Inc.


KIDE - 4Kids Entertainment 
AMR  - AMR Corporation
CI   - Cigna Corporation


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


AOL $158.00 (+9.25) To follow-up on Thursday's update and for 
those who've been playing this split-run know the time has 
come.  AOL is splitting its stock 2:1 Monday after the bell 
and so of course we're exiting the play this weekend.  We never 
recommend holding through the ex-date since the odds are stacked 
for a post-split decline.  Therefore if you haven't already, 
consider closing your positions before the bell on Monday.  In 
other words, why take a heedless chance when you can choose 
to gleefully take your profits and go shopping? 

SLR $86.13 (-1.75) Ok hit the alarms!  A slight pullback is one 
thing, but $2.38, or 2.7% when the Nasdaq is setting records is 
another.  We've decided to exit this momentum play this weekend 
based on Friday's poor performance.  The overhead opposition is 
still just points away at $90, but with SLR now perched on the 
10-dma ($86.17) we'd rather not wait for another strong bounce 
and instead move on to better plays.  

LVLT $78.06 (+4.13) The shares of LVLT have been a nice stock
to trade over the last few trading sessions, but the shares
just continue to move very slowly.  We were looking for this
stock to go up and then back up to fill the gap from normal 
profit-taking, before the next leg up.  Although we are seeing 
intraday highs, the play has not been ideal for different
types of traders.  We will choose to take the money off of the 
table and move on to stocks with more of a consistent trading 
pattern to the upside.  For those aggressive traders that wish 
to continue this play, we believe that you can continue to 
make money if your timing is correct.  This stock requires a 
lot of personal attention to be very successful.  The uptrend 
remains in place, and the telecommunications processing 
systems sector remains a very hot sector, although the volume 
in LVLT has slowed somewhat.  LVLT going forward could 
possibly continue to be profitable, but we believe there 
are better opportunities in current market conditions.

CNCX $32.13 -0.68 (-1.56) It was a hard end of the week for 
the ISP's, especially the smaller ones like CNCX, with the
major ISP's like AOL having trouble breaking through current
resistance levels, because of the big run that they have had
in the past few weeks, it was time for them to take a breather, 
the small ISP's hit a peak earlier in the week and slid some
to close the week.  We expected CNCX to pullback and fill the 
gap before it started a new leg up, it doesn't look like it 
has completed the pullback so we are having second thoughts 
on the next leg up.  Although still possible, with the stock 
closing the week down almost 2 points, we see better 
opportunities in the market that we can be taking advantage of.   

MXIM $86.38 (-1.00) It's time to step aside from MXIM.  It's 
not that we believe the split run won't continue but it may 
take a breather and consolidate or pullback first.  We said 
Thursday we needed to see the momentum continue through the 
$88 area and hold on a closing basis.  MXIM did make a new
high Friday at $88.44 only to fall back and head lower.  The 
pullback may be to get steam to make another run at the overhead
resistance and it may be entering a phase of consolidation and
profit-taking.  The Semiconductor industry has enjoyed a nice 
move up in the last few weeks and they are due to take a rest 
anytime now.  The ex-date for the 2:1 split announced Thursday, 
is not until December 21st, so we have plenty of time for an 
actual split run to develop and may be able to get a better 
entry point in the near future.

JPM $138.63 (-0.69) Is JPM consolidating or did someone sneak 
in and let the air out of all the balloons?  Whatever it is, we 
took a hard look at the banking sector and decided to let our 
JPM play go, at least for now.  With the price of oil trading 
over $26, traders seem to be focused the inflationary implications 
involved.  Most analysts feel we got a reprieve from the FED 
until early February, but with oil where it is now, traders are 
concerned it will show up in future CPI numbers, giving the FED 
one more reason to consider more interest rate hikes.  Thus the 
Financial sectors have began to consolidate from the gains 
achieved earlier in the week.  JPM has not yet given us a good 
entry point for our call play, so we will stand aside and look 
for other opportunities. 


RMDY $38.31 (+2.00) Here we are on RMDY once again.  The 
stock has stopped right at resistance at the 10-dma at $37.50.  
As you may recall, the 10-dma has been serving as resistance 
for our play and has not let us down so far.  You can see the 
top that the stock put in during Friday's afternoon trading.  
The 10-dma just refused to let it pass through.  So why is it 
on the drop list?  Well, because it is not moving very fast 
and we don't want our time premiums to erode.  We still think 
that if the 10-dma can hold as resistance once again, that a 
break below support at $35 will produce a drop to $32.50.  
That would make for a decent return on this play.  Therefore, 
brave souls may want to continue this path but keep your stops 
set for a break over $38 with good volume, just in case.
NKE $49.25 (+3.13) Once again NKE has refused to hold 
it's trend and is therefore being kicked off the put list.  
The advantage to playing NKE puts is the overall sector and 
company weakness that has been apparent for the past couple 
years.  The problem is that it spikes around, betraying the 
moving averages and technical support.  We felt like it was 
now settling in to a trend after breaking below $50 and was 
consistently moving down.  Sure enough after only one decent 
day of declines, NKE has spiked up once again.  The reason 
for the spike was a Lehman Bros upgrade and word that the 
company has replaced their CFO.  They hired an ex-Pepsi 
executive how has a strong reputation.  Anyway, you get the 
picture.  Don't expect to see NKE on the put or call list 
again until it has some real strong catalysts.  We forgot 
how bad it hurt us last time.  

EL $43.13 (-0.25) Friday was a big day with big volume for 
Estee Lauder.  With the holidays closer than I would like to 
admit, it is very possible that EL has hit it's bottom and is 
beginning to trend upward.  EL closed smack dab on it's high 
for the day posting larger than average volume, both 
indications of renewed and continuing investor interest.  EL 
also managed to breakthrough and close above its 10-dma.  
It's probably not going much higher but it may not be going 
much lower so we don't want to sit and watch our premiums 


Current Split Candidates
CMVT - Comverse Tech
SNE  - Sony Corp
NOK  - Nokia
SFE  - Safeguard
ICGE - Internet Capitol Group
YHOO - Yahoo!

Split candidates that are not current plays
CHKP - Check Point 
MEDI - MedImmune
DCLK - DoubleClick
BRCM - Broadcom Corp 
FLEX - Flextronics International Ltd.


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

Symbol - Stock          Splits/Date  
DNA  - Genentech        2:1 no date set
EMLX - Emulex           2:1 11-18-99 vote to aprove
AOL  - America Online   2:1 11-19-99 ex-date 11-22
AMGN - Amgen            2:1 11-19-99 ex-date 11-22
VRTS - Veritas          3:2 11-19-99 ex-date 11-22
AOL  - AmericaOnline    2:1 11-22-99 ex-date 11-23
POWI - Power Integrat   2:1 11-22-99 ex-date 11-23
OCLI - Optical Coating  2:1 11-30-99 ex-date 12-01 cancelled
ADVP - Advance Paradigm 2:1 11-30-99 ex-date 12-01
ORBK - Orbotech         3:2 11-30-99 ex-date 12-01
VIGN - Vignette Corp    2:1 12-01-99 ex-date 12-02
OATS - Wild Oats        3:2 12-01-99 ex-date 12-02
BRCD - Brocade          2:1 12-02-99 ex-date 12-03 no optn
VRTY - Verity           2:1 12-03-99 ex-date 12-06
SUNW - SunMicro         2:1 12-07-99 ex-date 12-08
AGN  - Allergan         2:1 12-09-99 ex-date 12-10
CMTN - CopperMountain   2:1 12-09-99 ex-date 12-10 (KUA)
GDW  - Golden West      3:1 12-10-99 ex-date 12-13
XLNX - Xilinx           2:1 12-27-99 ex-date 12-28
JDSU - JDS Uniphase     2:1 12-29-99 ex-date 12-30

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


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

Call plays of the day:

HLIT - Harmonic Inc $72.06 (+13.06)

See details in sector list 

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


QCOM - Qualcomm Inc. $367.06 (-10.94)

See details in sector list 

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

Put play of the day:

RMBS - Rambus Inc. $82.13 (-5.88)

See details in put list 

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


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

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

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

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

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

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

The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the 
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


GTW - Gateway Inc $79.00 (-2.50)

Gateway is the #2 direct marketer of PCs in the US only 
behind global leader, Dell Computer.  Instead of using 
resellers, Gateway takes orders via phone or Web site and 
ships directly to the computer user saving the customer 
markup costs.  They develop, manufacture, and support a 
broad product line of desktop and portable PCs, digital 
media PC's, servers, workstations, and other PC-related 
items.  The company has also expanded into the Internet 
access market (gateway.net) and is continuing to add new 
Gateway Country showrooms across the US.  Its array of 
customers include individuals, businesses, government 
agencies, and educational facilities.  Chairman and 
founder, Ted Waitt, still owns 41% of the company.

GTW's repeated sweeps to daily lows around $76, a point that 
just recently marked overhead resistance, and the subsequent 
upswing late Friday afternoon signals the beginning of an 
uptrend.  Link this technical perspective with the apparent 
rotation into the hardware sector and we have ingredients for 
a call play.  Take for example Big Blue (IBM) and HWP.  Both 
stocks surged on Thursday following Hewlett Packard's positive 
Q4 earnings' results and its successful IPO spinoff of Agilent 
Technologies.  The temptation is just too great for the bargain 
hunters to stay on the sidelines any longer!  We see this price 
level as a solid entry point into a promising momentum play.  
Trading volume too is strong demonstrating GTW's unwavering 
appeal to the investor.  

Usually there's lots of news affecting GTW or the hardware 
sector and recently it's all been pretty good press.  On Friday 
Gateway announced a three-year alliance with Nickelodeon, the #1 
kids TV network which houses Rugrats and Blue's Clues.  Under 
the terms of the agreement these two very popular entertainment 
franchises will become part of an all-in-one Gateway Astro PC.  
The deal resulted from research that showed just how influential 
young children are in purchasing decisions.  Earlier in the 
week Gateway announced an international marketing alliance with 
Computacenter, the UK's largest computer distributor.  They said 
it will be Gateway's "preferred partner" and sell its PCs to 
Europe's corporate and government clients over the next 2 years.

BUY CALL DEC-75*GTW-LO OI= 661 at $7.75 SL= 6.00
BUY CALL DEC-80 GTW-LP OI= 508 at $5.25 SL= 3.50
BUY CALL DEC-85 GTW-LQ OI= 349 at $3.38 SL= 1.75
BUY CALL JAN-80 GTW-AP OI= 375 at $8.00 SL= 6.25
BUY CALL JAN-85 GTW-AQ OI= 317 at $6.38 SL= 4.75

Picked on Nov 21st at    $79.00    P/E = 54
Change since picked       +0.00    52 week high=$84.00
Analysts Ratings     12-8-1-0-0    52 week low =$36.13
Last earnings 09/99   est= 0.34    actual= 0.35 surprise +2.9%
Next earnings 01-21   est= 0.49    versus= 0.41
Average Daily Volume = 2.61 mln
Chart = http://quote.yahoo.com/q?s=GTW&d=3m


SUNW - Sun Microsystems, Inc. $129.56 (+10.25)(+9.75)(+3.75) 

Microsystems is the leading provider of high quality 
hardware, software and services for establishing enterprise
wide intranets and expanding the power of the Internet.  Sun
is the leading maker of UNIX-based, number crunching 
workstation computers, storage devices, and servers for 
powering corporate computer networks.  With more than $11 
billion in annual revenues, the company sells its products to 
a variety of different markets, and can be found in more than 
150 countries.

Late in the trading day on Friday, the shares of SUNW began 
to pick up steam, after a day that saw the stock trading as 
low as $125.  The volume remained steady as traders continue 
to look for any weakness below recent 52 week highs to get 
into the stock.  Earlier in the week we saw an intra-day high 
of $131.31, but on Friday the significance of the late day 
push was we got a closing high of $129.56.  We continue to 
remind you that the momentum in the stock is due to positive 
news for the company, as well as the computer hardware sector.  
Also it continues to make a pre-split run.  The stock will be 
splitting on 12/09, that gives us a little less than three weeks 
to ride this wave.  The interesting scenario with SUNW is that 
whenever it seems like the split run is going to fizzle, it 
is backed up with a new product being introduced or positive 
comments from analysts or some story that continues to feed 
traders with positive news.  This combination going forward 
should push us to new highs in the coming weeks.  We continue 
to look to add to positions above the current intraday high of 
$131.31, but will not hesitate to nibble on a bounce off of 
support levels, look for a possible trading support bounce at 

Investors were looking for bargains on Friday as they bid up the
shares of other computer hardware stocks like IBM, CPQ.  Money
began to pour into the depressed stocks in the sector, as well
as the favorable stocks which include GTW and SUNW.  More and 
more investors believe that the Y2K scare is overblown and are
continuing to put money to work in the sectors that have had 
major demand.  

BUY CALL DEC-125*SUX-LE OI=3955 at $11.00 SL= 8.75
BUY CALL DEC-130 SUX-LF OI=2319 at $ 8.00 SL= 6.25
BUY CALL JAN-125 SUX-AE OI=1362 at $14.25 SL=11.50
BUY CALL JAN-130 SUX-AF OI=1702 at $11.88 SL= 9.44

Picked on Nov 7th  at   $109.69    P/E = 86
Change since picked      +19.88    52-week high=$131.31
Analyst Ratings      9-12-3-0-0    52-week low =$ 30.25
Last earnings 10/29   est= 0.31    actual= 0.33
Next earnings 01-20   est= 0.40    versus= 0.34
Average daily volume = 11.5 mln 
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m


LSI - LSI Logic Corp. $66.44 (+0.94)(+7.50)

LSI Logic, The system on a Chip Company, is a leading supplier 
of custom high performance semiconductors, with operations
worldwide.  The company enables customers to build complete
systems on a single chip with its CoreWare design program, 
which increases performance, lowers system costs and 
accelerates time to market.  LSI Logic develops application
optimized products in partnership with trend setting customers
and operates leading-edge manufacturing facilities to produce
submicron geometry chips.

Investors were bidding up the likes of National Semiconductor
after Lehman Brothers raised there price target, and it was
reported that Semiconductors have experienced triple digit 
gains for the year.  This sparked a rally in the overall 
sector and LSI, after the recent consolidation ended and LSI 
pressed forward to hit another closing high of $66.44.  LSI 
continues to go higher on the back of comments that are positive 
for the overall sector going forward.  Analyst believe that 
earnings are going to continue coming in stronger than expected.  
Sales growth is also growing faster than forecasted.  Look to 
see more money inflowing into the sector as we go forward and 
look to add to current positions at these levels and again 
above the 52-week high of $66.94 which is not far off.  The 
Semiconductor sector is volatile as a group.  The daily trading
ranges will provide traders with entry points on pullbacks.
If the sector pulls back on Monday, look for trading support 
near $63.50.  Watch for increasing volume as well to signal 
an oncoming rally.

