The Option Investor Newsletter Wednesday 3-22-2000 Copyright 2000, All rights reserved. Redistribution in any form strictly prohibited. Posted online for subscribers at http://www.OptionInvestor.com Also provided as a service to The Online Investor Advantage ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 3-22-2000 High Low Volume Advance Decline DOW 10866.70 - 40.60 10917.30 10789.10 1,077,120k 1,635 1,315 Nasdaq 4,864.75 + 153.07 4900.42 4736.90 1,769,316k 2,513 1,699 S&P-100 810.55 + 3.68 813.52 802.00 Totals 4,148 3,014 S&P-500 1500.64 + 6.77 1505.08 1487.33 57.9% 42.1% $RUT 571.19 + 18.40 571.24 552.79 $TRAN 2651.65 - 16.16 2692.04 2645.97 VIX 22.99 - 0.35 23.91 22.73 Put/Call Ratio .46 ****************************************************************** No News?? OK, Let's Rally With the Fed behind us and no big economic news left this week, traders decided to make a run higher. Despite a modest opening, the Nasdaq slowly began to climb. You could tell that investors wanted to dip their toe in the pool before jumping in. After weathering some mid-day resistance at 4835, the Nasdaq comp took off and traders were swimming in profits. By 3pm EST, we hit 4900.42, which was the day high and backed off into the close. All in all, it was a flashback of the momentum we saw for 6 months. Nasdaq up, Dow down. A scenario we have become used to playing. The question here is, did we just fall for a bear trap? Could it be that the Dow needed a breather from an extended run and some money cycled back to the Nasdaq for the perceived value? If the Dow regains upside momentum tomorrow, this money could flow right back to the Dow. Let's face it, the Biotechs were due to bounce. The Semis were due to bounce. Not even a weak earnings report by Micron could stop the inevitable bounce that this index and these sectors were in need of. The Nasdaq did manage to close above the 10-dma which is positive, but the volume supporting the bounce was weak at 1.74 billion shares. Some of the big names looked tired too. Yahoo was breaking out over $200 late in the afternoon, but just couldn't mount any more upside, closing back under $200. It didn't help either to have Abby Joseph Cohen, chief investment strategist at Goldman Sachs, raise her target for the S&P 500 and DJIA, with no mention of an increase in her Nasdaq target. Sounds to me like she is a believer in the cyclical shift this year and maybe some consolidation for the Nasdaq. Tomorrow will be interesting to see if the Nasdaq can build on today's close over the 10-dma and possibly push above today's high of 4900. Expect that to be resistance initially. It would take a 36-point move to get there as we closed at 4864.69, +153 in one of the largest moves ever for the Nasdaq, but not out of line from what we have become accustomed to. You can see from the chart below that a good technical picture is forming. And it seems that when the Nasdaq runs this year, the Russell 2000 follows. The RUT was up 18.40 today to 571.19, but under it's 10-dma, which may be proof that the coast isn't clear yet. As far as the DJIA, it's hard to complain that it gave back 40-points after the mammoth 1000-point rise. It pulled back intraday to 10,800 a couple times and found solid support. It closed down 40.64 to 10,866.70. Volume was average at 1.07 bln, indicating a real lack of sellers. The S&P 500 pushed higher to close at a record high of 1500.64, up 6.77. Note the solid floor for the blue chips intraday today. We aren't that far from a test of 11,000. You have to give some credit to today's recovery to the 30-yr bond which rallied yesterday and held the gains today. The yield is sitting down at 5.97%. With the inverted yield curve, it doesn't have the same punch to boost the markets, but it is nice to see it moving in the right direction. I don't have to tell you homebuyers about the inverted curve though. The gist is that Greenspan and friends keep raising short-term interest rates and 5 and 10-year bonds (along with mortgage rates) have been unable to move lower with the 30-yr. A big portion of the long bond's move is based on the government's decision to retire some of this debt and limit new supply. The rebound in tech-related sectors made up the move on the Nasdaq. The Biotech sector jumped 10%, the Semis up 9.2%, and Software up over 3%. Other sectors moving higher include Internet, Telecom and Transports. The losers on the day were Gold, Cyclicals, and Healthcare. The VIX is nearing the low- end, but holding steady at just over 23. Speaking of the low-end, MU