Option Investor
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Daily Newsletter, Thursday, 01/06/2000

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The Option Investor Newsletter         Thursday  1-6-2000
Copyright 2000, 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)
************************************************************
       1-6-2000            High     Low     Volume Advance Decline
DOW    11253.30 + 130.70 11313.40 11098.40 1,084,276k 1,963  1,136
Nasdaq  3727.13 - 150.41  3868.76  3715.62 1,594,505k 1,925  2,199
S&P-100  762.64 +   1.12   767.66   756.56    Totals  3,888  3,335
S&P-500 1403.45 +   1.34  1411.90  1392.02            53.8%  46.2%
$RUT     475.34 -   3.49   480.19   474.39
$TRAN   2937.08 +  69.72  2945.36  2843.30
VIX       28.13 -   0.02    29.63    26.54
Put/Call Ratio       .48
*************************************************************

Technically the Nasdaq has now corrected the required -10%

Shortly before the close today the Nasdaq touched the magic
-10% correction retracement from Monday's closing high of
4131. The Nasdaq rebounded +60 points from that low but the
selling was not over yet. Twelve minutes before the close
their was a rumor that a big company was going to pre-warn
and the bottom fell out of the market again. Lucent stepped
up and announced an earnings shortfall from Y2K impact and
product mix. This was only minutes after the Dow and Nasdaq
were rocked by a rumor from the futures pits that Microsoft
was going to miss their numbers. This rumor was refuted 
quickly and the stock and markets recovered. The Dow had 
been the leader all day as it moved within slightly more 
than 200 points from its previous high. The MSFT rumors 
knocked more than -100 points off the intraday high but the
Dow still managed to close +130.61 for the day. This close
is over +300 points from the Wednesday low.


 


 

Tuesday's Nasdaq chart
 


This Nasdaq chart from Tuesday (above) showed the Nasdaq setting 
right on first level support at 3900 with a next stop of 3700-3750
if that level (3900) failed. Don't look now but we stopped
dead on that stronger support at 3725. With the second largest
point loss ever the Nasdaq has added to this weeks disaster
and is now down over -400 points from the last record close
on Monday. Counting from the record intraday high on Monday
it is now down -14% and actually strongly oversold at this point.

The Dow however is benefiting from sector rotation out of techs
and into the dull stocks with real earnings. Stocks like MMM,
DOW, DE, PG and AA have all turned in strong performances this
week. The trend appears to be dump techs and run to the defensive
cyclical sectors. I don't personally believe it. I think there
is some rotation occurring but I think the tech buyers are just
holding cash and waiting on the sidelines for the correction
and the Jobs Report on Friday to be over. Fund managers are
seeing cash starting to appear in the mail and they will have
to put this retirement money to work. In any scenario techs
will still outperform all other sectors once the bottom of this
tax deferred selling is over.

Economic reports today were in our favor. New Home Sales actually
dropped -7.1% in November and were down from the huge +9% in Oct.
This is proof that the higher interest rates are trickling down
into the buyers in the economy. The Jobless Claims also jumped
to +309,000, a +33,000 increase from last week. This was the 
largest weekly number in the last year. The next chapter in the
economic play book is the Jobs Report Friday morning. Estimates
are for an increase in jobs of +250,000 compared with November's
+234,000. Unemployment is expected to hold at 4.1%. This number
is closely watched by the Fed as an indicator of future price
inflation as companies are forced to pay more to get quality
help. A weaker increase in jobs and a firm unemployment rate
would benefit the markets and possibly stop the tech slide.

Volume was strong on both major markets with 1.6 bln on the
Nasdaq and 1 bln on the NYSE. Advances beat the decliners by
822 on the NYSE but lost on the NASDAQ by -283. The NYSE ticks
were very bullish at the close at +791. The VIX did break into
the 30s yesterday but eased off to the mid 20s today. 

With Gateway, Beyond.com and Lucent announcing earnings warnings
this week the flight out of stocks that may also warn is fueling
the profit taking. Many funds are convinced that they will be 
able to buy techs cheaper after the Fed meeting Feb-1st and 
many are closing large portions of their positions in suspect
companies. Stocks that announce next week include Intel and YHOO
and both are being sold with huge volume. YHOO announces on Tuesday
and INTC on Thursday.  Nobody wants to get hit with the type of
sell off Lucent experienced today. Lucent closed at $69.31 
and traded down as low as $51 in after hours. This was a loss 
in market cap of almost -$48 billion. Cisco took the offensive
after the Lucent warning and said they were on track to meet
their previous estimates and would not change their guidance.
The S&P futures quickly bounced and stabilized around -5.00.

As you can tell by the news we are right in the middle of the
earnings warning season. Since this is the reporting period
for the fourth quarter, which was most impacted by Y2K freezes,
we could see a flood of these over the next couple weeks. 
Techs are still expected to turn in earnings gains of +25%
for this quarter but the forecast dwindles from there. Many
feel there was a lot of Y2K spending over the last 12 months
and many companies are now fully funded for capital expenditures.

I received several "nice" emails on my Yahoo comments in the
Tuesday newsletter. Many attempted to "educate" me on why
Yahoo was going to roar back from Tuesdays $443 close and set
new highs before earnings next week. They used this "logic"
to justify why they were still holding after YHOO dropped
-$57 from the high of $500 on Tuesday. Some of the language 
was quite "colorful". If I lost -$57 a share on an option I 
was still holding I would probably have come colorful language
as well. In case you did not see the close today, I regret
to inform you that YHOO did not come roaring back and was
trading at $353 in after hours, -$90 from Tuesday's close and
-$147 from the Tuesday high. Not all stocks come back and
believing in this fairy tale will eventually bankrupt you.
You can be right and still lose a lot of money if you are
right at the wrong time. 75% of stock movement is market
or sector related. This is especially true for the Internets.
If the Nasdaq goes down most of the Nasdaq stocks will go down. 
That does not mean that YHOO will not have blowout earnings 
and/or announce a split. You can be right, good earnings and a
split, but the stock tanks -$147 with the market. Options
require strong discipline and good money management skills.
Emotion has no place in option trading but at the same time
we are not robots either. We are emotional people, especially
when it comes to money, and this is a critical problem that
needs to be addressed for us to be better traders.

Anyone know a good CEO looking to change jobs? Sony Corp
needs one badly. The CEO of SNE said today that any price
for their stock over $190 would be a bubble and not justified.
I thought a CEO was supposed to make decisions that would help
their shareholders and not bankrupt them. SNE dropped -34 
to $215 on the news. I am sure he will get a few "polite"
emails on this move.

For Friday everything depends on the Jobs Report. With a
good report the Nasdaq could see a quick relief rally. With
a bad report the race to the exits will continue as traders
on the sidelines may elect to stay on the sidelines until
after the Fed meeting. The Dow could see some profit taking
soon from the strong gains in the last two days. The Nasdaq
is technically oversold and sitting on support but the
after hours numbers for most of the tech stocks show another
$5 to $15 drop due to the Lucent warning. If bargain hunters
don't appear in the pre-market trading tomorrow then the
Nasdaq open is going to be ugly. Waiting for entry points that
are at strong support levels would be a good idea. Remember
you do not have to be in the market just because the market
is open. You can wait for evidence of a real rebound before
going back into the flames.

Good Luck, Sell Too Soon.

Jim Brown
Editor



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

A Virtual Small-Cap Monopoly
By  S.P. Brown

Small-cap investors must have the patience of Job.  While the 
larger cap indices have soared over the past two years, both 
the Russell 2000 (RUT) and the S&P 400 SmallCap (SML) have 
basically flat-lined, leaving many small-cap investors 
scratching their heads and wondering if their stocks will ever 
come to life. 

http://members.OptionInvestor.com/stocknews/010600_1.asp



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

As of Market Close - Thursday, January 6, 2000 

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

DOW Industrials   10,800  11,550  11,253    Neutral   1.04
SPX S&P 500        1,340   1,400   1,403    BULLISH  12.03
OEX S&P 100          700     750     763    BULLISH  12.03
RUT Russell 2000     430     450     475    BULLISH  11.12
NDX NASD 100       3,200   3,800   3,341    Neutral   1.06  *
MSH High Tech      1,650   1,900   1,703    Neutral   1.06  *

XCI Hardware       1,250   1,425   1,309    Neutral   1.06  *
CWX Software       1,210   1,420   1,193    BEARISH   1.06  *
SOX Semiconductor    640     660     669    BULLISH  12.21
NWX Networking       820     900     809    BEARISH   1.06  *
INX Internet         665     800     667    Neutral   1.06  *

BIX Banking          645     690     537    BEARISH  11.30
XBD Brokerage        410     450     408    Neutral  11.30
IUX Insurance        625     650     577    BEARISH  11.30

RLX Retail           900     935     953    BULLISH  11.23
DRG Drug             380     400     348    BEARISH  12.07
HCX Healthcare       760     790     702    BEARISH  12.07
XAL Airline          180     190     147    BEARISH   5.21
OIX Oil & Gas        280     315     293    Neutral   1.06  *


Posture Alert    
The year 2000 is off to a horrendous start for technology stocks, 
as the Nasdaq got blistered once again Thursday. Losing issues were 
led by the Software Index, which posted a -6.46% loss, followed by 
the Internet (-5.64%) and the Nasdaq 100 (-4.75%).  Low P/E stocks 
finally had a good day, with the Banking sector closing up +4.14%, 
followed by Healthcare (+2.80%), and Insurance (+2.20%). With this 
most recent market action, the posture board got turned upside down. 
Sectors getting downgraded to Bearish include Networking and 
Software. Sectors getting downgraded to Neutral include Hardware, 
Internet, Morgan Stanley High Tech and the Nasdaq 100. Finally, Oil 
& Gas was upgraded to Neutral as that sector bounced on some recent 
brokerage upgrades.