On Thursday good news was reported that LSI's 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 LSI. 

BUY CALL DEC-60*LSI-LL OI= 626 at $ 8.25 SL=6.50
BUY CALL DEC-65 LSI-LM OI=1322 at $ 5.13 SL=3.38
BUY CALL JAN-60 LSI-AL OI=2749 at $10.63 SL=7.63
BUY CALL JAN-65 LSI-AM OI=3183 at $ 7.63 SL=5.75

Picked on Nov 14th  at     65.50    P/E = 119
Change since picked        +0.94    52-week high=$66.94
Analyst Ratings       13-6-3-0-0    52-week low= $15.19
Last earnings 10/29    est= 0.30    actual= 0.35
Next earnings 02-02    est= 0.43    versus= 0.00
Average daily volume =  2.17 mln 
Chart = http://quote.yahoo.com/q?s=LSI&d=3m


HLIT - Harmonic Inc $72.06 (+13.06)

Harmonic designs, manufactures and markets digital and fiber
optic systems that deliver video, voice and data over cable,
satellite, telecom 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.

With the uptrend firmly in place, HLIT remains on fire!!  When 
we review the trading picture for Friday it might have been 
hard getting an immediate trading profit because of the gap 
open in the morning that saw the shares open up at $72.50, 
well above the close from Thursday of $69.75.  During the 
day the shares were volatile and provide a number of good 
opportunities to enter the stock.  The stock pulled back 
to as low as $70 a share during the day, before closing at 
$72.06.  The momentum in the telecom equipment sector remains 
very bullish, as a number of stocks continue to breakout to 
the upside.  Going forward, patience may pay off with the 
market at lofty levels but we like the stock at current levels 
to continue to trend higher.  In case of a pullback look for 
support to hold up at the $68 level.  Another possible strategy 
is to sell your positions if the stock continues to gap up at 
the open and then look to get back in on a intraday pullback.  
If the momentum carries HLIT higher, we expect some pretty 
strong resistance at $80, the 52-week high.  That might not 
be a bad short-term exit point.  

Warburg Dillon Read hosted a three-day Global telecom conf.
in New York City this past week, with the emphasis on the 
explosive data traffic as a result from the Internet.  Warburg
is bullish on the outlook for two areas: wireless communications
and fiber optic transmission.  More specifically they favor
the companies that provide the various components that will
enable these networks to flourish.  They expect companies like
ETEK, Terayon Communications, JDS Uniphase and HLIT to be well 
positioned to take advantage of the business opportunities.

BUY CALL DEC-65 LQL-LM OI=454 at $11.50 SL= 9.25
BUY CALL DEC-70*LQL-LN OI=306 at $ 9.00 SL= 6.75
BUY CALL DEC-75 LQL-LO OI=246 at $ 6.88 SL= 5.00
BUY CALL JAN-65 LQL-AM OI=253 at $15.38 SL=11.38
BUY CALL JAN-70 LQL-AN OI=105 at $12.75 SL=10.25

Picked on Nov 18th  at   $69.75     P/E = 387
Change since picked       +2.31     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 = 1.03 mln 
Chart = http://quote.yahoo.com/q?s=HLIT&d=3m


SNE - Sony Corp $176.63 (+0.13)(+11.81)(+4.94)

Sony is a consumer electronics and multimedia entertainment 
company.  It sells products like TVs, VCRs, MiniDisc systems, 
stereos, digital camcorders, DVD video players, and the 
Playstation home video game system.  It is also in the process 
of strengthening its position in the music and image-based 
software markets.  Some of Sony's entertainment assets include 
Columbia TriStar Motion Picture, Columbia TriStar Television, 
Sony Pictures Studio, and Columbia and Epic record labels.  
Other high-tech products include flat-screen TVs, digital 
TVs, CD-ROMs, and digital cellular telephones.  

The Bulls are ready to run!  The profit-takers did their part 
to hold the market back on Friday as many prepare to head 
into a shortened holiday trading week.  Sony has been 
experiencing profit-taking throughout the week and looks to 
have entered into a period of consolidation on Friday which 
managed to pull Sony up to close at the high of the day and 
just pennies short of Thursday's close.  It looks as though 
Sony is ready to reclaim it's positive momentum run heading 
into next week.  SNE has support at it's 10-dma of $175.75, 
which held up well in Friday's session.  If Sony does regain 
momentum, it may very well be time to jump on board with a new 
play.  Sony does have some resistance at $180, but now that 
the profit-taking could be out of the way, Sony may have the 
legs to continue running without being pulled back as it was 
last time.  We will definitely want to see a move up backed 
with good volume to confirm, but Sony is looking well positioned 
heading into this week.

The biggest shopping day of the year is just days away!  Can 
you imagine just how many Playstations grace the lists of 
children around the world? (Alright, so it's on my list too.)  
Sony did a bit of flexing at last weeks Comdex convention and 
looks to be making a splash in the world of digital music 
players.  Some are the size of wristwatches and of course you 
can find them in a variety of colors.  Sony also announced 
plans on Friday to open a museum in Beijing China to help 
people learn more about the physical sciences.

BUY CALL DEC-170 SNE-LN OI-201 at $11.75 SL=9.25
BUY CALL DEC-175*SNE-LO OI=210 at $ 8.38 SL=6.25
BUY CALL DEC-180 SNE-LP OI=238 at $ 5.88 SL=4.00
BUY CALL JAN-180 SNE-AP OI=184 at $ 9.88 SL=7.00 

SELL PUT DEC-175 SNE-XO OI= 55 at $ 6.00 SL=8.00
(See risks of selling puts in the play legend) 

Picked on Nov 7th at  $164.69   P/E = N/A 
Change since picked    +11.94   52-week high=$181.50 
Analysts Ratings    0-1-0-0-0   52-week low =$ 65.50 
Last earnings 10/99  est= N/A   actual= N/A 
Next earnings 01-00  est= N/A   versus= N/A 
Average Daily Volume =  180 K  
Chart = http://quote.yahoo.com/q?s=SNE&d=3m


EMC - EMC Corporation $89.38 (+6.69)(+8.93)

Memory hardware and software is their primary focus.  EMC
Corporation is the #1 maker of mainframe computer disk memory
hardware and software.  EMC makes memory storage and retrieval
systems for larger mainframe computers as well as UNIX and 
Windows NT systems, using redundant array of independent disks
or (RAID).  With an emphasis on overseeing a corporation's 
Internet data, EMC continues to boost its presence in software
and related services.  About 80 percent of EMC's revenue comes
from storage hardware.  Over the last 5 years EMC's earnings 
have increased an average of 30 percent annually.  EMC competes
in the market place with IBM, Compaq and Hitachi. 

EMC opened near its high at $89.75 and then dropped to its low 
of $86.50 in the first thirty minutes of trading Friday morning.
For now the $87 area seems to have provided support for our
play in EMC, as the hardware company bounced back late in the 
day to close at $89.38.  In the near term we still believe 
the trend for EMC is higher.  If you have a position in EMC,
depending on your entry point you probably have some money on
the table and we would urge you to protect it.  Keep in mind, 
that in the last thirty days EMC has added almost $30 to 
the price of its stock, and somewhere along the lines, all that
money is going to get a little heavy and some of those folks 
are going to want to lighten their load and go to the bank.
For EMC to remain on our list of potential plays we are going
to need to see it continue its upward momentum, with solid 
volume.  Should we see a pullback or some profit-taking set
in there are two areas that could be solid re-entry points.  
A bounce off of the $87 or $83 levels accompanied by strong 
volume could provide a good entry point.  We are not trying
to scare anyone off but as you know markets do not go straight
up or down and the hardware sector has enjoyed nice moves in
the last month.

In the news, having completed its acquisition of Data General,
EMC said this week it will eliminate the low end of its Aviion 
server line in an attempt to make the business unit profitable.
In the coming months the company will gradually eliminate its
desktop PC and low-end and mid-range servers.  Elsewhere 
Soundview Technology Group analyst Gary Helmig downgraded EMC
from a Strong Buy to a Buy with a twelve month price target of
$115.  Wednesday Wendy Abramowitz an analyst at Argus Research
Group downgraded EMC from a Buy to a Hold as well.

BUY CALL DEC-75 EMB-LO OI=1623 at $15.50 SL=12.00
BUY CALL DEC-80 EMB-LP OI=2575 at $11.13 SL= 8.75
BUY CALL DEC-85*EMB-LQ OI=3143 at $ 7.50 SL= 5.75
BUY CALL DEC-90 EMB-LR OI=2168 at $ 4.50 SL= 2.75

SELL PUT DEC-80 EMB-XP OI= 702 at $ 1.19 SL= 2.50
(See risks of selling puts in the play legend)
Picked on Nov 14th at    $82.69    P/E = 90
Change since picked       +6.69    52-week high=$90.38
Analysts Ratings     16-7-2-0-0    52-week low =$33.00
Last earnings 09/99   est= 0.27    actual= 0.29 surprise +7.4%
Next earnings 01-25   est= 0.31    versus= 0.24
Average daily volume = 5.77 mln
Chart = http://quote.yahoo.com/q?s=EMC&d=3m


GMST - Gemstar International $104.63 (+4.25)

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.

Our Split run play in GMST is beginning to set up nicely.  Now 
if it will just continue with the momentum we saw early last week
we will all be happy campers.  Thursday GMST announced its second
2:1 split of the year.  The first came back in May.  GMST dropped 
back to the $101 area Thursday, but recovered into the close.  
Friday shares of GMST started out a bit weak again however the 
$102 area provided support.  GMST has began to consolidate from 
the last week's run up from the $90 area.  The primary challenge 
for our split play is to see if the $100 holds and if the stock 
can continue to move up and take out the previous high of $110.63
with conviction.  If you are considering a position in GMST, we 
would view a move through the $106 level with solid volume 
as a potential area to buy calls.  We would like to see the 
major indices leading the way as well, which could be a problem.
With the Nasdaq continuing to head into uncharted territory
the potential for a retracement or at least a consolidation
grows by the day.  The strength exhibited after the early
declines in each of the last two sessions is promising.  GMST
closed right on its 5-dma at $104.63.  Several other technical
indicators have come off the ceiling as well.  Volume on the 
pullback has been light indicating there aren't a lot of people
ready to jump ship just yet either.  Notice the high Open Interest
in the December 115 Calls at 2692.  This can be a good indication
of where traders expect GMST to run into solid resistance.   In 
considering a new play assess your risk profile and check the 
direction of the broader markets prior to entering you order.

Last week analyst Michael E. Stanek of Lehman Brothers reiterated
his Buy rating for GMST and set a twelve month price target of 
$150.  Analysts at Hambrecht & Quist and at Gerard Klauer also
reiterated Buy ratings for GMST late last week.

BUY CALL DEC-100*GST-LT OI= 530 at $11.63 SL=9.25
BUY CALL DEC-105 GST-LA OI= 785 at $ 8.88 SL=6.75
BUY CALL DEC-110 GST-LB OI= 336 at $ 6.63 SL=4.75
BUY CALL DEC-115 GST-LC OI=2692 at $ 4.88 SL=3.25

SELL PUT DEC- 95 QLF-XS OI= 128 at $ 5.13 SL=7.00
SELL PUT DEC-100 GST-XT OI=2922 at $ 6.25 SL=8.00
(See risks of selling puts in the play legend)

Picked on Nov 18th at   $104.88    P/E = 140
Change since picked       -0.25    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


The Option Investor Newsletter             11-21-99  
Sunday                4  of  6



ICGE - Internet Capital Group $166.94 (+7.63)

Internet Capital Group is an Internet holding company 
actively engaged in business to business e-commerce through 
a network of partner companies.  It provides operational 
assistance, capital support, industry expertise, and a 
strategic network of business relationships intended to 
maximize the long-term market potential of more than 40 
business to business e-commerce partner companies.

This recent IPO has been on a firm, steady uptrend ever
since it went public back in early August.  The stock tacked 
on 7.63 points in a sector that has most of the recent action, 
Internet stocks.  Many in the sector have upcoming splits. 
Stocks set to split in the very near future in the sector
are:  AOL, VIGN, BRCD, SCNT just to name a few.  For the new 
companies like ICGE the rumor is that they will be following 
the leaders and will be announcing a stock split soon, and with 
investors believing that they are getting something for nothing 
it should help the stocks sky rocket even higher.  Going forward 
on the back of this rumor we should see continued momentum in 
the new Internet software and services stocks.  We would look 
to enter positions at this level in ICGE, being mindful that 
the stock is volatile and has a wide intra-day trading range.  
Look for pullbacks to trading support near $160.  Resistance is 
above at $180.  This stock has pulled back off of recent highs 
and we look to see another push to new highs, we are looking for 
a possible stock split announcement and want to be in position 
for a run up in anticipation.    

An acquisition was recently made by ICGE to help to build 
the company as the leader in Web-based procurement.  ICGE 
bought Purchasing Solutions, Inc., an e-commerce purchasing
service that helps companies reduce total procurement costs.
As companies seek new opportunities to enhance productivity
and reduce costs, supply chain management, particularly the
corporate procurement process, is emerging as a huge

BUY CALL DEC-165 EUG-LM OI=  60 at $18.50 SL=15.75
BUY CALL DEC-170*EUG-LN OI= 101 at $16.63 SL=14.00 Best OI
BUY CALL DEC-175 EUG-LO OI=  78 at $14.25 SL=11.50
BUY CALL JAN-170 EUG-AN OI=  31 at $23.75 SL=21.25
BUY CALL JAN-175 EUG-AO OI=  15 at $18.38 SL=15.63

Picked on Nov 21st at   $166.94     P/E = N/A
Change since picked       +0.00     52-week high=$195.56
Analyst Ratings       0-2-1-0-0     52-week low =$ 14.00
Last earnings 11/11   est= 0.17     actual= -0.13
Next earnings 02-01   est= 0.18     versus= N/A
Average daily volume = 1.37 mln 
Chart = http://quote.yahoo.com/q?s=ICGE&d=3m


CMGI - CMGI Inc. $124.88 (+23.38)

They invest in the future of the Internet.  CMGI develops and
operates Internet and direct marketing companies as well as 
venture funds focused on the Internet.  They assist in the 
internal development and the operation of their majority owned
subsidiaries within the CMGI Internet Group.  CMGI has a stake
in more than 40 Internet Companies including Lycos and Raging 
Bull.  They also own 83% of search engine AltaVista.  They have
a majority interest in Engage Technologies, ADSmart, NaviSite 
and MyWay.com.  Services include Web Hosting, ad serving, and 
traffic analysis.  Located in Andover, MA, CMGI competes in the
marketplace with Safeguard Scientifics, SOFTBANK, and ideally. 