reported numbers low numbers last night. Sometimes it is amazing the way the market will absolutely brutalize a stock when they disappoint those oh-so demanding analysts with earnings. Remember LU last quarter when they missed the estimates. It sold off after-hours and opened down 20% the next day (making it a great LEAP play). But today, investors and analysts had a change of heart. Micron Technology announced earnings yesterday after the bell and disappointed the analysts by posting quarterly earnings of $0.58 per diluted share versus estimates of $0.74. They missed by $0.16, that's about 21% off. MU closed on Tuesday at $131.38 and after the report, it traded as low as $114 in after-hours trading. Investors ran for the exits and MU got fleeced. Although quick sellers may have gotten a better night sleep last night, MU will probably be in their nightmares tonight as it opened this morning at $129, as if nothing even happened. And to add insult to injury, MU closed today's session at $139.50. At least three analysts came to MU's defense this morning, raising earnings estimates and price targets. Just when you thought you had this market figured out, something bizarre like this happens. Today, Microsoft teamed up with Texas Instruments to expand its reach into the wireless arena. The two tech behemoths have entered into a pact to develop enhanced software capabilities for wireless handheld devices, such as Palm Pilots. This collaboration will involve MSFT's Windows CE operating system and TXN's programmable digital signal processors(DSP). The end result will be enhanced multimedia functions, such as wireless Web access, streaming audio and video, and even video- conferencing. MSFT and TXN said in a press release that the alliance will benefit software developers by allowing more flexibility in their software design for the variety of mobile Internet devices that are out on the market. MSFT remains determined to grab a piece of the wireless market and establish itself as a premier player. MSFT was up $0.50 at $103.25. TXN closed at $179.06, up $7.81. With the earnings season getting under way again, many expected earnings warnings the past couple of weeks. Yesterday, in a statement by GE CFO Keith Sherin, GE announced that it expects to "modestly exceed" analyst consensus estimates, citing "unusually strong momentum." GE was rewarding nicely as it rocketed to $150 in Tuesday's session and then today held solidly to close at $150.88, up $0.38. This is an important development for GE, who has been in a rut since trading at these levels in mid-January. Many consider GE to be a bellweather for the broader market and, with the sector rotation and shift towards DOW stocks during the past week, GE could lead the "old economy" stocks back to the glory days. Yet, don't be misled, GE is not just an old brick-and-mortar company. They are creating themselves into a an "old economy" hybrid, developing business units that will provide a full-range of service for Internet-based commerce. So what does the future hold? I wish I knew for certain, but I am anxious to see what tomorrow brings. If the Nasdaq can add to today's gains on better volume and push above 4900 on a closing basis, there would be reason to start believing the recovery is for real. After all, we are headed to earnings season. But a rollover tomorrow on another day of weak volume may be the kiss of death for at least another week. That would put us in a position to consolidate some more. And another disaster like MSTR and we could be retesting 4450. That could really dampen enthusiasm for the high-growth stocks. Don't be fooled by whatever happens early in the day too. The Nasdaq may open up after today's move, barring some bad news. The bottom line for the Nasdaq will be the volume. Enough with these less than 2 billion days. Let's rally crank out some good volume. Otherwise, I can't be convinced this is for real. On the other hand, if the DJIA picks up again on continuing strong volume, then 11,000 here we come. Look for the NYSE tech stocks to lead the way, along with the Financials. This move in the blue-chips is becoming more and more like the rally in fall of 1998 when the market crapped out in October only to quickly take off back to new highs. In all cases, proceed with caution and sell too soon. Ryan Nelson Asst. Editor *********** STOCK NEWS *********** Warner-Lambert Pulls Diabetes Drug By Cindy Christ If you or I suddenly lost more than $400 million in annual income, it likely would have a material impact on our