Option Investor
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Daily Newsletter, Sunday, 02/20/2000

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The Option Investor Newsletter          Sunday  2-20-2000  1 of 5
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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
         WE 2-18          WE 2-11           WE 2-4         WE 1-28
DOW     10219.52 -205.69 10425.21 -538.59 10963.80 +224.93 -512.84
Nasdaq   4411.74 + 16.29  4395.45 +151.31  4244.14 +357.07 -348.33
S&P-100   728.52 - 23.52   752.04 - 23.47   775.51 + 37.47 - 41.74
S&P-500  1346.09 - 41.03  1387.12 - 37.25  1424.37 + 64.21 - 81.20
RUT       545.68 +  8.58   537.10 + 11.58   525.52 + 20.90 - 29.33
TRAN     2430.80 -  5.33  2436.13 -172.83  2608.96 + 27.21 -169.74
VIX        28.45 +  1.53    26.92 +  3.99    22.93 -  6.16 +  6.43
Put/Call     .63              .59              .45             .60
******************************************************************

Do you really want to sell your Nasdaq stocks?

What did you expect Greenspan to say? Come on down to the local
Federal Reserve, we are having a sale on cash? Who in their right
mind did not expect the Fed to raise rates at the next two meetings?
Nobody! (I said right mind) So what is the big deal? Did the Internet
die? Did cell phones go the way of CB radios? Did investors decide
they made enough money last year? I think not! 

What we have here is a combination of old economy and new economy.
Only Friday the Nasdaq finally tired of trying to drag the old
economy into Y2K. On Friday six stocks accounted for -200 Dow
points and caused a selling panic that crossed over into the Nasdaq.
The culprits? AXP -10.06 = -69 Dow points, GE -5.75 = -37 Dow,
JPM -3.50 = -20 Dow, IBM -4.13 = -25 Dow, INTC -4.63 = -25 Dow,
MSFT -4.56 = -24 Dow. Six stocks, -200 Dow points. Now I would have
no trouble building a case for a financial sell off as a result of
the Greenspan remarks except that three of these stocks are tech
stocks. I spent more than a few hours this weekend looking behind
the Dow to see what we could expect next week. To start the analysis
I compiled a chart of all the Dow stocks and how they impacted the
average on Friday along with the next support level for each. It
proved to be very interesting research.  


 

You can see immediately where the damage was inflicted. Was this 
a result of a market sell off or something related to the stocks
themselves? Since I did not expect to see the three tech stocks in
the heavy loss column I had to question what was really happening.
Lets look at each of the big losers and see what really occurred.

The big loser was of course American Express, which hammered the 
Dow for a -69 point drop. AXP had been trading in a range until 
the February FOMC meeting and the rate hike. When it appeared that
there would be several more, maybe aggressive tightening, this
interest sensitive stock headed south. At the same time there
were rumors of a possible buyout of an online broker for an
obscene amount of money. AXP even announced a 3:1 split but the
bleeding continued. Could that also be a reason why investors are
leaving AXP. Look at the spike on Jan-24th when they announced
blowout earnings and the 3:1 split. The payable date for the
split is May-10th, an eternity in split run terms. If you have
been investing long then you know what happens to companies after
they announce earnings, they normally go down after the immediate
spike. Same with a split announcement. All at once there was no
reason to be in AXP. Earnings over, split months away and now
a series of interest rate hikes. This was a sell off looking 
for a place to happen. On Friday the technicals got worse with
a close under the 200DMA. This is an automatic sell signal for
many institutional investors. A 200DMA break down means move on
to something else. My forecast is we could see some more selling
at the open on Tuesday from these automatic sell orders. As you
can see from the chart above and below AXP could drop another
$3.50 before hitting the next support level. The impact to the 
Dow would be another -23 point drop.


 

The next financial stock is JP Morgan. JPM has been trending down
since November. Business direction and acquisition strategies have 
put a cloud over the stock and another round of interest rate 
increases will only complicate troubles for JPM. Next support
is -3.50 away at $106 and not very strong support at that. JPM
will probably see some more selling next week and the drop to
support would equate to another -18 Dow points.


  
The next stock, GE, is really ugly. GE has been down trending since
mid December and had pretty good support recently at $133. As you
can see by the chart the bearish descending triangle broke down
last week when support finally collapsed. GE is very interest rate
sensitive. Not only does the GE Capital Company suffer from interest
rate increases but almost all the equipment made by GE in their
dozens of different businesses is high dollar capital equipment. 
This means the buyers must finance it somewhere. Higher interest 
rates slow down sales simply because the cost of borrowing produces 
a higher overall purchase price. If interest rates could be heading
up another .75% to 1.00% then GE sales could suffer. They are right
at support of $125 but could easily fall to $120 or below. A drop
to $120 would equate to another -32 Dow points since GE is the
third largest weighting in the Dow.


 

The other major financial in the Dow is Citigroup but they are 
weathering the storm fairly well with only a -1.06 drop on Friday.
They have also been down trending since mid January but are currently
sitting on support at $51-52. Yes, they are trending down but they
do not have the same problems as JPM, AXP and GE.

The tech stocks that collapsed on Friday each have their own reasons.
The first is Microsoft. After a false rally in December when rumors
of a settlement were leaked incorrectly, MSFT has been trending down
with only a slight interruption for earnings. News last week that 
Windows 2000 was not going to be received with open arms by the
buying public and rumors of technical compatibility problems were
more than MSFT stock could bear. Rumors that Bill Gates had agreed
to release the Windows source code in a compromise with the Justice
Dept were proven false and yet another positive development evaporated.
Currently testing the January low of $95 and the next stop could
easily be $90-91.50. A drop to $91.50 would equate to -16 Dow points
but the selling should slow considerably the closer it gets to $90.


 

The next tech stock is IBM. This good news is this was purely 
a news related drop but the bad news is it could continue. On 
Friday Merrill Lynch released the results of a survey of 70 major
corporations. Half said they planned to buy less IBM hardware
this year and only 18 said they planned to buy more. Extrapolated
across the industry Merrill expressed concern for IBM revenues
from hardware, especially in the second quarter. Also on Friday
the SEC ordered IBM to place a shareholder resolution on the
proxy statement for the April meeting that would let shareholders
vote on the type of pension plan they wanted. IBM is trying to
move to a cash balance plan which would be cheaper for the
company and thousands of employees complained that it was unfair.
Although this was strictly a combination of news events the
perception that IBM may have trouble making their quarterly
numbers from declining sales is likely to force a retest of
support at $109. The impact to the Dow would be -15 points.


 

Intel is the opposite of all the previous Dow losers. INTC has 
been moving up with the hot chip sector and on successive new
product announcements. There does not appear to be any negative
news on the wires about Intel. Every day they announce a new
business development or partnership. They are on the move and
set a new high just this week. There is no reason for Intel to
be moving down except for profit taking on NASDAQ weakness. 
Currently at support in the $104-105 range I do not see any
further downside other than they will follow the market to 
some extent.


 

One stock not down on Friday which could be trouble is Hewlett
Packard. We had a nice earnings run and a good report but that
is now old news. If the tech sector remains weak HWP could suffer
from profit taking next week. Minor support at $120 and if it
dropped all the way (-9.44) it would equate to -56 Dow points. 


 

The market picture is really a good news bad news story. The 
financials are likely to remain weak and will prevent any 
strength from other sectors in the Dow from making any gains.
The Dow looks ugly. Now trading significantly below its 200DMA
and following an intact down trend line since the Jan-14th high.
It is now extremely oversold but appears unstoppable until we
retest the October low of 10000. If you take all the Dow stocks
in the first chart above and chart next level support for each
and then calculate the equivalent Dow points for that drop you
get a total of -181 Dow points. That means that if EVERY Dow
stock dropped to support on Tuesday's open the Dow would come
real close to hitting 10000 from the current 10219. Add in the
fear factor and the likelihood that buyers will wait on the
sidelines until 10K is actually hit and you can see the 
possibilities. 


 


 

If the Dow does not stop at 10K the picture gets really bleak.
Under 10K we could go into free fall for another -700 to -800 
points and we would be firmly in a bear market cycle. This is 
highly unlikely and I think you can see from the chart above 
that we have a really good chance to bounce strongly off 10000. 
A successful retest of 10000 would set us up for a strong run
into the April earnings cycle. This would be the best scenario
possible. A -15% correction, successful retest of five month
lows and we would be off to the races again.

The NASDAQ posted the sixth largest point decline ever on Friday
and one upped the Dow's seventh largest on the same day. The 
volume was strong at 1.9 bln but about 300mln off the record high
on Thursday. For the week the NASDAQ was up +16 points but up
+127 points off last Monday's low of 4291. We have two support
points on the Nasdaq should things start out bad on Tuesday.
First support is 4360, which we have seen several times in
the last two weeks. The next support level is 4300 which we
just tested on Monday and scored a clear vertical rebound.


 


 

Now for my real opinion. Profit taking, simple profit taking
from some huge gains in the NASDAQ in February. Just from the
Monday low last week we were up almost +300 points. The NASDAQ
is being powered by the sell off in the Dow. Plain and simple.
Old economy vs new economy. Look at the biotechs last week.
Many were up $20-$30-$50 or more. Do you honestly think traders
were going into a long holiday weekend without taking some
profits from those kind of gains? 

A three day weekend after a strong record breaking run on the
NASDAQ is a recipe for selling. Add to that the combination of
news and events on six of the biggest Dow stocks and you can
see where the panic began. Also factor in the problem with the
NASDAQ ticker. For over two hours traders cannot tell what is
happening to the NASDAQ. A computer problem prevented anyone
from taking comfort in the strength of the NASDAQ while the
Dow was dropping like a rock. When in doubt sell! If you do
not know what is happening the most common result is to bail
out of your position and move to the sidelines to watch safely.
Many did this on Friday. Add in the pending holiday and lower
volume and you get disaster.

Look at the positive factors. The Fed is going to raise rates
to insure that the economy is going to continue to run smoothly.
The Fed, per Greenspan, has even raised its targets from a
2.5%-3% growth rate to a 3%-4.5% growth rate. That is a 50%
increase from a 3% top to a 4.5% top. Rejoice!! That means
they will not need to raise rates as much because they are
not trying to slow the economy down as far as previously
attempted. Also, Greenspan said he would not tie rate increases
to stock prices. This is a major statement. Since the irrational
exuberance speech at 7900 the market had increased almost
50% before losing ground this month. Is the exuberance not
irrational anymore? The next rate hike is a month away on
March 21st. I am sure that will be the topic of conversation
every day but does anybody not think that this hike and even
the next one is already priced into the market? 

Do you really want to sell your NASDAQ stocks? Neither do I
and neither do any of the thousands of funds that have been
chasing them for the last month. You can bet that the midnight
oil is burning this weekend as managers are deciding how best
to spend their money next week. They are hoping for a gift in
the form of another dip. If the Dow bounces off 10K and 
starts up again the buying frenzy will be fierce on the
NASDAQ. People are just overly cautious with the Dow losing
-100 points or more every day. Turn the Dow around and the
NASDAQ will fly. If the NASDAQ can score +100 points days
when the Dow is negative, as it has recently, how much
better can it do if the Dow has a successful retest of
10K like hundreds of analysts have been hoping for over
the last five months?

Can the NASDAQ go down from here? Sure. The rally has been
powered by liquidity. Massive liquidity as money flows 
into tech funds in record amounts. The farther the Dow
drops the more liquidity is generated. The farther the
NASDAQ drops the more liquidity is generated. Every 100
point drop causes more and more cash to stack up on the
sidelines. Eventually this pent up buying power will flood 
over into the NASDAQ and the race to April earnings will
begin. April earnings! Do you realize that CMGI will sound
the bugle announcing the next cycle when they announce
earnings on March 15th. Just like the first rays of dawn 
the excitement of a new earnings cycle will wash over the
markets. That is only three weeks away. We do have some
clouds in the forecast between now and then. Greenspan
will have an opportunity to display a kinder, gentler
viewpoint on Wednesday. Yes, he is baaaaack. He will present
the same testimony to Congress on Wednesday. After the beating
the markets took from his testimony last week it is entirely
possible that he will tone down his hawkish tone to appease
the politicians. This is an election year and everybody is
looking for votes.

I said Thursday that I could not see any reason for the 
NASDAQ to self destruct and I still don't. I have been verbally
abusing the Dow for weeks and even at these levels I would
not buy non-tech Dow stocks but I think at 10K there will
be some serious bargain hunting by the value investing
crowd, what is left of them. There are many funds actually
closing their "value" offerings for lack of interest. Do
you know what they do with the stocks in a value fund
when they close the fund? Is that your final answer? You
win the prize. They sell them. Some merge them into another 
fund to disguise the fact but they eventually get sold. Is 
it any wonder that there is a bear market in value stocks. 
Even the value investors don't want them anymore. Just one 
more reason why I am not closing my NASDAQ positions just yet. 
At least not today! My threshold of pain is 4300 on the NASDAQ. 
Under 4300 I am back to cash and preparing my shopping list.

There are three axioms in trading that bear repeating. Don't 
fight the tape, don't fight the Fed and don't try an catch a
falling knife. The Fed axiom is not as relative today as
in the past for tech stocks but still very true for old
economy stocks. The other two however are vitally important. 
Don't open positions until you see the rebound regardless 
of how good a deal it appears to be. Wait for the rebound 
to confirm before starting a new position. Line up your 
targets but keep your finger off the trigger. 

Trade smart, sell too soon.

Jim Brown
Editor


Disclosure: My current positions include:

AFFX, ANAD, ARX, BEAS, BVSN, CMDX, DITC, EMLX, ENZ, HGSI, INSP,
ITWO, JMED, MSTR, PUMA, SILK, TIBX, TERN, LU, DELL, AMTD, OEX,
QQQ.


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

What a week!  The dip to 4300 on the Nasdaq on Monday
could not have been scripted better. I was in cash
and waiting on the sidelines. Once the rebound started
I went shopping and got a little carried away. With
one week to go on the Feb premiums most had little
value and lots of risk. I looked at March put premiums
and started drooling. You could get a 40% return on
almost every large cap fast mover and very little risk.
To make a long story short I sold puts on about ten
stocks and then added to them as the week progressed.

This is the list.

AFFX MAR-280 $20.50
ANAD MAR-140 $16.00
BEAS MAR-120 $16.88
BVSN MAR-170 $17.38
BVSN MAR-180 $20.13
CMDX MAR-120 $14.13
DITC MAR-165 $15.25
EMLX MAR-125 $12.13
HGSI MAR-165 $13.38
HGSI MAR-170 $16.00
HGSI MAR-200 $18.38
INSP MAR-200 $23.13
ITWO MAR-260 $25.88
JMED MAR-075 $04.63
MSTR MAR-170 $19.13
PUMA MAR-100 $10.13
SILK MAR-200 $17.13
TERN MAR-150 $14.75
TERN MAR-180 $13.75
TIBX MAR-230 $25.13


My average return if I held them all to expiration would
be about 36%. This will not happen. Several, JMED, MSTR
went negative on Friday and I did not close them due to
the market drop. I am waiting to see if we get a rebound 
on Tuesday. If not I will close for the loss and forget
them. Some of the others are $20-50 out of the money and
the premiums will drop to almost nothing next week as
March becomes the current month option. I will close
those for $1-2.00, free my margin and sell something
else. Once the market stabilizes I will put a GTC stop 
loss on the ones that I am not closing and wait them
out.

Contrary to what Janar has been writing I think the 
naked put strategy is one of the best available. I am
happy to "cap" my returns on this part of my portfolio
at 30% per month. Compound that for 12 months and see
what you get. I am very comfortable with the risk because
I think it is less than straight calls. With selling time
the only way you lose is if the stock drops fast and hard.
If it drops slow, stays flat or goes up, you win. You
can protect yourself against the first event with stop
losses. If I sell a put @ $20 and set my stop loss at
$25 then I will incur a 25% loss. By spreading my 
capital across 20 stocks I will get stopped out on several
but many more will expire worthless for a full profit.
Oh well, each to his own.

*****

On the call plays I diagramed last week, MLNM, CLRN, ANAD
only one closed the week down. I am going to show last 
weeks charts and what I expected and then this weeks 
chart so you can see what happened. Since I wrote them 
up in this column I did not play them to avoid conflict 
of interest claims.


CLRN Straight Call

Last week we had been building a wedge at $105 and it
appeared that a breakout was immenient. We got the
breakout on Monday and it ran all the way up to $125
before pulling back to close at $103 on Friday. The 
concept and the decision was valid and had you taken a
position as the wedge was building the result would have
been a huge win. This shows the power of this type of
formation.

Last weeks charts:
 



 

This weeks chart:
 



ANAD - Straight call play

Strictly momentum - when your hot, your hot. ANAD is hot. The chart
this week looks just like last weeks except angle of ascent slowed
slightly with the market weakness. Just like last week ANAD was 
still going up even on the bad days. Up +2.13 on Friday during the
sell off. I don't know how much longer it will continue but the 
point here is the pattern. Find good stocks with this breakout
pattern and you have a winner.


 


 

MLNM - Straight call play

What else could you ask for. The dip on Friday turned out to be a
real buying opportunity. When the Nasdaq dropped to 4291 on Monday
MLNM did not even budge. There were no sellers. When the Nasdaq came
roaring back it did so on the strength of the biotechs and MLNM was
leading the way. From $215 on Monday to $310 on Thursday you could
not have asked for a better entry point of a better play. I received
several emails from readers who bought calls on Monday and they were
real happy. 


 


 

This weeks chart:
 



*********
New Plays
*********

INSP - Infospace - Straight Call Play
 


Infospace is consolidating from a +$65 run and the range is getting
tighter. When it did not fall with the big Nasdaq drop on Friday,
only posting a -$.75 loss I upgraded my expectations. With the range
getting tighter I think the breakout will come soon. If the Nasdaq
rebounds I think INSP will start making big moves again. 


ISLD - Digital Island - Straight Call
  


ISLD has the same exact pattern that CLRN was showing last week. 
The bullish wedge predicts a strong breakout and the lack of any
selling on Friday is also a strong sign. Short of another Nasdaq
correction I think ISLD looks like a good opportunity.

********

Always bullish to a fault!

On Friday even though the chart said no, I felt the -300 point
drop on the Dow was over done and we would get a bounce at
738 on the OEX. I caught the falling knife point first and 
extraction at the open on Tuesday could be painful. I bought
the Mar-740 calls on the small bounce around 3:30 Friday only
to see the bottom fall out again as soon as I was filled.


OEX - Mar-740 calls
 


QQQ - Mar-200 Calls
 


The game plan for this week is all based on what happens before
noon on Tuesday. If the Dow bounces off 10K then the Nasdaq will
bounce also. If it appears we are going down then I will start
closing the call plays immediately with the intention of buying
more when we really do reach the bottom. I will start closing
the naked put plays that are in danger as we approach 4300 and
then close them all if we pierce that level.

I am highly profitable in most of them already and I do not
want to give it back.

Trade smart, wait for the bounce and sell too soon.

Jim



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

EuroTech Ltd: Cleaning Up After Us...$$$

Many market pundits say that this long-running bull market 
has been spurred primarily by technology stocks, particularaly, 
medium and large cap tech stocks.  Thus, these experts feel 
that the "bubble" will burst because of lack of follow-through 
from other sectors.  We are seeing some signs of the broadening 
of the market.  Biotechs, for example, have had a huge run, 
bolstered by breakthroughs in the genomics stocks.  The blue 
chips, on the other hand, have had a tough time. 

That leaves us with the small stocks.  Surprisingly, the small-
caps have finally joined the party.  In fact, the most prevalent 
indicator of small stocks, the Russell 2000 Index, is all of 
a sudden hitting new highs.  Trying to pick the next Microsoft 
or Cisco is not easy.  The problem with small-cap stocks is...
well...they're small, there are tons of them, and it's often 
difficult trying to find information on them. 

One small-cap that I recently ran across, called Eurotech 
Limited (EURO:BB), may have some good prospects.  You probably 
are asking yourself what the (:BB) stands for.  Bulletin Board.  
It means hat this is a tiny company.  But this tiny company 
recently received $25 million in funding in order to commence 
production of several previously classified technologies, one 
being demonstrated at the end of next month.  If the demo goes 
well, Eurotech may well be on its way from being a small company, 
burning through oodles of cash, to a royalty and licensing 
machine.

Eurotech, based in Washington D.C., is a development stage, 
technology transfer, holding, marketing and management company 
formed to commercialize new, existing but previously unrecognized, 
technologies, with a particular current emphasis on technologies 
developed by prominent research institutes and individual 
researchers in the former Soviet Union and Israel.  The company 
intends to commercialize those and other technologies principally 
in Western and Central Europe, Ukraine, Russia, and North 
America. 

The company looks primed for growth in 2000.  Last November, 
EURO acquired controlling interest in six Israeli incubator 
technologies.  EURO was a twenty percent owner of these 
technologies in partnership with the Israeli government for 
two years and each technology will emerge from the incubator 
program by mid-2000.  Each technology has sparked considerable 
excitement in their respective industry and will go directly 
from incubator to production.

Eurotech president, Don V. Hahnfeldt, described the US-Israeli 
partnership in the incubator program, as a business success 
formula for new technologies.  He expects these technologies 
to be quickly pulled by their respective industries into 
production and a profitable share of $100 million markets. 

The Company's immediate focus is on the commercializing of 
four of its principal technologies: EKOR, a silicon-based 
elastomer compound; Hybrid Non-isocyanate Polyurethane, a 
modified polyurethane; Liquid Ebonite Material, a synthetic 
liquid rubber; and Rubcon, a polymer-based, rubberized concrete.

Since it is a development-stage company, that basicaly means 
no the company has no profits.  However, the company stated 
that several of the above-mentioned technologies are currently 
ready for production.  Eurotech said it believes that the year 
2000 will be its first profitable year since its incorporation 
in 1995. 

Just two days ago, on February 16, at the Department of Energy, 
Richland Operations Office (RL), and its adjacent Hanford 
training facility, Eurotech was invited to demonstrate the 
capabilities of its EKOR foam material.  The demonstrations 
are tentatively scheduled for the end of March 2000, provided 
that EURO scientists have completed their current containment 
project at Chernobyl's nuclear power plant.  Government and 
private contracts could be coming down the pike.

EKOR is a radiation-resistent foam that was originally created 
to contain radioactive water and air borne radionuclides 
resulting from the 1986 accident at the Chernobyl Nuclear Power 
Plant.  In addition to containing radioactive waste, EKOR's 
unique physical and chemical properties have proved advantageous 
for numerous applications in the transportation, storage and 
disposal of nuclear waste along with multiple transportation 
and industrial applications. 

The company's liquid Ebonite Material, or LEM, patent pending, 
is an advanced rubber compound with diverse specific additives 
for use as a coating in corrosive environments.  EURO claims 
that the product is superior to competing products made by 
Neoprene and Thiokol. 

Euro's third product, ready from production, is called hybrid 
nonisocyanate polyurethane (NIPU).  It's a modified polyurethane 
compound with lowered permeability and greater chemical 
resistance for paints and coatings.  NIPUs are ideal for crack 
resistant composite materials, chemically resistant coatings, 
sealants, and glues.

Finally, RubCon, patent pending, is the company's rubber concrete 
material, used in chemical environments made from an advanced 
rubber that replaces conventional cement.  Applications include 
industrial flooring, electrolysis, containment structures, 
seismic reinforcement, support  foundations, and other uses.

If you don't understand a word in the last four paragraphs, 
don't worry.  The management team at EURO has decades of 
experience.  The folks running the show have heavy-duty 
military and scientific backgrounds. 

Financials are simple to explain.  The company has had no 
revenues since inception. But news of becoming profitable this 
year, the production of EKOR upon succesful demonstrations, as 
well as several other products with $100 million market 
potential each sounds quite compelling.  Shares have been on 
the move, now trading for around $5 per share and has roughly 
30 million shares outstanding.  For the speculative investor, 
these shares may be worth looking at. 



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


Candlesticks...
By Ryan Nelson

They're not just for romantic dinners anymore.  In fact, they 
have been much more than that for nearly 400 years.  That is 
because in the 1600s the Japanese developed a method of 
technical analysis used to analyze the price of rice contracts.  
This was a lesser known method of charting until a gentleman 
named Steve Nison popularized candlestick charting for our 
time.  This method is similar to most bar or line charts 
because it only records prices without adding any calculations.  

I got a lot of great requests last week on what on methods 
we use here at OI to analyze and pick securities.  Candlesticks 
stuck out to me because Jim and I do use this as part of our 
method when picking the calls and puts for the newsletter.  Now, 
this method can be fairly in depth with patterns that have names 
such as Hammer, Doji, Spinning tops, Star and the ever popular 
Hanging Man.  Not to mention the variations of each pattern 
like Long-legged Doji, Dragon-fly Doji, Gravestone Doji, and 
Doji Star.  So you can see it gets pretty in depth, but we 
take what we feel is the best part of candlestick charting to 
supplement our technical analysis.  That is what we are going 
to discuss today...what we at OI like to see when using charts 
with candlestick patterns.  You can create this pattern in 
most interactive charting programs.

----------------------------

Hammer

This is probably the most watched for signal in candlestick 
charting.  The hammer has the potential to signal a bottom 
after a significant downtrend.  That is what the definition 
reads anyway.  I would add that the downtrend doesn't have to 
be very significant.  It could just a quick pullback on an 
uptrending stock.  You can see from the chart below what a 
hammer looks like, but let me put it into words also.  It 
basically means that the stock opens at or near the day high 
before incurring some selling that takes the stock lower 
intraday.  Now if it closed near the low, all you would see is 
a long red bar.  This is not a hammer.  Instead the stock would 
have to recover from the intraday low to close back at, near 
or above the opening price.  This creates the long tail with 
a small body.  It doesn't matter if the body is green or red, 
just that it is small.  See below.  Notice how it kind of 
looks like a hammer?  

Anyway, it signals a sort of capitulation event.  I would 
expect the intraday bottom to have lots of volume as it starts 
to move back up again as well.  You can see from the perfect 
hammer on BVSN that it was accompanied by high volume for that 
day.  It is this signal that we look for to help in determining 
entry points after a down day or two in the market.  Friday 
was a good day to search for hammers.


 


 
 
----------------------------

Doji 

The flip side of the coin is the Doji.  This star-shaped pattern 
is formed when the stock opens at the middle of the day's range 
and closes at the same level, leaving it with no body.  It also 
must include lots of volatility where the stock trades both 
higher and lower than the opening price.  Thus you end up with 
a long line down and a line through the middle.  This signifies 
a turning point to either the upside or downside.  This is 
because the trading that creates this pattern stems from 
indecision.  The old battle between buyers and sellers where 
one party is about to win out.  

I usually look for these as signs of a topping out, as buyers 
lack the strength to push the stock much higher.  Volume should 
be light as well.  You can see two really good dojis circled 
in the Merck chart below.  Two days of indecision before the 
sellers win out and MRK tanks.  The pattern works here, but I 
have found it much harder to pick a top than a bottom.  I 
prefer using a hammer to guide me with entry points over a 
doji guiding me to sell.  Sometimes it just can't account for 
the momentum in the market.  That is why I like seeing two of 
them for MRK to confirm the pattern.  Then the third day began 
the descent which would be the time to open a put play.


  

----------------------------

One final note, you may have noticed that this section of the 
newsletter has two names, AskOIN and Ask the Analyst.  We are 
going to keep it simple going forward and just call it Ask the 
Analyst.  Same writers, same style, just one name.  Send me more 
symbols because next week we are looking at individual stocks.

Good Luck to all and don't forget to send in the symbols for 
any stock you want analyzed.  Send those requests to 
asktheanalyst@OptionInvestor.com  

----------------------------

DISCLAIMER:
This column 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 Ask the Analyst 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 its accuracy.



