Option Investor
Newsletter

Daily Newsletter, Tuesday, 12/21/1999

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The Option Investor Newsletter         Tuesday 12-21-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       12-21-99             High     Low     Volume Advance Decline
DOW    11200.50 +  56.20 11237.80 11098.00   963,540k 1,579   1,502
Nasdaq  3911.15 + 127.28  3911.17  3785.78 1,480,165k 2,148   2,056
S&P-100  778.86 +   7.57   781.35   769.41    Totals  3,727   3,558
S&P-500 1433.43 +  15.34  1436.41  1414.80            51.1%   48.9%
$RUT     475.79 +   8.60   475.79   467.12
$TRAN   2836.50 -  47.97  2884.62  2826.96
VIX       23.44 -   1.22    25.81    23.01
Put/Call Ratio       .46
*************************************************************

Faster than a speeding bullet, more powerful than a locomotive,
able to leap tall records in a single bound.

The Nasdaq, the superman of bull markets, leapt several records
in a single bound today. Posting a +127 point gain the Nasdaq
surpassed the previous one day gain of +108 last September. It
also posted another record high, the 56th this year, and had
another 1.5 bln share day. The S&P also joined the party adding
+15.34 to a new record high. The Dow was again the laggard with
only a +56 point gain and remains firmly mired in a trading range 
between 11100 and 11300. We did close above previous support
of 11150 again but the index was negative most of the day.


 


 

This is a simply remarkable chart of the Nasdaq. After bouncing 
off support at 3525 three times it has taken off like a rocket.
Gravity and sanity has ceased to exist. It looks like the next
stop could be 4000. The Nasdaq is now up +78% for the year and
if the bullishness continues to gain speed we could have an
outside chance of seeing something close to a +100% gain for 
the year. +100% would be in the 4394 range. Granted that would 
be a monumental feat but with the constant stream of bigger days 
and record highs nothing is out of the realm of reality. Would
you have believed a +30 gain on QCOM to $500? Or maybe a +36
gain on YHOO to $405 or a +57 gain on CMRC to $480? Could you
expect +48 for CMGI to $270 and +$40 on ICGE to 184?

Does anybody see anything wrong with this picture? Granted we
should thank the Fed for the Y2K Christmas present but this is
true irrational exuberance. Like the new years eve reveler who
has too much to drink and allows his inhibitions to relax with
the excitement of the party, waking up the next day may bring
some regrets. The Fed passed on raising rates or even raising
the bias only two weeks before Y2K and the Nasdaq celebrated
with wild abandon. The lack of a stern Fed statement today
has put the Fed on hold until next year but the outlook for
February is grim. They simply wanted to avoid any hint of
misunderstanding about their Y2K stance but I am afraid that
Uncle Al will not be so nice next time they meet. With the
economy soaring at a +5% growth rate it is almost a sure thing
that they will raise rates after Y2K. There are three new bears 
and only one neutral member being added to the FOMC committee
for next year and it is almost a 100% chance we will see a series
of rate hikes from these new bears as they attempt to shape 
monetary policy for 2000. 23 of 30 bond dealers surveyed are
expecting a rate hike in February.

But for the time being the trading light is green, or at least
it would appear to be. You know what I have always said, "when
everything is too good too be true, it is." I can't currently
picture a scenario that will cause a significant pull back any
time soon. That is scary. Normally there are several things
on the watch list to help keep a lid on the markets but the
current rally strength would require a monster event and there
are none scheduled with that potential. We are firmly entrenched 
in earnings warning season but there is a scarcity of negative
events. Many analysts think many companies are waiting until
after Y2K hoping a post 1/1/2000 announcement will be ignored
in the expected rally. If a flood of announcements does take
place we will have our first test of 2000 very soon.

The relief rally we saw today was impressive on the surface but
the Advance/Decline numbers were still a concern. With such big
gains on the Nasdaq you would expect a large win by advancers but
it did not happen. The advances did win but only by a slim margin
of 92 issues. (2148/2056) The NYSE was positive also but only
by 169 (3727/3558). The leaders soared but the rank and file
marched to a different drummer. New lows on the NYSE were 326
compared to only 75 new highs. Eventually this will impact the
market.

The most notable non-Fed event for the day was the high profile
announcement by Ralph Acompora of his new targets for next year.
He is calling for as much as 14,000 on the Dow, 1800 for the S&P
and 5000 for the Nasdaq. Calling the current rally simply another
leg in the current "Mega Bull Market" (his term) he says we could
easily see another 25% gain over the next two years. His words
were fuel to the already hot rally but he did also say there
would be pull backs before we reached his targets. When Ralph?

Several new additions to the S&P-500 could provide some trading 
ideas for this week. Transocean Offshore (RIG), NCR Corp (NCR)
and First Security (FSCO) were announced today. Fund managers
will now be forced to buy them and rebalance their portfolios.

The money is still flowing into the market as TrimTabs.com 
said $11 bln came into the market last week. They are also
projecting a huge flow of cash into the market in the next two
weeks as Y2K holdouts start throwing cash at the market. The
year 2000 rally train appears to have left the station and it
is approaching supersonic speeds. With only two trading days
before the after Christmas rally is expected to start, one
wonders how much more buying can occur. The expected light
volume turned into another top ten record day on the Nasdaq.
No profit taking there. If buyers are waiting for another
pull back before taking positions for January they are probably
entering panic mode. With new highs all around on incredible
gains the "it can't go up any more" thoughts are turning into
"Oh my gosh, I missed it" and the urge to throw money at anything
not up double digits in the next two days is undoubtedly growing.

They markets got a "get out of December free" card from the Fed's
deck today but the bond market did not celebrate. Yields rose to
6.46% on the prospect of a rate hike next February. Bonds and
stocks may have disconnected today but like a boomerang they
always come back. In times like these, there is nothing to do
but "go long till your wrong" and let the market tell us when
to quit. The trend is your friend and many traders have gone
broke trying to buck a winning trend and call market tops. Our 
suggestion is to enjoy the ride but keep your stops close just 
in case. With upgrades flowing like eggnog and stock splits
more plentiful than candy canes there appears to be no coal
in the market stocking this week.

Good Luck, Sell Too Soon.

Jim Brown
Editor



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

Top Athletes Tackle E-Commerce Arena
By Cindy Christ

Three of the world's best-known athletes are teaming up with CBS
to launch a sports and outdoors website with plans of going
public next year.

John Elway, Michael Jordan and Wayne Gretzky said Tuesday they're
launching MVP.com, an online sporting goods store offering
equipment, apparel and advice from the world's top athletes and
sporting enthusiasts.

/members/stocknews/122199_1.asp


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

As of Market Close - Tuesday, December 21, 1999 

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

DOW Industrials   10,800  11,320  11,200    Neutral  11.12
SPX S&P 500        1,340   1,400   1,433    BULLISH  12.03
OEX S&P 100          700     750     779    BULLISH  12.03
RUT Russell 2000     430     450     476    BULLISH  11.12
NDX NASD 100       2,850   3,150   3,529    BULLISH  12.03
MSH High Tech      1,450   1,630   1,814    BULLISH  12.03

XCI Hardware       1,160   1,210   1,362    BULLISH  11.11
CWX Software       1,100   1,200   1,347    BULLISH   9.03
SOX Semiconductor    580     660     699    BULLISH  12.21  *
NWX Networking       750     800     877    BULLISH  12.03
INX Internet         600     675     775    BULLISH  12.07

BIX Banking          645     690     560    BEARISH  11.30
XBD Brokerage        410     450     424    Neutral  11.30
IUX Insurance        625     650     589    BEARISH  11.30

RLX Retail           900     935     960    BULLISH  11.23
DRG Drug             380     400     339    BEARISH  12.07
HCX Healthcare       760     790     678    BEARISH  12.07
XAL Airline          180     190     150    BEARISH   5.21
OIX Oil & Gas        290     315     291    Neutral  11.23

 
Posture Alert    
Thanks to the Fed leaving their bias at Neutral, the broad market 
rallied hard with more records for technology shares. Sector 
leaders for Tuesday include Semiconductors (+4.73%), Internet 
(+4.38%), and the Nasdaq 100 (+4.09%). Losers were limited to the 
Drug, Healthcare, and Energy sectors. With this most recen
t 
action, we have upgraded Semiconductors to BULLISH from Neutral.



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

Tuesday December 21, 1999

Overextended?

Like a broken record, the Nasdaq broke new highs once again, as 
the leading sectors continued to outperform the overall market. 
This sharp jump was on the heels of the Federal Reserve stating 
that their bias would remain neutral. This did come as a slight 
surprise, as many Wall Street pundits believed that a tightening 
bias was in the works. As such, technology stocks ripped into 
record ground, with no apparent signs of gravity. 

One sector that we have highlighted dozens of times in the past for 
its negative sentiment is the Nasdaq 100 (NDX). The NDX has had 
an incredible run this year, and jumped up a whopping +4.09% today 
alone. One aspect of market sentiment that we have commented on 
consistently throughout the entire year was the amount of negative 
sentiment surrounding the NDX in the form of its put/call ratio and 
short interest. Put buyers have consistently stepped up all year, 
nonstop, during the entire run-up on this beloved index. However, 
today, for the first time in quite a long time, we witnessed a 
significant drop off in puts, and increased activity in calls. 
Could this be a change of heart? Have these put buyers on the NDX 
thrown in the towel, and jumped on the bulls' side? Hopefully not, 
so let's hope they just took the Christmas week off, and will be 
back to business very shortly, because we need their negative 
sentiment to take this index even higher! We have stated for a 
long time, that when the bears throw in the towel on the NDX, we 
would be concerned about technology valuation. Well, this could be 
right here, right now. 

The put/call ratio for trading on the NDX today stood at .46, 
which would usually not be a bad number except that the bears have 
dominated this index all year. The overall put/call ratio for this 
index still stands at 1.95, which is VERY BEARISH, and has been 
above 2.0 a majority of the time during the last couple of months. 
So when we see the put/call ratio for today's trading at .46 when 
the ratio has been consistently bearish, we do get a little 
concerned. We also get a little concerned when we see a 
significant increase in call activity that is front month, and 
out-of-the-money, without the same action on the put side. Now, we 
don't want to get anyone alarmed, because we have been extremely 
bullish on the NDX for a long time and continue to be, however, if 
the bears have given up on the NDX, then this index may be 
overextended and due for a serious retracement. We will continue to 
monitor this index closely, so until we can confirm this suspicion 
(of a change in negative sentiment), we would stick with the 
positive trend, but become a little more cautious.


BULLISH Signs: 

Cash Flow:
The amount of money being poured into this market continues to be  
Strong, as evidenced by this last week's IPO's and the strong 
volume on all exchanges. 

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 up in stock price.


Mixed Signs:

Volatility Index (23.44):
Once again, the VIX presaged a near-term market top, when it 
bounced off of 20. It is now safely off of the lows, however, a 
break through its 50dma may signal more downside in the market.


