Option Investor
Newsletter

Daily Newsletter, Tuesday, 04/18/2000

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter         Tuesday 04-18-2000
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 10 font for table alignment)
******************************************************************
       4-18-2000           High     Low     Volume Advance Decline
DOW    10767.40 + 184.90 10773.90 10571.30 1,093,776k 1,975  1,009
Nasdaq 3,793.57 + 254.41  3794.97  3563.83 2,151,278k 3,271  1,055
S&P-100  785.92 +  30.55   785.92   761.84    Totals  5,246  2,064
S&P-500 1441.61 +  44.13  1441.61  1397.81            71.8%  28.2%
$RUT     486.09 +  26.83   486.09   459.26
$TRAN   2769.53 +  90.95  2771.77  2673.49
VIX       29.37 -   2.82    31.34    29.20
Put/Call Ratio       .65
******************************************************************

Back to back record gains wipes out Friday's loss.

Just another normal day on the Nasdaq. Record gains following
record losses, etc, etc, etc. Fortunately the back to back record
gains are a lot easier to take than the three days of the top
three losses from last week. With the bears still going from
interview to interview in the media you would think that this 
is a perfectly constructed bear trap rally. Could it be? Don't
count them out just yet.

The Dow was the laggard today as the Nasdaq rallied from the
-35% lows from last week. The Dow however may be about done for
the current rally. As more and more Dow components announce
earnings and the reason for the rally subsides the Dow will
have a much harder time recovering the high ground. For instance
IBM and INTC announced today and missed the whisper numbers. 

The Nasdaq is rapidly approaching the first real test for the
current rebound. Closing today at 3790, only +15 points above
the days upper resistance on end of day momentum only, the index
will encounter real resistance at 3800-3900. Buyers tomorrow will 
have to fight profit taking and immediate resistance. 


 


 


 


The Nasdaq scored a several records today. The largest single day
point gain ever at +254, eclipsing yesterdays biggest one day
point gain ever of +218. This was the first time ever that the
Nasdaq posted two +200 point gain days back to back and only
two days since the largest ond day point drop ever. Volatility
is still the name of the game. The challenge here will be 
maintaining the current momentum. Even after the huge drops the
+450 point two day gain is a sure target for profit taking. We
have rebounded +14.2% in two days and that exceeds the +10.8%
two day rebound from the Oct-1987 crash. After that rebound
the Nasdaq headed down again and retested the lows again several
weeks later. Almost all the analysts have avoided calling Friday
the bottom and most are expecting the Nasdaq to head back down
again. The next two days will be the real test as we enter
resistance from above and natural profit taking before the long
holiday weekend. 

Four of the big boys announced earnings after the close today
with mixed results. IBM announced $.83 vs estimates of $.78 but
below the whisper number of $.84. IBM also announced a -5% drop
in revenue from the Y2K impact but said future quarters would
be strong. Still the stock got hammered in after hours trading
for -3.63 as details of the lower revenue became public. Intel
also announced and beat the street estimates of $.69 with a $.71
actual but also missed the whisper number of $.73. Intel split
the revenue range expected and said business was good but an
easing of the chip shortage could occur in coming quarters and
warned that margins could suffer as AMD and Intel battle is out
on the front lines. INTC was down -4.50 in after hours trading. 
Those two stocks alone will account for a significant drop in
the Dow at the open if this sentiment carries forward into
Wednesday.  

AOL also announced earnings and beat the estimates of +.09  
with a +$.11. The whisper number was also $.09. AOL managed
to beat the revenue numbers and the new subscriber numbers but
still traded down initially but rallied back to close flat in
after hours.

QCOM was the big winner in the after hours earnings parade.
Announcing +$.26 they beat estimates of $.24 and matched the
whisper number of $.26 as well. However, "it is all in the call"
and the conference call was very upbeat and positive with a
strong forecast for coming quarters and upbeat comments about
the new product mix. Revenues were down substantially from
estimates of $1.1 bln to the $717 mln they actually posted.
However the street did not seem to care and QCOM was up +8.00
in after hours trading. 

Lets see if I understand this. AOL beat all the estimates
including revenue and hit the whisper number and traded down
to flat. QCOM hit the estimates and the whisper number but
missed revenues by -34% and traded up +$8.00. This is why
sentiment is so important and also why you should never hold
over an earnings announcement. Had you owned IBM, INTC, AOL
and QCOM, four big names, the odds of losing money at the
open tomorrow are very good. -$3.63 on IBM, -$4.50 on INTC,
flat on AOL but probably down at the open on lack of interest
and up +$8.00 on QCOM if it holds. Not a pretty picture.

With Thursday being option expiration day this month this 
week would normally have an upward bias but after the big bounce
it would be impossible to predict which way the bias might be
leaning. Ralph Block said on CNBC this afternoon that there
has not been a major sell off after a TRIN spike, like I
reported on Sunday, since records were kept beginning in 1962.
That does not mean we will not retest the 3300 level again
before moving upward. There were 13 occurrences of just such
a spike and none had a meaningful drop below that bottom
in the weeks following. 

Now a contrarian indicator would be Ralph Acompora who was
quoted today as calling for Nasdaq 2900 as a retest low.
While I do not agree with him he has been right before.
Lately however he has been late to the party and not exactly
in top form. Several people emailed me today and commented
that "if Ralph is saying 2900 now, Friday was the bottom."

I would have to say that the rally is convincing on the surface
with NYSE advancers beating decliners 2:1 and Nasdaq advancers
beating 3:1. Second tier stocks on the Nasdaq finally joined
the action today after the big cap rally on Monday. Volume
was decent as well with over 1 bln on the NYSE and 2 bln on
the Nasdaq. Still I am cautious. I see it and I want to 
believe but I keep looking over my shoulder expecting Freddy
Kruger to be coming through the door. Historically the Nasdaq
has been down the last half of April. However the day before
Good Friday is typically up as well as the last three days of 
the month. These small trends can easily be flattened by the
major moves we have been seeing.

So lets recap. We were blindsided by a lower retest of the
April 4th low. We were told we would have to retest that
low. WHAM! Now we have a significantly lower low and they
are telling us we will have to retest that lower low. Retests
normally occur within one-to-five weeks. Earnings are here
and traders will either sell before for a profit or after
for a loss, but they will sell. The last half of April is
normally down. Tax contributions cease this week. Liquidity
is in question. Yes, everything looks like it is bargain
priced but didn't it look that way last week also? And the
week before? 

Quiz: What pattern is characterized by continuing lower lows
and lower highs? A down trend! This is what the Nasdaq looks
like now. Until we break out of this pattern with a close
over 4000 to start and over 4400 to confirm then we are still
going down. We all want to look at the chart and see a rally
in progress. It is human nature. We ignore the negative because
we are focusing on the positives. Since March 10th we have
been in a solid down trend of a week down followed by 2-3
up days. We have to break this trend this week or repeat the
process again next week. We had our two free up days and 
everything we get from this point forward we are going to 
have to work for. The Dow will take a shot at the open in
the morning from IBM and INTC and that could set the tone 
for the day. The Nasdaq closed at its high and could easily
continue the rally effort. I would be very cautious of any
roll over on the Nasdaq after the open. Everyone will be 
watching and any sign of weakness will evoke the flight
response from the thousands of traders that got burned in
the last two weeks. Remember, the Fed is still in our future
and although I do not expect it there are those who are
calling for a +.50% rate hike and that would be a killer.

I went flat at the start of the roll over this afternoon 
and I am going to watch from the sidelines until next week.

Trade smart and protect your profits.

Jim Brown
Editor

Current long position: none


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

Tyco International Posts Strong Results
By Matt Paolucci

Tyco International Ltd. (TYC), a diversified manufacturing 
and service company, reported second quarter (ending March
31,2000) diluted earnings per share before non-recurring
charges and credits and extraordinary item, were 50 cents per
share, a 47 percent increase over 34 cents per share for the
same quarter last year. Analysts' estimates were for 50 cents
as well.

Tyco is the world's largest manufacturer and servicer 
of electrical and electronic components and undersea
telecommunications systems, the world's largest manufacturer,
installer, and provider of fire protection systems and
electronic security services, and is the largest manufacturer
of flow control valves. TYC expects fiscal 2000 revenues to
exceed $28 billion.

The company also is big in laying undersea fiber optic cable.
TYC filed last month for a $1 billion IPO for its TyCom fiber
optic unit. Tyco bills itself as the world's leading
independent, integrated, supplier of undersea fiber optic
networks and services, having installed more than 350,000
kilometers of undersea cable, more than any other supplier.

Net income for the second quarter rose to $853.6 million, an
increase of 50 percent compared to $567.8 million last year.

Sales for the quarter rose 35 percent to $7.07 billion
compared with last year's $5.24 billion.

Shares of the Exeter, NH-based company closed at $43.00, down
$2.50.

The results for 1999 have been restated to reflect its merger
with AMP, which occurred on April 2, 1999 and was accounted
for as a pooling of interests. Results are also before
acquisition-related and non-recurring charges and
extraordinary items. After charges and other related expenses,
diluted earnings per share were 50 cents, or $855.9 million,
in fiscal 2000 compared to 7 cents, or $119.5 million, in
fiscal 1999.

"Each of our four businesses had strong organic growth and
generated positive free cash flow in the second quarter," said
L. Dennis Kozlowski, Tyco's Chairman and CEO. "Our core
businesses are well positioned to continue that trend for the
remainder of the year," he added.

Its Telecommunications and Electronics unit reported a revenue
increase of 75 percent over the prior year period. Even more
impressive was the 44 percent jump in net profit margins from
15.9 percent to 22.9 percent.

Acquisitions within the T&E unit included Temasa and Raychem
in 1999, and Siemens Electromechanical Components and
Praegitzer in fiscal 2000. Increased volume attributed to the
unit's strong results.