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

As of Market Close - Friday, February 18, 2000 

                    Key Benchmarks
Broad Market        Bearish/Bullish     Last    Posture/Since  Alert
******************************************************************** 
DOW Industrials     10,700   11,250   10,219    BEARISH  2.17  
SPX S&P 500          1,350    1,450    1,346    BEARISH  2.18  *
OEX S&P 100            740      780      728    BEARISH  2.18  * 
RUT Russell 2000       500      560      546    Neutral  2.18  *  
NDX NASD 100         3,575    4,090    3,967    Neutral  2.18  * 
MSH High Tech        1,800    2,000    1,928    Neutral  2.11 

XCI Hardware         1,300    1,525    1,450    Neutral  2.11 
CWX Software         1,200    1,470    1,447    Neutral  2.18  * 
SOX Semiconductor      740      940      936    Neutral  2.18  *  
NWX Networking         900    1,040    1,029    Neutral  2.18  *   
INX Internet           700      800      713    Neutral  1.06 
BTK Biotech            420      675      631    Neutral  2.18  *

BIX Banking            550      690      479    BEARISH 11.30 
XBD Brokerage          400      450      404    Neutral 11.30 
IUX Insurance          550      600      492    BEARISH 11.30 

RLX Retail             950    1,000      805    BEARISH  1.28 
DRG Drug               340      380      328    BEARISH  2.18  * 
HCX Healthcare         700      750      685    BEARISH  2.18  *
XAL Airline            160      180      120    BEARISH  5.21 
OIX Oil & Gas          250      280      256    Neutral  2.15 


***Posture Alert***
After failing to confirm the breakout into record territory on 
Thursday (2/17) and selling off precipitously on Friday (2/18), we 
have turned Neutral across the technology group.  We have also 
turned bearish across select blue chip sectors including S&P 
100/500, Drug and Healthcare after violating key support levels.  
Take a special note of our key benchmarks for each index for they 
have been updated with the recent market volatility. 



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

A Reversal is Not a Reversal until the Reversal Is a Reversal! 
By Pinnacle Capital Advisors 
Sunday, February 20, 2000

One of the most common pitfalls of active traders is jumping the 
gun and anticipating a market reversal.
 
At the end of January weeks ago, Pinnacle Capital Advisors talked 
about the power of key reversal signals through technical and 
sentiment analysis.  When one steps away from the trading pit and 
looks at a simple bar chart, it's amazing how obvious a REVERSAL 
signal emerges.  For example, the S&P 500 (SPX) registered a 
classic tweezer bottom reversal signal on January 30 right at the 
200-day moving average. (A tweezer bottom is one of the most 
powerful candlestick charting reversal signals). 

Yet, too often, in our desire to get in quicker, traders 
anticipate a market REVERSAL.  Friday's action underscores the 
challenge when investors were catching the falling knife all day 
long.  After selling off for nearly two weeks from its previous 
high (1,440) on February 8th, many investors were eager to buy the 
next dip as the blue chip index drew closer to the previous 
support level and 200-day moving average. So investors were buying 
all the way down ANTICPATING the market REVERSAL. 

After all, Thursday's benign economic reports showed that 
inflation was in check and many investors have been adopting the 
new economy paradigm.  What's more, the market volatility index 
(VIX), which helps measure investor sentiment, was also fast 
approaching the level (30.0) where one expects to see a market 
REVERSAL. 

But whoops!, we did not get a REVERSAL late Friday afternoon as 
many investors were hoping for.  If one honestly looks at the S&P 
500 and VIX daily charts, NO REVERSAL signal appears.  In fact, 
don't look now, but the S&P 500 just VIOLATED its 200-day moving 
average.

Savvy traders have the discipline to WAIT until the REVERSAL 
signal has been put in place.  This means that a meaningful 
technical and/or sentiment indicator has REVERSED course and the 
underlying stock is heading in the desired direction. This is 
particularly important for option traders since market timing is 
crucial.  If one jumps the gun and picks up an option when fading 
the market, the option trader will quickly discover how quickly he 
is out of the money.  

At Pinnacle Capital Advisors, we like to use daily reversal 
signals instead of intraday signals for several reasons.  First, 
daily charts and signals tend to reflect the voice of all of the 
traders, not just the day traders who are looking for dips.  Next, 
a stock/index's closing price is more meaningful from a 
technician's perspective.  Finally, options trading, by its very 
nature, tends to lend itself to longer holding periods.  For 
example, if you are buying a June 2000 call on a blue chip company 
like IBM, why jump the gun and buy the option when the market is 
falling (intraday) when you can WAIT and see if an key REVERSAL 
signal emerges and is confirmed the next trading day.  

We may very well get the REVERSAL next week.  But one of 
Pinnacle's winning  trading axioms may be appropriate heading into 
the new trading week: A REVERSAL is not a REVERSAL until the 
REVERSAL is a REVERSAL.

 

 


 


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 (6.148):
Friday's action appears to holding just above its 200-dma. 

Volatility Index (28.45):
A review of the VIX's daily chart suggests that the low 30's are 
an excellent buying opportunity, and the low 20's continue to be a 
great selling opportunity. The VIX peaked on an intraday basis 
Friday (2/18) at 29.1 before closing at 28.45. This may lead to a 
potential reversal pattern and signal the end of the market's 
current slide. 

BEARISH Signs: 
Energy Prices:
With the rapid rise in crude oil, everything from manufacturing 
to transportation will be affected by higher costs. These higher 
costs will be felt 1-2 quarters out, and could put pressure on 
profit margins. 

The Power of Sentiment Analysis
It has often been said that the crowd is right during the market 
trends but wrong at both ends. Measuring and evaluating the 
sentiment of the crowd, therefore, can give savvy option traders 
a decided edge. 


Pinnacle Index OEX              Friday
Benchmark                       (2/18)



Overhead Resistance (750-830)     2.16        

OEX Close                       728.04

Underlying Support  (700-730)     5.63        


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


Peak Open Interest (OEX)
                     Friday
Strike/Contracts     (2/18)



Puts               700 / 5,522
Calls              800 / 4,863
Put/Call Ratio         1.14


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 18, 2000    Top                 21.09

February 18, 2000                       28.45



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

For the week of February 21st, 2000

Monday

Holiday - None Scheduled

Tuesday

None Scheduled

Wednesday

Greenspan testifies before Congress on the state of the economy

BTM Schroders            2/19   Forecast: --     Previous: 1.2% 
LJR Redbook              2/19   Forecast: --     Previous: 0.8% 
API Oil Stocks           2/18   Forecast: --     Previous: -2.574M

Thursday

Jobless Claims           2/19   Forecast: --     Previous: 283K 
Durable Goods            Jan    Forecast: -1.4%  Previous: 4.1% 

Friday

GDP                      Q4-fin Forecast: 6.0%   Previous: 5.8%   


Week of 2/28

2/28 APICS Survey - Feb
2/28 Personal Income/Spending  - Jan  
2/28 Chicago PMI - Feb
2/28 Consumer Confidence - Feb
3/1  Construction Spending - Jan
3/1  NAPM Index - Feb
3/2  Leadin Indicators - Jan
3/2  New Home Sales - Jan
3/3  Nonfarm Payrolls - Feb
3/3  Unemployment  - Feb
3/3  Factory Orders - Jan
3/3  NAPM non-manufact - Feb



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

This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter              2-20-2000  
Sunday                        2 of 5


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*************
WOMAN'S WORLD
*************

Follow the Money
By Mary Redmond

Qwest leaps have had a great run up. Qwest went from 40 to a high 
of 50 on Thursday.  The leaps went to 17 7/8. On Wednesday Qwest 
opened at 49 then dropped two points. This may have been because 
Merrill downgraded them from a buy to an accumulate and upgraded 
AT&T to a strong buy. I think perhaps Merrill wants to say 
something nice about AT&T because they are one of the lead 
underwriters in the AT&T multi billion dollar tracking stock 
ipo coming up. I find upgrades and downgrades like this 
irritating - what is really the difference between a buy, a 
strong buy and an accumulate? In other words, buy it, buy it, 
or buy it. Qwest recuperated on Thursday after the Humphrey 
Hawkins testimony and regained the lost ground. I am  holding 
on to my leaps.

CMGI is showing predictable support and resistance trading 
patterns. It shows  support at 110, resistance at 115.  This 
is a good day trading stock to pick up a couple of points here 
and there if you can watch it closely. I think it is going to 
break out to the upside in March and  I think a good strategy 
to use may be a bullish put credit spread. Buy CMGI March 100 
puts, sell CMGI March 110 puts .  The maximum potential gain 
is the credit, the potential loss is the difference between 
the strike prices minus the credit. It is a good method to use 
on a stock when you have a bullish outlook and  you know the 
trading pattern very well. The internet sector seems to be in 
an awkward  phase of growing now . Some investors are becoming
disillusioned  with certain stocks whose market capitalizations 
may have come too far too fast. 

I think this is where management is key. So far the management 
of CMGI has been able to separate themselves from the crowed of
floundering, non profitable internet companies.  Management is 
one of the key intangible factors you must take into consideration 
when evaluating a company. Could it be that the drop in Lucent's 
share price and the rise in Hewlett Packard's was related to one 
of Lucent's stars Carly Fiorina leaving Lucent for HWP?  It may 
be related, although of course you can never prove a direct 
cause and effect relationship I was able to pick up BCE  at 117.
I think it will be difficult for this one to trade down very much
unless Nortel really  takes a dive, and NT seems to get stronger 
every day. BCE and NT are trading exactly in tandem, and the BCE 
leaps are significantly cheaper than NT leaps. Nobody seems to be
paying any attention to the rest of BCE. 

One of my targets for next week is Nextlink. I have been following
this stock since September, and I own it in my long term portfolio.
Since the market capitalization is relatively small  as compared 
to the market cap of some of the other Nasdaq 100 stocks I think 
it has a lot more growth potential. Once a company reaches the 10
billion market cap the institutions can start buying seriously, 
and often the growth in market cap picks up momentum at this point.
In the last couple of years we have seen giant companies emerge -
Microsoft was the first company to reach 500 billion in market 
capitalization, GE and CSCO are the second and third largest US
companies. It will be interesting to see how long companies like
this can keep up the same rate of growth in market cap. Which will 
be the first trillion dollar company?

One key indicator which may have influenced the market this 
week is the fact that cash flows to U.S. equity funds slowed by
approximately 35% according to AMG Data and Trimtabs. Flows to 
U.S. mutual funds for the week ended February 16 were in the 
range of 6 to 7.7 billion dollars as compared with 11 billion 
the prior week. In addition, the flows to European equity sector
funds increased significantly. Aproximately 40% of the total cash
went into European equity funds. Aproximately 27% went into 
technology sector funds. There is still a lot of money going 
into funds, but compared to prior weeks it is a major slowdown. 
When you combine that fact with the Humphrey Hawkins testimony, 
the dwindling down of earnings, and overall weakness in the Dow 
you have the recipe for difficulties in the market.

On Tuesday  of this week the financial stocks in the Dow started
showing signs of life after being beaten down for months. Two 
prominent analysts , Thomas Galvin of DLJ and Abby Cohen of 
Goldman stated their opinions that financial stocks should rally 
this year. This could be a tremendous boost to the Dow, S & P 
and Nasdaq.  Financials make up about 13% of the S & P, and JPM, 
AXP and C have a great influence on the Dow. The problems seem 
to stem from the rising interest rate environment and perhaps 
the fact that money has been flowing out of financial sector 
mutual funds and into tech funds. 

The traditional banking business has been suffering for another 
reason also. A vast oversimplification of the traditional banking
business is loaning out deposited money.  You deposit your money 
in a savings account at the bank and they loan it out at a higher
rate of interest and keep the spread. The problem is very few 
people are depositing their money in a savings account at the 
bank anymore. It's all going into the market or money market 
funds.  Last year over 300 billion dollars went into the market 
and money market funds. So what's a bank to do? Follow the money
trail, and it leads to the brokerage, investment banking and 
mutual fund businesses.

The trend in the financial services industry is consolidation 
since the repeal of the Glass Steagall act last year. At least
a dozen banks have purchased brokerage firms.  The Glass Steagall 
act was enacted in the 1930s primarily because so many brokerage 
firms collapsed after 1929 that the regulators believed combining
brokerage and banking would lead to destabilization of the 
financial markets. However, nowadays both banks and brokerages 
are scrutinized by federal and state authorities, and it is 
reasonable to assume that cash in a brokerage firm is as safe 
as cash in a bank. 

The most famous example of this is Citigroup, the brazen merger 
between Travelers and Citibank, which took place before the 
Glass Steagall act was formally repealed. Other examples include
Allianz buying Pimco, Bank America Robertson Stephens, Chase 
Hambrecht & Quist and Deutsche Bank Alex Brown. 

The financial services industry is alive and booming. In fact,
next to the technology stocks, financial service firms offer 
one of the highest revenue growth rates. We hear so many
predictions that the online brokers are going to take all the
business away from full service brokers and investment banks 
that some people have been hesitant to buy these stocks.  
However, that is a very narrow view of the industry. It ignores
the phenomenal growth of money flowing into mutual funds and 
the trading which is done by these funds. Many premier 
investment banks and trading floors deal almost exclusively 
with institutions. When Janus or Fidelity come in to buy 10 
million dollars worth of stock, they are not doing it through 
an online discount broker for an eight dollar commission. In 
these trades, an eighth of a point adds up to thousands of 
dollars, and precise execution is critical.  Institutional 
traders have the ability to call the specialists and market 
makers to execute block trades in large amounts.  In addition, 
the investment banking business is flourishing, and the boom 
of the 1990s has drawn an estimated 80 million more investors
to the financial markets than there were a decade ago. There 
is more than enough business for full service and discount 
brokers, and hopefully their stock prices will reflect that 
this year.

Contact Support

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

Lynda is on vacation this week.

Renee will be back on Tuesday



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

Strategy Analysis
By Janar Wasito

Like an itinerant fashion model trying on the latest stuff in 
Paris, Rome and London, I have been trying on just about every
available option strategy this month to find the one that best 
suits me. I've also been going through brokers like Imelda 
Marcos goes through shoes. Let me tell you what I have learned.

Selling Puts. This strategy looks good when you first encounter 
it. Look at those nice fat put premiums, especially on the most
volatile stocks. I have made money with this strategy this past 
month by selling puts on BRCM, AFFX & VRSN -- all stocks I 
wouldn't mind owning (a key point). I could also have made a 
good profit by staying in a short CMRC put position, but I 
closed it before the stock took off for a slight loss. The 
negative part of this strategy is that your reward is capped 
at the price you sold the put for, and your downside is 
potentially much greater if the stock drops below your break 
even point (the strike price minus the premium you sold the put
for). So, in summary, this is a strategy that I am going to stay 
away from due to the unfavorable reward/risk ratio. I would 
consider doing it in order to acquire LT stock holdings, and for 
that, I think it is superb. 

But, I am getting out of the LT Stock business too. The risk/ 
reward diagram on a LT stock holding is a diagonal. I don't 
like the fact that your stock holdings can just drop off, 
without controlling the downside. Much of this thinking is a 
result of studying some of the Optionetics materials.

Selling Naked Calls. I actually made a profit by doing this 
with VRSN Feb 210 Calls. I sold them in late January when 
VRSN bounced off of that level and headed down. I should have 
bought to close when VRSN was way down at 145, and I could 
have bought back the calls at less than 2, which I had sold 
for 15 just a week earlier. That would have been a nice play. 
But I am also out of the naked Call business too. The reward 
is capped to the upside at the premium you took in. The risk 
is unlimited. A hundred point move can wipe you out and leave 
you with greater liability than the cash in your account. That 
is not a business I want to be in. The other risk is that you 
have to watch the stock all the time. This is an even greater 
risk. Why get rich if you can't enjoy it day to day and you 
can't sleep? Take VRSN for example. It bounced off of 210 in 
late Jan, when I sold my Feb210 Calls. I sold 145 Puts when 
it approached that level in early Feb. It really was a beautiful 
short strangle, especially when VRSN went right back to the 
middle of the range, giving me about 30 points of breathing 
room on either side. I bought the puts back for a profit. But 
then the hackers launched their very excellent net war on CNN, 
Yahoo, ETrade, etc, and VRSN became a hot stock again, and 
shot up through 210... 220, etc. Forget it. Not a game I want.

Selling Covered Calls. I was all over this a few weeks ago. 
I thought I had found a way to get dividends on tech stocks. 
Again, some optionetics study materials opened my eyes to the 
reality -- your upside reward is capped by a break even point 
defined as the strike price + the premium taken in. I sold a 
whole boatload of covered calls against core holdings this month. 
If I weren't getting ready to liquidate my core holdings anyway, 
I would be disappointed by some of the plays. I sold CSCO Feb 
125s for 2.5 (should have waited for earnings). Those will be 
called away. I sold VRSN Feb220s in both my IRA and core LT 
Stock Account. That stock will be called away, since it is 
trading right below the break even of 220 + 15 (ie, the strike 
price + the premium). My SUNW might not be called away, since 
the Feb95s I sold are still slightly out of the money with 15 
minutes left until expiration. The other covered calls that I 
wrote on SCH, MSFT, and AOL are all going to expire worthless. 
But the drop off in those stocks has cost more than the covered 
calls delivered in premiums. It is true, I can write covered 
calls against those stocks every month. But there is a strategy 
I like better...

Calendar Spreads. I would rather own a 2 year LEAP (or even 
a 9 month call) on a company with explosive growth potential 
(eg, BRCM, VRSN, AFFX, INCY, JDSU... follow the newsletter 
call picks and start making your own list), and write 30 day 
calls against them every month to capture the high volatility 
premiums and to benefit from time decay (theta). This means 
buying the LEAP/ long term option when the market, sector, 
and stock is oversold, and waiting until the market, sector, 
and stock is over bought. How do you determine overbought/ 
sold? You need a system that is simple enough to do in 20 
minutes, and to be consistent in looking at the market for 
these opportunities (eg, 30 minutes after the open, 30 minutes 
before the close). I look at the NDX & NDOOH; SPX & SPOOH; 10 
day exponential moving averages on the major averages (INDU, 
COMPX, OEX); and VIX to determine over bought/ over sold on 
the market. Then I take the sectors symbols from the market 
sentiment section of the newsletter and put them into a 
separate screen in qcharts, and look at what is up/ down big. 
Then I look at individual stocks, which I have broken up by 
sector below the sector symbols in the same quote sheet; the 
sectors are Internet, Biotech, Semiconductors, Networking. On
individual stocks, I have a screen set up to look at 200, 50, 
and 10 day exponential moving averages; stochastics; bollinger 
bands. I read the newsletter each night for market direction 
(market wrap); sector strength (market sentiment); put/ call 
ratios on the index options.

Spreads. I really like spreads. I just entered my first spread 
plays this week, and this is going to be one of my two core 
strategies (along with calendar spreads). Spreads come in two 
flavors -- debit and credit. Spreads can be bullish or bearish. 
I can't explain spreads in detail here, and for that, you 
really need to go to the OptionInvestor/Optionetics seminar
advertised in each newsletter. 

(For complete details http://www.OptionInvestor.com/seminar/)

Here are the trades I put on --

Date: 2/16
Stock: JDSU
Strategy: Bull Call Spread
Elements:
Bought JDSU Sept 220 Call at 52.5
Sold JDSU Sept 270 Call at 36
Stock Price: 213
Events: Split, 3/13
Reward/ Risk :: 33.5/ 16.5 (ie, I am risking 1 to make 2)
Break Even: 236.5 (the lower strike + the debit, in the case 
of a bull call spread)
Target Exit: 43.3 [16.5 + (.80 * 33.5)] (this calculation 
could be wrong, but it is my way of shooting for 80% profit. 
I want to close the spread for 43 or better, which will require 
the stock price to get up to 260 or 270)
Adjustment Targets:
195 - Buy to close the short leg, and let the long leg run up

Stock: JDSU
Strategy: Bull Put Spread
Elements:
Sold JDSU Mar 230 Put at 35.5
Bought JDSU Mar 190 Put at 13.25
Reward/ Risk :: 22.25/ 17.75
Break Even: 208 (the higher put minus credit received)
Target Exit: Expiration in March
Adjustment Targets: ?

I would like to distribute my spreads as follows:
1. One credit spread for every debit spread so that I offset 
the costs and get mostly "free plays" with respect to the funds 
in my account
2. Debit Spreads go out as far as possible (minimum 45 days), 
to give myself "time to be right." For example, on that JDSU 
Sept 220/270 Bull Call Spread, I have 7 months on the "Intel 
of Optical Switches." So it dropped 7 points today. So what? 
Support has been strong at 200. Does anyone think that JDSU 
will not be at 260 (130 post split) by September? How about 
by late March, after its split? The downside of going out far, 
though, is that you will never get max profit unless you hold 
until expiration, but I am not shooting for max profit. 75% 
profit would be fine, especially since my reward/ risk ratio 
is so favorable to begin with. Look at it this way. You make 
a bet where you risk $8000 to get $15,000 if you are right. 
You will settle for $12,000 if you are right long before the 
bet expires.
3. Credit Spreads are used for event targets under 30 days to 
take advantage of time decay (theta). Remember those short puts 
I liked above but found too risky? Well, here is the same 
principle (time decay) in a package which makes the reward/ risk
calculation acceptable. Again, JDSU splits on 3/13. Support has 
been strong at 200 for the last few weeks. When it dipped today 
to 206 or so, I looked for a credit spread with a better than 
1:1 reward/ risk ratio. I expect a split run to begin in the 
next few weeks, and, when it does, I think that JDSU can go over
230 pretty quickly. I might take profits, but I would rather 
just let the play expire worthless for full profit.

On brokers, I am glad to report that my friends down at 
Preferred Trade, conveniently located about 2 floors above 
the Pacific Options Exchange (PACX) are still the option 
trading champs of the investment world, in my opinion. Here's 
why. I put on the JDSU Bull Call Spread (Debit) in my brand 
spanking new Schwab account, complete with that sexy stand 
alone (non browser) software that Chuck uses in the commercial. 
It took me about 5 hours to put on the trade. Of course, my 
limit was below the "natural" price, because I was trying to 
get a better fill. I called it in, checked it on the software, 
and there was no fill. Then I called to check what was going 
on, and to see if they could check on the floor. I changed my
limit. I changed my limit again. Finally, I got through to 
their options desk and had someone go check the order on the 
floor a few minutes before the close. They finally got a fill.

On Friday, I was ready to put on the Bull Put Spread (after 
sleeping in until about 2 hours after the market opened -- 
one of the advantages of spread trading on the West Coast, 
where market open is 6:30 AM!). So, I follow the stock on 
qcharts, pick out the spread I want to do. I try to log onto 
the sexy Sch software, and, no dice. No joy in mudsville. I 
call in, and, after 45 minutes on hold, finally get a human 
being who tells me that the system is down and the software 
isn't working. Guess the cyber hackers are going after SCH. 
So, I go over to my Mr. Stock Account, and, lo and behold, 
the account I opened on Monday online is up, but the check 
I walked into their office personally on Wednesday has not 
yet hit my account. So, I fool around with their spread order 
entry screens to calculate some different trades, then to go 
Preferred Trade.

It took me 32 seconds to do the trade in Preferred.

Of course, I wanted to do the trade in my Schwab account so 
that the credit would offset the debit. That would have been 
nice. But, in Preferred, I could simply hit the bid on the 
best exchange to sell the puts I wanted to, and I could hit 
the ask on the best exchange for the puts I wanted to buy. 
Right click in qcharts, pick the exchange using time & sales,
send the order. I just made my own spread. No problems, no 
worries.

So, as I write this, I am rethinking my broker game plan, 
and considering shifting assets once again. Another trip 
down to the financial district between the Charles Schwab 
building and the Preferred offices right across the street, 
maybe -- or perhaps just with wire transfers (I like walking
in and talking to a person, seeing what the office looks like). 
Just like a boxing gym -- you'll get the best results in the 
place that looks the most beat up. That's where you find a 
team of folks with esprit de corps, pride, camaraderie and 
real knowledge. After all, the option trading pits aren't 
pretty places.

Janar Wasito
Contact Support


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***********

An Osmotic Technical Point of View
By Harrison Frolick

The end of the Web as we know it, a long Osmotic Technical View

I read with dread and trepidation today the news that our 
President was proposing 2 billion dollars to police the 
Internet. Could this be the beginning of the end? The only 
reason the Net has done the amazing things that it has is 
precisely because our Government has kept its mitts off of 
it. The old adage "Hi, we are from the government and we are 
here to help you" comes to mind. 

OK, I have to admit that I get a little protective of the Net. 
It truly has provided several careers for me. Can you imagine 
investing without it? You would not be even be able to get a 
chuckle out the stuff that I write (come on, some of my stuff
at least makes you laugh once in awhile) without it. Think 
about, as a fellow stockoptionaholic how else would we be able
to get our fixes? Phone trades all of the time? Charts that 
were sent via snail mail? No more intra-day trades, no more 
real-time charts, no more email alerts. No more OIN, Yikes! 
Think about it. The Net has drastically changed everyone's 
lives, even it they don't realize it. I have never given it 
much thought before but, along with the good old US of A, I 
am a Net Patriot. I am serious, we have a lot to be thankful
for. Thank goodness for electrons!

So let us use Osmotic Technical Analysis.  What I am trying 
to figure out is if they do manage to forcefully become 
involved with the Net ( I actually think it is a foregone 
conclusion) , how bad are they going to damage it and slow
things down and when? Notice I did not say if. This is a 
question that all Net investors should be asking themselves. 
No one that I have spoken with believes that government 
interaction with the Net can be positive. Depending on their 
course of action , they could slow the growth of the Net by 
50 to 90%. What would that do to Yahoo's price multiple for 
instance?  Long term put plays with leaps maybe?

While the only stated goal is to help, a couple of key goals
have been circulated through back channels rather openly. The
2nd goal but, the first to be implemented is that every single
individual on the net will have a permanent identifier key 
that goes out with everything he or she does on the net. I 
should say identifies every law abiding citizen. While this 
is technically aimed at stopping the criminals, the only one
that this will really affect is you and me. The hackers will
find a way around this, believe me, I know enough of them. It
is kind of like waving a red bandanna in front of a bull. The
ident tag only has one purpose and one purpose only. Can you 
guess what it is? This tag is already in place in the new 
Pentium. This is the first step toward taxation of the Net. 
Taxation of the Net is the 1 goal. Taxation of Net is the new
holy grail for politicians. Never mind that it could actually
destroy the goose that lays the golden eggs. Net Tax is the 
new mantra for the millennium, get used to it. You will hear
much more about it in the coming months. It is coming from 
both sides of the isles.

Here is my prediction as a Net investor and sometimes it does 
pay to take the long view. Depending on how much momentum is 
gained by politicians with a public that is ignorant of the 
implication of a Net tax , the Net as we know it could 
drastically be curtailed in as little as three years. This 
could in turn put a brake on the returns that everyone has 
gotten used to and could do irreparable harm to many of the
stocks of the New Economy which in turn could put an immature
screeching halt to the boom that we have had. We will have to
wait and see. But, keep this in mind in the future after all 
of the ruckus is over. Basically one impact that it will have
is to possibly freeze out some US companies in long term Net 
growth. Is this going to happen this year or next? Probably 
not, but it will give have the effect of giving a very large
edge to established companies with the infrastructure to 
handle the burden of collecting the tax in the long run. We 
are going to see continued consolidation.  Are there still 
billions to be made for Net companies? Sure, but it is my 
firm belief that the Net's glory days have just become numbered. 
Where to go next? Biotech? Then we really have to become 
knowledgeable about viruses.

