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Daily Newsletter, Tuesday, 02/08/2000

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The Option Investor Newsletter         Tuesday  2-08-2000
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
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MARKET WRAP  (view in courier font for table alignment)
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       2-08-2000           High     Low     Volume Advance Decline
DOW    10957.60 + 51.81 11022.75 10904.26 1,052,863k 1,588  1,438
Nasdaq  4427.50 +105.73  4428.48  4370.01 1,981,522k 2,385  1,842
S&P-100  782.21 +  9.32   783.69   774.19    Totals  3,973  3,280
S&P-500 1441.75 + 18.75  1441.83  1424.24            54.7%  45.3%
$RUT     537.49 +  5.10   539.15   532.39
$TRAN   2582.80 + 10.59  2598.58  2562.81
VIX       22.10 -  1.60    22.96    21.99
Put/Call Ratio      .56
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It is not the Economy, Stupid.

The worker productivity report this morning showed no hint of
inflation for the fourth quarter with worker productivity rising
a huge +5% while unit labor costs declined by 1%. It was a case
of news too good to be true. The report defused fears that the
Fed would react again soon to raise rates. Investors went on a
shopping spree and tech stocks were on the top of the list. The
Nasdaq posted another record high, the third in three days, at
4427. The Nasdaq winning streak has now stretched to seven days
and +13% from its low of 3750 on Monday of last week. The Nasdaq
showed no signs of resting and closed at the high of the day.
Tomorrow is likely to start out in rally mode as well after Cisco
announced record earnings and a 2:1 stock split after the bell. 
As a major component of the Nasdaq the +$8.00 CSCO gained in after 
hours will jump start the Nasdaq at the open. Nasdaq futures are 
up +$25 at 6:15

 
 

