Option Investor
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Daily Newsletter, Thursday, 03/02/2000

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The Option Investor Newsletter         Thursday  3-2-2000
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)
************************************************************
       3-02-2000           High     Low     Volume Advance Decline
DOW    10164.90 +  27.00 10212.40 10103.50 1,191,065k 1,276  1,668
Nasdaq  4754.51 -  29.57  4829.01  4705.45 2,136,911k 2,046  2,235
S&P-100  750.26 +   6.72   753.00   742.23    Totals  3,322  3,903
S&P-500 1381.76 +   2.57  1386.56  1370.35            46.0%  54.0%
$RUT     584.04 -   4.31   591.41   579.80
$TRAN   2353.93 -  43.84  2401.62  2342.14
VIX       23.90 +   0.22    25.04    23.20
Put/Call Ratio       .41
*************************************************************

It was not pretty but the Dow makes it four in a row!

It was an ugly day in the markets but we finally broke the
cycle of Wednesday to Friday free fall. After opening slightly
positive the Dow traded on both sides of the ledger all day and
barely squeaked out a win at the close. But a win is still a win
especially when the February employment report is due out Friday
morning. I am still encouraged by the lack of another sell off.
You can tell by the volume this week that a fierce battle is
being waged between the bulls and the bears. There are plenty
of sellers but there are also plenty of buyers with deep pockets
for bargain hunting the NYSE stocks which are now shouting value
louder every day.

The NASDAQ ended yesterday up +17.5% for the year and in striking
distance of Nasdaq-5000. (N5K for future reference) After setting
a new intraday high of 4829 today, many traders decided to take 
profits from the +350 point gain since Monday's low. Simple 
profit taking in front of the Employment Report. No, the world 
is not coming to an end, the Nasdaq is not correcting and the
3Com PALM IPO did not tank the market contrary to many analysts 
views.


 


 

Talk is cheap but oil is not. With commentators warning of an
impending recession brought on by high oil prices and higher
interest rates, the oil experts, and I use the term loosely,
were "warning" OPEC that they need to increase output soon. I
am sorry boys and girls but this mornings oil price of $32 is
not going to bring on a recession, even with higher interest
rates. "Warning" OPEC is not going to accomplish anything. The
market rules and will create supply to fill the void. At $33
oil it becomes economical for many electric generation plants
to use more coal. At $33 oil the production cheaters will pump
even more to capture the profits before the big guys open the
valves again. Don't look now but OPEC is starting to leak. The
hard line production cuts are starting to bend under the pressure
of the cash register not the political process. While high oil
prices is killing the airlines and trucking industry it is
only a cyclical thing and these industries consider it a routine
annoyance and hedge their future needs whenever possible.

The PALM that would be king of the Internet made a successful
debut with their IPO today. With dealers quoting $70-$160 in 
premarket indications the PALM IPO was the talk of the market.
For a stock that was only $20 last April 3Com has made quite
a comeback. With an intraday high yesterday of $120 3Com had
quadrupled its market cap while losing market share in their
networking business. After the IPO today where 3Com sold off
4% of the PALM business the market cap of both companies is
now more than 900% what it was a year ago. Based on today's
price PALM by itself is bigger than Apple Computer which has 
been around forever and even bigger than its parent 3Com. While
I agree that the Palm pilot is pretty neat and the new color
models even neater, are we not getting a little out of hand
here? If there was ever a speculative bubble this was it. I
had been wishing for a week that I could short PALM this morning
but I had to sit on the sidelines and watch that $160 spike in
the opening minutes bleed away to close at ONLY $94 for a -40%
drop for those lucky (or stupid) enough to buy at the open.
The loss was not limited to only a few "lucky" traders with
over 38 million shares trading. Since there were only 23 million
shares, or 4%, released to the public there was a lot of 
happy/sad trading going on. Picture the expression on the face 
of the happy trader as he gets a confirmation of his "market"
purchase of PALM at $150, 140, 130, whatever, and only then 
to find out that it was already -$10, $20, $30 cheaper than 
he paid and dropping so fast you could not place an order to 
sell. I am sure there were many converts to the "I am not 
playing IPOs in the open market" church of destitution today 
and many speculators are licking their wounds tonight.  


 

The economic numbers today were a mixed bag and only set the
stage for the Employment report on Friday. The New Home Sales
came in with a drop of -4% which was great except that December
was revised up +4.2% to make the whole thing a push. The numbers 
were skewed by weather and other seasonal factors. This is where
I am pinning my hopes for tomorrow. The January Employment 
Numbers were much higher than expected and I think the weather 
skewed those numbers also. I would not be surprised if the
employment numbers Friday come in much lower than expected to
offset the very high January figures. If they do we could be 
off to the races again. The Fed meeting is still over two weeks
away and some analysts are claiming that the soft market and
easing economic numbers could actually hold the Fed back from 
raising in March. Don't hold your breath. Since everyone has 
expected the Fed to raise for sometime a non-raise event in 
March would be like yelling fire in a crowded theater. They 
will raise because they can without any market impact. It is
already expected and priced in to the market.

Friday's direction should be determined before the market opens
by the Employment report. Anything but a larger than expected
jobs number or lower than expected unemployment number should
be the green light to start the March run into April earnings.
The Dow is showing strength and the NASDAQ got its profit taking
done on Thursday. With four of the last five Fridays producing
a -200 point Dow day any positive close would be welcome.

Trade smart and sell too soon.


Jim Brown
Editor

Disclosure notice: 

Current long positions include; CMGI, EMLX, JDSU, GLW, HGSI  



**********
STOCK NEWS
**********

The AMEX Finds Its Niche
By  S.P. Brown

Not so long ago the American Stock Exchange (AMEX) seemed 
destined for the trash heap.  The exchange used to be the place 
where young small-cap stocks matured before heading off to the 
NYSE.  In fact, when investors thought of the two major stock 
exchanges, they used to think of the NYSE and the AMEX.

That all changed with the advent of the Nasdaq stock exchange 
in the early 1970s.  The Nasdaq became the place young 
companies went to mature.  What's more, many stocks that grow 
up on the Nasdaq are content to stay there.  Now, when 
investors think of the two major stock exchanges, they think 
of the NYSE and the Nasdaq.

Since small-cap stocks went to the Nasdaq and large-cap stocks 
went to the NYSE, the AMEX could no longer compete as a pure 
equity trading market, continuing to do so would have been 
analogous to a local five & dime attempting to butt heads with 
Wal-Mart and K-Mart.

So the AMEX decided to do a makeover.  In addition to being a 
market for a few forgettable common stocks, the exchange became 
the principal market for index equity trading instruments.  
These instruments, or index shares as they are more commonly 
called, track most major domestic market sectors, as well as 
most foreign equity markets.   

Equity index shares come in over 50 flavors, allowing investors 
to trade a selected market with a single investment that is as 
easy to trade as a share of stock.  But unlike mutual fund 
index shares, investors can buy or sell these index shares at 
any time during the trading day.  What's more, investors can 
turn in their index shares for the underlying securities.  This 
little feature virtually guarantees a premium or discount won't 
develop like it often does with closed-end mutual funds.

Here's the real nifty feature, though, these index shares can 
be shorted without waiting for an uptick in price.

Last week the AMEX introduced three new index shares that 
should be of particular interest to Internet investors.  Let's 
face it, it can be a challenge to construct a diversified 
Internet portfolio when many of the Internet companies are 
trading at triple-digit levels. 

The AMEX has addressed this dilemma with securities known as 
HOLDRs, which are receipts for an interest in an Internet 
trust. Each HOLDR contains 20 different Internet companies.  
The three HOLDRs track Internet architecture (IAH), 
infrastructure (III) and B2B e-commerce (BHH). 

Internet architecture contains the likes of Sun Microsystems 
(SUNW), Cisco Systems (CSCO), Foundry Networks (FDRY) and 
Sycamore Networks (SCMR).  

Internet Infrastructure gives investors access to Inktomi 
(INKT), Broadvision, Inc. (BVSN), Vignette Corporation (VIGN), 
BEA Systems, Inc. (BEAS) and Exodus Communications (EXDS).  

