Option Investor
Newsletter

Daily Newsletter, Tuesday, 03/28/2000

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter         Tuesday 3-28-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       3-28-2000           High     Low     Volume Advance Decline
DOW    10936.10 -  89.70 11094.30 10932.80   954,242k 1,351  1,656
Nasdaq 4,833.89 - 124.67  4952.93  4833.89 1,487,892k 1,522  2,765
S&P-100  821.40 -   8.77   832.79   821.08    Totals  2,873  4,421
S&P-500 1507.73 -  16.13  1527.36  1507.09            39.4%  60.6%
$RUT     559.04 -  14.61   573.65   559.04
$TRAN   2680.97 +  13.16  2727.34  2664.66
VIX       26.58 -   0.17    27.68    25.75
Put/Call Ratio       .47
******************************************************************

Abby Is Selling, But Will Funds Start Buying?

Abby Joseph Cohen spoiled the markets today, but it may be 
time for other money managers to start their quarterly window 
dressing shopping spree.  If you caught any of the action today, 
you know it was famed Goldman Sachs analyst Abby Joseph Cohen 
who brought a dark cloud to Wall Street today.  In a somewhat 
confusing move before the market open, she changed her allocation 
in stocks from 70% down to 65%.  It was confusing in that she 
had just upped her price targets for the DJIA and S&P 500 last 
week.  How does she expect to hit those targets with everyone 
selling stocks?  I guess what can be derived from this change 
in allocation is that she is expecting better gains in the 
non-Nasdaq stocks, which is in line with her comments about the 
switch.  Still, ahead of what should be an incredible earnings 
month, the timing seemed suspect.  Nevertheless, the futures 
were near +10 this morning until the news hit and they quickly 
dropped to -6 and set the tone for the day.  

The damage might not be as bad as it looks at first glance 
though.  Sure the Nasdaq was -124 and closing right smack on 
the low, but volume was flat out anemic at 1.5 bln shares.  
Also, you had a lot of people talking over the weekend about 
a sluggish start to the week and then picking up ahead of 
March 31st and the end of the quarter window dressing.  Throw 
in some decent support at 4800 on the Nasdaq supported by the 
10-dma and we might just be a quick morning capitulation away 
from an entry point.  Losers did almost double gainers by a 
27-15 margin on the Nasdaq though.  A bounce at 4800 will be 
the key before jumping back in with both feet.


 

The DJIA held up better, but still gave up gains in the final 
90 minutes of trading.  The Industrials fell by 89.74 to close 
at 10936.11.  Advancers beat decliners by a 17-12 margin on 
light volume of 952 million shares.  Yep, back under 11,000 as 
the DJIA again failed at resistance of 11,100 during the past 
few days.  The chart below is an updated version of the one from 
last week showing this resistance level.  It is clear where the 
sellers are accumulating, but the light volume is suggesting 
there aren't a whole lot of sellers out there.  It is probably 
more along the lines of some healthy profit-taking after a big 
run up on the DJIA.




 

In fact, there was a lot of good news that went relatively 
unnoticed today.  For instance, Oil tanked again on news that 
OPEC has reached an agreement in principle to increase output.  
There has been no formal announcement yet to just how many 
barrels they will send to market, but it is expected at any 
time.  Oil prices finished down $0.70 cents to $27.09.  Not 
bad compared to the $34 level we were looking at just over a 
week ago.  The preliminary report is a 1.7 million barrels a 
day increase, which is closer to the high end of expectations.  
Although, the word crossing CNBC late this afternoon suggests 
that maybe the deal at 1.7 million is not final.  Either way, 
oil continues to fall and that will help curb inflation. 

Also, consumer confidence fell for the second straight month 
on worries over inflation.  If people start spending less, it 
is hard for prices and inflation to increase.  In the treasury 
market, bond prices gained ground.  The 10-year bond (the new 
bellwether) gained ground and saw its yield fall to 6.15% 
from 6.18%.  Most of this was a flight to quality reaction 
to today's market, along with the positive economic numbers. 

The winners today could mostly be found in Airlines, Banking, 
Retail, Insurance and other Cyclicals.  The losers were in 
High-Tech, Internet, and Utilities.  The best bet was to stay 
in those stocks that were showing strength or holding support 
as they are likely to take off when the market recovers.  Other-
wise, finding an exit point on the losers is time well spent.  
You don't want to get caught watching something bleed to death.  
Sounds simple, but a reminder is always useful.  You may remember 
what happened the week of March expiration when the entire 
Nasdaq bled all week long, leaving call-sellers happy and call- 
buyers mourning.

The biggest joke of the day was rumors of an emergency Fed 
meeting that might be called to raise rates ahead of their 
next meeting.  Come on guys, who starts some of these.  I think 
it is a pretty safe bet that isn't going to happen.  Alan and 
friends have been fairly systematic about the way they've been 
raising rates.  They have had five, 25-point moves over a period 
of 9 months and are not likely to do anything so drastic.  This 
could have sparked some selling, but not by smart money as they 
know the Fed will sit pat until their next scheduled meeting.  

PALM was our big earnings news after the close today.  In their 
first report as a publicly traded company, PALM beat the street 
by two cents.  First Call had an estimate of $0.01 and they 
earned $15.5 million, or $0.03.  This was a pleasant surprise 
and hopefully the beginning of many more to come in the next 
month.  PALM was trading up from their regular session close 
at $54.81 to $57 after-hours.

Logical thought would lead us to believe that a negative open 
tomorrow is imminent, barring some market moving news.  Despite 
PALM's solid earnings and some more late news that AT&T has 
set the range for the IPO on their wireless tracking stock, 
a close at the day-low is never good.  As mentioned above, we 
may see a morning dip before stocks stage a mid-week comeback. 
Paul Cherney, market analyst at Standard & Poor's said it best 
today, "A lot of the mutual fund managers, especially those that
are in the blue chips, are just biding their time, trying to
pick a point to stuff the ledger with some of the better-name
blue chips,".  Agreed.  The market has been trending lower for 
three days now and it may be time for a bounce.  Watch the 4800 
level on the Nasdaq for a bounce.  The futures are down less 
than a point at the time of this writing, which isn't telling 
us anything except we will have to sign on a few minutes early 
tomorrow to figure out which way sentiment is leaning.  

If you are brave, look for a capitulation early confirmed by 
volume or a major support line.  Others should watch for a 
breakout of the current downtrends in all major indices to 
confirm the reversal.  A well-placed trend line along the 
falling intraday highs should be a good guide.  See the one 
on the DJIA above as an example.  A move above such a line 
will help to restore confidence for a short-term rally.  In 
all cases, trade smart and sell too soon.

Ryan Nelson
Asst. Editor

P.S.  The first seminar concluded today in grand fashion and 
second one began this evening.  That one will end this coming 
weekend and Jim will be back to work providing his market 
analysis starting next Tuesday, after using Monday to recharge 
his batteries from those 14-hour days.  We like to give him 
one day off from time-to-time!



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

Gas Prices Fuel Consumer Confidence Slide
By Cindy Christ

Rising gas prices may prove a boon to the Federal Reserve
Board, which hasn't met its goal of curbing rampant consumer
spending despite a series of interest rate hikes.

Since June, the Federal Open Market Committee has raised
interest rates five times in a bid to slow down consumer
spending, which accounts for about two-thirds of the U.S.
economy.

On Tuesday, The Conference Board reported its closely watched
Consumer Confidence Index fell in March for the second month
in a row, a sign consumers may shut their pocketbooks amid a
more cautious outlook for the future.

The Index now stands at 136.7, down from 140.8 in February and
a record high of 144.7 in January. The consensus forecast on
Wall Street was 139.8.

The Conference Board said the March decline was caused by a
dip in the Expectation Index, which fell to 106.2, down from
114.6 last month.

Although consumers are becoming more guarded, they're still
upbeat about the current economy. The Present Situation Index
actually rose to 182.4 in March from 180.1 in February.

"While optimism about current economic conditions continues at
high levels, consumers have turned cautious about prospects
for the next six months," said Lynn Franco, Director of the
New York group's Consumer Research Center, in a news release.

"Analysts are waiting to see if a further erosion in
confidence triggers a slowdown in consumer spending," Franco
added.

Overall, the survey showed significant increases in the
proportion of respondents expecting business conditions, job
prospects and income increases to worsen over the next six
months.

In addition, results showed that lowered expectations are
affecting consumer purchases of big-ticket items, with the
percentage of consumers planning to buy a car in the next six
months dropping to 8.4 from 9.8 in February

Higher mortgage rates also are helping undermine home sales,
with the percentage of people planning to buy a home sliding
to 3.8 from 4.5 last month.

In an interview with CNBC financial television, conference
board economist Delos Smith said rising gas and home heating
oil prices are key factors eroding confidence levels.

"136.7 isn't really all that bad," Smith said. "Fuel prices
are what's driving consumer fear."

Over the last year, fuel costs have surged, as the
Organization of Petroleum Exporting Countries cut back
production levels to pump up sagging oil prices.

The average cost for a gallon of gas in the U.S. as of March
25 was $1.59 a gallon, up nearly 61 percent from 99 cents a
year ago.

At meeting in Vienna Tuesday, OPEC ministers tentatively
agreed to ease oil restrictions by releasing an additional 1.7
million barrels a day on the world oil market.

Soaring fuel prices notwithstanding, The Conference Board said
it's unlikely that weakened confidence will put the brakes on
a thriving U.S. economy.

