Option Investor
Newsletter

Daily Newsletter, Tuesday, 12/07/1999

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The Option Investor Newsletter         Tuesday  12-07-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        12-7-99            High     Low    Volume Advances Decline
DOW    11106.60 - 118.40 11253.40 11106.60 1,085,860k 1,046  2,025
Nasdaq  3586.92 +  40.91  3589.06  3532.41 1,564,357k 1,992  2,138
S&P-100  756.10 -   6.65   765.09   755.82    Totals  3,071  4,163
S&P-500 1409.17 -  14.17  1426.81  1409.17            42.4%  57.6%
$RUT     465.70 -   0.05   467.29   463.63
$TRAN   2886.16 -  19.36  2929.93  2886.16
VIX       21.38 +   0.32    22.33    21.14
Put/Call Ratio       .51
*************************************************************

Yahoo! Is that what you yell as the cliff crumbles below you?

The only story today if you were long Nasdaq stocks was the
incredible run by Yahoo. Closing up +67.19 it was trading after
hours down -10.44 at $337. The driving force of course was the
addition of YHOO to the S&P-500 after the close today. In just
the last week YHOO has gone from $210 on Nov-30th to as high as
$353 today. A tremendous +$143 in one week. If you were in this
play you are probably sipping champagne and getting ready to
celebrate Christmas early. I hope you sold today as this type
of hype is totally unsustainable in the real world. The market 
cap of YHOO rose over 50% in one week to $90 billion yet not
one new product or service was added. While YHOO would be a
tempting short target for tomorrow it could be several days
before the slide begins. Many funds will wait until the hype
dies down before opening their positions. Nothing requires
a fund to buy before the inclusion date. Over 1.7 mln shares
were traded after hours.

When a stock is added to the S&P it impacts the weighting of
all the other stocks in the index. Essentially, fund managers
must sell some of the other 499 stocks as they buy YHOO in
order to balance their holding to match the S&P weighting.
MSFT and GE, the two biggest S&P components will have millions
of shares sold across all the funds. The S&P may see some
pressure due to the selling for rebalancing and any pullback 
on YHOO from the +$143 gain. In reality part of the market
weakness today was due to funds selling stocks in advance of
the YHOO event. YHOO is now trading at a multiple of 117 to
sales and each Yahoo visitor is valued at over $2500. Next
time you hit their site, you decide if your visit was worth
$2500. If your 60 second visit is not worth $2500 then what
is it worth? $50, $100, $250? If you picked the high number
of $250 then YHOO should only be worth $33.80 per share. But
of course my math may not count. Schoeder analyst Arthur
Newman raised his price target on YHOO today to $350 claiming
that YHOO was worth a premium in the Internet portal market
but "the only question is how much". He left his "outperform"
rating on the stock, which is only barely a recommendation.

While YHOO was exploding off the charts the rest of the market
was very mixed. Some other Internet big name stocks were down
as investors took profits. AMZN -1.69, EBAY -12.74, PHCM -8.13,
ATHM -4.50, SUNW -2.44. There were some big winners on the
other end of the scale. RHAT +$52, JNPR +$43, CMRC +34.50,
EXDS +20.69, ARBA +17, SFE +14.63, VRSN +12.39, RNWK +10.75,
CMGI +9.97. It was a mixed market as traders seemed to run
from stock to stock as each rose and fell dozens of points
intraday. A little frothy here at the top? The four pillars
of the Nasdaq, DELL, CSCO, INTC, MSFT only managed a total
of +.75 for a gain today. Could it be that the Nasdaq string
of records is tiring?


 


 

The NYSE lost -118 points on over 1 bln shares of volume. This
is not a good sign. Volume precedes price and high volume on
a down day could be an omen. The Dow leaders all led down
today with KO, GM, MMM, CAT, PG, JNJ, MRK all posting solid
losses. Advancers beat decliners by 2:1 on the NYSE and were
flat on the Nasdaq. We are obviously seeing two markets here.
The stock market and the tech market. 

The Dow weakness today came after great economic numbers were
announced this morning which should have propelled the Dow
upward, not downward. The productivity numbers were revised
upward to +4.9% from +4.2% and were the strongest in seven
years. The unit labor costs actually went down -0.2%, the
biggest decline in two years. With economic reports so
favorable the Fed may as well cancel their meeting scheduled
for 12/21 and just take a long holiday break. The odds of a
rate hike this year are zero. The PPI on Friday would have to 
be a blow out for the Fed to take any action.

The continued Nasdaq rally has silenced even the noted bear,
Barton Biggs. He said today that the rally was a bubble and
now officially a mania but was so strong it could continue
for some time. When Barton says the market can go up for some
time to come, we must be close to the top. He has been wrong
for so long that a change in attitude could be the 
capitalization the market has been expecting.

With the Nasdaq up +63.6% YTD every Nasdaq stock must have
had huge gains for the year, right? Did you know that only
2221 of the 4500 Nasdaq stocks have gone up this year? 2371
have actually gone down YTD. The S&P looks the same with only
43% up compared to 57% down. So if only 48% of the Nasdaq has
gone up this year how can the Nasdaq be up +63%? The answer
is the way the index is weighted. Only ten stocks make up
34% of the entire index. The biggies of course are CSCO, 
MSFT, DELL, INTC and in ninth and tenth place are YHOO, up
+178% for the year and QCOM, +1439% for the year. With 100%
to 1400% gainers in the top ten it is amazing to think it
is only up +63%.

The PC sector took a hit today with a downgrade of Gateway.
Analysts said slow delivery of chips from Intel would impact
earnings and cause them to only meet estimates. Rumors that
employees were grumbling at the Christmas party that they
were not going to make bonuses due to slow sales did not
help either. After the close today International Data Corp
lowered its growth forecast for the entire sector for the 
fourth quarter. DELL, IBM, GTW, CPQ, HWP are all being hurt
by chip shortages and memory shortages caused by the earthquake
and the Intel problems. They lowered the growth forecast to 
+17% from +20%. They also claimed that 4th qtr PC orders were
slowing due to a freeze on new purchases until after Y2K.
This is not going to set well with the tech sector tomorrow.

Where do we go from here? I wish I had a crystal ball. There
is a lot of support under the Nasdaq. Every dip is met with
strong buyers waiting in the wings. We will probably see
some post-YHOO let down but who knows how far down will be.
I would watch the market breadth and look for any pullback
to be a buying opportunity. Just wait for it to bounce
before starting a new position. We still have the Y2K
uncertainty which could be contributing to the bad breadth
and until the Dow recovers the Nasdaq will not be stringing
many more records together. The Dow and Nasdaq may disconnect
from time to time but they always come back together.
Patience is the key word today. 

Pick your next entry point very carefully! 
Good Luck, Sell Too Soon.


Jim Brown
Editor


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

Internet IPOs Show Strong Aftermarket Performance
By Cindy Christ

With only two weeks left until Christmas, IPO shoppers are
lining up their carts to haul in what's left of this year's
hottest deals.

As 1999 draws to an end, expectations are still high for
record profits from the new issues market, which has had a
spectacular run this year. Through the end of November, nearly
$96 billion has been raised through 502 new issues. Compare
that to 1993, a record year, when roughly $58 billion was
raised.

/members/stocknews/120799_1.asp



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

As of Market Close - Tuesday, December 7, 1999 

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

DOW Industrials   10,750  11,320  11,108    Neutral  11.12
SPX S&P 500        1,340   1,400   1,409    BULLISH  12.03
OEX S&P 100          700     750     756    BULLISH  12.03
RUT Russell 2000     430     450     466    BULLISH  11.12
NDX NASD 100       2,650   3,150   3,205    BULLISH  12.03
MSH High Tech      1,340   1,630   1,710    BULLISH  12.03

XCI Hardware       1,075   1,160   1,252    BULLISH  11.11
CWX Software       1,000   1,160   1,264    BULLISH   9.03
SOX Semiconductor    560     660     668    BULLISH  12.07  *
NWX Networking       650     800     833    BULLISH  12.03
INX Internet         525     675     713    BULLISH  12.07  *

BIX Banking          645     690     580    BEARISH  11.30
XBD Brokerage        395     450     440    Neutral  11.30
IUX Insurance        625     650     604    BEARISH  11.30

RLX Retail           875     910     913    BULLISH  11.23
DRG Drug             375     395     364    Neutral  11.30
HCX Healthcare       750     790     719    Neutral  11.09
XAL Airline          180     190     149    BEARISH   5.21
OIX Oil & Gas        285     315     291    Neutral  11.23

 
Posture Alert    
Yahoo led the Nasdaq to another all time high on volume of 1.5 
billion, while the Dow and S&P's divergence from technology 
continues. Leaders Tuesday include Internet (+4.12%), Brokerage 
(+2.80%), and Networking (+2.12%), while sectors on the downside 
were led by Banking (-3.10%), Healthcare (-2.73%), and 
Semiconductors (-2.10%).  With this week's action, we have upped 
Internet and Semiconductors to BULLISH from Neutral, and have 
lowered the Drug and Healthcare sectors to BEARISH from Neutral.



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

Tuesday December 7, 1999

The Energizer Nasdaq!