BEARISH Signs:

Interest Rates (6.450%):
The yield on the 30-yr Treasury is back into dangerous territory, 
and could cause a precipitous sell-off should we see new highs.
 

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

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


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.


The Power of Sentiment Analysis

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

 
Pinnacle Index OEX              Friday      Tues
Benchmark                       (12/17)    (12/21)

Overhead Resistance (780-800)     9.69       3.51

OEX Close                       773.93     778.86

Underlying Support (750-770)      1.10       1.34


What the Pinnacle Index is telling us:
Based on 12/21, current overhead (780-800) is not as significant as 
it was before, and if the trend continues, we may soon see a test 
of this level. Underlying support did increase very slightly, but 
is not yet sufficient.


Put/Call Ratio                  Friday     Tues
Strike/Contracts                (12/17)   (12/21)

CBOE Total P/C Ratio             .43         .46
CBOE Equity P/C Ratio            .34         .35
OEX P/C Ratio                   1.24        1.73


Peak Open Interest (OEX)
                     Friday           Tues
Strike/Contracts     (12/17)         (12/21)

Puts                 700 / 8,398     700 / 9,067
Calls                700 / 6,272     700 / 6,272
Put/Call Ratio         1.34            1.45


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 21, 1999                       23.44



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

Daily Results

Index      Last    Mon    Tue   Week
Dow     11200.54  12.54  56.27  68.81
Nasdaq   3911.15  30.81 127.28 158.09
$OEX      778.86  -2.64   7.57   4.93
$SPX     1433.43  -2.96  15.34  12.38
$RUT      475.79   0.98   8.60   9.58
$TRAN    2836.50  -3.09  -3.09  -6.18
$VIX       23.44  -0.16  -0.16  -0.32

Calls              Mon    Tue   Week

YHOO      405.56  19.50  36.06  55.56  Yahoo!  Yahoo!  Yahoo!
QCOM      496.88  11.81  30.06  41.88  QCOM makes it up to $500!
JDSU      278.47  14.31  23.22  37.53  Looks to be a split run
NSOL      267.50  18.75   8.81  27.56  NSOL hits a home run!
NXLK       91.38   3.50  15.88  19.38  NXLK continues to drive!
DCLK      216.50  -3.56  15.13  11.56  Joins the split party!
INKT      181.00  -8.06  18.00   9.94  The breakout we wanted!
STM       148.00   4.63   4.38   9.00  STM makes gains on the open
NT         99.25   1.56   6.44   8.81  Lots of pluses = BREAKOUT!
TTN        42.00   3.19   4.38   7.56  TTN in greener pastures
BVSN      136.13  -3.00  10.13   7.13  BVSN breaks through!
INSP      173.50  -9.19  16.00   6.81  INSP makes a solid move
VRTS      123.94   7.91  -1.44   6.47  Looks poised to deliver
CLS        97.13   6.25  -0.75   5.50  Dropped, splits tomorrow
VIGN      153.00   4.56  -1.50   3.06  Lots of opportunities!
TERN       72.75   2.31   0.50   2.81  Reaches a new high at $75
SONE       85.50   1.25   0.25   1.50  Still climbing higher
AOL        86.00   2.00  -0.25   1.00  Attracting some attention
NOK       169.50   3.19  -2.19   1.00  Nokia is a growth story
GLW       112.63   1.88  -1.75   0.13  Dropped, doesn't go
TMX       111.69   0.19  -0.81  -1.06  Dropped, flattens out

Puts

ETYS       32.94  -2.75  -1.88  -4.63  Can you say entry point?
EK         68.19  -1.31  -2.94  -3.75  New, time to revisit EK!
KIDE       33.13  -1.31  -1.94  -3.25  KIDE takes the plunge!
BMY        60.13  -0.69  -1.28  -2.00  Drug stocks get pummeled
GT         25.50  -0.63  -0.94  -1.56  GT just can't get a grip!
LTR        59.25  -0.06  -0.63  -0.69  The sellers win the day
WB         68.19   0.69   1.50   2.19  A possible point of entry?
GILD       40.63  -0.88   3.38   2.50  Tries to sell the bad news
PWAV       57.38   9.38  -1.00   8.38  Dropped, caught a wave



************
WOMANS WORLD
************
 
Pssst  Hey, Alan. Come Meet Me Under the Mistletoe

Boy, I'd ask someone to please pinch me, but I am black and blue 
from pinching myself. I hope everyone made some money today. You 
would have had to try really, really hard to not make money this 
week. Unbelievable!! Thank you Alan for not messing up my Christmas 
rally. 

Last week, when the market was more mixed, I bought a basket of 
cheap, OTM January calls on both QCOM and YHOO. I did this because 
I expected these stocks to move higher this week and I felt I would 
benefit greatly from the multiples since I already held strong 
positions at better strike prices on both. With today's rally 
(which I totally underestimated), those contracts are now all ATM 
and ITM. Occasionally buying multiples of cheap OTM options, does 
work well in your favor. It sure did this time! I was caught off 
guard by the post announcement rally, sitting on too much cash 
from Friday's option expiration. Waiting for a pull back in the 
stocks I wanted,...which never came, cost me dearly. 

After expiration Friday, with money in my pocket, I was anxious 
to go option shopping. I wanted February YHOO options but I would 
have to wait till Tuesday. I guess everybody and their brother 
was waiting on the same thing because anyone wanting February 
options today, was either going to pay "a lot" or else, "a lot 
more". Actually on Monday, I really was looking to spend some 
money, but YHOO & QCOM were up, as were most other things on my 
watch & potential split list. I was looking for something that 
looked "relatively cheap" and a bargain. Boy, that's a joke isn't 
it??!!  It certainly wasn't going to be YHOO or QCOM. I wanted to 
place an order in the morning and then go shopping, but I wasn't 
in the mood to jump in front of a racecar, the day before an FOMC 
meeting. Ahhh, but then I saw Doubleclick!

Sweet, sweet, Doubleclick. Nobody wanted to play with him yesterday 
and he was in the red, all by himself. I had bought a few test 
contracts of DCLK and CMGI last week and I could still kick myself 
for not buying more CMGI. It left me in the dust! DCLK was on my 
radar because I wanted to own the stock. Well, you know me, I didn't 
want to buy it, I wanted to get it free with my profits. Anyway, 
Doubleclick is in the business of advertising. Internet advertising. 
In the last few months I have kept a close ear to news about the 
increase in monies spent for internet advertising and how effective 
those banner ads have proved to be. We have all been hearing that 
e-retailing will be huge this Christmas. I knew this to be true 
for sure, when I heard Ed McMahan say on TV last week, that he 
bought his wife's Christmas present over the internet. Anyway, 
Doubleclick fit my profile for a potentially hot growth company.

Actually, after I finally noticed DCLK limping a little yesterday, 
it had already established a pattern that looked a little too sick 
for me to jump in on. I wanted to buy, but the chart and indicators 
kept telling me it had more downside potential to go. All day I 
kept waiting for an entry point I felt comfortable with, so I 
could go shopping. Finally in the late afternoon, a significant 
sell off occurred. In the last few minutes before the close, a 
beautiful clean bounce occurred at 195 and my directional movement 
indicator showed a strong surge to the upside. On the bounce, I 
loaded up with January ATM and OTM calls and an April, hopefully 
for my "free shares". As luck would have it, after Monday's close, 
they announced a 2:1 stock split. Yes, I think I'll be getting 
myself some free shares down the road. Can we say "entry"? 
Sometimes, it just happens and jumps out at ya.

Today, I was still hoping to add to my QCOM and YHOO positions 
but golly gee, not at THOSE levels, especially not before the 
announcement! Everything I wanted seemed to have gapped up at 
the open today. Of course, had I bought yesterday, I'd be plenty 
happy about that. But, I don't like to buy at times like this, 
especially in the face of uncertainty and in a market that has 
been running on an Eveready battery that won't seem to quit. 

In reviewing my list of stocks, I noticed that JDSU, which is 
splitting next week, did not gap up this morning. It had sold 
off last week and I missed a wonderful entry while concentrating 
on other plays. Since it didn't gap open this morning and was 
relatively stable with small gains, I loaded an order ready to 
hit, as soon as the fed announcement was made, if it was in my 
favor. The fed announcement would be the only uncertainty I would 
have for placing the trade because of the strength of the company; 
the stock split next week and the sell off from last week. Once 
the coast was clear, I entered the order and I watched my positions 
take off with the stock after the announcement. A better entry on 
this stock was last week on the sell off. Since I missed that, I 
felt I wanted to be conservative and wait until I knew the results 
of the fed announcement. Now, I think it's a green light going 
into next weeks split.

This market is really something, right now. I keep pinching myself 
to make sure I'm not dreaming. I think it is exciting for all of 
us, lucky enough to be part of it. On one hand, one has to be very 
careful. On the other hand, it seems so easy. Tomorrow, is a bond 
auction, I think the last one for the year. We may give up a few 
of today's gains because of it. But hopefully, that would give my 
high flyers a chance to come back to earth a little, so I can scoop 
up a few more contracts. I'm anxious to ride YHOO's rocket ship 
going into the January earnings. A potential 3:1 split makes my 
heart beat very, very fast and I am watchful for any good entry, 
to buy more. If there is a sell off on the last trading day, I will 
be buying.

I'm getting a little nervous though. Gains like these can spoil 
you quickly and fake you into believing it will last forever. I'll 
be glad when my fingernails start growing back out!

Renee
renee@OptionInvestor.com



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

An Osmotic Technical Point of View
Musings and other Bull

Wow, I had the beginning of a really great story this afternoon. 
But, it just flat just out disappeared without a trace. Kind of 
like what happens to some of my trades!

I have to laugh when I watch magicians take a hundred dollar bill 
and rip it up into little pieces and make it disappear. Wimps! I 
have done that with $10,000 before and never even had to touch it! 
When the magicians do it, the $100 bill always turns up again. 
When I do it, it stays gone! Those guys need to talk to us option 
traders. And they have the gall to call themselves professionals.
For those of you that have been wondering and even those that have 
not, here is my definition of an "Osmotic Technician". Osmosis, 
according to Webster at www.m-w.com (thanks to a reader, this is 
a great link!) is as follows:

A process of absorption or diffusion suggestive of the flow of 
osmotic action; especially : a usually effortless often unconscious 
assimilation  

So, my definition of an "Osmotic Technician" is a person that 
uses technical indicators and does extensive charting, while at 
the same time also looks at the bigger picture. You have to look 
at what is going on with the economy, technological advancements, 
and news that may reinforce or disagree with what the technical 
information is indicating. 

