Option Investor
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Daily Newsletter, Sunday, 02/06/2000

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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************      
         WE 2-4           WE 1-28          WE 1-20          WE 1-14
DOW     10963.80 +224.93 10738.87 -512.84 11251.71 -471.20  +200.42
Nasdaq   4244.14 +357.07  3887.07 -348.33  4235.40 +171.13  +181.65
S&P-100   775.51 + 37.47   738.04 - 41.74   779.78 - 17.74  + 14.03
S&P-500  1424.37 + 64.21  1360.16 - 81.20  1441.36 - 23.79  + 23.68
RUT       525.52 + 20.90   504.62 - 29.33   533.95 + 25.84  + 19.80
TRAN     2608.96 + 27.21  2581.75 -169.74  2751.49 -140.14  - 73.09
VIX        22.93 -  6.16    29.09 +  6.43    22.66 +   .53  -  1.07
Put/Call     .45              .60              .47              .42
******************************************************************

Fasten your seatbelts. Get ready for a bumpy ride.

Bungee trading anyone? Last Sunday the NASDAQ had just put in a -415
point week and the bears were tripping over each other to proclaim
the end of the bull market. This week the NASDAQ gained +500 points
from the intraday low on Monday. (+357 from the Friday close) 
Record high to a -11% correction and back to record high in just two
weeks. Over bought to over sold to over bought. The Dow however, 
is not quite the picture of health that you would expect. I said 
last week that the Dow would suffer while the NASDAQ added strong
gains but I think it was worse than we expected. After posting two
back to back triple digit gains on Mon/Tue the Dow has not been able
to muster any support. You would think it was the Dow that woke from
its slumber and stuck its head out on Feb-2nd. After seeing the
shadow we are now condemned to six more weeks of drops before the
April earnings run.


 





 


It may be a long time before you hear the terms "flight to quality"
or "safety of bonds" again. The volatility in the bond market this
week was extremely rare. Several days saw bonds gain or lose multiple 
points. There are rumors flying that several big hedge funds and
large banks got hurt very badly. There was even a rumor that the 
Fed would hold an emergency meeting to address the problem. The actual
problem is our fault. We are paying taxes at a record rate and the
government said they would be cutting back on the number of bonds
they sell and would be aggressively buying back some bonds already
in circulation. The supply of the 30-yr bond is going to dry up.
Companies and financial institutions, that use these bonds for hedging
against the fluctuations in the financial markets, scrambled to buy
and traders who were short bonds added to the panic. After the
Fed announced they would not be meeting the bonds started easing.

It is official, we are in the longest economic expansion in history
at 107 months and counting. The economy continues to explode at
almost twice the GDP the Fed wants. The Nonfarm payrolls on Friday
were off the charts. There were 387,000 new jobs created in January
and unemployment dropped to a 30 year low of 4%, a level Greenspan 
considers a trigger point. The estimate of new jobs was 250K and the 
actual number was over 50% higher. A Merrill Lynch Economist, Bruce
Steinberg warned that new jobs must drop to 175,000 a month in order
to maintain the 4% unemployment rate. Many economists expected the
rate to fall below 4% this month. The huge increase in employment
will push the GDP even higher. Normally a report like this would 
be the kiss of death to any tech rally but not today.

Stocks continued the tale of two markets this week. The Nasdaq
powered ahead but the Dow only managed +224 points. Much of the
Dow's gains were made on an oversold bounce on Mon/Tue. Once the
Fed meeting was over the reality set in on the Dow. The Fed may
raise rates as many as three more times. Financials took it on the
chin and started giving up ground. Materials stocks started dropping
on fears that reduced demand caused by higher interest rates would
impact their performance. Inflation might not be running rampant
but nowhere is it dropping. Gold shot up +$23 an ounce after Placer
Dome Mining said they were going to discontinue their hedging 
operation because they felt the price was going to move higher from
here. Previously they would contract to sell future production at
today's prices in order to protect against a fall in price. Rising
gold prices are seen as a prelude to an inflationary cycle.

The competition for PC sales just got tougher and prices just became
significantly cheaper. Ford announced that they would be offering a
fully featured HWP PC, printer and Internet access for only $5 per mo.
When you consider Ford has 350,000 employees that became a huge sale
for HWP. Ford only joined the list of companies "giving" away computers
as perks for only a token amount. Delta, with 72,000 employees made
the same announcement this week at $12 per month. This perk gives
companies one more string to keep employees tied to their job and
prevent having to bid for trained workers in the work place. The
downside of course is the removal of these workers from the retail
PC market place. If you are HWP you probably had to give away all
but a very minimum profit margin to close an order of this size. As
this trend catches on, more than a dozen companies currently offer
this perk, the retail PC sellers will see not only their business
but their clients slip away. Of course a smarter worker with a new
computer needs software, joysticks, speakers, etc and the margins on
those items are fatter than the margins on a PC. The real winner if
this trend continues? Microsoft. Easily a couple million new copies
of Win98 will go on these free computers this year.

I told you last week that this coming Monday and Tuesday would be
the key. We are four days into February and the Dow is now trending 
down and closed under the psychologically important 11000. The 
NASDAQ is showing signs of a failed rally at 4300. The NASDAQ 
did make a new record close by +9 points but dropped -52 points 
from the high of the day. The tech sector is showing signs of 
weakness. Not all the techs were in the rally. These heavyweights 
of the tech/Internet world, JDSU, QCOM, YHOO, BVSN, RHAT, VERT, EPNY, 
AMZN, BRCD, PUMA, ASKJ, INKT, EMLX, VIGN, INSP, NSOL, CMGI, ICGE, 
RNWK, CMRC, DCLK, ITWO, BRCM all ended the day down. Many were up
strong intraday but fell in the afternoon. It could be just fear of
darkness and pre-weekend profit taking but when that many stocks 
diverse stocks all fail at once I start looking under the surface.

I think there is still a lot of complacency in the market. Investors
are literally selling anything non-tech to buy tech stocks. The price
is not important. They just want to be in techs and get those 100% 
returns "everybody" got last year. The publicity blitz is upon us.
Every tech fund with outstanding results last year is promoting their
record gains in an effort to seduce you to move your money into their
wallets. Dozens of funds generated over +100% gains. Even the Munder
Internet fund posted +110% for the year. Now the hunt is on. Which
fund is going to be the winner this year. Cash out my Acme Market Loser
and my Lost Value Advantage funds and throw money at the techs. While
this sounds like a pure reason to buy techs now it is also a reason
to be skeptical of market health. Past performance is no guarantee of
future results is what all the brochures say. This means give me your
money and we will invest it and we might return a profit. A sure way
to not show a profit would be to throw this money at the NASDAQ after
a possible failed rally signal like we had on Friday. Fund managers
know this. There is a tremendous amount of money on the sidelines.
They are waiting for a signal. The green light. The starters pistol.
Instead we get a Fed rate hike, (do not pass go). The Fed warns they
will probably raise rates again in March if not before, (pay the
Fed tax). The nonfarm payrolls come in +50% more than expected, 
(speeding ticket, pay a fine). The wall of worry just keeps getting
higher when we want it to go away.

The main reason for market rallies just died. Earnings. Almost all
the earnings announcements have passed. The stock split announcements
and corresponding spike in prices is over. CSCO and DELL are about
the only major tech stocks left to report and only one of those will
be positive. Don't look now but there is another reason to sell stocks
in February. Traders are faced with that yearly beating called income
tax. With record gains last year and most of them trading gains, 
traders will have to convert a sizeable chunk of stock to cash for
the tax man. If every online trader had to take only 10% out of his
account for taxes, and that number is probably low, you would almost
be able to hear the collective gasp as the market softened. This cash
out does not have to happen in February and more than likely many will
try and stretch it until the last minute in April but it begins in 
February. Next week is when the cash flow battle will begin. Managers
will wait on the sidelines expectantly hoping for a pullback. Tech
fund managers, flush with cash from people moving out of value funds,
will be hard pressed to wait very long. Like a kid in a candy store
with a pocket full of Christmas money they will be ready to scoop
up techs by the arm full if there is no sign of a sell off. Monday
and Tuesday will be key days. If we can hold around 11000 on the 
Dow, 1400 on the S&P and 4050 on the NASDAQ then we have a chance.
If all slip under these numbers we could see yet another "correction".
The most probable scenario is a tug of war between the buyers and
the sellers and the result would be a highly volatile range bound
market for the next two weeks. Remember last summer when we were 
locked in a trading range on the Dow for weeks at a time. 


 

This was the biggest week ever for the NASDAQ both in points 
gained and percentage gained. Since nothing goes up in a straight 
line that alone would be enough to make traders nervous about next
week. This probably had a lot to do with the sell off in the last 
hour on Friday. Tuesday is the Nonfarm Productivity report and 
Friday hosts the Retail Sales report. These are not the heavyweights
like the FOMC meeting or the Nonfarm payrolls but they will be 
watched. Volume on the NYSE continues to be heavy which makes the 
down indications worse. Advancers only beat decliners on the NASDAQ 
by 21:19 on a record day Friday. The wild cards Friday were the 
S&P and the RUT. The S&P closed above support of 1400 and the 
Russell-2000 finished at almost the high of the day. These indexes
could be the real picture of the broader market and the drama
surrounding the Dow and NASDAQ is just to keep us confused. I think
this week boils down to "if you own it, hold it" and if you are
planning to open new positions try to pick your entry points 
carefully. Fasten your seatbelts, volatility ahead.

Trade smart, sell too soon.

Jim Brown
Editor



******************************
OptionInvestor/Optionetics 
Spring Advanced Seminar Series
******************************

The spring dates for the OptionInvestor/Optionetics seminar
series are approaching fast. 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?



***********
JIM'S PLAYS
***********

This was a pretty good week, with the exception of the dip
on Monday that gave me some serious second thoughts. I closed
some naked puts on the intraday dip on Thursday and then added 
some more when the market turned around again. I am trying not 
to trade much due to my concern for the market direction in
February and a pressing work schedule. Because of the number
of active plays I am not going to explain many since the 
concept is the same for most.

After the dip on Monday I was in several much deeper than I
wanted. This uneasiness made me gun shy when the Thursday drop
started. 










 

On BRCM I had sold in the money because of the 3:1 split coming. After
the big run I was worried we could see some pre-split selling and put
a tight stop on the play. 


 

I really blew it on SILK. I should have had a stop but didn't. I should
have covered immediately and didn't. I pulled a true rookie move and
let it bleed thinking $140 support would hold. The Nasdaq was in rally
mode and there was no news on SILK. Somebody was selling a big stake and
I thought surely it would stop. Wrong idea. I got into this trap by 
having too many open positions and after the gap down I did not want
to believe it would not bounce back up like the rest of the Nasdaq stocks.
My loss, and it energized me to go back to placing GTC stop losses on 
every position. When I click submit to open the position I immediately
change the 'sell open' to 'buy close' and put in my stop. Sometimes before
the opening order is even filled. Discipline is the key. Over confidence 
is the flaw. Do as I say, not as I do.


NOK - $170 Calls
 



NEW POSITIONS THIS WEEK:
 
 










 

The next three plays are a little out of my normal risk profile. They
have very little risk, have very low margin and high return percentages
on two week plays. 






 


INDEX PLAYS CLOSED:


QQQ Calls purchased Friday 1/28.
 


OEX - $760 calls purchased Friday 1/28



NEW INDEX PLAYS:

You know my thoughts on market direction. Nothing goes in a straight
line. After five up days on the Nasdaq and with the Dow looking weak
I could not go into the weekend without a bunch of Puts on both the
QQQ and the OEX to protect myself on being stopped out on some of the
naked put plays above. If the market gaps down I am protected. I think
the chances of a gap up are slim.






This is way too many plays to maintain and watch carefully but the
Naked Put plays require very little maintenance if you set them up
right to start with. You have to be disciplined to set your GTC
stop losses when you start the play and then raise them daily as
the play progresses. I hope the market breaks out next week and runs
all the way to April earnings. I don't see it but it would be nice.
I am planning to keep my stops close in case of another correction.
I want to be in cash if we get another one because I think it will
be the last one until April. Entry points near the bottom are much
easier to maintain.

Good Luck

Jim



************
Stock News
************

I Just Don't Get It
By  S.P. Brown

I have to admit pro-wrestling has always been something of a 
head-scratcher to me.  I just don't get the entertainment 
value of muscle-bound men and scantily-clad women pretending 
to pummel one another with inanimate objects and spine-jarring 
body slams.  But then again, I don't get Ally McBeal, tractor
pulls and Martha Stewart either.  

http://members.OptionInvestor.com/stocknews/020600_1.asp



*******
Ask OIN
*******

Man's Best Friend is a Trend Line, not a Dog.
By Ryan Nelson

Everyone needs a best friend.  Whether it is a dog or a college 
buddy or a spouse or one of your children, it is someone you 
are comfortable with and can trust.  Let me tell you about my 
best friend in the trading world.  It is known as a Trend Line and 
is part of most interactive charting programs.  For those of you 
unfamiliar with a Trend Line, it is a line that extends 
continually in one direction on your chart.  We will look at some 
examples in the charts below.  The beauty of the Trend Line is the 
ability of this simple device to take the emotion out of your 
trades.

http://members.OptionInvestor.com/ask/020600_1.asp



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

As of Market Close - Friday, February 4, 2000 

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

DOW Industrials   10,700  11,250  10,964    Neutral   2.01
SPX S&P 500        1,350   1,500   1,424    Neutral   2.01
OEX S&P 100          730     800     775    Neutral   2.01
RUT Russell 2000     475     500     525    BULLISH  11.12
NDX NASD 100       3,200   3,850   3,874    BULLISH   2.03
MSH High Tech      1,650   1,900   1,929    BULLISH   2.03

XCI Hardware       1,300   1,460   1,456    Neutral   1.28
CWX Software       1,200   1,420   1,393    Neutral   1.07
SOX Semiconductor    700     745     868    BULLISH  12.21
NWX Networking       800     900     971    BULLISH   2.03
INX Internet         700     800     763    Neutral   1.06

BIX Banking          645     690     532    BEARISH  11.30
XBD Brokerage        400     450     430    Neutral  11.30
IUX Insurance        625     650     556    BEARISH  11.30

RLX Retail           950   1,000     917    BEARISH   1.28
DRG Drug             340     400     355    Neutral   1.28
HCX Healthcare       700     790     741    Neutral   1.28
XAL Airline          180     190     127    BEARISH   5.21
OIX Oil & Gas        280     315     263    BEARISH   1.27


Posture Alert
A favorable interpretation of January's employment report sparked 
the Nasdaq to close into record territory capping a biggest 
weekly advance for the technology market (+21%). Other broad 
market measures have rallied back to their respective 50-day 
moving averages while financial, airline and Oil & Gas sectors 
drift lower.



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

Sunday, February 6, 2000

A Record or Top Reversal Signal!
By Pinnacle Capital Advisors

With Nasdaq rallying sharply this week and closing in virgin 
territory, do we have a record or a top reversal signal?

Don't look now, but the Nasdaq just revealed a nice BIG Doji and 
a second day of a three-day reversal pattern known as an evening 
star according to Candlestick charting technicians.  If the 
Nasdaq gaps down on Monday (2/7) and loses more than 50 points, 
it will complete the three-day reversal signal and many market 
timers will be calling for a short-term top.  More alarming, many 
media observers will be claiming that the Nasdaq could not hold 
it's gain and may deflate investor sentiment and spark a 
precipitous sell off.


 

With so much on the line, let's take a closer look at what we 
really have from a top down perspective.  First, it's true that 
Nasdaq rebounded sharply following the bond market rally that 
began last Monday (1/31).  But the Nasdaq really broke record 
ground on the heels of two technology sectors - networking and 
semiconductors. These sectors were led primarily by Cisco (CSCO) 
and Intel (INTC), both of which registered new 52- week highs.  
Cisco reports its earnings next week so it basically on an 
earnings run.  But if you look at Intel's Chart, you'll see a 
flaming shooting star - another potential top reversal signal. 

Sector             Close    Posture  Since
SOX Semiconductor    868    BULLISH  12/21


 

NWX Networking       971    BULLISH   2/03   

Although Hardware, software and Internet recorded advances last 
week, they have NOT broken out yet and are just sitting above 
their respective 50-dma but in their potential failed rally 
zones.
						
Sector             Close    Posture   Since  Failed Rally Zones
XCI Hardware       1,456    Neutral   1/28   1,400 - 1,460
CWX Software       1,393    Neutral   1/07   1,380 - 1,400
INX Internet         763    Neutral   1/06     760 -   800

So much for technology sector.  More problematic is the balance 
of the market.  Don't look now, but the DJIA closed below 11,000 
again and BELOW its 50-dma.  There is an old saying that what was 
once support can also serve as resistance.  Could the 11,000 
level fall victim to the new line of defense.  But most investors 
are writing off the DOW because it hosts many "Old Business" 
companies. Guys like International Paper (IP) and United 
Technologies (UTX) which have fallen on bad times.  But the S&P 
100 (OEX) and S&P 500 (SPX) doesn't look that much better.  Both 
are sitting right at their respective 50-dma and coming off a 
potential reversal signal as well.

Sector            Close    Posture   Since   Failed Rally Zone
DOW Industrials   10,964    Neutral   2/01   11,000 - 11,600
SPX S&P 500        1,424    Neutral   2/01    1,425 - 1,460
OEX S&P 100          775    Neutral   2/01      770 -   800




 

Now normally in a Bull market one would expect the S&P 100 and 
500 to bounce of their respective 50-dma and continue to lift the 
equity markets higher.  But take a look at some of the sectors 
that make up the S&P 100 and 500.

Sectors            Close   Posture  As of     Recent Action
BIX Banking          532    BEARISH  11/30    FAILED below 50dma
XBD Brokerage        430    Neutral  11/30    FAILED @ 50dma
IUX Insurance        556    BEARISH  11/30    FAILED below 50dma

RLX Retail           917    BEARISH   1/28    FAILED below 50dma
DRG Drug             355    Neutral   1/28    FAILED below 50dma
HCX Healthcare       741    Neutral   1/28    FAILED below 50dma
XAL Airline          127    BEARISH   5/21    FAILED @ 50dma
OIX Oil & Gas        263    BEARISH   1/27    FAILED below 50dma





Not very good looking charts and it underscores why our market 
posture for many of these lagging sectors has been BEARISH.  Now 
if you were a betting man, which direction would you expect the 
S&P 100 and 500 to move with Banking, Brokerage, Insurance, 
Retail, Drug, Healthcare, Airline and Oil & Gas all drifting 
south.

Many market analysts believe that Networking and Biotech stocks 
will lead the market higher. From Pinnacle Capital Advisors' 
perspective, it's hard to imagine a scenario where the equity 
markets can get airborne with broader participation.


BULLISH Signs: 

Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of 
analyst expectations.

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

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 (6.225):
Although the bond market rally has helped bring the current yield 
down near 6.0 last week, it closed Friday (2/4) at 6.225.


BEARISH Signs:

Volatility Index (22.93):
The VIX continues to prove that the low 30's are an excellent 
buying opportunity, and the low 20's continue to be a great 
selling opportunity. The VIX gapped down below 22.0 before 
snapping back and closing at 22.93 on Friday (2/4).

 
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                       (2/4) 

Overhead Resistance (780-830)     4.76    

OEX Close                       775.51 

Underlying Support  (740-760)     2.10
Underlying Support  (700-735)    10.31


What the Pinnacle Index is telling us:
Overhead resistance is building and could stall a broad market 
advance. 


Put/Call Ratio                  Friday
Strike/Contracts                (2/4) 

CBOE Total P/C Ratio             .45      
CBOE Equity P/C Ratio            .38
OEX P/C Ratio                   1.05


Peak Open Interest (OEX)
                     Friday 
Strike/Contracts     (2/4)  

Puts               700 / 9,281
Calls              800 / 7,350
Put/Call Ratio        1.26


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

February 4, 2000                        22.95



*************
COMING EVENTS
*************

For the week of February 7th, 2000

Monday

Consumer Credit          Dec    Forecast: $8.7B  Previous: $15.6B

Tuesday

Non-farm Productivity    Q4-pre Forecast: 5.1%   Previous: 4.9%
Unit Labor Costs         Q4-pre Forecast: --     Previous: -0.2%
Richmond Fed Survey      Jan    Forecast: --     Previous: 15   

Wednesday

Wholesale Inventories    Dec    Forecast: 0.7%   Previous: 1.1% 

Thursday

Jobless Claims           2/04   Forecast: --     Previous: 274K 

Friday

Retail Sales             Jan    Forecast: 0.7%   Previous: 1.2%   
Univ of Mich Sentiment   Feb    Forecast: --     Previous: 111.1
Chicago Fed Index        Dec    Forecast: --     Previous: 136.4

Week of 2/13

2/14 Business Inventories - Dec
2/15 Capacity Utilization - Jan
2/15 Industrial Production - Jan
2/16 Building Permits - Jan
2/16 Export Prices - Jan
2/16 Import Prices - Jan
2/16 Housing Starts - Jan
2/17 Producer Price Index - Jan
2/17 Philadelphia Fed Index - Feb
2/18 Consumer Price Index - Jan
2/18 International Trade - Dec


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

GETTING READY FOR CAMP MOM
By Lynda Schuepp

Every year I look forward to my winter break at "Camp Mom".  I go 
to a spa in Mexico with 2 close friends and get pampered for one 
week. No kids, no husbands, no grocery shopping, no errands, no 
shoveling and no carpooling.   Isolated in the Sierra Madres, this 
area has no faxes, TV,  e-mails, IBD or Internet.  The vacation is 
a most active and relaxing one at the same time.  It is physically 
active with hiking, horseback riding, and of course "cheap" 
shopping.  At the end of day we get massages, facials, roman 
bathes, pedicures, you name it.  My brain goes on vacation and it 
is the only place in the world that I don't think about trading 
or what the market is doing. 

