Option Investor

Daily Newsletter, Tuesday, 02/29/2000

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The Option Investor Newsletter         Tuesday  2-29-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
       2-29-2000           High     Low     Volume Advance Decline
DOW    10128.30 +  89.70 10204.90 10030.30 1,186,106k 1,809  1,179
Nasdaq  4696.69 + 118.84  4698.46  4637.17 2,088,835k 2,644  1,606
S&P-100  738.64 +  10.89   741.48   727.75    Totals  4,453  2,785
S&P-500 1366.42 +  18.37  1369.63  1348.05            61.5%  38.5%
$RUT     577.71 +  20.03   577.72   557.68
$TRAN   2388.86 +  27.08  2394.82  2355.61
VIX       25.59 -   1.31    26.99    25.14
Put/Call Ratio       .41

Looks like a rally, feels like a rally, but is is a rally?

If it is not a rally it is a very good imitation. However, you
know there is a catch. Remember back just two weeks ago on the 
11th/14th when we had a -200 point Friday and a plus +350 point 
Monday/Tuesday? Or maybe you have forgotten Friday Jan-28th and
the -200 point drop followed by a +300 point gain on Mon/Tue.
I am going to refresh your memory below but hopefully we have
broken the cycle today and traders are ready for the April
earnings run to begin.


The NASDAQ caught fire today after resting yesterday with a
needed profit taking stop. The rise came on the backs of chip
stocks and biotechs with the very big caps mostly quiet. MSFT
lost -2.19, DELL -.19, INTC +.63, CSCO +1.63, WCOM +.38, QCOM
-.69 and with ORCL the winner at +5.63.

After resting last week the biotechs were back in force. Big
winners, again, were PDLI +32, HGSI +13, IMNX +6. Probably the
broadest sector advance was the semiconductor stocks. After
receiving several upgrades today the sector ramped up to record
gains again. PMCS scored a price upgrade to $250 and a +14.31
gain. ATML, the play of the day last night posted a +5.88 gain.
TriQuint posted a +7.56, TXN +10.25, LSI +7.00, MU +20, AMAT 
+6.00, KLAC +8.00, XLNX +9.00, VTSS +12, BRCM +16. Simply 
incredible! The semiconductor index was up +104 or a whopping 
+10%! Some estimate the need for chips could grow by +300% in 
the next year. Motorola helped boost the sector interest by 
announcing a 3:1 split and added +13.50. Salomon Smith Barney 
raised price targets on seven chip stocks and Deutsche Banc 
Alex Brown resumed coverage of three stocks with strong buy 
ratings. (ALTR, XLNX, ATML). Rambus, the much maligned, quick
to brag, slow to ship, fast chip company added +60 to $301. 
This stock was only $80 two weeks ago. Looks like their time 
has come!

Banc Boston Robertson Stevens is holding a technology conference
this week and the list of presenters is a "who's who" of the
tech world. CMGI was scheduled to present at 4:30 today and 
everyone expected a bullish outlook on web growth. Add to the
CMGI pre-conference hype a raising of estimates by BBRS and you
got an explosive rally by CMGI posting a +13 gain after 2:30
when the announcement came. CMGI had been moving down all day
after a nice recovery yesterday. I was even thinking about 
closing my CMGI position for lack of follow through but with
earnings only two weeks away I had decided to hold. A good
decision in retrospect. 1stUp.com, a CMGI company, and Lycos
announced today a free Internet service and CMGI was expected
to present the plans at the conference. A CSFB analyst said
this was a no-lose proposition since offering free Lycos
access would eliminate the need for an outside ISP, letting
Lycos control both access and content. CMGI will receive a
split of the ad revenue from the project. With 65 million
dial-up Internet users Lycos expects to garner a large share 
due to their size. AltaVista, another CMGI Company, also offers
free access. 


Was it the falling consumer confidence number announced this
morning that changed investor sentiment? I doubt it. The 
factor that made the dynamic duo team up for another dance
was probably something as simple as an extreme oversold 
condition on the Dow stocks. Nothing moves in a straight line
forever and if you look at the daily Dow chart above it has
been repeating the four down two up for sometime now. I felt
fairly good about this rally on the surface but as I write 
this I am having second thoughts. The VIX has retreated from
the 29.50 buy range and plummeted to close at 25.55 today.
The put/call ratio dropped to .41, which is also negative.
These two indicators are not infallible but they should 
cause you to be aware of the subtle changes in the markets
tomorrow. Granted these indicators are skewed toward NYSE 
stocks but as the Dow/NYSE goes, so goes the market eventually.
If we roll over again this week buyers who have been thrice
burned on bear traps recently will be very cautious before
stepping back into the gap the next time the Dow drops under
10K. On the flip side, I will put my bullish hat on here, 
the advance/decline ratios were the strongest I have seen 
of any of these aborted rallies. The past bear trap rallies
have had advances only even with declines or even losing to
declines so I think this one may have some staying power.

This divergence between the Dow and the NASDAQ has been 
unprecedented and the NASDAQ shows no signs of correcting
anytime soon. That means the Dow is the index that has to
change its spots. That may be happening this week. Even with
a downgrade to Alcoa today the Dow, which opened down, managed 
to mount a good steady climb all day and did not really sell
off at the close. There was a small sell program that hit at 
10200 for about -65 points but buyers stepped up and filled 
the gap. Financials had a mixed day and were hurt by an
earnings warning from a regional bank but most rose slowly
all day. Unsettling however was the drop in the last
five minutes by AXP, JPM, BAC, WFC and BK. Citicorp broke
the mold by finishing close to the high of the day. It
could have just been fear of darkness and fear of another
repeat drop for the other financials but Wednesday will tell.
I think it is a good sign that the Dow finished positive
with major components losing ground. IBM -1.75, MSFT -2.19,
GM -1.88, DD -1.38 and AA -2.56. Volume increased to the
upside on IBM when it touched $101 late this afternoon and
there was a nice bargain hunting bounce at the close.

With the first April earnings only five weeks away the odds 
of any more serious drops are reduced every day. The NASDAQ 
rally today was on the largest volume ever of 2.08 bln shares 
and the 8th largest point gain. Some analysts attribute some 
of the gains to end of month window dressing by hedge funds 
but I think it was simply real buyers trying not to miss the 
next express train out. The next economic stumbling blocks
are the NAPM and Construction Spending tomorrow and then
the big February Employment Report on Friday. I don't think
anything short of a blowout on the Employment Report can 
cause any more damage from interest rate fears than we
already have. We know the Fed will raise rates at the next
two meetings. We know Greenspan will ONLY raise +.25% each
and we know that the political process may slow down any
rate increases after that. In short, interest rates have
a top and we know where that top is within .25%. The Fed
will not and has not raised much above 6% even when the
economy was stronger than it is currently. Investors are
awakening to this fact and the future raises will prove to
be less of a deterrent to the market than the Y2K event.
If we get another dip this week, it may be our last.

In the abandon ship category, we recommended that readers 
close their positions on the ANAD play before the close on 
Tuesday to avoid post split depression and profit taking 
from the nice gains on this 3:2 split run. It is nice to 
see you took our advice but did you all have to wait until
the very last minute? The market maker must have thought
the sky was falling. Stop losses anyone? If you did not
have one you are now married to this play. 


In the rumor department there was a rumor today that DT was 
going to announce a buyout of Qwest after PCCW bought Cable
and Wireless for $38.1 billion. The stock perked up around
midday which could be insiders trying to beat the announcement.
I picked up some but it is still just a rumor!! Also the rumor 
that JDSU will be added to the S&P-500 is making the rounds again. 
Eventually this will happen but it may not be the next entry. 
Long term buyers should plan now for a future surprise.  

Now see, I made it through an entire commentary without using
the terms "--- economy."

Trade smart and sell too soon.

Jim Brown

Current positions include:



Micronetics: Bringing Crystal-Like Clarity to Wireless

Wireless, wireless, wireless. Have you heard enough about this 
industry? I sure haven't. Words like fiber optic networking, 
dedicated subscriber lines, undersea dark fiber, optical 
cable, gigabytes, hybrid fiber coax, pump lasers, photon 
amplifiers, and high-speed access can easily perk up the 
ears of investors. Well, add to that list voltage control 
oscillators, attenuators, and multi-path fading simulators. 
The future of telecommunications is both exciting and 
confusing. I think Webster's needs to publish a technology 
terms dictionary.   

Micronetics Wireless (NOIZ), based in Hudson, New Hampshire, 
designs and manufactures radio-frequency (RF) components and 
test equipment that help keep signals clear in cellular, 
satellite, microwave, and radar systems worldwide. Products 
include RF controls for military radar and communications 
systems, noise source components that test reception and 
transmission quality, and other noise generators and frequency 
emulators. They even help out the local weatherman in making 
their predictions.

