The Option Investor Newsletter Wednesday 3-15-2000 Copyright 2000, All rights reserved. Redistribution in any form strictly prohibited. Posted online for subscribers at http://www.OptionInvestor.com Also provided as a service to The Online Investor Advantage ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 3-15-2000 High Low Volume Advance Decline DOW 10131.40 + 320.20 10180.20 9776.50 1,305,979k 1,914 1,122 Nasdaq 4,582.62 - 124.01 4758.44 4553.92 1,937,803k 1,544 2,740 S&P-100 749.30 + 18.55 753.34 729.65 Totals 3,458 3,862 S&P-500 1392.14 + 32.99 1397.99 1356.99 47.2% 52.8% $RUT 558.87 - 14.12 576.40 556.43 $TRAN 2521.71 + 139.94 2543.87 2382.34 VIX 25.06 - 1.37 29.13 24.08 Put/Call Ratio .54 ****************************************************************** The "Old" Wall Street Two-Step What's this? The Dow is up big and the Nasdaq down big. Who changed the rules when I wasn't looking! I thought we were supposed to be buying "new" economy stocks. Honestly, that has been my favorite part of watching CNBC for the past month and hearing the phrase "new" economy. Analysts and traders alike have been acting as if there was a major shift in the way we will invest for the next millennium. Now, I am the first to admit that I have been having a blast trading the "new" economy stocks for months now, but at some point money will shift to another area. You can bank on it. Ask anyone who owned Biotech this week about the shift that has gone on. We have been taking a hard look at the markets this week in the office and the prevailing wisdom says "yeah it looks like a shift, but it's hard to fathom ahead of earnings". The bottom line is, expect the volatility to continue over the next month or so. But where there is volatility, there is opportunity! The DJIA did there best to provide a jump-the-gun rally ahead of the PPI report due out tomorrow, but the Nasdaq sat this one out. A plus 320-point move on the DJIA is just what the doctor ordered and put this "old" economy back above the 10,000 level. Today's close was at 10,131.41, up over 320 points as it gave a licking to the "new" economy Nasdaq. That index was down 123.95 to 4582.68. We are looking at a nearly 500 point loss on the Nasdaq this week alone. The good news is that we hit the 10% correction level. Are the buyers ready to join in on a solid PPI report tomorrow? We will see, but if the PPI is taken as negative, we could see some more Nasdaq support levels broken, which may really scare some people. It has been awhile since traders have really felt fear in the Nasdaq like we have this week. Here are the support levels that traders will be watching in case of a morning disaster. I don't think it will be quite that ugly though. The $VIX had a little scare today, reaching up to 28, but closed in the middle of the road at 25.05. The Nasdaq isn't tanking because of any fundamental shortcomings. Instead, the mass exodus is from traders wanting to cycle quickly over to where they see the next move taking place. Today the sentiment was to go back to the DJIA. Financials, Chemicals, Banks, Drugs and Cyclicals may be perceived as the best chance to double your money in the next 6 months. It validates the popularity of the stock market as no one wants to sit out, just rotate to the next hot spot. Again, whether this is a short-term fad or the place to be over the next quarter or two is yet to be seen. As much as I want to go after some of the NYSE stocks like I did today, I still have one eye on the Nasdaq at any given time. Some of these stocks have already correct between 30-50%. It doesn't take long for traders to sniff out a tech-bargain. The point losers on the Nasdaq today read like a horror story. CMVT -26.13, EPNY -61.94, NAVI -58.00, CHKP -38.19, CLRN -27.50, AKAM -29.44, MRVC -29.38, and RBAK -24.50. The amazing part of this wave of selling is that a lot of these stocks are still higher than they were at the start of last month. Volume on the NYSE was heavy at 1.3 billion shares, confirming that there were buyers on Wall Street. The Nasdaq volume was 1.93 billion which is solid, but not over 2 billion like we had been seeing even a week ago on the advance. This kind of action where the volume is leaning to the strong market is indicative of a healthy market, not one of panic. You may remember the Nasdaq had been the