"A moderate cutback in consumer spending is unlikely to stifle
still-strong economic growth," Franco said.



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

As of Market Close - Tuesday, March 28, 2000 

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

DOW Industrials   10,850  11,250  10,936    Neutral   3.16
SPX S&P 500        1,410   1,475   1,508    BULLISH   3.21
OEX S&P 100          780     800     821    BULLISH   3.21
RUT Russell 2000     510     530     559    BULLISH   2.24
NDX NASD 100       4,000   4,150   4,583    BULLISH   2.24
MSH High Tech        975   1,000   1,130    BULLISH   2.24

XCI Hardware       1,480   1,510   1,733    BULLISH   2.24
CWX Software       1,430   1,670   1,557    Neutral   3.21
SOX Semiconductor  1,130   1,360   1,261    Neutral   3.21
NWX Networking     1,000   1,040   1,151    BULLISH   2.24
INX Internet         770     800     895    BULLISH   3.09

BIX Banking          520     600     579    Neutral   3.16
XBD Brokerage        450     480     551    BULLISH   2.31
IUX Insurance        520     600     556    Neutral   3.16

RLX Retail           900   1,000     925    Neutral   3.16
DRG Drug             340     380     339    BEARISH   3.28  **
HCX Healthcare       700     750     686    BEARISH   3.24
XAL Airline          130     150     143    Neutral   3.10
OIX Oil & Gas        265     300     273    Neutral   3.16

 
Posture Alert    
A longtime Wall Street Bull helped shake out some weak hands 
today, as Abby Joseph Cohen reduced her equity exposure by 5% to 
a mere 65% exposure rate.  Regardless of how meaningless this news 
was, it did make enough news to become a self-fulfilling event, as 
the Dow and NASDAQ stumbled today. Sectors showing strength today 
include Airlines; which had a +4.30% gain thanks to United Airlines 
positive pre-release, and Banking +1.03%. With this most recent 
action, we have downgraded the Drug sector to Bearish. 



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

Tuesday, March 28, 2000

Did you get Abby Greenspaned!
 
So a big time bull lowered her recommendation in equities by 5% 
and the market sells off. Was today's lower close a byproduct of 
her recommendation, or just a little profit taking after a big run 
up? Now granted, Abby does have pull, but we would lean to the 
latter.

Regardless, some issues did get hit today, including technology 
bellwethers Intel and Cisco Systems, which got hit for -7 and 
-2 3/16 respectively. However, both issues were up +24-25% just in 
the month of March, so to see these issues sell-off after Abby's 
comments was expected! 

One noticeable trend that everyone has witnessed this year has 
been the dramatic volatility in the market. Market corrections 
are starting to occur often, and now last for only a couple of 
days. Investors and traders switch from the bulls to bears camp 
as quickly as the weather changes in Chicago. This quick change 
in sentiment needs to be followed with close scrutiny, as one 
or two days can easily change perception. 

We highlighted several companies in Sunday's letter and gave the 
sentiment for those issues, including the Pinnacle Index, whisper 
number, as well as their earnings expectations. The two highest 
sentiment issues were Best Buy, and Cabletron Systems. Best Buy 
had a Pinnacle Index (as of Thursday 3/23) of 5.61, however, 
heading into today, it dropped to 2.63. Some of the best sentiment 
witnessed is the previous couple of trading days ahead of an 
earnings announcement. Obviously, in this case, the put buyers came 
marching in with a vengeance these last two days, and are paying 
the price today as Best Buy blew away even the infamous "whisper 
number" when they reported earnings. Because of this quick and 
dramatic change, we decided to revisit Cabletron, since they are 
due to report tomorrow. Now the Pinnacle Index for this stock has 
dropped as well, but is still very high and feverishly optimistic 
at 8.63. Now should Cabletron beat their whisper number of $.16 
and have a rosy conference call, all bets are off, because with 
the dramatic increase in short interest, the stock could easily 
get squeezed and run higher. However, if earnings only come 
inline, combined with the high level of investor expectations, this 
stock may be poised for a pull back. Once again, we would lean 
to the latter, unless we get Abby Greenspamed.   


BULLISH Signs: 

Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of 
analyst expectations. General Electric and United Airlines are 
the latest bellwethers 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 (5.988):
The current yield is in bullish territory.


Mixed Signs: 

Volatility Index (26.58):
The VIX continues to prove that the low 30's are an excellent 
buying opportunity, and the low 20's continue to be a great 
selling opportunity.


BEARISH Signs:

Pre-Release Season: 
With April just around the corner, we have the beginning of 
pre-release season. Over the next 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!

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  
Benchmark                        (3/24)      (3/28)

Overhead Resistance (830-860)     7.14         3.22

OEX Close                       832.65       821.40

Underlying Support  (800-825)     1.22         1.02
Underlying Support  (770-795)     0.82         1.37

What the Pinnacle Index is telling us:
Overhead resistance has dropped significantly, which will help the 
bulls if this market decides to make another run. However, support is 
still light, so the chance for more of a pullback still exists.



Put/Call Ratio                  Friday     Tues
Strike/Contracts                (3/24)    (3/28)

CBOE Total P/C Ratio             n/a        .43
CBOE Equity P/C Ratio            n/a        .38
OEX P/C Ratio                    n/a       1.47


Peak Open Interest (OEX)
                     Friday           Tues  

Strike/Contracts     (3/24)           (3/28)

Puts                700 / 9,113     720 / 8,654
Calls               830 / 4,363     830 / 4,637
Put/Call Ratio         2.08


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 24, 2000                          26.58



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

Daily Results

Index      Last     Mon     Tue    Week
Dow     10936.11  -86.87  -89.74 -176.61
Nasdaq   4834.00   -4.47 -124.56 -129.03
$OEX      821.40   -2.48   -8.77  -11.25
$SPX     1507.73   -3.60  -16.13  -19.73
$RUT      559.04   -0.36  -14.61  -14.97
$TRAN    2680.97  -20.34   13.16   -7.18
$VIX       26.58    0.94   -0.17    0.77

Calls               Mon     Tue    Week

QCOM      154.81    2.94    5.88    8.82  New, recent breakout
MFNX      101.13    1.44    1.63    3.06  Lines-up major contracts
NOK       226.25    5.50   -3.69    1.81  Still holding on
IBM       122.50    6.25   -4.50    1.75  Big Blue on the move
AOL        71.81    3.44   -2.63    1.13  It could have been worse
YHOO      195.00    6.75   -5.75    1.00  Six days until earnings
T          59.50    1.56   -0.81    0.75  New, wireless IPO soon!
RATL       86.88    3.19   -3.06    0.13  Whiplash Alert!!
DELL       55.88    1.44   -2.00   -0.56  In a channel here
BMCS       52.19    2.19   -2.81   -0.63  Watch for better volume
NT        140.56    1.81   -2.50   -0.69  Strategic B2B alliances
SNDK      131.63   12.50  -13.44   -0.94  Up & down from the news
BAC        53.56   -0.50   -0.56   -1.06  Still a pretty picture
HWP       140.69    3.81   -5.50   -1.69  Third time's a charm
INTC      135.69    3.63   -7.00   -3.38  Sitting at support
SEG        67.25    0.75   -4.50   -3.75  Dropped, time to go
NITE       55.00   -2.06   -2.00   -4.06  $60 = strong resistance
RNWK       68.22    0.31   -4.41   -4.09  Dropped, like a rock
ERICY      98.00   -3.19   -1.63   -4.81  Partners and contracts
SCH        60.13   -5.44    0.63   -4.81  Bucking the trend today
ALTR       87.69   -2.38   -5.81   -8.19  Price targets upped
EXDS      162.25   -5.50   -5.56  -11.06  Poised to go higher

Puts

RHAT       50.13   -3.88   -6.50  -10.38  Down on strong volume
AT         61.88   -2.56   -3.88   -6.44  New, ready to roll over
ISLD       71.63    0.06   -4.44   -4.38  Rolling back underwater
GTW        54.63   -0.25   -1.38   -1.63  Expecting shortfalls
CPQ        28.50    0.56   -0.94   -0.38  Hoping for a warning
PSIX       37.94    1.06   -0.94    0.13  Nearing support @ $36.63
FON        60.38    0.88    0.25    1.13  Dropped, good bye
CKFR       65.50   12.56   -8.25    4.31  Dropped, letting this go



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

First 150% Challenge Trades and The Value of the Telephone in 
an Electronic World.
By: Harrison Frolick

After receiving several emails from one of the programmers at 
OIN concerning my receipt of an email on how to format my stories 
and then, a few emails later, about how everything that I had 
sent in was in 14 point type, I realized, once again, for the 
third time today that emails and technology still have some 
gaping holes in them.  The end result was that it was neat to 
email back and forth; but, if we had picked up the phone and 
had a 20 second conversation, we could have figured out that 
the problem was that I had sent them a rough draft and NOT the 
3 versions later, finished story as I had intended.  Sorry folks, 
but you got the rough draft, again!  As this happened with the 
last story that was published, as well,  I was really miffed at 
myself.  If there are cuss words in the version you are now 
reading, then I did it again. (darn *^%* dang)*)&& dingleberry#%@ 
whitehouse%$#politicians##^%~)

This also happened earlier today with a principal of a trading 
house.  Not the cussing part....well, actually that, too.  About 
five emails into it, I got POD and got the president of the 
firm on the phone.  I learned as a kid that bypassing the flunkies 
and starting at the top usually gets things taken care of.  What 
surprised me was that we got the situation taken care of.  In 
conversation, he was explaining how great that their electronic 
trading system was, (It is not that great.  I have yet to find 
one that I am truly happy with), and I asked him about the long 
wait to get through to a broker on the phone.  He thought that 
only a 5 minute wait was great.  I was dumbfounded.  Well, I 
have news for all of you brokers.  Anything over 1 minute is 
unacceptable if you want my money and the loads of accounts that 
follow me, and you had better have more than 2 people on the 
phones.  5 minutes could cost me $5,000 or $50,000, you schmoe.  
Which is why I don't trade at 5 of the top 5 brokers.

