Option Investor

Daily Newsletter, Sunday, 03/19/2000

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The Option Investor Newsletter          Sunday  3-19-2000  1 of 5
Copyright 2000, All rights reserved. 
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Entire newsletter best viewed in COURIER 10 font for alignment
         WE 3-17          WE 3-10           WE 3-3         WE 2-25
DOW     10595.23 +666.41  9928.82 -438.38 10367.20 +505.08 -357.40
Nasdaq   4798.13 -250.49  5048.62 +133.83  4914.79 +324.29 +178.76
S&P-100   786.74 + 37.24   749.50 - 16.45   765.95 + 46.17 -  8.74
S&P-500  1464.47 + 69.40  1395.07 - 14.10  1409.17 + 75.81 - 12.73
RUT       574.77 - 29.04   603.81 +  5.93   597.88 + 41.14 + 11.06
TRAN     2623.83 +258.54  2365.29 - 69.16  2434.45 + 83.19 - 79.54
VIX        23.67 -   .13    23.80 +  2.51    21.29 -  7.79 +  0.63
Put/Call     .42              .39              .40             .41

Look out above, the bull is back?

Simply incredible! What am I talking about, the Dow finished down?
In my eyes it was a victory of Superbowl proportions. Thursday
the Dow was like Rocky Balboa struggling to his feet and pulling
every last ounce of energy to win that final round at the close. 
After taking the beating of his life and spending more time on the 
mat than on his feet he found the energy to fight back and win. 
I have to admit that when the Dow was trying so hard to hit that 
+500 mark in the last few minutes it almost brought tears to my 
eyes. The market is my life. I live it, eat it, breathe it. I even 
dream about it. (My wife says I need counseling) Still as exciting
as it was to witness history in the making on Thursday, Friday was
the Superbowl and we won. There maybe -35 less points left on the
Dow scoreboard but it was a sentiment win of epic proportions.

+819 points in two days. The very definition of over bought ran
smack up against the definition of profit taking.
(Friday, 'frI-de, noun, A. the last trading day of the week. 
B. profit taking day. C. Pay day.) 

We survived. The sellers came and the buyers never flinched. We 
held our positions. We watched our charts but there was never a 
serious attempt to run it back down. Sure there was some give and 
take and some individual stocks gave back Thursday's gains but 
the fortress held. They took their best shot and the market did
not even flinch. As the afternoon was drawing to a close I was
almost as excited as I was at the close on Thursday. This was
bigger. A weekend before a Fed meeting with huge profits on the
table and traders held overnight and over the weekend! Lookout 
above! The bull is back and he is ready to rumble. 

Before I have you running down to the ATM to transfer money
into your brokerage account I should probably qualify my 
comments on Friday's action. While the Nasdaq was up +80 there 
was no follow through volume. Only 1.69 bln shares traded. There 
was no rush to buy and there was no rush to sell. Everyone simply 
held their breath and hoped it would not crash again. The Dow 
managed 1.3 bln shares and there was some rotation but calm was 
the byword for the day. Calm and orderly. Sellers and buyers, 
buyers and sellers. Everyone kept looking over his or her shoulder 
expecting to see a wave of selling at any moment but it just did 
not happen. The Dow moved in a 200 point trading range and had 
plenty of opportunity to tank but ended the day only 35 points 
from yesterday's close. This is a major sentiment change and a 
major victory for the home team. Next you will be expecting floor 
traders to line up on camera and moon Greenspan. 


There was a negative chart pattern on the Dow for Friday. The range
for the day was almost 200 points and the Dow closed only 30 points
from the low of the day. This finish at the bottom of a wide range
is normally negative on its own but taken in context I think we 
should be grateful for small favors. Given the large gains of the
previous two days I think the shooting star pattern is a false

Another positive was the non-impact from the rebalancing of the
S&P on Friday. Many funds were selling stock at the close to
adjust their fund weights to the new S&P weight. This wholesale
portfolio adjustment was almost invisible. There were exceptions
like NT which had a huge imbalance to the buy side and several
million shares were bought at the close which added +$9 to the
stock price. 

Since 1995 there has only been 46 days of heavy volume where
the up volume beat the down volume by anything close to the 10:1
ratio we saw on Thursday. Of those 46 days 70% or 32 resulted in
significant market gains in the coming week. Where you would
expect almost a 100% follow through the actual market statistics 
only indicated a positive follow through two out of three times. 
This indecision is what will keep us on our toes next week. No 
investor wants to jump in at the current price if this was just 
an oversold bounce and we are going to roll over again next week. 
With the PE of the major industrial companies in the S&P averaging 
only 11 there does not appear to be much risk of a further drop.
Value investors started showing signs of a pulse again but after
being in intensive care for months the recuperation could take
some time. These investors will likely ease back into the market
one step at a time instead diving blindly into the murky waters.

The CPI on Friday was also a non-event although food and energy
prices soared. Other sectors dropped and the net impact was a
+0.5% gain for February with the core rate up only +0.2%.
The next hurdle in the economic calendar is the FOMC meeting on
Tuesday. There is no doubt that the Fed will raise rates and it
has already been factored into the market. What investors will
be watching is the wording on the releases. Are we going to 
have one more increase or two, or three? With bond yields now
at 6% and productivity increasing at record rates the Fed by
their own admission is baffled at what to do. The "stay vigilant"
and "react aggressively" rhetoric is falling on deaf ears. The
question is at what point does Greenspan get mad and decide to 
up the ante? The market gains of this week now have many analysts
wondering if Greenspan will break out of his incremental mode of
the past and fire a real shot across the bow of the economy with
a +.50% rate in an attempt to get attention. The real quandary
is how the markets will react to any action. A +.25% raise is
expected and deemed just another nuisance news event and celebrate
the non-event by going on another stock buying binge. A +.50%
raise could be seen as affirmative action by the Fed to backup
their words with strong action to keep the current economic
expansion on track for years to come. Investors could celebrate
the strong action as evidence the Fed is in control and go on
another stock buying binge. A win-win scenario and one that has
got to have Greenspan pondering the wisdom of accepting another
term in office. The Fed has withdrawn all the extra funds that
they injected for the Y2K crisis and nobody has noticed due to
the strength in the economy. As one analyst put it, "the Internet
is more important than the Fed and the Fed has not caught on yet."

Even though the FOMC meeting this week is not likely to have
any real impact on the markets it will still be the focus of
the news until it is over. The 2:15PM announcement may cause
a big market move in one direction or the other but the impact
will only be temporary without serious negative language in
the release. Since the FOMC meeting is the only major economic
incident for the week maybe the markets will start focusing
on the real story, April earnings. With YHOO, the first major
announcer the first week of April and only a little more than
two weeks ahead, any April earnings run should start this week.
I am hoping the lack of serious profit taking on Friday will
prove to be the result of investors taking positions they do
not want to sell until after earnings. If trader sentiment
has improved as it appeared on Thursday then we could be back
near record highs very soon. If we tank again this close to
April earnings then the entire market is in trouble. May and 
June have not been kind to us recently as you can see by these
charts. If the market is going to rally into earnings then trade
hard and plan to be out in case we are in for a repeat of history.

This is a great time to be an investor and even better to be
a trader. The market moves already this year have equaled the
moves that used to take years. Just the trading ranges in the
Nasdaq from last Fridays high of over 5100 to the low of 4455
this Thursday was the equivalent of the total move for entire
years until just recently. The +2500 point move from the Oct
low just six months ago equaled the previous 26 year move.
Think about it. The total gain of 26 years since the Nasdaq was
started in 1971 was doubled in only six months. The previous
doubling move took only 12 months from the October 1998 low
of 1357 to the Oct 1999 high of 2919. The previous double took
three years from 1000 in July-1995 to 2000 in July 1998. 

1000-2000 in three years followed by -32% drop in three months.
1357-2919 in twelve months followed by -15% drop in one month.
2630-5132 in six months followed by a -13% drop in four days.
As you can see from the examples above we are moving at an
incredible rate of speed. The shear volatility from the
magnitude of these moves is very troubling and tough to handle
for new investors but very profitable for more experienced
traders. Yes, there is a high risk that the market is overvalued
and can crash farther at any time based on historical valuations.
What investors are betting on today is the strong economy and
the technical innovations that are literally changing the way
we live on almost a daily basis. Yes, stocks could be overvalued
based on the economy of the 60s, 70s, 80s and even the 90s but
is it overvalued for the 2000s? Just as the markets are not
the same markets your father traded they are not the same 
markets we all traded just 2-3 years ago either. Traders are
not faced with buying an option for $3-$4 and waiting a month
for it to move to $6-$7. Today the intraday ranges on even
the lower volatility options can be $6-$7 a day. Stop losses
are almost worthless with the huge intraday swings and entry
points have become the most important part of execution. If
you make a good entry then you insulate yourself from many of
the other problems traders are experiencing. The second most
important trading aspect today is exit points. With many
Nasdaq stocks trading in ranges of $20, $30, $50, even $75
points during the week it is important to take profits when
they are offered. The stock may continue to run or it could
drop again in a heartbeat. The sector rotation which previously
took weeks and then days is now occurring in hours. Sectors
up double digits in the morning can be down double digits in
the afternoon. Traders must be quick or they will be broke.

What prompted this editorial is the constant stream of email
that goes something like this: I bought a $19 call option on
SDLI. It went up to $37 and last week and this week it is $4.
What should I do?  The other repeated email goes something
like this: I bought a $19 call option on SDLI and I was 
stopped out at $17. I bought it back again at $22 and was 
was stopped out at $20. I bought it back at $25 and did not
put in a stop order and it is $4. What should I do? 
There is no magic answer except you should not trade options
above your experience level. This is the greatest market in
history but it is also the most dangerous to the inexperienced
trader. If you have never traded options before then you 
should start out by learning how with "inexpensive" positions.
What would happen to you if you showed up at the Indy 500 as
a spectator and they picked you at random from the audience
to drive in the race? How long do you think the average person
would last after they strapped you into a 200MPH car and the
green flag dropped. Most would not make it a lap before ending
up against a fence or at the bottom of a pile of flaming debris.

For this same reason you should not jump into a 200MPH option
and not expect a financial accident. Until you learn how to
trade options you should start with the easy ones. Get the
feel of the stock cycles and market cycles. Practice entry
and exits. Project reasonable expectations and learn to take
profits when you reach 75% of those expectations. Options
trading is extremely profitable if done right and will
bankrupt your account if done wrong. Just because your
brother in law made 1000% last month does not mean you can
do that this month. (Did he tell you he lost 90% of his capital
the month before?) The best bets this week for low volatility, 
low risk option plays are DELL, NITE, SEG, INTC, AOL. These 
are good companies with charts that don't look like the Alps.
Learn to walk before you run because it is a long way back
from zero.

The market open on Monday will be critical. It is then that
we could see any profit taking from the huge gains last week.
Traders may be having second thoughts about holding profits
over the Fed meeting even when logic dictates that the meeting
will have no impact on the markets. Plan for the April earnings 
run but allow for disaster also. Far too many traders only 
look at the upside until disaster strikes. Don't be caught 
looking the other way.

Trade smart, sell too soon.

Jim Brown

My current long positions: 

No shorts

Editors note: Due to the volume of email I receive it is 
impossible for me to respond to even a small percentage. If 
you have questions or comments about OIN please direct them to 
questions@OptionInvestor.com and someone will respond. 
Thank you for your cooperation.

Options Traders !

Mr. Stock's new online trading site has been designed for you. 
Trade spreads, straddles, covered writes, and stocks online.
Get real-time market data throughout our site. Advanced options
tools include volatility graphs, implied volatilities, and more.



Biotech crashes, Nasdaq corrections, +500 point days! 
What a week. I happened to be sitting at my PC trading
when the Biotechs crashed. I was talking to some of the
other traders at the office at the time and we were all
dodging the knife. When the report came on CNBC that the
intent of the press conference had been misunderstood I
quickly sold all the ITM naked puts I could get the market
makers to take on HGSI, AFFX, CRA and IDPH. As they quickly
bounced off their lows I was congratulating myself on my
trading prowess. Unfortunately my "big head" got in the
way as the week progressed. The six figure profits I had
on Wednesday morning slowly bled thousands as the biotechs
failed to continue their rebound. 

What's wrong? I don't understand! The news was all over 
that nothing had changed. Don't investors get it? I used
every excuse in the book in trying to hope them back up.
Finally on Thursday when the Nasdaq rolled over for the 
last drop to 4455 I bailed on the puts with only 20% of
the gains I had on Wednesday morning. Just another example
of how to not let your bias and knowledge get in the way.
Just because the facts point to one conclusion and the 
stock is moving in a different direction, always go with
the stock. Never fight the tape. 

The good news about closing all those biotech naked put positions
on Thursday morning was it put me back into all cash. When the 
Nasdaq bottom came later that morning I was ready to establish
my positions for April. 

I opened the following naked puts. If held to expiration they
would produce these returns based on my 25% margin requirement
at Preferred.

Stock Strike Premium Return
ADAP - $170 - 22.88 - 54%
AMCC - $230 - 39.38 - 68%
AMCC - $260 - 41.44 - 64%
BRCD - $160 - 22.75 - 57%
CIEN - $140 - 10.25 - 29%
CMRC - $200 - 18.50 - 37%
INSP - $210 - 30.00 - 57% - possibly in trouble
MSTR - $230 - 39.50 - 69%
NTAP - $190 - 24.38 - 51%
PMCS - $200 - 28.25 - 56%
SCMR - $140 - 21.13 - 60%
SDLI - $180 - 21.94 - 49%
SDLI - $210 - 24.44 - 47%
VRSN - $210 - 27.13 - 52%
YHOO - $170 - 19.88 - 47%
ARBA - closed when it rolled back over Friday

As long time readers know I will not hold them to expiration for
multiple reasons. 

Time decay will begin rapidly next week as the options become
current month. Time decay occurs most rapidly as options go
from ITM to OTM. Since all but one of these are now OTM the
drop next week should be swift.

Premium drop does not happen in a straight line. The bigger 
the premium the faster the drop but as the premium decreases
the slower the decay. Even if the option becomes $30-$40 OTM
the last 25% of the premium will bleed very slowly as holders
refuse to believe there is no hope for a rebound.

Using the YHOO put as an example, the 19.88 premium may lose
50% of its value next week but the last $10 may bleed away
over the next three weeks. Once the premium reaches a plateau
where decay has slowed to a minimum there is no reason to
continue the risk. If I close the play for $5 two weeks early
I capture $14.88 profit and I have no risk of some random
event like an Ebay purchase or missed earnings from sending
me back to a loss some morning before the options even open.

Another reason is the increasing margin requirements. The
initial margin requirement when sold was $4000. ($160*25%)

As the stock price goes up, say to $220 the margin requirement
also goes up since it is 25% of the underlying until closed.
At $220 the margin would be $5500 per contract. That may not
sound like much $4000 to $5500 but I currently have over 400
contracts of the stocks listed above. Multiply 1500 x 400
and you get $600,000. So without making another trade if all
the stocks I sold puts on went up then my margin would go up
as well. I get no extra premium for the increased margin just
increased liability.

Using the YHOO example if the premium drops to $5 and YHOO
goes to $220 the maintenance percentage at that point would 
drop to 9%. This does not mean I lost the initial 47% it just 
means the risk-reward factor for holding YHOO at that point 
is 9%. If I can close that position and sell another naked put 
on something else for the 30%-40% returns above then I would be 
stupid to maintain a 9% maintenance position. If I close the
position early at $5.00 then I lock in my returns for the
partial month on YHOO at 37% and then do it again with 
something else. ($14.88 / ($160*.25)) = 37%.

I think you can see that if you write ITM naked puts your
returns can be very good. As long as you watch your positions
the first day or so until they go OTM and then put on a stop
loss your risk is actually less than with straight calls.
The difference is decay is working for you with puts and
against you with calls.


I also bought a few calls on YHOO for the expected earnings
run. I had looked at calls on YHOO for a week but the premiums
were higher than I could stand but when it dipped to $160 on
the Nasdaq drop I could not resist.


Since I started posting my disclosure notice at the bottom 
of the market wrap I have received many emails asking why I 
don't write about all of my trades. Volume! In the March
option cycle alone I made over 500 trades and had over 1300
fills. There is no way I could write about them all. 


Since I backed up the truck on the Thursday dip I am really
hoping for a continued rally next week. Of course we all
know what hope is worth. 


There will be no Jim's plays next Sunday. I will be at the
Denver seminar with many of our readers from all over the world.
I am going to be trading live each day and many of you will
get to see how these plays work out in real time plus I will
be adding plays based on what we teach and see during the 

Good Luck


Spring Advanced Seminar Series

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

Here are the spring dates: 

Mar 26/27 Dallas
Apr 2/3   San Francisco

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

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

Stock News

C.R. Bard: Not High-Tech, But Mid-Tech, Plus Dividends
By Matt Paolucci

In these days of extreme market volatility and uncertainty,
investors have become very short-term focused, which only
leads to more volatility. It's becoming more and more
difficult to find companies that one would be comfortable 
holding for the long-term, especially technology-related 
companies. Well, medical devices maker C.R. Bard (BCR) would 
may change your mind.

C.R. Bard has been around a while, 95 years to be exact. CEO
William Longfield describes Bard as a mid-tech company rather
than a high-tech company. They are truly a global company,
with almost a third of their business coming from outside of
the United States. Bard develops, manufactures and markets
health care products, including vascular, urological and
oncological diagnosis and intervention products, sold to
hospitals, health care professionals, and extended care and
alternate site facilities.

"One of the key things that differentiates Bard from many of
the other companies is that in over 70 percent of our product
lines we are the market leader. We're a uniquely positioned
company that is the leader in almost every business that it's
in," Longfield said.

The company seems to be on a run. Last week, one of the
company's subsidiaries, Davol Inc., received U.S. Food and
Drug Administration (FDA) approval to market its Avitene
Ultrafoam(TM) collagen sponge used to stop bleeding during
surgical procedures by accelerating blood clot formation. The
Ultrafoam product is the only collagen hemostatic sponge
approved for use in all surgical applications, including
neurosurgery, the surgical specialty using topical hemostats
most frequently.

According to IMS Health, Inc., a national marketing research
firm, more than 5 million hemostatic agents are used annually
in the United States. Good news for Bard.

And in January, Bard received U.S. FDA 510(k) approval to
market its Memotherm FLEXX biliary stent for treating
cancerous biliary obstructions. The stent and its associated
delivery system enable the device to negotiate difficult
anatomy and allows the stent to conform to acute bends in the
biliary duct. The biliary duct is a small duct that carries
bile (aids in the digestive process), which is secreted by the
liver, to the gall bladder.

The stent business is highly competitive, which includes such
companies as Guidant Corp. (GDT) and industry giant Medtronic

Bard's financials look very healthy, as the company has been
busy buying back shares and divesting non-core businesses. For
the year ending December 31, 1999, Bard reported fourth
quarter revenues of $270 million versus $269 million in the
prior year period. Diluted earnings per share was 64 cents
versus 48 cents, excluding one-time charges. Full year
revenues were $1.03 billion versus $1.16 billion, with
earnings per share of $2.28 versus $1.96, net of one-time
gains and charges.

Longfield stated, "We are just beginning to demonstrate the
financial strength that is a result of our strong market
positions. Our sales momentum continues to build, while our
gross profit margin increases and our SG&A expense decreases
as a percentage of sales. Our operating income rose to record
levels and, most importantly, the return on shareholder
investment was over 20 percent for the year 1999..."

Despite the good news, shares of BCR are down from their 
52-week high of $59, currently trading for $40, presenting 
a compelling buying opportunity. The company is highly
profitable, boasting net profit margins of almost 12 percent,
four times the industry average. Bard actually pays a
quarterly dividend, currently two percent, an complete anomaly
when considering most growth stocks pay no dividends. Bard's
balance sheet is in great shape, with almost $100 million in

Of the thirteen analysts surveyed by Zack's Investment
Research that follow shares of BCR, only eight have the stock
rated either a Strong Buy or Moderate Buy. With earnings per 
share of $2.28 for fiscal 1999, the stock trades at less than 
18 times earnings, and only 15 times fiscal 2000 estimates.


What A Difference A Week Makes
By Ryan Nelson

We went from indestructible to self-destruction in only 4 
trading days.  It seems like you only have micro-seconds to 
make your buying decisions now-a-days before you have missed 
the boat and an even less amount of time to pull the trigger 
to get out unless you want to get stuck holding the bag.  That 
is why I love the weekend.  A chance to step back to analyze 
just what is happening on Wall Street.  Some are calling this 
week's action on the Nasdaq just another buying opportunity, 
but I am a skeptic this time around.  I think the Nasdaq is 
ready to take a breather for at least a couple weeks ahead 
of earnings season, if not longer.  The great thing about this 
healthy bull market though is that money has not moved to the 
sidelines, just cycled to other sectors.  Still no one wants 
to miss the next big move, no matter where it occurs.  That 
is smart thinking too.  Whether it is the Nasdaq, the DJIA, 
Russell 2000, Japanese markets, Gold, Cyclicals, Europe, Oil, 
or the Transports.  Something is always on the go and it is 
up to us to figure out where.  

Before we jump into charts this week, I recommend you take a 
look at last week's article as we will build on what we talked 
about.  MRVC, for example, will also be a part of this article 
since it has drastically changed in just 5 days.  That is 
where we will start today.


MRV Communications - MRVC

We've played this thing a lot in OI, just not as a straight 
call play.  Probably because Jim and I never found the perfect 
entry point for that.
-last week's article

Can you say, Entry Point?  There it is.  A more than 50 percent 
retracement, volume picking up near the bottom to catch the 
fall and a nice candlestick tail.  Jim and I liked what we 
saw and it is now on the call list.  I just can't believe it 
happened so fast!  Oh well, instead of sitting around in awe 
of the move this week, we jumped on the entry point.  

You know I am somewhat skeptical of the Nasdaq right now, but 
when you get such a big drop like this one, you are usually 
good for at least a relief bounce.  Especially on a good 
company in a good sector.  Besides some of our other editors 
and analysts are bullish on the Nasdaq right now as we head 
to April earnings.  Either way, $132 is a lot better than the 
$184 of last Friday.  

Here is the chart this week showing some of the technical 
indicators we like to see in choosing an entry after a pullback.  
These rules apply to all stocks too, not just MRVC.