And the B2B index shares gives investors exposure to high-
flyers Commerce One (CMRC), Ariba (ARBA), Chemdex Corporation 
(CMDX) and Internet Capital Group, Inc. (ICGE).

In addition to Internet index and market specific index shares, 
the AMEX also offers index shares that mimic the Dow Jones 
Industrial Average, the S&P 500, the S&P Mid-Cap 400 and the 
Nasdaq 100.  

Investors who wish to instantly construct a diversified 
portfolio, or cost effectively trade one market against 
another, would be well-served to take a closer look at the 
AMEX index offerings.  



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

As of Market Close - Thursday, March 2, 2000 

                   Key Benchmarks
Broad Market       Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
DOW Industrials   10,700  11,250  10,165    BEARISH   2.17
SPX S&P 500        1,400   1,450   1,382    BEARISH   2.18
OEX S&P 100          740     780     750    Neutral   3.02  *
RUT Russell 2000     500     520     584    BULLISH   2.24
NDX NASD 100       3,800   4,000   4,234    BULLISH   2.24
MSH High Tech      1,850   2,000   2,070    BULLISH   2.24

XCI Hardware       1,300   1,460   1,532    BULLISH   2.24
CWX Software       1,200   1,470   1,470    BULLISH   2.24
SOX Semiconductor    800     900   1,136    BULLISH   2.24
NWX Networking       940   1,000   1,130    BULLISH   2.24
INX Internet         700     800     737    Neutral   1.06

BIX Banking          500     550     483    BEARISH  11.30
XBD Brokerage        400     450     472    BULLISH   2.31
IUX Insurance        500     550     472    BEARISH  11.30

RLX Retail           950   1,000     825    BEARISH   1.28
DRG Drug             340     380     319    BEARISH   2.18
HCX Healthcare       700     750     659    BEARISH   2.18
XAL Airline          120     140     115    BEARISH   5.21
OIX Oil & Gas        280     315     258    BEARISH   1.27


***Posture Alert***
It was another big volume day for the NASDAQ, as 2-billion share 
days are becoming the norm. 3Com and its spin-off, Palm, led the 
action today, however, the broad market closed relatively 
unchanged. Individual sectors did see action however most were to 
the downside. Sectors making a move Thursday include Software 
(-4.10%), Semiconductors (-3.09%), Insurance (-2.50%), and 
Networking (-2.45%).  With this most recent market action, we have 
upgraded the S&P 100 to Neutral from Bearish!



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

Palm This!

Thursday, March 2, 2000

Strike up another 2-billion share day for the NASDAQ, as volume 
continues to show no signs of letting up. This influx of cash 
continues to pour in as well, as evidenced by the big surge in 
today's hot IPO, Palm. Palm, which was partially spun off by 
parent 3Com (COMS), also happens to be our topic du jour today, as 
sentiment for this issue was building up all month last month.

Gauging investor sentiment can be a very rewarding and profitable 
endeavor. Here at Pinnacle Capital, we are always evaluating 
sentiment in hopes of finding the next rising star or falling 
angel. Today, we made some extremely profitable trades in 3Com, 
which we can thank due to our sentiment analysis! The sentiment 
for 3Com and its Palm spin-off was building all during the month 
of February. For those of you who don't know, 3Com was spun off 
4% of Palm in an IPO, with the rest of the equity in Palm being 
rewarded to shareholders of 3Com stock 6 months down the road. So 
for the last month, 3Com stock has been trading up in anticipation 
of the Palm spin-off. As you can see from the graph below, the 
stock has more than doubled during the last 4 weeks alone. Having 
a gain of over 100% should be satisfying for most, especially 
given the short time frame.

However, when we arrived at the office this morning, we kept 
hearing about the Palm spin-off on every medium available. Every 
on-line financial site was talking about it, CNBC hyped the event 
for weeks (not to mention all day), and even local radio stations 
were talking about the Palm. Everywhere we turned, we were 
getting Palmed! You couldn't pay enough money for the free 
publicity that this stock received! So we decided that the old 
adage of buy-the-rumor, sell-the-news might come into play on 
3Com's stock. So, already knowing that this spin-off has gotten 
millions in free press, as well as 3Com stock appreciating over 
100% in a few weeks, we decided to look at what the option 
speculators were leaning to. Below, we have made a chart showing 
volume for today, as well as previous open interest. As you can 
see by the chart, call options were trading off the charts! Not 
only is there two weeks left until March expiration, but call 
premiums were huge, and call volume/open interest was surpassing 
put volume/open interest by over 6 to 1!  The sentiment was too 
overwhelmingly bullish, so we decided to sell 3Com stock, off the 
open. Never looked back. Sentiment analysis can be so rewarding, 
which is why Pinnacle loves earnings season. So when your 
favorite company is having a major news event (i.e. earnings, 
spin-off, buy-out), check the sentiment, it just may help! 


                    Open                                 Open
Option    Volume  Interest  Symbol    Option    Volume  Interest Symbol
MAR-95C    2889     4367    THQ CS    MAR-95P    901     1739    THQ OS
MAR-100C  12391    14280    THQ CT    MAR-100P  3428     1572    THQ OT
MAR-105C   4510     6269    THU CA    MAR-105P   777     1390    THU OA
MAR-110C   8626     9313    THU CB    MAR-110P   661     1464    THU OB
MAR-115C  10432    10512    THU CC    MAR-115P   680      850    THU OC
MAR-120C   1559     1283    THU CD    MAR-120P   114       20    THU OD
MAR-125C    774      342    THU CE    MAR-125P    22        0    THU OE
MAR-130C   3324      777    THU CF    MAR-130P    22       10    THU OF
Totals:   44505    47143 = 91648                6605     7045 = 13650


 

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. 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 (6.144):
The current yield is now safely off of 52-week highs and is 
temporarily out of the danger zone.


Mixed Signs: None


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.

Volatility Index (23.90):
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 last week, and is now getting close to the selling range!


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

 
Pinnacle Index OEX              Friday       Tues       Thurs
Benchmark                       (2/25)      (2/29)      (3/2)

Overhead Resistance (755-800)     3.28       4.68        6.23
Overhead Resistance (730-750)     1.15       1.28        1.05

OEX Close                       719.78     738.64      750.26

Underlying Support  (700-720)     5.70       4.92        6.09
Underlying Support  (650-695)     8.11      10.20        9.80

What the Pinnacle Index is telling us:
We stated on Sunday and Tuesday that we would rally on the OEX, 
and we got just what the doctor ordered. However, we believe that 
the OEX will start to stall starting at 755, and then stay trading 
range bound for the near term. 


Put/Call Ratio                  Friday     Tues       Thurs
Strike/Contracts                (2/25)    (2/29)      (3/2)

CBOE Total P/C Ratio             .41       .41         .41
CBOE Equity P/C Ratio            .36       .36         .33
OEX P/C Ratio                   1.19       .99        1.96


Peak Open Interest (OEX)
                     Friday           Tues            Thurs
Strike/Contracts     (2/25)          (2/29)           (3/2)

Puts               700 / 7,704      700 / 8,177     700 / 9,538
Calls              800 / 7,965      750 / 8,182     750 / 8,248
Put/Call Ratio         0.97            .99             1.16


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

March 2, 2000                           23.90


Investors Intelligence
                    Major             Percent     Percent
Date                Turning Point     Bullish     Bearish

October 97          Bottom            22.0        48.3       
July 20, 1998       Top               52.0        24.0         
October 8, 1998     Bottom            38.5        42.7
January 11, 1999    Top               58.3        30.0
March 4, 1999       Bottom            49.1        32.5
Oct. 13, 1999       Bottom            39.2        37.5

February 25, 2000                     51.8        28.6
March 2, 2000                         52.3        28.3



Please view this in COURIER 10 font for alignment
*************************************************
CHANGES THIS WEEK

Daily Results

Index      Last    Mon    Tue    Wed    Thu   Week
Dow     10164.92 176.53  89.66   9.62  26.99 302.80
Nasdaq   4754.51 -12.65 118.84  87.39 -29.57 164.01
$OEX      750.26   7.97  10.89   4.90   6.72  30.48
$SPX     1381.76  14.69  18.37  12.77   2.57  48.40
$RUT      584.04   0.94  20.03  10.64  -4.31  27.30
$TRAN    2353.93  10.52  27.08   8.91 -43.84   2.67
$VIX       23.90  -1.98  -1.31  -1.91   0.22  -4.98