In its Healthcare and Specialty Products, revenues grew 14
percent versus the second quarter of 1999. The impact of
revenues from acquired businesses in the Healthcare and
Plastics businesses was offset by a decrease in revenues
associated with divested healthcare businesses. Net margins
fell slightly, though still a very strong 23.8 percent.

Tyco's Fire and Security Services division grew modestly.
Revenues were $1.47 billion versus $1.31 billion. Profit
margins fell due to tougher competition, and the
reorganization of its sales force and dealer programs.

Lastly, revenues in its Flow Control Products and Services
segment grew 22 percent to $991.5 million versus $811.8
million in the prior year. Operating profits surged 35 percent
and net profits margins jumped 170 basis points to 18.1
percent.

Second quarter free cash flow, net cash generated from
operations less capital expenditures and dividends, exceeded
$500 million. For the first six months of fiscal 2000, free
cash flow was $954.5 million versus a negative $12.5 million
in the prior year period.

Of the sixteen analysts keeping tabs on Tyco, all have either
a Strong Buy or Moderate Buy rating on TYC. Earnings estimates
for fiscal 2000 are $2.15, and $2.63 for fiscal 2001. Tyco is
ranked third out of 21 companies in Zack's Investment
Research's Protection and Safety category.

In an interview with OptionInvestor.com, regarding the ongoing
SEC inquiry into possible accounting problems, a company
spokesman said Tyco would be updating the public once a
conclusion of the inquiry emerges.


**************
MARKET POSTURE
**************

As of Market Close - Tuesday, April 18, 2000 

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

DOW Industrials   11,000  11,400  10,767    BEARISH   4.14
SPX S&P 500        1,500   1,550   1,442    BEARISH   4.14
OEX S&P 100          800     850     786    BEARISH   4.13
RUT Russell 2000     550     600     486    BEARISH   4.14
NDX NASD 100       4,000   4,500   3,716    BEARISH   4.13  
MSH High Tech      1,000   1,150     953    BEARISH   4.13 

XCI Hardware       1,600   1,700   1,538    BEARISH   4.13  
CWX Software       1,500   1,670   1,277    BEARISH   4.04
SOX Semiconductor  1,200   1,300   1,053    BEARISH   4.13  
NWX Networking     1,070   1,190     959    BEARISH   4.04
INX Internet         800     940     611    BEARISH   4.04

BIX Banking          530     620     562    Neutral   3.16
XBD Brokerage        500     580     466    BEARISH   4.14  
IUX Insurance        540     620     563    Neutral   3.16

RLX Retail           900   1,000     914    Neutral   4.13 
DRG Drug             355     380     374    Neutral   3.30
HCX Healthcare       710     760     752    Neutral   3.30
XAL Airline          130     155     140    Neutral   3.10
OIX Oil & Gas        265     300     278    Neutral   3.16
 
Posture Alert    
The NASDAQ surged for its second straight (point-gain) record,
as volume topped 2.1-billion shares. The positive earnings run
has temporarily saved this market and has made the shorts run for
cover in dramatic fashion. Sectors leading the way today include 
Internet (+10.03%), Brokerage (+9.95%), Software (+6.50%), and the 
Russell 2000 (+5.84%). There are no current changes in posture.  


****************
MARKET SENTIMENT 
****************

Tuesday, April 18, 2000

Super Tuesday!
 
With a plethora of strong corporate earnings, the markets rebounded in 
dramatic fashion Monday and Tuesday. This relief rally was a welcome 
sight, and was helped by the short sellers, who ran for cover in any 
and all directions. The NASDAQ, which lost 1125-points last week, has 
now gained back nearly half in two days. This major gyration in the 
market is making bulls and bears sleepless in Seattle, or wherever they 
reside. Regardless, with 2 trading days left before April expiration, 
we are due for more extreme volatility!

After the bell, we had a continuum of earnings from numerous 
bellwethers, and so far, Super Tuesday looks to be an extremely 
positive one! Intel, IBM, America Online, Qualcomm, Inktomi, and Covad 
all came out with stellar numbers. Lucent Tech is due to report before 
the open tomorrow, so we may have a clean sweep.  

These positive earnings have helped save the bulls from the plunge last 
week, but in two weeks, what does this market have to look forward to? 
Once we get through earnings season, the trading bias will definitely 
favor the bears, as inflation worries and Fed Watch will take control 
of the media. And with many key sectors still trading below important 
benchmarks, it is important that you take advantage of this rally and 
not get greedy (for those of you with good entry points) or lighten up 
positions if your are margined to heavily. In the mean time, enjoy the 
positive media spin, and the short squeeze that may continue!  

One great gauge for sentiment analysis is following the option activity 
for the S&P 100. The OEX is the most actively traded options contract, 
and following this contract can be very beneficial as well as 
rewarding. In Sunday's letter, we highlighted in the Pinnacle Index 
section for the OEX that: "new support is overwhelmingly strong, and 
both overhead resistance levels are light. This would indicate the 
potential for a powerful relief rally this week." Well, we got the 
rally we were looking, and hopefully some of you took advantage of 
this sentiment analysis.


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.

Interest Rates (5.782):
The current yield is in bullish territory.

Volatility Index (39.33)
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.


Mixed Signs: None


BEARISH Signs:
Liquidity Crunch:
With the fear of inflation, and the most likely scenario of several 
more rate hikes, liquidity in the marketplace will become a more 
significant issue and put more pressure on equities.


IPO Dilution:
With so many IPO's hitting the market, there seems to be dilution 
occurring where shares of finally freed up to sell by insiders. 
$58.6 billion of stock was freed up for trading in March, $67.3 
billion this month, and $118.3 billion in May. This is too much 
stock for the system to handle. 
 
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 sell-off 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                        (4/14)      (4/18)      (4/20)
******************************************************************

Overhead Resistance (805-840)     n/a         3.69
Overhead Resistance (765-800)     0.53        1.57

OEX Close                       731.94      785.92

Underlying Support  (735-760)     0.28        1.85 
Underlying Support  (700-735)    18.30       15.89

What the Pinnacle Index is telling us:
In Sunday's letter, we stated that: "new support is overwhelmingly 
strong, and both overhead resistance levels are light. This would 
indicate the potential for a powerful relief rally this week." Well, we 
got the rally we were looking for, but with 2 days until option 
expiration, we believe the OEX will be stuck in a trading range.  



Put/Call Ratio 
********************************************************************
                                Friday     Tues       Thurs
Strike/Contracts                (4/14)    (4/18)      (4/20)
********************************************************************


CBOE Total P/C Ratio             .91        .65
CBOE Equity P/C Ratio            .77        .55
OEX P/C Ratio                   1.40       1.31


Peak Open Interest (OEX)
********************************************************************
                     Friday           Tues            Thurs
Strike/Contracts     (4/14)          (4/18)          (4/20)
********************************************************************


Puts                700 /  8,755    700 /  9,546  
Calls               845 / 18,490    845 / 19,543
Put/Call Ratio         0.47           0.49


Market Volatility Index (VIX)
********************************************************************
                    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
April 14, 2000      Bottom?             39.33

April 18, 2000                          29.37   


*************
WOMAN'S WORLD
*************

Fire Sale, Anyone? I Smell Smoke!
By: Renee White

A two day rally. Feel better now? Don't be too quick to say, 
"Yes".

Today certainly felt better.  I love the color green.  The Nasdaq 
always makes us smile when it points due north.  Nasdaq advancers 
beating decliners 3:1, largest point gain, generals standing tall,
breadth broadening out and easily erasing two resistance levels 
(3650 and 3750) we were anticipating hitting our heads against a 
few times.  I was beginning to wonder if this was an exercise in 
"scream therapy".  More than a few of you jumped in to this 
euphoria and few took profits at the end of the day.

There is something eerie about the feeling this time.  I don't 
feel good.  On the one hand, there are good reasons for that.  
Just a look at my account balance change over the last month 
and you will understand.  Filtering out my pain, against the 
backdrop of strange market conditions, makes interpretation more 
difficult than usual for me.  Never the less, I will share my 
thoughts to massage the mental processes.

Am I the only one who has noticed that even after a severe market 
correction, almost all companies are still selling off after their 
earnings announcements even when they were good?  Earnings ARE 
coming in great, aren't they?  Doesn't that strike anyone a 
little odd?  We had a ton of companies who had their split runs 
ruined, due to the first leg of this correction starting in March.
Then the slide continued, just to make sure no one was that good 
at dodging.  We were set-up.  All other dips had been correcting 
quickly.  Moreover, buying the dips had rewarded many since last 
October.  Well in case no one has noticed, the short-term rules 
have changed again.

I know, I know.  We had a big rally today.  Sorry for the eye 
rolling but it was about a week too late to help me!  The worst 
sell-off one can get is shortly before option expiration.  The 
recovery is then fighting time decay (theta) and what may have 
been deep ITM may then be way OTM.  That's a mean trick!  Even 
buying the surging relief can cost you.  JDSU had a low of 74 
yesterday, came off the lows then traded pretty range bound all 
day before taking off the last 30 min. of the day.  I have been 
watching this stock closely, for several weeks.  It is a 
favorite amongst many and prices this low just looked too lucky 
to get.  I jumped in for a one-day trade in the afternoon, since 
I knew this stock well and felt few would let it stay at these 
levels long.  It had a nice run up into the close with strong 
volume....usually a good sign.  I held, deciding to exit today 
on continued strength instead of taking my profit at the close. 

