Option Investor

Daily Newsletter, Sunday, 11/28/1999

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The Option Investor Newsletter            Sunday  11-28-99  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 11-26         WE 11-19         WE 11-12         WE 11-05
DOW     10988.91 - 14.98 11003.89 +234.57 10769.32 + 64.84  - 25.38
Nasdaq   3447.81 + 78.56  3369.25 +148.10  3221.15 +119.95  +135.86
S&P-100   753.57 +  4.27   749.30 + 18.21   731.09 + 12.29  +  1.77
S&P-500  1416.62 -  5.38  1422.00 + 25.96  1396.04 + 25.84  +  7.30
RUT       458.94 -  2.33   461.27 + 11.58   449.69 +  7.28  + 13.77
TRAN     2909.16 - 67.34  2976.50 -113.07  3089.57 + 85.58  - 54.99
VIX        22.95 +  3.32    19.63 -  2.05    21.68 -   .38  -  2.50
Put/Call     .42              .47              .51

Bonds starting to weigh heavily on the markets.

Don't look now but the stock market has not really disconnected 
itself from the bond market as it had appeared in the last two
weeks. The Personal Income and Spending numbers for October were
announced Friday morning and Alan Greenspan probably dropped his
coffee cup at the breakfast table. The October Personal Income
number came in at +1.3%, more than double what analysts had
expected and the largest number in over five years. The Personal 
Spending figures also doubled estimates at +.6% for October and
September was revised upward to +.5%. The bond market, which had
already been seeing yields creep upward, closed Friday with a 6.23%
yield. Things are looking great for the economy but bad for the
Fed outlook. Next week we have the important NAPM Index on Wednesday
which will probably show some higher prices as a result of the oil
price gains. On Friday we have the November Jobs Report and analysts
expectations are for a possible unemployment number under 4%. This
would be very bad and could prompt the Fed to reconsider their 
"no more rate hikes this year" posture. Bond futures are already
pricing in a hike for the February meeting. The strong economy
is continuing to surprise everyone with its continued gains. The
Fed does not like surprises and always has the last laugh.


The Dow has been marking time in the 11000-11050 range for over
a week after the big +500 points move earlier in the month. 
Several times it has closed exactly at the 11,000 bottom. The 
longer we stay in this range the more we will build stronger
support and weaken the overhead resistance. The risk is a 
breakout under 11,000 which could have us trading back down in 
our previous range under 10750. I am not expecting this but
it is a possible scenario. Monday should be the key. 


The Nasdaq has had such a strong run with very little profit
taking that we should be on the lookout for a pause to refresh
before starting the December rally. I put a retracement graph
on the chart above so you could see the various levels of
support. When you look at retracements you are looking at
levels of profit taking on the gains made from the start of the
rally. I used 2700 as the start in this example. That gives us
over +750 points. A -15% retracement would put us back at 3358,
a -25% at 3284 and -40% at 3173. Short of a serious news event
or the Fed spontaneously announcing a new rate hike, the odds
of a retracement over -15% are very slim and over -25% almost
non-existient. Either number would only set us back to the 
levels we were at a little over a week ago.


One of the more alarming charts from Friday was the VIX. After
hovering in the dangerous ranges between 22-19 for over a week,
it gapped up on Friday at the open and then spiked almost 1.5
points in just the last 20 min of trading. There is only one
thing that could cause this spike and it is a large change in
the ratio of puts and calls on the OEX. When everyone is bullish
and buying calls the VIX drops under 20 like it did last week.
This is a bearish sign that the market has become lopsided in
favor of the bulls. When the bulls start buying puts to either
protect their long positions or for speculation because they
feel a correction is imminent the VIX will start moving up. So
based on Friday's closing move, either a lot of people are
expecting a correction on Monday or they bought "put" insurance
on their long positions just in case. My experience is telling
me that there are a lot of traders expecting the market to 
backup before moving forward. This does not make them right. It
just means they voted with their wallets which carries a lot
more weight than water cooler chit chat. 

Everyone knew that Friday would be a light day but the NYSE only
managed 312 million shares to the Nasdaq's 721 mln. NYSE advancers
beat decliners for a change but only slightly. The decliners had
won the last six days. Actually in 10 of the last 15 days the
decliners had the edge. Market breadth has been deteriorating
steadily. You will not see the Dow mount any kind of serious 
rally with advance/decline heading south like you see in this 
chart. Also the Dow has pushed over 11000 five times in the 
last seven months and has failed to hold it every time. 


Much of the recent Nasdaq rally in the last two weeks has been 
due to shorts covering not positive earnings momentum. There is 
currently only 2.04 days of short interest on the Nasdaq compared 
to 2.29 in ths same period of last year. Everybody who shorted 
QCOM, JDSU, RHAT and company recently have been paying a stiff 
educational premium to learn that "the trend is your friend." 
Never bet against the trend. The stock news was very light on 
Friday with the same old story, "Nasdaq sets another new record" 
leading the way.

The outlook for next week is a toss up. The bullish sentiment 
by the retail investor, as well as the institutional investor, 
should keep any possible correction reasonable. The orders are 
still there, just under the market, and any dip is likely to 
meet strong support. We are due for a pullback how far depends 
on the Y2K fear still lingering on investors minds. This has 
not shown any impact recently but the closer we get the more 
it becomes a possible problem. The wildcards for the week are 
the possible fallout from an inflation strong NAPM report on 
Wednesday and the non-farm payrolls report on Friday. We could 
continue to see the Dow weaker before both of these numbers 
but any serious pull back on the Nasdaq is only going to be 
seen as a buying opportunity. There are still some analysts
around that are calling for the Dow to trade under 10,000 
before December is over. If this comes to pass, back up the
truck and load up because you may never see it again.

Y2K Renewal Offer!!!

Long time readers know that each December we offer our 
subscribers an extra value package as a thank you for their 
support. The package this year contains (2) of our Y2K Option 
Expiration Calendar Mousepads and the Millennium Edition of 
the Stock Traders Almanac, a $50 value.  You will receive two 
mousepads, one for home and another for the office so you have 
no excuse for not knowing those expiration dates and strike 
price codes. We are also giving away the Millennium Edition 
of the Stock Traders Almanac by Yale Hirsch. This almanac has 
thousands of facts, tips and hard information that a trader 
cannot live without. Just one of these facts can pay for the 
newsletter subscription for the entire year and there are 
thousands of them.  This is the serious stock traders bible. 

And the offer is.....Renew your subscription in December at the 
annual rate and receive (2) Y2K Option Expiration Calendar Mousepads 
and the Millenniun Edition of the almanac for FREE. This package 
is a $50 value. Added to the savings you receive on an annual 
subscription over the monthly rate and it is like getting over 
four months of the newsletter for free. A $180 value. The supply 
of almanacs is limited so don't delay. Click here for more info.

This weekends newsletter is packed full of great info. We have
five articles from active traders in both Traders Corner and
Womans World. Check out the many lessons you can learn without 
the expense of losing your own money. 

My educational article this week is called "Exit Strategies,
Escaping with a Profit." This is the fourth in the series. 
Look for it on the website.

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

Jim Brown


Due to a heavy office schedule last week I only managed 
plays on three stocks but they are all looking like winners. 
I played a conservative play (you will love this) on QCOM 
and two long calls on SUNW and BVSN.

QCOM - The play of the week, again!

You may recall from last week that I day traded QCOM all 
week for a strong but stressful win. This week I took a more 
conservative approach. Before the open on Monday QCOM was at
$365. I am expecting QCOM to be over $400 soon. That is a
$35 move. Just buying the stock would give you a bad case
of nerves with $25 daily price swings. Since QCOM has a
4:1 split announced for December and the China WTO deal
almost assures CDMA for China, there is almost no possibility
of QCOM not being over $400 by Dec-17th options expiration.
My conservative play was to sell the Dec-400 puts for $54.25
on Monday. If QCOM is over $400 in three weeks then I have
a $55 profit. If I had bought the stock and held to $400
then I would only have a $35 profit. (Yes, I know I would
have possibilities for over $400 gains with the stock) 
By selling the puts the time decay works in my favor instead
of buying calls with $20 or more of time premium that would
decay against me. The puts AAFXY closed Friday at $35.50 and
QCOM looks ripe to breakout over $400 any day. I am now up
+$20 and my worst case scenario would be owning QCOM stock
at something less than $400 with a basis of $345. I also took
advantage of the morning dips on Tue/Wed to buy the stock
and sell it the same day for $5 and $7 net profits each day.
I pointed out this trend last week as well. Friday however,
QCOM did not dip but gapped open and could be starting a new
and even better trend. I still plan to go long on QCOM at
$400 and sell Dec covered calls at $440 or Dec 3rd, which
ever occurs first. If you are not in this play just buying
the stock now and selling the $410 calls would return you
over $45 in the next three weeks with a close over $410 on

SUNW - $120 calls

SunMicro has had a long, strong run and had pulled back for a
week to rest. This was as simple a play as you will ever see.
Strong stock, pull back on profit taking, retest of previous
high ($130), retest of previous support ($125), rebound and 
breakout. Classic entry point, perfect play. If only they would 
all react like this! Bought $120 call at $11.50 on Tuesday. 
Friday's close was $18.25. If not for the split just around 
the corner I would have sold on Friday but I was hoping to 
see $140 or better on Monday. I will sell this in a heartbeat
on any Nasdaq weakness.

BVSN - $100 calls

Broadvision has also been making strong moves. When I saw the
spike on Monday afternoon I was very frustrated. I had been 
looking for a pull back to enter the play and not a spike.
The quick dip on profit taking on Tuesday morning did not
quite get back to Monday's trading range. When the rebound 
started I pulled the trigger and was congratulating myself
until Wednesday. I rationalized that it was simply more 
rotational profit taking and I would wait until Friday to
sell if the direction changed. The opening gap was a relief
and I chalked the afternoon slide to the Nasdaq roll over.
I entered the calls at $12.50 and was wishing I had sold 
them at Friday's $18.50 after the market closed. I very 
seldom pass up a 50% profit on a stock that is not moving 
fast. I put in a limit sell for the Monday open just in
case we get a gap and crap Nasdaq on Monday.

Recap: With only three plays it was a very successful week.
I fully expect the QCOM puts to expire worthless and that
play alone will be very profitable. This week is a toss up.
I plan to go with the flow. I have been trading too much
trying to pick tops and bottoms which is something we preach
against constantly. Emotional trading is one of the hardest
things to conquer. With the possibility of the markets being
unstable this week I will setup my trading screen on Sunday
night with four call plays and four put plays and see which
way we head at the open.

JDSU has been looking like QCOM for several days now and 
with any market weakness it may be a good short/put candidate.

One stock that refuses to go down is USM. We have been waiting
for a pullback to enter the play but it just will not quit.
SCI and SDLI are also unstoppable. VRSN has a split soon
and looks good.

Other than that, be very careful on Monday. Look for buying
opportunities during the week instead of rushing into plays
just because the market is open. 

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


OPTIONS 101 - 1 of 2

Exit Strategies, Escaping with Profits
By Jim Brown

No, this is not an article on Sell Too Soon. I just wanted
to put all your minds at ease that I was not going to try
to twist your arm to sell those winners, while they were
still winners.

I am going to try to broaden your horizons with some types
of exits that will add to your profits and reduce your losses.
With that aim, I have to build from a common base and move into
the more exotic stuff. So bear with me.


It would be really nice if we never needed to discuss this 
topic but we all know that Murphy's Law is alive and well.
Before you enter a trade, you should always know how much 
you are willing to lose. I said LOSE. I know from experience
that most will enter a $6 option with the idea that you will
sell if it hits $10 or $4. Profit and loss. Now in reality
the closer the price gets to either number human nature takes
over and we start changing the plan. On the loss side, the
closer it gets to $4 the more you will start rationalizing 
that the stock chart looks like a bottom is forming. I will 
sell it when it gets to $3.00. It had to be just a large 
block order. The drop is market related. I will sell it when 
it gets to $2.50. The earnings's warning was from another 
company. It will bounce soon. I will sell it when it gets to 
$2.00.  It has to come back up. I will sell it when it gets 
to $1.00. Why did the jobs report impact my stock. I wish it 
would go back up so I could get $1.00 for it. 

Lose means sell for a loss. Not hold for a loss. Before a $6
option can sell for $3 it has to sell for $5, and $4 etc. The
trend is going against you and yet for some reason we always
convince ourselves that it is just temporary. Once you understand
the following principle and act on it, selling for a loss will
be a lot easier. Here is the principle: You can buy it back.

When you are in the trade you cannot think clearly and 
objectively. Maybe you are that one individual that can
always do this but I have never met anyone that does.
We all know that when a trade is going against us, the
minute we sell for a loss is the minute the stock will
rebound like a rocket. This keeps us from exercising 
rational judgement and closing the trade. In reality this
is always made worse by our procrastination to sell in the
first place. If we had sold that option at $4.50, we would 
not have had the problem of rationalizing a sell for a bigger
loss at $3. 

If we are in a trade that, we researched every conceivable way
before making the trade and the trade goes against us then
the answer that should instantly pop into our minds is: 

OOPS! That was not the entry point! 
I will sell it and wait for a better entry point. 

If we had that attitude then everything else in trading would
be easy. Instead, we all take the position that "It will come
back" and our fate is sealed. We agonize over every .25 drop
in the stock and corresponding drop in the option. We are 
totally focused on this position and are missing other winning 
plays because we are trying to "hope it back up."

Think about it. If you liked the stock/option at $6.00 you
should really like it at $2.00. If you had sold it at $4.00
and the stock was bouncing then you would love to be back in
at $2.00. 

The essential point here is the decision you make to get back in.
If you had not made the first trade, WOULD YOU BUY THIS OPTION

This should be an entirely different decision. Not one based on
a previous play. Many times traders will jump right back into
the fire they just escaped from simply because they felt the
first loss was just a mistake.  MAKE SURE THE SECOND BUY IS 

Types of stop losses:

When you enter the first trade, you should know exactly where
your loss exit will be. This number can either be based on the
option price or the stock price. There are pros and cons to
both. Basically, the option price is loosely tied to the stock
price. Depending on the time remaining and the ITM/OTM depth
of the strike price the option price can move more OR less than
the stock price.

Stops based on Option Price:

By setting a stop loss based on the option price you are not
filled until the option price actually hits that price. Sometimes
the stock can be moving so fast that the option price lags the
actual stock move. By the time the option prices hits your stop
and then you get executed it could be much lower than you expected.
When stocks are moving rapidly the spread between bid and ask on
options widens. 

Stops based on the Stock Price:

Recently another way of setting stop losses has been developed.
That is setting the stop loss or sell order based on the stock
price. I believe this way has merits for many situations. If 
you are setting stops that are very close to the current option
price then you should use the option price method. Let's say you
bought a $6 option that is trading for $10 and you want to set
a profit stop loss at $9.50. When the bid hits $9.50 your order
turns into a market order instantly and you execute at or close
to $9.50. Stops based on the stock price are better utilized as
catastrophe insurance. If your $6 option was trading at $10 and
you wanted to protect yourself against intraday spikes in the
option price due to order volume or small swings in the stock
price then you could use a stock price stop. If the stock price
was $150 you could enter the order to sell your option if the
stock price touches $144.75. It would take a full $5.25 downward
move in the stock price to execute your sell but you would be 
protected against a major disaster. The example is extreme but
I think you get the idea. I like the stock price concept since
the stock price is what drives the option price. If some event
caused a quick drop in the stock price your order could be
executed before the option price had a chance to fully equalize
and possibly get you out quicker and for a higher sell. The
only broker I know that offers this option is Preferred Capital.

Trailing Stops:

A wise way to use stop losses is to follow your option price
upward with a trailing stop loss. This prevents you from losing 
all the profits you have gained to that point. If your $6 option
is now trading for $10, and you would rather not take the 66%
profit then set a stop loss for $7.75. I never use an even number.
If you watch the bid and ask on active stocks like QCOM or JDSU
then you will see the market maker adjust the bid from a 1/4 or
3/8 to 13/16 or 15/16. He will not go to the even number. Retail
investors tend to set even numbers as limit sell stops and by 
stopping the bid on the even dollar number he will get a flood 
of sell orders. By setting the bid, just under the even dollar
amounts he has time to survey the order flow and decide where
to go next. Options market makers however seem to like even
numbers. If the stock is falling they will tend to react to the
next even number for the option price. Setting your trailing stop
at the $x.75 level may keep you from being stopped out by an 
intraday spike. It has saved me on numerous occasions. 

Selling for a Profit:

Now that we got the stop loss discussion out of the way, we can
move into the more enjoyable side of selling. Selling for a profit.

There are many ways to do this but first consider trailing stops
as your first line of defense. 

The best offense is a limit sell for a predetermined amount.
If you are happy with a 66% profit then place a $9.88 limit sell
for your $6.00 option once your order is executed. You will have 
a much better chance of being filled if you use the same logic
on profit sell orders as you do on stop losses. That is don't
place even number orders. The best number is probably $x.75. It
allows the market maker to set the ask for the even number and
then creep the bid to take you out at the same time. Obviously
you need to take into account the normal bid/ask spread on the
option first. If you are playing QCOM options the bid/ask spread
could be $2 but an AOL spread could be only 1/8.

Once you set your limit sell you can become the market at any
time. If the stock moves quickly and the order flow is thin then
the market maker may not want to cover you and the next "market"
buy order that comes in can take you out even when the posted
prices are different. This should not happen in an electronic
market but it does. Whenever humans are involved human nature
plays a big part in execution. 

Set a sell immediately after you buy!

What to sell for?

I will not go into the different rationales for when to sell
but you know my thoughts. I like to take a profit over and over
instead of trying to make a homerun on every play. I feel like
the longer you have an open position the more chances of a
market event turning your profit into a loss. With a $10,000
account, if you took a 25% profit once every two weeks for
a year you would have $62,500 profit without the benefits of
compounding. Read that again. If you never invested more than
$10,000 total at one time, and only closed the trade once every
two weeks, you could make over $62,500 in one year. Granted,
some positions will lose money but even if you are in the market
you will also have many positions that will make more than 25%
due to news events or gap opens. I estimate that a trader who
will follow instructions EXACTLY can net $50,000 on a $10,000
account every year without fail. Notice I said follows 
instructions EXACTLY.  

Different personalities of course will want to risk larger
losses for the possibilities of larger profits. That is your
choice. Just don't bad mouth options trading if you get your
account cleaned from time to time.

Types of Closes:
The simple way out is of course to sell your entire position 
at once when your profit target is reached. Too simple? Too
limiting? Not enough upside? Not everyone likes coffee either.

Optional exits include selling only a portion of your position
at predetermined exits. This allows for greater profits on the
remaining contracts while locking in a minimal return on the
early contracts. Lets say you bought 20 contracts at $4.00 and
sold 5 contracts at +50%, 5 contracts at +75%, 5 contracts at 
+100% and 5 contracts at +150%. Your total profit would be 7,500 
and you would have only $1,500 at risk after the first ten
contracts are sold. 

20 x $4.00 = $8,000
5 x $6.00 = $3,000 50%
5 x $7.00 = $3,500 75%
5 x $8.00 = $4,000 100%
5 x $10.00= $5,000 150%

You can adjust this scenario any way you want. Maybe 10 @ 50%
and 10 @ 100%. The downside of course is the length of time in
the trade. The first sell may be in only a day or two and the
last sell could be two weeks later. My thoughts are always on
limiting my time in a trade. The longer you are at risk the 
better chance of that risk biting you. Of course my trading
goals and risk profile is much shorter than 90% of most option
traders. If you are committed to holding options rather than
trading them then this is a good strategy for reducing your
risk. After the first half sell, the trade is almost risk free
and you can ride it indefinitely.

Now the exciting exits!

Exiting on the upside

Lets say you have been in a play for some time. Your $6 call 
option for the $75 strike is now worth $13 and the stock is at 
$86. You could just sell for the $13 and have a homerun but you 
feel that even though the stock is looking tired it may still 
have some room to move. How can you maximize this position? 

Consider this. Sell the $90 call option to close the play. If the
stock is at $86 the $90 option is probably $5 or more depending
on the time remaining on the option. By selling a higher priced 
strike you lower your cost on the play. If you sell the $90 for
$5 your $6 option now has a cost basis of $1.00. If the stock 
finishes under $90 your higher strike expires worthless and you
keep the $5.00. If the stock goes over $90 your upside on the
$75 call is now limited to $15 (the difference between $75-$90)
but you made $5 on the higher call. At expiration you exercise
your $75 call to cover the $90 call you sold. The net to you is
$20. This type of play should be used on tired stocks that may
have peaked and you expect them to finish around the strike price
you sold. The risk is having to hold the $75 call longer to
remain covered on the $90 call. Of course, you could close both
positions at any time the stock price started falling. You should
still be profitable on both since the OTM $90 call will decay 
faster than the ITM call. 

Exiting on the downside

Yes, it happens. You did not sell when it hit your stop loss.
Now you are wishing you had sold but the stock just does not
want to cooperate. Your $75 call for $6 is now only worth $.50
and the stock price is $72 and dropping. How can you salvage
some capital? 

Consider this: Sell the $70 call for $3.00 using your worthless
$75 call for collateral (margin). If the stock price is $72 but
sliding then the ITM call for $3.00 is soon to be out of the money
and worthless also. You recover $3 of your investment in the $75
call. If the stock continues to less than $70 then both options
will expire worthless and you keep the $3 or half of your starting
investment. Your risk is that the stock will have a miraculous
recovery and bounce off $70 and move up again. This is good news!
You should close the position on the call you sold when it passes
what you received for it. The good news is that your previously
worthless call is now appreciating in value and the play you
started with is alive again. If you did not cover in time the
most you could be out is $2.00 even if the stock went to $100.
That is the difference between $70 and $75 ($5) minus the $3
you received as premium. The way to avoid this is to maintain
a buy to close stop loss of say $4.00. Your total out of pocket
would be $1.00 and you are still long an appreciating $75 option.


It is always better to manage profitable positions than losing
positions. Be proactive on the profit side and totally inflexible
on the down side. Set your stops and take small losses. 

Jim Brown

Market Posture

As of Market Close - Friday, November 26, 1999 

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

DOW Industrials   10,750  11,320  10,989    Neutral  11.12
SPX S&P 500        1,315   1,385   1,417    BULLISH  11.12
OEX S&P 100          675     725     754    BULLISH  11.12
RUT Russell 2000     425     445     459    BULLISH  11.12
NDX NASD 100       2,320   2,520   3,117    BULLISH  10.28
MSH High Tech      1,120   1,250   1,621    BULLISH  10.28

XCI Hardware       1,000   1,095   1,195    BULLISH  11.11
CWX Software         770     800   1,224    BULLISH   9.03
SOX Semiconductor    475     525     638    BULLISH  10.29 
NWX Networking       550     615     801    BULLISH  10.28
INX Internet         495     525     670    BULLISH  11.05

BIX Banking          635     690     633    Neutral  10.28
XBD Brokerage        395     435     439    BULLISH  11.12
IUX Insurance        605     650     607    Neutral  11.09

RLX Retail           875     930     922    Neutral  11.23
DRG Drug             375     390     393    BULLISH  11.04
HCX Healthcare       750     790     779    Neutral  11.09
XAL Airline          180     190     145    BEARISH   5.21
OIX Oil & Gas        285     315     301    Neutral  11.23

Posture Alert    
The holiday gave everyone an opportunity to say thanks, 
especially those of us who have been long technology stocks. 
Friday's half day saw the Nasdaq break another high, with good 
volume to boot considering the shortened trading day. Leaders 
included Networking (+2.59%), Internet (+1.30%), and Software 
(+1.23%), while Insurance (-1.66%) was the day's loser. There 
are no current changes in our current posture.