We see and hear hundreds of valuable tid-bits of information 
that our subconscious processes and stores away without you 
even knowing about it. Did you ever have a play that you were 
looking at that you just "knew" was going to take off but, you 
weren't sure why? You know, one of those gut feelings. You 
usually don't play it and then it absolutely takes off to the
moon. It is just possible that you saw or heard information 
that substantiated your view but, did so subconsciously. 
An "Osmotic Technician" use these hunches along with technical 
analysis to his or her advantage. I hate to break it to the guys, 
but, I do believe that women have it easier than us concerning 
this. Women's' intuition and all..... I think it may have 
something to do with why we (men) do not like to stop and ask 
for directions.

In writing once again, (for those of you that have sent me 
untoward E's, I am using the term "writing" loosely) I have 
found that you start looking at things in a different way. I 
tend to notice things. Kind of like after getting a new car. 
Did you ever notice that all of a sudden you see your particular 
model all over the darn place? Have you ever noticed that when 
options come up in a general conversation the first thing that 
people say is, "Oh my, aren't those risky"? Then, depending on 
whether or not I am in the mood at all, a short or lengthy 
conversation ensues. But, one thing that I have learned is that 
converts must be willing.... 

What I have noticed is that I have a tendency to hang out with 
my friends that trade quite a bit more than those that don't. 
Ya, ya, I know. After all, I am a stockaholic. Besides that, 
there is a certain camaraderie that option traders enjoy, and 
it does not matter whether you are a man or woman, young or old. 
It is a special breed that sticks with this unique form of 
entertainment.

Option trading is an individual sport, kind of like bull-riding. 
You can get all of the help you want (that is what OIN is here 
for) and do all of the preparation you want to but, (I am going 
to mix metaphors) when it comes down to actually doing the trade, 
it is like a bull-rider and the bull. You have to hang on for 
the full 8 seconds and you are out there all by yourself. This 
is not a team sport. You also have to know something about what 
is going on to really appreciate a good ride, even if it is 
someone else's. Just like in bull riding, even the best option 
trader does not always make the whistle. So the next time you 
are flicking through the channels on a Sunday night and see 
bull-riding, stop for awhile and you might just see what I mean.

Well, I am truly going to wrap up most of my positions tomorrow 
and cover the few that I will keep into the New Year (quit laughing). 
I know that I can make it for longer than 15 hours this time. 
Awww, heck, who am I kidding? Is there an option patch? 
I do have one burning question that I would like to get cleared 
up before we start into the new millennium. What happens to the 
other sock?

Happy Holidays to all! May your winners run long and your losers 
be stopped short!

Happy Trading!

Harrison

Harrison@OptionInvestor.com

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

A Tribute to a Teacher

As we celebrate the holidays, I just want to pay a word of thanks 
to Jim Brown for being something that we value in all walks of 
life -- a superb teacher. Last year, at this time, I was completing 
a stock investment program in 1998 and was ready to turn to 
something more aggressive with part of my capital. A friend started 
forwarding Optioninvestor newsletters to me and I read them with 
great interest, making some initial plays in December before 
jumping in with about 15% of my overall assets in January.

Jim's write ups were humorous, insightful, and very savvy. He 
would pepper market wraps with analogies such as the surf analogy 
(entering a play is like catching a wave... you ride it as far as 
it will go, but recognize that most plays will not be spectacular, 
and it is better to get off of that wave, and seek out a better 
one... be patient), the duck hunting analogy (you sit in the blind, 
and maybe you spend most of your day waiting until the right moment, 
then you shoot the targets you planned), and the cyclical rule 
(even in a up trending market, there will be 3 to 4 up days,
followed by 2-3 down days... make your entry on the down days). 
These analogies and rules made sense to me, and I could see them 
in work in the markets. In January, I made some great plays that 
can be the biggest liability to a beginning trader (held over 
earnings for both AOL & MSFT, making 100% on each play). However, 
feeling bullet proof can be a big liability on a battlefield. I 
put it all onto DELL for February earnings, and everyone knows 
what happened there. I actually had a great run up on the Dell 
Feb100 contract (I remember it well) as it moved from 4 to 14 in
two days... and I held... while it dropped to 12... then 9... 
then 6, where I finally took profits. Then I put more into DELL 
calls in the weeks leading up to the announcement in a down 
trending February market. When I finally lost most of this capital 
(though I still had a gain for the year, because I had preserved 
my option trading principal), I wrote Jim a email saying that I 
had broken the rules, I was disappointed, but that he and his staff 
were doing a terrific job, and that I would build up my capital 
again by taking 25% profits consistently. He actually published 
that message in one of his market wraps. I did build up my capital 
again, and learned to read the markets. Jim answered emails about 
qcharts and other products. The local optioninvestor club has 
become a source of friends, support, ideas and camaraderie. Jim 
has brought on writers such as Renee, Mary, Lynda, Harrison and 
me to provide perspective to as wide a range of readers as
possible. The best thing that I can say about Jim & his staff -- 
perhaps the best thing you can say about teachers in any field -- 
is that they really want us to succeed as students & market 
participants (and I am STILL a student... and will be for a while!). 
I will share my 1999 results in this column when I am out of my 
plays in early January. But, suffice it to say that my dilemma now 
is -- can I afford to work? -- a good problem to have when you are 
a graduate student!

My Plays. I am loosely monitoring my plays this week, having 
made the decision not to actively trade during the holidays. My 
stocking stuffer plays are doing nicely, with NOK Jan135s up 
about 150% since I bought them in late Nov. As well, my SNE 
Jan170 is up 100% with a recent surge to 210 for SNE. GTW & SCH 
plays are dying, though the computer maker started to make a 
comeback; I still expect some turn around in both of these plays
since holiday computer sales and recent trading volumes have been 
strong. I just need some analyst to recognize this by mid January. 
My strategy with my stocking stuffers was to put a small enough 
amount of capital into each play that I could just let them ride, 
and they have done well. I already took profits on SUNW, YHOO & 
EGRP stocking stuffers last week (which paid for all of the 
stocking stuffer plays), and redeployed the capital into NOK, QCOM, 
& GSTRF LEAPS. All three long term plays are up, though my strategy 
with them is simply to hold them to augment the performance of my
LT Stock Portfolio. I will not be looking for entry into more LEAPS 
until post-Y2K euphoria has run its course, perhaps in March. The 
QCOM Jan02 410, bought at 145 is already over 200. The GSTRF Jan02 
30 LEAP, bought at 8 is already at 12, as this satellite cell phone 
operator launches its service, and distinguishes its identity from 
failed competitor Iridium partly through QCOM's CDMA technology. In 
my ST Options Portfolio, I trimmed my holdings by selling GE and 
PHCM plays on Monday morning, in part because the newsletter dropped 
GE (though I elected to keep my SUNW Jan Calls, though the newsletter 
dropped that play also -- I simply think that SUNW is a "must own" 
for fund managers starting new holdings in January). My positions 
in QCOM Jan380s and Jan390s is paying off nicely -- the fact that
these plays are now about 100 points in the money means that these
contracts now have a nice delta, and it offsets the large premium 
that I paid for them. I am comfortable holdings these through 10 
point swings up and down as QCOM jets into its 4:1 split, with an 
announcement regarding the sale of the handset division expected 
before Y2K. INKT and JDSU, also splitting soon, are doing nicely 
today ahead of the Fed announcement. AOL, MSFT, SUNW, and NOK 
round out my remaining ST Options holdings. I do expect dips, but 
so far, the two weeks before the New Year have been ruled by
liquidity, as I expected. All of my plays are in stocks with strong
fundamentals in the hottest sectors (the net & wireless telecom). 
Intraday volatility can be jarring, but not if you don't watch it 
closely, as is my present strategy. Wake me up in the new millennium, 
when I can start selling this stuff to eager buyers.

Finally, I would like to use one of my 2 weekly columns to start 
some thing called "Trading Decision Games," to allow readers to 
apply some of the insights that Jim has been sharing in his Options 
101 series. This is a version of a training tool for officers and 
non-commissioned officers which I picked up in the Marines. The 
idea is to put you into a tactical/ trading situation, with limited 
information, and for you to make a decision, describe your orders, 
describe your exit strategy, and give your rationale. Please email 
your answers to me and I will post the best 3 "solutions" each
week (recognizing that there is no "correct" solution). 

Situation. The date is December 7, 1999. You are very happy with 
your recent plays, which include YHOO, VRSN, and NOK. NOK gapped 
up for two straight days to end the previous week and to start 
the next week. The NOK Dec 140 Calls which you purchased at 6 
traded as high as 36 on monday; you exited at 16 and 30 on the 
previous Friday and on Monday's open. The newsletter market wrap 
is giving a cautionary guidance about the rally after the November 
run up, and Friday and Monday's burst of bullish activity, though 
the Pinnacle advisors section notes that continued short and put 
buying should give support to a continued rally. But you are not
sure. You like NOK, which is currently trading at 169 - 175. The 
latest write up on NOK, however, cautioned about the recent run 
up, and said that support is around 160 - 165. You have $50,000 
in your trading account. You like to go with the newsletter's 
recommended plays (denoted by an asterisk -- *), which, in this 
case is the NOK Jan160 Call contract. 

Requirement: BEFORE THE NEXT MARKET OPEN, write up a brief plan, 
including the following:
-- the specific order that you are going to give your broker. If 
the broker allows buy to open, market, contingent on stock (at a 
certain price), give those specific details. include the number 
of contracts, whether you will put in multiple orders, and any 
other details.
-- the next order that you will enter immediately after your 
first order fills. eg, will you enter a stop order, if so, what 
type and what kind. Will you enter a limit sell. Will you enter 
a stop on part of your position, and a limit sell on the other 
part.
-- your profit expectations and timeframe. do you have a "drop 
dead" time limit of a few days, or are you going to let the 
position run for a few weeks.
-- your rationale. describe why you gave the orders that you did, 
and why you have the expectations that you do, including any  
company related news that you think is important, but which you 
can fit in a space of about a paragraph.

In the future, we will do more involved Trading Decision Games, 
but for now, we will start with situations that will allow you 
to easily apply what Jim has been discussing in the Options 101 
series. 

Finally, thanks to Renee & Harrison for some cautionary words 
about the potential pitfalls of being a stockaholic. It's easy 
to justify when you are kickin' butt, but one of the keys to 
making money is to know when NOT to trade, and there are probably 
month long periods when that will be the case in 2000. I am 
definitely taking the advice of Renee and Harrison about getting 
some ignored parts of my financial life in order. Thanks!

Good Luck & Merry Christmas

Janar Joseph Wasito
janar@OptionInvestor.com



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


CALLS:
*****

CLS $97.13 -0.75 (+5.50) On a day when tech stocks were all 
the rage, we certainly would have liked to have seen the 
shares of Celestica making a new high.  It would be hard to 
say that CLS had a bad day only being down $0.88.  However, 
when playing with the fast and loose high flying stocks you 
always raise your warning flags when momentum appears to be 
waning.  A pullback to close the gap between $87 and $89 would 
not be out of the question.  As we mentioned before, the 
shares of CLS will begin trading on a split basis on the NYSE 
tomorrow.  The shares are already trading on a split basis in 
Canada.  We always like to close a profitable split trade on 
the last day of trading before the actual split.

