Option Investor

Daily Newsletter, Wednesday, 02/02/2000

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The Option Investor Newsletter         Wednesday  2-2-2000
Copyright 2000, All rights reserved.
Redistribution in any form strictly prohibited.

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

Also provided as a service to The Online Investor Advantage
MARKET WRAP  (view in courier font for table alignment)
       2-02-2000           High     Low     Volume Advance Decline
DOW    11003.20 -  37.80 11118.90 10987.10 1,036,464k 1,686  1,320
Nasdaq  4073.96 +  21.98  4125.75  4051.44 1,523,981k 2,334  1,715
S&P-100  763.92 -   2.97   771.97   762.62    Totals  4,020  3,035
S&P-500 1409.12 -   0.16  1420.61  1403.49            56.9%  43.1%
$RUT     509.89 +   6.14   511.41   503.75
$TRAN   2609.66 +  33.03  2620.46  2563.79
VIX       24.38 -   0.44    26.08    23.39
Put/Call Ratio       .48

February's Decision is in, Time to worry about March??

The verdict is in and it is....not too bad!  The FOMC raised 
short-term interest rates by 25 basis points in both the Fed  
funds rate and Discount rate, the two key overnight lending 
rates.  This was a widely anticipated move and the markets 
reacted more calmly then they did after other recent Fed 
decisions.  Mainly because the decision was mostly a foregone 
conclusion and we saw no surprises.  Most traders also were 
not phased by the new method of delivering the future directive.  
The Fed's main statement said "The committee remains concerned 
that over time increases in demand will continue to exceed the 
growth in potential supply, even after taking account of the 
pronounced rise in productivity growth".  Or in other words, 
inflation may prompt us to raise rates in the future.  The 
market's answer was apparently "OK, we're fine with that" 
because it traded higher for most of the session before sliding 
near the close.  

Also the bond had a strong rally today.  The 30-year yield 
dropped over 10-basis points from yesterday's close and most of 
that drop came in a hurry at 10am EST when it fell from 6.43% 
to 6.34% in about 20 minutes.  This move was based on the news 
that the government would be cutting back on supply.  After 
the Fed announcement, the bond yield creeped back to 6.35%, 
temporarily stalling the markets, before heading right back to 
rally mode.  It closed at 6.32%, right at the low for the day   
and is showing a quote of 6.29% at the time of this writing.  
All of these are good signs for the markets.

The Nasdaq was the more stable market today and it closed up 
21.98 points to 4073.96, remaining positive all day despite a 
couple bounces off the unchanged mark.  Volume was light until 
the announcement and ended at 1.5 billion shares.  The NYSE 
was yo-yoing around for most of the session, bouncing off 
support at 11,000 and running into resistance at 11,100.  It 
closed near the lower end of the range at 11003.20, -37.85, but 
still held above that key 11,000 mark.  The volume was average 
at 1.03 billion.  The S&P 500 dropped fractionally to close at 
1409.12, down 0.16.  The Russell 2000 was up 6.14 to 509.89 
(the best performer in percentage terms of the four mentioned 
indices).  The chart below will give you a better feel for 
what is happening in the markets.


In the news today, it was announced that a lawsuit has been 
filed on behalf of approximately 8 million AOL customers against 
the ISP giant.  The customer's claim that AOL software is 
responsible for disabling many of their existing Internet 
accounts with AOL's competitors.  An AOL spokesman claimed 
that there was no fact backing the claims.  AOL had commented
previously on the issue, stating that many of their customers 
did not know that when they installed AOL onto their computers, 
that AOL would begin taking over and providing a good deal of 
their online services for them. 

Software maker INSO was slaughtered in today's session after 
announcing that fourth-quarter revenue would fall short of 
analyst expectations, and that total sales could come in up 
to $11-$12 million below estimates.  The reasons behind the 
projected shortfall?  According to CFO Stephen Jaeger, INSO 
has "determined that these preliminary revenues reflect 
primarily sales execution and sales force staffing issues."  
That seems like a wordy way of saying that we don't have the 
staff to sell our product, and therefore, we aren't.  INSO also 
announced that they have turned to Morgan Stanley Dean Witter 
to explore alternatives for the future of the company, including 
a possible sale.  To add insult to injury, Banc of America 
Securities downgraded INSO from a Buy to a Market Performer.  
INSO is expected to announce Q4 earnings on March 7th.  Shares 
of INSO finished down $20.50 at $14.75 (and no those number are 
not reversed).

