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Daily Newsletter, Tuesday, 04/25/2000

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The Option Investor Newsletter             Tuesday 4-25-2000
Copyright 2000, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       4-25-2000           High     Low     Volume Advance Decline
DOW    11124.80 + 218.70 11136.60 10881.00 1,066,935k 2,193    810
Nasdaq 3,711.23 + 228.75  3711.57  3583.92 1,621,448k 2,848  1,316
S&P-100  795.32 -   4.57   795.88   777.77    Totals  5,041  2,126
S&P-500 1477.14 +  27.81  1477.67  1438.42            70.3%  29.7%
$RUT     489.03 +  20.49   489.03   468.54
$TRAN   2914.03 + 108.90  2918.07  2803.04
VIX       27.06 -   3.12    29.11    26.94
Put/Call Ratio       .41
*************************************************************

A broad based rally? What changed?

The market today was a different market than we have seen in 
some time. The broad-based rally today covered both markets 
and almost all sectors. The rising tide floated almost all 
boats. Of the 100+ stocks that I personally follow every day 
only four were negative and included BVSN, AKAM, ADAP, EXDS. 
The optimism was bubbling over even from the bears. The 
"retest" phrase was actually slipping from usage among the 
many "experts" on the various media outlets.

The key may have been Ralph Bloch. Ralph has been on the cutting
edge of calling the turning points over the last several weeks
and has been very close to perfect in his calls. When the rally
appeared to stall around midday Ralph announced that the low
on Monday appeared to be a successful retest of the April 17th
low of 3227. Monday's low of 3345 may not be an exact technical
retest but if Ralph liked it, the market approved. Of course it
also helped that Microsoft CEO Steve Ballmer sent an email to
employees stating that he was confident that MSFT would not be
broken up and they would be vindicated in the end. He repeated
his stance later in a telephone interview and was adamant that
the company would survive as a single entity. This confidence 
not only put a bottom under MSFT stock but aided the market as
well. MSFT also gave employees 70 mln new stock options with 
the option price set at the low for Monday. The added incentive
appears aimed at keeping key employees as it fights the breakup
battle.


 


 

Earnings are the fuel and the market was on fire today. Some 
of the majors included Proctor & Gamble who announced in line
with their already reduced expectations and after rising all 
last week, got killed again today with a -6.25 drop. The 
outlook for PG was bleak with slowing sales and rising costs.
Several analysts also downgraded PG again. But even with the 
-6.25 drop the Dow rallied as the techs gained back ground. 
Dow tech stocks roared back to life with IBM +6.00, HWP +7.00,
INTC +8.88 and even MSFT regained +2.75 after taking a -$12
beating yesterday.

Another NYSE stock announcing today really set fire to the
Nasdaq. Corning, (GLW) easily beat the street with $.64 vs
estimates of $.55 and +78% over last years $.36 number. 
Corning did not do this with glass baking dishes. Corning 
is a leading supplier of fiber optic cable and the excellent
earnings from blowout fiber sales confirmed the tech trends 
for the entire sector. Nasdaq companies that benefited were 
JDSU +12.56, CIEN +15.38, SCMR +6.69 and to a lesser extent 
LU, ORTL, CSCO. Corning was so positive in their outlook 
that investors were rewarded with a +$28 gain during regular
trading.

Other major announcers today included JDSU who beat estimates
by a penny and promptly dropped -$7.75 in after hours trading.
Got to do better than that guys! AMGN announced in line with
estimates and dropped -$3.00.  LSI Logic beat estimates by a
penny and dropped -$3.88.  Compaq announced inline with 
estimates but there was some confusion about some non-operating
earnings and dropped -$1.00 after the close but CPQ was up
+$3.00 on the tech rally today. On the winning side was Nortel
which beat estimates by +$.05 and added +$6.00 after the close
on top of a +13 during regular trading. NT said they expected
earnings to grow by +30% to +35% going forward. EBAY announced 
blowout earnings, doubling estimates, and guided analysts even 
higher for the next quarter. With auctions exceeding $1 bln
for the first time and registered bidders exceeding 12.6 mln
or a +230% increase from last year, the auction giant truly 
controls their own destiny. EBAY also announced a surprise 2:1 
split to occur on May-24th.

The Nasdaq gain Tuesday of +229 was the second largest gain ever
but when combined with Monday's loss of -161 it only gives us 
a +88 for the week. The Nasdaq has now recorded the ten biggest
gains and the ten biggest losses ever and all occurred this year. 
Even with the days gains the Nasdaq is still -27% down from 
the March highs. Even with the rally today the Nasdaq is still
technically over sold but few analysts are forecasting a rally
yet. The rally today puts the Nasdaq closer to breaking out of
the down trending channel, which started on March 24th, than it 
has been since April 10th. We are currently at the proverbial
inflection point. On a historical basis it is still very oversold
but this is also historically the time the Nasdaq has trouble
as the earnings flood dries to a trickle. The Nasdaq closed over 
its 200 DMA again and this may be the first step in starting 
a new up trend. 

Advance/declines were very positive today with the NYSE and the
Nasdaq both posting better than 2:1 ratios. Up volume was better
the 4:1 over down volume. On the surface it would appear the 
rally has legs but with 73% of the S&P having already announced
the earnings parade is drawing to a close. Normally this would
be the call to move to the sidelines but since the majority of
major players have been standing on the sidelines for several
weeks the urge to buy the rally is going to be strong. Nobody
wants to miss the train if the Nasdaq is going to start trending
up again. Stocks have not been this cheap since December of last
year and nobody expects them to remain at this level for long.
Now we are likely to see a test of wills as buyers face each
other over a banquet table of juicy steaks. All the funds 
would like to see prices drop a little more but if someone
across the table flinches and starts grabbing for the best 
steaks the resulting feeding frenzy would make a room full 
of lumberjacks afraid of losing fingers and hands trying to 
grab a morsel.  

It will all boil down to whether the fund managers think the
selling is over, or not. If they think this was just another
bear trap rally, just like the last two big up days this month, 
then we will struggle again. If they decide that this is as cheap
as stocks are going to get before the June earnings run then
the buying will pick up speed and the Nasdaq express will be
back on track. In order to confirm the current rally the Nasdaq
will need to close over 3800 tomorrow and hold over 3800 the
rest of the week. Right now we have a lower high and a higher
low formation and only one will eventually prevail. If the
market climbs the wall of economic worry we have this week 
then the rally is for real. Wednesday we have the Durable
Goods Orders and Thursday we are expecting the Employment Cost
Index and GDP as well as a speech by Greenspan. These reports
could set the tone for May. If the reports continue to show
inflation creeping up then Greenspan and company will be a
larger worry as the FOMC meeting in three weeks edges closer. 
I think it is a good possibility that we will see some weakness 
between now and Thursday until the ECI and GDP numbers are
known. If those are much higher than expected all eyes will
be on the Greenspan speech for a hint of a more aggressive
rate policy and that would of course be market negative.
Tuesday, Richmond Fed President Alfred Broaddus, a voting
member of the Fed's rate policy group, said recent economic
data point to a risk of higher inflation and intensifies his
concerns about the economy overheating. As I have said before
the Fed will telegraph pending rate increases and investors
will be listening to the coded words for changing signals. 

I would not argue with any rally now but the most likely
possibility would be a narrow range until after the FOMC 
meeting and then a big rally into July earnings. Trade 
anything the market gives us but keep your stops close!


Did you buy it? On Sunday I suggested using the QQQ to capitalize
on any dip and bounce this week. The QQQ had only been under $80
once this year and that was on the 17th. I felt the $80 level 
was strong support and I suggested buying the QQQ stock or options 
on the QQQ if it broke $80 this week. On Monday it hit $79.88 and 
then rebounded. Great play for investors who wanted to capture
the market move without having to be right on a particular tech
stock at the same time. 


 


Trade smart and sell too soon.

Jim Brown
Editor

Current long positions include: VIGN, NTAP


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

IP Offers to Buy Champion
By: Matt Paolucci

International Paper (IP) on Tuesday offered to purchase all
outstanding shares of Champion International (CHA) in a cash
and stock transaction worth an estimated $8.5 billion,
comprised of $43 in cash and $21 in stock. With its $64 per
share offer, IP has effectively started a bidding war for
Stamford, Conn.-based Champion.

On February 17, Finnish forestry company UPM-Kymmene unveiled
its plan to buy Champion for $6.56 billion in stock. Helsinki-
based UPM offered $52.74 per share of for Champion, a 30
percent premium to the U.S. firm's closing price Wednesday at
the time. But shares of both Champion and UPM have come down
since the announcement, as analysts questioned whether UPM was
paying too much.

The paper industry is in the midst of consolidation. Just five
days after UPM's merger accord with Champion was announced in
February, Finnish-Swedish forest products company Stora Enso
nnounced a deal to acquire Consolidated Papers Inc. (CDP) for
bout $4 billion. IP itself completed a $6.6 billion buyout of
another paper behemoth, Union Camp, just last year.

"Our cash and stock offer is far more attractive to Champion
shareholders," said John Dillon. "It not only represents a
significant premium over the UPM-Kymmene offer, but also
provides Champion shareholders certainty of value and much
more liquidity."

"A merger with Champion affords us the opportunity to
significantly improve profitability by strengthening our core
businesses There is no question in my mind that we will be a
stronger company," Dillon added.

Based on Monday's closing prices, the International Paper
offer represents more than a 20 percent premium over the
mplied value of the UPM-Kymmene proposal and nearly 25 percent
over Champion's closing share price.

In addition, IP would assume approximately $2.3 billion of
Champion's debt.

International Paper's offer is not subject to any financing
conditions or to pooling-of-interests accounting treatment and
does not require an IP shareholder vote.

The merger is expected to result in $425 million in annual
cost savings as a result of integrating manufacturing
operations, reductions in duplicate overhead costs and
improved purchasing efficiencies, principally in North
America.

In addition, the combined company will be able to reduce
capital expenditures below the amount spent as separate
entities.

International Paper also announced plans to sell more than $3
billion in assets by the end of 2001, as part of the company's
increased focus on its core businesses.

IP said it is prepared to enter into discussions with
Champion's management as soon as the Company's board has
authorized those discussions.

The transaction is subject to regulatory approvals, which are
not expected to delay completion of the deal.



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

As of Market Close - Tuesday, April 25, 2000 

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

DOW Industrials   11,000  11,400  11,125    Neutral   4.25  **
SPX S&P 500        1,500   1,550   1,477    BEARISH   4.14
OEX S&P 100          800     850     795    BEARISH   4.13
RUT Russell 2000     550     600     489    BEARISH   4.14
NDX NASD 100       4,000   4,500   3,621    BEARISH   4.13
MSH High Tech      1,000   1,150     952    BEARISH   4.13

XCI Hardware       1,600   1,700   1,488    BEARISH   4.13
CWX Software       1,500   1,670   1,204    BEARISH   4.04
SOX Semiconductor  1,200   1,300   1,082    BEARISH   4.13
NWX Networking     1,070   1,190     984    BEARISH   4.04
INX Internet         800     940     590    BEARISH   4.04

BIX Banking          530     620     581    Neutral   3.16
XBD Brokerage        500     580     481    BEARISH   4.14
IUX Insurance        540     620     609    Neutral   3.16

RLX Retail           900   1,000     967    Neutral   4.13 
DRG Drug             355     380     386    BULLISH   4.25  **
HCX Healthcare       710     760     774    BULLISH   4.25  **
XAL Airline          130     155     147    Neutral   3.10
OIX Oil & Gas        265     300     290    Neutral   3.16
 
Posture Alert    
The old & new economy stocks both enjoyed a solid day Tuesday,
as numerous equities made up the losses from Monday's Microsoft
debacle. Sectors leading the way include Internet (+9.25%), 
Semiconductors (+8.94%), NASDAQ 100 (+7.99%), and Software
(+7.79%). With this most recent action, we have upgraded the Drug
and Healthcare sectors to Bullish from Neutral, and have upped
the Dow to Neutral from Bearish.   



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

Tuesday, April 25, 2000

Bears 1,249, Bulls 879!

Tuesday's trading ended in stellar fashion, as all indexes participated 
in the relief rally. This rally came on the heels of Microsoft Monday, 
in which the software bellwether sank and took all passengers with it. 
Tuesday's trading was extremely positive, especially since most indexes 
closed at higher levels than before the pre-Microsoft news. However, 
the only negative today was volume, as the NYSE traded just over a 
billion shares while the NASDAQ traded 1.6 billion, which if compared 
to the chart below, is quite light. Regardless, a win is a win, so 
we'll enjoy it for the moment!

Corporate earnings continue to please, and has given huge support for 
this market. If it weren't for the strong earnings, this market would 
be in bad shape. Regardless, as it stands the S&P 500 has done a 
remarkable job of managing the earnings. Below is a scoreboard of S&P 
500 companies and their earnings record for this quarter.

S&P 500 Earnings:
Beat Expectations:   252  or 72.8%
Missed Expectations:  35  or 10.1%
Reported In-Line:     59  or 17.0%
Total:               346
 
Pretty impressive results so far, and they continue to come in great. 
After the bell today, we had bellwethers such as Nortel and Ebay smash 
expectations. These numbers may help fuel the rally over the next 
several days; however, as we have stated before, after earnings season, 
the media will be fascinated with Mr. Greenspan and the ever so fun 
game of FedWatch. So don't be pulled into any bear traps! 

Below, we have highlighted the NASDAQ records, and surprise-surprise; 
many of them have come from the month of April. The top 4 point gainers 
and losers are all from this month. Now if you were to tally up the top 
4 gains and compare them versus the top 4 losses, the score would be 
1249.16 (bears) and 879.92 (bulls), or an average of 312.29 to 219.98. 
This is not the type of score we like to see, and unless the bulls can 
pull off a last second Hail-Mary, the bears will end the month 
victorious. 