Another new high on good volume propelled the Nasdaq into 
stratospheric territory while the Dow and S&P are left watching 
the dust. Yahoo led the pace, as it has been for this last week, 
rocketing up another +67 as fund managers fight for the stock with 
all the short sellers who continue to run for cover. This 
continued strength in the sector is fueling other technology 
stocks to higher highs as bears continue to throw in the towel. 
This trend seems to be continuing, as most evidenced by moves 
today in Yahoo and Ciena, and as such, we thought it would be 
appropriate to show the highest short interest stocks for your 
benefit. Below is a list of the largest short interest issues on 
the NYSE and Nasdaq.   
			
Largest Short Positions			

NASDAQ
Rank	                   Nov. 15       Oct. 15        Change
1 Dell Computer        50,910,477    50,795,305	       115,172
2 Cisco Sys            45,476,522    41,913,992      3,562,530
3 Intel                36,698,561    37,586,522       -887,961
4 Microsoft	           34,243,978    31,735,669      2,508,309
5 Qwest Comm Int       29,457,369    25,238,901      4,218,468
6 Amazon.com           29,256,028    36,919,383     -7,663,355
7 MCI Worldcom         28,310,350    25,113,459      3,196,891
8 E*trade Group        28,307,031    26,757,152      1,549,879
9 Oracle Corp          24,307,926    22,742,493      1,565,433
10 Nextel A            24,110,466    23,975,398        135,068
11 Comcast A spc       20,030,890    14,711,898      5,318,992
12 Global Crossing     19,884,422    24,942,658     -5,058,236
13 Peoplesoft Inc      17,304,258    18,263,768       -959,510
14 Ameritrade Hldg A   16,728,961    14,715,342      2,013,619
15 Globalstar Tel      16,094,145    14,038,347      2,055,798

Other Notables:

Yahoo                  14,201,884    12,586,194      1,615,690
Ciena Corporation       5,551,676     4,228,239      1,323,437
AtHome Corporation     13,392,536    17,379,044     -3,986,508
Ebay                    5,564,312     6,068,850       -504,538
CMGI                   10,393,116    11,700,164     -1,307,048
Apple Computer          7,399,852     6,872,607        527,245

  
NYSE
1 Vodafone ads         76,979,365    70,579,714      6,399,651
2 AT&T Corp            72,210,559    69,827,674      2,382,885
3 Abbott Labs          58,930,283    64,192,454     -5,262,171
4 Walt Disney          58,608,964    57,653,168        955,796
5 Wal-Mart Stores      44,265,243    40,581,231      3,684,012
6 Lucent Technologies  39,467,209    48,657,236     -9,190,027
7 BP Amoco             34,850,708    21,928,039     12,922,669
8 EMC Corp             33,677,063    31,910,872      1,766,191
9 Kmart Corp           33,612,739    35,746,082     -2,133,343
10 Infinity Bdcst      32,317,790    30,820,865      1,496,925
11 Columbia/HCA Hlth   32,113,932    31,164,094        949,838
12 America Online      31,676,556    32,234,882       -558,326
13 Sprint PCS          30,048,117    20,798,545      9,249,572
14 Time Warner         29,732,970    32,870,409     -3,137,439
15 Citigroup           28,740,718    20,713,749      8,026,969
16 Nortel Netwk        27,494,276    16,171,863     11,322,413
17 Compaq Computer     26,060,644    20,309,720      5,750,924

Some of your favorite stocks may be on this list, and if any of 
them report a positive news event, watch out above, especially for 
the Nasdaq issues. If this index keeps going on pace, the energizer 
bunny will be looking for a new job, as the energizer Nasdaq will 
become the new spokesperson! At least our pink friend will help 
out next month's employment data as he searches for a new position.   


BULLISH Signs: 

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

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.

S-Squeeze:
News events continue to squeeze the shorts, as lately evidenced by 
Yahoo's incredible run.


Mixed Signs:

Volatility Index (21.38):
The VIX is trading once again near its previous lows. Another quick 
reversal at this benchmark will likely presage an intermediate top. 


BEARISH Signs:
 
Interest Rates:
The yield on the 30-yr Treasury broke support, and may soon hit 
52-week highs.

Advance/Decline Line:
The A/D line's continual break does not serve the best interests 
of the overall market.

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%
Friday, December 03       66,323       +83.4%


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.

 
Pinnacle Index OEX              Friday      Tues
Benchmark                       (12/3)     (12/7)

Overhead Resistance (770-800)    35.30      9.14
Overhead Resistance (750-765)     N/A       0.76

OEX Close                       767.48    756.11

Underlying Support (730-745)      1.65      2.43


What the Pinnacle Index is telling us:
Based on 12/7, overhead resistance (750-765) is very light, while 
overhead (770-800) is heavy but decreasing. Underlying support is 
also building strength.


Put/Call Ratio                  Friday     Tues
Strike/Contracts                (12/3)    (12/7)

CBOE Total P/C Ratio             .52       .51
CBOE Equity P/C Ratio            .38       .42
OEX P/C Ratio                   1.67      1.38


Peak Open Interest (OEX)
                     Friday           Tues
Strike/Contracts     (12/3)          (12/7)

Puts                 750 / 9,697     750 / 11,174
Calls                750 / 8,315     780 /  8,466
Put/Call Ratio         1.16            1.32


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
 
December 7, 1999                        21.38


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
November 26, 1999                     53.0        28.7



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

Daily Results

Index      Last    Mon     Tue    Week
Dow     11106.65 -61.17 -118.36 -179.53
Nasdaq   3586.92  25.38   40.91   66.29
$OEX      756.10  -4.73   -6.65  -11.38
$SPX     1409.17  -9.96  -14.17  -24.13
$RUT      465.70   1.17   -0.05    1.12
$TRAN    2886.16 -23.28  -19.36  -42.64
$VIX       21.38   0.24    0.32    0.56

Calls              Mon     Tue    Week

YHOO      348.00  27.81   67.19   95.00  Dropped, what a run!
CMGI      178.06   7.94   10.06   18.00  CMGI continues to run
BRCM      224.50  13.75    3.00   16.75  Has something to prove
NOK       171.81  19.94   -4.63   15.75  A big gain on Monday!
QCOM      398.88  10.31    4.13   14.44  QCOM breaks out!
GMST      128.50   5.06    6.31   11.38  Split run keeps going...
SDLI      193.75  15.50   -4.75   10.75  Money managers galore!
PRGN       90.13  10.75   -1.63    9.13  New, another new high
JDSU      259.75   3.25    5.31    8.56  Let volume be your guide
STM       137.75   5.50    0.88    6.38  Another new 52-week high
USWB       50.06   2.00    1.88    3.88  New, looks to outperform
NT         84.00   3.94   -0.13    3.81  Now that's more like it!
VOD        52.75   3.63   -0.25    3.31  The deal may still go!
MXIM       95.28   2.63    0.34    2.97  In the right direction
AOL        79.75   2.63   -1.25    1.63  Holds leading position
TIF        81.25   0.06    1.50    1.56  The bulls go shopping!
MACR       77.25   4.06   -3.44    0.63  New 52-week high!
SNE       183.63  -2.00    2.50    0.50  Has established pattern
EMC        94.50  -1.25    0.25   -0.75  May give room for entry
ANSR       31.63  -0.50   -1.38   -1.88  Has a new cheerleader
VVTV       43.56  -2.06   -0.44   -2.50  Dropped, remains weak
MSFT       93.00  -0.69   -2.44   -3.13  Dropped, defies good news
HGSI      126.00  -5.69    2.38   -3.31  Tests and holds support
MEDI      121.13  -7.13   -3.25  -10.38  Dropped, we can't wait
VISX       52.00   0.38  -36.13  -35.75  Still on our play list!

Puts

PGR        75.19  -1.75   -1.75   -3.50  You cant insure investors
JCI        49.25   0.81   -4.00   -3.19  JCI goes for the fake out
GT         30.31  -1.44   -1.06   -2.50  Keeps on rolling down
KIDE       48.25  -3.81    2.50   -1.31  Smaller, shorter bounce
BOW        48.19   0.00    0.19    0.19  Looking for a break
EK         61.38   1.19    0.06    1.25  A little bottom fishing?



************
WOMANS WORLD
************

THANK YOU LORD! Tweaking Yahoo A Little More

WOW!! What can I say? Talk about a fun ride and an early Christmas! 
Intuition?  Not completely. Let me share with you how I thought 
through YHOO, when I bought into the closing sell-off Friday, my 
buying today and what I'm thinking from here. 

First of all, for anyone who has YHOO profits since last week, 
lock those babies in, NOW!! That means take your profits out of 
the plays, sit back, pay off your credit cards and relax a little. 
Better to be safe, then sorry. This was a rare event. Tomorrow is 
uncertain.

Secondly, please realize that the newer you are to option trading, 
the harder it usually is to successfully trade short term or intra 
day plays. Although learning option principles is imperative, 
learning how to read the market and interpreting what you hear 
on the news, is the key. It is similar to buying groceries. You 
will have either a meat & potato or a gourmet meal, depending on 
the knowledge base of the cook. The shorter the trade, good entry 
points become even more critical, as do real time quotes, 
intra-day charts and indicators. Needless to say, you must watch 
these closely. 

Last Friday, I felt fairly confident in my buying decision, even 
though YHOO was selling off into the close. I received an email 
asking how I knew to do this, because the reader had bought puts 
at the close. Well, my thinking centered around the continued 
strength of  YHOO's blow out earnings and growth. Being included 
in the S & P is a major event for any stock, but especially this 
one, since many fund managers don't touch internets. I saw this 
as a forced upon purchase, by people who are normally more 
conservative...the S & P crowd versus the internet crowd. I knew 
the majority of these players, would be purchasing shares this 
week, probably on Tuesday. YHOO channeled most of the day Friday, 
which usually means there will be a break out, either up or down. 
I had thought I missed the dip, but it was given back to me at 
the close. I took it. If I was right, it would be an excellent 
entry.