Copper Mountain Networks (CMTN) posted better than expected 
earnings after the close yesterday, coming in 2 cents better 
than analysts estimates.  CMTN cited continuing strong demand 
for their products that provide high-speed online services via 
copper phone lines.  WR Hambrecht initiated coverage of CMTN 
today as a Market Outperformer.  Shares of CMTN closed up $9.19 
at $66.

IDEC Pharmaceuticals (IDPH) received a downgrade from Prudential 
Securities that apparently investors found hard to swallow.  
Prudential cut IDPH from a Strong Buy to an Accumulate.  The 
reason offered backing the downgrade was concern regarding a 
patent granted to a competitor that could pose a problem for 
IDPH in obtaining approval from the Food and Drug Administration 
for their drug, Zevalin.

Today, Datron Systems, a satellite communications company 
announced that it has developed a high speed Internet connection 
for use in a MOVING vehicle.  This is done by using a satellite
television antenna.  This news had Datron shares moving toward 
the stars, closing up over $8 for the session.  Does this mean 
that people will now be able to drink coffee, talk on the phone, 
and surf the net all while driving in rush hour traffic?  Bus 
pass anyone?

Amazon.com announced earnings after the bell today.   The street 
had predicted a loss of 48 cents a share versus a reported 
actual loss of 55 cents per share.  However, the reported actual 
loss was on target with the street's whisper numbers.  Scott 
Reamer, analyst for SG Cowen, appeared on CNBC following the 
announcement and seemed to be fairly bullish on the stock.  He 
stated specifically that AMZN was breaking new ground by 
offering multiple products through multiple "stores" and 
therefore, he was willing to grant a bit of leeway in regards 
to the loss.  He predicted that AMZN would have to tap into 
the market to obtain a financial "cushion" and offered the 
possibility of a convertible debenture or an equity issue, 
though he did not speculate as to which he thought was more 
likely.  He also noted that at this point, AMZN needed to prove 
to the street that their business model works.  The question 
that everyone seems to be asking now is, is continually 
reporting increasingly larger losses worth it merely to obtain 
a larger market share?  There seems to be a good deal of bullish 
analyst support out there backing AMZN.  Merrill Lynch analyst 
Henry Blodget believes that the current weakness in AMZN in 
merely an overreaction, while analyst Mitch Bartlett of Dain 
Rauscher Wessels thinks that the company will be profitable 
in the long-term.  Bartlett believes the next few quarters "will 
be a period when the strongest get stronger."  The one common 
thought threading its way throughout all of the opinions on AMZN, 
is the belief that AMZN needs to develop a plan to become 
profitable and then make it happen.  Shares of AMZN were up big 
in after-hours trading to $78.

Late news coming across the wire reports that Pfizer and Warner 
Lambert have reached a deal in the neighborhood of 85 billion 
dollars.  It works out to 2.75 PFE shares for each WLA share.  
We are sure to hear a lot more about this tomorrow as American 
Home Products throws in their two cents.  

All and all, the markets had a good day except for the final 
30 minute retreat.  They made it through the first Fed move 
since November with relatively low volatility and the bond 
went for a nice rally.  We still have an unemployment report 
on Friday to overcome, but the economic front is fairly quiet 
after that.  If the markets can stabilize in the morning, it 
could be the ground work for a move higher.  The 4050 level for 
the Nasdaq will be the support to watch.  A close for the Nasdaq 
over the 10-dma would be encouraging.  The minutes from the Fed 
meeting will be released tomorrow and that will play a part 
as well.  

