Option Investor

Daily Newsletter, Sunday, 01/30/2000

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The Option Investor Newsletter          Sunday  1-30-2000  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 1-28          WE 1-20          WE 1-14         WE 1-07
DOW     10738.87 -512.84 11251.71 -471.20 11722.98 +200.42 + 25.44
Nasdaq   3887.07 -348.33  4235.40 +171.13  4064.27 +181.65 -186.66
S&P-100   738.04 - 41.74   779.78 - 17.74   797.52 + 14.03 -  9.34
S&P-500  1360.16 - 81.20  1441.36 - 23.79  1465.15 + 23.68 - 27.78
RUT       504.62 - 29.33   533.95 + 25.84   508.11 + 19.80 - 16.44
TRAN     2581.75 -169.74  2751.49 -140.14  2891.63 - 73.09 - 12.48
VIX        29.09 +  6.43    22.66 +   .53    22.13 -  1.07 -  3.51
Put/Call     .60              .47              .42             .50

Are we there yet?

How often have your heard that? Are we there yet becomes the 
refrain that every parent dreads on a long trip with a car full 
of expectant children. They continue to ask because they have no
concept of time and distance. Parents compound this by answering
"just a little while longer" or "almost" when there may be hours
left in the trip. It is easier than explaining the correct answer
and the 20 questions that follow. To those of you, that emailed me
Friday at various times asking "are we there yet", I dedicate this

The buying opportunity today, for everyone in cash, was brought
to you by the Goldilocks economy. The Employment Cost Index, which
is closely watched by the Fed, posted a much stronger than expected
gain of +1.1% compared to estimates of +0.9%. This equates to a
+3.4% annual increase in employment costs. The GDP came in at a
scorching rate of +5.8% when estimates were only +5.2%. The Fed
would like to see a GDP in the range of +3.5%. At the rate we 
are increasing we could see +7% by the end of the year without
any brakes on the growth. Almost twice the Fed's target rate.
The University of Michigan Consumer Sentiment came in at much
stronger than expected 112 vs the 105.4 posted in December. This
and the GDP shows the American consumer is buying everything in
sight and there is no letup. Business inventories doubled in the
third and fourth quarters to supply this buying binge. Consumer
spending is off the charts and is propelled by the tightest
unemployment in decades and the billions of dollars in wealth
pouring in from the runaway stock market. The government, if
you believe Clinton, will have the trillions of dollars of 
national debt paid off in the next ten years or so based on the
soaring tax receipts. Tax receipts based on the profits of the
Internet economy and the profits from investing in the stock
market. This windfall income stream could dry up in the blink
of an eye if the Fed allows the economy and the stock market
to run unchecked until it self destructed by itself. It would
also dry up if the Fed turned up the heat too high. Either way
the outlook would be grim. The key here is to let the economy
and the markets continue to run but just slow them down slightly.
Money will continue to flow, consumers will continue to buy
and profits and taxes will continue to accrue. 

Adding to the extremely negative economic reports Friday was a
couple of high profile earnings challenges. Compaq, not a 
stranger to earnings warnings, did an about face. At an analyst
meeting Friday morning Compaq blessed the future growth estimates
of +15% to +17%. Later in the day, an analyst expressed concern
about Compaq being able to grow at more than +10% to +11%. The
company, when confronted with the concerns, agreed that the 
10% to 11% numbers were actually closer to reality. That is a
pretty good trick, lose 6% of your growth estimates, a billion 
dollars or so, in only a couple hours! The next bombshell
was in the Internet sector. Amazon announced it was laying
off 150 workers in a cost reduction move to slow their cash
burn rate. Although this was only a small number of their
7500 employees it was seen as a warning of things to come.
Amazon is rumored to be planning to float another $1 bln plus
offering to raise cash to make it through fiscal 2000 and 
announcing a layoff three days before their earnings was a
warning to investors that they would lose more than expected.
This increasing cash burn and widening losses for one of the
biggest E-commerce sites on the net prompted concerns for all
Internet stocks. These worries are only amplified by the high
high valuations of techs and the extreme bullishness in the 
market. Investor sentiment is at the highest point since July 
1999. All the buyers were fully invested in spite of the 
impending Fed meeting. 

The reasons for staying invested are almost gone. Earnings, 
have just about run their course and the February correction
was just around the corner. Add to this mix a few margin 
calls and the Dow breaking under its 200 DMA and you have
a recipe for trouble. Stir in some investor frustration with
leaders YHOO, almost -40% from its recent high, and QCOM, -50%
from its recent high, and many investors just decided to take
their lumps and move to the sidelines. All of a sudden there
are no buyers, even in a month where according to trimtabs.com
$24 billion has come into mutual funds. Of this amount 25%
went into global funds and the majority of the remaining $16
bln was earmarked for tech funds. $13 billion in additional
funds were taken out of the general market and earmarked for 
the heavy IPO calendar. NYSE stocks were going begging for 
buyers. Funds were caught selling retail, manufacturing, 
cyclicals and basic material stocks as their customers 
moved into position to capitalize on the February weakness. 
Bonds were hot for a change with yields dropping into the 
6.43% range. You can see where the cash was being parked 
until buying time is here again. The only sector positive
for the day was drugs. Spared the "price control" for Medicare
speech by Clinton on Thursday night investors breathed a sigh 
of relief and started moving back into this sector.





Are we there yet? As you can see by the charts, there was some
serious damage done this week. The Dow is now down -962 points
from the record closing high on Jan-14th of 11731. Support at
11000 is long past and if needed the next level is around 10640,
almost -130 points lower. The Nasdaq was even worse in percentage
terms. The -152 point drop today, the second largest point drop
in Nasdaq history, brought the total for the week to -415 points 
from the intraday high just last Monday. The two major averages 
were not the only place there was blood on the floor. The 
Russell-2000 was hammered for -12 points to bring the loss for 
the week to -36 points. The S&P-500 suffered its 7th largest
point drop ever and is now trading at levels not seen since 
last November. As I said on Thursday, if we broke support it
would get ugly. Ugly was an understatement. There was almost
no bounce at the close and the "order on close" volume was
all on the sell side. 

In just five days the Nasdaq has gone from record high to
correction levels and the Fed has not even raised the rates
yet. The Nasdaq broke the -10% intraday level of 3872 Friday
and came within 9 points of touching the -10% level based on 
the previous record closing high of 4274. That is close enough
in my book. The Dow however is still 130 points above its
-10% correction level.  The Nasdaq has now traded five straight
days with over a 100 point spread. The highest volatility in 
Nasdaq history. Stocks with great earnings are being applauded
on the announcement and then executed. Take SNDK who blew away
estimates and announced a split. They gained +$33 Thursday 
and lost -$23 Friday. VIGN, great earnings, -$22 etc, etc.


If we are not there, we are at least at a rest stop. As you
can see by the combination chart above the VIX is almost
exactly where it was when we corrected on the Dow the first
week of January. Remember the Dow dropped back to 11000 in
that event. The VIX has only reached this level five times
in the last six months and each time it was a market bottom.
Can it get worse? Sure but it is very rare. If the VIX reached
32 it would equate to the same severity drop as the drops in
August and October last year. Memorable occasions but the
cash flow into the market this time of year is much stronger
and therefore harder to hold down.

No analysis of the market next week would be complete without
an analysis of the pending Fed meeting. I think there is no
doubt in anybody's mind that there will be at least a +.25%
rate increase. After the economic reports this morning there
is a great number of analysts that think Greenspan could raise
rates a full +.50%. Here is where the problem lies. In reality
a +.50% increase is already priced into the market but there
is still the uncertainty. It is like being summoned by the 
boss after being late three times in one week. You know you
are in trouble, you just don't know how much until you get
the lecture. The economy is in trouble, we just do not know
how much. Chairman Greenspan is weighing the punishment.
Here is my guess:

They will only raise +.25%. Why? Greenspan is an incrementalist.
He raised +.50 before and the market cratered. Different time,
different factors but still it cratered. This is an election
year and you can bet some higher ups do not want to have a
market event during their last year in office. They would like
to get their boy elected and it is going to be a tough road
without additional challenges. They also do not want to trip
up the cash machine that is paying down the debt and contributing
to election campaigns. The market drop before the meeting has
taken the pressure off the committee to "control" the runaway
market. If we were pushing 12000 on the Dow it would be a
tougher call. Under 11000, with "valuation" concerns making
the rounds, some steam has been let out of the boiler. If they 
only raise +.25% now they can raise +.25% again in March and 
again in May and again in June, etc. They do not even have to 
wait for a meeting. If they see a blowout report, they can raise
at any time. Therefore, they do not have to rock the boat with
a +.50% hike now. At the March meeting they will have the 
complete economic data from January and February and they
will be better able to tell if the hot economy cooled after
the holidays or accelerated.

My forecast for the week looks like this. Monday morning is
a toss up. We could see a follow through of selling from 
Friday but I think it will be much more reserved. If anything
we could see a drop at the open to the Nasdaq -10% level again
and then a bargain hunter bounce. Cooler heads should prevail
and many traders will be looking to buy some of these tech
stocks before they rocket back up again. The weekend is a 
long time for traders itching to put their money back to
work in stocks -20% to -30% off their highs. I am expecting
a relief rally on Monday with a flat day Tuesday until after
the meeting. Unfortunately we have January Non-farm payrolls
on Friday so some traders will still be cautious.

The wall of worry is vertical at this point and the market
performs best under pressure. The downdraft will have taken 
some of the wind out of the bulls sails and made them more
cautious. The good news in my mind is the drop. We have been
expecting a drop in February for a month. Because of the
huge gains from the October lows traders sold early in an
attempt to beat the rush. We are now strongly oversold and
the chance of a continued drop in February is now lessened
quite a bit. A convincing case could be made now for a 
slow recovery over the next two weeks and then a rally in
March as we near April earnings. So by taking our medicine
early and in large doses we may have vaccinated ourselves
against the February correction. Regardless of investor 
sentiment the markets are oversold and poised for a relief 
rally, soon. Nothing ever goes straight up or straight down. 
Any dip on Monday morning could be another buying opportunity 
for aggressive traders. Cautious traders should wait for the 
conclusion of the Fed meeting and confirmation that the drop 
is over. 

A week like we just finished sure makes you appreciate stop
losses! You did use them? Didn't you? Don't you wish you had?

Something funny happened this week. I did not get any emails
complaining about my bearish outlook the last two weeks. I 
can't imagine why?

Trade smart, sell too soon.

Jim Brown

Seminar guest speakers

It is with much pleasure that we announce the guest speakers
for the Option Investor Expo in Denver. These gentlemen are
in high demand as financial consultants and commentators and
we are glad to present them to our readers.

Harry Browne

Harry Browne is an investment advisor, a newsletter writer, 
and a public speaker. In his latest work, Fail-Safe Investing,  
Harry collects his 30 years of investment experience and 
delivers it to readers in 17 short, savvy rules for financial 
investment safety.  In all, he has written eleven books with 
combined sales of over 2 million copies. In 1996 he was the 
Libertarian candidate for President of the United States

John Dessauer

		John Dessauer, editor of John Dessauer's Investor's 
World and chairman of McGinn Investment Management, is well known 
for his many accomplishments. Since 1989 he has been a regular 
panelist on Wall $treet Week with Louis Rukeyser. In 1995 John 
won the nation's most difficult investment competition, the annual 
portfolio contest for panelists on Wall $treet Week. He placed 
second in 1996. In 1999 John finished in the Wall $treet Week 
winners' circle for both the mid-year and year-end shows. His 
1999 portfolio was up 60.43% earnings him third place.

Mark Leibovit

Mark Leibovit, author of the Volume Reversal method of market 
timing. In 1997, Timer Digest ranked Mark Leibovit in the top 10 
market timers for the final half of 1997. Timer Digest ranked him 
#1 gold timer during 1996 and as the top market timer for the first 
half of 1989. Also, in 1989 the VRS was ranked in the top ten by 
the Hulbert Financial Digest and in July of that same year the 
Hulbert Financial Digest ranked the VRS #3 for top performance over 
the previous five years for mutual fund timing. Mark Leibovit served 
as a weekly consultant for 7 years on Louis Rukeyser's Wall Street 


The 2nd Annual Option Investor Seminar is almost sold out.
There are only a few seats left for the March 28-31 event.

As you can see by the quality of guest speakers announced
this weekend the event will be packed full of quality

If you were thinking about going but had not made up your
mind then this is your last chance. We will not be repeating
this 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.

There are only a few seats left. 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?


Remember this closing paragraph from last Sunday?

--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. 

WOW!! I could not have asked for a more perfect scenario!
-412 points from the Monday open!


QQQ-Feb-196 puts 

Going into Monday I only had one trading position, QQQ puts, 
which I had bought at the close on the previous Friday. Something 
scary happened just before the open Monday. At 5:30 AM there
was a loud pop in my office at home. My wife and I both jumped
out of bed and ran to investigate. I opened the door and there
was a strong smell of smoke. The battery backup on my PC was
screaming and the fault light was on. My trading PC was dark.
Once I turned off the alarm I explored the problem and found
that the power supply inside my PC had fried and tripped the
breakers. No problem, air out the room and back to bed. Check
the futures on CNBC before I doze off again and the futures
have spiked from the night before and the market is going to
blow out at the open. It suddenly dawns on me that I cannot
sell the puts without the phone call that takes 30 minutes at
the open. No PC, no online trading! OOPS! But surely the 
Nasdaq will cool after the open and I can sell them when I
get to work for only a minor loss. To make a long story shorter
the Nasdaq had crashed almost immediately and by the time I got
to work I was very profitable. I resisted the impulse to sell
too soon with the Fed meetingon the horizon and the Dow still
dropping. On Tuesday the markets opened down but recovered a 
little bit early. The ticks and advance/decline was sinking
so I held until mid-afternoon. When the Nasdaq spiked downward
and then held I thought we might get a relief bounce and closed
my position. I was congratulating myself all afternoon on 
selling .50 off the high for the day (low on the QQQ) until 
the bottom fell out again on Wednesday morning. Still a 
profitable play. I closed the position at $19.13, cost $12.25.

VOD - APR- $40 calls

After the drop on Monday Tuesday I took advantage of the bounce
on Wednesday to close the VOD calls. Momentum was fading and 
so were the markets. Still profitable, I sold them for $18.25.


I am still holding my leaps on Lucent and Gateway but I did not
sell any covered calls yet. With the market sinking the premiums
were too low on the strikes far enough away from the stock price
to be fairly sure of not being called out. 


My plan for the week was hope for a -10% correction and then
sell naked puts at the bottom. Everything worked great except
for the last word in the last sentence, "bottom". I had an
itchy trigger finger and executed my sells too soon. I am still
comfortable but now I am a little closer to the money on some
than I would like. Still, if we get any rebound it will take the
pressure off. I am not going to go into detail on each position
since the idea is the same. We want the stock price to be above
the strike price before expiration three weeks from now.


If I am going to bet heavily on the rebound by selling this many
naked puts then I should be long calls as well. I am. I bought
the following Friday afternoon expecting a rebound into the close.
The rebound was weak and the QQQ and OEX could be trouble on
Monday. Also the NOK calls could get hammered after the overseas
markets react to our drop on Friday. Still the NOK earnings should
hold them up to some extent. If we get a rebound NOK should fly.
It was up +$10 on Friday morning after the ERICY earnings. If
ERICY did good then NOK should do better and they are a split
candidate also. No, I will not hold over earnings.


I am not planning to trade this week. As you can see I have
my plate full and any further down moves could be disaster.
I am firmly convinced that after such a major move the markets
will bounce some before going much lower. The amount of money
on the sidelines just keeps growing and there is no other game
in town. I will be perfectly happy with a small bounce and
flat market for the next three weeks until expiration but I 
will play the cards dealt.

Good Luck


OPTIONS 101 by Jim Brown

Big Cap Naked Puts

I have had many requests this weekend for the high 
premium, high return naked put list again. With the
market so beatup this would be a good strategy and
there are only three weeks left until February 
expiration. Because this strategy requires naked
option writing and not all of our readers can use
it, I am not going to be talking about it for several
weeks. I will continue publishing the list below
but only on the website and in the Naked Put Section.

I screened the top 75 highest premium optionable stocks
and these are the ones I would play. Some are better
than others but they would all be plays depending on
your risk profile and use of stop losses. Several would
be great plays and I am sorry I missed them last week.

The table is sorted in percent of return order and 
not in order of safety or play critera. Please look
at a chart and make your own decision before using
this strategy. High returns always mean high risk.

Jim Brown

Sym  Price Strk Prem Ret% Support

ASKJ   100 100 11.75  47  100
ENZ     90  80  9.13  41   85
ASKJ   100  95  9.38  38  100
MUSE   163 160 15.25  37  160
VIGN   206 200 18.00  35  200
AFFX   228 220 20.00  35  220
MCOM   102 100  8.63  34  100
VRTS   154 150 13.00  34  150
SDLI   270 260 22.75  34  260
FDRY   130 125 10.75  33  125
VRSN   164 160 13.75  33  160
CRA    210 210 17.50  33  210
TIBX   158 150 12.50  32  155
MUSE   163 150 13.00  32  160
NSOL   223 220 17.65  32  220
SILK   162 160 12.75  31  160
PEB    166 160 12.38  30  160
VRTS   154 145 11.00  29  150
VRSN   164 155 11.25  27  160
MLNM   186 180 12.63  27  185
SDLI   270 250 18.25  27  250
ADAP   126 120  8.13  26  125
VERT   265 250 17.38  26  235
MCOM   102  95  6.25  25  100
BRCM   284 280 18.00  25  275
BRCM   284 280 18.00  25  275
INSP   152 140  9.25  24  145
PMCS   190 180 11.25  24  185
CRA    210 200 12.75  24  210
EXDS   120 110  6.75  23  120
ORTL   140 130  8.13  23  135
ARBA   174 170 10.00  23  170
AFFX   228 200 11.75  21  220
SEPR   138 135  6.75  20  135
VERT   265 240 13.38  20  235
BRCM   284 270 13.50  19  275
BRCM   284 270 13.50  19  275

Stock News

Soon to be optionable - Sycamore Networks
by Bill Gamble

Headquartered in Chelmsford, MA is one of Wall Street's latest
darlings, Sycamore Networks. They are focused on development of
transport, switching and management products that are required to 
create a flexible and intelligent optical network



by Ryan Nelson

"I'm not dead yet!" to quote a line from Monty Python's classic 
movie, The Search for the Holy Grail.  That is how I feel after 
daring to take on the markets this week; wounded, but not dead.  
Actually we had been expecting the bears to crash the party 
soon, just like they did this time last year  (see Jim's warnings
in his past wraps for the last couple of weeks).


Market Posture

As of Market Close - Friday, January 28, 2000 

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

DOW Industrials   11,000  11,250  10,739    BEARISH   1.28  *
SPX S&P 500        1,400   1,500   1,360    BEARISH   1.28  *
OEX S&P 100          750     800     738    BEARISH   1.28  *
RUT Russell 2000     475     500     505    BULLISH  11.12
NDX NASD 100       3,200   3,850   3,446    Neutral   1.06
MSH High Tech      1,650   1,900   1,706    Neutral   1.06

XCI Hardware       1,300   1,460   1,310    Neutral   1.28  *
CWX Software       1,200   1,420   1,217    Neutral   1.07
SOX Semiconductor    700     745     749    BULLISH  12.21
NWX Networking       800     900     835    Neutral   1.07
INX Internet         700     800     701    Neutral   1.06

BIX Banking          645     690     528    BEARISH  11.30
XBD Brokerage        400     450     420    Neutral  11.30
IUX Insurance        625     650     554    BEARISH  11.30

RLX Retail           950   1,000     864    BEARISH   1.28  *
DRG Drug             340     400     352    Neutral   1.28  *
HCX Healthcare       700     790     722    Neutral   1.28  *
XAL Airline          180     190     129    BEARISH   5.21
OIX Oil & Gas        280     315     271    BEARISH   1.27

Posture Alert    
Fears of inflation sent the market into a tailspin Friday; as most 
sectors closed down significantly, thanks to the stronger than 
expected Gross Domestic Product and Employment Cost Index. Sectors 
that shed considerably were led by Internet (-5.38%), Software 
(-5.03%), Retail (-4.89%), and the NDX (-4.10%). As such, sectors 
that were downgraded on this last week's carnage include the Dow, 
S&P 500, Hardware, S&P 100, and Retail. Two sectors that were 
upgraded from Bearish to Neutral include Drug and Healthcare. Not 
only did these two sectors bounce off previous levels, but the 
flight-to-quality syndrome made these two respective sectors the 
only positive closes on Friday, both gaining 1.66%. If further 
market weakness persists, we would look for more strength in these 
two sectors.

Market Sentiment 

Sunday, January 30, 2000

Great Expectations III!

