Option Investor

Daily Newsletter, Sunday, 04/30/2000

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The Option Investor Newsletter             Sunday  4-30-2000  
Copyright 2000, All rights reserved.                  1 of 6
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com

Entire newsletter best viewed in COURIER 10 font for alignment
        WE 4-28           WE 4-20          WE 4-14           WE 4-7
 DOW    10733.91 -110.14 10844.05 +538.28 10305.77 - 805.71 +189.56
 Nasdaq  3860.66 +216.78  3643.88 +322.59  3321.29 -1125.16 -126.44
 S&P-100  781.42 +  4.30   777.12 + 45.18   731.94 -  89.58 +  6.46
 S&P-500 1452.43 + 17.89  1434.54 + 77.23  1357.31 - 159.04 + 17.77
 RUT      506.25 + 24.41   481.84 + 28.12   453.72 -  89.27 +  3.90
 TRAN    2850.01 + 16.76  2833.25 +106.21  2727.04 - 100.68 + 64.48
 VIX       28.78 +   .37    28.41 - 10.92    39.33 +  12.39 -   .27
 Put/Call    .51              .75              .94              .37

The Nasdaq slowly rises from the ashes.

I think I can, I think I can, I think I can. Just like the well 
worn phrase from a children's book the Nasdaq is the market that
thought it could. This week has been one of building strength.
Just like a punch drunk Rocky the Nasdaq has been up, down and
sideways all week but the strength is coming back noticeably. The
drop at the open on Thursday after the bad ECI report was only
momentary and the trend was steadily upward after the first ten
minutes. The recovery was not helped by the Dow which has lost
-400 points since breaking 11100 on Wednesday. 

Techs are back and old economy stocks are suffering from investor
flight as confidence in the tech sector returns. The financial
stocks took it on the chin on fears that the Fed will see the
inflation monster and raise rates more aggressively two weeks
from now. The drop in financial stocks put the skids on the Dow 
and there were no earnings left to hold it up. 



We are now entering the twilight zone. The two week period before
the Fed meeting filled with more potential disasters. Between
now and May 16th we will have to overcome a flurry of economic
reports with the largest being April Non-farm payrolls next Friday 
and the PPI/CPI duo doing the tag team thing beginning the following 
Friday. The Fed will have all the economic data they could ever
want when they meet and many analysts are now claiming they may
take the bigger +.50 step if the markets appear to be firming.
Talk about a good news/bad news joke. Good news the markets are
rallying! Bad news, the markets are rallying and the Fed gets
to take a bigger bite. I still think Greenspan wants to be an
incrementalist and continue stacking the +.25% hikes but the
more aggressive members of the board are becoming more vocal.

The hot news for Friday (yawn) was of course the Justice Dept 
recommendation of splitting Microsoft into two companies.
One which would focus on operating systems and the other would
handle application software like Word, Excel, Explorer, etc. 
The two companies could not rejoin for at least ten years. The
states joining forces on the trial split on the decision to break
up the software giant. Several states disagreed with the plan
but nobody broke ranks to support the Microsoft position. One
of the major points of the plan would prohibit Gates from owning
stock in more than one of the two companies. I wonder how that
would work? Would Bill just sell his stock on the open market
or maybe just tender his stock to some other third party, say
Oracle CEO Larry Ellison? I am sure Larry does not currently
own any. Maybe Larry would just swap an equal number shares of
Oracle for the MSFT shares? Nope, that would not work because
Gates would then be a monopoly again. Of course with Bill and
Larry as equals on each board absolutely nothing would ever get
done. Of course the board meetings would be very well attended. 
The eventual outcome could still be years from now and Bush
has said he would take a personal interest in cases like this.
Should it drag into the next presidency and Bush wins the odds
of a breakup are slim. Either way we think there is no downside
at this point. After the drop to $65 last week there are simply
no sellers left. MSFT actually traded up after hours today after
the verdict. If you want a good long term play this week then
leaps on MSFT would be a good call. For free money the May $70
puts are $3.50 and put sellers could go naked here with minimal

The Nasdaq finally confirmed the +3800 break a week ago Thursday
with a close over 3800 on Friday. This is the first step in the 
bullish scenario of establishing a higher high. The higher lows
set on the 17th, 24th and 27th are a positive sign as well. With
the Dow still suffering ECI sticker shock the Nasdaq is having
to go it alone. The Dow is drifting downward with the next support
at 10650, about 90 points away, but the next support after that
is under 10400. We know from previous experience that a continued
divergence of the two indexes will eventually drag on the one
moving upward. Just look at April 12th for confirmation of this.

Where normally I would be very bullish today based on the higher
close over 3800 I am still suspicious of the rally. There are
many good signs like the number of 52 week lows dropping and
advances strongly over declines. Even though the Dow was down
-154 on Friday the NYSE advancers beat decliners by +415 issues.
If this was May-17th I would be screaming buy but with the Fed
ahead there is still a possibility of another dip between now
and then. Many, many Nasdaq stocks have had some huge gains
since the April 14th drop. PMCS for instance has gained over
$70, AMCC +$50 and neither has had any serious profit taking.
The bounce on many of the leaders has been very strong and
many investors may be leery of taking a position until there
is some profit taking. The market is still not healthy even
though the Nasdaq is making good strides. 30-40 Initial Public
Offerings have been cancelled and many others are waiting for
market strength to return before setting dates. Cash is still
on the sidelines but it is not rushing into the battle. The 
higher the Nasdaq leaders go the more resistance we will see.
The "if only it gets back to $xxx I can sell and get my money
back" concept is alive and well. Investors down -20%, -30%, 
-50% are all cussing themselves for not selling when the drop
began and they are making promises to their creator, themselves
and their wives about what they will do "if only" they get 
their money back. This creeping resistance will be with us
for sometime and could cause a lot of aggravation in the form
of failed rallies in the future. 

I really hate to keep repeating this but over 80% of companies
have reported earnings already. If the Nasdaq was not already
so far down we would be at the historical post earnings sell 
off point. The only thing that will move the markets up next
week is the fear that the sell off was overdone and the train
is about to leave the station. A lot of traders will be looking
at the Nasdaq chart this weekend and pointing to the close over
3800 as the confirmation trigger. A positive open on Monday
could be the spark that we need. If we fall back under 3800
the money on the sidelines will breathe a sigh of relief and
start plotting entry points for a post Fed rally. If the Nasdaq
moves up strongly on Monday and posts another higher high then
money will start flowing. It is simply a technical and sentiment
trigger coming together at the same point and the results could
be incredible. That is my bullish side hoping the rally has
begun. My bearish side is still looking at the dozen or so
economic reports before the Fed meeting and telling me to wait
patiently. You never lose money in cash. 

Our challenge is to ignore what our biases and emotions are 
trying to tell us and simply trade what the market gives us. 
If you are bullish and the market is trending down you will 
repeat the April losses. A simple indicator for us next week 
would be - go long if the Nasdaq is over 3800 and go short or 
flat if the Nasdaq is under 3800. Your decision process is over.
All you have to do is execute.

Trade smart, don't buy too soon.

Jim Brown

My current long positions:  NTAP, RAMP


Not a good week for me. I made money but sold WAY TOO SOON.
After buying the rebound last Friday afternoon the drop on
Monday was painful but I did not sell. On Tuesday the Nasdaq
gapped open and put me back on the profit side but when it
appeared to be starting to roll over after lunch I closed
my long plays. I had set the trigger at Nasdaq 3600 and when
it broke that level I closed the positions. Of course hindsight
is 20:20 but you will never go broke taking a profit. Another
factor influencing my decision was a heavy work and meeting
schedule the rest of the week. I would have been a wreck
trying to monitor plays while out of the office and away
from a PC. 

VIGN - Stock


After gloating about my dumb luck on VIGN last week Murphy got
into the act. VIGN dropped at the open on Monday and I did not
have a stop loss in place. Once it recovered on Tuesday I elected
to close the stock position. The weakness from Monday was
haunting me and I was worried it might come back. I had bought
the stock for $42.13 and sold it for $45 and change, plus I
sold the April covered call for $3.13. My total profit in the
trade ended up around $6.00. Not near what I was expecting after
last week but better than a loss by a bunch!

NTAP - Stock


This play is working better than I could have planned it. After
buying the stock two weeks ago for $47 and writing the April $57
call for $3.25 it closed just under $57 and my calls expired 
worthless for a full profit. I have not written the May calls
yet because NTAP has been on a rocket ride up almost +26 since
I bought it the prior week. $80 was the high in April but $110
was the high in March. If it pauses at $80 I think that will
be the signal to write the May calls which are currently about

Naked puts

I had sold naked puts on the prior Friday dip on BRCM, ARBA,
TIBX, SCMR. I closed each on the Tuesday afternoon dip for
about a breakeven. Had I waited another 30 min the outcome
would have been significantly different. The problem of 
course was my entry point. After buying the dip/bounce on
Friday and then having the bottom fall out on Monday I was
conditioned to bail out early on any weakness once I got
back to even. Funny how that works but we all do it. Buying
early and then selling too soon easily cost me six figures
in lost profits. That is profits, not capital and it could
just as easily retested the lows again.

Hindsight is 20:20.   

New Plays

RAMP - May-$20 Calls


Several message boards are saying that RAMP will be bought
by CSCO or Lucent in the next two weeks. This is my lottery
play for the week. I bought some May-$20 calls for $2.00.
Strictly a rumor play and if the stock had not been building
a bullish wedge I would have ignored it. This is a strong
formation and it looked like there was not much downside.

I am flat with the exception of NTAP and RAMP and I plan to 
watch and wait. I am in no rush to play ahead of the Fed 
meeting unless we see some real strength.