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

Thursday, January 6, 2000

Shopping for a higher money market rate?

Technology stocks got blistered once again Thursday, and there 
seems to be no end in sight to the carnage, as many of the leading 
companies continue to break below key support levels. Gateway 
Computer and Beyond.com pre-released negative earnings last night 
which didn't help this market, but the bombshell came today after 
the close, as Lucent Technology whiffed on their quarter, coming 
in significantly below expectations. Lucent did state that their 
earnings were on pace for the fiscal year, but that small bit of 
positive news didn't seem to help, as the stock got blasted for 
-17 in after-hours trading. Thanks to Lucent, shares of other 
telecommunications/networking stocks are weak after-hours, with 
Cisco Systems, Tellabs, Nortel Networks, Motorolla, Nokia, and 
Ericsson all trading substantially lower. With Lucent being the 
most widely held stock in the world, it will be interesting to see 
how the investors react. Will the millions of Baby-Bell investors 
start nibbling at the discounted shares, or do we see panic 
selling instead? Time will tell.

With technology becoming an everyday focus in our lives, the speed 
of information is extremely overwhelming, especially compared to 
where it was years ago. Along with this change in technology, we 
have also witnessed the speed at which sentiment in the 
marketplace can change.  The previous mentality of the investors 
in this market was buy high, sell higher. Valuations just didn't 
matter. Now, everyone is starting to get worried about valuations 
and P/E ratios, as evidenced by strength in some of the value 
sectors this week. If P/E ratios and valuation ever come back into 
favor, this technology wreck is just the beginning. However, as it 
stands, corrections are truly healthy for the marketplace. This is 
how we form a base to work off of, and this is how more bears get 
sucked in, only to cover short positions months later at a higher 
price.

As it stands, sentiment has changed very quickly on technology 
shares. When you combine this with the fact that interest rates 
are breaking new highs, energy prices are breaking new highs, 
overseas markets look terrible, and the technicals on our leaders 
look bleak, you will see more selling pressure ahead. We are sure 
to see a bounce sometime soon, but we believe that any rally will 
be met with the "I'll sell on the first bounce" mentality. This 
attitude will only help the bears in the short term. Now 
technically speaking, with the recent divergence between the Dow 
and the Nasdaq, the potential of the Dow heading south and catching 
up with the Nasdaq increases daily. We would then most likely 
witness some consolidation that may be the type that is multi-
month rather than multi-week, so patience in the technology camp 
is a must. Next support for the Nasdaq is about 3504, which who 
knows, maybe we'll see tomorrow. Regardless, long term, this is 
another blip on the bull's radar. Short term, start searching for 
the next land mine, or at least the highest money market rate, 
because by the time this earnings season is over, we will 
definitely see some cheap companies! 


BULLISH Signs: None


Mixed Signs:

Cash Flow:
The cash on the sidelines is building, however, until it starts 
getting put to use, we would be a little cautious.

Volatility Index (28.13):
The VIX sliced through its 50-day moving average last week, and 
presaged this current market sell-off. In the past however, the 
VIX has proven that the low 30's to be a good buying opportunity. 


BEARISH Signs:

Pre-Release Season:
We are in the pre-release season, in which companies with negative 
earnings announcements spill the beans. We have witnessed several 
such as Gateway Computer, Beyond.com, and now Lucent Technology.  

Interest Rates (6.572%):
The yield continues to break new highs, and finally, the market has 
noticed. Next stop should be 6.75-7.00%. Currently, there is a 20% 
chance of a 50 basis point increase in February.

Valuation:
Low price to earnings stocks have been a safe haven so far in 2000, 
while high P/E stocks have gotten blistered. Is value coming back 
into play?
 
Advance/Decline Line:
The A/D line's continual break does not serve the best interests 
of the overall market, but recently, we are starting to witness a 
slight uptick.

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.

Technicals:
Many of the major sectors continue to break key support levels, 
suggesting further downside, especially in technology.


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       Thurs
Benchmark                       (12/31)     (1/4)      (1/6)

Overhead Resistance (785-810)     N/A       2.12        3.55
Overhead Resistance (760-780)     N/A       0.57        0.98

OEX Close                         N/A     759.01      762.64

Underlying Support (730-750)      N/A       2.44        2.51
Underlying Support (700-725)      N/A       2.75        3.10

What the Pinnacle Index is telling us:
Based on January 6, direct overhead is light, and underlying 
support is slightly increasing. 

Put/Call Ratio                  Friday     Tues       Thurs
Strike/Contracts                (12/31)    (1/4)      (1/6)

CBOE Total P/C Ratio             .51        .55        .50
CBOE Equity P/C Ratio            .38        .42        .40
OEX P/C Ratio                   1.87       1.22       1.20


Peak Open Interest (OEX)
                     Friday           Tues            Thurs
Strike/Contracts     (12/31)          (1/4)           (1/6)

Puts                700 / 11,799      700 / 12,174    700 / 12,185
Calls               700 /  6,086      700 /  6,023    800 /  6,904
Put/Call Ratio        1.94              2.02            1.76



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

Daily Results

Index      Last     Mon     Tue     Wed     Thu    Week
Dow     11253.26 -139.61 -359.58  124.72  130.61 -243.86
Nasdaq   3727.13   61.84 -229.46  -24.15 -150.41 -342.18
$OEX      762.64   -4.04  -29.78    2.51    1.12  -30.19
$SPX     1403.45  -14.03  -55.80    2.69    1.34  -65.80
$RUT      475.34   -8.33   -6.68    0.45   -3.49  -18.05
$TRAN    2937.08  -33.53  -81.50    5.19   69.72  -40.12
$VIX       28.13   -2.02    5.36   -1.49   -0.02    1.83

Calls               Mon     Tue     Wed     Thu    Week

GO         29.00    2.38    1.88    0.81    0.19    5.25  New
CMTN       52.13    4.75   -1.50    2.13   -2.00    3.38  Guilt?
AMGN       61.13    2.88   -4.81    2.00    1.00    1.06  New
HGSI      149.13    5.31  -19.69    7.38    3.50   -3.50  Split!
GSTRF      37.69    2.75    1.00   -6.13   -3.94   -6.31  Buyers!
TTN        39.63   -0.31   -3.56   -1.13   -2.69   -7.69  Firm 
VIGN      155.00   25.56   -6.94   -6.19  -20.44   -8.00  Bottom?
CMRC      188.38    7.13   14.88   -4.00  -26.13   -8.13  Watching
ADI        84.50   -2.81   -4.56    1.25   -2.38   -8.50  Strength
NXLK       73.88   -0.06   -6.69    3.56   -6.00   -9.19  Dropped
EMC        99.63    5.75   -7.06   -5.00   -2.38   -9.63  Bounced
BCE        78.19    0.13   -4.69   -3.19   -4.25  -12.00  Dropped
CHKP      183.22   19.75  -19.75   -2.00  -13.53  -15.53  Support
AFFX      146.00   -6.69  -13.00   -1.75   -2.25  -23.69  Resilient
NT         76.50   -0.06   -7.19   -3.88  -13.38  -24.50  Dropped
STM       126.31    3.75   -9.69   -8.13  -11.06  -25.13  Dropped
VRTS      114.06   -1.13  -11.69   -3.13  -13.13  -29.06  Dropped
PMCS      125.50   -1.56   -9.81   -8.38  -15.06  -34.81  Dropped
QCOM      140.06    3.19  -17.25   -5.63  -16.38  -36.06  Holds on
NOK       154.00   -4.06  -14.00    0.00  -16.00  -37.06  Sit tight
BVSN      129.25   19.38  -19.13  -10.44  -30.63  -40.81  Holding
DCLK      199.00   14.94  -30.94   -9.06  -29.00  -54.06  Dropped
YHOO      368.19   42.31  -32.00  -32.50  -42.31  -64.50  Dropped

Puts

SCNT       67.50   -1.31   -9.75   -1.25   -6.63  -18.94  New
GTW        59.69   -2.69   -6.56   -5.94    4.69  -12.38  Warning!
CIEN       45.88   -1.88   -2.44   -3.44   -3.88  -11.63  Great!
WCOM       47.19   -1.13   -2.44    1.75   -4.06   -5.88  New
SPLN       49.13   -1.63   -0.56    1.19   -3.00   -4.00  Falling
HNZ        38.13   -1.00   -0.88   -0.13    0.31   -1.69  Sloooow
JNJ        92.56   -1.06   -3.38    0.94    2.81   -0.69  Defensive



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

DID YOU MAKE ANY MONEY TODAY? (just kidding) 

Now We Know why Barbara Streisand sang the song "Memories...of 
the way we were.", with such feeling & passion.

For those who thought they missed the last run up, this violent 
blood bath is giving you another opportunity for a good entry. 
It can prove to be very profitable, if you took your profits 
earlier and have any cash left to play it. Our economy is good 
and earnings on good companies will continue to be good too. 
Although Amazon pre announced, their sales were strong as were 
Barnes & Noble. Strong companies with good Christmas sales 
should do well. The sell off will not last forever. But the Y2K 
buying frenzy the last 4 weeks caused us to overlook other market 
adjusting factors, which are now hitting us in the face. 

