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Daily Newsletter, Tuesday, 01/25/2000

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The Option Investor Newsletter         Tuesday 1-25-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       1-25-2000           High     Low     Volume Advance Decline
DOW    11029.90 + 21.70 11079.50 10883.40 1,067,416k 1,243  1,773
Nasdaq  4167.41 + 71.33  4303.15  4095.31 1,735,345k 2,010  2,183
S&P-100  767.31 +  8.57   770.06   755.32    Totals  3,253  3,956
S&P-500 1410.03 +  8.12  1414.26  1388.49            45.1%  54.9%
$RUT     521.59 -  1.36   525.27   513.69
$TRAN   2654.69 - 48.26  2717.82  2651.89
VIX       24.34 -  1.98    26.37    23.62
Put/Call Ratio      .53
*************************************************************

Miraculous recovery or bear trap rally?

After a week of losses on the Dow, amounting to over -800 points
at the intraday low of today, the Dow finally showed signs of a
pulse. The rebound off the bottom at -120 came after a breath 
stopping drop below 10900 which was not a real support level 
technically but possibly a psychological support level. On Monday 
the low came within 20 points of 10900 before rebounding. After 
trading as high as +75 shortly after the open this morning the 
almost -200 point drop to the low at 2:PM had traders biting
their fingernails afraid we were going to repeat the -243 loss
from Monday.  The Nasdaq tried twice to rally after an almost 
-85 point drop at the open but followed the Dow down at 2:PM
to a low of 4028.  The rebound however was outstanding with a
+139 point gain from the low. 


 


 

The general consensus of the analysts had the Dow rebound as
simply a relief rally from the six day sell off. The spark
for the rally was also the cancellation of the Greenspan
testimony today because of a severe snow storm. With traders
worried about what he might say the market had been jittery.
Take away the photo op and sound bite possibility and add
a -800 point drop into oversold and you have a thin excuse
for a rally. The Nasdaq has not needed an excuse to rally
lately and with any positive Dow momentum behind it could
be back in record territory soon. The flaw in this theory
of course is still the Employment Cost Index on Thursday
and the Fed meeting on Mon/Tue of next week. Everyone believes
they will raise rates and anything in the +.25% range is
already priced into the market. Still there is that level
of uncertainty that will keep the volatility in the markets.

The bonds rallied higher today as money still moved out of
stocks. The bonds had been weak early after the Consumer
Confidence numbers came in at 144.7, the highest ever in the 
report's 32 year history. This was revised upward from 141.7
in December. With the economy firing on all cylinders the
prospects for a stronger than expected GDP on Friday are good.
The prospects for a stronger than expected ECI report on
Thursday are also good with record year end bonuses and heavy
weightings in energy as well. This strong data in front of the
Fed meeting could cause market indigestion.

Stock splits and earnings are still powering the markets with
record numbers of each. With 67% of the S&P companies that
have reported posting better than expected results, investors
should be happy with the returns. As usual many stocks are
taking a beating even after announcing results that beat 
estimates. AMGN +.01 and lost -3.38, QCOM +.01 lost -10.50,
AHP +.01 lost -2.00. 

Qualcomm (QCOM) on Tuesday posted a fiscal first quarter 
operating profit that was just ahead of Wall Street's expectations, 
on revenue that increased 19 percent. Excluding non-recurring 
charges, the wireless-communications technology provider logged 
earnings of 25 cents per share, during the period ended Dec-26th. 
Revenue during the quarter came in at $1.1 billion, up from $941 
million during the year-ago period. Analysts had expected QCOM to 
post a first quarter profit of 24 cents per share, according to 
First Call. 

Compaq Computer (CPQ) reported a 56 percent tumble in fourth-
quarter profits on a 4 percent drop in revenue, dragged down by 
lower sales of business computers as the company struggled to 
maintain its global leadership in PCs. Compaq did manage to beat 
Wall Street expectations, but the results were bolstered by a gain 
of $50 million in its own investment portfolio, separate from 
growth from its computer business. CPQ earned 19 cents a share, in 
the final quarter of 1999, off from 43 cents a share, in the 
year-ago quarter. Sales dipped to $10.48 billion from $10.86 
billion. Analysts estimates were for 16 cents per share. In a side 
note, Dell still has not warned but their quarter does not end 
until Jan-31st.

Online auction house eBay (EBAY) reported better-than-expected 
fourth-quarter profits Tuesday, reflecting a surge in registered 
users. The San Jose, company posted net income of $4.9 million 
or 4 cents per diluted share. Profits, excluding one-time items, 
rose to $6.1 million, or 4 cents per diluted share, compared 
with $3.9 million, or 3 cents per diluted share, in the year-ago 
period. Analysts expected eBay to earn 2 cents per share. Revenues 
reached $73.9 million, a 139 percent increase over the $30.9 million 
reported for the year-ago quarter. Shares of Ebay bucked the post
earnings trend and were up sharply in after hours trading.

Internet search site Ask Jeeves Inc. (ASKJ) disclosed it will 
acquire privately held Direct Hit Technologies Inc., a Web search 
engine firm, for stock valued at approximately $507 million. Terms 
call for ASKJ to exchange 5.12 million unregistered shares of common 
stock for all outstanding shares, warrants and options of Direct Hit. 
Based on Monday's closing price of 99 for Ask Jeeves shares, the 
transaction is valued at $507 million. CS First Boston initiated 
coverage of Ask Jeeves with a "buy" recommendation, and set a 
year-end price target of 215.

LSI Logic Corp. (LSI) reported 1999 record revenues of $2.09 
billion, a 38 percent increase over the $1.52 billion in 1998. 
During 1999 profits grew at more than twice the rate of revenue 
growth, and cash more than doubled to $661 million. Net income for 
1999, before amortization of goodwill and other special items 
(EBG), was $1.12 a diluted share, an 85 percent increase over the 
65 cents a diluted share reported for 1998. LSI Logic also 
announced a stock dividend in the form of a 2:1 common stock 
split, effective February 4, 2000. 

Shares of Nortel Networks (NT) moved higher after hours after 
the networking behemoth topped analysts' estimates and declared a 
2:1 split of its shares. Sales at the Canadian company rose 21 
percent to $6.99 billion. Nortel earned 55 cents per share, up 
from 36 cents per share, beating consensus estimates of 45 cents 
per share. The stock closed at 102.63 and moved to 105 after hours 
also bucking the trend.

Splits announced today included YWAVE - Yellowwave 2:1, SJR - Shaw 
Communications 2:1, DS - Dallas Semi 2:1, LSI - LSI Logic 2:1,
RNWK - RealNetworks 2:1, NT - Nortel 2:1.

Important earnings to watch for tomorrow will be EMC (Easy Money 
Corp), JDSU (Just Don't Sell Us) and BVSN (Best Valued Stock in 
Nasdaq). The aliases of course are ours. With the good earnings 
performance by EBAY and other Internet companies Nasdaq will be 
hard pressed to drop very far even if there is a Fed wreck. There 
is just too much positive investor sentiment. Even with the 
positive sentiment and the positive close on both indexes today 
the breadth was still negative with advancers losing to decliners. 
Actually, the volume was lighter today than normal if you can call 
2.8 bln shares on both exchanges light. After the nearly 2 bln 
share day yesterday the Nasdaq dropped back over -200 mln shares 
to ONLY 1.7 bln!  

We get another chance at Greenspeak tomorrow as Greenspan testifies
before the confirmation committee as he tries to keep his current 
job. The cancelled testimony today is likely to be rescheduled for 
later in the week and will give traders yet another Maalox moment 
between now and the Fed meeting. I continue to urge traders to be 
cautious going into February. The violent drops and wide intraday 
ranges are symptomatic of a weak market. Traders are afraid the 
bottom can fall out from under them at any moment and they sell on 
the slightest indication of weakness. This provides a great 
traders market but gives the buy and hold investor ulcers. While 
I am concerned about weakness going into February the Dow is still 
in oversold territory. Also, the last several Fed meetings has 
seen an increase in buying the last two days before the event as 
the more aggressive traders try to take positions in front of a 
possibly favorable decision. I think the bad news is in the market 
and today proved there were buyers lurking in then wings. Just be 
cautious until a new trend becomes apparent.

Good Luck, Sell too Soon

Jim Brown 
Editor


****************************************************
ANNUAL OPTION INVESTOR SEMINAR UPDATE - IMPORTANT !!
****************************************************

The four day Option Investor Option Expo in Denver 
on March 28-31st is going fast. 

We are going to announce the guest speakers next Sunday
and you are not going to believe who we have coming!!

