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Daily Newsletter, Wednesday, 01/12/2000

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The Option Investor Newsletter         Wednesday  1-12-2000
Copyright 2000, All rights reserved.
Redistribution in any form strictly prohibited.

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

Also provided as a service to The Online Investor Advantage
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       1-12-2000           High     Low     Volume Advance Decline
DOW    11551.10 +  40.00 11612.50 11505.20   978,138k 1,356  1,696
Nasdaq  3850.02 -  71.17  3950.98  3834.53 1,519,027k 1,799  2,334
S&P-100  782.73 -   2.52   788.30   780.36    Totals  3,155  4,030
S&P-500 1432.25 -   6.31  1442.60  1427.08            43.9%  56.1%
$RUT     490.04 -   2.57   494.84   487.09
$TRAN   2936.24 -  13.32  2966.68  2931.61
VIX       24.63 +   0.70    25.51    23.33
Put/Call Ratio       .45
******************************************************************

The Thrill of Wednesdays

The beauty of writing the Wednesday Market Wrap is that YHOO 
typically announces on Tuesday and I get to cover the aftermath, 
which is where I want to start today.  The company announced 
great earnings, strong revenue growth and a gave traders a 
bonus with a 2:1 stock split.  YHOO then began dropping in 
after-hours trading, down over $20.  It is standard procedure 
for Yahoo to fall after earnings.  In truth, the 2:1 split was 
the only thing stopping us from recommending puts last night 
(we don't want to fight against another catalyst).  So when 
YHOO opened at $390, it was screaming for put plays.  Who is 
out there bidding this stock back to almost even before the 
market open?!  Not to make this a soapbox issue, but this has 
been one of the most reliable trends in the market for the past 
two years.  A huge run-up into earnings followed by a short-term 
decline.  So congratulations to all who took advantage of the 
odd opening in shares of YHOO for a quick $40 profit on the 
stock's intraday trading today.  YHOO ended at $357.56, down 
almost $40. 

But this isn't a Yahoo Wrap so let's get back to markets where 
a lot of action happened today, in front of what could be a 
real wild ride tomorrow.  Let's take a poll.  What is more 
important to the markets on Thursday?  A)  The PPI report due 
out in the morning, B) Retail Sales numbers also due out early, 
C) INTC's earnings report after the close, or D) the Greenspan 
speech in the evening.  The answer is a trick!  It is E) all of 
the above.  Not to mention how the bond will react to this 
overload of interest rate sensitive data.  You would be prudent 
to keep an eye on the 30-year bond yield before placing your 
bets.  Some analysts are still talking about a run towards a 
yield of 7.00%.  Here are the expectations for the data.  The 
PPI is expected to be up by 0.3%, with the core rate increasing 
by 0.1%.  The Retail Sales figures are forecast to be up 0.9% 
which is a big jump.  In evaluating this number you will have to 
look at what part new car sales played.  They had a great month 
and may skew the number slightly.  Once the bond traders get this 
sorted out, they will have to worry about what Mr.Greenspan might 
say that evening.  It's not that rising rates have really hurt 
the high-tech sector over the past couple months, but there is 
an increasing feeling that a move to 7.00% would bring out the 
bears.

The Dow ended up 40.02 to 11551.10, helped by Financials, even 
though the bond was sinking.  The Financials won't be able to 
continue to rise if the bond is sinking so we will consider this 
to be abnormal.  Especially when you consider that 3 out of the 
last 4 times the PPI and Retail Sales were released on the same 
day, the bond got hammered.  The S$P 500 was down 6.46 today and 
the Nasdaq was down big, dropping over 71 points.  Volume was 
good, but nothing to write home about.  Decliners also ruled the 
day over advancers.  The 30-year bond ended trading with a yield 
of 6.71%.

The Nasdaq spiked open today up 30 points and if you put your 
hand in that cookie jar, you got caught.  It quickly reversed 
course and never came close to that level again.  It did bounce 
at 3835, which at the time was an 80 point loss, to come back 
to even before rolling over again.  The Dow faired better by 
holding in a tight 100 point range all day. 


 


 

Shares of Microsoft were plagued Wednesday by a report in 
today's edition of USA Today.  The report noted the intentions 
of federal and state prosecutors to seek a breakup of the 
colossal software maker.  This news helped to bring MSFT down      
$3.56 for the session.  Rumor has it that lawyers are looking to 
split Microsoft into two or three separate entities according 
to products.  None of the parties involved would comment on the
rather speculative report.  One spokeswoman from the Justice
Department was quoted as saying that the report was "inaccurate 
in several important respects" and "does not accurately 
represent our views."  But there was news later that MSFT could 
be broken into 3 separate companies.