For the week of November 29, 1999


Existing Home Sales      Oct    Forecast: 5.2M   Previous: 5.13M


Chicago NAPM             Nov    Forecast: --     Previous: -0.2%
Consumer Confidence      Nov    Forecast: 59.0   Previous: 58.8 


NAPM Index               Nov    Forecast: 58.0   Previous: 56.6 
Construction Spending    Oct    Forecast: unch   Previous: 0.5% 
Leading Indicators       Oct    Forecast: 0.1%   Previous: -0.1%   


New Home Sales           Oct    Forecast: 800K   Previous: 811K 


Non-Farm Payrolls        Nov    Forecast: 203K   Previous: 310K 
Unemployment Rate        Nov    Forecast: 4.0%   Previous: 4.1% 
Factory Orders           Oct    Forecast: 34.6   Previous: 34.6 
NAPM-non-manuf           Nov    Forecast: --     Previous: 60.0 

Week of 11/29

12/07 Productivity - Q3-Rev
12/07 Consumer Credit - Oct
12/09 Export Prices - Nov
12/09 Import Prices - Nov
12/09 Wholesale Inventories - Oct
12/10 PPI - Nov


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The Option Investor Newsletter              11-28-99  
Sunday                        2 of 6

Stock News
Making Tracks
By S.P. Brown 

What's the hottest trend in corporate finance these days? 
The tracking stock, and the list of big-name companies joining 
the trend is growing. Some of the heavy hitters that have 
recently issued these newfangled securities include Donaldson, 
Lufkin & Jenrette (DLJ), Sprint (FON), Barnes and Noble (BKS), 
and Ziff- Davis (ZD). 

BEA Systems Tops Holiday Buy Lists
By Cindy Christ 

Looking for a bargain in the sizzling e-commerce software arena? 

Impossible, you might say, and with good reason. In recent months, 
stock prices in this scorching sector have grown at hyper speed. 
Check out share levels of companies like Broad Vision (BVSN),
Commerce One (CMRC) and Vignette (VIGN), and you'll see that 
e-commerce players like these have climbed between four- and 
sixteen-fold this year.


Womans World

We have another new contributor to the Woman's World educational 
section starting today. Lynda Schuepp, is a long time buy and 
hold stock trader and has ten years experience in option trading. 
She is an active day trader and holds a BA in Music and a MS in 
Finance. Please welcome her to Option Investor - Jim.

First I want to assure you that Jim has not gone over the edge 
by having a second woman write for the newsletter.  I hope that 
my style of option trading will provide some insight to both 
male and female readers of OIN. 

 It is my intent to share a good and bad experience weekly unless; 
of course there is no bad experience for the week (highly unlikely).  
While it is painful enough to lose money, sharing my experiences in 
writing, forces me to analyze and determine where I went wrong or 
right and why.  It is comforting to know we are not alone in our 
"dumb mistakes".  I tend to write in outline form because I know 
how limited traders' time can be, particularly if you read 2-3 
newsletters daily. Details will be provided for the investor who 
is new to options --advanced traders can skip over my details. 

My successful AND unsuccessful Split play of the week 
this week was QCOM.  

STOCK SPLIT STRATEGY: One of my trading strategies in to buy 
in the money call options on highly volatile stocks that are 
in a split run.  I use this as a leveraged way to play the 
stock for about 1/10 the cost.  This week was no exception.  

*	Buy a call option with a delta >.5 on stocks with great 
momentum prior to the split.  Delta is the % the option 
will change in relation to the change in the underlying 
stock.  For example: an option with a delta of .5 would 
move $.50 for every $1 the stock moves. 
*	Buy options that are fairly priced on a dip but do not 
	exceed 1/10 of the cost of the stock.
*	Buy options that are fairly priced.  
Volatility plays the biggest part in pricing of options, 
particularly stock split runs.  If the implied volatility 
is less than or equal to the historical volatility then 
the option is fairly priced.  If the implied volatility 
is higher than the historical volatility, I wait or buy 
very deep in the money.
*	WRITE down mental stops and exit strategy. 
For my stop:  I use the average daily range for the 2 
weeks prior to the stock split announcement.  While this
 may appear to be quite aggressive in stocks like QCOM, 
it keeps me in the play longer for greater profits.    
Below is the chart I constructed for QCOM.  As you can 
see, the average daily trading range was 10 points.  
After the split announcement the average daily range 
increased to $24.   So, you see a 10-point stop is 
actually quite conservative. 
For my exit:  sell when the stock increases 2 times the 
stock's average daily range, in this case 20 points.  If 
the stock moves up 20 points, I would sell the option at 
the bid.  I don't quibble at this point to determine 
whether the market maker is paying me a fair price for 
the option.  
*	Determine position size:  
You may want to decrease you normal position size on 
stocks with this kind of range.  If you have a normal 
maximum loss set at $1000 per trade, then only buy 1 
contract (100 x 10 point swing).  I tend to break my own 
position sizing rules when I do split plays as long as 
the market is trending up. 

*	Buy the current month's calls if there is ample open 
	interest (300 contracts or more)

Date		Open		High		Low		Close	
2-Nov-99	229.50	229.50	219.25	224.81	
1-Nov-99	221.56	229.56	220.00	225.19	
29-Oct-99	221.00	226.38	217.38	222.75	
28-Oct-99	213.13	218.00	208.50	218.00	
27-Oct-99	210.81	210.81	203.50	208.13	
26-Oct-99	215.88	217.25	207.38	207.75	
25-Oct-99	216.25	219.69	210.13	211.13	
22-Oct-99	220.25	225.75	211.06	215.75	
21-Oct-99	199.00	216.88	197.69	215.69	
20-Oct-99	201.44	202.38	196.53	202.31	
19-Oct-99	200.88	205.69	195.00	198.00	
		Avg Hi -->	200.16	190.53	<--Avg Lo	
	Avg Daily range-->	9.62	Exit at -->	+20.00	

QCOM has so much momentum it is difficult to not make money in 
this stock.  While it was not my most profitable trade of the 
week, it was the most successful using the strategy described 
above.  On 11/23, QCOM had pulled back to $344 for the day.   
I watched it cross back up over $350, which, because there was 
a lot of support there, would provide me a good entry point.  

After scanning all the options, I purchased 10 contracts of 
the Dec 350 call ($2 in the money) for $30.  QCOM was $352, 
delta was .55 and the option's theoretical value was $30.50, 
indicating that the option was fairly priced.  There was 
plenty of open interest and the market trend was favorable so, 
all my criteria were met.  All I had to do was make sure QCOM 
didn't drop below $342 and wait until it got up to $372 to 
sell my options.   That day QCOM closed at 360 ¼, about half 
way to my planned exit.   

The next day QCOM moved down 6 points in the first 30 minutes.  
Because I was in over my head on the wrong side of a trade in 
BRCM, fear and greed, our emotional enemies, clouded my judgment. 
I didn't practice my exit strategy on BRCM I so eloquently stated 
above.   It's always hard to exit a trade with a pretty substantial 
loss because in doing so, you're admitting you were wrong.  When 
I fail to implement my exit strategy, I usually have to bleed for 
a long time and then finally reach my saturation point before 
exiting.  Naturally, after my exit, the stock seems to pick that 
particular moment to turn back around.  God, I hate when that 
happens.   I'm getting better at exiting bad trades but as you 
can see, I haven't managed to effectively implement that strategy 
100% of the time.  I hope by sharing my failures, I will help 
others to learn more quickly.  Perhaps you can now understand 
that when I saw that first "10 min up candle" on QCOM, I was 
eager to lock in some profit.  I sold my options for a 3-¼ point 

Now for the bad news:  if I had followed my exit strategy on QCOM, 
I only would have had to wait until later that day for my 10-point 
profit.  QCOM never went below my stop and therefore never 
triggered a sell signal.   In analyzing this mistake, I realized 
the bigger mistake was in not exiting the BRCM trade the day 
before when my stop was signaled.  Because BRCM was still down 10 
points at the open on 11/24, I reacted emotionally when I saw QCOM 
heading south.   Had I taken my loss on BRCM the day before, I 
wouldn't have been fazed when QCOM dipped 6 points and I would 
have gone forward and made my intended profit.  Sometimes, however, 
you do get lucky (at least in a bull market).  BRCM did turn back 
around and I am currently even.  

The Moral:  Try to rely less on luck and more on good systematic 
trading to protect your wins, minimize your losses and preserve 
your capital.   In other words, when you act like a turkey pray 
and you might have something to give thanks for.



Another new contributor this week. Mary Redmond is an options
trader and a licensed broker with a degree in economics. She
will be contributing on a weekly basis from a sound fundamental
perspective. Please welcome her to the newsletter and give her
your support. Jim 

Strong research does not guarantee a win but it sure helps!

In the last week I was able to make a 65% return on an original 
investment in three days with one of my stock option positions. 
I have found that the best way for me to trade options is to 
balance a solid understanding of the fundamentals of the company 
with the leverage and momentum available in the options market. 
Warren Buffet, the third richest American, is still considered 
by many the best investor of all times and follows a clear rule 
when investing: Only buy what you understand. Options traders can 
modify this rule: Only buy options on stocks you understand. I 
only buy an option on a stock when I have read the annual report, 
watched the stock's trading pattern for a while, and seen how it 
responds to good and bad news which is disseminated on the company 
as well as overall market trends. For example: if some analyst 
downgrades your stock tomorrow from a buy to a hold is it likely 
to lose 50% of its value in one day? This is something you should 
be aware of (Microsoft is an example of a stock which has support 
like an armored tank; even a "downgrade" from the Dept of Justice 
didn't destroy the stock price.).Has the management of the company 
demonstrated a willingness and ability to help boost the stock 
price during difficult periods in the market? Does the company 
have patented technology and a unique niche in their industry 
or are they a commodity business, which means competition will 
decrease profit margins? Are the earnings of the company growing 
at a faster rate than the earnings of the S&P 500? Is the company 
profitable or bleeding red? Companies which are not yet profitable
and rely heavily on the debt markets for financing can be 
dramatically effected on a short term basis by fluctuations in 
the interest rate market. Also after trading options for a while 
you learn to know your own response to fear and greed. For example, 
when I am trading short term (expiring) options I get too nervous 
to hold them longer than a day. For that reason, I usually like to
trade 6 month options or leaps.

I had been expecting a big move in CMGI in December prior to the 
earnings, which are to be reported the third week in December, 
because the company did a successful IPO this quarter and also 
because of the success of their Alta Vista web site which 
attracted 800,000 new viewers in less than 6 months. CMGI had 
been dormant for several weeks at the 100 level. I had purchased 
a Jan  2001 100 call at 33, and put on a  spread on the Jan 2001 
110/120 calls for a total debit of $2. A few factors lined up last 
week which pushed the price from 100 to a high of 143. First, CMGI 
presented at the Goldman Sachs internet conference in California 
on Wednesday which was announced the day before .  I expected it 
to pop up 5-10 points that day and it moved up over 20 points 
probably in part because two analysts (Prudential and Goldman) 
upgraded the stock. In addition, it was announced that the trade 
agreement with China will benefit CMGI. The Jan 100 leaps went 
up from 33 to 45 5/8.  I sold them  (12 5/8 points profit) and 
bought the Jan 110 leaps for 42 1/2. Usually after this stock 
makes a dramatic move in one day there is a follow through the 
next day probably because everyone assumes something phenomenal 
must be happening. The next day the stock went higher on strong 
volume but I didn't take a profit on the 110s. Mistake. The only 
thing holding me back was the possibility of missing another big 
move the next day. This is called balancing fear and greed: fear 
of losing profits vs. fear of missing the next big move.. However, 
it's never a profit until you take it. On Friday I tried to sell 
the 110 leaps  at 44 7/8, but missed the market and panicked when 
the stock went to 120. Sold at 40 1/2.  2 point loss Bought June 
125 calls at 28 5/8. On Monday I sold the June 125 calls for 
30 3/8 and closed out the short position of the spread early 
in the day at 44 3/8. Later in the day I closed out the long 
position Jan 110 call  at 57 for a profit of 11 points on spread.
I think the stock has further upside with earnings coming up, 
however, the party can't continue at this rate  forever; if the 
stock continued to increase 40 points every week it would be a 
2000 dollar stock in one year. A few years maybe. So I bought an 
out of the money leap, leaving the profit in cash in the acct.. 
I know the top 10 rules say don't buy OTM calls but with a leap 
it can be a more realistic bet. Depending on market conditions 
it may be possible to target shoot another in the money call 
prior to  the December earnings release.

This particular type of trading is not suitable for everyone, 
as leaps have drawbacks. They are expensive which limits your 
capital available for other positions. The spread between bid 
and ask can be as much as 2 points, which makes it difficult to 
day trade for a one or two point profit since you are essentially 
at the mercy of the market maker. However, if some of your favorite 
stocks have been dormant and you are expecting a dramatic price 
increase trading leaps can be highly lucrative and less risky than 
short term options.

Mary Redmond


Losing Money on Vacation, Part II

On Tuesday, I shared a story of overconfidence, the expense of a 
vacation and a list of mistakes I have learned from. My gains in 
the first quarter of 1999, caused me to loose sight of how fragile 
directional plays really were. To be honest, all of the mistakes 
I listed did not occur while I was on one vacation. I added a few 
other lessons. My account drop did not occur just from a trip. 
Once returned, I got distracted with some personal issues that 
were more important to me, than trading. Basically, I turned my 
back on my account for 6 weeks. I did not realize it would do 
that much damage, because before, the market had always come back.  
I do things differently now.

By the way, never let anyone convince you that picking the right 
option to play, is the most important aspect of option trading. 
Only beginners believe that theory. Learning to think like an 
option trader takes time, practice, fine tuning and an ability 
to dissect your losses. The subtleties within the market, and 
how you decipher them, are what make your trades more likely to 
succeed or not. Yes, in the beginning, it is a little easier to 
follow the red caboose, but with time, your goal is to develop 
your own radar and sensing device. Just like cooking, sometimes 
you just get that little feeling, maybe you shouldn't leave it 
in the oven as long as the recipe says. 

The biggest lesson learned from my experience this year, was that 
I did not trade efficiently.  Not having an efficient system when 
things turn against you, costs you exponentially on the downside 
curve. Upon returning to trading, the first thing I did was order 
a real time quote service with charts. I now use Qcharts, where I 
can follow stocks, indexes, options and charts of each. I am able 
to follow the 10 day moving average, which helps on entry points. 
I doubt that a trader that holds a full time job needs real time, 
but any trader at home trading intra-day, certainly does. It has 
made all the difference in the world. Charts also give one the 
ability to research your stocks for historical activity, during 
previous earnings and stock split runs, or sector sell offs. 

Also, Qcharts allows you to tie your real time quotes in with your 
Preferred Trade account. Since I had heard great things about 
Preferred, I decided to try them. Now, I could point at a stock or 
option, right click, and my Preferred Trade account would pop up 
in my face, loaded & ready, for a buy or sell order. My trade 
execution time immediately vaporized to seconds, from very long 
minutes with Fidelity. (My IRA is still at Fidelity) This feature 
alone can well pay for your Qcharts.  I can now grab a momentary 
dip, or sell on a peak...and their options are cheaper too. 
Combining these two services alone, with basic TA, can teach you 
a wealth of knowledge that improves your trading. Also through 
Preferred Trade, I was able to follow my cost basis for the first 
time. This helped me to feel the pain if a trade was against me, 
thus helping me to exit quickly, preventing further loss. 

For basic technical analysis (TA) information, go to your local 
book store and pull out several from different authors. Find one 
that reads easy for YOU. The basic info is what you want. From a 
basic book, you will understand basic patterns which will get you
thinking through "entry points", "support" and "resistance". I 
know you read all the time, how important these points are. They 
really are. If a high flying stock like Qualcomm,  pulls back 
intra-day, to its 10 day moving average,  staring at a 4:1 stock 
split in the near future, you will understand how this becomes a 
buying opportunity "buying the dip", versus a reason to run for 
cover & sell off your position... or worse, "catching a falling 

Also, between learning a little TA and having charts, you will be 
able to follow stochastics, bollinger bands, MACD or any other 
indicators that your internal radar becomes accustomed to. We all 
agree that hind site is 20:20. Well, if a play goes against you, 
you have the luxury of learning from it, by actually going back 
and studying the indicators you missed, which should have clued 
you into the move. This can be done after hours. Eventually, you 
will learn not only to look at your stock, but its sector index, 
the market it trades, the futures, bond yields, market sentiment 
and the VIX all before entering your positions. All of these give 
you little hints, of things that are brewing in the background, 
which might affect your trades. I review the TA and indicators 
on all my plays before leaving town, if I keep them at all.

Other things I learned include: diversifying LESS in my option 
trades, LESS companies, LESS strike prices, LESS open positions. 
If I believe in a trade, I PLAY it! If I'm wrong, I get out soon. 
Before, I played 15 companies, now 4-5, but with more contracts 
each. I play one or two strike prices, choosing the one with the 
highest open interest. Getting out of a low open interest option, 
always worked against me. Nobody wanted it.

And by far, the best lesson I have learned was Jim's SELL TOO SOON. 
This concept alone, will help you repair your mistakes on entry & 
exits, protect your profits and keep more money in your pocket 
when you're right or wrong. It's great to use before a vacation. 

I hope everyone had a yummy Thanksgiving. I had a wonderful time. 
It made me think of my Daddy. Tuesday, I want to share with you 
some of my early memories, of things he taught me.



Filling Up the Christmas Stocking

In my monthly "off week," I have been taking care of some 
longer term investment management items. First of all, I 
closed a OEX Put position for about a 33% loss. The pullback 
which I thought was coming was minor and was over by Tuesday 
morning. I think December will be more volatile than November 
has been so far, but I was not prepared to stay in that position
and pray for a better exit. Time to move on. My plan for the 
week was to enter a series of longer term call positions with 
January 2000 or January 2002 expiration. These were my targets:

EGRP & SCH. I have been following the increased trading volume 
and think that this will turn into increased profits for these 
online brokers. Schwab, for example, traded as high as 77 in 
April before breaking below 30 in October, where I entered my 
first play on that stock. I exited that play for 150% profit 
last week, and entered new January plays on both SCH and EGRP 
on Tuesday of this week. The new breed of online traders are 
basically bullish and as the market goes into a Holiday Rally- 
Y2K "Melt Up," I expect these stocks to benefit from a tidal 
wave of liquidity flowing back into the markets. 

SUNW. I follow this current newsletter pick because of several 
successful option trades. In addition, I know it is splitting 
in a few weeks. In the current Internet mania, this is one of 
those stocks that I am sure every mutual fund manager will hold 
through the early December turbulance and want to own in the 
new year. I bought January calls on SUNW on the general market 
weakness on Tuesday. Nice profit there already.

CSCO. This is one of my best performing core, Long Term Stock 
holdings, having returned 300+% since I bought it in early 1998. 
I think that it will continue to appreciate, even through a major
shakout of negative revenue, "dot com" companies which I expect 
in the next 6 to 18 months. Therefore, I bought a Jan 02 LEAP 
position on CSCO on Tuesday's weakness. This is the beginning 
of a change in how I manage my LT Stock Portfolio: over the next
6-12 months, I plan to add a set dollar amount each month in LEAP
investments to benefit from the greater leverage in these 

YHOO. The "sawtooth" pattern of run up to earnings & drop off 
after earnings is clear if you look at YHOO over the last year 
or two. Next earnings are first week or two in January. Therefore, 
I am getting on this train now. The stock should benefit from a 
great Holiday ecommerce season, a potential split, and other 
good news. I entered this play on Tuesday's dip, and it is 
already paying off. 

AMZN. I entered a Jan call position on AMZN back in October. 
What a ride! Down to mid 60s after Jeff "Who Needs Profits" Bezos' 
conference call following earnings. Now back on the rise as 
Holiday ecommerce season moves into high gear. I'm glad to see 
this one coming back, and expect that this will be a very 
profitable play by the time I take profits early in January.
I see no reason that this December/ January will not repeat 
last year's dot com stock mania, though the winners will be a 
larger group, and any one stock will enjoy smaller gains. 

GTW, SNE, NOK. All major consumer electronics plays that I 
think will have terrific Holiday appreciation. GTW seems to 
be winning with a "clicks & mortar" marketing approach which 
is targeting the consumers missed by DELL's more tech savvy, 
online only marketing approach. SNE is extending the PC to 
all aspects of entertainment with a family of related products
using innovative memory products. NOK is the dominant handset 
player and will expand its influence in other wireless products 
with their WAP network. I entered January calls on each of 
these three stock on Wednesday.

My plan for these plays is to monitor them but not to actively 
trade them. Except for AMZN, they are all in the money. All of 
the plays are mostly intrinsic value. They aren't out of the 
money "lottery tickets." If they hit 100%, I will consider 
taking profits. The dollar amount in each play is about the 
same, and is small enough so that I can let them ride without 
too much concern. As long as most of them perform as I expect, 
the one or two losers in the bunch will not hurt my "New Years 
Portfolio" too much. I tend to think that the easy money has 
been made by call plays in this November run. December will be 
harder, particularly with end of November "window dressing," 
and other mutual fund driven dynamics in the first few weeks of
December. So I expect more volatility. I plan to start trading 
my Short Term Option Portfolio again next week, after the 
December premiums have cooled off a little. 

Welcome to Renee, Lynda and Mary: I am glad to see the "Woman's 
World" column and I am sure they will add a lot to the team at 
the Option Investor. I've looked back at some of my columns and 
can see how some women would take offense to locker room humor. 
However, I think that the market is neither male nor female. I 
take a options & futures class with male and female business
students at one of the country's top business schools, and we 
value each other's opinions, whether they are derived from logic, 
emotion, quantitative research, experience, sports/military 
analogies or a combination of those elements. My female classmates 
would be offended by the idea that they have to get special 
treatment as women. So, I think that the idea of more voices in 
the trader's corner makes sense. When I write about trading, I
draw on certain aspects of my background which help me the most -
the military, which has helped me to plan; and sports, which 
relate to the dynamic nature of the wins and losses in trading 
a financial instrument which moves very quickly.

I would prefer that Jim not pidgeon hole me into the "macho 
Marine" category. I have many aspects of my background which do 
not come out in my columns such as my undergrad experience at 
Harvard, my experience working at a program for single mothers 
and their kids, my teaching experience, or my current law school 
experience. I could use the column to talk about how to spot 
mispriced ITM or OTM options using Black-Scholes, but my sense is
that this is beyond what most reader's are looking for. I think 
most readers are looking for someone they can relate to -- another 
novice trader who goes through very emotional wins and losses. I 
hope Woman's World offers that to a broader range of our readers.
Janar Joseph Wasito


A New Revelation...Again
by Ryan Nelson
Asst. Editor

There comes a time in every trader's life where they ask 
themselves, What was I thinking?  It just so happens that I 
ask myself that question a little more often than I like.  But 
if those words have stumbled from your mouth as well then you 
can probably relate to the experience that I had these past 
two weeks.  