The Nasdaq volume today at 1,972,320K shares was the second largest on record. Coupled with the strong volume on the NYSE of 1,052,863K it was just another three billion share Tuesday. This is almost twice the daily volume from just one year ago. Unfortunately the Dow did not really take part in the tech rally again. The Dow is setting up for a test of stamina between the bulls and bears as the current lower high scenario is coming even closer to the current support of 10850. With the Nasdaq stretching the current string of positive days to the breaking point the Dow will have to contribute to the rally soon or we could be in trouble. The Nasdaq closed over 4400 for the first time while the Dow was not able to even close over 11000 on good numbers. As the Nasdaq races higher the Dow will become an increasingly heavy handicap. How many flights of stairs can you climb before collapsing if you had to pick up another 20lbs of luggage on each landing? Part of the drag on the Dow today came in the form of earnings warnings and news of new court battles for tobacco. Nike warned they would miss their earnings this year due to store closings and the loss of retail space in several of their larger outlets. Foot Locker, Just for Feet and others are giving less retail exposure to Nike as they try to cram more brands and different merchandise into their stores. NKE dropped -18% or -8.56 in heavy trading. In the "it can't get any worse" category, the tobacco industry came under fire again with news that there was going to be a landmark suit alleging price fixing among the major players. With a potential fine or settlement in the billions of dollars this news was just another blow to already depressed tobacco stocks. Phillip Morris (MO) dropped under $20 to a price not seen since 1994. Nabisco closed at $30.38 which was a four year low. Add this to the $3000 fine for every teenager that smokes by 2004 and the new +.25 per pack proposed Federal youth tax and their future profits are literally going up in smoke. The health care sector also took a major hit today after Aetna announced results that displeased analysts. Although technically AET beat estimates, analysts were quick to point out that a large portion of the profits were made from one time events like reduced tax rates and capital gains. Actual profits from continuing operations of $.99 missed estimates by a long shot. AET lost -9.75 and drug the entire sector with it as investors feared the higher drug prices would reduce others profits as well. The economy is not broken, stupid. Cisco announced record profits after the close and proclaimed the Internet economy alive, well, shrinking costs and increasing productivity at every turn. After announcing a 2:1 split the resulting jump in the CSCO share price powered Cisco from the third largest market cap company in the U.S. to the number two company behind Microsoft and displacing GE as the previous second largest. Not bad for a ten year old startup! This was the ninth split announced by Cisco. CSCO beat analysts estimates with a +.25 cent profit and a +49% profit increase. Cisco claimed almost no Y2K damage saying their calls that Friday were less than any regular day. The next big name to announce is Dell after the close on Thursday but the report is not likely to be a barn burner like CSCO. Dell has previously warned they would miss estimates so expectations are not very high. Dell is suffering from the dog pile mentality as big name firms try to capture the spotlight by downgrading the stock. Today Warburg Dillon Reed cut their recommendation to a hold from a buy saying Dell was now too big to react quickly to changing markets. The big news this week appears to be the hacker attacks on all the big name websites. Yesterday hackers shut down Yahoo for over three hours with a "denial of service" (DOS) attack. Today the high visibility target was Buy.com which went public today. They also were shut down for several hours after the CEO appeared on CNBC. It appears the price of fame is high. The Ebay CEO was scheduled to be on CNBC this morning and cancelled giving no reason. Does she think the hackers are stupid? As if to say we know why you cancelled, EBAY was shutdown around 5:PM tonight by the same DOS attack. The attackers seem to have escalated the war to a new level. Each site reported access attempt data rates in excess of 800MB per second to their portal pages. This would equate to clicking on your Yahoo.com bookmark over 40 million times per minute. Obviously the attempt is not something that one high school student on his parents PC could accomplish. This is a coordinated attack by numerous people, employing "spoofing" software to hide their identities. For their sake they better hope they hid them well since the FBI is working with the various websites to trap the origination addresses and you can bet the cops will show up soon. One thing about the Internet, contrary to what you see in spy/thriller shows on TV, everything is traceable eventually. The FBI said it had already narrowed the search to less than 50 addresses but until they could physically check each address they could not identify the hackers. On Sunday I said Monday and Tuesday would be the key. Unfortunately it is a combination lock. With the Nasdaq up seven days in a row in breakout mode the tech buyers are celebrating. The Dow has still failed to join the party but this may be a symptom of the falling Dow theory I also mentioned. The new Internet economy is not driven by Walmart, McDonalds, Minnesota Mining, International Paper or Alcoa. These stocks are under pressure as investors flee to the tech stocks powering the Internet. It is entirely possible we could see the Nasdaq and the Dow diverge for some time. The problem is the historical convergence of the two indexes. While they have never run equally they at least ran in the same direction more often than not. If we are going to see this trend continue at this rate the odds of the Nasdaq surpassing the Dow will be much sooner than anyone previously expected. Simply projecting the gains from the last three months, including corrections, for the balance of the year would put the Nasdaq real close to 10,000. Can't happen you say? The Nasdaq is now up +100% in just the last 14 months and the trend is accelerating. Two billion share days will soon be common. 100 point gains are becoming common place. If the Nasdaq only equaled the last twelve months performance it would be over 9000. This is not your fathers market. Why do you think Dow Jones added Intel and Microsoft to the Dow? Self defense! At this rate of divergence maybe they need to add YHOO, JDSO and QCOM as well just to stay ahead. With oil prices falling and the rally extending into biotechs, telecoms and Internets everything appears to be lining up in our favor. Just remember what happens when everybody stands up on the same side of the boat. You think we are having fun now, just wait until later in the year when we can trade all night as well. Get to know you pizza delivery boy soon. He may be your lifeline in the future. Trade smart and sell too soon. Jim Brown Editor ****************************** OptionInvestor/Optionetics Spring Advanced Seminar Series ****************************** The spring dates for the OptionInvestor/Optionetics seminar series are rapidly approaching. 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? **************** Market Sentiment **************** Tuesday, February 8, 2000 Connecting to the Net By Pinnacle Capital Advisors With Nasdaq closing further in record territory, more and more investors are turning to the hot Internet sector; but how are people connecting to the net? According to industry sources, several market segments are expanding including ISDN lines, digital subscriber lines and direct satellite. Below is a comparative breakdown on how American and Europeans (United Kingdom, France & Germany) are accessing the Internet today. Americans: Normal Telephone 71% Cable Modem 11% ISDN Line 5% Digital subscriber 3% Web TV 2% Direct Satellite 1% Europeans: Normal Telephone 50% ISDN Line 23% Cable Modem 14% Digital subscriber 4% Direct Satellite 2% Web TV 1% Since our Sunday article, Hardware and software sectors have broken out and set new 52-week highs. Therefore, we have we have turned Bullish across these select sectors. Sector Close Posture Since Failed Rally Zones XCI Hardware 1,506 BULLISH 2/8 1,400 - 1,460 CWX Software 1,453 BULLISH 2/8 1,380 - 1,400 INX Internet 800 Neutral 1/06 760 - 800 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 on the NYSE is still very high, eclipsing 4 billion shares. The short interest on the Nasdaq is more than 2.4b shares. Mixed Signs: Interest Rates (6.220): Although the bond market rally has helped bring the current yield down near 6.0 last week, it closed Tuesday (2/8) at 6.220. BEARISH Signs: Volatility Index (22.24): 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 Tues Thurs Benchmark (2/4) (2/8) (2/10) Overhead Resistance (780-830) 4.76 3.50 OEX Close 775.51 782.21 Underlying Support (740-760) 2.10 2.45 Underlying Support (700-735) 10.31 10.55 What the Pinnacle Index is telling us: Overhead resistance is building and could stall a broad market advance. Peak Open Interest (OEX) Friday Tues Thurs Strike/Contracts (2/4) (2/8) (2/10) Puts 700 / 9,281 740 / 9,312 Calls 800 / 7,350 800 / 7,222 Put/Call Ratio 1.26 1.29 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 February 8, 2000 22.24 ************** Market Posture ************** As of Market Close - Tuesday, February 8, 2000 Key Benchmarks Broad Market Bearish/Bullish Last Posture/Since Alert **************************************************************** DOW Industrials 10,700 11,250 10,957 Neutral 2.01 SPX S&P 500 1,350 1,500 1,441 Neutral 2.01 OEX S&P 100 730 800 782 Neutral 2.01 RUT Russell 2000 475 500 537 BULLISH 11.12 NDX NASD 100 3,200 3,850 4,061 BULLISH 2.03 MSH High Tech 1,650 1,900 1,992 BULLISH 2.03 XCI Hardware 1,300 1,460 1,507 BULLISH 2.08 * CWX Software 1,200 1,420 1,453 BULLISH 2.08 * SOX Semiconductor 700 745 1,000 BULLISH 12.21 NWX Networking 800 900 971 BULLISH 2.03 INX Internet 700 800 800 Neutral 1.06 BIX Banking 645 690 541 BEARISH 11.30 XBD Brokerage 400 450 443 Neutral 11.30 IUX Insurance 625 650 533 BEARISH 11.30 RLX Retail 950 1,000 937 BEARISH 1.28 DRG Drug 340 400 363 Neutral 1.28 HCX Healthcare 700 790 756 Neutral 1.28 XAL Airline 180 190 127 BEARISH 5.21 OIX Oil & Gas 280 315 262 BEARISH 1.27 Posture Alert A favorable productivity report and Cisco's earnings report sparked a broad-based rally sending the Nasdaq further into record territory. After the Hardware and software sectors set a new 52-week high, we have turned Bullish across these select sectors. **************** WOMANS WORLD **************** I Keep Thinking We Are Top Heavy By Renee White This bond yield inversion has really thrown me for a loop. I've been in the markets for many years, including the October 1987 crash when I had an active Series 7 securities license. None of that experience is helping me understand what the changes in the bond standard will do for my trading. In the long run, I think it is good, but trading the short-term leaves me with uncertainty. Initially, last week I thought if there is a shortage of 30 year bonds being offered for auction this Thursday, then supply and demand should push the bonds higher. Since the markets follow the bonds, shouldn't that mean the rally should continue? But if the need for the 30 yr bonds has now diminished, and the 10 yr bonds are being considered as the new benchmark, how do I integrate that information into my trading? This is new for a lot of us that watch bond yields as we trade. It is adding to confusion and making my brain hurt. Last week, during the mid-week Nasdaq intra-day weakness, I entered orders on CSCO, INSP, NOK and YHOO. I did not know if these plays would hold because there was little market reaction after the rate hike announcement. I felt the lack of sell off pressure was in my favor and could possibly fair well for these stocks with anticipated split plays. I really did not feel they would all hold, but after getting stopped out prematurely on my QQQ options bought at the 10% Nasdaq correction, I was willing to take the risk. I would follow the trend and have my finger ready to exit, if one of them (or all)looked shaky come Monday or Tuesday of this week. To my surprise, all but YHOO, continued strength last week and So far, throughout this week. I closed my CSCO position today choosing not to hold over earnings, with a 62% gain, while raising my stops and leaving gains in INSP +28%, NOK +46%, and finally YHOO +13% at the close. YHOO had been late to the party, but was up as much as 37% intra-day today. Never underestimate the heart of a Champion. I expect more strength in YHOO Since it is due to split after the close on Friday. Basically, last week after the Fed announcement, I decided to follow the trend, but not knowing if it would continue up one hour after the next in lieu of the Dow's weakness. I would like to enter VERT, but I have been waiting for its' sell-off to hit a bottom. That may have happened today. I will wait for confirmation with probably a market pull back, and then enter if it is recovering. Monday turned out to be stronger than I anticipated. Again, I was expecting the typical volatility and shakiness that usually occurs during bond auction week. Of course, that also means I wasn't expecting today's Nasdaq rally on the productivity gains. I had shorted the February 198 QQQ's for two reasons; I expected Nasdaq to take a breather due to the bond auctions and my other stock and option holdings were doing well, taking for a protective position. All morning I vacillated to exit or hold, finally deciding to hold, basically for the same reasons I bought them. CSCO typically follows the Nasdaq. If it is still flying tomorrow, I may get creamed. After great earnings today and a stock split announcement, could CSCO's strength tomorrow prop a heavy Nasdaq up if it started selling off? I don't know but it would certainly help it. CSCO has had a great run recently, so it's time for profit taking and a little selling on the news but I'm not sure it knows that. If it does start selling off, that may help weigh on Nasdaq, since it is clearly ready for profit taking. I obviously bought these QQQs a little early, which can happen when you play against the trend and try to time a top. If it wasn't for auction week with the 10 yr being tomorrow, I may have exited, but then again, it is now a 7 day Nasdaq Rally and the VIX is moving lower! Certainly some big guys, will want to take profits soon. By trading QQQ (the Nasdaq 100 index)against the VIX like I mentioned in a recent Article, you take away both the stock & sector risk, and only play the market. You don't have to be a "stock picker" if you play QQQ or its options, which move slower. Trying to time a market top is always hard. With productivity gains looking good, and this latest inflation data favoring a continued bull market, it makes for a dangerous game. Lots of money has been sitting patiently, waiting for the typical February sell-off, in order to have a good entry. But I think some have gotten nervous waiting, since some have had sidelined Y2K money sitting there since last May, not feeling comfortable re-entering at the year-end rally. An early January sell-off kept their money out, as did anticipation for a typical February post-earnings sell-off. Now, no sell-off and here comes the money. So other than typical bouts of profit taking our February may not follow recent history. Every week seems to be highlighting a new chapter in the book about "the new economy". The scary part of it is that we will have to stumble our way into the new parameters and standards be that a change in bond yields, or tight labor markets with increased productivity gains, until new patterns develop. It will be easy for any of us, to trip and fall. I thought Howard, a reader of mine, had a great idea. He suggested that the Fed should be accountable like everyone else, by fielding a lot more questions in public, giving reasons as well as their views and explanations. He suggest that accountability be achieved by beginning to have debates on TV between economists, business leaders and the Fed, without the politicians doing the questioning. Boy! Now doesn't that sound like a really interesting Prime Time Special? Wouldn't that be fun to watch? Think of the great ad campaigns they could be generated for imbedding in that hour. Be that frogs undermining lizards, Stuart Xeroxing his face, Johnny rubbing the bunions, or even Stuart changing jobs to rub bunions too, it would certainly capture a lot of people's attention possibly even more than The Super Bowl. Now THAT would cause some uncertainty, volatility and interesting trading!! Renee White Contact Support ************** TRADERS CORNER ************** Picking Up Dimes In Front of a Bulldozer By Janar Wasito One of my mentors describes the strategy of selling puts and calls as "picking up dimes in front of a bulldozer". The payoff pattern is a lot of little gains followed by a big loss. Don't get crushed in a big loss. Well, my trading for the last two weeks has followed this pattern, but the big loss did not come from being short calls or puts. It came from a combination of circumstances & the oldest pitfall in the trader's life -- holding onto a losing position hoping for it to come back. I had 8 straight profitable days coming into this week by using some of the short put and short call strategies that I have been teaching myself. On Friday, however, I went back to a straight put directional play -- QQQ Puts. I loaded up at one of the peaks, and actually had a profit by the close. My plan this weekend consisted of two parts -- first, add to the QQQ Put position; second, be prepared to sell puts on Internet stocks if the market sold off and I could determine a bottom with some confidence. On Monday, I followed my plan of adding to my QQQ Put position, since the VIX was near a low, and the formation on the Nasdaq chart looked like a reversal was in the offing. On Monday afternoon, I was driving a friend to school during the last hour of trading. Everything looked OK going into the last hour, but then Murphy struck. The NASDAQ headed up, and my QQQ Puts headed down. By the time I got my wireless modem equipped lap top up and running, I had about 15 minutes left, and I was trying to decide what to do. My friend needed a ride to class, and I was getting killed, trying to correspond with other people in the local options trading group about what the QQQ put/call ratio was implying, and about other breadth indicators. I would normally cut a losing position at 15%, which had occured somewhere on Highway 280, southbound at 65 miles per hour. Now, I was down 25%. I could have changed the execution prices on my orders in Preferred, but probably not in my other broker due to low bandwidth compared to my DSL line in my San Francisco apartment. On Tuesday, I am still in the play, but down over 50%. I should have gotten out. There is no doubt about it. I am committing a cardinal sin as a trader. But CSCO announces after the bell, and I have noticed CSCO weakening throughout the day. I also note that the NASDAQ is up something like 5 or 6 days straight. It can't continue straight up. I have totally blown it. Even if I get back to even or exit with a profit, my judgment has taken an irrevocable hit for the week. So, how do you pick up dimes in front of a bulldozer? Carefully. Here is my checklist of how I read & prepare the Sunday big put section into action on a personal level. 1. Take big put section 2. Cut & paste the plays into MS Word & save as text 3. Import into excel and use the macros to format it into a spreadsheet 4. Rank by ROI (Sort feature) 5. Look at charts of indexes, sector & stocks 6. Picks stocks I know 7. Pick prices I would want to own stock; get option codes for that strike. The stocks fall into three categories -- those I know; those that need more research; and no-go stocks. 8. Take available cash. Multiply by 2 to get marginable buying power. 9. Figure number of contracts that I can buy (by figuring the amount of shares I can actually own. I think that this method is more conservative than the method used by brokers. But I would rather be conservative.) 10. Pick alternates. So, I arrive at a list of 7 primary and 2 alternate stocks with strike prices and option codes that I would like to sell at the bottom of a major sell off. I also have ball park numbers of the contracts that I would like to sell. I might sell 4 or 5 of these plays when and if a major sell off occurs and I see something that looks like a bottom. Good Luck. Buy to Close too Soon. Contact Support ************** STOCK NEWS ************** Zoran Rides Digital Revolution By Cindy Christ The business outlook for semiconductors has never looked brighter. Driven by strong growth in wireless communications, chip sales are at an all-time high. On Monday, the Semiconductor Industry Association reported that worldwide chip sales grew nearly 19 percent between 1998 and 1999, hitting a new industry record of $149 billion last year. http://members.OptionInvestor.com/stocknews/020800_1.asp ************** DAILY RESULTS ************** Index Last Mon Tue Week Dow 10957.60 -58.01 51.81 -6.20 Nasdaq 4427.50 77.63 105.73 183.36 $OEX 782.21 -2.62 9.32 6.70 $SPX 1441.75 -1.37 18.75 17.38 $RUT 537.49 6.87 5.10 11.97 $TRAN 2582.80 -36.75 10.59 -26.16 $VIX 22.10 0.77 -1.60 -0.83 Calls Mon Tue Week AMCC 217.38 27.75 3.81 31.56 Runaway train award BRCM 335.00 28.31 -4.31 24.00 Great recovery for BRCM PMCS 270.38 18.81 4.38 23.19 A tear of joy to our eye MUSE 210.06 5.50 17.44 22.94 Making up for lost time BEAS 105.88 10.56 6.06 16.63 See why the red carpet? TQNT 217.13 14.28 -2.50 11.78 Dropped, a fat wallet! TXN 138.88 2.50 4.38 6.88 New, has moved up sharply CMGI 125.38 1.38 5.44 6.81 CMGI answers our question LLTC 108.00 3.47 3.09 6.56 We are not complaining CUBE 85.69 2.31 3.19 5.50 New, a new semi play! COVD 81.25 1.69 3.00 4.69 Bullish as ever on COVD ASPT 64.50 1.63 2.88 4.50 New, astounding momentum ICIX 53.56 3.94 0.38 4.31 Good news from ICIX! NTAP 132.00 -2.56 6.63 4.06 Buyers come to the rescue PSIX 96.25 -0.63 4.25 3.63 A final run for PSIX? VECO 64.50 -0.31 3.44 3.13 Dropped, earnings Thurs. EBAY 169.75 1.50 0.19 1.69 Higher highs and lows SNDK 143.06 3.13 -2.06 1.06 More interest in SNDK BCE 119.00 -3.19 3.19 0.00 Look to LU for catalyst ADIC 58.13 1.63 -1.88 -0.25 We see the hidden value MFNX 76.88 -2.38 0.94 -1.44 Looking for a reason LU 54.19 -0.38 -2.44 -2.81 Dropped, downgrade blues Puts PVN 73.19 -2.38 -2.75 -5.13 New, same lesson twice KMG 49.13 -3.75 -1.00 -4.75 New, story based put play GBIX 36.44 -1.00 -2.56 -3.56 Much like the day after GD 43.00 -1.06 -1.50 -2.56 New, investors panic! MMM 87.69 -1.44 0.06 -1.38 The bears push a little PGR 59.50 0.00 -0.75 -0.75 PGR is slip sliding away UAL 54.88 -0.50 -0.13 -0.63 UAL rekindles concerns PG 95.75 -1.50 2.50 1.00 Continued steady slide SCAI 34.50 1.06 4.44 5.50 Dropped, earnings run? VERT 232.97 0.00 6.97 6.97 More volume on way down **************** PLAY OF THE DAY **************** ICIX - Intermedia Communications $53.56 +0.38 (+4.31 this week) 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. Sunday's Write Up 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. Tuesday's Write Up Good news from ICIX today! Not only is ICIX a positive momentum run with some nice ties to DIGX (refer to previous ICIX write ups for further details if you are new to this play) but today, ICIX officially became an earnings run. The company set a date to announce Q4 and year-end results next Wednesday, February 16th before the open. Should ICIX continue to exhibit the momentum we have seen recently, we will be keeping ICIX on our play list until next Tuesday. As you know, OI recommends closing out your positions prior to an earnings announcement to avoid a post earnings depression. ICIX gapped up to hit a new 52-week high at the open this morning before quickly pulling back to find some nice support right around $52.50. ICIX spent the majority of today's session around this level before making a nice late day recovery and closing the session in the black. This afternoon's rally may have come as word made its way onto the street about the upcoming earnings announcement. Support could continue to hold between $52.50-$53 which looks to be backed by $50-$49.50. Note: It was another nice day for DIGX, as it gained $2.75, traded within $0.75 of the 52-week high and closed over $100. Translation? More money in the pocket of ICIX. ***February contracts expire in two weeks*** BUY CALL FEB-45 QIX-BI OI=2161 at $ 9.13 SL=6.75 BUY CALL FEB-50 QIX-BJ OI=2509 at $ 4.88 SL=3.25 BUY CALL FEB-55 QIX-BK OI= 47 at $ 2.06 SL=1.00 BUY CALL MAR-45 QIX-CI OI=1694 at $11.38 SL=9.00 BUY CALL MAR-50*QIX-CJ OI= 694 at $ 7.88 SL=6.25 BUY CALL MAR-55 QIX-CK OI= 351 at $ 5.38 SL=3.50 Picked on Jan 30th at $45.00 P/E = N/A Change since picked +8.56 52-week high=$54.50 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 = 1.50 mln /charts/charts.asp?symbol=ICIX ****************** CALL PLAY UPDATES ****************** MUSE $210.06 +17.44 (+22.94) Micromuse was a little late in coming to the NASDAQ party last week, but it is certainly making up for lost time. By flying above the $200 level, MUSE is looking stronger every day and could rise much higher if this extended rally continues. A contributing factor to the rally was yesterday's announcement that MUSE has another new client. Genosys Technology Management is a global company providing network operations center services, technology hosting and professional services. Genosys will be using MUSE's Netcool software to enhance their overall services. MUSE has comfortably broken out of the consolidation area of the mid $170's. Today's rally was very impressive with the stock closing near the highs of the day and staying well above the psychologically important $200 level. Although MUSE is in a decided uptrend, past breakouts seem to only last for a day or two followed by several days of sideways action. Please keep this in mind when considering exit strategies, especially if MUSE gaps up tomorrow. ADIC $58.13 -1.88 (-0.25) The disappointing start this week for the shares of ADIC have not discouraged us from this play. We believe that the "Street" has yet to recognize the hidden value found in owning shares of ADIC. The company owns a big chunk of high flyer, Crossroads Systems (NASDAQ:CRDS). CRDS is a storage router company and ADIC has an OEM agreement to distribute these products. ADIC owns 2.6 million shares of CRDS. CRDS has rallied over 60 points in the past three days resulting in over $120 million in paper profits for ADIC. The rally for CRDS could easily continue on the heels of CSCO's strong earnings report. At some point this incredible rally in CRDS could be realized in a strong move for the shares of ADIC. In the meantime, ADIC is in the middle of a range between roughly $50- $65. There is some support around $55 which might prove to be a good entry point for a bullish position. If ADIC can trade above $62 a more substantial rally may ensue. LLTC $108.00 +3.06 (+6.56) Two more days of the exact same pattern for LLTC and we are not complaining. The gaps up followed by an intraday sell off into negative territory has proven to be excellent entry points as we suggested in Sunday's write-up. The Semiconductor Index continues to blow people's "SOX" off by cruising into new highs. LLTC is one of the biggest and most stable of the chip stocks and is a strong beneficiary of the accumulation of shares within this Index. Part of the rally may be attributed to Thursday's research coming from Merrill stating that LLTC may become a huge provider of the next wave of "E" business by being a major supplier to the e-appliance industry. We have no problem staying long this stock as it continues to propel itself into new high ground. Today saw another very strong close for LLTC up near its highs for the day. With CSCO coming out with strong earnings after the close, it is possible we may get another gap up opening for major technology stocks. If this were to occur it would be inadvisable to chase LLTC because of the aforementioned trading pattern (assuming that this pattern continues). A very aggressive trader may consider taking profits on the open and attempt to re-enter a position if there is an intraday pullback. Longer-term position holders should be wary if LLTC has a close in negative territory which may be indicative of LLTC needing to take a break before moving higher. **************************************** PLAY UPDATES CONTINUED IN SECTION TWO **************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to "Contact Support" with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 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         Tuesday  2-08-2000
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