Shareholders of CMGI had quite an exciting week.  CMGI started 
out the week trading near the $100 dollar mark.  By the close of
business Friday CMGI had seen a high of $135.25 and traded back 
to close at $124.88 up over $23 for the week.  The excitement 
for CMGI shareholders came mostly on the news of China signing 
an agreement Monday with the U.S., which will pave the way for 
China to enter the World Trade Organization.  So why all the 
excitement for CMGI?  CMGI recently signed a deal with Pacific 
Century Cyberworks Ltd., a Hong Kong Internet company, which 
will allow CMGI to expand into the lucrative Chinese Internet 
market.  If you noticed this week's trading, just about any
stock that had anything to do China enjoyed a positive move.
We are looking for CMGI to continue to move higher and a solid
move through the $130 area would be viewed as an opportunity 
to participate in our call play.  The only fly in the ointment
at this point would be the concern over interest rates that 
seems to have returned to the markets.  The bond market is
beginning to say there's inflation and the stock market could
start to believe the folks in the bond pits sooner or later.
If that's the case then the financial stocks and interest rate 
sensitive firms could find the going a bit tough.  Obviously
CMGI can exhibit volatility, and this play may not be for 
everyone.  Prior to entering a new play consider the volatility
of the stock and your own risk profile.  For those with nerves
of steel this could be a great play.   

Wednesday analysts at Goldman Sachs initiated coverage of 
CMGI with a rating of Market Outperform.  Prudential's Paul 
Merembloom rated CMGI as a strong buy and raised his price 
forecast to $186 citing the U.S./China agreement as a 
lucrative opportunity for CMGI, as well as other new 
ventures coming to market.  

BUY CALL DEC-120 GCB-LD OI=3366 at $13.75 SL=11.00
BUY CALL DEC-125 GCB-LE OI=1436 at $12.00 SL= 9.50
BUY CALL DEC-130*GCB-LF OI=1797 at $ 9.25 SL= 7.00
BUY CALL DEC-135 GCB-LG	OI= 914 at $ 7.25 SL= 5.50
BUY CALL DEC-140 GCB-LH	OI=2141 at $ 6.00 SL= 4.25

Picked on Nov 21st at   $124.88    P/E = 31
Change since picked       +0.00    52-week high=$165.00
Analysts Ratings      3-6-0-1-0    52-week low =$ 16.34
Last earnings 08/99   est= 4.08    actual= 4.24 surprise +3.9%
Next earnings 12-15   est=-0.17    versus= 0.38
Average daily volume = 4.32 mln
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m


SFE - Safeguard Scientific Inc $124.00 (+11.50)(+9.00)

Safeguard is an Internet-centric holding company that finds, 
acquires, operates and manages business-to-business companies 
engaged in e-commerce, e-communications, and e-business software 
and services and has interests in several private equity funds.  
Safeguard generally acquires ownership interests in companies 
that allow it to have a significant influence over their 
direction and management over the long-term.  Safeguard assigns 
a dedicated team to each partner company and actively assists 
its partner companies in their management, operations and 
finances.  Safeguard seeks to maximize shareholder value by 
actively providing operational assistance and expertise to 
help its partner companies grow and develop and by giving its 
shareholders the opportunity to participate in the initial 
public offerings of its partner companies while retaining a 
significant ownership interest after the initial public 

SFE had a great week, but on Friday showed signs of weakness 
despite a gain on the day.  To get to the point, volume was low 
and the price was flat.  That's an unusual combination on a low 
float, high visibility, and volatile issue.  By itself, it 
doesn't mean much, but is certainly not indicative of a stock 
that wants to go up.  In fact, the last three days of trading saw 
the trend flattening out in comparison to the previous two weeks.  
The short-term channel shows a trading range of $121 to $127.  
SFE is right in the middle.  However, the breakout over its old 
April high of $120 is a good sign, though the low volume scares 
us a bit.  Nonetheless, we think the best target shooting entry 
is around $120 ($120 is where the chart shows old resistance and 
new support) as long as the volume keeps up (picks up), and the 
rest of the NASDAQ keeps away from reclaiming some of the 600 
points it's gained in the last 15 trading days.  Plan your entry 
carefully and cut your losses quickly if it moves south of $120 - 
the next stop is $112-$115.  Profit potential is good, but the 
ice is thin.  Run if you hear a crack.

There isn't much news to move the price.  Since SFE has really 
been carried up in price on no news of its own, it becomes an 
easy target for bad news, especially when you consider that the 
market is at historical levels over its moving average.  If you 
target shoot, be sure to use a trailing stop on the downside.  
Otherwise, don't leave your computer.  As for a split, SFE has 
had the ability to split for some time since the price has been 
well above historical split levels.  Though, it's possible, We 
don't think we'll hear an announcement any time soon - maybe 
February when they announce earnings.

***No January strikes available yet***

BUY CALL DEC-120 SFE-LD OI= 590 at $12.00 SL= 9.50
BUY CALL DEC-125*SFE-LE OI=1061 at $ 9.50 SL= 7.25
BUY CALL DEC-130 SFE-LF OI=   5 at $ 7.38 SL= 5.50 low OI

Picked on Nov 11th at $118.75     P/E = 50
Change since picked     +6.25     52-week high=$127.75
Analysts Ratings    8-4-1-0-0     52-week low =$ 24.50
Last earnings 10/99 est= 0.14     actual= 0.26  surprise= 85.7%
Next earnings 02-17 est= 0.16     versus=-0.23
Average Daily Volume =  442 K
Chart = http://quote.yahoo.com/q?s=SFE&d=3m


YHOO - Yahoo! Inc $218.75 (+21.81)   

Yahoo! Inc is a global Internet media company that offers an 
online guide to web navigation, plus a branded network of 
comprehensive information, communication services, and 
shopping access to millions of users daily.  Over 32 mln 
users visit the Web site each month.  Yahoo! operates in the 
black with the bulk of its revenues derived from advertisements 
commissioned by its list of about 3800 clients.

YHOO is a split-candidate play powered by e-holiday momentum and 
the general excitement that surrounds this high-flying Internet 
at this price level.  Historically, the company has announced 
stock splits when the share price reaches $200 to $220.  Recall 
YHOO recently split 2:1 on February 5th.  For another split to 
become reality this calendar year, a shareholder meeting would 
be required to increase the number of authorized shares.  We saw 
investor enthusiasm catch hold after the stock broke through 
overhead resistance at $203.  From that point on YHOO has 
provided entry points between $205 and $210, a level that's 
evolved as near-term support this week and the 10-dma ($203.59) 
is now just a dot in the rear-view mirror.  For players who 
jumped right into the game, they reaped instant rewards as YHOO 
stretched even higher on Friday just missing the $220 mark.  
Earlier, First Union Securities gave YHOO a boost when they 
started coverage on Thursday with a Strong Buy rating and also 
issued a bullish price target of $240.  

In the spirit of the holiday season, 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 Yahoo! 
already has events in place for this Spring.  On Tuesday, Yahoo! 
Internet Life magazine announced its first annual Online Film 
Festival to be held on March 22nd and 23rd.  Their goal is to 
magnify the importance of film via the Internet.  Yahoo! has 
deals with online and offline communities including Amazon.com 
and Roger Ebert to help promote this event.  In international 
news, the landmark trade agreement between the US and China 
should prove beneficial for Yahoo! who 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. 

BUY CALL DEC-210*YMM-LB OI=3132 at $18.50 SL=14.50
BUY CALL DEC-220 YMM-LD OI=2392 at $13.38 SL=10.75
BUY CALL DEC-230 YMM-LF OI=1776 at $ 9.38 SL= 7.00
BUY CALL JAN-220 YMM-AD OI=6838 at $22.00 SL=17.25
BUY CALL JAN-230 YMM-AF OI=4800 at $17.75 SL=14.00

Picked on Aug 15th at   $212.56    P/E = 1033
Change since picked       +6.19    52 week high=$244.00
Analysts Ratings    13-15-4-0-0    52 week low =$  9.69
Last earnings 09/99   est= 0.09    actual= 0.14 surprise +55.6%
Next earnings 01-12   est= 0.15    versus= 0.07
Average Daily Volume = 7.90 mln
Chart = http://quote.yahoo.com/q?s=YHOO&d=3m


BVSN - Broadvision $97.50 (+9.00)(+5.00)(+9.94)

Broadvision's software helps companies become e-commerce 
powerhouses.  Their depth in One to One Internet software 
provides the tools for all facets of the online transaction, 
including ordering, payment, fulfillment, customer service and 
billing.  It also allows users to collect, track and manage 
customer visits, then create customer profiles accordingly.  
Trophy Customers include Oracle, American Airlines, Credit 
Suisse, Ernst and Young, Hewlett Packard, Home Depot, Motorola, 
Vodafone and Wal-Mart.  Insiders own 46% of the company.

Once again, here's an issue where volume has overtaken 
intelligence.  Mind you, we're not complaining about a profit, 
just noting that there is no substitute for volume when it comes 
to moving a stock's price.  Friday's stellar gain came during 
amateur hour and is considered highly unusual, except on option 
expiration Friday when contracts get exercised.  The action puts 
immediate buying pressure on the stock, as thousands of contracts 
were exercised following the recent run.  In the process, BVSN 
broke $96 resistance and held it to set yet another new high.  On 
the theory that old resistance becomes new support, $96 appears 
to be a new support level with new resistance at $99 (a new 
intraday high).  With share value up over 1500% this year, BVSN 
just executed their first split (3:1) in October.  The 
announcement came when the stock traded at $133.  We're getting 
there, but not yet.  The first hurdle will be clearing resistance 
at $99, then the psychological barrier of $100.  If that's not 
enough, consider that the NASDAQ has risen over 600 points in the 
last 15 trading days, setting 12 new records on extraordinary 
volume along the way, without any correction.  Anyone see a red 
flag here?  Charting history and a good story are things we 
see in the rear view mirror that would spur us to take a new 
position.  However, instead, we would encourage you to look 
through the windshield this week.  Confirm market direction 
before making the play.  GDP and jobless claims are reported on 

In the news, Friedman, Billings, Ramsey reinstated their Buy 
rating with no other details.  Careful.  GEOCapital, Lou 
Navellier and Pilgrim Baxter (all large institutional holders 
of BVSN) have sold over 3 mln shares according to September 
filings and declined comment on their moves.  Navellier was a 
bit more forthcoming: "It's frothy; I trimmed it and stand 
ready to trim more.  I'd like its earnings momentum to pick up.  
It's officially a Hold on my system."  Piper Jaffrey also 
reiterated their Buy rating this week.

***No January strikes available yet***

BUY CALL DEC- 90*BDV-LR OI=1419 at $14.50 SL=11.50
BUY CALL DEC- 95 BDV-LS OI= 401 at $11.75 SL= 9.25
BUY CALL DEC-100 BDV-LT OI= 720 at $ 9.50 SL= 7.25

Picked on Nov 7th at    $83.50     P/E = 615
Change since picked     +14.00     52-week high=$99.00
Analysts Ratings    5-16-1-0-0     52-week low =$ 4.81
Last earnings 09/99  est= 0.13     actual= 0.16
Next earnings 01-27  est= 0.16     versus= 0.08
Average Daily Volume = 1.4 mln
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m


MSFT - Microsoft Corp $86.00 (-3.19)

Microsoft is the #1 software company in the world.  They 
develop, manufacture, license, and support a broad range of 
software products including Windows operating systems, server 
applications, the popular MS Office suite, and a Web Browser.  
The company is presently involved in anti-trust issues with the 
government.  CEO and co-founder, Bill Gates still owns 15% of 

Our Microsoft play is based on the recent move by US District 
Judge Thomas Penfield Jackson to appoint a mediator in the 
government's antitrust case against Microsoft to negotiate an 
out-of-court settlement.  Both sides assented to the appointment 
of Richard A. Posner, Chief Judge of the 7th US Circuit Court of 
Appeals and a free-market advocate.  Investors were pleased too 
that talks would likely resume and started to put their money 
back into MSFT on Friday. 

By the end of Friday's session MSFT was showing signs of a 
renewal and traded up $1.06 (1.3%) on strong volume.  Take a 
look at a chart and you can visually confirm the stock's 
downfall after the courts declared the company a monopoly and 
bully just two weeks ago.  It's evident MSFT lots its trading 
legs and began to play tag with the 200-dma (now at $86.45).  
We believe this price level is the bottom and thus, an awesome 
buying opportunity.  The first step of opposition is just 
overhead at $90 and $91 then its onward to break the barriers at 
$95 and $96.  As the Nasdaq rages on to newer heights and the 
end of the monopoly battle seems to be coming to a timely close, 
MSFT is no doubt poised to go higher in the near-term.  The 
only problem is entry points.  Instinet already showed MSFT 
above $90 after-hours on Friday.  Don't chase MSFT if the 
stock is overly euphoric. 

BUY CALL DEC-80 MSQ-LP OI= 2756 at $7.75 SL=6.00
BUY CALL DEC-85 MSQ-LQ OI= 8457 at $4.25 SL=2.50
BUY CALL DEC-90*MSQ-LR OI=20212 at $1.94 SL=1.00
BUY CALL JAN-85 MSQ-AQ OI=32958 at $6.38 SL=4.75
BUY CALL JAN-90 MSQ-AR OI=34321 at $4.25 SL=2.50

SELL PUT DEC-85 MSQ-XQ OI=15296 at $2.88 SL=4.75
(See risks of selling puts in the play legend)

Picked on Nov 21 at      $86.00    P/E = 91
Change since picked       +0.00    52-week high=$100.75
Analysts Ratings    14-17-3-0-0    52-week low =$ 54.62
Last earnings 09/99   est= 0.34    actual= 0.38 surprise +11.8%
Next earnings 01-19   est= 0.42    versus= 0.36
Average Daily Volume = 26.5 mln
Chart = http://quote.yahoo.com/q?s=MSFT&d=3m


VRTY - Verity Inc $99.13 (+5.81)

Verity develops knowledge retrieval software products for 
corporate internet and extranets, online publishers and e-
commerce providers, OEMs and independent software vendors.  
Verity makes software capable of accessing information stored 
in multiple formats and locations.  The company's software 
simplifies data management information to index, classify, 
search, and retrieve data.  Verity has a large corporate 
clientele ranging from chip makers to Internet publishers 
which include Cigna, Toshiba, CNET, and EDGAR online.  