Calls              Mon    Tue    Wed    Thu   Week

DNA       214.50   7.72  11.38  20.00   1.63  39.50  Charged!
INSP      261.06  -7.19  -1.13  21.00  23.06  35.75  Moon boots
CLRN      128.00   3.06   7.19  12.75   6.00  29.00  New
GLW       205.88 -10.94   8.25  15.00   3.06  18.06  Nice pop
JDSU      273.00   3.81  10.63  17.25  -7.88  16.19  2:1 split
CHKP      220.50  -4.13   2.44   7.81   8.75  14.88  Breakout
EMLX      168.63  -8.38  11.25  15.56  -6.94  11.50  More up
LHSP      116.88  -7.72   5.44  14.06  -3.13   8.66  Steps up
VERT      234.13  -7.75   2.00   9.63   4.50   8.38  Up nicely
HGSI      214.13  -1.19  13.44   7.00 -11.13   8.13  Entry point
ENMD       83.13  11.38  11.00  -5.00 -10.38   7.00  Dropped
CMGI      124.00  -1.13  13.19  -1.88  -3.69   6.50  Earnings
NSM        73.50   5.50   1.63  -1.88   0.25   5.50  Earnings
CCBL       44.97   1.00   4.22   1.59  -1.34   5.47  New
ATML       47.88   0.44   5.88   1.31  -2.94   4.69  Breather
ADIC       88.00   1.94   4.63   6.19  -8.81   3.94  Rewinds
AFCI       61.00  10.31   0.38  -3.50  -3.63   3.56  Radar's on
ERICY     100.50   0.38  -2.00   2.88   1.63   2.88  Answers
COMS       81.81  -1.63  18.94   6.13 -22.31   1.13  Dropped
INKT      145.50  -4.13  -3.88   3.94   4.44   0.38  No doubt
SEBL      136.56  -3.69   4.00  -3.94   1.81  -1.81  Stuck?
QLGC      140.69  -3.63  14.38  -7.25  -8.06  -4.56  Tidy profit
NEON       80.13  -2.63   8.69  -1.69  -9.81  -5.44  Dropped

Puts

RNWK       64.25  -5.38  -2.69  -0.56  -5.50 -14.13  Slides
DD         46.88   0.38  -1.38   2.13  -1.50  -4.63  New
RHAT       63.78  -4.81  -2.88  -4.94   8.03  -4.59  Dropped
PPG        47.13   0.00   0.31  -1.06  -1.19  -1.94  New
JNJ        73.69   0.75  -0.75   1.38   0.31   1.69  Linger mode
KMG        46.38   1.63   2.38   1.75   0.38   5.63  Still weak



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

There is no Womans World article tonight, Renee is still on vacation.


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

Trader's Euro Dispatches, Part Deux

Well, here I am in that little Internet Cafe off of Hyde Park again. 
The last 5 nights have all been spent in bars, cafes, restaurants. 
Instead of ticker symbols, I have the names of beverages and other 
intoxicants running through my head. Guinness. Bordeaux. Beujoulais. 
A Girl Named Sam. Greek Places in Paris. Plates breaking, flaming 
skewers...

And I am making money.

The great thing about being a trader is that you can do it anywhere 
in the world. It is even better to do it in Europe because the 
markets open in the afternoon. Quite civil. Think of a nice place 
on the west coast of Ireland or up in the Swiss Alps, perhaps 
Grindelwald, or around Interlaken (literally, between the lakes). 
Put on some JDSU spreads. Hit the slopes, go for a bike ride along 
the Burren coast.

Here's the basic equation that is going to drive my trading program 
in the future: selling options pays for buying options. There are 
two important variations:

1. 30 day (or less) credit spreads pay for longer term debit spreads.

2. 10 day short calls pay for LEAPs (Calendar Spreads).

Right now, I just want to look at two credit spreads I put on right 
before I got on the plane for France:

sold JDSU Mar 230 Put (currently 5.375)
bought JDSU Mar 190 Put (currently .62)

That thing is dying a beautiful death. I risked 1 to make 1 -- 
normally you would want to do better, but I also thought that I 
had a good chance of capturing the entire credit due to the 3/13 
split. It is working out beautifully.

Similarly, I put on another credit spread:

sold IMNX Mar 185 Put (currently 11.25)
bought IMNX MAR 165 Put (currently 4.5)

With IMNX holding above 190 nicely, and a 3:1 split coming on 
Mar20, I am pretty confident that this play will expire worthless 
as well. Like the JDSU play, this play benefits from time decay, 
which has the effect of shrinking the spread, and increasing my 
profit on the play, if I do get out of it earlier than expiry.

I want to use these types of credit spreads to "finance" my longer 
term debit spreads. I have 5 or 6 longer term spreads on, most of 
which are doing nicely (JDSU, AFFX, CMGI), and one of which I might 
have to repair or drop (ICGE). The basic idea is that I use the 
profits generated each month from the credit spreads to plant longer 
term seeds with the debit spreads.

Similarly, I want to sell 10 day calls against my LEAP holdings 
(SEBL, BRCM, NOK, GE, CSCO, QCOM, IMNX, GSTRF) in order to finance 
those also. Of course, you have to find good overbought entry points 
to sell OTM short term calls so that you don't get called out.

Anyway, shooting off a quick email is a good way for me to organize 
my thoughts whilst cruising through my plays on my.yahoo.com and my 
online brokers. One of my travel companions just came in to check 
his email via a email pop server set to be accessible worldwide. My 
other two travel companions are a QCOM engineer and a San Diego 
attorney I boxed with in college. About time to get on the road to 
Soho....

When I get back, I am going to put together my outline for my 
trading program -- stock selection, strategy selection, entry point 
selection -- currently scribbled onto various back covers of books 
and the margins of print outs of the newsletter.

Good Luck
Contact Support

***********

Back to Basics in a Big Way
By: Harrison Frolick

I have been getting several emails on a few issues that I feel 
need to be addressed. I am not trying to pick on anyone here, it 
is just that sometimes I know I have a tendency to write for the 
more somewhat seasoned traders.  

First off, if you do not know how to chart, you should not be 
trading options!  You will lose your shirt and the one that you 
have to borrow after yours is gone. I have already lost a whole 
wardrobe so don't look at me. I suggest using a 3 day moving simple 
moving average.  A freebie charting service is www.bigcharts.com.  
Although I suggest that you break down and spend $30 bucks a month 
and get one the premium services that are advertised in the 
Investors Business Daily.  Then go to the book store and buy some 
books on how to chart.

I have seen so many people worry about spending a few bucks a 
month and yet, they put thousands on the line while trading.  
Dollar wise and penny foolish.  Spend the money on the charting 
or quote service.

Paper trade first.  Do it!  Especially you newbies or if you have 
had a losing streak lately.  Take a breather and paper trade.  
Don't give up.  Your losses will teach you the greatest lessons.  
They are part of your tuition payments in the school of option 
trading.

Don't got for the kill on every trade.  I have seen this time 
and time again.  People are up a couple of thousand dollars and 
they refuse to take it off of the table and end up in a losing 
position instead.  Here is the biggy, figure out how much you 
want to make on a trade before you get into the position and as 
soon as you get into it, place your exit order.  So what if it 
goes up after you get out?  You are making winning trades and 
that is the first hurdle. Now it is a just a matter of tweaking 
your exits. 

When Jim talks about making 100% per year trading options I must 
tell you something, he is terribly wrong!  No I am not calling 
him a liar.  He is just being conservative. That is OK though. 
He is supposed to be. But, you can do 200%, 300%, or more.  
Everyone is mistaken when they think that  they have to make a 
home run every time out.  If you just pick one trade, lets say 
10 contracts at  $10 and you wait a whole month and you sell them 
for $11.50.  You just made $1.50 on that option. Do you have any 
idea what your rate of return will be if you only go after that 
measly $1.50 in similar trades another 11 more times during the 
year?  Excluding  commissions your rate of return will 535% 
for the year.  Think about how many times you have passed up $1.50
on calls that you got into for less than $10.  Did you do 535% 
last year in your portfolio?  If you only pull out a $1 on similar 
trades 12 times a year you will pull in over 300%.  So go for a 
bunch of base hits.  Don't go for the home run every time.

