Option Investor
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Daily Newsletter, Thursday, 03/16/2000

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The Option Investor Newsletter         Thursday  3-16-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       3-16-2000           High     Low     Volume Advance Decline
DOW    10630.60 + 499.20 10632.50 10138.30 1,484,781k 2,431    648
Nasdaq 4,717.39 + 134.77  4717.76  4455.10 2,041,269k 2,256  1,994
S&P-100  781.93 +  32.63   782.00   750.65    Totals  4,687  2,642
S&P-500 1458.47 +  66.33  1458.47  1394.90            63.9%  36.1%
$RUT     574.24 +  15.37   574.24   546.22
$TRAN   2678.88 + 157.17  2678.88  2523.20
VIX       23.20 -   1.86    24.55    22.18
Put/Call Ratio       .54
*************************************************************

Correction? What correction?

Pain, fear and worry were replaced today by excitement and greed,
but it did not come from the usual suspects. The Nasdaq was still
hell bent on going back to February lows after gapping open this
morning but was dragged back from the brink of disaster by the
mother of all short squeezes. According to floor traders at the
NYSE there was a large number of fund managers who, faced with a
falling Dow and Nasdaq, had shorted the S&P-500 and went long
the Nasdaq expecting a Nasdaq bounce. Not expecting the Dow/S&P 
to recover anytime soon they were caught off guard by traders 
moving out of the Nasdaq and into S&P stocks. When they realized 
the rotation was for real and that the options expiration on 
Friday would put a serious crimp in their accounts, they were 
forced to buy S&P stocks to cover their shorts. With the Dow 
and S&P already severely oversold the increased volume supercharged 
stocks and the race was on. The "I have to cover at any price" 
mentality drove over 60% of the S&P up over 5% today. Many of 
these managers thought the combination of PPI/CPI/FOMC meeting 
would keep prices low until at least next Tuesday and safely out 
of March options. As you can see, even "experts" are humbled by 
the markets from time to time.

(There was a massive quote failure on the Internet today and 
many of the chart services have incomplete data. Hence the
intraday chart is the old style.) 


 




 

If this is a bear trap rally the next drop is going to be a killer. 
The Dow soared to the largest point gain ever at +499.19 and a 
giant step over the previous high of +380 on Sept-9, 1998. The 
advance decline line was not even close with a 7:1 advantage to
the advances. The volume at 1.48 bln shares was a new record 
high. The markets shook off a slightly higher than expected 
expected PPI and forgot their worries about the CPI on Friday 
since PPI was not out of line. We all know the Fed is going to 
raise rates on Tuesday so that is not an unknown. With nothing 
to hold it back the drastically oversold Dow became extremely 
overbought in only 48 hrs. Whatever happened to "normal" markets?

The Nasdaq, which gapped open +80 points at the open lost no
time heading south again. In a power dive to Late February
support and an intraday correction to the -13.2% level, even 
the soaring Dow could not slow it. But true to Nasdaq form the 
correction was short and sharp and marked the third -10% drop 
in three days this year. The intraday volatility was again 
extreme with a 262 point trading range. It was a tale of three 
markets. The Dow performing like a herd of stampeding bulls 
would be the obvious hero but inside the Nasdaq there was a 
real battle being waged. The leaders were soaring to new highs 
but there was an equal number of double digit losers as well. 
Capitulation was the name of the game and those that had already 
been there, done that, were off to the races and those who had 
previously resisted were taken out and beaten severely. Stocks 
like SMCR, MSTR, RBAK were down -$20 to -$40 and stocks like 
SDLI +33, INSP +29, PMCS +19, EBAY +28, AFFX +29, YHOO +12 were 
sprinting out ahead of the pack. The winners paid their dues 
yesterday but most of the big losers intraday today also 
recouped most of their losses by the close. Many stocks 
recovered +$15 to $20 once the February support levels were 
reached.

The tech rally gained steam after Dow component Hewlett-Packard,
whose stock price had been battered recently on confusion
about the Agilent spin off, announced that earnings were on
track and their stock was undervalued. After being down -7
early in the day HWP managed to close +1 for a quick injection
of +40 points into the Dow. With the help from HWP and their
positive comments, Dell computer shook off some profit taking
and rebounded +4 off its lows. The semiconductors were the
biggest rebounders on the promise of strong computer sales.
Not to be left out the biotechs blasted off again after the
Wall Street Journal tried to dispel some of the worries of
the Clinton press conference on Tuesday. There was real life
in every sector by the close.

Of course you know what is next. The nagging question of 
can we hold it. Can the Dow overcome the potential for 
profit taking after the +819 point gain in the last two 
days? If there was ever a case for profit taking this is it. 
The biggest single day gain, double day gain, volume, etc, 
etc. Investor sentiment has gone from "get me out of the 
market now!" to "I want back in, NOW!" in only two days. 
The VIX which normally goes from top to bottom over the 
period of a week or two went from almost 28 (buy) to almost
22 (sell) in only two sessions. Famine to feast to famine 
again? Strangely enough, even with the massive buying the 
VIX came off the bottom even with the Dow closing at the 
High of the day. Not far off the bottom but enough to give 
us hope that the rally may have legs. Over 60% of the 
S&P-500 stocks were up over 5% today. Over 16% of these 
Stocks were up on twice their daily volume. Of the record 
1.45 bln shares traded on the NYSE today 1.3 "billion" 
shares was up volume compared with 113 "million" of down 
volume.

This was broad based buying, very broad based on huge
volume. If this was a bear trap I don't want to find this
bear. I simply cannot in good conscience tell you to 
buy something tomorrow when I am buying OEX puts at the
close but I can't make a case for not buying either.
Other than overbought, everything just looks too good
to be true. (Where have you heard that before?) Even
though the obvious suggestion would be to wait for the
other shoe to drop. I would also caution you to not let
this rally get away from you. Remember the Dow was down
almost -2000 points from its January high so we have a
lot of ground to make up. Another factor that was evident
today was the tremendous liquidity coming off the sidelines.
Huge amounts of cash were put to work and by applying
historical norms there could be five to seven times that
amount still in the wings. Once traders gain confidence
that the rally is for real and not the mother of all
head fakes, previous record highs could be old news in
days instead of weeks. While the CPI is not likely to
cause any grief tomorrow after the PPI was benign, there
is still a FOMC meeting on Tuesday and Greenspan will
not be happy about the record gains. 

The suggestion for tomorrow is walk softly, we could be
on very thin ice. Because we closed at the highs of the 
day we could see a follow through at the open but this is
a triple witching options expiration Friday and all
bets come off the table by the close. Monday after options
expiration can be rocky also as traders are exercised and
have to shuffle their portfolios.

Trade smart and sell too soon.

Jim Brown
Editor

Disclosure notice: 

Current long positions include; 

SNE, SCMR, AMCC, CMRC, HWP, INSP, 
MSTR, PMCS, RBAK, SDLI, VRSN, YHOO

No shorts

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

Palm Opens Japanese Unit
By Cindy Christ

Recent 3Com spin-off Palm Inc. said Thursday it had opened a
new subsidiary to sell handheld computers in Japan.

Based in Tokyo, Palm Computing K.K. will sell Japanese
versions of Palm branded products through 300 computer and
consumer electronics stores throughout the country.

Palm also unveiled Japanese language versions of its Palm IIIc
and Palm Vx handheld devices that will be for sale starting
April 15th in Japan.

The suggested retail price for the Palm IIIc is 49,800 yen, or
about $472. The Vx version will cost 41,800, or around $396.

"The handheld computing industry is growing and diversifying
rapidly in Japan today," said Palm CEO Carl Yankowski in a
news release.

"The Palm Computing K.K. team will focus on driving adoption
of Palm branded products and the Palm OS platform, utilizing
Palm's strengths in wireless Internet and data access and
electronic messaging to drive Palm's expansion in Japan," he
added.

Palm (NASDAQ:PALM) began trading independently from parent
company 3Com (NASDAQ:COMS) on March 2nd. After rocketing more
than 200 percent on its debut, shares in Palm have settled
down to trade near its opening price.

PALM shares closed down Thursday $0.19, or 0.34 percent, at
$55.56.

In the first half of 1999, Palm posted revenues of $435
million, up 65 percent from the year-ago period. Profits were
$22.5 million, a 39 percent increase.

International sales account for 32 percent of Palm's total
sales, up from 25 percent last year.

According to market research firm International Data Corp.,
Palm holds 70 percent of the market for handheld devices
called personal digital assistants (PDAs), which help people
on the go keep track of appointments, names and addresses, to-
do lists, and other information.

In late February Palm introduced its first PDA with a color
screen, and promised to introduce a device with wireless
connectivity for the European market by the end of this year,
most likely in partnership with Vodafone Airtouch Plc
(NYSE:VOD).

Analysts say that expansion in Asia and Europe, which lead the
U.S. in mobile communications, is a must for Palm to keep its
dominant market position.

IDC estimates that the worldwide market for handheld devices
from pocket-sized computers to PDAs and cell phones will
triple by the year 2003.

With mobile communications set to explode, Palm faces stiff
competition in the device arena from U.S.-based Handspring,
which developed the Palm operating system, Casio, Compaq
Computer (NYSE:CPQ) and Hewlett-Packard (NYSE:HWP), and Psion
PLC (LSE:PON.L) in the U.K.

In the operating system market, Palm competes with rivals
Symbian, a consortium of global cell phone makers majority
owned by Psion, and Microsoft (NASDAQ:MSFT), which has
developed a pared-down version of Windows called Windows CE
that powers a variety of personal electronics, including
pocket-sized computers, electronic books and digital music
players.

Separately, The Philadelphia Stock Exchange said it began
listing options on Palm (PHLX:UPY) Thursday. The options trade
on the February expiration cycle, with initial expiries in
April, May, August and November. Opening strike prices are 60,
65 and 70.

Specialist Susquehanna Investment group will offer automatic
execution guarantee of up to 50 contracts for orders executed
through AUTOM, PHLX's automated system for equity and sectors
index options.

The Pacific Exchange (PCX) also began trading options on Palm
(PCX: UPY) Thursday, trading on the February expiration cycle
with opening strike prices of 60, 65 and 70 for the months of
April, May, August and November. Position and exercise limits
have been set at 60,000 contracts.