This one's simple.  We're adding VRTY as a split run play ahead 
of the 2:1 paydate on December 3rd.  Earlier this month we 
watched VRTY break out on the upside after being added to the 
S&P 600 Small-Cap Index on November 5th and begin trading well 
above October's $75 resistance level, but unfortunately on 
dissipating volume.  Now granted volume has yet to reflect the 
typical enthusiasm which usually earmarks a profitable split 
run, but we believe that confirmation will present itself as 
the split date quickly approaches in just two short weeks.

Putting the trading volume issue aside, VRTY is poised to break 
through that psychological $100 mark and charge towards a 
reasonable target of $110, a mere 10% climb!.  With the bullish 
sentiment intact, technical indicators such as the MACD and STO 
in positive mode, and the 10-dma ($93.34) tucked under the 
near-term support level at $95 we see prospective gains for VRTY 
as a definite possibility.  An entry shouldn't be too difficult 
to navigate.  This HIGH-RISK Internet play offers enough 
volatility and point spread intraday to target shoot for a 
daily bottom near support even on a climb, but again look for 
a show of volume to further validate your decision. 

BUY CALL DEC- 95*YQV-LS OI=347 at $11.00 SL= 8.75
BUY CALL DEC-100 YQV-LT OI=216 at $ 8.38 SL= 6.50
BUY CALL DEC-105 YQV-LA OI= 21 at $ 6.38 SL= 4.75 low OI
BUY CALL MAR-100 YQV-CT OI=  3 at $15.50 SL=12.00 low OI
BUY CALL MAR-105 YQV-CA OI=  0 at $12.63 SL=10.25 low OI

SELL PUT DEC-100 YQV-XR OI= 10 at $ 3.63 SL= 5.50
(See risks of selling puts in the play legend)

Picked on Aug 24th at   $99.13    P/E = 390
Change since picked      +0.00    52-week high=$104.00
Analysts Ratings     4-1-0-0-0    52-week low =$ 15.62
Last earnings 08/99  est= 0.21    actual= 0.32
Next earnings 12-15  est= 0.23    versus= 0.18
Average Daily Volume =   304 K
Chart = http://quote.yahoo.com/q?s=VRTY&d=3m


CMVT - Comverse $142.44 (+21.19)(+7.50)(+18.50 previous 3 weeks)

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. 

This just keeps getting better and better, doesn't it?  Well, 
unless you passed up or forgot to enter the play, in which case 
it leaves a knot in your stomach every time you get a quote 
on CMVT.  Believe me, I've been there.  This week we saw a 
gain of over $20 in CMVT.  That combined with, once again,  
numerous entry points has made trading in CMVT profitable and 
fun.  We talked about the clock ticking away at us on Thursday 
and it is true.  We are really starting to run out of time on 
our CMVT play.  The earnings are set to be released after the 
close on Nov 30th.  That means this week will be the last of 
the plays and we need to close up shop on CMVT by Monday or 
Tuesday of next week.   Truthfully, you have to wonder how 
much strength CMVT has left.  It is up over $40 since we 
picked in on Oct 21st.  And with the market also looking over-
extended, we may be in for a bout of profit-taking.  This is 
just speculation though because CMVT still looks technically 
strong.  We issue a profit-taking warning purely on common 
sense, although that sometimes doesn't mean a lick on Wall 
Street.  The strong technical picture stems from a bullish 
close over $140 on Friday.  The volume was average but it 
has been average all along and CMVT keeps trucking higher.  
The word is probably leaking that a split may be coming with 
earnings.  We have said all along that it is quite likely but 
we still don't want to risk holding over earnings.  That brings 
in to play a possible disappoint in earnings, no split 
announcement, or a post-announcement and/or post-earnings 
sell-off.  That is just too many factors to pull CMVT down.  
So for those looking to enter a play, support is at $140, $135 
and at the 10-dma at $125 (not likely to hit this without a 
stiff market downdraft).  We will call the outlook for this 
week cautiously optimistic but will keep the stops tight to 
avoid giving back any of our gains.   

Let's determine who the veteran's of the this play are.  Do 
you think there was any new news on CMVT this week?  If you 
answered no, then you may be a play veteran.  Most likely a 
profitable one as well.  As we have said before, CMVT rarely 
has press releases and this week was no exception.  We will 
keep watching for them anyhow.  We know there will be one 
after the close on Tuesday the 30th.  

BUY CALL DEC-130 CQV-LF OI=935 at $18.00 SL=14.00 
BUY CALL DEC-135*CQV-LG OI=154 at $14.00 SL=11.25
BUY CALL DEC-140 CQV-LH OI= 83 at $12.00 SL= 9.50 low OI

SELL PUT DEC-115 CQV-WC OI=  9 at $ 1.25 SL= 2.50 low OI
(See risks of selling puts in the play legend)

Picked on Oct 21st at  $102.13    P/E = 78
Change since picked     +40.31    52-week high=$142.50
Analysts Ratings     9-3-0-0-0    52-week low =$ 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  


NT - Nortel Networks $81.25 (+8.69)(+3.75)(+6.88)

Here come 'Ol Flat Top; he come groovin' up slowly.  What does 
this has to do with the new era of communications, we don't 
know.  But the bandwidth enabling capability of NT equipment 
is causing the Internet to "Come Together" (the Beatles song 
used in NT's TV commercials) with PC's, TV's, LANs, plus 
wireless and fiber data/voice communications systems everywhere.  
NT makes the equipment that makes the electronic convergence 
possible.  With over $19 bln in sales, they are number #2 
behind competitor Lucent in size.  Canadian Telecom owns 40%.  
The U.S. accounts for over 50% of sales.

Recall from Thursday's write-up that a new study released earlier 
in the week ranks NT as the number one producer of optical 
networking gear worldwide, outpacing Lucent by a 32% to 27% 
market share.  NT has been on fire ever since.  It's also much 
more attractively priced than LU, which has money managers 
flocking, as indicated by volume far surpassing the ADV.  They 
are also garnering business away from one-time leader, Newbridge 
Networks, which may help explain why Newbridge has fallen on hard 
times.  Anyway NT expects to sell $10 bln worth of optical gear 
next year, and grow revenue 21%, while expanding their margins in 
the process - again, money managers salivate.  Though they last 
split in August (2:1), the announcement came earlier in July when 
the price was $88.  We're almost there.  However, since their 
authorized shares are unlimited and they are Canada based, NT is 
not required to file proxy statements with the SEC.  Thus, we 
don't have the typical evidence available, which would indicate a 
pending split announcement.  Consider it gravy, but don't bank on 
it.  True to form, old resistance at $75 became new support, from 
which NT has continued its ascent.  Thursday and Friday's charts 
are truly a thing of beauty, with support forming (barely) at 
$77.25 and $80.50.  Resistance is $81.38.  NT's close within 
$0.13 of the high gives a strong sign that the trend should 
continue.  Dips have been minimal.  So long as the market remains 
friendly, target shooting here will likely get you the best 
entry.  Volume weakness would be a sign to stay away as would 
negative market conditions - market wide profit-taking for 
instance.  Confirm market direction.

Here's some contrarian good news.  Brokerage firm Griffiths, 
McBurney maintains their Accumulate rating, while RCB Dominion 
reiterated its Outperform rating.  One Buy or Strong Buy rating 
from a large firm would likely spark another wave of retail, 
if not institutional buying.

BUY CALL DEC-75*NT-LO OI= 648 at $8.63 SL=6.50
BUY CALL DEC-80 NT-LP OI=1300 at $5.63 SL=4.00
BUY CALL DEC-85 NT-LQ OI= 441 at $3.50 SL=1.75
BUY CALL JAN-80 NT-AP OI= 188 at $8.50 SL=6.50
BUY CALL JAN-85 NT-AQ OI=  80 at $6.13 SL=4.25 low OI

Picked on Nov 7th at    $68.81     P/E = 490
Change since picked     +12.44     52-week high=$81.38
Analysts Ratings   12-12-3-0-0     52-week low =$22.06
Last earnings 10/99  est= 0.26     actual= 0.28 surprise=7.7%
Next earnings 01-26  est= 0.44     versus= 0.36
Average Daily Volume = 3.8 mln
Chart = http://quote.yahoo.com/q?s=NT&d=3m


NOK - Nokia $133.50 (+11.25)(+6.38)

Finnish Phone Firm, Nokia is the world's number one maker of 
wireless cellular phones, ahead of Motorola, Ericsson and 
Qualcomm.  In addition they make wireless networking equipment, 
PC monitors and workstations, digital satellite and cable 
network systems and set-top boxes.  However mobile phones 
make up 80% of their $18.5 bln in annual sales.  Return on 
equity is an industry smokin' 43%, and they currently sit on 
$3.3 bln cash, or slightly over $3 per share.  Only a hunch, 
but do you think they'd make a great candidate to purchase 
QCOM's handset business?

Wow!  What a hard run NOK had this week, especially Thursday, 
where it gapped up $6 from Wednesday's close.  Gaps like that (no 
news) beg to be filled, and the pleas were answered on Friday in 
a round of profit-taking that whacked $3 from the price.  Even 
so, it didn't fall out of the channel, which ranges from $125 to 
$137.  Under the "old resistance = new support" theory, $130 in 
fact proved to be support in the first 20 minutes of trading, 
followed early in the afternoon by support at $131.  We would be 
inclined to target shoot the $130-$131 range.  Support after 
that?  $127.  Volume remains solid and well above the ADV.  It 
looked particularly good going into Friday's close following the 
bounce off $131.  If it can hold this level and move up over 
$140, we will have a split candidate too, though foreign company 
splits are a bit tougher to predict since they don't leave a 
trail of SEC filings to sniff out.  We should exercise some 
caution though as tech stocks (mostly NASDAQ) have come a long 
way in a hurry.  With over 600 points in gain and no substantial 
pullback, keep your guard up by using a trailing stop.  Remember 
too that a gapping stock can skip right over your limit, making 
this play inherently more risky.  Again, support is $130; 
resistance is $139.

There have been no major announcement this week from NOK, while 
trading volume in Europe has been trailing off slightly, 
portending that the same may soon happen here.  If so, we could 
be in for a pullback.  Make sure the volume is there before you 
make a trade.

BUY CALL DEC-125 NAY-LE OI=2158 at $11.75 SL=9.25
BUY CALL DEC-130*NAY-LF OI=2909 at $ 8.63 SL=6.50
BUY CALL DEC-135 NAY-LG OI= 284 at $ 6.13 SL=4.25
BUY CALL DEC-140 NAY-LH OI= 881 at $ 4.00 SL=2.50 
BUY CALL JAN-135 NAY-AG OI= 185 at $ 9.75 SL=7.25
BUY CALL JAN-140 NAY-AH OI= 184 at $ 7.25 SL=5.50

Picked on Nov 14th at  $122.25     P/E = 119
Change since picked     +11.25     52-week high=$140.00
Analysts Ratings    13-8-0-0-0     52-week low =$ 44.25
Last earning 10/99   est= 0.52     actual= 0.57 surprise = 9.6%
Next earning 01/28   est= 0.66     versus= 0.58
Average Daily Volume = 2.7 mln 
Chart = http://quote.yahoo.com/q?s=NOK&d=3m


QCOM - Qualcomm Inc. $367.06 (-10.94)

QUALCOMM Incorporated is a leader in developing and delivering 
innovative digital wireless communications products and services 
based on the Company's CDMA digital technology.  The Company's 
major business areas include CDMA phones; integrated CDMA 
chipsets and system software; technology licensing; and 
satellite-based systems including OmniTRACS® and portions of 
the Globalstar(TM) system. Headquartered in San Diego, Calif., 
QUALCOMM is included in the S&P 500 Index and is a 1999 FORTUNE 
500 company.

The $10.94 loss last week doesn't tell the whole story.  It was 
down to $328 from a high of $406 on Monday.  Voila', instant 20% 
correction - Hello, entry point!  Support is quite strong at 
$330, a bit less so at $350, and merely stable from Friday's 
trading at $358 to $360.  While the finish was strong with lots 
of volume (compared to the rest of Friday) pushing up the price 
into the close, the overall daily volume fell all week to roughly 
half its ADV on Friday.  Where have all the buyers gone?  The 
company has a great story to tell.  Every time Nokia, Ericsson, 
Motorola, Samsung, or anybody else sells a CDMA phone (VOD, PCS), 
QCOM collects a royalty (Microsoft method).  Even though the "per 
unit" fee isn't as high, handsets are outselling PCs and will 
soon outstrip PC penetration worldwide.  Hello, revenue stream!  
How about this from their 10-K?  " QUALCOMM has set an objective 
of completing discussions and entering an agreement before the 
end of the 1999 calendar year [with regard to their handset 
business], which may result in a non-recurring charge to 
earnings.  [They want to sell it and may incur selling expenses]"  
On December 20 at 7:30 am PT (when the market opens), there is a 
special shareholder meeting with three items on the agenda: first 
and second, to approve an authorization to increase the share 
count from 300 mln to 3 bln in order to effect the 4:1 stock 
split (still enough shares for another 2:1 after that); third, 
"to transact such other business as may properly come before the 
meeting or any adjournment or postponement thereof."  That would 
be the perfect venue to announce the buyer of their handset 
business, in addition to approving the split.

The news is contained above.  Still, with the NASDAQ up over 600 
points, there could be a substantial correction in the market 
before December 20.  Gunslingers should feel free to trade in the 
range of support and resistance ($330-$390), while the rest of us 
perhaps wait for more of a market wide pullback.  With $40 moves 
possible for QCOM, it's important to keep your stops in place and 
adjust them upward to keep from giving them back in a quick round 
of profit taking.  It goes without saying, confirm market 
direction first.


Another good strategy for this play would be to go long the 
stock and write covered calls at or out of the money.  The 
premiums are so inflated that even a $20 out of the money 
contract can yield an extra $25 of profit. 