DSLN is my latest favorite covered call stock that you can pick 
up 20% or more on doing just good old covered calls. And I think 
that I am long DSLN as I write this Yes, I still do them for the 
reasons listed above.  Try doing 30% per month and figure your 
returns.  This is why I trade options! And people ask me if you 
can make any money trading options........

Happy Trading!


PICKS WE DROPPED
****************
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.


CALLS:
*****

ENMD $83.13 -10.38 (+7.00) Is anyone else asking what happened?
ENMD started looking sick early yesterday, dropping as low as
$85.50 before recovering for the balance of the day.  Any hope
for a continued improvement was quickly dashed as ENMD dropped
sharply at the open today, and then moved down for the rest of
the day.  Volume has been above the ADV and ENMD has lost over 
$15 in the past 2 days.  There has been no news to drive the 
move.  It just appears as though investors are taking their 
profits and heading for the next hot play.  With today's drop, 
the 5-dma has failed as support for the first time since early 
February; until ENMD can get healthy, we have to let it go in 
favor of more robust plays.

NEON $80.13 -9.81 (-5.44) That will teach us to open our big
mouth!  Remember on Tuesday, we asked "Is anyone was ever going
to turn out this light?".  Well somebody either turned it off,
or it burned out.  Yesterday's trading seemed to have established
support at $90, but it evaporated at the open this morning.
Losing almost $10 on above average volume is not the kind of
performance we like to see in our Call plays.  Adding insult to
injury, this was the first day since February 14th that NEON has
even been near its 10-dma ($82.25).  Slicing through this level
mid-day didn't even slow the descent and leaves us with no choice
but to drop NEON until its future begins to brighten again.

COMS $81.81 -22.31 (+1.13) Well it was fun while it lasted, and
profitable too.  Traders that were able to take advantage of our
play in COMS, and the IPO of its PALM unit this morning, were
provided with thrill of victory, and hopefully sold too soon,
before COMS fell out of bed.  The IPO of PALM certainly live up
to all the hype surrounding its first day.  After being priced
at $30-$32 and getting bumped up yesterday to $38, shares of 
PALM opened at $145 per share and hit a high of $165 before the
selling set in.  COMS made a new high Wednesday at $119.75
before falling back to close at $104.13.  COMS again gapped up
this morning to $117 as PALM hit the market.  This play was based
on the expected run-up of COMS prior to the IPO.  Now that PALM
has made its debut, the enthusiasm has waned, and COMS ended the
day down -22.31 at $81.81.  That is what we expected now that 
the news is out and investors were ready to sell too soon.


PUTS:
*****

RHAT $63.78 +8.03 (-4.59) RHAT continued to reward us for our 
patience until today (as you may remember, we had RHAT on 
probation last week).  However, the time has come when we must 
at last take RHAT off our put play list.  RedHat offered some 
great opportunities for profit in yesterday's session, dropping 
nearly $5 for the day.  Shares of RHAT shot up this morning and 
ran into resistance at $65.  RHAT then pulled back a bit to test
support at $60 before having another go at it.  RHAT had strong 
volume backing today's gain and was able to make a move through 
it's 5-dma of $62.50.  At this point, we don't think that even 
a probationary period will cut it.  There are just too many 
indications emerging that are pointing in the direction of 
possible trend reversal.  No matter, we are up big and will 
take our profits and go.



********************
PLAY UPDATES - CALLS
********************

ADIC $88.00 -8.81 (+3.94) Did somebody hit the rewind button?
After gapping up yesterday morning, ADIC ran into solid
resistance at $100 and has peeled off continuously since then.
Closing at the low of the day today, ADIC is right at the $88
support level (near the spike high from last Friday), and just
below the 5-dma ($89.13).  This has the look of simple profit-
taking as the drop has come on declining volume.  Trading less
than the daily average of 490K shares today, we will need to
see a return of buyers to drive shares higher as the 2-for-1
split approaches on March 13th.  The company continues to expand
its market penetration, announcing yesterday that it is bringing
Linux servers into the fold of Storage Area Network (SAN) data
sharing applications that it supports.  The new support, through
ADIC's CentraVision File-sharing System (CVFS), will mean that
Linux systems will be able to use SANs to share consolidated
storage, increase workflow efficiency, and eliminate both
bandwidth bottlenecks and the need for redundant data.  Look 
for shares to move up from current levels on increasing volume
before initiating new positions.  Should we see more weakness,
there is further support at $84, but wait for the bounce and
volume increase before pushing the play button.

LHSP $116.88 -3.13 (+8.66) Stepping up to the plate at the open
yesterday, investors confirmed that the $100 level is solid
support, as they shattered the mild $108 resistance level at
the open.  With the strong move and consolidation through
yesterday afternoon and all day today, $115 is emerging as
support again.  Recall that we had a similar picture just 6
days ago, before LHSP dropped down to support at $100, giving
patient investors a great entry point.  Today's consolidation,
(a loss of $3.13) came on only about 60% of the ADV, and has 
the feel of mild profit-taking.  Presenting tonight at the 
Robbie Stephens Tech 2000 Conference should provide yet another
opportunity for the company to impress investors with their
strong product mix and growing list of industry alliances.
Recall that part of the excitement is their announcement of 
a 2-for-1 split (shareholder approval and execution date
pending), and anticipation of this event should continue to
drive shares higher.  Look for $115 to hold as support, and an
increase in volume to trigger your entry.  More conservative
players may want to wait for a convincing move through the 
$120 level before jumping on board.

QLGC $140.69 -8.06 (-4.56) We were wondering when the profit-
taking would appear, and got our answer over the last 2 days.
After re-testing resistance at $160, the selling volume began
to overwhelm the buyers, dropping the price all the way to
support at $140 by today's close.  With almost a $20 drop in
the past 2 days, open positions should have been stopped out,
leaving you with some tidy profits.  Presenting at the Robbie
Stephens Conference this afternoon seemed to have little effect,
as the stock closed right near the low of the day.  Although
volume has been steadily dropping over the past 3 days, today
still saw 50% more than the daily average number of shares
trading hands.  Strong support exists at $135, and a bounce
here would make for an ideal entry going forward.  If the
selling continues through this support level, we will be
concerned about the viability of our play, and would recommend
standing aside.  Resistance should be seen near $150, and 
more conservative players may want to wait for prices to 
trade through this level before jumping back on board.

ERICY $100.50 +1.63 (+2.88) Have you ever had the feeling that 
someone is listening in on your phone call?  It is beginning 
to feel that way with ERICY because whatever we seem to request 
as an indication for continuing positive momentum, ERICY seems 
to immediately deliver.  We mentioned on Tuesday that a break
through the $100 level would be a nice bullish indication and 
another viable point for possible entry.  Well, here we are.  
This morning, ERICY decided that it was time for it to be on 
the other side of $100.  ERICY traded up to $101.63 before 
going another round with the bears and pulling back to test 
the support of it's 5-dma, which held nicely and provided the  
springboard for ERICY to bounce back from.  The bulls then 
stepped in and traded ERICY up to a new high of $102.  We are 
now looking to the $100 level to provide support.  However, 
should ERICY pull back through, ERICY's 5-dma of $98.25 
continues to hug tightly to ERICY and could provide additional 
support if needed.  Watch for entry points at either one of 
these levels should ERICY continue right on with it's move.  