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 for this seminar 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.

http://www.OptionInvestor.com/bootcamp/oinmain.html


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.

http://www.OptionInvestor.com/bootcamp/oinmain.html



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

St. Jude: You May Want To Bypass This One

Shares of St. Paul , Minn.- based St. Jude Medical, Inc. 
(NYSE: STJ) have not been experiencing the best of times for 
the past several months. The company, which designs, manufactures, 
and markets medical devices primarily for cardiac care, has 
seen its stock price fall from $40 per share last September, to
 a current price of $25, a drop of 38 percent.

http://members.OptionInvestor.com/stocknews/012500_1.asp


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

As of Market Close - Tuesday, January 25, 2000 

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

DOW Industrials   11,000  11,250  11,030    Neutral   1.25  *
SPX S&P 500        1,340   1,400   1,410    BULLISH  12.03
OEX S&P 100          700     750     767    BULLISH  12.03
RUT Russell 2000     430     450     522    BULLISH  11.12
NDX NASD 100       3,200   3,850   3,759    Neutral   1.06
MSH High Tech      1,650   1,900   1,864    Neutral   1.06

XCI Hardware       1,300   1,350   1,421    BULLISH   1.14
CWX Software       1,210   1,420   1,314    Neutral   1.07
SOX Semiconductor    640     660     816    BULLISH  12.21
NWX Networking       820     900     892    Neutral   1.07
INX Internet         665     800     736    Neutral   1.06

BIX Banking          645     690     519    BEARISH  11.30
XBD Brokerage        410     450     419    Neutral  11.30
IUX Insurance        625     650     557    BEARISH  11.30

RLX Retail           900     935     905    Neutral   1.25  *
DRG Drug             380     400     344    BEARISH  12.07
HCX Healthcare       760     790     703    BEARISH  12.07
XAL Airline          180     190     131    BEARISH   5.21
OIX Oil & Gas        280     315     285    Neutral   1.06


Posture Alert    
Strong corporate earnings continue to support this market from 
being overtaken by the bears; however, with major earnings season 
soon to be over, what will become everyone's focus? As such, 
strong volume and volatility continue to be the norm. Today's 
leading sectors were Semiconductors (+3.35%), the NASDAQ 100 
(+2.68%), and Hardware (+2.19%). Now with this most recent market 
action, we have lowered the Retail sector and the Dow to Neutral 
from Bullish.



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

Tuesday, January 25, 2000

Reaching for the Tums yet?

The battle for control of this market continues with volatile 
price movements and action, in which both bears and bulls have 
been getting shaken out of their trading positions, only to see a 
major reverse occur. This lack of confidence in both camps 
(bears/bulls) has only helped fuel these extremes, as well as the 
swell in exchange volume. If January's volatility is any 
indication for the rest of 2000, then we should be buying the 
major drug and pharmaceutical companies, because it will easily 
be a record year for sales in Alka-Seltzer, Zantac, Tums, etc.

Now, for the bears out there, we see some indications that this 
market may have peaked, at least in the near-term. These reasons 
include:

1. Financial sector weakness
2. Failure to react to favorable earnings reports
3. Violation of key support levels
4. Breakdown of Russell 2000
5. IPO failure
6. Higher energy costs

In the above list, we have already witnessed 4 out of 6 reasons 
become reality, with the exceptions of the Russell 2000 and the 
failing of initial public offering. With several IPO's due out 
this week, it will be interesting to see how they react. With 
regards to the Russell 2000, it was one of the few indexes to turn 
around today, as it closed in the red. We will continue to monitor 
these two scenarios to see if they pan out. 

Now not to end on a negative note, we do find the put/call ratio 
on many of the indexes to be a positive for the bulls' camp. As 
the market dropped on Monday, we did witness put buying to be 
significant in comparison to the calls. This does prove to be 
very important, as we believe this will give the market support in 
the short-term. As it stands, the overall put/call ratio for the 
major indexes are as follows:
  
S&P 500    (SPX)  1.39
S&P 100    (OEX)  1.65
NASDAQ 100 (NDX)  4.57
All equities:     0.65

Now from a contrarian stance, these numbers above do favor the 
bulls' efforts in the short haul. In addition, the Pinnacle Index 
(OEX (750-770) saw a nice pickup in value, indicating once again 
that put buyers were rushing into the market quicker than call 
buyers. Should the Pinnacle Index (2.93) increase during the next 
couple of trading sessions, it may suggest that a near-term bottom 
has already occurred. 


BULLISH Signs: 

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

Cash Flow:
The cash that has been sitting on the sidelines has been put to 
use as of late, as record volumes for the major indexes have been 
shattered.


Mixed Signs: None


BEARISH Signs:

Volatility Index (24.34):
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 (6.634%):
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.

 
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       Tues
Benchmark                       (1/21)      (1/25)

Overhead Resistance (780-800)     0.83       1.26

OEX Close                       779.78     767.31

Underlying Support  (750-770)     2.14       2.93



What the Pinnacle Index is telling us:
Based on January 25, underlying support for the OEX is building as 
put buyers come rushing into play this recent downdraft. 
Overhead resistance is still light, and should the put players 
continue on their ways, we may see the OEX make a rally attempt.  

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)
                     Friday           Tues
Strike/Contracts     (1/21)           (1/25)

Puts               760 / 5,234       760 / 7,121
Calls              745 / 4,079       745 / 4,304   
Put/Call Ratio         1.28             1.65



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

Daily Results

Index      Last     Mon    Tue    Week
Dow     11029.89 -243.54  21.72 -221.82
Nasdaq   4167.41 -139.32  71.33  -67.99
$OEX      767.31  -21.04   8.57  -12.47
$SPX     1410.03  -39.45   8.12  -31.33
$RUT      525.27  -10.99  -1.36  -12.35
$TRAN    2654.69  -48.54 -48.26  -96.80
$VIX       24.34    3.66  -1.98    1.68

Calls               Mon    Tue    Week

TQNT      159.63    1.13  17.00   18.13  TQNT is a great performer
SILK      159.50    4.00   9.50   13.50  New, remains strong
VECO       56.00    5.63   0.75    6.38  New, future looks bright
PMCS      196.88   -4.00   9.63    5.63  New, positive momentum
VIGN      216.50    5.50  -1.50    4.00  Dropped, earnings today
ANAD       81.50   -2.88   5.13    2.25  The countdown is on
CMVT      152.00   -5.00   6.63    1.63  Buyers push CMVT up
MFNX       70.63    4.13  -3.38    0.75  MFNX needed a break!
MSTR      289.00   -6.13   6.00   -0.13  Dropped, earnings Thurs
VOD        55.06   -1.00   0.13   -0.88  VOD behaves very nicely
JDSU      232.00  -17.06  15.94   -1.13  Dropped, no mystery here
DISH       94.81   -0.38  -1.06   -1.44  A break-out for DISH!
LVLT      108.88    2.38  -4.00   -1.63  Makes decisive recovery
PCS       108.25   -2.25  -0.25   -2.50  On the road to recovery
NOK       183.00   -5.00   3.06   -2.88  Support holds nicely
AES        76.00    0.00  -4.00   -4.00  Dropped, stock collapses
GMST       75.00   -7.81   2.94   -4.88  We like overall uptrend
TWX        86.63   -3.50  -1.38   -4.88  TWX holds up very well
EXDS      129.38   -8.94   0.44   -8.50  Dropped, earnings Weds
SEPR      146.00   -5.00  -4.00   -9.00  Dropped, takes it on chin
NTAP      107.19  -15.13   5.19   -9.94  Good bang for the buck?
NTLI      125.50   -8.13  -2.75  -10.88  10-dma holds as support
HGSI      205.19   -6.63 -10.06  -16.69  Splits 2:1 next Monday
AFFX      224.75  -27.25  -1.63  -28.88  Out of the woods yet?

Puts

CMGI      114.44   -7.63   3.81   -3.81  Edges closer to our goal
IIJI       78.44   -0.13  -3.06   -3.19  IIJI closes below $80!
RLM        66.38   -2.19  -0.81   -3.00  Market adds pressure
SLR        76.50   -3.00  -0.50   -1.88  Looks technically weak
MU         65.88    2.38  -3.63   -1.25  Downgrade sinks shares
FD         43.06   -2.63   1.81   -0.81  Quite a bit of news
RMBS       76.38   -0.38   1.38    1.00  Investors cast leery eye
WCOM       43.19   -0.81   2.38    1.56  Dropped, found a bottom



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

There is no Womans World article tonight, as Renee is on Vacation.


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

An Osmotic Technical Point of View - Whoops!

Whoops, I was reading Option Investor's weekend update and 
realized that I had not written a story to put in it, again. 
That and I forgot to put in stop limits on my only losing trade 
last week. Just perfecting that disappearing money trick for the 
day I take my act on the road. They say that your memory is the 
first thing to go when you get old and I don't remember the second 
thing. I hope everyone is having as much fun as I am with this 
market. I have a feeling that February is going to be a real 
doozie! Speaking of which, do you know where doozie came from? 
It came from the car, Dussenberg. Perhaps the best car ever made, 
but that is another story. Speaking of driving, if the market were 
my friend and we had been out for "a few," I would be taking away 
the keys right about now. It is acting like it had more than one 
too many. Speaking of friends.....for those of you that are as 
enamored with JDSU as I am, have I got a tidbit for you. ETEK has 
become another very good friend to us. This is an excerpt from 
ETEK's very own website at www.e-tek.com:

"The merger agreement provides for the exchange of 1.1 shares 
of JDS Uniphase common stock for each common share of E-TEK. 
Completion of the transaction is subject to customary 
closing conditions, including an E-TEK stockholders' vote 
and regulatory approvals. Following completion of the 
transaction, E-TEK will operate as a wholly-owned 
subsidiary of JDS Uniphase."