TMX $111.69 -0.81 (-1.06) Shares of TMX traded in a very narrow 
range this morning as investors exercised caution before the 
fed interest rate announcement.  When the fed announced that 
they were going to hold rates steady and maintain a neutral 
stance, Mexican stocks in general began to reverse and recover 
the mornings slight losses.  So what happened to TMX?  TMX 
decided not to participate in the relief rally and instead, 
inched downward.  TMX appears to have flattened out and looks 
to have lost its positive momentum, which is why we initiated 
this play.  TMX does have a stock split coming up in February 
but we believe that we are still a ways off from a split run, 
and, therefore, we are dropping this play for the time being. 

GLW $112.63 -1.75 (+0.13) We are ending our play on GLW because 
it never really got going.  This play looks to have flattened 
out before we were able to get in.  While today's afternoon
market rallied, the bears moved in to drag GLW down to close 
just pennies shy of the low for the day.  This move down was 
backed by good volume.  GLW looks set to pick up where it left 
off and at this point there are simply too many good movers 
out there for us to continue playing GLW.  


PUTS:
*****

PWAV $57.38 -1.00 (+8.38) Powerwave looks to have caught one!  
We mentioned that PWAV had some support at $45 and it never 
even made it down to test it.  PWAV gained over $9 on Monday 
and only wound up giving a dollar back after making a nice 
bounce at $50.  PWAV has regained the support of its 5-dma, 
which is currently at $54.75 and is quickly gaining on its 
10-dma of $59.  Though today's volume was roughly half of 
the daily average, it appears that PWAV is working for a 
trend reversal.  Therefore, we are going to jump ship and 
turn our attention to other more profitable plays.



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

SONE $85.50 +0.25 (+1.50) I think I can, I think I can.  That 
pretty much summarizes SONE as it has tried for the past 2 days 
to re-establish its upward momentum, and break out of the range 
between $84-88.  Excursions to the upper end of this range 
continue to be met by sellers and likewise, trips to the bottom 
of the range are met by sellers.  Volume is running just about 
average, which causes us some concern with the interest today 
in other B2B issues.  We would have liked to see more strength 
in SONE with the healthy move in the NASDAQ today, but perhaps 
it is still digesting its gains from the past two weeks.  An 
encouraging note is that sellers have been unable to push SONE 
below the 5-dma (currently near $81), leading us to believe a 
breakout may be close.  Now that the FED decision is past and 
has proved itself to be a non-issue, the wild card for the rest
of the week will be volume.  Will interest in the tech issues 
continue, or will traders relax?  Only time will tell.  On 
Monday, Raymond James raised their rating on SONE from Accumulate 
to Buy.  Going forward, the game plan is much the same; look 
for a bounce near the 5-dma accompanied by volume before opening 
new positions.  Entries could also be considered if SONE breaks 
above resistance near $88 on strong volume.  As usual, for those 
holding open positions, keep those stops in place.  In the event 
of a market pullback, SONE could fall all the way to the 10-dma, 
near $70.
 
DCLK $216.50 +15.13 (+11.56) DCLK decided to join the split 
party with by announcing a 2:1 stock split after the close on 
Monday.  They are just one in the long list of companies that 
are in need of a stock split with mounting gains in the Nasdaq.  
The bonus for our DCLK play is a close ex-date.  DCLK will be 
splitting their shares on Jan 10th.  We would normally consider 
closing out a play and jumping back in closer to the ex-date, 
but that may not be necessary here.  Do use caution as stocks 
tend to sell-off after the announcement if they had a run up 
in anticipation of a split.  DCLK has good support at $200 on 
any pullback, otherwise continue to ride the momentum.  

STM $148.00 +4.38 (+9.00) STM continues to make gains on the 
open each day as STM has gapped up everyday since last Thursday. 
It's the intraday moves are lacking, but it has been able to 
hold the gains from the gap open.  There is no real news to 
drive STM which is ok because investors are obviously still 
interested.  We would like more volume but are content as long 
as the current trend remains in tact.  STM has support at $139, 
but we would definitely wait for a bounce before opening new 
plays if it retreats that far.  On Monday they announced a new 
R&D program with Hewlett-Packard to develop a technology platform 
based on Very Long Instruction Word (VLIW) technology.  Keep 
close to the sell button in case we get a pullback from today's 
record run in the markets.

NXLK $91.38 +15.88 (+19.38) Nextlink continues to drive 
forward into new high ground.  In fact, if you take a look at 
the chart you will notice that the uptrend is getting steeper.  
This is a good sign for the potential for more profits for 
call buyers.  Yesterday's trading was solid with the stock 
closing just an eighth below the high for the day at $75.50.  
The follow through today has resulted in yet another new high.  
The acceleration of buying into the close was extraordinary.  
At the time of this writing there was not any news to explain 
the 10 point rally into the close.  In the news, yesterday, 
Nextlink announced the appointment of a new President and COO.  
Nate Davis was previously an Executive Vice President with 
Nextel.  The guy barely needs to change his letterhead.  Where 
is he going to retire, Next Level Communications?  Seriously 
though, investors are pleased with the announcement evidenced 
by yesterday's rally.  At this stage of the game it would 
probably be a good idea to take profits on a gap up opening 
tomorrow with the intention to buy again on a pullback.  
Trading should be pretty light after tomorrow morning.  A pull 
back to $83, which would be a 50% retracement of today's rally 
would be a good entry point for the next possible run into new 
high ground.

INSP $173.50 +16.00 (+6.81) After an inside trading day 
yesterday (a lower high and a higher low than the previous 
day), INSP made a solid move to break above the trading range 
of the past two days and closed on its high print of the day.  
For these reasons our confidence is greater now in the belief 
that the next stop for INSP will be a test of the old highs 
at $181.  The company announced that it has integrated 
Microsoft's Instant Messenger with INSP's Instant Messaging 
Service.  The service will give users the ability to send and 
receive instant messages anytime, anywhere and on any device.  
If INSP gaps up tomorrow expect a test of $181.  A break above 
that price and INSP could have a very nice run.  Please be 
cautious if volume starts to get light tomorrow.  If the 
traders are going home early, momentum stocks could drift 
lower.  The split date for INSP is January 4th and pullbacks 
can be bought with caution.  As always keep your stops in 
there. 

TTN $42.00 +4.38 (+7.56) Titan keeps stomping into greener 
pastures.  Investors catching up on their financial news have 
really taken a liking to Titan's new meat irradiation business 
that was approved last week by the USFDA.  The stock has 
rallied sharply for two days now.  With the holidays 
approaching, it would not be a bad idea for traders to take 
profits if we can get a third gap up opening in row.  A 
pullback could prove to be an excellent opportunity to put on 
new positions.  If the stock starts trading above today's high 
of $42.50 it could run for a couple more points.  Buying the 
stock tomorrow if it breaks to new highs would be very 
aggressive but it could be potentially profitable.  Just be 
careful of pullbacks.  A less aggressive investor can try and 
pick up the stock if it pulls back to support in the $35 area 
where there is some short-term support.


********************************************
PICK NEWS - CALLS - CONTINUED IN SECTION TWO
********************************************



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

The Option Investor Newsletter         Tuesday 12-21-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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

BVSN $136.13 +10.13 (+7.13) Broadvision took back $3 during 
Monday's session, finding resistance at $135 in the first half
of the session and $130 late day.  Today, BVSN made a good move
up in the morning, hitting its head at $135 once again, and
quickly pulling back to revisit resistance at $130.  BVSN found
some legs to make another run, finally managing a breakthrough 
and a close above $135 at the end of the session.  The $135 
level has been providing formidable resistance for the last two
sessions and we view today's finish as a good indication of 
BVSN's continuing positive momentum run.  BVSN has near term 
support at $130, which is currently BVSN's 5-dma.  BVSN has 
additional support at $125 and $120.  BVSN really wants to run 
and we believe it will do so, particularly as we approach 
earnings on January 18th (unconfirmed).  Make your entries on 
the pullbacks.  Broadvision was ranked number one on Barron's 
Best Internet Companies list in the December 20 issue, citing 
BVSN as the best performer amongst its peers, such as America 
Online, Yahoo!, and Amazon.com.  

VRTS $123.94 -1.44 (+6.47) The software sector got back on track
today.  Shares of VRTS have certainly had a nice beginning for
the week as well.  VRTS gained $7.91 Monday on light volume of 
2.6 of million shares.  Traders took back $1.44 today.  The 
volume was a bit higher today at 3.6 million.  A positive for
our play in VRTS is the bounce we saw late this morning at the 
$120 level.  There is really no company specific news in the
last couple of days to account for the moves.  VRTS is a popular 
stock for investors and traders that follow the software sector.
It has split twice so far this year, as has got a great deal of
good press.  With the Fed out of the way, or as out of the way
as we ever get the Fed, VRTS appears poised to let Santa deliver
more profits.  If you joined in this play, $120 area should be 
guide.  Further movement higher would be an opportunity to enter
this play if you haven't already.  As always assess your risk 
profile and sets your stops accordingly. 

NSOL $267.50 +8.81 (+27.56) Sometimes you hit a homerun without
swinging for the fence.  That's pretty much the case with our
play in NSOL.  Monday, on its first day in the Nasdaq 100, 
investors gave the Internet domain registrar quite a warm 
welcome.  NSOL gained $18.75.  Today the warmth continued as 
NSOL added another $8.81 to the price of the company's stock.
NSOL made another run at the $274.50 high it set last Friday, 
right out of the gate today, but fell back to catch its breath.  
Since being selected to our play list, NSOL has run up over $60 
and could be gearing up to make a run into Y2K.  NSOL announced 
a split early in January of this year and they could be preparing 
to do the same next month.  They certainly have the available 
shares to do so.  As for our play, NSOL has intraday support at 
$258.50.  Continued upward movement or a bounce off support 
would be a signal to enter this play.  As you can see, NSOL can 
be an extremely volatile stock and is not a play for everyone. 

TERN $72.75 +0.50 (+2.81) On the bright side TERN did make a 
new high at $75.  The other news is it didn't continue it higher
with the momentum, yet.  At this point it appears as though
the communications company is consolidating for the next leg
up rather than setting up to see any serious profit-taking.
The key as far as support lies at the $70 level.  As long as
shares of TERN can continue to stay above the support level 
on a closing basis, we feel as though TERN should get untracked 
and continue its upward momentum.  TERN did get the support
of analysts at Deutsche Banc Alex Brown on Monday.  They 
reiterated their Strong Buy rating of the company.  They also
estimated 3-5 year growth for the company to be near 75 percent.
With the Brazilian markets opening up as a result of recent 
legislation, we believe that may be just the news the company
needs to continue its upward trek.  Liquidity is going to get
thinner for the balance of the week.  Be careful if you are 
trying to enter a new play in TERN.  Set your price objectives 
and stick with them. 
 
