Option Investor

Daily Newsletter, Sunday, 03/05/2000

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The Option Investor Newsletter          Sunday  3-5-2000  1 of 5
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com

Entire newsletter best viewed in COURIER 10 font for alignment
         WE 3-3           WE 2-25          WE 2-18         WE 2-11     
DOW     10367.20 +505.08  9862.12 -357.40 10219.52 -205.29 -538.59
Nasdaq   4914.79 +324.29  4590.50 +178.76  4411.74 + 16.29 +151.31
S&P-100   765.95 + 46.17   719.78 -  8.74   728.52 - 23.52 - 23.47
S&P-500  1409.17 + 75.81  1333.36 - 12.73  1346.09 - 41.03 - 37.25
RUT       597.88 + 41.14   556.74 + 11.06   545.68 +  8.58 + 11.58
TRAN     2434.45 + 83.19  2351.26 - 79.54  2430.80 -  5.33 -172.83
VIX        21.29 -  7.79    29.08 +  0.63    28.45 +  1.53 +  3.99
Put/Call     .40              .41              .63             .59

Rational exuberance breaks black Friday curse.

Fewer jobs, higher unemployment equals massive market rally. I know
it sounds like a contradiction of terms but what is good for American
workers is not always good for the markets. The February Employment
report reported gains of only +43,000 new jobs compared with the
official estimates four times higher. The unemployment rate rose 
to 4.1% when official estimates were a drop to 3.9%. What happened? 
You heard it here first. As I said on Thursday we felt the January
report, which was much higher than expected, was exaggerated by
weather related factors. We felt this report would come in less
than expected as those factors worked their way out of the system.
The herd on the street saw the surface numbers and thought it was
the mother of all buy signals. The markets gapped open and the
Dow ran nonstop to 10,443 before realization started to sink in.
The NASDAQ surged farther into record territory closing at the
high of the day and the first close over 4900. The Dow gained 
+504 points for the week and the NASDAQ gained +324. If you
measure from the NASDAQ's intraday low on Monday of 4466 then
the NASDAQ scored a +448 point gain.





The NASDAQ has been on a run since bouncing off 4300 twice in 
February. So much of a run it has now tacked on +600 points since
the last major period of weakness. It did have two days of simple
profit taking and buyers bought the dip with a vengeance. At this 
point we have a really good chance of some serious profit taking
at any time. The odds are greater due to the 5000 milestone. 
Indexes tend to falter at significant milestones after major 
rallies. N5K could prove to be a short term ceiling if we fail
to break above it and hold on the first attempt. Since N5K was
the end of 2000 target for dozens of market pundits, and it appears
that we could hit it this week, then where are we going from here?

We are sure there are as many ideas as we have readers so we are
going to play a Nasdaq-5000 game. The prize is $500 and it is 
open to all current readers of OIN. The concept is simple. 
Click on the link below and tell us when the NASDAQ will first
hit 5000 and when it will first close above 5000. All entries
must be submitted prior to 9:AM EST on Monday.


The NASDAQ soared to the third biggest point gain ever on the
third largest volume ever of 2.1 bln shares. Records are becoming
so common that writers are running out of adjectives to describe
the market. The NASDAQ has had only 14 days of triple digit gains
ever and 11 of them have been this year.

Top ten NASDAQ days

02/23/00 168.21
01/10/00 167.05
03/03/00 160.28
01/07/00 155.49
02/03/00 137.02
12/21/99 127.28
02/10/00 122.39
02/17/00 121.27
02/29/00 118.72
02/01/00 111.63  

Also amazing is the volume. At 2.1 bln shares today only 
qualified as the third largest. Powering the huge gains this 
week were the semiconductor and biotech stocks. The SOX is
now up +70% YTD but even that gain is overshadowed by the
biotech index (BTK) with a +90% YTD gain. Even with the 
brighter outlook across the board these types of gains cannot
go on forever. Trees do not grow to the sky. Technicians are
becoming concerned that this euphoria is really turning into 
the speculative bubble that ends badly.



With the NASDAQ extending its gains daily into nosebleed territory
it might be wise to remember that the Dow is still in correction
territory. Even with the +500 points gained last week the Dow is
still down over -12% since the January high and still -3% under
November-1999 levels. To put things into perspective the +202
point gain on Friday was in sharp contrast to the -1200 points
lossed in the previous five Fridays. Yes, the Dow has gained back
+500 points of the -1700 points lost since Jan-14th but in two of
the bear trap rallies we gained over 300 points only to lose them
again. Follow through is the key here. If the Dow can hold its own
next week we have a chance. It really does not have to gain much
to have a positive impact, just stay above 11200 and preferably
above 11300. There is significant overhead resistance at almost
every century mark and it will take a complete revival of interest
in old economy stocks to power this index upward. Several of the
laggards experienced a brief rebound on Friday but in reality 
their individual outlook is still bleak. MMM posted a $10 gain
at the open on Friday but slipped back to close at $89.50 and
only a $3.44 gain. MMM traded as high as $103 in January. IP 
gapped up +$4 at the open for a +10% gain but slipped back to
only +1.19 for the day at $36.31. IP traded at $60 in January.
AA jumped +3.50 at the open but dropped back to +1.13 for the
day at $67.94. IP traded at $82 in January. Dupont managed to
hold most of its +5.00 opening gains with $3.88 at the close 
but DD was significantly under the $74 it managed in January.
The big Dow winner for Friday was ironically DOW Chemical. For
some reason investors ran back to DOW and pushed it up +$14
from its 99.00 close on Thursday. Slippage did occur but DOW 
was able to hang on to +10.25 of its gains. Still closing at
$109 was far shy of its January high of $142.

My point here is why? Four of the Dow's most unloved companies
sprinted on the rate relief rally at the open but were unable
to hold onto much of their gains. Had they closed at the highs
on increasing investor optimism then I would view the bounce 
in a more positive light. Instead I view it as a relief rally
based on the news event. Nothing changed in the minds of most
investors. These stocks are proud of managing single digit
growth per year when tech stocks are powering ahead to 50%,
75% and 100% gains per quarter. These old economy stocks
cannot even be considered "safe" investments in today's
market. Why buy? I can't imagine why given the Fed is still
in rate increase mode. We still have at least two rate increases
in our future. The only thing changed is the possibility in
some analysts minds that Greenspan would raise +.50% instead
of +.25% in March. Since they were wrong anyway what difference
did it make. Drug stocks, long held to be safe havens, just
keep dropping. How much farther can the Dow rally when the
bloom is gone from the Friday favorites if MRK, JNJ, PG
all have charts with no bottom in sight? Another reason these
stocks are not likely to rebound far is simply dictated by
cash flow. Growth funds have received +$47.7 bln in cash
in Jan/Feb while value funds have lost -$26.5 bln in the 
same period. Several value funds have complained that they
would like to buy these beat down stocks at these levels
but they simply couldn't do to a lack of cash. They are
being faced with more redemption's than investments on a
daily basis and they do not see any light at the end of 
the tunnel. 

Before you accuse me of getting my bear suit out of the closet
I think I should temper my comments. The Dow had its best week
since July-1999. We should celebrate! Then we should quickly
turn our attention back to the NASDAQ because focusing on the
Dow next week could be disappointing. The real excitement is
strictly NASDAQ. What, the Russell-2000 is setting records
also? Don't believe everything you see. The Russell-2000
could be renamed the Russell-13 since the recent major moves
into record territory have been on the back of only 13 Russell 
"large caps." 

We should be celebrating the rebound of the market but we
should always keep our eyes on the pillars of the markets
as well. Take away the semiconductors and biotechs last week
and the outcome would have been much different. How much
longer do you think those leaders can continue to post gains
of $30-$40-$50 per week without some profit taking? Just
look at the weekly results for the OIN plays last week. 
The stocks of 17 of the 25 call plays had double digit 
gains. Profit taking anyone? 

Bond, what bond? When is the last time you heard about bond 
yields being a factor in the stock market? The 30-yr bond 
closed on Friday at 6.13% yields and have been trading in a 
tight range all week. This may change on Monday. Just when 
you thought it was safe to go back into the market Federal 
Reserve Governor Laurence Meyer launched a warning that the 
Fed may have to be "aggressively reactive" in the near future 
to halt the increase in consumer spending and allow the 
supply/demand equation to ease. Saying that economic numbers 
to come, even if benign, would not be enough to cause the 
Fed to stand down from the current rate increase policy and 
the Fed may have to react even more aggressively. The hawkish 
speech on Friday night held no hope for investors that the 
Fed would ease its stance anytime soon.

Before I give you whiplash with my change of direction I want
to point you to the broader market indexes of the OEX and SPX.



Both of these broader market indexes have posted strong rallies 
even when the Dow was marking time tue/wed/thr of last week. This
is very encouraging and could point to a healing process on a 
broader level. Both these indexes just barely closed over their
respective inflection points and we are only a couple S&P future
points away from slipping back into a technical negative. The OEX
needs to confirm the move with a close over 785 and the SPX with 
a close around 1450.  If either starts falling again the recent
pattern of lower highs will be confirmed and the whole downward
trend could start all over again.

Last but not least is our friend (or enemy) the VIX. While the
VIX does not always signal buys or sells exactly the indicator
does forecast direction changes very routinely within a day or 


Look at the chart of the VIX above. On Jan-14th, the Dow top in
January of 11749, the VIX was 20.90, the exact sell indicator we
have today. On February 8th the VIX hit 22 and the Dow sold off
-650 points in the next five days. Don't look now boys and girls
but the euphoria is rampant and the VIX is flashing red. The
companion indicator, the Put/Call ratio is .40 which is also 
on the low end of the spectrum. Under 50 is bearish, over 50
bullish. Remember that most down trends are triggered by the
market reaching a new high after a strong run. Sounds like the
NASDAQ to me. I am not saying the market is going to crash
but I do think there will be some profit taking very soon. My
current thought process, assuming we open up on Monday, would
be a run to 5000 and then a drop on profit taking and a possible
consolidation period before the run into April earnings. As
much as I don't want to admit it, we still have room for another
correction in the NASDAQ before the April earnings run.

Trade smart, sell too soon.

Jim Brown

Disclosure: My current positions include:


Editors note: Due to the volume of email I receive it is 
impossible for me to respond to even 20%. I usually get well 
over 1000 unsolicited emails per day. I can't even read them all, 
much less respond to them. Please don't take offense if I do not 
answer your email. I do try to set aside several hours a week to 
read subscriber email but I can normally only get through several 
hundred at best. 

If you have questions about OIN please direct them to 
Contact Support and a real person will respond. 
We cannot give specific answers to specific trading requests. 
We cannot tell you if you should hold your Dell stock or how
to handle trades gone bad. We do love to get your email about
your winning trades also. We pass them around like a pat on 
the back for a job well done.

Within the next two weeks we should have our newest website
revision up and it contains a huge website guide and frequently
asked questions page. Please check these out before sending
your emails.

Thank you for your cooperation.



What a week! With the Nasdaq running rampant almost all of my
naked puts were deep out of the money and highly profitable.
When the Dow started fading at midday on Friday and the VIX
dropping like a rock I closed everything and regrouped. With
only two weeks to go before expiration the remaining premiums
are slippinf fast. If we do get a pullback next week I plan
on using the inflated premiums from the drop to sell more
puts wherever stocks have dropped to support and rebound.

When the VIX hit 21 on Friday afternoon I bought OEX and
QQQ puts again just in case the market dies on Monday. I 
may have jumped the gun with the N5K euphoria so strong.
The Nasdaq could sprint to 5000 on Monday morning and then
fall back. I will be watching closely at the open. 

I only have two other plays open and both were started
on Friday.

NXTV $142.50  Short $140 calls

With the announcement that Qwest might be taking a minority
position in NextLevel the stock ran up $35. A totally 
unsupported level. The keywords here are "rumor" and 
"minority" stake. I sold the $140 puts when the price was 
only $130 thinking the news would come out and push the 
price over $140. When the price rocketed to $155 and then 
the follow on news was negative, IE; no news, I decided to 
turn it into a straddle and sold the $140 calls as well.
When it started back down I decided to short it early at 
$145 and try to capture a couple more dollars. That is when
disaster struck. No shares available to short! OOPS! I
quickly covered the puts for anout a $12k loss (75 contracts).
I still think the news will dry up and the calls will expire.
Any market wekaness will only help. Time will tell.

ARBA $330   Short March $330 calls

ARBA announced a split and an analyst upgraded the price target
to $350 on Friday. The excitement added $30 to the price. After
soaring +1000% since their IPO last year and adding +$70 since
Monday I took a chance and wrote calls on ARBA friday afternoon.
The price started dropping around 2:PM and the candles on the
5 min chart were showing more red than green and getting longer.
If the Nasdaq races off to 5000 on Monday morning I may get
stopped out but ANY Nasdaq weakness should knock $10-20 off
the stock price. (IMO)

OEX - $770 puts 


QQQ $220 puts

These two plays were strictly based on the big gains made by the
Dow and Nasdaq last week and the extremely low VIX at 20.90.  If
ever there was going to be a pullback the VIX at 20.90 is screaming
sell. Ironic that whenever all things look too good to be true they
usually are......we will see if the VIX is lying or not on Monday.
Nothing precludes it from dropping even farther if the Nasdaq
bounds out of the gate on Monday. That will only make these positions
uncomfortable but I will wait till I see what happens during the 
day and then add to them.


The game plan for this week is "wait on the market". You do not
have to be in the market at all times and even if you can't sit
out then only invest a small percentage. I think the next run
to earnings will be the big one and I hope the markets drop
like a rock on Mon/Tue to give us some good entry points for
that run. Don't buy the first dip. Be patient.

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


Spring Advanced Seminar Series

The spring dates for the OptionInvestor/Optionetics seminar
series are approaching fast. This is the advanced seminar
taught by George Fontanills and Tom Gentile. If you feel
you need more option strategies in your trading arsenal 
like the Delta Neutral Straddles George is famous for then
this seminar is for you. Remember, you can bring a friend
for free and retake this seminar as many times as you want for
free. The cost of the two day seminar is about what you would
lose in only one trade. Invest it, don't lose it.

Here are the spring dates: 

Mar 19/20 Chicago 
Mar 26/27 Dallas
Apr 2/3   San Francisco

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

There is a 100% money back guarantee and you can take a friend
for free. What else could you ask for?

Stock News

Acxiom Corp: Better Marketing via Technology

Knowing your customers is the probably the single most 
important element to running a successful business. With the 
evolution of the Internet, information, in many respects, is 
easier to obtain than ever before. But sifting through that 
information can be tedious and time-consuming. Companies that 
know the most about their clients, and can act quickly enough, 
will have the best chances for success. 

Acxiom Corporation (ACXM), based in Little Rock, Arkansas, is 
a global leader in this area.  They provide comprehensive 
information management solutions using customer, consumer 
and business data.  The company's databases provide information 
on 95 percent of US households. Besides its core data delivery 
business, which makes up 55 percent of sales, Acxiom also offers 
data processing and outsourcing services.

Clients such as Allstate, Wal-Mart, Netscape, Procter & Gamble, 
and AT&T use Acxiom's information to pinpoint customers that 
might want their products and services. 

The company has been on an acquisition binge of late, buying 
data marketing and delivery companies to protect market share, 
and extend the breadth of its Acxiom Data Network, a new Web-
based data delivery system. 

Consider the power that business gains when it can quickly and 
accurately see a big picture of their customers and markets to 
discern buying patters, product and market overlap, and new 
opportunities for cross-selling and upselling.  Acxiom's 
products and services allow business enterprises to more 
effectively manage inventory, transportation, and 
communications, all which can further a company's competitive 

Say, for example, that you are a large insurance company, and 
that you want to launch a large mail/email campaign to existing 
and prospective clients, but you want to send only to those 
prospects that can afford the service and that have excellent 
credit ratings.  Acxiom's technology products can quickly scour 
your company's database of customers, as well as its databases, 
to compile a customized "perfect" audience that result in the 
most responses and, thus, more sales. 

One of Acxiom's products, AbiliTec, has helped Acxiom bag 
several new clients. Abilitec is a customer integration 
product that links to Axciom's comprehensive knowledge base 
(Acxiom Data Network) of consumer and business name and 
addresses.  AbiliTec facilitates customer relationship 
management by enabling companies to achieve a single view of 
a customer across multiple business lines and databases. 
AbiliTec can handle easily large-scale database environments, 
and can accommodate real-time transactional needs.

Acxiom's customers span many industries, including automotive, 
credit card, healthcare, insurance, media, real estate, retail, 
banking, technology and telecommunications. 

Most companies in the business of providing online customer 
solutions are bleeding red ink.  Acxiom's financials and 
fundamentals, on the other hand, look strong. For the nine 
months ended December 31, 1999, revenues rose 30 percent to 
$702.6 million.  Net income totaled $63.5 million versus a 
loss of $34.8 million.  Revenues increased in all segments of 
its business. 

As far as Wall Street is concern, Zack's Investment Research's 
survey of 13 analysts are estimating ACXM will earn 29 in the 
fourth quarter, ending March 31, 2000, up from 23 cents in the 
prior year period.  Fiscal 2000 earnings per share are expected 
to be $1.00 per share, up from 84 cents last year.  Fiscal 2001 
estimates are for earnings per share of $1.17, which would 
render a price to earnings ratio (P/E) of just 26, based on 
ACXM's current share price of $31. 

From a technical perspective, ACXM stock looks poised to move 
higher, finishing the day at a new 52-week, and all-time high, 
closing at $31.58 per share.  If you believe legendary investor 
Peter Lynch's theory that, "stocks that hit new highs tend to 
move higher," this is a good sign.  Always be sure to do your 
own due diligence. 


Ask the Analyst, Sunday, 03/05/00

Last Week's Question Was Answered With An Astounding, Yes.
By Ryan Nelson

After watching an indicator work so successfully for so long, 
you can really start to trust the outcome.  It proved itself 
again last week by signaling yet another top in the market.  
Of course, the indicator I am referring to is the VIX.  It was 
rising all last week during the market turmoil before topping 
out in the low 30s.  Sure enough, it signaled the top and begin 
to retreat.  This helped most major indices to mammoth moves 
and lots of profit.  So where is the VIX now?  Back down to 
20.90, almost ensuring there will be some profit-taking next 
week.  It is never for certain as the VIX could continue to 
hover in the upper or lower range, but the more it extends out 
of the typical range, the more likely you are to see a sharp 

Enough with the VIX though.  Despite being a beautiful Denver 
morning, I am ready to settle in at the computer and look at 
some charts.  We had lots of requests this week so let's see 
how many we can answer.


Intermedia Communications - ICIX

Could you please explain why icix is valued far below its 
intrinsic value.  Since it owns 80% of digx, now trading at 
$137, I am at a loss trying to figure out why it is only 
trading at $55. 
-thank you, Jeffrey

I know how you feel.  We played ICIX as an earnings run for 
their most recent quarter and I was scratching my head over 
the fact that it didn't respond to the incredible book value 
it is gaining from DIGX.  Not to mention ICIX isn't struggling 
with their business either.  You would think this was a shoe-in 
play, but there are still a few factors that worry me.

Namely, the short position increases every month.  It is now 
up to 60% of the float.  That is huge.  You usually don't see 
that kind of massive shorting unless something is wrong.  That 
alone would keep me from playing it.  Especially since the 
stock won't respond to the incredible gains from DIGX.  The 
chart doesn't show us anything bad, but I just can't bring 
myself to play a stock with such a high short position.  I 
have seen too many fortunes lost when bad news hits the wire.  

Besides, in this market you do not need to settle for plays 
that have a dark cloud hanging over it, despite the potential.




Sonic Foundry Inc - SFO

What are your comments on Sonic Foundry (SFO) AMEX and it's 
recent runup?

Never heard of it until now, but the chart looks good.  I 
personally don't play stocks with such a low average daily 
volume, in this case under 100K.  It makes for some slow 
trading, large spreads between the bid and ask, and even high 
volatility in some cases.  Fortunately, I don't see a lot of 
wild swings in this chart, which may mean it is a more stable 

SFO is a provider of software products and services that enable 
its customers to create and edit digital audio and video content.  
Again, they are a real small cap (but up and coming) company.  
I like the recent breakout over the downtrend line.  They had 
a 2 to 3 day move and are now consolidating.  They also recently 
agreed to acquire another company, which may pressure the 
stock somewhat.  But with that said, if SFO can hold the 5 or 
10-dma and begin to bounce higher on renewed volume (buying 
interest), I think you may find another short-term play here.  

The momentum has been there for SFO so far this year and until 
it tells you otherwise, you go with the flow.



Chemdex - CMDX

I bought CMDX at $120 last week. Now it is $240 (5 days later!!).  
What do you recommend?

Well Richard, as the long time readers know, I don't recommend 
anything, just talk about what I see.  But I would be happy to 
tell you what I would do with CMDX (now known as VNTR since 
they changed their name and symbol last week).  Sell it and 
sell it fast, but that's just me.   

I know you are supposed to let your winners run, but I can't 
turn down a quick doubling of my money.  I typically play 
options and let's say I buy something at the close on a good 
entry point.  The stock has some good news the next morning 
with either a positive product announcement or an upgrade and 
I am looking at a double within the first few minutes, I can't 
help but take the profit.  In some cases the news is so good 
that I will let it run, but I will take all the doubles I can 
get in such a short period of time.  

So it will come back to your goal for this investment.  If it 
is a long-term stock play, then hold it.  But with the VIX low
and the market potentially in need of profit-taking, you may 
be able to buy it back under $200.  I like this stock and the 
outlook for their business, but I can't resist such a big 
return in such a small amount of time.  

As for the chart, VNTR has struggled the past few days.  Only 
up $1.69 on Friday when the market went on such a run.  You 
can also see the intraday top at $220 in the afternoon.  
Whatever you decide, good luck and I hope you sell right at 
the top to make all the money you can!  




Good Luck to all and don't forget to send in the symbols for 
any stock you want analyzed.  Send those requests to 
Contact Support.  Please put the symbol in 
the subject line of the e-mail. 


This column is an information service only.  The information 
provided herein is not to be construed as an offer to buy or 
sell securities of any kind.  The Ask the Analyst picks are not 
to be considered a recommendation of any stock or option but an 
information resource to aid the investor in making an informed 
decision regarding trading in options.  It is possible at this 
or some subsequent date, the editor and staff of The Option 
Investor Newsletter may own, buy or sell securities presented.  
All investors should consult a qualified professional before 
trading in any security.  The information provided has been 
obtained from sources deemed reliable, but is not guaranteed 
as to its accuracy.