Coherent Technologies - COHR

Hi, I would greatly appreciate your inputs on COHERENT 
Regards, Subhashis

It's like you are reading my mind.  We almost played this 
as a call play two weeks ago, but just didn't feel real good 
about it so we passed.  We were afraid we might be catching 
the top.  In hindsight, it was a good call as we would have 
taken a beating on this one.  Right now, I have the same view 
of COHR that I have on almost all Nasdaq stocks...it's cheaper 
than it was last week.  

I wanted to show this chart to let you see why we passed on 
it before and what I think it may do in the short-term.  When 
we initially looked at it, COHR was just under $100 and had 
a made a run from $20 in early January.  That is a healthy move 
to say the least.  We find that $100 is typically a pretty 
strong psychological resistance level and, after that kind of 
a run, it takes an incredibly powerful momentum stock to go 
much higher.  Therefore we felt it needed to consolidate.  
Stocks don't go up in a straight line (unless your RMBS). (I 
can't believe I am saying that as RMBS used to be a sure 
thing for short players).

Anyway, COHR has pulled back to the 50-dma and bounced in a 
similar fashion to MRVC with a good candlestick tail, volume, 
and healthy retracement.  It is still stuck under the 10-dma 
though and I would like to see a close over that level before 
opening a position.  And volume continuing to increase. 

The main reason I think it may need more to time consolidate, 
along with the Nasdaq, is the lack of volume we saw in the 
rebound Friday.  Volume is the key to stock price movement in 
most cases and light volume on the rebound doesn't do it for 
me.  The Nasdaq posted incredibly low volume for a triple-
witching Friday.



Clorox - CLX

Ok, a man of few words, I like that.  We will analyze CLX as 
it comes at a time when scared and wounded Nasdaq investors 
are beginning to look elsewhere for investment opportunities.  
Clorox and other of the household stocks perked up this week 
after a brutal week before when P&G warned of earnings.  This 
hurt the entire sector as fears of higher material costs began 
to weigh on the group.  But where are investors expecting 
this sector to go?  It is already beaten to less than 50% 
of the 52-week highs, in most cases.  Could it be that this 
was the final capitulation event before a modest recovery?  
If so, I would like to capitalize on what has to be some 
incredibly low premiums in this tattered sector.  

I admit it.  I have been dabbling in some LEAPs on some stocks 
in this group.  There is always room for some diversification 
in your portfolio.  I don't own CLX, but when I look at the 
chart, I love the dead stop CLX had at $30.  I think you have 
a solid amount of buyers at this level.  CLX also broke above 
the 10-dma and out of a 2-month downtrend.  Now, we have to 
be careful here because CLX poked its head above the 10-dma 
once before in early March at $40, before succumbing to the 
weakness brought on by PG.  This may be a head-fake as well,   
but I don't think so though.  I think CLX was ready to rebound 
in early March before PG ruined things.  That gives us an even 
better entry point.  The problem here, as I see it, is that 
CLX will never be the big winner like some of the tech stocks 
we are becoming accustomed too.  This isn't necessarily bad, 
just keep in mind that it is a different kind of play.  It is 
a play based on solid entry points, low premiums, and calculated 
exit point decisions.  What I mean is, buy-low, sell-high and 
don't get greedy.  CLX is not going to bail you out of a bad 
play with a $15 up-move the day before expiration. 

We need to see a little more confirmation on the charts with 
the moving averages starting to round up, and a stair-stepping 
pattern of higher-lows to build a game plan on, but I wouldn't 
be surprised to see it happen.  Their products aren't going 
away anytime soon! 



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


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

Market Posture

As of Market Close - Friday, March 17, 2000 

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

DOW Industrials   10,000  11,500  10,595    Neutral   3.16   *
SPX S&P 500        1,400   1,475   1,464    Neutral   3.16   *
OEX S&P 100          760     800     787    Neutral   3.16   *
RUT Russell 2000     500     520     575    BULLISH   2.24
NDX NASD 100       3,800   4,000   4,440    BULLISH   2.24
MSH High Tech      1,650   2,000   2,191    BULLISH   2.24

XCI Hardware       1,300   1,460   1,624    BULLISH   2.24
CWX Software       1,200   1,470   1,408    BULLISH   2.24
SOX Semiconductor    800     900   1,254    BULLISH   2.24
NWX Networking       940   1,000   1,123    BULLISH   2.24
INX Internet         700     800     819    BULLISH   3.09

BIX Banking          500     600     549    Neutral   3.16   *
XBD Brokerage        400     450     527    BULLISH   2.31
IUX Insurance        500     600     515    Neutral   3.16   *

RLX Retail           900   1,000     924    Neutral   3.16   *
DRG Drug             340     380     345    Neutral   3.16   *
HCX Healthcare       700     750     701    Neutral   3.16   *
XAL Airline          110     140     133    Neutral   3.10
OIX Oil & Gas        240     300     276    Neutral   3.16   *

***Posture Alert***
The market rallied strong this week off an important support point 
at the 10,000 level.  Bond interest rates fell to their lowest 
level in six months after news of mild inflation set the stage for 
only a modest credit tightening by the Federal Reserve next week.  
Technology stocks regained their leadership role still up 18% on 
the year. Look for the blue chips to hold their gains next week.  
We remain bullish in the technology sectors and neutral across 
most other sectors. 

Market Sentiment 

A Preview of Great Expectations!

The year 2000 continues on its volatile way, with wild swings that 
would make you feel like you were at an amusement park. This trend 
will easily continue, and will probably get worse as more on-line 
investors try to day trade issues. The month of April starts the 
beginning of the major earnings run. However, the next two weeks 
starts the major negative pre-release season; in which companies, 
who are struggling, will let Wall Street know of their problems. 
This will be a time when we start seeing equities getting chopped 
in half, or dropping a large percentage off their current values. 
However, once we pass this cautionary time, we will be off to the 
start of another potentially successful earnings run.   

Below is a small list of equities (that should be reporting their 
earnings this next week) and our Pinnacle Index for those 
particular stocks. The Pinnacle Index is a proprietary product 
that determines current market sentiment and expectations for 
underlying equities and indexes, which is based upon speculation 
in the option markets. Also included are their expected earnings, 
the infamous whisper number (if available), and their estimated 
earnings release date. 

What we look for are liquid stocks/options that garner a lot of 
interest from the investment community. Most of the issues are 
high tech, and are thus more aggressive. We then filter out many 
of the equities, only to show stocks with excessive optimism or 
pessimism. From a contrarian standpoint (a high number is a good 
indication of extreme optimism, and a low number is a good 
indication of extreme pessimism) you should buy when its low, and 
sell when its high. Last quarter, we highlighted some stocks with 
a Pinnacle Index that were stratospheric (as high as the upper 
20's). Needless to say, these stocks had so much pent-up 
enthusiasm, that after their earnings, they tanked. It is the old 
adage, buy the rumor - sell the news. There were also numerous 
companies with a Pinnacle Index less than one. However, once 
these companies came out with their bad quarter, the stocks 
rallied due to the oversupply of pessimism.  

If your favorite stock is not listed, the most common reasons are: 
1) there are no options traded on the underlying equity 
2) lack of interest by option speculators in the security 
3) lack of quality information 
4) company already pre-released 
5) insufficient data. Also, as we get closer to the heart of 
earnings season, the list will expand dramatically to reflect 
companies whose earnings are due out shortly.

Company          Symbol  Pinnacle   Expected   Whisper#:  Estimated
                         Index(PI): Earnings:             Date*:

3Com             COMS      1.18       +.25       +.26       3/20
Tibex Software   TIBX      1.20       +.00       +.01       3/23
Liberate         LBRT      1.53       -.17       -.16       3/21
Micron Elect.    MUEI      4.80       +.04       +.05       3/20
Micron Tech      MU        0.99       +.83       +.92       3/20

So far, the Pinnacle Index for these companies due to report 
earnings is extremely low, with the exception of Micron 
Electronics. This is normally unusual, but given the recent 
sell-off in technology, we expected to see low numbers. The 
whisper number for Micron Technology is significantly higher 
than expected, so should they not beat this number, you may 
see downside pressure. If all of these companies beat their 
whispers handily, and have positive conference calls, we would 
expect to see rallies across the board. Have a good trading week.


Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of 
analyst expectations, with Oracle being the latest to blow away 

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 (6.106):
The current yield is now safely off of 52-week highs and is 
temporarily out of the danger zone.

Mixed Signs: 

Volatility Index (25.06):
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.





Pre-Release Season: 
With April just around the corner, we have the beginning of 
pre-release season. Over the next 3 to 4 weeks, companies will 
let Wall Street know that their profit/sales goals are not being 
met, and their stocks will get brutally punished. The first major 
corporation to do just this is Proctor & Gamble, with it's 27 
point decline.

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

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

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

Pinnacle Index OEX               Friday
Benchmark                        (3/17)

Overhead Resistance (790-820)    17.94                
Overhead Resistance (765-785)     7.16                  

OEX Close                       786.74              

Underlying Support  (740-760)     0.75                   
Underlying Support  (700-735)     4.27                     

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

Put/Call Ratio 
Strike/Contracts                (3/17)

CBOE Total P/C Ratio             .41        
CBOE Equity P/C Ratio            .35        
OEX P/C Ratio                   1.11       

Peak Open Interest (OEX)
Strike/Contracts     (3/17)

Puts               720 /  7,621           
Calls              750 /  3,820       
Put/Call Ratio         1.98            

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                          23.06



For the week of March 20th, 2000


Treasury Budget          Feb    Forecast:-$40.0B  Previous: $62.2B


Trade Balance            Jan    Forecast:-$26.5B  Previous:-$25.5B
FOMC Meeting


None Scheduled


Initial Claims           02/18  Forecast: 270 K   Previous: 262 K
FOMC Minutes             


Durable Orders           Feb    Forecast: Unch.   Previous: -1.3%

Week of 3/27

03/27 Existing Home Sales
03/28 Consumer Confidence
03/29 New Home Sales
03/30 GDP-Final
03/30 GDP Chain Deflator
03/30 Initial Claims
03/30 Help-Wanted Index
03/31 Personal Income
03/31 PCE
03/31 Chicago PMI
03/31 Factory Orders
03/31 Michigan Sentiment

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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter              3-19-2000
Sunday                        2 of 5


Liquidity Is Key
By Mary Redmond

We know now that one of the major technical indicators to watch is
liquidity.  For long term investors, the price of the stock will
eventually equal the value of the company, but for day by day or
month by month traders, the liquidity of the market is one of the
primary driving factors.  

Liquidity generally refers to money flows to various stocks or
sectors of the market.  The main one I watch for is cash flows 
to equity mutual finds.  A recent study at the University of Penn.
showed a 99% correlation between cash flows to mutual funds and 
the daily movement of the market. If you look at the flows over 
the past 6 months you can understand some of the movement we are
seeing now. 

You can see the cash flows to equity and bond funds on the web
sites of the investment company institute, ici.org, or several
other web sites which track flows.  Let's take a look at the last
six months and you can see the correlation with movement in the

In Sept of 1999, new cash flows to equity funds equaled 9.38 
billion.  Aggressive growth funds took in $2.04 billion.  This was 
only up slightly from August and the Dow dropped about 5% while 
the NASDAQ stayed in the 2700 range.  

In Oct of 1999 new cash flows rose to $20.4 billion.  Hybrid funds
took in $8.6 billion, foreign funds took in $4.42 billion, and 
aggressive growth took in 5.56 billion.  The Dow rose from 10,000
to approximately 10,700 and the NASDAQ started picking up speed 
and rose to 3000.

In November of 1999, new cash flows totaled $19.11 billion, with 
aggressive growth taking in $8.48 billion.  Is it any surprise 
that the NASDAQ rose from 3000 to 3500?  The Dow also participated
rising from 10,700 to over 11,000.

In December of 1999, the money kept coming as $24.26 billion came
into equity funds and aggressive growth funds took in $11.5 
billion of the total.  The Dow rose from 11,000 to 11,500 and the
NASDAQ hit 4000.

January of 2000 was the highest month on record with new cash 
totaling $39.98 billion.  Here's the key:  aggressive growth,
growth, and sector funds took in all the money with a total of
$40.48 billion, compared to $26.87 billion the prior month.
Practically no money went into blue chip value funds.  This
was when the Dow started deteriorating, from 11500 to under 
10,800.  The NASDAQ rallied, rising to 4500.  

In February the fund flows were strong, but again it was all
put into aggressive growth and technology funds.  Witness further
deterioration of the Dow.  Slowly, investors started to redeem
their value funds as they lost money.  Value funds actually
showed a net outflow of cash in February.  Meanwhile, tech 
funds took in close to $10 billion, with the average of $2.5
billion per week.  The NASDAQ hit 5000 and the Dow dropped to
below 10,000. 

As far as March is concerned, it appears to be coming in like
a lion.  For the week ending March 8, $5.4 billion went into
funds, and it all went into aggressive growth, small cap,
health care and tech.  For the week ending March 15, AMG Data
Services reported that $5 billion went into US Equity funds,
with $2.4 billion going into technology, $2.6 billion going into
aggressive growth, and the rest going into small cap.  This
is indicative that investors still have a strong interest in
the NASDAQ and tech stocks.  	

Will the trend of this week continue?  I don't think that 
investors have lost their interest in technology growth funds
after just one week of some loses.  Since some premier tech
stocks have earnings growth in the range of 100% annually, 
I think the NASDAQ will continue to have higher percentage
gains than the Dow.  However, it is a very good indicator 
to have a broadening market.

I started the week with only two open options positions, my 
Nextlink spread and Qwest Jan 55 calls.  The Nextlink spread was 
an example of a smiling skew spread, as the implied volatility 
for the 110 calls was higher than the implied volatility for the 
100 calls.  Essentially, this means that more people were buying 
the 110 calls because they are cheaper.  NXLK actually hit $100 
Thursday when the NASDAQ was at a low point but it bounced back 
up again.  Nextlink stock has a volatility of over 80% which can 
also make it a good candidate for covered call writing.

I also bought back in to CMGI at $120 because their Alta Vista
IPO is scheduled to come out in April which may give CMGI a big 
boost.  It is expected to be a major IPO, raising over $2 billion 
dollars, and CMGI is a majority shareholder.

I had made so much money on the Qwest leaps I had bought 
previously that I bought back in again last week.  Investors seem 
to be getting bored with this stock since the Deutsche Telecom 
talks have been suspended, so I decided to write 60 calls against 
my 55 leaps.  The April 60 calls were $1.38, which lowered the 
purchase price of the 55 leaps.  Eventually, if this strategy 
works out, the 55 leaps will be paid for. 

I am also considering buying two year leaps on Excite At Home.  
It is one of the few internet stocks which has decreased 
significantly in price over the last twelve months, which means 
the leaps are at bargain basement prices.  The market is valuing 
Excite At Home as if they were going under.  The price over 
book value is only about 1.5, meaning that they are trading right
around book value.  Short interest is 21%, so if shorts ever have 
to run for cover we could see a move like the Dow had on Thursday. 
They have experienced some loss of investor interest this year for 
a number of reasons.  Yet, their revenue growth rate for the nine
months ending September '99 was over 700% annually.  This might 
be a good long term play.


A Country New: Calendar Spreads
By Janar Wasito

I have decided to take an extended break from day-to-day, short 
term trading, and move into calendar spreads.  So this will be 
my last article for a few weeks.  In the future, I will cut back 
to perhaps two articles a month.  My reasons are partly personal:
finishing up a graduate school program, and getting ready for 
professional exams. And my reasons are partly due to portfolio 
management and my estimate of the market. This week has shown us 
record up days on the DOW and record down days on the NASDAQ. 
I think that we are probably in for more of the same general
volatility. For the last few years, November to April have been 
very positive periods for the market, but late April through 
October have been much rougher, to say the least. I started 
trading options actively a little over a year ago, and I had 
huge portfolio swings, particularly through the latter period.

The Marines have a term for operational execution called "recon 
pull."  The idea is that the reconnaissance effort determines 
where the main part of the force goes. Sun Tzu had this idea 
thousands of years ago--an army flows down the hill like water, 
avoiding the highlands, and clinging to the lowlands.  I am 
applying the same principle in a way.  Over the last 2 months, 
I have tested just about every trading strategy, and I am going
with the one that has given me the best results--calendar spreads.
I am going in big, with the bulk of what I made in some bullish 
trades at the end of 1999.  Though I risk buying a short term top, 
I think the LEAPs that I buy will be up, on average, by this time 
next year.

The basic idea is to buy a Long Term option and to write/sell 
short term (30 day or less) calls against it.  The rules of thumb 
are that you buy a LEAP with half intrinsic and half time 
premium.  This ensures that there is a high delta, thus, the 
LEAP generally moves in step with the stock.  In my version of 
the strategy, I will be selling front month calls at a strike 
price about 10% above the current level of the stock when there 
are about 10 - 12 days left (taking into account factors such as
market, sector, and stock oversold/overbought conditions, as I 
have detailed in previous articles).  I want to capture maximum
disparity between the time decay of the current month options 
and the time decay of the long term option.  Each month, at 
expiration, I plan to record the following values:

-- total value of the LT Options
-- cash flow from selling the ST Options
-- increase in value of the LT Options

After expiration today, I calculated the first two values and 
found that the present cash flow from the 10 day short calls 
I wrote amounted to 9.4% of the value of the LEAPs, and I have 
20 more months on those LEAPs.  Of course, this was aided by an 
almost picture perfect scenario in this trading cycle--the 
stocks tended to peak about 10 days before expiration, making for 
good entry points into the short calls.  In other cycles, the 
stocks will continue to go up, in which case I will make less 
from the short calls, but more from the gains in the LEAPs.  You 
do the math: at that rate, I can pay for the LEAP twice over 
by the time it expires in January, 2002.  Think of the LT Options 
as productive assets--the factory, property, and equipment of 
your portfolio, consider it a business.  They will go up and down 
in value.  

The cash flow from the ST Options should be reinvested in PP&E, 
which in turn throws off more present cash flow.  If the stock 
goes up to the strike price of the option you have sold, buy it 
back on the day before expiration;  the increase in value of the 
LT Option should offset the loss, if any.  The LT Options may go 
down in value in any given month or two;  over time, if you chose 
your stocks well, they should go up.  The secret ingredient of 
stock selection for this strategy--besides being a gorilla in a 
rapidly expanding market--is splits.  They provide more LEAPs and 
allow you to sell more ST Options each month.  I figure that I 
can execute this strategy by trading on three days a month:  
expiration (buying back ST Options, if necessary), the Monday 
after expiration (buying new LT Options), and the Monday two weeks
before expiration (selling ST Options).  This strategy will not 
give me the returns that making the right daily decisions on 
straight calls or naked puts would, but for the time invested, 
the average returns should be very good.  Depending on where I 
stand in 6 months, I may go back to some more short term 
strategies to take advantage of seasonally strong trading 

It's been a pleasure joining the OI Team and writing actively as 
I have done for the last 6 months.  I've learned more through 
the experience than I thought possible;  I have greater financial 
alternatives than I did last year, and I have Jim and the other 
writers to thank for a very useful newsletter.  As long as my 
calendar spreads throw off enough cash for the occasional ticket 
to the West Coast of Ireland, and a round of Guinness for the 
lads, I'll be a happy man in the world.  Follow the advice of 
Rudyard Kipling and treat triumph and disaster just the same.

"And so, princes, Kent bids you all adieu. He'll chart his old 
course in a country new"

Contact Support


"Skews, Ranges, and Probabilities" 
By Lee Lowell

Let's finish off our subject of volatility "skew".  For anyone 
just recently joining us, you can look at our past discussions 
on the OI website under the "Options 101" section.  To recap, 
volatility "skew" is a characteristic of options where the 
implied volatility level is different for each option in the 
chain.  Instead of all options trading at the same volatility 
(flat skew), each option has its own unique implied volatility 
which can be either higher or lower than its neighbor option. 
This is called a volatility "skew" and it can take several 
different shapes. 

I want to discuss another strategy that takes advantage of the 
skew effect.  It is the type of skew in which the OTM calls get
increasingly cheaper on an implied volatility basis.  We'll use 
the backspread as an example.  In a backspread, the trader will 
sell an ITM call and buy two or more ATM or slightly OTM calls 
for a credit in the account.  The backspread can be used after a 
stock has a pullback, but the trader is still bullish over the 
longer term.  But if for some reason your prediction is wrong and 
the stock goes down, you still have the initial credit to soften 
the blow.  Assume the scenario:  IBM is trading at $100/share. 
The June $70 call is trading at $35 with an implied volatility 
of 45% and the June $100 call is trading at $10 with an implied 
volatility of 40%.  Let's sell 1 June $70 call and buy 2 June 
$100 calls for an initial credit of $15.  This gives us unlimited 
profit potential if IBM moves above our breakeven point of $115 
because we'll be longer 1 extra call option. 

Now if these call options had a flat skew, our profit picture 
would look a little different.  We'll keep the $70 call as is, 
but move the $100 call's implied volatility to the same level as 
the $70 call.  Now we have a flat skew where both options are 
trading at 45%.  The $70 call is still worth $35 but now the 
$100 call is worth $13.  If we initiate the same backspread, 
we'll start out with a credit of only $9 this time and our 
breakeven has moved up to $121.  You can see how volatility skew
can change your profit/loss scenarios.  Like I've said previously, 
if you buy an option with lower implied volatility than the 
option you're selling, you start off with an advantage.

Basically, whenever you put on any options strategy, whether it 
is an outright buy or sell of a single call or put, or any 
complicated spread, just make sure you have an idea of what the
volatility level is or what the skew looks like.  Knowing your
volatility levels and skews ensures you of starting with an 
advantage or disadvantage for your option position.

Not only can implied volatility give us an idea of whether 
options are relatively cheap or expensive according to past 
levels, but it can also act as a predictor of possible future 
movement of the underlying.  When you're trying to figure out 
the probability of profit of your option position, it is the 
implied volatility that can help.  Let's use IBM again. IBM is 
at $100/share on March 1.  You want to sell credit spreads to 
bring in some extra income to your account, but you need to 
have an idea of what range IBM might trade in over the next six 
months.  Is there a way to figure that out?  Yes.