market seeing the strong relative volume. Maybe now it's the DJIA's turn. The big talk on the Street today was the speculation of a merger/alliance between EBAY and YHOO. CNBC initially broke the news Tuesday evening, sending EBAY's shares from its Tuesday close of $211 to as high as $241 in after-hours trading. Yet today, neither company commented on the what they called "speculative reports." In fact, reports today indicated that talks have been broken off and both stocks were hit hard in trading. EBAY made an about-face, quickly giving up overnight gains and then some, closing at $189.50, off $21.50. YHOO fared slightly better, selling off $10.25 to close at $158.50. This merger speculation is nothing new. Ever since the AOL-TWX merger announcement, YHOO's name has been floating around as it became apparent that a merger may be necessary to compete with its biggest rival, AOL. Although it would be advantageous for EBAY in that they would gain a much greater viewing audience, EBAY's significant relationship with AOL could make for a difficult negotiation. Not to mention the big price tag that comes along with the deal. In a deal that would be valued around $30 bln, the fact that YHOO needs EBAY more than EBAY needs YHOO could bring an even higher premium. As INTC's stock continues its tear upward, today's announcement that they would acquire Denmark's GIGA A/S drove INTC up another $2.31 to $120.19. GIGA is a manufacturer of network components, such as high speed communication chips used in optical networking and in directing internet traffic. This deal, to be done for $1.25 billion in cash, should give INTC greater capacity for designing and manufacturing fiber-optic infrastructure, which translates to faster internet access. In a company press release, Mark Christensen of Intel's Network Communication Group said that this acquisition would be beneficial for the "rapidly growing demand for high-bandwidth communication infrastructure." GIGA would become an Intel subsidiary within Level 1 Communications. GIGA was up 23.6% to 1,100 Danish Krones in European trading. On a severe down day for internet stocks, AMZN was off $1.88 to $63.75, driven by negative comments from a Paine Webber analyst. Sara Farley revised her 12-month price target for AMZN from $74 to $68 and reiterated Paine Webber's "neutral" stance on the stock. As a former high flier in the internet sector, AMZN's jets have cooled tremendously, declining steadily for the past three months. Initially, AMZN broke out to the forefront and became the darling of the internet sector for investor and traders alike. Yet, as other companies catch up with AMZN, stronger competition has made it more difficult for AMZN to continue to increase its earnings the way it has in the past. AOL's new alliance with Sears poses another threat to AMZN. Farley also mentioned that higher interest rates in the future will weigh upon AMZN's recent debt offering, affecting the bottom line. ORCL beat the Street yesterday, coming in with 3rd quarter earnings of $0.17 a share versus the consensus estimate of $0.13. They even beat the whisper number of $0.15. The company attributed their increased performance to strong database software sales. With 3rd quarter profit soaring 80%, the market was happy with ORCL's effort to cut costs. All this good news was in addition to the announcement on Tuesday that ORCL would team up with HKT, Cable & Wireless HKT Ltd., to offer business-to-business e-commerce services in China, a market that has proved to be elusive to American companies. ORCL traded up $1.63 to $78.63. Those of you in the market this week may have already turned your attention to the NYSE after the buy-the-dip mentality hasn't been working. I have been left holding the bag on my share of losing trades this week and it didn't take long for me to turn my attention elsewhere. The question is, how will tomorrow's pre-market PPI report affect this shift? Analysts are expecting a 0.5% increase. If it comes in lower than expected you may see a Nasdaq resurgence. Don't get caught running back in during amateur hour though. The NYSE looked really strong today and you don't want to be caught in the wrong issues. When I look at what has been strong lately, it is names like DELL, INTC, AXP, and heaven-forbid, even CPQ has been rallying. All "old" school