***********************************************
PLAY UPDATES - CALLS - CONTINUED IN SECTION TWO
***********************************************


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DISCLAIMER
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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
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The newsletter staff makes every effort to provide timely 
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The Option Investor Newsletter         Thursday  3-2-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


********************************
PLAY UPDATES - CALLS - CONTINUED
********************************

ATML $47.88 -2.94 (+4.69) Pulling back today to $45.94, ATML 
is taking a breather.  No problem though as the SOX also fell 
by 3.0%, likely a sympathy move for ATML.  Volume was normal 
however, which could indicate that most investors will hang on 
to see if higher profits can be obtained.  We had warned that 
besides being a hot group, Semiconductors are also a bit jumpy. 
If you are a little hesitant, watch the 5-dma at $47 for 
support.  If it breaks that, support at $44 would be the next 
place ATML for to go.  The more aggressive investor will use 
this pullback as a good opportunity to buy.  On Tuesday, two 
analysts initiated favorable positions on ATML.  Other than 
that, ATML has no fresh news. 

EMLX $168.63 -6.94 (+11.50) One day up, one day down.  That's
the pattern we've seen with EMLX so far this week.  As long
as the net result is more up than down we won't complain.  The
real plus on this play is the volume.  Yesterday's gain to a
new high at $179.81 had much better volume supporting the move.
EMLX gained +19.81 before traders began to bank some profits.
Today, with the Nasdaq struggling to show any signs of life,
traders continued to take some money off the table, but the 
volume was fairly light.  Volume Wednesday came in at 1.24
million shares, while today traders could only muster 597K.
Tomorrow could be another challenge for EMLX.  If you remember,
the past three Friday's EMLX has been a great place for 
investors to park their money when the broader markets have
struggled.  With the jobs report out tomorrow, the major indices
could again experience a lot of volatility.  A good report and 
it could be off to the races once again.  EMLX closed just below 
an intraday support level at $170.  Check the jobs report in 
the morning and the movement in EMLX and the Nasdaq prior to 
entering a new play or adding any additional positions.
 
NSM $73.50 +0.25 (+5.50) Tuesday's momentum in the chip sector
and NSM carried through long enough Wednesday for our current
best friend, NSM, to make a new high.  Investors began to either
loose interest or decided to take a some money out of their 
positions as NSM ended the session -1.88.  Today in watching
NSM trade it really appeared as though traders were a bit 
hesitant to get to excited about anything in the chip sector.
The SOX gave back over 3.0%, while NSM managed to add $0.25.
Another check in the plus column for our play, was the support
level near $70 did just what it was supposed to do, provide
support.  Remember our current interest in NSM is for an earnings
run.  At this point all signs point to a very good earnings
report, which would suggest our play could be getting ready to
explode.  NSM is scheduled to release earnings Mar 9th, and with
the company's CFO coming out earlier this week and suggesting
better than expected third-quarter results, we believe NSM
could take off at any time.  A move back through $74.50, with
solid volume may provide a good entry point for new plays.

CHKP $220.50 +8.75 (+14.88) Did we mention Tuesday that it
appeared as though CHKP was about ready to breakout?  We did
and it did.  Wednesday morning CHKP opened about $1 higher, and
made a new high at $218 before ending the day with a gain of
about 3.8%.  Today proved to be more of the same as CHKP
made another new high, and gained another 4.1%.  Other than
the drop early in the week, CHKP has just about performed on
command.  Besides being a great play, investors haven't
forgot about what CHKP is in the business of doing.  They help
to protect us from Internet hackers.  Their latest alliance was
with CoreHarbor, an e-procurement solution.  CHKP has signed
numerous alliances recently, which has also helped bring this
company to the forefront.  Looking for a reason CHKP could
continue to move higher.  Here's a good one.  The last hour of
the session today, CHKP jumped over $10 higher, with volume of
over 288K supporting the move.  That alone suggests there may
be plenty of upside potential for CHKP.  CHKP has now formed
intraday support at $220 and $211. 

HGSI $214.13 -11.13 (+8.13) Sometimes its necessary to look
for the silver lining in a play.  That's the case in our new 
play in HGSI.  HGSI gapped up Wednesday morning and made a new
52-week high before investors began to take some profits.  Today
the selling continued with HGSI loosing $11.81.  Where's the 
silver lining you ask?  HGSI made a low of $201, but found 
buyers waiting in the wings driving the price back up to close 
at $214.13.  For those of you that didn't get in and out of
this new play, the decline today and subsequent bounce provided
a much better entry point.  At this point it really appears 
as though HGSI and the Biotech sector have just taken a few days
to off before getting back on track.  Yesterday, Dr. William 
Haseltine, Chairman and CEO of  HGSI said in an interview, that
he sees a continued surge in the Biotech industry.  He went on
to say the new revolution in Biotech, is much more broad based
than the one that occurred in the early 1990's.  Volume on the 
decline today was fairly heavy, so it may be a good idea to 
confirm the strength of any further moves higher before entering
a new play.  

GLW $205.88 +3.06 (+18.06) Yesterday looked terrific for GLW 
while today's action served as confirmation of the move.  Solace 
can be found in the nice pop back over the 10-dma (currently 
$191.76).  It looks even better when you consider that as the 
NASDAQ struggled a bit today, GLW tagged its 10-dma during an 
amateur hour descent, then moved up smartly to close at yet 
another new high.  Chart watchers will appreciate today's long 
tail on the candlestick chart.  Part of what may have spurred the 
move was the announcement that GLW, in efforts to shed its non-
optical products, had entered an agreement in principle to sell 
its "metallic telecommunications cable" (read that, metal co-
axial for cable television) division to the UK's Belden Inc.  In 
our book, more optics equals more revenue.  That's the future.  
Looking for support?  Try $192, or consider $200, which served as 
intraday support today.  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 27th in order to make it 
happen.  Earnings are scheduled for April 17th, which would make 
a great time to make the split announcement.  

SEBL $136.56 +1.81 (-1.81) Hmmm.  Do we see the volume trending 
down?  Yes!  Despite trading over 4 mln shares yesterday, just 
58% of the ADV (3.5 mln shares) traded hands today.  That doesn't 
look good for a stock if it's supposed to setting new highs, and 
appears to be consolidating instead - probably not unreasonable 
considering the rise from $100 in the past 2 weeks.  
Unfortunately, SEBL is stuck in the $135 to $144 range.  
Nonetheless, that's plenty of room to profit from intraday moves.  
Still, you'd think that with a new e-business alliance announced 
yesterday with today's IPO giant, Palm Inc., SEBL might be 
getting some buying volume.  In fairness, B of A Securities did 
raise their price target from $150 to $175 yesterday and 
reiterated their Strong Buy rating.  Still looking for an entry?  
The good news is that $135 seems to be good entry support, while 
$144 provides resistance.  Conservative types can buy the dips to 
$131 (the 10-dma).  Otherwise $135 should work well.  If you want 
to be really sure, wait for a high volume breakout over $144. 
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 $234.13 +4.50 (+8.38) Still maintaining its low volumes 
compared to the ADV over the last two days, VERT has not yet gone 
vertical, but has moved up nicely on the coattails of the BBRS 
analyst conference.  It is noted that VERT has created over 3000 
store fronts across 55 industries, and continues to grow revenue 
at a 700% year over year rate.  A BBRS analyst noted that of the 
sell side B2B companies, VERT holds the greatest opportunity.  
Any sway over the markets on that news?  Nope.  Even so, support 
remains at $225.50 and $225 intraday.  If you want to get it 
better than that, try $220 with descending $2.50 increments to 
$215.  Otherwise, we'd like to see the volume come back in and 
carry it over $235 convincingly.  Not to worry though, there is 
still plenty of time to get into a position for the 2:1 split 
on March 31st.  Split adjusted trading begins on April 3rd.

JDSU $273.00 -7.88 (+16.19) From the BBRS conference yesterday, 
JDSU had hordes of people at their presentation.  That would 
explain part of the volume increase significantly over the ADV, 
especially yesterday.  At the conference, their CFO noted that 
internal production has been growing by 15% every three months 
yet, their customers continue to pressure them to grow faster.  
That's a nice problem to have and won't end soon with bandwidth 
demand doubling roughly every 4 months.  But for now, the play 
is focused on the 2:1 split run scheduled to take place after 
the close of business on March 10th.  Split trading begins on 
March 13th.  Support is at $270 from the intraday bounces taken 
today and yesterday.  Given the "event" at the end of next week, 
we'd expect this level to hold.  If it doesn't, and JDSU gets 
caught in a NASDAQ downdraft, the next stop is $267 (fairly weak 
if the market is moving south), followed by strong support at 
$260.  Target shoot to your risk tolerance and enjoy the ride.  
Be sure to keep an eye on daily volume.  If it peters out, the 
ride may be nearing an end, and that's the time to move up your 
stops to protect your profits.  One final note, yesterday SG 
Cowen raised their rating to a Strong Buy with a $300 price 
target for JDSU.