NT $99.44 +6.63 (+8.81) No FED action plus technology sector, 
plus optical category, plus Qtera purchase, plus top pick at 
JP Morgan equals...BREAKOUT!!.  Not content with a nice price 
target upgrade from $85 to $110 from JP Morgan, NT took out 
previous resistance of $94 after the FED announced there would 
be no change in interest rates or bias, and never looked back.  
Volume increased all the way through the close indicating the 
move should continue.  Cash is coming off the sidelines in 
droves, and barring any Y2K glitches (or Y2K inherent volatility), 
NT should keep going.  According to the "old resistance equals 
new support" theory, $94 should be new support.  Resistance at 
this point is more psychological than anything at $100.  The 
sky is still the limit, and volume is the fuel.  Target shooting 
on weakness should work well through the end of the month.  
While it still may be possible to pick up the option with the 
stock in the low $90s, that will be much tougher after today.

NOK $171.38 -0.31 (+1.00) For those of you nervous about the 
lack of movement in NOK following the FED announcement, 
especially since the rest of the market caught fire, take a 
deep breath and relax.  Remember NOK is an ADR whose price is 
determined in European markets.  That said, NOK needs to trade 
in Europe over night to reflect the markets action in the U.S. 
today.  Anybody want to venture a guess as to how the overseas 
markets will trade in the wake of today's rally?  Right, probably 
up.  NOK should look good in our markets tomorrow, assuming no 
catastrophes overnight.  NOK is a growth story that we expect it 
to surprise to the upside when it reports earnings, tentatively 
scheduled for January 30.  NOK is currently a split candidate 
too.  Support is decent at $165 and growing stronger at $170.  
Target shoot to your level of comfort and get set for what we 
think will be a buying spree after the new year.

QCOM $496.88 +30.06 (+41.88) Investors have to be asking 
themselves if QCOM is going to roll over and die soon.  We think 
not.  Shareholders yesterday approved the share reauthorization 
to enable the 4:1 split, with new shares to begin trading on 
December 30 (confirmed with QCOM IR).  We expect the moves to 
continue into the split based on today's continued high volume 
of 6.3 mln shares, 15% over the ADV.  Support?  Forgeddaboudit.  
The closet we can find is intraday at $481-$482.  After that, 
$455.  Don't count on hitting that number anytime soon, as today 
JP Morgan made it a Top Pick raising the price target from $460 
to $570.  Not only that, but Salomon Smith Barney notes that 
they could announce the buyer of their handset division this 
week.  Their likely buyer?  Nokia (wonder where we've heard 
that before)  Target shoot where you feel lucky.  This play 
should be confined to those able to handle a great amount of 
risk.  That said, if you want to hedge that downside risk a bit, 
time premiums are juicy and thus make great covered calls.  
Conclusion: move should continue; buy the dips after you see 
the bounce.

JDSU $278.47 +23.22 (+37.53) Early this morning JDSU broke over 
strong $262 resistance to $265, but couldn't hold and fell back 
to $258 where it traded flat.  That is until the FED announced 
its neutral stance on monetary policy.  At that point, JDSU began 
a strong volume driven assault on its old high of $272.  The 
action tapered then fell for a few minutes from there, before 
finally blasting through convincingly to a new high of $278.47.  
Support, though progressively weaker the higher the price rises, 
can be found at $248, $258, $268.  Given the volume increase 
today to 3.5 mln shares (12% over the ADV), we think the 2:1 
split run may have started today.  Recall that the split occurs 
on December 30.  At that point, we're not likely to see much of a 
post split depression given the increased buying activity 
expected once Y2K proves to be a non-event.  Buying on mid-day 
dips or target shooting will likely give the best entry.  
Otherwise look for the breakout over $280.

YHOO $405.56 +36.06 (+55.56) Following the FED's announcement 
that it would remain neutral on interest rates, investors exhaled 
the contents of their wallets all over this thing.  Why?  Of 
course Internets are typical beneficiaries of positive FED news, 
despite a spike in rates.  Go figure.  The fact is big cap 
Internets have a nice luster to fund managers, and YHOO in 
particular is on a pre earnings run.  January 11 is the announce 
date.  Support is hard to find following the breakout over $355.  
With volume strong (10% over the ADV today), pullbacks are 
temporary with traces of support at $355, $380, and $398.  Buy 
the dips, but beware of quick bouts of profit taking following 
today's stellar performance.  Aside from adrenaline, YHOO is 
running on pure momentum.  The prospect of a split helps too.  
2:1 is historical, but 3:1 appears more likely since enough 
shares are authorized and a 2:1 would still leave a pretty 
expensive price.  As long as sentiment remains in tact, volume 
should continue to drive the price.

AOL $85.00 -1.25 (+1.00)  What?  No gain?  Fear not.  AOL looks to 
be in a consolidation phase.  $84 offers good support on bounces 
and also fits the "old resistance equals new support" theory.  
Why keep it?  Large cap Internets are already emerging as targets 
for institutional managers and should become even more so after 
the first of the year.  Take your time and target shoot for your 
position on intraday dips.  If not $85, $79 is the next level of 
support.  Resistance is at $92 and $96.  Not much news of late as 
AOL's biggest headline today was that it landed on Fortune's list 
of "100 best companies to work for in America".  AOL is flying 
just under the radar, but as soon as volume picks up again 
following this brief pullback, the price should begin another 
ascent into earnings scheduled tentatively on January 19.  

VIGN $153.00 -1.50 (+3.06) We said Sunday the momentum behind 
the recent moves in VIGN would indicate there was more room 
the stock to move higher.  This is another play that offers
great opportunities and possibilities.  It is not a play for 
everyone due to the inflated option premiums.  For those with
the proper account size and a strong heart, VIGN gave us
a great entry point Monday afternoon.  With the move up 
yesterday intraday support is seen at $150.  A drop below that 
level on a closing basis could spell trouble for our play.
Monday's move came on good volume of 1.2 mln.  Today VIGN gave
back only -1.50 for the session on just under 1.0 mln shares.
We still believe the momentum behind this play will continue.
No real news in the last couple of days to move the stock 
in either direction.  With the Fed decision not leave interest
rates unchanged and the bias at a neutral rating, VIGN should
find its way higher going into Y2K.  If you entered this play
keep your stops close as VIGN can move.

INKT $181.00 +18.00 (+9.94) The breakout we had been looking 
for finally happened Tuesday.  As we mentioned sometimes a play
needs to be nurtured and allowed time to develop.  Our split
run play got just the nurturing it needed today.  And you won't
believe from where it came.  Alan Greenspan.  That's right
the Fed boss himself.  With the Fed announcing it was leaving 
interest rates unchanged and the dreaded bias at a neutral
rating shares of INKT took off like a rocket.  INKT bounced off
the $160 area Monday and began to trade higher this morning 
at the opening bell.  When news of the FOMC meeting hit the 
markets INKT gained over $13 in the last two hours of the 
session.  Volume for the day for INKT was strong at just over
2.0 mln. shares.  Today's move should clear the way for our play 
to continue into its 2:1 split on Dec. 31st.  Should we see
a pullback intraday support can be found at $175 and $170.
If you are in a play, assess your risk profile and adjust your 
stops accordingly.



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

ETYS $32.94 -1.88 (-4.63) Can you say entry point?  I knew you 
could.  ETYS is the gift that keeps on giving.  On Monday shares
of the online toy merchant moved right up to resistance at 
$40.25 and then headed south for the rest of the day.  Not only 
did the move occur on strong volume, almost twice the ADV, but 
prices moved right through the $36 support level, closing near 
the low of the day at $34.81.  Proving that there is no rest 
for the wicked, ETYS continued its descent today, not even 
challenging resistance (old support) at $36.  Shortly before 2pm, 
buyers pushed the issue up to $35, but the move didn't last.  
By the time it was all over, sellers had shaved another $1.88 
on triple the ADV, leaving yet another lump of coal for those 
who chose to hold and hope, closing the issue at $32.94.  The 
news continues to be positive, with the Wall Street Journal
reporting that ETYS led a 35% rise in online shopping traffic
last week.  NextCard Inc., the online credit card issuer, ranked 
the top 10 online shopping sites based on purchases made by 
its 135,000 customers and ETYS grabbed the #4 position behind 
Amazon.com, Buy.com, and BarnesandNoble.com.  Consumers continue 
to be pleased with ETYS, but this positive sentiment has failed 
to rub off on investors.  We must use caution going forward, 
as ETYS is very close to long-term support in the $28-29 range.  
This is the 52-week low, and with all of the oscillators, RSI, 
Stochastics, and Momentum moving deeply into oversold territory, 
we are overdue for a bounce.  If volume dries up, the momentum 
of our play will likely not be far behind.

LTR $59.25 -0.63 (-0.69) For all the trading on Monday, LTR 
went nowhere.  Trading in a very tight range on normal volume, 
buyers and sellers fought to a standstill, shaving a mere $0.06 
off of the share price.  Today was a little different with 
stronger volume and sellers definitely winning the day.  On 
1.5 times the ADV, LTR dropped a fraction to close near the 
low at $59.25.  This is particularly bearish considering the 
strength in the overall markets today.  Litigation woes and 
interest rate fears should continue to pull investors away 
from LTR.  Even though the FED left interest rates alone today, 
the consensus is that there will be a raise in February.  In 
the news today, the New York State Assembly is considering a 
doubling of cigarette taxes to pay for a new $2.9 billion health 
care program.  Between this and the announcement that the 
government of Canada is filing suit against big tobacco, LTR 
will be hard-pressed to show any strength in the near future.  
Before opening a new position, confirm prices are continuing to 
head south on good volume.  We may get a bounce up to resistance 
at the 10-dma (currently $60.80), but more likely the weakness 
will continue from here as investors put their money into 
stronger issues.

BMY $60.13 -1.28 (-2.00) Is there anything in the medicine 
chest to cure what ails Bristol-Meyers?  Drug stocks in 
general are getting pummeled to close out the year.  Buying 
appears to be unlikely until January for this sector.  Right 
now the sector is a hotbed of tax loss specials.  Yesterday, 
BMY closed just above its low at $60.  Today after an attempt 
to drag it up with a surging market, BMY again closed right on 
its low for the day at $60.13.  This is a very bearish pattern 
and puts can be bought if Bristol-Meyers trades below $58.88.  
A trade below that price could take the stock down to the next 
support level just above $57.  All of this selling despite the 
fact that BMY received an FDA approval for their antibiotic, 
Tequin.  Potential sales for this new drug could exceed $60 
million next year.