lifestyles. But we are not corporate behemoths, to whom such a sum is little more than a drop in the ocean. That explains why Wall Street yawned Wednesday after Warner- Lambert announced it would comply with the Food & Drug Administration's request to pull its diabetes drug Rezulin from the market. The FDA made the request after 63 deaths, 90 liver failures and 7 liver transplants were linked to the drug since its introduction in 1997. "When considered as a whole, the pre-marketing clinical data and post-marketing safety data from Rezulin as compared to similar, alternative diabetes drugs indicate that continued use of Rezulin now poses an unacceptable risk to patients," said Dr. Janet Woodcock, Director of the FDA's Center for Drug Evaluation and Research. The administration said that two newer drugs, Avandia made by SmithKline Beecham Plc and Eli Lilly's Actos, offer diabetes sufferers a safer alternative. "Data to date show that Avandia and Actos, both approved in the past year, offer the same benefits as Rezulin without the same risk," the FDA said in a statement. Shares in New Jersey-based Warner-Lambert, whose merger with Pfizer (PFE) will create the world's second-largest pharmaceutical company after its completion in early summer, slid 1.5 percent, closing down $1.38 at $93.63. Pfizer (PFE) also traded lower, down $1.06, or 2.9 percent, at $35.63. UK-based SmithKline Beecham (SBH) was up $0.44, or 0.65 percent, at $67.44 in New York, and Eli Lilly (LLY) added $1.88, or 3 percent, to $63.56. Analysts said that Warner-Lambert's loss would be SmithKline's and Lilly's gain, but the estimated $400 million drop in sales would impact its bottom line by just a penny or two. Gruntal & Co. pharmaceutical analyst Jeffrey Kraws said the loss will have very little impact on the firm's prospects, and lowered his 2000 earnings view by 2 cents, to $2.47 from $2.49. Analysts estimate that after the Warner-Lambert/Pfizer merger, the combined company would have sales of $31 billion in 2000 and plenty of other drugs in the pipeline to pick up the slack. "So if they lose the $400 million Rezulin would have brought in, it's hardly a major event," said Brown Bothers Harriman analyst Mike Krensavage in an interview with Reuters. Severe liver toxicity has been known to occur with Rezulin since 1997, yet the drug saw tremendous use as the only treatment that restored the body's sensitivity to insulin, reducing the number of insulin injections a diabetes patient would need. Mounting evidence of severe liver problems in some users prompted the FDA to strengthen labeling requirements and recommend limiting the drug to users not helped by other therapies. In the last two years, Rezulin sales totaled about $1.3 billion. But since 1999, the controversial drug has steadily lost market share to Actos and Avandia amid growing safety concerns, leading some experts to suggest that if Warner hadn't pulled Rezulin, its sales would have dried up anyway. Public Citizen, a Washington, D.C.-based advocacy group, has asked the U.S. government to launch a criminal investigation of Warner-Lambert, alleging the company neglected to report safety data. Despite the controversy, Warner-Lambert maintains Rezulin's effectiveness in treating type 2 diabetes. "the company continues to believe that the benefits of the drug outweigh its associated risks," Warner-Lambert said in a statement. "However, repeated media reports sensationalizing the risks associated with Rezulin therapy have created an environment in which patients and physicians are simply unable to make well -informed decisions regarding the safety and efficacy of Rezulin," the company said. The FDA is urging Rezulin users to contact their doctors to discuss alternative treatments. *************** PLAY OF THE DAY *************** PUT *** CKFR - Checkfree Holdings Corporation $65.43 -0.56 (-4.75) 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. Most Recent Write-Up So far so good. The negative trend continues for CKFR. On Monday, CKFR opened just above its close on St. Patty's Day and that was as high as it would be. It quickly fell out of bed with a hangover and traded as low as $59.31, on volume of 2.1 mln shares, almost twice the ADV. Tuesday morning, CKFR got a bounce at $59 and regained some ground with the market's post-interest rate hike rally. Tomorrow will be a telling session to see if we get follow through on the NASDAQ's triple digit gain. These levels for CKFR may represent good entry points, as we will be looking for a retest of the $59 level. Target shoot