Date        Point Change           Date        Point Change 
04/18/00      +254.41 	         04/14/00        -355.49 
04/25/00      +228.75               ???             ???
04/17/00      +217.87            04/03/00        -349.15 
04/07/00      +178.89            04/12/00        -286.27 
02/23/00      +168.21            04/10/00        -258.25 
01/10/00      +167.05            01/04/00        -229.46 
03/03/00      +160.28            03/14/00        -200.61 
01/07/00      +155.49            03/29/00        -189.22 
03/22/00      +153.07            03/20/00        -188.13 
03/09/00      +149.60            03/30/00        -186.78 
02/03/00      +137.02            04/24/00        -161.40 

Date          % Change              Date         % Change
10/21/87        +7.34            10/19/87         -11.35 
04/18/00        +7.19            04/14/00          -9.67 
04/25/00        +6.57            10/20/87          -9.00 
04/17/00        +6.56            10/26/87          -9.00 
09/08/98        +6.02            08/31/98          -8.56 
10/30/87        +5.29            04/03/00          -7.64 
10/29/87        +5.20            04/12/00          -7.06 
10/09/98        +5.17            04/10/00          -7.06 
09/01/98        +5.06            10/27/97          -7.02 
10/15/98        +4.55            03/27/80          -6.15  	
 

Top Volume Days (In History)  &   Lowest Volume Days for 2000
	
Date            Volume              Date           Volume 
04/04/00     2,881,326,200       03/27/00      1,374,793,800 
04/14/00     2,553,268,800       04/20/00      1,418,691,600 
04/17/00     2,447,524,600       02/01/00      1,419,596,600 
03/01/00     2,232,343,100       04/10/00      1,440,720,000 
04/18/00     2,147,927,000       01/13/00      1,470,650,500 
03/07/00     2,144,429,400       03/28/00      1,482,970,500 
03/02/00     2,137,076,800       01/31/00      1,503,964,700 
03/03/00     2,136,527,500       01/03/00      1,507,020,200 
03/31/00     2,111,442,500       01/04/00      1,509,974,100 
02/29/00     2,088,835,400       01/12/00      1,519,226,700 

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 (5.934):
The current yield is in bullish territory.

Volatility Index (27.06):
The VIX continues to prove that the low 30's are an excellent 
buying opportunity, and the low 20's continue to be a great selling 
opportunity.

Short Interest (NYSE):
Short interest on the NYSE fell 1.33% to 4,055,931,190 shares on April 
14; however, this is still a high level and from a contrarian 
viewpoint, would be considered bullish. 



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                              Thurs       Tues        Thurs
Benchmark                        (4/20)      (4/25)      (4/27)
******************************************************************

Overhead Resistance (805-830)     1.65        2.25
Overhead Resistance (775-800)     1.70        1.82

OEX Close                       777.12      795.32

Underlying Support  (745-770)     1.60        1.84
Underlying Support  (715-740)     5.53        6.45

What the Pinnacle Index is telling us:
Based on the above statistics, overhead and underlying both remain 
light, indicating we can still go in either direction with relative 
ease. Resistance will start to be felt at the 800 benchmark.   



Put/Call Ratio 
********************************************************************
                                Thurs      Tues       Thurs
Strike/Contracts                (4/20)    (4/25)      (4/27)
********************************************************************


CBOE Total P/C Ratio             .75       .41
CBOE Equity P/C Ratio            .68       .34
OEX P/C Ratio                   1.42      1.40


Peak Open Interest (OEX)
********************************************************************
                     Thurs          Tues            Thurs
Strike/Contracts     (4/20)         (4/25)          (4/27)
********************************************************************


Puts                680 / 4,808   680 / 5,264  
Calls               800 / 5,512   800 / 5,376
Put/Call Ratio         0.87         0.98


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 25, 2000                          27.06



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

A Laywer That Represents Himself...
By: David Popper

As a practicing attorney and owner of a small firm and 
frequent participant in court proceedings, I often have 
the ability to watch attorneys and pro se litigants argue
before the court.  Pro se litigants are those that 
represent themselves before the court.  Often I have
found that pro se litigants focus on irrelevant information
which may be emotionally satisfying but is in no way 
relevant to their case.  In fact, more times than not, I
have seen unrepresented persons argue to the judge in
such a manner as to annihilate their own meritorious case
and snatch defeat from the jaws of victory.  Some of these
unrepresented litigants are attorneys.  

It is often noted that a lawyer who represents himself has a
fool for a client.  Why?  EMOTIONS!  Though emotions
have a place in final arguments, they have absolutely no
place in the cold calculations needed to build a winning
case.  Likewise, emotions have absolutely no place in the
market.  Professional traders will tell you that their
success is best when the market is approached in an
academic manner.  

I have made every mistake in the book.  Most of the 
mistakes have their roots in emotion.  As a long time
trader, I have learned all of the trading rules that I need
to know.  Lack of discipline or emotion though often caused me
to violate the very rules that I understand.

Is it any wonder that the same trader that successfully
paper trades may lose when there is real money on the
table.  Emotions can and will destroy your account.  What
makes a trade emotional?  The answer may be different 
for every trader, but for me it is adopting too large a 
position in any one stock.  

Before Jim published his article "How to Trade High Risk
Internet Stocks without High Risks" I was using that
strategy.  At first, I adopted strike prices where the calls
were well above support points and the puts were placed
well below resistance.  Often, the difference between the
call and put strike prices on the same security were 50
to 60 points apart.  At that point, I would trade only 10 call
contracts and 10 put contracts.  Each contract would 
generate a premium of approximately $5 and therefore,
I had an excellent chance of earning an "easy" $10,000 
with reduced risk.  Money came easy.  But do you know 
what?  If $10,000 is this easy, if I narrowed the spread 
between the calls and puts, I could make $15 a contract
instead of $5.  If I doubled the number of contracts and
narrowed the spread, I could earn $60,000 per month 
instead of $10,000 per month.  I can live on $60,000
per month.  What I did not count on was emotion.  Options
are priced appropriate to risk.  With additional risk, my
strike prices were attacked.  I was constantly covering.  My
failure to place my calls and puts above and below natural
resistance and support levels left me vulnerable.   Every time
my strike prices were attacked, I covered too quickly.  The
positions were closed for a minor loss.

You see, greed made me rationalize that the strike prices
with high premiums were adequately protected, when they
were not.  Greed made me take a position which was too 
large for my account.  Fear made me close a put position
which I would otherwise keep open.  Emotions turned my
winning trades into losers.  

Over the next several issues, I will discuss emotions in the
market, their causes and perhaps a cure.

Contact Support


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

Moving At The Speed Of Light
By: Mary Redmond

We all want to know when the Nasdaq is going to go up again,
and some of us want to know about the Dow also.  The real 
upward momentum might come back when John and Jane Public
start investing aggressively in technology funds and John
and Jane Technology Fund Manager start buying technology
stocks aggressively again.  The issue is when is that going
to happen. 

Whether the Nasdaq goes way up or down it could very likely 
happen relatively fast.  The public's impatience has been
a contributing factor to the volatility seen in the markets
today.  If you take a look at a chart of both the Dow and 
the Nasdaq for the first quarter of the year you will see
an example of this.

The Dow hit a high of 11750 in January, then in February we
experienced a severe bear market in the "old economy" non
technology stocks. The Dow lost 2000 points in two months,
and hit a low of 9731.  Meanwhile, the Nasdaq moved from 
4000 to 5000.  People were talking about Nasdaq 7000 and Dow
9000 by the end of the year.  Quickly the pattern reversed
and the Dow actually went up again to 11500 while the Nasdaq
dropped.  This is an example of how fast corrections can
occur, and how quickly public sentiment can change.

We have no one to blame but ourselves for this.  The fund 
managers, brokers and investment advisors have to do what 
their customers want for the most part.  Fund managers used
to be able to show an excellent yearly performance record,
now they are expected to show excellent quarterly or monthly
performance, or risk losing their jobs.  The turnover rate
of shares traded on the NYSE is higher than it ever has been.
This has been blamed on day traders, but there are far too
many shares trading hands to be attributed solely to day
traders.

At the beginning of the 1990s it was estimated that between
two and five million Americans owned stocks.  Now the 
estimates are between eighty and one hundred million, and
if you add the mutual fund shareholders the number would 
be even higher.  Plus there are millions of investors from
other countries who regularly buy US stocks on our exchanges.
A couple of years ago, the thought of one billion shares 
trading hands on the Nasdaq was mind boggling.  Now a day
with only one billion shares trading is considered slow.

There are a couple of facts which indicate that cash may be
building up on the sidelines.  Approximately two trillion
of market capitalization exited stocks recently, and yet
there is less than 300 billion of margin debt outstanding.
This may be indicative that liabilities are being reduced.
Also, in anticipation of redemptions, some fund managers
raised cash by selling stocks only to be surprised by very
few redemptions.  They are now sitting on excess cash, and
generally do not get paid for holding cash. 

In addition, the Treasury Dept announced this morning that
they will buy back another three billion dollars worth of
bonds on Thursday.  This is additional liquidity which 
will be added to the system.  Remember, when the Dow was
11,750 in January the 10 year T bond was yielding 6.8%.
It has since that point declined nearly 100 basis points
in yield.  

Since many ipos which were scheduled to come out in the
last two weeks have been cancelled, this leaves excess
cash which would have been invested in the ipos.   This
may direct some of the cash to the perceived safety of
the large cap profitable growth stocks.  

The performance pressure of fund managers is impacting the
markets now.  For instance, the turnover of mutual fund 
shares is higher than it ever has been.  Fund managers can't
afford to show a bad quarter.  For this reason, some of 
them may be hesitant to start buying high flying technology
shares now.  The Nasdaq may go up again, but it could just
as easily go down a little more first.  Nobody wants to be
caught in the downdraft, so a lot of them sit on cash and
wait for someone else to make the first move.  

If the public starts to contribute to technology funds 
aggressively, and some fund managers start to buy, the Nasdaq
may start to go up again.  If this happens, other fund
managers and investors may jump in and start buying again
too.  Then the herd mentality can start in which everyone
wants to buy because they don't want to miss the next big
move upwards.   For the Nasdaq to go up again, we probably
need to see this scenario.  The psychology can reverse just
as easily, but whatever is going to happen, I wouldn't count
on it taking too long.

Contact Support


*****

The Answer is:  "No. We Aren't There Yet."
By: Renee White

It's been an interesting few days of trading and things are 
starting to feel better.  However, I am still skeptical.

Here we were, worried about closing below the 200 dma and holding 
3500 on Nasdaq and once again we blow right past the fear as 
though a feather in the wind.  In fact, we blew right past 3600 
also and we will soon be trying out that 3750 level.  Why would 
anyone question the strength of the bull? 

I question it.  Then again, I'm not that trusting.  Once hurt, I 
want confirmed signs of damage repair.  I want the flowers, the 
presents, smiles, laughter and the fun.  I want this market to 
grovel!!  Beg me to buy it with long calls!  Force me to believe 
that it loves me and it won't hurt me again.  I want it to 
convince me to trust it again.  I want to be wined, dined and 
pampered in the land of the greenbacks while all things point 
north.  I want those 100% option profits in one day again.  Give 
me winning trades I can make with my eyes closed!  Quit whining 
and crying...moaning and groaning, crawling on its sides.  Just 
give me greener pastures and a fat bank account once again.  Only 
then will I forgive it for destroying all my plans to spend my 
rewards this quarter.  I'm just not that trusting yet.  This 
market has proved nothing to me yet.

Actually, the daily chart is starting to look a little less 
putrid.  You know what that means; the worst part of this flu 
may be over, but it's not completely well yet.  There's always 
the risk of a relapse and as you know, sometimes it just lingers.  
The Nasdaq last pierced the lower level of the Bollinger bands on 
both the Friday and Monday of the major sell-off (April 14 & 17).  
It has come off the lower band nicely and other indicators are 
starting to look good, but I still expect it to tap that lower 
band again.  If I am right, that could be a couple hundred point 
tap which could be painful for short-term traders that have 
recently bought in.  I would feel better about playing a rally 
after this confirmation of the lows, or at least by coming close 
to it.  Until then, I'll probably limit my trades to mostly short 
term trading, intra-day or no longer than 30 hours on either the 
buy or sell side. 

In my evaluation, we have seen 3 legs of this down market.  The 
first leg was the week of March 27th, 2nd leg being April 3 and 
4th, while the 3rd leg was the Friday to Monday April 14 & 17th. 
Each leg was worse than the previous one.  The forth leg is yet 
to be determined but if it is expected to be the last, it should 
be less severe than April 17th.  Since the April 4th leg of this 
downtrend, we have had 6 up days and 8 down days.  Since Monday's 
capitulation day on April 17th, we have had 2 up days and 3 down 
days.  In fact, since the week of March 27 when the first leg of 
this downtrend started (which is when I got killed!), we have had 
only 5 clear up days and 13 down days. 

Let's review: +5 added to -13 = -8.  Not good.  That's more down 
days than positive days.  Easy math.  That is why I am still 
shorting stocks right now.  The bias is still negative.  It could 
be improving, or it could be faking me out.  I don't trust it.  
Until there is more confirmation, I will play what I see.  There 
were more advancers than decliners today, which is good.  But 
don't be easily fooled by that neat trick.  The volume was ok, 
nothing exciting.  Remember, some great earnings have been 
coming out and we should all know that if we are told to not 
hold over earnings, then probably other traders don't either.  
That means more pressure on the downside after this last batch of 
heavy hitters is finished reporting.  There will be a select few, 
which may temporarily advance, but the odds of a sustained rally 
before the FOMC meeting, the CPI and the PPI are slim in my 
opinion.  Those three events alone, coming out in front of the 
meeting, could be reason enough for triple puking.  Nevertheless, 
as the market changes, so will I.  Still though, beginners 
may want to wait until after the FOMC meeting.  My thinking is, 
I'd rather be a little late to the party, then risk losing even 
more money in a fake out.  This time, the stars must line up!

