Option Investor
Newsletter

Daily Newsletter, Thursday, 03/23/2000

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The Option Investor Newsletter         Thursday   3-23-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
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MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       3-23-2000           High     Low     Volume Advance Decline
DOW    11119.90 + 253.20 11136.60 10831.00 1,071,456k 1,830  2,179
Nasdaq 4,940.61 +  75.86  4975.66  4864.75 1,714,155k 1,157  2,062
S&P-100  831.70 +  21.15   834.12   806.19    Totals  2,987  4,241
S&P-500 1527.36 +  26.71  1532.50  1492.39            41.3%  58.7%
$RUT     573.79 +   2.60   577.91   571.19
$TRAN   2720.76 +  69.11  2724.35  2642.97
VIX       24.22 +   1.23    24.91    23.16
Put/Call Ratio       .41
******************************************************************

10,000 to 11,000 in Just 7 days

You used to have to wait for months to pass from one millennium 
mark to the next.  Welcome to the next generation of investing 
where it only takes 7 days to ramble over 1300 points on our 
blue-chip index.  The DJIA was sitting at 9800 last Wednesday 
when the bulls dug in and made a charge like none other we 
have seen in this index.  11,000 tried in vain to act as 
resistance this morning, but before the day was over, the curbs 
were in place due to the dramatic rise.  You can thank the 
stocks that have been working there way higher for the past 
week for today's gains too.  Strong Financials like Citigroup 
+2.94, Chase +6.94, Morgan Stanley +4.63 and good old American 
Express +8.25.  You wouldn't likely have found many traders 
saying "good old American Express" just two weeks ago when it 
was holding on by its fingernails to support at $130.  But 
here it is at $156 just two short weeks later.  Hewlett-Packard 
tacked on another +1.06, Alcoa chipped in +2.63, General Electric 
added +9.13 too, but the big winner of the day was Microsoft 
+8.63.  This was due to news that settlement talks have increased 
and some are expecting a resolution as early as next week.  The 
potential deal is not expected to result in a break-up or 
restructuring either.  Hey, either way is fine with me.  The 
sooner this gets put in the past, the better.  This will have a 
direct impact on the DJIA too, with MSFT now in the index.

You have to give credit to the "old economy" stocks.  A month 
ago they were being tossed around like a hot potato with no one 
willing to buy and hold.  Now they are like diamonds (no pun 
intended) and are leading this next leg of the rally in a 
continuing sign that sentiment is still strong.  It's not a 
matter of getting out of stocks, just shifting to the next sector 
set to rally.  The DJIA closed up a whopping +253 and just 12 
points under the day's high.  Volume was steady once again at 
1.07 bln shares.  Remember that little downtick yesterday where 
the DJIA closed off 40 points.  Apparently, that was the short-
term correction because back to the rally it was today.  In 
fact, lots of the Financials closed right on their day-high 
and aren't showing signs of stopping.  INTC took a breather 
today and may be back to rally mode tomorrow and who knows how 
high MSFT will run before stopping.  Don't be surprised to see 
a continuation even though common sense tells us that some 
profit-taking is in order.  Nothing surprises me anymore in 
this market.  

Take a look at the chart to see today's steady rise until 
it stalled somewhat at 11,100.  The second chart shows why 
this happened.  You have some historic resistance at this 
level.  Today's close near the high may be a sign of more to 
come, but don't bet the farm.  This thing has to take a break 
at some point and more than just for a half of a day like we 
saw Wednesday.  


 

 

The Nasdaq managed to rally again today.  It try for a 100+ 
day for the third day in a row, but gave way in the afternoon.  
It closed at 4940, up 75.86.  Volume was identical to yesterday 
at 1.7 bln.  It had a strong trend all day before rolling over 
as you see in the chart.  Without a 2 billion plus volume day 
this week to confirm the rally, it leaves me somewhat suspect 
of a continuance.  Especially, if the DJIA remains the leader.  
But, with earnings season nearing and the Nasdaq creeping back 
to old highs, it will always stay high on my market monitor.  
The test tomorrow will be if it can shrug off the late day 
profit-taking and maintain a good solid rally.  You almost 
have to figure more profit-takers will be looming ahead of the 
weekend and after this week's rebound.

 

Oddly enough, the VIX went up on a day like today.  Can't explain 
that one for you, but it closed at 24.55, +1.56.  Anyway, it 
is middle of the road, giving us the all clear signal.  Even 
news that from the FOMC minutes from February couldn't disrupt 
this bull market day.  It was reported that several members 
had favored a 50-point move in February.  As soon as that hit, 
I was expecting some sort of retracement in the averages, but 
not even a hint of selling emerged.  Traders must have figured 
that they got their 50-point move with the 25 in February and 
the other 25 this week.  They were even quoted as saying that 
"relatively high real interest rates would be needed" to curb 
the economy.  Still they admitted that inflation is not in 
sight just yet.  

GM was another big winner today on a report from CNBC that 
News Corp. was entertaining a bid for GM as a way to get at 
its Hughes subsidiary, operator of DirecTV, the nation's most 
popular and largest satellite television service with more than 
8 million customers.  This was quickly denied at News Corp, 
but someone must be a believer since GM climbed $5.25 to 
close at $87.  This is one of those rumors you scratch your 
head about since it sounds like a stretch to go after GMH 
that way.  News Corp's exact words on the matter, "entirely 
false and without merit." 

Oil dropped today by $0.15 to $27.31 a barrel as the waiting 
game to Monday's OPEC meeting is in full force.  Unless 
the rumors start to fly (and we all know that is possible in 
this commodity), don't expect much movement on Friday.  The 
OPEC oil ministers are expected to increase production by at 
least 1 million gallons a day, but some wonder if that will 
be enough.  Energy Secretary Bill Richardson believes there's 
an estimated 2 million barrel per day shortfall in supply 
compared to demand.  Some companies like Federal Express today 
announced an additional surcharge for deliveries based on the 
high fuel costs.  You can bet that more increases like this 
will show up on the inflation scale soon so next week will be 
crucial.

All in all, this has been a tame earnings warning season so 
far.  First Call has already indicated that there is more 
upside surprises likely than downside.  In truth, it is not 
likely to matter if Compaq or Eastman Kodak or some other 
already tattered stock warns to the downside.  You still have 
to fear the MicroStrategy warnings, but that was likely an 
isolated incident.  With that said, we could see a strong 
April for the markets.  Whether it is in cyclicals or back in 
the Nasdaq, there are stocks to play.  As always, let volume 
be your guide to which stocks are carrying current momentum.  
Again, today's Nasdaq afternoon rollover may be setting the 
tone for tomorrow as traders take gains of the table ahead 
of the weekend.  That wouldn't surprise since there weren't 
any profits to take home last week.  The DJIA continues to 
have a mind of it's own.  If it trek's above this general 
11,100 range again tomorrow, we could be back to new highs in 
a heartbeat.  Keep your eye on the financials and old school 
tech stocks like MSFT, INTC, HWP, and DELL that have had one 
mighty resurgence lately.  In all cases though, be smart and 
sell too soon.

Ryan Nelson
Asst. Editor


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

Earnings Estimates Don't Always Matter 
By  S.P. Brown

Meeting quarterly earnings estimates used to be a big deal, 
even in the gravity-defying tech-sector.  If a company missed 
the consensus estimate, its stock invariably took a beating.  

But the times they are a-changin', as Micron (MU) proved on 
Tuesday.  The DRAM chip maker missed its second-quarter (ended 
March 2) consensus earnings estimate badly, posting earnings of 
$0.58 a share compared to the consensus estimate for $0.74.  In 
fact, Micron even failed to meet the low analyst estimate of 
$0.61 a share.  

At first, the earnings shortfall was met with much 
consternation.  During regular trading on Tuesday, Micron's 
stock closed at $130.50, down $3.13.  Then, in after-hours 
trading, the stock slid another $11.25 to $119.25.  

On Wednesday, though, investors had a change of heart, pushing 
Micron stock up $4.63 from Tuesday's regular trading session 
close to $135.13.  

Admittedly, what's happening at the present is irrelevant in 
valuing an invest, the future is what counts.  

But the future for Micron isn't particularly clear.  Compared 
with the first quarter, the average selling price for memory 
chips fell 20 percent.  As a result of the decline in prices, 
gross profit margins for Micron's semiconductor operations 
dropped to 41 percent in the second quarter from 58 percent in 
the previous quarter.  

Furthermore, some analysts don't expect DRAM prices to gain 
much ground until the latter part of the year - if they gain at 
all - when PC makers begin to increase production in 
anticipation of the holiday buying season.

On the flip side, though, there are analysts forecasting demand 
for DRAMs to grow between 80 and 100 percent, but for supply to 
grow by only 60 to 70 percent, which, according to the laws of 
supply and demand, should cause prices to rise.

Despite the schizophrenic outlook for the DRAM chip industry, 
many of the big investment houses jumped on the Micron 
bandwagon yesterday anyway.  

Deutsche Banc Alex. Brown hiked its Micron share-price target 
to $210 from $130, while Warburg Dillon Read raised its 12-
month price target to $160 a share.  

Meanwhile, Robertson Stephens raised its earnings estimates 
following the second quarter release, and is expecting profits 
of $2.95 a share in fiscal year 2000 and $5.50 a share in 
fiscal year 2001. 

Finally, adding his two cents, Merrill Lynch's Joseph Osha 
wrote in a message to clients, "We think the outlook is 
extremely positive for Micron."  Osha rates the stock a long-
term buy.

All these differing estimates and opinions amalgamate to a 
First Call consensus earnings forecast for fiscal year 2000 of 
$3.42 a share.  While for the nearer term, the third-quarter 
First Call consensus estimate is for $0.67 a share.

As Micron has proven this quarter, the estimate might be a mute 
point.  

However, if the company misses it's earnings estimate again for 
the coming quarter, it will still be interesting to see if 
investors remain as forgiving as they did in the last quarter. 