Market Posture

As of Market Close - Friday, March 3, 2000

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

DOW Industrials   10,700  11,250  10,367    BEARISH   2.17
SPX S&P 500        1,400   1,450   1,409    Neutral   3.03  *
OEX S&P 100          740     780     766    Neutral   3.02
RUT Russell 2000     500     520     598    BULLISH   2.24
NDX NASD 100       3,800   4,000   4,443    BULLISH   2.24
MSH High Tech      1,850   2,000   2,148    BULLISH   2.24

XCI Hardware       1,300   1,460   1,588    BULLISH   2.24
CWX Software       1,200   1,470   1,578    BULLISH   2.24
SOX Semiconductor    800     900   1,211    BULLISH   2.24
NWX Networking       940   1,000   1,158    BULLISH   2.24
INX Internet         700     800     784    Neutral   1.06

BIX Banking          500     550     485    BEARISH  11.30
XBD Brokerage        400     450     488    BULLISH   2.31
IUX Insurance        500     550     470    BEARISH  11.30

RLX Retail           950   1,000     841    BEARISH   1.28
DRG Drug             340     380     315    BEARISH   2.18
HCX Healthcare       700     750     660    BEARISH   2.18
XAL Airline          120     140     121    Neutral   3.03  *
OIX Oil & Gas        280     315     256    BEARISH   1.27

***Posture Alert***
The employment figures sparked a huge rally on Wall Street, as 
fears of inflation have subsided, at least for one day anyway. 
Most industries participated in the big day, however, the Software 
sector led the way with a +7.29% gain! Other notables include 
Semiconductors (+6.64%), Internet (+6.46%), and Airlines (+4.76%).   
With this most recent action, we have upped Airlines and the S&P 
500 to Neutral from Bearish. 

Market Sentiment 

Sunday, March 5, 2000

Bill Gates and your $395 bucks!

The employment figures that came out Friday caused a broad-based 
explosion with all sectors participating. The Dow has now made it 5 
days (of gains) in a row, and the NASDAQ continues to do a good job 
of outperforming all other indexes, as it closed at another record 
high. Volume continues to surge on the NASDAQ, as 2-billion share 
days are becoming ever more the "norm."

Below are the top record volume days, and as you can see, we are 
shattering records every week!

Date:     Volume:
03/01/00  2,232,343,100
03/03/00  2,151,119,000
03/02/00  2,137,050,406 
02/29/00  2,088,835,400 
02/17/00  2,008,438,100 
01/24/00  1,980,702,700 
02/08/00  1,971,175,500 
02/24/00  1,944,047,900 
01/21/00  1,916,620,600 
02/18/00  1,898,407,400 
02/23/00  1,892,802,200 

So not only did the NASDAQ trade big volume, but it also closed up 
another +160 points! If the old adage of: volume precedes price 
follows here, NASDAQ 5500 is just around the corner!

Date:     Change: 
02/23/00  +168.21
03/03/00  +160.28 
01/10/00  +167.05 
01/07/00  +155.49 
02/03/00  +137.02 
12/21/99  +127.28 
02/10/00  +122.39 
02/17/00  +121.27 
02/29/00  +118.84 
02/01/00  +111.63 
09/03/99  +108.87 

Now with this continued surge in volume, we would not be surprised 
to see the NASDAQ rip through the 5,000 mark in relatively easy 
fashion. However, some things to take note for Monday/Tuesday 
would be that this market appears to be in a near-term overbought 
condition. The Volatility Index closed Friday at 21.29, which has 
been a reliable indicator to lighten up on positions. Now don't 
get us wrong, the VIX has been a teenager before, and it easily 
could be again, but the statistics point that at this stage, 
lightening up could be the best strategy. Now, in the past, we 
have seen the VIX get caught in a narrow trading range. We 
highlighted this fact below in the chart:


As you can see, the VIX traded in a relatively narrow range from 
November to January (as highlighted by the arrows), in which it 
never hit an oversold area (low 30's). Now during this time frame, 
the NASDAQ gained +1,000 points, with the VIX never closing below 
20. So at this stage (for the extremely short term), we would look 
to lighten up positions, and then look for a re-entry point after 
the VIX gets out of the overbought area.

Another gauge that we look readily look at for our trading is the 
Pinnacle Index on the OEX. In last Sunday/Tuesday's letter, we 
stated that based on the figures, we were due for a rally. Well, 
we got the rally and then some! However, when looking at the 
latest figures, the Pinnacle Index for the OEX (765-785) is 
extremely heavy, which would indicate that a slight pullback would 
be in order. With March expiration in less than 2 weeks, we view 
this area of the OEX as being a hurdle, and most likely, we will 
not surpass this area until after expiration. However, should the 
bears start aggressively buying puts in this range on the OEX, our 
figures will easily change. We will update you on any of those 
changes, but as it currently stands, this index is due for a 

As a side note, we found this analogy quite amusing:

Microsoft Stock Price (3/3/00): $96 1/8  
Bill Gates's Wealth:           $108 billion  
U.S. Population:                274 million  

Your Personal Contribution:    $395  

Bill thanks each and every one of us!


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 (6.117):
The current yield is now safely off of 52-week highs and is 
temporarily out of the danger zone.

Mixed Signs: None


Pre-Release Season: 
With April just around the corner, we have the beginning of 
pre-release season. Over the next 3 to 4 weeks, companies will 
let Wall Street know that their profit/sales goals are not being 
met, and their stocks will get brutally punished.

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 

Volatility Index (21.29):
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 is currently indicating an overbought market.

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

Pinnacle Index OEX               Friday
Benchmark                        (3/3) 

Overhead Resistance (790-820)    16.85
Overhead Resistance (765-785)     6.23

OEX Close                       765.95

Underlying Support  (740-760)     0.69
Underlying Support  (700-735)     2.71

What the Pinnacle Index is telling us:
The OEX got a nice lift on Friday thanks to the employment figures, 
however, the Pinnacle Index is indicating that the OEX is due for a 
little breather. Both overhead resistance levels are top heavy, 
indicating that the OEX will struggle at these respective benchmarks. 

Put/Call Ratio                  Friday
Strike/Contracts                (3/3)

CBOE Total P/C Ratio             .40
CBOE Equity P/C Ratio            .32
OEX P/C Ratio                   1.36

Peak Open Interest (OEX)
Strike/Contracts     (3/3)

Puts               680 / 9,154
Calls              750 / 7,497
Put/Call Ratio         1.22

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 3, 2000                           21.29

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


For the week of March 6th, 2000


None Scheduled


Productivity-Rev.        Q4     Forecast: 6.4%   Previous:  5.0%
Consumer Credit          Jan    Forecast: 7.0B   Previous: 11.2B


Fed Beige Book


Initial Claims          03/04   Forecast:  280K  Previous:  275K
Wholesale Inventories   Jan     Forecast:  0.4%  Previous:  0.4%


None Scheduled

Week of 3/13

03/14 Retail Sales
03/14 Retail Sales ex-auto
03/15 Business Inventories
03/15 Export Prices ex-ag.
03/15 Import Prices ex-oil
03/15 Industrial Production
03/15 Capacity Utilization
03/15 Current Account
03/16 PPI
03/16 Core PPI
03/16 Housing Starts
03/16 Building Permits
03/16 Initial Claims
03/16 Philadelphia Fed
03/17 CPI 
03/17 Core CPI
03/17 Michigan Sentiment

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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
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

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


Conversion Ratios are Important
By Mary Redmond

My best trade this week was my Qwest leaps.  I was getting
a little tired and bored of this stock on Monday when the
stock drifted down to 46, and my leaps drifted to 14 1/2.  
On Wednesday a rumor crossed the newslines that Deutsche
Telecom was in takeover talks with Qwest.  The stock shot 
up to 58 on Wednesday, and I thought it had further to go.
The next day it opened over 63, and I sold my leaps at 28 1/2
for a 16 1/2 point gain.  I still thought the stock was a good
buy so I bought back in to Qwest 2001 50 leaps at 15.  Neither
company had publicly commented on the rumors.  If the
takeover actually happens one of the important factors to 
watch for is company management changes.  When the 
management of a company is not given the same freedom and 
decision making abilities, corporate mergers sometimes work 
out for the worst.  On Thursday afternoon additional news
came out that Deutsche Telecom was in discussions with
Global Crossing and Qwest stopped trading temporarily,
then resumed in the range of 58 to 60.  On Friday I sold the
leaps at 17 5/8 when the VIX dropped below 22.  I like Qwest
even at a market capitalization of over 44 billion, regardless
of the takeover topic.  Later Friday news crossed Reuters that 
that DT and GLBX were not holding discussions.  This on again 
off again started making me dizzy.

IFCI sold off after earnings but stayed above 30 , which I
interpret as continued interest in the company.  The backlog
of orders this company has looks as if their revenues could 
double or quadruple this year, and I like it as a long term

CMGI popped like a champagne cork early in the week,
probably because of upcoming earnings and the fact that
the company presented to institutions at the Robertson
Stephens conference this week.  I sold the shares I bought 
a couple of weeks ago on Monday, then bought back in 
at 127 1/2.  The stock hasn't had as dramatic a run up to
earnings as it did last fall, when it went from 100 to over 
300. It may sell off after earnings, but CMGI is one of the 
few companies which has a history of going up slightly after
earnings.  In addition to buying the stock I had put on a 
put credit spread previously by buying 10 CMGI march 100 
puts at 3 7/8 and selling 10 CMGI March 110 puts at 7 1/4.  
This gives a credit of almost 4 points if CMGI can stay
above 110 before expiration.  Another possible strategy
would be to sell the 110 put naked, but this can tie up
alot of margin.

I still think CMGI is undervalued long term, and has a superb
management team, but the internet sector has not performed
as well as some of the other sectors like chips and biotechs
lately, so CMGI may stay in a trading range for a while.  
Some people have been making meaningless comparisons to
ICGE, which is not relevant since they have different 
business models.

On Wednesday of this week I bought Nextlink July 100 calls
at 24 1/4 when the stock was 110 and sold them at 26 the same 
day.  The reason I liked the calls is that they were already 
ten points in the money.  When the 100 calls sold down to
25 I put on a call spread buying the 100 calls at 25 and 
writing the 110 calls at 19.  On Friday I considered buying 
straight calls but I hestitated with the VIX at about 21.5.  

I had purchased a Lucent leap back when Lucent was 50,
and sold the leap when the stock went up to over 70 
this week. I think Lucent is a great long term buy, but
any time an option doubles I think it should be sold.

Sometimes when you are bullish on a stock after it has moved
up it can be more profitable to sell puts than buy calls.
The reason is that volatile stocks have both volatile
call and put ratios.  This is because of a strategy known
as a conversion, which is theoretically a risk free profit
usually only executed by market makers and specialists
on the floor of the exchange.  Understanding how the 
conversion strategy works can be important to understanding
how options are priced.  

A conversion strategy consists of buying 100 shares of the
underlying stock, buying a put and selling a call where 
the call and put option have the same strike price and
expiration date.  This position has a theoretically risk free 
profit if the cost of the position is less than the strike price
of the option.  Whenever the call/put ratio is out of whack
arbitrageurs and market makers will execute conversions
until the ratio is precise.  Individuals trading for their own
accounts at brokerage firms rarely have the opportunity
to profit from conversions due to transaction fees. 

An example of a conversion is as follows:  Buy 100 CMGI
at 132, buy a June 130 put at 23 (the price Friday afternoon)
and write a June 130 call at 26 7/8.  The cost of the position
is the cost of the stock plus the cost of the put minus the
credit received from the call.  In this case the profit is only 
1.87 points. What the stock does during the rest of the
time period is irrelevant.  The only risk is if the stock closes
at exactly the strike price on expiration date in which
case you don't know if you will be called.  If the stock is not 
called and drops Monday morning there will be a loss. 

In this case certain traders might think it makes more
sense to sell the 130 put and receive 23 points than to
pay 26 7/8 for the call.  

The money flows this week may have been helpd by over
50 billion in tax refunds the IRS has already mailed.  Some
of that money will come in to the market.  According to
AMG Data Services, cash flows into stock mutual funds
have already picked up after dropping significantly
the prior two weeks.  For the week ending March 1, 
over 10.9 billion went into equity mutual funds.  Tech
funds took in 2.6 billion, small cap aggressive growth
funds took in 5.3 billion, and international funds took 
in 5.3 billion.  Look out for that money to be spent.  

Mary Redmond
Contact Support


QUE PASA?   OEX  Ole, Ole (pronounced oh-lay, oh-lay)
By Linda Schuepp

Warning:  You may skip the first 2 paragraphs if you are in a hurry.

It's been a while since my last article, but I have been away on 
my yearly Mexican getaway, followed by an Option's Seminar in L.A.
I was pleased to meet many OIN readers at that seminar.  Thought 
I'd give you a little update, since I received so many inquiries 
about my planned escape.  This year it was quite an ordeal to get
to my annual Mexican Spa destination.  I go there as a relaxing 
retreat, to get away from the market, responsibilities and every 
day life in general.  I was originally routed through Chicago 
during the only major snowstorm the east has seen this winter.  
The prospect of getting marooned in Chicago for several days, is 
not my idea of a relaxing vacation so I, along with a couple of 
thousand other panicked "President Week" travelers, attempted to
find alternative routing.  After leaving Boston a day later than
scheduled, I had to fly to San Francisco, stay overnight, and get
up at 5 AM the next morning in order to catch a 6:15 A.M. flight 
to L.A.  From L.A., I took yet another flight to Mexico City 
finally arriving at 4:30 P.M. the following day, two days after 
I began the journey.  From there it was a 2-1/2 hour hair-raising
ride through the twisting, mountainous roads in a vehicle with no
shocks.  I was fortunate not to have to share the vehicle with any
live poultry.  Needless to say, I was desperate for a massage and 
a good margarita.   It was too late for the massage, but I 
comforted myself in the outdoor hot tub with a few margaritas. 

I really try to leave the market and the rest of my world behind, 
but this year the spa offered Internet access.  Wow, I thought, 
I can check a few stocks, send a couple of e-mails to my family 
and still have a ball.  You will recall, I own Tel Mex stock, so 
I figured, this could only help my position.  I only connected 
twice during the week because it took 20 minutes to get a clean 
connection, and when I did I was connected at 200 baud.  My 
daughter thought she'd be cute and send me a greeting card to 
say she missed me.  It took 20 minutes to download it.  Needless 
to say I didn't bother checking the market.  

During the week I had lots of pool time to reflect on my OEX 
strategy I wrote about before I left.  I put on an "At the Money" 
straddle on the OEX before I left, with instructions to my broker 
to sell either leg if I could get 5 points.   With a delta of .5 
for an ATM option, I figured if the OEX moved 10 points I should 
be able to get my 5 points.   The put side was closed out while 
I was gone and I was able to close out the call side this past 
week for 5 points as well.   Since I returned I have spent an 
inordinate amount of time trying to tweak the strategy, but
because I do not have historical daily option data for more than 
5 days, it is quite difficult to accurately backtest my strategy.
If anyone knows of a service, feed or publication that provides 
historical option data such as: daily open, hi, lo, and close-- 
please let me know immediately.  

I've been asked a lot of basic questions by new readers as to 
which strategies you should put on and when.   It sounds very 
complicated and seems that the possibilities are endless, but 
there are really only a few strategies you need to understand.
Simply focus on the key issues and implement the proper strategy.   

Step 1: Review charts of the security(s) you wish to trade and
determine key support and resistance levels
Step 2: Determine Market Direction (sector & exchange)
Step 3: Check Historical and Implied volatility to determine if 
options are expensive or cheap.  
Step 4:  Pick your Strategy
Step 5:  Determine your exit (both good and bad)
Step 6: Put on the Trade

After step one, you should have 4 or 5 candidates.   After step 
two, It is best to choose those securities that are trading in 
the same direction as the sector and the exchange.  The old 
saying "the trend is your friend" is never too trite.  It is 
much easier to make money on a stock that is going up along with 
its sector and along with the exchange it trades on.   

If the market is going up: implement bullish strategies.  
There are really only 4 main strategies-buy a call, sell a put, 
buy a bull call spread, or sell a bull put spread.  

Buy a call-simple strategy, but subject to time decay.  Biggest 
mistake people make is to buy OTM calls on stocks with no 
liquidity or calls with too little time left.  As a buyer, time 
is your enemy.   If I buy calls, and it isn't too often, I try 
to buy with at least 2 months left and some intrinsic value 
("in the money").  I actually prefer leaps (Long Term Equity 
Anticipation Security).  Check with your broker, but you are now 
only required to put up 75% on options with 9 months or greater 
to expiration.  This greatly changes your potential returns!

Sell a put-simple strategy, but subject to larger margin 
requirements and greater risk.  I like to write OTM puts BELOW 
a support with very little time left. I am basically a chicken 
when it comes to naked positions.  As a seller, time is your 

Buy a Bull Call Spread-buy a lower strike ATM or ITM call and 
sell a higher OTM call.   Think of this as a covered call, except 
that you are long a call instead of owning the stock.  Your risk
 and reward are both limited, but you can't have it all.  

Sell a Bull Put Spread-buy a lower strike ATM or OTM put and sell 
a higher strike ITM put.  This will put money in your pocket, 
which is why a lot of people like this one.  Like the Bull Call 
spread, your risk and reward are both limited. 

If you are bearish, you would do the opposite of the above four 
strategies: buy a put, sell a call, sell a bear put spread, or 
buy a bear put spread.

Regarding Step 3: If implied volatility is greater than 
historical volatility, than options will be expensive, therefore, 
you should be a seller of options (sell a call, sell a put, sell 
a spread).   If options are cheap you should implement long 
strategies (buy a call, buy a put, buy a spread).  So once you've 
determined market direction there are really only 3 strategies 
you can implement and they depend on your level of comfort.

Now here comes the hard part.  Determine your exit strategy.  
Do this before you place the trade.  Write it down, put a copy 
on your bathroom mirror if necessary and follow it.  Don't be 
greedy if your winning, and don't be a sucker if your losing.  

Now here comes the easy part.  Put on the trade and monitor it.  
Don't put all your eggs in one basket.   You should have at least 
4-5 different positions, hopefully not all in the same sector.  
That way, if one trade is a loser, chances are the other 4 will 
be winners.   As Jim says, "sell too soon", and that means if 
you're winning but especially if you're losing!

Lynda Schuepp
Contact Support


Renee will be back on Tuesday


A Nice First Day Back & Trading Checklist
By Janar Wasito

All vacations should go this well -- a great trip and a terrific 
rally on the first day back. It was hard not to be happy about 
the market today. Almost all of my plays were up, and big:

New LEAPS, purchased a few weeks ago: BRCM (+26), SEBL (+18), 
IMNX (+23), NOK (+8). These are going to be the basis for my 
LEAP/ Calendar spread strategy on stocks that are Gorillas, 
split often, and thus offer maximum potential to capture 
volatility by selling calls with 10 days to expiry against LEAPs 
with 22 months to expiry. My other LEAPs are GE, CSCO, QCOM, 
GSTRF. Nice to see some huge moves in my new LEAPs!

Bull Spreads: JDSU (+7, both March Credit and Sept Debit Spreads); 
CMGI (+10, Jan01 Debit Spread); ICGE (+8, Sept Debit Spread); NOK 
(+8, July Debit Spread); IMNX (+23, March Credit Spread); VIGN 
(+18, July Debit Spread). The principle in my spread trading is 
that the 30 day or less credit spread (always 1:1 reward: risk 
or better) is the solid rocket booster that generates the cash 
flow to put my longer term debit & credit spread plays (always 
2:1 reward: risk or better, preferably 3:1+) into a position to 
capture even higher rewards over a longer period of time. There's 
no free lunch: my returns are lower than if I had opened straight 
call plays on these stocks. On the flip side, I think that I can 
sustain this type of trading for a longer period without burning 
out. I think that I can control my draw downs more effectively 
with this style of trading. I also feel that I can use this 
methodology to manage a larger scale of money.

I spent a lot of time on the flight back reading various business 
magazines about where the economy is headed. Many articles are 
arguing that most Internet companies are going out of business 
because new dot.coms are going to run out of advertising dollars, 
etc, etc. Money managers who have been losing out of the technology 
boom are spilling a lot of ink (electrons?) trying to project a 
bubble, etc. I live in the heart of the Silicon Valley explosion, 
and I believe exactly the opposite. I think that the shift to new
economy companies will continue and accelerate. Individual and 
institutional investors have been pulling cash out of the DOW stocks 
and putting it into aggressive growth, technology funds. Those fund 
managers are going to trade the new cash like you and I trade 
options: they are going to put it into new, hot sectors, as they 
emerge. Watch for the emergence of new sectors, and the 
fragmentation of sectors. Which Biotechs are going to aid the 
development of biocomputing? Jim Clark, founder of 4 billion dollar 
companies, just sank 150 million into the Stanford Industrial 
Engineering program in biocomputing. Which networking companies 
are positioned to benefit/lose when optical networks kill SONET? 
Internet companies? What is NOT an Internet company today? Which 
ones will aid the boom in personal finance & trading as Baby 
Boomers become week- or day-traders like a crowd of hippies at 
Woodstock? Which healthcare companies will those Baby Boomers 
need when they hit 60 later this decade and the next? I am not 
saying the market will go straight up. I think that there will 
be big pull backs, and, with the speed of money today, they will 
be very fast. But I do think that the general direction is up. 
It will not be enough, though, to pick a basket of leading tech 
stocks, and to put a lot of cash into them. DELL, AOL, MSFT are 
all great companies, but they are hit tunes from years past, not 

Here is my trading checklist. It answers a lot of questions that 
I have received from readers over the past few weeks. I basically 
spent the first two monthes of this year re engineering my approach 
to trading. I had to go through this process because of a great 
QCOM trade that resulted in a massive gain, and a different scale 
to my portfolio. Not wanting to trade with only a small percentage 
of my assets, I decided to come up with a methodology that would 
minimize my risk, while putting a significant % of my assets in 
play. I also learned the hard way that a system that does not take 
stress into account cannot work over the long run. My schoolwork 
may have suffered a bit, but I think the end result -- both in 
financial terms, and in terms of my ability to do this for the 
long run -- are worth the effort. This checklist works for ME, 
and should not be construed as a recommendation for any one person 
in particular. Use it for what it is worth. It is also a work in 
progress, and it doesn't mean a thing if you can't pull the trigger. 
A lot of traders have tons of programs, all the reference books, 
and detailed checklists, but they still are too reluctant to put 
on a trade. This is probably a combination of lack of capital, 
overall life situation, and the result of getting burned. My goal 
is to make my trading a lot more like training for an athletic 
event -- consistent workouts, good decisions, and heads up play 
on game day. Nothing in here is rocket science, but it does 
require consistent work. This approach to trading takes the best 
of different methodologies I have been exposed to -- Jim Brown 
and this newsletter's market awareness and stock selection; George 
Fontanill's lower stress approach to combination plays; elements 
of trading psychology from Jack D. Schwager, ed., The Market 
Wizards & The New Market Wizards, and Marty Schwartz, Pit Bull.