After reading my last article, getting one of my partners to 
put up the 25k sounded like a great idea.  So, I am in the 
process of hitting up my partners for yet another 25k for my 
15%, or did I say 150% challenge?  They have all started 
laughing even before I finished saying, "I have another great 
idea."  I am going to make them all draw straws before the 
weekend is over, so at least one of them is going to have to 
empty their change jar.  They were actually relieved that I 
was only asking for 5 figures and not 7.  That is the price 
that they have to pay for hanging around me.  I have told them 
that they are going to get back a 15% return.  (OK, so I will 
give them a couple of  Wendy's gift certificates, too.  I am 
not totally unfair you know, they will be able to "Biggie Size" 
that order all year)  I am just telling them it is for one of 
my experiments.  I only have one straw left.....I see my victim 
now........

One of my 4 readers emailed and, as he was a newbie, he asked 
what graphing was.  My reply was such, "Charting was started 
in Japan several centuries ago to keep track of rice harvests.  
However, I now know that it is actually a measurement of how 
psychotic investors are at any given moment."  I should have 
added that it also measures how psychotic I am at any given 
moment when I try to interrupt those squiggley little lines and 
numbers.  Well, as I always say, when the coffee runs out, it 
is time to quit typing for awhile.......five hour break.......

Now for the juicy stuff.  I was amazed at the response that I 
got about the 15% return challenge.  OK.  I am joshing you.  I 
know it was 150%.  I just got one of my partners to draw a 
short straw.  So, I did the first trades, for better or worse, 
before the close and today is Friday, March 24, 00. 

A couple of things first.  One, I am not recommending any of 
the stocks or options that I am going to trade.  By the time 
you read this I may be long or short or not hold any of the 
options or stocks that I am writing about.  My trades in no 
way reflect what OIN does in any way.  These are my picks and 
no one else's.  I may use picks from OIN, but, as with everyone, 
I ultimately make the decisions to buy or sell the securities 
(unless I have a margin call I forget about and the broker does 
it for me).  This is for educational purposes only.  I don't 
want anyone saying they followed my trades and lost money!
You won't be able to follow my trades as by the time you read 
them, I could be out of them.  I also reserve the right to 
change my mind at any given moment. 

My trading style is definitely not for everyone!!  Sometimes 
it's not even for me!  I can afford, or in this case, my partner 
can afford to lose the whole 25k and not miss it.  When it's 
your money, use your noodle.  Don't  be stupid with your moola, 
or in my case someone else's!  Funny thing, they always want me 
to pay them back for some reason.

Ok, here is the fun stuff.  For better or for worse, here are 
the trades that I did and I will try to explain them to you the 
best I can.

03:40 PM Buy 5 RBF-JT $ 30 3/8 Option $ 15,187.50 Margin  These 
are the MERQ October 100 calls.

03:51 PM Buy 500 DSLN $ 23 3/16 Stock $ 11,593.75 Dsl.Net Inc 
Margin.  This is stock.  I will end up doing covered calls on 
these.

Here is the short explanation.  I came to an Osmotic decision 
and purchased them.  Ok.  So, I bought both of these based on 
the chart and the fact that I have followed these guys for awhile 
and I like the sectors that they are in.  There are better 
looking charts to be sure, but there are also worse ones.  So, 
I have spent about 22k of the 25k, so far.  No whining about 
the covered calls either!  If this works out as planned, you 
will be amazed at the results (please, please, please work).

While it might be prudent to have purchased only 2 or 3 calls 
and left some money for other plays, I do not want to try and 
change my trading style for this adventure.  I normally play no 
less than 5 contracts at a time.  So, that is what I am going 
to stick with.   I know from  past experience that if I change 
trading styles and I do make it a point to do so every 6 months 
if not sooner, it takes me a week or two to get into the swing 
of things.  So, what I am trying to say is that I normally put 
no more than 15% of my account in any one position.  Although, 
to be totally honest, I have been 100% in single trades and it 
is scary and not recommended.  But, I really needed the money 
to save my hide many moons ago, but, that is a story for another 
time.  I find that sometimes having fewer plays and watching 
them closely that I get better results than being all spread 
out.

Please note that on the option play, I gave myself plenty of 
time to be right.  I like to have breathing space.  Stock play, 
ditto!  So, for better or worse, we are off to the races!  I 
want to thank all the people that sent E's of encouragement.  
Of course, if I blow this, I realize that I will probably get 
twice as many "I told you so's."  Hey, its just another day 
in the life of a Stockaholic.  You do all realize that if we 
pull this off, this should put us in the 1% percentile for all 
mutual fund returns.  I'm just not sure if it will be the top 
or bottom percentile.  Just so everyone is on the same page, 
the goal of the Saga is to turn the $25,000 into $62,500 in one 
year and not $62.50.  Stay tuned to this same dot com for 
more Stockaholic Madness.

Happy Trading!


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:
*****

SEG $67.25 -4.50 (-3.75)  After providing a good run last week,
Seagate appears to have run out of momentum.  The stock edged up
to $73.63 on Monday, only to drift down to $71.75.  Today, SEG
gapped down by 3 points and fell all the way to $65.50.  Although 
the stock did rebound from day lows, there's too much risk to 
continue to hold any positions.  The stock came under pressure 
today from an announcement by IBM.  Big blue announced it would 
expand its sales force as part of a $400 mln push to sell 
networked storage systems for businesses to manage data.  The 
infamous Cohen comments didn't help SEG any, as many of the old 
tech names suffered today as the influential analyst cut back her 
equity exposure.

RNWK $68.25 -4.41 (-4.06) As a kid, did you ever try to skip a 
rock across the water to see how many bounces you could get only 
to see it sink in the end?  Of course you did.  Substitute RNWK 
for the rock.  While we got the breakout over $74, RNWK 
immediately flat-lined, skipping off $74 a few times yesterday.  
Today, you'd think that with Dain Rauscher Wessels initiating 
coverage with a Buy rating and price target of $100, the momentum 
would kick in to move the issue up.  Nope.  Under market 
resistance, the rock sank under water to $67.50 by today's close.  
The short-term ascending triangle we thought would portend the 
breakout was grossly taken out to the downside.  It should come 
as no surprise that we're dropping RNWK tonight under current 
market conditions.


PUTS:
*****

CKFR $65.50 -8.25 (-4.31)  The last two days of trading for CKFR
exemplify the old adage "Buy the rumor, sell the news."  That's 
exactly what happened.  CKFR was driven higher on Monday to as 
high as $74 and closed just a quarter below.  So what lifted CKFR
out of the $60s basement?  Nothing yesterday.  Yet today, CKFR 
announced that it closed a multi-year, non-exclusive extension to
its existing electronic payment agreement with Chase Manhattan 
Bank.  And with that good news, CKFR gave up most of its previous
day's gains.  Go figure.  Although these recent price swings have
offered plenty of entry points, there is too much uncertainty in
the future of this downtrend.  We will let this one go.

FON $60.38 +0.25 (+1.13) Today we saw FON tag $61.31 before 
pulling back in the late afternoon.  The penetration of the 200-
dma ($59.77) was a bullish move and the close above $60 sealed 
the play's fate.  It's possible the new coverage given to the 
company's wireless stock, PCS, has effected FON's share price.  
Today WR Hambrecht started Sprint PCS with a Buy rating and an 
$85 price target.  Unfortunately for all of us, this put play 
didn't work out and we're putting FON out to pasture this 
evening.



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

INTC $135.81 -6.88 (-3.25)  We can blame this one on Abby.  Just
when everything was running smoothly, someone had to say 
something.  There are two upsides to today's selloff though.  
First, volume was rather anemic, for the overall market and for
INTC, 22 mln shares vs. ADV of 26 mln.  Secondly, even as some 
took profits and put too much merit in Dear Abby's comments, INTC
held above its support level of $135.25 which was established 
early last week.  That support is the 10-dma and has provided 
nice bounces for INTC in the past.  We feel that the combination
of weak volume and historical levels should bode well for INTC.
This appears to be a great opportunity to enter this play.  A move
through $140 would be a more conservative entry point.  Use your
personal risk levels.  It is important to watch for market 
direction and strong volume tomorrow, indicating a conviction one 
way or the other.  The past two trading sessions are not out of 
the ordinary considering last week's fantastic rally. 

BMCS $52.19 -2.81 (-0.63)  Remember that trading channel we spoke 
about last week.  Well, it's still in it and BMCS did trade in 
a wider range than normal.  If you look at the intraday chart, you
will find that in the final 15 minutes of trading, BMCS flopped
down to $52.13.  It was on light volume and must be taken with a 
grain of salt.  The entire market had an accelerated selloff in 
the final moments.  The $52 level has provided support for BMCS
twice last week.  Although the selling was uncomfortable overall, 
the market lacked real conviction.  As we prepare for tomorrow, 
we will be watching the market direction and specifically, the
volume.  From there, choose entry points based on individual 
risk levels and keep an eye on the $52 and $51 support levels.