for entries based on personal risk levels and watch to see if CKFR follows the broader market trend. Comments Well today, the NASDAQ posted another triple digit gain of 153 points. And what did CKFR do? It rolled over, falling $0.56. The combination of CKFR's already established downtrend and its inability to move up with the NASDAQ sets the stage for a possible dip to the $59 level. With the NASDAQ bumping into 4900 and staggering away quietly today, we will be watching it closely to see which way it feels like going tomorrow. Will we get another rotation between the DOW and NASDAQ? We'll have to see, but if NASDAQ goes south tomorrow, don't expect CKFR to rally. BUY PUT APR-65 FCQ-PM OI=22 at $7.63 SL=5.50 BUY PUT APR-60 FCQ-PL OI=21 at $5.13 SL=3.25 Average Daily Volume = 1.42 mln /charts/charts.asp?symbol=CKFR ************************************* BIG COVERED CALLS & NAKED PUT SECTION ************************************* The key phrase is "Extreme Volatility"... You just got to love it - or at least sell the over-priced option premiums it creates. If you bought calls or puts and didn't sell quickly, you may even hate it. The summary list reflects that our candidates did fairly well in March (100% profitable) even with the recent whipsaw corrections. Only when the market corrects sharply can one appreciate the true value of a conservative covered write (or deep OTM naked put). The current high-volatility conditions do offer the potential for tremendous profit, but at great risk. We prefer to focus on a high probability of a reasonable profit with low risk and reduced potential for loss. Summary of Previous Picks: NOTE: MARCH prices as of Friday's close Covered Calls: (Margin would double the listed Monthly Return) Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return ORCL MAR 70 68.25 79.81 $1.75 8.7% SCMR MAR 95 89.31 144.50 $5.69 6.5% FNSR MAR 110 106.43 124.63 $3.57 6.4% INKT MAR 125 119.63 231.63 $5.37 5.9% BOUT MAR 80 78.63 89.06 $1.38 5.9% LWIN MAR 80 75.63 90.50 $4.37 5.9% NEON MAR 55 52.00 82.25 $3.00 5.8% INSP MAR 145 135.56 209.50 $9.44 5.7% CRA MAR 130 124.62 130.00 $5.38 5.7% ITVU MAR 105 98.25 127.63 $6.75 5.6% SMTC MAR 55 52.75 64.00 $2.25 5.6% CHINA MAR 95 90.12 112.00 $4.88 5.5% TIBX MAR 65 61.79 119.63 $3.20 5.3% Split 3 - 1 FIBR MAR 55 51.75 111.63 $3.25 5.2% ENTU MAR 65 61.88 110.00 $3.12 5.1% PUMA MAR 95 91.50 171.50 $3.50 5.1% IMNX MAR 130 122.50 173.88 $7.50 5.0% CLRS MAR 90 87.87 124.75 $2.13 4.6% MUSE MAR 87 82.50 153.50 $4.50 4.5% Split 2 - 1 DITC MAR 62 58.94 96.50 $3.07 4.3% Split 2 - 1 BVSN MAR 56 54.54 76.50 $1.46 3.5% Split 3 - 1 AFCI APR 55 49.75 76.75 $5.25 7.3% ISSX APR 105 96.19 128.81 $8.82 6.3% ASYT APR 40 37.18 53.63 $2.82 6.2% DITC APR 90 83.38 98.06 $6.63 5.5% TGNT APR 80 75.25 82.44 $4.75 5.2% NXTV APR 125 117.71 159.81 $7.29 5.1% PUMA APR 135 125.75 146.63 $9.25 5.1% NEON APR 65 61.22 65.31 $3.78 5.1% Naked Puts: Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return BOUT MAR 80 78.06 89.06 $1.94 23.5% ORCL MAR 70 68.69 79.81 $1.31 20.6% DITC MAR 87 86.00 96.50 $1.00 14.1% SCMR MAR 85 81.50 144.50 $3.50 13.3% BVSN MAR 53 52.08 76.50 $1.25 10.9% Split 3 - 1 NEON MAR 50 48.44 82.25 $1.56 10.9% FNSR MAR 95 93.31 124.63 $1.69 10.8% CRA MAR 120 117.19 130.00 $2.81 10.3% PUMA MAR 90 87.87 171.50 $2.13 10.1% MUSE MAR 82 80.19 153.50 $2.32 9.9% Split 2 - 1 ENTU MAR 60 58.31 110.00 $1.69 9.8% CHINA MAR 85 82.62 112.00 $2.38 9.3% INSP MAR 130 125.37 209.50 $4.63 9.3% LWIN MAR 70 68.19 90.50 $1.81 9.1% ITVU MAR 105 102.94 127.63 $2.06 8.9% TIBX MAR 58 56.83 119.63 $1.50 8.5% Split 3 - 1 CLRS MAR 80 79.06 124.75 $0.94 7.4% HLIT MAR 95 92.50 116.88 $2.50 7.4% IMNX MAR 165 163.25 173.88 $1.75 7.3% INKT MAR 110 108.37 231.63 $1.63 7.3% VRSN MAR 185 182.25 202.13 $2.75 7.1% INSP MAR 180 178.19 209.50 $1.81 7.0% MRVC MAR 70 69.06 132.88 $0.94 5.9% PROX MAR 80 78.50 148.94 $1.50 5.2% ASYT APR 35 33.38 53.63 $1.63 11.5% AFCI APR 45 42.63 76.75 $2.38 10.1% NXTV APR 115 110.63 159.81 $4.38 9.9% NEON APR 55 52.94 65.31 $2.06 9.0% ISSX APR 90 86.38 128.81 $3.63 9.0% MU APR 85 82.25 141.00 $2.75 8.9% TGNT APR 70 67.94 82.44 $2.06 8.4% INKT APR 140 136.00 217.25 $4.00 7.6% PUMA APR 120 115.63 146.63 $4.38 7.4% IMNX APR 51 49.83 66.88 $1.83 7.4% Split 3 - 1 SFE APR 60 58.00 90.00 $1.42 6.3% Split 3 - 1 AFCI APR 45 43.81 76.75 $1.19 5.9% NEW PICKS We list favorable "in-the-money" covered write and "out-of-the- money" naked put candidates that offer conservative entry points into technically bullish charts, with reasonable monthly returns. The positions