When I am in Mexico, I am comforted to know I have a large 
position in Tel Mex, which I bought in 1978 for $1 a share.  At 
that time the stock was paying a 6% cash dividend and a 25% stock 
dividend!  This stock is part of my treasure chest.  I love to 
write calls on part of the position, as it is usually stable 
during a 30-day period, except for this past week. I will 
probably have to unwind my calls this week by buying back the 
February calls and selling twice as many March calls at a higher 
strike price for a cashless transaction.  This strategy is a 
great way to unwind a bad covered call play by rolling forward.  
Stocks can't go up in a straight line forever, so eventually the 
calls will expire worthless.  My experience has been, it usually 
occurs the following month.  Of course, this assumes you have 
naked option writing capability. 

I'm leaving for "Camp Mom" on the day that the February Options 
expire so, in preparation for that vacation, I am adjusting my 
positions and strategies.   One of my New Year's resolutions was 
to build up my long-term portfolio.  I have started buying leaps 
on some stocks I'd like to have in what I call my "blue chip" 
portfolio.  They include CMGI, GE, AOL, and SUNW to name a few.  
All have provided me with fairly good entry points at various 
points the last two weeks, some better than others.  

After purchasing the leaps, my next step is to write covered calls 
against them.  However, with only 2 weeks to February's expiration 
date, the premiums are not high enough in some of these stocks for 
the level of risk.   In light of the possibility of having to 
unwind positions the day before I leave, I decided my time that 
day might be better spent on other things namely, packing.

The only leaps I wrote calls on were CMGI and SUNW.  On Thursday 
CMGI formed a doji pattern, a hanging man.  On Friday, when CMGI 
went below Thursdays close, I wrote the Feb 135 Calls for 3 and 
3-1/8.  By the close on Friday, they had dropped to 1-1/2.  I 
probably will close this position for a quick profit on Monday to 
avoid any heart palpitations before leaving.  I bought the SUNW 
leaps at a pretty good entry point very near the bottom on January 
27th.  Although when I look back, I'm not quite sure I didn't jump 
the gun.  I sold the Feb 85 calls on Monday when it looked like 
SUNW hadn't bottomed and was going lower.  I wanted to lock in 
some "safe, surefire profits" to protect my investment, famous 
last words.  I got suckered in during amateur hour.  That proved 
to be the low point for the week and SUNW ran for the rest of the 
week.  On Friday SUNW touched my strike price of 85.  Friday's 
candle was a doji.  While I never trust a doji at the bottom, 
they are generally very reliable at the top of a run.  Next week 
will probably be "squirming week".  My leap is up 4 points and 
I'm only down 1-1/2 in my call. Worst case is I buy back the 
call at a loss and possibly rewrite some march calls to cover 
my expenses.  

Because the volatility is so low on GE, it didn't seem worth my 
effort to write calls and cap my upside so instead I wrote 
February 130 puts for 2-3/8 on January 28th. The puts were down 
to 50 cents on Friday.  There is very strong support at 134 and 
with the time value premium evaporating by the minute, there 
really is very little risk left in this play. I had planned to 
be greedy on this one and let them expire worthless.  However, 
Friday's candle was a bearish shooting star.  I have found that 
80% of shooting stars at the top of a range are retested, so 
hopefully this will not be problematic. While this is one stock I 
really don't mind owning, I would prefer to obtain it using option 
strategies over the next 12 months rather than being put the stock 
before I leave.

I bought AOL Leaps and they have been sliding down ever since my 
purchase on January 25th.  This purchase was probably just a case 
of bad timing and being antsy to implement my strategy in order to 
have everything in its neat little place.  Trading seldom allows 
you to call the time frames.  I kept waiting for AOL to stop its 
free fall when in hind site, I would have been better to sit this 
one out and if necessary buy the leaps after I came back. I'm not 
worried about this one because my time frame is long-term.  Had 
this been a near term option I would have been out of this one 
in a heartbeat.  

It's amazing when you look back at the charts on a failed or poor 
trade.  I never can seem to find the criteria I thought I saw 
when I entered the trade.  Moral of this story: Never force fit a 
trade into your overall plan or you might get burned.
   
Contact Support


*************************************
WOMANS WORLD CONTINUED IN SECTION TWO
*************************************


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DISCLAIMER
***********

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              2-6-2000
Sunday                        2 of 5


**********************
WOMANS WORLD CONTINUED
**********************

Pharmaceutical Sector Under Attack
By Mary Redmond

One of my favorite stocks was on the move this week. CMGI went from 
100 to over 120 this week. Unfortunately I was not able to get in 
on Tuesday because I had to be away from the computer, so I got 
back in to Feb 115 calls on Wed before Mr. Greenspan gave us the 
green light when the stock was 116 and sold them when the stock 
was 119.5 after the Fed decision was announced. My other 
positions were happy ones, buying 100 NT at 94 on Monday, JDSU 
at 200, and Qwest leaps. The only dud position is Lucent, which 
is stuck in a rut at 56. I am quickly losing patience and am 
going to dump it if it's not up to 60 in a few days. 

An important sector to watch in the coming months is going to be 
the major pharmaceutical company stocks. The sector has performed 
poorly over the last 12 months, and some analysts believe the 
sector will continue to be under pressure in this election year 
due to investor's concerns about potential legislation which 
would impact the pharmaceutical companies profits. Since JNJ and 
MRK are in the Dow, and the S & P 500 has a number of major 
pharmaceutical companies, their performance will impact the 
entire market,  although perhaps not as much as the big technology 
stocks.

In addition, it is important to watch health care and drug 
expenditures as a percentage of the GDP. In 1970 health care 
expenditures made up only 7.1% of the GDP, in 1990 they made up 
12.2%. From the years of 1995 to 1999 health care has stayed 
between approximately 13.2 and 13.6% of the GDP. However, 
pharmaceutical expenditures continue to grow at twice the rate of 
overall health care spending, which is why drug costs are such a 
hot issue now. In an economy with relatively low inflation the 
drug costs are rising enough to concern everyone. Apparently, 
even the pharmaceutical company executives are concerned about 
their costs and profits, perhaps exemplified by the soap opera 
drama of who loves Warner Lambert the most which seems to have 
finally come to a conclusion.

A closer look at the pharmaceutical industry and the factors in 
health care can reveal some interesting facts. Health care is 
going to be a big issue in the twenty first century for a number 
of reasons. The first and most obvious is the fact that the US 
population, and also the population of many other industrial 
countries is aging rapidly. In another twenty to thirty years, 
the generation born between 1945 and 1965 will be at the 
traditional retirement age and are predicted to place a big drain 
on our Medicare and social security system. 

I think that a couple of other factors may help to offset this 
phenomenon. One is the rising immigrant population in the US. It 
is predicted that the US population will double in the next 100 
years, and most of the immigrants are of working age. In addition, 
the baby boom generation is a very independent, self-directed 
generation. The days of working for one company to retire at 65 
on a pension, play golf, watch TV, and go on a cruise twice a year 
are over. New discoveries in medical technology are being made 
every day, and people are living much longer, more productive 
lives than they used to. Baby boomers are likely to continue 
working productively far longer than previous generations did.

The concern among some investors and fund managers is that the 
government may impose price controls on the products of 
pharmaceutical companies, which could decrease their profit 
margins. However, the government does not completely control the 
price of prescription drugs, and it is unlikely that they will be 
able to do so in the future. Drug patent law is highly complex, 
but the government is generally restricted in the extent to which 
they can control the price of prescription drugs. Strict price 
controls are usually only levied on utilities and monopolies, 
and some insurance companies which have to apply to the state 
insurance boards to raise their rates. More probable legislation 
might include Medicare prescription drug plans which give a 
certain percentage discount to elderly Medicare patients. This 
might affect the profits of the pharmaceutical companies, but 
the exact estimates are unclear at this point.

The pharmaceutical companies have difficult jobs. The competition 
in the drug industry is intense, and the companies have to spend 
very heavily on research and development of new drugs in order to 
survive. There are very few drug categories (like pain relief or 
blood pressure) in which a single pharmaceutical company actually 
has the only available drug. We hear about the famous ones, like 
Viagra or Prozac, but for every famous patented drug marketed, 
there is a pharmaceutical company attempting to develop another 
competitor.

Since drug patents expire, and companies lose huge amounts of 
profits when the generic equivalents of their patented drugs come 
on the market, a large percentage of their gross profit is spent 
in the research area. The cost of getting a single drug through 
the FDA approval process can be as much as 50 to 100 million 
dollars, and the vast majority of chemicals starting out in the 
test tube don't make it to the approval process. The products' 
developers have to successfully finish preclincal trials, apply 
to begin Phase 1 clinical trials, finish Phase 1 successfully, 
apply to begin Phase2 clinicals, finish Phase 2 successfully, 
apply to begin Phase 3 clinicals, finish successfully, file a 
new drug application with the FDA and wait at least a year to 
hear the final approval results. During all of this time the 
major pharmaceuticals have to fund the state of the art 
laboratories, pay their scientists salaries and pay all of the 
costs of filing with the FDA. Is it any surprise that drug costs 
are going up?

Some smaller pharmaceutical companies have been successful this 
decade, but usually only the ones, which have strategic 
marketing agreements with the major pharmaceutical companies. 
It's not enough to just get a drug approved by the FDA. Marketing 
this new drug to physicians and hospitals can be difficult. 
Without the advertising budget and sales force behind the big 
companies, few small companies would be able to successfully sell 
their products, no matter how good they are.

There really is no easy solution to this issue. It affects 
everyone, from the rich to the working class. Most HMOs have been 
struggling to stay profitable with rising costs of medical 
equipment and prescription drugs, and some of their balance 
sheets look about as sick as their patients. Many insurance 
companies have closed their HMOs due to lack of profitability, 
and two major HMOs in the Northeast have recently closed. As 
exciting as the recent developments in biotechnology have been, 
somewhere along the line someone has to pay the bill. How it is 
going to be paid will effect all of us and the entire economy of 
the US in the twenty first century

Contact Support


****

IT'S A GOOD TIME FOR A STOP LOSS REVIEW 
By Renee White

A reader reminded me that we haven't discussed stop losses for a 
while. The discussion is really more about money management and 
discipline. 

-Hi Renee: 
-With all disclaimers in effect, and knowing that we take 
-responsibility for all of our options trading, with the comfort of 
-knowing that we can lose all the premiums, etc., etc. We realize 
-that placing "stops" is a personal decision based on amount of 
-risk that we are comfortable with.  However, can you give some 
-guidance on the following: We have a paper gain of around 
-$2,000 on NEM and a paper gain of $1750 on SBUX  Feb. options.  
-We realize that this is probably pennies to you--but--we are 
-trying to build up some money so that we can play with the big 
-boys/girls.  Anyway, do you have any suggestions on where we 
-might want to place the "stops".  We are referring to the MACD, 
-Stochastics, and 30 day moving average and feel that the stocks 
-will continue to go up.  While we'd like to preserve some of the 
-gain, we'd hate to place the stops too tight and be forced out of 
-the position.  Any comments? 
-Regards, Liana & Gary

Thank you Liana & Gary. This was a great question. Your profits are 
certainly not pennies to me. I could go shopping on that!!

Stop losses are so important to your growth and success in option 
trading. They sometimes appear just too simple and many ignore their 
virtues only to end up losing their profits. This whole subject 
matter is one of the biggest hurdles of gaining success in trading. 
Options are high risk and by their nature, they attract a lot of 
attention. Unfortunately, some only see the upside and do not 
protect their gains once they have them. Timing plays correctly 
is something only experience can teach you, and then it still is 
a major challenge. Until you feel you are experienced, it is best 
to not take unnecessary risks by waiting too long, to take your 
profits. This though, is the confusion for novices. They don't 
know what point is considered too late or too soon. Usually, one 
learns it was too late, when they lose money.

I have told the story of leaving town for a conference, with a 
lot of healthy open plays on the table. (That's a dumb thing to 
do!) While sitting in the conference, my underlying stocks crashed 
on a rapid sell-off, which of course, deflates the option 
premiums. Fortunately, it was at that conference that I was 
turned-on to this newsletter. I'll never forget the first time I 
read OIN, and the end of Jim Brown's article with "Sell Too Soon". 
It was just days after I had taken a big loss. I remember, I 
just rolled my eyes and chuckled thinking, "Now You Tell Me!". 
The impact of that phrase at the heels of my loss, had a huge 
effect on me. It is such a simple statement, but one that has 
made me so much more money and improved my trading immensely.

Suddenly, all the ducks were lining up in a row and I realized 
that EVERY successful option teacher/presenter/guru, etc., ALWAYS 
talked about being happy taking profitsANY profit.  NONE of 
them tell you to hold on, and on, and on, for the pie in the sky 
returns. These are successful traders that have already walked 
down the paths I was just learning. They already knew the secret 
path to success, while I was trying to find north on the compass. 
So, now I do things differently, occasionally selling too soon, 
but never complaining for the profit I take, since I can always 
re-enter if the play is still strong. Just keep some money in 
your pocket, move your strike price up, and don't re-invest the 
whole enchilada again. Also, ALWAYS review your bad plays.

You are right, different everyone has a different risk tolerance. 
The difference in the volatility of the underlying is also a 
consideration making it hard to set hard and fast rules. 
Obviously a volatile issue requires more wiggle room (and 
therefore risk), than a stable one.  The OIN Stop Loss figure is 
only a guideline and is generally about 20-25% loss, unless the 
option is over $15.  Then we peg a 22% loss figure to the nearest 
$0.25. Remember the saying, "never play with money you can't 
afford to lose". If you can't afford to lose the profit you just 
made, then you've reached your own stop loss. Don't be foolish 
and try to match someone else's stop loss if you are happy with 
your gain. Again, you can always re-enter with a portion of 
your winnings, with a near term at-the-money option which will 
move faster (in either direction). Of course an alternative is 
selling part of your position to secure your profit, leaving the 
balance at risk to go higher (and of course at risk to go lower, 
also). 

As for using various indicators to help with your decisions, I 
think that it is an individual decision based on how skilled you 
are at using charts and indicators. Every trader has a different 
style unique to himself or herself and their interpretation of 
their data may change, depending on the history of movement of 
the underlying. Some of my good friends live by daily charts 
alone, and only use entry/exit signals from indicators on those 
charts. Other friends I have only use intra-day parameters. I use 
a combination of each depending on what I "feel" is going to be 
happening in the future, near term. Sometimes it changes 
depending on the underlying, the sector, current market levels, 
economic reports due out, the newsall sorts of things. 

My daily chart friends use indicators for their exit and entry 
decisions, probably more than they use a hard stop loss figure. 
Again, I use a combination of both. On Stop Losses, I watch the 
underlying, and SL price until it is close. I then use my 
indicators to tell me when to exit intra-day at the highest point 
possible. I also do this to help me get good entries on dips. When 
things look hot, I go from candlesticks, to a longer-term bar chart, 
which helps me see severe quick dips, which look out of proportion 
with the market. If I am lucky enough to catch it, I just got a great 
entry at a support level. I do this during sell-offs. My other 
indicators are usually all sitting on oversold. On intra-day exits, 
I use the indicators to help me sit on my hands for a while, as I 
try to squeeze a few more dollars out of the play before it rolls 
over, signaling me to exit.
 
We are all different. I try to limit my losses to roughly a 20%. I 
may re-enter the trade once the slide is over, at then a better 
price. Sometimes I screw up, like my QQQ play last week, when I 
exited during a momentary sell-off. It ended up being at the 
bottom (after a really great entry), then I wasn't able to get 
back in. Last time I looked, I had lost $8 of potential profit 
per contract, if I had stayed in (over a 100% gain). BUT then 
again, I still had a 33% gain on the stop-loss exit I took. My 
mistake was letting it slide more than the 20% stops I had 
placed, causing me to exit late, at the bottom. If I had caught 
it earlier, exited at the 20% loss as planned, I could have 
bought back anywhere after the bounce back up. It would have 
been a beautiful play. Sometimes, getting distracted by phone 
calls cost you money by not watching your plays. 

As you become more experienced, you will have a better feel for 
things. Just consider it impossible to trade options without 
losing money. Now decide how much you are willing to lose. If 
your answer is "None", then either don't play options, or get out 
of the trade with money in your pocket 

Renee White
Contact Support



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

Silicon Valley Ethos
By Janar Wasito

OK, just to get the trades out of the way, I have made gains in 
the last straight 8 days using some of the short put & short call 
strategies which the newsletter has been outlining in the Options 
101 and other columns. VRSN is working like a champ, with my 
short Feb210 Calls bleeding time value even as the stock moves 
up; I should have stayed short those Feb145 Puts too, but I 
closed it for a profit. I am still short BRCM Feb270 Calls. I 
should also have stayed short those AFFX Feb210 Calls. No problemo, 
just learning the ropes. Sold VOD Feb65 Calls when the stock 
started rolling over after the merger announcement. Another 
example of a tech stock paying a dividend (and if I get called 
away at that price, fine). Cash flow, cash flow, cash flow. This 
weekend, I am planning to set up short put trades which take 
advantage of any major sell off next week. To give you an idea 
of what I am looking for, here are some of my "weapons free" 
indicators for pulling the trigger --

1. VIX above 28, preferably above 30.
2. DOW, NASDAQ, OEX all well below their 10 day EMA (see Marty 
Schwartz, a former jarhead and trading champ, in his book, Pit 
Bull, last chapter, for the significance of this and other 
indicators)
3. Similarly, big losses in the tech sector
4. Big losses in the individual stock (eg, AFFX, BRCM, VRSN)
5. Some kind of support levels (connect the dots with the lows 
from the last few months; not rocket science, more of a 
scientific wild assed guess)

Then, sell Feb puts 10 - 20 points below those levels of support 
when the stocks approach those levels. Have the buying power on 
hand to purchase the stock if put too. If the puts expire 
worthless, all the better.

On Friday, I opened a QQQ Put position because the VIX touched 
20 and was at 22, and the averages, especially the NAS were 
above the 10 day EMA. If the market continues up on Monday, I 
would still expect a pull back no later than Tues. If that 
doesn't happen, I close the pos for a loss. Already up slightly.

I really wanted to throw in a quick summary of a terrific 
presentation that I went to on Friday night. The speaker was the 
Chief Marketing Officer of Scient (SCNT). The venue was the 
Stanford Industrial Engineering program's Technology Thought 
Leader's series. It is ironic. Stanford undergrads have access to 
presentations that are more cutting edge and relevant to the 
direction of our economy than Wall Street Investment Bankers (at 
least the ones in New York). Who the hell would want to grow up? 
It is more fun building cool companies and developing cutting 
edge technology. Anyway, the speaker outlined 10 elements to 
supercharging your career in the Internet Economy, which serve 
as a pretty good window on the Ethos of Silicon Valley. And the 
ironic truth is, that while money does matter, the people who do 
the best are the ones who worry about it the least. To wit, the 10
rules --
1.Build Legendary Companies.
2.Be Big. Be a Big Impact Player. Do It.
3.Brainiacs. Seek Them Out. Avoid boring wonks.
4.Take Huge Risks. You Fail, So What.
5.Learn Tons. Stupid Sucks.
6.Get Coached. From the Best. Coaches: See openings on the field & 
Stand for your commitments.
7.Be Flexible. 80% of your assumptions will be wrong.
8.Market. All great execs are great marketers.
9.Be Entertaining. Work IS entertainment.
10.Create Massive Economic Results. For your customers and 
partners. That will take care of you.

I am going to apply all of these ideas in one way or another. 
Most immediately, to a project in which a fellow grad student an 
I put a Mexican high school on the 'net. Go out there, and create 
some havoc in your own corner of the web!

Janar Joseph Wasito
janar@OptionInvestor.com



**************
BROKERS CORNER
**************

TIME IS ON YOUR SIDE!!!
YES IT IS!!!

Would you pay to have extra time to accomplish the things that you
want? In the options market we do have the luxury of buying all 
of the time that we want. All we have to do is pay for it. 
Unfortunately the number one factor contributing to unsuccessful 
trades and lost money is the lack of time. Everyone has been in 
the uncomfortable situation of being correct on the direction of 
a particular stock or indexes and not making money with the trade 
because time runs out on an option. Professional traders make 
their living out of selling short-term options that retail 
customers buy because they are CHEAP. Besides the strike price 
the most important decision to make is how much time to purchase. 
Do the best you can to take the time decay factor out of the 
equation. Even if the move you are looking for occurs in a very 
short period you are going to benefit. But most importantly the 
extra time value that you paid for provides cushion and allows 
for the market to fluctuate without forcing you to make a tough 
decision to stay with a position or not. Many people are 
successful trading shorter time horizons. But I like not having 
to be as precise. It requires a lot more work and closer attention 
to hit the short-term home run with the odds against you.
Ideally, I recommend buying an option with two to three months 
of time or more. In addition, because of the accelerated time 
decay in the last thirty days prior to expiration, I suggest 
exiting positions prior to three weeks before expiration. Inside 
that time frame the options will melt away if nothing significant 
happens to the underlying stock or index. Like time through the 
hourglassas the saying goes. If you find yourself running out of 
time; rollout to the next month or two in order to take the 
time-component out of the equation. Try to make your trading as 
stress free as possible by formulating a plan and being 
disciplined. Mathematically you are better off to spend the 
extra premium to get the additional time even if you never use 
it. Buying the more expensive option and risking half of the 
premium will yield better results than buying the cheap option 
and risking the whole thing. If you are correct they will both 
be profitable and that extra time value you purchased allows for 
you to be less exact with your timing. Now if I could only find 
the extra time to

Alan Knuckman and Andrew Aronson
LaSalle St. Securities
(888) 281-9569




*************
READERS WRITE
*************

Dear sirs,
I've been trading the OEX options since September, not very long 
at all but I do like it better than trading stock.  I got into 
trading the OEX after following the skybox...I like it.  Stocks 
were whipping me around left and right and one good trade was 
leveled by one bad trade thus I had to find something better.  
I believe that I was meant to trade only the overall market and 
not individual stocks.  I have been fine tuning my strategy and 
with the help and guidance from the skybox, I am putting it to 
the test.  When I don't break the 'rules', I can profit but of 
course every now and then you get emotional and then everything 
goes bonkers...that's when it's time to take a break...
The best thing about the advisory service is the guidance.  With 
the skybox, I get confirmation on what I'm thinking and doing.  
I like, enjoy and appreciate the short commentaries on the market 
as I am not good at accessing and diagnosing the ailments of the 
market.  The market is such a hypochondriac that I get so confused 
as to what's ailing it day to day or hour by hour...
I have not followed the most recent trades that the OEX made and 
thus have not made a good profit...a real bummer...I broke my own 
rules thus keeping me out of the market...ever done that?  I'm 
learning and the with the help of the skybox, I'm can honestly say 
that I'm learning at a much faster pace.  