The correction occurred sooner than many expected. That is the 
challenge of learning how to trade. Can you exit your positions 
quickly if they look to be turning against you? That is the 
trick and where discipline comes in. As painful as this sell 
off is, getting it over with now, will give us a cleaner upside 
potential. Remember, the best medicine always tasted the worst. 

If unfortunately, you jumped back in prematurely, only to watch 
a further sell off into the close, the correct method is to always 
to exit immediately before the close. A pattern such as this tells 
you the stock has not found its strength yet and may have been an 
opportunity for many to unload more positions. This is called a 
bear trap. Even experienced traders get lured into the warm cozy 
den of the bear, thinking the selling carnage is over and a party 
is soon to begin. Realizing they have been invited to dinner and 
NOT as the guest, does not a happy camper make and usually results 
in blood.

The other reason to exit immediately before the close is because 
the stock will likely gap down on the next mornings open. If 
re-entry is wanted, waiting will more than likely afford you 
a better position with a premium that gapped down also. Being 
sensitive and playing the gaps is one of my favorite things. It 
can be very rewarding on either the up or down side. For the 
conservative (call) risk taker, one should wait till the 
underlying closes above the previous days high, before buying 
back in. Ultra conservative types will wait even longer, for 
a new resistance point to be broken & held.

Days like today make it hard for some to sell believing that 
the last two days have been so bloody, that it couldn't get 
worse. With a fed report due out in the morning, that is a 
very scary and risky thought. We are officially in a Nasdaq 
correction with some high flyers like YHOO, down almost 30% 
from their 52 week high, just a few days ago. If that report 
is bad, WATCH OUT, more to come!! If it is good, some of that 
sidelined money may begin showing up. With economic numbers 
pending in a shaky market, I did not have the stomach to jump 
in today, although I did get temporarily faked-out yesterday, 
in the trap. 

Knowing many are watching YHOO, I want to remind you of AOL 
last April. It had been a daily leader making day traders a 
lot of money running into its April earnings. There was a 
highly anticipated split announcement to come at that time. 
Many had been talking of a potential internet bubble, which 
was soon to pop. Sound familiar? AOL sold off swiftly & sharply 
10 days before earnings, had a slight recovery for a few days, 
then no split was announced as anticipated. The following 6 
months, AOL lost 50%+. Not to scare you more, but 50% off of 
YHOO's high is 250! So don't feel it can't get worse. Longer-term 
options do help but remember, those are real dollars going down 
the drain. Exiting until the sell off is over and the bounce is 
real, is the correct play. 

I wouldn't bet the farm for a 3:1 split on a stock dropping like 
a rock either. Wait for the stock, sector and market to turn 
around, before expecting a winning trade. If the sell off continues 
and YHOO blows through the whisper number again and announces a 
split, the day after earnings would probably be the time to enter. 
But when a 3:1 is anticipated and a 2:1 is announced instead or 
worse, no split is announced at all due to the stock price drop, 
one would do better preparing to play puts instead.

Hopefully by now, all have pocketed their profits made last week. 
Now would be a good time to do your homework and pick stocks you
either want to own or plan to trade. It is also a nice time for
leaps. These are the times I begin looking for stocks I want to
own using my Blow & Go strategy. Just remember, that play is a
strategy to buy stocks cheap in the future, for a long-term hold.
Its purpose is to set a buying price for a stock I want to own,
expecting a large move up after a correction is over. That is not 
the same as trading options, rolling out or churning for profits. 

Perhaps I will be wrong, but I wonder if because of Y2K, this might 
be our best sell off for the year. The question though, is the sell 
off over? The doom and gloom is pretty bad out there, so it should 
be close. Just remember, the markets will still fret over that FOMC 
meeting in February and that could last the whole month of January. 
Sideways markets are the hardest for many to profit from.

Renee White
renee@OptionInvestor.com



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

Trading Decision Game #2

Situation. Date: 1/4/00. You have just closed all of your open 
positions, including QCOM, JDSU, INKT, MSFT, SUNW, GTW, SCH, and 
a few others except for one -- GSTRF. You have moved most of your 
profits from your short term option account to a long term stock 
account. The DOW is down over 300 points and the NASDAQ is down 
over 200 points. You are happy with the decisions that you have 
made and have decided to take a few weeks of rest due to the 
demands of trading the last two months. However, the newsletter
alerts you to a potentially good trading opportunity. The headline 
of the Market Wrap section is "Get out your checkbook and prepare 
to back up the truck." You're a trader. You can't resist. 

From watching the indicators on your qcharts program, you know that 
the VIX may be reestablishing a range of 20 - 30, which it had for 
most of 1999 (though in Nov - Dec it stayed pretty much in the 20 
- 26 range). Jim Brown highlights 10850 on the DOW and 3800 on the 
NASDAQ as key support levels. You like the following two stocks to 
play -- QCOM and YHOO. QCOM has been on a tear, leading up to its 
4:1 split, and you know the stock well. After gapping up to 200 on 
Monday, it is now at 162, almost precisely where it split. YHOO is 
announcing earnings next week on the 11th and the speculation is 
that it will also announce a split, perhaps a 3:1, given the number 
of authorized shares. You punch up the newsletter write ups on YHOO
and QCOM and decide to trade the recommended plays -- YHOO Jan 410 
Call last traded around 65; QCOM Jan 160 Call last traded around 15. 

Requirement: BEFORE THE NEXT MARKET OPEN, write up your plan for 
trading these calls on the next trading day, Wednesday, Jan 5. In 
your plan describe what you will do if the market opens up, or if 
the market opens down. If you do get filled on orders, what will 
your next orders be (eg, stop loss at what %? limit sell at what 
%?) What indicators will you use to initiate your play (eg, 1 of 
3 major indicators -- DOW, NAS, VIX; 2 of 3? 3 of 3?)? Will you 
"leg in" to the play, buying part of your intended position, or 
buy the whole position? If you leg in, how many different purchases 
per contract will you make? What exit strategy will you employ to
get out of your position? What market trends lead you to the plan 
you have formulated? 

Email your answer to me at janar@OptionInvestor.com.

Note: This is actually a decision that I was faced with last 
Tuesday night. I will share my answer with you next Thursday. 
Please submit your plan. I know from experience that doing these 
plans can be a great way to refine and develop your decision 
making/ planning skills. And, in the final analysis, the trader 
who faces the market with a plan and the conviction that that 
plan gives you, will always beat the trader who just wakes up 
and decides to buy some calls or puts. 

Right now, I am all in cash, except for GSTRF and some LEAPs. 
This is not a market that I would want to trade. As a individual 
investor, you have a huge advantage over the guy who manages 
Fidelity Magellan or even a manager of a large hedge fund -- you 
can chose to be completely out of the market when it does not 
favor you. That is a very, very important advantage. You can 
take a vacation whenever you want to. Find the highest money 
market return and put your cash there and wait for the trade 
winds to blow your way. With the spike up in the VIX, the correct 
strategy to make money in this market is to sell volatility. That 
is, sell puts when the market approachs the lower bounds of its 
range, and sell calls when it approaches the upper bound. Since 
I have no real experience doing this, I will paper trade selling 
puts and calls, so that I can be prepared to do so for the Feb 
cycle. I think we will get some kind of earnings run through mid
January, but when that run rolls over, I will also be prepared 
to buy QQQ puts. 

Good Luck & Be Careful Out There

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:
*****

STM $127.63 -9.75 (-23.81) The profit-taking continued across 
the board today and yesterday.  The gap at the open of trading
for STM continued, but to the downside.  Instead of gapping up, 
the shares have opened down for the last two trading sessions.  
STM now sits at $127.63, down $17.87 points as traders have 
decided to dump semiconductor stocks.  The volume increase that 
we have been looking for in the shares of STM finally showed up, 
the shares traded almost twice as much as the average, and the 
stock dropped 9.75 points.  So much for the volume increasing 
to hold up the prices, this volume increase only contributed 
to STM's down draft.  We will choose to move away from STM at 
this time, because of the uncertainty in the Semiconductors and 
the tech sector as a whole.  The Semiconductor Index is now 
down 4% for the week and the recent consolidation seems to be 
settling in too the downside.  

DCLK $199.00 -29.00 (-54.06) DCLK is now down over 50 points 
for the week and 29 points for the day on heavy volume.
Recent support levels have now completely broken down.  The 
story is simply profit-taking in a major way from the high 
flying Internet companies such as DCLK.  The split run for DCLK 
has taken a turn for the worst.  Any positives being reported 
for DCLK have recently taken a back seat to this overall market 
pressure.  Risk levels to the downside have now outweighing 
any life to the upside for the stock.  Now that this has been 
confirmed in the shares of DCLK, it is time to look for better 
opportunities in the market.  Another factor is that DCLK will 
be splitting their stock 2:1 payable on 1/10, we usually look 
to be out of positions a day or two before the actual split. 

NXLK $73.88 -6.00 (-9.19) NXLK has been trading with great 
volatility the past two days between $72 and $80.  With big 
time selling into the close today, it looks as if NXLK is 
more likely to break below $72 then it is to trade above $80, 
especially after the bad news Lucent unleashed on the 
telecommunications sector.  Because of this likelihood that 
the stock will go lower before going higher, it forces us to 
drop NXLK.  For those of you who wish to continue following 
the stock, major support does exist at the $65 level.  In the 
news, NXLK received new coverage with a Hold rating from 
Landenberg Thalman (kind of a strange recommendation but they 
are probably waiting for some sort of market bottom before 
issuing a Buy).

