Option Investor

Daily Newsletter, Sunday, 03/12/2000

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The Option Investor Newsletter          Sunday  3-12-2000  1 of 5
Copyright 2000, All rights reserved. 
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Entire newsletter best viewed in COURIER 10 font for alignment
         WE 3-10           WE 3-3          WE 2-25         WE 2-18    
DOW      9928.82 -438.38 10367.20 +505.08  9862.12 -357.40 -205.29
Nasdaq   5048.62 +133.83  4914.79 +324.29  4590.50 +178.76 + 16.29
S&P-100   749.50 - 16.45   765.95 + 46.17   719.78 -  8.74 - 23.52
S&P-500  1395.07 - 14.10  1409.17 + 75.81  1333.36 - 12.73 - 41.03
RUT       603.81 +  5.93   597.88 + 41.14   556.74 + 11.06 +  8.58
TRAN     2365.29 - 69.16  2434.45 + 83.19  2351.26 - 79.54 -  5.33
VIX        23.80 +  2.51    21.29 -  7.79    29.08 +  0.63 +  1.53
Put/Call     .39              .40              .41             .63

Nasdaq +134 in record week, Dow -438 and falling.
What is wrong with this picture?

Extreme divergence. Or is it really just rapid convergence? Whatever
you call it the fact is the Dow and Nasdaq are headed in opposite
directions at a high rate of speed. Eventually this is going to 
cause serious problems and from the news reports today it may be 
sooner than we think. As long as the Dow remained positive Friday,
even by only single digits, the Nasdaq was in record setting rally 
mode. As soon as the Dow rolled over around 3:PM and dropped from
+30 to -90 the Nasdaq dropped from an intraday high of 5132 at +83
points to only barely close positive at +1.76. The results of the
Dow's drag on the Nasdaq will only get worse as we move farther
below 10,000. 



The Dow's failure to rally this week after the big drop on Tuesday
and the failure to hold over 10000 today has only confirmed the
current downward trend line and could be bad news for the week
ahead. In addition to the technical problems there are some serious
sentiment problems developing as well. Technically the Dow bounced
off the exact upper boundary of the down trending channel and 
technically we could see a drop next week to as low as 9500. 
The failure to even mount a credible bear trap rally after the 
big drop has put a serious cloud over the forecast. The volatility 
is increasing and we have four serious news events next week and 
none are expected to be market friendly. 

The Nasdaq turned in the equivalent of a full reversal with the 
sprint to a new intraday high of 5132 and then the retreat that
gave it all back. This reversal pattern after setting a new high 
is normally a sign that a rest is in the cards. Who can blame it? 
With an over 800 point gain (5132-4291=841 points) in only 14 
trading days since the Feb-22nd low there is a lot of profit 
waiting to be taken. We have had three days of -100 or more 
points to only gain it all back and then some the following day. 
We should patent this mini correction cycle of approximately once 
every four days and give it some catchy name like "settlement 
day" to set it apart from the real -10% corrections. We have 
had two of the major corrections in the last three months and 
the Nasdaq is still up over +24% for the year. We are on track 
for another +100% year and should lock in +30% by the end of 
March. A 100% year would put the Nasdaq at 8500 by year end. I 
am certainly not forecasting that but I would gladly take it. 
Back to the point, the Dow pulled the Nasdaq down today and is 
likely to do it again next week.

The main catalyst for the drop today was another earnings warning
from a major consumer firm. Dial (DL) warned that they would 
miss earnings by -10% to -12% this quarter and the resulting -$3
drop in price put them at a six year low. Not that Dial is a
real bellwether company but after PG earlier in the week traders
are now becoming increasingly worried about who else will come
out of the closet in the next three weeks. We are sure to get 
some more brand names and each will have its own reason for
missing the boat but the results will be the same. Market 
depression due to reduced earnings expectations for those 
not brave enough to warn. 

Another factor that is starting to become apparent is the 
awakening of the passive investor. Contrary to what you hear
about the online investing generation the majority of the
investing public are passive investors. Retirement accounts
make up the vast majority of their investments. Of these accounts
the vast majority are invested in index funds. A simple way to
maximize returns safely in a bull market. These funds are setup
to mirror the gains in the DOW, S&P, RUT, etc. Works great in
a bull market but the same mechanics that reward in up markets
also deduct in down markets. The passive investor will remain
that way as long as they can pick up a newspaper once a month
or so and marvel at how smart they were to invest in XYZ fund
which is up another xx% in the last month. Fat, dumb and happy.
What some analysts are beginning to see is the awakening of the
collective subconscious's of these investors. How many times
do you have to see a headline about the Dow being down XXX points
before it starts to sink in that maybe there is a problem in 
the markets? How many times do they have to look in the paper
and see a minus sign next to their super fund before they start
to wonder about the wisdom of staying invested? What is all this
talk about the techs being grossly overvalued, old economy stocks
rusting away, Warren Buffett down -48%? Warren Buffet? If the 
greatest investor of all time is losing money then maybe there 
is something I don't know. Maybe I should put that money into 
a money market account instead. 

OOPS! A phenomenon almost unknown in a decade called "net 
redemption's" is starting to appear. Value funds have been 
Suffering this problem for months and now index funds are 
beginning to see a net outflow of cash almost daily. Since 
index funds are not banks and are paid to hold stocks not cash, 
they have to sell stock to get the money for redemption's. When 
they need to sell large amounts of stock they use a type of 
order called "order on close". Instead of impacting the price 
negatively during the day by dumping large blocks of stock they 
place a "sell on close" order and they get paid whatever the 
closing price is for their stock. The market makers have an 
advantage in knowing when and how much stock is going to be 
sold and they can stockpile buy orders to offset the large block 
they are going to have to handle. At about 3:30 these "order on 
close" orders are made known on the floor of the NYSE. Recently
the number of "sell on close" orders has been rising. On Friday
there were blocks of several hundred thousand shares going out 
at the close. One block was 446,000. The public is starting to 
move and once in motion it will be hard to reverse the trend. 
This could cause the cycle to accelerate as the liquidity which 
has been powering the market begins to dry up. 

Before you start crying foul I will tell you that more money
came into the market in the last two weeks than most full months
of last year. The problem is that it did not go into value funds
or index funds. It went into growth funds and tech stocks. This
is money that came out of the Dow and out of the S&P. It is 
accelerating the Nasdaq and decelerating the Dow. I wrote a
couple months ago that I expected the Nasdaq to possibly pass 
the Dow late this year. It is looking more and more possible 
and probable as the calendar unwinds. If the Dow did nothing
and the Nasdaq continued to add +25% a quarter as it has in the
last twelve months then they would meet at year end. Instead
the Dow is on a downward spiral that is dropping twice as fast 
as the Nasdaq is advancing and they could converge as soon as
September-October. That is of course depending on how much the
Dow drop continues to degrade the market as a whole. While the
outlook for the Nasdaq is stellar there is always the chance
that investor psychology could turn based on the "perception"
of a negative market due to the media coverage of "Dow" as 
the "market". It is this "bear" market mentality that we will 
need to avoid as we progress farther into 2000 and continue 
to benefit from the Internet revolution. It is not a bear 
market. It is sector rotation in its purest form. 

The Internet is fueling record increases in productivity,
competition, cost savings, connectivity, research, communication
and cooperation. News of scientific discoveries like we are 
seeing in the biotech sector almost every week is available 
almost instantly across the net. Large strides in computing 
power and chip technology are increasing daily. Still shampoo 
is still shampoo and consumers are fickle. They will shop where
the variety is greatest at the best price. That may not be
a brick and mortar store. Companies that have been around for 
decades and are mired in the old sales and marketing paradigms 
will continue to suffer until they reinvent themselves and 
conform to the new Internet model. Earnings warnings? You
bet. Count on many of them. Also count on many "better than 
expected" results from the "new economy" companies. (I am 
really growing to hate those terms already) Now I ask you,
which type of company do you want to invest in? The answer...
1-800-redeem. Hello Fidelity, you know that index fund I
own......  Now you see the problem. "We" are the problem.
Welcome to 2000.

Having totally gone off the deep end and rambled for several
paragraphs I will try and direct your focus back to what is
important next week. Economic reports and lots of them, 
followed by a Fed meeting. Sounds like a great week to go 
fishing. Tuesday starts off the calendar with Retail Sales, 
Wednesday Business Inventories, Import/Export Prices, 
Industrial Production. Thursday Jobless Claims, PPI, Housing 
Starts, Building permits. Friday closes with the CPI. Could 
be a rough week. Follow all those probably negative economic 
reports with a dose of interest rate fears and a Fed meeting 
on Tuesday the 21st and you get a real Maalox moment.

The optimistic side of me is saying, "Dow down -438 points"
got to be some bargains here somewhere. The pessimistic
side is thinking, "I would not buy PG, JNJ, DD, EK, KO, so 
why should anybody else". Like I said last Sunday there is
still a Nasdaq correction lurking in our future and even
though it felt bad on Wednesday it was only a blip on the
chart so the "big one" is still in our future. It would
be nice if we could get through April earnings before we
get blindsided by the next trip to the woodshed but April
15th is still a long way off. I would be careful of any
Nasdaq weakness next week. With the market (Dow) still
in a down trend you never know when the Nasdaq bottom may 
fall out. The VIX has been easing down from its high of 
almost 29 on Wednesday. Friday it moved in a narrow range 
between 23.45 and 25 and finished almost unchanged for the 
day at 24.17. It is not giving us any signals, buy or sell, 
at the present. The put/call ratio however is only .39 and
indicating some weakness ahead.

Friday night almost all the other editors and writers in 
the office happened to congregate in one spot where a lively
discussion on market direction ensued. Without exception we
all believed that the market could and would go down next
week. All the negatives both technical and sentiment were
being tossed out like so many nails for the Dow coffin. Red
Alert! As I pondered the implications for this article Kimo
and I slowly came to the realization that everyone had built
the perfect wall of worry for the market to climb. Just like
I have repeated many times, "when everything looks too good
to be true, it probably is" the reverse is also true, "It 
is always darkest before the dawn". While I believe it
could get darker, 9500 would be really dark, there is another
axiom that comes to mind, "the herd is always wrong at both 
ends". If the herd here thinks the market is going down next 
week does that mean we should take the contrarian view and bet
against it? Absolutely not! Never fight the trend. Take all
the information you can find from every source possible and
then plan for each outcome, up and down. If you pre-plan
for both then you will be ready to execute for each direction. 
Once prepared, sit back and watch the show. Be slow to
react at the open and you will save yourself much grief. 

I can't tell you how many times I have prepared the night 
before for my "expected" market direction only to have the 
market do the exact opposite. Have you ever felt the market 
was at the bottom and planned to buy OEX calls the next day 
and all day you just kept waiting for an entry point as the 
market dropped several hundred points? Had you been market 
neutral and ready to play calls OR puts then you could have 
made thousands of dollars. Instead your market bias either 
kept you out of the market or convinced you a dip was a bottom
when it was just a dip. We can't force our view on the market.
What we believe is irrelevant. It is up to us to play the
hand we are dealt by the market. Most of us would be better
off each day if we could call somebody who is not an investor
over to the PC, show them a chart of the Dow and ask them
which way is the market going. Their answer would be 
unencumbered by the wealth of "knowledge" that we have been
blessed with. Because we know "so much" our vision is clouded.
To be successful investors we must get rid of the cataracts
of knowledge bias and then clearly follow the road map to
wealth the market provides for us on a daily basis.

Buy the dips but only when the rebound starts.

Trade smart, sell too soon.

Jim Brown


Due to scheduling conflicts we have had several cancellations
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in attending the second session please register ASAP. It is 
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intense option training by the Option Investor staff. 

For more info click here;


My current long positions: CPTH, RRRR, BWEB, KSU, SEG, TXN 
My current short positions: RIG, SLB

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you have questions or comments about OIN please direct them to 
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Thank you for your cooperation.

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There is no Jim's Plays article tonight.

Stock News

Sonic Boom
By  S.P. Brown

Talk about momentum, few companies have it working for them to 
the extent Sonic Foundry (SFO) does.  Since hitting its 52-week 
low back in August, this high-tech wunderkind has soared nearly 
1,400 percent to Friday's close of $118 a share.  

Given the three-letter stock symbol, Sonic obviously doesn't 
reside on the Nasdaq stock exchange.  In fact, the company 
doesn't even reside on the New York Stock Exchange; it's 
domiciled on the oft-neglected AMEX - the infamous home of 
mutual fund-like derivatives and long-forgotten small-cap 

Nevertheless, despite being on the wrong side of the tracks, 
Sonic is very much a high-tech stock.  The company makes some 
nifty Internet audio and video editing software such as Sound 
Forge, ACID and Stream Anywhere.  These products combine 
editing functions with the ability to convert different audio-
video software formats into various files compatible with 
Windows or Real streaming media platforms.

The ACID software allows users to edit and merge segments into 
a song, while Sound Forge allows users to modify digital audio 
and video files.  As for Stream Anywhere, it stores audio to a 
hard drive and prepares it for CDs, streaming over the Internet 
using either RealNetworks' G2 player or Microsoft Windows Media 
Technology for music compression formats such as MP3 or AVI. 
Thes technologies were recently showcased in an episode of 
"The Drew Carey Show," which was simultaneously broadcast over 
TV and the Internet. 

As for the numbers, Sonic is still at the development stage 
where what's happening at the present really doesn't matter 
much to investors (the company's been public for about 20 
months).  At any rate, here they are anyway:  For the most 
recent quarter ending December 31, revenues were $5.1 million, 
an 82 percent increase from the $2.8 million posted for the 
same quarter in 1998.  As for earnings, the company posted a 
net loss of $2.2 million, or $0.33 per share, compared with a 
net loss of $1.4 million, or $0.52 per share, for the same 
period last year. 

What investors do care about, though, is market potential, and  
Sonic has plenty of that.  According to market researchers 
Frost and Sullivan, worldwide demand for video compression 
technology is expected to reach $400 million by 2001, while the 
markets for video and audio post-production products in the US 
is expected to reach $1.4 billion by 2003.

What's more, with the massive build-out in broadband capacity 
that has been occuring of late, there is a growing need for 
high-quality broadband content to fill these new "fat pipes."  
There is also a potentially huge opportunity to help convert 
older audio and videotape into digital formats.  Sonic projects 
there are millions of hours of analog content that will need to 
eventually be digitized and edited for digital storage and 

To ensure it remains at the forefront of this potentially 
lucrative market, Sonic has moved fast to amass a blue-chip 
clientele, which includes the likes of Capitol Records, CBS 
News (CBS), Disney (DIS), News Corp. (NWS), General Electric 
(GE) and Seagrams (VO). 

On Thursday, Sonic added Time Warner (TWX) to this high-powered 
stable.  The company will provide software and full-scale media 
deployment technology to TWX's Warner Brothers Online and 
Entertaindom.com Internet subsidiaries.  Additionally, Warner 
Brothers will use Sonic's consulting and training services to 
push its traditional media onto the Internet.  

The importance of Sonic getting its foot in the door with TWX 
can't be underestimated, for it puts the company in an enviable 
position to help bridge the gap between TWX's vast media empire 
and America Online's (AOL) massive subscriber base. 

Sonic's alliance with TWX was formed as part of a new round of 
private financing that included an $18.5 million cash infusion 
by institutional investors Societe Generale and Essex 
Investment Management.  The company plans to use the money to 
fund its working capital needs.  

Sonic's recent successes has piqued the interest of more than a 
few market watchers.  One in particular, C.E. Unterberg analyst 
John Todd, predicts Sonic will increase sales to $36 million in 
2000, versus $14.8 million in 1999.  Todd also predicts that 
the company will shrink its per-share loss from $2.11 in 1999 
to $0.59 this year.  For the longer-term, Todd believes Sonic  
will grow revenues 50 percent a year for the next few years.  
Based on these prognostications, he has put a target price on 
Sonic of $175 a share. 

Granted, many analysts' stock price predications are as rooted 
in reality as the tooth fairy is.  However, Todd has a proven 
track record for sizing up new technology companies.  This guy 
foresaw the success of Puma Technology (PUMA), Proxim (PROX), 
Juniper Networks (JNPR) and Polycom (PLCM) long before their 
stocks' hit triple-digit levels.  

Another well-respected analyst who thinks Sonic has got room to 
run is Ray Dirks of Dirks & Company.  Dirks was particularly 
encouraged by the funding from Societe Generale and Essex 
Investment Management Co. LLC, a group known for very astute 
technology investing.  "The fact that they [Essex] put their 
money into Sonic Foundry indicates that this technology is for 
real," said Dirks, who added that he would be raising his 
current 52-week price target of $150 to somewhere above $200.

The company's well on its way to reaching that target.  This 
week alone Sonic added $44 to shareholder value.  

Finally, here's a heads-up for those investors who are prone to 
leap before they look.  There are no fewer than six other 
publicly traded Sonics out there in the investing universe.    
Distinguishing one from another is important, as none of them 
are interchangeable.  The only reason I bring this up is 
because of the well-publicized confusion that took place in 
January between Juno Online (JWEB) and Juno Lighting (JUNO).


Another Milestone Falls By The Wayside
By Ryan Nelson

Faster than a speeding bullet, more powerful than a locomotive, 
and able to leap over the DJIA in terms of popularity, the 
Nasdaq knocked over another milestone this week.  Just when 
we talked about the Volatility Index ($VIX) last week signaling 
a short-term top, the markets corrected by mid-week and it was 
back to the races.  Superman has nothing on this Nasdaq which 
seems literally unstoppable at times.  The question is, will 
the Nasdaq hit 6,000 by tax day like Jim predicted in the 
Thursday evening Market Wrap.  I have to admit, if this current 
channel remains in tact (as it has for 5 months now), it should 
be a piece of cake.  Not to mention, we are entering earnings 
season soon.  Markets typically fly during this period.  Either 
way, let's see if some of the stocks in this week's requests 
look to head higher or lower.

One note about last week's article first.  I had many requests 
asking what the float was and where you could get this info, 
along with the short interest.  Easy enough.  The float is the 
number of shares that are available to be traded by the general 
public.  It is lower than the total number of shares outstanding.  
This is because many shares are typically held by insiders, 
privately-held, or "locked up" in some form.  So it is good 
to know the float as it plays a part in how volatile and liquid 
trading may be in that security.  The lower the float, the 
more volatile the shares to either the upside or downside.

As far as short interest, it can be tough to determine how 
many shares short is too much.  Again, it comes back to the 
float and the average daily volume.  You sort of get a feel 
for what is out of line.  The bottom line here is that the 
smaller the short interest and short ratio, the better.  I 
just don't like to have a lot of traders betting against any 
of my long positions.  It weighs the stock down and makes it 
trade like it can't get it's feet underneath it to put a good 
run together.  We talked about ICIX having a huge short position 
and making it therefore too risky.  Whoever is shorting this 
stock has got to be having some sleepless nights.  ICIX is 
beginning to look like it is picking up steam.  Probably based 
on their stake in DIGX.  If they can put another day or two 
of rallies together, I wouldn't be surprised to see the shorts 
fleeing.  That would really set this stock on fire.  Again, it 
is a high-risk play, but worth watching as the volatility will 
undoubtedly increase as the battle between longs and shorts 
continue.  Remember we cited RMBS as an example of a short-
squeeze and that stock hit is now over $400!

For both of these numbers, there are many places to go.  I use 
the Yahoo! Finance page.  Go to Yahoo!, click on Finance, go 
to stock quotes and enter the symbol and hit enter.  Then hit 
Profile.  That will give you all the basics on the company.  


Bristol-Myers Squibb - BMY

What do you see with BMY?  The recent trend has been down and 
the recent news mixed.  With the biotech sector doing so well, 
do you think a little enthusiasm might bleed off for the 
pharmaceuticals as well?  At the current $50.00 level, I think 
this may be a great value play for a long term hold. 
Thanks! Gil

Great value play is right.  I am not usually a value kinda guy, 
but there is no denying the value in the drug sector.  This 
group has just been beaten to death and I don't think there 
is justification for the drubbing.  My guess is that most 
investors in this "general" area have been switching money to 
the Biotech sector.  Why not?  It has been incredibly hot.  
But I have seen the lots of Biotechs beginning to rollover 
after tripling or quadrupling already this year.  So it wouldn't 
surprise me to see money come back into drug stocks.  Let's 
face it, this is a cyclical group.  One year it's Biotech, 
the next year it's Drugs.  Remember how popular some of these 
stocks were last year?  Pfizer and Viagra.  Drug stocks can 
be big cash cows.  So at some point they have to be a buy.  
Now I don't recommend trying to catch a falling knife, but it 
would seem prudent to watch for reversal and may check out 
some LEAPS.  I bought LEAPS this week on a beaten down drug 

BMY's chart is showing signs of a bottom this week with the 
capitulation happening late Tuesday.  It will have strong 
resistance at $60, but I can't imagine this stock under that  
level a year from now, barring some unforeseen event.  Keep 
you eye on this stock and sector.  You may be glad you did 
in the long run.  It is also a good diversification play in 
this market.  The Nasdaq will eventually have to take a breather 
and I don't want to be stuck with all my eggs in one basket.



Metricom - MCOM

I'm enjoying my free trial on the optioninvestor.  I would like 
the stock MGIC analyzed and also MCOM.
Thanks much, Ron Rasoletti

I have good news and bad news for you Ron.  Good news is that 
your pick made it into the article.  Bad news is I only have 
time for one of them.  Let's go with MCOM since it is at a 
pivotal point.  

Metricom is a provider of wide area wireless communications 
solutions.  They were thrust into the limelight last June 
when it was announced that Paul Allen's venture capital firm 
would be adding to their stake in MCOM.  This really made 
MCOM a mainstream stock.  We begin adding it to the call list 
from time to time last summer.  

Right now the chart looks very interesting.  Note how it has 
retreated recently, but stopped dead on the 100-dma.  In fact, 
the 100-dma has been a historically strong support level.  Take 
a look at a chart from last September for confirmation.  So as 
MCOM consolidates, it will eventually have to choose a direction.  
My guess is higher, but if it breaks the 100-dma on strong 
volume, I would not be afraid to buy puts.  Just make sure it 
is a solid break with a close under the 100-dma.  You don't 
want to get faked-out based on one bad market day or some other 
one-day news event.  

A move to the upside could be considered on a break over the 
50-dma.  Next stop would then be resistance at $100.  After that 
you are in blue-sky territory and the momentum investors will 
take over.  

Anyway, MCOM is at a pivot point and should be playable once it 
picks a direction.  



MRV Communications - MRVC

What about MRVC?  I had it at 18 sold it at 22.5...watched the 
doji at 52 and it's gone nuts ever since.
Curious why it's never been OIN pick?
Never been a pick?  We've played this thing a lot in OI, just 
not as a straight call play.  Probably because Jim and I never 
found the perfect entry point for that.  But we've had it in 
our Naked Put section, Naked Put Percentage List and even in 
Ask the Analyst.  See the January 23rd issue for my last write-
up of MRVC.  It was then that we noted the amazing basing 
pattern and the breakout.  Who know it would run like this 

So in our January 23rd issue we were cautiously optimistic, 
but know I have to go one the record as bearish on MRVC.  Too 
far, too fast, that is all.  Great company, great sector, but 
$90 to $190 in just under a month is too steep for my blood.  
They did announce a split on March 3rd and that could keep the 
stock running, but the risk level is incredibly steep, especially 
for call buying.  With the high premiums due to the implied 
volatility, I can't see being a buyer here.  Not to mention, 
the split date isn't even scheduled yet.  Second quarter of 
next year is the best the company could give as a date.  I 
would expect, and wait, for a pullback first.   I don't even 
have a target for this to pullback.  You could argue a 50% 
retracement would be $140 and that is where I would start 
looking for an entry point.  I would also want to see strong 
volume come back to the play wherever the bottom forms.  A 
good tail on a candlestick would also be a good confirmation.  

All in all, high premiums, a huge run, and no set stock split 
date would all keep me on the sidelines for awhile on MRVC.  
Who knows, maybe in another month and a half we will revisit 
MRVC once again and turn back to bullish for a split run.  You 
know we love to revisit our favorites!