GILD $40.63 +3.38 (+2.50) Time to start watching Gilead 
Sciences very cautiously.  Today's rally was very strong.  It 
was a case of selling the news.  Bad news that is.  It works 
both ways.  GILD settled a patent dispute with biotech 
heavyweight Chiron.  GILD admitted to violating three of 
Chiron's patents for their hepatitis C drugs.  As a result, 
Gilead assigned Chiron a co-ownership interest to all of 
Gilead's hepatitis C virus research results.  Perhaps 
investors are happy that the case was settled, thus reducing 
litigation costs.  In the long run it can not be a good thing 
that Gilead now has to share research results with Chiron.  
Most importantly for put holders of Gilead is that the stock 
rallied right into a brick wall of resistance at $41.  You can 
buy puts at this level.  If the stock trades above $41.25 the 
next stop could very well be $45, the next level of resistance.  
Therefore, put holders should use the $41.25 level as a good 
place to put stops.  If Gilead fails to climb higher look for 
a retest of the low at $37 where we will determine if it is 
time to take profits.

WB $68.19 +1.50 (+2.19) Wachovia has had two positive days in 
a row, but we are not convinced that this is a reversal of WB's 
long time downward trend.  The financials had a good day overall 
thanks to the Fed's decision to keep rates steady and maintain a 
neutral stance.  WB made a good move up early on but struggled 
with the $68 level.  We are looking at this recent move up as 
a potential for some good points of entry.  WB has its 10-dma 
providing resistance right around $70.  With $70 being such a 
strong psychological number as well, we expect this level to 
hold.  WB does have some weak support at its 5-dma of $68 with 
additional support at $66 and $60.  Should the above referenced 
resistance levels hold we could be cleared for a healthy fall 
and with some nice opportunities for new entries.  

GT $25.50 -0.94 (-1.56) Goodyear just can't seem to get a grip.  
This really is the picture perfect put play.  Monday, GT lost 
another $0.63 and continually found resistance at $27.  Today, 
GT made another good move down and dropped to close below $26.  
Good volume continues to back GT's decline, which as we mentioned 
on Sunday, is most likely indicative of some end of the year 
portfolio clean up.  GT's next real level of support is at $20.  
GT's 5 and 10-dma are still providing immediate resistance right 
around $27.  GT has further resistance at $30.  Being that GT 
typically opens at the high of the day and steadily declines 
for the remainder of the session, try and time new entries to 
the earlier part of the day.  An article released on Sunday 
reported an expected increase in profit for Sumitomo Rubber 
Industries through its alliance with GT, which was formed last 
June.  Sumitomo did not revise its 1999 earnings forecast.  GT 
and Sumitomo inked a deal to form a global alliance by forming 
joint venture operating companies in North America, Europe, 
and Japan. 

KIDE $33.13 -1.94 (-3.25) KIDE continued its decline on Monday 
and decided to close just above its low for the day of $35.  
KIDE has spent a few days toying with the $35 support level 
and this morning, finally took the plunge.  Once KIDE made the
breakthrough, it made a quick drop down to the low of the day,  
$31.25.  KIDE spent the remainder of the session flirting with 
$32.50.  KIDE is approaching some solid support right around $30 
and it is quite possible that we are going to see a bounce in 
the near future.  New entries are extremely risky at this point 
and we would recommend waiting for a bounce backed by holding 
support and a reclamation of negative momentum before making 
any new moves.   KIDE could run into some resistance at $35 
and has resistance at its 10-dma of $39.50.   



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

No new call plays tonight.


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

EK - Eastman Kodak Company $57.38 -2.94 (-3.75 this week)

Eastman Kodak Company is engaged in developing, manufacturing,
and marketing consumer, professional, health and other imaging
products around the world. The company has four operating 
segments: Consumer Imaging, Kodak Professional, Health Imaging,
and Other Imaging. Primarily all of these divisions are in 
the business of selling photographic supplies and equipment. 
Their main competitor is Fuji.

Time to revisit this stumbling behemoth.  A couple of weeks ago 
we grew weary of waiting for EK to break down.  Well, now it is 
happening.  It all goes back to the perception that EK's 
management is clueless to the new paradigm that drives the 
prices of publicly held stocks.  Despite being a leader in 
digital photographic technologies, Kodak seems to cling to its 
old technologies, at least in the sense of how they portray 
themselves.  It is possible that there is a lot of fear in the 
halls down at headquarters about how they will be able to 
replace the bulk of their revenues from the old standards.  
Until Kodak redefines itself as a cutting edge innovative new 
technology company and stops emphasizing their stodgy old 
commodities business the shares will continue to underperform 
the market.  Our current goal here is to try and capture the 
last week of tax loss selling before value investors start to 
build a bottom for the stock in January.  After making a new 
low today very few institutional investors want a position in 
Kodak on their books to clutter up their otherwise stellar 
year.  Kodak had very major support, going all the way back 
to December 1997, at the high $57 to $58 range.  Puts can be 
purchased here.  Confirmation of the downtrend and good put 
profits may be had if the stock trades below today's low of 
$56.63.

BUY PUT JAN-65*EK-XM OI=5069 at $7.75 SL=5.75
BUY PUT JAN-60 EK-ML OI=9472 at $3.50 SL=1.75

Average Daily Volume = 1.13 mln
Chart = http://quote.yahoo.com/q?s=EK&d=3m




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

NT - Nortel Networks $99.25 +6.44 (+8.81 this week)

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.

Sundays Write Up

Not much changed since Thursday's update, which is to say that 
following the breakout early last week, NT remained fairly flat 
in the $89 to $92 range.  As the largest provider of Optical 
networking equipment ahead of Lucent, and anticipating $10 bln 
in sales of optical equipment alone in 2000 (which could account 
for up to 30% of NT's business), NT expects this segment of its 
business to grow more rapidly than any of its other divisions.  
Compared to its peers, it's still reasonably priced too, which 
has fund managers salivating (evidenced by strong volume above 
the ADV of 4.3 mln shares).  20% growth rate and increasing 
margins don't hurt either.  Support is currently mild at $90 and 
gets stronger in descending $2 increments ($89, $87, and $85).  
If it drops below $85, it will likely do so with strong volume 
since that's where the most recent breakout occurred, in which 
case you may want to make an exit or stand aside.  Feel free to 
target shoot to your comfort level.  Just make sure there is 
volume in the issue - weak with descending price is OK; strong 
and descending indicates institutional selling.  Weak volume, 
but ascending price should prepare you for the exits; average 
to strong volume and ascending price is ideal.  Resistance is 
$92.50; breakout occurs at $94.  We suggest target shooting in 
the $80's or waiting for the breakout.  Also, despite the 30% 
greater return for every $1 NT gains, we are dropping the Clarify 
(CLFY) strikes because they are so thinly traded and the spreads 
eat up the profits.  NT is also a split candidate at these 
levels.  A likely announcement date would be with earnings 
tentatively scheduled for January 25.

In the news, NT agreed to purchase Qtera, a company developing a 
technology that will allow an optical signal to travel further 
without regeneration.  Purchase price: $3.5 bln.  NT also took 
a position in a small DSL provider (Log On America) for $5 mln.  
NT will sell them $47 mln worth of DSL equipment for starters.

Tuesday's Write Up

No FED action plus technology sector, plus optical category, 
plus Qtera purchase, plus top pick at JP Morgan equals...
BREAKOUT!!.  Not content with a nice price target upgrade 
from $85 to $110 from JP Morgan, NT took out previous resistance 
of $94 after the FED announced there would be no change in 
interest rates or bias, and never looked back.  Volume increased 
all the way through the close indicating the move should 
continue.  Cash is coming off the sidelines in droves, and 
barring any Y2K glitches (or Y2K inherent volatility), NT should 
keep going.  According to the "old resistance equals new support" 
theory, $94 should be new support.  Resistance at this point is 
more psychological than anything at $100.  The sky is still the 
limit, and volume is the fuel.  Target shooting on weakness 
should work well through the end of the month.  While it still 
may be possible to pick up the option with the stock in the low 
$90s, that will be much tougher after today.

BUY CALL JAN-85*NT-AQ OI=1718 at $17.00 SL=13.25
BUY CALL JAN-90 NT-AR OI=2939 at $13.00 SL=10.00
BUY CALL JAN-95 NT-AS OI=1375 at $ 9.75 SL= 7.50
BUY CALL FEB-90 NT-BR OI= 101 at $15.50 SL=12.00
BUY CALL FEB-95 NT-BS OI= 124 at $12.38 SL= 9.50

Picked on Nov 7th at    $68.81     P/E = 580
Change since picked     +30.44     52-week high=$99.63
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 = 4.3 mln
Chart = http://quote.yahoo.com/q?s=NT&d=3m



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

In This Case, No Move Is The Best Move..

Monday, December 21

In the battle for market supremacy, blue-chip stocks were ousted
by technology issues as bond rates climbed to two-year highs. The
Dow Jones Industrial Average closed near session lows, down 113
points at 11,144 while the Nasdaq composite posted another day of
records, up 30 points to 3,783. The tech-driven index has gained
more than 70% this year. The S&P 500 index was down 3 points at
1,418. Volume was heavy with 902 million shares traded on the Big
Board. Market breadth was negative with declining issues leading
advancers 1,813 to 1,295. The yield on the 30-year Treasury bond
rose to 6.44%, its highest since October, 1997.

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

Vodaphone       VOD   LJAN45/JAN50C  $10.00  debit   LEAPS/CC's 
Newmont Gold    NEM   JAN20C/JAN22C  $1.93   debit   bull-call 
On Health       ONHN  APR7C/JAN10C   $2.12   debit   diagonal 	
C.R. Bard       BCR   JAN65C/JAN60C  $0.38   credit  bear-call 
C.R. Bard       BCR   JAN65C/JAN55C  $1.56   credit  bear-call
Telephone Data  TDS   JAN150C/J145C  $0.50   credit  bear-call
Telephone Data  TDS   JAN150C/J140C  $1.38   credit  bear-call

Today's session provided some excellent entry opportunities for
our new spread candidates. On Health Network was the only play
that required adjustment as the prices for the (long) position
opened significantly lower than Friday's quotes. The difference
offered a slightly better opening debit on the bullish diagonal
spread. In the bear-call scenarios, we chose the conservative
positions.


Portfolio plays:

Technology stocks continued their record run today but financial
issues turned negative as bonds weakened and Tuesday's Federal
Reserve meeting weighed heavily on investors. Most analysts say
the Fed will leave interest rates unchanged but could shift from
a neutral bias to a tightening one to indicate a leaning toward
boosting rates again in the new year. Traces of inflation have yet
to slow the booming telecommunications industry and our leading
issue today was Motorola (MOT). The stock climbed over $6 to end
at a new all-time (closing) high of $137 amid optimism that those
types of businesses will become more profitable next year. J.P.
Morgan Securities analyst Greg Geiling said earnings estimates for
Motorola could rise next year as the company boosts operating
margins in its chip and cellular-phone businesses. He now expects
Motorola shares to climb to $165 within a year.