A stronger than expected GDP and ECI helped add fuel to the bears 
fire on Friday, as most indexes suffered serious losses on the 
day. The ECI (Employment Cost Index), rose 1.1% in the fourth 
quarter, or faster than the 0.9% increase many analysts were 
expecting. This higher percentage on the ECI is what many pundits 
were concerned with, especially since Fed Chairman Alan Greenspan 
closely watches this index with intense scrutiny. With a 25 
basis-point rate hike already figured into this upcoming meeting, 
as well as another 25-point hike in the spring, do these two 
latest economic figures really mean anything in the longer term of 
our economy? Is the negative sentiment in this market already 
priced in, and as such, will we rally soon?

Some negatives in the current market place include inflation, 
overvaluation, higher energy costs, key indexes breaking below 
support levels, higher interest rates, high levels of investor 
expectations, as well as leading equities that are breaking below 
key levels. Everything listed is very important, and this market 
is at a crucial moment. However, there are several things to keep 
a close watch on that we thought were positive. During, Friday's 
big drop, option speculation was dominated by the bears. Put/call 
ratios were above average, and a lack of call speculation was 
obvious. The Pinnacle Index for the OEX (700-735) is indicating 
that support for this market at these levels is great. This 
consistent negative sentiment ahead of the Fed may be suggesting 
that a relief rally is due. Another thing that could be viewed as 
positive soon is that the Volatility Index closed at 29.09, and 
was as high as 30.04 Friday. For the last year, the low 30's on the 
VIX have been an accurate indicator for short-term bottoms. 
Finally, corporate earnings continue to come in very strong so 
fundamentals remain intact. 

Earnings for S&P 500 Companies:
278 companies have reported earnings above estimates.
 48 companies have reported earnings in-line with estimates.
 23 companies have reported earnings below estimates.

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*:
Amazon.com       AMZN      0.98      -.48       -.47      2/2
Bud-weis-errrr   BUD       3.70      +.40       +.43      2/3
CompUSA          CPU       6.20      -.05       -.05      2/2
CNET             CNET      1.01      -.41       -.40      2/3
Cdnow            CDNW      2.98      -.93       -.87      2/3
Elec. Data Sys.  EDS       4.57      +.59       +.60      2/3
GoTo.com         GOTO      1.75      -.41       -.36      2/1
Metricom         MCOM      9.87     -1.80      -1.75      2/3
NetSpeak         NSPK      9.40      -.25       -.17      2/1
NetPerceptions   NETP      3.94      -.14       -.13      2/2
Peoplesoft       PSFT      3.27      +.02       +.03      2/1
QuePasa          PASA      6.28      -.48       -.47      2/1
Sprint           FON       3.04      +.40       +.40      2/1
Sprint PCS       PCS       6.73     -1.45      -1.45      2/1
Nokia            NOK       5.94      +.67       +.72      2/1
Open Market Inc  OMKT      9.68      -.13       -.11      2/3
Pairgain Tech    PAIR      2.54      -.05       -.05      2/3
Pixar            PIXR      1.25      +.13       +.14      2/3
Schering-Plough  SGP       1.25      +.33       +.33      2/2
Tekelec          TKLC      8.42      +.18       +.20      2/2
Time Warner      TWX       2.96      +.16       +.20      2/2
Viant            VIAN      4.67      +.03       +.04      2/3
Williams Comm.   WCG       6.69      -.23       -.21      2/2        
Stocks with high expectations this week include CompUSA, Metricom, 
NetSpeak, QuePasa, Sprint PCS, Nokia, OpenMarket, Tekelec, and 
Williams Communications. Low expectation stocks include Amazon, 
CNET, GoTo.Com, Pixar, and Schering-Plough. Have a good trading 


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 

Short Interest:
From a contrarian stand, short interest (JAN-14) on the NYSE is 
still very high, totaling 3,973,256,735 shares. The short interest 
on the Nasdaq rose another 2.11% in the latest figures, its fourth 
consecutive record, to 2,413,628,695 shares. 

Mixed Signs: 

Interest Rates (6.431):
The current break below a minor uptrend line leads us to believe 
that yields may pull back temporarily and test the 6.4% breakout 


Volatility Index (29.09):
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. 

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                       (1/28)

Overhead Resistance (765-785)     1.02
Overhead Resistance (740-760)     0.54

OEX Close                       738.04

Underlying Support  (700-735)    18.11

What the Pinnacle Index is telling us:
Based on January 28, the lack of call buying and the extreme 
amounts of put buying may indicate an oversold market. Underlying 
support at these levels is currently very strong, and overhead 
resistance is very light. Based solely on the Pinnacle Index 
numbers, we would not be surprised to see a relief rally this 
week on the OEX.

Put/Call Ratio                  Friday
Strike/Contracts                (1/28)

CBOE Total P/C Ratio             .60
CBOE Equity P/C Ratio            .45
OEX P/C Ratio                   1.41

Peak Open Interest (OEX)
Strike/Contracts     (1/28)

Puts               700 / 7,185
Calls              800 / 6,190
Put/Call Ratio         1.16

Volatility Index    Major
Date                Turning Point       VIX

October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   
May 14, 1999        Top                 25.01 
July 16, 1999       Top                 18.13 
August  5, 1999     Bottom              32.12 
October 15, 1999    Bottom              32.06

January 28, 2000    Bottom?             29.09



For the week of January 31st, 2000


Personal Income          Dec    Forecast: 0.5%   Previous: 0.4% 
Personal Spending        Dec    Forecast: 0.8%   Previous: 0.5% 
APICS Survey             Jan    Forecast: --     Previous: 51.2 
Chicago PMI              Jan    Forecast: --     Previous: 64.6 


NAPM Index               Jan    Forecast: 55.5%  Previous: 56.8%
Construction Spending    Dec    Forecast: -0.3%  Previous: 2.6% 


Leading Economic Indicat Dec    Forecast: 0.3%   Previous: 0.3% 
New Home Sales           Dec    Forecast: 870K   Previous: 865K 


Jobless Claims           1/29   Forecast: --     Previous: 266K 
NAPM Non-manufacturing   Jan    Forecast: --     Previous: 55.5%
Factory Orders           Dec    Forecast: 2.2%   Previous: 1.2% 


Nonfarm Payrolls         Jan    Forecast: 238K   Previous: 315K   
Unemployment Rate        Jan    Forecast: 4%     Previous: 4.1% 

Week of 1/31

2/07 Consumer Credit - Dec
2/08 Nonfarm Productivity - Q4
2/09 Wholesale Investories - Dec
2/11 Retail Sales - Jan
2/11 Univ Michigan Sentiment - Feb


Covered Calls in a Bull or Bear Market

"It was the best of times, it was the worst of times, it was the 
age of wisdom, it was the age of foolishness, it was the spring 
of hope, it was the winter of despair, we had everything before 
us, we had nothing before us, we were all going direct to Heaven, 
we were all going direct to hell."  Does this describe your 
trading on Monday or Friday?

On Friday, I spoke to all of my trader friends to make sure no 
one jumped out of any windows.  Fortunately for me, my office 
is on the first floor. Being an eternal optimist (bull/cow?), I 
bought OEX calls about 11:15 a.m. on Friday after I thought the 
market was putting in a bottom at 750.  That turned out to be 
about the high point for the rest of the afternoon.   Because I 
had a previously scheduled meeting for that afternoon, I was not 
able to watch the painful bleeding on a minute-by-minute basis 
as I normally would have.   

The first opportunity I had to check my positions was about 1:00pm.  
The OEX had dropped to 745 and I was down 2 points on my options.  
I put in an order to buy puts on the OEX to protect my downside, 
which seemed imminent at that point.  I couldn't find any green 
on my positions screen.  Fortunately, I had written a lot of naked 
calls (one leg of my covered call strategy) the previous week on 
stocks like BVSN, TIBX, LRCX, and CMGI.  I was happy to see that 
they were all in the "red".  

I closed out my BVSN naked calls (first leg of covered call 
strategy) that I had written the week before for an average of 12 
points on 20 contracts. That took some of the sting out of the bite 
I would have felt on Friday.  I then went back to my meeting and 
didn't get an opportunity to check my monitor again until 3:55 p.m.  
I tried unsuccessfully to buy back some more of my naked calls in 
my other positions in order to lock in some profits in case we 
woke up Monday to a raging Bull market. Doubtful, but as I've 
stated before, I am still an optimist at heart. I was quibbling 
over 1/8's and wasn't able to get any fills in the last five 

This week I had planned to write the second part of "Tweaking 
Covered Calls on Stocks Trending Up"(Part2), but after a week like 
the past one-that proved to be difficult, because I couldn't find 
up-trending stocks to implement the strategy.  So instead, I will 
explain why covered call strategy can be used as effectively in a 
bear market as a bull market.  

All strategies have a risk/reward profile.  In a bull market, your 
greatest risk is loss of upside gain on the stock.  In a bear 
market, your risk is loss on the falling stock price which will 
exceed the gain in the call your have written.  Therein lies the 
dichotomy of the covered call strategy, a tale of two strategies.  
Of course, in order to most effectively implement this strategy you 
must have naked option writing ability.  

With any strategy, timing in is of the essence.  In a bull market, 
if the stock were up trending, you would typically buy the stock 
first, and wait to write the call when the stock bounces off a 
resistance level and then write the call.  In a bear market you 
would typically sell the call first and wait for the stock to 
finish its descent and turn back around, at which time you would 
buy the stock.  

That is precisely what I did on expiration Friday of the previous 
week.  I wrote calls on BVSN, CMGI, TIBX and LRCX.  All of which 
appeared to be at the top of range short term.  I was prepared to 
buy the stock at a bottom, whenever that came.  During this past 
week BVSN, CMGI, and LRCX gave no signals of a bottom.  This is 
where one must be patient.  I typically get antsy and buy the 
stock too soon.  That is precisely what I did on TIBX.  

I missed my opportunity on Monday because I thought TIBX would 
continue downward.  On Tuesday Jan 25, TIBX gapped up.  I didn't 
want to get caught in a bear trap so I was waiting for TIBX to 
clear Friday's high of 175, for my signal to buy.  On Wednesday, 
TIBX opened at up again and started to skyrocket.  This stock is 
very volatile and when it moves, its moves are fast.  When it 
cleared 175 I put in my buy order.  I bought a half position 
against my Feb 185 calls and got filled at 178.  My next signal 
was 185, my strike price.  If TIBX cleared 185 I would buy my 
second half to cover the balance of my naked calls.  It traded 
for about a minute at 185 and hung in at 184, which appeared to 
be new resistance.  The stock went down from there for the rest 
of the day to close at 179-5/16.  On Thursday TIBX gapped up 
again to 182-1/16.  When it appeared to be holding at 180, I was 
afraid this was now support so I bought the second half of my 
position at 180-1/2.  My basis with my call premium was an 
average of 163 (average stock cost less call premium received).  
My downside break-even was 163 and my upside max was 185.  Since 
there was quite a bit of resistance at 163 on the way up, there 
should be considerable support at 163 on the way down.  

Unfortunately, I bought at the high for the day and watched the 
stock go down, bounce back up at 163 (my support level) and 
close at 170.  I was still up 7 points net.  And then came Friday!  
TIBX gapped down and opened at 162-1/8.  YIKES!  It immediately 
turned back up over my breakeven before I could sell my stock, 
so I held on (dumb in hindsight).  It rose to 165 by noontime and 
hovered between 164 and 168.  I then had my scheduled meeting and 
missed its meteoric drop to 156-1/2 near the close.  I had no time 
at the close to evaluate anything and I was 5 points in the hole!  
Unfortunately, the options were so overpriced and so far out of 
the money that they weren't dropping to the extent of the stock.  
I will be watching the futures Monday a.m. pre-market to determine 
my next move.  My guess is, I will take what I can get for the 
stock and let the options expire worthless or buy them back if TIBX 
puts in a bottom.  

All in all, evaluating the overall strategy, I won in 3 out of 4 
positions.  My wins in the other three positions will more than 
bail me out of my one loser, but TIBX wins again!  

In hindsight, I shouldn't have bought the second half of the stock 
position until it had cleared the 185 strike price, as originally 
planned, OR I should have sold half of my position after the gap 
down on Friday.  

THE LESSON: I encourage you all to take some good quality time 
and review your worst trade of the week.  Put it under a microscope 
and analyze it.  Go back and look at the intra-day charts and 
re-evaluate how it looks.  Was there really a good signal for you 
to buy or sell at that particular moment?  Believe me, you will 
learn a lot about yourself, and thus improve your trading going 

TIP: Remember when looking at the intra-day charts, you didn't 
have the forward candles at the time you made your decisions.  
I like to take a piece of paper and block out what came after 
my decision when analyzing my previous entry points.          
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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              1-30-2000  
Sunday                        2 of 5


Long leaps, short stock

I received a number of emails last week about my strategy of 
buying two leaps and taking a short in a stock. I used this 
particular strategy this week in one stock which I will detail, 
Qwest . On Tuesday when the market was down Qwest went down to 40. 
It had been 43 the week before, and the 52-week high was above 50. 
I bought two WWH Jan 02 40 calls at 12, and took a short in 100 
shares of the stock at 39.75. It is possible to make money if the 
stock goes up or down. The only way to lose money is if the stock 
stays completely flat. Since in this particular situation the leap 
is two years I have two years for the stock to make a big move one 
way or the other. (I think it's going to be up) The leaps have 
very slow time decay in this situation. I probably will not make 
really big money right away with this position, but I think that 
I will make money, as the odds of Qwest being 10 points above or 
below 40 in the next two years are very high.
This is only one example of this type of hedged strategy. Last 
week I detailed my strategy of buying 100 Nextlink and two at 
the money puts. This stock is volatile, in fact in the time I 
held the position the stock went from 80 to 65 to 95. The original 
cost of this position was 5600, 4000 for 100 stock on margin, 1600 
for two at the money Feb 80 puts. When the stock went down to 65 
the puts were both 15 ½, and the total position could have been 
closed for 6350, a profit of about 15% in a few weeks. The stock 
went up to 85, the puts were 6.5, the position had a profit of 1 
point. (who gets excited about that nowadays)Before the Jan options 
expiration Friday the stock finally hit 95 and the puts hit 3.5, 
for a profit of 8 points on the position.  In a situation like this, 
the options will lose time value very rapidly once they are expiring 
options. It is important to pick options two or three months from 

My other strategies for this method are Lucent, 100 shares and two  
July 55 puts at 5.5 each, Nortel and possibly Nextlink again. I am 
long Nortel and did not hedge this position. However, as an example 
of how this would work I can use Wednesday's early price of 103 for 
100 shares of Nortel and two June 100 puts at 13 7/8. The stock went 
up to 108 after it declared earnings beating the estimates and a 
split. The stock went up 5 points and the puts went down 
approximately 2/3 point each for a profit on the position of 
3 2/3. It is best to find a stock which is volatile like an 
internet stock but which has been dormant for several weeks (those 
are tough to find) Once a stock has made a big move up or down 
the price of the call and put options will be very high, which 
means your potential gains are limited.

You need to understand something about how options move to see how 
a position like this can be profitable. One at the money call or 
leap moves about one half a point for every point move in the stock 
up or down. For example, if Qwest goes to 43.5, which it did last 
week, the leap should go up about 1 ¾. At this point the position 
should be break even (up 3 ½ for the two leaps and down 3 ½ for 100 
shares short) Once Qwest goes to 45, the leaps will be in the money 
and should start picking up momentum and moving faster as the stock 
goes up. If Qwest hits 50, the leaps will be deep in the money and 
should generally move point for point with the stock. From this 
point on I should make two points (from two leaps) and lose only 
one with the short position for every one point move up.  The 
position can be highly profitable. 

Also, on the downside, if Qwest drops to 35, the leaps should lose 
about 2.5 points each which would make this a break even. (If you 
break even in a very bad market you will be doing better than most 
people) If Qwest drops below 30, the leaps should retain most of 
their time value (remember leaps don't lose time value quickly) and 
the short position should start making money. Once the leap is deep 
out of the money it should only move about 1/3 of a point for every 
point move in the stock. This means if the stock drops 2 points the 
leaps should only lose about 1 1/3 points. 

You won't make as much money from this type of position as you would 
if you took an outright bullish or bearish position and your 
judgement were correct, but if you want to take a hedged positions 
with a percentage of your capital this can be a good strategy. The 
most difficult part is finding a stock that is going to make a big 
move, because time is your enemy with this type of strategy. Time 
deteriorates option premiums, which means your position will lose 
value if the stock doesn't move.  This is why I like using leaps 
for this strategy because the time decay is slow. Leaps won't lose 
much time decay until about 6 months prior to expiration. I think 
we may have a choppy market for a while although I don't know of 
course, but hedging can be a way to protect your capital and make 
money in either an up or down markets.

The concept of option pricing is a way too complicated and complex  
a topic to be covered completely in a one page article. This is just 
to give a basic idea of what hedging is all about. There are a number 
of good books and software programs available for options traders 
which explain these and other strategies in greater detail than is 
possible in this article. I usually only take outright call or put 
positions with about 25 to 30 % of my capital and hedge the rest. 
The benefit of trading in today's markets is that volatility is, in 
my opinion here to stay. The huge trading volume on the exchanges 
and the fact that nearly 80 million Americans own stocks now, which 
is over twenty times higher than the number who owned stocks a decade 
ago, provides liquidity which can make hedged positions profitable.

Contact Support


Renee is still on vacation this week


Ugly or Beautiful -- all in the Eye of the Beholder

At the close, Friday, CNBC is heralding a story on "The Friday 
Sell Off" -- and I know exactly why I do not watch CNBC during 
the trading day. It encourages emotional trading & analysis 
which lead to bad decisions, which lead to more bad decisions. 
I was watching the market intermittently this morning, having 
slept in past the open. My one ST Trading Position -- short 
VRSN Feb 210 Calls -- was 35 points out of the money this 
morning, and I didn't really think that the market was going to 
turn around. I was pretty confident that VRSN would not gap up 
35 points in these market conditions.

I tuned into the market about halfway through the trading day. 
Sure enough, VRSN was down another 10 to 165. That's good, and 
just what I expected. It gave me 45 points of breathing room 
from the calls I sold earlier this week. But, the stock was now 
approaching the 155 - 160 support levels that I had, in my 
amateurish technical analysis mode, drawn into my qcharts last 
week. I priced the Feb140 through Feb155 Puts. Feb 145s were 20 
points out of the money, and below the support level that seems 
to be holding for the last 2 months. When VRSN bounced off of 160, 
I sold VRSN Feb145 Puts for 7.5. VRSN had been down hard in the 
last few days, and I thought it could hold support above 150. 
That delivers more present cash flow to my account in addition 
to the cash flow from selling the calls earlier this week.


In a continued sell off, VRSN might approach & violate 145. But, 
when I saw the bounce, I acted. Plus, I figured, get into the 
position before the weekend, which will be in my favor, since 
those premiums decaying over a weekend are good for me. In the 
broader market, I thought that there was a bounce off the lows 
of the day on the DOW. The NASDAQ continues to be weak, but might 
be setting up for at least a technical bounce early next week, I 
reasoned. I also sold a QQQ Put position at midday for a 25% profit. 
I established that QQQ Put position to hedge my LT Stock Holdings, 
but I took a profit when I had one. I have found that when playing 
index puts, it is always better to take a profit than to risk losing 
the profit in a bounce, technical or otherwise. If VRSN approaches 
145, then I have to be prepared to go short the stock. That is the 
risk that I am being paid to take by doing this strategy. 
Nonetheless, I saw very little possibility that VRSN was going to 
hit either 145 or 210 today. 65 points of width on this strangle 
play. Might just be wide enough to drive a Red Hot through.

Janar Joseph Wasito
Contact Support


An Osmotic Technical Point of View
Pirates, Yikes, Yippee, Ouch, Dell, USG, and a Polka ?

Lost in space.  I originally wrote this article Wednesday and it 
was sent off to OIN for Thursday (honest, ask Jim).  But, somehow 
in the shuffle, it never made it.  I am going to update where 
appropriate, but, I wanted to leave most of it "as is" for your 
benefit to see where my mind was as of Wednesday as an active 
trader.  I duke it out along  with you guys and gals almost every 

Interjections, that is what I would have to use to describe this 
market.  Well, my very good comrade JDSU did not disappoint me.  If 
you short-term traders got into JDSU before the earnings announcement, 
you should have made a few bucks.  Although, I think that they should 
make option market makers wear an eye patch for easy identification.  
This is so that everyone will know that they are pirates. Taking the 
premium out of the call as the stock moves up is definitely piracy 
and they should be made to walk the plank., this hurts. Ouch!  It is 
kind of like changing the odds on the horse race as the horses are 
running around the track.  I have actually seen this done as well, 
although, not nearly as often as getting robbed by the market maker 
pirates.  Did you know they actually have the skull and cross bones 
hanging outside the CBOE?

