Option Investor

Daily Newsletter, Sunday, 01/23/2000

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The Option Investor Newsletter          Sunday  1-23-2000  1 of 5
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Entire newsletter best viewed in COURIER 10 font for alignment
         WE 1-20          WE 1-14          WE 1-07         WE 12-31
DOW     11251.71 -471.20 11722.98 +200.42 11522.56 + 25.44  + 91.36
Nasdaq   4235.40 +171.13  4064.27 +181.65  3882.62 -186.66  + 99.84
S&P-100   779.78 - 17.74   797.52 + 14.03   783.49 -  9.34  -  2.73
S&P-500  1441.36 - 23.79  1465.15 + 23.68  1441.47 - 27.78  +  7.81
RUT       533.95 + 25.84   508.11 + 19.80   488.31 - 16.44  + 26.81
TRAN     2751.49 -140.14  2891.63 - 73.09  2964.72 - 12.48  + 89.50
VIX        22.66 +   .53    22.13 -  1.07    23.20 -  3.51  +  3.59
Put/Call     .47              .42              .50              .51

A tale of two markets!

The picture painted by the two major market indexes last week was
as different as night and day. Your view of the markets was probably
colored by which market you follow and how many characters in your
stocks symbol. The Dow came off three weeks of advances to lose -471
points. The Nasdaq continued to recover from the recent weakness to
post yet another record high close. 



The markets did exactly the opposite because of a polarization
of investor sentiment across all sectors. The consumer groups,
cyclicals, materials and most hard goods sectors were dumped
as investors who had been waiting for the great "broadening of
the market" finally gave up and started throwing money at the
tech express. The Internet revolution is changing the way we
research and value companies. The tech cycles of boom/bust
four times a year may even be coming to an end. It looks like
tech, tech, tech. A new cycle may be forming that has techs
always up and everything else always down. That sounds stupid
but the stocks your father bought are just not producing the
gains that the tech/Internet sector has attained. Investors
are fleeing fund groups that are value based and pouring that
money into the aggressive growth tech funds and the many Internet
funds popping up every week. Fund managers are forced to buy
techs or lose customers. Dozens of tech/Internet funds turned
in record one year results and many gained over 100% last year.

This liquidity driven tech rally is changing the way we look
at market cycles. Fund managers have previously known that they
could own tech stocks for only six months of the year and make
a great return. They would buy in Oct, sell in Feb, buy in Mar,
sell in July. Life was much simpler then. The cycles were as
predictable as the sunrise. This paradigm is about to be tested.
The normal February sell off is showing no signs of an early
appearance. While the chart patterns are almost identical from
this year to last year, the weakness you would expect to see
creeping into tech stocks a week before the big event is 
nowhere to be found. There are a few Internets that are not
taking part in the rally but they number just a handful. 


Every dip is met with buyers and most fund managers are either
praying for another 10% (even 5%) correction or have simply
given up on waiting and are buying heavily to avoid the missed
train syndrome. With the speculative bubble stage evolving into
the "we must have been valuing them incorrectly" stage, even the 
hard core bears are quietly withdrawing from the spotlight to
nurse their crippled brokerage accounts. Many have actually
admitted that the tech rally could continue for years based 
on the technology improvements and giant leaps in consumer 
acceptance of the new Internet generation.

Many feared the Internet explosion would eventually run out of 
capital due to over supply of new and crazy Internet ideas with 
no chance of success. Instead millionaires are being created
every day as new companies are started with just an idea and
within months are hugely successful. The stockholders who were
lucky enough to get an allocation at IPO time are now plowing
those windfall profits back into the next name they can't
pronounce IPO. Two years ago, nobody had ever heard the names
Akamai, Arriba, Kana, Foundry, Redback, Redhat, Epiphany, etc
and now they are throwing money at companies they can't even
pronounce and some they can't even buy yet through their online
broker. Companies like Pacific Cyberworks (PCCLF) and Softbank,
the Asian equivalents to CMGI and ICGE, are not recognized as
valid symbols by many online brokers.

There are 20 IPOs next week and the largest one is John Hancock
at 102 million shares. Ironically this old, established, well
respected company will probably be on the bottom of the list
of top performers by the end of the week. After all, they are
not a tech or an Internet so there is no pizzazz to the offering.
The resurgence of the IPO market after the Y2K hiatus is likely
to recharge the overall market. 

The test of the February cycle theory is rapidly approaching.
Many analysts are calling for a tech correction again and are
baffled by the continued tech rally. Ironically, as long as
everyone is expecting a correction it is not likely to appear.
The contrarian theory would call for a continued rally and
point to the wall of worry being built by these analysts as
a motivating factor. The real worry is when these bears change
their tune and start predicting the rally to continue. When
everybody is standing on the same side of the boat it will
turn over. The Dow has been weak from the sector rotation 
into the techs but it has failed to put a drag on the Nasdaq.
Actually the Dow is now moving into an oversold condition and
could turn positive next week on this sentiment alone. If the
Dow does turn positive it could support a continued Nasdaq
rally into the Fed meeting just at the time the Nasdaq should
be pausing from its +171 point gain last week. 

The Fed meeting (Feb-1&2nd) is the next major hurdle. There
are no major economic reports until the Employment Cost Index
on Thursday so all eyes will be focused on Fed week. Earnings 
are dwindling and the "reason for the rally" is almost over.
Dell Computer is widely expected to warn next week that they 
will miss earnings and that could hurt the techs if the market
is running scared. The Russell-2000 continues to be the measure
of the broader market and contrary to the Dow actually set a
new high every day last week. I think this is actually the
foundation under the Nasdaq rally as well. As long as investors
are buying the small caps there should not be any serious dips
in the forecast. Just remember the tide can turn on a moments

The bonds continue to be weak and yields are hovering around
6.73%. Many analysts fear the rising oil prices will eventually
boost prices into an inflationary range. In reality oil prices
only account for about 7% of the CPI and some analysts claim
the price would have to stay above $30 bbl for several months
before the impact would be severe enough to cause inflation
trouble. The G7 meeting this weekend had also kept a lid on
bond prices with some analysts expecting a call to rescue the
Euro by the attendees. The market breadth continues to be 
negative. Even on the Nasdaq, which closed at a new high Friday 
the advancers only beat the decliners by 132 issues. Volume was 
incredible on Friday with over 3 bln shares traded. 1.9 bln on 
the Nasdaq and 1.2 bln on the NYSE. The extremely heavy NYSE 
volume on a down day is normally a bad sign. However Proctor &
Gamble was the big loser on the Dow and accounted for -49 points 
of the -99 point loss. PG was making noises about entering into 
the Warner Lambert bidding war and investors were not happy. The
point however was the Dow was only down -50 points if you
discount PG.

About a third of the companies in the S&P 500 have reported 
their numbers. Growth has been strong: Earnings are better than 
23% over where they were in the year-ago period, according to 
earnings-tracker First Call/Thomson Financial. Moreover, 69% of 
the companies that have reported have topped estimates, against 
the usual 54%. 

Had you Greenspeak vaccination yet? Fed Chairman Alan Greenspan 
appears before Congress twice next week. He speaks to the 
Congressional Budget Committee on the budget Tuesday, and he will 
be grilled at the Senate Banking Committee's hearings to confirm 
him for a fourth term as Fed head Wednesday. While nobody expects
any earth moving comments you can bet the markets will be watching

For those that emailed me about suggested big cap naked puts for 
February I have created a list of the top 50 stocks with the highest
premiums and the best chances for expiring worthless. This list
is simply based on high premium value and high volatility. I
am making no claims about the stability of the stocks. You should
look at a chart for each and decide if it fits your risk profile.
The list is in my Options 101 article for today.

We will be announcing the guest speakers for the Denver
Options Expo this week and you will not be disappointed.
Watch for it!

Trade smart, sell too soon.

Jim Brown


The four day Option Investor Option Expo in Denver 
on March 25-28th is sold out!

Because of the huge response we have decided to 
schedule another identical seminar the same week. 

The second seminar will be held beginning on Tuesday March
28th with the Boot Camp refresher course and the three
day advanced seminar will be on March 29-30-31st (Wed/Thr/Fri)

If you were thinking about going but had not made up your
mind then this is your last chance. We were fortunate that
the hotel had meeting rooms available and there will not
be another opportunity until next year.

The four day Option Investor Seminar will be taught by 15 
of the Option Investor staff and will have several well 
known "guest" speakers. 

The first day, Tuesday March-28th is optional. This is a
special Options Boot Camp session for newer traders who need
to better understand the basic strategies before attending 
the Wed/Thr/Fri advanced classes.

The four day seminar will focus on explaining in detail each
of the option strategies you need to be a successful trader
in all kind of markets. You will learn how to choose what
strategy is right for you in every situation. You will learn
how to make money in any market and recognize the difference.
This is intensive instruction with real time, real life examples.
We will use live examples and study real plays as they occur.

Representatives will be available to answer your questions
from many of the brokers, charting and quote services we use 
at OIN. 

The tax saving information you will receive in the tax 
classes will more than pay for the entire trip.

This is our annual event and will not be repeated until 2001.

You can lose more than the price of the seminar in only 
one trade. Why not invest the same money in education and
profit from the experience the rest of your life?

For more information click below.


Some of the topics covered will be:

Entry Point, Entry Point, Entry Point
Technical & Fundamental Analysis 
Options on Stock Splits
Understanding Market Sentiment
Recognizing Market Changes
Cash Flow with Covered Calls
Covered Calls on Leaps
Using The Power of Index Options
Successful Spread Techniques
Maximizing Returns With Options
Selling Puts, A Win - Win Play
Using Options To Hedge the Market
Buying Stock with Options
Fundamentals of Charting
Picking the Right Play
In the Money, At the Money, Out of the Money
Understanding Risk Profiles
Making Stop Losses Work
Trend Trading
Day Trading Options
Trading Psychology
Money Management
Target Shooting, Waiting on the Market
Capitalizing on Earnings
Stress Free Straddles
Taxes and the Trader
Keeping more Profits by Paying Less Taxes
Selling Time
OEX Skybox
Recognizing Opportunity and Profiting From It.

The second session is already over half full. If you are 
interested please register immediately because seating
is limited.


Spring Advanced Seminar Series

The spring dates for the OptionInvestor/Optionetics seminar
series have been announced. This is the advanced seminar
taught by George Fontanills and Tom Gentile. If you feel
you need more option strategies in your trading arsenal 
like the Delta Neutral Straddles George is famous for then
this seminar is for you. Remember, you can bring a friend
for free and retake this seminar as many times as you want for
free. The cost of the two day seminar is about what you would
lose in only one trade. Invest it, don't lose it.

Here are the spring dates: 

Feb 27/28 Los Angeles
Mar 19/20 Chicago 
Mar 26/27 Dallas
Apr 2/3   San Francisco

For complete details http://www.OptionInvestor.com/seminar/

There is a 100% money back guarantee and you can take a friend
for free. What else could you ask for?


* FUN... CONTROVERSIAL... ADDICTIVE... and it's all FREE! *

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What a week if you were in Nasdaq stocks and a terrible
week if you owned NYSE stocks. Fortunately I was in OEX
and QQQ puts last Friday so the negative open on Monday
was profitable. If you are looking for trading tips this
week I am afraid you won't find any here. I was busy with
some changes we are fixing to make at OIN and I did not
trade much. The plan for this week is to sell naked puts
on several stocks but I am concerned that we could see
a market event soon so I am not sure if I want to sell now
or wait a week. Selling naked puts is a great strategy
normally but even better if you can sell at the bottom
of a market drop. The risk is much less.

QQQ - JAN-188 Puts

I owned the JAN-188 puts for $5.75 from the previous Fridays
close. I was able to sell them ot the open on Tuesday for
$5.25. This was a long shot as I stated last week. I lost -.50
on the QQQ puts but I did real well on the OEX puts. On Thursday
morning I felt the opening spike was too good to be true and
I bought the QQQ-190 puts for 2.13 pretty close to the top
and sold them a few minutes later for $3.00. At the close on
Friday the QQQ was touching the 193 level again and after four
up days I took a chance again and bought the QQQ-Feb-196 puts
for $12.25. Eventually this Nasdaq train has got to rest!
(famous last words)

OEX - Jan-810 puts

I wish I could say I was smart enough to hold my Jan-810 puts
until the close on Friday but sad to say I sold to soon. I 
sold my $14.00 puts for $18.25 when the Dow started to recover
at midday on Tuesday. I can't complain but those same puts
closed out the week at $30.25. On Thursday when the OEX
rolled over after the open I bought the 790 puts for $8.00
and sold them an hour later for $10.13. I did not buy OEX
puts at the close on Friday. The Dow is nearing oversold
and the Nasdaq is nearing over bought. I did play the Nasdaq.

LU Jan-2002-45 leaps

No excitement here but at least there was not another sell off.
Now that the worry is over I am planning to sell covered calls
against these leaps this week. The Feb-$55 calls are $2.25. I
think I will watch to see what direction the market takes and
then play accordingly. If we get a rally into the Fed meeting
like we have had several times recently then Maybe I can sell
the $60 for the same price and have less risk of being called 

GTW - Jan-2002 $50 Leaps

Nice bounce after earnings. Hopefully it will hold and start
moving back upward. I am going to write calls against these
leaps as well. The $65 calls are $3.13 but may be too close.
The $70 calls are $1.75. I think I will wait and see what the
market gives me and make the decision closer to the end of
the week.

VOD - APR- $40 calls

This play is working out great. I fought off the urge to sell 
them when they drifted lower midweek. They are in breakout
mode and if VOD can hold here we could go to $60 soon. I am 
still holding! I bought at the $45-46 level so I am comfortable
waiting. Below $52 I will start worrying.

BVSN Jan-$130 Puts

Finally a real direction. After closing my covered straddle
the prior week I had planned to sell naked puts on BVSN last
Tuesday. It worked great. I sold the $130 puts for $2.75 since 
they were clearly under support about $132 and BVSN never 
looked back. I closed them on Thursday for $.38 to avoid any
last minute disasters. BVSN is high on my list of naked puts
for February. With BVSN at $162, the $140 puts offer a 34%
return with a minimum of risk. I will probably wait to see
if the Nasdaq is going to pause or retreat before going opening
the position.


Again, I am not planning to trade much this week as I have
a heavy schedule. My preferred direction would be to have
some softness in the Nasdaq early in the week and then a
-10% drop or more around the Fed meeting. I would then 
leverage the majority of my account into naked puts on 
the stocks on my put list that went down the least and put
the rest into calls. That would be as close as I could get 
to a perfect environment. But, Murphy is alive and well and 
the markets will probably rocket all week and totally ignore 
reality and the Fed meeting. If the market does continue up
then the stocks below are the ones I am watching for call 

Good Luck


Watch list



Naked Put list for February
and answers to covered strangle questions.

I had many emails last week asking for my watch list for
naked puts for February. The list below is the top 50
stocks with the highest premiums. Many are excellent
plays and some have much higher risk. The stocks on
this list have high premiums because they tend to 
move quickly not because they are all great plays.
Spend ten minutes and look at a chart on each and 
decide which strike you are comfortable in selling.
Remember, peace of mind with a 25% monthly return is
far better than a 40% return and sleepless nights.


Stock News

Trimble Navigation: positioned for growth 

You probably have never heard of Trimble Navigation (NASDAQ:TRMB). 
But with interest peaking in the area of wireless technologies, 
specifically portable wireless devices, I expect that these 
guys will be making some headlines.


Ask OIN by Kimo

Hello everyone!  I'm glad to be back.  I know some of you have
really missed the Ask OIN column and we're sorry it hasn't been
on the site these last couple of weeks.

Now that all the staff is back from the holidays or vacations 
we are excited and looking forward to the year ahead.  


Market Posture

As of Market Close - Friday, January 21, 2000

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

DOW Industrials   11,000  11,250  11,252    BULLISH   1.13
SPX S&P 500        1,340   1,400   1,441    BULLISH  12.03
OEX S&P 100          700     750     780    BULLISH  12.03
RUT Russell 2000     430     450     534    BULLISH  11.12
NDX NASD 100       3,200   3,850   3,849    Neutral   1.06
MSH High Tech      1,650   1,900   1,882    Neutral   1.06

XCI Hardware       1,300   1,350   1,431    BULLISH   1.14
CWX Software       1,210   1,420   1,329    Neutral   1.07
SOX Semiconductor    640     660     804    BULLISH  12.21
NWX Networking       820     900     899    Neutral   1.07
INX Internet         665     800     760    Neutral   1.06

BIX Banking          645     690     519    BEARISH  11.30
XBD Brokerage        410     450     418    Neutral  11.30
IUX Insurance        625     650     563    BEARISH  11.30

RLX Retail           900     935     936    BULLISH  11.23
DRG Drug             380     400     359    BEARISH  12.07
HCX Healthcare       760     790     732    BEARISH  12.07
XAL Airline          180     190     134    BEARISH   5.21
OIX Oil & Gas        280     315     293    Neutral   1.06

Posture Alert    
The Nasdaq closed out the week on a higher note, as the technology 
index nearly traded 2 billion shares Friday. The Dow continues to 
suffer, as the index suffered another losing day Friday thanks to 
Procter & Gamble's (-9 7/8) apparent entry into the Warner-Lambert 
(and now American Home) auction. If this last week of January is 
any indication for the rest of 2000, then we should all be loading 
up on the small caps, as the Russell 2000 closed up another +1.26% 
Friday (+9% for the last 6 trading days). Losing sectors Friday 
were Airlines (-2.44%), Brokerage (-2.16%), and Retail (-1.81%).

Market Sentiment 

Sunday, January 23, 2000

Great Expectations II!

The earnings season continues to look impressive, and heading into 
the new trading week, the expectations for these solid earnings 
continue to rise. Below is a list of equities (that should be 
reporting their earnings this next week) and our Pinnacle Index 
for those particular stocks. The Pinnacle Index is a proprietary 
product that determines current market sentiment and expectations 
for underlying equities and indexes, which is based upon 
speculation in the option markets. Also included are their 
expected earnings, the infamous whisper number (if available), and 
their estimated earnings release date. 

What we look for are liquid stocks/options that garner a lot of 
interest from the investment community. Most of the issues are 
high tech, and are thus more aggressive. We then filter out many 
of the equities, only to show stocks with excessive optimism or 
pessimism. From a contrarian standpoint (a high number is a good 
indication of extreme optimism, and a low number is a good 
indication of extreme pessimism) you should buy when its low, and 
sell when its high. Last quarter, we highlighted some stocks with 
a Pinnacle Index that were stratospheric (as high as the upper 
20's). Needless to say, these stocks had so much pent-up 
enthusiasm, that after their earnings, they tanked. It is the old 
adage, buy the rumor - sell the news. There were also numerous 
companies with a Pinnacle Index less than one. However, once 
these companies came out with their bad quarter, the stocks 
rallied due to the oversupply of pessimism.  

If your favorite stock is not listed, the most common reasons are: 
1) there are no options traded on the underlying equity 
2) lack of interest by option speculators in the security 
3) lack of quality information 
4) company already pre-released 
5) insufficient data. Also, as we get closer to the heart of 
earnings season, the list will expand dramatically to reflect 
companies whose earnings are due out shortly.

Company          Symbol  Pinnacle   Expected   Whisper#:  Estimated
                         Index(PI): Earnings:             Date*:
American Express AXP       1.29     +1.33      +1.35      1/24
AT&T             T         4.89      +.56       +.57      1/24
BMC Software     BMCS      1.79      +.49       +.50      1/25     
Broadvision      BVSN      9.87      +.06       +.07      1/26
Checkfree Hold   CKFR      8.22      -.10       -.10      1/25

Compaq Computer  CPQ       6.77      +.15       +.17      1/25
Covad            COVD      8.25      -.97       -.95      1/25
Coca Cola        KO        4.74      +.30       +.33      1/24
Compuware        CPWR      2.10      +.33       +.35      1/24
ECI Telecom      ECIL      7.18      +.62       +.63      1/28
Elect Arts       ERTS      3.70     +1.38      +1.42      1/25 
Ebay             EBAY      6.47      +.02       +.04      1/25
EMC Corp         EMC       8.89      +.31       +.33      1/26
Ericcson         ERICY     2.30      +.32       +.33      1/28
Exodus           EXDS      7.19      -.21       -.17      1/26
First Data       FDC       9.04      +.54       +.55      1/27
JDS Uniphase     JDSU      7.95      +.16       +.19      1/26
Lsi Logic        LSI       9.33      +.43       +.48      1/25
Lexmark          LXK       1.10      +.68       +.69      1/24

Macromedia       MACR      8.28      +.13       +.14      1/26
Mirage Resorts   MIR       3.25      +.19       +.19      1/24
MP3.Com          MPPP      1.49      -.20       -.18      1/25
Mindspring       MSPG      3.10      -.09       -.07      1/25
Merrill Lynch    MER       3.59     +1.35      +1.38      1/25
NetZero          NZRO      8.52      -.28       -.26      1/26

Priceline.com    PCLN      5.95      -.08       -.06      1/27
Phillip Morris   MO        0.98      -.77       -.77      1/26
Qualcomm         QCOM      2.99      +.24       +.27      1/25
SanDisk          SNDK      8.78      +.22       +.23      1/26
Silicon Graphics SGI       2.74      -.09       -.08      1/24
Starbucks        SBUX      2.72      +.16       +.16      1/27
Tellabs          TLAB      2.58      +.40       +.43      1/25

Equities showing high levels of expectations this week include: 
Sandisk, Priceline, Netzero, Macromedia, Lsi Logic, JDS Uniphase, 
First Data, Exodus, EMC, Ebay, ECI Telecom, Compaq, and 
Broadvision. Low expectation equities include: American Express, 
BMC Software, Compuware, Ericcson, Lexmark, MP3.com, Phillip 
Morris, Qualcomm, Tellabs, Starbucks, and Silicon Graphics. Have 
a good trading week. 


Corporate Earnings:
Major corporate earnings are coming out left and right, and so far, 
it looks to be another very solid quarter!

Cash Flow:
The cash that has been sitting on the sidelines was put to use 
today, as the Dow traded over a billions shares, while the Nasdaq 
traded 1.85 billion.

Mixed Signs: None


Volatility Index (22.66):
The VIX continues to prove that the low 30's are an 
excellent buying opportunity, and the high teens continue to be a 
great selling opportunity. 

Interest Rates (6.709%):
The yield continues to break new highs, with the next stop being 
6.75-7.00%. The market has already priced a 25 basis point 
increase this February, however the market is also pricing in a 
30% chance of a 50 basis point hike.

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?
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.

The Power of Sentiment Analysis

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

Pinnacle Index OEX              Friday
Benchmark                       (1/21)

Overhead Resistance (780-800)     0.83

OEX Close                       779.78

Underlying Support  (750-770)     2.14

What the Pinnacle Index is telling us:
Based on January 21, direct overhead is now light, and support is 
building. Based on the sentiment, we would not be surprised to see 
the OEX bounce higher this upcoming week.