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 10, 2000 

                   Key Benchmarks
Broad Market       Bearish/Bullish  Last    Posture/Since  Alert
DOW Industrials   10,700  11,250   9,929    BEARISH   2.17
SPX S&P 500        1,410   1,450   1,395    BEARISH   3.07
OEX S&P 100          765     780     750    BEARISH   3.07
RUT Russell 2000     500     520     604    BULLISH   2.24
NDX NASD 100       3,800   4,000   4,587    BULLISH   2.24
MSH High Tech      1,850   2,000   2,196    BULLISH   2.24

XCI Hardware       1,300   1,460   1,618    BULLISH   2.24
CWX Software       1,200   1,470   1,630    BULLISH   2.24
SOX Semiconductor    800     900   1,333    BULLISH   2.24
NWX Networking       940   1,000   1,158    BULLISH   2.24
INX Internet         700     800     846    BULLISH   3.09

BIX Banking          500     550     464    BEARISH  11.30
XBD Brokerage        400     450     495    BULLISH   2.31
IUX Insurance        500     550     446    BEARISH  11.30

RLX Retail           950   1,000     803    BEARISH   1.28
DRG Drug             340     380     329    BEARISH   2.18
HCX Healthcare       700     750     671    BEARISH   2.18
XAL Airline          110     140     121    Neutral   3.10  *
OIX Oil & Gas        280     315     274    BEARISH   1.27

***Posture Alert***
The Dow ended the week under 10k, while the NASDAQ continued to 
shrug off the blue-chip woes by maintaining the 5,000 mark in good 
fashion. Friday's activity saw the Brokerage sector jump up +3.62%, 
thanks to the mega-merger between Deutsche Bank AG and Dresdner 
Bank AG. This only helped fuel rumors or more industry 
consolidation. Other sectors that showed strength include the 
Semiconductor sector (+3.30%) as well as Airlines (+3.15). With 
this most recent action, we have upped Airlines to Neutral from 

Market Sentiment 

Sunday, March 12, 2000

Technology stocks locked in another solid week, as the NASDAQ 
maintained the 5,000 mark while the Dow continues to languish 
below the 10k level. Congratulations to the NASDAQ 5000 winner 
(Louise Hill), but would you be so kind as to let us know when the 
NASDAQ will beat the Dow? They are only 4,800 points apart right 
now, and with the torrid pace that the NASDAQ is on, combined with 
the poor pace that the Dow is on, it may be just a couple of months 
before we see that scenario occur! 

Volume continues to surge on the NASDAQ, which just shows the 
strength in technology shares. This volume continues to crack 
2-billion shares a day, which is phenomenal. Does anyone see the 
NASDAQ trend slowing down anytime soon? With all of the millions 
of new traders coming onto the net, controlling their own dollars, 
as well as the foreign investors looking for action, this trend 
towards the NASDAQ should continue for a long time (long time in 
traders-talk is what, 2 weeks?). This trend continues to be 
ECON-101 (first-level economics in college), where demand continues 
to outstrip supply. Too many dollars are chasing too few stocks. 
Professionals talk on CNBC about the new thinking on how to value 
stocks, which is a bunch of BS! This trend happens to be one of 
the most basic economic principles, supply vs. demand. As long as 
the supply of new money and investors continue to surge, 
concentration will be put on high growth companies which happens to 
help fuel the NASDAQ. 

Now many times in the past, Pinnacle Capital has highlighted the 
sentiment on the NASDAQ 100 (NDX) or the QQQ (which trades on the 
American Exchange). Once again, we want to highlight the sentiment 
on this index, versus the Dow. Now during the entire run-up in the 
NASDAQ 100, we have witnessed and highlighted heavy put buying 
versus call buying. The sentiment on the NASDAQ 100 during the 
major rallies was extremely bearish, and it continues to be. The 
put/call ratio on Friday for the NDX was 3.90, that is, almost 4 
puts for every call. This is a very bearish figure. Now, look at 
the chart below. The most bullish index is the Dow, which happens 
to be the worst-performing index. The most bearish index is the 
NASDAQ 100, which happens to be the best performing index. What a 
perfect contrarian scenario!

Now if you look at the QQQ, there are over 7 puts for every call, 
which is unbelievably bearish! Anyway, we continue to view the 
statistics below from a contrarian stand, so as long as the bears 
are dominating the NASDAQ 100, we will continue to be bullish on 
this index. And as long as the option speculators are bullish on 
the Dow, we will stay bearish. This sentiment analysis has been 
extremely dead-on accurate, when predicating major moves on the 
indexes. The bearishness on the NASDAQ has continued now for many 
months, and as long as it does, we will continue to see major 
milestones accomplished! Have a good trading week! 

Put/Call Ratio
Index     Friday 3/10/00    Overall   

S&P 100      1.81            1.31 
S&P 500      0.97            1.27
Dow          0.27            0.93
NASDAQ 100   3.90            1.83
QQQ                       N/A             7.27

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 (6.148):
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. The first major 
corporation to do just this is Proctor & Gamble, with it's 27 
point decline.

Volatility Index (23.80):
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. At current levels, the VIX is within one good 
day of being in overbought territory.

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

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

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                        (3/10)

Overhead Resistance (790-820)    18.34
Overhead Resistance (765-785)     6.26

OEX Close                       749.50

Underlying Support  (740-760)     0.78
Underlying Support  (700-735)     4.16

What the Pinnacle Index is telling us:
The Pinnacle Index was the perfect market-timing tool last week, 
as we called the run-up and both failed rallies. Anyway, based on 
Friday's numbers, we have light support until the 700-735 range, 
where support is extremely strong. However, overhead resistance is 
heavy (765+) so the odds of us breaking this level by March 
expiration is very small. We did notice a heavy put/call ratio on 
the OEX Friday, so we may see a small bounce early in the week for 
the S&P 100.

Put/Call Ratio                  Friday
Strike/Contracts                (3/10)

CBOE Total P/C Ratio             .39
CBOE Equity P/C Ratio            .31
OEX P/C Ratio                   1.81

Peak Open Interest (OEX)
Strike/Contracts     (3/10)

Puts               700 / 11,436
Calls              750 /  9,088
Put/Call Ratio         1.26

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 10, 2000                          23.80

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
March 9, 2000                         53.4        27.6


For the week of March 13th, 2000


None Scheduled


Retail Sales             Feb    Forecast: 1.0%   Previous: 0.3%
Retail Sales ex-auto     Feb    Forecast: 0.7%   Previous:-0.3%


Business Inventories     Jan    Forecast:  0.4%   Previous:  0.5%
Export Prices ex-ag.     Feb    Forecast:  N/A    Previous:  0.1%
Import Prices ex-oil     Feb    Forecast:  N/A    Previous: -0.1%
Industrial Production    Feb    Forecast:  0.6%   Previous:  1.0%
Capacity Utilization     Feb    Forecast: 81.9%   Previous: 81.6%
Current Account          Q4     Forecast:-95.0B   Previous:-89.9B


PPI                      Feb    Forecast:  0.6%    Previous:  Unch. 
Core PPI                 Feb    Forecast:  0.3%    Previous: -0.2%
Housing Starts           Feb    Forecast:1.720M    Previous:1.775M
Building Permits         Feb    Forecast:   N/A    Previous:1.763M
Initial Claims           03/11  Forecast:  280K    Previous:  280K
Philadelphia Fed         Mar    Forecast:  13.0    Previous:  13.3

CPI                      Feb    Forecast:  0.4%    Previous:  0.2%
Core CPI                 Feb    Forecast:  0.2%    Previous:  0.2%
Michigan Sentiment       Mar    Forecast: 110.5    Previous: 111.3  

Week of 3/20

03/20 Treasury Budget
03/21 Trade Balance
03/21 FOMC Meeting 
03/23 Initial Claims
03/23 FOMC Minutes
03/24 Durable Orders

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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              3-12-2000  
Sunday                        2 of 5


What is the value of a company?
By Mary Redmond

One of the big news topics this week was the on again off again 
merger trio between Qwest, Deutsche Telecom and Qwest's merger 
partner US West.  It was announced early this  week that the 
attempted  takeover of Qwest by Deutsche Telecom had been
cancelled, because Qwest might face a potential lawsuit from 
their partner US West.  Qwest dropped down as low as 50.  Then 
early Thursday morning a rumor was published in a European 
financial newspaper that Deutsche telecom had made a 100 billion
dollar offer for both companies.  By Thursday evening Qwest
released news that the merger talks had been suspended.

This type of merger would face many legal and regulatory 
hurdles, and could take years to complete.  The point is that 
Qwest has a worldclass set of assets, and if  both Deutsche 
Telecom and US West want them,  others may want them too.   

When CMGI skyrocketed above 146 I closed the put credit spread 
I had put on two weeks earlier by selling  the 100 puts at 3/8 
and buying back the 110 puts for 1.5,  for a total credit on 
the spread of 2.7 points.  The stock bounced off 150, and 
couldn't hold.  On Tuesday I sold my shares of CMGI at 146 and 
bought back in  at 141.   I considered selling Thursday 
afternoon when it hit 148, but I held on.  Holding a stock 
over earnings is risky, but not as dangerous as holding an 
option, because the option premiums can become so inflated 
when a company is expected  to report good earnings that you 
end up paying for the excitement of the earnings. CMGI ended 
up reporting earnings much better than expectations, but didn't 
sell off dramatically, it just stayed in the same trading range.

I had purchased Nextlink July 100 calls at 21 the week before 
last, and last week I put a spread on Nextlink calls by buying 
the July 100 calls at 25 and selling the July 110 calls at 19.  
On Friday Nextlink opened up over 15 points, and I couldn't
figure out why until I heard on the news that a brokerage firm 
had indentified Nextlink as a ptential takeover target for 
Deutsche Telecom.  I sold my Nextlink calls at 28, because I 
think it's a great long term company, but I couldn't face
going through the same on again off again rumors Qwest was 
subjected to.

How do you value a company? There are many different methods 
but  most are a variation on the basic principles of security 
analysis which were first illuminated in the classic book 
Security Analysis by Benjamin Graham.  Anyone who is interested 
in stock market investing should take the time to read this 
book, as the principles still  hold even in our techno-driven 
momentum market.

At the most basic level, the value of a company is its book 
value, or the value of its assets minus liabilities.   The 
property, plant, and equipment, or the value of savings 
deposits at a bank, its inventories and accounts receivable.  
Assets like patented technology are hard to place a precise 
value on,  which is why the widest price swings frequently 
occur in companies which have no earnings, and only new 
technology.  But companies rarely trade all the way down to 
book value unless there is something wrong with the company 
or a serious misperception of its value in the stock market.   
This is because stocks have earnings power, which is the 
ability to generate money off their assets. 

Graham determined in the 1930's that a company could be 
valued the way a bond could be valued, by summing up the 
future earnings payments of a company and discounting by the 
appropriate discount rate.  This is where the uncertainty 
comes in, because future earnings are not predictable like 
bond interest payments. 

Predicting the future value of a company thus becomes  tricky.  
The method some analysts use is to determine the shareholders' 
equity, then calculate the return on equity, or what percentage 
return you receive on your investment.  This is where the profit 
margin comes in. Companies which are highly capital intensive, 
and have to spend a lot of their earnings on upgrading their 
equipment don't have as much left over to reinvest in their 
companies.  Once you determine the return on shareholders' 
equity and the amount that is reinvested back in the company 
you can estimate a future value for shareholders' equity.

Some analysts have stated that they feel technology stocks are 
overvalued and the "old economy"  stocks have been knocked down 
so low they are bargains.   However, by looking at the 
shareholders equity of some of the technology stocks in the 
Nasdaq you can determine that some of the growth is not just 
growth in the multiples the stocks trade at, but growth in the 
actual book value of the companies.  

It used to be believed that you could always count on the blue 
chips for slow and steady gains over time, and that technology 
stocks were riskier.   However, investors are learning nowadays 
that the real risk to a company is stagnation while the rest of 
the economy and market progresses. 

Mutual fund investors again demonstrated their appetite for 
technology stocks, as approximately 5.4 billion flowed into 
equity funds for the week ended March 8, and 2.8 billion went 
into technology funds.   Aggressive growth took in 2.5 billion, 
small cap took in 1.1 billion, and health care took in 1 
billion.  Value funds took in practically no cash at all, as 
investors showed they would rather stick with money market 
funds than value funds.   A remarkable 23.2 billion flowed in 
to money market funds last week according to AMG data services. 
Value funds and index funds may have difficult times ahead, 
because the proliferation of index tracking stocks like 
Diamonds, Spyders, and the QQQs have taken a lot of money 
away, and because investors are finding that blue chips are 
no longer the safe haven they were once believed to have been. 

Mary Redmond
Contact Support


SHIRT/BLOUSE! Going Naked 101
By Linda Schuepp

It is apparent to me that going naked (with regard to options) 
is perceived as the macho, sophisticated route that many would 
like to try but either are afraid to, or worse yet, do it without 
really understanding what they're in for.  

I felt this article was needed, because I receive quite a bit 
of e-mails from readers just starting out.  I really love to 
receive these e-mails and encourage you to ask your questions 
and hope that I am helpful in accelerating your learning curve.

Going naked is nothing more than the other side of a directional 
bet.  What makes it a little more complicated is the fact we deal 
with puts AND calls.  It's easier to understand directional bets 
when dealing with stock.  You buy stock if you think it's going 
up and you sell or "short" stock if you think it's going down.  
When you "short" stock, you are selling stock that you don't own.  
You're betting the stock will go down, and when it does, you can 
later "buy" back the stock that your broker borrowed for you.  
The money from the sale goes into your account and you have what 
in effect is a loan to your broker.  Your profit is the difference 
between the price you "shorted" the stock and price you eventually 
paid to buy it back less any interest you had to pay the broker 
for the "loan" of the stock.

Now for the options-it's a little more complicated to take a 
directional position because there are calls AND puts, and they 
can be in, at or out of the money.   So, let's break this down 
into bite size pieces everyone can understand.   The only thing 
different from the stock analogy in dealing with options is the 
terminology.  Selling naked is nothing other than "shorting"-- 
you are selling an option that you don't own.  The seller of the 
option is called the option writer.  The buyer is called the 
holder.  All the transactions are handled by a market maker who 
acts like a real-estate agent and makes a commission (the bid-ask 
spread).  Once you understand the lingo, it gets a little less 
The Call Side: It's always easier to understand the long side 
of any transaction and it's also easier to understand the "call" 
side of an option transaction.   When you buy a call, you think 
the underlying asset is going up.  The call acts like a substitute 
for buying the stock.  In order for you to buy the call, someone 
else has to sell it.  That someone could be selling a call that 
they bought previously or selling a call that they don't own 
(going naked).  The person "selling" the call thinks the stock 
is going DOWN or not going anywhere in the near future.  Unlike 
holding onto stock that is basing before making another leg up 
(QCOM), the call holder (buyer) does not want to hold onto the 
call because time value is eroding with each passing day.  Option 
volatility (one of option pricing factors) is also going down 
which makes the call even less valuable.  Therefore, if you felt 
a stock was going down, sideways or only going up only a little, 
you would "sell" the call.  If the stock continues to go sideways 
or go down, the call that you sold would go down in value-and that 
is a good thing.  At some point you could "buy" back the call to 
close out your naked position or you may simply let the option 
expire worthless. 

Tips for getting started selling naked calls: 
-pick stocks that have good volatility (no utility companies) 
-sell calls on stocks in a fast downtrend that have not bottomed
-sell "out of the money" strikes (higher than current price) 
-pick strike price ABOVE strong resistance (old 52 day high's)
-sell calls when implied volatility is higher than historical 
-pick stocks that have lots of daily volume (liquidity)
-get out of position if stock reaches strike price sold

Now for the harder part-
The Put Side: When you buy a put, you think the underlying asset 
is going down.  Buying a put is a downward directional bet like 
shorting a stock.  The only risk is the cost of the put.  If the 
stock takes off for the moon (JDSU) your loss would be miniscule 
compared to shorting the stock.  Again, like the call side, in 
order for you to buy a put, someone else has to sell it. The 
person "selling" the put thinks the stock is going UP or not 
going anywhere in the near future.  The put seller (this is the 
toughest to understand) believes the stock will go UP or stay 
above the strike price they sold the put for.  If the stock goes 
up, trades sideways or even goes down a little, the seller gets 
to keep the premium they received for selling the option "naked".  

Tips for getting started selling naked puts: 
-pick stocks that have fairly high volatility 
-sell puts on stocks in a fast up-trend but have not yet peaked 
-sell "out of the money" strikes (lower than current price) 
-set strike price below strong support (old 52 day low's)
-sell puts when implied volatility is higher than historical 
-pick stocks that have lots of daily volume
-GET OUT of position if stock reaches strike price sold

CAUTION:  Don't sell any naked calls or puts until you know what 
happens to the value of your option if the stock goes up, down, 
or doesn't move.  You also need to understand what happens to 
time value.  You must know of any upcoming events that could 
cause significant changes to the value of your stock such as 
when earnings are due for the stock or if approval is due on a 
lawsuit.  Volatility typically is higher just before known events 
such as earnings and drops off after the announcement.  Therefore, 
it is better to sell options in periods of high volatility and 
buy in periods of low volatility.  This is not meant to scare 
you off, just to warn you the things that can get in your way of 
being profitable.

BAILOUT: There are only two ways to bail out of naked positions. 

The Call Side: If you sold a naked call and the stock went UP 
to your strike price, you could:

1. Buy back the call at a loss or 
2. Buy the stock.  

If you bought the stock you would now have a covered call position.
If you had sold the call ABOVE a previous significant resistance 
level, such as a 52 week high as suggested, you would probably now 
be bullish on the stock and you could additionally purchase even 
more stock.  If you are near to expiration, with no time value 
left in the option, you could get "called out" of your original 
naked call position, which is now a "covered position".  This 
means the call holder (buyer) has the right to buy the stock from 
you the writer (seller) at the strike price you originally sold 
the call for.  Since you covered your position by purchasing stock 
at the strike price written, you would deliver that stock and your 
naked call position is now over and done with.  You would have 
hopefully made a profit on this transaction (the premium received 
less commissions and slippage).   You could now make more money 
on the additional stock you purchased after the stock reversed 
its trend.  This of course assumes you have unlimited capital.

The Put Side: If you sold a naked put and the stock went DOWN to 
your strike price, you could buy back the put at a loss or you 
could short the stock.  You would now have a "covered put" 
position.  If you had sold the put BELOW a previous significant 
support level, you and everyone else would probably now be bearish 
about the stock.   If there were little time value (close to 
expiration) then the stock would be "put" to you.   This means 
the put holder (buyer) has the right to sell the stock to you, 
the writer (seller), at the strike price you originally sold the 
put for.  Since you covered your position by shorting the stock, 
you would be obligated to buy the stock from the option holder, 
which would fulfill your short position.  This transaction would 
be a wash.   Your naked put position is now over and done with as 
is your short stock postion.  You probably would have made a 
profit (the premium received less commissions and slippage) on 
this transaction.   Similarly to bailing out of the naked call 
position, you could have shorted more stock than necessary to 
fulfill the put contracts you originally sold and therefore take 
a bearish directional position.  If you had shorted additional 
stock, which I don't recommend for beginners, you would now make 
money on the additional stock as the stock reverses its up-trend 
and continues downward.  This also assumes you have unlimited 
capital.  Even though you are taking money in when you short a 
stock, you have to have enough money in your account to maintain 
the margin required (50%).

In summary, selling naked options is like play strip poker.  
If you're careful and play your cards right, you won't lose 
your shirt!

Lynda Schuepp
Contact Support


Renee will be back on Tuesday


The Space Shuttle Uniphase & Versign
By Janar Wasito

I have had some requests to detail what I mean by using current 
month credit spreads as a booster rocket to get debit spreads into 
orbit. So, here it goes. This is one part money management, one 
part entry points, and one part discipline. But there is nothing
riskless or magic about it, so take it all with a large grain of 
salt. This is a variation on the Free Play article that Jim wrote 
a few weeks back. He detailed a good entry point on DELL (high 30s, 
if memory serves), and a technique for getting a "free trade" -- 
i.e., sell a put, and use the proceeds to buy a call. Put a stop 
on the short put, and let the call run. If the stock goes up (as 
it did), the put goes down in value (and you benefit from time 
decay if you stay in the short put position), and the call goes 
up in value.

My variation on this technique is a little more complex, in that 
it involves two types of bull spreads. I am NOT (nor do I aspire 
to be) a spread guru or expert. For that, you need to go to George 
Fontanill's seminars, or a similar expert. I can't really cover the 
details of a bull spread in this article. It is too complicated. 
But, I will attempt to lay out some of the main concepts so that 
you can get a start.

About 3 weeks ago, I put on my first two spread trades, both on 
JDSU. Here are the trades:

Date: 2/16
Stock: JDSU
Strategy: Bull Call Spread
Bought JDSU Sept 220 Call at 52.5
Sold JDSU Sept 270 Call at 36
Stock Price: 213
Events: Split, 3/13
Reward/ Risk :: 33.5/ 16.5 (ie, I am risking 1 to make 2)
Break Even: 236.5 (the lower strike + the debit, in the case of 
a bull call spread)

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


As you can see in the above chart, the success of this trade 
depended on a steady up trend. Spread trading isn't magic. It 
has its advantages and disadvantages. If the stock doesn't move 
in your direction, you will still lose money, but maybe more slowly. 
That said, my JDSU trades went about as well as the possibly could 
have. Here is the principle: the short term (ie, current month, 
or 30 day), credit spread pays for the long term (ie, 3 - 6 month), 
debit spread. In a Bull Put Spread/ credit spread, you sell a 
higher strike put, and buy a lower strike put. Because you receive 
more from the option you sold than from the option you bought, you 
receive a credit. You calculate the reward simply by taking the 
amount of credit you have received. You calculate the risk by taking 
the spread (in this case, 40) and subtracting the reward from it 
(ie, 40 - 22 = 18). Notice, that I sold a put ABOVE the price of 
the stock, which is highly risky. I took this risk because I knew 
that the stock was splitting, and because consolidation was strong 
at the 200 level. In order to get the 1:1 or better rik reward 
ratio that I want on credit spreads, I typically need to sell a 
put above the price where the stock is trading. That is just how 
the pricing of options plays out.

I compare these two trades, taken together, with the space shuttle 
for the following reason:

1. Like solid rocket boosters that burn for a preset, comparatively 
short time in order to escape gravity, a 30 day, or less, bull put 
spread burns a very volatile fuel, namely theta (time decay) in a 
period when gravity (also like time decay) is the greatest. In the
final 30 days of its life, an option's time & volatility premium 
decays very, very rapidly. That decay is particularly exacerbated 
in the final 10 days (which is why I also like calendar spread, 
but that is a different article). A Bull Put Spread on a stock 
that is moving up towards an event (splits, earnings) in a up 
trending market takes advantage of time decay and of the movement 
of the stock. In this case, I only needed JDSU to go to 230 and 
STAY THERE to get max reward. If JDSU went to 232 and stayed there 
for 3 weeks (a highly unlikely event), then, each day and week that 
it dragged on, both sides of the play would decay. But the higher 
strike put would lose more value per day than the lower strike 
option. Since I sold the higher strike option, I would benefit 
simply from time decay if JDSU just went to 232 and stayed there. 
Of course, JDSU did not just go to 230, it went to 300, then started 
falling back to the planet. I had set a limit order to buy to close 
the short side of the play at 1/2. This order filled, and I was out 
of the play for 95% of my potential reward, or about an ROI of 105% 
in 2 weeks. A great play no matter how you slice it.

2. Like the main engines of a space shuttle that take it into the 
stratosphere, and allow for more complex maneuvering, the bull 
call spread is designed for greater flexibility over a longer 
period of time. My Bull Call Spread (Sept 220/270) is a different 
animal from the Bull Put Spread for a variety of reasons. Most 
importantly, I have a comparatively long time horizon. This is 
both good and bad. I have a long time to be right. On the other 
hand, I have to wait a long time to get max reward. In this play, 
for example, I risked 16.5 to make 33.5, but I will only realize 
the full reward if I wait until expiry in September (provided JDSU 
is still above 270). At its height of 300, I could have closed this 
play for an ROI of, perhaps, 60%, when the max theoretical ROI at 
expiration is 200%. Looking back on it, I think that I should have 
closed this play at 60% ROI and moved on and waited for better plays. 
But, as I said, this is my second spread trade, so I am learning. 
A 60% return on a three week play is a terrific return. On the other 
hand, if I had played JDSU with straight calls (just buying April 
220 Calls for example) my returns would have been in the several 
hundred percent range. There is no free lunch. The beauty of these 
two plays together, in my mind, is that the second, debit play is 
"paid for" by the credit play. The credit play is closed, the cash 
is in my account. That cash is, by design, of the exact same amount 
about 1% of my portfolio) as the debit. Taken together, the debit 
spread represents pure gravy. From a finance perspective, these two 
plays together are a positive net present value project by definition. 
The first half of the project has already paid for the second leg of 
the project. Although I wish I had taken the 60% ROI exit when I 
could have, I don't worry at all about this play. I can afford to 
let it run for 6 months to collect max reward. Its paid for. A 
portfolio full of successful plays like this will produce 
magnificent results over the long run.