OK, my long term trades are now three whole hours.   How about you?  
The good news in this market is that if you are not happy with the 
price of something, just wait an hour and it will change.  The bad 
news is that it might be up or down, but, it definitely won't be the 
same.  Kind of like the weather in Denver.  

Here is my take on Dell.  The party has been over for awhile but, 
they cannot get all the people with light shades on their heads to 
leave.  Don't ask me about my personal experience with the rather 
large Dell paperweight that I recently purchased. Great paperweight!  
My thoughts now are we have Compaq all over again.

I am going out on a limb here as it is actually Wednesday evening 
and the markets got rocked to say the least.  Yikes, the $NDX got 
body slammed right into the close as I was bravely (or foolishly) 
picking up JDSU 2 minutes till the close.  I watched the after 
markets as JDSU continued to fall.  They beat the numbers, but, 
was it enough? Yippee, it was.  So, ETEK should have a nice little 
spike tomorrow.  I am really going out on a limb here.  You will 
all be able to tell if my crystal ball is really working.  Here goes, 
ETEK should spike for at least 5 minutes for 5 points.  There, I am 
committed ,or at least should be.  ETEK actually shot up over 10 
points for quite awhile and yes I did get out!

As far as I know, OIN is bringing you another first.  The following 
are the lyrics to the very first option trading song.  I don't have 
a melody yet but, who knows, we could have a top Polka hit on our 
hands.  If anyone would like to add a verse, a melody, or rewrite 
the whole thing, just let me know.

We are option traders
option trading is fun
We'll be trading options
till there is no trading to be done
Calls, puts, straddles, and even a spread
Sometimes options can make your face turn bright red

As long as we don't run out of money
options can be fun
then we tell our spouses
to see what we have wrung
Then it is one of two things
We may be getting kisses or
See how fast we can run
Oh, my my, isn't option trading fun
OK, can anyone guess what I am loading up on the most?  No, it is 
not booze or any controlled substances.  Greenstuff, greenbacks, 
dinero, wampum, moolah, coinage, dough, bread, loot, benjis, cash.  
I feel the breeze of February coming and it is this traders opinion 
that the temperature and the markets are going lower.  (I do so like 
it when I actually interpret the charts correctly.  Every once in 
awhile you get it right.  If you put a 3 day moving average on the 
$NDX you can see that we may still be in for big trouble if we don't 
have a reversal on Monday) 

Here is a stock to watch for everyone, USG.  They make building 
supply products.  I think they make close to $8.00 per share and 
their PE is a whopping 4.5.  Most importantly, they have options. 
It actually made it up to 41 1/2 Friday and still ended  up at 
39 1/8 on Friday, I am long the August 40 calls USG HH for $5. 
Although interest rates may slow down home starts, so far, so good.

Are you having trouble getting into puts or are missing taking 
profits?   Here is a tip that I taught myself .   Print out the 
charts on the stocks that you have made the most money on with 
calls.  Now here is the tough part.  Turn it upside down.  
Amazingly simple, but, it really works!  Well, I am off to look 
for some put plays and my lacrosse helmet.  With this market, 
trading has definitely become a contact sport.  As always, trade 
safe and buckle up and  remember, the money you save, is probably 
your own!

Happy Trading!
Contact SupportHarrison


Sunday, January 30, 2000


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


I started by putting messages on the OI club message board. The 
first one in mid Dec. asked any one interested to contact me. 
Suffice it to say we had 8 attendees at our 1st mtg., Dec 27th. 
This was an organizational meeting and it was decided: 

Limit our subjects to tools and techniques so that we don't get 
distracted by subjects that might not be of interest to the whole 

Meet once/month on the Monday preceding Option Expiration Friday, 

Limit the meeting time to 1 1/2 hours.

I volunteered my office centrally located in Irvine to hold the 

It was so successful that afterwards most of the group talked 
outside for another hour. Most attendees have between 1-2 years 
experience with options. I think most felt it was gratifying to 
meet kindred spirits to whom we could discuss option trading. One 
attendee said it was worth missing Monday Night Football for. Now 
that's a real testimonial. Another said if I gain one idea at 
each meeting, it will be more than worthwhile. 

The second meeting was Monday Jan. 17th. WE HAD 12 ATTENDEES. Two 
orig. members called and said they couldn't make it because of 
the Martin Luther King holiday (Whoops, we didn't even think 
about that). One member was prepared to share some of his 
screening tools with us. We gathered around a monitor and he went 
through his technique. It was great stuff - we all learned and 
appreciated his willingness to share with the group. The mood of 
the group is just that - a willingness and desire to share. If 
the group gets too much larger we're going to need a larger meeting 
place than my conference room. 

The next meeting - Feb. 14th , 6 PM in Irvine, another member is 
going to show us the programs he uses and on March 13th a member 
is going to share a new program which he is beta testing. 

So we are off to an interesting start. 

Phil Nathan - 
Organizer, Orange County Option Investor Trading Club

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


Predicting Sector Strength

One of my market assumptions is that if a beaten down large cap 
stock in a certain sector gives a buy signal, then that sector 
might be in for an extended multi-quarter, even multi-year rally. 

Just as there are many new uses for specialized chips, which help 
fuel the Semiconductor sector, so are there many new developments 
in biotech, such as tissue and organ regeneration, genome mapping, 
or new cures for cancer.  

These sectors could be pre-eminent for the next decade because of 
all these new developments.  In fact, one area to watch is the 
merging of these two technologies, such as Affymetrix (AFFX).  An 
example of such "biochip" technology being developed by various 
companies is intraocular surgery for the blind, implanting a 
microchip that can "see" and transmits electrical signals that 
can be visually interpreted by the human brain.

Two stocks in late December 1999, alerted me to the fact that 
something major was going on in this sector.  On 12/21/99, Genzyme 
(GENZ), gave a buy signal by closing above the 50 day moving 
average at the high of the day on double average volume, with 
follow-through the next day.  This is a large cap stock that got 
clobbered, losing over 40% of its share price from its August 1999 
high to the December 1999 low.

The second stock that gave a tell tale sign that something was 
going on in this sector is Gilead Sciences (GILD).  Also on 12/21/99, 
GILD closed at the high of the day above the 4-day and 10-day moving 
averages on higher than average trade.  Then on 12/28/99, it closed 
at the high of the day above the 50 day moving average on about five 
times the usual trade.  GILD was a large cap in August 1999, but lost 
50% of its value by December 1999.

Disclosure:  I held positions in these two stocks, and they have been 
closed as of the time of this writing. Both options were double or 
better.  And Gilead held up despite the market drop the first week 
in January.  Genzyme dropped to break-even, but rebounded sharply by 
the second week.

Both trades are examples of low-risk entry points, because the 
downside is minimized, and the upside is maximized.  Risk is also 
managed by being in the right sector at the right time. 

These types of setups are usually optimal for 3-4 week trades.  You 
can use a time stop, or a percentage stop of about 20% gain on the 
underlying, or a double or triple on the option.  One such system 
trade, Enron (ENE) is up 30% in less than a month.   Sometimes you 
take a trip but you may want turn it into a journey, i.e., turning 
a short term into a long-term trade. 

One final note about the biotechs:  they make great put plays when 
the market gets wobbly as it did in the first week of January 2000.  
Medimune (MEDI) can be a great moneymaker as the sell-offs are 
massive (40 points in two days starting 1/3/99).  This is because 
the market makers and Electronic Communications Networks (ECNs) 
provide very little liquidity even though this is a large cap stock.  
If you have access to a Level II screen you will very often see 100 
shares at each price level of the bid (left side).  All it takes, 
then, is for a couple of traders to sell 1000 shares and a cascade 
effect takes place as more and more stops get hit!

Francis Chadwick
Research Analyst 


Combination Positions: Strategy Selection

This week we are going to begin a new series on trading with
spreads and other combinations.  As you can tell from the format
of the Spreads section, it is written primarily for the novice
trader, about 75% of our readership.  With this in mind, it is
obvious why I focus on the simplest techniques available.  In
today's discussion, we will review one of the most common
combination strategies and its advantages and limitations.

There are many types of traders and no single strategy can work
for all of them.  Suitability; one's risk/reward attitude and
financial condition, is the key to determining which technique
may be best for a specific individual.  There is a wide range of
trading strategies from which to choose, both aggressive and
conservative.  From high potential profit debit-spreads and sell
straddles to covered-call writing on LEAPS and everything else
in between; calendar and ratio spreads and various butterflies.
Unfortunately, every strategy has risk and it is impossible to
classify any specific technique as the absolute best method.  The
most important issue is to completely understand the mechanics of
any strategy that you are using and try to construct a group of
diverse positions based on a suitable trading style and the
correct portfolio outlook.

There are a number of factors to consider when determining which
is the most appropriate trading strategy.  The character of the
position; aggressive or conservative, the technical pattern of the
underlying issue and the market, option volatility levels and the
the probability of a successful outcome.  In most cases, there is
more than one favorable strategy and even though each technique
has different attributes, they can all be useful in a trader's
portfolio at the proper time.

The majority of traders are interesting in returning a favorable
profit and at the same time, limiting their exposure to financial
risk.  For those with a conservative outlook, this can be difficult
in the current market of high flying issues.  The bullish, limited
risk approach falls into two basic categories; option buying and
(covered) option selling.  The most widely used method of option
trading has always been the purchase of calls.  This technique can
be very profitable but leaves the trader exposed to a large amount
of downside risk.  From a technical viewpoint, it is more favorable
in stocks that have broken-out from lengthy consolidation patterns;
hardly the case in today's market-leading issues.  In addition,
traders who purchase options are forced to pay extreme premiums for
positions in the more volatile stocks, significantly reducing the
probability of profit.  Those who are intelligent enough to realize
the uncertainty associated with this type of approach are generally
forced to remain on the sidelines until they discover a favorable

Fortunately in today's market, there are a number of ways to reduce
risk and simultaneously benefit from those high premiums. The first
technique that meets this criteria is the "in-the money" debit
spread. This strategy is considered conservative because the risk
is limited and the position is generally low cost with no margin or
collateral requirements.  The spread is initiated with the purchase
of an in-the-money option and the sale of an at-the-money option,
both with the same expiration.  The strategy requires that you pay
a premium; the cost difference between the option purchased and
the option sold, in exchange for the potential of receiving the
difference between the two option strike prices.  The in-the-money
debit spread has substantial benefits over a long option including
lower cost, lower risk, and the ability to benefit from premium
disparities in both options.

The risk in this type of position is limited to the amount paid
for the spread (plus commissions).  The break-even point is equal
to the long option's strike price plus the initial debit.  The
long call is hedged for loss by gains from the sale of the short
option.  This factor can be very important to a trader who can
forecast market direction but cannot withstand the normal market
fluctuations, even when the issue is trending in his favor.  The
potential for significantly lower losses will allow the position
to survive all but the worst corrections and can often be the
difference between a winning and losing trade.

Another method that is commonly used to increase the probability
of profit in this strategy requires an understanding of implied
volatility in option pricing.  When opening any type of spread,
it's important to take advantage of premium disparities to create
the best possible position.  Always try to initiate new plays when
there is little premium in the long position and excess value in
the sold option.  This approach allows you to enter the position
at a discount, with a theoretical edge.

Here is an example of a recent, in-the-money debit spread:


ASDV - Aspect Development  $78.00     *** New All-Time High ***

Aspect Development creates, markets and supports enterprise client
server software and content products that enable manufacturers to
improve product development and business processes through
component and supplier management (CSM). Aspect's CSM solution is
licensed to global enterprises in many industries including
electronics and high technology, aerospace and defense, automotive, 
industrial process and consumer package goods. The CSM solution 
incorporates four interrelated elements, the Explore family of 
enterprise client server software products, the VIP family of
component and supplier content databases, Professional Services
for legacy data conversion and business process consulting and a
Web Catalog Publisher. Aspect's customers include more than 150 of
the 200 largest manufacturing companies in the world.

ASDV makes Internet-based software and reference data products
that help businesses improve product development and business
processes through component and supplier management solutions.
Their recent blow-out earnings and the B2B sector momentum has
boosted the issue to new highs. The technical support from the
recent consolidation area provides a margin of safety for this
favorable short-term position.

PLAY (conservative - bullish/debit spread):

BUY  CALL FEB-55 QDV-BK OI=5   A=$24.75
SELL CALL FEB-65 QDV-BM OI=155 B=$15.75
INITIAL NET DEBIT TARGET=$9.00 ROI(max)=11% (two weeks)


The advantages of this bullish technique appear so overwhelming
that many traders wonder why anyone would consider buying naked
options. Unfortunately there are several limitations that should
be considered before a position is initiated.  The first of course,
is the extra commission, hardly a consideration.  Second, spread
and combination plays are subject to slippage that can occur when
two or more positions are opened at different times, while the
price of the underlying issue fluctuates. This unfavorable affect
can be eliminated through the use of simultaneous (contingency)
orders. The most obvious drawback to this type of position is the
limited profit potential. However, for most traders, the ability
to return a favorable profit, even in the case of static or
slightly declining issues is more than enough reason to utilize
this conservative technique.

Next time: The Art and Science of Debit Spreads.

Click here to email Ray Cummins


Daily Results

Index      Last    Week
Dow     10738.87 -512.84
Nasdaq   3887.07 -348.33
$OEX      738.04  -41.74
$SPX     1360.16  -81.20
$RUT      504.62  -16.83
$TRAN    2581.75 -169.74
$VIX       29.09    7.29

Calls              Week

TQNT      160.50   19.00  Do not tell TQNT about the correction!
SILK      162.00   16.00  Driven by strong earnings and upgrades
VECO       56.00    6.38  Is there another peak coming for VECO?
LU         55.25    4.13  Displays strength and holds steady
ICIX       45.00    3.94  New, demonstrates relative strength
EMIS       39.63    0.63  New, a call play not hard to swallow
BGEN       92.25    0.25  BGEN entered the S&P 500 Index Friday
FRX        69.25    0.25  New, a bullish story for drug sector
PMCS      190.06   -1.19  A Valentines Day split run play!
VOD        54.63   -1.31  VOD looks find a resolution in battle
PEB       165.00   -2.88  New, stock splits 2:1 February 18th
MFNX       65.16   -4.72  Renewed strength from here for MFNX?
LVLT      104.94   -5.56  Reporting earnings before bell Thurs.
NOK       180.13   -8.13  Dropped, alas no wedgie for Nokia
PCS       101.00   -8.63  Dropped, earnings on February 1st
ADAP      125.47   -9.03  New, we have been itching for this one
TWX        81.88   -9.25  Dropped, gets a no confidence vote
MUSE      162.88  -10.06  MUSE stock splitting 2:1 February 23rd
DISH       84.19  -12.06  Dropped, timing can be everything
CMGI      105.50  -12.75  New, makes move from our put play list
NTAP       99.19  -17.94  Opportunities can come in strange ways
NTLI      118.31  -18.06  Dropped, Friday's loss exasperating
AFFX      228.13  -25.50  Impressed by AFFX's leadership skills
BRCM      284.00  -28.44  New, potentially fantastic split run


INTU       57.75  -17.88  New, shareholders had a rough week
CMGI      105.50  -12.75  Dropped, moving CMGI to our call list
SLR        70.06   -8.31  Full tilt on negative indicators
MU         59.50   -7.13  Dropped, could be the bottom for MU
IIJI       74.63   -7.00  Dropped, possible trend reversal
IPG        47.00   -5.75  New, following the DOW's movement
ADBE       57.56   -5.31  New, quickly losing short-term favor
BBY        50.00   -5.28  New, last three weeks not kind to BBY
RLM        66.06   -3.31  Dropped, looks to be near bottom
FD         41.63   -2.25  Dropped, at a long-time support level
UAL        57.88   -2.25  Mother nature does some wing clipping



CMGI - CMG Information Services Inc 
EMIS - Emisphere Technologies, Inc. 
ICIX - Intermedia Communications 
FRX  - Forest Laboratories
PEB  - PE Corporation
ADAP - Adaptive Broadband Corp. 
BRCM - Broadcom Corp. 


BBY  - Best Buy Inc. 
ADBE - Adobe Systems Inc.
INTU - Intuit Inc.
IPG  - Interpublic Group of Companies Inc.


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.


TWX $81.88 (-9.25) Unfortunately, our leveraged AOL play gets
a vote of 'No Confidence'.  The press continues to be positive
on the merger between TWX and AOL, but that hasn't been enough
to stem the flow of sellers in this negative market.  In the
midst of yet another ugly day on both the NASDAQ and the DOW,
AOL broke its major support at $60 for the first time since
breaking out in early November.  TWX followed suit, closing
well below its $84 support level.  Since beginning coverage
last weekend, our play hasn't given us a decent entry and the
drop today on increasing volume was the last straw.  We may
revisit these two when market sentiment improves, but for now
we'll have to stand aside.

NTLI $118.31 (-18.06) NTLI was on thin ice and has frankly 
turned out to be a disappointment.  The stock was on a great 
split run before settling down to the $125 consolidation level 
this week.  The pullback was natural following the huge gains, 
but Friday's -$6.69 loss was exasperating.  We were patiently 
waiting for an upward bounce off the 10-dma ($127.03) not vice-
versa.  Combine this negative performance with the upcoming 5:4 
split date on February 3rd and we have no choice but to exit 
the play at once.

PCS $102.13 (-8.63) Our earnings/split play on PCS went out 
with a whimper on Friday, losing $7.38 for the session.  PCS 
opened and traded up to a high just over $110 before falling 
into a steady decline for the rest of the day.  Roughly $4 of 
the days loss came within the last thirty minutes of trading.  
Why?  A 144 sale of approximately 11 million shares.  On Friday, 
Chase Hambrecht and Quist initiated coverage of PCS with a Buy 
rating and a price target of $175.  Though things are still 
looking good for PCS, they will be announcing earnings on 
Tuesday before the open and therefore, we are dropping this 
play.  Be sure to close out your positions before the close 
on Monday.  PCS stock splits 2:1 on the 4th.

NOK $177.50 (-8.13) Alas, no wedgie of the breakout kind was to 
be found on Friday's chart, though we could have been convinced 
otherwise from the gap open to $189 following news that Ericsson 
had blown away their earnings number.  In lockstep with the rest 
of the market, NOK sank back to its old familiar support at $175 
before finishing the day at $177.  We hope you sold into the 
strength of amateur hour.  Still, given ERICY's strong earnings 
report, we expect NOK to announce equally strong if not stronger 
earnings on Tuesday before the opening bell.  However, we never 
recommend holding over earnings and are thus dropping the play 
this weekend.  We suggest making your exit Monday, especially on 
any strength.  If NOK beats analysts' expectations by a long shot 
and announces a split, then we will consider adding it back 
depending on the particulars.  But for now, it's over.  Time to 
move on.

DISH $84.19 (-12.06) Timing can be everything when selecting
an option play.  Although DISH never really gave us a point to 
enter this play, we still be believe the uptrend could continue
once we get the Fed meeting out of the way.  The $88 support
area didn't hold with the carnage that took place in the major 
indices Friday.  The next level of support for DISH is found
at $80.  DISH closed below its 50-dma at $85.70 and could go
lower before gaining any momentum to move back up.  We are 
dropping DISH from our list of plays, but will keep our eye on
the satellite company for opportunities in the near future.


RLM $66.06 (-3.31) In consideration of the negative market 
sentiment (to say the least!) RLM proved it's quite comfortable 
in the $66 range.  Yesterday it broke this support level 
indicating it may be heading for the 200-dma ($63.29).  However 
today's upward push on strong volume gave us a clear signal it 
was near the bottom.  Therefore we're dropping RLM from our put 
list this weekend.

CMGI $105.50 (-12.75) Yes indeed CMGI was a winner this week!  
As "planned" (and I say this loosely) the stock ultimately 
retraced 50% from its recent highs to the vicinity of the $100 
level.  At this point we expect buyers to start lining up and 
nibbling on this Internet powerhouse.  Hence, it becomes wise to 
move out of the puts and into the calls.  Following along on 
that thought, we're closing our put play on CMGI and switching 
it over to our call section this weekend.  This move is of 
course based on the expectation that our forecast is correct.  

IIJI $74.63 (-7.00) IIJI has provided us with a decent put play, 
however, we are concerned with the fact that IIJI seems to be 
spending a good deal of time trading around its current level.  
As we mentioned in Thursday's write up, IIJI has reached a level 
of some previously established support, and it looks as though 
this level could hold and serve as a bottom to IIJI's recent 
downward trend.  IIJI demonstrated good relative strength on 
Friday and though the volume backing the move up was certainly 
nothing to write home about, it was still an improvement over 
Thursday's down day.  Being that we are seeing more and more 
indications of a possible trend reversal for IIJI, we are 
dropping it from put play list.