that we find favorable (and will track every week) will be marked by asterisks. Do not enter these trades unless you fully understand the strategy and various methods of manipulating the position should the stock price drop, or rise, and in the event you decide you want to keep the issue. **** CY - Cypress Semiconductor $53.31 *** Hot Sector *** Cypress Semiconductor designs, develops, manufactures and markets a broad line of high-performance digital and mixed-signal integrated circuits for a range of markets including data communications, telecommunications, computers and instrumentation systems. They offer over 425 products through their two business units, Memory Products and Non-Memory Products. Cypress' memory products division offers static random access memories (RAMs) and multi-chip modules. Non-Memory Products include programmable logic products and programming software, programmable skew clocking, data communication products, computer products, including clocks and Universal Serial Bus micro controllers, and nonvolatile memory products. The chip sector has been on the move in recent months and even the Micron earnings shortfall failed to stem the bullish trend. Cypress is one of the newcomers to the mid-cap semiconductor group and last week's upgrades are just beginning to have a real effect on the share value of the issue. Credit Suisse First Boston raised its price target on Cypress to $57 after reporting that the company is on track to beat the first quarter earnings estimates. Warburg Dillon Read also recently raised the Cypress earnings and price target after a positive meeting with company management. The target was raised to $60 based on a strong March quarter. Cypress is also currently benefiting from broad-based growth across several areas of its communications-rich product mix. We favor the opportunity to own it at a discounted price. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 45 CY DI 1047 10.38 42.93 4.9% *** Sell Put APR 40 CY PH 269 1.00 39.00 8.7% *** Sell Put APR 45 CY PI 221 2.19 42.81 14.6% Chart = /charts/charts.asp?symbol=CY **** IBIS - Ibis Technology $108.63 *** Leading-Edge Technology *** Ibis Technology is the leading manufacturer of high current oxygen implanters and leading supplier of SIMOX (Separation by IMplantation of OXygen) wafers to semiconductor manufacturers. SIMOX wafers are state-of-the-art silicon-on-insulator wafers, which enable the production of integrated circuits with significant advantages over circuits constructed on conventional bulk silicon or epitaxial wafers. These advantages include substantially reduced power consumption, more efficient low voltage operation and significantly improved speed. These characteristics make SIMOX-SOI wafers well suited for many com- mercial applications, including wireless communications devices such as cellular phones, portable and desktop computers, automotive electronics, telecom access networks and optical sensors. Ibis is another "hot" company in the chip sector and the group is expected to continue to outperform the overall market in the next few months. Analysts have issued a number of new upgrades in the sector and as earnings come out for the first quarter, there will be an influx of money into this bullish technology industry. The technical strength of IBIS is obvious and the recent move into triple digits suggests the trend is intact and will continue. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Put APR 80 UIB PP 251 1.06 78.94 4.7% Sell Put APR 85 UIB PQ 358 1.75 83.25 7.6% *** Sell Put APR 90 UIB PR 305 2.94 87.06 10.7% Chart = /charts/charts.asp?symbol=IBIS **** NT - Nortel Networks $134.00 *** Optical Dominance! *** Nortel Networks is a leading global supplier of data and telephony network solutions and services. They operate in two segments: carrier and enterprise. Its business consists of the design, development, manufacture, marketing, sale, financing, installation, servicing and support of data and telephony networks for carrier and enterprise customers. Customers include public and private institutions; local, long-distance, personal communications services and cellular mobile communications companies; cable television companies; Internet service providers and utilities. Nortel Networks has a presence in over 150 countries worldwide. Nortel has recently increased its optical network capability through several significant acquisitions. Investors are excited about Nortel's aggressive moves in the optical market and most analysts suggest the company should continue