When a stock sells off into the close, closing lower than the 
open & the high of the previous day, it can gap DOWN the next 
morning. This is the more common occurrence. But, all major Fed 
news was already out, that could possibly damage the markets 
between Friday and today. To me, the only real threat of risk 
appeared to be normal profit taking from last weeks gains. When 
I weighed that against all the money that was going to be chasing 
YHOO Monday and Tuesday, I decided I was at a higher risk by not 
playing it. I figured a lot of people would jump in on the dip 
and cause an immediate run up Monday. I felt I had limited risk 
because any dip would be met by forced buyers. So, I played my 
instincts based on a "news play" instead of technicals. Also, I 
remembered the markets reaction to AOL inclusion last year. 

On Monday, I watched it for 1/2 day and felt good. I took some 
profits on YAHOO, AOL & QCOM, in order to free up a little money 
to trade YHOO intra-day on Tuesday. After that,  I went to the 
hospital to "work". 

This morning, I first bought Jan 270 (ITM) at the early rotation 
dip and sold them an hour or so later for a decent profit, when 
things quieted down. I started bouncing between my 1 min and 5 
min Qcharts, carefully observing volume, candlestick movements, 
stochastics, MACD and a directional movement indicator I use. I 
tweaked my preferences on all of these to give me a more sensitive, 
intra-day feel, of the motion. I watched the volume and saw that 
they sold when it hit the upper Bollinger Band and volume would 
increase on the buy side, when it hit the lower Bollinger Band. 
I decided if I believed in my own theory, I needed to play it. 
So, when all my indicators showed "oversold" and I saw buying 
coming in,  I placed a limit order to buy 5 contracts of the 
December 290 (ATM) (YHOO= 292), @ 19 3/4.  It took a while, but 
they took it. It was a good entry. Those babies were 60 going 
into the close (203+%) . I don't even remember what I paid for 
the Jan 270 in the morning, at this time. The day just became a 
big blur to me. The worse part of the day, was realizing these 
nice intra-day gains, just cost me a big time short term capital 
gains tax. By the way, my original Jan 270 contracts bought 
@ 3 1/4 for Blow & Go, closed at 83 (a 2,454% gain!). Yes, 
take profits!!

Really great traders, can go in and out several times a day, 
churning large number of contracts with minimal point swings to 
their favors. I did not do this. I only had a few round turns 
this morning. Most of my money was already in contracts bought 
last week. Still, I have no complaints. I have years to perfect 
those skills. There was a time when I always lost money on 30 
day trades and would never attempt intra-day. I am more confident 
now because I have learned basic technical analysis skills, which
 anyone can do with minimal, evening or weekend reading. Having 
real time quotes and a great brokerage help too. 

Now what?? Well, this part of the party is over for YHOO. This 
was a once in a lifetime event for YHOO. Take your gains and be 
happy. I could be wrong but I will be expecting a period of 
profit taking and lull in the stock to start, once the S & P 
buying pressure is over. That may start as early as tomorrow. 
Who knows? If you take your profits now, you won't have to worry. 
I have no idea how long that lull will last. I will let the markets 
tell me. It could be anywhere from a few hours, to a few days, to 
a week. Just keep in mind, YHOO is WAY beyond its split territory. 
There is no rule that says it must only be reported at earnings, 
it could come earlier......and then there is the question of how much 
of a split we get. Remember? With earnings due around January 11th, 
I doubt that traders will stay out long or a big dip to occur 
because they are ready for the second party to begin.

It is probable that YHOO pushed Nasdaq up today. All other market 
factors were down. With the YHOO buying pressure relaxing Wednesday 
and the CPI coming out on Friday, we may get a soft Nasdaq market 
this week. I will not buy YHOO on a sell off into a close this week. 
But if all markets close down and YHOO closes below the previous 
days highs, I will be watching for an entry, maybe Wednesday or 
Thursday. That's my idea at this time. Also, until YHOO gives me 
a clear feeling that the profit takers are finished & the buyers 
are back ready for earnings, my attention will focus on QCOM. I am 
looking for more entries now, because it is REALLY itching badly 
to break out of the chains that bind it. Once it closes above that 
402+ area, watch out! I am hoping for an entry with a soft market, 
later this week. But, it may not give me that gift. 

Well, this is how I did it and this is why I narrowed my focus to 
only a few plays. Even now, I see how I could have tweaked it a 
little bit more. 

Renee
renee@OptionInvestor.com



*************
READERS WRITE 
*************

Date: Sunday, December 05, 1999 3:00 PM
Subject: General Comment re: Making $50,000 out of $10,000 in one 
year

Disclaimer: I have not turned my account $10,000 into $50,000 YET. 
Thats only $1000/week. 

It does not surprise me that people will doubt that this can 
happen, but to them I say this: In todays world accountability is 
everything. I believe that Jim is in error in telling everyone 
that if they do EXACTLY what he says they will turn their account 
into $50,000 only in that he didn't tell them the sacrifice of 
time and energy that will be involved. If you want something, you 
have to go and get it; that is, you have to work for it. Expecting 
OI to hand you $50,000 for your $10,000 is somewhat absurd. If 
this were the case, I would be giving OI all my money and I would 
be retiring tonight. 

Anyone purchasing and following this letter still has the 
obligation to due diligence in all the recommendations given in 
the newsletter. I have found on many occasions that I have 
disagreed with a position or two that they have put out there to 
play, mostly it is due to comfort level with a stock that I do not 
understand the underlying business.
 
Jim might say buy this, but I don't play them. That's OK. OI 
gives you enough valuable information and the market has been so 
cooperative that you could have turned $10,000 into $100,000 if 
you were able to follow the market and buy and sell as 
recommended in this newsletter. Take a stock like QCOM, 10 
contracts of the 220s would be worth over $150,000 right now. 3 
contracts, if purchased with a $30 premium, would be worth around 
$50,000. Wealth does happen. 

OI tracks and gives you these stocks to play right now as it is 
happening and much more. They take the fear of knowing which way 
the market is moving away from the subscriber by flat out telling 
you the chance of it going up or going down. They are more 
accurate than the weather forecaster, and they constantly give you 
the disclaimers that you need to keep you reins tight on postions, 
because you can lose them quickly. While it doesn't surprise me 
that people would write about that comment, it never ceases to 
amaze me how people can expect $40,000 from their $350 
subscription. If you are only slightly dilligent, and made 
$10,000, thats 100% return. Try getting a 100% return from a 
broker or mutual fund. 

If you are losing money on your plays, then you are not being 
diligent in getting out of positions. One thing that I have 
learned from this game is this, You will not win all the time. In 
fact, you will not win a lot of the time. The key is getting out 
quickly when a trade goes against you , that is cutting your losses 
and riding your winners. Winners can turn into losers at one 
stroke of one mans tongue (be in Greenspam, Balimar etc) , so you 
have to be monitoring your positions fastidiously so you can cut 
your losses and save your profits. Options are not a buy and hold 
game, I try to not keep many positions open over weekends simply 
because of the time decay in my options. Sometimes it is better to 
just get out and re-enter them if you think the reward is still 
there. There truely has never been a better time than right now 
for options traders, the market volatility has led to fantastic 
gains. 

Thank you OI for this insightful newsletter, I have earned and 
learned more in 3 months from this newsletter than I could have 
earned/learned from multiple stock trading seminars and books. I 
look forward to the newsletter as an opportunity to learn from 
those with greater experience than I, and to pick up tips for 
turning my $10000 account into $50000 next year. I hope to parlay 
this knowledge into a larger house down the road. 

Thanks again. 
mark



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


CALLS:
*****

YHOO $348.00 +67.19 (+95.00) When Carolyn Luther Trabuco, 
Internet analyst from First Union Securities, raised her 12-
month price target to $350 from $240 she stressed that it could 
likely be a one-week objective.  Well, she hit the bulls-eye as 
did Arthur Newman, analyst from Schroder & Co who also raised 
his price target to $350.  Yesterday YHOO surged $27.81, or 11% 
on news of its growing global presence.  A report by research 
firm, MMXI Europe BV named Yahoo! as the #1 ISP in Europe.  
After the bell today YHOO was officially added to the S&P 500. 
Consequently every single index mutual fund that tracks the S&P 
will be forced to buy shares of YHOO over the next several 
weeks.  Today's huge upswell was a result of the money managers 
filling their portfolios combined with short sellers trying to 
cover their positions getting the big squeeze.  Even still at 
these prices YHOO is extremely inflated and could easily get the 
rug pulled from under its feet.  Therefore, we're exiting the 
play this evening to avoid the EXTREME VOLATILITY we anticipate 
in the near-term.  Final tally = over $136 gained from the 
recommendation on Nov 16th.

MSFT $93.00 -2.44 (-3.13) The product news and promising joint 
ventures that hit the press today couldn't wash away the bad 
taste of "violated anti-trust laws" which scorned Microsoft in 
yesterday's headlines.  We warned resistance was very strong at 
the $95-$96 and even expected a little recoil.  However after 
watching MSFT return to its 10-dma ($92.61) in defiance of 
today's positive news events we're exiting the play tonight.  