Actually, I call it a revelation because it opened my eyes to 
a mistake I had been making in trading my portfolio.  Let 
me share with you my goal.  My goal is to double my trading 
account every 6 months.  I don't know if this is a good goal 
or a bad goal but I sleep well at night with my positions and 
that is what matters most to me.  (Loss of sleep is a dead give-
away that your current positions are out of whack with your 
investment objectives and risk tolerance.)  So with a month 
and a half left on this go round, I was sitting pretty close 
to accomplishing my goal.  With the bulls back on Wall Street 
the final turn to the finish line should be a piece of cake, 

Wrong, and let me tell you why.  Despite using similar tactics 
in picking my investments, my trading style had changed and was 
betraying my strategy.  I had gotten over anxious to complete 
my task and began jumping in and out of positions.  I found 
my commission costs going up and my profits going down.  The 
only goal I was fulfilling was helping Ned Johnson (owner of 
Fidelity Investments, my current online trading broker) in his 
race against Charles Schwab for online trading market share.  
At the end of the week, I looked back across my confirmations 
and realized that if I would have held anyone of my positions 
to my original strategy when I bought them, that I would have 
made good profits.  Instead, I was impatient, undisciplined 
and emotional in my decisions.  I was no closer to my goal and 
left wondering where had the magic gone. 

So I pondered my situation and thought to myself that if I only 
had more trading capital, I may not have felt it necessary to 
jump back and forth.  That I could have held all the positions 
and made more money.  What a solution, right?

Ehhh!  Still wrong.  This is were the revelation occurred.  In 
talking with Jim about the seemingly vast opportunities on one 
of those Nasdaq record-breaking days, (you know, the entire month 
of November) he said something that hit home to my situation.  
In summary, he said there is never enough capital to play all 
the positions that look interesting.  Whoa, stop the press.  The 
head gunslinger is basically saying that more bullets isn't the 
solution I needed.  I guess that makes sense.  Why would more 
bullets help if my aim is still off target?  What I needed was 
to return to the basics that had gotten me to where I am.  I 
felt like my eyes had just been opened, and frankly, to a 
principle I already knew.   

Besides how was I going to increase my capital to accommodate 
more plays.  At last check, money still doesn't grow on trees 
and I would still have to limit my trades to only a few.  And 
with spreading yourself over many positions, you can bring into 
play a whole new can of worms.  That is not what I wanted to 
do.  I wanted to return to my original strategy that had been 
working all along and that is exactly what I did this week.

In a holiday shortened week, I looked to keep it simple.  I 
dumped my VRTY since the split run was looking more like a split 
crawl.  I allocated some money to GMST as it was clearing the 
resistance between $105 and $108.  The post-split announcement 
sell-off had bottomed out and this split runner looked like it 
was gaining momentum.  So I was in GMST with the stock passing 
$109.  My goal was to see GMST at the $120 level ahead of the 
split in three weeks.  The Nasdaq dumped on me on Tuesday but 
I was above my stops and didn't jump ship.  Needless to say, I 
am very happy with the reward.  When the stock open above $119 
on Friday, I couldn't resist selling.  That was a quick move 
and I will watch for a possible re-entry point if it dips down 
next week.

Thanks to that Tuesday decline, I could easily see ETYS standing 
out as one of a few positive stocks on my screen.  Sure enough, 
Wednesday morning it punched above $60 and I entered a position 
here.  I missed most of the market action on Wednesday, but was 
extremely happy to see that Nasdaq had soared by 77 points.  
ETYS hit $70 on Friday before pulling back to near $67 on the 
close.  I held over the weekend for the possibility of another 
strong open.  It has gapped up nicely for three straight days.  
So two-for-two this week, and back on track.

So there you have it.  I had gotten off the path on one simple 
rule and was left twisting in the wind.  Emotional trading and
too many plays. It is seems amazing how important each rule and 
principle is but, at the same time, I have never won at black-jack 
with a 22.  Coming close doesn't count for much sometimes.  The 
point is that it is late while I write this and when I turn off 
the computer and jump into bed, I will be falling right to sleep.  
In my book, a solid trading plan executed with discipline 
translates to no loss of sleep.  Maybe that should be my only 
goal from now on. 
Ryan Nelson


I have been an investor for over 20 years but have only recently 
begun to trade equities options. I was a subscriber to another 
options newsletter for a year at the cost of $2900, but was 
barely able to produce enough positive results to barely pay 
for the subscription after subtracting the losing plays which 
were recommended. Many of the suggested plays went against my 
better judgement when critical factors such as sector movement 
and overall market direction were considered. I discovered
your service about 2 months ago and subscribed immediately 
after a few days of monitoring the recommended plays while 
using the free 2-week trial. What I liked immediately was the 
inclusion of the background information on the plays which 
were being recommended, right up to the latest information 
on the companies available at the time the play was being 
recommended. I also like the teaching which is always a part 
of the newsletters. In the past 6 weeks I have been able to 
use your recommendations to build not only my confidence in 
playing options, but also to build my brokerage account which 
is dedicated strictly to options from $4000 to over $12000. 
My only negative comment relates to the persistent short term 
strategy which your newsletter promotes by recommending option 
plays which are at most 6 weeks or so from expiration. I have 
had a couple of plays expire worthless, and then move forward 
to impressive gains which were never realized. I have begun to
buy options which are 80 - 100 days out to avoid this. I
have also become more confident in making my own choices based 
on information I have gleened from other sources (Business Week, 
Investors Business Daily, Wall Street Journal) with success.
Thank you for your great service. Keep up the good work -
many of us are depending on you! May you enjoy and Happy and 
Joyous Thanksgiving from the bounty which the Lord has provided!

John Martens


I have been trading options for several years, and have done
well. I have also done some stock investing (not trading) and
that has done well, too. As a technical VP at an internet
company, I spent a *lot* of hours at the office when I would have
rather been at home. Even more importantly, my family wanted
me at home (i should be glad they agreed!). I had made a plan
a while back that I would take a long time off and stay home when
the right time became obvious to me. Events at work and in the
market combined to give me both a reason and the means to do this
early in 1998. After much spousal conferencing and much prayer,
I decided to leave my job.

The same week i decided to leave my job, I went to an investment
and trading seminar in Dallas where I met Chris Verhaegh. While
I sat in the seminar having "protect your capital" preached over
and over, I lost $300k in the market. Why? There were 2 reasons.
#1 was that I had failed to put into practice what I was learning.
But it would have been hard to do that instantaneously, in any 
#2 was that I had strayed too far, too fast, from what I knew 
was my comfort zone.

In the past, the vast majority of my options activity had been 
in LEAPS. LEAPS calls on large picks and shovels companies (
e.g. Cisco and Intel) had, quite literally, never failed to 
return a profit. In fact, profits of 300%-$1000% were not uncommon 
at all. But I was using small amounts of capital to keep total 
risk down. But in January, after making some successful short-term 
trades, I got caught in the downdraft and saw most of it evaporate 
while I tried to "hope it back up." But, as they say in my native 
Tennessee, "That dog won't hunt!"

Since then, I have made only very select short-term trades, and 
almost all of them were based on OIN recommendations and my own 
followup research. But I have also returned to what I am still 
the most comfortable with, and that is LEAPS. The biggest 
difference there is that I am much more conscious of entry points 
(thanks to Jim), and of the dynamics of premiums (thanks to Chris). 
I also have a third line in the water some of the time - lottery 
tickets (albeit with improved odds).

This overall stategy works very well for me for several reasons:
+ I didn't leave my job to immediately take another full time
job, simply relocating my office to the house. While I can
easily see taking what I am learning and putting it into practice
with something more akin to Jim's glued-to-the-screen style,
that just is NOT what I want to do right now. I want to do a
gazillion home projects and help with school (our kids are home-
schooled) and take some vacations. With LEAPS, you have a nice
compromise of options leverage, and a degree of buy-and-hold 
freedom from the quote screen. Note that I always buy LEAPS at 
least 12 months out, and sometimes 24 months or more. Because of 
this, I am perfectly willing to buy deep OTM on my reliable "plugger"
+ LEAPS allow you to capture long-term tax treatment on option
profits, which is a pretty sweet deal. The sweeter deal is
short-term trading index options, which the IRS treats as 60%
long-term capital gains. I will probably branch into this next.
+ By putting smaller percentages (1-5%) of my assets into carefully
selected short-term OTM calls, I am able to juice up my returns
without seriously risking my future. For instance, I bought OTM
calls on CSCO when they started to rebound after sharp-brief profit-
taking recently. As Jim would say: entry point, entry point, entry
point. Initially, I only buy 1/10 to 1/4 of my ultimate plan, and
average up with positive market and sector movement. Although still
risky, this is a far cry from buying XYZ at $0.44 just because it
was at $10.00 a week ago. (don't do that!) Although I called these
lottery tickets above, I don't really think they are in the same

I hope this provides a little insight into how option risk, 
reward, and management intensity can be tailored to some 
different goals and lifestyles. Thanks for sharing your research 
and market savvy with us, and keep those newsletters coming!

ND Newman


The AskOin editor is on vacation this weekend. Please
check back next Sunday for the next installment in this

Market Sentiment 

Sunday, November 28, 1999

Bring on the Santa Claus Rally!

The day for giving thanks turned in a nice rally for the NASDAQ, 
as technology stocks continued the buy high, sell higher fever. 
Looking ahead, many pundits are now calling for a correction, 
especially on the NASDAQ where the index has soared over 56% 
year-to-date! It may happen, but based on the sentiment readings 
that we are witnessing, we see further upside potential. 

One area of sentiment that we like to watch here at Pinnacle 
Capital is the level of short interest. Short interest is often 
considered an indication of the level of skepticism in the market. 
Traders who sell securities short, borrow shares and then sell 
them, betting they can profit by buying the stock back later at 
lower prices. Last month we highlighted how the NASDAQ's short 
interest increased by over 5% ending October 15. During this 
last month ending November 15, short interest increased another 
1.4%, to set another record in pessimism.  The total of short 
interest for the NASDAQ and NYSE now stands at 2.3 billion and 
4.0 billion, both ALL-TIME HIGHS! 

What is the pain threshold for these short sellers? Your guess 
is as good as ours, but the day when these shorts start throwing 
in the towel, is the day when we get concerned for a market 
correction! However, based on the statistics above, shorts are 
still alive, and more than willing to play the game. Two of the 
crazier stories from Friday where shorts played a major role 
include the stocks of Telular (WRLS) and Ariel (ADSP).  These 
two stocks closed up 435% and 244% on Friday alone, after being 
up significantly more intra-day. This speculation is just 
maddening; however, the reason we are talking about these two 
equities is that the short sellers were all over these stocks 
early in the game. They were more than happy to short ADSP at 
$10 the previous day. However, when the stock continued its 
strength, the shorts who ran for cover (and most of them did), 
only helped fuel the buying frenzy that caused these astronomical 
returns. What would you do if you shorted a stock on Wednesday 
at $10, and the next day it is at $50? Can you stomach holding 
this thing much longer even though the odds of a major retracement 
are great? Probably not! The bottom line is that short interest 
continues to surge, and as long as it does, you can expect more 
short squeezes and thus, more upside rallies!

We continue to watch the S&P 100 with great scrutiny, and over 
the last week, the put buyers continue to rush in. Currently, 
the top 4 out of 5 open interest leaders for the OEX reside in 
the puts, with December 750 being the greatest. At the 750 strike, 
puts are actually greater than calls, which is very rare, and 
indicates extremely bearish sentiment. What this tells us is 
that the support for the OEX is building, and that the chance 
of a continuation in the rally is picking up steam. We will 
continue to monitor the OEX activity and inform you of any 

Finally, the chance of a big pullback increases with every record-
breaking day that we have. However, as long as the bears continue 
to participate in the market; like we have been witnessing, and 
the 30-yr Treasury doesn't get back into record highs, we should 
be in great shape for a Santa Claus Rally!


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 another 1.4% from October. 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!

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

Mixed Signs:

Volatility Index (22.95):
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.

Interest Rates:
The yield on the 30-yr Treasury is getting closer to the 
danger zone, and should it creep higher, it will definitely 
become a major obstacle for this market rally.

Investor Intelligence:  
The rapid change from bearish to bullish sentiment has been 
too great, and may indicate a near term top in the market.

Energy Prices:
With the rapid rise in crude oil, everything from manufacturing 
to transportation will be affected by higher costs. These higher 
cost will be felt more 1-2 quarters out, and could put pressure 
on profit margins.

OTM Call Analysis

As we move closer to the December 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          -
Friday, November 26       55,598       +53.7%

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                       (11/26)
Overhead Resistance (750-760)    1.50

OEX Close                       753.57

Underlying Support (730-745)     1.82

What the Pinnacle Index is telling us:
Based on 11/26, overhead resistance has decreased significantly 
and is giving indications that we may run to 765. Underlying 
support is also increasing, which should give the market more 

Put/Call Ratio                  Friday     Tues       Thurs
Strike/Contracts                (11/26)   (11/30)     (12/2)

CBOE Total P/C Ratio             .42
CBOE Equity P/C Ratio            .32
OEX P/C Ratio                   1.29

Peak Open Interest   Friday           Tues            Thurs
Strike/Contracts     (11/26)          (11/30)         (12/2)

Puts                 750 / 6,887
Calls                750 / 6,533
Put/Call Ratio         1.05

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 
November 26, 1999                       22.95

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 18, 1999                     52.1        29.9


The Option Investor Newsletter          11-28-99  
Sunday                        3 of 6


Index     Last  Week
Dow    10988.91-14.98
Nasdaq  3447.81 78.56
$OEX     753.57  4.27
$SPX    1416.62 -5.38
$RUT     458.94 -2.33
$TRAN   2909.16-50.07
$VIX      22.95  3.32

Calls           Week

BRCM     207.13 10.63  New, a possible split announcement?
BVSN     111.00 13.51  Broadvisions view grows even wider
CMGI     146.63 21.76  It was another great week for CMGI
EMC       90.31 -0.88  Our play on EMC is at a crossroads
GMST     118.50 13.88  Play kicked into high gear last week
GTW       79.06 -1.56  GTW is close to a big breakthrough
HGSI     115.50 16.13  New, creating a lot of warm fuzzies
HLIT      68.50 -3.56  Dropped, but keep it on your radar
IMCL      41.19  4.31  New, a successful secondary offering
JDSU     266.00 52.19  In the middle of a short-term channel
MACR      69.25  6.63  Positive technical & good volume
MSFT      91.13  3.63  Microsoft is poised to move higher
NOK      146.75  8.75  Waiting for the gap to be filled in...
NT        81.69  2.18  A new twist on our options for NT!
QCOM     384.75 17.69  Investors hold on for split approval
QLGC     124.13 12.63  Split or not, the momentum continues!
SDLI     186.75 42.63  Trading at the top of it's channel
SNE      185.94  9.32  Sony, the gift that keeps on giving!
SUNW     136.06  6.50  Split run resumes with heavy buying
VRSN     198.00 27.94  Four consecutive new 52 week highs!
VRTY     105.50  6.38  Only five days left for our split run
VVTV      47.81  6.06  New, posts record sales for Q3
YHOO     226.88  8.12  A split candidate and enthusiasm


ALTR      58.50 -1.13  Dropped, semiconductors get a boost
BOW       46.88 -5.50  New, a classical cyclical stock
CI        79.44 -4.22  Cigna joins sector on a trip south
GT        34.13 -2.88  New, it looks easier to drive downhill
HWP       95.38  1.28  New, nothing to keep bulls on board
KIDE      63.25  6.25  Dropped, short, sweet and over!
RFMD      72.44  1.44  Dropped, a capitulation by the bulls
RMBS      76.88 -5.25  A rather lack luster performance
WLP       59.06 -5.50  New, WLP is looking a little sick



HGSI - Human Genome Sciences
IMCL - ImClone Systems
VVTV - Value Vision Intl
BRCM - Broadcom


BOW  - Bowater Inc
HWP  - Hewlett-Packard
WLP  - Wellpoint Health
GT   - Goodyear Tire


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.


HLIT $69.00 (-3.69) The gap open trading strategy for the shares 
of HLIT remained consistent last week, as the stock continued 
higher earlier in the week, before starting to slide on Wednesday,
and then again on Friday.  Since the coverage of the stock 
a week or so ago, we got two or three trading opportunities 
to make a quick profit, but the upward trend seems to be
consolidating.  There was no reported bad news for the company, 
it looks like a case of profit taking.  This is discouraging
for a company in such a hot sector.  The holidays should be
sending it with the rest of the market.  Watch for its 50 dma
at $65 to be support.


KIDE $63.25 (+6.25) It was short, it was sweet and it 
is over! KIDE gapped up at the open on Wednesday and managed 
to pick up nearly $12 before the close.  Talk about a bounce!  
If you have played KIDE, you know that when KIDE makes a move, 
it makes it big.  KIDE traded up another $9 in Friday's session, 
busted through its 10-dma, which is currently $59, and posted 
volume over three times the daily average.  We noted in last 
Tuesday's write up that we were expecting a bounce right around 
$40 (it bounced off of $42), so hopefully everyone remembered 
to tighten their stops and made out well on our KIDE play.  
With the holiday shopping frenzy kicking into high gear, and 
the Pokemon clan gracing the lists of children worldwide, it 
is really no surprise that KIDE is on the tear once again.  

ALTR $58.50 (-1.13) With a bit of help from ABN AMRO, it 
looks as though the semis are off once again.  ABN came out 
with a report estimating that the semiconductor industry will 
grow 25% in 2000 and 31% in 2001 before finally suffering a 
decline in 2003.  The report mentioned Altera specifically as 
a beneficiary of the potential future upswing and apparently, 
that was exactly what investors needed to hear to restore 
their confidence in ALTR.  ALTR made a solid bounce from $54 
mid-week and has been on the move up since, thus ending our 
put play.

RFMD $72.44 (+1.44) With a drop of over $3 on Monday, RFMD
started the week on the right track, at least for put holders.
Tuesday looked promising as well because the selling was 
coming in earnest with high volume (3.1 million shares).
Unfortunately, Tuesday's sell off to a low of $63.50 looks
like a fake out or at least a short-term capitulation by 
bulls. A strong rally on Wednesday with more volume than on 
Tuesday, tells us that the short term down trend may be over.  
With a follow through rally on Friday, it seems the safest way 
to trade RFMD right now is to not trade it at all.


Current Split Candidates
CMVT - Comverse Tech
SNE  - Sony Corp
NOK  - Nokia
SFE  - Safeguard
YHOO - Yahoo!
BRCM - Broadcom
QLGC - QLogic
HGSI - Human Genome
VRTY - Verity

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  
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
PT   - Portugal Tele    5:1 12-01-99 ex-date 12-02
BELFB- Bel Fuse         2:1 12-01-99 ex-date 12-02
BRCD - Brocade          2:1 12-02-99 ex-date 12-03 no optn
TWTR - Tweeter Home     2:1 12-02-99 ex-date 12-03 no optn
ACTU - Actuate          2:1 12-02-99 ex-date 12-03 no optn
VRTY - Verity           2:1 12-03-99 ex-date 12-06
VRSN - Verisign         2:1 12-06-99 ex-date 12-07
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)
NTRS - Northern Trust   2:1 12-09-99 ex-date 12-10
GDW  - Golden West      3:1 12-10-99 ex-date 12-13
GMST - Gemstar Intl     2:1 12-13-99 ex-date 12-14
EXDS - Exodus Comm      2:1 12-14-99 ex-date 12-15
EMLX - Emulex Corp      2:1 12-15-99 ex-date 12-16
DTM  - Dataram          3:2 12-15-99 ex-date 12-16 no optn
BWE  - BancWest         2:1 12-15-99 ex-date 12-16
ATML - Atmel            2:1 12-17-99 ex-date 12-20
ARBA - Ariba            2:1 12-17-99 ex-date 12-20
TVGIA- TV Guide         2:1 12-17-99 ex-date 12-20
IDPH - IDEC Pharma      2:1 12-20-99 ex-date 12-21
BEAS - BEA Systems      2:1 12-20-99 ex-date 12-21
NTAP - Network Appliance2:1 12-20-99 ex-date 12-21
MRCY - Mercury Computer 2:1 12-20-99 ex-date 12-21
MXIM - Maxim Integrated 2:1 12-21-99 ex-date 12-22
UNFY - Unify Corp       2:1 12-21-99 ex-date 12-22
CMRC - Commerce One     3:1 12-23-99 ex-date 12-27
XLNX - Xilinx           2:1 12-27-99 ex-date 12-28
ICGE - Internet Capital 2:1 12-27-99 ex-date 12-28
JDSU - JDS Uniphase     2:1 12-29-99 ex-date 12-30
HD   - Home Depot       3:2 12-30-99 ex-date 12-31
WCOM - MCIWorldcom      3:2 12-30-99 ex-date 12-31
JNPR - Juniper Netwk    3:1 01-14-00 ex-date 01-18

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:
IMCL - ImClone Systems $41.19 (+4.31)

See biotech section for details

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

VRSN - Verisign Inc $198.00 (+27.94)

See Internet section for details

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

Put play of the day:
BOW - Bowater, Inc. $46.88 (-5.50

See put section for details

Chart = http://quote.yahoo.com/q?s=BOW&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 $79.06 (+0.06)(-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.

We first added to GTW to our call list last weekend as a 
potential momentum play.  Technically we saw GTW sweep to daily 
lows around $76 - a point that by the way just recently marked 
overhead resistance.  The subsequent upswing signaled to us the 
beginning of an uptrend and thus we saw "buying opportunity".  
Beyond that, the rotation into the hardware sector with two of 
its leaders IBM and HWP spiking up following earnings 
announcements and news events further sparked our interest.
On Monday we watched GTW open strong and slam into strong 
resistance at the $80 mark.  The channeling pattern this week 
between firm support at $76 and overhead opposition has indeed 
provided various points of entry.  However it'd be less risky to 
see GTW break through $80 and make a run for the 52-week high at 
$84 (set on November 15th) before opening new plays.  Be 
careful, while we have no qualms about GTW's fundamentals, if
the market decides to pullback this week, $75 may not hold it
up and we could see $70 (we know - that sounds drastic.  just
wait for a close over $80 if you're squeemish).

In the news this week, Fidelity Investments and Gateway 
announced a cooperative agreement.  Existing and potential 
Fidelity clients will receive discounts on Gateway PCs.  
Fidelity's position is to enhance the benefits of the Web and 
fidelity.com as a user friendly investing alternative.  On 
Tuesday Mike Mata, VP of e-commerce and Business Development for 
Gateway announced the launch of Esource, customized Web sites 
for large institutions, educational buyers, and corporate 
customers to track and choose their purchases.  Many believe 
this move is overdue when compared to Dell's existing Premier 
Page service.