I hope you will continue to provide this great service.  I am 
mainly keeping my subscription to OIN because of Jim Brown's 
commentaries and the OEX skybox...
 
 
Thank you for your great service...
 
Liane

************

Dear Jim: 
All my friends and people I know have lost money in the stock 
market this month except me. You were right on when you said 
"Some will give their profits back and then some". 
I am not going to give you 100 percent of the credit but your 
newsletter deserves 80 percent; you deserve 10 percent; and, I 
deserve the remaining 10 percent. Here is why: Your newsletter 
gave us the facts, numbers and the plays. You provided us with 
your overall opinion and the general direction of where we are 
today. And, I on the other hand had the discipline to hold the 
impulse to buy and wait for the entry points (you may even recall 
I wrote to complain about it). I, then bought and sold the OEX 
puts following the Skybox's game plan. The end result is I made 
more money when I should have been losing money just like my 
friends and people I know. What is the difference? The education 
I have received from the OIN newsletter for the past 16 months. 
It has been a hell of a ride (UP) and lots of hard work away from 
my family. Thank you very much. You have helped me become a savy 
mature stock investor. 
Mario Garcia

*************

When I joined OI in May, 1999, I (like others) expected to go to 
a few key spots on the OI site and find Excaliber waiting for me. 
It took some weeks to 'settle in' to the format and content of OIN 
material. It was a period of adjusting my focus on the pertinent 
(for me) OI material as well as adjusting my trading/investing 
style to focus on those strategies I fully understood (leaving the 
wierd-willies to those far brighter or ambitious than I). Today, 
I am much more comforatable with my investment decisions and make 
more educated moves. I do not expect to be totally at ease nor do 
I want to be. It's sort of like the old saying about motorcycles: 
"When it no longer scares you, park or sell it!!" I respect the 
market for its power and fear its ability to humble you quickly 
when you get too arrogant. As a result, your trading rules, when 
followed, serve as a sound, fundamental insurance policy against 
disaster. Keep up the good work and may the wind be at your back!!

Don



*******
Mailbag 
*******

Concerning Covered-calls: 

Dear Sir,

I have a question about writing covered calls. If you write a 
covered call on a stock, (either by selling a leap or a one month 
call) and then the underlying stock spins-off part of its stock 
as a separate company, do the calls you wrote change to reflect 
this in some way as they would do with an ordinary stock split?

Thank you in advance for your reply   GM


Subj:   Spin-offs

Usually, when a stock spins off a subsidiary, shareholders of 
record receive a designated amount of shares of the new company, 
for each share they currently own.  When GM spun off Delphi, GM 
shareholders received something like 0.7 shares of Delphi for 
each share of GM they held.  Therefore, a call that was written 
before the spin-off will reflect the value of the original 
position (GM + Delphi). New options will be produced with a 
different symbol that reflect the post spin-off and will be at a 
vastly different value. Your broker will be able to tell you the 
exact value of your option and what it represents. 

OIN

**************

Concerning Covered-calls:

Dear OIN,

Thank you for your wonderful newsletter.  I have a general question.
I am interested in covered calls. Your last newsletter on Sunday
addressed covered write strategies.  Is it possible you may add a 
covered call strategy where you would look at stock ownership 
first and then write covered calls on that specific stock for 
income. This seams to be a different strategy than your current 
strategy addressed last Sunday. I am new to covered calls.

Sincerely, RV


Subj:   Covered Calls...

Unfortunately, the nature of our newsletter is short-term, aiming 
to take advantage of ever-changing trends. We search through 
hundreds of stocks each weekend and with the timeliness of 
publishing constraints, are unable to do a thorough fundamental 
evaluation of each company. At a time of astronomical 
evaluations, when even the pros are having trouble determining 
fair value, a total return concept seems highly appropriate. 
Quite simply, we favor our current approach for its historical 
probability of success and consistent monthly income.

OIN

**************

Concerning Covered-calls:

Note: This question was edited (paraphrased).

Dear OIN,

In the summary of the Covered-calls section;

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

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%


Are the prices listed on the options targets?  That doesn't seem 
to make sense.   I thought these were buy-write strategies for 
the most part.  The stock price is updated, shouldn't the call 
price in the summary move too? All the other option prices are 
updated on the Sunday newsletter. Can you update these prices as 
well?

Thanks,

G


Subj:   CC's summary...

I believe you are referring to the "SUMMARY OF PREVIOUS PICKS." 
At times, it may appear to be a PICK list, which it is not.

In the summary, the bid price isn't current. It is simply a list 
to track the results of our plays. When we offered the position, 
MUEI was at 12.75 and the $10 call was for 3.25 for a cost basis 
of  9.50. The current price and option may meet the original (net 
debit) criteria at certain times but that is not something we 
monitor. If we favor the play as a new pick, it will be listed in 
the "candidates" section with a complete narrative and 
stock/option quote. That doesn't prevent you from playing the 
position after it has been offered in previous newsletters, just 
be aware that we are offering the play based on the technicals 
and current position of the stock/option/strike prices. We can't 
know what's going to occur a day later so use good judgment and 
remember that you are always responsible for any trades you make. 
Do your own research and be knowledgeable of all the facts 
surrounding the issue. If you still like the play after you have 
performed thorough due diligence, and a review of the option 
prices/cost basis, then go for it!

OIN

**************

Concerning Spreads:

Dear OIN,

I constantly own LONG CALLS that are ITM or DITM.

As the earnings date approaches, I would like to keep my long 
position held through the earnings date.   This is because most 
of my good stock picks have strong earnings and subsequent 
splits that rally the stock even further.  I am willing to risk 
the earnings volatility. 

If my current call is ITM or DITM...I would like to take action 
the DAY BEFORE earnings to protect myself a little bit on the 
volatility of the stock in case in turns downward after the 
earnings.  What alternatives should I consider?

Also, when I sell an ATM or ITM put; I am worried about being 
assigned. I want to cover/buyback prior to being assigned.   How 
do I calculate when I should cover/buyback this position just 
prior to being assigned?  Do I put a buy-stop on the option 
itself or do I base decision upon how far down the underlying 
stock goes. 

Thanks,  F


Subj:     Spreading gains and risk 

It sounds like you understand the situation fairly well and there 
are certainly many alternatives. One of the most common floor 
trading practices for the scenario you have described (after you 
have the position, but with an event approaching) is to sell an 
OTM call and a deep OTM put, taking advantage of the high IV on 
both sides of the issue. (Look for overpriced options - 
obviously). The position has a high statistical probability of 
success and only loses potential when the underlying makes a 
significant move in either direction. Even then, it usually 
profits in a much greater range on the downside and only limits 
profits slightly on the upside. 

As far as early assignment

As long as there is time value in the sold options, you have 
very little chance of being exercised. Some people worry too 
much about being called early or assigned. Unfortunately, 
although it rarely happens, it is true that it often occurs at 
the worst time. Statistically the odds are low that it will be 
YOUR options. Just watch the time value in the options; when they 
trade at parity, it may be time to go. If you can't cover the 
assignment or offset it (by selling short etc), then don't take 
the risk. Obviously, it's important to be notified in a timely 
manner! Your broker needs to tell you right away so you have a 
choice as to how to fulfill your obligation.

OIN

**************

Concerning Spreads:

Hi there,

First I wanted to commend you on publishing the best financial 
service I read along with the Wall Street Journal. Anyway, my 
question deals with spreads. You recommend to sell a call and buy 
a call at a lower price. For example in thursday's write-up, Ray 
details a spread whereby one should sell a Siebel $95 call and 
buy a $85 call. I do understand that I am purchasing for $7.75 the 
potential spread to be worth $10 at options expiration date in 
Feb. I also understand that as long as Siebel closes above $95 
that I will owe my broker 100 shares at $95, offset by the 
$85 call. My question is this: will my broker (Schwab) 
automatically do the offsetting upon expiration? Or am I to sell 
this spread on the last day of expiration? Thanks for your help 
in advance.

GW

Subj:     Spreads and auto-exercise.

Some personal brokers will auto-exercise ITM calls at expiration 
but don't count on it. The guidelines are generally $0.25 ITM for 
institutional positions and $0.75 ITM for retail positions.

It's your responsibility to manage your trades and your positions 
and in most cases with spreads, it's far cheaper to buy/sell to 
close the spread at expiration; rather than exercise and/or 
accept assignment.

OIN

**************

Concerning Spreads:

Dear OIN,

I am interested in your service, and have looked at some of your 
recommendations on spreads.  I trade with Ameritrade, and found 
that a major portion of your ROI calculations is gobbled up by 
trade commissions.  For example, at Ameritrade, a debit spread, 
if the options were both exercised, would cost $96 in 
commissions.  In one of your recommendations for a debit spread 
your ROI is 29%.  Since they were both in the money and would 
presumably be exercised, the ROI would only be 16.6% 
(depending on where you put the commissions in the calculations). 

I was wondering if you have any suggest or recommend any 
brokerage houses which are less expensive for options trading.

Sincerely,

CR


Subj:     Spreads and commissions

First of all, it sounds like you are considering one-contract 
trades, which simply won't work with all but the most expensive 
issues. The majority of our spread positions (and those of most 
options traders), are 10 and 20 contract plays; occasionally, but 
almost never less than 5 contracts.

The broker I use is Preferred Trade and I believe the commissions 
are in the same range as Ameritrade. For example, a 10 contract 
option trade of a $5.00 position is about $30. But when you trade 
10 contracts in a debit spread for a $1 return on $9 
(for example), the commissions have very little affect on the 
outcome. In this case, if you opted to exercise and be 
assigned, the commissions would be about 10% of your profit or 
$100; leaving you with $900 on $9,000 invested. A reasonable 
return for sure

OIN



LAST WEEKS CHANGE FOR THIS WEEKS PICKS:
***************************************

Daily Results

Index      Last   Week
Dow     10963.80 224.93
Nasdaq   4244.14 357.07
$OEX      775.51  37.47
$SPX     1424.37  64.21
$RUT      525.52  20.90
$TRAN    2608.96  27.21
$VIX       22.93  -6.16

Calls             Week

PMCS      247.19  57.13  A fantastic week for PMCS split play
TQNT      205.34  44.84  Looks like one of new years strongest
AMCC      185.81  36.69  New, AMCC is a stock split candidate
NTAP      127.94  28.75  Last week turned out to be even better
BRCM      311.00  27.00  BRCM offers chance to get on board
MUSE      187.13  24.25  MUSE proves its better late then never
SNDK      142.00  24.06  Sandisk is seeing incredible growth
EBAY      168.06  20.50  EBAY is an emerging momentum play
BCE       119.00  20.38  A play about unlocking the value
MFNX       78.31  13.16  MetroMedia delivers big daily gains
CMGI      118.56  13.06  Lots of intraday entry point potential
PSIX       92.63  12.00  PSINet is not wasting any of its time
LLTC      101.44  10.69  A core institutional holding for years
BGEN       99.13   6.88  Dropped, lacks the momentum we need
BEAS       89.25   6.56  We are rolling out the red carpet!
ADIC       58.38   6.44  New, earnings announcement Feb 16th
VECO       61.38   5.38  VECO is a strong beneficiary of trend
ICIX       49.25   4.25  Slow and steady picks up the pace
COVD       76.56   3.38  COVD kicks into gear after rocky start
VOD        57.81   3.19  Dropped, investors jump ship on VOD
LU         57.00   1.69  A great play for conservative trader
FRX        66.00  -3.25  Dropped, weak relative strength
SILK      138.50 -23.50  Dropped, a silk purse from sows ear?

Puts

VERT      226.00 -40.00  New, looks like VERT wants to fill gap
GBIX       40.00  -5.84  Too much, too fast hurts GBIX shares
PG         94.75  -5.56  New, spending causes PG to lose ground
SCAI       29.00  -5.38  New, investors frantically selling
MMM        89.06  -3.19  New, things not looking good for MMM
UAL        55.50  -2.38  Skyrocketing fuel costs put on squeeze
PGR        60.25  -1.88  Bad earnings help to drive PGR down
IPG        50.06   3.06  Dropped, approaching train slows down
BBY        56.88   8.13  Dropped, the operative word is Buy!



STOCKS ADDED TO THE PICK LIST
*****************************

Calls

ADIC - Advanced Digital Information Corp.
AMCC - Applied Micro Circuits Corp.
BEAS - BEA Systems

Puts

SCAI - Sanchez Computer Associates Inc.
VERT - VerticalNet Inc.
MMM  - Minnesota Mining and Manufacturing
PG   - Proctor & Gamble Co.



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**************************************************************



*****************************
SEE DISCLAIMER IN SECTION ONE

The Option Investor Newsletter          2-6-2000    
Sunday                        3 of 5


***************************
PICKS WE DROPPED THIS WEEK
***************************

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.


CALLS

SILK $138.50 (-23.50) How does that saying go about making a
silk purse out of a sows ear?  We've been waiting all week for
SILK to turn around and make a run towards higher ground.
Recall that the sticking point throughout this play has been
very light volume.  We kept the play this week because the
decline also took place on light volume.  After 5 down days,
SILK finally bounced at the 50-dma and moved up on Friday.
Unfortunately, as soon as SILK reached the 30-dma, sellers
reappeared and pushed the price down to close near the low of
the day.  Given the strength in the NASDAQ and the anemic
volume in SILK, we must conclude that investors have lost
interest.  With all the other opportunities available, we
choose to let SILK roll around in the mud while we put our
money to use elsewhere.

VOD $57.81 (+3.19) In typical "buy the rumor, sell the news"
fashion, investors bid the price of VOD up this week in
anticipation of the Mannesmann merger, only to jump ship as
soon as news of the agreement between the two companies became
public.  VOD gave us a nice quick run, moving as high as $63.63
on Wednesday.  Now that all the news is out, it appears that
nervousness about the details of the $190 billion merger
agreement will require a consolidation near current levels.
Until investors sort out their feelings about the merger, we
will move on to greener pastures.

FRX $66.00 (-3.25) There is nothing wrong with Forest Labs.  We 
just feel that with so many other good plays out there that it 
is time to drop this call play.  The relative strength of FRX 
has dropped all week as money has poured into other stocks.  
We had remarked previously that FRX was forming a potentially 
bullish right-side-triangle formation.  It appears that the 
formation is now a bit tenuous as the stock is barely staying 
above its trend line.  On a risk/reward basis it is time to 
look elsewhere for some potential profits.  If the stock can 
finally emerge from the doldrums and make a new high we may 
revisit this drug stock.

BGEN $99.13 (+6.88) Its first full week in the S&P 500 was 
volatile to say the least.  Seems the old buy the rumor-sell
the news frame of mind is alive and well.  Actually BGEN did
manage to gain +6.88 this week, but it was Friday's trade that
it discouraging.  The Biotech sector gained over 5.0% Friday,
while BGEN gave back over 3.0% of Thursday gains.  BGEN could
see more downside pressure.  Although BGEN has given us several
opportunities, we haven't really seen the upward momentum we
were looking for when adding BGEN to our call list.  BGEN will
most likely find itself on our list of favorites in the future,
but for now, it's time to move on.


PUTS

BBY $56.88 (+8.13) The operative word here is Buy!  The battle
over the $52 resistance level turned into a rout on Friday.  We
got the bounce we were waiting for at $52; unfortunately it was
in the wrong direction.  Gapping up through strong resistance
was not a good initial sign for our put play.  Buyers showed up
early and came back often, pushing the price through both the
30-dma and 50-dma, for a closing gain of nearly $5.  Encouraged
by reports of strong consumer electronics sales, the bulls
have made a strong case for a near-term bottom in BBY.   

IPG $50.06 (+3.06) It appeared as we lay tied to the tracks over 
the past few days that the approaching train was slowing.  
Especially after Thursday's promising performance that hinted 
IPG would begin to trend back done.  Plain and simple we got 
faked out.  Granted there wasn't much of an upward move on 
Friday and IPG still couldn't crack overhead resistance at $51, 
but let's not ignore the signs.  The stock closed above both the 
5-dma ($48.31) and 10-dma ($48.94) in active trading.  There are 
better plays to be made.  We're dropping IPG from our put list 
this weekend.



STOCK SPLIT CANDIDATES 
***********************

Current Split Candidates
 
NTAP - Network Apliances
EBAY - Ebay
MFNX - MetroMedia
 
 
Split candidates that aren't current plays
 
CSCO - Cisco Systems
CMVT - Comverse Technology
IMNX - Immunex
EMC  - EMC Corp.
 
Recent announcements we predicted
 
No changes from last week



STOCKS WITH UPCOMING SPLITS 
****************************

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

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

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



********************
THE PLAYS OF THE DAY 
********************

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


Call plays of the day:
**********************

EBAY - eBay Inc $168.06 (+20.50)

See details in sector list

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

****

MFNX - MetroMedia Fiber Network $78.31 (+13.16)(P3W +17.11)

See details in sector list

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



Put play of the day:
********************

MMM - Minnesota Mining and Manufacturing $89.06 (-3.19)

See details in put list

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



*************
DEFINITIONS
*************

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
weeks

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.

RISKS of SELLING PUTS:
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.



***********
CALLS PLAYS
***********
Hardware
********

SNDK - Sandisk Corp. $142.00 (+24.06)

What's in a name?  SNDK provides computer storage sans disk.
The company is a leading provider of flash memory storage
devices - integrated circuits that retain data when power is
off.  The company is involved in all aspects of flash memory
process development, chip design, controller development, and
system-level integration.  SNDK has customized its products 
to address the needs of many emerging applications in the
consumer electronics and industrial/communications markets,
including digital cameras, smart phones, personal digital
assistants (PDA), and MP3 portable music players.

SNDK is seeing incredible growth, announcing on Wednesday that
the company shipped over 3 million CompactFlash memory cards 
in 1999.  This represents more than a 140% increase over 1998 
and helps to explain the increase in the stock price over the 
past month.  As if that weren't enough, SNDK announced stellar
earnings on January 26th (8 cents above estimates), and then
announced a 2:1 stock split, payable on February 22nd.  On
Friday, SNDK finally broke through the $137 resistance level on
a surge of buying volume and closed at $142.  This resistance
should now become support, backed up by $129.  SNDK is now in
blue-sky territory, with the only resistance being Friday's high
of $149.50.  Entries can be considered on a pullback near $140
or on a breakout to new highs.  The move up on Friday came on
very strong volume (nearly twice the ADV) and we expect buyers
will continue to flock to SNDK as the split date approaches.

Sandisk continues to improve its market position, announcing
Thursday that it will supply CompactFlash memory cards for the
new Hewlett Packard PhotoSmart C618 and C912 digital cameras.
Nelson Chan, senior VP for marketing at SNDK said, "HP's
decision to use SanDisk CompactFlash memory cards in its most
advanced digital cameras demonstrates the capability of the
SanDisk CF card to support not only high-resolution image
storage, but also next generation features such as continuous
shooting and audio recording".

***February contracts expire in two weeks***

BUY CALL FEB-135 SWQ-BG OI= 55 at $21.25 SL=16.50
BUY CALL FEB-140*SWQ-BH OI=104 at $17.88 SL=14.00
BUY CALL MAR-135 SWQ-CG OI= 30 at $31.63 SL=24.50
BUY CALL MAR-140 SWQ-CH OI= 17 at $29.25 SL=22.75 low OI

SELL PUT FEB-125 SWQ-NE OI= 44 at $ 8.00 SL=10.25
(See risks of selling puts in play legend)

Picked on Feb 3rd at  $135.06     P/E = 158
Change since picked     +6.94     52-week high=$149.50
Analysts Ratings    1-4-0-0-0     52-week low =$ 17.00
Last earnings 01/00 est= 0.22     actual= 0.30
Next earnings 04-26 est= 0.29     versus= 0.15
Average Daily Volume =  925 K
/charts/charts.asp?symbol=SNDK 



*************
SEMICONDUCTOR
*************

AMCC - Applied Micro Circuits Corp. $185.81 (+36.69)

Applied Micro Circuits designs, develops, manufactures and 
markets high-performance, high bandwidth silicon connectivity 
for optical networks.  The company uses high-frequency, mixed-
signal design expertise, higher layer digital content and 
multiple silicon process technologies to offer integrated 
circuit products for the data/telecom markets.  With the 
company's acquisition of Cimaron Communications in March 1999, 
AMCC is positioned to provide industry-leading, fiber-to-switch 
silicon solutions, including framers, mappers, PMD and physical 
layer devices.  Among AMCC's customers are Alcatel, Cisco 
Systems, Juniper Networks, Lucent technologies, Nokia, Nortel 
Networks, Siemens and 3Com.

Let's face it, it's just plain sexy to be in the optical 
networking and bandwidth expansion business.  Witness NT, JDSU, 
SDLI, QCOM, NOK, GLW, BRCM, etc.  To that end, we bring you AMCC 
as a strong silicon arms merchant in the same war.  AMCC has been 
tearing up the chart since it announced a 17% earnings surprise 
on January 10.  While some might consider revenue exposure from 
a single client (40% +/- of AMCC's revenue comes from NT), we 
consider it an asset.  AMCC has hitched their wagon to NT, while 
LU got pounded.  Isn't that good?  Look who jumped ahead in the 
optical networking war - NT.  Now that analysts are buzzing that 
NT's revenue growth rate should be more like 25% instead of 21%, 
logically AMCC should be along for the ride.  Since finding 
strong support at $138 on Monday, historical support has been 
moving up roughly $10 per day, and actually found support at $182 
on Friday.  Other support levels are $175, $173, $170, and $165.  
With such a huge run in the last five days without time off, AMCC 
is due for a pullback.  In fact, not to scare you, but from a 
purely technical standpoint, AMCC broke out of its 2-month 
trading channel to set a new high on Friday.  Thus, if it is to 
remain true to its channel, a retracement to $155 over the next 
few days would not be unexpected, especially if the NASDAQ rolls 
over back into its trading range.  The point is to be careful 
with your entry.  Don't rush to buy this thing Monday morning 
unless you see a positive market, advancers beating decliners 
and AMCC moving up on strong volume after amateur hour.