Good Luck



Track Data's CEO Gets De-Railed
By: S.P. Brown

Talk about choking on your own cooking, much less eating it. 
Track Data (TRAC) chairman and chief executive Baruch "Barry" 
Hertz did just that earlier this month, choking to the tune of 
$45 million on the same product he was serving to his 

Unfamiliar with the Track Data pedigree?  Officially, the 
company sells real-time financial market data, fundamental 
research, charting, and analytical services to institutional 
and individual investors through telephony and Internet lines.

Unofficially, the company sells the wonders of online trading - 
day-trading to be more specific.  Track Data's principal 
offering is a proprietary trading system known as MyTrack, a 
system regular viewers of CNBC may recognize because of the 
redundancy in which it's pitched during the channel's financial 

As most experienced traders know, day-trading can be risky 
business, particularly day-trading on margin.  The 50-year-old 
Hertz, who owns 72 percent of Track Data's 63 million shares, 
learned this lesson firsthand when the stock market, 
particularly the Nasdaq, tanked a couple of Friday's ago.  

It seems that Hertz was such a big believer in MyTrack that he 
leveraged himself to the gills to prove to himself and the 
Track Data faithful that he did indeed practice what he 
preached.  To that end, Hertz bought a bevy of tech stocks  
through four brokerage houses, making liberal use of margin to 
do so.  For collateral, Hertz posted 25 million of Track Data 

Unfortunately for Hertz, and many other leveraged tech 
investors, April has been brutal to technology issues, meaning 
Hertz's margined portfolio went south in a hurry, much to the 
chagrin of his creditors.  

So, last week, Hertz received a $45 million margin call, which  
he didn't have the money to cover.  In response, the four 
brokerages implemented a little "CYA" management and sold  17 
million shares of Hertz's Track Data shares to cover the short-
fall.  One of the firms - E.D.& F Man International, a Chicago 
futures trading firm - filed a statement Thursday with the 
Securities & Exchange Commission saying it sold 12 million 
Track Data shares. 

After satisfying most of the debt obligations, the brokerage 
firms returned 4 million of those shares to Hertz, but they're 
holding onto another 3.1 million.   

Most of the selling went down April 19.  On that frightful day, 
Track Data volume soared to 42.6 million shares compared to the 
average daily volume of 1.5 million shares, which caused the 
stock to lose over a third of its value.   By week's end, much 
the worse for wear, the shares were quoted at $2 and change, 
down some 80 percent from their early January high of around 

During the free-fall, Track Data officials had been vocal in
letting the world know that Hertz's dealings were entirely 
separate from Track Data's and that Hertz's losses had no 
bearing on the company's operations.

One can only wonder if the company hadn't already started to 
undertake a little damage control.  On April 3, Track Data 
announced it would split its stock 3-for-2.  No big deal, 
right?  In fact, a stock often rises in anticipation of stock 
splits.   However, Track Data's stock was only trading around 
$8.00 per share when the company announced the split.

Most companies want their stocks to trade above $10 per share, 
which gives it some institutional appeal, for many brokerages 
and investment houses won't consider stocks priced in single 
digits.  Moreover, a large institutional following can improve 
a stock's liquidity and name recognition, which makes Track 
Data's split all that more perplexing.  

On the other hand, though, a stock split can also be a way to 
squeeze shorts.  Technically, when a stock split occurs, all 
the old shares are recalled and new shares are issued.  This
means that traders short the old shares have to scramble to 
cover their positions so those investors they borrowed the 
shares from can turn them in for the new shares.  

Whether Track Data was attempting to squeeze shorts out of its 
stock is open to debate. 

Then, another head-scratching move occurred on April 14, when 
the company formally put itself up for sale, four days before 
Hertz's big losses hit the wires.   

The damage inflicted by the precipitous hit both to Mr. Hertz 
and his fellow Track Data shareholders was obviously huge.  
However, the hit to the company's business franchise might be 
even bigger.   Hertz's margin call doesn't exactly do much to 
reassure existing Track Data customers, much less attract new 
ones.  Even if Track Data, the company, was economically 
separated from its CEO, there is still guilt by association.  

What's more, many trading insiders say there are concerns about 
the technology behind the company's MyTrack online-trading 
system.  One executive at an online firm that caters to the 
same day-trading market as MyTrack dismissively referred to the 
firm's technology as "third rate." 

The silence from Hertz regarding his losses has been deafening, 
to say the least.  Track Data officials attribute Hertz's 
sudden low profile (he's used to averaging a press release a 
day) to the fact that the announcement of his market losses 
coincided with the start of  Passover.  An Israeli native, 
Hertz and his family packed their bags and journeyed to Israel 
for the holiday and were not expected to return until this 

However, Track Data has reported that Hertz will finally field 
questions on the matter Tuesday afternoon in a live chat at the 
firm's MyTrack Web site.  It will be the first public comments 
from Hertz, since the company disclosed his trading woes 10 
days ago.

Needless to say, he'll have a lot of explaining to do, 
particularly regarding investor concerns over the company 
franchise and the more than coincidental timing of the stock-
split and sale announcement.  

The moral of this vignette, if there is one, is not that Mr. 
Hertz is a terrible person.  Actually, it's tough to find fault 
with a guy who believes so much in his product he'll go into 
hock $45 million for it.  No, the moral is caveat emptor.
Financial shenanigans - such as inappropriate stock splits and 
abrupt sales announcements - are often pre-cursors of bad 
things to come.  


Is it February again?
By: Eric Utley

It was just two months ago we enjoyed the dichotomy between old
and new economy.  Wait, that was last Friday.  A day after the
ECI surprised Wall Street, technology stocks rallied and the rest
of the market worried.  I said last Wednesday that an ECI less
than 0.9% might send the market into rally mode.  Little did I
know that an ECI of 1.4% would send the tech stocks higher.  The
return of the divergence between the old blue chips and the new
tech stocks has many people worried, again.  Traders believe that
we won't see a new bull market emerge until the financials,
drugs, and techs move higher, together.  The divergence combined
with a few other things has traders worried.  Those other things
are most notably the lack of volume during the recent reversal.
What's more, traders say that the NASDAQ turned around too
quickly, that most bear markets take a minimum of three months
to work through.

I don't want to put a damper on last Friday's rally, believe me
it was nice to see the NASDAQ gain ground last week.  But, the
ECI reaction is a good example of just how hard it is to be right
in this market.  Famous Money Masters like Julian Robertson and
now Stanley Druckenmill have thrown in the towel.  These are
people with decades of experience on Wall Street.  Granted, they
both were plagued by the great value paradox, but these guys
are legends.  And this market shut them down.  I touched on the
idea last Wednesday of being patient, letting the market come to
you.  Waiting for just the right trade.  The current environment
is a punishing one, remember, a traders number one goal is to
preserve capital, and then make money.  Don't get me wrong, there
are plenty of opportunities to make money right now, it's just
much more difficult than it has been for the past three years.

As we enter into the summer slowdown, or what has normally been a
slow time of year, one thing seems certain - uncertainty.  On one
side you have the bulls pointing to the record setting earnings
season we just witnessed.  And on the other side, the bears are
growling about valuations, P/E ratios, bottoms, tops, and so on.
I'd like to here from our readers.  Tell me what you think, send
your requests along with opinions about the market to
Contact Support   Please put the symbol in the 
subject line of the e-mail.


Digital Lightwave - DIGL

Catalyzed by the last earnings, DIGL seems to be making strongly
bullish moves.  Could you check its chart? - JMacLd

DIGL is a leading provider of optical networking products.  The
company reported earnings about two weeks ago.  Revenues were up
129% for the quarter, and net income was 14 cents per share,
versus a loss of 6 cents a year earlier.  The CEO of DIGL said
that the first quarter of the year is historically the slowest.
If that's the case, I can't wait to see next quarter's numbers.
DIGL is positioning itself to benefit from the explosive growth
of the optical network infrastructure.  Photons are to Wall
Street what plastics were to Dustin Hoffman in The Graduate.
For DIGL to succeed from here its simply a matter of execution,
the company is in the right business at the right time.

The enthusiasm surrounding fiber optic stocks pushed DIGL up to
$150 in early March.  From there, the stock formed a nasty
head-and-shoulders top, broke through the right shoulder, and
sank all the way to $26 in the second week of April.  After
hitting bottom, those strong bullish moves you mentioned almost
tripled the stock in about two weeks.  I think earnings were the 
driving force behind that move, and could continue to move the
stock higher.  But, DIGL will face major resistance at the broken
head-and-shoulders line at $80.  A strong move above that level
could carry the stock higher.



InfoSpace - INSP

Sold naked puts on INSP last month in my trading account.  Could
you please help analyze this for me?  Thanks. - Diane

INSP is a leading Internet infrastructure company.  INSP provides
data and services to wireless devices, merchants and Web sites.
The company has relationships with the biggest names in tech
universe.  Aol, Microsoft, Dow Jones, Nokia, Lucent, and Intel.
Essentially, INSP is capitalizing on the two hottest sectors
right now, the Internet and wireless.  The stock is a favorite
among money managers.  The CEO of INSP is notorious for being
able to tell a good story to Wall Street and deliver on those
promises.  Just last week, INSP surprised those very analysts
with a better-than-expected earnings report.

Over the past two months, INSP developed what is becoming a very
familiar chart pattern.  You can see on the chart below the big
head-and-shoulders top formed in February and March that sent
INSP falling to $40.  After establishing a double-bottom at that
level, INSP has since reversed and established a strong uptrend.
The stock will have major resistance at two levels.  The first
will be at $80, the broken shoulder line, and the second will be
at the top of the shoulder at $95.



This column 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 Ask the Analyst 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 its accuracy.