As for the individual plays, most stocks on my watch list are 
looking pretty good technically.  The $VIX is stable too, 
treading water just over 24.  After confirming direction in the 
morning, there may be entry points to be had.  Some of the hot 
sectors from today like Semis, Banking, Telecom and Biotech have 
held their momentum in recent days.  You know what they say...
if it ain't broke, don't fix it.  That is one theme I will be 
trading on tommorow.  The other?  Sell too soon.

Ryan Nelson
Asst. Editor


Schwab Targets Day Traders
By Cindy Christ

Attention all day traders: Charles Schwab wants you.

The nation's No. 1 online broker said Wednesday it's acquiring
CyBerCorp, an Austin, Texas-based day trading firm, and
lowering commissions to lure active traders to its client

Under the all-stock deal valued at $488 million, Schwab (SCH)
will exchange approximately 13.7 million unregistered shares
for all outstanding shares, options and equity rights of
privately held CyBerCorp.

At the end of 1999, CyBerCorp said it had nearly 2,500
customer accounts and about $202 million in customer assets.

The acquisition, which values each CyBerCorp account at
$195,200, is expected to close in first quarter 2000.

Schwab also said it would reduce commissions for its most
active retail customers, cutting online equity commissions to
$14.95 from $29.95 for clients who make more than 60 trades a
quarter, and to $19.95 for those exceeding 30 trades a

Customers must have $50,000 in account assets to qualify for
the new pricing, which took effect Tuesday.

Five-year-old CyBerCorp provides electronic trading technology
and online brokerage services to the most active and lucrative

The company also designs and develops electronic order routing
software that gives traders the ability to scan ECNs, or
electronic communications networks, market makers, and market
specialists for the best prices available.

"This is cutting edge technology that has proven immensely
popular with highly active investors," said David S. Pottruck,
Schwab president and co-CEO, in a news release.

"It is a trading cockpit for full-time investors who want to
view and participate in the market like an institutional
trader," he added.

In December CyBerCorp's customers made 19,000 average daily
trades, helping place the firm among the top 10 online brokers
according to Hambrecht & Quist and US Bancorp Piper Jaffray.

Last year, CyBerCorp's revenues were roughly $25 million, up
350 percent from 1998. During the same period, customer
accounts and assets grew tenfold, the company said.

In making the acquisition, Schwab was as interested in
CyBerCorp's trading technology as its customer base.

"...It's essential that we continue to be at the forefront as
the Internet and new technologies break down the barriers
between investors and the financial markets, and as new
trading technologies migrate from the institutional and active
trader markets to the wider community of retail investors,"
Pottruck said.

CyBerCorp will keep its headquarters and 140 employees in
Austin and become a unit of Schwab's San Francisco based-
Capital Markets & Trading Division.

The merger comes on the heels of Schwab's acquisition of U.S.
Trust Corp., a New York-based investment management firm
offering financial services to wealthy people.

Rumors of the deal and Schwab's reduced commission structure
shook the online brokerage sector Tuesday, as investors feared
lower fees would set off a commission war and reduce profits.
But by Wednesday, most Internet brokers had bounced back. 

Although Schwab traded up to $36.25 intraday on the news,
shares closed down $0.06, or 0.18 percent, to $35.56.

No. 2 Internet broker E-Trade (EGRP) rose $0.31, or 1.6
percent, to $20.25. TD Waterhouse (TWE) gained $0.69, or 5.1
percent, to $14.06.

Online brokers are locked in a fierce battle to gain market
share and attract semiprofessional day traders, who account
for a small number of accounts but a large percentage of
Internet brokerage fees.

Day traders often operate from professional day trading firms,
which typically charge lower commissions and use sophisticated
computer systems to access lower share prices by eliminating

Competition is expected to heat up in April when Instinet, the
Reuters-owned electronic order system matching buyers and
sellers, launches a retail brokerage unit.

Despite posting record trading volumes for three consecutive
months, most online brokers are trading near 52-week lows.
Experts say higher marketing costs and rising interest rates
have limited investor interest in online brokerage shares,
which peaked last summer.