Ariba (ARBA) announced earnings on Tuesday, coming in 4 cents 
better than analysts estimates.  Today, Prudential upgraded 
ARBA from a Hold to a Strong Buy.  Ariba shares closed down 
just over 18 points for the session at $172.88. 

Today, Drugstore.com (DSCM) announced plans to acquire 
Beauty.com.  DSCM will issue 1.3 million of its shares for 
100% ownership of Beauty.com.  This deal is worth an approximate 
$42 million.  The plan is for Beauty to maintain its operations 
from New York while DSCM will begin providing customer service,
operational infrastructure and technology support.  

USA Networks (USAI) announced plans to buy Precision Response 
in a stock swap worth an approximate $608 million.  USAI plans 
to combine Precision's e-commerce customer service with its 
USA Electronic Commerce and Serviced unit.

Digital communications provider Razorfish (RAZF) shares closed 
up $5.88 at $87.13 following a 2:1 split announcement which 
will be effective as of January 27th. 

Shares of Rite Aid (RAD) were down $2.75 after the company 
announced late Tuesday that they would not be reporting end of 
the year quarterly results until their auditors had completed 
a review of financial information.  Lehman Brothers also 
downgraded the stock from a Buy to a Neutral citing the 
company's lack of earnings power as the reason for the 
downgrade.

Here are my thoughts and they are just that, but use them for 
what they are worth.  Markets cycle, and we are entering the 
lull period after a healthy boom (to say the least) for the 
past three months.  Traders are selling the rallies and the 
markets have been generally trending sideways to lower since 
the start of the year.  The bond can no longer be ignored.  As 
it continues to fall, investors will shift money over from high 
P.E. stocks.  Another indicator is the overall bullishness in 
the Investor Intelligence survey.  This is a classic contrarion 
indicator.  It is at a level that is typical of a short-term 
correction in the markets.  The market charts don't look great 
technically and sideways trading and a little consolidation 
sounds bad, but would be considered healthy.  The Dow is in 
less jeopardy to sink based on the fact it hasn't really gone 
far.  The Nasdaq on the other hand might be looking at 3700 
once again or possibly a break of that support, pushing it down 
to the 3550 level.  The timing is tougher to predict, but it 
is hard to imagine that we can flush out all of the worries 
before the Fed meeting on Feb. 2nd.  

Not to worry though because an experienced investor can make 
money in all markets (that makes it sound too easy but its 
true).  Selling calls, buying puts, combos, and straddles aren't 
always exciting, but produce a decent return.  I love a good 
bull market, but have learned to wait until the time is right 
before jumping in with both feet to buy calls.  LEAPS is another 
strategy worth a look when the market takes these quick dips, 
especially when the $VIX jumps over 30 (currently at 24.63).  

Don't fight this negative trend.  You may end up with a damaged 
portfolio after stepping into a bear trap.  


Ryan Nelson
Asst. Editor  


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

Buying stocks with big profit margins: a safer bet

With all the volatility in the stock market these days, its 
difficult to find companies to invest in that allow you to 
sleep comfortably at night. Whether you are a risk-taker or 
not, one possible way of eliminating, or at least reducing 
those sleepless nights, may be to look at companies with large 
profit margins. Investing in companies with big profit margins 
is a good way insulate yourself against various economic 
pressures, such as pricing pressures due to increased 
competition, increases in overhead costs, or unfavorable tax 
status, whatever the case may be. If adverse economic 
conditions were to erode a company's margins, profits would of 
course shrink, but not necessarily evaporate. Big profit 
margins can help insure against companies from taking drastic 
measures. 

To find these companies, it does not take a P.H.D. in 
biochemistry from M.I.T. Most of the companies who dominate 
their respective industries do so for a reason. Perhaps its 
because the company has built a better mousetrap, has better 
technology, or has a dominant market share. Usually, the 
companies who have garnered these high margins were able to 
do so through some competitive advantage. 
 
In software, for example, the 800-pound gorilla is, of course, 
Microsoft, which has posted consistent quarterly net margins 
of roughly 40 percent. That means that out of every dollar of 
revenue Bill Gates' little outfit in Redmond, Washington 
generates, 40 cents goes to the bottom line. Practically every 
computer in existence today uses Microsoft's operating system. 
Microsoft dominates because of its installed base, which grows 
every day. The company receives a fee for each machine, 
regardless of whether the computer is put together by Dell, 
Compaq, or Gateway. With the emergence of the Linux operating 
system, Microsoft will have its hands full warding off the 
programmers who boast of Linux's more robust and more stable 
platform.
 