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

As of Market Close - Thursday, March 23, 2000 

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

DOW Industrials   10,850  11,250  11,120    Neutral   3.16
SPX S&P 500        1,410   1,475   1,527    BULLISH   3.21
OEX S&P 100          780     800     832    BULLISH   3.21
RUT Russell 2000     510     530     574    BULLISH   2.24
NDX NASD 100       4,000   4,150   4,661    BULLISH   2.24
MSH High Tech        975   1,000   1,146    BULLISH   2.24

XCI Hardware       1,480   1,510   1,764    BULLISH   2.24
CWX Software       1,430   1,670   1,592    Neutral   3.21
SOX Semiconductor  1,130   1,360   1,285    Neutral   3.21
NWX Networking     1,000   1,040   1,160    BULLISH   2.24
INX Internet         770     800     903    BULLISH   3.09

BIX Banking          520     600     587    Neutral   3.16
XBD Brokerage        450     480     557    BULLISH   2.31
IUX Insurance        500     560     557    Neutral   3.16

RLX Retail           900   1,000     923    Neutral   3.16
DRG Drug             340     380     350    Neutral   3.16
HCX Healthcare       700     750     706    Neutral   3.16
XAL Airline          110     140     139    Neutral   3.10
OIX Oil & Gas        265     300     276    Neutral   3.16


Posture Alert    
The major exchanges witnessed a good rally today; however, it was 
concentrated within a few big names. Five stocks accounted for 
185-points of the Dow's 253-point rally, including Microsoft, 
American Express, JP Morgan, GE, and General Motors. Leading 
sectors Thursday include Brokerage (+4.70%), Insurance (+4.34%), 
and Banking (+3.98%). There are no current changes in posture.



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

Thursday, March 23, 2000

Combining Forces!

Blue chips and technology shares both raced ahead Thursday, as the S&P 
100, S&P 500, and the NASDAQ 100 all broke record highs. Technology 
shares got a boost from a potential settlement between the Department 
of Justice and Microsoft, in which Microsoft would not be divided up. 
Because of this rumor, shares of Mr. Softy rose +8 5/8 to help 
contribute to the NASDAQ's gains, as well as boosting the Dow by 43 
points. The combining forces of blue chip and technology stocks are 
also helping short sellers run for the door, which in turn, has helped 
propel this market into higher highs. Earnings continue to be 
impressive, the long bond is safely off of the highs, and there has 
been (so far) a lack of major negative announcements, so higher highs 
should come soon.   

One important gauge of sentiment is the level of short interest on the 
major exchanges. Investors who sell securities "short" borrow stock and 
sell it, betting that the stock's price will decline and that they will 
be able to buy the shares back later at a lower price for return to the 
lender. Short interest reflects the number of shares that have yet to 
be repurchased to give back to lenders. In the past, stocks that have 
heavy short interest, when combined with some sort of positive news, 
has witnessed very quick and powerful up-moves.  At times, short 
sellers are forced to cover, which only helps the buying pressure, and 
this is known as a "short squeeze."

The short interest on the NYSE increased +5.7% to 4,110,510,698 shares 
on March 15. This bearish level would suggest further upside potential.
Below is a list of the most shorted securities on the NYSE.

Largest Short Positions  
Rank Mar. 15 Feb. 15 Change 
1    Qwest Comm Int'l       75,993,604     72,997,555      2,996,049  
2    At&T                   74,216,583     69,387,948      4,828,635  
3    Sprint (Pcs Grp)       65,490,493     79,492,948    -14,002,455  
4    VodafoneGrp(Ads)       61,938,122     65,300,068     -3,361,946  
5    Walt Disney-Hldg       60,746,141     58,845,710      1,900,431  
6    America Online         54,528,042     61,665,635     -7,137,593  
7    Lucent Technologies    47,408,985     39,394,215      8,014,770  
8    Nortel Networks        41,791,043     33,806,519      7,984,524  
9    Time Warner (Hldg)     34,392,577     40,295,634     -5,903,057  
10   Pfizer                 32,851,919     16,813,732     16,038,187  
11   Wal-Mart Stores        32,244,310     33,951,697     -1,707,387  
12   Columbia/HcaHlth       31,722,058     32,209,396       -487,338  
13   Kmart                  31,093,503     33,396,771     -2,303,268  
14   TELDeMexico(Ads)       29,008,399     31,096,795     -2,088,396  
15   Bell Atlantic          28,136,197     23,043,174      5,093,023  
16   Alcatel                23,535,678      4,478,995     19,056,684  
17   Schwab (Charles)       21,254,433     14,080,429      7,174,004  
18   TelefonicaSA(Adss)     21,200,986     15,667,145      5,533,841  
19   LoralSpace&Comm        21,074,014     17,446,530      3,627,484  
20   Compaq Computer        21,006,497     20,734,725        271,772  
  
 

BULLISH Signs: 

Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of 
analyst expectations. General Electric is the latest bellwether to give 
positive comments regarding earnings.

Short Interest:
Short interest continues to climb as quickly as the market. The short 
interest on the NYSE increased +5.7% to 4,110,510,698 shares on March 
15. This bearish level would suggest further upside potential.

Interest Rates (5.904):
The current yield is in bullish territory.


Mixed Signs: None

BEARISH Signs:

Pre-Release Season: 
With April just around the corner, we have the beginning of pre-release 
season. Over the next several 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, followed by 
MicroStrategy and its 140-point decline!

Volatility Index (24.22):
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. 


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

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


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

 
Pinnacle Index OEX               Friday      Tues        Thurs
Benchmark                        (3/17)      (3/21)      (3/23)

Overhead Resistance (830-860)    21.25       25.67       31.20

OEX Close                       786.74      806.87      831.70

Underlying Support  (800-825)     n/a         n/a         0.33
Underlying Support  (770-795)     0.88        0.92        2.20

What the Pinnacle Index is telling us:
Based on Thursday's sentiment, we would expect some profit taking to 
occur very shortly, as the sentiment on overhead seems too bullish.


Put/Call Ratio                  Friday     Tues       Thurs
Strike/Contracts                (3/17)    (3/21)      (3/23)

CBOE Total P/C Ratio             .41       .43         .41
CBOE Equity P/C Ratio            .35       .36         .35
OEX P/C Ratio                   1.11      1.56        1.31


Peak Open Interest (OEX)
                     Friday           Tues            Thurs
Strike/Contracts     (3/17)           (3/21)          (3/23)

Puts               720 / 7,621     720 / 9,271     700 / 8,431
Calls              750 / 3,890     880 / 4,217     785 / 4,271
Put/Call Ratio         1.98           2.20            1.97


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 23, 2000                          24.22



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

Daily Results

Index     Last     Mon     Tue     Wed     Thu    Week
Dow    11119.86   85.01  227.10  -40.64  253.16  524.63
Nasdaq  4940.61 -188.13  101.68  153.07   75.86  142.48
$OEX     831.70   -1.44   21.57    3.68   21.15   44.96
$SPX    1527.35   -7.84   37.24    6.77   26.71   62.88
$RUT     573.79  -25.57    3.59   18.40    2.60   -0.98
$TRAN   2720.76  -24.24   68.22  -16.16   69.11   96.93
$VIX      24.22    0.50   -0.83   -0.35    1.23    0.55

Calls              Mon     Tue     Wed     Thu    Week

YHOO     191.00    0.91   19.72    5.44   -6.19   19.88  Tough day
EXDS     171.00   -8.75   12.75   14.13    1.63   19.75  Running
NOK      219.63    2.13    9.50    7.50    1.44   19.75  Split 4/7
INTC     142.63    5.13    3.44    5.63   -1.44   12.75  Breather
HWP      147.25    5.19   -2.13    4.31    1.06    9.25  Steady
NT       137.25   -2.56    3.31    4.50    3.25    8.50  New
IDPH     126.13  -12.44    9.09   15.66   -5.13    7.19  Still up
SCH       61.50   -1.25    0.44    3.13    3.94    6.75  Break out
AOL       70.75    2.13    0.50    4.38   -1.25    6.38  Lookin up
IBM      115.25    2.75    0.75    0.75    1.00    5.25  Basing
RATL      93.56   -1.63   -3.88    3.50    7.06    5.06  Nice move
BAC       54.19   -0.37    1.37    0.44    2.75    4.19  New
SEG       69.88   -2.75   -0.81    3.00    1.69    1.13  Fights on
XRX       26.88    0.19    3.75   -2.75   -0.13    1.07  Needs ink
DELL      57.50    1.25    0.31    0.13   -0.63    1.06  Holding
NITE      52.75   -3.25    0.50    5.94   -2.19    1.00  Pulled up
BMCS      54.06   -3.56    3.06    0.94   -1.44   -1.00  Ready
BGEN      76.13   -5.63   -1.13    3.38   -5.38   -8.75  Dropped
SCMR     134.94  -13.50   -3.75   14.75   -7.06   -9.56  Dropped
MRVC     123.00  -18.50    3.75   13.88   -9.00   -9.88  Teetering
CHKP     219.00  -37.19   25.19   -5.94    1.44  -16.50  Coming up
VERT     190.03  -37.63   14.00    5.00  -11.97  -30.60  Dropped

Puts

ISLD      75.06  -12.56    0.19   11.00   -6.19   -7.56  Down time
CKFR      62.88   -5.44    1.25   -0.56   -2.56   -7.31  Retest$59
RHAT      57.50   -3.63   -2.06    0.81   -0.50   -5.38  Seein red
FON       55.63   -0.87    1.06   -3.25   -1.13   -4.19  New
EK        56.25    0.31    0.00   -1.69    0.19   -1.19  Flattened
CPQ       30.00    0.19    0.00    1.56   -3.13   -0.75  New



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

Lessons Learned During Extreme Volatility
By Renee White

Have we learned any new lessons this month?  Boy, I know I have. 
Some have made me money and some have lost me money.  Then there 
was also a lesson that scared the heck out of me and caused me to 
lose my sense of humor for a couple of days.  More on that one 
later. 