Lowered defense spending in recent years has forced 
Micronetics to shift its focus toward the commercial sector. 
Sales are now evenly split between commercial and military 
manufacturers, including Lockheed Martin, Lucent, Marconi, and 
Texas Instruments. 

The company's equipment is used inside all kinds of telecom 
equipment to help reduce and/or eliminate noise signals inside 
wireless devices. You probably have one of their devices in 
your cellular phone. 

The company is small. They currently have just 3 patents. One 
is for its MicroSource low phase VCO (voltage control 
oscillator), another is for its MicroCal Module, and a third 
patent covers the method and apparatus for verifying the 
integrity of smart antenna systems deployed in cellular, PCS 
and wireless local loop systems. Not the easiest stuff to 

The company is also in the process of obtain ISO Certification, 
which basically is an industry stamp of approval of quality and 

But this small company, all of a sudden, has seen some huge 
moves in its stock price. Shares, which have been languishing 
in the $2 to $3 range for the last couple of years, have since 
moved up to $10, where it had been sitting until yesterday. 
Then the floodgates opened. Shares of NOIZ erupted, rising 
more than $14, or 136 percent, to $25. Shares are up another 
$17 to $42 today.

The big news: The company announced that it was demonstrating 
the first integrated AWGN (additive white Gausian noise) 
Generator and Multi-Path fading simulator for CDMA 
applications at the CTIA Wireless 2000 in New Orleans. Huh?

The two main sources of signal distortion in wireless 
communications systems are multi-path fading (weakening of the 
signal) and noise contamination (static). The product NOIZ is 
demonstrating integrates into one piece of test equipment the 
automatic generation of additive Guasian noise for signal to 
noise ratio measurements, and communication channel simulation 
for inducing various fading and multi-path effects on the 
transmitted signal. 

Simply stated, their product combines multiple test functions 
in one single product, which is cheaper, smaller and easier to 
use than those currently available on the market. And its the 
only product in the market.   

In the last eight months, the only insider buying stock has 
been CEO Richard Kalin, who bought 1 million shares at $1.41 
back in July of 1999. Unusually enough, all other transactions 
by insiders have been planned sales, adding up to around 
90,000 shares. Kalin currently owns about 31 percent of the 

The financials for NOIZ look pretty good. For the third 
quarter of fiscal 2000, ending December, net sales increased 
to $1.66 million from $1.09 million in the prior year period, 
an increase of over 52 percent. Net income increased to 4 
cents per share versus 3 per share in the same quarter a year 
ago, an increase of 25 percent. 

Revenues for the first nine months of FY2000 increased to 
$4.49 million from $3.29 million, a 36 percent increase. Net 
income increased to 11 cents from 10 cents per share, up 16 

In the last few months, NOIZ has received contracts from areas 
other than just the wireless arena, confirming the wide 
acceptance of NOIZ's products. For example, on January 18, the 
National Oceanic and Atmospheric Administration awarded 
Micronetics a contract to supply noise measurement 
instruments. Ralph Marrone, Vice President of Micronetics/
Equipment, stated, "This is the first of what is expected to 
be a series of contracts over the next few years to supply 
these instruments to several of the National Weather Service's 
NEXRAD weather radar stations." 

Also, Micronetics was awarded a significant order from Daimler 
Chrysler Aerospace to supply microwave-integrated assemblies 
for the European Fighter Aircraft. Multi-year deliveries are 
scheduled to begin the first half of 2000. 

NOIZ seems to be making quite a bit of just that...noise. Like 
I mentioned earlier, Micronetics is a small company, but it 
has some very innovative products, and it happens to be in 
one of the hottest sectors on Wall Street. The company is 
profitable, which is an anomaly in the youthful wireless 
industry. A word of caution: the number of shares in the float 
is quite small, at around 2 million. Net profit margins are 
just under 6 percent, and it has practically no debt. NOIZ is 
not covered by any analysts, presently. Perhaps these latest 
announcements will finally get NOIZ abuzz on Wall Street.

Market Posture

As of Market Close - Tuesday, February 29, 2000 

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

DOW Industrials   10,700  11,250  10,128    BEARISH   2.17
SPX S&P 500        1,400   1,450   1,366    BEARISH   2.18
OEX S&P 100          740     780     739    BEARISH   2.18
RUT Russell 2000     500     520     578    BULLISH   2.24
NDX NASD 100       3,800   4,000   4,267    BULLISH   2.24
MSH High Tech      1,850   2,000   2,075    BULLISH   2.24

XCI Hardware       1,300   1,460   1,515    BULLISH   2.24
CWX Software       1,200   1,470   1,551    BULLISH   2.24
SOX Semiconductor    800     900   1,170    BULLISH   2.24
NWX Networking       940   1,000   1,109    BULLISH   2.24
INX Internet         700     800     753    Neutral   1.06

BIX Banking          500     550     485    BEARISH  11.30
XBD Brokerage        400     450     450    Neutral  11.30
IUX Insurance        500     550     479    BEARISH  11.30

RLX Retail           950   1,000     836    BEARISH   1.28
DRG Drug             340     380     321    BEARISH   2.18
HCX Healthcare       700     750     664    BEARISH   2.18
XAL Airline          120     140     117    BEARISH   5.21
OIX Oil & Gas        280     315     252    BEARISH   1.27

Posture Alert    
The broad market as a whole locked in a solid day as the Dow and 
NASDAQ both climbed higher on good volume. The NASDAQ traded 2.1 
billion shares, which still shows how much cash is being put to 
use. The Semiconductor sector was on fire, as that index closed up 
+9.75%! Other leaders include Brokerage (+5.88%), Networking 
(+4.24%), the Russell 2000 (+3.59%), and Software (+3.52%). There 
are no current changes in posture.

Market Sentiment 

Tuesday, February 29, 2000

The Shorts Keep on Shorting!

The Dow and NASDAQ actually hung together for a day, but the 
bigger news is that volume on the NASDAQ surpassed the 2-billion 
mark again! This increase in volume is a combination of the cash 
flow that is still being put to use, as well as the shorts 
running for cover, which leads us to our topic today.

One important gauge of sentiment is the level of short interest on 
the major exchanges. Investors who sell securities "short" borrow 
stock and sell it, betting that the stock's price will decline and 
that they will be able to buy the shares back later at a lower 
price for return to the lender. Short interest reflects the number 
of shares that have yet to be repurchased to give back to lenders. 
In the past, stocks that have heavy short interest, when combined 
with some sort of positive news, has witnessed very quick and 
powerful up-moves.  At times, short sellers are forced to cover, 
which only helps the buying pressure, and this is known as a 
"short squeeze." 

Short sales outstanding on the Nasdaq rose again in the latest 
month, hitting a fifth consecutive record. The level of short 
sales not yet closed out, jumped 8.51% to 2,618,936,228 shares on 
February 15. If you look at the graph below, and go back 5 months 
when record shorting began, you see a very nice corresponding 
return for the index.


As such, below is a list of the most heavily shorted stocks on the 
NASDAQ, and based on changes from the previous month, it is evident 
that the shorts are alive and well. 

Largest Short Positions			
Rank                     Feb. 15            Jan. 14          Change
1  Oracle                45,414,368        40,983,954      4,430,414  
2  Dell Computer         42,277,863        41,159,694      1,118,169  
3  Cisco Sys             40,121,348        38,730,832      1,390,516  
4  Amazon.Com            36,448,474        31,865,788      4,582,686  
5  MCI Worldcom          35,756,276        30,858,750      4,897,526  
6  Intel                 34,173,314        32,111,659      2,061,655  
7  E*trade Group         32,853,309        25,746,956      7,106,353  
8  Microsoft             32,772,285        38,248,483     -5,476,198  
9  Nextel Com A          29,661,046        27,211,762      2,449,284  
10 Qualcomm              28,499,590        28,392,634        106,956  
11 Global Crossing       24,999,886        26,370,891     -1,371,005  
12 Yahoo                 22,930,241        33,373,120    -10,442,879  
13 Informix              22,488,375        12,536,720      9,951,655  
14 Comcast Cl A          22,081,080        19,395,863      2,685,217  
15 AT Home               21,456,638        19,835,805      1,620,833  
** Rambus                 8,832,872  

Rambus was included to show what can happen when the shorts get 
squeezed. Rambus stock has gained +164 dollars in just the last 5 
days. CNBC continued to highlight the squeeze on air, which only 
helped add fuel to the fire! 