In other areas of technology, data storage in particular, 
Hopkinton, Mass.-based EMC Corp. is the leader boasting net 
margins of 22%. The company's shares have risen dramatically 
with the evolution of the Internet and its need to store 
innumerable types of data, such as demographic information.  

Gemstar International develops, markets and licenses 
proprietary technologies and systems under the VCR Plus+ name, 
designed to simplify and enhance consumers' interaction with 
electronics products and other platforms that deliver video, 
programming information and other data.

The company boasts of staggering net margins of 47 percent. 
John Malone, the telecommunications and cable magnate, stated 
that the block of patents that Gemstar holds on its VCR Plus+ 
and electronic programming guide technologies is 
"unassailable."   

The semiconductor industry is another industry where larger 
than average profit margins can occasionally be found, but you 
have to be careful. These stocks tend to be cyclical in 
nature. Swings in supply and demand for semiconductors can 
greatly affect unit prices. Firms that make commodity-type 
chips are the ones that are subject to these supply and demand 
shifts. Too much supply in the market and these firms must 
lower prices to keep attracting buyers. It becomes a war based 
on volume, not on price. Intel, which dominates the industry, 
posts the strongest profits in the memory chip industry with 
margins in the 25 percent range. 

But these margins are not exclusively found in the technology 
sector. 

Coca Cola, the Atlanta-based soft drink juggernaut posts net 
margins in the 15 to 16 percent range. Coke is the number one 
brand name in the world. The stock has come down recently from 
the 70s to around 60 recently. The company is battling back 
from increased marketing expenses related to building customer 
trust after last year's European contamination scare, negative 
currency translation, and consolidation of Russian and Indian 
bottling assets which currently are operating at losses. 
Coke's latest strategy is to buy weak bottlers, strengthen 
them, and then sell them again for a profit, thereby gaining 
profits and better bottlers for continued distribution.

In the area of film production, Digital animation movie studio 
Pixar, who's credits include Toy Story, Toy Story 2 and A 
Bug's Life, has posted average net margins for the last four 
quarters of almost 38 percent. 

VISX Corporation, the undisputed leader in laser vision 
correction, with a market share in excess of 75 percent, has 
net margins of 35%. The company reportedly receives a $250 
license fee for every laser procedure, with now one million 
procedures completed, according to its Web site. Doctors love 
the company and many have had the procedures done. The Company 
holds over 140 patents for the technology worldwide and has 
more than 70 additional patents pending. The Company received 
its first U.S. Food and Drug Administration market approval in 
1995 and was the first laser manufacturer with approval to 
treat low, moderate and high myopia, astigmatism, and 
hyperopia. 

The drug sector has several candidates with some very 
attractive margins as well. American Genetics, also known as 
AMGEN, posts regular net margins in the neighborhood of 33 
percent. Pfizer Inc., the behemoth in the pharmaceutical 
sector, posts net margins, on average, of 16.3 percent in its 
last 4 quarters. MedImmune, which develops and markets 
products for the prevention and treatment of infectious 
disease and for use in transplantation medicine, posts solid 
net margins of 34 percent. 

Indirectly related to the pharmaceutical industry are the 
genomics companies. These companies are focussed on drugs 
based on the discovery and understanding of the medical 
utility of genes for human healthcare. Many of these companies 
are not profitable because much of the operations are in the 
area of research and development. However, Human Genome 
Sciences and Millennium Pharmaceuticals are two of the more 
prominent contenders in the field. Millennium, however, is the 
one that is profitable, posting net margins of 11 percent. PE 
Biosystems, an indirect participant in the genomics sector, 
which focuses on in the development, manufacture, sale, and 
service for life science research, posts net margins of 13.2% 
net margins.   

Keep in mind that there are many other tools one can use for 
evaluating investment candidates. Examining the profitability 
of companies should be accompanied with other types of 
analysis. In addition to big profits, check out the company's 
competition, what Wall Street analysts think of the company 
and the sector its in, and so forth. As yourself questions. Is 
this truly the dominant company in the industry? Are there 
emerging technologies or other economic forces (interest 
rates, inflation, etc.) that could hurt my investment? Do your 
homework and good luck! 