BCE $78.19 -4.25 (-12.00) The shares of BCE continue to cut 
through support levels like a hot knife through butter.  We 
know that we introduced BCE as a longer-term play but we can 
not ignore the technical disintegration.  In a continuing theme 
in tonight's updates, BCE will probably be hurt by Lucent's 
earnings shortfall announcement.  Particularly because of its 
NT holdings, a major competitor of Lucent's.  We will continue 
to watch BCE and if it can develop support and consolidate then 
perhaps we will re-enter it as a call play for its fundamental 
story.  

VRTS $114.06 -13.13 (-29.06) The software stocks got hammered 
today and VRTS was no exception.  Traders believe the correction
in the Nasdaq is here and may now have the momentum to carry 
the tech heavy index lower.  Judging by the selling that came 
to VRTS, that's already began.  VRTS gave back in three days 
what it took twelve sessions to gain.  Shares of VRTS lost 
$3.13 Wednesday and another $13.13 today.  The past two days 
over 9.6 million shares have changed hands.  Considering just 
over 3 mln is the ADV, it looks like folks are serious about 
unloading the software company, for now.  We will get out of 
the way and let VRTS regroup.  

PMCS $125.50 -15.06 (-34.81) What the "tech god's giveth", they
can certainly take away.  The Semiconductor sector had a tough
day, along with most other stocks at the Nasdaq.  PMCS fell to 
the $140 support level yesterday.  Today the selling continued,
and PMCS finished the day $15.06 under water.  The volume picked
up, coming in at 2.1 mln.  Honestly we thought Tuesday, that 
PMCS might continue to trade lower, find support and resume 
it's trend.  We believe the selling today was overdone, but the 
fact is PMCS lost $15, and its time to let this one go for now.  
The downdraft at the Nasdaq is likely to continue, as some 
traders and analysts are now admitting we are in the middle of 
a correction.  A good jobs report tomorrow, and CPI numbers next 
week could change the picture at least temporarily.  There are 
good plays available, but right now, PMCS will have to find a 
new dance partner.

YHOO $368.19 -42.31 (-64.50) Bumpy ride turned out to be an 
understatement.  YHOO is down 23% in 3 sessions, which is a bad 
sign for a growth company on the verge of announcing what we 
think will be strong earnings and a split.  With only 3 trading 
days until earnings, and the possibility of tough talk from 
Alphonso the Great (Greenspan) following the employment figures 
tomorrow, it may not be enough to pull this formerly high flyer 
(and hot sector) out of its tailspin.  We expected $425, $400, 
and $380 to act as support - none did.  The 10-dma of $420 has 
been severely violated over the last two days.  In short, the 
technicals have been trashed.  Though YHOO still has the 
possibility of shooting up again into earnings if the market 
reverses direction, we don't encourage holding a position through 
earnings and would suggest not initiating new positions until 
YHOO finds its bottom (hopefully with both hands, just to be 
sure!).  Accordingly, we're dropping it for now but will keep 
our eye on it for an after earnings play.

NT $85.00 -4.88 (-16.00) NT collapsed today and continued to fall 
well under its 10-dma from where it usually recovers.  Volume 
remains high during the sell-off telling us that there may be 
more room to fall.  But here's the ice (not icing) to put on the 
cake.  Lucent announced after hours that they would not make 
their numbers citing that they couldn't produce product fast 
enough and were suffering from under capacity.  We might buy that 
were it not for the fact that revenue is flat over last year - NO 
GROWTH!  That's not what we expect from a market leader in the 
communications revolution.  It could be that NT is really putting 
the hurt on LU in the optical networking field and further 
extending its lead as the #1 provider over #2, Lucent.  While we 
suspect NT will ultimately be a beneficiary of LU's misfortune as 
the real story unfolds (say right around NT earnings date?), most 
of NT's after hours trading has been in the $76.50-$78.00 range 
(-$8 from the close) telling us that tomorrow and the near-term 
will be ugly.  NT is still a great company, but the trade has 
moved against us under general market, and now "sympathy" 
conditions.  How quickly we bring NT back to the call list will 
depend on how quickly the market recovers and how quickly 
investors realize they have thrown the baby (NT) out with the 
bathwater (LU).  For now, we're dropping it from the play list.


PUTS:
*****

No dropped puts tonight.



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

BVSN $129.25 -30.63 (-40.81) Yes, we are still hanging on to 
Broadvision.  We first began playing BVSN right around $130 
citing the breakthrough at this level as a bullish indication
supporting a positive momentum run.  Well, here we are again 
although this time we are looking for $130 to provide support.  
The jobs report due out before the open tomorrow will most 
likely provide the determining factor for the future of this 
play.  If we get a positive report, we look for $130 to provide 
a good level for new entries.  If the report is negative we 
will most likely be dropping BVSN this weekend.  BVSN did 
attempt a bit of a late day bounce just under $130 which was 
backed by some nice volume, indicating that there are still 
investors out there interested in owning this stock.

QCOM $140.06 -16.38 (-36.06) Despite a sinking market, QCOM has 
held up pretty well.  The $160 support broke early on Wednesday, 
but the 10-dma at $148 held the stock nicely before QCOM took 
off Wednesday afternoon.  It was a nice short-term play but 
after today's trading, we are right back underwater.  The Nasdaq, 
down again for the third day, needs the life brought back into 
it otherwise support may continue to disappear.  The next stop 
on the way down would be $130.  Use caution on this play with 
the Jobs report due out Friday.   Helping QCOM, Argus Research
Corp. raised the company from a Hold to Buy today.  QCOM also 
announced today it will be calling it's 5 3/4 Trust Convertible
Preferred Securities on March 6, 2000.  Most holders are 
expected to convert these into common shares.  QCOM said they 
see no additional dilution to earnings due to the conversions.  
Investors will come back to QCOM, it's just a question of when.  
Keep your eyes peeled for signs of a market bottom before 
opening a new position. 

AFFX $146.00 -2.25 (-23.69) The shares of AFFX showed a bit 
of resiliency as the rest of the NASDAQ's former favorites 
continued their downward spiral today.  Yesterday, AFFX did 
test the support mentioned in Tuesday's write-up providing a 
possible entry point for brave investors.  Today, the stock 
stayed comfortably above yesterday's low and even traded 
briefly above yesterday's high.  This is pretty good technical 
action.  If we can get any abatement in the overall selling 
and AFFX can close above $150, then it might be time to buy 
with the likely scenario that AFFX can resume its uptrend.  
The Biotechs were strong, as they usually are this time of 
year, and perhaps they will become the leadership group that 
leads the NASDAQ out of the abyss.  AFFX has good support at 
the $140 level.

TTN $39.63 -2.69 (-7.69) Titan is desperately attempting to 
keep firm ground against this torrent of selling.  After a nice 
run into the end of the year, the shares of Titan have been 
trading in a range between $38 and $48.  TTN tried to rally 
today only to get pushed back to major support on the close. 
Holding support here is critical.  If TTN can trade flat to 
slightly up in what looks to be a bad market for telecom 
stocks tomorrow, then the prospect of TTN to trade to at least 
$43-$44 is good.  TTN may continue a consolidation process to 
give it strength to tackle resistance at the old highs.  If 
support fails tomorrow then TTN could easily drop down to $34 
or even $31.  These would be good levels to go long if the 
overall market appears to be bottoming.


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


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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 
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The newsletter staff makes every effort to provide timely 
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delivery times due to factors beyond our control.


The Option Investor Newsletter         Thursday  1-6-2000
Copyright 2000, All rights reserved.              
Redistribution in any form strictly prohibited.  


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

ADI $84.50 -2.38 (-8.50) The momentum on this play started to 
let up on Monday following Friday's all-time high of $94.50.  
For the past few days consolidation has continued in the 
vicinity of the support at $84.  ADI is showing strength at 
this present level especially considering market conditions.  
Support is firmer at $80 and $81 which previously acted as 
strong resistance, but a return to that level would certainly 
be bearish.  Remember we added this Semiconductor to our call 
list purely as a momentum run which was given a boost by powerful 
analyst comments.  

CMRC $188.38 -26.13 (-8.13) Yikes! The Internet sector continues 
to take a lashing as interest-rate fears rock the tech boat 
and heavy profit-taking on the Nasdaq is the name of the 
game.  CMRC certainly got its share of the whip today 
driving it down under its established support base of $200.  
However, we believe it's still a bull market and the bargain 
hunters will start chomping at the bit soon.  Remember the 
interest-rate sensitive stock are always the first to fall yet 
the first to recover.  Yesterday CMRC was the recipient of a Buy 
reiteration by Dresdner Kleinwort Benson Securities who also set 
a price target at $333!  So let's keep an eye on CMRC and watch 
for a solid move through the 5-dma ($204.30) before opening 
any new positions on this momentum play.  On the news front, 
Commerce One entered into a joint venture with Banacci, 
Mexico's main financial group, and will offer a B2B electronic 
marketplace to Latin America.  The company also announced the 
formation of its Public Sector Group that is dedicated to 
providing e-commerce solutions to federal, state, and local 
governments as well as higher education institutions. 