Palm options on the PCX were allocated to lead market maker
Ali Saadat of LETCO L.L.C.



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

As of Market Close - Thursday, March 16, 2000 

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

DOW Industrials   10,000  11,500  10,631    Neutral   3.16   *
SPX S&P 500        1,400   1,475   1,458    Neutral   3.16   *
OEX S&P 100          760     800     782    Neutral   3.16   *  
RUT Russell 2000     500     520     574    BULLISH   2.24
NDX NASD 100       3,800   4,000   4,353    BULLISH   2.24
MSH High Tech      1,650   2,000   2,129    BULLISH   2.24

XCI Hardware       1,300   1,460   1,571    BULLISH   2.24
CWX Software       1,200   1,470   1,528    BULLISH   2.24
SOX Semiconductor    800     900   1,227    BULLISH   2.24
NWX Networking       940   1,000   1,100    BULLISH   2.24
INX Internet         700     800     819    BULLISH   3.09

BIX Banking          500     600     553    Neutral   3.16   *
XBD Brokerage        400     450     499    BULLISH   2.31
IUX Insurance        500     600     530    Neutral   3.16   *

RLX Retail           900   1,000     923    Neutral   3.16   *
DRG Drug             340     380     358    Neutral   3.16   *
HCX Healthcare       700     750     721    Neutral   3.16   *
XAL Airline          110     140     135    Neutral   3.10
OIX Oil & Gas        240     300     285    Neutral   3.16   *

Posture Alert
Wow! The Dow Jones Industrial average is had its biggest single 
point gain after advancing close to 500 points or 5%. The DJIA 
confirmed an important support point at the 10,000 level the past 
few days.  As such we have turned neutral across several of the 
previously Bearish industry sectors including Financial, Retail, 
Drug and Oil & Gas. Please make a note. After today's stunning 
reversal, we have updated several of our key benchmark levels. 



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

Tweezer Bottoms
By Pinnacle Capital Advisors

Thursday, March 16, 2000

One of the important candlestick reversal signals we look for in 
the volatile market is a tweezer bottom.  A Tweezer bottom is a 
long down day followed by a big up day.  Talk about a big up day.  
The Dow Jones Industrial average is had its biggest single point 
gain after advancing close to 500 points or 5%. These profitable 
reversal signals become more significant if they occur near a 
meaningful technical measure such as moving average and support 
levels.  The DJIA, for example, confirmed an important support 
point at the 10,000 level the past few days.  

Attached are several broad market indices that registered 
important tweezer bottoms.


 





 

BULLISH Signs: 

Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of 
analyst expectations, with Oracle being the latest to blow away 
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 (6.39):
The current yield is now safely off of 52-week highs and is 
temporarily out of the danger zone.


Mixed Signs: 

Volatility Index (23.06):
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.


BEARISH Signs:

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

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

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


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

 
Pinnacle Index OEX               Friday      Tues      Thurs
Benchmark                        (3/10)      (3/14)    (3/16)

Overhead Resistance (790-820)    18.34       19.45       18.34
Overhead Resistance (765-785)     6.26        6.12        5.45
Overhead Resistance (740-760)     0.78        1.07         .98

OEX Close                       749.50      730.75      781.93

Underlying Support  (700-735)     4.16        5.06        8.12   

What the Pinnacle Index is telling us:
Based on Tuesday's readings, underlying support is strong 
(700-735), and gaining strength. Overhead (790-820) the 
next two overhead resistance is heavy.


Put/Call Ratio 
                                Friday     Tues
Strike/Contracts                (3/10)    (3/14)

CBOE Total P/C Ratio             .39       .43
CBOE Equity P/C Ratio            .31       .34
OEX P/C Ratio                   1.81      1.31


Peak Open Interest (OEX)
                     Friday           Tues             Thurs
Strike/Contracts     (3/10)           (3/14)           (3/16)

Puts               700 / 11,436     700 / 13,210    700 / 12,411
Calls              750 /  9,088     750 /  9,247    750 /  8,341 
Put/Call Ratio         1.26            1.43            1.49


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 14, 2000                          26.43
March 14, 2000                          23.06



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

Daily Results

Index      Last     Mon     Tue     Wed     Thu    Week
Dow     10630.60   18.31 -135.89  320.17  499.19  701.78
Nasdaq   4717.39 -141.38 -200.61 -124.01  134.77 -331.23
$OEX      781.93   -6.50  -12.25   18.55   32.63   32.43
$SPX     1458.47  -11.45  -24.47   32.99   66.33   63.40
$RUT      574.24  -13.67  -17.15  -14.12   15.37  -29.57
$TRAN    2678.88   26.65  -10.17  139.94  157.17  313.59
$VIX       23.20    1.56    1.07   -1.37   -1.86   -0.60

Calls               Mon     Tue     Wed     Thu    Week

SNE       250.00  -18.25   15.81   13.63   -4.94    6.25  Hvy vol.
DELL       55.00    3.50    1.19   -2.25    1.31    3.75  Bounced
BGEN       86.81   -3.93   -3.12    1.25    8.63    2.75  New
ANDW       27.38   -0.25   -0.81   -0.19    0.06   -1.19  Dropped
CSCO      131.66   -0.19   -4.44   -3.13    3.03   -4.72  Split 
NITE       47.00   -1.38   -4.13   -2.00    1.06   -6.45  Hang in
YHOO      170.19   -2.25   -7.06  -10.25   11.69   -7.88  Caution
IDPH      119.88  -13.56  -10.75    3.56   11.31   -9.43  Entry pt
AFCI       69.94    0.44   -4.63    2.00   -7.69   -9.88  Dropped
BWEB       48.06   -3.88   -5.63   -0.25   -0.19   -9.94  Momentum
DSTM       29.94   -3.44   -4.69   -2.38   -3.00  -13.50  Dropped
HWP       133.00   -0.44   -6.50   -8.00    1.00  -13.94  New
NOK       200.00   -0.88   -8.50  -10.50    4.00  -15.00  LookinUP
RRRR       62.63   -7.13   -4.88   -9.81   -3.56  -25.38  Dropped
FDRY      175.00   -9.44  -17.25   -3.53    4.03  -26.19  Volatile
TIBX      111.25   -4.19   -2.63  -12.13   -8.00  -26.95  Ern.Run
VERT      230.38  -19.19  -24.00  -12.69   13.06  -42.81  core B2B 
CLRN      125.00    0.50  -11.75  -27.50   -5.50  -44.25  Dropped
NTAP      182.56  -13.63  -31.06  -24.00    9.50  -54.31  Split
VIGN      242.50  -23.00   -1.25  -20.50   -9.75  -54.50  Selloff
EMLX      160.00  -16.00  -16.50  -20.38   -2.63  -55.50  Dropped
CHKP      219.13  -11.69  -21.31  -38.19   10.44  -60.75  Bounce 

Puts

CIEN      133.47  -15.75  -13.13   -8.69    8.16  -29.41  Rollin'
BVF        50.56   -4.38    0.69    0.31    0.69   -2.69  Down
EK         58.13    0.44   -0.44    1.13    3.00    4.13  Risky
PPG        52.81   -0.75    0.06    4.19    2.63    6.13  Dropped
DD         53.50    2.50   -0.63    2.81    2.88    7.56  Dropped
UAL        54.50    0.31    0.25    5.44    2.25    8.25  Dropped



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

Shake, Rattle, and Roll
By Renee White

Not even Little Richard's rhythm could compare to the beat of 
this market. Talk about moving to a different beat of a drummer! 
In less than 5 trading days, we have gone from classical Bolero, 
singing Nasdaq 6,000 (and even 10,000), to singing the BB King 
Blues, only to dance the jig, fall flat with a heart attack and 
be revived for a little Saturday Night Fever dancing. Talk about 
a Fever!!!  I can only imagine  the confusion and bewilderment of 
new traders, much less new option traders. I am wondering how 
some of you feel now, after doing so well from October through 
December when you were considering quitting your jobs for full 
time trading. 

There was a time in the past when I defended my honor, claiming 
adamantly, "I am NOT a day-trader!" I have a good friend who 
evaluates deals for venture capitalists in the Silicone Valley. 
He doesn't play the market. Usually, I don't mention my trading 
to non-trading friends, which is most of them. Knowing I was 
ready to make some changes in my life, he began passing me some 
very interesting opportunities that became very tempting during 
last summer's sell-off. At one point, I realized I just couldn't 
turn my back on the opportunity to trade Y2K, so I had to tell 
him about my option trading. Even though a couple of the deals 
were once in a lifetime opportunities, so was Y2K. A good 
opportunity wouldn't be so good, if I couldn't trade. Not only 
that, I tend to go into everything with a passion to excel. I 
didn't want the distraction of a new deal competing with mental 
maneuverings around Y2K. My admissions though, lead to an 
unexpected realization. He categorized me as a day-trader and 
nothing I said could clarify the difference. I was just as 
surprised at my own reaction to the misunderstanding. After 
several exhaustive discussions and listening to his lectures of 
how I was wasting my talents playing Vegas markets, we agreed to 
avoid the discussion until after January. 

Times do change quickly. Not only is he very interested in 
learning more and more about option trading, but in this market, 
if one hasn't learned day-trading skills, they can go broke 
quickly! I've noticed how much younger and younger the pits are 
getting and I wonder how many older fund managers and high-roller 
traders, still exist. New technology versus old technology? Let's 
talk about day-traders versus the Warren Buffets. We've all 
laughed at Stuart in the Ameritrade commercials, but I think 
that scenario is very real. The younger hot shots always learn 
the newest tricks first. The older ones who are smart, get on 
board as quickly as they recognize a trend, usually introduced by 
the younger up-coming hotshots. Fortunes were made and lost in 
the last several days. The really superb traders made fortunes on 
both ends of the extremes, not once, but several times! I want to 
emulate those traders. Online momentum traders are here to stay. 
I think swings like this are going to become more and more common. 
It's the power of the internet. The little man (the day-traders), 
collectively can and will, start moving markets without the fund 
managers participating, like Monday morning showed us. And gee 
wiz, when they both buy in harmony that is one explosive 
firecracker! 