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

CHKP - Check Point Software $190.50 -12.00 (-1.38 this week)

Check Point provides Internet security.  The company provides
secure enterprise networking solutions that enable customers
to implement centralized policy-based management with enterprise-
wide distributed deployment.  Simply put, CHKP has benefited
from rising demand for its virtual private networks software
which lets remote workers, business allies and customers
securely access corporate computer networks.

Sunday's Write Up

The main catalyst for our play on CHKP, is a run towards
earnings with the added bonus of a split.  The split date should
be announced after the shareholder meeting on January 13, and 
we think it could coincide with earnings, now confirmed for
February 1.  Once investors finished punishing the Internets,
they refocused on these facts and helped CHKP recover nicely on
Friday.  Trading as low as $174.50 on Thursday, CHKP was saved
from the grim reaper's scythe by bouncing right at the $175
support level.  Money began flowing in Friday morning, but the
stubborn bears demanded one more test of support around noon.
After that, CHKP was off to the races, adding almost $16 from
the low of the day to close just below resistance ($194) which
is also the site of the 10-dma.  Going forward, we may need to
see CHKP test support near $184 before powering forward and a
bounce here accompanied by strong volume should provide a good
entry.  If CHKP remains strong next week, a move through $194
is buyable as long as it is confirmed by volume.  We may see
additional resistance near $205 on the way to the 52-week high,
set only a week ago at $218.50.  Keep in mind, this is a
volatile issue, with wide daily price swings, so entry points
should be abundant and stops are a must.

James Pressler, an Internet analyst at PaineWebber, speaking
Thursday on CNBC, included CHKP as one of his favorites in the
new year, referring to it as the standard in internet security.
CHKP announced Tuesday that its FireWall-1 Internet security
solution and IBM's HACMP high availability software have both
met the rigorous integration standards, enabling IBM to
strengthen its security offering.  This provides customers with
the protection and availability that e-businesses require.

***January contracts expire in two weeks***

Tuesday's Write Up

Monday's record move on the NASDAQ gave a nice boost to our 
earnings/split play.  Gapping up over $6, CHKP never looked
back, adding just under $20 for the day on average volume.  
Tuesday was a mixed bag for CHKP, as it was for many of the 
high-flying technology shares.  Opening lower, shares ran all 
the way to $218.50, last week's new 52-week high, before 
succumbing to selling pressure.  CHKP gave up all of its
intraday gains to lose over $9 on the session.  There is light
support at $200 and then $193.  With the strength of this play,
earnings February 1 and a split (date to be determined at the
shareholder meeting on January 13), look for CHKP to continue
showing strength.  Resistance is up at the 52-week high, which
was tested again today.  Remember, this is a volatile internet
issue, so evaluate your risk profile accordingly.  CHKP 
continued to add to its market leading position Monday, through
collaboration with Verisign.  The 2 companies unveiled
Go Secure!(SM) for Check Point which facilitates the deployment
of digital certificates in Check Point's VPN-1T/FireWall-1
solution.  With continuing concern over internet security,
CHKP's ability to provide security in its systems will continue
to attract customers.

BUY CALL JAN-190*KEV-AR OI= 94 at $11.63 SL= 9.00
BUY CALL JAN-195 KEV-AS OI= 74 at $ 9.00 SL= 6.75
BUY CALL JAN-200 KEV-AT OI=230 at $ 7.25 SL= 5.50
BUY CALL FEB-190 KEV-BR OI= 58 at $23.88 SL=18.50
BUY CALL FEB-200 KEV-BT OI= 86 at $21.63 SL=16.75

Picked on Jan 4th at  $198.75     P/E = 97
Change since picked     -8.25     52-week high=$223.50
Analysts Ratings    7-6-3-0-0     52-week low =$ 26.75
Last earnings 10/99 est= 0.56     actual= 0.60
Next earnings 02-01 est= 0.65     versus= 0.47
Average Daily Volume =  597 K
Chart = http://quote.yahoo.com/q?s=CHKP&d=3m



********************************
BIG COVERED CALLS AND NAKED PUTS
********************************

 Welcome to our BIG, BIG-MONEY Covered Calls and Naked Put section.
 We will be listing a favorable "in-the-money" positions that offer
 conservative entry points into technically bullish charts, with
 reasonable monthly returns. The positions that we find favorable
 (and will track every week) will be marked by asterisks. We will
 also list more aggressive positions for those traders so inclined.
 Do not enter these trades unless you fully understand the strategy
 and various methods of manipulating the position should the stock
 price drop or rise and in the event you decide you want to keep
 the issue.
 