I'm sure after the damage done the last 2 weeks, many are 
wondering if it is safe to come out and play again.  I think so. 
For now anyway.  My plan (as of today) is to play April earnings 
and then exit the market for May and June.  I may have a couple of 
light plays then, but for the most part, my inertia will end as 
earnings wind down late April, probably until late June.  But for 
now, I think the worst is over and soon we will be taking out new 
highs.  Let's see if I get this right twice in a row:  I doubt we 
will close over 5,000 until Monday, but it could be Tuesday.  Once 
we do, I expect full momentum. 

I feel fortunate that I'm recovering well from the sell-off.  I 
could not watch the markets closely last week, due to other 
responsibilities, and several of my plays took a beating when I 
wasn't looking, before I could exit.  I lost some good money on 
some great companies caught up in the downdraft.  Like many of 
you, I kept thinking each dip was the last.  I did not know which 
companies would come back quickly but I did believe the NASDAQ 
would rebound for April.  Several times, when major support levels 
were broken, I tried to buy more April QQQ options on the bounce, 
both ITM and ATM, with my last purchases being last Thursday.  
Some of these hurt for a day or two, but I felt certain that I 
would be rewarded once the carnage was over and the attention 
focused on earnings again. 

Although I had to take hits exiting many equity plays, I decided 
to hold the QQQs.  Luck was in my corner because on Monday, QQQ 
split 2:1 and suddenly I had twice as many contracts, right when 
the market was bottoming out!  That sort of thing could make 
anyone very happy!  When the market started back up, these QQQs 
helped heal the pain of lost equity premiums, due to the 
sheer number of contracts I have.  I wish I had remembered it was 
splitting because I would have bought more for the rally that I 
expected after FOMC.  Anyway, I cannot complain.  These QQQs are 
already close to 100% profit.  Looking over entries from the last 
week and a half, my best entries were BRCM, YHOO.  Last week's 
entries have already returned 125% and I am still adding to my 
positions because I think YHOO is soon to take out 200 and fly. 
How about JDSU @ 121 1/2 (now 134) and GE @ 126 7/8 (now, 160!). 
These look great, but trust me, I lost plenty on INSP, VERT and 
CMVT.  I have been playing QQQ with every 10% NASDAQ correction 
this year and it has proved very profitable.  I may be more 
cautious loading up during the summer sell off, but I will load 
again next October during the anxiety, panic, and fear of the 
October curse. 

The other lesson I learned this week had to do with a Reg T 
Violation.  Have you ever heard of Reg T?  I always find it 
interesting when there are laws that affect you, but no one has 
told you anything about them.  I've been trading for many years 
but only recently have bounced into this regulation.  Monday, I 
found myself frozen out of one of my accounts due to violating 
Reg T.  I was forced to wire transfer $10K immediately, to meet 
a Regulation T call.  No, this is not a Margin Call.  This is 
Regulation T, a separate pain of its own.  A nasty rule concerning 
the equity in your account at the start of the day that follows 
day traders around like a shadow in the dark. 

I had no intention of playing the markets on Monday.  My entries 
were ready for Greenspamming and I needed the time to take care 
of other business.  But, something started telling me to look at 
my account.  You know how that little voice keeps telling you 
something, when you are trying your best to ignore it?  After 
about 4 hours, I finally booted up and found that I had this 
Regulation T violation.  Ugghhh!  I almost dropped my teeth! 

What happened was that I had CSCO options in my IRA account 
which expire in April.  I also had CSCO options in one of my 
personal trading accounts.  With all the carnage last week I did 
not check these options.  I saw CSCO listed, but in my mind these 
were also April expirations.  I was wrong.  Monday, I realized 
they had been deep ITM March expirations. 

I have several brokerage accounts, some I trade more heavily than 
others.  If you ever decide to change brokerage firms, make sure 
you know what they do with options that are ITM at expiration.  I 
got accustomed to how my original account handled things on 
expiration Friday and did not think life may be different 
elsewhere.  For example, when you have options that are deep ITM 
on expiration and you do not sell the options or give them 
exercise directions, one firm may automatically sell your 
contracts for you at the closing price on expiration Friday and 
credit your account.  That is nice if you are traveling, have 
other distractions on expiration day, or miss exiting contracts 
by accident.  The commission is higher but the funds show up in 
your cash account. 

But not all firms are the same.  Another firm may assume that if 
you do not sell your deep ITM options before expiration Friday, 
you want to exercise the contracts and own the shares.  Now my 
friends, that can be a very expensive lesson if you had no 
intention of buying all those shares of stock, due to the ITM 
contracts that you had neglected.  Just think if you had 
forgotten about 10, 30, or even 50 contracts, assuming they would
be cashed out! 

So on Monday, I booted up and found that I had a Reg T violation. 
All those ITM March CSCO calls were exercised unexpectedly and 
there wasn't enough cash and margin in the account to cover the 
purchase.  That threw me into a Reg T violation.  The really bad 
thing about Reg T is that it is much nastier than the infamous 
Margin Call.  With a margin call, you can sell off any of your 
securities and satisfy the call obligation.  But with a Reg T 
violation, you are not allowed to use the proceeds of anything 
you sell in your account to meet the obligation of the call. 
Plus you are frozen out from buying anything.  You must supply 
fresh cash!  Hard, cold, fresh, crisp greenbacks! 

Don't ask me why.  I don't understand myself.  I've asked for 
more information so I could read the ruling, but I have not 
received it.  I do know that the NYSE has Day Trading rules 
which specifically address a "Day Trading Call".  Evidently, 
Reg T is a new ruling that concerns the buying power in your 
account at the beginning of the trading day.  You must have the 
funds available before you make the purchase.  In other words, 
don't buy something without having adequate buying power in your 
account before THAT transaction.  If you think that the next 
transaction will be selling off a different position that will 
cover the first purchase, it won't.  That is a Reg T Violation. 
I don't understand how the exercise of options that are done
automatically could put you in so much trouble.  But if you 
do not have the funds sitting there when you have an accidental 
exercise, not only are you in violation of Reg T, selling off 
other securities in your account so that you can buy the dip 
right before the FOMC meeting means nothing except that you 
probably missed a good buying opportunity!  One of my other 
brokerage accounts freezes your account for 90 days with any 
Reg T violation.  NINETY DAYS!!  Even if you hand deliver cash! 
Obviously, this regulation is intentionally ugly, in order to get 
your attention.  Your punishment depends on the firm you use. 

Perhaps if anyone has readable layman information on Regulation T 
and how it affects option expirations, margin requirements, or 
why we can not sell positions we hold in order to meet the call, 
would you be kind enough to share it with me, with references.  I 
would like to put this information out for all to understand, so 
it doesn't happen to others.  I found a lot of legal jargon under 
the Code of Federal Regulations, Title 12-Banks and Banking, 
Chapter II Federal Reserve System, Part 220 Credit By Brokers 
and Dealers (Regulation T), but nothing readable to the layman 
which clearly defines non-intentional exercise or the selling 
of securities to cover your call.  It's pretty scary to me, as a
trader, that I can't find out the rules of the game. 

I feel lucky that I was able to handle this unexpected expense. 
It could have easily been much worse.  Since so many people have 
only one brokerage account, I urge you to look at your account 
and make sure you understand what happens with your positions if 
you miss a contract on expiration Friday.  Will you be forced to 
buy the stock?  Also, make sure you know if you have a margin 
account and what your balance is at all times.  I'm an 
experienced trader and I have never had a margin call.  I use 
margin heavily at times, and not at all at other times.  The 
riskier I feel the play is, the less likely I am to use it.  
Still, I was fooled by misinterpreting the display in one of my
accounts and I realized too late that the margin information was 
not clear.  Also, it was my mistake that I had forgotten options 
that were exercised without my knowledge.  That was just stupid 
on my part to assume they would be cashed out. 

Ohhhh, if we don't learn one lesson, there is always another!! 
Let's all hope the stress of the last two weeks is over and that 
when we look back in a month, all those entry points we held have 
proven to be perfect timing! 

I look forward to meeting everyone at the OI seminar next week.  
Be sure and say "Hi". 

Contact Support



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

An Osmotic Technical Point of View:
A Stockaholic View and the 150% Return Challenge
By Harrison Frolick

One of the things that I think everyone has a tendency to do with 
trading is to forget to have fun.  I know that I do.  What the 
heck is the sense of being a stockaholic if partaking doesn't give 
you a buzz, I ask you?  This fact has a tendency to reach out and 
grab me at the oddest times.  I realized it just a few moments 
ago, as I sat down at the computer to check my email at 2:24 in 
the AM.  Which is why you are reading this now.  How can I have 
fun when the market has a Malox moment every hour, you might ask? 
Well, all I can tell you is that from my personal experience, 
when I quit having fun trading, my returns go into the 
you-know-what.  Not that you can't make money when you are not 
having fun, but I know I sure make a heck of a lot more when 
I am laughing while I do it.

Sometimes you need to shake things up.  For those of you that 
have access to real-time quotes and want to practice your 
charting capabilities, or even those of you without them, here 
is a two part exercise that might be worth trying to get the 
buzz back in being a stockaholic.  The first part of the exercise 
is to grab 10 contracts of your favorite option of the day and 
see if you can't make 3/8 on it in an hour or, heck, even an 
entire day.  We are only talking 3/8 here, how many times have 
you seen an option pop 3/8 in only five minutes.  Easy, right? 
Watch the hourly charts and do it.  If you figure $80 round trip 
for commissions, that leaves you with $300 for the hour, or day, 
if you are successful.  The second part of the exercise is the 
most important part.  What you need to do is make a reservation 
at a nice restaurant and take someone you care about with you 
and spend the $300 dollars!  If you have any money left after 
that, go see that movie you have been wanting to see.  The point 
is not to come home with a dime of that $300, unless you have 
to pay the sitter.  But make sure that you don't keep a cent 
of it. 