FD $41.63 (-2.25) Because FD looks to be trading at a level of 
long-time support, we are ending our put play on FD.  We have 
seen the strong volume backing the positive days rather than 
the negative, which is another indication that things could 
turn around for FD soon.  The news about FD's plans for Internet 
related spending, which spooked investors and worked to drive 
FD down, is out and digested.   FD delivered the drop we were 
looking for when we initiated this play and therefore, we are 
happy to bow out while we are still on the right side of this 

MU $59.50 (-7.13) Banc of America Securities strikes again!  If 
you remember, Banc of America downgraded MU last Tuesday from 
a Strong Buy to a Buy.  Apparently, they decided that Buy was 
still too strong of a rating and downgraded MU again on Friday 
from a Buy to a Market Perform.  The second downgrade sent MU 
shares down to lose $5.25 for the session.  MU looks to have 
found some support right around $60, which is the drop we were 
looking for when we initiated this play.  Being that this level 
is a long-time support level for MU, we are dropping our MU 
from our play list to avoid falling victim to a trend reversal.


Current Split Candidates
LVLT - Level Three Communications
NTAP - Network Appliance
SILK - SilkNet Software
Split candidates that are not current plays
IMNX - Immunex
EMC  - EMC Corp.
FFIV - F5 Networks
CSCO - Cisco Systems
CMVT - Comverse Tech
Recent Announcements we predicted
NT   - Nortel  (most recent pick) 
VRTS - Veritas (most recent pick)


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

Symbol - Stock          Splits/Date  
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
RNWK - RealNetwork      2:1 02-11-00 ex-date 02-14
SCMR - Sycamore Netwks  3:1 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
LSI  - LSI Logic        2:1 02-16-00 ex-date 02-17
DSPG - DSP Group        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
SCI  - SCI Systems      2:1 02-18-00 ex-date 02-19
TIBX - Tibco Software   3:1 02-18-00 ex-date 02-19    
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
SNDK - SanDisk          2:1 02-22-00 ex-date 02-23
PXCM - Proxicom         2:1 02-24-00 ex-date 02-25
ITRU - InterTrust Tech  2:1 02-24-00 ex-date 02-25
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
WEBT - Webtrends        2:1 02-29-00 ex-date 03-01
ANAD - Anadigics        3:2 02-29-00 ex-date 03-01
MMPT - Modem Media      2:1 03-01-00 ex-date 03-02
VRTS - Veritas Soft     3:2 03-03-00 ex-date 03-04
XLA  - Xcelera.com      2:1 03-03-00 ex-date 03-40
SLR  - Solectron        2:1 03-08-00 ex-date 03-09
JDSU - JDS Uniphase     2:1 03-10-00 ex-date 03-13
ALLR - Allaire Corp     2:1 03-15-00 ex-date 03-16
LRCX - Lam Research     3:1 03-16-00 ex-date 03-17
SANM - Sanmina Corp     2:1 03-22-00 ex-date 03-23
LLTC - Linear Tech      2:1 03-27-00 ex-date 03-28
AHAA - Alpha Industries 2:1 04-19-00 ex-date 04-20
GE   - General Elec     3:1 04-26-00 shareholder mtg
AXP  - American Express 3:1 05-10-00 ex-date 05-11
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:

MUSE - Micromuse Inc. $162.88 (-10.06)

See details in sector list

Chart =


AFFX - Affymetrix Inc. $228.13 (-25.50)(+66.88)(+33.50)

See details in sector list

Chart =


ICIX - Intermedia Communications $45.00 (+3.94)

See details in sector list

Chart =

Put play of the day:

ADBE - Adobe Systems Inc. $57.56 (-5.31)

See details in put list

Chart =

Tired of waiting on trades to execute? 
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Stop Losses based on the option price or the stock price.
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The Option Investor Newsletter          1-30-2000  
Sunday                        3 of 5


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.


PEB - PE Corporation $165.00 (-2.88)

PE Corporation is the leading supplier of products, services, 
and information in the life sciences and in genomics, used 
in markets such as pharmaceuticals, biotechnology, basic 
research, molecular medicine, human DNA, environmental testing, 
food, and agriculture.  It is the parent company to PE 
Biosystems Group and the Celera Geonomics Group.  PE Biosystems 
develops, markets and supports systems consisting of 
instruments, reagents, and software that are used in basic 
life science research, pharmaceutical research and development,
diagnostics, forensics, and food testing. 

Last week was a little rough for the Biotechs in general, 
however, PEB managed to hold up fairly well.  Friday's session 
saw a loss of over $7 for PEB but this doesn't seem so bad if 
you take Thursday's session into account.  PEB announced
earnings last Thursday morning and came in a penny above 
analysts estimates.  The stock actually had a delayed opening 
due to an order imbalance following the announcement.  When 
the stock did finally open, it shot up and traded to a new 52-
week high of $189.25.  PEB closed the day posting a gain just 
under $10.  See, now Friday doesn't seem so bad does it?  We 
believe that last week may have presented us with a great 
opportunity.  PEB has been traded down to a level of some 
previously established solid support.  PEB held support at $160 
on Friday and $165 at several points throughout last week and 
we think that this current level may serve well in providing 
some potential points of entry.  Another reason we like PEB as 
a call play is an announcement made on Wednesday of an upcoming 
2:1 stock split to be payable on February 18th.  Now that the 
earnings announcement excitement is over, we think that the 
upcoming split and the fact that PEB has some solid near-term 
support may have PEB positioned well to reclaim some positive 
momentum.  PEB may encounter some resistance in the neighborhood 
of $170-$171 so keep an eye on this level.  Obviously, it will 
be important to confirm direction this week before entering. 

On Tuesday, it was announced that PEB was engaging in a 
combination of "intellectual property" with Quantech Ltd. (QQQQ)
to form a corporation called HTS-Biosystems.  On Monday, PEB 
announced that they would be acquiring privately-held Third Wave 
Technologies for approximately 1.97 million shares of stock. 

BUY CALL FEB-165 PEB-BY OI=  6 at $15.50 SL=12.00 low OI
BUY CALL FEB-170*PEB-BW OI=151 at $13.00 SL=10.00
BUY CALL FEB-175 PEB-BV OI=  0 at $11.50 SL= 9.00 New contract

Picked on Jan 30th at $165.00     P/E = 75
Change since picked     +0.00     52-week high=$189.25
Analysts Ratings    4-4-2-0-0     52-week low =$ 43.94
Last earnings 01/00 est= 0.40     actual= 0.41
Next earnings 04-27 est= 0.49     versus= 0.32
Average Daily Volume =  625 K


BGEN - Biogen Inc. $92.25 (+0.25)

Biogen researches, develops, and markets biopharmaceuticals
to treat a variety of illnesses.  AVONEX, is the company's
claim to fame, used in the treatment of multiple sclerosis.
Other drugs made by BGEN include Amevive, for psoriasis;
Antova for autoimmune diseases; and Adentri, for congestive
heart failure.  BGEN also receives revenues from licensing
drugs it has developed to other companies.  BGEN has research
agreements with Schering-Plough, SmithKline Beecham, Merck
and Abbott Laborites.

Friday was a gut wrenching experience for many investors, as
the major indices tumbled.  Shareholders of BGEN, saw the
company loose over 7% in the price of its stock.  Volume for the
day was incredible at 24 million.  BGEN did have one highlight 
for the day.  It entered the S&P 500 index at the end of the day, 
which is what accounts for the high volume.  After making a low
at $89.88, in the last thirty minutes of trading, buyers stepped 
in buying shares of the Biotech company.  The volume during the 
last hour Friday was heavy with over 4.5 million shares changing
hands.  Although BGEN experienced selling during the session,
some good news was released after the close, which could help 
bring BGEN and the Biotech sector out of the hole.  A panel of
experts that makes recommendations to the Food and Drug 
Administration, voted that Novatrone, made by Immunex, could
safely slow the progress of advanced stages of multiple sclerosis.
Technically BGEN had made a new 52-week high in each of the three
previous sessions, and was beginning to get a bit over extended.
Friday's decline could be providing us with a great entry point
for this play.  The $90 mark is a solid support area for BGEN,
with the next level found at $85.  With the Immunex news in the 
market, we would look for BGEN to find its footing and climb
out of the hole.  The only fly in the ointment could be the FOMC
meeting next week, as investors may continue to be skittish, 
until the Fed is out of the way.  Prior to entering a play
in BGEN confirm the volume and the direction of the Biotech 

Recently BGEN was added to the "Focus List" at Merrill Lynch
as their stock of the week.  Tuesday, Merrill Lynch analyst
Eric M. Hecht reiterated his near term Buy rating of BGEN and
also reiterated a long-term Buy rating.  In the last two weeks
BGEN has seen at least four upgrades or reiterations adding
strength to the recent moves.

BUY CALL FEB- 85 BGQ-BQ OI= 514 at $10.50 SL=8.25
BUY CALL FEB- 90*BGV-BR OI= 877 at $ 8.38 SL=6.50
BUY CALL FEB- 95 BGV-BS OI= 948 at $ 5.63 SL=3.75
BUY CALL FEB-100 BGV-BT OI=2365 at $ 3.75 SL=2.00

Picked on Jan 27th at    $99.69    P/E = 66
Change since picked       -7.44    52-week high=$101.25
Analysts Ratings     9-6-11-0-0    52-week low =$ 44.00
Last earnings 01/00   est=-0.42    actual= 0.44 
Next earnings 04-13   est= 0.42    versus=-0.29
Average daily volume = 2.80 mln


EMIS - Emisphere Technologies, Inc. $39.63 (+0.63)

Emisphere Technologies, Inc. is a biopharmaceutical company 
specializing in the oral delivery of therapeutic macromolecules 
and other compounds that are not currently deliverable by 
oral means.  The company has two drugs in human clinical 
trials using its unique carrier technology and has strategic 
alliances and ongoing feasibility studies with several other 
pharmaceutical and biotech companies, including Novartis 
Pharma AG and Eli Lilly & Co.

While looking at the chart for EMIS, you could say that our 
reasons for initiating a call play aren't hard to swallow.  
Sorry, couldn't resist.  EMIS is an up and comer in the 
biopharmaceutical field with, as mentioned above, a focus on 
developing oral pharmaceuticals.  EMIS has come up with an 
oral form of a drug called Herapin, which is currently in 
Phase III trials.  This is an anti-coagulant and is 
typically used to prevent Deep Vein Thrombosis following 
surgery.  On January 11th, CEO Michael Goldberg announced 
that EMIS has also discovered a viable way for oral delivery 
of a protein to treat osteoporosis.  EMIS is working through 
Phase I trials with Novartis on this new oral protein.  EMIS 
demonstrated good relative strength last week, not only 
against the market as a whole but more specifically, against 
the Nasdaq Biotechs.  The Nasdaq Biotech Index was headed 
downhill all last week and lost nearly 200 points.  EMIS on 
the other hand, managed to close the week up $0.63.  Not a 
huge gain, but still a gain in the face of adversity.  Support 
is something that EMIS looks to have plenty of.  EMIS is 
resting just pennies above its 5-dma, which is at $39.  EMIS' 
10-dma, which is currently at $38.25, has done a nice job 
providing support throughout the majority of January.  EMIS 
has tested and held this level several times this month.  We 
also see some support right around $37.50, $34 and $30.  EMIS 
has found resistance at $40, and though it has traded above 
this level before, $40 is going to be an important breakthrough
level for an indication of the positive momentum of this play.  
The volume backing the positive days for EMIS has been impressive, 
a good indication that there are plenty of investors feeling 
bullish toward this stock.  Look for more trading and a close 
above $40.  If we see this, and there is solid volume backing 
the move we could be cleared for new entries.  

In the news, EMIS received a nice little blurb on January 20th 
in the Hambrecht and Quist 18th Annual Healthcare Conference 
Issue regarding the continuing success and broadening use of 
its Herapin products.  The stock closed up $3.81 the following 
day.  There is some conflicting information out there regarding 
the date of the next earnings announcement, but using history 
as our guide, we believe there should be one mid-March.  We 
will be confirming the exact date with the company next week.

BUY CALL FEB-35*MTQ-BG OI=196 at $6.25 SL=4.50
BUY CALL FEB-40 MTQ-BH OI=181 at $4.13 SL=2.50
BUY CALL FEB-45 MTQ-BI OI=543 at $1.88 SL=1.00
BUY CALL MAR-40 MTQ-CH OI= 13 at $6.13 SL=4.25
BUY CALL MAR-45 MTQ-CI OI=615 at $4.25 SL=2.50

Picked on Jan 30th at  $39.63     P/E = N/A
Change since picked     +0.00     52-week high=$41.75
Analysts Ratings    2-2-0-0-0     52-week low =$ 6.50
Last earnings 12/99 est=-0.99     actual=-0.81
Next earnings 03-15 est=  N/A     versus=  N/A
Average Daily Volume =  277 K



AFFX - Affymetrix Inc. $228.13 (-25.50)(+66.88)(+33.50)

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.

We continue to be impressed with the leadership qualities of 
AFFX.  When the NASDAQ was getting killed, AFFX kept coming back  
showing a relative strength that is necessary to designate it as 
a candidate for leadership.  AFFX is one of the single best ways 
to make a play on the very exciting Human Genome Project.  The 
mapping of the Human Genome could easily become one of the most 
significant sources for pharmacological discoveries for the next 
several years.  The potential revenues for AFFX are huge because  
Healthcare is one of the biggest components of our economy.  By 
providing the necessary tools for Human Genome researchers, AFFX 
stands to be one of the biggest beneficiaries of this hugely 
important endeavor.  By definition, AFFX is not only a genomic 
stock but it is also considered to be a semiconductor AND a 
software company.  AFFX is a great play for any institution 
which desires to invest in any or all of these industry groups.
AFFX will be reporting earnings on Thursday.  If the market can 
survive the Fed meeting on Tuesday, we may be able to get an 
earnings run.  We caution against holding a position through an 
earnings report, due to inflated premiums and totally 
unpredictable stock price reactions.  Therefore, if you do not 
happen to read Tuesday's update, we will be dropping the stock 
before the earnings.  AFFX had a very interesting week that was 
full of important technical action.  Tuesday's selloff took the 
stock right down to the breakout point around $205 and change, 
thereby establishing a nice support level and a possible entry 
point.  For the rest of the week the stock appeared to be 
tethered to $225.  Every rally and sell off brought the stock 
back near to that price.  It appears that AFFX will have a 
substantial break from this range at some point.  Support is at 
$215 and the aforementioned low $200's.  Resistance remains at 
$240 and then the psychologically important $250 level. 

Those of you who watched the State of the Union Address were 
treated not only to Clinton's Freudian slip, but also to the 
rare occurrence of the President singling out technological 
development.  The President singled out the Director of the 
Genome Project, applauded his efforts and called for continued 
Government funding of important scientific research.  This has 
to be a good thing for AFFX, perhaps accounting for the stock's 
rise in an otherwise awful market on Friday.  

BUY CALL FEB-230*FUE-BF OI=115 at $24.88 SL=19.38
BUY CALL FEB-240 FUE-BH OI=132 at $20.63 SL=16.00
BUY CALL FEB-250 FUE-BJ OI=288 at $17.00 SL=13.25
BUY CALL MAR-220 FUE-CD OI= 21 at $38.63 SL=30.13
BUY CALL MAR-250 FUE-CJ OI= 10 at $26.63 SL=20.75

SELL PUT FEB-200 FUE-NT OI=280 at $11.75 SL=15.00
(See risks of selling puts in play legend)

Picked on Jan 2nd at    $184.75     P/E = N/A
Change since picked      +43.38     52-week high=$271.06
Analysts Ratings      3-5-2-0-0     52-week low =$ 31.75
Last earnings 10/99  est= -0.28     actual= -0.21
Next earnings 02-03  est= -0.20     versus= -0.31
Average Daily Volume =    506 K



BRCM - Broadcom Corp. $284.00 (-28.44)

Broadcom develops integrated circuits used in broadband data
and video transmission products.  The company's integrated
circuits are in more than 80% of all cable modems and in digital
set-top boxes.  The company depends on two company's for the 
majority of their business, General Instruments, which is now 
part of Motorola and 3Com.  BRCM's integrated circuits are also
used in Ethernet networking, digital broadcast satellite, and 
digital subscriber line products.  The competition in the
industry is stiff, but they hold their own against Conexant 
Systems, Lucent and Texas Instruments.

After a shaky start at the first of the year, BRCM experienced
a great earnings run.  Now we are adding BRCM to our list of 
plays for its potential to give us an equally fantastic split
run.  This earnings season investors have bid the price of many 
companies stock higher going into earnings, only to punish
them by selling shares after the announcement, regardless of 
the report.  Jan 18th, BRCM reported solid earnings, beating the 
street by 14%, with revenues increasing by 116%.  That same day
the company declared a 2-for-1 stock split.  Since that time 
BRCM has seen the share price fall from its high at $332.13 all
the way back to Friday's low of $272.44.  The ex-date for the 
split is Valentines Day, February 14th, and we believe BRCM is
setting up to provide us with a sweet play as well.  Friday 
during the carnage in the broader markets, BRCM found buyers
late in the day and managed to finish the day in the plus 
column.  BRCM and the Internet sector has taken a drubbing this
week.  The $274 area has provided good support for BRCM on 
three different occasions during the week.  The fact that we 
saw buyers step in and buy shares of BRCM, on a day like Friday
tells us the split run is about ready to begin.  BRCM can
obviously be a volatile stock and may not fit everyone's
risk profile.  The option premiums are a bit expensive due to
the volatility, but if we get a good split run, it should 
provide a nice return.

Although the price of BRCM stock has declined, it hasn't 
changed the mind of analysts that follow the company.  After
reporting earnings, Morgan Stanley Dean Witter reiterated an
Outperform rating for BRCM, raising year 2000 earnings 
estimates and the target price from $250 to $400.     

BUY CALL FEB-280*RDW-BP OI=1022 at $23.63 SL=18.50
BUY CALL FEB-290 RDW-BR OI= 724 at $18.75 SL=14.63
BUY CALL FEB-300 RDW-BT OI=1509 at $15.00 SL=11.75 
BUY CALL FEB-310 RDU-BB OI= 546 at $11.63 SL= 9.25

Picked on Jan 30th at   $284.00    PE = 394
Change since picked       +0.00    52-week high=$332.13
Analysts Ratings     8-13-1-0-0    52-week low =$ 46.25
Last earnings 01/00   est= 0.27    actual= 0.31 
Next earnings 04-18   est= 0.31    versus=-0.19
Average daily volume = 2.12 mln



TQNT - TriQuint Semiconductor $160.50 (+19.00)(+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.

Please, nobody tell TriQuint Semiconductor that we are in the 
second major NASDAQ correction of the month.  All week we have 
been reporting that TQNT is one of the strongest tech stocks out 
there.  The strength of TriQuint shares seems to be based on the 
fact that they are one of the best pure plays for both the 
Semiconductor industry as well as the Telecommunications sector. 
Both sectors have been leading contributors to this long-term 
economic and stock market boom.  Fund managers and individual 
investors alike seem to be saying why not buy shares of a 
company that represents both groups.  Buying may also be fueled 
by the company's announcement of a 2-for-1 split, payable near
February 22nd (subject to shareholder approval, yeah like they 
ever say no!).  Ever since we began following this company as a 
Call Play, we have noticed a very solid stair step accumulation 
pattern.  Also, its volatility has developed a very nice trading 
pattern for intraday players.  Profits have been possible by 
avoiding the gap-ups and waiting for the pullback, followed by a 
midday rally into higher ground.  We have also continuously 
remarked that this very bullish pattern may be broken if the 
stock trades below its previous day's low.  On Friday, the stock 
did indeed trade below Thursday's low print of $151.63.  But 
like a beach ball held under water, TQNT's shares exploded back 
up despite the incredible late day selling pressure in the 
overall market.  The early selling has indeed put a chink in the 
armor of TQNT's uptrend but the counter-rally may have offset 
that.  Suffice it to say, more caution is advised if one is 
going to trade TQNT to the long side.  But if you are inclined 
to go long, there are very few stocks that look stronger than 
TQNT, at least for now.

It seems very strange that the CBOE has not seen fit to add some 
out-of-the-money calls for TQNT.  Is it a commentary on their 
perception of the company?  Not likely.  They just have to be 
created daily with the stock hitting new highs so often.  If 
you are so inclined to trade out-of-the-money calls then you 
can find them in May.

BUY CALL FEB-145 TQN-BX OI=  3 at $21.38 SL=16.68 low OI
BUY CALL FEB-150 TQN-BW OI=126 at $18.00 SL=14.00
BUY CALL MAR-150*TQN-CZ OI=101 at $23.00 SL=17.88

SELL PUT FEB-140 TQN-NY OI=  5 at $ 3.38 SL= 5.00
(See risks of selling puts in play legend)

Picked on Jan 13th at  $130.00    P/E = 141
Change since picked     +30.50    52-week high=$163.00
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 =   401 K



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

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.