 
 Summary of Previous Picks:
 
 Covered Calls:
 
 Stock  Strike Strike Cost    Current  Profit  Monthly
 Symbol Month  Price  Basis   Price    (Loss)  Return
 
 PUMA    JAN    80     77.16  105.00   $2.84    7.00%
 CLRS    JAN    60     58.06   83.00   $1.94    6.40%
 INCY    JAN    60     58.22  117.13   $1.78    5.80%
 AFFX    JAN   120    116.75  162.94   $3.25    5.30%
 HGSI    JAN   125    121.63  152.94   $3.37    5.30%
 
 Naked Puts:
 
 Stock  Strike Strike Cost    Current  Profit  Monthly
 Symbol Month  Price  Basis   Price    (Loss)  Return
 
 CLRS    JAN    55     53.87   83.00   $1.13   11.70%
 INCY    JAN    50     49.00  117.13   $1.00   10.50%
 IDC     JAN    30     29.37   30.13   $0.63    9.60% Watch Closely
 AFFX    JAN   105    103.44  162.94   $1.56    9.50%
 PUMA    JAN    65     63.87  105.00   $1.13    9.40%
 HGSI    JAN   115    113.62  152.94   $1.38    8.60%
 CRA     JAN   115    113.75  234.00   $1.25    7.20%
 ICGE    JAN   110    108.87  131.75   $1.13    6.20%
  
 Our target Return On Investment: for January is 1.5% for
 nine days; for February is 6.1% for thirty-seven days; which 
 equates to a 5% monthly return. A margin account would double
 the listed covered call returns. 
 
 
 NEW PICKS 
 
 January Plays
 
 HNCS - HNC Software  $91.94   *** Disparity Play ***
 
 HNC Software develops, markets and supports predictive software
 solutions for leading service industries. These predictive
 software solutions employ proprietary neural-network predictive
 decision engines, profiles, traditional statistical modeling,
 business models, expert rules and context vectors to convert
 existing data and business experiences into recommendations and
 actions. Leading service industries such as the healthcare and
 insurance, financial services and retail industries are using
 predictive software to improve profitability, competitiveness
 and customer satisfaction. HNCS's healthcare/insurance industry
 products include CRLink, MIRA, CompCompare, ProviderCompare,
 PMAdvisor, VeriComp, Autoadvisor, eCM Director and Spyder.
 Financial service industry products include Falcon and ProfitMax,
 and its retail industry products include several solutions under
 the Retek name.
 
 HNCS is a well-known company with an excellent technical history
 but this play is based solely on the disparity in option premiums
 at the $60 strike price. Normally we would pass on this type of
 position but the return on investment is favorable for a ten-day
 play.
 
 HNC Software (HNCS) $91.94
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Call JAN 60   NSQ AL  20       33.13    58.81     2.0%
 
 Chart = http://quote.yahoo.com/q?s=HNCS&d=6m
 
****

 RFMD - RF Micro Devices  $74.88   *** Technicals Only ***
 
 RF Micro Devices designs, develops, manufactures and markets
 proprietary radio frequency integrated circuits for wireless
 communications applications such as cellular and personal
 communication services, cordless telephony, wireless local area
 networks, wireless local loop, industrial radios, security and
 remote meter reading. RFMD offers a broad array of products,
 including amplifiers, mixers, modulators/demodulators and single
 chip transmitters, receivers and transceivers, which represent a
 substantial majority of the RFICs required in wireless subscriber
 equipment. The company designs products using three distinct
 process technologies, gallium arsenide heterojunction bipolar 
 transistor, silicon bipolar transistor, and to a lesser extent,
 gallium arsenide metal semiconductor field effect transistor.
 
 The company produces some unique components for a number of
 industries and their fundamental outlook is excellent. First
 Boston leads the coverage on this stock and their most recent
 rating was a strong buy with a price target of $85. The issue
 has an excellent short-term pattern that complements the low risk
 position and the play offers a favorable risk/reward ratio based
 on inflated option premiums.
  
 RFMD $74.88 
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Call JAN 65   RFZ AM  333      11.00    63.88     1.8%
 
 Chart = http://quote.yahoo.com/q?s=RFMD&d=6m
 
****

 ARTG - Art Technology Group  $100.88   *** Own This One! ***
 
 Art Technology offers an integrated suite of Internet customer 
 relationship management and electronic commerce software
 applications. The company's solution enables businesses to
 understand, manage and build online customer relationships and to
 market, sell and support products and services over the Internet
 more effectively. Their Dynamo product suite is designed to
 provide businesses with the core application platform and software
 tools required to develop and deploy personalized, reliable,
 large-scale Web sites for conducting electronic commerce. ARTG
 also provides a variety of consulting, design, application
 development, integration, and training and support services in
 conjunction with its products through its Innovation Solutions and
 Express Services offerings.
 