Yesterday, instead of shorting like I thought I would do, I 
bought a few thousand shares of NetZero for what I thought would 
be an intra-day play.  I bought after a rollover bounce.  It 
then consolidated all day long just staring at me.  I was unable 
to exit by mid day as I had planned.  Anxiety hit during the 
afternoon sell-off which made me cuss for not shorting my own 
advice.  However, just before I was going to take my loss, the 
whole market took off like a rocket.  This is why it is so 
important to watch not only YOUR stock, but the general market 
trend also.  Those who follow me know I play the hard closing 
run-ups a lot, for the gap-open profits.  Seeing the Nasdaq take 
off just when I was about to take my loss, caused me to pause.  
Good thing.  Volume picked up and everything turned around.  
Expecting a hard run into the close, I held and ended the day 
feeling fine.  I exited within the first hour of trading this 
morning with a really nice profit. 

Unfortunately, I sold too soon because after consolidating for a 
while again this morning, NetZero took off due North!  When I saw 
it, I immediately shorted the stock.  I was hoping to exit this 
afternoon, but it continued North as if to know I had just 
shorted it.  Again, I held.  I don't expect tomorrow will be 
another rally in front of the economic numbers on Thursday, 
especially with Greenspan speaking in the afternoon also.  
Last Thursday, NetZero closed at 8 3/4.  Today it closed at 16.  
Would anyone be thinking of taking profits in front of a 
Greenspan speech you think?  That's what I expect anyway.  I 
was also able to successfully short EXDS for a nice clean 
intra-day play, along with a short term QQQ trade.  I'm avoiding 
the options on QQQ at this time, playing them directly instead.

Most traders know that when Greenspan speaks, the market listens.  
Since he has a recent history of confusing us with oblivious 
hints of his next rate hike intentions, I will play the fear by 
making lemonade while shorting for profit.  With the degree of 
damage done technically on Nasdaq, it is unrealistic to expect an 
easy ride straight up.  A reversal must have more up days than 
down days and we are not there yet.  In fact, I expect more wild 
volatility until after the FOMC meeting on May 16th.  After 
Thursday we will have roughly 2 weeks to worry and trade the fear 
of the May 16th meeting.  Some rallies may occur, followed by 
abrupt profit taking. 

So for now, I will wait for more downside on Nasdaq before I step 
in to start buying my Leaps and longer term plays.  Just 
remember:  if the sector is down and the market is down, your 
great stock with a future stock split may still not be able to 
keep its head above water AND you still have evaporating time 
premiums with the options.  Wait till the wind is to your back. 

I am making my list of candidates and getting the symbols of the 
strikes with large open interest.  If a re-test of recent lows 
occurs quickly, I will be prepared to pounce, assuming I have 
not already used up my buying power for that day.  OH, that would 
be a very mean joke!! 

Contact Support


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

The Psychology of Trading
By: Molly Evans

The markets giveth and they taketh back.  This is the axiom
of a seasoned market player.  Trading seems like it should
be so easy.  The commercials on t.v. show people reveling in
the ease of clicking and the riches of instant profit. 
Brokerages give out margin like Halloween candy and analysts
just raise the price target of Tech XYZ as it already hit 
their first number.  That's the way it was just a few LONG 
weeks ago.  Shall we examine what's taken place since then?  
The Nazdaq had an 80% gain in a year and kept charging with 
only a couple of bumps along the way.  The fed started raising 
interest rates but investors brushed that aside because, "that 
doesn't affect technology companies."  A couple of reports 
came in raising the question of inflation creeping into the 
economy and then a prominent bull threw a red flag, warning
"the little guy" that perhaps now would be a good time to trim
some fat from their portfolios.  Carnage ensues.  You know
the story.  What really happened here though?  It's elementary
psychology Watson.

"The Market" itself is just a very big crowd of people.  
It's every man for himself.  There is promise of fantastic 
monetary reward for outsmarting the next guy yet one risks 
giving it all away should he not mind the port.  There is 
money in the market because people as well as yourself puts 
it there.  No one goes into the market with the intent of 
giving you their money.  Hence, trading is a very tough way 
to bring home a fair dollar.  Others are trying to rob you 
while you've got your hand in someone else's back pocket.  
As Dr. Alexander Elder, author of "Trading for a Living" 
states, "The trading highway is littered with wrecks.  
Trading is the most dangerous human endeavor short of war."

We've just witnessed many wrecks.  How you as an individual 
performs when there is a pile up on this highway is due in 
large part to your trading psychology.  Amateur traders bring 
all of their emotional baggage to the table.  That is a very 
expensive suitcase in the market.  A good trader's ultimate 
goal is to trade well.  Isn't there a book "Do What You Love, 
The Money Will Follow"??  That's the nature and psyche of a 
good trader.  Successful trading builds equity.  That's the 
reward.  To get there, it takes more than luck and and an 
80% run up bull market.  A trader must keep emotions in check, 
trade with a plan and not allow the primitive group psychology 
influence his good judgment.  

Market swings are a result of the collective whole swaying 
from indifference to hope or pessimism and fear to optimism 
and greed.  People enveloped in the crowd, think differently 
than they would were they in solitude.  They become more 
credulous and impulsive, anxiously search for a leader, and 
react to emotions instead of using their intellect.  It's a 
proven psychological phenomenon.  Elder relates that just as 
a soldier will follow a trusted leader to his death, so too 
will a trader wipe out his account in the belief that he is 
following a trend and has a winner despite the apparent 
losses that are mounting.  "When we join groups, our thinking 
on issues involving that group regresses to the level of a 
child.  A leaderless group cannot hold itself together and 
falls apart.  This explains buying and selling panics.  When 
traders suddenly feel that the trend they have been following 
has abandoned them, they dump their positions in panic.  
Group members may catch a few trends, but they get killed when 
trends reverse.  When you join a group, you act like a child 
following a parent.  Markets do not care about your well-being.  
Successful traders are independent thinkers."

This of course, is not say that you should become a contrarian 
investor!  The crowd is bigger and stronger than you.  You 
should never go against the crowd no matter how smart you are.  
The key is to plan your trades away from the market.  Devise 
your entry and exit plans and then stick to it.  Be patient.  
Wait for that entry point.  If it doesn't come along, you know 
what?  There's another train coming.  Find it.  The beauty of 
individual investing and trading is that you don't have to 
trade.  You can afford to be patient for the right opportunity.  
The weakest part of any trading plan is the trader himself.  
Traders fail when they don't have or deviate from their plan.  
Plans are created by reasoning individuals while impulsive 
trades are made by crowd induced euphoria or fear.  

The markets rise because of greed among buyers and fear 
among short sellers.  When a rally ensues, it's because the 
bulls are afraid they're being left behind at the station 
and they hop aboard at any price.  A short seller feels 
trapped in an escalating rally as they watch their profits
melt and turn into losses.  Hence, the rush to cover their 
positions and the rally drives on up.  As Elder says, "Fear 
is a stronger emotion than greed, and rallies driven by 
short covering are especially sharp."  If this is fact, then 
the opposite is true too.  Markets will fall the fastest by 
panic selling.  The message boards are filled with sad 
testimony about their margin or panic selling and their 
lament that the market immediately turned around as soon as 
they were out.  Don't be in this situation.  This happens 
because the crowd sellers were gripped by the same fear or 
margin debt and everyone dumps at the same point.  Obviously 
as soon as the capitulation ensues, the markets head north.  
The crowd gets greedy and goes on a new shopping spree in 
the market. 

As traders going forward, we have to guage the sentiment of 
the crowd and plan our trades accordingly.  The aim of market 
analysis isn't to correctly guess the future price of a stock. 
A biased bull looks at chart and says, "Where can I buy?" while 
a biased bear looks at the same chart ands asks, "Where do I 
short?"  A fair market analyst looks from neither perspective 
but seeks only the truth.  Are the bulls or the bears in control?  
Is anyone in control right now?  Yesterday it was the bears, 
today it was the bulls.  Liken today's market to something 
tangible.  Borrowing from Elder's example, if a man falls down 
a flight of stairs, he might just get up, brush off and run up 
them again.  Now assume he just fell out of a third story window.  
He won't just get up and run right then.  He may have broken a 
leg.  The question we should all ponder is, did we just fall down 
the stairs or did we fall out of that third story window? 

Contact Support

Elder, Alexander; Trading For a Living: Psychology, Trading Tactics 
	and Money Management; Wiley and Sons, Inc. New York; 1993.


*****

Falling Knives Or $100 Bills?
By: Austin Passamonte
 
Depends on which side of the market you are in! Are you a 
bonafide raging bull? On days like this it sure is easy to be 
one. However, have you met any traders who only go long calls, 
sit on their hands or get carved up trying to trade somewhere 
in between? They might be missing out on profits and fun!

While attending the O/I seminar in Denver last month one of 
many excellent instructors asked the crowd for a show of hands 
from all of the "bulls" present. A virtual sea of palms stretched 
into the air across the room. These individuals were easily 
spotted for the remainder of our stay  they were the ones 
huddled into groups during breaks watching CNBC as the NASDAQ 
plunged three days straight. One could almost guess how deeply 
invested in call options each individual was with a quick glance 
at their slumped body posture, glassy stare and grumbling amongst 
each other. Haven't we all seen this image gazing back from 
the mirror ourselves? 

The crowd was then asked for hands from the "bears" and a few 
brave souls poked their paws barely (poor puns intended) above 
their heads. The last request was for traders who considered 
themselves market neutral to account their presence, and no 
more than five or six of us dared admit that fact to the crowd. 
I wondered to myself, "how can this be"?

One never likes to see falling stock prices but if the event 
is out of our control, why not profit from it instead of 
lamenting the inevitable? 

It would be very hard indeed to commit oneself to regularly buy 
puts on CSCO, DELL, QCOM, INTC, SUNW, MSFT,  - we could list 
symbols 'til the cows come home. These tech stalwarts have 
been so good to everyone in the past (including today), how 
could we possibly fade them? This mental hang-up is partially 
based in reality. Buying puts on strong stocks hopefully near 
a market "top" is much riskier than long calls near a "bottom" 
in my opinion. We have two choices: sit out the falling markets 
while grinding our teeth and pacing the floor waiting for 
bullish entry points or learn to trade both sides of the 
mountain. Remember, moving markets spend half the time going 
up and the remainder going down, now don't they? The good news 
is one can theoretically make twice the money in that same 
period of time. The best news is there is usually more profit 
to be made quicker on the downside than on the way up. 

Which brings us to the point of this piece. You can profit big-
time from trading index options in any ranging market condition, 
especially when the markets fall. There is good money waiting 
to be made with QQQ, DJX and OEX options. It is my opinion that 
an astute trader can have far greater returns (and keep more 
of the profit due to 60% long term 40% short term capital gains 
tax rate) in most market conditions smartly trading the indexes 
both directions than solely looking for long call/short put 
strategies. If you never lie awake at night too excited to 
sleep because the market is poised to plummet and $100 bills 
are fixin' to fall from the sky into your trading account then 
we need to talk! 

One exercise I practice every night is to pull up the CBOE charts 
from the left column of tools in this site and plot the daily 
price movement of the OEX, DJX and QQQ options within a few 
strikes price range either way of the current market. Keeping 
this data in my daily trading log allows me to flip back to 
those large range days and see just how the indexes behaved. 
You'd be surprised how many times these index options appreciate 
20%, 50% and even 100%+ in a single day of epic proportions 
like we witness about every two weeks lately.

When capitulation days are expected as this Thursday could be, 
or when they appear out of nowhere as today has, it pays to 
have a game plan that captures large moves. Having a short list 
of selected choices from puts & calls on the DJX (Dow) and QQQ 
(NASDAQ 100) a strike or two away from current index levels 
while the market is live allows you to calmly select the proper 
play for the situation. 

At the bottom of most future letters I'll include a couple of 
index options and the trading range prices for that day. This 
doesn't mean I bought & sold them (won't I wish), it will simply 
be an example of what a trader might have experienced had they 
purchased somewhere in the middle. I think you'll be pleasantly 
surprised to see how many singles, doubles and occasional grand-
slam hits for your profit ledger are on the table during most 
trading days. I'll try to expand in detail what I attempt to 
accomplish with index options and share some ideas you might 
find useful during volatile markets. We'll start with the OEX 
(S&P 100) by exploring strategies in detail and what it has to 
offer you. Hey, what do you say we learn a little, turn that 
knowledge into profits and have some fun along the way together?

Trade the right direction.



May 25th, 2000
OEX May 780 Call: low 17 1/2, high 30 1/2 - total gain +13 (42%)  
OEX May 790 Call: low 12 1/8, high 23 1/2 - total gain +11 3/8 (48%)
QQQ May 92  Call: low  3 1/8, high  5 1/8 - total gain +2  (39%)
DJX May 110 Call: low  2 1/2, high  4     - total gain +1 1/2 (37%)  

*****

I Wouldn't Call it a Win
By Janar Wasito

I've often written in this column about having a trading plan and keeping
your cool under fire. In the past month, some of these traits may have
become liabilities instead of assets. As Molly pointed out, the slow boil
will kill the frog who would otherwise jump out of the pot of boiling
water. Ribbit. As I write this, my Calendar Spread Strategy is beating the
NASDAQ -- it is designed to by systematically capturing the premium each
month from short term calls sold. But over the April Options Cycle, the NAS
is down 24%, and my portfolio of Calendar Spreads is down 20%. I wouldn't
call it a win.