Computer-based industries continue to shine and today's portfolio
winners included Computer Associates (CA) and Solectron (SLR). The
Computer Associates rally came after the company was rated a new
"buy" by analysts at Jackson Partners & Associates. The 12-month
target price is $73.00 per share. Another boost came as SmartMoney
magazine named CA in its twelve favorite stocks for the year ahead.
Solectron's move may have been purely a technical rebound from the 
recent sell-off but it appears the issue has strong support near
our sold (short) strike price. The bullish LEAPS/CC's spread has
been one of our more profitable plays in the last few months. The
Unisys (UIS) recovery has been much better than expected and today
the issue moved up another $1.00 to close at $31.75. The lawsuits
are still pouring in, but none of the current investors appear to
notice and any settlement is years in the future. In the interim,
the company is focusing on increasing market share and that has
boosted the rebounding stock value in past weeks. Internet issues
performed well in Monday's session and one of our most surprising
plays was YouthStream Media Networks (NETS). The issue moved up
$3.25 to close near a new high at $31.25 on speculation about a
possible Disney deal. Our bullish position is profitable above $25.

One of the few "non-technology" groups that continues to make a
broad recovery is the Consumer Cyclicals. Our most recent addition
to this group is Navistar (NAV) and both new positions moved into 
profitable territory during Monday's rally. The bullish diagonal
spread, JUL35C/JAN45C now has a $1 credit and the JAN40C/45C debit
position can be closed for a $2.62 profit. General Motors (GM) is
another automotive stock that has made a solid recovery from lows
in October and both of our long-term positions are now profitable.
Our new LEAPS/CC's play on United Airlines (UAL) has exceeded all 
expectations and today the issue moved up $2.38 with the bullish
transport sector. The stock finished at $77.50, a recent high and
both of our new plays are at maximum profit. 
 
Tuesday, December 21

Stocks rallied across the board as investors applauded the Federal 
Reserve's decision to hold interest rates steady. The blue-chips
ended up 56 points at 11,200 after being in negative territory for
most of the session. The technology-driven Nasdaq composite index
enjoyed another awesome day, soaring 127 points to 3,911. Even the
broader S&P 500 index was up almost 16 points, finishing at 1,433.
The yield on the benchmark 30-year Treasury bond rose to 6.45%,
its highest level in more than two years.

Portfolio plays:

Today's session included a number of blowouts in the Internet
group and while our portfolio was a bit more docile, we did have
some big winners. Priceline.com (PCLN) climbed $3.38 to $59.50 as
the online commerce stocks blossomed during the rally. Our current
"bull-call" spread (JAN50C/60C) is profitable with the stock above
$56 and the rebound may be an indication of new interest in the
issue. Another leading sector is Wireless Communications and our
top position in this group is Qwest (QWST). Today the stock rose
over $3 to a recent high near $44 after the company announced that
it will move to the New York Stock Exchange. It will trade on the
Big Board beginning 1/3/00 under the symbol Q. Our bullish debit
spread is now $9 in-the-money and the position profit is 15% after
just two weeks. Another recent addition to the bull-call portfolio
is PanamSat (SPOT) and today the issue exceeded all expectations
closing at a new 52-week high. Both positions on this issue are
now profitable and we expect the share value to move higher in the
coming weeks.

Small-cap stocks have lagged the broad market but fortunately,
most of our low-cost issues continue to profit from the incredible
interest in options. One of our newest (bullish) speculation plays
is On Health Networks (ONHN) and in just two days, the position
has become profitable. Today the stock hit a recent high of $13.50
during the rally in Internet issues. Another of the best performing
stocks in past weeks is Peoplesoft (PSFT) and share value in the
computer software company rose $1.38 to a 26-week high of $23. The
move put our Covered-combination (JAN-$15) at maximum profit and
the remaining long position from last month's diagonal spread
closed easily at $5.50 credit.

The long-term portfolio continues to suffer from profit-taking in
many issues but Motorola (MOT) remained in excellent form, rising
almost $4 to a new high near $138. The move came on momentum from
the recent upgrade by a J.P. Morgan. A JPM analyst said he expects
a healthy fourth quarter from the telecom equipment industry and
added that the outlook for capital spending in 2000 appears very
robust. The key product areas expected to drive revenue growth are
wireless handsets and infrastructure services. Computer Associates
(CA) also continued its winning ways with a $1.62 move to close at
$64. The rally places the issue at our sold (short) strike and the
maximum profit area in our bullish LEAPS/CC's play. Past winners
Solectron (SLR) and Sun Microsystems (SUNW) made favorable moves
in today's session. Solectron closed at the top of a recent range
near $89 and Sun Microsystems is successfully testing a post-split
sell-off with buying on each drop to the $73 area.

One of our most unimpressive plays has been American International
Group (AIG). Today the issue rebounded to a midday high near $105
but that is far short of the original target and the chart pattern
is now technically unfavorable. Our current plan is to watch the
renewed bullish trend for continued signs of selling into strength
and if the stock fails to hold the short-term moving average, we
will close the long positions to protect the remaining capital.

Straddles:

It's been a great month for the Straddle Portfolio as many of the
previously tame issues have come to life with the market's renewed
volatility. Our leading performer was Lycos (LCOS) with a $30 move
over the past three weeks. Our profit in the position was $18 on
$14.62 invested for a gain in excess of 100%. Another 100%+ return
came from the Station Casinos (STN) position with a $7.75 maximum
credit on $3.75 invested. Straddles with significant profits in
the past month include Cullen Frost Bankers (CFR), a $1.93 profit
on $3.06 debit; Mylan Laboratories (MYL), $2.68 returned on $4.56
invested; Allegheny (ATI) with $0.88 profit on $2.50 debit and our
most recent winner, Univision (UVN) which is now offering a $17.00 
credit against an original cost basis of $14.75. We expect that
issue to move higher in the coming weeks, now that it is trading
at new all-time highs. Jones Pharmaceuticals (JMED) has also made
some big moves over the past few days and that position is now
profitable.


Summary Of Monthly Positions:

***********************
CALENDAR SPREAD SUMMARY
***********************

Stock  Pick    Last      Position    Debit  Value    G/L   Status

ABTE  $10.81  $7.66   MAR10C/DEC10C  $1.00  $1.00   $0.00  Closed
BEL   $64.13  $64.94  APR65C/JAN65C ($2.00) $2.00   $4.00   Open
BIDS  $5.06   $5.25    MAY7C/JAN7C   $0.62  $0.62   $0.00   Open
CHB   $9.62   $7.94   APR10C/JAN10C  $0.81  $0.50  ($0.31)  Open
CYCH  $11.88  $9.94   MAR15C/JAN15C  $0.75  $0.50  ($0.25)  Open
CTIX  $19.12  $12.50  JAN22C/DEC22C  $1.12  $0.50  ($0.62) Closed
DLP   $26.63  $17.19  FEB30P/JAN30P  $1.25  $1.12  ($0.12) Closed
ELON  $9.00   $13.00  MAY10C/DEC10C  $1.25  $2.38   $1.12  Closed
FO    $33.38  $31.81  JAN35C/DEC35C  $0.68  $0.62  ($0.06) Closed
GERN  $13.00  $12.00  MAR12C/JAN12C  $0.62  $0.50  ($0.12)  Open
LGE   $22.69  $18.13  MAR22C/DEC22C  $0.88  $0.38  ($0.50) Closed
LOR   $18.00  $16.69  APR20C/JAN20C  $1.25  $1.25   $0.00   Open
MUEI  $10.50  $12.13  APR12C/JAN12C ($0.50) $0.75   $1.25   Open
OXY   $21.69  $20.50  JAN22C/DEC22C ($0.50) $0.38   $0.88  Closed
PILL  $13.62  $11.50  APR15C/JAN15C  $1.00  $0.88  ($0.12)  Open
PSFT  $16.19  $21.06  JAN17C/DEC20C  $0.38  $3.00   $2.62   Open
SATH  $13.00  $11.88  FEB15C/JAN15C  $0.38  $0.50   $0.12   Open
SGI   $9.38   $9.44   FEB10C/JAN10C  $0.31  $0.38   $0.06   Open
SWBT  $19.93  $19.75  MAY20C/JAN20C  $0.93  $1.00   $0.06   Open
TALK  $13.75  $14.88  JAN15C/DEC17C  $1.38  $2.25   $0.88  Closed
TDFX  $8.50   $9.22   MAR10C/JAN10C  $0.12  $0.50   $0.38   Open
TOY   $16.62  $14.88  JAN17C/DEC17C  $0.12  $0.88   $0.75  Closed
ZOLT  $7.68   $9.88   APR7C/JAN10C   $1.62  $2.00   $0.38   Open

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position. However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new option against the long position, the
net cost should decline or the position value should increase.


************************
COVERED-CALLS WITH LEAPS
************************

Stock  Pick    Last     Position     Debit  Value    G/L   Status

ADBE  $76.13  $67.50  JAN80/JAN80C  $7.50   $6.00  ($1.50)  Open
CA    $53.56  $59.63  JAN60/JAN65C  $4.88  $11.12   $6.25   Open
CS    $16.80  $28.50  JAN15/JAN22C  $5.75   $7.75   $2.00   Open
GM    $71.68  $71.00  JAN75/JAN75C  $8.25   $8.75   $0.50  Closed
GM    $71.68  $71.00  JAN75/JAN75C  $5.50   $8.75   $3.25   Open
JNJ   $95.68  $94.88  JAN100/J100C  $3.12   $9.50   $6.38   Open
MDT   $39.38  $33.56  JAN37/JAN40C  $4.25   $4.38   $0.12   Open
MOT  $100.00  $131.56 JAN105/J120C $18.00  $25.88   $7.88   Open
PG   $109.50  $106.25 JAN100/J110C $14.88  $17.50   $2.62   Open
SBC   $54.93  $51.38  JAN40/JAN55C $15.00  $13.50   $1.50   Open
SLR   $71.25  $85.00  JAN70/JAN85C $15.50  $20.00   $4.50   Open
SUNW  $35.88  $75.13  JAN37/JAN70C $24.00  $31.50   $7.50   Open
UAL   $70.38  $75.00  JAN60/JAN70C $13.25  $14.25   $1.00   Open
UAL   $70.38  $75.00  JAN75/JAN75C  $6.75   $9.38   $2.62   Open
XOM   $81.94  $82.63  JAN85/JAN85C  $4.75   $7.38   $2.62   Open

* New LEAPS/Covered-Calls plays are generally not profitable for
  at least two strike periods.