BUY CALL DEC-75 GTW-LO OI=1691 at $7.25 SL=5.50
BUY CALL DEC-80 GTW-LP OI= 910 at $4.50 SL=2.75
BUY CALL DEC-85*GTW-LQ OI= 944 at $2.63 SL=1.25
BUY CALL JAN-80 GTW-AP OI= 765 at $7.75 SL=6.00
BUY CALL JAN-85 GTW-AQ OI= 381 at $5.75 SL=4.00

wait for dips to sell puts
SELL PUT DEC-75 GTW-XO OI= 830 at $3.00 SL=4.50
SELL PUT DEC-80 GTW-XP OI=2819 at $5.25 SL=7.00 
(See risks of selling puts in the play legend) 

Picked on Nov 21st at    $79.00    P/E = 55
Change since picked       +0.06    52 week high=$84.00
Analysts Ratings     12-8-1-0-0    52 week low =$36.12
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 = 2.58 mln
Chart = http://quote.yahoo.com/q?s=GTW&d=3m


SUNW - Sun Microsystems, Inc. $136.06 (+10.31)(10.25)(P2W+13.50) 

Sun 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 and on the World Wide Web.

Hardware stocks took off again on Friday, after news of an
agreement between DELL and Research in Motion, a relative 
unknown on the scene.  Looking at a chart on SUNW is like
looking at a chart of the Nasdaq.  Unbelievable!  The stock
paused briefly this week to consolidate part of run up from
$100.  Investors continue to look for tech stocks and SUNW
provides plenty of liquidity.  Thus after several days of
going sideways, the holiday week gave SUNW the push it needed
to break above $130 and away it went.  A lot of this is 
pure momentum, but plenty of players have their sights on
the stock split.  The ex-date is coming soon on Dec. 8th 
which is a week from Wednesday.  With such a strong move up
and many traders expecting a possible dip in the Nasdaq this
week, we recommend targeting shooting any new plays.  For
those already profitable, be sure to adjust your stops to
suit your own level of risk.  For the majority if SUNW's move
it has been using the 5 dma as support.  Expect the stock
to return to this level at $130.50 which would also retest the
old resistance.  Stronger support is at the 10 dma of $127.
With such an extended run, split players may start leaving
early - this may be your only week to play.  Be careful
and watch the Nasdaq.

Looking at the option activity going into the last trading
days before the stock split on 12/09, the out of the money 
December Calls (140,145,150) continue to see a lot of action, 
with traders placing bets looking for higher prices.  A very
bullish indication. 

BUY CALL DEC-130*SUX-LF OI=4729 at $10.75 SL= 7.50 wait for dip
BUY CALL DEC-135 SUX-LG OI=3302 at $ 7.75 SL= 6.00
BUY CALL DEC-140 SUX-LH OI=4203 at $ 5.63 SL= 3.38
BUY CALL JAN-135 SUX-AG OI=1968 at $12.88 SL=10.25
BUY CALL JAN-140 SUX-AH OI=3220 at $10.38 SL= 7.75

Picked on Nov. 7th  at    $109.69    P/E = 92
Change since picked        +26.37    52 week high=$138.25
Analyst Ratings        9-12-3-0-0    52 week low =$ 34.50
Last earnings 10/29     est= 0.31    actual= 0.33
Next earnings 01/20     est= 0.40    versus= 0.34
Average daily volume =   11.8 mln 
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m


SNE - Sony Corp $185.94 (+9.32)(+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.  

Sony is the gift that just keeps on giving!  After Sony 
finished it's bout with the profit takers in the week before 
last, it resumed its beautiful positive momentum run with ease.  
Sony gained over $9 for the week and closed on Friday at the 
high of the day, posting nice volume for the shortened trading 
session.  Therefore, we look to be very well positioned heading 
into next week.  The problem, of course, is finding an entry 
point!  If you aren't in yet, your best bet is to wait for 
intraday dips to hop on board. Sony has support at it's 10-dma 
of $180.  There is no resistance in site, as SNE closed just 
pennies short of its all time high set Friday.

There was plenty of good news for Sony last week. The Sony 
Electronics Unit has given the go ahead for authorized dealers 
to resume Internet sales, including televisions, DVD players 
and camcorders.  There had been a restriction placed on such 
sales while Sony went through and reviewed various service and 
support issues.  Sony debuted their redesigned PlayStation Web 
site last week, which promises to have more, new and better 
features for PlayStation fans.  Sony also announced plans to 
increase their digital camera production output by an 
approximate 30% by launching production in Shanghai.  The 
Federal Trade Commission has asked for additional information 
from both Sony and Time Warner in regards to the proposed 
merger between Columbia House and CDNow.  Sony has stated that 
they remain committed to the deal and are working to provide
resolutions to any issues raised by the FTC.  When the merger 
is completed, Sony and Time Warner will own 37% each of the 
newly formed company.  And of course, there is that yearly 
phenomenon known as holiday shopping, which Sony is sure 
to benefit from.  

BUY CALL DEC-175 SNE-LO OI=212 at $14.00 SL=11.25
BUY CALL DEC-180 SNE-LP OI=379 at $10.25 SL= 7.50
BUY CALL DEC-185*SMW-LQ OI= 47 at $ 7.25 SL= 5.25
BUY CALL JAN-180 SNE-AP OI=193 at $15.00 SL=11.75 

SELL PUT DEC-175 SNE-XO OI= 55 at $ 2.06 SL=3.00
(See risks of selling puts in the play legend) 

Picked on Nov 7th at $164.69  P/E = 56
Change since picked   +21.25  52-week high=$186.00 
Analysts Ratings   0-1-0-0-0  52-week low =$ 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 = 176 K 
Chart = http://quote.yahoo.com/q?s=SNE&d=3m


EMC - EMC Corporation $90.31 (+0.93)(+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. 

Our play in EMC is at a crossroads.  Since November 18th, EMC
has traded in a narrow $3 range.  At this point the $90 area
has proven to be a tough nut to crack.  Traders seem to want to 
bid the price of the hardware maker higher, but there has been 
no volume to push EMC to the next level.  EMC did inch higher
in light holiday trade Friday.  A company named "Research in 
Motion", signed a partnership agreement with Dell.  News of the
agreement did lend support to the hardware sector.  EMC is 
reaching a point where it will either breakout to make new highs
or begin to fall under its own weight.  One interesting point
to consider with the Nasdaq continuing to make new highs, EMC
has struggled to break through overhead resistance.  Should we 
see a correction in the major indices, EMC will probably see
some overdue profit taking as well.  If the self feeding-frenzy
continues in the markets after the holidays, then the chances are
good that EMC could push through the $90 level and continue higher.
As we mentioned EMC and the broader markets are due for a pullback
or correction.  You shouldn't fight the trend, but you should 
exercise prudence when entering a new play or adjusting your 
stops on an existing position.  The $87 area has provided some 
support for EMC.  If we see a bounce off that support area,
with good volume then we would look to add a new play.  If EMC
breaks through the $90 level, please make sure there is better
than average volume behind it prior to entering a new play.
As always assess the potential risks and rewards prior to 
placing an order for a new play.  For the more pessimistic
bulls, if the markets correct sharply (as it is prone to do)
EMC could see $80.  Good enough reason to play with stops.    

In other news, the chat rooms are full of talk of a split for
EMC, but there is no news to substantiate the rumors.  They do
have the shares available, and are approaching the area where
they split earlier this year, but at this point only wishful
thinking.  Two analysts recently downgraded EMC from a strong 
buy to a buy, yet left the 12-month price target near $115. 

BUY CALL DEC-80 EMB-LP OI=2495 at $11.38 SL=8.75 only on dip
BUY CALL DEC-85*EMB-LQ OI=3412 at $ 7.38 SL=5.50
BUY CALL DEC-90 EMB-LR OI=3977 at $ 4.13 SL=2.50
BUY CALL DEC-95 EMB-LS OI=1328 at $ 2.06 SL=1.00 if breaks up

wait for dips to sell puts
SELL PUT DEC-85 EMB-XQ OI=1210 at $ 1.75 SL= 3.50
(See risks of selling puts in the play legend) 

Picked on Nov 14th at    $82.69    P/E = 90
Change since picked      + 7.62    52 week high=$90.38
Analysts Ratings     15-8-3-0-0    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 = 5.87 mln
Chart = http://quote.yahoo.com/q?s=EMC&d=3m


GMST - Gemstar International $118.50 (+13.87)(+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 kicked in to high gear this week as
the momentum we were looking for returned.  GMST splits 2:1 on
December 13th.  Monday after a bounce off the support at $106
shares of GMST surged for the balance of the holiday week to a
new high at $119.38 before closing at $118.50 on Friday up $13.87
for the week.  Considering it was a holiday week the volume on the
move has been solid.  Open interest in the December 115 calls 
increased substantially as well, indicating players were jumping 
on board this train.   A helping hand for our play came in the 
form a split announcement from TV Guide, Tuesday after the close.
In early October, Gemstar agreed to purchase this rival, for about 
$9.2 billion.  TV guide will split 2:1 on December 17th before 
being acquired by GMST.  Technically GMST could be a bit over-
extended and we could see some of the traders that bought GMST
stock less than two weeks ago at $100 take some money off the 
table.  Should we see any selling in the major indices this week,
GMST would certainly not be immune to any profit taking as well. 
GMST would see intraday support near $110 give or take $2.  Any 
bounce off  those areas would be viewed as an opportunity to either 
add to or initiate a new position in GMST, as there appears to be 
more room to the upside for Gemstar before the split.  GMST has been 
a profitable split play at this point, so adjust your stops
accordingly to protect the profits in your account.   Should the
momentum continue higher, enter a new play only on strong volume,
and keep your stops close.

No other news at this time.

BUY CALL DEC-110 GST-LB OI= 638 at $13.38 SL=10.75
BUY CALL DEC-115*GST-LC OI=4766 at $10.13 SL= 7.50
BUY CALL DEC-120 GST-LD OI= 168 at $ 6.88 SL= 5.00

wait for dips to sell puts
SELL PUT DEC-105 GST-XA OI=1302 at $ 3.63 SL=5.50
SELL PUT DEC-110 GST-XB OI=  75 at $ 4.63 SL=6.50
SELL PUT DEC-115 GST-XC OI= 114 at $ 6.25 SL=8.00 if drops, risky!
(See risks of selling puts in the play legend) 

Picked on Nov 18th at   $104.88    P/E = 157
Change since picked      +13.62    52 week high=$119.38
Analysts Ratings      6-0-0-0-0    52 week low =$ 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 = 1.24 mln
Chart = http://quote.yahoo.com/q?s=GMST&d=3m


HGSI - Human Genome Sciences, Inc. $115.50 (+16.50)

Human Genome Sciences develops drugs and diagnostic products based 
on human genes. The company also researches non-human genes, 
including those of bacteria, fungi, and viruses, which could prove
useful in the creation of vaccines and antibiotics. Although HGS 
has no marketable products, it has several in clinical testing. HGS 
has formed collaborations with SmithKline Beecham, Takeda Chemical 
Industries, Merck and The Institute of Genomic Research. these 
firms pay HGS to develop products for cancer, heart disease, 
arthritis and Lou Gehrig's disease. HGS has one-third of a joint 
venture developing gene therapy for vascular diseases, and has 
discovered a protein that could treat AIDS and other immune 
disorders. As of mid June 1999, HGS had filed patent applications 
that describe the medical uses of more than 6,450 newly discovered 
human genes. 

What is driving up the price of HGSI? Good question. One cannot 
deny the phenomenal momentum of this stock. Recently there have 
been two news items that may have influenced this rally. First, 
and probably causing only a minor influence, Needham initiated a 
buy rating on the company on November 23. The most significant news 
item occurred on October 27th. The Board of Directors called for a 
special stockholders meeting seeking the authorization to increase 
the number of common shares from 50 million to 250 million. The 
meeting is scheduled for December 16th. The implication of such a 
large increase in common stock is a obviously a stock split.
Visions of Sugar Plum Fairies are dancing in the heads of investors. 
Even though, as we all know, a stock split changes absolutely 
nothing about the fundamentals and prospects of a company, it just 
human nature to think you are getting something for nothing. With
potential for more than a 2:1, investors are lining up for all of 
that potential holiday cheer. Who are we to fight them? After all, 
emotions drive markets and with potential blockbuster discoveries 
and a pending split, HGSI is creating a lot of warm fuzzies. 
Technically, HGSI had a very good Friday. Although the volume was 
not particularly good due to the holiday week, HGSI was able to 
rally as high as $125.75, a new high. Even though it pulled back 
to $115.50 it still managed to close in new high ground. Resistance 
is at Friday's high. Support is at $111. Major support is in the 
$100 area.

BUY CALL DEC-110*HQI-LB OI=30 at $12.00 SL= 9.50
BUY CALL DEC-115 HQI-LC OI= 0 at $ 8.75 SL= 6.75 volume = 113 Fri.
BUY CALL JAN-115 HQI-AC OI= 2 at $13.88 SL=11.25 caution - low OI

Picked on Nov 28th at $115.50     P/E = N/A
Change since picked    + 0.00     52-week high=$125.75             
Analysts Ratings    1-3-2-0-0     52-week low =$ 28.75                 
Last earning 10/25  est=-0.42     actual=-0.42                            
Next earning 02/11  est=-0.68     versus=-0.55                            
Average Daily Volume =  403 K 
Chart = http://quote.yahoo.com/q?s=HGSI&d=3m


IMCL - ImClone Systems $41.19 (+4.31)

ImClone Systems Inc., is a biopharmaceutical company dedicated to 
the development of novel treatments for cancer and cancer related 
disorders. Through its novel research and development programs, 
ImClone is developing a pipeline for potential products for cancer. 
Its innovative approaches have led to three distinct development 
programs: cancer therapeutics, cancer vaccines and anti-
angiogenesis agents. Each of these programs has resulted in product 
candidates, some of which are advancing through clinical studies.

ImClone Systems, Inc. was the beneficiary of a successful 
secondary offering on November 19th. Presumably, the 2.75 million 
share offering at $32 per share will give IMCL a cash infusion 
enabling the company to continue moving its products through 
clinical trials. One of the lead underwriters of the offering, 
Prudential Securities, increased their price target to $45 per share 
in the near term and spoke of a $100 target within two years. 
Although it is not uncommon for an underwriter to write glowingly 
about a company after participation in an offering it is 
nevertheless a positive for the company to receive support from one 
of Wall Street's big boys. Prudential has a lot of investors, and 
with the biotechs heating up, IMCL could be one of the winners. 
On Friday, IMCL's shares broke above resistance at $39.50 
completing a usually bullish cup-and-handle pattern. The implication 
of this pattern is that IMCL shares could continue to rally, 
especially without much overhead resistance. Aggressive investors 
could initiate bullish positions if IMCL starts moving up on 
Monday. Less aggressive investors might want to wait and see if 
IMCL can pull back and test the support at $39.50 before initiating 
any positions. IMCL has strong support at the price of $35. However, 
with the current chart pattern it seem unlikely that IMCL will test 
that support any time soon.  Chart lovers can see that IMCL has 
been climbing its 5 dma (currently at 38.19).  A break in this
support could result in a quick drop to its 10 dma (also at $35).

BUY CALL DEC-35 QCI-LG OI=813 at $7.63 SL=5.75
BUY CALL DEC-40*QCI-LH OI=677 at $4.63 SL=2.75
BUY CALL JAN-40 QCI-AH OI= 81 at $6.75 SL=5.25
Picked on Nov 26th at  $41.09     P/E = N/A
Change since picked     +0.00     52-week high=$41.75             
Analysts Ratings    2-4-1-0-0     52-week low =$ 8.19                 
Last earning 11/16  est= 0.21     actual= -0.44                            
Next earning  3/31  est=-0.17     versus= -0.34                           
Average Daily Volume =  677 K 
Chart = http://quote.yahoo.com/q?s=IMCL&d=3m


VRSN - Verisign Inc $198.00 (+27.94)

VeriSign provides Internet-based trust services that 
authenticate and protect data so secure transactions and 
communications can be conducted over the Internet, intranet, and 
extranets.  Websites, enterprises, government agencies, and even 
individuals use VeriSign's digital ID's (digital certificates) 
with the encrypted information as cybersafeguards for such 
activities as e-mail, home banking, and credit card 
transactions.  Visa represents 14% of total sales.

After following stellar earnings on October 21st, sheer momentum 
was driving VRSN upward to new levels.  Then on November 11th 
Verisign announced a 2:1 stock split and the fire was rekindled.  
However this week truly marked the take-off point with gains of 
$27.94, or 16.4%!  The stock has invariably stretched into new 
territory and on Friday, VRSN set its fourth consecutive 52-week 
high!  So it now stands that $202.50 is officially overhead 
resistance.  You'd normally expect a little back filling after 
such enormous leaps, but its possible investor's slap-happy 
enthusiasm may not let up with just 6 trading sessions left in 
this VOLATILE split play.  VRSN's split takes affect on Tuesday,
December 7th.  The 10-dma ($178.27) has risen and positioning 
itself slightly below near-term support at $180.  There's no 
crystal ball to see if VRSN will return to this level; therefore 
you may have to target shoot for an intraday low that is in line 
with their risk tolerance if you decide to open any new 

Let's bring you up-to-date on the news.  On November 11th when 
the Board of Directors announced the 2:1 stock split, the 
company also separately announced a partnership with Telia, 
Sweden's largest telecommunications company, to provide digital 
certificate and public key infrastructure (PKI) services in the 
Nordic and Baltic regions.   In other news the e-commerce 
industry was given the word that the US Senate passed legislation 
allowing digital signatures to have the same legal standing as 
those written on paper. For those searching for an analyst view 
point, on November 18th David Zale of Sands Brothers & Co 
reiterated a Strong Buy rating for VRSN and issued a price target 
of $250! 

BUY CALL DEC-190*XVR-LR OI=313 at $20.25 SL=15.75
BUY CALL DEC-195 XVR-LS OI= 96 at $17.75 SL=14.00
BUY CALL DEC-200 XVR-LT OI=315 at $15.25 SL=12.00
BUY CALL JAN-195 XVR-AS OI= 21 at $27.38 SL=21.50
BUY CALL JAN-200 XVR-AT OI= 53 at $25.13 SL=19.50

Picked on Nov 23 at     $187.00    P/E = N/A
Change since picked      +12.00    52 week high=$202.50
Analysts Ratings     5-12-3-0-0    52 week low =$  9.68
Last earnings 09/99   est= 0.02    actual= 0.03 surprise +50.0% 
Next earnings 01-25   est= 0.05    versus=-0.06
Average Daily Volume = 1.35 mln
Chart = http://quote.yahoo.com/q?s=VRSN&d=3m


CMGI - CMGI Inc. $146.63 (+21.75)(+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,ICGE, and SOFTBANK.

Shareholders in CMGI had another great week.  CMGI which invests
in, develops and operates a number of funds, whose primary focus
is the Internet saw $21.75 added to the price of its stock this
week.  There was news and rumors galore, actually a little 
something for everyone.  The previous week the gains in CMGI came
on the news of the agreement involving China and its entry into the
World Trade Organization.  This week CMGI announced they were 
launching a new business to business venture fund.  The new fund 
is expected to build on the success of the CMGI's current funds,
and their strong track record in B2B investments, and could reach
up to $1 billion in capital.  Rumors of a split announcement and 
a merger with 24/7 Media also helped propel CMGI higher this week.
24/7 Media(TFSM) is said to be the target of a potential merger 
deal for CMGI.  The talks between CMGI and TFSM have been an on
again-off rumor for sometime.  CMGI has beefed up it's holdings in
other online advertising companies this year.  As for a stock split
they do have the available shares.  Shareholders of CMGI did enjoy
a 2:1 split in late May.  The stock was trading near $175 when news
of a split came out last March.  CMGI will hold their annual
stockholders meeting December 17th, just two days after they report
earnings.  It could be a perfect time to announce a split, however
as of now it's all speculation.  Whatever the reason, CMGI has
caught on fire in the last 10 days and appears to be moving higher.
Keep in mind CMGI has shot up over $45 in the last two weeks.  For
those of you that entered our play in CMGI adjust your stops to 
protect your profits.  Intraday support for CMGI can be seen at 
$145, $140, and near $135.  If you are considering a new play, 
consider not only your risk profile but also the fact that CMGI 
can be a very volatile stock and may not be for everyone.    

There is no other significant news on CMGI at this time.    

BUY CALL DEC-140 GCB-LH OI=3706 at $15.00 SL=11.75
BUY CALL DEC-145 GCB-LI OI= 830 at $12.75 SL=10.50
BUY CALL DEC-150*GCB-LJ OI=3740 at $10.00 SL= 7.50
BUY CALL DEC-160 GCD-LL	OI=2063 at $ 7.13 SL= 5.25

Picked on Nov 21st at   $124.88    P/E = 36
Change since picked      +21.75    52 week high=$165.00
Analysts Ratings      4-6-0-0-0    52 week low =$ 16.34
Last earnings 07/99   est= 4.08    actual= 4.24 surprise +3.9%
Next earnings 12-15   est=-0.17    versus= 0.38
Average daily volume = 4.41 mln
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m


The Option Investor Newsletter             11-28-99  
Sunday                4  of  6

Internet cont.

VVTV - Value Vision International $47.81 (+4.31)

Value Vision International, Inc. owns and operates the third
largest and fastest growing home shopping network and a 
companion Internet shopping website, both which are being
re-branded as SnapTV and SnapTV.com, respectively, as part 
of a wide-ranging direct e-commerce strategy the Company is
pursuing with NBC Internet (NBCi).  The moves are expected
to position SnapTV and NBCi as the leaders in the ongoing
convergence of television and the Internet, combining the
promotional and selling power of television with the purely
digital world of e-commerce.  Value Vision, which is 
approximately 40% owned by GE Equity and NBC, offers live
programming 24 hours per day, 7 days a week.

On Tuesday VVTV came out with record sales for the third
quarter as they soared to $67 million, 84% higher than the
comparable prior-year period.  The principal contributor
to this improvement was the company's television home 
shopping operations, and going forward the company is 
reporting on-going strength in core operations, and they
look to expand efforts of new product offerings.  As we 
go into the holiday season, the retail sector, especially
the Catalogue and Mail order companies are going to receive
a lot of attention.  VVTV seems to be stepping up as the 
leader in the space.  On Friday the stock hit another 52 
week high of $47.88 on heavy volume, 2 times more than
average.  We expect the upward momentum to continue as we
approach the Christmas and New Year season, we look to add
to positions here, or on dips.  Mild support levels seem to be 
holding up at the 45.00 level.  Be very careful here.  We
like the looks of VVTV but there is an eerie similarity 
between it and a chart of the Nasdaq.  VVTV has been climbing
its 5 dma (currently at $45.00) with the occasional dips 
to its 10 dma (currently at $42.75) before recovering.
Any major selling in the Nasdaq could pull VVTV down with it.
Play with stops.

In the news, major league baseball legend Pete Rose, the 
games all-time hit king will appear on VVTV on Sunday 
promoting sports memorabilia, during a prime time special.
This should draw increased attention to the company.