Want the gravy now?  AMCC is also a split candidate.  It's last 
one (2:1) announced on August 3 when the stock traded at $95 was 
effective on September 10 at $105.  The split price was then 
$57.50 from where it has since risen.  AMCC has 180 mln 
authorized shares, but only 54 mln issued.  That leaves enough 
for a 3:1 (one can only hope).  Anyway, AMCC is nearly double 
the price of its last announcement and the long-term trend is 
right in the sweet spot.  No shareholder meeting is necessary.  
The announcement could come any time there is a BOD meeting.  
We'll let you know if and when we find a firm date.

***February contracts expire in two weeks***

BUY CALL FEB-160 AEX-BL OI=467 at $30.75 SL=24.00
BUY CALL FEB-170 AEX-BN OI=290 at $23.50 SL=18.25
BUY CALL*MAR-170 AEX-CN OI=209 at $30.50 SL=24.00
BUY CALL MAR-180 AEX-CP OI= 27 at $25.25 SL=19.75
BUY CALL MAR-190 AEX-CR OI= 98 at $20.75 SL=16.25

Picked on Feb 6th at    $185.81     P/E = 332
Change since picked       +0.00     52-week high=$188.63
Analysts Ratings      9-3-0-0-0     52-week low =$ 16.88
Last earning 01/00    est= 0.18     actual= 0.21 surprise=12%
Next earning 04-10    est= 0.22     versus= 0.10
Average Daily Volume = 1.15 mln
/charts/charts.asp?symbol=AMCC

****

PMCS - PMC-Sierra Inc. $247.19 (+57.13)(-1.13)

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.  

Up $57.13 for the week.  That pretty much sums it up.  We were 
trying to think of a way to open today's write up on PMCS that 
would convey our delight with the stellar performance that 
PMCS has given us since we first initiated this play on the 
25th of January.  We finally decided that sometimes, the 
simple facts are all you need.  We are entering the final leg 
of this split run since the stock is set to split 2:1 next 
Friday the 11th.  As always, to avoid a post split depression, 
it is important to close out your positions before the actual 
split.  Resistance is really not a factor at this point since 
PMCS has been trading to new highs on a daily basis.  PMCS 
closed Friday's session just over $2 under the high for the 
day, so PMCS could be set to continue right where it left off 
on Monday.  As we did in Thursday's write up, we must again 
note the possibility of some profit-taking in the near future.  
Since PMCS has made such a big gain in such a short period 
of time, there are bound to be some investors locking in 
their profits before long.  This is why it is so important 
to adjust your stops as the stock moves up to protect your own 
profits.  Another reason to keep those stops tight is that, 
because PMCS has traded up so quickly, it has some room to fall 
back before encountering any notable support levels.  PMCS did 
make one small "bounce" at $240 on Friday, though this level 
may not prove to provide very solid since PMCS has not really 
had a chance to test it.  The closest, tested, solid looking 
support level for PMCS looks to be at the 5-dma of $216.50, 
obviously some distance back.  This level could be backed by  
support at $205 and $200.  Exercise caution going forward, 
particularly as we approach the split date.  Otherwise, we 
hope you are enjoying the ride.

You may be thinking that investors are showing quite a bit of 
enthusiasm for a split run.  There are indeed other factors 
playing into PMCS's recent performance, namely the performance 
of the Semiconductor sector as a whole.  The Philadelphia 
Semiconductor Index (SOX) traded up to new highs last week, 
and though it was down slightly on Friday, it still had a 
fairly strong session.  A report issued by Banc of America 
Securities on Friday documented comments made by two of their 
senior semiconductor analysts at the Securities Technology 
Conference held last week.  One of the analysts, Alex Guana, 
was quoted as saying, "Given the pure communications focus of 
the broadband semiconductor companies on our coverage universe,
and the vast work remaining to be done in enriching and 
extending the power of the Internet, we believe magnificent 
1999 results can readily be surpassed in 2000,"  Guana went on 
to specifically name PMCS as being one of the four leaders in 
the semiconductor arena.  Banc of America Securities has PMCS 
rated at a Strong Buy.

***February contracts expire in two weeks***

BUY CALL FEB-220 SDL-BD OI=834 at $34.50 SL=27.00
BUY CALL FEB-230*SDL-BF OI=148 at $27.88 SL=21.75
BUY CALL FEB-240 SDL-BH OI=136 at $22.00 SL=17.00
BUY CALL MAR-230 SDL-CF OI= 86 at $38.38 SL=30.00
BUY CALL MAR-240 SDL-CH OI= 35 at $33.25 SL=26.00

SELL PUT FEB-220 SDL-ND OI= 66 at $ 6.63 SL= 8.50
(See risks of selling puts in play legend)

Picked on Jan 25th at   $196.88     P/E = 160
Change since picked      +50.31     52-week high=$249.63
Analysts Ratings     15-6-2-0-0     52-week low =$ 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 = 1.63 mln
/charts/charts.asp?symbol=PMCS

****

TQNT - TriQuint Semiconductor $205.34 (+44.84)(+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.

TQNT continues its increasingly comfortable role of being one of 
the strongest stocks of the new year.  Two weeks ago, TQNT 
rallied in the face of some pretty strong selling.  Last week, 
TQNT exploded as investors adopted a very sunny disposition for 
tech stocks in general.  One of the reasons for this continued 
accumulation of TQNT's shares seems to be based upon the fact 
that TriQuint is a pure play for both the Semiconductor and 
Telecommunications sectors.  With both sectors presenting 
themselves as leading groups for investment dollars it appears 
that TQNT is attracting a lot of money from any investor 
interested in either or both groups.  Last week we were waiting 
for the shareholder approval to authorize more shares to enable 
the stock to split 2-for-1 February 22nd.  Although it was a 
foregone conclusion that the authorization would happen, it 
appears that investors were cheered by the fact that the 
authorization was for a whopping 200 million shares vs. the 
current 25 million shares thus giving the company plenty of room 
for more splits.  Doink!  That is the sound we heard as TQNT 
banged its head right into the always psychologically important 
resistance point of $200 on Friday's opening.  Sometimes you 
can't keep a good momentum stock down as TQNT pulled back 
gathered its strength and soared right past $200 to cap off a 
fantastic week.  The close above $200 is very encouraging for 
the possibility that the run is not over.  Resistance is the new 
high of $215.06.  The trading pattern we have remarked upon over 
the past few weeks is still intact.  Day traders have had the 
opportunity to sell the gap ups, get an intraday pullback, 
followed by late rallies that make new intraday highs.  $200 
could prove to be an important pivot point for traders next 
week.  Be cautious about support.  After such a nice run, real 
support can not be found until $160, the old consolidation 
range.

One possible contributory factor to TQNT's runup last week was 
their presentation on Thursday at The Banc of America Securities 
Technology 2000 Conference.  We finally have some more 
"affordable" options available for TQNT, as the Exchanges have 
finally caught up to the stock's meteoric rise.

***February contracts expire in two weeks***
***All contracts have low OI***

BUY CALL FEB-190 TNN-BR OI= 5 at $21.50 SL=16.75
BUY CALL FEB-195 TNN-BS OI= 2 at $18.25 SL=14.25
BUY CALL FEB-200 TNN-BT OI= 1 at $15.13 SL=11.75
BUY CALL MAR-195 TNN-CS OI= 2 at $26.38 SL=20.50
BUY CALL MAR-200*TNN-CT OI=10 at $24.25 SL=18.88 

Picked on Jan 13th at  $130.00    P/E = 176
Change since picked     +75.34    52-week high=$215.06
Analysts Ratings     5-4-4-0-0    52-week low =$ 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 =   425 K
/charts/charts.asp?symbol=TQNT

****

VECO - Veeco Instruments Inc. $61.38 (+5.38)(+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.

Veeco is a strong beneficiary of the trend of major technology 
manufacturers sorely needing to upgrade their equipment in order 
to stay competitive.  Every new innovation requires more 
sophisticated tools and Veeco supplies them.  The race to 
upgrade is evident in the fact that Veeco has already received 
$7 million in new product orders this year.  Veeco also seems to 
have a history of rallying this time of year and you couple that 
with the fact that the market seems to be broadening out to 
include some more of the midcap stocks and we may have set the 
stage for some more price increases for the stock.  Interest in 
the stock seemed to peak, topping out at resistance of $64.50, 
right after Veeco gave a presentation at the Banc of America 
Securities Technology 2000 Conference on Tuesday.  The rest of 
the week saw the stock make a small, but steady move higher to 
re-test that high.  Earnings are due out February 10th after 
the close.  Perhaps we can get an earnings based rally this 
week.  It is very important to look at the very long-term chart 
when studying Veeco.  The stock has lower highs going back four 
years.  It is entirely possible that the stock may be peaking 
soon, so do not be afraid to take profits if the stock starts to 
weaken.  There is overhead resistance caused by shareholders who 
may have been "stuck" in the stock for a long time and just can 
not wait to sell.  On the plus side, a break above $65 could 
result in a nice run to $74 or higher.

A week ago it was announced that 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 $1 
million.  It appears that the stock has been able to shrug off 
this negative news.  It should also be noted that volume has 
picked up a little in the past week.

***February contracts expire in two weeks***

BUY CALL FEB-55*QVC-BK OI=149 at $8.13 SL=6.25
BUY CALL FEB-60 QVC-BL OI=156 at $4.50 SL=2.75
BUY CALL MAR-55 QVC-CK OI= 41 at $9.75 SL=7.25
BUY CALL MAR-60 QVC-CL OI= 39 at $6.25 SL=4.25
BUY CALL MAR-65 QVC-CM OI=111 at $4.88 SL=2.75

Picked on Jan 25th at   $56.00    P/E = 45
Change since picked      +5.38    52-week high=$64.50
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 =   350 K
/charts/charts.asp?symbol=VECO

****

LLTC - Linear Technology $101.44 (+10.69)

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.

Linear Tech could be the most quiet major technology company in 
the NASDAQ 100.  Their products are critical for a vast array of 
industries and their electrical components can be used in a mind 
numbing number of different applications.  This is why LLTC has 
been a core institutional holding for many years.  Sideline cash 
began piling into some of the old technology stalwarts last 
week, INTC and CSCO to name two,  and it appears that LLTC has 
been getting a good chunk of that cash as well.  Add to that, 
the announcement of a 2-for-1 split payable March 27th (a bit 
far off for a split run but a potentially positive influence) 
and LLTC seems poised to continue its stair-step climb into new 
high ground.  Semiconductor stocks were very hot in January and 
LLTC was definitely one of them.  The stock rallied from day one 
of this year, climbing from $73 to just under $100 before pulling 
back and consolidating.  In the past week LLTC has completed a 
very bullish cup-and-handle pattern by closing above $100.  We 
have observed some stocks in the past that have staged nice 
moves after completing this pattern.  A possible move to $120 or 
higher is certainly possible.  Although LLTC has made new highs 
in each of the past three days, it has the annoying habit of 
pulling back and actually going negative intraday.  If this 
continues you may be able to utilize this pattern for more 
advantageous entry prices.  Major support can be found at the 
breakout point of $95.  As long as the stock keeps making new 
highs, we will be able to hold on to this profitable position.
You may want to protect yourself if the stock drops below $100.

A strong earnings season was one reason that Semiconductor 
stocks gathered a big chunk of investor's money last month.  
LLTC had one of the more stellar reports with sales up over 
35% and earnings up 41%.  The company gave analysts guidance 
that the current quarter will also be very strong.

***February contracts expire in two weeks***

BUY CALL FEB- 95 LLQ-BS OI=323 at $ 8.75 SL=6.50
BUY CALL FEB-100 LLQ-BT OI=768 at $ 5.25 SL=3.50
BUY CALL FEB-105 LLQ-BA OI= 20 at $ 3.13 SL=1.50 low OI
BUY CALL MAR- 95 LLQ-CS OI=145 at $12.13 SL=9.50
BUY CALL MAR-100*LLQ-CT OI=268 at $ 9.50 SL=7.00

SELL PUT FEB- 95 LLQ-NS OI=367 at $ 1.81 SL=3.50
(See risks of selling puts in play legend)

Picked on Feb 1st at    $97.69    P/E = 72
Change since picked      +3.75    52-week high=$103.50
Analysts Ratings    7-10-4-0-0    52-week low =$ 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



******** 
Internet
********

COVD - Covad Communications $76.56 (+3.38) 

Covad communications is in the high speed Internet business.
The motto at their Web site says "The Internet, the way it 
should be".  COVD has more than 350 qualified ISP partners 
across the U.S. to offer Covad DSL.  They concentrate primarily 
in the metro areas, operating more than 16,700 lines.  They 
have formed strategic alliances with AT&T, Nextlink and Quest.
Operating over existing copper phone lines allows the company 
to offer lower rates and 24 hour connectivity.  Their primary 
competition comes from NorthPoint and Rhythms Netconnections.  

After a rocky start, COVD kicked into gear Friday, as buyers
bid shares of the communications company $6.19 higher.  Morgan
Stanley Dean Witter may have helped initiate COVD's move after
reiterating an Outperform rating, and raising their target 
price to $82.  Actually several brokerage companies have 
reiterated or raised their rating on COVD recently.  Since 
reporting earnings in late January, COVD had suffered from a 
sell the news mentality seen in the markets this earnings 
season.  COVD beat the street handily by 17%, and experienced 
about 15% decline in the price of their stock.  Investors woke
up to the fact COVD is a great buy at these levels, and one 
that could be included for those looking to add a good 
Telecom company to their portfolio.  Analysts at DLJ recently 
adjusted their price target from $75 to $90.  COVD's claim to
fame, is their focus on developing DSL services to Metro areas,
where 24 hour connectivity has not been available.  When it
comes to the Internet, speed and reliability is second to none.
During the last quarter COVD installed more DSL lines than 
its two primary competitors combined.  Thursday's late day 
bounce continued Friday and provided us with a good entry
point for our play.  The volume Friday was about average and
we'd like to see it pick up, along with a continued move higher.
If we see a pullback early in the week, support is seen at $75,
$74 and $72.

Wednesday, President Clinton proposed a $2.4 billion program
of tax incentives for companies aimed at increasing America's
access to computers, the Internet and technology.  He is 
seeking the deployment of high-speed Internet services to rural
and poor urban communities.  If some version of the program is
approved it could prove to be a gold mine for COVD, Dell and
others in the industry.

***February contracts expire in two weeks***

BUY CALL FEB-65 COU-BM OI=402 at $13.00 SL=10.25
BUY CALL FEB-70 COU-BN OI=548 at $ 8.88 SL= 6.50
BUY CALL FEB-75 COU-BO OI=289 at $ 5.75 SL= 4.00
BUY CALL MAR-70 COU-CN OI=453 at $12.63 SL=10.00
BUY CALL MAR-75 COU-CO OI=110 at $ 9.63 SL= 7.50

SELL PUT FEB-70 COU-NN OI= 172 at $1.81 SL= 3.25
(See risks of selling puts in play legend)

Picked on Feb 01st at    $74.00    PE = N/A
Change since picked       +2.56    52-week high=$81.00
Analysts Ratings      6-6-1-0-0    52-week low =$24.83
Last earnings 01/00   est=-0.97    actual=-0.80 
Next earnings 04-25   est=-1.05    versus=-0.56
Average daily volume = 2.61 mln
/charts/charts.asp?symbol=COVD

****

CMGI - CMG Information Services Inc $118.56 (+13.06)(-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.  

It was evident buyers were lined up to buy this stock early 
Monday morning.  After the second bounce off $100 the momentum 
took hold and our play was right on track.  Once it was clear 
that the Fed wasn't going to do anything drastic, the share 
price reached an impressive $126.75 by Friday.  For our new 
readers, CMGI was added as a call play last Sunday on the 
premise that after it retraced 50% of its share price since 
hitting an all-time high of $163.50 (split-adjusted) on January 
3rd, buyers would start nibbling on this Internet powerhouse. 
Essentially our forecast was that this low share price would 
entice investors and thus, create upward momentum.  And yes, 
we'll take credit where credit is due, the timing was on the 
money so to speak.  If you missed the initial buying opportunity 
on Monday, there were plenty of intraday entry points on the 
climb during the week.  However Friday's finale may be the true 
blessing in disguise.  The downdraft left us with a potential 
entry going into next week.  After the stock shattered the near-
term resistance at $125 and traded consistently at this level, 
profit-takers came rushing out of the wings during the last 
hours of trading.  CMGI slipped to the proximity of the 5-dma 
($118.11) on increasing volume and this has left us wondering.  
Will CMGI hold at this at this support level on Monday?  If it 
does not, the next step is at the $10-dma ($114.40) and your 
radar should be making a clatter.  Otherwise simply wait for 
a confirming bounce (after amateur hour of course!) before 
beginning any new positions.  Remember too, it's important to 
pay attention to market sentiment.

On Tuesday Prudential reiterated a Strong Buy rating and upped 
their 12-month price target to $216 from $200.  In other news, 
CMGI announced on Friday that it will take a 4.9% stake in 
Divine InterVentures, an Internet company focused on the B2B 
market.  This move will expand CMGI's reach into the Midwest 
markets.

***February contracts expire in two weeks***

BUY CALL FEB-115*GCD-BC OI=1904 at $ 8.63 SL= 6.50
BUY CALL FEB-120 GCD-BD OI=3129 at $ 6.25 SL= 4.50
BUY CALL FEB-125 GCD-BE OI=2821 at $ 4.38 SL= 2.75
BUY CALL MAR-120 GCD-CD OI=2043 at $13.13 SL=10.75
BUY CALL MAR-125 GCD-CE OI=2016 at $10.75 SL= 8.75

Picked on Jan 30th at   $105.50    PE = 91
Change since picked      +13.06    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 = 6.47 mln
/charts/charts.asp?symbol=CMGI

****

EBAY - eBay Inc $168.06 (+20.50)

eBay is an Internet auction service in which users buy and sell 
personal property.  The  sellers pay a fee to have heir items 
placed on the company's Web site and the buyers get to browse 
and make bids on the merchandise.  If an item sells, eBay 
charges the seller a percentage of the closing price.  The 
company's rivals in the auctioning arena are Yahoo! and 
Amazon.com.

On Thursday evening we added EBAY to our call list as an 
emerging momentum play.  We took into consideration that the 
Fed's expected rate hike of 25 basis points was now a memory 
clearing the runway for interest-rate sensitive stocks to take 
off.  Plus Amazon.com's (AMZN) delivery of solid earnings' also 
helped traders cozy back up the these high-flying Internets.  
Previously on January 26th, we watched eBay also deliver solid 
4Q earnings.  The company came it at $0.04 p/s, which beat 
estimates by a significant $0.02!  The share price rose a sharp 
11.7%, or $16.06, but it slammed into strong resistance at 
$158.75 despite the supplementary slew of positive analyst 
comments.  For instance, Robertson Stephens, Lehman Brothers, 
and DLJ all reiterated a Buy recommendation with the latter firm 
"calling EBAY a core Internet holding and saying it should 
outperform much of the Internet sector for the year".  Then just 
two days later, Paine Webber also started coverage with a Buy 
rating citing eBay is "fundamentally changing the way 
transactions take place tend to be the best investment 
opportunities as these business models are based more on 
technology and software platforms, rather than fixed assets".  
The firm also issued a $225 price target.  Nonetheless, EBAY 
channeled primarily between $145 and $155.  Then on Thursday, 
EBAY made a strong move through the resistance at $158.75 on 
increasing volume.  To us this signaled the potential of a very 
profitable run.  In addition, EBAY's close above the 5-dma 
(now at $157.05) and 10-dma ($151.46) as well as its finish 
in the proximity of the intraday high at $166.38 further 
characterized a bullish sentiment.  W.R. Hambrecht's new 
coverage of a Market Outperform with a $225 price target on 
Thursday just put the icing on the cake.  We obviously like to 
stack the odds in our favor.  Friday's trading was active.  
Unfortunately if you missed the early pullback back to old 
resistance at $158 and $160, you entry points were higher.  
Your best bet turned out to be intraday dips near $165.  If the 
upward momentum continues to build then target shooting will be 
the name of the game.  Near-term support is at $165, then $160 
with overhead resistance at $170 and $180.  The 52-week record 
is much higher at $234, but EBAY becomes a split-candidate 
before that at the $200 mark.  Proceed with caution and know 
your risk tolerance for volatility.  Use stops carefully.

eBay came under scrutiny this week for allowing Ku Klux Klan-
related products on its site.  This follows earlier criticism of 
the sale of Nazi items that can be obtained on the auction site. 
As a result of the negative media surrounding this hot issue, 
the company announced on Thursday evening that such items will 
now have to meet certain criteria to be listed for sale on the 
site.  On Friday, it hit the press that eBay is under preliminary 
investigation by US anti-trust enforcers.  The company is being 
questioned for allegedly interfering with online software that 
searches multiple auction sites.  This is already a non-event.

***February contracts expire in two weeks***

BUY CALL FEB-160 QXB-BL OI=1956 at $13.00 SL=10.50
BUY CALL FEB-165 QXB-BU OI= 961 at $10.00 SL= 7.50
BUY CALL FEB-170*QXB-BV OI=1839 at $ 7.50 SL= 5.75
BUY CALL FEB-175 QXB-BX OI=2202 at $ 5.50 SL= 3.75
BUY CALL MAR-170 QXB-CV OI= 251 at $16.50 SL=12.75
BUY CALL MAR-175 QXB-CX OI=  54 at $14.25 SL=11.25

Picked on Feb 3rd at    $165.00    P/E = 2952
Change since picked       +3.06    52-week high=$234.00
Analysts Ratings      9-7-6-0-0    52-week low =$ 64.00
Last earnings 01/00   est= 0.02    actual= 0.04
Next earnings 04-24   est= 0.03    versus= 0.04
Average Daily Volume = 3.28 mln
/charts/charts.asp?symbol=EBAY



******************************************
CALLS - INTERNET CONTINUED IN SECTION FOUR
******************************************



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/charts/charts.asp?symbol=NTAP

****

PSIX - PSINet Inc. $92.63 (+12.00)

PSINet wants to hook you up.  Providing Internet access to
businesses, government agencies, and ISPs in 22 countries,
the company offers dial-up and dedicated Internet access,
Web hosting, remote access to enterprise networks and
e-commerce solutions.  Much of the company's recent growth 
has come through the acquisition of an assortment of ISPs 
in several countries.   