MEDI $121.13 -3.25 (-10.38) We did not have much time to get 
to know MEDI.  The stock seems to be getting sold much harder 
than the rest of the biotechs, most of whom have suffered a 
little profit taking this week.  The concern here is that MEDI 
may have run out of gas and will need some time before attempting 
a move on its old highs.  We do not want to sit and wait holding 
very pricey options.  There was no news reported about MEDI over 
the past couple of days.  For those of you who are still trading 
MEDI be alert to the support at $117.  MEDI tested this level 
for the second time in a week and bounced quite nicely off of 
it today.  If MEDI continues to hold this support it might 
prove to be a profitable entry point.

VVTV $43.56 -0.44 (-2.50) VVTV in the past had been a good 
stock to buy on dips for a quick trade near the $44.50 level, 
but on Monday profit-takers stepped in to sell-off the shares
to close the day at $44.  The selling pressure continued
today as the stock remained weak trading as low as $41.13, 
passing through major support levels.  The uptrend has now
been broken, and the technicals shows the stock now in the
developing stages of a downtrend.  A bounce could be on the 
horizon, but we will choose to move away from the shares at 
this point.  It was mentioned this morning on Bloomberg by a 
well known analyst that VVTV would be a good stock to buy at 
these levels.  This could be true, but it looks like your 
classic case of you buy, while we sell.


PUTS:
*****

No dropped put plays today.



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


The Option Investor Newsletter         Tuesday  12-07-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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

MXIM $95.28 +0.34 (+2.97) Maxim is heading the right direction, 
following up on last Thursday's expansion breakout.  The stock 
has since formed a new channel, accelerating away from the 5 
and 10-dma's.  The stock set a new record, hitting $95.88 during 
intraday trading on Monday.  For now, support is sitting at $95 
and again at $93.  The stock consolidated at $93 for most of 
Tuesday before a major upmove at the end of the day, setting 
a new closing record and maintaining a string of 5 straight 
up days.  Volume has been good to heavy.  A test of $100 is 
looking more and more likely.  The split is set for Dec 22nd.

AOL $79.75 -1.25 (+1.63) AOL jumped $2.75 yesterday on news it 
holds a leading position in the global market according to a 
research survey by MMXI Europe BV.  Today AOL opened strong at 
$81.94 but finished on the downside.  One factor in today's 
overall trading was the negative pressure from the DOW as well 
as AOL's obvious exclusion from the AT&T (T) and MindSpring 
(MSPG) non-binding access deal.  In a letter to the FCC, AT&T 
outlined a plan to give high-speed Internet access to rivals 
when its exclusive agreement with ExciteAtHome expires in June 
2002.  However, in another letter sent to MindSpring it appears 
that AOL is not necessarily a party to the agreement.  We're 
keeping AOL on our call list in anticipation of a holiday run-
up.  Our goal is to target shoot an intraday entry around $75 
and then ride it back up.

ANSR $31.63 -1.38 (-1.88) After flying up 46.5% last week, we 
cautioned to be on the look out for profit-takers.  The stock 
is indeed experiencing some consolidation now but remains firm 
at $31.50, its daily low on both Monday and Tuesday.  Volume 
was also moderate indicating ANSR isn't a prime candidate for 
a panic sell.  Plus ANSR has a new cheerleader.  Yesterday 
Hambrecht & Co initiated "research coverage" on ANSR stating 
"the company has world-class management, works with blue chip 
clients, and has assembled a complete service solution. 
AnswerThink offers most, if not all, services offered by the Big 
5 but is much more nimble, economical for clients and attractive 
for employees".  Resistance is just overhead at $36.62, the 52-
week high set in May 1998.  Technically the outlook is promising 
as it hasn't fallen apart over the past two days and is holding 
above $28 (recent opposition) and its rising 10-dma ($27.65). 
We're looking for another momentum breakout in the near-term.

SNE $183.63 +2.38 (+0.50) Sony spent Monday setting the table 
(note the chart) for a nice gap up at the open on Tuesday.  SNE 
traded up, hitting it's head at $185 in the morning and found 
some resistance at $184 in today's afternoon session.  SNE has 
support at its 10-dma of $183.50.  Being that SNE closed just 
pennies above this level, we will want to see it hold heading 
into tomorrow.  If needed, SNE has further support at its 5-dma 
of $182.25 and $180.  Resistance is still looming ahead at $185 
and $190.  Sony has established a bit of a pattern lately with 
an up day followed by a down and should this continue, this may 
end up being your best bet for a new entry.  Watch for support 
levels to hold before entering on a down day.  Sony announced 
plans to increase production of their cathode ray tubes for 
TVs in the US and the UK by the end of next March and plan to 
increase production capacity from 20% to 30%.  On Monday, Sony 
announced that they have reached sales of 70 million units for 
their world wide shipments of the Sony PlayStation.  This is 
the best in the industry.  

BRCM $224.50 +3.00 (+16.75) Apparently, every time Broadcom is 
given a new price target, BRCM feels like it has something to 
prove.  For example, on Oct 15th, Kaufman Brothers reported 
a 12-month price target of $140.  On Nov 1st, BRCM traded 
up to over $140, just two weeks later.  Perhaps they meant 
1/2 month?  On Nov 3rd, Adviser.com reported a Long-Term 
price target of $180.  Long-Term?  BRCM blew through $180 just 
over one week later!  Now Dean Witter has provided us with a 
$250 price target and BRCM seems to have its heart set on 
getting there and getting there fast.  BRCM has established a 
pattern as of late, gapping up at the open in a run fueled by 
exuberant investors, and usually tagging the high of the day 
early in the session.  Then the profit-takers emerge and usually 
end up bringing BRCM back down to hit the low of the day.  Once 
the profit-takers have been satisfied, BRCM, apparently worn 
out from the morning "activities", settles into a narrow trading 
range for the remainder of the session.  This pattern has been 
excellent for providing us with great opportunities for points 
of entry on the pullbacks.   BRCM traded to a new all time high 
of $227.88 within the first 30 minutes of the open and this 
level is now serving as resistance.  $220 managed to hold BRCM 
throughout today's session and we look for this level to hold 
as support going forward.  Broadcom has further support at its 
10-dma of $202 backed by support at $200, if needed.  Take 
advantage of the pullbacks for new entries.

HGSI $126.00 +2.38 (-3.31) Monday's action started with a 
little profit-taking.  HGSI gapped higher but then tested minor 
support at $120.50, down over eight points at the time.  HGSI 
managed a small rally into the close, finishing down just under 
$5.50 for the day.  HGSI dropped again early on Tuesday and 
successfully tested the $120.50 support.  It is encouraging 
that this support held with no selling below it.  In the news, 
HGSI filed to offer $150 million in convertible subordinated 
notes due 2006.  The company expects to complete the offering 
this month.  The offering may compete for investment capital 
with the common stock for the rest of this month.  It is not 
negative news but it could slow things down a little while it 
is being digested.  Today's close near the intraday high was 
encouraging and we will give HGSI a little time to break out 
above resistance at $133.  Keep those stops and watch the 
support at $120.50 (also the 10-dma) closely. 

VISX $52.00 -36.13 (-35.75) Yes, VISX is still on our play list.  
First off, let me just say that hopefully everyone has read 
over the top ten rules for trading options and did not enter 
a new play on the day following the newsletter.  Granted, it 
is sometimes warranted but with Monday's ugly opening, it 
didn't look good from the start.  Alright, onto our VISX play.  
Last night, it was announced that the International Trade 
Commission  had rendered an "Initial" Determination in favor 
of Nidek in the patent infringement lawsuit, saying that Nidek 
did not violate the Tariff Act of 1930.  VISX opened down $37.75 
at $50.38 and traded in a fairly tight range throughout the day 
before trying to make a bit of a late day comeback and closing 
at $52.  This comeback is part of what decided in favor of 
keeping VISX.  Today, we saw a good deal of institutional buying 
throughout the day, indicating that many see this as an overdone 
reaction and nothing more than a great buying opportunity.  VISX 
weathered 5 downgrades in one day and now that these are dealt 
with, VISX should have some room to recover.  We don't want to 
give up the bounce just becuase VISX slammed us initially.  
Warburg, Dilon and Read have opted to maintain their Buy rating 
on VISX, stating that the fundamentals of the company remain 
in tact.  VISX still controls 70 percent of the laser vision 
correction market.  Another point to note is that the fat lady 
is not singing just yet.  VISX has stated that they will ask 
the commission for a full review of the Initial Determination.  
Besides, VISX has other lawsuits against Nidek that are more 
important to the future of the business than this suit.  Overall, 
we see today's dramatic decline as an overly emotional reaction 
to a story who's final chapter has yet to be written.  Obviously, 
exercise caution, confirm direction before entering and use 
your stops but tomorrow we should know if VISX wants to rebound.  
The longer VISX holds above $50, the more likely we will see 
a good bounce to recover some of today's lost money.