BUT, someone turned the lights out on me and slammed the barn door 
on my fingers!!  I hate it when that happens!  That booger sold 
off right after the open, then played ping-pong with yesterdays 
high before sinking this afternoon.  My options opened lower 
and never had a chance to see my profits from yesterday's close 
again.  It was a one day trade alright, just not what I was 
expecting.  I had been victimized by a fight between buying into 
the high volatility yesterday and the loss of time value this 
close to expiration.  TAKE THAT!  A lesson to which one 
carries the bigger stick.  On top of that, my time and sales 
data was wrong and I realized I exited 3/4 point lower than 
necessary since it wasn't posting all the exchanges orders.  
Oh, it doesn't matter now. It's pennies compared to the last 
month. 

Most of you have read by now that many expect a retest of 
Friday's low, before feeling confident to jump back in.  Am I 
wrong or was it just last week when we were expecting the retest 
of a different low?  I think it was a higher low than the one we 
got Friday.  What happened there?  Another surprise?  I don't 
know about you, but I am tired of surprises lately.  I just want 
a present worth keeping.

The damage has been so severe that I hear many statistically 
explain why we should feel free to be buying.  Perhaps I 
should believe them.  Before I do though, I will go back to the 
basics of watching volume, advance/decline lines, the market and 
the sectors.  I will be keenly aware of the markets' ability to 
take out yesterdays high and its ability to barrel through 
resistance levels.  Each play I place may not work, but each one 
will have a sound reason with firm justification for entering it. 
My stops will be tight.  Don't try to wish or hope anything in 
this environment.  Also, I will be reviewing the moving averages 
of stocks I plan to enter and making sure that they are 
recovering well, from the damage.  Are they pulling back over 
there 200-dma, or is their 30-dma crossing up over their 50?  
Whatever the pattern, it must continue to confirm a buy signal. 
This is not a time for indiscriminant buying.  Remember, if it 
feels too good to be true, it usually is.  

Also, this is a good time to review "stages" which the price 
movement of a stock goes through, for any who are unfamiliar. 
Volume may be a boring topic, but understanding how it helps 
in determining if a rally will continue isn't so boring if you 
lose money because you ignored it.  The articles last week about 
using volume to determine upside or downside breakouts is an 
easy place to start if you do not have a good book to review. 

Okay, so here's the picture that is forming in my mind that will 
affect my trading decisions in the near term.  Who knows if we 
have really seen the bottom.  I sure don't.  The next one may 
even be lower still.  Unheard of you think?  That's what they 
said last week!  Earnings have been great this quarter, yet 
most companies are selling off after their reports.  But wait!  
Didn't they just go through a correction?  How much lower can 
they go if they do not have earnings again for another 3 months?  
Good question.

The biggest threat to the recovery I see is the fear.  It will 
soon hang heavy, once most companies have reported, while selling 
off during the post-earnings period.  That threat will be the 
overwhelming fear of a 50 basis point increase at the next FOMC 
meeting on May 16th.  Can't think we can't go lower?  Then check 
out the fear in October '99 after several weak months and before 
the dreaded FOMC meeting.  Until that is known, every economic 
report will be worried about and dissected even closer than usual. 
This time around I will not be placing trades in front of the 
announcements as I have since October.  Of course, that could 
change, but the risk seems much higher now.  Even in the best of 
times, late April is the beginning of a weak period for our 
markets.  With the recent carnage, the uncertainty of severe 
punishment by the Fed and a post earnings depression heading into 
the summer doldrums......well, I don't know about you, but things 
just don't feel as easy as before.

Like I said Sunday, take your time.  There is no hurry.  Enough 
damage has been done that most would like to see a consolidating 
base form here, in both the overall market and individual stocks. 
What that means to you is that although some days seem to race 
off due north, others will fall back.  On a daily chart one 
would see rolling or baseline patterns range bound over a period 
of time....days, weeks or months?  There would be difficulties 
breaking through resistance levels on the first or second try. 
Entries should be on pullbacks or on breakouts over resistance 
levels.  I guess what I am saying is it just might not be that 
easy this time. 

I will use some of this consolidation time to work on repairing 
my account.  Most likely, I will sell some of my long stock 
positions into rallies when a stock is appearing very strong.  
I will wait for a pull back day (preferably 2 or 3 if I get it) 
and purchase OTM Leaps of the underlying but at today's lower 
prices.  This will keep me in the companies I want to hold long 
term (at good entries) and free up cash. I will be trading fewer 
positions, so I can watch them more closely and keeping more 
cash available.  My time frames will change, either much shorter 
or much longer than usual.  Uncertain times require an adjustment 
to trading style.  I have already seen the difference between 
the damage in my short-term trading account which is the 
risky aggressive account, and my more conservative long term, 
IRA account.  It is a good time to make long-term adjustments. 

No one likes anyone who spoils the party but everyone likes to 
hear the rumor which can help them with a "heads-up".  This 
morning it just felt a little too quiet to me, even though we 
were in a rally.  It almost felt eerie, like others were 
watching and waiting.  I wondered if it were the short sellers, 
trying to decide to hold or cover.  When the volume picked up, 
it became clear.  Someone yelled "FIRE-SALE" and they started 
covering their shorts fast and furious.  That's always good for 
people holding stocks and options that they want to exit when 
the next rally occurs.  Uh oh, is that another surprise?  Did 
you enter today?  Will they dump tomorrow so they can build 
up their cash?

So, what happens now?  Without help from the shorts covering 
their you-know-whats, can we continue going up from here?  Your 
theory is as good as mine.  Until I know for sure, I will be 
trading very cautiously because I see no reason for a sustained 
upward move at the moment.   Let's all hope I'm wrong. 

Contact Support


***********
OPTIONS 101
***********

Lessons Learned
By: Lee Lowell

Nobody needs to hear anymore how bad it was on Wall Street last 
week.  We've just gone through one of the harshest weeks on 
record.  Did you have your money management plan at work, or did 
you let greed, your ego, and hope take over?  When we first learn 
about the markets and how to trade, you always hear of that one 
rule about preserving cash and taking profits from time to time.  
That rule has never hit home more than it did last week.  All 
those profits built up from November 1999 to March 2000 have just 
about vanished for many people.  I know I have given away a nice 
chunk of change.  It hurts bad!  You never think that it will 
happen to you.  That only happens to the other guy.  Well, guess 
what?  No matter how hard you've researched your picks, and how 
good you think the company may be, most likely you lost some 
money too.  Kudos to all those great investors who sold out of 
all their positions two weeks ago.  Do you know anyone who did?

As an active stock and commodity trader, most of my positions 
are short-term.  My option trades usually never last more than
two months.  I do own some stocks for the long haul and some 
leaps options, but 95% of the trades I make are to get in and out
relatively quickly.  But nevertheless, all my stocks and long 
call options took it on the chin last week.  Anyone who has 
traded for awhile has success and failure stories.  But the ones
who have more success stories are the ones who have a good money
management plan.  There's nothing wrong with taking a profit.  
Ever!  No matter how small it may be, a profit is a profit.  I
know I saw too many of my profits dwindle last week.  Setting 
stop-loss orders is a great way to automatically lock in a profit
or keep a loss to a minimum.  Use it!  You'll be happy you did,
especially after you've seen how much money you could've saved 
after last week's meltdown.  You can always buy back in after 
the fall.

After last week, many people probably had to re-assess their
career choice.  I know I always do after a bad spell.  Trading 
for a living is a tough job.  The stress level is about as high 
as you can get for any career.  And the stakes are just as high.  
Are you playing with your retirement money or your kid's college 
money?  Are you able to keep a clear mind in times like these?  
Do you have nerves of steel?  Before you get into a career of 
trading, you need to assess your own ability to handle these 
kinds of pressures.  Also, how well you do in the market is 
totally black and white.  You either make money or you lose 
money.  You're either up or down.  You're either happy or sad.  
There's no in-between.  You're not providing a service for 
anyone, you're not creating a product, nor are you adding any 
immediate benefit to the economy.  You're out there for yourself 
to make money.

Most people don't realize the psychological effect trading can 
have on a person.  When the bottom line is whether you made 
money or not, it can be a great burden on someone's psyche.  
You're totally judged on how well you've done in the market and 
how much moolah is in your bank account.  There's no great 
feeling of teamwork or comradery when you trade.  Or that 
feeling of satisfaction you've gotten after helping build the
only functioning hospital in a third world country.  It's every
man for him/herself.  The mood swings can be so erratic.  You're 
incredibly happy and feel invincible when you make money, but you 
feel like the biggest loser when the trades go sour.  While I was 
in the midst of being a floor trader some years back, there was a 
study that said the average burnout rate for a floor trader was 
five years.  I made it to five years, three months.  Woohoo!  
It's as much a physically demanding job as it is mentally.  It's 
also why the average age of the floor trader is usually under 35.  
It's hard standing on your feet for 6-7 hours a day, every day.  
Getting pushed, shoved, elbowed, spit on.  It ain't pretty.  I've 
since moved my trading operation to my home where I can focus on 
the mental part of the game.  The physical aspect is no longer 
needed.  And I don't have to shower if I don't want to.      

Getting back to the greed, ego and hope thing.  These are the 
three most important psychological obstacles to overcome if you 
want to be successful in the markets.  Greed is what keeps you in 
the market for that extra eighth of a point on your stock/option. 
Your ego is what keeps you from selling your stock/option when 
you don't want to admit defeat and take a loss.  And hope is what 
you do after you've realized that greed and ego have taken most 
of your money away.  It's very hard to admit that you made a 
losing trade.  It's against human nature to want to be a loser.  
We should fight as hard as we can and not give up.  
Unfortunately, that fighter mentality can cause big losses in the 
market.  You can't single-handedly stand in front of the big bad 
bear train.  Once again, the successful traders are the ones who
can keep their greed and ego in check.  If the trade goes 
against them and hits their stop-loss, then they're out and on
to the next trade.  Don't fall in love with your picks and don't
"hope" the market higher.  It doesn't work.  We've all tried it.