If once every two weeks you do this one hour trade and enjoy the 
profit, you will be amazed at how much better you and the person 
you share it with will feel.  You will find the $300 compounding 
in your account even though you spent it.  This really works!  I 
may be setting myself up here, and I am only speaking for myself, 
but I know I have a tendency to talk about how much money that you 
can make trading options.  I have a question for all of those 
that read this column (I need all 4 of you to respond!). I am 
thinking about giving myself a test that, if I don't pass, could 
end my writing career (OK, so I am bored and Jim does not pay me 
to write anyway).  I am planning to set aside $25,000 (or better 
yet, get one of my partners to set it aside) and trade it to see 
if I can make a 150% annualized return with everyone watching my 
back as I do it.  This should be no biggy, but when you have
people watching you do the simplest of tasks, Murphy has a
tendency to become intimately involved.  As I have been taking 
on more and more responsibilities with some of my other 
investments I have only been able to trade an hour or so a day 
at most, so this ought to be a fun and informative venture.  
Would you be happy with 150%?  Let me know what you think. 


Happy Trading!

Contact SupportHarrison



**************
BROKERS CORNER
**************

LEAPS OF FAITH? FAITH IN LEAPS?
By Alan Knuckman and Andrew Aronson

A topic of great interest within the investment community concerns
the use of LEAPS.  The Long-term Equity AnticiPation Security 
(LEAPS) function as an option with a greater time horizon.  
Technically, LEAPS are securities but not always treated as such 
by brokerage firms and most importantly, their margin departments.

As we have stated many times before, one of the most common
mistakes option traders make is choosing too short of time 
duration prior to expiration.  The clock of time decay is always
ticking but the most detrimental impact occurs within the last 
45 days. (Example:  April options currently have 4 weeks to
expiration).  Try to get out of the option during the same month 
of expiration and roll to a further month to avoid the time decay 
and the emotional toil of watching an option until the last day. 
In the final weeks, the stock CAN move the direction you had 
anticipated but IF IT DOESN'T, THERE IS NO TIME TO RECOVER!!

To combat the unfortunate event of having options expire 
worthless, some traders have tried to take the time factor out 
of the equation with LEAPS.  This may be the answer for some 
traders that have not developed a trading discipline.  If you 
purchase LEAPS, the time decay is not nearly as much of a concern.
It has instead extended the decision-making process of when 
to take a profit or loss.  Unfortunately, some traders feel false 
security and still do not have a plan when to get out.  Anybody 
can get into a trade but experience and discipline are crucial in
deciding when to get out, right or wrong.  The non-emotional 
trader has a plan regardless of the time horizon and could trade 
in and out of the same position 4-5 times, while another would 
ride the stocks ups and downs without exiting.

LEAPS are not magic but are useful for some traders to experiment 
with the option market and very useful in long term planning. 
What has been successful is purchasing LEAPS on very well known
companies that have had some earning warnings or other cause 
for a dramatic emotional drop but remain fundamentally solid 
and profitable.  Examples of recent LEAP plays of this nature 
include IBM, ORCL, MSFT, LU, etc.  In these instances, these 
stocks encountered a problem of meeting very high, increasing
expectations but are certainly worth a long-term look.

LEAPS have a place in our trading plan but HOPEFULLY AS AN 
INFORMED OPTION TRADER, we can do better with more exact 
strategies to get the best return for the dollar.  Option traders
with experience will set their exit parameters after solid 
research.  They will plan for a profit with exit orders and plan 
for a loss with stop loss orders.  By doing the proper research 
and choosing the right combination of strike price and time 
duration, option traders can get better results than those who 
purchase LEAPS because they "think " a stock will go up over the 
next year.  The lesson to be learned is to have an educated 
opinion of whether the stock is going up, down, or nowhere, and 
then an appropriate strategy for your trading style.  Most 
importantly, plan to act, not to react out of fear.  Enter with a 
plan, exit with a plan.

One newly popularized option strategy employs selling near-term 
options against purchased LEAPS.  Mathematically, this is a 
variation of a covered call, yet it has some other interesting
characteristics to consider.  The LEAP is the anchor position 
and writing the short-term call against it generates premium. 
The problem lies with having to offset the sold call if the 
underlying LEAP stock makes a move.  Herein lies the 
million-dollar problem.  If the stock moves, the LEAP could be 
called out to meet the short-term obligation.  Unfortunately, 
you are forfeiting a long-term option to meet a short-term 
obligation.  You are completely covered but you are also giving up 
the extra time value.  Why cash in an option with a huge amount 
of time value to meet this obligation?

Your other choice is even more difficult.  Should you buy back 
the short-term option written against the LEAP for premium to 
avoid being called out?  It is going to be more expensive than 
what you sold for and require cash.  If you do that, it would be 
a shame if the LEAP then declined in the following months, 
causing further potential losses.  This variation on covered 
calls has been talked about as the next greatest strategy but 
is not as easy as it may seem.

Another factor to consider with this strategy is the margin
requirements.  Because of the problem illustrated above, many 
brokerages firms DO NOT view this as a covered position and 
require margin for the "naked call" sold against the LEAP. 
National Financial Services, which is a division of Fidelity 
Investments, requires 30% of the value of the stock as margin on 
naked options sold.  Many big-name firms require margin on this
"covered play" for the reasons above and to be sure experienced,
well-capitalized traders understand the potential pitfalls, and
that they aren't just rookies looking for "sure things."

Options strategies are tools that are used depending upon your 
trading style, experience, risk tolerance and account size. 
Unfortunately, many traders feel they have to use all of their 
tools, such as spread, covered call, etc., simply for the sake of 
using them.  Develop a trading discipline for yourself and the
appropriate time for each tool will become more apparent.  Any 
trade is worth doing as long you have a plan for entry, profit, 
and exit.  Without a plan, poor decision-making often results.

Lasalle Options
Toll Free 888-281-9569
www.lasalleoptions.com



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


CALLS:
*****

BGEN $76.13 -5.38 (-8.75) Well that's it, we aren't going to 
let traders kick our play around anymore.  We are pulling it
from our list and the bears will have to look elsewhere
for something to pick on.  This one took it on the chin after
the close on Wednesday, when BGEN lost an arbitration against
Schering-Plough Corp., over the royalty payments of SGP's 
hepatitis C treatment, Rebetron.  Company executives from BGEN
said, although they were disappointed in the results of the
arbitration, they expected no loss of income.  Investors not
only didn't buy that answer, they didn't buy stock either.
BGEN lost -$5.38 on strong volume, with just under 10 million
shares being traded.  The $74-$75 did hold up for now, but
BGEN closed below its 200-dma sitting at $78.99.  The fund
managers may or may not rush back in and buy BGEN at these
levels, but for now we will let BGEN go.  

SCMR $134.94 -7.06 (-9.56) The Nasdaq was sizzling hot today 
while SCMR could barely hold a simmer.  Since this isn't a case 
of natural consolidation, we must read the writing on the wall.  
The stock is trapped in a basing range unable to hold the higher 
levels above $145.  Granted the intraday volatility provided 
wide spreads for target shooting and profit, but it's time to 
retire SCMR for more decisive movers.  For those with open 
positions, watch $148 for overhead resistance.  

VERT $190.03 -11.97 (-30.60) Despite a rise in the rest of the 
market, Internet companies have been a bit weak in the recent 
recovery.  VERT has not participated a bit and can't mount a big 
enough head of steam to get out of the hole.  Today, it bounced 
south of its 5-dma, currently at $198.53 on volume slightly 
exceeding the ADV.  Support remains at $175.  There's nothing 
wrong with the company that we can see - it's just not moving.  
Though VERT splits 2:1 on Mar 31st, we think the shares should 
be doing better by now, and think there are better opportunities 
for profit elsewhere.  Thus we're dropping VERT tonight.


PUTS:
*****

No dropped puts this evening.



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

AOL $70.88 -1.13 (+6.38) Rather than the a pullback, AOL moved
through the $69 area we mentioned on Tuesday.  News that the
their subscriber base grew about 10% since December, brought
buyers out of the woodwork.  On Wednesday AOL gained about 6.6%,
ending the day well above our $69 target at $72.  And how about
that volume.  The move came with over 35 million shares changing
hands.  Today our confidence was bolstered by news that could
have done some damage to our play.  Company officials at Walt
Disney confirmed they had been engaged in lobbying U.S. House
and Senate members against the merger with Time Warner.  Disney
fears its programming would be denied fair access to AOL's Web
sites if the two company's merger is allowed.  AOL did trade
lower for the session, but the volume was light, and with no
volatility.  AOL fell to a support area near $69.75 and bounced
back trading in a very narrow range for the balance of the 
session.  It almost looked as though traders were standing around
saying that was bad news, wasn't it?, as there was no follow-
through selling.  AOL finished the day with a loss of -1.13,
with 17.4 million shares traded.  No one running for the exits
here.  AOL has good intraday support near its 100-dma at $69.13.
A decline through that level may be a good point to place stops
depending on you entry point.  A continued move higher would
signal a chance to jump on board this play. 

RATL $93.56 +7.06 (+5.06) No news can be good news.  After a
volatile day on Tuesday, traders began to test the waters on
one of our software plays on Wednesday.  Today they jumped in
with both feet, as RATL gained over 7.0%.  No company news to
support the move, although news that Microsoft and the U.S.
Justice Department are getting along better may have helped
spur RATL and the whole software sector higher today.  The 
volume was better on Wednesday, although today was respectable
with 865K shares traded.  Another plus for our play came late
in the session.  As the Nasdaq, was beginning to pull back a 
bit, RATL saw more buyers jump in.  In the last fifteen minutes
of the day, RATL advanced over $2 on strong volume of 110K 
shares.  Ending the day near the high of the day certainly
suggests a move to higher prices.  However if we do see profit-
taking set in, a move back to near $90 would not be out of the
question.  RATL now has support near $90 and $88 and a bounce
off those levels would be a great entry point for a new play.
If the momentum continues we would also look for opportunities
to buy calls, however be prepared to sell too soon, just in 
case the water gets too hot.      

CHKP $219.00 +1.44 (-16.50) Ok, sometimes we just don't give up
very easily.  Why are we hanging onto CHKP?  Elasticity, is the
answer.  Yes, CHKP has been volatile since its fall from its 
highs early last week.  It could even be said that it has been 
a bit difficult to trade.  As we've said in the past, CHKP is 
not a play for everyone to consider.  But the fact is CHKP has 
hit the $190 to $200 area three times this week and bounced back 
shows great elasticity in our opinion.  CHKP did manage to pick 
$1.44 today, but the volume was light with only 527K changing 
hands.  A look at intraday charts shows that CHKP appeared to 
be rolling over late in the day.  Support levels are seen at 
$215, $210 and again back near $200.  A decline to one those 
levels, followed by a bounce may provide one more chance to buy 
calls, but be cautious.  For those needing more proof, a move 
back through $230 may provide a better entry point for this 
play.  We will stick with CHKP for now, to see if there is 
one more bounce left in this play.      