Put/Call Ratio                  Friday 
Strike/Contracts                (1/21) 

CBOE Total P/C Ratio             .47
CBOE Equity P/C Ratio            .41
OEX P/C Ratio                   1.26

Peak Open Interest (OEX)
Strike/Contracts     (1/21)

Puts                745 / 4,079
Calls               760 / 5,234
Put/Call Ratio        0.47


For the week of January 24th, 2000


None Scheduled


Existing Home Sales      Dec    Forecast: --     Previous: 5.09M
Consumer Confidence      Jan    Forecast: 141.1  Previous: 141.4


None Scheduled


Jobless Claims           1/22   Forecast: --     Previous: 272K 
Employment Cost Index    Q4     Forecast: 0.9%   Previous: 0.8%
Durable Goods Orders     Dec    Forecast: 0.7%   Previous: 1.2% 
Help Wanted Index        Dec    Forecast: --     Previous: 85


Gross Domestic Product   Q4-fin Forecast: 5.1%   Previous: 5.7%   
Univ Michigan Sentiment  Jan    Forecast: --     Previous: 111.4

Week of 1/31

1/31 Personal Income - Dec
1/31 Chicago PMI - Jan
2/01 Construction Spending - Dec
2/01 NAPM Index - Jan 
2/01 FOMC - Rate meeting begins
2/02 Leading Indicators - Dec
2/02 New Home Sales - Dec
2/02 FOMC - Rate hike announcement
2/03 Factory Orders - Dec
2/04 Nonfarm payrolls - Jan


Tweaking Covered Calls - (Part 1 of 2) 

It is always difficult to determine at any given moment what 
strategy to put on.  One of my favorite strategies is covered 
calls, but I must confess I don't do it often enough.  After 
speaking to an investment firm this week about covered calls, 
I decided to expand my rules and do some analysis to tweak this 
strategy for my own purposes and thought I would share this with 

As a review, a covered call is going long the stock and writing 
(shorting) the call option.  Writing a covered call has its 
advantages and disadvantages.  Writing the call locks in a 
short-term profit, while at the same time caps your upside 
potential.  However, in lieu of capping your upside, you have 
a lower break-even in the event your stock goes down.  Is the 
glass half empty or half full? 

I looked at two different scenarios and determined how I could 
more effectively implement a covered call strategy in each of 
these.  They are as follows: stocks trending sideways (Part 1) 
and stocks trending up (Part2).  First, let's look at a stock 
trending sideways.  Actually, the covered call strategy, 
generally works best for this trend.
The chart below of AIG (American International Group) shows a 
stock that is channeling, with a slight upward bias. 


For the last four years, AIG has split every summer and the 
overall trend is up.  Even in a stock trending sideways, I 
like the bias to be up.  After all, I won't be nearly as upset 
if I get called out and make money, then if the stock tanks and 
I'm stuck losing money on the stock.  

Now, because timing is everything, let's look at the ideal 
scenario for AIG.  The first step in doing any covered call is 
to determine the support and resistance levels.  Ideally, in a 
covered write, you would buy the stock at support and sell the 
call at resistance, not necessarily in that order (unless you 
can't write naked calls in your brokerage account).  In that 
case, you must first wait for the dip to buy the stock, and then 
let the stock run up before writing the call.  

Support for AIG is at 102 and then again at 100 and then at 98.  
These are the levels we would like to buy the stock.   A bounce 
UP off of any of these numbers would be ideal.  Resistance is 
at 111 and next level up is at 114-1/2, the 52 week high.  After 
a failed bounce off these levels, we would like to write the 
call.  It is impossible to pick the tops and the bottoms, but 
realistically we should be able to buy the stock at about 104 
on the way up from the bottom after a bounce off 98 or 102.   
At the top of the range we should be able to write the February 
110 calls when AIG is at 108 or 109 after a failed run at 111, 
or write the call when AIG is at 109 or 110 after a failed run 
at 114-1/2.  

Because this stock is channeling and has more upside potential, 
I would like to keep the stock and write calls against it as 
often as I can, until such time that the overall pattern or 
trend breaks down.  Because time value erodes the most in the 
last 30 days, my own criteria would dictate that I write the 
February 110 call when AIG bounces off resistance.  Of course 
you should have a stop-loss one point below support at either 
99 or 97, depending on your risk tolerance.    
My biggest problem is when I see a predictable pattern like AIG's; 
I tend to pull the trigger too soon on one of the legs.  Remember, 
channels do not last forever.  A lot of times, by the time you 
find them, they are over-- only you don't know it.   Most people 
generally lose on this strategy because they put on both legs at 
the same time or initiate one of the legs too soon.  Believe me, 
I've been there.

The previous week ending Jan 14, AIG went up steadily from 104 
to 114-1/2.  The February 110 call ran from 2-5/8 to 7.  Had we 
implemented the strategy outlined above during the previous week, 
we would have bought AIG on Tuesday January 6 at 103 (above 
support).  On Friday Jan 14, the stock made a 52-week high of 
114-1/2.  This would not have been the time to write the call, 
although, in hindsight it was.  The stock could just as easily 
run up from the high, after it had broken through its key 
resistance level of 111.  

The bounce off resistance came on Tuesday Jan 18 when it gapped 
down at the open and ran below the 111-resistance level.  At 110 
we would be scrambling to write the February 110 call for about 
4 points.  Your break-even for the stock would be 99, stock cost 
less call premium (103-4=99).  Now, here is where you can tweak 
this strategy.    The stock can do one of three things: 

1. Stock CONTINUES in the channel:
If the stock bottoms and bounces UP off support, you could buy 
back the call for about 2 points, netting 2 points profit, and 
ride the stock back up to resistance and do it all over again.  

2.  Stock breaks through BELOW support:
If the stock continues downward and closes BELOW support, you 
would sell the stock and let the call expire worthless.   If 
you can't go naked, you would buy back the call at a profit, 
which would offset your loss in the stock.

3.  Stock breaks through ABOVE resistance:
If after selling the call, the stock turns around and continues 
to rise above the previous high 114-1/2, you could buy an "at 
the money" call or buy more stock.  You would then get called 
out of your original position for a profit and additionally 
have the call or stock to let run up for an uncapped profit.   

Now can we make money on this stock using this strategy?  Last 
week, AIG dropped from 112-3/8 to a low of 102-1/16 and closed 
just below 104 NEAR support.  The stock has been dropping in 
price for the last 4 days.  The Feb 110 call dropped from a high 
of 5 to a low of 1-15/16 on Friday.  To maximize our return we 
want to buy the stock near the bottom of the range and sell the 
call near the top of its range, remembering that with each 
passing day the Feb time-value is melting away.  

It is entirely possible that the support level will become 103 
or 104 if it bounces off this number a few times, as this stock 
is favored to the upside.  In that case, I would buy the stock 
off a bounce of 104 and wait for the stock to run up before 
writing the call.  Currently AIG is NEAR the bottom of the 
existing range, but a clear signal has not yet been given. I 
will be watching AIG closely this week to see if we get the 
bounce off resistance as an entry point.  

I only wish I had seen this pattern last week or the week before.  
My next article will be how to tweak this pattern in a stock 
trending upward, with an analysis of AIG over the next coming week.  
Contact Support


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

The Option Investor Newsletter              1-23-2000
Sunday                        2 of 5


Crash of 1929, never again.

My trades for the week were profitable although I missed a couple 
of good plays. I had previously closed out my Nextlink puts at a 
profit and wrote a Jan 75 call on Nextlink when it was 75. I was 
sorry I did when the stock went up to 89 the next week. So I bought 
back the Jan 75 call and wrote an April 85 call with only one half 
point difference in price. Possibly after earnings season I may be 
able to buy back the April 85 call cheap. My Qwest 2002 40 leaps 
were purchased at 11.5, and hit a high of 14, a profit of 20% in 
a couple of weeks. I think this has a lot further to go, and is a 
very low priced option for a two-year leap. Take a look at most two 
year leaps on technology stocks, and they will usually run over 50 
or 60 dollars. My Nortel was purchased at 94, and is now 101. I plan 
to hang on to this until the day before the company reports earnings. 
CMGI Jan 125 leaps are trading around 37, which I think is reasonable,
however if they drop to around 32 I am going to grab some.  Despite 
the run up of the last few months, CMGI is a dynamic company with a 
lot of good news coming out every day. A solid earnings season and 
a strong Nasdaq have overpriced many option premiums. However, I 
have noticed a few stocks I like which have been down or flat and 
might make good candidates for leaps like At Home, Lucent, Dell and 
Qwest. My strategy is to buy two at the money leaps and take a short 
in the stocks. This way money can be made in either an up or down 

Last Monday in the Wall Street Journal there were a couple of 
articles discussing the topic of the overvalued Japanese stock 
market of the 1980s and the US stock market crash of 1929. There 
were three charts in a graph showing the rise of the Nikkei in 
the 1980s, the rise of the Dow before 1929 and the rise of the 
S & P 500 in the 1990s.  The three charts looked identical except 
the chart of the S & P stopped before the other two crashed, and 
the articles raised the issue of previous "speculative bubble" 
periods and the ensuing crashes that followed. I found the graph 
misleading and the articles void of essential facts about the 
time periods and different economic fundamentals, which could 
lead readers to draw inappropriate conclusions.

First, there are several important differences in the U.S. 
financial markets of the 1920s and those of the present. In 
the 1920s in the US there was no Securities and Exchange 
Commission. The SEC came into existence in the 30s to help 
stabilize the financial markets and protect the American investor 
from fraud. Many of the speculative stocks purchased in the 1920s 
were actually in bankruptcy and this was not disclosed to 
investors. The Federal Reserve existed in the 20s but it did not 
serve the same roles or functions it does now.  It did not 
regulate margin requirements, which is why many investors were 
speculating by buying stocks on five- percent margin. The Fed 
did not exert the same influence over the money supply or interest 
rates that it does today. The exchanges themselves were not well 
regulated, which is why many specialists trading stocks back then 
lost all their money and couldn't open their stocks. Nowadays the 
Federal Reserve can actually intervene in the financial markets 
by lending money directly to specialists on the floor of the 
exchange if it is necessary so they can open their stocks. The 
exchanges did not have trading stops at various levels as they 
do now.

Comparing the Japanese stock market to the US stock market at 
any point in history is like comparing animals of two different 
species.  The Japanese society was not really a capitalist 
society in the 1980s or 1990s. Their social, economic, political 
and financial structure was based on principles foreign to 
Americans, such as kieretsu, which loosely translated means unity.  
They did not have the entrepreneurial spirit or individualistic 
motivations our society does. The government protected the banks, 
which lent money to dud customers, who kept borrowing more and 
more to pay off debts they could not afford. The finance ministry 
hid the banks' bad debts.  Shareholders did not sue corporations 
and corporations did not sue each other because it was considered 
an act of disloyalty. Publicly traded stocks, which were not 
scrutinized by a regulatory organization such as the SEC lied on 
their balance sheets. Brokerage firms were known to engage in such 
practices as compensating customers losses out of the firm's own 
account. Insurance policies were heavily leveraged through the 
debt markets.

The tight collusion of their political economy locked together 
special interest groups in tight unity.  Companies donated money 
to politicians, politicians got them work from the government, 
and the companies offer the politicians jobs when they retired. 
Employees were guaranteed lifetime employment, but venture 
capitalists, scientists and individual entrepreneurs could not 
find financing to start their own businesses, as capital was 
only available to the same big corporations.

The belief among many in the late 1980s was that Japan led the 
world in economic efficiency. In certain industries that may have 
been true, for instance mass production of automobiles. But the 
rising cost of land in Japan, and price fixing and other anti-
competitive practices led to gross inefficiencies in large 
segments of their economy. While the US and Europe turned to the 
information technology and service industries as the foundation 
of growth, Japan has stagnated, depending on a few manufacturing 
industries to support their entire economy.

The Japanese stock market resembled a building with a weak 
foundation. It was built on principles of fraud and deception 
and leveraged through excessive debt. Japanese accounting 
standards allowed companies to hide their problems not show them. 
Since the younger generation in Japan is starting to yearn for 
the Western way of life, the shock therapy, which was inflicted 
on them through their recession and market crash, may force their 
society to change. 

The US financial markets will have their ups and downs.  Some 
individuals will show poor judgement by buying certain speculative 
stocks. The market will correct at some point, nobody knows when, 
but it may be scary and some people will lose money. However the 
US market is like a building with a strong foundation. If a house 
is built with a weak foundation and an earthquake hits, the house 
will crumble and have to be rebuilt. If a house is built with a 
strong foundation an earthquake may shake it but not destroy it.


Renee is on vacation this week


Why Do Most Traders Lose Money?

In his book, Market Wizards, Jack D. Schwager asks Marty Schwartz 
that question. Marty Schwartz responds: "Because they would rather 
lose money than admit they're wrong. What is the ultimate 
rationalization of a trader in a losing position? 'I'll get out 
when I am even.' Why is getting out even so important? Because it 
protects the ego. I became a winning trader when I was able to say, 
'To hell with my ego, making money is more important.'"

Schwager, a former Marine, also draws on his training as an officer 
when in a tight position. The Marines, he says, taught him to either 
go forward or go backward, but don't just sit there. That's what I 
did this morning. One part of the plan I formulated last weekend 
was to begin to get experience executing the covered strangle 
strategy that Jim Brown described a few weeks ago. Instead of 
laying on both sides, I decided to start by selling only a naked 
call, and hedging it by buying the underlying whenever the stock
went in the money.

I went through 7 Internet/ Red Hot stocks with high volatilities 
to select good candidates to roll over. I narrowed down my choices 
to ARBA, TIBX, and ICGE. Against the advice of some advisors, I 
went with TIBX because it had the highest premiums. Having run up 
substantially last week (see Lynda's column from the Sunday 
newsletter), I figured that it was about time for it to roll over, 
hopefully with the rest of the market. I sold the Feb 165 Calls at 
20.25 on Tuesday when TIBX was trading at 158.

TIBX did not roll over. It did the worst possible thing. It went 
to the strike and played hopscotch. 163... 167... 164... 167. I 
sat in front of a computer in school and hedged... and unhedged... 
and hedged... and unhedged. Boy, let me tell you, that is fun. 
This morning, I checked the account figures, and I did not have 
enough buying power to fully hedge my position if TIBX went over 
165. There is another nice feeling. So, I sat there through the 
open, and watched TIBX open at 164.875... and meander up to 168. 
Should I buy to close part of my naked call position? Close all of 
it? Should I hedge as much as I can by buying as much stock as I can?

Then, Marty Schwartz' words came back to me. He describes unwinding 
a losing position with his wife standing over his shoulder, saying 
"get smaller... get smaller." First, I put in an order to buy to 
close part of the naked call position at a limit price that I knew 
would not fill -- at least I could adjust back into the spread. 
That was a good step. Then, I wrote the following down on my blotter: 
"1. Get Flat 2. Think Clear." Then I bought to close the remaining 
part of my position. I was already feeling much better. I had more 
than enough buying power to hedge the remaining contracts. I 
still had that unfilled order. Should I keep that too?

Better to get flat and start again. I adjusted the limit and got 
filled. Now, I am thinking through the lessons learned --

1. This is not a riskless strategy.
2. One risk is that you have to watch the market each day and 
every day. I called my girlfriend, who asked, "Is this a waste 
of time?" Each individual has to answer that.
3. Another risk is that the Internet/ Red Hot stocks which have 
the highest volatilities also move the most quickly. And Murphy 
is alive and well, as I know.
4. Another risk for the novice trader moving up to this level of 
trading is not fully understanding the margin math involved. If 
you are contemplating this strategy, check with your broker 
regarding: trade date balance, short market value, equity, how 
maintenance requirement is calculated, and buying power.

On the plus side, this week, I did sell VRSN Feb 220 Covered Calls 
for 15 while the stock was at 200 after a big gap up. I also sold 
SCH Feb 45 Covered Calls for 1.5. I sold those in my LT Stock 
Account. I have already fully thought through those transactions -- 
if I get exercised, I have no problem selling the stock at that 
price; however, I think the market is getting set to roll over, so 
I hope that I end up pocketing the premiums.

This weekend, I plan to go back to the drawing board. I am not 
completely throwing out the covered strangle strategy. I just 
want to learn it step by step, and to clearly evaluate whether 
it fits my trading style. Jim's Options 101 article from last 
weekend about selling naked puts may be more up my alley, 
especially since I have a list of stocks (HGSI, INCY, BRCM) 
that I would not mind acquiring as LT holdings when, and if, 
they go on sale.

I can't report glorious victories this week, but at least I will 
live to fight another day.

Janar Joseph Wasito


Sunday, January 23, 2000


 Visit the trading club message boards and see what others have 
to say:



We had a small group of seven this month. We met at the downtown 
office of one of our group. It was very helpful being able to use 
David's computer setup to pull charts and information. I reviewed 
some of my recent trades and strategies with the group. 
Especially one of my recent trades that I thought would be 
educational to the group in adjusting positions. I had purchased 
CNCX (Concentric) at $28.50 per share and sold a JAN 30 covered 
call for $3.00 per share. When the news came out that NXLK was 
purchasing CNCX, the stock shot up to over $40.00. I stood to 
make another $1.50 per share when called out of the JAN 30 for a 
total of $4.50. However, I waited for a pull back and bought the 
JAN 30 back at $8.125, then I waited for the upside and sold a 
FEB35 at $5.50 to cover the buy back. Now when I am called out in 
February I'll make a total of $6.50 per share versus the $3.00 to 
$4.50 per share from the original transaction. I'll watch this 
and if there is any kind of pull back before February expiration, 
I may buy back the FEB35 and sell a FEB40. I also shared some of 
my trades doing naked puts and long stock -covered calls. 

One of our new attendees, Hughes shared some of his strategies 
with us. He sets up several stocks under different sectors and 
watches the sectors and the stocks for new plays. He stressed the 
importance of watching a small group of stocks and mostly playing 
those stocks. This is something that Jim Brown has previously 
mentioned: Get to know stock patterns of just a few stocks, 
monitor the news and know everything you can about those 
companies, then play just those stocks. Hughes also re-inforced 
how important it is to set stop losses so he only takes small 
losses. We discussed watching the trend line and technical chart 
patterns for the positions we are in. We shared ideas and 
experiences about different charting services and brokerage 
accounts, ie, Telecharts vs Quote and Interquote and Preferred 
Trade vs others. 

It is great for me to get together with others who are on the 
same trading wavelength. I always come away from our meetings 
having learned something new and more importantly discussing the
effectiveness of setting trading rules and following them. 

In February we are planning to meet on Thursday the 17th at 6:00 
PM in the Sandy area. We alternate between downtown and the Sandy 
area since we have people coming from both the North end as well 
as the South end of the valley. We are setting up a guest speaker 
who writes for the OIN newsletter. Hope to see some new faces at 
this meeting. If you are interested in attending and are not 
already on my group list, contact Leslie at Contact Support
and she will forward my e-mail address to you. 

Carol Mortensen 
Salt Lake City area organizer. 

If you would like to join contact us at Contact Support
and Contact Support


Daily Results

Index     Last    Week
Dow    11251.71 -371.68
Nasdaq  4235.40  125.24
$OEX     779.78  -14.19
$SPX    1441.36  -19.58
$RUT     533.94   19.72
$TRAN   2751.49 -107.32
$VIX      22.66   -0.62

Calls             Week

AFFX     253.63   66.88  If you are looking for a new leader
MSTR     289.13   61.19  Investors key into potential growth
JDSU     233.13   40.94  Earnings announcement January 26th
HGSI     221.88   37.25  Still a hot issue in a strong sector
EXDS     137.88   31.88  Houston, we have ignition for EXDS!
SEPR     155.00   28.88  SEPR tags new 52-week high on Friday
LVLT     110.50   23.75  LVLT has plenty of room for a split
NTAP     117.13   23.44  Extremely well positioned in industry
PCS      110.75   13.00  Looking for a nice sprint from PCS
MFNX      69.88   12.75  Ten straight days of gains for MFNX!
VIGN     212.50   11.56  Earnings on Tuesday after the close
TQNT     141.50   11.50  A double whammy makes for a must own
NTLI     136.38   11.06  New, 5:4 stock split on Feb 3rd
LSI       82.00    9.25  Dropped, reporting earnings on Tuesday
EMC      121.00    8.63  Dropped, start looking for an exit
TWX       91.13    7.88  New, a play on the merger with AOL
ANAD      79.25    6.25  Earnings just around the corner!
DISH      96.25    6.00  New, we welcome DISH back to our list
GMST      79.88    3.06  GMST is ready to reap the rewards!
VOD       55.94    3.06  The bickering with Mannesmann goes on
CMVT     150.38    2.06  It is hard not to like CMVT's chart
NOK      185.00    1.56  Was Friday's breakout the beginning?
AES       80.00   -3.25  New, no discrimination against profit!
ADI       96.63   -4.75  Dropped, momentum may be subsiding


RMBS      75.38  -14.25  New, a decline pattern easy to see
MU        67.13   -6.13  New, lack of performance gives us go
SLR       80.00   -5.75  New, predictable earnings kiss of death
WCOM      41.63   -4.94  Like a punch drunk boxer, on the ropes
RLM       69.38   -4.13  A negative reaction doesn't help RLM
FD        43.88   -4.00  Investors head for the returns counter
IIJI      81.63   -3.88  Takes the initiative for a downturn
CMGI     118.25   -3.69  Still suffering from post-split blues
ISLD      91.63   14.50  Dropped, hungry investors grab up ISLD
ICGE     159.00   25.50  Dropped, makes too good of an effort



AES  - AES Corp.
TWX  - Time Warner
DISH - Echostar Communications


MU   - Micron Technology
RMBS - Rambus Inc.
SLR  - Solectron


Remember that historically, when we drop a pick it will go up 
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


ADI $96.63 (-4.75) ADI has indeed been a lucrative momentum 
play since we first picked it on December 30th.  The intraday 
volatility offered a multitude of entry and exit points.  
Unfortunately we believe the momentum is subsiding and are 
exiting the play this weekend.  ADI has not only shown weakness 
over the past two days, but also violated the 5-dma ($99.48) 
line which is not a good sign in this case.

EMC $121.00 (+8.63) EMC has given us a nice run, and still may
have some legs left.  On Friday sellers moved in early, but
were unable to push the price below $117.  Buying pressure
resurfaced and pushed prices above the new $120 resistance.
EMC showed us the money by closing at $121, right at the high
of the day.  The strength today leads us to believe prices
could continue upwards on Monday, but with earnings scheduled
for Wednesday before the open, start looking for a good exit
point.  Since we never recommend holding through earnings, you
want to be out before the close on Tuesday.