Now the short view.  Is this a stock pickers market or what?  
I am either doing really well or getting booted out of plays 
pronto. Which reminds me,  Bull Riding is back on Sunday nights
again. You should catch it once.  As an option trader, you will
know just how some of those riders feel.  I played the Corning 
150 Sep calls QAZIJ's earlier this month. So far so good. I also
jumped into some March 190 Yahoo calls YUUCR's. You could have 
doubled your money on those today. To the reader who asked if 
I ever day traded options? Yes, there are always exceptions to 
every rule, Yahoo is one of them. I am still hanging on to my 
ETEK April 230 calls FNYDF's through the split. JDSU appears 
to have some support around the 197 level intra-day. We will 
just have to wait and see. Although, I am getting loaded up on
the green stuff again ahead of the FMC meeting. Oil is starting
to bother me a bit too. Talk about manipulating prices, the oil
consortitium makes the option maker pirates seem like Sunday 
school teachers. Remember, keep those stops tight and now might
be a good time to practice those put plays. 

Happy Trading

Stockoptionaholic, Net Patriot and PBR fan

Harrison
Contact SupportHarrison

**********

Some Osmotic Technical Observations for your Radar Screens

I am going to offer some Osmotic observations that I have made 
recently for your perusal. Lets start with CSCO. CSCO was on my
radar for quite awhile and I must have made at least $50 dollars
on the last run. But where is it now? I say that CSCO is a bit 
long in the tooth and tired. Is the party over yet? Not quite 
but, it is beginning to reach the point of one too many splits
and it is going to take some time to recover. Dell, well, ditto
x 10. There are some younger pups out there that offer much 
better return potential and that are in the same industry. 

In the Net end instead of CSCO I am looking at the likes of 
NDSL, PDYN, ISPD, or even RBAK. A couple of these NDSL, ISPD 
and RBAK have been on a tear lately and could easily double 
from where they are now within the next 6 months. NDSL and 
ISPD are up nearly 50% since I mentioned them a few weeks ago. 
PDYN is getting ready to take off again and RBAK is dominating 
the industry. Give me any of these over CSCO for high % returns. 
Most of the calls are still relatively reasonable to boot. 
In case you have not noticed the market is becoming very 
selective these days. Contrary to what the talking heads are 
saying, if you are not in tech, you are not in the market. Do 
you have to be smart about it? Sure but, you are far ahead of 
the rest of the pack just by getting OIN. 

What is going to be hot over the next year? High speed Net 
access and this means DSL, cable, and fiber. Certain Bio tech 
is going to continue to roll. My one must have is HGSI. I have
been following these guys for quite awhile and buy long term 
calls on dips. You will glad you did. Their Aids patent is just 
the first of many to come. These guys are not just the leaders 
in the field. They own the turf and the stadium and they are 
going to make the rules. I could see it at $400 by the end of 
the year and not be surprised. Another up and comer is EPPH. 
They are a bulletin board but, should be on the big board here 
shortly. They have gone form $3 1/2 to $20 and there is a good 
reason why. As soon as they have options, I am there.
The Net Portals appear to have their work cut out for them. As 
we get faster and faster Internet access, which is why some of 
the above stocks are rocketing, the portals are in danger of 
becoming a non-event. You will be able to put together your 
own Home page with ticker, news from abcd, a section for OIN 
and what ever else that you happen to want. It is called page 
wiping. You can pick pieces from whatever source you care to 
and put them all together anyway you want. You won't have to 
go to AOL, or Go or even Yahoo. Although, I think that Yahoo 
will be able to stand up to this as is longer than the others. 
The rules are going to change in this arena and good old Yahoo 
will probably figure them out way before the rest of the pack.
Since I write about half of my pieces over a few days, and the
above was written yesterday, (hey, I am a trader who writes) it
comforts me to know that even after the whopper of the day we 
had Friday, most of the picks above held up pretty well. 
Did most of you get the Email alert on IFCI on Thursday? Well 
I caught it a bit late or so I thought and the calls were 
beginning to run or so I thought. Well, I just picked up the 
stock figuring that I could pick up a point or two. I was 
filled at 24 5/16 and I placed a day order to sell it at 27 
in one of my orphan accounts. With that particular broker a 
day order lasts until 9:00 PM and stays active through the 
after-market. All this I had forgotten until I checked this 
morning after seeing it blow through 30 like a hot knife 
cutting butter. Oh well, at least I had a higher day trading 
limit today. Picked up some more PDYN. The July 40 calls are 
reasonable. 

Here is my long shot of the month for you, JAKK, JAKKS PACIFIC 
INC. They are a toy manufacturer and they could be poised to 
take off here in the fairly near term. They make the WWF 
figurines, (dolls for boys) and a bunch of other neat stuff. 
They have great earnings and the Sep 20's and 17 1/2's are 
in the 3 to 4 range. Check this out for earnings. "Fourth-
quarter net sales in 1999 were $62.5 million, 162% higher 
than the $23.9 million in the prior year period. Fourth-quarter 
net income increased by 490% to $9.0 million, or $0.49 per 
diluted share (on 18.4 million weighted average shares 
outstanding), from $1.5 million, or $0.14 per diluted share 
(on 11.8 million weighted average shares outstanding), in the
same period a year ago." 
Well now that Professional Bull Riding is back on Sundays, I 
will have to get my charting done early. If you get a chance 
to catch it you will see why I am reminded of this market and
trading when I watch these guys. It seems that it only takes 
about all of 8 seconds to get blown out of some of the trades
these days. Here is to making it to the buzzer on your next 
trade.

Happy Trading

Contact SupportHarrison


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


Up is Down?

Whether trading options or the underlying security, we investors 
generally utilize fundamental and technical resources to research 
the investment.  It has been said that a stock's price movement 
is 50% influenced by the market (NYSE or NASDAQ), 20-30% by the 
sector and the rest by the company's business.  In addition to 
looking at the general market indicators, the smart money refers 
to the sentiment and contrarian indicators.  Market sentiment 
indicators track what the crowd is doing with their money.  The
contrarian investor will research the various sentiment indicators
(Investor Sentiment, Put/Call Ratio, etc.) and trade the opposite 
of the crowd.  The reason investors might want to trade to opposite
of the novice is because of sayings on the street like, "The herd 
always gets slaughtered" and "Bulls make money, bears make money, 
sheep get slaughtered." One such sentiment/contrarian indicator is
the CBOE's "VIX" (Volatility Index).  The VIX is only contrarian 
in its action.  For instance, a spike up when the market is down 
can be read as a potential rise in the broader market.  Inversely,
a spike down when the market is rising can be read as a potential 
decline in the broader markets.  Up is down, down is up.  

The "VIX, introduced by CBOE in 1993, measures the 
volatility of the US equity market. It provides 
investors with up-to-the-minute market estimates of 
expected volatility by using real-time OEX index option 
bid/ask quotes. This index is calculated by taking a 
weighted average of the implied volatility's of eight 
OEX calls and puts. The chosen options have an average
time to maturity of 30 days. Consequently, the VIX is 
intended to indicate the implied volatility of 30-day 
index options. It is used by some traders as a general
indication of index option implied volatility." (Trading 
Index Options by James B. Bittman). 

Basically, the VIX is the measure of changes in price expressed 
in percentage terms without regard to direction.  Some investors
use the index as an indication of Put volume versus Call volume.
But that is the definition of the Put/Call ratio.  Another saying
is "when the VIX is high it's time to buy, when the VIX is low 
it's time to go (sell). 

I use the VIX as an indicator of inverse relationships.  
Furthermore, when the VIX spikes up or peaks, I have observed 
that the S&P100 (OEX) and/or S&P500 (SPX) indicate a possible 
buy.  However, it is very important to point out that the signal 
may be intraday, short term (days or weeks), or a general reversal.
An example of a shorter-term bounce is when the VIX spiked up to 
about 25.3 on November 30th, the OEX was at a 738.  A few days 
later the OEX bounced to 773 while the VIX spiked down to 19.6.


 


 

In addition, when the VIX dropped down, this indicated a reversal
on the OEX.  The OEX declined to about 750 after a few days.  
During that decline, the VIX climbed back up.  The OEX reversed 
its short term trend upward.  However, this advance in the OEX 
lasted for more than just a few days.  Further examples of this 
inverse relationship can be seen in January's violent trading 
patterns.     

Furthermore, in the middle of January the VIX had dropped sharply 
to 20.5 and the OEX peaked at around 801.  The OEX then declined 
over a 10 day period to a low of approximately 732.  Therefore, 
when the VIX jumps sharply in numbers, percentages or visually, 
and the market index (OEX or SPX) is down or down-trending, this
can indicate that the market may soon change direction.  
Furthermore, when the VIX drops sharply in numbers, percentages 
or visually, and the market index (OEX or SPX) is up or even up-
trending, this can indicate that the market may soon change 
direction.  I must warn you that I am not recommending any 
purchase or sales of any securities.  Furthermore, my intention 
is to educate and promote excellent trading practices. 

An example of an indication of a longer-term reversal can be 
observed on the charts.  The spike on the VIX chart in the 
middle of October can be matched to the change in direction 
the markets benefited from shortly after.  As the OEX chart 
shows, the index advanced from the 640's in October to the 
790's into the first trading day of Y2K.  

If you have any additional questions regarding this article, 
please feel free to contact me at 877-379-6778 or E-Mail 
RJOgil@AOL.COM.  Neither Presidential Brokerage, Inc. nor 
Robert J. Ogilvie.make any representation as to the accuracy
reliability or completeness of any charts, formulas, and /or 
research opinions presented herein.  This article is intended
solely for educational purposes.  Nothing herein should be 
construed as an offer or solicitation to buy or sell any 
securities.



******************
OPTION CLUB UPDATE
******************

Sunday, February 20, 2000

THE OPTION INVESTOR TRADING CLUBS CONTINUE TO ADD NEW LOCATIONS.  
OUR NEWEST CLUBS CAN BE FOUND IN RENO, NEVADA, MODESTO, 
CALIFORNIA, ORANGE COUNTY, CALIFORNIA AND NEW ZEALAND!!! 

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

	http://boards.OptionInvestor.com/tradersclubs/

Following are updates from two meetings that are taking place 
this weekend.  If this sounds like something that you could 
benefit from, drop us a line at Visit@OptionInvestor.com or 
Contact Support for more information on a club in your 
area.


UPDATE FROM NEW ORLEANS, LA
*******************************
OIN -NEW ORLEANS TRADING CLUB

OCCASION: CLUB MEETING

DATE: SATURDAY - - - - FEBRUARY 19, 2000

WHERE: WESTWEGO REGIONAL LIBRARY

635 FOURTH STREET

WESTWEGO, LA

(504) 349-5912

TIME: 1:00 PM UNTIL 4:00 PM

Our guest speaker will be Gabe Rivera. Gabe has successfully 
traded Options for over the past 6 years. He will discuss his 
Option trading techniques and philosophies and will field 
questions from the floor.

REQUIREMENTS FOR THIS MEETING: Gabe would like for those members 
that were present at our January meeting to bring in at least one 
graph showing the "Pennant Flag" formation. Gabe said you can get
the charts from either Investors Business Daily or from the Wall 
Street Journal or from the Internet. Gabe would like for you to 
pick the Graph during the week of February 7th or before and then 
look for the same graph the following week (Week of February 
14th) to see if you can detect a "breakout".

All OIN Members are asked to bring $5.00 to help defray the cost 
of the meeting room and refreshments. Members can bring another 
Option Trader guest(s) if they wish, they do not have to be a 
member of OIN . First time guests are free.

Steven Johnson
Contact Support


UPDATE FROM ST. LOUIS, MO
***************************

We had our regular meeting on the night of 7 February at our 
usual location.  Our next meeting will be on the 21st 
(President's Day) at 7:00pm. The markets are closed, but we can 
still meet.

At our last meeting we viewed another instructional video on 
LEAPS. At our next meeting we will view a presentation on splits 
and discuss trading strategies. Everyone should be receiving the
Splittrader. If not, here is the URL. Access is with the same 
login and password used for OIN.

http://www.SplitTrader.com

I also received word of a TC2000 group meeting in St. Louis on 
the 18th of March. 

The Trader's Almanac highlights the fact that for 8 years in a 
row the day before President's Day weekend is a "dog."

Again thanks to Karen and Fred Deckerd for the VCR and Mike Moore
for the TV and Denny for the tapes.

Any questions, thought or ideas call or write me.

Maris





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

Daily Results

Index      Last    Week
Dow     10219.52 -205.69
Nasdaq   4411.74   16.29
$OEX      728.52  -23.52
$SPX     1346.09  -14.54
$RUT      545.68    8.58
$TRAN    2430.80   -5.33
$VIX       28.45    1.53

Calls              Week

BEAS      146.00   38.00  Dropped, a marvelous earnings run
GLW       193.31   27.56  Not an average casserole dish maker
SEPR      167.13   26.88  2-for-1 split payable this Friday!
ANAD      146.25   22.25  ANAD is keeping it's head held high
MUSE      230.00   20.50  Dropped, shares splitting on Tuesday
ENMD       67.50   18.94  New, ENMD works to provide new hope
NEON       73.63   16.88  New, NEON continues to glow brightly
PHCM      137.63   16.50  New, a play backed by great volume
EMLX      140.00   16.13  EMLX battles negative sentiment
IFCI       32.00   15.75  We weren't kidding about big leagues
INSP      200.25    8.94  Another 2:1  split for the millennium!
COMS       69.69    7.38  New, upcoming IPO of its Palm unit
LHSP       89.38    7.38  LHSP driven by strong buying volume
ISSX       94.69    5.81  Shaking out the bears to move ahead
PCMS       23.06    4.31  A sleeping giant finally awakened
ESPI       13.94    3.38  New, ESPI got a shot of adrenaline
Q          49.44    3.19  New, shares of Qwest are on the move
BCE       119.38    1.34  Manages a close above it's 10-dma
ISLD      115.38    1.13  ISLD is a plain old momentum play
COVD       85.00    0.38  Interesting scenarios to consider
ERICY      88.69   -1.50  Looking forward to CeBit next week
CUBE       84.88   -2.31  Dropped, CUBE future too uncertain
TXN       134.00   -2.75  Dropped, crossing over double yellow
CLRN      103.00   -3.25  Dropped, rough and tumble for CLRN
SNDK      145.63   -3.44  Dropped, Much Ado About Nothing
ASPT       59.56   -8.31  Dropped, snap crackle and no pop
AMCC      215.06  -14.97  Dropped, fast mover thrown in reverse

Puts

RHAT       71.50  -11.88  Weak investor interest plagues RHAT
MRK        62.00   -3.25  Looming patent expirations hurt MRK
KMG        45.44   -2.69  Some slippery relative strength
KRB        20.00   -0.81  We must thank Mr. Greenspan for this
JNJ        77.44    0.00  What we have here is a sector play
PGR        55.94    1.94  Greenspan helps stop PGR's rally


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

Calls

PHCM - Phone.com 
ENMD - EntreMed Inc. 
NEON - New Era of Networks 
ESPI - e.spire Communications 
Q    - Qwest Communications 
COMS - 3Com Corp. 


Puts

No new puts this weekend


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


****************************
SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter          2-20-2000  
Sunday                        3 of 5


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

Remember that historically, when we drop a pick it will go up 
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS

AMCC $215.06 (-14.97) When you travel at 200 mph and throw the 
car in reverse, the transmission get ruined in an instant.  When 
you throw a fast moving stock in reverse, trades get ruined just 
as quickly.  While the maximum profit in this play could have 
easily exceeded $70, AMCC is off about $40 from its intraweek 
high.  That's a big fall in a short period.  Can it come back 
quickly?  Yes, it could possibly.  But the fact that it closed 
well under its 10-dma of $226.87 is a technical breakdown in our 
book.  Also, while AMCC remains a split candidate, there are no 
major scheduled events until earnings in April, which would make 
a likely announcement date (that is unless management hands 
investors a surprise).  Volume has fallen four days in a row too.  
Technical violation, no events and decreasing volume make it 
necessary to move on.  Thus we're cutting AMCC loose this 
weekend.

MUSE $230.00 (+20.50) Shares of MUSE will be splitting on 
Tuesday the 22nd, and therefore it is time to end this play. 
We have been playing MUSE since the end of January, when MUSE 
was at a mere $166.69 (we say this slightly tongue in cheek 
of course).  Even though MUSE closed Friday's session down 
just over $6 for the day, we are still up over $60 on this 
play.  Not bad at all if we do say so ourselves.  Not to 
mention that MUSE had traded as high as $237.75 during this 
pre-split run play.  It is always a little hard to let a play 
like this go, but we must charge ahead, as there are always 
more opportunities out there.  It is important to close out 
your positions early in the day on Tuesday to avoid falling 
victim to a post-split depression.

CUBE $84.88 (-2.31) Admittedly, we struggled with this one.  
Is it time to drop CUBE from our call play list?  In looking 
at last weeks chart for CUBE, we finally decided that it was 
time to do so.  CUBE traded in a fairly narrow range and just 
couldn't deliver much on the upside (obviously, as we did 
finish down over $2 for the week).  CUBE looks to have some 
formidable near-term resistance and may have a bit of a fall 
before being met with any solid support.  Basically, the risk 
of continuing to play CUBE is killing the play.  CUBE may 
bounce back next week, but there are too many great looking 
plays out there for us to hold a space open for something 
this uncertain.

ASPT $59.56 (-8.31) Snap, crackle, but no pop this week.  ASPT 
was holding up quite well as it consolidated at the higher 
share prices, that is until it got cut down -6.34 on Friday.  
This sharp descent pushed the stock below the converging 5-dma 
($65.53) and the 10-dma ($65.15) plainly hinting all was not 
well.  We believe the momentum on this news-driven play has 
fizzled out for the meantime.  Since time is money, we're 
exiting ASPT this weekend for more profitable opportunities. 

CLRN $103.00 (-3.25) It was a rough and tumble week for CLRN,
possibly due to concern about the 2.8 million shares that come
out of IPO lockup on Monday.  With an ADV of only about 500 K
shares, the potential negative impact looks to be making
investors nervous.  The company has been especially tight-lipped
about the outcome of the shareholder vote last Tuesday on
increasing the authorized shares from 50 to 200 million.  We
still smell a split coming, but perhaps the company is holding
that in reserve. Given the uncertainty, we will let CLRN go 
this weekend and wait for the sentiment to improve.

SNDK $145.63 (-3.44) Much Ado About Nothing seems an apt title
for the split run on SNDK.  The bulls made one final attempt on
Thursday, but the broad market weakness on Friday was just too
much.  SNDK gave up over $8 and any open positions should have
been stopped out.  The split occurs on Tuesday, and since we
never recommend holding over a split, it is time to let SNDK go.

TXN $134.88 (-2.75) Like a drunk driver weaving down the road
at 3am, TXN keeps crossing over the double yellow line (support
at $137).  It looks like our momentum play has become rangebound,
at best.  Unable to break through resistance at $145, the real
clincher is the fact that volume picked up as TXN dropped
Friday afternoon.  Given the broad-based weakness in the markets
on Friday, we will take away the keys and let TXN go home to
sober up.

BEAS $146.00 (+38.00) BEAS is putting the finishing touches on
a marvelous earnings run.  With the bleeding going on in the
broader markets Friday, investors added another $11.50 to the
price of BEAS stock.  BEAS spent all week in what most would 
consider a technically overbought condition.  Traders that
choose to ignore this play because its price was "overbought"
last weekend, missed a $38 move this week.  The lesson here is
momentum can move stocks to unprecedented levels regardless of
the technical picture.  Volume the past two days was, very heavy
with over 10.0 million shares changing hands, suggesting BEAS 
may not be done yet.  They will report earnings after the close
of business Tuesday.  Although it may be tempting to hang on
to current positions, we will close this one for now.  


PUTS

No dropped puts this weekend.



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

Current Split Candidates:
 
PHCM - Phone.com
GLW  - Corning, Inc.
ISLD - Digital Island
ISSX - ISS Group
 
 
Split Candidates that aren't current plays
 
EMC   - EMC Corp.
CMVT  - Comverse Tech.
TERN  - Terayon Comm.
CHINA - China.com

 
Recent announcements we predicted:
 
NXLK - NextLink Comm. (most recent pick) 
IMNX - Immunex Corp.  (most recent pick)



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

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

Symbol - Stock          Splits/Date  
SNDK - SanDisk          2:1 02-22-00 ex-date 02-23
TQNT - Triquint         2:1 02-22-00 ex-date 02-23
KANA - Kana Corp        2:1 02-22-00 ex-date 02-23
IVX  - IVAX Corp        3:2 02-22-00 ex-date 02-23
SANM - Sanmina Corp     2:1 02-22-00 ex-date 02-23
MUSE - Micromuse        2:1 02-22-00 ex-date 02-23
VIAN - Viant Corp       2:1 02-23-00 ex-date 02-24
USAI - USA Networks     2:1 02-24-00 ex-date 02-25
ESIO - Electro Scient   2:1 02-24-00 ex-date 02-25
EMMS - Emmis Corp       2:1 02-24-00 ex-date 02-25
PXCM - Proxicom         2:1 02-24-00 ex-date 02-25
ITRU - InterTrust       2:1 02-24-00 ex-date 02-25
MGG  - MGM Grand        2:1 02-25-00 ex-date 02-28
SEPR - Sepracor         2:1 02-25-00 ex-date 02-28
GSPN - Globespan        3:1 02-25-00 ex-date 02-28
SILI - Siliconix        3:1 02-28-00 ex-date 02-29
NSOL - Network Solution 2:1 02-28-00 ex-date 02-29
DS   - Dallas Semi      2:1 02-28-00 ex-date 02-29
SDLI - SDL Inc          2:1 02-29-00 ex-date 03-01
GTLL - Global Tech      3:2 02-29-00 ex-date 03-01
TMPW - TMP Worldwide    2:1 02-29-00 ex-date 03-01
WEBT - WebTrends        2:1 02-29-00 ex-date 03-01
ANAD - Anadigics        3:2 02-29-00 ex-date 03-01
MMPT - Modem Media      2:1 03-01-00 ex-date 03-02
ONXS - Onyx Soft        2:1 03-01-00 ex-date 03-02
JMED - Jones Pharma     3:2 03-01-00 ex-date 03-02
DSPG - DSP Group        2:1 03-01-00 ex-date 03-02
KILN - Kirlin Holding   2:1 03-01-00 ex-date 03-02
WCII - Winstar          3:2 03-02-00 ex-date 03-03
VRTS - Veritas          3:2 03-03-00 ex-date 03-04
XLA  - Xcelera          2:1 03-03-00 ex-date 03-04
SLR  - Solectron        2:1 03-08-00 ex-date 03-09
BFRE - Be Free          2:1 03-08-00 ex-date 03-09
JDSU - JDS Uniphase     2:1 03-10-00 ex-date 03-13
ASDV - Aspect Dev       2:1 03-10-00 ex-date 03-13
SDLI - SDL Inc          2:1 03-13-00 ex-date 03-14
BVSN - Broadvision      3:1 03-13-00 ex-date 03-14
ADIC - Advanced Digital 2:1 03-13-00 ex-date 03-14
ADVS - Advent Software  2:1 03-13-00 ex-date 03-14
ALLR - Allaire Corp     2:1 03-14-00 ex-date 03-15
BRCD - Brocade          2:1 03-14-00 ex-date 03-15
AJG  - Arthur Gallagher 2:1 03-15-00 ex-date 03-16
OTTR - Otter Tail Pwr   2:1 03-15-00 ex-date 03-16
WLSN - Wilson Leather   3:2 03-15-00 ex-date 03-16  
AMAT - Applied Materials2:1 03-15-00 ex-date 03-16
ADI  - Analog Devices   2:1 03-15-00 ex-date 03-16
AGIL - Agile Software   2:1 03-16-00 ex-date 03-17
LRCX - Lam Research     3:1 03-16-00 ex-date 03-17
MVSN - Macrovision      2:1 03-17-00 ex-date 03-20
TLGD - Tollgrade Comm   2:1 03-20-00 ex-date 03-21
IMNX - Immunex Corp     3:1 03-20-00 ex-date 03-21
SANM - Sanmina          2:1 03-22-00 ex-date 03-23
CSCO - Cisco            2:1 03-22-00 ex-date 03-23
WON  - Westwood One     2:1 03-22-00 ex-date 03-23
NTAP - Network Appliance2:1 03-22-00 ex-date 03-23
NSOL - Network Solution 2:1 03-23-00 ex-date 03-24
TEVA - Teva Pharma      2:1 03-24-00 ex-date 03-27
PCLE - Pinnacle Systems 2:1 03-24-00 ex-date 03-27
HAUP - Hauppauge Digitl 2:1 03-24-00 ex-date 03-27
JWG  - JWGenesis        3:2 03-24-00 ex-date 03-27 
LLTC - Linear Tech      2:1 03-27-00 ex-date 03-28
VERT - VerticalNet      2:1 03-31-00 ex-date 04-03
RADS - Radiant Systems  3:2 03-31-00 ex-date 04-03
SBL  - Symbol Tech      3:2 04-05-00 ex-date 04-06
HDI  - Harley Davidson  2:1 04-07-00 ex-date 04-10
AHAA - Alpha Industries 2:1 04-19-00 ex=date 04-20
ELNT - Elantec Semi     2:1 04-21-00 ex-date 04-24
GE   - General Elec     3:1 04-26-00 shareholder mtg
AXP  - American Exprs   3:1 05-10-00 ex-date 05-11
SNE  - Sony Corp        2:1 05-19-00 ex-date 05-22
CXR  - Cox Radio        3:1 05-19-00 ex-date 05-22
MEDI - Medimmune        3:1 06-02-00 ex-date 06-05
AA   - Alcoa            2:1 06-09-00 ex-date 06-12
NXLK - Nextlink         2:1 06-15-00 ex-date 06-16

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



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

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


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

ERICY - LM Ericsson Telephone $88.69 (-1.50)

See details in sector list

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

****

ISLD - Digital Island $115.38 (+1.13)(+26.19)

See details in sector list

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


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

KMG - Kerr-McGee Corp. $45.44 (-2.69)(-5.75)

See details in put list

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



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

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
TP/P= True premium or Time premium
RRR = Risk/Reward/Ratio
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume
MTD = Move to double - amount stock must move to double option price
                         in one week. ONE WEEK MOVE ONLY !

Numbers within ( ) are the amount of change for the week.
Numbers within ( ) may be designated with PxW, like P3W, prior 3
weeks

The options with a "*" by the strike price are our choices from the 
group. If the stock moves as expected we feel they have the best 
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5 
Analysts who follow each stock rate it and these rating are 
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell" 

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the 
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.



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

COMS - 3Com Corp. $69.69 (+7.38)

3com is a broad-based supplier of local area network(LAN) and
wide area network(WAN) systems.  They are the world's second
largest maker of computer networking products.  COMS personal
connectivity unit focuses on modems and cards for connecting
to the Internet and other networks.  They also make network
infrastructure gear and network management software.  In an
attempt to refocus on networking, 3com is spinning off its
Palm subsidiary, which makes the Palm electronic organizer
and licenses Palm technology.