LLTC - Linear Technology $100.19 +2.50 (+9.44 this week)

Linear Technology is a manufacturer of high performance linear 
integrated circuits.  LLTC products include operational, 
instrumentation and audio amplifiers; voltage regulators, power 
management devices, DC-DC converters and voltage references; 
communications interface circuits and sample-and-hold devices.
Applications for LLTC's circuits include telecommunications, 
cellular telephones, networking products and satellite systems,
notebook and desk top computers, computer peripherals, 
video/multimedia, automotive electronics and military and 
space systems.

Tuesday's Write Up

Wow!  It certainly is exhausting to try and list every product 
and product application for Linear Technology.  It is that 
depth in product that makes LLTC a must own for any serious 
investor in the semiconductor industry.  LLTC does not make the 
"sexy" chips that seem to get people's attention.  Rather, they 
make everything else that keeps our technological world whirring 
away.  The most recent tech rally seems to be dominated by old 
standbys.  Comfortable names that have been core holdings for 
years, and LLTC is one of them.  LLTC has garnered the interest 
of the shorter term investor by announcing a 2-for-1 split 
payable March 27th (a bit far off for a split trade, but an 
influencing factor, nevertheless).  January was a great month 
for chip stocks and LLTC was definitely one of the beneficiaries.
LLTC began the year in a straight uptrend from $73 to a new high 
of $99.69.  After a pullback and consolidation into a range of 
$89-$95 for several days, the shares of LLTC seem to have 
gathered the strength to tackle that always critical price level 
of $100.  Early traders may want a position now in anticipation 
of an attempt to break through $100.  Other investors may want 
to wait for a close above $100 before initiating a position.  
Either way, LLTC is in a strong uptrend that should continue as 
long as this accumulation phase of major technology names 
continues.  If the market sells off look for support around $89-
$90 followed by more support in the low $80's.

One of the reasons for all of the strength in Semiconductor 
sector last month was strong earnings and LLTC had one of the 
best reports.  Sales for the second quarter were up 35% and 
earnings were up 41%.  Guidance for the March quarter was very 
bullish.  Because of the strong report, Goldman Sach's raised 
their earnings estimates for the company and CSFB raised their 
target to $105.

BUY CALL FEB- 90 LLQ-BR OI=294 at $12.00 SL=9.50
BUY CALL FEB- 95*LLQ-BS OI=208 at $ 8.50 SL=6.50
BUY CALL FEB-100 LLQ-BT OI=462 at $ 5.75 SL=4.00
BUY CALL MAR- 95 LLQ-CS OI= 64 at $11.75 SL=9.50 
BUY CALL MAR-100 LLQ-CT OI= 72 at $ 9.38 SL=7.00

Picked on Feb 1st at    $97.69    P/E = 67
Change since picked      +2.50    52-week high=$100.44
Analysts Ratings    7-10-4-0-0    52-week low =$ 41.75
Last earnings 01/00  est= 0.38    actual= 0.40
Next earnings 04-13  est= 0.41    versus= 0.31
Average Daily Volume = 1.6 mln


Today, the FED looked and saw the shadow of inflation. We will 
concentrate on bullish charts with entry points at technical 
support. Positions we favor (and will track every week) are
marked by ***. We will also list more aggressive positions for
those traders so inclined.

Do not enter these trades unless you fully understand the strategy
and various methods of manipulating the position should the stock
price drop or rise and in the event you decide you want to keep
the issue.

Summary of Previous Picks:

Covered Calls:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

RNWK    FEB    150  143.44  161.44  $6.56    6.0%
RIMM    FEB     60   57.38   84.13  $2.62    6.0%
NEWP    FEB     55   52.06   77.00  $2.94    5.7%
DITC    FEB     90   85.25  123.00  $4.75    5.6%
JNPR    FEB    125  120.12  137.06  $4.88    5.4%
ASDV    FEB     60   57.00   72.00  $3.00    5.3%
QCOM    FEB    125  119.00  142.06  $6.00    5.1%
CNXT    FEB     65   61.93   86.00  $3.07    5.0%
HLIT    FEB     95   91.56  103.69  $3.44    5.0%
VRIO    FEB     55   52.50   62.50  $2.50    4.8%
MERQ    FEB    110  106.31  124.94  $3.69    4.6%
ADAP    FEB     75   71.06   90.00  $3.94    4.6%
GMH     FEB    100   95.81  109.25  $4.19    3.6%
NVLS    FEB     38   36.48   53.44  $1.53    3.4% Split 3 for 1