LSI $82.00 (+9.25) We are dropping LSI this weekend because 
the company reports earnings Tuesday after the close, before 
another newsletter is published.  LSI may have one or two more 
days of momentum left in the current earnings run.  The 
Semiconductor company broke out to a new 52-week high Friday
on strong volume of 1.87 million.  LSI has seen earnings improve 
over the last year and has a recent history of earnings coming
in ahead of analysts estimates.  LSI moved up this week on 
positive comments from two analysts.  If you have a position 
in LSI, we would suggest moving your stops up and letting the 
market dictate your next move.  Remember you will want to close 
this play by the end of the trading day Tuesday.


ICGE $159.00 (+25.50) ICGE is making such a good effort to 
remain high that we concede defeat and are saying goodbye 
to our put play.  They broke through the resistance level 
of $150 and it looks like that will be support now.  Earnings
are also coming up here on February 1st and it looks like last
week was a foresight into an earnings run for ICGE.  Although
CMGI has been down, and ICGE usually follows close on their 
heels, CMGI's misfortune has had no effect on ICGE.  The Nasdaq,
however, has been a big help for ICGE.  Investors seem to be 
on ICGE's side, but still a little cautious with only normal
volume behind these good days.  Which is how we see ICGE, as
their market capitalization skyrockets we raise our eyebrows
at their pricey valuation and wonder if the fast climb could
indicate the same kind of fall for them in the future.  For
now though we say goodbye and maybe we'll see them again soon.

ISLD $91.63 (+14.50) Apparently, investors were hungry for 
any kind of news to give them the go ahead on ISLD.  ISLD 
began Friday's session looking as though it was going to spend 
another day flirting around the $80 level.  Then, about half 
way through the session, we saw the volume pick up to propel 
the shares as high as $94.50.  ISLD wound up closing the day 
up over $11.50 with strong volume backing the move.  So, the 
news that fueled the run?  On Friday, ISLD announced that it 
had filed with the SEC to offer 4.5 million common shares and 
$175 million worth of convertible subordinated notes.  It is 
unusual that this kind of news would inspire such a big move. 
Nevertheless, it did and therefore it is time to leave ISLD 
behind and swim for the mainland.     


Current Split Candidates
NOK  - Nokia
AFFX - AffyMetrix
VIGN - Vignette Corp.
LVLT - Level Three Communications
EXDS - Exodus Communications
CMVT - Comverse Tech.
Split Candidates that are not current plays:
VRTS - Veritas Software
IMNX - Immunex
EMC  - EMC Corp
FFIV - F5 Networks Inc.
NT   - Nortel Networks
Recent Announcements We Predicted
SEPR - Sepracor Inc.


We don't list all splits available, only those we 
feel may have play possibilities. 

Symbol - Stock          Splits/Date  
MWD  - Morgan Stanley   2:1 01-26-00 ex-date 01-27
MSTR - Micro Strategy   2:1 01-26-00 ex-date 01-27
RAZF - Razorfish        2:1 01-27-00 ex-date 01-28
CHKP - CheckPoint Soft  2:1 01-28-00 ex-date 01-31
CYTC - CYTYC Corp       2:1 01-28-00 ex-date 01-31
HGSI - Human Genome     2:1 01-28-00 ex-date 01-31
GBIX - Globix Corp      2:1 01-31-00 ex-date 02-01
TMX  - Telmex           2:1 02-01-00 ex-date 02-02
NTLI - NTL Inc          5:4 02-03-00 ex-date 02-04
PCS  - Sprint PCS       2:1 02-04-00 ex-date 02-07
ASYT - Asyst Tech       2:1 02-04-00 ex-date 02-07
FDS  - Factset Systems  2:1 02-04-00 ex-date 02-07
PEB  - PE Biosystems    2:1 02-04-00 ex-date 02-07
MCHP - Microchip Tech   3:2 02-07-00 ex-date 02-08
QLGC - Qlogic Corp      2:1 02-08-00 ex-date 02-09
INFY - Infosys          2:1 02-11-00 ex-date 02-14
MERQ - Mercury Interact 2:1 02-11-00 ex-date 02-14
PSIX - PSINet Inc       2:1 02-11-00 ex-date 02-14
BRCM - Broadcom         2:1 02-11-00 ex-date 02-14
PMCS - PMC-Sierra       2:1 02-11-00 ex-date 02-14
YHOO - Yahoo!           2:1 02-14-00 ex-date 02-15
HRL  - Hormel           2:1 02-15-00 ex-date 02-16
EMMS - Emmis Comm       2:1 02-15-00 ex-date 02-16
EXAR - Exar Corp        3:2 02-15-00 ex-date 02-16
ADCT - ADC Telecom      2:1 02-15-00 ex-date 02-16
DITC - Ditech Comm      2:1 02-16-00 ex-date 02-17
CTXS - Citrix Systems   2:1 02-16-00 ex-date 02-17
ITWO - I2 Tech          2:1 02-17-00 ex-date 02-18
CBXC - Cybex Comp Prod  3:2 02-18-00 ex-date 02-21
PRGN - Peregrine Sys    2:1 02-18-00 ex-date 02-21
TQNT - Triquint         2:1 02-22-00 ex-date 02-23
KANA - Kana Corp        2:1 02-22-00 ex-date 02-23
IVX  - IVAX Corp        3:2 02-22-00 ex-date 02-23
SANM - Sanmina Corp     2:1 02-22-00 ex-date 02-23
MUSE - Micromuse        2:1 02-22-00 ex-date 02-23
USAI - USA Networks     2:1 02-24-00 ex-date 02-25
ESIO - Electro Scient   2:1 02-24-00 ex-date 02-25
MGG  - MGM Grand        2:1 02-25-00 ex-date 02-28
SEPR - Sepracor         2:1 02-25-00 ex-date 02-28
SILI - Siliconix        3:1 02-28-00 ex-date 02-29
NSOL - Network Solution 2:1 02-28-00 ex-date 02-29
SDLI - SDL Inc          2:1 02-29-00 ex-date 03-01
GTLL - Global Tech      3:2 02-29-00 ex-date 03-01
TMPW - TMP Worldwide    2:1 02-29-00 ex-date 03-01
SLR  - Solectron        2:1 03-08-00 ex-date 03-09
JDSU - JDS Uniphase     2:1 03-10-00 ex-date 03-13
LLTC - Linear Tech      2:1 03-27-00 ex-date 03-28
GE   - General Elec     3:1 04-26-00 shareholder mtg
SNE  - Sony Corp        2:1 05-19-00 ex-date 05-22
AA   - Alcoa            2:1 06-09-00 ex-date 06-12

For a complete list of all the coming splits check out the
"split calendar" on the side of the online edition newsletter


With all the great plays each week we can never decide
on just one so take your pick. 

Call plays of the day:

VIGN - Vignette Corporation $212.50 (+11.56)(P3W +50.44)

See details in sector list

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


NOK - Nokia $185.63 (+1.56)(+13.06)(-20.06)(+6.00)(P6W +58.13)

See details in sector list

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

Put play of the day:

RMBS - Rambus Inc $75.38 (-14.25)

See details in put list

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


SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
TP/P= True premium or Time premium
RRR = Risk/Reward/Ratio
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume
MTD = Move to double - amount stock must move to double option price
                         in one week. ONE WEEK MOVE ONLY !

Numbers within ( ) are the amount of change for the week.
Numbers within ( ) may be designated with PxW, like P3W, prior 3

The options with a "*" by the strike price are our choices from the 
group. If the stock moves as expected we feel they have the best 
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5 
Analysts who follow each stock rate it and these rating are 
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell" 

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the 
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


HGSI - Human Genome Sciences $221.88 (+37.25)(+24.31)(P2W +31.25)

Human Genome Sciences develops drugs and diagnostic products
based on human genes.  Although the company has no marketable
products, firms pay HGSI to develop products for cancer, heart
disease, arthritis, and Lou Gerhig's disease.  HGSI is involved
with SmithKline Beecham, Merck, and The Institute of Genomic 
Research.  HGSI also researches non-human genes, including
those of bacteria, fungi and viruses.  These could eventually
prove useful in creating vaccines and antibiotics.  HGSI 
competes with Genzyme, Incyte Pharmaceuticals and Scios.

Some investors are wondering just how much higher HGSI and
stocks in the Genomics field can go.  Since being added to our
play list on December 28th, HGSI has run up about 60%.  Is 
there a pullback coming?  Probably so.  At this point when
it does occurs, it should be viewed as an opportunity to jump
on board one of the strongest issues, in the hottest sectors,
at this time.  Investors added another $37.25 to the price of 
HGSI stock this week.  Volume for the week was heavy with 3.99
million shares changing hands in four days.  For a stock that
sees an ADV of 468K, that tells us there may be more room to 
move higher, but HGSI could slow down to catch it's breath 
early next week.  HGSI closed near intraday support of $220.
The next two levels of support would be seen at $214.50 and 
$208.  We believe HGSI could experience some profit-taking 
early next week.   However we also believe it will be short-
lived.  A retracement followed by a bounce, would be a great 
chance to join in on this split run play.  We have just one 
week left in this one, as HGSI splits 2-for-1 Jan 31st.  
Although HGSI has been a fantastic play, the option premiums
are high and are not for all traders. 
On Thursday the Biotech sector got another endorsement.  This
one came from none other than President Bill Clinton.  The 
President declared January National Biotechnology Month.
President Clinton said "the impact of biotechnology is far-
reaching" and has "provided a greater understanding of 
cellular and genetic processes, fostering research into 
treatments for diseases that affect millions of Americans, 
such as Parkinson's, Alzheimer's, diabetes, heart disease, 
AIDS and cancer."

BUY CALL FEB-210 HHA-BB OI=53 at $35.63 SL=28.00
BUY CALL FEB-215*HHA-BC OI=74 at $33.25 SL=26.00
BUY CALL FEB-220 HHA-BD OI= 0 at $31.88 SL=25.00 New Strike

SELL PUT FEB-185 HHA-NQ OI= 5 at $11.38 SL=14.00
(See risks of selling puts in play legend)

Picked on Dec 28th at   $138.88    P/E = N/A
Change since picked      +83.00    52-week high=$232.00
Analysts Ratings      1-4-2-0-0    52-week low =$ 28.75
Last earnings 10/99   est=-0.30    actual=-0.42 
Next earnings 02-07   est=-0.70    versus=-0.55
Average daily volume =    468 K
Chart = http://quote.yahoo.com/q?s=HGSI&d=3m


SEPR - Sepracor Inc. $155.00 (+28.88)(+8.00)

They are a specialty pharmaceutical company that develop 
improved versions of widely prescribed existing pharmaceuticals.
Located in Marlborough, MA, Sepracor products can offer
reduced side effects, improved safety, new uses, and improved 
dosage forms over traditional compounds.  They are currently 
in the process of developing drugs to treat asthma, allergies, 
pain, sleep disorders, and depression.  SEPR has licensed to 
Johnson & Johnson the rights to an improved version of JNJ's
own Propulsid heartburn medication.  SEPR competes in the 
healthcare sector with Bayer AG, Glaxo Wellcome, and
Johnson & Johnson.

The Board of Directors of SEPR provided us with great news 
to help our earnings play.  Thursday morning they announced
a 2-for-1 split of the company's stock.  The ex-date is not
for another month, on Feb 28th.  Since the first of the year,
the Biotechnology sector has been on the move.  Investors have
sold blue-chip stocks and invested their funds in SEPR and 
many of the companies in this sector.  The strength early
in week in SEPR was the result of positive comments from
analysts late last week.  SEPR gained over $26 in four days,
most of which came on news of the split announcement.  SEPR 
made a new 52-week high Friday at $157.  We could see some 
traders take some money off the table early in the week.  SEPR 
has support at $151 and $143.  Many traders are expecting next 
week to be choppy ahead of the Fed meeting the first of February.
We believe that may be true, however investors seem to want to 
jump into stocks in the Biotech sector.  If we see a pullback 
to support in SEPR, followed by a bounce, we would look for 
opportunities to buy calls.  Remember it will be a short-term 
play, that you will want to exit by Thursday at the close, as 
SEPR is scheduled to report earnings Friday morning.

SEPR announced this week it has initiated a 400-patient clinical
efficiency trial for (+)-zopiclone in the treatment of insomnia.  
Racemic zopiclone is a non-benzodiazepine rapid-acting hypnotic
indicated for the treatment of sleep disorders.  Racemic 
zopiclone is marketed under the names of Imovane and Amoban 
and is available in approximately 80 countries worldwide and 
has never been submitted for approval in the U.S. 

BUY CALL FEB-140*ERQ-BH OI=161 at $20.38 SL=16.13
BUY CALL FEB-145 ERQ-BI OI=  0 at $17.00 SL=13.50 New Strike 
BUY CALL FEB-150 ERQ-BJ OI=  0 at $14.25 SL=11.25 New Strike

Picked on Jan 11th at  $122.38     P/E = N/A
Change since picked     +32.63     52-week high=$157.00
Analysts Ratings     5-4-2-0-0     52-week low =$ 58.75
Last earnings 10/99  est=-1.56     actual=-1.68 
Next earnings 01-28  est=-1.47     versus=-1.10
Average Daily Volume =   446 K
Chart = http://quote.yahoo.com/q?s=SEPR&d=3m


TQNT - TriQuint Semiconductor $141.50 (+11.50)

TriQuint Semiconductor is a leading worldwide supplier of a 
broad range of high performance gallium arsenide (GaAs) 
integrated circuits.  TriQuint's products span the RF and 
millimeter wave frequency ranges and employ analog and mixed 
signal circuit designs.  They are used in wireless 
communications, telecommunications, data communications and 
aerospace systems.  TriQuint offers both standard and customer 
specific products as well as foundry services.  TriQuint's two 
operations, in Oregon and Texas, are both certified to the ISO 
9001 international quality standard.

Oftentimes, January is the month that establishes the leadership 
groups for the rest of the year.  With the SOX making several 
new highs so far this year it appears that Semiconductors will 
be one of those leaders.  TriQuint's bullish story does not end 
there.  The company's products are the key component of another 
leading industry group, wireless communications.  This double-
whammy makes TQNT a must own stock for followers of either or 
both industry groups.  One only needs to look at the chart to 
see that TQNT is under accumulation.  On top of this very 
bullish story, TQNT increased interest in its stock by 
announcing a 2-for-1 stock split, payable on February 22nd.
TQNT's excellent uptrend was broken in the first week of the 
year.  TQNT built a nice base at $100 to defend itself against 
the heavy selling.  Since then it has been a nearly perfect 
stairstep moving ever higher.  The best way to play the stock 
seems to be to buy intraday pullbacks.  The trend looks good as 
long as TQNT does not trade below any previous day's close.  If 
that were to happen the stock may be exhibiting signs of taking 
a break and looking to establish a new support level.  Therefore, 
the first support level is $138 followed by $130.  We liked the 
intraday print just above the psychologically important resistance 
level of $150.  If the stock can close convincingly above that 
price we could see a very nice rally.

Day traders may be interested in this stock.  All last week TQNT 
would gap up, pullback in the first half hour and then make a 
subsequent new high, only to pullback again into the close.  
This is a very tradable pattern for anyone who is extremely 
aggressive with their money.  Option players should look for 
new strikes becoming available on Monday.

BUY CALL FEB-125 TQN-BE OI=1602 at $22.13 SL=17.25
BUY CALL FEB-130 TQN-BF OI=  26 at $18.88 SL=14.75
BUY CALL FEB-135*TQN-BZ OI= 157 at $17.38 SL=13.50

Picked on Jan 13th at  $130.00    P/E = 131
Change since picked     +11.50    52-week high=$150.38
Analysts Ratings     5-4-4-0-0    52-week low = $10.31
Last earnings 10/99  est= 0.27    actual= 0.36
Next earnings 02-10  est= 0.37    versus= 0.21
Average Daily Volume =   394 K
Chart = http://quote.yahoo.com/q?s=TQNT&d=3m 


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The Option Investor Newsletter          1-23-2000
Sunday                        3 of 5


NTAP - Network Appliance Inc. $117.13 (+23.44)(+8.69) 

Their customer base is an impressive group of clients.  Names 
like Yahoo, AOL, Motorola, Siemens and the UK's #1 ISP Demon 
Internet depend on them daily.  Network Appliance uses its 
Netcache software and NetApp suite of network storage 
servers, or filers.  These products are designed for and provide
fast reliable cost effective service for Internet service 
providers, and corporate intranets.  NTAP's hi-powered ONTAP 
operating system allows simultaneous access by users from  
Windows, UNIX and Web platforms.  NTAP is located in Sunnyvale, 
Ca and competes against EMC, Sun Microsystems, Cisco Systems 
and Novell.  

Shares of NTAP experienced a nice gain this week.  Investors
continued to sell blue-chip stocks and rotate their funds
into technology stocks.  Traders focused their buying on tech 
issues that have proven track records as far as earnings and 
future profit potential.  NTAP falls exactly in that category as
NTAP is extremely well positioned in its industry.  They don't
report earnings until the middle of February, but analysts and
investors are expecting solid numbers.  The sector has been 
strong in past and regained momentum this week.  NTAP seemed
to be aided by PSIX, as the networking company announced a 
2-for-1 stock split.  Thursday morning analysts at PaineWebber
reiterated their Buy rating of NTAP.  They set a new price
target of $150.  NTAP made a new 52 week high Friday at 
$121.50.  Volume on the last day of the week was strong at
2.45 million shares.  Although we expect the trend to continue 
higher, NTAP gained over $23 for the week and a bit of 
profit taking would be normal.  Technically support for NTAP 
is seen at $115 and $106.  Another area of support is the
5-dma at $110.54.  If we see a pullback next week in the 
Nasdaq and NTAP, look for opportunities to buy calls with a 
bounce off a support area.

Wednesday, Veritas Software and NTAP announced the availability 
of a fully integrated and qualified high-availability 
application solution for NTAP's storage appliances.  Customers
can now achieve continuous access to critical information at 
both the application level and the data storage level, which
will increase overall information availability for their

BUY CALL FEB-110*NUL-BB OI= 80 at $14.63 SL=11.50
BUY CALL FEB-115 NUL-BC OI= 33 at $11.25 SL= 8.75 low OI
BUY CALL FEB-120 NUL-BD OI= 22 at $ 9.25 SL= 7.00 low OI
BUY CALL FEB-125 NUL-BE OI=175 at $ 7.25 SL= 5.50

SELL PUT FEB-105 NUL-NA OI=  3 at $ 4.00 SL= 6.00 low OI
(See risks of selling puts in play legend)

Picked on Jan 16th at    $93.69    P/E = 389
Change since picked      +23.44    52-week high=$121.50
Analysts Ratings      8-5-1-0-0    52-week low =$ 19.06
Last earnings 11/99   est= 0.17    actual= 0.19 surprise=+10.0%
Next earnings 02-16   est= 0.11    versus= 0.06
Average daily volume = 1.61 mln
Chart = http://quote.yahoo.com/q?s=NTAP&d=3m


VIGN - Vignette Corporation $212.50 (+11.56)(P3W +50.44)

VIGN provides Internet Relationship Management (IRM) software
products and services, a category of enterprise solutions
designed to enable businesses to build sustainable online
customer relationships, increase returns on internet-related
investments and capitalize on internet business opportunities.
VIGN's clients come from diverse sectors and include financial
services, health, education and government, media, retail,
technology and telecommunications.

As we mentioned on Thursday, VIGN looked like it was gathering
its strength for another run at its 52-week high.  Trading had
been light, with VIGN giving back some of its recent gains on
light volume.  Buyers returned with a vengeance on Friday,
shattering the resistance at $206 and setting a new closing
high of $212.50.  Trading as high as $219.88 on double its
average daily volume, VIGN gave up some of its stellar gains
as darkness approached.  This play is based on a run into
earnings, and the company is still being cagey about telling
us when to expect the announcement.  According to Investor
Relations, we can expect them at the end of January or early
February - Thanks!  That's a big help.  We want to be cautious
going forward as Briefing.com is reporting a confirmed earnings
date of January 25, after the close.  For those of you keeping
score, that is Tuesday, so watch out for VIGN to just spring
the numbers on us.  The resistance at $200 has now become
support, with stronger support at $193-194, reinforced by the
10-dma at $194.50.  Because of the uncertainty about earnings,
we recommend caution in adding new positions at this time, and
urge you to keep your stops in place.  Also, watch for lots of 
action on Tuesday as VIGN's CEO will be appearing on CNBC's 
Power Lunch.  This typically adds to the volatility.

In the "late to the party" category, Donald Cunningham of
Gilmour & Associates raised VIGN from a Sell to Neutral on
Wednesday.  He must have woken up to the fact that most of his
colleagues had Buy ratings with price targets well over $200.

***Editor's note:  VIGN's website is now showing Tuesday, 
after the close, as a confirmed earnings date.  Therefore, 
close out the position before Tuesday's market close.***

BUY CALL FEB-200 GGV-BT OI=184 at $32.38 SL=25.25
BUY CALL FEB-210*GGV-BB OI=201 at $27.38 SL=21.50
BUY CALL MAR-210 GGV-CB OI=281 at $37.00 SL=28.75

Picked on Dec 30th at   $163.75     P/E = N/A
Change since picked      +48.75     52-week high=$212.50
Analysts Ratings      9-4-0-0-0     52-week low =$ 19.91
Last earnings 10/99   est=-0.20     actual=-0.19
Next earnings 01-25   est=-0.09     versus= N/A
Average Daily Volume = 1.33 mln
Chart = http://quote.yahoo.com/q?s=VIGN&d=3m


EXDS - Exodus Communications $137.88 (+31.88)(+18.88)

Though they don't like the term, they are frequently called 
"server farms".  Exodus is a leading provider of Internet systems 
and network management solutions for enterprises with mission-
critical Internet operations.  Exodus manages Internet Web sites 
and its network infrastructure from 16 Internet Data Centers 
located in the United States and Europe.  Exodus currently has 
IDCs located in the Austin, Boston, Chicago, London, Los Angeles 
(2), New York (2), Seattle (2), Silicon Valley (4) and 
Washington, D.C. (2) metropolitan areas.  Exodus added three 
additional IDCs and three international server hosting sites at 
the end of 1999, bringing the total number of Exodus sites to 22 

Houston, we have ignition!  The week started out peppered with 
big news announcements.  The most noteworthy include teaming up 
with Foundry Networks to increase access speeds up to 10 times 
for EXDS customers, a partnership with Nomura Research Institute 
to offer Web hosting services in Japan, and announcement of their 
intention to team up with Anderson Consulting to offer Internet 
hosting and solutions to financial institutions - all of which 
helped goose the price this week.  However, there was nothing on 
the newswires that would account for $10 of Friday's $12 gain in 
the final hour and one half of trading.  Volume really cranked 
at the close bringing an otherwise average volume day to a 50% 
excess.  Demand is strong, and technicals are strong in the 
positive.  The only thing we can figure is that traders and 
investors lit EXDS's rocket in anticipation of strong earnings 
after the close on January 26,and the possibility of a split 
announcement too.  While it looks like the oxygen supply won't 
run out until EXDS is in orbit, we want to caution you that 
traders may have recognized that the YHOO pattern applies to 
other issues too.  Thus, a selloff prior to earnings could occur 
anytime beforehand.  That said, consider setting your stops so 
you don't give back that free money you earned into Friday's 
close.  Mild support is at $132, but it's much stronger at $122 - 
not much in between, making EXDS inherently risky.  Wear your G-
suit to absorb the punishing acceleration in both directions.