MFNX $101.13 +1.63 (+3.06)  MFNX continues to line-up major
contracts to build high speed networks.  The latest announcement 
came Tuesday as Lucent said it is launching a venture called 
GeoVideo Network.  The new LU venture along with several partners 
will build a video network designed for the Internet.  The new 
GeoVideo Network will allow business users to send and receive 
real-time video.  The new venture will target markets such as 
university telemedicine, teleconferencing, and the long-distance 
video connections used by television stations.  Consumer services 
such as video-on-demand and electronic cinema will be offered in 
the near future.  One of those several partners in the new venture 
will be MFNX.  Metromedia will supply the local and long-distance
optical network equipment and its AboveNet subsidiary will supply
global Internet Protocol services.  MFNX bounced off support at 
$99 Tuesday afternoon and rallied sharply into the close, gaining 
$3 in the last half-hour of trading.  The stock looks ready to 
make new highs after the late-day rally today.  Overhead 
resistance is just above at $102, look for a bounce off support 
in the $100 - 101 level as an entry into MFNX.

ERICY $98.00 -1.63 (-4.81)  Rumors circulated at trading desks 
this morning that ERICY may come out with a pre-announcement of an
earnings shortfall.  Company officials quickly denounced the
rumors with a press release out of Sweden.  The stock gapped down
3 points this morning in light of the rumors and moved higher
throughout the day to regain lost ground.  Volume picked up 
towards the end of the day as traders dismissed the rumors. 
In the news today, ERICY announced a breakthrough contract with 
international operator Tele2.  Ericsson will install the new
Broadband Wireless IP Access System - Beewip.  ERICY's Beewip
system is a high performance broadband wireless IP access
system intended for small and medium business customers.  Also
today, ERICY announced a partnership with White Pine Software
(WPNE).  Ericsson will uses White Pine's CU-SeeMe@ Web technology
in its messaging product to create the first commercially 
available instant messaging with video capability.  We are still
looking for ERICY to move higher as we approach Friday, when
shareholders are expected to approve the proposed 4-for-1 split.
Wait for the stock to regain momentum before entering any new
positions.  Look for directional confirmation and volume to pick
up as we approach Friday.

NT $140.56 -2.50 (-0.69)  B2B is big!  Leading research firms
project the business-to-business market to grow between $2.7 tln
and $7.3 tln by 2004, from about $131 bln last year.  That's
trillions of dollars!  Those figures explain why today Nortel
announced a new B2B initiative.  NT today launched the Clarify
e-Business Applications Unit, which will provide enterprises and
service providers with business-to-business applications for 
managing customer relationships and building virtual Internet
marketplaces.  In conjunction with the new unit, NT formed an 
alliance with Andersen Consulting to deliver professional services 
to help companies implement advanced e-Business strategies and 
technologies.  NT created the new unit by combining the recent 
acquisitions of Clarify and Periphonics.  The first products and
services that Nortel will deliver through the new unit will help
companies to access customer and inventory information in 
real-time, using hand-held wireless Net devices.  Although the
announcement didn't move the stock higher today, this is a 
strategic move by Nortel.  The stock has found strong support 
at $140 level.  Volume has been decreasing, as traders digest 
the run-up from last week.  Look for a bounce off $140 and 
volume to pick up as the stock moves higher.

SCH $60.13 +0.63 (-4.81)  Profit taking was the phrase of the
day yesterday as the finance sector sold-off, especially the
e-finance sector.  The stock was due for a breather after the
incredible rally last week.  Schwab was also hurt Monday by a 
downgrade of competitor DLJ.  Morgan Stanley cut its rating to
neutral from outperform, as analysts believe the shares of DLJ 
are fully valued.  The profit warning from financial services firm
Finova (FNV) didn't help the cause.  Tuesday provided better news 
for online brokers as Deutsche Bank said it will take a 14.6% 
stake in National Discount Brokers (NDB).  The announcement may 
have helped SCH to buck the trend today as many analysts still 
believe the company may be a take-over target.  Technically, SCH
has found solid support at $60 and is trading well above its major
moving averages.  The sell-off yesterday has provided a good entry 
into the play.  Look for the upward trend in SCH to continue with 
a bounce off support at $60. 

EXDS $162.25 -5.56 (-11.06)  Over the past two days, some good 
and bad news has developed for our EXDS play.  First, the bad.
IBM and Qwest announced Monday that they have formed a $5 bln
venture to build 28 CyberCenters in order to meet the growing
demand for companies using the Internet.  The CyberCenters will
provide a variety of e-business services such as Web hosting and 
application services.  The story should sound familiar since
Exodus is the industry leader in providing Web hosting and
services.  It remains to be seen what impact the new venture
will have on EXDS.  Now for some good news.  Tuesday EXDS
announced a partnership with Netergy Networks (EGHT), formerly
known as 8X8.  The new agreement will provide voice over IP
through Exodus Internet Data Centers.  The alliance will add to
EXDS's portfolio of products and services of Internet
applications.  Even with the announcement from Q and IBM, EXDS
still looks poised to move higher.  EXDS should benefit from
end-of-the-quarter window dressing, which traders expect to
start taking place as early as tomorrow.  Wait for the stock to 
turnaround and for volume to regain before entering into any
new plays.  A move back above $166 with healthy volume would
provide a good entry point.

RATL $86.88 -3.06 (+0.13)  Whiplash Alert!  On Monday if you
had a position in RATL you undoubtedly were pleased to see the 
software company trading $5-$6 higher as it approached the $93
level late in the day.  If you check you position after the 
the close you saw RATL had gained $3.19 for the day after profit
taking set in near the close of business.  Still, a decent start
for the week.  Today with the weakness in the NASDAQ, RATL fell
back to the $86 area before buyers stepped in, bidding the price
back up near the $90 area, only to experience another round of
late day selling, sending the price back down to close with a 
loss of $3.06 for the day.  The volume today was very light, as 
only 336K shares changed hands.  While we realize if you had a 
position in RATL, a loss is still a loss, no matter how light the
volume.  Light volume and volatility unfortunately go hand in
hand.  For now we aren't going to get to excited about today's 
decline for a couple of reasons:  the lack of volume and the $86 
area, which has provided good support in the last few sessions.
If you had a position, depending on your entry, you either have 
been stopped out, or may be looking to enter again.  The 10-dma 
sits tonight at $86.16.  Another bounce off that area would 
provide a good entry for a new play.  With a close below that 
area, it may be time to step aside.

AOL $71.81 -2.63 (+0.81)  It could have been worse.  A 3% loss is
bad enough, but at this point not enough to throw a good play 
out the window.  Technically everything is still intact and looks
very good as AOL really was due for a pullback.  Today the
markets drifted lower for most of the session.  After Monday's
move to $74.63, the decline today came on light volume and with
no real conviction.  There is one plus as we see it:  the 
intraday chart is still showing a pattern of higher lows, with 
the $71 area providing good support.  AOL also continues to 
distance its self from its 100-dma, now found at $69.28.  During
the past two days, the broader markets have experienced light 
volume as traders seemed to want to take a breather.  With the 
negative headlines today, the drop in the Dow and NASDAQ could
certainly have been worse as well.  As we head into the end of
the week, analysts are suggesting that end of the quarter window
dressing should appear.  We would expect AOL to participate
with continued momentum to the upside.  Probably not a big deal
in the overall picture for AOL, but on Monday AOL Europe and
T-Online ended a recent quarrel, which could benefit AOL in the
long run.  Overall bounces off the $70-$71 area should be viewed
as buying opportunities as well as continued moves higher. 

BAC $53.56 -0.56 (-1.06)  The chart still shows a pretty picture
for BAC.  With the "Abby" effect blindsiding the markets before
the open, BAC sold off to $52.63 in the opening moments of 
trading today.  Buyers stepped in bidding shares of BAC higher,
but the holding company could never really get untracked after
buyers jumped ship at the $54.69, leaving BAC to drift lower for
the rest of the session.  This is not necessarily a negative as 
the sentiment and trading was lackluster in not only BAC, but the
broader markets as well.  BAC did close down just $0.56, on thin
volume of 5.4 million shares.  It's very easy on days like 
yesterday and today to try to find reasons why a stock move higher 
or lower, especially sitting in front of a quote screen all day.  
So far this week, very few traders have wanted to come out and 
play.  Volatility for some issues has been extreme.  But for BAC 
and others to continue to move higher, or move lower on profit
taking, we are going to need players to return to the table.  Not 
much news to move BAC higher or lower so far this week.  BAC is 
forming intraday support near $53, but should find additional 
buyers if we see a decline back to the $52 area.  If the momentum 
can continue, we would look for BAC to challenge its 200-dma now 
seen at $57.10.