PSIX isn't wasting any time.  Investors began returning on
Tuesday and pushed shares higher for the next 3 days.  After
tacking on over $16 in three days, PSIX took a rest to
consolidate its gains on Friday.  Contributing to the week-end
weakness was news of the company's continued acquisition binge
(see news below).  The primary catalyst for our play is the
combination of earnings, scheduled for the week of the 21st
(the company has not released the actual date), and a 2:1 split,
payable this Friday.  Support is intact at the 10-dma ($89.50)
and should provide a good base to push higher as the split 
date approaches.  A break through the $95 level, supported by
continued buying interest, should give PSIX the strength it
needs to make a run at its 52-week high ($107.19), set 2 weeks
ago.  Another bounce near $89 would be an ideal entry point,
although more conservative investors may want to wait for a
break through of last week's high of $97.75.  As always, volume
will be the key to a strong move upwards.  PSIX can have large
intraday moves, providing ample entry points and underscoring
the need to play with stops.

Continuing on its growth-through-acquisition quest, PSIX agreed
to buy Lebanon's fifth largest ISP, New Com, for an undisclosed
amount.  A key benefit of this purchase is New Com's direct
fiber-optic line to New York, making for easier integration
into PSIX's worldwide network.  As the first major ISP to 
start moving into this part of the world, PSIX will use the
acquisition as a launching pad into the Middle East, India and
Africa.  As further evidence that the company is serious about
growth, PSIX announced last week that it would spend over $380
million to expand in Hong Kong over the next 10 years.  On
Thursday, Robertson Stephens reiterated their Buy rating on
PSIX and issued a price target of $172.

***February contracts expire in two weeks***

BUY CALL FEB- 90*SQP-BR OI=1351 at $ 8.88 SL= 6.75
BUY CALL FEB- 95 SQP-BS OI=2202 at $ 6.38 SL= 4.75
BUY CALL FEB-100 SQP-BT OI=1238 at $ 4.50 SL= 2.75
BUY CALL MAR- 95 SQP-CS OI= 206 at $12.88 SL=10.50
BUY CALL MAR-100 SQP-CT OI=  79 at $10.13 SL= 7.50

Picked on Feb 1st at     $86.75     P/E = N/A
Change since picked       +5.88     52-week high=$107.19
Analysts Ratings     10-3-1-0-0     52-week low =$ 30.38
Last earnings 10/99   est=-1.38     actual=-1.35
Next earnings 02-21   est=-1.75     versus=-1.02
Average Daily Volume = 1.95 mln
/charts/charts.asp?symbol=PSIX


*********
SOFTWARE
*********

BEAS - BEA Systems $89.25 (+6.56)

Founded in 1995 BEA Systems has become widely known as a 
leading provider of middleware for enterprise applications.
This is largely because of the success of BEA Tuxedo and BEA
WebLogic, which together comprise approximately 46 percent
of the transaction server market.  Amazon.com, FedEx and 
Ericsson use BEA TUXEDO, to process millions of transactions
daily.  BEAS entered the market for application servers, Java-
based software used in developing and integrating e-commerce
and other Internet based applications with BEA WebLogic.  BEAS
provides complete solutions to its customers through a full 
range of services including, developing customer components,
consulting, training and support.

We will roll out the red carpet for this one.  BEAS, will enter
our play list with all the fanfare it deserves.  10 out of 12
of the analysts that follow BEAS have rated it a Strong Buy.
The other two have issued a Buy and a Hold rating, but we feel
confident they will soon choose to join the majority.  Last week
analysts at First Boston reiterated their Strong Buy rating
based on discussions with the company's COO.  Analysts feel
BEAS will exceed the $138 million in revenues and $0.07 EPS,
currently projected.  BEAS is scheduled to report earnings
February 22, after the close.  With the momentum seen recently
in BEAS, this could be the beginning of a very profitable
earnings run.  With the exception of a brief decline at the
beginning of the year and a round of profit-taking early
last week, BEAS has seen the momentum continue since its
2-for-1 split December 20th.  BEAS made a new high at $95
on January 24th.  During the profit-taking last Monday BEAS
made a low of $68.88 and didn't even stop to catch its
breath as it made its way back to $90 on Friday.  BEAS appears
to be preparing to move into uncharted territory.  We would
view move through $90 as a chance to buy calls.  If we see
any pullback a followed by a bounce the $88 and $85 levels
would also provide a suitable entry point.

The latest addition to the BEAS family of satisfied customers
came this week as BEAS announced eDaycare.com is using 
BEA WebLogic Server, as the core application server technology
for its 3-month old site.  According to the eDaycare founder,
after polling several Internet firms, they discovered BEA 
WebLogic Server is fast becoming and industry standard for
dotcom companies.  

***February contracts expire in two weeks***

BUY CALL FEB-85 BUC-BQ OI=1035 at $ 9.25 SL= 7.00
BUY CALL FEB-90*BUC-BR OI=2348 at $ 6.75 SL= 5.00
BUY CALL FEB-95 BUC-BS OI=1383 at $ 4.63 SL= 2.75
BUY CALL MAR-85 BUC-CQ OI= 582 at $16.88 SL=13.25
BUY CALL MAR-90 BUC-CR OI=1191 at $14.25 SL=11.25

SELL PUT FEB-80 BUC-NP OI= 400 at $ 2.75 SL= 4.50
(See risks of selling puts in play legend)

Picked on Feb 06th at    $89.25   PE = N/A
Change since picked       +0.00   52-week high=$95.00
Analysts Ratings     10-1-1-0-0   52-week low =$ 3.38
Last earnings 11/99   est= 0.05   actual= 0.06 
Next earnings 02-22   est= 0.07   versus=-0.03
Average daily volume = 2.61 mln
/charts/charts.asp?symbol=BEAS

****

ADIC - Advanced Digital Information Corp $58.38 (+6.44)

ADIC is a leading global provider in the market to manage and 
protect information for computer networks.  The company has 
over 50,000 automated tape libraries installed and a suite of 
software solutions and Storage Area Networking (SAN) products.  
These products are marketed under ADIC and ADIC/GRAU brands of 
OEM partners including Dell, Exabyte and Unisys.  The company's 
own storage management tools include AMASS, FileServ and 
CentraVision which are software products that provide users 
with shared access to network data.

If there is one universal desire in the technological age, it is 
to have as much memory capacity and access to it as possible.  
ADIC is one company that seeks to provide the most cutting edge 
tools to allow companies to fulfill their ever growing capacity 
needs.  Smaller technology firms are starting to participate 
again and ADIC is no exception.  With earnings expected after 
the close on February 16th, we are looking for the possibility 
of a continued run of the company's share price.  ADIC announced 
year end results in early December that showed a 95% increase in 
sales for the year and they beat the Street's estimate by $0.04.  
If those trends continue then it is entirely possible that an 
earnings run could occur as investors are always interested in 
the fastest growing companies.  After establishing a new high in 
mid-January after breaking out of a nice base around $50, ADIC 
has had a very volatile past two weeks which has seen the stock 
reverse course and start to head back up higher.  The selloff 
down below $43 appears to have been an aberration and the stock 
has recovered nicely.  Friday's move beyond $56.38 was an 
encouraging sign that the stock may be back on its way to 
challenge for another new high.  If we get a selloff you may 
want to try and go long around $55 where we find some pretty 
good support.  If ADIC takes out Friday's high print of $60.13 
an attempt for a new high could occur very quickly.

Part of the recent excitement about ADIC occurred after a new 
product was revealed last Tuesday.  The company has added new 
Fibre Channel routers to its suite of Open SAN Backup Solution 
products, making the package the first in the industry to build 
support for direct-to-tape, server-less backup within SAN's.  
Also, ADIC will hold its annual shareholder meeting on the 
16th, the same day as their earnings release.  Look for more 
good news to be announced at that time.  CEO's rarely say 
anything but good news and investors know it so don't expect 
much selling in ADIC ahead of this date. 

***February contracts expire in two weeks*** 

BUY CALL FEB-55 QXG-BK OI=106 at $5.38 SL=3.50
BUY CALL FEB-60*QXG-BL OI=169 at $2.75 SL=1.25
BUY CALL FEB-65 QXG-BM OI= 45 at $1.56 SL=0.75 low OI
BUY CALL MAR-55 QXG-CK OI=187 at $8.25 SL=6.25
BUY CALL MAR-60 QXG-CL OI=118 at $5.88 SL=4.00

SELL PUT FEB-55 QXG-NK OI= 54 at $1.88 SL=3.50
(See risks of selling puts in play legend)

Picked on Feb 6th at    $58.38    P/E = 77
Change since picked      +0.00    52-week high=$66.38
Analysts Ratings     3-3-0-0-0    52-week low =$ 6.63
Last earnings 12/99  est= 0.22    actual= 0.26
Next earnings 02-16  est= 0.23    versus= 0.13
Average Daily Volume =   422 K
/charts/charts.asp?symbol=ADIC

****

MUSE - Micromuse Inc. $187.13 (+24.25)(-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.

This sizzling hot Internet software company sure has one "cool" 
product.  Netcool software is fast becoming a dominating 
standard for helping ISP's manage their networks.  Helping to 
drive excitement in the stock is a pending 2-for-1 stock split 
with a scheduled payable date of February 23rd.  There was also 
a significant technology conference sponsored by Banc of America 
last week.  One of the strongest investment opinions to come 
out of the week of presentations came from B of A's senior 
communications services and software analyst David Raezer.  It 
is his assertion that communications software companies are 
well-positioned and will offer solid investment opportunities 
due to information carriers increasing reliance on software for 
future growth.  MUSE was singled out as one of the best 
companies to benefit from this growth.  This new assertion is 
hardly a surprise as MUSE is coming off of a year where it was 
21st in Bloomberg's list of best price performers among 1999's 
publicly traded stocks.  A common theme among last week's 
biggest stock price winners was technology companies that sell 
new technologies to Internet companies.  This symbiosis was 
recently commented upon by the CEO of Micromuse when he said, 
"The explosive growth of Internet, telecom and cable networks are 
major drivers of our business."  MUSE sure took its sweet time 
to catch up with the explosion in NASDAQ shares last week.  
Better late than never as MUSE had an excellent Friday which saw 
the share price of the stock take out resistance at $184 and 
finish the day up $14.25.  If the market can stay strong, MUSE 
certainly seems poised to test its all-time high of $192.50 next 
week.  A break above that level could get the stock really 
rolling out of its recent sideways action that has established 
good support in the mid $160's.

MUSE acquired two new clients last week that helped to confirm 
the strength and popularity of Netcool Software.  Knology, a 
cable modem Internet service provider and Cox Communications, 
one of the nation's largest broadband communications companies, 
will now both use Netcool to help manage their fast growing 
networks.

***February contracts expire in two weeks***

BUY CALL FEB-175 QVM-BO OI= 45 at $19.25 SL=15.00
BUY CALL FEB-180 QVM-BP OI= 96 at $15.00 SL=11.75
BUY CALL FEB-185*QVM-BQ OI=107 at $12.88 SL=10.25
BUY CALL MAR-175 QVM-CO OI=  1 at $30.63 SL=23.88 low OI
BUY CALL MAR-180 QVM-CP OI=  5 at $28.13 SL=22.00 low OI

Picked on Jan 27th at  $166.69    P/E = 393
Change since picked     +20.44    52-week high=$192.50
Analysts Ratings     5-6-0-0-0    52-week low =$ 28.13
Last earnings 01/00  est= 0.13    actual= 0.13
Next earnings 04-19  est= 0.14    versus= 0.07
Average Daily Volume =   289 K
/charts/charts.asp?symbol=MUSE


*******
Telecom
*******

BRCM - Broadcom Corp. $311.00 (+27.00)(-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.

The bears certainly had their way with BRCM Friday.  Frankly
we view this as chance to get in on the last leg of a great
split run play.  As we have said time and again, nothing goes
straight up or down.  From its low of $266 on Monday, BRCM
ran up $64.25 to a high at $330.25 on Thursday.  That's a 24%
percent move in four days.  It stands to reason we would see
a retracement.  A 50% pullback would put BRCM at $298.13, which
just happens to be near its 10-dma at $295.84.  We would all
love to see our plays continue to move higher without any 
interruption, but that rarely happens.  We would hope you 
entered this split run play and have pocketed some of your 
profits by now.  We are anticipating another opportunity to 
enter the last this play, as we have about one week before the
2-for-1 split next Monday.  If we see any weakness in BRCM and
the Nasdaq early next week, a bounce off support near $300 could 
provide the opportunity we are looking for.  The Semiconductor
sector has outpaced all other sectors since the first of the 
year.  Although their will be bumps along the way, we expect
the strength in the BRCM and the chip sector to continue. 

Friday analysts at the Bank of America Securities Technology 
Conference commented on BRCM.  Alex Gauna, a senior semi-
conductor analyst, said he believes there's no better-positioned
company, than Broadcom going into 2000.  He went on to say the
premium seen in BRCM is warranted given the instrumental role 
the company is playing in the evolution of next generation
Internet communications.  For further analysis, see this week's 
AskOIN article.

***February contracts expire in two weeks***

BUY CALL FEB-300*RDW-BT OI=1629 at $26.00 SL=20.50
BUY CALL FEB-310 RDW-BB OI= 657 at $20.75 SL=16.25
BUY CALL FEB-320 RDW-BD OI= 921 at $16.25 SL=12.75 

Picked on Jan 30th at   $284.00    PE = 432
Change since picked      +27.00    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
/charts/charts.asp?symbol=BRCM

****

MFNX - MetroMedia Fiber Network $78.31 (+13.16)(P3W +17.11)

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.

With the exception of two trading days, MFNX has delivered big 
daily gains every time the volume exceeds 3 mln shares since late 
December - that's just 100K over the ADV of 2.9 mln.  Applying 
a bit of logic tells us that barely breaking the ADV usually 
produces nice gains.  We can further interpret that most days are 
spent under the ADV.  Why the exercise?  It's just a reminder 
that MFNX is volatile and needs volume in excess of the ADV to 
put on the big moves.  Anyway, Friday's chart shows a textbook 
breakout.  Take a look for yourself on the 5-minute chart.  
Following a gap up at the open and a price spike in amateur hour 
to $76.50, MFNX fell back, then regained upward movement.  In the 
11 o'clock hour, it flattened out testing resistance that just 
happens to be the high reached during amateur hour.  In the next 
5 minutes as price eked above $76.50, technical traders piled in 
driving the price higher.  Voila' - instant breakout.  Note too 
that later in the day $76.50 was tested twice to the down side.  
On both occasions $76.50 held.  In total, there were three 
occasions to take a position.  The first on the first breakout 
over the amateur hour high; the second and third on the 
successive tests and bounces off $76.50.  Normally we wouldn't 
spend as much time on the technical aspects of a play.  However, 
we thought this one was instructional with something to be 
learned from the detail.  Anyway, here's a quiz for MFNX 
veterans.  How much news was released from the company to move 
the price?  Is that your final answer?  Right - none!!  That 
said, we're still waiting for an earnings date from their IR 
department.  Zack's has February 15 listed, but that is 
unconfirmed by the company.  When we finally do get earnings, we 
could also get a split announcement since they have announced 
previous splits between $50 and $85.  As noted above, support is 
$76.50, but if NASDAQ takes a breather after setting a new 
record, it won't likely hold.  However, as a previous high, $75 
is pretty strong, followed solidly by $70.  Target shoot your 
entry to suit your risk profile and pay particular attention to 
the intraday volume.  The gains happen when the volume is big.

Two analyst recommendations: first, Wasserstein Perella rated 
MFNX a Buy with an $85 target; second, Advanced Equities (we 
haven't heard of 'em either) set an $80 target coupled with a Buy 
rating late last week.  News is scarce, but you already knew 
that.

***February contracts expire in two weeks***

BUY CALL FEB-70 QFN-BN OI= 578 at $ 9.88 SL=7.50
BUY CALL FEB-75 QFN-BO OI=1453 at $ 6.38 SL=4.50
BUY CALL FEB-80 QFN-BP OI= 430 at $ 3.25 SL=1.50
BUY CALL MAR-75*QFN-CO OI= 241 at $10.00 SL=7.50
BUY CALL MAR-80 QFN-CP OI= 269 at $ 7.50 SL=5.75

Picked on Jan 16th at   $57.13     P/E = N/A
Change since picked     +21.18     52-week high=$79.38
Analysts Ratings    18-8-0-0-0     52-week low =$17.38
Last earnings 11/99  est=-0.12     actual=-0.16 Surprise=-33%
Next earnings 02-15  est=-0.26     versus= N/A
Average Daily Volume = 2.9 mln
/charts/charts.asp?symbol=MFNX

****

LU - Lucent Technologies $57.00 (+1.69)(-2.63)

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.  

Those of you wanting a fast action play may want to skip to the 
next write-up.  LU has been moving at a snail's pace, which for 
the conservative trader is a good thing.  Our basis for the play 
is that all the bad news (missed earnings, poor short-term 
outlook, crummy conference call) is out.  So are the serious 
sellers?  LU found a bottom at $50 and has been inching up ever 
since January 19, with support moving up $1 at a time.  $57 held 
Friday, but $56 is pretty solid.  Resistance is holding firmly at 
$58.  Anyone see a pattern here?  With higher-lows and resistance 
planted at $58, LU is forming an ascending pennant.  The 
formation has been accompanied by gradually increasing volume 
over the ADV for the last three days.  We think LU is getting 
ready for a breakout as long as the rest of the market 
cooperates.  Careful though.  Lots of OI at the FEB-60 and MAR-60 
strikes could provide strong resistance.  It's not like there's 
a whole lotta fluctuation in the price, so target shooting has 
less meaning.  It also means price moves will likely be small.  
Thus, be content with smaller gains on this one.  Enter according 
to your risk profile or let volume be your guide when the stock 
reaches $58. 

In the news, LU is buying assets from VCT for $100 mln cash.  
The acquisition is of a semiconductor division that makes 
semiconductor components to computer hard disk drive 
manufacturers.  Class action lawsuits are still flying too.  
But those are usually settled without a trial and the potential 
expense is already factored into the price.

***February contracts expire in two weeks***

BUY CALL FEB-50 LU-BJ OI= 2947 at $7.88 SL=6.00
BUY CALL FEB-55*LU-BK OI=13704 at $3.50 SL=1.75
BUY CALL FEB-60 LU-BL OI=23795 at $0.91 SL=0.00 High Risk!
BUY CALL MAR-55 LU-CK OI= 2452 at $5.25 SL=3.50
BUY CALL MAR-60 LU-CL OI=11340 at $2.75 SL=1.25

Picked on Jan 27th at    $57.44     P/E = 81
Change since picked       -0.44     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 
/charts/charts.asp?symbol=LU

****

BCE - BCE Inc. $119.00 (+20.38)

BCE is Canada's largest communications company.  Through its 
operations in communications services, BCE provides residence 
and business customers in Canada with terrestrial and wireless 
communications products and applications, satellite 
communications and direct-to-home television services, systems 
integration expertise, electronic commerce solutions, Internet 
access and high-speed data services, and directories.  Abroad, 
through Bell Canada International's investee companies, BCE 
provides communications services to more than 6 million 
customers in Asia and Latin America.  BCE also has an extensive 
international presence through its 39% ownership of Nortel 
Networks, a network designer and builder of communications 
networks, as well as through Teleglobe, an international 
telecommunications carrier.  

Here's the deal.  This play is really about unlocking the value 
of BCE's Nortel Networks holdings.  BCE is about to spin off 95% 
of its ownership, or 39% of Nortel as a dividend to BCE 
shareholders.  Here's the math.  BCE has a market cap of about 
$70 bln.  NT has a market cap of about $145 bln.  With a 39% 
interest in NT worth about $57 bln., the market is valuing the 
remainder of BCE at only about $13 bln.  As the owner of 80% of 
Bell Canada, Canada's largest phone company with over $9 bln in 
sales, BCE is undervalued.  For every share of BCE owned, 
shareholders will receive .78 shares of NT (for every $100 of 
BCE, shareholders will get the equivalent of a $78 dividend in 
the form of NT shares).  In short, BCE is way too cheap and 
should be considered a value/arbitrage play based on Nortel's 
growing value, and the market's realization that the remainder of 
BCE is more valuable too.  Also contributing to BCE's magnificent 
jump on Friday was the NT roadshow, wherein analysts came away 
with revenue growth revisions of 25% up from 21% previously 
estimated.  With NT up $12 on the day, so went BCE.  We hope you 
got a piece of it.  Those wanting into the play, be aware that 
Friday's finish was a bit weak, which means that there could be a 
pullback.  Experienced traders almost expect it given the steep 
rise.  Support is tough to find, but $118 is the first and 
weakest level, followed by $115 and $110.  BCE's 10-dma, which 
has typically provided good support is way back at $103.  NT has 
blown way out of the channel too and really has no support until 
about $107.  Watch that one for clues.  The point is there is 
room to fall so pick your entry carefully, and enjoy the ride 
as NT's roadshow continues.

The news is above.  However, always on the lookout for unlocking 
value, BCE signed a joint venture agreement with Lycos to form 
a new Internet portal with Canadian content for the business to 
consumer market.  The venture is called Sympatico-Lycos.

***February contracts expire in two weeks***

BUY CALL FEB-110*BCE-BB OI=700 at $11.00 SL=8.75
BUY CALL FEB-115 BCE-BC OI=158 at $ 7.38 SL=5.50
BUY CALL FEB-120 BCE-BD OI= 42 at $ 4.50 SL=2.75
BUY CALL MAR-115 BCE-CC OI=  3 at $11.88 SL=9.50 low OI
BUY CALL MAR-120 BCE-CD OI= 40 at $ 9.38 SL=7.00

Picked on Feb 3rd at  $109.63     P/E = 19
Change since picked     +9.38     52-week high=$109.88
Analysts Ratings    4-4-0-1-0     52-week low =$38.31
Last earnings 01/99  est= N/A     actual= N/A
Next earnings 04-00  est= N/A     versus= N/A
Average Daily Volume =  785 K
/charts/charts.asp?symbol=BCE

****

ICIX - Intermedia Communications $49.25 (+4.25)(+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.