With high time value, consider using Jim's Covered Straddle 
strategy outlined in a recent Options 101 column or selling 
naked puts.

BUY CALL FEB-130*QED-BF OI= 117 at $21.00 SL=16.50
BUY CALL FEB-135 QED-BG OI=  38 at $18.63 SL=14.50 low OI
BUY CALL FEB-140 QED-BH OI=  77 at $16.38 SL=12.75

SELL PUT FEB-110 DUB-NB OI= 115 at $ 5.00 SL= 6.25
(See risks of selling puts in play legend)

Picked on Jan 11th at   $103.19     P/E = N/A
Change since picked      +34.69     52-week high=$140.00
Analysts Ratings     18-8-0-0-0     52-week low =$  9.00
Last earnings 10/99   est=-0.29     actual=-0.29
Next earnings 01-26   est=-0.19     versus=-0.13
Average Daily Volume = 3.90 mln
Chart = http://quote.yahoo.com/q?s=EXDS&d=3m


MFNX - MetroMedia Fiber Network $69.88 (+12.75)(+9.00)

Buckets-O-Bits.  That's not a new dog food.  It's MetroMedia's 
business to send big batches of data down its fiber-optic 
network lines as a competitive local exchange carrier (CLEC).  
It operates its network in Chicago, Philadelphia, New York City 
and Washington, D.C. and interconnects its service areas through 
an agreement with Williams Communications.  It rents its fiber 
to customers, ISP's, other local and long distance carriers 
and wireless providers.  Racal is their partner between 
the U.S. and the U.K.  Metromedia also owns Abovenet, a recent 
acquisition (and competitor of Exodus Communications) in the 
hosting business.  Bell Atlantic owns 10% of the company and 
contracts with MFNX to use their network.

Ten straight days of gains - will it ever end?  We hope not, but 
as we often repeat, nothing goes up forever in a straight line 
and MFNX is defying the odds.  Volume is beginning to taper back 
to match the ADV too, which tells us that this immediate run may 
be about to end - at least temporarily.  Consider moving those 
stops up so you don't have to give anything back.  Unfortunately, 
MFNX is rather tight-lipped on news that would be driving the 
price.  So far they have not committed to an earnings date.  Just 
in the last week, their IR department has told us from the first 
week in February to the first week in March.  Zack's has February 
7 listed, so we go with that for now.  Despite the frustration 
with "secret" news and IR, the chart is nothing less than 
incredible.  There is really no support to speak of (except a 
brief test of $66 on Friday) and blue sky all around.  Were it 
not for a closing volume surge, MFNX likely would have closed 
flat for the day.  Nonetheless, all indicators (MACD, stochastic, 
and RSI) are maxed out positive.  Still we suggest waiting for 
a pullback.  Or if your risk profile allows it, step in on an 
intraday (mid-day) dip, say around lunchtime.  But remember those 

More from the "it's-news-but-we're-not-going-to-talk-about-it" 
department: Metromedia Fiber Network Inc said it acquired closely 
held network builder, M.I.B.H. Inc. for about $51 million in cash 
and stock to expedite the development of a high-speed Internet 
network in North America and Europe.  Bloomberg, who penned the 
article noted, "The company wouldn't comment on further details 
about the acquisition".  No surprise there.

BUY CALL FEB-65*QFN-BM OI=498 at $ 8.88 SL= 6.75
BUY CALL FEB-70 QFN-BN OI= 19 at $ 6.25 SL= 4.25 low OI
BUY CALL FEB-75 QFN-BO OI=100 at $ 4.13 SL= 2.50
BUY CALL MAY-75 QFN-EN OI=  7 at $12.50 SL=10.00 low OI

Picked on Jan 16th at   $57.13     P/E = N/A
Change since picked     +12.75     52-week high=$70.38
Analysts Ratings    18-8-0-0-0     52-week low =$17.38
Last earnings 11/99  est=-0.12     actual=-0.16 Surprise=-33%
Next earnings 02-07  est=-0.26     versus= 0.00
Average Daily Volume = 2.8 mln
Chart = http://quote.yahoo.com/q?s=MFNX&d=3m


MSTR - MicroStrategy Inc. $289.13 (+61.19)(+17.56)(+0.38)

MicroStrategy is a worldwide provider of enterprise DSS 
software applications and related services.  DSS software 
enables users access to and the analysis of information 
stored in large relational databases through various devices 
like the Internet, e-mail, telephones, pagers and other 
wireless communications devices.  Through this software clients 
can improve operations, analyze marketing effectiveness and 
create and deliver targeted one-to-one marketing campaigns to 
customers.  MicroStrategy also provides customers with 
professional and customer support services.  

MSTR is fast becoming one of the favorite plays in the very 
hot B2B sector.  MicroStrategy has completed an amazing 
transformation from a medical supply company into a leading 
information technology company.  B2B stocks were very strong 
last week as investors are keying into the potential explosive 
growth of this field.  This industry could be one of the 
strongest for many years to come as businesses in all fields 
are spending tons of money to become more efficient by 
utilizing the Internet for their information gathering and 
dissemination.  MSTR is planning a 2-for-1 stock split on 
January 26th, which is adding fuel to an already very hot 
fire.  There is evidence that MSTR's software and consulting 
services are becoming very popular.  MSTR has recently added a 
string of high profile clients including Sybase, Ameritrade 
and Dimension Data, to name just a few.  Last week, MSTR 
completed the formation of a nice base at $219.  MSTR has been 
able to take off quite nicely from that level.  The race to 
accumulate shares really exploded when the stock traded above 
$250.  The ensuing rally took MSTR to the exact psychological 
resistance level of $300.  MSTR's quick rise took a small break 
on Friday as the stock failed to make a new high finding a 
little resistance at $296 before falling back.  Pullbacks to 
the $270 level have resulted in some nice bounces.  If the 
stock can wander back to that area it might be a nice place to 
go long and participate in a split rally.  Below $270 we find 
support at $250.  Just remember we are at the tail end of this 
play as the split will be after the close on Wednesday.

MicroStrategy is planning to advertise during the Super Bowl 
in an attempt to lure even more businesses.  We noted last 
week that the stock really started rallying the day after 
employees returned to work after a two week company wide 
planning and strategy meeting.  Somebody liked what they heard!  
It is also interesting to note that MSTR was named by Fortune 
Magazine as one of the "Top 100 Best Places to Work", with the 
stock going parabolic we can see why.

BUY CALL FEB-270 MKZ-BN OI=11 at $48.38 SL=37.75
BUY CALL FEB-280 MKZ-BP OI= 5 at $42.88 SL=33.50
BUY CALL FEB-290*MKZ-BR OI=14 at $38.38 SL=30.00
BUY CALL FEB-300 MKZ-BT OI=66 at $33.88 SL=26.50

SELL PUT FEB-250 EUU-NZ OI=24 at $18.50 SL=24.00 
(See risks of selling puts in play legend)

Picked on Jan 9th at   $210.38    P/E = 1028
Change since picked     +78.75    52-week high=$300.00
Analysts Ratings     5-3-1-0-0    52-week low =$ 14.69
Last earnings 10/99  est= 0.08    actual= 0.09 
Next earnings 01-27  est= 0.11    versus= 0.07
Average daily volume =   337 K
Chart = http://quote.yahoo.com/q?s=MSTR&d=3m


VOD - Vodaphone AirTouch $55.94 (+3.06)(+5.25)

Formed when the UK's Vodaphone Group bought US wireless
provider AirTouch Communications in 1999, VOD operates mobile
phone networks offering voice messaging, paging, and data
services.  With the most mobile phone subscribers in the world,
(31 million and rising), VOD is a giant in the world of wireless
phones, holding the #1 position in the UK and the #2 position
in the US.  The company continues to expand at aggressive pace,
having agreed to combine with US wireless carrier Bell Atlantic,
and still pursuing its takeover bid for Germany's Mannesman.

While it may be entertaining, the bickering between VOD and
Mannesmann is not lighting a fire under our call play.  For
those of you new to this drama, VOD has been working hard to
negotiate a merger with Mannesmann.  VOD's advances have been
soundly rejected at every turn, but when we added this play on
Tuesday, it looked like a sweetened offer might do the trick.
Well it was not to be!  Mannesmann shot back, calling the latest
offer "wholly inadequate", indicating there is still much work
to be done if the merger is to be approved before the offer
expires in 2 weeks.  Our play still looks good technically as
prices bounced firmly at $54 Friday morning.  This is right in
the middle of the gap up on Tuesday morning, and should provide
strong support going forward.  The drop on Friday did come on
fairly heavy volume, which causes us some concern, especially
since volume diminished significantly as prices recovered in
the afternoon.  Going forward, entries can be considered on
another bounce from support or if VOD can trade through
resistance at $57.50.  If you trade this ADR, be mindful of
the fact it usually gaps at the open and the direction of the
gap is frequently a good indicator of the overall direction
for the day.

Most of the news this week is merger related, so here's the
meat.  VOD is willing to raise its all-stock offer for
Mannesmann, giving Mannesmann shareholders just under half of
the merged company, but Mannesmann management isn't willing to
support the offer unless its owners get at least 58.5 percent.
VOD may even be willing to appoint Mannesmann CEO Klaus Esser to
the combined company's top post if he agrees to the "merger of
equals".  Both companies are rumored to be in talks with the
French conglomerate Vivendi, in an effort to strengthen their
respective bargaining positions.  In other news, VOD has agreed
to buy an additional 16.9 percent of Airtel SA, as it seeks to
gain majority control of Spain's second-largest wireless phone

BUY CALL FEB-50*VOD-BJ OI=4143 at $8.38 SL=6.50
BUY CALL FEB-55 VOD-BK OI=1508 at $5.13 SL=3.25
BUY CALL FEB-60 VOD-BL OI= 333 at $3.00 SL=1.50
BUY CALL APR-55 VOD-DK OI=1955 at $7.50 SL=5.75
BUY CALL APR-60 VOD-DL OI= 539 at $5.63 SL=3.75

Picked on Jan 18th at    $57.50    P/E = N/A
Change since picked       -1.56    52-week high=$58.00
Analysts Ratings      4-3-2-0-0    52-week low =$33.21
Last earnings 12/99   est=  N/A    actual=  N/A
Next earnings 06-08   est= 0.42    versus= 0.34
Average Daily Volume = 3.59 mln
Chart = http://quote.yahoo.com/q?s=VOD&d=3m


ANAD - Anadigics Inc $79.25 (+6.25)(+25.56)

Anadigics designs and manufactures radio frequency and microwave 
gallium arsenide integrated circuits (IC).  These circuits 
are sold to communications equipment makers in the broadband, 
direct satellite, fiber-optic and wireless communications 
markets.  Ericsson, Motorola, and Qualcomm account for about 
60% of total sales.

Positive company news along with a Strong Buy recommendation 
from Needham & Co first ignited ANAD's upward momentum.  
Anadigics announced on January 10th a $10 mln expansion of its 
state-of-the-art six-inch facility production facility in 
response to the growing demand for its wireless and broadband 
products.  Investors realized the revenue potential and 
subsequently have since bid up the share price $27.25, or 52.4%.  
To spice up the momentum, earnings are just around too.  On 
Wednesday, ANAD reached a pinnacle at $83.06 and is now 
consolidating at near-term support ($79).  This is the first 
time ANAD has really flattened out in awhile.  That may not be 
a good sign.  Also, the company is confirmed to report earnings 
this Friday January 28th, after the bell, which leaves us with 
only four more trading sessions.  So be careful if you're 
considering a quick in-and-out play.  OIN never recommends 
holding over an earnings' announcement.  

BUY CALL FEB-70 DQA-BN OI=145 at $13.63 SL=11.00
BUY CALL FEB-75*DQA-BO OI= 33 at $10.75 SL= 8.50
BUY CALL FEB-80 DQA-BP OI= 10 at $ 8.50 SL= 6.50
BUY CALL FEB-85 DQA-BQ OI=  0 at $ 6.13 SL= 4.25 New Strike

Picked on Jan 13th at   $66.00    P/E = N/A
Change since picked     +13.25    52-week high=$83.06
Analysts Ratings     3-2-1-0-0    52-week low =$11.19
Last earnings 10/99  est= 0.10    actual= 0.15
Next earnings 01-28  est= 0.16    versus=-0.01
Average Daily Volume =   370 K
Chart = http://quote.yahoo.com/q?s=ANAD&d=3m


LVLT - Level 3 Communications $110.50 (+23.75)(+10.88)

Level 3 Communications is a telecommunications and information 
service company that is building an international fiber-optic 
network.  The technology is based on Internet protocol.  They 
provide local, long-distance, and Internet service over leased 
networks in 20 cities in the US and Europe.  

Besides sheer momentum, LVLT has a couple of other factors that 
are driving its share price higher and higher.  Level 3 is 
confirmed to report earnings on February 3rd, before the bell, 
and at these higher trading levels above $80, LVLT is considered 
a split-candidate.  Since a recent increase of authorized shares 
from 500 mln to 1.5 bln and only 341 mln shares outstanding 
there's plenty of room for a stock split.  These events are 
powering LVLT into higher realms.  At the beginning of the week, 
we were looking for the stock to show strength above $90.  By 
Thursday we saw near-term support elevate to $94 and $95 and the 
5-dma become clearly out-paced.  However there was still concern 
since the 52-week high at $100.13 represented a psychological 
hump and $98 was standing as the first line of resistance.  All 
our concern was for naught as this powerhouse shattered the 
glass-ceiling and climbed to an all-time high of $111.  The 
stock demonstrated its stamina and bullishly closed just cents 
away from this mark on Friday.  Notably trading volume was 5 
times the ADV at 8.18 mln shares exchanging hands.  This is 
definitely a good sign of more to come.  So where's the entry 
point?  Well there's obviously been no pullback so traders have 
had to risk an intraday buy on the ascent.  I say "risk" because 
you don't want to get caught buying at an inflated price only 
to watch the stock begin a consolidation period the next day 
or so.  This is a decision you must make based on your personal 
risk profile.

On Tuesday, Level 3 and Convergys (CVG), an outsource business 
support systems company, inked a deal which will link CVG's 
online billing and customer services to Level 3's Internet 

BUY CALL FEB-100 QHN-BT OI=774 at $15.63 SL=12.25
BUY CALL FEB-105*QHN-BA OI=239 at $12.00 SL= 9.50
BUY CALL FEB-110 QHN-BB OI=102 at $10.00 SL= 7.50
BUY CALL MAR-105 QHN-CA OI= 80 at $15.13 SL=11.75
BUY CALL MAR-110 QHN-CB OI=684 at $12.50 SL=10.00

Picked on Jan 16th at    $86.75    P/E = N/A
Change since picked      +23.75    52-week high=$111.00
Analysts Ratings      4-5-2-0-0    52-week low =$ 39.81
Last earnings 10/99   est=-0.51    actual=-0.43
Next earnings 02-03   est=-0.60    versus=-0.11
Average Daily Volume = 1.69 mln
Chart = http://quote.yahoo.com/q?s=LVLT&d=3m


CMVT - Comverse Technology $150.38 (+2.06)(+9.31)(-5.75)

Comverse is the world leader in multimedia telecommunications
applications.  Through its Comverse Network Systems division,
the company markets its Access NP and TRILOGUE INfinity Enhanced
Services Platforms, which enable wireless, wireline, and
internet companies to offer enhanced telecommunications services
to business and residential customers.  Among these services
are voice and fax messaging, call answering, and web
information services.  Comverse also offers Intelligent 
Peripheral/Service Node, supporting next-generation personal 
communication services such as pre-paid wireless, mobile number 
portability, call screening, and mobile attendant functions.

It doesn't have the huge gains of some of the Internets, but
CMVT's chart is hard not to like.  Consistently delivering
higher-lows, it broke through resistance at $149 on Thursday
and used that level for support on Friday.  With the nearly
$7 gain on Thursday, we would have been surprised if there
hadn't been some profit-taking.  It was encouraging to see
volume less than 40% of the ADV on Friday's pullback.  The
5-dma (currently $148.38) provided excellent support all week,
adding momentum to fuel this play which was originally started
on speculation about a possible split announcement (see below).
Investors are being attracted to CMVT because of the strength
of its market position; its customer base currently numbers
more than 290 telecommunications operators worldwide, with more
than 150 of these in the rapidly growing digital wireless
market.  We are getting close to the 52-week high of $155.88,
the next resistance level, and will need to see volume return to
push us through.  Going forward, CMVT has additional support at
$144-145, which would provide a nice entry in the event of broad
market weakness.  There is additional support near $139-140, but
in the absence of a broad selloff on the NASDAQ, a drop to that
level would cause us to question the viability of our play.
Consider opening new positions on a convincing bounce (read
volume) off of support anywhere above $144.  For those with open
positions, remember to use stops so you don't end up giving back
your gains.

News is sparse on CMVT, so we are left to enjoy the ride while
we wait for the much anticipated split announcement.  Recall
that it has been a split candidate since October when the
company increased the number of shares and the CEO said a split
would be coming in a matter of weeks or months.

BUY CALL FEB-145 CQV-BI OI=179 at $13.00 SL=10.50
BUY CALL FEB-150*CQV-BJ OI=218 at $10.25 SL= 7.75
BUY CALL FEB-155 CQV-BK OI=160 at $ 7.75 SL= 6.00
BUY CALL APR-150 CQV-DJ OI=395 at $18.75 SL=14.63
BUY CALL APR-155 CQZ-DK OI= 41 at $17.25 SL=13.50

SELL PUT FEB-135 CQV-NG OI= 10 at $ 3.00 SL= 4.75
(See risks of selling puts in play legend)

Picked on Jan 9th at    $139.00     P/E = 74
Change since picked      +11.38     52-week high=$155.88
Analysts Ratings     10-4-0-0-0     52-week low =$ 43.63
Last earnings 11/99   est= 0.53     actual= 0.56
Next earnings 02-29   est= 0.56     versus= 0.44
Average Daily Volume = 1.28 mln
Chart = http://quote.yahoo.com/q?s=CMVT&d=3m


PCS - Sprint PCS Group $110.75 (+13.00)

Sprint PCS operates the largest 100 percent digital, 100% 
PCS nationwide wireless network in the United States, already 
serving the majority of the nation's metropolitan areas 
including more than 4,000 cities and communities across the 
country.  Sprint PCS has licensed PCS coverage of nearly 270 
million people in all 50 states, Puerto Rico and the U.S. 
Virgin Islands.  Sprint PCS is a wholly owned tracking group 
of Sprint Corporation.  Sprint is a global communications 
company at the forefront in integrating long distance, local
and wireless communications services and one of the world's 
largest carriers of Internet traffic.  Sprint built and 
operates the United States' only nationwide all-digital, 
fiber optic network and is a leader in advanced data 
communications services. 

We are looking for a nice sprint from PCS as it heads toward 
a stellar beginning to February.  Not only do we get an earnings 
announcement on February 1st, we also have a 2:1 stock split on 
February 4th.  We are looking for these two upcoming events 
to provide us with a nice run to finish out January.  PCS added 
yet another day to its good looking trend, picking up on Friday 
right where it had left off on Thursday.  Though PCS did not 
really test $110 enough on Friday to identify it as support, 
this level could hold going forward.  PCS looks to have support 
right around $107.50 and additional support at $100, which is 
not only a strong psychological number, but is also currently 
the 10-dma.  The 52-week high of $114.44 looks to be the only
resistance in the road at this point.  As we mentioned on 
Thursday, new entries are most likely best made toward the 
early part of the session, as PCS has a pattern of opening on 
or near the low for the day and gradually moving up to the 

Other than the upcoming earnings announcement and stock split, 
there is not much out there in the way of news that is 
currently helping to move this stock.  There seems to be a 
bit of confusion out there as to whether the new price target 
of $160 from Paine Webber is pre or post-split.  The $160 
target is a pre-split number.  One point of interest is Friday's 
high volume on the February 105 and 110 contracts (see below).

BUY CALL FEB-105 PCS-BA OI=421 at $12.00 SL=9.50 Fri. vol= 1668
BUY CALL FEB-110*PCS-BB OI=758 at $ 8.88 SL=6.50 Fri. vol= 1109
BUY CALL FEB-115 PCS-BC OI=447 at $ 6.50 SL=4.75

SELL PUT FEB- 95 PCS-NS OI=155 at $1.75 SL=3.50
(See risks of selling puts in play legend)

Picked on Jan 20th at   $108.00     P/E = N/A
Change since picked       +2.75     52-week high=$114.44
Analysts Ratings      9-8-7-0-1     52-week low =$ 25.56
Last earning 10/99    est=-1.24     actual=-1.31
Next earning 02-01    est=-1.45     versus=-1.43
Average Daily Volume = 2.39 mln
Chart = http://quote.yahoo.com/q?s=PCS&d=3m


NOK - Nokia $185.63 (+1.56)(+13.06)(-20.06)(+6.00)(P6W +58.13)

Finnish Phone Firm, Nokia is the world's number one maker of 
wireless cellular phones, ahead of Motorola, Ericsson and 
Qualcomm.  In addition they make wireless networking equipment, 
PC monitors and workstations, digital satellite and cable 
network systems, and set-top boxes.  However mobile phones 
make up 80% of their $18.5 bln in annual sales.  Return on 
equity is an industry smokin' 43%, and they currently sit on 
$3.3 bln cash, or slightly over $3 per share.

NOK finished a volatile, range-bound week with a bang on Friday, 
tacking on $5.88.  While volume remained well under the ADV of 
3.4 mln shares all week, Friday it picked back up to at least 
match the average.  By now, we all know that handset sales are on 
fire and NOK, as well as the other brands, can't keep up with 
demand despite excellent manufacturing capability.  The growth 
has exceeded even NOK's highest projections.  In fact, it was as 
early as November that NOK's chairman guided the Street to higher 
growth rates in the 30-40% range.  Given that he noted they would 
achieve their three revenue goals in two years, we think that 40% 
is conservative (more like 50% - but that will dribble out over 
the next few earnings periods.  Speaking of earnings, NOK 
announces theirs on February 1 before the bell.  Furthermore, 
their conference call begins around 8:00 a.m. ET, wherein NOK may 
also announce a split given that their shares have now reached 
over $150, a historical split level.  Support has been moving up 
during the last two weeks, and is fairly strong at $175, though 
$177 held up well toward the end of the week.  With 20/20 
hindsight, we can see that NOK has been consolidating with higher 
lows on slack volume with resistance at $185.  Friday's breakout 
into the close with increased volume on Friday may signal that 
the earnings run has begun.  Volume will be the key

While earnings are driving the play, NOK announced that Scandic 
Hotels, the largest Scandinavian hotel chain would begin 
implementing a WAP booking service utilizing NOK's equipment and 
expertise - just another step in becoming the dominant hardware 
player in the wireless world.