A further word about theta. I think of it as rocket fuel because 
that is the right way to think both about risk and reward. If you 
sell a naked put, you are banking on theta. You want your stock 
to stay above the strike price while each day (and you love those 
weekends, especially before expiration week) passes in order for 
theta to work in your favor. One view of naked puts is that they 
are a great tool that can give you monthly compounding of 15 to 
25%. That's true. My view (shared by George Fontanills, which is 
where I have adopted this view), is that naked puts are a kind of 
rocket engine that can use the fuel of theta to blow up your entire 
portfolio. George talks about a hedge fund that did nothing but 
sell puts. It grew to $60,000,000, but, on one day in Oct97, it 
went to negative $60,000,000. My alternative to capture the same 
rocket fuel of time decay is to use bull put spreads. By 
engineering your plays and deciding to risk a sufficient amount 
of capital, you can still achieve returns in the 15% to 25% per 
month range. But if some unforeseen stock or market disaster should 
happen, you won't blow up your entire portfolio. This is not to say 
that selling puts is by itself a bad or wrong strategy. I am just 
saying to look at the risk/ reward going into the strategy. In naked 
puts, the risks are larger than the rewards, although the rewards 
are high and attractive.

Let me illustrate the two-stage space shuttle strategy with another 
stock, VRSN. In fact, I had exposure to VRSN in this last week in 
just about every conceivable way:
1. Naked Puts (Short Mar 200): only as much as I could actually 
purchase if put to using the margin in my LT Stock Account
2. Sept 190 Calls (Calendar Spread in the future; check out the 
high premiums)
3. Bull Call Spread, June 220/300
4. Bull Put Spread, Apr 190/210
5. Buy-Write (Bought Stock, Sold Mar 240 Call, in IRA Account)


Strategies 1 - 4 were put on after VRSN tanked on the NSOL 
acquisition news. I came into the week with strategy 5. At the 
end of the day, I am very happy with the result. The only thing I 
could have done better was to buy back the 240 calls when VRSN was 
down at 200, so that I could re sell another set of calls against 
the stock, perhaps a Mar250. Oh well. Needless to say, I am bullish 
on the stock, as I think it is the Internet backbone company, 
particularly on with this deal. I want to focus on Strategies 3 
and 4, which, together, represent a kind of Space Shuttle play.

Stage 1: April 190/210 Bull Put Spread is the Solid Rocket Booster. 
This play caused me some heart ache, because I legged into it. I 
was pretty confident that VRSN would bounce because I thought this 
was a terrific deal. So, I sold the Apr 210 Put -- NAKED! -- on 
Tuesday morning. As VRSN continued to tank... down to 200, 190, 
185... I was underwater and not very happy about it. At this point, 
my fundamental conviction about the strength of the business kept 
me in the trade. But let me be very clear. I took a huge risk, and 
one that is not recommended. Anyway, I set a limit order to buy the 
Apr190 Put to complete the spread. I set that order so that I would 
have a better than 1:1 risk:reward ratio, actually about 1.2:8. I 
could actually have done better. On Thursday morning, VRSN started 
to come back, and by Thursday afternoon, I was a happy camper again. 
I had put the spread on, and I was 30 points above max reward. The 
play was already very profitable, and I could close it, or wait for 
a few weeks and let theta burn up. I was fully hedged, so that I 
knew the maximum risk that I was taking should VRSN tank to 100. 
That risk is less than 1% of my total assets. I expect that VRSN 
will move up in price as analysts realize the full value of this 
deal. In any case, I think that VRSN will be above 210 by April 
expiry, so this first stage of my VRSN space shuttle play looks 
like it is on track for a smooth lift off.

Stage 2: June 220/300 Bull Call Spread is the Main Engine. I was 
already learning from my JDSU experience. The downside to putting 
on a September JDSU Bull Call Spread is that max reward is a full 
6 months away. In this case, I decided to split the difference 
with a Bull Call Spread that is 3 1/2 months away. But in this 
Bull Call Spread, the reward:risk ratio is 58:22, or better than 
2 to 1, in fact, almost 3 to 1. The reward to risk ratio is that 
high because the stock was heading down when I put on a spread 
that had a pay off in the opposite direction. The crowd was running 
in one direction, and I took a position going the opposite way. I 
got paid for taking what the market perceived as a large risk. 
Sometimes, though, the market is right, and you get crushed. This 
time, I was right, and it looks like I am going to be alright. If 
the credit spread does in fact hit max reward by April expiry (or 
sooner, as in the case of the JDSU play), then this too becomes a 
"free play." Once that happens, I sleep a lot easier. Say, in the 
best of all possible worlds, that VRSN goes to 300 by the beginning 
of May. Well, I can just sit on the position and unwind it, or try
to take max reward at expiry in June. More likely, if the play goes 
to 50 to 100% ROI sometime in the next month or two, I will just 
close the play and move on.

I don't want everyone to get the impression that I don't make 
mistakes. I let a beautiful AFFX Bull Call Spread slip through 
my fingers. I had 50% ROI or better, but I actually let it go 
negative today. On the plus side, I have 6 months to expiry. Same 
story with the JDSU Bull Call Spread. My INSP Mar Bull Put Spread 
is badly underwater, but at least I am hedged. My CSCO Mar Bull 
Put Spread is at max reward (135) but threatening to go underwater 

My overall portfolio management is somewhat like marksmanship 
qualification in the Marines (go ahead, get those emails ready 
now). In the known distance course, each Marine shoots from the 200, 
300, and 500 meter line. The 200 meter line is a rapid fire station 
in which the Marine shoots 10 rounds in a minute at a prone target. 
That is somewhat like my Bull Put Spread/ Credit Spread program. 
I would like to shoot 10 to 15 of these trades in a given monthly 
expiration cycle. Each trade represents 1% of my overall assets. 
The targets are rapid reaction targets -- newsletter picks for 
call plays and naked puts, keeping a close eye on the entry points 
recommended. I set up these targets every Sunday, Tuesday, and 
Thursday in a qcharts quote sheet with targeted entry points in 
the comment column next to the last price. I can set price alerts, 
but I rarely do. I should do more of that in the future. I use my 
checklist to determine whether the market, sector, and stock are 
telling me this is a good entry point. The best times to shoot 
entries to these types of plays are in the two weeks following 
expiration to capture good theta decay.

The 300 meter line is a slower fire program, emphasizing good 
marksmanship positions such as prone, kneeling, sitting. But the 
rifle score is progressive -- the 200 meter line sets you up for 
good performance on the 300 meter line, and so on. In the same 
way, my current month credit spread trading should "pay for" my 
debit spread trading. That's why I want to take only good shots 
on the credit spreads. If I hit every one of the 10 - 15 credit 
spreads I shoot, then I have paid for 10 - 15 longer term debit 
spreads, and that is where the 2:1, 3:1 reward: risk ratios are.

By the time a Marine gets back to the 500 meter line, he has 
10 minutes to place 10 shots into a man size target. It takes 
concentration, attention to windage and weather conditions, and 
near perfect marksmanship from the most stable position -- the 
prone. If the 200 and 300 have gone well, a Marine should be well 
set up to succeed on the 500, and get a good rifle score. This is 
my LEAP/ Calendar spread trading. Each month, I put a predetermined 
amount (8% of assets) into LEAPs on options on stocks that I know 
well, think are Gorillas, and will split often. Basically, these 
positions are highly leveraged stock positions. I buy deep in the 
money so that I have a high delta. My first few shots in this 
program (BRCM, SEBL, IMNX, NOK) have been winners, averaging 30% 
returns over less than a month. I sell 10 day calls against these 
LEAPs when the market, sector and stock look over bought. It is 
not a perfect science. Sometimes the calls I sell go in the 
money (eg, SEBL Mar 160 Call, sold earlier this week). In that 
case, I plan to buy the contract back on Thursday if it is still 
in the money. Because of the high delta on the SEBL LEAP, I make 
more money on the LEAPs' appreciation than I lose on the contract 
I need to buy back, and I benefit from the huge disparity in time 
decay between a deep in the money LEAP with 22 months of life and 
a 10 day call.

Every Marine a Rifleman. Including John Glenn, who, as an apparently 
old man, just flew the shuttle into space. And before you send those 
emails, some of the best shots in the Marines... are women!

Good Luck

Janar Wasito
Contact Support


"Volatility skew re-visited"
By Lee Lowell

     I would like to thank all the readers for the kind words 
you've e-mailed me and for all the great questions too.  I want 
to devote part of this week's article to answering some questions 
that I feel might benefit most of the readers.  Plus we'll get 
into more examples of using volatility skew.  

     First I want to clarify one of the calculations I made in 
last week's piece.  Thanks to a very sharp eye of one of our 
readers, I want to further explain the point I was trying to make.  
If you followed me on the ratio spread examples using the flat and 
smile skew, I did use incorrect numbers for the break-even points.  
But the numbers that I published were meant to make a different 
point.  My break-even numbers were $73 and $70 respectively for 
the 1x2 and 1x3 call spreads of XYZ corp.  What I really wanted 
to say was that your profits on these spreads start to diminish 
at these levels.  I should not have said that those numbers were 
the break-even points.  The real break-even points were $83 and 
$75 respectively.  Thanks for looking out!

     I've gotten a lot of questions on how to go about finding 
options with certain skew characteristics.  Unfortunately there 
is no way of finding or filtering out stocks with certain skew 
shapes.  I am continuously searching for such a helpful tool.  
The only way to know what kind of skew your stock exhibits is 
to look at the implied volatility numbers associated  with each 
option in the chain.  You can then compare each strike's volatility 
to the others in the chain within the same month and against other 
months.  You will either see most of the options within same month 
as having the same implied volatility (flat skew), or you will see 
each strike having a different volatility number (smile or variation
skew).  Look at the spreadsheet below.   This is a custom 
spreadsheet that I had someone design for me to use with MS Excel.


This is a spreadsheet for Cisco April call options.  In 
another section of the spreadsheet, (which I did not put here)  
it has all the information on the underlying security itself, i.e. 
last price, change, high, low, etc.  For the spreadsheet above, 
all the option information I need is right here.  I've got the 
strike price, days to expiration, bid & ask price, and the two 
most important columns show "bid implied volatility" and "ask 
implied volatility".  Like I've been saying to most of the readers
 - if you want too be a serious option trader and put the odds on 
your side, you need to have good implied volatility data.  Some 
datafeed vendors will just give you the implied volatility figure 
based on the last trade of the option.  Well, that is really of 
no value because the last trade could have happened days ago.  
You need to know what the bid implied vol. and the ask implied 
vols. are because it is current and you can compare it to the 
other strikes and and to its past history too.  This is why I 
have this custom spreadsheet.

     Let's take a look at the chain above.  Cisco was trading 
around $132/share, so the $130 and $135 calss are closest to the 
money.  What kind of skew is Cisco showing?  Look at either the 
"imp vol bid" or "imp vol ask" columns.  Above $130, the 
volatilities start to decrease and below $130, the volatilities 
start to increase.  So, from the ATM (at-the-money) $130 strike 
and lower, the volatilities slope upwards and the strikes above 
$130 slope downwards.  This could be a classic case of where many 
people are writing covered calls.  As holders of the underlying 
stock, you sell upside calls against your position.  If enough 
people are doing this on the same stock, it will drive down the 
premiums on the calls therefore lowering the implied volatilities.  
At the same time people are long the underlying, they may also buy 
puts for added insurance against a down move in the stock.  As 
more people buy the puts, this increases their premiums and the 
implied vols at the same time.

     These last two columns that show the bid and ask volatility 
are easily attained.  Just as you can figure out the implied 
volatility by using the most recent option price, you can figure 
out the bid and ask implied volatility too.  By using the actual 
bid and ask price of the option, you then run it through the 
Black-Scholes model and it will spit out the bid or ask implied 
vol.  This spreadsheet is Excel based and can be programmed with 
a Black-Scholes model to do such calculations.  I also have this 
spreadsheet connected to a real-time datafeed so it is updated 
continuouslt tick for tick.  This done using the Excel DDE link 
that is compatible with certain data vendors.  I highly suggest 
this for all serious option traders.

     Even though the chain above is for the calls, the chain for 
the puts will have the same charateristics.  The lower strikes 
will have higher vols than the closer-to-the-money purs.  This 
is where doing debit put spreads would give you an advantage from 
the start because you'll be buying an option with lower volatility 
than the one you're selling.  If you have access to historical 
volatility data, you can compare the levels seen in your option 
chain to the past levels, and instantly know where these options 
are trading relative to its past.  If it's in the low end of its 
historical range, buying options would be a good play.  You could 
outright buy calls or puts, dpending on your outlook for the 
stock's future direction.  If the volatility is in the high end 
of its range, look for selling strategies.  Or if you still want 
to buy options when its volatility is high, make sure you do 
spreads.  This way you'll be buying and selling high volatility 
which can minimize the negative effect of a volatility drop.

     This is how I conduct my research for my own options trading.  
I've been asked the question of what my routine is like before 
I actually take a position.  Once I've decided on a stock I'm 
interested in, I'll  check the chart patterns and then look at 
the option prices.  I then look at the past historical volatility 
levels of the underlying and the past implied volatility levels 
of the option.  Looking at these numbers on a graph is really 
helpful.  I'm still looking for the best vendor that shows this 
type of data.  Usually, both the historical volatility and the 
implied volatility will move in tandem with each other.  Most of 
the time, the implied volatility will be higher than the historical 
because it's a projection of the future price range of the stock.  
Most market makers and traders are unwilling to bring the implied 
volatility down lower than the historical because everything is 
still unknown about the future.  Nobody wants to sell options too 
cheaply or below its historical range.  That could be costly.

     If the implied and historical are moving in the same 
direction, I then compare the implied to its past levels to see 
where it's at.  I only concentrate on the implied volatility at 
this time.  If you're going to trade the option, you'll either 
buy it or sell it based on where it's trading in the marketplace.  
And those prices in the marketplace are based on implied volatility.
It doesn't matter at this point how the historical vol. compares 
to the implied vol.  What matters is that you know where the 
implied is compared to its past.

The only other pattern you need to look at is if the IV (implied 
vol) and the HV (historical vol) are moving in the opposite 
directions.  I touched on this briefly in the last article.  
What will usually happen is that implied will start to make a 
move higher but the historical will stay the same.  This is due 
in part to speculation on the near term future of the stock.  
There may be some rumors flying around, maybe someone got some 
inside information, earnings are due out, or the Fed is having 
a meeting.  All these factors will lead to a temporary bump 
higher in the IV which is where the disparity can be seen when 
compared to the HV.  

     I want to show you a graph of a smiling skew.  Someone 
e-mailed me and asked if I could include graphs with my 

     This is a skew chart for AOL.  AOL closed around $61/share 
so that means $60 is the ATM (at-the-money) strike.  The calls 
are on the left and the puts on the right.  You can see that the 
further you move away from the ATM strike for both calls and puts, 
in both directions (higher and lower than the ATM ), the IV gets 
higher.  This is a classic "smiling skew".  The best ways to take 
advantage of the smiling skew is to use the strategies I discussed 
last time.  And next time I will discuss how to use the other skew 
patterns in your options trading as I've run out of time for this 

Good luck.

Lee Lowell
Contact Support



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


Hello all members,

There will be an OIN Meeting next Friday, March 17th.  We'll 
begin gathering around 7:30 at the Hyatt in Cherry Hill, NJ for 
dinner or snacks. The meeting will follow. Come in anytime, the 
last meeting we had such a good time we didn't leave until after 
11pm.  Covered calls will be one topic, the rest of the agenda
will be open.

The Hyatt in Cherry Hill is on Rt. 70 (eastbound) in Cherry Hill, 
NJ. There is only one restaurant on the ground floor with a 
reserved room in the rear. The Hyatt is near the Garden State 

Jim Bowman - jimbow1248@home.com

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


Daily Results

Index       Last    Week
Dow       9928.82 -438.38
Nasdaq    5048.62  133.83
$OEX       749.50  -16.45
$SPX      1395.07  -14.10
$RUT       603.81    5.93
$TRAN     2365.29  -93.01
$VIX        23.80    2.51

Calls               Week

CHKP       279.88   50.13  New deal furthers positive sentiment
NTAP       236.88   36.94  Just over a week of split run left
CLRN       169.25   31.25  Sellers are having a staring contest
EMLX       215.50   25.25  Square the books and start again Monday
QLGC       178.81   23.38  Dropped, all good things must come to end
VERT       273.19   21.47  Low float powering incredible split run
YHOO       178.06   20.06  New, let the earnings run begin!
RRRR        88.00   20.00  Revving its engine last week
TIBX       138.19   16.19  New, time to start your engines!
AFCI        79.81   14.31  Buyout rumors and a timely upgrade
BWEB        58.00   13.50  New, strong trend last week
DSTM        43.44   11.44  Timely trading alert captures a big move
AMD         52.00   11.13  Price war with Intel dampens sentiment
SEBL       162.88    8.16  Dropped, volume sinking like a stone
CMVT       233.63    6.13  New, short trigger on this split run
DELL        51.25    5.00  New found enthusiasm like DELL of old
WCG         57.88    3.63  Time for Williams to get to work
NITE        49.56    3.13  New, brokers are catching fire lately
ATML        54.44    2.00  Dropped, cooling off at resistance
ANDW        28.56    1.06  Waiting for an increase in volume
CSCO       136.38   -1.06  Will they be entering the DJIA??
MER        104.94   -2.06  Dropped, better roads to travel
ERICY      100.63   -4.19  Technically driven ahead of the split
NOK        215.00   -5.00  Shareholder meeting is approaching
TXN        181.75   -5.88  Trend line is signaling entry point
GLW        191.50  -13.75  Dropped, looks in need of a breather
INSP       244.94  -14.88  Dropped, selloff was nail in the coffin
SNE        243.75  -55.69  Rumors of problem brings an entry point


BVF         50.25  -10.75  New, patent problems and new debt issue
EK          54.00   -5.63  New, usually good for an earnings warning
DD          45.94   -4.81  No telling how far left to drop
UAL         47.19   -3.25  Anything but a smooth ride for United
PPG         46.69   -2.38  Attracting little more than yawns


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The Option Investor Newsletter          3-12-2000  
Sunday                        3 of 5



CMVT - Comverse Technology
YHOO - Yahoo! Inc
NITE - Knight/Trimark Group 
TIBX - Tibco Software 
BWEB - BackWeb Technologies 


EK  - Eastman Kodak 
BVF - Biovail Corp 


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.


ATML $54.44 -1.13 (+2.00) ATML is cooling off.  They have been
hot for awhile with no real resistance.  It looks like things 
are changing.  On Friday they hit near a 52-week record by 
trading up to $58.13, but it was all downhill from there.  
Showing that resistance is set.  Mostly due to profit-taking 
would be our guess.  Volume was nothing to write home about, 
just under average.  Support is the 10-dma of $52.  They gave 
us a great little run and it's time to move on to something 
else.  There has been no news effecting ATML. 

INSP $244.94 (-14.88) Patience is indeed a virtue, but there's 
limits and we've reached ours.  The 12-point loss in Friday's 
surging market was the nail in the coffin.  The descent brought 
INSP down to an shaky position at the 10-dma ($246.10).  While 
volume levels remained creditable this week and INSP traded in 
a sensible entry range ($250 to $260), the current level is 
unnerving.  Let's not forget INSP is splitting its stock 2:1 and 
going ex-div on April 7th.  In other words there's still a good 
probability of a resurgence.  However, we no longer think it's a 
good time to open call positions and are exiting the split play 
this weekend.

QLGC $178.81 (+23.38) All good things must come to an end.
QLGC has given us quite a run since we picked it on February
22nd down near $115.  The momentum began to wane by the middle
of last week and we were waiting for a break, either up or down,
from the consolidation pattern.  Showing that the enthusiastic
reception of all the good news was running out of gas, sellers
stepped on the brakes in the last hour on Friday.  With the
conviction of increasing volume, they pushed QLGC down through
the $182 support level, closing the issue at the low of the day.
There will likely be more weakness while QLGC refuels, so we'll
move on to other issues that have just topped off their tanks.

GLW $191.50 (-13.75) In common with JDSU last week, GLW 
benefited from exposure at OFC 2000 and a media day of its own.  
Unfortunately that's over.  Optical equipment manufacturers took 
a well deserved break anyway last week as investors again focused 
on semiconductors.  GLW just couldn't get any traction and volume 
on Friday confirms it - only 80% of the ADV.  While they will 
likely announce a split with earnings on April 17 (followed by a 
shareholder meeting with a scheduled authorized share increase 
agenda item), investors seem to think it's too early to take a 
position for the eventual run.  So it is this weekend that we 
drop GLW from our list.  It doesn't mean bail out at all costs - 
keep it on your radar, as we too will be watching for an 
opportunity to bring it back.  Volume swells will be the key.

SEBL $162.88 (+8.16) While support over the last few days 
appeared to hold pretty well at $162, successive volume sank 
like a stone - only 72% of the ADV on Friday.  Until volume 
returns, it appears that SEBL has seemingly run out of reasons 
to move up and consolidation appears at hand.  While SEBL is a 
split candidate, they will not likely make the announcement 
until earnings in late April - too far a way to motivate an 
earnings or split announcement run.  We can't feel too bad 
though; SEBL gave us a very nice run.

MER $104.94 (-2.06) Wednesday looked bleak with MER falling 
through its $104 support level and Thursday we began to see 
a bit of a turnaround.  But Friday's session was a telling one.  
And what it told us was that it is time to go.  See ya later.
After valiant effort to break $110, MER just plain ran out of 
gas.  In the final two hours of trading, MER fell to the hands
of profit-takers, and on heavy volume as well.  So there you 
have it, it was a volatile and rocky road this past week which
allowed for some good quick trades but looking on down the 
road, I'd rather be going somewhere else.  Time to move on.


No dropped puts this weekend


Current Split Candidates
EMLX - Emulex
CLRN - Clarent
TIBX - Tibco Software
TXN  - Texas Instruments
Split candidates that are not current plays
EMC  - EMC Corporation
PHCM - Phone.com
FDRY - Foundry Networks
EBAY - EBay Inc.

Recent announcements we predicted
CHINA - China.com
CMVT  - Comverse Tech


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

Symbol - Stock          Splits/Date  
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
TTPA - Trintech Group   2:1 03-22-00 ex-date 03-23
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
BWAY - Breakaway        2:1 03-23-00 ex-date 03-24
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
COVD - Covad Comm       3:2 03-31-00 ex-date 04-03
QSFT - Quest Software   2:1 03-31-00 ex-date 04-03
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
CMVT - Comverse Tech    2:1 04-03-00 ex-date 04-04
ENGA - Engage Tech      2:1 04-03-00 ex-date 04-04
ASGN - On Assignment    2:1 04-03-00 ex-date 04-04
RDBK - Redback Networks 2:1 04-03-00 ex-date 04-04   
ADRX - AndrxCorp        2:1 04-03-00 ex-date 04-04
GRDN - Guardian Tech    2:1 04-03-00 ex-date 04-04
CTCI - CT Comm          2:1 04-05-00 ex-date 04-06
VITR - Vitria Tech      2:1 04-05-00 ex-date 04-06
NAVI - NaviSite         2:1 04-05-00 ex-date 04-06
UTCI - Uniroyal Tech    2:1 04-05-00 ex-date 04-06
SBL  - Symbol Tech      3:2 04-05-00 ex-date 04-06
ABGX - Abgenix          2:1 04-06-00 ex-date 04-07
LINK - Interlink Elec   3:2 04-07-00 ex-date 04-10
WDR  - Waddell & Reed   3:2 04-07-00 ex-date 04-10
HDI  - Harley Davidson  2:1 04-07-00 ex-date 04-10
MKTY - Mechanical Tech  3:1 04-12-00 ex-date 04-13
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
KSS  - Kohls Corp       2:1 04-24-00 ex-date 04-25
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
AEG  - AEGON N.V.       2:1 05-30-00 ex-date 05-31
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
RMBS - Rambus           4:1 06-14-00 ex-date 06-15
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:

TXN - Texas Instruments $181.75 (-5.88)

See details in sector list

Chart = /charts.asp?symbol=TXN


NITE - Knight/Trimark Group $49.56 (+3.13)

See details in sector list

Chart = /charts.asp?symbol=NITE

Put play of the day:

BVF - Biovail Corp $50.25 (-10.75)

See details in sector list

Chart = /charts.asp?symbol=BVF


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.