This sounds like an advertisement to stay away from trading 
altogether.  Not at all.  It's just a primer to help you be
aware of what it takes to become a successful trader.  It's
always easier said than done.  But that's where experience and
the "school of hard knocks" will help in the long run.  Before 
you jump into the trading waters, make sure you've read some 
basic investment books, spent some time on financial websites, 
talk to others who've invested for awhile, know your own 
temperament, and don't quit your other job just yet.  Don't be 
afraid to take some money off the table.  Even long-term 
investors/buy-and-holders should take profits every once in 
awhile.  I wish I had recently.  But don't discount the great 
buying opportunities that can arise after free falls like last 
week.  Just when it seems the darkest, that is sometimes the best 
time to buy back in (if you have some spare cash).  Don't get me 
wrong, I love trading for a living, but sometimes it takes a big 
move like last week for you to re-read all the money management 
rules.  I wouldn't give up this profession for anything else. 
(o.k., maybe to become a pro baseball player.  What man wouldn't?).

Good luck and be ready for the next buying opportunities.

Contact Support


*************
DAILY RESULTS
*************

Index      Last     Mon     Tue    Week
Dow    10767.42  276.74  184.91  461.65
Nasdaq  3793.57  217.87  254.41  472.28
$OEX     785.92   30.55   23.43   53.98
$SPX    1441.61   44.13   40.17   84.30
$RUT     486.09    5.54   26.83   32.37
$TRAN   2769.53  -48.46   90.95   42.49
$VIX      29.37   -7.14   -2.82   -9.96

Calls               Mon     Tue    Week

SEBL     126.88   26.19   14.13   40.31  Dropped, earnings 4/18
SCMR      75.69    2.13   22.56   24.69  Wow! Now that's a rebound
MERQ      79.63   17.97    2.91   20.88  36% bounce this week
ADBE     117.00   15.50    3.69   19.19  Reversal came to light
SDLI     160.50   14.38    3.13   17.50  Dropped, earnings 4/19
LXK      118.00   -2.00   17.69   15.69  Surge gives buy signal
ABGX      81.94   -2.25   17.31   15.06  Now that's more like it
VERT      43.00    5.63    9.38   15.01  New, coming back strong
VIGN      56.75    4.50   10.00   14.50  Dropped, earnings 4/19
NXTL     118.56    5.06    8.63   13.69  Price improves with volume
TIBX      61.25    7.63    5.31   12.94  New, B2B "plumbing"
CMVT      83.38    2.44    7.00    9.44  Continued it winning ways
VSTR      98.81    4.88    3.94    8.81  Nice start to a new play
WLA      107.50    1.38    4.63    6.00  Dropped, earnings 4/19
GMST      46.38   -2.25    7.50    5.25  Recovery from Monday
VOD       50.13    2.75    2.38    5.13  New, back over 200-dma
ENE       68.00   -3.00    1.25   -1.75  Found support at $66


Puts

DCLK      51.63   -0.75   -8.19   -8.94  New, dot-com now dot-bomb
EK        58.50    0.31   -3.31   -3.00  New, rolling over again
WY        53.50   -0.31   -1.50   -1.81  New, old economy put play
FIBR      36.88   -1.22    7.66    6.44  Bounce may be entry point
MCLD      63.88    6.19    3.06    9.25  Resistance at 10-dma
CNXT      56.94    6.34    4.50   10.84  Dropped, earnings 4/19


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:
*****

SEBL $126.88 +14.13 (+40.31) With a huge sigh of relief,
investors jumped into SEBL shares yesterday in advance of
earnings which came out today after the close.  Although SEBL
still looks great technically, as we mentioned in the weekend
newsletter, we are dropping the issue due to earnings.
Starting out yesterday with a gap down below $80, there was a
strong move through $90 in amateur hour.  There were several
opportunities to jump on board, and we hope you managed to grab
one of them.

VIGN $56.75 +10.00 (+14.50) Well, are you out of breath from
that sprint?  This was a quick play but well worth it, as VIGN
gave us several attractive entry points over the past 2 days
and has moved strongly higher, climbing as much as $20 since
yesterday's low at $38.  Unfortunately we have to let this
one go tonight as VIGN reports earnings tomorrow after the
close, and we don't want to be the last one standing when 
the music stops.  If you still have open positions, use any
strength tomorrow to provide for a more profitable exit.

SDLI $160.50 +3.13 (+17.50) As we noted when we wrote this play 
up in the Sunday newsletter, it would be a really short play 
thanks to an earnings announcement tomorrow after the close.  As 
a leader along with JDSU and GLW in the fiber optic revolution, 
SDLI had found good closing support at $140 and intraday panic 
level support at $130, and those levels proved to be a buying 
opportunity for a fast $17+ price move.  No news today, but it's 
apparent institutional investors were taking nibbles as evidenced 
by the 17 block trades and volume that today exceeded the ADV by 
65%.  It probably helps that SDLI will hold a shareholders 
meeting on May 18, in which there is an agenda item to increase 
the outstanding shares.  Split candidate, anyone?  No matter, 
with earnings here, it's time to exit and move on to another 
play.  We'll keep an eye on it for a possible addition later on.

WLA $107.50 +4.63 (+6.00) Time to close up shop on our play in
WLA.  At least this one is going out with a bang.  So far this
week WLA has managed to recover all of Friday's losses, and
then some.  They are scheduled to report earnings before the
open tomorrow.  Today, its merger partner Pfizer, posted better
than expected results, beating street estimates by three cents
per share.  PFE added about 4% today.  Analysts are looking for
WLA to come in with earnings of $0.56 per share.  It's certainly
possible Warner-Lambert could see better than expected results
and continue to move higher.  Going into the close, buyers were
adding this one to their portfolio's, with the volume picking
up along with the price.  We had a couple of chances to profit
from this play, but for now we will stick with rule number two.


PUTS:
*****

CNXT $56.94 +4.50 (+10.84) While this play was short in time, 
it was sweet.  A light started to flicker at the end of trading 
yesterday hinting CNXT wasn't going to fall much further.  In 
heavy trading it resurfaced above $50 for a strong close.  
The intraday volatility was superb though with an early dips 
to October 1999 levels at $41!  The broad-based rally today put 
significant upward pressure on CNXT.  Granted the stock hasn't 
moved through its 10-dma at $62.43, but we'd rather exit too 
soon.  Plus recall the company is reporting earnings tomorrow, 
after the close.  This event is unlikely to spark much 
excitement, but why take unnecessary risks especially 
considering CNXT's upswing today.   


***************************
PLAY UPDATES 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 04-18-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.


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

GMST $46.38 +7.50 (+5.25) GMST got blind-sided on Monday by 
news that its takeover target, TV Guide's (TVGIA), 1Q earnings 
fell 93% due to expenses related to the upcoming acquisition.  
Despite the rallying markets, GMST lost $2.25 pushing it just a 
fraction from Friday's bottom.  The more aggressive used this 
slide on bad news as a prime buying opportunity, while others 
waited until GMST moved through the stabilizing 5-dma (now at 
$42.64) today.  The result of today's bull session was near-term 
support developing at $44 and $45.  It'll be important to see 
this level establish itself; especially if you're still shy 
about jumping into this recovery play.  A positive sign that 
GMST can make headway in the immediate future is the robust 
volume (at almost triple the ADV!) that backed today's $7.50 
climb.  Plus its strong close above $46 clears the way for the 
next line of opposition at the $50 level.  Recovery for GMST 
appears to be a good bet, but as always, pay close attention 
to the overall market sentiment to foreshadow direction.

ABGX $81.94 +17.31 (+15.06) Now that's more like it.  After a
scary gap down at the open on Monday, ABGX zoomed up over $15
and then pulled back over $10 - all during the first hour of
trading.  Can you say volatility?  ABGX pulled back to
consolidate just above $60 in the afternoon, providing us with
one last entry point before moving up in the last 15 minutes and
then tacking on over $17 today.  The movement this week has
confirmed support at the 200-dma ($53.56) and closing near the
high of the day today is encouraging.  Volume has been dropping
for 5 days, but today was still significantly above the ADV.
Bumping into resistance near $82, we need to see volume stay
strong in order to push ABGX higher as earnings approach on
April 25th.  Intraday support is firming near the $74 level,
and as long as the broad markets and the Biotech sector can
stay healthy, look for a renewed bounce at support to get you
into the play.

LXK $118.00 +17.69 (+15.69) Continuing to vacillate all day
yesterday, LXK gave us a clear buy signal this morning as the
price began to surge in late-morning trading, backed up by
increasing volume.  This move closely coincided with the
company's announcement of price reductions across their entire
line of inkjet printers.  This may be indicating that LXK is
poised to take more market share from Hewlett Packard, or the
move may be the beginning of our earnings run.  With the health
in the NASDAQ improving the past 2 days, and earnings less 
than a week away (before the open on April 24th), the printer
company looks like it may be ready to run even further.  Today
saw a price increase of more than 17.5% on volume nearly 50%
over the ADV, and we are now approaching resistance at $120.
Any weakness could provide another entry near support at $110,
while continued buying that breaks resistance is also buyable.
For those with open positions, keep in mind that the NASDAQ
has retraced almost 500 points of last week's losses, so protect
those profits by moving up your stops.

ENE $68.00 +1.25 (-1.75) So long safety, back to tech we go. 
Investors have backed off completely on volume (registering just 
83% of the ADV today) while their attention has been distracted 
by a technology rebound.  The good news is that despite a non-
directional day yesterday, today ENE found support and moved 
north again from $66.  If it gets there again, consider it a 
buying opportunity since any dips below that have been intraday, 
and ENE has not had a close below that level since February.  If 
tech stocks demand an Alka-Seltzer from swallowing so many points 
so quickly, ENE may yet see renewed interest.  The stochastic too 
has just reversed from a previously oversold condition.  On the 
way up, ENE should encounter resistance at $71, $74, and $77.  
Pick your entry carefully and consider ENE as more of a defensive 
position that will shine on days when the technology sector is 
down.  No news except that ENE and OXY are jointly responding to 
a request for proposal on business ventures in Saudi Arabia -- 
sprinkles in the frosting, but not the cake.