BUY CALL DEC-350 AAF-LJ OI=1854 at $45.00 SL=35.00
BUY CALL DEC-360*AAF-LL OI=1039 at $38.50 SL=30.00
BUY CALL DEC-370 AAF-LN OI=1540 at $35.00 SL=27.50
BUY CALL DEC-380 AAF-LP OI=1480 at $31.00 SL=24.00
BUY CALL JAN-370 AAF-AN OI= 483 at $53.63 SL=42.00
BUY CALL JAN-380 AAF-AP OI= 523 at $48.00 SL=37.50

SELL PUT DEC-300 AAF-XT OI=2038 at $ 8.75 SL=11.00
(See risks of selling puts in the play legend)

Picked on Nov 16th at   $330.00    P/E = 265
Change since picked      +37.06    52-week high=$406.13
Analysts Ratings      6-8-4-0-0    52-week low =$ 24.50
Last earnings 11/99   est= 0.88    actual= 0.91
Next earnings 02-00   est=  N/A    versus= N/A
Average Daily Volume = 10.1 mln
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m


JDSU - JDS Uniphase $213.81 (+13.81)

Uniphase Corporation is a fully integrated optical electronics 
company that designs, develops, manufactures and markets fiber 
optic telecommunications components and modules and laser 
subsystems. The Company's telecommunications products include 
semiconductor lasers, high-speed external modulators, 
transmitters, fiber Bragg gratings and optical modules for fiber 
optic networks in the telecommunications and cable television 
industries.  Based in the Silicon Valley, California, they 
employ approximately 6260 people worldwide.  Customers include 
Lucent, Nortel, Cisco and Ciena.  American Express owns 10% of 
the common shares

"Dear God, please let there be one more company like Intel to 
invest in, and I promise not to mess it up this time".  Here's 
your big break.  UNPH makes the laser modules and pumps (in 
addition to other components) that split a fiber optic strand 
into many different, potentially unlimited channels.  Effectively 
they do for light what Intel does for electrons.  Their 
components are critical to the development of optical networks.  
You might think that George Soros is responsible for the recent 
price spurt if you were watching CNBC on Friday.  Not so.  While 
a fund managed by Soros disclosed that it owned about 440K 
shares, the trend was already in place.  Higher lows had been 
converging with resistance of $204 for the last 2 weeks - a 
perfect ascending triangle or pennant.  We got the breakout with 
volume at twice the ADV on Friday.  Though reaching as high as 
$222, JDSU encountered some profit-taking (down to $213) in the 
late afternoon before recovering to $214 into the close.  Support 
is near at $213, then $210, then $207, then finally $204 (the 
old resistance/new support theory).  Depending on your risk 
tolerance, you can target shoot in this range, though we don't 
really expect $204 again unless there is drastic market wide 
profit taking (not unlikely give the recent run).  Though not 
helping the immediate play, the December 30th 2:1 split will be 
a catalyst for price movement in mid-December.  Pick your entry 
carefully and keep your stops set so you don't give your profits 
back to Mr. Market.

For investors who still like to see earnings growth, we have the 
following from a Reuters report: The fiscal Q2 (December) revenue 
estimate was raised by $5 million to $270 million, but the $0.31 
EPS estimate was left unchanged.  The fiscal 2000 revenue 
estimate was raised by $25 million to $1.140 billion.  The EPS 
estimate was raised $0.02 to $1.33.  The fiscal 2001 revenue 
estimate was raised by $57 million to $1.790 billion and the EPS 
estimate was raised $0.05 to $2.00.  The strong buy rating was 

***No January strikes available***

BUY CALL DEC-210*UQD-LB OI=1197 at $19.38 SL=15.00
BUY CALL DEC-220 UQD-LD OI=1196 at $14.50 SL=11.50
BUY CALL DEC-230 UQD-LF OI= 626 at $10.50 SL= 9.25

SELL PUT DEC-200 UTQ-XT OI= 290 at $ 9.75 SL=12.00
(See risks of selling puts in the play legend)

Picked on Nov 21st at  $213.81    P/E = N/A
Change since picked     + 0.00    52-week high=$222.00
Analysts Ratings   13-13-0-0-0    52-week low =$ 23.75
Last earnings 10/99  est= 0.25    actual= 0.29 surprise = 16%
Next earnings 01-24  est= 0.30    versus= 0.14
Average Daily Volume = 2.5 mln
Chart = http://quote.yahoo.com/q?s=JDSU&d=3m


The Option Investor Newsletter             11-21-99  
Sunday                        5 of 6


Everything looks good in our leaps portfolio after another 
incredible week for the markets.  So let's revisit our question 
from last week, Are we embarking on an incredible three month 
run in the NASDAQ similar to last year?  Since we never really 
answered that last week, let me say...not without a breather.  
The main reason is that the NASDAQ has already come too far, 
too fast.  Therefore, let's use caution buying leaps and perhaps 
take some money off the table.  You will notice some nice gains 
already shaping up in the current plays.  So "Cautiously 
Optimistic" will be our buzz word for the week.  In reality, 
a quick, painful NASDAQ dip (the kind that causes our hearts 
to skip a beat) would be just what the doctor ordered to open 
some new plays.   

Current Plays


EMC       11/07/99   JAN-2001 $80  ZOH-AP at $26.38     $15.38
                     JAN-2002 $90  WUE-AR at $30.13     $19.00
DELL      11/07/99   JAN-2001 $50  ZDE-AJ at $ 7.25     $ 7.00
                     JAN-2002 $50  WDQ-AJ at $11.50     $11.25
GPS       11/07/99   JAN-2001 $40  ZGS-AH at $ 8.00     $ 5.75
                     JAN-2002 $45  QGS-AI at $ 9.25     $ 7.88
IBM       11/07/99   JAN-2001 $100 ZIB-AT at $21.63     $13.63
                     JAN-2002 $110 WIB-AB at $25.00     $16.50
WMT       11/07/99   JAN-2001 $70  ZWT-AN at $ 6.00     $ 6.50
                     JAN-2002 $75  WWT-AO at $10.00     $ 9.75
LU        11/14/99   JAN-2001 $80  ZEU-AP at $15.88     $12.88
                     JAN-2002 $90  WEU-AR at $19.25     $16.13
CSCO      11/14/99   JAN-2001 $80  ZCY-AP at $23.13     $19.13
                     JAN-2002 $90  WIV-AR at $22.25     $22.00
SLR       11/14/99   JAN-2001 $85  ZSR-AQ at $20.75     $21.75

To review the play description on any of our current plays, 
go to the LEAPS section for the date the play was added

New Plays

GE - General Electric $137.69

Here it is.  The biggest of the big conglomerate companies.  
After spending most of the year stuck between $100 and $120, 
GE has now broken out.  This move has been fueled by positive 
analyst comments, good earnings expectations and a recovering 
Asia.  This makes it a prime candidate for a LEAP play.  Also 
with the consolidation that has occurred in 1999, we don't 
think we have missed much of the move.  That fact that we 
are adding GE to our LEAP section is indicative of its future
potential.  As you know, we typically are looking for tech 
stocks with big potential.  Like we mentioned in this week's 
summary above, we do expect a market pullback.  Therefore, 
let's look to enter GE at support near $135.  Or for those 
even more patient you may get $130 (but it may not come back 
that far).  Either way, we are expecting to head higher.  

BUY LEAP JAN-2001 $150.00 ZGR-AU at $16.25
BUY LEAP JAN-2002 $150.00 WGE-AU at $25.50



GTW - Gateway $78.75

Gateway is now being called the next Dell when it comes to 
cornering the computer market.  They have followed down a 
similar path in taking business away from the big boys (AKA 
IBM, CPQ, and HWP).  As long as they stay on this path, we 
will be able to profit from a well planned leap play.  That 
plan is going to consist of the right contracts with the ever 
elusive entry point.  The contracts are listed below and the 
entry point looks like $75 if we get a small pullback and 
$70 in a stronger Nasdaq correction.  To help drive GTW is 
the continuing strong demand for PCs during the 4th quarter.  
This is typically the strongest for box makers.  Even Intel 
has said the demand is stronger than they can supply chips 
right now.  Apple said the same thing 2 months ago.  All of 
this evidence signals further strength and no Y2K meltdown.

BUY LEAP JAN-2001 $ 90.00 ZWB-AR at $17.75
BUY LEAP JAN-2002 $100.00 WGB-AT at $22.50


Why drop calls now??  Let the momentum carry us where it may.  
But I do have my stops very tight!


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


RMBS - Rambus Inc. $82.13 (-5.88)

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.

The descent continues!  RMBS opened with a bounce on Friday, 
offering some rather attractive possible points of entry, 
and then began to trend downward for the remainder of the 
session.  RMBS closed very near the low of the day while 
posting approximately half of it's average daily volume.  
We would like to see better volume but the lower-highs and 
lower-lows continue to appear on a seemingly daily basis, 
propelling us toward the support level at $80.  We are still 
looking for a breakthrough of this level, because after that 
support is going to be harder to come by, leaving room for a 
good potential plunge.  RMBS still has resistance at its 10-dma 
of $88.  RMBS is illustrating weak relative strength against 
the Semis as the SOX was up 4.55 in trading on Friday and yet 
Rambus was unable to participate in much of the climb.  Wait 
for any intraday run ups, like the few we witnessed on Friday, 
for possible new entry points.  Another negative note in the 
news for Rambus as a recent article on CNET noted the higher
latency of Rambus memory, resulting in a slower response time.
Therefore, the memory is unable to "reach the capabilities 
that severs need."  We should see this play come to life if 
a market correction will ever arrive.

BUY PUT DEC-85*BNQ-XQ OI= 320 at $9.13 SL=6.75
BUY PUT DEC-80 BNQ-XP OI=3220 at $6.75 SL=4.75

Average Daily Volume = 1.81 mln
Chart = http://quote.yahoo.com/q?s=RMBS&d=3m


KIDE - 4Kids Entertainment $57.00 (-19.94)

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

Though the world-wide Pokemon craze continues on, investors 
have found other "toys" to play with in the market and 
apparently have lost some interest in KIDE.  KIDE, which 
had nearly tripled in the month of October, traded up to a 
high of $93.25 on November 9th and sunk to a low of $55 just 
one week later, a difference of $38.25.  Ouch!  KIDE needs 
more then a band-aid for that one!  So why the dramatic and 
rapid decline?  One reason has been a simple post-earnings 
announcement depression.  Another, is that many investors were 
looking for a stock-split announcement with KIDE's earnings 
report on November 15th, which did not occur.  The Pokemon 
movie is already out, so no more hype there.  The market in 
general has been recovering well, thus offering many other 
attractive opportunities for investors, whereas throughout much 
of November, KIDE was one of the few consistently hot stocks 
(if you remember, we played KIDE all the way up in November, 
and dropped it for this very reason.)  KIDE has posted weak 
volume in the last two trading sessions and has closed near the 
low of the day, both good indications of a continuing lack of 
investor interest.  KIDE bid farewell some time ago to it's 
10-dma and continues to sink, looking for any kind of support. 
The 50-dma is at $55.  After that, more support at $50 and $40.  
Because KIDE has been so flamboyant in it's moves, it rarely 
takes the time to establish any other type of formidable support, 
therefore, KIDE could very well continue it's downward trend 
toward this level.  Keep in mind, we have seen a substantial 
loss in a short amount of time, therefore, this is a very 

BUY PUT DEC-60*IUK-XL OI=579 at $10.13 SL=7.50
BUY PUT DEC-55 IUK-XK OI=293 at $ 7.50 SL=5.75

Average Daily Volume = 1.17 mln
Chart = http://quote.yahoo.com/q?s=KIDE&d=3m


AMR - AMR Corporation $57.75 (-4.25)

American is the #2 airline in the United States behind UAL's 
United Airlines.  AMR is a leader in air transportation, in 
the development and application of information technology for 
aviation, and travel and tourism.  American serves about 180 
destinations in the Americas and Europe with hubs in Chicago, 
Dallas/Fort Worth, Miami, and San Juan, Puerto Rico.  They 
offer a wide range of other aviation-related activities, 
including management services, training and consulting.  AMR 
also provides commuter service through American Eagle and owns 
Reno Air, which operates primarily in the western US.  

AMR spent last week flying low and crashing through support 
levels.  AMR managed to violate its 10-dma in late day 
trading on Wednesday, and has continued its steady descent, 
minus a brief afternoon rally on Thursday.  With investors 
turning away from Transports as high oil prices continue to 
plague the sector, AMR has certainly been feeling the heat.  
AMR has been beset with continuing weak volume throughout 
November showing an overall lack of buyer interest.  The 
airlines in general are struggling as the cost of fuel is 
causing many companies to make cut backs on the number of 
flights available, particularly those that may not sell enough 
seats to merely cover the cost of fuel.  This also has potential 
to bite into the holiday travel season profit.  Until we see 
a turnaround in this situation, AMR's descent could continue.  
AMR has some support at it's 50-dma of $57.50.  Should AMR 
trade below this level, which is only $0.25 away, AMR could 
very well be cleared for a fall to $54.  AMR's 10-dma of $60.75 
should serve as resistance.  AMR has done a nice job in the 
past of providing brief rallies for potential entries, so keep 
an eye out for these.  The current oil future contracts for 
the front month are more expensive than later months.  This 
is rare and signals that traders think oil will rise more 
rapidly in the short-term.  Watch the price of oil to help 
dictate where the Airline sector is going.

BUY PUT DEC-60*AMR-XL OI=161 at $4.00 SL=2.50
BUY PUT DEC-50 AMR-XK OI=180 at $1.38 SL=0.50

Average Daily Volume = 933 K
Chart = http://quote.yahoo.com/q?s=AMR&d=3m


CI - Cigna Corporation $83.75 (+0.38) 

They are one of the largest investor-owned insurers in the 
United States.  CIGNA is also one of the premier companies
in the financial services industry.  Its primary segment is 
health care.  Although the trend in the industry leans towards
managed care, about half of the premiums come from indemnity 
insurance.  The CIGNA Healthcare unit has about 6 million HMO
members.  The company also sells group life, accident, and 
disability coverage, insurance and retirement plans.  Connecticut 
General Life and Insurance Company of North America are CIGNA's 
major subsidiaries, and are among the oldest insurance companies 
in the United States. 