Rather than the blow by blow of this strategy, I thought I would hit a
couple of general items that are applicable to a wider set of option
traders. The first item is something called Regimes of Volatility. In a
futures and options class I recently took, we looked at a paper from a
major investment bank that outlined 3 major types of markets in seven
periods between Fall 97 and Spring 99. Without getting too technical, when
there is a major drop -- as we have seen over the last month on the NASDAQ
-- the implied volatilities move opposite the major averages. That means
that the volatility premium, especially for short term options, goes way up
while the averages go way down. The reason is probably apparent to anyone
who has been following the markets for the last month. Big, unpredictable
drops occur, causing big snap back moves. The VIX and other major
indicators move out of comfort zones that have served traders well for 12
months. The market makers who trade for a living need a much wider margin
of error, which translates into higher premiums and wider spreads. The net
result for the individual trader is that we have to pay much more for
options in an environment which is much less likely to yield consistently
positive results. Marty Schwartz, a superb trader of both futures and
options, looks at how the market reacts to good and bad news. In the last
few weeks, the market has reacted negatively to both bad news (CPI) and
fair or good news (earnings). It makes the market very hard to trade, and
it doesn't help that the options we use are more expensive.

The second point is another fairly obvious one: the Internet Bubble has
burst. It's not over yet. The best book on this is The Internet Bubble by
the Perkins brothers, founding and managing editors of the Red Herring. The
basic dynamic described is that insiders (company executives, venture
capitalists, investment bankers) are selling stock to the individual
investor -- and it is all a huge joke! It's a joke because traditional
valuation measures such as inventory turnover, debt-to-equity ratio, and
other measures, do not mean a thing anymore. Those insiders all have their
MBAs, and they studied the indicators I am talking about. I had classes on
those too (though I was trading options on my wireless modem equipped lap
top in the back of class). The Perkins brothers list 133 companies, most
Internet e-tailers, and they take a close look at the economics. Most of
those are destined to fail outright or to be acquired. That will be the
business story of the next quarter. Insiders are coming out of lock up in
greater numbers in April and May, according to thestreet.com. Even at these
prices, they will make a tidy profit. Here's a real life indicator, one of
many I should have paid closer attention to. At the beginning of this year,
I went out to lunch with a dot.com CEO who had just graduated from business
school while I was still working on my degree. I had worked on his company
for a period while in school. His company had been backed by top tier
venture firms with almost $10 million dollars, and had grown to almost 40
employees. Over lunch, we were comparing notes and he noted his company's
revenue figures. As an individual trader, I had actually made more trading
than his 1999 revenues. And this is a company that has made it through the
minefield of getting funded in a very competitive environment. He was
planning on another round of funding leading to an IPO before year end.
Great company, great service, but that is what's coming out the IPO
pipeline. In retrospect (which is always 20/20), my battle plan for 2000
should have had a dot.com bubble play book. Puts, Bear Call Spreads. Now, I
think we are in a grinding bear market with further to fall. But with
NASDAQ +86% last year, we should all have read the handwriting on the wall
a little more closely.

The third point is that option trading is stressful. Well, OK, Janar, tell
me something I don't know. Last weekend was not a good one for me. I have
watched my financial cushion shrink as I stay in the calendar spread
positions I opened 5 weeks ago, against the better advice of advisors,
friends, and participants in our local options trading list. This has had a
corresponding effect of shrinking my professional/ career options to ones I
am less enthused about. (I know, play the biggest violin in the world
between your thumb and forefinger for a fresh graduate in the Bay Area,
still the country's hottest job market, where we have real negative
unemployment.) I had a bull put spread on ICGE constructed of going short
Sept 220 Puts and long Sept 120 Puts. It looked like a smart, innovative
play when I put it on in late February and ICGE had earnings in front of it
and the NAS was still headed to 6000 by tax day, soon to overtake the DOW.
It didn't look like such a great play when only one of the four 220 puts I
had sold was exercised against me in the depths of the tech sell off last
week. $22,000 for $3800 worth of stock. So, I closed the rest of that
position on Monday morning. Boy, those 120 Puts sure moved nicely! On a
personal basis, the reality is that the markets have overwhelmed me. Last
year, I made it a habit to take a week off every month so that I could
approach the markets with a fresh eye. This proved invaluable in my best
trading period -- November and December. I thought that the calendar spread
strategy would be lower stress. Wrong! The stress is that I am in a trade
each and every day. I executed as well as I possibly could have, selling
deep OTM calls just when my holdings rolled over. I bought them back on the
depths of the dips, pocketed the money, and bought more LEAPs. Still,
because of the depth of the sell off, I am down, and down big. In this
environment, it has been hard to keep up with school and other commitments.
It's taken a toll on relationships, some of which were on shaky ground to
begin with.

How should one deal with this? In light of the continuing lock ups
expiring, and the Internet Bubble continuing to burst (not all at once),
the best thing would probably be to unwind all my positions and go
completely to cash and go chill out. I haven't come to that point yet. A
friend from the local option club has suggested some useful steps, though.
First of all, think through the worst case scenario and the impact that
will have. Because of the way I have set up my finances, none of these
trades will impact my "daily operating costs" for at least a year, probably
longer. That's a start. One good step is just go ride a bike, relax, do
something recreational. Then come back and record lessons learned and make
a plan.

First, I need to make some career decisions. It really makes no sense to
hinge those decisions on my brokerage accounts. I've already closed the
ICGE play. I've learned a lesson there -- never open a OTM bull put play
again. Never go naked puts, which would be even worse. Never enter a
position which threatens the rest of my portfolio. Though these techniques
can be useful for the most experienced traders, they don't fit my style,
and above all, every trader needs to arrive at a methodology which fits
their style. Exercise and going to mass are important to me. Getting
organized over the next few weeks is important. Establishing my own
criteria for career decisions is important. Getting out and socializing is
important. Taking the next big steps in education & career are important.

Finally, I scribbled out some specific protective measures. At the tops in
the market, sector & stock, sell deep OTM Calls. Hedge half of the position
with puts equal to half of the cash flow from the calls sold. Wait until
month end to account for the proceeds from calls sold and puts. Then and
only then reinvest in LEAPs. Thus, my lines of defense against a downtrend
are: cash, calls sold, and puts.

On the plus side, I tend to think that the stocks which underlie my LEAPs
are at or close to a bottom. Maybe they can drop 10% from here. Maybe Ralph
Acampora will be right about NASDAQ 2900. Any time I have seen the Market
Sentiment indicators pegged completely to one side -- either bullish or
bearish -- it has been about time for them to swing back to the middle.
That was true on July 19, 1999. That was true in mid October, 1999. That
was true on March 10, 2000. Will it be true now? I think that sometime in
the next week or two, it will be true again. Perhaps the NASDAQ's
performance in 1994 is an instructive guide for us. It started the year at
775 and ended it at 750 after some rather volatile trading, including a
nasty drop in March/ April. Abby Cohen says that the S&P will end the year
at 1575, implying a rise of about 10% from our present level. I think we
could very well be at our bottom, and that the NASDAQ should head up from
here, but not strongly or in a sustained way.

My goal, with the Calendar Spread Strategy, is to sell short dated calls
equal in value to about 10 - 12% of the long dated calls I hold. I use that
cash to buy more LEAPs, thus allowing me to sell more short dated calls. My
entry point at NASDAQ 4800 was clearly bad, and would have been much better
at NASDAQ 3300. Still, the strategy delivered cash flow in the April
Expiration Cycle, just not enough to offset the downside move in the
technology sector. If we have indeed put in a bottom, or close to it, then
the strategy should work over the next 6 months.

Contact Support

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

Index      Last     Mon     Tue    Week
Dow     11124.82   62.05  218.72  280.77
Nasdaq   3711.23 -161.40  228.75   67.35
$OEX      795.32    5.50   -4.57    0.93
$SPX     1477.14    7.07   27.81   34.88
$RUT      489.03  -13.30   20.49    7.19
$TRAN    2914.03  -28.12  108.90   80.78
$VIX       27.06    1.87   -3.12   -1.25

Calls               Mon     Tue    Week

RMBS      186.22   -5.63   24.34   18.72  Heading up with strength
TIBX       79.38   -2.88   14.38   11.50  Just like we wanted...
AMD        88.00    1.88    7.00    8.88  Possible split coming??
BRCM      160.88  -10.63   19.00    8.38  Strong gap up today...
GE        166.00    3.81    3.94    7.75  New, now at all-time high
ADBE      120.00   -7.88   15.25    7.38  More shares, maybe split?
TER       103.38   -3.81   10.88    7.06  New, broke its channel
NOC        72.56    3.44    2.13    5.56  New, runnin' and gunnin'
SCMR       69.50   -1.75    6.69    4.94  Steel stomach needed...
MERQ       75.44   -6.63    9.69    3.06  Top rebounding candidate
CVS        46.75    0.19    2.75    2.94  New, found its lows
DHR        54.94    0.50    1.50    2.00  Gotta love this chart
GMST       42.13   -1.00    1.44    0.44  Dropped, bargain hunters
CMVT       79.69   -4.81    4.44   -0.38  Made Barron's best cut
ARBA       66.94   -7.00    4.94   -2.06  Look for renewed bounce
VSTR       93.00  -14.06    6.13   -7.94  Trick could mean treats


Puts


DIGX       52.44  -24.06    1.06  -23.00  Thank you Exodus!
AKAM       73.06  -11.06   -2.81  -13.88  New, lock-up over soon
PG         64.25    1.56   -6.25   -4.69  New, problems continue
EK         59.25   -0.75    1.50    0.75  Dropped, not movin'
WY         55.44    1.00    0.25    1.25  Dropped, found bottom
MCOM       30.38   -2.25    5.00    2.75  Channel still descending
NTPA       34.38   -0.50    3.38    2.88  Ready to roll over??
FIBR       45.25   -1.94    7.19    5.25  Dropped, taking profits
DCLK       67.63    1.81   10.38   12.19  Dropped, time to go


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:
*****

GMST $42.13 +1.44 (+0.44) Along with the rest of the tech 
sector, GMST got up on the wrong side of the bed Monday morning.  
The promising future for a recovery ahead of its earnings looks 
bleak.  The stock saw a sweep to a new all-time low of $34.63 by 
late afternoon Monday as the pressure of Microsoft's (MSFT) woes 
bore down its weight.  It was ultimately rescued from utter 
demise by an onslaught of bargain hunters who came off the 
sidelines driving up the trading volume and share price.  In the 
last hour of the session, they bid up GMST before GMST settled 
for a strong close near the 5-dma at $40.69.  Yet while support 
is relatively firm at $40, GMST appears to be range bound.  We 
expected the stock to give a better performance by now.  Since 
time is money and earnings are more than two weeks away we're 
exiting tonight to make room for more lucrative plays.  Gemstar 
is expected to report earnings around May 12th.


PUTS:
*****

WY $55.44 +0.25 (+1.25) The post-earnings decline appears to 
have come to an unwelcome end.  Last week WY continued to 
develop a pattern of lower highs and challenged the $53 mark 
with a dive to $52.50 on Thursday.  However, this week WY 
signaled it hit bottom.  After a quick dip to $53.50 on Monday, 
the stock edged higher and is currently sandwiched between the 
5-dma ($54.58) and the 10-dma ($57.09).  It's possible the 10-
dma could serve as strong opposition, but we're betting WY won't 
slide much further.  Therefore we're dropping it as a put play 
this evening.  If you're a nature lover, then you'll be 
interested to know the National Audubon Society recently 
recognized Weyerhaeuser's "Cool Springs" Environmental 
Education Forest as an Important Bird Area (IBA) in North 
Carolina.

DCLK $67.63 +10.38 (+12.19) The debate surrounding privacy on 
the Net took a back seat this week when DCLK announced several
strategic alliances.  With the majority of Net stocks taking a
bath Monday, DCLK held up relatively well.  The stock sold off
early Monday morning, finding support at $52.  After hitting its
low for the day DCLK quickly rebounded and rallied into the
close.  The end-of-day tech buying Monday culminated with a gap
higher by $2.50 Tuesday morning.  DCLK got an additional boost by
announcing they have joined forces with Broadband Digital Group
to deliver advertisements to more than 900,000 registered users.
DCLK also said they have teamed with Uniscape, a Global
Applications Service Provider, in an attempt to expand their
global presence.  It appears that traders have forgotten about
the controversy currently surrounding DCLK.  In light of the
strong showing Tuesday, its time to step aside and look for
opportunities elsewhere.

EK $59.25 +1.50 (+0.75) Although it doesn't look particularly
strong, EK also doesn't look ready to continue to the downside.
The downtrend, which had remained intact up through yesterday
(creating a nice pattern of lower highs and lower lows) was
broken today as EK closed above yesterday's high.  There may be
further downside to the issue, but support at $58 looks solid.
We'll let it go for now and look for other plays with more
excitement to offer.

FIBR $45.25 (+5.25)  Well, it looks like the NASDAQ may have put 
in its bottom yesterday...for the short term.  Today's broad 
market recovery lifted many battered NASDAQ stocks, FIBR being 
one of them.  Technically, FIBR traded in a narrow range and 
bottomed around the $35 level during yesterday's NASDAQ sell-off.  
Additional downside looks unlikely.  Today's 18% climb confirmed 
that most of the sellers have already come to the table.  The 
previous week's low was about $26 and since then FIBR has begun 
to round out.  Remember, FIBR's March high was $150 so we have 
seen quite a bit of selling the past month.  We entered this put 
play at $70.25 and don't mind taking our profits from this 
recent downdraft.  


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



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

The Option Investor Newsletter             Tuesday 4-25-2000
Copyright 2000, All rights reserved.       
Redistribution in any form strictly prohibited.