CMGI $178.06 +10.06 (+18.00) The run in CMGI continues.  Just
exactly what kind of run we aren't sure, but it's a run none
the less.  We could be in the middle of an earnings run as CMGI
announces earnings in a week.  On the other hand we could be 
experiencing a run where investors expecting a split announcement.
The annual stockholders meeting is scheduled for December 17th.
What ever the reason CMGI has added $17.91 to the price of their
stock so far this week.  Volume the first two days has been about 
average.  CMGI broke through $170.75 Monday but fell back to 
close just shy of the of the resistance level.  Today CMGI, 
opened over $6 higher and bounced off the $170 area indicating
the next leg up is in motion.  The Internet stocks were led
higher today by Yahoo, which went into the S&P 500 at the close 
of business today.  There has been no major news behind the moves
so far this week.  CMGI has split twice in the last 12 months
and would appear to be setting up for another announcement.
As for our play we see intraday support at $173 and a bounce 
off that area should provide a good entry point for adding to 
or initiating a new play.

GMST $128.50 +6.31 (+11.38) Our split run play in GMST keeps 
moving along very nicely.  For the week GMST has gained over $11
and should finish the split run in fine style.  GMST splits 2:1
on December 13th, after the close.  If you have not taken a 
position in GMST the clock is ticking as we will be closing 
out ahead of the split.  There has been some concern among 
investors that the proposed deal between GMST and TV Guide may 
not go through due to federal antitrust issues and differences 
in the corporate cultures of the two companies.  It may not have 
been a big concern to shareholders of GMST stock however, TV 
Guide shareholders did voice concerns.  At PaineWebber's annual 
media conference in New York, TV Guide President and CEO Peter 
Boylan, rejected speculation that there are problems with the 
planned sale.  If you have a position in our split run, intraday 
support for GMST can be found at $125.  We would consider your 
profit expectations and move your stops up accordingly.  

EMC $94.50 +0.25 (-0.75) Shares of EMC have seen a bit of a 
pullback so far this week.  EMC did fall to a low of $93.50
in each of the past two sessions, yet still managed to recover
late in each of the sessions.  With the strength seen in the
Nasdaq the first two days of the week, we would like to have
seen EMC move higher.  Technically, EMC is due for more of a 
retracement and it may be just around the corner.  Although
EMC bounced off the $94 area it could appear as though we have 
a new buying opportunity.  We would be careful about entering
a new play as it feels as though EMC is somewhat overextended
and could find the $90 area again prior to another move up.
If you hold a position in EMC and haven't taken some money 
off the table, we would suggest moving your stops near the
lows of the week.  As we said Sunday, you can always buy it 
back.  A bounce off the $90 area could provide a good point 
for a new entry.  

VOD $52.75 -0.25 (+3.31) VOD provided us with a great entry 
point on Monday.  Shares of the telecom company gapped up $1 
higher right out of the gate on expectations that the Mannesmann 
deal may not be dead in the water after all.  VOD has been a 
little sluggish recently compared to others in its industry 
and has to make up some ground.  Last night Bel Atlantic and 
Vodafone won the backing of a venture from the U.S. Justice 
department.  They are seeking buyers for overlapping phone
operations in 15 states to satisfy U.S. conditions for clearing
their joint venture.  The joint venture will create the largest
U.S. wireless phone company with more than 21 million customers,
compared to 12 million for AT&T.  Investors showed their approval
today as VOD hit a high of $53.25 before settling at $52.75 
down $0.25 for the session.  VOD has gained over $3 for the 
week and we may see some profit-taking set in before any further 
moves higher.  Intraday support for VOD now is seen at $52.  
Should we see VOD decline further the next area of support is 
down near $49.  On continued strength accompanied by solid 
volume we would enter a new position but would keep your stops 
close, as the broader markets are long overdue for profit-taking 
and it could come at any time.

STM $137.75 +0.88 (+6.38) STM, Europe's second biggest computer 
chip maker, continues to strike deals and the price continues 
to follow.  Today it was announced that Scientific Atlanta 
and STM are joining to develop advanced high-speed Internet 
Protocol.  This is on the back of yesterday's 3-year partnership 
announcement with Synopsys to develop an advanced system level 
design solution for complex Systems on a Chip (SOC).  The $SOX 
Semiconductor Index gave back 14.28 points today, but remains 
up over 10 points for the week and this helped to drive the 
prices higher for STM.  The main forces driving the upward 
momentum was the good news for the company, the buying pressure 
remained strong in late trading and we got the breakout we were 
looking for.  STM closed at another 52-week high $137.75.  The 
$SOX tried to rally this afternoon, but even with the rally 
fading, STM powered ahead.  Volume was still average and we 
are cautious on STM here.  There is some support at the $134 
level but in reality, we would like to tighten our stops and 
start looking for an exit if STM reverses course.    

MACR $77.25 -3.44 (+0.63) MACR gapped up at the open of 
trading today pushing the shares up to another 52-week high
of $82.75 before the profit-takers stepped up to the plate to 
take some of Monday's gains off of the table.  We were looking
to target shoot our way in above $77.50 this week, and traders
that were aggressive were able to get in and out for a quick
profit.  The volatility will no doubt continue this week with
a bias to the upside and higher-highs.  With the Streaming 
Media Conference starting today, this should have MACR and 
other ISP's and Tech developers in the spotlight.  Going 
forward any new positions taken above the $77.50 level should 
be followed up with tight protective stops. 

TIF $81.25 +1.50 (+1.56) Although the price surges took a break
on Monday, there were no major sellers stepping up to the plate
as the shares advanced slightly $0.06.  Today the bulls returned
for another round of buying that remained steady and strong all
day, closing the day at another 52-week closing high at $81.25.
The ascending pennant formation that was noticed on the charts
came through as the move to the upside continued on average 
volume.  The volume will have to continue to hold up strong for
us to see higher-highs, so protect yourself and take profits 
according to your risk tolerance.  Going forward, we would like 
a bounce off $80 for a solid entry point.

NT $84.00 -0.13 (+3.81) That's more like it.  NT has the volume 
picking up again and continues moving to new highs.  $79 remains 
the most solid support, but over the last 2 days of trading, 
$82.50, $83.50, and $84.50 have provided support, while 
(surprise!) $85.50 has provided resistance.  You can target shoot 
at your level of comfort down to $79.  But with all this cash 
coming into the market, it's not likely to see that level again 
until the market does a nosedive, or NT offers up some lousy news 
(not immediately likely given the current telecom environment).  
For those just joining this play, NT in now the #1 producer of 
optical networking equipment ahead of Lucent and Cisco, and is 
poised to grow total revenues next year by 20% (music to a fund 
manager's ears).  Margins are increasing too.  Of course, if we 
could figure out a way to cram 1.6 Terabits of data per second 
down a single strand of optical fiber, we'd be a formidable 
competitor and we'd solve an e-mail capacity problem too!  Until 
then, we'll just have to enjoy playing their options.  Remember 
too since NT is buying CLFY, it's possible to earn a 30% greater 
return playing CLFY options in buyout sympathy.

NOK $171.81 -4.00 (+15.75) OK, so today didn't look so hot by 
itself.  But can we really complain in light of the +$20 move 
yesterday.  What was that about?  It was about continuous analyst 
upgrades and earnings/price target revisions following NOK's 
analyst conference last week, wherein its chairman said growth 
estimates of 25%-35% had been revised upward to 30%-40% through 
2001.  He also effectively said that NOK would meet its growth 
targets a year early through the same period.  That's like a 
third year of revenue for the price of two.  Hello revenue 
stream.  Is it any wonder that analysts have rushed for the 
upgrade button?  New price targets from three major brokerages 
all exceed $220, and NOK is in split range again.  Did we also 
mention they are a candidate (though not guaranteed) to purchase 
Qualcomm's handset business?  The only real support after 
yesterday's gain is $170, or the opening breakout number of $165.  
But with upgrades like this, like cockroaches, more are sure to 
follow.  We think the move is more than just a temporary spike, 
and thus, will not retrace much lower (barring market meltdown).  
Just in case, use a trailing stop to protect the loot.

QCOM $398.88 +4.13 (+14.44) The breakout over $390 we'd been 
waiting for (actually $392) occurred yesterday and continued 
today, but on much fewer shares than the ADV.  While that was 
initially a concern to us because a breakout without volume is 
considered weak, the fact is that at $400 per share (doubled in 
the last 60 days, up 1450% in 1999), it's tough to trade as many 
shares if your trading account isn't growing at the same rate.  
If you think about it, the ADV should be falling just because 
the stock is more expensive.  QCOM could come back a bit to test 
$390 one more time.  That would give us a buying opportunity 
before the shareholder meeting on December 20, wherein 
shareholders will vote a share increase enabling the 4:1 split to 
happen.  QCOM would also likely announce a buyer of their handset 
business.  Intraday support is at $397.  $390 (old resistance) 
after that, then $385.  Due to rapid time decay of DEC strikes, 
you may want to consider the JAN strikes.  For the well 
initiated, selling puts at support ($390) can add to the returns.  
Look for the momentum to pick up into December 20th, but protect 
your profits with stops in case the market doesn't cooperate.  
You can always buy back in later.

JDSU $259.75 +5.31 (+8.56) JDSU continues to trade in the 
ascending pennant formation.  Man, is it getting squeezed.  
Support, both historical and ascending channel, is at $255.  
Resistance is not far away at $263 for a near-term breakout, 
then $273 for a "blue sky" breakout.  If shorts feel threatened, 
a covering squeeze could be the catalyst for a bigger move.  
Remember, JDSU is splitting 2:1 on December 30th, and doesn't 
appear ready to run hard just yet, although now is a good time to 
scale into a position while the daily volume remains below the 
ADV.  Just watch the time premium decay.  If you can handle the 
$$$, you may want to look at January strikes since the Decembers 
won't get us through the split anyway.  Short-term traders won't 
need to sweat this as much.  Again, for the intestinally 
fortified, experienced traders can consider selling ATM or OTM 
puts to boost the return.  Be careful of Mr. Correction in the 
process.  Gravity can take over at a moment's notice.  Confirm 
market direction before playing - let volume be your guide.