Naked Puts:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

DITC    FEB     85   81.25  123.00  $3.75   13.7%
QCOM    FEB    115  111.12  142.06  $3.88   11.8%
JNPR    FEB    113  110.62  137.06  $2.38   10.1%
CNXT    FEB     60   58.25   86.00  $1.75    9.9%
VRIO    FEB     50   48.56   62.50  $1.44    9.7%
NEWP    FEB     50   48.69   77.00  $1.31    9.5%
HLIT    FEB     85   83.44  103.69  $1.56    8.6%
RNWK    FEB    130  127.75  161.44  $2.25    8.2%
ASDV    FEB     50   48.81   72.00  $1.19    7.7%
RIMM    FEB     50   49.19   84.13  $0.81    7.1%
ADAP    FEB     65   63.25   90.00  $1.75    7.1%
CTXS    FEB    120  117.69  143.00  $2.31    7.0%
PGTV    FEB     95   93.69  123.13  $1.31    6.3%
NXTL    FEB    100   98.12  112.19  $1.88    6.3%
VIGN    FEB    160  157.69  199.00  $2.31    6.2%
PMCS    FEB    150  148.12  219.25  $1.88    5.8%
NVLS    FEB     33   32.63   53.44  $0.71    5.8% Split 3 for 1
GMH     FEB     95   92.75  109.25  $2.25    5.6%
MERQ    FEB     95   93.87  124.94  $1.13    5.6%


NOTE: Our target Return On Investment for February is 2.6% for
16 days which equates to a 5% monthly return. A margin account 
would double the listed covered call returns. 


CNXT - Conexant Systems  $86.00   *** S&P 500 Addition ***

Conexant provides semiconductor products and systems solutions
for communications electronics. Conexant delivers integrated
systems and semiconductor products for a range of communications
applications. These products facilitate communications worldwide
through wireline voice/data communications networks, cordless
and cellular wireless telephony systems, personal imaging devices
and equipment and emerging cable/wireless broadband communications
networks. CNXT operates in five business segments that include
Personal Computing, Network Access, Wireless Communications,
Digital Info-tainment and Personal Imaging.

In January, Conexant reported that it had record revenues in the
latest quarter and expects a 40% increase in revenues for its
fiscal 2000. The company experienced record product shipments
across a broad range of its businesses, including networking and
wireless communications and personal computing. The CEO said the
company is well positioned to grow significantly faster than the
overall semiconductor industry and expects to deliver more than
$2 billion in revenues next year.

Last week, Conexant was selected to join the S&P 500 Index. With
the eventual buying that must occur as funds add the issue to
their portfolio, this low risk position has a high probability of
a profitable outcome.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Call FEB 75   QXN BO  2095     12.50    73.50     2.0% ***

Sell Put  FEB 70   QXN NN  481       0.69    69.31     3.6%***
Sell Put  FEB 75   QXN NO  1031      1.56    73.44     6.3%

Chart =


CTXS - Citrix Systems  $143.00   *** Split Run? ***

Citrix supplies thin client/server application server products
and technologies that enable enterprise-wide deployment of
applications designed for Windows operating systems. Their
MetaFrame and WinFrame product lines, developed under license
and strategic alliance agreements with Microsoft Corporation,
permit organizations to deploy Windows applications without
regard to location, network connection or type of client hardware
platforms. MetaFrame software is an enhancement to the Windows NT
Server 4.0, Terminal Server Edition. The MetaFrame product line
enables organizations to deploy, manage and access applications
across the extended enterprise. WinFrame is a Windows application
server software based on Windows NT 3.51 that allows customers to
deploy advanced Windows applications remotely, provide Windows
applications to a broad array of client platforms and publish
enterprise applications on a corporate Intranet.