It looks like the market might be trying to broaden out and 
start to include some of its smaller brethren.  Couple that fact 
with VECO's historical pattern of rallying this time of year and 
we see Veeco as a possible opportunity to make a little profit 
to the upside.  Veeco is in a good group of companies that 
should be able to increase revenues and earnings into the 
foreseeable future.  Last year, Y2K sucked up a lot of the 
budgets of technology companies.  This year, many of those same 
companies need to get up to date on their other needs, such as 
tools for semiconductor manufacturing and measurement devices. 
In recent weeks Veeco has received new orders of over $7 
million, if this trend continues then VECO could have a 
sustainable rally.  We first became intrigued by VECO when it 
experienced a very high volume breakout on January 24th.  We 
could not find any news that could account for the interest.  
However, it was a major technical event that drove the stock out 
of the $40-$50 range.  A new resistance level of $60 has been 
established.  We are looking for a break above that price to 
help confirm that VECO is going in the right direction before 
the 02-10 earnings report.  It is important to note that VECO's 
share priced peaked during this time last year.  A very long- 
term chart indicates that VECO has lower highs going back four 
years.  If another peak is coming do not be afraid to take quick 
profits.  They stock may find support initially at $53.38 and 
then at $50.  These might prove to be good entry points if the 
bears get their claws in the market early next week.

On Friday, Wyko Corp, a division of Veeco had a ruling go 
against them in a lawsuit initiated by Zygo Corp concerning 
patent infringement.  The judgement was for just over $1 
million.  It is possible that this untimely news, announced 
during the middle of a market selloff, might have taken VECO 
down a little more than it ordinarily would have.  We will keep 
an eye on the situation.

BUY CALL FEB-50 QVC-BJ OI=430 at $7.88 SL=5.75
BUY CALL FEB-55*QVC-BK OI=158 at $5.00 SL=3.25
BUY CALL FEB-60 QVC-BL OI=157 at $2.81 SL=1.25
BUY CALL MAR-55 QVC-CK OI= 25 at $7.75 SL=5.25

Picked on Jan 25th at   $56.00    P/E = 41
Change since picked      +0.00    52-week high=$60.13
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 =   326 K



PMCS - PMC-Sierra Inc. $190.06 (-1.19) 

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.  

PMCS gapped down nearly $5 to open at $186.38 on Friday and 
quickly traded up to tag its high for the day at $195.50.  
Once again, PMCS did find support at its 10-dma, which is now 
at $184.  This level could continue to provide a nice back up 
support level when needed.  PMCS wrestled its way through 
Friday's session made a nice move up toward the close.  We are
encouraged by the relative strength that PMCS demonstrated in 
the face of Friday's weak market.  PMCS could be positioned for 
a nice start to next week, particularly since we are still at 
a level of some potentially good possible points for new entry.  
Let us not forget the reason that we initiated our play on PMCS.  
PMCS stock will be splitting 2:1 on February 14th.  One thing to 
keep in mind, is that PMCS has offered a trading range of $87.50 
just during the month of January.  Therefore, it is not all that
surprising that we have seen some profit-taking as of late.  
Look for $190 to provide some support going forward.  Again, as 
we mentioned last Thursday, this level could be a nice area for 
possible entry points.  $195 provided some resistance at various 
points throughout last week so watch for some trading above this 
level to confirm momentum.  PMCS looks to have some additional
resistance to conquer at $200.

Other than the upcoming stock split, there is no other new 
news out there for PMCS.

BUY CALL FEB-190*SDL-BR OI=338 at $16.75 SL=13.00
BUY CALL FEB-195 SDL-BS OI=153 at $14.75 SL=11.50
BUY CALL FEB-200 SDL-BT OI=901 at $12.88 SL=10.00
BUY CALL FEB-210 SDL-BB OI=217 at $ 9.63 SL= 7.50

Picked on Jan 25th at   $196.88     P/E = 160
Change since picked       -6.81     52-week high=$207.50
Analysts Ratings     15-6-2-0-0     52-week low =$ 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 = 1.61 mln



ADAP - Adaptive Broadband Corp. $125.48 (-9.03)

Through their satellite and microwave transmission systems/ 
equipment, Adaptive Broadband offers consumers the power of a 
high-speed corporate LAN connection from their home, office 
or wherever business takes them.  AB-Access provides wireless 
broadband connections at 25 Mbps, enabling high-speed 
communications for roughly the cost of a cable modem.  With 
AB-Access, users can attach a portable device to their laptops 
and enjoy the convenience of "anytime, anywhere" access to 
people and information.  Similar to mobile telephones, consumers 
will be able to purchase AB-Access through retail outlets and 
order over-the-air activation for immediate service.  ADAP 
developed this technology by building a point-to-multipoint 
radio platform featuring ultra-efficient data transport.  This 
Media Access Control (MAC) layer delivers more bandwidth to 
more customers per unit of spectrum than any other product on 
the market.  The design enables service providers to obtain a 
"mosaic" of licenses - from MMDS to LMDS bands and beyond - and 
still deliver a consistent set of services.

First take note that ADAP is a risky play and not for the weak 
stomached.  For a company that just reported a loss of $0.19 on 
Thursday (three cents wider than expected) and that also lost 
over $13 of value on Friday, you might be wondering what it's 
doing on the call list.  Here's the deal.  As an arms merchant in 
a battle for the last mile to your home, ADAP offers the right 
product (wireless delivery at 25 Mbps) at the right time when 
cable and DSL, both terrestrial delivery systems, are duking it 
out for supremacy.  Briefing.com reports that ADAP gave one of 
the strongest analyst presentations made at the CE Unterberg 
Towbin Broadband Conference last week.  We've been itching to 
make this play.  From our perspective, the doubling in price over 
the last 13 of 14 trading days hasn't gone unnoticed in our 
research, but we haven't recommended it because we were waiting 
for a pullback.  Thursday and Friday, we got it based on less 
than expected earnings.  However, ADAP also announced a 2:1 stock 
split payable in March to make up for the shortcoming.  The 
pullback also happens to correspond with a 50% retracement of 
the price spike, and more importantly corresponds with a strong 
recovery (with strong buying volume) to near its 10-dma ($127) 
from its low of $116 just 10 minutes from closing - that's some 
recovery!  And we consider it a good entry point.  As we noted, 
ADAP is volatile.  That said, we could get another test of $116 
if the market's selling pressure keeps up.  You can target shoot 
there, but you run 2 risks: 1) you get filled and ADAP moves 
further south; 2) it never gets back down to $116 and you miss 
the fill altogether.  You really need to make your entry where 
you feel comfortable, and use stop orders to protect your gains 
(or against losses).  

Be sure to check out the "Ask OIN" section for detailed technical 
analysis.  Now, a few red flags sure to draw ire from bulls - In 
the growing broadband equipment business, it's not acceptable to 
report losses bigger than expected (remember Lucent).  It's even 
less acceptable to sell equipment (supposedly in high demand) for 
less than it costs to make.  While they may have partially solved 
that problem by outsourcing production to Solectron, there is a 
pretty low barrier to entry that will keep pressure on profit 
margins.  Here's the capper.  Despite the excellent presentation 
at the CE Unterberg Towbin Broadband Conference, CEU&T harshly 
downgraded ADAP from Strong Buy to Neutral based on valuation 
following the conference - Ouch!

BUY CALL FEB-120*CQI-BD OI=71 at $14.75 SL=11.50
BUY CALL FEB-125 QHV-BE OI=10 at $12.38 SL= 9.25 low OI
BUY CALL FEB-130 QHV-BF OI=61 at $ 9.88 SL= 7.25
BUY CALL MAR-130 QHV-CF OI= 0 at $16.50 SL=13.00 Wait for OI!

Picked on Jan 30th at $125.47     P/E = N/A
Change since picked     +0.00     52-week high=$159.69
Analysts Ratings    4-0-1-0-0     52-week low =$  9.00
Last earning 01/00  est=-0.16     actual=-0.19 surprise=-18.7%
Next earning 04-27  est= 0.02     versus=-0.28
Average Daily Volume =  458 K 



CMGI - CMG Information Services Inc $105.50 (-12.75)

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.  

In anticipation that buyers will start lining up and nibbling 
on this Internet powerhouse we're adding CMGI to our call list.  
Since climbing to an all-time high at $163.50 (split-adjusted) 
on January 3rd, CMGI has retraced over 50% of its share price.  
We successfully played CMGI as a put the past couple of weeks 
and set our goal for it to move back towards the $100 level and 
break the 50-dma (now at $109.27).  The play went well and now 
it's time to see the writing on the wall and move on.  For the 
past four trading sessions CMGI has been trying to bottom out, 
yet continued to move lower due to market conditions.  It easily 
penetrated the first line of support at $112.50 and on Friday 
dipped to an intraday low of $103.88.  Now it's possible the 
stock could edge a bit lower in the very near-term, but we 
prefer to use this level as a buying opportunity.  A move 
through the 5-dma ($110.69) technical will give us the first 
definitive sign of a reversal and more conservatively, through 
near-term resistance at $115.  Essentially the approach is based 
on our forecast that this low share price will entice investors 
and thus, create upward momentum.

Earlier in the week CMGI announced 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.  On Thursday, Lazard Freres & Co started new 
coverage with a Buy recommendation and issued a price target 
of $170 for CMGI.

BUY CALL FEB-100 GCD-BT OI= 531 at $12.13 SL= 9.50
BUY CALL FEB-105 GCD-BA OI=1184 at $ 9.25 SL= 7.00
BUY CALL FEB-110 GCD-BB OI=1290 at $ 7.00 SL= 5.25
BUY CALL MAR-105*GCD-CA OI= 445 at $15.13 SL=11.75
BUY CALL MAR-110 GCD-CB OI=1346 at $13.00 SL=10.50

Picked on Jan 30th at   $105.50    PE = 81
Change since picked       +0.00    52 week high=$163.50
Analysts Ratings      4-7-0-0-0    52 week low =$ 20.50
Last earnings 12/99   est=-0.72    actual=-1.08 
Next earnings 03-13   est=-1.32    versus= 0.07
Average Daily Volume = 6.04 mln



NTAP - Network Appliance Inc. $99.19 (-17.94)(+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.  

Opportunities sometimes come in the strangest ways.  What we 
are referring to is the broad market sell-off that took place
Friday.  Hopefully if you had a position in NTAP, you took some
money off the table earlier in the week, and have been patiently
waiting for another chance to enter this play.  That could be 
exactly what is coming.  NTAP could not escaped the selling in 
the markets Friday, but the $98 level held up as the low of the
day.  The volume was heavy in the broader markets Friday, and 
NTAP lost only -3.69, on average volume, with 1.8 million shares 
changing hands.  This suggests investors that hold shares of NTAP
stock still believe NTAP will recover from the decline seen this 
past week.  Why would shareholders continue to believe in NTAP?
The networking company joined the S&P 500 index last June, and
since Nov 1st has been the top performing stock in the index.
NTAP also ranks very high when comparing earnings and book value  
and over 68% of the outstanding shares are owned by institutions.
So how do we continue with this play?  We are looking for NTAP
to begin to form a base at this support level and then to regain
some momentum.  Be patient, let the FED have their meeting next
week, and look for NTAP to get back on track.  We could see a 
relief rally begin next week.  If the $98 level proves to be 
support for NTAP, we would look for a bounce to enter a new 
position.  With the volatility we've seen, the use of trailing 
stops would be advised.

Earlier this week NTAP announced the availability of NetCache 
4.1 streaming media.  NTAP becomes the only company with a
streaming media solution capable of delivering digital video 
and audio content like Internet Webcasts and corporate 
videoconferences using the major streaming formats, including
Apple QuickTime, Microsoft Windows Media, and RealNetworks. 

BUY CALL FEB- 90 NUL-BR OI=156 at $14.25 SL=11.50
BUY CALL FEB- 95 NUL-BS OI=391 at $11.25 SL= 8.75
BUY CALL FEB-100*NUL-BT OI=175 at $ 8.38 SL= 6.25
BUY CALL FEB-105 NUL-BA OI=296 at $ 6.75 SL= 5.00

SELL PUT FEB- 90 NUL-NR OI= 46 at $ 3.88 SL= 5.50
(See risks of selling puts in play legend)

Picked on Jan 16th at    $93.69   P/E = 331
Change since picked       +5.50   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 02-15   est= 0.11   versus= 0.06
Average daily volume = 1.76 mln



SILK - Silknet Software $162.00 (+16.00)(+10.13)

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.

After five straight days of gains in a difficult market
environment, SILK was due for a rest.  We were concerned with
the lack of conviction in this week's move, as volume has
remained low at about half the ADV.  Given the carnage in the
major indices Friday, we were pleased to see our play only give
up $6, closing above Wednesday's intraday support level of $161.  
Because of the rapid move up, additional support is sparse,
appearing first at $150, the site of the 10-dma.  This is a
pure momentum play, driven by strong earnings and analyst
upgrades.  While that is frequently enough in a positive market,
this type of play will eventually fall victim to a weak market.
In order for the move up to continue, we need to see volume
return to something approaching the daily average, and that
will likely require an improvement in overall market sentiment.
Consider opening new positions at current levels if buyers
return in force.  Otherwise, apprehension over the pending
interest rate increase could produce a drop to the $150 area.
A bounce here would provide a very nice entry, but wait for
the bounce.  Chasing an entry point can have an unpleasant
effect on your trading account. 

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= 20 at $24.88 SL=19.50 low OI
BUY CALL FEB-160*ULI-BL OI=149 at $18.75 SL=14.63
BUY CALL FEB-165 ULI-BM OI= 66 at $16.50 SL=12.88
BUY CALL FEB-170 ULI-BN OI= 23 at $14.50 SL=11.50 low OI

Picked on Jan 25th at $159.50     P/E = N/A
Change since picked     +2.50     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 =  291 K



MUSE - Micromuse Inc. $162.88 (-10.06)

Micromuse develops, markets and supports scaleable, rapidly 
deployable, configurable, software solutions for the effective 
monitoring and management of multiple elements underlying an 
enterprise's information technology infrastructure.  Micromuse 
recently earned the highly acclaimed "Best of Show" award in 
the network management category at the 1999 Networld + Interop 
in Atlanta.  Major Micromuse clients include: AirTouch, AOL, 
AT&T, Charles Schwab, GTE, Mindspring and a number of financial 
investment concerns.  Micromuse is considered to be the leading 
provider of fault and service-level management software.  
Micromuse is perhaps better known as the "Netcool" company, 
which refers to its software product used extensively by 
telecommunications and Internet service providers.

IT managers love to be cool and MUSE has one of the hottest 
(coldest?) software products on the market, Netcool, which 
enables telecom and Internet service providers manage their 
varying systems.  Micromuse has been greatly rewarded for their 
innovation with a supercharged stock.  In fact the company has 
announced that it will split its shares 2-for-1 on Feb 23rd.  
The share price of MUSE is so hot that it made Bloomberg's list 
of the top 100 stocks whose increase in share price in 1999 
outpaced that of all other publicly traded companies.  MUSE was 
number 21 on the list.  High-Tech stocks that derive the bulk of 
their business from supplying other High-Tech companies with 
the tools that they need to stay on the cutting edge seem to be 
among the strongest companies in the market.  This symbiosis was 
recently mentioned by the CEO of MUSE, Greg Brown, when he 
remarked, "The explosive growth of Internet, telecom and cable 
networks are major drivers behind our business."  During recent 
trading sessions, Micromuse has formed what is called a 
contracting triangle formation.  What usually happens as a 
result of this formation is that a break to one side or the 
other results in a huge move.  If the market can recover and 
rally, we like the chances of MUSE breaking to the upside due to 
a split rally.  The key boundaries that need to be watched are 
$160-$172, which was almost the entire range of Friday's 
trading.  A breakout to the upside could find resistance at $185 
followed by the all-time high of $192.50.  The next support 
level below $160 is $152.

Micromuse reported a very strong quarter on Jan 19th.  Revenue 
was up 106% when compared to the first quarter last year.  The 
net earnings were up over 62%  Micromuse also announced that 
they have increased their customer base with 91 new clients 
taking the total to 532.

BUY CALL FEB-160 QVM-BL OI= 19 at $21.38 SL=16.68 low OI
BUY CALL FEB-165 QVM-BM OI=  5 at $18.88 SL=14.75 low OI
BUY CALL FEB-170*QVM-BN OI=162 at $16.50 SL=12.88
BUY CALL FEB-175 QVM-BO OI= 41 at $14.75 SL=11.50
BUY CALL MAR-165 QVM-CM OI= 20 at $27.88 SL=21.75 low OI

Picked on Jan 27th at  $166.69    P/E = 386
Change since picked      -3.81    52-week high=$192.50
Analysts Ratings     5-6-0-0-0    52-week low =$ 24.00
Last earnings 01/00  est= 0.13    actual= 0.13
Next earnings 04-19  est= 0.14    versus= 0.07
Average Daily Volume =   291 K



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The Option Investor Newsletter             1-30-2000  
Sunday                        4 of 5


MFNX - MetroMedia Fiber Network $65.16 (-4.72)(+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.

Complaining of a small loss with low volume during Friday's 
selloff would be akin to complaining about leaves blowing in your 
yard during a hurricane.  No whining.  MFNX actually moved up $5 
to $72 with strong volume in the second 15 minutes after the 
open.  Though drifting back, MFNX stayed mostly positive until 
the last 1.5 hours of trading.  Even in the final 10 minutes, it 
found the horsepower to pop up over $1 from its $64 low.  The 10-
dma ($66) has historically acted as good support, but MFNX is 
slightly below that now.  Given the nature of the selloff, we 
would not be surprised to see renewed strength from here.  The 
reason for the play in the first place is that MFNX is actually 
selling capacity within its dark fiber network to other carriers 
by the lambda, or number of light frequencies, rather than the 
bit stream.  By using Nortel's all-wave technology, they can cram 
potentially 50% more wavelengths down a single strand of fiber.  
In addition to their high capacity network now spanning 20 cities 
in Europe and the U.S., they also own AboveNet, a Web hosting 
(server farm) operation similar to Exodus in character.  With 
daily volume scaled back from last week, MFNX may need some time 
to consolidate.  A willing market would be nice too.  Also, with 
an IR and PR department rather tight-lipped on news, earnings 
scheduled for release in late February or early March (IR would 
not confirm a date) are not going to help much here.  Support is 
$66.  As long as volume remains below the ADV, and the market 
remains wobbly, MFNX will remain volatile.  You can target shoot 
your favorite $1 increment down to $62.50 beginning at $66.  
Otherwise you may want to wait for a break over $72 with volume 
for the best chances of success.  (Tasmanian Devil personality)

Needless to say, no news this week either, though Advanced 
Equities meekly issued a Buy rating with an $80 13-month price 
target.  At least they don't have to work very hard to be correct 
on this one.

BUY CALL FEB-60 QFN-BL OI=715 at $8.25 SL=6.50
BUY CALL FEB-65 QFN-BM OI=541 at $5.25 SL=3.50
BUY CALL FEB-70 QFN-BN OI=558 at $3.38 SL=1.50
BUY CALL MAR-65 QFN-CM OI= 36 at $8.00 SL=6.25
BUY CALL MAR-70 QFN-CN OI=268 at $6.13 SL=4.25

Picked on Jan 16th at   $57.13     P/E = N/A
Change since picked      +8.03     52-week high=$75.81
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 = 2.9 mln



LU - Lucent Technologies $55.31 (+4.13)

Formerly known as Western Electric, Lucent makes the things 
that make communications work, or so goes the tag line on the 
commercials.  Actually, Lucent Technologies, headquartered in 
Murray Hill, N. J., designs, builds, and delivers a wide range 
of public and private networks, communications systems and 
software, data networking systems, business telephone systems, 
and microelectronics components.  Bell Labs is the research 
and development arm for the company.    

By now we all know that Lucent missed the earnings boat - they 
missed by one penny.  In short, they underestimated demand for 
optical products and got aced by Nortel.  Their CEO, Richard 
McGinn was apologetic on the conference call, but left analysts 
convinced LU was on the right track for the future.  In his own 
words, "As the world moves to global networks, we aim to be the 
plumbers, with our optics, silicon, software services."  He pegs 
revenue growth at 17% and further gains in market share for 
FY2000.  With all the bad news from earnings priced in and most 
of the sellers shaken out on that 176-mln share day following the 
warning, and stragglers exiting on the 18th, only the die-hards 
were left after January 20.  Support is rock solid at the $50-$52 
level.  However, LU has encountered resistance at $58 since the 
drop.  It's worth noting though on the chart that LU's Friday 
loss came early in the morning session and did not follow the 
market pattern down late in the afternoon.  In a display of good 
strength, it stopped dead in its tracks at $55 (above its 10-dma 
of $53.77) held steady around $55.50 for the next five hours 
while the rest of the market caved in around it.  If you tend 
toward the conservative, this may be your kind of play.  Given 
the strength, you can consider taking a position at the current 
level, or wait for LU to bounce off $52 (maybe won't happen 
again).  If you really want to be sure, consider waiting for 
the breakout over $58.50.