Our new play in COMS is just full of reasons it could turn out
to be a good play.  COMS is in the networking sector with the 
likes of CSCO, JNPR and others which has provided plenty of 
profits for traders since the beginning of the month.  What 
makes COMS so attractive at this point is not the sector.  It's 
the upcoming IPO of its Palm unit in a couple of weeks.  The
company's stock had been struggling a bit, but since Palm filed
plans in December to raise an estimated $368 million in an IPO
shares of COMS have moved substantially higher.  Investors in 
COMS will own shares not only 3Com, but they will get a stake 
in Palm as well.  COMS will initially retain a 93% stake in the 
company, though it plans to distribute its Palm shares to 3Com 
investors.  When Palm spins off they will have an initial market 
value of about $9.1 billion, based on initial estimates.  3COM 
has a market cap near $24 bln.  So this is really a play on an 
IPO in Palm as much as it is in COMS.  Palm expects to begin 
trading in early March under the ticker "PALM".  Now back to 
COMS.  They made a high Thursday at $77, before Friday's debacle 
in the Dow and Nasdaq.  COMS did manage to find support near $66 
Friday, before bouncing back to close at $69.69.  Should we see 
more selling next week, the $65-$66 area should provide support.  
If traders come back in better spirits, COMS should participate 
and move higher.  The IPO craze has continued to be amazing this 
month and we have no reason to believe investors won't bid 
shares of COMS higher in an attempt to participate in Palm's IPO.

Technology stocks got a shot in the arm Tuesday, when the U.S.
House of Representatives approved a bill authorizing $6.9 billion
over 5 years for information technology research.  Most of the
money goes to university research labs, yet companies like AOL,
CSCO, SUNW and COMS often partner with academic institutions to
develop new technologies.

***Editor's note:  Please see the Ask the Analyst section for 
more technical analysis on COMS.***

BUY CALL MAR-65 THQ-CM OI=7865 at $10.13 SL=7.75
BUY CALL MAR-70 THQ-CN OI=5694 at $ 7.75 SL=5.75
BUY CALL MAR-75 THQ-CO OI=6382 at $ 5.63 SL=3.75
BUY CALL APR-70*THQ-DN OI=4578 at $10.00 SL=7.50

Picked on Feb 20th at    $69.69    PE = 51
Change since picked       +0.00    52-week high=$77.00
Analysts Ratings     5-8-18-0-0    52-week low =$20.00
Last earnings 12/99   est= 0.34    actual= 0.37 
Next earnings 03-21   est= 0.25    versus=-0.24
Average daily volume = 10.0 mln
/charts/charts.asp?symbol=COMS


********
BIO-TECH
********

ENMD - EntreMed Inc. $67.50 (+18.94)

EntreMed, a leader in the field of angiogenesis research and
development, develops drugs that inhibit the abnormal growth
of new blood vessels associated with cancer, rheumatoid
arthritis, macular degeneration, and other diseases.  New blood
vessel growth is detrimental in these diseases because it
nourishes the disease causing cells.  ENMD has developed two
compounds, Angiostatin and Endostatin, which have successfully
blocked blood vessel growth in tumors.  The company is working
on a drug delivery system based on a blood-cell permeation
device and has received permission to make the controversial
drug Thalidomide, used for treating AIDS-related cancer.

Millions of Americans are praying for better drugs to treat,
inhibit, and even prevent cancer.  ENMD is trying hard to answer
their prayers and provided new hope this week.  A leader in the
fight to find drugs capable of preventing the growth of cancer
by cutting off the blood supply to the offending cells, ENMD
gained approval this week for clinical testing of their latest
candidate (see news below).  Beginning to come to life in mid-
January, the current move really got going in the first week
of February.  Showing us a nice stair-step pattern of higher
lows and higher highs, ENMD is now approaching resistance at
its 52-week high of $69.50.  Driven by the rapid-fire product
announcements, the move will soon get a booster shot from
earnings.  Scheduled to be released March 22nd, we have ample
time to search for an entry point to take advantage of an
earnings run.  Owing to the rapid move upwards, support exists
in roughly $5 increments ($65, $60, $55), and a bounce near
$60 or $65 would provide a nice entry point.  ENMD has a habit
of moving up sharply and then consolidating its gains for a day
or two before repeating the process.  Wait for the next move up
and then enter as the subsequent consolidation gives way to
buyers again.  More conservative players may want to wait for
a convincing breakout to new highs before jumping on board.

On Monday, ENMD received permission from the Food and Drug
Administration to begin clinical trials of its latest
angiogenesis inhibitor.  The compound, 2-Methoxyestradiol
(2ME2), is a naturally-occurring molecule that directly inhibits
both the growth of tumor cells the growth of the blood vessels
feeding those cells.  This makes 2ME2 the first product candidate
from ENMD to attack both compartments of cancer: the tumor cells
and their blood supply.  In preclinical studies in mice, oral
2ME2 effectively inhibited metastatic growth of lung and
pancreatic cancers and caused regression of primary tumors
associated with several other human cancers including breast
cancer.  In sharp contrast to conventional chemotherapeutics,
little or no toxicity was observed in preclinical studies.

BUY CALL MAR-65 QMA-CM OI=248 at $11.25 SL= 9.00
BUY CALL MAR-70 QMA-CN OI=368 at $ 9.13 SL= 6.75
BUY CALL JUN-65*QMA-EM OI=138 at $18.75 SL=14.50
BUY CALL JUN-70 QMA-EN OI=204 at $16.75 SL=13.00

SELL PUT MAR-55 QMA-OK OI=335 at $4.50 SL=6.25
(See risks of selling puts in play legend)

Picked on Feb 20th at  $67.50     P/E = N/A
Change since picked     +0.00     52-week high=$69.50
Analysts Ratings    0-1-0-0-0     52-week low =$16.00
Last earnings 11/99 est=-0.81     actual=-0.48
Next earnings 03-22 est=-0.44     versus=-0.35
Average Daily Volume =  409 K
/charts/charts.asp?symbol=ENMD

****

SEPR - Sepracor $167.13 (+26.88)

As a specialty pharmaceutical company, SEPR strive to develop
improved versions of widely prescribed drugs.  Their Improved
Chemical Entities (ICE) program identifies existing, widely
prescribed drugs that might be replaced by improved, single-
isomer or active-metabolite forms of such drugs.  The company
then seeks to develop ICEs that offer one or more benefits
over the parent drugs, such as reduced side effects, improved
efficacy or effectiveness for new indications.  SEPR has
licensed or is developing ICEs to treat a broad range of
indications in areas including respiratory, urology/
gastroenterology, and psychiatry/neurology.

On a never-ending quest to make a better drug, SEPR appeals to
our desire for better health.  As Americans strive to live
longer, more vibrant lives, SEPR wants to be there to provide
the drugs we need.  SEPR didn't waste any time after we picked
it on Tuesday.  Pausing just long enough to allow for prudent
entries after amateur hour on Wednesday, the stock was driven
sharply higher by the close on Thursday.  Nothing moves in a
straight line and a little consolidation was expected,
especially considering the broad market weakness.  The
consolidation on Friday makes a good case for support building
at $163-164.  With the gap up on Friday, resistance has now
moved up near $177.  The primary motivation for our play, other
than the strength of the Biotech sector, is the 2-for-1 split,
ex-div this Friday.  Stronger support can be found down at
$155, but given the short fuse on this play, we would be
concerned if SEPR dropped that far.  Look for a bounce near
Friday's support level to trigger your entry.

News has been light on SEPR lately, which should focus investor
attention on the upcoming split.  The most recent news was the
company's issuance of $400 million in convertible bonds on
February 7th.  The proceeds of the sale will be used for its
ongoing preclinical and clinical trials, and other research 
and development programs. 

BUY CALL MAR-160 ERQ-CL OI= 79 at $19.63 SL=15.25
BUY CALL MAR-165*ERQ-CM OI=248 at $18.00 SL=14.00
BUY CALL APR-160 ERQ-DL OI= 78 at $22.38 SL=17.50
BUY CALL APR-165 ERQ-DM OI= 70 at $20.50 SL=16.00

SELL PUT MAR-140 ERQ-OH OI= 32 at $ 3.38 SL= 5.25
(See risks of selling puts in play legend)

Picked on Feb 15th at $149.13     P/E = N/A
Change since picked    +18.00     52-week high=$178.38
Analysts Ratings    5-5-2-0-0     52-week low =$ 58.75
Last earnings 01/00 est=-1.53     actual=-1.79
Next earnings 04-27 est=-1.72     versus=-0.93
Average Daily Volume =  535 K
/charts/charts.asp?symbol=SEPR



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

Q - Qwest Communications $49.44 (+3.19)

They call themselves an Internet communications company.  
Qwest's growing range of advanced Internet applications and
services are delivered and enabled by the most advanced network
on earth.  The Quest network is built with the industry's most 
advanced technologies.  In the U.S. it reaches over 18,815 
miles and connects to 150 cities across the country.  They 
offer local and long distance telephone, Internet and multimedia
services to businesses and consumers over its Internet based
protocol network.  They are the #4 long distance provider in
the U.S.  Q's network extends 1400 miles into Mexico, and 
has joined KPN, the Dutch telecommunications company, in a
joint venture in Europe.

The symbol and the location where the company's stock is traded
may have changed, but the stock's performance certainly hasn't.
The first of the year Qwest changed its symbol from "QWST" to
just "Q", and moved from the volatile Nasdaq over to the NYSE. 
The move according to company officials should lead to "less 
share price volatility and a greater depth of trading in it 
shares".  After a brief dip to the $38 level, shares of Q have 
been on the move.  Q escaped a sell-off after reporting earnings
in line with analysts estimates the first part of February.  The 
real rush to buy Qwest stock seems to have come from the numerous 
upgrades from analysts that follow the company.  Since reporting
earnings and especially this past week analysts have come out 
pounding the table on Q.  Most have either reiterated Buy or 
Strong Buy ratings.  Wednesday, Merrill Lynch resumed coverage 
on the Telecom sector.  They came out with an intermediate term
Accumulate and a long-term Buy rating for Q.  They went on to
say Qwest's planned acquisition of US West will combine new, 
high-growth telecom assets with the traditional local voice
business.  Additionally analyst's indicated the combined 
Qwest-US West company would be very attractive given the 
aggressive leadership from the company's CEO.  Qwest held up 
very well with the decline seen in the markets Friday and 
could be lending itself to a great entry point for our new play.
After making a high of $50.88 early in the day, Q pulled back 
to support at $49, which happens to be its 5-dma.  The next 
levels of support are found at $48 and $47.  If traders come 
back in a better mood Tuesday than when they left, we would 
look for Q to regain its footing and move higher.

Early last week Qwest said it had signed a deal to provide 
network access to Jato Communications as well as take a $12.5
million stake in the company, which provides high-speed Internet
services.  Under the 5 1/2 year deal, Jato will pay Qwest $25
million for access to Qwest's high-speed network.
  
BUY CALL MAR-40 Q-CH OI= 5509 at $9.63 SL=7.75
BUY CALL MAR-45*Q-CI OI=11326 at $5.00 SL=3.25
BUY CALL MAR-50 Q-CJ OI= 4797 at $2.31 SL=1.25
BUY CALL APR-50 Q-DJ OI= 4911 at $3.25 SL=1.50
BUY CALL APR-55 Q-DK OI= 1597 at $1.50 SL=0.75

Picked on Feb 20th at    $49.44    PE = 84
Change since picked       +0.00    52-week high=$52.38
Analysts Ratings     16-5-5-0-0    52-week low =$25.19
Last earnings 02/00   est= 0.05    actual= 0.04 
Next earnings 05-03   est= 0.04    versus=-0.00
Average daily volume = 7.53 mln
/charts/charts.asp?symbol=Q

****

COVD - Covad Communications $85.00 (+0.38)(+8.06)(+3.38) 

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

Are we bored yet?  The lack of movement in COVD is providing
us with some interesting scenarios to consider.  After the 
initial spike down to $80 early Monday, COVD regained its 
composure.  The problem is that it has traded for most of the
week in a $2 range.  That kind of activity can cause even the 
most patient of traders to begin to lose interest.  We pointed
out Thursday, for COVD to get back on track it would need
to have new buyers enter the market.  So where's the new buyers? 
Probably sitting on their hands.  It can be very difficult to 
place a buy order when you see the broader markets falling out
of bed.  The other side of the coin is that COVD didn't really 
participate Wednesday and Thursday when the Nasdaq was on its
way to new highs.  How do we treat our play in COVD?  For now 
we go back to the basics.  Our view of the company in the 
near-term and the fundamentals haven't changed.  The fact that 
$84 has provided support for COVD, when it has drifted lower
during the week is another check in the plus column.  COVD lost
only -$0.50 in the wake of the selling at the Nasdaq on Friday 
is another real positive.  Obviously it's a matter of personal 
preference, but until we see selling pressures develop, or some
other fundamental reason to dump COVD, we will stick with the 
DSL company for a while longer.  A close above $86, supported by
solid volume would certainly reinforce our belief and provide a
good entry point for new positions.

Then lack of any new announcements from COVD could be what is 
keeping the stock in such a narrow trading range.  News of COVD's
DSL services becoming available in the greater Pittsburgh, 
Pennsylvania area did help move the company's stock.
 
BUY CALL MAR-75 COU-CO OI=176 at $14.88 SL=11.50
BUY CALL MAR-80 COU-CP OI=571 at $11.75 SL= 9.25
BUY CALL MAR-85*COU-CQ OI=388 at $ 9.13 SL= 6.75
BUY CALL MAR-90 COU-CR OI=224 at $ 6.38 SL= 4.25

SELL PUT MAR-80 COU-OP OI= 77 at $ 4.88 SL= 6.50
(See risks of selling puts in play legend)
 
Picked on Feb 01st at    $74.00    PE = N/A
Change since picked      +11.00    52 week high=$88.13
Analysts Ratings      7-7-1-0-0    52 week low =$24.83
Last earnings 01/00   est=-0.97    actual=-0.80 
Next earnings 04-25   est=-1.06    versus=-0.56
Average daily volume = 2.10 mln
/charts/charts.asp?symbol=COVD

****

EMLX - Emulex Corp. $140.00 (+16.13)(+15.88)

Emulex Corp is a leading developer and supplier of fibre 
channel technology, an ANSI standard communications interface 
that delivers unprecedented bandwidth, connectivity and 
reliability networking applications.  They design three types 
of connectivity products: network access servers, print servers 
and high-speed fibre channel products.  They sell their products 
worldwide to OEM and end users, through other distribution 
channels including value-added resellers, systems integrators 
and others.  

Once again EMLX provided a safe haven for investors looking for
a place to put their money.  Just as it did the previous Friday,
EMLX battled the negative sentiment seen in the major indices
and came out a winner.  EMLX broke out of its intraday ascending
triangle pattern to a new hit a high of $147.75, before pulling
back to close at $140.  With over 2.0 million shares changing 
hands it appears as though traders are serious about owning a 
piece of this rock.  Some of the push behind the move may have
come from an article in the Friday's "Investor's Business Daily".
EMLX was named a top new buy of the Putnam OTC Emerging Growth 
Fund.  As we mentioned before, institutions are heavily invested 
in EMLX, with over 83% of the outstanding shares in the hands of 
traders, that can make or break a company.  The little guys were 
jumping in as well, with many of the chat rooms predicting a 
stock split.  EMLX has split its stock 2-for-1, twice since last 
August, with the latest on December 16th.  EMLX is approaching 
the area where the last split was announced and they do have the 
available shares necessary, but we stress we have seen no 
indication from the company that a split could be in the works.  
So where do we go from here?  We believe the momentum seen 
Friday will continue to carry the stock higher.  A move back 
through the support levels at $138 or $135 could signal EMLX 
is taking a bit of a breather.

On Thursday EMLX announced the they were partnering with Seagate
Technology to demonstrate 2Gb/s fibre channel products at CeBIT
in Hannover, Germany.  In this demonstration, the recently
announced Emulex LightPulse(TM) LP9002 fibre channel host adapter
will operate in conjunction with Seagates 2Gs/s disc drives to 
set a new standard for fibre channel performance.
 
BUY CALL MAR-140*UMQ-CH OI=253 at $18.13 SL=14.00
BUY CALL MAR-145 UMQ-CI OI= 41 at $16.00 SL=12.50
BUY CALL MAR-150 UMQ-CJ OI= 35 at $12.75 SL=10.00
BUY CALL APR-150 UEL-DJ OI= 93 at $21.75 SL=17.00

Picked on Feb 13th at $123.88   P/E = 255
Change since picked    +16.13   52-week high=$170.25
Analysts Ratings    3-4-0-0-0   52-week low =$  6.63
Last earnings 01/00  est=0.14   actual=0.23
Next earnings 04-25  est=0.17   versus=0.05
Average Daily Volume =  991 K
/charts/charts.asp?symbol=EMLX

****

ISLD - Digital Island $115.38 (+1.13)(+26.19)

Digital Island is a leading global e-business delivery network 
company.  They offer hosting, content delivery, network 
management, and support for mission critical applications.  The 
company has regional Data Centers in New York, Santa Clara, 
Honolulu, and London, connecting directly into 21 countries 
with content distribution sites in nine markets worldwide.  Its 
clients are multinational corporations that use the Internet 
for day-to-day business operations.

There is no news, no upcoming splits or earnings report to drive 
this stock.  ISLD is a plain old momentum play.  This is a 
company with cutting-edge technology when it comes to delivering 
content-on-demand via multiple Internet devices.  Recently ISLD 
and others in the emerging "Enhanced TV and Broadband" markets 
have rebounded from depressed levels despite economic worries 
and broad market volatility.  We first added ISLD to our call 
list last weekend when we saw it crack the stubborn resistance 
at $115.  This week, ISLD initially pulled back in a sharp and 
swift manner sinking to an intraday low of $100.25 by Tuesday 
morning before rebounding on a spike in volume.  Wednesday 
continued to provide entry points for the brave heart near the 
$105 mark while the more conservative waited for Thursday's 
breakout to jump in the game.  And we've got to show some 
enthusiasm its performance on Friday.  ISLD maintained a solid 
stance at an $108 support level and boldly broke Monday's 
intraday high of $118.13 while the Nasdaq was falling apart at 
the seams.  In our opinion that's not too shabby for a pure 
momentum play!  The next obstacle is for the momentum to 
generate enough "oomph" to pop ISLD over the $120 hump.  If 
you're looking to play the volatility, then bounces off $110 
still make for a good entry on the climb.  Although firmer 
support is still at $105 just under the rising 5-dma (now at 
$110.18).  

In the news this week, Digital Island announced FT.com, the UK's 
media giant, was added to its clientele list.  ISLD will supply 
critical infrastructure and network services to support the new 
Financial Times portal. 

BUY CALL MAR-110 SUH-CB OI= 104 at $18.38 SL=14.25
BUY CALL MAR-115*SUH-CC OI= 233 at $15.88 SL=12.25
BUY CALL MAR-120 SUH-CD OI=  41 at $13.88 SL=11.25
BUY CALL MAY-115 SUH-EC OI=  26 at $27.25 SL=21.25 low OI
BUY CALL MAY-120 SUH-ED OI=1571 at $25.38 SL=20.00

Picked on Feb 13th at   $114.25    P/E = N/A
Change since picked       +1.13    52 week high=$156.94
Analysts Ratings      4-2-0-0-0    52 week low =$  8.66
Last earnings 12/99   est=-0.71    actual=-0.61
Next earnings 05-02   est=-0.77    versus= N/A
Average daily volume = 1.19 mln
/charts/charts.asp?symbol=ISLD

****

PHCM - Phone.com $137.63 (+16.50)

Unwire your phone for the Internet!  Phone.com, Inc. is a 
leading provider of software and services that enable the 
delivery of Internet-based information services to mass-market 
wireless telephones.  Using its software, wireless subscribers 
have access to Internet and corporate intranet-based services, 
including Email, news, stocks, weather, travel and sports.  
In addition, subscribers have access via their wireless 
telephones to network operators' intranet-based telephony 
services, which may include over-the-air activation, call 
management, billing history information, pricing plan 
subscription and voice message management.  

Here's an easy one.  PHCM is in the hot wireless application 
protocol (WAP) business that allows you to surf the net in 
wireless mode.  Since their December post split depression 
following their 2:1 split in November, PHCM has had a steady and 
predictable range-bound pattern with resistance firmly planted at 
$140, with slightly ascending support between $100 and $110 
(though it doesn't qualify for an ascending pennant).  So what's 
different this time that makes us think it won't bounce down to 
$110?  Right - volume.  Looking at a volume chart, we can see 
that it doubled the ADV over the last four trading days.  Can 
you say "accumulation"?  That's the word mutual funds use to 
describe something they intend to own.  Anyway, if the buying 
interest keeps up, it won't take long to get the technical 
traders piling in too on any breakout over $142.  While you can 
try to target shoot for a better entry, dips haven't constituted 
more than $2 in the last four days.  Thus you run the risk of 
not getting filled.  There is also the remote chance that PHCM 
could reverse on us again and head for the bottom of the channel 
($110).  In this case, we think it's better to wait for the 
breakout over $142 backed up with volume to take a position.  If 
you can tolerate more risk and see the volume is huge even at 
$140, you can consider entering early, as other technical traders 
will be doing the same based on their risk profiles.  As for 
another split, yes, the price is high, but it needs to get 
over $200 to get back on the split radar.

PHCM has been on an acquisition spree lately beginning with their 
$500 mln purchase of Paragon software, which allows wireless 
phones to "hot synch" with other desktop, laptop and appliances 
using Microsoft Outlook and Lotus Notes.  They also recently 
announced their $850 mln purchase of Onebox.com, which will 
expand PHCM's reach into wireless messaging services.  While no 
bravery was required for this upgrade, USB Piper Jaffrey upped 
their price target from $143 to $150 and reiterated their Strong 
Buy rating the week before last.

BUY CALL MAR-130*UMC-CF OI=245 at $19.50 SL=15.25
BUY CALL MAR-140 UMC-CH OI=271 at $14.50 SL=11.50
BUY CALL MAR-150 UMC-CI OI= 97 at $10.25 SL= 7.75
BUY CALL APR-140 UMC-DH OI=146 at $23.13 SL=18.00
BUY CALL APR-150 UMC-DJ OI=207 at $19.50 SL=15.25

Picked on Feb 20th at   $137.63     P/E = N/A
Change since picked       +0.00     52-week high=$175.00
Analysts Ratings      3-3-0-0-0     52-week low =$ 16.13
Last earnings 01/00  est= -0.17     actual= -0.08
Next earnings 04-20  est= -0.16     versus= -0.50
Average Daily Volume = 1.95 mln
/charts/charts.asp?symbol=PHCM

****

NEON - New Era of Networks $73.63 (+16.88)

Delivering e-business and enterprise application integration
solutions, NEON is the leader in providing packaged solutions
that successfully integrate legacy applications, client/server
and Web-based applications.  Proving that the old and new can
successfully coexist, NEON counts large banks and financial
institutions like Chase Manhattan and Merrill Lynch among the
long list of companies that use its proprietary software
technology to integrate business information on incompatible
databases and operating systems.  Through partnerships, internal
growth, and acquisitions, NEON serves some 800 clients worldwide
in the healthcare, insurance, telecommunications, travel and
manufacturing industries.

Like a beacon in the night, NEON continues to glow brightly.
Receiving a recharge on Monday from the positive press (see
below), NEON spent the week charging higher.  Even the NASDAQ
weakness on Friday couldn't dim investor enthusiasm for this
B2B leader.  After a strong move up in October and November of
last year, NEON entered a 3-month period of consolidation.
Although not moving very quickly, this consolidation period
did result in a nice pattern of higher-highs and higher-lows.
Breaking out of this uptrending channel on Thursday galvanized
more buyers to flock to the stock.  The strength of the move
is highlighted by the fact that the 5-dma (currently at $66.50)
hasn't been touched since Monday.  The move up this week took
place on above average volume and it was encouraging to see the
volume surge as prices moved up in the final hour on Friday.
Look for NEON to find support near $70, followed by $66.
Consider opening new positions on a bounce near either of these
levels, as long volume returns.  More conservative investors may
want to wait for a convincing breakout above resistance at $75
before jumping on board.

NEON and Softplus, Inc., a leading e-solutions company announced
a strategic partnership on Monday.  Softplus will offer NEON's
e-business infrastructure platform as part of its end-to-end
e-solutions, providing flexible, Internet-based applications to
the communications industry.  Also on Monday, NEON announced 
a strategic partnership with eXcelon Corporation, a leading
supplier of dynamic B2B solutions.  eXceleon will bundle core
components of NEON's e-business products with its new B2B
Integration Server in order to enhance the server's enterprise
connectivity.

BUY CALL MAR-65 QNO-CM OI=313 at $12.63 SL=10.00
BUY CALL MAR-70*QNO-CN OI=435 at $ 9.63 SL= 7.25
BUY CALL APR-70 QNO-DN OI=211 at $14.88 SL=11.75
BUY CALL JUN-75 QNO-DO OI=149 at $12.88 SL=10.25

SELL PUT MAR-60 QNO-OL OI=50 at $2.44 SL=4.00
(See risks of selling puts in play legend)

Picked on Feb 20th at    $73.63     P/E = N/A
Change since picked       +0.00     52-week high=$78.38
Analysts Ratings      2-5-1-0-0     52-week low =$12.19
Last earnings 01/00   est=-0.03     actual= 0.00
Next earnings 04-26   est= 0.01     versus= 0.11
Average Daily Volume = 1.05 mln
/charts/charts.asp?symbol=NEON

****

INSP - InfoSpace.com Inc $200.25 (+8.94)(+41.19)

InfoSpace.com provides content and commerce solutions for Web 
sites and Internet appliances. Their focus is on content such 
as yellow pages, maps, classified ads, real-time stock quotes, 
sports and other information.  InfoSpace.com has 100+ online 
customers including the likes of American Online and Microsoft.  
Founder and CEO, Naveen Jain, has a 38% stake while Acorn 
Ventures owns 12% of the company.

This is a play first ignited by stellar earnings on January 26th 
that came just after a 2:1 stock split earlier in the month.  
Since then INSP has almost doubled in price and now there's 
another twist to the story.  On January 31st, the BoD announced 
another 2:1 stock split for the millennium!  A vote to increase 
authorized shares from 200 mln to 900 mln is expected by written 
consent and is expected to be approved by shareholders.  If all 
goes according to plan then 100% stock dividend will be paid 
on March 15th.  That gives us a little over three weeks to play 
the split run.  Currently INSP is in a consolidation period 
trading primarily in a tight range between $195 and $200.  The 
more aggressive will use this lull to get their foot in the 
door.  However, if your risk portfolio doesn't permit an early 
entry, then wait for INSP to crack the all-time resistance at 
$208, a new record set Monday morning.  Look for volume to back 
the climb too!  Stacking as many odds in your favor is the name 
of the game.

On Friday, it hit the press that InfoSpace.com filed suit 
against Viador (formerly known as InfoSpace), a Website software 
maker, for violating an agreement not to use the InfoSpace 
trademark.  InfoSpace.com is asking a judge to stop the 
infringement and award monetary damages and fees.  Earlier in 
the week InfoSpace.com announced it signed an agreement to 
integrate Mojam's live music event listing into its consumer 
content services.  And in other news, AirTouch Cellular 
announced it has chosen INSP to deliver its Internet services 
and applications serving as AirTouch's US mobile Internet 
platform.

BUY CALL MAR-195 FHY-CS OI=122 at $27.75 SL=21.50
BUY CALL MAR-200*FHY-CT OI=450 at $25.25 SL=19.75
BUY CALL MAR-210 FHY-CB OI=117 at $20.00 SL=15.50
BUY CALL APR-200 FHY-DT OI=105 at $38.38 SL=30.00
BUY CALL APR-210 FHY-DB OI= 61 at $34.75 SL=27.00

Picked on Feb 10th at   $191.50    P/E = N/A
Change since picked       +8.75    52-week high=$208.00
Analysts Ratings      6-3-0-0-0    52-week low =$ 10.00
Last earnings 12/99   est= 0.00    actual= 0.09
Next earnings 05-01   est=-0.12    versus=-0.01
Average Daily Volume = 1.76 mln
/charts/charts.asp?symbol=INSP


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

LHSP - Lernout & Hauspie $89.38 (+7.38)(+21.38)

On the cutting edge of interfacing man to his machines, LHSP
is the world's leading provider of speech and language
technology products and services.  Included in the company's
broad array of products and services are the following;
speech recognition for more than 15 languages (another 20
are on the way), digital speech and music compression, language 
translation, text-to-speech, Web-based translations, and
dictation of continuous speech.  LHSP is collaborating with
Microsoft (who owns 7% of LHSP) on its own speech recognition
interface.

