The Option Investor Newsletter Sunday 12-12-99 1 of 5 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 ****************************************************************** MARKET STATS FOR LAST WEEK AND PRIOR WEEKS ****************************************************************** WE 12-10 WE 12-03 WE 11-26 WE 11-19 DOW 11224.70 - 61.48 11286.18 +297.27 10988.91 - 14.98 +234.57 Nasdaq 3620.24 + 99.61 3520.63 + 72.82 3447.81 + 78.56 +148.10 S&P-100 763.49 - 3.99 767.48 + 13.91 753.57 + 4.27 + 18.21 S&P-500 1417.04 - 16.26 1433.30 + 16.68 1416.62 - 5.38 + 25.96 RUT 466.71 + 2.13 464.58 + 5.64 458.94 - 2.33 + 11.58 TRAN 2874.94 - 53.86 2928.80 + 19.64 2909.16 - 67.34 -113.07 VIX 20.92 + .10 20.82 - 2.13 22.95 + 3.32 - 2.05 Put/Call .45 .49 .42 .47 ****************************************************************** I think I can, I think I can, I think I can. It was touch and go at the open and it took almost all day for the Nasdaq to build up steam and pull itself out of a -33 point deficit but the result was the same. Another record high close on the fourth largest volume day ever for the Nasdaq. The index with the can do attitude struggled to climb that mountain of overvalued worry but the Nasdaq rolled right over the shorts and the bears. The Dow actually came along for the ride, closing up +89.91 points and only 102 points from a new high. From my vantage point it is looking like the start of a December rally and nothing has been able to hold it back. Do not get me wrong. We will have some serious profit taking someday but with only the CPI and a lame duck Fed meeting between us and Christmas, it may be January before the big one hits. The PPI report was very tame at only a +0.2% increase overall but the core rate at unchanged was even better. Analysts had been predicting a +0.1% increase. The bond market continued its rally and yields dropped to 6.16%. Already analysts are forecasting sub 6% yields next week if the CPI is as benign as the PPI. The main factor behind the decrease was lower prices for cars, trucks and computer components. There are no economic reports on Monday but Tuesday starts a big list beginning with the CPI, Retail Sales and Real Earnings. Wednesday has Business Inventories, Industrial Production and Capacity Utilization. Once over the CPI hurdle the next big event is the Fed meeting the following Tuesday. With the market in rally mode the CPI would have to be a disaster to put any serious crimp in the sprint to Y2K. After the PPI today the Fed is even more out of the picture. With the massive amounts of cash they have been putting into the system in preparation for Y2K, it would be out of character for them to try and crimp its use by raising rates with Y2K only 10 days away. Some analysts were calling for a bias change to tighten but after the PPI even that has dropped from discussion. Another market mover today was the drop in oil prices. IRAQ got approval to extend its oil for food program and the prospect of that supply coming into the market again, crude dropped to $25.20. Airlines rebounded and the transportation index gained +59 points to end the slide, which started Wednesday. The tech bears were out in force today. Led by another Niles downgrade of Intel and Dell just as the Nasdaq broke into positive territory around noon. Citing falling sales from Y2K freezes, slow chip production and falling PC prices, he said Dell would have trouble meeting top line estimates. Intel is unable to make chips fast enough on the top end and PC prices on the low end just keep falling. He feels fourth quarter profit margins will shrink. This one - two punch comes only a day after IBM reminded analysts that the Y2K event was slowing mainframes and PC sales and they would only meet the already lowered fourth qtr earnings. Intel finished down -$1.00, Dell -1.19 and IBM -4.38. Just in case you forgot, earnings start in four weeks. Do you remember what comes before earnings? Confession. The four weeks before earnings is confession season. That is when you confess to your stockholders and the world that your sales plan is not working, new products were flops and management does not have a clue. Of course they don't actually say all of this, they just issue an earnings warning and let you make your own deductions. Just to get things started off right Xerox volunteered to be the scapegoat and fired off their warning at 4:01 PM Friday. It was an attention getter. They estimated they would miss earnings by -40% and blamed it on everything except late deliveries by Santa Claus. Bad product mix, Y2K, slow sales, high priced systems not moving, etc, etc. It was really ironic that they choose today since today was the only up day their stock has had since November 19th. I can see the fund managers now. Let's get some XRX today boys. Tech is so high and XRX has been beaten up so bad it just can't go any lower. Looks like an entry point to me. Wrong! Those lucky buyers that bought in at $25 and change just before the close, saw their recent acquisition dropped by -20% to $19.88 before the trade confirmations even arrived. The Gloom and Doom team was out in force today. As soon as the Nasdaq broke into positive territory the airwaves was full of tech bears preaching immediate crash. The tech bubble theory has reached the point where the bears and air personalities have said it so often they think it is true. Now they can't understand why it continues to expand. Nothing says a market cannot continue up. Does anyone not think that the mere mention of Linux should double or triple a companies value? You don't think that $300 for a $30 stock on the first day is out of line? Surely I jest, but in reality technology is driving productivity gains faster than at any point in human history. Look at where we were just ten years ago before the Internet. People actually talked at the supper table, watched hours of boring TV and then went to bed. People did not check their email or S&P futures during bathroom breaks in the middle of the night. (I know some of you really do this) The majority of you only moved into the Internet generation within the last two years. That is really scary. With the permanent bulls quoting Nasdaq 4000, 5000, even 10,000 in the next three years and the Dow sharing space in orbit with the Hubbell telescope, there has got to be some tremendous rallies in front of us. Yes, the techs are overvalued. They are overvalued compared to previous historical values like a Mercedes is overvalued compared to a covered wagon. Both are four wheel vehicles but from different ages. Techs are changing daily. Products in production now will be scrap eighteen months from now. The world as we know it is changing so rapidly that even us tech savvy, Internet junkies have no comprehension of where we will be ten years from now. A news article out today said that Nokia will be the leading personal computer maker by 2002. Think about it. The news is full of new Internet capable devices from pagers, cell phones, digital assistants, all miniature PCs. Your cell phone has more computing power now than a 286 desktop just five years ago. So is Nokia just a phone company and should have a PE of 25 or the largest computer manufacturer in the world with a PE of 78. Things change. In the Internet economy we are being exposed to on a daily basis the only rule is "change or die". Websites are forced to reinvent themselves daily to keep their visitors coming back. This kind of change previously took years to evolve, then months and now days in some cases. Why did I take you down this evolutionary path today? Simply to prove a point. Tech valuations today are subjective at best. Who knows what the value of today's ideas will be tomorrow. We are investing today in tomorrow's hopes. In reality by the time tomorrow comes those ideas will be old and stale. How do you value that? Are techs overvalued, correctly valued or perhaps undervalued when you take the last five years changes and project the same changes over the next several years? Mankind's knowledge is doubling every eighteen months. (fact) The rate of increase is exponential. In three years, we will know 300% more than we know now. What will Intel be worth? Or HGSI, AMGN, BVSN, SUNW, EXDS, ARBA, RHAT or all four Microsofts? We will not continue to go up in a straight line. There will be pullbacks and profit taking. All the whining and posturing on CNBC is noise. As option traders we are privileged to be able to make money quickly in either direction. Our only challenge is to pick the right direction and hang on until the direction changes. The next five weeks should be very profitable. We have the year-end rally as people who were waiting for a Y2K sell off race to catch up with those who stayed invested. We will have the January rally as those who did stay out rush to get back into the market along with the cash investments from year end retirement contributions. There maybe a pullback or two between now and January but the trend should be solidly up. Every pull back should be viewed as a buying opportunity. Just remember when buying the dips over the next two weeks that there may be a Y2K pothole in the road ahead. Nobody has seen it yet but you don't know if that next dip between now and Y2K is the real thing. On any dip WAIT for the bounce before starting new positions. In any event, trade hard for the next six weeks and take February off. Have a safe week in the market. Watch for buying opportunities, pick your entry points VERY CAREFULLY and sell too soon. Jim Brown Editor Circumstances prevented me from doing an Options 101 article this week but I will pick up again next Sunday. ******************** Y2K Renewal Offer!!! ******************** Announcing the cheapest renewal rate available! $24.91 mo* 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 Millennium Edition of the almanac for FREE. This package has 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. This lowers the actual price of the newsletter to only $24.91 per month for an annual subscription. The supply of almanacs is limited so don't delay. Click here for more info. http://www.OptionInvestor.com/renewalinfo.asp *********** JIM'S PLAYS *********** QCOM - Dec-400 Naked Puts I am still holding the short position on the Dec-400 naked puts. I covered them on Friday morning when it appeared that we we might have some Nasdaq weakness. I opened the position again after the bounce for only $1 difference. I still have faith that QCOM will end next week over $400 and they will expire worthless. QCOM does have some weakness around 405 but when it does finally close over 400 I think it will rocket. New Plays I waited patiently for an entry point for what seemed like an eternity but in reality was only three days. When the market is moving up and you are not invested every point is painful. My patience was rewarded on Thursday when the Nasdaq dropped all the way back to support at 3520. The ensuing rebound was a perfect entry point for several plays. I am not going to go into much detail on each one because the entry point was based on the Nasdaq drop. The stocks were just targets of opportunity on my watch list. QCOM - DEC-390 Calls I had been waiting for an opportunity since the big jump last week. When it hit support on the Nasdaq drop I bought the UQD-LH for $8.00. ARBA - $240 Calls This was a classic example of an entry point. Nice pullback on market weakness and quick recovery. I bought the DEC-240 calls on Thr for $9.25 and ARBA ran for over +$11 on Friday. I held a sizeable profit over the weekend because I expect the market to open higher and ARBA closed at the high of the day. INKT - $150 calls Nice pullback right to support at $160. Not as big a bounce as I expected and I am worried about a lack of follow through. BVSN - $90 calls Broadvision had been building a saucer bottom after a quick recovery from the price downgrade last month. They are a strong play in the Internet sector and I think they are ready to move again. I bought the $90 BDV-LR for $14.50. Strategy: Because these are all December calls I plan to sell them on Monday morning and hope for a brief pullback before or after the CPI to give me another entry point for January positions on the strong movers. With the CPI on Tuesday be very careful on Monday. Look for buying opportunities during the week instead of rushing into plays just because the market is open. We are extended and you never know when the crowd will see a Y2K threat and run to the sidelines for the next two weeks. It may not happen but buying the next dip could be a challenge. Just be ready to pull the rip cord on your parachute if the bottom falls out beneath you. Remember, my trading plan is to trade "only when profitable" and yours should be also. Jim ************ Stock News ************ Ciena's Turn to Shine By S.P. Brown What a week it's been for Ciena Corp. (CIEN). This leading maker of equipment that increases the capacity of fiber optic networks closed Friday at $71.88 a share, a 16.40 percent gain over Thursday's close. Friday, though, was only one day in an amazing trading week for a company many investors had left for dead. CIEN's ascent began on Tuesday when a rumor was circulated on the Street that the company had signed Qwest Communications (QWST) to a significant fiber optic equipment contract. The rumor couldn't be substantiated because neither company was willing to comment. /members/stocknews/121299_1.asp ******* ASK OIN ******* More fun than a coiled spring. We had a lot of great questions for "Ask the Analyst" this week. On top of the list were QCOM, CSCO, and CTXS. Plus, a little bit of oil (stocks) to help grease the wheels. Send us an email to askoin@OptionInvestor.com and we'll apply some basic technical analysis to the stocks of your choice. /members/askoin/121299_1.asp ************** Market Posture ************** As of Market Close - Friday, December 10, 1999 Key Benchmarks Broad Market Bearish/Bullish Last Posture/Since Alert **************************************************************** DOW Industrials 10,750 11,320 11,225 Neutral 11.12 SPX S&P 500 1,340 1,400 1,417 BULLISH 12.03 OEX S&P 100 700 750 764 BULLISH 12.03 RUT Russell 2000 430 450 467 BULLISH 11.12 NDX NASD 100 2,650 3,150 3,203 BULLISH 12.03 MSH High Tech 1,340 1,630 1,733 BULLISH 12.03 XCI Hardware 1,075 1,160 1,240 BULLISH 11.11 CWX Software 1,000 1,160 1,275 BULLISH 9.03 SOX Semiconductor 560 660 633 Neutral 12.10 * NWX Networking 650 800 847 BULLISH 12.03 INX Internet 525 675 778 BULLISH 12.07 BIX Banking 645 690 587 BEARISH 11.30 XBD Brokerage 395 450 446 Neutral 11.30 IUX Insurance 625 650 619 BEARISH 11.30 RLX Retail 875 910 952 BULLISH 11.23 DRG Drug 375 395 361 Neutral 11.30 HCX Healthcare 750 790 713 Neutral 11.09 XAL Airline 180 190 148 BEARISH 5.21 OIX Oil & Gas 285 315 292 Neutral 11.23 Posture Alert The Nasdaq continues to march on, breaking new records on record breaking volume. Leaders Friday include Airlines (+2.77%), Software (+2.70%), Banking (+2.36%), and Retail (+2.15%). Losers were limited to Oil & Gas (-2.08), and Semiconductors (-1.42%). For the week, the only major winner was the Internet sector, which posted an 18% gain for the week, followed by Networking, which had a 5% gain. With Friday's action, we have lowered the Semiconductor sector to Neutral from Bullish. ****************** Market Sentiment ****************** Sunday December 12, 1999 Throwing in the Towel! The battle for control of this market continues, with the bulls tacking on another victory Friday. Overall for the week, there was not much progress in terms of the individual sectors (i.e. Dow, SPX, OEX, etc.). Most of the major sectors closed relatively near last Friday's closing prices. However, the sectors that did move this week were the Internet sector (INX), which closed up 18% for the week, and Networking (NWX), which closed up about 5%. Losers for the week included Banking (BIX), which was down about -8% for the week, as well as Drug (DRG) and Healthcare (HCX), which were both down about -6%. The violent tug-of-war that was apparent this last week, will most likely continue for the rest of the major indexes this next week. However, we will try to stick with sectors that are breaking out or breaking down, such as the ones named above, and we will continue to watch for other sectors showing signs of a major move. The latest Investors Intelligence survey came out, and bullishness actually decreased and bearish sentiment increased. The change wasn't major, but it is a step in the right direction for this market. We recently stated that the figures were too bullish, too quick, and this slight move may be the start of something more significant. For this market to continue breaking new highs, we do need more bears in the mix. We've been looking for signs of a slowdown in the amount of money being poured into this market, and we haven't found it yet. This last week saw some incredible IPO's, with Freemarket (FMKT) and VA Linux (LNUX) making record breaking debuts. This new money continues to be put to use, and as long as it does, it is a major advantage for the bulls. Looking at the yield on the 30-year Treasury, we witnessed a significant move this last week, as the bond rallied by 96 basis points. This move is now safely off of the highs, and is getting close to bullish territory. The long bond has been a thorn-in-the-side to many bulls, but it may soon become another ace-in-the-hole. Looking ahead to this next week, we do have option expiration. Pinnacle continues to track the levels of calls and puts for various stocks and sectors. The S&P 100, being the most liquid index option, continues to show very bearish signs. In terms of open interest, 5 out of the top 6 are on the put side. The put/call ratio on the OEX stands at 1.44, including LEAPS it stands at a whopping 1.98. This is very bearish and can only be beneficial for the bulls' camp. However, overhead for the OEX is currently significant. The Pinnacle Index is in double digits for the OEX (770-800), so a major rally this next week will be met with heavy resistance. Another sector showing heavy put activity is the Nasdaq 100. The NDX currently has a put/call ratio of 1.76, which is bearish. This bearish sentiment on both the OEX and NDX, from a contrarian stand, is very positive for this market. The day that these put buyers throw in the towel, is the day we start getting worried about a significant sell-off! BULLISH Signs: Cash Flow: The amount of money being poured into this market continues to be Strong, as evidenced by this last week's record IPO's. 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, as well as Amazon's latest jump. Mixed Signs: Interest Rates (6.161%): The yield on the 30-yr Treasury is now safely off of the highs. BEARISH Signs: 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. However, we did see a slight downtick in sentiment this last week. Energy Prices: With the rapid rise in crude oil, everything from manufacturing to transportation will be affected by higher costs. These higher costs will be felt 1-2 quarters out, and could put pressure on profit margins. Volatility Index (20.92): The VIX is trading once again near its previous lows. Another quick reversal at this benchmark will likely presage an intermediate top. 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% Friday, December 10 86,405 +138.9% 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 Benchmark (12/10) Overhead Resistance (770-800) 14.51 Overhead Resistance (750-765) .85 OEX Close 763.49 Underlying Support (730-745) 3.01 What the Pinnacle Index is telling us: Based on 12/7, overhead resistance (750-765) is very light, while and underlying support continues to build strength. Overhead (770-800) continues to be heavy, and will not likely break until after next week's option expiration. Put/Call Ratio Friday Strike/Contracts (12/10) CBOE Total P/C Ratio .45 CBOE Equity P/C Ratio .35 OEX P/C Ratio 1.44 Peak Open Interest (OEX) Friday Strike/Contracts (12/10) Puts 750 / 14,912 Calls 780 / 13,427 Put/Call Ratio 1.11 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 10, 1999 20.92 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 24, 1999 53.0 28.7 December 10, 1999 51.7 29.3 ************* COMING EVENTS ************* For the week of December 13, 1999 Monday None Scheduled Tuesday Consumer Price Index Nov Forecast: 0.3% Previous: 0.2% Retail Sales Nov Forecast: 0.4% Previous: unch Atlanta Fed Index Nov Forecast: -- Previous: 13.7 Real Earnings Nov Forecast: -- Previous: 0.5% Wednesday Business Inventories Oct Forecast: -- Previous: 0.4% Industrial Production Nov Forecast: 0.2% Previous: 0.7% Capacity Utilization Nov Forecast: 80.7% Previous: 80.7% Thursday Jobless Claims 12/11 Forecast: -- Previous: 293K International Trade Oct Forecast: -$24.3BPrevious: -24.4B Phil Fed Survey Dec Forecast: -- Previous: 15.8 Friday Housing Starts Nov Forecast: 1.63M Previous: 1.628M Building Permints Nov Forecast: 1.58M Previous: 1.594M Week of 12/20 12/21 FOMC meeting on interest rates **!!