SCMR $75.69 +22.56 (+24.69) Wow!  Now that was a rebound!  While 
SCMR skipped along $50 a few times yesterday to inch up at the 
close, today fund managers lit the volume rocket by trading more 
than 6.9 mln shares (three times the ADV of 2.2 mln).  Most of 
those were buy orders as evidenced by the 47 block trades and 
$22+ price gain.  Another factor adding to the huge rise is that 
there are only 48.9 mln shares in float.  High demand and low 
supply equals big price move.  However, there was a perceived 
danger here and some readers were right to point out that SCMR's 
IPO lockup period ended over the weekend.  While that use to 
matter, the real danger in lockup expiration is the anticipated 
selling before it actually happens.  It's like investors learning 
to bail on YHOO about one week before earnings.  Once the pattern 
is known, traders and investors will try to run it early creating 
a new pattern.  Sometimes this matters.  However in the case of 
SCMR, only 11% of the total shares came out of the lockup 
compared to an average amount of 20-25% for other companies.  It 
just wasn't an issue in this case since SCMR was also coming off 
its lows.  Not many insiders are going to bail at the bottom.  We 
look for the move to continue as we suspect the bargain prices 
and the potential for an earnings run into the mid-May earnings 
date (actually the "third week of May" according to IR) will 
keep fund managers coming back for more of this scrappy CSCO 
competitor.  Careful though.  It won't go back to $200 in a 
straight line.  Intraday support is at $65, firm support at $60, 
and "back up the truck" support at $50.  Mild resistance is at 
$80, and stronger at $100.  With today's gains, there will likely 
be a better buying opportunity.  Consider waiting for it.

NXTL $118.56 +8.63 (+13.69) "A day or two of improved investor
sentiment and this one could fly."  That was a comment from 
our weekend update on NXTL.  Investor sentiment improved and
so did the price of our play.  It took a while yesterday, as
NXTL languished near its recent lows, hovering near the $100
level for most of the session, but late in the day buyers emerged
driving NXTL higher by $5.06.  The volume on Monday was solid
with over 6.7 million shares changing hands.  After adding about
$7 today, it appeared as though our play was beginning to
roll-over late this afternoon, but once again investors came to
the table with money in hand bidding Nextel to its high of
the day in the last thirty minutes of the session.  Is the Nasdaq
and NXTL out of the woods?  Time will tell, but with the volume
at the end of the day, most signs point north.  NXTL has jumped
up about 18% in the past two days.  If we see a pullback, we
would look for support at $114 and again at $108.  Overhead the
100 and 10-dma sitting at $120.41 and $121.24 respectively.  A 
move through those levels with, decent volume and we could be off
to the races.  NXTL is scheduled to report quarterly results next
Wednesday before the open, which could put the finishing touches
to a bumpy yet profitable play.
  
VSTR $98.81 +3.94 (+8.81) It's always nice to start a new play
with a gain.  A gain of just under 10% gives traders a chance to
regain their confidence, especially after last week.  Although
VSTR did penetrate the $83-$84 base yesterday, it didn't take
long to attract investors attention.  Once the buyers showed up,
VSTR began to climb back up the chart, ending the day with a
$4.88 gain.  Today the results were similar, before running into
resistance near $100.  The volume has been a little better than
average, the past two sessions as investors began to buy stocks
they sold last week.  Merrill Lynch analyst Linda Mutschler, went
out on the limb, reiterating VSTR as a near-term Accumulate this
morning before the open.  She also reiterated her long term 
rating as a Buy.  Last week, if you'll remember, VSTR was rated a
Strong Buy and Buy at two other firms.  This morning BUYPHONE.com
announced it had signed a marketing agreement with VSTR, for
nationwide distribution of wireless services.  VSTR now has
support at $97 and $94.  Only its 10-dma at $101.18, stands in
its way until it hits $110 where the next resistance level is
seen. 

MERQ $79.63 +2.91 (+20.88) Lets see, a better than $20 gain in
two days, with just over 4.5 million shares traded.  Not a bad
start to our new play.  Last Thursday, MERQ reported better than
expected earnings, beating street estimates by a penny.  Compared
to a year earlier profits at MERQ were up 83%.  The news seemed
to excite analysts, as the company received five reiterations 
of a Buy or Strong Buy rating.  After the strongest quarter in
the history of the company, you already know what happened on
Friday.  The sell-off Friday was completely over done, as
investors returned to work on Monday bidding shares back to the
$80 area, where it started the previous week.  The announcement
that IBM would begin to use some of MERQ products probably 
hasn't hurt this new play either.  Can MERQ maintain the rebound?
With the momentum seen the past two days it would appear,
investors have seen the error of the ways late last week.  A
pullback to the $76 or $71 area probably wouldn't be out of 
line, as MERQ has bounced about 36% so far this week.   

ADBE $117.00 +3.69 (+19.19) The reversal that we mentioned in
Sunday's write-up came to light Monday as ADBE ramped higher.  
The stock opened lower along with the NASDAQ Monday morning 
and traded in a range between $100 and $105 for most of the
afternoon.  In the last half-hour of trading, ADBE exploded
higher, gaining $10.  The momentum spilled over into Tuesday as
ADBE gapped higher this morning by $2.25.  The momentum faded a
bit this afternoon as traders took a break from ADBE and focused
on some of the big tech names reporting earnings on Tuesday, such
as INTC and QCOM.  The stock drifted along into the close,
bouncing off support of $115.  We're looking for momentum to
return to ADBE in the next few days as traders anticipate the
upcoming Annual Shareholder Meeting.  Investors will vote on the
proposed increase of authorized shares, paving the way for a
split.  The chart continues to look strong as ADBE moves toward
a new high.  An aggressive trader might target shoot for an entry
point as ADBE bounces off support at $115.  While those of you
looking to minimize risk might wait for ADBE to breakout above
resistance at $120 on heavy volume.  A move above $120 would
position ADBE to retest its 52-week high of $125.  However, 
if the broad market falls to profit-taking or shows general
weakness, you might consider setting a stop.  ADBE doesn't have
much support below its current levels, a trailing stop in the
$110 - $115 range might limit any downside risk.
  
CMVT $83.38 +7.00 (+9.44) CMVT continued its winning ways early
Monday morning as the stock surged $6 in the first 15 minutes of
trading.  The early morning buying was seen again Tuesday morning
as CMVT gained another $6 in the first 15 minutes of trading.
Volume continues to remain robust for CMVT during its recent
rally, as investors accumulate the stock.  The telecom equipment
sector has shown impressive strength in the last two days,
providing additional lift to CMVT.  Another big boost for CMVT
came Tuesday as ULCM, a subsidiary of CMVT gained a whopping
64%!  CMVT spun off the software company two weeks and retains
82% of the company.  From here, CMVT has major resistance just
above at $84.  The stock had trouble moving above that level all
day Tuesday.  A breakout on heavy volume above $84 may provide an
excellent entry point.  Above $84, CMVT will next find resistance
at $90.  After the early morning run-up Tuesday, CMVT cleared 
most major resistance levels.  Consequently, the stock now has 
little support as it current price.  The stock will most likely 
find support in the $84 to $82 range.  Below that level, CMVT 
doesn't have much help until the low $70 range.  Consider a 
trailing stop after entering into the play in case of profit-
taking after the recent rally.


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

FIBR $36.88 +7.66 (+6.44) Finally a bounce!  Not that it helped
those with open put positions, but further weakness could provide 
us with one more entry to our play.  On Monday FIBR tested the
$25 area.  Buyers did show up, in pretty good numbers today.
What we are going to hang our hat on for now, is either the
folks that entered yesterday and early today may want to pull
some money off the table if FIBR advances.  Also some of the 
traders that couldn't believe their eyes as Osicom was falling
and didn't get out, may use a bounce an opportunity to sell.
The other side of the coin would suggest that FIBR has been 
beat up so badly, the only investors left to buy are the die-
hards that really believe in the company, and their long term 
goals.  Time will tell, but for now, FIBR is sitting just above 
an intraday support level at $35.  The next levels of resistance
are found between $40 and $43.  If the bounce continues, and is
followed by weakness, look to buy puts one more time. 

MCLD $63.88 +3.06 (+9.25) Sometimes a rising tide lifts all
ships, even the sinking ones.  The NASDAQ Telecom Index rose 6.2%
Monday, after sinking 27% last week.  Along with broad sector
strength, MCLD benefited from positive analyst comments Monday.
Jack Grubman of Salomon Smith Barney, possibly the most
influential telecom analyst on Wall Street, reiterated his Buy
ratings on emerging local phone carriers.  Interestingly, Grubman
is also an investment banker for Salomon, raising capital for
many of the companies he follows.  Despite the positive comments,
many investors remain unconvinced about MCLD.  The company will
face increasingly stiff competition from rival CLECs, driving
prices down, and cutting into profits or adding to losses in
MCLD's case.  The rally in MCLD may be short lived as overly
optimistic traders refocus on the companies rising debt levels
and increasing competition.  Watch for the selling to resume, and
confirm any downward move with heavy volume.  MCLD has support
just below at $62, look for the stock to fall through that level
as a possible entry point.  Pay close attention to the action in
the overall telecom sector as a continued rally may float shares 
of MCLD higher.