BUY CALL FEB-180*NZY-BP OI=2092 at $16.75 SL=13.00
BUY CALL FEB-185 NZY-BQ OI= 521 at $14.38 SL=11.00
BUY CALL FEB-190 NZY-BR OI=1958 at $12.25 SL= 9.75
BUY CALL APR-185 NZY-DQ OI= 455 at $24.13 SL=18.75
BUY CALL APR-190 NZY-DR OI= 347 at $21.25 SL=16.50

Picked on Nov 14th at  $122.25     P/E = 81
Change since picked     +63.38     52 week high=$196.00
Analysts Ratings    13-8-0-0-0     52 week low =$ 62.31
Last earning 10/99   est= 0.52     actual= 0.57 surprise=9.6%
Next earning 02-01   est= 0.66     versus= 0.58
Average Daily Volume = 3.4 mln 
Chart = http://quote.yahoo.com/q?s=NOK&d=3m


JDSU - JDS Uniphase $233.13 (+40.94)(+12.88)(+7.75)

Here's another company laying around on paradigm beach ready 
to surf the next wave.  Uniphase Corporation is a fully 
integrated optical electronics company that designs, develops, 
manufactures and markets fiber optic telecommunications 
components and modules and laser subsystems.  The Company's 
telecommunications products include semiconductor lasers, 
high-speed external modulators, transmitters, fiber Bragg 
gratings and optical modules for fiber optic networks in the 
telecommunications and cable television industries.  Based in 
the Silicon Valley, California, they employ approximately 6260 
people worldwide.  

As we've said before, "Dear God, please let there be one more 
company like Intel to invest in, and I promise not to mess it up 
this time".  Effectively they do for light what Intel does for 
electrons and is the largest arms merchant in the optical 
networking wars.  Whatta week for JDSU!  Anybody complaining?  No 
sooner had ETEK announced an 18% earnings surprise last week when 
JDSU announced they'd bought ETEK.  Given that the industry has 
been unable to keep up with demand, the new ETEK/JDSU combination 
should produce better manufacturing efficiencies and capacity, 
assuring a better supply chain according to Kevin Kalkhoven, 
JDSU's CEO.  Extending a multi-year supply agreement with Lucent 
this week didn't hurt either.  With good momentum already 
underway, earnings scheduled for release on January 26 after the 
bell should really spark trader action on Monday and Tuesday, 
probably juicing the price even more.  Go easy though - remember 
YHOO that actually sold off prior to earnings?  Traders are 
getting savvy to the pattern and may begin to unwind in front of 
the announcement.  Think about tightening those stops since we 
never recommend holding through earnings - there's no good reason 
to let greed keep you in the play as the profits slip away.  Not 
counting the last two days, support is way down around $210.  
Nearer, but much less reliable are $232, $229, and $225.  
Consider setting your stops just under those figures according to 
your risk profile so you don't get bounced out on a minor dip.  
Just a reminder too that JDSU announced another 2:1 split 3 days 
following its last split, which will become effective on March 
10, assuming the shareholders approve an increase in the number 
of authorized shares from 600 mln to 3 bln on February 25.  
However, that is not the main reason for the play.

Those interested in listening to the conference call can go to 
the following address at 4:15 p.m. ET:


The guys at Griffiths McBurney who recommended a Reduce rating 
last week with a price target of $68 are probably kicking 
themselves now.  We bet their clients are kicking them too!

Limited resources and oh so many ways to play!  Consider the 
Covered Straddle from a recent "Options 101" portion of the 
newsletter (naked puts too).  Just look at those juicy premiums 
ripe for the selling!

BUY CALL FEB-220 UCQ-BD OI=3675 at $34.13 SL=26.75
BUY CALL FEB-230*UCQ-BF OI=1119 at $29.38 SL=23.00
BUY CALL FEB-240 UCQ-BH OI= 703 at $24.88 SL=19.50

SELL PUT FEB-210 UCQ-NB OI= 766 at $17.58 SL=21.50
(See risks of selling puts in play legend)

Picked on Jan 13th at  $187.69    P/E = N/A
Change since picked     +45.44    52-week high=$248.50
Analysts Ratings   13-13-0-0-0    52-week low =$ 16.56
Last earnings 10/99  est= 0.25    actual= 0.29 surprise=16%
Next earnings 01-26  est=  N/A    versus= 0.07
Average Daily Volume = 5.0 mln
Chart = http://quote.yahoo.com/q?s=JDSU&d=3m


NTLI - NTL Inc $136.38 (+11.06)

NTL is the UK's biggest cable TV operator.  They provide 
extensive communication networks to homes, businesses, and 
wholesalers.  Television, radio, Internet, wireless, and a 
variety of telecommunications services are provided to more 
than two million subscribers.  NTL is presently extending its 
reach in Europe through the purchase of Cablecom, the #1 Swiss 
cable operator, and France Telcom has agreed to take a 25% 
stake in the company in a deal worth approximately $5.5 bln.

NTL's share price has risen significantly over the past couple 
months escalating from $90 in early December to a new all-time 
high of $137.09 during Friday's session.  Our call play is 
elementary.  We're anticipating NTLI will continue to climb 
to newer heights in the upcoming weeks because of pre-split 
excitement.  On January 20th the BoD announced a 5:4 stock split 
of its common stock payable on February 3rd.  There are about 
106.2 mln shares outstanding and 400 mln authorized providing 
plenty of room for the split.  Therefore it's expected the 
existing momentum is likely to be fueled by this event.  It's 
also quite possible NTLI could exceed CBIC World Market's price 
target of $150 before all is said and done.  On the day of the 
split announcement CIBC started coverage for NTLI with a new Buy 
and issued the 12-month price target.  That same day NTLI 
cracked strong resistance at $128 and pushed through the $130 
level.  Near-term support is now emerging at $131 and $132 just 
above the trailing 5-dma ($129.50).  This technical indicator 
has consistently served as support during the recent uptrend.  
If the stock fails to take a breather during the next few 
sessions you may have to look for an intraday bottom to get your 
foot in the door.  Keep in mind this is a quick play.  There are 
only eight trading days until NTLI splits.  We never recommend 
holding through the ex-date.  

Recently it hit the press that NTLI is planning to bid $5 bln 
for Belgium's Telnet NV, a telephone and cable service company.  
Neither company offered comment.  NTLI is also in talks to buy a 
10% stake in Aston Villa Plc, an English Premier League soccer 
club.  The strategy?  To gain influence and negotiating power 
over Premier League TV nights.

***Presently there are no strikes above 135***

BUY CALL FEB-125 ISQ-BE OI=455 at $16.75 SL=12.75
BUY CALL FEB-130*ISQ-BF OI= 55 at $13.50 SL=11.25 low OI
BUY CALL FEB-135 ISQ-BG OI= 21 at $10.63 SL= 8.25
BUY CALL MAR-130 ISQ-CF OI=200 at $14.50 SL=11.50
BUY CALL MAR-135 ISQ-CG OI=  0 at $12.25 SL= 9.75 New Strike

Picked on Jan 23rd at   $136.38    P/E = N/A
Change since picked       +0.00    52-week high=$137.09
Analysts Ratings      1-0-0-0-0    52-week low =$ 53.00
Last earnings 11/99   est=-3.66    actual=-2.89
Next earnings 03-31   est=-3.59    versus=-2.74
Average daily volume = 1.17 mln
Chart = http://quote.yahoo.com/q?s=NTLI&d=3m


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The Option Investor Newsletter             1-23-2000
Sunday                        4 of 5


AFFX - Affymetrix Inc. $253.63 (+66.88)(+33.50)(-16.49)

Affymetrix, Inc. is recognized as a worldwide leader in the 
field of DNA chip technology.  The Company has developed and 
intends to establish its GeneChip system as the platform of 
choice for acquiring, analyzing and managing complex genetic 
information in order to improve the diagnosis, monitoring and 
treatment of disease.  The Company's GeneChip system consists 
of disposable DNA probe arrays containing gene sequences on a 
chip, certain reagents for use with probe arrays, a scanner 
and other instruments to process the probe arrays, and software 
to analyze and manage genetic information from the probe 
arrays.  The company sells its products to Drug and Biotech 
companies involved in gene research.

If you are looking for the new leaders of the NASDAQ, you may 
not have to look any farther than AFFX.  When the sideline 
cash started piling back into the market the past two weeks, 
one of the biggest beneficiaries has been AFFX, primarily 
because it is an unique way to invest in the Human Genome 
Project.  Affymetrix provides the tools that researchers need 
to keep the project going.  As long as funding for the project 
continues, AFFX is in position to experience outstanding 
growth.  AFFX is not only considered a Genomics stock, it is 
also a software and semiconductor company.  By having a claim 
to three high tech sectors, AFFX is fast becoming a must own 
stock for any Mutual Fund that specializes in these sectors.
When we started AFFX as a play three weeks ago we mentioned 
that the original breakout above $130 implied a run to $260.
We have also noticed that AFFX seems to trade in accordance 
with the psychologically important support and resistance 
levels.  Last week when AFFX closed nicely above $200 it 
rallied straight to $250, found a little resistance at $250 
pulled back, gathered strength and moved forward again to 
close nicely above the $250 level.  If the market stays 
healthy next week we could see AFFX rally to the next level 
of $300.  Having said that, be careful.  AFFX is an extremely 
volatile stock and should only be considered a play for investors 
who can monitor the position closely.  Support levels can first 
be found at $250 then $240 then all the way back at $200.  
Friday's high print of $271.13 is a resistance point that needs 
to be taken out for the stock to keep its incredible run going.

How many times have we seen an analyst raise their target 
price on a high flying stock only to watch the stock take out 
the new target within days?  Talk about an ego boost!  CS 
First Boston raised their target price on AFFX to $250 from 
$150 on Wednesday.  The leader of the Genomics race is Celera, 
which announced that it has completed 90% of the mapping 
project.  If this news brings more companies into the research 
fold then Affymetrix stands to benefit from the sale of its 
research tools.  One recently announced new client for AFFX 
was Novartis.  When looking at the options available please 
note that at the time of writing this report there was almost 
no open interest in the near-the-money calls.  This is due to 
both the stock's very quick rally and Friday's expiration.  
Look for new strikes to begin trading on Monday.

BUY CALL FEB-230 FUE-BF OI=0 at $47.75 SL=37.25
BUY CALL FEB-240*FUE-BH OI=0 at $42.25 SL=33.00 Fri. vol=19
BUY CALL MAY-220 FUE-ED OI=0 at $64.25 SL=50.00
BUY CALL MAY-230 FUE-EF OI=0 at $58.38 SL=45.50
Picked on Jan 2nd at   $184.75    P/E = N/A
Change since picked     +68.88    52-week high=$271.13
Analysts Ratings     3-5-2-0-0    52-week low =$ 31.00
Last earnings 10/99  est=-0.28    actual=-0.21
Next earnings 02-03  est=-0.20    versus=-0.31
Average Daily Volume  =  473 K
Chart = http://quote.yahoo.com/q?s=AFFX&d=3m 


GMST - Gemstar International $79.88 (+3.06)(+11.31)

Gemstar develops, markets and licenses proprietary 
technologies and systems aimed at making technology user-
friendly for consumers under the VCR Plus+ name.  Gemstar is 
a leading provider of electronic program guide services, which 
allow users to view a television program guide on screen, 
obtain details about a show, sort shows by themes or 
categories and select shows for tuning or recording, all 
through remote control.  Gemstar's primary source of revenues 
has been license fees paid by consumer electronics 
manufacturers and publications for the licensing of the VCR 
Plus+ technology and the right to print the PlusCode Numbers.

Gemstar has been putting itself into position to become a 
household name in the world of home electronics.  It took the 
company years to get its proprietary technology accepted and 
now that it has been accepted, GMST is ready to reap the 
rewards.  Recently, GMST was added to the NASDAQ 100 thereby 
validating the claim that it is one of the leading technology 
stocks trading today.  Many of today's stock market leaders 
are very recent additions to the NASDAQ 100 and GMST is one of 
only three foreign companies in the Index.  The long-term 
story for Gemstar that has investors buying the stock is the 
belief that the company will be one of the leaders in the 
development of fully interactive television.  GMST broke 
sharply above a downtrend that saw the stock drop from $80 to 
$60 during the first week of hangover selling.  A five day 
rally ensued, resulting in the establishment of a new high at 
$88.50, followed by another round of profit taking.  Now what?  
It looks like GMST has found some nice support around $76.  If 
that support fails due to a sideways market next week look for 
more support around $72.  A period of consolidation might be 
exactly what GMST needs to gather strength for the next run at 
new highs.  If the stock starts the week with strength look 
for new highs to be tested if GMST trades above $82.

By adding the two leading "electronic book" companies, NuvoMedia 
and Softbook Press in a stock transaction, Gemstar is becoming 
a powerful new age media player.  GMST already owns one of the 
largest publications in the world, TV Guide.  The battle for 
control of the new age of television got a little more 
interesting when GMST filed suit against TiVo for allegedly 
infringing a patent on its interactive TV program guide.
BUY CALL FEB-70 GST-BN OI=1641 at $13.50 SL=10.50
BUY CALL FEB-75*GST-BO OI=4363 at $10.13 SL= 7.50
BUY CALL FEB-80 GST-BP OI=1113 at $ 7.13 SL= 5.25

SELL PUT FEB-75 GST-NO OI= 231 at $ 4.38 SL= 6.00
(See risks of selling puts in play legend)

Picked on Jan 11th at    $70.63    P/E = 99
Change since picked       +9.88    52-week high=$88.50
Analysts Ratings      7-0-0-0-0    52-week low =$13.88
Last earnings 10/99   est= 0.09    actual= 0.09
Next earnings 02-15   est= 0.10    versus= 0.08
Average Daily Volume = 1.50 mln 
Chart = http://quote.yahoo.com/q?s=GMST&d=3m


AES - AES Corp. $80.00 (-3.25)

AES is a leading global power company comprised of competitive 
generation, distribution and retail supply businesses.  The 
company's generating assets include interests in one hundred 
and nineteen facilities totaling over 42 gigawatts of 
capacity.  AES' electricity distribution network has over 
940,000 km of conductor and associated rights of way.  In 
addition, through its various retail electricity supply 
businesses, the company sells over 110,000 gigawatt hours per 
year to over 15 million end-use customers.

Surprised to see a utility company profiled in these pages?  We 
never discriminate against a company that looks primed to give 
us some profits.  There are a lot of NYSE stocks that seem to 
be going nowhere so far this year and AES is an exception.  
AES' stock has increased over 12% in three weeks.  A lot of 
"safe" money seems to be flowing into companies like AES.  One 
story that has been driving the shares of utility companies 
recently is deregulation.  AES is one of the strongest in the 
industry and stands to benefit from this continuing development.  
Our main interest in AES is technical so let's look at the chart.  
On January 14th, AES established a new high of $83.25.  AES 
subsequently pulled back and established a very nice 2 day base 
at $77.50.  A break above that base on Friday implies that the 
stock should take a look at the old high and possibly trade 
through it.  A follow through rally to at least $90 is not out 
of the question.  We can find first support at $78 which might 
be a good entry point if we get a pullback on Monday.  An open 
above $80 would be bullish for a run to $83.25.  If for some 
reason the stock falls below the $77.50 point you should probably 
avoid a bullish position until support is re-established.

On January 5th, Warburg Dillon Read raised their price target 
to $95 from $77.  The target is based on 25 times estimated 
2001 earnings.  The research report also noted that AES' 
Brazilian investments have recovered nicely since the currency 
devaluation.  The analyst re-iterated a "Strong Buy" 

BUY CALL FEB-70 AES-BN OI=1547 at $11.25 SL=8.75 
BUY CALL FEB-75*AES-BO OI= 406 at $ 6.88 SL=4.75
BUY CALL FEB-80 AES-BP OI= 219 at $ 3.75 SL=1.75
BUY CALL FEB-85 AES-BQ OI=  20 at $ 1.81 SL=0.75

Picked on Jan 20th at  $80.00    P/E = 71
Change since picked     +0.00    52-week high=$83.38
Analysts Ratings    9-5-2-0-0    52-week low =$32.81
Last earnings 10/99 est= 0.50    actual= 0.50
Next earnings 02-03 est= 0.59    versus= 0.49
Average Daily Volume =  786 K 
Chart = http://quote.yahoo.com/q?s=AES&d=3m


TWX - Time Warner $91.13 (+7.88)

Time Warner is the world's largest media and entertainment
company with revenues in excess of $23 billion.  The company
is in every area of the media business, from publishing and
music to movies and cable TV.  Its portfolio includes Time Inc.,
Warner Music Group, Home Box Office (HBO), and Warner Cable.
TWX also owns cable TV networks (CNN, TBS, TNT) and other
properties from Mad Magazine to the Atlanta Braves.  America
Online (AOL) recently announced that it is buying TWX in a
$178 billion stock transaction.

This is a play on the merger of TWX with AOL.  Although
investors severely punished AOL after announcement of the
merger on January 10th, $60 has emerged as strong support
(AOL closed at $65 on Friday).  When the deal was announced,
TWX shares jumped as high as $102, but then fell back as
investors began to digest the news.  Once investors wake up
and realize that the deal is good for both companies, shares
should start marching up nicely.  We want to take advantage
of the recovery in AOL (as the selling looks like it was
overdone) and we can get more bang for our buck from TWX.
There are 1.75 outstanding shares of AOL for each share of
TWX (and in this merger-of-equals) so TWX shares will move 
faster.  After the announcement, TWX declined to about $78, 
where it now has strong support.  It began moving up on Jan 13th
and since then has shown us a nice pattern of higher-highs
and higher-lows.  The 10-dma has moved up to $84, which should
provide good support going forward.  Any pullback near this
level with a corresponding bounce, would make for an excellent
entry point.  If the stock remains strong, wait for it to move
convincingly through the 52-week high of $92.25 before opening
a new position.  Currently TWX has earnings scheduled for
February 1 (unconfirmed).

TWX and AOL have been hiring teams of lobbyists to minimize
any potential political complications to their merger.  AOL
is highly motivated (by a $5.4 billion fee for backing out)
to avoid a repeat of the criticism leveled at the CBS and
Viacom merger by the Senate Judiciary Committee last October.
AOL's reported strong earnings last week with a record 1.8
million new members last quarter.

BUY CALL FEB- 90*TWX-BR OI=5609 at $6.50 SL=4.75
BUY CALL FEB- 95 TWX-BA OI=5977 at $4.25 SL=2.50
BUY CALL FEB-100 TWX-BB OI= 733 at $2.81 SL=1.50
BUY CALL MAR- 95 TWX-CA OI= 532 at $7.38 SL=5.50
BUY CALL MAR-100 TWX-CB OI=1228 at $5.63 SL=3.75

Picked on Jan 23rd at    $91.13     P/E = 142
Change since picked       +0.00     52-week high=$102.00
Analysts Ratings     9-10-0-0-0     52-week low =$ 58.50
Last earnings 10/99   est= 0.04     actual=  0.07
Next earnings 02-01   est= 0.16     versus= -0.17
Average Daily Volume = 1.17 mln
Chart = http://quote.yahoo.com/q?s=TWX&d=3m


DISH - Echostar Communications $96.25 (+6.00)

Located in Littleton, Co is the second-largest provider of
satellite broadcasting.  EchoStar operates the DISH Network
and offers more than 300 channels of digital TV and audio
programming.  They have over 3 million subscribers and also 
provide satellite delivery of local network stations in 
several large markets.  Their Technologies Corp. designs, 
manufactures and distributes DBS set-top boxes and antennas 
and other digital equipment.  DISH formed a partnership with
Microsoft to provide WebTV access through its DBS system.  
They compete with industry heavy-weights DIRECTV, Time Warner,
and AT&T Broadband & Internet Services.

We welcome DISH back to our list of plays.  DISH had a 
fantastic start to the new year, making a new 52-week high
at $102.  Profit-taking then began at the Nasdaq, and for 
DISH, as the communications company saw the price of their
shares decline to a strong support level at $80.  Since then
DISH has spent time consolidating.  Last Monday DISH began
an accent to higher prices, with momentum gaining as the week
went on.  Volume the last two days of the week picked up 
as well.  We believe DISH is poised to break out over the
century mark, and mount an assault on the old high.  With the
passage of satellite TV legislation by Congress last December,
DISH can now offer cable customers an affordable alternative
by offering local programming.  This Wednesday DISH announced 
they will offer local channels to Houston and Kansas City,
in addition to the 20 cities already in the loop.  The balance
of the month may be choppy ahead of the Fed meeting in early 
February.  We believe the momentum behind the current move will 
continue.  Should we see a pullback next week, DISH will find 
intraday support at $94 and $91.  The 5-dma is seen at $93.15, 
with the 10-dma back at $89.70.  If we see continued strength 
in DISH, we would look to enter this play.  We feel DISH is 
very close to breaking out.  A close over $100 would be the 
confirming factor.

Tuesday DISH declared a quarterly dividend on the company's
6 3/4% Series C Preferred Stock.  Also DISH announced that 
Castle Cable Services, a private cable company is installing
the first of EchoStar's Quadrature Amplitude Modulation 
systems for multiple dwelling units in North America at the 
Avalon Towers in San Francisco, California.

BUY CALL FEB- 90 UAB-BR OI= 313 at $12.13 SL= 9.50
BUY CALL FEB- 95*UAB-BC OI= 536 at $ 9.63 SL= 7.38
BUY CALL FEB-100 UAB-BD OI=1338 at $ 7.25 SL= 5.50
BUY CALL FEB-105 UAB-BE OI= 539 at $ 5.38 SL= 3.50

SELL PUT FEB- 85 UAB-NQ OI= 103 at $ 3.25 SL= 5.00
(See risks of selling puts in play legend)

Picked on Jan 23rd at    $96.25    P/E = N/A
Change since picked       +0.00    52-week high=$102.00
Analysts Ratings      9-6-1-0-0    52-week low =$ 10.75
Last earnings 11/99   est=-0.48    actual=-0.55 surprise=-14.6%
Next earnings 03-01   est=-0.62    versus=-0.67
Average daily volume = 1.95 mln
Chart = http://quote.yahoo.com/q?s=DISH&d=3m


Our LEAPS portfolio continues to give us some nice gains.  The
VIX closed at 22.66, so waiting for it to rise will provide
better entries.  The laggards in our portfolio like LU and GTW,
may be giving us some nice entry points.  Speaking of entry
points, AOL looks like it is recovering from the merger-related
selloff.  Now would be a good time to start buying into this
one while it's cheap.  We started coverage of TWX in the Calls
section this weekend.  The leverage described there could also
be applied to the AOL LEAP play.  EMC has been a nice play, and
since earnings come out Wednesday morning, now would be a good
time to consider taking some profit off the table.  Decide for 
yourself if you want to hold over earnings, it depends on your 
investment objective.  All in all, we continue to be pleased 
with the market, but watch out for the typical post-earnings 
market dip that may be approaching.   