JDSU was trading at $230 per share and ETEK at $215. What is 
wrong with this picture? Come on, the answer is worth $38 per 
share. When you buy ETEK you will receive 1.1 shares of JDSU. 
ETEK should be trading at a 10% premium to JDSU. Why isn't it 
you may ask? How many of you knew about this? I must say that 
OIN readers are way above average in the gray matter department 
(no, I am serious). But, you can't keep up with everything. How 
long will this last? Maybe a week. Maybe a month. Who knows? But, 
I can guarantee you it will not be there forever. So, if you 
like JDSU, you have to love ETEK. As soon as the big boys figure 
this one out, you will see at least parody on the prices and then 
a move into the premium. This could happen all in one day. I'll 
post the progress of this in the future.

Well, I have a few too many trades going at once today, so I am 
going to pair it down some. SEBL is looking pretty good these 
days on solid consolidation. Maybe some in the money Aug calls. 
Hmmmm. After all, I am an Option Trader! 

Happy Trading!
Contact SupportHarrison



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


CALLS:
*****

AES 76.00 -4.00 (-4.00) After showing remarkable relative 
strength in the face of yesterday's debacle, AES completely 
collapsed during today's late rally.  We warned about the 
support level, so hopefully it was not too painful.  We are 
dropping this play so quickly for one simple trading rule: If 
a position does not start working right away you should get 
out.  There is some support at this price, so perhaps we will 
get a little bounce on tomorrow's open that will allow us to 
exit without too much of a loss.

MSTR $289.00 +6.00 (-0.13) If you had not watched this stock 
for the past two days you would say nothing has happened, 
shrug your shoulders and get on with your life.  The truth is 
that the stock has traded in a 48 point range.  Not only did 
MSTR break out convincingly to a new high on Monday's opening, 
but it also reversed course and broke its short term uptrend 
only to rally back to the high $280's where it is trying to 
consolidate.  We are dropping this very profitable play 
because it is announcing earnings and splitting on Thursday.
If you were unable to take your profits on yesterday's gap up 
look to get out sometime tomorrow before the earnings and 
split.  Today's range was $289.88-$266.  Those two prices 
should be the pivot points for any major moves.

VIGN $216.50 (+4.00) Our play on VIGN is now officially over
as the company reported earnings today after the close.  We
were provided many opportunities to profit on this play as the
price ran up in anticipation of earnings.  The sellers started
to appear yesterday right after the open and VIGN headed down
from there along with the NASDAQ.  This is consistent with the
new pattern emerging where traders start to sell a day or two
before the actual earnings announcement.  For now, we say thank
you to VIGN and look forward to adding it to the play list again
in the future.

JDSU $232 +15.91 (-1.13) No great mystery here.  With earnings 
coming out tomorrow after the bell, it's time to say good bye to 
a very profitable play.  Veteran readers know we never recommend 
holding over earnings - the risks outweigh the rewards.  That said, 
we have every confidence that JDSU will handily beat the street 
estimates.  However, optimism is already reflected in the stock.  
With a $45 move since we picked it on January 13, JDSU has been 
and should continue to be a winner, and we may pick it up again 
as its split date of March 10 approaches.  Based on Nortel 
delivering a 22% earnings surprise after today's close, with most 
of their 21% revenue growth coming in their optical business, the 
long term future for those of you that actually own JDSU shares 
or LEAPS looks great.  It's just drop for now, not a drop forever.

EXDS $129.38 -0.44 (-8.50) Same story, different stock.  Hopefully, 
you got out yesterday before the afternoon selloff.  EXDS reports 
earnings tomorrow, so we are dropping it tonight.  The good news 
is that EXDS could announce another split with their earnings 
announcement.  We will be keeping an eye on EXDS with the idea 
that it may again make a good play, depending on the earnings and 
possible split.  Until then, time to harvest the profits and exit 
the play.  For those of you contemplating hanging on, just a 
reminder that you won't go broke making a profit.  Sell too soon.

SEPR $146.00 -4.00 (-9.00) It's time to let SEPR go for the
time being.  SEPR took it on the chin Monday as the broader 
markets experienced wide spread selling.  SEPR did manage to 
make a new high at $158.50 before the selling began.  The 
volume Monday was fairly heavy with 920K changing hands.  SEPR 
fell to a support level of $135 today before buyers stepped in.  
SEPR ended the session down -4.00 at $146.00.  We are dropping 
SEPR, as the company reports earnings Friday morning before 
the open.  We will keep our eye on the biotech company as they 
announced a 2-for-1 split of the company's stock last week.  
The ex-date for the split is scheduled for Feb 28th and could 
show up on our play list as a split run play in the very near 
future. 


PUTS:
*****

WCOM $43.19 +2.38 (+1.56) We were wondering if poor WCOM was 
ever going to find a bottom and it looks like we got our answer.
Setting a new 52-week low at $40.63 yesterday, WCOM finally
got some relief today, adding $2.38 by the close.  Adding to
the recovery today was the positive earnings announcement from
AT&T.  There may be further downside potential if the broad
market continues to weaken, but we think there are better
opportunities elsewhere.



********************
PLAY UPDATES - CALLS
********************

TQNT $160.00 +17.00 (+18.13) TriQuint Semiconductor has been 
one of the single best performing technology stocks of the 
past two days.  Yesterday was a perfect day for trading the 
strategy mentioned in Sunday's write-up.  TQNT gapped up on 
the open, during amateur hour it pulled back and subsequently 
experienced a very nice rally after taking out the opening 
high price, only to suffer profit-taking into the close.  Today, 
TQNT got a huge boost for being added to the S&P MidCap 400 
Index.  The stock gapped up double digits, pulled back only 
a little, and then made another new high right before the 
close.  This is a very strong accumulation pattern and we will 
go with it until it stops.  Since the trading pattern is 
intact, try to avoid buying gap ups and try to possibly go 
long on pullbacks.  Be very careful if the stock trades below 
today's low print of $148.75.  Any break in the uptrend could 
result in some selling and a period of consolidation.

AFFX $224.75 -1.63 (-28.88) Affymetrix trades just as true to 
breaking support levels to the downside as it does breaking 
resistance to the upside.  One of the problems of trading a 
stock that just went parabolic to the upside is that real 
support is not found until the stock goes all the way back to 
the breakout point.  This is exactly what happened today.  The 
breakout point for AFFX was $204.  Today the stock bounced 
very nicely off of $205.88 and rallied the rest of the day.  
Humane Genome stocks have been hit with profit taking.  
Today's close below yesterday's low tells us that AFFX might 
not be out of the woods yet.  If it does trade to the upside 
tomorrow then look for initial resistance at $226.50 followed 
by $232.50.  If it can take out those levels then $250 could 
be reached very quickly.

GMST $75.00 +2.94 (-4.88) We still like the story that has 
propelled the shares of Gemstar higher.  We also like the 
overall uptrend.  The break below the $80 support was a little 
discouraging in the very short-term.  Today the shares of 
GMST dropped in what could have been a short-term selling 
capitulation within an uptrend.  The nice rally into the close 
was very encouraging especially with the stock closing up on 
the day.  We mentioned in Sunday's write-up that a little 
consolidation looks to be in order for GMST.  It is very 
possible that a little patience will be necessary before we 
can start taking profits.  There is some good support in the 
$72 area which might provide a good entry point for a 
bullish position.  Any gap up will take out today's high, 
which would be bullish.  However, try and be patient and see 
if you can get a pullback.  A trading range between $72 and 
$81 seems likely for the next few days.  CIBC World Markets 
began coverage of GMST today with a Strong Buy recommendation.

PCS $108.25 -0.25 (-2.50) Though PCS did have two days in a 
row on the downside, it spent the majority of today's session 
on the road to recovery.  Monday, PCS opened and quickly traded 
to a high of $111.50 before succumbing to a few rounds of 
profit-taking.  PCS fell out of bed this morning, opened down 
$2.50 and traded as low as $104.25.  This looks to have been 
a good place to get on board with new entries.  PCS moved 
steadily up for the rest of the day and managed a close right 
on its 5-dma.  PCS could encounter some resistance at the $110 
level.  Should PCS continue picking up its positive momentum, 
we could be cleared for new entries to carry us through to 
earnings.  Do not forget the reasons for this play.  We have 
an earnings announcement on February 1st, followed by a 2:1 
split on February 4th.  

CMVT $152.00 +6.63 (+1.63) We were really starting to get
concerned about CMVT, especially after the drop to $137.50
during amateur hour today.  Fortunately the buyers came back
and quickly pushed our play up to the $142-143 range where it
stayed until the last hour of the day.  Volume returned and
pushed CMVT up through $144, (which could have become
resistance), to close at its high of the day.  We are now back
above the $149 level, but we need to see it hold.  Look for a
bounce at this level or a continued move up on strong volume
before opening new positions.  Remember that the primary catalyst
for this play (other than momentum) is our anticipation of a
split announcement.  Congratulations if you bought the dip
this morning, but don't forget to keep those stops in place.