Largest Changes 

Rank                     Feb. 15            Jan. 14          Change
1  Exodus Commun         18,634,733         8,642,432      9,992,301  
2  Informix              22,488,375        12,536,720      9,951,655  
3  Paging Network         9,009,442           888,409      8,121,033  
4  E*trade Group         32,853,309        25,746,956      7,106,353  
5  CMGI                  19,937,810        14,218,326      5,719,484  
6  Read-Rite             10,680,730         5,185,259      5,495,471  
7  Conexant Systems      15,619,346        10,215,526      5,403,820  

1  Yahoo Inc             22,930,241        33,373,120    -10,442,879  
2  BEA Systems            3,224,054         9,878,207     -6,654,153  
3  Microsoft             32,772,285        38,248,483     -5,476,198  
4  Psinet                10,354,207        15,137,098     -4,782,891  
5  Chiron                 9,088,917        12,619,658     -3,530,741  
6  IDEC Pharmaceu         4,406,704         7,644,263     -3,237,559  
7  Peoplesoft             9,481,576        11,951,117     -2,469,541 


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. With the NASDAQ surpassing volume of 2 billion shares 
again, this money is obviously flowing into technology.

Short Interest:
Short interest continues to climb as quickly as the market. The 
short interest on the NASDAQ increased another +8.51%, for a 5th 
consecutive record.

Interest Rates (6.133):
The current yield is now safely off of 52-week highs and is 
temporarily out of the danger zone.

Mixed Signs: 

Volatility Index (25.59):
The VIX continues to prove that the low 30's are an excellent 
buying opportunity, and the low 20's continue to be a great 
selling opportunity. The VIX proved to be a good buying 
opportunity again this past week!

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 

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 

The Power of Sentiment Analysis

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

Pinnacle Index
OEX                             Friday       Tues 
Benchmark                       (2/25)      (2/29)

Overhead Resistance (755-800)     3.28       4.68
Overhead Resistance (730-750)     1.15       1.28

OEX Close                       719.78     738.64

Underlying Support  (700-720)     5.70       4.92
Underlying Support  (650-695)     8.11      10.20

What the Pinnacle Index is telling us:
Based on the most recent sentiment, support for the OEX continues 
to be strong, while overhead is light up to 750 benchmark. Option 
speculators are starting to bet on a major move, as evidenced by 
the big increase in overhead (755-800). So as a contrarian, we 
would bet against this logic and against any significant move 
above the 750 level in the near term. 

Put/Call Ratio                  Friday     Tues 
Strike/Contracts                (2/25)    (2/29)

CBOE Total P/C Ratio             .41       .41
CBOE Equity P/C Ratio            .36       .36
OEX P/C Ratio                   1.19       .99

Peak Open Interest (OEX)
                     Friday           Tues 
Strike/Contracts     (2/25)          (2/29)

Puts               700 / 7,704      700 / 8,177
Calls              800 / 7,965      750 / 8,182
Put/Call Ratio         0.97            .99

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 29, 2000                       25.59

Please view this in COURIER 10 font for alignment

Daily Results

Index     Last    Mon    Tue   Week
Dow    10128.31 176.53  89.66 266.19
Nasdaq  4696.69 -12.65 118.84 106.19
$OEX     738.64   7.97  10.89  18.86
$SPX    1366.42  14.69  18.37  33.06
$RUT     577.71   0.94  20.03  20.97
$TRAN   2388.86  10.52  27.08  37.60
$VIX      25.59  -1.98  -1.31  -3.29

Calls             Mon    Tue   Week

ENMD      98.50  11.38  11.00  22.38  Off to the races again
DNA      192.88   7.72  11.38  19.09  New, another new high!
COMS      98.00  -1.63  18.94  17.31  A big thank you to Palm
JDSU     263.63   3.81  10.63  14.44  New, a split run for JDSU
HGSI     218.25  -1.19  13.44  12.25  New, ready to explode
CMGI     129.56  -1.13  13.19  12.06  Can you say breakout!!!
QLGC     156.00  -3.63  14.38  10.75  Takes your breath away!
AFCI      68.13  10.31   0.38  10.69  AFCI hits the accelerator
NSM       75.13   5.50   1.63   7.13  NSM outlook brightens
ADIC      90.63   1.94   4.63   6.56  New, continues right up
ATML      49.50   0.44   5.88   6.31  Flexes it's muscles today
NEON      91.63  -2.63   8.69   6.06  NEON just won't burn out
EMLX     160.00  -8.38  11.25   2.88  EMLX restores our faith
SEBL     138.69  -3.69   4.00   0.31  SEBL gives us a squeeker
GLW      188.00  -8.06   8.25   0.19  GLW is a split candidate
ERICY     96.00   0.38  -2.00  -1.63  Volume on the right side
CHKP     203.94  -4.13   2.44  -1.69  Buyers lurking in wings
LHSP     105.94  -7.72   5.44  -2.28  Did you wait for bounce?
PCMS      18.25  -2.16  -2.22  -4.38  Dropped, sharks surface
VERT     220.00  -7.75   2.00  -5.75  Still time to enter VERT
INKT     137.13  -4.13  -3.88  -8.00  INKT bounces off support
INSP     217.00  -7.19  -1.13  -8.31  Intraday range for profit
ANAD     135.00  -0.88 -11.00 -11.88  Dropped, splits tonight
PHCM     139.63  -9.50  -3.88 -13.38  Dropped, gravity wins


RNWK      70.31  -5.38  -2.69  -8.06  New, singing the blues
RHAT      60.69  -4.81  -2.88  -7.69  RHAT gets comfortable
JNJ       72.00   1.56  -0.75   0.81  Nothing seems to help JNJ
MCOM      77.88  -4.50   6.00   1.50  Dropped, springboard
LLY       59.44   0.81   1.94   2.75  Dropped, rally's with DOW
KMG       44.75   1.63   2.38   4.00  Still beneath it's 10-dma
FD        36.69   2.69   1.44   4.13  Dropped, FD finds bottom
PGR       59.50   2.19   2.75   4.94  Dropped, PGR gets bullish


Renee is out of town.


Making Money on the Road
By Janar Wasito

You've gotta love it when you make money on vacation! I am 
writing this quick column from an Internet Cafe in London, 
which is quite a digitally literate city from the looks of 
this and other such establishments around the town. I spent 
the first two nights in Paris, drinking & eating with some 
friends. It's been a blast.

I have been checking stock quotes intermittently in papers 
and on the web here in London. JDSU, on which I have both a 
credit spread and a debit spread, is doing great. My other 
current winners look like CMGI (spread with expiry much later 
this year), NOK (spread expiring this summer), AFFX (spread 
expiring this summer; may have missed a good exit on Friday, 
but one of the beautiful aspects of these kinds of plays is 
having time), IMNX (March credit spread with max profit at 
185 -- looking real good right now, especially with a split 
coming!), VIGN (got up to 235, maybe portending a move to 
higher ground). My sole loser is ICGE, which fell back after 
some warning about future earnings; but, again, I have a lot 
of time on this spread.

I had a ton of plays set up on stocks which are moving, but 
which I didn't play -- PHCM, CMDX, HGSI. Oh well. DOW looks 
ugly. (written Sunday) Techs look strong. Good for me.

As for spreads, I think that this is a technique that fits 
my trading style. First, I like to take longer term, bullish 
bets on companies which I understand from living in Silicon 
Valley. I like having a downside adjustment (closing the short 
side of a bull call spread). And, most importantly, I like the 
lower stress that allows doing things like taking a trip, and 
watching the market very loosely, for perhaps 10 days a month.
That aspect of spread trading will allow me to be a long term 
success with trading -- more of the athlete in the race for the 
long run, instead of the fighter living and dying by every trade. 
One of the very successful traders interviewed in the New Market 
Wizards says that successful traders do not find excitement in 
the market. He continues that your emotions can be like a spring 
-- if you stretch them and compress them too often, they wear 
out. For me, at least, spread trading is the right technique.

Oh yeah, on my stop in St Louis on the way out, I grabbed a 
bunch of LEAPs -- NOK, SEBL, IMNX, BRCM. When I get back, I 
plan on looking for good overbought entry points to sell March 
calls against them, thus taking advantage of a maximum time 
decay (theta) disparity between deep ITM Calls with 22 months 
of time left and OTM Calls with about 10 days of time left. 
This structure is so favorable for the trader!

Anyway, good luck and buy to close too soon!

Contact Support

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time. 
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


PCMS $18.25 -2.22 (-4.38) The sharks finally surfaced and began
to drag this play under water.  When we last visited PCMS we were
waiting for the telecom equipment company to make a move one way
or the other.  This time it was the other, as PCMS began the week
with shareholders hitting the sell button.  Again no company 
specific news behind the move.  We mentioned Sunday a move back 
through $21.75 would signal it may be time to take some money off
the table.  Well PCMS made that move in the first fifteen minutes
of trading Monday, however the $20 level did hold up late in the
day.  At that time it appeared as though PCMS may be setting up
for a bounce and a possible entry point for a new play.  Nope,
PCMS gapped down at the open today, hitting $16 by the end of
amateur hour.  PCMS did give us several chances to make a profit,
but for now we will stand aside until we see some signs of life.