As of Market Close - Friday, April 28, 2000 

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

DOW Industrials   11,000  11,400  10,734    BEARISH   4.28   * 
SPX S&P 500        1,500   1,550   1,452    BEARISH   4.14  
OEX S&P 100          800     850     781    BEARISH   4.13  
RUT Russell 2000     550     600     506    BEARISH   4.14  
NDX NASD 100       4,000   4,500   3,773    BEARISH   4.13  
MSH High Tech      1,000   1,150     978    BEARISH   4.13  

XCI Hardware       1,600   1,700   1,519    BEARISH   4.13  
CWX Software       1,500   1,670   1,258    BEARISH   4.04
SOX Semiconductor  1,200   1,300   1,172    BEARISH   4.13  
NWX Networking     1,070   1,190   1,021    BEARISH   4.04
INX Internet         800     940     642    BEARISH   4.04

BIX Banking          530     620     540    Neutral   3.16
XBD Brokerage        500     580     472    BEARISH   4.14  
IUX Insurance        540     620     589    Neutral   3.16

RLX Retail           900   1,000     908    Neutral   4.13 
DRG Drug             355     385     375    Neutral   4.28  *  
HCX Healthcare       710     775     755    Neutral   4.28  *  
XAL Airline          130     155     143    Neutral   3.10
OIX Oil & Gas        265     300     284    Neutral   3.16
Posture Alert    
Technology stocks closed out the week on a positive note, as the
NASDAQ added another +2.30% in gains on Friday. Leading sectors 
on Friday include Internet (+5.53%), Semiconductors (+3.22%), and 
the Russell 2000 (+2.36%). For the week, Semiconductors gained 
+14% while the Internet sector gained +11.6%. With this most 
recent action, we have lowered the Dow to Bearish, and the Drug
and Healthcare sectors to Neutral from Bullish. 


Sunday, April 30, 2000

April is Over!

The month of April ended like it started, with lots of volatility 
and suspense for traders. It was a poor month for most people, as 
numerous sectors got smashed while technology valuations were 
getting annihilated. The battle of old economy versus new economy 
was the common theme all month, and the new didn't do so well. 
Many stocks that were recently trading in the $200-$300 range are 
now trading in the low double-digit area. Even the NASDAQ 
composite lost -15.5%, though it rebounded 19.5% from the lows. 
Now below are a small list of sectors and their returns for 
April, which is not a pretty sight to see. However, if you sold 
all your technology stocks at the end of March and bought Drug 
stocks, we would like to borrow your crystal ball for this next 
month. Because with earnings season coming to a close as well as 
the Fed storm cloud hanging over our heads, anything can happen. 

DOW Industrials     -2.0% 
SPX S&P 500         -3.2% 
OEX S&P 100         -4.2% 
RUT Russell 2000    -6.2% 
NDX NASD 100       -14.3% 
MSH High Tech       -8.0% 
XCI Hardware        -8.7% 
CWX Software       -12.8%       
SOX Semiconductor   -1.0% 
NWX Networking      -3.4%     
INX Internet       -22.1%         
BIX Banking         -6.1%          
XBD Brokerage      -12.2% 
IUX Insurance        0.0%        
RLX Retail          -4.9% 
DRG Drug            +8.0% 
HCX Healthcare      +7.8% 
XAL Airline          0.0%          
OIX Oil & Gas       -3.1%        

Now from a sentiment standpoint, we feel the media will become 
significantly more bearish over the next couple of weeks. The 
major earnings season is over, and the Fed Meeting is just around 
the corner. The possibility that the Fed may raise rates by 50 
basis points is becoming more reality with every economic 
indicator. Combine this with the Microsoft saga, and you get our 
picture. Currently, there is no major event to help propel this 
market back to new highs. Most likely, we will continue to stay 
trading range bound in the near future, with bearish 

Now to end things on a positive note, we always monitor the 

put/call ratio on the NASDAQ 100. Now during the major run-ups 
these last couple of years, the NDX was always accompanied by a 
bearish put/call ratio. Well, this ratio is starting to get back 
to those bearish levels of past. On Friday, the put/call ratio 
for the NDX was a whopping 3.54, which is extremely bearish. From 
a contrarian viewpoint, this is very bullish. Now you may have 
also heard about the resignation of George Soros's top two hedge 
fund managers (due to poor performance). The rumors were that 
they have been liquidating billions of dollars worth of 
technology stocks (during this last month) due to margin calls. 
Now during big drops in the market in previous years, there 
always seem to be a hedge fund that goes under, and it usually 
occurs right at the bottom. This event, may just be another 
indicator that a bottom has been put in the market!  


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 (5.962):
The current yield is in bullish territory.

Volatility Index (28.86):
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


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

IPO Dilution:
With so many IPO's hitting the market, there seems to be dilution 
occurring where shares of finally freed up to sell by insiders. 
$58.6 billion of stock was freed up for trading in March, $67.3 
billion this month, and $118.3 billion in May. This is too much 
stock for the system to handle. 
Energy Prices:
With the rapid rise in crude oil, everything from manufacturing 
to transportation will be affected by higher costs. These higher 
costs will be felt 1-2 quarters out, and could put pressure on 
profit margins. 

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


The Power of Sentiment Analysis

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

Pinnacle Index
OEX                              Friday       Tues        Thurs
Benchmark                        (4/28)       (5/2)       (5/4)

Overhead Resistance (805-830)     3.03
Overhead Resistance (775-800)     1.04

OEX Close                       781.42

Underlying Support  (745-770)     2.22
Underlying Support  (715-740)     8.19

What the Pinnacle Index is telling us:
Based on the above statistics, direct overhead and direct 
underlying both remain light, indicating we could either way with 
relative ease.   

Put/Call Ratio 
                                Friday      Tues       Thurs
Strike/Contracts                (4/28)      (5/2)      (5/4)

CBOE Total P/C Ratio             .51
CBOE Equity P/C Ratio            .41
OEX P/C Ratio                   1.29

Peak Open Interest (OEX)
                     Friday          Tues            Thurs
Strike/Contracts     (4/28)         (5/2)            (5/4)

Puts                660 / 5,521
Calls               800 / 5,916   
Put/Call Ratio        0.93

Market Volatility Index (VIX)
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 28, 2000                          28.86


For the week of May 1, 2000


Auto Sales               Apr    Forecast:  6.9M    Previous: 6.881M
Truck Sales              Apr    Forecast:  8.1M    Previous: 8.044M
NAPM Index               Apr    Forecast: 55.5%    Previous:  55.8%
Construction Spending    Mar    Forecast:  0.0%    Previous:   1.5%


New Home Sales           Mar    Forecast:  900K    Previous:  919K
Leading Indicators       Mar    Forecast:  0.1%    Previous: -0.3%


NAPM Service             Apr    Forecast:   N/A    Previous: 64.0%
Factory Orders           Mar    Forecast:  1.5%    Previous: -0.8%
Fed Beige Book           ---    Forecast:  ----    Previous:  ---- 


Productivity             Q1     Forecast:  3.5%   Previous:   6.4%
Initial Claims           04/29  Forecast:  275K   Previous:   283K


Nonfarm Payrolls         Apr    Forecast:  325K   Previous:   416K
Unemployment Rate        Apr    Forecast:  4.0%   Previous:   4.1%
Hourly Earnings          Apr    Forecast:  0.3%   Previous:   0.4%
Average Workweek         Apr    Forecast: 34.5H   Previous:  34.5H
Consumer Credit          Mar    Forecast: $9.5B   Previous: $12.0B
Week of May 8th

05/09 Wholesale Inventories
05/11 Retail Sales
05/11 Retail Sales ex-auto
05/11 Initial Claims
05/11 Export Prices ex-ag.
05/11 Import Prices ex-oil
05/12 PPI
05/12 Core PPI
05/12 Business Inventories
05/12 Michigan Sentiment

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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 
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The Option Investor Newsletter                     4-30-2000  
Sunday                                                2 of 6


Straddling the Fence
By: Mary Redmond

There were a couple of reports on the cash inflows to mutual
funds for the week ending April 26.  AMG Data reported that
the flows to equity funds were approximately 4.5 billion, 
with over 79% going to growth funds.  According to a CNBC
news report, there were record cash inflows to equity funds
last week totalling over 10 billion, with significant inflows
to technology and growth funds.  I would be inclined to 
believe the larger number is more accurate.

Tracking the money market fund inflows can also be productive.
The investment company institute reported that for the week 
ending April 27 retail money market funds decreased by 23.52
billion, and institutional money market funds decreased by 4.42
billion.  This may be indicative that cash is coming out of
money market funds and into the equity market.  Total money
market funds totalled 1.669 trillion on April 26.  Since the
last several months have shown a clear pattern of investors
favoring one sector over another it is important to track the
money flows to various sectors.

Some option traders use strategies called straddles when they
are uncertain of market direction or stock direction,
particularly in this violently volatile market environment.   
The concept is simple to understand.  A straddle means you are
playing both sides of the market at the same time.  The most
basic straddle consists of buying both a call and a put with
the same strike price and expiration date.  An example of 
this would be ABC June 100 calls and ABC June 100 puts.  If
the stock goes up the call goes up, if the stock goes down,
the put goes up.

Straddles are not as easy as they appear.  They can become
complicated when you take into consideration the volatility 
and time decay of the options.  Many stocks today reflect 
the overall volatility of the market and move as much as ten
to twenty points in a day.  Any movement in a stock increases
the volatility and thus the price of the call and put options.
In order to find inexpensive options you need to find stocks
which have made very little movement in the last year or two.
Obviously, these can be hard to find.