TWX $86.63 -1.00 (-4.88) Given the carnage in the markets
yesterday, our TWX play held up very well.  It didn't even
seriously challenge support at $84.  Melting down with the
broader markets yesterday, TWX finally bounced at $85 in the
last 30 minutes of the day, closing at $87.63.  Although volume
remains near 5 times its historical average (a side effect of
merger interest), it was encouraging to see that it was less
than half the ADV seen all last week.  Recall that this is a
leveraged play on the merger with AOL.  The selloff in AOL
that followed the merger announcement looks to have been
overdone and we want to take advantage of the recovery.  There
are 1.75 outstanding shares of AOL for each share of TWX,
meaning TWX shares will move faster in this merger-of-equals.
Adding further fuel to the play was the announcement yesterday
that TWX and EMI Group reached an agreement to merge their
recorded music and music publishing interests in a 50/50 global
joint venture.  Going forward, wait for a bounce off support
accompanied by a rise in volume before initiating new positions.
With the current volatility in the broad markets, be sure to
use stops.

VOD $55.06 +0.13 (-0.88) Considering the ferocity of the
selloff in the markets yesterday, VOD has behaved very nicely,
telling us that the $54 level is strong support.  Dipping as
low as $53.94, VOD saw buyers return, pushing the price back
up for only a $1 loss on the day.  Trading today was fairly
tame, with our merger play adding $0.13 on light volume of
only 1.8 million shares.  New positions can be considered on
a bounce from the $54-55 level as long as buying volume returns.
In the news, VOD shareholders overwhelmingly approved the
pending merger with Mannesmann and the US joint venture with
Bell Atlantic.  Chris Gent, VOD's CEO reaffirmed the company's
strategy of becoming Europe's global telecom leader and urged
Mannesmann shareholders to approve the merger before the offer
expires on February 7th.

NOK $182.75 +2.75 (-2.88) Earnings are on the immediate horizon, 
scheduled for February 1 before the bell.  We might even get a 
split announcement then too.  Unless NOK has all of a sudden 
forgotten how to make phones, the fabulous earnings of NOK's 
suppliers (TXN, AMCC) are telegraphing that NOK may blow away 
their earnings too.  Their CEO's admission that they would be 
cramming three years of revenues into two years is promising for 
the future.  Technically however, the wimpy volume today despite 
the gain, throws a caution flag.  We'd expect that this close to 
earnings and a possible split, NOK ought to move with a bit more 
conviction.  No matter, even in the turbulent action over the 
last two days, a rising support level of $180 is holding nicely.  
Still NOK needs to get the lead out.  Our best suggestion is to 
still buy on any weakness with your eye on February 1.  Just be 
sure the market is running in your favor before you get into the 
play.

MFNX $70.63 -3.38 (+0.75) OK, still no news, but we were grateful 
to see MFNX finally have a negative day after 11 straight days of 
gains.  This is probably the only time you will ever see us happy 
about a loss for the day.  Nothing goes up forever in a straight 
line and MFNX needed a break in order to give us an entry.  You 
might view today's loss as a buying opportunity, especially since 
it came on reduced volume compared to recent days.  Along with 
everything else in today's market, MFNX too got a bump back up 
over $70 late in the afternoon providing some support at $68.  
From last Friday, there is also support at $66.  Target shoot to 
your comfort level, but recognize that today's loss turns the 
technical indicators in the down direction, and frankly one day 
may not be enough for MFNX to cool off.  Give it some room.  Let 
a pickup in volume and overall positive tone of the market be 
your guide.  Unfortunately, there is no earnings event on the 
horizon until perhaps late February or early March according to 
IR.  So we'll have to wait for that earnings run until later.

ANAD $80.34 +4.38 (+2.25) The final countdown is upon us.  
There's only two trading days left to play this earnings' run.  
ANAD is confirmed to report this Friday at 8:30am.  The past 
two days have been volatile however, the stock didn't disappoint 
us amidst the Nasdaq's weakness.  On Monday ANAD managed to 
trade consistently above $80 until the late day pressure pushed 
it down -$2.88.  Today amateur hour was nerve-wracking as ANAD 
plummeted to an intraday low of $73.75.  But the stock's 
powerful run-up as the market reversed restored our confidence.  
This is indeed all "good & dandy", but remember the tight two-
day time frame left to play.  OIN never recommends holding over 
an earnings' announcement.

LVLT $108.88 -4.00 (-1.63) At its lowest point of trading 
today, LVLT lost over 10.3% of its share price the day after its 
analyst and investor conference.  Today's downdraft was sharp 
and the dip below the 5-dma ($105.05) was a bit daunting.  
However the decisive recovery during the last hour of trading 
proved the stock hadn't lost its upward momentum.  More simply, 
LVLT was a victim of expected profit-taking after such huge 
gains and of course was responding to the overall market 
weakness.  If you're more conservative, wait for another break 
through $110 for better confirmation.  The main topics of 
yesterday's conference included Level3's accelerated worldwide 
network construction schedule that is expected to be finished 
ahead of schedule in the 4Q of 2000.  Also company executives 
discussed the expansion of its wholesale facilities and the 
plans to build an Asian undersea connection.  The race with 
Qwest (Q) and Global Crossing (GBLX) is on!  Today Kaufman 
Brothers reiterated a Buy recommendation and issued an $163 
price target.  LVLT is reporting earnings next week on February 
3rd, before the bell.

NTLI $125.50 -2.75 (-10.88) NTLI suffered a significant decline 
yesterday violating its trailing support at the 5-dma ($129.84).  
Still we're keeping this split play on our call list because it 
held firm at the 10-dma ($125.51) throughout trading today.  Put 
another way, this downdraft is more likely a response to the 
negative market sentiment and natural consolidation.  Recall 
NTLI just set an all-time high at $137.09 on Friday.  Consider 
waiting for a definitive bounce before opening a new position. 
This play is time-sensitive.  There's only a few trading 
sessions left before NTLI splits 5:4 on February 3rd.  In the 
news, NTL and Aston Villa, an English Premier League soccer club 
inked a lucrative deal.  Aston Villa will be given a $42.9 mln 
interest-free loan payable over five years.  In turn NTL 
receives a 9.9% stake in the club and according to a Premium TV 
managing director Geoffrey Hamilton-Fairley, NTL would harness 
"all media opportunities including e-commerce and the Internet, 
which is going to be an increasingly important medium in 
football".  This arrangement follows others in the industry 
vying for media rights.  



***********************************************
PLAY UPDATES - CALLS - CONTINUED IN SECTION TWO
***********************************************



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This newsletter is a publication dedicated to the education 
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Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


********************************
PLAY UPDATES - CALLS - CONTINUED
********************************

HGSI $205.19 -10.06 (-16.69) HGSI jumped up to a new 52-week
high right out of the gate Monday morning at $241.  Actually 
the Genomics company held up very well until the selling got 
serious in the major indices.  HGSI fell to a low of $205, but 
rebounded to close at $215.25 down only -6.63 for the session.  
The volatility continued today as traders sold shares of HGSI 
at the opening bell.  HGSI made a low of $196.81 in the first 
fifteen minutes of trading today, when the buyers stepped in 
bidding the price back up. Given the fact that HGSI has gained 
over $96, since Jan 12th, a retracement was not unexpected.  
What is impressive, is how well the stock held up given the 
weakness seen the past two sessions.   HGSI did propose a 
private offering of $150 million, in convertible notes Monday 
after the close.   HGSI splits 2:1 next Monday and we believe 
HGSI may regain its momentum going into the split.  The $200 
area provided good support for HGSI.  Continued movement to 
the upside would provide one last chance to enter this split 
run play.  A close below $200 would definitely change our view.

NTAP $107.19 +5.19 (-9.94) NTAP could not escape the selling
in the broader markets Monday.  Investors shaved almost 13%
off the price of NTAP stock, as traders finally decided to 
take some money off the table.  The volume behind the move was 
solid with 3.2 mln shares changing hands.  NTAP gave back in 
one day, most of what it gained last week, but did bounce off 
a strong support level this morning at $100.  So we are back 
at square one.  NTAP did pick up $5.19 today on good volume.  
Our reasons for entering this play have not changed.  We believe 
the company is well positioned in its industry, and a can produce 
a good bang for the buck.  NTAP announced today that Informix 
Corporation has certified NetApp data management appliances, 
also known as "fliers" for deployment in Informix data 
environments.  As for our play, continued momentum would 
provide a good point to enter a new play.  Conservative 
investors may want to see NTAP move through the $110 resistance 
level, supported by strong volume, prior to placing an order.

DISH $94.81 -1.06 (-1.44) Our play in DISH started off in the 
right direction first thing Monday morning.  We said Sunday that 
we believed the recent momentum behind DISH had the company 
poised to break out over $100.  Break-out it did.  DISH made a 
new high at $104.44 in the first hour of trading, pulled back 
near $100 and began another move higher before the carnage began 
in the major indices.  Although it wasn't panic-selling investors 
sold shares of DISH all the way down to $95, near the end of 
the session.  The selling continued this morning, however DISH 
bounced off its 10-dma at $91.38 when buyers entered the market 
driving the price of DISH shares back up to $94.81.  No company 
specific news in the past two session, just traders moving in 
and our of the stock.  Intraday support for DISH is seen at $92 
and resistance is found at $96.  A new entry point would be seen 
on continued strength over $96.  With the volatility seen in the 
broader markets, set your stops according to your risk profile 
and be prepared to take a profit when given the opportunity.    



