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Daily Newsletter, Sunday, 02/27/2000

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The Option Investor Newsletter          Sunday  2-27-2000  1 of 5
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Redistribution in any form strictly prohibited.

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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
         WE 2-25          WE 2-18          WE 2-11          WE 2-4        
DOW      9862.12 -357.40 10219.52 -205.29 10425.21 -538.59 +224.93 
Nasdaq   4590.50 +178.76  4411.74 + 16.29  4395.45 +151.31 +357.07
S&P-100   719.78 -  8.74   728.52 - 23.52   752.04 - 23.47 + 37.47
S&P-500  1333.36 - 12.73  1346.09 - 41.03  1387.12 - 37.25 + 64.21
RUT       556.74 + 11.06   545.68 +  8.58   537.10 + 11.58 + 20.90
TRAN     2351.26 - 79.54  2430.80 -  5.33  2436.13 -172.83 + 27.21
VIX        29.08 +  0.63    28.45 +  1.53    26.92 +  3.99 -  6.16
Put/Call     .41              .63              .59             .45
******************************************************************

A World of Change

I don't know about you, but is anyone else just a little tired 
of hearing about the "old economy" versus the "new economy".  
Come on media people; we got it already.  Unfortunately, those 
two ideas, old economy versus new economy are affecting the 
market in very big ways.  Now, just to spare everyone from 
reading yet another commentary inundated with those two terms, 
I'm going to substitute "old economy" with "old world" and "new 
economy" with "new world".  Sounds nice, doesn't it.  We are all 
adventurers at heart.  Otherwise we wouldn't be taking charge of 
our own financial future as we strive to find the next 
successful trade.

It probably doesn't sound very nice no matter what you call it 
if you were trading Dow stocks on Friday.  Trading was ugly from 
the word go and the venerable index struggled for a whole 90 
minutes (11:30 to 1:00pm) with support at 10,000.  Investors 
were relieved to hear the closing bell since it called an end to 
an ugly week on the NYSE.  However, by the time the smoke 
cleared, the Dow Jones Industrial Average had crossed not one, 
but two lines in the sand.  The milestone of Dow 10,000 was bad 
enough, but the index broke through 9900 in the last half hour 
of trading before closing at 9878.  The damage was a 230 point 
loss.

This marked the fourth Friday out of the last five Fridays that 
the Dow has lost over 200 points.  Clearly the bulls are not 
willing to hold over the weekend and the bears are more than 
happy to take advantage of that fact.  If you remember the wrap 
on Tuesday, we were very suspicious of the bounce on the Dow and 
suspected it to be the third in a series of bear traps.

chart of bear traps
 


As traders saw the Dow index close below the psychological level 
of 10,000, you could almost see the fear in some of their minds.  
Is this the beginning of the end?  No one really knows; but this 
wouldn't be the first time someone wrote the epitaph for this 
bull market a little prematurely.  At the end of this month, 
next Tuesday, we will have marked our 107th month for the 
longest expansion in history.  A normal economic expansion is 
closer to 43 to 50 months long.  How can we not expect a few 
bumps in the road with a journey this long.  If we survive next 
month, the 108th month, this bull market will be nine years old.

Technology has not only extended the life span of humans, but of 
the business cycle as well.  The question is, can technology 
stop the cardiac arrest that is affecting the "old world" 
stocks.  The markets have put on a pretty frantic run the last 
10 to 12 months but the Dow appears out of breath.  It was 10 
months ago last April that the Dow last closed under 10,000.  
Since that time the Nasdaq has gained about 80%.  In comparison, 
the Dow is down almost 16% from its Jan. 14th closing high of 
11,722 versus the Nasdaq's 13% gain for the new millennium.  
According to Markethistory.com, the Nasdaq has outperformed the 
Dow by over 40% in the last few months.  This is the widest 
divergence in the history of the two indices.  Many are 
concerned that a divergence this size only spells trouble and it 
will likely correct and painfully so.  (more on this later)

chart of the Dow versus the Nasdaq
 


Trading activity on both exchanges was hectic.  The NYSE saw 
over 1 billion shares traded while the Nasdaq exchanged more 
than 1.8 billion.  Breadth was negative and combined advancers 
lost to decliners: 3103 to 4030.  The overall trend between the 
two could be seen in new 52 week lows to new 52 week highs.  The 
NYSE had 46 new highs and 192 new lows while the Nasdaq glowed 
with 280 new highs and 92 new lows.  The broader markets 
reflected the Dow's bearish stance with the OEX falling 11.38 to 
719.78, the SPX fell 20 to 1333.36, even the Nasdaq gave up a 
few points to fall 27.15 to 4590.50.  The only shining star 
among the major indices was the Russell 2000.  The RUT gained 
2.70 to 556.74.

Last week Jim discussed where the Dow 30 stocks were and how 
they could affect the valuation of the DJIA.  Without going into 
the same detail, I want to point out that several stocks in the 
Dow still remain weak and a reversal is not yet imminent.  
Actually, I've reduced this study to an informal poll.  How many 
of the Dow 30 stocks are at or near their 52 week lows?  10.  
How many of the Dow 30 are turning over?  8.  How many have 
given us a technical breakdown (this week)?  4.  How many are 
just plain crashing?  4.  This gives us a total of 26.  Now, one 
more question.  How many of the Dow 30 stocks are under their 
200 dma?  Answer: 22.  Needless to say, we are not looking at a 
very healthy picture as the majority of these "old world" stocks 
are being left by investors for the "new world" performance 
stocks.  Why would you buy and hold IP for two years and loose 
20% when you could buy stocks like CMRC or ARBA (B2B companies) 
and make 20% in one (CMRC) or two (ARBA) days ?  Hmmmmm?  I'm 
waiting for an answer...  Exactly, you wouldn't.

chart of IP versus ARBA
 

 
"But wait, maybe this is just an over reaction to the GDP and 
housing starts that came out on Friday", cries the diehard Dow 
fan.  It is a possibility, but looking back now, Friday's 
results seem inevitable.  Economists were looking to revise 
1999's 4Q GDP up from 5.8% to 6.5% and when it came out to an 
unexpected 6.9% investors reacted.  This is almost twice what 
the Fed chairman Greenspan would like to see economy grow at.
The last time the economy was near the 7% growth rate was when 
it hit 7.2% back in the 4Q of 1987.  Everyone should know what 
happened in 1987.  You don't?  Okay, here's a hint.  It happened 
on a Monday but that is all I'm going to help you with.  

The unexpected GDP results renewed interest rate fears.  You've 
probably heard that a dozen times this weekend but ask yourself 
why?  Everyone expects Greenspan to raise rates again at the 
next FOMC meeting on March 21st and probably again at the June 
meeting.  However, if the economy is too strong, investors worry 
that he may be tempted to raise by 50 basis points or worse - a 
possible surprise rate hike before the next scheduled meeting.  
Fortunately, we still have two factors on our side.  Number one, 
inflation remains in check.  The GDP price deflator, one of the 
inflation gauges the Fed watches, only rose at a 2% annual rate 
inline with estimates.  Number two, the Fed governor's previous 
string of rate hikes may be having their intended effect.  The 
National Association of Realtors reported a 10.7% decline in 
home sales for January.  This was the largest monthly slow down 
in over three years.  Most economists agree that Alan's last 
four rate hikes will prevent Q1 of 2000 from outpacing the end 
of 1999.

Now, how do we apply this to our trading next week?  We are 
probably looking at two scenarios.  Scenario one, the weak 
stocks drag the strong stocks down with them.  The Dow has 
corrected almost 16% from its high and we are firmly in 
correction territory.  Investor sentiment is wary for the Dow 
and this may be the beginning of a bear cycle for the index.  
Not surprisingly, many of the non-tech sectors have corrected as 
much or even more.  Many of the cyclical stocks are down over 
20% in the last eight weeks (definite bear market here).  One 
thought among the bearish camp is that we can't experience the 
bottom or reversal we are looking for until the strong stocks 
pull back and correct as well.  This is a possibility as the 
true impact on investors' sense of confidence with the Dow 
closing under 10,000 may not be fully known for days.  It was a 
little bit disturbing for some market pundits to note that 
several of the Nasdaq mega-caps, like MSFT, WCOM, DELL, SUNW, 
CSCO, were all down for the day.

Technically, the market can correct in a couple of ways.  We can 
experience a short, sharp, high volume washout across all the 
sectors or we can suffer through a softer but extended round of 
consolidation.  At the moment, neither appear to be more popular 
than the other, but if I had my choice I'd prefer fast and 
sharp.  It's just like getting punished as a kid.  Don't give me 
the two-hour lecture and then spank me.  Just spank me and get 
it over with.  

Scenario two: The dual market continues.  While not the only 
spokesperson for this belief system, Banc of America analyst, 
John Zimmerman, feels that this divergence between the Dow and 
the Nasdaq will continue for the next several quarters.  
Investors doing their homework can see that it is almost a 
dollar for dollar move between the two "worlds".  For every 
dollar investors take out of "old world" stocks in the Dow and 
on the NYSE they are buying a dollar of "new world" stocks on 
the Nasdaq.  Somewhere, somehow, someone has infiltrated the 
mind of the masses and convinced them that high-growth tech 
stocks are insulated from the dangers of higher interest rates.  
While this may hold true for the short term, old-school traders 
have no doubt that even the old rules will catch up to the 
Nasdaq some day.  The challenge is that "some day" never seems 
to appear.  Scenario two is not perfect.  If the dual market 
continues, we are likely to see extremely short sharp 
corrections within individual sectors as stocks suffer the usual 
sector rotation.  

Furthermore, scenario two will continue to benefit from the 
enormous amount of liquidity for Nasdaq stocks.  Sure, we've 
already mentioned that traders are taking money out of the "old 
world" stocks.  So are a lot of institutions.  For some funds, 
if a stock drops below its 200 dma, they have to sell.  Even 
worse for the "old world" stocks is that value funds have been 
left in the dust by their high-growth tech fund brethren.  Last 
week, Jim mentioned how several have ceased to exist or are 
being phased out and merged.  This leaves no one to pick up 
these "bargains" in the "old world" sectors.  If you are long 
these equities, you don't want to be asking yourself, "how low 
can they go?"  On the other hand, look at the tech fund 
managers.  Each month you have umpteen million dollars coming in 
and you are not allowed to sit on it very long.  You're going to 
have to put it to work somewhere and the best place is the 
Nasdaq (or the Russell 2000).  Now you're faced with the dilemma 
to purchase a bunch of tech stocks that you think are overbought 
and too expensive.  To make matters worse, you are competing 
with hundreds of other fund managers for the same issues.  No 
wonder some of these stocks climb 30 points in a day.  

Reality is likely to be some combination of the two scenarios 
above.  Interest rates will remain an issue.  Fortunately, some 
market commentators feel that the last rate hike will be in 
June.  Why? Because the Fed is likely to remain inactive when 
the political process heats up next fall.  The bad news is 
politics isn't the only thing heating up.  Oil prices continue 
to surge and April crude closed over $30 a barrel on Friday.  
The 13-month trend in oil prices does not appear to be abating.

We do have a few events to look for next week.  3Com is expected 
to IPO their much anticipated palm pilot unit late in the week.  
There has been so much excitement over this IPO it is liable to 
be a winner.  On Wednesday we have the NAPM report.  This should 
come out around 10:00 a.m. ET and could have market moving 
consequences.  Economists will be watching as the report details 
several sub-indices that are leading economic indicators.  Plus 
on Friday we have the big one.  Before the bell, the Employment 
report will hold everyone's attention.  If unemployment falls 
under 4.0% the markets may overreact.  Actually, if unemployment 
falls to 3.9% it will be the first time since 1970.  

Also on the agenda for next week are a few earnings reports.
Some of the larger companies reporting are: for Monday, Protein 
Design Labs (one of the recent biotech rockets); for Wednesday, 
Tiffany, TJX, and Michael's stores; and for Thursday, Verio, 
Staples, and Costco.

As long as we have our eyes open for the big events, don't 
forget to watch the charts.  We mentioned earlier that a close 
under 10,000 could preclude a move to 9300 or 9000.  However, 
the Dow's next support level looks like 9650.  Dow 9650 was an 
early top in Jan. 1999 and a subsequent bottom in March of 1999.

chart on the Dow.
 


What is a little unnerving is the Dow's close under its 20 month 
moving average.  This does not paint a strong technical picture.

chart on the Dow
 


The OEX is looking ugly as well.  Currently it sits just above 
its 200 dma at 716.  A breakdown from here could herald a run to 
700.

chart on the OEX
 


The S&P 500 (SPX) is worse.  We've already broken through the 
200 dma and have tried three times to close above it - all to no 
avail.  Friday's close was ominous and 1300 could be a 
psychological support level.

chart on the SPX
 


On the other hand, the Russell 2000 looks very strong.  Think of 
its as the broad market for the Nasdaq.  The small cap index is 
up over 10% for the year.  560 is resistance.

chart of the RUT.X
 


In my final comments, I would consider doing a little soul 
searching if I owned any of the Dow or "old world" stocks.  
Besides being extremely oversold, nothing precludes this 
correction from turning truly bearish.  One question I would ask 
myself was, "why didn't have I have a stop loss?"  Then I 
wouldn't be asking myself if this was the time to sell and I'd 
be sitting in cash looking for the next trade.  

The Dow struggled with 10,000 and lost.  Where the Dow goes from 
here is anyone's guess.  However, and more importantly, how much 
importance should I assign an index that tracks 30 stocks?  Just 
as many long time traders are questioning their use of the 30 
year bond as the benchmark (and considering switching to the 10 
year bond), many investors are turning towards the Nasdaq as 
their new beacon to lighting their way in this "new world".

To repeat the warning from last week, if the Dow breaks 10,000 
we should just move to the sidelines to watch.  It never hurts 
to be in cash because it gives you choices and freedom to watch 
the market without the heartache.  It is better to not trade at 
all than force yourself to trade in a bad market.  

It is possible we'll see a relief rally in the Dow but if it 
closes above 10,000 I'll be surprised.  I'm more inclined to 
watch the Nasdaq for any reaction to the Dow's breakdown than 
watch the Dow.  The Nasdaq is where the action is and my bullish 
nature is voting for scenario two.  

Sell too soon.

Kimo
Contributing Editor



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

There will be no Jim's Plays article tonight.



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

LookSmart Jumps on Bullish Comments
By Cindy Christ

Investors gave LookSmart Ltd. (LOOK) more than a passing
glance Friday after U.S. Bancorp Piper Jaffray issued bullish
comments on the San Francisco-based Internet search engine and
media directory firm.

LOOK shares surged more than 11 percent to an intraday high of
$43.42 after analyst Safa Rashtchy launched coverage with a
"strong buy" rating and $94 price target, based on a multiple
of 48 times his 2001 revenue estimate of $168 million.

"In our view, the demand for total-navigation platforms is
accelerating rapidly, as web-sites are moving beyond search,
and marketers are increasingly relying on 'web-guides' to
acquire and maintain customers," said Rashtchy in a research
note to clients.

Rashtchy said LookSmart's recent advertising deals with Time
Warner (TWX), Sony (SNE) and Amazon.com (AMZN) are indications
of its "market leading" position.

Rashtchy outlined four reasons for his recommendation.

At recent levels, LookSmart trades at about 19 times 2001
revenues, or a 60 percent discount to other Internet
infrastructure providers like Inktomi (INKT), BroadVision
(BVSN) and DoubleClick (DCLK), he said.

The company also sports gross margins of 85 percent from its
"write once, publish many times," approach and has expanding
revenue sources. And with an audience of 45 million in the
United States and an additional 31 million internationally,
LookSmart also has the critical mass to attract large
advertisers.

LookSmart was launched in 1996 with funding from Reader's
Digest, which still owns 11 percent of the company.

In 1999, LookSmart posted sales of $48.9 million, up nearly
456 percent from the previous year. Net loss was $64.7
million.

LookSmart distributes content in about 60,000 subject
categories through multiple channels, including a global
network of 220 Internet Service Providers, major Web sites and
portals such as Netscape, MSN, Excite@Home and AltaVista.

Rivals include No. 1 Internet Service Provider America Online
(AOL) as well as Lycos (LCOS) and Yahoo! (YHOO).

The company's unique, but labor intensive business model
deploys about 200 editors who review Web sites to ensure
relevance and filter out hate or pornography content.

According to Media Metrix, LookSmart has recently been leading
Internet portals in traffic growth, achieving a 112 percent
growth rate between December 1998 and July 1999.

Down Under, LookSmart is even more popular, where it's ranked
the largest search and directory site and the second largest
Web site in Australia, according to Internet research company
IMR Worldwide.

This month LookSmart applied to list a portion of its stock on
the Australian Stock Exchange (ASX). If approved, shares will
come from existing shareholders.

Shares in LookSmart closed up Friday $2.75, or 7.1 percent, at
$41.75 on more than six times average daily volume.



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

Fear Is High, Is It Time To Buy??
By Ryan Nelson

The talk on the Street is of the Dow, but should that discourage 
you from playing the Nasdaq?  We are going to look at some of 
the stocks you requested which call the Nasdaq home.  We already 
know what the Dow Industrial stocks look like...52-week lows 
or worse.  That doesn't mean their aren't great plays on the 
Nasdaq or Russell 2000 though.  I was talking with another 
financial newsletter editor this week and oddly enough, we kept 
going over what a successful week of trading it had been.  
Don't listen to the financial shows and publications that are 
painting a picture of carnage on Wall Street.  That is a 
one-sided story.  In truth, a lot of money leaving the Dow 
isn't necessarily leaving the stock market, but just switching 
to other stocks.  Like California in 1849, there's gold in 
these hills.  Just as long as you are searching in the right 
hills, that is!  Let's jump to the charts and pan out the 
winners from the fool's gold.

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

Liberate - LBRT

If you get a chance, I'd love to hear what you guys have to say 
about Liberate (LBRT).  They've just finished up their secondary 
offering, and it looks like a pretty wild ride to me.  They also 
just started trading options a few weeks ago, so maybe there are 
some plays here?
thanks, russ

Wild ride is right.  That typically happens when a company does 
a secondary offering.  They are diluting the stock, which is 
negative, but it can be tough deciding whether to get out, 
go short, buy puts, etc.  The timing is even more difficult.  
Some like to play the anticipation of the secondary as traders 
sell because they fear more selling.  Others wait for the day 
of the offering thinking the new shares may be sold and further 
depress the stock.  Others sit back and wait for a day or two 
after the offering in search of entry points.  Thus, you have 
the backdrop for some wild swings.  Why not take advantage of 
it with some options?

I took a hard look at LBRT for adding it to the put play list 
and didn't pull the trigger.  I'm now glad I didn't because it 
held up pretty well on Friday.  I wish I could see a play here 
to take advantage of the volatility, but all I see now is high 
risk/limited reward.  $120 appears to be the top, $80 the bottom 
and we are right in the middle.  Because of the erratic behavior 
of traders in secondary offering situations that I listed above, 
I am going to the sidelines on this one.  Too many better plays 
available.  

I tell you one thing though, If LBRT does sell off down to the 
trend line or the $80 support level, I would be much more tempted 
to pick up some calls on the bounce.  That's the thing about 
secondary offerings, it is usually good for an entry point on 
an already uptrending stock.  It causes a short-term decline 
then rebounds but, I would want to see it hold at support and 
bounce first.


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

Riding the Fiberoptic wave

I personally do think the stock (IFCI)has a lot of momentum, 
but I am not sure if I should add more of this stock to my 
portfolio.  What do you suggest?

Any advise will be a great help 
Thanks Deepak.

Ah, the great stock unknown stock that has been thrust into 
the spotlight with the fiberoptic revolution.  It is amazing 
to see how momentum can take over a sector.  I have been 
watching this stock for 2 years sit between $6 and $9 with 
absolutely no investor interest until this year.  It is 
amazing what a new millennium can change.

Good question, Deepak.  I love playing this stock and I will 
show you the way I have been trading it for the past two weeks.  
You can see from the chart below that a well placed trend line 
can dictate the buy times for IFCI.  The dips have been on 
light volume and the surge on strong volume.  That is why I 
have confidence to buy the dips.  