Let's use the Nasdaq 100 (QQQ) options as an example.  For
simplicity, let's assume the June 90 calls are 8 7/8 to 9 1/8,  
and the June 90 puts are 7 1/8 to 7 5/8.  Let's say you buy the
call at 9 and the put at 7 1/2.  The total cost of the spread
is 1650.  If the QQQ stock was exactly 90 at the time of
purchase, then the movement of the call options based on the
movement of the stock is equal to the movement of the put
options based on the movement of the stock.  In other words,
if QQQ went up one point the call should go up 1/2 point and
the put should go down 1/2 point.

When the stock or index is highly volatile, you really need
to have an explosive movement in the stock for the straddle
to be profitable.  In this example, if you held the position
to expiration, you would need QQQ to move by more than the
total cost of the straddle plus the transaction fees.  You
would thus need to have QQQ be above 90 + 16.50 or 106.5
or below 90 - 16.5, or 73.5 to be profitable.  If QQQ went
up to 110, then the profit would be 3 1/2 points since the
call would be worth 20 and the put would expire worthless. 
The profit would thus be 3 1/2 points minus transaction 
fees.  This means you need to have a movement of almost 
20% in about seven weeks.  Since we have had movements in 
the Nasdaq of between ten and twenty percent a month the
QQQ is priced for volatility.

If you put on a straddle the worst thing that can happen
is that the stock or index does nothing.  Remember, the 
closer you get to expiration the faster the option will
lose value.  In the above example, this means if QQQ 
does nothing, by June the calls and puts will lose a 
significant amount of value.  You could be looking at calls
and puts of between four and six dollars.  Part of the
artistry of profiting on straddles is anticipating a 
volatile move in a stock or option within a specified 
period of time.

There are many different variations on straddles which
allow traders to protect themselves from market loss 
while benefiting to a certain degree from a market rise.
The strangle is one of these.  This consists of a call
and a put with the same expiration date but different
strike prices.  For example, a QQQ June 95 call and a
QQQ June 85 put.  In this situation, you need an even
greater movement in the stock or index to acheive profit.

Sometimes if you want to buy a stock but you think it may
go down you can protect yourself from loss to a certain
degree by buying the stock and a put option.  However,
with highly volatile stocks this is usually not realistic.
For instance, Broadcom at 175 has an August 175 put option
priced at 33 3/4.  This means the stock would have to go up
more than 33 3/4 points to make up for the loss on the put.
A more reasonable strategy is to buy a stock which has been
relatively flat and use the divident to pay for the put.

If you have ever wondered why volatile stocks which have 
recently made big moves up have expensive put options it is
because of the conversion ratio.  For example, the Broadcom
175 put is not priced at 33 3/4 because someone out there
thinks it will be 34 points lower by August.  It is because
the call is 35 1/2 to 37 1/4.  If you bought Broadcom at 175,
wrote the call at 35 1/2 and bought the put at 33 3/4 your
total cost would be 173.25.  The profit would be 1 3/4 points
or 175-173.25, not including transaction fees.  This is 
considered to be a risk free position, since if the stock drops
below 175 at expiration you could exersize the put and lock 
in a profit of 1 3/4 points, or 1.0 percent minus transaction
fees.  If you look at any call and put options you will see 
that stock + put - call will yield a profit which is lower
than or equal to the short term risk free rate of borrowing
money, if the call and put are the same strike price and
expiration date.  Market makers on the floor sometimes use 
these positions, since they can trade without paying any
commissions, which add up when you are doing many trades.


Will Profit-Taking Be On Tuesday? 
By: Renee White

Well, still anemic volume but that didn't stop Nasdaq from 
holding firm on Friday.  I was nervous in the morning when I 
heard that the Microsoft ruling would be known after the close. 
Microsoft's recent problems have caused havoc in the markets 
lately.  Will it happen again?  With our recent history of 
Friday afternoon sell-offs, it could have easily been another 
opportunity to sell into the close.  Although I did take 
positions early in QQQ at 92 7/8, I backed off from taking 
tech option positions until I know for sure the effects of 
the verdict on the tech sector.  Still, the strength of Nasdaq 
was palpable as it maintained a higher low and higher high 
than previous days this week.  Closing over Thursday's high, 
Thursday's close, above Friday's open and not far from Friday's 
high, are all very strong signs of a market ready to advance 
especially in lieu of potential damaging news coming out after 
the close on a Friday.  That tells me that perhaps holders of 
the other major tech leaders, may be willing to let MSFT deal 
with its own problems as an independent entity, refusing to let 
go of their own tech shares.  I suspect the narrow trading range 
was due to MSFT also, not just Friday trading.  This battle will 
continue for a long time and evidently, you can only scare 
people with bad news so many times in a month. 

The strength into the close was impressive as Nasdaq ignored 
potentially more bad news.  Although the volume on the buy side 
has not returned yet, the hesitation makes sense to me.  Most 
wouldn't want to risk crossing the railroad tracks as a freight 
train is passing.  That's okay.  Advancers were still ahead of 
decliners, which is just one more step in the positive direction.  
I think volume will return Monday. 

Another reason I chose not to load up on options Friday was the 
time value decay of a weekend.  It is even more noticeable if a 
large gap down and sell-off were to occur on Monday after the 
MSFT news.  I did take the risk of holding my QQQ shares over 
the weekend, since time value is not an issue.  I was planning 
on buying protective puts at the end of the day, but I changed 
my mind with the bounce in the final 10 min.  Instead, I chose 
to sell some equities into the rally thereby freeing up more 
buying power for Monday. 

We aren't home free though.  Now that we have crossed the hurdle 
of closing over the 3,800 level we are now faced with closing 
over the 4,000 level. I don't think that one will be as smooth.  
We gapped open over the 3,800 level Friday and held strong all 
day.  The question is: If we gap up on the open Monday and don't 
sell off much, will we hit 4,000 and then fall back down just 
when we are ready to take positions? A rally Monday could throw 
us into that confusing situation. 

By the time we start approaching 4000, many who jumped in early 
will be ready to start taking profits.  Since a gap up opening 
could put us close to that range, I may wait for the sell-off day 
before jumping in with options for a continue move up.  In fact, 
it may take that soft pull-back for the volume to return.  If the 
MSFT news does not tank the market on Monday it will be another 
very good sign. 

A profit taking day followed by a bounce, would be a buying 
opportunity in early week.  I suspect anxiety over the next rate 
hike will start becoming more of an issue a week from now, more 
than this next week.  Any Leaps I miss entering early this week, 
I will plan on entering right before the FOMC meeting.  In fact, 
any other short-term options that I do enter, will probably be 
May or June issue since they will be short-term trades.  I won't 
want to lose those profits with a melt-down right before the 
FOMC.  I will be buying them to hold for only a few days at a 
time.  Since most new traders don't trade short-term options 
profitably, longer term issues may still be best.  You cannot 
buy and hold short-term options these days.  You must be happy 
with your one or two day gains, take profits, then wait for 
another pull back if you want to enter again.  At a minimum, I 
will take partial profits before the weakness in front of the 
FOMC meeting, play the downside and then possibly roll out to 
July as we approach the "max fear" period.  Playing into the 
"max fear" is risky and I could change my mind as we approach 
those dates.  I like the old "Buy Low, Sell High" theory but I 
really don't like the nasty cousin "Buy Low, Sell Lower".  It's 
always a gut level call.

I received many emails this week asking which stocks I am looking 
at and which ones I have interest in buying for Leaps.  Just like 
a kid in a toy store, there are more I want than I can possibly 
buy.  If I share my list with you, will you promise to wait until 
AFTER I buy them, so that I can benefit from any surge up in 
price?  I think that would be a nice pay-back for me sharing my 
watch list, don't you?  Think about it.  It's almost like 
intentionally poking myself in the eye, if I am patiently waiting 
on an entry, then broadcast that I want to buy it.  Funny how 
that price never seems to get back to my entry???

Oh well, it's a free market and I am a generous person.  Keep in 
mind, these are just some of my personal picks.  There is no 
guarantee that they won't turn to dust, like my Microsoft Leaps 
recently.  How do I chose my stocks?  Well, in my IRA I want 
diversity across both old & new economy sectors.  I have been 
buying Leaps in that account since the October '99 lows.  Since 
my IRA held up better than my personal account which id tech 
heavy and did not include Leaps, I am looking to add Leaps to 
that account.  I try to think 2-3 years out and decide where 
I think demand will be and which companies may help us get 
there.  Remember, all companies do not have Leaps, so our buying 
desires may be limited to shorter options or the stock itself.

My background is not in technology, so I think this through on 
a very simplistic level.  Believing we are in an internet and 
technology revolution, I look at things that will impact my daily 
life as a consumer.  My main interests this year has been in the 
semiconductors, telecommunications, broadband, fiber-optics and 
some backbone internet services & software.  Of course, there is 
always the wild hair play also.  I buy options on stocks that I 
want to own.  I like to get the shares for "free" by buying 
enough contracts (preferably before a split or earnings run) 
and use the proceeds from the majority of the contracts to pay 
for exercising a few contracts to hold long shares.  I have 
found this technique very rewarding while keeping my equity 
entries good.  Therefore, I look for companies I want to own, 
which have been blowing out their expected earnings lately.  
This tells me they are still growing and with each earnings 
report, more investors take notice when they do it again.  
Depending on the company, availability of Leaps, the premium on 
the Leaps, the entry point, my expectation of movement and how 
much cash I have, I decide to play for either the next earnings 
or a Leap.  Sometimes the Leaps as just too expensive, so I 
play shorter term to accomplish the same goal.  With Leaps, I 
buy a little OTM.