Forget E.F. Hutton!  When LHSP speaks, investors listen.
Continuing to drive technology toward the nirvana of reliable
voice communication to computers (large and small), LHSP
continues to make giant strides in that direction.  LHSP spent
most of the week stuck to the $80 support/resistance level, but
Friday brought the breakout we were waiting for.  Moving in the
opposite direction of the ailing NASDAQ, and posting a gain of
over $9 on twice its average daily volume is definitely a good
sign.  LHSP looks like it has finally digested its gains from
the first week of February and is striking out to new highs.
In addition to the continuing stream of product announcements
and alliances, LHSP is still receiving support from its strong
earnings announcement on February 7th.  As if that wasn't
enough, the company announced a 2-for-1 split (date and
shareholder approval pending) along with earnings.  The $80
level has now been clearly defined as support, followed by $75,
and resistance has moved up to Friday's high of $94.63.  LHSP
showed minor support intraday on Friday near the $85 level and
a bounce there would make for a nice entry point going forward.
This move is being driven by strong buying volume - be wary of
a continued move up if volume starts to drop off.

LHSP announced on Tuesday that its text-to-speech technology
will be made available for use with Lucent Technologies' new
Enhanced Media Resource Server (eMRS), a next-generation
platform for deploying Internet and calling services.  The
agreement calls for LHSP to provide its RealSpeak product, a
natural-sounding text-to-speech engine, as an available option
on Lucent's eMRS.  Combined, the two companies' technologies
will allow telecommunications service providers to create and
offer value-added speech-enabled services such as Talking Call
Waiting and Talking Caller ID.

BUY CALL MAR-85 XQL-CQ OI=238 at $11.25 SL= 9.00
BUY CALL MAR-90*XQL-CR OI=537 at $ 8.63 SL= 6.50
BUY CALL JUN-85 XQL-FQ OI=113 at $17.75 SL=13.75
BUY CALL JUN-90 XQL-FR OI=439 at $15.63 SL=12.25

SELL PUT MAR-75 XQL-OO OI=435 at $ 2.50  SL= 4.00
(See risks of selling puts in play legend)

Picked on Feb 12th at  $82.00     P/E = 116
Change since picked     +7.38     52-week high=$94.63
Analysts Ratings    1-1-1-0-0     52-week low =$25.75
Last earnings 02/00 est= 0.20     actual= 0.22
Next earnings 05-10 est= 0.16     versus= 0.12
Average Daily Volume =  802 K
/charts/charts.asp?symbol=LHSP

****

ISSX - ISS Group, Inc. $94.69 (+5.81)

ISS is a leading global provider of security management 
solutions for e-business.  Major products include SAFEsuite 
security software and ePatrol managed security services and 
strategic consulting and education services.  Through these 
products and services, ISS helps clients protect digital assets 
and helps to ensure the availability, confidentiality and 
integrity of computer systems and information critical to 
e-business.  ISS' lifecycle e-business security management 
solutions protect more than 5,000 customers including 21 of 
the 25 largest U.S. commercial banks, 9 of the 10 largest 
telecommunications companies and over 35 government agencies.

As we mentioned when we initiated coverage of ISSX on Thursday, 
ISSX was headed toward the ever important psychological $100 
level.  Well, it made it there on Friday, but only for a brief 
"hi, how you doing" new 52-week high, kind of visit.  Apparently, 
ISSX had other plans that day and couldn't stay long.  ISSX 
pulled back to close the week just under $95.  We did see some 
strong volume on Friday, though it seems to have been equally
distributed between both the ascending and descending portions 
of the day, therefore, we are not concerned about declining 
investor interest.  No, we think that Friday's session was 
probably just some good old-fashioned profit-taking, which is 
a healthy occurrence before breakthrough of an important level, 
i.e., $100.  We could be positioned to reclaim positive momentum 
heading into next week, though there may still be a few bears 
to shake out of the rug.  ISSX looks to have some support at 
it's 5-dma ($94), which did a fairly decent job of holding 
throughout last Friday's session.  Look for this level to 
continue to hold.  The direction of the market is bound to be 
a factor next week, but we are still bullish on ISSX.  Obviously,
you will want to confirm direction, but Friday's decline may 
have been a gift, offering some nice potential points of entry.  

On Friday, ISSX announced plans to expand its operations into 
Egypt and thus increase its global Internet security presence.  
On that same day ISSX also announced a new strategic alliance 
with VeriLinks, to further Internet security product development 
for both companies.  

BUY CALL MAR- 90*ISU-CR OI=149 at $15.38 SL=12.00
BUY CALL MAR- 95 ISU-CS OI= 12 at $11.75 SL= 9.00 low OI
BUY CALL MAR-100 ISU-CT OI= 61 at $ 9.63 SL= 7.00
BUY CALL APR- 95 ISU-DS OI=  5 at $16.13 SL=12.50 low OI
BUY CALL APR-100 ISU-DT OI= 80 at $14.25 SL=11.50 

Picked on Feb 17th at   $97.38    P/E = 573
Change since picked      -2.69    52-week high=$100.25
Analysts Ratings     4-6-0-0-0    52-week low =$ 20.00
Last earnings 01/00  est= 0.05    actual= 0.05
Next earnings 04-27  est= 0.06    versus= 0.04
Average Daily Volume =   841 K
/charts/charts.asp?symbol=ISSX


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

ESPI - e.spire Communications $13.94 (+3.38)

e.spire Communications is an integrated telecommunications 
provider.  Their services comprise voice, high-speed data, and 
Internet services including high-speed DSL (digital subscriber 
line) and Web hosting to business and government clients.  This 
competitive local-exchange carrier is in direct competition with 
the Bells.  The company's network infrastructure comprises over 
1,700 route miles of fiber-optic cable, 66 Newbridge 
asynchronous transfer mode (ATM) switches, 19 Lucent 5ESS 
switches, and about 22,000 backbone long-haul miles in its 
leased coast-to-coast broadband data network.

We received such an overwhelming response to PCMS and IFCI that 
we decided to add ESPI too!  This stock also doesn't fit our 
typical profile as it's priced under $30, but no matter, ESPI 
has lots of potential for lucrative profits!  Importantly the 
option contracts are active and there's reason that they'll 
continue to rise.  ESPI got a shot of adrenaline following 
Tuesday's announcement that it was awarded $14.2 mln in 
reciprocal compensation from BellSouth and another $2.9 mln from 
GTE for violations surrounding interconnection agreements.  As 
we know, Cash is King and this intoxicated investors.  ESPI has 
risen over 30% climbing up from a base support of $10.  The 
better news is that earnings are just around the corner expected 
on February 28th.  We're anticipating this will keep the 
momentum intact and drive the share price higher.  Be aware 
there is overhead opposition at $18.13, last April's all-time 
high, so watch for resistance near that level.  Now during the 
past three trading sessions ESPI has literally climb straight 
up, so near-term support is difficult to determine.  Although on 
Friday, ESPI managed to trade above $12.50 amid the chaos of the 
Nasdaq.  This is certainly a good sign, but look lower to the 
5-dma ($11.76) and the 10-dma ($11.06) for a bit more resolution.

Earlier in the month Ladenburg Thalman & Co reiterated a Buy 
rating for ESPI and issued a $17 price target.  Also, Merrill 
Lynch reinstated its long-term Accumulate along with a 
short-term Neutral rating.

BUY CALL MAR- 5 AQ-CA OI= 401 at $9.25 SL=7.00
BUY CALL MAR-10*AQ-CB OI=2830 at $4.38 SL=2.75
BUY CALL MAR-15 AQ-CC OI=1674 at $1.31 SL=0.00 High Risk!

Picked on Feb 20th at   $13.94    P/E = N/A
Change since picked      +0.00    52-week high=$18.13
Analysts Ratings     2-3-4-0-0    52-week low =$ 4.50
Last earnings 10/99  est=-1.45    actual=-1.60
Next earnings 02-28  est=-1.51    versus=-1.44
Average Daily Volume = 1.88 mln
/charts/charts.asp?symbol=ESPI

****

PCMS - P-COM Inc $23.06 (+4.31)(-0.31)

Their company logo says they are the Leading Supplier of 
telecom distribution equipment and services for end user access
to the World-Wide Network.  The company's products are based on
common system architecture and are designed to carry various 
combinations of voice, data and video traffic and to be easily
configurable based on the needs of its customers.  PCMS contracts
out the majority of its manufacturing, and also provides related
software and networking support.  Most of PCMS's revenues come
from outside the United States.    

Just another day in the life of a small Telecom company.  With
a mood in the broader markets that could be described as nasty,
PCMS quietly made its way to another new high.  Not much in the
way of company specific news to help move the stock along either,
which is somewhat impressive.  Traders continue to see the 
value of this company with its fixed wireless technologies,
as good substitute and an alternative to laying cable.  PCMS is
viewed as stock that is "cheap" in comparison to others in the
industry.  PCMS may be a sleeping giant that has now been
awakened.  Since being added last week to our list of plays, PCMS
has seen 23% added to the price of its stock.  Granted the price 
is less expensive and the option premiums are less than many of 
the tech plays available to traders, but that really is the beauty
of this play.  The downside risk is less and the upside potential 
is unlimited.  Although we don't include the volume for options 
in the section below, we would note the MAR 20 and 25 Calls saw 
over 1500 traded Friday.  Technically PCMS has again moved into 
uncharted waters.  We expect the momentum to continue.  If we do
see a pullback, $22.50 should provide support and would be a 
good point to enter a new play.

As we said there has been little company specific news this week,
but a recent note from analyst Mark Roberts, of First Union, may
have carried quite a lot of weight in the investment circles. 
He mentioned that P-Com was once carried a paralyzing financial 
debt load, and that they may have "gotten its financial house 
in order and can focus on making radios".

BUY CALL MAR-20 PQP-CD OI=3970 at $5.00 SL=3.25
BUY CALL MAR-25 PQP-CE OI= 747 at $2.81 SL=1.50
BUY CALL MAY-20 PQP-ED OI=1372 at $7.25 SL=5.50
BUY CALL MAY-25*PQP-EE OI= 405 at $5.00 SL=3.25

Picked on Feb 13th at    $18.75    PE = N/A
Change since picked       +4.31    52-week high=$23.88
Analysts Ratings      3-5-2-0-0    52-week low =$ 3.69
Last earnings 01/00   est=-0.10    actual=-0.10 
Next earnings 04-27   est=-0.04    versus=-0.27
Average daily volume = 1.98 mln
/charts/charts.asp?symbol=PCMS

****

BCE - BCE Inc. $119.38 (+1.34)(-0.97)(+20.31)

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

This play is really about unlocking the value of BCE's Nortel 
Networks holdings.  BCE is about to spin off 95% of its 
ownership, or 39% of Nortel as a dividend to BCE shareholders.  
How does the math work?  Pretty well.  BCE has a market cap of 
about $78 bln.  NT has a market cap of about $168 bln.  With a 
39% interest in NT worth about $65.5 bln, the market is valuing 
the remainder of BCE at only about $12.5 bln.  That's just 1.3 
times sales and 3.7 times earnings for Canada's largest phone 
company, net of NT's value - a steal in our book.  Unfortunately, 
the rest of the market doesn't yet think so.  Thus, in the 
meantime, we will have to be content with BCE moving up $1 bln 
in value as NT moves up $1 bln in value.  The point is to watch 
NT for clues to BCE until investors recognize the intrinsic value 
of BCE shares.  And yes, NT has had some contract wins with 
Qwest Communications and Metromedia Fiber Network at Lucent's 
expense.  Technically, BCE has been range-bound over the last two 
weeks finding support at $116 and $118, while bumping its head on 
$124.  Unfortunately, with the overall funk in the market, BCE is 
reluctantly getting pulled down with it.  Nonetheless, it managed 
a close $0.38 above its 10-dma of $119, which provides 
historically good support.  It's pretty stable anyway.  Target 
shooting to your comfort level will make your entry that much 
better if the market remains soft.  Keep your eyes on NT for 
clues to direction.

One technical point to note is the doji candlestick formation 
(upside down "T" on the chart, see this week's Ask the Analyst 
section for more info on Dojis) from Wednesday, which occurred 
on high volume.  Technically it could portend a breakdown in a 
weaker stock, but we give it slightly less weight compared to 
the 10-dma support, thanks to strength of NT.  On Thursday, CSFB 
reiterated NT a strong buy citing those recent sales to Qwest 
and MFNX as evidence that NT is the optical networking king.

BUY CALL MAR-115 BCE-CC OI=483 at $10.00 SL= 7.50
BUY CALL MAR-120*BCE-CD OI=348 at $ 7.38 SL= 5.50
BUY CALL MAR-125 BCE-CE OI=507 at $ 5.13 SL= 3.25
BUY CALL JUN-120 BCE-FD OI= 90 at $17.38 SL=13.50
BUY CALL JUN-125 BCE-FE OI=257 at $14.75 SL=11.75

Picked on Feb 02nd at $109.63     P/E = 21
Change since picked     +8.40     52-week high=$124.56
Analysts Ratings    4-4-0-1-0     52-week low =$ 38.31
Last earnings 01/00  est= N/A     actual= N/A
Next earnings 04-27  est= N/A     versus= N/A
Average Daily Volume =  962 K
/charts/charts.asp?symbol=BCE

****

ANAD - Anadigics $146.25 (+22.25)(+23.97)

Anadigics designs and manufactures radio frequency integrated 
circuit (RFIC) solutions for growing broadband and wireless 
communications markets (broadband, cable, fiber optic and PCS).  
The company's innovative high frequency RFICs enable 
manufacturers of communications equipment to enhance overall 
system performance, manufacturing cost, and time to market.  
By utilizing state-of-the-art manufacturing processes for 
its RFICs, ANAD achieves the high-volume, and cost-effective 
products required by leading companies in its targeted high-
growth communications markets.  ANAD was the first GaAs (Gallium 
Arsenide) IC manufacturer to receive ISO 9001 certification.

What selloff?  While others around it were sinking to the bottom 
of the bowl on Friday, ANAD kept its head up high until a big 
sell order hit 1.5 hrs before the close.  Even so, a $7 recovery 
off the low of $137 in the final hour is testimony to its 
strength.  Why play it in the first place?  Aside from a 38% 
earnings surprise on Jan 28th borne of their success in optical 
semiconductors, ANAD has exactly doubled since that day, making 
it king of momentum.  It refuses to go down.  If there is an 
Achilles heel, it's that volume has been steadily declining since 
Monday of last week, bringing ANAD back to match its ADV by 
Friday.  The recent gains against market headwinds will only 
continue if volume heads back up or the market tides begin to 
rise again (maybe wishful thinking at this moment).  Support 
is strong at $136 and $140, slightly less so at $142 and $145.  
Resistance is at $148-$149.  Yep, you guessed it...a short-term 
ascending pennant.  What could cause a breakout to the upside and 
swell the volume to boot?  How 'bout a split run between now and 
Feb 29th?  After the close, the 3:2 split takes effect for 
trading on March 1st.  Buying the dips at support should provide 
the best entry.  Just be aware that $3 (Friday excepted) is about 
the most dip we've seen lately.  If you intend to wait for ANAD 
to bleed red ink before taking a position, you may not be filled.  
Note too that low OI and big bid/ask spreads make this a risky 
play despite ANAD's recent strength.

Though the play is based on the above, one of the big events for 
ANAD last week was its contract win to sell Motorola 10 mln 
CDMA/AMPS switches for use in dual mode mobile phones.  

BUY CALL MAR-140 AUZ-CH OI=61 at $21.25 SL=16.50
BUY CALL MAR-145*AUZ-CI OI=97 at $19.13 SL=15.00
BUY CALL MAR-150 AUZ-CJ OI=15 at $16.75 SL=13.00 low OI
BUY CALL APR-145 AUZ-DI OI= 0 at $27.13 SL=21.25 Wait for OI!
BUY CALL APR-150 AUZ-DJ OI=54 at $25.38 SL=19.75

SELL PUT MAR-120 DQA-OD OI=58 at $ 5.88 SL= 7.50
(See risks of selling puts in play legend)

Picked on Feb 13th at  $124.00     P/E = 478
Change since picked     +22.25     52-week high=$149.25
Analysts Ratings     3-2-1-0-0     52-week low =$ 13.00
Last earnings 01/00  est= 0.16     actual= 0.22 surprise=38%
Next earnings 04-28  est= 0.20     versus= 0.08
Average Daily Volume =   436 K
/charts/charts.asp?symbol=ANAD

****

GLW - Corning Inc. $193.63 (+27.56)(+25.31)

Corning is a premier provider of optical fiber, cable, and 
photonic products for the telecommunications industry; high-
performance glass for computers, television screens, and other 
information display applications; advanced optical materials for 
the semiconductor industry and the scientific community; ceramic 
substrates for the automotive industry; specialized polymer 
products for biotechnology applications; and other advanced 
materials and technologies.  Pots and pans (housewares) have 
been a division of Borden since their sale in April 1998.

No longer your average casserole dish manufacturer, Corning (GLW) 
is a latecomer taking aim at JDS Uniphase (JDSU) as a leader in 
the photonics revolution.  While their market cap is less by 
comparison, their revenue growth in the optical communications 
business has spurred the recent price surge while JDSU remains 
flat.  Investors have learned they are not a cookware company any 
longer, but a producer of over half the world's supply of fiber 
optic cable instead - more than twice the amount as its next  
competitor, Lucent.  With its recent purchases of Oak Industries, 
Siecor and NetOptix (OPTX), they have become a powerhouse of 
optical subsystem assemblies for the industry, nearing the 
capacity, and certainly with the financing to compete with JDSU 
(though JDSU will not suffer for this).  Earnings came in last 
quarter with a 6% surprise ($0.03 better than analyst estimates 
of $0.50).  Support is solid at $175, which also happens to be 
the 10-dma.  Volume remained at or above the ADV all week 
indicating buyers had an appetite for the stuff.  Unfortunately, 
levels of support become a bit more shaky thanks to the big gain 
on Thursday, but $185 should provide some comfort.  Even on 
Friday when the rest of the market took an instant vacation, GLW 
held well in the $190-$191.  A small tick up at the close on 
Friday is a good sign for the opening on Tuesday (Monday is a 
trading holiday).  Consider target shooting your entry after 
amateur hour (as long as the market doesn't melt down first).  
GLW is also a split candidate at these levels and hasn't split 
since 1992.  However, they will need shareholder approval to do 
so.  As we noted Thursday, they are due in the next week or two 
to release their proxy statement for a likely shareholder meeting 
in April.  That would likely contain an agenda item to increase 
the amount of authorized shares, which would allow a split.  
We'll keep you posted.

No news on Friday, but from Thursday's write-up, though 
maintaining their Outperform rating, Gruntal and Co. raised 
their near-term price target from $176 to $200 (none too soon) 
and from $203 to $235 on a long-term basis, which accounts for 
the Oak Industries and Siecor purchase.  GLW's purchase of 
NetOptix (OPTX) is unaccounted for in Gruntal's rating.

BUY CALL MAR-180 GRJ-CP OI=152 at $23.13 SL=18.00
BUY CALL MAR-190 GRJ-CR OI=616 at $19.63 SL=15.31
BUY CALL MAR-200*GRJ-CT OI=343 at $15.13 SL=11.75
BUY CALL MAY-190 GRJ-ER OI= 47 at $32.13 SL=25.00 low OI
BUY CALL MAY-200 GRJ-ET OI=239 at $28.00 SL=22.00

Picked on Feb 17th at   $191.06     P/E = 91
Change since picked       +2.25     52-week high=$194.94
Analysts Ratings      7-6-0-0-0     52-week low =$ 47.69
Last earnings 01/00   est= 0.48     actual= 0.51
Next earnings 04-00   est= 0.47     versus= 0.36
Average Daily Volume = 2.34 mln
/charts/charts.asp?symbol=GLW

****

ERICY - LM Ericsson Telephone $88.69 (-1.50)

Ericsson is a world-leading supplier in the fast-growing and 
dynamic telecommunications and data communications industry, 
offering advanced communications solutions for mobile and 
fixed networks, as well as consumer products.  Ericsson is a 
total solutions supplier for all customer segments: network 
operators and service providers, enterprises and consumers. 
Ericsson has more than 100,000 employees, representation in 
140 countries and clearly the world's largest customer base 
in the telecommunications field. 

This is the kind of call that you want to pick up.  ERICY is 
shaping up nicely for us as it has continued its steady upward 
climb.  ERICY did trade through its 10-dma, which is currently 
at $88, and could now offer some support going forward.  The 
next level of resistance for ERICY looks to be at $90, which 
it did flirt with during Friday's session.  A breakthrough 
here backed with the kind of strong volume we have been seeing, 
will be a nice bullish indication.  As you will see below, we 
think that the positive news out on ERICY will help ERICY to 
trade higher next week.

On Saturday morning, Ericsson Microelectronics announced that 
they would be working with QUALCOMM to co-develop chips using 
what is known as the Bluetooth Standard.  This enables data to 
move between cellular phones, notebook PCs, and other handheld 
devices over a wireless network.  In other ERICY related news, 
it is anticipated that telecom stocks, along with many Internet 
and techs, will benefit from the upcoming computer and technology 
trade show known as CeBIT.  The trade show will be held from 
February 23rd through March 1st in Hanover, Germany.  It is 
expected that Ericsson will have a very visible presence at the 
trade show.  They plan to show off many of their products for 
e-commerce, the mobile office, and the mobile Internet.  And 
finally, another little tidbit in regards to the pending 4:1 
stock split.  There will be a vote held at the Annual General 
Meeting for approval of the split.  ERICY believes that the 
actual split will take place in May. 

BUY CALL MAR- 80 RQC-CP OI= 509 at $11.38 SL=9.25 
BUY CALL MAR- 85*RQC-CQ OI=1126 at $ 8.13 SL=6.25
BUY CALL MAR- 90 RQC-CR OI=1083 at $ 5.50 SL=3.75
BUY CALL MAR- 95 RQC-CS OI= 432 at $ 3.50 SL=1.75
BUY CALL MAR-100 RQC-CT OI=  87 at $ 2.25 SL=1.00

Picked on Feb 15th at    $86.38     P/E = 120
Change since picked       +2.31     52-week high=$92.13
Analysts Ratings     8-11-4-0-0     52-week low =$20.50
Last earnings 01/00   est= 0.32     actual= 0.36
Next earnings 04-28   est= 0.17     versus= 0.04
Average Daily Volume = 4.12 mln
/charts/charts.asp?symbol=ERICY

****

IFCI - International Fibercom $32.00 (+15.75)

International FiberCom is a leading provider of a wide range 
of engineering, development and maintenance services for fiber 
optic, broadband networks, public telephone networks, local 
and wide area networks and specialized wireless applications.  
With a number of recent strategic acquisitions that complement 
and enhance existing services and products, International 
FiberCom has positioned itself as a "one-stop shop" for the 
telecom and cable TV industries.

When we said "Welcome to the big leagues" to IFCI last Thursday, 
we weren't kidding.  It turned out to be a fantastic finish to 
the week for IFCI.  If you were playing IFCI, you probably 
couldn't help but keep a close eye on the action, but please 
allow us to indulge in a brief recap.  As you may know, we 
welcomed IFCI to our call play list last Thursday with a 
morning Trading Alert.  IFCI finished Thursday's session up 
$5.56 and posted some very impressive volume, not only for the 
stock, but in the options contracts as well.  Friday, things 
just kept getting better as IFCI traded up to a new all time 
high of $34.50.  Nearly 11 million shares traded hands on Friday, 
which is over 7 times the daily average.  Alright, enough of 
our patting ourselves on the back, but we do hope you are 
enjoying the ride so far.  IFCI looks to have established some 
rather solid looking support at $30, which it tested several 
times on Friday.  This will be an important near-term level.  
We want to see this level to continue to hold to confirm the 
momentum that pushed IFCI through.  We have one week left to 
be in this play, as earnings are scheduled to be announced on 
the 29th.  Be sure to keep your stops tight on the way up.

As we mentioned, earnings are on the 29th, which could prove 
to be a nice catalyst to keep up IFCI's positive momentum next 
week.  The only other news out there was an article released 
on Thursday afternoon reporting the increased volume and value 
of the IFCI options, particularly the March 20 calls.  But 
the article stated they weren't sure why.  Doesn't it feel 
good to be ahead of the game?

BUY CALL MAR-20 IQD-CD OI=2156 at $12.75 SL= 9.75
BUY CALL MAR-25 IQD-CE OI=1671 at $10.25 SL= 7.75
BUY CALL MAR-30 IQD-CF OI=   0 at $ 7.88 SL= 6.00 New contract
BUY CALL MAY-25*IQD-EE OI= 911 at $13.25 SL=10.50

Picked on Feb 17th at    $22.00    P/E = 96	
Change since picked      +10.00    52-week high=$34.50
Analysts Ratings      0-1-0-0-0    52-week low =$ 4.50
Last earnings 11/99   est=  N/A    actual= 0.02
Next earnings 02-29   est= 0.06    versus= 0.12
Average Daily Volume = 1.51 mln
/charts/charts.asp?symbol=IFCI


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



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*******************************
CALLS CONTINUED IN SECTION FOUR
*******************************
SEE DISCLAIMER IN SECTION ONE

The Option Investor Newsletter             2-20-2000  
Sunday                        4 of 5


*****************
CALLS - CONTINUED
*****************
 
********
SOFTWARE
********

LHSP - Lernout & Hauspie $89.38 (+7.38)(+21.38)

On the cutting edge of interfacing man to his machines, LHSP
is the world's leading provider of speech and language
technology products and services.  Included in the company's
broad array of products and services are the following;
speech recognition for more than 15 languages (another 20
are on the way), digital speech and music compression, language 
translation, text-to-speech, Web-based translations, and
dictation of continuous speech.  LHSP is collaborating with
Microsoft (who owns 7% of LHSP) on its own speech recognition
interface.

Forget E.F. Hutton!  When LHSP speaks, investors listen.
Continuing to drive technology toward the nirvana of reliable
voice communication to computers (large and small), LHSP
continues to make giant strides in that direction.  LHSP spent
most of the week stuck to the $80 support/resistance level, but
Friday brought the breakout we were waiting for.  Moving in the
opposite direction of the ailing NASDAQ, and posting a gain of
over $9 on twice its average daily volume is definitely a good
sign.  LHSP looks like it has finally digested its gains from
the first week of February and is striking out to new highs.
In addition to the continuing stream of product announcements
and alliances, LHSP is still receiving support from its strong
earnings announcement on February 7th.  As if that wasn't
enough, the company announced a 2-for-1 split (date and
shareholder approval pending) along with earnings.  The $80
level has now been clearly defined as support, followed by $75,
and resistance has moved up to Friday's high of $94.63.  LHSP
showed minor support intraday on Friday near the $85 level and
a bounce there would make for a nice entry point going forward.
This move is being driven by strong buying volume - be wary of
a continued move up if volume starts to drop off.

LHSP announced on Tuesday that its text-to-speech technology
will be made available for use with Lucent Technologies' new
Enhanced Media Resource Server (eMRS), a next-generation
platform for deploying Internet and calling services.  The
agreement calls for LHSP to provide its RealSpeak product, a
natural-sounding text-to-speech engine, as an available option
on Lucent's eMRS.  Combined, the two companies' technologies
will allow telecommunications service providers to create and
offer value-added speech-enabled services such as Talking Call
Waiting and Talking Caller ID.