Remember what implied volatility really represents?  It's the 
market's best guess of the future movement of the underlying 
stock until expiration day.  If IBM has a 35% implied volatility, 
that means that IBM should be trading in a range of +/- 35% from 
its stock price today over the next year.  Well what if we want to 
find out what the range of IBM might be over the next 6 months, 6 
weeks, 6 days, etc.  Here's a formula for figuring that out.  The 
implied volatility of 35% helps us figure out a 1 standard 
deviation move for IBM.  This will give us a range for IBM that 
is 67% accurate. Here's what the formula looks like:

1 STD move = (IV) x (Underlying Price) x (Square root of DTE/ 365)

Let's put in some numbers:

IBM = $100

IV (implied volatility) = 35%

DTE (days to exp.) = 180

365 = days in a year

STD (standard deviation)

1 STD = (35%) x ($100) x (Square root of 180/365)

1 STD = (.35) x ($100) x (.70)

1 STD = 24.5 (approx.)

Our result tells us that over the next 6 months, IBM should trade 
in a range of $75.50 - $124.50 with a 67% success rate.  If we 
wanted to be sure with a 95% accuracy rate, then we just double 
the range to +/- 49 points.  So if you were going to sell put or 
call credit spreads on IBM, use the 2 STD calculation to give 
yourself more margin for error.  Now you know you should sell 
the $150 calls or the $50 puts as the short leg of your spread.  
This way you are 95% sure that IBM won't trade through your short
option.  Check your options chains to see if these strikes have 
enough premium to sell because they are quite a bit OTM.  I would
suggest not selling any spreads for less than $0.75. It's just 
not worth it for that little amount.  There's always an exception 
though.  Just remember there's a 5% chance that IBM will go beyond 
the ranges we just figured out.  And you must be aware of the 
changing implied volatility of IBM.  You should probably 
re-calculate your ranges once a week to make sure your still
comfortable with the spread.  Always be prepared for the 

Now don't just go out and haphazardly sell any credit spreads on 
any stock.  You still need to take into consideration the relative 
level of volatility.  Try to sell credit spreads when the stock's 
volatility is in its high end of the historical range.  And look 
at the price trend of the stock too.  If the stock is in an 
uptrend, you'll be better off selling put credit spreads.  If the 
stock is in a downtrend, you should look to sell call credit 
spreads.  If the stock is in a trading range, then you could sell 
put and call credit spreads at the same time on the same stock 
using the same month's expiration.

Let's do one more example with the following data:

EBAY = $150

DTE = 35

IV = 75%

1 STD = (.75) x ($150) x (sq. root 35/365)

1 STD = (112.5) x (.31)

1 STD = 35 points

EBAY should trade in a range of $115-$185 over the next 35 days 
with a 67% accuracy or $80-$220 with a 95% accuracy.  So set 
your spreads accordingly. 

So we've figured out our probabilities if we're selling the 
options. What about if we buy an option?  What's our probability 
of the option being ITM by expiration?  That's where the delta 
of the option comes into play.  The delta of an option can tell 
us a few different things. 

One, the probability of our option finishing ITM by expiration 
day.  If you buy a call option with a .75 delta, this is telling 
you that the option has a 75% chance of being ITM by expiration.  
A delta of .25 indicates a 25% chance of our option finishing 
ITM.  This doesn't mean that you will make money on your option 
even though it might be ITM by expiration.  If you bought an IBM 
$130 call at $10 and IBM closes at $132 on expiration day, you 
will have lost $8 on your trade even though your option finished 
ITM.  You really want your option to finish ITM by more than what 
your option cost you.  In order for your $130 call to be 
profitable, you need IBM to close above $140 by expiration. 

The delta also tells us the rate of change in the option price 
compared to the movement of the underlying.  If your call option 
has a .75 delta, this means that for every $1 move in the 
underlying (up or down), your option price should increase or 
decrease by $.75.  The last way to use the delta really affects 
floor traders more than anyone else.  The delta number will tell 
you how many shares of stock to completely hedge against your 
option position.  If you buy 100 call options with a .75 delta, 
this is equivalent to being long 7500 shares of stock.  So you 
would need to sell 7500 shares of stock to be completely delta 
neutral. This really applies to floor traders who deal in large 
quantity of stock and options.  They do this sort of hedging 
activities to lock in price discrepancies of the options.  They 
will buy or sell large quantities of the options and then 
immediately offset their risk by simultaneously buying or 
selling the underlying security in the amount indicated by 
the delta.

That pretty much sums up what volatility skew is all about.  
We've also seen how to figure out the probable range of a stock 
over a certain amount of time, and the probability of an option
position finishing ITM by expiration.  As Forrest Gump once 
said, "That's all I have to say about that".

Good luck,
Lee Lowell 

Contact Support


Sunday, March 19, 2000


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Concerning Spread ROI's:


How do you calculate the ROI's for basic spread positions?


Return on investment (ROI) is simply the amount returned against 
the amount invested.  In any play, you invest a certain amount 
and when you close the position (sell out or buy back) or it 
expires, you have gained or lost a specific dollar amount. That 
amount divided into what you invested is your return or ROI. In 
a debit spread, the maximum ROI is simply the maximum credit 
divided by the initial debit.  There is no margin requirement 
for a debit position (you can not lose more than you invest).

In the case of BCMS:

PLAY (speculative - bullish/debit spread):

BUY  CALL APR-35 BCQ-DG OI=6   A=$17.25
SELL CALL APR-45 BCQ-DI OI=845 B=$8.75

Initial debit = $8.25 (actually we only managed to achieve $8.50)
Maximum possible credit = $1.75
$1.75/$8.25 = 21% - nothing more, nothing less...you factor in 
the commissions based on the number of contracts.

With credit spreads the ROI is similar, only the amount invested 
is the COLLATERAL required.  If I spend (or collateralize) 
$4/contract and I receive $1/contract, I have earned $1 on $4 
invested, per contract...thus an ROI of 25%. Credit spread 
collateral is a simple formula:

The difference between the strikes minus the initial credit 
received, times the number of contracts. It's also the maximum 
amount of loss (obviously).

In the case of the recent CMGI play:

PLAY (aggressive - bullish/credit spread):

BUY  PUT MAR-115 GCD-OC OI=1825 A=$2.31
SELL PUT MAR-120 GCD-OD OI=2531 B=$3.00

If you achieve $0.75 initial credit then...$5 - $0.75 = $4.25

Your broker will need $425.00 for every contract opened in this
play...that's the absolute maximum loss (at expiration).

The ROI is simply $0.75 / $4.25 = 17.6% 
(again, commissions not included)

As far as other combination strategies and ROI calculations:  
Diagonal spreads are initially like debit spreads but they must 
be re-calculated as adjustments are made;  Calendar spreads and 
Covered-calls with LEAPS require a more complex approach (far too 
extensive to explain in this forum) but the information is 
available in a number of popular books including "McMillan on 
Options" and "Option Volatility & Pricing; Advanced Trading 
Strategies and Techniques" by Sheldon Natenberg.

Good Luck!


Concerning Naked-Put ROI's:

Dear OIN:

How do you calculate your monthly return on naked puts? 
For example:

ORCL  $83.12

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  MAR 67   ORY OU  1905      0.88    66.12    16.5%
Sell Put  MAR 70   ORY ON  7139      1.31    68.69    20.7% ***
Sell Put  MAR 72   ORY OV  1525      1.75    70.25    24.8%


The return on investment (ROI) is based on the equity required to 
be in your account to start the play and would equal the premium 
received divided by the equity requirement.

The equity requirement would be the greater of the following: 
(based on E*trade and other common E-brokers)

  (0.40 * Price Picked + Premium - ( Price Picked - Strike Price))
  (0.20 * Price Picked + Premium) which will take precedence as 
   you go deeper out-of-the-money.

Using ORCL as an example:

Price Picked $83.12
Strike = 70
Premium received = $1.31
20% equity requiremt.(per shr) = 0.2 * 83.12 + 1.31 = 17.94
40% equity requiremt.(per shr) = 0.4 * 83.12 + 1.31 - (83.12 - 70) 
				       = 21.44
The equity requirement = 21.44
ROI = 1.31 / 21.44 = 6.1% after multiplying by 100

I calculate a monthly return by dividing the ROI by the number of 
days left to expiration to get a daily ROI.  I then multiply by 
365 and divide by 12.

Number of days left to expiration = 9
Monthly Return = 6.1 / 9 * 365 / 12 = 20.6%

Good Luck!


Daily Results

Index      Last    Week
Dow     10595.23  666.41
Nasdaq   4798.13 -250.49
$OEX      786.74   37.24
$SPX     1464.47   69.40
$RUT      574.77  -29.04
$TRAN    2623.83  258.54
$VIX       23.67   -0.13

Calls              Week

INTC      129.88    9.69  New, sights set on new highs
AOL        64.38    5.63  New, things are looking up
DELL       56.44    5.19  Future looks bright w/plenty of upgrades
SEG        68.75    4.50  New, on a tear, up 40% in last month
SNE       248.06    4.31  Dropped, time to find new toys
BMCS       55.06    3.13  New, possible upside pre-announcement 
RATL       88.50    1.56  New, shows support at $84
BGEN       84.88    0.81  "Unfairly beat up" equals good value
CSCO      135.00   -1.38  Only three days left to play this split
NITE       51.75   -1.70  Markets posting large aggregate volumes
EXDS      151.25   -5.75  New, move past 10-dma confirms uptrend
YHOO      171.13   -6.94  A pure and simple earnings play!
BWEB       49.25   -8.75  Orderly decline with no panic mentality
HWP       138.00   -8.94  Undervalued & looks to be headed higher
IDPH      118.94  -10.38  "Shell shock" selling provide good entry
NOK       199.88  -18.00  March 22nd vote for 4:1 split
TIBX      119.63  -18.56  Only four days until earnings
SCMR      144.50  -25.50  New, valuation reflects opportunity
FDRY      169.25  -31.94  Dropped, pullback got out of hand
NTAP      200.75  -41.00  Dropped, split run play took nasty turn
CHKP      235.50  -44.38  "Support and bounced," convinced?
MRVC      132.88  -51.63  New, can you say oversold?
VERT      220.63  -52.56  Live by momentum, die by it 
VIGN      236.25  -60.75  Finally found support at $233


TERN      188.56  -77.94  New, heading south fast
ISLD       82.63  -25.88  New, downhill slide since early March
CIEN      142.63  -20.26  Dropped, no more bungee-trading for us
CKFR       70.19  -18.44  New, sickly technicals makes good put
BVF        50.63   -2.63  Dropped, "See you in September" or not
EK         57.44    3.44  Continues to bounce



SCMR - Sycamore Networks 
RATL - Rational Software Corp. 
INTC - Intel Corporation 
BMCS - BMC Software Inc. 
SEG  - Seagate Technology, Inc. 
EXDS - Exodus Communications, Inc. 
MRVC - MRV Communications Inc. 
AOL  - America Online Inc. 


ISLD - Digital Island 
CKFR - Checkfree Holdings Corporation 
TERN - Terayon Communication Systems 


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


SNE $248.06 (+4.31) Similar to a child 2 days after getting a
new toy, SNE investors seem to have lost interest in the issue,
now that all the news is out.  Sure, rumors of a recall have
been dispensed with, but news on Friday of yet another glitch
in the company's new PlayStation2 have left investors a little
gun-shy.  The stock has been unable to hold support at $250 and
doesn't look to have a lot of juice to push it higher.  Until
all the news is digested, SNE will likely meander around its
current level, so we'll put it away and search for other toys
to play with.

NTAP $200.75 (-36.13) Our split run play in NTAP took a nasty
turn this week, as traders sold tech stocks like there was no
tomorrow.  The networking company lost about 32% in the process,
but did manage to gain back about half of its losses.  Although
intraday charts are pointing higher, NTAP closed against the
resistance level at $200 on Friday.  NTAP will split its stock
2-for-1 Wednesday after the close, and could have a little more
room to go.  For those with positions in NTAP, that want to hang
on for a last minute surge, we would view the area near $188 as
a point to fold.  We are dropping NTAP this weekend as time is
running out.  NTAP did provide us with a good run earlier, but
we will look elsewhere as the recent pullback in tech issues
is providing us with better opportunities at this time. 

FDRY $169.25 (-31.94) Whoa!  This pullback thing got a little out 
of hand.  Our concerns with the lack of buyers on Thursday's 
rebound, and to a lesser degree March 25th's lockup expiration, 
are proving to be well founded.  Against the grain of Friday's 
NASDAQ market, FDRY actually shed over $5 and bounced south of 
both its 5-dma of $176.10 and 10-dma of $178.80.  We don't 
recommend taking new positions at this level.  Perhaps after the 
consolidation firms and the lockup selling runs its course, we 
can revisit the issue.  But for now, it's time to cast FDRY in 
the slag heap.


CIEN $142.63 (-20.25) Short and sweet was our play on CIEN. 
The recovering NASDAQ combined with solid support at $115 was
all it took for the stock to reverse directions.  The bungee-
trading on Thursday looks to have created a near-term bottom
for the stock and the move higher has been confirmed by healthy
volume.  The increase in the number of authorized shares was
approved at Thursday's shareholder meeting, so a split
announcement could be waiting in the wings.  Friday's good
move, puts CIEN solidly above its 30-dma ($129.65), and support
at $134.  CIEN looks like it may have further upside in store,
and with the ground level rising, we'll take our bungee cords
and go home before we get hurt.

BVF $50.63 (+0.38) Bye-bye, so-long, farewell is how the lyrics
begin the song "See you in September".  Well, we don't know if
it will be September or not, but we are saying farewell to BVF.
BVF did give us quick drop early in the week, but it wasn't much
and you would have had to be quick to pull the trigger as well.
Actually after bouncing off the $46-47 area for most of the week
BVF seems to be putting in a bottom.  Fundamentally things 
haven't changed much in the last few days, but investors have
been willing to step in at these levels and began to slowly
bid the price back up.  Is this the bottom?  We don't know,
but BVF has had every chance to continue lower, only to find
buyers waiting in the wings.  The volume did pick up Friday,
so we believe its time to say so-long to this one.


Current Split Candidates
TIBX - Tibco Software
INTC - Intel Corp
CHKP - CheckPoint Software
Split candidates that are not current plays
EMC  - EMC Corp
PHCM - Phone.com
FDRY - Foundry Networks
EBAY - EBay Inc.


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

Symbol - Stock          Splits/Date  
TLGD - Tollgrade Comm   2:1 03-20-00 ex-date 03-21
IMNX - Immunex Corp     3:1 03-20-00 ex-date 03-21
EVRC - Evercel Inc      2:1 03-21-00 ex-date 03-22
TTPA - Trintech Group   2:1 03-22-00 ex-date 03-23
DISH - EchoStar Comm    3:1 03-22-00 ex-date 03-23
PUMA - Puma Tech Inc    2:1 03-22-00 ex-date 03-23
SANM - Sanmina          2:1 03-22-00 ex-date 03-23
CSCO - Cisco            2:1 03-22-00 ex-date 03-23
WON  - Westwood One     2:1 03-22-00 ex-date 03-23
NTAP - Network Appliance2:1 03-22-00 ex-date 03-23
AMCC - Applied Micro    2:1 03-23-00 ex-date 03-24
BWAY - Breakaway        2:1 03-23-00 ex-date 03-24
NSOL - Network Solution 2:1 03-23-00 ex-date 03-24
LDP  - London Pacific   4:1 03-24-00 ex-date 03-27
ARTG - Art Technology   2:1 03-24-00 ex-date 03-27
TEVA - Teva Pharma      2:1 03-24-00 ex-date 03-27
PCLE - Pinnacle Systems 2:1 03-24-00 ex-date 03-27
HAUP - Hauppauge Digitl 2:1 03-24-00 ex-date 03-27
JWG  - JWGenesis        3:2 03-24-00 ex-date 03-27
KCP  - Kenneth Cole     3:2 03-27-00 ex-date 03-28 
LLTC - Linear Tech      2:1 03-27-00 ex-date 03-28
IQIQ - ViaLink          2:1 03-27-00 ex-date 03-28
SMTL - Semitool Inc     2:1 03-28-00 ex-date 03-29
USIX - USinterworking   3:2 03-28-00 ex-date 03-29
SRNA - SERENA Software  3:2 03-29-00 ex-date 03-30
JBL  - Jabil Circuit    2:1 03-30-00 ex-date 03-31
CRGN - CuraGen Corp     2:1 03-30-00 ex-date 03-31
COVD - Covad Comm       3:2 03-31-00 ex-date 04-03
QSFT - Quest Software   2:1 03-31-00 ex-date 04-03
ARBA - Ariba            2:1 03-31-00 ex-date 04-03
VERT - VerticalNet      2:1 03-31-00 ex-date 04-03
RADS - Radiant Systems  3:2 03-31-00 ex-date 04-03
RMD  - ResMed Inc       2:1 03-31-00 ex-date 04-03
CMVT - Comverse Tech    2:1 04-03-00 ex-date 04-04
ENGA - Engage Tech      2:1 04-03-00 ex-date 04-04
ASGN - On Assignment    2:1 04-03-00 ex-date 04-04
RDBK - Redback Networks 2:1 04-03-00 ex-date 04-04   
ADRX - AndrxCorp        2:1 04-03-00 ex-date 04-04
GRDN - Guardian Tech    2:1 04-03-00 ex-date 04-04
NYFX - NYFIX Inc        3:2 04-04-00 ex-date 04-05
CTCI - CT Comm          2:1 04-05-00 ex-date 04-06
VITR - Vitria Tech      2:1 04-05-00 ex-date 04-06
NAVI - NaviSite         2:1 04-05-00 ex-date 04-06
UTCI - Uniroyal Tech    2:1 04-05-00 ex-date 04-06
SBL  - Symbol Tech      3:2 04-05-00 ex-date 04-06
ABGX - Abgenix          2:1 04-06-00 ex-date 04-07
PWR  - Quanta Services  3:2 04-07-00 ex-date 04-10
LINK - Interlink Elec   3:2 04-07-00 ex-date 04-10
WDR  - Waddell & Reed   3:2 04-07-00 ex-date 04-10
HDI  - Harley Davidson  2:1 04-07-00 ex-date 04-10
DLK  - Datalink.net     2:1 04-10-00 ex-date 04-11
CELG - Celgene Corp     3:1 04-11-00 ex-date 04-12
MKTY - Mechanical Tech  3:1 04-12-00 ex-date 04-13
FNSR - Finisar Corp     3:1 04-12-00 ex-date 04-13
VIGN - Vignette Corp    3:1 04-13-00 ex-date 04-14
MFNX - Metromedia Fiber 2:1 04-17-00 ex-date 04-18
MLNM - Millenium Pharm  2:1 04-18-00 ex-date 04-19
CMRC - Commerce One     2:1 04-19-00 ex-date 04-20
AHAA - Alpha Industries 2:1 04-19-00 ex=date 04-20
ELNT - Elantec Semi     2:1 04-21-00 ex-date 04-24
KSS  - Kohls Corp       2:1 04-24-00 ex-date 04-25
MCLD - McLeodUSA        3:1 04-24-00 ex-date 04-25
APH  - Amphenol Corp    2:1 04-25-00 ex-date 04-26
GE   - General Elec     3:1 04-26-00 shareholder mtg
CYSV - Cysive Inc       2:1 05-08-00 ex-date 05-09
AXP  - American Exprs   3:1 05-10-00 ex-date 05-11
ALKS - Alkermes         2:1 05-12-00 ex-date 05-15
SIVB - Silicon Valley   2:1 05-15-00 ex-date 05-16
SNE  - Sony Corp        2:1 05-19-00 ex-date 05-22
CXR  - Cox Radio        3:1 05-19-00 ex-date 05-22
AEG  - AEGON N.V.       2:1 05-30-00 ex-date 05-31
MOT  - Motorola         3:1 06-01-00 ex-date 06-02
MEDI - Medimmune        3:1 06-02-00 ex-date 06-05
NXTL - Nextel Comm      2:1 06-06-00 ex-date 06-07
ANEN - Anaren Micro     3:2 06-09-00 ex-date 06-12
AA   - Alcoa            2:1 06-09-00 ex-date 06-12
RMBS - Rambus           4:1 06-14-00 ex-date 06-15
NXLK - Nextlink         2:1 06-15-00 ex-date 06-16
EXDS - Exodus Comm      2:1 06-20-00 ex-date 06-21

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


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

Call plays of the day:

TIBX - Tibco Software $119.63 (-18.56)(+16.19)

See details in sector list

Chart = /charts.asp?symbol=TIBX


BMCS - BMC Software Inc. $55.06 (+3.13)

See details in sector list

Chart = /charts.asp?symbol=BMCS

Put play of the day:

CKFR - Checkfree Holdings Corporation $70.19 (-18.44)

See details in put list

Chart = /charts.asp?symbol=CKFR


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

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

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

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

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

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

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


SEG - Seagate Technology, Inc. $68.75 (+4.50)

Seagate is a leading provider of technologies and products
that enable people to store, access, and manage information.
Seagate is the world's largest manufacturer of disk drives.
The company sells its products mainly to manufacturers such
as Compaq.  Seagate continues to drive new solutions for the
enterprise and Internet markets, where the demand for storage
is ever increasing.  The company continues to expand through 
investment and acquisition.  Seagate owns about 128 mln shares
of the data storage giant Veritas, adding roughly $100 per 
share to the stock.

Looking for some value in the tech sector?  SEG is on a tear,
up 40% in the last month.  The stock has climbed higher on the
heels of a resurgent PC sector and an increased demand for data 
storage.  The investment in VRTS doesn't hurt either.  Many 
traders are buying SEG as a cheaper way to play VRTS.  Last week 
the stock was hit by some brutal profit-taking and overall sector 
weakness.  On Thursday, SEG muscled through the 5-dma, back above 
support.  Look for the stock to continue to bounce above support
on strong volume.  The wide intraday swings are providing great 
entry points.  A dip below the 5-day would be a good place to 
look for entry into this play.  Or on a breakout over resistance 
at the $72-$73 level.  

SEG is slated to report earnings on April 13th.  The company has 
blown away analyst estimates two quarters in a row.  An earnings 
run should begin sometime this week as traders anticipate more 
good news from SEG.