CHKP $183.22 -13.53 (-15.53) CHKP, like the rest of the Internet
sector has gotten punished this week.  Although showing some
support at $187 both yesterday and today, the late-day selloff
in the NASDAQ was too much.  CHKP gave up over $17 today on
average volume to close at $183.22.  Currently sitting right on
support, which is also the location of the 30-dma, CHKP is at a
critical point.  The main driver for this play is the earnings
on January 20th, as well as the split scheduled for the end of
the month.  The shareholder meeting on January 13th should give
us the actual ex-date.  We would like to see CHKP recover from
here, but it may pull back and test support at $175, depending
on how the broader market performs.  Look for a bounce,
accompanied by a resurgence of buying volume before entering
new positions.  As this is a volatile issue, evaluate your 
risk tolerance and use stops.

EMC $99.63 -2.38 (-9.63) EMC couldn't dodge the selloff in the
tech sector this week, but has actually performed fairly well.
Dropping with the NASDAQ at the open yesterday, EMC bounced
nicely right at the $98 long-term support level.  With a slight
recovery towards the end of the day, EMC dropped again today to
test support.  Overhead resistance is building at $105, which 
is the bottom of yesterday's gap down at the open as well as the
location of the 10-dma.  Volume on the drop Wednesday was double
the ADV, as investors fled everything technology.  Today, volume
was average, indicating less selling pressure and a potential
bottom forming.  Going forward, look for prices to bounce near
current levels and trade through today's intra-day resistance at
$102 on strong volume.  This would make for a good entry, but
given the recent market volatility, keep your stops in place.
In the news today, Merrill Lynch added EMC to its top 10
technology list.  

VIGN $155.00 -20.44 (-8.00) VIGN has held up better than the
rest of the high-flying Internets.  Yesterday, prices fell to
support near $165 and bounced twice before closing up from the
lows at $175.44.  This morning, VIGN tested support again and
looked to be forming a bottom.  With the afternoon meltdown on
the NASDAQ, VIGN couldn't hold back the selling momentum and
shed over $20 to close at $155.  With volume more than double
the daily average yesterday, it was encouraging to see lighter
volume today, although we saw it increase as the selling
pressure mounted in the afternoon.  If the selling continues,
look for VIGN to bounce at its next support level near $147.
We need to see a bottom form before opening new positions, with
the return of buyers creating positive volume.  Don't try to
catch this falling knife - wait for the NASDAQ to turn around
and definitely play this volatile issue with stops.  Once the
NASDAQ finds its legs, VIGN should recover nicely with earnings
on January 19th and positive comments and upgrades from analysts.
Greg Vogel of Banc of America maintained his Strong Buy rating
and raised his price target from $133 to $265 on Tuesday.  Also
on Tuesday, Aaron Scott of Advest Inc., increased his rating 
from Buy to Strong Buy and raised his price target from $130 
to $275.  

HGSI $149.13 +3.50 (-3.50) Wednesday afternoon we received the 
news we had been waiting for.  HGSI announced a 2-for-1 stock
split.  The ex-date is scheduled for January 28th.  HGSI bounced
off the $136 are yesterday and managed to gain $3.50 today.  We 
would like to have seen a little better move today, but 
considering the negative mood at the Nasdaq today we will take
what we can get.  The volume today was light at 549K.  HGSI
is well positioned in the gene-mapping industry and we expect
the company to gain momentum.  HGSI will report earnings in
a couple of weeks which could help get this stock back on
track as well.  HGSI closed at an intraday resistance level.  
Continued strength would provide a good entry point for this 
play.  The December jobs report comes out in the morning, which
could help turn Nasdaq around, or send it to new lows.  Confirm
the tone of the markets and the direction of HGSI prior to 
entering a new play.  A small float of only 14.6 mln shares 
will help HGSI as traders start buying in for the split run.

CMTN $52.13 -2.00 (+3.38) CMTN had a rough go of it today.  The 
negative tone in at the Nasdaq, and the fact that the Telecom 
and Internet sectors got kicked around made it tough going
for CMTN.  CMTN sells its products to telecommunications and
Internet service providers.  Both of the sectors lost 5% to
7% during today's session.  Lucent Technologies (LU) came out 
with an earnings warning this afternoon.  CMTN has strategic 
partnerships with Lucent, among others.  The decline in shares
of CMTN was probably more guilt by association, than anything
to do directly with the company, although problems with those
sectors, could certainly cause problems for CMTN.  CMTN closed 
on an intraday support level.  Should we see further weakness 
the next areas of support are seen at $49.25, followed by $46. 
CMTN closed right at the 5-dma average which sits at $52.10. 
As for entering a new play, confirm market direction and 
movement of the stock itself prior to placing an order.  If 
you entered this play, keep your stops close as we could see a 
little more weakness before CMTN continues higher. 

GSTRF $37.69 -3.91 (-6.31) Ignorance and misinformation runs 
rampant on this company as yet another analyst (at Merrill Lynch) 
takes to the airwaves via CNBC to cite, (paraphrased) "there is 
no fundamental reason why this stock should be moving up the way 
it has in the past 2 weeks."  Really?  How about that as of 
January 1, you can buy a Globalstar phone at your local AirTouch 
store and use it 15 minutes later while walking out the door.  
The fundamental is that IT WORKS, which is something Iridium, 
Teledisic, or ICO Global could never claim!  GSTRF has pre-sold 
$25 mln in airtime to distributors at an average cost of $0.47 
per minute, and is currently marketed at about $1.50 per minute.  
The pre-sold time is seen as a validation and acceptance in the 
marketplace.  GSTRF's costs (including operations) are just $0.05 
cents per minute at full capacity, and they need just 400K users 
at current rates to break even.  Their cost efficiencies are just 
1/10 that of their failed predecessors and they will have data 
transmission capabilities within 18 months.  For the 20% of the 
population that isn't blanketed by cellular service or can't get 
a phone line to a remote area, GSTRF is a Godsend.  GSTRF is 
expected to have 400K customers by the end of 2000 with $238 mln 
in revenues.  Now that we've got that off our chest, GSTRF has 
held up well despite the bashing.  In a market that has sold off 
tremendously over the last 3 days, GSTRF should have fallen back 
into its old trading range of $20-$30 if there is truly "nothing 
new".  It hasn't.  Volume remains strong and buyers continue to 
take positions.  Even today, support remained strong at $37.50, 
though well below $39.50 where we had expected it to hold.  $37, 
then $35 will be the next levels of support to be tested.  While 
we think very highly of Globalstar, our job is to play what we're 
given, not pick sides.  That said, we still need to see the 
bounce off $37 support or a break back over $40 with strong 
volume to consider initiating a new position.  Don't try to 
catch the falling knife.

NOK $154.00 -16.00 (-37.06) Actually, NOK closed at $160, but 
has traded after hours at $154-$156.  To remain consistent we 
go with the reported number.  NOK hasn't seen this level since 
December 15 when it tagged $150 on an intraday dip.  That's 
firm support.  That it held at this level amongst the carnage 
in other sectors is a good sign.  Nonetheless, the buying 
opportunities haven't shown themselves this week.  We suggest 
sitting tight and waiting for the bounce, not just in NOK, but 
in the market.  We still expect an earnings surprise and perhaps 
a split on February 1st.  We are tempted to say this is a buying 
opportunity, but won't, given the tentativeness and sour mood 
of the market.  Even news that Merrill Lynch has added it to 
its top 10 picks didn't help today.  Could we be nearing a 
bottom?  We hope so, but wait for market conditions to improve 
(perhaps tomorrow after the employment numbers release?  Wishful 
thinking) before taking a position and watch $150 like a hawk.



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

HNZ $38.13 +0.31 (-1.69) Heinz gapped down nearly a dollar at 
the open on Wednesday.  HNZ traded down to a new 52-week low of
$36.63 and found resistance for the day at $38.  This morning, 
it looked as though the $38 level would hold, however, HNZ did
manage to break through and traded up to nearly $39.  The mini 
rally was short lived and HNZ quickly turned around and moved 
back down to rest just pennies above $38 for the night.  We 
believe that this brief and insignificant move up is merely 
indicative of investors looking for a more defensive position 
in the market.  HNZ has immediate resistance at $38.50 (5-dma) 
and further resistance at $40.  Whether or not the $38 level 
will back HNZ going forward is yet to be seen, as HNZ has spent 
some time as of late flirting around this level.  Tomorrow's 
job report is most likely going to determine the short-term 
direction for HNZ.  A negative report may very well send the 
buyers in the direction of more defensive positions, and could 
end our put play on HNZ.  On Wednesday, Merrill Lynch downgraded 
HNZ to Intermediate and Long-Term Accumulate from Buy.  Merrill 
downgraded several fellow food-producers citing a "generally 
negative view of food stocks" as the reason backing the 
downgrades.     

SPLN $46.13 -3.00 (-4.00) We did get a close below the 50-dma 
($47) however, we are still looking for a close below $45 before 
we are absolutely convinced that SPLN has the intention of 
continuing on with its downward trend.  Though SPLN did manage 
a positive day on Wednesday, the sellers ruled the day until 
just before the close when the buyers moved in to drive the 
stock up to close just over $49.  SPLN made a nice move down 
today, dropping three points backed with good volume.  We do 
not recommend any new positions until we see a drop below $45.  
This level has provided solid support throughout the last week.  
SPLN has been finding consistent resistance right around $49.50 
and is backed closely by further resistance in the neighborhood 
of $50.25. 