But would I add more to my positions?  Probably not.  They 
have earnings due out on Tuesday and I don't think they will 
justify the current price.  This stock has already more than 
tripled this year.  If they had some great technology to 
drive analysts to drooling over future earnings projections 
than maybe, but they dig ditches for the cable.  There are no 
royalty payments for years to come from this business.  So I 
would be leery.  I don't plan on playing it again anytime 
soon.  Also, once the earnings come out, the high premiums 
will deflate and you will get caught there too.  I know you 
are referring to the stock, but keep in mind the excitement 
will lessen unless they blow away earnings.  This has been a 
great play recently, and will be again in the future, but I 
am expecting a period of consolidation.  


 

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

The King of the Internet

Would you please forecast on CMGI for the year 2000 ???
Thanks, hdho

Where CMGI may end up this year is anyone's guess and will 
probably be dictated by the overall Nasdaq sentiment, but 
since we just added it as a call play, I would love to show 
you why.  

CMGI is a great company in my book.  When they were lingering 
around $80 (pre-split) last September and October, that was 
a great bargain.  Due to a spectacular earnings report, CMGI 
took off, more than tripling their stock price.  We've seen a 
little consolidation now that the excitement of the split has 
worn off.  I had been watching this one closely because they 
report earnings on the 9th of March and figure it will have 
an earnings run after last quarter's great numbers.  It looks 
like it began on Wednesday.  We added it for the Thursday 
newsletter because the market dips couldn't really pull the 
stock down.  

Friday gave an even better entry after ICGE (a sector mate) 
reported terrible numbers.  That is ok, CMGI probably had a 
few sellers because of it, but that is definitely an ICGE 
problem that I won't go in to detail on (I would be here all 
day talking about how over-valued they are).  Anyway, CMGI 
held up good on Friday with the ICGE weakness and the market 
retreat.  Not to mention the $2 jump in the final ten minutes.  
I think that was traders starting to jump on board for next 
move.  It still has resistance at $120 and $125, but after 
that it should be smooth sailing.


 


 

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

Good Luck to all and don't forget to send in the symbols for 
any stock you want analyzed.  Send those requests to 
Contact Support

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

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 25, 2000 

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

DOW Industrials   10,700  11,250   9,862    BEARISH   2.17
SPX S&P 500        1,400   1,450   1,333    BEARISH   2.18
OEX S&P 100          740     780     720    BEARISH   2.18
RUT Russell 2000     500     520     557    BULLISH   2.24
NDX NASD 100       3,800   4,000   4,179    BULLISH   2.24
MSH High Tech      1,850   2,000   2,002    BULLISH   2.24

XCI Hardware       1,300   1,460   1,498    BULLISH   2.24
CWX Software       1,200   1,470   1,503    BULLISH   2.24
SOX Semiconductor    800     900   1,032    BULLISH   2.24
NWX Networking       940   1,000   1,067    BULLISH   2.24
INX Internet         700     800     762    Neutral   1.06

BIX Banking          500     550     471    BEARISH  11.30
XBD Brokerage        400     450     419    Neutral  11.30
IUX Insurance        500     550     464    BEARISH  11.30

RLX Retail           950   1,000     777    BEARISH   1.28
DRG Drug             340     380     318    BEARISH   2.18
HCX Healthcare       700     750     663    BEARISH   2.18
XAL Airline          120     140     117    BEARISH   5.21
OIX Oil & Gas        280     315     242    BEARISH   1.27


***Posture Alert***    
The market divergence continues, as the Dow closed below the 10k 
mark in unfavorable fashion. This is the first time in 10 months 
that the Dow has closed below this infamous mark, and with 
Friday's close, is now down about 17% off of the highs.  Sectors 
leading the downside pressure include Semiconductors (-2.98%), 
Software (-2.46%), the Dow (-2.28%) and Healthcare (-2.16%). There 
are no current changes in posture.



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

Sunday, February 27, 2000

Potential Reversals?

So the Dow finally did it (closed below 10k), and of all things, 
it had to happen on a Friday so that every financial publication 
under the sun can hype the mystical event all weekend long. In 
honor of this extraordinary feat, we won't discuss this close at 
all. What we are going to talk about are three of the worst 
sectors to have owned during the last year, and the potential of 
catching a reversal.

Catching a reversal can put some big gains in your pocket, no 
matter whether you are playing the long or the short. (See Market 
Sentiment 2/20/00 & 2/22/00 for more key information on reversals.) 
Three sectors that Pinnacle Capital has been bearish on since May 
1999, are the Airline, Banking, and Insurance sectors. (You can 
check the Market Posture section for confirmation of dates and 
pricing.) These 3 sectors have been brutalized during this 
time-span, losing 36%, 33%, and 31% respectively. If you played 
the short side when we went bearish on these sectors, then you are 
a happy camper and have put in solid returns! 

These three sectors are currently at key levels, each not seen 
since October of 1998, which was a bad month for all. As you can 
see by the charts below, these sectors gave clear reversal signals 
during that month, and the performance of those sectors during the 
next three months were astounding. After witnessing a clear 
reversal, the Insurance sector rebounded 36% during the next 12 
weeks, while the Banking sector returned a stellar 50%, and the 
Airline sector reported the best of all, jumping 55%. 

                 October of 1998:      Close as of 2/25/00:
Banking   (BIX)      471.86                  471.34
Insurance (IUX)      459.39                  464.17
Airline   (XAL)      112.69                  117.08

Now don't get us wrong, we are not recommending purchasing these 
sectors just yet. Until we get confirmation, we are still bearish 
on these under-performing sectors. However, reversals can happen 
quickly, and hopefully, by highlighting the potential for a 
reversal and past performances, we all may benefit should this 
scenario occur. 

Now to put things in perspective, these 3 indexes haven't closed 
at these levels since October of 1998. The Dow hit a low of 7,467 
(9,862 
now) during this time frame, and the NASDAQ was as low as 1,357 (as 
opposed to 4590 currently). So should the media bears put some fear 
into this market in the upcoming week, and we continue to see a 
sell-off, we will then be looking for overbought sectors 
(technology) showing signs of key reversals to the downside! 


 


 


 


BULLISH Signs: 

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

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

Short Interest:
From a contrarian stand, short interest (JAN-14) on the NYSE is 
still very high, totaling 3,973,256,735 shares. The short interest 
on the Nasdaq rose another 2.11% in the latest figures, its fourth 
consecutive record, to 2,413,628,695 shares. 

Interest Rates (6.153):
The current yield is now safely off of 52-week highs and is 
temporarily out of the danger zone.


Mixed Signs: 

Volatility Index (28.88):
The VIX continues to prove that the low 30's are an excellent 
buying opportunity, and the low 20's continue to be a great selling 
opportunity. With the VIX at almost 29, we are getting closer to a 
potential buying opportunity.

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.

Investor Expectations:
More and more investors are now expecting high double-digit growth 
if not triple-digit expansion in their portfolios. This extreme 
positive sentiment could help fuel a future selloff in technology 
shares.


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                       (2/25)

Overhead Resistance (755-800)     3.28
Overhead Resistance (730-750)     1.15

OEX Close                       719.78

Underlying Support  (700-720)     5.70
Underlying Support  (650-695)     8.11

What the Pinnacle Index is telling us:
Based on the most recent sentiment, support for the OEX is building 
dramatically, and direct overhead is light, which would indicate 
that we may be in for a slight rally this week.


Put/Call Ratio                  Friday
Strike/Contracts                (2/25)

CBOE Total P/C Ratio             .41
CBOE Equity P/C Ratio            .36
OEX P/C Ratio                   1.19


Peak Open Interest (OEX)
                     Friday
Strike/Contracts     (2/25)

Puts               700 / 7,704
Calls              800 / 7,965
Put/Call Ratio         0.97


Volatility Index    Major
Date                Turning Point       VIX

October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   
May 14, 1999        Top                 25.01 
July 16, 1999       Top                 18.13 
August  5, 1999     Bottom              32.12 
October 15, 1999    Bottom              32.06
January 28, 2000    Bottom              29.09

February 25, 2000                       28.88



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

For the week of February 28th, 2000

Monday

Personal Income          Jan    Forecast: 0.7%   Previous: 0.3%
PCE                      Jan    Forecast: 0.4%   Previous: 0.8%

Tuesday

Chicago PMI              Feb    Forecast:  55.6% Previous:  55.6%
Consumer Confidence      Feb    Forecast: 143.5% Previous: 144.7%

Wednesday

NAPM Index               Feb    Forecast: 56.3%  Previous: 56.3%
Construction Spending    Jan    Forecast:  0.3%  Previous:  2.0%
Auto Sales               Feb    Forecast:  7.2M  Previous:  7.3M
Truck Sales              Feb    Forecast:  7.6M  Previous:  7.6M

Thursday

Initial Claims          02/26   Forecast:  280K  Previous:  278K
New Home Sales           Jan    Forecast:  880K  Previous:  900K
Leading Indicators       Jan    Forecast:  0.2%  Previous:  0.4%

Friday

Nonfarm Payrolls         Feb    Forecast:  235K  Previous:  387K
Unemployment Rate        Feb    Forecast:  4.0%  Previous:  4.0%
Hourly Earnings          Feb    Forecast:  0.3%  Previous:  0.4%
Average Workweek         Feb    Forecast:  34.6  Previous:  34.6
Factory Orders           Jan    Forecast: -0.6%  Previous:  3.3%
NAPM Services            Feb    Forecast:   --   Previous:  52.2%
Michigan Sentiment       Feb    Forecast: 111.2  Previous: 111.2

Week of 3/06

3/7 Productivity-Rev. - Q4
3/7 Consumer Credit - Jan  
3/8 Fed Beige Book 
3/9 Initial Claims - 03/04    
3/9 Wholesale Inventories - Jan



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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              2-27-2000
Sunday                        2 of 5


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

Don't Give Up On Treasuries
By: Mary Redmond

IFCI seemed like a breath of fresh spring air after a miserable 
winter. Even the carnage of Dow 10K didn't ruin the nice run 
up from 25 last week.  I bought it last Thursday at 28, and I 
couldn't bear to sell it when I should have at 34, so I held 
it all this week until Thursday and sold at 32.5.  When it 
started moving back up again on Friday I couldn't resist buying 
back in at 35.5.  I think this one could double or triple this 
year, but there might be an even better entry point next week 
after earnings.  This stock has just hit the one billion market 
cap level, which is the level at which institutions start taking 
notice, and you know what happens then. 

When CMGI dropped below key support of 110 on Tuesday I figured 
I could sell at a loss and buy back cheaper or buy puts and 
make a quick profit on the way down .I opted for the latter.  
I sold  my puts when CMGI hit 103, when the Dow was 10100 and 
the VIX was 30 I doubt the stock would drop below 100 unless 
there was a severe downturn in tech stocks.  The puts helped 
to make up for the loss on the stock, and I didn't feel so bad 
about getting into the stock too early for March earnings.  It 
recuperated on Wednesday and reached a high of over 120, possibly 
on the news about Chemdex and the AOL upgrade.  The volume has 
increased over the last few days perhaps because investors are 
expecting solid earnings in March.

Qwest seems to be stuck in a rut near 47.50 after the nice run 
up it had from 40 the last couple of weeks. I think the 2002 
Leaps are still a bargain at 16.5 because I think Qwest could 
easily hit 70 this year.  How many two year leaps on high speed 
Internet access companies do you see trading under 30 or 40?  
Not many.

Remember I wrote last week that over 35% of the cash that went 
into mutual funds the prior week went into European funds?  Is 
this one of the reasons that Deutsche telecom, France telecom, 
British telecom, Ericsson and Nokia rallied early this week?  
European funds are considered safer than Asian and Latin American 
funds, and there are fewer European growth stocks to buy.  After 
the Humphrey Hawkins testimony on Wednesday I bought Ericy 
March 90 calls when the stock was 91 and sold them the next 
day when the stock hit 93.  I was annoyed on Friday when the 
stock hit 97, but I don't feel completely comfortable hanging 
on to short term options when the Dow can't stage a decent rally.  
I know the future is tech stocks, but mankind can't progress 
on technology alone.  We need financials, pharmaceuticals, 
industrials, and cyclicals to rally as well.

Anyone think that the folks at Dow Jones may be feeling a little 
left out of the party these days?  Do you realize if they hadn't 
included Intel, Microsoft, HD and SBC in the Dow and kept GT 
and the others the Dow could have been well below its current 
level?  My guess is that the Dow Jones average may be reshuffled 
again this year.  According to AMG data services, for the week 
ending Feb 23, inflows into mutual funds totaled 3.8 billion, 
less than half of the flows in the prior two weeks.  Over 2 
billion went into tech funds, approximately 1.6 billion went 
into health care and biotech. Large cap equity index funds 
showed outflows of 150 million.  I guess very few people want 
to buy S & P and Dow index funds anymore.  Year to date fund 
inflows total 65.62 billion, with over 25% going into technology 
funds.

You would have had to have been in a cave the last couple of 
weeks to have not heard the news about the Treasury's buyback 
program.  We have the luxury of a budge surplus for the first 
time in decades as the baby boomers and their successful 
companies have been flooding the coffers of the US Treasury 
with cash.  The Treasury dept has initiated a program of buying 
back previously issued government bonds.  It was first announced 
that the 30 year bond would be retired, and after the bond market 
went haywire the Treasury Secretary stated that the debt would 
be retired all along the entirety of the yield curve.  This has 
been one of the factors which has pushed down the yield on the 
30 year bond from 6.75 several weeks ago to under 6.10 this 
week.

A number of questions have been raised about this topic and its 
implications on the financial markets, and particularly the 
issue as to whether this negates the effect of the Federal 
Reserve's interest rate increases.  In fact, this question was 
raised at the Humphrey Hawkins testimony.  The answer given by 
Chairman Greenspan was that the Treasury buyback has not negated 
the interest rate hikes of the last several months.  However, 
falling yields on the 30 year Treasury can potentially complicate 
monetary policy as short term rates may need to rise by even 
more to cool potential inflationary pressures. 

The US is not alone in its budget surplus.  In fact, a number 
of wealthy industrial countries are enjoying a budget surplus., 
including Norway, Ireland, Denmark and Sweden.  The real issue 
for the Fed and the Treasury is what should happen if the U.S. 
government were actually to become free of the necessity of 
raising money through issuing debt instruments.

This scenario is not likely.  In fact, it is impossible to 
predict how much the cost of future medicare needs are going 
to be because you can't predict what new medical technology 
will be invented in the future, and how much as yet undiscovered 
cures will cost.  It is estimated that the US medicare population 
will double from 40 million to 80 million over the next ten 
years.  In addition, it is difficult to precisely predict 
future needs of the education, military, and other government 
departments.

In addition, the thirty year US Treasury bond serves an essential 
function in the U.S financial markets in addition to foreign 
financial markets.  The 30 year Treasury rate is used as a 
benchmark in pricing corporate, state and municipal bonds as 
well as influencing the price of derivatives like options and 
also foreign currency prices.  If the government bond market 
dried up corporates and municipals would be more difficult to 
price and investors would demand higher rates.  How can you 
price a 30 year municipal bond when there is no 30 year Treasury 
bond?  Foreign countries' bonds are also priced using the US 
30 year Treasury as a benchmark.

The options market could potentially be thrown into a turmoil 
without a benchmark for a short-term risk free rate.  This is 
because call and put ratios are priced on a conversion ratio, 
which is theoretically a risk free profit.  A conversion means 
buying stock and a put, and writing a covered call.  Whenever 
this yields more profit than the short term rate of borrowing 
money arbitrageurs will come in and execute.  But the short-
term rate is based on the long term rate.  Without risk free 
long term rates short term rates could rise, adversely affecting 
option prices.

Many pension funds as well as the Social Security trust fund 
hold the majority of their assets in long term bonds.  This 
is essential for the survival of the social security fund.  
It is too risky to place any corporate bond into the social 
security fund, because corporations cannot guarantee payments 
or repayment of principal.  Investing social security money in
the market has the potential to cause dangerous instability in 
the market and depletion of the fund.

Many foreign countries require that a percentage of their pension 
money is invested in US government securities, and many foreign 
exchange reserves are held in US Treasury bonds.  We may not 
realize on a day to day basis the extent to which the US Treasury 
bond influences our trading, but it maintains an essential 
function in the global financial markets.


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

Good Trades and waiting for the Dotted Duck 
By: Harrison Frolick

Whew! What a week, the Dow is biting the dust and certain NASDAQ 
stocks are taking off. Although this should not be that big of 
a revelation to OIN readers. You have choice between a company 
that is growing 15% per year, or one that is growing 50% or 
even 100% a year. Pretty simple stuff! Not much deduction really, 
although the talking heads will have you think otherwise.

Actually ,I am happy to see the Dow tanking. It might just give 
the powers that be a minute to pause before they try to adjust 
the markets again. Doubtful, but hey, everyone can dream. The 
only thing that I really see on the horizon that could hurt the 
economy is oil prices. Why in heavens name we do not bring one 
tenth of the of time, money and effort that our government has 
brought to bear on anti-trust suits over the last few years 
against our very own US companies i.e. Microsoft and IBM instead 
of the absolutely proven injurious monopoly of the oil cartel 
is beyond me. 

But, I am not going there today. What I wanted to pass along 
for perusal is MCRL - Micrel Inc. They manufacture high bandwidth 
analog devices. Keep it on the radar. 

Can everyone say ETEK at a premium? The premium for ETEK appears 
to be firmly in place at the moment compared to JDSU. JDSU was 
around $256 and ETEK at $259. There is still about $20 sloshing 
around to picked up from this merger. For those of you that 
picked up the FNY DF the April 230 Calls that I mentioned 
previously, you are now up well over 100%.

I know that I have made this observation before but, I think 
that is worth re-telling as it keeps popping up in all of my 
business transactions these days, not just trading. When you 
get into a trade correctly, you never feel uneasy about it 
because, it does exactly what it is supposed to do without 
any psychic effort on your part. When you do your homework 
and get the charting right, these trades are profitable from 
day one. It is then only a matter of when to pull your profits 
out. This goes for most business transactions as well. For me 
at least, my most profitable deals are effortless and I do not 
expend hardly any effort on them. While the bad deals and trades 
seem to suck an extraordinary energy out of you. What happens 
is that by not being patient in getting into the trade, you 
spend far more time on it afterward than it would have taken 
to do it right before you go into it. If you really did your 
homework, often as not you probably would not be in the trade 
in the first place.

Now a lesson I learned about patience from duck hunting. Rubber 
ones! Have you ever been to a fair or carnival where you see 
all of those little yellow rubber ducks going around in circle 
in a big tank filled with water? If you have not, here is the 
scoop. Certain ducks have dots on them and they hand you a 2 
foot long stick with magnet on the end of about 2 feet of 
string. The ducks have magnets on them too. You are supposed 
to catch the duck using your magnet. Sounds easy in principle 
but, let me tell you, there are a lot of those ducks in there 
and they whiz by oh so fast. In my years of rubber duck 
observations I would say that 1 in less than 500 participants 
catch the fiercely coveted dotted duck and then hardly ever on 
the first try! 

Well, the first time that I was exposed to this phenomena was 
many moons ago on my first date with a very lovely girl that I 
desperately wanted to impress. She just happened to mention that 
she thought that a certain fuzzy toy was pretty darn cute, didn't 
I think? I do so like intelligent women! My male hunter/provider 
instinct kicked into overdrive right then and there at the duck 
tank. Watch out spotted duck, you are mine. So I ponied up the 
50 cents for 5 tries (hey, this was several decades ago, I figure 
that 50 cents back then was like $3 bucks now). Well, 5 minutes, 
$3 bucks, and 30 tries later, no spotted duck! I only had another 
$2 bucks left if I still wanted to take her to the movies and 
get popcorn and pop. OK I said to myself, you can do this! I 
knew that it could be done as I had just witnessed a little 
3-year old girl walk over and snag one on here first try 
(beginners luck). After observing for a few minutes and feeling 
my dates watchful amused gaze, I had a plan! Rather than 
chasing the spotted duck, I would wait for him to come to me. 
So, I so carefully used both hands to steady my dangling magnet 
and braced myself against the railing (I highly suggest that 
you use this stance) . And waited, 30 seconds and 200 ducks 
passed, 1 minute 400 ducks, I know this is going to work! 2 
minutes and 800 ducks later the dotted duck passed directly 
under my magnet and whamo I had him. $1.50 later my date had 
4 of the cute fuzzy critters and I could tell that she was 
very impressed.