 Art Technology was recently presented with an Editor's Choice
 Award (Best Java Application Server) for its Dynamo Product Suite.
 The award recognizes industry-leading companies that provide
 business solutions with Java and respond to the increasing demands
 of technology. Dynamo was one of the first 100% Java application
 servers and today drives some of the largest and busiest Ecommerce
 sites on the Web today. ARTG customers include 3M, BMG Music,
 Hilton Hotels, J-Crew, John Hancock Funds, MTV/Nickelodeon, Peapod,
 Scudder/Kemper, Sony Online Entertainment and Sun Microsystems.
 
 The recent run-up has left most of the moving averages well behind 
 and now the stock is trying to find solid ground from which to
 make its next assault. We believe $75 is an extreme target for the
 issue (in the next 10 days) and the return on investment offers a
 fair risk/reward ratio against the possibility of owning the issue.
 
 Art Technology Group (ARTG) $100.88 
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Put  JAN 75   AYQ MO  275      0.94     74.06     4.5% ***
 Sell Put  JAN 80   AYQ MP  123      1.75     78.25     8.0%
 Sell Put  JAN 85   AYQ MQ  37       2.38     82.62     8.9%
 
 Chart = http://quote.yahoo.com/q?s=ARTG&d=6m
 
****

 ASDV - Aspect Development  $66.25   *** Picking The Bottom ***
 
 Aspect Development creates, markets and supports enterprise client
 server software and content products that enable manufacturers to
 improve product development and business processes through
 component and supplier management (CSM). Aspect's CSM solution is
 licensed to global enterprises in many industries including
 electronics and high technology, aerospace and defense, automotive, 
 industrial process and consumer package goods. The CSM solution 
 incorporates four interrelated elements, the Explore family of 
 enterprise client server software products, the VIP family of
 component and supplier content databases, Professional Services
 for legacy data conversion and business process consulting and a
 Web Catalog Publisher. Aspect's customers include more than 150 of
 the 200 largest manufacturing companies in the world.
 
 In short, ASDV makes Internet-based software and reference data
 products that help businesses improve product development and
 business processes through component and supplier management
 solutions. That's one of the hottest sectors in the market right
 now and the late-December rally has boosted the stock out of an
 old trading range to new all-time highs. We will use the technical
 support from the recent consolidation area to provide a favorable
 short-term position.
 
 Aspect Development  (ASDV) $66.25 
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Put  JAN 55   QDV MK  19       0.63     54.37     4.0% ***
 
 Chart = http://quote.yahoo.com/q?s=ASDV&d=6m
 
****

 INCY - Incyte Pharmaceuticals  $103.00   ** A Genome World ***
 
 Incyte Pharmaceuticals designs, develops and markets genomic
 database products, genomic data management software tools and
 related reagents and services, providing access to its genomic
 databases through collaborations with other pharmaceutical, 
 biotechnology and agricultural companies worldwide. Incyte's
 portfolio of database modules includes the LifeSeq human gene
 sequence and expression database, the LifeSeq FL database of
 full-length human genes, the LifeSeq Atlas mapping database,
 the PathoSeq microbial genomic database, the ZooSeq animal
 genomic database, the LifeTools suite of bioinformatics software
 programs, and LifeSeq 3D data mining and visualization software,
 as well as a variety of custom database and sequencing services.
 Each database module consists of a relational database that runs
 on UNIX-based client/server networks and incorporates HTML and
 JAVA graphical user interfaces enabling collaborators to use
 multiple search tools and browse various database modules.
 
 Incyte's CEO says the company will enjoy accelerated revenue
 growth this year as new database deals kick in and they become
 the gateway for biotech and pharmaceutical companies. Incyte
 expects to be the focal point for companies and researchers
 seeking comprehensive DNA data, and will announce later this
 year how it will use the Internet to expand its offerings.
 
 On January 11, Deutsche Banc Alex Brown raised its rating on
 shares of Incyte with a new price target of $157. The firm said
 it believes that a combination of anticipated new deals and a
 major acceleration in revenue growth could fuel new investor
 interest. The collaborations would supplement the deals with
 AstraZeneca and Pfizer signed last quarter and may also include
 programs focused on Incyte's genetic variability program.
 