ANAD $135.00 -11.00 (-11.88) Time to go!  ANAD undergoes its 3:2 
split this evening after the close.  Veteran readers know we 
always recommend an exit prior to an event - earnings and splits 
alike.  We kept it as a play only because we expect some 
enthusiasm tomorrow morning at the new split price; however a 
recovery to the pre-split level of $153 is a big jump to make.  
Those of you who stuck it out to that point were nicely rewarded.  
However, if you did not exit prior to 3:30 ET, you are probably 
in pain right now since ANAD fell $18 from its high of $153 with 
just 28 minutes to go before the close.  Hopefully, you had stops 
in place to break your fall.  For those who chose to walk the 
rope without a net, tomorrow morning during amateur hour may be 
your last opportunity to exit with any profit.  Don't get caught 
in the gravity borne of "buy the rumor, sell the news".  You can 
always buy it back if it resumes its previous performance.  
ANAD isn't over forever, but it is over for now.

PHCM $139.63 -3.88 (-13.38) If PHCM doesn't look like a good play 
to you any longer, we think you are right.  It doesn't look like 
it to us either.  While we got the breakout of the ascending 
pennant formation at $140-$142, and were able to capitalize on 
it up to $154, PHCM could not escape the pull of gravity.  In a 
disappointing display of weakness, it closed today below its 
breakout point while the rest of the tech sector zoomed ahead.  
Perhaps ORCL's planned introduction of a competing product, 
OracleMobile, finally got the better of it.  We can find no other 
news.  No matter, we're cutting the line on this mobile data 
protocol play for now.


MCOM $77.88 +6.00 (+1.50) Shares of MCOM seemed to find a 
springboard from which to bounce at $70.  MCOM gapped down 
over $5 on Monday morning and rolled all the way down to $69.38 
before finding its feet.  Today, MCOM was off and running, 
gapping up over $3 at the open and trading as high as $83.38 
before finally taking a breather and surrendering to a mere 6 
point gain for the day (we say this tongue in cheek, of course).  
The volume backing MCOM's move up today was also impressive, 
coming in at two times the ADV, indicating quite a few interested 
MCOM buyers out there.  Needless to say, we think MCOM may have 
found it's bottom at $70 and therefore, we are donning running 
shoes of our own and making a break for another play.  

LLY $59.44 +1.31 (+2.75) To be honest, it looks like we caught 
this one at the bottom.  The good thing about this play, is it 
never offered the opportunity for us to get on board.  Yesterday, 
the bulls charged in on the DOW and pushed LLY up right along 
with it.  LLY managed to break through it's 10-dma at $59.25 
during today's session and posted volume two times the ADV 
backing the move.  Things are looking a little too rosy for 
Lilly and therefore, we are dropping it from our put play list.

FD $36.69 +1.44 (+4.13) Well, it isn't what we were trying to
do, but we managed to pick the bottom on FD.  Breaking to new
multi-year lows and looking technically weak, FD fooled us.
Turning on a dime with the NYSE recovery yesterday, FD
underscored the strength of the move with more than a $2 gap up
at the open today.  Although there is still uncertainty in the
retail sector, FD no longer looks like a good put candidate.
The broad-based Retail sector recovery today didn't help our
play either.  We'll let it go and move on to the wide selection
of much better plays.

PGR $59.50 +2.75 (+4.94) Are investors remembering PGR?   
Hopefully you had set stops for such a reversing trend.  We 
had mentioned that PGR might rebound above resistance at $55
which happened yesterday.  Making a bullish move over the last 
two days and crossing above the 10-dma.  So we are throwing 
in the towel on PGR.  Volume hasn't been real heavy for this 
rally, but PGR just might be taking advantage of the Dow.  
As you know, the Dow has had a strong rally after Friday's 
capitulation day.  So this little spark of investor interest 
will cause us to say goodbye to PGR.


ENMD $98.50 +11.00 (+22.38) With one final test of the $75
support level mid-day yesterday, ENMD was off to the races
again, running as high as $98.81 in today's session.  Sure
enough, the lack of action last week was simple consolidation,
as volume has picked back up to about 50% over the ADV this
week, confirming the strength of the climb.  Investors seem
satisfied with the 5-dma (now $81.50) as support and have sent
shares soaring along with the rest of the strong Biotech sector.
Driven by the companies strong (and getting stronger) market
position with respect to anti-cancer drugs and treatments.  The
latest big news, although almost a week old, bears repeating as
it highlights the strength of the company's market position.  
On Wednesday, ENMD announced the issuance of a broad patent,
covering all anti-angiogenic 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.  Going forward,
ENMD is now in blue-sky territory, closing very near the high
of the day today.  Mild support looks to be forming near $92,
followed by $86.  As long as volume remains strong, consider
buying intra-day dips to take advantage of this winning play.

LHSP $105.94 +5.44 (-2.28) Did you wait for the bounce or lose
a finger trying to catch the falling knife?  The last few days
have seen a dearth of buyers, as investors took profits from the
most recent run-up.  After bouncing twice at the $100 level over
the past 2 days, it appears that LHSP may be ready to move higher
again.  Volume however, is still not very convincing, hovering
right at the daily average.  LHSP looks like it ran into some
resistance near $108, and we would like to see a successful
breakthrough of this level to confirm LHSP is ready to move
higher again.  Perhaps the excitement over the company's upcoming
2-for-1 split has begun to wear off - volume will be the key
going forward.  The move up to this point has continued to be
fueled by the stream of product announcements and industry
alliances.  Underscoring the popularity of speech recognition
products in the consumer marketplace, LHSP penned two new
promotional/bundling agreements yesterday with Voyetra Turtle
Beach, and AMD.  Both agreements will add to LHSP's market
penetration in the speech recognition market.  Consider entries
on a renewed bounce near $100 or a break above $108.

NEON $91.63 +8.69 (+6.06) Is anyone ever going to turn out
this light?  NEON keeps attracting investors like moths to a
flame.  The difference is that they aren't getting burned.
Yesterday was fairly quiet but today yielded yet another 52-week
high of $96.25 on solid volume.  Profit-taking appeared in the
afternoon, but the selling volume was fairly light, and new
support appeared in the vicinity of $90.  NEON's surge higher
continues to be fueled by frequent product announcements and
industry alliances, the latest of which was today's alliance
with mobile e-commerce solution provider, TANTAU Software.
The partnership addresses the growing demand for transaction-
based wireless capabilities, including bill payments, account
transfers, stock trades and online purchases.  Investors are
continuing to use the 5-dma (currently at $$85.50) as support
for each surge higher.  Consider entries on a bounce from either
the new $90 support level or the 5-dma.  As long as volume
remains strong, NEON could soon top the psychologically important
$100 level.  A breakout above $95 can be considered for entries
as well.

QLGC $156.00 +14.63 (+10.75) The drop on yesterday's NASDAQ
weakness was certainly breathtaking, but in retrospect provided
a rare entry point.  Beginning its recovery late yesterday
afternoon, today QLGC rose like a phoenix from the ashes of
the quick NASDAQ selloff.  Hitting yet another 52-week high,
this time at $159.50, QLGC consolidated a bit before moving
higher into the close on increasing volume.  As long as the
volume remains heavy (75% above the ADV today), look for a
continuation of this move tomorrow as investors attempt to
break through the $160 resistance level.  Although there is
now strong support near $135, don't expect this level to be
seen any time soon.  Instead, look for entries to appear near
$153 (support today) and then $150.  There is nothing new to
which we can attribute the move - just the continuing stream
of product announcements and the momentum of both the stock
and the sector.  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 without host



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This newsletter is a publication dedicated to the education 
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only. The information provided herein is not to be construed 
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newsletter picks are not to be considered a recommendation 
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The Option Investor Newsletter         Tuesday  2-29-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


ERICY $96.00 -2.00 (-1.63) Everyone deserves a day off, 
particularly after demonstrating the kind of momentum that 
ERICY has of late.  Monday's gain was small but backed with 
volume exceeding 10 million shares, which is twice the daily 
average.  Though ERICY took back $2 in today's session, we saw
the volume level drop and not even reach the ADV.  In other 
words, the momentum is on the right side of ERICY for our call 
play.  ERICY found support right around $96 today and has tested 
support at $95 as well.  ERICY's 10-dma could play back up at 
$91.75, if needed.  Resistance is the ever elusive $100 level, 
and though investors may struggle with this psychological number 
for a bit, ERICY could have the positive momentum backing it to 
break through.  A breakthrough and a close above $100 will be 
a nice bullish indication and could provide another viable entry 
level.  Yesterday, ERICY announced plans to form a joint firm 
with Volvo (VOLVY) and Telia, which will be called WirelessCar.  
This company plans to deliver mobile Web service to the 
automotive industry.  Just imagine all of those people out there 
who will not only be able to chat on their cell phones, but will 
now be able to shop for their mother's birthday present online, 
all while driving in the lane next to you!  Mass transit is 
sounding better every day, isn't it?
ATML $49.50 +5.88 (+6.31) ATML is flexing their muscles for
all to see and we are quite impressed too.  They set another 
new 52-week high today after being listed as the Play-of-the-
Day in the Monday newsletter.  We are having above average 
volume on these high point gains too.  Analysts are also 
looking in ATML's direction with two new coverages initiated 
today.  Chase and HQ started them at a Buy rating while DB 
Alex Brown initiated them at a Strong Buy.  This is partly 
because the whole semiconductor industry has been on fire.  
Few other areas posses the growth and upside potential as the 
semiconductors do in 2000, according to some analysts.  The
SOX pushed the Nasdaq today to a new high which will really 
put them in the spotlight.  Now we might see profit-taking 
as Semis are an extremely jumpy bunch.  Support is at $44 
for ATML.  So set stops is you are worried about a reversal.
Otherwise, continue to ride the momentum.  A push above $50 
on strong volume is bullish for the next move.      