BUY CALL APR-65 SEG-DM OI=2229 at $ 9.88 SL=6.75
BUY CALL APR-70*SEG-DN OI=1955 at $ 7.88 SL=5.50
BUY CALL APR-75 SEG-DO OI= 677 at $ 5.88 SL=3.50
BUY CALL JUN-70 SEG-FN OI= 402 at $11.50 SL=8.50
BUY CALL JUN-75 SEG-FO OI=1449 at $ 9.75 SL=6.75

Picked on Mar 19th at  $68.75     P/E = 17
Change since picked     +0.00     52-week high=$73.75
Analysts Ratings    4-6-4-0-0     52-week low =$25.13
Last earnings 01/00  est=0.09     actual=0.14
Next earnings 04-13  est=0.13     versus=0.49
Average Daily Volume =  2.68 mln


INTC - Intel Corporation $129.88 (+9.69)

Intel Corporation designs, develops, manufactures and markets 
computer components and related products at various levels of 
integration. Intel's principal components consist of silicon-
based semiconductors etched with complex patterns of transistors. 
The Company's major products include microprocessors, chipsets, 
embedded processors and micro-controllers, flash memory products, 
graphics products, network and communications products, systems 
management software, conferencing products and digital imaging 
products.  Intel sells its products to original equipment 
manufacturers (OEMs) of computer systems and peripherals; PC 
users (including individuals, large and small businesses and 
Internet service providers) who buy Intel's PC enhancements, 
business communications products and networking products.

Take a look at a 3-month chart of INTC.  On January 31st, INTC
had an intraday low of $92.88.  And that's the last INTC saw of
those levels.  From there, it's been a steady and strong climb
to it's current level of $129.88, which is a new 52-week high.
Notice that it traded off its 10-dma for most of this uptrend, 
and when it violated the 10-dma, it was for a brief moment.  In 
one case, the 30-dma provided a bounce.  It has been an impressive 
run and it appears to be getting better.  Throughout this volatile
trading week, INTC volume remained strong and it held smartly 
as the NASDAQ withered and revived.  During the major NASDAQ
sell-off on Wednesday, INTC did not break.  And on Thursday, 
INTC found good support at $120.  With a little luck from the
Irish on Friday, INTC established intraday support around the 
$127.75-$128 level.  INTC got a little help from its friends as
well.  In the news, CS First Boston reiterated a Strong Buy for
INTC and repeated its 12-month price target of $150.  Robbie
Stephens came out and upgraded INTC from a Buy to a Strong Buy.
Also, INTC acquired Denmark's GIGA A/S, a manufacturer of network 
components, such as high speed communication chips used in 
optical networking and in directing internet traffic.  According
to a company press release, there is "explosive internet growth
behind the GIGA buy."  So the technicals are strong and the 
news is good.   

Next week should be an interesting one as we watch INTC closely.
Support is at $128-$127.75 and below that, $125.  Resistance will
be psychological as INTC attempts new highs.  Keep these levels
in mind when looking for entry points.  Word on the Street is 
that INTC is having a stellar quarter and may pre-announce that
it will exceed earnings estimates.  Maybe that's why these 
brokers have been talking this past week.  We'll have to see.

BUY CALL APR-130*INQ-DF OI=11867 at $8.00 SL=6.00
BUY CALL APR-135 INQ-DG OI= 6273 at $5.75 SL=4.00
BUY CALL APR-140 INQ-DH OI= 4195 at $4.00 SL=2.50
BUY CALL JUL-150 INQ-GJ OI= 2545 at $7.75 SL=5.75

Picked on Mar 19th at    $129.88   P/E = 62
Change since picked        +0.00   52-week high=$129.88
Analysts Ratings     20-12-6-0-0   52-week low =$ 50.13
Last earnings 01/00    est= 0.63   actual= 0.69
Next earnings 04-12    est= 0.68   versus= 0.57
Average Daily Volume = 26.03 mln


DELL - Dell Computer $56.44 (+5.19)(+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.

DELL's future looks bright with the previous week's upgrades 
and upward revisions of price targets driving the stock price.  
The strengthening sector, signs that corporate customers are 
interested in purchasing more PCs, and recent news that Dell 
will introduce a new line of servers to offset any slowing in 
overall PC sales were the pertinent factors that initiated 
DELL's recent revival (see last Sunday's write-up for further 
details).  The continuous slew of stimulants such as the above-
mentioned is what drives a stock higher.  By Tuesday the growing 
momentum launched DELL to a new all-time high of $57.94!  Indeed 
the market volatility was hellish, but this stock survived 
practically unscathed.  On Friday it was again pushing towards 
its opposition.  Even though near-term support is established 
at $55, in-line with the rising 5-dma ($55.18), look for DELL 
to hold this level before opening any new positions.  Play on 
the side of caution and confirm another breakout.

The myriad of analysts' comments this week were dazzling.  The 
details were reported in Tuesday's lengthy update.  On Friday 
there was more specific news surrounding Dell's expansion into 
the server appliance market.  It's rumored that the company 
will unveil its new lineup, perhaps called PowerApp, before its 
financial analyst meeting next month.  Importantly, this move 
to enter one of the hottest hardware growth areas will offset 
any decline in PC prices.

BUY CALL APR-50 DLQ-DJ OI=22841 at $8.00 SL=6.00
BUY CALL APR-55 DLQ-DK OI=11586 at $4.75 SL=2.75
BUY CALL APR-60 DLQ-DL OI=13975 at $2.69 SL=1.25
BUY CALL MAY-55 DLQ-EK OI=20031 at $6.38 SL=4.75
BUY CALL MAY-60*DLQ-EL OI=12473 at $4.13 SL=2.50
BUY CALL MAY-65 DLQ-EM OI= 4234 at $2.56 SL=1.25

Picked on March 9th at   $50.44    P/E = 93
Change since picked       +6.00    52-week high=$57.94
Analysts Ratings    17-13-4-0-0    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 = 34.9 mln


HWP - Hewlett Packard $138.00 (-8.94)

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).

Investors seemed to agree with the view that HWP is undervalued,
as the issue tacked on $5 on Friday.  This followed comments
from the company (see news below) on Thursday that the computer
company was undervalued in relation to its peers.  As HWP
continues to launch new products and grow revenue at a 20% clip,
investors are taking notice again.  Additionally, above $140
the company becomes a split candidate, and has more than enough
shares to pull it off.  With a classic bounce right at the
50-dma ($123.25) on Thursday, HWP has already gained $14 from
the lows of the week.  The recovery is encouraging, as it has
come on very strong volume, approaching twice the ADV on
Thursday.  The long tail on the candlestick from Thursday is
a good indicator of investor convictions that HWP is a bargain
in the mid 120's.  The recovery ran into some resistance near
the 10-dma ($142) on Friday and pulled back into the close.
With the continued positive press, HWP looks to be headed higher
from here.  With the FED expected to raise interest rates next
week, we might get lucky and see an entry as HWP retests support
near the 30-dma (currently at $132.50).  A more conservative
approach would be to wait for a convincing break through of
resistance near $141.

On Thursday, 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, HWPs
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.  Continuing to innovate, HWP announced
on Thursday that its HP 9000 N-Class e-commerce servers are
now the fastest on the market.

BUY CALL APR-135 HWP-DG OI= 552 at $12.00 SL= 9.50
BUY CALL APR-140 HWP-DH OI=1181 at $ 9.75 SL= 7.25
BUY CALL APR-145*HWP-DI OI=1349 at $ 7.38 SL= 5.50
BUY CALL MAY-140 HWP-EH OI=1508 at $12.75 SL=10.25
BUY CALL MAY-145 HWP-EI OI= 167 at $10.63 SL= 8.25

SELL PUT APR-120 HWP-PD OI= 833 at $ 2.88 SL= 4.50
(See risks of selling puts in play legend)

Picked on Mar 16th at   $133.00     P/E = 46
Change since picked       +5.00     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 = 3.61 mln


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The Option Investor Newsletter          3-19-2000
Sunday                        3 of 5


EXDS - Exodus Communications, Inc. $151.25 (-5.75)

Exodus provides Internet system and network management 
solutions for companies with mission-critical Internet 
operations.  The company offers sophisticated systems along
with technology professional services to provide optimal 
performance for customers' Web sites.  Exodus has a long
list of customers, including:  EBAY, YHOO, SUNW, and AMAT.  
The company continues to expand its business through 
acquisitions and expansion overseas.  EXDS operates global
data centers in Tokyo, London, and Frankfurt.

EXDS is making the Web a bigger, better, and faster place.
The company is a pick and shovel provider in the proverbial
Internet gold rush.  EXDS lost some ground last week, and many
traders are pointing to the expiration of the recent lockup
period as the reason for the decline.  Essentially, the lockup 
period is the time after new stock has been issued when
insiders cannot sell.  Once this period expires, insiders can 
sell their stock.  This selling tends to push the price of 
the stock down.  On Tuesday of last week, EXDS began selling 
off on heavy volume.  Once the insiders are done selling, there 
tends to be built-up demand for the stock.  It appears that the 
insiders are done selling, noting the $11 gain on Friday.  With 
the added liquidity provided by the recent selling, large 
institutions may step in and begin accumulating shares at these 
lower levels.  Minor resistance is at the 10-dma (currently $155 
and major resistance is at the $165 level.  EXDS did manage to 
close above $150 which was acting as resistance all day Friday.

Last week Exodus received positive comments from several 
analysts.  Credit Suisse First Boston analyst Tim Newington 
said that Exodus is positioned well to be the dominant player 
in the web hosting market.  Also, AG Edwards initiated coverage 
on EXDS with an Accumulate.

BUY CALL APR-155*QED-DK OI= 308 at $17.63 SL=12.50
BUY CALL APR-160 QED-DL OI=2322 at $15.63 SL=11.25
BUY CALL APR-165 OED-DM OI= 276 at $13.88 SL=10.00
BUY CALL JUN-165 OED-FM OI= 162 at $22.25 SL=16.00

Picked on Mar 19th at   $151.25     P/E = N/A
Change since picked       +0.00     52-week high=$175.00
Analysts Ratings    18-11-0-0-0     52-week low =$ 12.13
Last earnings 10/99   est=-0.21     actual=-0.25
Next earnings 04-21   est=-0.24     versus=-0.14
Average Daily Volume = 5.23 mln


MRVC - MRV Communications Inc. $132.88 (-51.63)

MRV Communications is focusing on fiber-optics.  Around 80% of
the company's sales come from its networking products, which 
direct and move data around corporate LANs and WANs.  The other 
20% of sales come from MRV's fiber-optic voice, data, and video 
transmission components.  MRVC is another company that is 
making the Internet a better place to be.  MRVC is developing
technology for the next generation of Internet infrastructure,
as the Web evolves into a global communications network.

Can you say oversold?  Some tech stocks took it on the chin last 
week, with MRVC among them.  The stock was in free fall, losing 
nearly 75 points before rebounding on Thursday.  It appears the 
carnage is over after finding support at the current levels.  
The story here is that nothing fundamentally changed with the 
company last week.  The stock has doubled in less than a month 
and some profit-taking was in order.  However, the combination 
of profit-taking and fear drove MRVC down to levels that now 
present a good opportunity for traders who can tolerate more 
risk.  When placing a trade, look for the stock to get above 
light resistance at $135.  A move above $135 shouldn't encounter 
much resistance all the way to the 10-dma at $164.  Wait for 
the stock to regain momentum after traders refocus on earnings 
scheduled for April 26th, and the recent 2-for-1 stock split 
announcement set for the end of May.
This is high risk play so look for intraday weakness to find 
entry points.  Confirm the direction of the stock after entering
any new plays and set tight stops.  The quicker the play, the 
better, to limit your risk.  Also see both this week's and last 
week's Ask the Analyst columns for more info on MRVC.
BUY CALL APR-135*RVY-DG OI=127 at $21.63 SL=15.50
BUY CALL APR-140 RVY-DH OI=325 at $19.63 SL=14.50
BUY CALL APR-145 RVY-DI OI= 76 at $18.00 SL=13.00

Picked on Mar 19th at   $132.88     P/E = N/A
Change since picked       +0.00     52-week high=$194.88
Analysts Ratings      1-0-1-0-0     52-week low =$  5.88
Last earnings 01/00    est=0.02     actual= 0.02
Next earnings 04-26    est=0.03     versus=-0.03
Average Daily Volume = 1.28 mln


AOL - America Online Inc. $64.38 (+5.63)

Founded in 1985 America Online says they are the world's leader
in interactive services, Web brands, Internet technologies and 
e-commerce services.  They operate two world-wide Internet 
services AOL, with more than 21 million members and CompuServe
with more than 2.5 million members.  Through its strategic
alliance with Sun Microsystems, the company develops and offers
business operating in the Net Economy easy to deploy, end-to-end
e-commerce and enterprise solutions under the alliance iPlanet
brand.  Their other leading Internet brands include ICQ, AOL
Instant Messenger, Digital City and the Netscape Netcenter.

One of the recent whipping boys in the Internet sector is back
on our play list.  Since its high in mid-December shares of AOL
have been getting kicked around and shown no respect.  The merger
announcement early this year with Time Warner did little to prop
up the price of the company's stock as investors were no longer
sure who or what they were dealing with, a hot Internet company,
or an old world media company.  The major Internet indexes moved
sideways to higher ever since, leaving this old Internet favorite
in the dust.  Whether its because investors have begun to get
more comfortable with the idea of the merger, or that AOL traded
below the $50 level, investors finally decided that AOL was
worth another look.  Since the merger announcement most of the
analysts that follow the company have continued to pound the
table on AOL reiterating Strong Buy and Buy ratings, with several
making it a "top pick".  This week the "old world" stocks were
re-awakened at least for the time being.  We aren't going to 
decide here if AOL fits in the "old world" or "new world"
category, but what we did see is a quality stock gain almost 10%
this week on pretty decent volume.  AOL is at crossroads in more
ways than one.  On Monday AOL moved back over its 200-dma and
was able to maintain its distance.  The next area of resistance
over head for AOL is at $66, which is just under  the 100-dma 
of $68.19.  Cautious investors may want to wait 
for a breakout over these levels, otherwise target-shoot to 
your risk level.

Friday AOL and Bertelsmann AG announced a new strategic global
alliance to expand the distribution of Bertelsmann's leading
media content and e-commerce properties over AOL's interactive 
brands world wide.  It's a four year alliance valued at $250 

BUY CALL APR-55 AOO-DK OI=22848 at $11.63 SL=8.00
BUY CALL APR-60*AOO-DL OI=95228 at $ 7.50 SL=4.75
BUY CALL APR-65 AOO-DM OI=36978 at $ 4.75 SL=2.50
BUY CALL APR-70 AOO-DN OI=35803 at $ 2.75 SL=1.25
BUY CALL JUL-70 AOO-GN OI=16004 at $ 7.50 SL=5.00

SELL PUT APR-60 AOO-PL OI=53548 at $ 2.38 SL=4.00
(See risks of selling puts in play legend)

Picked on Mar 19th at    $64.38    PE = 157
Change since picked       +0.00    52-week high=$95.81
Analysts Ratings    25-14-3-0-0    52-week low =$38.47
Last earnings 01/00   est= 0.08    actual= 0.09 
Next earnings 04-18   est= 0.09    versus=-0.05
Average daily volume = 26.9 mln


SCMR - Sycamore Networks $144.50 (-25.50)

Sycamore Networks was founded in 1998 and is headquartered in 
Chelmsford, Massachusetts.  The company combines significant 
experience in data networking with expertise in optics to 
develop intelligent optical networking solutions for carriers 
and service providers.  Sycamore's products are based on a 
common software foundation, enabling concentration on the 
delivery of services and end-to-end optical networking.  
Sycamore's products and product plans include optical transport 
and switching systems and end-to-end optical network management 

Sycamore Networks is pushing hard to expand its global presence 
and emerge as a key strategic player.  According to the Chairman 
and co-founder of Sycamore Networks, Gururaj Deshpande, they are 
"not satisfied with hyper-growth in the US" and are positioning 
themselves for growth in "Europe and soon in Asia".  Moving 
forward on that approach, SCMR announced on Friday a $40 mln 
deal with its newest customer, Storm Telecommunications.  This 
UK-based company will use Sycamore products exclusively as the 
Storm Network is built out across Europe.  Storm 
Telecommunications is a new-generation fiber network company 
that is geared to be the first international company to offer 
optically switched services to customers in Europe, Scandinavia, 
and the US.  This deal certainly plays right into Sycamore's 
expansion plans.  Just last month SCMR also signed on Utfors, a 
Sweden-based service provider, and LD COM, a Paris-based French 
metropolitan network operator as global customers.  In response 
to the initiatory $40 mln deal with Storm, confident investors 
bid up the share price 5.5%, or $7.56 in Friday's session.  CSFB 
cheered for the network equipment firm with a Buy rating and 
issued a new $175 price target.  Analyst James Parmelee also 
raised fiscal 2000 and 2001 EPS citing "aggressive valuation 
reflects enormous market opportunity and SCMR's potential to 
emerge as a key strategic supplier".  Yes, this is a pure 
momentum play - SCMR isn't expected to report earnings until 
May 18th.  Our expectation is that momentum will snowball and 
provide option traders with some upside profits in the near-
term.  Taking a look at a chart, you can see SCMR is coming off 
recent lows with bottom support in the proximity of the 30-dma 
($133.94).  The first stage of resistance is over 15 points away 
at $160, but still be aware.  For an entry point, watch for 
positive moves above the 5-dma (currently at $141.98).  In last 
week's volatile markets, the $140 level has demonstrated relative 
strength for support. 

In the news on Wednesday, SCMR announced the pricing of its 
public offering of 10.2 mln shares of common stock at $150.25 
per share.  The settlement date was March 17th.  Earlier this 
month FS Van Kasper upgraded SCMR to a Strong Buy from a Buy 
and in February, Salomon Smith Barney raised its recommendation 
to a Buy from Outperform.

BUY CALL APR-140*QSM-DH OI=250 at $21.13 SL=16.50
BUY CALL APR-145 QSM-DI OI= 98 at $18.88 SL=14.75
BUY CALL APR-150 QSM-DJ OI=337 at $16.75 SL=13.00
BUY CALL APR-155 QSM-DK OI=416 at $15.13 SL=11.75

Picked on March 19th at $144.50    P/E = N/A
Change since picked       +0.00    52-week high=$199.50
Analysts Ratings      4-3-1-0-0    52-week low =$ 56.67
Last earnings 12/99   est= 0.00    actual= 0.01
Next earnings 05-18   est= 0.00    versus= N/A
Average Daily Volume = 1.33 mln


VIGN - Vignette Corporation $236.25 (-60.75)

VIGN provides Internet Relationship Management (IRM) software
products and services, a category of enterprise solutions
designed to enable businesses to build sustainable online
customer relationships, increase returns on internet-related
investments and capitalize on internet business opportunities.
VIGN's clients come from diverse sectors and include financial
services, health, education and government, media, retail,
technology and telecommunications.

Helped by the recovery on the NASDAQ and an upgrade from ABN
Amro, VIGN finally halted its four-day losing streak.  Plunging
in typical sell-the-news fashion after announcing a 3-for-1
split on Wednesday, VIGN finally found support at $233.  Volume
has dropped off the past 2 days, and any move higher will have
to be powered by increasing volume.  VIGN should begin to garner
more positive attention as the date of the split (4/14)
approaches, with the encore of earnings on 4/19.  With the FED
raising interest rates next week, the volatility could likely
provide us with an attractive entry point before the recovery
begins in earnest.  Testing support several times on Thursday
and Friday, and now sitting just above the 30-dma ($235), VIGN
appears to be gathering its strength for a profitable run.
Strong growth and aggressive expansion plans (see news below)
will add fuel to the fire, and buying interest should propel
the stock back towards its highs from a week ago.  Look to enter
this play on either a bounce from support or a break through
resistance in the vicinity of $245.  At the risk of repeating
ourselves, remember that VIGN is a volatile Internet and $30
daily price swings are not uncommon.  

On Friday, ABN AMRO began coverage of VIGN with an Outperform
rating and a price target of $300.  Citing strong growth,
expectations are for VIGN to garner a 30% market share by 2002.
Not content to sit on its laurels, VIGN is targeting growth in
India, calling that country the "top Asian market".  The company
expects India's mushrooming Internet firms to account for the
largest share of its Asian sales this year.  Allan Bagley, the
firm's Asia-Pacific region director, says VIGN will soon set 
up a sales and support office in India to capitalize on the
explosion of Internet-based businesses.  Bagley went on to say
that alliances in east and south-east Asia last year have
allowed VIGN's customer base in the region to grow to 35-40
customers, a figure he hopes to double in 2000.

BUY CALL APR-230 GGV-DF OI=258 at $45.00 SL=35.00
BUY CALL APR-240*GGV-DH OI=262 at $40.75 SL=31.75
BUY CALL APR-250 GGV-DJ OI=533 at $37.38 SL=29.00
BUY CALL APR-260 GGV-DL OI=293 at $33.50 SL=26.25

SELL PUT APR-200 GGV-PT OI=168 at $21.13 SL=27.00
(See risks of selling puts in play legend)

Picked on Mar 14th at   $272.75     P/E = N/A
Change since picked      -36.50     52-week high=$302.00
Analysts Ratings      3-2-0-0-0     52-week low =$ 21.00
Last earnings 01/00   est=-0.08     actual=-0.05
Next earnings 04-25   est=-0.06     versus=-0.18
Average Daily Volume = 1.23 mln


YHOO - Yahoo! Inc $171.13 (-6.94)(+20.06)   

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

If the Nasdaq jitters would just dissipate we could all yell 
"Yahoo!" and rattle our pockets with profits.  YHOO is heading 
into its earnings which is scheduled for April 4th, after the 
bell.  Now all of you GUTSY Internets players know YHOO 
typically runs strong right up to the announcement then does an 
about face and dives deep on profit-taking!  Simple as it may 
sound that's our play.  Ride the wave up, then if circumstances 
permit, play the downtrend.  The current market conditions have 
held YHOO in check as of yet, but the gift is entry points.  The 
entry range was wide this week from a low at $156 (wow!) to 
openings near the 5-dma ($168.88) and 10-dma ($172.56).  The 
intraday dips like Friday's are still the best bet to jump 
aboard; although the more cautious types should be on the 
sidelines patiently waiting for a move through resistance at 

A variety of news swirled around Yahoo! this week.  On Monday, 
Yahoo! unveiled the newest member of its global network.  Yahoo! 
Argentina, an Internet guide, is the 22nd World property in one 
of Latin America's most competitive markets.  Yahoo! also plans 
to announce a partnership with ConsumerReview.com to offer its 
users more product reviews.  The British ISP, 365 Corp, 
announced it signed a pact with Yahoo! to supply sport content. 