For an excellent article on Lucent, grab a copy of the Forbes 
Magazine, February 7 issue.  In it, the author mentions that LU 
may offer an optical component tracking stock that "could add 
billions in value".  In other news, note that class action 
lawsuits filed by multiple law firms over the recent price drop 
will cause some parasitic drag on sentiment, but that it will 
most likely be settled once discovery is completed.  No worries.

BUY CALL FEB-50 LU-BJ OI= 3106 at $6.25 SL=4.50
BUY CALL FEB-55*LU-BK OI=12299 at $2.88 SL=1.50
BUY CALL FEB-60 LU-BL OI=21733 at $1.06 SL=0.00 High Risk!
BUY CALL MAR-55 LU-CK OI= 1051 at $4.38 SL=4.00
BUY CALL MAR-60 LU-CL OI= 4244 at $2.25 SL=1.25

Picked on Jan 27th at    $57.44     P/E = 81
Change since picked       -1.38     52 week high=$84.19
Analysts Ratings    15-16-5-0-0     52 week low =$47.00
Last earning 01/00    est= 0.37     actual= 0.36 surprise=-3.0%
Next earning 04-20    est= 0.25     versus= 0.17
Average Daily Volume = 16.8 mln 


VOD - Vodaphone AirTouch $54.63 (-1.31)(+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.

Reminiscent of watching two 5-year olds argue over their
favorite toy, the endless bickering between VOD and Mannesmann
is becoming tiresome.  We're glad it will be over one way or
the other when VOD's buyout offer expires on February 7th.
The VOD management team continues to woo Mannesmann
shareholders, but no amount of concessions seems sufficient
to coerce the Mannesmann management team to abandon their
go-it-alone strategy.  The latest maneuvering has Mannesmann
trying to build alliances in the internet world; making the
case that Mannesmann is also an internet company, while VOD
has no internet presence (see news below).  All of this
wrangling has had little affect on VOD shares, as they trade
between $54 and $58 on average volume.  Entries can still be
considered when prices bounce off of support at $54, but more 
conservative investors may want to wait for a convincing break
through the upper end of this trading range.  VOD will likely
remain rangebound until the resolution to this battle becomes
apparent.  This will likely continue to be a news-driven play,
but general market weakness could still torpedo our play.  As
such, play with caution, and keep your stops in place.

Concerning speculation about a deal with AOL, Mannesmann
confirmed that integrated online services play a key role
in the company's strategy, and that they have been talking to
several different Internet companies about possible
collaboration.  Also on Friday, Mannesmann announced a joint
venture with Deutsche Bank, launching a new European service
that turns phones into personal bank tellers by combining
telephone and bank accounts.  Mannesmann hopes the venture,
called Tele-Commerce Bank, will bolster the company's
e-commerce strategy and strengthen its defense against VOD's
$156 billion hostile takeover bid.

BUY CALL FEB-50 VOD-BJ OI=3250 at $6.75 SL=5.00
BUY CALL FEB-55 VOD-BK OI=1761 at $3.25 SL=1.75
BUY CALL FEB-60 VOD-BL OI=1869 at $1.63 SL=0.75
BUY CALL APR-55*VOD-DK OI=2173 at $6.50 SL=4.75
BUY CALL APR-60 VOD-DL OI= 705 at $4.50 SL=2.75

Picked on Jan 18th at    $57.50    P/E = N/A
Change since picked       -2.88    52-week high=$58.00
Analysts Ratings      3-3-2-0-0    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 = 4.13 mln



LVLT - Level 3 Communications $104.94 (-5.56)(+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.    

Welcome new readers!  LVLT was first added to our call list on 
January 16th as it was building momentum ahead of its scheduled 
earnings.  Earnings are now upon us.  Level3 is confirmed to 
report this Thursday, before the bell.  Another factor that 
played into this momentum scenario is the possibility of a 
split announcement around this time too.  LVLT reached split-
level candidacy when it began trading consistently above $80.  
With 1.5 bln shares authorized and only 341 mln outstanding 
there are certainly plenty of shares available for a stock split 
(we've got our fingers crossed!).  The initial run up was at 
lightening speed taking us upwards to an all-time of $120.25, 
the pinnacle reached on Monday.  You couldn't have asked for a 
more bullish climb!  However since then the market has shown 
signs of instability and weakness.  Plus you had to expect 
traders to take some money off the table at some point.  Now 
granted LVLT held up well just above the 5-dma (now at $108.99), 
but on Friday the stock surrendered and slipped under this mark. 
At this time we must continue to advocated "caution" 
particularly in front of the Fed meeting (February 1st and 2nd).  
Remember too that you want to be out of any existing positions 
before LVLT reports its earnings Thursday morning.  It's not 
worth the risk to hold over the announcement no matter how good 
the numbers may prove to be.  For the aggressive day traders, 
LVLT is still providing lots of intraday volatility for target 

On Monday Level3 executives held a conference for analysts and 
investors.  The main topics included Level3's accelerated 
worldwide network construction schedule that is expected to be 
finished ahead of schedule in the 4Q of 2000.  Also part of the 
discussion was the expansion of its wholesale facilities and the 
plans to build an Asian undersea connection.  The following day 
Kaufman Brothers reiterated a Buy recommendation and issued an 
$163 price target.  

BUY CALL FEB-100*QHN-BT OI=1284 at $ 9.50 SL=7.25
BUY CALL FEB-105 QHN-BA OI= 424 at $ 6.63 SL=5.00
BUY CALL FEB-110 QHN-BB OI=2722 at $ 4.50 SL=2.75
BUY CALL MAR-105 QHN-CA OI= 594 at $10.50 SL=8.25
BUY CALL MAR-110 QHN-CB OI=1066 at $ 8.25 SL=6.50

Picked on Jan 16th at    $86.75    P/E = N/A
Change since picked      +18.19    52-week high=$120.25
Analysts Ratings      4-5-2-0-0    52-week low =$ 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 = 1.93 mln



ICIX - Intermedia Communications $45.00 (+3.94)

Intermedia Communications is an integrated communications 
provider with products and services that encompass the broadest 
range of networking solutions available from any single 
supplier.  These solutions include local and long distance 
services, frame relay networking, Internet, ATM, and bundled 
services, which provide both voice and data connectivity on a 
single access circuit.  Intermedia's ViewSPAN offers performance
monitoring across numerous platforms, integrating even those 
networks owned by other carriers.  Intermedia's products and 
services include industry-leading guarantees, customer service,
technical support for design, implementation, and operations.
Perhaps the most impressive quality for ICIX last week was the 
relative strength it demonstrated, particularly on Friday.  We
saw the Nasdaq Telecommunications Index down over 40 points 
and yet ICIX managed a nice gain of nearly $2.  Not to mention 
that ICIX traded to a new 52-week high of $46.38 and posted 
volume over two times the daily average.  Apparently, there 
are plenty of investors interested in this stock.  ICIX has 
been trending upward since roughly the beginning of November 
and has picked up the pace a bit throughout the last two months. 
January 12th turned out to be a very good day for ICIX.  Digex 
(DIGX), which is a subsidiary of ICIX, announced that it would 
be working with Compaq and Microsoft (MSFT) to develop 
application hosting services.  It was also announced that CPQ 
and MSFT would each invest $50 million in DIGX to help with the 
funding of the service development.  It was reported that DIGX 
had acquired roughly $700 million total in strategic financing 
from various sources.  On the same day, Duff & Phelps Credit 
Rating Company raised their Rating Outlook for ICIX from Stable 
to Positive, citing the strategic financing announcement as the 
reason for the upgrade.  On January 13th, ICIX was upgraded by 
AG Edwards from an Accumulate to a Buy.  ICIX gained $1.75 on 
the 12th and $4 on the 13th.  ICIX has some nice support backing 
it.  Its 5 and 10-dmas have converged at $42.25, which could 
provide some solid support if needed.  The $42 level looks to 
have provided some support several times last week, so this 
could be a good level for possible entry points on pullbacks.  
ICIX has additional support at $41, $40 and $37. ICIX did 
encounter some resistance at $46 on Friday, but could have the 
momentum to keep climbing through this level next week. 
We have an unconfirmed date of February 24th for an upcoming 
earnings announcement.  We will be confirming this date with 
the company next week.  Last Wednesday, ICIX announced their
strategies for continuing growth and expansion.  These 
initiatives included expanding their DSL service, an 
enhancement in their ability to offer voice and data 
communications services, and improvement in the area of 
global connectivity.  They also announced that they had 
signed on to the Optical Domain Service Interconnect 
agreement to "collaboratively develop and encourage open 
interfaces and protocols within the telecommunications 

BUY CALL FEB-40 QIX-BH OI=1717 at $7.00 SL=5.25
BUY CALL FEB-45 QIX-BI OI=1117 at $4.13 SL=2.50
BUY CALL FEB-50 QIX-BJ OI=1409 at $2.13 SL=1.00
BUY CALL MAR-40*QIX-CH OI= 245 at $9.13 SL=6.75
BUY CALL MAR-45 QIX-CI OI=1558 at $6.50 SL=4.75

Picked on Jan 25th at    $45.00     P/E = N/A
Change since picked       +0.00     52-week high=$46.38
Analysts Ratings      6-5-3-0-0     52-week low =$13.06
Last earnings 11/99   est=-2.98     actual=-2.97
Next earnings 02-24   est=-3.08     versus=-2.84
Average Daily Volume = 1.38 mln



FRX - Forest Laboratories $69.25 (+0.25)

Forest Labs develops, manufactures and sells both branded and 
generic forms of ethical products which require a physician's 
prescription, as well as non-prescription pharmaceutical 
products sold over-the-counter, which are used for a wide range 
of illnesses.  The company's main products include Celexa, a 
selective serotonin reuptake inhibitor for the treatment of 
depression; Tiazac, for the treatment of hypertension and 
angina; Aerobid, an inhalent for asthma; and Infasurf, for the 
treatment of respiratory distress in infants.

The bullish story for the Drug sector is very well known.  We 
have an aging population.  New drugs are providing results not 
deemed possible just a generation ago.  More people around the 
world can afford and are willing to pay for life saving 
therapies.  Pricing remains very strong due to vigorously 
protected patents and revenues and profits continue to grow in a 
steady and even fashion.  So why is it that Drug stocks can not 
seem to get out of their own way?  Several rallies have failed 
over the past several months.  Late last week Drug stocks became 
a relatively safe harbor against the torrential winds of major 
selling.  Will this rally last?  We do not know.  But if this 
trend continues for awhile we might as well be invested in one 
of the strongest stocks in the sector and FRX is clearly one of 
the best.  FRX is up over 50% from its October lows.  After a 
little selling early this year, FRX enjoyed a key reversal rally 
that shattered resistance at $61.75.  A subsequent pullback to 
the breakout point indicates that the low $60's is an excellent 
support area for the stock.  Friday's rally was very impressive 
and it is clear that scared money is finding its way to more 
familiar and supposedly more fundamentally stable stocks.  If 
this trend continues, look for FRX to make another new high, 
followed by a pullback.  A break above Friday's high could be 
good for a small rally to the high of $70.75.  A new high might 
give us a rally of a couple more points.  FRX is in a decided 
uptrend.  Because of sharp pullbacks that seem to last a few 
days, it may be advisable to use a trailing stop strategy to 
protect any profits you may have.  The first level of support 
can be found just above $65 followed by $61. 

Following an earnings report on January 18th when FRX "beat" 
the estimates by $0.02, Robertson Stephens reiterated their 
Buy rating on the company.  Their current target price of $65 
has not been raised, yet.

BUY CALL FEB-60 FRX-BL OI= 43 at $ 8.00 SL=6.25
BUY CALL FEB-65 FRX-BM OI= 71 at $ 6.00 SL=4.25 
BUY CALL FEB-70*FRX-BN OI=101 at $ 3.25 SL=1.50
BUY CALL MAY-65 FRX-EM OI=109 at $10.13 SL=7.50
BUY CALL MAY-70 FRX-EN OI= 81 at $ 6.63 SL=4.75

Picked on Jan 30th at   $69.25    PE = 47
Change since picked      +0.00    52-week high=$70.75
Analysts Ratings     6-8-4-0-0    52-week low =$41.25
Last earnings 01/00  est= 0.34    actual= 0.36 
Next earnings 05-04  est= 0.30    versus= 0.45
Average daily volume =   597 K


LEAPS by Mark Phillips

Waiting for entry points?  Patient investors were rewarded last
week as the VIX closed at 29.09.  It was an ugly week in the
markets, but experience has shown us that this is exactly what
we want for good entry points on our LEAP plays.  The VIX in the
low 30's continues to provide excellent buying opportunities.  
You will notice that many of our returns went down, but not 
just because the stocks dipped, the premiums deflated as well.  
This makes for great call buying opportunities!  In looking 
through the charts, many of our LEAP plays have now pulled
back to support, providing good entry points, as long as the
markets move up from here.  Patience is still the watchword;
with earnings season winding down and the FOMC meeting early
next week, play with caution.  

Current Plays


EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $36.00   134.07%
                 JAN-2002 $ 90  WUE-AR   $19.00   $40.13   111.21%
GPS    11/07/99  JAN-2001 $ 40  ZGS-AH   $ 5.75   $11.50   100.00%
                 JAN-2002 $ 45  WGS-AI   $ 7.88   $13.63    72.97%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $25.88    89.88%
                 JAN-2002 $110  WIB-AB   $16.50   $29.88    81.09%
LU     11/14/99  JAN-2001 $ 80  ZEU-AP   $12.88   $ 4.75   -63.12%
                 JAN-2002 $ 90  WEU-AR   $16.13   $ 8.63   -46.50%
CSCO   11/14/99  JAN-2001 $ 80  ZCY-AP   $19.13   $34.75    81.65%
                 JAN-2002 $ 90  WIV-AR   $22.00   $37.38    69.91%
GE     11/21/99  JAN-2001 $150  ZGR-AU   $16.25   $15.88   - 2.28%
                 JAN-2002 $150  WGE-AU   $25.50   $25.63     0.51%
GTW    11/21/99  JAN-2001 $ 90  ZWB-AR   $17.75   $ 7.00   -60.56%
                 JAN-2002 $100  WGB-AT   $22.50   $11.25   -50.00%
NT     11/28/99  JAN-2001 $ 75  ZOO-AO   $22.25   $34.75    56.18%
                 JAN-2002 $ 75  WNT-AO   $30.25   $42.25    39.67%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $14.88    38.42%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $19.25    28.33%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $21.75   - 2.25%
                 JAN-2002 $120  WGZ-AD   $28.50   $27.88   - 2.18%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $34.75    47.87%
                 JAN-2002 $100  WFU-AT   $27.25   $40.25    47.71%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $16.63   - 5.67%
                 JAN-2002 $ 90  WJX-AR   $22.00   $21.88   - 0.06%
AOL    12/23/99  JAN-2001 $ 90  ZKS-AR   $20.13   $ 6.38   -68.31%
                 JAN-2002 $100  WAN-AT   $25.63   $10.88   -57.55%
LU     01/09/00  JAN-2001 $ 50  ZEU-AJ   $13.63   $15.00    10.09%
GTW    01/09/00  JAN-2001 $ 60  ZWB-AL   $15.88   $15.38   - 3.15%
MOT    01/09/00  JAN-2001 $125  ZMA-AE   $31.13   $29.38   - 5.62%
                 JAN-2002 $125  WMA-AE   $41.50   $40.13   - 3.30%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $ 7.50   -17.85% 
                 JAN-2002 $ 40  WSY-AH   $12.63   $11.25   -10.93%

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

ERICY - Ericsson $70.06

A split run in the LEAPS section?  Sure, why not.  Money
invested in ERICY had been pretty much dead until late October
when investors started paying attention again.  The price has
nearly doubled since then and the faithful were rewarded last
week with strong earnings and the announcement of a 4:1 split.
That's right, a $70 Telecom stock with a pending 4:1 split!
Shareholders will vote on the split on March 31st, giving us
plenty of time to open positions before the run commences.
Now before you start getting visions of QCOM in your head, stop
and take a deep breath.  ERICY doesn't have the kind of power
that was afforded QCOM through its CDMA ownership.  ERICY is
simply a strong player in the telecommunications field,
supported by several analyst upgrades.  The company expects
20 percent sales growth this year and forsees "substantial"
earnings growth.  Support is building at $65, which should
provide a nice entry point in the event of a pullback.

BUY LEAP JAN-2001 $65.00 ZYD-AM at $19.75
BUY LEAP JAN-2002 $65.00 WRY-AM at $27.00



MSFT - Microsoft $98.25

It seems as though you can't go wrong with MSFT.  No matter
what obstacles appear, (Y2K, anti-trust lawsuit, etc.), MSFT
just rolls over them like a Panzer on a Sunday drive through
the countryside.  Each negative news event simply provides us
with another entry point.  Regardless of the outcome of the
Justice Department's anti-trust case, MSFT shareholders will
continue to be rewarded.  Even if the company is broken up,
the result will be two or more 800-lb gorillas instead of one
1600-lb behemoth.  MSFT has strong support in the $94-96 range,
and a bounce near this level would make for a nice entry going

BUY LEAP JAN-2001 $100.00 ZMF-AT at $17.63
BUY LEAP JAN-2002 $110.00 WMF-AB at $21.63



KM $8.50 We started this as a speculative value play, but it
hasn't shown sustained signs of life.  Although we got some 
movement from when we started coverage on December 5th, there 
isn't enough life to keep it.  Weakness in retailers like WMT 
will exert further downward pressure, prompting us to let KM 
go.  Just keep in mind that we saw some incredible percent gains 
in the at-the-money options when KM decided to move.  You could 
almost treat this as a rolling stock situation.  Buy the dips 
and sell the rallies.

ADBE $57.56 What was looking like a consolidation last week
gave way to a renewed decline in ADBE, as prices fell through
support at $60.  This level had held up well since early
December, but Friday's drop takes our play down to levels not
seen since early October.  While our play may recover from here,
we think it is more likely to continue weakening and we don't
want to try to pick the bottom.  ADBE is still very well
positioned in its marketplace, so we expect it to return to 
our LEAPS list when investor sentiment improves.


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.


UAL - UAL Corp $57.88 (-2.25)

UAL is a holding company whose principal subsidiary is United 
Air Lines, the world's largest airline.  They engage in the 
commercial air transportation of people, property, and mail.  
Notably, UAL is one of the world's largest employee-controlled 
companies with its employees owning 47% of the stake.    

On January 13th, UAL abruptly announced its 2000 financial 
forecast would be well below analyst expectations.  UAL shares 
stumbled a whopping 13% on strong volume!  In due course this 
warning dragged down the airline sector that is already 
feeling the squeeze from skyrocketing fuel costs.  UAL cited 
that rising fuel prices could push its costs upwards of 25% 
compared to the 1999 levels.  Plus the company is expecting 
labor costs to rise as well in anticipation of contract 
negotiations with its pilots and mechanics.  Merrill Lynch also 
came forward on the news and downgraded the airline to a Near-
Term Neutral from a Near-Term Accumulate.  It's also important 
to note that many of the airlines (including UAL) recently 
reported solid earnings and beat analysts' estimates; however, 
we need to remember that these numbers are tempered by the fact 
that estimates were significantly lowered due to the rising oil 
prices.  Despite these negative events UAL held firm above 
support at $60.  But remember that blizzard that pummeled the 
east coast this week?  Well it caused major flight disruptions 
and United was forced to cancel nearly 400 flights.  You could 
rationalize that Mother Nature simply clipped the airline's 
wings.  But from a deeper perspective consumers are already 
"annoyed" by what they consider poor customer service and 
delayed flights.  This only added salt to the wound.  Now tack 
on that UAL would be adding on a $20 fuel surcharge (already on 
domestic flights) as well as a general 3% increase to its 
international flights and you've got a nasty combination.  On 
Tuesday the stock slipped under firm support at $60 dipping to 
an intraday low of $58.  Volume was moderate to very strong and 
UAL hit lower-lows as the week progressed.  Keep in mind that 
the negative market sentiment is playing a significant role in 
the descent too.  For an entry take a look at a one-month chart 
with a 5-dma line.  It's easy to see this technical indicator is 
a good gauge for an entry into this put play.  

***Presently there are no strikes below 55***

BUY PUT FEB-60*UAL-NL OI=819 at $3.75 SL=2.25
BUY PUT FEB-55 UAL-NK OI=865 at $1.25 SL=0.50

Average Daily Volume = 709 K



SLR - Solectron $70.06 (-8.31)(-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.    