I learned two big lessons this week. In anticipation of this 
major sell-off, which I even forecasted in an article shortly 
after the Feb 22nd sell-off, I took profits last week in order to 
free up cash for my new entries this week. In my last column I 
wrote about missing the big dip Monday and staying out after the 
rebound. I did nibble though on some shares and leaps for my IRA 
account, QLGC, CMRC, GLW, AXF, SBC. The gap up on Tuesday's open, 
made me think I had missed my entry for April earnings. Since the 
sell-off came earlier in the week than I was anticipating, I 
looked at support levels and started entering cheap option prices 
for open orders in case a retest of those levels occurred again 
later this week. Some were really cheap entries, that I felt sure 
would not be filled. I had other non-market obligations this week, 
that would keep me away from trading. I read the early sell-off 
as odd. Odd enough not to jump in on the rally Monday. 
Unfortunately, not odd enough to stop me from entering all those 
open orders when I wasn't going to be around to watch it. As I 
said, all of them got filled, all the way down the bloody slide 
on Tuesday. By the time I looked at things, I was hurting. I will 
not ever do that again. Markets move too fast these days and stops 
only work if you place them. I got filled on a ton of open orders 
when I wasn't looking and had not yet entered stops, before a 
further drastic drop occurred. 

By Wednesday, I was ready to start practicing my smile in front of 
the mirror, dye my hair and go apply for a job at the local ice 
cream parlor. I mean, if you're going to buy the dips, might as 
well enjoy the flavor! Instead, I kept waiting on a rally. I 
jumped in, then back  out, getting whip-sawed about, not wanting 
to get stuck holding more bad plays but wanting to buy the dip. 
It's a dog eat dog world and I was beginning to feel like I was 
wearing milk bone underwear! One minute, my plays looked to be 
recovering, the next minute sinking. Each new rally failed and bit 
the dust. I exited a few plays from Tuesday but many seemed to 
hold up well with the slides. I kept reminding myself I was 
expecting this sell-off. Most of my plays were April splits, so 
if they held up, I thought the rebound could be strong since the 
split runs coincided with earnings. Yes, climbing uphill would be 
hard, but many were bought ITM with premiums already deflated. 
Since the worse appeared over, I felt the risk was in my favor to 
hold for one or two more days to evaluate the re-bounders. I 
decided that I would add to the stronger plays when the market 
turned and buyers jumped in and I would exit any that acted like 
they didn't want to play anymore. This would lower my cost basis 
in the plays I kept and add quantity contracts that were cheap 
and re-bounding. My confidence Wednesday though, was shot. 
Wednesday was nasty, with lots of head fakes intra-day. 

I focused so much on Nasdaq, that I totally missed the DOW surge. 
Playing OEX was the place to be for sure! Actually, entering 
those plays a day early cost me more than the slide. It cost me 
big in the distraction and not seeing the whole market, except I 
did get GE & JDSU at cheap prices. I had a trading buddy Wednesday 
and we discussed if we should buy going into the close. At that 
time, Nasdaq was pointing due south without a hint of changing 
course. On days like that, I typically make my call in the last 
5 minutes of the day. Typically, a bad day with a big last hour 
sell-off, followed by a sharp reversal running fast into the 
close, is a buy signal for me. He jumped on it like a flee on a 
dog, but I just stared at it and couldn't pull the trigger. At 
seconds before the close, I realized my bleeding from the Tuesday 
entries had completely shot my ability to play a good risk. Of 
course, he made out like a bandit with the gap up on the open 
this morning, while I hammered myself for not being willing to 
risk in front of the PPI. My knees had gotten wobbly and I had 
melted into a puddle. What a wimp! 

But today, I felt better. The gap up sold off in what was a nice 
put play. I could tell volume was huge when we hit the bottom 
because my charts and quotes went out. That is the second lesson 
I've learned this week. I have reached the point of having to have 
a back-up system. I can't be exposed without it much longer. My 
rebound of the day was INSP and I loaded up. I also added to 
positions in CMVT, VERT, TXN. I've been buying QQQ options over 
the last couple of days and these too performed well today. CREE 
and VIGN who announced a 3:1 split yesterday, did not show signs 
of strength with Nasdaq, so I vaporized them to stop the pain. 
By end of day, recovery from Tuesday was occurring faster than I 
had expected, mostly due to adding to strong positions that took 
off today. At one point in the last couple of days, I had thought 
of writing puts to help offset some of the lost premiums from 
these early entries. That's still a possibility. But right now, I 
want to keep things simple and just get through next Tuesday. 
I've learned enough lessons this week. 

Actually, I am not worried any more. This gave me an opportunity 
to buy more contracts on good plays, cheaply. I still like the 
plays and April earnings are still going to be good. Day trading 
causes people to go where the money and momentum are. It's just 
that everyone is a day-trader in one form or fashion these days, 
if they're a player. The confidence in techs will be back soon, 
because that is where the earnings will be. As the Proctor & 
Gambles of the world, try to figure out how to play the internet 
game, new technologies are being patented including the next 
generation of chips, requiring the next generation of equipment 
to handle them. Profit taking is due in the Dow and where do you 
think they will look for bargains for April earnings? My guess 
is positioning for April earnings will occur soon and a lot of 
options will be bought by next Tuesday. See you on Tuesday. 

Renee White
Contact Support



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

The Exit Plan
By Janar Wasito

When I was in the Marines, my platoon almost conducted an embassy 
relief operation. We sat on an amphibious ship, practiced "fast 
roping" down a fire pole sized rope in the back of a helicopter, 
and studied maps of possible extraction points and the surrounding 
areas. The plans we developed were never complete without the final
part -- the exit plan. This is a key part of what new traders need 
to think through. Come to think of it, this is something that 
experienced traders need to review, as I recently learned again.

Let's say that you are a new trader and that you decided to play 
straight calls. You set up your targets on your quote software. 
You put alerts on the stocks at the entry points that you want. 
You have rehearsed your plan mentally. You know which trades you 
will make to establish the position. If you are using a broker 
like preferred trade, you can "target shoot" your entry into a 
position. Take, for example, YHOO, which went below 175, which 
was the target support level that the newsletter noted in the 
Sunday newsletter. YHOO spent some time below that level today, 
but closed above it. You could enter an order as follows: Buy to 
Open, YHOO Apr 185 Call, market, stop on stock @ 175. When YHOO 
hit 175, the order would be executed, and you would probably be 
filled at the ask price for that contract.

Now, when should you think about your exit?

After YHOO earnings on April 4? That makes sense, right? YHOO 
always runs up to earnings, then sells off afterwards. You could 
just buy puts on the day after earnings. Why not wait until April 
1 to figure out when and at what price you will sell your options. 
Yeah, that's the ticket.

That makes about as much sense as landing on the roof of the 
embassy and then starting to plan how you will get back to the 
helicopter carrier 500 miles back over the jungle and the sea. 
You might be able to figure it out, but that's not how smart 
traders operate. The most valuable thing about options trading 
that my experience in the Marines gave me was this concept -- go 
to the point of maximum risk, then work hard to eliminate the risk.

The right answer to the above question is that you MUST decide on 
an exit strategy BEFORE you put on the position. It is one of the 
basic 10 rules of option trading (see the left hand column link) 
So, you enter the YHOO Apr 185 Call for 15. Realize that your 
option has no intrinsic value, that is, if you exercise the option 
you can purchase YHOO at 185, but since YHOO is at 175, you would 
lose 10 points per share if you sold it. Your option is out of the 
money. Your purchase price of 15 points is pure volatility and 
time premium. You have just bought a ticking time bomb, and your 
mission is to toss it to someone else who will pay a higher price 
in the next few weeks. It is a ticking bomb because as each day 
passes, time value erodes. It is a trade off that you must learn 
about, but for the new trader it is enough to realize that time 
works against you as (you hope) price movement works in your favor.

What is a reasonable exit? That varies by individual trader. But 
the important point is that you should place an exit order as soon
as you get filled. There are two basic types of exit orders you 
should consider -- stops & limits.

A stop loss order is designed to prevent you from losing too much 
of your capital. For example, you could enter a sell to close, 
YHOO Apr 185 Call, market, stop at 11.75 order. You might get 
filled below 11.85, but you would preserve about 80% of your 
capital in the event that the stock moves against you. Stops 
look like a great way to protect yourself when you first get 
into option trading, but the reality is that a lot of 20% losses 
will tear a huge hole in your portfolio very quickly. One trader 
in our local club basically says that you need to be able to 
weather the down turns in stocks that you think are on overall 
up trends. The only real safety comes from a good entry point. 
That takes awareness of the market, sector, and stock.

There are several approaches which you can use to enter a limit 
sell order.

One approach would be to shoot for a high reward. Go for 100% 
profit. Place a limit sell at 30, so if the stock goes through 
the roof, you automatically sell at a price of 30. Often, you 
will wish that you were still in the play, but trust me, 100% 
profit in 3 weeks is a great play. If you get filled, you can 
take half of the money, and put it into a higher strike call. 
Alternately, You can place one order to sell half of the position 
at 100%, and let the other half of the play run. If you do this, 
the remaining part of the play is a "free play" because the profit 
from the first half of the play has paid for the cost of the 
second half of the play. If the stock tanks after you get out of 
the first half, you still have a profit built into the second 
half of the play, even if you let it drop quite a ways.

A higher probability approach would be to place a limit sell 
order at 25% for part of the order. At just about this time of 
the year in 1999, I was just recovering from a disastrous DELL
 trade which had wiped out my profits from a very good January. 
I recovered from that situation by taking 25% profits, over and 
over, until I took some big swings at the fence during April 
earnings. 25% profits combined with a high percentage of winners 
(entry point is essential) will result in big gains in your 
portfolio. The other advantage of taking 25% profits over and 
over is that you will exit plays more quickly, go back to cash, 
and be able to look for new trades. This translates into a more 
efficient use of capital.

A third approach which new and veteran traders alike should 
consider is to set two exit points. Put in one limit sell for 
half of those YHOO Calls at 15 + 25%, and put in a second one 
for the other half at 15 + 75%. The 25% limit sells will often 
fill in a few hours or a few days. You should also consider a 
time limit (3 days?) after which you automatically exit the 
play if it doesn't move substantially in your direction.