** 12/22 Gross Domestic Product - Q3-Final 12/23 Personal Income - Nov 12/23 Durable Goods Orders - Nov 12/23 Help-Wanted Index - Nov ************* WOMAN'S WORLD ************* TWEAKING THE BULL Last week I wrote an article about "conservative" bull put spreads and shared my criteria for entrance, exit and damage control. As expected I received many letters with various specific questions, which I answered. It was clear from the questions that more detail is wanted by many of you. I would like to share one reader's letter, which is the basis of my article this week. Lynda, I thoroughly enjoyed your Sunday article on the Bull Put Spread. In fact, I am giving it a try on JDSU (210's and 220's) with 20 contracts. We will see today if support holds at 245 since it closed yesterday at 247. I have a question: In your "Rules" you say make sure that there is, at least, 1-2 points to be made in the spread. Why wouldn't .75 work? After all, you would still make $1500 on 20 contracts and you would only have to restrict $20,000 for a couple of weeks. That's still a 180% annual rate of return. John I also did a form of a bull put spread on JDSU this week, which I will explain while we go through the steps necessary before putting on the trade that john and I did. Let's go through the necessary steps and determine where, when and if we should put on a spread on JDSU. Step 1: Determine if you are bullish about the stock. Once you have identified a stock that you might want to do this strategy with, identify if the longer-term trend is upward and still intact. I use a three-month chart (shown above). Look if volume is increasing or decreasing in relation to the price. If the price is going up and the volume is going up, you can reasonably expect the continuation of an up-trend. In this chart you can see that throughout the month of October the volume was increasing and always above the average volume. In November, the price of JDSU was rising but the volume was decreasing, indicating that the buyers were starting to fade away. Possibly the institutions were no longer accumulating the stock. You should expect to see a dip when there are more sellers than buyers. Sure enough, the fourth week in November the price drops and volume increases to a level higher than the last couple of months. The first week in December, the volume drops back down to a more average level, indicating that the dip MAY be over. Overall, the trend is up so this stock is a candidate for establishing a bull put spread. Step 2: Is the dip really over? Come in a little closer and take a good look. Using one-month daily chart, you can see that from November 26th to December 2 the volume was increasing and the price was decreasing. Not a good time to buy or do any bullish strategies. After the dip to November 30 we see higher highs and lower lows, usually indicating some consolidation. Step 3: If the dip is over, what are key support and resistance areas? Determine when to enter the trade and when to exit if you're wrong. I next look at a 10 day 15 minute chart (shown above) to get a better look at support and resistance levels. . The key support areas are 225, 230 235 238 and 240 with strong resistance at 253. Because there is strong support at the lowest level 225, I would want to put on a spread below this level. Buy looking at the current premiums "at the money", you can see what cost of the spread probably would be if the stock dropped to 225. The cost of the spread if JDSU dropped to 225 would be about 10 or 11 points. John entered the trade on the last Thursday in the chart (12/9). I entered the trade on the last Monday in the chart (12/6) The premium for the 210/220 spread was only .75 because the strikes were so far away from the price of the stock. Remember my rule says put on the spread after a dip and you have a signal that the dip is over but allow yourself plenty of room for error. I didn't think it was worth my time to put on this spread at these prices, so I did a variation. I bought the Dec 200 put for 1 3/8 and sold the JAN 200 put for 7 ¼, a credit to my account of 5 7/8. My risk (highly improbable) was a loss of 11 if I had to buy back the spread if it dropped to 225 less the 5 7/8 points I already received. Of if I really wanted to tough it out I was protected down to 200. John was risking about a 5 point spread if JDSU went down to 225 but he could only make .75 points even though the risk was also highly improbable. John's trade doesn't meet my criteria outlined last week. I would move on to something else, which I did. Don't try and force fit a strategy. Step 4: When to enter? I entered my spread on Monday Dec. 6th. It was a wild day. The stock gapped up at the open, ran up over former resistance of 253, dropped back to 245 and then back up to close at 251. I never put on a trade during amateur hour (the first hour) and decided to see where this baby was going. I was convinced it was ready to blow, so I needed to enter the trade now because the premiums would never be higher. (My expectation was that it would continue much higher without first dropping). From Monday to Thursday when John entered the trade JDSU basically went sideways. I admit, I jumped the gun on my entrance on Monday; I was antsy and tried to convince myself that my criteria had been met. On Thursday when John entered the trade, the stock opened higher, but John didn't wait for a confirmation that the dip/consolidation was over. He put on the trade described in his letter above for .75 per contract. (Not enough moola for me.) He later went out and JDSU tanked. Now, if John really understood where support really was, he wouldn't have panicked. But he did, and wound out of the trade when JDSU hit about 240. I also rode the roller coaster down that day, chewing what remained of my fingernails, reminding myself this was perfectly natural for this stock and not to panic unless it hits 225, my predetermined exit point. JDSU as it would have it, went down and bounced firmly off 228 and went racing back up with strong volume. Actually I was watching my intra day charts at the time and when JDSU tanked, the volume also dropped when it got down that low, indicating that there were no more sellers. I kept telling myself, it's ok, don't panic. I am still in the trade and will ride this one all the way to the bank or down to 225. Moral is: don't force fit strategies just because you are anxious to implement. Also paper trade the strategy on 4 or 5 stocks for a month or so and see how good you are. It will help you perfect your timing, gain confidence and you will have a chance to see how you handle the dips. Lynda Schuepp lynda@OptionInvestor.com ***************************************** MORE WOMANS WORLD ARTICLES IN SECTION TWO ***************************************** ************************Advertisement************************* Tired of waiting on trades to execute? 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The Option Investor Newsletter 12-12-99 Sunday 2 of 5 ************************ WOMANS WORLD - CONTINUED ************************ Fundamentals Unbelievable, incredible, awesome. I sold the CMGI 190 leap I had bought last week at 38 for a 2 point profit on Thursday, then I bought a 200 leap at 38 and sold it at 41 on Friday. On Friday I bought a June 160 leap at 38.5 and sold it on Monday at 38. I don't really know why I sold that one, it was a spur of the moment decision. When the stock started moving again on Monday I bought a March 165 call for 34 5/8. On Tuesday I sold that for 35.5, bought a 190 leap at 55 1/8 and sold it Wed for 58 1/4. I have now made over 100% on my original investment in a couple of weeks with this one position. I am not really a one-stock woman, but this has been such a perfect and easy play that I have been focusing almost all of my attention on it. It is difficult in a very active market to direct your attention to many different plays. This stock has gone from 100 to over 200 in a few weeks, and logic and common sense would dictate that it should have corrected long ago. However, the trend is your friend and for the last few weeks this trend has been up. Even in an aggressive play in a strong bull market anything can happen which is why I feel compelled to sell an option at a profit, any profit. You can always buy back in later. Frankly, this type of move is a little scary. I got out of my last option on Wednesday, and on Thursday I am staring at my screen watching the stock moving from 204 to 175.5 and back up to over 190. The old cliché "nobody ever went broke taking a profit" should be memorized by options traders daily. My other positions for the last couple of weeks were adding to my Broadcom and my Nextlink position. I bought 50 Broadcom at 175, and watched it move another 50 points. I also bought Nextlink at 51 15/16 last week and watched it move to over 64 . After reading Janar's column on taking one week off every month I plan to reassess my strategy on this play, particularly with earnings coming up on the 15th. Usually after a particularly large move a stock will level off after earnings to a 2 to 5 point daily trading range until it is ready for the next big move The traditional thought is that you should buy what you know and if you don't understand it don't buy it. However, with the amount of money made in the technology and Internet sector over the last few years, the professionals and investing public want to participate. How well can any of us really know the technology stocks? Does "buy what you know" mean you have to be an engineer to buy Intel or Cisco, or a medical doctor to buy a biotechnology company? Not necessarily, in fact I know doctors who have lost money investing in medical stocks, possibly because they focus too much on a narrow area and not enough on the overall market. You can, however, use some general rules and develop an awareness for what is going on in the industries and the market. Try to look for a company which has many products on the market as well as many in the research and development phase, and a market for their products which is big enough to support one or many competitors. Remember: patents expire, technology changes at breathtaking speeds, and nothing is immune from competition in today's marketplace. Sure, right now Qualcomm has the CDMA chip every cell phone needs, but don't you think the engineers at the other companies are working on developing better and faster chips? Of course, you can ride the wave but always look over your shoulder. Research and development is particularly important among the giant pharmaceutical companies because of the rate at which medicine is advancing and changing. One blockbuster product is never enough. For example, drug patents generally expire after 14 years, and a brand name drug can be as much as 400% more expensive than a generic one. Warren Buffet puts a lot of stake in management. Some of his most famous investments have been on the basis of management change. Some of this is intangible, you can't always fully define what makes a good CEO today. Very few people nowadays have the opportunity to talk to the top CEOs like Michael Dell or John Chambers but sometimes you can see company representatives on TV and get an idea of what they are about. Does the management seem down to earth and concerned about the interests of the shareholders? Does the CEO take the time to give interviews and communicate with the investment community or does that person have the attitude that he/she doesn't give two hoots about the market? Does the management have a solid educational background and experience? Does the company have strategic alliances with other companies? Look at the news on some of the public news services like Reuters. How often does the company issue press releases? If the last press release was in 1997 the company probably doesn't bother to keep the shareholders up to date Try to look for a company, which makes products or has assets, which are necessary, irreplaceable and unavailable elsewhere. This is an ideal situation, which is not always possible to find, but sometimes you can come close. I have always been a little skeptical of retail Internet stocks. What are they doing someone else can't come along and do better? Unless they are selling proprietary products, you can't buy on other web sites someone else is eventually going to attempt to compete. When the Internet was a brand new phenomenon, some Internet retail sites increased their market value 1000 fold in a few years. However, the market is starting to mature, and many new initial public offerings have come out in the Internet sector over the last year or two. Many competitors in a field means the only way a company can maintain market share is to cut down on the price and decrease profit margins. Eventually this means less profit for the shareholders. Investing in infrastructure is probably the best way to invest in the future of the Internet. The future of the Internet is bandwidth. Bandwidth means the measure of transmission capacity through cables, wires, fiber optic lines or satellites. You simply have to have it. There is such a phenomenal amount of information, which has to be transmitted over the Internet nowadays that companies are fighting to buy broadband assets, which are expected to be worth much higher multiples in the twenty first century. If you have broadband assets you have something solid, and you have book value. Mary Redmond mary@OptionInvestor.com **** Part Time vs Full Time Trading, Is the Grass Really Greener? I was reminded Friday, of some of the differences between trying to trade part time amongst a demanding "regular" outside job, versus making that high risk decision to trade full time. As with anything else in this world which pays high rewards, the risks are high also. In option trading, it is important that one determine their own particular risk profiles, against a back drop of their true talents and devotion for learning, before making big changes. I'd like to explore a few of the differences involved in each, because we always seem to think the grass is greener on the other side. On Friday at lunch, I had a major hard drive crash on my main laptop computer, from which I trade. That was a first for me and now I understand the need for a back-up system. It vaporized my mail program, most documents and my Qcharts. Luckily, I had another computer at home, but it was void of all my email, phone numbers, addresses and relevant programs with passwords for trading. So, forgive me for not responding to any lost emails. Thanks to my success in YHOO last week, I had already ordered a new laptop, due in 2 days. Boy, that was lucky!! An emergent problem such as this, only brings to light the potential for high dollar losses in short term, high risk plays. Once I realized I had a BIG problem, I immediately called by phone, to exit my high risk December Qualcomm plays purchased on Thursday. Qualcomm was down on Friday but because I had been fortunate to enter those 60 high risk contracts at an incredible entry point, I was still able to exit those plays at net. Again, good entry points are the best protection you have. Also, although I did not really want to exit, I forced myself to exit 1/2 of my December 290 YHOO contracts at what appeared to be the high of the day. I don't recall my entry at this time due to lost data, but I think they were up double or more (3x?) since entry this week. I had too many things to worry about and I did not want lost profits to add to it. Since Thursday, other than position for January YHOO and QCOM, I have entered no new plays. This is just one of many possibilities that can affect your "perfect" trading environment at home. You may also experience cable outages which can give you CNBC withdrawal tantrums, or local phone outages which can cause nausea, vomiting and diarrhea since you are unable to trade by Internet, watch CNBC or even call in an order to your broker! Talk about a potential for a heart attack!!! That's usually when your cell phone battery is dead and right before you were planning to exit big trades. Ahhh, yes, the advantages of trading at home!! Before I get to strategies, it is important that potential converts realize that the tax bite is much more obvious, when you pay it straight out of your own pocket, as is medical insurance. Being self-employed has its luxuries, but the isolation of trading is a very real phenomena which bothers me daily. After January, I will be thinking about this issue because for me, the money alone is not enough. I miss the social interaction. If I can figure out how to have both, then I will be happy. If I can't, then I will have some difficult decisions to make. I chose 1999 to trade full time, because of the Y2K effects on the market. It has been an incredible learning experience for me, for which I will benefit the rest of my life. Having been on both sides of option trading, I understand the confusion and frustration many eager young option traders face. The profit potential feels so tangible, that it looks so easy. As I've said before, there is more to the skills of trading, then only learning what the strategy is. When I first started option trading, the internet was still fairly new. Online trading was embryonic at best. I knew no other trader, until this year. I had to dig for information and figure things out the hard way...by trial & error. I was very fortunate in my successes but had OIN been available to me back then, I know it would have changed my life. They do so much research for you that would take hours and hours to do on your own. For a part time trader, this is truly an inexpensive educational trading tool. As a full time trader, I find that time flies by so fast, because I am multitasking between CNBC, 1, 5, 15, 60 min and daily charts, quotes, bond rates, S & P futures, offsetting the markets against the equities I play and their sectors, setting alerts for entries & exits, and trying to figure out which is which when they all go off at the same time....which is usually when the doorbell rings and the dog wants out. Keep in mind that everyone in the outside world, does not appreciate your juggling routine, for if you are home, you must be playing hooky so therefore not answering the phone is not understood. You cannot tell them you have a heap of money sitting on a stock like YHOO on Tuesday, watching your net worth change by the second. No matter what, if they don't trade, they really don't understand. Discussing losses, just makes it worse, for there is no sympathy without being judged for doing something so stupid. But if I was trading part time again, based on what I have learned this year, I would do these things. I would faithfully read OIN. I would choose only a few trades to try at a time, then I would become familiar with what their charts looked like for the year, quarter, month and week. I would set buy limit orders on entry points suggested by the research team at OIN. I would immediately place sell limit orders of 25% profit on each contract and as it sells, I'd enter a lower value buy limit order at a good entry again. Again, place a 25% profit order. If the play is still successful and running, I would keep playing it. This churning of small cash flow profits, will make you consistently more money, then trying to wait for the high 100% returns that you occasionally read about. Not being able to watch plays closely, make these returns difficult to consistently achieve. Also, most great option traders, churn for cash flow, at smaller percent gains. They keep their money working constantly, buying low and selling high. Also, learn to put some of your profits in your pocket, instead of playing with 100% of it over again. I learned this mistake this year...and I promise you, I won't need to learn it twice!!! You've heard it before, but never play with money you can't afford to give away or loose. Make sure you understand that. Then, I would find a system which sent email or pager alerts, if my underlying hit a particular target, triggering me to call in a trade. I do not use stop loss orders on options because of inherent problems with them. But, an email or pager alert would suite me fine, for downside risk. Also, when distraction from the market is your norm, I think longer term and deeper in-the-money plays are safer. It gives you a little more margin of safety to recover from mistakes due to the extra time and built in intrinsic value. Again, great entry points help too. The longer the term of the option, the less volatile the extremes of option price movement, either for, or against you. Short term options make you more money, but they are higher risk and require careful monitoring to extract those high profits without falling victim to price swing reversals. Also, buying leaps at great entry levels, will give you nice upswing movement with time, plus allow you to write covered calls for added monthly income. Remember AOL and AMZN in the summer? There is nothing that says you must keep these contracts till expiration. If possible, I would check charts mid-morning, at lunch, 30 min before market close and after work, just to make sure everything is okay on your shorter-term plays. Anything going down into the closing 15 min, has the potential to gap down at the open the next day...more so over the weekend. If you are near your stop loss, consider exiting before the close. For more piece of mind, I would learn spreads and straddles for profit potential with minimal exposure to large losses. I would analyze myself, to know if I was a speculator, a conservative investor and I would place trades accordingly. Knowing how much I could afford to literally loose, knowing my strengths and weakness, and learning when trades are not appropriate for me, is valuable insight. If you loose big as a part time trader, you will be grateful you still have your day job. There is no room for these mistakes when trading full time for your income, your family's well being and Uncle Sam's pocket. Other than this, I would recommend becoming sensitive to fed news and potential economic reports. Again, the OIN Market Analysis helps with this. The real key though, to both the full time trader and part time trader is like Jim says, learning to "sell too soon". Renee renee@OptionInvestor.com For more considerations on this topic, try Getting Started in Options, by Michael C. Thomsett, Chapter Nine 'Choosing Your Own Strategy' *************** TRADERS CORNER *************** The Longer Breath? When the immediate situation looks bad, but the overall situation looks good, decision makers are faced with a situation that German military writers call "the longer breath." Do I hold here in hopes of a breakthrough, or do I cut my losses and direct my efforts elsewhere? That is where I am at as I watch the market go into its final hour on Friday afternoon. The market is up strongly, with DOW +110, and NASDAQ +20. Yet the three positions in my ST Option Portfolio are near the bottom of my rankings of underlying stocks for my options plays. NOK. I have been buying Dec 160 and Jan 160 Calls when NOK dips below 170. Today, NOK started the day at 166 and hasn't really budged. I was stopped out of my Dec play, which is just as well, since the time premium will begin to drop radically next week. I bought the contracts at 12.5 and sold today, at the low, of 8.75. One of the problems with stop orders is that if you don't get good entry points, stop orders can simply compound your losses. Negative 10% returns compounded will empty your portfolio quickly. After last week's strong run up, I probably should have been more patient. I continue to hold the Jan 160 Calls, which are now underwater too. Hence, the dilemma -- do I hold, or cut my losses, and move on to more profitable plays? QCOM. I have been buying Jan 390 Calls to add to my Jan 380s, which I had decided to hold from last week. These plays have turned into a big slug in my portfolio which steal my focus. Today, like a slug, the stock is just crawling along 389. The lows of today and yesterday would push the "graphical convergence" (for what it is worth, which is doubtful), out to Dec 15 or 16. However, that accords with the fact that the shareholder meeting will take place on 12/20, and volume has been drying up as the lows get higher. But, the telecom sector has cooled a bit the last few days, and holding calls for this long exposes me to all kinds of general market vulnerability. Nonetheless I hold, due to my conviction that once the 4:1 date is announced, along with the sale of the handset division, the stock will react positively. SCH. Yesterday, one of the members of our local club alerted us that one of the investment banks had finally put out a bullish note on trading volume and on line brokers. I had been itching to make a play on the Outside Line Backers, which, I knew would benefit from the growth in trading volume. I had SCH in my sights, as I own a few Jan45 contracts in my LT Stock Account, as well as some EGRP calls. I backed up the truck on the SCH Jan45 at 1.5 yesterday afternoon when the market started to bounce back from its lows. Sure enough, the contract closed up with a last bid at 2.25. 