Just like clockwork, SLR gapped up to $73 on Friday where it hit 
resistance and fell back through $72, which would have made a 
good entry as SLR continued south to $69 where it regained 
support.  Hmmm...two negative days in a row where SLR found 
support at $69 - it's looking pretty tough to move any further 
down, though with any continued weakness in the market, the 
stairs could lead further into the basement.  However, our best 
suggestion for a good entry is to wait for a bounce down from 
resistance at $73, or simply wait for a break down through $69 
on strong volume.  That's what makes the play so workable.  
The chart is full-tilt negative on indicators including MACD, 
stochastic, and RSI.  If SLR can move down with conviction past 
$69, the next strong support level will be $62.  Volume in 
descent mode remains well above the ADV conveying that sellers 
are still in control.  Play this one for the technicals.

Not even an earnings run will save this stock since SLR won't 
announce until March 13, according to Zack's.  However, more 
upgrades like the one from Merrill Lynch might.  They reiterated 
their long and short-term Buy rating while offering a new price 
target of $120.  Others could follow.

BUY PUT FEB-75*SLR-NO OI=377 at $7.38 SL=5.50
BUY PUT FEB-70 SLR-NN OI-596 at $4.50 SL=2.75

Average Daily Volume = 1.6 mln



BBY - Best Buy Inc. $48.75 (-5.28)

If it requires electricity, Best Buy wants to be your store.
As the #1 consumer electronics specialty retailer, BBY sells
home office products (computers, telephones, copiers), consumer
electronics (TVs, VCRs, stereo systems), entertainment software
(CDs, DVDs, video games), and appliances (microwaves, vacuums).
BBY operates over 310 stores in 36 states and offers product
information and demonstration areas to make customers feel more
confident about utilizing a self-service discount store format.

Suffering the double insult of general market weakness and the
end of the Christmas shopping season, BBY hasn't been a very
good buy for investors this year.  Without the anticipation of
earnings to prop up the share price, the last three weeks have
not been kind to BBY.  Losing over $9 since its January high,
the electronics retailer looks to be headed for lower ground.
With the e-commerce side of its business just getting started,
higher interest rates just around the corner, and the seasonal
weakness in the overall stock market, BBY looks like a great
put play.  Now trading below both the 30 and 50 day moving
averages, BBY broke through long-term support at $51 on Friday.
This should provide resistance going forward, reinforced by the
30-dma ($51.50) and the 50-dma ($52.50).  Volume has been on the
light side this week, but began picking up on Friday.  Look for
additional selling to push prices down to $43-44 before BBY
finds support.  A move up to resistance followed by renewed
selling pressure is buyable, as is a continuation of the slide
from Friday's close. 

BUY PUT FEB-50*BBY-NJ OI=999 at $3.63 SL=1.75
BUY PUT FEB-45 BBY-NI OI=543 at $1.63 SL=0.75

Average Daily Volume = 3.28 mln



ADBE - Adobe Systems Inc. $57.56 (-5.31)

Adobe Systems builds software solutions for Web and print 
publishing.  Its graphic design, imaging, dynamic media, and 
authoring tools enable customers to create, publish and deliver 
visually rich content for various types of media.  The company's 
products are used by Web and graphic designers, professional 
publishers, document-intensive organizations, business users 
and consumers.  Adobe is the 4th largest U.S. based personal 
software company and has over $1 billion in annual revenues.

Yesterday's favorites are quickly losing short-term favor and 
ADBE is not immune to the changing tide.  There is nothing wrong 
with ADBE internally.  December's earnings announcement was 
strong.  The company recently released a new product for their 
business application clients and the company was named in 
Fortune Magazine as one of the best 100 companies to work for.  
So what gives?  Why is the stock in a downtrend?  Could it 
simply be because the company, as good as it is, is just 
yesterday's news?  Is bad news coming?  Whatever the reason, we 
primarily like ADBE as a put play because of its chart.  After 
peaking at $79 in November, Adobe has suffered a steady string 
of lower highs and lower lows.  It is a very well defined 
downtrend and profits have been made selling rallies for two 
months.  With the market losing steam, look for ADBE to be a 
source for raising cash.  If there is a rally, look for ADBE to 
possibly top out around $60, where a potentially profitable put 
position might be placed.  A break below Friday's low of $56.63 
might be the sign momentum players need to punish the stock a 
little bit more.  ADBE's most recent uptrend began around $52.  
We see that price as potentially providing pretty good support. 
If the stock can find support there, it might be a good place 
to take profits.

BUY PUT FEB-60*AEQ-NL OI= 429 at $5.25 SL=3.50
BUY PUT FEB-55 AEQ-NK OI=1195 at $2.94 SL=1.50

Average Daily Volume = 1.98 mln



INTU - Intuit Inc. $57.75 (-17.88)

Intuit makes software.  ADBE is the number one maker of personal
finance software.  The company is well known for its Quicken
personal finance and TurboTax tax filing products.  They have
added the Internet as a marketing tool as well.  The company
offers Internet products and services such as financial news 
site Quicken.com, payroll processing, insurance marketing, and
mortgage filing.  Their main competition comes from H&R Block 
and Microsoft.

Shareholders of INTU had a tough week.  The one bright spot
should have been the announcement of a new president to run the
company.  Investors either didn't approve or didn't care, as 
they sold share of INTU for most of the week, dropping over
$17 off the price of the company's stock.  Monday INTU named
Stephen Bennett as the new president and CEO, replacing
William Harris, who quit in September.  Analysts at ABN Amro
reiterated their Buy rating on INTU on the announcement and
maintained their earnings estimates for the software company.
Much of the recent concern surrounding INTU recently, seems 
to have come from their lack of any strong leadership.  Several
analysts believe Bennett may do a good job, but investors
are taking a "show me" attitude towards the company.  Our put
play in INTU is not expected to be a long-term play, but we do
believe the momentum behind the current down-draft could carry
the stock to the $51 to $52 area before finding any support.
With the negative tone in the broader markets it may not take
much to push the stock to new lows.  If we do see a bounce
from this level, initial resistance is found at the 50-dma at
$60.82 followed by $65.  A bounce followed by a decline would
provide a good entry for this play.

BUY PUT FEB-65 IQU-NM OI= 410 at $9.63 SL=7.25
BUY PUT FEB-60*IQU-NL OI=2473 at $6.13 SL=4.25
BUY PUT FEB-55 IQU-NK OI= 371 at $3.63 SL=2.00

Average daily volume = 3.18 mln



IPG - Interpublic Group of Companies Inc $47.00 (-5.75)

IPG owns and operates leading advertising agencies and 
communications services companies.  They are the world's #2 
advertising group standing only behind  Omnicom.  Their global 
advertising agency business is conducted through the McCann-
Erickson World Group and The Lowe Group.  The company also 
operates a media buying business through its ownership of 
Western International Media.  It also has its hands in 
public relations, graphic design, and market research.  

Are you interested in another stock that clearly mimics the 
DOW's movement?  Overlap IPG and the Dow Jones Industrial 
Average(INDU) charts and you've got yourself a nice match.  The 
first inkling of the stock's downdraft was back on January 20th 
after it topped the day before at $55.56 on moderate volume.  
As the market's weakness and instability extended so did IPG's 
decline.  By this Thursday IPG had cracked support at $51 and 
was trading below the 50-dma (now at $51.60).  It edged even 
lower on Friday moving closer to the 200-dma line ($42.66), a 
technical indicator it hasn't tagged since mid-November.  Even 
a new Market Perform rating from DLJ on Wednesday had no 
positive effect.  In contrast, the news of the $110 to $115 mln 
in charges against 4Q earnings certainly did put a damper on the 
share price this week.  IPG is confirmed to report next month 
on February 23rd.  The charges are a reflection of the global 
merger between Lowe & Partners and Ammirati Puris Lintas.  Also 
the company announced it would be reducing the work force 
between these two giants by about 7%, or 900 jobs.  Still let's 
keep in mind that IPG is more heavily influenced by the market 
than anything else.  So it's imperative to confirm both stock 
direction and market sentiment before opening a new position.  
It's difficult to pinpoint a solid entry into this put play.  
Overhead resistance is strong at $51, but if IPG continues in 
a straight descent you may have to simply take a risk on an 
intraday high.

BUY PUT FEB-55*IPG-NK OI= 31 at $7.13 SL=5.50
BUY PUT FEB-50 IPG-NJ OI=100 at $3.25 SL=1.75

Average Daily Volume = 975 K


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The Option Investor Newsletter             1-30-2000  
Sunday                        5 of 5


Success With Covered-Calls: It's All About Attitude...

Each week we receive a wide variety of questions regarding our
approach to this conservative strategy.  The most common topics
are related to portfolio management and trading style.  The list
of subjects generally encompasses a number of basic strategy
goals and we have narrowed the area of discussion to three
primary issues:

1. Why do we focus on stocks under $30?
2. Why don't we recommend out-the-money covered writes?
3. Why aren't we concerned with stock ownership?

Essentially, why do we do what we do? There is a simple answer:

Because that is the style and approach we have found to be most
successful in this conservative strategy.

Over the years, we have tried several different variations of
this technique and have encountered many of the well-known
covered-call demons, "Why didn't I just buy and hold (and avoid
the covered-call).  Why did I buy and hold? (If only I had sold
the call earlier.)  Why didn't I close (buy-back the call and
sell the stock) that position?"  Oh, and my favorite, "I wish I
had sold the in-the-money call!" The accompanying mood changes
and second-guessing occur at various times.  You probably know
them well by now; "This week I am long-term...no wait, maybe I am
short term...I don't know!  Look at those call buyers making a
killing as the market climbs, maybe I should do that!  Look at
those call buyers getting killed as the market tanks. No thanks,
too risky.  I'm glad I just sell covered-calls!"

So that's really what it all comes down to; risk tolerance.  As
proponents of this system, we have slowly evolved into "non-
risk-takers", or in most cases, we endure as little risk as
possible.  We tend to trade for lower returns than those that are
listed in the play section. (3% on margin equates to a 6% monthly
return.) We don't focus as much on the reward side of our trading
strategy.  When we have in the past (personal experiences abound),
we've been burned.  What did we learn?  To be successful, you must
remove emotions (mainly greed) from any trading strategy.  We have
found that if we concentrate on not losing money (by focusing on 
downside protection), our portfolio grows.  What really matters is
that we achieve a high probability of not losing money!  The rest
will almost always take care of itself.

To counter the "buy and hold" mentality, many of our trades are
entered via a "buy-write."  Too many times in the past, we have
bought stock, hoping to sell the call on a rally, only to watch
the value of the call drop.  I have never aged so fast in such a
short time (waiting for an upside move to inflate the value of the
call I want to sell).  If we don't use a buy-write, we sell the
call right after we buy the stock.  To offset the impact of
commissions, we usually trade a minimum of 500 - 1000 shares.
Once we enter a position, we monitor it daily. (Unlike like the
short-term call buyers, who are usually glued to their computer
screen all day, fingers on the "sell" button.)  We check the
price movement on a closing basis and review any news releases or
market activities that might affect the position.  Occasionally we
will check the issue during the day, but usually it is after the
close. With this style of trading (limited risk/maximum downside
protection), most positions can fall to technical support and
still provide maximum profit.  If the underlying stock rises
significantly (and the written call is trading at parity), there
may be an opportunity to close the play early, exchanging a quick
turnaround for a slightly smaller return.  The most important act
occurs when the position becomes negative.  Do not hesitate to buy
back the call and sell the stock (or roll down), depending on your
analysis and outlook of the overall situation.

As far as pricing, we concentrate stocks under $30 because they
provide the best yield (due to the relative premiums in option
pricing).  These low cost issues also allow us to open several
positions to further diversify the potential risk.  The use of
high-priced stocks would require the majority of novice traders
to participate in only one or two positions, not to mention the
potential for increased risk.  Statistics suggest that this
technique works well for those who favor its risk/reward outlook.
With almost two years of providing covered write candidates for
the OIN's subscribers, we have averaged 8 out of 10 profitable
choices, with annualized returns well above all but the most
successful funds. Remember, these small cap issues were recently
in their own private bear market. Only after experiencing days
like this Friday, can investors appreciate the value of our 
conservative approach.

Good Luck!


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

CYOE    5.50   9.06   FEB   5.00  1.44  *$  0.94  23.2%  21.3%
TERA    4.41   6.25   FEB   5.00  0.50  *$  1.09  27.9%  20.2%
WDC     5.50   5.00   FEB   5.00  1.13   $  0.63  14.4%  10.4%
GMGC    6.84   7.41   FEB   5.00  2.38  *$  0.54  12.1%   8.8%
GMGC    7.50   7.41   FEB   5.00  2.88  *$  0.38   8.2%   7.6%
MESG   17.31  18.31   FEB  15.00  3.25  *$  0.94   6.7%   7.3%
ESPI    9.22  11.06   FEB   7.50  2.19  *$  0.47   6.7%   7.3%
ERTH    6.03   5.03   FEB   5.00  1.38  *$  0.35   7.5%   6.9%
CCUR   18.38  19.50   FEB  15.00  4.38  *$  1.00   7.1%   6.6%
ASFT   21.50  18.50   FEB  15.00  7.38  *$  0.88   6.2%   5.7%
VTS    17.75  15.81   FEB  15.00  3.50  *$  0.75   5.3%   5.7%
VOYN   13.06  12.19   FEB  10.00  3.50  *$  0.44   4.6%   5.0%
HRC     5.81   5.44   FEB   5.00  1.13  *$  0.32   6.8%   5.0%
EAII   14.25  12.50   FEB  10.00  4.75  *$  0.50   5.3%   4.9%
MUEI   12.75  10.81   FEB  10.00  3.25  *$  0.50   5.3%   4.9%
CORL   22.13  19.63   FEB  15.00  7.75  *$  0.62   4.3%   4.7%
DBCC    9.19   8.31   FEB   7.50  2.00  *$  0.31   4.3%   4.7%
MSGI   19.13  18.25   FEB  15.00  4.75  *$  0.62   4.3%   4.7%
PCMS   10.06  14.88   FEB   7.50  3.00  *$  0.44   6.2%   4.5%
HMK     9.88   9.94   FEB   7.50  2.81  *$  0.43   6.1%   4.4%
XICO   22.56  19.75   FEB  17.50  5.75  *$  0.69   4.1%   3.8%
IFCI   10.13  13.25   FEB   7.50  3.00  *$  0.37   5.2%   3.8%
GELX   20.38  16.13   FEB  17.50  4.00   $ -0.25  -1.5%   0.0%
GSTX   10.69   8.63   FEB  10.00  1.63   $ -0.43  -4.7%   0.0%

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


Many of the stocks above are starting to consolidate (pullback)
with the general market malaise. The strength of these issues
will be measured by how well they hold up at support. Breaking 
through a support area would be a logical exit signal (time to
roll down?). Geltex (GELX) is approaching the neck-line of its
recent double bottom (around $14.00) and that should be a key
support area. Gst Telecom's (GSTX) president and CEO resigned 
and caused the usual stock correction. The stock may test the 
December low. The technicals on both of these issues remains
fairly healthy though price is the ultimate gauge.

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

BRKT   25.75  FEB 22.50  BUQ BX  4.13  200   21.62   4.1%   4.1%
CCCG   16.88  FEB 15.00  KDQ BC  2.56  175   14.32   4.7%   4.7%
ESPI   11.06  FEB  7.50   AQ BU  3.88  1060   7.18   4.5%   4.5%
KELL    8.81  FEB  7.50  KQC BU  1.69  0      7.12   5.3%   5.3%
MCRE   11.88  FEB 10.00  MQZ BB  2.50  439    9.38   6.6%   6.6%
NZRO   35.00  FEB 25.00  NUR BE 10.88  42    24.12   3.6%   3.6%
PRST   19.63  FEB 17.50  PQK BW  2.75  325   16.88   3.7%   3.7%

Sequenced by Return Not Called

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

MCRE   11.88  FEB 10.00  MQZ BB  2.50  439    9.38   6.6%   6.6%
KELL    8.81  FEB  7.50  KQC BU  1.69  0      7.12   5.3%   5.3%
CCCG   16.88  FEB 15.00  KDQ BC  2.56  175   14.32   4.7%   4.7%
ESPI   11.06  FEB  7.50   AQ BU  3.88  1060   7.18   4.5%   4.5%
BRKT   25.75  FEB 22.50  BUQ BX  4.13  200   21.62   4.1%   4.1%
PRST   19.63  FEB 17.50  PQK BW  2.75  325   16.88   3.7%   3.7%
NZRO   35.00  FEB 25.00  NUR BE 10.88  42    24.12   3.6%   3.6%

Company Descriptions

BRKT - Brooktrout  $25.75  *** New Range? ***

Brooktrout is a worldwide supplier of electronic communications 
products. Through its multiple companies, Brooktrout's mission is
to provide high performance, quality electronic communications
products to system vendors, service providers and VARs dependent
on electronic information exchange. Their subsidiary, Brooktrout
Software is enhancing its e-Business solutions, replacing touch-
tone capabilities with speech-enabled functionality through an
alliance with SpeechWorks. Though the stock has a rolling past,
it appears to have broken out of its previous range and is headed
higher. With earnings due this week, we will remain cautious and
speculate with a cost basis at recent support.

FEB 22.50 BUQ BX Bid=4.13 OI=200 CB=21.62 RC=4.1% RNC=4.1%

Chart = 


CCCG - CCC Information  $16.88  *** Next move up? ***

CCC Information Services is the automotive claims industry's top
provider of business solutions. Connecting people, processes and 
information, CCC's innovative technology-based capabilities ensure 
that the right information is always available - at the right time 
and to the right person - to make the right business decision. On
Thursday, CCC announced record revenue and operating income for the
quarter. The momentum from the earnings run has moved CCC above its
stage one base and to a new 52-week high. Favorable speculation on
an issue with technical support near the cost basis.

FEB 15.00 KDQ BC Bid=2.56 OI=175 CB=14.32 RC=4.7% RNC=4.7%

Chart = 


ESPI - e.spire Communications  $11.06 *** Deep ITM ***

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 & project management expertise. Upgraded, downgraded,
new customer accounts, and the launch of e.spire XpressLink (DSL).
This week a new CEO. What to make of it all? How about a breakout 
above the 150 dma on heavy volume reaching a new 6 month high? A 
week later with another chance at a very conservative covered call

FEB 7.50 AQ BU Bid=3.88 OI=1060 CB=7.18 RC=4.5% RNC=4.5%

Chart = 


KELL - Kellstrom Industries  $8.81  *** Stage I Base ***

Kellstrom Industries is a leader in the airborne equipment segments
of the international aviation services after-market. Kellstrom's 
principal business is the purchasing, overhauling, reselling and 
leasing of aircraft, avionics and aircraft rotables, and engines 
and engine parts. The company is also a leading international after
market reseller of turbo-jet engines and turbo-jet engine parts for
helicopters and large cargo transport aircraft for which it also 
supplies airframe material. The chart is exhibiting positive
technical divergence's as KELL forms a stage I base. Established
support above the sold strike provides favorable speculation.
Earnings are due near February 14.

FEB 7.50 KQC BU Bid=1.69 OI=0 CB=7.12 RC=5.3% RNC=5.3%

Chart = 


MCRE - MetaCreations  $11.88 *** 3D Software ***

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. With earnings due
next week, MetaCreations is consolidating. We favor the technical
support provided by the 30 dma at the sold strike.

FEB 10.00 MQZ BB Bid=2.50 OI=439 CB=9.38 RC=6.6% RNC=6.6%

Chart = 


NZRO - NetZero  $35.00  *** 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. NetZero reported a higher
loss but beat estimates and posted a 10,000% increase in revenues
from the same quarter last year. Investors appear pleased as the
price continues to climb. We favor caution and an entry point
below technical support.

FEB 25.00 NUR BE Bid=10.88 OI=42 CB=24.12 RC=3.6% RNC=3.6%

Chart = 


PRST - Presstek $19.63  *** Stage II climb ***

Presstek is a leading developer and international marketer of 
non-photographic, non-toxic digital imaging and printing plate
technologies for the printing and graphic arts industries. PRST's
products and applications incorporate PEARL® and DI® technologies 
and utilize PEARL consumables for computer-to-plate and direct-to
press applications. The company's patented DI and PEARL thermal 
laser diode family of products enable its customers to produce
high quality, full-color lithographic printed materials more 
quickly and cost efficiently. Presstek has continued its stage
II climb since exiting a base in November. With earnings due
shortly, we favor a cost basis near the 30 dma and technical
support of the December high.

FEB 17.50 PQK BW Bid=2.75 OI=325 CB=16.88 RC=3.7% RNC=3.7%

Chart = 


Selling Naked Puts: Strategies And Objectives...