***********************************************
PLAY UPDATES - CALLS - CONTINUED IN SECTION TWO
***********************************************


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

The Option Investor Newsletter         Thursday   3-23-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


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

SEG $69.63 +1.44 (+1.13) Tuesday's momentum carried SEG up to 
resistance at $70 yesterday.  After bouncing off solid support at
$68 today the stock ran into resistance again at $70.  The stock
has now formed a triple top at $70.  We've come to a crucial 
point in this play, before entering any new positions, you may 
want to wait for a breakout above $70 with good volume.  In the 
meantime, you might set tighter stops in light of a selloff.  
Strong support is at the $68 level, below that we don't see much
help until the $62 - $64 level.  In the news today, SEG announced
they have developed the world's highest data storage capacity
for recording media applications.  The new technology will allow
users to store 60 gigabytes of data on a single 3.5" disk.  This 
demonstrates SEG continued expansion into e-business markets, 
as consumer demand for data storage increases.

SCH $62.00 +4.44 (+6.75) Planning on retiring early?  Schwab 
is helping in more than one way.  The stock has really gained
momentum, as it continues to make new highs on impressive volume.
The finance sector continues to show strength with the 30-year
bond holding below 6% and on the heels of an earnings report out
today by Morgan Stanley.  Profits jumped by 49% for MWD, driven
by an increase in trading revenues.  Look for any pullbacks to
the 10-dma for new entry into SCH.  Support for SCH is currently
at $58 and again at $56.  At the same time, continue to ride 
the momentum as long as it lasts, buying the intraday dips.  

MRVC $123.00 -9.00 (-9.88) Volatility continues to be the name 
of the game with our MRVC play.  The stock continued sharply 
higher yesterday after Tuesday's rally hitting an intraday high 
of $140.  Traders didn't take much interest in MRVC today as the 
stock drifted lower on light volume.  The decline today could be
attributed to overall sector weakness in the Semis, in what
appeared to be profit-taking.  Strong support lies just below
at $120 which may provide a good entry point.  Look for volume
to pick up with any bounce off support as traders move back into
the this sector.  Set tight stops on any new plays, should MRVC 
fall below $120, the next support is all the way down at $105.

EXDS $171.00 +1.63 (+19.75) More good news for Exodus yesterday
as they announced a $637 million investment in Mirror Image, a 
subsidiary of Xcelera.com (XLA).  Together, EXDS and Mirror 
Image intend to enhance Web site performance for customers.  The
combination will create the fastest and most reliable platform
for distribution of Internet content.  Traders approved of the 
announcement yesterday as shares of EXDS rose steadily into the
close.  Today, CSFB reiterated EXDS as a strong buy, and Lehman 
Brothers raised their price target to $210, up from $175.  The 
stock is back above it's 10-dma which now provides support.
Confirm a bounce off the 10-day with direction for entry into
any new call plays.  

INTC $142.63 -1.44 (+12.75) Well, what did you expect?  INTC
deserved this much-needed breather today after seven straight
sessions of gains.  Yes, that's seven.  I think that it is fair 
to say that INTC is back.  It has provided tremendous leadership
in the market for both the DOW and the NASDAQ.  As we look
forward, we still have earnings on April 12th and possibly, a 
record quarter.  Since we have added this to our play list, it
has been tough to get in on the dips as there has been very
few.  Today did offer a chance for entry as INTC dipped to 
$139.44.  That level appears to provide support.  Let's call it
$140.  The market is still very bullish on the chip maker and 
INTC's recent alliances and acquisitions prove that it is 
serious about expanding into the internet realm.  These dips
provide quick entry points, yet watch closely to see how INTC
reacts to a down day for the NASDAQ, if we get one.  Resistance
will be met at $144 and then $145.38, its all-time high.     

BMCS $54.06 -1.44 (-1.00) Talk about trading in a channel.  If
you look at an intraday chart you can actually visualize the 
upper and lower lines that make up the channel.  Or you can tell 
your charting program to do it too.  Either way, BMCS closed 
right in the middle of that channel.  It clawed its way back 
from a gapped opening at $53.75 and a low of $52.06.  BMCS peaked 
today at $55.56.  This range offered plenty of entry points.  We 
are not counting this call play out yet.  The dip we saw today 
was due to sector woes, as Compuware was downgraded and the rest 
of the sector felt a brief moment of sorrow.  But they got over 
it and BMCS established support at $54.  Fundamentally, BMCS 
looks good.  Still, word on the Street is that they are on track 
to a strong quarter, and with a sound technical picture, BMCS is 
a low volatility play that has great potential.  Target shoot 
on the dips for entry points suited to your risk.  

NOK $219.63 +1.44 (+19.75) As expected, NOK shareholders approved 
the 4:1 split.  The information was not easy to find, but from a 
company press release (for some reason not picked up in the U.S. 
Media), the split will take place after the close on April 7th.  
Split adjusted trading takes place on Monday, April 10th.  That 
should keep NOK moving with an upside bias.  Support is hard to 
discern on the current chart, but historically it's been good at 
$200 and $205.  Even that, by definition, is old news given the 
confirmation of the split date.  Maybe of more use is the 5-dma, 
currently at $210.40, but NOK was too strong to reach that far 
down today, managing a nice rebound from $214.  In the news - 
more deals and alliances.  First NOK was awarded a contract with 
Scandic Hotels (133 units) to provide them with WAP networks.  
Prior to that, they announced a deal with Hainan Mobile 
Communications of China that will add $30 mln to the revenue 
stream.  Target shoot to your level of comfort and enjoy what we 
think will be a nice ride over resistance at $220 into blue 
sky territory by the split (maybe before that if the market 
holds firm tomorrow and next week).

NITE $52.75 -2.19 (+1.00) After seeing Morgan Stanley and Lehman 
Bros. smoke analysts' estimates by a long shot earlier in the 
week, there is no doubt that exchange volume from the beginning 
of the year has made the brokerage business very profitable.  
NITE continues to enjoy the spoils of this strong market.  It's 
only going to get better now that they've acquired a specialist 
post on Philadelphia Exchange, effectively doubling their option 
contract listings on the Philly.  Like clockwork, NITE hit the 
upper end of the trading channel at $55 and moved back toward the 
centerline.  With any round or profit-taking tomorrow (typical 
for a Friday), it could trade down to the $47-$48 range, which we 
think makes a great entry.  $50 is the 10-dma (and centerline of 
the channel) and may also be a good place to board the train (if 
you see NITE bounce from there).  Today's drop on low volume 
just isn't an issue and gets us that much closer to a buying 
opportunity.  Helping matters even more, ABN AMRO raised their 
price target from $65 to $75 after management revealed plans to 
create a European venture that NITE says could be as big as the 
U.S.  Expect the launch in Fall 2000.  Earnings are scheduled 
for April 19th.  Wait for the dips and target shoot to your 
level comfort for the best entry.

XRX $26.88 -0.13 (+1.06) Just when we thought XRX was ready to 
produce, it looks like they need toner to replicate the $3 gain 
from Tuesday.  Alas, XRX has been falling since Wednesday 
morning.  Three bounces this week at $26.75 seems like near-term 
support to us, especially since today's decline happened on low 
volume (67% of the ADV).  However, the 5-dma ($27.09) is just 
slightly above today's closing, which makes the direction tough 
to call.  If the market finds itself in the mood for profit- 
taking, XRX could well decline a bit more to its 10-dma of 
$25.86.  Unless news comes out that they forgot how to make 
copiers, consider it a buying opportunity.  Near-term resistance 
is $30, then $32.50, which would constitute a breakout over the 
gap-down level last seen in October (very bullish).  Earnings are 
confirmed on April 25 before the bell.  Since there isn't a lot 
of time premium in the April option prices, consider the May 
strikes to capture the earnings run and maybe an increase in 
theta (borne of volatility on the move up).  Target shoot 
according to your risk tolerance level.  No news to report 
over the last two days.

YHOO $191.00 -6.19 (+19.88) Readers! Please forgive a writer's 
"faux pas".  Yahoo! is reporting earnings Wednesday April 5th, 
after the bell.  In the past two sessions, YHOO easily slid 
through the ominous $200 mark.  So now that that psychological 
barrier is behind us there's nothing to hold YHOO back.  And 
remember the possibility of another stock split?  Well it's 
looking good - Yahoo! is holding a shareholders' meeting May 
12th to vote on an increase of authorized shares from 900 mln 
to 5 bln!  You've got to love this Internet powerhouse!  And 
today's profit-taking in the late afternoon gave us the 
opportunity to jump into positions.  The current level is 
slightly below near-term support at $195, which serves as a 
reasonable entry, unless we're gifted with dips to the rising 
5-dma (now at $184.62).  As usual, there was news swirling 
around YHOO.  On Wednesday, they announced a co-branded marketing 
blitz with beverage giant, Pepsi-Cola.  Through an on-line and 
off-line program call Pepsi Stuff.com, consumers can earn points 
and discounts online from an under-the-cap logo on Pepsi and 
Mountain Dew bottles.  The five-month promotion is expected to 
launch in August 2000.  And more directly related to Yahoo's 
revenues, there was also an announcement that they acquired 
Arthas.com, a Web-based person-to-person electronic commerce 
payment service company.  This addition will enhance Yahoo!'s 
current commerce offerings to its 120 mln individual users. 
Terms of the agreement weren't disclosed. 