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

AMD $87.00 +6.00 (+8.63) The shareholders' meeting is just two 
days away and we're eager for a split announcement to create 
even more excitement and momentum.  The company is asking 
shareholders to increase the number of authorized shares to 7.25 
mln, which would give the BoD plenty of room for a stock split.  
The investors' anticipation was evident today by the rising 
volume levels (over 5+ mln) and bullish $6 climb.  Take a look 
at a chart and you can see firm support is much lower at $75 
near the 10-dma.  However in today's session, intraday support 
established itself much higher at $82-$83.  This is quite a 
spread.  If there's no earth-shattering event and the markets 
hold up, then its unlikely AMD will experience much of a 
pullback in the next couple of days, but there's never a 
guarantee.  If this turns out to be the case and you decide to 
add new positions, then you'll have to jump in on an intraday 
dip.  This is a more aggressive trading style and not for 
everyone, so be careful.  Yesterday AMD demonstrated a prototype 
processor platform, the Athlon, featuring support for double 
data rate (DDR) memory.  This new performance technology 
operates with the highest-bandwidth and lowest-latency PC memory 
technology currently available; thus providing advanced levels 
of performance.  The technology should be available in the 2nd 
half of 2000. 

ADBE $120.00 +15.25 (+7.38) The MSFT meltdown brought pressure to
ADBE along with the rest of the software sector Monday.  Despite
the sharp selloff in Net stocks, ADBE didn't retest its lows from
last week.  ADBE continues to show relative strength as it
remains in its ascending channel, tracing higher highs and higher
lows.  Recently, analysts suggest that ADBE is positioned to take
advantage of the boom in digital cameras.  Businesses are
purchasing digital cameras at an increasing rate, and using
ADBE's software for editing purposes.  The boom in camera sales
is expected to add to ADBE's already increasing sales.  The day
we have long awaited is here.  Wednesday, ADBE investors are
voting on a proposal to increase the number of authorized shares
needed for a split.  In anticipation of the meeting ADBE soared
in the final hour of trading Tuesday, gaining $8 on heavy volume.
The stock has ran into resistance twice at the $120 level.  The
announcement of a split tomorrow could propel the stock above
resistance and position it to retest its 52-week high of $125.
Watch for the stock to clear the $120 level and confirm any move
with heavy volume.  Be cautious though, if the broad market shows
weakness, ADBE doesn't have much support until $115.  Watch the
trading early in the day, and pick an entry point that is
suitable for your risk level.

CMVT $79.69 +4.44 (-0.38) CMVT made the cut last weekend when 
the infamous Barron's published a list of the best performing
companies for investors.  CMVT came in 6th out of the 500 largest
companies ranked by market capitalization.  In the article, US
Bancorp Piper Jaffray reiterated its $130 price target.  The
spotlight from Barron's didn't help CMVT Monday as the stock fell
in early trading along with the rest of the tech sector.  Traders
stepped in late Monday afternoon to salvage the day and carry the
tech sector higher.  The buying carried over Tuesday morning as
CMVT gapped higher by over $2.  Traders are beginning to talk
about the upcoming earnings for CMVT, though the report is a 
few weeks away, great numbers are expected.  We're looking for
momentum to build in the coming weeks as investors anxiously
await earnings.  The rally today put CMVT back above its 5-dma,
a level that has provided support for the stock.  The stock will
face resistance at $82 before moving higher.  Look for a breakout
above that level on heavy volume as a possible entry point.  If
the market weakens, CMVT should find support at $76.  Confirm
direction in the broader market before entering the play, CMVT
has the tendency to follow market direction.

ARBA $66.94 +4.94 (-2.06) Heading the wrong way, ARBA plunged
below support at $60 yesterday, but was saved by the late-day
NASDAQ recovery.  Finally clawing it's way above $60, ARBA
closed the day at $62 on fairly heavy volume.  The bounce that
occurred in the last hour of trading provided an excellent entry
as both volume and price increased right into the close.  After
gapping up at the open today, ARBA had very little price
movement, trading within a $2 range for most of the day.  The
lack of price movement wasn't due to a lack of volume, as ARBA
traded just above the ADV of 5.2 million shares.  Another note
of concern is the fact that the NASDAQ and the Internet index
both closed strongly today, while ARBA remained flat right up
to the closing bell.  Support seems to be holding near $65, but
with the strength of the broad markets, we would have liked to
have seen more buying interest today.  Use caution going forward
and force ARBA to prove itself before putting your money at
risk.  Look for either a renewed bounce at the $60 support 
level or a break through resistance at $70.

DHR $54.94 +1.50 (+2.00) How can you not love a chart like that?
Mimicking the steady gains seen on the DJIA this week, DHR has
continued to march upwards, pausing occasionally to allow new
players to step on board and then continuing the ascent.  Volume
has been a bit anemic (probably an effect of the light volume
in the market as a whole), but looks like it is gradually
picking up.  The bounce off the 200-dma a week ago looks like
a confirmation of the trend change, and today DHR posted its
highest close since last September.  In the event of a market 
pullback, look for a bounce near $52 to provide for a better 
entry.  If the uptrend continues, consider jumping onboard as 
buyers push through resistance at $55.  Continued strength in 
the issue will likely be predicated on the continued health of 
"old economy" stocks on the NYSE, so check market strength 
before playing.

RMBS $186.22 (+24.35)  Sure enough, $150 provided support late 
last week and looks to have held yesterday when the NASDAQ finally
"retested" lows.  With that strength heading into today, RMBS had 
buyers throughout the day.  The stock gapped up on the open to 
$166.88 and trended higher, finding intraday support at $180.  
The Semiconductor Index($SOX) was up almost 9% today.  This strong
move today looks very nice as we picked RMBS this weekend at 
$167.50.  Yet, it is important to note that this stock traded as
high as $471 in March and plummeted from there.  Thus, trading in 
RMBS should be closely watched for entry and exit points during
its short term pops and slides.  Taking advantage of this
volatility can be very profitable.  Remember, if and when the 
NASDAQ falls under selling pressure, RMBS and the other Semis 
that have been bid up may come under that same pressure.  As 
for now, this is the leadership sector and trading should be 
done using support levels and individual risk profiles.

MERQ $75.44 +9.69  A top rebounding candidate?  Not Shaq, but MERQ.
Shaq may have received his first scoring title in the NBA, but 
MERQ certainly exemplified a strong rebound.  We entered on April
16th at $58.75 and saw just that.  And although trading has been
volatile, up has been the general direction.  Last week, MERQ 
managed to hold its head above $70 but with yesterday's NASDAQ
sell-off, MERQ gapped down and found intraday support at $63. 
Yet it was today that MERQ reestablished itself firmly above the
$70 level.  Even more encouraging for this call play was the 
strong volume into the close, which was just off its highs.  Last
Tuesday and Wednesday, the stock tested $80 and encountered 
resistance.  This is the next level to look toward on the upside.
On the downside, MERQ found support last Thursday at $70 and below
that, look to $65.  These would be timely entry points, depending 
on personal risk levels.  The NASDAQ has been the catalyst in this
market, both up and down, so look to it for overall direction.

VSTR $93.00 +6.13 (-7.94) We said that if the NASDAQ were to retest 
its lows that things could get tricky for VSTR.  Monday was ugly 
as the NASDAQ dragged VSTR down until it found support at $85. 
Even with the NASDAQ rebound today, the stock once again tested 
the $85 support level.  As of midday, it looked as if VSTR might 
have been a drop but our spirits were lifted, as well as the stock, 
in the afternoon.  VSTR finished up just off its intraday high of 
$94.50.  The fact that it crept back down to $85 initially was
concerning, but with such a strong finish, we believe that a bottom
may have been put in.  Short term support lies at $85.  VSTR's 
first resistance will be at its 10-dma of $93.50, above that look
to $95 and $100.  Watch to see how the stock deals with those 
overhead levels.  Enter based on individual risk levels and watch
the NASDAQ for overall market direction as that has been the 
prominent leader.    

SCMR $69.50 +6.69 (+4.94) Despite a NASDAQ nosedive yesterday 
that came close to retesting previous lows, SCMR only needed a 
brief encounter at $55 before deciding a rebound was in order.  
There is no specific new on the issue, however, Goldman Sachs 
initiated coverage on RBAK, SCMR's competitor, with an addition 
to its "recommended list".  Their upgrade was based on two 
prominent trends - new access networks and upgrades in broadband 
infrastructure.  SCMR's chart is remarkably similar to RBAK's and 
will act in sympathy with any news void.  Yes, SCMR traded flat 
today after gapping up at the open, but the volume increased 
slightly to 45% over the ADV.  Technically, there is intraday 
support at $66, which also happens to be the 5-dma.  However, 
SCMR is having a tough time getting back over its 10-dma of 
$70.23.  Though it can get through it intraday, it's been unable 
to hold.  $75 is proving an even tougher level to penetrate.  
Given this morning's gap up and lack of movement thereafter, 
we're of the mind to let SCMR come to us by target shooting back 
at $66 (aggressive) or better yet, looking for an even better 
entry at $57, a previous level of support.  This is still a risky 
play by virtue of its volatility.  Sit this one out if you don't 
have a stainless steel stomach.

TIBX $79.38 +14.38 (+11.50) Just like we wanted...a move over 
$73 backed by volume.  TIBX has developed a pattern over the last 
three days of trading flat after the open then blasting off in 
the afternoon.  Today was no exception.  After the breakout over 
$73 (a spike to almost $79 actually), TIBX settled back to trade 
at just over $73 for most of the day, then took off to test mild 
resistance at $82.  We still expect mild resistance there, but 
the upside once that breakthrough happens is the 50-dma of $95.  
Why the optimism?  The 5-dma of $63.41 and the 10-dma of $60.90 
are holding up nicely as intraday lows and support.  As long as 
the market cooperates, momentum for this issue should remain 
strong, especially if today's volume of nearly 2.2 mln shares 
(48% over the ADV) is any indication.  Target shooting at $70, 
$65 and $61.00 should yield a good entry (depending on the 
market), but if the market decides to test the bottom one more 
time, $57 could provide support too.  While earnings won't affect 
the play (scheduled in June), shareholders have recently 
authorized an increase in the shares, which would enable a split.  
Once TIBX gets back over $100, it becomes a candidate again.

BRCM $160.88 +19.00 (+8.38) Yesterday, true to the rest of the 
market, BRCM took a 10% nosedive despite being great earnings and 
being named to Barron's list of best-performing companies for 
investors among the 500 largest corporations.  Too bad it had to 
break south of $143 support before finding its footing at $128 
yesterday.  If you caught it on that rebound into yesterday's 
close, you were richly rewarded in today's gap opening to $150 
and move over $160.  With volume at over twice the ADV, interest 
has returned to the issue and should continue thanks in part to 
a B of A Securities reiteration of their Strong Buy rating and 
price target of $300.  Target shooting support looks good at 
$150.  There's little bit of intraday support too at $155.  
Resistance is way up at $180, so there's room to run.  With such 
a big gain today, be sure to keep your stops in place so as not 
to lose your profit.  Just because it's only on paper doesn't 
mean you haven't earned it.


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

DIGX $52.44 +1.06 (-23.00) Thank you EXDS!  Last Thursday, EXDS
reported earnings that beat analyst estimates, but warned that
sales would slow down this year.  Combined with a weak broad
market, the announcement from EXDS sent a shockwave through the
sector as DIGX lost 32% Monday.  It appears that the once beloved
infrastructure stocks have fallen from grace along with their
counterparts in B2B and B2C.  The days of 50% sequential growth
are over, and investors are running for the exit.  DIGX gapped
lower Monday by more than $7 and continued to drop all the way 
to $50.  The stock enjoyed a small bounce Tuesday, but failed 
to show significant strength.  DIGX attempted to rally into the
close, but failed in the last 15 minutes of trading as the
broader market soared.  Noting the relative weakness Tuesday, it
appears the selling isn't over yet.  The stock is now trading
well below its descending 10-dma with minor support just below 
at $52 and again at $50.  Below $50, there is no support in sight
until $40.  If the stock has a relief rally, an aggressive
trader might look for an entry near resistance at $60.  If the
selling continues, look for DIGX to fall through support and
confirm with heavy volume.

NTPA $34.38 +3.38 (+2.88) As the broad indices soared today,
NTPA couldn't help but go along for the ride.  Posting volume
just below the ADV, the stock has moved off of yesterday's low
of $27, but is bumping into resistance at $34-35.  NTPA seemed
to be following the lead of the NASDAQ up until the last couple
hours of trading today.  As the NASDAQ surged into the close,
NTPA flattened out and refused to move higher.  As the economic
reports continue to flow this week and Greenspan speaks on
Thursday, any hiccup on the NASDAQ could be just the catalyst
to cause further weakness in NTPA.  Look for the stock to roll
over near current levels or perhaps $37.50 before initiating
new positions.  The issue will likely find support near $30, but
a lack of follow through in the tech market will make it that
much harder for NTPA to prevent further losses.  Also having
negative implications, volume on the mild recovery over the 
past 2 days is significantly weaker than that posted during the
decline last week; this is usually a good sign that the bounce
to the upside lacks conviction.

MCOM $30.38 +5.00 (+2.75) A rising tide floats all boats, 
sometimes even dinghies.  MCOM never got a chance to test the low 
end of the descending channel at $23 though it did dip below the 
$27 entry point yesterday and stayed there.  Sadly, its negative 
sentiment and lousy technical picture could not hold it back in 
the face of a 228 point NASDAQ gain.  Since the picture hasn't 
changed for MCOM (they still have system build-out delays that 
will zap their projected revenue stream), view today's move back 
over $30 as a prelude to a buying opportunity, especially if the 
market gaps open tomorrow or Thursday and carries MCOM up to $37, 
a previous level of resistance.  The point is to wait for a move 
back south after the open to get the best entry.  At a current 
$30, MCOM is still in the middle of the descending channel with 
the upper band at $40 and the lower band at $20, so wait for it 
to get off dead-center first. 