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

TIBX - Tibco Software $61.25 +5.31 (+13.06 this week)

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

With earnings happening a month ago (a penny profit vs. $0.00 
est.), TIBX has had plenty of time to consolidate and won't 
report again until June.  We didn't know this until today, 
however, they are the plumbing that operates ARBA's, MySAP.com, 
and Alta-Vista systems.  Not only that, listen to Scott McNealy, 
CEO of SUNW, from a TIBX sponsored conference today; "Businesses 
can create an auction-style internal transactions environment, 
providing the best, real-time market data available for pricing, 
goods and even stocks - and TIBCO is making these real-time 
connective portals possible."  Today, TIBX reported that they 
will be providing a new software platform software to number of 
other players that want to set up B2B exchanges -- namely, Aether 
Systems, SingleSourceIT (a private group boasting relationships 
with Ingram Micro, HWP, CPQ, ORCL and IBM), and Delta Airlines.  
Their technology not surprisingly is embedded in CSCO equipment 
too.  The chart and recovery look great.  Technically, after 
finding support at $45 at its lowest point in the last few weeks, 
TIBX sold off 30,000 shares in a likely prearranged buy all the 
way to $33 in yesterday's open.  One guy got it and the ensuing 
trades went off at over $45 for the rest of the day.  It was from 
that point that TIBX made a great recovery over the last two 
trading days.  Intraday support is at $45 and $53.  $57 is a bit 
weaker, but works too.  Target shoot to your level of comfort.

We don't expect TIBX to remain at these levels for long since 
this B2B "plumbing" company traded at $120 just 30 days ago.  The 
story is too compelling and fund managers are snapping this stuff 
up in big amounts.  Today, the volume was almost twice the ADV.  
No upgrades today or in the last week, but that could change in 
the coming weeks.  Last week, shareholders voted to increase the 
outstanding shares from 300 mln to 1.2 bln.  It becomes a split 
candidate again once the price gets back over $100.

BUY CALL MAY-55 PAV-EK OI= 29 at $13.63 SL=10.25
BUY CALL MAY-60*PAV-EL OI=545 at $11.00 SL= 8.25
BUY CALL MAY-65 PAV-EM OI= 43 at $ 9.25 SL= 6.25
BUY CALL AUG-65 PAV-HM OI= 11 at $19.63 SL=14.00 low OI

SELL PUT MAY-50 PAV-QJ OI=111 at $ 4.88 SL= 7.00
(See risks of selling puts in play legend)

Picked on Apr 18th at   $61.25     P/E = N/A
Change since picked      +0.00     52-week high=$147.00
Analysts Ratings     3-0-0-0-0     52-week low =$  6.56
Last earnings 03/00  est= 0.00     actual= 0.01 
Next earnings 06-19  est= 0.00     versus= N/A
Average Daily Volume = 1.5 mln
/charts/charts.asp?symbol=TIBX


VOD - Vodafone AirTouch Group, $50.13 +2.38 (+5.13 this week)

Vodafone Airtouch is the world's largest mobile telecom company.
The now operate in 23 countries and have approximately 28 million
subscribers.  They operate wireless networks, offering voice, 
messaging, paging and data services.  They are in the process of
taking control of Mannesman AG, operator of Germany's #1 wireless
carrier.  Their compete for market share with AT&T Wireless Group,
BT and Deutsche Telekom.

It's been a while, but Vodafone's back.  VOD found its way back
to our list of potential plays, after providing investors with
a nice bounce the first two days of the week.  After a 15% drop
last week buyers have investors have began to focus on the 
telecom company.  So far this week the new found enthusiasm has
come on the heels of solid volume with over 11.2 million shares
changing hands in the first two sessions.  As with many of the 
issues in the sector, we believe the selling was a bit overdone.
VOD is in the spotlight this week as they are currently bidding
for five wireless licenses, being issued by the U.K. government.
Vodafone also said today they are selling a majority stake in
Atecs, Mannesmann AG's engineering and automotive business, to
Siemens and Robert Bosch GmgH, in a deal valued at 9.6 billion
euros($9.12 billion)  VOD said the deal means the German group
can focus on developing its core telecom business.  The latest
comments for Vodafone came last week, as analyst Mark Lambert at
Merrill Lynch reiterated a near-term Buy rating on the Telecom
company.  VOD has been on the short end of the stick since
early March when it reached its 52 week high at $64.38.  The
company has struggled to find buyers until yesterday morning
when shares traded below $45, a level not seen since the
beginning of the year.  As we noted, the volume picked up
as investors began to shop for bargains late yesterday.  Support
is now found at $49.50 and the 200-dma at $48.63.  If the
major indices see a pullback tomorrow we would look to target 
shoot near those levels.

In the above mentioned bidding VOD seems to be in the lead for
the second-widest bandwidth of the five permits.  They are
currently bidding against TIW for the license A, which has the 
broadest bandwidth, according to analyst familiar with the
auction.

BUY CALL MAY-45 VOD-EI OI= 331 at $ 7.00 SL=5.00
BUY CALL MAY-50 VOD-EJ OI= 530 at $ 4.13 SL=2.50
BUY CALL MAY-55 VOD-EK OI=1325 at $ 2.19 SL=1.00
BUY CALL JUL-40 VOD-GH OI=2262 at $12.50 SL=9.25
BUY CALL JUL-50*VOD-GJ OI= 502 at $ 6.75 SL=4.75

SELL PUT MAY-45 VOD-QI OI=1896 at $ 1.69 SL=3.00
(See risks of selling puts in play legend)

Picked on Apr 18th at    $50.13    PE = N/A
Change since picked       +0.00    52 week high=$64.38
Analysts Ratings      4-4-1-0-0    52 week low =$33.84
Last earnings 12/99    est= N/A    actual= N/A 
Next earnings 04-99    est= N/A    versus= N/A
Average daily volume = 5.96 mln
/charts/charts.asp?symbol=VOD


VERT - VerticalNet Software Inc $43.00 +9.38 (+15.00 this week)

VerticalNet is a leading owner and operator of vertical trade 
communities specifically targeting the B2B segment of Internet 
commerce.  They act as an industry-specific source of 
information, interaction, and e-commerce for industries spanning 
communications, healthcare, and sciences.  VerticalNet is 
currently expanding into Europe and Japan.  Internet Capital 
Group owns 33% of the company. 

Snap, crackle, pop!  That's what VERT has done in this week's 
rallying markets.  It snapped back to life at Monday's opening 
bell and went on a tear.  In just two days, VERT recovered 
$15.00, or 53.6% of its share price and is poised for a powerful 
run.  First there's the analysts who are still bullish on the 
B2B stocks.  Specifically Tomas Isakowitz at Janney Montgomery 
Scott reiterated his Buy rating on VERT today.  And earlier, 
BB&T Markets initiated new coverage for the stock with a Long-
Term Buy recommendation.  So what's ahead besides pure momentum 
to drive VERT higher?  No, it's not a stock dividend.  VERT just 
split 2:1 on March 31st, but the company is expecting to report 
earnings this month.  Tentatively they're scheduled to announce 
on Monday, after the bell, so it's possible this run will be 
short and sweet.  Remember OIN never holds over earnings.  We'll 
confirm the date and time ASAP.  Everything seems to be in place 
for a profitable play, but the risk is still HIGH.  VERT is one 
of those infamous Internets known for VOLATILITY.  If you're 
looking for an entry, dips to near-term support at $40 are 
suitable.  If there's an intraday pullback to the current 5-dma 
at $36.44, then that'd be gift.  But of course that'd be more 
risky; especially since we expect VERT to power higher and not 
return bottom support.

In the news today, VerticalNet announced it entered into a 
partnership with KnowledgePlanet.com, the leading B2B eLearning 
solution company.  In a joint effort they will deploy co-branded 
eLearning portals throughout VerticalNet's 55 communities.  

BUY CALL MAY-40 UER-EH OI=659 at $9.38 SL=6.50
BUY CALL MAY-45*UER-EI OI=185 at $7.13 SL=5.00
BUY CALL MAY-50 UER-EJ OI=486 at $5.63 SL=3.50
BUY CALL MAY-55 UER-EK OI=305 at $4.25 SL=1.75

Picked on April 18th  at $43.00    P/E = N/A
Change since picked       +0.00    52 week high=$148.38
Analysts Ratings      8-8-1-0-0    52 week low =$ 13.56
Last earnings 12/99   est=-0.36    actual=-0.28
Next earnings 04-24   est=-0.17    versus=-0.10
Average daily volume = 2.24 mln
/charts/charts.asp?symbol=VERT


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

EK - Eastman Kodak $58.50 -3.31 (-3.00 this week)

Holding status in our minds as a household name, EK develops,
manufactures and markets a wide range of consumer and commercial
imaging products such as film, photographic paper, processing
services, cameras and projectors.  The company also operates in
the Health Imaging market segment, providing medical films,
chemicals and processing equipment, which are used to capture,
store and process images and information for customers in the
healthcare industry.

After a brief earnings run, assisted by a flight from tech
stocks to value-oriented companies, EK looks like it is rolling
over again.  The return of investors to their favorite four-
letter stocks has left a shortage of buyers for issues such 
as EK.  After announcing earnings yesterday that were slightly
better than estimates, the photo company is suffering from the
"buy the rumor, sell the news" syndrome.  Attempting to move
higher this morning, EK succumbed to the sellers on volume 70%
greater than the ADV.  This does not bode well for EK investors,
especially as all the major indices were strongly higher today.
Losing $3.31 today, EK definitely looked weak, posting the
biggest point loss of all the DJIA stocks.  EK is being sucked
down by the twin-power vacuum created as enthusiasm returns to
the technology sector and by the usual effect of a post-earnings
depression.  Closing near the low of the day today, EK may find
support near $58.  Use a break through of this support level as
a possible entry point.  If we see a move up to resistance near 
$62, a rollover from there would provide an even better entry.  
The only cause for concern would be a Nasdaq rollover that sends 
investors back to the "safe" plays like EK.  So keep eye towards 
market sentiment at all times.