SDLI $193.75 -4.75 (+10.75) Well, we got out pennant breakout, 
but on low volume.  It would have been more convincing with big 
volume.  Although with a $15 gain yesterday, is it any wonder 
that some profits were taken off the table today?  $191 offered 
solid support today, but the real strength of the play was 
in yesterday's high buying volume ascent to $196.  Money 
managers appeared all over it like flies on...well, you know.  
Unfortunately, it fell almost as fast as it rose until the funds 
came back for more sending SDLI back to close at its high of the 
day, $198.50.  Some profit-taking today could be expected just 
like in NOK.  We want to send out a word of caution here.  $200 
is a huge psychological barrier for this issue, and volumes have 
been weak lately compared to weeks past.  If the market hiccups, 
SDLI could move south pretty quickly.  It's not as well known or 
universally loved like JDSU.  News is harder to come by as well.  
It's rapid gains make it susceptible to valuation downgrades too.  
Of course, a split announcement would clear up all that in a 
hurry.  Sadly, while the price screams for it, management appears 
reluctant to do so, at least until the next earnings announcement 
in February.  High premiums make for good covered call material 
or selling puts.  If you do the latter, watch it like a hawk.



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

GT $30.31 -1.06 (-2.50) My goodness, you would think that GT is 
headquartered in San Francisco, California rather than Akron, 
Ohio!  GT seems to have no problem finding hills and just keeps 
right on rolling down them.  GT lost nearly $1.50 in yesterday's 
session and just over $1 today.  GT did make a bounce at $30 
today, however it was small and short-lived.  GT quickly found
resistance at $30.50 and the many investors that hopped on board 
at the bounce (GT posted volume nearly two and half times the 
average) seemed a little disenchanted by the end of the session.  
They key to continuing our put play on GT is going to be a 
breakthrough of $30 and on good volume.  GT has resistance at 
its 5-dma of $32 and further resistance at the 10-dma of $33.     

KIDE $48.25 +2.50 (-1.31) KIDE made a bounce again from the 
100-dma of $142.50 midway through today's session.  This is 
the same place it bounced two weeks ago but the bounces are 
getting smaller and the rallies are getting shorter.  After 
trading as high as $51.88, KIDE had already started to roll.  
And as KIDE approached the close, the sellers were coming 
back in.  This was a great day for our put play!  Why?  Entry 
points!  We see KIDE resuming its downward trend and expect 
that KIDE may very well pick up the momentum on the way down 
to finally break through the 100-dma.  As we have practiced 
in the past, tightening stops as we approach this level will 
be important to prepare for possible bounces.  

JCI $49.25 -4.00 (-3.19) Johnson Controls barely managed 
to close on Monday above Friday's intraday high, up over $0.75 
for the day.  Ordinarily this would be a cause for concern, 
technically speaking but it didn't break above the 10-dma so 
we knew we were looking at an entry point if JCI rolled over.  
And it looks like the value investors got faked out!  Today, 
JCI suffered a very steep drop of over $4, despite the fact 
that there was not any major news today.  The volume was heavy 
too.  Perhaps today's drop was a delayed reaction to Friday's 
news of a big raise for the CEO.  It is more likely that JCI 
is suffering from more end-of-the-year portfolio shuffling 
which tends to impact downtrending stocks.  The only negative 
news that this writer could find was a downgrade of Dana Corp 
(DCN) by Lehman.  Dana Corp is in the same industry group as 
JCI.  On the positive side, JCI announced the delivery of its 
6 millionth Homelink Universal Transceiver.  This device for
automobiles allows for multiple remote operations; home 
security, lighting, garage doors etc.  After today's collapse 
you have to go all the way back to October of 1998 and January 
of 1997 where you will find significant support in the $44-$46 
range.  This area may provide a good exit point for a put 
position. 

EK $61.38 +0.06 (+1.25) Kodak started the week on solid 
footing.  There were not any reprecussions from the comments 
from marketing chief, Carl Gustin.  If you remember, he was 
quoted as saying that digital imaging does not offer any 
advantages over traditional photography, other than ease of 
sharing.  Investors may have been more focused on the 
announcement that Kodak has completed their labor cuts which 
should result in $100 million in annual savings.  News items 
that have a direct impact on a company's earnings tend to 
influence the underlying shares.  The job cuts are old news 
and now that they have been completed, perhaps a little selling 
of the news is in order.  The most likely scenario for Kodak's 
two day rally is a little bottom fishing.  When the market sells 
off, some investors turn to value stocks like EK.  Today's action 
was uninspiring with a range of less than one point.  Watch for 
any rallies above $62.25, where resistance has been formed for 
the past two days.  A test of this level without a break above 
it could be a good place to initiate a put position.  On the 
downside, we would like to see EK trade below $60 for 
confirmation that the downtrend is still intact.

BOW $48.19 +0.19 (+0.19) Sleepy yet?  With Bowater trading 
in one point daily ranges some sort of stimulant may be needed 
to watch this issue.  A tightening of trading ranges usually 
indicates that a stock is entering a period of consolidating. 
The stock is still in a downtrend and it is more likely that 
when the stock breaks from this consolidation phase it will 
break to the downside.  However, we will be watching the stock 
very closely to make sure it is not making an important bottom 
here.  A test of $46.19 seems likely.  If the selling does not 
pick up soon and break through support, we will consider dropping 
this put recommendation.  Even though we did not pay much premium 
for these puts, we still can not wait too long.  $47.81 has been 
support for the last three trading days.  We need the stock to 
trade below this support and to test its lows at $46.19 to 
maintain this position.  A nice market shake-out should do 
the job.


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

PRGN - Peregrine Systems Inc $90.13 -1.63 (+9.13 for the week)

Peregrine Systems provides an integrated suite of packaged 
infrastructure management application software to businesses.  
Its primary products include the inaugural ServiceCenter, a 
helpdesk software; AssetCenter, a solution for managing 
equipment procurement and tracking inventory; and FleetAnywhere 
designed for managing fleets of vehicles.  Other services 
include training, consulting and support.  Chairman John 
Moores has a 22% stake in the company.

What started this solid run?  The Strong Buy reiteration by 
analyst David Breiner of Volpe Brown Whelan & Co and his 
upgraded price target of $90 from $49.  His words alone were 
the catalyst that launched PRGN upwards $16, or 25% on November 
24th.  Since the initial breakout near-term support has evolved 
at $80 and is more firmly established at $70.  The momentum 
then kicked back into gear on Monday.  PRGN traded on more than 
double the normal volume and met the analyst's price target of 
$90 with a $10.75 advance.  The gains extended immediately at 
the bell today.  PRGN opened strong at $96.75 to set another 
new 52-week high and beating yesterday's record close.  Trading 
activity remained strong throughout the day as it consistently 
consolidated in the $87 to $90 range.  PRGN is a pure momentum 
play.  Therefore a broad market rally and any good news are 
important factors to consider in planning your strategy.

Peregrine announced on Monday the immediate availability of 
a management option that allows users of its InfraCenter for 
Workgroups to resolve its own support problems thereby reducing 
help desk calls.  On November 30th, the company announced that 
United Airlines purchased its FleetAnywhere software solution  
for use in 39 of its worldwide locations. 

BUY CALL DEC-90 GQP-LR OI=  0 at $ 5.13 SL= 3.25 Big volume today
BUY CALL JAN-85 GQP-AQ OI= 19 at $12.75 SL=10.25 low OI
BUY CALL JAN-90*GQP-AR OI=695 at $ 9.50 SL= 7.25
BUY CALL JAN-95 GQP-AS OI=  0 at $ 8.63 SL= 6.50 New Strike

Picked on Dec 7th at    $90.13    P/E = N/A
Change since picked      +0.00    52-week high=$96.75
Analysts Ratings    10-1-1-0-0    52-week low =$11.44
Last earnings 10/99  est= 0.15    actual= 0.16
Next earnings 01-20  est= 0.16    versus= 0.11
Average Daily Volume =   666 K
Chart = http://quote.yahoo.com/q?s=PRGN&d=3m

****

USWB - USWeb Corp. $50.06 +1.88 (+3.88 this week)

USWeb seeks to transform businesses in the digital economy 
and create sustainable market leadership for its clients.
As the leading Internet professional services firm, USWeb
has created a new standard for success in the digital 
economy-Time-to-Value.  Time-to-Value means USWeb applies
extensive insight, experience and scale to deliver break
through results quickly.

Coverage was initiated by Legg Mason on USWB with an Outperform 
rating on Monday.  This was on the back of Friday's news
that USWB would be offering a new service for customers 
looking to outsource there Internet setup and management 
needs.  Customers will pay a monthly fee from $25,000 to 
$75,000 dollars to have USWB design, host, or operate 
there Internet applications.  This will help company's to
avoid paying the start up cost of building there own system.
The shares of USWB have been on a steady climb this month
reaching a 52-week high today of $50.13 backed by strong 
volume.  Looking ahead, we like the stock at current levels.
The technical picture for the stock is very strong with 
prices, volume, and the moneystream converging in a hot 
sector-Internet software and services.  Look for the uptrend
to remain steady as long as the Nasdaq continues to break 
records.  The volatility in the shares should allow traders 
to target shoot there way in above current levels or on a 
pullback to support levels near $48.