names. Other things to watch tomorrow will be the opening level. We have gapped one way and then traded the other all week. I will be real leery about rushing in tomorrow. If it is on the Nasdaq, make it confirm itself in the morning. If it is on the NYSE, it probably won't spurt out of reach. Most of my losers this week have been in stocks that carried more risk than reward. After all, we are in earnings warning season so play it safe until you are sure. My gut instinct? The Nasdaq will bounce back and forth making for great plays, but it could be time for the "old" school names to shine. Ryan Nelson Asst. Editor *************************Advertisement**************************** Options Traders ! Mr. Stock's new online trading site has been designed for you. Trade spreads, straddles, covered writes, and stocks online. Get real-time market data throughout our site. Advanced options tools include volatility graphs, implied volatilities, and more. http://mojofarm.mediaplex.com/adserver/click_thru_request/565-58-1875-3 ****************************************************************** *********** STOCK NEWS *********** Arch Communications: Can it and Paging Networks Survive? By: Matt Paolucci The future of telecommunications, especially wireless, is getting more exciting every day. The things we can accomplish without even setting foot in the office is astounding compared to just a few years ago. Other than keeping a physical address for mail delivery and a server for your Web site, practically every other function can now be achieved by way of a remote device. That's exactly what Arch Communications (APGR) is thinking. Arch is the #2 independent paging company in the U.S. Arch became #2 through its 1999 purchase of private-held MobileMedia. With its pending merger with Paging Network (PAGE), expected to close by mid-year, it will become #1 independent paging company in the world, with over 16 million subscribers and annual revenues exceeding $1.7 billion. Arch, by itself, offers four kinds of paging services: digital display, alphanumeric display, tone- only, and tone-plus-voice, to some 7 million subscribers. It operates in all 50 US states, Washington DC, and in the Caribbean. Arch markets its pagers through more than 300 offices and retail stores, on the Internet, and through independent resellers, sales agents, and retailers. Arch was recently chosen by Internet services giant America Online Inc. (AOL) to provide two-way wireless messaging capabilities for its new AOL Mobile Messenger service and plans to offer AOL's e-mail and AOL Instant Messenger (AIM) services to consumers using devices enabled with APGR's messaging capabilities. The companies signed a three-year agreement. Arch has also signed an deal with The Free Network, a leading multi-level marketing company serving primarily the telecommunications industry. Under the agreement, The Free Network's approximately 55,000 independent representatives will market Arch products to current and potential customers. The program is scheduled to launch mid-March. Last week, the company announced a strategic alliance with MyWay.com, a leading developer and distributor of custom portal solutions, to allow Arch customers to wirelessly access and customize a wide variety of content and applications on the World Wide Web, including national and local news and weather, stock quotes, email and personal organizer applications, through Arch's Web site. The company has also been hard at work reducing its debt. On March 9, the company completed a transaction with bondholders in which Arch issued roughly 10 million shares of Arch common stock in exchange for $135 million of 10.875 percent Senior Discount Notes due in 2008. The big question is: Can Arch Communication and Paging Networks survive and thrive in the highly-competitive wireless services arena? Sure, the combined company will have 16 million subscribers, more than $1.7 billion in annual revenues, and $535 million in EBITDA (earnings before interest, taxes, depreciation and amortization). It will also have 2,300 salespeople pushing their products and services. Lastly, the two companies estimate that synergies created by the merged entity will amount to $80 million over the next two years. Not bad. On the other hand, the combined company will have $1.8 billion in debt, 172 