In mid-January, Citrix posted fourth-quarter operating earnings
of $37.7 million, 50% higher than the year-earlier quarter and
slightly ahead of Wall Street's consensus expectations. Citrix
also said they would split their stock 2-for-1 in the form of a
dividend. The dividend is payable on or about February 16 to
shareholders on record as of January 31.

The stock has favorable support near $120, and that is where we
will position our entry point in this conservative, short-term

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Call FEB 125  XSQ BU  287     21.00    122.00     2.5% ***

Sell Put  FEB 115  XSQ NC  416      1.31    113.69     4.3%
Sell Put  FEB 120  XSQ ND  706      2.06    117.94     5.7% ***
Sell Put  FEB 125  XSQ NU  583      3.13    121.87     7.4%

Chart =


IMNX - Immunex  $137.00     *** FDA Approval ***

Immunex is a biopharmaceutical company that discovers, develops,
manufactures and markets innovative therapeutic products for the
treatment of human diseases including cancer, infectious diseases
and immunological disorders. The Company's major product lines
are Enbrel, Leukine, Novantrone and Thioplex. Enbrel is a soluble
tumor necrosis factor receptor used to reduce inflammatory
activity in patients with moderate to severe rheumatoid arthritis.
Leukine is a granulocyte-macrophage colony-stimulating factor that
is used to stimulate infection-fighting white blood cells.
Novantrone and Thioplex are chemotherapy drugs that are used to
treat pain in cancer patients. Immunex is also developing products
to address ailments such as inflammatory disease, infection,
multiple sclerosis, asthma and cancer.

Last week's big news for Biotech leader IMNX was the approval of
NOVANTRONE (mitoxantrone for injection concentrate). The drug was
unanimously recommended for approval to slow the worsening of
neurologic disability and to reduce the relapse rate in patients
with clinically worsening forms of relapsing-remitting and
secondary progressive multiple sclerosis. This recommendation was
made by the U.S. FDA Peripheral and Central Nervous System Drugs
Advisory Panel.

Just prior to the drug approval news, Immunex narrowly surpassed
Wall Street expectations, posting slightly higher net income for
the fourth quarter. The company reported income of $16.2 million,
or $0.09, on revenues of $162 million for the quarter. The results
were just above the 8-cents-a-share consensus forecast and that
made IMNX a great rally candidate. We like the idea of owning this
issue near a short-term technical consolidation area.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Put  FEB 110  IUU NB  108      1.63    108.37     5.5%
Sell Put  FEB 115  IUU NC  296      2.50    112.50     7.1% ***
Sell Put  FEB 120  IUU ND  84       3.63    116.37     8.8%

Chart =


JNPR - Juniper Networks  $137.06  *** Entry Point ***

Juniper Networks is a leading provider of Internet infrastructure
solutions to Internet service providers and other telecom service
providers. The company delivers next generation Internet backbone
routers specifically designed for service provider networks. The
company's flagship product is the M40 Internet backbone router,
featuring high performance ASIC-based packet forwarding technology
and Internet optimized architecture into a purpose-built solution
for service providers. Juniper's backbone routers are specifically
designed to accommodate the size and scope of the Internet.

Juniper recently posted its first gains as a public company and
two analysts raised their outlook on the stock based on revenue
growth of $45.4 million, a 54% rise from the third quarter. The
analyst from Credit Suisse First Boston said Juniper's quarterly
results easily surpassed his expectations and he announced that
strong international sales along with growing customer diversity
bode well for the company's revenues. Warburg Dillon Read analyst
Nikos Theodosopoulos also raised his 12-month price target for
Juniper Networks to $155 per share, based on solid revenues and
upwardly revised estimates for the coming year.

We favor a technically correct entry point on this issue at a
recent support area near $115.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Put  FEB 110  JUX NB  204      1.38    108.63     4.7% ***
Sell Put  FEB 120  JUX ND  455      3.00    117.00     7.4%

Chart =


MRVC - MRV Communications  $74.50   *** Own This One! ***

MRV Communications is a manufacturer and marketer of optical
high-speed networks that integrate switching, routing, remote
access and fiber optic transmission systems. The company designs,
manufactures and sells computer networking products, primarily
Ethernet LAN routing switches, WAN and remote access devices and
fiber optic components for the transmission of voice, video and
data across enterprise, telecommunications and cable TV networks.
The company's advanced networking solutions greatly enhance the
functionality of local area network and wide area networks by
reducing network congestion while allowing end users to preserve
their legacy investments in pre-existing networks and providing
cost-effective migration paths to next generation technologies
such as Gigabit Ethernet.

This position made today's list based on the recent performance
of the sector and the favorable technical outlook of the issue.
The consolidation area near $58 should provide an excellent safety
net in the event of a short-term market downturn.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Call FEB 60   VQX BL  610      16.50    58.00     3.4% ***

Sell Put  FEB 55   VQX NK  87       1.06     53.94     6.7% ***
Sell Put  FEB 60   VQX NL  174      1.94     58.06    11.2%

Chart =


NEWP - Newport Corporation  $77.00   *** Hold That Line! ***

Newport, together with its consolidated subsidiaries, is a global
supplier of high precision components, instruments, positioning
and measurement systems to the fiber optic, computer peripherals, 
semiconductor equipment and scientific research markets. Newport
designs, manufactures and markets components and systems that
enhance productivity and capabilities of automated assembly and
test and measurement for precision manufacturing and engineering
applications. The company also provides sophisticated equipment
to commercial, academic and governmental research institutions
worldwide. NEWP operates in three business segments, Components
and Subassemblies, Instruments and Systems and their European

We also favor this position based on the sector performance and
the underlying technicals for the issue. Unfortunately, the stock
is somewhat overbought and at some point, investors will begin to
take profits. Can the issue remain above the 25 DMA for two weeks?
Only time will tell. We will use the recent consolidation area
near $65 as an entry target for this aggressive combination play.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Call FEB 65   QNW BM  100      13.75    63.25     2.8% ***

Sell Put  FEB 60   QNW NL  3        1.19     58.81     7.2% ***
Sell Put  FEB 65   QNW NM  0        2.13     62.88    10.2%

Chart =


NSM - National Semiconductor  $55.25   *** Portfolio Position ***

National Semiconductor designs, develops, manufactures and markets
semiconductor products, including microprocessors for the personal
computer industry, and a line of analog, mixed-signal and other
integrated circuits for use in wireless communications, flat panel
and CRT display, power management, LANs and WANs, automotive and
military aerospace products. NSM operates in three business groups.
The Analog Group develops and manufactures operational amplifiers,
power management circuits, data acquisition circuits and interface
circuits. The Communications/Consumer Group supplies integrated
circuits in the wireless and LAN markets and wireless circuits for
the cellular and cordless telephone markets. Cyrix Group develops
central processing units, system logic chip solutions for Cyrix
microprocessors, information access and multimedia appliances and
a portfolio of peripheral product solutions.

You might not call this a big-cap stock but we think it is a very
favorable addition to any portfolio. The company has excellent
growth potential and the recent all-time high suggests a new price
range is the issue's future. We favor the technical support near
$48 as a cost basis for this position.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Call FEB 50   NSM BJ  3542     6.62     48.63     2.8% ***

Sell Put  FEB 50   NSM NJ  1744     1.13     48.88     6.3% ***

Chart =


RNWK - RealNetworks  $161.44  *** Split Run! ***

RealNetworks provides branded software products and services
that enable the delivery of streaming media content over the
Internet and Intranets. The company's software runs on a variety
of operating systems and hardware platforms, enabling content
providers to encode content such as audio, video or other
multimedia programming into discrete data packets that can be
broadcast to large numbers of simultaneous users. Their products
and services include its RealSystem, a streaming media solution
that includes RealAudio and RealVideo technology, an electronic
commerce Website designed to promote streaming media products,
and a network of content collection Websites. Other RealNetwork
products include the Basic Server, RealProducer G2, RealEncoder,
Commerce Solution and Real Presenter. In addition, the company
provides consulting services that relate to the creation and
maintenance of streaming media networks.