50% gain for a few hours work. Another astute member of our club posted a follow up email after the close noting that the best plays might be NITE, AMTD, EGRP, but perhaps not SCH. I loaded those plays into qcharts, and, sure enough, SCH was off a point today, though the Jan45 held its price (increased volatility?). NITE & AMTD, however, were each up 3 - 4 points. SCH announces trading volume on Monday, though, and some analysts are expecting this to help all the outside line backers to make a pretty good run. The real dilemma is that with the market up and all of my plays down, it is very hard to pull the trigger on good plays when they cross your radar. For example, I had bought, then sold, AOL Jan80 calls last week and early this week. I was ready to make another play on those, but it was hard to justify, when my attention was focused on the wireless wonderstocks, NOK & QCOM. I thought about jumping aboard the AOL train yesterday, then again this morning, but missed profitable entry points as the stock moved up to 90 from a base of 80. So too, I missed making entries into NITE and AMTD plays. Last week, I did literally everything right, and the market cooperated perfectly. This week, on balance, I have made money, especially with a nice gain on Monday, but it has not gone quite so perfectly. I started loading up on NOK and QCOM a day too early on Wednesday. Had I waited until Thus, I would have had much better entries. Now, I am in a holding pattern, neither wanting to exit and miss good moves in the wireless twins, nor am I willing to put more capital at risk, though clearly there are good plays. This is the reality that we all face from time to time. There is no perfect answer. If this was easy, everyone would be a millionaire. So it goes. Janar Joseph Wasito janar@OptionInvestor.com **** An Osmotic Technical Point of View. Trading Lessons from the Holiday Dinner Table. In looking at the market this past week I am reminded of something that I learn anew almost every Holiday Dinner and the lesson is a great analogy for the current market. The food is great and for the most part, so is the company, much like most of the tech stocks in the NASDAQ and even the DOW. The lesson is usually learned with the last few bites and that is where we are in this market feast that we have been partaking in. Your taste buds and accounts have been well fed (if you done your home work) and your are getting kind of full. But, oh the mashed, sweet, scalloped potatoes, cranberry sauce, ham, turkey or (fill in the blank) look awfully good and just another bite or two sounds really good and it is really hard to resist.. We have all given in and do you remember how it feels? Not too pleasant. However, it is the difference between taking those last few bites and not, that can make the rest of your day enjoyable or really uncomfortable for awhile. By not getting up from the table now with most of your profits, there is a very good chance that the next few weeks can become very uncomfortable indeed. And all because you wanted just a few more bites. I suggest that you might want to get up from the table now. But, I do not believe in depravation without reward, there is always dessert! Like the preverbal dinner, if you take a bit of a breather now, dessert might just be very sweet indeed. Take a few days off to reassess the market and look for some of the great Put plays that we are sure to see in the coming weeks and look for some support when some of the great stocks out there with good fundamentals start to retrace these great runs that they have had. Buying opportunities for Calls and Leaps will be there galore! The desserts that this market is going to serve up in the next few weeks are going to amaze and astound even the most jaded traders out there. Both Put and Call plays will abound. They are going to be very sweet and very profitable indeed. So, think about getting up from the table now and waiting for dessert. While your waiting, do you homework and get ready for some of the sweet trades that you left room for. You will be glad you did! Harrison harrison@OptionInvestor.com ************************ TRADING CLUB UPDATE ************************ Sunday, December 12, 1999 OPTION INVESTOR TRADING CLUBS CONTINUE TO HAVE SUCCESSFUL AND PRODUCTIVE MEETINGS!!! Visit the trading club message boards and see what others have to say: http://boards.OptionInvestor.com/tradersclubs/ UPDATE FROM BOISE, ID ********************* The Boise club is having its first meeting Monday, December 13. Anyone interested can contact me at Ljohnstona@aol.com Thanks so much, Lynn Johnston UPDATE FROM NEW ORLEANS, LA **************************** Hello from New Orleans!!!!!! The New Orleans Club has had two very successful Club meetings and enthusiasm and interest is increasing. We even had 3 guests in attendance at our December Meeting who have said they are going to try the Free Trial subscription to OptionInvestor.com next week. The topics we discussed in our meeting has even persuaded one guest to look into switching to the online broker "Preferred Trade". We had a very lively discussion on Split Plays and Earnings Plays from one of our experienced New Orleans member Rio Sonza. Rio's wife Thelma who also attended, is also an experienced Option Trader and has done quite well in watching and playing the splits. Over the past 45 days this dynamic couple has made over 18 Trades of which only 2 were unsuccessful! We then had a lively round table discussion on Y2K and its implications on some of our Option Trades. In general, all the meeting participates agreed that Y2K would probably be a non- event in the United States but could have a profound effect in other parts of the World that did not work on the problem in advance like the US. One member showed concern that the "uneducated public" may make a run on the banks to hoard money and if the media was to cover that event, it may cause panic, similar to what we see here in Louisiana when a hurricane is heading our way. All the ATM machines in Louisiana now carry $20 dollar bills and nothing smaller, anticipating the last minute customers trying to withdrawal large amounts of money. All members in attendance have begun to switch their money and trading business to "Preferred Trade". All of us feel that with the NEW STOP system that Jim Brown has recommended that we try, we can all make more money in the long run. Finally, our meeting focused on the "Top Ten Rules for Option Trading" written by Optioninvestor. We went over all ten rules and resolved that we must continue to followed these rules if we want to remain successful in our Options trading. For our meeting in January we are lining up a Local Speaker who has over 9 years of experience in Option Trading to discuss Volatility and Spreads trading in Options. He has been quite successful in this area and doesn't mind sharing his knowledge with other Traders. Also at the January meeting, we will have a discussion from one of our Members on "Chart Reading". This too is a frequently requested topic to cover at our Club meetings. Please e-mail me (firstname.lastname@example.org) if you want more details concerning any of these events or to join the NO-OIC. We look forward to hearing from new members, and as always guests of members are welcomed to attend our meetings. Warmest Regards, Steven Johnson email@example.com UPDATE FROM ST. LOUIS, MO ************************* The OIN STL Group has been meeting regularly every other Monday night. Our next meeting is Monday 13 December at 0700 at the office of Wellness Therapies at 15274 Manchester Road, Ballwin (located west to Georgia Carpet Outlet). We will not be meeting the night of the 27th. Our first meeting of the new year will be on 3 January. For future meetings we are exploring trading videos that we can buy as a group and show and discuss at future meetings. I am also going to try to arrange for brokers who specialize in options to discuss using brokers. Anyone in the St. Louis or Southern Illinois area interested in meeting and discussing options or investing is welcome. You are not alone. Call me at 618-235-3842 or my e-mail is firstname.lastname@example.org. Maris Eshleman ************************************************************** If you would like to join an option trading club anywhere in the world please contact us at Visit@OptionInvestor.com and Organize@OptionInvestor.com and we will put you in touch with the one nearest you. ************************************************************** LAST WEEKS CHANGE FOR THIS WEEKS PICKS: *************************************** Index Last Week Dow 11224.70 -61.48 Nasdaq 3620.24 99.60 $OEX 763.49 -3.99 $SPX 1417.04 -16.26 $RUT 466.71 2.13 $TRAN 2874.94 -53.86 $VIX 20.92 0.10 Calls Week CMGI 194.06 34.00 We bask in the glow of being CMGI investors ARBA 236.75 32.13 New, business is booming for B2B & ARBA DCLK 196.00 26.63 Establishing itself as a dominant player INKT 167.75 22.75 Inktomi is split-happy and on the move! CLS 86.75 13.81 New, simply can't ignore this momentum! AOL 91.50 13.38 AOL relishes the holiday season momentum! NOK 168.00 11.94 Demand exceeds the loftiest projections GE 147.00 11.69 A little holiday cheer with a split? SUNW 81.88 10.88 New, the Sun keeps on rising after split MACR 86.88 10.25 Perfect intraday for stock option traders BRCM 217.75 10.00 Dropped, violates a good deal of support TMX 110.13 8.50 New, welcome to another split party! GMST 125.38 8.25 Dropped, meets a round of serious selling NT 88.25 8.06 Take note! NT is now a split candidate! QCOM 391.50 7.06 The buyers gladly move in on higher dips STM 136.81 5.44 Demonstrates food relative strength USWB 50.88 4.69 ADV has more than doubled! SNE 187.31 4.19 Waiting to receive direction from Tankan VRTS 109.06 2.94 New, VRTS and the software sector heat up PRGN 81.88 0.88 Looking to re-ignite the climb for PRGN! VOD 49.81 0.31 The VOD takeover saga continues... ANSR 33.00 -0.50 Dropped, disappointed in ANSR's response EMC 94.44 -0.81 Dropped, momentum dies on the vine MXIM 86.50 -5.81 Dropped, less than an optimum play JDSU 244.25 -6.94 JDSU gets a Strong Buy and a $300 target SDLI 173.13 -9.88 Dropped, the demand looks to have dried Puts ETYS 45.13 -8.69 New, Scrooge makes his holiday appearance GILD 39.00 -6.56 New, a weak link in a weakening sector KIDE 44.69 -4.88 Could KIDE be cleared for a healthy fall? GT 28.75 -4.06 Goodyear struggles to find a good day! PGR 76.56 -2.00 Progressive makes progress downhill JCI 51.75 -0.69 Dropped, where did all of the sellers go EK 61.25 1.13 Dropped, manages to scare away the bears STOCKS ADDED TO THE PICK LIST ***************************** Calls TMX - Telefonos De Mexico VRTS - VERITAS Software ARBA - Ariba Inc. SUNW - Sun Microsystems CLS - Celestica Inc. Puts ETYS - eToys Inc. GILD - Gilead Sciences Inc. *************************** PICKS WE DROPPED THIS WEEK *************************** 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. CALLS MXIM $86.50 (-5.81) Maxim was less than an optimum play for us last week. It started to head south half way through the week. So what happened to our split-run? Hopefully, it just took a breather because it still has a week and a half before the ex-date, but it is the sector that is worrying us. The Semiconductors are typically spikey one way or the other and right now are in the midst of a downward spike. If this lasts a couple more days, we will have lost our split-run. That is why we are dropping it now so that we can start searching for a good exit point. A bright spot was CSFB speaking positively about the sector. They sighted 16% year-to-date sales growth and the expectation for 25% growth next year. Remember, we should see a good intra-day spike to allow for an decent exit. ANSR $33.00 (-0.50) We're disappointed ANSR hasn't responded to positive analyst forecasts or Nasdaq rallies this week. Granted after flying up 46.5% the week before we anticipated some consolidation, but ANSR is simply channeling in the $32 to $34 range. On one hand the stock shows no signs of falling apart, but on the other no signs of a breakout either. Time is wasting and we've decided to exit the play this week-end. GMST $125.38 (+8.25) GMST made a futile attempt to move higher in the first hour of trading Friday morning, only to be met by a round of serious selling. GMST split 2:1 after the close of business Monday. The bears drove the price of GMST stock to a low of $120.75 in the first 90 minutes of the session. We hope you had your trailing stops in place and were able to close out this split run with a nice profit. If you didn't get stopped out Friday we would suggest closing this play Monday so as not to leave any more money on the table. We will keep our eye on GMST for opportunities in the near future. EMC $94.44 (-0.81) As we mentioned Thursday EMC is stuck in a narrow trading range. The hardware maker has seen its recent momentum die on the vine. EMC could find it again at any time and continue on to new highs, or it could fall under its own weight. Friday, after the major indices dipped early in the session and the began to rebound EMC stayed stuck in the mud. The hardware index closed in the red as well indicating stocks in this sector could be setting up for a round of profit-taking. EMC has given us several profitable trades in the last month, so we will say good-bye for now and look elsewhere for new opportunities. BRCM $217.75 (+10.00) Broadcom may be heading into a bit of a downtrend as it pulled back on Friday, finding lower resistance and violating a good deal of support, including it's 10-dma of $218. BRCM does have a bit of support at $215, but this is weak support at best and we see the next level of solid support being $200. BRCM simply has lost too much momentum and has too much resistance to hold it back to make the risk of continuing this play worthwhile. SDLI $173.13 (-9.88) Another record close on the second highest volume day for the NASDAQ, and all SDLI could do is eke out 67% of its ADV, while submarining the price in the process. Into the first hour of trading, SDLI fell below its $180 support level to a low of $172, then recovered back over $180. It didn't hold. SDLI sank through the afternoon to close at $173.13. Not only did sellers emerge, there were no buyers. Demand dried up while supply increased, forcing the price down. Hopefully you were able to set stops and make a hasty escape following our caution on Thursday night. We can find no news that might explain the decline. Therein lies the problem - SDLI isn't as well known and doesn't make the news like JDSU might. Low volume tells us that it probably just fell off the radar screen. Such are the risks with low volume stocks without much coverage. Needless to say we're dropping it from the current lineup. PUTS EK $61.25 (+1.13) Looks like the company's announcement of expanding its share buy back program was enough to scare the bears. The company reported on Thursday that they will increase the buyback program by $200 million raising the total authorized for share repurchase to $900 million. Last weeks action suggests that EK is attempting to build a bottom and find a little support. The possibility that the major selling may be over in the shares of Kodak makes us not want to sit on puts and just watch the premium decay. The stock developed a trading range between $62.50 and $60.25 last week. It is very difficult to make money trading long options with such a tight range for the underlying security. JCI $51.75 (-0.69) Where did all of the sellers go? JCI did manage to pull back grudgingly last week but it looks as if the downtrend is leveling off. You do not want to be long puts on a stock that may be ending a long term downtrend. Granted, the jury is still out on whether JCI has found a bottom. There has not been any news recently to get investors interested in the stock on either the long or the short side. It is possible that tax loss selling in the shares of JCI is abating and everyone who wanted to liquidate shares has already done so. The most interesting technical action occurred on Tuesday and Wednesday. After a quick drop to new lows on Tuesday, JCI managed to climb out of the whole and regain most of those losses on Wednesday. If Tuesday's volume had been huge, this pattern would have been indicative of a final blowoff capitulation. The possibility that it was a final capitulation and that time is ticking away on our options makes us believe that owning puts right now on JCI is not worth it on a risk to reward basis. STOCK SPLIT CANDIDATES *********************** Current Split Candidates SNE - Sony Corp CMGI - CMG Information Services NOK - Nokia STM - STMicroelectronics ARBA - Ariba DCLK - DoubleClick Split Candidates that are not current plays QLGC - QLogic Software CMVT - Comverse Tech CHKP - CheckPoint HGSI - Human Genome Sciences SDLI - SDL Incorporated BRCM - Broadcom YHOO - Yahoo! MEDI - MedImmune STOCKS WITH UPCOMING SPLITS **************************** We don't list all splits available, only those we feel may have play possibilities. Symbol - Stock Splits/Date 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 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 Appliance 2:1 12-20-99 ex-date 12-21 MRCY - Mercury Computer 2:1 12-20-99 ex-date 12-21 PPRO - PurchasePro.com 3:2 12-20-99 ex-date 12-21 IQIQ - Vialink 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 CLS - Celestica 2:1 12-21-99 ex-date 12-22 FLEX - Flextronics 2:1 12-22-99 ex-date 12-23 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 HOTT - Hot Topic 2:1 12-27-99 ex-date 12-28 SEAC - SeaChange 3:1 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 INKT - Inktomi 2:1 12-30-99 ex-date 12-31 INSP - Infospace 2:1 01-04-00 ex-date 01-05 FDRY - Foundry 2:1 01-07-00 ex-date 01-10 ITN - InterTan 3:2 01-13-00 ex-date 01-14 COST - Costco 2:1 01-13-00 ex-date 01-14 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 page. ******************** THE PLAYS OF THE DAY ******************** With all the great plays each week we can never decide on just one so take your pick. Call plays of the day: ********************** SUNW - Sun Microsystems $81.88 (+10.88 S/A)(+2.97 S/A) See sector list for details Chart = http://quote.yahoo.com/q?s=SUNW&d=3m **** TMX - Telefonos De Mexico $110.13 (+8.50) See sector list for details Chart = http://quote.yahoo.com/q?s=TMX&d=3m Put play of the day: ******************** GILD - Gilead Sciences Inc. $39.00 (-6.56) See put section for details Chart = http://quote.yahoo.com/q?s=GILD&d=3m ******************** Y2K Renewal Offer!!! ******************** Announcing the cheapest renewal rate available! $24.91 mo* 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 Millennium Edition of the almanac for FREE. This package has 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. This lowers the actual price of the newsletter to only $24.91 per month for an annual subscription. The supply of almanacs is limited so don't delay. Click here for more info. http://www.OptionInvestor.com/renewalinfo.asp ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millineum with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** **************************** SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter 12-12-99 Sunday 3 of 5 ************* DEFINITIONS ************* 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 weeks 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. RISKS of SELLING PUTS: 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. *********** CALLS PLAYS *********** Hardware *********** SUNW - Sun Microsystems $81.88 (+10.88 S/A)(+2.97 S/A) 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. A new Sun rises? OK, a hokey tag line, but you have to admire the rise it's taken since the split on Wednesday. While we don't recommend