Internet advertising and services firms should be in play, as
Agency.com in the space is due to go public this week.  That 
could put other cyber-advertisers like Razorfish and USWB 
in the spotlight.
     
BUY CALL DEC-45 QWB-LI OI= 837 at $6.00 SL=4.25
BUY CALL DEC-50*QWB-LJ OI=1264 at $2.88 SL=1.38
BUY CALL JAN-45 QWB-AI OI= 497 at $8.63 SL=6.63
BUY CALL JAN-50 QWB-AJ OI= 949 at $5.88 SL=4.13

Picked on Dec 7th at    $50.06    P/E = N/A
Change since picked      +0.00    52-week high=$50.13
Analyst Ratings     10-6-1-0-0    52-week low =$17.00
Last earnings 11/27 est=  0.13    actual= 0.15
Next earnings 01-24 est=  0.16    versus= 0.07
Average daily volume =   895 K 
Chart = http://quote.yahoo.com/q?s=USWB&d=3m



******************************
NEW PUT PLAY / PLAY OF THE DAY 
******************************

PGR - The Progressive Corp $75.19 -1.75 (-3.50 this week)

In business since 1937, Progressive is one of the nation's 
largest auto insurers.  Progressive offers all types of 
vehicle insurance and property-casualty insurance through 
30,000 independent agencies, the Internet and through 
affiliate programs.  PGR is a holding company for 82 
subsidiaries.  PGR also has one mutual insurance company 
affiliate.

Too bad Progressive can not insure its shareholders from 
declines.  Actually, it could through the use of derivatives 
but I digress.  A large part of the bearish story for PGR is 
technical.  After dropping below strong support at $89 on Nov 
17th on almost three times normal volume, PGR has dropped almost 
every day for two weeks.  Surely, the biggest factor influencing 
the stock of PGR has been the rise in interest rates.  Financial 
companies, especially those that deal mostly with individuals 
are at a greater risk by an increase in rates.  When insurance 
rates go up, people stop buying.  Please allow a little idle 
speculation here.  Is it possible that Progressive stock is 
under distribution due to Millennium concerns?  If there is any 
civil unrest, the major property insurers could be in big 
trouble.  We do not foresee any major problems with Y2K.  But 
perception is everything and if investors are fearful of 
potential civil unrest then they definitely will not be buying 
the shares of Progressive.  Another influence applying pressure 
on Progressive is end-of-year portfolio adjustment.  It is a 
common theme in all of our put plays right now and PGR is 
commonly affected.  Entry into a put position can be made on 
any small intraday rally.  Be wary of the stock trading above 
resistance of $79.  We feel that this downtrend could continue 
for the rest of the month.  We are recommending some January 
options because December expires next week.  

BUY PUT JAN-80*PGR-NP OI=74 at $7.38 SL=5.75
BUY PUT JAN-75 PGR-NO OI=24 at $4.63 SL=2.75

Average Daily Volume = 328 K
Chart = http://quote.yahoo.com/q?s=PGR&d=3m



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

Technology Stocks Continue To Dominate The Market..

Monday, December 6

U.S. markets ended mixed Monday as blue chip issues fell while the
technology sector moved higher. The Dow slid 61 points to 11,225
after climbing 297 points last week. The technology-heavy Nasdaq
index set a new record high, rising 25 points to 3,546. The broad
market S&P 500 index fell 10 points to 1,423 as declining issues
led advances on both the New York Stock Exchange and the Nasdaq.
NYSE declines outnumbered advances 1,959 to 1106 on volume of 913
million shares. The benchmark 30-year U.S. Treasury bond rose 7/32,
pushing its yield down to 6.25%.

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

Agco           AG     FEB12C/JAN15C   $1.50   debit   diagonal 
Fortune        FO     JAN35C/DEC35C   $0.68   debit   calendar 
United         UAL    LJAN60/DEC70C   $15.50  debit   LEAPS/CC's 
United         UAL    LJAN75/DEC75C   $10.00  debit   LEAPS/CC's 
C.R. Bard      BCR    DEC60P/DEC55P   $4.31   debit   bear-put 
Delta & Pine   DLP    DEC30C/DEC20P   $1.62   credit  strangle
Cygnus         CYGN   DEC12C/DEC7P    $0.00   credit  strangle

The first session of the week began on a sour note as our quote
server (Interquote) fell victim to the limitations of the telecom
infrastructure. Some of the phone lines that provide data to the
system were down for most of the day. As a result, most of our
option pricing information came from delayed sources or time and
sales reports. Though we cannot guarantee the absolute accuracy
of the quotes, most of the new positions were available at (or
near) the suggested target prices.

United Airlines (UAL) was the first candidate and unfortunately,
the stock price began to drop right from the open. Our first move
was to lower the target debits on both positions. The issue fell
to morning lows near $68, and favorable entries were achieved.
The C.R. Bard spread offered less opportunity for profit. The best
observed debit (on a simultaneous order basis) was $4.31. Agco was
somewhat more cooperative, offering a brief opportunity for entry
at the target price before the issue moved higher near the middle
of the session. Fortune Brands options were active with over 100
contracts in each series during the session. Our entry debit was
slightly higher than the suggested debit but it was a favorable
price (discounted) for the position.

Our two credit strangles were disappointing. The Delta & Pine Land
position offered a much lower credit than we suggested in the play
recommendation and Cygnus did not trade at all. Trading was halted
before the open due to the FDA advisory committee meeting on their
GlucoWatch, a device to painlessly record blood sugar. The FDA is
expected to conduct a thorough review of the product as it will be
the first device to provide this information directly to patients.
If it is approved, the share value of the stock will rocket but if
it is rejected the stock price will plummet. There were favorable
debit straddles and credit strangles on this issue and it will be
interesting to see where the stock price eventually finishes.

Portfolio plays:

Internet and telecom shares dominated the market today and one of
the major announcements affected both sectors. Cable television
companies on Monday welcomed AT&T's (T) agreement to share its
high-speed Internet lines, arguing the deal proved that additional 
government regulation was not needed. Operating from the same set
of facts, Internet service providers (ISPs) and consumer groups
said the pact reflected a desperate need for new federal rules
imposing the shared access principles sooner, more broadly and on
all cable companies. Both groups were active on the news and it
appears the infrastructure will soon be shared. One of our other
telecom plays, Motorola (MOT) needed no assistance with its rally.
Shares of the stock rocketed with wireless industry issues as the
prospects for wireless services improve and handset sales climbed.
Falling service prices, increased worldwide network coverage and
faster-than-expected phone sales, particularly Web-ready handsets
have contributed to the recent boom. The realization that wireless 
networks will serve as high-speed Internet platforms is one of the
major driving forces behind the industry's growth. Our position in
Motorola (MOT), a bullish LEAPS/CC's spread, was adjusted higher
with the move. The short option is now in January (at $125) with a
total debit of $22.50 in the spread; LJAN100C/JAN120C. Another of
our LEAPS issues made a significant move. Solectron (SLR) rose $4
to close at a new high near $95. As we said on Friday, our bullish 
spread was in dire need of an adjustment and today we rolled to a
higher strike on the position (LJAN70C/JAN85C) for a $15.50 debit.
Positions on Sun Microsystems (SUNW) and Exxon - Mobil (EXOM) were
also moved into January (and higher) as both of the bullish stocks 
continued their winning ways.

The big rallies in the Internet group were a mixed blessing. Lycos
(LCOS) and other U.S. online networks climbed after a new report
showed they remain popular with residential users in Europe's top
three markets. Many of the peripheral companies also participated
in the move but Excite@home (ATHM) fell $4 after AT&T (T) said it
would open its cable systems to other Internet service providers.
The two have an exclusive agreement that expires in 2002 and now
the benefits of that covenant may not be realized. For investors,
the worry is that ATHM's $18.6 billion market cap is based in part
on exclusive contracts with its cable partners. Without exclusive 
agreements, it will be difficult for @Home to maintain and grow a 
substantial subscriber base. With that type of character changing
news, we decided to take the safe (and profitable) exit, closing
all of our bullish positions in the issue. 

We also had some activity in the small-cap group. Silicon Graphics
(SGI) rallied $1.12 after announcing that Texas Tech University
has selected SGI's processor/server for their new high-performance
computing center. The system provides both the computational and
the visualization functionality to enable the scientific studies
associated with more than sixty Ph.D. programs, as well as a broad 
spectrum of government and private-sector projects. Our bullish
calendar spread benefitted from the news but the issue will have
to be monitored for a continued upward move as the profit margin
will decrease rapidly. Autoweb (AWEB) moved $2.50 higher after a
recent consolidation near $10. The rally provides a second early
exit opportunity on the bullish diagonal spread with $3.38 credit
for the position.

On the down side, our recent spread on Cheap Tickets (CTIX) was
hit hard after the company said its fourth quarter earnings will
be lower than expected. Officials said the prolonged fare war in
the airline industry is hurting profits and they anticipate a big
downfall in revenues this quarter. The stock fell $6, leaving our
bullish calendar spread high and dry at $22.50. One of the early
exit options was a move to the bear-call (credit) spread, but the
risk of new losses (if the stock rebounds) were fairly high with
regard to the potential reward. The long option was closed for a
credit of $0.50 to limit losses. Another of our calendar spread
stocks has begun to lose momentum and it is time to take profits
on the play. Occidental Petroleum (OXY) fell through the bottom of
its three month trading range today and we suspect the drop will 
continue as crude-oil prices consolidate. The current position 
(JAN22C/DEC22C) was closed for a credit of $0.38, a $0.88 profit
for the play.