*******************
PLAY UPDATES - PUTS
*******************

RMBS $76.38 +1.38 (+1.00) Investors are casting a cautious eye 
in the direction of RMBS.  RMBS was up at close today, but 
volume was below average, meaning those investors buying RMBS
are minimal.  The 50-dma ($76.08) acting as resistance held true
with a few bounces above the level, but no breakouts.  We did 
fall as far as 72.25 and that is bringing us closer to support 
at $67.  Which should be the next stopping point for RMBS.  
So when you have a stock like RMBS that has wide trading ranges 
from day to day, entry points are easier to find.  Anywhere 
close to resistance from the 10-dma would be a good entrance.  
Stops are important on any breakouts above the 10-dma that are 
supported with volume.  Without a lot of investors support 
backing the up day, which was probably due to market conditions 
more than anything, we still see RMBS on a downward fall.  
There was no major news effecting our play today. 

IIJI $78.44 -3.06 (-3.19) It was a great day for our put play 
as IIJI finally broke through and closed below $80.  If you
have been following this one at all, you know that IIJI has 
been flirting with a breakthrough of this level for some time 
and had been unsuccessful, until today.  IIJI moved down to a 
low just over $75.  IIJI is now trading under its 100-dma of 
$79, which could provide some resistance.  This level is backed 
by $80 and we are looking for this level to begin to provide as 
formidable of resistance as it did solid of support.  IIJI does 
have some support between $74 and $72.  Volume has been a little 
light and though we are encouraged by today's decline, we would 
like to see the volume pick up to confirm the validity of the 
drop.  Until we see an increase in volume to back the trading 
at this level, we recommend holding off on any new entries.

FD $43.06 +1.19 (-0.81) Quite a bit of news out there for FD 
so far this week.  On Monday, Net Perceptions (NETP) announced 
that it had been selected by Fingerhut Companies, a division 
of FD, as it's preferred partner for advanced e-commerce 
solutions.  Meaning?  This appears to be a step toward FD's 
continuing Internet advancement.  This morning, two Bear 
Stearns analysts released an article revealing the results of 
study that they had done in the weeks preceding the holidays 
of several well-known Web sites.  FD was mentioned in the 
article though it was not in the most positive light.  FD was 
touted as the "delivery offender" since FD was unable to 
deliver the merchandise that the analysts had ordered by the 
designated time frame.  The analysts report goes on to warn 
that on-line shopping can be a "tedious" experience and say 
that shoppers may be better off by making a run to the store.  
Not exactly the kind of news you want to be hearing soon after 
a company announces that they plan on spending as much as $200 
million on its Internet businesses in the next twelve months.
$42 served as support throughout today's session.  $44 has 
continued to provide resistance.  Being that we did not see 
good volume backing today's move up, we are not convinced that 
today was any kind of indication of trend reversal.  Therefore, 
watch for the $44 level to hold, a drop below $42 backed with 
good volume and take advantage of days like today for possible 
points of new entry.

MU $65.94 -3.56 (-1.25) MU shares reacted positively on Monday 
to an upgrade from ABN AMRO, who raised MU from a Hold to a 
Buy with a 12-month price target of $120.  The stock picked 
up over $2 on the news.  The enthusiasm regarding the upgrade 
seems to have been rather short lived as today, MU resumed its 
downward trend.  This was helped by BancAmerica Semiconductor 
analyst, Rick Whittington, who downgraded MU this morning from 
a Strong Buy to a Buy, citing concern over the continuing 
decline in DRAM spot prices as the reason for the downgrade.  
This news caused shares of MU to drop sharply mid-day.  MU 
traded as low as $64.25 before attempting a bit of a recovery.  
MU then fell back to close toward the low end of its day.  We 
are thankful for Monday's upgrade as it offered us some nice
opportunities for entry points.  $71 held as resistance on 
Monday and MU's 5-dma (currently $69) managed to hold MU back 
today.  We saw big volume backing today's decline, an nice 
bearish indication.  Watch for a drop below $65 with continuing 
volume.  The next support level looks to be right at $60.

SLR $76.50 -0.50 (-1.88) SLR continues its decline on the chart.  
Technically, it's weak in the RSI, MACD, and stochastic 
departments.  Extra volume above the ADV while SLR is in a 
decline is an added bonus.  Late yesterday afternoon would have 
made a great entry as it fell back under $79 after bouncing up to 
about $81 early in the day.  Today, the trend continued.  While 
finding just a bit of near-term strength with a small uptrend 
from $75 at 2:30 p.m. ET, we don't think that will hold.  The 
next real support is at $72.  Earnings are not until March 13, so 
an earnings run will not save it.  Neither will their 2:1 split 
which does not occur until March 8.  If SLR bounces up at 
tomorrow's open, and assuming the rest of the market doesn't 
blast off into the stratosphere, consider taking a position soon 
after amateur hour (generally the high of the day on a weak 
stock) or when the price declines again below $79.  It's a great 
company, but everybody is looking at the other pretty girls at 
the dance right now.

CMGI $114.44 +3.81 (-3.81) CMGI edged itself closer to our 
ultimate goal near the 50-dma ($105.76) this week.  Overhead 
resistance proved to be strong at $115 indicating a pattern of 
lower-highs may be forming.  And volume remains robust with over 
8 mln shares being exchanged in comparison to the ADV of 5.75 
mln.  Importantly CMGI also managed to penetrate $112.50 during 
intraday trading this week.  This is a good sign because it 
represented the first line of opposition established last week.  
Following along those lines, we'd like to see a close below this 
mark over the next few days.   In the news CMGI and its venture 
capital arm, @Ventures, launched @Ventures Technology Fund, a $1 
bln capital investment focusing on Internet technologies and 
infrastructure companies.  Also CMGI announced a 50-50 joint 
venture with Pacific Century CyberWorks, Asia's largest scope 
Net company outside of Japan.  Together they will orbit the 
emerging Asian cyberspace.

RLM $66.38 -0.88 (-3.00) The negative market sentiment added 
pressure to RLM's share price over the past two days.  Although 
there was a big drop in volume too with levels dipping below its 
ADV of 500 K.  Nonetheless, RLM shed another 4.3% in a steady 
descent.  There hasn't been any company specific news to effect 
Reynolds.  However on Monday rival Alcan (AL) reported solid 
earnings coming in at $0.69 p/s versus $0.30 last year same 
quarter and beating First Call estimates of $0.56!  Make note 
too that investors shunned the Buy reiteration from Deutsche 
Bank Securities and the $110 price target it issued for RLM on 
Monday.  Taking a look at a one-month chart it appears a bounce 
off the 5-dma (now at $68.36) signals is a comparative entry 
point.



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

VECO - Veeco Instruments Inc. $56.00 +0.75 (+6.38 this week)

Veeco Instruments is a worldwide leader in metrology tools for 
the data storage, semiconductor and research and scientific 
markets; and process equipment etch and deposition tools for 
the data storage and opto-telecommunications markets.  Major 
clients include; IBM, Seagate, Read-Rite, TDK, Siemens and 
Samsung.  Some of Veeco's major products include, force/
scanning probe microscopes, optical interferometers, stylus 
profilers, X-Ray fluorescence thickness measurement systems 
and leak detection/vacuum equipment.

Companies that are providing the tools enabling semiconductor 
and telecommunications companies to make their products have 
been very strong so far this year.  In fact, the relatively 
smaller P/E's and strong growth rates of these companies has 
made them a very popular way to invest in the continuing 
technological revolution.  Add to this the markets recent 
broadening of investments to start including some of the 
smaller stocks out there (Veeco has a market cap just under a 
billion dollars), leads us to believe that more money may be 
going into stocks like Veeco.  In recent weeks, Veeco has 
received new orders for just under $7 million.  If this trend 
continues, which seems likely considering how technology 
manufacturing companies are constantly upgrading equipment to 
stay competitive, then look for Veeco to get more new contracts 
and to continue its stock price appreciation.  It was a long 
time in coming, but Veeco is finally approaching its high of 
just under $65 made last year right around earnings.  Hmmm, 
could it happen again?  Since October the stock had been trading 
in a nice range between $40-$50 with a fakeout selloff in the 
first week of this year (what stock didn't).  The recent rally 
has been the result of the breakout above $50 on incredible 
volume too.  With its penchant for round numbers, look for a 
test of the old highs when the stock can take out $60, followed 
by a possible run into earnings on Feb 10th.  Support can first 
be found at $53.38 and then $50. 

The most recent analyst comments came from Bank of America.  
B of A raised their rating to a Strong Buy.

BUY CALL FEB-50 QVC-BJ OI=394 at $7.75 SL=5.75
BUY CALL FEB-55*QVC-BK OI= 61 at $4.38 SL=2.75
BUY CALL FEB-60 QVC-BL OI=107 at $2.56 SL=1.25

SELL PUT FEB-50 QVC-NJ OI= 30 at $1.38 SL=2.50
(See risks of selling puts in play legend)

Picked on Jan 25th at   $56.00    P/E = 41
Change since picked      +0.00    52-week high=$58.69
Analysts Ratings     7-5-1-0-0    52-week low =$24.44
Last earnings 10/99  est= 0.35    actual= 0.39
Next earnings 02-10  est= 0.39    versus= 0.30
Average Daily Volume =   366 K

Chart = 
/charts/charts.asp?symbol=VECO

****

PMCS - PMC-Sierra Inc. $196.88 +9.63 (+5.63 this week)

PMC-Sierra is in the business of designing, developing, and 
supporting high-performance semiconductor system solutions for 
the communications market.  The company is a leading provider 
of high speed internetworking component solutions emphasizing 
ATM, Ethernet, SONET/SDH, T1/E1 and T3/E3 applications.  The 
company's products are used in broadband communications 
infrastructures and high bandwidth networks.  Other network 
equipment manufacturers integrate the company's products into 
their own system for Internet, remote-access and corporate 
data networking applications. 