There are a number of well-known principles that a new investor
should consider when participating in this technique. Experienced
option traders use this strategy because it offers two methods for
generating profits: collecting premium by selling out-of-the money
options or acquiring stock at a reduced price. Investors who sell
puts for stock ownership believe the underlying issue is a good
buy at the strike price whereas speculators write options with the
expectation they will not be exercised.

The first and foremost rule for any style of option trading is to
feel comfortable with the strategy you are using. Writing naked
options is often described as one of the most aggressive methods
of derivatives trading and it is important to understand the risks
inherent in the strategy. As with most techniques, the key is to
evaluate the profit/loss characteristics of the position and avoid
any trade that is unsuitable, based on your experience level or
portfolio outlook. The next requirement for any form of investment
is to utilize a trading plan and sound money management principles.
The initial step in this process is to define the overall profit
objectives and loss limits. In most cases, winning trades involve
far less critical decision-making; it's the losers that determine
your success or failure. Managing each position in an efficient
and unemotional manner is the best way to increase the probability
of profitable outcome.

Selection and timing are generally considered the most important
characteristics of a favorable position. A successful trader will
wait until an overwhelming majority of factors are positive before
initiating a trade. Fortunately, opportunities are plentiful and
as option traders we must be very selective, participating only
when the circumstances indicate the probability of profit is at
the highest levels. One of the keys to correct entry timing is to
let the market tell you when to trade; based on reliable technical
patterns, option volatility and public sentiment (often the most
useful contrarian indicator). The skilled and disciplined option
writer can benefit from all types of markets using a diverse, well
ordered approach to this uniquely effective strategy.
Naked option writing is one of the few techniques where the trader
has an advantage over the majority of other players. The option
seller provides the buyer a market in which to speculate, and for
that service he is paid a fee and receives slightly better odds.
Studies suggest that option writers can achieve a 15 - 20% greater
probability of success in their trading through the sale of over-
valued positions. Obviously, before you can evaluate a potential
candidate, you must know whether volatility is historically high
or low and be able to compare it's value to that of other possible
positions. Option sellers strive to take advantage of statistically
high option premiums and in most cases, the best opportunities
occur when volatility is at an extreme. In fact, that is also when
the greatest number of pricing disparities are present in the
market. The last theoretically important component is time decay.
Over-valued, high volatility options lose their time premium
rapidly as they approach expiration and that is the primary reason
why this strategy has become so popular with Jim (the OIN editor).
The current market offers an incredible number of volatile issues
with overpriced options and when you become a merchant of time,
the odds are definitely in your favor.

                      *** 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

MCRE   12.56  11.81   FEB  10.00  0.69  *$  0.69  21.6%  23.4%
WSTL   11.44  18.88   FEB   7.50  0.50  *$  0.50  17.9%  16.5%
HSAC   23.00  18.56   FEB  17.50  0.69  *$  0.69  13.0%  14.2%
DMRK   22.38  31.13   FEB  17.50  0.69  *$  0.69  13.3%  12.3%
SMSC   14.25  13.88   FEB  12.50  0.50  *$  0.50  11.2%  12.2%
NSPK   22.25  20.25   FEB  15.00  0.56  *$  0.56  11.2%  12.1%
NZRO   33.25  34.94   FEB  22.50  0.75  *$  0.75  10.1%  11.0%
RNBO   24.75  23.88   FEB  20.00  0.56  *$  0.56   9.8%  10.7%
TLCM   20.25  23.13   FEB  15.00  0.50  *$  0.50  11.0%  10.1%
QTRN   24.44  26.06   FEB  17.50  0.50  *$  0.50   9.3%  10.1%
NPLS   23.06  26.00   FEB  17.50  0.44  *$  0.44   8.7%   9.5%
PGEX   22.81  19.69   FEB  15.00  0.50  *$  0.50   9.9%   9.1%
PILT   25.94  27.50   FEB  17.50  0.56  *$  0.56   9.7%   9.0%
CPQ    32.00  27.50   FEB  25.00  0.56  *$  0.56   8.0%   8.7%
NOVL   33.69  30.19   FEB  25.00  0.63  *$  0.63   8.5%   7.9%
GSTRF  34.19  31.75   FEB  22.50  0.63  *$  0.63   8.4%   7.8%
EMIS   35.63  39.63   FEB  25.00  0.63  *$  0.63   8.1%   7.5%
NETA   28.00  25.69   FEB  20.00  0.38  *$  0.38   6.4%   5.9%

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


High Speed Access (HSAC) is still displaying positive technical 
divergence's though a test of the December low appears likely.
Breaking that support would be a logical exit point. Netspeak
(NSPK) will need to weaken considerably to reach our sold strike.
With Compaq (CPQ), we may see just how strong the support really
is (at the sold strike). This assessment applies to Novell (NOVL)
and Globalstar (GSTRF) as well. Evaluate now whether you want to
own any of these issues. If not, stick to your pre-planned target
exit (where you will buy the put to close your position).

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

MESG   18.31  FEB 15.00  MUG NC  0.50  92    14.50  11.1%
MSGI   18.50  FEB 15.00  UMS NC  0.50  238   14.50  11.4%
OTEX   20.63  FEB 17.50  QFT NW  0.56  266   16.94   9.9%
PCMS   15.00  FEB 12.50  PQP NV  0.50  195   12.00  12.5%
TLCM   23.13  FEB 17.50  TMU NW  0.31  40    17.19   6.3%
TRVL   15.50  FEB 12.50  TVU NV  0.44  10    12.06  12.1% 
TSEMF  14.38  FEB 12.50  TWQ NV  0.75  50    11.75  16.2%
XICO   19.75  FEB 15.00  CIU NC  0.31  30    14.69   7.3%

Sequenced by ROI  

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

TSEMF  14.38  FEB 12.50  TWQ NV  0.75  50    11.75  16.2%
PCMS   15.00  FEB 12.50  PQP NV  0.50  195   12.00  12.5%
TRVL   15.50  FEB 12.50  TVU NV  0.44  10    12.06  12.1% 
MSGI   18.50  FEB 15.00  UMS NC  0.50  238   14.50  11.4%
MESG   18.31  FEB 15.00  MUG NC  0.50  92    14.50  11.1%
OTEX   20.63  FEB 17.50  QFT NW  0.56  266   16.94   9.9%
XICO   19.75  FEB 15.00  CIU NC  0.31  30    14.69   7.3%
TLCM   23.13  FEB 17.50  TMU NW  0.31  40    17.19   6.3%

Company Descriptions

MESG - MessageMedia $18.31  *** New Contracts ***

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. New contracts and BUY rating with a
$28.50 target from Robertson Stephens provides us with favorable
speculation. With earnings due in about 10 days, we favor selling
a strike below the December high.

FEB  15.00  MUG NC  Bid=0.50  OI=92  CB=14.50  ROI=11.1%

Chart = 


MSGI - Marketing Services  $18.50  *** Breakout soon? ***

Marketing Services 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. Marketing Services has formed
an ascending triangle (a bullish formation) with technical 
support near our cost basis.

FEB  15.00  UMS NC  Bid=0.50  OI=238  CB=14.50  ROI=11.4%

Chart = 


OTEX - Open Text $20.63  *** Share Buyback ***

Open Text develops, markets, licenses and supports collaborative 
knowledge management application software for use on intranets, 
extranets and the web, that enables users to find electronically
stored information and work together in creative processes. Their
flagship "Livelink" software enables users to search intranets,
manage documents and work flow, collaborate on projects, and 
schedule corporate wide group activities. Open Text values its
shares at $20 as it just completed a 4 million share buy back
program. The technicals remain bullish as the issue has moved
above its 150 dma with a recent increase in volume.

FEB  17.50  QFT NW  Bid=0.56  OI=266  CB=16.94  ROI=9.9%

Chart = 


PCMS - P-Com  $15.00  *** Is it gone?/Can we catch it? ***

P-Com develops, manufactures, and markets network access systems 
for the worldwide wireless telecommunications market. The point-
to-point, spread spectrum, and point-to-multipoint radio links 
provided by PCMS are designed to satisfy the network requirements
of cellular, personal and corporate telecom services, public
utilities and local governments. In addition, P-Com provides 
comprehensive network services including system planning, program
planning and management, path design, and installation. P-COM 
has moved to a new 52-week high on increasing volume and Friday's
upgrade along with the recent favorable earnings report should
propel it higher.

FEB  12.50  PQP NV  Bid=0.50  OI=195  CB=12.00  ROI=12.5%

Chart = 


TLCM - TelCom Semiconductor  $23.13 *** Blue Sky ***

TelCom Semiconductor designs, develops, manufactures and markets
a diversified portfolio of high-performance analog integrated
circuits for a wide variety of applications in the industrial,
wireless communications, computing, networking and medical markets.
The company builds products in a number of critical areas for a
wide range of electronic systems. After recently being upgraded, 
TelCom reported record revenues and operational profits for the 
fourth quarter and full year this week. TelCom has moved into 
blue sky territory though some consolidation is in order. We 
favor getting paid for trying to own TelCom near support.

FEB  17.50  TMU NW  Bid=0.31  OI=40  CB=17.19  ROI=6.3%

Chart = 


TRVL - Travel Services  $15.50  *** Breakout ***

Travel Services International is a specialized distributor of
travel products including cruise vacations, vacation packages,
domestic and international airline tickets and European auto
rentals, and also provides travel services such as electronic
hotel reservation services, specialized hotel programs and
services and incentive travel programs. The company provides
its services to both travel agents and retail customers, and
recently they launched a new vacation web site (mytravel.com).
The technical break-out above old resistance near $14 may be
an indication of a new trading range for this issue.

FEB  12.50  TVU NV  Bid=0.44  Oi=10  CB=12.06  ROI=12.1%

Chart = 


TSEMF - Tower semiconductor $14.38   *** Stealth Take-over? ***

Tower semiconductor is an independent manufacturer of integrated
circuits on silicon wafers and a provider of related services.
As a foundry, Tower provides IC design, manufacturing and
turnkey services using advanced production capabilities and the
proprietary IC designs of its customers, and is specializing in
providing solutions for embedded non-volatile memory devices and
CMOS image sensors. ICs manufactured by Tower are adapted into
a wide range of products in diverse and rapidly growing markets, 
including computer and office equipment, communication products
and consumer electronics. Israel Corp. has recently obtained 45%
interest in Tower providing financial strength and management 
experience that should help Tower's growth plans. Investors have
reacted positively with Tower breaking out of its recent trading
range. We favor the support near our cost basis. Earnings are due
this week.

FEB  12.50  TWQ NV  Bid=0.75  OI=50  CB=11.75  ROI=16.2%

Chart = 


XICO - Xicor  $19.75  *** Own This One! ***

Xicor designs, develops, manufactures and markets reprogrammable
nonvolatile semiconductor integrated circuits containing digital,
analog and reprogrammable nonvolatile elements. Xicor's devices
can be reprogrammed bit by bit or in larger groups without being
removed from the system and operate from a range of power sources.
Xicor recently reported favorable quarterly earnings and received
a new upgrade with a price target of $35. That's optimistic for
sure but we like the cost basis of this position, near a recent
consolidation area and technical support (December highs).

FEB  15.00  CIU NC  Bid=0.31  OI=30  CB=14.69  ROI=7.3%

Chart = 


Panic And Pandemonium In The Pits..

Friday, January 28

Traders bolted for the exits Friday as robust economic data
raised fears the Fed would fight inflation aggressively in its
monetary policy meeting next week. The Dow Industrials fell
sharply, closing down 289 points at 10,738. The Nasdaq posted
its second biggest point loss ever, falling 152 points to 3887.
The S&P 500 index closed down 38 points at 1360. Volume on the
Big Board was unusually average at 1 billion shares. Losers
trounced the winners 2,034 to 1,001. Bond prices firmed and the
30-year Treasury closed up 31/32 with the yield at 6.49%.

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

Aspect Dev.   ASDV   FEB55C/FEB65C   $8.75   debit   bull-call
Corning       GLW    FEB120P/F130P   $1.12   credit  bull-put
Siebel Sys.   SEBL   FEB85C/FEB95C   $7.00   debit   bull-call

Our new group of bullish positions might be considered untimely,
based on today's market movement. Fortunately, the positions we
offered were all market leaders, and there is a good chance they
will finish the expiration period profitable. Aspect Development
was by far the strongest of the three, falling only slightly
during the session. Corning took a big dive but support near $125
may eventually help the bullish credit spread. SEBL, our reader's
request play was the most troublesome issue, opening almost $4
lower and finding little support on the way to a $10 loss. Our
initial move was to the next lower strike and an $8.50 debit on
the FEB80C/FEB90C spread was achieved before the selling began in
earnest. However, we will list the play as originally posted for
those of you that made no adjustment.

Portfolio plays:

Equity markets tumbled after the release of stronger-than-expected
economic data renewed concerns of inflation and higher interest
rates. The slide came on the announcement that the fourth quarter
gross domestic product rose 5.8% versus the forecast 5.0%. The
employment cost index also ended higher, 1.1% against a forecast
rise of 0.9%. Analysts say the data was very negative and many now
expect the Fed to raise rates by 50 basis points when they meet to
discuss monetary policy next week. 

The bearish move took the DOW below the 11,000 level for the first
time since early January, and beneath its 200-day moving average;
a technically significant support level. Now the bears are out in
force and they have plenty of ammunition with the market internals
weakening on a daily basis. The selling was widespread and without
remorse, and financial stocks were hardest hit. Among the few
bright spots in the market were shares of drug companies and small
telecom issues. In the tech arena, Internet issues were pounded
and the majority of other sectors were significantly affected. Our
portfolio was no different with nearly all of the issues falling
on the news of rising inflation. The losses were significant in a
number of the higher priced stocks but the majority of portfolio
plays are intact. Those that were in danger of substantial losses
were closed to protect previous gains. We also exited a few of
the high risk positions with significant downside potential. The
next few days will undoubtedly determine our level of success for
the month of February.

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


NN - Newbridge Networks  $28.68   *** New Merger Speculation ***

Newbridge Networks designs, manufactures, markets and services
wide area networking (WAN) solutions to service providers and
corporate customers based on a broad product family that cost
effectively addresses their constantly evolving communications
requirements. Newbridge has developed a broad family of digital
networking products that are effective in the core, edge and
access portions of service provider or corporate WANs. Their
products employ a common architecture that allows TDM, X.25,
frame relay, asynchronous transfer mode (ATM), SMDS and local
area networks (LAN) internetworking to coexist within the same
network and provides a migration path from legacy narrowband to
next generation broadband networks. Their customers include the
world's 350 largest service providers and 10,000 corporations,
government organizations and other institutions in more than
100 countries.

Shares in Newbridge Networks spiked last week as takeover rumors
resurfaced. Speculation that a sale could come in the next month
propelled the stock to recent highs. A number of candidates have
been named as potential buyers including Nortel Networks, Cisco
Systems, Tellabs and European telecom companies Alcatel Alsthom,
Siemens AG and Ericsson. The company may consider the sale of a
portion of the business, rather than the entire operation.

Newbridge is also due to report earnings on or near February 22
and fortunately, the announcement should occur after this month's
options expire. We will use the new interest in call options to
open a speculative, short-term position.

PLAY (speculative - bullish/diagonal spread):

BUY  CALL MAR-17.50 NN-CW OI=222  A=$11.00
SELL CALL FEB-25.00 NN-BE OI=9047 B=$4.62



CCN - Chris Craft Industries  $75.38   *** CBS Buy-out? ***

Chris-Craft Industries is a television broadcasting company
with business conducted through its majority owned subsidiary,
BHC Communications (BHC), which owns of Chris-Craft Television
(CCTV), Pinelands and over half of United Television (UTV). BHC
operates six very high frequency (VHF) television stations and
three ultra high frequency (UHF) television stations, together
constituting Chris-Craft's Television Division. United Paramount
Network (UPN), owned 50% by BHC and 50% by Viacom's Paramount
Television Group, broadcasts ten hours of original prime time
programming on five nights per week. CCN Industrial Products, a
wholly owned subsidiary of Chris-Craft that constitutes its
Industrial Division, is primarily engaged in manufacturing 
plastic flexible films and distributing containment systems to
the healthcare industry.

Chris-Craft shares broke-out of a recent trading range last week
after reports that the company was again in talks with CBS Corp.
(CBS) regarding a potential acquisition. Published news items
suggested that representatives of both companies met on Thursday
in a renewed effort to consummate a deal. CBS, which is being
acquired by Viacom, is apparently pursuing the pact on behalf of
both companies. Chris-Craft is considered a favorable candidate
for the conglomerate because the revised FCC rules concerning
TV-station ownership have made its properties very attractive.
Another factor that could lead to a Chris-Craft takeover is its
equal partnership with Viacom in the UPN television network.

Regardless of the outcome, speculation is rampant and the new
interest in CCN's stock has pushed the issue above a short-term
resistance level. With support near the sold strike, this play
offers a favorable risk/reward outlook.

PLAY (aggressive - bullish/credit spread):

BUY  PUT FEB-65 CCN-NM OI=189 A=$0.68
SELL PUT FEB-70 CCN-NN OI=60  B=$1.50



EXTR - Extreme Networks  $87.38   *** Extremely Awesome! ***

Extreme Networks provides switching solutions that meet the
needs of enterprise local area networks, via utilization of ASIC
semiconductors throughout the product line. Their leading-edge
switches transmit more information faster and enable enterprises
to transition from older LANs to current technologies. Extreme
makes several switch product lines including BlackDiamond and
Summit, which address the switching needs across the LAN, from
desktops to servers, work groups, and network cores. Extreme also
offers software for switch management and system configuration.
Their customers include electronics manufacturers and resellers
around the globe.

Extreme pummeled the analysts with record results earlier this
month and for that act, they were rewarded. Their share value
gapped-up $15 and a slew of upgrades followed. Robertson Stephens
Senior Communications - Networking Analyst Paul Johnson was the
first to step forward, reiterating his BUY rating and raising
future estimates based on higher revenue growth from the company's
business model and new product lines. Hambrecht & Quist also
rates Extreme a BUY and they recently added the company to their
Focus List, based on its compelling near-term growth prospect and
attractive relative valuation.

We simply favor the fundamental outlook and bullish technicals.
The possibility of ownership at that level is also attractive,
in the event of a short-term consolidation.

PLAY (conservative - bullish/credit spread):

BUY  PUT FEB-65 EVT-NM OI=41  A=$0.75
SELL PUT FEB-70 EVT-NN OI=145 B=$1.18



These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy, based on option pricing
disparities. Current news and market sentiment will have an
effect on these issues so review each play individually and make
your own decision about the future outcome of the position.


TQNT - Triquint Semiconductor  $160.50  *** Up, Up and Away! ***

TriQuint Semiconductor develops, manufactures and markets high
performance analog and mixed signal integrated circuits for the
communications markets. The company utilizes its proprietary
gallium arsenide (GaAs) technology to enable its products to
overcome the performance barriers of silicon devices in a
variety of applications. TriQuint offers families of standard
products for each of its target markets, including wireless
communications, telecommunications, data communications and
millimeter wave communications.

This issue has one of the strongest technical patterns in the
market. The stock has traded at or above its 30 dma for almost
nine months and the trend shows no signs of weakening. TQNT
is also being added to the S&P MidCap 400 Index; a move that
can only help its trend. A small disparity in option premiums
will allow us to participate in the upward movement of this
issue with relatively low risk.

PLAY (aggressive - bullish/debit spread):

BUY  CALL FEB-135 TQN-BZ OI=452 A=$27.25
SELL CALL FEB-140 TQN-BY OI=1   B=$24.00



Profitable debit straddles are relatively simple to uncover and
there are three rules to identifying favorable conditions for a
straddle purchase. First, the trader should select issues with
options that are undervalued (statistically cheap). Next, the
underlying security must have the potential to move (high or low)
enough to make the straddle profitable. Finally, the underlying
stock should have a history of multiple movements through a
sufficient range in the required amount of time to justify the
overall risk/reward of the position. It appears the following
play meets all of the requirements.


APLX - Applix Incorporated  $14.62   

Applix develops, markets and supports front office business
software applications, which allow organizations to improve
decision-making and corporate productivity. The front office
business applications include a suite of thin-client Customer
Relationship Management applications, which include Applix
Enterprise and Enterprise Anyware product lines, and a set of
real-time Business Intelligence tools and applications, which
include the Applix TM1 product line. In addition to its front
office business applications, Applix also provides a set of
decision support applications, consisting of Applixware and
Applix Anyware products. Most of the company's products are
available on a variety of software platforms, including
Windows, Windows NT, UNIX and Linux environments.

Review the news articles concerning their recent earnings and
the company's investment in a Linux-based enterprise before
opening any positions.

PLAY (conservative - neutral/debit straddle):

BUY  CALL JUL-15 AUL-GC OI=175 A=$3.25
BUY  PUT  JUL-15 AUL-SC OI=10  A=$3.50


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