SNDK $131.63 -13.44 (-0.94)  Monday the headlines brought buyers
to the market to move SNDK +$12.50 for the session.  Today, the
headline news seemed to take them away just about as quickly. 
On Monday, SanDisk announced that Toshiba Corp. had introduced the
world's first product designed to use the SD(Secure Digital)
Memory Card, a high capacity, high-security flash card.  The
device is an mobile Internet audio player, the first in a series
of products that SNDK expects to be introduced with the SD
Memory Card.  Today, the Goldman Sachs strategist put fear into
the tech arena saying investors should lighten their load a 
bit in tech issues.  Well, investors did just that, as they sold
shares of SNDK and others.  SNDK gave back all of Monday's gains
losing over 9.0% for the session.  The plus for this one is that 
the $130 area held up pretty well, actually finding a few buyers 
late in the session.  We are sticking with SNDK to see what the 
mood will be the next couple of days as the momentum going into 
this week appeared to be in our favor.  Today's decline could be
just a bump in the road for a very good play.  SNDK has support
at $130 and at its 10-dma at $126.12.  A bounce off either spot
could be a good entry point for our play.  Be sure and check the 
volume before entering a new position.  

HWP $140.69 -5.50 (-1.69)  Hopefully the third time is a charm,
as today was HWP's third visit to $140 support in the past 6
days.  Today's drop came on light volume (only about two-thirds
of the ADV), and looks like it was just a side effect of the
overall market weakness.  HWP hasn't come close to its ADV of
3.64 million shares since this consolidation began a week ago.
To move higher, we need the buyers to come back and pump up the
volume.  Earnings season has commenced, but HWP doesn't report
until mid-May, so don't look for any help from that direction
in the near term.  Recall that the $140 area is potential split
territory for the computer maker, and with plenty of shares
authorized, an announcement could come at any time between now
and earnings.  The company has been coming out with regular
positive news items about products and alliances, and if the
broad markets can move higher, HWP should be able to ride the
wave.  If prices can bounce from here, current levels represent
an attractive entry point.  Resistance is still at $150, so
more conservative players may want to wait for a move through
this level before pulling the trigger.

ALTR $87.69 -5.81 (-8.19)  PLD stocks were on the move Monday 
aided by strength in shares of IBM.  Initially ALTR tested the 
waters at its 52-week high ($99.25) in the morning session.  
However, after settling back to near-term support at $94 and 
$95, the stock since succumbed to some profit taking despite 
CSFB's comment that the company is likely to meet or beat 1Q 
expectations.  Analyst Eric Rothdeutsch of Merrill Lynch also 
came forward on Monday (the second time this month) and 
reiterated his Near-Term Accumulate and Long-Term Buy ratings 
for ALTR.  He also upped the price target to $120 from $110.  
Another good sign that ALTR was merely pulling back with the 
market was that volume was low at only about 60% of its ADV.  
With all that said and done, we're left with entry points into 
this earnings' play!  For those that want better confirmation, 
wait for a positive move off the current level near the 10-dma 
($88.76) and look for upward bounces off the 5-dma (now at 
$91.52).  This latter indicator is a sensible tool to use in an 
uptrend.  Altera is scheduled to report after the bell on April 
12th.


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


************************Advertisement*************************
Tired of waiting on trades to execute? 
Does your broker offer Stop Losses on Options?  

Trade instantly with Stop Losses at Preferred Capital Markets
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with Preferred Capital

Anything else is too slow!

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


FREE TRIAL READERS
******************
If you like the results you have been receiving we 
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


We would like to have you as a subscriber. You may 
subscribe at any time but your subscription will not 
start until your free trial is over.

To subscribe you may go to our website at 

www.OptionInvestor.com

and click on "subscribe" to use our secure credit 
card server or you may simply send an email to

 "Contact Support" 

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the 
information over the phone.

You may also fax the information to: 303-797-1333


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         Tuesday  3-28-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


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

YHOO $195.13 -5.63 (+1.13)  Six days and counting until Yahoo! 
reports earnings.  The announcement is scheduled for next 
Wednesday April 5th, after the bell.  This week started off with 
a bang!  YHOO flirted with its resistance and pushed above $205.  
Although in the long run, our compensation was a variety of 
entry points near the 5-dma ($195.54).  Honestly this is a 
pretty good performance in an environment where many of the 
Nasdaq stocks were trying to shake off the "market moving" 
comments by Abby Joseph Cohen today.  In other news, Yahoo! is 
requesting that the SEC exempt them from regulation as a mutual 
fund.  If approved, this decision could set a precedent for 
other Web companies that have stock holdings representing at 
least 3/4 of total assets.  FYI - Mutual funds have many 
regulatory restrictions such as debt limits and a ban on 
employee stock options, which is not a prospect a regular 
operating company wants.  But in the meantime, Smile!  Yahoo! 
Photos launched today.  Shutterfly, an online digital photo 
service, is providing an easy-to-use service for the photo 
enthusiasts.  And on the global front, mobile users in the UK 
and Ireland can now access the Yahoo! portal from their wireless 
handsets.  To wrap it up, this play is a simple earnings' run on 
an Internet powerhouse that has volatile moves and great 
potential for large profits.  In other words this equals HIGH-
RISK!

IBM $122.50 -4.38 (+1.00)  The question now is it momentum or 
upcoming earnings that is accelerating IBM's uptrend?  At its 
peak on Monday, the share price rose $7.00, or 5.8% on news it 
signed a $5 bln seven-year pact with Quest Communications 
International.  In a joint effort they will build 28 new 
Internet data centers to provide Web site management.  The rally 
was also a direct reaction to MSDW's analyst, Tom Kraemer's 
upgrade.  He raised the stock to an Outperform from a Neutral 
and issued a price target of $140 citing the company's diversity 
as an overall strength.  Currently IBM's price level is the 
highest it's been since September 1999 and this in itself could 
pump up the momentum.  Intraday $122 held up as a bottom while 
it's more likely $125 and $126 will evolve as near-term support 
under better market conditions.  Looking at a chart it's obvious 
$115 is much firmer support, but a slide to this old resistance 
level at the 10-dma ($115.18) should ring your warning bells.  A 
nice balance would be to catch an entry on dips near the 5-dma 
(currently at $119.90) in conjunction with upward bounces on 
strong volume.  Above the first line of opposition is at 
Monday's high of $128.50, then the 52-week record at $139.19.  
In regard to earnings, the company is expected to report around 
April 19th (not yet confirmed) and the whispers are that IBM 
will easily meet the Street's numbers.  In the news today, IBM 
announced it won a $370 mln contract with Jaccs, a Japanese 
financial-services company, to maintain its network for the next 
six and a half years.  And look out EMC...IBM is hiring 1,000 
sales people to sell its new data storage products.  The $400 
mln effort is aimed at slowing the momentum of the #1 maker of 
storage systems and gaining market share. 

DELL $55.88 -2.00 (-0.56)  DELL is currently channeling at these 
higher levels while volume continues to be moderate.  Intraday 
$57 and $58 near the 5 and 10 DMAs are proving to be strong, 
although $55 is holding up well as bottom support.  Dips to this 
level are good points of entry for the more aggressive players 
who don't want to wait for a breakout.  Resistance continues to 
be tested just above $59, but the real challenge is for DELL to 
move through $60 and stretch into new territory once again.  On 
Monday, Mort Topfer, a director and counselor at Dell, assured 
money managers that the parts shortages are now behind them and 
are no longer a threat to near-term results.  Additionally he 
said Dell is "very comfortable" with analysts' expectations for 
the 1Q.  It's anticipated the company will report around May 
11th.  This is the kind of news traders need to hear if the 
momentum is to be sustained.  Today Dell lost a few dollars and 
its likely the news that CEO, Michael Dell, filed to sell 4 mln 
shares of his stock was the culprit.  

NOK $226.31 (+4.56) Though NOK splits 4:1 after the close on 
April 7th and set an all-time high yesterday at $233.38, it 
couldn't escape today's sell-off.  Aside from the split, NOK may 
have been partially supported by their announcement of an 
operational Internet browsing phone.  According a to a news 
release, the phone allows instant access to the Net with an HTML 
browser, a built-in modem and infrared connectivity that enables 
data exchange with computers and other Nokia phones.  While there 
was a nice bounce off the low today of $225, the recovery didn't 
last as NOK faded into the close.  $220 and $215 offer some 
historical support.  However the 5-dma, currently $223.83, has 
held up nicely in the recent 8-day gain.  Careful -- the 10-dma, 
which offers the next level of technical support is down at 
$213.05.  Even NOK, as strong as it's been on its split run won't 
likely hold up if the market continues its downtrend.  We suggest 
you consider waiting for a convincing bounce backed up by 
increasing volume, and a clear signal that the market has 
reversed to the upside.  Earnings are tentatively set for May 2nd 
and are not a part of the play.

NITE $55.00 -2.00 (-4.06) Just as we thought, $60 proved to be 
strong resistance.  A negative market helped make it worse.  No 
high volume either.  Perhaps that explains how NITE managed a 
fall below its 5-dma of $55.75.  If it can't quickly recover from 
here, we'd expect NITE to nose down to the 10-dma of $52.07, 
which also happens to be near the lower side of the channel.  
However, $54-$57 has provided historical support.  Despite 
Abbey's comments today that she favors financials, the electronic 
brokerage sector didn't benefit much.  Thus, we suggest waiting 
for the market to fill its sails again before taking a position.  
Otherwise, if you feel like you just can't sit still, at least 
target shoot at a level of commensurate with your risk tolerance.  
Earnings are scheduled for April 19.