DNA $214.50 +1.63 (+39.50) Even the extremely aggressive players 
who planned to jump into this play at Tuesday's support level 
of $187 and $190 couldn't get their foot in the door.  DNA was 
already charged at the bell opening upwards $17.13 at $210!  If 
you were looking for a way that day, then your best bet was on 
an intraday dip to $205.  The momentum behind Wednesday's rally 
was likely connected to the early morning coverage initiated by 
CSFB.  This WallStreet "darling" was rated a Strong Buy.  Today 
DNA not only held the higher price levels, but also stretched 
farther into new territory claiming, for the second day in a 
row, another new 52-week record.  Resistance is now at $220 
and short-term support has risen to $210 and $212.  Below that 
look to $205 which is still almost 10 points above the 5-dma 
($195.59).  We're looking for this momentum to continue in the 
wake of volatile markets.  Earnings too are next month 
tentatively scheduled for April 12th.  The icing on the cake 
would of course be a split announcement around that time.  
Currently, DNA is trading at more than 60% above historical 
split-levels.

AFCI $61.00 -3.63 (+3.56) Ok it looks like a mild retracement is 
setting in after AFCI pinnacled at an all-time high on Monday 
($71.38).  The volume did taper off to moderate levels (below 
the ADV) and overall, AFCI is up a few dollars for the week.  
If you take it from a technical perspective, the stock is 
positioned firmly between the 10-dma ($56.80) and the 5-dma 
($63.78), which for the most part is a fair place to 
consolidate.  However, let's put up our radar antennas anyway.  
AFCI is moving strictly on investor momentum resulting from a 
BoD meeting last week and subsequent analysts' comments.  
Therefore we want to first verify that AFCI is, in fact, just 
taking a breather.  Keep stops in place and be patient before 
opening any new plays.

INSP $261.06 +23.06 (+35.75) Did you have your moon boots dusted 
off and a supply of Tang on hand for the rocket ride into space? 
INSP made two extraordinary moves since Tuesday with gains 
totaling $43.06, or 19.8%!  Accordingly volume was respectable
at about 2.35 mln shares exchanging hands each day.  The surge 
was a welcome coming after the short period of consolidation 
between $215 and $225.  This is especially true for the traders 
who risked the entries earlier on in the week.  Now that 
Friday's all-time high at $231 is just dot in the rear-view 
mirror, we have today's record at $264.88 as resistance.  Firmer 
support is near the rising 5-dma (now at $231.90) but intraday 
the $250 mark showed strength.  Remember the exhilarating space 
ride won't last forever.  INSP is splitting its stock 2:1 on 
March 15th so be prepared to exit before then.  In the news, 
InfoSpace.com is dropping the dot.com from its name to better 
reflect its position as a global provider of infrastructure 
services online and off.

INKT $145.50 +4.44 (+0.38) No doubt about it, INKT traded flat 
yesterday while others shot upwards.  But did you notice how 
well it managed at its near-term support level of $138 and $140?  
This demonstrated strength at the higher price levels.  The 
payoff came in today's market as the stock's momentum 
resurfaced.  This infrastructure stock hit two birds with one 
stone.  First it shattered Friday's all-time high of $148.25 and 
then it cleared a psychological path as it moved above the $150 
mark.  Overhead opposition is now at $151.56.  The only 
dissenting factor in this scenario is that volume was rather 
mild.  But again on the brighter side of this momentum play, SG 
Cowen upped its price target to $200 from $150 citing that 
Inktomi "continues to see strong demand for its traffic server".  
At present the firm has a Strong Buy rating for INKT.  Today 
intraday support was solid at $145, but lower near the 5-dma 
($141.96) still serves as a better support level.  Remember 
please, INKT is a NOT a conservative play.  In other news, 
e-lingo, the leading Internet-based translation platform, 
and INKT announced they will integrate their resources and 
provide a comprehensive multi-lingual search solution to 
Internet portals and destination sites.

CMGI $124.00 -3.69 (+6.50) The question recently resurfaced 
about this stock's price.  What is CMGI really worth?  According 
to Prudential Securities the stock is worth about $216 while 
Lazard Freres took a more conservative stab at $170.  Although 
it's unlikely that we'll reach those price levels ahead of 
CMGI's earnings' report on Thursday, Mar 9th, it's always nice 
to dream.  For those who jumped into this earnings' play early 
you were sufficiently compensated on Tuesday afternoon.  There's 
still time to trade this play so let's take a look at entry 
points.  During the past two trading sessions, CMGI has pulled 
back and honestly this is a blessing.  Currently it's hovering 
just above the 5-dma ($123.03) and an upward bounce from here is 
a relatively reliable signal that CMGI will climb in the near-
term.  Of course keep stops in place for protection.  Overhead, 
watch Tuesday's intraday high at $131 for resistance and 
remember close all your position BEFORE next Thursday to avoid 
post-earnings' depression.  In the news yesterday, CMGI along 
with Hicks, Muse, Tate & Furst Inc and Pacific Century 
CyberWorks Ltd announced the formation of a new venture capital 
partnership, @Ventures Global Partners.  They have agreed to 
invest up to $500 mln each to support emerging Internet 
companies in Asia, Europe, and the Americas.



*******************
PLAY UPDATES - PUTS
*******************

KMG $46.38 +0.38 (+5.63) Yes, KMG did manage a breakthrough 
of its 10-dma during yesterday's session.  As you may remember, 
it was KMG's inability to breakthrough this level that granted 
it a stay of execution on Tuesday.  So what is our reason for 
offering KMG an extended stay despite its recent breakthrough?  
Though KMG continued to ascend today, the gain was slight, 
resistance held firm and the volume backing today's move was 
unimpressive.  KMG's weak relative strength against it's peers 
has managed to capture the focus of this play, rather than the 
all of the recent oil crisis news.  However, we have seen some 
recent developments in this arena, which may also help to drive 
KMG back down.  On Thursday, oil ministers from Mexico, Saudi 
Arabia, and Venezuela came together, claiming that oil exporting 
countries should boost production to help alleviate some of the 
pressure behind inflated global oil prices.  The Saudi Arabian 
oil minister Ali Naimi stated that though further discussions 
were needed, the decision would be made at the upcoming OPEC 
meeting.  In other words, relief is imminent and this could 
very well have a negative impact on the sector.  KMG's 10-dma 
is at $44.25, and a drop below this level would be a nice 
bearish indication.  KMG found intraday resistance at $47 and 
we are looking for this level to continue to hold.   

RNWK $64.25 -5.50 (-14.13) Does today's intraday trading chart 
for RNWK make anyone else want to go skiing?  RNWK gapped up 
slightly at the open and quickly began to slide downhill.  If 
you were paying attention this morning, entry points were yours 
for the taking.  We believe that RNWK has the potential to fall 
to $60 and it seems to have its mind set on getting there.  
Exercise caution as we get closer to $60.  This level looks to 
be a pretty solid level of support and though RNWK may have the
momentum backing it to carry it through, why risk it until you 
know?  Along those same lines, be sure to tighten stops on any 
open positions to protect your profits against a possible bounce.  
Your best bet for new entries is to try and make your way in 
toward the earlier part of the session, once the direction for 
the day looks to be set.  

JNJ $73.69 +0.31 (+2.50) Two large block trades at $73 on 
Wednesday and JNJ has been in "linger" mode ever since.  Volume 
still remains robust with trading levels at or exceeding the ADV 
of 3.5 mln.  And so the battle of the bears and bulls continues.  
Today was a little nerve-wracking as JNJ flirted with $75 
tagging $74.94 at one point.  Yesterday too saw the stock close 
smack on its daily high.  In all candor these are not bearish 
signs.  Yet JNJ still positioned below the 10-dma ($74.65) and 
this is the saving grace of our sector play.  If it blows 
through this technical indicator, it may be a good idea to 
abandon the pirate ship and move on to better treasures.  For 
now, keep the life preservers in tote and watch for a convincing 
dive under Monday's intraday low of $70.06 for confirmation. 