BUY CALL DEC-45 UVR-LI OI=633 at $5.00 SL=3.25
BUY CALL DEC-50 UVR-LJ OI=  0 at $2.50 SL=1.25 vol=32 on Fri.
BUY CALL JAN-45 UVR-AI OI= 33 at $5.88 SL=4.38
BUY CALL JAN-50 UVR-AJ OI= 20 at $4.50 SL=2.75 vol=180 on Fri.

Picked on Nov. 28th  at    $47.81    P/E = N/A
Change since picked         +0.00    52 week high=$ 47.88
Analyst Ratings         1-0-0-0-0    52 week low =$  4.19
Last earnings 11/23     est= 0.02    actual= 0.06
Next earnings 01/00     est= 0.06    versus= 0.06
Average daily volume =      424 K
Chart = http://quote.yahoo.com/q?s=VVTV&d=3m


YHOO - Yahoo! Inc $226.88 (+8.13)(+21.81)   

Yahoo! Inc is a global Internet media company that offers 
an online guide to web navigation, 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 investor enthusiasm 
which typically surrounds this high-flying Internet at this 
price level.  Historically the company has announced stock 
splits when the share price reaches $200 to $220 and this week 
YHOO surpassed those marks!  Recall YHOO recently split 2:1 on 
February 5th, 1999.  Now it was previously thought that YHOO
did not have enough shares to authorize another split.  We have
found new data that contradicts that viewpoint.  It appears
that YHOO has 900 mln shares authorized and only 263 mln 
outstanding.  Therefore, this Internet blue chip could 
announce a split if it wants to.  Either way, we might see
one with a shareholder meeting likely to occur in April or
March.  The earnings report is expected on January 12th.  
However e-holiday momentum is also a factor in the stock's 
recent rise.  The arrival of the holiday season is starting to 
pump up the e-tailers.  Since YHOO is in a similar position to 
Amazon.com (AMZN), American Online (AOL), and eToys (ETYS) which 
all have a loyal audience, they are among the top picks for a 
profitable holiday quarter.  

In the trading arena this week, YHOO established a near-term 
support level at $218 - $220 level just above the trailing 
10-dma ($215.92) and consistently powered higher.  On Friday, 
YHOO hit an intraday high of $235.25 before selling off in the 
afternoon.  Not to worry the downdraft was on low volume 
indicating the selling was simply due to some investors taking a 
little cash off the table ahead of the weekend.  Actually 
Friday's afternoon reprieve was a blessing if you were waiting 
for a slight pullback before jumping into the play.  Although 
YHOO's volatility does offers daily entry points even during a 
climb. Despite the volatility, YHOO has been in a tight range
as it bounces off its 5 dma (currently resting right above it
now).  If YHOO breaks the 5 dma, like during a Nasdaq sell-off,
first stop will be the 10 dma and not the mild support at 
$220.  It was encouraging to see YHOO so handily beat its old
closing high back in April.  At the moment, overhead opposition 
is at Friday's daily high ($235.25), however you can almost 
taste a new 52-week high in the near future.  The $244 level hit
(intraday) during the "Hoorah" of April is merely 17+ points 
(7%) away!  Remember to confirm the stock's direction next week 
along with the market sentiment and plan entry points carefully.  
Continuing in the spirit of the holiday season, Yahoo! is 
providing shoppers with online consumer safety tips with viewing 
on the home page of shopping.yahoo.com.  In other news this week 
Yahoo! signed a marketing agreement with 1-800-FLOWERS.com 
providing subscribers with direct access to the popular flower 
and gift site.  

BUY CALL DEC-220 YMM-LD OI=4851 at $16.13 SL=12.50
BUY CALL DEC-230*YMM-LF OI=5239 at $11.25 SL= 9.00
BUY CALL DEC-240 YMM-LH OI=3267 at $ 7.25 SL= 5.50
BUY CALL JAN-230 YMM-AF OI=4347 at $22.13 SL=17.25
BUY CALL JAN-240 YMM-AH OI=4862 at $18.00 SL=14.00

Picked on Aug 15th at   $212.56    P/E = 1116
Change since picked      +14.32    52 week high=$244.00
Analysts Ratings    13-14-4-0-0    52 week low =$  9.68
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 = 7.73 mln
Chart = http://quote.yahoo.com/q?s=YHOO&d=3m


BVSN - Broadvision $111.00 (+13.50)(+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 WalMart.  Insiders own 46% of the company.

BVSN's view is growing wider by the day.  Now providing over 400 
of the largest "brand name" businesses with end to end e-tail and 
customer interactive services, BVSN is catching the holiday 
spirit.  With more people expected to transact business online 
than ever before this holiday season, BVSN stands to benefit as 
the software provider that makes it happen.  Technically, BVSN 
closed at a new high of $111, but has twice encountered 
resistance at $113-$114.  From Tuesday and Wednesday last week, 
support formed at $106; the next level down is $100.  On 
"Daytrader Friday" support was found at $110.  Volumes have come 
back a bit too (still above the ADV), indicating the frothy 
enthusiasm may be temporarily over.  Enthusiasm without the froth 
is still good.  We're inclined to target shoot from $102-$106, 
but you should pick your own level of risk.  BVSN has also been a 
recent 3:1 splitter.  The announcement was made at $133. Though 
we are not there yet, as we get closer to that number, BVSN could 
again entertain a split.  Still keep your guard up.  BVSN has 
almost doubled in the last month, making it susceptible to a 
big pullbacks should the rest of the market decide it's time for 
a 10% correction, following this almost uninterrupted recent run.  
Make sure the market is going in your favor before starting a new 
play and use a trailing stop to protect your profits if BVSN 
starts to backslide.

In the news, BVSN was named as a Fortune e-50 company in the 
November 15 issue of Fortune, which certainly raises the 
visibility.  Not much else making the news on this one.  Be 
vigilant in your news monitoring.  If you don't see news, it 
generally means they aren't making any, and the next bit could be 

BUY CALL DEC-105*BDV-LI OI=411 at $13.38 SL=10.75
BUY CALL DEC-110 BDV-LH OI=286 at $11.13 SL= 8.75
BUY CALL DEC-115 BDV-LC OI= 83 at $ 8.63 SL= 6.50
BUY CALL JAN-110 BDV-AH OI=123 at $17.13 SL=13.50
BUY CALL JAN-115 BDV-AC OI= 74 at $15.13 SL=11.75

Picked on Nov 7th at   $83.50     P/E = 615
Change since picked    +27.50     52-week high=$114.69
Analysts Ratings   5-16-1-0-0     52-week low =$  6.63
Last earnings 09/99 est= 0.13     actual= 0.16
Next earnings  1-27 est= 0.16     versus= 0.08
Average Daily Volume =   1.5M
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m

MACR - Macromedia Inc. $69.25 (+6.62)

Macromedia is a leading provider of Web authoring and 
production  software for professional Web developers.  Its
products range from Dreamweaver, the market-leading
professional Web authoring environment, to Flash, the 
industry standard for high-impact, vector-based Web sites 
that deliver motion, sound, interactivity and graphics.  

MACR is a big name when it comes to web based development
tools.  Just to make sure, they are hiring an advertising
agency to establish that fact.  With a lot of enthusiasm 
for stocks in the Internet software sector, MACR finished
the holiday week with a +2.13 gain on Friday.  MACR is 
looking very bullish technically.  It hit a double top at
$50 in April and later in May. Suddenly near the first of
October, its stock explodes off its 30 dma and breaks
the $50 barrier.  Spending the next couple of weeks 
consolidating, it quickly powers higher with a string of
new acquisitions and strategic partnerships.  Again,
it powers through $60 only to fall back and consolidate
to its 30 dma before exploding again.  Does anyone detect
a pattern?  All of MACR's longer term moving averages are 
finally begin to point up and it looks like we are in a
stage two ascent.  Some chartist could argue we are in
the middle of a wide ascending channel.  Whatever the case,
the short term technical outlook is bullish with a great
case of higher lows.  Conservative players should wait for
a close above $70, while patient ones can target shoot 
support at $64 if we get a Nasdaq pull back.

In recent news, MACR is currently involved in a new web site to 
be launched in January called StanLee.Net, a comic Website that
is suppose to be the next Amazon.com for comic books.  Well we 
don't know about that, but the street is buying the story, a
number of brokerage houses are rating the stock a strong buy.
They have also recently hired a well known Advertising agency
To help establish there brand name.  Furthermore looking at the 
option activity, the December 70 Calls had open interest of 319 
contracts on Tuesday, today the open interest is 1363, traders
are placing bets that the shares are going higher in the near 

BUY CALL DEC-65 MRQ-LM OI= 349 at $ 8.50 SL= 6.50
BUY CALL DEC-70*MRQ-LN OI=1363 at $ 5.50 SL= 3.75
BUY CALL JAN-65 MRQ-AM OI=  30 at $12.88 SL=10.63
BUY CALL JAN-70 MRQ-AN OI=  39 at $ 9.63 SL= 7.50

Picked on Nov. 23rd  at   $67.56    P/E = 113
Change since picked        +1.69    52 week high=$70.31
Analyst Ratings        5-4-1-0-0    52 week low =$24.25
Last earnings 11/13    est= 0.31    actual= 0.19
Next earnings 01/26    est= 0.15    versus= 0.12
Average daily volume =     907 K 
Chart = http://quote.yahoo.com/q?s=MACR&d=3m


MSFT - Microsoft Corp $91.13 (+5.13)(-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 call play is based on the recent move by US District Judge 
Thomas Penfield Jackson to appoint a mediator, Richard A. 
Posner, Chief Judge of the 7th US Circuit Court of Appeals in 
the government's antitrust case against Microsoft to negotiate 
an out-of-court settlement.  Jackson didn't want "divergent 
views" to destroy the current rapport "between the states and 
the Justice Department so far has been, I think enormously 
helpful. And I would like to see it continue. I would not like 
to have to deal with divergent points of view."  Investors were 
pleased too that talks would likely resume and started to put 
their money back into MSFT.  The first sign of MSFT's renewal 
was on Friday November 19th when it traded up $1.06 (1.3%) on 
strong volume after succumbing to a monopoly and bully lashing.  
The stock hit bottom as it played tag with the 200-dma (then @ 
$85-$86), but this week's rise places it firmly at the first 
line of defense.  The next battle maybe a tough one.  MSFT 
finally cleared all of its moving averages only to land at
the bottom of a lot of congestion.  Looking at the chart, we
could see a move to $95 or $96 but beyond that may require 
an out-of-court agreement with the gov't.  The recent sessions 
have provided lots of intraday action extending many different 
opportunities for entry into this news-driven momentum play.  As 
the Nasdaq rages on and the end of the monopoly skirmish seems 
to be coming to a timely close, MSFT is poised to go higher in 
the near-term as long as the good news keeps on coming.

The New York Times reported on Thursday that Microsoft and its 
government opponents have been called to appear in Chicago this 
Tuesday to begin private settlement talks.  A source close to 
the case said Judge Posner is "expected to assess quickly the 
chances of a settlement between the two sides" and that an 
agreement would most likely happen "by the end of January, or it 
won't happen".  Many know Microsoft has been accelerating its 
investments into the cable TV industry both on the domestic 
front and internationally.  Presently the company is negotiating 
a deal to acquire a 60% stake in Titus Communications Corp, 
Japan's 2nd largest cable TV operator, which is owned by 
MediaOne Group (UMG) for approximately $957 mln.  It's likely an 
agreement will be reached quickly.  In other news, Microsoft and 
partners Softbank and Global Crossing (GBLX) announced the 
completion of a joint venture company, Asia Global Crossing.  
Together they will construct an undersea network called East 
Asia Crossing to link Japan, China, Singapore, Hong Kong,
Taiwan, South Korea, Malaysia, and the Philippines to provide 
advanced network-based telecommunications services to businesses 
and consumers throughout Asia.

BUY CALL DEC-85 MSQ-LQ OI=15006 at $7.50 SL=5.75
BUY CALL DEC-90*MSQ-LR OI=28024 at $3.50 SL=1.75
BUY CALL DEC-95 MSQ-LS OI=34594 at $1.38 SL=0.75
BUY CALL JAN-90 MSQ-AR OI=35621 at $6.38 SL=4.75
BUY CALL JAN-95 MSQ-AS OI=23553 at $4.13 SL=2.50

SELL PUT DEC-85 MSQ-XQ OI=16144 at $0.88 SL=1.50 (wait for dip)
SELL PUT DEC-90 MSQ-XR OI=11470 at $2.00 SL=3.75
(See risks of selling puts in the play legend) 

Picked on Nov 21 at      $86.00    P/E = 60
Change since picked       +5.13    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 = 26.8 mln
Chart = http://quote.yahoo.com/q?s=MSFT&d=3m


VRTY - Verity Inc $105.50 (+6.37)(+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.  

VRTY is a split run play that's quickly approaching its pay date 
- there's only five trading left!  The stock is splitting 2:1 
after the bell on Friday 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 nonetheless VRTY clearly broke through the psychological 
$100 barrier.  This week VRTY made a valiant charge towards 
$110, just missing the target on Tuesday as it swept up to 
$109.25 on moderate volume.  

If you used the consolidation period at strong support 
($100-101) mid-week to enter the play - Congratulations!  On 
Friday VRTY bullishly advanced $5.50, or 5.5% in a straight up 
ascent from the open.  The 10-dma ($98.68) is still nicely 
tucked under near-term support and remains a good point of 
reference for a stop loss.   There are no news events to report 
that would have affected trading this week, however remember the 
2:1 split is this Friday.  Verity's earnings are expected to 
follow around December 15th therefore it's possible we may not 
see a post-split decline.  No matter it's still recommended to 
exit your positions before the close on Friday.  You can always 
jump back into another position after VRTY goes ex-div on 
Monday December 6th AND you've confirmed definitive upward 
direction.  Remember cash is king!

BUY CALL DEC-100*YQV-LT OI=682 at $13.50 SL=11.00
BUY CALL DEC-105 YQV-LA OI=483 at $10.75 SL= 8.50
BUY CALL DEC-110 YQV-LB OI=114 at $ 9.00 SL= 6.75
BUY CALL JAN-105 YQV-AA OI=  1 at $13.63 SL=11.00
BUY CALL JAN-110 YQV-AB OI= 22 at $14.50 SL=11.50

Picked on Nov 21st at   $99.13    P/E = 95
Change since picked      +6.37    52-week high=$109.25
Analysts Ratings     5-1-0-0-0    52-week low =$ 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 =   312 K
Chart = http://quote.yahoo.com/q?s=VRTY&d=3m


SDLI - SDL, Inc. $186.75 (+19.25)

SDL's products power the transmission of data, voice and Internet 
information over fiber optic networks to meet the needs of 
telecommunications, dense wavelength division multiplexing 
(DWDM), cable television and satellite communications 
applications. They enable customers to meet the bandwidth needs 
of increasing Internet, data, video and voice traffic by 
expanding their fiber optic communications networks much more 
quickly and efficiently than would be possible using conventional 
electronic and optical technologies. SDL's optical products also 
serve a variety of non-communications applications, including 
materials processing and printing.

Anybody have a nosebleed yet?  Friday's gain of $18 is amazing.  
It's also a bit dangerous since the gain came with only half the 
ADV.  Granted it was a short day, but the institutions left this 
one on the bench while the daytraders got most of the action.  
Technically, SDLI is trading at the top of its channel and we 
should expect a pullback after 8 straight days of new record 
highs.  Nothing goes up in a straight line for long.  The nearest 
support is all round numbers like $180, $170, then $160.  All of 
these are shaky at best since any close on Friday over $168 would 
have been a record - everything above it is blue sky and can 
quickly evaporate.  SDLI is another hot player in the optical 
equipment/networking sector and is rumored to have an interest 
in acquiring ETEK, which if actually announced, might not be so 
great for our play since most acquiring companies lose price 
while the "acquirees" gain.  So why does SDLI keep gaining?  
Perhaps because it too is a candidate for acquisition from a 
bigger player - the rumor here is CSCO - again, a completely 
unconfirmed rumor.  No matter what the reason, the sector is 
consolidating and there will be more buyouts.  SDLI should 
continue to be a great play as long as the volume remains high 
and the sector remains hot.  Still you need to have an itchy 
trigger finger to get in on any bounces (that's been tough the 
last few days) and to get out if the trade goes against you (more 
likely based on history).  This play should only be attempted by 
extremely risk tolerant types - it's about as far a way from a 
bond payment as you can get.

CSFB came to the party on Wednesday with a new price target of 
$210 and a Buy rating.  SDLI could also be a split candidate, but 
management has split the stock only once before at roughly $72.  
SDLI is two and a half times that now.  They need more shares 
authorized to make it happen anyway, and so far have not filed a 
proxy statement to get shareholder approval.  Though the stock 
price currently screams for a split, management appears reticent 
to do so right now.  Earnings are not until February, which would 
be a likely time for an announcement.

***High time value risk***

Like QCOM, this play may fit your profile for covered calls 
too.  Selling the DEC-180 (ITM) produces a 10.8% return 
through December 17 if called.  Just watch the downside if 
the speculative frenzy ends.

***No January strikes yet***
- plus low volume at these high levels -
>>be careful with these stops... adjust them to your risk

BUY CALL DEC-170*YSL-LN OI=21 at $31.25 SL=24.50 look for dip
BUY CALL DEC-175 YSL-LO OI=31 at $28.13 SL=22.00
BUY CALL DEC-180 YSL-LP OI= 0 at $25.50 SL=20.00 wait for OI

Picked on Nov 23rd at  $167.50    P/E = 249
Change since picked     +19.25    52-week high=$189.25
Analysts Ratings     8-9-0-0-0    52-week low =$ 10.69
Last earnings 10/99  est= 0.18    actual= 0.22 surprise = 22%
Next earnings 02-09  est= 0.25    versus= 0.14
Average Daily Volume =    804K
Chart = http://quote.yahoo.com/q?s=SDLI&d=3m


NT - Nortel Networks $81.69 (+0.44)(+8.69)(+3.75)(+6.87)

Here come 'Ol Flat Top; he come groovin' up slowly.  What 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, local area networks, 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 firm, BCE owns 40%.  The U.S. 
accounts for over 50% of sales.

NT practically stood still this week despite some favorable 
analyst coverage, including a SoundView price target upgrade to 
$110.  Even so, it still eked out a new closing high the day 
after Thanksgiving.  Now the number one producer of optical 
networking gear ahead of Lucent took the week off for 
consolidation.  Volume fell off too.  Notice the relationship?  
No volume = no gain.  Support is at $77(10dma), then $75.  You 
can target shoot here or wait for a breakout over $82.50 (with 
volume) to take a position.  NT is also a possible splitter once 
it reaches $88, but don't base the play on that.  Here's a new 
twist.  We don't usually list options of acquired companies, but 
in the case of NT buying CLFY (Clarify is a designer and 
manufacturer of front office e-business software solutions.  The 
transaction will close in the first quarter of 2000), we have an 
opportunity to leverage the play.  NT is paying 1.3 shares for 
every CLFY share, which means that for every $1 gain in NT, CLFY 
will move up $1.30, thus we list CLFY strikes too.  Though NT and 
CLFY track closely, don't play the CLFY angle unless you monitor 
NT for a good entry too.

Not much on news, but NT did announce a single platform that can 
accommodate both voice and DSL in the same software and node 
solution.  If you were paying attention, Wednesday was a great
entry point - but it took faith that the 10 dma would hold.
Looking at Wednesday intraday... it fell in the morning and
climbed slowly all day.  This doesn't mean that we don't have
a good entry now, but watch the overall market.


BUY CALL DEC-75 NT-LO OI=1777 at $8.75 SL=6.50
BUY CALL DEC-80 NT-LP OI=2436 at $5.25 SL=3.50
BUY CALL DEC-85*NT-LQ OI=1896 at $3.00 SL=1.50
BUY CALL JAN-80 NT-AP OI= 907 at $8.00 SL=6.25
BUY CALL JAN-85 NT-AQ OI= 273 at $5.75 SL=4.00

CLARIFY STRIKES: (CLFY = $102.94) - CAUTION - low volume

BUY CALL DEC- 95 QCY-LS OI=  0 at $ 9.88 SL= 7.50, $7.94 ITM
BUY CALL DEC-100*QCY-LT OI= 50 at $ 7.38 SL= 5.50
BUY CALL DEC-105 QCY-LA OI= 17 at $ 6.63 SL= 5.00
BUY CALL JAN-100 QCY-AT OI=  4 at $13.13 SL=10.50
BUY CALL JAN-105 QCY-AA OI=  2 at $ 8.63 SL= 6.50

Picked on Nov 7th at   $68.81     P/E = 489
Change since picked    +12.88     52-week high=$82.19
Analysts Ratings  12-12-3-0-0     52-week low =$22.06
Last earnings 09/99 est= 0.26     actual= 0.28 surprise=7.7%
Next earnings  1-26 est= 0.44     versus= 0.36
Average Daily Volume =   4.0M
Chart = http://quote.yahoo.com/q?s=NT&d=3m


NOK - Nokia $146.75 (+13.25)(+11.25)(+6.37)

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?

Another day, another gap open.  What's a target shooter to do?  
Simple. . .wait for Friday's big $4 gap from $140-$144 to fill 
in.  Friday being a short trading day, we think the action was 
daytrader inspired, despite a new all-time closing high.  On the 
old resistance = new support theory, look to target shoot in the 
$140 range; after that $135-$136.  What's causing the run in the 
first place?  In short, NOK is the largest mobile phone producer 
in the world and Christmas is coming soon.  With the world 
rapidly adapting to wireless and literally dumping their land-
based systems, NOK is producing far more handsets than they had 
projected just last year, and the trend looks to continue.  We 
also (almost reluctantly) have to put NOK on the split list now 
that it trades over $140.  The trick is that it has to hold here 
and then move up.  We know it's easy to disregard caution in this 
type of a market.  While we expect the gains to keep coming, it 
is entirely dependent on volume.  If it dries up, you'll want to 
be sure to have a trailing stop in place.  While not a guarantee, 
it's the only protection we have against misfortune should the 
market decide its time for a correction following the record 
setting pace of November.

Not much in the news this week, except that NOK will be co-
branding with Infospace to provide Web portal information to 
wireless phones.