Since the end of October CIGNA has put in a nice run from the
$65 area all the way up to $87.25.  Wednesday it seemed as though
the proverbial worm may have turned for CI and the stocks in 
the Insurance and Financial sectors.  Late Tuesday and early 
Wednesday morning shares of CI continued to climb as a result
of the FOMC meeting.  Wednesday afternoon it was looked like
CI started to run out of gas.  CI has not experienced any strong
selling, but seems to have run out of buyers.  Again if the 
buyers dry up there is only one way a market can go, and that
would be south.  That is the primary reason CI has joined our 
list of Put plays.  The whole sector appears to be positioning
itself to rollover.  With the inflation, interest rate, oil
saga facing investors it may not be long before they click the 
sell button on their computer screens and send the price of CI, 
the Nasdaq, and the broader indices lower.  Technically, CI 
closed below a support level of $84 on Friday.  The next 
point of support for CI is near $82 followed by $80.  Another 
interesting technical point is CI has a rather large gap between
$73 and $78 in its chart, which will probably get filled 
sooner rather than later.  If the markets continue to focus
on interest rates and oil it won't be long before we see a 
consolidation at best or a bit of a correction and the financial
and interest rate sensitive stocks will lead the way.  The chart
looks ugly and we would view any further declines as a chance
to buy Puts.  Should we see a bounce back over the $85-$86
area we would want to reconsider our stance.  As always assess
the profit potential and the risks prior to entering a new play.

This past Monday CIGNA lost a $210 million tax fight, as the U.S.
Supreme Court rejected an appeal.  The court left intact an 
appeals court decision which upheld a $62 million deficiency
notice assessed against CI and several of its units in 1992.
Tuesday analyst Robert J. Hoehm at ING Barings raised his rating
for CI from a Buy to a Strong Buy.

BUY PUT DEC-85*CI-XQ OI=3 at $4.00 SL=2.50 low OI
BUY PUT DEC-80 CI-XP OI=1 at $1.94 SL=1.00 low OI

Average daily volume = 990 K
Chart = http://quote.yahoo.com/q?s=CI&d=3m


Another Incredible Week..

Friday, November 19

Equity markets ended mixed Friday as blue-chips faltered while 
technology issues continued their winning ways. The Dow Jones
Industrial Average closed down 31 points at 11,003 but for the
week, the Dow was up 234 points. The Nasdaq composite climbed
22 points to 3,369 and another record, its 13th in 16 sessions.
The S&P 500 index ended the week at 1,422 after setting a new
all-time high on Thursday. Market breadth continues to be poor
as declining issues led advances 1821 to 1197 on heavy volume
of 877 million shares traded on the NYSE. The 30-year Treasury
bond was flat with the yield remaining at 6.17%.

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

Shop-At-Home      SATH  FEB15C/DEC15C  $1.12   debit  calendar
Adobe Systems     ADBE  JAN80C/DEC85C  $14.50  debit  LEAPS/CC's
Proctor & Gamble  PG    JAN100C/D100C  $18.50  debit  LEAPS/CC's

Our new plays were an active group during the double-witching
session of futures and options expirations. All three issues
fell at the open with PG moving the furthest. Within twenty
minutes, the stock traded down $1.31 and the suggested target
was easily achieved. ADBE traded in a smaller range during the
morning session and was relatively stable throughout the day.
There were numerous times when the observed quotes were within
$0.25 of our target (on a simultaneous basis) and with a $15
position, the relatively small difference should have been
easily overcome. SATH performed no better than our other new
issues, falling quickly to the $12.50 range. We adjusted our
target $0.06 lower and the spread traded near that price at
various times during the day.

Portfolio plays:

Friday's volatile activity capped an incredible month for the
Spreads/Combos portfolio and the main section (calls/puts) of
the OI newsletter as well. The technology sector continued to
dominate the market with investors flocking to the large-cap
issues after Hewlett-Packard's (HWP) incredible $17 rally on
Thursday. International Business Machines (IBM) picked up the
momentum today, jumping $7 on one analyst's comments that the
computer maker's PC unit should return to profitability this
quarter. Favorable earnings were behind many of the rallies
earlier in the month and today's big winner was Nvidia (NVDA).
The stock priced jumped $7 after the maker of graphics chips
reported better-than-expected third-quarter income. Revenues
almost doubled, climbing to $97 million from just $52 million
a year ago. They also beat the consensus analyst estimate by
$0.03 a share. Our bullish debit spread has moved almost $20
in-the-money since the play was offered two weeks ago. Aware
(AWRE) was the other big mover in the mid-cap group, climbing
$4.31 to close near an all-time-high at $49. The only option
available (to remain in the bullish January position) was a
roll-up to the Dec-$40 call for a debit of $4. The remaining
position (JAN30C/DEC40C) would have a cost basis of $8.25.

Much of today's activity centered on the final adjustments
for the (short) November positions. The most exciting issue
was Computer Associates (CA). The stock rose almost $5 after
Warburg Dillon Read initiated coverage of the company with a
"buy" rating and a target price of $75. The favorable chart
and a breakout above the old trading range $60 dictated that
we move to a bullish outlook in the LEAPS/CC's play. Johnson
& Johnson (JNJ) required a move to December and with the stock
comfortably established near the $100 mark, we decided to stay
neutral, rolling forward to the DEC-$100 strike with a $1.75
credit. Toys-R-Us (TOY) cooperated nicely with our adjustment
to December, finishing just below the short option at $17.50.
The credit for the move to DEC-$17.50 calls was $1.00. Other
stocks that were on our hit list included Echelon (ELON) and
Micron (MUEI). ELON required a buy-to-close at the $10 strike
with a $1.12 credit for next month's options and the DEC-$12.50
calls on MUEI were offered at $0.50 during morning trading.

Two of our best volatility plays; Monsanto (MTC) and C.R. Bard
(BCR) moved into profitable territory today as the sold (short)
November options expired worthless. Monsanto was one of the top
plays of the month returning 40% profit in less than two weeks.  
Aggressive traders may have chosen to sell the December options
against the current long position (JAN-$50 calls) to reduce the
cost basis. Our choice was simply to close the January options
for market value ($2.75) at the end of the session (and we will
track the spread with both outcomes). Our remaining position in
C.R. Bard was worth $2.25 at the close, a $0.38 profit on $1.88
invested. Excite@Home (ATHM) rallied to a blazing finish, ending
the week up $7.25 and closing at maximum profit in both of our
bullish spreads. Unfortunately, we were unable to post the most
recent gains, having exited (and rolled forward) our positions
on Thursday.

One of Friday's losers was 3dfx (TDFX). The stock price slumped
$1.38 after the company announced quarterly results that failed
to impress investors. The company lost money on operations and
their entry into the board manufacturing business now appears to
be an impediment to success. The neutral calendar spread can be
closed for a small profit however, if you still have hope in the
future outcome of the company's plan, the current long (Mar-$10) 
position has relatively little downside at a cost of only $0.75.
We are also closing one of long-term positions that has yet to
perform as expected. The Limited (LTD) has failed to recover in
the recent market rally and we have decided to recommend an exit
of the remaining position.
Questions & comments on spreads/combos to ray@OptionInvestor.com


ATHM - Excite@Home  $51.31     *** Bandwidth Giant ***

Excite@Home is a global media company offering media services
through Excite (www.excite.com) and broadband subscription
services. A subsidiary, MatchLogic (www.matchlogic.com) offers
marketers industry leading digital advertising capabilities
including media production, email services, user profiling and
targeting, database analysis, and management all integrated in
a complete solutions package. Prior to the excite merger, ATHM
was a leading provider of Internet services to consumers and
businesses over the cable television infrastructure. The @Home
service, allows residential subscribers to connect their PC's
via cable modems to the company's high-speed parallel Internet.
ATHM currently has 72 million cable homes in the consumer base
to deliver its vision of new age personalized content.

Excite@Home rallied last week after the Federal Communications
Commission ruled that the large regional telephone companies
must now share their existing phone lines with companies that
sell digital subscriber line equipment exclusively. Previously,
consumers who wanted DSL service from an independent supplier
needed a second data line added. They now will be entitled to
share the already existing copper lines. The decision reflects
the FCC's stance on fair bandwidth competition, giving the
consumer a choice of high-speed Internet providers.

Excite@Home is also planning the use of wireless transmission
boxes to shrink installation costs and give the customer high
speed Internet access regardless of the location of the cable
connection in their home. The boxes plug into a cable line and
send signals to a television or PC. Customers would be able to
buy the cable boxes in retail stores, reducing the installation
time. The wireless technology is expected to be available next

The company is closely followed and Friday's break-out should
bring a number of new upgrades. The current list of October's
recommendations (six "strong buys") includes: Schroder & Co.
reiterating a BUY with a target of $55; Jefferies, initiating
coverage with a BUY, target $57; Bear Stearns reiterating BUY,
after ATHM beats 3rd quarter revenue and subscriber estimates;
Deutsche Banc Alex Brown reiterating BUY, subscriber growth and
Ad revenue highlight solid quarter with increased estimates for
2000; Hambrecht & Quist reiterating BUY, on 220,000 subscribers
versus a 160,000 estimate in the quarter; Prudential Securities
reiterating STRONG BUY, with accelerating subscriber growth and
higher revenues. Keep in mind these were posted before the most
recent FCC news and the technical change in character.

We rate this issue as one of the better short-term investments
and the excellent option premiums will allow us to participate
in the new trend with favorable, limited-risk spread positions.

PLAY (conservative - bullish/debit spread):

BUY  CALL DEC-35 AHQ-LG OI=1096 A=$16.88
SELL CALL DEC-45 AHQ-LI OI=4082 B=$8.12
INITIAL NET DEBIT TARGET=$8.62 ROI(max)=42% B/E=$43.62

- or -

PLAY (aggressive - bullish/diagonal spread):

BUY  CALL JAN-37.50 AHQ-AS OI=347  A=$15.62
SELL CALL DEC-55.00 AHQ-LK OI=2511 B=$3.25

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


UIS - Unisys  $29.25     *** On The Rebound? ***

Unisys is a major supplier of information services and solutions
on a worldwide basis. Through its business units; Information
Services, Computer Systems, and Global Customer Services, Unisys
provides systems and solutions designed to enhance productivity,
competitiveness and responsiveness of its clients. They operate
mainly in the information services and systems segment providing
solutions that can help clients with technology, improving the
performance of their business-critical systems.

Shares of Unisys have suffered recently, losing half their value
in a severe October plunge that followed the most recent earnings
report. UIS beat analyst estimates by $0.07 a share in the third 
quarter, but its shares plunged $20 because total sales improved
only 4% compared to the year-ago quarter. Making matters worse,
Unisys said revenue growth will be sluggish in the fourth quarter
though it will likely meet the earnings estimates. Lawyers moved
quickly to avenge shareholders losses, filing complaints of false
claims and reckless misrepresentations and omissions of material
facts. The litigants contend that, as a result of this wrongful
conduct, the price of Unisys common stock traded at artificially 
inflated levels.

The lawsuits will go on for years but the important issue is that
UIS is getting back on track. Thursday they announced initiatives
to focus worldwide sales and services on delivering a wide array
of targeted Unisys e-@ction Solutions. The plan will enhance the
way the company serves its customers and capitalize on the market 
opportunities presented by the acceleration of E-commerce. Morgan 
Stanley Dean Witter favors the new outlook and the broker raised
its rating to "outperform" with a target price of $37.

Here are the current earnings estimates and analyst ratings:

Upcoming Earnings - 1/14/00  Quarterly EPS Estimates - 0.45
Last Qtr Surprise - 11%      Previous Qtr. Surprise  - 15%
Long-Term Growth  - 18%      Analyst Recommendations - 6,5,4,0,0

We favor this issue from a conservatively bullish viewpoint and
will participate in the rebound with an ITM diagonal spread. The
position has favorable short-term potential (if the stock moves
quickly through the sold strike) and also allows for reasonable
consolidation during the recovery.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL APR-22.50 UIS-DX OI=425  A=$8.75
SELL CALL DEC-30.00 UIS-LF OI=1426 B=$1.75

For those of you that favor the short-term trend, there is a
small disparity in the front-month (ITM) options. Aggressive
traders only - not a portfolio play.
PLAY (aggressive - bullish/debit spread):

BUY  CALL DEC-25.00 UIS-LE OI=3706 A=$4.88
SELL CALL DEC-27.50 UIS-LY OI=0    B=$2.93
INITIAL NET DEBIT TARGET=$1.88 ROI(max)=32% B/E=$26.88

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


AWEB  - AutoWeb.com  $9.68     *** Internet Speculation *** 

Autoweb.com is a leading consumer automotive Internet service.
With an extensive collection of automotive related community,
content and commerce offerings, Autoweb.com guides consumers
through every stage of vehicle ownership from browsing and
buying, to enjoying, maintaining or selling. As a trusted
intermediary, the Autoweb.com process connects mass market
consumers to buying alternatives through the most extensive
network of Member Dealers and other commerce partners, and
ensures the consumer experience is faster, better and easier.
A number of partnerships announced by Autoweb.com in the last
couple of weeks have bolstered the company's initiatives to
increase growth through alliances and acquisitions. AWEB has
recently signed an agreement with Infiniti, a luxury division
of Nissan North America. The deal implements and executes a 
comprehensive, joint sales and marketing program allowing the
Infiniti network of dealers to join Autoweb.com's 5,000 Member
Dealers. The plan represents the first time that an automobile 
manufacturer has aligned with an Internet company to promote
the membership of its dealers nationwide. Autoweb.com has also
signed agreements with Intuit's InsureMarket services and with
GE Financial Assurance Auto Warranty Services to offer discount
online vehicle service contracts.

The post-IPO sell off appears to have finally abated and the
issue is forming a base near $9. An upward move from this area
is likely in the next few months and we will construct a spread
to take advantage of any future rally. The favorable disparity
in option premiums allows us to open this play with a small
theoretical edge. Those of you with a neutral - bullish outlook
can sell the DEC-$10 call for a lower cost-basis (and slightly
greater upside risk).     

PLAY (speculative - bullish/diagonal spread):

BUY  CALL MAY-10.00 UWB-EB OI=15 A=$2.93
SELL CALL DEC-12.50 UWB-LV OI=80 B=$0.62

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


ITVU - InterVu  $64.50     *** Internet Video ***

InterVU is a specialized service company seeking to establish
a leadership position in the Internet video delivery market.
The company utilizes a proprietary software system for routing
and distributing high quality video over the Internet at rapid
speeds. Their unique system moves the video delivery mechanism
to a network of specialized servers strategically situated on
the Internet. 

In the last quarter, ITVU reported record levels of revenues,
customer growth, events and content stored on their network. In
the past three months, revenues have doubled and their direct
customer base has grown 55%. This favorable performance is the
result of the rapid adoption of streaming media as a viable
entertainment medium and a strategic business tool.

Intervu continues to focus on the growing opportunities in the 
entertainment and business communications segments and recently,
Time Warner's CNN News Group announced plans to buy $20 million
of the company as part of a three-year agreement. InterVu will
provide its services for stations of TNT and the TBS along with
three years of on-air/online advertising for CNN's properties.