As you attempt to put together your own checklist (and you must put 
together your own, even if you copy parts of other trader's work), 
remember this -- less is more. If you can get the strategy that 
fits your personality from a free source, or a book, all the better. 
If you can find it on the web, print it out, read it over and over 
until it makes sense, great. Don't feel like you are better 
prepared to face the market because you have 3 different real 
time quote services, 5 brokers, and some expensive, proprietary 
software that costs a fortune. Those costs all come out of your 
bottom line in the business you are running. I use this newsletter, 
qcharts, and if I could have only one broker, it would be 
preferred trade. The rest of this, I have put together from sources 
on the web (free trials are great), books, lunches with some other 
traders, etc. I have also worked through a variety of strategies 
because I need to be in a trade to really perceive the dynamics 
of things like time decay (theta) and why it can be so profitable. 
There are tons of great mathematicians in business schools and 
investment banks, but the real test is who can make money. My 
finance professor has been in inflation indexed treasury bonds 
and East Asian funds for the past few years because his extensive 
knowledge tells him that these are the assets which make the most
sense. But after you have gone through the different strategies, 
I think it is best to settle on the two that work best for you. 
For me, those are credit/ debit spreads and LEAP/ calendar spreads. 
Read extensively, try everything, then settle down with a few 
strategies and execute. Less is more. As I trade, I will doubtless 
boil down this monstrosity even more.

Trading Checklist
1.  Money Management.
a.  Principles
i.  Trade for the long run. Avoid compressing/ stretching the 
spring. Take at least one week of solid vacation per month. 
Reward successful period with travel & recreation. View trading 
as an athletic challenge.
ii. George's Rule: Success in Trading is determined by how much 
you put into stable assets like cash & real estate, not by how 
big your trading account gets.
iii. Corollary to George's Rule: Success in Trading is determined 
by what you do with your non-trading time, not by how much time 
& effort you put into trading.
iv. Ed Seykota: Everyone Gets What They Want from the Markets. 
I want $_____ dollars, after taxes -- not more, not less.
v.  Paul Tudor Jones: Play Great Defense, Not Great Offense.
b.  Stop Loss Rules
i.  Position: Immediately exit positions which are down 15%, or 
7% of underlying stock
ii. Portfolio: Immediately close 50% of positions when down 3% 
from previous month's close; repeat as necessary.
c.  Asset Allocation
i.  LEAPs/ Calendar Spreads (50%) ("LT Option Account")
1.  Add 8% of total available assets to LEAP positions each month.
a.  2% per LEAP
b.  1% per 9 month call (where LEAP is unavailable)
2.  Maintain cash reserve of 15% of total assets
3.  Sell current month calls with 10 days remaining at oversold 
moments. Target: Pay for 5% of LEAP per month.
a.  Principle: Shorting calls with 10 days until expiry lowers 
the cost of LEAPs
ii. Spreads (50%) ("ST Option Account")
1.  Max Risk: 1% per position
2.  30 or Less Credit Spreads (Bull Put Spreads): 10  15 per month.
a.  Always 1:1 Reward: Risk or better
3.  3 to 6 month Debit & Credit Spreads
a.  Only as many as previous month's credit spreads have "paid for."
b.  Always 2:1 Reward: Risk or better, preferably 3:1.
iii.Future Asset Classes: Real Estate (50% or less), ________ 
(% to be determined)

2.  Stock Selection
a.  Time Allocation. Sunday after 6 P.M. until completion. One 
hour per weekday evening.
b.  Sector. Look for hyper growth benefiting Baby Boomers. (The 
Long Boom, Roaring 2000s)
c.  Leading Companies. Look for Gorillas. (The Gorilla Game, 
Crossing the Chasm) Trade what I understand (One Up on Wall Street, 
Beating the Street)
d.  Watch List
i.  Add companies from OIN Sunday, Tuesday & Thursday newsletter 
to watch list with entry (support) points
ii. Set up credit spread plays with break even or max profit at 
suggested support levels
iii.When company is removed from OIN play list, add it to the 
appropriate watch list category: Internet, Computer Software, 
Networking, Wireless, Biotech
1.  Be fast to add new sectors as they emerge
iv. Each Sunday, update watch list in my.yahoo.com, note upcoming 
earnings & splits and recent new highs; cruise company web sites.
v.  Candidates for Spreads
1.  Consolidation on major support
2.  Low Implied Volatility for Debit Spreads
3.  High Implied Volatility for Credit Spreads
4.  Deep OTM Options Available
vi. Candidates for LEAPs
1.  Huge Market, Good Management, Sustainable Competitive Advantage
2.  2 or More Splits in Last Year
a.  Principle: Time & Volatility Premiums remain similar for the 
split LEAPs, and for the calls which can be sold against the LEAPs.
e.  Sources: View trading as an opportunity to learn about business 
& the most exciting period in history.
i.  Investors Business Daily
ii. San Jose Mercury News
iii.Red Herring
iv. OIN (Calls, Naked Put Candidates, Local Club)

3.  Checklist for Taking Position (Entry/ Strategy Selection)
a.  Time Allocation. 30 Minutes after market opens. 60 minutes 
before market closes.
b.  Market: Is the Market overbought or oversold?
i.  Check Charts & Moving Averages prior to making a trade. Don't 
go against them.
ii. VIX. Below 22 = overbought. Over 28 = oversold.
iii.TYX. Less predictive power, but note for macro shifts in direction.
1.  Resistance & Support Levels.
2.  Above/ below 10 Day Exponential Moving Average (EMA). Above = 
green light (beware reversal). Below = red light (might be entry 
3.  Hitting Bollinger Bands
a.  Above  = Overbought
b.  Below = Oversold
4.  Stochastics: Major drop offs = entry points
v.  NDX/ NDOOH & SPX/ SPOOH. Are the futures above/ below the 
cash? Beware 3:20 Sell Program.
vi. ADVDECV.NQ & ADVDECV.NY. View in 30 minute chart to spot 
intraday reversals which might be entry points.
vii.Are we above or below moving averages, i.e., in positive or 
negative mode?
viii.Are we above or below a dominant trend line?
ix.  Has recent price action taken out previous highs or lows?
c.  Sector: Is the Sector over bought or oversold?
i.  Sector Indexes (CWX.X, MSH.X, SOX.X, DOT.X, XCI.X, NWX.X, 
1.  Resistance & Support Levels
2.  Above/ below 10 Day Exponential Moving Average (EMA). Above = 
green light (beware reversal). Below = red light (might be entry 
3.  Hitting Bollinger Bands
a.  Above  = Overbought
b.  Below = Oversold
4.  Stochastics: Major drop offs = entry points
ii. Leading Stocks. Are there major news driven moves in the 
sector leaders (splits, earnings, new products)?
iii. Market is oversold, Sector is Neutral/ Overbought: Do Nothing
iv.  Market is overbought, Sector is Neutral/ Sold: Do Nothing
v.   Market is oversold, Sector is oversold: Look at stocks
vi.  Market is over bought, Sector is overbought: Look at stocks
d.   Stock
i.   Individual Stock
1.   Resistance & Support Levels
2.   Above/ below 10 Day Exponential Moving Average (EMA). Above = 
green light (beware reversal). Below = red light (might be entry 
3.   Hitting Bollinger Bands
a.   Above  = Overbought
b.   Below = Oversold
4.   Stochastics: Major drop offs = entry points
ii.  Splits, Earnings, New Products?
iii. Market is Oversold, Sector is Oversold, Stock is Neutral/ 
Overbought: Do Nothing
iv.  Market is Overbought, Sector is overbought, Stock is Neutral/ 
Oversold: Do Nothing
v.   Market is Oversold, Sector is Oversold, Stock is Oversold
1.   Buy LEAPs
2.   Enter Bull Spreads
3.   Adjust Bull Spreads (Close Short Leg of Bull Call Spread)
vi.  Market is Overbought, Sector is Overbought, Stock is overbought
1.   Write Calendar Spread
2.   Exit Bull Call Spread
e.   Always ask before taking a position: do I really want to 
have this position?
f.   Always know the amount I am willing to lose before taking a 
position. Know the uncle point and honor it.
g.   After a very profitable run of trading, reduce the position size.
h.   After a successful period, take a day off as a reward.
i.   Tricks of the Trade:
1.   Gaps in Charts
2.   Mutual Fund Cash
3.   Three Day Rule
4.   Put/ Call Ratio
5.   How Market Reacts to News
6.   New Highs/ New Lows
7.   Up Mondays
8.   Market Probability Calendar
9.   Option Expirations
10.  Trading on the Half Hour
11.  Take Out the Highs/ Take Out the Lows
12.  First Trade Back
13.  Worst Fears Not Realized
14.  Ego: "I can tell you how I became a winner  I learned how 
     to lose."

Janar Wasito
Contact Support


Sunday, March 5, 2000


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



We had our regular meeting on Monday the 21st. Our attendance 
continues to build and I continue to get more people who are 

We viewed an instructional video about splits and split runs. 
This was followed by a discussion of split plays and the split 
trader. Again, thanks to Mike Moore and the Deckerd's for the AV 

Our next meeting will be March 6. At that meeting each person 
will present a play - successful or unsuccessful- and discuss it. 
Why you did it, what your plan was, how it went and lessons 
learned. Remember it is good to learn from others' mistakes and 
the more we have the fewer mistakes you will make.

A few weeks ago I presented a put spread I did on MSFT. Here's an 
update.  So far I have had 400 shares (I did 10 contracts) put to 
me. In each case I sold the shares and then sold my long puts 
with enough spread to about breakeven. First 200 I actually made 
a few bucks, but on the second my only loss was from commissions. 
This was one of the motives for doing this play.  If it didn't 
work there was very little downside with very positive upside.
I think MSFT has good upside. Just not now. I will probably try 
to trade out and close the position with a profit.

Our lunch today had a record attendance. I secured Ozzie's Bull 
Pen for each Thursday in March so lunch will be there until further 
notice. We will reserve it month to month.

Any questions or need information drop me a note. Look forward to 
seeing everyone on the 6th.



By Alan Knuckman

      The goal of all trading is to make money.  That fact is 
sometimes lost in the battle with the market and the emotional 
effect it takes on us.  Ego gets in the way of our decision making 
process and unfortunate results can occur.  Mastering emotions 
requires discipline and planning prior to entering a trade.

     If you place a profit taking order at a level you would be 
happy with of $500, $1000, $2500, etc, the only regret is that 
YOU COULD HAVE MADE MORE MONEY.  If it doesn't get there you can 
always adjust your exit but at least a goal is in place.  At 
minimum exit half of the positions if you double your money.  
The worst thing that could happen is you break even.  It 
certainly beats losing money.

     Everyone's measure of a successful trade is different.  
Some traders would rather lose money than miss out on a big move.  
Chasing markets or greedily refusing to take profits often catches 
up with you.  Another day always leads to more opportunities.  
MANY TRADERS HOLD POSITIONS TOO LONG and are afraid of what they 
may miss not being in the market.  Fear and greed are not the 
deciding factors for successful traders.

     The natural tendency for traders is to get out when a 
position is going against them or because they are afraid to 
give back profits.  It is very hard to think clearly if fear
is used in determining when to exit.  A disciplined trader 
places both a profit taking order at a level they are happy to 
exit and a protective stop loss if the market fails to act as 
they had planned.  When the emotions involved in trading are 
minimized more successful results usually follow.

     The strategy of peeling off positions at different levels 
and setting targets instills trading discipline but doesn't suit 
everybody.  The emotional "would have, could have, should have" 
trader sometimes tries to feel when it is time to exit.  That 
style of trading is not necessarily focusing on monetary success 
but instead the entertainment value in being right.  An 
experienced trader would use the peaks and valleys to exit and 
possibly reenter positions.  As obvious as it seems making some 
money is always better than losing.

     A stock can always move much higher or lower than you 
anticipated.  Choosing the top or bottom is nearly impossible 
and the majority of money is made somewhere in the middle.  
Try to determine before hand what makes you happy as a trader 
and your results should be better.

Alan Knuckman and Andrew Aronson
Lasalle Options
Toll-Free 888-281-9569


An Osmotic Technical Point of View
A view from the edge.

Well, was that an interesting week or what?  For me it was so in 
more ways than one.  Don't know about you but, I made more money 
last week than I had so far this year up until Monday.  Brian Eno, 
whom I respect very much once said "Don't be afraid of things 
because they're easy to do" and I think that may be the quotation 
for the week.

Last week was kind of a blur for me trading wise, other than
everything was easy.  Entered trades when the charts said to, 
put the stops in, and also traded Osmotically.  That is I listened 
to that quite little voice in the back of my head and exited or 
entered a dozen or so trades earlier than the chart indicated.  
Was right every single time too  Your subconsious gray matter is 
pretty wonderful when you listen to it.

The twist this week for me was that I had my third brush with 
mortality in the past 10 months Monday evening.  It could best be 
described as a catastrophic failure of a mechanical device.  I think 
that I need to change hobbies.  This one was as close as I ever care 
to get.  As the numbness of actually how close this one was wears off 
a bit,  I can state unequivocally there is no stiffer tonic to help 
you reexamine your priorities in life.  It has allowed me for however
briefly, to reduce things to their lowest common denominator.  I 
think that is partially why trading was "easy" this week.

I hope that all of you who have followed the ETEK equation are 
having fun! How about that premium!  I suggest the you might want 
to consider taking some of the $100+ that you have made on those 
calls off the table.  Sometimes the most profitable plays are too 
obvious (see quote above).  

Considering the response that I received from my story on charting, 
I am going to see if Jim can put in some charts to show you how I 
judge getting into and out of some of my plays.  Ones that I have 
actually made money on.  You can get theoretical BS just about 
anywhere but, not here.  These are by no means scientific or maybe 
even "correct" but, they work for me.

Well, I shall leave you with a suggestion for those of you that 
racked up some big gains this week.  Take some of the money and go 
do something for the ones that you care for.  Do not wait around to 
later either.  Do it today!  Otherwise, what are you really trading 

Happy Trading!


 "Ever heard of the skew effect?"   
By Lee Lowell

      Ok, now that we've got a handle on the different types of 
volatilities and how to figure them out, let's see how we can use 
it to our advantage in the marketplace.  As I was talking about 
my last article with my father; he said to me, "explain how this 
volatility thing works with an example".  
Here's what I showed him:  (hypothetical example)

March 1, 2000			March 1, 2000
IBM stock $100/share		YHOO stock  $100/share
IBM June  $100 call = $5	YHOO June  $100 call = $10

     Why is YHOO's June $100 call double the price of IBM's $100 
call?  They both have the same stock price, the same strike price, 
and the same expiration date.  (we'll leave out interest rates 
and dividends since they don't have a major effect).  There is 
only one explanation for the difference in option premiums, and 
that is VOLATILITY!  YHOO is a much more volatile stock than IBM 
and it is reflected in its option premium.  YHOO can blast through 
so many different strikes on any given day and then reverse itself 
back down too.  IBM takes the nice slow path of going through 
strikes (if it moves at all).  Since YHOO has the ability to turn 
out-of-the-money options into in-the-money options more quickly,
its volatility component will be much higher.  This is the effect 
volatility has on option premiums.

     Let's move onto something deeper.  Have you ever heard about 
volatility "skews"?  This is one characteristic of volatility that 
makes for great trading opportunities.  In a perfect market, all 
the implied volatilities of each strike in an option chain would 
be trading at the same level.  For example,  XYZ corp. is trading 
at $65 and has option strikes ranging from $50 - $100. Each option 
(puts and calls) has an implied volatility of 35%.  This is what's 
called a flat skew.  Most stable stocks can have this sort of flat 
skew.  Now, very volatile stocks can have what's called a sloping 
skew.  This is when the implied volatilities for each strike are 
different.  ABC corp. has strikes ranging from $25 - $200 because 
it has moved within that range over the last 3 months.  It is 
trading at $80 today and its implied volatility for each strike 
looks like this: 75%, 77%, 80%, 82%, 85%, 88%, etc. etc.  starting 
with the at-the-money call strike and moving higher.  The same can 
be said for the puts.  Starting with the at-the-money put and 
moving lower in strikes.  

     Here's what the levels would look like for XYZ corp.:

Calls Strike 80  85   90   95  100  105 
Imp. Vol.    75% 77%  80%  82%  85%  88%	

PutsStrike  55  60  65  70  75  80
Imp. Vol.   88% 85% 82% 80% 77% 75%

     You can see as the calls increase from the at-the-money strike, 
so does the implied volatility.  And as the puts decrease from the 
at-the-money strike, the volatility goes up.  The out-of-the-money 
strikes have the higher implied vols.  This is called a "smiling 
skew" because if you plotted the levels on a graph, it would look 
like a smile.  What is the reason for this?  Good question.  It is 
mostly because of the uninformed amateur option players out there 
that make up most of the general public.   And due to lots of 
speculation.  Many traders like to play the out-of-the-money 
options because they are cheap and the rewards can be huge if the 
stock moves in their favor.  As the volume increases in the 
out-of-the-money options as more people want to get in on the move, 
there is pressure to bid up the option premiums and the market 
makers are aware of this.  So they keep bumping up their asking 
prices.  This is turn leads to higher implied volatilites on these 
options.  This holds true for calls and puts.  One of the reasons 
why the puts have this sort of skew dates back to the crash of '87.  
Many people got burned on the downside so lower strike puts will 
usually have higher implied volatilites now.  This is really evident 
in the S&P 500 put options.  If you are using a real-time data feed 
that gives implied volatility levels for an option chain, look for 
the skew effect.  

     Not all skews are smiling though.  Some options have downward 
sloping skews in the calls as the strikes increase.  This is due 
in part by many large hedge funds and institutional firms that 
employ covered call writing.   These funds are long the underlying
and short the calls against them.  As many more firms employ this 
strategy and sell the calls in volume, this tends to bring down 
the call premiums, thus lowering its implied volatility.  At the 
same time as the call are sold, these same firms may be buying 
the downside puts for protection too.  (thanks to the '87 crash 
effect) This tends to raise the implied vols of the 
out-of-the-money puts as I said before.  So the volatility "skew" 
can have a few different shapes.  Just look at different option 
chains that supply implied volatility numbers and you can see 
this effect.

     So how do we use the skew effect to our advantage?  It can 
be employed in a few different spread type strategies.  Let's 
start with options that have a smiling skew.  If you are bullish 
or bearish on a stock but want to be conservative in your option 
strategy, then you can initiate debit call and put spreads to 
lower your overall cash outlay.  If you buy a call spread on 
options with a smiling skew, you are assured to buy the option 
with the lower implied volatility and sell the option with higher 
implied volatility.  For a put spread, you'll be buying the put 
that has a lower implied vol. and selling the put with higher 
implied vol.  So what does that mean?  This automatically puts 
the odds in your favor.  Or should I say, starts you off with 
an advantage.  All options on the same underlying stock should 
trade at the same volatility, but they don't.  Why would someone 
pay more (on an implied volatility basis) for an option in the 
same chain on the same underlying?  I told you before.  It's 
because of speculators who want to get in on the game and buy 
cheap out-of-the-money options.  This buying pressure causes 
the implied volatilites of the further out-of-the-money option 
to slope higher.

     So when you buy an option with lower implied volatility 
than the option you're selling, you already have the odds tipped 
in your favor.  Now whether or not you eventually make money on 
your spread will be determined by where the underlying stock 
ends up.  But at least you know that you started with a slight 
advantage.  Let's look at an example to help clarify my ranting.

XYZ corp. at $50 with flat skew:

Calls     50  55  60  65  70  75  80

Imp. Vol. 35% 35% 35% 35% 35% 35% 35%

Premium   5    4   3   2   1  .5  .25

XYZ  $60 - $75 call spread = $2.50

XYZ corp. at $50 with smile skew:

Calls     50  55  60  65  70  75  80

Imp. Vol. 35% 37% 39% 41% 44% 47% 50%

Premium    5  4.5  4 3.75 3.5 3.25 3

XYZ  $60 - $75 call spread = $.75

     Do you see what happened here?  If you bought the XYZ June 
$60 - $75 call spread with a flat skew, the spread would cost 
you $2.50.  But with the smile skew, the same call spread would 
only cost you $.75.  That's a big difference!  That's a $1.75 
cheaper per spread.  This is what volatility analysis can do 
for your trading.  It can start you off with an advantage.  
I highly recommend checking the implied volatilites for the 
strikes you're interested in trading.  

     Now let's use a different kind of spread to take advantage 
of the skew effect.  We'll use the ratio spread this time.  A 
ratio spread consists of buying a closer-to-the-money option 
and selling two or more further out-of-the-money options.  The 
ratio could be 1:2 or 1:3, depending on your outlook and risk 
tolerance.  Most of the time you would want to initiate a ratio 
spread for a credit or $0 net into your account.

Here's an example using the same XYZ data:

     If you were to put on the XYZ $60 - $70 1x3 call spread 
with the flat skew, the cost would be $0 plus commissions.  
Your position would consist of long 1 XYZ $60 call at $3 and 
short 3 XYZ $70 calls at $1, for $0 net.    (for the short side, 
just multiply the number of contracts by the premium.  3x $1 = $3.  
So your total long premium minus the short premium = $0)

     If you were to put on a ratio spread using the smile skew, 
with a ratio of 1x2, here's what the outcome would be.  You 
would be long 1 XYZ $60 call at $4 and short 2 XYZ $70 calls 
at $3.50 with a net CREDIT of $3 in your account.  Now that's 
nice!   And the good part is that your ratio has been reduced 
to a 1x2 contract spread vs. the 1x3 contract spread with the 
flat skew example.  This smaller ratio reduces your outright 
risk if the trade should happen to go against you.  

     Let me just expand on why someone might want to do ratio 
spreads and how the final numbers might look.  XYZ corp. is $50 
today.  A trader might believe that XYZ will not go any higher 
than $70 per share over the next 3 months.  So he/she will put 
on a ratio spread of long 1 $60 call and short 2 $70 calls for 
a credit of $3 (using the example above).  At expiration day, 
XYZ closes at $68.  Here's what happens:

Long 1 $60 call in-the-money = $8, for a total gain of $4.  
($8 - $4 initial outlay = $4 gain)
Short 2 $70 calls out-of-the-money = $0, for a total gain of $7  
($7 initial credit)
Total profit = $11.

     That's how it works.  Not only did this trader begin with 
a credit in his/her account, but he/she made even more money 
because the prediction was correct.  Just remember though, XYZ 
could have gone up well past $68 in that time frame.  In that 
case, the trader would be short more options than long, so they 
would have to cover at sometime. (maybe at a loss).  With the 
$3 initial credit, the breakeven would be at $73 and losses 
would start to occur above that number.  With the flat skew 
spread, the breakeven is at $70 with 2 extra short calls to 
deal with if XYZ starts flying past $70.