All of these companies do not fit all of my parameters.  But they 
are the ones I am considering entering in the near future with a 
nice pull-back.  In no particular order, they include: NOVLS, 
XLNX.  As a disclaimer, I should state that I already own Leaps 
in GE, EMC, GLW, TXN, MSFT and INTC, but I'd like to buy more.  
Also, with prices so depressed on some non-leaders, I may enter 
both long shares and options as a mere long-shot play.  I took 
a position in NetZero, a free isp, late Friday.  It got battered, 
fried and burnt in the recent melt-down.  A combination of 
Qualcomm announcing this week that they were buying a stake in 
the company, seeing a new advertisement campaign start on TV and 
radio, hearing their impressive earnings report on Thursday 
which according to BusinessWire: 3rd quarter revenues were up 
2,049% over the prior year quarter, and very low long term debt, 
made me consider them for both a long and short term position.
This is not an exhaustive list of all my favorite stocks.  I 
already own many leaders with either shares or Leaps.  With many 
splits still on the horizon, near term weakness may provide for 
good entries for good companies.  Also I should note; once 
I exercise and hold the shares long I rarely play the underlying 
option again.  Instead, my interest and studying time turns 
elsewhere.  Except for EBAY, my internet allocation is full, as 
is my pharmaceuticals, with telecommunications not far behind.
With the semiconductors, if a split run is killed by near term 
weakness, I feel these issues may be the first to accelerate 
once the general market recovers its strength.  Deciding when 
that will occur is the trick, which is why time is on our side.  
Until we know for sure, we will all need to adjust our trading 
styles to accommodate an erratic market with an ill-defined 
short-term direction.  Keeping our plays either very short or 
very long is one way to achieve this.  My personal opinion is 
that this market is still too high risk for those new traders, 
who can't at a minimum find support and resistance levels on a 
chart.  Charts are like a lifeboat.  Although it too may have a 
hole in the bottom, most of the time it will carry you in the 
direction of safety.

Have a good one!

Contact Support


A Week in the Life of an OEX Trader
By: Lynda Schuepp  

Sometimes you have to be hit over the head with a stick, other
times it requires a brick.  Hopefully, I am smart enough this
time to finally learn from my own experiences.  I need 
validation that I am not the only trader who makes the same 
mistakes over and over again.  I plan to do an article on the
psychology of trading next week so please send me emails with 
your best and worst experience this week.  Believe me, no story 
is too dumb.

A lot of people, including myself, trade the QQQ options but I 
really hate them.  I have vowed many times over the past years 
that I will not trade them ever again.  I always lose money or 
make too little for the amount of risk involved.  I vow, 
hopefully for the last time, I will never trade them again. 

Because of the great liquidity on the OEX, I can get much 
better fills and if I want to do a pure Nasdaq play, I can 
always trade the QQQ's directly, regardless of market direction.
What's really cool is you can short the QQQ's without an uptick,
which is key in a falling market.  This is particularly important 
to know for all of you who have never shorted stock.  With 
equities, you need an "uptick", before getting filled.  This 
means if the stock is tanking, it never upticks for even one 
trade and therefore you won't get filled. If the stock/market is
tanking, rest assured the puts are overpriced and have huge 
spreads.   So if the market is tanking, you can jump on board 
by shorting the QQQ's, which represents the Nasdaq 100.  Shorting
stock is really no different than buying stock, except that you 
are betting on the opposite direction.  Margins are the same 
(50% initially with 30% maintenance).  Like selling options, some
brokers won't let you, so you need to find one who will.  If you 
can only go long, you will miss at great deal of the action 
during these wonderfully volatile times. 

Now back to my favorite, the OEX.  Generally, I trade the OEX 
intra-day for 1-2 points daily.  Recently I have been trying to 
close out my positions at the end of the day, but I broke those 
rules several times this week and fortunately it worked out for 
me.  Typically, when I close out a position such as selling my 
calls, I take a new position by buying puts at the same time.  

What a great couple of weeks it has been for the OEX.  Since the
beginning of the year, the average daily range for the OEX has 
been 18 points and the weekly range has been 42 points.  This 
week was no exception.  Now let me tell you why I do not plan 
on trading the QQQ options anymore and why I am an advocate of
trading the OEX.   Being the contrition trader that I am, I 
bought OEX calls during the big drop at the open on Monday.  The
calls were cheap (theoretical value more than actual price).  I 
was able to get 10 contracts at 20-1/2 and another 10 at 19-1/2.  
I sold half that day for 21-1/2(sold too soon) and the next day I
sold the other 10 contracts for 28!  In contrast, during that 
same time, I bought 10 contracts of QQQ calls for 10-3/8.  I sold 
the QQQ calls at the same time the following day as my OEX calls 
but I only got 12-1/4!  Please make me eat my words if I ever 
trade the QQQ options again.  

On Tuesday, I bought OEX puts for 14-3/4 and sold them the next 
day for 18-1/2.  Upon the sale of my OEX calls on Tuesday I 
bought 770 puts for 14-1/4.  I wasn't sure of the action and 
because I had a hair appointment in Boston followed by shopping 
on Newbury Street, I sold half of my position later that day for 
13-1/4 for a loss of $1000.  I held on to 10 contracts, because 
I wasn't completely convinced of the "recovery".   Wednesday was
another short day for me because I had to meet with my personal
trainer (turning 50 makes you do these crazy things) so I had 
tried to get some action on the OEX before 2PM.  I sold the 
second half of my puts for 16-1/4 making up for my small loss 
the previous day.  I bought OEX 800 calls but they really didn't 
move much, so a closed out for 3/4 of a point.  Thursday I didn't
trade much because a had a luncheon in town with an old friend 
so I only bought 790 calls for 19 and left instructions with my
broker to get me out if they dropped to 17 or went up to 20.
Obviously, I still didn't have that much confidence in the 
"rally".  I got filled at 20 near the end of my long luncheon 
and spent the rest of the afternoon and early evening at my 
favorite bookstore before picking up my daughter from a late 
Lacrosse game.  Friday I had fun with the OEX- I bought 790 
puts near the open for 16-1/8 and sold 15 minutes later for 18-7/8.  
Later I bought the 790 calls but they just didn't move, so I 
closed them out for 1/8 point gain. (Whoopee-- better safe than
sorry).  Later I bought the 780 puts for 16-3/4 and sold them 
about 45 minutes later for 18.  I vowed I would go home empty 
over the weekend because I was afraid of a short-covering rally 
at the close.  

During these past few volatile weeks I have been on my pulpit 
telling anyone who'd listen stay away from equity options, just 
trade the OEX options or stocks or stay on the sidelines.  By 
trading the underlying, it's faster to get in and out and you 
don't lose on each side of the trade with bid/ask spreads wide 
enough for a Mack truck to get through.  A lot of amateurs don't
understand that many times they are paying though the nose for 
the option when its direction is clearly apparent, (like QQQ 
puts Monday morning).  The market makers widen the spreads, on 
both sides of the trade.  They get you coming and going.  The 
stock goes up 10 points and you only make 2 points on the move!  
Why?  When you open the position you lose at least 1-2 points 
for being anxious and giving in to the market-maker's greed and 
when you try to close out the position, they get you again for
another 1 or 2 points in between the spread.   I think it is
important to have a system that gives you "fair value" in order 
to know if you are overpaying for the option.  Minimally, you 
need to know implied volatility vs. historical volatility and
determine for yourself, if the option is worth the high premium.
For instance, this week I tried to buy some options on TERN.  I
looked at the montage and the bid/ask was 12 1/2 x 13.  What I 
didn't know was the market maker was at 12-1/2 and some trader 
was trying to sell for 13.  I went in between the spread and 
tried to buy at 12-3/4.  The fair value was 12-1/4 but I was 
willing to pay a little more to get in on the action on this 
volatile stock.  After I saw an order go thru for 13 the bid/ask
spread moved to 12-1/2 x 15-1/2.  Pity the poor sucker who sold 
at 13.  The stock didn't even move in price!  I knew I wouldn't 
be able to buy at my price so I moved on.  This is one painful
lesson, thank God, I have finally learned (most of the time).  

So all in all, I did pretty well this week.  My secret: trade 
the OEX. Great volatility, great liquidity and a cheap way to 
trade market direction without getting creamed by a news story 
on your favorite stock (MO, TYCO, MSFT etc.) 

Contact Support


By: Janar Wasito

Does it feel like you are in a submarine, looking for that perfect
trade to shoot, but the destroyer Greenspan is on the surface 
dropping rate hikes like depth charges?  Boom, boom, boom.  Every 
economic report sounds like the sonar man calling out, "splashes."
(Yes, I did just see U-571.)  The question is how to survive?  How 
to surface at the right spot and launch a pretty good 
counterattack of your own.

I want to walk through some of the steps that a beginning trader 
needs to think about.  A lot of the columns here(including my own) 
have started focusing on advanced techniques--short covered
strangles, naked puts, calendar spreads, covered calls with 
LEAPs.  These are great, but require experience and capital.  Say 
that is not you.  Say you were in my shoes about a year ago at
this time.  That's where I want to begin.

Asset Allocation.  At this time last year, trading options was a 
flying leap--as Ken Stabler might put it, throw deep.  But I did 
it with 15% of my portfolio.  This is the first lesson for a 
beginning trader.  Take a certain amount of high risk capital.  
The rest of my capital was in long term stocks and bond funds and 
cash.  Cash is always handy.  One of those depth charges could 
rupture my options trading account, and I would be down 15%, but 
that was it.