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

TER - Teradyne Inc. $103.38 +10.88 (+7.06 this week)

Teradyne is one of the world's top makers of automated test
equipment for electronics and telecommunications.  Teradyne
systems are used by manufacturers to analyze the performance 
of semiconductors, circuit boards, and software, and by
telecommunications companies to test subscriber lines and
equipment.  Teradyne also makes backplanes, assemblies that
house circuit boards and connect their electrical impulses with
other elements in a system.  The company has operations in
Ireland, Japan, and the US, and gets almost half of its sales
from international business.

If there is a group of stocks that are going to lead the market
higher it's going to be the Semis.  The Semiconductor industry
is experiencing a phenomenal period of growth in what is a very
cyclical business.  The recent earnings reports are a testament
to the exploding growth in the sector as the semis blows away
estimates.  And blow away estimates is exactly what TER did last
week.  The company earned 60 cents per share versus a 52 cent
estimate.  That prompted Bear Sterns to upgrade TER from an
Attractive rating to a Buy, and AG Edwards raised their rating
from Accumulate to Buy.  The earnings report and analyst upgrades
pushed TER to an all-time high of $102 last Thursday.  Momentum
fizzled Monday as the tech sector was led lower by MSFT, but
Tuesday was a new day and TER hit a new high.  The stock blasted
through $100 to hit an intraday high of $107 on impressive
volume.  It appears the momentum has returned to the Semis and
we're looking for TER to continue to make new highs.  One event
that may push TER higher is the upcoming earnings report from
semiconductor giant AMAT, scheduled May 10th.  The gap up Tuesday
morning put TER well above its 10-dma, and used it to climb
higher throughout the day.  Watch for the stock to roll higher
using its 10-day as support, the only resistance in the way is
the intraday high of $107.  If traders take profits, TER will
most likely find support at $100.  Target shoot to your risk
level and confirm any move higher with healthy volume.

Another catalyst that may push TER higher is the upcoming Annual
Shareholder Meeting scheduled for May 25th.  Investors will 
vote on a proposal to increase authorized shares from 250 mln 
to 1 bln.  TER's last split was in August of last year when 
the stock was trading in the $70 range.  

BUY CALL MAY-100*TER-ET OI=445 at $13.25 SL=10.00
BUY CALL MAY-105 TER-EA OI=522 at $10.38 SL= 7.50
BUY CALL MAY-110 TER-EB OI= 23 at $ 8.38 SL= 6.00 low OI

SELL PUT MAY- 95 TER-QS OI= 22 at $ 7.00 SL=10.00
(See risks of selling puts in play legend)

Picked on Apr 25th at   $103.38    P/E = 59
Change since picked       +0.00    52-week high=$107.00
Analysts Ratings      9-9-0-0-0    52-week low =$ 21.81
Last earnings 03/00    est=0.51    actual=0.60
Next earnings 07-20    est=0.65    versus=0.20
Average Daily Volume = 1.97 mln
/charts/charts.asp?symbol=TER


GE - General Electric Co. $166.00 +3.94 (+7.75 this week)

Unless you've been a cave dweller for the last 100 years, you 
probably know what GE does.  Just in case you need a refresher, 
GE is a diversified services, technology and manufacturing 
company that operates in more than 100 countries and employs 
nearly 340,000 people worldwide.  They make light bulbs, jet 
engines, medical equipment, however they are mostly a finance 
company from which they derive most of their profits.  If you 
are in the financial markets, you probably know them as the 
parent company of the CNBC business television.

Forget CSCO, MSFT and INTC - this is a breakout play.  It's 
good to be King of the Market caps again thanks to the recent 
technology shellacking.  Just like in drag racing where there is 
no substitute for cubic inches, so it is with solid businesses 
where there is no substitute for huge revenue.  At $117 billion 
in annual revenue, it exceeds the other three combined by 67%.  
Despite its size, it still grows at a respectable 15% a year, 
carries a profit margin of 26%, a return on equity of 29% and 
sports over $11 bln in cash.  Well, today GE finally did it - it 
broke out to a new high in a steady increase right from the open.  
Support has been moving up, even during the selloff in technology 
that had 50% or more of the value squashed from it in recent 
weeks.  Strong support is at $150, then $155.  If history repeats 
itself and old resistance becomes new support, then look for $164 
to hold.  The magic of a breakout of such an industry leader 
should create lots of excitement among investors since GE is 
considered a proxy for the market (and perhaps a confirmation of 
a green flag for a new leg up in the overall market - don't lose 
composure over it though).  Careful.  Though we may see more blue 
sky from this issue since the MACD and RSI indicators have just 
turned positive, the stochastic indicator is getting into the 
"overbought zone" (though it too won't turn over on a dime).  We 
don't say that to throw cold water on the play, but more as a 
reminder to exercise restraint and use good judgement in taking a 
position.  As an added bonus, remember that GE will be splitting 
its shares 3:1 shortly, and will set the actual date tomorrow.

In the news, today GE announced they were entering the online 
consumer banking business by partnering with CompuBank under the 
GE financial network umbrella.  No great shakes, but naturally, 
it was the buzz on CNBC.

BUY CALL MAY-160*GE-EV OI=3230 at $10.88 SL=8.00
BUY CALL MAY-165 GE-EM OI=4080 at $ 7.88 SL=5.50
BUY CALL MAY-170 GE-EW OI=2504 at $ 5.25 SL=3.25
BUY CALL JUN-165 GE-FM OI=1897 at $11.75 SL=8.75
BUY CALL JUN-170 GE-FW OI=2455 at $ 9.13 SL=6.25

Picked on Apr 25th at   $166.00     P/E = 48
Change since picked       +0.00     52-week high=$166.31
Analysts Ratings     7-15-1-0-0     52-week low =$ 91.81
Last earnings 04/00   est= 0.76     actual= 0.78 surprise=3% 
Next earnings 07-18   est= 0.97     versus= 0.85
Average Daily Volume = 7.70 mln
/charts/charts.asp?symbol=GE


CVS - CVS Corp $46.75 +2.75 (+2.94 this week)

CVS operates 4,078 drugstores in 27 states in the US and the 
District of Columbia.  Through its acquisitions of Revco and 
Arbor Drugs. CVS is the #2 drugstore chain when it comes to 
total sales.  But if you're tallying store count and 
prescriptions filled, then it takes the lead position away from 
Walgreens.  The company also expanded its market reach to the 
Internet through its purchase of Soma, an online pharmacy.  

The broad rally, new coverage, and a piece of good press revved 
up CVS today.  Salomon Smith Barney started CVS with an 
Outperform rating priming the stock for a solid run to $53.44, 
its all-time high.  The company's announcement that it received 
the "2000 Best in E-commerce Systems Award" for its ability to 
integrate its Web and "bricks-and-mortar" systems from Retail 
Systems Alert Group also boosted traders' interest.  In 1999 
acquired Soma.com (now CVS.com) "with the goal of providing 
the highest degree of convenience and quality service to our 
customers, both on and offline," said Bernie Segal, director of 
merchandising/store operations for CVS/pharmacy.  "This award 
further validates our strategy" and demonstrates a solid e-
business model for our investors.  Granted one day doesn't make 
a trend, but we're adding CVS on the prospect its momentum will 
stay intact ahead of earnings expected in less than two weeks.  
This "click-and-brick" company is confirmed to report on May 
9th, before the bell.  Near-term support is firm at $43 and $44, 
which currently corresponds to the 5-dma ($43.88) and 10-dma 
($42.98).  Consider waiting for dips and bounces off these 
technical indicators.  Today CVS broke its short-term resistance 
level and moved through $45, which is definitely a bullish sign.  
However the stock may experience some mild profit taking at 
these higher levels.  Pay close attention to market direction 
and pick your entries carefully.  

On April 19 announced that its Board of Directors has approved 
its quarterly cash dividend at the rate of $0.0575 per share on 
the Company's common stock, payable May 4, 

BUY CALL MAY-40 CVS-EH OI= 968 at $7.50 SL=5.25
BUY CALL MAY-45*CVS-EI OI=1260 at $3.50 SL=1.75
BUY CALL MAY-50 CVS-EJ OI=  83 at $1.13 SL=0.00
BUY CALL JUN-45 CVS-FI OI=   0 at $4.75 SL=2.75 Wait for OI!
BUY CALL JUN-50 CVS-FJ OI=  14 at $2.50 SL=1.25 low OI

Picked on April 25th at  $46.75    P/E = 30
Change since picked       +0.00    52-week high=$53.44
Analysts Ratings      8-5-2-0-0    52-week low =$27.75
Last earnings 12/99   est= 0.43    actual= 0.46
Next earnings 05-09   est= 0.47    versus= 0.40
Average Daily Volume = 2.85 mln
/charts/charts.asp?symbol=CVS


NOC - Northrop Grumman $72.56 +2.13 (+5.63 this week)

Northrup Grumman is a leader in the US aerospace and defense
markets.  The company provides integrated systems and
electronics, aerostructures, and information technology services.
It makes Joint STARS battlefield surveillance systems, AWACS
radar for the US Air Force, and airplane parts for its customers.
It supplies upgrades, modifications, and missile systems for the
B-2 Stealth bombers and computer systems for the government and
private sector.  The company has focused on consolidating
operations to lessen the blow of its failed acquisition by
Lockheed Martin and cutbacks from Boeing.

NOC flew past analyst radars and blasted away estimates.  Unlike
most stocks with positive earnings announcements, NOC rose
smartly after announcing earnings Monday morning.  The company
reported net income of $173 mln, or $2.47 per share versus
estimates of $1.80.  The results reflect an increase in profit
margins from its Integrated Systems, and information technology
units.  During the conference call Monday, Kent Kresa, NOC's CEO,
said the company will focus on businesses with the greatest
growth potential.  Kresa said, "We are continuing to
strategically redefine Northrop and are pursuing a plan that
focuses on our high-growth business areas of defense electronics,
systems integration, and information technology."  In
anticipation of the earnings report, NOC has made a steady climb
in the last month.  The chart is looking beautiful as the stock
looks positioned to test its all-time high of $75.94.  The last
time NOC was trading at these levels was before the announcement
of the failure to merge with Lockheed Martin last August.  The
stock will face major resistance at $75.  A breakout above that
level would provide an excellent entry point.  Use a bounce off
the 5-dma to look for a more aggressive entry point.

Keeping with its new focus, NOC is said to be exploring a
possible business alliance with DaimlerChrysler Aerospace.  The
Wall Street Journal reported Tuesday that the two companies will
focus on areas including reconnaissance and surveillance systems.
An official announcement is expected sometime this week.

BUY CALL MAY-65 NOC-EM OI=499 at $8.50 SL=6.00
BUY CALL MAY-70*NOC-EN OI=155 at $4.75 SL=2.75
BUY CALL MAY-75 NOC-EO OI=101 at $2.13 SL=1.00
BUY CALL JUN-70 NOC-FN OI=  0 at $6.00 SL=4.00 Wait for OI!

Picked on Apr 25th at  $72.56    P/E = 9
Change since picked     +0.00    52-week high=$75.94
Analysts Ratings    4-4-4-0-0    52-week low =$42.63
Last earnings 04/00  est=1.76    actual=2.47
Next earnings 07-21  est=1.92    versus=1.64
Average Daily Volume =  393 K
/charts/charts.asp?symbol=NOC



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

PG - Procter & Gamble $64.25 -6.25 (-4.69 this week)

Providing a broad range of consumable products, PG manufactures
cleaning, paper goods, beauty care, food and health care items
that we have likely all been using our entire lives.  From
toothpaste to facial tissue, laundry detergent to water filters,
and cosmetics to coffee, it is difficult to make a trip to the
grocery store without buying a handful of PG products.  The
company has been reorganized around global business units 
rather than geographic regions and about half of sales come 
from outside the US.

Managing to barely match downward-revised earnings estimates
this morning did nothing to reassure PG investors that the
picture is particularly rosy going forward.  The economy is
still strong and people have not stopped blowing their noses or
washing their hair, but PG is being pressured by increased
investment costs and a decrease in gross margins.  In typical
"buy the rumor, sell the news" fashion, investors punished the
company, slashing $6.25 from the share price on volume 25% over
the ADV.  In this fickle market, the smallest infraction can
cause investors to jump ship, and those that do return are less
tolerant of future disappointments.  With selling volume picking
up into the close and the final trade near the low of the day,
it looks like there may be more downside in store.  This came
on a day where the DJIA posted a strong 200+ point gain, and 
it is clear that investors are looking for stocks that will 
provide strength for more than 2 or 3 days.  As an old-line
manufacturing company, PG will be susceptible to any market
downturn caused by increasing interest rates.  With the markets
expecting more rate hikes ahead, mediocre earnings, and the
usual summer doldrums just around the corner, look for today's
decline in PG to continue.  PG tried to find support near $65
today, but when the selling resumed, it became clear there was
more downside to be had.  Use any failed rally as an opportunity 
to enter new positions as sentiment deteriorates and PG sets 
its sights on support at $60 and then $55.  Remember to pay 
attention to selling volume - when it starts to dry up, this
will likely be the first indication of a bottom forming.

BUY PUT MAY-65*PG-QM OI=2032 at $3.38 SL=1.50
BUY PUT MAY-60 PG-QL OI=1259 at $1.50 SL=0.75

Average Daily Volume = 7.60 mln
/charts/charts.asp?symbol=PG


AKAM - Akamai Technologies $73.06 -2.81 (-13.88 this week)

Akamai Technologies provides a global Internet content delivery 
service that improves Website speed and reliability and enables 
richer, more engaging Website content.  Its FreeFlow technology 
analyzes Web traffic and transmits the content via the most 
efficient route.  Currently Akamai has over 2000 servers 
deployed in 40 countries across 55 telecommunications networks.  
Akamai (pronounced AH-kuh-my) is Hawaiian for intelligent, 
clever and cool. 