This play originated in the weekly research for the Naked-Puts
section. The small disparity in the put-option premiums offers
a favorable edge in a limited risk position for those who are
bullish on the issue.
PLAY (conservative - bullish/credit spread):

BUY  PUT DEC-40 QYU-XH OI=44 A=$0.56
SELL PUT DEC-45 QYU-XI OI=35 B=$1.25

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


The Option Investor Newsletter             11-21-99  
Sunday                        6 of 6


The Mentality Of The Market...

When successful traders discuss their common traits, you will 
often hear how important it is to understand the fundamentals of
technical analysis and basic market timing. Unfortunately, new 
investors are so overwhelmed by the incredible number of chart-
patterns and indicators, they overlook the most common rules for
consistent profits.

The dilemma facing many investors is simple; they want to own 
good stocks but yet they are afraid to buy at the highs. The 
emotion of the moment generally dictates the issue, causing the 
majority of typical traders to enter new positions near the top, 
when the stock is finishing the rally. At that point, everybody 
who is bullish on the issue already has it and there is no one 
left to support the price. The professionals are the first to 
exit, quietly closing out their positions while the public is
overwhelmed by glowing earnings reports and bullish forecasts. As
the stock struggles to hold its gains, trading volume drifts lower
and the three major groups trading the issue; the technical group,
the fundamentalists and the public, compete to determine the next
trend. When the historical pattern exhibits the first signs of
failure, the technical traders begin to sell in earnest. Analysts
and brokerages raise their targets to buttress the price, but when 
the issue no longer responds to good news, the outcome is clear. 
Soon the public becomes nervous and as the correction takes shape,
closing orders increase in number. The fundamentalist is the last
to go, generally after a full-scale downtrend is in effect. With 
this type of psychological analysis, it obvious how human nature 
determines our actions in the stock market. Hope leads to fear,
and then to panic, and the few that remain through it all (the 
amateurs), eventually unload their positions for significant

(Continued in the Naked-Puts section..)

SUMMARY OF PREVIOUS PICKS  (Final Summary for November)

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

CYOE    5.56   5.19   NOV   5.00  1.06  *$  0.50  11.1%  16.1%
SATH   11.06  12.38   NOV  10.00  2.31  *$  1.25  14.3%  12.4%
LIPO    7.56  12.50   NOV   7.50  0.75  *$  0.69  10.1%  11.0%
FLAS    9.63  10.75   NOV   7.50  2.63  *$  0.50   7.1%  10.3%
EGHT    5.00   4.81   NOV   5.00  0.88   $  0.69  16.7%   9.1%
MRVT   11.38  11.00   NOV  10.00  2.13  *$  0.75   8.1%   8.8%
ITIG    8.06  15.88   NOV   7.50  1.25  *$  0.69  10.1%   8.8%
LTXX   15.19  19.69   NOV  15.00  1.25  *$  1.06   7.6%   8.3%
ZIXI   33.00  41.50   NOV  25.00  9.88  *$  1.88   8.1%   7.1%
COOL    8.53  13.13   NOV   7.50  1.88  *$  0.85  12.8%   6.9%
CNCX   26.50  32.13   NOV  22.50  5.25  *$  1.25   5.9%   6.4%
SFSK    8.44  12.38   NOV   7.50  1.25  *$  0.31   4.3%   6.2%
RRRR   11.44  30.88   NOV  10.00  2.25  *$  0.81   8.8%   5.5%
PILT   12.69  21.13   NOV  10.00  3.38  *$  0.69   7.4%   5.4%
NPIX   23.25  37.25   NOV  17.50  6.75  *$  1.00   6.1%   5.3%
COOL    9.06  13.13   NOV   7.50  2.06  *$  0.50   7.1%   5.2%
BNYN    8.72  13.88   NOV   7.50  1.63  *$  0.41   5.8%   5.0%
ASMI    8.50  16.00   NOV   7.50  1.56  *$  0.56   8.1%   5.0%
ELON    8.91  11.00   NOV   7.50  1.88  *$  0.47   6.7%   4.8%
PAIR   13.44  17.88   NOV  12.50  1.81  *$  0.87   7.5%   4.6%
ABTL   15.13  14.75   NOV  12.50  3.13  *$  0.50   4.2%   4.5%
DRYR   17.13  17.00   NOV  15.00  3.13  *$  1.00   7.1%   4.4%
MAPX    9.06   8.56   NOV   7.50  2.06  *$  0.50   7.1%   4.4%
EGGS    9.38  13.50   NOV   7.50  2.31  *$  0.43   6.1%   4.4%
NPIX   23.00  37.25   NOV  17.50  6.50  *$  1.00   6.1%   4.4%
GBLX   35.38  45.44   NOV  30.00  6.75  *$  1.37   4.8%   4.2%
NVDA   22.63  42.88   NOV  20.00  4.62  *$  1.99  11.0%   4.0%
NPNT   22.13  36.63   NOV  17.50  5.25  *$  0.62   3.7%   4.0%
IRF    17.44  21.75   NOV  15.00  3.00  *$  0.56   3.9%   3.4%
BNBN   20.00  18.38   NOV  17.50  3.38  *$  0.88   5.3%   3.3%
PRGY   21.75  32.13   NOV  17.50  4.88  *$  0.63   3.7%   3.2%
LCBM*  14.06  12.06   NOV  12.50  2.50   $  0.50   4.3%   2.7%
CS     16.69  23.00   NOV  15.00  2.38  *$  0.69   4.8%   2.1%
NEM    23.25  21.81   NOV  22.50  2.25   $  0.81   3.9%   2.1%
LCBM*  14.88  12.06   NOV  12.50  3.00   $  0.18   1.5%   1.1%
PILL   13.88  11.00   NOV  12.50  2.75   $ -0.13  -1.2%   0.0%
PILL   14.88  11.00   NOV  12.50  2.88   $ -1.00  -8.3%   0.0%

FSII   10.44  10.06   DEC  10.00  1.81  *$  1.37  15.9%  13.8%
ITIG   10.00  15.88   DEC  10.00  1.25  *$  1.25  14.3%   8.9%
ABTE   10.75  10.19   DEC  10.00  1.63  *$  0.88   9.6%   8.4%
ALGO   15.25  13.88   DEC  12.50  3.75  *$  1.00   8.7%   7.6%
WSTL    8.00  10.81   DEC   7.50  1.06  *$  0.56   8.1%   7.0%
BTOB   18.38  20.81   DEC  15.00  4.63  *$  1.25   9.1%   6.6%
AND     8.38   7.56   DEC   7.50  1.38  *$  0.50   7.1%   6.2%
CYCH    8.38  11.81   DEC   7.50  1.44  *$  0.56   8.1%   5.8%
CRUS   13.94  14.38   DEC  12.50  2.19  *$  0.75   6.4%   5.5%
PILT   18.50  21.13   DEC  15.00  4.38  *$  0.88   6.2%   5.4%
RRRR   14.75  30.88   DEC  12.50  3.25  *$  1.00   8.7%   5.4%
WAVX   13.19  15.25   DEC  10.00  3.88  *$  0.69   7.4%   5.4%
DRIV   22.75  29.88   DEC  20.00  4.25  *$  1.50   8.1%   5.0%
DIGE   14.44  17.69   DEC  12.50  2.75  *$  0.81   6.9%   5.0%
PILT   15.94  21.13   DEC  12.50  4.25  *$  0.81   6.9%   5.0%
PRGY   25.38  32.13   DEC  22.50  4.50  *$  1.62   7.8%   4.8%
LTXX   16.00  19.69   DEC  15.00  2.06  *$  1.06   7.6%   4.7%
TOPP    9.81  10.63   DEC   7.50  2.75  *$  0.44   6.2%   3.9%
DGII   13.56  14.88   DEC  12.50  1.69  *$  0.63   5.3%   3.8%
JDAS   11.63  14.75   DEC  10.00  2.13  *$  0.50   5.3%   3.8%

Ticker* = Position closed early for profit.
*$ = Stock price is above the sold striking price.


Lifecore Biomedical (LCBM) managed to stay above the sold strike,
though we show a lower return due to closing the position early.
Coyote Network (CYOE) traded momentarily below $5 but did manage
to finish the month above the sold strike. 8x8 Inc. (EGHT) has
moved back above its 150 dma. Though December strikes are not yet
available, a FEB-$5 call is available for $0.75. Newmont Mining
(NEM) appears to be strengthening with the DEC-$20 call offering
a credit of $2.62. Rolling down to the DEC-$10 call ($1.56) is 
an option, but with Proxymed's (PILL) recent technical weakness,
it may not be enough to make the play favorable.

November positions previously closed were Youbet.Com Inc. (UBET)
and Beyond.Com Corp. (BYND).

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

Sequenced by Return Not Called

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

MESG   17.63  DEC 15.00  MUG LC  3.63  418   14.00   7.1%   7.1%
SATH   12.44  DEC 10.00  SQR LB  3.00  558    9.44   5.9%   5.9%
MOGN   13.44  DEC 12.50  QOG LV  1.63  265   11.81   5.8%   5.8%
FLAS   10.75  DEC  7.50  UFL LU  3.63  94     7.12   5.3%   5.3%
ICGX   20.50  DEC 17.50  QIG LW  3.88  518   16.62   5.3%   5.3%
BEAM   20.13  DEC 17.50  BAQ LW  3.38  1706  16.75   4.5%   4.5%
IVIL   28.38  DEC 22.50  IIU LX  6.75  76    21.63   4.0%   4.0%

Company Descriptions

BEAM - Summit Technology  $20.13  *** FDA Approval ***

Summit Technology and its subsidiaries consist of two operating 
segments: Laser vision correction which includes manufacturing,
selling and servicing laser systems and related products to 
correct vision disorders and collecting per procedure license 
fees from users of its systems; and Contact lenses and related
products which are sold via mail order through its wholly-owned 
subsidiary, Lens Express. Recent FDA approval of Summit's Apex 
Plus Excimer Laser Workstation (for the treatment of hyperopia)
and favorable earnings resulted in an upside exit out of a four-
month base. We favor selling the strike price within this recent
consolidation, as it is now support.

DEC 17.50 BAQ LW Bid=3.38 OI=1706 CB=16.75 RC=4.5% RNC=4.5%

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


FLAS - FlashNet Communications  $10.75 *** PRGY Merger ***

FlashNet is a nationwide provider of consumer Internet access
and business services, offering high speed Internet access and
related services that enable customers to outsource Internet 
and electronic commerce activities. Well the news is out..
after record revenues for this quarter, FlashNet entered an
agreement to merge with Prodigy (PRGY). This ties Flashnet's
share price to Prodigy (which is in a strong stage-two climb).
FlashNet also has support near our cost basis (just in case
the deal falls through).

DEC 7.50 UFL LU Bid=3.63 OI=94 CB=7.12 RC=5.3% RNC=5.3%

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


ICGX - ICG Communications  $20.50 *** Stage I ***

ICG Communications is one of the nation's fastest-growing 
providers of broadband services to the ISP community. Through 
its nationwide communications network that serves more than
700 cities, ICG provides access for approximately 10% of the
nation's dial-up Internet traffic. In addition, ICG provides 
high-quality telecom services, including local, long distance 
and data communications, to businesses nationwide, as well as 
direct connectivity to interexchange carriers. The downgrade
after earnings near the end of October appears to have been a
buying opportunity. Though ICG reported a greater loss, access
lines increased sequentially by 18% and revenues increased 64%.
We favor a cost basis within support, now that the share price
has moved back above its 150 dma (near $19) on heavy volume.

DEC 17.50 QIG LW Bid=3.88 OI=518 CB=16.62 RC=5.3% RNC=5.3%

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


IVIL - iVillage Inc.  $28.38  *** Technicals Only ***

iVillage provides an easy-to-use, comprehensive online network 
of sites tailored to the interests and needs of women using the
Internet. iVillage.com consists of 15 content specific channels 
organized by subject matter and several shopping areas. This 
quarter's earnings showed a 30% increase in membership and 150%
increase in revenue from last year. Wit Capital has started
coverage on iVillage with an Outperform, stating a price target
of $31 to $35. Favorable speculation on an improving technical 
picture: Buying pressure reversal; successful test of $22.50 
intraday lows in November (short term "W"); a rally on increased
volume. We prefer a conservative entry below the November lows, 
taking advantage of the overpriced option premium.

DEC 22.50 IIU LX Bid=6.75 OI=76 CB=21.63 RC=4.0% RNC=4.0%

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


MESG - MessageMedia  $17.63 *** Revenues Up 750% ***

MessageMedia is a leading provider of e-mail-based customer 
relationship management and direct marketing services. MESG 
offers a comprehensive suite of outsource messaging services 
for information delivery, e-commerce services, permission-based
direct marketing, ongoing customer communications and real-time
customer feedback solutions using industry standard Internet 
protocols. A strong earnings report at the end of October
initiated the current rally. The launch of SupportView, a real-
time web-based customer survey and decision support system 
spurred a price jump on Thursday. MESG's overall uptrend has
remained intact with the July high becoming the next target.

DEC 15.00 MUG LC Bid=3.63 OI=418 CB=14.00 RC=7.1% RNC=7.1%

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


MOGN - MGI Pharma  $13.44   *** Long-Term Play ***

MGI Pharma is a pharmaceutical company that acquires, develops 
and markets differentiated specialty pharmaceutical products for 
therapeutic markets of unmet needs. MOGN's product portfolio is 
comprised of products that address specific needs in the fields
of cancer and rheumatology. MOGN's profitability continued this
quarter with a 30% increase in revenues due primarily to growth
in sales of Salagen® Tablets. MOGN's is conducting three phase
II human clinical trials, studying irofulven (A World Cancer
Conference topic) and its effectiveness on prostate, pancreatic
and ovarian cancers. Technicals reflect a steady 2-year uptrend
on a profitable company with potential products under research.

DEC 12.50 QOG LV Bid=1.63 OI=265 CB=11.81 RC=5.8% RNC=5.8%

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


SATH - Shop At Home, Inc.  $12.44 *** New Uptrend? ***

SATH sells specialty consumer products, primarily collectibles, 
through interactive electronic media including broadcast, cable 
and satellite television and, increasingly, over the Internet. 
Shop At Home Network reaches over 56 million unique cable and 
satellite households and is the Nation's 15th largest television 
broadcaster with stations in San Francisco, Boston, Houston, 
Cleveland, Raleigh and Bridgeport, which is licensed to the New 
York market. Shop At Home reported record revenues this quarter
and on Friday announced a new weekday sales record. The technical
picture has turned bullish as Shop At Home has moved above this
Summer's consolidation (head-n-shoulders bottom?). Can a new
all-time high be far behind?