AFCI $68.13 +0.38 (+10.69) After a quick entry dip down to $56 
on Monday, AFCI hit the accelerator.  With volume turned up 
full-tilt (more than 3 times the ADV), the stock blasted through 
resistance of Friday's all-time high ($58.63).  This was just 
type of move we wanted to see for confirmation.  The new 52-week 
record is at $71.38.  Recall AFCI is a pure momentum play that 
made huge gains last week.  At the start today, investors 
scraped some profits off the top pushing AFCI down to an 
intraday support level at $63.  But the momentum powered up in 
the last hour.  AFCI made a dash for the finish line and claimed 
a fractional gain.  Volume was also quite respectable at 2.95 
mln (ADV=1.86 mln).  The dma's are far surpassed at this point.  
Put up the radar if AFCI returns to firm support at the 5-dma 
($59.46).  On one hand, an intraday dip to this level could be 
used as an entry point, but have stops in place incase it's a 
sign that momentum has fizzled.  An entry intraday is tough to 
call.  A lull in the share price (like today's trading at the 
$63 level) followed by a bounce is of course the first hint that 
a stock is getting revved up to climb.  On this play, much is 
going to depend on your stomach (and portfolio) for risk.  So 
far this week there's no company specific news to effect 

INSP $217.00 -1.13 (-8.31) Okay let's re-evaluate our split 
play.  First we've got about 2 weeks left until INSP splits 2:1 
on March 15th, so there's plenty of time make our trades.  If 
you're willing to bet that INSP will rocket upward again into 
higher realms like it did on Thursday and Friday, then here's 
your entry.  INSP is at the moment hovering in the vicinity of 
$215 and $225.  Technically $215.21 is the current daily 5-dma 
and this mark serves as a pretty fair entry gauge.  The wide 
intraday spreads in and of themselves are offering room for 
profit.  But if you'd rather not add more venture to an already 
VOLATILE Internet play, then of course you'll wait for INSP 
to move through $231, Friday's all-time high.  In the news 
yesterday, InfoSpace announced it made an investment (financial 
details not available) in Internet Broadcast Systems (IBS), a 
leader in the industry of converging local television news and 
the Internet through its national network of local Web channels.  
According to IBS, the investment will help it expand its Web 
channels in the US and Canadian markets.

INKT $137.13 -3.88 (-8.00) I'm confident all of you were 
prepared for the mild downdraft; especially after watching the 
momentum drive the share price up $22.56 last week in five 
consecutive moves which propelled INKT to higher highs.  
Friday's 52-week record still stands at $148.25.  Call to mind, 
consolidation is normal and expected.  INKT is managing this 
consolidation period quite well.  It consistently made strong 
bounces off near-term support of $138 and $140, until profit- 
takers took a bigger bite out of the share price in late 
afternoon trading today.  INKT slipped below the 5-dma (now at 
$140.84), however the volume was rather low.  The moderate 
trading volume is a good sign that validates the sellers aren't 
in any rush to dump the stock.  If you're interested in adding 
more positions or getting an entry into this momentum play, 
consider waiting for upward confirmation over the next few days.  
At least be patient for a solid bounce off the 5-dma followed by
a convincing upward trend.

CMGI $129.56 +13.19 (+12.06) Can you say BREAKOUT!!  Yes indeed, 
early entries on solid plays can certainly be profitable.  CMGI 
is our case in point.  The extremely bullish upswing off firm 
support at $114 and $115 today shot CMGI right through strong 
resistance at $120 and $122.25 (Thursday's intraday high).  New 
readers, CMGI is a simple earnings play that we added on 
Thursday evening in anticipation of a stellar run.  The company 
is confirmed to report on March 9th.  Make sure if you're 
considering playing this run that you have your positions closed 
prior to this date to avoid any post-earnings' decline.  Now 
what we have to deal with is possible back-filling tomorrow 
(considering the intense move this afternoon).  So wait and see 
how CMGI responds tomorrow before you jump in headfirst.  If 
there's a back-fill look to the $120 level (at the 5-dma 
$120.54) for near-term support.  In the news, CMGI's iCast 
division is releasing an application that combines multimedia 
content with instant messaging features.  Also, don't forget 
that CMGI is presenting this evening at the Robertson Stephen's 
Tech Conference taking place this week.  This could keep the 
buyers coming.  The stock is already at $132 after-hours. 

EMLX $160.00 +11.25 (+2.88) EMLX tested the bottom of the channel
we mentioned this past weekend and it did so in the first hour 
of the session on Monday.  Investors sold shares of EMLX right 
from the start pushing the fibre channel technology company
down to $143.50.  It was beginning to appear as though investors
were turning their back on EMLX.  Today our faith was restored as
as Emulex found traders ready to buy.  EMLX is not as volatile as
many of the companies on the Nasdaq, but certainly comes with
enough volatility to keep us awake as it experienced about a 10%
move from its low to its high today.  The bottom line for this
one, is that it continued its recent momentum after a one day
bout with profit-taking.  Not much on the news front for EMLX,
but they were scheduled to make a presentation at the Robertson
Stephens Tech 2000 conference in San Francisco this afternoon.
Technically EMLX closed on and intraday support level at $160.
The next areas of support are seen at $155 and $150.  Some 
suggest EMLX may have come to far to fast, but for now we 
believe EMLX could be preparing to mount an attack on its
high set in early January.

COMS $98.00 +18.94 (+17.31) Aren't IPO's fun!  Well at least this
one is.  With the Palm IPO expected to price tomorrow and hit
the streets Thursday, shares of 3Com soared almost 24% today.  
COMS added about $6 Monday, only to see the gains slip away by 
the end of the day.  This morning COMS jumped up over $5 at the
open and never looked back, picking up 24% by day's end.  Most of
the push today came on the news that Palm had doubled the amount
it expects to raise from its initial stock sale tomorrow.  Palm
expects to sell 23 million shares, or about a 4% stake in Palm,
at a price range of $30 to $32 per share.  3Com has said they
plan to distribute their estimated 94% stake in Palm to 
shareholders sometime in the next six months.  Volume on today's
move was extremely heavy with 40.9 mln shares changing hands.
How high can COMS go?  Obviously no one knows for sure, but COMS
was moving higher at the end of the session today.  COMS has 
minor support at $96 and $91 although another gap opening is 
certainly possible again tomorrow.  With the IPO on Thursday, 
be prepared to close any positions as we could see a pullback 
after the IPO.

NSM $75.13 +1.63 (+7.13) NSM fell to the $64 level of support
early Monday, when buyers decided to start nibbling on shares
of the semiconductor company.  Actually the whole sector showed
signs of weakness early Monday, but began to find some strength
just after lunch.  Today began with a much brighter outlook,
after analysts at several brokerage firms either upgraded or 
reiterated Buy and Strong Buy ratings on several companies in
the SOX.  NSM made a new high today $75.38, not only on the
strength seen in the sector today, but probably more on comments
made by Don MacLeod, NSM's Chief Financial Officer yesterday.
MacLeod said he sees third-quarter revenue rising over the
second quarter figures.  MacLeod went on to say he sees third-
quarter gross profit in the range of 46 to 48 percent versus
45 percent in the second quarter.  This brings us back to 
why we added NSM to our play list.  NSM will report earnings
March 9th.  With the CFO saying he expects the company to
report better than expected earnings, we would look for NSM
to continue to new highs.  NSM has support at $73, with the
5-dMA sitting at $71.39.  A bounce off either support level or
continued momentum would offer a good entry point. 

CHKP $203.94 +2.44 (-1.69) Our play in CHKP has started out the
way we'd like to see a new play begin.  For those with the
foresight to jump in when CHKP fell out of bed Monday and hit
the support level at $190, you certainly must be pleased.
CHKP regained its composure after the initial sell-off ending
the day down just -$4.13.  Today CHKP did find a few buyers
lurking in the wings, but not in the numbers we'd like to see.
Volume was a bit light today, but CHKP did pick up $2.44.  We 
are making it the Play of the Day for tomorrow based on what 
looks like a breakout beginning.  It really started to tick 
up right before the close and may be worth a look for entry 
points.  A move over $208 on strong volume would be the green 
light.  CHKP did announce a new alliance Monday with CoreHarbor.  
The joint effort will integrate CHKP's Secure Virtual Network 
Architecture into its hosted e-procurement solution ProcureEdge.  
Technically, CHKP has support still at $200 and $190.  Be sure 
to confirm the volume prior to entering any new play. 