holding a position over a split, SUNW has turned out all right. In fact, it's up $9 in three trading days with robust volume. There is no single story that would cause such a move, but the one getting the most airtime is the news that Digital Island in a pact with Sun and Inktomi will deploy 5000 Sun servers in the next two years. It's a big deal because Sun also agreed to a $20 mln equity stake in Digital Island, whose shares rose 60% the day of the announcement. Sun also tacked on over $6 that day. Despite gapping up to $83.38 the day of the split, the price fell back to support of $77 before bouncing up to the next level of support at $79, from where it continues its current move. $79 also happens to be a 35% retracement of the three-day gain, and should make good support from here. Also, technically speaking, SUNW gave us a hammer formation on the chart ("t" shaped bar graph - the longer the t's tail, the better), which indicates good technical strength. Just be careful since the 10- dma is way down at $72 and would likely be the best level of support in a severe market hiccup. To summarize, you may want to consider target shooting at $79, or $77 depending on your risk tolerance. Volume will be the key to further moves. Dips are buyable should SUNW move north from here. There is a boatload of open December and January $85 contracts, which speaks bullishly to the future. BUY CALL JAN-75 SUX-AO OI=4958 at $11.00 SL= 8.75 BUY CALL JAN-80*SUX-AP OI=4716 at $ 8.00 SL= 6.25 BUY CALL JAN-85 SUX-AQ OI=3655 at $ 5.63 SL= 4.00 BUY CALL APR-80 SUX-DP OI=4156 at $13.50 SL=10.75 BUY CALL APR-85 SUX-DQ OI=1906 at $11.00 SL= 8.75 Picked on Dec 12th at $81.88 P/E =111 Change since picked +0.00 52-week high=$83.00 Analysts Ratings 7-12-5-0-0 52-week low =$18.06 Last earnings 10/99 est= 0.33 actual= 0.31 surprise=+6% Next earnings 01-13 est= 0.20 versus= 0.17 Average Daily Volume = 12.6 mln Chart = http://quote.yahoo.com/q?s=SUNW&d=3m **** CLS - Celestica Inc. $86.75 +3.50 (+13.81) Celestica is a global leader in the electronics manufacturing services industry. With over 17,000 employees worldwide, Celestica operates 28 manufacturing and design facilities in the United States, Canada, Mexico, the United Kingdom, Ireland, the Czech Republic, Thailand, Hong Kong and China. Celestica provides a broad range of services including design, prototyping, assembly, testing, product assurance, supply chain management, worldwide distribution and after-sales service. Its customers include industry leading original equipment manufacturers (OEMs), primarily in the computer and communications sectors. Shares in Celestica have closed higher than the previous day or seven consecutive days. We simply cannot ignore that kind of momentum. Celestica, the world's No.3 manufacturer of electronics on a contract basis, announced a two-for-one stock split on Tuesday. The stock of this Toronto based company will split on December 15th on the Montreal and Toronto exchanges and in New York it will trade on a due-bill basis starting on the 15th with the ex-date on the 22nd. CLS has the news and is in the right group to keep its momentum going. Technically speaking, the shares of Celestica look very good. On the day of the split announcement CLS gapped up just under 5 points on the open. The charge continued for the rest of the week. We are looking for a continuation of this uptrend next week. Be very careful if CLS drops below $80. If it were to drop below $80, it would imply that CLS will attempt to close the gap all the back to $76 before heading higher. Odds are this will be a quick momentum and split play for us with an exit point on or before the split date. We would like a pullback to buy in and that is what we were originally waiting for, but we just never got it. So since we want to take part in this very quick split-run (ex-date is less than two weeks out), we need to target shoot our way in on an intraday bounce. There was only one other significant news item, besides the split announced last Tuesday. Schroder announced an outperform rating while initiating coverage of Celestica yesterday. BUY CALL JAN-75*CLS-AO OI=3041 at $14.38 SL=11.25 BUY CALL JAN-80 CLS-AP OI= 105 at $10.88 SL= 8.75 BUY CALL JAN-85 CLS-AQ OI= 10 at $ 7.75 SL= 5.75 low OI Picked on Dec 12th at $86.75 P/E = 157 Change since picked +0.00 52-week high=$87.13 Analysts Ratings 6-7-2-0-0 52-week low =$20.25 Last earnings 10/99 est= 0.33 actual= 0.37 Next earnings 02-08 est= 0.40 versus= 0.27 Average Daily Volume = 4.96 mln Chart = http://quote.yahoo.com/q?s=CLS&d=3m **** SNE - Sony Corp $187.31 (+4.19)(-2.81)(+9.31)(+16.88 prev 3 wks) 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. By the time the market opens here on Monday, the Bank of Japan will have announced the findings of the Tankan report (essentially the equivalent of our GDP). As we mentioned last Thursday, this may cause big swings depending, on their findings on the current status of the economy. This will most likely be the driving force behind the direction Sony takes heading into next week. Hopefully, everyone who is currently playing Sony, has tightened their stops in preparation for the possibility of an adverse report. Sony had a fairly non-eventful finish to the week, trading in a fairly tight range throughout Friday and closing right at it's 10-dma. Sony's 5 and 10-dmas look to be converging to provide support, though support and resistance may have little relevance on Monday, again because of the Tankan report. Your best bet is to wait and let Sony settle. If the report is negative, watch for support levels to hold around $180 but we will likely exit the play. If the report is positive, this could be just the fuel we need to propel us through the resistance at $190 and the 52-week high of $192. It should be an easy journey to $200 after that. Sony recently announced plans to move into the world of online banking. Sony and banking? Apparently so! Sony plans to focus on the individual consumer and has already begun working on this endeavor with the hopes of making it onto the emerging scene by 2001. Sony plans to help customers finance loans and pay bills on-line and is now working to decide whether they themselves are going to acquire a banking license or if they are going acquire a lender. The Bank of Sony, who would have thought? BUY CALL JAN-180 SNE-AP OI=419 at $15.63 SL=12.00 BUY CALL JAN-185*SNE-AQ OI=128 at $12.50 SL=10.00 BUY CALL JAN-190 SMW-AR OI= 56 at $ 9.63 SL= 7.00 low OI BUY CALL JAN-195 SMW-AS OI=117 at $ 7.25 SL= 5.50 Picked on Nov 7th at $164.69 P/E = N/A Change since picked +22.63 52-week high=$192.00 Analysts Ratings 0-1-0-0-0 52-week low =$ 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 = 184 K Chart = http://quote.yahoo.com/q?s=SNE&d=3m ************* SEMICONDUCTOR ************* STM - Stmicroelectronics $136.81 (+5.44)(+11.31) STMicroelectronics is a global independent semiconductor company, that designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronics applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems. STM continued to consolidate this week with a bias to the upside. There is major support in this stock near the $134 level. STM bounced off of this level each trading day last week before closing the week at $136.81. The trading pattern of STM is holding stronger than the SOX index which leads us to believe that STM should rally nicely when the Semiconductor sector turns around from this week long slump. STM was able to hold at support levels in the midst of overall SOX weakness because of the favorable news being reported on the company. The SOX finished the week down almost 25 points in the midst of what was widely reported profit-taking in the sector. This pullback has been advertised by analyst as a screaming buying opportunity. We are bullish, but cautious on STM, look for the $134 level to continue to hold, this is a good place to target shoot for a new entry point. Once the profit taking has ceased in the sector, the momentum should resume to the upside. A break above $137.75 should push the stock back up to test the 52-week high of $145. STMicroelectronics and Ericsson announced an agreement this week where the two companies will develop a range of devices. This agreement will build on the companies leading positions in hot wireless technology sector. BUY CALL JAN-125 STM-AE OI=110 at $17.00 SL=13.75 BUY CALL JAN-130 STM AF OI= 2 at $14.63 SL=11.50 low OI BUY CALL JAN-135*STM-AG OI= 78 at $11.38 SL= 9.00 Picked on Nov 30th $125.06 P/E = 82 Change since picked +11.75 52-week high=$145.00 Analyst Ratings 12-2-2-0-0 52-week low =$ 35.69 Last earnings 11-13 est= 0.43 actual= 0.46 Next earnings 01-25 est= 0.56 versus= 0.42 Average daily volume = 1.05 mln Chart = http://quote.yahoo.com/q?s=STM&d=3m ******** Internet ******** CMGI - CMGI Inc. $194.06 (+34.00)(+13.44)(+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, SOFTBANK, and ideally. It was another great week for CMGI investors. CMGI gained $34 making a new high Thursday morning at $204. They will report earnings after the close of business Wednesday. Last quarter CMGI reported earnings of $4.24 per share. Most of the profits came from the sale of shares it holds in other Internet firms. This quarter the street is expecting a loss of $-0.70 per share. Investors are also anticipating a split announcement to come from the Internet developer. CMGI will conduct its annual shareholders Dec 17th. Last month CEO David Wetherell told a group of analysts that CMGI expects to become the second-largest Internet firm in terms of revenue by the end of its fiscal year in July. If that were to happen CMGI would have to pass either AOL or Yahoo. As for next week we would look for the strength to continue in CMGI. Technical indicators say the stock is a bit over bought and due for a pullback. CMGI did bounce off an intraday support level near $188 Friday and could be poised for one last surge higher prior to reporting earnings. If you re-entered a play in CMGI, we would consider $188 as a potential area to close your position. If we see further strength in CMGI early in the week, traders could add to existing positions, but know it should be a very short-term play and you would want to be out by the closing bell on Wednesday. Normally we do not suggest playing current month options during options expiration week, but the volatility in the January contracts is high and you will probably want to close any open positions this week. In other news CMGI owned AltaVista announced the launch of UK and European Internet search engine. AltaVista is also expected to announce Monday that it will use Homestead's Technology to power its home page builder service. The real news for CMGI this week is the earnings report Wednesday. BUY CALL DEC-180*GCD-LP OI=2204 at $21.50 SL=16.75 BUY CALL JAN-200 GCD-AZ OI=5246 at $29.50 SL=23.00 BUY CALL JAN-220 GCD-AD OI=1399 at $23.38 SL=18.25 Picked on Nov 21st at $124.88 P/E = 47 Change since picked +69.19 52-week high=$204.00 Analysts Ratings 4-6-0-0-0 52-week low =$ 16.34 Last earnings 09/99 est= 4.08 actual= 4.24 surprise=+3.9% Next earnings 12-15 est=-0.70 versus= 0.38 Average daily volume = 4.53 mln Chart = http://quote.yahoo.com/q?s=CMGI&d=3m **** DCLK - DoubleClick $196.00 (+26.63) DoubleClick is a leading provider of comprehensive global Internet advertising solutions for marketers and Web publishers. Combining technology and media expertise, DoubleClick centralizes planning, execution, control, tracking and reporting for online media campaigns. The online advertising firm offers a targeted delivery of ads using its patented DART technology. DART measures Ad effectiveness and Web traffic. DoubleClick has Global headquarters in New York City and maintains offices in 32 other major cities around the world. There are numerous examples of companies counting on advertising to support their delivery of media content via the Internet and they are looking to the major ad-serving networks. DCLK is well on its way to establishing itself as the dominant player in the sector. DCLK received positive news and split rumors, that helped the shares go up another $26.63 points on the week to close at $196. The trading range intra-day is very volatile, but biased to the upside. The week's trading range was $168.38- $209.38. We continue to see higher-highs, but getting there is not a steady climb up. Trying to enter a position into the stock can be an adventure. This is not a stock to trade for the weak of heart. Those adventurous traders can look for a bounce off of support levels near $190, more support is at $180. A move above $200 accompanied by volume would be a buy signal. Looking back at current history for DoubleClick, they last announced a 2:1 stock split in April. At that time, the shares were trading at $180, the shares now sit at $196. Looking at the records from the last annual shareholders meeting this past May, shareholders authorized an increase of shares from 60 million to 400 million. Currently only 45 million shares have been issued, so they definitely have enough shares for another 2:1 split. BUY CALL JAN-195 TDU-AS OI= 223 at $24.00 SL=20.75 BUY CALL JAN-200*TDU-AT OI= 955 at $21.50 SL=18.25 BUY CALL JAN-210 QTD-AB OI= 149 at $17.63 SL=14.13 BUY CALL JAN-220 QTD-AD OI= 126 at $14.50 SL=11.00 Picked on Dec 9th at $197.00 P/E = N/A Change since picked -1.00 52-week high=$209.38 Analyst Ratings 11-7-1-0-0 52-week low =$ 16.00 Last earnings 10/99 est= -0.14 actual= -0.13 Next earnings 01-19 est= -0.10 versus= -0.13 Average daily volume = 2.7 mln Chart = http://quote.yahoo.com/q?s=DCLK&d=3m **** USWB - USWeb Corp. $50.88 (+4.69)(+2.13) 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. The business to business side of the Internet has been on fire lately, with an influx of IPO's and positive news from the well establish players in the space. This upcoming week will see more companies going public as the ad giants are trying to get listed, on the heels of successful IPO's such as Agency.com and Razorfish. This positive sentiment is adding interest to shares like USWB, that saw a drastic move in volume this week. The average daily volume has more than doubled from previous weeks. This technical change, that has been accompanied by good relative strength has produced higher prices. After a couple of days of minor profit-taking the shares are setting up for another leg to the upside. The stock is attractive at current levels, with good support at the $50 level and then again at $48. The shares can be volatile during the trading day, so be sure to confirm market direction before entering a new position. The stock currently sits at $50.88, not far from a new 52-week high $53.81. USWB is now giving their customers the best of both worlds as they recently introduced an Internet application manager for e-Commerce. This service will encompass both managed application services and custom consulting. This is the essence of Time-to-Value and is why USWB is the leader in Internet professional services. BUY CALL JAN-45*QWB-AI OI=3696 at $9.50 SL=7.50 BUY CALL JAN-50 QWB-AJ OI=2179 at $6.63 SL=4.88 BUY CALL JAN-55 QWB-AK OI= 193 at $1.19 SL=0.50 High Risk! Picked on Dec 7th at $50.06 P/E = N/A Change since picked +0.81 52-week high=$53.81 Analyst Ratings 10-6-1-0-0 52-week low =$17.00 Last earnings 10/99 est= 0.13 actual= 0.15 Next earnings 01-24 est= 0.16 versus= 0.07 Average daily volume = 2.60 mln Chart = http://quote.yahoo.com/q?s=USWB&d=3m **** AOL - America Online Inc $91.50 (+13.38)(-5.25) AOL is the world's #1 provider of online services with over 21 mln subscribers. It's acquisitions in 1998 and 1999 have given the company a 60% market share and diversity. CompuServe, an online service geared more to professionals, added its 2 million users to the AOL portfolio in 1998. This year AOL brought the Web navigator, Netscape, to its organization and is also using DIRECTV to launch an interactive TV service. AOL is a momentum play driven by news and the holiday season. We added the play when we saw signs of recovery following its post-split depression. Recently AOL has been channeling between $78 and $82, finally breaking out on Thursday. That day Wit Capital reiterated a Buy recommendation and issued a 12 to 18- month price target of $105. On Friday AOL jumped another $5.25, or 6.1% on news of an "imminent" cross-marketing deal with Walmart (WMT); however there's much speculation as to what kind of alliance will emerge. Support remains firm at $80-$82 in- line with the 10-dma ($80.60). This level is an optimum point of entry, but if AOL continues to climb look for intraday volatility to get your foot in the door. Keeping in the holiday spirit, AOL announced a new "concierge" shopping service to make gift-giving easier this season with its 'At Your Service' on Shop@AOL. The service gives shoppers direct access to over 50 AOL merchants with alerts to companies offering free shipping, gift wrapping, and bonus gifts. In other news Telescan announced a three-year deal to add its stock screening and portfolio analysis tools to AOL's personal finance channel. And AOL is at war again. This time with AT&T's WorldNet Internet who tried to give its 1.8 mln subscribers Instant Messaging access to not only AOL, but also to rival Microsoft (MSFT). AT&T subscribers were quickly rejected from AIM system. BUY CALL JAN-85*AOO-AQ OI=35008 at $13.38 SL=10.75 BUY CALL JAN-90 AOO-AR OI=30005 at $10.50 SL= 8.00 BUY CALL JAN-95 AOO-AS OI=19805 at $ 8.25 SL= 6.50 SELL PUT DEC-85 AOO-XQ OI= 6655 at $ 1.75 SL= 3.00 (See risks of selling puts in the play legend) Picked on Dec 2nd at $79.88 P/E = 251 Change since picked +11.63 52-week high=$93.00 Analysts Ratings 24-16-3-0-0 52-week low =$20.38 Last earnings 10/99 est= 0.13 actual= 0.15 surprise=+15.4% Next earnings 01-19 est= 0.14 versus= 0.08 Average Daily Volume = 18.3 mln Chart = http://quote.yahoo.com/q?s=AOL&d=3m ********* SOFTWARE ********* PRGN - Peregrine Systems Inc $81.88 (+0.88) 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. PRGN is a pure momentum play. On November 24th, a Strong Buy reiteration by analyst David Breiner of Volpe Brown Whelan & Co and his upgraded price target of $90 from $49 launched PRGN upwards $16, or 25%. Since the initial breakout last month near-term support has evolved at $80 and is more firmly established at $70. The momentum kicked back into gear last 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 on Tuesday. PRGN opened strong at $96.75 to set another new 52-week high beating Monday's record close. By Thursday the Nasdaq sell-off was in full-swing and PRGN was brought down a notch two. This downdraft has effectively offered entry points in the proximity of near-term support and the 10-dma ($80.66). Despite the pullback First Albany reiterated a Strong Buy rating and issued a $120 price target on Thursday. Since this play is based on momentum look for a broad market rally and more good news to re-ignite the climb. On Monday Peregrine announced 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. And on Thursday, Peregrine announced its GetIt! solution suite, self-service applications for Internet Procurement. Separately the company announced an alliance partnership with Commerce One to integrate its GetResources! (the 1st application in GetIt!) to allow for direct connection to Commerce One's MarketSite, the global trading portal; thus promoting real-time transaction capabilities. Some other vendors who've signed GetResources! agreements include Compaq Computers, Office Depot, Dell, and IBM Global Services. BUY CALL JAN-80*GQP-AP OI= 251 at $11.00 SL= 8.75 BUY CALL JAN-85 GQP-AQ OI= 51 at $ 9.25 SL= 7.00 low OI BUY CALL JAN-90 GQP-AR OI=3004 at $ 6.50 SL= 4.75 Picked on Dec 7th at $90.13 P/E = N/A Change since picked -8.25 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 01-19 est= 0.16 versus= 0.11 Average Daily Volume = 699 K Chart = http://quote.yahoo.com/q?s=PRGN&d=3m **** INKT - Inktomi Corp $167.75 (+22.75) Inktomi develops the world's most scalable software for the world's fastest-moving software environment: the Internet. The company's core technology underpins products for the Internet infrastructure that contribute to network performance, scalability and efficiency. Inktomi technology paves the way for emerging opportunities in online commerce, media and communications by enabling the Internet to intelligently accommodate more users and data traffic. Inktomi developed the search engine that runs such popular portals as HotBot, NBC's Snap, Yahoo!, and the Disney Internet Guide. INKT is split-happy. On December 3rd, the Board of Directors announced a 2:1 stock split payable on or about December 30th. The company has 300 mln shares authorized and 50 mln outstanding. Therefore there are plenty of shares available for the split. INKT share prices surged on the news. This week the momentum remained intact as the stock stretched into new territory. On Wednesday, INKT hit $179.88, setting the most recent new high. The profit-taking that followed on the Nasdaq was a blessing as it pulled INKT back into an entry range. Near-term support is established at $160 and an intraday dip to this level would be a solid entry. On Thursday, INKT received vote of confidence with a Strong Buy recommendation from Thomas Weisel Partners. In other news this week, Inktomi and Sun MicroSystems (SUNW) agreed to invest $26 mln in Digital Island, a company that provides high-speed data network services for Internet businesses. This strategic alliance provides leadership in the content distribution industry. BUY CALL JAN-165*KYQ-AM OI= 94 at $23.13 SL=18.00 BUY CALL JAN-170 KYQ-AN OI=418 at $20.38 SL=16.00 BUY CALL JAN-175 KYQ-AO OI= 11 at $18.00 SL=14.00 low OI BUY CALL JAN-180 KYQ-AP OI=363 at $16.25 SL=12.75 Picked on Dec 9th at $166.94 P/E = N/A Change since picked +0.81 52-week high=$179.88 Analysts Ratings 7-6-3-0-0 52-week low =$ 51.31 Last earnings 10/99 est=-0.10 actual=-0.09 surprise +10.0% Next earnings 01-20 est=-0.08 versus=-0.14 Average