Things were already looking pretty good for PMCS.  Announcing 
earnings two cents better than estimates and a 2:1 stock split
ex-div on February 14th last week certainly didn't hurt things.  
Follow that up with a dose of reiterated ratings peppered with 
a few healthy upgrades, and voila!  You have yourself a call 
play.  PMCS had spent a good deal of time flirting around the 
$100 level.  PMCS bid farewell to this level with a brief dip 
mid-December and has been headed steadily uphill ever since.  
PMCS looked to have misplaced its running shoes around the 7th 
of this month but found them at $120 and quickly reclaimed its 
positive momentum run, tagging a low $34 dollars higher the 
very next day.  Morgan Stanley gave PMCS yet another boost in 
the arm by initiating coverage at an Outperform with a $225 
price target.  On Monday, PMCS traded up to a new all-time high 
of $205.  PMCS traded up to $204 during today's session.  We 
did see volume over two times the daily average backing today's 
nearly 10-point gain, another good bullish indication in favor 
of our call play.  PMCS has plenty of support to fall back on 
should the profit-taking bears emerge from the woods.  PMCS 
has a bit of support right around $191 with more solid support 
backing at $190.  Additional support can be found at the 5-dma, 
which is currently at $184 and has done a nice job of holding 
in the past.  This is backed by the 10-dma of $171.50, should 
things get ugly for a bit.  Resistance is at $200.  We are 
inching closer to a close above $200, which we would like to 
see to confirm continuing positive momentum.

Last Thursday, the American Stock Exchange announced plans to 
begin trading in options on several companies, one being PMCS.  
On Friday, Robertson Stephens reiterated their Strong Buy Rating 
on PMCS.  That same day, Lehman Brothers upped their earnings 
estimates for PMCS and Pacific Crest upgraded PMCS from a Buy 
to a Strong Buy.  Wow, enough said!

BUY CALL FEB-190 SDL-BR OI=218 at $22.25 SL=17.50
BUY CALL FEB-195 SDL-BS OI=114 at $19.75 SL=15.50
BUY CALL FEB-200*SDL-BT OI=252 at $17.50 SL=13.50
BUY CALL FEB-210 SDL-BB OI= 64 at $13.63 SL=11.00

Picked on Jan 25th at   $196.88     P/E = 170
Change since picked       +0.00     52-week high=$205.00
Analysts Ratings     15-6-2-0-0     52-week low =$ 31.94
Last earnings 01/00   est= 0.27     actual= 0.29
Next earnings 04-20   est= 0.29     versus= 0.17
Average Daily Volume = 1.55 mln

Chart = 
/charts/charts.asp?symbol=PMCS

****

SILK - Silknet Software $159.50 +9.50 (+13.50 this week)

Silknet Software is squarely positioned in the e-business
world, providing its industry-leading customer-centric
applications and systems to the likes of Microsoft, Office
Depot, Sprint, Inacom, and Bell Canada.  SILK's software
allows companies to build strong customer relationships
through personalized marketing, sales, electronic commerce
and customer support services.  SILK's approach integrates
all customer interactions and data, whether across the Internet,
by phone, through e-mail, or in person, providing the company's
partners and customers with a single view of their relationship.

Along with the rest of the NASDAQ, sellers hammered SILK right
after the first of the year.  After finding its feet near $105,
buyers began immediately buying it up and quickly pushed the
price above $130.  After a couple days of consolidation, the
stock began steadily moving up, using the 10-dma (currently
$142.50) as support.  The move really got underway when the
company announced strong earnings on the 13th, followed by
George Gilbert of Credit Suisse First Boston reiterating his
Buy rating the next day.  It has been encouraging to see that
SILK has remained strong this week in the face of the weakness
in the broader markets.  We are a bit concerned that volume 
has been light and we want to see it pick up going forward.
Looking at an intraday chart, we see a very nice pattern of
higher-highs and higher-lows over the past week and a half.
Because the move up has been so quick, there is not strong
support until $133.  We should see mild support at $150, and
then $144; a bounce at either of these levels accompanied by
increasing volume is a good target for opening new positions.
The next point of resistance will likely be the 52-week high
($177.94), set on December 30.  This is a volatile internet
stock, subject to large daily moves.  While this provides
plenty of entry points, exercise caution and use stops to
protect yourself in the event of a correction.

SILK continues to form strong alliances and customer 
relationships, the latest with Computer Sciences Corp.
Beneficial to both companies, the agreement (announced today)
extends SILK's business-to business market penetration.  On
January 19th, the company announced the adoption of Silknet
eBusiness Systems and Silknet eService by two automotive
e-commerce companies, BBCN.com and CarParts.com.

BUY CALL FEB-155 ULI-BK OI= 23 at $21.00 SL=16.38
BUY CALL FEB-160*ULI-BL OI=156 at $18.50 SL=14.50
BUY CALL FEB-165 ULI-BM OI= 41 at $16.63 SL=13.00
BUY CALL APR-170 ULI-BN OI= 41 at $14.63 SL=11.50

Picked on Jan 25th at $159.50     P/E = N/A
Change since picked     +0.00     52-week high=$177.94
Analysts Ratings    1-6-0-0-0     52-week low =$15.63
Last earnings 01/00 est=-0.28     actual=-0.20
Next earnings 04-13 est=-0.26     versus= N/A
Average Daily Volume =  274 K

Chart = 
/charts/charts.asp?symbol=SILK



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

No new put plays tonight.



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

CMVT - Comverse Technology $152.00 +6.63 (+1.63 this week)

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.

Sunday's Write Up

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.

Tuesday's Write Up

CMVT We were really starting to get concerned about CMVT, 
especially after the drop to $137.50 during amateur hour today.
Fortunately the buyers came back and quickly pushed our play up 
to the $142-143 range where it stayed until the last hour of 
the day.  Volume returned and pushed CMVT up through $144, 
(which could have become resistance), to close at its high of 
the day.  We are now back above the $149 level, but we need to 
see it hold.  Look for a bounce at this level or a continued move 
up on strong volume before opening new positions.  Remember that 
the primary catalyst for this play (other than momentum) is our 
anticipation of a split announcement.  Congratulations if you
bought the dip this morning, but don't forget to keep those stops 
in place.

BUY CALL FEB-145 CQV-BI OI=190 at $14.63 SL=11.50
BUY CALL FEB-150*CQV-BJ OI=285 at $12.00 SL= 9.50
BUY CALL FEB-155 CQV-BK OI=229 at $ 9.50 SL= 7.00
BUY CALL MAR-150 CQV-CJ OI=  4 at $16.75 SL=13.00

SELL PUT FEB-135 CQV-NG OI=130 at $ 4.00 SL= 5.75
(See risks of selling puts in play legend)

Picked on Jan 9th at    $139.00     P/E = 78
Change since picked      +13.00     52-week high=$158.50
Analysts Ratings     10-4-0-0-0     52-week low =$ 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 = 1.29 mln

Chart = 
/charts/charts.asp?symbol=CMVT


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

Dow Stages Comeback?

Monday, January 24 

Nervous investors clobbered the market today, driving the Nasdaq
to its fourth biggest point loss ever after a Federal Reserve
official suggested aggressive interest-rate hikes may be in the
works. The Dow closed down 243 points, its ninth biggest point
loss, while the Nasdaq composite ended down 139 points at 4096.
The S&P 500 index ended down 39 points at 1401. Volume on the Big
Board was active with 1.1 billion shares traded. Losers thumped
winners 2,039 to 1,029. Bond prices were higher with the 30-year
treasury up 20/32, bid at 93 6/32, moving its yield down to 6.64%.


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

Cintas        CTAS   FEB65C/60C   $0.75   credit   bear-call
Progressive   PGR    FEB85C/80C   $0.62   credit   bear-call
BCE Inc.      BCE    FEB75C/85C   $8.25   debit    bull-call
ESC Medical   ESCM   APR7C/10C    $1.38   debit    bull-call
Sprint Pcs    PCS    FEB85C/95C   $8.88   debit    bull-call
Sprint Pcs    PCS    FEB85C/100C  $12.50  debit    bull-call


Portfolio plays:

Monday's sell-off started right after Federal Reserve Bank of
Atlanta President Jack Guynn said he did not see many signs that
the committee's previous actions were slowing consumer demand.
Retailers, cyclicals, Internet stocks and energy shares quickly
plummeted and the majority of blue-chip stocks ended the day
sharply lower. The Fed's policy-setting committee is scheduled
to meet next week to decide whether to raise interest rates and
most economists are now predicting a 25-basis-point increase in
the federal funds rate. Until today, most technology investors
had ignored the possibility of higher interest rates. Now it
appears they are taking notice.