**********************
PLAY UPDATES CONTINUED, Calls
**********************

ICIX $53.56 +0.38 (+4.31) Good news from ICIX today!  Not only 
is ICIX a positive momentum run with some nice ties to DIGX 
(refer to previous ICIX write ups for further details if you 
are new to this play) but today, ICIX officially became an 
earnings run.  The company set a date to announce Q4 and year-
end results next Wednesday, February 16th before the open.  
Should ICIX continue to exhibit the momentum we have seen 
recently, we will be keeping ICIX on our play list until next 
Tuesday.  As you know, OI recommends closing out your positions
prior to an earnings announcement to avoid a post earnings 
depression.  ICIX gapped up to hit a new 52-week high at the 
open this morning before quickly pulling back to find some nice 
support right around $52.50.  ICIX spent the majority of 
today's session around this level before making a nice late day
recovery and closing the session in the black.  This afternoon's 
rally may have come as word made its way onto the street about 
the upcoming earnings announcement.  Support could continue to 
hold between $52.50-$53 which looks to be backed by $50-$49.50.  
Note:  It was another nice day for DIGX, as it gained $2.75, 
traded within $0.75 of the 52-week high and closed over $100. 
Translation?  More money in the pocket of ICIX.

PMCS $270.38 +4.38 (+23.19) This is the kind of call play that 
can bring a tear of joy to your eye.  We thought that this 
mornings run down to just under $263 may have been the beginning 
of some possible profit-taking, which we have been keeping an 
eye out for.  After all, PMCS has gained nearly $90 in just 
the last six sessions!  PMCS found some support right around 
$270 and $265, but truthfully, if the profit-takers move in on 
PMCS, we may not see support catch until a more solid support 
level is reached, such as its 5-dma of $246.50.  Do exercise 
caution at this point.  If you take a look at today's intraday 
chart for PMCS you will see evidence of the profit-takers lurking 
in the woods.  It is could be only a matter of time before they 
decide to emerge to lock in their profits, thus taking PMCS down.
Because the stock is splitting on Friday, it may be a good idea 
to start thinking about closing out your positions and taking 
your profits.  If you are going to stay for the remainder of the 
pre-split run, be sure to tighten your stops to protect yourself
against potential profit-taking.  