Current Plays


EMC     11/07/99  JAN-2001 $80  ZOH-AP at $51.50   $15.38  234.85%
                  JAN-2002 $90  WUE-AR at $54.75   $19.00  188.16%
GPS     11/07/99  JAN-2001 $40  ZGS-AH at $12.88   $ 5.75  124.00%
                  JAN-2002 $45  WGS-AI at $14.88   $ 7.88   88.83%
IBM     11/07/99  JAN-2001 $100 ZIB-AT at $33.50   $13.63  145.78%
                  JAN-2002 $110 WIB-AB at $36.75   $16.50  122.73%
CSCO    11/14/99  JAN-2001 $80  ZCY-AP at $45.25   $19.13  136.54%
                  JAN-2002 $90  WIV-AR at $46.50   $22.00  111.36%
GE      11/21/99  JAN-2001 $150 ZGR-AU at $20.88   $16.25   28.49%
                  JAN-2002 $150 WGE-AU at $31.63   $25.50   24.04%
NT      11/28/99  JAN-2001 $75  ZOO-AO at $40.88   $22.25   83.73%
                  JAN-2002 $75  WNT-AO at $49.50   $30.25   63.64%
VOD     12/05/99  JAN-2001 $50  ZAT-AJ at $15.63   $10.75   45.40%
                  JAN-2002 $50  WHV-AJ at $20.25   $15.00   35.00%
KM      12/05/99  JAN-2001 $10  ZKM-AB at $ 2.81   $ 2.50   12.40%
                  JAN-2002 $15  WKM-AC at $ 2.25   $ 1.75   28.57%
ADBE    12/12/99  JAN-2001 $65  ZAE-AM at $14.25   $15.00  - 5.00%
                  JAN-2002 $70  WAE-AN at $18.50   $20.38  - 9.22%
TXN     12/12/99  JAN-2001 $110 ZTN-AB at $25.50   $22.25   10.11%
                  JAN-2002 $120 WGZ-AD at $30.75   $28.50    7.89%
NXTL    12/19/99  JAN-2001 $90  ZFU-AR at $44.75   $23.50   90.43%
                  JAN-2002 $100 WFU-AT at $50.25   $27.25   84.40%
SUNW    12/19/99  JAN-2001 $80  ZJX-AP at $23.38   $17.63   32.62%
                  JAN-2002 $90  WJX-AR at $28.50   $22.00   29.55%
AOL     12/23/99  JAN-2001 $90  ZKS-AR at $ 9.13   $20.13  -54.65% 
                  JAN-2002 $100 WAN-AT at $13.75   $25.63  -46.35%
LU      11/14/99  JAN-2001 $80  ZEU-AP at $ 4.38   $12.88  -65.99%
                  JAN-2002 $90  WEU-AR at $ 8.25   $16.13  -48.85%
        01/09/00  JAN-2001 $50  ZEU-AJ at $13.50   $13.63    0.95%
GTW     11/21/99  JAN-2001 $90  ZWB-AR at $ 7.75   $17.75  -56.34%
                  JAN-2002 $100 WGB-AT at $12.63   $22.50  -43.87%
        01/09/00  JAN-2001 $60  ZWB-AL at $16.75   $15.88    5.48%
MOT     01/09/00  JAN-2001 $125 ZMA-AE at $41.38   $31.13   32.93%
                  JAN-2002 $125 WMA-AE at $52.25   $41.50   25.90%
CY      01/16/00  JAN-2001 $40  ZSY-AH at $ 9.00   $ 9.13  - 1.42 
                  JAN-2002 $40  WSY-AH at $12.75   $12.63    1.03
To review the play description on any of our current plays, 
go to the LEAPS section for the date the play was added

New Plays

No new plays with the VIX so low and a potential market dip 


SLR $78.38 Solectron has provided a couple of nice runs from
support at $80 up to $95, but we are concerned about it in the
short-term.  On Friday it closed below long-term support and
we are adding it to our put list this weekend.  The day after
the current slide began, the company announced they would split
their stock 2-for-1, payable February 23rd.  The company
fundamentals still look very strong, and once the buyers return,
we expect SLR to return as a LEAP play.


Put plays can be very profitable but have a larger risk than call 
plays. When a stock is falling the entire investment community 
(except the shorts) is hoping it will reverse and start back up. 
The company management is also doing everything they can to shore 
up their stock price. The company issues press releases, brokers 
talk it up, analysts try to put a positive spin on everything. 
Then of course there is the death knell, the "buy recommendation" 
simply because the price has dropped to some level that analysts 
feel attractive again. Buyers who like the stock wait until it 
appears a bottom has been reached and then jump on it in a feeding 
frenzy. They may already have a large position and are averaging 
down. Many factors can stop a free falling stock in mid drop.


IIJI - Internet Initiative Japan, Inc. $81.63 (-3.88)(-11.50)

Founded in 1992, IIJI offers a comprehensive range of Internet 
access services and Internet-related services to customers, 
including corporations and other Internet service providers, 
in Japan.  IIJI offers its services via one of the largest 
Internet network backbones in Japan as well as between Japan 
and the United States.

We were waiting for IIJI to make up its mind as to what 
direction it was going to head.  Friday was encouraging for 
our put play, as IIJI dropped $3.75 for the session.  IIJI 
tested and held support at $80 several times throughout the day. 
As we have mentioned, this level seems to be providing solid 
support and timing new entries around this current level could 
be risky.  We are obviously looking for a drop below this level 
to indicate the continuing negative momentum for this put play. 
Otherwise, new entries are really only going to be feasible on 
any moves up held back by resistance.  This could be risky and 
it will be imperative to use your stops if you are going to try 
and target shoot your way in.  We saw a pick up in Friday's 
volume, as it was nearly double over Thursday's, which was a 
nice bearish indication.  IIJI looks to have immediate 
resistance overhead at $82 backed by its 5-dma of $84.  Though 
we have not been able to confirm the date yet, there will most 
likely be an upcoming earnings announcement sometime around 
February 15th.  The possibility of an earnings run makes a 
breakthrough the $80 level even more important for the 
continuance of our put play.  Exercise caution.  On Friday, 
IIJI announced that it will be expanding service areas for 
high-speed dialup access from 30 points, to 34.  This will 
allow dial-up customers more convenient access to wider 

***Editor's note:  IIJI put premiums currently appear grossly 
over-priced so proceed with caution.***

BUY PUT FEB-80*IUJ-NP OI=87 at $10.63 SL=8.00
BUY PUT FEB-75 IUJ-NO OI=38 at $ 8.00 SL=6.25

Average Daily Volume = 538 K
Chart = http://quote.yahoo.com/q?s=IIJI&d=3m


FD - Federated Department Stores $43.88 (-4.00)(-2.94)

Federated Department Stores, Inc. is the nation's largest 
operator of department stores, located in all major regions
of the United States.  Federated operates 403 department 
stores in 33 states as of January 1, 2000.  Additionally, 
in March of 1999 Federated acquired Fingerhut, which together 
with Bloomingdale's By Mail, Macy's By Mail, Macys.Com and 
certain other direct marketing activities comprises its 
direct-to-customer businesses. 

Investors seem to be finding that the shares of FD just don't 
fit right in their portfolio anymore and are heading for the 
returns counter.  Friday was another day downhill for FD, as 
it dropped over $2.  FD found resistance for the day at $44 
and closed the session just pennies shy of this level.  We did 
see nice volume backing FD's declines last week, which seems 
to be indicative of the lack of investors wanting to own this 
stock.  As we mentioned, FD did find resistance at $44 on 
Friday and looks to have additional resistance to conquer at 
$46 and $48.  FD's next level of support looks to be right 
around $42-$41 followed with a bit of support in the $39 
neighborhood.  Should we get a breakthrough here, we could 
be cleared for a healthy fall.  As far as new entries go, 
watch for any intraday rallies backed with holding resistance 
and try and target shoot your way in.  The $48 level of 
resistance looks to be rather solid and any moves up and bounce 
from this level could offer some nice opportunities.  Though 
FD claims that E-Commerce is going to prove to be the growth 
segment of their business, investors seem to be concerned about 
the effect FD's near-term Internet related spending could have 
on the stock.  This news could continue to plague the shares 
for a while.   

BUY PUT FEB-50 FD-NJ OI= 33 at $5.13 SL=3.25
BUY PUT FEB-45*FD-NI OI=680 at $3.00 SL=1.50

Average Daily Volume = 1.22 mln
Chart = http://quote.yahoo.com/q?s=FD&d=3m


WCOM - MCI WorldCom, Inc. $41.63 (-4.94)(-0.63)(-5.88)

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.

Like a punch-drunk boxer, WCOM is on the ropes again, setting
another 52-week low on Friday.  On triple the average daily
volume, our put play went down all day Friday, pummeled by the
now-familiar double-whammy of reduced revenues and merger
concerns.  Competitor AT&T announces earnings on Tuesday before
the open and is expected to see reduced long-distance revenues
due to its ongoing rate war with WCOM and Sprint.  This concern
is spilling over to shares of WCOM, and the results on Tuesday
are likely to add further downside pressure.  The news on the
merger with Sprint is also bearish.  Sprint is close to an
agreement on the divestiture of its interest in the unprofitable
Global One telecommunications joint venture, and the value of
the cash sale is now expected to be closer to $5 billion than
the originally estimated $10 billion.  WCOM will report its
earnings on February 10, but we don't expect any help from
that corner.  Going forward, we expect $45 to provide serious
resistance, as this is now the location of the 10-dma.  Support
is harder to find, as WCOM has not traded this low since late
1998.  Using historic levels, we may see support in the $37-38

BUY PUT FEB-45*LDQ-NI OI=8791 at $5.13 SL=3.25
BUY PUT FEB-40 LDQ-NH OI=4020 at $2.19 SL=1.00

Average Daily Volume = 18.47 mln
Chart = http://quote.yahoo.com/q?s=WCOM&d=3m


CMGI - CMG Information Services Inc $118.25 (-3.69)(-15.56)

CMGI invests in, develops, and integrates advanced Internet, 
interactive, and database management technologies.  The 
company's venture capital arm is called @Ventures and boasts a 
portfolio of over 30 Internet companies such as Lycos and Raging 
Bull.  One of the more prominent additions to its portfolio is a 
83% acquisition of the search engine, Alta Vista.  The majority 
of CMGI's revenues (80%) is derived from fulfillment and mailing 
list services.  

CMGI is a "post-split" blues play.  Initially the culprit was 
broad interest-rate concerns and typical pre-split profit- 
taking.  But following the actual 2:1 split on January 12th, 
CMGI continued its descent and slipped under the 30-dma (now 
at $126.17).  Our Target is for a 50% retracement of the 
extraordinary gains made since mid-November.  Take a look at a 
chart and you can see this price level is in-line with the 50-
dma (now at $103.30).  The volume has been strong too sometimes 
double or triple the ADV.  This week $123 and $125 formed a 
shield of resistance while an intraday low of $112.50 serves as 
bottom support.  The intraday swings offer a multitude of entry 
opportunities, but let's make no mistake here.  CMGI is a 
volatile Internet play that requires your undivided attention.  
In other words, be prepared for a quick turnaround.  In the news 
on Tuesday, CMGI announced its acquisition of Green Witch, LLC, 
a leader of open source Internet radio broadcast solutions.  
Financial terms were not available.  And on Thursday, CMGI 
announced another acquisition.  By way of one of its majority 
owned companies, Engage, a tracker of online customers' tastes, 
it is acquiring Adsmart, an Internet ad buyer, and Flycast, an 
Internet ad seller, in a $2.6 bln internal stock deal.  The 
strategy is to form a single organization to deliver online 
advertising and marketing.  The deal is expected to be closed 
during the 2Q of 2000.  As a result of this pact CMGI's holdings 
will exceed $11 bln dollars, an astonishing eight-fold increase 
from last year.

BUY PUT FEB-125 GCD-NE OI=1425 at $17.38 SL=13.50
BUY PUT FEB-120 GCD-ND OI=1162 at $12.88 SL=10.50
BUY PUT FEB-115*GCD-NC OI= 575 at $10.88 SL= 8.75

Average Daily Volume = 5.75 mln
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m


RLM - Reynolds Metals $69.38 (-4.13)

Reynolds Metal is the #3 aluminum producer in the world.  
RLM may be best known for its aluminum foil, but they also 
serve customers in the aluminum fabricating, packaging and 
consumer, construction, distribution, and automotive markets.  
The company has over 100 operations in 24 countries.  In the 
future, it's expected that Reynolds Metal will be acquired by 
Alcoa (AA) pending a decision by the governments anti-trust 

A steady downdraft foreshadowed a post-earnings decline despite 
the company's solid earnings report of $1.09 p/s versus $0.76 
p/s same quarter a year ago on Wednesday.  To add salt to the 
existing wound, investors continued to shred the share price up 
on concerns that Alcoa's decision to boost aluminum production 
by 7% before the end of the year would ultimately drive down the 
prices and profits of Reynolds.  Although from a fundamental 
view point, analysts agree Alcoa's plan to increase production 
is positive.  Nonetheless, RLM was already suffering a 
significant decline from an $82 high on January 10th, and the 
investor's negative reaction seem to seal its fate.  The stock 
fell a sharp $5.13, or 7.1% on Thursday.  Friday's performance 
indicated overhead resistance is establishing a pattern of 
lower-highs and bottom support is waggling between $66 and $67.  
Beyond that the 200-dma ($62.97) marks the next line of 
opposition for RLM.  Friday may have afforded entry points into 
this put play, however it's imperative to confirm direction and 
sentiment before opening a new position.  

BUY PUT FEB-70*RLM-NN OI=2806 at $4.13 SL=2.50
BUY PUT FEB-65 RLM-NM OI=2270 at $2.13 SL=1.00

Average Daily Volume = 500 K
Chart = http://quote.yahoo.com/q?s=RLM&D=3m


MU - Micron Technology $67.13 (-6.13)

Micron designs, develops, makes and markets semiconductor 
memory products.  Also known as DRAMs.  MU also manufactures 
entire PC systems via 64% owned Micron electronics (MUEI).  
Production includes a wide range of memory intensive, high 
performance desktop and notebook PC systems and multiprocessor 
network servers.  Brand names include GoBook ClientPro, 
Millenia and Transport Trek.

Micron's performance, or lack there of, during Friday's 
session gave us the go ahead to initiate this put play.  MU 
broke through $70, leaving a good deal of support behind on 
its way down, including the combined support of its 10 and 
30-dmas at $72.50.  MU had strong volume pushing it down, a 
good indication that there are plenty of investors looking to 
unload this stock.  This is a negative momentum run, pure and 
simple.  $65 managed to catch MU briefly on Friday, though we 
see the real support coming in to play right around $60.  $70 
could hold as resistance going forward.  MU has additional 
resistance overhead right around $71, where its 5 and 50-dmas 
have converged.  MU demonstrated weak relative strength 
throughout the majority of last week.  While the Semiconductors 
in general had a fairly decent week, MU continued to steadily 
decline.  Another reason we like this put play, is that MU 
continues to go down despite positive news.  For example, on 
Monday, an announcement was made the MU along with five other 
companies including Intel (INTC), were working together to 
further develop high-performance DRAM chip technology.  You 
would think that an announcement tying MU in with a name like 
INTC would have a positive impact on the stock.  Not the case 
here though.  Another example was an upgrade by ABN AMRO from 
Outperform to Buy.  Apparently, investors weren't even 
interested in buying the upgrade, as MU continued right on 
downhill.  Watch for a drop below $65 to confirm continuing 
negative momentum.  For new entries, try and enter toward the 
earlier part of the session, as typically MU opens near its 
high and closes near its low.  

BUY PUT FEB-70*MU-NN OI=10325 at $8.63 SL=6.50
BUY PUT FEB-65 MU-NM OI= 1127 at $5.88 SL=4.25  

Average Daily Volume = 5.15 mln
Chart = http://quote.yahoo.com/q?s=MU&d=3m


RMBS - Rambus Inc $75.38 (-14.25)

Rambus Inc. is based in Mountain View, Calif.  They develop 
and licenses high-speed chip-to-chip interface technology that
enables semiconductor memory devices to keep pace with faster 
generations of processors and controllers.  Providers of 
Rambus-based integrated circuits include the world's leading 
DRAM, ASIC and PC controller manufacturers.  Currently, eight 
of the world's top-10 semiconductor companies license Rambus 

We picked RMBS as a put play this week and you can easily see
the reason why.  The decline pattern is very easy to follow, 
but first let's talk numbers.  They have now broken through 
support of $77, which makes the next support level at $66-$68.  
The close below the 50-dma ($76.08) on Friday is another good 
sign.  The 50-dma should now act at resistance.  Also note the 
strong intraday top on RMBS at $77 during the day Friday.  Now 
lets talk surroundings.  The Nasdaq.  It has been rising all week  
with no effect on RMBS they have been declining all week.  And 
RMBS provides no help for themselves with earnings coming out 
that only meet analysts expectations.  Also, RMBS is suing 
Hitachi for a patent violation.  With all that in mind it looks 
like a downward trend to us.  Volume on Friday was high which 
shows that investors are helping with the decline.  Watch the 
price Monday and since RMBS tends to have wide trading ranges 
use that to your advantage and get in on the high side.  A good 
idea for stops is to place them slightly above the 10-dma in 
case RMBS reverses course.

BUY PUT FEB-80 BNQ-NP OI=708 at $9.50 SL=7.00
BUY PUT FEB-75*BNQ-NO OI=905 at $6.75 SL=4.75

Average Daily Volume = 1.63 mln
Chart = http://quote.yahoo.com/q?s=RMBS&d=3m


SLR - Solectron $78.38 (-5.75)

Solectron is a premier global provider of customized 
manufacturing services rendering electronic solutions for 
original equipment manufacturers (OEM's).  They have won the 
Malcolm Baldrige Award for their manufacturing excellence 
twice.  Solectron has a wide range of clients including Cisco, 
Hewlett-Packard, and Mitsubishi.  

While we don't have anything specifically in the news that would 
explain the negative chart pattern, we do know that investors 
have moved on to the sex appeal of high-flying companies offering 
a lick and a promise.  Having predictable, nonetheless growing, 
earnings seems to be the kiss of death that brings wild price 
gyrations back to earth.  With nothing left to argue about, it's 
pretty tough for an analyst to raise a price target from $350 to 
$600 just because he/she can spin the story.  The fact is SLR is 
an excellent company with excellent (and growing) earnings.  Only 
the stock is in a slump now.  As opportunists, our job is to 
capitalize on the sentiment.  Looking at the technical chart, 
SLR was doing its best imitation of a yo-yo, having encountered 
resistance at $95 only to regain support at $80.  SLR fell 
through support at mid-day and couldn't get back over $79 (new 
resistance?).  The crowning blow was the selling of over 635K 
shares in a block trade at $78 after the bell on Friday.  Ouch!  
That's rough on a stock with 1.6 mln as its ADV.  Needless to 
say, RSI, stochastic and MACD are deep in negative territory.  
The next level of support is around $72 and could easily move to 
that level in an overall southerly market move (not out of the 
question with Fed meetings in the offing).  To be sure the move 
south is for real, look for a mild recovery say to $79, then 
another bounce south on increasing volume.  That will be the key.

News that may account for the recent downtrend is that IBM 
awarded Celestica its server business, and SLR apparently had 
some Q1 inventory issues.  Nonetheless, Lehman Bros upgraded the 
stock to Outperform from Neutral.  That didn't save SLR.  Not 
even an earnings run will save this stock since they won't 
announce until March 13, according to Zack's

BUY PUT FEB-80*SLR-NP OI=647 at $6.50 SL=4.75
BUY PUT FEB-75 SLR-NO OI= 42 at $3.88 SL=2.25

Average Daily Volume = 1.6 mln
Chart = http://quote.yahoo.com/q?s=SLR&d=3m

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The Option Investor Newsletter             1-23-2000
Sunday                        5 of 5


Covered-Calls: The Correct Approach...

Understanding how various strategies work can often be the most
difficult task for a new trader. Fortunately, the advantages of
most option trading techniques are well worth the time devoted to 
learning how to use them. Covered-call writing is a stock options
trading strategy that investors utilize when they are striving for
a conservative risk profile along with favorable profit potential
in neutral to bullish market environments.

Investors usually write covered-calls to generate monthly income,
collecting the premium for the sale of an option against a stock
position in his or her portfolio. This conservative strategy can
be used effectively on all type of stocks as long as the outlook
(fundamental or technical) for the issue is favorable. One of the
advantages to this technique is that it allows new investors to
learn successful trend-trading techniques with a small margin of
safety while managing the combined positions for upside profit
and downside risk.

The underlying basis for this strategy is a high probability of
limited profit. The major advantage to a novice trader is that the
technique is easy to use and the resultant position is far more 
conservative than outright stock ownership. By writing an option
on the stock, the investor has insured the issue against a future
drop in value. Unfortunately, the downside risk in ownership is
not eliminated, only reduced. In addition, the cost of opportunity
or potential upside movement can be substantial. There are other,
more subtle benefits and disadvantages but these are the most
common reasons that investors choose or avoid this technique.

The reason most long-term investors do not write covered options
is the possibility of unrealized gains when the share value rises
significantly or the loss of the underlying issue in assignment.
Both of these concerns have merit but statistics suggest that a
systematic program of covered writing outperforms stock ownership
on a consistent basis. If a trader is more concerned about stock
ownership, or is extremely bullish, or worried about capping his
profit potential, then perhaps a different philosophy should be 
employed -- as in just buying the call, or just buying the stock
itself. Such a philosophy when writing calls, is more like being
a stockholder and trading options against one's stock position,
rather than actually participating in a covered writing strategy.

The key to success with this technique lies in one objective; a 
reasonable flow of monthly income with limited portfolio risk.
The focus of play selection should be to continually produce an
acceptable level of option premium while protecting against the
potential for downside losses. Issues that become unfavorable due
to changes in fundamental or technical characteristics must be
removed from the portfolio before they can generate significant
deficits. Catastrophic failures are not unavoidable but they can
be sufficiently managed to reduce the effects of the shortfall.