BUY PUT MAY-65 EK-QM OI= 59 at $7.00 SL=5.00
BUY PUT MAY-60*EK-QL OI=375 at $3.00 SL=1.50

Average Daily Volume = 1.74 mln
/charts/charts.asp?symbol=EK


DCLK - DoubleClick Inc. $51.63 -8.19 (-8.94 this week)

DoubleClick is an online advertising firm that offers targeted ad
delivery using it patented DART technology, a dynamic analysis
tool that collects information on audience behavior and uses
that data to target ad placement.  DART also measures Web traffic
and ad effectiveness.  DoubleClick delivers ads to more than
1,300 sites in its network, including AltaVista and US News
Online.  Doubleclick is expanding its business through merger 
and acquisition.  The company recently acquired software firm
NetGravity and information provider Abacus Direct.

The once beloved dot coms have become dot bombs.  The current
market conditions are not very favorable to those companies that
continue to lose money.  Continued losses are exactly what DCLK
reported Monday evening.  The company posted a loss of $13.2 mln
or about 11 cents per share, in line with analysts estimates.
Its not unusual for a tech stock to fall after its earnings
report, but the downward trend in DCLK continues in spite of
two record days in a row for the NASDAQ.  The Goldman Sachs
Internet Index ($GIN) rocketed 10% higher Tuesday, while DCLK
showed continued relative weakness.  Not only does DCLK have 
to deal with continued operating losses, the company is in the
middle of a heated debate surrounding online privacy.  Consumer
advocates are increasingly pressuring Congress to develop laws
to bolster privacy on the Internet.  The controversy stems from
DCLK's merger with Abacus.  The combined entity plans to match
online consumer names and home addresses with Web surfing habits.
The recent market conditions and concerns surrounding DCLK's
business ethics have sent the stock sliding from its 52-week
high of $135.25.  After the slump Tuesday, DCLK has fallen below
its last major support level.  The stock won't find much support
until $45, a level not seen since last August.  Watch for volume
to continue to remain strong as traders liquidate.  The stock is
below its descending 10-dma, watch for DCLK to bump against that
level and confirm direction before entering into the play.  Also,
watch for open interest to increase in the lower strike prices
before, many of the strikes are relatively new contracts.

BUY PUT MAY-60 TDU-QL OI=171 at $14.00 SL=10.50
BUY PUT MAY-55 TDU-QK OI=  6 at $10.00 SL= 7.00 low OI 
BUY PUT MAY-50*QWE-QJ OI= 11 at $ 7.50 SL= 5.25 low OI

Average Daily Volume = 4.35 mln
/charts/charts.asp?symbol=DCLK


WY - Weyerhaeuser Co $53.50 -1.50 (-1.81 this week)

Weyerhaeuser is the third-largest U.S. forestry company with 
operations and offices worldwide.  The company primarily grows 
and harvests timber on about 5.7 million acres in the southern 
US and Pacific Northwest with cutting rights on about 33.5 
million acres in Canada.  They also manufacture and sell other 
forest products including pulp, paper, newsprint, and various 
types of boards.  Weyerhaeuser has grown through acquisitions 
and is involved in real estate construction and development.

We're adding WY to our put list as a classic post-earnings 
decline play.  This morning WY reported 1Q profits more than 
doubled coming in at $1.04 p/s versus the lower consensus 
estimate of $0.92.  The company said its numbers were lifted by 
soaring pulp prices, recent acquisitions, and the strong paper 
and housing markets.  Yet WY added another $1.50, or 2.8% while 
the broad markets were on the fast track.   Even in its 
entirety, this stock hasn't been doing very well this year.  
It's fallen over 26% this year in comparison to a 1.9% fall in 
the S&P's 500 Index.  Then you tie in no positive action in the 
share price while the present sentiment is for investors to 
look at these types of stocks as an alternative to the cut-down 
techs.  But let's keep it simple.  The basis of this play 
is primarily focused on the fact that many stocks slide 
significantly after announcing its earnings, no matter how good 
the news.  Therefore look for WY to stay below $55 and move 
toward bottom support at $48 and $50.  Accordingly downward 
bounces off the 50-dma ($54.53) or even higher at the 5-dma 
($56.89) on an intraday spike would then be relatively good 
entry points.  In other news last week, Weyerhaeuser was named 
as a possible buyer for Fletcher Challenge's forestry division.  
The New Zealand-based division is being sold off for $2.5 bln 
in cash plus assumed debt.  The company declined to comment.

BUY PUT MAY-60 WY-QL OI=10 at $6.13 SL=4.00
BUY PUT MAY-55*WY-QK OI=43 at $4.25 SL=2.50
BUY PUT MAY-50 WY-QJ OI= 2 at $1.13 SL=0.00 low OI

Average Daily Volume = 1.52 mln
/charts/charts.asp?symbol=WY


*********************
PLAY OF THE DAY - PUT
*********************

MCLD - McLeodUSA, Inc. $63.88 +3.06 (+9.25 this week)

McLeodUSA is a facilities-based CLEC (competitive local-exchange
carrier).  The company provides telecommunications services,
including local and long-distance phone service and Internet
access.  It operates more than 616,000 local access lines,
serving about 261,000 business and residential customers in 12
US states in the Midwest and Rocky Mountains.  MCLD plans to add
PCS wireless service to its offerings; it owns 27 PCS licenses.
Founder and CEO Clark McLeod and his Wife, Mary, own 13% of the
company.
  
Most Recent Write-Up

Sometimes a rising tide lifts all ships, even the sinking ones.  
The NASDAQ Telecom Index rose 6.2% Monday, after sinking 27% last 
week.  Along with broad sector strength, MCLD benefited from 
positive analyst comments Monday.  Jack Grubman of Salomon Smith
Barney, possibly the most influential telecom analyst on Wall 
Street, reiterated his Buy ratings on emerging local phone 
carriers.  Interestingly, Grubman is also an investment banker for
Salomon, raising capital for many of the companies he follows.  
Despite the positive comments, many investors remain unconvinced 
about MCLD.  The company will face increasingly stiff competition 
from rival CLECs, driving prices down, and cutting into profits or
adding to losses in MCLD's case.  The rally in MCLD may be short 
lived as overly optimistic traders refocus on the companies rising 
debt levels and increasing competition.  Watch for the selling to 
resume, and confirm any downward move with heavy volume.  MCLD has
support just below at $62, look for the stock to fall through that
level as a possible entry point.  Pay close attention to the 
action in the overall telecom sector as a continued rally may 
float shares of MCLD higher.

Comments

Looking at a daily chart, MCLD has been in a downtrend since mid-
March as it consistently trades off its 10-dma.  On Friday and 
Monday, it found support at its 200-dma of $52.75 and today traded
up to $66.81, right at its 10-dma.  It is this point that MCLD 
pulled back.  Using this 10-dma as a resistance indicator, pick 
entry points based on personal risk levels.  Remember, the broad 
markets should lead stocks as a whole tomorrow and Thursday.

BUY PUT MAY-65*QMD-QM OI=1022 at $8.38 SL=6.25 
BUY PUT MAY-60 QMD-QL OI=  12 at $5.63 SL=3.75 low OI 

Average Daily Volume = 1.67 mln
/charts/charts.asp?symbol=MCLD


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

Title: Rising From The Ashes...

Monday, April 17

The markets rebounded today and a final buying surge lifted the
recently battered Nasdaq to a record point gain.  Technology
stocks recovered to boost the composite index 217 points to a
close at 3,539.  Blue chips also participated with the Dow Jones
Industrial Average up 276 points to 10,582 on strength in market
bellwethers.  The broader market also pushed higher with the S&P
500 index 44 points higher at 1,401.  Despite rebounding indices,
market breadth remained negative with declines leading advances
on both the Nasdaq and the NYSE.  Trading volume was active on
the technology index with 2.40 billion shares exchanged.  Stocks
on the Big Board were also heavily traded with a volume of 1.17
billion shares.  The 30-year U.S. Treasury bond dropped 2-6/32,
pushing the yield to 5.94% from Friday's close at 5.79%.
 

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

Aegon N.V. AEG   AUG80C/AUG80P   $13.00   debit   straddle
Jones      JNY   AUG30C/AUG30P   $7.12    debit   straddle
Liposome   LIPO  AUG15C/AUG17P   $5.88    debit   straddle
MasTec     MTZ   JUL75C/JUL70P   $13.00   debit   straddle

There was little activity in our new straddle positions but the
opening prices were favorable for most of the plays.  Aegon and
Mastec were both opened at the target entry debits and although
Liposome traded in a small range, the straddle was available at
a better than expected price.  Remember, this issue will mimic
the movement in Elan Corporation (ELN) unless the pending merger
is disapproved.  Jones Apparel was the most active position and
our opening price was slightly above the low of the session.


Portfolio plays:

Stocks rallied big in small groups today as investors moved back
into select, household names after last week's brisk sell-off.
Most of the traditional market leaders rallied as investors put
money into perceived safety stocks while a number of speculative
sectors such as Internet and Bio-tech slumped.  The majority of
blue-chip issues moved higher with powerhouse General Electric
(GE) and consumer products giant Procter & Gamble (PG) leading
the way.  In the technology industry, the semiconductor sector
soared, recouping nearly all of Friday's losses.  Major Drug and
finance companies also showed strength while oil industry shares
and retailers continued to lose ground.