DELL - Dell Computer $51.25 (+5.00)

Dell Computer is the world's #1 direct-sale computer vendor and 
one of the world's top PC makers.  Therefore it's understandable 
that the company designs, develops, manufactures, markets, 
services, and supports a variety of computer systems including 
desktops, notebooks, workstations, network servers, and storage 
products.  Dell's clients include the government, corporations, 
the medical and education industries, as well as the individual 
consumer.  Founder Michael Dell is still the CEO and maintains 
a 14% stake in the company.

A strengthening sector, signs that corporate customers are 
interested in purchasing more PCs, and recent news that Dell 
will introduce a new line of servers to offset any slowing in 
overall PC sales and we have the ingredients for a short-term 
momentum play.  By February 9th, DELL plummeted to a low of 
$35.56 before regaining its present composure.  After such 
a devastating decline, DELL remarkably just set a new 52-
week record high on Friday ($54.03) and is poised to move 
higher.  The "bump in the road" as Dell puts it is over and 
analysts agree.  Granted Dell admits it won't be making stellar 
earnings number like the 50% increases from year earlier 
quarters, but a 30% goal is very much within their grasp.  Ashok 
Kumar, analyst for USB Piper Jaffray, is confident that Dell 
"should have no problem exceeding the re-calibrated earnings" 
and noted he rates DELL as a Strong Buy.  Earlier in the week, 
he upped DELL's price target to $65 from $55.  And in regard to 
PC sales, Trent May, manager of the Invesco Growth Fund, 
declared that "over the last two weeks, we've seen reports of 
improving corporate PC demand, which obviously Dell would be 
the biggest beneficiary of".  These comments follow Thursday's 
press release that Dell Computer became the global market leader 
in both portable and desktop personal computer shipments to 
medium and large businesses in the 4Q of 1999 according to the 
market research firm IDC.  This puts rivals Compaq (CPQ) and IBM 
in the backseat as they struggle to move from largely indirect 
to direct sales models.  Additionally, Dell will introduce 
"appliance servers", a new line of servers as early as this 
month aimed at small businesses that use the Internet.  These 
new servers increase power of Web sites and manage Internet 
traffic, but the kicker is that they are much cheaper and user 
friendly than conventional servers.  On Thursday, the stock's 
dynamism demonstrated a growing intensity and sprung off the 
5-dma (then at $47.24) and didn't look back at the comfortable 
support zone.  The bold move was backed by heavy volume (more 
than double the ADV) of over 71 mln shares exchanging hands.  
Friday's performance was also very bullish.  Analyst Donald 
Young of Paine Webber gave DELL a boost with an upgrade to a Buy 
from an Attractive.  He also upped the price target by 56% to 
$78 from a mere $50.  DELL shot up immediately and cleared the 
path of resistance by first setting a new all-time high at 
$54.03.  The rest of day it held firm trading in a tight range 
between $53 and $54.  A typical late day pullback before the 
weekend did knock a couple dollars off the share price, but this 
effectively offered traders entries.  A lower level of support 
is at $47 and $48.  Although if there's a severe correction, and 
the stock returns to $44 and $45 near the 10-dma ($45.72) take 
out the red flag.  At the moment, earnings aren't expected until 
the beginning of May.  Therefore let's keep in mind this play 
is based on sheer momentum and always, always keep your eyes 
peeled for the profit mongers.  

Dell along with IBM and Hewlett-Packard are to be the "chosen 
ones" to roll out Intel's new 1GHz Pentium III, a chip they 
claim is faster than anything fierce competitor, Advanced Micro 
Devices (AMD), has in its inventory.  Talking about chips...Dell 
warned owners of a faulty memory chip in its Latitude and 
Inspiron computers shipped between February 1 and November 20, 
1999.  As many as 400 K, or 48% of the notebook computer are 
likely to contain the defective memory chip.  On a more positive 
note, Dell announced it began online product sales in Hungary.  
This new online venture marks the first of its kind in central 
and Eastern Europe according to Glenn Jones, Dell marketing 
director in Europe, the Middle East and Africa.

BUY CALL APR-45 DLQ-DI OI=16608 at $7.88 SL=6.25
BUY CALL APR-50*DLQ-DJ OI=18161 at $4.50 SL=2.75
BUY CALL APR-55 DLQ-DK OI= 3409 at $2.38 SL=1.25
BUY CALL MAY-50 DLQ-EJ OI=20884 at $5.63 SL=4.00
BUY CALL MAY-55 DLQ-EK OI=17806 at $3.36 SL=1.75

Picked on March 9th at   $50.44    P/E = 85
Change since picked       +0.81    52 week high=$54.03
Analysts Ratings    14-18-3-0-0    52 week low =$31.38
Last earnings 12/99   est= 0.15    actual= 0.16
Next earnings 05-18   est= 0.16    versus= 0.16
Average daily volume = 32.4 mln


AMD - Advance Micro Devices $53.00 (+11.13)

AMD is a global supplier of integrated circuits for the personal
and networked computer and communications markets.  They produce
processors, flash memories, programmable logic devices, and 
products for communications and networking applications.  the
company ranks #2 in the microprocessor market behind Intel,
however it has captured about a 60% share of the sub-$1000 PC
market.  AMD also makes embedded chips and nonvolatile memories.
They have manufacturing operations in Europe, China and Japan,
with about 55% of its sales outside the U.S.  AMD gets about
12% of its revenues from Compaq Computers.

How does that saying go? "Into each life some rain must fall"
Well on Friday it not only rained, on one the recent additions
to our play list, it poured.  The storm came in the form of 
news that Intel had managed to snatch away the role as the 
primary chip vendor of the new Microsoft X-Box game from AMD.
Industry analysts said AMD had been rumored to be nearly
guaranteed the spot as the primary vendor for over a year, when
Intel somehow won the bid in an llth hour deal.  Rumors were
still circulating Friday, but Microsoft had no comment on it.
A company spokesman for AMD said they were not prepared to get
into a "scorched-earth price war with Intel to get the Microsoft
business, and now the end result is they don't have it."  Shares
of AMD fell almost $7 at the open on Friday, and continued to
decline until hitting the recent support level at $50.  The 
bright spot, if there is one, showed AMD clawing its way back to 
end the day at $53.  Depending on your view point that kind
of decline can either present a buying opportunity or be the
beginning of a trend to lower prices.  For now we will look at
the decline as a potential buying opportunity, only because we
believe the reaction to the news may have been exaggerated.
The selling was swift and sharp, and may be just a bump
(all-be-it a big bump) in the road for our play.  The fact that
AMD did find buyers on three different occasions in the $50 to
$51 area is what we are going to hang our rain gear on for now.
If AMD can wring itself out and move higher we would look to
buy calls.  Another decline through the $50 level could put
a premature end to the life of this play.

The news earlier in the week that AMD had beat Intel to the
punch with the release of their 1GHZ chip was overshadowed
by Friday's Microsoft debacle.  Earlier this week analysts at
Gruntal  did their best to help by reiterating their short-term
Outperform rating of the AMD.  We will keep our eyes peeled for
any new reiterations or recommendations for AMD early next week.   

BUY CALL APR-45 AMD-DI OI=3507 at $11.63 SL=9.25
BUY CALL APR-50*AMD-DJ OI=4403 at $ 8.63 SL=6.50
BUY CALL APR-55 AMD-DK OI=6271 at $ 6.50 SL=4.75
BUY CALL APR-60 AMD-DL OI=6303 at $ 4.75 SL=3.00

SELL PUT MAR-50 AMD-OJ OI= 982 at $ 1.50 SL=3.00
(See risks of selling puts in play legend)

Picked on Mar 07th at    $53.25    PE = N/A
Change since picked       -0.25    52 week high=$60.00
Analysts Ratings      8-6-8-0-0    52 week low =$14.56
Last earnings 01/00   est=-0.06    actual= 0.43 
Next earnings 04-19   est= 0.37    versus=-0.81
Average daily volume = 3.86 mln


TXN - Texas Instruments $181.75 (-5.88)

Texas Instruments is in the semiconductor business.  They
specialize in real-time technologies, digital solutions for
applications where waiting isn't an option.  Their DSP and 
analog chips are the brains behind many of today's most 
attractive opportunities such as digital wireless phones and
broadband.  To quote their President, "Texas Instruments is 
gaining significant market momentum, and is well positioned
going forward as the global market for DSL continues to ramp 
up."  TXN is currently engage with several other manufacturers 
to provide advanced DSL solutions and plans to announce 
additional customers throughout the year.

A well placed investment in the chip sector has proven to be one
of the best places to park your money since the first of the
year.  One of the reasons we've added TXN to our play list is
that time and again the semiconductor company has provided us
with some outstanding plays.  Well we believe it is time again.
After making a new high at $200 on Monday, TXN did experience
some normal profit taking.  Early on Thursday TXN bounced off
its trend-line near $168, which has followed the stock's move
higher since late January.  It's amazing how a stock will trend
higher or lower, pull back to its trend line and bounce again.
Well, TXN has bounced and we believe is poised to make an assault
on its recent high.  A report released late Wednesday from the
Semiconductor Industry Association(SIA) showed year-to-year
growth is at 32.9%, for the 3 months ending in January, compared
to the same three month period in 1999.  The SIA's Global Sales
Report is a three-month moving average of sales activity, which
represents some 70 companies.  The first three months of the 
year is typically the slowest time of the year for semiconductor
companies, so it would appear that TXN and others in the 
industry are in for a banner year.  Although it may be a bit
early, TXN is scheduled to report earnings around April 24th.
They will also hold their annual stockholders meeting on April
20th.  On the agenda is a request to double the amount of 
authorized shares from 1.2 billion to 2.4 billion, which may
provide TXN with a pre-split announcement, pre-earnings boost.
Although TXN spent most of the day on Friday, trading between
$173 and $175, it did see some buying going into the final
hour with the volume picking up and may follow through early
next week.

On Friday, TXN signed a deal with a Belgian firm, Barco, to
supply it with its Digital Light Processing(DLP) Cinema
technology.  This agreement will allow Barco to develop a
completely new range of projectors that will have the capability
of replacing 35 millimeter film projectors in cinema theatres
around the world.

BUY CALL APR-170 TNZ-DN OI=1444 at $23.00 SL=17.75
BUY CALL APR-180 TNZ-DP OI=1980 at $17.75 SL=13.75
BUY CALL APR-190*TXR-DR OI= 550 at $12.75 SL=10.00
BUY CALL APR-195 TXR-DS OI= 397 at $10.88 SL= 8.50

SELL PUT MAR-170 TNZ-ON OI= 987 at $ 2.06 SL= 3.75
(See risks of selling puts in play legend)

Picked on Mar 09th at   $180.38    PE = 108
Change since picked       +1.38    52 week high=$200.00
Analysts Ratings    15-13-4-1-0    52 week low =$ 45.50
Last earnings 01/00   est= 0.47    actual= 0.51 
Next earnings 04-24   est= 0.53    versus=-0.32
Average daily volume = 4.59 mln


YHOO - Yahoo! Inc $178.06 (+20.06)   

Yahoo! Inc is a global Internet media company that offers 
an online guide to web navigation, a branded network of 
comprehensive information, communication services, and 
shopping access to millions of users daily.  Over 32 mln users 
visit the Web site each month.  Yahoo! operates in the black 
with the bulk of its revenues derived from advertisements 
commissioned by its list of about 3800 clients.

Put me back in the game coach!  Yahoo finally regained 
consciousness on Monday after suffering a steady decline from 
the record high of $250.06 it set on January 4th.  While the pop 
out of its two-month long descent unquestionably consoled long-
term holders, the 12.7%, or $20.06 gain this week encouraged 
momentum and technical traders to start chomping at the bit.  
Two Internet conferences hosted by Paine Webber and 
PlaNet.WallStreet certainly brought attention to the sector on 
Monday, but overall we're betting Yahoo!'s upcoming earnings 
will be the prevalent factor to keep the momentum rolling.  YHOO 
is reporting in little more than three weeks on April 4th, after 
the bell.  Typically YHOO accommodates traders with a great run 
right up to the report, then dives deep on the announcement.  So 
take heed and don't even consider holding over earnings.  If 
anything, be prepared to buy some puts!  On an outside chance 
let's delve into the possibility of another split.  Currently 
Yahoo! has 900 mln shares authorized and about 527 mln issued so 
the BoD would need shareholders' approval for an increase.  But 
that shouldn't pose too much of a problem.  It's more of a 
question of whether the company will have a second split this 
year.  Recall YHOO recently split 2:1 on February 11th.  And 
honestly, YHOO historically only becomes a split candidate at 
the $200 level.  Regardless it's good to know what the future 
may hold.  It'd be nice to see enough intraday volatility for an 
entry around the 10-dma ($167.44), but upward bounces off the 
5-dma ($176.25) are more probable at this point.  Opposition is 
at Thursday's intraday high of $185.  So watch for resistance 
at that mark and look for stronger volume to back the climb.

On Thursday, YHOO got a boost from the announcement that  
Network Appliance would be its sole system provider for the 
increasing data that it stores and delivers over its global 
network.  Yahoo! currently has about 120 mln users accessing its 
site each month so it's extremely valuable to have a top-notch 
storage company managing the system.  In other news, Yahoo! 
recently introduced a finance show called "Yahoo Finance Vision" 
that allows users to trade stocks, get up-to-date news, and 
submit questions to guests during live interviews.  

BUY CALL APR-170 YUU-DN OI=3594 at $23.00 SL=18.00
BUY CALL APR-175 YUU-DO OI=5904 at $20.25 SL=15.75
BUY CALL APR-180 YUU-DP OI=5611 at $18.00 SL=14.00
BUY CALL APR-185*YUU-DQ OI=2112 at $15.88 SL=12.50
BUY CALL APR-190 YUU-DR OI=2813 at $14.00 SL=11.25

Picked on March 12th at $178.06    P/E = 1729
Change since picked       +0.00    52-week high=$250.06
Analysts Ratings    14-13-4-0-0    52-week low =$ 55.00
Last earnings 12/99   est= 0.15    actual= 0.19
Next earnings 04-05   est= 0.09    versus= 0.03
Average Daily Volume = 8.63 mln


NTAP - Network Appliance Inc. $236.88 (+36.94)(+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. 

NTAP really didn't have that bad of day on Friday.  After all 
it did gap up over $6 at the open and make a new high in the 
early moments of the session.  For the rest of the day, NTAP 
struggled a bit more than we would like to have seen, especially 
after announcing a strategic relationship with Yahoo, on 
Thursday after the close.  NTAP fell about $15 before buyers 
stepped in attempting to save the day.  $228 did provide 
support and should be used as a reference for traders that 
are looking for entry points this play in the first part of 
the week.  $233 may be a more likely target as NTAP continues 
its split run.  If NTAP breaks those support levels with any 
conviction, there are a couple of minor areas of support below, 
but the next solid support doesn't show up until near $213.  
NTAP will be splitting after the close on the 22nd so all 
positions will need to be closed out by then.  Until then, sit 
back and enjoy what has already been a stellar split run.

BUY CALL APR-230 ULM-DF OI=190 at $38.25 SL=28.50
BUY CALL APR-240 ULM-DH OI=605 at $34.63 SL=25.00
BUY CALL APR-250 ULM-DJ OI=256 at $29.88 SL=22.50

SELL PUT MAR-230 ULM-OF OI= 17 at $ 8.25 SL=11.00
(See risks of selling puts in play legend)

Picked on Mar 05th at   $199.94    PE = 658
Change since picked      +36.94    52-week high=$248.00
Analysts Ratings     10-5-1-0-0    52-week low =$ 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


VERT - VerticalNet, Inc. $273.19 (+21.47)(+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. 

As the 2:1 split date of March 31st nears, VERT has been on the 
move, but nonetheless had trouble piercing and holding its 
current and previous resistance level of $290.  After nearly a 
$40 move up from its open on Monday, we wouldn't be surprised to 
find a couple of days of consolidation.  Despite a loss on 
Friday, we think the current upward trend remains intact.  $260 
to $265 used to provide resistance, but proved to be support on 
Friday where the typical mentality is to sell in order to avoid 
potential disaster over a weekend.  Throughout the afternoon, 
VERT had a steady downward trend, but was met in the final 10 
minutes with a surge of buying orders that propelled it up $7 
from it's $266 low.  Historical support is way back at $240.  
Moving averages are slightly higher, but still a long way back at 
$244 (10-dma) and $257.41 (5-dma).  If the market continues 
positive this coming week, we think $265 would provide a good 
entry.  If it starts out shaky, look for at least the moving 
averages to hold.  If you want to play the run a bit safer, wait 
for a breakout over $280 backed by volume above the ADV.  Just 
beware that resistance again pops up at the all-time high of 
$296.75.  After that?  Blue sky.  With a currently low float of 
14.8 mln shares, 1.5 mln share days can help VERT to really rock.  
So watch the volume for a clue to direction.  Also note the 
expensive options.  May strikes are not available yet and July 
contracts are price out of this world.  Don't play this one if 
your intestinal fortitude isn't strong.

In the big picture, there should be no doubt that VERT is one of 
the undisputed leaders in the B2B sector along with ARBA and 
CMRC.  Recall that in January VERT entered a joint venture with 
Softbank and four days later got an equity infusion from 
Kingmaker, Microsoft.  The big news propelling VERT this week was 
two-fold.  First, VERT announced their acquisition of privately 
held Tradeum for $500 mln, which is to immediately add to 
earnings.  Second, upon the news, Lehman Bros. reiterated their 
Buy recommendation with a price target of $350.

BUY CALL APR-260 URE-DL OI=264 at $47.50 SL=37.00
BUY CALL APR-270 URE-DN OI= 67 at $43.25 SL=33.75
BUY CALL APR-280*URE-DP OI=111 at $38.88 SL=30.25

Picked on Feb 24th at  $221.00     P/E = N/A
Change since picked     +52.19     52-week high=$296.75
Analysts Ratings     4-6-3-0-0     52-week low =$ 25.44
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


CSCO - Cisco Systems Inc $136.38 (-1.06)(+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.

CSCO came aboard our call list last weekend as a candidate for a 
split run.  The stock splits 2:1 in just a little less than two 
weeks on March 22nd.  There's plenty of shares for the stock 
split with 5.4 bln shares authorized and only 3.42 mln 
outstanding.  Some may have wondered why we started CSCO without 
a breakout first, but the early notice was to give our readers 
opportunities for solid entries at the stock's firm support 
levels of $130 and $135.  Our position is that pre-split 
excitement will give CSCO a shot of adrenaline as the split 
dates draws closer.  As it turned out on Thursday, CSCO led the 
pack on rumors that it would oust PG as a member of the DOW 
Industrials and take their place.  The stock made gains of 
$7.25, or 5.5% on strong volume.  Another boost also came from 
analyst Tim Luke of Lehman Brothers who repeated his Buy rating 
and commented that "Cisco remains a core holding in our universe 
of Internet infrastructure stocks".  On Friday, volume did taper 
back to average levels, but it proved to be just as thrilling. 
CSCO reached another record high as it powered up to $141.88 in 
the early morning session.  The pre-weekend profit-taking did 
however pull CSCO down a smidgen to near-term support at $135 
and $136.  But essentially this level is a safe haven.  From a 
technical standpoint, CSCO is above the 5-dma ($135.31) and 10-
dma ($134.13) and solid upward bounces off these marks certainly 
make great entry points.

Here's a few of the highlights swirling around Cisco this week.  
Cisco won a $280 mln equipment bid from Cogent Communications,  
a specialized Internet Service Provider (ISP).  This fiber optic 
gear order is the largest optical networking sale to date.  
Notably it will provide Cogent with the first end-to-end all 
optical network to deliver Internet access service with speeds 
100 times faster than a T-1 connection.  There was also big news 
surrounding Cisco and Cap Gemini SA, Europe's largest computer-
services company.  They recently entered into a Web alliance to 
sell and service Internet and telecommunications systems.  
Currently this is a market where sales are increasing by 30% a 
year!  According to the terms, Cisco will invest $671 million in 
Cap Gemini and $164 million for a 4.9 percent stake in the new 
venture company while Cap Gemini will contribute 12% of its 

BUY CALL APR-130 CWY-DF OI= 9226 at $14.50 SL=11.50
BUY CALL APR-135*CWY-DG OI= 8612 at $11.50 SL= 9.25
BUY CALL APR-140 CWY-DH OI=11393 at $ 8.88 SL= 6.75
BUY CALL APR-145 CWY-DI OI= 7813 at $ 6.75 SL= 5.00
BUY CALL APR-150 CWY-DJ OI=10370 at $ 5.13 SL= 3.25

Picked on March 5th at  $137.44    PE = 187
Change since picked       +1.06    52-week high=$141.88
Analysts Ratings    23-15-0-0-0    52-week low =$ 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 = 23.9 mln


RRRR - Rare Medium Group $88.00 (+20.00)(+14.19)

Originally known as ICC Technologies, the company divested
itself of its old business (air-conditioning operations) in
favor of newer technology after purchasing Web-site developer,
Rare Medium in 1998. RRRR provides planning, consulting,
technology, marketing and Web-hosting services to large and
mid-sized corporations looking to develop their e-commerce
businesses.  The company employs a service delivery methodology
that ensures rapid speed to market of business solutions,
iterative refinement of the solution, and a solution that is
linked to business benefit.  The company runs six offices in
the U.S., one in Canada, and another in Australia and has the
ability to conduct projects on either fixed price, fixed time,
or a time and materials basis.

Revving its engine early in the week, RRRR tore down the track,
posting a new 52-week high of $94.75 Friday morning.  Finally
pausing to allow for a (hopefully) brief pitstop, investors
began taking profits mid-day on Friday.  Consolidating for the
remainder of the session, RRRR looks to be building support
near $88, backed up by $84 and then the 5-dma (down at $80).
The 10-dma ($70) hasn't been a factor since the stock began
racing higher in late February.  Confirming the move higher,
volume picked up throughout the week, stabilizing in excess
of 2 million shares, a healthy 25% over the ADV.  One
unsettling signal appeared in the last 30 minutes of Friday's
session; volume picked up sharply (trading over 300,000
shares), as the price dropped $2.25.  Ending the day near its
low may be cause for concern, so keep an eye on volume on
Monday.  The selling may continue, providing us with an
attractive entry point.  With the gains achieved this week,
tighten up your stops on any open positions so you don't give
back all your profits.  Look to enter new positions when RRRR
confirms it is ready to drive higher by moving off of support
with the added fuel of increasing volume.

The latest news for RRRR occurred on February 24th.  Sylvan
Learning Systems, Inc. announced that it plans to launch a
venture subsidiary that will invest in and incubate emerging
internet technology companies in the education and training
marketplace.  RRRR is one of several companies that will
invest in and support the venture.

BUY CALL APR-85*RRU-DQ OI= 77 at $15.00 SL=11.75
BUY CALL APR-90 RRU-DR OI=195 at $12.88 SL=10.25
BUY CALL APR-95 RRU-DS OI=225 at $11.00 SL= 8.75
BUY CALL MAY-90 RRU-ER OI= 52 at $16.63 SL=13.00
BUY CALL MAY-95 RRU-ES OI=700 at $14.75 SL=11.75

Picked on Mar 7th at     $72.44     P/E = N/A
Change since picked      +15.56     52-week high=$94.75
Analysts Ratings      0-1-1-0-0     52-week low =$ 4.44
Last earnings 02/00   est=-0.21     actual=-0.24
Next earnings 05-15   est=  N/A     versus=-0.22
Average Daily Volume = 1.48 mln


EMLX - Emulex Corp. $215.50 (+25.25)(+33.13)(P3W+49.13)

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

What's going on with EMLX you ask?  That's a good question,
let's see if we can shed some light on this fibre channel tech
play.  On the positive side, despite a volatile session on
Wednesday, when it fell to the $180 level in the first ninety
minutes of trading, EMLX did manage to finish each session in
with a gain.  We did see a fair amount of buyers enter the market
after the decline, which is a plus in the overall picture.  EMLX
also managed to make a new high in four out of the five sessions,
with the last coming on Friday at $224.38.  Now lets look at the
other side of the coin on EMLX.  EMLX did close in the lower end
of its range on Friday, which would normally indicate either
some consolidation or weakness in the next day or two.  The
volume Friday was very light, at just under half the ADV for
our play.  At this point we believe the close in the lower end
of the range is probably due more to the fact that traders
had made a little money and preferred to spend the weekend in
cash, rather than with open positions, as the broad markets did
deteriorate late in the day, after a choppy session.  That is
not meant to be construed as a negative, rather a "We've had a 
decent week, let's square the books and see what the new week 
brings" type of mentality.  Intraday charts do paint a picture
that is indicative of a stock beginning to roll over.  EMLX
closed on intraday support at $215.  Minor support levels show
up at $211, $203 and $198.  A decline to any of the support
levels could present new buying opportunities, as could a
move to the upside.  A new week may bring new buyers to the
market, however keep your stops in place and check the volume
prior to entering any new plays.