**************
NEW CALL PLAYS 
**************

CCBL - C-COR.net Corp $44.97 -1.34 (+5.47 this week)

As makers of fiber optic equipment and RF devices, customers 
include cable television operators, telephone companies, and 
installers of broadband communication networks for manufacturing 
plants, offices, campuses, institutions, airports, and traffic 
control systems.  In support of its products, C-COR offers 
technical customer services, including network engineering, 
installation and maintenance assistance, and training.  The 
latest in manufacturing processes and techniques including 
surface mount technology and an integrated MRP II system, 
enable C-COR to produce high quality, value-added products 
for the worldwide communications market.  That's the long 
way of saying they are in the optical component and broadband 
access infrastructure business.

Here's another low-cost optical play.  Having more than doubled 
since tagging $20 on January 31, CCBL has been on a jet ride.  A 
word of caution before we get started - the pilot has hiccups and 
has been know to deploy thrust-reversers, causing unusual flight 
characteristics.  That said, after hitting a new all-time high 
of $48.75 yesterday, profit-takers stepped in to do their job.  
Fortunately, the volume was lower than yesterdays' move, 
indicating no serious attempt to jettison the issue.  The good 
news is that on a technical chart, CCBL bounced back above its 
5-dma ($43.20) in a strong display of support.  As the dip to 
$42.50 bounced up, it left a long candlestick tail behind it on 
the technical chart, despite the red body.  With institutional 
ownership increasing month over month and now at 82%, we think 
the low float of 16.7 mln shares will keep the issue moving as 
retail investors dive on the bone.  Earnings are a ways off, 
currently estimated at April 13th.  The one risk in this deal 
is the diminishing volume, which could be a precursor to further 
"dippage" and consolidation.  This play is not for the 
conservative trader.  But if you are a conservative trader, 
and you've got that wild hair, at least confirm that the volume 
is moving back up from the recent tapering.  While March strikes 
are available, you may want to consider Aprils to capture a 
potential earnings run.

News is scarce, but the last upgrade by CE Unterberg Towbin was 
to a Strong Buy and a $52 price target on February 17.  It's 
also worth noting that on February 22, they received a $33 mln 
order from Adelphia Communications - about 15% of their trailing 
12-month revenues of $228 mln.

BUY CALL MAR-40 LQE-CH OI=254 at $7.38 SL=5.50
BUY CALL MAR-45 LQE-CI OI=146 at $4.00 SL=2.50
BUY CALL MAR-50 LQE-CJ OI= 25 at $1.63 SL=0.75
BUY CALL APR-45*LQE-DI OI= 87 at $6.38 SL=4.50
BUY CALL APR-50 LQE-DJ OI= 50 at $4.38 SL=2.75

Picked on Mar 02nd at  $44.97     P/E = 59
Change since picked     +0.00     52-week high=$48.75
Analysts Ratings    1-4-1-0-0     52-week low =$ 8.00
Last earnings 01/00  est= N/A     actual= N/A
Next earnings 04-13  est= N/A     versus= N/A
Average Daily Volume =  591 K
/charts/charts.asp?symbol=CCBL

****

CLRN - Clarent Corp. $128.00 +6.00 (+29.00 this week)

Clarent makes Internet-based telephony systems that transfer
voice, data and faxes.  Their telephony systems permit the
simultaneous transmission of voice, fax and data over the 
Internet and similar communications networks.  The method
of technology uses network space more efficiently than 
traditional circuit systems, because it takes up space only 
during transmissions.  Clarent has three distinct components
in their system, which is comprised of Clarent Gateway, Clarent
Command Center, and a third party relational data base.  Their
revenues come primarily from telecommunications service 
providers such as AT&T, although about half of their customers
are outside the U.S.  Clarent's competition is found in Cisco
Systems and Lucent.

Their website says they fuel the telecommunications revolution
minute by minute.  The past few days the price of CLRN stock has
risen minute by minute as well.  CLRN seems to have found their
way into the hearts of many investors on Wall Street.  AT&T 
accounts for about a third of CLRN's revenue.  With the rumors
circulating early in the week on DT having interest in Qwest
and US West, many of the telecom stocks have seen renewed 
interest as well.  CLRN has added $29 so far this week and 
appears to be headed higher.  CLRN is not followed by a great
number of analysts, but those that do follow them have rated 
the company a Buy or Strong Buy.  Their popularity among 
institutions has increased in the last few months as well with
institutional ownership increasing about 41% in the last quarter.
We've added CLRN to our play list based on the renewed interest 
in the Telecom sector and the current momentum behind the recent
moves.  The gains this week have come with more than 4.5 million
changing hands.  Not bad for a company whose AVD is only 580K.  
The technical picture is bright for CLRN as MACD and Stochastics
have just turned positive as well.  CLRN has support at $124 
and $120.  Although the chart is shows CLRN pointing higher, a 
pullback to one of the support levels would also provide a good 
entry point for our new play.  
  
Part of the recent popularity seen in CLRN came last month when
the company signed memorandums of understanding(MOU's) with
five companies in Taiwan to build the new broadband local access
device targeted at any broadband media.  Last week Clarent was
chosen by gecco.net an emerging wholesale international long
distance provider headquartered in Germany, to be its IP 
telephony supplier for a network that Gecco intends to build 
throughout Europe, the Middle East and Asia.

BUY CALL MAR-115 KGQ-CC OI= 39 at $19.13 SL=15.00
BUY CALL MAR-120 KGQ-CD OI= 47 at $16.25 SL=12.75
BUY CALL MAR-125*KGQ-CE OI= 95 at $13.25 SL=10.25
BUY CALL MAY-120 KGQ-ED OI=105 at $30.00 SL=23.75
BUY CALL MAY-125 KGQ-EE OI=  5 at $28.00 SL=22.00 low OI

SELL PUT MAR-105 KGQ-OA OI= 19 at $ 3.75 SL= 5.50
(See risks of selling puts in play legend)

Picked on Mar 02nd at $128.00    P/E = N/A
Change since picked      0.00    52-week high=$132.13
Analysts Ratings    2-3-0-0-0    52-week low =$ 19.88
Last earnings 01/00 est-=0.10    actual=-0.05
Next earnings 04-20 est=-0.04    versus= N/A
Average Daily Volume =  580 K
/charts/charts.asp?symbol=CLRN



*************
NEW PUT PLAYS 
*************

DD - DuPont $46.88 -1.50 (-4.63 this week)

DuPont is a leader of global industrial companies that produce
and engineer products such as pharmaceuticals, chemicals, 
high performance materials, and agriculturals.  Some of their
products include Teflon, Dacron and Lycra.  The company is 
mainly focused in the life sciences area and its work includes 
the finding of treatment for the H.I.V virus.  It is the number 
one chemical firm in the U.S.  The company operates globally 
through some 20 strategic business units.

Unfortunately for DuPont, it has found itself lumped into the 
category of "old economy" stocks.  Though DD claims to be a 
participant in the life sciences arena, the fact of the matter 
is that DD is largely a chemical company.  A chemical company 
with management that many investors don't seem to be all that 
impressed with.  DD is what you would call an interest rate 
sensitive stock, and as you probably know, rising interest rate 
fears have played a key role in recent market volatility.  DD 
has been having a rough go of it since the beginning of January, 
when DD was flirting with it's 52-week high of $75.19.  Since 
then, DD has trended steadily downward and has been eking out 
new 52-week lows on a fairly regular basis.  Today was no 
exception as DD traded down to a new 52-week low of $46.88.  
The volume has remained strong backing DD's decline, which is 
a nice bearish indication that there are plenty of willing 
sellers out there for DuPont.  DD closed today's session smack 
dab on it's low for the day, which could have DD positioned 
well to continue right on with it's decline tomorrow.  DD does 
tend to post a rather volatile intraday trend so you may want 
to try and target shoot your way in on one of the intraday 
mini-rallies met with holding resistance.  DD looks to have 
immediate resistance overhead at its 5-dma of $50, a level 
which could provide some rather formidable resistance going 
forward.  Until we see a change in investor sentiment toward 
the cyclicals in general and more investor confidence in the 
management of DD, we could be cleared to continue on with this 
downtrend.  