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

PSIX $37.94 -0.94 (+0.13)  If you slept in today you missed a
good opportunity.  PSIX shares went as high as $40.94 early 
this morning creating a great premium.  Once they hit that high
it was a fast drop down into $38 territory.  This seems to 
be a trend for PSIX.  Monday's trading was the same story.  
Investors still haven't forgiven PSIX for their decision to
acquire Metamor Worldwide.  Evidence of that is the volume 
backing point drops.  Analysts are silent, not changing their
minds about the downgrades given PSIX last week.  Circumstances
don't look favorable for PSIX and support at $36.63 should 
continue to be tested.  A trend is not absolute so be cautious.  
As we noted before, PSIX usually creates premiums early in the 
trading day, which is a benefit of this play.  Today, PSIX 
announced a spin-off of their consumer business, Inter.net,
which will begin operations April 1, 2000.       

GTW $54.63 -1.38 (-1.63)  Not that we want to wish GTW any bad
luck, but investors returned this week with the same idea we
had, sell.  The story on Gateway is anticipated revenue and
earnings shortfalls.  Since late November, the hardware maker
has struggled with this issue.  Most bounces since that time
have been met by sellers ready to get out.  At some point there
will be buyers that enter the picture but for now the stock 
continues to move lower.  Investors may have began to nail the 
coffin shut as GTW closed today below its 200-dma at $55.14. 
According to a market maker at the Chicago Board of Options 
Exhange, the busiest options yesterday were the April 60 and 55 
puts.  Early on Monday, about 440 calls were bought, while over 
1982 puts changed hands on the CBOE, American Stock Exchange and 
the Pacific Exchange.  Definitely not a good sign for those 
expecting a reversal of the current trend.  GTW did find a few 
buyers in the early going on Monday, but it was short-lived as 
the bears jumped back in and GTW went to $57.50.  Technically, a
bounce up to the $56 area could see the bears enter again.
Further weakness would also provide an opportunity to buy puts.
If GTW continues its descent, it may not find much support until
the $51.50 level. 

ISLD $71.63 -4.44 (-4.38)  Every few days ISLD pops up, as it
attempts to break out of its continuing downtrend.  Each time,
the sellers are waiting just around the corner, ready to beat
the tar out of the buyers, sending the price down to new yearly
lows.  The cycle that is forming is 5-7 days down and 2-3 days
up.  Each cycle is smooth and provides nice entry points as the
sellers take control and the price rolls over.  Although this
pattern has been repeating all month, we must exercise caution
at this point.  Volume has been dropping over the past 3 days,
posting less than 60% of the ADV today.  Sitting just above the
$70 support level, ISLD could be touching bottom here, so
exercise caution - make sure a continued down move gets confirmed
by increasing volume.  Look to enter new positions as sellers
manage to penetrate this support level.  Otherwise, look for
buyers to float the price up to resistance near $76 or the
10-dma ($78.75).  As ISLD rolls over, feel free to jump aboard
and help push it back underwater.

RHAT $50.13 -6.50 (-10.38)  As RHAT lead off the April earnings
cycle yesterday, we got a stark reminder of why we exercise so
much caution during amateur hour.  The company reported earnings
slightly better than expectations, causing a gap up to $64 at
the open.  This was quickly followed by a drop below $60,
and then a slow, steady decline for the remainder of the day.
RHAT gave up over $6 from its daily high and then tacked on a
$6.50 loss today.  Adding insult to injury, the volume was
strong, topping 4.5 million shares today.  Today's drop sliced
through support at $55 without a second thought, opening the
door for RHAT to test support at $44-45.  Look to enter new
positions if bottom-fishers push the price up to resistance
near $55 or the 5-dma (up at $56.50) and then run out of steam.
The downward momentum seems to be building, but strong volume
will continue to be the key.  Tighten your stops if it starts
to dry up, as it could be our first sign that RHAT has found a
bottom.

CPQ $28.44 -0.88 (-0.25) In essence we're playing CPQ for an 
anticipated earnings disappointment and a negative chart trend.  
Typically, when CPQ reaches $32 it heads south again to support 
of $24 on the low side of the trending channel.  In the short 
term, there is support at $28.50, a level from which CPQ began to 
break down into the close.  We are comfortable holding existing 
positions here.  However, we need to see how CPQ will open 
tomorrow.  One other factor that we'll keep our eye open is the 
volume, which has been declining for the last three days to just 
63% of its ADV.  That's an indicator that the sellers may have 
already done the damage and CPQ could begin to form a base at 
this level causing us to assess keeping CPQ on the put list.  
Ideally, CPQ would bounce up to $29 and begin to fade again, or 
drop below $28 with intensified selling right from the start.  
Either would constitute an entry in our opinion.  There is no 
news to turn CPQ around for the positive, but it doesn't mean 
positive news couldn't reverse the trend.  Earnings are now 
confirmed for April 25.  That said, CPQ still has two weeks to 
give us an earnings warning.



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

T - AT&T $59.94 -0.38 (+1.19 this week)

With over 90 million customers, AT&T is the US's #1 Telecom
company.  The services offered by the company include long
distance, wireless phone service, Internet access, and local
and international phone services for businesses.  In an attempt
to dominate the domestic cable TV market, T will become the #1
US cable operator with its planned purchase of MediaOne.

Are you ready for the largest IPO in US history?  Today, AT&T
set the IPO terms for its wireless business.  After being beaten
down for the first two months of the year, T finally found
support near $45 in late February.  The upward move ran into
some resistance near $55, but has left that level in the dust.
The action over the past 2 days has brought T to its next level
of resistance ($60) which is also the high seen back in November.
There will likely be additional resistance at $62 and $64, as T
attempts to move higher.  The real driver for this play is the
anticipated enthusiasm for T's IPO of their wireless services
(see news below).  Tentatively scheduled for April 26th, the IPO
will occur in close proximity to earnings (4/25).  The confluence
of these two events should allow the Telecom giant to push higher
as the dates approach.  The strong move upwards over the past 2
weeks may require some profit-taking.  Look for a pullback to $58
to trigger your entry, but wait for the bounce first.  A more
conservative entry would be to wait for T to close above
resistance at $60 before throwing your hat in the ring.

AT&T is looking to raise more than $11.5 billion by selling 360
million shares of a tracking stock to represent its wireless
voice and data operations.  Announcing the pricing today, T set
an estimated price of $26-32 per share.  After the offering, T
will retain between 82 and 85 percent of the economic interest
in the AT&T Wireless Group.  If the recent 3Com/Palm spinoff is
any indication, it could be an exciting month.

BUY CALL APR-55*T-DK OI=65889 at $5.13 SL=3.00
BUY CALL APR-60 T-DL OI=45185 at $2.25 SL=1.00
BUY CALL MAY-60 T-EL OI=13725 at $4.13 SL=2.50
BUY CALL MAY-65 T-EM OI= 4674 at $2.44 SL=1.25

Picked on Mar 28th at     $59.94     P/E = 35
Change since picked        +0.00     52-week high=$63.00
Analysts Ratings      16-8-7-0-0     52-week low =$41.50
Last earnings 01/00    est= 0.56     actual= 0.57
Next earnings 04-25    est= 0.42     versus= 0.61
Average Daily Volume = 11.00 mln
/charts/charts.asp?symbol=T

****

QCOM - Qualcomm Inc $154.81 +5.88 (+8.81 for the week)

Qualcomm develops and manufactures communications technologies 
and products. It's best known for its CDMA (code division 
multiple access) technology which is the industry standard for 
mobile communications.  This technology and is used in cellular 
phones, wireless telephone system equipment, and satellite 
ground stations.  Qualcomm also provides the trucking industry 
with a monitoring system call OnmiTRACS and is currently in a 
joint venture to develop a low-earth-orbit satellite 
communication system called Globalstar.  They are also the #2 
supplier of digital cell phones following Nokia.  Their largest 
competitor is Motorola.

After an astounding performance in 1999, QCOM is again making 
the headlines.  The stock's recent break out its channel and the 
company's upcoming earnings is the basis for this play.  Last 
Thursday QCOM broke free of its bindings and emerged from its 
trading range of the last three months.  Oscillating between 
$125 and $145 did prove quite frustrating for investors, but now 
QCOM appears to be on the move again.  The 10, 30, and 50 DMAs, 
which all converge around in the proximity of $134 to $139, are 
now dots in the rear-view mirror.  The nearest technical 
indicator is the 5-dma ($145.75) and is the mark of old 
resistance, which QCOM blasted through on Friday.  This week the 
stock signal to us that this run is no head-fake.  Granted, if 
QCOM did dive it has a long way to fall so protect your profits 
with trailing stops.  Entries can be found at near-term support 
of $145 and $150, but if you're playing on the side of caution 
watch QCOM trade consistently above $153 on good volume.  Be 
patient, there's plenty of time to find your entry.  QCOM is 
reporting earnings in three weeks on April 18th, after the bell.
For those that watch for potential splits around earnings, this 
stock may very well be a hopeful.  QCOM becomes a candidate at 
$160 and the company has plenty of shares for a stock split.

Today Qualcomm and Motorola settled a three-year legal battle 
over patents covering QCOM's wireless communication technology.  
According to the terms, neither is making financial restitution 
and both have agreed to a three-year moratorium on patent-
infringement suits.  However, Motorola will now pay royalties to 
Qualcomm for use of its CDMA technology. 