Strategy Selection.  Keep it Simple, Stupid.  KISS.  That's a good 
rule of thumb for beginning traders, not that I considered myself
stupid.  Between January and April of last year, my first four 
months in the options game, I traded only straight calls.  I
didn't worry about margin.  Those "sell to open" tabs on the big
Beantown broker I used--heck if I knew what they were.  Implied 
volatility, what's that?  Theta, Gamma?  Who cares.  I buy a call 
low and sell it high.  That was pretty much my strategy.  And 
that's a perfectly workable strategy.  At the middle of the year, 
I started to have some success with index puts (OEX puts, but QQQs 
have their place, though both of these vehicles are expensive).

So, let's say you have $15,000 in risk capital, and you are going 
to trade calls on individual stocks and OEX or QQQ Puts for down
moves.  Where to next?

Well, let's approach this like a military operation.  What are the
mission essential tasks?  You have to recognize the market, sector, 
and stock movement.  You have to select a contract to trade.  You 
have to enter the trade quickly, and close it quickly.  And, oh 
yeah, some of us have jobs and real lives so we can't sit in front 
of a monitor all day.  Can it be done?

Recognizing the Market, Sector and Stock.  Let's assume that you 
have a Windows based laptop, like a DELL Latitude with some flavor 
of Pentium III processor.  Throw in 128 megs of ram for fast 
processing.  Get a fast home internet connection.  If you live in 
the SF Bay Area, consider a wireless modem(www.ricochet.com).  
The whole package might cost $2500.  Now, we need some software. 
Qcharts(www.qcharts.com) works very well for my purposes; it is 
highly configurable and can be integrated with various brokers, 
which we will discuss more below.  Everyone has their list of 
favorite indicators.  Mine include: 

VIX: right now the range is in flux.  Before this last correction,
below 22 was overbought, and over 28 was oversold.  Now, well, 
stay tuned.  

TYX: the 30-year Treasury bond, interest rate indicator is more 
favorable for equities if it is low, but this has been losing 
its power as an indicator.  

DOW, COMPX, OEX: look for resistance & support levels in the 
Market Wraps & Market Sentiments.  

10 Day Exponential Moving Average: (set it in Qcharts for the 
above indexes).  Above it = green light.  Below it = Red light.

Bollinger bands on the indexes: Hitting the upper = possibly 
overbought.  Hitting the lower = possibly oversold.

NDX/NDOOH & SPX/SPOOH: Are the futures above/below the cash? 
Beware 3:20 Sell Program.

ADVDECV.NQ & ADVDECV.NY: View in 30 minute chart to spot intraday
reversals which might be entry points.  The same chart indicators 
can be applied to sector indexes (CWX.X, MSH.X, SOX.X, DOT.X, 
XCI.X, NWX.X, BTK.X, GIN.X, XBD.X) and individual charts.

Select a Contract to Trade.  Go to the call section on Sunday, 
pick five Call Play candidates, and load those contracts into a 
separate quote sheet in Qcharts.  I usually just pick the contract 
with the asterisk, as reflecting the best risk/reward.  Go with 
it, that's what you are paying for.  Scan the article on the play
for one very important indicator--probable support.  Load that 
support level as an alert in Qcharts.  Draw that support level on 
a chart of the stock.  Think about how you will play it if the 
stock drops to that support level, and begins to bounce.

Entering/Exiting a Trade.  Go with Preferred Trade(www.preftech.com). 
I finally found them in May of last year, after flailing around 
with the Beantown firm and the firm with the great ad campaign--
let me tell you the only thing I had coming out the wazoo was
frustration.  Great ads, horrible broker.  In option trading, the 
only thing that counts is execution.  Preferred has a stand alone 
software program, and it is fast.  It allows you to select the 
exchange you want to place your trade on, and allows stops, 
including stops on stock.  

So, now you are set up to trade XYZ at an entry point of 100.  I 
would have one quote sheet in Qcharts for the stock, and a 
separate quote sheet for the options.  In the stock quote sheet, 
I would put a comment column next to the price column, and note 
the probable support level in the comment column.  Stock drops to 
101, I see that the stock is near support, market turns up, 
sector is strong, drop to the quote sheet with the options, select 
the option I want to play, right click in Qcharts (you need to 
activate the feature) automatically setting up the trade in the 
Preferred software.  Select the amount of capital you want to risk. 
I recommend maybe 20% of your working capital in any one trade--so, 
$3000 in a $15,000 account.  You should have already worked out 
how many contracts you are going to trade.  Set up a separate time 
& sales window in Qcharts.  When you are ready to enter the trade 
(and the window will often last 5 minutes), quickly take a look at 
the T&S screen, select the exchange with the lowest ask (but avoid 
the AMEX if you can)--the CBOE usually is fast.  Complete the 
order, and send it.  If you are shooting an order at the ask, you 
will get filled in 2 seconds.  

Now, immediately place an order to exit.  Whether you place a 
trailing stop or a limit sell above the price, and whether you 
use the stop on stock or contingent on stock features are 
something to cover later, and something you need to think 
through.  But the main point is immediately place an order.  In 
the current market environment, I think a really good way to go 
is to systematically take 25% profits.  In this system, take the 
XYZ May 100 Call, add 25% to the price, and set a limit sell.  A 
lot of you are trading with accounts broken by greed, fear, and 
one too many of those depth charges exploding on your screen.  
Repair it with small wins, compounded, and a high percentage of
winners.  Repairing it with the grand slam mentality will probably 
wipe out your account altogether.  It would be better just to sit 
it out, but better times may not come this choppy year.

Dealing with Life.  The basic rule for monitoring the market is 
to avoid amateur hour(the first hour), unless you are adept at 
fading the initial direction(i.e., market opens lower, but quickly
recovers, as on Thursday).  Then focus on the market from, say 
9 AM to 10 AM EST.  Next, focus on the market from 1 PM to 2 PM 
EST, when many traders come back from lunch on the East Coast. 
Then pick up the market at about 2:45 to the closing bell.  
Although you will miss some moves, by catching the market at 
those critical junctures, you will see most of the moves 
happening.  Last summer, I worked but had my wireless modem 
equipped lap top, and I ran my account through that.  Can't say 
it made me more productive, but it was very profitable.  Stress 
will degrade your ability to make good decisions, and good 
decisions are all you have standing between success and failure.  
Exercise, relationships, diet, sleep, faith--all that stuff is 
important, but hard to do.

Can it be done?  This is a very individualistic question.  Most 
people should not trade options.  Most people should not invest 
in individual stocks.  It's not easy, and experience is not 
necessarily a barrier to failure.  A losing attitude is that this
is just a game, and this is just play money.  It's real.  It's not 
the house's money if it is in your account.  But, all this said, 
it is very possible to succeed.  Your goals should be modest (10 
to 25% returns per month, compounded, will give you great returns 
over a year; equally important, preventing drawdowns is essential). 
A word to the wise:  take a week off every month.  Had I done this
earlier last year, I probably would have had a better year, and I
kicked butt last year.   I have not done it this year, and I have
suffered as a trader because of it.

Two trends especially applicable in this market:

Three Day Rule.  Strong stocks trending up will take a break after 
three days.  Look for the dips that occur regularly. This will be 
even more pronounced if we settle into a range bound market.

Worst Fears Not Realized(see Marty Schwartz, Pit Bull).  If you 
wake up on the morning of the ECI and it is horrible, and the 
NASDAQ tumbles...but reverses, then your worst fears of another 
-355 point day have not been realized, and the market is ready for 
at least a modest rally. Play it.

Good Luck.  Trade small until you start winning, then trade bigger.

PS: I'll probably alternate between these basic articles and 
calendar spread articles.  Since March 20(the start of the April 
Options Cycle), the NASDAQ is down 22%, and I am up 2% in the 
strategy.  I credit the difference to selling short dated calls 
equal to about 11% of the value of the LEAPs I am holding.  I 
intend to extend my lead over the NASDAQ each month by another 11%.
It ain't easy, and it sure ain't stress-free, but it's working.

Contact Support


An Osmotic View of Gifts from DC. Some Great Leap Plays!
By: Harrison Frolick

As much ranting as I have done about the individuals from DC, 
I have a feeling that they are going to unknowingly make up
for everything that they have done to Microsoft.  THANK YOU!
They apparently will succeed in doing what old Bill only wished 
he could do, but could not do legally.  

By breaking up Microsoft, Bill is going to be able to dominate
not just one area, but several!  The bottom line is that long
term Leap plays on MSFT could be the most profitable plays of 
of the decade.  It is going to be very similar to what happened
to AT&T when they spun off Lucent.  While this will take some 
time, it may not take that long.  Bill and company may not put
up much of a fight as I am sure they realize the benefit to 
their own pocket books.  After all, it is not who runs the 
companies, but who controls the checkbooks and they are all
sitting on Bill's desk and that is not going to change.

The MSFT 2002 Leaps look pretty darn good here as well as just 
buying the stock in the current range.  It could be a while
before you see any big moves, but you might want to consider 
doing out-of-the-money covered calls while holding it.  The Fed 
should give plenty of warning when they are going to act on this.  
Don't be surprised however if MSFT does not put up much of a 

Also be leery of MSFT's competition, especially Sun and Corel. 
With the new agreement, the new tamer MSFT will be able to go 
after them on their own turf and they won't stand a chance.

So the play as it stands now is go long MSFT long term and short 
Sun, Corel and maybe even Oracle.  Remember, do your own homework!
Sometimes things work out far better than you expected!

Happy Trading!