Daily Volume = 1.98 mln Chart = http://quote.yahoo.com/q?s=INKT&d=3m **** MACR - Macromedia Inc. $86.88 (+10.25)(+7.38)(+6.63) 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. The company recently announced a new corporate strategy known as the Macromedia eBusiness Infrastructure, which will provide developers and companies with the first comprehensive, integrated solution for creating, managing, personalizing and analyzing Web content. MACR was getting a lot of positive press this past week and traders were rewarding the company by pushing the stock price up over 10 points. The intra-day trading pattern is perfect for stock and option traders. The recent pattern has the stock surging up 5 or 6 points, profit-takers then step up to the plate to take some of the chips off of the table, the stock bounces back off of support levels, currently between $77-$79, then the stock surges again to new highs. $87.50 is the current 52-week high. This has been a consistent pattern to the upside since we began initial coverage of the stock, the stock is now up close to 20 points in three weeks. Going forward, the bullish scenario is still firmly in place and we believe that at current levels the stock is setting up for higher-highs. The stock closed up strongly on Friday at $86.88, closing at the high end of the range, if history repeats itself we should see a pullback the following trading session, look for a bounce near $80. Trailing stops are a must after positions have been taken. At the Streaming Media West '99 conference this week, Chairman and chief executive Rob Burgess said the company's Shockwave.com Web site has signed the creators of "South Park" to produce 39 original animated shorts based on the show. He added that the Macromedia Flash Player has been installed by more than 180 million consumers worldwide. BUY CALL JAN-80*MRQ-AP OI=114 at $14.00 SL=11.25 BUY CALL JAN-85 MRQ-AQ OI= 30 at $12.00 SL= 9.50 low OI BUY CALL FEB-80 MRQ-BP OI= 42 at $17.00 SL=13.75 low OI BUY CALL FEB-85 MRQ-BQ OI= 30 at $14.25 SL=11.50 low OI Picked on Nov 23rd at $67.56 P/E = 139 Change since picked +19.31 52-week high=$87.50 Analyst Ratings 5-4-1-0-0 52-week low =$26.25 Last earnings 10/99 est= 0.31 actual= 0.19 Next earnings 01-26 est= 0.15 versus= 0.12 Average daily volume = 938 K Chart = http://quote.yahoo.com/q?s=MACR&d=3m ******* Telecom ******* VRTS - VERITAS Software $109.06 (+2.94) The world's largest maker of storage management software is located in Mountain View, California. VERITAS supplies enterprise data storage management solutions and provides advanced storage management software for open systems environments. Other VRTS products offer centralized administration with a high degree of automation. They also make backup software and cluster management tools. VRTS has partnered with the likes of Hewlett-Packard, Microsoft and other manufacturers, all of which have licensed and bundled VERITAS products with their operating systems. The software index continues to make its way higher and VRTS is certainly doing its part to help lead the way. VRTS got a boost Thursday when it announced its software used to backup data on computer systems is being shipped with Red Hat Inc.'s Linux 6.1 Deluxe product. These days anything connected to Linux seems to move. Shares of VRTS gapped up over $11 to open at $116 Thursday morning. By midday VRTS dropped back to a low of $102.88 amidst some profit-taking. VRTS finished the day +3.44 and tacked on another $1.13 on Friday. The software sector continues to be hot. Friday the software index helped lead the Nasdaq higher gaining 2.7%. As one analyst said recently, VRTS is becoming the "gorilla vendor" as the software market explodes. Speaking of analysts, Tuesday, Michael Stanek from Lehman Brothers initiated coverage of VRTS, with a Buy rating. His twelve month target for VRTS came in at $140 per share. Wednesday analysts at SG Cowen reiterated a Strong Buy rating of the software company. Most feel that despite recent losses brought on by acquisitions Veritas' business is a long term one, since the increased reliance on database storage by corporations isn't going away. VRTS settled the week in the middle of an intraday trading range between $105 and $110. The next area of support for VRTS lies at $100, near its 10-dma of $101.95. Should we see further profit-taking a bounce off $105 with solid volume could provide a good entry point. If VRTS moves higher, a breakout above $110 would also provide a good point of entry. BUY CALL JAN-105 VUQ-AA OI=317 at $15.50 SL=12.00 BUY CALL JAN-110*VUQ-AB OI=455 at $13.25 SL=10.75 BUY CALL JAN-115 VUQ-AC OI= 32 at $11.13 SL= 8.75 low OI BUY CALL JAN-120 VUQ-AD OI=621 at $ 9.25 SL= 7.00 Picked on Dec 12th at $109.06 P/E = N/A Change since picked +0.00 52-week high=$116.00 Analysts Ratings 6-15-2-0-0 52-week low =$ 17.53 Last earnings 10/99 est= 0.14 actual= 0.11 surprise=+27.3% Next earnings 01-13 est= 0.15 versus= 0.08 Average daily volume = 2.42 mln Chart = http://quote.yahoo.com/q?s=VRTS&d=3m **** JDSU - JDS Uniphase $244.25 (-6.94)(-13.81)(+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 shares. "Dear God, please let there be one more company like Intel to invest in, and I promise not to mess it up this time". Here's your big break. UNPH makes the laser modules and pumps (in addition to other components) that split a fiber optic strand into many different, potentially unlimited channels. Basiclly they do for light what Intel does for electrons. Their components are critical to the development of optical networks. Were you able to catch that dip to $228 on Thursday? If so, and you were lucky enough to catch Friday's top at $248, you made out like a bandit. Unfortunately, sellers took over in the last hour of Friday's trading to snuff out a big part of the gain...that is until buyers puffed $2 back into the price during the last five minutes. Whew, what a roller coaster! While we originally thought we were seeing a nice ascending pennant formation, it's actually turned out to be your standard pennant. Last week, the highs were getting lower as the lows were getting higher. It still portends a breakout, but the direction is less clear on a technical basis. We still vote for a breakout to high side though, thanks to a 2:1 split coming on December 30. The lower consolidating volume should be considered a good sign. Aside from Thursday's major dip to $228, nobody appears to willing to sell in the face of the impending split. Anyone playing JDSU's last split in late July will remember the five-day rise from $82 to $94 upon its occurrence. Profits happen! With the Santa Claus rally and the January effect (coupled with a lot of cash) handily crushing speculative bubble and inflation fears, the market is likely to continue moving up. Support is tough to find, in the congestion lately, but historically, the 10-dma has been there to lend it (support) when need be. JDSU is currently on it at $244. In the news, brokerage firm Thomas Weisel named JDSU a Strong Buy, while Wachovia named it an LT Buy with a $300 price target. Also noted is that Janus and Franklin funds own a big chunk of JDSU. Time premiums are high. You may want to wait until you see volume come back before taking a position. If you are itching to play right now, we suggest January strikes since the rate of decay is a bit slower. For those desiring to be time merchants, consider selling ATM covered calls (currently DEC-240) for a 3.3% return on a five-day hold if called out. Naked puts can be profitable too if you understand the inherent risks. BUY CALL JAN-230*UQD-AF OI= 819 at $35.75 SL=28.00 BUY CALL JAN-240 UQD-AH OI= 813 at $30.88 SL=24.00 BUY CALL JAN-250 UQD-AJ OI=1913 at $26.75 SL=21.00 BUY CALL JAN-260 UQD-AL OI=1040 at $22.88 SL=18.00 Picked on Nov 21st at $213.81 P/E = N/A Change since picked +30.44 52-week high=$273.61 Analysts Ratings 13-13-0-0-0 52-week low =$ 27.69 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 = 2.8 mln Chart = http://quote.yahoo.com/q?s=JDSU&d=3m **** NOK - Nokia $168.00 (+11.94)(+9.31)(+13.25)(+11.25)(+6.38) Finnish Phone Firm, Nokia is the world's number one maker of wireless cellular phones, ahead of Motorola, Ericsson and Qualcomm. In addition they make wireless networking equipment, PC monitors and workstations, digital satellite and cable network systems and set-top boxes. However mobile phones make up 80% of their $18.5 bln in annual sales. Return on equity is an industry smokin' 43%, and they currently sit on $3.3 bln cash, or slightly over $3 per share. Only a hunch, but do you think they'd make a great candidate to purchase QCOM's handset business? The words of the Chairman still echo. In an analyst meeting two weeks ago, he noted that demand was exceeding even his lofty projections...so much so that NOK was raising its projected growth rate to 30-40% from 25-35% through 2002. He noted too that he thinks the world will hit 1 bln wireless subscribers by the end of 2002, a year ahead of schedule. That's like stuffing 3 years of revenue into 2. You can bet he's been conservative with the numbers and that there are still some positive surprises in store later (say around earnings tentatively scheduled on January 20). As the largest cap stock on all of Europe, the last thing NOK wants to do is disappoint. Needless to say, the buzz caused numerous upgrades from analysts, which feed on themselves prompting others to join the party. Unfortunately, it also caused NOK to get ahead of itself a bit and step outside (to the upside) of the current trading channel on strong volume. NOK spent most of the week drifting back to the center of the ascending channel, finding good support at $165. Careful, any move south would likely set up a test at $155, the low end of the channel. While that's unlikely given the increasing volume and price bounce into Friday's close, it's still something to watch as you plan the trade. Barring a meltdown in the markets, we'd consider target shooting in the $165 range. Of course, if volume picks up and the rest of the market looks good, you may not want to wait. Resistance is way up at $177, so there's room to run. Just be sure to use a protective stop or a trailing stop for any reversals. Janus funds disclosed this week that they own 6.5% of NOK. Goldman Sachs was the latest to join the analyst party with a price target over $210. They also placed it on their European recommended list. Nomura Securities even went on to say that NOK will be the biggest PC company in unit sales, alluding to a trend of bringing more sophisticated data to mobile phones. Just a thought of our own that we'll add: with over $3 bln in cash, they have made it know that they are on the acquisition path. What better target than Qualcomm's handset division, in which QCOM announced that they hope to have buyer by year-end? The announcement could come at QCOM's shareholder meeting on Dec 20th Don't hang your hat on this. It's just a speculative hunch. BUY CALL JAN-160 NAY-AL OI=1509 at $19.50 SL=15.25 BUY CALL JAN-170*NZY-AN OI=1027 at $14.25 SL=11.25 BUY CALL JAN-180 NZY-AP OI= 948 at $10.13 SL= 7.75 BUY CALL APR-170 NZY-DN OI= 351 at $24.50 SL=19.00 BUY CALL APR-180 NZY-DP OI= 68 at $19.63 SL=15.25 Picked on Nov 14th at $122.25 P/E = 77 Change since picked +45.75 52-week high=$179.12 Analysts Ratings 13-8-0-0-0 52-week low =$ 52.31 Last earning 10/99 est= 0.52 actual= 0.57 surpris=+9.6% Next earning 01-20 est= 0.66 versus= 0.58 Average Daily Volume = 3.10 mln Chart = http://quote.yahoo.com/q?s=NOK&d=3m **** QCOM - Qualcomm Inc. $391.50 (+7.06)(-0.31)(+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 portions of the Globalstar(TM) system. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and is a 1999 FORTUNE 500 company. This isn't a complaint. In fact, it's just the opposite. Despite a $7.06 gain this week, QCOM has been consolidating nicely in the current ascending pennant range on anemic volume. It has not exceeded it ADV in the last 15 trading days. That's a good thing and gives the stock a breather before its next ascent. How can that be good? If you connect the lows (or pullbacks) on the chart since mid-November, you will have an ascending line, or the lower border of the pennant. It means there are fewer sellers at these levels, and buyers gladly move in on every successfully higher dip. Connecting the resistance points should give a flat line (roughly) in the $390-$405 range. As the lows (support) get higher to converge with resistance, you get the pennant formation. If it's ascending, you usually get the breakout to the upside, which we expect to happen with QCOM. The catalyst? The December 20 shareholder meeting wherein we expect approval of a share reauthorization plan, which will enable the 4:1 split to occur shortly thereafter. QCOM could also announce the sale of its handset business, which it has said it would like to sell by year-end. That would swell the volume and thus the price back up. If that were going to happen, we'd expect to see the move this week in anticipation of the meeting. Volume will be the key. Short-term support is $380-$385, but Friday's strong close may keep it over $390 from here. Target shoot to your level of comfort. A major breakout occurs when the volume moves up and takes the price over its all-time high of $407.50. Of course, if the market does its best imitation of a submarine, QCOM will be under water too. So keep your stops set just in case. December strike time decay will really be working against call buyers this week. The ATM DEC strikes still have roughly $13 of time value and the ATMs have $10 of time value. We don't recommend their purchase. However, a covered call writer (seller) can still earn 3.2% on the ATMs if called out in the next five days so long as QCOM remains above $390. Naked put sellers can do equally well, but this carries a bit more risk if you are not careful. Buying anything past January is inherently more expensive, so we offer only January strikes this week. BUY CALL JAN-380 AAF-AP OI=1232 at $46.00 SL=36.00 BUY CALL JAN-390*AAF-AX OI=1103 at $43.13 SL=33.50 BUY CALL JAN-400 AAF-AY OI=7011 at $38.75 SL=30.25 SELL PUT DEC-370 AAF-XN OI=1607 at $ 4.00 SL=6.25 (See risks of selling puts in play legend) Picked on Nov 16th at $330.00 P/E = 319 Change since picked +61.50 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 = 5.70 mln Chart = http://quote.yahoo.com/q?s=QCOM&d=3m **** VOD - Vodafone Group $49.75 (+0.31)(+0.69) Formed earlier this year, when the UK's Vodaphone group bought AirTouch Comm, Vodafone AirTouch provides international mobile telecommunications services. VOD operates analog and digital cellular network services including voice communications, messaging, paging, and mobile data services. They serve over 31 million mobile phone customers in 23 countries, with over nine million subscribers in the United States and more than seven million in the UK. They take on the best, competing with AT&T, BT, and Cable & Wireless. VOD recently announced a bid for Germany's Mannesmann. The takeover saga continues. Whether VOD can pull off its hostile take-over of Mannesmann remains to be seen. The take- over talks have been the driving force behind shares of VOD stock. When potential good news comes out, VOD shares rise. As Mannesmann executives continue to make comments against the merger the VOD stock begins to slip. Late last week Hamburg based shareholders in Mannesmann filed a lawsuit against the company's CEO for trying to woo selected investors in his favor to help fight the takeover. Klauss Esser, Mannesmann's CEO said Wednesday he is not against further talks, however he didn't see the any point in discussing the current offer any further. We really feel the merger or hostile bid will eventually take place. Friday the Telecom index gained about 1 percent on the news of a deal between KPN and BellSouth. VOD fell $1 to close the week at $49.75 for a gain of $0.31. VOD provided us with a good entry point for our play and a quick profit early in the week. Technically, VOD has filled the gap from last Monday and could be setting up for another move higher. The volume on the decline from the highs made earlier in the week has been below normal indicating no one is rushing to get out. We would watch VOD for a bounce off the $48-$49 area as a place to target shoot for a new play in VOD. VOD is looking a little weak and may need a boost of good news to get the stock back on track. Before entering a new play in VOD, check the news, and assess your risk profile. In other news concerning the takeover, VOD said it would sell a minority stake in Mannesmann AG's traditional phone business if its $148 billion hostile offer is successful. VOD executives said they hope to hold more than 50% of Mannesmann shares by the close of February. VOD's CEO reiterated earlier remarks that a merger of the two companies wouldn't result in job cuts or the sale of any Mannesmann assets not already on the auction block. BUY CALL JAN-40 VOD-AH OI=1843 at $10.25 SL=7.75 BUY CALL JAN-45 VOD-AI OI=3045 at $ 6.25 SL=4.50 BUY CALL JAN-50*VOD-AJ OI=5826 at $ 3.38 SL=1.75 BUY CALL JAN-55 VOD-AK OI=1638 at $ 1.75 SL=1.00 Picked on Dec 5th at $49.44 P/E = 94 Change since picked +0.31 52-week high=$53.63 Analysts Ratings 6-3-3-0-0 52-week low =$27.73 Last earnings 09/99 est= N/A actual= N/A Next earnings 12-99 est= N/A versus= N/A Average daily volume = 3.83 mln Chart = http://quote.yahoo.com/q?s=VOD&d=3m ***************************************** CALLS - TELECOM CONTINUED IN SECTION FOUR ***************************************** ******************** Y2K Renewal Offer!!! ******************** Announcing the cheapest renewal rate available! $24.91 mo* 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 Millennium Edition of the almanac for FREE. This package has 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. This lowers the actual price of the newsletter to only $24.91 per month for an annual subscription. The supply of almanacs is limited so don't delay. Click here for more info. http://www.OptionInvestor.com/renewalinfo.asp ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millineum with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ******************************* CALLS CONTINUED IN SECTION FOUR ******************************* SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter 12-12-99 Sunday 4 of 5 ************************* CALLS - TELECOM CONTINUED ************************* NT - Nortel Networks $88.25 (+8.06)(1.50)(+0.44)(P3W +19.31) Here come 'Ol Flat Top; he come groovin' up slowly. What does this has to do with the new era of communications, we don't know. But the bandwidth enabling capability of NT equipment is causing the Internet to "Come Together" (the Beatles song used in NT's TV commercials) with PC's, TV's, LANs, plus wireless and fiber data/voice communications systems everywhere. NT makes the equipment that makes the electronic convergence possible. With over $19 bln in sales, they are number #2 behind competitor Lucent in size. Canadian Telecom owns 40%. The U.S. accounts for over 50% of sales. Ol' Flat Top was looking pretty flat for most of the week, topping out at firm resistance of $85.50 on Tuesday, Wednesday, and Thursday, with support in the $82-$83 range. Despite a short dip on Friday morning to $83, buying volume didn't let up, which propelled NT in a breakout through $85.50 all the way to $88.69 (a new trading high) with no hesitation. Volume was a fist- pumping 40% above the ADV. Just as there is no substitute for cubic inches in drag racing, there is no substitute for volume in price movement. As the number one producer of optical networking equipment ahead of Lucent, fund buyers are looking for large-cap companies with 20% revenue growth prospects and increasing margins. NT fits the bill, and we look for funds to keep putting some of their cash to work in this issue. Part of the attraction too is their ability to fulfill big orders in a hurry. For instance, they just inked a $600 mln deal with AT&T wireless to supply new TDMA equipment (CDMA is the future, but when you are an arms merchant, the revenue source is of little concern) over the next three years. Not one to stand still either, NT continues on the cutting edge of the optical business with development of equipment that can move 28 mln simultaneous Internet connections over a single strand of fiber. But we digress. Look for support back at previous resistance of $85.50, a shootable target. However, if volume should persist (and we hope it does so that this breakout may continue), you may have to be content with buying small dips. Just don't buy in the first hour of trading. FYI, NT is now a split candidate. Unfortunately, their announcements don't usually correspond with earnings announcement, the next of which is scheduled January 25. You can play Clarify (CLFY) options too for 30% greater leverage (NT is buying CLFY), but there are fewer OI, thus it's a bit more volatile. While this looks like a great play, it too will be toast if the market rolls over or suffers a big downdraft. Remember the stops. While not a bold step, CSFB raised their target price from $80 to $100 after an upbeat meeting with management. Their rating remains a Strong Buy, with NT as a core holding. The bigger news is that NT is in talks to acquire privately held Qtera for $3.8 bln. Qtera is developing technology that allows a light signal to travel further without regeneration or amplification. NORTEL STRIKES: BUY CALL JAN-85 NT-AQ OI=1762 at $ 9.00 SL=6.75 BUY CALL JAN-90*NT-AR OI=1110 at $ 6.75 SL=5.00 BUY CALL JAN-95 NT-AS OI= 70 at $ 4.25 SL=2.50 low OI BUY CALL MAR-90 NT-CR OI= 372 at $10.13 SL=7.75 BUY CALL MAR-95 NT-CS OI= 142 at $ 8.00 SL=6.25 CLARIFY STRIKES: (CLFY = $111.38) BUY CALL JAN-105 QCY-AA OI= 22 at $10.25 SL=7.75 BUY CALL JAN-110 QCY-AB OI= 0 at $11.25 SL=9.00 Picked on Nov 7th at $68.81 P/E = 516 Change since picked +19.44 52-week high=$88.69 Analysts Ratings 12-12-3-0-0 52-week low =$22.06 Last earnings 10/99 est= 