Trading was volatile and that character is expected to continue
this week as investors balance today's recovery with concerns
about inflation and future corporate earnings.  Most analysts
said the recent active selling was based on demands by brokers
(margin calls) that customers bring their accounts up to minimum
collateral requirements.  Margin calls can create selling losses
as investors liquidate their holdings to repay their outstanding
loans.  In addition, worries over inflation and upcoming reports
on revenues from Internet and technology companies may undermine 
the recovery.  The flight to quality is expected to reduce many
of the more speculative companies back to acceptable valuations.
With that type of pessimistic outlook for the short-term, most
analysts believe the market will drift lower in the coming weeks,
establishing a secure trading range before moving higher in a
sustainable rally.

The Spreads Portfolio enjoyed a number of favorable moves during
the session.  Proctor and Gamble (PG) was the big winner, up $6
on strength in conglomerates and market-safety issues.  Our top
technology issue was Sun Microsystems (SUNW) with an awesome $8
rally.  The bullish move pushed our credit-spread strangle back
into a profitable range.  Advanced Micro Devices (AMD) led the
semiconductor group with a move to $72 as the sector recovered on
speculation of future growth of the computer industry.  Advances
were made in many of our new target sectors; Consumer Products,
Finance, and Major Drugs.  Spread positions in Abbott Labs (ABT),
Kellogs (K), Bank Of Tokyo (MBK), Ryder (R), Summit Bancorp (SUB),
Warner Lambert (WLA), and Xerox (XRX) all profited from the rally.
Of course the question now is whether the current market recovery
can be sustained.


Tuesday, April 18

Technology stocks moved higher today, driving the Nasdaq to its
biggest one-day point gain in history.  Bio-tech and Internet
companies helped lift the composite of technology of stocks 254
points to 3,793, surpassing Monday's record gain.  Traditional
stocks also rallied to boost the Dow Jones industrial average 189
points to 10,767.  Tuesday's rally was broad with S&P 500 index
up 40 to 1,441.  The market's breadth was solidly positive with
advances outpacing declines on both the NYSE and the Nasdaq.  The
Big Board saw 1.09 billion shares change hands while 2.13 billion
shares traded on the Nasdaq.  The 30-year bond was up 9/32, bid
at 104 23/32, where it yielded 5.90%.


Portfolio plays:

The stock market rallied again today and the activity was widely
recognized as the first step to meaningful change in character.
The brisk recovery continued across most sectors and from our
perspective, the fear of future corrections is relatively small.
Leading technology issues roared back to reverse the market's
meltdown as solid quarterly earnings reminded investors of strong
corporate fundamentals while relatively low prices encouraged
aggressive buying.  Many analysts were surprised by the size of
the rally and most suggest a period of basing with a potential
test of the recent lows is a likely outcome.

The majority of issues in the Spreads Section moved higher during
the bullish session but regrettably, there are only a few plays
that can benefit from any future rally.  Most of the portfolio
positions have previously been closed to protect gains and limit
losses.  However, a number of disparity positions were active in
today's trading.  Our new calendar spreads in Abbott Labs (ABT)
and Halliburton (HAL) enjoyed favorable moves and both plays have
offered profitable early-exit opportunities.  In addition, one of
our new straddle plays became an immediate winner as the option
premiums snapped-back to theoretical value.  The Mastec (MTZ)
position was easily closed for a favorable, one-day profit as the
overall credit for the straddle jumped to $14.75.


Questions & comments on spreads/combos to Click here to email Ray Cummins
******************************************************************
				- NEW PLAYS -

With our long-term portfolio desperately in need of new positions
and the incredibly volatility in front-month premiums, we decided
to look for some conservative plays that are based on the concept
of selling time.

****

SEPR - Sepracor  $84.00  *** Major Drug Leader! ***

Sepracor is a specialty pharmaceutical company that develops
improved versions of widely prescribed pharmaceutical compounds.
Their Improved Chemical Entities development program identifies
existing, widely prescribed drugs that might be replaced by
improved single-isomer or active-metabolite forms of such drugs.
Sepracor then seeks to develop ICEs that offer benefits over the
parent drugs, such as reduced side effects, improved therapeutic
efficacy or effectiveness for new indications.  Sepracor has also
licensed or is developing ICEs intended to treat a broad range of
indications in areas including respiratory, gastroenterology and
psychiatry/neurology.  Sepracor's ICEs include a large number of
well known drugs such as Fexofenadine, Fluoxetine and Bupropion.

Sepracor has weathered the recent bearish activity with flying
colors and today the unique drug-developer jumped $13 on strength
in the biotechnology sector.  The issue has been in recovery mode
since the Federal Trade Commission approved a drug licensing deal
between Eli Lilly (LLY) and Sepracor.  Last week, Lilly announced
that the FTC has closed its investigation and given the go ahead
for the licensing agreement between the two companies.  Under the
agreement, Lilly will exclusively develop and commercialize the
product Fluoxetine, an improved version of the antidepressant
drug Prozac.  On completion of the deal, Sepracor is expected to
receive an up-front payment and license fee for $20 million, and
up to $70 million in additional milestone payments based on the
progression of the drug through development.  That's a significant
revenue enhancement and the recent trading activity suggests that
investors are bullish on the issue.  While we favor today's rally,
our plan is to "target shoot" the position for a slightly better
cost basis.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  JAN01-60  ZQT-AL  OI=211  A=$36.50
SELL CALL  MAY00-90  ERU-ER  OI=122  B=$8.12
INITIAL NET DEBIT TARGET=$27.00-$27.25 TARGET ROI=100%

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

****

JNJ - Johnson & Johnson  $81.50  *** Big Earnings Rally! ***

Johnson & Johnson manufactures and sells a variety of health care
products worldwide.  The Consumer segment produces personal care
and hygiene products for oral and baby care, first aid use, non
prescription drug usage, sanitary protection and skin and hair
care.  Some of the company's major brands are Band-Aid bandages,
Carefree feminine hygiene products, Johnson's baby care products,
Mylanta acid controller, Neutrogena skin and hair care products
and Tylenol pain and cold symptom relievers.  The Pharmaceutical
segment produces prescription drugs for allergy, antibacterial,
fungal, anti-anemia, contraceptive, dermatological, intestinal
and pain management uses.  These drugs include Ergamosil, a colon
cancer drug, Floxin antibacterial, Imodium for anti-diarrhea and
Leustatin, for leukemia.  Retin-A dermatological cream for acne
is also a major product.  The Professional segment manufactures
products such as surgical and medical equipment and devices for
use in the professional health field.

The earnings are in and Johnson & Johnson, one of the nation's
largest pharmaceutical makers, reported strong revenue growth
in the first quarter, easily topping analysts' forecasts.  The
company's profit rose 15%, fueled by strong sales of the health
care conglomerate's top selling anemia and anti-psychotics drugs.
The company earned $1.3 billion in the January-March quarter as
sales rose 9% to $7.3 billion.  JNJ's drug sales rose 18% to $3
billion and the company's top sellers; Procrit/Eprex for anemia,
Risperdal, an antipsychotic pill, and Duragesic, a transdermal
patch for chronic pain all contributed to the success.  Their
consumer goods sales also rose favorably, led by Neutrogena skin
care products.  The company's professional division, which also
includes sales of medical devices, posted a 4% increase in sales.

The future is bright but there may be some post-earnings selling
after the recent rally.  We will attempt to achieve a slightly
lower "net-debit" entry during the next few sessions.


PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN01-85  ZJN-AQ  OI=7740  A=$10.00
SELL CALL  MAY00-85  JNJ-EQ  OI=1494  B=$2.50
INITIAL NET DEBIT TARGET=$7.00-7.12 TARGET ROI=100%

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.  A bullish form of calendar spread is when
the underlying issue is below the strike price of the options.
This position is generally speculative with low initial cost.
The most favorable outcome occurs when the underlying stock
consolidates initially, allowing the sold option to expire and
then eventually rallies above the long option strike price.  In
some cases, the simple erosion of time value in the short option
can produce a net gain.
 
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. Ideally, the spreader would like to have the stock finish
just below the sold strike when the near-term option expires. If
the short options are in-the-money at expiration, he will have
to buy them back to preserve the long-term position.

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

****

LNY - Landry's Seafood Restaurants  $7.06  *** RAIN Merger? ***

Landry's Seafood Restaurants owns and operates full-service,
mid-priced, casual dining, seafood restaurants located in 26
states under the restaurant divisional names Joe's Crab Shack,
Landry's Seafood House and Crab House.  In addition, Landry's
operates three limited-menu, take-out service units.  Their
restaurants offer a wide variety of high quality, broiled,
grilled and fried seafood items at moderate prices, including
red snapper, shrimp, crawfish, lump crabmeat, lobster, oysters,
scallops, flounder and other traditional seafood items, many
with a choice of unique seasonings, stuffings and toppings.

A merger proposal with Rainforest Café (RAIN) is in the works
and most analysts suggest the deal will be beneficial to the
company.  Under the deal, valued at about $125 million in cash
and stock, each share of Rainforest stock will be converted, at
the shareholder's election, into the right to receive $5.23 in
cash, or 0.5816 shares of Landry common stock for each RAIN
share outstanding.  The merger will be voted on at a special
meeting of Rainforest's shareholders on April 28, 2000.  There
are other circumstances regarding the transaction that require
further research.

This position is based in large part on the current price and
previous trading range of the underlying issue.  The technical
history of the stock suggests that a new character is in place
and the recent recovery should continue.  However, the current
volatility associated with a potential merger has also produced
some excellent trading activity and this generally leads to
favorable option premiums.  Our position is that the issue will
continue to provide opportunities for selling options in the
historical trading range between $6 and $9.


PLAY (conservative - bullish/calendar spread):

BUY  CALL  OCT-7.50  LNY-JU  OI=20   A=$1.12
SELL CALL  MAY-7.50  LNY-EU  OI=100  B=$0.31
INITIAL NET DEBIT TARGET=0.68 TARGET ROI=50%

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



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