BUY CALL APR-165*YUU-DM OI=3889 at $21.88 SL=17.00
BUY CALL APR-170 YUU-DN OI=5934 at $19.25 SL=15.00
BUY CALL APR-175 YUU-DO OI=6272 at $17.13 SL=13.25
BUY CALL APR-180 YUU-DP OI=7438 at $15.13 SL=11.75
BUY CALL APR-185 YUU-DQ OI=4025 at $13.25 SL=10.75

Picked on March 12th at $178.06    P/E = 1661
Change since picked       -6.93    52-week high=$250.06
Analysts Ratings    15-14-4-0-0    52-week low =$ 55.00
Last earnings 12/99   est= 0.15    actual= 0.19
Next earnings 04-05   est= 0.09    versus= 0.03
Average Daily Volume = 8.28 mln


CSCO - Cisco Systems Inc $135.00 (-1.38)(+1.06)(+4.69)

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

The ruthless market put quite a damper on our split play, yet 
you couldn't beat the scope of entry points made available.  
By Thursday CSCO recouped most of its recent losses.  Friday 
showed even more promise.  The stock lifted itself back to a 
higher support level at $135.  It looks like CSCO may still be 
able to make a run for the all-time high at $141.88 before it 
goes ex-div next Thursday.  The market's optimism is renewing, 
but you have to be careful at this point in the play.  Time is 
short!  There's only three trading days left to play this 

Although recent news was not necessarily market moving, CSCO is 
buying two privately-held companies for $501 mln in an attempt 
to increase its business in the corporate telecom and digital 
home markets.  The two companies it has agreed to buy are 
JetCell, a wireless technology maker, in a stock deal worth $200 
million, and InfoGear Technology, a maker of software used to 
manage information appliances, in a stock deal worth $301 
million.  The acquisitions are worth mentioning as it 
demonstrates CSCO's continued efforts to grow its business into 
new areas.  Earlier in the week, IBM announced that CSCO along 
with the likes of Motorola (MOT), Intel (INTC), and Nokia (NOK) 
will team to design and develop products & services to link 
wireless phones and computers to the Internet.

BUY CALL APR-130*CWY-DF OI=12281 at $13.75 SL=11.00
BUY CALL APR-135 CWY-DG OI=14706 at $10.75 SL= 8.75
BUY CALL APR-140 CWY-DH OI=13522 at $ 8.50 SL= 6.50
BUY CALL APR-145 CWY-DI OI=12671 at $ 6.63 SL= 5.00

Picked on March 5th at  $137.44    PE = 188
Change since picked       -2.44    52-week high=$141.88
Analysts Ratings    23-14-0-0-0    52-week low =$ 47.00
Last earnings 12/99   est= 0.23    actual= 0.25
Next earnings 05-09   est= 0.26    versus= 0.19
Average daily volume = 24.6 mln


BMCS - BMC Software Inc. $55.06 (+3.13)

BMC Software is the leading provider of management solutions 
that enhance the availability, performance and recovery of 
companies' business-critical applications.  This application 
service assurance(TM) strategy combines superior products with 
BMC Software Professional Services and outstanding customer 
support to assure that the e-business applications that 
companies rely on most, stay up and running around the clock.  
BMC Software is among the world's largest independent software 
vendors, is a Forbes 500 company and is a member of the S&P 500.

Last week was quite a ride for NASDAQ investors, scaring some
and thrilling others.  And just when the bears thought they 
were delivering a debilitating blow, the bulls poised their 
horns and charged onward.  With the NASDAQ swinging violently
at times this week, BMCS remained rather headstrong.  On Tuesday
when the NASDAQ chalked up a 300 point downfall, BMCS found 
support at $48.25.  Wednesday's session of increasing fear had
BMCS consolidating at $48.75, as if the NASDAQ decline was a 
non-event.  But it was Thursday that BMCS moved higher on strong
volume, propelled by the NASDAQ's bounce from 4455.  Thus, the 
trend was set.  And it continued on Friday, closing just off the
high of the day with a late session volume surge.  So what's the
good news?  Well, it's been heard on the Street that BMCS is 
having a stellar quarter, closing some major contracts in the
beginning of the 1st quarter that couldn't get done in December
on top of already strong business.  What kind of business you
ask?  "Data optimization" with their MQ Series capabilities.  
This architecture reduces memory consumption, I/O rates, and 
decreases network bandwidth requirements while improving their
customers' end-to-end transmission time.  In short, BMCS software
provides shorter overall processing time which means that 
customers get more from their current systems without having 
to make costly hardware upgrades.

Technically, BMCS looks good.  With support at $54, BMCS will
have to battle resistance of $56, a level not seen since the 
first trading week of the millennium.  Breaking through this 
level just might be possible as there are rumors floating 
about on the Street about a possible pre-announcement from 
BMCS that they will beat earnings estimates of $0.47, due 
out on 04/27. 

BUY CALL APR-55 BCQ-DK OI=321 at $3.13 SL=1.50
BUY CALL APR-60*BCQ-DL OI=237 at $1.88 SL=0.75
BUY CALL APR-65 BCQ-DM OI= 68 at $1.00 SL=0.00 High Risk!
BUY CALL MAY-60 BCQ-EL OI=990 at $4.75 SL=3.25

Picked on Mar 19th at    $55.06    P/E = 56
Change since picked       +0.00    52-week high=$86.63
Analysts Ratings     5-13-9-0-0    52-week low =$30.00
Last earnings 01/00   est= 0.42    actual= 0.41
Next earnings 04-27   est= 0.47    versus= 0.47
Average Daily Volume = 6.38 mln


RATL - Rational Software Corp. $88.50 (+1.56)

Rational Software is an e-development company.  Rational's 
e-development solution helps organizations overcome the
e-software paradox by accelerating time to market while 
improving quality.  Their integrated solution simplifies the 
process of acquiring, deploying and supporting a comprehensive 
software development platform.  Rational generates almost 40% 
of it's revenues from process consulting, training, and related 
services.  47 of Fortune e-50 companies use Rational's 
e-development solutions.  

Rational Software joins our list after exhibiting an irrational
round of profit-taking this past week.  RATL was just one of
the many stocks in the Nasdaq that saw the bears ramble through
the trading floors, knocking the legs out from underneath some
very impressive rallies.  RATL started the week out, trading
lower on the economic news out of Asia.  Buyers quickly stepped
in bidding the price of the software company to a new high at
$105 before profit-taking set in.  Unfortunately the sentiment
in the tech stocks changed overnight and the bears remained in
control until late Wednesday.  One of our latest plays comes
with quite a recommendation as well.  Earlier this month RATL
announced it was recently ranked as the number one company in
a survey of "Companies Wall Street Analysts Liked Best."  That's
right, RATL was #1 in a survey of 147 companies that received
the strongest recommendations from Wall Street analysts across
all industry segments, according to data compiled by I/B/E/S
International Inc.  Volume this week was heavy, as traders pulled
money off the table from earlier gains.  We are hanging our hat
on the bounce off the support level at $75 on Wednesday.  With
the selling continuing early Thursday in the Nasdaq, RATL was
actually finding buyers enter the market, which indicates the
bears were getting tired and a bottom may have been found.
One word of caution however, RATL did add $5.69 on Friday, but
the volume was just below the norm at 940k.  If the sentiment
stays strong next week, we would look for RATL to continue to
move higher as well.  The technical picture shows support at 
$84 and the previously mentioned $75 area.

A press release Friday, announced that Rational Corporation has
teamed up with Advanced Programming Institute, as partners in
technology and education.  The Rational Unified Partner Program
supports over 300 participating partners with tools, joint
marketing opportunities, qualifications and training. 

BUY CALL APR-80 RAQ-DP OI=  70 at $15.63 SL=12.25
BUY CALL APR-85 RAQ-DQ OI= 115 at $13.00 SL=10.25
BUY CALL APR-90*RAQ-DR OI=1093 at $10.63 SL= 8.25
BUY CALL APR-95 RAQ-DS OI=  38 at $ 8.50 SL= 6.50
BUY CALL JUL-90 RAQ-GR OI= 106 at $14.50 SL=11.25

SELL PUT APR-75 RAQ-PO OI=  60 at $ 4.00 SL= 5.75
(See risks of selling puts in play legend)

Picked on Mar 19th at    $88.50    PE = 104
Change since picked       +0.00    52-week high=$105.00
Analysts Ratings      8-1-1-0-0    52-week low =$ 21.88
Last earnings 01/00   est= 0.25    actual= 0.27 
Next earnings 04-19   est= 0.31    versus= 0.23
Average daily volume = 1.04 mln


TIBX - Tibco Software $119.63 (-18.56)(+16.19)

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

Every time TIBX starts its engine, it seems as though it needs 
to head back to pit row for awhile.  Last week provided an 
opportunity though for nearly every fast mover to take a pit 
stop.  Just like in real car racing, good track conditions are 
necessary to start a good race - perpetual oil slicks are 
trouble.  The same metaphor applies to stocks.  If market 
conditions are not good, individual issues usually participate 
to an 85% degree.  So it was with TIBX.  Too bad since TIBX 
announced to analysts on Mar 9th that they expect revenues to 
more than double to $41 mln over a year ago.  The same report 
also noted that license revenue grew more than 190% over the 
previous Q1.  Those two items alone would have caused the market 
to salivate under normal market conditions.  Now that the market 
has reversed itself, we look for TIBX to run hard into earnings 
scheduled for Mar 23rd, when we also expect another split 
announcement.  Why the expectation of another split?  The last 
one was announced at $125 (we're almost there again) and TIBX 
has an agenda item at the shareholder's meeting scheduled for 
Apr 12th to increase the authorized shares from 300 mln to 
1.2 bln.  The sequence is to announce the split with earnings 
on 3/23, then seek shareholder approval on 4/12, with the split 
execution date to follow shortly thereafter.  Good support can 
be found at $115 and $105.  Volume is picking up again too, 
which signals the run may have begun on Friday.  Only four days 
to play until earnings, so make it count!

Other than an announcement of a software implementation for RSL 
Telecom, news was fairly quiet.  Remember, this play isn't 
based on news, but rather on earnings and a possible split.

BUY CALL APR-110*PIW-DB OI=130 at $23.50 SL=18.25
BUY CALL APR-120 PIW-DD OI=398 at $19.00 SL=14.75
BUY CALL APR-130 PIW-DF OI=375 at $15.13 SL=11.75
BUY CALL MAY-130 PIW-EF OI=114 at $20.50 SL=16.00
BUY CALL MAY-140 PIW-EH OI= 92 at $17.50 SL=13.75

SELL PUT APR-100 PIW-PT OI=156 at $10.88 SL=13.50
(See risks of selling puts in play legend)

Picked on Mar 12th at  $138.19     P/E = N/A
Change since picked     -18.56     52-week high=$147.00
Analysts Ratings     3-0-0-0-0     52-week low =$  6.56
Last earnings 12/99  est=-0.03     actual= 0.01 surprise=133%
Next earnings 04-23  est= 0.00     versus= N/A
Average Daily Volume =   802 K


CHKP - Check Point Software $235.50 (-44.38)(+50.13)(P2W+31.56)

Check Point Software has laid claim on being the best in the
business at securing the Internet.  Their Secure Virtual Network
(SVN) architecture provides the infrastructure that enables
secure and reliable Internet communications.  It's FireWall-1
verifies remote users, controls access and blocks viruses and
other unwanted Web content, while VPN-1 will allow companies
to set up virtual private networks for secure internal and
remote communications.  CheckPoint markets its products through
manufacturers and resellers including Sun Microsystems.  CHKP
is located in Rmat Gan, Israel, but nearly 60% of its sales
come from the U.S.

The laws of gravity prevailed this week in the Nasdaq and CHKP.
CHKP had strong momentum from its move in late February to its
high a week ago Friday.  It took 10 trading sessions for CHKP
to travel from the $189 area to its high at $295 on March 10th.
A 56% move in 10 sessions is impressive by any standards.  The 
move to new highs was very tradable, as the only real requirement 
for those that bought CHKP was to move their stops up and enjoy 
the ride.  The reason for moving stops up became apparent on 
Monday as it took only four days to erase profits from the 
accounts of those that didn't have their stops in place or 
couldn't pull the trigger.  We mentioned Tuesday that CHKP was 
near the bottom of its channel, and could bounce from levels 
seen near $242.  Negative investor sentiment for the tech 
stocks continued to keep pressure on CHKP until hitting $189 
early Thursday morning.  You've seen the term "don't try to 
catch a falling knife" many times in our newsletter and now 
you know why.  Bounces off support are normally very buyable, 
but when overall market sentiment has changed, you will get cut.  
So why do we think CHKP may have hit a near term bottom?  First 
CHKP hit old support near $190 and bounced.  Support and bounced, 
not convinced?  We can't blame you.  A look at the volume as CHKP 
was approaching the low Thursday morning, shows over 1.6 mln 
shares traded in just two hours.  Nearly twice its ADV traded 
in 120 minutes.  This kind of action is typical an exhaustion 
top or bottom.  CHKP continued to move higher on Friday as traders 
nibbled on more of their recent tech favorites.  Support is now 
found near $220.  A move back through the $242 will also provide 
a good entry point for a new play, but confirmation of overall 
market sentiment may be prudent prior to placing your order.

On Wednesday Check Point and Nokia announced a new solution
designed for telcom and service providers to address the high-
growth market for delivering managed Internet security and VPN
services to small and medium businesses.  This new product
package further leverages the Check Point/Nokia appliance
experience to enable service providers to truly scale their 
security service offerings, with a cost-effective framework
to secure small and medium sized businesses.  

BUY CALL APR-230 YKE-DV OI=291 at $41.25 SL=32.25  
BUY CALL APR-240*KGE-DH OI=184 at $35.75 SL=27.88
BUY CALL APR-250 KGE-DJ OI=189 at $31.75 SL=24.75
BUY CALL APR-260 KGE-DL OI=215 at $28.00 SL=21.75

SELL PUT APR-180 YKE-PP OI= 94 at $10.13 SL=13.00
(See risks of selling puts in play legend)

Picked on Feb 27th at $205.63    P/E = 203
Change since picked    +29.88    52-week high=$295.00
Analysts Ratings    9-5-2-0-0    52-week low =$ 11.50
Last earnings 01/00  est=0.32    actual=0.35
Next earnings 04-18  est=0.35    versus=0.25
Average Daily Volume =  907 K


BWEB - BackWeb Technologies $49.25 (-8.75)(+13.50)

BackWeb Technologies provides Push software for e-business
solutions that solve the problem of timely, accurate information
delivery across corporate networks and the Internet.  They
provide an automated and reliable way to communicate any data
type over any network connection.  Their customizable software,
helps manage sales, software distribution, e-commerce and other
tasks, and can set up broadcast channels that download preferred
data directly to users with out delays or interruptions.  They do
business with some of the biggest names in the Tech world, in
Cisco Systems, Compaq, SAP and AT&T.  Founded in 1995, BWEB had
its IPO in June of 1999.

Investors added BWEB back into their portfolios Thursday morning
as the Nasdaq began to bounce back.  The decline this week in
BWEB was really very orderly for the most part, showing no signs
of the "get me out an any price" mentality.  Volume was light
with the majority of the damage done the first two days of the 
week.  In percentage terms BWEB, corrected about 24% this week
before finding buyers willing to jump in at the $45 area.  As
we said last weekend we were expecting a pullback, but the move
appeared to be exaggerated by the negative sentiment in the 
Nasdaq.  A study of the volume since the first of the month will
illustrate the strength behind recent moves.  BWEB began the 
month of March at $38.  It moved to $59.13 over the next 7 days,
with over 12.5 million shares being traded.  The retracement this
week had just 2.5 million shares changing hands.  Our intent is
not to belabor the volume issue, rather show the conviction or
strong belief of those that bought shares of BWEB as it continued
into uncharted waters, and why we believe this is a temporary
setback, and a potential buying opportunity for our play.  There
have been no company press releases this week, and no comments
from the few brokers that follow the e-business solutions company.
BWEB may still be riding on the coattails of an earlier release
that Cable & Wireless(CWP) will offer its popular push software
to its top global accounts, and an alliance with SAP AG, a
provider of inter-enterprise solutions.  As BWEB began to move
higher late on Friday, the volume did pick up a bit, but overall
it was light for the session at 303K.  Whatever the reason for
the popularity, BWEB will probably take its cue from the Nasdaq
next week.  BWEB ran into resistance Friday near its 10-dma at
$50.19 and has intraday support at $48 and strong support at $45.
BUY CALL APR-40*UBW-DH OI=100 at $12.88 SL=10.00
BUY CALL APR-45 UBW-DI OI=204 at $10.00 SL= 7.50
BUY CALL APR-50 UBW-DJ OI=280 at $ 7.38 SL= 5.75
BUY CALL APR-55 UBW-DK OI=476 at $ 5.63 SL= 3.75
BUY CALL JUN-50 UBW-FJ OI=359 at $11.13 SL= 8.75

SELL PUT APR-45 UBW-PI OI= 18 at $ 5.13 SL= 7.00
(See risks of selling puts in play legend)

Picked on Mar 12th at  $58.00    P/E = N/A
Change since picked     -8.75    52-week high=$59.13
Analysts Ratings    1-3-0-0-0    52-week low =$15.00 
Last earnings 01/00 est=-0.08    actual=-0.04
Next earnings 04-26 est=-0.06    versus= N/A
Average Daily Volume =  955 K


VERT - VerticalNet, Inc. $220.63 (-52.56)(+21.47)(+25.97)(+27.00)

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

Live by momentum, die by momentum...and discover the beauty of 
stop losses.  That was hammered home on Thursday as VERT plunged 
to $195 intraday (previous historical support from February).  
Traders holding $270 strikes were wondering where they might find 
the highest building from which to jump.  Alas, recovery was at 
hand and made for quite an entry for those willing to pull the 
trigger.  Still, with VERT down $52 for the week, you might be 
asking yourself why it's still on the list?  The big picture is 
that VERT is one of the new "Big Three" (along with ARBA and 
CMRC) in the B2B Internet sector, having received a large capital 
infusion from Kingmaker, Microsoft.  It isn't in danger of 
falling off the face of the Earth the way that smaller players 
might be.  The focus of the play now is on the 2:1 split that 
will occur after the close on Mar 31st.  Split adjusted trading 
will begin on Apr 3rd.  We're still a bit nervous about support 
given Friday's negative move on low volume.  VERT could easily 
test the $200 level again, though $215 may provide some support 
if the market and sector remain strong.  With the 5-dma ($230.46) 
and 10-dma ($243.94) so decimated, VERT's current price well 
under these two won't mean much going into the split.  However, 
with a 25% pullback from its high and the split less than two 
weeks away, VERT still has the makings of a good split run.  
As we noted last week, don't play this one if your intestinal 
fortitude isn't strong.

In the news, Eastman Chemical inked a deal with VERT to sell 
paints and coatings on the Net, and is called (surprise!) 
paintandcoatings.com.  It's actually a spin-off of VERT bought 
by Eastman for "multi seven-figure $$$" in which VERT is a JV 
partner.  More importantly for sentiment, Merrill Lynch's Henry 
Blodgett started coverage with a Long Term Buy and a 12-18 month 
price target of $350.  He also noted that he expects the shares 
to remain volatile and would not be surprised to see shares 
consolidate over the near-term.  Furthermore, he views any 
weakness in the stock as a buying opportunity.  Us too.

BUY CALL APR-210 ERW-DB OI=305 at $37.00 SL=29.00
BUY CALL APR-220*ERW-DD OI=550 at $32.63 SL=25.50
BUY CALL APR-230 ERW-DF OI=605 at $29.25 SL=22.00

SELL PUT APR-195 ERW-PS OI= 79 at $15.50 SL=19.50
(See risks of selling puts in play legend)

Picked on Feb 24th at  $221.00     P/E = N/A
Change since picked      -0.44     52-week high=$296.75
Analysts Ratings     4-6-3-0-0     52-week low =$ 25.44
Last earnings 02/00  est=-0.36     actual=-0.28
Next earnings 05-02  est=-0.45     versus=-0.19
Average Daily Volume = 1.4 mln


NOK - Nokia $199.88 (-15.13)(-5.00) 

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

This is the second week in row that saw a swipe taken at NOK's 
share price.  For a company with growing revenues, garnering 
bigger profit and gaining market share, you'd think NOK's share 
price should be on fire.  Sometimes the market comes with its own 
fire hose to dowse even the hottest ember.  So why keep it?  
Easy...a shareholder's meeting this Wednesday, Mar 22nd to vote 
their approval of the 4:1 stock split announced Feb 1st.  If 
approved (any dissenters?), the execution date would likely be 
during the first week of April.  Anyway, now that the correction 
has reversed itself, we would expect a split run to ensue on news 
of the shareholders' approval.  Technically, there is some 
support at the $196 level than again at $190.  To the upside, if 
volume should pick up again, look for a move over $205 to confirm 
the direction.  Don't look for technicals though to carry the 
flag on this play.  NOK is still below its 5, 10, and 30-dma 
thanks to the markets' discombobulating last week.  Anyway, it 
should be about two weeks before the actual split, typically 
the time at which the real move into the split begins, good 
technicals or not.  Enter at your level of risk tolerance and 
consider selling naked puts if your account allows it.  Support 
is rock solid at $180 unless NOK forgets how to make phones 
first thing Monday morning.

In the news, we reported Thursday night that the Finnish 
companies that make the face covers for Nokia handsets may 
continue their strike until next week, causing delays in NOK's 
shipments.  This may or may not be a big deal.  However keep 
your eyes and ears open for related news.  Anything negatively 
affecting revenues or profits could derail any split run.