BUY CALL MAR-85 XQL-CQ OI=238 at $11.25 SL= 9.00
BUY CALL MAR-90*XQL-CR OI=537 at $ 8.63 SL= 6.50
BUY CALL JUN-85 XQL-FQ OI=113 at $17.75 SL=13.75
BUY CALL JUN-90 XQL-FR OI=439 at $15.63 SL=12.25

SELL PUT MAR-75 XQL-OO OI=435 at $ 2.50  SL= 4.00
(See risks of selling puts in play legend)

Picked on Feb 12th at  $82.00     P/E = 116
Change since picked     +7.38     52-week high=$94.63
Analysts Ratings    1-1-1-0-0     52-week low =$25.75
Last earnings 02/00 est= 0.20     actual= 0.22
Next earnings 05-10 est= 0.16     versus= 0.12
Average Daily Volume =  802 K
/charts/charts.asp?symbol=LHSP

****

ISSX - ISS Group, Inc. $94.69 (+5.81)

ISS is a leading global provider of security management 
solutions for e-business.  Major products include SAFEsuite 
security software and ePatrol managed security services and 
strategic consulting and education services.  Through these 
products and services, ISS helps clients protect digital assets 
and helps to ensure the availability, confidentiality and 
integrity of computer systems and information critical to 
e-business.  ISS' lifecycle e-business security management 
solutions protect more than 5,000 customers including 21 of 
the 25 largest U.S. commercial banks, 9 of the 10 largest 
telecommunications companies and over 35 government agencies.

As we mentioned when we initiated coverage of ISSX on Thursday, 
ISSX was headed toward the ever important psychological $100 
level.  Well, it made it there on Friday, but only for a brief 
"hi, how you doing" new 52-week high, kind of visit.  Apparently, 
ISSX had other plans that day and couldn't stay long.  ISSX 
pulled back to close the week just under $95.  We did see some 
strong volume on Friday, though it seems to have been equally
distributed between both the ascending and descending portions 
of the day, therefore, we are not concerned about declining 
investor interest.  No, we think that Friday's session was 
probably just some good old-fashioned profit-taking, which is 
a healthy occurrence before breakthrough of an important level, 
i.e., $100.  We could be positioned to reclaim positive momentum 
heading into next week, though there may still be a few bears 
to shake out of the rug.  ISSX looks to have some support at 
it's 5-dma ($94), which did a fairly decent job of holding 
throughout last Friday's session.  Look for this level to 
continue to hold.  The direction of the market is bound to be 
a factor next week, but we are still bullish on ISSX.  Obviously,
you will want to confirm direction, but Friday's decline may 
have been a gift, offering some nice potential points of entry.  

On Friday, ISSX announced plans to expand its operations into 
Egypt and thus increase its global Internet security presence.  
On that same day ISSX also announced a new strategic alliance 
with VeriLinks, to further Internet security product development 
for both companies.  

BUY CALL MAR- 90*ISU-CR OI=149 at $15.38 SL=12.00
BUY CALL MAR- 95 ISU-CS OI= 12 at $11.75 SL= 9.00 low OI
BUY CALL MAR-100 ISU-CT OI= 61 at $ 9.63 SL= 7.00
BUY CALL APR- 95 ISU-DS OI=  5 at $16.13 SL=12.50 low OI
BUY CALL APR-100 ISU-DT OI= 80 at $14.25 SL=11.50 

Picked on Feb 17th at   $97.38    P/E = 573
Change since picked      -2.69    52-week high=$100.25
Analysts Ratings     4-6-0-0-0    52-week low =$ 20.00
Last earnings 01/00  est= 0.05    actual= 0.05
Next earnings 04-27  est= 0.06    versus= 0.04
Average Daily Volume =   841 K
/charts/charts.asp?symbol=ISSX


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

ESPI - e.spire Communications $13.94 (+3.38)

e.spire Communications is an integrated telecommunications 
provider.  Their services comprise voice, high-speed data, and 
Internet services including high-speed DSL (digital subscriber 
line) and Web hosting to business and government clients.  This 
competitive local-exchange carrier is in direct competition with 
the Bells.  The company's network infrastructure comprises over 
1,700 route miles of fiber-optic cable, 66 Newbridge 
asynchronous transfer mode (ATM) switches, 19 Lucent 5ESS 
switches, and about 22,000 backbone long-haul miles in its 
leased coast-to-coast broadband data network.

We received such an overwhelming response to PCMS and IFCI that 
we decided to add ESPI too!  This stock also doesn't fit our 
typical profile as it's priced under $30, but no matter, ESPI 
has lots of potential for lucrative profits!  Importantly the 
option contracts are active and there's reason that they'll 
continue to rise.  ESPI got a shot of adrenaline following 
Tuesday's announcement that it was awarded $14.2 mln in 
reciprocal compensation from BellSouth and another $2.9 mln from 
GTE for violations surrounding interconnection agreements.  As 
we know, Cash is King and this intoxicated investors.  ESPI has 
risen over 30% climbing up from a base support of $10.  The 
better news is that earnings are just around the corner expected 
on February 28th.  We're anticipating this will keep the 
momentum intact and drive the share price higher.  Be aware 
there is overhead opposition at $18.13, last April's all-time 
high, so watch for resistance near that level.  Now during the 
past three trading sessions ESPI has literally climb straight 
up, so near-term support is difficult to determine.  Although on 
Friday, ESPI managed to trade above $12.50 amid the chaos of the 
Nasdaq.  This is certainly a good sign, but look lower to the 
5-dma ($11.76) and the 10-dma ($11.06) for a bit more resolution.

Earlier in the month Ladenburg Thalman & Co reiterated a Buy 
rating for ESPI and issued a $17 price target.  Also, Merrill 
Lynch reinstated its long-term Accumulate along with a 
short-term Neutral rating.

BUY CALL MAR- 5 AQ-CA OI= 401 at $9.25 SL=7.00
BUY CALL MAR-10*AQ-CB OI=2830 at $4.38 SL=2.75
BUY CALL MAR-15 AQ-CC OI=1674 at $1.31 SL=0.00 High Risk!

Picked on Feb 20th at   $13.94    P/E = N/A
Change since picked      +0.00    52-week high=$18.13
Analysts Ratings     2-3-4-0-0    52-week low =$ 4.50
Last earnings 10/99  est=-1.45    actual=-1.60
Next earnings 02-28  est=-1.51    versus=-1.44
Average Daily Volume = 1.88 mln
/charts/charts.asp?symbol=ESPI

****

PCMS - P-COM Inc $23.06 (+4.31)(-0.31)

Their company logo says they are the Leading Supplier of 
telecom distribution equipment and services for end user access
to the World-Wide Network.  The company's products are based on
common system architecture and are designed to carry various 
combinations of voice, data and video traffic and to be easily
configurable based on the needs of its customers.  PCMS contracts
out the majority of its manufacturing, and also provides related
software and networking support.  Most of PCMS's revenues come
from outside the United States.    

Just another day in the life of a small Telecom company.  With
a mood in the broader markets that could be described as nasty,
PCMS quietly made its way to another new high.  Not much in the
way of company specific news to help move the stock along either,
which is somewhat impressive.  Traders continue to see the 
value of this company with its fixed wireless technologies,
as good substitute and an alternative to laying cable.  PCMS is
viewed as stock that is "cheap" in comparison to others in the
industry.  PCMS may be a sleeping giant that has now been
awakened.  Since being added last week to our list of plays, PCMS
has seen 23% added to the price of its stock.  Granted the price 
is less expensive and the option premiums are less than many of 
the tech plays available to traders, but that really is the beauty
of this play.  The downside risk is less and the upside potential 
is unlimited.  Although we don't include the volume for options 
in the section below, we would note the MAR 20 and 25 Calls saw 
over 1500 traded Friday.  Technically PCMS has again moved into 
uncharted waters.  We expect the momentum to continue.  If we do
see a pullback, $22.50 should provide support and would be a 
good point to enter a new play.

As we said there has been little company specific news this week,
but a recent note from analyst Mark Roberts, of First Union, may
have carried quite a lot of weight in the investment circles. 
He mentioned that P-Com was once carried a paralyzing financial 
debt load, and that they may have "gotten its financial house 
in order and can focus on making radios".

BUY CALL MAR-20 PQP-CD OI=3970 at $5.00 SL=3.25
BUY CALL MAR-25 PQP-CE OI= 747 at $2.81 SL=1.50
BUY CALL MAY-20 PQP-ED OI=1372 at $7.25 SL=5.50
BUY CALL MAY-25*PQP-EE OI= 405 at $5.00 SL=3.25

Picked on Feb 13th at    $18.75    PE = N/A
Change since picked       +4.31    52-week high=$23.88
Analysts Ratings      3-5-2-0-0    52-week low =$ 3.69
Last earnings 01/00   est=-0.10    actual=-0.10 
Next earnings 04-27   est=-0.04    versus=-0.27
Average daily volume = 1.98 mln
/charts/charts.asp?symbol=PCMS

****

BCE - BCE Inc. $119.38 (+1.34)(-0.97)(+20.31)

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

This play is really about unlocking the value of BCE's Nortel 
Networks holdings.  BCE is about to spin off 95% of its 
ownership, or 39% of Nortel as a dividend to BCE shareholders.  
How does the math work?  Pretty well.  BCE has a market cap of 
about $78 bln.  NT has a market cap of about $168 bln.  With a 
39% interest in NT worth about $65.5 bln, the market is valuing 
the remainder of BCE at only about $12.5 bln.  That's just 1.3 
times sales and 3.7 times earnings for Canada's largest phone 
company, net of NT's value - a steal in our book.  Unfortunately, 
the rest of the market doesn't yet think so.  Thus, in the 
meantime, we will have to be content with BCE moving up $1 bln 
in value as NT moves up $1 bln in value.  The point is to watch 
NT for clues to BCE until investors recognize the intrinsic value 
of BCE shares.  And yes, NT has had some contract wins with 
Qwest Communications and Metromedia Fiber Network at Lucent's 
expense.  Technically, BCE has been range-bound over the last two 
weeks finding support at $116 and $118, while bumping its head on 
$124.  Unfortunately, with the overall funk in the market, BCE is 
reluctantly getting pulled down with it.  Nonetheless, it managed 
a close $0.38 above its 10-dma of $119, which provides 
historically good support.  It's pretty stable anyway.  Target 
shooting to your comfort level will make your entry that much 
better if the market remains soft.  Keep your eyes on NT for 
clues to direction.

One technical point to note is the doji candlestick formation 
(upside down "T" on the chart, see this week's Ask the Analyst 
section for more info on Dojis) from Wednesday, which occurred 
on high volume.  Technically it could portend a breakdown in a 
weaker stock, but we give it slightly less weight compared to 
the 10-dma support, thanks to strength of NT.  On Thursday, CSFB 
reiterated NT a strong buy citing those recent sales to Qwest 
and MFNX as evidence that NT is the optical networking king.

BUY CALL MAR-115 BCE-CC OI=483 at $10.00 SL= 7.50
BUY CALL MAR-120*BCE-CD OI=348 at $ 7.38 SL= 5.50
BUY CALL MAR-125 BCE-CE OI=507 at $ 5.13 SL= 3.25
BUY CALL JUN-120 BCE-FD OI= 90 at $17.38 SL=13.50
BUY CALL JUN-125 BCE-FE OI=257 at $14.75 SL=11.75

Picked on Feb 02nd at $109.63     P/E = 21
Change since picked     +8.40     52-week high=$124.56
Analysts Ratings    4-4-0-1-0     52-week low =$ 38.31
Last earnings 01/00  est= N/A     actual= N/A
Next earnings 04-27  est= N/A     versus= N/A
Average Daily Volume =  962 K
/charts/charts.asp?symbol=BCE

****

ANAD - Anadigics $146.25 (+22.25)(+23.97)

Anadigics designs and manufactures radio frequency integrated 
circuit (RFIC) solutions for growing broadband and wireless 
communications markets (broadband, cable, fiber optic and PCS).  
The company's innovative high frequency RFICs enable 
manufacturers of communications equipment to enhance overall 
system performance, manufacturing cost, and time to market.  
By utilizing state-of-the-art manufacturing processes for 
its RFICs, ANAD achieves the high-volume, and cost-effective 
products required by leading companies in its targeted high-
growth communications markets.  ANAD was the first GaAs (Gallium 
Arsenide) IC manufacturer to receive ISO 9001 certification.

What selloff?  While others around it were sinking to the bottom 
of the bowl on Friday, ANAD kept its head up high until a big 
sell order hit 1.5 hrs before the close.  Even so, a $7 recovery 
off the low of $137 in the final hour is testimony to its 
strength.  Why play it in the first place?  Aside from a 38% 
earnings surprise on Jan 28th borne of their success in optical 
semiconductors, ANAD has exactly doubled since that day, making 
it king of momentum.  It refuses to go down.  If there is an 
Achilles heel, it's that volume has been steadily declining since 
Monday of last week, bringing ANAD back to match its ADV by 
Friday.  The recent gains against market headwinds will only 
continue if volume heads back up or the market tides begin to 
rise again (maybe wishful thinking at this moment).  Support 
is strong at $136 and $140, slightly less so at $142 and $145.  
Resistance is at $148-$149.  Yep, you guessed it...a short-term 
ascending pennant.  What could cause a breakout to the upside and 
swell the volume to boot?  How 'bout a split run between now and 
Feb 29th?  After the close, the 3:2 split takes effect for 
trading on March 1st.  Buying the dips at support should provide 
the best entry.  Just be aware that $3 (Friday excepted) is about 
the most dip we've seen lately.  If you intend to wait for ANAD 
to bleed red ink before taking a position, you may not be filled.  
Note too that low OI and big bid/ask spreads make this a risky 
play despite ANAD's recent strength.

Though the play is based on the above, one of the big events for 
ANAD last week was its contract win to sell Motorola 10 mln 
CDMA/AMPS switches for use in dual mode mobile phones.  

BUY CALL MAR-140 AUZ-CH OI=61 at $21.25 SL=16.50
BUY CALL MAR-145*AUZ-CI OI=97 at $19.13 SL=15.00
BUY CALL MAR-150 AUZ-CJ OI=15 at $16.75 SL=13.00 low OI
BUY CALL APR-145 AUZ-DI OI= 0 at $27.13 SL=21.25 Wait for OI!
BUY CALL APR-150 AUZ-DJ OI=54 at $25.38 SL=19.75

SELL PUT MAR-120 DQA-OD OI=58 at $ 5.88 SL= 7.50
(See risks of selling puts in play legend)

Picked on Feb 13th at  $124.00     P/E = 478
Change since picked     +22.25     52-week high=$149.25
Analysts Ratings     3-2-1-0-0     52-week low =$ 13.00
Last earnings 01/00  est= 0.16     actual= 0.22 surprise=38%
Next earnings 04-28  est= 0.20     versus= 0.08
Average Daily Volume =   436 K
/charts/charts.asp?symbol=ANAD

****

GLW - Corning Inc. $193.63 (+27.56)(+25.31)

Corning is a premier provider of optical fiber, cable, and 
photonic products for the telecommunications industry; high-
performance glass for computers, television screens, and other 
information display applications; advanced optical materials for 
the semiconductor industry and the scientific community; ceramic 
substrates for the automotive industry; specialized polymer 
products for biotechnology applications; and other advanced 
materials and technologies.  Pots and pans (housewares) have 
been a division of Borden since their sale in April 1998.

No longer your average casserole dish manufacturer, Corning (GLW) 
is a latecomer taking aim at JDS Uniphase (JDSU) as a leader in 
the photonics revolution.  While their market cap is less by 
comparison, their revenue growth in the optical communications 
business has spurred the recent price surge while JDSU remains 
flat.  Investors have learned they are not a cookware company any 
longer, but a producer of over half the world's supply of fiber 
optic cable instead - more than twice the amount as its next  
competitor, Lucent.  With its recent purchases of Oak Industries, 
Siecor and NetOptix (OPTX), they have become a powerhouse of 
optical subsystem assemblies for the industry, nearing the 
capacity, and certainly with the financing to compete with JDSU 
(though JDSU will not suffer for this).  Earnings came in last 
quarter with a 6% surprise ($0.03 better than analyst estimates 
of $0.50).  Support is solid at $175, which also happens to be 
the 10-dma.  Volume remained at or above the ADV all week 
indicating buyers had an appetite for the stuff.  Unfortunately, 
levels of support become a bit more shaky thanks to the big gain 
on Thursday, but $185 should provide some comfort.  Even on 
Friday when the rest of the market took an instant vacation, GLW 
held well in the $190-$191.  A small tick up at the close on 
Friday is a good sign for the opening on Tuesday (Monday is a 
trading holiday).  Consider target shooting your entry after 
amateur hour (as long as the market doesn't melt down first).  
GLW is also a split candidate at these levels and hasn't split 
since 1992.  However, they will need shareholder approval to do 
so.  As we noted Thursday, they are due in the next week or two 
to release their proxy statement for a likely shareholder meeting 
in April.  That would likely contain an agenda item to increase 
the amount of authorized shares, which would allow a split.  
We'll keep you posted.

No news on Friday, but from Thursday's write-up, though 
maintaining their Outperform rating, Gruntal and Co. raised 
their near-term price target from $176 to $200 (none too soon) 
and from $203 to $235 on a long-term basis, which accounts for 
the Oak Industries and Siecor purchase.  GLW's purchase of 
NetOptix (OPTX) is unaccounted for in Gruntal's rating.

BUY CALL MAR-180 GRJ-CP OI=152 at $23.13 SL=18.00
BUY CALL MAR-190 GRJ-CR OI=616 at $19.63 SL=15.31
BUY CALL MAR-200*GRJ-CT OI=343 at $15.13 SL=11.75
BUY CALL MAY-190 GRJ-ER OI= 47 at $32.13 SL=25.00 low OI
BUY CALL MAY-200 GRJ-ET OI=239 at $28.00 SL=22.00

Picked on Feb 17th at   $191.06     P/E = 91
Change since picked       +2.25     52-week high=$194.94
Analysts Ratings      7-6-0-0-0     52-week low =$ 47.69
Last earnings 01/00   est= 0.48     actual= 0.51
Next earnings 04-00   est= 0.47     versus= 0.36
Average Daily Volume = 2.34 mln
/charts/charts.asp?symbol=GLW

****

ERICY - LM Ericsson Telephone $88.69 (-1.50)

Ericsson is a world-leading supplier in the fast-growing and 
dynamic telecommunications and data communications industry, 
offering advanced communications solutions for mobile and 
fixed networks, as well as consumer products.  Ericsson is a 
total solutions supplier for all customer segments: network 
operators and service providers, enterprises and consumers. 
Ericsson has more than 100,000 employees, representation in 
140 countries and clearly the world's largest customer base 
in the telecommunications field. 

This is the kind of call that you want to pick up.  ERICY is 
shaping up nicely for us as it has continued its steady upward 
climb.  ERICY did trade through its 10-dma, which is currently 
at $88, and could now offer some support going forward.  The 
next level of resistance for ERICY looks to be at $90, which 
it did flirt with during Friday's session.  A breakthrough 
here backed with the kind of strong volume we have been seeing, 
will be a nice bullish indication.  As you will see below, we 
think that the positive news out on ERICY will help ERICY to 
trade higher next week.

On Saturday morning, Ericsson Microelectronics announced that 
they would be working with QUALCOMM to co-develop chips using 
what is known as the Bluetooth Standard.  This enables data to 
move between cellular phones, notebook PCs, and other handheld 
devices over a wireless network.  In other ERICY related news, 
it is anticipated that telecom stocks, along with many Internet 
and techs, will benefit from the upcoming computer and technology 
trade show known as CeBIT.  The trade show will be held from 
February 23rd through March 1st in Hanover, Germany.  It is 
expected that Ericsson will have a very visible presence at the 
trade show.  They plan to show off many of their products for 
e-commerce, the mobile office, and the mobile Internet.  And 
finally, another little tidbit in regards to the pending 4:1 
stock split.  There will be a vote held at the Annual General 
Meeting for approval of the split.  ERICY believes that the 
actual split will take place in May. 

BUY CALL MAR- 80 RQC-CP OI= 509 at $11.38 SL=9.25 
BUY CALL MAR- 85*RQC-CQ OI=1126 at $ 8.13 SL=6.25
BUY CALL MAR- 90 RQC-CR OI=1083 at $ 5.50 SL=3.75
BUY CALL MAR- 95 RQC-CS OI= 432 at $ 3.50 SL=1.75
BUY CALL MAR-100 RQC-CT OI=  87 at $ 2.25 SL=1.00

Picked on Feb 15th at    $86.38     P/E = 120
Change since picked       +2.31     52-week high=$92.13
Analysts Ratings     8-11-4-0-0     52-week low =$20.50
Last earnings 01/00   est= 0.32     actual= 0.36
Next earnings 04-28   est= 0.17     versus= 0.04
Average Daily Volume = 4.12 mln
http://OptionInvestor.com/charts/charts.asp?symbol=ERICY

****

IFCI - International Fibercom $32.00 (+15.75)

International FiberCom is a leading provider of a wide range 
of engineering, development and maintenance services for fiber 
optic, broadband networks, public telephone networks, local 
and wide area networks and specialized wireless applications.  
With a number of recent strategic acquisitions that complement 
and enhance existing services and products, International 
FiberCom has positioned itself as a "one-stop shop" for the 
telecom and cable TV industries.

When we said "Welcome to the big leagues" to IFCI last Thursday, 
we weren't kidding.  It turned out to be a fantastic finish to 
the week for IFCI.  If you were playing IFCI, you probably 
couldn't help but keep a close eye on the action, but please 
allow us to indulge in a brief recap.  As you may know, we 
welcomed IFCI to our call play list last Thursday with a 
morning Trading Alert.  IFCI finished Thursday's session up 
$5.56 and posted some very impressive volume, not only for the 
stock, but in the options contracts as well.  Friday, things 
just kept getting better as IFCI traded up to a new all time 
high of $34.50.  Nearly 11 million shares traded hands on Friday, 
which is over 7 times the daily average.  Alright, enough of 
our patting ourselves on the back, but we do hope you are 
enjoying the ride so far.  IFCI looks to have established some 
rather solid looking support at $30, which it tested several 
times on Friday.  This will be an important near-term level.  
We want to see this level to continue to hold to confirm the 
momentum that pushed IFCI through.  We have one week left to 
be in this play, as earnings are scheduled to be announced on 
the 29th.  Be sure to keep your stops tight on the way up.

As we mentioned, earnings are on the 29th, which could prove 
to be a nice catalyst to keep up IFCI's positive momentum next 
week.  The only other news out there was an article released 
on Thursday afternoon reporting the increased volume and value 
of the IFCI options, particularly the March 20 calls.  But 
the article stated they weren't sure why.  Doesn't it feel 
good to be ahead of the game?

BUY CALL MAR-20 IQD-CD OI=2156 at $12.75 SL= 9.75
BUY CALL MAR-25 IQD-CE OI=1671 at $10.25 SL= 7.75
BUY CALL MAR-30 IQD-CF OI=   0 at $ 7.88 SL= 6.00 New contract
BUY CALL MAY-25*IQD-EE OI= 911 at $13.25 SL=10.50

Picked on Feb 17th at    $22.00    P/E = 96	
Change since picked      +10.00    52-week high=$34.50
Analysts Ratings      0-1-0-0-0    52-week low =$ 4.50
Last earnings 11/99   est=  N/A    actual= 0.02
Next earnings 02-29   est= 0.06    versus= 0.12
Average Daily Volume = 1.51 mln
/charts/charts.asp?symbol=IFCI



**********************
LEAPS by Mark Phillips
**********************

Remaining rangebound, the VIX is trying to set us up for some
attractive entry points.  Moving up above 29 on Friday, the
index settled at 28.45 on Friday, as the broader markets
continued to struggle.  Recall that a VIX over 30 has
historically been a good indication of a near-term market
bottom and hence a buying opportunity.  As evidence of this
fact, look at some of the stocks in our portfolio (GE, MSFT),
that have declined to major support levels.  GE has the honor
of launching a new feature of the LEAPS section, the LEAP of
the Week.  Similar to the Play of the Day, the LEAP of the Week
seeks to find the play that provides the best value for the week
ahead.  Our LU play is still on probation, (now double-secret)
as it refuses to move higher.  Fortunately the $50 support level
is holding for now.  Watch the VIX carefully, as a move above
30 could present us with some attractive entry points in the
coming week.

Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $49.13   219.44%
                 JAN-2002 $ 90  WUE-AR   $19.00   $53.00   178.95%
GPS    11/07/99  JAN-2001 $ 40  ZGS-AH   $ 5.75   $10.88    89.22%
                 JAN-2002 $ 45  WGS-AI   $ 7.88   $13.13    66.62%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $26.50    94.42%
                 JAN-2002 $110  WIB-AB   $16.50   $30.25    83.33%
LU     11/14/99  JAN-2001 $ 80  ZEU-AP   $12.88   $ 3.75   -70.89%
                 JAN-2002 $ 90  WEU-AR   $16.13   $ 7.00   -56.60%
CSCO   11/14/99  JAN-2001 $ 80  ZCY-AP   $19.13   $54.50   184.89%
                 JAN-2002 $ 90  WIV-AR   $22.00   $55.88   154.00%
GE     11/21/99  JAN-2001 $150  ZGR-AU   $16.25   $11.75   -27.69%
                 JAN-2002 $150  WGE-AU   $25.50   $20.50   -19.61%
NT     11/28/99  JAN-2001 $ 75  ZOO-AO   $22.25   $55.00   147.19%
                 JAN-2002 $ 75  WNT-AO   $30.25   $64.13   112.00%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $12.00    11.63%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $17.38    15.87%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $41.63    85.98%
                 JAN-2002 $120  WGZ-AD   $28.50   $47.38    66.25%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $42.50    80.85%
                 JAN-2002 $100  WFU-AT   $27.25   $48.00    76.15%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $27.75    57.40%
                 JAN-2002 $ 90  WJX-AR   $22.00   $32.50    47.73%
LU     01/09/00  JAN-2001 $ 50  ZEU-AJ   $13.63   $12.75   - 6.46%
MOT    01/09/00  JAN-2001 $125  ZMA-AE   $31.13   $41.00    31.74%
                 JAN-2002 $125  WMA-AE   $41.50   $52.50    26.51%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $10.88    19.17% 
                 JAN-2002 $ 40  WSY-AH   $12.63   $15.00    18.76%
ERICY  01/30/00  JAN-2001 $ 65  ZYD-AM   $19.75   $33.50    69.62%
                 JAN-2002 $ 65  WRY-AM   $27.00   $41.00    51.85%
MSFT   01/30/00  JAN-2001 $100  ZMF-AT   $17.63   $16.38   - 7.09%
                 JAN-2002 $110  WMF-AB   $21.63   $20.38   - 5.78%
ICIX   02/06/00  JAN-2001 $ 55  ZLJ-AK   $12.00   $22.38    86.50%
                 JAN-2002 $ 55  WLJ-AK   $18.00   $28.63    59.05%
Q      02/13/00  JAN-2001 $ 50  ZWK-AJ   $ 5.88   $ 7.75    31.80%
                 JAN-2002 $ 50  WWH-AJ   $10.88   $13.25    21.78%
CS     02/13/00  JAN-2001 $ 30  ZCJ-AF   $14.25   $12.38   -13.12%
                 JAN-2002 $ 30  WLJ-AK   $18.25   $16.13   -11.62%
        
To review the play description on any of our current plays, 
go to the LEAPS section for the date the play was added
 

Leap of the Week

GE - General Electric $125.13

Falling with the rest of the DOW this week, GE is presenting us
with a rare bargain.  Pressured by interest rate and inflation
fears, it is now sitting on major support from the 200-dma 
at $125.  LEAP plays provide the ability to profit from near-
term weakness by focusing on the long-term growth potential.  
With a 3-for-1 split coming in June, GE looks attractive at 
these levels.  Selling volume is still heavy, but once the 
buyers return, look to jump in with both feet.  Strong stocks 
like GE don't often present us with such attractive entry 
opportunities.  