CIEN $45.88 -3.88 (-11.63) Not surprisingly, this put play is 
working out great due to the overall destruction of anything 
"Tech" related.  CIEN was actually trading a little higher this 
morning, probably due to a little bottom fishing activity.  It 
did not last and when the stock broke support at $50 late in 
the day, selling accelerated.  You may want to consider taking 
profits at the $43 level if that support holds.  It is hard to 
tell how the market is going to react to the negative news 
coming from key competitor Lucent.  Is Lucent's earnings 
shortfall an indication of overall weakness in the sector thus 
indicating that Ciena's quarter will also be weak?  Or is 
Lucent's quarter weak because it is losing market share to the 
likes of Ciena?  Either way the market will tell us tomorrow. 
Resistance is at $50 and stopping a put play if CIEN begins 
rallying past that point would be a good idea. 

JNJ $92.56 +2.81 (-0.69) The inflation fears today prompted 
traders to shift some of their money out of the techs and into 
the consumers.  JNJ was an obvious recipient of this sentiment 
and tacked on a couple of points.  Still we decided to keep it 
on our put list for now, but are rolling out the "caution" sign. 
From a technical standpoint, JNJ couldn't penetrate the 10-dma 
($93.13) indicator today and honestly this was its saving grace.  
Wait for a move below the historical $90 mark for better 
confirmation.

GTW $59.69 +3.19 (-12.37) While we expected to see GTW go into a 
slump thanks to Dell's misfortune on Tuesday (they were 
downgraded before the open), we didn't expect an earnings warning 
from GTW on Wednesday.  They expect earnings to fall $0.07 short 
of the Street's $0.44 estimate.  GTW pointed the finger at Intel 
saying it was their fault for not delivering all the processor 
chips necessary to fulfill customer orders in the $1000-$1200 
range.  The stock cratered in after hours trading to as low as 
$51 before rebounding to $57.38 at today's open.  With the bad 
news out, a rebound from yesterday's drop, and analysts' 
reiteration of their Buy rating (one was actually an upgrade from 
AG Edwards), we may have already found a bottom on GTW.  Even so 
we're going to keep it around for another day.  Resistance is at 
$61.  If you see a bounce south from there, you may want to 
consider taking a position.  If you are a bit less daring, 
consider waiting until GTW falls under $55, and the market and 
sector are simultaneously moving south too.  Look for mild 
support $59 and strong support at $55.  The 10-dma was violated 
on Monday but hasn't yet caught up to the stock price that keeps 
running away from it.  Tread lightly - we need to see a strong 
move on high volume to get the play to succeed on a new entry.



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

AMGN - Amgen, Inc. $61.13 +1.00 (+0.94 this week)

Amgen is one of the elite companies in the biotechnology 
industry.  Amgen develops products to treat cancer, 
arthritis, blood disorders, Parkinson's, Alzheimer's, other 
infectious disease and many more.  Its current drugs 
include: Neupogen (used for cancer and AIDS patients), 
Infergen (for treating hepatitis C), and Epogen (for the 
production of red blood cells).  It has several alliances 
with other key companies that help Amgen maintain its 
position as world's largest biotechnology company.  Current 
drugs under development include Stemgen, an early acting 
blood cell growth factor, and Leptin, the protein produced 
by the obesity gene used to help regulate the amount of fat 
stored by the body.

During times of investor panic, relative strength becomes one 
of the most important factors in determining what to buy.  
When it seems like investors are selling everything that they 
own, you want to be in the stocks that nobody seems to want to 
sell.  This technical scenario exists for the shares of Amgen.  
Amgen has a two-fold fundamental story that seems to inspire 
investors to hold on to their positions in this Biotech 
leader.  Amgen has a very strong drug pipeline, the lifeblood 
of investor interest in a Biotech.  Kinaret, a drug for 
treating rheumatoid arthritis, is under review at the FDA and 
NESP, a potential blockbuster drug for treating anemia will be 
submitted to the FDA.  In the meantime, the growing uses for 
Neupogen, especially for chemotherapy patients, continues to 
drive profits.  On January 20th Amgen will post their earnings.  
Amgen has a history of posting strong results this time of 
year.  In late December, AMGN had a substantial breakout above 
$50 which took the stock all the way to $70.  Recent profit- 
taking has established a new support level at $58.  This is a 
potential entry point if we have more weakness in the market.  
Otherwise, one could enter a position near today's close 
between $61-$62.  Momentum investors will want to go long 
AMGN if the stock trades above today's high of $61.94.

There have been several recent upgrades and price target 
revisions for Amgen.  On Tuesday, Paine Webber raised its 
price target from $60 to $80.  Dennis Harp, the analyst at 
Deutsche Banc Alex Brown termed the company "a bargain" 
relative to the earnings multiples of its peers in the 
industry.

BUY CALL JAN-55 YAA-AK OI=2673 at $7.75 SL=5.75  
BUY CALL JAN-60*YAA-AL OI=3843 at $4.13 SL=2.50
BUY CALL JAN-65 YAA-AM OI=4528 at $2.00 SL=1.00
BUY CALL FEB-60 YAA-BL OI=1024 at $6.63 SL=4.75
BUY CALL FEB-65 YAA-BM OI=1277 at $4.38 SL=2.50

Picked on Jan 6th at     $61.00    P/E = 62
Change since picked       +0.00    52-week high=$70.00
Analysts Ratings    14-12-8-0-0    52-week low =$25.69
Last earnings 10/99   est= 0.25    actual= 0.25
Next earnings 01-20   est= 0.25    versus= 0.22
Average Daily Volume = 6.67 mln 
Chart = http://quote.yahoo.com/q?s=AMGN&d=3m 

****

GO - GO.com $29.00 +0.19 (+5.25 this week)

GO.com is a newly formed Internet company -- the result of a 
merger between Infoseek and The Walt Disney Co.'s online 
unit, Buena Vista Internet Group (BVIG).  Basically GO is a 
tracking stock for Disney's Internet venture.  They provide 
Internet services to Disney-related Web sites including the 
GO.com portal, ABC.com, Disney.com, ESPN.com, NFL.com, NASCAR 
Online, and Family.com to name a few.  The GO Network derives 
nearly 90% of revenue from advertising and has over 21 mln 
visitors each month.

Whispers could be heard at the end of 1999 that GO was poised 
to go higher.  The company aptly timed its announcement that 
not only had its ABC.com's Web traffic doubled in the past 12 
months, but also that its Internet reach exceeded rival 
competitor CBS by a significant 85%.  Coupled with reports that 
its suite of e-commerce sites had three times more sales than 
same time last holiday season and things started to really look 
rosy.  Just like clock work, GO sprung into the year and made a 
move off its support at $24.  It showed strength as it held at 
$26 before taking that next step and facing overhead opposition 
at $28.94.  Granted GO is a cheaper stock than you may be 
accustomed to seeing on our call list, however we added it 
tonight for a couple of reasons.  First of all, the stock broke 
through that tough resistance today hitting an intraday high of 
$30.38 showing promise it could go higher.  Second, the call 
option volume is picking up momentum which is no doubt a bullish 
sentiment.  Now if all goes well near-term support is likely to 
form around $28 and if it does this would be a good entry into 
this news-driven momentum play.

More good news came today.  According to a Nielsen//NetRatings 
report, the GO Network was fastest growing Web site from August 
to November 1999 with a 31% growth spurt easily surpassing its 
nearest competitor by an 11% margin.  Kevin Mayer, executive VP 
and GM of the GO Network, responded to the positive report 
saying that "not only are our leading brands, like ABC.com and 
ESPN.com, continuing to dominate in their categories, but the 
portal itself is gaining momentum among users".  Earlier the 
company also announced an affiliate program, affiliate.go.com, 
that allows business or personal Web sites to add certain GO 
Network content  such as Web search, daily weather forecasts, 
or stock quotes, free of charge.  This arrangement affords the 
GO Network access to more consumers.  

BUY CALL JAN-25 GO-AE OI=1419 at $4.88 SL=3.25
BUY CALL JAN-30 GO-AF OI=2200 at $1.88 SL=1.00
BUY CALL FEB-30*GO-BF OI= 551 at $3.50 SL=1.75
BUY CALL FEB-35 GO-BG OI= 163 at $1.94 SL=1.00

Picked on Jan 6th at   $29.00    P/E = N/A
Change since picked     +0.00    52-week high=$37.69
Analysts Ratings    1-0-0-0-0    52-week low =$21.50
Last earnings 09/99 est=  N/A    actual=-0.34
Next earnings 02-03 est=-0.45    versus=-0.39
Average Daily Volume =    N/A
Chart = http://quote.yahoo.com/q?s=GO&d=3m



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

SCNT - Scient Corp $67.50 -6.63 (-18.94 this week)

Scient is leading a new category of professional services firms 
focused solely on building eBusiness systems and capabilities 
that help companies go to market rapidly and build competitive
differentiation.  Scient specializes in developing strategic 
eBusiness solutions for both Fortune 500 companies and 
electronic start-ups that want to dominate their marketplace. 