In our long-term portfolio, Johnson & Johnson (JNJ) was the big
loser, falling $6 to $84. Our LEAPS/CC's play was substantially
profitable and based on the bearish trend, we decided to close
the position to protect current gains. On the good side, Procter
& Gamble (PG) recovered some losses today after reporting it has
ended merger discussions with Warner-Lambert (WLA) and American
Home Products (AHP). PG's CEO said the pact would have created
substantial shareholder value with minimal up-front dilution but
investors had been skeptical about the 3-way merger. In addition,
P&G reportedly had sent an unsolicited letter to Gillette (G),
seeking to discuss the possibility of a deal weeks before they
entered talks to buy Warner-Lambert. Our long-term position will
remain profitable with the stock in the $100 range but with the
recent bearish technicals and earnings forthcoming, it may be
prudent to exit the spread now while it is profitable. Another
losing issue, SBC Communications (SBC) appears to be content in
the new range below $45. With little news to move the stock in
the short term, we have decided to close this position and move
the remaining capital into a new play.

The few winners in today's session were in computer software and
biotechnology issues. The leader in the Spreads/Combos portfolio
was Geron (GERN), up almost $6 at $37 on continued optimism over 
their new patents in cloning technology. The patents cover nuclear
transfer procedures, which could help doctors grow living tissue,
such as cartilage, bone and muscle, for transplants. The transfer
technology is expected to be of significant value in regenerative
medicine, which is focused on producing cells and tissues in vitro
for treatment of a wide range of degenerative diseases. Another
issue that rallied today was Computer Associates (CA). The stock
climbed $2.38 to a new high near $73 after a joint announcement
that Computer Associates and Red Hat (RHAT) have discovered some
ground-breaking solutions For Linux. The details will be released
later this week. Computer Associates also reports earnings after
Tuesday's session.


Tuesday, January 25

Investors recovered from Monday's interest-rate woes, boosting
the blue-chip index to a winning session on strength in corporate
earnings. The Dow Jones industrial average rose 21 points to end
at 11,029 while the Nasdaq composite index moved 71 points higher
to end at 4,167. The broader S&P 500 stock index climbed 8 points
to close at 1,410. On the NYSE, decliners beat advancers 17 to 12
with over 1 billion shares exchanged. There were 187 shares at new
lows and 33 at new highs. The benchmark 30-year U.S. Treasury Bond
was up 6/32 with the yield at 6.63%.


Portfolio plays:

A number of issues rebounded in today's session and small-caps
were again the leaders in the portfolio. Our recent adjustment on
Key Energy Group (KEG) is paying off as the bullish stock climbed
another $1.06 to end at $9.12. The recent momentum is based on new
investor interest in the oil service companies and KEY's positive
earnings report last week. The CEO said the company should be able
to generate substantial free-cash flow, even with modest growth in
activity levels. Demand for service is increasing and activity in
all of their domestic and international operations grew from the
prior quarter. Equipment utilization, revenues and service margins
all showed signs of improvement. With commodity prices continuing
to escalate, customers are spending more on drilling, service and 
ancillary equipment. That virtually guarantees Key's success this
year as they are one of the world's largest land-based rig service
operators and one of the nation's largest drilling companies. The
other surprises came in the medical appliances group. I-Stat (STAT)
rallied $1 to close at $14 with no public news. The move provided
a break-even exit for those of you that may be concerned with the
bearish indications in the chart pattern. A break below today's
low would be another early exit signal and rather than testing the
support, it may be more prudent to move the capital into another
position. Medtronics (MDT) was the other medical mover, climbing
$1.50 to and at $44.75. Our bullish LEAPS/CC's spread returns the
maximum profit above $42.50.

Other issues in the long-term portfolio enjoyed bullish sessions.
Adobe Systems (ADBE) and Sun Microsystems (SUNW) both rallied in
the wake of recent positive earnings announcements and we expect
these well-known technology issues to hold their value even in the
event of a rate hike. In addition to being a sector favorite, Sun
Microsystems also announced a new pact with software maker Oracle
(ORCL) and business consultants Price-Waterhouse-Cooper to provide
technology tools and services to entertainment and media companies.
The companies said they plan to offer services such as archiving
and retrieval of content, support for e-business applications,
royalties and intellectual property rights management, and digital
conversion. In the latest chapter in the legal battle between SUNW
and Microsoft, a federal judge reinstated an order forcing MSFT to
change software based on the Java programming language created by
Sun Microsystems. The decision supports a November 1998 injunction
that was overturned by an appeals court last August. That should
be a bonus as well. One of our major oil issues was in the news.
Exxon Mobil (XOM), the world's largest publicly traded oil company,
finished unchanged at $84 after reporting last quarter's income
rose by 34%. Our bullish position is at maximum profit with the
stock at $85.


Summary Of Monthly Positions:

This month's incredible market volatility provided some excellent
opportunities for the Spreads/Combos section and we have tried to
offer a wide selection of different candidates in the most basic
strategies. Fortunately the market has cooperated with us in many
of the recent positions and we are happy to report that January's
group of plays enjoyed the best performance in the history of this
section. While our conservative style and simplistic approach may
not always be the most exciting avenue for profits, we hope you
can find something in the play suggestions or narratives that help
you become a profitable trader.


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

Stock   Pick    Last      Position    Credit  Cost    G/L   Status

ALLR  $130.25  $153.50  JAN175C/165C  $0.75  $0.00   $0.75  Closed
BCR    $49.00  $47.56    JAN65C/60C   $0.38  $0.00   $0.38  Closed
BCR    $49.00  $47.56    JAN65C/55C   $1.56  $0.00   $1.56  Closed
EXDS   $87.12  $137.88   JAN70P/72P   $0.50  $0.00   $0.50  Closed
LGTO   $61.31  $30.00    JAN80C/75C   $0.62  $0.00   $0.62  Closed
RMBS   $77.62  $75.38    JAN60P/65P   $0.38  $0.00   $0.38  Closed
TDS   $122.12  $121.19  JAN150C/J145C $0.50  $0.00   $0.50  Closed
TDS   $122.12  $121.19  JAN150C/J140C $1.38  $0.00   $1.38  Closed
VYTL   $45.25  $45.63   JAN55C/JAN50C $1.00  $0.00   $1.00  Closed

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


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

Stock  Pick    Last     Position     Debit  Value    G/L    Status

AG    $13.88  $12.81  MAY15C/FEB15C  $0.75   New     Play    Open
BCGI  $5.12   $7.56    JUN5C/FEB7C   $1.31  $2.00   $0.68    Open
BEL   $64.13  $60.06  APR65C/JAN65C ($2.00) $2.25   $4.25   Closed
BIDS  $5.06   $4.31    MAY7C/JAN7C   $0.62  $0.50  ($0.12)  Closed
CHB   $9.62   $8.13   APR10C/JAN10C  $0.81  $0.75  ($0.06)  Closed
CYCH  $11.88  $9.13   MAR15C/JAN15C  $0.75  $0.88   $0.12   Closed
GERN  $13.00  $31.56  MAR12C/JAN12C  $0.62  $1.00   $0.38   Closed
GERN  $13.00  $31.56  MAR12C/FEB15C  $1.25  $2.12   $0.88    Open
HUM   $9.25   $7.81   MAY10C/FEB10C  $0.75  $0.38  ($0.38)   Open
HRC   $5.75   $6.38    MAR7C/FEB7C   $0.19  $0.19   $0.00    Open
KEG   $6.81   $8.56    JUL7C/FEB10C  $1.93  $2.06   $0.12    Open
KLOC  $5.93   $5.56    APR7C/FEB7C   $0.75  $1.38   $0.62    Open
LOR   $18.00  $22.94  APR20C/JAN20C  $1.25  $1.75   $0.50   Closed
LOR   $18.00  $22.94  APR20C/FEB22C  $1.75  $2.75   $1.00    Open
MUEI  $10.50  $12.00  APR12C/FEB12C ($1.62) $0.75   $2.38    Open
PDE   $17.25  $17.56  APR17C/FEB17C  $0.56  $0.81   $0.25    Open
PILL  $13.62  $10.38  APR15C/JAN15C  $1.00  $0.50  ($0.50)  Closed
SATH  $13.00  $11.94  FEB15C/JAN15C  $0.38  $0.50   $0.12   Closed
SGI   $9.38   $10.81  FEB10C/JAN10C  $0.31  $0.75   $0.43   Closed
STRX  $8.43   $7.94    MAY7C/FEB7C   $0.12  $0.50   $0.38    Open
SVGI  $16.38  $24.78  JUN17C/JAN17C  $2.06  $2.50   $0.43   Closed
SVGI  $16.38  $24.78  JUN17C/FEB20C  $2.88  $3.62   $0.75    Open
SWBT  $19.93  $18.19  MAY20C/JAN20C  $0.93  $1.12   $0.19    Open
TERA  $6.62   $7.06    JUN5C/FEB7C   $2.00   New     Play    Open
TALK  $17.68  $18.69  APR22C/FEB22C  $0.25  $0.62   $0.38    Open
TDFX  $8.50   $9.00   MAR10C/FEB10C ($0.38) $0.25   $0.62    Open
THC   $26.31  $25.25  MAY30C/FEB30C  $0.75  $0.50  ($0.25)  Closed
ZOLT  $7.68   $9.88    APR7C/FEB10C  $0.75  $1.88   $1.12    Open