A final approach to taking a profit on a call which is moving 
up is to use a "trailing stop." Say YHOO goes to 200... 210... 
220... 234, right before earnings. As that occurs, you are 
thinking to yourself, "Oh my gawd, I am rich!" Well, you're not 
rich until you get out of the trade. One thing you can do is to 
move a stop order up behind the option. Sell to close, stop on 
stock @ 194.75... 199.75... 204.75... 209.75... 214.75... 219.75..
224.75... 229.75 (these should trail the stock price by 5 or 10 
points... place the stop price below an obvious 5 or 10 point 
price so that a market maker sweeping out stop orders doesn't 
catch you on a downswing). The problem here, of course, is that 
YHOO doesn't go up in a straight line. Pull backs will trigger 
your trailing stops, and then you will get taken out, perhaps 
when the stock is at 204. Then you will watch the stock go to 
237. That's OK, as long as you make a profit. Prepare for it 
mentally. Don't get too greedy, and you can make a lot of money 
trading options.

These concepts apply to more advanced techniques too. I went 
through all of my open positions (mostly spreads) today, and 
I set limit sells for each of the elements of the spread. I 
set insanely high sell to close, and ridiculously low buy to 
close orders. The purpose of this was both to take a close 
look at my open positions, and to have an order so that I could 
just adjust the limit back into the bid ask spread if the right 
situation presented itself. If you trade naked puts, you should 
consider two types of orders immediately after entering a 
position. First, a protective stop order. For example, today 
(Monday), I sold a RBAK Apr 380 Put for 37.125. I immediately 
set a buy to close, market, stop on stock @ 369.75 to protect 
myself from a big move down in the stock, and up in the option. 
In my situation, I have tossed a ticking bomb to another trader. 
I hope that the stock moves up, the option moves down in price, 
and I benefit from time decay. I also set a buy to open, RBAK 
Apr 360 Put, market, contingent on stock @ 389.75, to open a 
highly favorable Bull Put Spread, if the stock moves up in 
price. If I get the spread on, then I will cancel the stop on 
stock order for the RBAK Apr 380, and replace it with the second 
type of order a Put Seller should put on. I will place a Buy to 
Close, RBAK Apr 380 Put, limit @ 4.75. If RBAK moves up 20 points 
in a few weeks, then the option I sold will go down in value, 
and I will keep more of the premium which I sold. I want to 
close the play on any favorable spikes. I missed this kind of 
exit on several of the spreads I had on recently, but i don't 
want to go into too much detail.

The trailing stop technique can apply to selling puts too. How 
do you do that? Simple. Say RBAK goes ballistic -- 390, 410, 425,
440. Well, I am protected, right? I am a spread trader. Actually, 
it could quite easily go back down to 350 very quickly, erasing 
my profit. So, I can set a buy to close, stop on stock @ 394.75, 
409.75, 424.75, etc., until I get taken out. Actually, forcing 
myself to review lessons for new traders has made me highly 
aware of the basic techniques that I have been forgetting as I 
explore new strategies.

So, as you plan your trades, think like a good platoon commander. 
Your job is not done until every one of your Marines is back on 
the helicopter headed safely out to sea.

Contact Support


*****************

An Osmotic Technical Point of View
The DNA of picking pockets
by Harrison Frolick

OK, so I have decided to give up sky diving for awhile. Well, 
not really. So is everyone having fun? I know I sure have been. 
Hope some you got out of ETEK at the top and then got back in, 
and out, and in. You get the picture. Neat ride huh?! As Jim 
says, "Sell too soon!"

The past couple of weeks have shown how you can make $150 on 
a stock even thoughit only moves $100 or so. I am still playing 
the usual suspects while waiting to see if good old HGSI will 
ever recover after the blow that the President gave it today. 
Biotechs have been on my radar for quite awhile and I try and 
keep up with most of the scientific journals. Although, I must 
say that it is getting tougher. The biotechs were just getting 
ready to come out of their shells, and then out of the blue, 
whamo! If you wonder why your biotech holdings may have 
plummeted today I am going to explain what happened, if not 
why. 

Without getting political, I am going to examine how a joint 
statement by President Clinton and Prime Minister Tony Blair 
picked the pockets of investors everywhere for 10s of billions 
dollars. While the stated goal was to help realize the benefits 
of biotech, their plan could very well set back the benefits 
of biotech for a decade.

In a statement today they said the human genetic blueprint was, 
"...one of the most significant scientific projects of all time.
" Oh, really? They went on to say, "To realize the full promise 
of the research raw funamental data on the human genome 
including the human DNA serquence and its variations, should 
be made freely available to scientist everywhere."

Basically, what they have said is that all of the investors 
and biotech companies that have invested billions in reasearch 
should give it all up for free. In my experience, all that you 
have to do to get to the bottom of most absurd statements like 
these is to follow the money. 

The following is an excerpt from a story that I have been 
working on for the past week, but takes on a whole new meaning 
with these latest events. Read on and I will offer a few opinons
and then you can draw your own conclusions.

Because of one little process called PCR or Polymerase Chain 
Reaction the world has been forever  changed. This was the 
brainchild of Kary Mullis who won the Nobel prize for it. He 
has a book out, "Dancing Naked in the Mind Field," that I 
highly recommend. It is not the normal droll scientific drivel. 
He is one of the few people that I would really like to meet 
one of these days. I have always found that understanding an 
industry to the best of your ability is the best way to profit 
from it. In fact, that is part of becoming and Osmotic trader. 
DNA, as you may well know, is pretty small stuff. Like really, 
really small. What PCR does is duplicate a piece of DNA millions
of times so that you get a large enough sample to really see 
and mess with. This has made the study of the Human Genome 
possible. It also made cloning possible; i.e., Dolly the sheep 
and now the pigs and it is widely held that human cloning has 
already been done but, the parties  have not or may not come 
forward because of the load of you-know-what that is going to 
hit them. 

You will probably see cloning mainstreamed through the cloning 
of pets and other animals first. No, I am really not kidding! 
In fact ,for disclosure, I am an investor in one such company. 
No it is not public, yet. But, while the money will probably be 
made from pets and livestock, the big reward will be that we 
will be able to save and store the DNA from the hundreds of 
animals that are otherwise going to be extinct in the very near 
future. A viable breeding population can then be established. 
No, dinosaurs are not allowed with us but, someone else will 
probably figure out a way to do it. As with most human endeavors, 
only a fool would say that it will never be done. On the neat 
side though, you will probably be able to see a real live mammoth 
or mastodon in the flesh shortly.

Perhaps the largest benefit to be seen with cloning is that in 
the very near future there will no longer be a shortage of donor 
organs which will save literally millions of people per year. 
If you have a bad ticker, you will be able to clone one of own 
and know that it won't be rejected. While this may shock some 
of you, it is coming. Personally, if you have every lost a loved 
one for lack of an otherwise easily replaceable organ., this is 
indeed a blessing. The same will eventually go for people that 
have lost limbs or even their eyesight. 

The other benefits of biotek include the possibility of wiping 
out almost every inherited disease known to man. The revenues 
that this will generate will dwarf current pharmaceutical revenues. 
This is also why the industry may not be as far along as it could 
be. The large drug companies have a lot of pull with world 
governments and they have not exactly helped with certain aspects 
of biotech development. This is especially true in the US which 
is why you will see many of the breakthroughs come from outside 
our borders. The genie is out of the bottle on this one. 
That is what I had done on Friday. Little did I know about the 
statement coming out. The chilling effect for biotech companies 
being at the mercy of the state to the extent that the government 
can now come in and place your reasearch in the public domain is 
a frightening.  Which is why the biotechs dropped dramatically. 
Who in there right mind is going to invest in research  if they 
have to give it away. The original plan for the government to 
map the human DNA was to have government National Institute of 
helth run the project and I think that they said that it would 
take twice as long to do as it has. The reason is that private 
industry stepped in and streamlined the whole process.
Otherwise, we would not be where we are today. This even goes 
against current patent policy on a world wide basis. The 
inovations that we have seen in the past few years is going 
to drastically slow down if this proposal is passed into law. 
Personally, I think that it will be challenged in the courts but,
in the meantime biotechs are going to limp along. The part that 
I regret is that this action will cause suffering for millions 
of people. Is the biotech run over? No, but the development 
today bears watching closely (pun intended). If you have biotech 
stocks that dumped today, at least I have given you reason why 
they went down, if not the exact motivation behind the move. 
Have a fun and profitable week and watch those charts! 

Happy Trading, Think Osmotically!

Contact SupportHarrison



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DISCLAIMER
**********
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         Thursday  3-16-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


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


CALLS:
*****

DSTM $29.94 -3.00 (-13.50) What can you say?  This had been a
good little run that rode the coattails of NASDAQ 5K.  Plenty 
of volatility and very good stock movement made this call play 
profitable.  In the past week, DSTM traded as high as $47.50, 
and today, sank to as low as $28.50.  Just as the NASDAQ's 
potent advance last week lifted DSTM to new highs, it's 12% or 
so deflation dragged DSTM back down to earth.  DSTM proved to 
be a worthy call play, so thanks for playing, and it's time to 
start a new game.

ANDW $27.38 +0.06 (-1.19) Like DSTM, ANDW provided some 
attractive trading opportunities throughout the past 2 trading 
weeks.  This earnings run play, due out on April 20th, looked
good, but the overall market rotation dominated money flow the
last two sessions.  Following suit of the NASDAQ, ANDW felt the
pain of the yesterday's tech sell off.  In fact, it seems that 
if your stock has four letters, you have been seeing a lot of 
red lately.  Even with some relief today in the NASDAQ issues, 
we are going to move away from ANDW, which delivered a nice 
profit.  Don't be surprised if you see it again in April.

AFCI $69.94 -7.69 (-9.88) AFCI has been a teeter-totter: up one
day, down another, up, down...  But volatility has been the 
name of the game this past week.  Today, the NASDAQ traded in 
a 262 point range.  But AFCI's lack of participation in today's 
late session rally signals that this stock may be getting tired.
Investor money has pumped up the DJIA stocks and has broadened
the market rally.  Since picking AFCI back on February 27, we 
are up $12.50 from $57.44.  Besides the buyout rumors seem to 
have quieted, leaving investors in no mood to hold shares.  So 
it is time to part and say goodbye to AFCI.