On Thursday EMLX did receive a nice endorsement from Michael
Cohen senior analyst for the Alpha Analytics Digital Future Fund.
Cohen said EMLX is one of the top holdings in the fund which has
returned more than 61% in the first two months of the year.

BUY CALL APR-190 UEL-DR OI=148 at $44.00 SL=34.25
BUY CALL APR-200 UEL-DT OI=161 at $38.25 SL=29.75
BUY CALL APR-210*UEL-DB OI=177 at $33.50 SL=26.00
BUY CALL APR-220 UEL-DD OI=121 at $30.25 SL=23.50

SELL PUT MAR-180 UEL-OP OI=125 at $ 1.56 SL= 3.00
(See risks of selling puts in play legend)

Picked on Feb 13th at   $123.88    P/E = 392
Change since picked      +91.63    52-week high=$224.38
Analysts Ratings      3-4-0-0-0    52-week low =$  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 = 1.09 mln


TIBX - Tibco Software $138.19 (+16.19)

Headquartered in Palo Alto, California, TIBCO Software Inc. is 
a leading provider of real-time infrastructure software for 
e-business.  TIBCO's products and services enable computer 
applications and platforms to communicate efficiently across 
networks.  The TIB/ActiveEnterprise(TM) product suite facilitates 
the distribution of information and integration of business 
processes by connecting applications to a network through its 
patented technology.  (That's code for B2B enabler.)  TIB 
technology was first used to "digitize" Wall Street and has been 
adopted in diverse industries, including manufacturing, energy, 
telecommunications, and electronic commerce.  TIBCO Software's 
global client base includes Cisco, Yahoo!, NEC, 3Com, Sun 
Microsystems, SAP, Philips, AT&T and AOL/Netscape.  

OK, Sparky, here's the deal.  With only minor backfires, TIBX has 
risen from a split adjusted $50 on February 1st to its current 
level.  In late February and early March, $125 showed great 
support as TIBX  consolidated during those few days.  Following a 
hard dip'n'bounce to $110, TIBX has been on the move.  Support 
has been moving up intraday $4 at a time from $120 ($124, $128, 
$132, $136, and $138).  Resistance is at $140.  TIBX is now 
staring at breakout country through the windshield.  Earnings to 
be announced on March 23rd should be the driver.  It was just 
Thursday that TIBX announced it expects Q1 revenues to more than 
double from $18 mln last year to $41+ mln in the same quarter 
this year.  Here's the real beauty of the play.  TIBX announced a 
3:1 split on January 24 when it traded at a pre-split value of 
$156.  Don't look now, but we're heading there again in a hurry.  
TIBX executed the split on February 22 taking the stock to a 
split adjusted $82, from which it has climbed to current levels.  
Man, can this baby accelerate!  Now on the agenda for the annual 
shareholder meeting April 12 is an item to increase the 
authorized shares from the current 300 mln to 1.2 bln shares.  
Here's our read on the lineup - another 3:1 split announcement on 
March 23rd, with shareholder approval on April 11th and execution 
within two weeks thereafter.  Ladies and gentlemen, start your 
engines!  (But confirm that the racetrack is safe to drive first.  
You don't want to wreck on the first lap.)

In a separate statement from PRNewswire, Tibco said it had taken 
a $4 million stake in WebEx Inc., which provides Web-based 
meeting services. 

BUY CALL APR-130 PIW-DF OI=102 at $26.75 SL=21.00
BUY CALL APR-140*PIW-DH OI=362 at $22.63 SL=17.75
BUY CALL APR-150 PIW-DJ OI=117 at $18.38 SL=14.25
BUY CALL MAY-140 PIW-EH OI= 33 at $28.50 SL=22.25
BUY CALL MAY-150 PIW-EJ OI=161 at $25.00 SL=19.50

Picked on Mar 12th at  $138.19     P/E = N/A
Change since picked      +0.00     52-week high=$147.00
Analysts Ratings     3-0-0-0-0     52-week low =$  6.56
Last earnings 12/99  est=-0.03     actual= 0.01 surprise=133%
Next earnings 03-23  est= 0.00     versus= N/A
Average Daily Volume =   684 K


BWEB - BackWeb Technologies $58.00 (+13.50)

BackWeb Technologies provides Push software for e-business
solutions that solve the problem of timely, accurate information
delivery across corporate networks and the Internet.  They
provide an automated and reliable way to communicate any data
type over any network connection.  Their customizable software,
helps manage sales, software distribution, e-commerce and other
tasks, and can set up broadcast channels that download preferred
data directly to users with out delays or interruptions.  

It's all about speed with BWEB.  If you look at the speed at
which BWEB has climbed to new highs, you can see why we added 
Internet infrastructure company to our play list.  Actually 
the charts don't tell the whole story on this one, but do 
show how fast this investors are jumping into this relatively
new company.  This past Tuesday BWEB announced a major alliance
with SAP AG a provider of inter-enterprise solutions.  SAP is
working with BackWeb to provide a "push" platform for its
popular mySAP.com business-to-business online community and
solution set.  In looking at the analysts comments it is a 
bit surprising that not more brokerage firms haven't jumped 
on the bandwagon with BWEB.  At this time only four firms are 
following the company, with just one rating BWEB a Strong Buy 
and the other 3 coming in with a Buy rating.  On Friday, 
analysts at Lehman did at least reiterate their Buy rating.  
Another interesting note is the volume.  For a company that 
has a 3 month ADV of 948K, BWEB has averaged about 1.6 million 
shares per day since the first of the month.  In the past nine 
trading sessions BWEB has seen only 1 close in the red.  Since 
the first of March, BWEB has rallied about 52%.  The next 
question that comes to mind is how do we approach this new play.  
BWEB picked up 3% Friday, making a new high on a day the broader 
markets couldn't decide which direction to go.  This would 
suggest there is certainly more upside potential ahead.  In 
addition, the price and volume picked up the pace late in the 
day when the major indices were back-tracking.  On a daily 
basis BWEB could be getting a bit over-bought, however we 
wouldn't expect a large pullback.  BWEB has support near $54 
with the next level back at $47.  If traders come back to work 
ready to sell on Monday those levels should find buyers waiting 
in the wings.  If BWEB continues its recent momentum, we would 
also look to enter this new play.  However it may be prudent 
to keep your stops close, just in case investors that bought 
BWEB earlier this month decide to take some money off the table.

Other than the reiteration form Lehman analysts this week and
the SAP announcement there has been very little news come out
on BWEB.  With the recent run up in price we will look for
more analysts come out pounding the table on BWEB.

BUY CALL APR-45 UBW-DI OI=205 at $15.88 SL=12.25
BUY CALL APR-50 UBW-DJ OI=259 at $12.88 SL=10.00
BUY CALL APR-55*UBW-DK OI= 55 at $ 9.63 SL= 7.50
BUY CALL APR-60 UBW-DL OI=198 at $ 8.00 SL= 6.25
BUY CALL JUN-50 UBW-FJ OI=288 at $16.88 SL=13.00

SELL PUT APR-50 UBW-PJ OI= 18 at $ 5.13 SL= 7.00
(See risks of selling puts in play legend)

Picked on Mar 12th at  $58.00    P/E = N/A
Change since picked     +0.00    52-week high=$59.13
Analysts Ratings    1-3-0-0-0    52-week low =$15.00 
Last earnings 01/00 est=-0.08    actual=-0.04
Next earnings 04-26 est-=0.06    versus= N/A
Average Daily Volume =  948 K


CHKP - Check Point Software $279.88 (+50.13)(+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.   

Some investors and media analysts still seem to be perplexed 
about what is going on with Nasdaq stocks and some of the
old bellwether stocks in the NYSE.  A look at one of our more
profitable plays could provide some insight.  This past week
CHKP closed with a gain of over $50.  That's a profit of more
than 22%.  If you consider the new high made on Friday at $295,
the profit picture is closer to a gain of 29%.  A profit of 29%
in 7 days, how many of the "old economy stocks" perform that
well even in the so-called good times?  Fund managers, investors
and traders have developed the need for "instant financial
gratification."  Many of their trades or investments are viewed
with the "What have you done for me lately" kind of attitude.
It's not that we endorse or disagree with this philosophy, but
it is prevalent in today's market place.  Traders now spend
anywhere from hours to days in the current hot stock or sector
and then roll out to jump into the next opportunity.  The point
here is that CHKP, for whatever perceived reason, has provided
those wonderful opportunities, actually since its stock split in
late January.  CHKP is in the business of providing security for
company's involved in the Internet.  The Internet is here to stay
and anyone that can make life easier for ISP's or Internet users
will profit quite handsomely for their efforts.  The real boost
for CHKP came this week when they signed a deal with Telecom
Italia.  Telecom Italia is the leading provider of three key
services telephone lines, wireless service and the Internet.
With the broad market experiencing a choppy session on Friday,
CHKP ended the day with a gain of +9.50, which supports the 
above theory.  CHKP is way above its recent channel and may be
forming a new one.  Support is found at $275 and $263.  If you
have a current position move your stops up.  Further moves higher
would be viewed as a buying opportunity as CHKP doesn't appear
to be running out of gas just yet.

As we mentioned earlier this week, CHKP may have found new
buyers after analysts at Prudential Securities upped their
rating on CHKP from an Accumulate to a Strong Buy.  Eric Zimits,
an analyst at Chase Hambrecht and Quist also commented on the
agreement with Telecom Italia, saying it was an important win 
for CHKP, adding that it will act as another distribution 
channel for Check Point.

BUY CALL APR-270 KGE-DN OI= 36 at $40.50 SL=31.50
BUY CALL APR-280*KGE-DP OI=184 at $36.50 SL=28.50
BUY CALL APR-290 KGE-DR OI=  0 at $32.13 SL=25.00 Wait for OI!
BUY CALL APR-300 KGE-DT OI=256 at $28.25 SL=22.00

SELL PUT APR-240 KGE-PH OI= 45 at $13.63 SL=17.50
(See risks of selling puts in play legend)

Picked on Feb 27th at $205.63    P/E = 241
Change since picked    +74.25    52-week high=$295.00
Analysts Ratings    8-6-2-0-0    52-week low =$ 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 =  836 K


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The Option Investor Newsletter             3-12-2000  
Sunday                        4 of 5


ERICY - LM Ericsson Telephone $100.63 (-4.19)(P3wks +14.63)

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. 
And the roller coaster ride continues.  Just when you thought 
you had recovered from losing your stomach on the first drop,
ERICY has climbed to yet another falling point.  But that's okay
considering the price moves are not too harsh.  They really have 
provided us with very nice entry points.  When looking at a 
10-day chart, the past three sessions have been trending up with 
slightly higher intraday highs and higher intraday lows.  The 
final three hours of trading on Friday had ERICY building a 
steady intraday support at $100, hinting at an upwards move on
decent volume.  The fall from the $104 level really was both 
healthy and necessary for ERICY to advance.  The gap opening
on Friday, March 3rd had to be retraced, and the sooner the 
better.  Remember, we are still up on this position and the past 
few days only represented entry opportunities into an uptrending 
stock.  There has not been any real news this week for ERICY and
trading has been technically driven.  ERICY is a split play, even
though it won't go ex-div until May.  But with the vote to 
increase the number of authorized shares is coming at the end of 
the month, that little bit of news may start the real run.  Use 
this time to pick good entry points and keep your seatbelts 
fastened, this ride isn't over yet.

It isn't over yet, and there will be great opportunity to profit
from ERICY.  The real concern here is the overall market 
sentiment, and specifically, the NASDAQ.  Next week has a slew 
of economic data coming out that could potentially be market 
moving.  Use caution ahead of the reports.

BUY CALL APR- 95 RQC-DS OI=3529 at $11.50 SL=8.50
BUY CALL APR-100 RQC-DT OI=2955 at $ 8.75 SL=6.50
BUY CALL APR-105*RQC-DA OI= 533 at $ 6.63 SL=4.75
BUY CALL APR-110 RQC-DB OI=1532 at $ 4.88 SL=3.25

Picked on Feb 15th at    $86.38     P/E = 138
Change since picked      +14.25     52-week high=$105.25	
Analysts Ratings     8-11-4-0-0     52-week low =$ 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


ANDW - Andrew Corporation $28.56 (+1.06)

Andrew Corporation is a global supplier of communications 
systems equipment and services.  Major markets are wireless 
communications which includes cellular, government and military 
end use, antennas and complete earth stations for satellite 
communication systems, personal communications services, 
electronic radar systems, communication reconnaissance systems, 
connectivity devices for use in communication systems, and 
related ancillary items and services, and common carrier. 

When we initiated coverage of ANDW on Monday, March 6th, it
was just getting ready to make that next move.  ANDW had traded
down to the low of the day at $26.25 where it found great 
support and the buying began.  It quickly ran to the $29-$30 
range where it traded for the duration of the day.  We knew that
ANDW would have to retrace that pop and it did so on Wednesday.
That is a good sign to see when a stock covers that extreme 
fluctuations and finds support at a higher level than previous.
Buyers stepped in and picked ANDW up at about $27.50.  After 
that we were off to the races again but the most encouraging 
trading pattern occurred on Friday.  ANDW consolidated for most
of the day building a support level at about $29.  Although it
closed slightly below that level, volume was very light on the
day as traders appeared to have called it an early weekend.  
As for the fundamentals of ANDW, their acquisition of Conifer 
Corp. and the hot "broadband"(I love that word!) market creates 
very positive implications.  ANDW is also benefiting from an 
Asian recovery as 48% of their business comes from outside the 
U.S. Asia-Pacific highlights included large orders from customers 
in China, Taiwan, Australia and Japan.  As for the patent 
infringement squabble with California Amplifier, ANDW seems 
to be well-positioned legally.  We still feel that ANDW will 
continue its uptrend and test short-term resistance at $30.75.

As for trading, continue to look for suitable and profitable 
entry points on the slight downturns.  Be aware of your support 
and resistance levels.  A bit more consolidation at $29 on 
Monday wouldn't be all that bad for the two week time horizon.  
Watch for increased volume which would indicate a more solid 
support.  Don't forget your risk levels and stops.   

BUY CALL APR-25 AQN-DE OI=1045 at $5.50 SL=3.75
BUY CALL APR-30*AQN-DF OI=5345 at $2.94 SL=1.50
BUY CALL APR-35 AQN-DG OI= 480 at $1.44 SL=0.75
BUY CALL JUL-35 AQN-GG OI= 118 at $3.13 SL=1.75

Picked on Mar 05th at    $26.38     P/E = 91
Change Since Picked       +2.19     52-week high=31.25
Analysts Ratings      2-3-2-0-0     52-week low =11.00
Last Earnings 01/00   est= 0.18     actual= 0.21
Next Earnings 04/21   est= 0.15     actual= N/A
Average Daily Volume = 1.95 mln


CMVT - Comverse Technology $233.63 (+6.13)

Comverse makes enhanced telecommunications systems and is 
the 3rd largest firm in the voice mail market.  Its TRILOGUE 
Infinity and Access NP product lines supply voice and fax 
messaging, automated personal assistant, and call answering 
services.  TRILOGUE is marketed to telecom network operators 
and gives multiple telephone users access to integrated 
digital information and messaging services.  Comverse's 
AUDIODISK and ULTRA lines are communications monitoring 
systems used by police and surveillance agencies, correctional 
institutions, emergency 911 services, financial institutions 
and tele-marketers. 

Third time's a charm.  That's how we feel about CMVT and its 
ongoing battle with the $240 resistance level.  Last week, CMVT
tested this level twice, once on Tuesday where it briefly broke
through to set a 52-week high at $247.75, and again on Thursday
where it peaked and retreated.  This time, however, things look 
better.  The week ending March 3rd showed CMVT making a steady 
move to $230.  Last week, there was a retracement of those 
previous gains, finding a bounce off $210.  This was due to the 
fact that Tuesday, March 7th, CMVT announced a 2-1 split.  A 
typical post-announcement depression.  So what we have here is
a bit of a split play until the ex-date of April 4th.  The 
trading pattern on Wednesday was very encouraging as CMVT built 
a strong support at $225.50.  And on Friday, it traded sideways, 
re-establishing a solid support level at $230 initially set on 
Monday.  We view this as a positive basing for the next upmove 
on this split run.  CMVT looks technically strong, having 
retraced its gaps and poising itself to move higher.  It appears
to be ready for another steady climb as it did the week ending 
March 3rd.  With its sights set on resistance at $240 and 
support levels at $230 and $225.50, CMVT is due for a nice split

Once again, CMVT is back on the play list.  And we're not the 
only ones who see this stock as a lucrative one.  Lehman Bros.
upped Comverse's 12-month price target to $280 from $240 and 
raised its 2000 earnings estimates to $2.64 from $2.55.  "Both
revenues and backlog continue to show accelerating growth," the 
report said.  They added that CMVT is poised to emerge as a key
beneficiary of rapid growth in wireless data, warranting a 
premium valuation.  Okay then, growth and wireless.  That's
all you had to say.  By the way, U.S. Bancorp also raised its
price target to $290.
BUY CALL APR-230 CQZ-DF	OI=136 at $25.00 SL=19.00
BUY CALL APR-240 CQZ-DH OI=277 at $20.25 SL=15.00
BUY CALL APR-250*CQZ-DJ OI= 67 at $16.63 SL=12.50
BUY CALL JUL-250 CQZ-GJ OI= 82 at $33.63 SL=25.00

Picked on Mar 12th at  $233.63    P/E = 109.17
Change since picked      +0.00    52-week high=$247.75
Analysts Ratings    10-3-0-0-0    52-week low =$ 49.94
Last earnings 03/00  est= 0.58    actual= 0.60
Next earnings 06-00  est= 0.58    versus= 0.48
Average Daily Volume = 1.15 mln


WCG - Williams Communications Group $57.88 (+3.63)(+4.75)

WCG is 85% owned by Williams Company (WMB), a gas utility 
transmission company whose rights of way have been filled 
with ubiquitous strands of fiber optic cable.  In 1985, WMB 
became the first energy company to harness its core competency 
as a builder of networks to enable competition in the 
communications industry Williams Communications is North 
America's only exclusively carrier- focused fiber-optic 
network and the largest independent source of end-to-end 
integrated business communications solutions-data, voice or 
video.  Based in Tulsa, Okla., Williams Communications 
operates primarily in North America, with offices in Europe 
and Asia and investments in South America and Australia.

Rolling up their sleeves to trade, then rolling them back down 
again before they all go to dinner (from their TV commercials), 
the Williams family hasn't done much for their stock price since 
we picked it up Tuesday.  So how about getting out of the dessert 
trough and getting back to work?!  Actually, this 100% IP digital 
network operator gave us a strong move on Friday, powering up $3 
from its $46 opening.  While we can't tell exactly why this 
happened, our best educated guess is that investors made an 
assumption that WCG might be a Deutsche Telecom acquisition 
candidate following US West's spurning of DT's offer.  On that 
news, GBLX and LVLT moved up too.  Aside from strong support at 
$53.50 displayed on Thursday morning's dip'n'bounce, there is 
good support at $55 too.  Resistance is at $60.  Target shoot to 
suit your risk profile, and look for the trend to continue up.  
However, beware that volume has fallen back over the last two 
days to match the ADV.  So what?  Well, the 10-day move from $40 
came on volume of almost twice the ADV.  WCG probably won't give 
us that breakout over $60 unless the volume picks up over the ADV 
again.  Use the telecom index (TCX.X) as a guide too.  If DT 
ceases to pursue any U.S. carrier, the sector may suffer.

Recently, WMB announced deals to purchase 2200 miles of fiber in 
Michigan, Ohio, Indiana, Illinois and Wisconsin from SBC's 
Ameritech division.  Similarly, they recently swapped network 
capacity with Sweden's Telia in a deal valued at $440 mln.  As 
noted on Thursday, Lehman Bros. raised their price target to $62 
from $52, while Solomon Bros. reiterated their Buy rating and 
raised their target to $70 from $46.  CSFB was the first to 
notice two weeks ago when they raised their target from $38 to 
$65 and reiterated their Buy rating.  Company specific news is 

BUY CALL APR-55*WCG-DK OI=1578 at $8.00 SL=6.25
BUY CALL APR-60 WCG-DL OI= 670 at $5.75 SL=4.00
BUY CALL MAY-60 WCG-EL OI=  70 at $7.13 SL=5.25

Picked on Mar 07 at     $59.00     P/E = N/A
Change since picked      -1.13     52-week high=$61.81
Analysts Ratings     2-3-1-0-0     52-week low =$23.25
Last earnings 02/00  est=-0.23     actual=-0.16
Next earnings 05-13  est=-0.42     versus= N/A
Average Daily Volume =   986 K


NOK - Nokia $215.00 (-5.00) 

Finnish Phone Firm, Nokia is the world's number one maker of 
wireless cellular phones, ahead of Motorola, Ericsson and 
Kyocera.  In addition they make wireless networking equipment, 
PC monitors and workstations, digital satellite and cable 
network systems, and set-top boxes.  However mobile phones 
make up 80% of their $19.8 bln in annual sales.  

Here's some background flavor of what this market leader in 
wireless handsets has recently accomplished.  For starters, their 
1999 market share grew to 30% from 23% in 1998.  On February 1, 
NOK announced a 46% increase in previous year profits, a 2-mln-
share repurchase, and a dividend increase.  Net sales grew at 
49%, which should be no surprise given their CEO's comments late 
in 1999 that they would meet their 2003 total revenue figures by 
the end of 2002 (cramming 3 yrs of income into 2 yrs).  NOK blew 
out earnings as they reported a 7.5% surprise of $0.72 vs. 
estimates of $0.67.  At the same time, NOK was keeping the 
Street's expectations in check by guiding analysts to a "30-40% 
growth" rate.  That was then; this is now.  Why make the play, 
you might ask?  February 1st was also the day NOK announced it 
would split its shares 4:1 pending shareholder approval at a 
special meeting to be held on March 22nd.  The actual split date 
would then follow roughly two weeks later, or the first week in 
April.  Technically, we noted Thursday to look for support at 
$214 or dip'n'bounce from $207 as a possible entry following 
amateur hour.  Unfortunately NOK gapped up to $217 at the open 
and range traded between $217 and $220 until 30 minutes before 
the close, where it took a nosedive (sure enough) down to $214, 
then recovered $1 in the final minute.  Was than an entry?  
Pretty clever disguise if it was.  With plenty of time to take a 
position before the split, consider the same approach for Monday. 

Has Nokia seen the light?  There was a rumor that NOK may be 
nearing an agreement to purchase QCOM CDMA chips for use in its 
handsets.  While NOK's CEO spoke to analysts in San Francisco on 
Friday, noting that QCOM's CDMA technology was "very important" 
to NOK, he stopped short of announcing the agreement.  Because of 
the continued growing importance of CDMA in new wireless systems 
all over the world, we think the agreement will ultimately come 
if NOK wants to remain the dominant handset provider.  Also 
noteworthy is that NOK announced a couple of weeks ago it will 
collaborate with AOL to bring instant messaging to the handset.  
Analysts have helped too.  Thursday, Prudential Volpe Tech 
reiterated their Strong Buy with a price target of $230, citing 
that NOK currently trades at 10% discount to ERICY based on 2001 
First Call EPS estimates.  Friday, a Morgan Stanley analyst 
raised her price target from Euro 250 to 300.  We don't know the 
conversion, but figure any upgrade in price from MSDW is good.  
The real play is in the split run.