IDPH $126.13 -5.13 (+7.19) The Nasdaq's positive sentiment is 
certainly lending a helping hand to this stock's recovery!  IDPH 
proved it could indeed move higher and tacked on $15.66, or 
13.5% yesterday.  Today, near-term support established itself 
at $128 and $130 while IDPH experienced some mild consolidation 
(entry points for the less conservative!).  This level is in 
the proximity of the 30-dma ($130.30) and a breakout above this 
technical indicator would be considered very bullish.  And watch 
for increasing volume levels to signal another upward bounce 
too.  The overhead resistance isn't that far away at $136.31, 
yesterday's intraday high.  Just keep in mind, this is a sector 
play and major swings by others in Biotechs will have 
unmistakable effects on IDPH.

HWP $147.25 +1.06 (+9.25) Like the little engine that could,
HWP finally pushed up and closed above the $147 resistance
level.  Helped by strength on both of the major indexes and
the continuing flow of positive news, the stock managed to tack
on just over a dollar today.  Keeping busy, HWP has announced
alliances with Microsoft and LetsBuyIt.com in the last 2 days.
Under the terms of the multi-year alliance with Microsoft, 
the 2 companies will cooperatively market, sell and support
Internet-enabling solutions for service providers creating
applications and services over the Internet.  After investors
confirmed the $142 support level this morning, it was a nice
smooth move up to $149.50, where profit-taking began to appear.
As the major indices rolled over in the last hour, HWP gave up
$2.25, but managed to close over $147 for the first time since
March 9th.  It was nice to see HWP move up, but the light volume
(only about two-thirds of the ADV) raises a caution flag.  If
HWP is going to break through resistance at $150, we need to
see buyers drive up the volume.  We would like to see HWP hold
support at $147 and move up from here, but in the absence of
confirming volume, it may need to test support at $142 again
before launching higher.  A bounce at either support level is
buyable, as is a break through of resistance at $150.  Solidly
above the $140 level, HWP is into its traditional split range.
With 4.8 bln shares authorized and only 1 bln outstanding, 
the announcement could come at any time.

DELL $57.50 -0.63 (+1.06) DELL suffered a bit today as chip 
leader, Intel (INTC), dragged down the hardware sector.  It's 
great that the mother of all chipmakers (which happens to be on 
our call list!) powered up to another all-time high yesterday. 
But unfortunately the whole sector got caught in its 
consolidation trap.  However since we're bulls and chock-full 
of optimism, the bright side of the coin is entry points into 
this momentum play.  On mild pullbacks (like today), DELL dips 
to the 5-dma ($57.56) and typical bounces upward from there.  
So where's resistance?  Well on Wednesday the stock delighted 
us with another 52-week record at $59.69, but this mark is 
considered strong resistance.  Obviously a move through this 
psychological level would provide solid confirmation that 
there's enough driving force to carry it to higher levels.
In other words at this point in the play, you're entry points 
are dependent on your personal risk profile.  In the news, Dell 
Computer, announced a price reduction on select units of its 
Precision Workstation.  According to Dave DuPont, senior 
marketing manager, Dell Precision Workstations, "The inherent 
advantages of Dell's direct model, combined with our ability to 
pass along component cost savings, enable us to offer the newest 
RDRAM workstations at prices lower than most of our competitors' 
recent SDRAM-based workstations".

IBM $115.25 +1.00 (+5.25) Wow! Traders got a nice entry this 
morning as IBM slid to short-term support in the $112 range 
before climbing back up above $115.  Besides the raging Nasdaq, 
company news likely played a vital role in this momentum play's 
eventual performance.  In the news, IBM joined forces with TDK 
to develop more solutions for the award-winning ThinkPad family.  
B2B anyone?  IBM is teaming with CommerceQuest to deliver five 
e-marketplaces to customers in a broad range of industries with 
60 more in the pipeline.  John Patrick, vice president of Internet 
technology at IBM stated that "more than ever, industries are 
looking to IBM and integrators, such as CommerceQuest, to provide 
the hardware, software and services to build their online trading 
communities".  And perhaps IBM is a bit late catching the server 
bug, but look out Dell, Compaq, and HWP because Big Blue is 
making up lost time with the release of a wide collection of 
models within their Netfinity line.  All these events and  
further demonstrates the diverse nature of IBM and its intent to 
continue to be a market leader.  We're betting this kind of news 
and the positive market sentiment will power IBM higher in the 
short-term.  If you're waiting for a more definitive breakout, 
look for IBM to move through $115.88, today's intraday high 
before opening new positions.



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

EK $56.25 +0.19 (-1.19) EK finally got moving on Wednesday 
after flattening out just under $58 as it broke out of the
old trading range.  Meeting up with support and dropping 
as low as $55.75.  But it stalled again by quickly flattening 
out at $56.  We like the fact that EK is testing that support 
level, but is unable to bounce, especially during good trading 
days for the DJIA.  Still EK seems to be lingering around.  
Earnings are due out Apr 16th and traders don't seem eager to 
go with or without EK.  As we've stated before patience is the 
key and hopefully all this waiting will pay off.  Still no 
word on a warning for those upcoming earnings.  However there 
is still time left in the warning season.  If you are looking 
for an entry, wait for a drop below $55.75.  Otherwise, any 
move substantially higher from here will result in a drop from 
our put list.

CKFR $62.88 -2.56 (-7.31) Things are looking good as CKFR 
continues its decline even as the NASDAQ posts another strong
gain.  We almost saw another triple digit advance for the NASDAQ.
which would have been three in a row.  Let me ask you, what do 
you think CKFR will do when we see a down day for the NASDAQ?  
CKFR opened today just where it closed yesterday and closed
down, $0.25 above its low of the day.  We still feel that CKFR 
could sink to its support level of $59 which it tested on 
Monday and Tuesday.  CKFR's range of $4.63 today provided some
entry points.  So look for market direction tomorrow and let's
see if CKFR retests $59 for the third time this week.

ISLD $75.06 -6.19 (-7.56) Entry point?  We've got your entry
point right here!  Moving up to almost touch the 10-dma
(currently at $87.63), ISLD gave investors a head fake this
morning.  Don't you feel sorry for those investors that bought
the gap at the open?  After tagging $87, it was all downhill
for ISLD, closing at the low of the day.  Need confirmation?
How about 50% greater volume than the daily average, and a drop
of over $4 in the last 30 minutes.  Although minor news stories
have been coming out fairly regularly, investors seem to still
be fixated on the Barron's "burn-rate" article.  With the strong
volume today, especially with the accelerating decline into the
close, look for ISLD to continue to sink.  We may see some minor
support near $73, but look for the real support to be at $70.
If $70 can't hold, it could be a quick slide to $60.  Continue
working entries as ISLD struggles up to resistance at $79-80 and
then rolls over.  Keep an eye on volume as a drop below the ADV
could be our first sign that a bottom is forming. 

RHAT $57.50 -0.50 (-5.38) Helped by positive news this morning,
RHAT gave us a gift of an entry point.  The announcement that
eToys uses more than 500 machines running Red Hat Linux gave the
stock a boost, but the excitement didn't last.  RHAT reached as
high as $61.19 this morning, but there was no volume to keep it
above resistance at $60.  With a lack of follow-through buying
volume, the sellers came out of the woodwork, pushing RHAT back
below the 5-dma (currently at $59).  Dropping fractionally for
the day on average volume, and staying below all the moving
averages, RHAT's downtrend is still very much intact.  Over the
past couple days, the stock has been finding support near $57,
with stronger support near $55.  As long as we don't see a
resurgence of the Linux mania from a few months ago, RHAT looks
to be headed lower still.  Consider new entries if the stock
rolls over near either the 5-dma or resistance at $60.
Alternatively, wait for increasing selling volume to push RHAT
down through support at $57, and enjoy the ride.



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

NT - Nortel Networks $137.25 +3.25 (+9.25 this week)

Nortel is a maker of telecom products.  Their products include 
switching, wireless, and broadband network systems for service 
providers.  Today, Nortel is creating a high performance 
Internet that is faster than ever.  The company is using 
acquisitions to keep up with LU and to challenge CSCO in the 
data networking market.  With 70,000 employees, Nortel has 
presence in 150 countries across Europe, Asia, the Middle East, 
Africa, Canada, and the United States.  

What does Nortel want the Internet to be?  A cash cow.  With a
one year return of 350%, NT has become a cash cow for investors.
With the recent rotation out of second-tier tech stocks into the
big-cap names, NT continues to plow higher.  Nortel continued
it's shopping spree this week by purchasing optical component 
maker CoreTek.  The purchase will strengthen Nortel's offerings
for an all-optical Internet and secure their lead in the hot
optical networking market.  Today, good news flowed from Europe.
Metromedia Fiber Network (MFNX) signed an agreement with NT to
connect area networks across Europe, using Nortel's OPTera
technology.  The project will connect 16 major cities,
providing one of the fastest, most reliable networks in the
world.  Nearly 50% of Internet traffic in Europe now travels
over Internet equipment made by Nortel.  Turning to the chart,
NT broke out of congestion yesterday by closing above overhead
resistance at $130.  Over the past week, the stock formed an
ascending triangle.  With the breakout yesterday, and the
continuation today, the stock is poised to make higher-highs.
The stock has been finding solid support at the 10-dma, showing
little weakness.  Any dip below the 10-day would provide a good
entry point.  Strong support for NT is at previous resistance
of $130, any bounce off this level would provide another good
entry into this play.

Earnings are still a month away and NT last announced a split 
on Jan 25th.  The payable date will be set at the next 
shareholder meeting.  However, the company has not yet announced 
the date of the next meeting.  With the stock trading at new 
highs, an announcement could come at any time, providing further 
fire to the stock.