EMLX $160.00 -2.63 (-55.50) Good-bye old friend.  EMLX almost
became part of the family after being on our list for about a
month now.  Unless you've been under a rock (and we couldn't
blame you if you were), you know by now EMLX continued its
drop which began on Monday.  Today EMLX hit $141 at its intraday
low, but did manage to come back to close with a loss of only
-$2.63 for the session.  Could EMLX find its legs and continue
to bounce back?  That's certainly a possibility.  However the 
many stocks in the Nasdaq seemed to begrudgingly join in with
the late day rally and EMLX was one of them.  EMLX provided us
with a nice run, gaining just over $100 since joining our list.
For now its time to say so-long, but we will stay in touch for
as EMLX, could join the family again in the near future.

CLRN $125.00 -5.50 (-44.50) Well as you know, the selling 
continued in the Nasdaq and in CLRN.  If you had your stops
in place on Tuesday near $163, good for you.  If you didn't then
the last couple of days has been tough to sit and watch.  We
are letting this one go not only because of the drop in price
this week, but the fact that CLRN stayed stuck in the mud, with
the Nasdaq gaining momentum late in the session.  Fundamentally
things haven't really changed for CLRN, however the momentum
and the excitement surrounding the company certainly have.
CLRN has support at $120 from mid-February and earlier this 
month, and may begin to reverse its trend from here.  However
as you've seen this week, support is only good when more 
traders want to buy than sell once its touched.

RRRR $62.63 -3.56 (-25.38) Anybody see the ripcord on my
parachute?  Violating one support level after another, RRRR
plummeted into the ground ($60) before slowing its descent.
Losing over a third of its value since last week's high of
$94.75, our play is pretty badly beaten up.  We reaped a tidy
profit on our play until the bottom fell out of the NASDAQ -
stop losses anyone?  Given the recovery today in the NASDAQ,
this could be the bottom for RRRR, but it may have a hard time
resuming its upward momentum until it spends some time in the
hospital.  We'll give it some recuperation time while we move
on to other plays.  


PUTS:
*****

DD $53.50 +2.88 (+7.69) It feels like deja vu.  It was about 
a year ago that we saw a very similar rotation where DJIA stocks
began to move up while the NASDAQ's skyrocketing trend leveled 
off.  This rotation to "old economy" stocks, which isn't all 
that surprising, has benefited DD and hurt our put play.  A 
retest of the $45 level never materialized as money flowed out
of the tech index and into the neglected issues at the NYSE.  
This play provided decent volatility since we picked it on 
March 2nd and good short-term trading opportunities.  Yet, 
this strong up move for DD and the DJIA is convincing enough 
to drop this issue for now. 

PPG $52.81 +2.63 (+6.13) If we didn't know any better, we'd
think that PPG changed its name to PPG.com!  But no, PPG is
just benefiting from the triumph of the value investors.
Seeming to lend support to any stock that has been publicly
flogged lately, these investors have helped PPG to add almost
$7 in the past 2 days in the midst of an unprecedented recovery
on the NYSE.  Now that the downtrend has been decisively broken,
we'll let PPG go, and move on to other plays.

UAL $54.50 +2.25 (+7.31) Not only did UAL pull out of its dive,
but it appears to have strapped on a couple of solid rocket
boosters.  Gaining $7.69 (16%) over the past 2 days on very
strong volume has given the lagging transport stock new life.
Value investors went on a buying spree, and virtually any stock
that had been abused lately was in favor over the past 2 days.
Now clearly above the 30-dma ($51), we'll step off this play
before getting a nosebleed.



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

IDPH $199.88 +11.31 (-9.44) The negative feeling behind the 
Biotechs is starting to ease.  IDPH gave us a good bottoming 
pattern mid-week at $100 and made for a nice entry.  Today's 
close just under $120 is the reward.  It wasn't a tough call 
to add this play either as IDPH is a more established Biotech 
that actually turns a profit.  A move above $120 backed by 
volume would be the next breakout.  Waiting for a pullback?  
Support is looking good at $100, although a retreat to that 
level may be asking too much.  In the news on Wednesday, IDEC
announced the results of a phase 1 trial for a new drug.  
Preliminary findings were favorable according to the company.  
More news like this is what investors will need to hear to 
bring them streaming back to Biotechs and sending our play 
higher.  Watch the biotech index (BTK.X) for additional signs 
of direction.  

YHOO $170.75 +12.25 (-7.31) Well, it wasn't quite a day to 
yell "Yahoo", but it was better than the recent action.  Trader 
talk today was about a solid bounce off 4450 for the Nasdaq 
today and YHOO bounced solidly today as well.  The low at $156 
was a gift to this earnings run play.  Hopefully the Nasdaq 
has gotten its jitters out of the way so that we can get to 
that earnings run.  In reality, YHOO has held up extremely 
well in this week's carnage.  Resistance is still overhead at 
$183.  Until we crack that level, all cautious types may want 
to sit out (we all feel like cautious types after this week).  
The intraday dips like today's are still the best bet to jump 
aboard.  Look for the Nasdaq relief rally to continue on 
Friday, but triple-witching may throw a wrench in trading so 
use caution.

DELL $55.00 +1.31 (+3.75) DELL today mirrored the NASDAQ, 
selling off in the morning and turning around in the afternoon 
to post a gain.  In the early going, DELL bounced off of $51 
and built an intraday support at $52.  In the final hour and a 
half of the session, DELL traded continually off its 5-dma, 
closing just off its highs for the day.  Look to see if DELL 
can hold this $55 level where it established support during
yesterday's session.  DELL's future looks bright with the 
previous week's upgrades and upward revisions of price targets
driving the stock price.  St. Patty's Day tomorrow brings us 
CPI, triple witching, and green beer so watch for market 
direction and pick entry points suited to your risk levels.  
DELL may retest its 52-week high of $57.94.

CSCO $131.66 +3.03 (-4.72) The market surged today and CSCO
recouped most of yesterday's losses.  CSCO has been on a slide 
the last two sessions from $138.  Last Friday, they posted a 
52-week intraday high of $141.88.  In contrast, today's low was 
$124.31.  Talk about great entry points.  With their split coming
next Thursday and a general market optimism, CSCO looks like it
could run again.  There is mild support at both $131 and $131.50
so look for a move off of these levels.  Another strong day for 
the NASDAQ could help CSCO get back to $136 where it will meet 
resistance.  Today's market surge overshadowed news that CSCO 
was buying two privately-held companies for $501 mln in an 
attempt to increase its business in the corporate telecom and 
digital home markets.  Although this is not necessarily market
moving, it is worth mentioning CSCO's continued efforts to grow
its business into new areas.  Watch for tomorrow's market 
direction and choose suitable entry points.  Remember that this
is a split play.

NTAP $182.56 +9.50 (-54.31) NTAP made the cut once more.  Why 
is that you ask?  Because NTAP really may have put in a bottom
the past two days.  NTAP sold off early today, but found buyers
entering the market for the balance of the session.  Remember
our interest in NTAP is for a split run.  The "correction" seen
in the Nasdaq and NTAP may have come at a great time, and could
providing us with a very good place to buy calls.  With NTAP
due to split 2-for-1 after the close next Wednesday.  From its
high last Friday, NTAP fell $86, or about 35%.  Today even with
the Nasdaq struggling until late in the day, this maker of high-
speed data storage servers, found buyers willing to put their
money on the line.  Just because we've seen a correction in 
the markets, doesn't change the fact that there is a high
demand for storage and it will only continue to grow.  Investors
may be a bit more picky when rotating from sectors and hot
stocks but we still believe this one is worth another look.
Apparently analysts at Robertson Stephens think so too, as 
they reiterated their Buy rating on NTAP Wednesday. 

CHKP $219.13 +10.44 (-60.75) Talk about a bounce!  CHKP added
to losses seen the past two days hitting $189 early today.  
With the Nasdaq officially in correction mode with a decline
of over 10% from recent highs, CHKP and others experienced
wider swings in volatility.  From its high last Friday at 
$295, CHKP fell 36%, in four days.  As we said Tuesday, swift
and brutal if you were long.  CHKP ended the session with a
gain of 5%.  We've kept CHKP on our list as the volume today
was heavy and the momentum picked up as the price began to
bounce back.  The sentiment surrounding the Internet security
seemed to improve as the day went on.  On Wednesday CHKP 
introduced Check Point SiteManager-1 System.  It's a new
solution designed specifically to enable telecomms and service
providers to address the high growth market for delivering
managed Internet security and VPN services to small and 
medium business.  CHKP has support now at $210.  Confirm 
direction and volume prior to entering a new play.

SNE $250.00 -4.94 (+6.25) It was a long fall, but SNE looks
like it has finally found its bottom.  After touching $218 
earlier in the week, investors seem to have regained their 
senses, allowing SNE to move up moderately and begin building 
support near $245.  Volume is running a little heavier than 
average, and looks to be heavier on the up-moves than on the 
down-moves.  The company seems to have weathered the debacle 
over the PlayStation2 release, is still well positioned in its 
core markets, and from the news yesterday, seems intent on 
capitalizing on the convergence of entertainment and technology.  
The company announced it will reorganize parts of its electronics 
business to better realize its goal of becoming a "broadband 
entertainment company".  In light of the pending AOL-Time Warner 
merger, SNE has had to start thinking more about merging its 
products with its content properties.  Look to enter new 
positions as SNE bounces at support found at $245 and then $240.  
SNE will likely run into some resistance near $258 where the 
10-dma ($259) and the 50-dma ($257) appear to be converging.  
More conservative investors may want to wait for SNE to close 
above this level before jumping on board.