BUY CALL APR-210 NZY-DB OI=2147 at $19.00 SL=14.75
BUY CALL APR-220*NZY-DD OI=3297 at $14.13 SL=11.25
BUY CALL APR-230 NZY-DF OI=1186 at $10.25 SL= 7.75
BUY CALL JUL-220 NZY-GD OI= 710 at $27.88 SL=21.75
BUY CALL JUL-230 NZY-GF OI= 225 at $23.63 SL=18.50

Picked on Mar 09th at   $214.63     P/E = 96
Change since picked       +0.38     52-week high=$227.06
Analysts Ratings     16-9-1-0-0     52-week low =$ 67.69
Last earnings 02/00   est= 0.67     actual= 0.72
Next earnings 05-02   est=-0.61     versus= 0.48
Average Daily Volume = 3.45 mln


CLRN - Clarent Corp. $169.25 (+31.25)(+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.

The old attage of, what if you threw a party and nobody came, 
seemed be the story of the day for CLRN on Friday.  On the
bright side at least the uninvited "Sellers" that crashed our
party on late Tuesday and early Wednesday didn't show up
either.  CLRN did see a little profit taking early in the day
but really traded in a very narrow $6 range for most of the
session.  With only 265K shares changing hands, it's pretty
difficult to move this stock in either direction.  Here's the
deal as we see it on CLRN.  Since the end of February, CLRN
has enjoyed a very nice run up, almost doubling in price.  
Investors that have bought stock on this rally have either
taken some profit along the way and re-entered, or simply 
hung on and enjoyed the ride.  Those that have shorted CLRN
either have deep pockets, or have had their heads taken off on
on the rally.  CLRN seems to be at a crossroads as we closed
the week, with few traders wanting to get out, yet few willing
to lay down additional funds to jump in.  The uncertainty may
have come with the Nasdaq hitting the 5000 mark, and many 
viewing that as a psychological level, expecting traders to 
take profits.  It's the "I'm not going to sell my positions
until I see some else sell" kind of thinking.  So we sit here
stuck, waiting for company news or economic data to move the
broad markets and CLRN.  A move back through $165 or $160 with
any momentum could spell trouble for our play.  With the Dow
and Nasdaq seeing weakness late in the day Friday, CLRN held
its own pretty well.  If CLRN can move higher, with average or
better volume then the bulls may be back in the drivers seat.

The only company news to come out this week on CLRN surfaced
Tuesday with the announcement that they had signed a deal
with a company named Insors, a Chicago based B2B integrated
communications solutions provider.  Insors plans to package
Clarent's gateways and the Clarent Command Center with routers,
hubs and other products, targeting Fortune 1000 companies. 

BUY CALL APR-145 KGQ-DI OI=17 at $45.88 SL=35.75
BUY CALL APR-150*KGQ-DJ OI=94 at $40.63 SL=31.50
BUY CALL APR-155 KGQ-DK OI=46 at $39.13 SL=30.25

SELL PUT APR-140 KGQ-PH OI=10 at $12.63 SL=16.25
(See risks of selling puts in play legend)

Picked on Mar 02nd at $128.00    P/E = N/A
Change since picked    +41.25    52-week high=$178.50
Analysts Ratings    2-3-0-0-0    52-week low =$ 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 =  588 K


AFCI - Advanced Fibre Communications $79.81 (+14.31)(+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 wireline or wireless systems to smaller line-sized markets.  
Global clients include Alltel, Sprint, France Telecom, and 
Cable & Wireless Panama.   

AFCI experienced topsy-turvy trading patterns this week that 
kept us on our toes.  But in all truth the intraday volatility 
really was an advantage.  In four out of five trading sessions, 
this momentum driven stock has set record highs.  Yet the 
continuous bounces off the 5 & 10 DMAs provided solid entry 
points.  Friday's dynamic move following new Buy coverage by 
Syed Haider of Frost Securities however, swiftly launched AFCI 
beyond these technical indicators.  The stock easily cracked 
tough resistance at $80 and pinnacled at $89.38, the latest 52-
week record.  AFCI did pullback in late day profit-taking, but 
held firm just a fraction under the $80 mark demonstrating it 
should manage these higher price levels into next week.  Under 
the prevailing circumstances, entry points could be had near the 
5-dma ($74.86).  But let's not forget the obvious.  If the 
momentum fizzles because traders find some other stock that fits 
their fancy, then there's nothing to drive the share price back 
up.  Remember this play is based on building momentum dating 
back to the end of February.  Initially there was a BoD meeting 
that may have sparked some interest, but more likely it was the 
slew of analysts' comments that ultimately propelled the share 
price to higher realms.  Also, in the rumor-mill, traders are 
talking about a potential buyout of AFCI by CSCO.  We have no 
idea if this is the case, but it may account for the strange 
movement and volume spikes. 

Currently there hasn't been any eminent news events to effect 
the share price.  However there was a small piece about AFCI in 
a recent Robertson Stephens' report.  AFCI was listed along with 
CIENA (CIEN) and Carrier Access (CACS) as smaller companies in 
the communications industry that have "the advantage of focus".  
Senior Analyst Paul Silverstein, also noted "Advanced Fibre, has 
a product that not only is extremely technologically capable but 
also has been out in the field for several years now" and "has 
the benefit of an impressive base of reference accounts".

BUY CALL APR-75*AQF-DO OI=1016 at $17.75 SL=13.50
BUY CALL APR-80 AQF-DP OI= 932 at $15.50 SL=12.00
BUY CALL APR-85 AQF-DQ OI= 192 at $13.75 SL=11.00

Picked on Feb 27th at    $57.44    P/E = 27
Change since picked      +22.38    52-week high=$89.38
Analysts Ratings      5-8-1-0-0    52-week low =$ 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 = 2.11 mln


SNE - Sony Corporation $243.75 (-55.69)

If you like to be entertained, Sony has your fix.  Its
PlayStation home video game system alone accounts for about
11% of the electronics and entertainment giant's worldwide
sales.  As the #2 consumer electronics firm, SNE makes a host
of products including cameras, DVD players, MiniDisc and Walkman
stereo systems, computers, TVs, and VCRs.  Rounding out the
company's assets are Columbia TriStar and record labels Columbia
and Epic.

Looking for a catalyst for the dramatic drop in SNE shares this
week?  Look no further than rumors of a possible recall of their
latest toy, the PlayStation2 (see news below).  Let this be a
lesson to all you parents out there.  Never give your child a
toy and then suggest you might have to take it away because it
might not work right.  With the heavily-hyped release of the new
game unit just last Saturday, having to recall the estimated
980,000 sold in the first 3 days would be a major loss of face
for the electronics giant.  The degree to which SNE is dependent
on sales of the PlayStation game series exacerbated the decline,
as SNE investors jumped ship in droves on Thursday and Friday,
finishing out a brutal week where SNE lost over 18%.  Although
this may seem like trying to catch the proverbial falling knife,
we are actually setting up to profit from an over-blown news
event.  SNE shares reached their most recent peak in advance of
the release of the new game system and the combination of that
event occurring and the negative news immediately afterwards,
has served to bring shares of SNE back down to where they are
attractive again.  Support on Friday seemed to be forming near
$240, but don't push play until we see a confirming bounce
accompanied by renewed buying volume.  Just like many other
ADRs, SNE tends to gap at the open, meaning it can run right
over your stops.  Take this into account when evaluating your
risk tolerance.

Denying rumors that the PlayStation2 game console will be
recalled due to technical problems, the company did acknowledge
there is a glitch and instructed customers with unsolvable
problems to return their machines for a replacement.  According
to Ben Gurnsey, of Sony Computer Entertainment, the company has
received some 340 phone calls so far from customers complaining
about a glitch in the game system.  The 8-megabyte memory card
can apparently erase data that runs the system and the Digital
Video Disk (DVD) player.

BUY CALL APR-240 SMW-DH OI=176 at $26.00 SL=20.25
BUY CALL APR-250*SMW-DJ OI=223 at $20.88 SL=16.25
BUY CALL APR-260 SMW-DL OI= 49 at $16.13 SL=12.50
BUY CALL APR-270 SMW-DN OI=145 at $13.25 SL=10.75

Picked on Mar 9th at $259.06     P/E = 71
Change since picked   -15.31     52-week high=$314.75
Analysts Ratings   1-1-0-0-0     52-week low =$ 89.25
Last earnings 01/00 est= N/A
Next earnings 04-?? est= N/A
Average Daily Volume = 464 K


DSTM - Datastream Systems $43.44 (+11.44)  

Datastream Systems helps companies ensure plant efficiency 
through intelligent asset management and online industrial 
procurement.  The company's products and services help a wide 
range of customers in 129 countries -- including more than 
60% of the Fortune 500 -- increase equipment uptime, reduce 
maintenance, repair and operations costs and ultimately, 
streamline business procurement processes.  The company has 
sold over 55,000 systems worldwide, accounting for more than 
56% of the unit market share* in CMMS/EAM.  The company's 
iProcure network, located at www.iProcure.com , provides 
procurement capabilities for the industrial market.

This was a great week for DSTM as we picked this one on 
Thursday.  With good strength, swelling option and stock volume, 
DSTM has made a strong and convincing move through its key
psychological resistance level of $40.  Friday's trading session
gave DSTM an all-time high of $47.50, while it settled into a
trading channel between $42 and $45.  Although DSTM has been 
relatively quiet in the news, the company did put out a press
release announcing the completion of an 18-month installation
of the MP5i(TM) enterprise asset management(EAM) system at 
Slovnaft, the largest oil and gas company in Slovakia.  The 
feat was that DSTM provided the only true Slovak-language 
product available that included local implementation and 
technical support.  The industry's first fully Web-architected 
EAM system, MP5i features an open systems architecture that 
permits rapid integration with other software applications such 
as Enterprise Resource Planning (ERP),financial management, 
document management and production controls.  So what does all 
this mean?  Continual progress in the procurement process.  I 
know it's a mouth full.  This business-to-business progress
provides a good outlook for the company and the industry.

At a closer look, DSTM has made a strong and healthy move, not
to mention a profitable one.  While Friday's trading pattern 
showed a good basing at the $43.50 level, watch closely and 
assess DSTM's posture for entry points that are suited to your
risk level.  It is important to remember that we are all 
digesting the NASDAQ's strong move above 5K, so Monday will be 
telling as to trader sentiment.    

BUY CALL APR-30 DQK-DF OI= 118 at $15.75 SL=11.00
BUY CALL APR-35 DQK-DG OI= 275 at $13.75 SL=10.00
BUY CALL APR-40*DQK-DH OI=1032 at $10.75 SL= 7.75

Picked on Mar 09th     $37.00    P/E = 101
Change since picked     +6.43    52-week high=$47.75
Analysts Ratings    2-0-1-0-0    52-week low =$ 6.63
Last earnings 01/00 est=  N/A    actual= 0.12
Next earnings 04/27 est=-0.03    versus=  N/A
Average Daily Volume =  735 K


NITE - Knight/Trimark Group $49.56 (+3.13)

Knight/Trimark, headquartered in Jersey City, NJ, is the parent 
company of Knight Securities, Trimark Securities and Knight 
Financial Products (formerly Arbitrade, LLC).  Knight is the 
largest wholesale market maker in U.S. equity securities, and 
advertise with the tagline "where the trade gets done".  The 
four-year old Knight/Trimark Group, as the largest destination 
for on-line trade executions, is the unseen "processing power" 
behind the explosive growth in on-line securities trading. 

The on-line broker sector caught fire Friday as MER, SCH, DLJ, 
AMTD, EGRP, and yes, NITE all made moves to the upside with each 
issue trading in excess of their ADV.  Why might that be?  If you 
have noticed the average daily volume increase on both the NYSE 
and especially the NASDAQ during the first two months of the 
year, and you guessed that means more trading commissions, you 
win the prize!  Not only has NITE transacted a successively 
greater amount of shares in each of the last three months (7.2 
bln, 10.2 bln, and 11.2 bln in December, January, and February, 
respectively), they have seen their market share grow from 19.6% 
of all NASDAQ transactions to 21.8% in the same period.  Nothing 
new in this trend - just that analysts and news pundits decided 
to notice that on Friday.  Technically, after a big jump from $40 
to $50 in the first three days of March, NITE need a rest.  And 
rest it did in a consolidation around $44.  On Friday's news, 
volume jumped and so did the price (up to $50 resistance where 
we'd normally encounter resistance), but we think the news is 
strong enough to generate a new upward trend.  Its next encounter 
with resistance will be at $55.  The nice long tails on the last 
four days of candlestick charts also convey the strength of its 
$44 support, though NITE closed above its 10-dma (currently at 
$46) each of those days.  $47 and $48 also provide mild intraday 
support.  Target shoot to your comfort level and confirm market 
direction first.

The news is contained above, but know too that Merrill Lynch 
upgraded NITE from Accumulate to Neutral and raised their FY00 
estimate from $1.90 to $2.35 and FY01 from $2.25 to $2.95.  Their 
long-term growth rate projection is raised from 23% to 25% 

BUY CALL APR-45 QTN-DI OI=4669 at $8.00 SL=6.25
BUY CALL APR-50*QTN-DJ OI=4032 at $5.63 SL=3.75
BUY CALL APR-55 QTN-DK OI=2917 at $3.63 SL=2.00
BUY CALL JUL-50 QTN-GJ OI=1622 at $9.75 SL=7.25
BUY CALL JUL-55 QTN-GK OI=1142 at $8.00 SL=6.25

Picked on Mar 12th at   $49.56     P/E = 31
Change since picked      +0.00     52-week high=$81.63
Analysts Ratings     4-4-0-1-0     52-week low =$21.19
Last earnings 01/00  est= 0.34     actual= 0.54 surprise=59%
Next earnings 04-19  est= 0.60     versus= 0.34
Average Daily Volume = 3.45 mln

LEAPS by Mark Phillips

Don't look now, but this week brings (Gasp!) a value play to
the LEAPS section.  We actually found a DJIA stock (AXP), so
badly beaten up and with so many positives to consider, we just
had to add it.  At the risk of putting you to sleep, we'll
restate the obvious; The NASDAQ closed above 5000 this week
and the VIX managed to stay out of the danger zone.  The VIX
this week actually saw quite a bit of excitement, starting out
the week at 21.37 and moving as high as 29.06 by Wednesday
morning.  This provided some very nice entry points,
especially on our recent Leap of the Week picks (MSFT, GE,
IBM).  With both the CPI and PPI reports coming, the FOMC
meeting just around the corner and the market entering
earnings-warning season, volatility is likely to continue.
The VIX continues to be an excellent bellwether for market
tops (low 20's) and market bottoms (high 20's/low 30's),
and Friday's close at 23.80 has the index moving toward the
sell zone.  Stake out your favorite LEAPs, watch for the VIX
to move into the high 20's and be ready to strike as your
entry criteria are satisfied.

Current Plays


EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $59.25   285.37%
                 JAN-2002 $ 90  WUE-AR   $19.00   $62.75   230.26%
GPS    11/07/99  JAN-2001 $ 40  ZGS-AH   $ 5.75   $13.00   126.09%
                 JAN-2002 $ 45  WGS-AI   $ 7.88   $15.38    95.24%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $21.13    55.05%
                 JAN-2002 $110  WIB-AB   $16.50   $25.75    56.06%
LU     11/14/99  JAN-2001 $ 80  ZEU-AP   $12.88   $ 8.88   -31.07%
                 JAN-2002 $ 90  WEU-AR   $16.13   $13.63   -15.50%
CSCO   11/14/99  JAN-2001 $ 80  ZCY-AP   $19.13   $64.13   235.29%
                 JAN-2002 $ 90  WIV-AR   $22.00   $66.13   200.57%
GE     11/21/99  JAN-2001 $150  ZGR-AU   $16.25   $14.63   -10.00%
                 JAN-2002 $150  WGE-AU   $25.50   $25.50     0.00%
NT     11/28/99  JAN-2001 $ 75  ZOO-AO   $22.25   $58.75   164.04%
                 JAN-2002 $ 75  WNT-AO   $30.25   $68.13   125.21%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $20.50    90.70%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $26.50    76.67%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $82.38   270.22%
                 JAN-2002 $120  WGZ-AD   $28.50   $86.50   203.51%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $79.13   236.70%
                 JAN-2002 $100  WFU-AT   $27.25   $82.63   203.21%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $28.75    63.12%
                 JAN-2002 $ 90  WJX-AR   $22.00   $33.00    50.00%
LU     01/09/00  JAN-2001 $ 50  ZEU-AJ   $13.63   $23.88    75.23%
MOT    01/09/00  JAN-2001 $125  ZMA-AE   $31.13   $64.00   105.62%
                 JAN-2002 $125  WMA-AE   $41.50   $77.13    85.84%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $16.38    79.45%
                 JAN-2002 $ 40  WSY-AH   $12.63   $21.75    72.28%
ERICY  01/30/00  JAN-2001 $ 65  ZYD-AM   $19.75   $43.50   120.25%
                 JAN-2002 $ 65  WRY-AM   $27.00   $51.13    89.35%
MSFT   01/30/00  JAN-2001 $100  ZMF-AT   $17.63   $20.00    13.48%
                 JAN-2002 $110  WMF-AB   $21.63   $24.50    13.29%
CS     02/13/00  JAN-2001 $ 30  ZCJ-AF   $14.25   $22.25    56.14%
                 JAN-2002 $ 30  WLJ-AK   $18.25   $26.50    43.84%
ICOS   02/20/00  JAN-2001 $ 40  ZIL-AH   $10.25   $17.13    67.07%
                 JAN-2002 $ 45  WJI-AI   $12.13   $20.50    69.07%
NSM    02/27/00  JAN-2001 $ 70  ZUN-AN   $18.50   $20.00     8.11%
                 JAN-2002 $ 70  WUN-AN   $24.25   $27.00    11.34%
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

TXN - Texas Instruments $181.75

Nobody will look at the price on TXN LEAPS and make the mistake
of calling them cheap.  But given the growth the company is
seeing (not to mention the appreciation in share price), one
could make the argument that they are a bargain.  The stock has
pulled back a bit in the last week providing what may be the
best entry point for the next couple of months.  That's a bold
statement and here's the beef.  TXN is well into its usual split
territory.  Nothing has been announced yet, but a vote to
authorize more shares is on the agenda at the Annual BoD Meeting
on April 20.  Then earnings will be released on the 24th - seems
like the perfect time for a split announcement, don't you think.
Looking at the incredible strength of the SOX (of which TXN is
a huge component), we think there is plenty more upside and want
to get in early before the great unwashed masses drive up the
share price.  TXN has been using the 5-dma (currently at
$172.50) as support for this latest move (confirmed with the
bounce at $168 last Thursday).  Look to open new positions if
TXN gets close to this level and bounces again.  With the VIX
moving south of 25 again, it wouldn't hurt to wait for a return
to the upper 20's before jumping on board this one.

BUY LEAP JAN-2001 $190.00 ZZI-AR at $35.38
BUY LEAP JAN-2002 $200.00 WGZ-AT at $48.75


New Plays

AOL - America Online $58.75

Vindication arrives for those of you who said we were nuts
to drop AOL from the play list 3 weeks ago.  At the time, the
king-of-ISPs was hitting new lows and showed no sign of
stopping.  Investors were dead-set on punishing both AOL and
its merger partner TWX.  Investors seem to be getting more
comfortable with the idea of the merger, as AOL has not only
put in a solid bottom at $50, it is actually starting to move
back up.  Now solidly above both the 10-dma and the 30-dma
($57.88 and $57.00 respectively), AOL now needs to show us it
can stay above its 50-dma and the all-important 200-dma
(converging near $60.75).  Good support is found at $55 and
a bounce near here would make for a great entry point.
Barring further weakness in the issue, look to open new
positions as AOL pushes through and closes above $61.

BUY LEAP JAN-2001 $60.00 ZKS-AL at $14.00
BUY LEAP JAN-2002 $65.00 WAN-AM at $18.63



AXP - American Express $126.69

Investors in AXP have gotten spanked hard since the first
of February and we want to be in position when they stop
crying over their losses.  Falling from the high-160's to
near $120, AXP is near its 52-week lows and major support.  
Driven by interest rate fears and lack of enthusiasm for any 
DJIA stock, the decline in AXP looks to be overdone.  Another 
factor to consider is AXP's move into the online world by 
investing in and signing a joint marketing agreement with 
Respond.com, an online shopping service.  But wait, there's 
more!  On January 24th, the company announced a 3:1 split that 
takes place on May 10th.  In the meantime, we will have earnings 
coming up on April 24th.  This looks like a good time to start 
searching for that entry point.  We don't think it is very 
far off either.  Consider new entries on any dip back near 
the $120 level.

BUY LEAP JAN-2001 $130.00 ZXP-AF at $21.75
BUY LEAP JAN-2002 $140.00 WXP-AH at $28.00




Q $53.25 Giving us a great entry point at $45, Q rocketed to
almost $70 as speculation began to increase that the company
would be pursuing a Trans-Atlantic merger.  Investors gobbled
up the shares and gave us a nice inflation of our option
premiums.  Unfortunately, the potential of a merger with
Deutsche Telekom (DT) made US West feel like the jilted
lover.  Sparks flew throughout the week, with the net result
being a drop in share price for all three companies.  DT has
withdrawn their offer, leaving Q and USW to kiss and make up,
but investors don't seem interested in watching the ending to
this saga.  With all the news and rumors out in the open, we
have also lost interest and will move on to more attractive


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.


PPG - PPG Industries $46.69 (-2.38)(+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.

After four down days, PPG was due for a bit of a bounce.
Although this out-of-favor stock managed to gain more than $1
while the DJIA had yet another negative day, the move lacked
conviction, coming on less than two-thirds of the ADV.  Value
investors couldn't even challenge the 10-dma (up at $47.50), and
this level should continue to pressure PPG.  With little in the
way of news to support the stock, any buying interest continues
to be muted and half-hearted.  Even the announcement last week
that the company was creating an e-commerce unit elicited little
more than yawns from investors.  The only bright spot for PPG
was the last hour on Friday, which saw increasing volume as
price moved up fractionally - not exactly a screaming buy signal,
but a note of caution for our play.  With the DJIA still obeying
its downtrending channel, cyclical stocks like PPG will likely
have trouble moving higher.  Also with interest rate fears alive
and well and the release of the PPI/CPI numbers later this week,
PPG should continue to struggle.  Look to enter new positions on
a southward bounce from the vicinity of the 10-dma, and enjoy
the slide, even though it is a bit slow.

BUY PUT APR-50*PPG-PJ OI=9 at $5.50 SL=3.75 low OI
BUY PUT APR-45 PPG-PI OI=0 at $2.00 SL=1.00 Wait for OI!

Average Daily Volume = 531 K


UAL - United Airlines $47.19 (-3.25)

United Airlines is the largest air carrier in the world and 
the largest majority employee-owned company, offering nearly 
2,300 flights a day to 135 destinations in 27 countries and 
two U.S. territories.  It is an industry innovator with break-
throughs such as E-Ticket Service, Airport Gate Readers, The 
Chariot(SM) mobile airport podium, United Shuttle, and the 
introduction of the technologically advanced Boeing 777.   

The dive looks like it may be flattening out, but UAL is still
in trouble.  Managing to bounce on both Thursday and Friday at
$46.25, this beaten-up airline stock could be putting in a
near-term bottom.  We have seen this same pattern recently, and
each time it has eventually broken, yielding an even lower low.
Keep in mind that the lows this week haven't been seen since
late 1996.  Why do we think UAL still has further to go before
regaining control?  It's the triple whammy of increasing fuel
costs (crude oil is still near 9-year highs), the overall
weakness in transport stocks, and the announcement last week
that the airline is seeing reduced occupancy rates on its
flights.  Add to this the ongoing competition between all the
domestic carriers, making it difficult to raise fares for fear
of seeing occupancy rates drop even further.  Continental did
raise fares on Friday, but the failure of any other airline to
follow their lead makes it unlikely that the fare increase
will stick.  Volume is still gliding along right at the ADV.
If support at $45-46 fails to hold, UAL could drop all the way
to $39-40 before catching another updraft.  Look to enter new
positions if UAL can test and confirm resistance at the 10-dma
(currently $48.19).

BUY PUT APR-50*UAL-PJ OI=157 at $4.75 SL=3.00
BUY PUT APR-45 UAL-PI OI=213 at $2.00 SL=1.00

Average Daily Volume = 781 K


DD - DuPont $45.94 (-4.81)(-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.