GLW $188.00 +8.25 (+0.19) For a brief moment yesterday, it looked 
as though GLW had forgotten how to make optical fiber.  The stock 
made an instant $17 nosedive during the first 45 minutes of 
trading.  However, what the market taketh away, it sometimes 
giveth back.  Such was the state of trading GLW so far this week.  
Not only did the last two days make GLW look a bit long of tooth 
(worn out), GLW violated all the averages yesterday and closed 
$10 under its 10-dma on 50% more volume than the ADV.  Today, 
just the opposite.  As we noted Sunday, GLW would likely claw its 
way back with any recovery in the NYSE issues.  We're happy to 
say that GLW closed back over its 10-dma of $185.92 on volume of 
13% over the ADV.  For the technical traders, that's a positive 
sign and is further bolstered by the long tail on today's 
candlestick formation.  It looks like even conservative traders 
would have found an entry late in today's trading as GLW passed 
back over previous support of $187.  Adding to the technical 
security was a series of higher lows on the way back up.  While 
we think it safe to get back in the water, you might get a better 
entry by target shooting $187, or $185, depending on your 
tolerance for risk.  GLW is also a split candidate and now has an 
agenda item for shareholders to authorize more shares at the next 
shareholder meeting on April 27 in order to make it happen.  
Earnings are scheduled for April 17, which would make a great 
time to make the split announcement.  

SEBL $138.69 (+0.31) That was a squeeker.  If you closed your 
eyes, it looks like nothing happened over the last two days.  
However, that was not the case.  While we thought $130 would hold 
as support in all but the worst case scenario, SEBL slipped 
briefly to $125 (the center of the ascending channel) after 
finding what seemed like new support on the top line outside the 
channel at $138.  Despite a good effort to stair step its way 
back over that level, intraday stutter stepping with a positive 
bias took over after today's open.  The two technical bright 
spots today though were the long tail on the candlestick 
formation, indicating investors interest in pushing the price 
back up from the lowest levels of the day, and the close once 
again above the top line of the channel, now at $139.  That last 
one is a double-edged sword though.  Without volume, which would 
indicate investors' conviction about the upward price direction, 
SEBL may be susceptible to another pullback.  If it comes true, 
look for a bounce at support at $139, $136, or $130.  The worst 
case would be at the 10-dma, now at $124.54.  The sentiment 
from Prudential's upgrade last week is still intact.  Target 
shoot to your own level of comfort.  SEBL is also a split 
candidate at these levels although shareholders will need to vote 
an increase in authorized shares in order to effect anything 
greater than a 3:2 split.

VERT $220.00 +2.00 (-5.75) While we might loudly complain that 
volume fell off a cliff and the price didn't move relative the 
rest of the tech issues in the last two trading days, that could 
actually be a blessing.  The low volume of roughly half the ADV 
of 1.4 mln shares says that traders are not interested in dumping 
VERT shares either and we may have found a higher low following 
the solid bounce off previous long-term support of $200.  It now 
appears support is holding well at $215-$216.  Use that as your 
target for what will likely be the best entry.  If you'd rather 
see a breakout before taking a position, then $225 backed up with 
an increase in volume is your number.  Still helping to drive 
this play going forward will be the 2:1 split, which will take 
effect after the close on March 31.  You still have plenty of 
time for a good entry, so wait for VERT to come to you.  With the 
rest of the market moving forward though, the probability of VERT 
remaining at these levels for long diminishes.  Earnings are not 
a factor again until May.


RHAT $60.69 -2.88 (-7.69) RHAT seems to be getting pretty 
comfortable on our play list.  RHAT has continued to decline 
for the past two sessions and has posted strong volume on the 
way down.  Not even another record breaking day for the NASDAQ 
could offer RHAT shareholders any relief.  RHAT is currently 
trading at a level of pre-established support though it does 
not appear to be very solid.  Should RHAT trade through $60, 
it may be cleared for a healthy fall back to the next level 
of solid support, which looks to be in the neighborhood of $47.
Should RHAT make a move up, it may end up hitting its head at 
$70, a level that has not only provided resistance in the past, 
but is now backed by RHAT's 10-dma.  If RHAT makes a move up, 
watch for resistance to hold it back, a reclamation of negative 
momentum and take advantage for new possible entry points.  
Otherwise, we recommend waiting for RHAT to trade through $60.  
As always, remember to adjust your stop loss orders as RHAT 
continues to decline to lock in your profits.

KMG $44.75 +2.38 (+4.00) The bottom line on this put play is 
the fact that KMG closed 10 cents under it's 10-dma.  This may 
not seem so significant at first glance, but drilling a little 
deeper (pardon the pun), we believe that there is more downside
to come for KMG.  If you remember, KMG rallied briefly mid-month 
and made it all the way up to, you guessed it, it's 10-dma. That 
level held KMG back and we have benefited from a 10-point loss 
since.  Though KMG finally decided that it wanted to rally along 
with the other oil service stocks, in comparison, KMG's rally 
was weak.  We have continually pointed out the weak relative 
strength against it's peers, such as SLB, which traded up to 
a new 52-week high today.  We will let KMG have its day in the 
sun, but until we see a breakthrough of the 10-dma, KMG is 
staying put (again, pardon the pun).

JNJ $72.00 -0.75 (+0.81) What's in our favor for keeping JNJ on 
the put list.  Well for starters the DOW is trying to make some 
ground, yet JNJ can't penetrate $73.44 with volume levels almost 
double the ADV.  Even today CSFB came out with a new Strong Buy 
recommendation for JNJ and zippo, no breakout.   However we're 
still faced with bottom opposition fractionally near the $70 
level.  Monday's daily low of $70.06 is the new 52-week record! 
Again, better confirmation that the downtrend will continues if 
for JNJ to slide under this mark.   If you want in now, then 
shoot for downward bounces off the 5-dma (currently at $72.85).


JDSU - JDS Uniphase $263.63 +10.63 (+6.81 this week)

Here's another company laying around on paradigm beach ready 
to surf the next wave.  JDS Uniphase Corporation is a fully 
integrated optical electronics company that designs, develops, 
manufactures and markets fiber optic telecommunications 
components and modules and laser subsystems.  The Company's 
telecommunications products include semiconductor lasers, high-
speed external modulators, transmitters, fiber Bragg gratings 
and optical modules for fiber optic networks in the telecom 
and cable television industries.  Based in the Silicon Valley, 
California, they employ approximately 6260 people worldwide.  
Customers include Lucent, Nortel, Cisco and Ciena.  

Pure and simple, we're adding this old favorite back tonight for 
no other reason than a split run.   Yep, within a week after its 
last 2:1 split on December 31, JDSU announced another 2:1 payable 
on March 10, assuming shareholders approved an increase in the 
authorized shares from 600 mln to 3 bln shares.  That approval 
came last Friday.  Technically, JDSU pulled out of its slump a 
week and a half ago when it was trading around $210.  It's been 
on the rise ever since with a noticeable increase in volume.  The 
volume has been constant at 20% over the ADV of 7.6 mln shares 
for the past three trading days.  If volume keeps up, we'd expect 
the run to continue.  Near-term support is found at $245, $253, 
$258, and intraday at $260.  Prior to today, resistance was at 
$260, but by the close, JDSU had broken through to close at a 
new high of $263 - another short-term ascending pennant with 
subsequent breakout.  Even better, it was up another $3 in after 
hours trading.  Assuming the market cooperates tomorrow after 
what we hope/think will be a benign NAPM report, JDSU should 
continue on its journey into the split.  Target shoot to your 
level of comfort after amateur hour.

JDSU continues to solidify its position as lead dog in the 
optical revolution.  As we've noted before, JDSU is to photons 
what Intel is to electrons.  JDSU is also another Gilder 
favorite.  Want a sympathy play?  Look no further than ETEK, 
which JDSU announced last month that it would purchase.  The 
OCLI merger was completed on February 5th.