VIGN $242.50 -9.75 (-54.50) It's hard to find any "new economy"
stocks that haven't been in the red over the past two days and
VIGN is no exception.  Sellers pushed the share price as low as
$228, before the buyers couldn't take it anymore and jumped back
in.  A similar pattern was seen across the tech sector as the
NASDAQ recovered from a huge loss, to post a respectable gain.
Yesterday, VIGN cut through its 10-dma like a hot knife through
butter and had to challenge the 30-dma ($233.63) today before
finding support.  Looking for a catalyst for the plunge (other
than the correction on the NASDAQ)?  Look no further than the
company's announcement Wednesday morning of a 3-for-1 split,
which will take place on April 14.  In typical post-news
fashion, the price plunged almost $40 immediately, before saner
heads prevailed allowing for a modest recovery.  Of course,
then the bottom fell out of the NASDAQ, and the downdraft
dragged VIGN lower as well.  Providing some encouragement today
was the stock's ability to close above $240, the support level
created by the January highs.  As money flows back into the
NASDAQ in anticipation of strong earnings growth, look for VIGN
to resume its climb.  Resistance will likely appear at $248 and
then $260.  At the risk of repeating ourselves, remember that
VIGN is a volatile Internet, commonly posting $30 intraday 
price swings.  

BWEB $48.06 -0.19 (-9.94) As we said Tuesday, a decline or
drop in price is still a negative.  BWEB is down over $9 for
the week, but the impressive part is how well it has actually
held up.  We mentioned the $45 level of support Tuesday.  With 
the Nasdaq and many of the tech favorites in the tank, BWEB had
buyers waiting in the wings at $45 to $46.  Volume last week
when BWEB was making a new high each day was strong, averaging
1.6 million shares per day.  Volume this week so far on the 
decline has been light averaging about 628K per session.  A
quick check of the math tells us that investors still believe
in this stock and aren't going to let a correction scare them
away.  There has been no company specific news so far this
week to help prop the price up or pull it down.  We were 
expecting a bit of a pullback this week, but we believe its
been exaggerated by the correction in the Nasdaq.  If the 
major indices can maintain the momentum seen late today, we 
would look for BWEB to get back on track.

VERT $230.38 +13.06 (-42.81) If you don't have a bad case of 
whiplash from playing VERT, kiss your chiropractor.  From 
Tuesday, we recommended standing aside if VERT couldn't hold 
$225, as the next resistance would be $195-$200.  Bingo!!  VERT 
tagged $195.13 this morning and marched $35 out of the basement 
by day's end.  While VERT still sits below its 5-dma ($240.98) 
and 10-dma ($247.05), today's big recovery off the low on volume 
exceeding the ADV by 42% looks technically positive.  Even better 
is that the extreme oversold condition (stochastic) reversed 
itself this morning, and should continue northward as VERT again 
attempts a split run into its 2:1 split date of March 31st.  
Target shooting back at $215 will likely give the best entry.  
Otherwise a breakout over $240 with increased volume would help 
confirm the direction of the trade.  The next resistance would 
then be $250.  Note too from briefing.com, "Merrill Lynch 
Internet analyst initiated coverage with a near-term Accumulate, 
Long-Term Buy rating and a price target of $350; calls VERT a 
core B2B holding; notes high valuation but would recommend 
buying on weakness."

NOK $200.00 +4.00 (-15.00) So much for $205 as a good entry 
point.  The worst was not over.  NOK, which trades as an ADR 
(notorious for gap openings as a result of overseas trading) 
gapped down at yesterday's open to $202 and fell through 
yesterday and this morning, touching $182 around 11:00 ET today.  
Credit the tech rebound for lumping NOK with it on its stellar 
recovery.  While NOK couldn't close above yesterday's opening 
price, the pony in today's pile is that NOK showed more than 
twice the ADV as it recovered $15 off its low, and moved 
decisively upward from its technically oversold condition.  NOK 
is also splitting its shares 4:1 in roughly early April following 
a shareholder meeting on March 22nd.  We'll keep you posted on 
the date.  Accordingly, we maintain that the worst is over for.  
However, one wild card to be aware of is that shipments from 
Finnish phone cover makers could be halted if chemical workers 
extend a strike until next week.  That would naturally prevent 
the shipment of completed phones...not good for short-term 
business, but highly unlikely to affect the long-term prospects.

NITE $47.00 +1.06 (-2.56) An initial glance at the chart shows a 
snoozer of a trading pattern on volume fractionally above average 
for the last two days.  Ho-hum might be the response were it not 
for NITE's ability to stand firm in the NASDAQ's headwind today, 
and especially yesterday.  Support at $45 yesterday and $46 today 
held up well in what should have been a route.  The lack of 
volume with good support confirms investors desire not to 
jettison the issue.  A small added bonus...BankBoston Robertson 
Stevens reiterated its Buy rating and raised is EPS from $0.70 to 
$0.90 citing that "According to Autex/OTC, Knight/Trimark average 
March quarter weekly volumes are up 100 percent over December 
quarter volumes".  Earnings are anticipated on Apr 19th.  Target 
shoot at your level of comfort, but confirm market direction 
first.  Tomorrow (triple witching day) could be a bit tricky.

TIBX $111.25 -8.00 (-26.94) An $8 loss on the day when NASDAQ 
recovers 262 points off its low?  Why is this still on the list?  
First along with the NASDAQ's "v" bottom, TIBX recovered $10 from 
its low of $101 on volume of four times the ADV following a sharp 
sell-off this morning.  Second, earnings are scheduled for 
announcement on March 23rd (earnings run) when we also expect 
another split announcement.  Why do we expect it?  On the agenda 
for the shareholders meeting scheduled April 11th is an item for 
approval to authorize a share increase from 300 mln to 1.2 bln 
shares.  The close today above its previous resistance level of 
$109 set on February 28 is a good sign.  While we don't expect 
the price to get or remain down for long (earnings are just a 
week away), triple witching and index adjusting could make this 
a jittery ride tomorrow.  Target shoot to your level of comfort 
down to 101, otherwise you may want to wait for the break back 
over $120.  A piece of news that may have benefited TIBX, they 
announced that they have just completed a Web-based interactive 
portal for RSL communication, a telecom company.

FDRY $175.00 +4.03 -26.19 A big sell-off happened in almost 
every four-letter company symbol (NASDAQ) this morning only 
to be followed by a terrific recovery.  FDRY was no exception, 
hitting $153 before its $22 recovery by the market's close.  
No news on the wires, so we have to look deeper into the chart 
for direction.  Volume has been merely average running close 
to the ADV since Tuesday.  While the rebounds were nice from 
the low $150's, and convey a bottoming out of the sell-off, 
the low prices have not been greedily met with a surge of 
buying volume, causing us some concern.  With earnings not 
scheduled until April 24, there is no event to drive this 
play forward for now.  Another concern is that the lockup 
period will expire on March 25, making over 85 mln shares 
available for trade.  Most are still company owned and won't 
be an issue; however, insiders could still have an affect 
on the price with just 10 mln shares in float.  If you are 
going to play this one, target shoot aggressively and keep 
a close stop set going into the end of next week.



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

EK $58.13 +3.00 (+4.13) It doesn't look promising that EK 
will stay a put play if another day like today occurs.  EK 
got a major boost from the Dow today.  They broke through
resistance and went as high as $60.  Volume was impressive
showing momentum in the breakthrough.  So why keep EK?  It
is risky and that should be kept in mind when entering EK.  
What we think happened today is EK fed off the positive 
momentum of the Dow.  Consider also that after they made
their run up to $60, they turned right back around.  At any
time we still expect an earnings warning.  So we will watch
and wait for a little while longer.  In the news EK announced
they will continue Olympic sponsorship through 2008.      

CIEN $133.47 +8.16 (-29.41) Bungee jumping anyone?  Continuing
to be abused with the rest of the NASDAQ, as investors jumped
to the much-maligned NYSE stocks, CIEN plunged through support
near $120 this morning.  Falling all the way to $115 before
finding support, CIEN posted an amazing recovery in lockstep
with the NASDAQ.  Very heavy volume accompanied the recovery
from today's lows, so we would advise caution in opening new
positions.  With an almost $19 range, today provided an
excellent intraday trading opportunity for those watching the
market.  Going forward, look for CIEN to follow the lead of the
NASDAQ, which could mean more choppiness ahead.  Moving back
above the 30-dma ($127.50) and support in the $121-123 area,
Although probably not a factor in today's wild market, the 
announcement that Global TeleSystems (GTS) will invest 
approximately $100 million in CIEN's open-standards CoreStream 
systems.  If the NASDAQ can move up again tomorrow, CIEN may 
go along for the ride.  Watch for a rollover near resistance 
and then jump on for the next plunge down.

BVF $50.56 +0.69 (+0.31) Just when you got a good put play 
developing, an analyst steps in and reiterates a Buy on the
company.  That may or may not have been the reason for the move
up in price today of BVF.  CIBC analyst, Lennox Gibbs, came out
this morning reiterating his Buy rating on BVF, projecting a 
12-month price target of $66.  Actually BVF has given us a
quick move down to $46, which may be the extent of what we are
going to get.  However the volume on the down days has been far
heavier than the days BVF has shown gains.  The fundamentals
at this point haven't really changed so we are going to hang
with BVF for a while longer.  As we mentioned before, technically
BVF could bounce all the way up to the $52-$54 area and begin
to fall again keeping the current downtrend in tact.  Another
plus for this play?  The Drug and Biotech sectors added about
5.0%-6.0% today, while BVF could only manage a gain of about
1.0%.  At this point BVF hasn't joined the party, and may head
back south. 



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

HWP - Hewlett Packard $133.00 +1.00 (-13.94 this week)

As the #2 computer company worldwide, HWP provides computers,
imaging and printing peripherals, software, and computer-related
services.  Taking full advantage of the tremendous international
growth, more than half of the company's sales come from outside
the U.S.  HWP is in the process of restructuring itself as an
Internet specialist, providing Web hardware, software, and
support to corporate customers.  In pursuit of that goal, the
company recently spun off its test and measurement and medical
electronics businesses as Agilent Technologies (A).