Right then and there I learned a lesson that I still carry with 
me. It's this, by having a plan and being patient, the actual 
execution of the deed becomes easy and fun! So, wait for the 
charts to give you a screaming buy signal, and if you like a 
stock, follow it and look for that signal to get in. They always 
give you one sooner or later and then jump on it. Then, this 
game becomes a lot easier and you will find that it will become 
very profitable too. You will wonder how you bungled along 
before, I know I do. It can be truly amazing. I suggest that 
you chart the picks that OIN has given you today and go make 
some money. Then you too can go after the dotted duck yourself!  
Remember, wait for the duck!

Happy Trading!



*******************
TRADING CLUB UPDATE
*******************

Sunday, February 27, 2000

THE OPTION INVESTOR TRADING CLUBS CAN BE FOUND ALL OVER THE 
WORLD!!! 

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

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


UPDATE FROM THE UNITED KINGDOM
*******************************

The UK Options Club now has 30 interested UK traders on the email 
list. We held our second meeting on Sunday 20th February in sunny 
Swindon.

One of the members of the group has offices that are being 
converted into a dedicated 'Trading room' for 4-6 active traders. 
We will be able to use these facilities for future meetings and, 
as seems to be the tradition with OIN clubs, we'll meet on the 
Sunday following Options expiration Friday.

The vision of those who were able to attend the meeting was 
definitely toward full time trading. Who wants to work for some 
grumpy old boss!!!  However, the focus was strongly towards doing 
this in a methodical and logical way. Most of those present, 
presented some of their own methods and ideas they felt would add 
to the knowledge of the group and generate discussion. The cry we 
use, to keep our feet on the ground is "we're still babies at 
this!"  Meaning that we're at a very early learning stage and
find out as much as possible, always checking out sources of 
information to make sure they're valid.

Two items unique to our situation are understanding our UK tax 
liabilities as they relate to holding and trading and account in 
America, and understanding the whole economic/political cycles in 
the USA. We trade US Options because of the trading facilities 
and availability of information on US companies is far better, 
and cheaper than for the UK.  Many of us started mid 1999 so we 
haven't been through a full year of Greenspan even! However, the 
Option Investor Newsletter is invaluable in explaining which 
upcoming economic/political events we should be aware of.

We had some very useful presentations on dealing with UK taxes 
from trading, basic technical analysis focusing on 50 & 200 dma's 
and support/resistance levels, and discussions on trading 
strategies.

There is massive interest and momentum generated within our 
group, so we are going to meet monthly from now on - probably 
meeting in a dedicated trading room.... how cool is that!

Happy trading all....regards,

Charles Saldanha - Contact Support

If you would be interested in meeting regularly with other 
investors, drop us a line at Visit@OptionInvestor.com or 
Contact Support




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

Daily Results

Index      Last    Week
Dow      9862.12 -357.40
Nasdaq   4590.50  178.76
$OEX      719.78   -8.74
$SPX     1333.36  -12.73
$RUT      556.74   11.06
$TRAN    2351.26  -79.54
$VIX       28.88    0.43

Calls              Week

QLGC      145.25   34.25  QLGC still looking technically strong
VERT      225.75   27.00  Could be poised for strong open Monday
INSP      225.31   25.06  Second stock split of the new year
SEBL      138.38   23.81  SEBL's pattern remains strong
INKT      145.13   22.56  Constant flow of news pumps up stock
LHSP      108.22   18.84  LHSP continues making giant strides
EMLX      157.13   17.13  Emulex has formed classic channel
PHCM      153.00   15.38  PHCM offers us a nice performance
NEON       85.56   11.94  Does more than just glow brightly
COMS       80.69   11.00  COMS could be ready to break loose!
CMGI      117.50    9.13  Are you interested in an early entry?
ERICY      97.63    8.94  ERICY has it's eye on the $100 level
AFCI       57.44    8.69  New, buyers nibbling on AFCI shares
ENMD       76.13    8.63  New 52-week high every day last week
CHKP      205.63    7.44  New, breaks through $200 with volume
ATML       43.19    5.19  New, hot sector, hot stock
NSM        68.00    4.50  May be offering a good entry point
IFCI       36.00    4.00  Dropped, earnings Tuesday morning
ANAD      146.88    0.63  ANAD splits 3:2 on February 29th
PCMS       22.63   -0.44  Several factors influencing movement
ESPI       12.75   -1.19  Dropped, putting ESPI out to pasture
Q          46.69   -2.75  Dropped, simply not going our way
GLW       187.88   -5.50  Is there a consolidation at hand?

Puts

MCOM       76.38  -13.38  Friday was a great day for our play
JNJ        70.50   -6.25  JNJ just can't help but lose footing
KMG        40.75   -4.69  Has fallen and can't seem to get up
RHAT       68.38   -3.13  A thank you to Linux for more downside
LLY        56.69   -1.81  New, shares of LLY not feeling well
PGR        54.56   -1.38  Lack of attention could push PGR down
FD         33.13   -1.25  FD weakness seems likely to continue


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

Calls

AFCI - Advanced Fibre Communications 
ATML - Atmel Corporation 
CHKP - Check Point Software 

Puts

LLY - Eli Lilly 


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

ESPI $12.75 (-1.19) We're putting ESPI out to pasture this 
weekend.  In the simplest terms, it's putting us all to sleep. 
On Thursday the company reported great news that it has signed 
a commitment letter with Honeywell International for $50 mln in 
equity funding and then on Friday, Ladenburg Thalmann & Co 
reiterated at Strong Buy and issued a $17 price target.  In 
defiance of these news events and the upcoming earnings report, 
ESPI is still stuck between its 10-dma ($12.09) and 5-dma 
($13.09).  It's quite possible ESPI could come back to life 
after the company's press release announcing a conclusive 
earnings' date, but we're exiting this play for more productive 
opportunities.

IFCI $36.00 (+4.00) How was that for a grand finale?  Since 
we are bidding farewell to IFCI, let us take a look back to 
see just how far we have come.  When we first initiated this 
call play on February 17th, IFCI was trading at a mere $22.  
We recommended the MAR-20 calls, which were trading at $4.38.  
Here we are, just over one week later.  IFCI has traded as 
high as $38.25 and those MAR-20 contracts made it all the way 
up to $18 during Friday's session.  Not bad, if we do say so 
ourselves.  Unfortunately, it is time for us to bid this stellar
performer farewell, as IFCI is set to announce earnings on 
Tuesday before the open.  It is important that you close out 
all open positions before Monday's close to avoid falling victim 
to a post-earnings depression.  We hope you enjoyed the ride.

Q $46.69 (-2.75) The favorable views from analysts and the
potentially bright out look for the company really haven't
changed.  Since being added last weekend, Qwest shares have
spent most of the time drifting lower.  The last time we checked
it is very difficult to make a profit buying calls when your 
stock moves lower.  Any minor buying spurts this week were met
by traders wanting to sell.  After beginning a bounce late in
the day Thursday, Qwest popped up to $48 at the open Friday
morning.  Sellers entered the arena again, pushing Qwest down
for the balance of the session.  On the bright side, $46.50 held
as the low of the day.  Unfortunately Qwest finished the day near
its low, which doesn't paint a pretty picture for Monday.  It's
possible Qwest is going to bounce from here, or could be forming
a base at the current levels.  For now, the fact is, Qwest simply
in not going our way, so we will move on.


PUTS

No dropped puts.



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

PHCM - Phone.com
GLW  - Corning Inc.
SEBL - Siebel Systems
CHKP - CheckPoint Software
EMLX - Emulex
QLGC - QLogic Corporation
 
Split candidates that are not current plays
 
CHINA - China.com
EMC   - EMC Corporation
CMVT  - Comverse Technology
TERN  - Terayon Comm


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

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

Symbol - Stock          Splits/Date  
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
CPTL - CTC Comm         3:2 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
EVRC - Evercel Inc      2:1 03-21-00 ex-date 03-22
PUMA - Puma Tech Inc    2:1 03-22-00 ex-date 03-23
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
KCP  - Kenneth Cole     3:2 03-27-00 ex-date 03-28 
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
RMD  - ResMed Inc       2:1 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
CYSV - Cysive Inc       2:1 05-08-00 ex-date 05-09
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
NXTL - Nextel Comm      2:1 06-06-00 ex-date 06-07
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:
**********************

CHKP - Check Point Software $205.63 (+7.44)

See details in sector list

Chart = /charts.asp?symbol=CHKP

****

VERT - VerticalNet, Inc. $225.75 (+27.00)

See details in sector list

Chart = /charts.asp?symbol=VERT

****

ANAD - Anadigics $146.88 (+0.63)(+22.25)(+23.97)

See details in sector list

Chart = /charts.asp?symbol=ANAD



*************
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. $80.69 (+11.00)(+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 play in COMS could be ready to break loose.  Palm, a 
subsidiary of COMS, is scheduled for its IPO this week.  The
widely anticipated IPO of Palm is expected to price 23 million
shares, with a price range of $14-$16.  Investors that don't 
have the luxury of being able to participate directly in the
IPO, have another advantage.  They can buy shares of COM, and
be able to have their cake and eat it to, so to speak.  Traders
that buy 3Com stock will also be eligible to own shares of
Palm.  The company will initially retain a 93% stake in Palm,
though it plans to distribute its Palm shares to 3Com investors.
In checking with the investor relations department at COMS,
we only were able to get that the IPO, was expected to price
during the week of Feb 28th.  COMS held up pretty well for
most of the day Friday.  After dropping to a support level at
$80, COMS exploded to a new high at $84.25 only to succumb to
the pressures seen in the broader markets late in the day.
Although the volume was about average Tuesday, investors
showed their approval of the upcoming IPO, bidding shares of
COMS higher on nearly twice its ADV for the balance of the week.
With the long-awaited IPO of Palm, finally in sight, we expect
shares of COMS to continue its recent momentum.  A look at the
technical picture shows $80 and $76 as support levels for COMS, 
with the 5-dma sitting at $76.38.  
 
Further proof of Palm's popularity in the market place, was
evidenced this week at the CeBIT 2000 conference in Germany.
Greg Rhine, vice president of world wide sales for Palm, said
230 large corporations in the U.S. have opted for Palm-based
systems, and over 30 corporate users are exclusively based on
Palm technology.  Palm already claims a 70 percent share of
its market worldwide.
   
BUY CALL MAR-70 THQ-CO OI=8508 at $11.88 SL= 9.25
BUY CALL MAR-75*THQ-CP OI=6929 at $ 9.50 SL= 7.25
BUY CALL MAR-80 THQ-CQ OI=9079 at $ 7.50 SL= 5.75
BUY CALL APR-75 THQ-DO OI=3133 at $14.88 SL=11.50
BUY CALL APR-80 THQ-DP OI=1330 at $12.50 SL= 9.75

SELL PUT MAR-70 THQ-ON OI=2762 at $ 4.25 SL= 6.00
(See risks of selling puts in play legend)

Picked on Feb 20th at    $69.69    PE = 59
Change since picked      +11.00    52-week high=$84.25
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 = 9.38 mln
/charts/charts.asp?symbol=COMS


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

NSM - National Semiconductor $68.00 (+4.50)

National Semiconductor combines leading edge analog and digital
technologies to create highly integrated solutions for the 
information age.  They are developing the next generation 
microchip, called a system-on-a-chip, which will combine a
microprocessor and logic and memory components in a single
unit.  These products will be used in Internet appliances and
set-top boxes.  No longer in the PC processor market, NSM has 
switched its focus to integrated circuits that are used in
communications devices, networking equipment and automobiles.
The majority of the NSM's revenues come from outside the 
U.S. with 60% of its sales in Asia and Europe.  NSM does 
business with some big names including Lucent, Compaq, Samsung
and Siemens.

After a setting new a high Thursday, NSM fell prey to profit-
taking Friday.  NSM did give back a bit more than we would like
to have seen, but may also may be setting up to give us a very
good entry point for our play.  NSM gapped down Friday at the
open and drifted lower for most of the session dropping to an
intraday support level of $68 in the last fifteen minutes of the
session.  Technically there are minor support levels down at $66
and $64, but we believe this may be a case of nothing more than
profit taking from this week's strong advance.  After adding over
16% in four days, NSM was due for some profit-taking.  Volume 
Friday would support that view, as only 1.8 million shares changed
hands.  Other programmable device makers suffered through a 
tough session Friday as well, with ALTR, AMAT and MOT all giving
back recent gains.  At this point, we believe the decline
was due to the confusion in the broader markets and the lack of
buyers willing to step in, not a negative view of NSM.  Our
original opinion of NSM and the near term prospects have not
changed.  Analysts have been positive on NSM as well.  Last
Friday, analysts at Gerard Klauer reiterated their Buy rating on
the semiconductor company.  Our immediate interest in NSM is for
an earnings run.  NSM is due to report earnings March 9th, and
are on track to come in well ahead of last year.  We would wait
and see the mood of traders, when they return to work Monday,
before jumping into a new play on NSM, but we do we do believe
NSM will regain its footing and move higher into earnings.  

Thursday National Semiconductor announced its entry into the 
GSM wireless telephone market with an integrated radio 
transceiver for GSM cellular telephony at the CeBit 2000 
conference in Germany.  They also disclosed their strategy for 
future product development of wireless applications ranging
from cellular phones to other portable electronics such as
mobile computers, personal digital assistants, portable 
printers and faxes.

BUY CALL MAR-60 NSM-CL OI=3125 at $11.13 SL=8.75
BUY CALL MAR-65 NSM-CM OI=1470 at $ 7.63 SL=5.75
BUY CALL MAR-70 NSM-CN OI=1858 at $ 5.25 SL=3.50
BUY CALL MAR-75 NSM-CO OI=1785 at $ 3.50 SL=1.75
BUY CALL APR-70*NSM-DN OI= 149 at $ 8.50 SL=6.50

SELL PUT MAR-60 NSM-OL OI= 685 at $ 2.19 SL=3.75
(See risks of selling puts in play legend)

Picked on Feb 24th at    $72.72    PE = N/A
Change since picked       -4.72    52-week high=$74.00
Analysts Ratings      9-9-2-0-0    52-week low =$ 8.88
Last earnings 12/99   est= 0.26    actual= 0.37 
Next earnings 03-09   est= 0.45    versus=-0.16
Average daily volume = 2.48 mln
/charts/charts.asp?symbol=NSM

****

QLGC - QLogic Corporation $145.25 (+34.25)(+10.97)

Somebody has to make the equipment that lets your computer talk
to all its peripheral equipment, and QLGC does it well.  A
leading designer and supplier of semiconductor and board-level
input/output (I/O) management products, QLGC has been providing
SCSI-based connectivity solutions to this market sector for 
over 12 years.  QLGC's I/O products provide a high performance
interface between computer systems and their attached data
storage peripherals, such as hard disk and tape drives,
removable disk drives and RAID (redundant array of independent
disks) subsystems.

Building a better mousetrap has certainly worked for QLGC.
The company's leading-edge I/O products are in high demand and
the result has been gratifying.  Defying gravity for the most
of the week, QLGC took full advantage of the surge in the
NASDAQ, posting an almost $20 gain on Wednesday.  Volume was
heavy all week, finally declining to about 50% over the ADV as
the stock began to consolidate on Friday.  Demand for its
products coupled with compatibility with the newest technology
(see news below) is a formidable combination and investors have
been taking notice.  Although still technically strong, the
stock is now almost $15 above its 5-dma ($130.50), and looks a
bit top-heavy.  We would expect some consolidation of its recent
gains before heading higher.  Support is forming near $145,
followed by $140, and a bounce at either of these levels would
make for an attractive entry point.  On a strong momentum play
such as QLGC, strong volume will be the key to a continued move
upwards.  If the bulls remain in control next week, consider
jumping on board if the price breaks through resistance at $155.

Extending their penetration into the Storage Area Network (SAN)
market, QLGC announced on Friday that its ISP2100A processor is
now shipping in the new StorageTek 9840 Fibre Channel Tape Drive,
the first native Fibre Channel tape drive in the industry.  The
ISP2100A is a fully autonomous device, capable of managing
multiple I/O operations and associated data transfers from start
to finish withou host intervention.  On Wednesday, QLGC announced
that its QLA2200 Series Fibre Channel adapters are the first and
only Fibre Channel adapters to have achieved compliance with
Microsoft's PC99 test, ensuring compatibility with Microsoft's
new Windows 2000 operating system in both workstation and server
environments.

BUY CALL MAR-145*QOV-CI OI= 17 at $13.63 SL=11.00
BUY CALL MAR-150 QOV-CJ OI=  0 at $11.38 SL= 9.00 Fri's vol=80
BUY CALL MAR-155 QOV-CK OI=  0 at $ 9.38 SL= 7.00 Fri's vol=38
BUY CALL APR-150 QOV-DJ OI=  0 at $19.75 SL=15.50 Wait for OI
BUY CALL APR-155 QOV-DK OI=  0 at $17.63 SL=13.75 Wait for OI

SELL PUT MAR-130 QOV-OF OI= 48 at $ 5.63 SL= 7.50
(See risks of selling puts in play legend)

Picked on Feb 22nd at $115.50     P/E = 229
Change since picked    +29.75     52-week high=$154.94
Analysts Ratings    3-3-0-0-0     52-week low =$ 11.63
Last earnings 01/00 est= 0.36     actual= 0.40
Next earnings 04-19 est= 0.20     versus= 0.11
Average Daily Volume =  845 K
/charts/charts.asp?symbol=QLGC

****

ATML - Atmel Corporation $43.19 (+5.19)

Founded in 1984, Atmel Corporation is headquartered in San Jose,
California with manufacturing facilities in Colorado Springs, 
Colorado; Nantes and Rousset, France and Heilbronn, Germany. 
Atmel designs, manufactures and markets on a worldwide basis 
advanced logic, mixed-signal, non-volatile memory, and RF 
semiconductors.  Atmel is also a leading provider of system 
level integration semiconductor solutions using advanced CMOS, 
BiCMOS, BiPolar and SiGe process technologies.

ATML is taking the bull by its horns and riding to a higher 
ground.  Shares of ATML hit a new 52-week high on Friday.
Trading in uncharted territory, shares are at the highest 
they have ever traded.  Trading volume on Friday showed that 
investors were ready to jump aboard once it broke out over 
resistance at $41.63.  ATML had almost 3 times their average 
volume.  Looking at the sector, it continues to stay hot with 
the $SOX hitting a new high on Thursday before succumbing to 
market weakness.  Semiconductors are in favor with new word 
this week that demand may be exceeding already high expectations.  
Financial analysts are predicting ATML will see higher earnings 
this year and next.  They also say ATML will grow at a higher 
rate than the markets.  Great news for those already aboard 
and a good enticer for those thinking about joining.  Support 
at $41could be tested in market weakness, but it is more likely 
the Semiconductor stocks will move higher before they go lower.  
Deciding when to jump on will be up to each investor and their 
risk level.  

In the news, ATML is strengthening their position as a supplier 
of single-chip solutions.  Creating a partnership with Aplio
to provide a total system solution enabling manufacturers 
to launch Internet Phones, E-mail and MP3 Appliances at a low 
cost and short time to market. 
                  
BUY CALL MAR-35 AQT-CG OI=8315 at $9.13 SL=6.75
BUY CALL MAR-40 AQT-CH OI=2646 at $5.25 SL=3.25
BUY CALL MAR-45*AQT-CI OI= 980 at $2.44 SL=1.25
BUY CALL APR-45 AQT-DI OI=   0 at $5.13 SL=3.25 Fri's vol=193

Picked on Feb 25th at    $43.19    P/E= 108
Change since picked       +0.00    52-week high=$41.63
Analysts Ratings      7-5-2-0-0    52-week low =$ 7.50
Last earnings 01/00   est= 0.13    actual= 0.16
Next earnings 04-24   est= 0.17    versus= N/A
Average Daily Volume = 3.88 mln
/charts/charts.asp?symbol=ATML


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

ENMD - EntreMed Inc. $76.13 (+8.63)(+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 is providing new hope.  With a virtual
patent-based lock up on all forms of the angiostatin molecule,
(see news below), ENMD could be just getting warmed up as a
serious player in the red hot Biotech sector.  Moving up
steadily, the stock hit a new-52-week high every day last week.
Using the 5-dma (currently at $73.13) as support, ENMD is
benefiting from its own product and patent announcements as well
as the strength in the NASDAQ and the Biotech sector.  Although
new highs were posted all week, the declining volume gives us
cause for concern.  The week opened with a strong move to the
upside on double the ADV, but volume had dropped off to only 75%
of the ADV by Friday.  Investors may be just taking a breather,
but it looks like ENMD may need to consolidate its gains before
heading higher.  Although the play is still technically strong,
any momentum play will stagnate in the absence of strong buying
volume.  Below the 5-dma, support is forming at $72, followed by
$70.  With resistance moving up daily, the number to beat is 
now $78, and conservative investors will want to wait for a
convincing breakout before opening new positions.  Dips to
support are buyable, but only if the buyers come back to life
and drive volume north of the daily average.