In the OIN's Covered-call portfolio, we follow this conservative,
"total return concept" when evaluating potential candidates. We
utilize overvalued premiums to generate maximum yield in the event
the share value declines. We target 5% monthly returns and view
the entire position as a single entity with respect to risk and 
probability of profit. Our track record suggests that this method
consistently produces a 35%-40% annual return on investment, in
all but the worst market conditions. For conservative investors,
that is a more than acceptable rate or return.  


Stock  Price  Last    Mon  Strike  Opt    Profit  ROI    Monthly
Sym    Picked Price        Price   Bid    /Loss          ROI

MCRE    7.56  12.50   JAN   7.50  1.31  *$  1.25  20.0%  14.5%
SPLH    8.44  12.25   JAN   7.50  1.81  *$  0.87  13.1%  11.4%
EMIS   19.88  39.00   JAN  17.50  4.50  *$  2.12  13.8%  10.0%
WSTL   10.75  17.00   JAN  10.00  1.88  *$  1.13  12.7%   9.2%
CBIZ   10.31   7.63   JAN   7.50  3.63  *$  0.82  12.3%   8.9%
FSII   10.69  18.00   JAN  10.00  1.94  *$  1.25  14.3%   8.9%
LGND   11.69  16.13   JAN  10.00  2.75  *$  1.06  11.9%   8.6%
NFO    14.38  21.56   JAN  12.50  2.94  *$  1.06   9.3%   8.1%
STRX    8.13   7.94   JAN   7.50  1.00  *$  0.37   5.2%   7.5%
AWEB   12.13  11.75   JAN  10.00  3.00  *$  0.87   9.5%   6.9%
NETA   25.13  27.19   JAN  22.50  3.63  *$  1.00   4.7%   6.7%
SCOC   17.88  20.19   JAN  15.00  4.13  *$  1.25   9.1%   6.6%
PILT   17.56  28.75   JAN  12.50  5.88  *$  0.82   7.0%   6.1%
ONHN   10.25   8.13   JAN   7.50  3.38  *$  0.63   9.2%   5.7%
ENER   11.81  16.88   JAN  10.00  2.06  *$  0.25   2.6%   5.6%
BAMM    9.81   7.81   JAN   7.50  2.75  *$  0.44   6.2%   5.4%
MWHS   15.06  18.25   JAN  12.50  3.25  *$  0.69   5.8%   5.1%
PILT   20.25  28.75   JAN  15.00  6.38  *$  1.13   8.1%   5.1%
RNBO   20.00  24.50   JAN  15.00  6.13  *$  1.13   8.1%   5.1%
NPLS   20.56  23.06   JAN  17.50  3.63  *$  0.57   3.4%   4.9%
TSCM   15.75  18.50   JAN  12.50  3.88  *$  0.63   5.3%   4.6%
NETS   28.00  25.25   JAN  22.50  6.63  *$  1.13   5.3%   4.6%
AGY    16.88  16.69   JAN  15.00  2.75  *$  0.87   6.2%   4.5%
EMIS   24.63  39.00   JAN  20.00  5.38  *$  0.75   3.9%   4.2%
CNCX   29.88  49.00   JAN  22.50  8.00  *$  0.62   2.8%   4.1%
ENMD   28.44  54.63   JAN  22.50  6.75  *$  0.81   3.7%   4.1%
SATH   12.69  11.94   JAN  10.00  3.38  *$  0.69   7.4%   4.0%
MESG   16.63  17.31   JAN  12.50  4.88  *$  0.75   6.4%   4.0%
BNYN   15.81  21.00   JAN  12.50  4.13  *$  0.82   7.0%   3.8%
BIDS    5.13   4.31   JAN   5.00  1.00   $  0.18   4.4%   2.7%
TTWO   16.31  11.88   JAN  12.50  4.63   $  0.20   1.7%   1.2%
BIDS    5.25   4.31   JAN   5.00  0.94   $  0.00   0.0%   0.0%
VDAT   13.50   9.13   JAN  10.00  3.88   $ -0.49  -5.1%   0.0%

CYOE    5.50   6.50   FEB   5.00  1.44  *$  0.94  23.2%  21.3%
TERA    4.41   7.06   FEB   5.00  0.50  *$  1.09  27.9%  20.2%
WDC     5.50   5.13   FEB   5.00  1.13  *$  0.63  14.4%  10.4%
GMGC    6.84   6.94   FEB   5.00  2.38  *$  0.54  12.1%   8.8%
GMGC    7.50   6.94   FEB   5.00  2.88  *$  0.38   8.2%   7.6%
ERTH    6.03   5.16   FEB   5.00  1.38  *$  0.35   7.5%   6.9%
CCUR   18.38  23.44   FEB  15.00  4.38  *$  1.00   7.1%   6.6%
ASFT   21.50  20.13   FEB  15.00  7.38  *$  0.88   6.2%   5.7%
HRC     5.81   6.38   FEB   5.00  1.13  *$  0.32   6.8%   5.0%
EAII   14.25  14.56   FEB  10.00  4.75  *$  0.50   5.3%   4.9%
MUEI   12.75  12.00   FEB  10.00  3.25  *$  0.50   5.3%   4.9%
PCMS   10.06  13.50   FEB   7.50  3.00  *$  0.44   6.2%   4.5%
HMK     9.88  11.69   FEB   7.50  2.81  *$  0.43   6.1%   4.4%
XICO   22.56  20.38   FEB  17.50  5.75  *$  0.69   4.1%   3.8%
IFCI   10.13  16.56   FEB   7.50  3.00  *$  0.37   5.2%   3.8%

*$ = Stock price is above the sold striking price.


The Friday rebound of Bid.Com (BIDS) looks promising. The issue
appears to have made another successful test of the August low.
The premiums in February and May are quite favorable. Visual Data
(VDAT) is still suffering from the its downgrade and earnings
report. A possible test of the October lows could be forthcoming.
Consider rolling down to the FEB-$7.50 call for a wash verses
cutting losses and moving on. The MAY-$7.50 is an alternative 
but that is a long time to tie up money for a small profit.
Century Business (CBIZ) just made it, but may not be called away
at $7.62. On Health Network (ONHN) enjoyed a nice rebound. No news
to explain the Take-Two Interactive Software (TTWO) drop Friday
and it wasn't a good sign that it broke its 50 dma on relatively
heavy volume. You may want to consider the break-even exit until
the reason is known.

January Positions Previously Closed:

Value America (VUSA), Summit Tech (BEAM).

OI - Open Interest
CB - Cost Basis (Price paid - Prem rec'd, the break-even point)
RC  - Return Called
RNC - Return Not Called (Stock Price Unchanged)

Sequenced by Company

Stock  Price  Mon Strike Option  Opt   Open  Cost    RC     RNC
Sym               Price  Symbol  Bid   Intr  Basis

CORL   22.13  FEB 15.00  ORU BC  7.75  195   14.38   4.3%   4.3%
DBCC    9.19  FEB  7.50  BQD BU  2.00  152    7.19   4.3%   4.3%
ESPI    9.22  FEB  7.50   AQ BU  2.19  953    7.03   6.7%   6.7%
GELX   20.38  FEB 17.50  GQX BW  4.00  140   16.38   6.8%   6.8%
GSTX   10.69  FEB 10.00  QGS BB  1.63  736    9.06  10.4%  10.4%
MESG   17.31  FEB 15.00  MUG BC  3.25  236   14.06   6.7%   6.7%
MSGI   19.13  FEB 15.00  UMS BC  4.75  666   14.38   4.3%   4.3%
VOYN   13.06  FEB 10.00  UOY BB  3.50  187    9.56   4.6%   4.6%
VTS    17.75  FEB 15.00  VTS BC  3.50  579   14.25   5.3%   5.3%

Sequenced by Return Not Called

Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

GSTX   10.69  FEB 10.00  QGS BB  1.63  736    9.06  10.4%  10.4%
GELX   20.38  FEB 17.50  GQX BW  4.00  140   16.38   6.8%   6.8%
ESPI    9.22  FEB  7.50   AQ BU  2.19  953    7.03   6.7%   6.7%
MESG   17.31  FEB 15.00  MUG BC  3.25  236   14.06   6.7%   6.7%
VTS    17.75  FEB 15.00  VTS BC  3.50  579   14.25   5.3%   5.3%
VOYN   13.06  FEB 10.00  UOY BB  3.50  187    9.56   4.6%   4.6%
CORL   22.13  FEB 15.00  ORU BC  7.75  195   14.38   4.3%   4.3%
DBCC    9.19  FEB  7.50  BQD BU  2.00  152    7.19   4.3%   4.3%
MSGI   19.13  FEB 15.00  UMS BC  4.75  666   14.38   4.3%   4.3%

Company Descriptions

CORL - Corel  $22.13  *** New Contracts ***

Corel is an internationally recognized developer of award-winning 
business productivity, graphics and operating system solutions on
the Windows®, Linux®, UNIX®, Macintosh® and Java(TM) platforms. 
Corel also develops market-leading, Web-based solutions including 
applications, contents, e-commerce and online services. Investors
appear to support Corel's earnings report even though a profit was
provided by a one time tax gain. The real news was on Friday with
the U.S. Department of Justice licensing of Corel WordPerfect® 
software - enough for a $3 dollar pop and a new January high. 
Though bullish, we prefer a cost basis near the December low. 

FEB 15.00 ORU BC Bid=7.75 OI=195 CB=14.38 RC=4.3% RNC=4.3%

Chart = http://quote.yahoo.com/q?s=CORL&d=1y


DBCC - Data Broadcasting  $9.19  *** Expansion ***

Data Broadcasting is a leading provider of real-time market data 
to the individual trader and investor. The company delivers real-
time stock quotes, financial news and information to three million
users via PCs, wireless FM, cable, satellite and the Internet 
(eSignal and cbs.marketwatch). Data Broadcasting is also one
of the principal investors in WhisperNumber.com. DBC continues to
expand its partnerships with several trading firms as it steadily
establishes itself in the investment community. Shareholders are
scheduled to vote Feb. 23 on the previously announced merger with 
Financial Times Asset Management. We favor the successful test of
last year's lows and a cost basis below the December support.

FEB  7.50 BQD BU Bid=2.00 OI=152 CB=7.19 RC=4.3% RNC=4.3%

Chart = http://quote.yahoo.com/q?s=DBCC&d=1y


ESPI - e.spire Communications  $9.22  *** CLEC Rally? ***

e.spire Communications is a leading integrated communications 
provider, offering traditional local and long distance, Internet
access and Web-hosting services, and advanced data solutions, such
as ATM and frame relay. e.spire's subsidiary, ACSI Network Tech. 
provides third parties, including other communications concerns, 
municipalities and corporations, with turnkey fiber-optic design, 
construction and project management expertise. Upgraded, downgraded,
new customer accounts, and the launch of e.spire XpressLink (DSL).
What to make of it all? How about a breakout above the 150 dma on
heavy volume reaching a new 5-month high? 

FEB  7.50  AQ BU Bid=2.19 OI=953 CB=7.03 RC=6.7% RNC=6.7%

Chart = http://quote.yahoo.com/q?s=ESPI&d=1y


GELX - GelTex Pharmaceuticals  $20.38  *** Drug Manufacturer ***

GelTex Pharmaceuticals develops polymer-based, non-absorbed 
pharmaceuticals that selectively bind and eliminate target
substances from the intestinal tract resulting in a systemic 
medical benefit. GelTex and Sankyo Pharma have signed agreements 
on the licensing of Cholestagel®  for the treatment of hyper-
cholesterolemia. GelTex submitted its NDA on Cholestagel in July
of last year and anticipates an FDA decision in mid-2000. Last
week GelTex reported a 16% jump in fourth-quarter revenues
and forecast solid earnings growth in line with expectations.
We favor the strong breakout in a hot sector. 

FEB 17.50 GQX BW Bid=4.00 OI=140 CB=16.38 RC=6.8% RNC=6.8%

Chart = http://quote.yahoo.com/q?s=GELX&d=1y


GSTX - GST Telecommunications  $10.69  *** Another CLEC ***

GST Telecommunications provides a broad range of integrated tele-
communications products and services including enhanced data and 
Internet services and comprehensive voice services throughout the
US. Facilities-based GST continues to focus on its western regional
strategy by anchoring its next generation networks in local markets
and connecting them via long haul fiber networks. An agreement (swap
fiber access plus cash) with Worldwide Fiber on Jan. 12 helped move 
GST's price above its 150 dma on heavy volume. GST also announced a
35% increase in sales and a 37% increase in installations compared 
to the previous quarter. Favorable speculation in a hot sector.

FEB 10.00 QGS BB Bid=1.63 OI=736 CB=9.06 RC=10.4% RNC=10.4%

Chart = http://quote.yahoo.com/q?s=GSTX&d=1y


MESG - MessageMedia  $17.31  *** New BUY Rating ***

MessageMedia is the leading provider of e-mail-based customer 
relationship management and direct marketing services. The Company
offers a comprehensive suite of outsource messaging services for 
information delivery, e-commerce services, permission-based direct 
marketing, ongoing customer communications and real-time customer 
feedback solutions using industry standard Internet protocols. 
MESG's clients include: Cisco, E*TRADE, AOL, Apple, Yahoo!, and
Microsoft, to mention a few. A buy rating and a $28.50 price target
from Robertson Stephens should make for favorable speculation. We
favor a cost basis near support as MESG consolidates. Earnings
are due next week.

FEB 15.00 MUG BC Bid=3.25 OI=236 CB=14.06 RC=6.7% RNC=6.7%

Chart = http://quote.yahoo.com/q?s=MESG&d=1y


MSGI - Marketing Services Group  $19.13  *** Trading Range ***

Marketing Services Group  is organized into two business divisions:
The Internet Group and The Direct Group. The Internet Group's 
mission is to acquire, invest in and incubate Internet companies. 
The Direct Group provides strategic planning, direct marketing, 
database marketing, telemarketing, telefundraising, media planning 
and buying. MSGi's revenues have grown from $16 million in fiscal
1996 to in excess of $100 million on an annualized basis. GE and 
CMGI both have positions in MSGI. The technicals continue to 
strengthen though we favor an entry point near support. Earnings
are due near February 14.

FEB 15.00 UMS BC Bid=4.75 OI=666 CB=14.38 RC=4.3% RNC=4.3%

Chart = http://quote.yahoo.com/q?s=MSGI&d=1y


VOYN - Voyager.net  $13.06  *** Need I say CLEC? ***

Voyager.net is the largest Internet service company focused in the
Midwestern US, with approximately 340,000 subscribers including 650
DSL subscribers. Voyager.net's focus is on providing quality, local
Internet services to customers in the Midwest, including smaller 
communities in the secondary and rural markets. Voyager.net recently
announced its plans to roll-out DSL-based broadband solutions in 40 
Midwest cities. Last week, Jefferies & Co. initiated coverage with a
buy rating. The spike in price in early January was due to a tender
offer by Growth Capital to purchase up to 1,500,000 shares of common
stock from stockholders of Voyager.net at $10.00 per share. Hmmmm.
OK. That's a reasonable strike price to sell.

FEB 10.00 UOY BB Bid=3.50 OI=187 CB=9.56 RC=4.6% RNC=4.6%

Chart = http://quote.yahoo.com/q?s=VOYN&d=1y


VTS - Veritas DGC  $17.75  *** Oil Sector On Fire ***

Veritas DGC, headquartered in Houston, Texas, provides integrated 
geological and geophysical technologies to the petroleum industry 
worldwide. Veritas has started off the millennium with a new CEO
in Richard C. White, the recent President of the Western Geophysical
division of Baker Hughes. Veritas also continues to install NEC 
vector supercomputers as it works towards providing faster 
turnaround on complex 3D depth imaging projects. With the recent 
boost in oil prices drawing attention, it only follows that oil 
companies will be increasing exploration budgets. We favor the 
breakout above the 150 dma and the improving technical picture 
suggesting a new trend.

FEB 15.00 VTS BC Bid=3.50 OI=579 CB=14.25 RC=5.3% RNC=5.3%

Chart = http://quote.yahoo.com/q?s=VTS&d=1y


Option Trading Basics: Using The Correct Strategy...

There are benefits and disadvantages to every form of option
trading. The key is to construct positions with a high probability
of profit and limited downside risk. Flexibility is another
important aspect of successful trading and in order to select the
most appropriate technique, you must beware of the current market
trends and the character of option volatility. With this approach,
you can easily determine the proper strategy for any specific set
of conditions.

One of the most common questions that new traders ask is whether
it is better to buy or sell options. The truth is, both long and
short positions have benefits, depending on the outlook for the 
underlying issue and relative cost (premium) of the options. Long
positions offer limited risk and the potential for exponential
profits while the sale of options benefits from time value decay
and a historically higher probability of success. Novice traders
are generally attracted to option buying because the potential for
loss is limited; an option buyer can only lose the amount of the
initial investment, and the benefits of purchasing options are far
less complicated than option sales. In contrast, experienced
traders are the most common participants in option selling
strategies. They promote the techniques based on known advantages;
options are a decaying asset and the margin for error (and profit)
is much higher than strategies in which you buy premium.

In most cases, the benefits of one particular strategy over
another are readily apparent. As an example, an investor who is
bullish on an underlying issue market can either buy a call or
sell a put. Both techniques are based on a future upside movement
but they have entirely different risk/reward characteristics. The
long call option has low risk along with a low probability of a
large reward. The short put option has greater risk with a high
probability of a small reward. Each position has merit based on
the relative price of option premiums and the character of the
expected movement in the underlying instrument. 

The disadvantages to option buying are obvious but most traders
increase the potential for loss by purchasing expensive options
(high implied volatility = inflated premium) that are too far
out-of-the-money and too close to expiration. Occasionally, with
the incredible moves in markets such as the recent technology
rally they will be successful. Unfortunately, that success is
statistically short-lived. On the other hand, there are drawbacks
to option writing. The most devastating is a "gapping" market open.
Huge price swings and rising volatility can also become a seller's
nightmare. Professional traders are the most frequent writers of
options and they typically hedge their positions in the short-term
to limit risk. Until recently, this technique was difficult for
retail traders due to prohibitive commission costs and delays in
order execution. Now the most sought-after methods are available
to anyone who has the skill and determination to master the art.
After reading Jim's (OIN editor) recent articles on the covered-
strangle, most of you would have to agree with the advantages of
this approach.

There are benefits to almost every style of trading and success
comes from knowledge of profitable techniques and the ability to
correctly implement them in a timely manner.

                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


Stock  Price  Last    Mon  Strike  Opt    Profit   ROI   Monthly
Sym    Picked Price        Price   Bid    /Loss          ROI

ADG    13.13  12.50   JAN  10.00  0.25  *$  0.25   8.7%  18.9%
AWEB   12.88  11.75   JAN  10.00  0.50  *$  0.50  16.2%  17.6%
ITIG   24.81  35.75   JAN  17.50  0.63  *$  0.63  11.3%  16.3%
WAXS   20.00  19.94   JAN  17.50  0.69  *$  0.69  11.1%  16.1%
ASFT   18.13  20.13   JAN  12.50  0.25  *$  0.25   6.4%  14.0%
PILT   17.13  28.75   JAN  12.50  0.50  *$  0.50  12.7%  13.8%
AFCI   37.13  43.69   JAN  27.50  0.50  *$  0.50   6.3%  13.7%
RNBO   21.94  24.50   JAN  17.50  0.81  *$  0.81  15.6%  13.5%
AND     9.25   7.75   JAN   7.50  0.44  *$  0.44  18.4%  13.3%
SATH   12.94  11.94   JAN  10.00  0.56  *$  0.56  17.8%  12.9%
SCOC   29.00  20.19   JAN  17.50  0.56  *$  0.56   8.8%  12.8%
GSTRF  35.56  43.69   JAN  25.00  0.44  *$  0.44   5.8%  12.7%
ORCT   31.00  54.94   JAN  25.00  0.81  *$  0.81  11.2%  12.2%
AMD    33.00  37.88   JAN  25.00  0.38  *$  0.38   5.4%  11.8%
IUSA   12.13  17.06   JAN   7.50  0.31  *$  0.31  11.3%   9.8%
LOR    20.25  22.94   JAN  17.50  0.38  *$  0.38   6.6%   9.6%
EMIS   21.00  39.00   JAN  15.00  0.50  *$  0.50  10.6%   9.2%
DAVX   23.75  27.00   JAN  17.50  0.56  *$  0.56  10.5%   9.2%
CCUR   17.75  23.44   JAN  12.50  0.50  *$  0.50  12.3%   8.9%
SCOC   17.88  20.19   JAN  12.50  0.44  *$  0.44  10.9%   7.9%
MSGI   19.00  19.13   JAN  12.50  0.38  *$  0.38   9.1%   7.9%
ENMD   28.44  54.63   JAN  20.00  0.44  *$  0.44   7.2%   7.8%
CS     28.50  27.50   JAN  20.00  0.56  *$  0.56   8.9%   7.8%
PRRC   23.56  28.31   JAN  17.50  0.56  *$  0.56  10.6%   7.7%
INSO   32.13  34.00   JAN  20.00  0.75  *$  0.75  10.4%   7.6%
WAXS   20.50  19.94   JAN  15.00  0.38  *$  0.38   8.5%   7.4%
NETS   28.00  25.25   JAN  20.00  0.50  *$  0.50   8.2%   7.1%
MMWW   37.38  26.94   JAN  22.50  0.50  *$  0.50   6.3%   4.5%
EGRP   35.56  23.56   JAN  25.00  0.56   $ -0.88 -11.5%   0.0%
CNQR   29.50  19.50   JAN  22.50  0.94   $ -2.06 -30.1%   0.0%

WSTL   11.44  17.00   FEB   7.50  0.50  *$  0.50  17.9%  16.5%
DMRK   22.38  29.56   FEB  17.50  0.69  *$  0.69  13.3%  12.3%
TLCM   20.25  21.88   FEB  15.00  0.50  *$  0.50  11.0%  10.1%
PGEX   22.81  19.88   FEB  15.00  0.50  *$  0.50   9.9%   9.1%
PILT   25.94  28.75   FEB  17.50  0.56  *$  0.56   9.7%   9.0%
NOVL   33.69  35.88   FEB  25.00  0.63  *$  0.63   8.5%   7.9%
GSTRF  34.19  43.69   FEB  22.50  0.63  *$  0.63   8.4%   7.8%
EMIS   35.63  39.00   FEB  25.00  0.63  *$  0.63   8.1%   7.5%
NETA   28.00  27.19   FEB  20.00  0.38  *$  0.38   6.4%   5.9%

*$ = Stock price is above the sold striking price.


E*Trade Group (EGRP) is doing the post earnings drop. A test of
the September - October lows appears likely. To get a different 
perspective, look at a long term chart (2 year weekly). That
viewpoint makes a case for cutting losses early while they are
minimal. Concur Technologies (CNQR) offered an escape on Thursday
(near break-even) after missing earnings and being downgraded.
Current technical support is about $10 lower.