BUY CALL APR-190 NZY-DR OI=1519 at $21.50 SL=16.75
BUY CALL APR-200*NZY-DT OI=4180 at $16.25 SL=12.75
BUY CALL APR-210 NZY-DB OI=3358 at $11.75 SL= 9.25
BUY CALL JUL-210 NZY-GB OI= 653 at $25.75 SL=19.25

SELL PUT APR-180 NZY-PP OI=1207 at $ 6.00 SL= 8.00
(See risks of selling puts in play legend)

Picked on Mar 09 at     $214.63     P/E = 96
Change since picked      -14.75     52-week high=$227.06
Analysts Ratings     16-9-1-0-0     52-week low =$ 67.69
Last earnings 02/00   est= 0.67     actual= 0.72
Next earnings 05-02   est=-0.61     versus= 0.48
Average Daily Volume = 3.41 mln


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The Option Investor Newsletter             3-19-2000  
Sunday                        4 of 5


NITE - Knight/Trimark Group $51.75 (+2.19)(+3.13)

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

BankBoston Robertson Stevens reiterated its Buy rating and raised 
his 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".  While BBRS may have 
penned the above, plenty of other analysts were having the same 
thoughts regarding the whole sector.  Mar 17th was the second 
Friday in a row where all the online brokers posted trading 
volume in excess of their ADV's.  Buying interest has really 
swelled for SCH, AMTD, EGRP and DLJ too.  As long as the markets 
continue to post large aggregate volume, expect the trend to 
continue along with it.  Earnings are anticipated on Apr 19th.  
While we think it's a bit too early for a typical earnings run 
to begin, based on revenue projections and upgrades, it may have 
already started.  If you squint real hard, you can find intraday 
support in $1 increments beginning at $44.  $45 and $46 are 
pretty strong historically.  $50 and $51 worked on Friday.  
Resistance is at $55.  A break over that level (as long as volume 
remains) would set up for a challenge of $60.  

The news is contained above, but know too that Merrill Lynch 
upgraded NITE from Accumulate to Neutral and raised their FY00 
estimate from $1.90 to $2.35 and FY01 from $2.25 to $2.95.  Their 
long-term growth rate projection is raised from 23% to 25% 
(briefing.com).  DB Alex Brown joined the chorus too by raising 
their rating from Buy to Strong Buy earlier in the week citing 
speculation that Goldman's purchase of Schwab (rumor only) would 
be good for NITE's order flow business.

BUY CALL APR-45 QTN-DI OI=4903 at $10.00 SL=7.50
BUY CALL APR-50 QTN-DJ OI=6399 at $ 7.00 SL=5.25
BUY CALL APR-55*QTN-DK OI=5587 at $ 3.63 SL=1.50
BUY CALL JUL-50 QTN-GJ OI=1829 at $11.88 SL=9.50
BUY CALL JUL-55 QTN-GK OI=1212 at $ 9.88 SL=7.50

SELL PUT APR-40 QTN-PH OI=2232 at $ 1.38 SL=2.50
(See risks of selling puts in play legend)

Picked on Mar 12th at   $49.56     P/E = 32
Change since picked      +2.19     52-week high=$81.62
Analysts Ratings     4-4-0-1-0     52-week low =$21.19
Last earnings 01/00  est= 0.34     actual= 0.54 surprise=59%
Next earnings 04-19  est= 0.60     versus= 0.34
Average Daily Volume = 4.2 mln


IDPH - IDEC Pharmaceuticals $188.94 (+10.38)

IDPH researches and develops therapies for the treatment of 
cancer and autoimmune and inflammatory diseases. IDEC was the 
first-ever to received FDA approval of a monoclonal antibody, 
called Rituxan, that is now the most widely used treatment of 
non-Hodgkin's lymphomas in the U.S. The company has two other 
anti-cancer drugs in the approval process and five more are in 
the pipeline. 

There's no doubt the genomics sector reached sky-high valuations 
and made many investors rich.  But the gene stocks took a severe 
pounding this week.  The catalyst was President Clinton and 
British Prime Minister Blair's discussion over the inevitable 
moral question (or shall we be a bit more direct and also say 
perhaps, money too?)...should the human genome research date 
belong to the public scientists as well as the private 
enterprises?  This controversy knocked the whole Biotech sector 
off its pristine pedestal.  On Tuesday, the Amex Biotech Index 
(BTK.X) plunged a record 13.2% on the comments.  Take note - 
this is a good index to watch for additional signs of direction.  
Certainly it may be a bumpy road ahead for this play especially 
in these explosive markets, but here's our take from Tuesday.  
The panic sell was blatant "shell shock".  Investors feared 
future revenues could be ultimately forfeited to government 
entities.  Our initial play for the coming days was that 
investors would realize IDPH is much more than the genomics 
project.  Remember, this company has real products making money 
right now.  And sure enough, the negative feeling started to 
ease.  IDPH moved off its bottoming pattern of $100 and closed 
just under $120.  A nice reward!  Now we're faced with 
resistance.  Therefore we need a move through this mark backed 
by volume for confirmation.  Positive market sentiment and good 
news should also lend a helping hand.  

On Wednesday, IDEC announced the results of a phase 1 trial for 
a new drug, Idec-114 (antibody in Psoriasis).  Preliminary 
findings were favorable according to the company.  More news 
like this is what investors need to hear.

BUY CALL APR-110 IDK-DB OI=127 at $21.88 SL=17.00
BUY CALL APR-115 IDK-DC OI= 69 at $19.00 SL=14.75
BUY CALL APR-120*IDK-DD OI=203 at $16.63 SL=13.00
BUY CALL APR-125 IDK-DE OI= 63 at $14.75 SL=11.75
BUY CALL APR-130 IDK-DF OI= 79 at $12.88 SL=10.50

Picked on March 14th at $105.00    P/E = 139
Change since picked      +13.94    52-week high=$173.00
Analysts Ratings      6-5-1-0-0    52-week low =$ 21.25
Last earnings 12/99   est= 0.15    actual= 0.15
Next earnings 04-20   est= 0.12    versus= 0.10
Average Daily Volume = 1.28 mln


BGEN - Biogen Inc. $84.88 (+0.81)

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.

Beauty is in the eye of the beholder.  This recent addition to
our play list could end up being a real beauty.  By now we're
sure everyone has heard about the remarks made earlier in the
week, by President Clinton, that sent the Biotech stocks in the
tank.  Clinton's remarks proved to be the catalyst to profit-
taking on issues that had enjoyed a run for the past few months.
The correction at the Nasdaq pushed the BGEN and sector favorites
to levels not seen since the first of the year.  From its high
in February, BGEN has corrected,(for lack of a better term), over
40%.  We don't really like the term "corrected" as that implies
BGEN was over-valued in the first place.  We believe that BGEN
at the current levels provides an outstanding opportunity to buy
calls in a stock that should trade at higher levels.  Paul Abel,
co-portfolio manager of The Medical Fund(MEDRX) has been shopping
for bargains the past couple of days.  His fund is up 24% for the
year and 70% since its inception in late September.  What did
he buy this week?  BGEN and AMGN topped the list, as he said
they had been "unfairly beat-up".  Abel went on to say, "They are
good companies with solid earnings and competitive product 
pipelines."  We couldn't agree more, and that's why BGEN made its
way back on our list of favorites.  Technically the $76-$79 area
provided good support this week and showed stronger volume
indicating BGEN could have made a bottom.  BGEN did move up to
$90 Friday, before sellers entered, although it appeared to be
position squaring or options expiration activity, going into the
weekend, rather than anything else.  The 10-dma is found at $90.13
and a push back through that level accompanied by good volume may
provide confidence for more conservative investors.

All of the companies in The Medical Fund referenced above focus
on oncology.  Abel said "it is their feeling the way research
is going, there will be a great improvement in cancer therapy
and in treatments, if not cures."  Concerning BGEN and others,
he continued with "not only do they do ground-breaking research,
they delivered sales and earnings.  That wasn't true before."
BUY CALL APR-80*BGQ-DP OI=1633 at $12.75 SL=10.00
BUY CALL APR-85 BGQ-DQ OI=1254 at $10.50 SL= 8.25
BUY CALL APR-90 BGV-DR OI=3664 at $ 8.25 SL= 6.25
BUY CALL JUL-90 BGV-GR OI= 709 at $15.50 SL=12.00

SELL PUT APR-75 BGQ-PO OI=1933 at $ 4.13 SL= 6.25
(See risks of selling puts in play legend)

Picked on Mar 16th at    $86.81    PE = 61
Change since picked       -1.94    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 = 4.41 mln

LEAPS by Mark Phillips

What's the world coming to?  Two weeks in a row now, we have
added a LEAP play on a Financial stock.  In case you missed it,
the old economy stocks staged a comeback this week and Banking
stocks weren't about to be left behind.  If you need proof, just
look at the $17+ gain on last week's new play, AXP.  Continuing
to telegraph great entries on our LEAPs plays, the VIX moved as
high as 29.14 on Wednesday, before falling for the rest of the
week.  This corresponded perfectly to great entry points, near
major support levels for several of our plays, among them EMC,
TXN, NXTL, and SUNW.  The VIX is now below 24 again (23.67), and 
we would advise caution in opening new positions until it can 
move back towards the upper end of its range.  Recall that a VIX 
reading in the low 20's represents the danger (market top) zone 
and the low 30's frequently signals a buying opportunity.  With 
the volatility in this market, great entry points seem to be 
popping up left and right.  Watch your favorite LEAPs for an 
entry point and, when the VIX moves into the buy zone, be 
prepared to jump on board.

Current Plays


EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $57.63   274.80%
                 JAN-2002 $ 90  WUE-AR   $19.00   $60.75   219.74%
GPS    11/07/99  JAN-2001 $ 40  ZGS-AH   $ 5.75   $13.13   128.26%
                 JAN-2002 $ 45  WGS-AI   $ 7.88   $15.38    95.24%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $24.38    78.90%
                 JAN-2002 $110  WIB-AB   $16.50   $28.88    75.00%
LU     11/14/99  JAN-2001 $ 80  ZEU-AP   $12.88   $10.25   -20.39%
                 JAN-2002 $ 90  WEU-AR   $16.13   $15.13   - 6.20%
CSCO   11/14/99  JAN-2001 $ 80  ZCY-AP   $19.13   $64.00   234.64%
                 JAN-2002 $ 90  WIV-AR   $22.00   $66.00   200.00%
GE     11/21/99  JAN-2001 $150  ZGR-AU   $16.25   $19.13    17.69%
                 JAN-2002 $150  WGE-AU   $25.50   $29.63    16.18%
NT     11/28/99  JAN-2001 $ 75  ZOO-AO   $22.25   $63.63   185.96%
                 JAN-2002 $ 75  WNT-AO   $30.25   $72.50   139.67%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $17.50    62.79%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $23.63    57.50%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $71.88   223.03%
                 JAN-2002 $120  WGZ-AD   $28.50   $76.88   169.74%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $69.63   196.28%
                 JAN-2002 $100  WFU-AT   $27.25   $74.88   174.77%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $30.38    72.34%
                 JAN-2002 $ 90  WJX-AR   $22.00   $35.13    59.66%
LU     01/09/00  JAN-2001 $ 50  ZEU-AJ   $13.63   $26.00    90.83%
MOT    01/09/00  JAN-2001 $125  ZMA-AE   $31.13   $49.00    57.43%
                 JAN-2002 $125  WMA-AE   $41.50   $61.25    47.59%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $15.63    71.23%
                 JAN-2002 $ 40  WSY-AH   $12.63   $20.88    65.35%
ERICY  01/30/00  JAN-2001 $ 65  ZYD-AM   $19.75   $37.25    88.61%
                 JAN-2002 $ 65  WRY-AM   $27.00   $45.00    66.67%
MSFT   01/30/00  JAN-2001 $100  ZMF-AT   $17.63   $18.50     4.96%
                 JAN-2002 $110  WMF-AB   $21.63   $23.25     7.51%
CS     02/13/00  JAN-2001 $ 30  ZCJ-AF   $14.25   $20.50    43.86%
                 JAN-2002 $ 30  WLJ-AK   $18.25   $24.75    35.62%
ICOS   02/20/00  JAN-2001 $ 40  ZIL-AH   $10.25   $10.75     4.88%
                 JAN-2002 $ 45  WJI-AI   $12.13   $14.13    16.49%
NSM    02/27/00  JAN-2001 $ 70  ZUN-AN   $18.50   $17.88   - 3.38%
                 JAN-2002 $ 70  WUN-AN   $24.25   $25.13     3.61%
AOL    03/12/00  JAN-2001 $ 60  ZKS-AL   $14.00   $17.25    23.21%
                 JAN-2002 $ 65  WAN-AM   $18.63   $22.50    20.81%
AXP    03/12/00  JAN-2001 $130  ZXP-AF   $21.75   $32.88    51.15%
                 JAN-2002 $140  WXP-AH   $28.00   $39.00    39.29%

To review the play description on any of our current plays, 
go to the LEAPS section for the date the play was added.

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

Leap of the Week

MOT - Motorola $149.50

Since beginning its latest uptrend in late October, MOT has
provided attractive entry points each time it touches the
50-dma (currently at $151.50).  With the turmoil in the markets
last week, this looks like a tough entry to pass up.  The
Semiconductor industry is still showing tremendous growth, and
with earnings just around the corner, we don't expect MOT to
hang around down here for long.  The real long-term issue though,
is the pending split, scheduled for early June.  Shareholder
approval is still necessary to raise the number of authorized
shares and should be forthcoming at the annual meeting on 
May 1st.  Perhaps attempting to reassure investors earlier this
week, an analyst with Warburg Dillon Read repeated his Buy
rating on the company.  Resistance appears at $154 and then
$160.  Conservative investors may want to wait for buying
interest to return and break through these levels before
opening new positions.  With solid support at $146, a bounce
here would make for an ideal entry, especially if the VIX
(below 24 again) can move up into the high 20's.

BUY LEAP JAN-2001 $150.00 ZJC-AJ at $37.75
BUY LEAP JAN-2002 $160.00 WMA-AL at $47.50


New Plays

WM - Washington Mutual $25.38

Unless you've been living in a cave, you know that banking
stocks have taken a beating over the past several months,
primarily on fears of rising interest rates.  Although the FED
is expected to raise rates again next week, the prospects for
more increases is diminishing, as inflation still refuses to
raise its ugly head.  A broad recovery in the Banking sector
this week seems to indicate the trend is about to reverse.  WM
was not immune from this effect, gaining as much as $6, before
consolidating its gains on Friday.  The action this week pushed
WM above both its 5-dma ($24.50) and 10-dma ($23.50) and
confirmed resistance at $26.  For all of you out there who are
looking for a cheap way to play LEAPS, this is your ticket -
volatility has been almost non-existent and expectations have
not risen enough to inflate the premiums.  More consolidation
is possible ahead of the FED meeting, so look for entries as
WM bounces at support near $24.

BUY LEAP JAN-2001 $25.00 ZWI-AE at $5.00
BUY LEAP JAN-2002 $30.00 WWI-AF at $5.38



No dropped LEAPS this week.

Rolling Over to LEAPs
By: Mark Phillips

So, you've been looking at your Mutual Fund statements on your 
rollover IRAs and are congratulating yourself on the 80% gain 
in the Tech fund and big gains in the index fund over the past 
year.  Now, are you ready to step up to the big leagues?  If so, 
it's time you looked to options.  Sure, you know that options 
give you great leverage over straight stock purchases, but 
you're afraid to put your retirement at risk in this volatile 
market, right?

If you're looking for a way to turbo-charge your long-term
investment returns without exposing yourself to undue risk,
then you aren't alone.  In 1990, the CBOE responded to this
desire by introducing LEAPS (Long-term Equity Appreciation
Securities).  It sounds complicated, but simply put, LEAPS are
long-term options with expiration dates as much as 3 years in
the future.  This instrument appeals to both options and stock
traders, by providing the strengths of each while minimizing
the weaknesses.

Investing in stocks (or groups of stocks through Mutual Funds)
provides the ability to capitalize on long-term growth, but the
downside is that you must buy the stock outright, tying up a
significant amount of capital.  Options provide greater returns,
but the disadvantage is that your timing must be precise.  Buy
at the wrong time and the option value can decay while you wait
for the stock to appreciate.

Most investors overlook the fact that LEAPS can provide great
returns without the rapid time decay of short-term options.
An option's price is made up of intrinsic value and time value.
Intrinsic value represents the equity of the option and can be
thought of as a down payment on the stock.  Time value represents
the potential of the stock to appreciate over time.  In option
pricing, At The Money (ATM) options have the highest time value.

Time passes at a constant rate and as it does, the time value
of an option decreases.  This is referred to as time decay.  Time
decay increases as an option approaches expiration with fully
half of the time value in an ATM option vaporizing in the last
30 days.  Using actual pricing data for CSCO, the chart below
shows how the value of an ATM option decays over time.


Making it onto our LEAPs playlist on November 14th, CSCO provides
a good example of the benefits of LEAPs over outright stock
purchases.  When added to the list, CSCO was trading at $83.44.
The recommended January 2001 $80 LEAP (closest to ATM) was
trading at $19.13.  The cost of purchasing 100 shares of stock
was $8344, while the LEAP cost was $1913.  Four months later,
the stock has appreciated to $135, for a gain of $5156 or 62%.
The LEAP is now trading at $63.38, showing a gain of $4425 or
231%.  For roughly the same cost ($7652 vs. $8344) as 100 shares
of stock, you could have purchased 4 of the LEAPS and netted a
gain of $17,700.

As you can see, longer-term options (LEAPs) allow investors to
use a buy-and-hold approach in conjunction with the leverage
provided by options.  The normal penalty (watching the time
value of the option melt away on a day-by-day basis) while
waiting for the underlying security to appreciate, becomes a
secondary effect.

What about the downside?  What happens if one of the stocks in
which you bought LEAPs takes a dive?  Since the time value
doesn't rapidly disappear, there is time to wait for the stock
to recover.  Taking an example from our LEAPs portfolio, let's
look at Lucent (LU).

Added to the playlist on November 14th, when LU was trading at
$72.50, the recommended January 2001 $80 LEAP was going for
$12.88.  Everything was looking great until LU shocked investors
with an earnings warning in early January.  The punishment was
severe as the stock quickly dropped to approximately $50 per
share and the $80 LEAP dropped to approximately $4.  Although
the stock went nowhere for the next 2 months, investors finally
started coming back, LU is once again trading above $70 and the
LEAP has moved back to $10.  Now LU will likely have to move
above $75 before our LEAP will be trading at the price where
we initially recommended it, but it is clear that the time value
did not evaporate.  We can afford to hold the LEAP and wait for
the stock to come back, provided that the stock is fundamentally 
sound.  These transitory events can be used as great opportunities 
to purchase LEAPs in anticipation of the eventual recovery in the 

Due to the long timeframe on LEAPs, we can afford to be patient,
waiting for that ideal entry point.  Our favorite indicator in
this regard is the CBOE Market Volatility Index (VIX), because
it is very reliable at identifying market tops and bottoms.
The VIX moves in the opposite direction of the markets, so when
it is high (low 30's) the market is approaching a near-term
bottom.  When the VIX moves into the low 20's, this is the
danger zone for a market top, and good entry points are more 
difficult to come by.  Low readings on the VIX can even be used 
as a trigger to lock in profits on successful positions.

So what kind of performance can you get from a LEAPS portfolio?
Just taking a sample from our LEAPs portfolio will give some
idea.  Those stocks on which we recommended LEAPs before the
first of the year (EMC, GPS, IBM, LU, CSCO, GE, NT, VOD, TXN,
NXTL, and SUNW) provide a good cross-section of the overall
market.  With returns ranging from a loss of 23%(LU) to a gain
of 271% (EMC), a portfolio made up of one of the recommended
January 2001 LEAPs on each of the stocks listed above would
have provided a 126% rate of return in only four months.

With returns like that, supplementing your long-term investments
with LEAPs on strong stocks is a hard alternative to ignore.

So why don't you build your own mutual fund, based on LEAPs on
some of the fast moving stocks in this market.  They're more
affordable than 100 shares of your favorite tech stock and
can appreciate faster due to the leverage.


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


EK - Eastman Kodak $57.44 (+3.44)(-5.63)

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

Are you sick yet from all the bouncing around?  EK's breakout
over resistance on Thursday was short lived.  Friday they 
couldn't even break over Thursdays close.  So, like we had 
assumed, that jump was mostly due to the Dow's momentum.  EK
is at a vulnerable point right now.  Trading down to their 
52-week low of $53.31 is likely if circumstances are unfavorable.  
They may be forced down even lower if EK makes another earnings 
warning like they have done before.  Therefore, this play 
requires patience for the right entry point.  A bounce off 
resistance is your best bet.  Earnings are due out Apr 16th, 
not giving EK a lot more time to send a warning.  So we will 
have to sit back and watch carefully what happens.  If EK trades 
above $60 we would probably drop this play so place your stops 
accordingly.  The 10-dma ($55.88) is support and will be the 
next support level.  However if that earnings warning does 
come, all levels of support are gone.  In the news, EK 
announced their continual sponsorship of the Olympics 
through 2008.  Hardly worth mentioning as it won't affect 
our play.

BUY PUT APR-55*EK-PK OI=1764 at $1.44 SL=0.75
BUY PUT APR-50 EK-PJ OI=2047 at $0.50 SL=0.00 High Risk!

Average Daily Volume = 1.86 mln


ISLD - Digital Island $82.63 (-25.88)

Digital Island provides a global private network and related
services for enterprises needing to implement business-critical
applications worldwide.  ISLD enables customers to effectively
deploy and manage global applications by combining the
reliability, performance and broad range of functions available
in private Intranets with the global access of the public
Internet.  ISLD has five regional data centers in Asia, Europe,
and the US connected to ISPs in more than 20 countries, and
maintains over 1200 online content distributors including
America Online, The Wall Street Journal, and CNBC.com.

ISLD has been slowly sinking into the ocean since early December
of last year, when a slew of upgrades propelled shares north of
$155.  Falling back to consolidate between $75-90, ISLD slowly
began moving higher in February.  Peaking at $129.50 at the
beginning of March, it has been a downhill slide ever since.
The quick correction on the NASDAQ sapped any upward momentum
that may have been building and the issue continued to
deteriorate, even as the NASDAQ began to recover.  Increasing
volume is confirming the slide, hitting almost 2 million shares
on Friday.  ISLD is now sitting just above the $80 support level
established in January and has broken through the 50-dma
(currently at $97.75).  In addition to the 50-dma, ISLD will
likely see resistance near $92.  In the interest of attractive
entry points, we would like to see a move up to resistance
before resuming the downtrend.  Given the strength of the
decline though, we may not get that lucky.  If the issue keeps
sinking and the volume doesn't dry up, look to initiate new
positions as the price breaks below $80.