     You can see how the skew effect can give you an advantage.  
So it is in the best interest of every option trader to be aware 
of the volatility skew. (if there is any).  Just check your 
option chain data before putting on the trade to see if the 
odds might be in your favor.  

Next time, I will discuss more strategies to take advantage of 
the skew effect.


Lee Lowell
Contact Support

Tired of waiting on trades to execute? 
Does your broker offer Stop Losses on Options?  

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Stop Losses based on the option price or the stock price.
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Anything else is too slow!



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


Daily Results

Index      Last    Week
Dow     10367.20  505.08
Nasdaq   4914.79  324.29
$OEX      765.95   46.17
$SPX     1409.17   75.81
$RUT      597.88   41.14
$TRAN    2434.45   83.19
$VIX       21.29   -7.59

Calls              Week

DNA       234.50   59.50  A great week for our play on DNA!
CLRN      138.00   39.00  What a nice start to a brand new play
INSP      259.81   34.50  INSP offers exhilarating space ride
EMLX      190.25   33.13  See what a little good news can do?
VERT      251.72   25.97  VERT gets it's fair share of momentum
CHKP      229.75   24.13  Another command performance from CHKP
JDSU      280.00   23.19  JDSU shares split 2:1 on March 10th
GLW       205.25   17.44  GLW puts on quite a nice performance
CMGI      134.06   16.56  CMGI took the spotlight last week
SEBL      154.72   16.34  Seibel investors and traders rejoice!
INKT      160.97   15.85  Powerful momentum puts INKT in game
ADIC       96.94   12.88  Split run is back in business
MER       107.00   11.13  New, Merrill Lynch charges ahead
CCBL       49.72   10.22  Here's another low cost optical play
QLGC      155.44   10.19  QLGC looks to be on the move again
LHSP      118.25   10.03  This play still worth "listening" to
HGSI      216.00   10.00  Dropped, more like tarnished brass
NSM        77.44    9.44  NSM to announce earnings this Thurs.
ATML       52.44    9.25  Semiconductor optimism boosts ATML
AFCI       65.50    8.06  A fire began to kindle under AFCI
ERICY     104.81    7.19  ERICY just keeps cruising right along
NTAP      199.94    7.00  New, shares to split 2:1 March 23rd
CSCO      137.44    4.69  New, rolling out the red carpet
MDT        51.38    3.94  New, found it's legs and wants to run


CTS        52.31  -14.06  New, breaks through key $60 level
RNWK       70.19   -8.19  Unable to breakthrough 10-dma on Fri.
MRK        57.50   -2.69  New, MRK continues to limp along
PPG        49.06    0.00  Investors came to their senses 
JNJ        73.50    2.31  Dropped, time to abandon this ship
DD         50.75   -0.75  Opportunities for possible entry?
KMG        46.94    6.19  Dropped, alright, enough is enough



MER  - Merrill Lynch 
NTAP - Network Appliance Inc. 
MDT  - Medtronic Inc.
CSCO - Cisco Systems Inc.


CTS - CTS Corporation 
MRK - Merck & Co.


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


HGSI $216.00 (+10.00) The silver lining we were looking for in
HGSI is beginning to appear more like tarnished brass.  While
we believe the Biotech sector and more specifically the genomics
industry still has a bright future, HGSI released some news late
Thursday that could take shine out of this play.  The company
said they will call $200 million in 5% convertible subordinated
notes for redemption and take a $30 million or $0.55 per share
charge.  The notes convert into HGSI stock at a price of $71.63
per share, and the conversion right will expire on March 21st.
This dilution of shares would up the number of outstanding shares
by about 2.8 million shares if all notes were converted.  Friday
HGSI did open higher but again tested the $200 area.  HGSI really
appeared to struggle for most of the session ending the day
+$1.88 to the good.  With the dilution coming we will let HGSI 
go for now.


KMG $46.94 (+6.19) Alright, enough is enough.  It looks as 
though the bounce that KMG made from $40 may have been 
legitimate.  Though we still believe there could be more 
downside in the near future of KMG, we can no longer justify 
hanging on to a put play that posted gains every single day 
last week.  We cannot deny the possibility that KMG may have 
at long last found a bottom and is now attempting to recover. 
KMG is now over $2 above its 10-dma and seems to have acquired 
a good deal of support.  Resistance may be encountered at the 
$50 level, however, the risk/reward factor is simply not in 
our favor at this point.  It is time to let this one slip on by.  

JNJ $73.50 (+2.31) Slip on the life preserver and abandon ship.  
While JNJ continues to trade at respectable volume levels it's 
now stuck in a narrow trading range unable to crack Monday's 
all-time low at $70.06.  Furthermore it's systematically 
developing a pattern of higher-lows.  This, in particular, is 
not a bearish indication and we're exiting the play. 


Current Split Candidates
CHKP - CheckPoint Software
EMLX - Emulex
QLGC - QLogic
GLW  - Corning
SEBL - Siebel Systems
INKT - Inktomi Corp
CLRN - Clarent Corp.
Split Candidates that are not current plays
CHINA - China.com
CMVT  - Comverse Tech.
EMC   - EMC Corp.
PHCM  - Phone.com
Most recent announcements we predicted
TERN - Terayon Comm. (most recent pick)


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

Symbol - Stock          Splits/Date  
SLR  - Solectron        2:1 03-08-00 ex-date 03-09
BFRE - Be Free          2:1 03-08-00 ex-date 03-09
JDSU - JDS Uniphase     2:1 03-10-00 ex-date 03-13
ASDV - Aspect Dev       2:1 03-10-00 ex-date 03-13
SDLI - SDL Inc          2:1 03-13-00 ex-date 03-14
BVSN - Broadvision      3:1 03-13-00 ex-date 03-14
ADIC - Advanced Digital 2:1 03-13-00 ex-date 03-14
ADVS - Advent Software  2:1 03-13-00 ex-date 03-14
ALLR - Allaire Corp     2:1 03-14-00 ex-date 03-15
BRCD - Brocade          2:1 03-14-00 ex-date 03-15
AJG  - Arthur Gallagher 2:1 03-15-00 ex-date 03-16
OTTR - Otter Tail Pwr   2:1 03-15-00 ex-date 03-16
WLSN - Wilson Leather   3:2 03-15-00 ex-date 03-16  
AMAT - Applied Materials2:1 03-15-00 ex-date 03-16
ADI  - Analog Devices   2:1 03-15-00 ex-date 03-16
AGIL - Agile Software   2:1 03-16-00 ex-date 03-17
LRCX - Lam Research     3:1 03-16-00 ex-date 03-17
SFE  - Safeguard        3:1 03-17-00 ex-date 03-20
MVSN - Macrovision      2:1 03-17-00 ex-date 03-20
CPTL - CTC Comm         3:2 03-17-00 ex-date 03-20
TLGD - Tollgrade Comm   2:1 03-20-00 ex-date 03-21
IMNX - Immunex Corp     3:1 03-20-00 ex-date 03-21
EVRC - Evercel Inc      2:1 03-21-00 ex-date 03-22
DISH - EchoStar Comm    3:1 03-22-00 ex-date 03-23
PUMA - Puma Tech Inc    2:1 03-22-00 ex-date 03-23
SANM - Sanmina          2:1 03-22-00 ex-date 03-23
CSCO - Cisco            2:1 03-22-00 ex-date 03-23
WON  - Westwood One     2:1 03-22-00 ex-date 03-23
NTAP - Network Appliance2:1 03-22-00 ex-date 03-23
NSOL - Network Solution 2:1 03-23-00 ex-date 03-24
ARTG - Art Technology   2:1 03-24-00 ex-date 03-27
TEVA - Teva Pharma      2:1 03-24-00 ex-date 03-27
PCLE - Pinnacle Systems 2:1 03-24-00 ex-date 03-27
HAUP - Hauppauge Digitl 2:1 03-24-00 ex-date 03-27
JWG  - JWGenesis        3:2 03-24-00 ex-date 03-27
KCP  - Kenneth Cole     3:2 03-27-00 ex-date 03-28 
LLTC - Linear Tech      2:1 03-27-00 ex-date 03-28
IQIQ - ViaLink          2:1 03-27-00 ex-date 03-28
SMTL - Semitool Inc     2:1 03-28-00 ex-date 03-29
USIX - USinterworking   3:2 03-28-00 ex-date 03-29
CRGN - CuraGen Corp     2:1 03-30-00 ex-date 03-31
ARBA - Ariba            2:1 03-31-00 ex-date 04-03
VERT - VerticalNet      2:1 03-31-00 ex-date 04-03
RADS - Radiant Systems  3:2 03-31-00 ex-date 04-03
RMD  - ResMed Inc       2:1 03-31-00 ex-date 04-03
ADRX - AndrxCorp        2:1 04-03-00 ex-date 04-04
GRDN - Guardian Tech    2:1 04-03-00 ex-date 04-04
SBL  - Symbol Tech      3:2 04-05-00 ex-date 04-06
ABGX - Abgenix          2:1 04-06-00 ex-date 04-07
HDI  - Harley Davidson  2:1 04-07-00 ex-date 04-10
MFNX - Metromedia Fiber 2:1 04-17-00 ex-date 04-18
MLNM - Millenium Pharm  2:1 04-18-00 ex-date 04-19
AHAA - Alpha Industries 2:1 04-19-00 ex=date 04-20
ELNT - Elantec Semi     2:1 04-21-00 ex-date 04-24
MCLD - McLeodUSA        3:1 04-24-00 ex-date 04-25
GE   - General Elec     3:1 04-26-00 shareholder mtg
CYSV - Cysive Inc       2:1 05-08-00 ex-date 05-09
AXP  - American Exprs   3:1 05-10-00 ex-date 05-11
ALKS - Alkermes         2:1 05-12-00 ex-date 05-15
SNE  - Sony Corp        2:1 05-19-00 ex-date 05-22
CXR  - Cox Radio        3:1 05-19-00 ex-date 05-22
MOT  - Motorola         3:1 06-01-00 ex-date 06-02
MEDI - Medimmune        3:1 06-02-00 ex-date 06-05
NXTL - Nextel Comm      2:1 06-06-00 ex-date 06-07
ANEN - Anaren Micro     3:2 06-09-00 ex-date 06-12
AA   - Alcoa            2:1 06-09-00 ex-date 06-12
NXLK - Nextlink         2:1 06-15-00 ex-date 06-16
EXDS - Exodus Comm      2:1 06-20-00 ex-date 06-21

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


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

Call plays of the day:

NSM - National Semiconductor $77.44 (+9.44)(+4.50)

See details in sector list

Chart = /charts.asp?symbol=NSM


JDSU - JDS Uniphase $280.00 (+23.19)(+6.81)

See details in sector list

Chart = /charts.asp?symbol=JDSU

Put play of the day:

MRK - Merck & Co. $57.50 (-2.69)

See details in put list

Chart = /charts.asp?symbol=MRK


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

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

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

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

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

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

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


CSCO - Cisco Systems Inc $137.44 (+4.69)

Cisco is a worldwide leader in networking for the Internet.  
They provide networking solutions to businesses that allow 
for seamless communication without regard to differences in 
time, place, or type of computer equipment.  Cisco directs 
2/3rds of the network traffic out there and is also a major 
maker of LAN switches.  The strategic alliances they have 
formed with such big names as Microsoft, Alcatel, and US West 
further enhance their influence and presence in the networking 

The red carpet is once again being rolled out for CSCO.  This 
time it's being added to OIN's call list for a split run.  The 
stock splits 2:1 in a little more than two weeks on March 22nd.  
There's no question the BoD has enough shares.  These days Cisco 
has 5.4 bln shares authorized and only 3.42 mln outstanding.  
Now even though volume has been drifting at moderate levels, 
we're anticipating some pre-split excitement will give CSCO a 
shot of adrenaline.  As of Friday's close, Cisco is perched just 
a hair under the 52-week high of $139 (set on February 23rd).  
Dips near the converged 5-dma ($132.95) and 10-dma ($132.31) are 
considered solid entries as these levels represent relatively 
strong support.  If you want to play it safer, then a move 
through $139 is your target entry.  Also look for stronger 
volume levels to back the climb.  

Cisco was recently ordered to change its name in Brazil.  
Apparently Brazil's Sisco Sistemas e Computadores SA had 
registered its name eight years before the San Jose company.  
Cisco has until April 9th to comply with the ruling or face 
$5,693 a day in penalties.  Also on the global front, Cisco 
along with the Intel Corp, made recommendations to foster the 
growth of Internet usage and e-commerce in the Russian markets. 
As of 1998 Internet-related services in the Russian markets was 
worth about $160 mln.

***March contracts expire in 2 weeks***

BUY CALL MAR-130 CWY-CF OI=12192 at $ 9.75 SL=7.50
BUY CALL MAR-135*CWY-CG OI=16083 at $ 6.25 SL=4.50
BUY CALL MAR-140 CWY-CH OI=11092 at $ 3.38 SL=1.75
BUY CALL MAR-145 CWY-CI OI= 6978 at $ 1.69 SL=0.75
BUY CALL APR-135 CWY-DG OI= 5186 at $11.63 SL=9.25
BUY CALL APR-140 CWY-DH OI= 8036 at $ 8.63 SL=6.50

Picked on March 5th at  $137.44    PE = 188
Change since picked       +0.00    52 week high=$139.00
Analysts Ratings    23-15-0-0-0    52 week low =$ 47.00
Last earnings 12/99   est= 0.23    actual= 0.25
Next earnings 05-09   est= 0.26    versus= 0.19
Average daily volume = 23.8 mln


MDT - Medtronic Inc. $51.38 (+3.94)

As the world's leading medical technology company, MDT makes
devices to help regulate medical problems from erratic
heartbeats to tremors and incontinence.  The company conducts
business in more than 120 countries in the areas of cardiac
rhythm management, neurological and spinal, vascular, and
cardiac surgery.  About half its sales come from defibrillators
and pacing products, including devices for slow, irregular, or
rapid heartbeats.  Through its Arterial Vascular Engineering
subsidiary, MDT makes catheters, stents, and guidewires used
in angioplasties.  MDT is also developing products for
minimally invasive cardiac surgery and sleep apnea.

Helping us stay healthy in spite of ourselves, MDT continues
to provide devices critical to keeping our hearts ticking.  A
different angle than the Biotech firms who are working on anti-
cancer treatments, MDT goes right to the source of the problem
to control and mitigate cardiac and neurological abnormalities.
Breaking out of a year-long consolidation in late January,
shares of the company seem to have really found their legs in
the past few weeks.  Helped along by strong earnings and a host
of positive analyst comments (see news below), shares of MDT
surged to a new all-time high of $51.50 on Friday.  Although
volume was a bit lackluster (25% below the ADV), the intraday
volume picture is more encouraging.  Each time prices moved up,
they were accompanied by a surge in volume, which tapered off as
MDT prepared for the next surge higher.  Also encouraging is the
fact that the close was just a tiny fraction below the high of
the day.  With a strong close above $50, this level should now
act as support, followed closely by $49 which is right between
the 5-dma and 10-dma.  Now in uncharted territory, MDT looks
poised to continue higher.  Feel free to jump on board if the
buyers continue to bid shares up on Monday, but a more
conservative approach would be to wait for a confirming bounce
at support.

MDT competitor Guidant (GDT) saw its shares hit a record high
this week on perceptions that the medical device maker will
report strong first-quarter sales.  According to Goldman Sachs
analyst Lawrence Keusch, there is a strong sense that both GDT
and MDT will retain their competitive position in the
defibrillator market.  This came on the heels of a host of
positive analyst comments in the last 2 weeks.  On Tuesday,
CS First Boston began coverage of MDT with a Buy Rating.  This
followed ABN Amro reiterating its Buy rating and raising its
price target from $50 to $60 on February 24th.  The same day,
Gruntal raised its long-term price target from $50 to $62,
leaving its rating at Outperform.  This all followed MDT's
strong earnings release on February 23rd, where the company
reported a 28% rise in earnings on an 18% revenue growth.
All four of its major business units reported double-digit
sales growth.

***March contracts expire in 2 weeks***

BUY CALL MAR-50 MDT-CJ OI=3536 at $2.69 SL=1.25
BUY CALL MAR-55 MDT-CK OI=1021 at $0.75 SL=0.00 High Risk!
BUY CALL APR-50 MDT-DJ OI= 207 at $4.38 SL=2.75
BUY CALL APR-55*MDT-DK OI= 237 at $1.94 SL=1.00

Picked on Mar 5th at     $51.38     P/E = 93
Change since picked       +0.00     52-week high=$51.50
Analysts Ratings    14-17-2-0-0     52-week low =$29.94
Last earnings 02/00   est= 0.23     actual= 0.23
Next earnings 05-24   est= 0.26     versus= 0.20
Average Daily Volume = 4.27 mln


DNA - Genetech Inc $234.50 (+59.50)

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. 
Momentum traders are also taking notice.  Following a growth 
stock conference at the end of February, which discussed 
cutting-edge genetic treatments, many of these momentum players 
jumped on DNA.  The stock has since been a big mover.  Last 
Friday it closed above the previous resistance of $173.50 and 
then proved it could hold higher levels on Monday.  The momentum 
was intact and building.  Although momentum isn't the only 
element in this play's favor.  There's no doubt DNA is a split-
candidate.  This Wall Street darling is currently trading at 
more than 60% above historical split-levels ($130).  DNA last 
split 2:1 in November 1999.  Notably the trigger event for the 
split announcement was an earnings' release.  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.  However the company only has 
400 mln shares authorized and 257 mln outstanding so without a 
vote to increase the number of shares there's only enough 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, particularly 
the $20 move on Friday, which marked the third consecutive 52-
week record.  So we've got to be careful on the entry.  At these 
lofty levels, surely some will want to take some chips off the 
table.  The nearest support levels are at $210 and $215 while 
$205 near the 5-dma ($207.49) is next in line.  A big correction 
could see DNA below $200.  This is not likely to play into the 
scenario, but nevertheless be aware of the risk.  Overhead 
resistance is at Friday's all-time high of $245.  If DNA doesn't 
slow down and consolidation you could look for intraday dips and 
enter on the climb.  But of course this is extremely risky and 
only for the aggressive players who can afford to take a hit if 
all goes to pot.  

On Wednesday CSFB began coverage on DNA with a Strong Buy rating.  
Earlier on February 8th, Goldman Sashes reiterated a Market 

***March contracts expire in 2 weeks***

BUY CALL MAR-190 DWN-CR OI= 20 at $46.50 SL=36.25
BUY CALL MAR-195 DWN-CS OI=163 at $41.75 SL=32.50
BUY CALL APR-195 DWN-DS OI= 94 at $48.00 SL=37.50
BUY CALL APR-210 DWN-DB OI=  1 at $37.88 SL=29.50 low OI
BUY CALL APR-220*DWN-DD OI=113 at $32.00 SL=25.00

Picked on Feb 29th at  $192.88    P/E = N/A
Change since picked     +41.63    52-week high=$245.00
Analysts Ratings     3-5-5-0-0    52-week low =$ 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 =   830 K


QLGC - QLogic Corporation $155.44 (+10.19)(+34.25)(+10.97)

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

Building a better mousetrap has certainly worked for QLGC.
The company's leading-edge I/O products are in high demand and
the result has been gratifying.  Add to this the continued
stream of positive comments from the company and the rapid rise
in the share price is no mystery.  Succumbing to a bit of profit
-taking mid-week, QLGC looks to be on the move again.  After
confirming the $140 support level twice on Thursday, buyers
returned in force Friday.  Bidding shares back above the $150
resistance level on double the ADV gave QLGC new life and
allowed the issue to close just a smidge below the high of the
day.  The next target will be the 52-week high at $159.50, which
should be an easy mark if the markets can stay healthy.  With
NASDAQ 5K just a short hop away, the enthusiasm for this next
millennium mark could be just what QLGC needs to shoot to new
highs.  Even with the profit-taking that took place last week,
QLGC didn't get anywhere near challenging its 10-dma (currently
$139.50).  Look for the $150 level to provide support, followed
by $147 and target shoot for those intra-day entry points.  Keep
an eye on volume as it will be key to QLGC's future direction -
if it drops off, beware of the profit-takers hiding in the

In a decidedly positive interview on Friday, QLGC's CEO touted
the company's track record, citing strong financial performance,
the string of innovative products brought to market, and the
extensive OEM customer base, supported by a strong supplier
network.  Also on Friday, QLGC announced support for
Quantum-ATL's Prism Storage Architecture initiative, which is
designed to provide Global 1000 corporations with a cost
effective means to realize the benefits of Storage Area
Networks (SANs).

***March contracts expire in 2 weeks***

BUY CALL MAR-150 QOV-CJ OI=175 at $14.00 SL=11.00
BUY CALL MAR-155 QOV-CK OI= 58 at $11.50 SL= 9.00
BUY CALL MAR-160*QOV-CL OI=174 at $ 9.13 SL= 7.00
BUY CALL APR-155 QOV-DK OI= 36 at $22.88 SL=15.50
BUY CALL APR-160 QOV-DL OI=485 at $20.63 SL=13.75

SELL PUT MAR-140 QOV-OH OI=326 at $4.13 SL=7.50
(See risks of selling puts in play legend)

Picked on Feb 22nd at $115.50     P/E = 221
Change since picked    +39.94     52-week high=$159.50
Analysts Ratings    3-3-0-0-0     52-week low =$ 11.63
Last earnings 01/00 est= 0.18     actual= 0.20
Next earnings 04-19 est= 0.20     versus= 0.11
Average Daily Volume =  892 K


ATML - Atmel Corporation $52.44 (+9.25)(+5.19)

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

That sure was a short break before ATML started higher again.  
It had cooled off on Thursday, closing at $47.88 due to profit-
taking.  So come Friday all the bears had been shaken out, 
giving the bulls their chance to continue ATML's climb.  The 
optimism that the Semiconductors will outperform the markets 
is obviously continuing.  We didn't see strong volume backing 
the loss on Thursday either so we knew it may be time to rally 
again on Friday.  We would still like to see stronger volume 
backing the move, but we can't complain about that intraday 
trend.  Hardly any weakness at all.  ATML's resistance point 
is $53.50.  A bullish indictor will be if that level is broken 
with volume.  On the other hand, we are looking at the 5-dma 
($49) as support if ATML heads downward.  Place stops to protect 
yourselves of anything lower than that.  ATML has a lot in 
their favor right now.  They are in a hot sector, they have
analysts backing them, there is a bright outlook on future 
earnings, and market conditions are good.  All these factors 
should allow them to keep their current direction.