Contact SupportHarrison


Index      Last    Week
Dow     10733.91 -110.14
Nasdaq   3860.66  216.80
$OEX      781.42   -8.96
$SPX     1452.43   26.24
$RUT      506.25   24.41
$TRAN    2850.01   16.76
$VIX       28.86    0.55


RMBS      230.00   62.50  37% move this week, we'll take it.
JNPR      212.69   26.56  Snapping back in fiery style
TIBX       89.06   21.19  B2B's favorite Internet plumber
BRCM      172.38   19.88  CEO will be presenting at conference
MERQ       90.00   17.94  The upgrades keep coming strong
NTAP       73.94   17.06  New, hardware play ahead of earnings
SCMR       78.50   13.94  Is this the next Cisco??
CMGI       71.25   13.56  Contributing to the recovery in Internets
ADI        76.81   12.06  New, strong sector, strong stock
AMD        87.50    9.75  Took flight this week setting new highs
CMVT       89.19    9.13  Earnings are just a week away
TER       110.00    8.56  Sector of the year?  Must be the Semis
ADBE      120.94    8.31  Remains one of the few bright spots
ADCT       60.75    6.88  Earnings run play for mid-May
SFE        42.00    5.88  New, play ahead of earnings on May 11th
ARBA       74.19    5.19  Shownig that persistence pays off
NOC        70.88    5.00  Watch out if the momentum decides to turn
DHR        57.13    4.19  Indifference to the travails of the DJIA
KANA       42.56    2.56  New, big volume supporting the rise
CVS        43.50   -3.69  Dropped, broke through the 10-dma
GE        157.25   -6.69  Last chance to run with split on Friday


PG         59.75   -9.19  Broke back below $60
LOW        49.50   -5.81  New, ugly Friday lands it on put list
ADRX       51.19   -3.76  Still under the 10-dma, entry point!
HNZ        34.00   -3.63  New, slow but steady in failing sector



ADI  - Analog Devices
KANA - Kana Communications
SFE  - Safeguard Scientifics
NTAP - Network Appliance


LOW - Lowe's Companies
HNZ - H.J. Heinz 


Remember that historically, when we drop a pick it will go up 
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CVS $43.50 (-0.31) CVS made our drop list this weekend for 
violation of the 10-dma line.  Never once did the stock slip 
under this daily indicator during its recent rise above the $40 
level.  Therefore we're taking this infraction and its inability 
to rally in Friday's market as a sign that CVS just doesn't have 
what it takes to move to new heights.  Do however keep your eye 
on CVS for a possible earnings' run in a couple of weeks.  The 
company is scheduled to report on May 9th, before the bell.


No dropped put plays.

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

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

Anything else is too slow!



The Option Investor Newsletter                     4-30-2000  
Sunday                                                3 of 6


Current Split Candidates

Split Candidates that aren't current plays



We don't list all splits available, only those we 
feel may have play possibilities. 

Symbol - Stock          Splits/Date  

MU   - Micron Tech      2:1 05-01-00 ex-date 05-02
CYSV - Cysive Inc       2:1 05-08-00 ex-date 05-09
ZOMX - Zomax Inc        2:1 05-08-00 ex-date 05-09
BALT - Baltimore Tech   5:1 05-10-00 ex-date 05-11
AXP  - American Exprs   3:1 05-10-00 ex-date 05-11
TFS  - Three Five Sys.  3:2 05-12-00 ex-date 05-15
SYK  - Stryker Corp     2:1 05-12-00 ex-date 05-15
ALKS - Alkermes         2:1 05-12-00 ex-date 05-15
PWAV - Powerwave Tech   3:1 05-15-00 ex-date 05-16
AMK  - Am Tech Ceramics 2:1 05-15-00 ex-date 05-16 
SIVB - Silicon Valley   2:1 05-15-00 ex-date 05-16
CMOS - Credence Systems 2:1 05-17-00 ex-date 05-18
ACLNF- A.C.L.N. Ltd     5:4 05-18-00 ex-date 05-19
RI   - Ruby Tuesday     2:1 05-19-00 ex-date 05-22
SNE  - Sony Corp        2:1 05-19-00 ex-date 05-22
CXR  - Cox Radio        3:1 05-19-00 ex-date 05-22
SBSI - Southside Banc.  2:1 05-19-00 ex-date 05-22
DG   - Dollar General   5:4 05-22-00 ex-date 05-23   
PAYX - Paychex          3:2 05-22-00 ex-date 05-23
EBAY - eBay Inc         2:1 05-24-00 ex-date 05-25
MSA  - Mine Safety App. 3:1 05-24-00 ex-date 05-25
AEG  - AEGON N.V.       2:1 05-30-00 ex-date 05-31
AVX  - AVX Corp         2:1 06-01-00 ex-date 06-02
AES  - AES Corp         2:1 06-01-00 ex-date 06-02
MOT  - Motorola         3:1 06-01-00 ex-date 06-02
KPN  - KPN Telecom      2:1 06-02-00 ex-date 06-05
MEDI - Medimmune        3:1 06-02-00 ex-date 06-05
NXTL - Nextel Comm      2:1 06-06-00 ex-date 06-07
FKL  - Franklin Capital 3:2 06-07-00 ex-date 06-08
LMGA - Liberty Media Grp2:1 06-09-00 ex-date 06-12
CMB  - Chase Manhattan  3:2 06-09-00 ex-date 06-12 
ANEN - Anaren Micro     3:2 06-09-00 ex-date 06-12
AA   - Alcoa            2:1 06-09-00 ex-date 06-12
RMBS - Rambus           4:1 06-14-00 ex-date 06-15
JNPR - Juniper Networks 2:1 06-15-00 ex-date 06-16
NXLK - Nextlink         2:1 06-15-00 ex-date 06-16
EXDS - Exodus Comm      2:1 06-20-00 ex-date 06-21
AAPL - Apple Computer   2:1 06-20-00 ex-date 06-21
XETA - Xeta Corp        2:1 07-17-00 ex-date 07-18
POS  - catalina Mktg.   3:1 08-17-00 ex-date 08-18

For a complete list of all the coming splits check out the
"split calendar" on the side of the online edition newsletter


With all the great plays each week we can never decide
on just one so take your pick. 

Call plays of the day:

BRCM - Broadcom, Inc. $172.38 (+19.88)

See details in sector list



JNPR - Juniper Networks Inc $212.69 (+26.56)

See details in sector list

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


ARBA - Ariba, Inc. $74.19 (+5.19)

See details in sector list

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


SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
TP/P= True premium or Time premium
RRR = Risk/Reward/Ratio
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume
MTD = Move to double - amount stock must move to double option price
                         in one week. ONE WEEK MOVE ONLY !

Numbers within ( ) are the amount of change for the week.
Numbers within ( ) may be designated with PxW, like P3W, prior 3

The options with a "*" by the strike price are our choices from the 
group. If the stock moves as expected we feel they have the best 
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5 
Analysts who follow each stock rate it and these rating are 
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell" 

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the 
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.



JNPR - Juniper Networks Inc $212.69 (+26.56)

Juniper Networks develops and provides next-generation 
Internet infrastructure systems that are designed to meet 
the scalability, performance, density, and compatibility 
requirements of IP networking systems.  The company's M40 
and M20 Internet backbone router use JUNOS network traffic 
management software, ASICs.  Its clients include some of 
the world's leading service providers such as Ericsson and 

JNPR is snapping back with a fiery style!  Rising from the 
depths of the Internet massacre, JNPR left the comfy zone of 
$150 and hoisted itself above stubborn resistance of the 10-dma 
this week.  Most importantly, the momentum remained intact this 
time around giving hint JNPR is poised to run higher.  Other 
technical achievements included definitive moves through the 
tough mark at $200 and on Friday, a major surge to $222.50 
before settling down to for strong finish at $212.75.  The nice 
touch was the solid volume levels backing the advance.  Besides 
JNPR's building momentum, generally speaking analysts and other 
professionals are bullish on the company's business outlook.  On 
April 13th Juniper Networks posted remarkable 4Q results coming 
in at double the consensus and also announced a 2:1 stock split 
payable for June 15th!  This will be the second time JNPR is 
splitting its stock this millennium (JNPR split 3:1 in January).  
The stock dividend does however require shareholders' approval.  
At the Annual Meeting on May 4th, there is a vote on the agenda 
to increase the number of authorized shares from 200 mln to 1 bln.  
For now though, our play is to ride JNPR's current upward 
momentum and take the optimistic view that the company's 
impending 2:1 stock split and advancing NASDAQ will stimulate 
its rise.  On the analyst front Friday, analyst Gina Sockolow at 
Brean Murray Securities reiterated a Buy recommendation for 
JNPR.  Take note too that of the 14 analysts currently tracking 
JNPR, all have Strong Buy or Buy recommendations in place.  Many 
have also raised earnings' estimates and JNPR has a price target 
as high as $330 attached to it.  We know this stock is a strong 
performer in rebounding markets and we're expecting JNPR to 
power higher in the short-term.  But don't throw caution to the 
wind.  Old resistance at $200 should now serve as support, but 
pullbacks near $180 aren't out of the question either.  Entries 
off support or a bit lower at the 5-dma ($196.86) are 
reasonable, but if there's no dips to this level then the more 
aggressive could enter on an intraday climb for a quick in-and-
out.  This is very RISKY so at least consider keeping a mental 
stop in place to protect profits and capital. 

In recent news Active Software, a leading provider of eBusiness 
infrastructure software products announced Juniper Networks has 
implemented its ActiveWorks Integration System as the platform 
for its comprehensive e-business processes.