Looking for a good value in a tech stock?  HWP thinks they are
the ticket, touting their own stock as being undervalued (see
news below).  They might be right; with the successful spin-off
of Agilent Technologies, (of which HWP maintains 85% ownership),
shareholders should begin to focus on the core strength and
value of the computer and internet side of the business.  The
tech-wreck this week brought HWP as low as $124 before the stock
bounced (just above the 50-dma of $123.25).  A quick glance at a
daily chart shows this to be a good support level, tested several
times since the middle of February.  The solid bounce today is
very encouraging, coming at a major support level and confirmed
by volume over twice the ADV.  Depending on the underlying
strength and longevity of the bounce in the broader markets, HWP
will likely see tiered resistance at $135, $139, and $142.  With
the continuing minefield of economic reports, the stock could
remain volatile, providing some attractive entry points.  HWP
becomes a split candidate above $140, and the company has plenty
of authorized shares.  Look for a bounce from support near
either the 30-dma ($132) or the 50-dma to trigger your entries.
More conservative players may want to wait for a break through
the first resistance level ($135) before opening new positions.

This afternoon, HWP confirmed that it is on track to make its
revenue growth goals of 12-15 percent and said that its stock
is undervalued.  After the recent spinoff of Agilent, HWP's
treasurer, Larry Tomlinson, places the PE ratio of the company
near 25 and says it should be closer to 35, based on the
valuations of its peers.

BUY CALL APR-130 HWP-DF OI= 464 at $ 9.13 SL=6.75
BUY CALL APR-135*HWP-DG OI=1121 at $ 7.13 SL=5.25
BUY CALL APR-140 HWP-DH OI=1318 at $ 5.25 SL=3.50
BUY CALL MAY-135 HWP-EG OI= 601 at $12.13 SL=9.50
BUY CALL MAY-140 HWP-EH OI=1468 at $10.13 SL=7.50

SELL PUT APR-120 HWP-PD OI= 571 at $ 4.13 SL=6.00
(See risks of selling puts in play legend)

Picked on Mar 16th at   $133.00     P/E = 44
Change since picked       +0.00     52-week high=$155.50
Analysts Ratings    10-12-6-0-0     52-week low =$ 65.13
Last earnings 02/00   est= 0.77     actual= 0.80
Next earnings 05-17   est= 0.81     versus= 0.88
Average Daily Volume = 3.56 mln
/charts/charts.asp?symbol=HWP

****

BGEN - Biogen Inc. $86.81 +8.63 (+2.75 this week)

Biogen researches, develops, and markets biopharmaceuticals
to treat a variety of illnesses.  AVONEX, is the company's
claim to fame, used in the treatment of multiple sclerosis.
Other drugs made by BGEN include Amevive, for psoriasis;
Antova for autoimmune diseases; and Adentri, for congestive
heart failure.  BGEN also receives revenues from licensing
drugs it has developed to other companies.  BGEN has research
agreements with Schering-Plough, SmithKline Beecham, Merck
and Abbott Laborites.

Volatility can produce huge gains and equal losses and this time
we believe it's produced a very good opportunity.  Late last
week BGEN and the Biotech sector fell victim to the sector
rotation seen so frequently.  Early this week President Clinton
and U.K. Prime Minister Tony Blair poured fuel on the rotation
fire with a statement that they wanted the data discovered by the
mapping of human genes to be made public.  As you undoubtedly 
heard those comments prompted traders to sell the gene discovery
companies and those with drugs on the market or in development
like BGEN, IMNX and AMGN.  And sell they did.  It's amazing just
how well BGEN has held up with the all that was going on around
it.  The $77-$80 area has provide great support for our new
play the past few days, and today BGEN began what appears to us
good chance to buy calls.  Many traders have reconciled that
investors over-reacted to the comments from the President, and
recent weakness or correction in the Biotech sector may have 
run its course.  John Borzilleri, a fund manager with State 
Street Research & Management said today, investors buying at 
these levels are going for security of known names.  Borzilleri
manages a fund that has about $55 billion in assets and includes
BGEN.  Late today as BGEN went through the $85 level the volume
picked indicating this could be the start of something very
good.  We would look for $84 to provide support should we see
a pull back in the morning.

The last broker comments seen on BGEN came in late February.
With the price decline seen since the first of the first part
of the month we would anticipate some favorable comments from
analysts to reach the market with BGEN trading back at these 
levels.  16 out of 27 that follow the company currently have
BGEN rated either a Buy or Strong Buy.

BUY CALL APR-80 BGQ-DP OI=1642 at $14.13 SL=11.00
BUY CALL APR-85*BGQ-DQ OI=1238 at $11.50 SL= 9.00
BUY CALL APR-90 BGV-DR OI=3673 at $ 9.25 SL= 7.00
BUY CALL JUL-90 BGV-GR OI= 693 at $16.75 SL=13.00

SELL PUT APR-75 BGQ-PO OI=1902 at $ 4.00 SL= 6.25
(See risks of selling puts in play legend)

Picked on Mar 16th at    $86.81    PE = 62
Change since picked       +0.00    52-week high=$129.00
Analysts Ratings     9-7-11-0-0    52-week low =$ 45.13
Last earnings 01/00   est= 0.42    actual= 0.44 
Next earnings 04-10   est= 0.43    versus= 0.29
Average daily volume = 4.35 mln
/charts/charts.asp?symbol=BGEN



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

No new put plays today.



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

DELL - Dell Computer Corporation $55.00 +1.31 (+3.75) (+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.  

Most Recent Write-Up

DELL today mirrored the NASDAQ, selling off in the morning and 
turning around in the afternoon to post a gain.  In the early 
going, DELL bounced off of $51 and built an intraday support at 
$52.  In the final hour and a half of the session, DELL traded 
continually off its 5-dma, closing just off its highs for the 
day.  Look to see if DELL can hold this $55 level where it 
established support during yesterday's session.  DELL's future 
looks bright with the previous week's upgrades and upward 
revisions of price targets driving the stock price.  St. Patty's 
Day tomorrow brings us CPI, triple witching, and green beer so 
watch for market direction and pick entry points suited to your 
risk levels.  DELL may retest its 52-week high of $57.94.

Comments

DELL has been hot for two weeks, even despite the Nasdaq woes.  
The last two days gave us the first real sell-off during this 
period.  The volume was light and the bounce occurred this 
afternoon so we'll call it an entry point and jump on board 
for the next move higher.    

BUY CALL APR-50 DLQ-DJ OI=22655 at $6.88 SL=5.25
BUY CALL APR-55 DLQ-DK OI=10542 at $4.00 SL=2.50
BUY CALL APR-60*DLQ-DL OI=14087 at $2.25 SL=1.00
BUY CALL MAY-60 DLQ-EL OI=12356 at $3.63 SL=2.50

Picked on March 9th at   $50.44    P/E = 88
Change since picked       +0.81    52 week high=$57.94
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
/charts/charts.asp?symbol=DELL



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

To Infinity And Beyond..

Wednesday, March 15

Blue-chip stocks recovered today as investors sought refuge from
the recent technology sell-off.  The Dow Jones Industrial average
leaped 320 points to finish at 10,131 while the Nasdaq index fell
124 points to 4,583.  The S&P 500 Index rose 33 points to 1,392.
On the New York Stock Exchange, advances led declines 19-11 on
active volume of 1.3 billion shares.  The 30-year Treasury bond
rose 8/32, bid at 102 11/32, where it yielded 6.07%.


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

Navistar        NAV    JUL45C/APR45C   $2.00   debit   calendar
Navistar        NAV    JUL25C/APR35C   $9.00   debit   diagonal
Billing Conc.   BILL   APR7CC/APR7NP   $6.62   debit   Cov/Combo
Network Assoc.  NETA   JAN15C/APR30C   $14.38  debit   LEAPS/CC's

The wild and woolly session did little for our three new positions
with each of the issues trading in relatively small ranges.  There
were a number of favorable opportunities to leg-into the spreads
but our prices are based on simultaneous orders.  The target cost
basis for the BILL combination play was not available until late
in the afternoon.


Portfolio plays:

The flight to quality was apparent today as traders scooped up
recently flagging blue-chip issues and continued to dump formerly
high-flying tech stocks.  Analysts say the correction was long
overdue for many of the Internet/Networking and Semiconductor
companies.  While the Dow posted big gains, the Nasdaq registered
sharp losses as bargain hunting investors rotated the new leaders
into their portfolios.  Many sectors enjoyed substantial gains
with the majority of financial, cyclical, retail and drug stocks
all finishing higher.  A number of biotech issues rebounded from
recent slumps and only 3 Dow components ended the session in
negative territory.  Now that blue-chips have begun to recover,
all eyes are on the FOMC meeting next week.  Experts suggest that
a 25-basis-point interest-rate hike has already been factored into
the broader market, but concern over rising inflation is expected
to plague equities through the summer months.

The big surprise came in one of our straddle issues as LHS Group
(LHS) rose $12 to $52 after the firm reported it would be acquired
by UK's Sema Group for $4.7 billion in stock.  The debit straddle
closed with a $27 credit, a profit of $21.25 on $6.75 invested.
The rest of the portfolio was a horrific site with crimson quotes
dominating the spreadsheet.  A few of the bullish, momentum plays
required action to limit potential losses (MYPT and SPLN were two
obvious choices) but the recent volatile movement provided a great
opportunity to talk about exit strategies.  In the Credit Spreads
section, Level-3 Communications (LVLT) was on our hit list and as
expected, the stock displayed its new character perfectly, falling
to a recent low near the previous support area at $105.  The issue
eventually rebounded to a closing price of $109 but the movement
offered plenty of opportunity to profit from a simple roll-out.

In the case of credit spreads, a favorable outcome is for the
stock price to finish outside (OTM) of both positions.  In this
case, both options expire worthless and you are left with the
original credit as the profit.  There are three common ways to
exit or cover a losing credit spread.  You can simply close the
position at a debit and register the loss.  There is also Jim's
popular technique; covering the short position as the stock moves
through the sold strike.  For LVLT, that would mean shorting the
stock near $115.  This is a great method for bailing out on an
issue that has reversed course but you must be prepared to buy it
back in the event of a recovery.  Another option is to "roll-out"
of the spread for profit (or at least break-even).  To roll-out
of a credit spread, place an order to close the short option
anytime the stocks trades (and preferably closes) below technical
support or a well-established trend line or moving average.  Of
course there are other, more precise signals that can be used but
the technique is based on the probability that the stock should
continue to move in that direction.  After the short position is 
repurchased, wait for the stock to lose momentum and sell the long
position to close the entire play.  It is a difficult technique to 
perform when emotion enters the formula but it works well once you
become experienced at it.  The key to success is using the method
at known support levels or after key reversal signals, otherwise
you are just speculating about the stock's next move.