***March contracts expire in 2 weeks***       

BUY CALL MAR-45 AQT-CI OI=4108 at $8.50 SL=6.50
BUY CALL MAR-50 AQT-CJ OI= 485 at $4.88 SL=2.75
BUY CALL MAR-55 AQT-CK OI= 313 at $2.63 SL=1.25
BUY CALL APR-50*AQT-DJ OI= 732 at $8.38 SL=6.25 

Picked on Feb 25th at    $43.19    P/E = 108
Change since picked       +9.25    52-week high=$53.50
Analysts Ratings      7-5-2-0-0    52-week low =$ 7.50
Last earnings 01/00   est= 0.13    actual= 0.16
Next earnings 04-24   est= 0.17    versus= N/A
Average Daily Volume = 5.41 mln


NSM - National Semiconductor $77.44 (+9.44)(+4.50)

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

How does that cliche go?  Ask and you shall receive?  Well, we 
asked for a move through $74.50 accompanied by solid volume, and
that's exactly what we received.  Shares of NSM moved through
$74.50 in the first five minutes of trading on pretty good 
volume and moved higher from there.  Ok, so maybe the tame
jobs report helped our earnings play get back on track, but
we will take whatever help we can get.  By the end of the day
NSM had made another new high at $77.88 and closed near that
high, which suggests the momentum could continue next week.
NSM is scheduled to report earnings after the close on Thursday,
so we do have a bit of time for this play to continue.  Many
times earnings runs don't really kick into high gear until the
last week or so before earnings are released, which may just be
the case with our play.  NSM received some good press this week
after the Robertson Stephens Tech Conference.  Twenty-one
leading semiconductor analysts were on hand to examine the 
tech sector and NSM received high marks from Arun Veerappan,
Vice President and Senior Analyst with Robertson Stephens.
Companies whose focus in the industry is in the communications
area are growing in popularity, and that is exactly where NSM
sits.  Veerappan believes communications is where the growth
is, which places NSM in an attractive position in the market
place.  NSM has support at $75 and $73.  Although NSM ended
the day with all signs pointing higher, a pullback to support
would also provide a good entry point for our earnings play.

Wednesday National Semiconductor introduced the world's 
smallest USB node controller, the USBN9603.  The USB node
controller solution is 68 percent smaller than the industry
TSSOP standard, making it the industry's smallest.  Company
official said "the USBN9603 is ideal for mobile telephones
which couldn't use previous USB devices due to size and 
supply voltage."  

***March contracts expire in two weeks***

BUY CALL MAR-70 NSM-CN OI=3120 at $10.13 SL= 7.50
BUY CALL MAR-75 NSM-CO OI=3280 at $ 7.25 SL= 5.50
BUY CALL MAR-80 NSM-CP OI=1498 at $ 5.00 SL= 3.25
BUY CALL APR-70 NSM-DN OI= 405 at $14.00 SL=11.25
BUY CALL APR-75*NSM-DO OI= 534 at $11.88 SL= 9.50

SELL PUT MAR-70 NSM-ON OI= 942 at $ 2.25 SL= 3.75
(See risks of selling puts in play legend)

Picked on Feb 24th at    $72.72    PE = N/A
Change since picked       +4.72    52 week high=$77.88
Analysts Ratings      9-9-2-0-0    52 week low =$ 8.88
Last earnings 12/99   est= 0.26    actual= 0.37 
Next earnings 03-09   est= 0.45    versus=-0.16
Average daily volume = 2.47 mln


NTAP - Network Appliance Inc. $199.94 (+7.00) 

Their customer base is an impressive group of clients.  Names 
like Yahoo, AOL, Motorola, Siemens and the UK's #1 ISP Demon 
Internet depend on them daily.  Network Appliance uses its 
Netcache software and NetApp suite of network storage servers,
or filers.  These products are designed for and provide fast
reliable cost effective service for Internet service providers,
and corporate intranets.  NTAP's hi-powered ONTAP operating
system allows simultaneous access by users from Windows, UNIX
and Web platforms.  NTAP is located in Sunnyvale, Ca and 
competes against EMC, Sun Microsystems, Cisco Systems and Novell. 

An earnings run or split run, sometimes we don't know which are
more fun to play.  NTAP provided traders with a very profitable
earnings run in late January and early February.   Well, NTAP
reported solid earnings, meeting analysts estimates, coming in
well ahead of last year.  They also announced a 2-for-1 split
of the company's stock set for March 23rd.  The networker didn't
even suffer from an earnings sell-off, seen so frequently this
earnings season.  It simply continued its trend to a new high
at $207.94.  This past week investors took some money off the
table and NTAP spent most of the week consolidating.  Friday,
with Fed fears easing a bit, NTAP got back on track and appears
to be setting up to provide us with a brand new opportunity.
With the split coming in a little over 2 weeks, we are looking
for NTAP to come through with an equally great split run.  NTAP
jumped over $24 the day after earnings and the split was
announced.  With each move higher NTAP has seen a fair amount
of profit taking, but has found buyers waiting in the wings on
just about every down move.  What we are saying here is the
die-hard investors have held onto their shares, short-term
traders taking profits have only created buying opportunities
for others.  After a brief dip to the $181 area early this week
NTAP has been gradually moving up, ending the week with a
strong gain with 2.1 million shares changing hands.  NTAP has
support at $195, $188 and $182.  If we see any profit taking in
the broad markets early next week we would look for a chance to
jump on board this new split run.  A continued move higher would
also provide a good opportunity, as NTAP could out-do itself
once again.

The brokerage companies approve of the near term outlook for
NTAP as well, with four coming out after NTAP's earnings and
split announcement reiterating Buy ratings on the company.
NTAP's split will be the second on in the last three months,
with the last coming on December 21st.

***March contracts expire in two weeks***

BUY CALL MAR-190 ULM-CR OI=259 at $18.25 SL=14.25
BUY CALL MAR-200*ULM-CT OI=338 at $13.13 SL=10.25
BUY CALL APR-190 ULM-DR OI=234 at $30.13 SL=23.50
BUY CALL APR-200 ULM-DT OI=262 at $25.25 SL=19.75
BUY CALL APR-210 ULM-DB OI= 15 at $21.00 SL=16.25

SELL PUT MAR-180 ULM-OP OI=249 at $ 5.00 SL= 6.75
(See risks of selling puts in play legend)

Picked on Mar 05th at   $199.94    PE = 571
Change since picked       +0.00    52 week high=$207.94
Analysts Ratings     10-5-1-0-0    52 week low =$ 19.69
Last earnings 02/00   est= 0.11    actual= 0.11 
Next earnings 05-16   est= 0.12    versus= 0.06
Average daily volume = 2.25 mln


INKT - Inktomi Corp $160.97 (+15.85)(+22.56)

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

The powerful momentum that drove this infrastructure stock 
upwards of 18.4% the previous week is now back in the game.  
After a significant, but expected downdraft this week the 
momentum resurfaced on Thursday.  INKT rose off strong near-term 
support levels of $138 and $140 and overcame two important 
obstacles.  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 to tag $151.56 intraday.  Friday cinched the deal with 
a $15.47, or 10.6% jump.  It appears investors are still very 
much interested in this faction of the Internet industry.  Money 
is again flowing into INKT.  But keep your guard up for some 
back-filling after the huge gain on Friday.  For the dma 
watchers, the 5-dma at $145.13 is a good gauge to warn of 
any impending doom.  On the other hand, a definitive bounce off 
this mark following a correction could ultimately be a solid 
entry.  Pay attention to the market sentiment.  The first level 
of short-term support is at $150, yet $156 showed strength 
during a last-minute dip on Friday.  Your entry will undoubtedly 
depend how INKT responds to the market over the next few days.  
As a reminder, INKT is very HIGH-RISK and not for those with a  
weak stomach.

Mid-week SG Cowen upped its price target on INKT to $200 from 
$150 citing that the company "continues to see strong demand for 
its traffic server".  Currently the firm has a Strong Buy rating 
for the stock.  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 

***March contracts expire in 2 weeks***

BUY CALL MAR-150 KYQ-CJ OI=109 at $17.38 SL=13.50
BUY CALL MAR-155 KYQ-CK OI=333 at $14.13 SL=11.25
BUY CALL APR-150*KYQ-DJ OI=882 at $25.50 SL=20.00
BUY CALL APR-155 KYQ-DK OI=176 at $22.00 SL=17.25

Picked on Feb 22nd at   $132.00    P/E = N/A
Change since picked      +28.97    52 week high=$163.25
Analysts Ratings      8-9-1-0-0    52 week low =$ 28.13
Last earnings 12/99   est=-0.04    actual=-0.02 
Next earnings 04-17   est=-0.02    versus=-0.07
Average Daily Volume = 2.34 mln


INSP - InfoSpace $259.81 (+34.50)(+25.06)(+8.94)(P4W +75.31)

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

Many of you have enjoyed the exhilarating space ride INSP has 
taken us on.  Just this week, the opportunity for astronomical 
profits were at hand.  INSP moved from its consolidation respite 
at $215 and $225 to rocket to the heights of $277 by Friday 
morning.  Volume also regained respectability trading above 2.1 
mln during the latter part of the week.  INSP is obviously 
getting more perked up as its split date approaches.  InfoSpace 
stock is splitting 2:1 on April 7th (just announced the ex-date 
on Friday).  Be prepared to exit your positions before it goes 
ex-div to avoid any chance of a post-split depression.  If you're 
looking for another play into this split run then it appears a 
dip to $250 could provide the entry you desire.  This mark has 
held up well under the pressure of the past two trading sessions.  
But again, I must remind you.  There are many perils and risks 
in playing the Internet stocks.  They have wild intraday swings 
and can also reverse a trend without notice.  Never leave this 
type of play unattended.  If you still interested or have open 
positions, watch $280 as a psychological point of resistance.  
If this stock does take a dive, the first sign of its demise will 
be a return to the 5-dma ($238.80) followed a slip to firmer 
support at $230.

In the news this week, InfoSpace announced it made an investment 
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.  And a name change for the company is on the 
horizon. 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.

***March contracts expire in 2 weeks***

BUY CALL MAR-250 FHY-CJ OI= 44 at $27.25 SL=21.25
BUY CALL MAR-260 FHY-CL OI= 60 at $22.63 SL=17.75
BUY CALL MAR-270 FHY-CW OI= 13 at $18.25 SL=14.25
BUY CALL APR-270 FHY-DW OI= 15 at $35.25 SL=27.50
BUY CALL APR-280*FHY-DX OI= 18 at $31.38 SL=24.50

Picked on Feb 10th at   $191.50    P/E = N/A
Change since picked      +68.31    52-week high=$277.00
Analysts Ratings      5-3-0-0-0    52-week low =$ 10.00
Last earnings 12/99   est= 0.00    actual= 0.09
Next earnings 05-01   est=-0.12    versus=-0.01
Average Daily Volume = 1.81 mln


CMGI - CMG Information Services $134.06 (+16.56)(+9.13) 

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

CMGI took the spotlight this week!  The stock made stellar gains 
topping 15%, or $17.69 ahead of its scheduled earnings' date.  
Unfortunately this earnings' play is almost over.  CMGI is 
confirmed to report on Thursday, March 9th, but it's UNKNOWN at 
what time during the day they'll announce.  Therefore it's very 
important that you're out of any call positions before that 
date.  You certainly don't want to be caught in a post-earnings' 
sell-off!  If you got into the play two weeks ago when we first 
alerted OIN readers of this play's great potential, then you're 
pockets should be overflowing with greenbacks.  Even if you were 
more conservative and waited for the break above $120 you can 
still say "they showed me the money"!  Now let's take a look at 
our current situation.  There's 3 trading sessions left. CMGI 
just plowed through $130 on Friday and managed a near-term 
support level of $132 and $134 quite well.  It shouldn't take 
much to move through overhead resistance is at $135.38, Friday's 
intraday high, but if it does get stuck then time is your enemy.  
Only you can determine if this play still fits your risk 

In the news this week, CMGI's iCast division is releasing an 
application that combines multimedia content with instant 
messaging features.  CMGI is also partnering with Hicks, Muse, 
Tate & Furst Inc and Pacific Century CyberWorks Ltd to form a 
new venture capital alliance, @Ventures Global Partners.  They 
have agreed to invest up to $500 mln each to support emerging 
Internet companies in Asia, Europe, and the Americas.

***March contracts expire in 2 weeks***

BUY CALL MAR-130 GCD-CF OI=6440 at $13.00 SL=10.50
BUY CALL MAR-135 GCD-CG OI=3269 at $11.25 SL= 9.00
BUY CALL MAR-140*GCD-CH OI=3678 at $ 9.00 SL= 6.75
BUY CALL APR-140 GCD-DH OI=2096 at $18.00 SL=14.00
BUY CALL APR-145 GCD-DI OI= 213 at $16.00 SL=12.50
BUY CALL ARP-150 GCD-DJ OI=1979 at $14.50 SL=11.25

Picked on Feb 24th at   $119.06    P/E = 103
Change since picked      +15.00    52-week high=$163.50
Analysts Ratings      4-7-0-0-0    52-week low =$ 26.94
Last earnings 12/99   est=-0.72    actual=-1.08
Next earnings 03-09   est=-1.32    versus= 0.07
Average Daily Volume = 6.75 mln


CLRN - Clarent Corp. $138.00 (+39.00)

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.

What a nice start to a brand new play.  CLRN joined the broad
markets in a rally Friday, moving to another new high.  The 
Robertson Stephens Tech Conference was certainly good for a
number of stocks this week, as comments coming at the end of 
the meeting concerning CLRN, were very favorable.  Paul Johnson,
Managing director at Robertson Stephens, mentioned CLRN with
the likes of Brocade Communications, saying that while today
CLRN is primarily focused on international long distance, over
time they will be focused on domestic as well.  Johnson went on
to comment that CLRN will be "the next generation voice player."
The telecom industry saw some renewed interest this past week
for a variety of reasons, and CLRN did its share to support
its brothers and sisters in the industry, with investors adding
39% to the price of its stock.  Part of the recent interest in
CLRN could be a special stockholders meeting that was held the
middle of February.  The company's board of directors asked for
approval to increase the number of authorized shares from 50 mln
to 200 mln, which can mean only one thing, a split is in the 
works.  Actually we don't know if they approved the board's 
request, but we feel certain shareholders checked the box for 
approval.  Technically, a look at an intraday chart shows CLRN
forming an ascending triangle pattern.  Typically this suggests
a move to higher prices in a market that is moving up.  Support
for CLRN is seen at $135, $131 and back at $124.  The charts are
indicating that the momentum should continue, however we would
check the mood of traders Monday, as a pullback could provide 
a good entry point for a new play as well.

There was very little company specific news come out this week
on CLRN.  Besides the Robertson Stevens Tech Conference, shares
of stocks in the sector moved higher on rumors and discussions
between DT, Qwest, and US West.  Earlier this week gecco.net did
choose CLRN to be its IP telephony supplier for a network it 
intends to build throughout Europe, the Middle East and Asia.

***March contracts expire in two weeks***

BUY CALL MAR-130*KGQ-CF OI= 0 at $16.88 SL=13.00 New Strike
BUY CALL MAR-135 KGQ-CG OI= 0 at $14.13 SL=11.00 New Strike
BUY CALL APR-125 KGQ-DE OI=50 at $31.38 SL=24.50
BUY CALL APR-130 KGQ-DF OI=70 at $29.00 SL=22.75
BUY CALL APR-135 KGQ-DG OI= 0 at $26.63 SL=20.75 New Strike

SELL PUT MAR-115 KGQ-OC OI= 1 at $ 4.88 SL= 6.50
(See risks of selling puts in play legend)

Picked on Mar 02nd at $128.00    P/E = N/A
Change since picked    +10.00    52-week high=$139.06
Analysts Ratings    2-3-0-0-0    52-week low =$ 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 =  571 K


SEBL - Siebel Systems, Inc. $154.72 (+16.34)(+23.81)

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

SEBL investors and traders alike were probably rejoicing in a 
"Thank God It's Friday" breakout (a rarity this year), wherein 
SEBL steadily rose over $18 for the day.  The catalyst?  A surge 
of volume after lunch, moving SEBL over previous resistance of 
$144.  Once that figure was hit, technical traders jumped in too 
for the breakout to a new high.  It didn't hurt either that DLJ 
issued a price target to $160 and initiating coverage with a Buy 
rating earlier in the day.  They cited SEBL's ability to leverage 
its position as the dominant CRM (customer relations management) 
solutions provider going forward.  Following the breakout, range 
trading in the late afternoon ensued between $147 and $150.  A 
final 15 minute volume surge and $4 price rise looks good for 
Monday's market opening (just don't take a position in amateur 
hour).  If the rally doesn't fall apart from any Fed-speak on 
Monday and the sentiment holds with traders who think that NASDAQ 
5000 is going to happen, look for support at $150 (old 
resistance) and again at $147 (late intraday support).  Support 
is really solid at $135.  Despite the volume surges at certain 
price points during the day, daily volume still remains below the 
ADV.  Accordingly, the move up isn't quite as convincing as we'd 
like it to be.  Thus, our target for shooting is probably better 
relegated to a lower number between the 10-dma and 5-dma, 
currently $134.50 and $140.36 respectively.

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.  In the 
news, B of A issued a Strong Buy rating and raised it's price 
target on SEBL earlier in the week from $150 to $175, citing 
strong near-term fundamentals.

***March contracts expire in 2 weeks***

BUY CALL MAR-150 SGW-CJ OI=421 at $11.75 SL= 9.25
BUY CALL MAR-155 SGW-CK OI= 37 at $ 9.00 SL= 6.75
BUY CALL MAR-160 SGW-CL OI=192 at $ 6.88 SL= 5.00
BUY CALL APR-155 SGW-DK OI=  0 at $16.50 SL=13.00 Wait for OI!
BUY CALL APR-160 SGW-DL OI=208 at $13.88 SL=10.75

Picked on Feb 22nd at  $121.88     P/E = 253
Change since picked     +32.84     52-week high=$155.00
Analysts Ratings     9-5-0-0-1     52-week low =$ 15.75
Last earnings 01/00  est= 0.15     actual= 0.19
Next earnings 04-25  est= 0.14     versus= 0.10
Average Daily Volume = 3.4 mln


VERT - VerticalNet, Inc. $251.72 (+25.97)(+27.00)

VerticalNet owns and operates 55 industry-specific Web sites 
designed as online business-to-business communities, known as 
vertical trade communities.  These vertical trade communities 
provide users with comprehensive sources of information, 
interaction and e-commerce.  They are grouped into the following 
provides auctions, catalogs, bookstores, career services and 
other e-commerce capabilities horizontally across its communities 
with sites like Industry Deals.com, IT CareerHub.com, LabX.com, 
Professional Store.com. VerticalNet's NECX Exchange provides an 
exchange for the electronic components industry. 

There's plenty of momentum to go around in the B2B sector and 
VERT is getting its fair share.  Much of the action came from 
analyst's comments at the BBRS Conference last week, where it was 
learned 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.  Despite the good 
story, the play is really based on technical patterns.  VERT had 
consolidated around $200 by late February when we picked it up. 
Since, it has jumped in $10 increments to consolidate then take 
off again.  $215 worked.  So did $225.  $235 was bypassed to test 
$245.  Late in Friday trading, VERT punched through that level on 
a strong volume surge to close up over $17 at $251.  However, 
volume remains below the ADV, which makes the move over $245 less 
reliable.  Even so, the moves have been so huge that the 5-dma 
($230.70) and the 10-dma ($220.78) are lagging way behind and 
should be considered as rock bottom (but unlikely) entry points.  
Any market weakness could lead to a nasty round of profit taking 
in this sector, VERT included, that could easily test these 
levels, but will likely result in an intraday bounce  The tails 
on the candlesticks indicate the sector's continued strength.  
Considering how hot the sector has been, consider it a gift.  
Even better, VERT splits 2:1 on March 31.  We expect VERT to get 
back to its old high of $289 by that time.  If it isn't apparent 
yet, this in one volatile issue.  Stepping away from your screen 
could cause a dip the same way washing your car can cause rain.  
To that end, protect your gains with a trailing stop (and buy a 
season pass at the car wash!).

There is no news other than the BBRS love-fest.  However for you 
long share traders, you can decrease the risk of trading only one 
issue by purchasing a basket of 20 of these B2B stocks available 
on the AMEX under the symbol BBH.  VERT currently makes up about 
7% of the index.  Unfortunately, they are not yet optionable.

***March contracts expire in 2 weeks***

BUY CALL MAR-240 URE-CH OI=723 at $25.63 SL=20.00
BUY CALL MAR-250 URE-CJ OI=389 at $17.75 SL=13.75
BUY CALL MAR-260 URE-CL OI=487 at $13.25 SL=10.25
BUY CALL APR-250*URE-DJ OI=403 at $37.88 SL=29.50
BUY CALL APR-260 URE-DL OI= 93 at $34.50 SL=27.00

Picked on Feb 24th at  $221.00     P/E = N/A
Change since picked     +30.72     52-week high=$289.56
Analysts Ratings     4-6-3-0-0     52-week low =$ 20.00
Last earnings 02/00  est=-0.36     actual=-0.28
Next earnings 05-02  est=-0.45     versus=-0.19
Average Daily Volume = 1.4 mln


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The Option Investor Newsletter             3-5-2000  
Sunday                        4 of 5


ADIC - Advanced Digital Information $96.94 (+12.88)

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

Like the Energizer Bunny, ADIC keeps going and going.
Continuing to march to higher-highs, ADIC finally took a
breather on Wednesday and Thursday to let investors park some
of their profits.  As soon as the price hit support at $88,
it was off to the races again as investors bid the price up
above $97 on Friday.  Closing very near the high, ADIC looks
poised to move higher, but the light volume does cause us some
concern.  It may just be investors resting before a final run
into ADIC's 2-for-1 split, set for March 13th.  The stock has
been strong for months now, and on February 16th, we were given
ample reason.  Along with the split announcement, the company
reported 30% sales growth and 80% earnings growth year-over-year.
With the continued gains in the NASDAQ, a positive outlook for
the company, and a pending split, ADIC shares look ready to
charge through resistance at $100 and back into new highs.
Intraday support looks to be forming at $95, with strong support
between $88 and $90.  ADIC trades in a nice, predictable manner,
as the direction of the open usually dictates the direction for
the remainder of the day.  Look to enter new positions on a
renewed bounce off of support, but wait for the confirmation of
increasing volume.  In its absence, any move to the upside will
likely be short-lived.  If things really get jumping next week,
a breakthrough of the $100 resistance level can also be
considered for an entry trigger.

Just the latest to jump on the Linux bandwagon, ADIC announced
on Wednesday that it is bringing Linux servers into Storage
Area Network (SAN) data sharing applications by supporting the
fast-growing operating system with ADIC's CentraVision File-
sharing System (CVFS).  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.