BUY CALL DEC-135 NAY-LG OI=1725 at $14.88 SL=11.75
BUY CALL DEC-140*NAY-LH OI=1882 at $11.50 SL= 9.00
BUY CALL DEC-145 NAY-LI OI=1086 at $ 8.00 SL= 6.25
BUY CALL DEC-150 NAY-LJ OI=   0 at $ 6.13 SL= 4.25 wait for OI
BUY CALL JAN-140 NAY-AH OI= 972 at $16.25 SL=12.50
BUY CALL JAN-145 NAY-AI OI= 610 at $13.88 SL=10.75

Picked on Nov 14th at $122.25     P/E = 121
Change since picked    +24.50     52 week high=$147.12
Analysts Ratings   13-8-0-0-0     52 week low =$ 47.81
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 =   2.8M 
Chart = http://quote.yahoo.com/q?s=NOK&d=3m


QCOM - Qualcomm Inc. $384.75 (+17.69)(-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 a 6.4% interest 
in Globalstar(TM). Headquartered in San Diego, Calif., QUALCOMM 
is included in the S&P 500 Index and is a 1999 FORTUNE 500® 

With CDMA as the new standard for wireless protocol transmission, 
QCOM will earn a fortune from licensing the technology over the 
next few years.  While they sell the equipment needed to run the 
systems, they also get paid by selling the code with every new 
CDMA phone, much the same way that MSFT gets paid for almost 
every new PC.  Even when they sell the handset division, the 
announcement of which is expected by year-end (perhaps at the 
December 20 shareholder meeting), they will still collect the fee 
for every handset sold with CDMA capability.  Technically, QCOM 
has been consolidating nicely on low volume.  It indicates that 
nobody is particularly interested in dumping the shares at these 
lofty heights.  Who'd want to with a 4:1 split expected to be 
approved by shareholders on December 20 (while not guaranteed, 
the split would likely be immediate)?  Support is hard to peg, 
but is moving up.  Just in the last week, it came as low as $345 
on Tuesday and $380 on Friday (short day).  We would expect 
Friday's gap to be back-filled down to $375 in a re-test of old 
resistance becoming new support.  Only a suggestion, but $375 
might make a good target.  Of course, if the market decides to 
retrace some of the November gains, all bets are off.  For the 
unexpected surprises (and they will occur), keep a trailing stop 
in place to protect your profits

The news is a bit old, however, China will adopt CDMA as the new 
standard for wireless transmission under the new trade agreement.  
When that happens, there are estimated to be 30 mln new 
subscribers within the first year.  That's bigger than AT&T's 
wireless division and fractionally less than Vodaphone and 
Airtouch combined.  With the announcement of the sale of the 
handset division (December 20?), there's added horsepower for a 
price move over and above the split news.


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 an at the money 
contract can yield roughly a 7% return until December 17. 


If QCOM takes a sudden unexpected turn for the worst,
all OTM strikes will likely vanish into thin air.  Obviously,
it has shown amazing strength so far and investors continue
to throw money at it with wild abandon... this will not last
forever.  This play is not for everyone.  Higher strikes are
only listed for those willing to take the risk.

BUY CALL DEC-370*AAF-LN OI=2066 at $37.00 SL=29.00 wait for dip
BUY CALL DEC-380 AAF-LP OI=1766 at $31.75 SL=24.75
BUY CALL DEC-390 AAF-LX OI=1956 at $27.00 SL=21.00
BUY CALL DEC-400*AAF-LY OI=2627 at $22.00 SL=16.50 
BUY CALL DEC-420 AAF-LV OI= 505 at $15.13 SL=11.00
BUY CALL JAN-370 AAF-AN OI= 655 at $58.00 SL=45.25
BUY CALL JAN-380 AAF-AP OI= 769 at $53.25 SL=41.50


Just for fun, we thought we would list the highest
strike available.  The DEC-500.  It is unbelievable 
that it has an OI of 1801.  Rest assured that if you
buy this one, you'd better count on a 99.999% chance
of losing money.  This is merely for the gambling type.

GAMBLE CALL DEC-500 AAF-LA OI=1801 at $2.50 SL=????

Picked on Nov 16th at   $330.00    P/E = 303
Change since picked      +54.75    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 01-19   est= 0.95    versus= 0.33
Average Daily Volume =  6.4 mln
Chart = http://quote.yahoo.com/q?s=qcom&d=3m


JDSU - JDS Uniphase $266.00 (+52.19)(+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 

"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.  
Now would somebody please show us an entry point?  Egad, this 
one's been hard to hit.  Wednesday we had one opportunity after 
the opening to get in at $240 before the run to $256 by the 
close.  Friday, volume remained solid, pushing the price all the 
way up to $272.50 before day-end profit taking zipped it back to 
$266.  Technically, we are in the middle of the short-term 
channel and at the high end of the longer-term channel.  In 
either case, support is in the $247-$250 range.  We urge you not 
to chase it at these lofty levels; wait for a pullback since 
missed money is better than lost money.  There is still a full 
month until the 2:1 split.  That said, there still appears to be 
plenty of cash waiting to be put to work, which will drive 
volume, and thus, the price.  As long as funds are buying, a 
major retracement is unlikely.  If you take a position, be sure 
to set a trailing stop to protect the profits (but choose 
carefully, our suggested stops may be too close for you).

JDSU again added another optical company to its stable by 
agreeing to buy Britain's SIFAM.  Their components split, combine 
and filter light on optical fibers.  It will cost them about $100 
mln.  This follows their recent agreements to buy EPITAXX for 
$400 mln, and OCLI for $2.8 bln.

***No January strikes available***

BUY CALL DEC-260 UQD-LL OI= 528 at $21.38 SL=16.75
BUY CALL DEC-270*UQD-LN OI=1482 at $16.38 SL=12.75 wait for dip
BUY CALL DEC-300 XXZ-LT OI= 215 at $ 7.13 SL= 4.00 see note.
BUY CALL JAN-270 UQD-AN OI= 272 at $28.38 SL=21.00
BUY CALL JAN-300 XXZ-AT OI=  73 at $17.13 SL=12.00

JDSU trades like a rocket.  Thus all of these premiums are
inflated.  As soon as this stock turns, premiums will deflate
like a balloon.  When it finds a bottom, that is when to buy.
When it is rocketing like this - it is time to sell calls 
(covered or naked - it is up to your account and risk profile).
Wait for a dip or consolidation of some kind to go long this
thing.  At this point, traders start looking at round numbers
like $300 as targets.  Be careful, just because there is a lot
of volume and OI for such OTM strikes doesn't mean the stock
will EVER reach that price.

Picked on Nov 21st at  $213.81    P/E = N/A
Change since picked     +52.19    52-week high=$273.62
Analysts Ratings   13-13-0-0-0    52-week low =$ 26.31
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 = 2.6 mln
Chart = http://quote.yahoo.com/q?s=JDSU&d=3m


BRCM - Broadcom, Corp. $207.13 (+10.63)

Broadcom Corporation is a leading provider of highly integrated, 
silicon solutions that enable broadband digital transmission 
of voice, data and video content to and throughout the home and 
within the business enterprise over existing communications 
infrastructures, most of which were not originally intended for 
digital transmission. Using proprietary technologies and advanced 
design methodologies, Broadcom designs, develops and supplies 
integrated circuits for some of the most significant broadband 
communications markets, including the markets for cable set-top 
boxes, cable modems, high-speed office networks, home networking, 
direct broadcast satellite and terrestrial digital broadcast, and 
digital subscriber line ("DSL"). 

BRCM started November with a close at $138 and here we are, 
over $69 later in just four weeks.  Why the big move up?  Could 
there be a possible split announcement in the near future of 
BRCM?  That's what we are thinking.  BRCM just recently held a 
special shareholders meeting on November 22 to vote on an 
increase of authorized shares from 200M to 400M, one good 
indication of an upcoming split. BRCM has a two-time history 
of lagging split announcements, so the fact that they did not 
announce at the recent meeting does not deter our play.  It is 
possible that BRCM could announce a split early as next week.  
There may be rounds of profit taking, since BRCM has made such 
a big climb in a relatively short period of time.  This has 
potential to offer some nice points of entry, so keep an eye
out. As far as support goes, the psychological levels look to 
be providing the majority, i.e., $200 and $190. BRCM's 10-dma 
is all the way down at $188.50, which could serve as further 
support if needed. BRCM hit it's head a few times on a 
resistance level of $210 throughout the session last Friday.  
Watch for a breakthrough here.  One thought being spread 
around lately is that BRCM has seen a lot of institutional
buying.  This is pretty hard to prove at the moment.  Whatever
your opinion, BRCM makes some wild swings and is not for 
everyone.  Conservative players should wait for a break out
above $210 and patient investors may see an entry point at
$190 (or even $180 if things get ugly).  Play with stops.

Broadcom announced last Wednesday that they are working on a 
chip that will increase the data throughput in a home network 
and plans to have the chips ready to ship out during the first 
half of next year.  BRCM is also scheduled to present at the 
upcoming Internet Stocks Forum on December 4th in Santa Clara.  
The semiconductors were boosted by a report issued by ABN AMRO 
last week.  The report estimated a fairly substantial period of 
growth for the semis over the next three years.

BUY CALL DEC-200 RDZ-LT OI=567 at $20.00 SL=15.50
BUY CALL DEC-210 RDW-LB OI=131 at $15.25 SL=12.00
BUY CALL DEC-220*RDW-LD OI= 97 at $11.25 SL= 8.75
BUY CALL JAN-220 RDW-AD OI= 13 at $21.75 SL=16.50

Picked on Oct 17th at $207.13     P/E = 258
Change since picked     +0.00     52-week high=$215.25
Analysts Ratings   6-13-1-0-0     52-week low =$ 42.50
Last earning 10/99  est= 0.21     actual= 0.26
Next earning 01-26  est= 0.27     versus= 0.13
Average Daily Volume =2.08mln 
Chart = http://quote.yahoo.com/q?s=BRCM&d=3m

QLGC - QLogic Corporation $124.13 (+12.63)  

The competition in their industry is very stiff, yet they lead
the market in Fibre Channel host bus adapter market.  Located 
in Costa Mesa, California - QLogic Corporation makes integrated 
circuits and adapter boards that connect peripheral devices 
to computers.  Their imput/output subsystems handle data flow
between computers and peripheral devices such as hard disk,
tape, and CD-ROM drives.  QLogic has expanded its product line
to include the higher-performance fibre channel standard.  They 
also make chips for the mass storage and server markets.  Sun 
Microsystems is one of QLGC's better known customers, although
about 40% of their sales are outside the U.S.  Their top 
competition comes from Adaptec, Cirrus Logic and Emulex.

Split announcement or not, we are looking for the momentum to 
continue in QLGC.  After making a high around November 11th,
the semiconductor industry and shares of QLGC, have consolidated
and traded lower.  Tuesday, QLGC bounced off the recent lows and
headed higher with conviction (buying volume).  The volume the
first two days of the week was about 30% higher than the ADV for
QLGC, suggesting this move up may be for real, rather than a head
fake.  The proof will come this week, when the vacationing holiday 
traders return to the market place.  Will they return ready to buy,
or will they want to put some money in their pockets?  This is 
always the $64,000 question.  QLGC and the many stocks in the sector
appear to be setting up to move higher, however if the buying
frenzy that we've seen in the Nasdaq slows down, the tech stocks
will take a break.  With stockholders recently approving an 
increase in the number of authorized shares from 50 mln. to 
150 mln., we have been looking for a split announcement, which 
may or may not come.  QLGC does not report earnings again until 
the third week of January and they may wait until then.  QLGC has 
split twice this year, with the last announcement coming in mid 
July, with QLGC trading near $134.00 level.  As for our play in 
QLGC, we would view any further momentum to the upside as an 
opportunity to buy calls, as long as it is supported with good 
volume.  Should traders come back ready to sell, intraday support
will be found near $120, and $115 with stronger support at $108
or its 30 dma.  Prior to entering a new play in QLGC check the 
direction of the major indices, the semiconductor sector and the 
stock itself.  

Tuesday QLGC announced that its ISP2200 intelligent Fibre Channel
processors and FAS466 Fast Architecture SCSI Processors have been 
implemented in the Digi-Data Fibre Sabre Family of RAID 
Controllers.  The advanced features and high performance of 
Qlogic's chips enable the Digi-Data Fibre Sabre RAID Controllers 
to address the high performance segment of the computer mass 
storage market.

BUY CALL DEC-115 QLC-LC OI=359 at $14.00 SL=11.25 on a dip
BUY CALL DEC-120*QLC-LD OI=407 at $11.00 SL= 8.75
BUY CALL DEC-125 QLC-LE OI=644 at $ 8.88 SL= 6.75
BUY CALL DEC-130 QLC-LF OI=412 at $ 6.50 SL= 4.75 carefully

Picked on Nov 23rd at   $119.00    P/E = 114
Change since picked      + 5.13    52 week high=$135.63
Analysts Ratings      3-4-1-0-0    52 week low =$ 23.25
Last earnings 09/99   est= 0.31    actual= 0.35 surprise +12.9%
Next earnings 01-20   est= 0.36    versus= 0.19
Average daily volume =    845 K
Chart = http://quote.yahoo.com/q?s=QLGC&d=3m


The Option Investor Newsletter             11-28-99  
Sunday                        5 of 6


All hail the Nasdaq.  Despite a quick pullback on Tuesday to 
the 10-dma, this market continues to show us its resilience.  
You can began to see the optimism grow when you notice that 
despite a stock remaining flat on the week, the 2001 options 
are not decreasing and the 2002 are actually rising.  This 
would lead one to believe that the VIX becomes even more of 
a factor when trading LEAPs.  You're best bet is to be buying 
when the market has corrected and the VIX is high and thus 
the premiums have decreased.  Of course, this is standard 
procedure in the options world, but becomes even more important 
when dealing with LEAPs.  Short-term options will rarely 
increase while the stock is flat.  That situation usually 
results in death by time decay.  So even though we are at a 
situation where the VIX is low and premiums are high, we are 
waiting for a nice short-term sell-off to do some buying.  
Remember, we have all kinds of time to sit back, be patient, 
and wait for the perfect buying opportunities.  If there is 
one thing to remember about trading LEAPs, it is that when 
fear is high, it's time to buy!


EMC       11/07/99   JAN-2001 $80  ZOH-AP at $26.63     $15.38
                     JAN-2002 $90  WUE-AR at $30.25     $19.00
DELL      11/07/99   JAN-2001 $50  ZDE-AJ at $ 8.00     $ 7.00
                     JAN-2002 $50  WDQ-AJ at $12.38     $11.25
GPS       11/07/99   JAN-2001 $40  ZGS-AH at $ 9.13     $ 5.75
                     JAN-2002 $45  QGS-AI at $10.00     $ 7.88
IBM       11/07/99   JAN-2001 $100 ZIB-AT at $21.88     $13.63
                     JAN-2002 $110 WIB-AB at $25.25     $16.50
WMT       11/07/99   JAN-2001 $70  ZWT-AN at $ 6.25     $ 6.50
                     JAN-2002 $75  WWT-AO at $ 9.38     $ 9.75
LU        11/14/99   JAN-2001 $80  ZEU-AP at $15.38     $12.88
                     JAN-2002 $90  WEU-AR at $18.75     $16.13
CSCO      11/14/99   JAN-2001 $80  ZCY-AP at $26.38     $19.13
                     JAN-2002 $90  WIV-AR at $29.13     $22.00
SLR       11/14/99   JAN-2001 $85  ZSR-AQ at $19.88     $21.75
GE        11/21/99   JAN-2001 $150 ZGR-AU at $15.13     $16.25
                     JAN-2002 $150 WGE-AU at $24.63     $25.50
GTW       11/21/99   JAN-2001 $90  ZWB-AR at $17.63     $17.75
                     JAN-2002 $100 WGB-AT at $23.38     $22.50

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

NT - Nortel $81.69

In watching old Northern Telecom for the past couple of years, 
you always wondered why they never received the same respect 
towards valuation as their main competitor Lucent.  Appartently, 
the times are a chaning, including NT's name which is now Nortel.  
In a study released last week, it shows NT is now ahead of LU 
in market share for the U.S. optical Internet market.  And the 
valuation has now caught up as momentum is picking up.  So with 
two major companies dueling it out for business, you may wonder 
why both are worthy of LEAP status.  That's easy.  We are still 
in the relatively early stages of this Internet revolution and 
both companies should capitalize.  With the recent rise from $60 
to $80, support and resistance is undefined.  As we mentioned 
above, we really need a good 3 to 5 day selloff to bring premiums 
back down and enable us to open a position.  So keep your eye 
out for buyable dips.   

BUY LEAPS JAN-2001 $75.00 ZOO-AO at $22.25
BUY LEAPS JAN-2002 $75.00 WNT-AO at $30.25


There are no dropped LEAPs this week.


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. $76.88 (-5.25)(-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.

Some of the semis had a strong week and Rambus decided to 
participate a bit in the rally.  RMBS traded up in the last 
two sessions, however, it has provided a rather lack luster 
performance when compared with its fellow sector members.   
RMBS had a nice day on Wednesday, gaining $1.38.  RMBS gapped 
up at the open on Friday, however, the positive momentum waned 
a bit as RMBS only saw a $0.50 gain. So the question is, what 
now? RMBS has found some support at $74, and as we mentioned 
in Tuesday's write-up, this is a crucial area for the continuation 
of our put play on RMBS.  We were looking for a drop and some 
consistent trading below this level last week, which we saw a 
small amount of on Wednesday, however, the drop was short-lived. 
Put traders should be cautious as RMBS is trading less than $3
from $80.  Both $80 and its 200 dma ($79) should act as 
significant resistance.  If RMBS breaks through either on 
the upside, then we'll need to seriously re-evaluate the put
position.  A report issued by ABN AMRO on Tuesday was most likely 
a factor in last weeks move up.  It estimated that the 
semiconductor industry would grow by 25% in 2000, 31% in 2001 
and 28% in 2002.  The report also predicted a 4-year cyclical 
sector pullback in 2003.

BUY PUT DEC-80*BNQ-XP OI=3428 at $7.00 SL=5.25
BUY PUT DEC-75 BNQ-XO OI= 899 at $4.63 SL=2.75

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


BOW - Bowater, Inc. $46.88 (-5.50)

Bowater Inc., manufactures, sells and distributes newsprint, 
directory paper, un-coated groundwood specialties, coated 
groundwood paper, market pulp and lumber. Bowater is the #1 U.S. 
maker of newsprint and became #2 in the world after it's purchase 
of Canadian company Avenor. Bowater now has the capacity to churn 
out about 3 billion tons of newsprint a year.  The company operates 
eight pulp and paper mills and three sawmills in Canada, South 
Korea and the U.S.

Bowater is a classic cyclical stock. By their nature cyclical 
stocks are extremely sensitive to interest rates for two reasons. 
In theory, when interest rates go up the economy will slow down 
due to fewer investments because of the cost of money. Because 
cyclical stocks are mostly involved in commodity products a slower 
economy normally means that there are fewer purchases of these 
products. Also, cyclical stocks tend to carry a relatively large 
amount of debt, due to large equipment, land and/or acquisition 
costs. Bowater is currently facing not only an economy with 
rising interest rates but also is facing a review of it's long 
term debt ratings by Moody's for a possible downgrade. A Moody's 
downgrade would increase the cost of capital for Bowater. This 
would be a painful blow to a currently unprofitable company. 
Earnings estimates for FY 99 are -$0.30. However, they are expected 
to be profitable next year with estimates calling for $2.82 in 
profits. As always, we are much more concerned with the immediate 
outlook for OUR profit opportunities! Moody's chief concerns lie 
in the possibility that Bowater will continue to remain in an 
aggressive acquisition mode, which could further stress debt 
protection measurements that are already significantly weakened 
from the effects of cyclically low pricing. The recent bad news 
from Moody's and a complete disinterest in cyclical stocks from 
Wall Street, leads us to believe that the downtrend may continue 
in Bowater's shares in the near future. On the cautious side, it 
is possible companies such as Bowater may be seen as a safe place 
to be should we experience a meltdown in the averages. Today, 
Bowater's stock closed below $47, which was support. Any trading 
below $45, where major support lies, could indicate a quick drop
to $40 and maybe into the thirties.

BUY PUT DEC-50*BOW-XJ OI=71 at $2.13 SL=1.00
BUY PUT DEC-45 BOW-XI OI=57 at $0.63 SL=0.00
BUY PUT DEC-40 BOW-XH OI=76 at $0.38 SL=0.00 RISKY!!

Average Daily Volume = 345 K
Chart = http://quote.yahoo.com/q?s=BOW&d=3m


HWP - Hewlett Packard Co. $95.37 (+1.75)

Hewlett-Packard Co. is the #2 computer company worldwide 
(behind IBM).  It is a leading provider of computers, 
peripherals, imaging equipment and computer related services.
More than half of HP's sales comes from outside the U.S. To 
further fuel its growth, HP is restructuring itself as an 
Internet specialist providing Web hardware, software and 
support to corporate customers. 

HP was among the hardest hit technology stocks during the 
September-October correction.  The value of HP's shares were
nearly cut in half from a high of 114 to an intraday low of 67
on October 27th.  Since the low HP has enjoyed a more than 50%
retracement of the sell-off.  There are three factors 
contributing to this rally. 1). The strong market has dragged 
HP up.  HP is included in most major buy programs due to its
large capitalization and membership in the Dow Industrials.  
2). The overwhelmingly positive reception by Wall Street for 
the IPO of spin-off Agilent Technologies.  On the day of the 
IPO, HWP shares rallied 14.25 points.  Most of this gain can
be attributed to the fact that HWP still retains an 80% stake
in Agilent Technologies.  3). Plus, that same day (Nov. 17th), 
HWP reported surprisingly strong earnings beating "The 
Street" by $0.02.  The effect of all three of these positive 
events could be abating.  The Dow Industrials rally has been 
relatively weaker than the NASDAQ's.  But even it it wasn't,
HWP's stock has just risen too far too fast.  If the Dow 
Industrials correct any time soon, HWP could be one of the
hardest hit issues in the index.  After the initial euphoria, 
the shares of Agilent have pulled back to $41, about halfway
between its IPO price and its subsequent high. It would not be  
surprising if Agilent tested the support of its IPO price of 
$30.  Lastly, upon closer inspection, HP's earnings might not 
have been as spectacular as had been previously perceived.  It 
seems that HP was a beneficiary of lower taxes.  (How come the 
billion dollar corporations get all of the tax breaks?)  There 
was one news item that may keep the bulls on board.  Flush 
with cash from the Agilent IPO, HP announced an authorization 
of the repurchase of $2 billion worth of its outstanding 
common stock.  That amount included $700 million left over 
from earlier authorizations.  Technically an excellent entry 
point for a bearish position in HWP would be when HWP trades 
below support at $92.75.  Be cautious of any breaks above 
resistance at $98.50.

BUY PUT DEC-100 HWP-XT OI= 278 at $6.38 SL=4.75
BUY PUT DEC- 95*HWP-XS OI=1108 at $3.50 SL=1.75
BUY PUT DEC- 90 HWP-XR OI=1860 at $1.63 SL=0.75

Picked on Nov 27th at  $95.38  P/E = 29.15
Change since picked     +0.00  52-week high=$118.44
Analysts Ratings   7-9-12-0-0  52-week low =$ 59.00
Last earning 11/21  est= 0.73  actual = 0.75
Next earning 02/00  est= 0.77  versus = 0.92
Average Daily Volume=4.80 mln
Chart = http://quote.yahoo.com/q?s=HWP&d=3m


WLP - Wellpoint Health $59.06 (-5.50)

Wellpoint Health Networks serves about 32 million individuals 
in the U.S. through HMOs, PPOs, and special networks such as 
dental, vision and mental health plans.  The company operates 
as Blue Cross in California and UNICARE through the rest of 
the nation.  Wellpoint also sells life insurance and third 
party administration to self-employed businesses.  In 1997, 
they acquired the group health and related life business of
John Hancock Mutual. 