BUY CALL MAR-250 UCQ-CJ OI=8998 at $26.00 SL=20.00
BUY CALL MAR-260 UCQ-CL OI=5534 at $20.38 SL=16.00
BUY CALL MAR-270*UCQ-CN OI=5296 at $15.63 SL=12.25
BUY CALL APR-260 UCQ-DL OI= 668 at $35.88 SL=28.00
BUY CALL APR-270 UCQ-DN OI= 245 at $31.25 SL=24.50

Picked on Feb 29th at  $263.88     P/E = N/A
Change since picked      +0.00     52-week high=$264.94
Analysts Ratings   20-11-1-0-0     52-week low =$ 21.38
Last earnings 01/00  est= 0.16     actual= 0.18
Next earnings 04-26  est= 0.20     versus= 0.09
Average Daily Volume = 7.6 mln


HGSI - Human Genome Sciences $218.25 +13.44 (+12.25 this week) 

Human Genome Sciences develops drugs and diagnostic products
based on human genes.  Although the company has no marketable
products, firms pay HGSI to develop products for cancer, heart
disease, arthritis, and Lou Gerhig's disease.  HGSI is involved
with SmithKline Beecham, Merck, and The Institute of Genomic 
Research.  HGSI also researches non-human genes, including
those of bacteria, fungi and viruses.  These could eventually
prove useful in creating vaccines and antibiotics.  HGSI
competes with Genzyme, Incyte Pharmaceuticals and Scios.

Welcome back old friend!  Since we last spent time with HGSI,
there has been more excitement surrounding the genomics company.
We previously had HGSI on our list of favorites for a 2-for-1
stock split at the end of January.  Since then the company has 
reported earnings and issued patent on a human gene that produces
what is believed to be a critical entry point for the AIDS virus.
Not a bad month, actually HGSI has already surpassed its pre-split
levels and gone on to new highs.  Their earnings weren't so hot,
but right now investors don't seem to care.  Most are betting on
the long-term prospects for company's in genomics industry. 
We've included HGSI on our play list again as the company is 
displaying the momentum necessary to move past the high set 
earlier this month at $231.  HGSI and many of the stocks in the
Biotech sector made new highs in the middle of the month, and
spent a few days consolidating.  HGSI added 6.0% today on 
solid volume.  The company received an honorable mention as a
favorite of Tom Bepler.  Bepler is the fund manager for the
Orbitex Health & Biotech fund.  By the way the Orbitex fund is
the third-best performing mutual fund this year, with an 80%
return through Feb 23rd.  Bepler said his top holdings in the
genomics include HGSI, among others.  HGSI appears to be ready
to explode.  Due to the volatility this may not be a play for
everyone, but for those with the proper sized account, it could
be a honey.  HGSI has support at $210 and $200, although given
given the strength of recent moves we may not see those areas
again soon.

On Friday a company named Vical, announced it would exchange its
DNA delivery technology for certain access to HGSI.  Vical has 
developed a technology to inject so-called naked DNA, genes
that enter the body without first being bundled with a virus.
The move is a beginning of a trend of partnerships between
companies who decipher genetic information and companies that
develop technology to introduce therapies into the body. 

BUY CALL MAR-210 HBW-CB OI=324 at $27.88 SL=21.50
BUY CALL MAR 220*HWB-CD OI=948 at $22.75 SL=17.75
BUY CALL MAR-230 HBW-CF OI=524 at $18.25 SL=14.00
BUY CALL APR-220 HBW-DD OI=104 at $41.38 SL=32.00

SELL PUT MAR-200 HBW-OT OI=131 at $13.50 SL=17.00
(See risks of selling puts in play legend)

Picked on Feb 29th at   $218.25    PE = N/A
Change since picked       +0.00    52 week high=$231.00
Analysts Ratings      1-4-2-0-0    52 week low =$ 14.63
Last earnings 02/00   est=-0.36    actual=-0.39 
Next earnings 05-11   est=-0.35    versus=-0.27
Average daily volume = 1.21 mln


ADIC - Advanced Digital Info $90.63 +4.63 (+6.56 this week)

A leading supplier of automated tape libraries, ADIC buys tape
drives from other manufacturers and outfits them with robotic
arms.  The arm then selects a tape from a multi-tape unit,
ranging in size from desktop-size to large standalone units,
and adds or accesses data.  With over 55,000 libraries installed
and a suite of innovative software solutions and Storage Area
Networking (SAN) products, ADIC is a leader in the rapidly
growing market to manage and protect computer network

You don't often see a chart with such a consistent stair-step
pattern of higher-highs and higher-lows.  This pattern has been
in place since before the company split its shares 2-for-1 last
August.  Without so much as a post-split depression, the stock
resumed its pattern, which has continued right up to today.
Using its 5-dma (now at $$82.38) as support over the last month,
ADIC technically looks very strong.  But that's just the
beginning; the company announced strong earnings on February
16th with 30% sales growth and 80% earnings growth year-over-
year.  Just in case that wasn't enough to get investors excited,
the company threw in a 2:1 split, and its execution date of 
March 13th, is rapidly approaching.  Not one to be content
sitting on its laurels, the company has been very busy.  In
early February, ADIC announced that it had added new Fibre
Channel routers to its suite of Open SAN Backup Solution
products, making that package the first in the industry to build
in support for direct disk-to-tape, serverless backup within
SANs.  Closing above the $90 resistance level today puts ADIC
back in blue-sky territory, with numerous levels of support
below.  Mild support is found at $84 and $78.50, with strong
support at $73.  The catch is, ADIC doesn't often drop back to
test major support.  You may get lucky and get an entry if ADIC
bounces off of one of its minor support levels, but given the
proximity of the split, don't wait too long.  If investor
enthusiasm remains unchecked, jump on board near today's close
if the $90 level holds as support.  Volume over the past
several weeks has been at or above its daily average and will
have to remain so if ADIC is going to push higher.

The most recent news on ADIC is from last Wednesday, but
highlights the growth the company is seeing.  In an attempt
to widen the options for IT departments responsible for storing,
managing, and analyzing large data sets, Fujitsu Computer
Products and ADIC announced integration of the new Fujitsu
M8100 tape drive into ADIC's Automated Mixed-Media Libraries
(AMLs).  The new Fujitsu drive provides for a fast data transfer
rate of 13.5 MB/second, and its inclusion in ADIC's suite of
products will help the company continue to address the rapidly
growing demands of the data storage industry.

BUY CALL MAR-85 QXG-CQ OI=14 at $ 9.25 SL= 7.00
BUY CALL MAR-90*QXG-CR OI=44 at $ 6.50 SL= 4.75
BUY CALL APR-85 QXG-DQ OI=20 at $14.88 SL=11.75
BUY CALL APR-90 QXG-DR OI= 2 at $12.50 SL=10.00

SELL PUT MAR-85 QXG-OQ OI= 0 at $ 5.63 SL= 7.25 New Strike
(See risks of selling puts in play legend)

Picked on Feb 29th at  $90.63     P/E = 102
Change since picked     +0.00     52-week high=$92.13
Analysts Ratings    3-3-0-0-0     52-week low =$ 7.19
Last earnings 02/00 est= 0.23     actual= 0.27
Next earnings 05-17 est= 0.25     versus= 0.17
Average Daily Volume =  490 K


DNA - Genetech Inc $192.88 +11.38 (+17.88 for the week)

Genentech is one of the largest biotechnology companies in the 
world.  The company's research has led to twelve biotechnology-
based products on the market today.  Genentech is the only 
biotechnology company to have taken seven of its own products 
from the laboratory to the marketplace, with several other 
products stemming from Genentech research licensed to other 
companies.  Today Genentech markets seven biotechnology-based 
products and has a product pipeline of more than a dozen 
potential products. Activase, Protropin and Nutropin, Herceptin, 
Pulmozyme, and Rituxin and two other drugs make up 66% of their 

Everyone knows Biotech is a hot sector, but the more 
discriminating investors are favoring companies like Genetech, 
CuraGen (CRGN), and Gene Logic (GLGC) who spend time and money 
researching genomics, gene therapy and genetic decoding.  Just 
last week, many of these biotech companies discussed cutting-
edge genetic treatments at a growth stock conference.  It 
appears this conference was the trigger event for the momentum 
players to jump aboard DNA.  Since Wednesday the stock has been 
on the move.  By Friday it closed above the previous resistance 
of $173.50, but we wanted to see the stock break $180 before 
adding it as a momentum play.  Although momentum isn't the 
only element in this play's favor.  DNA is a definite split-
candidate.  It's been trading way above historical split-levels 
of $130 for well over a month now.  DNA last split 2:1 in 
November 1999.  Notably the split was announced along with its 
earnings.  Genentech is scheduled to report its next earnings 
around April 12th, before the bell.  It'd be nice to see 
momentum carry DNA into an earnings and potential split run. 
Currently the company has 400 mln shares issued and 257 mln 
outstanding; thus, without shareholder's approval there's only 
enough shares for a 3:2 stock split.  But for now let's focus on 
the current trend.  We're faced with huge gains in a short time 
period so we've got to be careful on the entry.  The nearest 
support level is at $180 in-line with the 5-dma ($178.33) and 
then much firmer at the 10-dma ($170.07) although a return to 
this technical would likely kill the play.  In the case of no 
pullback AND it looks like DNA will power higher very quickly, 
then you could be extremely aggressive and use today's intraday 
support at $187 and $190 for an entry.  Be careful, very 

Earlier on February 8th, Goldman Sachs reiterated a Market 
Outperform rating for DNA.