The good news continues to flow related to the company's
anti-cancer drugs and treatments.  On Wednesday, ENMD announced
the issuance of a broad patent, covering all antiangiogenic
fragments and methods of production for its potent angiogenesis
inhibitor, angiostatin protein.  ENMD now has patent protection
covering all forms of the angiostatin molecule, whether used as
a protein, peptide fragment, or gene for delivery to a patient.

BUY CALL MAR-75*QMA-CO OI=92 at $11.25 SL= 9.00
BUY CALL MAR-80 QMA-CP OI= 0 at $ 9.13 SL= 6.75 Wait for OI!
BUY CALL MAR-85 QMA-CQ OI= 0 at $ 7.00 SL= 5.25 Wait for OI!
BUY CALL APR-80 QMA-DP OI= 3 at $18.63 SL=14.50 low OI
BUY CALL APR-85 QMA-DQ OI=15 at $16.75 SL=13.00

SELL PUT MAR-65 QMA-OM OI=55 at $ 4.75 SL= 6.50
(See risks of selling puts in play legend)

Picked on Feb 20th at  $67.50     P/E = N/A
Change since picked     +8.63     52-week high=$78.25
Analysts Ratings    0-1-0-0-0     52-week low =$17.75
Last earnings 11/99 est=-0.81     actual=-0.48
Next earnings 03-22 est=-0.44     versus=-0.35
Average Daily Volume =  438 K
/charts/charts.asp?symbol=ENMD



********************************
CALLS CONTINUED IN SECTION THREE
********************************


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

The Option Investor Newsletter          2-27-2000
Sunday                        3 of 5


***************
CALLS CONTINUED
*************** 
Internet
********

NEON - New Era of Networks $85.56 (+11.94)(+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.

Glowing brightly is one thing, but on Wednesday it looked like
NEON might burn out as the stock surged $20, (that's 27% for
those of you keeping score) on just over double the average
daily volume.  It was therefore no surprise to see NEON give up
some of those gains and consolidate for the remainder of the
week.  The drop in volume was encouraging, especially on Friday,
with only about 25% of the ADV.  The lows over the past 3 days
are gradually moving up, creating support near $83.  Additional
support can be found at the site of the 5-dma, currently at
$81.50.  After NEON's ballistic run on Wednesday, resistance 
is clear up at $93.  The move on Wednesday was driven by the
incredible strength on the NASDAQ and the continuing stream
of news releases from the company (see below).  As with any
momentum play, volume will be the key - if the buyers come back
in force, NEON could very quickly charge to new highs.  Both
Thursday and Friday produced inside days, creating a nice short
pennant, that should see a breakout on Monday or Tuesday.
Entries can be considered on a breakout above $87 or a bounce
from the $83 support level.

The company announced Thursday that TheStreet.com has selected
NEON technology to deliver highly personalized stock and news
alerts to subscribers of its upcoming commentary site,
RealMoney.com.  NEON's e-business infrastructure platform will
be used to provide extensive, highly customized information to
subscribers based on nothing more than the information itself.
Coming to light Tuesday, was news that Commerce One MarketSite
Direct Material Services will use NEON e-business integration
technology to offer flexible, expanded communication between
Commerce One partners and connectivity with advanced planning
and scheduling systems.

BUY CALL MAR-85*QNO-CQ OI= 78 at $ 9.13 SL= 6.75
BUY CALL MAR-90 QNO-CR OI=228 at $ 6.88 SL= 5.00
BUY CALL APR-90 QNO-DR OI= 58 at $13.00 SL=10.50
BUY CALL APR-95 QNO-DS OI= 34 at $11.00 SL= 8.75

SELL PUT MAR-70 QNO-ON OI=46 at $2.38 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      +11.94     52-week high=$93.25
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 = 1.01 mln
/charts/charts.asp?symbol=NEON

****

SEBL - Siebel Systems, Inc. $138.38 (+23.81)

Siebel Systems, Inc. is the world's leading provider of eBusiness 
applications software.  Siebel Systems provides an integrated 
family of eBusiness application software enabling multi-channel 
sales, marketing and customer service systems to be deployed over 
the web, call centers, field, reseller channels, retail and 
dealer networks.  Siebel Systems' sales and service facilities 
are deployed locally in more than 28 countries. 

SEBL broke out of its ascending channel this week prompting us to 
remark Thursday that despite its strength, there could be a 
pullback on Friday from profit takers.  Sure enough, SEBL dropped 
nearly $5 in the final hour of trading.  Not to worry - it still 
closed above the old channel, setting a new all-time high in the 
process, though volume was not that strong.  Other than its 
momentum and relative strength, why play it in the first place?  
In short, strong sentiment that began with blowout earnings in 
late January ($0.19 vs. $0.15 estimates).  On the chart, you 
can see the channel breakout at $130.  We had fully expected a 
pullback into the channel, and to some extent it's still 
possible.  However, with its strength on Friday, despite the 
small loss for the day, the pattern remains strong and we would 
expect the trend to continue, assuming no tech market meltdowns.  
Intraday support occurs at $140 (when it gets back there again), 
$138, $136 and not much else until $130.  The 10-dma is way back 
at $119.  However, given the meteoric rise, the average will 
lag reality for a short while; thus we think $130 will hold in 
all, but a worst case scenario.  Target shoot where your risk 
tolerance allows.  SEBL is also a split candidate again at these 
prices, although shareholders will have to authorize more shares 
if anything greater than a 3:2 is announced.  Their last split 
was a 2:1 announced in August, 1999 at $67.

SEBL received a Prudential upgrade (think Joe Battapaglia) from 
Buy to Strong Buy this week 

BUY CALL MAR-135*SGW-CG OI= 80 at $11.88 SL= 9.50
BUY CALL MAR-140 SGW-CH OI=526 at $ 8.88 SL= 6.75
BUY CALL MAR-145 SGW-CI OI= 25 at $ 6.88 SL= 5.25
BUY CALL APR-140 SGW-DH OI=206 at $15.38 SL=12.00
BUY CALL APR-145 SGW-DI OI=  1 at $13.00 SL=10.50 low OI

Picked on Feb 22nd at  $121.88     P/E = 259
Change since picked     +16.50     52-week high=$144.25
Analysts Ratings     9-5-0-0-1     52-week low =$ 15.75
Last earnings 01/00  est= 0.15     actual= 0.19
Next earnings 04-25  est= 0.14     versus= 0.10
Average Daily Volume = 3.4 mln
/charts/charts.asp?symbol=SEBL

****

VERT - VerticalNet, Inc. $225.75 (+27.00)

VerticalNet owns and operates 55 industry-specific Web sites 
designed as online business-to-business communities, known as 
vertical trade communities.  These vertical trade communities 
provide users with comprehensive sources of information, 
interaction and e-commerce.  They are grouped into the following 
industry sectors: ADVANCED TECHNOLOGIES, COMMUNICATIONS, 
ENVIRONMENTAL, FOOD AND PACKAGING, FOODSERVICE AND HOSPITALITY, 
HEALTHCARE/SCIENCE, MANUFACTURING AND METALS, PROCESS, PUBLIC 
SECTOR, SERVICE, TEXTILES AND APPAREL.  Additionally, VerticalNet 
provides auctions, catalogs, bookstores, career services and 
other e-commerce capabilities horizontally across its communities 
with sites like Industry Deals.com, IT CareerHub.com, LabX.com, 
Professional Store.com. VerticalNet's NECX Exchange provides an 
exchange for the electronic components industry. 

There are two reasons to make this play.  The first is that VERT, 
under the theory of "old resistance equals new support", VERT 
found a technical bottom at $200 (old resistance) after a big run 
to $289 in late January.  Since then, VERT has retraced the move 
100%, and began a new move back up beginning last Wednesday.  On 
Friday, VERT couldn't hold the ascent and fell from $234 to close 
at $225.75.  The good news is that it bounced from a $221 low 
with a burst of volume only 15 minutes before the close.  That 
could spell a nice opening on Monday.  Support is thin, but can 
be found at $213 and $221 intraday - $225 if you are an 
aggressive technician.  Volume fell back slightly on Friday, but 
remained 15% above the ADV.  The second reason is that VERT, 
along with a 29% earnings surprise announced a 2:1 stock split 
Payable on March 31 after the close.  While it won't affect the 
immediate price movement too much, just know that there's room to 
run (all-time high is $289.56) and plenty of time to get your 
entry.  The option premiums have big spreads, so don't buy or 
sell these with a market order.  Wait for your price.

With no news on Friday, Thursday's news still holds.  VERT has 
been upgraded three times during the last week and a half.  
Thursday, Goldman Sachs initiated coverage with an uninspiring 
Market Outperform.  The week previous to last, Sand Bros. 
upgraded from Neutral to Buy, and USB Piper Jaffrey initiated 
coverage with a Strong Buy rating.  Even Better, Honeywell and 
Microsoft announced they would collaborate to accelerate the 
growth of Myplant.com, an e-commerce hub for manufacturing 
industries.  Who provides the software to enable trading directly 
from the site?  Microsoft alliance partner, VERT, or course.

BUY CALL MAR-210 ERW-CB OI=249 at $33.25 SL=26.00
BUY CALL MAR-220 ERW-CD OI=347 at $28.13 SL=22.00
BUY CALL MAR-230*URE-CF OI=567 at $24.00 SL=18.75
BUY CALL APR-220 ERW-DD OI=275 at $41.88 SL=32.50
BUY CALL APR-230 URE-DF OI=215 at $38.38 SL=30.00

Picked on Feb 24th at  $221.00     P/E = N/A
Change since picked      +4.75     52-week high=$289.56
Analysts Ratings     4-6-3-0-0     52-week low =$ 17.50
Last earnings 02/00  est=-0.36     actual=-0.28
Next earnings 05-02  est=-0.45     versus=-0.19
Average Daily Volume = 1.4 mln
/charts/charts.asp?symbol=VERT

****

CMGI - CMG Information Services $117.50 (+9.13) 

CMGI invests in, develops, and integrates advanced Internet, 
interactive, and database management technologies.  The 
company's venture capital arm is called @Ventures and boasts a 
portfolio of over 30 Internet companies such as Lycos and Raging 
Bull.  One of the more prominent additions to its portfolio is a 
83% acquisition of the search engine, Alta Vista.  The majority 
of CMGI's revenues (80%) is derived from fulfillment and mailing 
list services. 

If you're interested in an early entry into a potential earnings 
run, then the next few trading sessions may prove to be the 
time.  We believe CMGI is a prime candidate for a stellar 
earnings run going into March.  Essentially we're anticipating 
a repeat performance of last quarter's upswing prior to the 
company's earnings' release.  For visual confirmation, take a 
look at a three-month chart and notice the strong moves before 
December 15th.  After adding CMGI on Thursday, Friday 
effectively provided a variety of entry points.  CMGI's flat 
activity was most likely due to the fact that another big player 
in the sector, The Internet Cap Group (ICGE), reported poor 
earnings the previous evening.  This news dragged others down 
too and ultimately may have affected the sector on Friday.  
CMGI consistently bounced off $114 and $115 during the past two 
days establishing a strong near-term support level.  Of course 
it's firmer at the 10-dma at $113.50 in the event of a correction.  
If you're more of a conservative and an early entry doesn't fit 
your risk portfolio, then wait for CMGI to crack the first line 
of opposition at $120.  Keep this in mind as you plan your 
strategy, CMGI is confirmed to report on Thursday, March 9th.  
Therefore this is a relatively quick play with only 8 days to 
trade.  It's very important that you're out of any positions 
before March 9th.  At this point, it's UNKNOWN at what time 
during the day they'll announce and you don't want to be caught 
in a post-earnings' sell-off!  

CEO David Wetherall announced on Friday that CMGI's iCast Corp, 
an online music and entertainment unit, will start giving away 
software that allows users to listen to radio via the Internet.  
The software can be downloaded from iCast or other CMGI-owned 
sites.  In other news, AltaVista, a media and commerce network 
company majority owned by CMGI, reported Internet traffic 
continues to climb with a record 54 million unique users 
worldwide visiting its network of sites.  And mid-week, US 
Bancorp Piper Jaffray reiterated a Strong Buy recommendation 
for CMGI, but offered no other comments.  

BUY CALL MAR-115 GCD-CC OI=3901 at $13.25 SL=10.75
BUY CALL MAR-120 GCD-CD OI=5445 at $10.88 SL= 8.75
BUY CALL MAR-125*GCD-CE OI=3919 at $ 8.75 SL= 6.75
BUY CALL APR-120 GCD-DD OI= 323 at $16.38 SL=12.75
BUY CALL APR-125 GCD-DE OI= 185 at $14.25 SL=11.25
BUY CALL APR-130 GCD-DF OI= 396 at $13.00 SL=10.50

Picked on Feb 24th at   $119.06    P/E = 91
Change since picked       -1.56    52-week high=$163.50
Analysts Ratings      5-5-0-0-0    52-week low =$ 26.94
Last earnings 12/99   est=-0.72    actual=-1.08
Next earnings 03-09   est=-1.32    versus= 0.07
Average Daily Volume = 6.72 mln
http://www.optioinvestor.com/charts.charts.asp?symbol=CMGI

****

INKT - Inktomi Corp $145.13 (+22.56)

Inktomi develops the world's most scalable software for the 
world's fastest-moving software environment: the Internet.  The 
company's core technology underpins products for the Internet 
infrastructure that contribute to network performance, 
scalability and efficiency. Inktomi technology paves the way 
for emerging opportunities in online commerce, media and 
communications by enabling the Internet to intelligently 
accommodate more users and data traffic.  Inktomi developed 
the search engine that runs such popular portals as HotBot, 
NBC's Snap, Yahoo!, and the Disney Internet Guide.

The constant flow of news tooting consistent Web growth is 
pumping up the infrastructure stocks.  Recently Media Metrix 
reported that the number of monthly unique visitors accessing 
the Internet has increased by 15%.  Since last Friday the money 
has been flowing into INKT.  So much that the share price has 
risen by a whopping 18.4%, or $22.56 in just a week's time.  
There's obviously no doubt INKT is on the top of investors' buy 
lists.  The first inkling that INKT was taking off came on the 
18th.  It made a strong move through stubborn resistance at $120 
and tagged $128.50 intraday.  The momentum breakout was in 
direct correlation with new coverage out by Dain Rauscher 
Wessels.  Analyst Stephen Sigmond rated INKT a Strong Buy and 
issued a $190 12-month price target that day.  He cited that 
"Inktomi is still in the early stages of a massive growth 
opportunity, and we believe the company should represent a core 
holding for investors in the Internet infrastructure sector".  
In response to this eloquent comment, INKT has made five 
consecutive moves into new territory.  The record now stands at 
Friday's intraday high of $148.25.  Short-term support is at 
$143 and $145, while $138 and $140 are a bit more firm.  Now 
let's consider a couple of issues at hand.  First it'll be 
natural for INKT to consolidate at some point so be prepared for 
a downdraft; and second, at these heights there's quite a lot of 
room to fall.  The 5-dma ($136.53) represents the first step 
down followed by a big on to the 10-dma ($125.88); and note this 
technical is below the stock's old resistance of $130!  So again 
be prepared and know your tolerance for risk.  Pay close 
attention to the stock's direction and market sentiment before 
opening any positions.  Honestly this type of play needs your 
undivided attention.  It is not for the faint of heart.  In 
volatile markets, using stops on Internets is difficult because 
the wild intraday swings could inadvertently stop you out of 
profits.

Within the industry there was the news that SBC Communications 
(SBC) will purchase Sterling Commerce (SE), a Net 
infrastructure firm, for $3.9 bln in an all cash deal on the 
expectation that all roads lead to conducting business online.  
This sentiment bodes well for INKT who makes the software that 
accommodates Web traffic!  Inktomi also announced an agreement 
with Apple Computer to extend the Inktomi TrafficServer content 
delivery platform  to support Apple's QuickTime technology.  
The integration will provide enhanced streaming media over 
the Internet.

BUY CALL MAR-135 KYQ-CG OI= 325 at $17.50 SL=13.75
BUY CALL MAR-140 KYQ-CH OI= 837 at $14.50 SL=11.50
BUY CALL MAR-145*KYQ-CI OI=1368 at $12.13 SL= 9.50
BUY CALL MAR-155 KYQ-CK OI=   0 at $ 7.38 SL= 5.75 New Strike
BUY CALL APR-140 KYQ-DH OI= 197 at $21.00 SL=16.50
BUY CALL APR-145 KYQ-DI OI=1192 at $18.75 SL=14.75

Picked on Feb 22nd at   $132.00    P/E = N/A
Change since picked      +13.13    52-week high=$148.25
Analysts Ratings      7-5-2-0-0    52-week low =$ 28.13
Last earnings 12/99   est=-0.04    actual=-0.02 
Next earnings 04-17   est=-0.02    versus=-0.07
Average Daily Volume = 2.32 mln
/charts/charts.asp?symbol=INKT

****

INSP - InfoSpace.com Inc $225.31 (+25.06)(+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.

InfoSpace.com is a company whose share price has increased more 
than 40-fold since its $15 IPO in December 1998.  But in the 
present moment, we're more excited that it's splitting its stock 
2:1 for the second time this year!  On January 31st the 
company's BoD announced the second 2:1 stock split - earlier, on 
January 4th, INSP just had a 100% stock dividend.  However, the 
upcoming split is still subject to shareholders' approval.  A 
vote to increase authorized share from 200 mln to 900 mln is 
expected soon by written consent.  Although currently appears 
to be enough shares available with only 48.2 mln issued.   
Currently there's only a little more than two weeks left to 
trade this split run.  INSP is scheduled to split its stock 2:1 
payable on March 15th.  For the new readers, let me back up a 
bit.  After OIN initially picked up INKT on February 10th, it 
went into a period of consolidation and traded in a narrow 
channel primarily between $195 and $200.  The more aggressive 
traders used this lull to jump in the game.  Of course they 
were betting on an eventual breakout, but this was a big risk 
considering the volatile markets.  As it turned out they were 
amply rewarded on Thursday.  INSP rocketed upward $32.25, or 
16.6% at its intraday peak.  The stock closed strong with volume 
backing up the spike at more than double the ADV.  Sure enough 
there was more upside to come on Friday.  INSP set another 52-
week record ($231) and managed to keep $3.69 in gains following 
some minor profit taking near the close.  Note "profit-taking" 
as a key word.  Beware of traders taking some chips off the 
table.  $225 is short-term support, then $215 on the deeper 
dips.  If INSP ever dips to the latter mark, then use this as an 
entry point, but only after confirming upward bounces.  Although 
it's quite possible you may have to target shoot on the climb as 
the split date approaches.

InfoSpace.com announced that it won the patent for commerce 
infrastructure services on the Internet and wireless devices.  
This patent encompasses private label commerce solutions for 
tracking purchases, services, and information on the Internet 
and wireless devices.  Also in the news this week was INSP's 
Saraide.com, a US-based mobile Internet services group.  The 
company recently inked a deal with Philips Electronics to 
provide them with new services for voice-operated wireless 
phones.

BUY CALL MAR-210 FHY-CB OI=296 at $31.75 SL=24.75
BUY CALL MAR-220*FHY-CD OI=631 at $26.88 SL=21.00
BUY CALL MAR-230 FHY-CF OI=449 at $22.75 SL=17.75
BUY CALL APR-220 FHY-DD OI= 43 at $42.13 SL=32.75
BUY CALL APR-230 FHY-DF OI=188 at $37.75 SL=29.50

Picked on Feb 10th at   $191.50    P/E = N/A
Change since picked      +33.81    52-week high=$231.00
Analysts Ratings      6-3-0-0-0    52-week low =$ 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

****

PHCM - Phone.com $153.00 (+15.38)(+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.  