If you want to talk about a good prospect for the long-term 
investor then AKAM should be on your list!  Since its IPO in 
October 1999, the company parlayed its client list from a mere 
49 to 227, increased revenues eight-fold to $7.2 mln, and 
clearly dominates the Internet traffic management market.  And 
now with the acquisition of INTERVU completed, Akamai is the 
world's largest Internet streaming media and broadband content 
delivery services company.  But for our purposes, let's focus on 
the present moment.  In the last six weeks AKAM has lost over 75% 
of its share price.  It's likely the impending release of 74+ mln 
shares coming into the market today scared away quite a few 
investors (the 180-day lockout period was over today).  As it 
turned out, the company announced along with earnings that most 
of the above mentioned shares held by insiders and management 
have been re-locked.  No dice.  We still have a post-earnings 
decline play.  Being a new company, they released numbers 
yesterday that indicated they'd missed estimates by 0.07 cents 
coming in at -$0.47 versus First Call's consensus of -$0.40.  
Even though after you discount goodwill amortization and 
compensation costs, Akamai actually beat estimates by $0.08.  But 
no matter, it was too late to change the negative disposition.  
In rallying market conditions today, AKAM shed another 3.7% 
adding to its already 12.7% loss from Monday.  The 5 and 10 DMAs 
are typically good gauges to use for evaluation.  Currently AKAM 
is below both technical indicators.  A downward move off the 5-
dma ($79.88) is a reasonable entry point into this momentum play.  
Know your portfolio's tolerance and keep trailing stops in place 
because this play is HIGH-RISK.  First its below the IPO prices 
and second it's an Internet, which always adds some excitement! 
Despite the disclaimers, it appears AKAM isn't going to recover 
in the very near-term following the earnings' blunder.  Plus, 
we've got the MOM and Stochastic also in our favor.  Both are
indicating further descent with their bright red arrows pointing 
south.  

BUY PUT MAY-75*RUG-QO OI=58 at $13.50 SL=10.75
BUY PUT MAY-70 RUG-QN OI=58 at $10.63 SL= 8.25

Average Daily Volume = 918 K
/charts/charts.asp?symbol=AKAM


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

AMD - Advanced Micro Devices $87.00 (+6.00)

Advanced Micro Devices is a leading semiconductor manufacturer. 
They ranked #2 in the microprocessor market, standing only 
behind Intel (INTC).  Their integrated circuits are primarily 
used for computers, telecommunications equipment, and data and 
networking devices.  The company has operations in the US, 
Germany, and throughout Asia.  
 
Most Recent Write-Up

The shareholders' meeting is just two days away and we're eager 
for a split announcement to create even more excitement and 
momentum.  The company is asking shareholders to increase the 
number of authorized shares to 7.25 mln, which would give the BoD
plenty of room for a stock split.  The investors' anticipation was
evident today by the rising volume levels (over 5+ mln) and 
bullish $6 climb.  Take a look at a chart and you can see firm 
support is much lower at $75 near the 10-dma.  However in today's 
session, intraday support established itself much higher at 
$82-$83.  This is quite a spread.  If there's no earth-shattering 
event and the markets hold up, then its unlikely AMD will 
experience much of a pullback in the next couple of days, but 
there's never a guarantee.  If this turns out to be the case and 
you decide to add new positions, then you'll have to jump in on 
an intraday dip.  This is a more aggressive trading style and not 
for everyone, so be careful.  Yesterday AMD demonstrated a 
prototype processor platform, the Athlon, featuring support for 
double data rate (DDR) memory.  This new performance technology
operates with the highest-bandwidth and lowest-latency PC memory 
technology currently available; thus providing advanced levels 
of performance.  The technology should be available in the 2nd 
half of 2000. 

Comments

AMD has taken flight, and analysts and money managers really like
its prospects.  Even during yesterday's NASDAQ sell-off, AMD was 
up almost $2.  Today AMD just kept going and closed at its highs.
Their earnings were strong and the business outlook appears to 
offer AMD good upside.  It certainly has become the leader in the
Semiconductor sector and professionals are hot for this one.  
Look for AMD to continue making new highs with NASDAQ advances. 

BUY CALL MAY-80*AMD-EP OI=7249 at $11.75 SL=9.50
BUY CALL MAY-85 AMD-EQ OI=1692 at $ 9.00 SL=6.75
BUY CALL MAY-90 AMD-ER OI=7010 at $ 6.63 SL=4.75
BUY CALL MAY-95 AKD-ES OI= 387 at $ 4.75 SL=2.75

Picked on April 21st at  $78.38    P/E = 61
Change since picked       +8.63    52-week high=$88.00
Analysts Ratings     7-10-6-0-0    52-week low =$15.63
Last earnings 03/00   est= 0.46    actual= 1.15
Next earnings 07-14   est= 1.09    versus=-1.10
Average Daily Volume = 5.23 mln
/charts/charts.asp?symbol=AMD


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

A Banner Day!

Monday, April 24

Technology stocks retreated for the third consecutive session as
Microsoft's woes dragged the Nasdaq lower.  Meanwhile, the Dow
industrials posted impressive gains as investors rotated to old
economy stocks in a brisk flight to quality.  The Dow finished 62
points higher at 10,906 and the Nasdaq Composite ended 161 lower
at 3482.  The S&P 500 Index was down 4 points at 1429.  Small cap
issues also slipped with the Russell 2000 Index ending slightly
lower at 468.  Nasdaq trading volume hit 1.53 billion shares with
declines beating advances more than 2-to-1.  Volume on the NYSE
was 873 million shares, with declines beating advances 1,671 to
1,272.  The 30-year Treasury fell 20/32, bid at 105 8/32, where
it yielded 5.86%.
 

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

Omnicon   OMC   MAY105C/M100C   $0.75   credit   bear-call
Recoton   RCOT  MAY15C/MAY12C   $0.00   credit   bear-call
Magna     MGA   AUG55C/MAY55C   $1.19   debit    calendar
Unocal    UCL   MAY25C/MAY27C   $2.00   debit    bull-call

The market moved lower in early trading and there was little
opportunity to participate in the bearish spreads.  The Omnicon
position offered a favorable credit for only a short period and
the opening price for the Recoton spread was well below our
target.  In contrast, the bullish Unocal play offered a number
of possible entry points during the first 30 minutes of the
session.  The Magna debit was based on a 5-contract trade near
9:40 a.m. 


Portfolio plays:

The technology group made a valiant, late session effort Monday
but the Nasdaq eventually fell victim to Microsoft's most recent
shortcoming; its revenue outlook.  The software company reported
disappointing revenues last Thursday and said it remains guarded
about near-term growth.  Analysts followed the news with reduced
earnings projections and lower price targets, even as Microsoft
posted solid third-quarter earnings of $0.43 per share, which
actually beat the estimates.  The uncertainty of the impending
break-up has also created concern among investors and it appears
the Justice Department may now ask a federal judge to split the
firm's "Windows" operating system from the rest of the company.
Sources close to the government's antitrust suit believe federal
regulators favor dividing Microsoft along product lines and that
may be the only solution that will appease those involved in the
landmark case.

Today's sell-off affected the market in a broad manner including
shares of leading computer companies as well as many blue-chip
technology stocks.  The good news is the hi-tech group recovered
from a severe downtrend early in the session to close well above
the lows of the day.  The Nasdaq index was down almost 300 points
at one point but rallied in the last 30 minutes of trading on
strength in the industry leaders.  Analysts now suggest the low
in mid-April is a benchmark level and the current consolidation
will likely be followed by a successful test of that range.  The
validity of the recovery is also based on a number of components
including breadth, volume, and volatility and unfortunately, only
time can determine if a technical bottom has occurred.
 
Despite the renewed slump in the technology group, many industrial
issues performed well during the session.  The Dow recovered from
an early deficit to eventually post gains as investors rotated to
some of the "old economy" stocks.  In the broad market, hardware,
defense and financial issues advanced, while computer software,
telecom and communication stocks moved lower.  Funds also shifted
to the pharmaceutical sector along with individual companies that
have delivered favorable earnings reports.  Our portfolio had a
number of big movers during the session and Warner Lambert (WLA)
topped the group with a $5 rally to $118.  Our bullish position is
now trading near maximum profit and should be closed to protect
gains and limit losses.  Johnson & Johnson (JNJ) rallied over $2
during the session, closing near $83 and slightly below the sold
strike in our bullish calendar spread.  The position will retain
maximum profit at $85.  Another long-term spread issue, Medtronics
(MDT) also participated in the upside activity, climbing almost $2
to close at $54.  Our LEAPS/CC's play is at maximum profit above
$45.  Those of you that closed the short (call) options on Friday
to remain in the neutral Halliburton (HAL) calendar spread were
rewarded with a nice rally this morning.  The position was easily
closed for a $0.75 profit during the first hour of the session.


Tuesday, April 25
 
Optimism returned to the market today as stocks rallied in almost
every sector.  The Nasdaq Composite rose 228 points to 3,711, its
second largest one-day point gain ever.  Strength in bellwether
issues boosted the Dow Jones Industrial Average 218 points to a
recent closing high of 11,124.  The broader market also moved up
with the S&P 500 Index rising 47 points to 1,477.  Nasdaq volume
hit 1.62 billion shares with advances beating declines more than
2-to-1.  Trading volume on the NYSE reached 1.06 billion shares,
with advances leading declines 2-to-1.  The 30-year Treasury slid
almost a full point, with the yield rising to 5.94%.


Portfolio plays:

The market rallied across the board Tuesday as blue-chip shares
benefited from strong corporate earnings reports and the Nasdaq
recovered from a recent downward trend.  Bullish profit forecasts
swayed investors back to the technology industry after Monday's
wave of selling and industrial issues rose on confidence in the
outlook for classic, "old economy" corporations.  Analysts also
suggested that technology stocks have been sold down so sharply
that most investors can no longer avoid the "bargain-hunting"
mentality.  Indeed it appears the majority of Nasdaq issues are
oversold and the short-term upside potential is excellent.  In
fact, after severe downturns earlier this month, the Nasdaq is
more than 25% below its all-time high of 5,048.  The technology
index is also "in the red" for the year 2000, but fortunately it
has remained well above its year-ago levels.  Now the question
how well the recovery trend will endure the post-earnings slump
that normally plagues technology stocks in the Spring months.

The Spreads Portfolio enjoyed a number of favorable moves in
today's session and most of the big winners were market-leading
issues.  Sepracor (SEPR) has outperformed most of our selections
in the past week and the stock led the section again today with a
$3 rally to close near $90.  The bullish LEAPS/CC's position has
reached the break-even point after just two weeks in play.  Many
of our other long-term issues participated in the rally including
Bank One (ONE), Computer Associates (CA), Johnson & Johnson (JNJ),
Network Associates (NETA), and Vodaphone (VOD).  Small-cap stocks
also experienced upside activity and Andrew (ANDW), Kellogs (K),
and Summit Bancorp (SUB) were the top performers in that group.
In the Straddles Section, Jones Apparel (JNY) has moved well into
the $30 range and our new debit straddle is now profitable.  The
recent calendar-spread on Magna International (MGA) also received
a favorable boost as the stock rallied $1.50 to $47.  The position
achieves maximum return near $55 but will profit in the near-term
far below that price range.


Summary Of Monthly Positions:

******************************************************************
                     - CREDIT SPREAD SUMMARY -
******************************************************************
Stock   Pick    Last     Position    Credit  Cost    G/L    Status

APCC   $41.06  $39.94   APR30P/35P   $0.75  $0.38   $0.38   Closed
CAMP   $31.00  $24.75   APR45C/40C   $1.00  $0.31   $0.68   Closed
CA     $61.56  $52.06   APR75C/70C   $0.43  $0.00   $0.43   Closed
CA     $61.56  $52.06   APR50P/55P   $0.50  $2.93  ($2.43)  Closed
ESIO   $64.00  $60.25   APR45P/50P   $1.25  $0.88   $0.38   Closed
IRF    $38.12  $42.44   APR50C/45C   $1.12  $0.38   $0.75   Closed
JBL    $41.12  $36.81   APR32P/35P   $0.62  $0.31   $0.31   Closed
NTRS   $72.06  $65.19   APR55P/60P   $0.81  $0.31   $0.50   Closed
NVDA   $93.12  $80.63   APR55P/65P   $1.25  $0.50   $0.75   Closed
NVLS   $55.12  $54.94   APR70C/65C   $0.50  $0.25   $0.25   Closed
SUNW   $93.69  $87.75   APR75P/80P   $0.50  $0.00   $0.50   Closed
SUNW   $93.69  $87.75  APR115C/110C  $0.75  $0.00   $0.75   Closed
TER    $96.25  $96.31   APR70P/75P   $0.50  $0.43   $0.06   Closed
TLAB   $58.12  $46.31   APR70C/65C   $0.43  $0.00   $0.43   Closed
TQNT   $73.50  $83.25  APR115C/110C  $0.00  $0.00   $0.00   Closed
TTN    $53.25  $40.81   APR35P/40P   $0.62  $0.38   $0.25   Closed
VNWK   $57.50  $43.56   APR80C/70C   $1.00  $0.00   $1.00   Closed

Note: The majority of these positions were closed early to protect
gains and limit potential losses.  Computer Associates (CA) was
assigned at $55 and we sold the MAY-$50 call to reduce our overall
debit in the stock.  The current cost basis is $48.56.