PSIX $96.25 +4.25 (+3.63) Our play is either running out of
steam or is taking a short rest to stoke the furnace for a
final run into the 2-for-1 split on Friday.  Earnings are also
approaching rapidly, currently scheduled for February 21, and
this may add further upward pressure when PSIX starts moving
again.  Trading this week has been relatively quiet as buyers
and sellers run the stock between resistance near $97 and
support which is building at $92.  New positions can be
considered on a bounce at support, although more timid
investors may want to wait for a convincing breakthrough of the
current resistance level.  Positive analyst comments continue
to flow, with the latest coming from Lehman Bothers analyst
Bill Garrahan.  He began coverage of PSIX today with an
Outperform rating and a price target of $108, calling PSIX "the
largest pure play Internet access provider, with significant
global network assets".  The $17 million investment PSIX made
in Metrocall last week will likely pay huge dividends as demand
increases for wireless data and messaging services.  If you are
considering a new position in PSIX, keep in mind this will be a
short run; with the split on Friday, we will be dropping it
from our play list on Thursday.

SNDK $143.06 -2.06 (+1.06) Apparently moving on to more exciting
issues, investors have left SNDK to its own devices this week.
Posting an inside day on light volume yesterday, there was a
little more interest today.  Trading today was a stark reminder
of why we don't recommend opening new positions during amateur
hour.  The rookies had run the price as high as $156 (a new
52-week high) by 10:30am EST, only to watch the stock bleed for
the balance of the day.  Finally stopping at $140, the bounce
at this level in the last 30 minutes of trading was encouraging,
and may have been the entry point we were waiting for.  Stronger
support is seen at $137 and a bounce between there and today's
low could provide for an ideal entry point.  Recall that the
primary catalyst for our play is the 2:1 split, payable on
February 21.  Note that the breakthrough of the $137 resistance
level came last Thursday after positive comments from Merrill
Lynch.  Citing the company as one of seven that should benefit
from growth in the e-appliance market, Merrill Lynch issued
near-term Accumulate and long-term Buy ratings.  SNDK can have
large daily price swings, as evidenced by today's action, so
protect your capital with stop losses.

BEAS $105.88 +6.06 (+16.63) Now you can see why we dugout the
red carpet for BEAS.  BEAS entered our play list and performed
like a champ.  We mentioned Sunday, a move through $90 would 
provide the perfect opportunity to buy calls.  BEAS jumped
through our first hoop in the first hour Monday, and provided
numerous chances to join in for the balance of the day.  And 
is you didn't take advantage of the entry on Monday, BEAS 
provided more of the same today, following Monday's blueprint 
almost to the tee.  How's the volume been?  Extremely heavy, 
with over 12.2 million shares changing hands in the first two 
sessions this week.  Last week several analysts were pounding 
the table on BEAS, after a positive meeting with the company's 
Chief Operating Officer.  BEAS is scheduled to report earnings 
on February 22.  $103.50 and $102 should provide support for 
BEAS, with a third level back at $96.  After a $16 increase in 
two days, we may see BEAS slow down to catch its breath.  If 
that's the case use any bounces, to jump on board.

NTAP $132.00 +6.63 (+4.06) NTAP gave us bit of a scare Monday, 
but a second look showed the decline to be only profit-taking
to the support level seen near $120.  Buyers came to the 
rescue NTAP late in the day, as the networker finished the day
down only -2.56.  Whether NTAP was following the lead set by 
CSCO today or moved up on its own, we were pleased with the 
end results.  After an initial pop up this morning NTAP, found
itself trading sideways for most of the day until the last
thirty minutes of the day.  Here's the impressive part, NTAP 
jumped over $6 the last half hour on strong volume.  Over 500K
shares were traded in that time, indicating there is more to 
come.  NTAP is due to report earnings next Tuesday, after the 
close of business.  Keep this in mind if you have a position, 
as you will definitely want to exit by Friday or Monday.  CSCO 
reported better than expected earnings this afternoon and was 
higher in after-hours trading which could bode well for our 
play as well.

BRCM $335.00 -4.31 (+24.00) Not only did our split run play
recover nicely the first two days, BRCM set a new high late
this afternoon before profit taking set in.  You don't have 
much time to participate in this one, as the payable date for
the split is Friday, with the ex-date Monday.  The late day
pullback came within $5 of a strong support level seen at $330.
Depending on the mood of investors in the morning we may have
one last chance to enter this play before the split.  It is
a bit concerning that with the Nasdaq setting a new high,
and Semiconductor sector finishing with a gain, BRCM couldn't
show a bit more strength late in the day, but we will play the
cards we are dealt.  The $330 level would be a good an entry 
or exit point depending on your positions.  BRCM is scheduled 
to give a presentation at the Goldman Sachs Technology Symposium
later this week, and investors will be listening for any 
positive announcements. 

EBAY $169.75 +0.19 (+1.69) For the third consecutive session, 
EBAY traded above the psychological $170 level.  The stock is 
clearly establishing a consistent pattern of higher-highs and 
higher-lows.  Accordingly, near-term support is now at $168 and 
171 with overhead resistance at today's intraday high at $175.
The news of eBay and Disney's Go.com four-year strategic 
marketing deal added some spice to today's climb.  Together they 
will offer co-branded person-to-person sites and a new merchant-
to-person site for Disney auctions.  Basically eBay will be 
Disney's online trading service.  All told the volume is only 
moderate, but there's no doubt EBAY has powerful momentum.  This 
is the very reason EBAY is on our call list.  Target shooting 
may be your best bet for an entry unless there's a pullback on 
the Nasdaq that brings the Internet sector down a few notches.  
As is always the case with VOLATILE Internet plays, know your 
tolerance for risk and use stops carefully.  In other Internet 
news, Yahoo and Buy.com were "sabotaged" and suffered major 
outages today.  These direct attacks bring up the question of 
how vulnerable are all Web sites.

CMGI $125.38 +5.44 (+6.81) The million dollar question we were 
left with on Friday's close was answered.  CMGI did hold at the 
$118 support level on Monday!  Then today we got an explicit 
bounce that confirmed upward direction.  Yes our next obstacle 
is opposition at $126.75, an intraday high from Friday, but take 
a look at the 30-dma.  This technical indicator (now at $126.48) 
is also resistance.  Be cautious until CMGI can generate the 
momentum to penetrate these levels.  Very short-term support is 
at $125, then firmer at $118 and $120.  If you're interested in 
playing intraday volatility, a dip to firmer support provides 
solid entry points assuming of course there's a wave to ride 
back up.  In the news, CMGI happily announced its 16.1% stake 
in Silknet (SILK) will result in a 5.4% minority stake in Kana 
Communications (KANA) following Kana's proposed $4.2 bln stock 
swap for the computer software business.  

COVD $81.25 +3.00 (+4.69) "We remain as bullish as ever on the
DSL market opportunity overall, and on Covad's positioning within
the market".  The above is a quote from this morning's upgrade
from analysts at E*OFFERING.  Christine Nairne, today upgraded 
her rating on COVD from a Buy to a Strong Buy, one day after the
communications company signed a national broadband agreement 
with OneMain.com.  OneMain.com is an ISP that serves smaller
metropolitan markets and rural communities, which just happens 
to be a perfect alliance for COVD.  On the news, COVD shot up to
a new high at $81.25, but fell back to the $78 area.  The lack of
any follow through is somewhat concerning.  This morning before 
the open we saw a large number of shares for sale, which made
us a bit suspicious as well.  The one positive for our play was
the strength seen in the final two hours of trading today.  COVD
managed to dust itself off and regain its composure and move back
above the $80 area that's provided stiff resistance.  Volume 
the last two hours was exceptionally strong with over 950K 
changing hands, almost half of what it did for the whole day.
So tonight we sit with $78 providing support and $82 as the new
resistance level.  A move through $82 with continued strong 
volume would keep our play on track.

MFNX $76.88 +0.94 (-1.44) Confirming that rarely does MFNX move 
up unless volume rises over 3 mln shares, today we saw MFNX stand 
still while the rest of the NASDAQ powered up the chart to a new 
record.  Volume was less than half the ADV.  No wonder the stock 
doesn't move up in unison with the rest of the NASDAQ - there's 
no volume!  The good news is that MFNX held at $76.50 today with 
the exception of the 11 o'clock ET hour where it took a brief dip 
to $75.94.  It's looking like $76 is providing solid support in 
preparation for the next move up - maybe borne of an earnings 
run?  Zack's still has February 15 listed as the release date, 
but we won't know that for sure until we get a confirmation from 
IR.  We think more like the first week in March.  Anyway the 
chart looks pretty good and resistance is up at $80 so there room 
to run.  Now, if we could only find a REASON for it to run.  As 
usual, nothing in the news that will cause that.  Target shoot if 
you wish, or buy contracts with more time (just don't use it), 
like May.

BCE $119.00 +3.13 (+0.00) Since this play is really based on 
unlocking BCE value via its sale of its 39% stake in NT, we can 
look to LU as the catalyst for today's move.  You may recall that 
Schroder downgraded LU by two notches to an Underperform rating, 
citing too much circuit-switching inventory that will likely have 
to be sold at a discount.  Not only that but LU is having trouble 
retaining personnel.  NT holds a bigger share of the next 
generation optical market than does LU, which tells us that NT is 
gaining even more ground at LU's expense.  Also, just a hunch, 
but maybe those "un-retained personnel" have found a home at NT?  
No matter, what's good for NT is good for BCE.  Support comes in 
$2 increments at $117, $115, $113, then again at $110.  Careful 
though, resistance is at $119-$120 and volume is decreasing ever 
so slightly from its highs in late January when the news hit that 
BCE would sell its NT interests.  BCE is also nicely above its 
10-dma and may need a breather before the two meet up again.  
Nothing is going to help anyway if the market decides to roll 
over later in the week.  Since BCE is so close to resistance, you 
may find it prudent to move up your trailing stop so you don't 
give back any profit.  If you still want to get into the play, 
wait for the breakout over $120 on strong volume or a pullback 
to your comfort level of risk.