We added PHCM to our list last week in anticipation of a breakout 
over the post split trading range of $110-$140.  Our catalyst 
that convinced us of the breakout was a substantial increase in 
volume.  That usually means institutions are at the feeding 
trough.  If you entered the play on that basis, your were not 
disappointed as PHCM continued its strong volume (2.3 times the 
ADV on Friday) to not only break out over $142 on Wednesday, but 
break through its next level of resistance at $149 on Friday.  
Even better was that major volume flooded the issue in the last 
hour on Friday driving the price up $5 while the rest of the 
market struggled.  In fact, B of A Securities Growth Fund 
manager, John Zimmerman noted in a CBS MarketWatch interview that 
they had recently purchased PHCM for the portfolio.  Anyway, as 
the leader in the Wireless Application Protocol (WAP), PHCM is 
now free to test $155, then $170 as long as volume continues 
strong.  We think it will get there based on patterns of 
accumulation.  Support is at $147 intraday, while the 10-dma is 
way back at $132.  Using the "old resistance equals new support" 
theory, look for $149 to provide a measure of support too, though 
that won't be nearly as strong.  Despite it's success, PHCM is 
still a volatile issue and isn't for the weak stomached.  Choose 
your entry to suit your risk and remember that recently, 
pullbacks have been limited to about $2, so don't be greedy.

News that could affect PHCM's share price came from the lips of 
Oracle founder, Larry Ellison, who announced that OracleMobile 
would enter the fray with a competing product.  It appears to 
have had no effect yet, but could if it gets traction in winning 
some contracts away from PHCM - not immediately likely, but 
possible.  One contract Larry won't get...last week PHCM 
entered an interoperability testing agreement with Mitsubishi 
Electric.

BUY CALL MAR-140 UMC-CH OI=646 at $19.88 SL=15.50
BUY CALL MAR-150*UMC-CJ OI=946 at $14.38 SL=11.25
BUY CALL MAR-160 UMC-CL OI=816 at $10.50 SL= 8.00
BUY CALL APR-150 UMC-DJ OI=261 at $25.50 SL=20.00
BUY CALL APR-160 UMC-DL OI=247 at $21.13 SL=16.50

SELL PUT MAR-130 UMC-OF OI=149 at $ 2.75 SL= 4.50
(See risks of selling puts in play legend)

Picked on Feb 20th at   $137.63     P/E = N/A
Change since picked      +15.38     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 = 2.06 mln
/charts/charts.asp?symbol=PHCM


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

CHKP - Check Point Software $205.63 (+7.44)

Check Point Software has laid claim on being the best in the
business at securing the Internet.  Their Secure Virtual Network
(SVN) architecture provides the infrastructure that enables 
secure and reliable Internet communications.  It's FireWall-1
verifies remote users, controls access and blocks viruses and
other unwanted Web content, while VPN-1 will allow companies
to set up virtual private networks for secure internal and 
remote communications.  CheckPoint markets its products through
manufacturers and resellers including Sun Microsystems.   

The recent rash of cyber attacks may have put one of our newest
additions to our play list in the limelight.  Actually there 
are several reasons we find CHKP so attractive at this time.
Friday, Mark Anderson, Vice President at Renaissance Investment
Management spoke very highly of CHKP in an interview, reviewing
his investment strategies.  He mentioned that CHKP was their top
performing position in 1999, having gained over 333%, saying they
still have CHKP rated a Buy.  Investors are focused on evaluating
and trying to differentiate which business models will succeed
and CHKP certainly comes in near the top of the list.  Other news
that moved CHKP to front of the class came this week when, CHKP
announced it had joined an alliance with several other company's
to help protect websites and corporate networks from cyber 
attacks.  CHKP's Cyber Attack Defense System, coupled with other
partners solutions will lead the way against preventing more
attacks.  With the broader markets in a destructive mode, traders
seemed to be looking for anything positive to move into, and
CHKP was not only a safe place to be Friday, but a very profitable
place as well.  CHKP broke through the $200 level that had been
a holding the stock back for the past four sessions.  The momentum
behind the move was strong with 1.68 million shares traded, over
twice the ADV.  With that kind of support behind a move we would
look for the momentum to continue.  CHKP now has strong support 
at $200, with minor support sitting at $195.  Any pullback to
$200 would be considered a good point to target shoot entry into
a new position.  Otherwise, jump on if the momentum suits you.

CheckPoint announced Wednesday that is working with Intel to
scale it Secure Virtual Network(SVN) architecture to a full 
64-bit implementation that supports the Intel Itanium processor.
Computers using the powerful Itanium process will now take full
advantage of CHKP's solutions for comprehensive Internet 
security.     

BUY CALL MAR-200*YKE-CT OI=320 at $20.13 SL=15.75
BUY CALL MAR-210 YKE-CB OI=503 at $15.88 SL=12.25
BUY CALL MAR-220 YKE-CU OI=  0 at $11.75 SL= 9.25 Wait for OI
BUY CALL APR-200 YKE-DT OI= 63 at $31.88 SL=25.00

SELL PUT MAR-180 YKE-OP OI=120 at $ 5.25 SL= 7.00
(See risks of selling puts in play legend)

Picked on Feb 27th at $205.63    P/E = 177
Change since picked     +0.00    52-week high=$208.50
Analysts Ratings    8-6-2-0-0    52-week low =$ 11.50
Last earnings 01/00  est=0.32    actual=0.35
Next earnings 04-18  est=0.35    versus=0.25
Average Daily Volume =  778 K
/charts/charts.asp?symbol=CHKP


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

ANAD - Anadigics $146.88 (+0.63)(+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.

ANAD is near the end of its split run.  On Tuesday, February 29th 
after the close, ANAD will undergo a 3:2 split to begin split 
adjusted trading on March 1st.  Thus, we will exit the play in 
Tuesday night's write-up instead of today's since there could be 
some amateur hour enthusiasm into which to sell on Wednesday 
following the split.  The more conservative can plan an exit on 
Monday or Tuesday.  Technically, the ascending pennant is still 
forming, indicating that there could be a breakout to a new high 
sparked by the split.  The only glitch we see here is that volume 
has fallen back to merely average (ADV = 435K).  Unless volume 
kicks it up a notch into or after the split, the potential 
breakout may turn to vapor.  At this time, you may want to 
consider moving your stops up to take you out on any weakness, 
and move your stops up on any strength (trailing stop) to capture 
the maximum profit before the split.  If we are lucky, we'll get 
an enthusiastic open on Wednesday that will likely peter out by 
days end.  $138 and $142 offer good support figures.  There's 
even a bit of intraday support at $146, though the 10-dma is 
at $139.73.  Just be sure to set your stops so you don't lose 
money on any market or stock weakness.

While news won't likely affect the outcome of the play, it is 
helpful to know that Paine Webber published it's Recommended list 
last week which included ANAD among other standouts like JDSU, 
RFMD, and PMCS.  They also began testing a new gallium arsenide 
(GaAs) amplifier chip in GSM handsets (Nokia, maybe?), but that 
doesn't mean "huge contract" yet.

BUY CALL MAR-140*AUZ-CH OI=202 at $20.50 SL=16.00
BUY CALL MAR-145 AUZ-CI OI=317 at $17.75 SL=14.00
BUY CALL MAR-150 AUZ-CJ OI=145 at $15.63 SL=12.25
BUY CALL APR-145 AUZ-DI OI= 28 at $27.13 SL=21.25
BUY CALL APR-150 AUZ-DJ OI= 85 at $25.00 SL=19.50

Picked on Feb 13th at  $124.00     P/E = 952
Change since picked     +22.88     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 =   435 K
/charts/charts.asp?symbol=ANAD

****

GLW - Corning Inc. $187.81 (-5.50)(+27.88)(+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.

GLW sputtered this week and we debated internally whether or not 
to keep it in the lineup.  We're keeping it for now, but the play 
is running on fumes.  Fundamentally, having shed its skin as a 
casserole dish maker in favor of the hot optical equipment 
manufacturing field, GLW has quickly become an able competitor of 
JDSU and SDLI.  That alone helps insure their future success as 
long as they don't all of a sudden forget how to make fiber optic 
cable.  While GLW just became a split candidate as a result of a 
shareholder meeting (April 27) agenda item to increase the number 
of authorize shares from 500 mln to 1.2 bln, there are some 
trouble spots.  Earning aren't until the week of April 17 and the 
split (assuming it's announced then) will take even longer - both 
too far away to matter in the play right now.  Second, volume has 
fallen sequentially over the last six trading days, trading just 
1.4 mln shares on Friday compared to the ADV of 2.4 mln.  We 
won't see a breakout with that lack of buying interest.  The good 
news is that the $185-$186 range is proving to be good support as 
the volume falls indicating a consolidation is at hand.  Assuming 
the market doesn't crater on us and we begin to see a recovery in 
the DJIA, GLW should move strongly in unison, though we don't 
know just exactly on which day that will happen.  Until the 
market tone improves or GLW gives us an "event" to anticipate, it 
could flat-line a bit longer.  Don't despair though.  This may be 
a good put selling or LEAP buying opportunity.  If you still 
intend to buy straight calls, the 10-dma offers solid support at 
$184, while $185-$186 has held nicely intraday.  Pick your entry 
to mesh with your risk tolerance.

Moody's reaffirmed GLW's long term debt rating last week.  They 
noted, "the ratings confirmation reflects Corning's improving 
profitability and cash flows, solid margins, global leadership 
position in optical fiber and cable, and the expectation that 
supply/demand factors for optical fiber and liquid crystal 
displays will provide steady growth opportunities in the near-
to-intermediate term."

BUY CALL MAR-180*GRJ-CP OI= 181 at $18.88 SL=14.25
BUY CALL MAR-190 GRJ-CR OI= 331 at $16.00 SL=12.50
BUY CALL MAR-200 GRJ-CT OI=1007 at $13.50 SL=10.75
BUY CALL APR-190 GRJ-DR OI=  76 at $23.25 SL=18.00
BUY CALL APR-200 GRJ-DT OI= 318 at $19.25 SL=15.00

SELL PUT MAR-170 GRJ-ON OI= 602 at $ 5.63 SL= 7.50
(See risks of selling puts in play legend)

Picked on Feb 17th at   $191.06     P/E = 99
Change since picked       -3.25     52-week high=$198.06
Analysts Ratings      7-6-0-0-0     52-week low =$ 47.69
Last earnings 01/00   est= 0.48     actual= 0.51
Next earnings 04-24   est= 0.47     versus= 0.36
Average Daily Volume = 2.35 mln
/charts/charts.asp?symbol=GLW

****

ERICY - LM Ericsson Telephone $97.63 (+8.94)(-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. 

Can you say MOMENTUM?  ERICY certainly picked up the pace for 
us on Friday, gaining $4.63 for the day with volume over two 
times the daily average.  ERICY seems to have its eye on the 
$100 level and it may not be long before we see ERICY make a 
break for it.  After all, ERICY was only $0.56 away on Friday.  
ERICY looks to have support at it's 5-dma, which is currently 
at $92.50.  This is backed by a level of support at $92, a 
level that ERICY tested and held last Thursday.  In addition, 
we see a rather solid looking level of support at $90, where 
ERICY established a bit of a base mid-week before continuing 
its ascent.  As you may well know, the $100 level can prove to 
be a bit of a challenge for any momentum run and we may see 
investors sell their positions to lock in profits.  If this 
occurs, watch for the above referenced support levels to hold 
and take advantage of any bouts of profit taking for possible 
points of entry. 
 
ERICY continues to strut its stuff at the CeBit trade show, 
which is currently taking place in Hanover, Germany.  ERICY 
has unveiled several new products, including its new mobile 
Portal solution for mobile network operators and the new 
Ericsson Screen Phone.  The trade show will continue through 
March 1st.  Ericsson announced late on Thursday that the total 
sales from its Bluetooth unit may be above 45 million units 
in 2001.  It is the Bluetooth wireless technology that ERICY 
is using in its cable-free handset.  On Friday, ERICY made a
presentation in Beijing supporting its third generation (3G) 
mobile technology.  ERICY stated that they are committed to 
cooperate with Chinese institutes to promote 3G technology in 
China.  And then of course there is the pending 4:1 stock split, 
which is expected to occur in May.  Though this is still a 
ways off, the appeal of a 4:1 may have buyers stepping up to 
the plate already.  And finally, we thought this story was 
worth mentioning just in case you needed a good laugh to start 
your week.  Last Thursday morning, two managers from Ericcson 
staged a mock kidnapping and robbery/hijacking on a chartered 
bus in Greece, which was apparently carrying 25 Ericcson 
employees.  The two managers asked the travel agency to go 
along with the plan and stop the bus as part of a "training 
exercise".  The two men had empty machine guns and when they 
entered onto the bus, they staged a fake kidnapping of an 
employee who was in on the plan.  The ironic part of the story 
is that a passing tourist saw what was happening and used a 
cellular phone to call the police.  Luckily, no one was hurt 
and those arrested have been released.

BUY CALL MAR- 85 RQC-CQ OI=1305 at $15.00 SL=11.75
BUY CALL MAR- 90 RQC-CR OI=2546 at $11.13 SL= 8.75
BUY CALL MAR- 95*RQC-CS OI=1436 at $ 7.88 SL= 6.00
BUY CALL MAR-100 RQC-CT OI=2723 at $ 5.25 SL= 3.50
BUY CALL APR-100 RQC-DT OI=1130 at $ 8.63 SL= 6.50

SELL PUT MAR- 90 RQC-OR OI= 408 at $ 2.44 SL= 4.00
(See risks of selling puts in play legend)

Picked on Feb 15th at    $86.38     P/E = 127
Change since picked      +11.25     52-week high=$99.44
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 = 5.12 mln
http://OptionInvestor.com/charts/charts.asp?symbol=ERICY

****

EMLX - Emulex Corp. $157.13 (+17.13)(+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.  

This probably sounds like a broken record, but for the third
Friday in a row, EMLX continued to provide a safe haven for 
investors looking for somewhere to put their money.  As before,
there was wide spread selling going on in the broader markets,
and EMLX managed to end the day on the right side of the ledger.
EMLX has formed a classic channel moving higher, since late 
January.  Out of the last nineteen trading days, EMLX has had
only four days where it finished the session in the red.  This
week investors added over $17 to the price of EMLX stock,
finishing in the plus column each day.  A quick look at the
volume shows the numbers declined in each session as well.  What
does all this mean for our play?  It means for EMLX to continue
to move higher, we are going to need to see new money enter
somewhere along the lines, or we may begin to see some profit
taking and consolidation set in.  Remember stocks rarely move
in a straight line.  We are by no means suggesting that EMLX
won't continue to move higher, simply pointing out the use of
a well placed trailing stop, is always a prudent move in a
profitable play.  Technically, EMLX has several levels of
intraday support at $155, $150 and $145.  The 5-dma has followed
the bottom of the channel quite nicely and is sitting at $149.09.
Our suggestions for EMLX?  Assess your risk profile and set your
stops accordingly.  If EMLX continues to move higher, jump on
board, but check the volume behind the move prior to placing
your order.

Friday EMLX announced support for Hewlett-Packard's Open Storage
Area Networking(SAN) Initiative.  EMLX also announced they were
partnering with Eurologic Systems, Finisar and Seagate Technology
to demonstrate a 2Gb/s fibre channel SAN solution at CeBIT 2000
in Germany this week.  this demonstration will highlight the
performance capabilities of upcoming fibre channel data rates.

BUY CALL MAR-150*UEL-CJ OI=184 at $20.75 SL=16.25
BUY CALL MAR-155 UEL-CK OI= 10 at $17.88 SL=14.00
BUY CALL MAR-160 UEL-CL OI=407 at $13.75 SL=10.75
BUY CALL APR-150 UEL-DJ OI=154 at $30.00 SL=23.50

SELL PUT MAR-140 UEL-OH OI=103 at $ 6.63 SL= 9.00
(See risks of selling puts in play legend)

Picked on Feb 13th at   $123.88    P/E = 286
Change since picked      +33.25    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 = 1.02 mln
/charts/charts.asp?symbol=EMLX

****

PCMS - P-COM Inc $22.63 (-0.44)(+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.    

Our play in P-COM may have several factors influencing recent
moves.  There has been little company specific news come out,
so PCMS has been left to swim with the sharks.  After making a
new high last Friday, PCMS spent most of the week consolidating.
Other than Thursday's move down to $20.50, PCMS has seen very
little in the way of buying or selling, trading for the most
part in a fairly narrow range.  The fact that PCMS didn't join
the ranks of stocks getting kicked around Friday, supports our
play for now.  With the major indices loosing up to 2.0% Friday,
PCMS gained just under 3.0%.  Remember part of our interest in
PCMS is that it is a less expensive stock, yet in percentage
terms, offers a chance for a great return, on the money invested.
At this point what we see happening with PCMS is a lack of 
interest more than anything else.  Investors that own stock in
the company aren't motivated to sell.  With the mood in the 
broad markets so negative, those same investors aren't quite 
ready to back up the truck and load up on shares of PCMS either.
Volume for the week averaged just 66% of the ADV for PCMS.
So we sit and wait.  A move back through $22.75 accompanied by
better than average volume would suggest PCMS is back on track.
A decline back through $21.75 would indicate it may be time
to look elsewhere or at least take some money off the table. 

As we mentioned earlier not much in the way of news for PCMS
this week, but a check of the open interest in the options 
shows the Mar 20 calls did decline a bit, yet the OI in the
Mar 25 calls and May options increased.  If we see a change 
of attitude in the broader markets, investors that added PCMS
options to their portfolio may be rewarded quite nicely.    

BUY CALL MAR-20 PQP-CD OI=3339 at $3.88 SL=2.25
BUY CALL MAR-25 PQP-CE OI=1279 at $1.56 SL=0.75
BUY CALL MAY-20 PQP-ED OI=1384 at $6.25 SL=4.50
BUY CALL MAY-25*PQP-EE OI= 640 at $4.13 SL=2.50

Picked on Feb 13th at    $18.75    PE = N/A
Change since picked       +3.88    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 = 2.09 mln
/charts/charts.asp?symbol=PCMS

****

AFCI - Advanced Fibre Communications $57.44 (+8.69)

Advanced Fibre Communications develops, manufactures, and 
supports the Universal Modular Carrier 1000 (UMC), a multi-
feature digital local-loop carrier system.  This product enables 
telecommunications providers to deliver voice, video, and data 
on wireline or wireless systems to smaller line-sized markets.  
Global clients include Alltel, Sprint, France Telecom, and 
Cable & Wireless Panama.  

Investors came back from a long weekend and started nibbling on 
the shares of AFCI.  There was a recent BoD meeting and perhaps 
this sparked the bullish charge.  What we do know for sure is 
that analysts are backing up the company.  Recently on February 
17th, Platinum Equities started new coverage with a Strong Buy 
recommendation.  Then in the midst of the powerful run-up, USB 
Piper Jaffray reiterated a Strong Buy and WR Hambrecht 
reiterated a Market Outperform rating on Friday.  The latter 
firm also issued a $60 price target.  News or events that drive 
a stock are certainly important, but it appears AFCI is 
experiencing more of a pure momentum rally.  In just three swift 
trading sessions, AFCI was lifted off support at $45 and 
propelled upward almost 25%.  The stock is now smidgen below its 
52-week high at $58.63.  AFCI just missed setting a new record 
by a fraction on Friday.  Therefore this tells us the stock is 
at a true resistance level.  The 5-dma ($51.28) and the 10-dma 
($50.70) certainly represent firmer support, but $57 was a 
strong support intraday on Friday.  Basically if AFCI is going 
to continue to charge it'll easily shatter the resistance and 
climb into new territory.  Watch for this confirmation (after 
amateur hour of course!); then look for intraday bottoms to get 
an entry.  The more cautious will want to wait for a definitive 
pullback before entering this HIGH-RISK momentum play.  

On Thursday, Fujitsu Telecommunications Europe, the leading 
supplier of high performance telecommunications solutions in the 
UK, announced it inked a deal with AFCI to integrated AFC's 
Next Generation Digital Loop Carrier products into Fujitsu's 
Multi-Service Access systems.