 Incyte Pharmaceuticals  (INCY) $103.00
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Put  JAN 65   IPQ MM  0        0.56     64.44     2.6% ***
 Sell Put  JAN 70   IPQ MN  52       1.00     69.00     4.6%
 Sell Put  JAN 75   IPQ MO  1        1.56     73.44     7.0%
 
 Chart = http://quote.yahoo.com/q?s=INCY&d=6m
 
****

 JDSU - JDS Uniphase  $180.69   *** An OIN Favorite ***
 
 JDS Uniphase develops, manufactures and markets components and
 modules for fiber optic telecommunications and cable television
 systems, laser subsystems and laser-based semiconductor wafer
 defect examination and analysis equipment. JDSU's telecomm and
 CATV divisions builds semiconductor lasers, high-speed external
 modulators, transmitters and other components for fiber optic
 networks. Their Laser Division designs, develops, manufactures
 and markets laser subsystems for a broad range of applications
 which include biotechnology, industrial process control and
 measurement, graphics and printing, and semiconductor equipment.
 JDSU's Ultrapointe subsidiary develops advanced laser-based
 systems for semiconductor wafer defect examination and analysis.
 
 This company has been at the top of the OIN leader board for
 many months and not much has changed since the 2 for 1 split in
 late December. The fundamental outlook is great and the chart
 continues to show strength, even in the wake of post-split
 selling. We consider this issue a long-term portfolio position.
 
 JDS Uniphase  (JDSU) $180.69 
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Put  JAN 125  UQD ME  2,631    0.69     124.31    1.9% ***
 Sell Put  JAN 130  UQD MF  626      0.81     129.19    2.2%
 Sell Put  JAN 135  UQD MG  763      0.94     134.06    2.5%
 Sell Put  JAN 140  XXZ MH  906      1.13     138.87    3.0%
 
 Chart = http://quote.yahoo.com/q?s=JDSU&d=6m
 
****

 PUMA - Puma Technology  $98.19   ** An Information Society ***   
 
 Puma Technology develops, markets and supports mobile device
 management and synchronization software designed to improve the
 productivity of handheld computers, smart phones and other
 wireless personal communications platforms.
 
 Analysts are very optimistic about Puma's prospects, because the
 acquisition NetMind gives the company a more complete e-commerce
 strategy at a time when companies are looking to offer consumers
 more wireless and mobile data services. With Puma's leading-edge
 data synchronization technology, the e-commerce technology from
 NetMind and the technology for rendering Web pages on handhelds
 from the August acquisition of  Proxinet, Puma is poised to become
 the next Phone.com or Broadvision.
 
 We favor the ITM positions with technical support near $75 to $80
 in this aggressive, short-term play.
 
 Puma Technology  (PUMA) $98.19 
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Put  JAN 70   PUP MN  83       0.75     69.25     3.7% ***
 Sell Put  JAN 75   PUP MO  112      1.31     73.69     6.3%
 Sell Put  JAN 80   PUP MP  129      2.25     77.75     9.6%
 
 Chart = http://quote.yahoo.com/q?s=PUMA&d=6m
 
****

 February Plays
 
 ADAP - Adaptive Broadband  $93.19   *** Covered-Combo ***
 
 Adaptive Broadband is a supplier of terrestrial wireless and
 satellite-based systems to support data communications, broadcast
 digital TV and telemetry networks. ADAP also provides products
 for satellite-based and terrestrial wireless ultra-high speed
 Internet access, transport and worldwide Internet backbones. The
 company's products are able to send large amounts of voice, video
 and data traffic over the airwaves using microwave and satellite
 technology. Adaptive currently derives revenues from two market
 areas: satellite communications and terrestrial wireless. Their
 product series include the AB-Infrastructure Series, the AB-Data
 Network Series, the AB-Video Series, and the AB-Internet Series.
 
 Recently listed with a number of issues that are expected to lead
 the emerging growth companies in the broadband industry, Adaptive
 is an excellent choice for a long-term portfolio holding. Today
 the issue was rated a new 'Accumulate' at Prudential Volpe with an
 initial price target of $92. We favor the recent consolidation
 area as price support for this conservative combination position.
 