Wellpoint is looking a little sick. WLP flirted with $100 
back in June and then fell into a perfect downward trend.  
WLP bottomed at $48.25 in the beginning of October and tried 
to find it's legs to make a run back up.  It was doing a fairly 
good job until mid-November, when WLP made a downward turn 
right along with the healthcare sector. Despite a recent 
upgrade from ING Barings from a Buy to a Strong Buy on 
November 16th, WLP has continued it's descent.  The overall 
daily volume has been dwindling, apparently right along with
investor interest.  WLP bid farewell to its 10-dma, which is 
currently $63, mid month and this level now serves as resistance.   
WLP had some support at $60, however, managed to trade and close 
below  this level in Friday's session.  At this point, WLP could 
very well be cleared for a healthy fall. Of course, confirm 
continuing negative momentum before entering a new play.  A 
teaser announcement was made in regards to WLP's possible 
purchase of Rush Prudential Health Plans, the largest health
maintenance organization in Chicago, for an estimated $290 million 
on November 21.  Neither company involved was available for 
comment and there has been nothing released pertaining to this 
deal since, but is something to keep an eye out for.  Especially
since the "buyer" normally goes down.  One warning:  both the
30 dma and the 50 dma have converged at $59.00.  This could 
potentially be very strong support.  Traders should wait
for WLP to close below it before initiating positions.
BUY PUT DEC-60 WLP-XL OI=  10 at $3.25 SL=1.50
BUY PUT DEC-55 WLP-XK*OI=1004 at $1.25 SL=0.50 

Average Daily Volume = 648K
Chart = http://quote.yahoo.com/q?s=WLP&d=3m


GT - Goodyear Tire and Rubber Co. $34.13 (-2.88)

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

Have you ever heard tires screaming on their way downhill?  
Well, if you haven't take a look at GT's recent trading 
pattern and listen up!  This is a picture perfect downward 
trend!  We were playing GT as a put not too long ago and we 
dropped it because it looked as though it had hit it's bottom.  
Little did we know... After being de-listed from the Dow Jones 
Industrial Average and a sour earnings report, GT has really 
struggled. GT did manage a short rally mid-month, but then made 
a sharp turn and decided it was easier to drive downhill.  When 
we played GT last time, we were waiting for a breakthrough of 
$35 to confirm continuing negative momentum.  GT finally made 
a break for it on the November 23rd and closed below $35 on 
the 24th.  Being that GT has sunk to and closed to a new 52-
week low, other than the psychological levels, i.e., $30, $20 
etc..., support is nearly impossible to find.  GT has not traded 
this low since 1995!  Ouch!  The long time elusive $35 now serves 
as resistance.  In the news, as part of an effort to purchase eight 
new factories, GT announced 1,400 layoffs and a shutdown of plants 
in Italy and Argentina.   

BUY PUT DEC-40*GT-XH OI=491 at $5.75 SL=3.75
BUY PUT DEC-35 GT-XG OI=108 at $1.81 SL=0.75

Average Daily Volume = 924K
Chart = http://quote.yahoo.com/q?s=GT&d=3m


CI - Cigna Corporation $79.44 (-4.31)(+0.38) 

They are one of the largest investor-owned insurance organizations
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.  Their CIGNA Healthcare unit has about 6 million HMO
members.  The company also sells group life, accident, and 
disability coverage, insurance and retirement plans.  

The sector is headed south and so is the price of CIGNA stock.
Actually CI began to consolidate late last week and began to
rollover last Friday.  CI made a feeble attempt to move higher
early in the week.  Tuesday anti-tobacco lawyer Richard Scruggs,
and a group of attorneys, filed a national lawsuit seeking 
class action status against five health maintenance organizations
(HMO's).  CIGNA topped the list of the nations largest HMO 
operators named in the lawsuit, charging them with violating
U.S. anti racketeering laws.  This will probably be tied up in 
the courts for years, and may or may not have any merit, but 
it didn't take long for CI and the Insurance sector to fall 
apart.  CI lost $4.31 for the week and the chart is ugly.  As 
we have mentioned there is a gap in the chart for CI between
$75 and $79.  As most technician know gaps usually get filled 
at some point or another.  CI could find support near the top
of the gap at $79.  Should we see the weakness continue it may 
not stop until it hits $75.00.  Intraday resistance can be 
found near $81.00 should some brave souls decide to step in 
and buy this stock.  If we do see a bounce up to resistance, 
followed by further weakness, we would look to buy puts or 
add to existing positions.  As with any play always assess the
potential for profits and the risks prior to entering a trade.
Be careful of the 50 dma at $78 and the 30 dma at $76.

In an attempt to bolster investor confidence, Aetna and other
big U.S. Health Insurers said Tuesday, they expect to see
the price of their stocks begin to rise through the end of 
the year as they get the premium increases from employers
they need to increase profits.  The news didn't help the 
price of stocks in the industry at least for this week. 

BUY PUT DEC-75 CI-XO OI= 30 at $1.13 SL=0.00 caution, low OI
BUY PUT DEC-80*CI-XP OI=185 at $3.38 SL=1.75
BUY PUT DEC-85 CI-XQ OI=143 at $6.50 SL=4.75

Average daily volume = 1.01 mln
Chart = http://quote.yahoo.com/q?s=CI&d=3m


Markets Slumber To Open The Holiday Season..

Equity markets ended mixed Friday in a brief, low volume session
as the majority of investors adjourned for the holiday weekend.

Wednesday, November 24

U.S. equity markets closed higher Wednesday as the Nasdaq moved
to yet another record in a pre-holiday rally. The index jumped
77 points to 3,420. The composite of technology stocks is over
50% higher for the year. The Dow climbed 12 points to 11,008 and
the S&P 500 index rose 12 points to 1,417. In the broader market,
losers edged out winners 8 to 7 on light volume of 737 million
shares on the NYSE. The 30-year U.S. Treasury bond weakened 4/32, 
driving the yield up to 6.21%.

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

Etek Dynamics   ETEK   DEC55P/DEC60P   $0.43   credit   bull-put 
Kent Elect.     KNT    DEC20C/DEC22C   $2.00   debit    bull-call
AT&T Corp.      T      JAN46C/JAN50C   $2.25   debit    diagonal
AT&T Corp.      T      JAN46C/DEC50C   $3.25   debit    bull-call

Etek was our big winner on Wednesday, opening $3 higher on news
that Credit Suisse First Boston started coverage of the company
with a "buy" rating and a $90 price target. CSFB outlined Etek's
plan to expand the breadth and depth of its products through a
focus on new acquisitions that will enhance their manufacturing 
capabilities. The only opportunity for a favorable entry (on a
simultaneous order basis) came during the initial consolidation
at 9:45 AM. The stock price closed at $80. KNT traded in a small
range for most of the morning but the disparity in option prices
was less favorable than originally quoted. The spread debit was
adjusted at the open and the best observed price was $2.00. AT&T
was up right from the start after the Wall Street Journal posted
the news that the telephone company will issue a tracking stock
for its wireless business. Once again, the spread positions were
less favorable with smaller upside potential.

Portfolio plays:

Technology stocks rallied again today but most analysts ignored
the advances, saying they were not paying too much attention to
the big gains because of the thin trading volumes. Higher crude
oil prices hurt the transportation and airline issues but gave a
lift to oil service shares. Meanwhile, rising bond yields again
put pressure on the bank and brokerage stocks while utilities
rebounded after reaching new lows for the year Tuesday. Internet
issues led the way as traders speculated on increasing levels of
online shopping during the holiday season. Analysts believe this
year will be the first real example of the power of the web with
regard to retail sales. Companies that can take advantage of the
trend will dominate the new era of E-tailing.

There were some favorable moves in the Spreads/Combos portfolio
and lower priced stocks continued to lead the section. Autoweb
(AWEB) climbed $1.75 to a midday high near $14 as the technical
rally moved into high gear. Our new diagonal spread offered the
first exit opportunity with a closing credit of $3.12; a profit
of $0.75 on $2.38 invested for one week. Echelon (ELON) was the
early exit candidate on Monday and now we are planning to adjust
the spread to the $12.50 strike for increased upside potential.
The stock priced moved $0.75 higher, closing on the edge of the
(neutral outlook) profit range at $13.75. Toys-R-Us (TOY) edged
back above the $17 mark but it may not hold there for long. The
current profit to close the (JAN17C/DEC17C) position is $0.50.
Network Associates (NETA) rebounded slightly, climbing $0.88 to
remain above $25; possibly a new support area. Our bullish play
(DEC12C/17C) will achieve maximum profit at expiration with the
current price.

In the long-term portfolio, Sun Micro (SUNW) has again exceeded
all expectations, rocketing another $7 to the $135 range as the
pre-split rally begins in earnest. Today's move put the stock at
a new all-time-high and there is no indication of any weakness.
The bullish LEAPS/CC's position is hopelessly behind the profit
curve at the $115 strike and our only option was to adjust the
spread to the new support level (near $125) at a cost of $8.25.
Another of our recent bullish issues is Cabletron (CS) and today
we made the move to the DEC-$20 strike for a small increase in 
upside potential. The new position (LJAN15C/DEC20C) has a debit
of $4.50. General Motors (GM) is the other stock that requires
daily monitoring (for a break-out above $75) but we have yet to
make any adjustments in the current spread. Polaroid (PRD) has
managed to hang on to the edge of the precipice near $19 but a
favorable outcome appears highly improbable. In the absence of
significant change in character, we expect to close the play in
the next few weeks.

Banking and Brokerage stocks have faltered on profit-taking but
today they recovered slightly. Ameritade (AMTD), Net@Bank (NTBK)
and TD WaterHouse (TWE) all moved up during the session. E*trade
Group (EGRP) was the only portfolio issue that failed to finish
in the black, losing $0.62 to end at $31.28. Our bullish spread
(APR25/JAN30) is profitable at the current price. Youth Networks
(NETS) and 3Com (COMS) were two of the other issues that climbed
higher in today's session, but the majority of the portfolio was
mired in a post-rally consolidation.

Thursday, November 25

Happy Thanksgiving!

Friday, November 26

Equity markets ended mixed Friday in a brief, low volume session
as the majority of investors adjourned for the holiday weekend.
The Dow Jones Industrials lost 19 points to close at 10,998 as
profit-taking in the final few minutes erased earlier gains. The
Nasdaq rose 27 points to 3,447 and another record close. The S&P
500 index finished relatively unchanged at 1,416. In the broader
market, winners outpaced losers on extremely thin volume of 312
million shares on the NYSE. The benchmark 30-year U.S. Treasury
bond fell 13/32, driving the yield to 6.24%.

Portfolio plays:

The holiday-shortened session provided some volatile activity
in many of the technology issues and our newest position was one
of the leaders on the NYSE. Shares of AT&T (T) rose $4.25 to end
at a recent high near $58 as speculation on a new tracking stock
continued to circulate. The phone giant declined to comment on a
news report that it is considering a huge initial public offering
of their wireless unit but analysts say the plans are already in
place. Our bullish debit spread is profitable and the well-known
issue appears to be headed for a new trading range near $65. The
other winner from Tuesday's section, Etek Dynamics (ETEK) added
$2 to finish at a new all-time (closing) high of $82. The issue
is now $20 above our sold strike in the (bullish) December credit 
spread. Excite@home (ATHM) continued to climb following a recent
technical breakout and the next target is $60. All of our bullish
debit (and diagonal) spreads are comfortably ITM and will remain 
profitable with the stock in the current price range above $55.

The majority of our small-cap issues are performing well and the
big surprise today was Toys-R-Us (TOY). The stock moved up $1.25
to a 120-day high of $18.62 after CEO Michael Goldstein said he's
comfortable with fourth quarter and year 2000 earnings estimates.
The position has already offered a favorable exit opportunity but
the rally provides a chance for additional profit with a bullish
adjustment to increase the upside potential of the current spread 
(JAN17C/DEC17C). Echelon (ELON) is another issue that has climbed
unexpectedly in recent days and the current position has a very
limited profit range above the current price. If you decide not
to roll-up, the current spread can be closed for favorable return.
Talk.com (TALK) made a nice move today, climbing $0.88 to end at
$18.31. Our diagonal spread achieves maximum profit at $17.50.
MessageMedia (MESG) rallied $1.19 on light volume, and the stock
appears to be preparing for an attempt at the all time high near
$21. Our ITM debit spread can now be closed for a $2.00 credit.

Computer Associates (CA) was our focus in the long-term portfolio,
up only $1.15, but now trading near an all-time-high at $66. The
recent sector upgrade has increased investor interest and the BOP
(buying pressure) is up significantly. With support at $62, this
issue has excellent upside potential. Our old favorites Motorola
(MOT) and Solectron (SLR) both rebounded during Friday's session
and it appears they are safely entrenched at their new levels. Of
course Sun Microsystems (SUNW) also moved higher, but that's not
a newsworthy item considering the incredible recent rally. Adobe
(ADBE) has started to falter slightly and it will be interesting
to see where the first support level begins to have a noticeable
effect on the stock price. The most recent bottom exists near $70.

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

LCOS - Lycos  $64.00   *** Ready To Go! ***

Lycos is a leading Web media company and owner of the Lycos
Network, one of the most visited hubs on the Internet reaching
one out of every two Internet users. The network is a unified
set of Web sites that attracts a diverse audience by offering a
variety of services including leading Web navigation resources,
homepage building, a web community and shopping center. LCOS is
dedicated to helping each individual user locate, retrieve and
manage information tailored to his or her personal interests. 

Lycos is on the move financially, reporting earnings that met
the Street's estimates with a 126% increase in year-over-year
first quarter revenue amid a global expansion of its services
and distribution. The CEO attributed the strong performance to
the company's expanded "depth and breadth" of its services and
distribution throughout the world. Lycos recently became one of
the web's first full-service e-commerce portals with the launch
of LYCOShop, an integrated shopping destination. Lycos has also
expanded its distribution of product offerings by extending its 
partnership with IBM and forming alliances with other companies
such as America Online.

Last week, Lycos announced it would buy Gamesville.com, one of
the most popular online gaming sites, for $207 million in stock. 
Gamesville.com has 2.2 million members who compete with other
players in electronic games over the Internet. The addition of 
Gamesville to the Lycos Network increases revenue, grows their
average daily usage by 20% and adds depth to marketing efforts.
After the announcement, PaineWebber raised their 18-month target
for LCOS to $135 a share based on the company's growth strategy
including the other recent acquisitions, Sonique and Quote.com.

Technically, LCOS has exited a lateral consolidation to the top
side and should take out the October high as several short-term
buy signals are still evident. With this week's quick move up,
price support is now centered around $55.00.

PLAY (conservative - bullish/debit spread):

BUY  CALL JAN-47.50 QWL-AW OI=256  A=$18.38
SELL CALL JAN-55.00 QWL-AK OI=1798 B=$12.25
INITIAL NET DEBIT TARGET=$6.00 ROI(max)=25% B/E=$53.50

- or -

PLAY (aggressive - bullish/debit spread):

BUY  CALL JAN-47.50 QWL-AW OI=256  A=$18.38
SELL CALL JAN-57.50 QWL-AY OI=1093 B=$10.62
INITIAL NET DEBIT TARGET=$7.62 ROI(max)=31% B/E=$55.12

Chart = http://quote.yahoo.com/q?s=LCOS&d=3m
DLP - Delta Pine And Land  $26.62   *** Monsanto Buyout? ***

Delta Pine And Land is a commercial producer of cotton planting
seed in the United States. It also breeds and distributes other
seed products; sorghum and soybean, and distributes hybrid corn
planting seed acquired from others under non-exclusive license 

The ongoing saga of the DLP merger has option buyers in a frenzy
and implied volatility and volume moved higher last week on new
concerns about the previously agreed-upon marriage with Monsanto.
The Wall Street Journal reported recently that Monsanto has been
holding talks with several companies, including Pfizer about a
full or partial sale of the company. The WSJ also said the Swiss
drug maker Novartis AG had emerged as a serious suitor. Both of
the companies declined comment about a possible deal but Pfizer
said it may be interested in acquiring Monsanto's pharmaceutical
(Searle) unit, if it were available separately.

The MTC deal has also been mired in a lengthy antitrust review
process and most investors have long since fled the scene for
greener pastures. With the incredible premium disparities in
option pricing and the possibility of a new player in the deal,
we thought it would be interesting to participate in one of the
the more favorable spread positions. Two candidates are offered,
depending on your personal outlook for the underlying issue.

PLAY (conservative - neutral/calendar spread):

BUY  PUT FEB-30 DLP-NF OI=980  A=$6.75
SELL PUT DEC-30 DLP-XF OI=1250 B=$5.37

- 0r, if you are Bearish on the issue -

PLAY (aggressive - bearish/diagonal spread):

BUY  PUT FEB-30 DLP-NF OI=980  A=$6.75
SELL PUT DEC-25 DLP-XE OI=3525 B=$3.12

Chart = http://quote.yahoo.com/q?s=DLP&d=3m
CHB - Champion Enterprises  $9.63     *** Cheap Speculation ***

Champion Enterprises is a leading producer of manufactured housing
and mid-size commercial vehicles. The company's housing operations
and markets are located throughout the U.S. and in western Canada.
They also offer commercial vehicles that are marketed throughout
the U.S. and Canada.

The Internet now affects almost all facets of commerce and this
company has finally made the move to online advertising. Champion
and Homestore.com (HOMS), the leading real estate destination on
the Internet, recently announced an agreement to list Champion's
homes on the world wide web. The agreement will allow Champion to
display its line of homes and services in 125 major markets on
HomeBuilder.com beginning in January 2000. Champion's home models
will be featured on maps in targeted, geographic regions where
they are available and independent retailers in those areas will
be linked directly to the web-site. Champion intends to be at the 
forefront of initiatives such as this to introduce their homes to
more consumers and broaden the long-term market.
After a series of recent failures, the stock price appears to be
establishing a base near $8 and the long-term outlook is moving
to a bullish stance. The small disparity in option premiums will
allow us to speculate on the eventual outcome of the share value
in a conservative, long-term position.

PLAY (conservative - bullish/calendar spread):

BUY  CALL APR-10 CHB-DB OI=174 A=$1.50
SELL CALL DEC-10 CHB-LB OI=104 B=$0.31

The basic premise in a calendar spread is simple; time erodes
the value of the near-term option at a faster rate than it will
the far-term option. Using this concept, it is also possible to
establish a directional (bullish) bias, constructing aggressive
out-of-the-money positions to take advantage of upward movement
and short-term option disparities.

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

Chart = http://quote.yahoo.com/q?s=CHB&d=3m
                     - READER'S REQUEST -

This week I received two requests for conservative, bullish plays
on well-known companies with upcoming stock splits. While these
candidates are not necessarily my choices for the best available
positions, they both offer favorable (low risk) spreads on issues
with solid technical trends and excellent (short-term) momentum.
Current news and market sentiment will have an effect on these
positions so review each play individually and make your own
decision about the future outcome of the underlying stock.
TVGIA - TV Guide  $64.12     *** Reader's Request ***

TV Guide is a global diversified media and communications company
that operates three primary business units, TV Guide Entertainment
Group, TV Guide Magazine Group, and United Video Group. TV Guide
markets and distributes products in the United States to over 100
million cable and satellite homes every week. TV Guide Magazine
and TV Guide Channel are the largest print and electronic guidance 
products in the world. The company also develops and sells other 
products and services to cable, satellite system operators, data 
communication networks, radio networks, and companies worldwide.

TV Guide announced today that its Board of Directors had approved
a two for one split of its Class A and Class B Common Stock. The
stock split will be affected in the form of a stock dividend of
one additional share of common stock for each share outstanding
on December 17, 1999, to holders of record on December 3, 1999.
It's the third two-for-one stock split in just over three and a
half years and investors have shown their appreciation, driving
the share value to close at a new all-time-high on Friday. Much
of the recent rally came after the news that TV Guide and Gemstar
International (GMST) announced a merger agreement under which TV
Guide will become a wholly owned subsidiary of Gemstar.

TVGIA is now back in the stage II climb after a brief rest and
consolidation period last week. Though the issue is overextended,
the current up-trend is showing no signs of retreat. Short-term
support exists near $58, which would be the bottom of its current 
regression channel and recent consolidation.

PLAY (conservative - bullish/debit spread):

BUY  CALL DEC-45 UQK-LI OI=43 A=$19.75
INITIAL NET DEBIT TARGET=$12.75 ROI(max)=17% B/E=$57.75

Chart = http://quote.yahoo.com/q?s=TVGIA&d=3m
VRTY - Verity  $105.50     *** Reader's Request ***

Verity develops, markets and supports knowledge retrieval software
products for application developers, corporate Intranet users and
e-commerce sites. Their technology enables organizations to manage
text-based information residing on the networks, making corporate 
content reusable across intranets, the internet and CD-ROMs. Their
products also enable application developers to embed search and
retrieval functionality into their own commercial applications.

Verity's board of directors has authorized a two-for-one split to
be accounted for as a stock dividend. The split will be effected
by distributing to each stockholder of record on November 17, 1999
one share of Verity's common stock for each share of common stock
held. The company expects the shares resulting from the split to
be distributed by the transfer agent on December 3, 1999 and the
shares of outstanding common stock will increase to 30,200,000.

Verity's split run began back in mid-October, a few days after the
issue had set a new all-time-high in the $75 range. Now the stock
is undergoing a very impressive rally as it continues its stage II 
climb. Intermediate-term support is at the 30 dma (exp), near $86,
also the bottom of a three month regression channel. In the short
term, the issue is showing no weakness and new support appears to
be developing around $100.

PLAY (conservative - bullish/credit spread):

BUY  PUT DEC-80 YQV-XP OI=107 A=$1.25
SELL PUT DEC-85 YQV-XQ OI=260 B=$1.88

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


The Option Investor Newsletter             11-28-99  
Sunday                        6 of 6


Covered-Call Exit Strategies...

One of our readers requested an educational narrative concerning
the proper management of "in-the-money" covered-call positions.

A rise in share value is the ultimate goal of stock ownership but
with the covered-write, a significant short-term move can provide
additional opportunities for profit. When the share price of the
underlying stock moves above the strike price of the short option,
the complexity of the position changes along with the risk factor
of early exercise. For long-term investors, the tax consequences
of assignment can also pose a difficult problem; how to adjust the
overall position for maximum return while retaining ownership of
the underlying stock.

If the share value rises substantially after the initial position
has been established, you have several choices: you can do nothing,
get called-out and accept the original return that was established
when the play was opened; if the option is priced near parity, you
can close the play early; or, you may also choose to adjust the 
position to match the revised outlook for the underlying issue by 
"rolling" the call up (or forward) to a higher strike price.

In closing the position early, an experienced trader evaluates the 
cost of commissions verses an increased annualized return. A "net" 
order (net credit) can be used in closing a covered write to ensure
a proper exit. Similar to a "Buy-Write", you would place an order 
to "sell the stock and buy-to-close the sold call for a specific 
net credit at a price relatively close to parity. 