BUY CALL APR-135*NTV-DG OI=1183 at $11.00 SL=8.25
BUY CALL APR-140 NTV-DH OI=2506 at $ 8.75 SL=6.25
BUY CALL APR-145 NTV-DI OI=2014 at $ 6.63 SL=4.50
BUY CALL MAY-145 NTV-EI OI= 130 at $11.50 SL=8.50  
BUY CALL MAY-150 NTV-EJ OI= 170 at $ 9.50 SL=6.50 

Picked on Mar 23rd at   $137.25     P/E = N/A
Change since picked       +0.00     52-week high=$138.38
Analysts Ratings    13-13-4-0-0     52-week low =$ 29.16
Last earnings 01/00    est=0.43     actual=0.55
Next earnings 04-25    est=0.19     versus=0.36
Average Daily Volume = 6.20 mln
/charts/charts.asp?symbol=NT

****

BAC - Bank of America, $54.19 +2.75 (+4.19 this week)

Bank of America is one of the largest holding companies in
the U.S. and offers a wide array of banking and financial
services.  They have over 11,500 branches in 47 states and
almost 40 countries.  BAC is the nations first coast-to-coast
bank.  They provide services throughout the Mid-Atlantic, the
Mid-west and the South.  BAC offers consumer, commercial, and
global corporate banking, which include commercial real-estate
investment and brokerage services, insurance and mutual funds.

Don't look now but this "old laggard" has gained over 27% in the 
last seven sessions.  This old economy stock was sitting at its
52-week low at $42.31 on March 10th, and this past Tuesday broke
through a resistance level sitting at $50.  Is everyone else as
tired of hearing and reading the word "old" as we are?  We 
thought so.  Ok we promise no more "old" on this one.  Many
banking and financial stocks have been down over 10% this year,
but have recently found buyers willing to lay their money on the
line.  Investors have decided for whatever reason, an adjustment
in their portfolios was over due and have began to find BAC and
others in the sector attractive.  A note out earlier this week
from Private Asset Management may helped propel BAC through
to new "short-term" highs.  The Private Bank of Bank of America,
with $130.5 billion in assets under management was ranked the 
number one money manager of high-net-worth assets.  The Private 
Bank focuses on building and preserving the wealth of individuals
and families.  Investors completely ignored Alan Greenspan and
the Fed Tuesday after the 25 basis point rate hike and continued
to push ahead bidding the price of BAC past the $50 mark, closing
at $51.  The last time BAC had seen that level was January 14th,
and that was only for one day.  The point here is that for now,
it appears as though BAC and some of the financial stocks are
now fashionable once again.  The real boost came late last week
when BAC saw over 34 million shares traded and the price rose
$5 to hit $50.  The follow through this week helps confirm the
recent strength is probably not a head fake.  BAC has closed
higher 6 out of the last 7 days.  Support is seen at $52 and $50.  
But sometimes the momentum doesn't stop for a breather and you 
can consider new positions at the present level.

As financial markets reacted calmly to the rate hikes by the Fed,
Bank of America led the way raising their prime lending rate to
9.0%, and was followed by Chase Manhattan and others.  At this 
point the five rate hikes by the Fed have had little affect on 
the profitability of BAC or other leaders in the industry, as 
BAC has enjoyed strong earnings for the last three quarters.

BUY CALL APR-45 BAC-DI OI= 2198 at $9.75 SL=7.25
BUY CALL APR-50 BAC-DJ OI= 5367 at $5.25 SL=3.50
BUY CALL APR-55 BAC-DK OI= 4416 at $2.38 SL=1.25
BUY CALL MAY-50*BAC-EJ OI=19093 at $6.25 SL=4.50
BUY CALL MAY-55 BAC-EK OI=10114 at $3.38 SL=1.75

Picked on Mar 23rd at    $54.19    PE = 12
Change since picked       +0.00    52-week high=$76.38
Analysts Ratings    13-13-4-0-0    52-week low =$42.31
Last earnings 01/00   est= 1.24    actual= 1.23 
Next earnings 04-17   est= 1.24    versus= 1.08
Average daily volume = 6.38 mln
/charts/charts.asp?symbol=BAC



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

CPQ - Compaq Computer Corp. $29.50 -2.75 (-0.75 this week)

Compaq, a Fortune Global 100 company, is the second largest 
computer company in the world and the largest global supplier 
of computer systems.  Compaq develops and markets hardware, 
software, solutions, and services, including enterprise 
computing solutions, fault-tolerant business-critical solutions, 
enterprise and network storage solutions, commercial desktop 
and portable products and consumer PCs.  Compaq products are 
sold and supported in more than 100 countries through a network 
of authorized Compaq marketing partners and online. 

CPQ is #2 and needs to try harder.  Despite the talk late last 
year of intending to switch to the online/direct model pioneered, 
perfected and improved by arch-rival, Dell, CPQ is rumored to 
again fall short of analysts' estimates when it reports earnings 
tentatively scheduled on April 25.  Those with a long memory will 
recall Michael Dell pointing to a descending profitability chart 
referring to a "traditional competitor's" cost structure and 
commenting that the company would be out of business in five 
years.  It was inferred then that he meant Compaq.  While we're 
not willing to step out on a limb with Mikey in calling for CPQ's 
demise, Dell clearly has the superior business model.  CPQ's 
biggest trouble is that they run the risk of alienating their 
entrenched legion of resellers, a big part of revenues, by going 
hog-wild into the online model.  They don't seem prepared to do 
that to save themselves.  Concerning the swirling rumors about 
missing the quarterly numbers, unlike Lucent who rushed to their 
own defense at their own shortfall accusation, CPQ has offered no 
comment.  Furthermore, an analyst on CNBC today stated that he 
didn't see any reason CPQ would do any better than last quarter 
and expected CPQ to miss.  Unlike last quarter where CPQ advised 
analysts to revise estimates slightly up, no such pre-
announcement has yet taken place, leading us and many others to 
conclude CPQ is indeed likely to miss.  Technicals won't play a 
big role here - this is more fundamental.  If you need evidence 
that something is up, look at the volume today over twice the ADV 
of 23 mln shares.  Two 1 mln share block trades also took place 
around 1:00 p.m. between $30.75 and $31.  The price fell from 
there.  Think those guys were loading up in anticipation of a 
blowout?  Not likely.

BUY PUT APR-35 CPQ-PG OI= 2994 at $6.25 SL=4.25
BUY PUT APR-30*CPQ-PF OI=19845 at $2.63 SL=1.25
BUY PUT APR-25 CPQ-PE OI=16347 at $0.69 SL=0.00 High Risk!

Average Daily Volume = 23.23 mln
/charts/charts.asp?symbol=CPQ

****

FON - Sprint Corp $55.63 -1.13 (-4.19 for the week)

Sprint Corporation is involved in worldwide communications 
integrating long distance, local service, and wireless 
services.  Other activities include telecom equipment 
distribution, directory publishing, and interests Internet 
access Sprint is based in Westwood, Kansas and has roughly 
65,000 employees nationwide.

First it was the tech sell-off last week that pressured FON to 
precariously teeter at the 200-dma indicator, but today's 
revival about its merger with MCIWorldCom (WCOM) was the straw 
that broke the camel's back.  Yes, the combination of these 
giants surely puts them in a dominant position however, the Bell 
companies' plans to aggressively enter the long-distance market 
will undoubtedly compel carriers to reduce prices as competition 
for market share increases.  As it stands now, Bell companies 
have identified twelve states it intends to seek long-distance 
authority by the fall of 2000, which just happens to coincide 
with the approximate time the MCIWorldCom-Sprint merger will be 
completed.  Now let's take it from a technical perspective. 
Visually it doesn't look good for FON.  Take a look at a one-
month chart and it's clear the stock slithered below bottom 
support at $58.  As it is, this places FON below the converged 
5-dma ($58.23) and 10-dma (58.70), which in our opinion is a 
bearish implication.  If the stock is indeed going to head for 
the 52-week low at $42.63, then FON will move lower in the next 
few trading sessions despite any positive sentiment of the DOW.  
Downward bounces off $58 should provide solid entries into this 
play.

BUY PUT APR-60*FON-PL OI= 531 at $5.63 SL=3.00
BUY PUT APR-55 FON-PK OI=1369 at $2.50 SL=1.25

Average Daily Volume = 2.44 mln
/charts/charts.asp?symbol=FON



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

NOK - Nokia Corporation $219.63 +1.44 (+19.75 this week)

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.  
  
Most Recent Write-Up

As expected, NOK shareholders approved the 4:1 split.  The
information was not easy to find, but from a company press
release (for some reason not picked up in the U.S. Media), the
split will take place after the close on April 7th.  Split
adjusted trading takes place on Monday, April 10th.  That should
keep NOK moving with an upside bias.  Support is hard to discern
on the current chart, but historically it's been good at $200 
and $205.  Even that, by definition, is old news given the 
confirmation of the split date.  Maybe of more use is the 5-dma, 
currently at $210.40, but NOK was too strong to reach that far 
down today, managing a nice rebound from $214.  In the news,
more deals and alliances.  First NOK was awarded a contract with 
Scandic Hotels (133 units) to provide them with WAP networks.  
Prior to that, they announced a deal with Hainan Mobile 
Communications of China that will add $30 mln to the revenue 
stream.  Target shoot to your level of comfort and enjoy what 
we think will be a nice ride over resistance at $220 into blue 
sky territory by the split (maybe before that if the market 
holds firm tomorrow and next week).

Comments

NOK found support this morning at $215 and set its sights on $220.
That's the same resistance level that we are eagerly watching.
Although NOK did not close above $220, it did make a few 
concerted efforts and had an intraday high of $220.75.  With a
split coming April 7th, the overall feeling is bullish.  But be
cautious tomorrow as $220 is very key resistance.  Don't go for 
the head fake.  For a more conservative entry, wait until NOK 
breaks through $221 and proves convincing.  That could indicate
a real breakout.  Less risk averse traders can target shoot for
entries suited to their levels.  

BUY CALL APR-210 NZY-DB OI=5532 at $20.75 SL=16.25
BUY CALL APR-220*NZY-DD OI=6026 at $15.50 SL=11.50
BUY CALL APR-230 NZY-DF OI=2195 at $10.88 SL= 8.75
BUY CALL MAY-220 NZY-ED OI= 424 at $21.75 SL=17.00
BUY CALL MAY-230 NZY-EF OI= 196 at $17.50 SL=13.50

Picked on Mar 09 at     $214.63     P/E = 95
Change since picked       +5.00     52-week high=$227.06
Analysts Ratings     16-9-1-0-0     52-week low =$ 67.69
Last earnings 02/00   est= 0.67     actual= 0.72
Next earnings 05-02   est=-0.61     versus= 0.48
Average Daily Volume = 3.45 mln
/charts/charts.asp?symbol=NOK



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

Another Record Day..