 Adaptive Broadband  (ADAP) $93.19 
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Call FEB 75   CQI BO  2        22.13    71.06     5.5% ***
 Sell Call FEB 80   CQI BP  96       18.88    74.31     7.7%
 
 Sell Put  FEB 65   CQI NM  31        1.75    63.25     8.6% ***
 Sell Put  FEB 70   CQI NN  20        2.38    67.62    11.3%
 
 Chart = http://quote.yahoo.com/q?s=ADAP&d=6m
 
****

 GMH - Hughes Electronics  $107.00   *** New All-Time High ***
 
 Hughes Electronics is a leading global provider of digital direct
 broadcast satellite entertainment services and communications
 services including satellite-based private business networks.
 Hughes, a wholly owned subsidiary of General Motors Corporation,
 is also a leading global manufacturer of satellite systems. Their
 businesses includes DIRECTV, which is the world's leading digital
 direct broadcast satellite service based on number of subscribers;
 PanAmSat, which owns and operates the largest commercial satellite
 fleet in the world; Spaceway, which is a planned satellite-based
 broadband communications platform that is expected to provide
 customers with high-speed multimedia transmission beginning in
 2002; Hughes Network Systems, which is a leader in satellite and
 wireless communications ground equipment and services; and Hughes
 Space and Communications, which is a top satellite manufacturer.
 
 The new rumor is that and Boeing (BA) plans to purchase Hughes
 Electronics' satellite-manufacturing business. The transaction
 would establish Hughes as an almost pure communications services
 company, allowing the company to achieve higher growth and better
 returns over the long term. Analysts have speculated for over a
 year that GM might spin-off Hughes as an independent company to
 boost shareholder value, but an outright sale of Hughes would come
 as a surprise. Some analysts have said that GM would more likely
 divest one-third of Hughes, worth about $27 billion and hold onto
 another one-third, while using the remaining one-third for debt
 and medical benefits obligations. Regardless on the outcome, this
 issue has been very bullish in recent months and the satellite
 communications industry continues to soar. Investors are flocking
 to this issue based on the new speculation but it should perform
 even without an eventual merger.
 
 Hughes Electronics  (GMH) $106.81 
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Call FEB 100  GMH BT  84       11.00    95.81    4.4% ***
 
 Sell Put  FEB 95   GMH NS  22        2.25    92.75    6.8% ***
 Sell Put  FEB 100  GMH NT  100       3.88    96.12    9.8%
  
 Chart = http://quote.yahoo.com/q?s=GMH&d=6m
 
****

 NVLS - Novellus Systems  $141.31   *** Big Split Coming ***
 
 Novellus Systems manufactures, markets and services advanced
 automated wafer fabrication systems for the deposition of thin
 films within the semiconductor equipment market. The company is
 a leading supplier of high productivity deposition systems used
 in the fabrication of integrated circuits. It employs three
 primary film deposition systems: the Chemical Vapor Deposition,
 the Physical Vapor Deposition and the electro-fill systems. CVD
 systems employ a chemical plasma to deposit all of the dielectric
 or insulating layers and certain of the conductive metal layers
 on the surface of a semiconductor wafer. PVD systems are used to
 deposit conductive metal layers by sputtering metallic atoms from
 the surface of a target source via high DC power. Electro-fill
 systems are used for depositing copper conductive layers in a
 dual damascene design architecture using an Aqueous solution.
 
 Novellus shares have surged since the chip equipment maker said
 its fourth quarter earnings would substantially exceed the Street
 estimates. Novellus also declared a 3-for-1 stock split, with a
 record date of December 30 and payment to be made on January 18.
 A number of recent upgrades have also boosted the stock and the
 most recent came from ABN AMRO analyst David Wu. Today he raised
 his 12-month price target to $180  based on increased sales and
 higher than expected fourth-quarter profits. The analyst said he
 is now expecting calendar 2000 growth of 35%. He also commented
 that Intel's future move to a two vendor policy in strategic
 processing equipment could open up a business opportunity for the
 company.
 
 Novellus Systems  (NVLS) $141.31 
 
 Action    Month &  Option  Open     Closing  Cost     Return On
 Req'd     Strike   Symbol  Interest Price    Basis    Investment
 
 Sell Call FEB 115  NLQ BC  299      31.88    109.43    5.1% ***
 Sell Call FEB 120  NLQ BD  1,076    28.38    112.93    6.3% 
 
 Sell Put  FEB 100  NLQ NT  88        2.13     97.87    7.0% ***
 Sell Put  FEB 105  NLQ NA  55        3.00    102.00    9.6%
 Sell Put  FEB 110  NLQ NB  222       4.25    105.75   13.1%
 
 Chart = http://quote.yahoo.com/q?s=NVLS&d=6m


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