BUY CALL MAR- 95*QXG-CS OI= 43 at $11.00 SL= 8.75
BUY CALL MAR-100 QXG-CT OI= 25 at $ 9.00 SL= 6.75
BUY CALL MAR-105 QXG-CA OI=102 at $ 6.88 SL= 5.00
BUY CALL APR-100 QXG-DT OI=  3 at $19.00 SL=14.75 low OI
BUY CALL APR-105 QXG-DA OI=  0 at $17.13 SL=13.25 Wait for OI!

SELL PUT MAR-85 QXG-OQ OI=66 at $4.13 SL=5.75
(See risks of selling puts in play legend)

Picked on Feb 29th at  $90.63     P/E = 104
Change since picked     +6.31     52-week high=$101.00
Analysts Ratings    3-3-0-0-0     52-week low =$  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 =  486 K


LHSP - Lernout & Hauspie $118.25 (+10.03)(P3W +47.59)

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

After waking up mid-week to bid shares of LHSP above the $100
support level, investors appear to have hit the mute button, as
volume dropped off again to less than half the ADV on Friday.
Relegated to a rather narrow range for the past 3 days, LHSP is
building support at $115 and resistance at $120.  With the
positive comments coming from the company and anticipation of
the 2-for-1 split (approval and execution date pending), LHSP
will likely break out of this tight range sooner rather than
later.  More encouraging than the profit-taking that took place
after LHSP last visited the $120 area, this looks to be
consolidation ahead of a renewed run at new highs.  Each spurt
higher has come on increasing volume, so continue to use this
indicator as a confirmation of the stock's direction before
turning the sound back on.  In the event of broad market
weakness, we may see a return to support near $108.50, which
could make for a very nice entry point.  Target shoot intraday
dips to your risk tolerance level and then enjoy the ride.  For
those more risk-averse, wait for a solid break through the $120
resistance level as LHSP investors make a run at the 52-week
high of $126.50.

In an upbeat interview on Thursday, LHSP CEO Gaston Bastiaens
spoke about the company's new voice sensitive technology and
real-time translation portals, and touted the company's growth
rate (more than 100% year-over-year for the past 3 years).
Presenting Thursday at the Robbie Stephens Tech 2000 Conference
provided yet another opportunity for the company to impress
investors with their strong product mix and growing list of
industry alliances, as evidenced by the strong jump in the
share price early Friday.

***March contracts expire in 2 weeks***

BUY CALL MAR-115 XQL-CC OI= 71 at $10.13 SL= 7.50
BUY CALL MAR-120 XQL-CD OI=334 at $ 7.88 SL= 6.00
BUY CALL MAR-125 XQL-CE OI= 19 at $ 5.25 SL= 3.50
BUY CALL APR-120 XQL-DD OI= 83 at $14.13 SL=11.25
BUY CALL APR-125 XXR-DE OI= 77 at $11.75 SL= 9.25

SELL PUT MAR-105 XQL-OA OI= 50 at $ 3.13 SL= 4.75
(See risks of selling puts in play legend)

Picked on Feb 12th at  $82.00     P/E = 165
Change since picked    +36.25     52-week high=$126.50
Analysts Ratings    1-1-1-0-0     52-week low =$ 25.75
Last earnings 02/00 est= 0.20     actual= 0.22
Next earnings 05-10 est= 0.16     versus= 0.12
Average Daily Volume =  930 K


CHKP - Check Point Software $229.75 (+24.13)(+7.44)

Check Point Software has laid claim on being the best in the
business at securing the Internet.  Their Secure Virtual Network
(SVN) architecture provides the infrastructure that enables
secure and reliable Internet communications.  It's FireWall-1
verifies remote users, controls access and blocks viruses and
other unwanted Web content, while VPN-1 will allow companies
to set up virtual private networks for secure internal and
remote communications.  CheckPoint markets its products through
manufacturers and resellers including Sun Microsystems.  CHKP
is located in Rmat Gan, Israel, but nearly 60% of its sales
come from the U.S.
CHKP presented another commanding performance Friday.  With an 
improved sentiment in the markets, CHKP saw $9.25, or another
4.2% added to the price of its stock.  Actually, at it's high
the gains were better than that, with CHKP topping out at $237
early in the session.  Whether it's the recent cyber attacks or
the positive comments from the Robertson Stephens Technology
Conference this week, that have moved CHKP to the head of the
the class, CHKP has enjoyed a very nice run since its breakout
on Wednesday.  One interesting note, shows the last upgrade or
reiteration CHKP received, came back in the middle of January.
It's not that the lack of comments from brokers that follow the
company, suggests anything wrong, as 14 out of the 16 that
follow CHKP have the company rated a Strong Buy or Buy at this
time.  We would have expected more comments and reiterations for
a company that has performed so well since its 2-for-1 split in
late January.  Since its split, CHKP has formed a very nice
channel in its move to new highs.  Friday's high just happens to
be where the top of the channel extended as well.  CHKP has had
recent pattern of making its move early in the day, and then
consolidating for the balance of the session.  That was the case
Friday, as CHKP pulled back to the $225 area and saw buyer's step
in again late in the day.  Intraday support for CHKP is seen at
$225, $220 and back at $212.  Although a bounce off support may
have already began late Friday, use these points as a guide
should we see profit taking in CHKP and the Nasdaq early in the
Most of the 100 or so Israeli tech and telecom stocks that trade
on the Nasdaq are outperforming their American software and 
telecom counterparts.  That's because Israel's engineers are 
releasing advanced patented technology.  This past Tuesday
Checkpoint and Internet Security Systems(ISSX) announced the
next generation of Check Point RealSecure which offers the most
comprehensive integration between intrusion detection and VPN/
firewall software. 

***March contracts expire in two weeks***

BUY CALL MAR-210 YKE-CB OI=872 at $28.88 SL=22.50
BUY CALL MAR-220*YKE-CU OI=849 at $21.00 SL=16.38
BUY CALL APR-220 YKE-DU OI= 55 at $35.50 SL=27.75
BUY CALL APR-230 YKE-DV OI= 26 at $31.00 SL=24.25

SELL PUT MAR-180 YKE-OT OI=112 at $ 3.25 SL= 5.00
(See risks of selling puts in play legend)

Picked on Feb 27th at $205.63    P/E = 198
Change since picked    +24.13    52-week high=$237.00
Analysts Ratings    8-6-2-0-0    52-week low =$ 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 =  821 K


AFCI - Advanced Fibre Communications $65.50 (+8.06)(+8.69)

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

A fire began to kindle under AFCI following February's long 
weekend.  Looking back there was a recent baud meeting that may 
have sparked investors' interest, but ultimately the momentum 
was fueled by the slew of analysts' comments.  Still if we put 
all this aside what we essentially have is a pure momentum play 
and nothing more.  Sure it's true that news or company events 
could effect AFCI, but it's the momentum traders that are 
running this show.  This adds to the risk factor because there's 
no set date to mark on the calendar to estimate when the trend 
will be likely over.  For instance, on a split or earnings' run 
you have a clue when the play will cool off or reverse.  So keep 
this in mind if you're new to trading momentum plays.  AFCI is 
at present a case in point.  On Monday, the stock dipped down to 
$56 and then went full-tilt setting a new 52-week record at 
$71.37!  Tuesday's volatility continued to provide profit 
opportunity.  But hold on the ride wasn't over.  By Thursday 
AFCI suffered enough of a downdraft to tweak our radar.  Simply 
put, it's sometimes difficult to determine if a momentum stock 
is taking a breather or is running out of steam.  Therefore 
entry points can be a risky business.  Friday's performance 
showed promise with a $4.50 gain, but it'd be better to see AFCI 
bounce off this point at the 5-dma ($65.39) and hold its gains. 

***March contracts expire in 2 weeks***

BUY CALL MAR-60*AQF-CL OI=2347 at $ 8.25 SL=6.50
BUY CALL MAR-65 AQF-CM OI= 284 at $ 5.50 SL=3.75
BUY CALL MAR-70 AQF-CN OI= 455 at $ 3.63 SL=2.00
BUY CALL APR-65 AQF-DM OI= 133 at $12.38 SL=9.75
BUY CALL APR-70 AQF-DN OI= 181 at $10.00 SL=7.50
BUY CALL APR-75 AQF-DO OI= 144 at $ 8.50 SL=6.50

Picked on Feb 27th at    $57.44    P/E = 22
Change since picked       +8.06    52 week high=$71.38
Analysts Ratings      5-8-1-0-0    52 week low =$ 6.75
Last earnings 12/99   est= 0.09    actual= 0.10
Next earnings 04-20   est= 0.07    versus= 0.04
Average daily volume = 1.97 mln


ERICY - LM Ericsson Telephone $104.81 (+7.19)(+8.94)(-1.50)

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

ERICY keeps cruising right along.  ERICY gapped up nearly 
three points at the open on Friday and set a new high at $105.
Possible points of new entry were a little hard to come by 
because of the gap at the open, however, as you will see 
mentioned in the paragraph below, there is still plenty of 
time to get on board.  Friday's volume was a little on the 
light side and we will be looking for this to pick up again 
next week.  ERICY looks to have established some near term 
support at $104, but the more solid support levels look to be 
at $100 and at ERICY's 5-dma of $99.50.  ERICY did close just 
pennies shy of the new high, and could be well positioned 
heading into this week to pick up right where it left off.

Do not forget, ERICY is a split run play.  And we are not 
talking your average 2:1 either.  ERICY is set to split its 
shares 4:1, something you do not often see for a stock trading 
at this current level.  The vote to approve the authorized 
shares for the split, will be taking place at the end of this 
month.  The actual split will probably not occur until May, 
leaving plenty of room for potential upside and entry points.  
In other words, this could be just the beginning of a 
potentially long and profitable run.  On Friday, it was 
announced that Ericsson and Saudi Telecommunications Company 
have signed a Letter of Intent far a deal valued at 
approximately $300 million.  The deal involves a major 
expansion and upgrade of Saudi Telecom's already existing GSM 
Network.  ERICY has also been selected to supply the WCDMA
infrastructure for Japan Telecom's new 3rd Generation network.

***March contracts expire in 2 weeks***

BUY CALL MAR- 95 RQC-CS OI=1062 at $11.25 SL=8.75
BUY CALL MAR-100 RQC-CT OI=4797 at $ 7.75 SL=5.75
BUY CALL MAR-105 RQC-CA OI=2406 at $ 4.63 SL=2.75
BUY CALL APR-100*RQC-DT OI=2105 at $11.75 SL=9.00
BUY CALL APR-105 RQC-DA OI= 180 at $ 9.00 SL=6.75

SELL PUT MAR- 95 RQC-OS OI= 426 at $ 1.00 SL=2.00
(See risks of selling puts in play legend) 

Picked on Feb 15th at    $86.38     P/E = 138
Change since picked      +18.44     52-week high=$105.00
Analysts Ratings     8-11-4-0-0     52-week low =$ 20.50
Last earnings 01/00   est= 0.32     actual= 0.36
Next earnings 04-28   est= 0.17     versus= 0.04
Average Daily Volume = 5.41 mln


JDSU - JDS Uniphase $280.00 (+23.19)(+6.81)

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 
telecommunications and cable television industries.  Based in the 
Silicon Valley, California, they employ approximately 6260 people 
worldwide.  Customers include Lucent, Nortel, Cisco and Ciena.  
American Express owns 10% of the common shares

It seems lately that split runs, rather than tax revenues, could 
be used to pay off the national debt.  They certainly have been 
profitable.  Probably one of the better ones we'll see could be 
put on by JDSU as it approaches its 2:1 split date on March 10.  
Split adjusted shares will begin trading on March 13.  While 
volume fell slightly below the ADV by week's end, we expect JDSU 
to rocket forward, not just on the split run, but also following 
what is anticipated to be new product introductions by JDSU at 
the Optical Fiber Comm (OFC 2000) conference to be held this week 
in Baltimore.  There's a buzz surrounding this meeting like we 
haven't heard in a long time.  Just listen to Chris Crespi, 
analyst at Banc of America Securities from a Reuter's article: 
"We expect the stock price of the participating companies to 
swing wildly by week's end."  Technically though, JDSU wasn't all 
that flashy by last week's end.  Don't get us wrong; we'll take a 
$7 gain on any Friday if it's handed to us.  However, JDSU 
hovered around $280 and generally failed to keep pace with the 
NASDAQ all of Friday.  That slightly sagging volume doesn't look 
good either considering the OFC 2000 event and 2:1 split.  
Support is around $270, though we don't think it will get to the 
next level at $260 before the split.  If you are real aggressive, 
$280 may actually be support.  There was some strange talk that 
market makers were trying to keep JDSU under $280 on Friday.  We 
are not clear on that line of thinking, but Friday's chart 
clearly shows the market's intent to keep this normally volatile 
issue rangebound in the extreme.

The OFC 2000 event will be the news.  Watch Monday morning for 
a clue.

***March contracts expire in 2 weeks***

BUY CALL MAR-270 UCQ-CN OI= 7488 at $21.50 SL=16.75
BUY CALL MAR-280*UCQ-CP OI=11977 at $16.00 SL=12.50
BUY CALL MAR-290 YSU-CR OI= 1327 at $12.50 SL=10.00
BUY CALL APR-280 UCQ-DP OI=  847 at $35.00 SL=27.25
BUY CALL APR-290 YSU-DR OI=  245 at $30.63 SL=24.00

Picked on Feb 29th at  $263.88     P/E = N/A
Change since picked     +16.13     52-week high=$285.69
Analysts Ratings   20-11-1-0-0     52-week low =$ 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 = 7.7 mln


CCBL - C-COR.net Corp $49.72 (+10.22)(+5.47)

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. C-COR employs approximately 1200 
people worldwide.  That's the long way of saying they are in the 
optical component and broadband access infrastructure business.

For those reading this play for the first time, let's recap from 
Thursday's letter when we introduced it: 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 
known to deploy thrust-reversers, causing unusual flight 
characteristics.  That said, this issue had no trouble at all 
springing at the open from $45 (coincidentally, its 5-dma) then 
finding support intraday at $48 before setting a new all-time 
trading high at $50.  Volume took a positive upward turn in the 
process to exceed its ADV by 19%.  Institutional buying is 
increasing monthly, and with a float of just 16.7 mln shares, 
retail buyers taking notice may stick to this issue like white 
on a picket fence.  Anyway, the trajectory is up.  That's the 
direction in which we expect the play to move as long as volume 
continues over the ADV and the overall market cooperates.  
Earnings are a ways off, currently anticipated on April 13 and 
should have no effect on the current stock movement.  Unless you 
have an iron stomach, you may want to consider the April strikes 
to capture what may turn into an earnings run by then.

There was no news on Friday to account for the move.  However, we 
note the following from Thursday's letter: 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, CCBL 
received a $33 mln order from Adelphia Communications - about 15% 
of their trailing 12-month revenues of $228 mln.

***March contracts expire in 2 weeks***

BUY CALL MAR-45 LQE-CI OI=225 at $7.38 SL=5.50
BUY CALL MAR-50 LQE-CJ OI=115 at $4.38 SL=2.75
BUY CALL APR-45 LQE-DI OI=111 at $9.88 SL=7.25
BUY CALL APR-50*LQE-DJ OI=153 at $7.38 SL=5.50

Picked on Mar 02nd at  $44.97     P/E = 57
Change since picked     +4.75     52-week high=$50.00
Analysts Ratings    1-4-1-0-0     52-week low =$ 8.00
Last earnings 01/00 est=  N/A     actual= 0.13
Next earnings 04-13 est= 0.11     versus=  N/A
Average Daily Volume =  595 K


GLW - Corning Inc. $205.25 (+17.44)(-5.50)(+27.88)(+25.31)

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

Aside from a nosedive at the open last Monday, GLW put on quite 
a performance.  No longer in the casserole dish business, GLW 
is emerging as the major challenger to JDSU in the optical 
component/subsystem heavyweight class.  Look no further for proof 
than last week's announcement that GLW would sell off their 
metallic cable division to the U.K.'s Belden, Inc. - no more 
"last century" technology for these guys.  Technically, volume 
remains above average (and did so all week), which tells us that 
buyers are at the trough.  It was enough buying activity to keep 
GLW moving up every time it touched its 5-dma, currently at 
$196.38.  With the big technology move, GLW never got there, as 
$200 support held firm on Friday.  As long as Fed-Speak doesn't 
get out of hand this week and throw cold water on the tech rally, 
we look for the move to continue.  Going forward, $200 support 
should remain intact in a strong market, otherwise target the 
shoot the 5-dma ($196.38) or the 10-dma ($193.18), depending on 
your comfort level.  Keep in mind that with such a big rise in a 
short time, GLW may again stop to catch it's breath.  However 
with earnings on April 17, and the likelihood of a split 
announcement on that date (shareholder meeting on April 27 to 
authorize new shares from 500 mln to 1.2 bln), the trend is up.  
Nonetheless, we think there will be buying opportunities along 
the way.  Target shoot to your level of risk tolerance, or wait 
for a breakout over $208, a resistance level tested three times 
in the last two days.  Volume is the key; just be sure to confirm 
that the market is in your favor before entering.

One item that could really light up GLW (so to speak) is their 
19th Annual Media Briefing/Fiber and Photonics Business Update to 
be held on Tuesday in New York.  Secondarily, they could see 
action from any buzz generated at the Optical Fiber Comm (OFC 
2000) Conference this week, which will be held in Baltimore this 

***March contracts expire in 2 weeks***

BUY CALL MAR-190 GRJ-CR OI= 952 at $22.00 SL=17.25
BUY CALL MAR-200*GRJ-CT OI=2425 at $16.00 SL=12.50
BUY CALL MAR-210 GRJ-CB OI=1041 at $11.25 SL= 9.00
BUY CALL APR-200 GRJ-DT OI= 445 at $27.38 SL=21.25
BUY CALL APR-210 GRJ-DB OI=  22 at $22.75 SL=17.75

Picked on Feb 17th at   $191.06     P/E =106
Change since picked      +14.19     52-week high=$207.94
Analysts Ratings      7-6-0-0-0     52-week low =$ 47.69
Last earnings 01/00   est= 0.48     actual= 0.51
Next earnings 04-24   est= 0.47     versus= 0.36
Average Daily Volume = 2.48 mln


EMLX - Emulex Corp. $190.25 (+33.13)(+17.13)(P2W+32.00)

Emulex Corp is a leading developer and supplier of fibre channel
technology, an ANSI standard communications interface that
delivers unprecedented bandwidth, connectivity and reliability
networking applications.  They design three types of connectivity
products: network access servers, print servers, and high-speed
fibre channel products.  They sell their products worldwide to
original equipment manufacturers, and end users, through other
distribution channels including value-added resellers, systems
integrators and others.  They have secured relationships with
some significant names including Compaq, EMC, Hitachi, IBM,
Sequent and Siemens.  IBM accounts for about 11% of sales and
Sequent, which IBM bought last year accounts for nearly 12%
of the EMLX revenues.

It's nice to see what a little good news can do for the price of
a stock price.  Actually there was no company specific news
out on EMLX, but the benign February jobs report helped ignite
a fire under the broader markets on Friday.  As we've said EMLX
had held up very well the previous three Friday's with the 
major indices in a tail spin.  Yesterday, with the overall market
sentiment much improved, EMLX took off at the opening bell and 
was trading +27 higher after the first ninety minutes of the
session.  It really appeared as though traders who had been
nibbling on shares of the computer peripherals company off and
on for the last few weeks, suddenly received the green light to
jump in with both feet, as the volume picked up again to over
1.0 million shares.  Friday's move certainly suggests there is
there is more upside potential for EMLX.  It broke through the
top of the channel we've mentioned in earlier updates and could
experience a bit of profit-taking, which wouldn't be bad as it
would allow for a better entry into new or additional positions.
EMLX has support at $188 and again at $178, and a retracement
followed by a bounce, would be a very good area to consider a
new play.  In the last month shareholders of EMLX have enjoyed
a gain of over $78.  Some are calling for EMLX to be the next
"CSCO", while the chat rooms are still buzzing about a potential
split.  We must reiterate, at this time there is no indication
of any split forthcoming.  For now we will simply call EMLX a
great play.  If you have a current position in EMLX, assess
your risk profile and set you stops accordingly.

As noted earlier, EMLX has been in the headlines very little
lately.  Friday EMLX did show up in the Investor's Business
Daily along with others as a Nasdaq stock in the news.  The
chart showed Emulex with +83% annual EPS growth and 0% debt.
We've mentioned that the institutions have been heavily
invested in EMLX for quite some time, and it seems like the
investing public has discovered this great company now as well.

***March contracts expire in two weeks***

BUY CALL MAR-175 UEL-CO OI=467 at $25.13 SL=19.50
BUY CALL MAR-180 UEL-CP OI=  5 at $21.50 SL=16.75 low OI
BUY CALL MAR-185 UEL-CQ OI=  1 at $18.63 SL=14.50 low OI
BUY CALL MAR-190 UEL-CR OI=  4 at $16.25 SL=12.63 low OI
BUY CALL APR-190*UEL-DR OI= 15 at $29.25 SL=22.75 low OI

SELL PUT MAR-170 UEL-ON OI= 83 at $ 5.63 SL= 7.50
(See risks of selling puts in play legend)

Picked on Feb 13th at   $123.88    P/E = 346
Change since picked      +66.38    52-week high=$195.69
Analysts Ratings      3-4-0-0-0    52-week low =$  6.63
Last earnings 01/00    est=0.14    actual=0.23
Next earnings 04-25    est=0.17    versus=0.05
Average daily volume = 1.05 mln


MER - Merrill Lynch $107.00 (+11.13)

Merrill Lynch, public since 1971, serves a wide array of 
clients ranging from individuals and small businesses to the 
world's largest corporations and governments.  With over 60,000
employees in more than 40 countries, the company provides 
investment, financing, advisory, insurance and related 
services, through its subsidiaries and affiliates. 

We are all probably familiar with the infamous Merrill Lynch 
bull.  This seems to be a very appropriate company icon, as 
lately MER has done nothing but charge ahead.  The financials 
are said to be in the "interest rate sensitive" category and 
as you may know, things have been a little rough lately for 
this group.  You would never know it by looking at Merrill 
Lynch's chart.  MER seems to be oblivious to the goings on of 
the rather volatile market and its peers.  Instead, MER has 
posted an impressive $21.25 gain since the first of February 
and looks to have the momentum behind it to keep right on going.  
The volume has remained strong behind MER's move up, a nice 
"bullish" indication that there are quite a few interested 
MER buyers out there.  MER has some solid support backing, 
the first at it's 5-dma of $103 followed by support levels 
at $102, $100 and $96 which MER tested and held throughout 
last week.  Friday, MER traded up to and closed near its new 
52-week high that was set during Wednesday's session.  The bull 
may be well positioned to continue it's charge into next week.