Wednesday, March 22

Blue-chip stocks consolidated today as investors moved money into
semiconductor and biotechnology issues.  The Dow Jones Industrial
Average finished down 40 points at 10,866 while the Nasdaq Index
jumped 153 to 4,864.  The broader S&P 500 Index gained 6 points to
a record high close of 1,500.  Breadth on the NYSE was positive
with advances beating declines 1,642 to 1,317 in volume of 1.07
billion shares.  In the bond market, the 30-year Treasury rose
6/32, bid at 103 31/32, where it yielded 5.95%.


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

American Power   APCC  APR30P/APR35P   $0.75   credit   bull-put
Philip Morris    MO    JUN25C/APR25C   $0.56   debit    calendar
Philip Morris    MO    JUN22C/APR22C   $0.88   debit    calendar
Hilton Hotels    HLT   MAY7C/APR10C    $1.00   debit    diagonal

All three of our issues consolidated during the session, allowing 
favorable entries in each new spread position.  Now the question
is whether these stocks can recover to provide favorable profits.


Portfolio plays:

Technology stocks continued to rebound during today's session
amid perceptions their future growth will be unaffected by rising
interest rates.  The belief is based on the opinion that earnings
will be strong and that many of the technology companies building
the Internet infrastructure can meet future capital requirements
through share sales.  Demand for their products is also unlikely
to be reduced by inflation and they are less sensitive to increases
in the cost of borrowing funds.  The outlook for blue-chip issues
is less favorable as money has once again began flowing out of the
classic companies.  The group has succumbed to profit-taking after
a solid rally in recent days and the market has yet to reaffirm
their attractiveness for the long-term.

The leading sectors were semiconductors and biotechnology but some
financial and drug issues managed to hold on to positive gains.
Now the question is which group will become the new market leader
as we move into the next earnings quarter and the May FOMC meeting.
Federal Reserve Chairman Alan Greenspan recently commented that it
is the Fed's goal to implement monetary policy that will foster a
continuation of solid growth and low inflation.  Only time will
determine if the markets can react positively to that optimistic
principal.

Our portfolio enjoyed a number of rallies in the leading market
groups.  Technology issues such as Electro Scientific (ESIO) and
Metromedia Fiber Network (MFNX) were the top performers and one of
our new bullish issues, American Online (AOL) made a surprise move.
AOL jumped $4.12 to $71.50 and our LEAPS/CC's position is already
profitable.  Of course an adjustment will be necessary to maintain
upside profitability and our first choice would be a roll-out to
the MAY-$70 (or $75) options.  The key is to gain potential while
retaining a favorable margin of downside protection and with any
adjustment, the future position is based on the current technical
outlook of the issue.  Small and mid-cap stocks also participated
in the rally and the majority of biotech and semiconductor issues
made favorable moves.  Advanced Micro Devices (AMD), Cirrus (CRUS),
Medtronics (MDT), Organogenesis (ORG), and Theragenics (TGX) were
the portfolio leaders.

Tera Computers (TERA) recovered slightly from a recent slump and
the move presents an excellent opportunity to close the position.
The current credit is $1.88 and with the bearish technical outlook,
it appears to be a favorable exit.  Duramed (DRMD) is one of the
few drug stocks that has failed to respond to the recent recovery
in the group and we have decided to roll-down (to prevent losses)
in the bullish diagonal spread.  The transition credit for the move
to MAY-$7.50 calls was $1.38 and the new position is JUN5/MAY7C at
$1.88 debit.


Thursday, March 23

Equity markets soared today on strength in both blue-chip and
technology issues.  The Dow Jones Industrial Average rallied 253
points to close at 11,119 and the Nasdaq Composite rose 75 points
to 4,940.  The S&P 500 Index gained 26 to 1,527, improving on
Wednesday's record close.  Advances led declines 3 - 2 on active
volume of 1.07 billion shares on the New York Stock Exchange.  The
30-year U.S. Treasury bond rose 23/32 pushing the yield down to
5.91%.

Blue-chip stocks climbed to record levels and the Nasdaq rallied
a third consecutive day after reports surfaced that Microsoft, the
world's leading maker of software, will settle its antitrust case
with the government.  The company and Justice Department officials
have discussed plans to settle the landmark antitrust case and
optimism surrounding the upcoming decision overflowed into other
computer-related industries.  Our portfolio enjoyed another day of
bullish activity and most of the positions participated in the
rally.  There were no clear leaders in our group but the top
industries in the market were banking and brokerages, computer
software, networking, paper products and conglomerates.  Most of
the recent winners in the semiconductor group consolidated gains
and biotechnology stocks were mixed as many of the sector leaders
fell to profit-taking.  Of course the broad manner in which the
market rallied is the best news of all.  A new record for the S&P
500 index was completely unexpected and the Dow's closing number
was its first above 11,000 since early February.  Lets just hope
the trend continues.

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


******************************************************************
                         - New Plays -

Banking and Finance issues have rallied over the last week amid
optimism concerning the outlook for future interest rates.  On
Tuesday, the FOMC raised the federal funds rate 25 basis points
to 6%.  That's the highest level in five years for the crucial
rate lenders use to set rates on loans and other financial
products.  The good news is most analysts see the relatively
small increase as a favorable measure for the economy and a boon
to the finance industry as it may be the last rate hike in the
near future.  Most companies in the industry have also enjoyed
record results in their stock businesses and investment banking
subsidiaries.  With the increased attention in the group, there
are a number of favorable issues on which we can speculate with
spread positions.

******************************************************************
ONE - Bank One  $28.56   *** LEAPS/CC's ***

Bank One Company is a multibank holding company formed by the
merger of Banc One Company and First Chicago NBD.  The company
engages primarily in five lines of business: Commercial Banking,
Credit Card, Retail Banking, Finance and Investment Management,
as well as proprietary investment activities.  Through its bank
subsidiaries, the company provides domestic retail banking,
finance and credit card services; worldwide corporate and
institutional banking services; trust and investment management.
The company also owns subsidiaries that engage in businesses
related to banking and finance, including credit card and merchant
processing, consumer and education finance, mortgage lending and
servicing, insurance, venture capital, investment and merchant
banking, trust, brokerage, investment management, leasing,
community development and data processing.

The big news for this issue is the possible sale of its online
subsidiary Wingspanbank.com.  Bank One has hired Morgan Stanley
Dean Witter to advise it in the possible sale of Internet-only
banking unit less than a year after it was launched.  Bank One is
exploring a sale of the unit as it scales back operations after a
drop in its stock price when it said it would miss earnings
estimates for the year.  The shortfall was blamed largely on
problems at Bank One's First USA credit-card unit, which was
closely associated with WingspanBank.com.

Now the speculators are out in force and with the recent rebound
in the financial group, this position has two factors in its favor.
The technical outlook for the stock is also stronger than many of
its competitors and there is excellent upside potential in the
issue.

Note: If the short options are "in-the-money" at expiration, you
must buy them back to preserve the long-term option.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  JAN01-20.00  ZBE-AD  OI=470   A=$10.12
SELL CALL  APR00-27.50  ONE-DY  OI=3319  B=$2.18
INITIAL NET DEBIT TARGET=$7.75 ROI TARGET=50%

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

****

SUB - Summit Bancorp  $27.00  *** Sector Play ***

Summit Bancorp is a bank holding company that owns three banks
and several active non-bank subsidiaries.  It is the largest New
Jersey-based bank holding company.  The bank's subsidiaries are
engaged in general banking businesses, securities brokerage,
insurance brokerage, venture capital investment, commercial
finance lending, lease financing, asset-based lending, letter of
credit issuance, data processing, and reinsurance.  The company
is segmented into three lines of business: retail banking,
commercial banking, and investment services and private banking.
Retail banking is geared towards the banking needs of individuals
and small businesses.  Commercial banking focuses on the banking
requirements of large and middle-market businesses.  Investment
services include trust services, sales of mutual funds, insurance
and brokerage and discount brokerage services.

We picked this issue for its unique ability to mimic the Regional
Banking sector.  We have offered positions on this issue in the
past and noticed that it simulates the group quite well.  If you
think the sector has a potential for significant recovery in the
coming months, this conservative position offers a simple method
to participate in the bullish trend.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  JUL-20.00  SUB-GD  OI=57   A=$7.62
SELL CALL  APR-27.50  SUB-DY  OI=268  B=$1.25
NET DEBIT TARGET=$6.12-$6.25 INITIAL ROI TARGET=22%

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

****

NTRS - Northern Trust  $72.06   *** Rumors Are Rampant! ***

Northern Trust Corporation is a banking and financial services
company that operates through subsidiaries throughout the United
States, Canada, the United Kingdom, Singapore and Hong Kong.
Corporate Institutional Services provides trust, commercial
banking and treasury management services to corporate and
institutional clients.  Trust offerings include custody services
for owners of securities, and securities lending and asset
management services.  CIS also offers retirement consulting and
record-keeping services and investment products.  Personal
Financial Services offers trust services, investment management
services, estate administration, banking and residential mortgage
lending.  This division focuses on high net worth individuals
through its Wealth Management Group.  Global Investments includes
products and services offered through Northern Trust Global
Investments, to clients of CIS and PFS.  NTGI also offers equity
and fixed income research and portfolio management services.

This position is based simply on recent increased activity in the
stock and underlying options.  The implied volatility in call
options surged this week as the stock spiked to a new 52-week high.
Most traders are again speculating on a potential buy-out or merger
but one analyst said that Northern is one of the country's leading
providers of trust, master trust and custody, asset management and
banking services and it is also one of the first issues people go
to when they shift into financials.  Regardless of the reason for
the move, we favor the recent spike in volume and the technical
support near the cost basis in this aggressive position.


PLAY (aggressive - bullish/credit spread):

BUY  PUT  APR-55  NRQ-PK  OI=63  A=$1.00
SELL PUT  APR-60  NRQ-PL  OI=140 B=$1.68
INITIAL NET CREDIT TARGET=$0.81 ROI(max)=19%

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


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