Boy, these DOW stocks get no respect, no respect at all, in the
immortal words of Rodney Dangerfield.  As the DOW continues to 
get beat up on every few days, DD has been right in the melee, 
taking its licks.  But who's to complain with this put play, 
especially with the great entry points that the weak and waning
buying provides.  The bears are winning this fight.  What is more
encouraging for our put play was the increased volume in the 
final two hours of trading on Friday, sending the stock down from 
$47 to its close.  So where do we go from here?  The answer may  
be down.  On Wednesday and Thursday, DD tested a short term 
support of $45.25, and on both occasions buying lifted the stock 
up for brief moments.  We will have to see how DD handles a retest 
of that level.  Maybe third time's a charm.  We certainly are not 
convinced that DD is on its way to a trend reversal.  And until
we see anything that even resembles a trend reversal, we're 
stickin' with this put play.  The temporary pops up to $47 and 
$48 have been nice entry points and represent short term 
resistance levels.  Going into next week's economic data 
extravaganza, DD doesn't seem to have any positive overtones.  
We are talking about an "old economy" stock that has fallen out
of favor with investors who have become disgruntled with DD's
management, who could also be considered "old economy."  Watch
for the selling to continue on Monday and be patient, as 
investors continue to lose faith.

Keep in mind that support, which is nothing but a trade or two 
away, is at $45.25.  Watch closely in the early going on Monday 
to see if DD goes for it or if there is a brief stint of buying.  
If buying does happen early, that's a great chance to put on this 
position.  If DD heads for that support and goes through, 
there's no telling how far and painful this fall will be for DD.       

BUY PUT APR-50 DD-PJ OI= 558 at $5.75 SL=4.00
BUY PUT APR-45*DD-PI OI=1177 at $2.75 SL=1.50
Average Daily Volume = 2.95 mln


EK - Eastman Kodak $54.00 (-5.63)

Since essentially inventing consumer photography in 1880 with 
the introduction of the first roll film camera, Eastman Kodak 
Company has focused its energies on making picture-taking easy 
and accessible to everyone, amateur and professional alike. 
With a full line of consumer films and cameras, single-use 
cameras, consumer digital cameras, inkjet media, and supporting
products and services, Kodak maintains that focus -- making 
it easy for everyone to get his or her pictures -- through 
all its offerings, regardless of technology.

EK hit a new 52-week low $53.94 on Thursday and a look ahead 
suggests more of the same for EK.  Let's look what is in EK 
future.  1st quarter earnings.  Now in the past EK hasn't been 
shy about giving an earnings warning before the numbers actually 
come out.  The current estimate is $0.93.  If EK does come out
with a warning as in the past, EK will fall quickly.  You know 
how "old economy" stocks have been treated lately.  Some 
investors might already be selling, afraid the writing is 
on the wall.  That would explain the falling stock price.  
Earnings will be announced on April 16th (confirmed date with 
company).  So a warning could come at any time.  Resistance is 
set at the 10-dma, $57.  Any run into that territory will be a 
great entrance.  Be cautious with this play as we are just 
assuming the past will repeat itself, which might not be the 
case.  Setting a new low, EK will be looking for a bottom, but 
a warning could give them a reason to find a bottom much lower.  
In the news EK's annual shareholders meeting is set for May 10th, 
2000.  Also they announced they are selling their Kodak Blue 
Plus Color charge-coupled device to manufacturers of digital 
cameras and other imaging devices.  It is going to take a lot 
stronger news than that for cure this ailing stock.

BUY PUT APR-55*EK-PK OI=1531 at $2.81 SL=1.25
BUY PUT APR-50 EK-PJ OI= 839 at $1.00 SL=0.00 High-Risk!

Average Daily Volume = 1.62 mln


BVF - Biovail Corp $50.25 (-10.75)

Biovail is a full-service pharmaceutical company that applies
it proprietary drug delivery technologies in developing "oral
controlled release products.  Biovail applies it proprietary
drug delivery technologies to successful drug compounds that
are free of patent protection to develop both branded and 
generic oral controlled-released products.  They also engage
in the formulation, testing, registration, manufacturing, 
and direct marketing of these oral controlled-released
products.  Its branded antihypertensive Tiazac, accounts for
most of its sales, but it does have high hopes for its generic
version of hypertensive Cardizem CD, which is awaiting 
regulatory approval.

Just when you think you found a winner in the Drug and Biotech
sector someone steps in and pulls the plug.  For now, that's the
case with one of our new put plays.  On Monday, Biovail received
FDA approval for its novel once daily controlled release
formulation of Diltiazem Hcl.  Biovail has granted to Forest
Laboratories, Biovail's license of Tiazac, an option to acquire
the exclusive right to market the product in the United States.
Should be good news right?  Well it appeared to be as shares of
BVF began to bounce off support at the $59 area.  The next day
Biovail announced it had received consent of a majority of the
holders of its 10 7/8% Senior Notes, in connection with a debt
tender offer.  On the news traders began to dump shares of BVF
stock.  It only gets worse from here as Wednesday a U.S. District
Judge in Florida found that Andrx Pharmaceutical's formulation
of a generic version of Tiazac does not infringe on Tiazac's
patent.  Andrx had claimed that Biovail's patent was invalid,
but the court said otherwise.  Biovail announced Wednesday it
would appeal the District Court decision.  It's a mess and will
get sorted out through court system in time.  Traders didn't
spend time worrying about who's right or wrong, they just
continued to sell.  The only thing that stopped BVF from
continuing its decline Friday was the closing bell.  Technically
BVF is nearing a support area at $48 and could be getting a bit
over sold.  Oversold or not the volume was picking up at the end
of the session on Friday, which would indicate there's more to
come.  BVF could bounce back up to between $52 and $54 but for
now that would appear to provide some tough resistance.  Further
weakness should be viewed as an opportunity to buy puts.
BUY PUT APR-60 BVF-PL OI= 1 at $ 7.75 SL=5.75 low OI
BUY PUT APR-55*BVF-PK OI=54 at $ 4.38 SL=2.75
BUY PUT APR-50 BVF-PJ OI= 0 at $ 3.75 SL=2.25 Wait for OI!
BUY PUT APR-45 BVF-PI OI=22 at $ 1.50 SL=0.75

Average Daily Volume =  414 K

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The Option Investor Newsletter             3-12-2000  
Sunday                        5 of 5


Charting Basics: Trading The Trend...

There are a number of ways that charts can be used to improve the
profit potential of a specific investing style or strategy.  The
first requirement of any successful trading system is to fully
understand the tools that are used to generate the entry and exit
signals.  Technicians study charts to forecast the future
direction and character of an issue and they evaluate pricing
patterns to determine what investors are thinking about a
particular stock or the market in general.

History has shown that the same types of patterns, with similar
indications and results, occur again and again in almost every
kind of market.  With that in mind, it's easy to understand why
chart patterns are not a specific characteristic of industry or
economy but rather they are more closely related to the traits and
emotions of the investors themselves.  In this case of the stock
market, human nature is the primary influence on the price of any
issue and the perception of future potential is what the chart
actually reflects.  To illustrate that point, a prominent analyst
suggested that an experienced technical trader could be taken back
in time to a different era; confronted with stocks in a foreign
system; and once familiar with the typical behavior of the market,
he would perform just as well as someone who traded the issues on
a daily basis.  The reason of course, is there is no black magic
involved in technical analysis.  Identifying chart patterns is a
simple and straight-forward process that requires nothing more
than a basic knowledge of common indicators and their historical

The foundation for all chart patterns is a trend.  The majority
of professional traders purchase stocks after a primary up-trend
is established.  The reason is simple; the character of a major
trend can last for months or even years without any significant
interruption.  A study of market-leading issues suggests that a
stock in a well-defined movement will often double or triple in
value before a substantial correction occurs.  The key then, is
to identify stocks with major trends; open positions that benefit
from the current directional movement; and remain in, and add to
those positions until there is evidence that the character of the
trend is threatened.  Obviously this is easier said than done,
since every stock undergoes daily fluctuations and is affected by
the overall movement of the market.

There is no specific set of rules or guidelines that will prevent
loss and guarantee profit but it is possible to create a system
of proven techniques to maximize your trading success.  The first
step in any structured approach is to define your investing
objectives and trading philosophy.  With these principles in mind,
you can create a list of operational rules and construct specific
strategies that meet your criteria for risk/reward.  The concept
of money management; profit and loss limits along with techniques
for initiating, adjusting, and closing positions will help you
build an arsenal of tactics to promote successful trading.  In the
end, you will acquire a number of methods based on observation
and experience which will help you identify profitable entry and 
exit opportunities and exploit those situations that require quick 
and precise judgment.  With hard work and determination, you will
eventually be able to correctly assess the market's condition;
implement a profitable strategy in a timely manner; and without
regard to human nature and emotion, manage the position for
maximum potential.

Good Luck!

SUMMARY OF PREVIOUS PICKS (March options expire Friday)

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   8.38   MAR   5.00  1.06  *$  0.72  19.0%
ASPX   12.56  15.13   MAR  10.00  3.25  *$  0.69  10.7%
HEB    11.94  17.69   MAR  10.00  2.69  *$  0.75   9.1%
ANIC    6.94   7.63   MAR   5.00  2.31  *$  0.37   9.0%
PTEK    8.94   9.19   MAR   7.50  2.13  *$  0.69   8.8%
TSEM   21.00  35.06   MAR  17.50  4.63  *$  1.13   7.8% New Symbol
FSII   17.81  22.88   MAR  15.00  4.25  *$  1.44   7.7%
IMNR   15.75  15.63   MAR  10.00  6.38  *$  0.63   7.6%
GZTC   29.13  33.38   MAR  22.50  8.38  *$  1.75   7.3%
AND     8.88  14.38   MAR   7.50  1.94  *$  0.56   7.0%
SCTC   22.31  24.00   MAR  20.00  3.75  *$  1.44   6.7%
TLXN   20.78  25.75   MAR  17.50  4.00  *$  0.72   6.2%
SMSC   14.25  14.94   MAR  12.50  2.25  *$  0.50   6.0%
REMC   26.38  54.00   MAR  22.50  5.00  *$  1.12   5.9%
PCMS   23.06  23.19   MAR  17.50  6.38  *$  0.82   5.5%
MCRE   15.50  30.88   MAR  12.50  3.88  *$  0.88   5.5%
SIII   15.00  23.38   MAR  12.50  3.38  *$  0.88   5.5%
EPIC    9.56   8.41   MAR   7.50  2.50  *$  0.44   5.4%
WRLS   28.00  23.75   MAR  17.50 11.13  *$  0.63   5.4%
ELIX   21.75  23.00   MAR  17.50  4.88  *$  0.63   5.4%
RNBO   30.88  43.00   MAR  25.00  7.00  *$  1.12   4.1%
ITIG   43.44  43.88   MAR  30.00 14.25  *$  0.81   4.0%
MSGI   24.88  19.75   MAR  20.00  6.00   $  0.87   4.0%
GELX   17.81  21.13   MAR  15.00  3.75  *$  0.94   3.6% 
XICO   26.13  21.69   MAR  22.50  4.75   $  0.31   2.1%
UBET    6.25   4.75   MAR   5.00  1.63   $  0.13   2.0%
DRMD   12.75   8.75   MAR  10.00  3.38   $ -0.62   0.0%

ESCM   17.50  14.81   APR  15.00  4.38   $  1.69   8.0%
BIDS    7.13   8.38   APR   5.00  2.63  *$  0.50   6.9%
AND    16.13  14.38   APR  12.50  4.75  *$  1.12   6.1%
COB    14.13  17.63   APR  10.00  5.00  *$  0.87   5.9%
THDO   15.75  15.00   APR  12.50  4.25  *$  1.00   5.4%
EPTO   14.00  16.94   APR  10.00  4.75  *$  0.75   5.0%
MUEI   14.50  19.25   APR  12.50  2.81  *$  0.81   4.3%

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


P-Com (PCMS) has orchestrated a brisk about-face! Standard Micro
(SMSC) bounced-back, recovering from its earnings warning.  There
are several negative divergences, so watch the issue closely.  
Duramed (DRMD) continues to languish after an earnings warning
and has moved below its 150 dma.  Evaluate holding the position
as several technical indicators have triggered a sell signal. 
Youbet.Com (UBET) is still suffering from a post-earnings drop
but April options remain favorable for those with a long-term
outlook.  Xicor (XICO) has stagnated and it is overbought.  The
April $20 calls offer a favorable roll-down to a cost basis of
$18.82 (after buying back the March $22.50 for $0.94), for those 
who desire more protection.  Marketing Services (MSGI) is testing
its 150 dma near $19.69 and breaking below that price would be a
bearish move; but it is oversold in the short-term.


Sequenced by Company

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

KOSP   20.31  MAR  17.50  KQW CW  3.25 9    17.06   2.6%   2.6%

EPTO   16.94  APR  12.50  QTP DV  5.25 812  11.69   6.9%   6.9%
FSII   22.88  APR  20.00  FQH DD  4.75 217  18.13  10.3%  10.3%
IARC   27.63  APR  22.50  IHU DX  7.75 63   19.88  13.2%  13.2%
POSS   12.56  APR  10.00  UPQ DB  3.25 322   9.31   7.4%   7.4%
TERA    8.81  APR   7.50  QIP DU  2.00 1069  6.81  10.1%  10.1%
TLXN   25.75  APR  20.00  TNQ DD  7.13 220  18.62   7.4%   7.4%

Sequenced by Return Called (& Not Called)

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

KOSP   20.31  MAR  17.50  KQW CW  3.25 9    17.06   2.6%   2.6%

IARC   27.63  APR  22.50  IHU DX  7.75 63   19.88  13.2%  13.2%
FSII   22.88  APR  20.00  FQH DD  4.75 217  18.13  10.3%  10.3%
TERA    8.81  APR   7.50  QIP DU  2.00 1069  6.81  10.1%  10.1%
POSS   12.56  APR  10.00  UPQ DB  3.25 322   9.31   7.4%   7.4%
TLXN   25.75  APR  20.00  TNQ DD  7.13 220  18.62   7.4%   7.4%
EPTO   16.94  APR  12.50  QTP DV  5.25 812  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)

                          March Candidates
KOSP - KOS Pharmaceuticals $20.31  *** Up, Up and Away! ***

KOS Pharmaceuticals is engaged in the development of proprietary 
prescription products for the treatment of certain chronic 
cardiovascular and respiratory diseases.  Sales of their lead 
product Niaspan (for the treatment of mixed-lipid disorder and 
recently approved for the treatment of low HDL cholesterol) grew 
46%, the seventh consecutive quarter of double-digit growth.  Kos 
remains on schedule for filing its NDA with the FDA for its second
internally-developed product, Nicostatin(TM).  Kos started a stage
II climb in January after announcing that the VA has added Niaspan®
to its national formulary for cholesterol therapy.  At the same
time, Kos announced that with Medi-Cal and TennCare acceptance of 
Niaspan, the drug is now reimbursable by the Medicaid programs of 
all 50 states.  We favor the support provided by the consolidation
area in February, which is near our cost basis. 

MAR 17.50 KQW CW Bid=3.25 OI=9 CB=17.06 RC=2.6% RNC=2.6%

Chart =

                         April Candidates
EPTO - Epitope  $16.94  *** 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 quarter's 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.  Another week 
offers another entry point in a very bullish issue. 

APR 12.50 QTP DV Bid=5.25 OI=812 CB=11.69 RC=6.9% RNC=6.9%

Chart =


FSII - FSI International  $22.88  *** Stage II ***

FSI is a leading global supplier of processing equipment used at 
key production steps to manufacture microelectronics, including 
semiconductor devices and thin film heads.  The company develops, 
manufactures, markets and supports products used in the technology
areas of microlithography, surface conditioning and spin-on 
dielectrics.  FSI recently agreed to add a two-year independent
director evaluation (TIDE) provision to its Share Rights Plan as
per EQSF Advisers request, to further shareholders' interests.
Recent news includes several new orders and an upgrade by Banc of 
America to a "buy" from "market perform."  The chart remains in a 
strong stage II climb with the February high providing near-term
support.  Our cost basis offers a favorable entry point.

APR 20.00 FQH DD Bid=4.75 OI=217 CB=18.13 RC=10.3% RNC=10.3%

Chart =


IARC - Information Architects $27.63  *** Bye Y2K, Hello B2B ***

Information Architects, formerly Alydaar Software, has transitioned
from a Y2K debugger to establishing an Internet services business
providing management consulting, design, development and deployment
for enterprise information portals using the Metaphoria Framework 
suite of products.  They also provide software conversion services, 
such as language translations and migrations.  The recent news 
includes several new partnerships, including Xceed and elcom; a 
successful new B2B application; as well as new coverage.  Investors
obviously were thrilled with the strategic change and have taken
IARC into "blue sky" territory.  We favor a cost basis below the 
30 dma (near the February consolidation area) in a hot issue that
is somewhat overextended.

APR 22.50 IHU DX Bid=7.75 OI=63 CB=19.88 RC=13.2% RNC=13.2%

Chart =


POSS - Possis Medical $12.56  *** FDA Approval Next Week? ***

Possis develops, manufactures and markets pioneering medical 
devices for the large and growing cardiovascular and vascular 
treatment markets.  Its primary product, the AngioJet Rheolytic 
Thrombectomy System, is marketed in the US for blood clot removal
from coronary arteries, coronary bypass grafts and AV dialysis 
access grafts.  The post earnings drop in February looked 
worrisome but managed to abate at the 30 dma.  Recently, Possis
received fresh capital ($15 Million) in a private placement,
which should help fund its AngioJet stroke clinical trials.  With
a mid-March FDA AngioJet peripheral artery approval expected, 
Chesapeake Securities Research issued a "time sensitive strong buy" 
recommendation and 12 month price target around $25.  Friday's jump
in price on heavy volume suggests current momentum could take POSS
above the February high.  We favor a cost basis near long-term
support on this very speculative issue.

APR 10.00 UPQ DB Bid=3.25 OI=322 CB=9.31 RC=7.4% RNC=7.4%

Chart =


TERA - Tera Computer $8.81  *** Tera buys Cray! ***

Tera Computer designs, builds and sells high-performance general
purpose parallel computer systems.  Tera says its Multithreaded
Architecture system represents the next wave in supercomputer 
technology because of its unique ability to provide high-
performance, broad applicability and ease of programming in a 
single system.  What is the best way to get rid of a competitor?
Osmosis!  On March 2, Tera announced it is buying most of Silicon 
Graphics' Cray supercomputer business in a deal valued at less 
than $100 million.  Tera will assume ownership of Cray's primary 
assets, including its supercomputer product line, the Cray brand 
name, existing service contracts, future Cray vector products and
three facilities in Chippewa Falls, Wis.  This is a new venture
for the much smaller Tera (soon to be called Cray) which should 
help broaden its potential customer base as the company is on the 
verge of full scale production of its MTA supercomputer.  A cost
basis below the 50 dma offers reasonable speculation now that the 
post-announcement drop appears to have ended.

APR 7.50 QIP DU Bid=2.00 OI=1069 CB=6.81 RC=10.1% RNC=10.1%

Chart =


TLXN - Telxon $25.75  *** Approaching Blue Sky Territory ***

Telxon is a leading global designer and manufacturer of wireless 
and mobile information systems for vertical markets.  The company
integrates advanced mobile computing and wireless data communica-
tion technology with a wide array of peripherals, application-
specific software and global customer services for its customers.
Telxon recently announced that it has installed a wireless mobile
price verification and inventory management system for Belk, the 
nations largest privately owned department store chain.  On Friday,
Ames Department Stores announced that it will become the first 
major retailer to roll out Telxon's wireless LAN-based telephony 
system.  These orders combined with an exploration into the Asian
market, bode well for Telxon's future and investors appear to 
agree.  The chart shows Telxon somewhat overbought in the short-
term, which suggests a cost basis near support is a prudent and
conservative entry point.

APR 20.00 TNQ DD Bid=7.13 OI=220 CB=18.62 RC=7.4% RNC=7.4%

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 StrikeOption Option Margin  %%  Support
Symbol Price Price Symbol Price  At 25%Return Level  Comments

VRTY   55.38  50   YQV-OJ  1.75  1385   13%   48
LYNX   71.50  70   ULX-ON  4.88  1788   27%   68 HIGH RISK
SNDK  125.81 120   SWF-OD  6.38  3145   20%  105 ENTRY POINT?
HIFN   85.00  80   HXQ-OP  3.38  2125   16%   80
AMCC  291.00 280   AZV-OP 15.63  7275   21%  275
ELON   90.50  85   EUL-OQ  4.50  2263   20%   85
RIMM  135.00 125   RUP-OE  3.75  3375   11%  130
SCMR  169.00 165   QSM-OM  7.50  4225   18%  165
SCMR  169.00 160   QSM-OL  5.88  4225   14%  165
HGSI  172.38 160   HBW-OL  5.50  4310   13%  170 WAIT FOR BOUNCE
PPRO  123.63 115   PPU-OC  4.88  3091   16%  120
CRA   203.00 185   CKA-OQ  7.38  5075   15%  200 CONFIRM FIRST
QLGC  179.13 170   QOV-ON  6.50  4478   15%  180 CONFIRM FIRST
QLGC  179.10 175   QOV-OO  8.75  4478   20%  180 CONFIRM FIRST
PLCM  116.56 110   QHD-OB  3.13  2914   11%  110
MERQ  115.00 110   RBF-OB  3.75  2875   13%  112
VPHM   95.00  90   HPU-OR  4.50  2375   19%   91
FIBR  139.00 125   QBD-OE  5.13  3475   15%  130
FFIV  115.75 110   FQL-OB  3.75  2894   13%  112 CONFIRM FIRST
SEBL  163.00 155   SGW-OK  4.13  4075   10%  162
IMNX  213.00 200   QUV-OT  6.88  5325   13%  210
GERN   58.00  55   GQD-OK  6.38  1450   44%   52 CONFIRM FIRST
ENZ    87.44  85   ENZ-OQ  4.25  2186   20%   87 CONFIRM FIRST
ENMD   73.25  70   QMA-ON  3.25  1831   18%   73 CONFIRM FIRST
AFCI   79.75  75   AQF-OO  2.19  1994   11%   75
RHAT   71.00  65   RCV-OM  2.13  1775   12%   68 CONFIRM FIRST
GWRX   51.69  45   GWU-OI  1.69  1292   13%   45
GWRX   51.69  50   GWU-OJ  3.63  1292   28%   45
DITC  117.50 110   DUI-OB  6.50  2938   22%  115
PUMA  187.00 180   YCQ-OP  7.00  4675   15%  180
PUMA  187.00 175   YCQ-OO  5.13  4675   11%  180
FNSR  145.00 140   FQY-OH  6.25  3625   17%  141
DIGL  132.75 120   DGU-OD  3.13  3319    9%  125
DIGL  132.80 125   DGU-OE  7.00  3320   21%  125
DIGL  132.80 130   DGU-OF  9.38  3320   28%  125
SPYG   81.38  75   YQG-OO  3.38  2035   17%   80
VERT  272.00 260   URE-OL  8.00  6800   12%  260
ADIC   90.00  85   QXG-OC  2.94  2250   13%   90
MMCN   55.00  50   CMQ-OJ  1.31  1375   10%   53
MMCN   55.00  55   CMQ-OK  4.00  1375   29%   53
MLNM  235.00 230   QMR-OU  9.50  5875   16%  230
BVSN  259.00 240   BZV-OU  8.13  6475   13%  255 SPLITS 3:1 TUES
ARBA  305.00 300   RBU-OT  9.13  7625   12%  300 SPLIT COMING
ARBA  305.00 320   RBU-OD 19.38  7625   25%  300 BET ON A REBOUND?
RBAK  386.00 380   BYU-CP 15.50  9650   16%  375 HIGH RISK
AFFX  257.00 250   FUE-OJ 10.63  6425   17%  250
BRCD  331.00 320   GUF-OD  9.00  8275   11%  330 SPLIT COMING
JNPR  282.00 270   JUY-ON  9.25  7050   13%  272
MRVC  184.50 175   RVY-OO  7.63  4613   17%  182
VIGN  294.00 280   QVG-OP  7.50  7350   10%  275
INCY  203.25 200   NGQ-OT 11.50  5081   23%  201 BOTTOM FISHING
NTAP  237.00 230   ULM-OF  8.25  5925   14%  220



AGGRESSIVE   SELL PUT MAR-320 RBU-OD at $19.38 = 25%
MODERATE     SELL PUT MAR-300 RBU-OT at $ 9.13 = 12%



AGGRESSIVE   SELL PUT MAR-230 ULM-OF at $8.25 = 14%
MODERATE     SELL PUT MAR-220 ULM-OD at $4.75 = 08%



AGGRESSIVE   SELL PUT MAR-70 RCV-ON at $4.13 = 23%
MODERATE     SELL PUT MAR-65 RCV-OM at $2.13 = 12%



AGGRESSIVE   SELL PUT MAR-130 DGU-OF at $9.38 = 28%
MODERATE     SELL PUT MAR-125 DGU-OE at $7.00 = 21%

For a Spread Sheet version of this information click here:


Option Trading Strategies; Spreads and Combinations...