AMCC $217.38 +3.81 (+31.56) AMCC gets the Runaway Train Award 
this week for its 17% gain since picked.  As a big chip provider 
to the wireless industry, AMCC is double-blessed since it is a 
semiconductor and an optical chip/wireless Internet equipment 
player, both of which have been nicely rewarded this week.  
Technically, it looks great and has been setting new highs on 
increasing volume.  Today, it was twice the ADV, which might be 
partially explained by noting that CSFB reinstated their Strong 
Buy rating with a $240 price target.  No matter how you slice 
it, AMCC is also a split candidate over $100.  There are enough 
shares for a 3:1.  Now at nosebleed altitude in price, we hate 
to suggest taking a position at this level, especially with no 
retracement following over $90 in gains in the last 7 days.  But 
momentum is clearly driving AMCC on.  As we suggested Sunday, 
"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."  The same logic still 
applies.  Remember those trailing stops too.


***********************************************************
NEW CALLS
***********************************************************

CUBE - C-Cube Microsystems $85.69 +3.19 (+5.50 this week)

C-Cube is the industry leader in the development and delivery of 
highly integrated digital video silicon and systems solutions.  
C-Cube's Semiconductor Division delivers digital video silicon 
and systems solutions for the communications and consumer 
electronics markets.  C-Cube's DiviCom Division is a leader in 
the deployment of digital video networks.

If you have been reading the Call plays section for the past 
month you will have noticed a number of very profitable plays in 
the Semiconductor sector.  Here is another one.  The story is 
mostly the same.  A very strong earnings report from a company 
that sells a lot of its product to other high tech companies.  
On January 20th, CUBE reported earnings of $0.40 "beating the 
Street" by three pennies.  One aspect that sets CUBE apart from 
other Semiconductor stocks is its strong relationship with the 
consumer electronics sector.  Circuit City and Best Buy recently 
have rallied on the reports that consumers are spending money 
like crazy on the latest gadgets.  C-Cube makes a lot of the 
chips for these must-have toys, especially DVD players.  Cube 
began the year on a soft note selling off with the rest of the 
market.  Since then the stock had a spectacular rally that saw 
shares rise from the mid $50's up to the low $80's.  After an 
inevitable pullback and consolidation back down to $70 the stock 
has been one of the big winners in this stellar NASDAQ run.  
With a new high established today look for the possibility that 
the momentum traders may start gobbling up shares and drive the 
stock higher.  It is important to note that CUBE is approaching 
that important $90 level.  If CUBE can close above $90 it may be 
the beneficiary of that peculiar phenomenon that drives stocks 
right to $100 as soon as they cross $90.  We have seen this 
happen many times before and hopefully it can happen again.  If 
the market slows down look for support in the high $70's for an 
entry point.

In early January the Lehman analyst re-iterated a Buy rating on 
the company with a target price of $71.  With the stock well 
above the target price we are looking for someone to step up to 
the plate and put a new more aggressive target price out there 
to shoot for.  We got a new target price of $110 from H.C. 
Wainwright.  Let's see if anyone follows suit. 

***February contracts expire in less than two weeks***

BUY CALL FEB-80 UQB-BP OI=440 at $ 7.50 SL= 5.75
BUY CALL FEB-85 UQB-BQ OI= 97 at $ 4.13 SL= 2.50
BUY CALL MAR-75 UQB-CO OI= 10 at $14.13 SL=11.25
BUY CALL MAR-80 UQB-CP OI=213 at $11.13 SL= 8.75
BUY CALL MAR-85*UQB-CQ OI=202 at $ 8.00 SL= 6.25

Picked on Feb 8th at    $85.69    P/E = 63
Change since picked      +0.00    52-week high=$86.00
Analysts Ratings     3-3-1-0-0    52-week low =$17.25
Last earnings 01/00  est= 0.37    actual= 0.40
Next earnings 04-20  est= 0.34    versus= 0.34
Average Daily Volume =   845 K
/charts/charts.asp?symbol=CUBE

**********

TXN - Texas Instruments $138.88 +4.38 (+6.88 this week)

How about Semiconductors R Us?  TXN has broad-based exposure
to the semiconductor market, especially in digital signal
processors and analog integrated circuits.  TXN's products are
used in a diverse range of electronic systems, including
digital cell phones, computers, printers, hard disk drives,
networking equipment, and digital cameras.  TXN also supplies
electronic controls equipment, sensors, radio-frequency
identification systems, and sophisticated graphing
calculators.

Continuing to benefit from the strong growth in the Semiconductor 
industry, TXN has moved up sharply over the past week.  Launching 
through resistance at $115, the buying volume pushed TXN above 
$130 in only 2 days.  After spending last Friday consolidating 
its gains, the buyers returned this week to add on another $6.88.  
After a slight post-earnings pullback, TXN was ready to run 
higher and good news and upgrades (see below) continue to add 
to the momentum.  TXN continues to produce cutting edge products, 
deliver them to market and post strong earnings.  That is a hard 
combination to beat and investors are continuing to show their 
approval.  Volume over the past week has been as high as 50% 
above the ADV, but has dropped off some this week as investors 
catch their breath.  TXN has mild support at $132 (also the 
site of the 5-dma), backed up by stronger support at $125.  
Resistance seems to be forming at $139, near today's high.  
Going forward, consider entries on a bounce near support or a 
break through $140.  As is the case with any momentum play, 
volume will be the key to moving higher and stops are a must.

Further strengthening its leadership in analog circuits, TXN
introduced new process technology on Monday that enables 20
times greater integration of Digital logic with Analog blocks
in Broadband applications.  Also yesterday, the Semiconductor
Industry Association (SIA) announced that worldwide sales of
semiconductors jumped 18.9 percent in 1999 to a record $149
billion.  According to George Scalise, president of the SIA,
"1999 broke all predictions and was an exceptional year of
record growth and productivity".  On February 4th, Banc of
America analyst Richard Whittington upgraded TXN from Buy to
Strong Buy, based on strong new designs for cable modems and
next-generation cell phones.

***February contracts expire in less than two weeks***

BUY CALL FEB-135 TNZ-BG OI=671 at $ 7.38 SL=5.50
BUY CALL FEB-140 TNZ-BH OI=311 at $ 4.63 SL=2.75
BUY CALL MAR-135 TNZ-CG OI=643 at $12.38 SL=9.75
BUY CALL MAR-140 TNZ-CH OI= 58 at $ 9.75 SL=7.25
BUY CALL MAR-145 TNZ-CI OI=154 at $ 7.63 SL=5.75

Picked on Feb 8th at     $138.38     P/E = 80
Change since picked        +0.00     52-week high=$139.69
Analysts Ratings     14-14-5-1-0     52-week low =$ 43.00
Last earnings 01/00    est= 0.47     actual= 0.51
Next earnings 04-24    est= 0.51     versus= 0.32
Average Daily Volume =  4.08 mln
/charts/charts.asp?symbol=TXN

**********

ASPT - Aspect Communications $64.50 +2.88 (+4.50 this week)

Aspect Communications provides customer relationship management 
solutions worldwide.  Their hardware and software enables 
companies consistent interactions with their customers via the 
telephone, Web, electronic mail, and fax.  Clients include 
DaimlerChrysler, E*Trade, ICT Group, Bank United, and 
PacificCare Health Systems.

The momentum generated from Aspect's announcement it will 
acquire PakNetX Corp is astounding.  On February 1st, ASPT 
reported it entered into a definitive agreement to purchase the 
privately held company.  ASPT took off like a rocket climbing 
from a daily low of $48.63 to today's all-time high of $65!  
This represents a 33.7% increase in just six trading sessions. 
Quite an impressive feat for any stock.  The acquisition is 
important because the combined technology will for the first 
time allow seamless integration of video, voice, conferencing, 
and Web interactions from a centrally managed software switch, 
thereby eliminating the traditional PBX.  As a result of the 
$55 mln cash deal, Aspect will take a one-time charge in the 
first quarter.  In response, CSFB trimmed their 2000 EPS outlook 
to $0.45 from $0.51 the following day, but this had no effect 
on the share price.  Near-term support is now right in the 
vicinity of the 5-dma ($59.52) and firmer at $58, the stock's 
previous resistance.  If you can catch a solid bounce off the 
5-dma on the rise, that would be a door prize.  But remember 
that in light of the rapid ascent traders should expect profit-
taking.  Enter into this momentum play with caution.  

In the news this week, Aspect announced the integration of its 
Aspect Portal applications with Clarify, Remedy and Vantive 
front-office systems.  This "out-of-the-box" solution provides a 
seamless system that can be easily customized to meet a client's 
need.

***February contracts expire in less than two weeks***

BUY CALL FEB-60 ATQ-BL OI= 99 at $ 7.25 SL=5.50
BUY CALL FEB-65 ATQ-BM OI=613 at $ 4.25 SL=2.75
BUY CALL MAR-60*ATQ-CL OI=113 at $11.00 SL=8.75
BUY CALL MAR-65 ATQ-CM OI= 57 at $ 8.25 SL=6.50

Picked on Feb 8th at     $64.50    P/E = N/A
Change since picked       +0.00    52-week high=$65.00
Analysts Ratings      1-9-1-0-0    52-week low =$ 6.00
Last earnings 12/99   est=-0.03    actual= 0.01
Next earnings 04-14   est= 0.00    versus=-0.27
Average Daily Volume = 1.04 mln
/charts/charts.asp?symbol=ASPT


***********************************************************
PUTS
***********************************************************

PGR $59.50 -0.75 (-0.75) Slip sliding away is the continuing 
catch phrase for the shares of PGR.  There is simply no interest 
on the buy side and bids continue to slowly drop.  Today's break
below $59.63 into new low territory is an encouraging sign that 
we can ride that slow steady stairway to put profits.  Investors 
have just simply decided that they wish to put their money to 
work in the only games in town, tech and biotech.  With interest 
rates rising the decline of financial stocks could keep going 
for awhile.  It appears that one could keep buying puts on mini-
rallies and be cautious of any rallies that take out the 
previous day's highs.