BUY LEAP JAN-2001 $130.00 ZGR-AF at $19.38
BUY LEAP JAN-2002 $140.00 WGE-AH at $25.25

/charts/charts.asp?symbol=GE


New Plays

ICOS - ICOS Corporation $40.25

With a helping hand from the surging Biotech sector, ICOS had
a great week, gaining $6.88 as buyers went on a spending spree.
ICOS has a long list of compounds in various stages of clinical
trials, among them Leukarrest, for the treatment of stroke, and
Pafase, used for treating ARDS (an inflammatory disease of the
pulmonary system).  The real excitement is being generated over
IC351, dubbed the "Viagra-killer" by Wall Street.  Working on
the same mechanism as Pfizer's Viagra, the inhibition of an
enzyme that decreases blood flow, IC351 has shown fewer side
effects during clinical trials.  Phase III trials are scheduled
to be complete in mid-2000, and positive results could send
shares soaring.  ICOS has support at $36 (the site of the
10-dma) and then $33 and a decline to either of these levels
would represent a gift of an entry point.  A successful
breakthrough of resistance at $42.50 should open the door for
ICOS to challenge the 52-week high at $48.50.  

BUY LEAP JAN-2001 $40.00 ZIL-AH at $10.25
BUY LEAP JAN-2002 $45.00 WJI-AI at $12.13

/charts/charts.asp?symbol=ICOS


Drops

AOL $50.88 Ever since announcing their merger agreement with
Time Warner, AOL has been in a downtrend, unable to mount a
meaningful recovery.  The 10-dma (now at $55.38) is providing
resistance as AOL continues to decline, falling below major
support at $55 this week.  Investors will eventually come back
to AOL, but our patience is limited.  We are not advocating the
liquidation of open positions, but in the absence of any
visible strength, we cannot continue to recommend new positions.
When the buyers return and AOL regains its feet, we will eagerly
add it back onto the play list, but for now we must say goodbye.



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

Put plays can be very profitable but have a larger risk than call 
plays. When a stock is falling the entire investment community 
(except the shorts) is hoping it will reverse and start back up. 
The company management is also doing everything they can to shore 
up their stock price. The company issues press releases, brokers 
talk it up, analysts try to put a positive spin on everything. 
Then of course there is the death knell, the "buy recommendation" 
simply because the price has dropped to some level that analysts 
feel attractive again. Buyers who like the stock wait until it 
appears a bottom has been reached and then jump on it in a feeding 
frenzy. They may already have a large position and are averaging 
down. Many factors can stop a free falling stock in mid drop.

****

KRB - MBNA Corporation $20.00 (-0.81)(-2.38)

MBNA Corporation, a bank holding company and parent of MBNA 
America, N.A., a national bank, has $72.3 billion in managed 
loans.  MBNA, the largest independent credit card lender in 
the world, also provides retail deposit, consumer loan, and 
insurance products. 

When you are running a put play you can't help but love when 
Greenspan makes remarks about interest rates rising.  His words
still sharply effect investors and the market.  Friday's trading 
was a classic example.  To add to our delight, Greenspan's 
remarks about interest rates are directly related to KRB's 
business so they get hit twice as hard.  Friday's events were 
all it took to finally break through the old support level that 
was holding KRB pretty well.  Next stop for support should be 
done around $16-$17, the lows from late 1998.  Another good 
point to look at is the fact that support was broken with a 
large amount of volume.  If investors were looking for an 
excuse to bail on KRB, once again we have Greenspan to thank 
because he sure gave them one.  With the Fed saying they 
will raise rates until the economy or the stock market slows 
down, it will be hard for KRB to benefit from any rally in the 
market.  But those rallies should cause great opportunities to 
enter.  Don't be surprised to see a couple of rebounds back 
around the old level of $21.  KRB has had no recent news.           

BUY PUT MAR-25 KRB-OE OI=2476 at $5.00 SL=3.25
BUY PUT MAR-20*KRB-OD OI=1023 at $1.19 SL=0.00 High Risk!

Average Daily Volume = 2.15 mln
/charts/charts.asp?symbol=KRB

****

KMG - Kerr-McGee Corp. $45.44 (-2.69)(-5.75)

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.

As Jim Brown mentioned in last Tuesday's wrap, those oil stains 
on your driveway may prove to be valuable soon.  Let us take a 
brief moment and recap the story behind this put play.  Many 
investors seem to believe that KMG's stock is priced accordingly 
with the current oil prices, i.e., roughly $30 a barrel.  Should 
OPEC decide to increase the oil production at their upcoming 
March meeting as many expect they will, this could potentially 
(and hopefully) drive the oil prices down.  This could very well 
send the oil and oil service stocks, such as KMG, further south. 
Obviously, we are seeing investors "brace" themselves for the 
seemingly inevitable correction in oil prices, and many of the 
oil and oil service stocks have been feeling the pressure.  KMG 
has continued its downward slide and seems almost oblivious to 
any of the benefits that have been reaped by the oil and oil 
service stocks.  When the oil stocks headed higher last week, 
KMG traded pretty much straight across, not really participating 
in the rallies.  When the oil service stocks had a rough day, 
KMG had a really rough day and had strong volume to back it.  
In other words, KMG's relative strength looks to be weak at 
best.  KMG seems to be flirting with some support at $45 and 
we will want to see KMG trade through here to confirm the 
continuing negative momentum.  Should KMG make a move up, it 
should run into some rather formidable resistance right around 
$48, where it's 5 and 10-dmas are currently working to converge.  
As you know, it is really the story behind this stock that will
determine the future direction, so if you are playing KMG, 
you will need to keep an ear open for any new developments. 

BUY PUT MAR-50*KMG-OJ OI=157 at $5.88 SL=4.25
BUY PUT MAR-45 KMG-OI OI= 77 at $2.69 SL=1.25

Average Daily Volume = 752 K
/charts/charts.asp?symbol=KMG

****

PGR - Progressive Corporation $55.94 (+1.94)(-6.25)(-1.88)

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

Well if PGR was trying to make something of that little rally,
Greenspan couldn't have picked a worse time to announce that 
the Fed will keep raising interest rates.  The Fed has 
really turned up the heat on the economy and stock market 
which makes PGR feel like they are roasting I'm sure.  Once 
again we see PGR turning their direction back downward to 
keep their stock on a steady fall.  It looks like the little
hope that was being played out over last week has been all
but shattered by the resistance from the 10-dma.  What a perfect 
entry point this moving average has been for sometime now.  
Down is the keyword still, despite the upgrade to a Strong 
Buy from CSFB.  The only real concern right now was the 
bounce at $54.69 on Friday.  Didn't see that coming.  A rally 
over the 10-dma would definitely be a reversal in the trend.  
But if PGR can roll over again on Tuesday and break below 
$54.69, then it should be an easy journey back to $52.     

BUY PUT MAR-60 PGR-OL OI=  54 at $5.88 SL=4.25
BUY PUT MAR-55*PGR-OK OI=1582 at $2.94 SL=1.50

Average Daily Volume = 503 K
/charts/charts.asp?symbol=PGR

****

RHAT - Red Hat, Inc. $71.50 (-11.88)

Red Hat is a developer and provider of open source software and 
services, including the Red Hat Linux operating system.  Red Hat 
is the market leader in open source operating systems (OS) 
software, services and information.  Red Hat offers a full line 
of services, including telephone support, on-site consulting, 
developer training, certification programs and priority access 
updates.  Red Hat shares all of its software innovations freely 
with the open source community under the GNU General Public 
License (GPL) and other public licenses.  RHAT has several 
partners including Compaq, Dell, Gateway, IBM, Hewlett-Packard 
and Silicon Graphics.

I wonder if Joe Cocker would have wanted this hat left on?  
We are seeing a continuing lack of investor interest, as they 
continue to unload Red Hat from their portfolios.  Friday's 
session saw RHAT give back nearly $4, a move which was backed
by volume roughly 30% higher than the daily average.  RHAT 
closed the session near its low for the day and could be 
positioned well to continue its decline.  There is plenty of 
resistance in RHAT's road at $74, $76 and $80. It is important 
to note however, that RHAT did find support at $70 last week, 
which could prove to be an obstacle for our bearish stance on 
RHAT.  Because RHAT climbed so far so fast, it is a little 
harder to peg any other near-term solid support levels until 
you get into the neighborhood of $62-$64.  It may very well 
end up being the mood of the market that decides if investors 
are interested in slipping back into their Red Hat just yet.  
It will be important to exercise caution and keep your stops 
tight.  Obviously, look for RHAT to trade through $70 to confirm
negative momentum.  Should RHAT make a turn and breakthrough 
the above referenced resistance levels, it may be time to take 
RHAT off of our put play list.  On Friday, analyst Steve Harmon 
made an appearance on CNBC and though he did say that he 
believed RHAT was a buy, his comments led one to believe that 
this was more of a long-term position.  During the interview, 
Harmon said "to me, this is a company we'll look at for the 
next two to three quarters, see how they do the integration."  
We are betting that there may still be some near-term downside 
to come for RHAT.

BUY PUT MAR-75*RCV-O0 OI=321 at $11.50 SL=9.25
BUY PUT MAR-70 RCV-ON OI=473 at $ 8.63 SL=6.50
BUY PUT MAR-65 RCV-OM OI=197 at $ 6.25 SL=4.50

Average Daily Volume = 1.75 mln
/charts/charts.asp?symbol=RHAT 

****

JNJ - Johnson & Johnson $77.44 (-0.00)(-4.69)

Johnson & Johnson is one of the world's largest and diversified 
makers of healthcare products.  JNJ has three distinct business
segments serving the consumer, professional, and pharmaceutical 
markets.  As a consumer you're probably most familiar with 
their over-the-counter brands like Tylenol, Band-Aids, and 
"no tears" baby shampoo.  But Johnson & Johnson reaches beyond 
that realm and expands all aspects of its product lines through 
acquisitions.  They are truly a healthcare giant.

To sum it all up what we have here is a sector play.  The broad 
negative pressure of the markets have caused consumer stocks 
like this healthcare giant to suffer intense sell-offs over the 
past month.  Currently JNJ is at levels not seen since 1998.  
Although this week hasn't been as intense as the week before.  
The stock primarily channeled in a tight range between strong 
resistance at the 10-dma and near-term support at $79.  It was 
certainly frustrating, but we banked on a descending breakout in 
consideration of upcoming economic events.  Finally JNJ headed 
south on the heels of the CPI report and slid back under the 5-
dma ($78.75).  Of course better confirmation is for it to move 
through $77 and break the 52-week low record ($75.94) set on 
February 11th.  For those that follow analysts comments closely 
you'll be relieved to hear that JNJ's share price was not 
effected by an upgrade put out by CSFB on Wednesday.  Ann Barber 
set a $95 price target and raised her rating to a Buy from a 
Hold citing "the stock is attractively valued at discounts to 
the market and its peer group".  Of course, we don't want to 
ignore an obvious element here.  At some point, buyers will 
start nibbling and this could reverse the trend.  Therefore use 
trailing stops to protect your capital and profits. 

BUY PUT MAR-85 JNJ-OQ OI=1795 at $8.38 SL=6.50
BUY PUT MAR-80*JNJ-OP OI=4007 at $4.63 SL=3.00
BUY PUT MAR-75 JNJ-OO OI=1334 at $2.06 SL=1.00

Average Daily Volume = 3.34 mln
/charts/charts.asp?symbol=JNJ

****

MRK - Merck & Co $62.00 (-3.25)

Merck is a research-driven pharmaceutical company that develops, 
manufactures, and markets a broad range of human and animal 
health products.  They are the #1 industry leader in the US and 
#2 worldwide.  Some of its more prominent drugs include Zocor 
and Meycaor (cholesterol drugs), Pepcid (an anti-ulcerant), 
top-selling hypertension drugs, Vasotec and Prinivil, and more 
recently the AIDS medication, Crixivan.  The drug maker also 
provides pharmaceutical benefit services through Merck-Medco 
Managed Care which it sells to corporations, labor unions, and 
insurance companies.  When it comes to e-commerce Merck won't 
be left behind either.  The company has formed an alliance with 
CVS to market drugs online.

A downturn in the broad markets coupled with its own looming 
patent expirations and it's no surprise why Merck is leading 
the pack of DOW Blue Chips towards new 52-week lows.  In an 
influential article February 9th, WSJ put a big emphasis on the 
fact that five of Merck's leading drugs will soon lose their 
patents.  As the knife slowly twisted, the report clearly made 
the point that the drug maker would now be very vulnerable to 
competition from the generics.  Bottom-line is, of course, 
revenues.  The targeted drugs are cholesterol fighter Mevacor, 
hypertension treatments Vasotec and Prinivil, and ulcer drugs 
Prilosec and Pepcid.  Investors obviously took to heart what 
they read in the revered WSJ and as a result, MRK fell $10.19, 
or 13.5% in just three trading sessions.  At that point, OIN 
needed to see if MRK could break that historical bottom support 
at $64 and $65 before adding it to our put list.  Patiently we 
waited for confirmation and we're ultimately rewarded on 
Thursday.  MRK made a definitive descent to $63.25!  By Friday's 
close it shed another $1.25 edging closer to its 52-week low of 
$60.94, which was set way back on August 11th 1999.  An intraday 
bounce off the 5-dma (now at $64.49) is a solid entry into this 
"Blue-Chips Are Out & Techs Are In" put play.  Keep in mind 
though that a negative market sentiment is an important factor 
to consider when planning your strategy.  Essentially there is 
no support south of the current level so to guess a bottom is 
quite risky.  In other words, watch out for prudent buyers 
stepping up to the plate and killing the play.  On the Analyst 
front Sutro & Co is no longer recommending a Buy on MRK.  On 
February 10th they downgraded MRK a Hold rating.  

BUY PUT MAR-70 MRK-ON OI=4905 at $8.63 SL=6.50
BUY PUT MAR-65*MRK-OM OI=1307 at $4.75 SL=3.00
BUY PUT MAR-60 MRK-OL OI= 398 at $2.13 SL=1.00

Average Daily Volume = 5.35 mln
/charts/charts.asp?symbol=MRK


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




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

The Option Investor Newsletter             2-20-2000  
Sunday                        5 of 5


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

Stock Buying Basics: Technical Analysis...

A number of readers have requested more information on how we pick
our plays.  Obviously, the most important factor in play selection
is the technical health of the underlying issue.  To determine the 
future trend (or character) for any stock, you must be able to
identify the most common historical patterns and understand the
implications of basic technical indicators. 

A large majority of chart formations fall into the category of
area patterns.  Each of these trends or indications can have
predictive value under certain conditions.  First we will discuss
the most common bullish patterns.

Ascending Triangle:

Right-angle triangles are the most popular group of area patterns.
These patterns are easily identified; one of the two trend lines
is generally flat while the other points toward it.  When the top
trend line is horizontal and the lower trend line slants up and
to the right, meeting the upper line at an intersection beyond the
price, the triangle is ascending.  The outlook for this type of
formation is very favorable and the continuation rally (after a
break-out has occurred), is generally of the same magnitude as the
height of the original triangle.  Here is an example:


 


Pennants and Flags:

In a flag pattern, the upper and lower boundary lines pattern are 
generally parallel though both may slant up, down or sideways in
the trend.  In a bullish trend, the formation resembles a flag
flying from a mast.  This pattern tends to form during the middle
of a rally.  A pennant is similar to a flag.  The major difference
is a pennant has converging rather than parallel trend lines (much
like an ascending triangle).  It generally occurs in a period of
congestion.  The pattern is short-term and forms after a sharp
upward movement in price.  Here is an example:


 

Rounded Bottom:

The rounded bottom is a reversal pattern that reflects a gradual
and symmetrical change in trend from bearish to bullish.  The price
pattern (and often the volume pattern) will resemble a concave
shape similar to a bowl or saucer.  It can be either long-term or
short-term.  A series of rounding bottom formations can occur where
the rising end moves higher than the preceding top of the previous
pattern.  Individual formations are generally 1 to 2 months long
and the change in price can be up to 25% of the share value.  Here
is an example of a long-term rounded bottom (or saucer):
  

 

  



Head-And-Shoulders Bottom:

This formation is one of the most common reversal patterns.  The 
first element is a pronounced sell-off in which volume increases
during the decline.  A brief recovery follows but the rally fails
near the support area of the previous range (prior to the initial
break-down).  Now the left shoulder and neckline are established.
A second sell-off drives the stock price to new lows but volume
quickly fades and a decisive reversal begins.  The lowest price is
the (inverted) head of the pattern.  The recovery again fails at
the neckline and with traders unwilling to commit fully to the new
trend, the stock fades to a short-term low; approximately equal to
the left shoulder.  The slump is brief and the change in direction
is once again decisive (often a hammer-bottom).  The new rally is
supported by a surge in volume and the momentum carries the issue
up and through the neckline (previous resistance) of the pattern.
At this point, a successful test of the neckline (now support) is
the final confirmation of a new trend.  Here is an example:


 

Next week, we'll focus on some new patterns.


SUMMARY OF PREVIOUS PICKS

NOTE: Using Margin doubles the listed Monthly Return! 

Stock  Price  Last   Call  Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

CYOE    5.50   7.25   FEB   5.00  1.44  *$  0.94  21.3%
TERA    4.41   8.00   FEB   5.00  0.50  *$  1.09  20.2%
WAVX   13.94  27.75   FEB  12.50  2.00  *$  0.56  10.2%
MCRE   11.88  13.25   FEB  10.00  2.50  *$  0.62   9.6%
GMGC    6.84  10.00   FEB   5.00  2.38  *$  0.54   8.8%
GMGC    7.50  10.00   FEB   5.00  2.88  *$  0.38   7.6%
MESG   17.31  16.38   FEB  15.00  3.25  *$  0.94   7.3%
ESPI    9.22  13.94   FEB   7.50  2.19  *$  0.47   7.3%
CCCG   16.88  21.50   FEB  15.00  2.56  *$  0.68   6.9%
ESPI   11.06  13.94   FEB   7.50  3.88  *$  0.32   6.5%
JDAS   22.69  23.38   FEB  20.00  3.25  *$  0.56   6.3%
VLNC   34.56  30.88   FEB  25.00 10.25  *$  0.69   6.2%
BRKT   25.75  37.13   FEB  22.50  4.13  *$  0.88   5.9%
ASFT   21.50  17.56   FEB  15.00  7.38  *$  0.88   5.7%
VTS    17.75  18.50   FEB  15.00  3.50  *$  0.75   5.7%
PRST   19.63  22.69   FEB  17.50  2.75  *$  0.62   5.3%
NZRO   35.00  25.25   FEB  25.00 10.88  *$  0.88   5.3%
VOYN   13.06  10.69   FEB  10.00  3.50  *$  0.44   5.0%
HRC     5.81   5.25   FEB   5.00  1.13  *$  0.32   5.0%
EAII   14.25  13.19   FEB  10.00  4.75  *$  0.50   4.9%
MUEI   12.75  11.81   FEB  10.00  3.25  *$  0.50   4.9%
CORL   22.13  15.75   FEB  15.00  7.75  *$  0.62   4.7%
DBCC    9.19  11.00   FEB   7.50  2.00  *$  0.31   4.7%
MSGI   19.13  26.06   FEB  15.00  4.75  *$  0.62   4.7%
PCMS   10.06  23.06   FEB   7.50  3.00  *$  0.44   4.5%
XICO   22.56  20.13   FEB  17.50  5.75  *$  0.69   3.8%
IFCI   10.13  32.00   FEB   7.50  3.00  *$  0.37   3.8%
CCUR   18.38  14.44   FEB  15.00  4.38   $  0.44   2.9%
HMK     9.88   7.13   FEB   7.50  2.81   $  0.06   0.6%
WDC     5.50   4.31   FEB   5.00  1.13   $ -0.06   0.0%
KELL    8.81   6.88   FEB   7.50  1.69   $ -0.24   0.0%
ERTH    6.03   4.25   FEB   5.00  1.38   $ -0.40   0.0%

PTEK    8.94   9.56   MAR   7.50  2.13  *$  0.69   8.8%
FSII   17.81  19.75   MAR  15.00  4.25  *$  1.44   7.7%
GZTC   29.13  41.50   MAR  22.50  8.38  *$  1.75   7.3%
AND     8.88  13.75   MAR   7.50  1.94  *$  0.56   7.0%
SCTC   22.31  27.06   MAR  20.00  3.75  *$  1.44   6.7%
UBET    6.25   5.25   MAR   5.00  1.63  *$  0.38   6.0%
MCRE   15.50  13.25   MAR  12.50  3.88  *$  0.88   5.5%
SIII   15.00  16.25   MAR  12.50  3.38  *$  0.88   5.5%
EPIC    9.56   9.38   MAR   7.50  2.50  *$  0.44   5.4%
MSGI   24.88  26.06   MAR  20.00  6.00  *$  1.12   5.2%
RNBO   30.88  31.63   MAR  25.00  7.00  *$  1.12   4.1%
GELX   17.81  21.63   MAR  15.00  3.75  *$  0.94   3.6%

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

Comments:

Kellstrom (KELL) has fallen significantly, resuming its
downtrend, after offering an opportunity to exit at brek-even
earlier this week.  Earthshell Container (ERTH) and Western
Digital (WDC) remain speculation plays and could test lower,
though rolling forward is a viable alternative, depending on
your long-term outlook.  Concurrent Computer (CCUR) and Ha-LO
Industries (HMK) appear quite bearish, making a quick exit
desirable.  For March, Metacreations (MCRE) sold off Friday
on very heavy volume with no news, signaling a possible
change of character.

Closed: 

Gst Telecom (GSTX), near break-even.


NEW PICKS

Sequenced by Company

Stock  Last  Call  Strike Option  Last Open Cost  Return Return
Symbol Price Month Price  Symbol  Bid  Intr Basis Called Unchanged

ANIC    6.94  MAR   5.00  NIQ CA  2.31 171   4.63   8.0%   8.0%
BIDS    5.34  MAR   5.00  BDU CA  1.06 1711  4.28  16.8%  16.8%
DRMD   12.75  MAR  10.00  DUQ CB  3.38 2988  9.37   6.7%   6.7%
HEB    11.94  MAR  10.00  HEB CB  2.69 402   9.25   8.1%   8.1%
IMNR   15.75  MAR  10.00  IMQ CB  6.38 477   9.37   6.7%   6.7%
PCMS   23.06  MAR  17.50  PQP CW  6.38 1010 16.68   4.9%   4.9%
REMC   26.38  MAR  22.50  RYQ CX  5.00 20   21.38   5.2%   5.2%
TSEMF  21.00  MAR  17.50  TWQ CW  4.63 58   16.37   6.9%   6.9%


Sequenced by Return Called & Return Not Called

Stock  Last  Call  Strike Option  Last Open Cost  Return Return
Symbol Price Month Price  Symbol  Bid  Intr Basis Called Unchanged

BIDS    5.34  MAR   5.00  BDU CA  1.06 1711  4.28  16.8%  16.8%
HEB    11.94  MAR  10.00  HEB CB  2.69 402   9.25   8.1%   8.1%
ANIC    6.94  MAR   5.00  NIQ CA  2.31 171   4.63   8.0%   8.0%
TSEMF  21.00  MAR  17.50  TWQ CW  4.63 58   16.37   6.9%   6.9%
DRMD   12.75  MAR  10.00  DUQ CB  3.38 2988  9.37   6.7%   6.7%
IMNR   15.75  MAR  10.00  IMQ CB  6.38 477   9.37   6.7%   6.7%
REMC   26.38  MAR  22.50  RYQ CX  5.00 20   21.38   5.2%   5.2%
PCMS   23.06  MAR  17.50  PQP CW  6.38 1010 16.68   4.9%   4.9%


Company Descriptions

OI  - Open Interest
CB  - Cost Basis or break-even point
RC  - Return Called
RNC - Return Not Called (Stock unchanged)

****

ANIC - Anicom  $6.94  *** What's up? ***

Anicom is involved in the sale and distribution of multimedia 
technology products consisting of communications related wire, 
cable, fiber optics and computer network and connectivity 
components.  The Company provides products that interconnect the
Internet serving as a vital link to the ever-growing global 
communications industry.  Anicom operates in a single business and 
geographic segment.  The products offered by the Company generally 
fall into the following categories: voice and data communications 
and fiber optics; sound, security, fire, alarm and energy 
management systems; electronic cable and industrial cable wiring 
and assemblies for automation, computers and robotics.  No news on
on Anicom but the chart shows a definite change in character.  We
favor the move above the 150 dma on heavy volume and a cost basis
below technical support.  Earnings are due Wednesday, 2/23/00.

MAR 5.00 NIQ CA Bid=2.31 OI=171 CB=4.63 RC=8.0% RNC=8.0%

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

****

BIDS - Bid.Com  $5.34  *** Stage I Base Continues ***

Bid.Com is one of e-commerce's leading international online sales 
and marketing organizations.  The company offers a compelling and
cost-effective method of selling a wide array of goods and services
over electronic distribution channels.  Bid.Com is strategically 
positioned to leverage its business-to-consumer technological 
leadership by offering the pre-eminent online auction platform for 
co-ventures into B2B markets, developing and implementing custom 
branded e-commerce solutions and for distribution through broadband
media.  Bid.Com made another successful test of the August low and
again offers a reasonable entry point on a speculative issue. 

MAR 5.00 BDU CA Bid=1.06 OI=1711 CB=4.28 RC=16.8% RNC=16.8%

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

****

DRMD - Duramed Pharmaceuticals  $12.75  *** Break out! ***

Duramed Pharmaceuticals develops, manufactures and markets 
prescription drug products.  The company's business strategy
emphasizes products with attractive market opportunities and 
potentially limited competition due to technological barriers 
to entry, focusing on women's health and the hormone replacement
therapy market.  Last year, the FDA approved the company's first
branded product, Cenestin® Tablets, for the treatment of symptoms 
associated with menopause. Duramed recently won approval from 
the FDA for Medroxyprogesterone Acetate (MPA) 2.5 mg, 5 mg and 
10 mg Tablets USP, for the treatment of secondary amenorrhea and 
abnormal uterine bleeding due to hormonal imbalance.  With the 
sector heating up, Duramed offers a favor cost basis at technical
support on an issue that has recently broke above its 150 dma.

MAR 10.00 DUQ CB Bid=3.38 OI=2988 CB=9.37 RC=6.7% RNC=6.7%

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

****

HEB - Hemispherx Biopharma  $11.94  *** Hot Sector ***

Hemispherx Biopharma is a pharmaceutical company engaged in the 
manufacture and global clinical development of new drug entities
in the nucleic acid (NA) class for chronic viral diseases and 
disorders of the immune system including CFS, HIV and hepatitis. 
Its flagship products are Ampligen®, which is being developed for
CFS and drug-resistant HIV, and polyadenur, which is being 
developed for hepatitis B and C.  Hemishperx's stock price spiked
on Thursday when it announced it has filed for FDA approval to 
test Ampligen in people whose HIV drug cocktails have stopped 
working.  We favor the recent support above our cost basis.

MAR 10.00 HEB CB Bid=2.69 OI=402 CB=9.25 RC=8.1% RNC=8.1%

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

****

IMNR - Immune Response  $15.75  *** Volcanic Sector! ***

Immune Response is a biopharmaceutical company developing 
immune-based therapies to induce specific T-cell responses 
for the treatment of HIV and autoimmune diseases.  In addition,
IMNR is working on cancer vaccines and gene therapy.  On
Thursday, Immune Response announced that they have synthesized
a proprietary new human Factor VIII gene, which may lead to 
improvements in the development of gene therapy for people 
with hemophilia A.  Sort of makes Prudential's downgrade a 
week before look a little premature.  We favor a conservative
entry on a speculative issue.