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

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


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

Stock  Pick    Last     Position     Debit   Value    G/L   Status

ADBE  $76.13  $62.88   JAN80/FEB75C  $6.50   $7.50   $1.00   Open
CA    $53.56  $70.81   JAN60/FEB65C  $2.12   $11.00  $8.88   Open
CS    $16.80  $27.50   JAN15/FEB22C  $4.75   $8.00   $3.25   Open
GM    $71.68  $81.94   JAN75/FEB80C  $6.62   $12.25  $5.62   Open
HRC   $5.75   $6.38    JAN7C/FEB7C   $1.25   $1.38   $0.12   Open
JNJ   $95.68  $89.88   JAN100/F100C  $2.12   $7.50   $5.38   Open
MDT   $39.38  $43.56   JAN37/FEB42C  $5.25   $8.00   $2.75   Open
MOT  $100.00  $144.25  JAN105/F135C  $22.50  $37.62  $15.12  Open
NETA  $25.12  $27.19   JAN15/FEB25C  $9.12   $10.25  $1.12   Open
PG   $109.50  $102.50  JAN100/F110C  $11.62  $12.12  $0.50   Open
SBC   $54.93  $42.81   JAN40/FEB50C  $12.62  $8.12  ($4.50)  Open
SLR   $71.25  $78.00   JAN70/FEB85C  $11.50  $18.00  $6.50   Open
SUNW  $35.88  $84.44   JAN37/FEB75C  $25.50  $34.00  $8.50   Open
UAL   $70.38  $60.06   JAN60/FEB70C  $11.25  $9.75  ($1.50)  Open
UAL   $70.38  $60.06   JAN75/FEB75C  $5.75   $4.75  ($1.00)  Open
VOD   $49.25  $55.88   JAN45/FEB50C  $7.75   $9.25   $1.50   Open
XOM   $81.94  $85.00   JAN85/FEB85C  $2.38   $7.00   $4.62   Open

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


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

Stock  Pick    Last     Position     Debit   Value    G/L   Status

AG    $13.75  $12.81  FEB12C/JAN15C  $1.50   $1.25  ($0.25) Closed
AGTX  $8.88   $8.81    JUN7C/FEB10C  $1.81   $2.00   $0.19   Open
AWEB  $9.68   $11.75  MAY10C/JAN12C  $0.88   $3.00   $2.12  Closed
BTGC  $15.50  $15.06  FEB12C/JAN15C  $2.00   $2.00   $0.00  Closed
CDN   $22.81  $21.88  MAY15C/FEB20C  $4.19   $4.62   $0.43   Open
CNCX  $29.38  $49.00  APR15C/JAN25C  $9.62  $10.00   $0.38  Closed
CNCX  $29.38  $49.00  APR15C/FEB40C  $17.75 $19.50   $1.75   Open
COHU  $29.25  $46.00  FEB25C/JAN30C  $2.88   $4.25   $1.38  Closed
CRUS  $14.06  $13.69  JUN10C/JAN15C  $4.25   $4.75   $0.50  Closed
CRUS  $14.06  $13.69  JUN10C/FEB12C  $2.25   $2.62   $0.38   Open
DLP   $26.63  $17.38  FEB30P/JAN25P  $3.25   $4.88   $1.62  Closed
EGRP  $24.94  $23.56  APR25C/JAN30C  $3.75   $5.00   $1.25  Closed
GSTRF $37.68  $43.69  MAR35C/FEB40C  $3.25   $4.50   $1.25   Open
KM    $10.00  $9.75    JUN7C/FEB10C  $1.75   $2.12   $0.38   Open
MSGI  $20.43  $19.13  MAY12C/FEB22C  $7.00   $6.88  ($0.12)  Open
NAV   $41.31  $43.75  JUL35C/FEB45C  $4.88   $8.50   $3.62   Open
NETS  $25.06  $25.25  FEB22C/JAN25C  $0.62   $2.62   $2.00  Closed
ONHN  $9.69   $8.13    APR7C/FEB7C   $0.62   $0.38  ($0.25)  Open
PCMS  $10.06  $13.50   MAY7C/FEB10C  $2.00   $2.50   $0.50  Closed
PCMS  $10.06  $13.50   MAY7C/FEB12C  $3.00   $4.00   $1.00   Open
PGEX  $22.56  $19.88  FEB12C/JAN20C  $7.12   $7.38   $0.25   Open
PTX   $5.38   $4.19    MAY5C/JAN7C   $1.38   $0.88  ($0.50) Closed
RCOT  $7.50   $12.00   MAY5C/FEB10C  $4.25   $4.50   $0.25   Open
SPOT  $49.68  $59.94  FEB45C/JAN50C  $4.00   $4.75   $0.75   Open
STAT  $15.75  $13.06  APR10C/FEB15C  $4.00   $3.25  ($0.75)  Open
T     $50.81  $52.38  JAN46C/JAN50C  $2.25   $3.25   $1.00  Closed
UIS   $29.25  $33.50  APR22C/FEB30C  $3.75   $7.00   $3.25   Open

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

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


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

Stock  Pick     Last     Position     Debit   Value   G/L   Status

AIG   $111.68  $103.94  JAN96C/110C  $10.88  $10.25 ($0.62) Closed
AIG   $111.68  $103.94  JAN104/110C  $4.62   $4.12  ($0.50) Closed
BVF   $51.93   $53.00    APR42C/50C  $10.00  $9.38  ($0.62)  Open
CD    $18.50   $20.75    JAN12C/17C  $4.06   $4.93   $0.88  Closed
COMS  $31.50   $49.56    JAN30C/32C  $1.31   $2.50   $1.19  Closed
HELX  $51.00   $58.00    APR25C/45C  $15.75  $16.25  $0.50   Open
LCOS  $64.00   $80.38    JAN47C/55C  $5.75   $7.50   $1.75  Closed
NAV   $41.31   $43.75    JAN40C/45C  $0.62   $2.75   $2.12  Closed
NEM   $24.43   $21.19    JAN20C/22C  $1.93   $2.12   $0.19  Closed
NTBK  $21.75   $18.00    JAN22C/25C  $0.25   $1.00   $0.75  Closed
PCLN  $65.06   $63.50    JAN50C/60C  $6.88   $5.25  ($1.62) Closed
QWST  $38.06   $41.81    JAN30C/35C  $4.00   $5.00   $1.00  Closed
SPLH  $12.25   $12.25    FEB7C/10C   $2.00   $2.00   $0.00   Open
SPOT  $49.68   $59.94    JAN45C/50C  $3.00   $4.38   $1.38  Closed
T     $50.81   $52.38    JAN46C/50C  $2.25   $3.25   $1.00  Closed
TKLC  $26.00   $28.63    FEB17C/22C  $4.12   $4.00  ($0.12)  Open
TWLB  $9.72    $7.72     FEB10C/12C  $0.75   $0.25  ($0.50) Closed
WDC   $5.56    $5.12     FEB5CC/NP   $4.38    New     Play   Open

* Priceline (PCLN) finished at maximum profit but that position,
  and a number of other plays were closed early to protect gains
  or prevent (limit) potential losses.

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


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

Stock  Pick    Last     Position   Credit    Cost    G/L    Status

DLP   $23.56  $17.38    JAN-17CC   $16.00   $17.50  $1.50   Closed
EMLX  $119.00 $136.38   FEB-100C   $95.00   $96.00  $1.00    Open
EMLX  $119.00 $136.38   FEB-95P    $92.50   $93.12  $0.62    Open
PSFT  $17.81  $25.00    JAN-15CC   $14.12   $15.00  $0.88   Closed

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


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

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

ALL   $24.50   $23.50  APR25C/25P   $5.50   $7.25   $4.25   Closed
ATI   $16.44   $22.06  APR17C/15P   $2.50   $3.38   $2.62   Closed
CAL   $36.43   $34.63  MAR35C/35P   $8.62   $11.00  $4.12   Closed
CBR   $27.19   $26.00  MAY25C/30P   $10.25  $9.50   $8.75    Open
CFR   $29.69   $24.63  MAR30C/30P   $3.06   $6.12   $5.25    Open
FDX   $35.19   $41.69  APR35C/35P   $9.75   $14.00  $9.00   Closed
JMED  $38.65   $56.06  MAR37C/40P   $8.12   $19.00  $18.75   Open
LHSG  $25.50   $35.50  APR25C/25P   $6.75   $11.75  $11.75   Open
MYL   $18.63   $26.75  APR17C/17P   $4.56   $10.50  $9.38    Open
U     $25.62   $23.75  MAY25C/25P   $8.00   $10.75  $4.62   Closed
UVN   $85.75  $106.81  MAR85C/85P   $14.75  $23.00  $22.00   Open

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

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

****

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

Questions & comments on spreads/combos to Click here to email Ray Cummins


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

Due to the extreme weather conditions across much of the country,
a number of our data sources (charting and search engines) were
unable to provide timely stock and option pricing information at
the close of today's session. Rather than try to offer a group of
less than outstanding selections, we have decided to take leave
of the market and begin work on the first of a new collection of
"Spread and Combination" strategy narratives. The first article
of the series will be posted in the Sunday edition of the OIN.



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

DISCLAIMER

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