GBIX $36.44 -2.56 (-3.56) The story for GBIX is a little like 
the day after Christmas.  The excitement for GBIX is over and 
investors are heading for the "returns counter" to unload their 
shares and use the money for other, more desirable "toys".  
Today, there were plenty of sellers lined up right around $37, 
and though this level tried to provide some support, it could 
not hold and the sellers managed to push the stock back to 
close underneath and just pennies above the low for the day.  
Volume backing today's decline was impressive, coming in roughly 
25% higher than average.  All of the indications that we like 
to see backing a good put play are present here.  We are 
approaching a level of some pre-established support in the 
neighborhood of $36-$34.  Though GBIX does look to have the 
necessary momentum to push it through this level, it may be a 
good idea to proceed with caution as far as new entries go.  
GBIX may encounter some resistance at $38, though the more 
formidable level looks to be at $40.  We don't believe that 
investors are ready to start redecorating their portfolios 
with GBIX shares just yet.

VERT $232.97 +6.97 (+6.97) VerticalNet traded more horizontally 
than vertically on Monday as it spent the day testing support 
at $225 and finally opted for a close unchanged for the day.  
Though VERT traded as low as $220 on Monday, the $225 level 
held well throughout the majority of the session and could 
provide us with a bit of an obstacle on this play.  Today, 
VerticalNet traded a bit truer to its name, heading straight 
up (or vertically) to $239.  Obviously, this is not the 
direction we are looking for, though we were encouraged by a 
couple of the factors in today's rally.  One being that VERT 
found resistance first at $239 and then at $235 nearer to the 
close (lower resistance levels).  Another encouraging factor 
in today's move was that there was considerably more volume 
backing the afternoon drop then the day's move up, which is 
indicative of more of traders looking to dump their shares 
of VERT.  Today's session may have done us a favor by providing 
some room for potential entry points.  We still think VERT 
could fall back to $200, but obviously you will want to 
confirm direction before entering and exercise caution at the 
$225 level.

MMM $87.69 +0.06 (-1.38) MMM seems to be stuck - relegated to
a narrow range of $3 as sellers absorb all of the available
buying volume.  Yesterday looked good for our play as the bears
pushed MMM through its resistance at $89.  Those that missed
their entry point yesterday were given another chance during
today's amateur hour.  Bouncing as high as $90 in the first 45
minutes of trading, MMM declined for the rest of the day,
closing near the low at $87.69.  Now that we are firmly below
the months-long support (now resistance) level of $89, the
10-dma (now below the 200-dma), should continue to provide
downward pressure.  Volume has been just north of the ADV and
we will need continued selling interest to propel our play
towards its next support in the vicinity of $81.

UAL $54.88 -0.13 (-0.63) The recent move by the major airlines 
to cut leisure fares by as much as 45% for US, Canadian, and 
Caribbean travel rekindled analysts' concerns of weaker airline 
revenues today.  Couple this with Clinton's transportation 
budget proposal yesterday, which ultimately would incorporate 
a cost-based fee passed directly onto the consumer, and the 
airlines are not in the limelight.  Overall, the Dow Jones 
Transportation average is on the skids resulting from higher 
fuel costs and tight labor markets, not to mention earnings 
season coming to an end, we think it smarter to play the 
downside at this point.  UAL doesn't have a firm support level 
south of its current price.  Although today, UAL did bounce 
intraday off points between $53.50 and the daily low of $53.13 
before it tried to unsuccessfully close above the short-term 
resistance at $55.  Technically UAL is still safely tucked under 
the 5-dma ($56.26) and this is a good sign.  Volume is robust 
too and at times reached levels more than double its ADV.  
Moreover keep your attention on the above-mentioned reference 
points for signs of direction.

PG $95.75 +2.50 (+1.00) News that Standard & Poor's picked 
Proctor & Gamble for its Global Index, a new index tracking 100 
of the world's largest public companies, was of no positive 
consequence on Monday.  PG continued its steady slide losing 
another dollar on strong volume.  Trading volume was vigorous 
again today, but instead of pushing lower PG found comfortable 
intraday support in the $92 and $93 range.  Late day the stock 
made a valiant charge but slammed into strong resistance just 
under the 5-dma ($96.04).  This is a bearish sign considering 
this technical indicator has served as overhead opposition on 
PG's descent.  Although it's important to recall that back in 
October, $92 and $93 was a bottom for the stock.  In other 
words, look for PG to crack these marks.  Even if market 
sentiment continues to be somewhat negative, it's possible 
investors may see this as a prime long-term buying opportunity 
despite the company's warning of weak 3Q results. 


***********************************************************
NEW PUTS
***********************************************************

GD - General Dynamics $43.00 -1.50 (-2.56 this week)

General Dynamics, headquartered in Falls Church, Virginia, 
employs approximately 44,000 people worldwide and has annualized 
sales of about $10 billion.  The company has leading market
positions in shipbuilding and marine systems, amphibious 
and land combat systems, information systems, and business 
aviation. 

Wow, the last time GD was this low was just about two years 
ago.  Talk about not capitalizing on the amazing bull market.  
Investors are really starting to panic too as we saw record 
volume today.  Adding insult to injury is the Nasdaq hitting 
a record close.  If we look back to May of 1998, GD went as 
low as $40.  That may be an upcoming support level to watch 
out for.  But with investors panicking, GD might fly past $40 
in which case the next stop would be $32.  News has been good 
for GD as their subsidiary, Gulfstream Aerospace, received a 
large contract today, but it had no effect on investors.  Over 
a week ago they got upgraded by two analysts from Buy to Strong 
Buy.  Despite this good news, something is obviously wrong with 
the stock.  Resistance is at $49 and also a great entry point 
if we bounce up there, but with investors in such a panic to 
unload GD, today's close might be the best price you can get.
It looks like nothing can help GD right now (but that is 
usually when a stock starts to bottom, right?).  Maybe not in 
this case.  So, as always, place stops to protect yourself from 
a shift in direction.  But with investors lack of faith in GD 
we see them continuing down that long path to more 52-week lows.

***February contracts expire in less than two weeks***

BUY PUT FEB-50 GD-NJ OI=320 at $5.75 SL=3.50
BUY PUT FEB-45*GD-NI OI=108 at $2.69 SL=1.25

Average Daily Volume = 917 K
/charts/charts.asp?symbol=GD

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

PVN - Providian Financial Corp. $73.19 -2.75 (-5.13 this week)

Providian is a provider of lending and deposit products to 
customers nationwide and also offers credit cards in the United 
Kingdom.  Providian serves a broad market with loan products 
including credit cards, home equity loans, secured cards and 
membership services.  With a commitment to 100% customer 
satisfaction, Providian's mission is to help its customers build 
or rebuild, protect and responsibly use credit by providing a 
quality borrowing experience that leads to active and lasting 
customer relationships (code for "C" grade consumer credit). 
Providian has $23 billion in assets under management and over 
12 million customers.

Sometimes kids need to learn the same lesson twice.  Such is the 
case for PVN.  Spurred by attorneys' general in California and 
Connecticut, there are rumblings that the Federal government may 
be coming after the subprime consumer credit giant.  That 
wouldn't be the first time PVN has had suits leveled at them.  
There were already four lawsuits filed in San Francisco that 
accuse Providian of charging consumers for credit products and 
services they didn't want, transferring balances from other 
credit cards without customer approval and imposing excessive 
late fees, according to a Forbes article published as far back as 
July, 1999.  Anyway, the rumor had an effect on the technical 
outlook for the stock, dropping it below historical support of 
$75-$77 on increased volume over the last two days.  It now 
trades under its 10, 50, and 200-dma.  That's a bad sign given 
that interest rates (bond rates, not discount rates) should be 
benefiting financials.  Not so for PVN.  Its next level of 
support is way down at $60.  It doesn't mean it will get there 
though.  The rumors could be dispelled quickly and PVN is still 
a nicely profitable company with a growing earnings stream (just 
the stuff to cause an upgrade).  A tick up to $75-$77, then a 
bounce back south would provide the best confirmation for entry - 
all the better if the market is headed south too from interest 
rate worries (watch tomorrow's 10-yr bond auction).

***February contracts expire in less than two weeks***

BUY PUT FEB-75 PVN-NO OI=548 at $4.25 SL=2.50
BUY PUT MAR-75 PVN-OO OI=432 at $7.13 SL=5.25
BUY PUT MAR-70*PVN-ON OI=785 at $4.38 SL=2.75

Average Daily Volume = 1.14 mln
/charts/charts.asp?symbol=PVN

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

KMG - Kerr-McGee Corp. $49.13 -1.00 (-4.75 this week)

Kerr-McGee Corporation is an Oklahoma City-based company 
engaged in two worldwide businesses.  One is oil and gas 
exploration and the other is production and marketing of 
titanium dioxide pigment.  The company purchased Oryx Energy 
in 1999, making it one of the top US non-integrated oil and 
gas companies.