***********************
DIAGONAL SPREAD SUMMARY
***********************

Stock  Pick    Last      Position    Debit   Value    G/L   Status

AG    $13.75  $12.19  FEB12C/JAN15C  $1.50   $1.00  ($0.50)  Open
AGTX  $8.88   $9.63    JUN7C/JAN10C  $2.31    NEW     PLAY   Open
AMTD  $21.93  $25.38  JAN21C/DEC25C  $2.88   $3.38   $0.50  Closed
ATHM  $51.31  $47.88  JAN37C/DEC55C $13.25  $13.50   $0.25  Closed
ATHM  $48.06  $47.88  JAN40C/DEC50C  $5.50   $9.00   $3.50  Closed
AWEB  $9.68   $12.50  MAY10C/DEC12C  $2.38   $3.38   $1.00  Closed
AWEB  $9.68   $12.50  MAY10C/JAN12C  $0.88   $2.50   $1.62   Open
COHU  $29.25  $29.06  FEB25C/JAN30C  $2.88   $2.62  ($0.12)  Open
COMS  $25.31  $48.75  JAN27C/DEC30C  $0.38   $2.50   $2.12  Closed
DLP   $26.63  $17.19  FEB30P/JAN25P  $3.25   $4.50   $1.25   Open
EGRP  $24.94  $30.06  APR25C/JAN30C  $3.75   $5.12   $1.38   Open
KM    $10.00  $11.19   JUN7C/JAN10C  $2.25   $2.62   $0.38   Open
NAV   $41.31  $44.13  JUL35C/JAN45C  $9.06   $9.12   $0.06   Open
NETS  $25.06  $28.00  FEB22C/JAN25C  $0.62   $2.12   $1.50   Open
NTBK  $21.75  $21.63  JAN22C/DEC25C  $2.00   $2.62   $0.62  Closed
PTX   $5.38   $6.00    MAY5C/JAN7C   $1.38   $1.50   $0.12   Open
T     $50.81  $53.63  JAN46C/DEC50C  $3.25   $3.75   $0.50   Open
UIS   $29.25  $30.75  APR22C/JAN30C  $4.88   $6.38   $1.50   Open

The diagonal spread is profitable if the value of the position
exceeds the initial debit (or cost-basis) at the expiration of
the long position. However, because we track the plays based on
the current closing cost/value, the gains for diagonal spreads
will rarely be reflected until the play closes. Each month, as
we sell a new option against the long position, the net cost
should decline or the position value should increase.


*************
DEBIT SPREADS
*************

Stock  Pick     Last     Position   Debit   Value    G/L   Status

AIG  $111.68  $103.50  JAN96C/J110C $10.88  $7.00  ($3.88)  Open
AIG  $111.68  $103.50  JAN104/J110C $4.62   $2.12  ($2.50)  Open
ATHM  $51.31  $47.88    DEC35C/45C  $9.12   $9.38   $0.25  Closed
BCR   $52.43  $49.00    DEC60P/55P  $4.31   $5.00   $0.68  Closed
CD    $18.50  $25.00    JAN12C/17C  $4.06   $4.75   $0.68   Open
COMS  $31.50  $48.75    JAN30C/32C  $1.31   $2.50   $1.18   Open
KNT   $23.75  $22.44    DEC20C/22C  $2.00   $2.43   $0.43  Closed
LCOS  $64.00  $80.94    JAN47C/55C  $5.75   $7.50   $2.75   Open
MEL   $39.19  $33.13    DEC37C/40C  $1.38   $1.00  ($0.38) Closed
MESG  $13.38  $14.38    DEC10C/12C  $1.50   $2.50   $1.00  Closed
NAV   $41.31  $44.13    JAN40C/45C  $0.62   $1.50   $0.88   Open
NETA  $19.80  $25.13    DEC12C/17C  $3.62   $5.00   $1.38  Closed
NTBK  $21.75  $21.63    JAN22C/25C  $0.25   $0.75   $0.50   Open
NVDA  $28.25  $37.63    DEC20C/25C  $3.50   $5.00   $1.50  Closed
PCLN  $65.06  $56.94    JAN50C/60C  $6.88   $5.75  ($1.12)  Open
QWST  $38.06  $41.69    JAN30C/35C  $4.00   $4.50   $0.50   Open
QWST  $38.06  $41.69    DEC35C/37C  $2.00   $2.50   $0.50  Closed
REV   $10.25  $7.50     JAN7C/10C   $1.50   $1.00  ($0.50) Closed
T     $50.81  $53.63    JAN46C/50C  $2.25   $2.50   $0.25   Open
TVGLA $64.12  $77.00    DEC45C/60C  $13.25  $15.00  $1.75  Closed
TWE   $16.63  $16.69    DEC12C/15C  $2.12   $2.50   $0.38  Closed
TWLB  $9.72   $9.09     FEB10C/12C  $0.75   $0.38  ($0.38)  Open
UIS   $29.25  $30.75    DEC25C/27C  $2.12   $2.50   $0.38  Closed

* Many of these positions were closed early to protect profits
  or prevent (limit) potential losses.

A debit-spread is profitable if the value of the position exceeds
the initial cost of the spread when the play is closed. However,
because we track plays based on the current cost/value, potential
gains may not be reflected until both positions are closed.


*********************
CREDIT SPREAD SUMMARY
*********************

Stock   Pick    Last    Position   Credit  Cost    G/L    Status

ETEK   $73.12  $90.25  DEC55P/60P  $0.43  $0.00   $0.43   Closed
ITVU   $64.50  $88.00  DEC40P/45P  $0.62  $0.00   $0.62   Closed
VRTY   $52.75  $33.38  DEC40P/42P  $0.68  $1.00  ($0.31)  Closed

Credit spreads are profitable if both positions remain OTM until
expiration. The cost-to-close price can be used to compare the
initial opening credit to the current spread value.


******************************
COVERED CALLS AND COMBINATIONS
******************************

Stock  Pick    Last     Position     Debit   Value   G/L   Status

DLP   $23.56  $17.19    JAN17CC     $16.00  $14.75 ($1.25)  Open
PIXR  $40.50  $39.69  DEC35CC/35NP  $32.62  $35.00  $2.38  Closed
PSFT  $17.81  $21.06    JAN15CC     $14.12  $15.00  $0.88   Open

A covered-call or combination is profitable if the closing credit
from the position is greater than the initial cost-basis.


***************
DEBIT STRADDLES
***************

Stock  Pick    Last     Position    Debit    M/V     C/V    Status

ALL   $24.50  $24.44   APR25C/25P   $5.50   $7.25   $4.38    Open
ATI   $16.44  $21.94   APR17C/15P   $2.50   $3.38   $3.00    Open
AMES  $31.63  $32.50   JAN30C/30P   $8.88   $9.62   $6.00   Closed
CAL   $36.43  $41.44   MAR35C/35P   $8.62   $9.00   $8.25    Open
CBR   $27.19  $28.00   MAY25C/30P  $10.25    New     Play    Open
CFR   $29.69  $25.25   MAR30C/30P   $3.06   $4.75   $4.75    Open
DLJ   $50.13  $47.38   JAN50C/50P  $13.25   $14.00  $8.75   Closed
FDX   $35.19  $40.00   APR35C/35P   $9.75   $13.12  $9.75    Open
JMED  $38.65  $38.94   MAR37C/40P   $8.12    New     Play    Open
MYL   $18.63  $20.44   APR17C/17P   $4.56   $7.25   $4.88    Open
STN   $25.25  $17.50   JAN25C/25P   $3.75   $7.75   $7.50   Closed
U     $25.62  $30.31   MAY25C25P    $8.00   $10.75  $7.75    Open
UVN   $85.75  $95.19   MAR85C/85P  $14.75   $15.38  $15.25   Open
WMB   $40.75  $29.06   JAN40C/40P   $8.12   $10.88  $10.75  Closed
LCOS  $58.94  $80.94   JAN70C/70P  $14.62   $33.00  $20.38  Closed

          M/V = Maximum Value  C/V = Current Value

A debit-straddle is profitable when the value of the position
exceeds the initial cost of the spread.

****

Note: We trade the 'Spreads' portfolio just as we would trade our
personal account and the ongoing narrative is a service we provide
to help novice traders understand how various positions might be
opened and closed. It is not intended as a substitute for your own
trading techniques nor does it replace your duty to manage the
positions in your portfolio. We post a list of the current plays
after each expiration period and the summary is a reasonable
representation of the positions offered during the month.

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


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

STAT - I-Stat Corporation     *** New 52-week High ***

I-Stat develops, manufactures and markets medical diagnostic
products for blood analysis that provide health professionals
with immediate and accurate critical diagnostic information at
the point of patient care. The company's products, known as the
i-STAT System, consist of portable, hand-held analyzers and
single-use, disposable cartridges, each of which simultaneously
performs different combinations of commonly ordered blood tests
in a short time period.

Merger-mania is in full swing and the recent deals with Monsanto
(MTC) and Pharmacia & Upjohn (PNU) along with the American Home
Products (AHP), Warner-Lambert (WLA), Pfizer (PFE) melee have
brought new interest into the sector. In this case, the failed
agreement by Alza (ALZA) and Abbott Laboratories (ABT) has made
I-Stat a new target for Abbott, one of the larger companies in
the group. Last week, Alza and Abbott called off their merger
deal, citing regulatory concerns by the Federal Trade Commission.
Now the focus is shifting to other acquisitions that might bring
Abbott, a recently beleaguered drug manufacturer, back to the
forefront of the industry.

Technically, the I-Stat break-out is very strong and the health
of the long-term pattern is excellent. A number of new, positive
indications suggest that the current move will find support near
$14, just below our opening cost basis. We expect to close (and
roll forward) the short $15 call after a portion of the time
premium erodes but in the event the stock continues higher, the
long option will be exercised (at January expiration) for a small
profit.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL APR-10 TAQ-DB OI=5   A=$6.50
SELL CALL JAN-15 TAQ-AC OI=191 B=$1.68
MAXIMUM INITIAL NET DEBIT=$4.68 TARGET ROI=50%

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

****

SVGI - Silicon Valley Group  $16.38   *** On The Move! ***

Silicon Valley Group designs, manufactures, markets and services
semiconductor processing equipment used in the fabrication of
integrated circuits. The fabrication of integrated circuits
involves repeating a complex series of process steps to a
semiconductor wafer. The three broad categories of wafer
processing steps are deposition, photolithography and etching.
Their products include photolithography exposure tools;
photo resistant processing equipment; oxidation, diffusion
and low-pressure chemical vapor deposition processing;
atmospheric pressure chemical vapor deposition systems and
precision optical components and systems.

The recent rally began after SVGI announced it won a $100 million
order for its Micrascan lithography system from an unnamed chip
maker. The booking of its lithography system reflects the growing
confidence in the rapid development of the semiconductor industry
and their advanced technology was a major factor in winning the
order. The multiple-unit order will be shipped during the next 12
to 15 months and is expected to significantly affect this year's
revenues. Bullish analysts have suggested this quarters earnings
will be two to three times the consensus estimate of $0.04/share.

Our outlook for the issue is bullish but we think the rally may
encounter some difficulty near the previous highs near $17. This
position offers an excellent entry point in the current trend and
the small disparity in option pricing will help us open the play
at a favorable discount.


PLAY (aggressive - bullish/calendar spread):

BUY  CALL JUN-17.50 VQQ-FW OI=219 A=$3.38
SELL CALL JAN-17.50 VQQ-AW OI=271 B=$1.18
INITIAL NET DEBIT TARGET=$2.00 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=SVGI&d=3m



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

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


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