BUY CALL APR-150 AUA-DJ OI=15656 at $13.25 SL=10.00
BUY CALL APR-155 AUA-DK OI= 5664 at $10.88 SL= 8.25
BUY CALL APR-160*AUA-DL OI=11751 at $ 8.50 SL= 6.00
BUY CALL APR-165 AUA-DM OI= 4224 at $ 6.75 SL= 4.75
BUY CALL MAY-160 AUA-EL OI= 1508 at $15.13 SL=11.00
BUY CALL MAY-165 AUA-EM OI=  305 at $13.25 SL=10.00

Picked on March 28th at $154.81    P/E = 36
Change since picked       +0.00    52-week high=$200.00
Analysts Ratings      7-7-6-0-0    52-week low =$ 13.56
Last earnings 12/99   est= 0.24    actual= 0.25
Next earnings 04-18   est= 0.24    versus= 0.10
Average Daily Volume = 19.1 mln
/charts/charts.asp?symbol=QCOM



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

AT - Alltel Corporation $61.50 -4.25 (-7.00 this week)

Alltel is a customer-focused information technology company that
offers telecommunications services to 8.5 mln customers in 25 US
states, mainly in the Southeast and the Midwest.  The company 
provides local phone service over nearly 2 mln local lines in
rural areas, and has gained approval to offer competitive local
access.  Alltel's cellular operations serve about 5 mln
customers.  Alltel also offers long-distance service to more
than 500,000 customers, as well as Internet access and paging
services.  The company operates in two principal areas, 
communications and information services.

Alltel is divided into two divisions, communications and
information services, where the latter is holding back the
former.  The information services division of AT provides
services ranging from systems integration for financial
services firms to marketing and mortgage servicing systems for 
residential lenders.  Many investors are beginning to question
the ability of the information services division to deliver
revenues.  Some analysts project the growth rate of the
division to be a dismal 3%.  The management of AT has
contemplated a spin-off of the division, but have yet to find a
buyer.  Although the communications division of AT is somewhat 
promising, the information services division continues to drag
the company lower.  Traders have expressed their feelings about
the stock recently, as heavy selling has pushed AT lower.  After
a sharp decline Monday on healthy volume, traders passionately
sold AT on Tuesday turning-over 4.8 mln shares, nearly three
times ADV of 1.3 mln shares.  The heavy volume suggests that the 
institutions are unloading shares of AT.  While management 
decides what to do with the ailing information services division,
we'll look for the stock to continue its downward slide.  The
stock has support just below at $60.  Look for entry into AT as
the stock falls through support en route to its 52-week low of
$55.88.  Watch for volume to continue to be high as the stock
moves lower.     

BUY PUT APR-65*AT-PM OI=228 at $5.50 SL=3.50 
BUY PUT APR-60 AT-PL OI=285 at $2.63 SL=1.25 

Average Daily Volume = 1.38 mln
/charts/charts.asp?symbol=AT



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

QCOM - Qualcomm Inc $154.81 +5.88 (+8.81 for the week)

Qualcomm develops and manufactures communications technologies 
and products. It's best known for its CDMA (code division 
multiple access) technology which is the industry standard for 
mobile communications.  This technology and is used in cellular 
phones, wireless telephone system equipment, and satellite 
ground stations.  Qualcomm also provides the trucking industry 
with a monitoring system call OnmiTRACS and is currently in a 
joint venture to develop a low-earth-orbit satellite 
communication system called Globalstar.  They are also the #2 
supplier of digital cell phones following Nokia.  Their largest 
competitor is Motorola.

After an astounding performance in 1999, QCOM is again making 
the headlines.  The stock's recent break out its channel and the 
company's upcoming earnings is the basis for this play.  Last 
Thursday QCOM broke free of its bindings and emerged from its 
trading range of the last three months.  Oscillating between 
$125 and $145 did prove quite frustrating for investors, but now 
QCOM appears to be on the move again.  The 10, 30, and 50 DMAs, 
which all converge around in the proximity of $134 to $139, are 
now dots in the rear-view mirror.  The nearest technical 
indicator is the 5-dma ($145.75) and is the mark of old 
resistance, which QCOM blasted through on Friday.  This week the 
stock signal to us that this run is no head-fake.  Granted, if 
QCOM did dive it has a long way to fall so protect your profits 
with trailing stops.  Entries can be found at near-term support 
of $145 and $150, but if you're playing on the side of caution 
watch QCOM trade consistently above $153 on good volume.  Be 
patient, there's plenty of time to find your entry.  QCOM is 
reporting earnings in three weeks on April 18th, after the bell.
For those that watch for potential splits around earnings, this 
stock may very well be a hopeful.  QCOM becomes a candidate at 
$160 and the company has plenty of shares for a stock split.

Today Qualcomm and Motorola settled a three-year legal battle 
over patents covering QCOM's wireless communication technology.  
According to the terms, neither is making financial restitution 
and both have agreed to a three-year moratorium on patent-
infringement suits.  However, Motorola will now pay royalties to 
Qualcomm for use of its CDMA technology. 

BUY CALL APR-150 AUA-DJ OI=15656 at $13.25 SL=10.00
BUY CALL APR-155 AUA-DK OI= 5664 at $10.88 SL= 8.25
BUY CALL APR-160*AUA-DL OI=11751 at $ 8.50 SL= 6.00
BUY CALL APR-165 AUA-DM OI= 4224 at $ 6.75 SL= 4.75
BUY CALL MAY-160 AUA-EL OI= 1508 at $15.13 SL=11.00
BUY CALL MAY-165 AUA-EM OI=  305 at $13.25 SL=10.00

Picked on March 28th at $154.81    P/E = 36
Change since picked       +0.00    52-week high=$200.00
Analysts Ratings      7-7-6-0-0    52-week low =$ 13.56
Last earnings 12/99   est= 0.24    actual= 0.25
Next earnings 04-18   est= 0.24    versus= 0.10
Average Daily Volume = 19.1 mln
/charts/charts.asp?symbol=QCOM



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

A Trend Coming To An End?

Monday, March 27

Profit-taking plagued Wall Street stocks Monday with major indices
ending lower.  The Dow Jones Industrial Average fell 86 points to
11,025 and the Nasdaq composite slipped 4 points to 4,958.  The
S&P 500 stock index slid 3 points to 1,523.  Declines led advances
on both the New York Stock Exchange and the Nasdaq.  The 30-year
U.S. Treasury bond rose 8/32 pushing the yield lower to 5.98%.


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

Jabil      JBL    APR65P/APR70P   $0.62   credit   bull-put
Nvidia     NVDA   APR55P/APR65P   $1.25   credit   bull-put
Titan      TTN    APR35P/APR40P   $0.62   credit   bull-put
Ubid.com   UBID   JUL30C/JUL30P   $10.62  debit    straddle

Monday's volatile session did little to help our new positions.
Jabil and Titan offered favorable entry opportunities for only
a brief period during the morning session before moving higher.
Nvidia traded lower most of the day but our target credit was
unavailable until late in the afternoon.  The entry price for
the Ubid straddle was difficult to estimate with the relatively
low volume.  There was a small block of contracts traded near
10:00 AM at $10.75 debit.


Portfolio plays:

Stocks were mostly lower today in a quiet and listless session
that lacked significant news.  A few issues moved higher as fund
managers concluded "end-of-quarter" buying to help push up the
prices of some of their bigger portfolio holdings.  Most traders
remained subdued on the sidelines while economists evaluated news
of housing sales and the effects of rising oil prices on consumer
products.  Analysts were also monitoring the meeting of the OPEC
in Vienna.  With no definitive announcement on production quotas,
there was little influence on Wall Street activity.  In a speech
before a Senate Commission, Greenspan said the rise in crude oil
prices over the past year has not had a serious impact on the U.S.
economy.  Based on that statement, it's obvious he hasn't paid
for airfare or gas in the family car for quite some time.

There were a few news items concerning portfolio positions.  Bank
One (ONE) named former Citigroup star James Dimon as the new CEO,
giving the Wall Street insider the job of fixing the credit card
operations and boosting its share price.  The new CEO said that he
was not interested in selling the bank or the credit card unit but
rather bringing it back to significant profitability.  He is also
buying 2 million shares of the bank's troubled stock, giving him a
huge personal stake in its performance.  The stock price closed up
$3.62 on the announcement and our new LEAPS/CC's play is already
at a break-even credit.  The next step is to correctly judge the
outcome of the new trend and make the necessary adjustment.  The
easiest way to protect for future upside movement is to roll up
and forward in the position.  With the added cost of $1.25-$1.38,
the spread could be changed to LJAN20C/MAY30C at a debit of $9.12.
The adjustment produces a position with no upside risk and retains
a favorable margin of downside protection.

Another of our recent additions to the long-term section, American
Online (AOL) has also been on the move.  The stock is trading well
above our sold strike in the diagonal spread and as mentioned last
week, our plan is to roll up and forward to the MAY-70 or 75 calls.
Any future consolidation should provide another chance to make
that adjustment with a favorable debit and our target will be in
the $1.12-$1.25 range for the move to MAY-$70 options.  Of course
our new position might be considered too conservative for those of
you that believe the issue will continue higher in the next few
weeks and as an alternative, there is also a favorable premium for
the MAY-$75 options.

Philip Morris (MO) slipped lower during the session after a jury 
in California ordered the company to pay $10 million in punitive
damages to a smoker dying of lung cancer.  Philip Morris said it
will appeal the verdict but the potential for future lawsuits may
damage the stock's current recovery.  Fortunately, our calendar
spread positions are low risk with ample time for additional
premium selling and both are expected to close profitably.  The
recent slide in biotechnology issues and diagnostic drug stocks 
has affected a number our small-cap positions and this week's
casualty was Epitope (EPTO).  On Monday, the stock opened higher
but failed to capitalize on a 5-day consolidation pattern with a
close below the 30 DMA.  That's generally our signal to exit but
in this case there is substantial support below the current price.
Our decision was to employ a break-even strategy with a move to
the MAY-$12.50 series and the new debit is $5.12.  Another issue
in that group is also a candidate for adjustment.  Organogenesis
(ORG) is technically hanging over the precipice but luckily, the
option premiums are favorable for a move down to the MAY-$12.50
series.  Once again we will simply attempt to protect the downside
and the $1.75 credit will reduce the cost of the overall position,
JUN10C/MAY12C to $11.62.