***Editor's Note: Lower strikes for April have not been created 

BUY PUT APR-95 SUH-PS OI=294 at $19.38 SL=15.00
BUY PUT APR-90*SUH-PR OI= 67 at $16.00 SL=12.50

Average Daily Volume = 1.32 mln


CKFR - Checkfree Holdings Corporation $70.19 (-18.44)

CheckFree Corporation is the leading provider of financial 
e-commerce services and products.  Founded as an electronic 
payments processor in 1981, CheckFree launched the first fully 
integrated electronic billing and payment solution, CheckFree 
E-Bill, in March of 1997.  Today, CheckFree services enable 
three million consumers to receive and pay bills over the 
Internet or electronically.  CheckFree's Investment Services 
division provides a range of investment management services to 
help more than 255 institutions provide portfolio management 
and reporting services to their clients.  CheckFree clients 
manage over 820,000 portfolios totaling more than $400 billion 
in assets.  Software and services provided by CheckFree's 
Compliance and Financial Service division are used to process 
more than two-thirds of the nation's six billion Automated 
Clearing House (ACH) payments.  In addition, nearly 400 banks 
and businesses use reconciliation products and services the 
division provides.

The trading patterns in CKFR have been very negative ever since 
the NASDAQ hit 5K on March 10th.  The previous three sessions had
already put CKFR into a downtrending trading pattern, coming off 
its March 7th intraday high of $103.13.  With that said, a 
NASDAQ correction was the last thing that CKFR wanted to see.  
This past week's 12% correction wiped out any shareholder
hopes that CKFR would reverse its trend.  It was Thursday's 
session that was particularly eye-catching.  As the NASDAQ 
bounced off of 4455 and began its recovery, CKFR blatantly
violated its 50-dma of $80.88, closing down at $74.94.  And to 
top off the week, CKFR made a convincing decline to close below 
its 100-dma of $75.31.  So we ponder...where to now?  Well, if it 
continues to hold this downtrend and trades off technicals, we
very well may see CKFR fall into the low $60's and test support
around $62.  And below that, we could see $40's.  That would 
get ugly.  But this is a put play and it's okay to be a little
bearish, isn't it?  Even as news pours in off the wire about 
new partnerships and mergers for CKFR, it just doesn't seem to 
be significant to the prevailing trading patterns.  Thus, what
we really have here is a put play based on poor technicals.  
Next week shall be an interesting one as we watch closely to see 
how the markets move after having such a volatile expiration
week.  Any downward pressure on the NASDAQ certainly wouldn't
help CKFR re-establish a new support but it would benefit those 
put players in the crowd.  So see how the market begins the new
trading week to determine which way it may go and choose your 
entry points based on individual risk levels.

***Editor's Note: Lower strikes for April have not been created 

BUY PUT APR-80*FCQ-PP OI=136 at $13.75 SL=11.25
BUY PUT MAY-65 FCQ-QM OI=175 at $ 8.63 SL= 6.50 

Average Daily Volume = 1.42 mln


TERN - Terayon Communication Systems $188.56 (-66.44)

Terayon manufactures and sells cable modem systems that allow 
cable operators to deploy two-way broadband access to home 
users.  The modem allows users to access Pay-Per-View movies, 
Video-On-Demand and the Internet through a set top box.  The 
company's systems are based upon S-CDMA (Synchronous Code 
Division Multiple Access) technology.  Terayon competitor's 
include: Broadcom, 3Com, Motorola, and Nortel.  

Questionable technology, shaky comments, and heavy selling.  
Hmmm...smells of a put play.  Terayon is betting their S-CDMA
technology will become the broadband standard.  Many analysts 
are beginning to question Terayon's wager on their proprietary
technology.  The argument is whether S-CDMA is a superior 
technology to TDMA.  TDMA (Time Division Multiple Access) is 
the current industry standard for modems, in which BRCM is the 
largest supplier.  An organization known as CableLabs sets 
specifications for modem suppliers, and they believe TDMA will 
be the future technology for broadband access.  Also, CableLabs
is questioning recent comments made by Terayon officials.  
Citing executives from TERN have made inaccurate claims about 
their technology.  What's more, TERN's venture capitalists have 
sold almost all of their shares.  The recent action in TERN's 
stock reflects the concerns of traders.  The stock plummeted 
through it's 10-dma last week and hasn't looked back.  Volume 
has been increasing with the recent downtrend as traders continue 
to sell TERN.  The only support for the stock is down around 
$155.  Entry points can be found after any brief rallies.  Look 
for volume to pick up as the stock drifts lower.
BUY PUT APR-180*YGT-PP OI=539 at $25.88 SL=18.00 
BUY PUT APR-175 YGT-PO OI= 86 at $23.13 SL=15.75 
BUY PUT APR-170 YGT-PN OI= 82 at $20.88 SL=14.50 

Average Daily Volume = 1.17 mln

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The Option Investor Newsletter             3-19-2000
Sunday                        5 of 5


Technical Analysis: Consolidation Patterns...

There are a number of different historical patterns that can
help you make profitable trading decisions.  In most cases, the
overall trend of the issue is the fundamental component of any
formation.  The evolution of a sustained directional movement
usually begins with an event or noticeable change in character
and as the trend develops, surges in volume accompany the new
peaks, followed by periods of consolidation.  Some setbacks may
be very brief while others, especially after a series of small
advances, last for weeks or several months.  One of the most
difficult tasks in technical analysis is to determine whether
or not the major trend is intact.  Fortunately, there are a
number of ways to establish when an important change in trend
has occurred.

The study of any trend generally begins with a trend-line and
when this boundary is significantly violated, a change in
character is likely underway.  However, there are many cases
where the trend is briefly terminated but eventually regains
its momentum.  One common type of consolidation occurs when
the stock transitions into a narrow horizontal range, moving
back and forth within obvious limits.  The pattern generally
forms during the period of a few days and can often carry on
for weeks.  As the formation develops, trading volume tends to
shrink.  When the initial trend is bullish, the peaks of the
intermediate rallies may coincide with increased volume.  Of
course the issue will eventually emerge from the pattern and
if the breakout is to the upside, it will usually occur in
conjunction with an exponential increase in trading volume.
When this type of activity occurs, it is likely that the major
trend has resumed and further advances will follow.

After the upward movement is reestablished, there is always
the possibility that the recent resistance area will be tested
for support.  In most cases, a new influx of buying interest
will occur as the issue recedes to the previous consolidation
area (the top of the rectangle).  In fact, when a breakout from
this type of pattern occurs, it is common for the initial rally
to continue for a few days and then retrace to the highs of the
the preceding pattern before resuming the primary trend.  This
reaction is initiated by short term profit-taking that occurs
immediately after a significant upward movement.  Traders that
missed the original break-out often use the brief pullback as
a second-chance buying opportunity, thus creating new support
at the previous resistance level.  This kind of activity is
common near both the tops and bottoms of rectangular patterns,
depending on the nature (bullish or bearish) of the overall

Trading range (rectangle) patterns are among the most common
formations that appear in charts.  They can reflect areas of
consolidation (before an eventual continuation) or they may
signal an important change in character (Reversal pattern).
The secret to success is learning to identify when the chart
indicates a resumption of the primary trend as opposed to a
potential reversal.  The character of the overall movement is
often determined by the dimensions of the pattern and in most
instances, the range-bound trading allows the issue to gain
new strength before continuing higher.  For that reason, the
majority of these patterns (that occur during a bullish trend),
result in upside break-outs.  Two different examples of the
formation and its unique characteristics can be seen in the
recent charts of ELON or CDT...


NOTE: Using Margin doubles the listed Monthly Return! 

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

BIDS    5.34   6.81   MAR   5.00  1.06  *$  0.72  19.0%
ASPX   12.56  14.75   MAR  10.00  3.25  *$  0.69  10.7%
HEB    11.94  13.75   MAR  10.00  2.69  *$  0.75   9.1%
ANIC    6.94   7.88   MAR   5.00  2.31  *$  0.37   9.0%
PTEK    8.94   8.13   MAR   7.50  2.13  *$  0.69   8.8%
TSEM   21.00  35.50   MAR  17.50  4.63  *$  1.13   7.8% 
FSII   17.81  19.75   MAR  15.00  4.25  *$  1.44   7.7%
IMNR   15.75  11.88   MAR  10.00  6.38  *$  0.63   7.6%
GZTC   29.13  29.00   MAR  22.50  8.38  *$  1.75   7.3%
AND     8.88  12.75   MAR   7.50  1.94  *$  0.56   7.0%
SCTC   22.31  23.50   MAR  20.00  3.75  *$  1.44   6.7%
TLXN   20.78  22.63   MAR  17.50  4.00  *$  0.72   6.2%
SMSC   14.25  14.06   MAR  12.50  2.25  *$  0.50   6.0%
REMC   26.38  43.75   MAR  22.50  5.00  *$  1.12   5.9%
PCMS   23.06  20.59   MAR  17.50  6.38  *$  0.82   5.5%
MCRE   15.50  25.06   MAR  12.50  3.88  *$  0.88   5.5%
SIII   15.00  20.75   MAR  12.50  3.38  *$  0.88   5.5%
EPIC    9.56   8.75   MAR   7.50  2.50  *$  0.44   5.4%
WRLS   28.00  19.94   MAR  17.50 11.13  *$  0.63   5.4%
ELIX   21.75  25.00   MAR  17.50  4.88  *$  0.63   5.4%
RNBO   30.88  42.00   MAR  25.00  7.00  *$  1.12   4.1%
ITIG   43.44  40.75   MAR  30.00 14.25  *$  0.81   4.0%
GELX   17.81  18.25   MAR  15.00  3.75  *$  0.94   3.6% 
UBET    6.25   4.81   MAR   5.00  1.63   $  0.19   3.0%
MSGI   24.88  18.94   MAR  20.00  6.00   $  0.06   0.3%
KOSP   20.31  17.06   MAR  17.50  3.25   $  0.00   0.0%
DRMD   12.75   8.94   MAR  10.00  3.38   $ -0.43   0.0%
XICO   26.13  19.38   MAR  22.50  4.75   $ -2.00   0.0%

BIDS    7.13   6.81   APR   5.00  2.63  *$  0.50   6.9%
FSII   22.88  19.75   APR  20.00  4.75   $  1.62   6.5%
AND    16.13  12.75   APR  12.50  4.75  *$  1.12   6.1%
ESCM   17.50  14.38   APR  15.00  4.38   $  1.26   6.0%
COB    14.13  16.63   APR  10.00  5.00  *$  0.87   5.9%
THDO   15.75  14.06   APR  12.50  4.25  *$  1.00   5.4%
TLXN   25.75  22.63   APR  20.00  7.13  *$  1.38   5.4%
POSS   12.56  14.00   APR  10.00  3.25  *$  0.69   5.4%
EPTO   14.00  14.06   APR  10.00  4.75  *$  0.75   5.0%
EPTO   16.94  14.06   APR  12.50  5.25  *$  0.81   5.0%
IARC   27.63  21.16   APR  22.50  7.75   $  1.28   4.7%
MUEI   14.50  17.75   APR  12.50  2.81  *$  0.81   4.3%
TERA    8.81   7.13   APR   7.50  2.00   $  0.32   3.4%

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


Those investors with a bullish, long-term outlook on Youbet.Com
(UBET), will have another chance to reduce their cost basis by 
selling April calls.  Marketing Services (MSGI) rallied strongly
on Friday's news, forming a bullish technical reversal.  Exiting
on any follow-through rally may be prudent though rolling down
to an April $17.50 or $15 call is an option.  Kos Pharma (KOSP) 
has corrected with the Drug sector and is testing its first line
of support (the February consolidation area and 30 dma).  A 50%
retracement could take the stock price down to around $13.50.
Maybe a good time to exit at break-even?  Duramed (DRMD) received
good news on Monday and appears to be holding around the January
high, though the April options remain fairly weak.  Evaluate your
long term outlook - a 2 year weekly chart shows an interesting
perspective.  Xicor (XICO) appears to have confirmed Thursday's
"hammer-bottom" raising the probability for a short term rally.
Those with a long term bullish outlook could roll down with April
calls as Xicor's first line of resistance is near $20.50, and the
overall correction may not be finished.  Several of the April
candidates have corrected but remain bullish overall.  The weakest
is Information Architects (IARC) which may be signaling a change
of character.

NEW PICKS - Sequenced by Return Called (& Not Called)

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

RAMP   21.09  APR  17.50  MUB DW  6.00 246  15.09  16.0%  16.0%
BYND    5.75  APR   5.00  QYD DA  1.38 354   4.38  14.3%  14.3%
RMII   10.13  APR   7.50  RMU DU  3.25 0     6.88   9.0%   9.0%
SCUR   22.88  APR  17.50  UQU DW  6.50 149  16.38   6.8%   6.8%
AND    12.75  APR  10.00  AND DB  3.38 282   9.38   6.7%   6.7%
IGEN   28.25  APR  22.50   GQ DX  6.88 0    21.37   5.3%   5.3%
MPPP   29.25  APR  20.00  PUM DD 10.25 70   19.00   5.3%   5.3%

Company Descriptions

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


AND - Andrea $12.75  *** New Entry Point? ***

Andrea designs, develops and manufactures audio technologies and 
equipment for enhancing applications that require high performance
and high quality voice input. The company has several patented 
and patent-pending audio products that enhance a wide range of 
audio products to reduce background noise and ensure the optimum
performance of voice applications.  Though revenues were lower for 
the fourth quarter, Andrea is expanding its technology portfolio 
and strategic alliances, which should boost future revenues.  AND
has broken above a stage I base on heavy volume and recently
reached a new 52 week high.  Some consolidation was expected and
Andrea has now reached a 50% retracement.  We favor a cost basis 
near the long-term 150 dma and the year-old support areas at the 
sold strike. 

APR 10.00 AND DB Bid=3.38 OI=282 CB=9.38 RC=6.7% RNC=6.7%

Chart =


BYND - Beyond.com $5.75  *** The Base Begins? ***

Beyond.com is an e-commerce services provider that builds and
manages websites for businesses and sells software and computer
related products to the government, corporate and consumer
markets.  Their eStore division allows software publishers,
hardware manufacturers and systems OEMs to put up a dot com store
on the Internet in a few weeks.  Beyond.com's movement into B2B
appears successful with several recent contracts.  The recent 
jump in price occurred after the IRS renewed its $15 million 
contract.  Beyond offers favorable speculation for traders with
a long-term perspective.  Several technical indicators are forming 
a positive divergence and the issue is under heavy accumulation.

APR 5.00 QYD DA Bid=1.38 OI=354 CB=4.38 RC=14.3% RNC=14.3%

Chart =


IGEN - IGEN International $28.25  *** Ready to Break-out? ***

IGEN International develops, manufactures, and markets diagnostic
systems utilizing IGEN's patented ORIGEN technology, which is
based on electrochemiluminescence, a universal diagnostic
platform, which addresses many segments of the diagnostics
industry.  IGEN and its associates design ORIGEN-based diagnostic
systems for multiple segments of worldwide diagnostic market,
from hospital and clinical reference laboratories to patient
point-of-care, life science research, and industrial uses.  The 
quick rise in IGEN's price in January resulted after a favorable
"preliminary" injunction was issued against Roche Diagnostics 
regarding a breached license agreement.  IGEN recently announced
that it has introduced an Infectious Disease Assay Panel that will
enable technology and pharmaceutical companies to use genomic drug
targets to discover treatments for bacterial and viral diseases, 
including AIDS.  We favor the cost basis below the year-long 
trading range.  Due diligence is mandatory!

APR 22.50 GQ DX Bid=6.88 OI=0 CB=21.37 RC=5.3% RNC=5.3%

Chart =


MPPP - MP3.com $29.25  *** Records to Cassettes to Cds to MP3? ***

MP3.com is developing an innovative approach to the promotion and
distribution of music.  The MP3.com Web site offers a variety of
attractive benefits to artists and consumers.  They use the
Internet and file formats that make music files smaller to enable
artists to distribute and promote their music and to enable
consumers to conveniently access this music.  Lots of news on MP3
which is embroiled in litigation with the Recording Industry 
regarding copy right laws.  MP3 recently formed MSP Group in 
response to the growing B2B demand for more ubiquitous access to 
music content and services.  With the failed merger of CDNow and
Columbia House, MP3 may have an opportunity for a partner.  We 
favor the improving technicals as investor speculation appears to
be driving the price higher.

APR 20.00 PUM DD Bid=10.25 OI=70 CB=19.00 RC=5.3% RNC=5.3%

Chart =


RAMP - Ramp Networks $21.09  *** New High Soon? ***

Ramp Networks is a provider of shared Internet access solutions
for the small office market. The WebRamp product family allows
multiple users in a small office to share the same Internet
connection simultaneously while optimizing each user's access
speed.  Favorable earnings in February sparked the latest rise
in price that was unaffected by the following downgrade to a 
"buy."  The technicals suggest a new all-time high may not be 
far behind.  We favor a conservative position near the 150 dma
and the February high.

APR 17.50 MUB DW Bid=6.00 OI=246 CB=15.09 RC=16.0% RNC=16.0%

Chart =


RMII - RMI.Net $10.13  *** Signs of a Breakout? ***

RMI.Net is a provider of E-Business and communication services
to small- and medium-sized business enterprises, as well as
dial-up residential customers.  Through their nationwide network
of owned and leased dial-up access sites, subscribers are able 
to access the Internet in 90 of the largest 100 metropolitan 
areas in the U.S.  RMI.Net's acquisitions appear to be working 
with record growth in sales of its DSL service and an earnings
"warning" on expected record revenues for the year.  We favor the
move above the 150 dma and nearby technical support.  Earnings
are expected on March 30.

APR 7.50 RMU DU Bid=3.25 OI=0 CB=6.88 RC=9.0% RNC=9.0%

Chart =


SCUR - Secure Computing   $22.88  *** Web Security ***

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

APR 17.50 UQU DW Bid=6.50 OI=149 CB=16.38 RC=6.8% RNC=6.8%

Chart =

Big Cap Naked Puts 

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

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

A      121.00  115     A-PC   10.13   3025   33%     120
ABGX   312.00  280   AXY-PP   40.13   7800   51%     280
ABGX   312.00  290   AXY-PR   46.25   7800   59%     280
ABGX   312.00  300   AXY-PT   52.50   7800   67%     280
AFCI    72.06   70   AQF-PN   11.50   1802   64%      70
AFCI    72.06   65   AQF-PM    8.88   1802   49%      70
AMCC   266.00  260   AZV-PL   38.50   6650   58%     260
AMCC   266.00  250   AZV-PJ   33.13   6650   50%     260
ARBA   266.19  260   RBU-PL   21.75   6655   33%     260
ASDV    86.31   80   QCI-PP    8.75   2158   41%      80
BEAS   106.00  100   BUC-PT   10.50   2650   40%     105
BLDP    98.75   95   DFQ-PS   11.50   2469   47%      96
BOBJ   128.00  120   BBJ-PD   12.63   3200   39%     125
BRCD   159.06  150   UBZ-PJ   14.13   3977   36%     140
BRCM   217.56  210   RDU-PB   19.38   5439   36%     215
CIEN   142.63  140   UEE-PH   15.63   3566   44%     140
CLRN   126.13  120   KGQ-PD   14.13   3153   45%     125
CMTN    92.38   90   KUA-PR    9.63   2310   42%      92
DITC    96.50   90   PUI-PR   12.50   2413   52%      95
ENTU   110.00  100   QYE-PT   12.00   2750   44%     108
ENZ     79.31   75   ENZ-PO    9.88   1983   50%      78
EXDS   151.25  145   QED-PH   14.38   3781   38%     146
EXDS   151.25  150   QED-PJ   16.88   3781   45%     146
FFIV    95.25   90   FQL-PR   10.88   2381   46%      94
HLIT   116.88  110   LQL-PB   11.25   2922   39%     115
IMNX   174.00  170   QUV-PN   27.75   4350   64%     174
IMNX   174.00  165   QVU-PM   24.88   4350   57%     174
JNPR   249.94  240   JUY-PH   25.63   6249   41%     240
KLAC    80.00   75   CKV-PO    6.00   2000   30%      77
MSTR   226.75  220   MKZ-PD   31.50   5669   56%     220
MSTR   226.75  210   MKZ-PB   26.25   5669   46%     220
NTAP   200.75  190   ULM-PR   21.00   5019   42%     195
NVDA    99.81   90   UVA-PR   10.75   2495   43%      96
NVDA    99.81   95   UVA-PS   16.00   2495   64%      96
PCLN    90.00   85   PUZ-PQ    7.63   2250   34%      90
PEB    100.94  100    BE-PT   12.38   2524   49%     100
PHCM   159.25  155   UMN-PK   18.13   3981   46%     155
PMCS   210.25  190   SZI-PR   18.00   5256   34%     200
PMCS   210.25  200   SZI-PT   22.25   5256   42%     200
PUMA   171.50  160   YCQ-PL   16.38   4288   38%     160
QLGC   155.50  140   QOV-PH   14.75   3888   38%     150
QLGC   155.50  150   QOV-PJ   19.88   3888   51%     150
RIMM   132.88  130   RUP-DF   15.38   3322   46%     128
SCMR   144.50  140   QSM-PH   15.38   3613   43%     140
SDLI   217.00  200   QZL-PT   19.00   5425   35%     200
SDLI   217.00  205   QZL-PA   20.75   5425   38%     200
SDLI   217.00  210   QZL-PB   23.63   5425   44%     200
SEBL   139.94  130   SGW-PF   10.38   3499   30%     134
SNDK   116.94  105   SWF-PA   13.75   2924   47%     113
SNDK   116.94  110   SWF-PB   16.38   2924   56%     113
SONE   101.75  100   QFB-PT   11.00   2544   43%     100
TIBX   119.63  115   PIW-PC   16.13   2991   54%     118
VIGN   236.00  230   GGV-PF   35.50   5900   60%     233
VRTS   164.81  150   VUQ-PJ   12.75   4120   31%     155
VRTS   164.81  155   VUQ-PK   14.75   4120   36%     155
VRTS   164.81  160   VUQ-PL   17.38   4120   42%     155

For an Excel Spreadsheet of this information, click here to 




AGGRESSIVE   SELL PUT APR-160 VUQ-PL at $17.38 = 42%  
MODERATE     SELL PUT APR-155 VUQ-PK at $14.75 = 36%



AGGRESSIVE   SELL PUT APR-210 QZL-PB at $23.63 = 44%
MODERATE     SELL PUT APR-205 QZL-PA at $20.75 = 38%



AGGRESSIVE   SELL PUT APR-150 QED-PJ at $16.88 = 45%    
MODERATE     SELL PUT APR-145 QED-PI at $14.38 = 38%


Option Trading Basics: Open Interest And Volume...