That's one nice thing about spreads; once you understand them, you
can turn many losing plays into winning ones with the effective
use of STOPS and by rolling out-of/into new positions when the
stock moves against you.  When you do lose, at least you have
reduced your losses by leveraging against another position.  With
the new CMGI play, we have another potential candidate for early
exit but our approach to this position will be quite different,
based on our outlook for the stock.  While the issue is obviously
experiencing some short-term difficulty, we favor the potential
for company, once the Internet rally is re-established.  Our plan
would simply be to sell a slightly OTM call ($125 - $130) if the
issue closed below the sold strike of the bullish, credit spread
($120).  The problem of course is that you will most likely have
to cover the sold calls with stock or another option position.  If
the stock finishes below $120 at expiration, you accept delivery
of the issue, establishing the covered-call.  The alternatives are
numerous but our conservative approach is simple; if the stock
recovers from the sell-off and begins a sustained move through the
sold strike (before expiration), we will simply buy the stock or
buy a deeper ITM call to create a bull-call spread.  In the case
of a bull-call spread, you can lower the amount of purchased time 
premium by moving well below the sold strike price ($100 or $105)
thus reducing the losses from slippage as the stock returns to a
bullish character.  Of course this technique requires continuos
management of the issue but it is one way to attempt salvage of a
losing position and with diligence, the outcome will generally be
positive.


Thursday, March 16

U.S. equities enjoyed an incredible rally today as blue-chips
roared and investors welcomed technology issues back into their
portfolios.  The Dow Industrials rocketed 499 to 10,630, its
largest rise ever.  The Nasdaq Composite rose 134 points to 4,717
while the S&P 500 index rallied 66 points to 1,458.  Volume came
in heavy at 1.48 billion on the NYSE with winners outpacing losers
24 to 7.  There were 49 new highs and 41 new lows on the NYSE.
The 30-year bond shed 13/32 to yield 6.04%.

Portfolio plays:

Today's session felt like expiration Friday with stocks moving
violently in both directions.  The action was fast and furious and
only those with nerves of steel jumped in at the midday lows.  The
end result was another blow-out session for the Dow and a fairly
productive recovery for the Nasdaq.  Our Spreads portfolio was
just as exciting but fortunately, there were only a few remaining
adjustments to be made. Here is a summary of the positions that
were moved to April along with the transition credit and the new
cost-basis.

Stock          Ticker    Position      Credit   C/B

Boston Comm.    BCGI    JUN5C/APR7C    $0.62   $0.31
Cadence         CDN    MAY15C/APR20C   $1.25   $1.68
Cirrus          CRUS   JUN10C/MAR17C  -$1.00   $4.75
Recoton         RCOT    MAY5C/AP10C    $0.43   $3.43
Tera            TERA    JUN5C/APR7C    $0.75   $0.68
Wavephore       WAVO    MAY5C/APR7C    $0.62   $1.43

There were also a few interesting surprises in today's session.
CMG Incorporated (CMGI) offered some engaging trading during the
volatile Nasdaq movement and although there were a number of
excellent opportunities to exit our new position, we decided to
hang on for the ride and sees how it fares tomorrow.  Our string
of Murphy's Law recoveries continued as one of the most recently
closed plays came storming back to profitability.  Tupperware (TUP)
rallied $1.62 to close above $18 and the APR-$15C/17C debit spread
yielded a favorable exit credit for those of you in the position.
It's always nice to be wrong for the benefit of the readers!

With only one day to go in this month's option expiration, the
trading during the final session is expected to be volatile with
a potential for momentum in both directions.  The recent gains in
blue-chip issues will most likely be consolidated and the leading
technology stocks are expected to continue the recovery from this
week's losses.  Our portfolio should experience little activity as
the majority of positions are closed or have already been adjusted
to reflect our outlook for April.  With any luck, the day will
end on a bullish note and we can record another profitable month
of conservative, spread trading.

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


****************
Reader's Request
****************

I received some favorable Email on the recent Navistar calendar
spread (and we have very few of those in the portfolio) so here
is a new candidate.  Another reader requested a bullish position
in Andrew (ANDW), one of the OIN's profitable call-option plays.

****

KR - Kroger  $15.56   *** Bottom Fishing! ***

The Kroger Company is engaged in the retail food business, and
is one of the largest supermarket operators in the United States.
Kroger also manufactures and processes food for sale by its 1,410
supermarkets located in 24 states under a variety of names.  The
company operates stores under the Kroger name in the Midwest and
South while subsidiary Dillon Companies operates supermarkets
under the names King Soopers, Dillon Food Stores, Fry's Stores,
City Market, Gerbes Supermarkets, and Sav-Mor.  In addition, the
company operates convenience stores under the trade names of Kwik
Shop, Quik Stop Markets, Tom Thumb Food Stores, Turkey Hill Minit
Markets, Loaf 'N Jug, and Mini-Mart.  They also manage the Kroger
Manufacturing Group, which manufactures more than 5,000 food and
non-food products in its 26 manufacturing plants.

Last week the #1 U.S. grocery chain reported higher-than-expected
fourth-quarter operating profits, aided by expanded sales of
private-label products and cost savings from its merger with Fred
Meyer.   Kroger reported its income rose to $331 million, or $0.39
per diluted share, up from $0.32 in the previous year.  Analysts
had expected operating income of $0.38 a share and were optimistic
about the results generated by a variety of merchandising programs
and product offerings.  The company has introduced more than 1,100 
private-label items over the past year, nearly triple the number
from 1998 and expanded growth in this category of sales is already
generating incremental sales and enhanced profit margins.  The
merger with Fred Meyer has also enabled Kroger to cut purchasing
costs.  The future however, may be plagued by high debt levels and
inflated inventory problems.

This position is simply a speculation play based on the recent
options activity and the excellent premium disparities.  If you
like the risk/reward potential, play along with us.


PLAY (speculative - bullish/calendar spread):

BUY  CALL JUL-17.50 KR-GW OI=544  A=$1.75
SELL CALL APR-17.50 KR-DW OI=5309 B=$0.68
INITIAL NET DEBIT TARGET=$0.93-$1.00 TARGET ROI=25%


The basic premise in a calendar spread is simple; time erodes
the value of the near-term option at a faster rate than it will
the far-term option.  The bullish calendar spread is used when
the underlying issue is some distance below the strike price of
the options.  This position is speculative with low initial cost
and large potential profits.  Two favorable outcomes can occur:
the stock rallies in the short-term and the position is closed
for a profit as time value erosion in the short option produces
a net gain or; the underlying stock consolidates, allowing the
sold option to expire and then eventually rallies above the long
option strike price.

It is generally best to establish this type of spread at least
2 - 3 months before the long option expires, capitalizing on the
ability to sell another option against the longer-term position.
That is the basic idea in this spread play; selling time value
in the options when they are overpriced (high implied volatility)
and buying it back (if necessary) when they return to intrinsic
value.

Chart =
/charts/charts.asp?symbol=KR

****

ANDW - Andrew Corporation  $27.38  *** An OIN Favorite! ***

Andrew Corporation is a supplier of communications products and
systems to worldwide commercial, industrial, and governmental
customers.  Its principal products include coaxial cables,
microwave antennas for point-to-point communication systems,
special purpose antennas for commercial and government end use,
antennas and complete earth stations for satellite communication
systems, cellular antenna products and telephone accessories,
electronic radar systems, communication reconnaissance systems,
and related ancillary items and services.  These products are
frequently sold as integrated systems rather than as separate
components with one half of them going directly to end users.
Most of the remainder is sold to radio equipment companies.
   
This issue has been in the "Call-Options" section of the OIN in
recent weeks and one of our readers suggested a bullish spread
position to take advantage of the inflated, front-month premiums.
That sounds like a great idea, although I am not sure if the
call option buyers will want us to drive their premiums lower.
Regardless, the technicals are excellent and this conservative
approach offers a favorable method to participate in the bullish
trend.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  JUL-15  AQN-GC OI=6    A=$13.38
SELL CALL  APR-25  AQN-DE OI=1155 B=$4.50
INITIAL NET DEBIT TARGET=$8.62-$8.88 INITIAL ROI TARGET=14%

Chart =
/charts/charts.asp?symbol=ANDW

****

MFNX - Metromedia Fiber Network  $89.93  *** Technicals Only! ***

Metromedia Fiber Network, the leading provider of end-to-end
optical network and Internet infrastructure solutions, is
revolutionizing the fiber optic industry.  Offering virtually
unlimited, unmetered bandwidth at a fixed cost, the company is
eliminating the bandwidth barrier and redefining the way
broadband capacity is sold.  They are extending metropolitan
optical networking infrastructure to the end user in strategic
top-tier markets, enabling its customers to implement the
latest data, video, Internet and multimedia applications.  They
focus on domestic intra-city fiber optic networks in clusters of
the 15 largest cities throughout the United States.  MetroMedia
currently operates high-bandwidth fiber optic communications
networks in New York and the greater Philadelphia area, and will
begin to operate similar networks in Washington, D.C.  They have
also begun engineering and constructing networks in Chicago, San
Francisco and Boston, Massachusetts.

Earnings were great in last week's report with revenues increasing
107% in 1999, up from $36.4 million in 1998.  The company's total
number of contracts increased 400% to $2.0 billion and their fiber
network jumped 181% to 646,000 miles.  To make things even better,
their board has approved a two-for-one split of its common stock.
The split, the fourth since the company went public in October of
1997, reflects the company's continued confidence in the success
of its business strategy and it will be distributed on April 17 to
shareholders of record as of March 14.

That's probably one of the reasons the issue is performing so well
in past weeks but we also favor the bullish sector outlook and the
excellent growth forecasts for the company.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  MAY-60  QFN-EL OI=280  A=$31.75
SELL CALL  APR-80  QFN-DP OI=564  B=$14.88
INITIAL NET DEBIT TARGET=$16.62-$16.75 INITIAL ROI TARGET=19%

Chart =
/charts/charts.asp?symbol=MFNXM


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************
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************

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