Things were looking pretty rosy for SCNT heading into December, 
The stock split 2:1 on December 6th and then moved up to tag 
a new 52-week high of $102.25 on the 13th.  The following day, 
ING Barings initiated coverage of SCNT with a Buy.  SCNT closed 
at $93, down $9.25 from the previous day's high.  Unfortunately 
for SCNT, things have continued downhill ever since.  SCNT has 
lost $34.75 in just over 3 weeks.  $80 tried to hold SCNT up 
for some time, however, SCNT finally broke through on Tuesday
and violated its 50-dma the following day.  At this point, we 
may very well be cleared for a healthy fall.  SCNT has some 
weak support just under $65 backed by more solid support at 
$60.  There is plenty of resistance in the road.  The 50-dma 
is providing some at $73.50 backed by the more formidable 
resistance at $80.  For the most part, SCNT's moves down have 
been backed by good volume, an indication that there are plenty 
of sellers out there.  Investors seem to be looking to the some 
of the "old school sectors" to cushion their portfolios while 
the Nasdaq corrects.  This is one of the reasons we believe 
that SCNT has the potential to provide us with a profitable 
put play.  On Wednesday, December 22nd, SCNT filed to offer 
2.35 million common shares.  1.5 million of these are being 
sold by SCNT and stockholders will sell the remaining 850,000.     

BUY PUT JAN-70 SMQ-MN OI=207 at $6.63 SL=4.75 today's vol=630
BUY PUT JAN-65*SMQ-MM OI=113 at $2.50 SL=1.25

Average Daily Volume = 339 K
Chart = http://quote.yahoo.com/q?s=SCNT&d=3m

****

WCOM - MCI WorldCom, Inc. $47.19 -4.06 (-5.88 this week)

MCI Worldcom is a telecommunications giant, providing consumers
and businesses with local, long distance, Internet, data, and
international communications services.  Included in the
company's products and services are switched and dedicated 
long distance and local products, dedicated and dial-up 
Internet access, wireless services, 800 services, calling 
cards, and debit cards.

WCOM continues to be under pressure due to concerns related
to its upcoming merger with Sprint.  The Telecom giant had been
consolidating near $53 after its early December slide, until
early this week when the NASDAQ added more downside pressure.
Sliding through support, WCOM got hammered today, losing over
$4 to close below the $51 support level.  The action this week
has placed WCOM solidly below all of its moving averages.  The
10-dma ($51.75) and the 30-dma ($52.75) will create overhead
resistance going forward.  Today's price action has brought 
WCOM down very close to its long-term support at $45, a level 
that hasn't been violated since late December...1998.  Today 
was a tough enough day with the weakness in the tech sector, 
but WCOM also got hit with bad news when Jack Grubman of Salomon 
Smith Barney cut his revenue estimates by 3 cents per share.  
The price moves this week have come on increasing volume, with 
over 3 times the ADV today.  Note that the volatility in the 
market has produced large price swings, which we can take 
advantage of.  Look for WCOM to bounce south from the $52-53 
range with strong selling volume to provide a good entry.  

BUY PUT JAN-50*LDQ-MJ OI=1184 at $4.13 SL=2.50
BUY PUT JAN-45 LDQ-MI OI= 166 at $1.50 SL=0.75
BUY PUT FEB-45 LDQ-NI OI= 270 at $2.75 SL=1.25

Average Daily Volume = 18.33 mln
Chart = http://quote.yahoo.com/q?s=WCOM&d=3m



*********************
PLAY OF THE DAY - PUT
*********************

CIEN - Ciena Corp. $45.88 -3.88 (-11.63 this week)

Ciena Corp designs, manufactures and sells open architecture, 
dense wavelength division multiplexing systems for fiber 
optic communications networks, including long-distance and 
local exchange carriers.  Ciena has more than two million 
optical channel kilometers installed worldwide.  Ciena's 
MultiWave DWDM systems enhance the transmission capacity of 
a single optical fiber without requiring significant 
modification or upgrade to transmission equipment.  Ciena 
offers optical transport products for long distance, short 
distance and ring-based applications, and through its 
wavewatcher network management system software.

Sunday's Write Up

Ciena has been one of the big winners of the year.  Just over 
a year ago CIEN was trading in the single digits and nobody 
wanted to get near this former high-flyer.  Then the market 
fell in love with any company in the fiber optic 
communications business.  Ciena's stock made a comeback for 
the ages.  Funny thing about success.  When you do well, 
everybody wants a piece and the trailblazers sometimes lose 
their claims to bigger and better financed competition.  This 
seems to be the case with Ciena.  Nortel and Lucent have been 
aggressively moving into Ciena's business.  Being bullied 
about by these behemoths must hurt.  To make matters worse, 
CSCO has entered into the fray with its planned acquisition of 
the fiber optic division of the Italian company, Pirelli.  
Ciena is doing everything it can to increase its product and 
customer base.  Will it be enough?  Hard to know for sure, but 
it seems that fear has gripped the minds of Ciena's 
shareholders and they are doing some selling.  Anybody with a 
memory of Ciena's price history has to be worried that the 
stock could fall all the way back into the single digits.  
Ciena probably would not deserve such a beating but emotions 
drive markets.  After a nice drop on Monday morning, CIEN 
staged a little rally for a couple of days.  On Thursday it 
appears that CIEN might have begun to roll over.  Only time 
will tell of course, but it is a good sign for put holders that 
CIEN closed in the bottom end of its range after taking out 
Wednesday's high.  $55 seems to be an area of a little 
support.  Look to get into a bearish position if CIEN can 
trade below that level.  You need to be cautious of CIEN 
trading above $60.  That would be indicative of CIEN trying to 
keep its comeback going.

Thursday's Write Up

Not surprisingly, this put play is working out great due to the 
overall destruction of anything "Tech" related.  CIEN was 
actually trading a little higher this morning, probably due to 
a little bottom fishing activity.  It did not last and when the 
stock broke support at $50 late in the day, selling accelerated.  
You may want to consider taking profits at the $43 level if that
support holds.  It is hard to tell how the market is going to 
react to the negative news coming from key competitor Lucent.  
Is Lucent's earnings shortfall an indication of overall weakness 
in the sector thus indicating that Ciena's quarter will also be 
weak?  Or is Lucent's quarter weak because it is losing market 
share to the likes of Ciena?  Either way the market will tell 
us tomorrow.  Resistance is at $50 and stopping a put play if 
CIEN begins rallying past that point would be a good idea. 

BUY PUT JAN-55*EUQ-MK OI=1592 at $10.38 SL=7.75
BUY PUT JAN-50 EUQ-MJ OI=1362 at $ 6.25 SL=4.50

Average daily volume = 5.29 mln                  
Chart = http://quote.yahoo.com/q?s=CIEN&d=3m



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

Nasdaq Tumbles As Investors Move To Traditional Stocks..

Wednesday, January 5

A volatile session pushed technology stocks to the sidelines as
investors shifted money into the blue chips amid nagging worries
about rising interest rates. The Dow climbed 124 points to 11,122
recovering a portion of the losses from Tuesday's session. The
Nasdaq composite slid 24 points to 3,877 during a roller-coaster
day that saw the technology-heavy index swing 180 points. The S&P
500 stock index ended almost unchanged at 1,4021 after falling as
much as 28 points earlier in the session. In the broader market, 
advancing stocks edged out declines 17 to 13 with more than 1.07
billion shares traded on the NYSE. There were 27 stocks at new
highs and 125 at new lows. The benchmark 30-year U.S. Treasury
bond declined more than a point while the yield rose to 6.62%.

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

Exodus          EXDS   JAN70P/JAN72P   $0.50   credit   bull-put
Kushner-Locke   KLOC   APR7C/JAN7C     $0.75   debit    calendar
Concentric      CNCX   APR15C/JAN25C   $4.62   debit    diagonal

All of our new plays offered favorable entry opportunities during
today's session. KLOC opened relatively close to the quoted debit
and each of the positions traded at or below the suggested target.

Portfolio plays:

The economy is on a roll and with analysts already worried that
the Federal Reserve will make aggressive interest rate hikes to
slow its growth, November factory orders came in stronger than
expected, causing new concerns of future inflation. Bonds have
also contributed to the market downfall and investors are once
again moving to safety issues. Among the strong sectors were oil, 
metals, utilities, aerospace and pharmaceuticals while Internets, 
semiconductors, telecommunications and retailers fell to profit-
taking. Some of the technology components of the Dow managed a
comeback during the session but blue-chip strength came from the
market workhorses and defensive stocks. Oil industry giant Exxon
-Mobil (XOM) was up almost $4 to $80.75 bringing our LEAPS/CC's
play back into favorable territory near the sold strike at $85.
On the downside, Proctor and Gamble (PG) fell $2 to a recent low
near $103 and the continued downward trend may prompt a defensive
move to February options. The biggest surprise in the long-term
portfolio was Computer Associates (CA) with a $7 collapse to $63.
The stock plunged after BMC Software (BMCS), a maker of software
that monitors computer networks plummeted $30 on news the company
will miss its third-quarter earnings expectations. BMC's earnings
will be in the range of $0.40 to $0.44 a share, well short of the
expected number. Analysts will now be watching for CA's report,
which is due in mid-January. Our position achieves maximum profit
with the stock at $65 (the sold strike) and with the uncertainty
in the upcoming earnings, we are going to roll to February options
for downside protection. The new position is LJAN60C/FEB65C at a
debit of $2.88.