DEC 10.00 SQR LB Bid=3.00 OI=558 CB=9.44 RC=5.9% RNC=5.9%

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


Successful Stock Ownership: A Few Rules To Live By...

Here are just a few of the most common guidelines that may help
you avoid the pitfalls of stock ownership. While we can't take 
credit for these rules (many are as old as the market itself), 
it's important to use this knowledge to improve your success in 
this vicious game that is the stock market.

Before opening any position:

Check the overall market indicators for direction. Analyze the 
sector and industry in which your issue resides. Study the 
performance of similar groups and make sure it coincides with 
your outlook. Choose only those stocks with the most favorable 
technical formations. Once you have a candidate in mind, do your
homework! Know the company and the calendar; upcoming events, 
earnings dates, and scheduled announcements.
Before entering your order:

Double-check the chart! Make sure you are absolutely ready to own 
the issue at the target price. Don't buy a stock that's in a 
downtrend (Stage 4) and never open a position right after good 
news, especially if the chart shows a significant advance prior to
the announcement. Never buy a stock just because it appears cheap 
after a big sell-off. Always use simple proven techniques. Develop
target prices for potential plays and take the human factor out of
trading by using LIMIT and GTC orders. When news or events change 
the character of the play, make the necessary adjustments.

After you have established the position:

The #1 rule: Know your exit and use a mental or mechanical stop.
Stay informed by monitoring all the news and announcements 
affecting your position.  Never hold a stock in an established 
downtrend no matter how fundamentally sound the company appears
to be...(Hope is an expensive emotion).

Closing the position:

Determining when to exit a play is a matter of personal preference
and you are the only one who can decide how you will trade. The
best advice is, be consistent. If you find that you're often 
buying and selling in similar situations, something is wrong with 
your system. The most painful lesson comes when you close losing 
positions. It's very difficult to learn to exit losing plays early
but the simple fact is: There is no reason to hang on to a losing 
position when there are so many other profitable plays that deserve
your time and money. Accept your losses, learn from your mistakes 
(evaluate each one critically) then move on! Success will come when
you create a favorable balance between hard work and patience. Too
many traders give up after a few losing plays, long before they 
have time to learn (and absorb!) the various methods required for 
profitable trading.

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

SUMMARY OF PREVIOUS PICKS (Final Summary for November)

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

NPLS   15.56  18.00   NOV  12.50  0.31  *$  0.31   8.9%  19.4%
NVX     7.94   6.13   NOV   5.00  0.56  *$  0.56  26.0%  16.2%
ICIX   28.75  32.00   NOV  22.50  0.44  *$  0.44   7.1%  15.4%
DUSA   14.94  15.63   NOV  12.50  0.50  *$  0.50  12.4%  13.4%
HELX   40.31  44.38   NOV  35.00  1.00  *$  1.00   8.5%  12.3%
DRIV   22.75  29.88   NOV  20.00  0.56  *$  0.56   8.1%  11.7%
SUPG   26.56  27.94   NOV  22.50  0.75  *$  0.75  10.3%  11.1%
ENMD   24.75  24.25   NOV  20.00  0.75  *$  0.75  12.7%  11.0%
NPIX   23.00  37.25   NOV  15.00  0.81  *$  0.81  15.0%  10.8%
PRGY   21.63  32.13   NOV  17.50  0.50  *$  0.50  10.0%  10.8%
NSPK   12.44  16.38   NOV  10.00  0.44  *$  0.44  14.8%  10.7%
CPTH   61.38  77.38   NOV  45.00  0.63  *$  0.63   4.9%  10.6%
TALK   14.94  18.38   NOV  12.50  0.38  *$  0.38   9.7%  10.5%
USIX   35.00  66.25   NOV  25.00  0.75  *$  0.75   9.7%  10.5%
TFSM   49.75  50.88   NOV  40.00  0.50  *$  0.50   4.7%  10.2%
DUSA   14.38  15.63   NOV  10.00  0.44  *$  0.44  13.3%   9.6%
NPIX   23.25  37.25   NOV  15.00  0.56  *$  0.56  10.7%   9.3%
LTXX   15.56  19.69   NOV  12.50  0.38  *$  0.38  10.7%   9.3%
SUPG   24.38  27.94   NOV  20.00  0.63  *$  0.63  10.5%   9.1%
IRF    19.63  21.75   NOV  17.50  0.38  *$  0.38   6.2%   9.0%
KIDE   40.44  57.00   NOV  25.00  1.13  *$  1.13  12.3%   8.9%
NEWZ    9.47  10.75   NOV   7.50  0.31  *$  0.31  14.1%   8.7%
SPGLA  12.00  10.50   NOV  10.00  0.38  *$  0.38  11.9%   8.7%
VERT   39.75  98.94   NOV  30.00  1.25  *$  1.25  13.6%   8.4%
BNYN    9.91  13.88   NOV   7.50  0.31  *$  0.31  13.5%   8.4%
CNCX   26.50  32.13   NOV  20.00  0.44  *$  0.44   7.7%   8.3%
RMDY   43.00  38.31   NOV  35.00  0.50  *$  0.50   5.2%   7.5%
RMBS   89.38  82.13   NOV  65.00  0.63  *$  0.63   3.4%   7.4%
RMDY   29.00  38.31   NOV  22.50  0.50  *$  0.50   7.9%   6.9%
SUPG   22.50  27.94   NOV  17.50  0.56  *$  0.56  11.1%   6.9%
TALK   12.63  18.38   NOV  10.00  0.31  *$  0.31  10.9%   6.8%
NPIX   23.88  37.25   NOV  15.00  0.31  *$  0.31   6.1%   6.6%
ZOMX   34.63  38.00   NOV  25.00  0.69  *$  0.69   9.1%   6.6%
EXTR   80.31  98.06   NOV  60.00  0.75  *$  0.75   4.5%   6.5%
ZIXI   33.00  41.50   NOV  20.00  0.50  *$  0.50   7.0%   6.1%
LGE    22.44  20.38   NOV  20.00  0.56  *$  0.56   7.9%   5.7%
TUTS   34.69  46.19   NOV  25.00  0.38  *$  0.38   5.2%   5.6%
NPIX   19.13  37.25   NOV  12.50  0.38  *$  0.38   9.0%   5.6%
HRBC   17.00  17.88   NOV  12.50  0.31  *$  0.31   8.4%   5.2%
CPTH   44.19  77.38   NOV  30.00  0.56  *$  0.56   6.0%   5.2%

FLAS   10.06  10.75   DEC   7.50  0.75  *$  0.75  27.2%  19.7%
STRX    7.63   6.88   DEC   5.00  0.44  *$  0.44  22.3%  13.9%
NSPK   15.50  16.38   DEC  12.50  0.50  *$  0.50  13.5%  11.7%
BNYN   12.75  13.88   DEC  10.00  0.38  *$  0.38  13.0%  11.3%
MSGI   16.94  19.50   DEC  12.50  0.50  *$  0.50  12.9%  11.2%
COOL    9.56  13.13   DEC   7.50  0.31  *$  0.31  14.0%  10.1%
NVDA   32.00  42.88   DEC  22.50  0.75  *$  0.75  10.5%   9.1%
MLTX   16.19  28.13   DEC  12.50  0.50  *$  0.50  13.4%   8.3%
XCED   31.63  28.25   DEC  22.50  0.63  *$  0.63   9.1%   7.9%
MTSN   15.56  16.94   DEC  12.50  0.31  *$  0.31   8.9%   7.8%
IONA   21.38  32.63   DEC  15.00  0.56  *$  0.56  11.6%   7.2%
TUTS   39.69  46.19   DEC  30.00  0.81  *$  0.81   9.3%   6.7%
NPIX   37.44  37.25   DEC  20.00  0.50  *$  0.50   6.3%   5.4%
LTXX   18.56  19.69   DEC  15.00  0.31  *$  0.31   7.4%   5.4%

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


Comments and questions received on the Data Broadcasting (DBCC) 
play have prompted us to list the position as unplayable. Monday's
pre-open news of a merger with FTAM, the Financial Times group, 
left investors in a quandary with speculation on the eventual 
ownership of the issue and the value (and composition) of the 
listed options. Those traders who chose to participate (even in 
light of the announcement) were well aware that any remaining
potential related directly to the fiscal condition of the combined
business; an entirely new entity with vastly different valuations
and fundamental issues. Baxter International's buy-out of North 
American Vaccine (NVX) rescued our position just in time. Remedy 
(RMDY), which managed to stay above the $35 strike, appears ready 
to resume its uptrend. All positions managed to remain above the
sold strike. Ardent Software (ARDT) fooled us in the end (Murphy's
Law in play again), as it was previously closed, along with
Theglobe.Com (TGLO).

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

Sequenced by ROI  

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

NSPK   16.38  DEC 12.50  NNQ XV  0.50  120   12.00  13.2%
DGII   14.88  DEC 12.50  DGQ XV  0.50  10    12.00  12.3%
PILT   21.31  DEC 15.00  PTU XC  0.56  75    14.44  11.6%
ONSL   24.00  DEC 17.50  QOL XW  0.63  246   16.87  11.6%
ITVU   64.50  DEC 45.00  QYU XI  1.38  35    43.62   9.7%
CTIX   20.13  DEC 15.00  UEY XC  0.38  5     14.62   8.6%
AMTD   28.19  DEC 20.00  TQA XD  0.44  1211  19.56   7.2%
MRVC   31.00  DEC 22.50  VQX XX  0.38  0     22.12   5.8%

Company Descriptions

AMTD - Ameritrade  $28.19   *** New Partners ***

Ameritrade Holding Corporation is a pioneer in the discount and
online brokerage industry. They provide brokerage and clearing
services to self-directed individual investors and institutions.
Shares of Internet brokers T.D. Waterhouse (TWE) and Ameritrade
rallied last week after Charles Schwab (SCH) said the three will
combine to form a giant online investment bank. Together, these
three online brokers have access to more than half of all U.S.
online customers and assets. This may be the last chance to own
this one at a reasonable price, or at least get paid to try.

DEC  20.00  TQA XD  Bid=0.44  OI=1211  CB=19.56  ROI=7.2%

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


CTIX - Cheap Tickets  $20.13     *** On The Rebound! ***

Cheap Tickets is a leading retail seller of discount tickets
for domestic leisure air travel. The company sells airline
tickets through call centers, retail stores and their Internet
site; www.cheaptickets.com. They also offer a full complement
of regularly published fares, affording customers a breadth of
choice in leisure travel at attractive prices including cruise
tickets, auto rentals and hotel reservations. Reported record
gross bookings in a favorable earnings announcement last month.
Recently authorized a $20 million share buy-back and heavy
accumulation is evident in the short-term chart history.

DEC  15.00  UEY XC  Bid=0.38  OI=5  CB=$14.62  ROI=8.6%

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


DGII - Digi International  $14.88   *** Own This One! ***

Digi International is a leading ISO 9001-compliant provider of
data communications hardware and software delivering seamless
connectivity solutions for open systems, server-based remote
access, and LAN markets. DGII markets its products through an
international network of distributors and resellers, system
integrators, and original equipment manufacturers. Thursday's
earnings report of $0.18 a share topped First Call's estimate
of $0.13, courtesy of improving gross margins. DIGI expects to
ramp-up its new RAS product line to fuel growth in the future.

DEC  12.50  DGQ XV  Bid=0.50  OI=10  CB=12.00  ROI=12.3%

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


ITVU - Intervu  $64.50     *** Internet Video ***

InterVU is a specialized service company seeking to establish
a leadership position in the Internet video delivery market.
The company utilizes a proprietary software system for routing
and distributing high quality video over the Internet at rapid
speeds. Their unique system moves the video delivery mechanism
to a network of specialized servers strategically situated on
the Internet. Time Warner's CNN News Group plans to buy $20
million in InterVu as part of a three-year agreement, in which
ITVU will provide its services for stations of TNT and the TBS.
A great chart history with recent support near the cost basis.

DEC  45.00  QYU XI  Bid=1.25  OI=35  CB=43.75  ROI=8.8%

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


MRVC - MRV Communications  $31.00   *** New Technology ***

MRV Communications designs, manufactures, markets and sells 
semiconductor laser diodes, light emitting diodes and fiber
optic transmitting and receiving modules for the transmission
of large amounts of information at high speeds and over long
distances. They company integrates these devices into other
components that are sold to manufacturers in the fiber optic
market. The company is developing a group of new fiber optic
products and Gruntal recently raised their target price to
$27 with a "market outperform" rating.

DEC  22.50  VQX XX  Bid=0.38  OI=0  CB=22.12  ROI=5.8%

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


NSPK - Netspeak  $16.38   *** A Second Opportunity ***

NetSpeak develops, markets, licenses, and supports a suite of
intelligent software modules which enable real-time, concurrent
interactive voice, video and data transmission over packetized
data networks such as the Internet and local-area and wide-area
networks. In addition to marketing its technology, services and
systems to new strategic partners, NSPK has begun to sell those
products directly to end-users. Recent upside earnings surprise
and a solid technical history with a 52-week high on Thursday.

DEC  12.50  NNQ XV  Bid=0.50  OI=120  CB=12.00  ROI=13.2%

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


ONSL - Onsale  $24.00   *** Egghead Deal Approved ***

Onsale is an electronic retailer pioneering a new sales format,
the interactive 24-hour online auction, designed to serve as an
efficient and entertaining marketing channel. They specialize in
selling computers, consumer electronics and wide range of other
products over the Internet. Egghead (EGSS) shareholders approved
the merger with ONSL and the new company will have a much larger
stake in the online auction industry. A recent reversal in the
technical outlook with support above the cost-basis.

DEC  17.50  QOL XW  Bid=0.63  OI=246  CB=16.87  ROI=11.6%

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


PILT - Pilot Network Services  $21.31   *** Still Going! ***	

Pilot Network Services, the Security Utility pioneer, is the only 
e-business network service provider of highly secure subscription
based e-business services. For companies of all sizes, in every 
industry, Pilot enables secure e-business by providing a wide 
range of services with built-in security to protect enterprise 
networks. Pilot recently announced earnings with revenues up 89%
and reached an agreement with Greyrock Capital for $8 million in
financing. Very strong technically and the recent break-out has
left us few entry opportunities. This is a conservative attempt
to profit from the upward movement.

DEC  15.00  PTU XC  Bid=0.56  OI=75  CB=14.44  ROI=11.6%

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



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