Tuesday, March 28

The major equity averages endured significant losses today with
technology stocks leading the way.  The Dow Industrials lost 89
points to close at 10,936.  The Nasdaq Composite slid 124 points
to 4,834 on profit-taking in the leading issues.  The S&P 500
Index and the Russell 2000 Index of small-cap stocks also moved
lower.  Volume was light with 951 million shares traded on the
NYSE and losers outpaced winners 18 to 12 on the Big Board.  The
bond market finished with minor gains in a choppy session as the
30-year bond rose 2/32 to yield 5.97%.


Portfolio Plays:

The majority of stocks fell today after one of Wall Street's most
influential analysts suggested a reduction in the weighting of
equities in a model portfolio.  Abby Cohen of Goldman Sachs said
recent gains in the market warranted a reduction in the equity
weighting to 65% with the resultant funds being moved into cash.
Her target groups for the model stock portfolio were financials,
pharmaceuticals and selected basic-material and energy-related
stocks.  The signal was obviously bearish to many investors and
the profit-taking continued in earnest.  The blue-chip technology
sector was hardest hit with Intel (INTC), International Business
Machines (IBM) and Hewlett Packard (HWP) leading the way down.
Microsoft (MSFT) managed to avoid the bulk of selling after news
the judge in the antitrust lawsuit against the software giant had
delayed his decision in the case for a week or more.  In the oil
industry, shares were mixed as members of OPEC appeared on the
verge of approving a deal to hike oil production that would lead
to a reduction in crude prices.  World oil producers have come
under pressure from the United States to increase output to help
prevent a gasoline crisis this summer.  As the day's discussions
ended, no official word was available but insiders at the Vienna
meeting said OPEC ministers were about to reach a deal on a 1.7
million barrels per day increase.  Unfortunately, most analysts
believe that number has already been factored into current prices.

Cohen's remarks sparked buying in financial shares, helping the
sector bounce back from large losses on Monday.  One of the most
heavily traded shares was our new long-term issue Bank One (ONE),
which climbed $2.75 to $34.75 as traders welcomed the news that
former Citigroup President James Dimon had been named Bank One's
new chairman and chief executive.  The company received upgrades
from Morgan Stanley Dean Witter, Advest and Donaldson, Lufkin &
Jenrette.  Another stock that rallied with the group was Northern
Trust (NTRS).  The issue rose $3.19 to $66 and based on the new
outlook for the sector, our speculative credit spread may survive
the current consolidation.

There were a number of other issues that enjoyed positive moves
in today's volatile session.  MetroMedia Fiber Network broke the
$100 mark and held the range, closing near $101.  Our bullish
diagonal position is at maximum profit above $80.  American Power
Conversion (APCC) also traded against the trend in the technology
group, closing up $2.50 at $42.  Jabil Circuit (JBL) continued to
rally ahead of its upcoming 2-for-1 split.  The chip-sector issue 
finished near an all-time high today and with the upcoming split
this Friday, it may climb to a new trading range.


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


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

QCOM - Qualcomm  $154.81   *** An Old Favorite! ***

Qualcomm is a global provider of digital wireless communications
products, technologies and services based on its Code Division
Multiple Access technology.  QCOM designs, develops, manufactures
and markets CDMA subscriber products and designs, develops and
markets CDMA chipsets and system software.  They also license and
receive royalty payments on CDMA technology from major domestic
and international telecommunications equipment suppliers.  In
addition, Qualcomm designs, manufactures and distributes products
and provides services for its OmniTRACS system.  The company also
has contracts with Globalstar, a low-Earth-orbit satellite system
utilizing CDMA technology, to design, develop and manufacture
subscriber products and ground communications systems and to
provide contract development services.

Today's big news was the long-awaited settlement between Qualcomm
and Motorola regarding a series of patent infringement lawsuits
that began in March 1997.  The agreement terminates the complex
litigation comprising a number of separate federal court cases
alleging claims and counterclaims for patent infringement, breach
of the license agreements, misappropriation of trade secrets and
unfair competition.  In the settlement, each company agreed to
dismiss its claims and counterclaims against the other and extend
their CDMA cross-licenses.  In addition, the companies said they
have agreed to a three-year moratorium on lawsuits with respect
to CDMA subscriber products, network equipment, chipsets and test
equipment.  They have also agreed to the terms of their original
1990 royalty-bearing license agreement.  As part of the agreement,
Motorola will again pay royalties to Qualcomm at rates that are
consistent with newly licensed patents.

The news of the Motorola settlement along with a number of recent
agreements and licensing deals has brought QCOM back into favor
with technology investors.  The bullish technical trend and the
favorable fundamental outlook (potentially higher royalties) are
excellent reasons for the issue to continue higher.  Our position
is relatively conservative with a reasonable margin for downside 
consolidation.


PLAY (conservative - bullish/debit spread):

BUY  CALL  APR-130  AUA-DF  OI=6421   A=$27.50
SELL CALL  APR-140  AUA-DH  OI=11144  B=$19.00
INITIAL NET DEBIT TARGET=$8.25-$8.38 ROI(max)=21%

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

****

LGTO - Legato Systems  $43.38  *** Something Is Up! ***

Legato develops, markets and supports advanced enterprise-strength
storage management software for the network computing market.  The
company maintains offices throughout the United States and around
the globe.  The core elements of their storage solutions include
scalability, heterogeneity, performance, ease of use and central
administration.  Legato's storage management solutions have been
designed for both network administrators and end users, and can be
accessed through a number of graphical user interfaces, including
Windows, Windows NT and Motif.  The company's flagship product,
Legato NetWorker, offers a family of easy-to-administer storage
management applications that protect network-wide data across
enterprises consisting of multiple operating systems such as
NetWare, Windows NT, Solaris, HP-UX, AIX, Macintosh, OS/2 and
DOS/Windows.

You may remember back in January when shares of Legato dropped
$20 after the company missed earnings estimates.  The cause for
most of the grief was simply that $13 million in sales revenues
from two new contracts had to be recognized in fiscal 2000 rather
than last year.  Of course investors also reacted negatively to
the downward revision in future earnings and that issue also took
time to evaluate.  Now the company is recovering with the rally
in data storage issues and analysts are starting to take notice.
Industry experts are predicting enormous growth rates for data
storage with estimates for the storage area network to grow to
over $13 billion by 2003.  The demand for storage will increase
with demand for bandwidth and Legato's product offerings are well
suited to meet emerging needs in the area of data security and
information management.

Monday's $8 move and the recent bullish activity suggests a new
trend is beginning.  Both of these positions are based on rising
activity in the stock and underlying options.  These plays offer
favorable risk/reward potential but they should be evaluated for
portfolio suitability and reviewed with regard to your strategic
approach and trading style.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  MAY-30  EQN-EF  OI=108   A=$15.75
SELL CALL  APR-40  EQN-DH  OI=1896  B=$7.25
NET DEBIT TARGET=$8.25-$8.38 INITIAL ROI TARGET=19%

-or-

PLAY (conservative - bullish/calendar spread):

BUY  CALL  JUN-50  EQN-FJ  OI=728   A=$6.00
SELL CALL  APR-50  EQN-DJ  OI=1948  B=$3.25
NET DEBIT TARGET=$2.50-$2.62 INITIAL ROI TARGET=50%


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

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


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

****

MBK - Bank Of Tokyo Mitsubishi  $14.00  *** Technicals Only! ***

The Bank of Tokyo-Mitsubishi is a commercial banking organization
in Japan that provides a broad range of domestic and international
banking services from its offices in Japan and around the world.
The company is one of the nine city, as opposed to regional, banks
in Japan.  The company offers its products and services through
seven business units that are comprised of Domestic Customers,
Overseas Customers, Investment Banking, Asset Management, Global
Service Banking, Treasury and Administration.

With the banking sector's recent recovery in the United States,
traders are also looking to foreign issues and emerging markets
for additional investments.  While there are a number of unique
difficulties in this style of trading (lack of information is one),
the interest in overseas markets is growing rapidly.  In the case
of MBK, it appears the company has turned the corner technically
and is well on its way to a test of the all-time highs.  Our goal
will be to gain a short-term favorable return (as the stock moves
higher) in this aggressive but low cost/risk position.

There is a very informative article concerning stocks that trade
on both the U.S. and Asian exchanges at:
 
http://biz.yahoo.com/ts/000313/fund1_000313.html


PLAY (aggressive - bullish/debit spread):

BUY  CALL  MAY-12.50  MBK-EV  OI=670    A=$1.88
SELL CALL  MAY-15.00  MBK-EC  OI=10380  B=$0.50
INITIAL NET DEBIT TARGET=$1.25 ROI(max)=100%

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



************************Advertisement*************************
Tired of waiting on trades to execute? 
Does your broker offer Stop Losses on Options?  

Trade instantly with Stop Losses at Preferred Capital Markets
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with Preferred Capital

Anything else is too slow!

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


************
See Disclaimer in section one
************

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives