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 ********** STOCK NEWS ********** 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 roster. 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 quarter. 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 investors. 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 middlemen. 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. ********************** PLAY OF THE DAY - PUT ********************** 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 /charts/charts.asp?symbol=LLTC ************************************* BIG COVERED CALLS & NAKED PUT SECTION ************************************* 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% NEW PICKS 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 = /charts/charts.asp?symbol=CNXT **** 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 play. 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 = /charts/charts.asp?symbol=CTXS **** 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 = /charts/charts.asp?symbol=IMNX **** 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 = /charts/charts.asp?symbol=JNPR **** 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 = /charts/charts.asp?symbol=MRVC **** 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 operations. 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 = /charts/charts.asp?symbol=NEWP **** 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 = /charts/charts.asp?symbol=NSM **** 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 = /charts/charts.asp?symbol=RNWK **** 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 = /charts/charts.asp?symbol=SDLI **** 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 = /charts/charts.asp?symbol=VIGN ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. 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