This is a story based put play.  As you know, oil prices have 
been very high.  Oil was at roughly $10 a barrel at the
beginning of 1999 and is now all the way up in the neighborhood
of $30 a barrel.  Because of the inflated prices, it is 
expected that OPEC will be announce plans to increase oil 
production at the March meeting to force the price of oil down.  
While this gesture will most likely grant relief to some, it 
is going to be the companies that have benefited from the high 
oil prices, i.e., drilling companies, such as KMG, that are 
going to suffer.  Though the overall global drilling activity 
fell 24% from 1998 to 1999, this drop was most likely curbed by 
the increase in oil price and demand.  Though analysts expect
drilling activity to increase in 2000, they also note that 
"some areas in 2000 will be slow to catch up", which will only 
add fuel to the fire at this point.  More specifically to KMG, 
though it continues to deliver good news, such as a recent 
deepwater oil discovery, which could yield between 70 and 100 
million barrels of oil, the stock continues to head south on a 
seemingly daily basis.  Apparently investors are growing leery 
as the March OPEC meeting approaches.  KMG looks to have 
everything in place to keep right on sliding downhill.  Shares 
of KMG traded up to a new 52-week high of $67.94 back on January 
21st.  Since then, things have been a little slippery for the 
oil and gas company.  KMG has exhausted all of its moving 
average support levels and could be positioned to continue its 
decline and offer a healthy drop.  KMG looks to have some 
resistance overhead at $50 with more right around $54.  We see 
some support between $46 and $44, but being that KMG's drop is 
most likely fueled by the upcoming OPEC meeting, we think that 
KMG could break through these levels.  In the news today, KMG 
announced a public offering of 7.5 million common shares at 
$50.06 a share and a separate offering of $550 million of 
10-year convertible debentures.  This action accounts for the 
huge volume in today's session (over 9 million shares). 

***February contracts expire in less than two weeks***

BUY PUT FEB-55 KMG-NK OI= 31 at $6.50 SL=4.75
BUY PUT MAR-55 KMG-OK OI= 12 at $7.63 SL=5.75
BUY PUT MAR-50*KMG-OJ OI=135 at $4.00 SL=2.50

Average Daily Volume = 471 K
/charts/charts.asp?symbol=KMG


******
DROPS
******

CALLS

TQNT $217.13 -2.50 (+11.78) It is with a heavy heart but a very 
fat wallet that we say goodbye to Triquint Semiconductor.  It 
looks like we finally had a blowoff top in the stock today and 
it is time for TQNT to cool off and attempt to consolidate its 
monster gains.  TQNT established a new high all the way up to 
$235.50 before pulling all the way back to $217.13 thus 
experiencing its first down day in six trading sessions that 
have seen the stock climb over 80 points.  This is clearly a 
time to utilize the axiom, you never go broke taking profits. 
Earnings are coming out on Thursday followed by a 2-for-1 split 
on February 22nd.  If the earnings come out fine we may pick up 
coverage of TQNT for the split run.

VECO $64.50 +3.44 (+3.13) Veeco keeps banging into resistance at 
$65 and with earnings coming out on Thursday it is time to exit 
this play.  A strong close today may give us a little follow 
through on the opening tomorrow and a good exit price.  Remember, 
Veeco has a history of peaking in share price this time of year.  
It seems unlikely that we will re-enter this stock as a call 
play.  That said, it is entirely possible that Veeco could 
really take off if it has a huge earnings announcement and can 
take out the major resistance points.  So you may want to keep 
an eye on it.

LU $54.13 -2.25 (-2.81) That was mighty unpleasant.  Just when 
we thought the bad news is out, Schroder's downgrades by two 
notches to an Underperform with a $45 price target.  That's 
like saying, "sell".  What's the reasoning?  Schroder's analyst 
thinks LU's circuit switching product is experiencing weak 
demand and may be subject to discounting later in the quarter 
at up to a 70% rate.  They also cited LU's personnel turnover.  
This is going to rub off nicely for NT/BCE since they have taken 
the lead in optical gear.  But it's lousy for LU since they now 
have to play catch-up and unload the old stuff at fire sale 
prices.  The sad part is, there is probably some truth to the 
analyst comments.  That said, we're dropping LU tonight.

PUTS

SCAI $34.50 +4.44 (+5.50) So now it decides to follow the 
Nasdaq!  We thought earlier that SCAI was missing out on the 
Nasdaq's highs, but we see now that SCAI has finally been talked 
into capitalizing on the good market conditions.  With earnings 
due out this Thursday the 10th, today might be the beginning 
of an earnings run.  So we will obviously drop our put play on 
SCAI.  They broke through resistance of the 10-dma at $32.50 
and on a good volume serge this afternoon.  Next resistance 
is tough to determine due to a lack of real trend in their 
trading.  It should be interesting however, to see what their 
earnings are and if investors really like what the numbers say.  
For now though, we are exiting SCAI.  


*****************
Combination Plays
*****************

Technology Buyers Propel Nasdaq To Record Levels..

U.S. equity markets rallied today after a report of increasing
productivity in American industry


*************
MARKET RECAP 
*************
Monday, February 7

Monday saw another Nasdaq record as investors continued to plow
money into technology and biotech stocks. The composite of high
tech issues closed 77 points higher at 4,321. The Dow Industrials
ended down 58 points at 10,905. Small-cap stocks outpaced the
broader market with the Russell 2000 up over 1% while the S&P 500
Index slipped to 1,424. On the NYSE, declines led advances 17 to
12 on 918 million shares exchanged. There were 82 stocks at new
highs and 151 at new lows. The benchmark 30-year U.S. Treasury
bond was down 29/32, with the yield at 6.34%.


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

PepsiCo     PEP    FEB37C/FEB35C   $0.38   credit   bear-call
Sandisk     SNDK   FEB95P/F105P    $0.75   credit   bull-put
BMC Soft.   BMCS   MAR40C/FEB45C   $3.75   debit    diagonal
Marshall    MI     FEB50C/FEB55C   $3.50   debit    bull-call
Southdown   SDW    FEB50P/FEB60C   $2.25   credit   strangle


Portfolio plays:

Technology stocks soared as investors continued to lose interest
in the majority of classic issues. Rising bond yields have reduced
the attractiveness of blue-chip companies since the Fed increased
interest rates in January. Higher interest rates reduce corporate
profits and make bonds and speculative issues more competitive as 
investments. Financial markets are forecasting more rate increases
in the next year and that means money will continue to flow into
high growth sectors such as Internet, telecom and biotechnology.

Chip companies were today's big winners, up after a bullish report
from the Semiconductor Industry Association. The SIA reported that
December worldwide semiconductor sales rose to $14.7 billion, and
year-end industry sales totaled $149 billion; an industry record.
Financial, cyclical and retail stocks were hit hard and transport
issues were lower even though oil prices fell. Gold company shares
were among the most active as they consolidated following a strong
rally last week. The majority of issues in the Spreads portfolio
moved higher with the surging technology group.

One of our headline issues, Pfizer (PFE) has finally agreed to buy
Warner-Lambert (WLA) for $90 billion in stock. The company will
exchange 2.75 shares of its stock for each outstanding share of 
Warner-Lambert. The combined company will produce $28 billion in
annual revenues, including $21 billion from pharmaceutical sales.
Pfizer shares rose to $36.75 on the news and we are hopeful the
issue will continue to rebound. Our bullish calendar spread will
begin to profit as the stock nears $38. Another long-term issue,
Adobe Systems (ADBE) was up $3 to $77 after announcing the debut
of PDF Merchant software, a server-based application that secures
electronic content for distribution and sales via the Internet.
Adobe PDF Merchant provides publishers the necessary security to
deliver electronic books directly to consumer devices. Our bullish
LEAPS/CC's position has rebounded significantly in the last week
and in order to maintain upside potential, we are going to roll
forward to March options. Our new position is LJAN80C/MAR80C at
$5.50 debit. The spread profit is near 100%.

A number of market-leading issues moved higher during the session.
Triquint (TQNT) was the top performer, up $14 to $220 on momentum
from the recent confirmation of an upcoming 2-for-1 split. Aspect
Development (ASDV) rallied $10 to $90 after the company was listed
as a current holding in a popular (aggressive) mutual fund. The RS
Internet Age portfolio includes middle-ware, content providers,
networking, application software and other technology companies.
BEA systems (BEAS) was also listed in that fund and the stock rose
$10 to end at a $100, a new all-time high. Emulex (EMLX) closed
up $12 at $120 after an article reported the issue was a majority
holding in the Evergreen Select Strategic Growth Fund. The fund's
manager focuses on hot technology areas such as bandwidth, data
storage and business-to-business e-commerce. Director Shannon Reid
says an explosion in the amount of information being transmitted
around the world creates a big opportunity for companies who have
the capacity to store, manage and access data. Extreme Networks
(EXTR), a top networking technology issue, finally recovered from
a recent slump. The stock bolted $6 to $88 with the rally in the
networking sector. Our bullish credit spread at $70 should expire
comfortably OTM and all of the positions on these issues are at or
near maximum profit.

In the small-cap group we had one surprise. Zoltek (ZOLT) gapped
up $1.75 to close at $12 on strength in some bullish block orders.
As usual, the company offered no news or reasons for the activity
but regardless of the reasons for the move, our bullish position
is now deep ITM and approaching maximum profit.


Tuesday, February 8

U.S. equity markets rallied today after a report of increasing
productivity in American industry. The Nasdaq composite rose 106
points to 4,427, closing above the 4,400 mark for the first time.
The Dow Jones Industrial Average recovered 51 points to 10,957,
after an early session romp to 11,000. The S&P 500 Index romped
17 points to 1,441. On the NYSE, advancers beat decliners 15 to
14 on 1.05 billion shares traded. There were 133 stocks at new
highs and 129 at new lows. The yield on the benchmark long bond
slumped to 6.24%.

Portfolio plays:

Investors lost all control in today's session, buying stocks at
an aggressive pace in a wide variety of sectors. Our portfolio
winners were much the same as yesterday with technology issues 
dominating the leader-board. Aspect Development (ASDV) roared
ahead almost $7 to close at $96 and BEA Systems added another $6
to end at $106. Adobe Systems (ADBE) rocketed to $83 in the fifth
consecutive day of gains. The stock has rebounded from lows near
$55 last Wednesday. BCE Incorporated (BCE) climbed $3 to close at
$119 as shares in one of their largest holdings, Nortel Networks
(NT) continued to rally. A number of other issues deserved mention
but the list of bullish big-cap stocks was far too extensive to
cover in our daily narrative.