Murphy's Law is alive and well in our Spreads/Combos portfolio
with Priceline.com (PCLN). Now that we have closed our play for a
small loss, the stock bounced $6 to $60 after the company said it
expects fourth-quarter sales of about $168 million, higher than
its original forecast. PCLN also added a record 972,000 customers
in the fourth quarter and the bullish outlook has attracted new
investors to the issue. A few of our smaller stocks were also in
the news. Recoton Corporation (RCOT), a top consumer electronic
company, announced its entry into the vehicle security/navigation
services market through a licensing agreement with Varitek (VATK).
The agreement gives RCOT a license to develop, manufacture, market
and distribute Varitek technologies under the JensenŽ brand name.
The stock rose $2.06 to $10.88 and our bullish play can be closed
near maximum profit or rolled up and forward to February options.
Talk.com (TALK) announced it has signed a marketing agreement with
First USA Bank, the largest issuer of Visa cards in the world. The
agreement, Talk.com's largest marketing pact to date, establishes 
Talk.com as the selected provider of long distance services in a
marketing program offered to First USA's cardmembers. TALK will
offer its telecom services to cardmembers via online/direct mail
promotions. The issue finished $0.81 higher on the announcement.

Our recent recovery play on Delta and Pine Land (DLP) appears to
be safely profitable now that its former merger partner Monsanto
(MTC) has paid the $81 million termination fee and removed the
restriction on the cotton seed company's search for new suitors.
The move effectively ended the deal and Delta said it would look
elsewhere for a partner that would help it compete in a rapidly 
consolidating industry. The stock moved almost $2 higher on the
news, finishing near $17.50 and well above our current cost basis.

Thursday, January 6

Blue-chip stocks rallied while technology issues suffered in a
classic sector rotation. The Dow Jones Industrial Average rose
130 points to 11,253 on rallying cyclical and financial stocks.
The technology-heavy Nasdaq index sank 150 points to 3,727 under
pressure from earnings and profit warnings. The broader S&P 500
index closed relatively unchanged at 1,403. Advancing shares beat
declines 19 to 11 with more than 1 billion shares traded on the
NYSE. There were 46 stocks at new highs and 78 at new lows. The
30-year U.S. Treasury bond moved up 25/32 with the yield down to
6.56%.

Portfolio plays:

Despite the continued sell-off in technology stocks, we enjoyed
a number of winners in the portfolio. PeopleSoft (PSFT) was the
leader in the small-cap section, climbing $4 to a recent high
near $22 after announcing that its fourth quarter earnings will
meet analysts' estimates. The developer of business management
software said it expects to report a profit of $0.02 to $0.04
per share. The company also said license revenues in the period
are expected to increase sharply over the third quarter both for
PeopleSoft enterprise business software and for Vantage customer 
relationship management software. It expects that fourth-quarter
license revenue for the combined company will increase 35%. The
move places both of our bullish positions deep in-the-money and
they should now expire at maximum profit.

Kushner-Locke (KLOC) climbed over a dollar to a midday high near
$7.25, offering a favorable early-exit opportunity just one day
after the position was opened. The stock is rising on speculation
of a possible merger or sale of the company's assets. Another new
position, Boston Communications (BCGI) enjoyed a small rally with
a $0.75 climb to $7.50. The bullish diagonal position can now be
closed for a favorable profit. Geron Corporation (GERN) continued
its recent break-out, climbing $0.81 to $15 after the company
discussed comments from a recent symposium. The meeting brought
together scientific and medical experts in cross-disciplinary
research being conducted to develop therapies for regenerative
medicine. It was attended by industry, academic and government
leaders from around the world in such fields as developmental
biology, gene targeting, neurology, immunology, telomere biology,
as well as nuclear transfer and reprogramming. Apparently they
had some good things to say about the company as it is again on
the move. Our recent change to a bullish position appears to be
paying dividends. Southwest Bancorp (SWBT) bounced back $0.75 to
end near $19 as the financial issues struggled to recover from
recent losses. We plan to use any further upside movement to roll
the position into February. Our old friend Zoltek (ZOLT) managed
a small gain, climbing to the $9 mark after days of consolidation.
We expect to sell the $10 strike, lowering our cost basis on the
APR-$7.50 call option, at the January expiration.

In the long-term portfolio, the big loser was Motorola (MOT). The
stock dropped almost $15 to a recent low near $120 as fears of
less-than-outstanding earnings hit the market. Many stocks in the
high-flying tech sector have perfect earnings already priced in
and any imperfection could send tech shares into a down-draft. Our
current LEAPS/CC's position is short at $120 and we will monitor
the issue for further downside movement. Computer Associates (CA)
also fell another $3, ending just below $60. Our roll-out to the 
February options should prevent losses in this position. Market
bellwethers Proctor and Gamble (PG) and Johnson & Johnson (JNJ)
were the highlight of the section as investors moved into safety
issues. Proctor and Gamble rose almost $5 to close at $108, just
short of our sold strike in January. The spread achieves maximum
profit at $110 and we will use the rally to move our spread into
February. Johnson & Johnson climbed over $3 to end at $93, well
short of our target but still profitable in the long-term play.
Exxon-Mobil (XOM) was the last of the big winners, up almost $4
as oil prices rebounded on news of steady OPEC cuts. Our neutral
position is at maximum profit and now we will have to decide how
the stock will perform in the future, based on today's move to a
recent high.

In the Straddles section, Federal Express (FDX) was a big mover,
up almost $5 on heavy volume today, and there was no public news.
One analyst said the shipper may have had strong business over the 
holiday season, and the company has an analysts meeting scheduled
for January 19, which could be prompting some speculative interest
in the stock. Another news item said a 3% fuel surcharge that FDX
recently announced might be helping the issue. Rising fuel prices 
pressured FDX earnings in the first two quarters of fiscal 2000.
Analyst Jeffrey Pittsburg, who offered a buy recommendation on FDX
Tuesday said they may benefit from business-to-business electronic 
commerce, especially now that companies no longer have to focus
their technology efforts on preventing Y2K computer problems. Our
straddle position climbed to a $14 credit during the session.

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


****************
READER'S REQUEST
****************

I have received a number of requests for plays on specific issues
this week and here are two that have excellent upside potential
in the coming months. The first position has been well documented
by the OIN researchers in recent call-option plays and now it is
offering a new entry point for those of you that are bullish
on Satellite-Telecom. The second play is based on a speculative
(bullish) outlook in the business/management services industry.

****

GSTRF - Globalstar Telecom  $37.69   *** Entry Point? ***

Globalstar Telecommunications is a general partner of Globalstar
L.P. (Globalstar), a development stage limited partnership which
is designing, constructing, and will operate a worldwide, low
earth orbit satellite based digital telecommunications system. 
Globalstar has launched almost one half of the 52 satellites that
will complete its full constellation. Globalstar intends to offer
low-cost, high quality telecommunications services, including
voice services, messaging and paging services, remote monitoring,
facsimile and other data services, including position location,
throughout the world. Loral Space & Communications (LOR) is the
managing general partner of Globalstar, with a majority ownership.

Lots of recent news and announcements on this issue and in the
satellite industry. The coverage in the main section of the OIN
should bring you up to date on the current outlook for the stock.

Technically, Globalstar ran out of the gate a bit fast and is
catching its breath. One would expect the consolidation to reach
up to 66% (somewhere around $30) as it works off its overbought
condition. The move above the recent six-month trading range on
high volume was bullish; the move above the 1998 high was more
so; that it was a new all time high is very bullish. We expect
support near $34, and then again as you near $30, which would be
at the 30 dma.

We have had a number of successful plays in this group recently
including PanamSat (SPOT) and Loral Space And Communications (LOR)
although GSTRF has yet to grace the Spreads/Combos section. The
recent consolidation has provided us with an excellent entry
opportunity and the small disparity in option premiums will help
us open the play at a discount.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL MAR-35 YVQ-CG OI=5926 A=$9.75
SELL CALL FEB-40 YVQ-BH OI=1080 B=$5.88
INITIAL NET DEBIT TARGET=$3.75 TARGET ROI=33%

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

****

MSGI - Marketing Services Group  $20.43   *** On The Move! ***

MSGI provides direct and database marketing, telemarketing and 
telefundraising, media planning and buying, online consulting
and commerce, automated Internet marketing and design services. 
The company offers these services to a divers group of over 600
clients located throughout the United States and Canada. These
services include customer and market data analysis, database
creation and analysis, data warehousing, predictive behavioral
modeling, list processing, brokerage/management, data enhancement
and other direct marketing information services.

The recent merger announcement between MSGI's Mazescape, a B2B
solution provider in the Internet recruitment industry, and
either Breckenridge Group or Claybrooke Associates caused
confusion among investors. Then the company announced they had
signed a definitive purchase agreement to acquire up to a 19%
equity position in Fusion Networks. Now they have decided to
merge their WiredEmpire and Pegasus Internet subsidiaries. The
combined subsidiaries will retain the WiredEmpire name and
together, will provide clients a full offering of interactive
solutions. Officials say that MSGI intends to pursue a strategy
of building, investing, acquiring and incubating promising
Internet businesses and they certainly achieved their goal this
year, with six Internet transactions in the second half of 1999.

Regardless of all the acquisitions and mergers, it appears the
stock is back in gear technically and the option pricing provides
a favorable entry point for aggressive position traders.

PLAY (aggressive - bullish/diagonal spread):

BUY  CALL MAY-12.50 UMS-EV OI=62  A=$9.88
SELL CALL FEB-22.50 UMS-BX OI=479 B=$2.56
INITIAL NET DEBIT TARGET=$7.00-$7.12 TARGET ROI=42%

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



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************
See Disclaimer in section one
************


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