0.26 actual= 0.28 surprise=7.7% Next earnings 01-26 est= 0.44 versus= 0.36 Average Daily Volume = 4.10 mln Chart = http://quote.yahoo.com/q?s=NT&d=3m **** TMX - Telefonos De Mexico $110.13 (+8.50) Telefonos de Mexico (Telmex) is a telecommunications provider of domestic and international telephone services in Mexico. Telmex also provides ISP connections to over 300K subscribers and is involved in reselling long-distance along the US borders. The wireless end of the business is handled by its subsidiary Telcel, which provides cellular service to over 3 mln customers. Welcome to another split party! On November 11th the Board of Directors announced a proposal to split its shares 2:1 to boost trading activity. On December 6th shareholders approved the stock split with a paydate of February 1st. Consequently the ADR's traded on the NYSE would be affected as well. An investor would receive 2 ADRs or every one they owned. Initially the split approval was shadowed by the growing concern surrounding Mexico's government spending. However that all changed on Wednesday as their interest rates dropped to a five-year low and the Internet craze sparked a renewed attention to Mexican telecom stocks. Although it's very likely the upgrade by Salomon Smith Barney played a more direct role in the upsurge as TMX jumped $5.69, or 5.9% on Wednesday. The firm raised its price target on the ADR to $140 and adjusted its EPS projections to reflect the 2:1 stock split. In all reality it may be too early for an "official" split run, however there's no doubt a momentum run powered by analysts' forecasts is in our midst. On Thursday, another analyst firm, Dresdner Kleinwort Benson, raised its 12-month price target to $126 from $106 citing a strong outlook for the peso. MSDW also came forward and upped its price target on TMX to $125 from $105 and raised its fiscal profit expectations for 1999 and 2000. The analyst wrote "Telmex is generating more revenues and investors are becoming increasingly aware of the sustainable long-term potential of these business segments" and "the upcoming stock split should increase the stock's appeal to retail investors". On Thursday TMX proceeded to set an all-time high hitting $109.94 only to have it shattered on Friday. The ADR continued its lofty ascent and tacked on another $5.06, or 4.8%. Intraday it peaked at $110.50 and closed just a fraction under this new 52-week high - a very bullish indication. Support is firm at $100, a mark just a smidge above the 10-dma ($99.72). However at this point we need to confirm direction and sentiment next week before opening any positions. BUY CALL JAN-105 TMX-AA OI= 445 at $10.25 SL=7.75 BUY CALL JAN-110*TMX-AB OI=1735 at $ 7.50 SL=5.75 BUY CALL JAN-115 TMX-AC OI= 324 at $ 5.25 SL=3.50 BUY CALL FEB-110 TMX-BB OI= 623 at $ 9.38 SL=7.00 BUY CALL FEB-115 TMX-BC OI= 0 at $ 7.13 SL=5.25 SELL PUT DEC-105 TMX-XA OI=1006 at $ 1.13 SL=2.50 (See risks of selling puts in play legend) Picked on Dec 12th at $110.13 P/E = 23 Change since picked +0.00 52-week high=$110.50 Analysts Ratings 1-3-5-0-0 52-week low =$ 39.88 Last earnings 10/99 est= 1.38 actual= 1.67 Next earnings 02-03 est= 1.46 versus= 1.26 Average Daily Volume = 1.51 mln Chart = http://quote.yahoo.com/q?s=TMX&d=3m ************* MISCELLANEOUS ************* ARBA - Ariba Inc. $236.75 (+32.13) Ariba is a leading provider of intranet and Internet-based business-to-business electronic commerce solutions for operating resources. The company's products efficiently connect requestors to approvers and buyers to suppliers to deliver an automated solution for improving the acquisition and management of operating resources, the goods and services required to operate a company. Ariba Operating Resource Management Systems (Ariba ORMS) enables organizations to automate the procurement cycle within their intranets, lowering the costs of acquiring and managing operating resources. Ariba Network, a global business-to-business electronic commerce network for operating resources, enables buyers and suppliers to automate transactions on the Internet. Talk about being in the right place at the right time! Business is booming in the business-to-business (B2B) world of e-commerce and ARBA looks to be a leader in the game. ARBA began trading in June at a mere $61. Here we are $175 later in just six months! ARBA has certainly been in the holiday spirit lately, as it has posted a gain nearing $50 since December 1st. ARBA has positive momentum play written all over it. ARBA has created a beautiful chart, consistently tagging higher-highs and higher-lows. ARBA currently has support at $230 and again at $220. ARBA found resistance at $240 this week and therefore, we will want to see a breakthrough of this level going forward to confirm continuing momentum. The ultimate resistance sits at the 52-week high of $246. ARBA does a nice job of providing room for entry on a seemingly daily basis, offering a wide trading range, i.e., $15.50 on Friday. Your best bet for playing ARBA is to target shoot your way in on an intraday dip or to wait for a bout of profit-taking, backed by holding support. Being that ARBA is such a big mover, it will be important to pay close attention. Use your stops and keep them tight once you're in to protect your profits. Don't forget ARBA splits 2:1 next Friday the 17th. Get out before the close!! ARBA is currently working with American Management Systems to launch Buysense.com, which will provide an on-line marketplace for state and local government agencies. The goal is to provide a common venue for purchases by region. On December 9th, Friedman, Billings, Ramsey and Co., initiated coverage of ARBA with a Buy rating and 12-month price target of $300, citing the growth of Business to Business e-commerce as the main catalyst for ARBA's expected rapid growth. Bear Stearns also initiated coverage the same day, with a Neutral rating, noting ARBA's high rate of competition and "generous" valuation. BUY CALL JAN-230 IUR-AF OI=560 at $35.13 SL=27.50 BUY CALL JAN-240*IUR-AH OI=211 at $30.63 SL=23.75 BUY CALL JAN-250 IUR-AJ OI=209 at $26.75 SL=20.75 BUY CALL JAN-260 IUR-AL OI=501 at $23.25 SL=18.00 SELL PUT DEC-210 IRU-XB OI=279 at $5.25 SL=7.00 (See risks of selling puts in play legend) Picked on Dec 12th at $236.75 P/E = N/A Change since picked +0.00 52-week high=$246.00 Analysts Ratings 2-10-2-0-0 52-week low =$ 61.00 Last earning 10/99 est= 0.21 actual= 0.26 Next earning 01-26 est= 0.27 versus= 0.13 Average Daily Volume = 1.36 mln Chart = http://quote.yahoo.com/q?s=ARBA&d=3m **** GE - General Electric $147.44 (+11.69) One of the most profitable companies in the world, General Electric has been able to make money in all kinds of different industries. The company is engaged in developing, marketing and manufacturing of a wide variety of products involved in generation, transmission, distribution and utilization of electricity and other goods. It produces aircraft engines, transportation equipment such as locomotives, appliances (both kitchen and laundry equipment), lighting, generators and turbines, nuclear reactors, medical imaging equipment, and plastics. GE is also a large player in the financial services field as well as information services. With ownership of NBC, General Electric is one of the largest broadcasters in the world. With this diversity and reach, it is no wonder they count their profits in the billions. GE is the largest capitalized stock on the U.S. exchanges. Because of this fact it is a very widely held stock. This fact is important to understanding why GE's stock might be a strong performer in the next couple of weeks. The biggest news item influencing our decision to profile GE has not been announced yet. The Board of Directors are meeting on December 17th. It is widely anticipated that GE executives will spread a little holiday cheer by announcing the first split of the company's stock over two years. GE shareholders have had an excellent year. A stock split would be the star on top of the Christmas tree. The main question that remains is whether the Board will decide to split 2:1 or 3:1. GE typically has announced good news in December. The shares of GE have done very well this year, trading over 50 points higher than last January's low of $94. Because of this we anticipate very little selling pressure on the stock for the rest of December. Why take a profit and pay tax on it in April when you can wait till next year to take a profit and delay paying taxes until April of 2001? Technically, GE had an excellent week. Since July, GE's stock has broken above six double tops. The stock is in a very strong up trend, and on Thursday it broke into new high ground again. With the lack of overhead resistance and possible good news coming we feel GE has a chance to continue rising. Support is at the recent breakout point of $141. A more cautious investor may try and wait to see if there is any market weakness next week and attempt to add a call position at the support point. More aggressive investors can buy calls on any strength. From the NBC news desk, well actually from many sources, GE announced that it had received a $1.98 billion Air Force engine contract on Tuesday. Also in the news, GE was named the world's most respected company for the second straight year in a worldwide survey of chief executive officers conducted for the Financial Times. GE Chief Executive Officer Jack Welch, who probably voted for himself and his company, was selected as the world's most respected business leader in the survey. Further proof that GE is perhaps the most ubiquitous company in the world, last week the National Christmas tree was lit up with 70,000 GE lights. BUY CALL JAN-135 GE-AG OI=4046 at $15.75 SL=11.75 BUY CALL JAN-140 GE-AH OI=5578 at $12.00 SL= 9.50 BUY CALL JAN-145*GE-AI OI=5591 at $ 8.63 SL= 6.50 BUY CALL JAN-150 GE-AU OI=4917 at $ 6.38 SL= 4.25 SELL PUT DEC-140 GE-XH OI=2856 at $ 1.00 SL= 2.00 (See risks of selling puts in play legend) Picked on Dec 9th at $143.56 P/E = 46 Change since picked +3.88 52-week high=$147.88 Analysts Ratings 9-10-1-0-0 52-week low =$ 86.19 Last earnings 10/99 est= 0.79 actual= 0.80 Next earnings 01-20 est= 0.92 versus= 0.80 Average Daily Volume = 4.96 mln Chart = http://quote.yahoo.com/q?s=GE&d=3m ***** LEAPS ***** Our LEAPS portfolio lived up to its motto of the gift that keeps on giving this week. We've seen the bull market and continuing high volatility directly impact the price of our contracts. We've noted before that even when the stock price stays even, the LEAPS can go up do to increasing volatility and therefore, a greater euphoria for the future. We are wishing AOL had come down to our target to $75 before sky- rocketing, but it only made it as far down as $78.50. That was a play we would like to have but we won't chase it. Instead, let's wait for a pullback to $80. I know its a long shot but we need a solid entry point to be successful. Besides there are always plenty of plays that look good. We still urge patience if you have time to wait. The last couple weeks of the year could prove volatile and give us the entry point we want. The VIX remains low at 20.99. Current Plays SYMBOL SINCE LEAPS SYMBOL CURRENT PICKED RETURN EMC 11/07/99 JAN-2001 $80 ZOH-AP at $29.38 $15.38 91.03% JAN-2002 $90 WUE-AR at $33.25 $19.00 75.00% DELL 11/07/99 JAN-2001 $50 ZDE-AJ at $ 7.13 $ 7.00 1.86% JAN-2002 $50 WDQ-AJ at $11.50 $11.25 2.22% GPS 11/07/99 JAN-2001 $40 ZGS-AH at $13.25 $ 5.75 130.44% JAN-2002 $45 WGS-AI at $14.63 $ 7.88 85.66% IBM 11/07/99 JAN-2001 $100 ZIB-AT at $24.75 $13.63 81.59% JAN-2002 $110 WIB-AB at $27.88 $16.50 68.97% WMT 11/07/99 JAN-2001 $70 ZWT-AN at $ 9.00 $ 6.50 38.46% JAN-2002 $75 WWT-AO at $12.63 $ 9.75 29.54% LU 11/14/99 JAN-2001 $80 ZEU-AP at $17.00 $12.88 31.99% JAN-2002 $90 WEU-AR at $20.13 $16.13 24.80% CSCO 11/14/99 JAN-2001 $80 ZCY-AP at $31.88 $19.13 66.65% JAN-2002 $90 WIV-AR at $34.25 $22.00 55.68% SLR 11/14/99 JAN-2001 $85 ZSR-AQ at $23.75 $21.75 9.20% GE 11/21/99 JAN-2001 $150 ZGR-AU at $22.75 $16.25 40.00% JAN-2002 $150 WGE-AU at $31.50 $25.50 23.53% GTW 11/21/99 JAN-2001 $90 ZWB-AR at $11.63 $17.75 -34.48% JAN-2002 $100 WGB-AT at $16.38 $22.50 -27.20% NT 11/28/99 JAN-2001 $75 ZOO-AO at $28.63 $22.25 28.67% JAN-2002 $75 WNT-AO at $35.63 $30.25 17.79% VOD 12/05/99 JAN-2001 $50 ZAT-AJ at $11.25 $10.75 4.65% JAN-2002 $50 WHV-AJ at $15.25 $15.00 1.67% KM 12/05/99 JAN-2001 $10 ZKM-AB at $3.25 $ 2.50 30.00% JAN-2002 $15 WKM-AC at $2.31 $ 1.75 32.00% To review the play description on any of our current plays, go to the LEAPS section for the date the play was added New Leap Plays ADBE - Adobe Systems $62.63 It's hard not to love a company that has their hand in about everything that crosses the Internet and Adobe fits in that category. Their Acrobat and Photoshop software products are becoming household names in the industry. ADBE had a great run this year from $20 to as high as $80 in mid-November. We view this little pullback to $60 as one worthy to be considered as an entry point. Proceed with caution because we don't like to try and pick a bottom but a well planned entry near $60, with a stop loss in place in the mid-$50s can only do some much damage relative to the possibility of a good move to the upside. BUY LEAP JAN-2001 $65.00 ZAE-AM at $15.00 BUY LEAP JAN-2002 $70.00 WAE-AN at $20.38 http://www.OptionInvestor.com/playimages/index.asp?image=adbe121299 **** TXN - Texas Instruments $106.88 TXN is the main player in providing chips for cell phones, VCRs, camcorders and modems. Their DSP chips own a 45% market share. Not to mention, they also make analog chips and other microprocessors. You will notice that most of our LEAP plays are on well-known companies and this one is now exception. We like the stock here based on its relative strength to the Semiconductor sector. This has been a hot sector but is subject to short-term pullbacks, like last week. TXN has been holding up better and better and is probably due to the cell phone craze that is going on. We've seen what kind of gains some of those stocks have put up (QCOM, NOK, VSTR, etc). TXN and their DSP chips have a direct benefit from the wireless revolution. $104 has been great support for TXN when looking for an entry. A breakout would be anything over $111. Target-shoot your way in according to your risk tolerance. BUY LEAP JAN-2001 $110.00 ZTN-AB at $22.25 BUY LEAP JAN-2002 $120.00 WGZ-AD at $28.50 http://www.OptionInvestor.com/playimages/index.asp?image=txn121299 Drops Yep, still no drops. We considered cutting our losses on GTW but since the news about the CFO leaving is out, the LEAPS have settled down. We are now expecting GTW to bottom in this area before running higher again. It's worth a look if you want to make a play on GTW. ***************** PUTS, PUTS, PUTS ***************** 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. **** KIDE - 4Kids Entertainment $44.69 (-4.88)(-13.69) 4Kids Entertainment is a vertically integrated entertainment based company. KIDE provides a wide range of services. KIDE designs, develops, and produces toys. It also handles international merchandise licensing media buying and planning, television distribution and production. KIDE is responsible for the licensing of World Championship Wrestling and the very popular Pokemon. KIDE spent the majority of Friday's session flirting with $44, posting weak volume and trying to make up its mind what direction it wanted to head. It is extremely important to exercise caution at this point as KIDE has solid support at the 100-dma of $43.50. This is were KIDE has been bouncing for the past couple weeks. We are looking for a violation of this level backed by good volume. If this occurs, KIDE could then be cleared for yet another healthy fall, as we see the next levels of support being the psychological level of $40 and then $38. KIDE has some immediate resistance overhead at its 30-dma of $45 and further resistance at $46, $48 and $50. That should keep even KIDE busy for a bit! Technically KIDE still looks like a solid put play as the rallies continue to become shorter, the highs lower, and support levels turning over into resistance. In reality, cautious investors should just walk away with their profits in hand but we are curious to see who will win this battle between buyers and sellers at $44. The failing rallies points to the sellers but this is a high-risk play so use caution. BUY PUT JAN-50 IUK-MJ OI=191 at $12.25 SL=9.75 BUY PUT JAN-45*IUK-MI OI=111 at $ 8.88 SL=6.50 BUY PUT JAN-40 IUK-MH OI=433 at $ 6.13 SL=4.50 Average Daily Volume = 1.45 mln Chart = http://quote.yahoo.com/q?s=KIDE&d=3m **** GT - Goodyear Tire and Rubber Co. $28.75 (-4.06)(-1.31)(-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. Goodyear did manage one good day last week, but that's about it. Though GT traded up to gain $0.50 in Friday's session, it never found the momentum to make it through it's 50-dma of $29. GT has further resistance ahead at the psychological level of $30, which is also GT's current 100-dma (these two combined could provide rather staunch resistance). Be careful with new entries. GT has opted to spend the weekend resting on converged support at its 10 and 30-dma, which could hold heading into this week. Therefore, we will want to see a violation of these two levels backed with good volume before even entertaining the thought of a new entry. Should GT exhaust it's support, your best bet for a new entry is to wait for one of GT's mini-rallies backed with holding resistance. Obviously, confirm continuing negative momentum before entering and remember to tighten your stops to protect your profits. BUY PUT JAN-35 GT-MG OI=459 at $6.38 SL=4.50 BUY PUT JAN-30*GT-MF OI=680 at $2.56 SL=1.25 Average Daily Volume = 995 K Chart = http://quote.yahoo.com/q?s=GT&d=3m **** PGR - The Progressive Corporation $76.56 (-2.13)(-3.19) 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. As a huge insurance company, Progressive has been hurt along with the other major financial stocks. With interest rates rising, the cost of money increases. When the cost of money increases for a company in the insurance business they have to pass along those costs to their customers in the form of higher rates, in order to stay profitable. That scenario assumes that customers will accept the higher rates. However, if you remember the last recession, and do not get us wrong we are not calling for a recession, many people who were struggling simply stopped buying insurance for things like cars, Progressive's bread-and-butter business. There is another possible explanation for the distribution of Progressive's shares. There may be the perception that PGR could be inordinately vulnerable to any civil unrest that may occur because of the Y2K event. Probably nothing will happen. But a huge property insurer would be hit rather hard if there was any rioting. Perception is a powerful influence on the price of a stock and if investors are fearful of potential civil unrest then certainly they will not be buying Progressive's stock. PGR's stock has been in a downtrend since November 17th. Last week the stock broke down to new lows only to recover very quickly. That pattern requires us to be very cautious about any put position. It is possible that PGR is attempting to build a base here. Look to buy puts if PGR drops below $75. You could also buy puts if PGR tests resistance at $79.50 and falls back. Aggressive investors can buy puts if PGR shows weakness in the face of any rally next week which would be indicative of the likely scenario that PGR will test support before it attempts resistance. BUY PUT JAN-80 PGR-NP OI= 55 at $6.25 SL=4.50 BUY PUT JAN-75*PGR-NO OI=233 at $4.38 SL=2.00 Average Daily Volume = 328 K Chart = http://quote.yahoo.com/q?s=PGR&d=3m **** ETYS - eToys Inc. $45.13 (-8.69) ETYS is a leading web-based retailer focused exclusively on children's products, including toys, video games, software, videos and music. Designed to be the consumers primary source for children's products, ETYS online store offers an extensive selection, with over 100,000 products and 750 brands. With its recent purchase of BabyCenter, ETYS now also provides online parenthood information and baby gear. Christmas is coming, and consumers are rating ETYS second only to Santa Claus. Over the past six weeks, the company has garnered the top slot in Robertson Stephens' Online Shopping Challenge, a consumer survey of online shoppers and their habits. Mentioned more often than all other e-tailers except for Amazon.com, ETYS rating of 9.4 out of 10, puts it well above the average score of 8.4. Elsewhere, Gomez Advisors rates eToys as the No. 1 online toy site. So what is the problem? Scrooge made his appearance on Thursday in the form of J.P. Morgan analyst Tom Wyman, with a Market Perform rating and a price target of $50. That's not exactly a glowing recommendation for an internet stock trading in the lower half of its 52-week range. He likes the company long-term, but cites concern over high valuations relative to its peer group. He sees it taking another year for the company to grow into its current valuations. This, coupled with the recent offering of $150 mln in convertible debt should continue to pull investors interest away from the stock. Since late November, the constant pressure has produced almost a $25 haircut. On Thursday, still refusing to show any strength, prices broke through long-term support at $50. Adding insult to injury on Friday, the shares dropped another $3.63, closing near the low of the session. Throughout the decline, volume has been heavy, roughly 50% above the average of 2.2 mln. ETYS is a volatile stock with large daily price swings, so take advantage of the movement. Look for a bounce near resistance, now at the old support of $50, to provide an entry as the selling pressure returns. During the move down over the past 2 weeks, the 5-dma (currently $50.76) has been reliable resistance and should continue to provide good entry points going forward. Watch the volume, as a return