Slow and steady ICIX decided to pick up the pace for us on 
Friday, as it gained $3.13 and traded up to a new 52-week high 
of $50.38.  Though we saw some nice momentum backed with solid 
volume, ICIX struggled at the $50 level and could not manage to 
break through.  Admittedly, we are concerned regarding the 
number of short positions out there on ICIX (roughly 50%).  As 
we mentioned in Thursday's write up, it is rare to see such a 
high number of short positions without finding some problems 
lurking underneath a few unturned stones.  We are not saying 
that this is the case here, but we feel it is important to note 
the concern.  Otherwise, ICIX is really shaping up nicely for 
us.  The $50 level could continue to provide resistance being 
that it is a strong psychological number.  Should ICIX make the 
break, we could be cleared to continue this positive momentum, 
possibly soon to be earnings (see news below), run.  ICIX looks 
to have some nice support shaping up right around $45.50-$46.  
Should ICIX move above $50, this level could serve well for 
possible points of entry.  Obviously, confirm momentum and 
remember to tighten your stops to protect profits on the way up.

We did dig up an article on ICIX, which came out last Monday.  
This article had a very bullish stance on ICIX and stated that 
based on their analysis of the company, ICIX should be trading 
in the neighborhood of $318 a share.  The author went on to 
say that ICIX seemed to have everything in place to really begin 
drawing some attention.  Be sure to keep in mind that the $318 
number is only that, and not a price target.  There seems to be 
quite a bit of discussion out there as to the pending earnings 
announcement.  We did try and confirm the date with the company 
last Thursday and were told that they have yet to set a specific 
date, but were planning to announce toward the end of this month.  
We will keep you posted.  Though this is a play on ICIX, we must 
also take note of new developments for Digex (DIGX).  As we have 
mentioned previously, ICIX owns over 80% of DIGX, so obviously 
what happens to DIGX effects ICIX.  On Friday, Preferred Capital 
Markets reiterated their Buy rating on DIGX and raised their 
price target to $120.  DIGX is currently trading at $97.25 
and was up $1.88 on Friday, following a positive earnings 
announcement on Thursday. 

***February contracts expire in two weeks***
 
BUY CALL FEB-45*QIX-BI OI=2253 at $6.00 SL=4.25
BUY CALL FEB-50 QIX-BJ OI=1889 at $2.88 SL=1.50
BUY CALL FEB-55 QIX-BK OI=   0 at $1.19 SL=0.00 High Risk!
BUY CALL MAR-45 QIX-CI OI=1743 at $8.25 SL=6.25
BUY CALL MAR-50 QIX-CJ OI= 247 at $5.88 SL=4.25

Picked on Jan 30th at    $45.00     P/E = N/A
Change since picked       +4.25     52-week high=$50.38
Analysts Ratings      6-5-3-0-0     52-week low =$13.50
Last earnings 11/99   est=-2.98     actual=-2.97
Next earnings 02-26   est=-3.08     versus=-2.84
Average Daily Volume = 1.46 mln
/charts/charts.asp?symbol=ICIX



*****
LEAPS
*****

by Mark Phillips

The weighting of our LEAPS portfolio towards tech stocks was
rewarded this week as the NASDAQ marched up to flirt with
record territory again.  The VIX once again demonstrated its
utility as an indicator of market tops and bottoms, as it rolled
over near 29 on Monday and closed the week at 22.93.  Our CSCO
play has given us a nice run and has earnings scheduled for
Tuesday afternoon.  Evaluate your investment objectives; you may
want to consider taking some profits off the table in advance
of the usual post-earnings dip.  The outcome of the VOD merger
with Mannesmann produced the usual post-news drop.  This play
will likely be rangebound until investors decide how they feel
about the details of the agreement.  Keep watching for that 
next entry point!  

Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $42.50   176.33%
                 JAN-2002 $ 90  WUE-AR   $19.00   $46.75   146.05%
GPS    11/07/99  JAN-2001 $ 40  ZGS-AH   $ 5.75   $17.63   206.61%
                 JAN-2002 $ 45  WGS-AI   $ 7.88   $19.38   145.94%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $28.88   111.89%
                 JAN-2002 $110  WIB-AB   $16.50   $32.63    97.76%
LU     11/14/99  JAN-2001 $ 80  ZEU-AP   $12.88   $ 5.50   -57.30%
                 JAN-2002 $ 90  WEU-AR   $16.13   $ 9.25   -42.65%
CSCO   11/14/99  JAN-2001 $ 80  ZCY-AP   $19.13   $49.88   160.74%
                 JAN-2002 $ 90  WIV-AR   $22.00   $51.13   132.40%
GE     11/21/99  JAN-2001 $150  ZGR-AU   $16.25   $19.63    20.80%
                 JAN-2002 $150  WGE-AU   $25.50   $30.13    18.16%
GTW    11/21/99  JAN-2001 $ 90  ZWB-AR   $17.75   $ 6.88   -61.24%
                 JAN-2002 $100  WGB-AT   $22.50   $11.25   -50.00%
NT     11/28/99  JAN-2001 $ 75  ZOO-AO   $22.25   $56.38   153.39%
                 JAN-2002 $ 75  WNT-AO   $30.25   $65.25   115.70%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $17.38    61.67%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $22.88    52.53%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $39.75    78.65%
                 JAN-2002 $120  WGZ-AD   $28.50   $45.38    59.23%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $42.75    81.91%
                 JAN-2002 $100  WFU-AT   $27.25   $48.00    76.15%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $21.75    23.37%
                 JAN-2002 $ 90  WJX-AR   $22.00   $26.88    22.18%
AOL    12/23/99  JAN-2001 $ 90  ZKS-AR   $20.13   $ 5.63   -72.03%
                 JAN-2002 $100  WAN-AT   $25.63   $10.00   -60.98%
LU     01/09/00  JAN-2001 $ 50  ZEU-AJ   $13.63   $16.00    14.81%
GTW    01/09/00  JAN-2001 $ 60  ZWB-AL   $15.88   $15.63   - 1.57%
MOT    01/09/00  JAN-2001 $125  ZMA-AE   $31.13   $50.00    60.62%
                 JAN-2002 $125  WMA-AE   $41.50   $62.00    49.40%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $ 9.13     0.00% 
                 JAN-2002 $ 40  WSY-AH   $12.63   $13.25     4.91%
ERICY  01/30/00  JAN-2001 $ 65  ZYD-AM   $19.75   $31.63    60.15%
                 JAN-2002 $ 65  WRY-AM   $27.00   $39.13    44.93%
MSFT   01/30/00  JAN-2001 $100  ZMF-AT   $17.63   $23.13    31.20%
                 JAN-2002 $110  WMF-AB   $21.63   $27.13    25.43%
        
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

ICIX - Intermedia Communications $49.25

ICIX presents a mixed bag of information for investors to digest.
This is currently a play in the Calls section, and we are adding
it as a LEAP to take advantage of the near term uncertainty.
Refer to the play in the Calls section for all the details, but
here are the major issues.  The company owns over 80% of Digex
(DIGX), a Web site application hosting company that had its IPO
last July.  The strong earnings posted by DIGX this week would
lead one to think ICIX would be screaming higher along with
DIGX.  But this is where it gets interesting; half the
outstanding shares are currently shorted, leading us to think
there may be some hidden issues with the company that may take
some time to sort out.  Using the 5-dma as support last week,
ICIX finally broke through the $45 resistance level with a spurt
of buying on Friday.  A retreat back to this level could present
a good buying opportunity.  Just be aware that this play could
take some time to really get moving while investors try to sort
out the conflicting signals.

BUY LEAP JAN-2001 $55.00 ZLJ-AK at $12.00
BUY LEAP JAN-2002 $55.00 WLJ-AK at $18.00

chart =
/charts/charts.asp?symbol=ICIX


Drops

With the Nasdaq roaring, we will hold all the current plays.



*****************
PUTS, PUTS, PUTS
*****************

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.

****

PGR - The Progressive Corporation $60.25 (-1.88)

In business since 1937, Progressive is one of the nation's 
largest auto insurers.  Progressive offers all types of vehicle 
insurance and property-casualty insurance through 30,000 
independent agencies, the Internet and through affiliate 
programs.  PGR is a holding company for 82 subsidiaries.  PGR 
also has one mutual insurance company affiliate.

It is time for us to go back to the put play that just keeps 
giving.  We last had PGR as a put play back in December when Y2K 
concerns kept driving the share price down.  Somehow the world 
survived the passing of Y2K and Progressive is still in a 
downtrend.  One contributing factor was PGR's lousy earnings 
report on January 25th.  The company missed estimates badly due 
to an unexpectedly large number of automobile damage claims 
stemming from Hurricane Irene.  Operating Income was a 
disappointing $.06 per share vs. $1.38 a year ago.  Estimates 
were for profits of $0.21 per share.  After the earnings, 
Prudential initiated coverage of the stock with a "Neutral" 
rating.  The losses could not come at a worse time.  Couple the 
bad earnings with rising interest rates and there could be more 
problems for PGR down the road.  The Fed is raising rates to 
attempt to slow down the economy.  One of the biggest benefits 
of a supercharged economy is the purchase of big ticket items 
like automobiles.  Being one of the biggest insurers of 
automobiles, a slowdown can not help PGR.  There is a very 
strong technical reason for our interest in PGR as a Put Play.
The stock is in a very well defined downtrend with the most 
recent breakdown dating all the way back to November 17th when 
the stock broke below support on three times normal volume.  
Since then it has been nothing but one new low after another 
with the occasional value investor buying bounce.  As long as 
the trend stays negative it appears that one could place 
profitable put positions in their accounts.  Look to place 
positions on mini-rallies that do not take out any previous 
day's high.

***February contracts expire in two weeks***

BUY PUT FEB-65 PGR-NM OI= 275 at $5.75 SL=4.00
BUY PUT FEB-60 PGR-NL OI=1225 at $2.13 SL=1.25
BUY PUT MAR-60*PGR-OL OI= 104 at $4.00 SL=2.50

Average Daily Volume = 380 K
/charts/charts.asp?symbol=PGR 

****

GBIX - Globix Corp. $40.00 (-5.84)

Globix Corporation is a leading provider of Internet 
connectivity and advanced Internet services for businesses 
in the United States and Europe.  Through its high-speed, 
fault-tolerant, fiber-optic network and state-of-the-art 
Internet Data Centers in New York City, Santa Clara, and 
London, Globix delivers superior reliability, security and
performance to companies using the Internet to deploy mission-
critical business strategies.  Cutting-edge applications 
include Co-Location, Web Hosting, Dedicated Access, Streaming 
Media, E-Commerce and Internet Security.  

Is this a case of Globix warming?  Alright, that was a bit of 
a stretch for a pun.  In taking a look at a chart for Globix, 
one is not likely to see a clear indication of momentum in 
either direction.  Obviously, we would like to see GBIX take 
a turn and head south.  We are slightly concerned as Friday's 
session saw not only a $2 gain for GBIX, but also volume that 
was nearly double the daily average.  Are the buyers ready to 
step back into the ring for GBIX?  We are betting not.  
Remember, one day does not make a trend and we believe that 
GBIX still has a lot to recover from.  The two 2:1 stock splits 
within the last month and a half, the negative earnings report 
just over a week ago and a lack of positive news to recapture 
the hearts of investors, are all factors that could work to keep 
the lid on GBIX for a while longer.  We will be keeping an eye 
on GBIX.  Should we see more sessions like Friday's GBIX's time 
on our put play list may be limited.  GBIX spent Friday's 
session flirting around $40 and finally settled for a close 
there.  GBIX does have a bit of pre-established support at 
this level not to mention that GBIX's 30-dma is moving in to 
play back up support at $38.50.  Exercise caution as GBIX 
decides what direction to head.  GBIX does have some immediate
resistance lurking overhead at $41 and $45.  Should GBIX 
continue to move up, encounter resistance and start to pull 
back these resistance levels could provide room for some 
potential entry points.  Although, if you are going to try and 
target shoot your way in here, remember to take the above 
mentioned support levels into account.  Until we see some 
consistent trading below these levels, new entries could 
be risky.  

***February contracts expire in two weeks***

BUY PUT FEB-40*GUI-NH OI= 8 at $4.13 SL=2.50 low OI
BUY PUT FEB-35 GUI-NG OI=22 at $1.75 SL=0.75

Average Daily Volume = 509 K
/charts/charts.asp?symbol=GBIX

****

UAL - UAL Corp $55.50 (-2.38)(-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.  

The airline sector as a whole has been in a general downtrend 
since January.  The skyrocketing fuel costs have put quite a 
squeeze on their bottom-line.  UAL added insult to injury when 
it abruptly announced on January 13th its fiscal 200 financial 
forecast would be well below analyst expectations.  The shares 
stumbled significantly losing 13% in one day.  Despite solid 4Q 
earnings on January 19th, UAL continued its descent.  The flight 
disruptions on January 25th resulting from the east coast 
blizzard was the straw that finally broke the camel's back.  
You've got to realize too that consumers have been less than 
satisfied with airline's customer service.  There is a constant 
stream of complaints about delays and rude treatment.  It seems 
investors have taken this sentiment to heart and are putting 
their money in other equities.  First UAL slipped under firm 
support at $60, then quickly flirted with $57.  Now the $56 
support level has been shattered.  Currently the 5-dma is at 
$57.30.  Look for a bounce off this indicator if you want an 
entry into this put play.  But still the question remains. 
Where's the bottom?  Honestly at this point it's hard to 
determine so let's not guess.  Be prepared with stops and pay 
close attention to stock and market direction.  In the news this 
week, UAL announced its January traffic decreased by 2.8% versus 
a comparable month in 1999.

***February contracts expire in two weeks***

BUY PUT FEB-60*UAL-NL OI=807 at $5.00 SL=3.25
BUY PUT FEB-55 UAL-NK OI=994 at $1.69 SL=0.75

Average Daily Volume = 704 K
/charts/charts.asp?symbol=UAL

****

SCAI - Sanchez Computer Associates Inc $29.00 (-5.38)

Sanchezis  a market leader in providing enterprise banking 
software systems and services for financial institutions 
worldwide and maintains its corporate headquarters in Malvern, 
Pa.  Sanchez directs its international operations out of its 
headquarters in Chester, U.K.  Additionally, the company 
maintains offices in San Francisco, London, Warsaw and 
Singapore. Its principal product is PROFILEŽ/Anyware, a 
highly flexible, multi-currency, multi-language, enterprise 
banking system that also supports emerging delivery channel 
technologies.

If you ever thought that all stocks would do great if the markets
were doing great, you were wrong.  Some stocks like SCAI, our 
new put play, are not affected by the records being broken 
around them.  This was one the best week in history of the 
Nasdaq and SCAI couldn't capitalize on it.  We are looking 
right now at support around $22 as the next stopping place for 
SCAI.  The 10-dma of $33 will provide resistance on each rally 
and would be a great entry point.  Something to look forward 
to this week is earnings announcements.  SCAI will announce 
their fourth quarter earnings on Feb. 10th (confirmed date).  
So watch to see if they come out better or worse than expected.  
We typically don't hold calls over earnings for the selloff 
that may occur after, but that would obviously favor puts.  The 
effect could be more trouble for SCAI.  Earnings don't look 
like they will help SCAI that much as the stock has been on the 
decline for over a month now.  SCAI has had no major news over 
the last month so there is no obvious indicator as to why the 
decline, but looking at increasing volume we see that investors
are still frantically selling.  Backing each day's loss has been  
volume greater than the average.  Place your stops just above 
the 10-dma resistance level in case of an turnaround. 

***February contracts expire in two weeks*** 

BUY PUT FEB-35*SUU-NG OI=29 at $5.00 SL=3.25
BUY PUT FEB-30 SUU-NF OI=95 at $3.00 SL=1.50

Average Daily Volume = 230 K
/charts/charts.asp?symbol=SCAI

****

VERT - VerticalNet Inc. $226.00 (-40.00)

VerticalNet, Inc. owns and operates 55 industry-specific Web 
sites designed as online business-to-business communities, 
known as vertical trade communities.  These vertical trade 
communities provide users with comprehensive sources of 
information, interaction and e-commerce.  Additionally, 
VerticalNet provides auctions, catalogs, bookstores, career 
services and other e-commerce capabilities horizontally 
across its communities with sites like Industry Deals.com, 
IT CareerHub.com, LabX.com, Professional Store.com.  
VerticalNet's NECX Exchange provides an exchange for the 
electronic components industry. 

January 21st was a very good day for VerticalNet.  It was on 
this day that Microsoft (MSFT) announced that it would be 
investing $100 million in VERT for a 2% stake.  Shares of VERT, 
which had ended the previous day at $193.56, shot up as high as 
$272 on the news.  Needless to say, this left a gap and it looks 
as though VERT may be trying to fill it.  VERT traded up to a 
new high of $289.56 back on January 26th and started to roll 
over the next day.  For the most part, VERT been headed downhill 
since.  February 1st also turned out to be a big day for VERT.  
VERT started the day by announcing a joint venture with British 
Telecom (BT) and Internet Capital Group (ICGE).  Then VERT 
announced Q4 earnings, coming in 8 cents per share better than 
analyst's expectations.  VERT decided to put a little icing on 
the cake and announce a 2:1 stock split to be payable on March 
31st.  We believe that VERT is currently experiencing a case of 
the post earnings/split announcement blues and though we don't 
think that VERT's rollover is long-term, we are going to try 
and profit from the reminder of it.  Being that VERT's split 
is not until the end of March, we do not think that there is 
a possibility of a split run for some time yet.  As we mentioned, 
VERT has a gap to fill and though it may not trade all the way 
back down to $193, we do think it is possible that VERT may see 
$200 again.  It may be a short play but it looks to have the 
potential to be a sweet one.  This is a high-risk play so take 
your own risk tolerance into account before entering and 
remember to use your stops.  VERT has been known to move big 
and move fast.  

***February contracts expire in two weeks***

BUY PUT FEB-220*ERW-ND OI=1625 at $12.75 SL=11.00
BUY PUT FEB-210 ERW-NB OI= 233 at $ 7.75 SL= 5.75
BUY PUT FEB-200 ERW-NT OI= 852 at $ 5.00 SL= 3.25

Average Daily Volume = 1.61 mln
/charts/charts.asp?symbol=VERT

****

MMM - Minnesota Mining and Manufacturing $89.06 (-3.19)

Commonly known as the maker of the ubiquitous, adhesive-backed
Post-It Notes, MMM is also a leading manufacturer of a variety
of industrial, consumer, and medical products.  Reflective
sheeting on highway signs, respirators, spill-control sorbents,
and Thinsulate brand insulations are just some of the company's
industrial products.  MMM also makes microbiology products,
making it easier for food processors to test for the
microbiological quality of food.

Buyers and sellers have been locked in a tug of war since early
August, relegating MMM to a fairly wide trading range between
$89 and $103.  Each time the lower end of this range has been
tested, buyers have stepped up to lend support to the sagging
share price.  This time things look different though, as the
decline over the past three weeks has been on much stronger
volume.  A failure of the $89 support level, could open the door
for a decline down to $80-81.  Amplifying the bearish tone on
Friday, the 10-dma crossed below the 200-dma for the first time
since April of last year.  Going forward, resistance at the
10-dma ($93) may provide for a good entry point.  Entries can
also be considered on a decline through support as long as
volume remains strong.  Beating earnings estimates by 8 cents
on January 26th had little effect on the share price and an
upgrade (Under Perform to Market Perform) from Banc of America
Securities only elicited more yawns.  There has been little
news of any importance other than the company's frequent
announcements of new products and alliances.

***February contracts expire in two weeks***

BUY PUT FEB-95*MMM-NS OI=1015 at $6.88 SL=5.00
BUY PUT FEB-90 MMM-NR OI=1285 at $3.13 SL=1.50

Average Daily Volume = 1.26 mln
/charts/charts.asp?symbol=MMM

****

PG - Proctor & Gamble Co $94.75 (-5.56)

Proctor & Gamble is the #1 manufacturer of consumer goods in 
the US.  The company operates worldwide in five main business 
segments: laundry and cleaning, paper products, beauty care, 
food and beverages, and health care.  Some of the brand names 
you are likely familiar with include Tide detergent, Pampers,
Crest toothpaste, Iams premium pet food, and Vicks cold 
products.  They also make PUR drinking water systems.  In a 
separate arena, P&G are the television producers of Guiding 
Light and As the World Turns.

Plans to accelerate marketing spending in the 3Q have caused PG 
to lose more ground.  The company's announcement came along with 
"rather flat" earnings on January 25th.  Bottom-line the company 
was pre-warning of a weaker 3Q.  This went over like a lead 
balloon.  Share prices continued to edge lower yet still found 
support above $98.  Although this week the downward momentum 
picked up speed.  By Thursday PG slipped under the converging 
5-dma ($98.35) and 200-dma ($98.79) giving us a hint that further 
deterioration may be on its way.  Sure enough, on Friday we saw 
more evidence of its demise as the stock lost $3.06, or 3.1% and 
closed bearishly just a fraction away from its daily low.  Other 
technical indicators like the MACD and Stochastic are in 
negative mode too.  Generally speaking, others in the consumer 
sectors are also weaker, but the basis of this play is pure 
momentum and PG's technical breakdown.  Optimum entry points 
would be to catch bounces off support at $98.  If the market 
doesn't provide that opportunity, wait for resistance at $94 
to become new support and then make your move.

***February contracts expire in two weeks***

BUY PUT FEB-100 PG-NT OI=3277 at $6.38 SL=4.75
BUY PUT FEB- 95*PG-NS OI=1256 at $3.25 SL=1.75
BUY PUT FEB- 90 PG-NR OI=1307 at $1.31 SL=0.75

Average Daily Volume = 2.66 mln
/charts/charts.asp?symbol=PG


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*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************

The Option Investor Newsletter             2-6-2000
Sunday                        5 of 5


*************
COVERED CALLS
*************

Success Basics: Fundamentals Of Charting...

This week we received a request for an explanation of the most
popular charting styles and their benefits and limitations.  While
there are many different types of charts available, the majority
of traders use some combination of the following; Bar charts,
Point and Figure Graphs and Japanese Candlesticks.

The most common type of stock chart is the bar or line chart.  It
depicts the high, low and closing price along with volume and a
number of other (optional) indicators for a specific time frame.
Another popular charting method is the point and figure approach,
which records only price changes while ignoring time and volume.
X's are place in boxes representing up days; and O's are placed
in boxes representing down days.  There is no provision for time
in point and figure charting.  As long as the trend remains the
same, the X's or O's are placed above or below each other.  When
a reversal occurs, a new vertical column depicts the next trend.
Point and figure charts are useful for spotting unique formations
and identifying areas of support and resistance.  However, they
should never be used alone since there is no volume indication.
The most unique chart style is the Candlestick, a charting method
originally developed in Japan.  The high and low are described as
shadows and plotted as a single line.  The price range between the
open and close is plotted as a rectangle on the single line.  If
the closing price is above the opening price, the body of the
rectangle is white.  If the close is below the open, the rectangle
is black.  There a number of common technical formations in each
of these methods that can be used to generate profitable trading
signals.  This week, we will focus on bar charts.

It's important for new traders to understand the fundamentals of
bar chart analysis.  The first requirement is to select a time
frame.  Charts that track a stock's movement on a daily closing
basis are the most common.  This time period is usually best for
short-term trading, where optimal resolution is important.  Another
useful time frame is the monthly chart and it often employed by
long term investors; those who are looking for trends of several
years.

There are a number of basic components that novice traders should
recognize and understand before they can use charts to develop a
profitable trading plan.  The most significant item to identify on
a historical bar or line chart is the closing price.  The stock's
price is the fundamental indicator on the chart because it forms
the pattern that will eventually dictate its future character or
trend.  The second factor is the amount of daily trading volume.
It's considered a favorable signal when volume expands as a stock
rises and decreases as a stock declines.  Increasing volume on a
break-out indicates powerful buying that will propel the stock to
significantly higher prices.  When identifying a bullish candidate,
be sure to confirm that trading volume supports the trend.

Another common indicator on the basic price chart is the Moving
Average.  For general analysis, most traders use a 150-day weighted
average, where the most recent action is more significant than the
older movement.  This effect makes the moving average sensitive to
current activity and helps the indicator reflect character changes
in a shorter time frame.  The primary quality of moving averages is
their ability to help determine the overall trend.  One well-known
rule to remember; never buy a stock when it is trading below its
declining 150-day moving average, no matter how cheap it appears
or how fundamentally sound the company.  This indication of price
performance is a clear signal to avoid the issue.

An additional indicator commonly used by professional traders is
the Relative Strength Line.  Relative strength reflects how well
the issue is performing when compared to the overall market.  For
stock buyers, the rules are simple. If the relative strength line
is in a downtrend, avoid the stock and look for a new candidate.
The relative strength line can also be used to identify situations
where a reversal is in progress.  When the indicator moves from
negative territory (below the median line) to positive territory,
that is a favorable signal.  When an upside breakout is accompanied
by a move of the relative strength line into positive territory,
the probability of a successful outcome is significantly increased.

One final characteristic that can often be the deciding factor in a
trade is the long-range history or background of the issue.  A long
range (weekly) chart can help you put the current price activity
into historical context. When an upside break-out is also a new
long-term high, the situation becomes extremely favorable.  In that
case, there is no further resistance or supply above the current
price.  The stock is in "blue sky" territory and when there are few
sellers trying to unload their shares (from previous losses), the
issue can move higher with little or no difficulty. As with most
elements of the market, it's all based on human nature.

Next week, Candlesticks and other red hot techniques..


SUMMARY OF PREVIOUS PICKS

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

CYOE    5.50   9.03   FEB   5.00  1.44  *$  0.94  23.2%  21.3%
TERA    4.41   7.69   FEB   5.00  0.50  *$  1.09  27.9%  20.2%
WDC     5.50   5.06   FEB   5.00  1.13  *$  0.63  14.4%  10.4%
MCRE   11.88  15.25   FEB  10.00  2.50  *$  0.62   6.6%   9.6%
GMGC    6.84   8.50   FEB   5.00  2.38  *$  0.54  12.1%   8.8%
KELL    8.81   8.25   FEB   7.50  1.69  *$  0.38   5.3%   7.7%
GMGC    7.50   8.50   FEB   5.00  2.88  *$  0.38   8.2%   7.6%
GELX   20.38  17.69   FEB  17.50  4.00  *$  1.12   6.8%   7.4%
MESG   17.31  19.88   FEB  15.00  3.25  *$  0.94   6.7%   7.3%
ESPI    9.22   9.81   FEB   7.50  2.19  *$  0.47   6.7%   7.3%
ERTH    6.03   5.13   FEB   5.00  1.38  *$  0.35   7.5%   6.9%
CCCG   16.88  24.06   FEB  15.00  2.56  *$  0.68   4.7%   6.9%
CCUR   18.38  18.63   FEB  15.00  4.38  *$  1.00   7.1%   6.6%
ESPI   11.06   9.81   FEB   7.50  3.88  *$  0.32   4.5%   6.5%
BRKT   25.75  36.88   FEB  22.50  4.13  *$  0.88   4.1%   5.9%
ASFT   21.50  17.88   FEB  15.00  7.38  *$  0.88   6.2%   5.7%
VTS    17.75  16.06   FEB  15.00  3.50  *$  0.75   5.3%   5.7%
PRST   19.63  20.81   FEB  17.50  2.75  *$  0.62   3.7%   5.3%
NZRO   35.00  32.75   FEB  25.00 10.88  *$  0.88   3.6%   5.3%
VOYN   13.06  12.50   FEB  10.00  3.50  *$  0.44   4.6%   5.0%
HRC     5.81   5.69   FEB   5.00  1.13  *$  0.32   6.8%   5.0%
EAII   14.25  13.69   FEB  10.00  4.75  *$  0.50   5.3%   4.9%
MUEI   12.75  10.69   FEB  10.00  3.25  *$  0.50   5.3%   4.9%
CORL   22.13  20.00   FEB  15.00  7.75  *$  0.62   4.3%   4.7%
DBCC    9.19   9.13   FEB   7.50  2.00  *$  0.31   4.3%   4.7%
MSGI   19.13  19.94   FEB  15.00  4.75  *$  0.62   4.3%   4.7%
PCMS   10.06  19.06   FEB   7.50  3.00  *$  0.44   6.2%   4.5%
HMK     9.88   9.00   FEB   7.50  2.81  *$  0.43   6.1%   4.4%
XICO   22.56  18.13   FEB  17.50  5.75  *$  0.69   4.1%   3.8%
IFCI   10.13  15.81   FEB   7.50  3.00  *$  0.37   5.2%   3.8%
GSTX   10.69   8.44   FEB  10.00  1.63   $ -0.62  -6.8%   0.0%

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

Gst Telecom's (GSTX) chart remains somewhat ambiguous though the
issue is oversold in the short term. Since rolling down to the 
March $7.50 call is not an option (yet), a close below $8.00 
could be considered an exit signal. Although Geltex Pharma (GELX)
rebounded, the technical strength is suspect in the short term.
Next week we will roll the position down to the March $15 strike.
Our current cost basis is $16.38. Buying back the February $17.50
for $1.44 and selling the March $15 for $3.75 will obtain a net
credit of $2.37. This will reduce our cost basis to $14.07, near
strong technical support. Those interested in greater downside
protection should consider the April series.


NEW PICKS
*********
Definitions:
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

JDAS   22.69  FEB 20.00  QAH BD  3.25  125   19.44   2.9%   2.9%
VLNC   34.56  FEB 25.00  VHQ BE 10.25  2165  24.31   2.8%   2.8%
WAVX   13.94  FEB 12.50  AXU BV  2.00  1336  11.94   4.7%   4.7%
         
FSII   17.81  MAR 15.00  FQH CC  4.25  270   13.56  10.6%  10.6%
MCRE   15.50  MAR 12.50  MQZ CV  3.88  33    11.62   7.6%   7.6%
SIII   15.00  MAR 12.50  SQI CV  3.38  57    11.62   7.6%   7.6%
UBET    6.25  MAR  5.00  BUB CA  1.63  98     4.62   8.2%   8.2%


Sequenced by Return Called (& Not Called)

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

WAVX   13.94  FEB 12.50  AXU BV  2.00  1336  11.94   4.7%   4.7%
JDAS   22.69  FEB 20.00  QAH BD  3.25  125   19.44   2.9%   2.9%
VLNC   34.56  FEB 25.00  VHQ BE 10.25  2165  24.31   2.8%   2.8%
         
FSII   17.81  MAR 15.00  FQH CC  4.25  270   13.56  10.6%  10.6%
UBET    6.25  MAR  5.00  BUB CA  1.63  98     4.62   8.2%   8.2%
MCRE   15.50  MAR 12.50  MQZ CV  3.88  33    11.62   7.6%   7.6%
SIII   15.00  MAR 12.50  SQI CV  3.38  57    11.62   7.6%   7.6%


Company Descriptions

FEBRUARY PLAYS

JDAS - JDA Software  $22.69  *** The Uptrend Resumes ***

JDA Software is the leading global provider of integrated retail 
software products and professional services with more than 700 
clients in over 50 countries. Addressing the requirements of both
brick and mortar and Internet companies, JDA's state-of-the-art 
solutions include merchandising, planning, allocation, decision 
support and financial systems; warehouse management and logistics
systems; point-of-sale and back-office in-store systems; and the 
industry's first integrated commercial e-retail applications. JDA
reported a profitable 4th quarter, beating estimates, after a year
of rebuilding. JDA continues to increase its license revenues,
recently signing an agreement with Office Depot. The technicals
are improving and JDA appears ready to resume its up-trend.

FEB 20.00 QAH BD Bid=3.25 OI=125 CB=19.44 RC=2.9% RNC=2.9%

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

****

VLNC - Valence Technology $34.56  *** Powering Up ***

Valence Technology, a leader in the development of lithium polymer
batteries, has more than 400 battery patents awarded and pending.
The company operates facilities in Henderson, Nev.; Seattle, Wash.;
and Mallusk, Northern Ireland. It also has a 50% owned subsidiary, 
Hanil Valence, in South Korea. Valence has blasted into Blue Sky
territory after receiving a couple of major purchase orders for its
advanced Lithium Polymer batteries. Recently, CIBC World Markets 
initiated coverage of the stock with a "strong buy" rating and a 
price target of $40. With the quick rise in value, we favor the
support near the December high.

FEB 25.00 VHQ BE Bid=10.25 OI=2165 CB=24.31 RC=2.8% RNC=2.8%

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

****

WAVX - Wave Systems $13.94  *** Web Movies *** 

Wave Systems is trying to create the world's best technologies and 
services to secure and sell digital information. With the recently 
completed acquisition of N*Able Tech., Wave now has a comprehensive
line of trusted client co-processor systems. Wave's technology is an
inexpensive, open standards, hardware and software-based device that
enables secure transaction processing and distributed information 
metering in users' PCs. A recently announced partnership with ITVU
will enable content providers to make money streaming content in a 
secure environment. Kanakaris Communications, which provides full-
length movies over the web, has now signed an agreement with WAVX.
The technical signals are increasingly bullish with Wave Systems
closing above its 150 dma on Friday.

FEB 12.50 AXU BV Bid=2.00 OI=1336 CB=11.94 RC=4.7% RNC=4.7%

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

****

MARCH PLAYS

FSII - FSI International $17.81  *** Higher and Higher ***

FSI is a leading global supplier of processing equipment used at 
key production steps to manufacture microelectronics, including 
semiconductor devices and thin film heads. The Company develops, 
manufactures, markets and supports products used in the technology
areas of microlithography, surface conditioning and spin-on 
dielectrics. FSI has recently agreed to add a two-year independent
director evaluation (TIDE) provision to its Share Rights Plan as
per EQSF Advisers request, to further shareholders' interests.
FSII has since resumed climbing (no news) but we favor an entry
point with a cost basis below the February low.

MAR 15.00 FQH CC Bid=4.25 OI=270 CB=13.56 RC=10.6% RNC=10.6%

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

****

MCRE - MetaCreations  $15.50  *** Blast Off ***

MetaCreations is focused on e-commerce visualization solutions for 
the World Wide Web. MetaCreations' strategy is centered on the 
Company's MetaStream technology and software tools designed to make
the interactive use of photo-realistic 3D on the Web practical and
pervasive. MCRE's continuing operations are focused exclusively on
its subsidiary, MetaStream.com, the leading provider of complete
end-to-end solutions for creating and deploying virtual products
for e-commerce. MetaStream.com is 80% owned by MCRE and 20% by 
Computer Associates. MCRE's fourth quarter revenues were lower 
than prior quarter's as a result of the decision to no longer 
focus on one-time MetaStream technology licenses, in favor of 
implementing a recurring broadcast licensing model. The drop at 
the open after the earnings, proved to be a buying opportunity.
We favor a cost basis below the end-of-December low. 

MAR 12.50 MQZ CV Bid=3.88 OI=33 CB=11.62 RC=7.6% RNC=7.6%

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

****

SIII - S3 $15.00  *** Technical Entry Point ***

S3 is building on the technology, distribution and brand strengths
of its Communications, Multimedia and Professional Graphics
divisions. S3 is committed to delivering targeted products for the
PC and Consumer/Internet Appliance markets. S3's recent acquisition
of Diamond Multimedia adds consumer brands such as the ViperTM and 
StealthTM series of graphics accelerators, the Rio(TM) series of 
Internet audio appliances, the SupraTM series of modems, and the 
HomeFree line of home networking products. S3 reported a net loss 
for the fourth quarter of $0.09 per diluted share compared to a net
loss for the fourth quarter of 1998 of $1.36 per share. After 
Preferred Capital Markets downgraded S3, citing uncertainty in the
graphics portion of the Company's business, S3 announced the 
release of customized levels of Quake III Arena (TM), the third 
installment of the PC gaming franchise from id Software. We favor
a cost basis at technical support in case of post-earnings blues.

MAR 12.50 SQI CV Bid=3.38 OI=57 CB=11.62 RC=7.6% RNC=7.6%

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

****

UBET - Youbet.com $6.25  *** Another Wager ***

Youbet.com currently provides members the ability to watch and, in
most states, the ability to wager on a wide selection of coast-to-
coast thoroughbred and harness horse racing, via its exclusive 
closed-loop network. Youbet.com does not actually accept or place 
any wagers. Wagers are accepted and placed only by a state licensed
wagering entity, currently the Ladbroke Pennsylvania facility. 
Youbet tanked when the LAPD raided its Los Angeles data center in
October. Youbet recently announced that it has since reached a 
civil resolution of the investigation. Investors reacted favorably
to this news and now Youbet is showing signs of heavy accumulation.
We will try to make our money back on this issue, though cautiously, 
betting on a cost basis at technical support.

MAR 5.00 BUB CA Bid=1.63 OI=98 CB=4.62 RC=8.2% RNC=8.2%

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



*****************
NAKED PUT SECTION
*****************

Option Basics: Floor Brokers and Market-Makers...

A number of readers have requested an explanation of the methods
and techniques that floor traders use to provide a liquid market.

The system of order flow and execution at a major exchange is
relatively simple.  Option orders are routed to the exchange by
brokerages.  Trades are filled by floor brokers or market-makers.
These specialists have distinct roles in assuring that customer
orders are executed in a fair and timely manner.  Floor brokers
are agents who execute orders on behalf of the public and other
firms.  They receive a fee for their service.  Market-makers trade
for personal (or sponsored) accounts, profiting from their skill
and ability.  They are entrepreneurs who risk their own capital
in order to compete with other market-makers for options orders.
At the CBOE, there is an additional class of trader; the order
book official.  Order book officials are salaried employees who
maintain the public customer limit order book.  These specialists
are responsible for the log of unfilled orders. They execute each
trade when the specified (limit) price is achieved.  Order book
officials have no personal financial interest in any trades that
occur.  An impartial and equitable opportunity to participate in
the market is the essence of the system.

The majority of methods employed by floor specialists to profit
from trading in options and their associated stocks are based on
pricing theory and statistical probability.  There are also a
number of scalping techniques; the most common of which occurs
when heavily traded options are bought at the bid and sold at the
ask, generating a spread credit for the market maker.  Specialists
who participate in risk-free transactions utilize simple arbitrage
techniques.  The concept of put-call parity identifies mis-priced
relationships between the call, put, and the stock.  If the call
is overpriced relative to the put, then the put is purchased and a
synthetic put, made up of a short call and long stock, is sold.
This technique is called a conversion.  If the call is under-priced
relative to the put, then the call is bought and a short synthetic
call, made up of a short put and short stock, is sold.  The is the
opposite of a conversion and is often called a reversal (or reverse
conversion).  Specialists also favor box spreads; two call options
with different strike prices and two put options with strike prices
equivalent to the calls. Once again, box spreads are only initiated
when the options are mis-priced on a relative basis.

Professional traders regularly use pricing models to help create
profitable option positions.  Some use the Black-Scholes formula to
identify hedge ratios that are created when options are mis-priced.
After the premium disparity is identified, ratio spreads between
various options for the same stock can be initiated.  Comparative
algorithms are used to determine the number of options to trade and
which option series should be purchased or sold.  Of course, these
strategies require dynamic changes in the hedge ratio as the input
variables change.  The maintenance requirements for this type of
option arbitrage make it far more difficult than box spreads and
conversions.

When an individual wants to buy a call or put option, the market-
maker generally has two choices. He can retain a short position in
the option series, until there is a demand for that position, or he
create a synthetic call or synthetic put to offset the transaction.
This is the foundation of option trading for retail participants
and floor traders profit from these positions when they earn the
bid-ask spread or when demand causes option prices to move in their
favor.  Next week, we will examine this technique in greater detail.

Good Luck


                      *** 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.


SUMMARY OF PREVIOUS PICKS 

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

TSEMF  14.38  15.75   FEB  12.50  0.75  *$  0.75  16.2%  23.5%
MCRE   12.56  15.25   FEB  10.00  0.69  *$  0.69  21.6%  23.4%
PCMS   15.00  19.06   FEB  12.50  0.50  *$  0.50  12.5%  18.1%
TRVL   15.50  14.44   FEB  12.50  0.44  *$  0.44  12.1%  17.5%
WSTL   11.44  20.06   FEB   7.50  0.50  *$  0.50  17.9%  16.5%
MSGI   18.50  19.94   FEB  15.00  0.50  *$  0.50  11.4%  16.5%
MESG   18.31  19.88   FEB  15.00  0.50  *$  0.50  11.1%  16.1%
OTEX   20.63  26.88   FEB  17.50  0.56  *$  0.56   9.9%  14.3%
HSAC   23.00  20.06   FEB  17.50  0.69  *$  0.69  13.0%  14.2%
DMRK   22.38  30.75   FEB  17.50  0.69  *$  0.69  13.3%  12.3%
SMSC   14.25  13.06   FEB  12.50  0.50  *$  0.50  11.2%  12.2%
NSPK   22.25  23.69   FEB  15.00  0.56  *$  0.56  11.2%  12.1%
NZRO   33.25  32.75   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%
XICO   19.75  18.13   FEB  15.00  0.31  *$  0.31   7.3%  10.5%
TLCM   20.25  21.75   FEB  15.00  0.50  *$  0.50  11.0%  10.1%
QTRN   24.44  30.25   FEB  17.50  0.50  *$  0.50   9.3%  10.1%
NPLS   23.06  27.81   FEB  17.50  0.44  *$  0.44   8.7%   9.5%
PGEX   22.81  21.13   FEB  15.00  0.50  *$  0.50   9.9%   9.1%
TLCM   23.13  21.75   FEB  17.50  0.31  *$  0.31   6.3%   9.1%
PILT   25.94  28.13   FEB  17.50  0.56  *$  0.56   9.7%   9.0%
CPQ    32.00  27.38   FEB  25.00  0.56  *$  0.56   8.0%   8.7%
NOVL   33.69  36.00   FEB  25.00  0.63  *$  0.63   8.5%   7.9%
GSTRF  34.19  33.00   FEB  22.50  0.63  *$  0.63   8.4%   7.8%
EMIS   35.63  39.25   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.

Comments:

Compaq (CPQ) is holding at its 50 dma and the Hewlett-Packard
(HWP) merger rumor should help. There is strong technical support
above the sold strike.


NEW PICKS
*********
Definitions:
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

NFLD   16.19  FEB 12.50  DHQ NV  0.38  296   12.12  10.5%
NSPK   23.69  FEB 20.00  NNQ ND  0.38  93    19.62   6.2%
VDAT   12.50  FEB 10.00  UDT NB  0.31  194    9.69  11.0%
        
DRD    28.00  MAR 20.00  DRD OD  0.56  0     19.44   9.1%
PTEC   20.63  MAR 15.00  PKQ OC  0.63  110   14.37  13.2%
RWAV   10.56  MAR  7.50  RQR OU  0.31  20     7.19  12.8%
ZONA    7.69  MAR  5.00  NQZ OA  0.31  0      4.69  16.8%

Sequenced by ROI  

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

VDAT   12.50  FEB 10.00  UDT NB  0.31  194    9.69  11.0%
NFLD   16.19  FEB 12.50  DHQ NV  0.38  296   12.12  10.5%
NSPK   23.69  FEB 20.00  NNQ ND  0.38  93    19.62   6.2%
        
ZONA    7.69  MAR  5.00  NQZ OA  0.31  0      4.69  16.8%
PTEC   20.63  MAR 15.00  PKQ OC  0.63  110   14.37  13.2%
RWAV   10.56  MAR  7.50  RQR OU  0.31  20     7.19  12.8%
DRD    28.00  MAR 20.00  DRD OD  0.56  0     19.44   9.1%


Company Descriptions

FEBRUARY PLAYS

NFLD - Northfield Laboratories  $16.19   *** What's Up? ***

Northfield Laboratories is engaged in the development of a safe
and effective alternative to transfused blood for use in the
treatment of acute blood loss.  The company's PolyHeme blood
product is a solution of chemically modified hemoglobin derived
from human blood.  Clinical studies indicate that PolyHeme carries
as much oxygen, and loads and unloads oxygen in the same manner,
as transfused blood.  Infusion of PolyHeme also restores blood
volume.  PolyHeme may eventually be effective as a resuscitative
fluid in the treatment of hemorrhagic shock resulting from
extensive blood loss.  Clinical studies indicate that PolyHeme is
universally compatible and accordingly should not require blood
typing prior to infusion.  Speculation concerning an upcoming NDA
is moving this issue higher.  Research thoroughly before opening
any positions.