OI  - Open Interest
CB  - Cost Basis (break-even point if put exercised) 
ROI - Return On Investment 

Sequenced by Company

Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

CPQ    32.00  FEB 25.00  CPQ NE  0.56  4270  24.44   8.0%
HSAC   23.00  FEB 17.50  HSU NW  0.69  25    16.81  13.0%
MCRE   12.56  FEB 10.00  MQZ NB  0.69  48     9.31  21.5%
NPLS   23.06  FEB 17.50  UTN NW  0.44  0     17.06   8.7%
NSPK   22.25  FEB 15.00  NNQ NC  0.56  63    14.44  11.2%
NZRO   33.25  FEB 22.50  NUR NX  0.75  47    21.75  10.1%
QTRN   24.44  FEB 17.50  QRT NW  0.50  95    17.00   9.3%
RNBO   24.75  FEB 20.00  BQO ND  0.56  0     19.44   9.8%
SMSC   14.25  FEB 12.50  OMQ NV  0.50  50    12.00  11.2%

Sequenced by ROI  

Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

MCRE   12.56  FEB 10.00  MQZ NB  0.69  48     9.31  21.5%
HSAC   23.00  FEB 17.50  HSU NW  0.69  25    16.81  13.0%
NSPK   22.25  FEB 15.00  NNQ NC  0.56  63    14.44  11.2%
SMSC   14.25  FEB 12.50  OMQ NV  0.50  50    12.00  11.2%
NZRO   33.25  FEB 22.50  NUR NX  0.75  47    21.75  10.1%
RNBO   24.75  FEB 20.00  BQO ND  0.56  0     19.44   9.8%
QTRN   24.44  FEB 17.50  QRT NW  0.50  95    17.00   9.3%
NPLS   23.06  FEB 17.50  UTN NW  0.44  0     17.06   8.7%
CPQ    32.00  FEB 25.00  CPQ NE  0.56  4270  24.44   8.0%

Company Descriptions

CPQ - Compaq Computer  $32.00  *** Earnings Rally ***

Compaq Computer designs, develops and manufactures hardware and
software including desktop and portable computers and consumer
personal computers. Compaq markets its products primarily to
business, home, government and education customers. They develop
products through customer-focused, global product groups, which
provide customers with solutions for leadership in the emerging 
Internet-based economy. The earnings run is in full swing and
next Tuesday's report will decide the outcome of the recent rally.
Potential owners can play it now, based on the bullish chart and
short-term traders can wait until the earnings are reported.

FEB  25.00  CPQ NE  Bid=0.56  OI=4270  CB=24.44  ROI=8.0%

Chart = http://quote.yahoo.com/q?s=CPQ&d=1y


HSAC - High Speed Access  $23.00  *** The Need for Speed ***

High Speed Access is a provider of high speed Internet access via
cable modem to residential and commercial users in ex-urban areas
Their services enable subscribers to receive Internet access at
speeds substantially faster than traditional Internet access, at
minimal cost to the cable operator. HSAC rose recently on optimism
that it will benefit from the America Online and Time Warner pact.
Institutional buying has picked up in the past few weeks and this 
quarter's earnings are expected to outperform analysts' estimates.

FEB  17.50  HSU NW  Bid=0.69  OI=25  CB=16.81  ROI=13.0%

Chart = http://quote.yahoo.com/q?s=HSAC&d=1y


MCRE - MetaCreations  $12.56  *** Breakout! ***

MetaCreations is a provider of graphics software for use in print,
on the Web and computer graphics applications. MCRE markets 2D and
3D visualization software and technologies in two basic categories:
professional and consumer. The company's professional product line
includes a number of well-known titles and their leading consumer
software is popular among amateur web designers. The recent chart
indications suggest MCRE is no longer a single digit issue.

FEB  10.00  MQZ NB  Bid=0.69  OI=48  CB=9.31  ROI=21.5%

Chart = http://quote.yahoo.com/q?s=MCRE&d=1y


NPLS - Network Plus  $23.06  *** New High Soon? ***

Network Plus is a facilities-based integrated communications
provider offering integrated local, long distance, data and
enhanced telecommunications services. Their customers are small
and medium-sized businesses located in major markets in the
Northeastern and Southeastern regions of the United States. They
also provide international wholesale transport and termination
services to major domestic and international telecommunication
carriers. A recent addition to the Lucent deal expands their
capacity for offering voice service over telephone lines capable
of simultaneously handling Internet transmission. Friday's jump
in price on heavy volume further validates the head-n-shoulders
bottom. Resistance is the intraday high in July.

FEB  17.50  UTN NW  Bid=0.44  OI=0  CB=17.06  ROI=8.7%

Chart = http://quote.yahoo.com/q?s=NPLS&d=1y


NSPK - NetSpeak  $22.25  *** Entry Point ***

NetSpeak develops, markets, licenses and supports a suite of
intelligent software modules that provide business solutions for
real-time interactive voice, video and data communications over 
packetized data networks such as the Internet, Lan's and Wan's.
NetSpeak's products allow organizations to build new voice and
video-enabled communications networks. Their products consist of
call management software, gateway systems and software based
client telephones. A fair cost basis for a popular issue in a
hot sector.

FEB  15.00  NNQ NC  Bid=0.56  OI=63  CB=14.44  ROI=11.2%

Chart = http://quote.yahoo.com/q?s=NSPK&d=1y


NZRO - NetZero  $33.25  *** IPO Speculation ***

NetZero is developing a new Internet service model that provides 
consumers with free access to the Internet while offering online 
advertisers an effective way to target those users. NetZero is the
nation's largest free Internet access provider based on number of 
registered users. NetZero just launched a service where members 
can now log-in to their personalized home page from any computer, 
through any Internet access provider. Their earnings report is
expected next week and the recent speculative rally has driven
the stock to record levels. Aggressive traders only.

FEB  22.50  NUR NX  Bid=0.75  OI=47  CB=21.75  ROI=10.1%

Chart = http://quote.yahoo.com/q?s=NZRO&d=1y


QTRN - Quintiles Transnational  $24.44  *** Stage I ***

Quintiles Transnational provides full-service contract research,
sales, marketing and healthcare policy consulting and health
information management services to the global pharmaceutical,
biotechnology, medical device and healthcare industries. QTRN
provides a broad range of contract services to help its clients
reduce the length of time from the beginning of development to
peak sales of a new drug or medical device. Quintiles also offers
healthcare policy research and management consulting services that
improve the quality, availability and effectiveness of healthcare.
A consolidation may be in order as earnings are expected next week.
We favor the sector and the technical support near the cost basis.

FEB  17.50  QRT NW  Bid=0.50  OI=95  CB=17.00  ROI=9.3%

Chart = http://quote.yahoo.com/q?s=QTRN&d=1y


RNBO - Rainbow Technologies  $24.75  *** B2B Play ***

Rainbow Technologies develops and supplies computer network
security products that secure the rights to software and other
digital content, and that provide privacy and security for
computer network and Internet communications and commerce. Their
products are designed for anti-piracy, license management and
tracking and software distribution over the Internet. They also
provide Internet security products computer transaction servers
engaged in Internet commerce, electronic brokerage and financial
services, and encrypted processing and acceleration for original
manufacturers of routers and switching equipment. A great company
in a rapidly expanding industry with an excellent chart pattern.

FEB  20.00  BQO ND  Bid=0.56  OI=0  CB=19.44  ROI=9.8%

Chart = http://quote.yahoo.com/q?s=RNBO&d=1y


SMSC - Standard Micro  $14.25  *** Aggressive Entry Point ***

Standard Micro is a global supplier of metal-oxide-semiconductor,
very-large-scale-integrated (MOS/VLSI) circuits for the personal 
computer (PC) and related industries. Their integrated circuits 
are developed and sold for applications in PC input/output, PC
connectivity, Local Area Networking (LAN), PC systems logic, and
embedded networking. The company's subsidiary, Toyo Microsystems
also sells local area networking products to original equipment
manufacturers and distributors of electronic components. The stage
II climb continues with the December consolidation providing 
technical support near our cost basis.

FEB  12.50  OMQ NV  Bid=0.50  OI=50  CB=12.00  ROI=11.2%

Chart = http://quote.yahoo.com/q?s=SMSC&d=1y


Dow Drubbing Continues..

Friday, January 21

Interest rate fears and higher oil prices combined to bring down
what was previously the world's most watched index. The new rage
is technology and today the Nasdaq composite climbed another 45
points to finish at 4,234, its third record close of the week.
Meanwhile, the Dow industrial average dropped 99 points to 11,251,
its fourth straight decline. The broader S&P 500 index ended down
4 points at 1,441. Trading was volatile due to Friday's "double-
witching" expiration of stock and index options and volume on the
NYSE was heavy at 1.2 billion shares traded. Losers again beat the 
winners 1,728 to 1,317. In the bond market, the 30-year treasury
rose 14/32, bid at 92 15/32, pushing its yield down to 6.70%. 
Thursday's new plays (positions/opening prices/strategy):

Tera Computers    TERA   JUN5C/FEB7C   $2.00   debit   diagonal
Western Digital   WDC    FEB5/CC-NP    $4.38   debit   cov-combo

Our new positions traded just as expected with Western Digital
consolidating during the session and Tera climbing higher on the
heels of the rallying technology sector. Neither position offered
our suggested target but both issues provide favorable entry

Portfolio plays:

The Dow drought continued today as rising oil prices weighed on 
transport stocks while cyclicals suffered from new fears of a rate
hike. The biggest conglomerate in our portfolio, Procter & Gamble
(PG) dropped almost $10 as investors voted their disapproval of
the possible merger with Warner-Lambert and American Home Products.
The Wall Street Journal reported that PG's board was scheduled to
hold a teleconference to discuss a possible pact and individuals
close to the talks suggest it is a done deal. A number of brokers
have downgraded the issue as a result of the speculation and our
position may suffer if the sell-off continues. We remain bullish
on the issue with a long-term diagonal position; LJAN100C/FEB110C
but the possibility of a roll-down to limit losses increased with
today's move.  

A number of other long-term issues were in the news and most of
them were affected by earnings announcements or the rising cost
of crude. Oil company stocks moved higher while transportation
issues remained under pressure amid of a bout of severely cold
weather and concerns about low petroleum inventories in the U.S.
and Europe. Fortunately we have straddled the issue with both
transport and oil stocks and our diverse portfolio averages the
effects of the commodity's changing prices. Today Exxon-Mobil
(XOM) was the beneficiary, climbing $1.31 to close at $85, our
sold strike for the LEAPS/CC's position. The move to FEB-$85 calls
reduced our cost basis in the overall position; LJAN85C/FEB85C
to $2.38. Airlines were hardest hit by the rising oil prices and
United (UAL) continued to suffer, falling to a recent low near $60.
It will be some time before our long-term position on that issue
regains profitability. On the bright side, SBC Communications (SBC)
rose 4% to $43 after Morgan Stanley upgraded the stock to a STRONG
BUY. Unfortunately, the issue has been in a slump as of late and
the bullish LEAPS/CC's spread remains one of our few losers. There
were other stocks in the long-term portfolio requiring adjustments
and the majority of moves involved downside protection. Solectron
(SLR) and Sun Microsystems (SUNW) were the only positions rolled
to a higher strike price.

Small-cap stocks continued to rally in today's session and the
top performer in that group was Geron (GERN). The stock soared
$7 to close near $31 after news the company had won the first two
British patents covering the technology used to clone "Dolly" the
sheep. Company officials said the patents cover nuclear transfer
technology, which could help doctors grow living tissue, such as
cartilage, bone and muscle, for transplants. Geron also said the
U.S. Patent Office had accepted its application for a patent on
the same technology. Needless to say, our position is at maximum

Recent market leaders dominated the Spreads/Combos portfolio and 
Concentric (CNCX) was today's winner, climbing almost $5 to a new
all-time high near $50. The issue is now tracking Nextlink (NXLK)
and Salomon Smith Barney raised their price target on shares of
the merger partner to $115 from $70. The upward revision is based
on changes to the revenue model created by the addition of CNCX.
Cohu (COHU) also rallied to an all-time high, finishing $3 higher
at $46. The issue has almost doubled since we opened the bullish
position last month.

The bullish oil sector also produced some excellent moves and
our new calendar position in Pride International (PDE) finished
exactly at the sold strike for a perfect transition to February
options. Key Energy (KEG) also rallied, climbing $1.12 to $8.50.
As we said in last week's commentary, continued upside movement
would require an adjustment in the bullish position to remain
profitable. The original spread was a JUL7C/FEB7C at $0.93 debit.
A roll-up to the February $10 calls on the short side required an
additional $1.00 of debit, raising the cost basis of the position
to $1.93. Now the spread will return $0.56 on $1.93 invested if
the stock finishes above $10 in February; or you can sell another
call against the long-term (July) position. If you think the stock
is overextended and will experience a pull-back, then you should
remain in the current position with a neutral to bearish outlook,
and wait for further signs of direction. The key to the concept
of selling time is maintaining a position that benefits from the
highest rate of premium erosion; and that occurs in at-the-money
options. Another play that found the mark was Zoltek (ZOLT). The
stock finished at $9.88, the ideal price for a move to February
options. Once again, we are selling the highest amount of time
premium, the $10 options.

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


This week I received two requests for conservative, bullish debit
spreads and another for a conservative position in Thursday's new
pick, Sprint PCS. The first play may satisfy all three petitions.


PCS - Sprint PCS  $110.75  *** Reader's Request ***

Sprint is a global communications company that integrates long
distance, local and wireless communications services, and carries 
Internet traffic. In 1998, Sprint formed the PCS Group to manage
their domestic wireless mobile phone services. PCS Group provides
nationwide service through operating its own digital network in
major United States metropolitan areas, affiliating with other
companies, roaming on other providers' analog cellular networks
using Dual-Band/Dual-Mode handsets, and digital PCS networks with
code division multiple access. Sprint PCS now operates the largest
100% digital, 100% PCS nationwide wireless network, serving the
majority of the nation with licensed PCS coverage of nearly 270
million people in all 50 states, Puerto Rico and the U.S. Virgin 

Wireless telecom continues to be a HOT industry and recently a
PaineWebber analyst raised price targets for the group based on
an expected record number of new wireless subscribers in 2000.
The report said that wireless subscribers will increase 25% over
the estimated 17 million who subscribed in 1999 and will grow to
24 million in 2001. Almost one half of the U.S. population will
use wireless next year and the expansion will boost the revenues
of companies like PCS. The upgrade suggested a new price target
for Sprint PCS of $160 and Deutche Banc Alex. Brown also recently
boosted its rating of the company.

The big news for Sprint is the upcoming two-for-one split of the
company's PCS stock. The split will be in the form of a dividend
in Sprint PCS shares. A comparable dividend will be paid on the
Class A common stock owned by France Telecom and Deutsche Telekom.
New shares will be issued on February 4, 2000, to shareholders of
record on January 14, 2000.

PLAY (very conservative - bullish/debit spread):

BUY  CALL FEB-85 PCS-BQ OI=1138 A=$26.50
SELL CALL FEB-95 PCS-BS OI=375  B=$17.50
INITIAL NET DEBIT TARGET=$8.75-$8.88 ROI(max)=12%

- or -

PLAY (conservative - bullish/debit spread):

BUY  CALL FEB-85  PCS-BQ OI=1138 A=$26.50
SELL CALL FEB-100 PCS-BT OI=1775 B=$14.00
INITIAL NET DEBIT TARGET=$12.38-$12.50 ROI(max)=20%

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


BCE - BCE Inc.  $96.75   *** Internet/Telecom Conglomerate ***

BCE supplies telecommunication and other wireless communication
services and equipment and publishes telephone directories. The
company holds Canada's national telephone company, Bell Canada,
and a broad array of telecommunication and Internet related
businesses. BCE has been compared favorably to other well-known
Internet holding companies and it is one of the most undervalued
telecommunication stocks in the sector, trading at a substantial
discount to these other industry leaders.

One of our leading researchers has compiled an excellent study
of this issue at:


Recent news items include favorable articles on the company and
a number of upgrades including a BUY rating at Nesbitt Burns and
a STRONG BUY at CIBC, both in the last week. We favor the bullish
technical formation and a small premium disparity will allow us
to participate in this play at a discount.

PLAY (conservative - bullish/debit spread):

BUY  CALL FEB-75 BCE-BO OI=314 A=$23.25
SELL CALL FEB-85 BCE-BQ OI=346 B=$14.88
INITIAL NET DEBIT TARGET=$8.12-$8.25 ROI(max)=21%

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


ESCM - ESC Medical Systems  $11.31   *** On The Rebound! ***

ESC Medical develops, manufactures and markets medical devices
utilizing lasers and proprietary intense pulsed light technology
for non-invasive treatment of varicose veins and other benign
vascular lesions, as well as other clinical applications. Their
PhotoDerm VL technology uses thermal energy generated by an
intense pulsed light source to selectively eliminate unwanted
lesions without damaging the surrounding healthy tissue. They are
also developing a product called the PhotoDerm PL, which is a 
noninvasive treatment to remove tattoos. Other products in the
works include a skin rejuvenation device to reduce wrinkles, a
hair-removal device, and a product to reduce psoriasis.

ESC Medical began the new year in a good way, announcing that
sales for the fourth quarter 1999 were strong and have exceeded
the company's expectations. The CEO suggested the results were
particularly encouraging since they came at a time when the
company was cutting expenses through a restructuring process.
He also said the results of the new leaner organization are
consistent with sales growth. In other news, ESC Medical and LPG
Systems announced they reached an out-of-court settlement of the
pending lawsuit involving LPG's therapeutic massage equipment.
As part of the agreement, ESC Medical will become a distributor
of LPG products, which are used for a variety of indications,
including the temporary reduction in the appearance of cellulite.
The recent break above a year-long base indicates a bullish trend
for this slumping issue. The new interest in options will provide
us with a favorable, low risk position with excellent reward

PLAY (conservative - bullish/debit spread):

BUY  CALL APR-7.50  QFC-DU OI=1045 A=$4.88
SELL CALL APR-10.00 QFC-DB OI=605  B=$3.38

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


CTAS - Cintas  $49.25   *** Fading Slowly ***

Cintas is engaged in the design, manufacture and rental of
corporate identity uniforms. They provide uniforms to businesses
of all types, including small service and manufacturing companies,
and major corporations that employ thousands of people. Cintas
also offers customized uniforms through its subsidiary, Uniforms
To You. The company's services to the rental markets include the
rental and cleaning of uniforms as well as providing ongoing
uniform upgrades. Their products include shirts, pants, jackets,
gloves, T-shirts, lab coats and hats. They also offers ancillary
products, such as the rental or sale of walk-off mats, fender
covers, towels, mops, linen products and first aid products.

There has been little in the way of positive news for Cintas in
the past few weeks. The brisk rotation out of consumer cyclicals
has left a number of well-known issues struggling and this stock
may be experiencing some of the same effects. The most negative
technical indication came after last week's announcement of a
a 27% increase in the company's annual dividend and three-for-two
split of its common stock. The share value fell almost $5 in the
three days following the news and now it appears that investors
will be unwilling to support any sustained rally in the coming

A small disparity in option pricing offers us a favorable edge
in this conservative, low cost position.

PLAY (conservative - bearish/credit spread):

BUY  CALL FEB-65 NQQ-BM OI=24  A=$0.25
SELL CALL FEB-60 NQQ-BL OI=116 B=$0.93

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


PGR - Progressive Insurance  $65.50   *** Comfortably Numb? ***

Progressive provides personal automobile insurance and other
specialty property-casualty insurance and related services. The
company's property-casualty insurance products protect customers
against collision and physical damage to their motor vehicles
and liability to others. Progressive's personal line insurance
provides insurance for passenger automobiles and recreational
vehicles. Progressive also offers specialty personal lines
including motorcycle, mobile home, boat and snowmobile insurance.
Other insurance products and services offered include physical
damage insurance and tracking services to protect the commercial
or retail lender's interest, liability insurance for directors
and officers, employee dishonesty insurance and claim services.
In addition, Progressive provides mono-line commercial vehicle
insurance, which covers commercial vehicle risks for primary
liability, physical damage and other supplementary insurance.

It's been a long and painful descent to the current levels and
for now there is no bottom in sight. Of the 17 major analysts
following the company, only a small minority suggest the issue
has a favorable short-term outlook. Overall, the stock is rated
slightly better than a HOLD (which means SELL) and the leading
brokers reiterated their bearish comments in recent reports.
S & P Market Scope suggests the company should be avoided with
the current sales forecast below projections. Ing Baring Furman
Selz says it's a HOLD at best with 4Q EPS expected to fall well
below analysts estimates. Analysts at Warburg Dillon Read are
the most optimistic, offering a new HOLD rating on the company.

The chart tells the tale and until it experiences a significant
character change, this issue has little chance of recovery. A
move above an ascending 30 dma will be our first indication to
review the position.

PLAY (conservative-bearish/credit spread):

BUY  CALL FEB-85 PGR-BQ OI=265 A=$0.68
SELL CALL FEB-80 PGR-BP OI=35  B=$1.25

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


As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time. The buyer has the rights and the seller
the obligations. With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
market industry or on the market as a whole. Spread strategies can
be made with index options similar to those made with individual
stock options. Many professional traders employ index spreads as a
hedge strategy. We favor debit positions on the SPX for momentum
and hedge or longer-term plays and OTM credit spreads on the OEX
when the risk/reward is favorable. Low ROI disparity spreads will
be listed (when available) for the conservative index trader.


OEX - S&P 100 Index  $779.78     OTM Credit-Spreads

The Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries. The component
stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding. 


For OTM credit spread trades, we like to use the actively-traded
S&P 100 Index options because they contain much more premium than
options on individual stocks and provide an underlying instrument
less prone to huge, gapping moves. Remember however, that you can
always be exercised early so monitor your positions daily. Review
the 'Market Sentiment' section for specific technical information
on the S&P 100 Index.


PLAY (Bearish):
BUY  CALL FEB-830 OEX-BF OI=2886 A=$1.56
SELL CALL FEB-825 OEX-BE OI=768  B=$2.00

PLAY (Bullish):
BUY  PUT FEB-730 OEZ-NF OI=1607 A=$4.12
SELL PUT FEB-735 OEZ-NG OI=1360 B=$4.75


By combining two credit spread positions, you can participate
in a popular neutral strategy known as the Long Iron Condor. It
is often used with range-bound positions and is a limited risk,
limited profit strategy that gives you a wide range for success.
The play is based solely on the current price and trading range
of the underlying issue and the recent technical trend. Current
news and market sentiment will have an effect on this position
so review the underlying issue and make your own decision about
the future outcome of the stock price.

CHART= http://quote.yahoo.com/q?s=^oex&d=b

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