Last Wednesday, brokerage shares benefited from an analyst 
report released predicting increased profits for many of the 
firms due to an increase in share trading and advising fees.  
The Solomon Smith Barney analyst went on to up his 12 month 
price target on MER from $110 to $140, citing the fact the 
market activity is currently at record levels as one reason 
for the upgrade.  Watch for upcoming earnings reports toward 
the end of this month from Morgan Stanley, Lehman Brothers and 
Goldman Sachs, as these reports could potentially have an impact 
on Merrill Lynch's share price.  

***March contracts expire in 2 weeks***

BUY CALL MAR-100 MER-CT OI=3117 at $8.75 SL=6.50
BUY CALL MAR-105 MER-CA OI=1867 at $5.63 SL=3.75
BUY CALL MAR-110 MER-CB OI=1817 at $3.25 SL=1.50
BUY CALL APR-105*MER-DA OI= 861 at $9.38 SL=7.00
BUY CALL APR-110 MER-DB OI=2774 at $7.00 SL=5.25

SELL PUT MAR-100 MER-OT OI= 811 at $1.50 SL=3.00
(See risks of selling puts in play legend)

Picked on Mar 5th at    $107.00     P/E = 106
Change since picked       +0.00     52-week high=$107.63
Analysts Ratings      3-3-3-0-0     52-week low =$ 62.00
Last earnings 01/00   est= 1.36     actual= 1.80
Next earnings 04-25   est= 1.53     versus= 1.44
Average Daily Volume = 2.84 mln

LEAPS by Mark Phillips

Well, that didn't take long!  From a high of 29.96 on Monday,
the VIX moved down sharply all week, ending up at 21.29.  This
is getting close to the typical "market top" zone of our
favorite indicator, and we urge caution over the next week.  We
want to buy LEAPS when the VIX is high and the stock in question
is providing an attractive entry point.  We can purchase LEAPS
on a strong stock that has fallen on hard times, profiting when
the (hopefully) inevitable recovery comes.  With the long fuse
on LEAPS, we don't have to worry about burning time-value on a
daily basis.  For a better understanding of our philosophy and
approach, read the last 2 weeks' Leap of the Week plays.  These
have been ideal entry points on great companies and patient
investors are being rewarded.  Another play that finally
delivered is LU - after being beaten up (remember, entry point!),
the company finally gave investors something positive to chew on
and Bingo! - an $18 move in less than 2 weeks.  This may be a
good week for LEAP players to sit on their hands - with the VIX
in the low 20's good, entry points may be hard to find.  If you
are looking to take some profits from winning plays off the
table, this may be as good a chance as any.

Current Plays


EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $48.63   216.19%
                 JAN-2002 $ 90  WUE-AR   $19.00   $52.63   177.00%
GPS    11/07/99  JAN-2001 $ 40  ZGS-AH   $ 5.75   $12.75   121.74%
                 JAN-2002 $ 45  WGS-AI   $ 7.88   $15.38    95.18%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $23.50    72.41%
                 JAN-2002 $110  WIB-AB   $16.50   $28.50    72.73%
LU     11/14/99  JAN-2001 $ 80  ZEU-AP   $12.88   $10.88   -15.53%
                 JAN-2002 $ 90  WEU-AR   $16.13   $15.63   - 3.10%
CSCO   11/14/99  JAN-2001 $ 80  ZCY-AP   $19.13   $64.75   238.47%
                 JAN-2002 $ 90  WIV-AR   $22.00   $66.25   201.14%
GE     11/21/99  JAN-2001 $150  ZGR-AU   $16.25   $18.25    12.31%
                 JAN-2002 $150  WGE-AU   $25.50   $29.13    14.24%
NT     11/28/99  JAN-2001 $ 75  ZOO-AO   $22.25   $56.75   155.06%
                 JAN-2002 $ 75  WNT-AO   $30.25   $66.00   118.18%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $18.25    69.77%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $23.88    59.20%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $87.75   294.38%
                 JAN-2002 $120  WGZ-AD   $28.50   $91.88   222.39%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $56.38   139.91%
                 JAN-2002 $100  WFU-AT   $27.25   $61.13   124.33%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $31.75    80.09%
                 JAN-2002 $ 90  WJX-AR   $22.00   $36.00    63.64%
LU     01/09/00  JAN-2001 $ 50  ZEU-AJ   $13.63   $27.38   100.88%
MOT    01/09/00  JAN-2001 $125  ZMA-AE   $31.13   $65.75   111.21%
                 JAN-2002 $125  WMA-AE   $41.50   $78.13    88.27%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $14.13    54.76%
                 JAN-2002 $ 40  WSY-AH   $12.63   $18.50    46.48%
ERICY  01/30/00  JAN-2001 $ 65  ZYD-AM   $19.75   $47.25   139.24%
                 JAN-2002 $ 65  WRY-AM   $27.00   $55.00   103.70%
MSFT   01/30/00  JAN-2001 $100  ZMF-AT   $17.63   $16.88   - 4.25%
                 JAN-2002 $110  WMF-AB   $21.63   $21.38   - 1.16%
Q      02/13/00  JAN-2001 $ 50  ZWK-AJ   $ 5.88   $19.13   225.34%
                 JAN-2002 $ 50  WWH-AJ   $10.88   $24.38   124.08%
CS     02/13/00  JAN-2001 $ 30  ZCJ-AF   $14.25   $24.13    69.33%
                 JAN-2002 $ 30  WLJ-AK   $18.25   $28.13    54.14%
ICOS   02/20/00  JAN-2001 $ 40  ZIL-AH   $10.25   $23.38   128.10%
                 JAN-2002 $ 45  WJI-AI   $12.13   $26.50   118.47%
NSM    02/27/00  JAN-2001 $ 70  ZUN-AN   $18.50   $24.50    32.43%
                 JAN-2002 $ 70  WUN-AN   $24.25   $31.25    28.87%
To review the play description on any of our current plays, 
go to the LEAPS section for the date the play was added.

Option Selection: Notice that many of our LEAP plays have moved
considerably since initially being picked.  The listed options
may therefore be deep in the money and very expensive.  When 
entering a new position, look to buy LEAPS according to your 
suitability level, but note that we typically initiate strikes 
that are slightly out of the money from the stock's current 

Leap of the Week

IBM - International Business Machines $109.00

Did you take advantage of the buying opportunity this week?
Bouncing thrice at the $100 support level, IBM epitomizes the
quality we look for in playing LEAPS.  Find a strong stock that
has fallen on hard times and wait for an attractive entry point.
Since there is plenty of time available, we can be patient, wait
for the bounce at support and then profit from the recovery in
the stock.  Like our prior Leap of the Week picks (MSFT and GE),
IBM looks like it has put in a bottom and is ready to head
higher.  On Thursday, Merrill Lynch analyst Steven Milunovich
expressed near term concerns, but expects the stock to be
stronger in the second half of the year.  This sounds to us like
the perfect recipe for a successful LEAP play.  With the VIX so
low, don't be in a hurry - let the play come to you.  Patience
will likely be rewarded with another choice entry near $100
before the move begins in earnest.

BUY LEAP JAN-2001 $110.00 ZIB-AB at $18.50
BUY LEAP JAN-2002 $120.00 WIB-AD at $24.63


New Plays

No new plays this week.


No drops this week either.


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


DD - DuPont $50.75 (-0.75)

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.

Friday's mild job report, which helped to alleviate rising 
interest rate fears, looks to have helped us with our put play 
on DD.  How so?  Friday presented us with some great opportunity 
for possible entry points.  DD attempted to participate in 
Friday's market rally but had it's run cut short by resistance 
at the $52 (10-dma) level.  By midday, DD found itself headed in 
the all too familiar downward direction and by the close, had 
taken back half of the day's gain.  One day does not a trend 
make, and we are certainly not convinced that DD is on its way 
to a trend reversal.  Another of the catalysts behind DD's move 
on Friday, were the kind words spoken by Merrill Lynch analyst 
John Roberts.  He raised his intermediate-term rating on DD to 
a Buy with a $58 12-month price target.  He further commented 
that "After 5 years of essentially flat EPS (earnings per share),
management appears committed to do whatever it takes to achieve 
10 percent-plus EPS growth in 2000,"  Sure, it sounds good, but 
by the end of Friday's session, it looked as though investors 
just weren't ready to buy in, and thus the selling resumed.  As 
we mentioned on Thursday, investors seem to be concerned with 
DD's upper management.  In perusing through the message boards, 
one is bound to encounter such terms as "dead wood" and "starched
shirts".  It could be that until DD takes action to do a little 
house cleaning on the upper executive level, the sellers will 
continue to determine DD's direction.  That is just fine by us. 
As we mentioned, DD found resistance on Friday at it's 10-dma.  
Watch for this level to continue to hold DD back. This level may 
serve well for possible entry points as well.  Also, watch for DD 
to trade back through $50 backed by volume as an indication that 
DD does intend to reclaim its downward trend.  

***March contracts expire in 2 weeks***

BUY PUT MAR-55*DD-OK OI= 907 at $4.63 SL=2.75
BUY PUT MAR-50 DD-OJ OI=1223 at $1.44 SL=0.75

Average Daily Volume = 2.95 mln


RNWK - RealNetworks $70.19 (-8.19)

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. In only four years, RealNetworks software systems 
have become by far the most pervasive method of streaming media 
on the Internet and intranets.  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.

When the rhythm is good, it is hard not to want to dance.  RNWK 
found itself tapping it's foot to the beat of the market on 
Friday as the NASDAQ jetted to yet another record high.  Was 
it the beginning of a reversal for RNWK, or was it merely a 
great opportunity for potential entry points?  Being that RNWK 
was unable to breakthrough its 10-dma on Friday, we are putting 
our money on the latter.  It was actually RNWK's 100-dma right 
that managed to keep the lid on during Friday's session.  RNWK's 
100-dma is now at $71 and RNWK's 10 and 50-dma's are working 
to converge right around $75.50, which could provide some 
formidable resistance if needed.  It is important for these 
support levels to hold, as a breakthrough could indicate a 
possible reversal.  The $70 level could play a key role in 
the future of RNWK's stay on our put play list.  As we have 
mentioned previously, though this level does look to have 
potential to provide some support, we see the real support 
coming into play near the $60 level.  If RNWK can manage a 
breakthrough the $70 level backed by strong volume we may be 
cleared for a fall to this level.  Did Friday's session remind 
you of just why using your Stop Loss orders is so important?  

***March contracts expire in 2 weeks***

BUY PUT MAR-70 RNO-ON OI= 819 at $5.50 SL=3.75
BUY PUT MAR-65*RBO-OM OI=1006 at $3.25 SL=1.50

Average Daily Volume = 1.97 mln


PPG - PPG Industries $49.06 (+0.00)

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.

Every dog has his day, and Friday was it for PPG.  Supported
by the recovery on the DOW, PPG managed to move as high as
$50.63, before investors came to their senses and remembered
they don't like manufacturing stocks.  Falling back from its
highs, PPG found support near $49 as the selling tapered off.
The big question is whether this is a bottom for the stock or
if we were just provided with an attractive entry point.  With
very little in the way of news, PPG should continue to be
influenced by the direction of the broad non-tech market.  PPG
looks to have solid resistance at $50.50, and if the bargain-
hunters can push through to close above this level, we will
likely have to concede defeat.  Conversely, moving up to
resistance and rolling over could provide us with a very
attractive entry point.  Below the $49 level, PPG will likely
find support near Thursday's new 52-week low of $46.63.   Look
to enter new positions on either another southward bounce from
$50.50, or a penetration of today's support at $49.  Keep an 
eye on volume, as continued buying interest could signal that 
life really has returned to this beaten down issue.

***March contracts expire in 2 weeks***

BUY PUT MAR-55 PPG-OK OI= 50 at $8.13 SL=6.25
BUY PUT MAR-50*PPG-OJ OI=109 at $2.44 SL=1.25

Average Daily Volume = 509 K


CTS - CTS Corporation $52.31 (-14.06)

CTS designs, manufactures and sells a broad line of electronic
components and custom assemblies for OEM customers in primarily 
the automotive, computer equipment and communications equipment 
markets worldwide.  Roughly one third of CTS' sales come from 
General Motors, Seagate Technology and Compaq.

Negative momentum is the name of this game.  CTS had managed 
to maintain a trading range between $60 and $80 from November 
through the end of February.  With no negative news backing the 
drop, the $60 level finally gave way on the second day of March 
and once it did the sellers picked up the pace and CTS closed 
the session down $8.44.  Since then, the negative momentum has
propelled CTS through its 200-dma, a level that has held since 
December of 1998.  CTS has consistently been tagging lower highs 
and lower lows.  CTS now looks cleared for a fall down to the 
next level of support, which is in the neighborhood of $44.  We 
have also seen an increase in the volume level since CTS broke 
$60, which indicates that there are a lot of investors who viewed 
that level as a solid level of support and are now in a panic 
mode to get out.  Despite the market's stellar performance on 
Friday, CTS continued to decline, giving us the go ahead to 
initiate this play.  CTS could encounter resistance at it's 
200-dma, which is now at $55.50, should it make an attempt at 
a move up.  Look for the long time support level of $60 to now 
provide a formidable level of resistance. 

***March contracts expire in 2 weeks***  

BUY PUT MAR-55*CTS-OK OI=400 at $5.00 SL=3.25
BUY PUT MAR-50 CTS-OJ OI=821 at $2.13 SL=1.00

Average Daily Volume = 2.95 mln


MRK - Merck & Co. $57.50 (-2.69)

Merck is a research-driven pharmaceutical company that discovers,
develops, manufactures and markets a broad range of human and
animal health products.  Profiting from American's poor eating
habits, Merck is the US's #1 drug maker, producing drugs to
battle high cholesterol, hypertension, and heart failure.
Cholesterol drugs Zocor and Mevacor and top-selling hypertension
drugs, Vasotec and Prinivil make up more than one-third of the
company's sales.  Among Merck's newer drugs are AIDS medication
Crixivan, anti-baldness pill Propecia, migraine treatment Maxalt
and arthritis pain medication Vioxx.  Moving into the internet
world, MRK has formed an alliance with CVS to market its drugs

Limping along with the rest of the NYSE, MRK has now not only
committed the cardinal sin of breaking its 52-week low, but
Friday provided the drug maker with its lowest close since June
of 1998.  As if the poor market conditions weren't enough for
MRK, on Friday a company official shot the company in the foot,
announcing his belief that no drug maker will complete
development of an HIV vaccine for at least another decade.  This
is not the kind of comment that attracts investors' enthusiasm,
much less their cash, and MRK paid the price by losing $1.75 on
the day.  Technically this issue looks weak as the January rally
failed to take out the double-top from October/November of last
year.  Volume on this latest decline has been strong with Friday
topping 10 million shares.  With the degree to which the share
price has been depressed, MRK may find support right near
Friday's closing price; if not, investors will have to look for
$54 to provide assistance.  Resistance on the upside comes in
the form of the old 52-week low near $61, backed up by the
10-dma (currently at $61.25).  Ideally, we'd like to see a move
up near resistance to provide for a better entry, but if the
selling continues, look to jump on board as the beleaguered
issue drops below Friday's low of $57.06.

***March contracts expire in 2 weeks***

BUY PUT MAR-60*MRK-OL OI=3782 at $3.75 SL=2.25
BUY PUT MAR-55 MRK-OK OI= 654 at $1.13 SL=0.00

Average Daily Volume = 5.82 mln

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


Charting Basics: Pattern Recognition...

The knowledge of basic chart formations can significantly increase
the probability of a successful position.  There are a number of
common technical patterns that can be used to identify favorable
entry points.  Trend lines, support and resistance and volume are
fundamental to any technical assessment and there is one specific
formation that historically exhibits all of these components in a
clear and concise manner.  This major reversal pattern was made
famous by Charles Dow and it has appeared in every major market
top or bottom in the last 50 years.  The formation I am referring
to is a precursor to both market rallies and major corrections.
It is accurately described as a "Head-n-Shoulders" top or bottom.


In its simplest form, the Head-n-Shoulders Top reflects the final
rallies in a major uptrend, the first recovery of the following
downtrend, and the potential support or breakdown area (neckline)
between the upward movements.  In a stage II climb, a stock will
generally advance along an established trend line in a series of
rallies that are interrupted by small corrections.  When the move
begins to lose strength, a consolidation area is formed.  If the
trend reverses to a significantly lower range before a recovery
occurs, a pattern of peaks and valleys will begin to evolve.  The
initial segment of the formation (the left shoulder) is normally
associated with high trading volume.  The follow-through to the
head of the pattern (generally a long-term high) will ordinarily
be driven by less volume.  A variation of the double-top, often
near the peak of buying will occasionally develop on slow moving
blue-chip issues.  This patterns typically exhibits heavy upside
volume which dissipates and then gradually increases as the stock
rounds-over into the downtrend.  The eventual recovery rally (to
the right shoulder) is generally made on relatively low volume.

As with any pattern, there can be a number of small variations.
For example, there may be two or more left shoulders near the same
price range, or two or more right shoulders.  In any case, the
most important component of the formation is the neckline.  When
it is broken, the pattern is complete and a significant change in
character often follows.  During this transition, trading volume
may not be significantly different but any substantial penetration
of the neckline warrants immediate action.  There is usually one
attempt at recovery but the move almost always fails at the level
of the neckline.  The following drop is often the most precipitous
of the entire formation and occasionally will eclipse the height
of the pattern (the top of the Head to the Neckline).  As the new
character evolves, successive rallies commonly fail at lower highs
until the overall decline is far greater than the magnitude of the
initial formation. 


The major differences between Head-and-Shoulders Tops and Bottoms
are the time periods necessary for the pattern to mature and the
trading volume associated with the development of the head (peak)
of the formation.  In bearish reversals, top formations are often
completed in a few weeks.  In contrast, significant support levels
(or bottoms) generally occur over longer periods and some patterns
may take months to evolve.  In failing issues, the breakdown from
from a Head-and-Shoulders Top may not include a significant change
in volume, whereas the bullish breakout from a Head-and-Shoulders
Bottom must have volume confirmation.  The historical traits of
well known patterns demonstrates the ability to profit from their
analysis and it's obvious you should never overlook the potential
of a clearly formed and definitely broken trend.

NOTE: Using Margin doubles the listed Monthly Return! 

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

BIDS    5.34   7.13   MAR   5.00  1.06  *$  0.72  19.0%
ASPX   12.56  11.16   MAR  10.00  3.25  *$  0.69  10.7%
HEB    11.94  15.75   MAR  10.00  2.69  *$  0.75   9.1%
ANIC    6.94   7.38   MAR   5.00  2.31  *$  0.37   9.0%
PTEK    8.94   9.38   MAR   7.50  2.13  *$  0.69   8.8%
TSEM   21.00  27.25   MAR  17.50  4.63  *$  1.13   7.8% New Symbol
FSII   17.81  20.00   MAR  15.00  4.25  *$  1.44   7.7%
XICO   26.13  23.25   MAR  22.50  4.75  *$  1.12   7.6%
IMNR   15.75  16.25   MAR  10.00  6.38  *$  0.63   7.6%
GZTC   29.13  44.00   MAR  22.50  8.38  *$  1.75   7.3%
AND     8.88  16.13   MAR   7.50  1.94  *$  0.56   7.0%
SCTC   22.31  25.00   MAR  20.00  3.75  *$  1.44   6.7%
TLXN   20.78  27.00   MAR  17.50  4.00  *$  0.72   6.2%
SMSC   14.25  13.69   MAR  12.50  2.25  *$  0.50   6.0%
UBET    6.25   5.19   MAR   5.00  1.63  *$  0.38   6.0%
REMC   26.38  39.38   MAR  22.50  5.00  *$  1.12   5.9%
PCMS   23.06  17.50   MAR  17.50  6.38   $  0.82   5.5%
MCRE   15.50  19.75   MAR  12.50  3.88  *$  0.88   5.5%
SIII   15.00  21.13   MAR  12.50  3.38  *$  0.88   5.5%
EPIC    9.56   8.91   MAR   7.50  2.50  *$  0.44   5.4%
WRLS   28.00  25.25   MAR  17.50 11.13  *$  0.63   5.4%
ELIX   21.75  21.00   MAR  17.50  4.88  *$  0.63   5.4%
MSGI   24.88  23.75   MAR  20.00  6.00  *$  1.12   5.2%
RNBO   30.88  44.38   MAR  25.00  7.00  *$  1.12   4.1%
ITIG   43.44  43.00   MAR  30.00 14.25  *$  0.81   4.0%
GELX   17.81  21.56   MAR  15.00  3.75  *$  0.94   3.6% 
DRMD   12.75   9.31   MAR  10.00  3.38   $ -0.06   0.0%

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


Some issues to watch that are testing (or may test) support 
include Auspex Systems (ASPX), Xicor (XICO), and Youbet (UBET).
Duramed Pharma (DRMD) and Standard Microsytems (SMSC) have 
weakened (earnings warning).  Consider exiting early or rolling
down, depending on your long term outlook.  P-Com (PCMS) is 
suffering some post earnings blues.  The 50 dma appears to be 
providing support as P-Com nears a 50 percent retracement of 
its latest rise in price.


Sequenced by Company

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

AND    16.13  APR  12.50  AND DV  4.75 152  11.38  9.8%   9.8%
BIDS    7.13  APR   5.00  BDU DA  2.63 642   4.50 11.1%  11.1%
COB    14.13  APR  10.00  COB DB  5.00 168   9.13  9.5%   9.5%
EPTO   14.00  APR  10.00  QTP DB  4.75 901   9.25  8.1%   8.1%
ESCM   17.50  APR  15.00  QFC DC  4.38 568  13.12 14.3%  14.3%
MUEI   14.50  APR  12.50  MQU DV  2.81 1728 11.69  6.9%   6.9%
THDO   15.75  APR  12.50  TUD DV  4.25 209  11.50  8.7%   8.7%

Sequenced by Return Called & Return Not Called

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

ESCM   17.50  APR  15.00  QFC DC  4.38 568  13.12 14.3%  14.3%
BIDS    7.13  APR   5.00  BDU DA  2.63 642   4.50 11.1%  11.1%
AND    16.13  APR  12.50  AND DV  4.75 152  11.38  9.8%   9.8%
COB    14.13  APR  10.00  COB DB  5.00 168   9.13  9.5%   9.5%
THDO   15.75  APR  12.50  TUD DV  4.25 209  11.50  8.7%   8.7%
EPTO   14.00  APR  10.00  QTP DB  4.75 901   9.25  8.1%   8.1%
MUEI   14.50  APR  12.50  MQU DV  2.81 1728 11.69  6.9%   6.9%

Company Descriptions

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

AND - Andrea $16.13 *** Breakout! ***

Andrea designs, develops and manufactures audio technologies and 
equipment for enhancing applications that require high performance
and high quality voice input. The Company's has several patented 
and Patent-pending audio products that enhance a wide range of 
audio products to eliminate background noise and ensure the optimum
performance of voice applications. Though revenues were lower for 
the fourth quarter, Andrea is expanding its technology portfolio 
and strategic alliances, which should boost future revenues.
Andrea has broken above a stage I base on heavy volume and has
reached a new 52 week high.  As Andrea is somewhat overextended,
we favor a cost basis below the February high.