MAR 10.00 IMQ CB Bid=6.38 OI=477 CB=9.37 RC=6.7% RNC=6.7%

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

****

PCMS - P-Com  $23.06  *** Just buy the call? ***

P-Com develops, manufactures, and markets network access systems 
for the worldwide wireless telecommunications market.  The point-
to-point, spread spectrum, and point-to-multipoint radio links 
provided by P-Com are designed to satisfy the network requirements
of cellular, personal and corporate communications services, public
utilities and local governments.  In addition, P-Com provides 
comprehensive network services including system planning, program
planning and management, path design, and installation.  With 
favorable earnings, several upgrades, and now a price target of
$35, P-Com appears undervalued, though overbought.

MAR 17.50 PQP CW Bid=6.38 OI=1010 CB=16.68 RC=4.9% RNC=4.9%

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

****

REMC - REMEC  $26.38  *** New High soon? ***

REMEC is a leader in the design and manufacture of microwave 
multi-function modules for microwave transmission systems used 
in the commercial wireless telecommunications market and defense
applications.  No news since REMEC announced a supply agreement
with SpectraPoint Wireless LLC and was upgraded by AG Edwards
and Dain Rauscher Wessels.  Yet the price continues to move 
higher and is nearing a new all time high on heavy volume.  
We favor the technical support near the January high.

MAR 22.50 RYQ CX Bid=5.00 OI=20 CB=21.38 RC=5.2% RNC=5.2%

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

****

TSEMF - Tower Semiconductor  $21.00  *** Blast-Off! ***

Tower semiconductor is an independent manufacturer of integrated
circuits on silicon wafers and a provider of related services.
As a foundry, Tower provides IC design, manufacturing and
turnkey services using advanced production capabilities and the
proprietary IC designs of its customers, and is specializing in
providing solutions for embedded non-volatile memory devices and
CMOS image sensors.  ICs manufactured by Tower are adapted into
a wide range of products in diverse and rapidly growing markets, 
including computer and office equipment, communication products
and consumer electronics.  Investors have boosted Tower out of a
recent trading range and we favor the support near our cost
basis as Tower approaches a new all time high.

MAR 17.50 TWQ CW Bid=4.63 OI=58 CB=16.37 RC=6.9% RNC=6.9%

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



********************
LARGE CAP NAKED PUTS
********************

If you use this new section please send me an email
at bigputs@OptionInvestor.com and tell me if you
would like to see strikes farther out of the money,
more strikes on the same stock, smaller list, bigger
list, etc. What would you like us to do with this 
section. If nobody sends mail we will assume nobody
is using it and we will drop it. Even if you just say
"I am using it" that will be enough to keep it going.

Send email to Contact Support


With four weeks to go there are still some huge
premiums. The volatility is playing havoc with
the call players but the put writers love it.
Many of these stocks have great charts.

symbol price strike symbol premium margin return

CLRS   82.88  80   RUR-OP   10.00  20.72   48%
MRVC   90.75  85   VQX-OQ   10.63  22.69   47%
PUMA  113.63  110  PUP-OB   15.00  28.41   53%
SCMR  117.00  110  QSM-OB    9.50  29.25   32%
EXDS  123.56  120  QED-OD   10.75  30.89   35%
ARTG  136.25  130  AYQ-OF   15.50  34.06   46%
BEAS  146.50  140  BUC-OH   17.25  36.63   47%
SFE   149.44  145  SFV-OI    9.63  37.36   26%
MSTR  160.63  150  MKZ-OJ   14.38  40.16   36%
NTAP  167.25  160  NUL-OL   11.50  41.81   28%
VRTS  173.06  165  UQJ-OM   11.50  43.27   27%
BVSN  179.50  170  BZV-ON   15.25  44.88   34%
PDLI  186.00  170  RPV-ON   13.63  46.50   29%
BRCM  189.94  180  RDU-OP   10.25  47.49   22%
GLW   193.00  190  GRJ-OR   14.25  48.25   30%
IMNX  193.38  180  QUV-OP   18.75  48.35   39%
ITRU  193.88  180  QIU-OP   13.00  48.47   27%
HGSI  199.00  180  HBW-OP   17.00  49.75   34%
INSP  200.25  190  FHY-OR   16.75  50.06   33%
VIGN  209.00  200  GGV-OT   20.00  52.25   38%
SILK  212.38  200  ILK-OT   17.13  53.10   32%
TQNT  223.19  220  TNN-OD   19.00  55.80   34%
ARBA  228.13  220  IUR-OV   18.38  57.03   32%
MUSE  229.38  220  QVM-OD   19.75  57.35   34%
TERN  232.50  220  YGT-OD   24.13  58.13   42%
VRSN  237.06  230  QVZ-OF   20.63  59.27   35%
JNPR  238.63  230  JUY-OF   21.75  59.66   36%
AKAM  241.00  230  UMU-OF   18.63  60.25   31%
MLNM  272.19  250  QMR-OW   18.50  68.05   27%
AFFX  280.00  270  FUA-ON   24.75  70.00   35%
CRA   315.00  300  CKA-OT   32.00  78.75   41%
SDLI  330.00  320  YAL-OD   22.13  82.50   27%


This is available in an excel spreadsheet 

http://www.OptionInvestor.com/downloads/hpfeb-21.xls



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

Option Trading: Exchange Basics...

Our recent article on market-makers and the mechanics of floor
trading has generated a number of inquiries.  The most notable
questions concern the subject of arbitrage and the manner in
which floor brokers maintain a liquid market.  Two subjects are
commonly misunderstood by new traders:

(1) Synthetic positions and their use in the options market.

(2) The limitation of arbitrage techniques to floor traders.

First, the definition of a synthetic position:  A combination of
instruments that simulate (in movement and character) a specific
position. Using options; a long call and a short put is equal
to synthetic long stock.  A long put and a short call is equal to
synthetic short stock.  Market-makers use synthetic positions to
create liquidity in options markets.  They transact options with
retail traders through the use of conversions and reversals.

The four basic synthetic positions are:

Conversions..

A short synthetic put - equals a short call and long stock, and
offsets a long put.

A long synthetic call - equals a long put and long stock, and
offsets a short call.

Reversals..

A short synthetic call - equals a short put and short stock, and
offsets a long call.
 
A long synthetic put - equals a long call and short stock, and
offsets a short put.
 
You may not know that in the first few years of option trading,
exchanges did not offer puts.  Market-makers and other specialists
provided put options to institutions (wanting to hedge their 
portfolios) through the use of synthetic positions.  The short
put was a product of the offsetting position, a synthetic long
put; created by buying a call and selling stock short.

****

Why is this type of strategy is limited to floor brokers?

Trading conversions and reversals involve calls, puts, and the
underlying stock.  Recall that a conversion is used when a retail
trader is interested in buying a call option and a reversal is
used when a retail trader desires to sell a call option.  These 
techniques are risk-free transactions since the price change on
the traded option is offset with the sale of synthetic positions.
Quite simply, the existence of transaction costs prevents the
trading public from initiating these types of arbitrage positions.
While floor traders do incur small fees for executions, these
costs do significantly hamper their ability to perform the
transactions in a risk free manner.

Next week: Understanding the system will increase your profits!



                      *** WARNING ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price.  This may cause a devastatingly
large loss which may wipe out all of your smaller gains.  There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own!  It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops.  Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


SUMMARY OF PREVIOUS PICKS 

Stock  Price  Last   Put   Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

VDAT   12.50  11.94   FEB  10.00  0.31  *$  0.31  24.0%
TSEMF  14.38  21.00   FEB  12.50  0.75  *$  0.75  23.5%
MCRE   12.56  13.25   FEB  10.00  0.69  *$  0.69  23.4%
NFLD   16.19  19.00   FEB  12.50  0.38  *$  0.38  22.8%
PCMS   15.00  23.06   FEB  12.50  0.50  *$  0.50  18.1%
TRVL   15.50  17.75   FEB  12.50  0.44  *$  0.44  17.5%
WSTL   11.44  25.88   FEB   7.50  0.50  *$  0.50  16.5%
MSGI   18.50  26.06   FEB  15.00  0.50  *$  0.50  16.5%
MESG   18.31  16.38   FEB  15.00  0.50  *$  0.50  16.1%
OTEX   20.63  33.88   FEB  17.50  0.56  *$  0.56  14.3%
HSAC   23.00  19.63   FEB  17.50  0.69  *$  0.69  14.2%
NSPK   23.69  21.06   FEB  20.00  0.38  *$  0.38  13.4%
DMRK   22.38  42.88   FEB  17.50  0.69  *$  0.69  12.3%
SMSC   14.25  15.19   FEB  12.50  0.50  *$  0.50  12.2%
NSPK   22.25  21.06   FEB  15.00  0.56  *$  0.56  12.1%
NZRO   33.25  25.25   FEB  22.50  0.75  *$  0.75  11.0%
RNBO   24.75  31.63   FEB  20.00  0.56  *$  0.56  10.7%
XICO   19.75  20.13   FEB  15.00  0.31  *$  0.31  10.5%
TLCM   20.25  23.19   FEB  15.00  0.50  *$  0.50  10.1%
QTRN   24.44  28.88   FEB  17.50  0.50  *$  0.50  10.1%
NPLS   23.06  33.50   FEB  17.50  0.44  *$  0.44   9.5%
PGEX   22.81  20.75   FEB  15.00  0.50  *$  0.50   9.1%
TLCM   23.13  23.19   FEB  17.50  0.31  *$  0.31   9.1%
PILT   25.94  32.50   FEB  17.50  0.56  *$  0.56   9.0%
CPQ    32.00  25.25   FEB  25.00  0.56  *$  0.56   8.7%
NOVL   33.69  34.13   FEB  25.00  0.63  *$  0.63   7.9%
GSTRF  34.19  23.00   FEB  22.50  0.63  *$  0.63   7.8%
EMIS   35.63  65.50   FEB  25.00  0.63  *$  0.63   7.5%
NETA   28.00  28.31   FEB  20.00  0.38  *$  0.38   5.9%
PRGY   25.75  21.25   FEB  22.50  0.31   $ -0.94   0.0%

ZONA    7.69   8.25   MAR   5.00  0.31  *$  0.31  12.1%
TSEMF  20.13  21.00   MAR  15.00  0.56  *$  0.56  10.6%
PTEC   20.63  27.13   MAR  15.00  0.63  *$  0.63   9.6%
RWAV   10.56   9.50   MAR   7.50  0.31  *$  0.31   9.3%
PGEX   23.13  20.75   MAR  17.50  0.50  *$  0.50   8.5%
PILT   33.94  32.50   MAR  22.50  0.63  *$  0.63   7.4%
MSGI   24.88  26.06   MAR  17.50  0.44  *$  0.44   7.1%
PTEC   23.06  27.13   MAR  17.50  0.38  *$  0.38   6.6%
DRD    28.00  24.00   MAR  20.00  0.56  *$  0.56   6.6%
AXTI   31.94  39.00   MAR  17.50  0.50  *$  0.50   6.3%
RNBO   30.88  31.63   MAR  22.50  0.38  *$  0.38   5.0%

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

Comments:

Compaq (CPQ) and Messagemedia (MESG) bounced near their 150
dma allowing the sold option to expire worthless.  The negative
Market action Friday terminated Prodigy's (PRGY) chance to
continue its up-trend; time to consider selling March calls or
exiting the position.  For March, keep an eye on Duane Reade
(DRD) with the current weakness in the retail sector.


NEW PICKS


Sequenced by Company

Stock  Last  Put   Strike Option  Last  Open Cost   ROI Opt
Symbol Price Month Price  Symbol  Bid   Intr Basis  Expired

ADG    15.31  MAR  10.00  ADG OB  0.38  280   9.62  11.0%
CRUS   20.31  MAR  15.00  CUQ OC  0.38  440  14.62   8.6%
EXLN   23.00  MAR  15.00  ODU OC  0.31  7    14.69   6.3%
IDTC   31.50  MAR  20.00  IQJ OD  0.50  466  19.50   7.4%
NTRX   31.13  MAR  20.00  UNX OD  0.69  52   19.31  10.0%
SKYC   28.63  MAR  20.00  KQF OD  0.44  130  19.56   7.1%
WSTL   25.88  MAR  17.50  QLW OW  0.69  82   16.81  11.8%

Sequenced by ROI  

Stock  Last  Put   Strike Option  Last  Open Cost   ROI Opt
Symbol Price Month Price  Symbol  Bid   Intr Basis  Expired

WSTL   25.88  MAR  17.50  QLW OW  0.69  82   16.81  11.8%
ADG    15.31  MAR  10.00  ADG OB  0.38  280   9.62  11.0%
NTRX   31.13  MAR  20.00  UNX OD  0.69  52   19.31  10.0%
CRUS   20.31  MAR  15.00  CUQ OC  0.38  440  14.62   8.6%
IDTC   31.50  MAR  20.00  IQJ OD  0.50  466  19.50   7.4%
SKYC   28.63  MAR  20.00  KQF OD  0.44  130  19.56   7.1%
EXLN   23.00  MAR  15.00  ODU OC  0.31  7    14.69   6.3%


Company Descriptions

Definitions:
OI  - Open Interest
CB  - Cost Basis (break-even point if put exercised) 
ROI - Return On Investment 

****

ADG - Advanced Communications  $15.31  *** WorldPages.com? ***

Advanced Communications Group is a regional competitive local
exchange carrier that provides integrated communications services
to business and residential customers located in the Midwestern
region of the United States.  ADG's integrated services include
local, long distance, Internet access, cellular and data services.
The company recently announced that its stockholders approved the
change in business focus along with the new name; WorldPages.com.
Upon receiving the remaining acquisition approvals, the company's
stock will be traded on the NYSE under the ticker "WPZ."  The
technicals appears favorable for a position below $10.

MAR 10.00 ADG OB Bid=0.38 OI=280 CB=9.62 ROI=11.0%

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

****

CRUS - Cirrus Logic  $20.31  *** Hot Sector! ***

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.  In January, Cirrus
reported favorable results for the quarter with net revenue growth
of 13% over the prior period.  The increase in revenue was fueled
by a record demand for their market-leading audio products as well
as a ramp to high-volume shipments of its integrated 3Ci chip for
hard disk drives.  The recent bullish technicals suggests this is
a conservative position.

MAR 15.00 CUQ OC Bid=0.38 OI=440 CB=14.62 ROI=8.6%

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

****

EXLN - eXcelon Corporation  $23.00  *** Up And Coming! ***
 
eXcelon is a provider of enterprise and embedded data management
solutions, including object-oriented and eXtensible Markup
Language (XML) data management solutions; a new universal data
standard from the World Wide Web Consortium.  EXLN also offers
training and consulting services, as well as maintenance and
support services.  The company's core data management product
offerings include ObjectStore, an enterprise object database
management system, eXcelon, an XML data server, and ObjectStore
PSE Pro, a suite of small footprint embeddable databases that can
be used either to prototype ObjectStore applications or as the
data management solution for embedded systems.  A number of new
contracts and agreements have propelled this issue to all-time
highs.  The recent consolidation area near $17 provides excellent
support for this conservative position.

MAR 15.00 ODU OC Bid=0.31 OI=7 CB=14.69 ROI=6.3%

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

****

IDTC - IDT Corporation  $31.50  *** An Old Favorite! *** 

IDT Corporation is a leading multinational carrier that provides
wholesale and retail customers with integrated international and
domestic long distance telecommunications service, Internet access
and, through Net2Phone, Internet telephony services.  IDT also
offers retail long distance services to individual and business
customers in the U.S. and around the globe.  IDT operates one of
the nation's largest Internet access networks and is well known
for their Net2Phone service, which allows customers to make phone
calls from a PC.  IDTC rallied last week on speculation that AOL
will buy a controlling interest in Net2Phone.  CNBC said AOL may
purchase IDT's remaining 48% stake in Net2Phone for terms that
could approach $70 per Net2Phone share.  That's a good thing!

MAR 20.00 IQJ OD Bid=0.50 OI=466 CB=19.50 ROI=7.4%

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

****

NTRX - Netrix  $31.13  *** Internet Voive/Data ***

Netrix is a worldwide provider of voice and data networking
products.  Netrix develops, manufactures, markets and supports
networking equipment for voice, data and image networks.  Netrix
products are designed to transport voice over data networks to
enable its customers to realize significant cost savings.  The
company currently offers products that focus on providing voice
over packet solutions, which leverage the emerging IP Telephony
space as well as the Frame Relay space.  Netrix offers leading
edge products for the emerging Internet voice/data industry and
the recent upgrade with a new all-time high bode well for the
issue.

MAR 20.00 UNX OD Bid=0.69 OI=52 CB=19.31 ROI=10.0%

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

****

SKYC - American Mobile Satellite  $28.63  *** Post-Earnings? ***

American Mobile Satellite is a provider of nationwide wireless
communications services, including data, dispatch and voice
services, primarily to business customers in the United States.
The company's combined network offers a broad range of end-to-end
wireless solutions utilizing a seamless network consisting of the
nation's largest, most fully deployed terrestrial wireless data
network and a satellite in geo-synchronous orbit.  American Mobile
provides data service through a number of network configurations,
including a terrestrial-only service network, a satellite-only
service network and a multi-mode terrestrial and satellite service
network.  The post-earnings rally was a surprise to all and the
chart suggests there is little chance of a retreat to $20.

MAR 20.00 KQF OD Bid=0.44 OI=130 CB=19.56 ROI=7.1%

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

****

WSTL - Westell Technologies  $25.88  *** DSL is Hot! ***

Westell Technologies supplies DSL Customer Premise Equipment,
DSL and Telephone Access Systems and monitoring and maintenance
equipment for demarcation points in telecommunications networks.
Conference Plus, Westell's service business, is an Application
Service Provider, providing audio, video, IP conferencing and
support services. The company serves ILECs, CLECs, alternative
carriers, and a number of well known companies in North America,
and through partners and reseller programs, telecommunications
companies around the Globe.  The recent favorable earnings and
brokerage upgrades have propelled WSTL to extended highs.  With
a consolidation expected, we will enter the issue at a discounted
price.

MAR 17.50 QLW OW Bid=0.69 OI=82 CB=16.81 ROI=11.8%

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



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

Inflation Woes Continue..

Friday, February 18

Interest-rate fears drove the markets lower Friday with stock
prices falling in all major groups.  The leading indexes slumped
on concerns over remarks made by Fed Chairman Alan Greenspan.
The Dow closed 295 points lower at 10,219 and the Nasdaq slipped
137 points to 4411.  The S&P 500 index plunged 42 points to 1346.
Volume on the Big Board reached 1 billion shares, with declines
outpacing advances by more than 2-to-1.  In the bond market,
prices were higher, with the benchmark 30-year Treasury up 31/32,
bid at 101 8/32, pushing its yield down to 6.148%.


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

Netopia     NTPA   MAR50C/MAR65C   $13.25   debit   bull-call
Iss Group   ISSX   MAR70P/MAR75P   $0.75    credit  bull-put
Intervu     ITVU   FEB90P/F100P    $1.12    credit  bull-put

With the market consolidation, all of our new positions offered
prices at or better than the suggested targets.


Portfolio plays:

Today's session was dominated by broad-based selling pressure as
investors remained concerned about inflation and the future
direction of interest rates.  Traders ignored the tame consumer
price report released earlier in the day and most analysts agreed
the data didn't change the outlook for rising interest rates.
The majority of blue-chip stocks ended at yearly lows and now the
industrial index has fallen almost 13% from the mid-January high.
In contrast, the Nasdaq achieved a new all-time high Thursday on
record volume and technology buyers said today's session was a
natural correction.  Two major factors affecting the movement were
the upcoming holiday week-end and the double-witching expiration
of options on stocks and stock indexes.

A number of portfolio issues suffered losses during the session
but fortunately, the majority of positions finished well beyond
the maximum profit range.  The few remaining (open) plays were
little affected by the move and a small group of consolidating
issues offered new opportunities for roll-outs and adjustments.
Some of our bullish small-cap stocks actually opposed the market
momentum, rallying to recent highs.  Overall, it was an excellent
end to another profitable month for the Spreads/Combos section.
Even the Straddles portfolio was simply amazing.  The position on
Jones Pharmaceuticals (JMED) provided a 400% profit and all of
the current plays in that group have achieved positive returns.

The summary of February's results along with the complete list of
current portfolio plays will be posted in next Tuesday's edition
of the OIN.

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


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

MRVC - Mrv Communications  $90.50   *** Earnings Rally! ***

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

MRVC is growing to meet the needs of the industry and in early
February, the company announced that it completed expansion of
its photonic capacity with a new state-of-the-art facility for
research and development, engineering, packaging, integration,
testing and sales and marketing.  This expansion will increase
their construction capacity, provide a quicker time to market
with better quality control and lower manufacturing costs.  The
facility will also improve their technical research ability and
allow the company to increase its staff with new scientists and
engineers.  The CEO says the added capacity will provide new
momentum to MRVC's goal of dominating the fiber optic component
market.

That's exciting news and a lofty goal for sure but the key is
how much did this whole package cost.  Earnings are due out on
Tuesday and the option premiums are based on the possibility of
a steep correction.  From our point of view, the issue is just
too strong to suffer much in any post-earnings sell-off.  Only
time will tell..


PLAY (conservative - bullish/debit spread):

BUY  CALL MAR-60 VQX-CL OI=32  A=$33.25
SELL CALL MAR-70 VQX-CN OI=120 B=$24.75
INITIAL NET DEBIT TARGET=$8.25-$8.38 ROI(max)=19%

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

****

ISSI - Integrated Silicon Solutions  $18.00   *** Hot Sector! ***

ISSI designs, develops and markets high-performance memory
devices including static random access memory (SRAM), specialty
dynamic random access memory (DRAM), and nonvolatile memory.  The
company also builds other memory devices such as certain EEPROM,
embedded memories, voice products and micro-controllers.  ISSI's
affiliate, NexFlash, produces serial and parallel Flash devices.
Their products are used in a number of telecommunications, data
communications, networking, personal computers, instrumentation
and consumer products. 

ISSI has rebounded significantly in the last few months amid
high demand for memory chips.  Now the company is planning a
follow-on offering of over 3 million shares, hoping to raise
money to invest in wafer-fabrication facilities and acquire new
technologies.  The company's goal is to develop their advanced
process technology to provide high-volume, cost effective support
for low to medium density DRAMs.  These devices are essential to
their growing DRAM product line and may provide the key to their
future success.

This ISSI chart was identified as a possible "break-out" pattern
and the favorable option premiums will allow us to speculate on
that possibility with a conservative position.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL APR-7.50  XUS-DU OI=222 A=$10.38
SELL CALL MAR-15.00 XUS-CC OI=43  B=$3.50
INITIAL NET DEBIT TARGET=$6.75 TARGET ROI=11%

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

****

ORG - Organogenesis  $14.63   *** Biotechnology Boom! ***

Organogenesis designs, develops and manufactures a number of
medical therapeutics containing living cells and/or natural
connective tissue.  The company was formed to advance and apply
the emerging field of tissue engineering to major medical needs.
Their product focus includes living tissue replacements, cell
based organ assist devices, and tissue-engineered technologies.
ORG's most advanced product is Apligraf living skin-construct.
Like human skin, Apligraf is living, all natural and bi-layered,
with both an upper epidermal and a lower dermal layer.  Apligraf
was approved by the US FDA for the treatment of venous leg ulcers.

The biotechnology industry is HOT and the recent speculation in
this group is incredible.  There are so many companies to choose
from and without real knowledge of their products and the future
potential of specific technologies, the only method we have of
selecting the best issues is charting.  In this case, the ORG
pattern fits the bill perfectly with a bullish break-out from a
steadily improving pattern.  Analysts from Gruntal & Co. agree
with our assessment and they timed their new coverage perfectly,
beating Wednesday's spike by almost a full week.  Their target
price is $19 based on the favored status of ORG among the few
companies in the replacement tissue industry.  We expect the
stock to consolidate, then continue higher and this low risk
position will allow plenty of downside margin (and time) for
eventual success.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL JUL-10 ORG-GB OI=78   A=$5.75
SELL CALL MAR-15 ORG-CC OI=1189 B=$1.38
INITIAL NET DEBIT TARGET=$4.12 TARGET ROI=21%

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

****

ARBA - Ariba  $229.00   *** Technicals Only ***

Ariba is a leading provider of Intranet and Internet business-to-
business electronic commerce solutions for operating resources.
The company's Operating Resource Management System, Ariba ORMS,
enables organizations to automate the procurement cycle within
their Intranets, lowering the costs associated with operating
resources.  The recently launched Ariba.com network is a global
business-to-business electronic commerce network for operating
resources that enables customers and suppliers to automate their
transactions on the Internet.  Ariba ORMS and Ariba.com combine
Intranet-based network applications with Internet-based networks
to create a business-to-business electronic commerce solution for
operating resources that benefits both buyers and suppliers.

Quite simply, Ariba is on the leading edge of B-2-B electronic
commerce, one of the hottest groups in the market.  Analysts are
lining up to back this issue and the most conservative price
target is $250.  The recent rally began with the break-out on
February 11.  Now the momentum is building and technically, the
issue has unlimited upside potential and solid support near the
cost basis.


PLAY (conservative - bullish/credit spread):

BUY  PUT MAR-160 OI=164 A=$2.25
SELL PUT MAR-170 OI=207 B=$3.25
INITIAL NET CREDIT TARGET=$1.12 ROI(max)=12%

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

****

BEAS - BEA Systems  $146.00  *** Reader's Request ***

BEA Systems is one of the leading providers of cross-platform
middle-ware and application server solutions for enterprise
applications. BEA's products and services enable mission-critical,
distributed applications to work seamlessly in client/server,
Internet, and legacy environments. BEA provides transactional,
messaging, and distributed object-based software, as well as an
industry-leading Java Web application server, for developing and
deploying these enterprise applications. In addition to its broad
software product line, BEA provides complete solutions to its
customers through a full range of services including developing
custom components, consulting, training, and support, and BEA's
extensive partner network. BEA focuses on four primary product
lines: BEA TUXEDO, BEA WebLogic, BEA eLink and BEA eSolutions.

The OIN has been all over this issue in recent weeks and today
one of our readers requested a conservative spread position on
the issue.  BEAS is popular right now because companies that can
provide software for e-commerce infrastructures are in demand.
Recently selected by the Phoenix-Engemann Aggressive Growth Fund,
Bea Systems is on a short list of technology issues that have
demonstrated top-line expansion and have solid long-term growth
prospects.  Additional brokerage analysis comes from First Boston
and in late January, they reiterated a STRONG BUY rating, based
on higher-than-expected revenues and EPS in the quarter.  Another
popular technology research company, SoundView also rates BEAS a
STRONG BUY, citing the possibility of several future deals with
large corporations.

We like the bullish technicals and the favorable option premiums
for this conservative credit-spread but unfortunately, earnings
are due on Tuesday.  While we do not generally suggest opening
new positions prior to earnings, this company is another of the
few candidates that appear capable of withstanding any potential
post-earnings sell-off.


PLAY (moderate - bullish/credit spread):

BUY  PUT MAR-90  BUC-OR OI=367 A=$2.13
SELL PUT MAR-105 BUC-OT OI=33  B=$4.50
INITIAL NET CREDIT TARGET=$2.50-$2.62 ROI(max)=17%

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


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SEE DISCLAIMER IN SECTION ONE
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DISCLAIMER

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

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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Option Investor Inc
PO Box 630350
Littleton, CO 80163

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