Tuesday, December 7

The Nasdaq closed at a new record high as Yahoo soared to $348 in
a frenzied session of all-out buying. Back in the real world, most
blue-chip stocks fell lower and the Dow industrial's dropped 118
points to 11,106. The S&P 500 index retreated 14 points to 1,409.
Declining issues led advances 2,024 to 1,048 in heavy trading on
the NYSE. The 30-year Treasury bond rose 1/2, dropping the yield
to 6.20%.
 
Portfolio plays:

We had some new names in the winners list today as the technology
group dominated the market. Unisys (UIS) moved up over $2 as the
company announced a number of new contracts and agreements. They
also received Microsoft's prestigious Industry Solution Award for
their FBA Navigator. Monday's news that Kellogg Company agreed to
extend its original outsourcing agreement with UIS for five years
also contributed to the rally. 3Com Corp (COMS) climbed $2 to end
near a recent high at $43. The move came as the company announced
that it has signed an agreement to acquire LANSource Technologies,
a leading vendor of data and fax-over IP software applications.
COMS intends to strengthen its position in the growing market for 
enhanced Internet Protocol based voice and data services, an area
projected to grow to $2 billion by 2002. The deal also provides
3Com with technology and expertise to accelerate its development
of integrated unified messaging for the IP telephony market.

Internet stocks participated in the rally and leading our Nasdaq
group, Verity (VRTY) rocketed $7 in a post-split rally to end near
$56. Verity develops knowledge retrieval software for the Internet
and their products benefit online publishers, e-commerce providers
and independent software vendors. TV Guide (TVGIA) bounded over $7
after positive comments (from their president and CEO) at the 27th
annual PaineWebber media conference in New York. Peter Boylan said
that TV Guide's strong brand familiarity gives it an edge in the
new digital media industry and the magazine's strengths, such as
the largest weekly readership in the world will boost its success.
The online brokerages came back to life as E*Trade Group (EGRP),
Ameritrade (AMTD) and TD Waterhouse (TWE) rebounded from recent
slumps. All three issues made favorable moves as the sector rose
with the rally in Internet financial stocks.

In the straddles portfolio, we had a new profitable position this
week as Williams Companies (WMB) broke to a recent low with the
falling oil issues. The credit for the Jan-$40 straddle reached
$8.88 and we expect it to move higher in the next few days. Mylan
Laboratories (MYL) continues to climb in the bullish market trend
and the credit for the APR-$17.50 straddle is near $7.25, a $2.62
profit for the position. Allegheny Teledyne (ALT) was also in the
news, now trading under the new name, Allegheny Technologies (ATI).
The company recently completed the spin-offs of Teledyne (TDY) and
Water Pik (PIK) and changed its name with the transition. ATI also
completed a one-for-two reverse split creating new option symbols
and valuations for the underlying stock. You should consider these
in future decisions for the outcome of the neutral April position.
 
The majority of our portfolio issues succumbed to profit-taking
after the incredible gains in the past few weeks. Many of these
stocks are due for significant corrections and we will try to keep
you advised of any changes in outlook for the negative positions.
This can become very difficult at times with the large number of
portfolio plays. Please remember the ongoing narrative is simply
a service we provide to help new traders understand how various
plays might be opened and closed. It is not intended to substitute
for your own trading techniques nor does it replace your duty to
manage the positions in your portfolio.

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


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

SBC - SBC Communications  $54.93     *** LEAPS/CC's ***

SBC Communications provides services and products through many
subsidiaries: the Telephone Company, Southwestern Bell Mobile
Systems, SBC International, Southwestern Bell Yellow Pages and
Telecommunications, along with SBC Media Ventures. Their group
of products includes landline & wireless telecom services, sales
of advertising and publication of directories, sales of customer 
premises, private business exchange (PBX) & wireless equipment,
and cable television services.

SBC is the #1 local telephone company in the U.S. and like many
of the industry leaders, it may soon issue tracking stocks for
its wireless telephone and international businesses. AT&T's (T)
recent rally came primarily after they announced a new tracking
stock for their wireless division. The CEO said a tracking stock
would be a good way to unlock the value of SBC's wireless unit.
SBC has 12 million wireless customers and its network covers 131
million potential customers in the United States. The good thing
for SBC investors is that they would not spin-off that type of
business completely since it affects one of the primary ways
they generate revenue; selling packaged telephone services.

SBC also recently completed its $61 billion acquisition of Baby
Bell, Ameritech and they are currently looking for more merger
candidates in Europe and in the wireless business. SBC already
has operations in several countries, and officials have said the
company would like to make some sort of deal within the next few
months. No specific targets have been named but the negotiations
are in progress. Once again, their goal in any agreement is to
deliver good value to the shareholders and this may eventually be
accomplished by linking the European telecom markets and possibly
entering a joint venture to acquire transatlantic cable capacity. 

From a technical point of view, SBC has moved above the recent
resistance area (near $50) on strong volume and the divergences
in money-stream and time-segmented volume suggest a bullish move
is forthcoming. We are going to play the long position deep-ITM
to allow an early exit in the event of a significant rally or a
negative character change in the next few months. A disparity in
option pricing will help us enter the play at a discount.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JAN01-40 ZFE-AH OI=8709 A=$17.75
SELL CALL JAN00-55 SBC-AK OI=3470 B=$2.50
INITIAL NET DEBIT TARGET=$15.00 TARGET ROI=50%

Aggressive traders should consider selling the DEC-$55 option at
$1.00 for short-term (time) premium. We will watch the prices for
that position in tomorrow's session.

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

****

CD - Cendant  $18.50     *** On The Rebound! ***

Cendant is one of the foremost consumer and business services
companies in the world. The company was created through the
merger of CUC International and HFS Incorporated in December
1997. Cendant provides membership-based consumer, travel and
real estate services. Their businesses provide a wide range of 
complementary consumer and business franchises including hotels
like Days Inn and Ramada, rental car agency Avis and real estate 
brokerages Century 21 along with Caldwell Banker.

The news of the settlement reached far and wide as CD agreed to
pay almost $3 billion to close the class-action lawsuit that
accused them of defrauding shareholders. The settlement should
resolve one of the largest shareholder lawsuits in the history
of the market. Even though the agreement will cost CD a charge
of $1.8 billion in the next quarter, most analysts agree it will
be beneficial as the company can now focus on future business.

Cendant has a number of new and unique opportunities including
the upcoming initial public offering of CompleteHome.com. This
prolific Internet real estate portal is currently growing faster
than its main rival, Homestore.com. and is expected to become
public in the spring of 2000. Analysts agree with the positive
future outlook for the company and a number of them have set
short-term targets well-above the current price. The most recent
recommendation comes from Salomon Smith Barney; a "buy" rating
with a target of $30. S & P Market Scope and Jefferies also have
bullish outlooks for the issue based on expectations that future
EPS will ahead of current targets.

An incredible amount of option interest has provided a number of
possible positions. We will opt for the simplest approach with
favorable premium disparities in both suggested plays.

PLAY (very conservative - bullish/debit spread):

BUY  CALL JAN-12.50 CD-AV OI=500   A=$6.12
SELL CALL JAN-17.50 CD-AW OI=10881 B=$2.06
INITIAL NET DEBIT TARGET=$3.88 ROI(max)=29%

- or -

PLAY (conservative - bullish/calendar spread):

BUY  CALL JAN-20 CD-AD OI=19471 A=$1.06
SELL CALL DEC-20 CD-LD OI=6581  B=$0.25
MAXIMUM INITIAL NET DEBIT=$0.68 TARGET ROI=25%

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


******************************************************************
- VOLATILITY PLAYS -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy due to implied volatility
extremes or disparities in option pricing. Market sentiment and
upcoming events will have an effect on these positions so review
each play and make your own decision about the future outcome of
the stock price.
******************************************************************

COHU - Cohu  $29.25     *** Momentum Play ***

Cohu designs and manufactures electromechanical systems handlers
that physically maneuver semiconductors in place for testing and 
interface directly with electronic test equipment which performs
the electrical test of the semiconductor devices. Other products
include television cameras, microwave radios and metal detectors
for industrial and hobbyist use.

Cohu made a big move last week, climbing $4 after an upgrade and
new coverage from Adams Harkness. Analysts initiated COHU with a
"strong buy" rating and the investors flocked to join the rally.
The technical breakout was awesome on excellent relative strength
and heavy volume. Buying trends indicate there is good demand at
this level and accumulation should increase in the coming weeks.

If you favor the long-term trend for the issue, there is a small
disparity in the February call options that will allow you to
enter a bullish play at a discount. We favor a short position in
the December call to reduce the cost of the initial spread. Plan
to close the sold position if the stock moves above $30 in the
short-term (before expiration).

PLAY (aggressive - bullish/diagonal spread):

BUY  CALL FEB-25 QCH-BE OI=255 A=$6.12
SELL CALL DEC-30 QCH-LF OI=21  B=$1.00
MAXIMUM NET DEBIT TARGET=$4.88 ROI TARGET=40%

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



*************************************************************
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