APR 12.50 AND DV Bid=4.75 OI=152 CB=11.38 RC=9.8% RNC=9.8%

Chart =


BIDS - Bid.Com $7.13 *** Blast off! ***

Bid.Com is one of e-commerce's leading international online sales 
and marketing organizations.  The company offers a compelling and
cost-effective method of selling a wide array of goods and services
over electronic distribution channels.  Bid.Com is strategically 
positioned to leverage its business-to-consumer technological 
leadership by offering the pre-eminent online auction platform for 
co-ventures into B2B markets, developing and implementing custom 
branded e-commerce solutions and for distribution through broadband
media.  After reporting earnings, showing revenues increasing by 
80 percent, Bid.Com has now announced plans to enter into a 
strategic alliance with Ireland's Sunday Business Post.  This 
should allow BIDS to take advantage of the growing demand for 
vertical online marketplaces in Europe.  The news caused the
stock to jump above its recent trading range closing above the
December high and making a successful test of its 150 dma. 

APR 5.00 BDU DA Bid=2.63 OI=642 CB=4.50 RC=11.1% RNC=11.1%

Chart =


COB - Columbia Labs $14.13 *** What's Up? ***

Columbia Laboratories develops unique pharmaceutical products
that treat female specific diseases and conditions including
infertility, dysmenorrhea, endometriosis, hormonal deficiencies
and the prevention of sexually transmitted diseases. Columbia's
research in endocrinology has also led to the development of a
product to treat Andropause in men. Their products primarily
utilize its patented bioadhesive delivery technology, the
Bioadhesive Delivery System.  The recent restructured senior 
management team can't be the only reason for such strength in
the tape.  Are investors anticipating blow-out earnings?  Is 
the rise due to sector strength?  With earnings due this week,
we favor speculating closer to support until the reason for 
the recent run-up is made known. 

APR 10.00 COB DB Bid=5.00 OI=168 CB=9.13 RC=9.5% RNC=9.5%

Chart =


EPTO - Epitope $14.00 *** Oral Drug Testing ***

Epitope develops, manufactures & markets oral specimen collection 
devices and diagnostic products using its proprietary oral fluid 
technologies. Epitope's lead product, the patented OraSure 
collection device, is used in conjunction with screening and 
confirmatory tests approved by the FDA to test for HIV-1 antibodies
and other conditions. Their technology is also being used to test
for drugs of abuse and other analytes. Last quarters earnings 
were favorable showing increasing revenues and narrowing losses.
The recent introduction of the Intercept(TM) oral fluid drug test
helped spur the resumption of the stage II climb.  We favor the
support provided by the January high and 30 dma.  

APR 10.00 QTP DB Bid=4.75 OI=901 CB=9.25 RC=8.1% RNC=8.1%

Chart =


ESCM - ESC Medical Systems $17.50 *** New FDA Approvals ***

ESC develops, manufactures and markets medical devices utilizing
lasers and proprietary intense pulsed light technology for
non-invasive treatment of varicose veins and other benign vascular
lesions, as well as other clinical applications. Their products
are used in a variety of areas, including cosmetic, medical, dental
and veterinary medicine.  ESC announced in January that strong
fourth quarter sales exceeded the Company's expectations, which
helped ignite a strong rally. With recent FDA approval for ESC's
proprietary Intense Pulsed Light technology for hair removal on
all skin types, the stock shows no signs of technical weakness. 

APR 15.00 QFC DC Bid=4.38 OI=568 CB=13.12 RC=14.3% RNC=14.3%

Chart =


MUEI - Micron Electronics $14.50 *** Another Breakout ***

Micron Electronics and its subsidiaries are the third largest
provider of personal computers sold through the direct channel.
They develop, manufacture, market and support electronic products
for a broad range of computing and digital applications. They
custom builds a wide variety of notebook and desktop PC systems
and servers for its core customers in consumer, commercial and
government sectors. Just as many of the PC makers have, Micron
has been focusing its resources to become a Web-hosting outfit.
The effort appears to have paid off as Micron was chosen as the
"number one Web hosting company in the world" by Hottest Hosts.
We favor the breakout above Micron's stage I base on heavy 
volume and the technical support at the sold strike. 

APR 12.50 MQU DV Bid=2.81 OI=1728 CB=11.69 RC=6.9% RNC=6.9%

Chart =


THDO - 3DO Company $15.75 *** Up and Away? ***

3DO is a leading developer and publisher of branded interactive
entertainment software. Its software products operate on several
multimedia platforms including personal computers, the Sony Play
Station and Nintendo N64 video game consoles, and the Internet.
Their software covers a broad spectrum of entertainment products,
including action, strategy, adventure/role playing, sports and
family games. Last quarter's earnings, powered by the release of
10 new games and European expansion, showed revenues up by 300 
percent. Shortly afterward, ING Barings initiated coverage with
a strong buy. We agree, though we favor a cost basis closer to 

APR 12.50 TUD DV Bid=4.25 OI=209 CB=11.50 RC=8.7% RNC=8.7%

Chart =


Naked Put Percentage List

DISCLAIMER:  Before entering any of the positions listed below, 
you need to understand your risk tolerance.  Selling puts can 
be a High-Risk endeavor depending on the strike you choose to 
sell.  For a greater return, you run a higher risk of being 
exercised.  Therefore, please consider other strikes than the 
ones listed below if you aren't comfortable with the one we 
choose.  We are gearing these towards higher-risk players.  In 
any case, you can always select a lower strike with a lower 
return if it better meets your suitability.

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

ELON     83.69      75    EUL-OO     6.88   20.92    33%
LYNX     94.69      80    ULX-OP     7.00   23.67    30%
CMTO     68.56      60    CQH-OL     3.88   17.14    23%
TXCC    101.06     100    TZQ-OT     9.50   25.27    38%
AMSC     63.00      60    QAY-OL     4.38   15.75    28%
RIMM    150.69     140    RUP-OH     8.00   37.67    21%
PUMA    172.00     160    YCQ-OL    13.63   43.00    32%
CORR     95.38      85    CHQ-OQ     6.75   23.85    28%
CIEN    170.00     165    UEE-OM    10.00   42.50    24%
ENMD     83.50      80    QMA-OP     6.25   20.88    30%
ENGA    165.94     160    GQE-OL    12.38   41.49    30%
ASDV    166.13     160    QFV-OL    16.13   41.53    39%
PMCS    201.00     200    SZI-OT    15.13   50.25    30%
ENZ      87.50      85    ENZ-OQ     5.88   21.88    27%
IMCL    154.44     140    QCI-OZ     4.63   38.61    12%
ADIC     96.94     100    QXG-OT    11.00   24.24    45%
FIBR    133.25     125    QBD-OE    10.38   33.31    31%
BVSN    260.25     250    BZV-OV    12.50   65.06    19%
CNXT     93.69      90    QXN-OR     5.75   23.42    25%
SDLI    442.00     440    QZL-OH    28.00  110.50    25%
CMGI    134.06     130    GCD-OF     8.13   33.52    24%
SONE    117.75     115    QFB-OC     7.25   29.44    25%
NSOL    355.69     340    JNV-OH    16.13   88.92    18%
MEDX    194.88     180    MJU-OP    21.13   48.72    43%
BRCD    315.25     300    UBZ-OT    13.50   78.81    17%
AMCC    269.38     260    AZV-OL    14.63   67.35    22%
EPNY    222.63     200    UEP-OT    10.13   55.66    18%
CRA     234.50     230    CKA-OU    18.00   58.63    31%
ALKS    186.00     180    ADE-OP    11.25   46.50    24%
PDLI    281.38     260    RPV-OV    17.38   70.35    25%



AGGRESSIVE   SELL PUT MAR-220 UEP-OD at $19.00 = 34%
MODERATE     SELL PUT MAR-210 UEP-OB at $14.25 = 26%



AGGRESSIVE   SELL PUT MAR-240 QZL-OH at $28.00 = 25%
MODERATE     SELL PUT MAR-230 QZL-OF at $22.13 = 20%



AGGRESSIVE   SELL PUT MAR-160 GQE-OL at $12.38 = 29%
MODERATE     SELL PUT MAR-155 GQE-OK at $10.38 = 25%



AGGRESSIVE   SELL PUT MAR-160 UEE-OL at $8.13 = 19%
MODERATE     SELL PUT MAR-155 UEE-OK at $6.00 = 14%


Naked Put Writing:  Buying stock at a discount...

In addition to viewing naked put writing as a strategy unto
itself, many investors and large portfolio managers who actually
want to acquire stock, will often write puts as well.  We have
mentioned before that there are two basic strategies to use in a
neutral to bullish Market.  The first technique involves writing
at-the-money puts to take advantage of a bullish movement in the
underlying stock for short-term profits.  The second technique, 
a less aggressive method, is to write an out-of-the-money put, 
hoping that the sold position will expire worthless. Many traders
who enter these positions never intend to own the stock, as they
are time merchants.  If the underlying stock drops in price, 
they simply buy back the puts and close the position.  

Yet the technique of writing naked puts is useful to many types
of investors who are oriented toward stock ownership.  When a 
stock's price rises quickly (as many have done recently), many 
investors will open a limit buy order near an expected technical
pullback.  If the stock never reaches the buy limit, the investor
misses out on the advance. Savvy investors will use a naked put
to acquire the same stock, using the option premium to reduce 
their net cost in the desired stock.  Of course, if the sold 
option remains out-of-the-money at expiration, the put will not 
be assigned and a naked put writer will also miss the advance. 
However, he still gets to keeps the premium from the put as it
will expire worthless.  The put writer takes a proactive role
in trying to acquire stock, and at the very least, receives some
compensation for his efforts.  It is simply a method of trying
to accumulate a stock position at prices lower than currently 
available on the market. 

Next week we should continue with the series on Option Trading 
Mechanics, as Ray should be back from "vacationing" in Moscow.   

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


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

ESPI   12.75  14.13   MAR  10.00  0.50  *$  0.50  23.7%
SCTC   24.38  25.00   MAR  17.50  0.63  *$  0.63  16.6%
WSTL   25.88  34.25   MAR  17.50  0.69  *$  0.69  13.2%
ANET   12.69  13.25   MAR  10.00  0.25  *$  0.25  13.0%
WPZ    15.31  14.00   MAR  10.00  0.38  *$  0.38  12.4% New Symbol
ZONA    7.69  12.69   MAR   5.00  0.31  *$  0.31  12.1%
WSTL   31.50  34.25   MAR  22.50  0.56  *$  0.56  11.8%
XICO   26.13  23.25   MAR  20.00  0.44  *$  0.44  11.2%
NTRX   31.13  25.88   MAR  20.00  0.69  *$  0.69  11.2%
CLPA   44.81  47.31   MAR  20.00  0.75  *$  0.75  11.2%
MSGI   23.75  23.75   MAR  17.50  0.38  *$  0.38  10.7%
TSEM   20.13  27.25   MAR  15.00  0.56  *$  0.56  10.6% New Symbol
CRUS   20.31  22.56   MAR  15.00  0.38  *$  0.38   9.6%
PTEC   20.63  28.75   MAR  15.00  0.63  *$  0.63   9.6%
RWAV   10.56   9.63   MAR   7.50  0.31  *$  0.31   9.3%
PGEX   23.13  20.19   MAR  17.50  0.50  *$  0.50   8.5%
IDTC   31.50  36.56   MAR  20.00  0.50  *$  0.50   8.3%
SKYC   28.63  34.00   MAR  20.00  0.44  *$  0.44   8.0%
PILT   33.94  38.19   MAR  22.50  0.63  *$  0.63   7.4%
EXLN   23.00  22.13   MAR  15.00  0.31  *$  0.31   7.1%
MSGI   24.88  23.75   MAR  17.50  0.44  *$  0.44   7.1%
PTEC   23.06  28.75   MAR  17.50  0.38  *$  0.38   6.6%
DRD    28.00  21.75   MAR  20.00  0.56  *$  0.56   6.6%
AXTI   31.94  45.75   MAR  17.50  0.50  *$  0.50   6.3%
RNBO   30.88  44.38   MAR  22.50  0.38  *$  0.38   5.0%

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


Rogue Wave (RWAV) appears to have successfully tested its 150 dma
and the January low.  Duane Reade (DRD) is testing previous 
lows (near the sold strike) and should be monitored closely.  The 
recent "strong buy" rating by Banc of America did little to stop 
the drop after earnings. With Duane Reade oversold in the short
term, consider using any rally that quickly fails to exit the 
position, unless you wish to own the issue.   


Sequenced by Company

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

BCRX   32.75  MAR  25.00  BIU OE  0.38  98   24.62   5.5%
ELIX   21.00  MAR  17.50  XQQ OW  0.50  0    17.00   9.3%
EXLN   22.13  MAR  17.50  ODU OW  0.56  116  16.94  11.2%
PLNR   15.88  MAR  12.50  PNQ OV  0.25  12   12.25   7.3%
SCTC   25.00  MAR  20.00  YQS OD  0.38  100  19.62   7.1%
TSEM   27.25  MAR  22.50  TWQ OX  0.38  50   22.12   5.8%

Sequenced by ROI 

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

EXLN   22.13  MAR  17.50  ODU OW  0.56  116  16.94  11.2%
ELIX   21.00  MAR  17.50  XQQ OW  0.50  0    17.00   9.3%
PLNR   15.88  MAR  12.50  PNQ OV  0.25  12   12.25   7.3%
SCTC   25.00  MAR  20.00  YQS OD  0.38  100  19.62   7.1%
TSEM   27.25  MAR  22.50  TWQ OX  0.38  50   22.12   5.8%
BCRX   32.75  MAR  25.00  BIU OE  0.38  98   24.62   5.5%

Company Descriptions

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

BCRX - BioCryst $32.75 *** Breakout ***

BioCryst Pharmaceuticals is a biotechnology company focused on the
development of pharmaceuticals for the treatment of infectious, 
inflammatory and cardiovascular diseases and disorders. BioCryst's
most advanced drug candidate, BCX-1812, is a neuraminidase inhibitor
designed to treat and prevent viral influenza.  The recent weakness
in BioCryst was due to possible delays in starting Phase III 
clinical trials for its flu treatment. In early February, BioCryst
announced that it will receive a $4 million milestone payment from 
the R.W. Johnson Pharmaceutical Research Institute reference the 
initiation of Phase III clinical trials oral influenza neuraminidase
inhibitor.  The price rebounded nicely though remaining within its 
six month trading range.  On Friday, BioCryst jumped out of this 
range and closed at a new all-time high.  There was no news with
this huge move but you can't argue with the tape.  We favor the 
strong support above the sold strike on this speculative issue. 

MAR 25.00 BIU OE Bid=0.38 OI=98 CB=24.62 ROI=5.5%

Chart =


ELIX - Electric Lightwave $21.00  *** Fiber Optics ***

Electric Lightwave is a broadband integrated communications company
providing Internet, data, voice and dedicated access services to 
communications-intensive businesses and the growing e-commerce 
market. The company owns and operates high-speed fiber optic 
networks that interconnect major markets in the West and operates
a leading national Internet and data network. Electric recently 
settled its dispute with US West and completed two more segments 
of its $131 million long haul route.  Electric just reported
earnings this week, showing revenue and margin growth, which 
should bode well for the future.  A speculative candidate, as
some post earnings weakness may occur.  We favor an entry point
below the 50 dma and the January high, with a cost basis near
the 150 dma.  

MAR 17.50 XQQ OW Bid=0.50 OI=0 CB=17.00 ROI=9.3%

Chart =


EXLN - eXcelon $22.13 *** B2B solutions ***

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

MAR 17.50 ODU OW Bid=0.56 OI=116 CB=16.94 ROI=11.2%

Chart =


PLNR - Planar Systems $15.88 *** Entry Point ***

Planar Systems is a provider of high performance electronic
information displays, display sub-systems and complete display
systems. The Company markets products based on a variety
of display technologies including active matrix liquid crystal
displays(AMLCDs), passive matrix liquid crystal displays (PMLCDs),
and several others. These products are used in a wide variety of
applications in Planar's core medical, transportation and
industrial markets.  Nothing like announcing the highest sales
ever to get your stock moving (enough to reach a new multi-year
high).  Planar has recently announced several new contracts for 
its display panels which suggest sales should increase. The
consolidation area near the sold strike offers a favorable
entry point in a hot issue. 

MAR 12.50 PNQ OV Bid=0.25 OI=12 CB=12.25 ROI=7.3%

Chart =


SCTC - Systems And Computer Tech. $25.00 *** Learning Curve ***

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

MAR 20.00 YQS OD Bid=0.38 OI=100 CB=19.62 ROI=7.1%

Chart =


TSEM - Tower Semiconductor $27.25 *** Entry Point ***

Tower Semiconductor is an independent manufacturer of integrated
circuits on silicon wafers and a provider of related services.
As a foundry, Tower provides IC design, manufacturing and
turnkey services using advanced production capabilities and the
proprietary IC designs of its customers, and is specializing in
providing solutions for embedded non-volatile memory devices and
CMOS image sensors.  ICs manufactured by Tower are adapted into
a wide range of products in diverse and rapidly growing markets, 
including computer and office equipment, communication products
and consumer electronics.  Strong fourth quarter earnings helped 
propel Tower into a strong stage II climb, which is now nearing 
blue sky territory. We favor a 2 week play with a cost basis 
near the 30 dma. 

MAR 22.50 TWQ OX Bid=0.38 OI=50 CB=22.12 ROI=5.8%

Chart =


Russian Shares Follow The West...

The dependence on U.S. markets is apparent in many of
the world's economies.

If you aren't a well-traveled person, a trip to the
capital of Russia (formerly the Soviet Union) would
appear to be an incredible opportunity.  After
spending a few days with the people of this culture,
I can safely confirm that opinion.  My temporary home
(the famous Ukraina Hotel) is located on the Southern
bank of the Moskva (Moscow) River in the heart of the
government district.  The view to the East of this
monumental building offers an impressive panorama of
the central part of Moscow: the "White House" of
Russian Parliament, the International Trade Center and
the most popular tourist area in the city; Novy Arbat
Street.  This location provides an excellent vantage
point to view the plight of Russian urban society.

The first and most important issue facing Russia's
current administration is the development of a sound
economic strategy.  The nation has often been accused
of spending beyond its means and once again the
country faces serious monetary problems.  Russia is
due to make over $700 million in foreign debt payments
this month but the current budget simply won't allow
it.  Their last resort, the central bank's reserves is
the only way to fulfill these obligations.  Despite the
problems in central government, the booming export
business and foreign interests in Russian corporations
continues to grow.  While its difficult to understand
why anyone would want to invest in companies that
operate in a severely cash-strapped economy, the motive
is obvious.  The world's wealthiest investors are
willing to go to any length to exploit a potentially
profitable situation.

The Russian Stock Market is a relatively new
achievement, born out of a necessity to finance the
flagging infrastructure.  Oil equities make up two
thirds of the market and telecoms are Russia's
dominant technology stocks.  The most popular gauge
of market performance is the Moscow Times Index, a
diverse group of 50 leading companies with a total
capitalization of almost $40 billion.  The movement of
the dollar-dominated index is heavily dependent on
Western markets and this broad-based indicator mimics
the Dow's performance during periods lacking
significant regional news.

The system of exchange and trading is similar to
Western markets but the obstacles for outside
investors are numerous.  The most important issue
concerns inconsistencies in the current securities
legislation.  Russian law regards a security or stock
only as a "tsennaya bumaga", a valuable paper.
Unfortunately, securities trading generally occurs
entirely in a virtual world and with current
regulations, there is no allowance for electronic
trading.  By defining a security as a document, Russian
legislators assumed a traditional, impractical approach.
In hindsight, lawmakers are now considering amendments
to recognize paperless markets.

There is another popular method of investing in Russian
industry.  The leading corporations are traded on U.S.
financial markets as American Depository Receipts
(ADR's); financial instruments that act as proxies on
Wall Street for the shares of companies based abroad.
ADR's were created in 1927 in response to British Law
prohibiting local companies from registering their
shares in foreign markets.  Most companies avoided the
letter of the law by using a proxy stock that traded
on Wall Street instead of real stock.  American
Depository Receipts are used by countries around the
globe to participate in U.S. corporate growth but in
Russia they also have an unclear legal status.  A large
number of Russian companies have sold ADR's on Wall
Street and although they are attractive to wealthy
foreign investors, under Russian law ADR's are not
absolutely recognized as an ownership stake in a
corporation.  A number of hard-line politicians are
opposed to the system and were they to derail the ADR
program, it would affect the ownership structure of
almost every major Russian corporation.  Of course any
trouble with the ADR market would eventually translate
into concerns for the entire concept; not a favorable
outcome for Wall Street.
It is interesting to note that the Bank of New York
is centrally involved in the current ADR controversy.
You may recall that BNY made the headlines years ago
as part of a billion dollar Russian money-laundering
scheme.  Now it is again at the eye of the storm as
the Wall Street ADR connection for Russian investors.
BNY retains almost 75% of the global ADR market and
has been in a unique position to influence how a number
of these proxies are leveraged in Russian corporations.
Critics of the program have filed formal complaints
about the way ADR's were run through the BNY with
Russian Stock Market officials and the U.S. Securities
Exchange Commission.  The statements suggest the BNY
has been conspiring with the management of Russian
companies that participate in the ADR program.  Of
course all the alleged activities are subject to
investigation and interpretation (none of them have
been substantiated), but the BNY is vulnerable because
it has multi-million dollar assets in Russia that
could eventually be seized.

There is one unique development that has come from the
recent ADR controversy.  A new project is underway to
create Russian Depository Receipts; proxies that would
let Russians buy a piece of Wall Street.  The plan was
unveiled last year by a group that includes Deutsche Bank
and Templeton Investments and it is being examined by
representatives of the Central Bank and the Russian
Commission for Securities.  The program is expected to
be in a place later this year and if successful, it maybe
extended to Russian ADR's.

Now let me get this straight - Russians investing in
Russian companies through proxy shares - that's
certainly an optimistic proposition, considering the
current state of economy.

Next week, I return home and we get back to the business
of making money...

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