BUY PUT MAR-55 DD-OK OI=750 at $8.25 SL=6.25
BUY PUT MAR-50*DD-OJ OI=901 at $3.75 SL=2.00

Average Daily Volume = 2.99 mln
/charts/charts.asp?symbol=DD

****

PPG - PPG Industries $47.13 -1.19 (-1.94 this week)

PPG manufactures a variety of products for the manufacturing,
construction, automotive and chemical processing industries.
The company also helps do-it-yourself homeowners brighten up
their house with its Lucite brand of house paints.  Paints,
stains, and other coatings account from almost half of the
company's sales, with the balance coming from the glass
products and chemicals divisions.  PPG has over 75
manufacturing facilities in 16 countries, but North America
accounts for 70% of company sales.

Another victim of the continuing preference for tech stocks
over old-line manufacturing stocks, PPG has been in a downtrend
for most of the year.  Completing a double-top near $65 in mid-
January, shares have been weak ever since.  Finding support at
$48 in mid-February, it looked like PPG might be able to stage
a recovery from the lowest levels seen since 1996.  Alas, it
wasn't to be.  After fighting its way back up to the low 50's,
PPG has once again succumbed, not so much to selling pressure
as to lack of interest.  The stock price has dropped below $48
on anemic volume (about 60% of the ADV) to post a new 52-week
low of $46.63.  Sitting on support at $47 (which isn't found
until you go back to late 1995), PPG will either find its legs
from here or continue to drop due to investor disinterest.  The
next level of support is near $41.50, and an increase in selling
volume could take us there rather quickly.  The 5-dma ($48.50)
is providing consistent resistance, and all the other moving
averages are far above.  Look to enter new positions on either
another southward bounce from the 5-dma or a penetration of
today's low.  Keep an eye on volume, as an increase in buying
interest could signal life returning to this beaten down issue.

BUY PUT MAR-55 PPG-OK OI= 50 at $7.00 SL=5.25
BUY PUT MAR-50*PPG-OJ OI=109 at $2.69 SL=1.25

Average Daily Volume = 515 K
/charts/charts.asp?symbol=PPG



**********************
PLAY OF THE DAY - CALL
**********************

GLW - Corning Inc. $205.88 +3.06 (+18.06 this week)

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.

Most Recent Write-Up

Yesterday looked terrific for GLW while today's action served 
as confirmation of the move.  Solace can be found in the nice 
pop back over the 10-dma (currently $191.76).  It looks even 
better when you consider that as the NASDAQ struggled a bit 
today, GLW tagged its 10-dma during an amateur hour descent, 
then moved up smartly to close at yet another new high.  Chart 
watchers will appreciate today's long tail on the candlestick 
chart.  Part of what may have spurred the move was the 
announcement that GLW, in efforts to shed its non-optical 
products, had entered an agreement in principle to sell its 
"metallic telecommunications cable" (read that, metal co-axial 
for cable television) division to the UK's Belden Inc.  In our 
book, more optics equals more revenue.  That's the future.  
Looking for support?  Try $192, or consider $200, which served as 
intraday support today.  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 27th in order to make it 
happen.  Earnings are scheduled for April 17th, which would make 
a great time to make the split announcement. 

Comments

Almost the entire Fiberoptic group retreated today with the 
exception of GLW.  It held $200 well for most of the afternoon 
despite the Nasdaq weakness and then pulled away into the close.  
A positive Jobs report should unleash the buyers that were 
hesitant this afternoon.

BUY CALL*MAR-190 GRJ-CR OI= 926 at $22.63 SL=17.50
BUY CALL MAR-200 GRJ-CT OI=1165 at $16.75 SL=13.00
BUY CALL MAR-210 GRJ-CB OI=1022 at $11.38 SL= 9.00
BUY CALL APR-210 GRJ-DB OI=  22 at $21.75 SL=16.75

SELL PUT MAR-200 GRJ-ON OI= 602 at $ 9.25 SL=12.00
(See risks of selling puts in play legend)

Picked on Feb 17th at   $191.06     P/E = 107
Change since picked      +15.81     52-week high=$207.25
Analysts Ratings      7-6-0-0-0     52-week low =$ 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



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

Markets End Mixed As Inflation Woes Continue..

Over the past few weeks, that description fits
almost any day on Wall Street.  It's certainly a
common theme in the headlines.  The problem is, I
have no idea whether that's accurate or not, as I
am on the other side of the planet and eight hours
ahead of Eastern Standard Time.  For those of you
expecting another article on option trading
techniques, I will apologize now for blatantly
avoiding the subject.  While I am in Moscow, the
opportunity to explore a new subject is just too
overwhelming.  I ask that you simply excuse this
diversion and join me in a brief review of a very
unique culture and the economic difficulty in
which it is enveloped.

A famous leader once described Russia as "A
riddle wrapped in a mystery inside an enimga."
For most foreigners, the mystery still exists.
Despite the fall of communism and the oppressive
soviet regime, the new era of glasnost has yet
to produce a significant change in the world's
view of Russian cultures and society.  The
people of the region are torn between the
cultures of the East and the West.  The city
of Moscow, while striving to be modern and
technologicaly advanced, is deeply rooted in its
peasant past.  It is the current capital and
occupies a central position in all aspects of
Russian life; historical, political, economic,
and cultural.  Located near the center of the
densely populated Russian plain, Moscow forms
the nucleus of this great empire and houses the
present government.  With the largest population
in the country (almost 10 Million residents), it
is also the industrial core of the region's most
developed area.  Moscow is the cultural heart of
this vast nation with the seat of the Russian
Orthodox Church and the majority of Russian art
and architecture.  Vistors to the capital city
come from all over the world and as you might
expect, a large percentage of the tourists are
native Russians.  People come to Moscow to see
the massive brick walls of Kremlin, the ancient
fortress and symbol of Russian power.  East of
the Kremlin lies Red Square, the giant parade
ground where the military might of the Soviet
Union once marched beneath the watchful gaze of
the Politburo.  At the south end of Red Square is
St. Basil's Cathedral, probably the most famous
site in all of Russia.  Together these landmarks
house a majority of the churches, museums and
galleries in the county.

There are some striking and noticable suprises
awaiting the first time visitor to this unique
region.  The major difference is the lack of
consumer electronics among the general public. In
every major city in America, the underlying theme
of any candid snapshot is leading-edge techology.
More than half of the people you encounter while
traveling in United States are linked to the world
through cellular and satellite communication
systems.  The ability to retrieve instant global
information is paramount to success in our society.
That is not the case in this region.  Their system
of finance is also vastly different than most
Western (or European) countries.  One recent
undertaking, the Russian Stock Market has been
plagued by crisis almost continuously since
inception.  Obviously, the central role of any
financial system is to pool savings and transfer the
funds to companies for investment.  All economies
have such a system and most combine the best known
methods of leading societies to create a working
mechanism.  Of course the internal coherence of any
successful system relies in large part on a
functioning economy.  In this area, Russia is sadly
lacking.

One obvious example; the standard of living in the
area surrounding our hotel is somewhat disconcerting.
Poverty persists in even the richest countries in the
world but it is surprising to see it on such a large
scale in the capital of a "super-power."  In Russia,
being poor is a problem for the majority; young and
elderly alike.  In 1999, the average monthly income
was about 1500 rubles ($65), well below the offical
subsistence level.  The Russian Goverment has been
in debt for years and with the IMF unwilling to resume
its lending program, funding shortages for their
infrastructure will continue for some time.  With this
kind of economic squalor to overcome, it's difficult
to expect any major improvement in Russia's financial
system.

Surprisingly, foreign interest in the Russian stock
market is significant.  The problem it seems, is the
ownership structure of Russian corporations.  The most
recent solution (American Depository Receipts), is
under attack and once again, the issue can be traced
to the political scene.  The problem with leadership
appears to be a common theme...

Next time: The Russian Stock Market - Boom or Bust?


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