million shares outstanding, and a paging product ill- equipped to compete with popular devices made by Palm Inc. (PALM), Nokia Corp. (NOK), and Ericsson Telephone (ERICY). Even though the merger between Arch and Paging Networks has some attractive qualities, the marriage was probably necessary just to compete. It will certainly be an uphill battle for the new Arch Communications, in my opinion. With both companies consumed in debt (with high interest rates, to boot), facing stiff competition, a lack of Wall Street interest in the combination, and an obsolete product, it may be best to do the shareholders of the new company a favor by taking the 16 million subscribers and seeing who shows up at the door with cash to acquire them. *************** PLAY OF THE DAY *************** CALL **** AFCI - Advanced Fibere Communications $77.63 +2.00 (-2.19) 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. Most Recent Write-Up The wide intraday swings are still in full force. AFCI experienced spreads of 10+ pts during past two days. There's not any "official" news regarding the scuttlebutt about a potential buyout of AFCI by CSCO, but again it may account for the topsy-turvy movement and volume spikes. This volatile momentum play continues to provide lots of room for entries and exits. Although in consideration of the present market conditions, it'd be wise to wait for an upward bounce off the 5-dma (currently at $77.09) before opening new call positions. If the stock dives the next stop is the $68 to $72 vicinity just below the 10-dma ($72.13). Aspect Communications announced yesterday it signed a new multi-year contract with France Telecom to provide its UMC1000 Multi-Service Access Platform. The terms also allow for joint development of products if the need arises. This award was well received by John Schofield, AFC's president and CEO, who boosted that "France Telecom has been a key, strategic AFC customer since 1995" and "this contract exemplifies AFC's new sales strategy of focusing on select markets and customers". Comments What I like about AFCI is that it didn't follow suit with the NASDAQ. In fact, it bucked the trend with a $2 gain. With very little good news for the NASDAQ, AFCI is a bright spot. In the final trading moments, AFCI rounded up slightly on the heaviest volume of the day. So for tomorrow, assess the PPI's impact on the market and watch for AFCI to hold this current level during amateur hour. By that time, we should have an idea of where we are going. If the PPI comes in benign, AFCI could really be the play of the day. BUY CALL APR-70 AQF-CN OI= 453 at $ 8.38 SL= 5.75 BUY CALL APR-75*AQF-CO OI= 951 at $ 4.25 SL= 2.50 BUY CALL APR-80 AQF-CP OI=1036 at $ 1.88 SL= 0.75 BUY CALL JUN-80 AQF-FP OI= 181 at $18.88 SL=14.00 Picked on Feb 27th at $57.44 P/E = 19 Change since picked +20.19 52-week high=$89.38 Analysts Ratings 4-8-1-0-0 52-week low =$ 6.75 Last earnings 12/99 est= 0.09 actual= 0.10 Next earnings 04-20 est= 0.07 versus= 0.04 Average daily volume = 1.86 mln /charts/charts.asp?symbol=AFCI ************************************* BIG COVERED CALLS & NAKED PUT SECTION ************************************* The Big Sell-Off Continues... Yet all of our positions in the Summary below remain at maximum profit. Only when the Market corrects sharply can the true value of a conservative covered write (or deep OTM naked put) be appreciated. The current high-volatility conditions do offer the potential for tremendous profit, but at great risk. We prefer to focus on a high probability of a reasonable profit with low risk and reduced potential for loss. Summary of Previous Picks: Covered Calls: (Margin would double the listed Monthly Return) Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return ORCL MAR 70 68.25 78.63 $1.75 8.7% SCMR MAR 95 89.31 135.63 $5.69 6.5% FNSR MAR 110 106.43 124.75 $3.57 6.4% INKT MAR 125 119.63 195.88 $5.37 5.9% BOUT MAR 80 78.63 89.00 $1.38 5.9% LWIN MAR 80 75.63 83.88 $4.37 5.9% NEON MAR 55 52.00 83.47 $3.00 5.8% INSP MAR 145 135.56 195.13 $9.44 5.7% CRA MAR 130 124.62 146.00 $5.38 5.7% ITVU MAR 105 98.25 138.25 $6.75 5.6% SMTC MAR 55 52.75 57.13 $2.25 5.6% CHINA MAR 95 90.12 106.50 $4.88 5.5% TIBX MAR 65 61.79 119.25 $3.20 5.3% Split 3 - 1 FIBR MAR 55 51.75 120.00 $3.25 5.2% ENTU MAR 65 61.88 99.13 $3.12 5.1% PUMA MAR 95 91.50 164.00 $3.50 5.1% IMNX MAR 130 122.50 170.56 $7.50 5.0% CLRS MAR 90 87.87 115.00 $2.13 4.6% MUSE MAR 87 82.50 150.00 $4.50 4.5% Split 2 - 1 DITC MAR 62 58.94 92.75 $3.07 4.3% Split 2 - 1 BVSN MAR 56 54.54 70.25 $1.46 3.5% Split 3 - 1 AFCI APR 55 49.75 77.63 $5.25 7.3% DITC APR 90 83.38 92.75 $6.63 5.5% PUMA APR 135 125.75 164.00 $9.25 5.1% ISSX APR 105 96.19 103.00 $6.82 4.9% Naked Puts: Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return BOUT MAR 80 78.06 89.00 $1.94 23.5% ORCL MAR 70 68.69 78.63 $1.31 20.6% DITC MAR 87 86.00 92.75 $1.00 14.1% SCMR MAR 85 81.50 135.63 $3.50 13.3% BVSN MAR 53 52.08 70.25 $1.25 10.9% Split 3 - 1 NEON MAR 50 48.44 83.47 $1.56 10.9% FNSR MAR 95 93.31 124.75 $1.69 10.8% CRA MAR 120 117.19 146.00 $2.81 10.3% PUMA MAR 90 87.87 164.00 $2.13 10.1% MUSE MAR 82 80.19 150.00 $2.32 9.9% Split 2 - 1 ENTU MAR 60 58.31 99.13 $1.69 9.8% CHINA MAR 85 82.62 106.50 $2.38 9.3% INSP MAR 130 125.37 195.13 $4.63 9.3% LWIN MAR 70 68.19 83.88 $1.81 9.1% ITVU MAR 105 102.94 138.25 $2.06 8.9% TIBX MAR 58 56.83 119.25 $1.50 8.5% Split 3 - 1 CLRS MAR 80 79.06 115.00 $0.94 7.4% HLIT MAR 95 92.50 119.00 $2.50 7.4% IMNX MAR 165 163.25 170.56 $1.75 7.3% INKT MAR 110 108.37 195.88 $1.63 7.3% VRSN MAR 185 182.25 194.75 $2.75 7.1% INSP MAR 180 178.19 195.13 $1.81 7.0% MRVC MAR 70 69.06 129.00 $0.94 5.9% PROX MAR 80 78.50 140.00 $1.50 5.2% AFCI APR 45 42.63 77.63 $2.38 10.1% ISSX APR 90 86.38 103.00 $3.63 9.0% IMNX APR 155 149.50 170.56 $5.50 7.4% PUMA APR 120 115.63 164.00 $4.38 7.4% NEW PICKS We list favorable "in-the-money" covered write and "out-of-the- money" naked put candidates that offer conservative entry points into technically bullish charts, with reasonable monthly returns. The positions that we find favorable (and will track every week) will be marked by asterisks. Do not enter these trades unless you fully understand the strategy and various methods of manipulating the position should the stock price drop, or rise, and in the event you decide you want to keep the issue. **** AFCI - Advanced Fibre Comm. $77.62 *** New 52-Week High *** Advanced Fibre is a manufacturer of telecommunications systems for the "local loop" between telephone service users and public telephone networks worldwide. AFC's flagship product is the UMC 1000 Third Generation Digital Loop Carrier (3GDLC). This unit is installed in a variety of network configurations to support the varying geographic distribution of subscriber bases. There are more than 12,000 UMC 1000 systems installed in 23 countries serving approximately 2.5 million access lines. In the United States, Sprint, WinStar, and Pac Bell, among others, deploy the UMC 1000 system. The system has also been deployed in a number of other counties around the globe. A recent article from the Robertson Stephens Tech 2000 Conference offered a bullish outlook for Advanced Fibre and its industry. In an in-depth interview, Paul Silverstein, Senior Analyst with Robertson Stephens reported the sector is experiencing extremely robust demand with two fundamental drivers; phenomenal end-user growth and the need for bandwidth and services from communications service providers. He believes smaller companies such as Advanced Fibre that concentrate on one particular market segment of the communications equipment industry have the advantage of focus. He also commented that Advanced Fibre has a product that not only is extremely technologically capable but also has been out in the field for several years now, deployed extensively throughout North America and other countries, and the company has the benefit of an impressive base of reference accounts. This sounds like the foundation for a great future and analysts from other brokerages agree. Today Lehman Brothers upgraded the issue and raised the price target to $100 a share based on a new multiyear contract with France Telecom for access equipment. The chart reflects a solid bullish trend with little downside risk and our new cost basis is still well below the recent trading range. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Put APR 45 AQF PI 243 1.19 43.81 5.8% *** Sell Put APR 47 AQF PT 104 1.63 45.38 7.8% Sell Put APR 50 AQF PJ 306 2.06 47.94 9.6% Chart = /charts/charts.asp?symbol=AFCI **** ASYT - Asyst Technologies $50.31 *** Hot Chip Sector! *** Asyst Technologies develops, manufactures and markets systems utilizing isolation technology, material tracking products and factory automation solutions used primarily in clean rooms for semiconductor manufacturing. Asyst addresses the requirements for increased levels of cleanliness, facility utilization, control and cost-effectiveness in semiconductor manufacturing through its SMIF mini environment system, its SMART-Traveler material control system, robotics and its family of automation software products and solutions. We selected this issue based on the company's potential for expansion in a sector that is expected to grow exponentially over the next two years. With multimillion-dollar contracts from Silterra Malaysia and 1st Silicon for its new fab-wide automation solution, the company has demonstrated the global demand for its products. They expect capitalize upon that strategic region, a fast-growing center for semiconductor fabrication and plan to develop other relationships after the new field service office is fully operational. We feel that the issue has great future potential and the recent technicals suggest our cost basis offers a favorable price to enter a new position. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 40 QQY DH 735 13.13 37.18 6.2% *** Sell Put APR 35 QQY PG 50 1.63 33.38 11.4% *** Sell Put APR 40 QQY PH 77 2.75 37.25 17.6% Chart = /charts/charts.asp?symbol=ASYT **** INKT - Inktomi $195.88 *** Wireless Expansion! *** Inktomi develops and markets scaleable software applications made to enhance the performance and intelligence of large-scale networks. Traffic Server is Inktomi's large-scale network cache application designed to address capacity constraints in high- traffic network routes. The Traffic Server software speeds traffic flow on the Internet by storing information closer to the user. Traffic Server increases effective bandwidth, adding speed, reliability and scalability to the network. Their Internet search engine application enables Internet portals and other Website customers to provide online search services to end-users. The Internet shopping engine, Inktomi's newest application, was initiated with the acquisition of C\\2\\B Technologies. The shopping engine is designed to enable end-users to quickly and easily locate products of interest, compare features and prices among products, and locate and purchase such products through participating merchants. Inktomi recently unveiled a major new strategy to deliver more online content to cellular phones and other wireless devices. In a new initiative involving alliances with six other technology companies, Inktomi will seek to accelerate the deployment of wireless devices equipped with Internet content and commerce functions. The wireless effort comprises their portal services and network products, and includes companies such as AirFlash, Portal Software and Cap Gemini, Sun Microsystems, Hewlett-Packard, and Gwcom. Inktomi plans to build superior wireless solutions and deliver data and services customized for the specific needs of mobile users. The company is expected to invest significantly in this growth area, leveraging their leadership position in the Internet infra-structure. Goldman Sachs recently offered a new "buy" rating on the company with a spot on the "recommended" list and it appears that most investors agree with their assessment. We are going to continue selling puts on the issue as long as the bullish trend is intact. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Put APR 135 KYQ PG 199 3.13 131.88 6.1% Sell Put APR 140 KYQ PH 398 4.00 136.00 7.6% *** Sell Put APR 145 KYQ PI 117 5.13 139.88 9.5% Sell Put APR 150 KYQ PJ 429 6.25 143.75 11.3% Chart = /charts/charts.asp?symbol=INKT **** MU - Micron $113.00 *** On The Move! *** Micron Technology and its subsidiaries, principally design, develop, manufacture and market semiconductor memory products, primarily DRAM, principally for use in personal computers and custom complex printed circuit board, memory module and system level assemblies. Their primary semiconductor products are dynamic random access memory components and through Micron Electronics (MUEI), its 63%-owned subsidiary, the company offers PC systems, notebooks and servers. This issue has been on a meteoric rise in the last few weeks and since Microsoft's Windows 2000 launch in February, business has been better for the whole group of hardware producers. Analysts are bullish on the company and Salomon Smith Barney offered the most recent upgrade, shifting its view to an "outperform", based on firmer DRAM pricing. Last Friday, Morgan Stanley Dean Witter reiterated their "outperform" citing Micron's favorable outlook for the second half of this year. Investors were advised to buy the stock on any weakness. In early March, Goldman Sachs also reiterated their "market outperform" rating and that helped boost the issue to it's current levels. We simply favor the opportunity to be paid for trying to own the issue at a discounted price. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Put APR 80 MU PP 1659 1.94 78.06 6.5% Sell Put APR 85 MU PQ 1097 2.75 82.25 8.9% *** Sell Put APR 90 MU PR 1583 3.88 86.13 12.0% Chart = /charts/charts.asp?symbol=MU **** NEON - New Era Of Networks $83.50 *** New Trading Range *** New Era of Networks is the leading provider of e-Business integration software. Its products enable companies to share information and manage end-to-end business processes across Internet-facing e-Business applications, packaged software such as ERP systems, and legacy applications. NEON has a rapidly growing base of 2,500 customers worldwide in a variety of industries including financial services, insurance, manufacturing, health-care, telecommunications and hospitality. NEON has demonstrated that its products shorten implementations while providing performance and reliability, proven in some of the most demanding transaction processing environments in the world. NEON partners with most of the leading IT software and service providers including IBM, BEA Systems, Broad Vision, Sun/Forte, Cambridge Technology, CIBER, Compaq, and Hewlett-Packard. In January, NEON reported a return to profitability with record revenues in the fourth quarter driven by e-Business and a strong demand for their infrastructure platforms. Goldman Sachs analyst Anne Meisner followed the bullish report with a revised rating of "market out-performer." The company is enjoying a return to favor among analysts after last summer's earnings shortfall and recently achieved a new all-time high. With the new deals this week (NTT data and Cognizant Technology Solutions) and the ongoing supply pact with IBM, the issue has the potential to continue well into the triple digits. Our conservative position should provide ample room for any future consolidation. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 65 QNO DM 583 22.25 61.22 5.1% *** Sell Put APR 50 QNO PJ 100 1.25 48.75 5.7% Sell Put APR 55 QNO PK 242 2.06 52.94 9.0% *** Sell Put APR 60 QNO PL 85 3.25 56.75 13.4% Sell Put APR 65 QNO PM 187 4.76 60.24 18.2% Chart = /charts/charts.asp?symbol=NEON **** NXTV - Next Level Communications $160.00 *** Another Player? *** Next Level designs and markets high-speed, high-volume, also known as broadband, communications equipment that enables telephone companies and other communications service providers to cost-effectively deliver a full suite of voice, data and video services over the existing copper telephone wire infrastructure. Service providers deploying the equipment can either offer voice, data and video services in a single product offering or offer each service separately depending on subscriber demand and the service providers' objectives. The recent merger discussions between Deutsche Telekom, Qwest and U.S. West has brought new interest to other companies in the group and Next Level is one of the premier service providers in that industry. Deutsche Telekom has been in talks to acquire Qwest and U.S. West, and Qwest recently announced it was in discussions to buy a minority stake in Next Level. The meetings are in the final stages but a deal has not been finalized. Sources say that both Qwest and U S West have been looking to roll-out services such as high-speed data and video over their existing infrastructure and now the opportunity may become intermingled in the merger plans. With the additional investor attention on this sector, the issue should have little trouble remaining above our conservative cost basis. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 125 NUX DE 42 42.38 117.71 5.1% *** Sell Put APR 115 NUX PC 15 4.38 110.63 9.9% *** Sell Put APR 120 NUX PD 5 5.50 114.50 12.1% Sell Put APR 125 NUX PE 10 7.00 118.00 14.7% Chart = /charts/charts.asp?symbol=NXTV **** SFE - Safeguard Scientifics $255.00 *** 3-For-1 Split Soon! *** Safeguard Scientifics is a diversified information technology company that develops, operates and manages emerging growth information technology companies. Safeguard is focusing on emerging opportunities in eCommerce, enterprise applications, and network infrastructure, which are expected to benefit from the growing use of the Internet as a fundamental business tool. Safeguard's reportable segments consist of general corporate operations, CompuCom, and Tangram. General corporate operations consist of developing, operating, and managing emerging growth, information technology partnership companies, and participating in the management of venture capital funds. CompuCom's daily operations include sales of distributed desktop computer products, and configuration, network integration, and technology support. Tangram's operations include the design, development, sale, and implementation of enterprise-wide asset tracking and software management solutions. Internet incubators are hot and shares of Safeguard have risen significantly in recent weeks on strength in the IPO market and a recent price upgrade. Last week, J.P. Morgan gave the company a "buy" rating and set its price target at $378 per share, based on the their growing core of Internet investments and the ability to enhance the values of those ventures. Large, well-established companies such as Safeguard are generally more involved with their investments, offering logistical support and driving the companies harder, which theoretically gives them an even bigger edge in the expanding market. A 3-for-1 stock split is also the works and the company recently filed with securities regulators to sell 10 million shares of common stock, the proceeds of which would be used to acquire more stakes in Internet infrastructure companies. The pay date for the split is on or about March 20, 2000. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Put APR 175 SFV PO 28 3.38 171.63 5.1% Sell Put APR 180 SFV PP 77 4.25 175.75 6.3% *** Sell Put APR 185 SFV PQ 25 5.00 180.00 7.3% Sell Put APR 190 SFV PR 47 6.00 184.00 8.7% Chart = /charts/charts.asp?symbol=SFE **** TGNT - Teligent $90.38 *** Growing Telecom Provider *** Teligent is a facilities-based communications company offering small and medium-sized business customers local, long distance, high-speed data and dedicated Internet services over digital SmartWave local networks. These networks integrate point-to-point and point-to-multi-point wireless technologies with traditional broadband wire-line technology. Teligent offers these services using SmartWave local networks across the country. The system is simple. TGNT places a small microwave antenna on the roof of a customer's building. When the customer picks up the telephone, accesses the Internet or activates a videoconference, the signal travels through Teligent's equipment and the rooftop antenna, which sends voice, data and video signals to a nearby base station, where the signals are communicated to a broadband switching center and then to their final destination. Teligent shares moved into a new trading range last week after it posted a smaller-than-expected loss in its fourth quarter. The big news was the company's infrastructure growth. In the quarter, Teligent installed nearly 90,000 lines, more than double the lines installed during the third quarter. The number of lines installed in the last three months of 1999 exceeded the total number of all lines installed during the company's history and the incredible expansion is expected to continue. The majority of analysts tracking the stock maintain a "buy" or "strong buy" recommendation and the most recent upgrade was issued yesterday. We simply favor the break-out above February's trading range and our cost basis offers a favorable entry point to open a conservative position. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 80 TNU DP 26 15.13 75.25 5.2% *** Sell Put APR 70 TNU PN 14 2.06 67.94 8.4% *** Sell Put APR 75 TNU PO 44 3.38 71.63 11.5% Sell Put APR 80 TNU PP 53 5.13 74.88 13.6% Chart = /charts/charts.asp?symbol=TGNT ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. 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