******************************************************************
                  - CALENDAR SPREAD SUMMARY -
******************************************************************
Stock  Pick    Last     Position     Debit   Value    G/L   Status

ABT   $37.81  $39.25  MAY40C/APR40C  $0.93   $1.50   $0.56  Closed
EPIC  $9.56   $5.28   JUL12C/APR12C  $0.93   $0.62  ($0.31) Closed
HAL   $40.18  $42.38  MAY40C/APR40C  $1.93   $2.25   $0.31   Open
KR    $15.56  $17.69  JUL17C/APR17C  $0.93   $1.31   $0.38  Closed
LGTO  $43.38  $16.00  JUN50C/MAY50C  $2.62   $3.25   $0.62  Closed
LNY   $7.06   $8.38    OCT7C/MAY7C   $0.75    New     Play   Open
MO    $20.31  $21.38  JUN25C/APR25C  $0.56   $1.00   $0.43  Closed
MO    $20.31  $21.38  JUN22C/APR22C  $0.88   $1.38   $0.50  Closed
NAV   $36.25  $34.31  JUL45C/APR45C  $2.00   $3.12   $1.12  Closed
STRX  $8.43   $4.88    MAY7C/APR7C  ($0.50)  $0.31   $0.81  Closed

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position.  However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new option against the long position, the
net debit should decline or the position value should increase.
******************************************************************
                   - COVERED-CALLS WITH LEAPS -
******************************************************************
Stock  Pick    Last     Position     Debit  Value    G/L   Status

AOL   $63.75  $60.25  JAN40/MAY70C  $26.00  $24.00 ($2.00) Closed
CA    $53.56  $52.06  JAN60/MAY60C ($4.62)  $5.75   $10.38 Closed
CS    $16.80  $20.31  JAN15/APR40C  $17.75  $18.50  $0.75  Closed
JNJ   $81.50  $81.75  JAN85/MAY85C  $7.50    New     Play   Open
MDT   $39.38  $52.44  JAN37/MAY45C  $4.00   $9.00   $5.00   Open
NETA  $25.12  $24.38  JAN15/MAY25C  $4.62   $9.25   $4.62   Open
NETA  $32.31  $24.38  JAN15/MAY25C  $10.38  $9.25  ($1.12)  Open
ONE   $28.56  $31.44  JAN20/MAY30C  $9.12   $9.12   $0.00   Open
PTEK  $8.94   $4.31   JAN5C/MAY7C   $2.50   $1.62  ($0.88) Closed
SEPR  $84.00  $89.25  JAN60/MAY90C  $28.00   New     Play   Open
VOD   $49.25  $46.00  JAN45/MAY50C  $4.50   $8.12   $3.62   Open

LEAPS/Covered-Calls are profitable if the value of the position
exceeds the initial debit at the end of the expiration period for
the long position.  However, because we track the plays based on
the current closing cost/value, the gains for these time spreads
will rarely be reflected until the play closes.
******************************************************************
                   - DIAGONAL SPREAD SUMMARY -
******************************************************************
Stock  Pick    Last     Position     Debit   Value    G/L   Status

ANDW  $27.38  $23.19  JUL15C/MAY22C  $6.50   $6.00  ($0.50)  Open
BCGI  $5.12   $9.25    JUN5C/APR7C   $0.31   $1.75   $1.43  Closed
CDN   $22.81  $16.19  MAY15C/APR20C  $1.68   $4.25   $2.56  Closed
CRUS  $14.06  $15.38  JUN10C/MAR17C  $4.75   $6.38   $1.62  Closed
DRMD  $10.12  $5.00    JUN5C/MAY7C   $1.88   $1.12  ($0.75) Closed
EPTO  $16.94  $8.78   JUL7C/MAY12C   $5.12   $2.75  ($2.38) Closed
ESPI  $10.88  $5.38   JUN5C/APR10C   $3.88   $3.00  ($0.88) Closed
HLT   $8.38   $7.25   MAY7C/APR10C   $1.00   $0.88  ($0.12) Closed
KEG   $6.81   $9.19   JUL7C/APR10C   $0.93   $2.75   $1.81  Closed
KR    $15.56  $17.69  JUL17C/MAY20C  $1.43   $2.31   $0.88  Closed
LGTO  $43.38  $16.00  MAY30C/APR40C  $8.25   $3.25  ($5.00) Closed
MFNX  $44.88  $27.13  MAY30C/APR40C  $8.50   $9.25   $0.75  Closed
MSGI  $20.43  $6.75   MAY12C/APR20C  $3.75   $4.50   $0.75  Closed
NAV   $36.25  $34.31  JUL25C/APR35C  $9.00   $10.12  $1.12  Closed
ORG   $14.62  $10.50  JUN10C/MAY12C  $1.62   $1.12  ($0.50) Closed
PCMS  $10.06  $9.63   MAY7C/APR17C   $6.00   $7.50   $1.50  Closed
R     $23.93  $22.19  MAY15C/APR22C  $6.88   $7.25   $0.38  Closed
RCOT  $7.50   $9.44   MAY5C/APR10C   $3.43   $4.62   $1.19  Closed
SUB   $27.00  $26.13  JUL20C/MAY25C  $4.12   $4.12   $0.00   Open
SVGI  $16.38  $25.63  JUN17C/APR25C  $3.88   $6.25   $2.38  Closed
TERA  $6.62   $5.94    JUN5C/APR7C   $0.68   $1.88   $1.19  Closed
TGX   $14.56  $7.75   JUN10C/MAY12C  $1.75   $0.88  ($0.88) Closed
TLXN  $22.62  $13.63  JUN12C/MAY20C  $5.12   $4.00  ($1.12) Closed
TTWO  $18.38  $10.00  JUN7C/MAY12C   $5.00   $2.75  ($2.25) Closed

* The majority of these positions were closed early to protect
  profits or prevent (limit) potential losses.

The diagonal spread is profitable if the value of the position
exceeds the initial debit (or cost-basis) at the expiration of
the long position.  However, because we track the plays based on
the current closing cost/value, the gains for diagonal spreads
will rarely be reflected until the play closes.  Each month, as
we sell a new option against the long position, the net cost
should decline or the position value should increase.
******************************************************************
                    - DEBIT SPREADS SUMMARY -
******************************************************************
Stock  Pick    Last     Position     Debit  Value    G/L   Status

AAPL $131.75  $118.88  AP110C/120C  $8.38   $7.00  ($1.38)  Closed
AMD   $58.12  $78.63   APR37C/50C   $8.62  $10.00   $1.38   Closed
BILL  $8.31   $5.06    APR7CC/NP    $6.62   $5.75  ($0.88)  Closed
BMCS  $51.43  $42.13   APR35C/45C   $8.50   $8.25  ($0.25)  Closed
EGRP  $29.25  $20.13   APR15C/25C   $8.75   $8.25  ($0.50)  Closed
ESCM  $11.31  $9.00    APR7C/10C    $1.38   $2.12   $0.62   Closed
HELX  $51.00  $54.00   APR25C/45C   $15.75  $19.25  $3.50   Closed
K     $26.25  $26.44   MAY22C/25C   $1.88   $1.75  ($0.12)   Open
MBK   $14.00  $14.06   MAY12C/15C   $1.38   $1.38   $0.00    Open
PG    $63.43  $68.94   MAY50C/60C   $8.50   $9.88   $1.38   Closed
QCOM $154.81  $109.50  AP130C/140C  $8.25   $7.12  ($1.12)  Closed
RMII  $11.00  $5.22    MAY5C/10C    $3.62   $3.25  ($0.38)  Closed
XRX   $25.81  $24.94   APR20C/22C   $1.75   $2.38   $0.62   Closed
WLA  $103.94  $113.63  MAY85C/95C   $8.75   $9.50   $0.75    Open

* A number of these positions were closed early to protect profits
  or prevent (limit) potential losses.

A debit-spread is profitable if the value of the position exceeds
the initial cost of the spread when the play is closed.  However,
because we track plays based on the current cost/value, potential
gains may not be reflected until both positions are closed.
******************************************************************
                   - DEBIT STRADDLES SUMMARY -
******************************************************************
Stock  Pick    Last     Position    Debit    M/V     C/V    Status

AEG   $80.50  $75.50   AUG80C/80P  $13.00    New     Play    Open
APLX  $14.62  $8.25    JUL15C/15P  $6.50   $8.25    $7.38    Open
CBR   $27.19  $18.00   MAY25C/30P  $10.25  $13.50   $12.00  Closed
JNY   $30.00  $30.19   AUG30C/30P  $7.12     New     Play    Open
LIPO  $16.50  $17.00   AUG15C/17P  $5.88     New     Play    Open
MTZ   $73.00  $75.31   JUL75C/70P  $13.00  $16.00   $15.75   Open
NLCS  $49.56  $47.00   JUL50C/50P  $9.62   $10.75   $9.75    Open
UBID  $31.44  $14.94   JUL30C/30P  $10.75  $15.50   $15.25  Closed
           
                M/V = Maximum Value  C/V = Current Value

A debit-straddle is profitable when the value of the position
exceeds the initial cost.
******************************************************************
Note: We trade the Spreads portfolio just as we would trade our
personal account and the ongoing narrative is a service we provide
to help novice traders understand how various positions might be
opened and closed.  It is not intended to substitute for your own
trading techniques nor does it replace your duty to manage the
positions in your portfolio.  We post a list of the current plays
after each expiration period and the summary is a reasonable
representation of the positions offered during the month.

Questions & comments on spreads/combos to Click here to email Ray Cummins
******************************************************************
                         - NEW PLAYS -
******************************************************************
GE - General Electric  $166.00  ** New All-Time High! ***

General Electric (GE) is one of the largest and most diversified
industrial corporations in the world.  Manufactured merchandise
includes appliances; lighting; industrial automation; medical
diagnostic imaging equipment; motors; electrical distribution
and control equipment; locomotives; power generation and delivery
products; nuclear power support services and fuel assemblies;
commercial and military aircraft jet engines; and engineered
materials.  Their services include; electrical supplies and
electrical apparatus installation, engineering, repair and
rebuilding services; and computer-related information services.
Through the National Broadcasting Company, GE delivers network
television services, operates television stations, and provides
cable, Internet and multimedia programming and distribution
services.  Through General Electric Capital Services, GE offers
a broad array of financial and other services.

General Electric is one of the biggest, and one of the best and
today's bullish activity suggests it is still a market favorite.
The analysts are in agreement, GE is the leading conglomerate in
America with 18 of the experts surveyed recommending at least a
"strong buy" on the issue.  Analysts at Lehman Brothers offered
the most recent upgrade and it appears they have timed the move
correctly, riding the stock to a new all-time high.  Our spread
position is conservative with a favorable risk/reward outlook.
 

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-145  GE-QI  OI=1722  A=$1.06
SELL PUT  MAY-150  GE-QU  OI=4287  B=$1.62
INITIAL NET CREDIT TARGET=$0.62-$0.68  ROI(max)=15% B/E=$149.31

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

*****

TER - Teradyne  $103.38  *** Another Break-out! ***

Teradyne is a leading manufacturer of automatic test equipment
and related software for the electronics and communications
industries.  Their unique products include systems to test
semiconductors, circuit boards, telephone lines and networks,
and software.  The company also is a leading manufacturer of
backplanes and associated connectors used in electronic systems.

Teradyne was on the move today with a $12 rally to a new closing
high near $103.  The bullish activity stems from resiliency in
the technology index, a strong semiconductor industry, earnings
that beat analysts expectations, and some optimistic comments
from several industry experts.  In fact, most brokerages that
have reports on the issue consider Teradyne to be the leading
growth-stock opportunity in the sector.

Our technical opinion is also bullish but we favor a conservative
approach to profit in this deep-out-of-the-money credit-spread.
With any luck, there will be a small pullback to help increase
the credit premium in the position.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-65  TER-QM  OI=34   A=$0.50
SELL PUT  MAY-75  TER-QO  OI=147  B=$1.43
INITIAL NET CREDIT TARGET=$1.06-$1.12  ROI(max)=12% B/E=$73.88

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

*****

ARW - Arrow Electronics  $41.69  *** New Trading Range! ***

Arrow is the world's largest distributor of electronic components
and computer products to industrial and commercial customers and
is the distributor of choice for hundreds of suppliers.  ARW's
global distribution network spans the world's three dominant
electronics markets: North America, Europe, and the Asia/Pacific
region.  The company is the largest electronics distributor in
each of these vital industrialized regions, serving a diversified
base of original equipment manufacturers and commercial customers
worldwide.  These OEMs include manufacturers of computer/office
products, industrial equipment (including machine tools, factory
automation, and robotic equipment), telecommunications products,
aircraft and aerospace equipment, scientific and medical devices.
Their commercial customers are mainly value-added resellers of
computer systems.

Last week Arrow Electronics reported record quarterly income that
increased to $63 million on sales of $2.8 billion, compared with
net income of $28 million in last year's first quarter.  Arrow's
net income more than doubled over last year's first quarter and
grew by over 40% from the trailing quarter, reflecting improving
market conditions in each of the core components operations in
North America, Europe, and the Asia/Pacific region.  Officials
also noted that first quarter sales and earnings were at record
levels and that improved gross profit margins helped the outcome
and last year's dramatic improvement in earnings accelerated in
the first quarter as the industry's recovery continued to gain
momentum.

Regardless of the reason, Arrow's share value has rallied in the
past two months and today the issue broke to a new all-time high.
Unfortunately, the issue is probably due for some consolidation
and we will use that activity to increase the credit premium in
this conservative position.


PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-30  ARW-QF  OI=0  A=$0.25
SELL PUT  MAY-35  ARW-QG  OI=0  B=$0.62
INITIAL NET CREDIT TARGET=$0.50  ROI(max)=11% B/E=$34.50

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



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