Last week, RNWK's share value soared after the company reported
its second straight profitable quarter and beat Street estimates.
Several analysts raised their estimates for the company after its
announcement of strong fourth quarter results and bullish outlook.
Donaldson, Lufkin and Jenrette and Bear Stearns revised their
earnings estimates as new advertising and digital music revenues
are expected to help increase profitability and margin expansion.
The company also announced a 2-for-1 split, payable on February
14, to shareholders of record on January 28, 2000.

The break-out above recent resistance near $155 should provide
a reasonable support area (entry opportunity) for those who are
bullish on the issue but don't want to pay retail.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Put  FEB 125  RNO NE  383      1.31    123.69     3.9%
Sell Put  FEB 130  RNO NF  315      2.00    128.00     5.7% ***
Sell Put  FEB 135  RNO NG  112      2.88    132.13     7.0%

Chart =


SDLI - SDL Incorporated  $292.44   *** Bigger Is Better? ***
SDL designs, manufactures and markets semiconductor lasers,
fiber optic related products and optoelectronic systems. SDL's
optical communications products power the transmission of data,
voice and Internet information over fiber optic networks to meet
the needs of telecommunications, dense wavelength division
multiplexing, cable television and satellite communications
applications. SDLI derives revenue from three principal market
areas: fiber optic and satellite communications, printing and
material processing, and contract research.

SDLI has been on the move lately, rising on news of record
earnings and brokerage upgrades. The stock has soared more
than 1,000% over the past 12 months, benefiting from intense
interest in companies that make equipment and components for
advanced fiber optic communications networks. However, another
reason for the rally may be the recent takeover rumors. One
analyst with market research firm Wall Street Strategies said
rumors have circulated about a potential deal with JDS Uniphase.
SDL could fetch more than $300 a share in a pact with the giant
of diversified electronics.

Regardless of the reason, SDL is once again at a new all-time
high and the possibility of it falling to our cost basis appears
rather slim.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Put  FEB 230  YSL NF  76       3.00    227.00     4.9% ***
Sell Put  FEB 240  YSL NU  111      4.25    235.75     6.2%

Chart =


VIGN - Vignette  $199.00   *** Calling The Bottom! ***

Vignette is the leading supplier of e-business applications for 
building online businesses. Vignette enables Internet businesses
to reach more prospects, attract and retain new customers, and
increase overall customer satisfaction, raising the total purchase
per visit. Vignette powers more than 500 of the leading dot.com 
and Fortune 500 e-businesses, including AT&T, BMW, CBS Broadcasting,
c/net, Daimler/Chrysler, Drug Emporium, FedEx, Kinko's, Simon & 
Schuster, Sprint, Tandy, United Airlines and Waste Management. 
Vignette e-business applications transparently automate the 
customer's side of the interaction, taking away all the anxiety 
and work involved in being a customer. 

Vignette reported record earnings last week with total revenues 
up 512% to $40.9 million compared to the same period in 1998. 
Though it reported a loss ($0.10 a share), it expects to turn 
profitable by the last quarter of 2000. It is interesting that 
Vignette's board of directors voted on Monday to increase the 
number of authorized shares to 500 million from the current 80 
million (pending approval by share-holders on March 14).

The consolidation we spoke of in the last issue is upon us, and
now the question is where will it end. The chart remains bullish
with the current price well above a rising 50 DMA and VIGN may
even continue its stage II climb into blue sky territory.

Action    Month &  Option  Open     Closing  Cost     Return On
Req'd     Strike   Symbol  Interest Price    Basis    Investment

Sell Put  FEB 140  UOJ NH  132      1.44    138.56     3.5%
Sell Put  FEB 145  UOJ NI  56       2.00    143.00     4.8% ***
Sell Put  FEB 150  UOJ NJ  150      2.88    147.13     6.7%

Chart =

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