***Currently these are the highest strikes available***

BUY CALL MAR-50 AQF-CJ OI=5221 at $ 9.00 SL= 6.75
BUY CALL MAR-55 AQF-CK OI=1955 at $ 5.75 SL= 4.00
BUY CALL MAR-60 AQF-CL OI= 874 at $ 3.50 SL= 1.75
BUY CALL APR-50 AQF-DJ OI= 149 at $12.38 SL=10.00
BUY CALL APR-55*AQF-DK OI= 487 at $ 9.63 SL= 7.50

Picked on Feb 27th at    $57.44    P/E = 19
Change since picked       +0.00    52-week high=$58.63
Analysts Ratings      4-8-1-0-0    52-week low =$ 6.75
Last earnings 12/99   est= 0.09    actual= 0.10
Next earnings 04-20   est= 0.07    versus= 0.04
Average daily volume = 1.86 mln
/charts/charts.asp?symbol=AFCI


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



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

The Option Investor Newsletter             2-27-2000
Sunday                        4 of 5


*****************
CALLS - CONTINUED
*****************
Miscellaneous
*************

LHSP - Lernout & Hauspie $108.22 (+18.84)(+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.
Driving technology toward the nirvana of reliable
voice communication to computers (large and small), LHSP
continues to make giant strides in that direction.  With
frequent new product announcements and industry alliances, the
company is right at the cutting edge of the drive to provide us
with direct voice access to all of our business and personal
information.  After breaking out of its consolidation near $80,
LHSP has been on a tear, jumping sharply on Wednesday's news
announcement (see below).  Adding over $22 on almost 4 times
the ADV, it is no wonder investors decided to take some profits
during the remainder of the week.  Support is forming at $105,
just above the top of Wednesday's gap up, and based on the
pattern of consolidation, resistance will likely be felt as
LHSP tries to push back up through $115.  Stronger support
appears at the psychologically important $100 level, but LHSP
may not get there unless the NASDAQ has an identity crisis,
and starts thinking it is the DOW.  The decline in share price
on Thursday and Friday looks to be nothing more than profit-
taking, as volume declined to below the daily average.  Part
of the motivation for LHSP's strength is the company's
announcement of a 2-for-1 split with earnings on February 9th.
If buyers return on Monday, look to open new positions on a
bounce from the $105 support level.  Further weakness could
provide a very appealing entry near $100, but remember that
volume is the key - its absence indicates a lack of conviction.

Continuing to expand its dominance in speech and linguistics
technology, LHSP announced Wednesday that it is demonstrating
a new hands free system for the automobiles that employ voice
activated dialing.  Developed in conjunction with Cellport
Systems, the new system is safer, more convenient and more
intuitive for drivers.  Then Thursday SwiftTouch Corporation
announced that it has licensed technologies from LHSP to enable
voice access to secure, Web-based personal information.  By
integrating LHSP's multi-language technologies with the Web and
advanced synchronization, SwiftTouch will be the first to offer
mobile professionals a solution to access their contacts,
schedules, and mission critical data whenever they need it.  For
you longer-term option traders, beginning on Monday, both the
PHLX and CBOE will begin trading 2001 and 2002 LEAPS on LHSP.

BUY CALL MAR-105 XQL-CA OI= 29 at $11.63 SL= 9.25
BUY CALL MAR-110*XQL-CB OI= 93 at $ 9.00 SL= 6.75
BUY CALL MAR-115 XQL-CC OI= 46 at $ 7.13 SL= 5.25
BUY CALL APR-110 XQL-DB OI=  0 at $14.13 SL=11.25
BUY CALL APR-115 XQL-DC OI=128 at $12.00 SL= 9.50

SELL PUT MAR- 90 XQL-OR OI= 72 at $ 2.75 SL= 4.50
(See risks of selling puts in play legend)

Picked on Feb 12th at  $82.00     P/E = 164
Change since picked    +26.22     52-week high=$126.50
Analysts Ratings    1-1-1-0-0     52-week low =$ 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 =  882 K
/charts/charts.asp?symbol=LHSP



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

As the divergence between the DOW and the NASDAQ continues, the
VIX is getting rather chummy with the 30 level.  Recall that a
VIX reading in the low 30s typically represents a good buying
opportunity.  Over the past 3 weeks, the index has marched
steadily upwards, posting higher-highs and higher-lows.  With
Tuesday's move as high as 30.69, and Friday's close at 29.08,
some attractive buying opportunities could be just around the
corner.  Along with the Leap of the Week (MSFT), look how some
of our plays (IBM, GE) have dropped to attractive entry (support)
levels.  We finally saw some life in the LU play this week;
could this be the beginning of the long-awaited recovery, or
is it just a head fake?  Only time will tell.  Keep an eye
(maybe two) on the VIX this week, as a solid move above 30 could
give you that attractive entry point you've been so patiently
waiting for.

Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $53.00   244.60%
                 JAN-2002 $ 90  WUE-AR   $19.00   $56.88   199.37%
GPS    11/07/99  JAN-2001 $ 40  ZGS-AH   $ 5.75   $13.63   137.04%
                 JAN-2002 $ 45  WGS-AI   $ 7.88   $15.63    98.35%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $21.25    55.91%
                 JAN-2002 $110  WIB-AB   $16.50   $25.63    55.33%
LU     11/14/99  JAN-2001 $ 80  ZEU-AP   $12.88   $ 5.75   -55.36%
                 JAN-2002 $ 90  WEU-AR   $16.13   $ 9.75   -39.55%
CSCO   11/14/99  JAN-2001 $ 80  ZCY-AP   $19.13   $61.13   219.55%
                 JAN-2002 $ 90  WIV-AR   $22.00   $62.63   184.68%
GE     11/21/99  JAN-2001 $150  ZGR-AU   $16.25   $12.13   -25.35%
                 JAN-2002 $150  WGE-AU   $25.50   $21.75   -14.71%
NT     11/28/99  JAN-2001 $ 75  ZOO-AO   $22.25   $49.88   124.18%
                 JAN-2002 $ 75  WNT-AO   $30.25   $59.25    95.87%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $16.50    53.49%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $22.50    34.09%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $56.25   152.81%
                 JAN-2002 $120  WGZ-AD   $28.50   $61.88   117.12%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $59.88   154.81%
                 JAN-2002 $100  WFU-AT   $27.25   $64.00   134.86%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $28.50    61.66%
                 JAN-2002 $ 90  WJX-AR   $22.00   $33.00    50.00%
LU     01/09/00  JAN-2001 $ 50  ZEU-AJ   $13.63   $17.00    24.72%
MOT    01/09/00  JAN-2001 $125  ZMA-AE   $31.13   $52.25    67.85%
                 JAN-2002 $125  WMA-AE   $41.50   $65.00    56.63%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $11.63    27.38%
                 JAN-2002 $ 40  WSY-AH   $12.63   $15.75    24.70%
ERICY  01/30/00  JAN-2001 $ 65  ZYD-AM   $19.75   $41.38   109.52%
                 JAN-2002 $ 65  WRY-AM   $27.00   $48.88    81.04%
MSFT   01/30/00  JAN-2001 $100  ZMF-AT   $17.63   $14.25   -19.17%
                 JAN-2002 $110  WMF-AB   $21.63   $18.25   -15.63%
Q      02/13/00  JAN-2001 $ 50  ZWK-AJ   $ 5.88   $ 6.13   - 4.25%
                 JAN-2002 $ 50  WWH-AJ   $10.88   $11.50   - 5.70%
CS     02/13/00  JAN-2001 $ 30  ZCJ-AF   $14.25   $19.00    33.33%
                 JAN-2002 $ 30  WLJ-AK   $18.25   $23.13    26.74%
ICOS   02/20/00  JAN-2001 $ 40  ZIL-AH   $10.25   $13.13    28.10%
                 JAN-2002 $ 45  WJI-AI   $12.13   $15.38    26.79%
        
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

MSFT - Microsoft $91.31

Remember back in mid-December when MSFT broke out of the its
broad trading range between $85 and $97?  Well, don't look now,
but the software giant is back in the middle of that range,
testing support at $91.  Plagued by the never-ending Justice
Department anti-trust case and the lackluster debut of Windows
2000, MSFT has been dropping from its late-December highs near
$120.  This is still a great company with strong growth
prospects and its hand in seemingly every new techno-toy that
we can't do without.  The advantage of LEAPS is that we can wait
for these sentiment-driven declines to provide entry points near
major support.  Then when the investing public figures out that
MSFT isn't going away, we can profit from the inevitable
recovery.  Stronger support exists near $84, and if you can 
get an entry there, consider it a gift.

BUY LEAP JAN-2001 $ 95.00 ZMF-AS at $16.38
BUY LEAP JAN-2002 $100.00 WMF-AT at $21.75

/charts.asp?symbol=MSFT


New Plays

NSM - National Semiconductor $68.00

After the painful decline that began in October of 1997, NSM
finally found its way again late last Spring.  Since then, the
chart presents us with a beautiful picture of higher-highs and
higher-lows.  What gets our attention though, is the upswings
are getting larger, and the downdrafts are getting smaller.
Each of the declines comes on lower volume and then as volume
picks up again, so does the share price.  Of course it doesn't
hurt that NSM operates in the red-hot Semiconductor and Wireless
industries; a fact that hasn't been lost on investors.  Not only
has the company returned to profitability, but it has also
significantly beat earnings estimates over the last 2 quarters.
Tagging a new 52-week high of $74 on Thursday, NSM is in blue
sky territory with mild support at $67 and stronger support at
$65.  A decline to either of these levels looks like a good 
entry for the next leg up.  That may not happen though with 
earnings only two weeks away.

BUY LEAP JAN-2001 $70.00 ZUN-AN at $18.50
BUY LEAP JAN-2002 $70.00 WUN-AN at $24.25

/charts.asp?symbol=NSM


Drops

ICIX $53.25 Since we picked it up on February 6th, ICIX had a
nice run into earnings on the 15th, but it doesn't look like
the post-earnings depression is over.  The fact that the loss
was larger than expected was initially offset by the Warburg
Dillon Read upgrade from $60 to $85.  However, the revenue
estimate was lowered based on a more conservative outlook for
systems integration and long distance revenues.  Once investors
digested all the details, ICIX began selling off, shedding over
$12 from its high of $65.63.  The selling volume has dropped
off considerably, but with so many other strong issues to choose
from, we'll let ICIX go and move on to greener pastures.



*****************
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.

****

JNJ - Johnson & Johnson $71.19 (-6.25)(-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.

The interest rate fears have resurfaced further adding to the 
negative sentiment of the DOW.  Even some of the techs were on 
shaky ground by the end of the week.  In this environment JNJ 
couldn't help but lose its footing.  By Wednesday, it slipped 
under $77, a formidable support level that was causing us great 
frustration.  To put it into some perspective, JNJ has shed 
$6.75, or 8.6% since Tuesday's close and set two consecutive 
all-time lows.  Thursday it hit $72 and then on Friday it sunk 
lower to $70.13.  Our patience paid off big-time!  It's 
important to note here that during Friday's session JNJ bounced 
upward off the vicinity of this latter mark ($70.13) three times 
in intraday trading.  Put another way, this new low could be a 
possible bottom.  And for those that have been following the 
play, you know what comes next.  Yes it's an unavoidable warning 
that must be reiterated.  We don't have a crystal ball and at 
some point value hunters will start nibbling so keep your stops 
in place to protect your profits!  Recall just a week ago Ann 
Barber, analyst at CSFB, commented that JNJ "is attractively 
valued at discounts to the market and its peer group".  She 
wasn't kidding.  Although let's face it.  For the most part, 
investors are still of the disposition that "techs are in and 
consumers are out".  If you're considering opening new positions 
or adding to existing ones, please wait for downward 
confirmation preferably through $70.  

BUY PUT MAR-80*JNJ-OP OI=4044 at $9.25 SL=7.00
BUY PUT MAR-75 JNJ-OO OI=1539 at $5.00 SL=3.25
BUY PUT MAR-70 JNJ-ON OI=1509 at $2.25 SL=1.25

Average Daily Volume = 3.50 mln
/charts/charts.asp?symbol=JNJ

****

PGR - Progressive Corp $54.56 (-1.38)(+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.

Despite lackluster performance, don't count PGR out.  The bears 
gave PGR a little push to trade them under support, giving us
reason to keep them.  This is a good indication that PGR has 
not hit bottom.  Another good indicator is when they tried 
to reclaim the 10-dma territory, they were forced back down.
It is hard to see investors appetite increasing for PGR since 
insurance stocks are trading around all time lows and the 
industry in general is not enticing.  Negative momentum 
displayed by traders still exists, but isn't backed by a lot 
of volume.  Therefore, this play should still be approached 
with caution.  It's not an easy ride down just because support 
of $55 was pierced.  We've already noted the lack of momentum 
and volume with that break.  PGR has shown us last Friday 
that they can break $55 and then bounce back above it.  With 
that in mind, watch out for a reversal.  Set stops to protect 
yourself while the next couple of trading days unfold.  An 
analyst from Advest started coverage of PGR on Wednesday with 
the ever-boring Market Perform rating.  This news did little 
for the stock, almost as if no one noticed.  Or maybe that 
PGR has just completely lost investor interest and no one is 
even watching PGR anymore.  Either way, the lack of buyers 
attention should keep PGR trending lower.

BUY PUT MAR-55*PGR-OK OI=1663 at $3.13 SL=1.50
BUY PUT MAR-50 PGR-OZ OI=  26 at $0.94 SL=0.00 High Risk!

Average Daily Volume = 462 K
/charts/charts.asp?symbol=PGR

****

FD - Federated Department Stores $32.56 (-1.25)

Better late than never, FD is trying to leave the comfort of
its luxurious brick and mortar walls.  The company is the
largest upscale retailer in the U.S., with over 400 stores in
33 states.  In addition to its flagship chains, Macy's and
Bloomingdale's, the company runs six regional chains, Lazuras,
The Bon Marche, Burdines, Stern's, Rich's, and Goldsmith's.
Attempting to capitalize on consumer demand for online shopping,
FD is increasing it's focus on catalog (Macy's by Mail and
Bloomingdale's by Mail) and internet (Macys.com) sales.

Plagued by the lack of interest for any stock symbol with less
than four letters, FD has been in a continuous downtrend since
the second week of January.  With the kind of consistency that
is hard not to love, FD continues to use the 5-dma, (now at
$33.50) as resistance.  The low on Thursday ($31.63), was not
only a 52-week low, but also the lowest level for the stock
since January of 1997.  It has been over a week since FD managed
to post a close above the rapidly declining 5-dma, and the stock
shows no sign of reversing the trend.  It is bad enough that
interest rates are rising (always tough on the retailers), but
the continuing weakness on the NYSE is making things even worse
for FD.  As if that wasn't enough, JC Penney and Gap Stores
released earnings this week, along with FD.  The street didn't
show much enthusiasm for any of the numbers and the FD weakness
is being exacerbated by association with a weak sector.  With
the DOW breaking support at 10,000 on Friday, the weakness
is likely to continue.  Good entries can still be had as FD
moves up to the 5-dma and rolls over.

BUY PUT MAR-40 FD-OH OI=20 at $7.88 SL=6.00
BUY PUT MAR-35*FD-OG OI=59 at $3.63 SL=1.75

Average Daily Volume = 1.23 mln
/charts/charts.asp?symbol=FD

****

KMG - Kerr-McGee Corp. $40.75 (-4.69)(-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.

KMG has fallen and it just cannot seem to get back up.  KMG 
continued its downward pattern to close out last week, dropping 
another $1.25 back into the barrel.  KMG briefly traded through 
$40 though quickly moved back up to claim this level as support, 
for the day at least.  Though there is no negative news specific 
to KMG, it just can't seem to find its footing.  As we have 
mentioned before, not even the days that see the oil service 
stocks doing well can seem to offer KMG shareholders any relief.  
If Friday's increased volume level backing the drop was any 
indication, it looks as though more and more investors are 
giving up and slipping out the back door on this one.  Though 
KMG does have some pre-established support at this current level, 
we see the more solid support kicking in somewhere just above 
$30 (a share, not a barrel), where KMG was trading last April.  
It seems that the fear of OPEC may increasing oil production 
at their March meeting, is providing the fuel that continues 
to drive KMG south.  Since the meeting is not until the end 
of March, there may very well be more downside to come.  Watch 
for KMG to trade through $40 to confirm continuing negative 
momentum, keep your ear to the wall for any new developments 
in the continuing oil crisis saga, and as always, tighten your 
stops as we continue downward.  

BUY PUT MAR-45 KMG-OI OI=101 at $5.38 SL=2.50
BUY PUT MAR-40*KMG-OH OI=346 at $2.00 SL=1.25

Average Daily Volume = 767 K
/charts/charts.asp?symbol=KMG

****

RHAT - Red Hat, Inc. $68.38 (-3.13)(-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.

We owe a big thank you to Linux for giving us some more time 
to benefit from our put play on RHAT.  Late on Thursday, Linux
announced earnings that came in 15 cents under analysts 
estimates.  This announcement drove shares of RHAT down on 
Friday, delivering not only the break through $70 we were 
looking for but a close below as well.  Therefore, we are 
keeping our RHAT on for a while longer.  RHAT's volume backing 
the drop was right on target with the daily average, and though 
we would have liked to seen a larger number, we can't complain 
too loudly.  As you may know, RHAT did trade through $70 one 
other time last week and wound up bouncing from a support level 
right around $67.50.  Well, if you take a look at Friday's 
chart, you will notice that RHAT tested and held this level 
of support yet again.  Therefore, it is important to exercise 
caution at this point.  We are not saying that RHAT has found 
its bottom yet, but we are also not ruling out the possibility.  
Should RHAT break through this level of support, we see the next 
level right around $60 with additional support backing in the
neighborhood of $52.  RHAT is still underneath its 10-dma of 
$73.50, and as long as RHAT does not breakthrough this level, 
we are not convinced that RHAT is pondering a trend reversal.  

BUY PUT MAR-75*RCV-O0 OI=362 at $12.25 SL=9.75
BUY PUT MAR-70 RCV-ON OI=927 at $ 9.00 SL=6.75
BUY PUT MAR-65 RCV-OM OI=398 at $ 6.13 SL=4.25

Average Daily Volume = 1.78 mln
/charts/charts.asp?symbol=RHAT

****

MCOM - Metricom $76.38 (-13.38)

Metricom is a leading provider of wide area mobile data 
communications solutions.  It designs, develops and markets 
wireless network products and services that provide low-cost, 
high performance, easy-to-use data communications that can be 
used in a broad range of personal computer and industrial 
applications.  The Company's networks take advantage of Federal
Communications Commission ("FCC") regulations that permit 
license-free, spread spectrum operation in the 902 to 928 MHz 
frequency band.  Metricom's primary service, Ricochet, provides 
users of portable and desktop computers and hand-held computing 
devices with fast, reliable, portable, wireless access to the 
Internet, private intranets, local area networks ("LANs"), 
e-mail and on-line services for a low, flat monthly subscription 
fee that permits unlimited usage. 

Wasn't Friday a great day?  Well, at least it was if you were 
playing MCOM as a put!  Not only did MCOM close Friday's 
session down $7.63, it also offered an intraday trading range 
of $12.50, all of which was backed by strong volume.  One
cautionary note is the fact that the majority of MCOM's Friday 
was ruled by the bears.  MCOM was dragged as low as $71, a 
level of pre-established support, where it bounced as the bulls 
stepped into the ring to close MCOM above $75.  We did see a 
pick up in volume on the bounce, so there are some interested 
buyers out there.  As we mentioned, MCOM looks to have some 
support right around $71, however, we see the more solid level 
right around $68, which is also MCOM's 100-dma.  Should MCOM 
make a move to continue its downward trend next week, exercise 
caution, particularly with new entries, around these levels.  
If MCOM decides to opt for a move on the positive side, it still 
has a good deal of resistance to contend with.  MCOM's 5-dma,
which is now at $84.75, has done a nice job of holding MCOM back.  
MCOM may also encounter resistance at $88 and $90, both levels 
at which MCOM has struggled before.  Any moves up that are met 
and held back by these resistance levels may provide the gift 
of potential entry.  As always, be sure to use your stops to 
protect any profits made so far.  

BUY PUT MAR-80*MQM-OP OI=131 at $8.50 SL=6.50
BUY PUT MAR-75 MQM-OO OI= 48 at $5.63 SL=3.75
BUY PUT MAR-70 MQM-ON OI=114 at $3.50 SL=1.75

Average Daily Volume = 749 K
/charts/charts.asp?symbol=MCOM

****

LLY - Eli Lilly $56.69 (-1.81)

Eli Lilly is a major U.S. drug company that discovers, develops, 
manufacturers and sells products in the Life Sciences industry.  
Some of Lilly's products include Prozac, to treat depression, 
Zyprexa, used in treatment of schizophrenia, Permax, a treatment 
for Parkinsons disease and Gemzar used for treatment of a 
pancreatic cancer.  Also the company produces a wide range of 
antibiotics, growth hormones, cardiovascular therapy medications, 
anti-ulcer agents, vitamins and animal health products.  The 
company also has subsidiaries through which it provides health 
care management services in the U.S.