FEB  12.50  DHQ NV  Bid=0.38  OI=296  CB=12.12  ROI=10.5%

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

****

NSPK - Netspeak  $23.69   *** On The Move Again! ***

NetSpeak develops, markets, licenses and supports a suite of
intelligent software modules that provide business solutions for
real-time interactive voice, video and data communications over
packetized data networks such as the Internet, Lan's and Wan's.
NetSpeak's products allow organizations to build new voice and
video-enabled communications networks.  Their products consist
of call management software, gateway systems and software based
client telephones.  The company has recently announced several
significant events, which further solidify its transition to a
product and market focused company.  The break-out on Friday
suggests this issue is moving to a new range and our cost basis
is a reasonable entry point on a popular issue in a hot sector.

FEB  20.00  NNQ ND  Bid=0.38  OI=93  CB=19.62  ROI=6.2%

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

****

VDAT - Visual Data Corporation  $12.50   *** Big Move! ***

Visual Data is a digital multi-media content provider in the
advertising industry.  It is also a full service production 
and distribution company capable of aggregating, broadcasting and
globally transmitting rich media content specifically developed
for the Internet and interactive television.  VDAT's products
include video libraries on topics such as travel, corporate
information and healthcare.  The company develops multi-media
libraries of interactive visual information which can be sold
and distributed on the Internet and other online services, laser
disc, DVD and eventually, Interactive Television.  The company's
products and services are marketed through a number of business
divisions, which provide administration, marketing and sales for
their respective brands.  Once again a significant move on Friday
may be the impetus for an upcoming rally.

FEB  10.00  UDT NB  Bid=0.31  OI=194  CB=9.69  ROI=11.0%

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


MARCH PLAYS

DRD - Duane Reade  $28.00  *** A Healthy Big Apple! ***

Duane Reade is the largest drugstore chain in New York City,
with 75 of its 128 stores located in Manhattan's high-traffic
business and residential districts.  Their drugstores offer a
wide variety of brand name and private label products; oral,
skin, hair care products, bath supplies, vitamins/nutritional
supplements, feminine hygiene products, family planning and baby
care products.  The company also has same-day photo-finishing
services in all stores and has installed 1-hour photo-finishing
in twenty stores.  Duane Reade also offers home delivery and
prescription-by-fax services.  A nice chart pattern with a clear
reversal in progress.

MAR  20.00  DRD OD  Bid=0.56  OI=0  CB=19.44  ROI=9.1%

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

****

PTEC - Phoenix Technologies  $20.63   *** Solid Growth! ***

Phoenix Technologies designs, develops and markets system and
chip level software for personal computers, peripheral devices
and information appliances.  This unique software provides
compatibility, connectivity and manageability of the various
components and technologies used in PCs, peripheral devices and
information appliances.  The company provides these products
primarily to manufacturers of personal computers, peripheral
equipment, integrated circuits, and system boards.  The company
recently reported solid revenues and strong operating profits
along with a positive outlook for the coming year.  We favor the
bullish technical outlook.

MAR  15.00  PKQ OC  Bid=0.63  OI=110  CB=14.37  ROI=13.2%

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

****

RWAV - Rogue Wave Software  $10.56   *** Software Ruffian ***

Rogue Wave is engaged in the development, sale and support of
object-oriented software systems and related tools.  They are one
of the leading providers of solutions for building profitable
business to business e-commerce systems.  Rogue Wave Software's
development tools and Professional Services Group enable companies
to develop applications on Internet time.  Rogue Wave products
support more than 300,000 developers worldwide at leading Fortune
500 e-businesses including 3Com, AT&T, Banc of America, Cisco,
Fujitsu, Hewlett Packard, IBM, MCI, Merrill Lynch, Morgan Stanley,
and Sun Microsystems.  Friday's close above a recent resistance
area near $10 may be the first step to a higher trading range.

MAR  7.50  RQR OU  Bid=0.31  OI=20  CB=7.19  ROI=12.8%

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

****

ZONA - Zonagen  $7.69   *** On The Rebound! ***

Zonagen is a biopharmaceutical company that is engaged in the
development of pharmaceutical products for the reproductive system;
sexual dysfunction, urology, contraception and infertility.  ZONA
has a worldwide sales and marketing agreement with Schering-Plough
corporation for Vasomax, the company's rapidly disintegrating oral
formulation of phentolamine mesylate for Male Erectile Dysfunction.
The position offers a favorable entry price on another speculative
drug issue with bullish technicals.  Once again, due-diligence is
a prerequisite to any new position.

MAR  5.00  NQZ OA  Bid=0.31  OI=0  CB=4.69  ROI=16.8%

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


************************
LARGE CAP NAKED PUT LIST
************************

These are the highest premium puts I would be comfortable
selling in this market. There were a lot of ugly charts
after the Friday afternoon drop and I ignored the most
likely candidates as too risky. All put selling has risk
but there is no reason to accept more than necessary.
If you write puts like these, please put in a GTC stop
loss order immediately. 

Jim

The margin is calculated using 25% of the underlying which
is what Preferred and most other brokers require. If your
broker requires more then your percentage of return would
be less. 

Stock Stock Strike Out Of Option Option Margin Rtn%
SymbolPrice Price  Money  Symbol  Prem  Amt

IIJI   81.00   80   1.00 IUJ-NP   5.13   20   25%
IIJI   81.00   75   6.00 IUJ-NO   4.00   20   20%
PUMA   82.63   75   7.63 PUP-NO   3.75   21   18%
PUMA   82.63   80   2.63 PUP-NP   5.75   21   28%
ISLD   86.94   80   6.94 SUH-NP   4.50   22   21%
ISLD   86.94   75  11.94 SUH-NO   2.75   22   13%
DTPI   89.25   80   9.25 DUP-NP   3.75   22   17%
MCOM   90.63   85   5.63 MQM-NQ   3.88   23   17%
PSIX   92.38   85   7.38 SQP-NQ   3.50   23   15%
FFIV   94.25   90   4.25 FQL-NR   6.00   24   25%
FFIV   94.25   85   9.25 FQL-NQ   4.00   24   17%
HLIT  110.88  105   5.88 LQL-NA   5.13   28   19%
HLIT  110.88  100  10.88 LQL-NT   3.25   28   12%
ADAP  116.00  110   6.00 CQI-NB   5.75   29   20%
ARTG  116.63  110   6.63 AYQ-NB   8.88   29   30%
ARTG  116.83  105  11.83 AYQ-NA   6.88   29   24%
ARTG  116.83  100  16.83 AYQ-NT   5.25   29   18%
EXDS  124.88  110  14.88 DUB-NB   3.13   31   10%
EXDS  124.88  115   9.88 DUB-NC   4.75   31   15%
EXDS  124.88  120   4.88 QED-ND   6.63   31   21%
FDRY  133.50  130   3.50  OQ-NF   8.38   33   25%
LRCX  137.00  125  12.00 MLC-NE   3.25   34    9%
QCOM  137.50  130   7.50 AUA-NF   4.13   34   12%
QCOM  137.50  125  12.50 AAF-NE   2.50   34    7%
SILK  138.50  125  13.50 ULI-NE   6.88   35   20%
DITC  140.06  120  20.06 DUI-ND   3.88   35   11%
DITC  140.06  125  15.06 DUI-NE  10.50   35   30%
SFE   149.50  140   9.50 SFE-NH   4.25   37   11%
INSP  150.19  140  10.19 OHY-NH   6.13   38   16%
IMNX  151.63  140  11.63 IUU-NH   6.63   38   17%
TMPW  155.38  145  10.38 BSQ-NW   7.13   39   18%
TMPW  155.38  150   5.38 BSQ-NU   9.25   39   24%
VRTS  156.88  140  16.88 VUQ-NH   4.13   39   11%
VRTS  156.88  145  11.88 VUQ-NI   5.50   39   14%
RNWK  157.34  145  12.34 RNO-NI   5.00   39   13%
ARBA  185.25  165  20.25 IUR-NM   4.38   46    9%
VRSN  189.06  175  14.06 QVZ-NO   5.38   47   11%
RBAK  198.50  180  18.50 BUK-NP   4.63   50    9%
JDSU  211.00  180  31.00 XXZ-NP   3.75   53    7%
JDSU  211.00  200  11.00 UCQ-NT   9.50   53   18%



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

Another day, Another Record!

Friday, February 4

Optimistic investors drove technology stocks to record highs
today as speculation over improving corporate earnings dominated
the market. The Nasdaq Composite rose 33 points to 4,244, a new
all-time high while the Dow Industrial Average fell 49 points to
10,963. The S&P 500 Index ended unchanged at 1,424. On the NYSE,
declining issues led advances 1,564 to 1,420 on active volume of
1.3	 billion shares. The benchmark 30-year U.S. Treasury Bond was
down 1-26/32, with the yield rising to 6.27%.


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

Deluxe Corp.  DLX    APR25C/FEB30C   $3.75    debit   diagonal
Bea Systems   BEAS   MAR50C/MAR65C   $12.38   debit   bull-call
Tupperware    TUP    APR15C/APR17C   $1.25    debit   bull-call


Portfolio plays:

Friday's technology rally capped the Nasdaq's best week ever
and our portfolio had a number of big winners. Triquint (TQNT)
tacked on another $13 to close at $205 after completing their
presentation at the The Banc of America Securities Technology
Week 2000 conference in San Francisco. Our recent bullish debit
spread appears safe at $140. Corning (GLW) romped $10.62 to end
at $165 after reporting it is investing $750 million to expand
its global fiber-making capacity by 50% within three years. The
world's leading supplier of optical fiber and cable said it wants
to begin offering its customers "one-stop shopping" by getting a
bigger foothold in the optical equipment field; developing the
components that amplify and redirect laser light pulses carrying
information at hyper-speed through fiber-optic grids. Our bullish
credit spread at $130 should expire comfortably out-of-the-money.

BCE Incorporated (BCE) rocketed almost $10 on the heels of the
telecom rally. One of their largest holdings, Canada's Nortel
Networks (NT) added $13 to end at $119, driving BCE's valuation
well into the triple digits. Nortel is another company that is
increasing the capacity of their optical manufacturing. In its
fourth-quarter results released on January 26, Nortel reported
that optical sales could soar to $10 billion in 2000 and they
are already planning a $400-million expansion to triple optical
production capacity this year. Unfortunately, our conservative
position reached maximum profit at $85. Aspect Development (ASDV) 
rebounded from a serious consolidation, gathering $6.75 on its
way to a closing price of $80. The volatile issue has managed to
return to our original price and we expect it to finish well above
the sold strike at $65. Today's move came after company officials
announced they will hold a Media and Analyst briefing to reveal
Aspects eMarkets business and product strategy roadmap. The event,
to be held next week, will include reports on Aspect's eCommerce
solutions, its Aspect Content Network, and key eCommerce business
partnership agreements. Another surprising issue was Biovail (BVF).
Today the stock rallied $4 to $58 after the company announced that
Phase III clinical trials have begun on Buspirone, a product used
in the treatment of generalized anxiety disorders. Biovail also
stated that it is in late stage development of three additional
formulations in the therapeutic classes of anxiety disorders,
diabetes and pain management. The company expects the initiation
of a number of Phase III clinical trials over the next 18 months.
In this case, our bullish debit position is deep in-the-money at
$50.

In the long-term portfolio, Adobe Systems (ADBE) was again the
leader, climbing $5 to a recent high near $74. Our previously
losing LEAPS/CC's position is now at 200% profit after only two
months in play. Medtronics (MDT) was also a big winner, rising
to a new all-time high near $48. The sector has been on the move
recently and with the upside potential in our position shrinking,
we decided to roll out and up to MAR-$45 options. Our LEAPS/CC's
spread is now a LJAN37C/MAR45C at $6.25 debit. Telecommunications
stocks jumped on news that Britain's Vodafone AirTouch Plc (VOD)
and Germany's Mannesmann AG agreed to a $178 billion merger, the
largest corporate deal in history. Vodafone shares fell almost $4
on the news of its blockbuster buy-out, with the stock the most
active on the NYSE. Fortunately, support at $55 (our sold strike) 
appears to be relatively solid and the position achieves maximum
profit above that price.

Smaller telecom issues rallied on speculation of further mergers
and the top performers in that group were P-Coms (PCMS) up $2 to
a new all-time high at $19, and Tekelec (TKLC) with a $2 move to
$34.50. Other low-priced stocks that made the leader board were
Marketing Services Group (MSGI) and Zoltek (ZOLT). Both of these
issues climbed higher without news or speculation, a good sign
for the long-term outlook. Our final surprise was Covance (CVD).
After Thursday's thrilling ride to the low 12's, the stock began
to rebound significantly, ending today's session at $15. Again
there was no news or widespread speculation to support the move.

In the Straddles section, Jones Pharmaceuticals (JMED) continues
to exceed all but the most optimistic expectations. This week our
March straddle (opened in December) reached 300% profit. That's
$24 returned on an initial investment of $8.12 only 6 week ago.
Another recent winner is Ciber (CBR). The neutral (May) position
is now "in the black" and currently offers a $1.00 profit. With
any luck, the issue will continue to decline, providing a higher
return in the coming weeks.

Questions & comments on spreads/combos to Contact Support


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

Last week's group of speculation plays received good reviews so
we decided to continue the search for merger/takeover candidates.

****

MI - Marshall & Ilsley  $56.00   *** Merger, Or Not? ***

Marshall & Ilsley is a bank and savings & loan holding company
providing financial services and general banking business. The
company's bank and savings association subsidiaries provide a
full-range of banking services to individuals, businesses and
governments throughout Wisconsin and in Phoenix, Arizona. These
subsidiaries offer retail, institutional, international, business
and correspondent banking, investment and trust services through
the operation of almost 250 offices.

MI is on the move and there has been some interesting option
activity in conjunction with the recent rally. Apparently, the
Business Journal of Milwaukee reported that Northwestern Mutual
Life was interested in a potential purchase of the company. Of
course Northwestern denied the report but Marshall & Ilsley has
often been rumored as an acquisition target because of its strong
position in the Wisconsin banking market and its desirable trust 
operation. Aside from its banking and trust business, Marshall
also operates M&I Data Service, which provides transaction data
processing services.

Analysts are mixed on the viability of the deal but there are
generally other factors that surface when a rumor like this one
becomes public news. In many cases, another suitor will emerge
and the speculation will begin again. If you like the chart and
the possibility of a two week profit, there are some favorable
disparities in the call options. Most of the activity exists in
the March series but we will use February options in our position.


PLAY (very speculative - bullish/debit spread):

BUY  CALL FEB-50 MI-BJ OI=0  A=$6.12
SELL CALL FEB-55 MI-BK OI=64 B=$2.81
INITIAL NET DEBIT TARGET=$3.00-$3.12 ROI(max)=60%

Chart =
ray@OptionInvestor.com

****

BMCS - BMC Software  $42.31   *** Bottom Fishing! ***

BMC Software develops, markets and provides maintenance and
support services for systems software products that improve the
performance, reliability, and manageability of large mainframe
systems software. BMC's software products address the three
predominant operating environments of enterprise computing: the
IBM OS/390 mainframe operating system; the various Unix operating
systems employed by hardware manufacturers like Hewlett Packard,
Sun Microsystems, IBM and Compaq; and Microsoft's emerging MS
Windows NT operating system. BMC's goal is to help improve the
efficiency and productivity of their customer's mainframe and
distributed IT systems.

BMC is definitely looking for the bottom and with the stock at
greatly reduced multiples, traders have begun to speculate on
rumors of a buyout. The company's share value has fallen sharply
since last month's warning that it might take several quarters
before stronger growth returns. Now the issue is beginning to
consolidate and the recent activity suggests something is up.
On Friday a BMC official declined to comment on speculation the
software maker was in takeover talks with International Business 
Machines (IBM) but option buyers were convinced of a future deal.

With implied volatility and volume rising on the rumors, there
are a number of favorable positions for those who want to
speculate on the eventual outcome. Our outlook is limited risk
and bullish with a favorable profit potential.


PLAY (aggressive - bullish/diagonal spread):

BUY  CALL MAR-40 BCQ-CH OI=951  A=$5.88
SELL CALL FEB-45 BCQ-BI OI=2521 B=$1.81
INITIAL NET DEBIT TARGET=$3.75-$3.88 TARGET ROI=25%

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


***************
TECHNICALS ONLY
***************

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 disparities in
option pricing. Current news and market sentiment will have an
effect on these issues. Review each play individually and make
your own decision about the future outcome of the position.

****

SNDK - SanDisk  $142.00   *** New All-Time High! ***

SanDisk designs, manufactures and markets flash memory data
storage products used in a wide variety of electronic systems.
Since its inception, the company has been involved in all
aspects of flash memory process development, chip design,
controller development and system-level integration to ensure
the creation of fully integrated, broadly inter-operable
products that are compatible with both existing and new system
platforms. The company has optimized its flash memory storage
solution, known as system flash, to address the needs of many
emerging applications in the consumer electronics, industrial
and communications markets. SanDisk has applied its technology
to the markets for digital cameras and other electronic devices
such as smart phones, personal digital assistants (PDA) and MP3
portable music players.

SanDisk recently announced that it shipped more than three
million CompactFlash memory cards in 1999, an increase of 140%
over the previous year. The incredible sales of CompactFlash,
SanDisk's leading product, were driven in part by the growing
popularity of digital cameras, many of which use the small,
removable, matchbook-sized cards as reusable digital film.
There are a number of other consumer products that use the
technology including hand-held PC's, photo printers, Internet
music players, medical monitors, set-top boxes and recorders.

With the demand for their products rising exponentially, Sandisk
has enjoyed significant gains in the last six months and the
chart shows no signs of weakness. In fact, Friday's closing high
suggests the stock will continue its stage II climb on improving
technical strength. Any pullback should meet strong support near
$100, provided by the August-September and December highs (which 
coincide with the 50 dma). That sounds like a great plan for the
next two weeks.


PLAY (conservative - bullish/credit spread):

BUY  PUT FEB-95  SWQ-NS OI=150 A=$1.43
SELL PUT FEB-105 SWQ-NA OI=49  B=$2.43
INITIAL NET CREDIT TARGET=$1.12 ROI=12%

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

****

PEP - PepsiCo  $32.75   *** It's Not The One! ***

PepsiCo consists of the Pepsi-Cola Company beverage company,
Frito-Lay Company, a manufacturer and distributor of snack chips,
and Tropicana Products, a marketer and producer of branded juices.
Pepsi-Cola's business units manufacture, sell and distribute Pepsi
and beverages bearing the Pepsi-Cola or Pepsi trademarks such as
Pepsi-Cola, Diet Pepsi, Pepsi One and Pepsi Max, and other brands
owned by Pepsico including Mountain Dew, 7UP (outside the United 
States), Slice, Mug, Aquafina and Mirinda. Tropicana manufactures
and sells its products under trademarks such as Tropicana Pure
Premium, Tropicana Season's Best and Dole Foods. The Frito-Lay
company manufactures and sells Lay's and Ruffles potato chips,
Doritos and Tostitos tortilla chips, Fritos cornchips, Cheetos
cheese flavored snacks, Rold Gold pretzels, Sunchips multigrain
snacks, as well as Wow! potato and tortilla chips.

Wow is right! What a mouthful of goodies. Unfortunately, the
recent chart pattern is not so yummy. PEP's technical strength
continues to weaken and a test of the October low is likely as
the support near $34 failed in the last sell-off. Any upside
movement will now meet resistance in the $34 to $35 range and
that's all we need to make this play profitable in two weeks.

Note: Earnings are expected on February 9.


PLAY (conservative - bearish/credit spread):

BUY  CALL FEB-37.50 PEP-CU OI=193 A=$0.31
SELL CALL FEB-35.00 PEP-CG OI=164 B=$0.62
INITIAL NET CREDIT TARGET=$0.38 ROI(max)=17%

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


*********************
STRADDLES & STRANGLES
*********************

Here is a play for those of you that favor Jim's premium selling
strategies. Although this is not one of the high-flying technology
issues, the position is statistically more favorable than most of
the candidates in that group. Be sure to review the techniques for
covering a naked position in the recent "Options 101" series. The
best explanation is at:

http://members.OptionInvestor.com/options101/010900_2.asp

****

SDW - Southdown Incorporated  $54.94   *** Merger Candidate ***

Southdown is a cement and ready-mixed concrete company that is
engaged in the production and distribution of Portland and
masonry cements. The company operates a number of cement-making
plants plus a network of cement distribution terminals. They also
mine, process and sell construction aggregates and specialty
mineral products in the eastern half of the United States and
in California, and operate a subsidiary that installs highway
safety systems such as guardrails, traffic signals, signage and
lighting. In addition, the company markets ready-mixed concrete
products.

This position also involves merger speculation and it is quite
complex. The cement-maker had been the target of British building
materials company Blue Circle Industries but negotiations ended
near the first of the year after pricing disagreements. Now Blue
Blue Circle Industries is facing a hostile bid from France's
Lafarge and it is unlikely they will revive talks with Southdown.
Regardless of the possibility of a merger, Southdown has been
active in recent weeks and the option premiums are inflated. The
technical trading range of this volatile issue ($46-$63) provides
a favorable background for our speculative position. Review the
news thoroughly before participating in this play.


PLAY (aggressive - neutral/credit strangle):

SELL CALL FEB-60 SDW-BL OI=171 B=$1.31
SELL PUT  FEB-50 SDW-NJ OI=45  B=$1.18
INITIAL NET CREDIT TARGET=$2.50-$2.62 ROI=18%

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



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*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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