BUY CALL MAR-180 DWN-CP OI=132 at $18.75 SL=14.75
BUY CALL MAR-185 DWN-CQ OI=  0 at $15.75 SL=12.25 New Strike
BUY CALL MAR-190 DWN-CR OI=  0 at $13.00 SL=10.50 Today's vol=63
BUY CALL APR-180*DWN-DP OI= 40 at $26.63 SL=20.75
BUY CALL APR-185 DWN-DQ OI=  0 at $23.88 SL=18.63 New Strike
BUY CALL APR-190 DWN-DR OI=  0 at $21.50 SL=16.75 New Strike

Picked on Feb 29th at  $192.88    P/E = N/A
Change since picked      +0.00    52-week high=$194.50
Analysts Ratings     3-5-5-0-0    52-week low =$ 58.25
Last earnings 12/99  est= 0.18    actual= 0.18
Next earnings 04-12  est= 0.25    versus= 0.22
Average Daily Volume =   794 K


RNWK - RealNetworks $70.31 -2.69 (-8.06 this week)

RealNetworks is the pioneer and established market leader in 
streaming media technology on the Internet.  RealNetworks is 
helping transform the Internet into the next mass medium by 
making real-time, or streaming, Internet broadcasting possible 
and profitable.  Based in Seattle, RealNetworks develops and 
markets software products and services designed to enable users 
of personal computers and other digital devices to send and 
receive real-time media using today's infrastructure.

Perhaps RealNetworks has the music turned up a little too loud 
and did not notice the rest of the NASDAQ moving up for yet 
another record breaking close.  RNWK headed up to tag a new 
52-week high on February 11th, which was the Friday before it's 
2:1 stock split.  Since the split, it looks as though RNWK 
fallen victim to a post-split depression as just over two weeks 
later, RNWK is trading nearly $30 lower.  So just how long will
RNWK be singing the post-split blues?  Though RNWK has found some 
support at the $70 level, we see the more solid support level 
coming in to play closer to the $60 level.  Being that RNWK has 
continued to post strong volume on it's way down (today's volume 
was particularly impressive, coming in at twice the ADV), we 
believe the negative momentum could very continue to carry RNWK 
lower.  RNWK looks to have resistance overhead at $76.  RNWK's 
10 and 30-dma's have worked to converge at $82, which could 
provide additional resistance if needed.  We recommend waiting 
for RNWK to trade through $70 before entering any new positions.  
Keep an eye on the volume level, as volume can be a very valuable 
tool in identifying the strength behind a move.  RNWK tends to 
open near its high for the day, so once the direction looks to 
be confirmed for the day, time new entries toward the earlier 
part of the session.  It is important to use your stops on this 
one as RNWK has a history of being a big mover.  Try and take 
advantage of the wide intraday trading ranges that RNWK tends 
to offer.  

BUY PUT MAR-75 RNO-OO OI=659 at $8.75 SL=6.50
BUY PUT MAR-70*RNO-ON OI=474 at $5.75 SL=4.00

Average Daily Volume = 1.89 mln


CHKP - Check Point Software $203.94 +2.44 (-1.69 this week)

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.   

Sunday's Write Up

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 

Tuesday's Write Up

Our play in CHKP has started out the way we'd like to see a 
new play begin.  For those with the foresight to jump in when 
CHKP fell out of bed Monday and hit the support level at $190, 
you certainly must be pleased.  CHKP regained its composure 
after the initial sell-off ending the day down just -$4.13.  
Today CHKP did find a few buyers lurking in the wings, but not 
in the numbers we'd like to see.  Volume was a bit light today,
but CHKP did pick up $2.44.  We are making it the Play of the 
Day for tomorrow based on what looks like a breakout beginning.  
It really started to tick up right before the close and may be 
worth a look for entry points.  A move over $208 on strong volume 
would be the green light.  CHKP did announce a new alliance 
Monday with CoreHarbor.  The joint effort will integrate CHKP's 
Secure Virtual Network Architecture into its hosted e-
procurement solution ProcureEdge.  Technically, CHKP has support 
still at $200 and $190.  Be sure to confirm the volume prior to 
entering any new play. 

BUY CALL MAR-200*YKE-CT OI=590 at $18.88 SL=14.75
BUY CALL MAR-210 YKE-CB OI=843 at $13.38 SL=10.75
BUY CALL MAR-220 YKE-CU OI=253 at $ 9.25 SL= 7.00
BUY CALL APR-200 YKE-DT OI=226 at $30.38 SL=23.75

SELL PUT MAR-180 YKE-OP OI=181 at $ 5.38 SL= 7.00
(See risks of selling puts in play legend)

Picked on Feb 27th at $205.63    P/E = 173
Change since picked     -1.69    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 =  814 K


Greetings from Moscow!

The people here are friendly and the weather is much the same as
my home state of Alaska.

With the recent volatility and indecision in the market, we have
a great opportunity to take a break from trading and discuss some
of the strategies that work best in uncertain times.  The options
market offers a number of tools and techniques that can help the
astute trader construct a powerful portfolio; one which possesses
a high degree of safety with consistent returns.  Through the use
of combinations, the trader has a vehicle to pursue a wide variety
of strategies.  The complete option player can profit with bullish
and bearish plays in situations that dictate either aggressive or
conservative positions.  With an understanding of the risk/reward
relationships between long and short options at different prices
in varying time periods, he can benefit from the most advanced
techniques available in the market.

The majority of traders utilize spreads to reduce the cost and the
risk of option ownership.  They construct combination plays with
partially offsetting option positions to reduce the potential for
capital loss.  Spreads can be designed to generate return diagrams
of almost any character but unfortunately, the fundamental benefit
of this type of trading is also its downfall; the potential gains
are limited.  The most popular types of combination positions are:

Price spreads - the purchase of an option at one strike price and
the sale of another option with a different strike price.  The
potential profit in this strategy is based on the correct forecast
of the direction of the market.

Time (calendar) spreads - the purchase of an option with one
expiration month and the sale of another option with a different
expiration month.  This type of spread benefits from the faster
decay in the time value of the short-term.

The diagonal spread is a combination of price and time (calendar)
spreads.  The most common version of this strategy requires the
purchase of a long-term call and the sale of a short-term call at
a higher strike price.  In most cases, the initial debit of the
position should be less than the spread between the two options,
eliminating the possibility of loss in an upside break-out.  The
primary advantage of this strategy is the cost basis of the long
position is reduced by the sale of the short-term option.  The
spread achieves maximum profit (at expiration) if the stock price
remains above the sold option's strike price.  The position can
also profit (before expiration) if the underlying issue advances
significantly after the play is opened.

In most cases, a diagonal position is an improvement over the
standard price spread.  If the stock price remains relatively
unchanged or falls slightly, the long option will retain more
value because of its extended maturity.  If the near-term (sold)
call expires, the position can be reestablished with the sale of
a new call.  If the long option is current month, the position
can be converted to a normal price spread.  Once again, if the
underlying issue rises above the sold strike price, the spread
will be profitable.  With longer-term options, the character of
the spread can be adjusted to match the outlook of the underlying
issue.  A neutral or bearish position can be established with the
sale of an ATM option or the original spread can be duplicated (at
a lower cost basis) with the sale of a new OTM option.  In either
scenario, the long-term diagonal spread benefits from the sale of
additional options throughout the life of the (long) position.

The majority of advantages in a diagonal spread are obvious but
there is one characteristic that most traders overlook.  In a
debit spread, if the stock advances substantially and the options
trade at parity, the maximum potential profit will be limited to
the difference between the strike prices.  With a diagonal spread,
the long option has more time premium.  Thus, when the underlying
issue trades near the strike price at expiration, the value of the
position will grow beyond the theoretical profit range.  With that
in mind, it's easy to see why the maximum potential for profit (at
expiration) occurs at the strike price of the sold option.

Another method that is commonly used to increase the probability
of profit in this strategy requires an understanding of relative
value and implied volatility in option pricing.  When opening or
adjusting any type of spread, it's important to take advantage of
the highest relative premium to create the best possible position.
The exploitation of option pricing disparities is also paramount.
In the majority of OIN positions, we try to open new spreads only
when there is a disparity in pricing (most likely excess value in
the sold option).  This technique allows us to enter plays with a
theoretical edge, at a discount.

For the investor who is not familiar with spread trading, this
strategy offers an excellent opportunity to learn the basics in a
low risk environment.  The concept of the diagonal spread is easy
to understand and once established, the position can be managed
with little difficulty.  The occasional adjustments also provide
the necessary background for more advanced techniques.  Those
who enjoy aggressive directional trading can construct positions to
fit their style as well.  Although the potential for upside profit
is reduced, the limited downside exposure provides a favorable
risk/reward ratio for the majority of investors.

Good Luck!


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