The drug stocks have had a rough go of it lately and have yet 
to find the medicine to make them feel any better.  LLY has 
been gradually trending lower since mid-November and on Friday, 
traded to a new 52-week low of $56.13.  Strong volume continues 
to back LLY's decline, indicating that there are plenty of 
sellers out there looking to unload this headache.  LLY seems 
to have a habit of making weak attempts at moves up.  Use this
knowledge of LLY's trading to your advantage for possible new 
entries.  Just be sure to watch for holding resistance levels 
to confirm the continuing downward trend.  LLY closed on Friday 
just shy of its low for the day, so we could be poised for a 
nice start to the week.  LLY's 5-dma, which is currently at 
$58.50, seems to be working well at keeping the lid on LLY.  
LLY also has resistance at $59 and $60 (10-dma).  Other then 
negative sentiment against its sector, many seem to be pointing 
toward weak management as another possible catalyst for LLY's 
continuing descent.  Not too mention all of the new competition 
that continues to emerge on the scene.  For example, on Friday, 
IVX Corporation announced supplemental FDA approval for its 
generic equivalent to LLY's Darvocet, which is a widely 
prescribed painkiller.  At this point, we believe that there 
may be enough negative sentiment out there against not only 
LLY, but the sector as a whole, to keep LLY on its current 
downward track.  Apparently, Prozac doesn't have much of an 
effect on bears!   

BUY PUT MAR-65 LLY-OM OI=2739 at $8.63 SL=6.50
BUY PUT MAR-60*LLY-OL OI=1432 at $4.38 SL=2.50
BUY PUT MAR-55 LLY-OK OI=1274 at $1.63 SL=0.75

Average Daily Volume = 2.63 mln
/charts/charts.asp?symbol=LLY


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

The Option Investor Newsletter             2-27-2000
Sunday                        5 of 5


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

Charting Basics: Trend Line Analysis..

The majority of technicians use historical charts to reflect
the daily price and volume action in a specific instrument.
In simpler terms, a chart is simply a representation of the
conditions that exist in the market.  While it is helpful in
projecting trends and character, technical analysis cannot
predict the future.

Charts are precise, accurate and correct in their depiction
and astute technicians will tell you the "tape doesn't lie."
Unfortunately, they do not reflect all the nuances of the
market and the instrument itself.  Charts exhibit patterns and
relationships, but they cannot identify the causes of a market
condition, nor determine it's eventual outcome.  As long as you
are aware of the limitations of the practice, technical
analysis can be your best ally in the world of investing.

With that in mind, our focus today will be identifying changes
in trends.  Last week, we reviewed a number of basic formations
and the area patterns that were discussed; ascending triangles,
pennants, and rounded bottoms are common precursors to upside
break-outs.  After the new direction is established, it's very
important to discern the quality and strength of the trend.  In
many cases, the up-trend is broken shortly after the reversal
is complete.  The problem for investors is to identify those
breakdowns which are significant, as opposed to the minor
penetrations which simply require an adjustment of the trend
line.  Unfortunately, the majority of small movements will not
offer a clear indication of character without confirmation from
other chart developments.  The key is to understand that any
significant penetration of a trend line is cause for concern
and requires subsequent reevaluation of the underlying position.

Before you can determine the significance of a correction or
pullback, the quality of the trend must first be established.
There are a number of traits common to the development stages
of powerful trends.  The first is the number of bottoms that
have occurred at or near the trend line in the recent history
of the issue.  With each successive test, the significance of
the movement is increased.  Another important component is the
period of time before the trend undergoes a significant test
or consolidation.  The longer it is, the greater its technical
strength and significance.  The severity of the slope or angle
of the trend line also has a bearing on the potential effect
of any pullback.  Generally, the greater the angle the smaller
the consequences of any penetration.  In contrast, flatter
trend lines are subject to greater fluctuations when broken.
You may see that effect in the current Dow-30 chart.

There are some basic guidelines to help establish the validity
of a break through the trend line.  The simplest factor to
evaluate is the magnitude of the correction.  In significant
reversals, the opposing move will end well beyond the previous
support area for the trend.  If trading volume is light during
the initial stages of penetration, a rebound is likely to occur.
However, when the recovery is not supported by increased trading
activity, the reversal will likely continue.  A decisive break
through a well-developed rally generally indicates the advance
has run out of momentum and steps should be taken to protect
profits.  On the other hand, a brief consolidation or topping
pattern which forms well away from the trend line can often be
ignored.  The most important concept is that almost any activity
can take place as long as the primary boundaries of the trend
are not threatened for more than a brief period.  Any sustained
movement beyond the trend line is generally a major change in
character.


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

BIDS    5.34   5.50   MAR   5.00  1.06  *$  0.72  19.0%
HEB    11.94  13.88   MAR  10.00  2.69  *$  0.75   9.1%
ANIC    6.94   8.50   MAR   5.00  2.31  *$  0.37   9.0%
PTEK    8.94   9.88   MAR   7.50  2.13  *$  0.69   8.8%
TSEMF  21.00  25.06   MAR  17.50  4.63  *$  1.13   7.8%
FSII   17.81  17.38   MAR  15.00  4.25  *$  1.44   7.7%
DRMD   12.75  12.81   MAR  10.00  3.38  *$  0.63   7.6%
IMNR   15.75  13.81   MAR  10.00  6.38  *$  0.63   7.6%
GZTC   29.13  46.75   MAR  22.50  8.38  *$  1.75   7.3%
AND     8.88  12.75   MAR   7.50  1.94  *$  0.56   7.0%
SCTC   22.31  24.38   MAR  20.00  3.75  *$  1.44   6.7%
UBET    6.25   5.19   MAR   5.00  1.63  *$  0.38   6.0%
REMC   26.38  34.50   MAR  22.50  5.00  *$  1.12   5.9%
PCMS   23.06  22.63   MAR  17.50  6.38  *$  0.82   5.5%
MCRE   15.50  16.25   MAR  12.50  3.88  *$  0.88   5.5%
SIII   15.00  15.31   MAR  12.50  3.38  *$  0.88   5.5%
EPIC    9.56   8.63   MAR   7.50  2.50  *$  0.44   5.4%
MSGI   24.88  23.75   MAR  20.00  6.00  *$  1.12   5.2%
RNBO   30.88  30.13   MAR  25.00  7.00  *$  1.12   4.1%
GELX   17.81  20.50   MAR  15.00  3.75  *$  0.94   3.6%

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

Comments:

Last Friday's drop in Metacreations (MCRE) appears to have been
a one day event though some negative technical divergence's are
apparent.  Overall, the majority of stocks are holding up well
considering the general market malaise.


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

ASPX   12.56  MAR  10.00  XUM CB  3.25  267   9.31  7.4%  7.4%
ELIX   21.75  MAR  17.50  XQQ CW  4.88  46   16.87  3.7%  3.7%
ITIG   43.44  MAR  30.00  ITU CF 14.25  65   29.19  2.8%  2.8%
SMSC   14.25  MAR  12.50  OMQ CV  2.25  0    12.00  4.2%  4.2%
TLXN   20.78  MAR  17.50  TNQ CW  4.00  462  16.78  4.3%  4.3%
WRLS   28.00  MAR  17.50  QVW CW 11.13  6    16.87  3.7%  3.7%
XICO   26.13  MAR  22.50  CIU CX  4.75  394  21.38  5.2%  5.2%

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

ASPX   12.56  MAR  10.00  XUM CB  3.25  267   9.31  7.4%  7.4%
XICO   26.13  MAR  22.50  CIU CX  4.75  394  21.38  5.2%  5.2%
TLXN   20.78  MAR  17.50  TNQ CW  4.00  462  16.78  4.3%  4.3%
SMSC   14.25  MAR  12.50  OMQ CV  2.25  0    12.00  4.2%  4.2%
ELIX   21.75  MAR  17.50  XQQ CW  4.88  46   16.87  3.7%  3.7%
WRLS   28.00  MAR  17.50  QVW CW 11.13  6    16.87  3.7%  3.7%
ITIG   43.44  MAR  30.00  ITU CF 14.25  65   29.19  2.8%  2.8%


Company Descriptions

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

****

ASPX - Auspex Systems  $12.56  *** New Management ***

Auspex Systems is a leading provider of network data-access 
solutions for All the Data, All the Time(TM).  The company's
customers are the market leaders and innovators in some of 
today's most competitive industries, where around-the-clock
availability of data is essential in order to achieve the 
individual objectives of their businesses.  With a new CEO
and president, and an upgrade from Preferred Capital, Auspex
appears ready to breakout above the November high.  We favor
the improving technicals and the increased volume on rallies.

MAR 10.00 XUM CB Bid=3.25 OI=267 CB=9.31 RC=7.4% RNC=7.4%

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

****

ELIX - Electric Lightwave  $21.75  *** Blue Sky? ***

Electric Lightwave is a leading integrated communications provider
of enhanced data services, frame relay, ATM and Internet access to
bandwidth intensive businesses and the growing e-commerce market. 
The company provides long-distance and data services nationwide. 
In its full-service markets, the company offers businesses local 
and long-distance telephone service and high-speed broadband via 
its fiber optic networks.  Electric recently settled its dispute 
with US West and completed two more segments of its $131 million 
long haul route.  Electric Lightwave has been in a strong up-trend 
since December and is just shy of a new all time high.  We favor
a cost basis below the January high.  Earnings are due next week.

MAR 17.50 XQQ CW Bid=4.88 OI=46 CB=16.87 RC=3.7% RNC=3.7%

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

****

ITIG - Intelligroup $43.44  *** SeraNova IPO ***

Intelligroup is a leading global Application Services Provider 
that helps companies of all sizes improve their business 
performance by implementing, optimizing, hosting and supporting
innovative, customized, e-commerce and enterprise applications. 
Among its portfolio of ASPplus Solutions is the revolutionary 
myADVISOR, a personalized, web-based knowledge management support
system that delivers personalized user support for customized 
e-commerce and enterprise applications.  Intelligroup has been
in strong stage II climb since November when it announced a
plan to spin off its B2B subsidiary, SeraNova, during the first
quarter of 2000.  We favor a very conservative entry point below
the 50 dma and the recent January consolidation area.

MAR 30.00 ITU CF Bid=14.25 OI=65 CB=29.19 RC=2.8% RNC=2.8%

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

****

SMSC - Standard Microsystems $14.25  *** Technicals Only! ***

Standard Microsystems is a worldwide supplier of metal-oxide-
semiconductor/ very large scale integrated (MOS/VLSI) circuits 
for the personal computer, peripherals and embedded systems 
marketplaces.  The company's products provide solutions in PC I/O, 
PC Systems Logic, USB and 1394 Connectivity, LAN and Embedded 
Control Systems.  Standard Microsystems resumed its uptrend
in January after a post earnings dip. We favor the change of 
character as SMSC has broken a multiyear downtrend.  The test
of the December high in early February bodes well for further 
upside movement.  We favor a cost basis below the support near
the 50 dma.

MAR 12.50 OMQ CV Bid=2.25 OI=0 CB=12.00 RC=4.2% RNC=4.2%

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

****

TLXN - Telxon $20.78  *** New uptrend? ***

Telxon is a leading global designer and manufacturer of wireless 
and mobile information systems for vertical markets. The company
integrates advanced mobile computing and wireless data communica-
tion technology with a wide array of peripherals, application-
specific software and global customer services for its customers.
Telxon has risen in unison with the rise of Aironet (AIRO), its 
former subsidiary.  Telxon recently made a move to obtain 90%
ownership in Metanetics, which gives Telxon the largest portfolio 
of image processing patents in the industry.  We favor the strong
technical history with the January consolidation area providing 
support near our cost basis.  

MAR 17.50 TNQ CW Bid=4.00 OI=462 CB=16.78 RC=4.3% RNC=4.3%

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

****

WRLS - Telular $28.00  *** Lucent Deal! ***

Telular designs and manufactures Fixed Wireless Terminals. The 
Company's proprietary telecommunications interface technology 
enables standard phone systems, fax, computer modem or monitored
alarm systems to utilize available cellular wireless service for
communications. Telular's product lines incorporate the world's 
leading cellular standards (GSM, TDMA, CDMA, AMPS) and include 
the PhonecellŽ and TelguardŽ lines.  Telular has been on a ride
into space since reaching severe lows last year.  The company's
revenues continue to improve with new agreements being announced 
almost weekly.  Investors have been bidding Telular ever higher, 
impressed with the move into China, and most recently, the deal 
with Lucent (enough for a 5 dollar spike on Friday).  We will 
remain conservative and take advantage of the call buyers who 
continue to inflate the option premiums.

MAR 17.50 QVW CW Bid=11.13 OI=6 CB=16.87 RC=3.7% RNC=3.7%

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

****

XICO - Xicor  $26.13  *** Improved Model! ***

Xicor designs, develops, manufactures and markets re-programmable
nonvolatile semiconductor integrated circuits containing digital,
analog and re-programmable nonvolatile elements.  Xicor's devices
offer a comprehensive set of features to its customers.  By virtue
of their non-volatility, Xicor's devices retain their information
content when power is lost or turned off.  Reprogramming is
accomplished by writing over the old data without a need for first
erasing the old data.  Xicor's devices can be reprogrammed bit by
bit or in larger groups of bits called words and pages without
being removed from the system.  Xicor products are sold in a
variety of packages, including plastic, ceramic and chip scale
packages for small footprint and height.  The transformation of
its business model is the reason behind the new success.  Last
summer they announced plans to outsource all of their production
and transition to R&D on the chips it makes.  Analysts took notice
and CIBC World Markets recently came out with a BUY rating and a
$28 price target.  RGR Financial has a STRONG BUY recommendation
with a $30 target.

MAR 22.50 CIU CX Bid=4.75 OI=394 CB=21.38 RC=5.2% RNC=5.2%

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


Naked Put Percentage List

The votes have been counted and it is overwhelming.  We are 
not only going to keep this section, but we are going to add
some charts to it as well.  Under the list you will find 
4 to 5 charts each week that show some of the plays with 
multiple support levels.  This will help you choose your play 
based on your risk tolerance.  Higher risk equals a higher 
return, but a safer play may help you sleep at night.  You 
make the call.  Thanks for an overall the great response to 
our inquiry last week!

There are 3 weeks left until expiration on the contracts listed 
below.  Not too shabby when you consider that fund managers 
used to hope for this kind of return in an entire year.    


Stock    Stock    Strike  Option   Option  Margin  Percent
Symbol   Price    Price   Symbol   Price   At 25%  Return

ITWO     150.27    135    QYJ-OF     9.00   37.57    24%
HGSI     206.00    180    HBW-OP    12.13   51.50    24%
IMNX     201.63    190    QUV-OR    13.50   50.41    27%
MLNM     263.00    240    QMR-OV    18.50   65.75    28%
VERT     225.75    210    ERW-OB    14.13   56.44    25%
NSOL     308.75    290    JNV-OR    15.50   77.19    20%
VRSN     239.88    220    QVD-OZ    10.25   59.97    17%
VSTR     140.44    130    BWU-OF     6.63   35.11    19%
CMRC     213.06    200    RUC-OT    12.00   53.27    23%
PMCS     185.63    165    SZI-ON     8.38   46.41    18%
VRTS     181.19    170    UQJ-ON     8.25   45.30    18%
INSP     225.31    200    FHY-OT    10.25   56.33    18%
CMVT     190.00    185    CQZ-OQ     8.38   47.50    18%
VIGN     228.75    220    GGV-OD    14.00   57.19    25%
JDSU     256.81    240    UCQ-OH    11.63   64.20    18%
BVSN     240.50    220    BZV-OD    13.63   60.13    23%
BRCM     191.00    180    RDU-OP     7.25   47.75    15%
AKAM     267.06    250    UMU-OJ    13.38   66.77    20%
BRCD     267.25    260    UBZ-OL    12.88   66.81    19%
AMCC     260.00    240    AZV-OH    14.00   65.00    22%
EPNY     187.00    170    UEP-ON    12.63   46.75    27%
NTAP     192.94    180    ULM-OP     9.38   48.24    19%
BEAS     129.88    120    BUC-OD     5.75   32.47    18%
DCLK      91.81     85    TDU-OQ     4.88   22.95    21%
CMGI     117.50    115    GCD-OC     8.63   29.38    29%
PHCM     153.00    145    UMC-OI     9.00   38.25    24%
CHKP     205.63    200    YKE-OT    12.38   51.41    24%



VRSN

 

AGGRESSIVE   SELL PUT MAR-240 QVZ-OH at $19.25 = 32%
MODERATE     SELL PUT MAR-230 QVZ-OF at $14.25 = 24%
CONSERVATIVE SELL PUT MAR-220 QVZ-OZ at $10.25 = 17%
 

MLNM

 

AGGRESSIVE   SELL PUT MAR-260 QMR-OX at $27.25 = 41%
MODERATE     SELL PUT MAR-240 QMR-OV at $18.50 = 28%
CONSERVATIVE SELL PUT MAR-220 QMR-OD at $ 9.38 = 14%


VERT

 

AGGRESSIVE   SELL PUT MAR-220 ERW-OD at $19.13 = 34%
MODERATE     SELL PUT MAR-210 ERW-OB at $14.13 = 25%
CONSERVATIVE SELL PUT MAR-200 ERW-OT at $10.13 = 18%


CHKP

 

AGGRESSIVE   SELL PUT MAR-200 YKE-OT at $12.38 = 24%
MODERATE     SELL PUT MAR-190 YKE-OR at $ 8.50 = 17%
CONSERVATIVE SELL PUT MAR-180 YKE-OT at $ 5.25 = 10%



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

Option Trading Mechanics: Making A Market

This week we examine a typical transaction and the method in which
floor-brokers profit through synthetic positions.

The majority of methods employed by floor specialists to profit
from options trading are based on pricing theory and statistical
probability.  Traders who participate in these transactions use
simple arbitrage techniques.  Very simply, when a retail trader
wants to buy a call or put option, the specialist will usually
create a synthetic call or synthetic put to offset the transaction.

The most profitable transactions for market makers are generally
deep-in-the-money calls and puts, since these options usually have
large bid-ask spreads (due to the lack of liquidity).  An example
of this type of trade: If an individual places an order to sell a
deep-in-the-money call, then the floor broker uses a reversal, or
reverse conversion with a short synthetic call (short stock and
short put) to offset the purchased call.  If the bid-ask spread is
$1 and the specialist pays the retail trader bid price only, the
position should yield a profit.  Recall that the basis for this
transaction is the market maker can buy the call at a discount and
at the same time, sell the synthetic call at fair value to generate
a risk free position.  Obviously this assumes the put option is
fairly priced and the stock can be shorted (sold) for the current
bid.  Any delay in the execution of the remaining components will
put the trade at risk.  If the share price changes or the "uptick"
rule (in most cases, stocks can be shorted only on an upward move)
prevents the specialist from shorting the stock in a timely manner,
the profit will quickly disappear.

There are no up-front funds needed for this technique but because
of the difficulty in shorting stock, specialists generally do not
receive all of the profit from the initial transaction.  However,
they do have one method of offsetting any potential losses.  In
the case of a reversal, the funds received from the sale of the
stock are placed in a risk-free, short-term investment.  Thus the
level of interest rates, the difference between the market prices
and fair value of the options, and the amount of funds received in
the short sale all have an effect on the eventual profitability of
the position.

Fortunately, all option trades do not result in a conversion or
reversal.  Since the majority of retail traders BUY options, and
since a large portion of purchased derivatives are redeemed at a
lower value (or expire worthless), market-makers will often take a
short position in these options.  Then they simply wait until the
option falls in value, to purchase an offsetting position.  In the
case of a short call option, they may eventually construct a long
synthetic call (a much easier transaction - no shorting of stock)
to offset the sold position.  Regardless of the situation or type
of arbitrage, their fundamental goal is to profit from disparities
in option pricing and by trading inside the bid/ask spread.

Now, is everybody ready to learn how they manage so many positions?