its buying binge to keep an edge over competitors in the hotly contested industry. This week the world's #2 network equipment supplier announced a deal worth $1.43 billion to buy CoreTek for its optical filter and laser technology. That deal and other recent purchases all fit into Nortel's plan to offer a start-to-finish optical network where traffic can enter, travel and exit a network without costly, time-consuming regeneration to electronic signals. Obviously demand is soaring for optical network equipment that can transport voice, data and video traffic at high speeds and Nortel is one of the leaders in the industry. Recent reports from research firms including Warburg Dillon Read, Ryan Hankin Kent, and Dell'Oro rank Nortel #1 for optical equipment sales and that bodes well for the fundamental future of the issue. Our plays however, are based strictly on the bullish technical indications and the opportunity to participate in the new trend with a conservative position. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Put APR 110 NTV PB 1803 1.63 108.38 5.3% Sell Put APR 115 NTV PC 1006 2.38 112.62 6.5% *** Sell Put APR 120 NTV PD 1122 3.75 116.25 8.8% Chart = /charts/charts.asp?symbol=NT **** PCLE - Pinnacle Systems $58.06 *** Split Run! *** Pinnacle Systems designs, manufactures, markets, and supports computer-based video post-production products to serve the broadcast, desktop and consumer markets. Their products use real time video processing and editing technologies to apply a variety of video post-production and on-air functions to multiple streams of live or recorded video material. These editing applications include the addition of special effects, graphics and titles. To address the broadcast market, they offer high performance, specialized Windows NT-based solutions for high-end, production and broadcast on-air applications. For the desktop market, they provide real time video manipulation and editing tools to support non-linear, computer-based, editing environments. To address the consumer market, they offer low cost, easy to use video editing solutions that allow consumers to edit their home videos using a personal computer, camcorder and VCR. Last quarter, Pinnacle's net sales were a record for the tenth consecutive quarter. They increased 60% over the same quarter last year and 24% sequentially. Their net income increased in line with sales but the big news was the announcement of a 2-for-1 split - effective March 24. Several new products and contracts over the last few months suggest that Pinnacle will continue with its string of sequentially increasing sales and income. The technicals remain strong as Pinnacle continues to climb into blue sky territory, something the stock has been doing for the last three years. We favor the technical support provided by the December high and a cost basis that offers a reasonable entry point into a stage II issue. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 50 PUC DJ 76 11.13 46.94 6.6% *** Sell Put APR 45 PUC PI 110 0.94 44.06 7.6% *** Sell Put APR 50 PUC PJ 0 2.31 47.69 13.4% Chart = /charts/charts.asp?symbol=PCLE **** PHCM - Phone.com $150.88 *** Sector Upgrade! *** Phone.com is a leading provider of software which enables the delivery of Internet-based services to mass-market wireless telephones. Their software products enable the delivery of Internet-based services to mass-market wireless telephones. Products include: UP.Link Server Suite, a product that network operators use to connect their subscribers' mass-market wireless telephones to Internet services; UP.Browser, a browser that is embedded in mass-market wireless telephones and enables wireless subscribers to access Internet services; UP.Smart, a suite of software applications that delivers personal digital assistant features to smartphones; and UP.SDK, a software development kit that Internet content providers and third-party developers use to create WML-compliant applications. Wireless Data and Communications stocks received a boost this week after a Robertson Stephens Senior Analyst reiterated "Buy" ratings on a number of stocks in the group. The report said that Phone.com has seen significant momentum during the first calendar quarter and is expected to announce another solid earnings report. The revenues will be supplemented by the recent acquisition of Onebox, a company that intends to capture a chunk of the emerging wireless Internet market with updated technology geared for mobile phones. Their new software service will allow people who use mobile phones to check a central email box, check voice mail, and respond to email with a voice message. Analysts say the products from Phone.com's new company will provide a powerful combination for wireless communications carriers and that's just what they need to become a leader in the industry. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 120 UMN DD 189 36.38 114.51 4.9% *** Sell Call APR 125 UMN DE 54 33.13 117.76 6.2% Sell Put APR 100 UMN PT 165 1.81 98.19 5.7% Sell Put APR 105 UMN PA 233 2.44 102.56 7.6% *** Sell Put APR 110 UMN PB 123 3.38 106.62 10.2% Sell Put APR 115 UMN PC 112 4.63 110.38 13.5% Sell Put APR 120 UMN PD 745 5.50 114.50 15.6% Sell Put APR 125 UMN PE 134 7.38 117.63 17.9% Chart = /charts/charts.asp?symbol=PHCM **** PHTN - Photon Dynamics $88.25 *** Own This One! *** Photon Dynamics is a supplier of array test, inspection and repair systems for the flat panel display (FPD) industry. Their systems are used to control, monitor and refine the manufacturing process to increase the yield of FPDs, to reduce materials loss, to transition new FPD designs from research and development to commercial production and to assist in the rapid start-up of new FPD manufacturing facilities. They offer a variety of products to inspect almost all commercially produced FPDs. These include Array Test Systems, Flat Panel Inspection Systems, and Array Repair Systems. Last year, Photon finalized its acquisition of CR Technology, a leading innovator of quality assurance and process control vision and x-ray inspection systems for semiconductor and electronics manufacturers. Photon is simply another hi-tech issue that has grown with the incredible expansion in the semiconductor group. Now the share value is once again at a new all-time high and the trend has been supported by heavy institutional buying in the past few months. Analysts have been bullish on the issue since late last year and the most recent brokerage opinion was outstanding. Wit Soundview analyst Michael O'Brien issued a "strong buy" rating on the stock based on increased estimates for fiscal year 2000 earnings. Now the question is, "where to from here"? The technical outlook is is positive but we will approach the position from a conservative viewpoint with a deep-in-the-money cost basis. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 70 PDU DN 0 21.75 66.50 5.3% *** Sell Put APR 65 PDU PM 0 1.06 63.94 5.7% *** Sell Put APR 70 PDU PN 0 2.06 67.94 10.6% Chart = /charts/charts.asp?symbol=PHTN **** YHOO - Yahoo $197.18 *** On The Move! *** Yahoo! is an Internet media company that offers a network of branded World Wide Web programming that provides broadcast media, personal communications and direct services. Yahoo! provides guides to online content, Web search capabilities, aggregated third party content, mail and community and personalization features. Yahoo! incorporates reference materials including real-time news, stock quotes, corporate earnings reports, mutual fund holdings, stock investing commentary, sports scores and commentary, weather and entertainment industry gossip, and organizes hypertext links to Websites featuring current events and issues of interest, such as elections, holidays and political issues. Yahoo! also offers includes Yellow Pages, maps, driving directions and classifieds listings and the opportunity for members to purchase goods and services such as books, music and videos, as well as other services such as automotive services, mortgages and brokerage services. There is not much to say about this Internet giant except that it has finally found its technical footing and appears well on the way to an attempt at a new all-time high. Tuesday's break above the recent resistance level near $180 signals a change in character and the developing trend may carry the issue well into the $220 range. With a number of new contracts and a move into the wireless delivery of web products, Yahoo will remain the King of Internet companies. Our conservative positions simply offer a choice of favorable entries into this widely popular stock. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 175 YUU DO 6985 32.13 165.07 6.1% *** Sell Call APR 180 YUU DP 9027 29.13 168.07 7.2% Sell Put APR 150 YMM PJ 5717 3.13 146.88 7.4% Sell Put APR 155 YUU PK 2465 4.25 150.75 9.9% *** Sell Put APR 160 YUU PL 2735 5.13 154.87 11.1% Sell Put APR 165 YUU PM 2434 6.63 158.37 12.6% Chart = /charts/charts.asp?symbol=YHOO ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. 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