to more sedate levels could warn that this free-fall is approaching ground level. For now, enjoy the ride down to the next level of support at $40, followed by $36. BUY PUT JAN-50*ETU-MJ OI=536 at $9.25 SL=7.00 BUY PUT JAN-45 ETU-MI OI=372 at $6.25 SL=4.75 Average Daily Volume = 2.21 mln Chart = http://quote.yahoo.com/q?s=ETYS&d=3m **** GILD - Gilead Sciences Inc. $39.00 (-6.56) GILD, a biopharmaceutical company, seeks to provide accelerated solutions for patients & caretakers. GILD discovers, develops, and commercializes proprietary therapeutics for viral diseases. GILD has some potentially significant new products now being readied for the market. These include adefovir dipivoxil for HIV and Tamiflu treatment for influenza, both of which are expected to receive FDA approval before year-end 1999. The R&D pipeline also includes other drugs for AIDS, hepatitis B, macular degeneration, cancer, and other conditions. However, the company is unlikely to be profitable before 2002. Biotech stocks in general had a tough week. The BTK index was down 6.40 for the week. It appears that the stocks of this sector are running out of gas after a spectacular year. Market interest seems to be concentrating on the pure tech and Internet plays. When attempting to take advantage of a downturn in a sector you should always look for one of the weakest stocks in the group for a put buying candidate. Gilead is just the kind of stock we are looking for. GILD broke down on November 1st when the USFDA advisory panel recommended the FDA not approve GILD's HIV drug. On the open it gapped down over 20 points. In the subsequent weeks it attempted to rally back but fell short at $54. On December 3rd the company decided to stop pursuing development and testing of the drug in the U.S. Since then it has been in a steady downtrend and seems likely to continue in that direction for the rest of the year, especially with the likelihood of tax-loss selling adding continued pressure on the stock. Some support can be found for the stock in the $35 area. Resistance at $42 might make a good entry point for a put. However, if you want to catch a possible drop to the test of support, the recommendation is to pick up the puts on any small bounce next week. Longer term support is $31.75 which was established in December of 1998. That area could provide an excellent exit point for a profitable put position. BUY PUT JAN-40*GDQ-MH OI=389 at $4.88 SL=3.25 BUY PUT JAN-35 GDQ-MG OI=130 at $1.88 SL=0.75 Average Daily Volume = 886 K Chart = http://quote.yahoo.com/q?s=GILD&d=3m ************************ SPREADS/STRADDLES/COMBOS ************************ Another Day, Another Nasdaq Record, Ho Hum.. Friday, December 10 Technology stocks surged late in the day driving the Nasdaq index above 3600 for a new all-time high. The composite of high-tech issues advanced 26 points to 3620. Financial stocks led the Dow higher on tame inflation news and the blue-chip gauge posted a 90 point rise to close at 11,224. It was the Dow's second straight double-digit gain and the index is well within striking distance of the August record. The S&P 500 index rose 9 points to 1417. Advances outpaced declines 1,557 to 1,494 as 990 million shares traded on the New York Stock Exchange. Breadth was positive for the first time since last Friday's record-setting rally. The 30 year bond was at 99 14/32, up 22/32, with the yield down at 6.16%. Thursday's new plays (positions/opening prices/strategy): Kmart KM JUN7C/JAN10C $2.25 debit diagonal Pillowtex PTX MAY5C/JAN7C $1.38 debit diagonal Qwest QWST JAN30C/JAN35C $4.00 debit bull-call Quest QWST DEC35C/DEC37C $2.00 debit bull-call Our new spread candidates were less than cooperative with regard to entry opportunities but there was plenty of movement for those that target-shoot individual positions. None of the spreads were available at the recommended prices on a simultaneous order basis. Portfolio plays: Banks and Brokerages led the spreads portfolio today on the heels of a well-received rally in the bond market. Strong trends in the levels of trading volume are also contributing to the upward bias of online brokers. A senior analyst from Robertson Stephens said Ameritrade Holdings' (AMTD) daily transactions are reaching record volumes this quarter and a new upgrade was issued based on revised earnings-per-share estimates. Shares of Ameritrade soared $3.12 to $28 and E*Trade Group (EGRP) was close behind, climbing almost $2 after another incredible day of online trading volume. Technology stocks continue to move higher even in the wake of the incredible valuations and two of our best performers were in this category. Network Associates (NETA) rose $2.62 after BancBoston Robertson Stephens raised its investment rating on the company to a "buy." Analyst John Powers said that traditional anti-virus products which contribute more than 50% of revenues, are showing strength in the fourth quarter. He expects the stock to trade in the $35 to $40 range. Unisys (UIS) has quietly been on the move, and today the stock price rose $1.12 to a recent high near $34 after 3Com (COMS) announced a consulting alliance with the company to help build and manage corporate networks. Both of our bullish spreads are at maximum profit with the stock above $30. Positive market breadth was one of the notable exceptions in the rally today and many of our small-cap stocks rebounded during the session. Echelon (ELON), Loral Space (LOR), Micron Electronics (MUEI), ProxyMed (PILL), Silicon Graphics (SGI), Shop-At-Home (SATH), 3dfx (TDFX) and Zoltek (ZOLT) all made favorable moves. Two of the issues that did not participate were Talk.com (TALK) and Toys-R-Us (TOYS). Toys-R-Us continues to offer a profitable exit even in light of the recent slump and the Talk.com position can be closed for $2.12 credit; a $0.75 return on $1.38 invested. United Airlines (UAL) led our long-term portfolio with a $2.25 gain after a group of major carriers increased travel fares in select markets. The latest attempt to offset soaring fuel costs is not as broad as the one near the end of November but it was seen as a positive move by most analysts. Our bullish LEAP/CC's positions on UAL are trading in positive territory and we expect a favorable roll-out to January options next week. The majority of other issues in this section suffered from profit-taking in the wake of recent rallies and only three stocks ended positive. Johnson & Johnson (JNJ), Motorola (MOT) and Sun Micro (SUNW) all made small gains during the session. Next Monday begins the final week of the last options expiration before Y2K and we expect it to be very interesting. Many of our long-term positions have already been rolled-forward to January in anticipation of a small correction but we do have some moves to complete before the deadline on Friday. Those of you with sold (short) positions in calendar spreads might consider making the necessary adjustments while the volatility remains high, taking advantage of the excess premium in many of the January options series. This is one of the few times that a majority of traders have avoided the front-month options in favor of distant series and it will be interesting to see if the contrarian theories are supported by the outcome. Questions & comments on spreads/combos to ray@OptionInvestor.com ********* NEW PLAYS ********* AIG - American International Group $111.69 *** Up We Go? *** American International Group is a holding company which through its subsidiaries is primarily engaged in a range of insurance and related activities and financial services in the U.S. and abroad. AIG also engages in securities brokerage and consumer finance, aircraft leasing and data processing. The company's activities include both general and life insurance operations and they even own a Ski Resort (Stone Mountain) in Vermont. AIG is the leading underwriter of commercial and industrial insurance in the U.S. In particular, they have established a leading position in many of the most specialized markets and they produce consistently strong operating performances and conservative balance sheet management. Big news on Friday for the company as federal regulators granted AIG permission to operate a federal savings bank. AIG is just the latest in a string of insurance companies, securities firms and other businesses outside the banking industry to get new federal thrift charters in recent months. The changes came about after Congress enacted sweeping new legislation rewriting the financial services laws and allowing banks, insurance and securities firms to merge and participate in competing industry products. AIG intends to start with a full-service savings bank in Delaware but that's only the beginning. After initial plans are in place, a major expansion should occur in many of their core markets and the growth possibilities are virtually unlimited. Technically, AIG has exited a stage III top formation (over nine months long) on improving technicals and should soon resume its historical, long-term uptrend. Last month's consolidation appears to be over as the chart is now increasingly bullish. Both of the suggested positions are based on favorable option pricing. PLAY (aggressive - bullish/debit spread): BUY CALL JAN-96 AYG-AV OI=363 A=$17.25 SELL CALL JAN-110 AIG-AB OI=191 B=$6.12 INITIAL NET DEBIT TARGET=$8.88 ROI(max)=68% B/E=$104.88 - or - PLAY (aggressive - bullish/diagonal spread): BUY CALL JAN-104 AYG-AW OI=2243 A=$10.50 SELL CALL DEC-115 AIG-LC OI=3261 B=$1.00 INITIAL NET DEBIT TARGET=$9.00 TARGET ROI=22% Chart = http://quote.yahoo.com/q?s=AIG&d=3m **** GERN - Geron Corporation $13.00 *** New Discoveries? *** Geron Corporation is a biopharmaceutical company exclusively focused on discovering and developing therapeutic and diagnostic products based upon common biological mechanisms associated with cancer and other age-related diseases. The company focuses on telomeres (which are structures at the ends of chromosomes) that have demonstrated the characteristics of a molecular "clock" of cellular aging, and telomerase, an enzyme which appears to stop time and confers cellular immortality. Geron made the news this week when the company said test-tube studies demonstrated their unique chemicals used to block the telomerase enzyme eliminated breast-cancer and prostate-cancer cells. The data may support the company's earlier findings that oligonucleotide and other genetic means of blocking production of the telomerase enzyme can cause death of immortalized cancer cells. Geron has theorized that telomerase prevents that normal and gradual cell-death process, effectively immortalizing cells into a cancerous state, particularly since the enzyme has been detected in more than 30 different types of cancer. Geron traded as high as $20 earlier this week, well above the previous 52-week high of $15 and volume has been incredible. The stock price broke-out of a long term base and although the current "gap-up" will probably be filled, solid support exists above $11.50. Heavy accumulation over the last several months suggests the issue also has institutional interest. It appears the news has some merit as option traders swamped the pits with heavy order flow during Tuesday's rally. We are going to pursue a longer-term outlook with a bullish, limited-risk position. The inflated premiums in the front-month options will help us open the play at a small discount. PLAY (aggressive - bullish/diagonal spread): BUY CALL MAR-12.50 GQD-CV OI=139 A=$2.31 SELL CALL DEC-15.00 GQD-LC OI=1483 B=$0.31 INITIAL NET DEBIT TARGET=$1.88 INITIAL TARGET ROI=32% Chart = http://quote.yahoo.com/q?s=GERN&d=3m **** SWBT - Southwest Bancorp $19.93 *** Technicals Only *** Southwest Bank Corporation is a holding company for Southwest Bank of Texas. The bank has a number of full-service facilities in the Longhorn State, which provide both commercial and private banking services, including financial planning and investment management. SWBT offers a full line of cash concentration, disbursement, and automated information reporting services. The individual branches also utilize local customers to staff a business development board that assists in developing or modifying products and services to better meet patrons' needs. A very unique situation with an issue that trades in a relatively small range and the recent bullish movement. The current outlook is certainly favorable but the question is how far can the stock price move on any significant break-out. The downside risk appears somewhat limited with near-term support at $17.50 and disparities in option pricing will allow us to open the position at a discount. PLAY (conservative - neutral/calendar spread): BUY CALL MAY-20 ZRQ-ED OI=14 A=$2.88 SELL CALL DEC-20 ZRQ-LD OI=60 B=$0.62 INITIAL NET DEBIT TARGET=$2.12 TARGET ROI=50% 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. 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=SWBT&d=3m ********* STRADDLES ********* This week's candidates are probability-based debit straddles and the basic guidelines for this type of play are relatively simple. There are three rules we use to identify favorable conditions for this type of straddle. First, the trader must select options that are undervalued (cheap). Next, the underlying security must have the potential to move (high or low) enough to make the straddle profitable. Finally, the underlying stock should have a history of multiple movements through a sufficient range in the required amount of time to justify the overall risk/reward of the position. Both of these issues are squarely between the strike prices and rather than open the straddles with a directional bias (or use ratio positions), we will simply buy the slightly ITM options for each series. **** JMED - Jones Pharmaceuticals $38.56 *** On The Move! *** Jones Pharmaceuticals manufactures, markets and distributes a wide variety of specialty medical products under its own trademarks and trade names. Their business strategy is to acquire a number of specialty prescription pharmaceutical product lines or operations that complement the marketing or distribution of existing product lines and to develop and apply marketing initiatives to those new products. A large part of their revenues are from thyroid-disorder drugs Tapazole, Levoxyl, Triostat, and Cytomel. Its other products include Thrombin-JMI; controls blood loss during major surgery, the anesthetic Brevital Sodium; and veterinary pharmaceuticals Soloxine, Tussigon, and Pancrezyme. A leading industry analyst from Robertson Stephens reiterated his "Strong Buy" rating on the company last month based on increasing prescription orders for Levoxyl (up 21%), Tapazole (up 11%) and Cytomel (up 33%). He also reported that organic growth continues to be strong and JMED is undervalued relative to specialty pharmaceutical companies. PLAY (conservative - neutral/debit straddle): BUY CALL MAR-37.50 JQM-CU OI=125 A=$4.12 BUY PUT MAR-40.00 JQM-OH OI=0 A=$4.00 INITIAL NET DEBIT TARGET=$7.88-$8.00 TARGET ROI=50% SL=$4.75 Chart = http://quote.yahoo.com/q?s=JMED&d=3m **** CBR - Ciber $27.29 *** Roller Coaster *** Ciber is a leading provider of information technology consulting, including application software staff supplementation, management consulting solutions for business/IT problems, package software implementation services, system life-cycle projects, millennium date change conversion services and networking procurement and engineering services. Lots of reports and announcements concerning new agreements and service contracts but the unique characteristic of this issue is the relatively continuos motion in which it moves. It appears the stock price has never traded in a range for more than a few weeks, and it changes direction significantly almost once each month. A strange candidate for sure! PLAY (conservative - neutral/debit straddle): BUY CALL MAY-25 CBR-EE OI=410 A=$5.25 BUY PUT MAY-30 CBR-QF OI=0 A=$5.12 INITIAL NET DEBIT TARGET=$10.00-$10.12 TARGET ROI=50% SL=$6.00 Chart = http://quote.yahoo.com/q?s=CBR&d=3m ******************** Y2K Renewal Offer!!! ******************** Announcing the cheapest renewal rate available! $24.91 mo* 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 Millennium Edition of the almanac for FREE. This package has 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. This lowers the actual price of the newsletter to only $24.91 per month for an annual subscription. The supply of almanacs is limited so don't delay. Click here for more info. http://www.OptionInvestor.com/renewalinfo.asp ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millineum with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ***************************** SEE DISCLAIMER IN SECTION ONE *****************************
The Option Investor Newsletter 12-12-99 Sunday 5 of 5 ************* COVERED CALLS ************* Technical Analysis: Interpreting Statistical Trends... The recent anemic appearance of the advance-decline figures is beginning to affect the opinions of all but the most optimistic analysts. While many experts would suggest the market can climb higher regardless of the quality of breadth, it is important to understand when historically important gauges are confirming a subtle change in direction or signaling a major reversal. The advance-decline numbers have long been used to help distinguish market tops early in their development and give advance warning to upcoming bearish cycles. There are several ways to use a statistical summary of advances and declines. Weekly figures offer a perspective for long-term investment analysis while daily numbers can be charted to indicate reversals of a short-term nature, suitable for trend-trading or scalping. The methods of A/D interpretation are basic to technical analysis and the results are accurate and easy to understand. One of the most common evaluations is based on the divergence of the A/D line and popular market indices. Another successful indication involves the use of long-term moving averages of the daily numbers. A well-known axiom suggests that a trend in motion can be expected to continue until it reverses. Using a long-term moving average of the A/D statistics can help identify this trend and recognize the true momentum of the market. Interpreting this type of indicator is similar to other momentum-based techniques in that the primary signal is a crossing (in either direction) of the median line. A move from one area to the other confirms a trend in that direction and the longer the period that the gauge has been either above or below the median, the more meaningful the signal when it occurs. The most significant trends are those indicated when a move has come from deep in positive or negative territory. In a bullish market, this indicator will usually achieve new highs before any of the major indices and a preemptory sell signal is identified by a sharp drop from the peak reading while it's still in positive territory. The most significant exit signals occur when the gauge has been in the upper region for extended periods and reached the highest extreme before finally issuing a bearish signal. This unique indicator can help identify the beginning of a bearish market well before the future trend surfaces and when utilized on a regular basis, it can provide added insight into the strength and character of the current cycle. The ability to recognize fundamental changes in the market outlook is a requirement for successful investing. To profit on a consistent basis, one must become familiar with the most common methods of technical analysis and apply this knowledge as a practical part of his (or her) daily trading strategy. SUMMARY OF PREVIOUS PICKS Stock Price Last Mon Strike Opt Profit ROI Monthly Sym Picked Price Price Bid /Loss ROI EMIS 16.88 19.88 DEC 15.00 3.38 *$ 1.50 11.1% 16.1% FSII 10.44 10.25 DEC 10.00 1.81 *$ 1.37 15.9% 13.8% ITIG 10.00 18.50 DEC 10.00 1.25 *$ 1.25 14.3% 8.9% MESG 17.63 16.91 DEC 15.00 3.63 *$ 1.00 7.1% 7.8% ALGO 15.25 14.56 DEC 12.50 3.75 *$ 1.00 8.7% 7.6% ONEM 19.94 17.69 DEC 17.50 3.25 *$ 0.81 4.9% 7.0% WSTL 8.00 10.75 DEC 7.50 1.06 *$ 0.56 8.1% 7.0% BTOB 18.38 17.69 DEC 15.00 4.63 *$ 1.25 9.1% 6.6% SATH 12.44 12.94 DEC 10.00 3.00 *$ 0.56 5.9% 6.4% MESG 17.88 16.91 DEC 15.00 3.50 *$ 0.62 4.3% 6.2% AND 8.38 9.38 DEC 7.50 1.38 *$ 0.50 7.1% 6.2% CYCH 8.38 10.50 DEC 7.50 1.44 *$ 0.56 8.1% 5.8% FLAS 10.75 7.63 DEC 7.50 3.63 *$ 0.38 5.3% 5.8% AWEB 12.25 12.13 DEC 10.00 2.63 *$ 0.38 4.0% 5.7% CRUS 13.94 13.06 DEC 12.50 2.19 *$ 0.75 6.4% 5.5% PILT 18.50 17.75 DEC 15.00 4.38 *$ 0.88 6.2% 5.4% RRRR 14.75 40.75 DEC 12.50 3.25 *$ 1.00 8.7% 5.4% WAVX 13.19 14.75 DEC 10.00 3.88 *$ 0.69 7.4% 5.4% COOL 14.50 12.50 DEC 12.50 2.44 $ 0.44 3.6% 5.3% DRIV 22.75 39.00 DEC 20.00 4.25 *$ 1.50 8.1% 5.0% DIGE 14.44 18.44 DEC 12.50 2.75 *$ 0.81 6.9% 5.0% PILT 15.94 17.75 DEC 12.50 4.25 *$ 0.81 6.9% 5.0% PRGY 25.38 23.75 DEC 22.50 4.50 *$ 1.62 7.8% 4.8% LTXX 16.00 17.50 DEC 15.00 2.06 *$ 1.06 7.6% 4.7% IVIL 28.38 25.06 DEC 22.50 6.75 *$ 0.87 4.0% 4.4% TOPP 9.81 11.81 DEC 7.50 2.75 *$ 0.44 6.2% 3.9% DGII 13.56 16.00 DEC 12.50 1.69 *$ 0.63 5.3% 3.8% JDAS 11.63 18.75 DEC 10.00 2.13 *$ 0.50 5.3% 3.8% ICGX 20.50 17.06 DEC 17.50 3.88 $ 0.44 2.6% 2.9% MOGN 13.44 11.38 DEC 12.50 1.63 $ -0.43 -3.6% 0.0% VUSA 14.38 11.25 DEC 12.50 2.63 $ -0.50 -4.3% 0.0% BEAM 20.13 15.31 DEC 17.50 3.38 $ -1.44 -8.6% 0.0% FSII 10.69 10.25 JAN 10.00 1.94 *$ 1.25 14.3% 8.9% VUSA 12.50 11.25 JAN 10.00 3.63 *$ 1.13 12.7% 7.9% ONHN 10.25 11.25 JAN 7.50 3.38 *$ 0.63 9.2% 5.7% BIDS 5.13 4.50 JAN 5.00 1.00 $ 0.37 9.0% 5.6% PILT 20.25 17.75 JAN 15.00 6.38 *$ 1.13 8.1% 5.1% RNBO 20.00 20.56 JAN 15.00 6.13 *$ 1.13 8.1% 5.1% SATH 12.69 12.94 JAN 10.00 3.38 *$ 0.69 7.4% 4.0% MESG 16.63 16.91 JAN 12.50 4.88 *$ 0.75 6.4% 4.0% BNYN 15.81 15.88 JAN 12.50 4.13 *$ 0.82 7.0% 3.8% BEAM 20.38 15.31 JAN 17.50 4.13 $ -0.94 -5.8% 0.0% *$ = Stock price is above the sold striking price. Comments/Observations on Open Positions: Cyberian Outpost (COOL) did offer a profitable exit if you chose to take it, and a JAN-$10 "roll-out/down" is available. Monitor Mgi Pharma (MOGN) while it tests support at $11.00. Value America (VUSA) appears to be testing its recent low (support) near $11.00. Summit (BEAM) has taken collateral damage on the VISX news (lost their lawsuit). Evaluate your risk-reward and the possible effect of several upgrades this week. December Positions Closed: Able Telecom (ABTE) at break-even. NEW PICKS ********* Definitions: 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 AGY 16.88 JAN 15.00 AGY AC 2.75 248 14.13 6.2% 6.2% AWEB 12.13 JAN 10.00 UWB AB 3.00 19 9.13 9.5% 9.5% CBIZ 10.31 JAN 7.50 SSQ AU 3.63 453 6.68 12.3% 12.3% EMIS 19.88 JAN 17.50 MTQ AW 4.50 110 15.38 13.8% 13.8% LGND 11.69 JAN 10.00 LQP AB 2.75 74 8.94 11.9% 11.9% MCRE 7.56 JAN 7.50 MQZ AU 1.31 113 6.25 20.0% 20.0% SCOC 17.88 JAN 15.00 UQS AC 4.13 492 13.75 9.1% 9.1% TTWO 16.31 JAN 12.50 TUO AV 4.63 255 11.68 7.0% 7.0% WSTL 10.75 JAN 10.00 QLW AB 1.88 84 8.87 12.7% 12.7% Sequenced by Return Not Called Stock Price Mon Strike Option Opt Open Cost RC RNC Sym Price Symbol Bid Intr Basis MCRE 7.56 JAN 7.50 MQZ AU 1.31 113 6.25 20.0% 20.0% EMIS 19.88 JAN 17.50 MTQ AW 4.50 110 15.38 13.8% 13.8% WSTL 10.75 JAN 10.00 QLW AB 1.88 84 8.87 12.7% 12.7% CBIZ 10.31 JAN 7.50 SSQ AU 3.63 453 6.68 12.3% 12.3% LGND 11.69 JAN 10.00 LQP AB 2.75 74 8.94 11.9% 11.9% AWEB 12.13 JAN 10.00 UWB AB 3.00 19 9.13 9.5% 9.5% SCOC 17.88 JAN 15.00 UQS AC 4.13 492 13.75 9.1% 9.1% TTWO 16.31 JAN 12.50 TUO AV 4.63 255 11.68 7.0% 7.0% AGY 16.88 JAN 15.00 AGY AC 2.75 248 14.13 6.2% 6.2% Company Descriptions AGY - Argosy Gaming Co. $16.88 *** Buyout Speculation *** Argosy Gaming is engaged in the business of providing casino style gaming and related entertainment to the public and, through its subsidiaries or joint ventures, owns and operates several casinos, hotels, and riverboats. Argosy reported record earnings, revenues and cash flows for its third quarter and a completion of their recent refinancing. The downgrade by Prudential had little effect (they had upgraded Argosy a month before) as the gaming sector is ripe with merger/take-over rumors. The heavy volume supporting Argosy's climb above a four month consolidation is a bullish sign. We favor a cost basis within support as investors speculate on the potential merger partners. JAN 15.00 AGY AC Bid=2.75 OI=248 CB=14.13 RC=6.2% RNC=6.2% Chart = http://quote.yahoo.com/q?s=AGY&d=3m **** AWEB - Autoweb.com $12.13 *** Internet Commerce *** 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 appears ready to emerge from a four month base as the current rally has heavy volume support. On Thursday, Fletcher and Faraday added Autoweb.com to their "buy" list. Favorable speculation with a cost basis near technical support. JAN 10.00 UWB AB Bid=3.00 OI=19 CB=9.13 RC=9.5% RNC=9.5% Chart = http://quote.yahoo.com/q?s=AWEB&d=3m **** CBIZ - Century Business Services $10.31 *** Buyout/Merger? *** Century is a diversified company which provides professional out-sourced business services to small/medium-sized companies, as well as individuals, government entities, and not-for-profit enterprises predominantly throughout the US. In October, Century enlisted Merrill Lynch to explore strategic alternatives including a merger, or selling the company. The recent heavy volume suggests something is afoot. We favor a conservative position well below technical support. Requires due-diligence. JAN 7.50 SSQ AU Bid=3.63 OI=453 CB=6.68 RC=12.3% RNC=12.3% Chart = http://quote.yahoo.com/q?s=CBIZ&d=3m **** EMIS - Emisphere Technologies $19.88 *** Stage II *** 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 recently crossed above the neckline of a long term double-bottom as it continues its stage II climb. The sold strike price is at support as Emisphere should consolidate after the recent 52-week high. JAN 17.50 MTQ AW Bid=4.50 OI=110 CB=15.38 RC=13.8% RNC=13.8% Chart = http://quote.yahoo.com/q?s=EMIS&d=3m **** LGND - Ligand Pharmaceuticals $11.69 *** News On Monday *** Ligand Pharmaceuticals discovers, develops and markets new drugs that address critical unmet medical needs of patients in the areas of cancer, skin diseases, and men's and women's hormone-related diseases, as well as osteoporosis, metabolic disorders and cardiovascular and inflammatory diseases. A very speculative play as the FDA panel will begin scrutinizing Ligand's Targretin on Monday for treating a rare form of cancer called cutaneous T-cell lymphoma (CTCL). Trading may be halted until the news is released which could make this position unavailable. Research required. JAN 10.00 LQP AB Bid=2.75 OI=74 CB=8.94 RC=11.9% RNC=11.9% Chart = http://quote.yahoo.com/q?s=LGND&d=3m **** MCRE - MetaCreations $7.56 *** New Products *** MetaCreations designs, develops, publishes, markets and supports visual computing software tools for the creation, editing and manipulation of computer graphic images and digital art. MCRE is focused on developing and marketing 2D and 3D visualization software for the World Wide Web and commercial graphic artists. The company recently rolled out a new broadcast licensing model for MetaStream(TM) that they expect will generate significant recurring revenue in the year 2000. The chart is showing signs of improvement as MetaCreations recently exited a year long base in a favorable reaction to positive earnings and new products. JAN 7.50 MQZ AU Bid=1.31 OI=113 CB=6.25 RC=20.0% RNC=20.0% Chart = http://quote.yahoo.com/q?s=MCRE&d=3m **** SCOC - Santa Cruz Operation $17.88 *** Up, Up, and Away *** Santa Cruz Operation is a leading supplier of UNIX System software for business-critical, network computing environments. Network computing offers businesses a more powerful, cost-effective way to share business-critical applications and information with people anywhere in the world. The key elements are powerful, scaleable, and reliable servers; and support for a wide range of clients. The company also offers an application broker for network computing. A nice bullish chart with excellent support near the cost-basis. JAN 15.00 UQS AC Bid=4.13 OI=492 CB=13.75 RC=9.1% RNC=9.1% Chart = http://quote.yahoo.com/q?s=SCOC&d=3m **** TTWO - Take-Two Interactive Software $16.31 *** New High! *** Take-Two is an integrated global developer, marketer, distributor, and publisher of interactive entertainment software games and accessories for the PC, Sony PlayStation, Nintendo 64, Nintendo Game Boy Color and the Sega Dreamcast. Take-Two has a plethora of news on new game releases, game sites, strong sales, etc. The effect on the chart is apparent as the stock is in a strong stage II climb supported by heavy volume. With earnings due on December 16, we favor a cost basis near the top of the recent range at $10. JAN 12.50 TUO AV Bid=4.63 OI=255 CB=11.68 RC=7.0% RNC=7.0% Chart = http://quote.yahoo.com/q?s=TTWO&d=3m **** WSTL - Westell Technologies $10.75 *** DSL Technology *** Westell Technologies is a holding company for Westell, Inc. and Conference Plus, Inc. WSTL manufactures and licenses DSL systems and value added CPE, and manufactures telecommunications access products. Conference Plus is an Applications Service Provider managing and hosting audio, video, IP conferencing and support services. Westell reported a significant rise in revenues last quarter. A recent "buy" recommendation by Warburg Dillon Read was followed by Robinson Humphrey's upgrade. This led to a nice price jump in November (unless you were short!), which moved WSTL above its recent trading range. The technical picture continues to improve with price support now at our cost basis. JAN 10.00 QLW AB Bid=1.88 OI=84 CB=8.87 RC=12.7% RNC=12.7% Chart = http://quote.yahoo.com/q?s=WSTL&d=3m ***************** NAKED PUT SECTION ***************** Successful Stock Ownership: Selling For Profit... Our recent discussion on the art of selling has generated a flood of suggestions and techniques. A number of entry and exit systems were generously contributed by our subscribers and this week's article (from one of the readers) summarizes the most commonly used method for position management; Sell-Stops. Learning to correctly manage portfolio positions; maximizing gains while limiting losses, is one of the most important aspects of successful investing. There is a good reason why the majority of investors lose money in the market. Most of them have yet to learn the #1 secret of profitable trading; the market will do whatever is necessary to prevent the uneducated masses from making money while consistently rewarding the astute professional minority. The first thing an investor should realize is that they must never hold any position without a protective Sell-Stop. The majority of market professionals use protective trailing stops but the retail trader is far less proficient in this practice. Using sell-stops eliminates the risk of emotional or reaction-based judgments in difficult situations and removes fear, hope and greed from the entire equation. The consistent use of this technique provides a mechanical and disciplined method for achieving profit. Allowing the market to make the exit decision is much more precise than relying on our complex human intuition. The proper placement of sell-stops requires a thorough knowledge of chart analysis and basic market trends or cycles. The primary price support areas and short-term (18 - 40 dma) moving averages are the main indicators that determine the initial target exits. After a trend had been established with the stock price above the moving average, the sell-stop is simply adjusted higher with each successive rally. As long as the stock price remains above its rising moving average, the trend is intact. As the moving average begins to level, the effects of short-term weakness become more apparent and the consolidation period begins. As the issue enters this high-risk area, the complexity of decision-making increases exponentially. Rather than try to discern the differences between a healthy dip and a full-scale reversal, a successful trader will focus on the positioning of the sell-stop. A quick review of the trend-lines and regression channels will provide the necessary information for a timely and accurate adjustment. In this manner, the potential for profit is maintained without the possibility of losing previous gains. Even with the most successful positions, the time to take profits will eventually arrive. The use of disciplined techniques can help one avoid the confusion that occurs when hard-earned money is at stake and make the whole experience less intimidating, possibly even enjoyable. Remember, taking profits is a good thing! *** WARNING!!! *** Occasionally a company will experience catastrophic news causing a severe drop in the stock price. This may cause a devastatingly large loss which may wipe out all of your smaller gains. There is one very important rule; Don't sell naked puts on stocks that you don't want to own! It is also important that you consider using trading STOPS on naked option positions to help limit losses when the stock price drops. Many professional traders suggest closing the position when the stock price falls below the sold strike or using a buy-to-close STOP at a price that is no more than twice the original premium from the sold option. SUMMARY OF PREVIOUS PICKS Stock Price Last Mon Strike Opt Profit ROI Monthly Sym Picked Price Price Bid /Loss ROI MAIL 21.88 25.63 DEC 17.50 0.56 *$ 0.56 11.3% 24.6% ELON 12.50 13.75 DEC 10.00 0.31 *$ 0.31 11.0% 24.0% HRBC 18.69 24.63 DEC 15.00 0.38 *$ 0.38 9.1% 19.8% FLAS 10.06 7.63 DEC 7.50 0.75 *$ 0.75 27.2% 19.7% NSPK 18.56 20.50 DEC 15.00 0.38 *$ 0.38 9.0% 19.5% IVIL 27.25 25.06 DEC 22.50 0.94 *$ 0.94 13.3% 19.2% SCOC 14.56 17.88 DEC 12.50 0.31 *$ 0.31 7.6% 16.5% PILT 20.25 17.75 DEC 15.00 0.31 *$ 0.31 7.1% 15.4% HEPH 16.50 12.50 DEC 12.50 0.38 $ 0.38 10.3% 15.0% ELIX 15.13 15.06 DEC 12.50 0.25 *$ 0.25 6.8% 14.8% NSPK 16.38 20.50 DEC 12.50 0.50 *$ 0.50 13.2% 14.4% RNBO 18.13 20.56 DEC 15.00 0.44 *$ 0.44 9.6% 14.0% STRX 7.63 8.00 DEC 5.00 0.44 *$ 0.44 22.3% 13.9% DGII 14.88 16.00 DEC 12.50 0.50 *$ 0.50 12.3% 13.3% ZOMX 36.06 44.63 DEC 30.00 0.81 *$ 0.81 8.8% 12.8% PILT 21.31 17.75 DEC 15.00 0.56 *$ 0.56 11.6% 12.6% NPIX 37.50 46.00 DEC 22.50 0.69 *$ 0.69 8.4% 12.2% MMWW 33.00 37.31 DEC 25.00 0.38 *$ 0.38 5.4% 11.8% NSPK 15.50 20.50 DEC 12.50 0.50 *$ 0.50 13.5% 11.7% BNYN 12.75 15.88 DEC 10.00 0.38 *$ 0.38 13.0% 11.3% MSGI 16.94 15.06 DEC 12.50 0.50 *$ 0.50 12.9% 11.2% COOL 9.56 12.50 DEC 7.50 0.31 *$ 0.31 14.0% 10.1% ITVU 64.50 74.25 DEC 45.00 1.25 *$ 1.25 8.8% 9.6% NVDA 32.00 37.94 DEC 22.50 0.75 *$ 0.75 10.5% 9.1% MLTX 16.19 35.75 DEC 12.50 0.50 *$ 0.50 13.4% 8.3% XCED 31.63 39.00 DEC 22.50 0.63 *$ 0.63 9.1% 7.9% AMTD 28.19 28.00 DEC 20.00 0.44 *$ 0.44 7.2% 7.9% MTSN 15.56 15.63 DEC 12.50 0.31 *$ 0.31 8.9% 7.8% IONA 21.38 35.13 DEC 15.00 0.56 *$ 0.56 11.6% 7.2% TUTS 39.69 42.50 DEC 30.00 0.81 *$ 0.81 9.3% 6.7% CMDX 65.19 92.44 DEC 40.00 0.63 *$ 0.63 4.6% 6.7% MRVC 31.00 42.44 DEC 22.50 0.38 *$ 0.38 5.8% 6.3% PDLI 40.75 49.00 DEC 35.00 0.44 *$ 0.44 4.0% 5.8% NPIX 37.44 46.00 DEC 20.00 0.50 *$ 0.50 6.3% 5.4% LTXX 18.56 17.50 DEC 15.00 0.31 *$ 0.31 7.4% 5.4% EGGS 24.00 14.31 DEC 17.50 0.63 $ -2.56 -47.1% 0.0% CTIX 20.13 12.50 DEC 15.00 0.38 $ -2.12 -48.1% 0.0% *$ = Stock price is above the sold striking price. Comments/Observations on Open Positions: Investors are exiting Onsale in droves after the merger with Egghead.Com (EGGS), and the symbol change from ONSL to EGGSD and back to EGGS just added to the confusion. You may consider closing this position if you are not prepared to own the issue. Cheap Tickets (CTIX) released an earnings warning and suffered quick and harsh punishement: also a candidate for an early exit. Positions Closed: Cdnow (CDNW). NEW PICKS ********* Definitions: 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 MAIL 25.75 DEC 20.00 UMA XD 0.31 723 19.69 5.7% AND 9.25 JAN 7.50 AND MU 0.44 10 7.06 18.4% CCUR 17.75 JAN 12.50 URC MV 0.50 40 12.00 12.3% EGRP 35.56 JAN 25.00 QGR ME 0.56 2896 24.44 7.3% INSO 32.13 JAN 20.00 IJQ MD 0.75 100 19.25 10.5% MMWW 37.38 JAN 22.50 EQB MX 0.50 0 22.00 6.3% PRRC 23.56 JAN 17.50 MQX MW 0.56 10 16.94 10.6% SATH 12.94 JAN 10.00 SQR MB 0.56 70 9.44 17.8% SCOC 17.88 JAN 12.50 UQS MV 0.44 40 12.06 11.0% Sequenced by ROI Stock Price Mon Strike Option Opt Open Cost ROI Opt Sym Price Symbol Bid Intr Basis Expired MAIL 25.75 DEC 20.00 UMA XD 0.31 723 19.69 5.7% AND 9.25 JAN 7.50 AND MU 0.44 10 7.06 18.4% SATH 12.94 JAN 10.00 SQR MB 0.56 70 9.44 17.8% CCUR 17.75 JAN 12.50 URC MV 0.50 40 12.00 12.3% SCOC 17.88 JAN 12.50 UQS MV 0.44 40 12.06 11.0% PRRC 23.56 JAN 17.50 MQX MW 0.56 10 16.94 10.6% INSO 32.13 JAN 20.00 IJQ MD 0.75 100 19.25 10.5% EGRP 35.56 JAN 25.00 QGR ME 0.56 2896 24.44 7.3% MMWW 37.38 JAN 22.50 EQB MX 0.50 0 22.00 6.3% Company Descriptions AND - Andrea Electronics $9.25 *** A New Range? *** Andrea Electronics Corporation has been engaged in the design and development of electronic audio systems, intercommunications and related equipment. The company's products include its traditional systems for military and industrial applications and its newer Andrea Anti-Noise products for voice-activated computing, telecom and computer/Internet communications. Andrea Electronics' DFTA technology will be now used in VCON telecom's MediaConnect system and other agreements are expected in the coming months. The break above recent resistance at $8.50 could signal the transition to a new trading range. JAN 7.50 AND MU Bid=0.44 OI=10 7.06 ROI=18.4% Chart = http://quote.yahoo.com/q?s=AND&d=3m **** CCUR - Concurrent Computer $17.75 *** Stage II *** Concurrent Computer is a supplier of high-performance systems, software, and services for the real-time and video-on-demand markets. A real-time system is one designed to acquire, process, store, and display large amounts of rapidly changing information in real time that is, with microsecond response as changes occur. Its systems provide real-time applications for gaming, simulation, engine test, air traffic control, weather analysis, interactive video-on-demand, multimedia, and mission critical data services such as financial market information. Acquisitions and alliances have strengthened Concurrent's video-on-demand market. A stage II stock that has resumed its up-trend after a normal retracement. JAN 12.50 URC MV Bid=0.50 OI=40 CB=12.00 ROI=12.3% Chart = http://quote.yahoo.com/q?s=CCUR&d=3m **** EGRP - E*Trade Group $35.56 *** Record Online Volume *** E*Trade Group is a leading provider of cost-effective, secure online discount brokerage services. It offers automated order placement, portfolio tracking and related market information, news and other information services through the Internet, direct modem access, telephone and interactive television. Wall Street expects daily trading volumes for online brokers to grow 20%-30% in the fourth quarter and the number of online accounts may escalate to 25 million by the year 2003. Analysts are revising their forecasts upwards for sequential transaction growth among online brokerages and that should boost the share value of these issues. JAN 25.00 QGR ME Bid=0.56 OI=2896 CB=24.44 ROI=7.3% Chart = http://quote.yahoo.com/q?s=EGRP&d=3m **** INSO - Inso $32.13 *** Technicals Only *** Inso is a supplier of various software solutions for sharing and publishing electronic information. The company provides software for the distribution of all forms of electronic information, from simple memos to complex technical manuals in environments ranging from desktop computers to the Internet. Inso's Specialties are: Electronic Publishing Solutions, Dynamic Document Exchange, and Lexical and Linguistic Products. Once last opportunity to enter the position as the issue moves to a two-year high. A reasonable correction would bring the stock price back to the cost basis. JAN 20.00 IJQ MD Bid=0.75 OI=100 CB=19.25 ROI=10.5% Chart = http://quote.yahoo.com/q?s=INSO&d=3m **** MAIL - Mail.com $25.75 *** Short-Term Speculation *** Mail.com is a global provider of email services. Mail.com's basic email services are free to members and anyone can become a member. The company generates revenues primarily from advertising related sales, including direct marketing and e-commerce promotion. The company also receives income from subscription services, such as increased storage capacity and premium email addresses. This is a one-week play to own the stock below recent technical support at $22.00 (or get paid for trying). DEC 20.00 UMA XD Bid=0.31 OI=723 CB=19.69 ROI=5.7% Chart = http://quote.yahoo.com/q?s=MAIL&d=3m **** MMWW - Metamor Worldwide $37.38 *** Xpedior Spin-off *** Metamor Worldwide is a leading provider of information technology and staffing services. It was founded as a traditional staffing business under the name CORESTAFF, Inc. The company now offers information technology project support, management, outsourcing, systems development, as well as supplemental staffing. The latest structural change occurred when MMWW acquired new IT services. Now Metamor is spinning off 20% of Xpedior and the remainder will go to MMWW shareholders. One share of Metamor will get you almost 1.5 shares of Xpedior. The new company is profitable and target values reach $60 a share. The transaction is expected to occur near 12/15. JAN 22.50 EQB MX Bid=0.50 OI=0 CB=22.00 ROI=6.3% Chart = http://quote.yahoo.com/q?s=MMWW&d=3m **** PRRC - Precision Response $23.56 *** Up, Up and Away! *** Precision Response answers the phone for its clients, providing primarily inbound telephone services such as the taking of sales orders, service requests, and customer questions and complaints. The company's call management and database software, CCPro, lets clients monitor and adjust particular service programs while they are in progress. Precision Response also derives a small portion of its revenue from outbound tele-services. The recent deal with Priceline.com (PCLN) and the big jump in November has put this company in the limelight. Bullish brokerage estimates and a clean break to a new all-time high suggest a favorable future. JAN 17.50 MQX MW Bid=0.56 OI=10 CB=16.94 ROI=10.6% Chart = http://quote.yahoo.com/q?s=PRRC&d=3m **** SATH - Shop-At-Home $12.94 *** Seasonal Sales *** 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. Shop At Home reported record revenues this quarter and recently announced a new weekday sales record. Lots of news on collectibles.com, and the new website appears to be drawing the interest of investors. The technical picture is bullish and Shop-At-Home has moved above a recent consolidation area. Once again, we favor a cost-basis well below the technical support. JAN 10.00 SQR MB Bid=0.56 OI=70 CB=9.44 ROI=17.8% Chart = http://quote.yahoo.com/q?s=SATH&d=3m **** SCOC - Santa Cruz Operation $17.88 *** Own This One! *** Santa Cruz Operation is a leading supplier of UNIX System software for business-critical, network computing environments. Network computing offers businesses a more powerful, cost-effective way to share business-critical applications and information with people anywhere in the world. The key elements are powerful, scaleable, and reliable servers; and support for a wide range of clients. The company also offers an application broker for network computing. A nice bullish chart with excellent support above the cost-basis. JAN 12.50 UQS MV Bid=0.44 OI=40 CB=12.06 ROI=11.0% Chart = http://quote.yahoo.com/q?s=SCOC&d=3m ******************** Y2K Renewal Offer!!! ******************** Announcing the cheapest renewal rate available! $24.91 mo* 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 Millennium Edition of the almanac for FREE. This package has 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. This lowers the actual price of the newsletter to only $24.91 per month for an annual subscription. The supply of almanacs is limited so don't delay. Click here for more info. http://www.OptionInvestor.com/renewalinfo.asp ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? 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