                      *** 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

WSTL   25.88  31.50   MAR  17.50  0.69  *$  0.69  13.2%
WPZ    15.31  12.25   MAR  10.00  0.38  *$  0.38  12.4% New Symbol
ZONA    7.69   8.50   MAR   5.00  0.31  *$  0.31  12.1%
NTRX   31.13  26.25   MAR  20.00  0.69  *$  0.69  11.2%
TSEMF  20.13  25.06   MAR  15.00  0.56  *$  0.56  10.6%
CRUS   20.31  19.88   MAR  15.00  0.38  *$  0.38   9.6%
PTEC   20.63  27.25   MAR  15.00  0.63  *$  0.63   9.6%
RWAV   10.56   8.44   MAR   7.50  0.31  *$  0.31   9.3%
PGEX   23.13  19.88   MAR  17.50  0.50  *$  0.50   8.5%
IDTC   31.50  38.13   MAR  20.00  0.50  *$  0.50   8.3%
SKYC   28.63  35.00   MAR  20.00  0.44  *$  0.44   8.0%
PILT   33.94  32.06   MAR  22.50  0.63  *$  0.63   7.4%
EXLN   23.00  20.19   MAR  15.00  0.31  *$  0.31   7.1%
MSGI   24.88  23.75   MAR  17.50  0.44  *$  0.44   7.1%
PTEC   23.06  27.25   MAR  17.50  0.38  *$  0.38   6.6%
DRD    28.00  24.56   MAR  20.00  0.56  *$  0.56   6.6%
AXTI   31.94  38.00   MAR  17.50  0.50  *$  0.50   6.3%
RNBO   30.88  30.13   MAR  22.50  0.38  *$  0.38   5.0%

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

Comments:

Advanced Communications (ADG) has changed its name and ticker
symbol to WorldPages.com (WPZ) and is experiencing some near
term selling pressure.  Close monitoring is warranted as 
WorldPages.com is testing support above $10.00.  Rogue Wave
(RWAV) is testing its 150 dma after a hard fall.  There are 
signs of strong accumulation but that doesn't prevent further
downside movement.


NEW PICKS

Sequenced by Company

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

ANET   12.69  MAR  10.00  QTE OB  0.25  97    9.75   9.0%
CLPA   44.81  MAR  20.00  QJC OD  0.75  244  19.25   7.7%
ESPI   12.75  MAR  10.00   AQ OB  0.50  659   9.50  16.4%
MSGI   23.75  MAR  17.50  UMS OW  0.38  36   17.12   7.4%
SCTC   24.38  MAR  17.50  YQS OW  0.63  8    16.87  11.4%
WSTL   31.50  MAR  22.50  QLW OX  0.56  493  21.94   8.2%
XICO   26.13  MAR  20.00  CIU OD  0.44  65   19.56   7.8%

Sequenced by ROI  

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

ESPI   12.75  MAR  10.00   AQ OB  0.50  659   9.50  16.4%
SCTC   24.38  MAR  17.50  YQS OW  0.63  8    16.87  11.4%
ANET   12.69  MAR  10.00  QTE OB  0.25  97    9.75   9.0%
WSTL   31.50  MAR  22.50  QLW OX  0.56  493  21.94   8.2%
XICO   26.13  MAR  20.00  CIU OD  0.44  65   19.56   7.8%
CLPA   44.81  MAR  20.00  QJC OD  0.75  244  19.25   7.7%
MSGI   23.75  MAR  17.50  UMS OW  0.38  36   17.12   7.4%


Company Descriptions

OI  - Open Interest
CB  - Cost Basis or break-even point 
ROI - Return On Investment 

****

ANET - Act Networks  $12.69  *** Own This One! ***

ACT Networks develops, manufactures, and markets multi-services
access products that enable the convergence of voice, video and
data onto one managed network.  Service providers and enterprise
customers use their products to build converged networks that are
bandwidth efficient, cost-effective and easy to manage.  Their
award-winning NetPerformer product incorporates advanced voice
and data compression algorithms, enhanced switching and traffic
management capabilities, and state-of-the-art hardware and
software integration technologies.  This position is simply based
on the new technical character of the issue.  The possibility of
owning the issue is slim but even in that case, the reward is
favorable.

MAR 10.00 QTE OB Bid=0.25 OI=97 CB=9.75 ROI=9.0%

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

****

CLPA - Cell Pathways  $44.81  *** Speculation Only! ***

CLPA is a pharmaceutical company focused on the development and
commercialization of products targeted at the treatment and
prevention of pre-cancerous lesions and cancer.  They aim to be
a leader in cancer chemo-prevention and to build and integrated
pharmaceutical company focused on the oncology market.  Their
business is characterized by a unique compound, Aptosyn that is
undergoing clinical trials for the treatment of various types of
pre-cancerous conditions.  Another drug candidate, CP461, has
completed Phase Ia human clinical testing and a Phase Ib clinical
trial in cancer patients is currently underway.  CLPA reported
earnings last week and there were no major surprises.  The company
also affirmed that preparations for commercializing Aptosyn are
proceeding as anticipated.  With some of the most overpriced
options in this market, this position must certainly be considered
speculative.

MAR 20.00 QJC OD Bid=0.75 OI=244 CB=19.25 ROI=7.7%

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

****

ESPI - e.spire  $12.75  *** Expansion And Growth! ***  

e.spire is a facilities-based Integrated Communications Provider
to businesses primarily in major markets in the southern half of
the United States.  They were one of the first Competitive Local
Exchange Carriers (CLECs) to combine the provision of dedicated,
local and long distance services with frame relay, asynchronous
transfer mode (ATM) and Internet services.  Having established a
suite of telecom services which emphasizes data capabilities in
addition to traditional CLEC offerings, e.spire has evolved into
an ICP.  Their facilities-based network infrastructure is designed
to provide services to customers on an end-to-end basis, and has
an extensive physical infrastructure and coast-to-coast broadband
data network.  e.spire was recently awarded more than $16 million
in its reciprocal compensation collection action against BellSouth
and GTE Florida.  The company also received $50 million of new
funding from Allied Capital Management.  This commitment brings
the current total of equity financing to $175 million; plenty of
money to complete their aggressive business plan.

MAR 10.00 AQ OB Bid=0.50 OI=659 CB=9.50 ROI=16.4%

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

****

MSGI - Marketing Services Group  $23.75  *** A New CMGI? ***

MSGI provides direct and database marketing, telemarketing and
telefundraising, media planning and buying, online consulting and
commerce, automated Internet marketing and Web design services.
MSGI operates in the category of Marketing Services; defined as
direct marketing; print & mail, telemarketing and telefundraising,
infomercials, Internet marketing, point of purchase, lettershop
and fulfillment.  This area has grown rapidly during the 90's due
to its consistently improving cost efficiencies (compared to mass
marketing) as well as advances in technology and data capturing 
capabilities.  Marketing Services recently completed a $30 million
strategic private placement of preferred stock.  The shares were 
purchased by an affiliate of Credit Suisse First Boston and the 
proceeds will be used for working capital including additional
minority Internet investments.  In short, MSGI plans to expand
into other strategic areas and this new funding will help them
exploit new opportunities.

MAR 17.50 UMS OW Bid=0.38 OI=36 CB=17.12 ROI=7.4%

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

****

SCTC - Systems And Computer Tech.  $24.38  *** Learning Curve ***

SCTC licenses and supports a suite of client/server, enterprise 
software and provides a range of information technology services,
including outsourcing, systems implementation, systems integration
and maintenance and enhancements.  The company offers a continuum
of information technology solutions from application software to
large-scale outsourcing contracts.  SCT targets the 2,200 English 
speaking institutions of higher education with enrollments greater
than 2,000 students for its software and services.  SCTC recently 
announced they will form a company with Datatel in the distance
education market.  This new company would provide a web-based
platform for integrating electronic teaching/learning environments
with administrative enterprise systems.  This is a unique and
undeveloped market that should provide enormous potential.

MAR 17.50 YQS OW Bid=0.63 OI=8 CB=16.87 ROI=11.4%

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

****

WSTL - Westell Technologies  $31.50  *** On The Move! ***

Westell Technologies and its subsidiaries supplies DSL Customer
Premise Equipment, DSL and Telephone Access Systems and monitoring
equipment for demarcation points in telecom networks.  Conference
Plus, their service business, is an Application Service Provider, 
hosting and providing audio, video, IP conferencing and support 
services. They service ILECs, CLECs, alternative carriers, and
Fortune 100 companies in North America, and through partners and 
reseller programs, telecommunications companies around the Globe.
New contracts with SBC Communications (SBC) and BellSouth (BLS)
along with the pending acquisition of Teltrend, a telecom and data
communications company have attracted investors to the issue.
Warburg Dillon Read recently raised their price target on Westell
to $48 based on the near-term upside potential.  We simply favor
the bullish technical outlook.

MAR 22.50 QLW OX Bid=0.56 OI=493 CB=21.94 ROI=8.2%

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

****

XICO - Xicor  $26.13  *** Improved Model! ***

Xicor designs, develops, manufactures and markets re-programmable
nonvolatile semiconductor integrated circuits containing digital,
analog and re-programmable nonvolatile elements.  Xicor's devices
offer a comprehensive set of features to its customers.  By virtue
of their non-volatility, Xicor's devices retain their information
content when power is lost or turned off.  Reprogramming is
accomplished by writing over the old data without a need for first
erasing the old data.  Xicor's devices can be reprogrammed bit by
bit or in larger groups of bits called words and pages without
being removed from the system.  Xicor products are sold in a
variety of packages, including plastic, ceramic and chip scale
packages for small footprint and height.  The transformation of
its business model is the reason behind the new success.  Last
summer they announced plans to outsource all of their production
and transition to R&D on the chips it makes.  Analysts took notice
and CIBC World Markets recently came out with a BUY rating and a
$28 price target.  RGR Financial has a STRONG BUY recommendation
with a $30 target.

MAR 20.00 CIU OD Bid=0.44 OI=65 CB=19.56 ROI=7.8%

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



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

Support At 10,000? Not Hardly...

Friday, February 25

Blue-chips plummeted Friday driving the Dow below the 10,000 mark
for the first time in almost a year.  The industrial index ended
230 points lower at 9862.  The Nasdaq Composite also slid lower,
closing down 27 points at 4590.  The S&P 500 index ended down 20
points at 1333.  Volume on the Big Board reached 1 billion shares
with declines outpacing advances 1,807 to 1,169.  Increasing bond
yields added downward pressure to stocks with the 30-year treasury
down 7/32, bid at 101 8/32, pushing its yield up to 6.14%.  For
the week, the Dow slid 357 points while the S&P 500 index fell 12
points.  The Nasdaq opposed the trend, gaining 178 points.


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

Exodus       EXDS   MAR105P/M110P   $0.68   credit   bull-put
Macromedia   MACR   MAR65P/MAR70P   $0.68   credit   bull-put
Minimed      MNMD   MAR70P/MAR75P   $0.68   credit   bull-put
Polycom      PLCM   MAR70P/MAR75P   $0.50   credit   bull-put

All of our new plays offered favorable entry opportunities.  The
most interesting position was Minimed.  The stock fell sharply
during the session, providing a much larger credit than expected.
The key now will be the recent technical support near $80.  Any
sustained move below that area should be considered a signal for
early exit or roll-out.
 

Portfolio plays:

The Dow industrials fell precipitously Friday, ending below the
technically significant 10,000 level as investors continued to
liquidate positions in inflation-sensitive stocks.  Analysts said
traders were also concerned with stronger-than-expected economic
data and the weakening broad market.  Almost half of the S&P 500
stocks are down at least 30% from last year's highs and only one
quarter of the issues on the NYSE have managed to avoid a severe
correction.  The leadership in the market has become extremely
narrow and despite several attempts to rally, technology stocks
were unable to drive the Nasdaq to a new record Friday.  With so
much negative sentiment among blue-chip issues, the number of
investors retreating into conservative investments such as money
market funds has increased significantly.

Fortunately, the Spreads portfolio has been blessed with a number
incredibly strong issues.  The top performers in the section were
among the market leaders.  MRV Communications (MRVC) had another
outstanding session, climbing $24 to a new all-time high at $139.
Ariba (ARBA) made the leader board for the third consecutive day
with an $11 rally to $264.  Ionay (IONA) bounded $8 to a recent
high near $81 and Iss Group (ISSX) closed at a record $100.  In
the small-cap group, Ptek Holdings (PTEK) jumped $1.31 to $9.88
on speculation of favorable earnings and the biggest surprise of
the day, IDT Corporation (IDTC) gapped $4 to a 52-week high near
$38 on continuing rumors of the Net2phone buy-out.  The majority
of these issues are well beyond their maximum profit targets and
there is little to suggest the trend will change in the near
future.

It's anybody's guess where the market is going and with that in
mind I feel fortunate to be departing the mayhem for a few days.
This week I am traveling in Russia and will be unable to provide
spread and combination candidates for the newsletter.  I will
however be publishing some new articles on strategy selection
and trading techniques (if my current ISP in Moscow is intact).
Those of you with questions concerning trading techniques can
send them to:

Contact Support

and they will be forwarded to another of our talented researchers.

Good Luck!


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

MIR - Mirage  $15.00   *** An Offer On The Table! ***

Mirage Resorts owns and operates hotel-casinos and resorts.  The
company is also developing hotel-casinos in the Marina area of
Atlantic City, New Jersey.  Bellagio is a European-style luxury
resort located on an approximately 90-acre site at the center of
the Las Vegas Strip.  The Mirage Hotel is a tropically themed
destination resort adjacent to Treasure Island near the center
of the Las Vegas Strip.  Treasure Island is a pirate-themed hotel
resort that attracts a number of first-time Las Vegas visitors.
Beau Rivage is a new beachfront resort located in Mississippi.
The Golden Nugget is a hotel-casino in downtown Las Vegas.  The
Golden Nugget-Laughlin is located near the center of the tourist
strip in Laughlin, Nevada.  Holiday Inn-Casino Boardwalk is also
on the Las Vegas Strip and the Monte Carlo just south of Bellagio.
Quite a collection of establishments!

Officials at the MGM Grand hotel recently offered to buy Mirage
resorts in a cash and stock deal valued at over $3 billion.  Kirk
Kerkorian of the MGM Grand said he would pay $17 per share in cash
or a combination of stock and cash to acquire the hotel group.
The offered price is well above the recent trading range of MIR's
stock and represents a substantial premium to the current
shareholders.  Park Place Entertainment and Harrah's may also be
interested in the bidding for Mirage but neither of the potential
suitors is ready to make a public offer.  Both companies are
reportedly crunching the numbers to determine whether a bid of
their own is feasible.  After the announcement, First Boston and
Deutsche Banc Alex Brown upped their ratings on Mirage Resorts.


PLAY (speculative-bullish/diagonal spread):

BUY  CALL MAY-12.50 MIR-EV OI=2698 A=$3.38
SELL CALL MAR-15.00 MIR-CC OI=2212 B=$1.12
INITIAL NET DEBIT TARGET=$2.00-$2.12 INITIAL TARGET ROI=18%

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

****

UFS - U.S. Foodservice  $15.50   *** Buyout Coming? ***

U.S. Foodservice is a broad-line foodservice distributor that
operates a number of full-service distribution centers that cover
a geographic area encompassing more than 85% of the population of
the United States.  The company markets and distributes more than
40,000 national, private label and signature brand items to over
130,000 foodservice customers, including restaurants, hotels,
healthcare facilities, cafeterias and schools.  U.S. Foodservice
product offerings include non-frozen food products, frozen foods,
janitorial and paper products and equipment and supplies.  Their
private label brands are Rykoff-Sexton Connoisseur, Foodservice
Blue, Foodservice Red, Chef's Variety, Harvest Value, Foodservice
Cattleman's Choice and Selection, Magnifry and Magnifries.  Their
Signature brands are Roseli, Hilltop Hearth, Cross Valley Farms,
Patuxent Farms, El Pasado Authentic Mexican Cuisine with a Touch
of the Past, Rituals, Pacific-Jade and Harbor Banks.

UFS enjoyed a big rally to close the week and implied volatility
nearly doubled in the options as takeover rumors circulated.  The
volume has been off the scale in both stock and option trading and
with the speculation of a buyout price in the low 20's, the trend
should continue.  Officials at the company did not return phone
calls for comment on the rumors or the stock and options activity
but there were a number of traders that suggested the rumors are
accurate.  Prior to the move there were two major brokers covering
the issue.  Schroder recently offered a STRONG BUY on quarterly
earnings strength and growth momentum while US Clearing reiterated
their STRONG BUY with a target of $29, based on expected 15% annual
EPS growth.  Regardless of the fundamentals, this position is a
speculation play with low risk and favorable reward.


PLAY (speculative - bullish/covered-combo):

BUY STOCK - UFS  LAST = $15.50
SELL CALL MAR-12.50 UFS-CV OI=992 B=$3.62
SELL CALL MAR-12.50 UFS-OV OI=195 B=$0.68
TARGET COST BASIS=$11.81 COMBINED ROI=12% (margin)

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

****

ICGX - Icg Communications  $30.94  *** Earnings Rally! ***

ICG is a leading competitive integrated communications provider
(ICP).  ICPs seek to provide an alternative to incumbent local
exchange carriers (ILEC), long distance carriers and other
communications service providers for a full range of services.
Through its competitive local exchange carrier (CLEC) operations,
the company operates fiber networks in regional clusters covering
major metropolitan statistical areas in California, Colorado,
Ohio, the Southeast and Texas.  They also provide a wide range of
network systems integration services and maritime/international
satellite transmission services.  The company markets bundled
service offerings provided over its fiber network including long
distance, enhanced telecommunications services and data services.
Additionally, ICGX owns and operates a nationwide data network,
over which the company recently began providing wholesale Internet
access and enhanced network services.

This play is all about earnings and with the conference call
scheduled for Tuesday, the potential for a large movement is
excellent.  Unfortunately, we don't know in which direction that
move will be.  Prudential Securities is bullish on the upcoming
report with a recent suggestion that the company will announce
several new developments.  Earlier in the month, Merrill Lynch
reinstated coverage of ICGX with new target price of $35.  Our
outlook is cautiously optimistic and we will participate in the
speculative play with a conservative, low-cost position.


PLAY (speculative - bullish/debit spread):

BUY  CALL MAR-20 QIG-CD OI=503  A=$11.25
SELL CALL MAR-25 QIG-CE OI=3719 B=$6.88
INITIAL NET DEBIT TARGET=$4.25 ROI(max)=17%

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


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

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues.  Review each play individually and make
your own decision about the future outcome of the position.

****

CTXS - Citrix Systems  $100.06   *** Post-Split Rally? ***

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

In mid-January, Citrix posted fourth-quarter operating earnings
of $37.7 million, 50% higher than the year-earlier quarter and
slightly ahead of Wall Street's consensus expectations.  Citrix
also recently split their stock 2-for-1 and after the dividend
was issued, there was little change in the trend.  The technical
pattern indicates support near $82-$85 and with last week's move
to a new all-time high, this position appears to be favorable
short-term speculation.

 
PLAY (aggressive - bullish/credit spread):

BUY  PUT MAR-85.00 XWW-OQ OI=282 A=$2.38
SELL PUT MAR-87.50 XWW-OY OI=20  B=$2.75
INITIAL NET CREDIT TARGET=$0.43 ROI(max)=20%

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

****

VIGN - Vignette  $228.75  *** Going For A New High! ***

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

Vignette reported record earnings last month with total revenues 
up 512% to $40.9 million compared to the same period in 1998. 
Though it reported a loss ($0.10 a share), it expects to turn 
profitable by the last quarter of 2000.  It is interesting that 
Vignette's board of directors voted in favor of increasing the
number of authorized shares to 500 million from the current 80 
million (pending approval by share-holders on March 14).  The
stock split in late 1999 near $100. Is there another split on
the way?

The consolidation we encountered in past weeks may be ending and
now the question is, "Will a new high be the outcome?"  The chart
remains bullish with the current price well above a rising 50 DMA
and Vignette may soon continue its stage II climb into "blue sky"
territory.


PLAY (aggressive - bullish/credit spread):

BUY  PUT MAR-185 GGV-OQ OI=222 A=$2.75
SELL PUT MAR-190 GGV-OR OI=327 B=$3.50
INITIAL NET CREDIT TARGET=$0.88 ROI(max)=21%

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


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