In the options market there are a number of terms and concepts
that are essential to successful trading.  The inherent complexity
of derivatives often inhibits a complete understanding of their
fundamental traits and with the large number of available options
for each stock, how can a new investor identify which positions
are best for a particular outlook or strategy?  Experienced option
traders generally follow a few simple guidelines when evaluating
potential candidates.

Most traders incorporate Open Interest data along with Trading
Volume analysis to distinguish favorable positions.  Open Interest
is the net number of open option contracts in a specific series
and Volume is simply the number of contracts traded on a given day.
The open interest figure increases (it might be more accurate to
say that an open interest is created) when a trader opens a new
position by purchasing an option from another trader who did not
previously hold a position in that option.  When the position is
closed (by selling the option), the open interest will either
remain the same or go down.  As an example; if the option was sold
to a trader who did not have a position before, or was already
long, the open interest does not change.  If the option was sold
to someone who had a short position, the open interest decreases
by one.  Simple right?  

In most cases, low open interest reflects a market lacking in
liquidity and indicates those instruments which may be relatively
more sensitive to small trading volumes.  When there are high
levels of open interest, option prices will be more fairly valued
but favorable fluctuations are likely to be quickly consumed by
the market due to the fact there are a number of participants
eager to open new positions or sell for profits.

As with stocks, low trading volume generally reflects uncertainty
regarding the direction of the market whereas high volume suggests
a significant level of confidence in the indicated trend.  When
volume is high during a bullish move and remains low during
corrections, the inference is the market is in a well-established,
bullish trend.  In contrast, when volume is high during a market
correction and light during recoveries, the indication is bearish.
Of course with option volume and open interest, the levels of
activity are always relative and more importantly, they need to be
adjusted for timely analysis as exchanges tend to issue open
interest data a day in arrears of volume figures.

Volume and Open Interest alone are not useful determinants of
market direction, but when evaluated in conjunction with other
indicators, some traders believe they can help determine whether
a trend is likely to reverse or continue.  In the case of call
options; when both open interest and the price of the underlying
are increasing, the indication may be that buyers are moving into
the issue as the bullish trend develops.  If on the other hand,
open interest is increasing while prices decline, new sellers are
outpacing buyers in what is probably a technically weak market.
They may be hedging portfolio stock or speculating on the maximum
price of the issue (selling premium).  A decline in open interest
while the underlying is falling in value may simply indicate a
liquidation of long positions and likely a technically strong
market overall.  The reasoning behind this assumption is declining
open interest suggests no new selling; no indications of hedging
and the bearish traders are unwilling to speculate on the magnitude
of the rally.  When open interest declines while the price of the
underlying increases, the implication is most likely a weak market;
as new buyers that normally accompany a bullish move are lacking.

Understanding the basic characteristics of options will help you
recognize how each component comes into play, and ultimately prove
to be important in assisting with educated and profitable trading

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


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

EXLN   22.13  17.81   MAR  17.50  0.56  *$  0.56  24.4%
ESPI   12.75  12.44   MAR  10.00  0.50  *$  0.50  23.7%
ELIX   21.00  25.00   MAR  17.50  0.50  *$  0.50  20.1%
SCTC   24.38  23.50   MAR  17.50  0.63  *$  0.63  16.6%
PLNR   15.88  13.25   MAR  12.50  0.25  *$  0.25  15.8%
SCTC   25.00  23.50   MAR  20.00  0.38  *$  0.38  15.3%
WSTL   25.88  38.19   MAR  17.50  0.69  *$  0.69  13.2%
ANET   12.69  11.94   MAR  10.00  0.25  *$  0.25  13.0%
TSEM   27.25  35.50   MAR  22.50  0.38  *$  0.38  12.6%
ZONA    7.69   9.25   MAR   5.00  0.31  *$  0.31  12.1%
BCRX   32.75  29.94   MAR  25.00  0.38  *$  0.38  11.9%
WSTL   31.50  38.19   MAR  22.50  0.56  *$  0.56  11.8%
NTRX   31.13  23.25   MAR  20.00  0.69  *$  0.69  11.2%
CLPA   44.81  31.75   MAR  20.00  0.75  *$  0.75  11.2%
MSGI   23.75  18.94   MAR  17.50  0.38  *$  0.38  10.7%
TSEM   20.13  35.50   MAR  15.00  0.56  *$  0.56  10.6% 
CRUS   20.31  19.88   MAR  15.00  0.38  *$  0.38   9.6%
PTEC   20.63  22.00   MAR  15.00  0.63  *$  0.63   9.6%
RWAV   10.56  10.06   MAR   7.50  0.31  *$  0.31   9.3%
PGEX   23.13  20.00   MAR  17.50  0.50  *$  0.50   8.5%
IDTC   31.50  32.81   MAR  20.00  0.50  *$  0.50   8.3%
SKYC   28.63  27.97   MAR  20.00  0.44  *$  0.44   8.0%
PILT   33.94  49.88   MAR  22.50  0.63  *$  0.63   7.4%
EXLN   23.00  17.81   MAR  15.00  0.31  *$  0.31   7.1%
MSGI   24.88  18.94   MAR  17.50  0.44  *$  0.44   7.1%
PTEC   23.06  22.00   MAR  17.50  0.38  *$  0.38   6.6%
AXTI   31.94  30.06   MAR  17.50  0.50  *$  0.50   6.3%
RNBO   30.88  42.00   MAR  22.50  0.38  *$  0.38   5.0%
WPZ    15.31   9.75   MAR  10.00  0.38   $  0.13   4.3% 
XICO   26.13  19.38   MAR  20.00  0.44   $ -0.18   0.0%

CONV   12.81  12.13   APR  10.00  0.56  *$  0.56  13.0%
MADGF  14.25  11.50   APR  10.00  0.50  *$  0.50  10.8%
PCMS   23.19  20.59   APR  15.00  0.81  *$  0.81  10.8%
ZONA   10.88   9.25   APR   7.50  0.38  *$  0.38  10.7%
ISIP   24.00  16.63   APR  15.00  0.75  *$  0.75   9.8%
SCUR   26.50  22.88   APR  17.50  0.75  *$  0.75   9.0%
OXGN   23.50  20.88   APR  17.50  0.50  *$  0.50   7.0%

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


Xicor (XICO) may have confirmed Thursday's "hammer-bottom"
which should allow for a favorable exit next week.  Selling
the April $20 call or rolling down to the April $17.50 call
remain viable options, depending on your risk tolerance.
Xicor's first line of resistance is near $20.50.  Worldpages.Com
(WPZ) is still working off an oversold condition and is looking
fairly weak, though rolling down to an April $7.50 call is
possible.  Several of the April candidates have corrected but
remain bullish overall.


Duane Reade (DRD) offered a favorable exit on the oversold rally
last week for a small profit of $0.25.  The more aggressive 
traders who held to expiration realized a maximum profit. 

NEW PICKS - Sequenced by ROI

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

CYOE   10.75  APR   7.50  QTO PU  0.44  566   7.06  17.0%
SPNW   20.75  APR  15.00  NUH PC  0.75  149  14.25  15.3%
RSLC   23.88  APR  17.50  QRL PW  0.69  621  16.81  12.6%
MCRE   25.06  APR  15.00  MQZ PC  0.69  20   14.31  12.1%
INSO   16.06  APR  10.00  IJQ PB  0.44  10    9.56  12.0%
NUHC   17.56  APR  12.50  NTQ PV  0.31  25   12.19   8.1%
CDT    34.31  APR  25.00  CDT PE  0.56  7    24.44   7.5%

Company Descriptions

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


CDT - Cable Design Technology  $34.31  *** Up, Up And Away! ***

Cable Design Technologies designs and manufactures specialty
electronic data transmission cables and network structured wiring
systems.  CDT products include high performance copper, fiber
optic and composite cable constructions, connectors and component
assemblies that are used in network communication, interconnect,
wireless, commercial aviation, automotive, automation & process
control and other applications.  Network Communication products
encompass the cable and components to complete the end-to-end
wiring system structure of local and wide area networks, as well
as outside communication, switchboard and equipment cable.  Their
other products include climate control, video distribution and
security and signal systems, electronic cards and surveillance.
Shares in CDT soared recently after the company said it received
a multi-million dollar order for fiber-optic cable. Demand for
fiber-optic cable is expected to increase by 25% annually over
the next few years and CDT has committed intensify their focus on
the development and acquisition of fiber optic products utilized
in communications, wireless, networking, video, CATV and Internet

APR 25.00 CDT PE Bid=0.56 OI=7 CB=24.44 ROI=7.5%

Chart =


CYOE - Coyote Network Systems  $10.75   *** New Range? ***

Coyote Network Systems provides telecommunications products,
international long distance services and network services,
primarily to entrepreneurial carriers such as domestic and
international long distance providers, competitive local exchange
carriers and Internet service providers.  Their products include
the DSS Switch, which provides cost-effective and versatile access
to the public switched telephone network and the Carrier IP
Gateway, a scaleable Internet Protocol solution.  They also provide
network integration and customer support services.  Coyote's new
plan is to deliver applications to the desktop using a simple
telephony-based Internet appliance over their own branded network.
They expect to aggressively grow a carrier customer base through
applications that include e-mail, unified messaging and other
transaction-based services.  The bullish technical outlook is the
basis for this position.

APR 7.50 QTO PU Bid=0.44 OI=566 CB=7.06 ROI=17.0%

Chart =


INSO - Inso Corporation  $16.05  *** Bottom Fishing! ***

Inso supplies software solutions to store, manage, share, and
publish electronic information.  They provide software solutions
to manage and distribute all forms of electronic information,
from simple memos to complex technical manuals, in environments
ranging from desktop computers to the Internet.  With enterprise
license agreements, integration in popular software products,
and bundling agreements, Inso technology is installed on more
than 70 million desktops worldwide. Their products are currently
focused on Electronic Publishing Solutions, Document Exchange,
and Product Data Management.  Inso shares plummeted in February
after the company warned of lower-than-expected revenue for the
fourth quarter and said it's considering the potential sale of
the company.  Now the worst appears to be over and the success
of their subsidiary, eBusiness Technologies is generating new
interest.  A cost basis near $10 offers favorable risk/reward

APR 10.00 IJQ PB Bid=0.44 OI=10 CB=9.56 ROI=12.0%

Chart =


MCRE - MetaCreations  $25.06  *** On The Move! ***

MetaCreations is focused on e-commerce visualization solutions
for the World Wide Web.  MetaCreations' strategy is centered on
the company's MetaStream technology and software tools designed
to make the interactive use of photo-realistic 3D on the Web
practical and pervasive.  MCRE's current operations are focused
exclusively on its subsidiary, MetaStream.com, a leading provider
of complete solutions for creating and deploying virtual products
for e-commerce.  MCRE's fourth quarter revenues were lower than
prior quarter's as a result of the decision to no longer focus on
one-time MetaStream technology licenses, in favor of implementing
a recurring broadcast licensing model.  The new bullish trend is
intact and our cost-basis is near recent technical support.

APR 15.00 MQZ PC Bid=0.69 OI=20 CB=14.31 ROI=12.1%

Chart =


NUHC - New Horizons Electronics  $17.55  *** Own This One! ***

Nu Horizons Electronics is engaged in the distribution of high
technology active and passive electronic components.  They are
also an export distributor of electronic equipment and a contract
assembler of circuit boards and related electromechanical devices
for various original equipment manufacturers.  Active and passive
components distributed by Nu Horizons include memory chips,
microprocessors, digital and linear circuits, microwave, RF and
fiber optic components, transistors and diodes, capacitors,
resistors and related networks.  These products are utilized by
electronics manufacturers including industrial instrumentation,
computers and peripheral equipment, consumer electronics,
telecom equipment, and a wide variety of other manufacturers.
Simply a good company with solid fundamentals and a bullish
technical outlook.

APR 12.50 NTQ PV Bid=0.31 OI=25 CB=12.19 ROI=8.1%

Chart =


RSLC - RSL Communications  $23.88  *** Expanding Telecom ***

RSL Communications is a rapidly growing multinational telecom
company that provides a broad array of services, with a focus
on international long distance voice services to businesses in
key markets.  RSLC also provides domestic long distance along
with fixed and wireless, calling card, data, Internet, private
line and other value-added telecommunications services.  RSLC
has expanded through acquisitions, strategic investments, joint
ventures and alliances.  The recent agreement to acquire REDNET,
one of the UK's leading B2B Internet Service Providers is seen
as a favorable move and it follows their announcement of record
fourth quarter consolidated and European results and plans to
emphasize the growth of its European businesses.

APR 17.50 QRL PW Bid=0.69 OI=621 CB=16.81 ROI=12.6%

Chart =


SPNW - Shopnow.com  $20.75  *** Internet Retail ***

SPNW provides an end-to-end solution that enables businesses to
engage in e-commerce with other businesses, merchants and
shoppers.  SPNW operates an e-commerce network (the ShopNow
Network) comprised of online marketplaces and web sites of
clients.  Their website provides access to thousands of merchants
and the products available cover a broad array of consumer goods
and services.  These include floral, electronic, automotive, and
apparel, and services include travel, legal, and health, as well
as other categories.  SPNW announced this month that their
b2bnow.com network, the company's global business-to-business
portal, added 40,000 new business customers and the growth has
spurred investor interest.  We favor recent bullish reversal and
the potential for significant upside movement.

APR 15.00 NUH PC BID=0.75 OI=149 CB=14.25 ROI=15.3%

Chart =


Dow Rests While Nasdaq Rallies..

Friday, March 17

Stocks ended mixed Friday with consolidation in blue-chips and
continued recovery in technology issues.  The Dow Industrials
closed down 35 points at 10,595 while the Nasdaq rose 80 points
to 4798.  The S&P 500 index ended 6 points higher at 1464.  The
volume on the NYSE was heavy at 1.3 billion shares with declines
beating advances 1,582 to 1,411.  In the bond market, the 30-year
Treasury rose 18/32, bid at 103 10/32, where it yielded 6.00%.

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

Kroger       KR      JUL17C/APR17C   $0.93   debit   calendar
Andrew       ANDW    JUL15C/APR25C   $8.50   debit   diagonal
MetroMedia   MFNX    MAY60C/APR80C   $17.00  debit   diagonal

Another session of volatile trading help reduce the opening prices
in our new spread positions.  ANDW dropped $1.50 in the first few
minutes of trading, offering an excellent entry debit.  MFNX also
fell at the open, providing a second favorable opportunity.  The
surprise of the day was KR, which initially traded in a small
range but rallied to a midday high of $17.50 and finished up $1.12
at $16.68.  Our calendar spread enjoyed the benefits of favorable
opening disparities and passed through a brief profitable period
in early trading.  Now the issue will be monitored for continued
upward movement and the first resistance level near $17.50 to $18
should provide a decisive test of the current rally.

Portfolio plays:

The technology sector continued to recover in today's session as
Networking and Hardware issues enjoyed impressive rallies while
Industrial stocks receded from recent gains.  Trading was choppy
as a result of the simultaneous expiration of options on stocks,
indexes and futures.  The excessive volatility over the past month
has produced some incredible gaps in market breadth and the large
upside movements may be finally be giving way to more sustainable
trends.  After a brief reprieve, the leading technology issues are
expected to continue higher, even in the face of rising interest
rates and only a significant change in the FOMC's future economic
outlook will alter the current course of the high-tech revolution.

Our portfolio finished the month in excellent fashion with the
overwhelming majority of plays profitable.  The Credit-Spreads
section was one short of a perfect performance and even the
losing position; Level 3 (LVLT) offered a number of profitable
exit opportunities.  Most of the April Debit Spreads closed at
maximum profit and the few negative plays were far outpaced by
winning positions.  Our time selling techniques in the long-term
portfolios; Covered-Calls with LEAPS and Calendar Spreads have
performed very well and the Straddles section produced the best
play of the period with a 400% return on LHS Group (LHSG).  The
strategy of the month; Diagonal Spreads also produced a number of
short-term winners with excellent returns.  Of course the market's
movement dictates our success and now the difficulty will be in
identifying the issues that will continue to move higher in the
coming weeks.  With any luck, the bullish trends in Networking,
Internet Commerce, Computer Hardware and Wireless Telecom will
remain intact and our simple approach to conservative position
trading will provide additional opportunities for profit.  The
summary of monthly plays will be published in Tuesday's edition
of the OIN.

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


With the FOMC meeting next week and the market in a state of
incredible volatility, we decided to search for conservative
plays on issues that have demonstrated recent technical strength.  
These spreads are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on these 
positions so review each play individually and make your own
decision about the future outcome of the stock price.


XRX - Xerox  $25.81  *** On The Rebound? ***

Xerox provides a number of document solutions that enhance and
improve business productivity.  Their processing activities
encompass developing, manufacturing, marketing, servicing and
financing a complete range of document processing products and
solutions.  Black and white light-lens copiers represent almost
half of the company's revenues but many of Xerox' new digital
products replace or compete with their current equipment.  Their
new products include the DocuTech family of digital production
publishers, the DocuPrint family of black and white printers,
the DocuColor family of color copiers and printers and the
Document Center family of black and white digital copiers.

Xerox is on the move and the recent news of an alliance with
with Sharp and Fuji Xerox to deliver faster, cheaper inkjet
printing has put the company back in the limelight.  Together
the three will invest more than $2 billion in inkjet research,
development, manufacturing and marketing and Xerox will offer
a full line of low-cost inkjet products.  The combination is
designed to create an unprecedented force to challenge copier
giant Hewlett-Packard.  Xerox estimates that inkjet products
and supplies represent a $57 billion market opportunity with a
double-digit annual growth rate.  Within the next few months,
Xerox said it will begin launching personal inkjet printers,
copiers and multifunction machines in North America, Europe
and developing markets.

The reason for the change in character is obvious and with the
extreme volume and volatility in options, there are a number of
favorable disparities for spreads.  This position offers the
simplest approach.

PLAY (conservative - bullish/debit spread):

BUY  CALL APR-20.00 XRX-DD OI=6533  A=$6.25
SELL CALL APR-22.50 XRX-DX OI=12142 B=$4.12
INITIAL NET DEBIT TARGET=$1.88-$2.00 ROI(max)=25%

Chart =


AOL - American Online  $64.75  *** LEAPS/CC's ***

America Online is the world's leader in interactive services,
Web brands, Internet technologies, and e-commerce services.  The
company operates two worldwide Internet services: America Online,
with more than 20 million members, and CompuServe, with more than
2.2 million members; several leading Internet brands including
ICQ, AOL Instant Messenger and Digital City, Inc.; the Netscape
Netcenter and AOL.COM portals; Netscape Navigator & Communicator
browsers; AOL MovieFone, the nation's # 1 movie listing guide and
ticketing service; and Spinner Networks and NullSoft, leaders in
Internet music.  Through its alliance with Sun Microsystems, the
company develops and offers easy-to-deploy, end-to-end e-commerce
and enterprise solutions for companies operating in the E-conomy.
AOL's product groups are AOL Interactive Services, CompuServe
Interactive Services/AOL Studios, and AOL International.

American Online is probably one of the most well-known issues of
all the Internet-related companies and the stock receives a fair
share of coverage in the OIN.  There are numerous facets to the
company, the most important of which may be the pending merger
with Time Warner (TWX) but our position is simply based on the
improving technical outlook.  The correction appears to be over
and the trend is now firmly established with a bullish bias.  The
"in-the-money" LEAPS are costly but the play begins with no upside
risk.  Remember, if the short options are "in-the-money" at
expiration, you must buy them back to preserve the long-term

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JAN01-40 ZKF-AH OI=12103 A=$29.50
SELL CALL APR00-65 AOO-DM OI=36978 B=$4.62

Chart =


EGRP - E*trade Group  $29.25  *** Break-out! ***

E*Trade Group is a provider of online investing services and has
established a popular, branded destination Web site for investors.
The company offers automated order placement and execution, along
with a suite of products and services that can be personalized,
including portfolio tracking, charting and quote applications,
real-time market commentary and analysis, and other information
services.  E*Trade provides these services 24 hours a day, seven
days a week by means of the Internet, telephone (interactive voice
recognition), online service providers and direct modem access.
Their proprietary transaction-enabling technology supports highly
automated, easy-to-use and cost-effective services that empower
its customers to take control of their investment decisions and
financial transactions.

The financial sector is HOT and E*Trade has been waiting in the
wings for a reason to rally.  Robertson Stephens Senior Analyst
Scott Appleby provided the necessary impetus with some positive
comments on the eBrokerage industry and an upgrade for EGRP.  The
report identifies the sequential transaction growth estimates for
the March quarter and offers bullish estimates for the eBrokerage
leaders.  E*Trade is certainly a leader and the $3 move on Friday
may be just the boost needed to carry the issue to a new trading
range.  Our conservative position will require a small retreat in
Monday's option prices to allow a favorable entry.

PLAY (conservative - bullish/debit spread):

BUY  CALL APR-15 QGR-DC OI=245   A=$14.38
SELL CALL APR-25 QGR-DE OI=11128 B=$5.38

Chart =

Readers Request

TLXN - Telxon  $22.63  *** Favorable Consolidation! ***

Telxon designs, manufactures, integrates, markets and supports
transaction-based mobile information systems.  Their mobile
computing devices and wireless local area network products
are integrated with its customers' host enterprise computer
systems and third party wide area networks, enabling mobile
workers to process information on a real-time basis at the point
of transaction.  Telxon's products are sold worldwide for use in
key vertical markets, including retail, transportation/logistics,
warehouse/distribution, route sales and manufacturing.  They also
serve several segments of the emerging mobile services market,
such as field service, insurance claims processing and work force

TLXN is one of our recent covered-call favorites and this week a
subscriber requested a bullish spread position in the issue.  The
stock has made significant gains in the past few months and the
pattern of consolidation appears to be coming to an end.  With
support near the cost basis, this position offers a favorable
alternative to stock ownership.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JUN-12.50 TNQ-FV OI=73  A=$11.38
SELL CALL APR-20.00 TNQ-DD OI=323 B=$5.25

Chart =

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