In the small-cap section, Marketing Services Group (MSGI) shot-up
$4 to $24 on speculation of a possible spin-off of WiredEmpire, an
Internet (B2B) commerce provider. WiredEmpire provides integrated
e-relationship tools and services for business. Companies looking
to enhance their Internet marketing and customer service efforts
can choose from a selection of Wired's products. Cabletron (CS)
rallied $3 to $31.50 as stocks in the networking sector continued
to reach new heights. Our bullish LEAPS/CC's spread was rolled up
and out to March during the session. The new position is short at
$25 (LJAN15C/MAR25C) with a $4.25 debit. Tekelec (TKLC) moved up
$2.62 to end at $36 with the telecom group and Unisys (UIS) ended
$1.50 higher at $33.50 after presenting a bullish future outlook
at the Goldman Sachs Technology Investment Symposium in Southern
California.

Our new group of speculation plays was a mixed lot. Marshall and
& Ilsley (MI) fell out of favor with a $1.50 decline to $54 while
BMC Software (BMCS) rallied $3.38 with the computer sector. The
speculative merger position on Chris Craft (CCN) rebounded nicely,
finishing at $0.50 debit with the stock ending $1.62 higher at $75.
It appears the bullish credit spread will expire safely OTM. The
calendar spread on Pfizer (PFE) is included in this section and
today the stock rebounded another $0.88 to close near $38. The
long option is once again trading above our cost basis. Our new
credit strangle on Southdown (SDW) moved back to the middle of the
profit envelope, closing just short of $56. The break-even points
are $47.75 and $62.25. It was nice to see Vodaphone (VOD) recover
in today's session. The frenzy for media, telecommunications and 
technology issues propelled many of the European stocks higher and
fortunately, the recent Mannesmann merger hasn't driven investors
away from this global issue.

In the straddles group, Ciber (CBR) continued into profitability
with a midday low near $17. The maximum observed return on the
position was $12.25. Another recent winner in the section, Jones
Pharmaceuticals (JMED) powered ahead $3 in Monday's session. Our
new straddle reached $19 profit, a 300% return for the two month 
position. LHS Group (LHSG) has also been one of the top performers
this month with a favorable $5.25 profit on $6.75 invested.

Questions & comments on spreads/combos to Click here to email Ray Cummins
******************************************************************
NEW PLAYS -
******************************************************************
AFCI - Advanced Fibre  $55.00     *** Momentum Play ***

Advanced Fibre Communications is an originator of telecom systems
for the "local loop" between telephone service users and public
telephone networks worldwide. AFC's flagship product is the UMC
1000 Third Generation Digital Loop Carrier. The UMC 1000 can be
installed in a variety of network configurations to support the
varying geographic distribution of subscriber bases. There are
thousands of AFCI's systems installed in countries around the
globe, serving approximately 2.5 million access lines. In the
U.S., leading companies such as Sprint, WinStar, and Pac Bell,
among others, deploy AFCI's UMC 1000 system.

Advanced Fibre has been on the move recently and the big news is
they have settled a lawsuit with RELTEC, a subsidiary of Marconi
Communications. In addition to the settlement, they have entered
into an agreement in which Marconi will distribute AFC's UMC1000
Multi-Service Access Platform for a period of three years. The
distribution agreement allows Marconi to offer a broader line of
products to its current and prospective customers. At the same
time, AFC will benefit from Marconi's worldwide presence.

The analysts were all over the news and they offered a slew of
positive comments. Gruntal reiterated a short-term target of $50
to $60. Josepthal upgraded AFCI to a BUY with increased earnings
estimates. US Clearing/Piper Jaffray also reiterated their STRONG
BUY rating based on the lawsuit settlement.

We simply favor the momentum in the issue and this bullish play
offers a favorable risk/reward outlook.


PLAY (very aggressive - bullish/diagonal spread):

BUY  CALL MAR-40 AFQ-CH OI=1021 A=$17.62
SELL CALL FEB-50 AFQ-BJ OI=45   B=$9.00
INITIAL NET DEBIT TARGET=$8.38-$8.50 TARGET ROI=19%


The basic diagonal spread is a combination of both price and time
(calendar) spreads. The most common version of this strategy
involves buying a longer term call and selling a nearer term call
at a higher strike price. The initial debit in the position should
be less than the spread between the two options, eliminating the
possibility of loss in an upside break-out. The cost basis of the
long-term option is reduced by the sale of the short-term option.
The position achieves maximum profit if the stock price remains
above the sold option's strike price. The spread can also achieve
positive returns long before expiration if the underlying stock
advances significantly. More information on this unique strategy
can be found in Sunday's edition of "Options 101."

Chart =
/charts/charts.asp?symbol=AFCI
******************************************************************
VLNC -  Valence Technology  $35.88     *** Earnings Rally! ***

Valence Technology is a development stage company engaged in
research and development to produce advanced rechargeable
batteries based upon lithium ion and polymer technologies. Their
current research design is a hybrid of proprietary technology
and a plastic lithium battery technology licensed from Bell 
Communications. The company's potential battery products may be
used in a number of applications including a rechargeable power
source for portable electronics products such as notebook
computers and cellular telephones, automotive starter, lighting
and ignition, electric vehicles and military equipment. Valence
derives most of its revenues from a completed research and
development contract with the Delphi Automotive Systems Group
of General Motors Corporation.

Valence is expected to report quarterly earnings this week and
option traders have risen to the occasion, speculating on the
outcome of the report. Implied Volatility and volume have been
off the scale with call options outpacing puts by a factor of
5 to 1. According to a First Call/Thomson Financial consensus
forecast, the company is expected to post a loss of $0.32 per
share for the quarter. The announcement should occur before
the company's annual shareholders' meeting on 2/15/00.

We expect the issue to consolidate in the short-term and with the
current interest in call options, we should be able to open one
of these positions at the target debit. A complete reversal with
a close below the brief support area (near $27-$28) would be a
potential early-exit signal.
   

PLAY (conservative - bullish debit spread):

BUY  CALL MAR-22.50 VHQ-CX OI=97  A=$14.88
SELL CALL MAR-25.00 VHQ-CE OI=333 B=$12.62
INITIAL NET DEBIT TARGET=$2.00 ROI(max)=25% B/E=$24.50

-or-

PLAY (conservative - bullish debit spread):

BUY  CALL MAR-20.00 VHQ-CD OI=533 A=$16.88
SELL CALL MAR-25.00 VHQ-CE OI=333 B=$12.62
INITIAL NET DEBIT TARGET=$4.00 ROI(max)=25% B/E=$24.00

Chart =
/charts/charts.asp?symbol=VLNC
******************************************************************
CRUS - Cirrus Logic  $15.69     *** Chip Sector Speculation ***

Cirrus Logic is a premier supplier of advanced integrated circuits
that combine mixed-signal processing, precision analog techniques,
embedded processors, and application-specific algorithms into
system-on-a-chip solutions for existing (and emerging growth)
markets. The company serves a broad customer base in the markets
of mass storage, personal computers, communications, consumer
electronics, and industrial electronics. They supply integrated
circuits that perform the key electronics functions contained in
advanced magnetic, optical, and removable disk drives. They also
develop and market products that address the needs of the Local
Area Network, Wide Area Network, and Internet environments. Their
key customers include Western Digital, Seagate, Hewlett-Packard,
Dell, Compaq, IBM, Cisco, Bay Networks, Motorola, and Sony.

In January, Cirrus reported favorable results for the quarter
with net revenue growth of 13% over the prior period. Earnings
per share were $0.40 compared to a per share loss of $0.15 in the
previous quarter. The increase in revenue was fueled by a record
demand for the company's market-leading "Crystal" audio products
as well as a ramp to high-volume shipments of its integrated 3Ci
chip for hard disk drives. Record shipments of its CD-RW chips
also helped boost profits. The continued expansion of bookings
and a large order backlog suggest Cirrus is poised to become a
leader in the field of high-performance analog and DSP solutions
for entertainment electronics.

The leading analyst for Cirrus is Goldman Sachs and last month
the brokerage raised its 2000 earnings estimates and upgraded the
stock to OUTPERFORM, based on the quarter's strong results. We
have made some excellent profits on the issue in the past and
the recent bullish technicals suggest now may be the time to open
another long-term position. In this case, we will use the small
premium disparity in OTM options to enter the play at a discount.


PLAY (conservative - bullish/calendar spread):

BUY  CALL JUN-20.00 CUQ-FD OI=332 A=$1.50
SELL CALL MAR-20.00 CUQ-CD OI=864 B=$0.56
INITIAL NET DEBIT TARGET=$0.81-$0.88 TARGET ROI=50%

More on time selling strategies..

The basic premise in a calendar spread is simple; time erodes
the value of the near-term option at a faster rate than it will
the far-term option.

A less neutral and more bullish type of calendar spread is when
the underlying issue is some distance below the strike price of
the options. This position is speculative with low initial cost
and large potential profits. Two favorable outcomes can occur:
the stock rallies in the short-term and the position is closed
for a profit as time value erosion in the short option produces
a net gain or; the underlying stock consolidates, allowing the
sold option to expire and then eventually rallies above the long
option strike price.

It is generally best to establish this type of spread at least
2 - 3 months before the long option expires, capitalizing on the
ability to sell another option against the longer-term position.
That is the basic idea in this spread play; selling time value
in the options when they are overpriced (high implied volatility)
and buying it back (if necessary) when they return to intrinsic
value. Ideally, the spreader would like to have the stock finish
just below the sold strike when the near-term option expires. If
the short options are in-the-money at expiration, he will have
to buy them back to preserve the long-term position.

/charts/charts.asp?symbol=CRUS

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