When you roll up (buy-back the current sold call and sell a higher
strike call), you increase the profit potential of the position.
The catch is, you surrender downside protection. Your new downside
break-even point will be increased by the amount of debit required
to complete the transaction (the cost of the closed position minus
the premium received for the new position). Thus when one rolls up,
a debit is incurred and this is usually considered a negative move
(placing more money at risk) by many traders. Generally it is more
beneficial to roll to a future expiration date as it reduces the
debit required for the new position. It is normally not advisable
to adjust to a higher strike if a 10% correction in the underlying
stock price cannot be withstood (though this percentage may not be
applicable to volatile Internet stocks).

As expiration nears and the time value premium disappears from the
written option, you should also consider rolling forward to reduce
the likelihood of early assignment and increase the overall profit
potential of the position. You can buy-back the short option and
sell a new, longer-term call at the same strike price or move to a
different series, consistent with your outlook for the underlying
issue. With deep in-the-money calls, the time value premium often
vanishes long before expiration. However, as long as there is time 
premium left in the call, there is little risk of early assignment
(you are also earning time premium by remaining with the original 
position). As the option price (bid) falls to parity or a discount,
there is a considerable probability of exercise by arbitrageurs;
floor traders who do not pay commissions for trading. When this
situation occurs, you should endeavor to roll-forward or adjust
the position in some manner that prevents a monetary loss through
early assignment.

The key is to evaluate the risk-reward outlook of all the possible
scenarios and construct a position that fits your trading plan and
your future outlook for the underlying issue.

Good Luck!


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

ITIG   10.00  16.00   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%
MESG   17.63  17.88   DEC  15.00  3.63  *$  1.00   7.1%   7.8%
ALGO   15.25  15.00   DEC  12.50  3.75  *$  1.00   8.7%   7.6%
FSII   10.44   9.34   DEC  10.00  1.81   $  0.71   8.2%   7.1%
WSTL    8.00  10.75   DEC   7.50  1.06  *$  0.56   8.1%   7.0%
BTOB   18.38  20.31   DEC  15.00  4.63  *$  1.25   9.1%   6.6%
SATH   12.44  12.69   DEC  10.00  3.00  *$  0.56   5.9%   6.4%
CYCH    8.38  11.25   DEC   7.50  1.44  *$  0.56   8.1%   5.8%
FLAS   10.75   9.44   DEC   7.50  3.63  *$  0.38   5.3%   5.8%
ICGX   20.50  20.63   DEC  17.50  3.88  *$  0.88   5.3%   5.8%
CRUS   13.94  13.88   DEC  12.50  2.19  *$  0.75   6.4%   5.5%
PILT   18.50  22.00   DEC  15.00  4.38  *$  0.88   6.2%   5.4%
RRRR   14.75  28.88   DEC  12.50  3.25  *$  1.00   8.7%   5.4%
WAVX   13.19  12.88   DEC  10.00  3.88  *$  0.69   7.4%   5.4%
DRIV   22.75  28.25   DEC  20.00  4.25  *$  1.50   8.1%   5.0%
DIGE   14.44  18.38   DEC  12.50  2.75  *$  0.81   6.9%   5.0%
PILT   15.94  22.00   DEC  12.50  4.25  *$  0.81   6.9%   5.0%
BEAM   20.13  19.38   DEC  17.50  3.38  *$  0.75   4.5%   4.9%
PRGY   25.38  29.00   DEC  22.50  4.50  *$  1.62   7.8%   4.8%
LTXX   16.00  18.56   DEC  15.00  2.06  *$  1.06   7.6%   4.7%
IVIL   28.38  27.25   DEC  22.50  6.75  *$  0.87   4.0%   4.4%
TOPP    9.81  10.69   DEC   7.50  2.75  *$  0.44   6.2%   3.9%
DGII   13.56  17.00   DEC  12.50  1.69  *$  0.63   5.3%   3.8%
JDAS   11.63  14.88   DEC  10.00  2.13  *$  0.50   5.3%   3.8%
MOGN   13.44  12.03   DEC  12.50  1.63   $  0.22   1.9%   2.0%
AND     8.38   6.94   DEC   7.50  1.38   $ -0.06  -0.9%   0.0%

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

Comments/Observations on Open Positions:

Fsi International (FSII) continues to consolidate and is entering
an initial support area; technical indicators remain bullish.
Topps Company (TOPP) appears to be weakening, though still well
above our recommended sold strike. Mgi Pharmaceuticals (MOGN) is
nearing the bottom of its trading range ($11.50) on low volume;
the overall outlook still bullish. Andrea (AND) has made a large
move down to support and is oversold in the short term; monitor
the position closely.

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

Sequenced by Company

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

AWEB   12.25  DEC 10.00  UWB LB  2.63  272    9.62   4.0%   4.0%
COOL   14.50  DEC 12.50  QOO LV  2.44  1371  12.06   3.6%   3.6%
EMIS   16.88  DEC 15.00  MTQ LC  3.38  1163  13.51  11.1%  11.1%
MESG   17.88  DEC 15.00  MUG LC  3.50  326   14.38   4.3%   4.3%
ONEM   19.94  DEC 17.50  ONU LW  3.25  80    16.69   4.9%   4.9%
VUSA   14.38  DEC 12.50  UAS LV  2.63  367   11.75   6.4%   6.4%

BNYN   15.81  JAN 12.50  QYN AV  4.13  622   11.68   7.0%   7.0%
SATH   12.69  JAN 10.00  SQR AB  3.38  17     9.31   7.4%   7.4%

Sequenced by Return Not Called

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

EMIS   16.88  DEC 15.00  MTQ LC  3.38  1163  13.51  11.1%  11.1%
VUSA   14.38  DEC 12.50  UAS LV  2.63  367   11.75   6.4%   6.4%
ONEM   19.94  DEC 17.50  ONU LW  3.25  80    16.69   4.9%   4.9%
MESG   17.88  DEC 15.00  MUG LC  3.50  326   14.38   4.3%   4.3%
AWEB   12.25  DEC 10.00  UWB LB  2.63  272    9.62   4.0%   4.0%
COOL   14.50  DEC 12.50  QOO LV  2.44  1371  12.06   3.6%   3.6%

SATH   12.69  JAN 10.00  SQR AB  3.38  17     9.31   7.4%   7.4%
BNYN   15.81  JAN 12.50  QYN AV  4.13  622   11.68   7.0%   7.0%

Company Descriptions
AWEB - Autoweb.com   $12.25  *** Internet Speculation *** 

Autoweb.com is the leading consumer automotive Internet service, 
guiding consumers through every stage of vehicle ownership. From 
research and buying, to enjoying, maintaining and selling, AWEB
delivers what consumers want. Autoweb.com works with over 5,000 
Member Dealers and other commerce partners to provide the best 
experience at every stage of vehicle ownership. Autoweb.com has
announced several agreements in the past few weeks as they try
to solidify partnerships and acquisitions. The technical picture
continues to improve and the stock appears ready to emerge from
a four-month base. The recent rally had heavy volume support and
a top-side resolution is the most likely outcome.

DEC 10.00 UWB LB Bid=2.63 OI=272 CB=9.62 RC=4.0% RNC=4.0%

Chart = http://quote.yahoo.com/q?s=AWEB&d=3m
COOL - Cyberian Outpost  $14.50  *** E-commerce ***

Cyberian Outpost is a leading global Internet-only retailer of
computer products to the consumer and small office/home office
marketplace. The company's online store features a fun, easy to
navigate interface with competitive pricing. Outpost.com is now
one of the most widely known and used e-commerce sites and has
received recognition from numerous publications. New contracts
and agreements will provide online revenue and the company plans
to target more business-to-business sales. Technically favorable
and the company expects to become profitable in the near future.

DEC 12.50 QOO LV Bid=2.44 OI=1371 CB=12.06 RC=3.6% RNC=3.6%

Chart = http://quote.yahoo.com/q?s=COOL&d=3m
EMIS - Emisphere Technologies  $16.88  *** A New Drug ***

Emisphere is a biopharmaceutical company specializing in the oral 
delivery of therapeutic macromolecules and other compounds that 
are not currently deliverable by oral means. The Company has two 
drugs in human clinical trials using its unique carrier technology
and has strategic alliances and ongoing feasibility studies with 
several pharmaceutical and biotechnology companies, including 
Novartis and Eli Lilly. EMIS's most clinically advanced product is
oral heparin which is designed to capture and expand the existing
$2 billion coronary anti-thrombosis market. Emisphere has complete 
control over the product and recently completed a $2 million share
offering to fund a portion of the Phase III trials. They are also 
seeking a partner to assist in expanded clinical development and 
global marketing. DB Alex Brown started coverage of EMIS with a
"buy" and set a $25 price target. We favor the cost basis near 
the October lows (share offering) as Emisphere approaches the 
neckline of a long term double bottom. Further research required!

DEC 15.00 MTQ LC Bid=3.38 OI=1163 CB=13.51 RC=11.1% RNC=11.1%

Chart = http://quote.yahoo.com/q?s=EMIS&d=3m
MESG - MessageMedia  $17.88  *** New Entry Point ***

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=3.50 OI=326 CB=14.38 RC=4.3% RNC=4.3%

Chart = http://quote.yahoo.com/q?s=MESG&d=3m
ONEM - OneMain.com  $19.94  *** Internet Speculation ***

Based in Reston, Virginia, OneMain.com is one of the largest
independent Internet service providers with approximately 561k
subscribers. OneMain.com provides Internet access and related 
services throughout the U. S. to individuals and businesses 
predominantly serving smaller metropolitan markets and rural 
communities. OneMain recently started 'geographic' web pages for
its customers which will provide customized local content with
links to information and entertainment in their surrounding area. 
For the third successive quarter, OneMain has exceeded published 
analyst estimates for revenue, subscribers and cash flow. OneMain
has rallied above a four month base after a post IPO sell off.
Favorable speculation with a cost basis near the support area.

DEC 17.50 ONU LW Bid=3.25 OI=80 CB=16.69 RC=4.9% RNC=4.9%

Chart = http://quote.yahoo.com/q?s=ONEM&d=3m
VUSA - Value America  $14.38  *** Stage I Base ***

Value America is a brand-direct and factory-authorized marketplace
for technology, office and consumer products. With over 30 product
categories, Value America offers customers superior value on 
products from more than 3,000 of the world's most trusted brands. 
Through unique multi-media product demonstrations, customers are 
provided with thorough product information, allowing them to make 
informed and confident buying decisions. Value America reported 
that its revenues increased 269% last quarter, with gross margin
increasing 110%. Recent agreements were announced with Federal
Express and Ask Jeeves. On Wednesday, a new CEO was named at the
same time Wolf Schmitt (retired Rubbermaid CEO) was named new 
Chairman of the Board. I can almost hear the take-over rumors 
being formulated! Value America is showing improving technical
strength as it appears ready to exit a technical basing pattern.

DEC 12.50 UAS LV Bid=2.63 OI=367 CB=11.75 RC=6.4% RNC=6.4%

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

Y2K Plays (January Positions)
BNYN - Banyan Systems  $15.81  *** Stage II (IPO) Rally ***

Banyan Systems designs, develops and markets standards-based
networking directory and messaging products that help people
communicate across enterprise networks and the Internet. They
are a pioneer in the computer networking field, and offer a
range of software products, professional services and several
intra-net solutions. Switchboard, their wholly owned Internet
based network filed to raise $60 million in a public offering.
Switchboard.com allows users to search for information about
people and businesses around the United States. Banyan has 
been in a strong stage II climb and is nearing a multi-year
high. We favor the support area above our sold strike as 
investors speculate on the Switchboard.com's IPO.

JAN 12.50 QYN AV Bid=4.13 OI=622 CB=11.68 RC=7.0% RNC=7.0%

Chart = http://quote.yahoo.com/q?s=BNYN&d=3m
SATH - Shop At Home  $12.69  *** 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 recently announced a new weekday sales record. Lots of news
on collectibles.com, Shop At Home's new web site, appears to be
drawing the interest of investors. The technical picture has 
turned bullish as Shop At Home has moved above this Summer's 
consolidation (head-n-shoulders bottom?) area. We favor a strike
price below the October/November range for those interested in a
high probability of a favorable return.

JAN 10.00 SQR AB Bid=3.38 OI=17 CB=9.31 RC=7.4% RNC=7.4%

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


Stock Buying Basics: Planning And Participation...

Momentum investors and speculators compete daily in a frenzied
race for immediate performance but participating in this chaotic
style of trading will seldom produce regular profits. Managing a
winning portfolio requires planning, patience and good judgment.
Learning when to buy and sell requires a solid understanding of
technical analysis and market trends. It is also important to use
consistent, well-known trading techniques.

Before you open any position, it is important to evaluate your
personal risk/reward attitude and develop a trading plan based on
that outlook. Once you have established a comfortable style of
investing, you must decide how to divide your portfolio among all
the different types of financial instruments. Most investors find
that a combination of investments will provide the best balance
of risk and reward while accomplishing their specific objectives.

If stock ownership is one of your primary investment tools, you
must learn to evaluate how each individual position contributes
to your long-term plan. Does the stock compliment your portfolio?
Is this a company you want to own right now or in the future? Are
you willing to pay the current price for the issue? Experienced
investors will assemble a collection of favorable candidates and
identify the best entry opportunity for each issue through chart
reading and technical analysis.

The ideal time to buy is when a stock is moving out of a defined
base into a dynamic stage II pattern. The breakout above the top
of the resistance area (and the long-term moving average) should
occur on impressive volume. In stage II, the 30-week MA generally
starts turning up shortly after the breakout. The initial rally is
usually followed by at least one pullback. That decline brings the
price back close to the breakout point, offering another excellent 
opportunity to enter the position. The less it retreats, the more
strength inherent in the move. The potency of the pattern becomes
evident as each successive peak eclipses the previous one and the
lows on corrections are also progressively higher. As long as all
of these gyrations continue to occur above the moving average, the
trend remains intact and long positions should be maintained until
the target exits are achieved. After the trend is well established
and favorable profits are guaranteed, the primary objective is to
manage the position for maximum return while avoiding potential
losses. That will be the subject of next week's discussion.

Good Luck!

                      *** 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.


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

FLAS   10.06   9.44   DEC   7.50  0.75  *$  0.75  27.2%  19.7%
NSPK   16.38  17.00   DEC  12.50  0.50  *$  0.50  13.2%  14.4%
STRX    7.63   7.00   DEC   5.00  0.44  *$  0.44  22.3%  13.9%
DGII   14.88  17.00   DEC  12.50  0.50  *$  0.50  12.3%  13.3%
PILT   21.31  22.00   DEC  15.00  0.56  *$  0.56  11.6%  12.6%
ONSL   24.00  26.63   DEC  17.50  0.63  *$  0.63  11.6%  12.6%
NSPK   15.50  17.00   DEC  12.50  0.50  *$  0.50  13.5%  11.7%
BNYN   12.75  15.75   DEC  10.00  0.38  *$  0.38  13.0%  11.3%
MSGI   16.94  19.44   DEC  12.50  0.50  *$  0.50  12.9%  11.2%
COOL    9.56  14.50   DEC   7.50  0.31  *$  0.31  14.0%  10.1%
ITVU   64.50  60.63   DEC  45.00  1.25  *$  1.25   8.8%   9.6%
CTIX   20.13  17.56   DEC  15.00  0.38  *$  0.38   8.6%   9.4%
NVDA   32.00  38.25   DEC  22.50  0.75  *$  0.75  10.5%   9.1%
MLTX   16.19  25.94   DEC  12.50  0.50  *$  0.50  13.4%   8.3%
XCED   31.63  29.25   DEC  22.50  0.63  *$  0.63   9.1%   7.9%
AMTD   28.19  24.50   DEC  20.00  0.44  *$  0.44   7.2%   7.9%
MTSN   15.56  16.88   DEC  12.50  0.31  *$  0.31   8.9%   7.8%
IONA   21.38  35.00   DEC  15.00  0.56  *$  0.56  11.6%   7.2%
TUTS   39.69  43.88   DEC  30.00  0.81  *$  0.81   9.3%   6.7%
MRVC   31.00  30.56   DEC  22.50  0.38  *$  0.38   5.8%   6.3%
NPIX   37.44  37.25   DEC  20.00  0.50  *$  0.50   6.3%   5.4%
LTXX   18.56  18.56   DEC  15.00  0.31  *$  0.31   7.4%   5.4%

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

Comments/Observations on Open Positions:

So far, so good! Positions that are consolidating remain within
an overall bullish pattern.

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

Sequenced by Company

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

CDNW   17.00  DEC 15.00  NWQ XC  0.50  81    14.50   9.4%
CMDX   65.19  DEC 40.00  CKU XH  0.63  50    39.37   4.6%
HEPH   16.50  DEC 12.50  HUP XV  0.38  47    12.12  10.3%
IVIL   27.25  DEC 22.50  IIU XX  0.94  306   21.56  13.3%
NPIX   37.50  DEC 22.50  XMQ XX  0.69  148   21.81   8.4%
PDLI   40.75  DEC 35.00  PQI XG  0.44  25    34.56   4.0%
RNBO   18.13  DEC 15.00  BQO XC  0.44  110   14.56   9.6%
ZOMX   36.06  DEC 30.00  ZMQ XF  0.81  74    29.19   8.8%

Sequenced by ROI  

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

IVIL   27.25  DEC 22.50  IIU XX  0.94  306   21.56  13.3%
HEPH   16.50  DEC 12.50  HUP XV  0.38  47    12.12  10.3%
RNBO   18.13  DEC 15.00  BQO XC  0.44  110   14.56   9.6%
CDNW   17.00  DEC 15.00  NWQ XC  0.50  81    14.50   9.4%
ZOMX   36.06  DEC 30.00  ZMQ XF  0.81  74    29.19   8.8%
NPIX   37.50  DEC 22.50  XMQ XX  0.69  148   21.81   8.4%
CMDX   65.19  DEC 40.00  CKU XH  0.63  50    39.37   4.6%
PDLI   40.75  DEC 35.00  PQI XG  0.44  25    34.56   4.0%

Company Descriptions
CDNW - Cdnow  $17.00     *** Sony/Time Warner Merger ***

Cdnow is an Internet retailer of CDs and other music products.
The company is one of the main sources for CDs and music-related 
products on the Internet. Cdnow.com offers an excellent selection,
competitive pricing and personalized merchandising. CDNW climbed
higher last week on increased speculation after the Federal Trade 
Commission asked Time Warner/Sony for information in connection
with the proposed deal with Columbia House. The new entity would
be owned 37% each by Sony and Time Warner and 26% by CDNW. Time
Warner and Sony remain committed to the merger and it is expected
to close in the first quarter of next year.

DEC  15.00  NWQ XC  Bid=0.50  OI=81  CB=14.50  ROI=9.4%

Chart = http://quote.yahoo.com/q?s=CDNW&d=3m
CMDX - Chemdex  $65.19     *** A B2B Business? ***

Chemdex is a leading provider of e-commerce solutions to the life
sciences industry, with a large number of suppliers and products 
available through the company's services. Chemdex provides life
sciences enterprises, such as biotechnology and pharmaceutical
companies and academic and research institutions, researchers and
suppliers to efficiently buy and sell research products through a
company marketplace. CMDX is considered the leading B2B firm in
the industry and CMGI's Internet venture has a large stake in this
consumer-oriented Web business. CMGI plans to create a fund based
on Internet firms that help businesses work together and CMDX is
one of the core components of that group.

DEC  40.00  CKU XH  Bid=0.63  OI=50  CB=39.37  ROI=4.6%

Chart = http://quote.yahoo.com/q?s=CMDX&d=3m
HEPH - Hollis-Eden Pharmaceuticals  $16.50  *** Speculation ***

Hollis-Eden Pharmaceuticals is a development-stage pharmaceutical 
company engaged in the advancement of products for the treatment
of infectious diseases and immune system disorders. The company
is currently testing its lead drug candidate, HE2000, in HIV/AIDS 
patients and anticipated progress with the AIDS-fighting compound
has sparked active trading. HEPH said earlier this month that it
will present results from preliminary studies on testing of their 
compound in early December along with additional findings from a
U.S. trial. Short interest is a major player in this issue and it
obviously requires serious due-diligence.

DEC  12.50  HUP XV  Bid=0.38  OI=47  CB=12.12  ROI=10.3%

Chart = http://quote.yahoo.com/q?s=HEPH&d=3m
IVIL - iVillage  $27.25   *** E-commerce ***

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 recently began
coverage on iVillage with an Outperform, stating a price target
of $31 to $35. A speculative target-shooting entry for an issue
with signs of a technical bottom: BOP reversal; successful test
of intraday lows in November (short term "W") and a rebound on
increased volume.

DEC  22.50  IIU XX  Bid=0.94  OI=306  CB=21.56  ROI=13.3%

Chart = http://quote.yahoo.com/q?s=IVIL&d=3m
NPIX - Network Peripherals  $37.50   *** An Old Favorite ***

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

DEC  22.50  XMQ XX  Bid=0.69  OI=148  CB=21.81  ROI=8.4%

Chart = http://quote.yahoo.com/q?s=NPIX&d=3m
PDLI - Protein Design Labs  $40.75  *** Pharmaceutical ***

Protein Design Labs is engaged in the development of human and 
humanized antibodies and other novel compounds to prevent or 
treat certain disease conditions, including viral infections, 
autoimmune diseases, inflammatory conditions, and cancers. In 
early November,  PDLI recently reported an operating loss of
$0.03 which was much better than the expectations of a $0.21
loss. PDLI also recently announced the initiation of a Phase
III clinical trial of its SMART(TM) (humanized) M195 Antibody
for the treatment of acute myelogenous leukemia and favorable
results using Zenapax® in renal transplantation. We favor the
long-term outlook and $35 is a fair price for the issue.

DEC 35.00 PQI XG Bid=0.44 OI=25 CB=34.56 ROI=4.0% 

Chart = http://quote.yahoo.com/q?s=PDLI&d=3m
RNBO - Rainbow Technologies  $18.13  *** Internet Security ***

Rainbow provides Security Solutions for the Information Age. The
company is a leading developer, manufacturer and supplier of 
software protection solutions, and a leading provider of network 
license management, Internet and information security. Rainbow
continues to develop products and new state-of-the-art website
security and authentication solutions. They are also expected to 
become one of the leading players in this growing industry. The
support near $14 should provide a reasonable safety net for any 
short-term consolidation.

DEC 15.00 BQO XC Bid=0.44 OI=110 CB=14.56 ROI=9.6% 

Chart = http://quote.yahoo.com/q?s=RNBO&d=3m
ZOMX - Zomax  $36.06  *** Entry Point ***

ZOMX is a top outsource service provider to software publishers,
computer manufacturers and multimedia products producers. These
services include call center/customer support; E-commerce; DVD
authoring services; CD and DVD mastering; CD, DVD, diskette and
cassette replication; graphic design; print management; assembly; 
packaging; warehousing; inventory management; distribution and 
fulfillment; and RMA processing. Zomax reported blow-out third
quarter earnings and expects continued strong sales and earnings
in the fourth quarter of 1999. With the continued rise in share
price, can another split (last one in August) be far behind? A
reasonable cost basis for target-shooting a new entry point.

DEC 30.00 ZMQ XF Bid=0.81 OI=74 CB=29.19 ROI=8.8% 

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



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