Spread trading is a complex and often misunderstood subject that
usually requires a great deal of study to understand completely.
The trader who perseveres will find there is a simple logic to
most of the concepts.  These knowledgeable traders earn the right
to have less money at risk and greater potential for profits.  As
one becomes familiar with the components of combination positions,
he can begin to formulate potentially profitable strategies.

One of the primary considerations for most traders is risk versus
reward.  In the derivatives market, buyers of options have limited
risk and unlimited reward while sellers of options have limited
reward and unlimited risk.  With this single perspective in mind,
it's obvious why most retail traders simply buy options.  Most
investors would never consider a position with unlimited risk and
yet few understand that almost any trade that isn't fully hedged
entails enormous speculation.  A violent adverse move, which does
not allow time for adjustments, can quickly reduce any position
to a fraction of its initial value.  With this in mind, it's hard
to understand why novice traders would take outright long or short
positions under any circumstances.  The only possible explanation
is that they believe the probability of catastrophic loss is very
small and the potential for profit is worth the risk.  Fortunately,
most option traders are aware that the risk/reward characteristics
of a position are not the only considerations.  Equally important
is the probability of profit or loss.  When a trader evaluates a
prospective position, the likelihood of each possible outcome must
be factored into the assessment.  Is the reward, even a limited
one, sufficient to offset the risk?

In option trading, risk comes in many forms.  Luckily, there are
also many ways to trade.  To increase the probability of profit,
the majority of successful option traders engage in some form of
combination, position or spread trading.  These methods are simply
a way of enabling an option trader to take advantage of miss-priced
options, while at the same time reducing the effects of short-term
changes in market conditions so that he can safely hold an option
position to maturity.  While there is no perfect position for the
option trader, successful investors learn to hedge their risk in
as many different ways as possible, thereby minimizing the effects
of volatile and adverse markets.

Discover the benefits of spread and combination trading in Larry
McMillan's book, "McMillan on Options" and "Option Volatility &
Pricing; Advanced Trading Strategies and Techniques" by Sheldon
Natenberg, both available in the OIN bookstore.  Of course you can
always visit our SPREADS/COMBINATIONS section, on the home page at:


Good Luck!

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

SUMMARY OF PREVIOUS PICKS (March options expire Friday)

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

EXLN   22.13  26.69   MAR  17.50  0.56  *$  0.56  24.4%
ESPI   12.75  14.44   MAR  10.00  0.50  *$  0.50  23.7%
ELIX   21.00  23.00   MAR  17.50  0.50  *$  0.50  20.1%
SCTC   24.38  24.00   MAR  17.50  0.63  *$  0.63  16.6%
PLNR   15.88  16.00   MAR  12.50  0.25  *$  0.25  15.8%
SCTC   25.00  24.00   MAR  20.00  0.38  *$  0.38  15.3%
WSTL   25.88  39.00   MAR  17.50  0.69  *$  0.69  13.2%
ANET   12.69  13.88   MAR  10.00  0.25  *$  0.25  13.0%
TSEM   27.25  35.06   MAR  22.50  0.38  *$  0.38  12.6%
WPZ    15.31  10.19   MAR  10.00  0.38  *$  0.38  12.4% New Symbol
ZONA    7.69  10.88   MAR   5.00  0.31  *$  0.31  12.1%
BCRX   32.75  29.88   MAR  25.00  0.38  *$  0.38  11.9%
WSTL   31.50  39.00   MAR  22.50  0.56  *$  0.56  11.8%
XICO   26.13  21.69   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  38.38   MAR  20.00  0.75  *$  0.75  11.2%
MSGI   23.75  19.75   MAR  17.50  0.38  *$  0.38  10.7%
TSEM   20.13  35.06   MAR  15.00  0.56  *$  0.56  10.6% New Symbol
CRUS   20.31  21.88   MAR  15.00  0.38  *$  0.38   9.6%
PTEC   20.63  27.38   MAR  15.00  0.63  *$  0.63   9.6%
RWAV   10.56  10.38   MAR   7.50  0.31  *$  0.31   9.3%
PGEX   23.13  20.94   MAR  17.50  0.50  *$  0.50   8.5%
IDTC   31.50  34.63   MAR  20.00  0.50  *$  0.50   8.3%
SKYC   28.63  40.31   MAR  20.00  0.44  *$  0.44   8.0%
PILT   33.94  49.50   MAR  22.50  0.63  *$  0.63   7.4%
EXLN   23.00  26.69   MAR  15.00  0.31  *$  0.31   7.1%
MSGI   24.88  19.75   MAR  17.50  0.44  *$  0.44   7.1%
PTEC   23.06  27.38   MAR  17.50  0.38  *$  0.38   6.6%
AXTI   31.94  40.50   MAR  17.50  0.50  *$  0.50   6.3%
RNBO   30.88  43.00   MAR  22.50  0.38  *$  0.38   5.0%

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


Marketing Services (MSGI) is testing its 150 dma near $19.69 and
should be watched closely.  It is oversold in the short-term.  It
remains to be seen if Pacific Gateway (PGEX) can breakout above
its 150 dma and reverse the long term downtrend.  The expected
sell-off (options aren't that expensive without a reason) has
begun for Cell Pathways (CLPA).  Monitor the position closely.
Netrix (NTRX) has entered a consolidation phase forming an
ascending triangle, with probability favoring an upside breakout.
Xicor (XICO) has stagnated and is technically overbought.  April
calls remain favorable for those with a long-term outlook who wish
to own the issue (though the chance may not present itself).  The
news that WorldPages.com (WPZ) is buying Interactive Media Services
didn't please investors and dropped the stock to its 150 dma.  WPZ
traded below $10 on Friday though it did manage to close at the
high (Hammer bottom?).  Watch this issue closely as the current
oversold condition could lead to a rally and a favorable early exit.


Duane Reade (DRD) offered a favorable exit on the oversold rally
this week for a small profit ($0.25 on Friday's down-day prices).


Sequenced by Company

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

CONV   12.81  APR  10.00  UVC PB  0.56  0     9.44   17.9%
ISIP   24.00  APR  15.00  QIS PC  0.75  214  14.25   13.5%
MADGF  14.25  APR  10.00  MQE PB  0.50  0     9.50   14.9%
OXGN   23.50  APR  17.50  QYO PW  0.50  64   17.00    9.6%
PCMS   23.19  APR  15.00  PQP PC  0.81  117  14.19   14.9%
SCUR   26.50  APR  17.50  UQU PW  0.75  52   16.75   12.4%
ZONA   10.88  APR   7.50  NQZ PU  0.38  20    7.12   14.9%

Sequenced by ROI  

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

CONV   12.81  APR  10.00  UVC PB  0.56  0     9.44   17.9%
MADGF  14.25  APR  10.00  MQE PB  0.50  0     9.50   14.9%
PCMS   23.19  APR  15.00  PQP PC  0.81  117  14.19   14.9%
ZONA   10.88  APR   7.50  NQZ PU  0.38  20    7.12   14.9%
ISIP   24.00  APR  15.00  QIS PC  0.75  214  14.25   13.5%
SCUR   26.50  APR  17.50  UQU PW  0.75  52   16.75   12.4%
OXGN   23.50  APR  17.50  QYO PW  0.50  64   17.00    9.6%

Company Descriptions

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


CONV - Convergent Communications  $12.81  *** Own This One! ***
Convergent Communications is a rapidly growing national provider
of single-source data and voice communications systems, services,
and solutions.  Convergent supplies the networks and provides the
services such as design, installation, management, and monitoring
of those networks.  They specialize in systems that allow small
and medium businesses to control their communications without
having to own and support the infrastructure.  CONV supplies the
data, voice and other equipment in exchange for an agreement to
manage, monitor and maintain that network.  The company now has
87 clients in four markets, amounting to long-term contracts of
$45 million, up from $15.2 million a year ago.  That's excellent
growth for a small company as they plan to expand into twelve
additional markets in 2000.

APR 10.00 UVC PB Bid=0.56 OI=0 CB=9.44 ROI=17.9%

Chart =


ISIP - Isis Pharmaceuticals  $24.00   *** Biotech Boom! ***

ISIS Pharmaceuticals is engaged in the discovery and development
of a new class of drugs based on antisense technology. ISIS
believes with antisense technology that it can design drugs that
are safer and more effective than traditional drugs.  They combine
an expertise in molecular and cellular biology with antisense
drug discovery techniques to design drugs to fight a wide range of
diseases, including infectious and inflammatory diseases and
cancer.  In addition, they have five antisense compounds in human
clinical trials and other compounds in preclinical development.
Isis soared recently after the company reported it received 20
new U.S. patents related to genomics.  The patents cover the use
of antisense inhibitors against genes involved in cancer, allergy
and auto-immune disease and give them an opportunity to collect
fees and possibly royalties for the use of antisense as a target
validation.  The stock is also benefiting from the current surge
in biotech.  Our cost basis appears to be a sensible entry point.

APR 15.00 QIS PC Bid=0.75 OI=214 CB=14.25 ROI=13.5%

Chart =


MADGF - Madge Networks  $14.25  *** Networking Is Hot! ***

Madge Networks N.V. is a global managed network services and
product solutions provider, working in the support of enterprises
deploying mission-critical Internet applications.  They specialize
in managed network services, web/application hosting, enterprise
LAN products and video networking.  Madge's goal is to optimize
the implementation of enterprises' voice, video and data networks
with the ultimate aim of convergence of all networking needs on
Internet Protocol solutions.  MADGF offers these services to many
companies in the financial services, media and publishing sectors.
MADGF recently debuted the Smart GigIntegrator, a high performance
Gigabit backbone-class switch, and the Smart WorkStream 100Mbps
workgroup switch along with a plan to offer Internet broadcasters
and advertisers delivery of targeted banner ads and rich media
advertising over the Madge Broadcast Network.  Also completed a
$30 million private placement to institutional investors, the
proceeds of which will be used fund the expansion of Madge.web.
A great price for a fast growing company.

APR 10.00 MQE PB Bid=0.50 OI=0 CB=9.50 ROI=14.9%

Chart =


OXGN - Oxigene  $23.50  *** New Drug Therapy! ***

Oxigene is an international biopharmaceutical company engaged
principally in the research and the development of products for
use in the treatment of cancer.  Recently they have begun to
investigate certain of their developmental stage products for
applications as direct cancer treatment agents, anti-inflammatory
agents or in the treatment of fungal or other infectious diseases,
as well as for DNA repair measurement and stimulation.  Currently,
Oxigene has in various stages of clinical development therapeutic
product candidates; Combretastatin, Declopramide, and Cordycepin.
Last year, OXGN agreed to a licensing agreement with Bristol
Myers to develop CA4P as an anti-cancer therapy.  Now the company
will expand its product portfolio by focusing on development of
non-systemic uses of CA4P for treatment of certain ocular diseases,
psoriasis and arthritis.  OXGN is also working with Techniclone to
develop their Vascular Targeting Agent, a new vascular technology
for the next generation of cancer therapeutic treatments.

APR 17.50 QYO PW Bid=0.50 OI=64 CB=17.00 ROI=9.6%

Chart =


PCMS - P-Com  $23.19  *** On The Rebound! ***

P-Com develops, manufactures, and markets network access systems 
for the worldwide wireless telecommunications market.  The point-
to-point, spread spectrum, and point-to-multipoint radio links 
provided by P-Com are designed to satisfy the network requirements
of cellular, personal & corporate communications services, public
utilities and local governments.  In addition, P-Com provides 
comprehensive network services including system planning, program
management, path design, and installation.  The sell-off was short
and the reversal was decisive.  With favorable earnings, several
upgrades, and now a price target of $35, the possibility of owning
the issue at $14 seems like stealing.

APR 15.00 PQP PC Bid=0.81 OI=117 CB=14.19 ROI=14.9%

Chart =


SCUR - Secure Computing  $26.50  *** Web Security ***

Secure Computing designs, develops, and markets inter-operable,
standards-based products for end-to-end network solutions,
including fire-walls, Web filters, authentication, Extranet access
control and security related professional services.  Secure's
customers include Fortune 500 companies, small branch offices and
government agencies, all of whom rely on software solutions to
maximize productivity on the Internet without compromising their
information security.  Their security products are designed to
provide integrated enterprise security solutions for corporate
networks.  SCUR now offers fire-wall software that dynamically
downloads policy management for an initial protocol allowing both
high-security and high-performance for all web-based businesses.
We simply favor the bullish technicals and the price support near
the cost basis.

APR 17.50 UQU PW Bid=0.75 OI=52 CB=16.75 ROI=12.4%

Chart =


ZONA - Zonagen  $10.88  *** Short Squeeze or Biotech Rally? ***

Zonagen is a biopharmaceutical company that is engaged in the
development of pharmaceutical products for the reproductive system;
sexual dysfunction, urology, contraception and infertility.  ZONA
has a worldwide sales and marketing agreement with Schering-Plough
corporation for Vasomax, the company's rapidly disintegrating oral
formulation of phentolamine mesylate for Male Erectile Dysfunction.
The recent strength in micro-cap biotech stocks and a potential
short-squeeze have boosted this issue to a new trading range.  The
April position offers a favorable entry price on speculative drug
stock with bullish technicals.  Once again, due-diligence is a
prerequisite to any speculative issue.

APR 7.50 NQZ PU Bid=0.38 OI=20 CB=7.12 ROI=14.9%

Chart =


Oil Prices and Profit Warnings Dominate The Headlines..

Friday, March 10

Industrial issues slumped Friday on concerns over earnings in the
consumer products sector.  The Dow fell 81 points to 9928 while
the Nasdaq remained relatively unchanged at 5048.  The S&P 500
index finished down 6 points at 1395.  Volume on the Big Board
was 1.13 billion shares, with declines beating advances 1,714 to
1,221.  In the bond market, the 30-year Treasury fell 11/32, bid
at 100 29/32, where it yielded 6.17%.

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

Advanced Micro   AMD    APR37C/50C     $8.62   debit   bull-call
BMC Software     BMCS   APR35C/45C     $8.50   debit   bull-call
Take Two Int.    TTWO   JUN7C/APR17C   $8.00   debit   diagonal
Take Two Int.    TTWO   JUN7C/APR15C   $6.50   debit   diagonal

AMD started the day off with an unexpected $5 drop and our target
debit was quickly adjusted.  The stock fell to a mid-day low near
$50 before recovering to close at $52.75.  TTWO fared slightly
better in early trading but eventually succumbed to profit-taking.
Our combination position at $15.00/$17.50 should provide adequate
downside protection until the bullish trend resumes.  BMCS traded
in a small range for the entire session and the opening price was
above our suggested target.

Portfolio plays:

Blue-chip issues struggled into positive territory during the
volatile session but eventually faded as investors lightened
their positions ahead of the week-end.  Cyclicals and consumer
issues were among the hardest hit and traders said the additional
earnings warnings simply made matters worse.  Drug stocks also
retreated after recent gains and the biotech rally appears to be
in its final stages.  Fortunately, technology issues continue to
support the Nasdaq's climb and they are expected to outperform
value stocks for the foreseeable future.  While investors have
been willing to pour their savings into market-leading stocks,
the American public is less optimistic about the future of the
economy.  The Consumer Confidence Index fell from a record high
in January and some experts say the drop, which was linked to
higher interest rates and oil prices, is a clear indication of
a future economic slump.  Regardless of the current pessimism,
the incredible growth of the Internet will drive valuations in
a few select groups to record highs and that's where we will
focus our attention in the coming months.

The majority of top performers over the last few weeks have come
from the technology sector and the leaders among those issues have
been in computer systems, telecommunications equipment/networking 
hardware, E-commerce and semiconductors.  That's the primary area
of attention for the Spreads portfolio and a large percentage of
our winning selections have come from this group.  Today's session
was no different with stocks such as Exodus (EXDS), Intervu (ITVU),
Kla-Tencor (KLAC), Netopia (NTPA) and Vignette (VIGN) dominating
the leader-board.  In the small-cap section, P-com (PCMS), Micron
Electronics (MUEI) and Network Associates (NETA) led the way and
a surprise rally from Zoltek (ZOLT) completed another great week.
There were a couple of issues that moved against us and we acted
quickly to limit potential losses.  Voicestream (VSTR) attempted
a last-gasp recovery Wednesday but failed exactly at the 30 dma
on increasing volume.  Thursday's move confirmed the trend and
our belated exit was one day too late.  This was a costly loss
that could have been avoided had we simply followed the position
diligently.  Biovail (BVF) was the other culprit and the story
was much the same.  BVF is a failing issue that slipped past our
cursory scans and relieved us of a few dollars.  The sad thing is
the spread could have been closed for a fair profit when the chart
initially exhibited the classic signs of impending doom.  Now we
are lucky to be exiting at a break-even basis.

With March options expiring next Friday, our goal will be to use
the current volatile trends to complete the remaining adjustments
in the longer-term positions.  Any of the issues that exhibit poor
technical character will be closed to protect gains and/or limit
losses.  With luck, the period will end on a positive note and the
majority of plays will finish with favorable profits.

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


Today's offerings are all momentum plays based on recent bullish
trends in the hot sectors.  Each of the positions have been
evaluated for probability of profit using the current price and
technical history of the stock.  News and market sentiment will
have an effect on each issue so review the plays individually and
make your own decision about the future outcome of the position.


MYPT - MyPoints.com  $66.12  *** Technicals Only! ***

MyPoints.com is a leading developer of Internet direct marketing
services and loyalty infrastructure. Their database-driven direct
marketing service, MyPoints®, enables businesses to identify,
acquire and retain customers through a unique program that
integrates highly targeted email and Web-based offers with
incentive points to respond to those offers both online and
offline.  MyPoints.com is also a leading developer of Internet
loyalty infrastructure, including MyPoints® Network and numerous
other custom-branded rewards programs based on their proprietary
technology platform -- the Digital Loyalty Engine.  MyPoints.com
has sales offices in cities nationwide.

As the CEO says, MyPoints.com simply rewards consumers for doing
things that they do every day such as interacting with targeted
e-mail offers, visiting web-sites, filling out surveys, and most
importantly, shopping.  This seems to be the wave of E-commerce
and this company is right on the mark with their current style
of exploiting web traffic.  A number of analysts now follow the
issue and they all have promising views for the future.  I favor
the recent surge in buying and the solid influx of money that is
being committed by retail investors.  This conservative position
offers an excellent, low-cost opportunity to participate in the
current Internet rally.

PLAY (aggressive - bullish/debit spread):

BUY  CALL APR-50 MYU-DJ OI=6  A=$20.12
SELL CALL APR-55 MYU-DK OI=27 B=$16.25
INITIAL NET DEBIT TARGET=$3.75-$3.88 ROI(max)=28%

Chart =


SPLN - Sportsline.com  $57.75  *** On The Move! ***

SportsLine.com is an Internet-based sports media company that
provides interactive information and programming as well as
merchandise to sports enthusiasts worldwide.  SPLN produces and
distributes original, interactive sports content, including
editorials and analyses, radio shows, contests, games, fantasy
league products and fan clubs.  SportsLine.com also distributes
a broad range of up-to-date news, scores, player and team
statistics and standings, photos, audio clips and video clips
obtained from CBS and other leading sports news organizations,
as well as the company's athletes.  Their news organization
provides general sports news and information for all major
professional and college sports obtained from strategic partners
and a variety of leading sports news organizations such as The
Associated Press, CBS, Reuters and SportsTicker.  SportsLine.com
also publishes editorials and analyses from its staff of writers
and editors and freelance sports journalists.

This company is simply one of the recent fairytale recoveries in
the Internet group.  The bullish momentum is growing and a number
of prominent analysts are supporting the move with institutional 
recommendations.  The technicals suggest an upcoming test of the
all-time highs and this position offers a conservative way to
profit from the new enthusiasm for the issue.

PLAY (aggressive - bullish/debit spread):

BUY  CALL APR-40 QSP-DH OI=116 A=$19.88
SELL CALL APR-50 QSP-DJ OI=155 B=$12.38
INITIAL NET DEBIT TARGET=$7.25-$7.38 ROI(max)=35%

Chart =


ESIO - Electro Scientific  $64.00  *** The Chip Sector is Hot! ***

Electro Scientific Industries and its subsidiaries provide
electronics manufacturers with equipment necessary to produce
key components used in wireless telecommunications, computers,
automotive electronics, and many other electronic products.  ESI
is one of the leading suppliers of advanced laser systems used
to improve the yield of semiconductor memory devices, and of
high-speed test and termination equipment used in the production
of miniature passive electronic components, and of advanced laser
systems used to fine tune electronic circuitry.  The company also
produces a family of mechanical and laser drilling systems for
production of printed wiring boards and advanced electronic
packaging, as well as machine vision products for manufacturers
of semiconductors, electronics and other products.

A recent industry study suggests the outlook for this sector will
remain very bullish for the next 12 - 24 months and consumer and
communications electronics are the key drivers in this cyclical
up-turn in the group.  Demand has been spurred by lower prices and
better performance resulting from advanced production technologies.
New materials are a key component of these new technologies, and
ESIO has provided the equipment to help construct a number of these
leading-edge products.  The most recent news for the company is a
$6 million order for multi-layer ceramic capacitor (MLCC) testing
and termination equipment.  The order began shipping in February
and will be completed during the next four months.  That should
keep investors interested in the issue well into the summer.

PLAY (aggressive - bullish/credit spread):

BUY  PUT APR-45 EQO-PI OI=0 A=$1.25

Chart =


EPTO - Epitope  $16.94  *** Covered-call Alternative ***

Epitope develops, manufactures and markets oral specimen
collection devices and diagnostic products using its proprietary
oral fluid technologies.  The company's primary focus is on the 
detection of antibodies to the Human Immunodeficiency Virus (HIV),
the cause of Acquired Immune Deficiency Syndrome (AIDS).  EPTO's
lead product, the patented OraSure collection device, is used in
conjunction with screening and confirmatory tests approved by the
United States Food and Drug Administration (FDA) to test for HIV-1
antibodies and other conditions.  Epitope also markets the HIV-1
Western blot confirmatory test kits used to confirm results of
initial screening tests for HIV-1 infection.  These products are
sold to public and private-sector clients in the United States
and certain foreign countries.  Their technology is also used to
test for drugs of abuse and other analytes.

This stock has been a past winner in the Covered-calls section but
with the increased attention, there are also some excellent option 
pricing disparities that favor specific spread techniques.  As far
as the fundamental outlook for the company, last quarter's earnings
were favorable with increasing revenues and narrowing losses.  The 
recent introduction of the Intercept oral fluid drug test helped
spur the resumption of the current bullish trend and this spread
position offers another method to speculate on the future potential
of the issue.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JUL-7.50  QTP-GU OI=557 A=$9.88
SELL CALL APR-15.00 QTP-DC OI=187 B=$3.50

Chart =


NLCS - National Computer Systems  $49.56  *** Big Mover! ***

National Computer Systems provides services and software for the
collection, management and interpretation of data.  The company's
application software products are focused on specific problems
within targeted markets, particularly K-12 education and large
scale data management.  The company's primary product and service
offerings include assessment and testing services, enterprise
software for schools, NCS services and data collection systems.
NCS provides test-scoring services, which include program design,
program management, software development, printing, packaging,
distribution and collection logistics, scoring, editing, analysis
and final reporting.  Their enterprise software products include
student administrative software to assist educators in student
management.  The company's NCS services include systems analysis
and design, software development, comprehensive data collection
technologies, telecommunication and telephone call center support.

Early in the week, the company reported record earnings.  Then the
upgrades followed and now the speculation is beginning to garner
attention (the option players are finally moving in).  The strange
thing is, no one really understands the reason for the big jump.
This position came up on all of our low premium/high volatility
scans and made the pages of two other newsletters.  Hopefully we
all can't be wrong!

PLAY (conservative - neutral/debit straddle):

BUY  CALL JUL-50 QEZ-GJ OI=34 A=$5.38
BUY  PUT  JUL-50 QEZ-SJ OI=8  A=$4.38

A longer time frame (October) is also available at an attractive
price.  You will have to decide whether the additional potential
is worth the cost.

Chart =

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