BUY CALL MAY-200*JUY-ET OI= 979 at $27.25 SL=21.25
BUY CALL MAY-210 JUY-EB OI= 405 at $22.13 SL=17.25
BUY CALL MAY-220 JUY-ED OI= 335 at $17.38 SL=13.50
BUY CALL JUN-220 JUY-FD OI=  20 at $28.38 SL=22.25 low OI
BUY CALL JUN-230 JUY-FF OI=  19 at $24.63 SL=19.25 low OI

Picked on April 27th at $208.94    P/E = N/A
Change since picked       +3.75    52-week high=$312.94
Analysts Ratings     10-4-0-0-0    52-week low =$ 30.04
Last earnings 04/00   est= 0.03    actual= 0.06
Next earnings 07-13   est= 0.06    versus=-0.03
Average Daily Volume = 3.29 mln


SCMR - Sycamore Networks $78.50 (+13.94)(+13.56)(-64.50)

A growing thorn in Cisco's side (but still small by comparison), 
Sycamore Networks develops and markets intelligent optical 
networking products that transport voice and data traffic over 
wavelengths of light.  The Company combines significant 
experience in data networking with expertise in optics to develop 
intelligent optical networking solutions for network service 
providers.  Sycamore's products are based on a common software 
foundation, enabling concentration on the delivery of services 
and end-to-end optical networking.  Sycamore's products and 
product plans include optical transport, access and switching 
systems and end-to-end optical network management solutions.  

With last week's excellent earnings reports by JDSU, NT and GLW, 
it should be evident that all things optical are truly in a 
special light (OK, bad pun).  All joking aside, optical 
components and the networking sectors are seeing consistently 
high demand and outstanding forward revenue prospects.  There is 
simply no other conclusion given JDSU's 22% SEQUENTIAL quarterly 
revenue increase.  Realizing the strength of the sector, 
investors, both institutional and retail are not letting these 
issues gather any dust.  SCMR, referred to in high tech circles 
as "the next Cisco", has been high on the radar screen as 
evidenced by the exceptionally high volume of over 7 mln shares 
(almost three times the ADV) on Friday.  With less than 50 mln 
shares in float, volume really gooses the price.  Technically, we 
noted on Thursday that a neutral wedge was forming and to look 
for a breakout.  Boy, did we get a big one to the upside!  SCMR 
now trades significantly above its nearest moving average (5-dma 
= $67.35), and nicely up from its breakout level of $73.  Going 
forward, $78 had provided some resistance, but should now provide 
support.  Just in case, $73 should now prove stronger near-term 
support.  If the market cooperates and volume remains high for 
the issue, nibble on a clean break over $79 backed by volume 
since that would effectively clear the resistance hurdle 
established in January.    For aggressive traders, you may see 
good results from target shooting at $73 or $69, depending on 
your risk profile.  Earnings on May 18th (CIEN reports then too) 
may start to help this play a bit more.  However, shares could 
begin an early sympathy move as CSCO's earnings draw near on May 

No analysts have made any upgrades or reiterations since late 
March.  However that could changes in the first few days in May 
as the company perhaps talks it up to analysts before the quiet 
period leading up to the May 18th earnings announcement.

BUY CALL MAY-75*SMZ-EO OI=200 at $11.50 SL= 8.50
BUY CALL MAY-80 SMZ-EP OI=435 at $ 9.38 SL= 6.25
BUY CALL MAY-85 SMZ-EQ OI=211 at $ 7.38 SL= 5.00
BUY CALL JUN-80 SMZ-FP OI= 73 at $13.63 SL=10.25
BUY CALL JUN-85 SMZ-FQ OI=154 at $11.38 SL= 8.50

SELL PUT MAY-60 SMZ-QL OI=187 at $ 2.31 SL= 4.00
(See risks of selling puts in play legend)

Picked on Apr 16th at    $51.00     P/E = N/A
Change since picked      +27.50     52-week high=$199.50
Analysts Ratings      5-3-0-0-0     52-week low =$ 48.94
Last earnings 02/00   est= 0.00     actual= 0.01  
Next earnings 05-18   est= 0.01     versus= N/A
Average Daily Volume = 2.60 mln


NTAP - Network Appliance Inc. $73.94 (+17.06)

Network Appliance, a veteran in network file serving and caching,
has been providing data access solutions since 1992, and is a
member of both the S&P 500 and NASDAQ 100 index.  Corporations
and ISPs, including Lycos, Yahoo!, Citicorp Securities, Siemens,
Lockheed, Cisco, Motorola, and Texas Instruments have deployed
NetApp solutions.  NetApp Internet caching solutions, NetCache
appliances and file servers deliver fast, simple, reliable
and cost-effective access to network-stored data and enable
simultaneous shared file services for UNIX, Windows NT and the
World Wide Web.

We haven't heard much from NTAP in a while, but now they're back
on board.  Since their 2-for-1 split in late March, NTAP struggled
along with many other tech stocks.  The networker sparred with 
its 200-dma the middle of the month and has come out on top, at
least for now.  NTAP is another Nasdaq stock that gave back about
67% of its market cap over the last month and a half, but now
seems to be on more solid ground.  So how did they end up on our
radar screen this time?  Well, Thursday's strong move off the $60
area didn't hurt.  On Monday the company is expected to announce
a new low-end product.  The NetCache C1100, a thin specialized
server that's built around an Intel chip.  NTAP's first products
were based on Intel chips, but the company had moved to Compaq's
Alpha chips.  Using Intel chips will allow NTAP to expand into a
less demanding, lower priced market.  This news is already in the
market, but we are looking for investors to add to NTAP's new
found momentum.  The increasing popularity of server-appliances
and the Internet's rising demand to store and transfer data and
information quickly, has helped keep NTAP a popular pick.  On
Wednesday, Daniel Grozdea analyst at Paribas initiated coverage
with a Buy rating and a price target of $100 a share.  James
Poyner Jr., from CE Unterberg Towbin, followed up on Thursday with
a Buy rating as well.  How do we approach this new play?  With a
$30 range this past week, NTAP can certainly be a bit volatile.
Support is seen at the 100-dma at $66.69 and again near $62.  The
next potential stumbling block comes in near $80 and its 50-dma
of $84.85.  If trading is choppy early in the week, check the 
volume of bounces off support, before entering a new play.

Last Monday NTAP announced that the Palm.Net service, a wireless
service of Palm, Inc. has deployed NetCache appliances to enhance
delivery of Internet pages to thousands of Palm VII hand held
computer uses.  The implementation of NetCache for the Palm.Net
service represents the first time that a caching solution is
being successfully used to expedite wireless data delivery on a
large scale.

BUY CALL MAY-65 NUL-EM OI=636 at $11.88 SL=9.00
BUY CALL MAY-70*NUL-EN OI=878 at $ 9.00 SL=6.25
BUY CALL MAY-75 NUL-EO OI=830 at $ 6.75 SL=4.75
BUY CALL JUN-70 NUL-FN OI=493 at $13.00 SL=9.75
BUY CALL JUN-75 NUL-FO OI=624 at $10.63 SL=8.00

SELL PUT MAY-70 NUL-QN OI=406 at $ 5.50 SL=7.75
(See risks of selling puts in play legend)

Picked on Apr 30th at    $73.94    PE = 411
Change since picked       +0.00    52-week high=$124.00
Analysts Ratings     10-4-1-0-0    52-week low =$  9.84
Last earnings 02/00   est= 0.11    actual= 0.11 
Next earnings 05-18   est= 0.06    versus= 0.03
Average daily volume = 4.42 mln


KANA - Kana Communications $42.56 (+2.56)

Kana Communications is a leading provider of comprehensive 
online customer communications solutions for marketing, sales 
and service. These mission critical applications support 
multiple channels of online contact including inbound and 
outbound e-mail, web based customer self-service, web forms, 
real-time messaging and voice over the Internet.  The company 
offers a comprehensive suite of online customer communication 
products for managing the entire customer lifecycle.

Our goal is to get in before the going gets too hot!  As a group 
the Internet infrastructure stocks rose almost 7% on Friday, 
which peaked our interest.  Granted this sector hasn't shown too 
much intensity recently, but Akamai (AKAM) led the group higher 
with a 34.5% rebound in the past two sessions.  The chaotic 
markets may account for the sector's lack of strength recently 
since many of the companies have shown robust growth and sales 
prospects.  KANA is on top of that list with a convincing future 
outlook.  The company just reported solid earnings on Tuesday 
and earlier this month a few analysts gave KANA good reviews.  
This play is in anticipation of a pure momentum run.  Coming off 
bottom-lows ($26 to $30) equaling the stock's IPO days, KANA is 
poised to power higher in the short-term.  And Friday's break 
through $40 was the first inkling it would recover.  The 10-DMA 
is now lower at $36.71, which is definitely a bullish 
indication.  This is especially true when you consider that KANA 
hasn't seen the upside of this technical since it got knock off 
its pristine pedestal way back on March 13th.  Definitive 
bounces off the 10-DMA back by strong volume are good entry 
points, but honestly it'd be better to see KANA make moves off 
near-term support at $40.  Before jumping in put as many odds in 
your favor.  For instance confirm the overall market sentiment 
and watch how others like EXDS, ISLD, and AKAM are performing. 

On April 19th, Kana Communications announced the completion of 
its acquisition of SilkNet Software.  The merger of the two 
firms will allow clients to use one vendor for their complete 
e-business customer communications needs.

BUY CALL MAY-35 URW-EG OI=559 at $10.13 SL=7.00
BUY CALL MAY-40*URW-EH OI=507 at $ 7.00 SL=5.00
BUY CALL MAY-45 URW-EI OI=143 at $ 4.13 SL=2.50
BUY CALL MAY-50 URW-EJ OI=252 at $ 2.75 SL=1.25
BUY CALL JUN-40 URW-FH OI= 50 at $ 9.38 SL=6.50

Picked on April 30th at $42.56    P/E = N/A
Change since picked      +0.00    52-week high=$175.50
Analysts Ratings     3-4-0-0-0    52-week low =$ 22.78
Last earnings 03/00  est=-0.23    actual=-0.19
Next earnings 07-26  est=-0.23    versus= N/A
Average Daily Volume =   921 K


AMD - Advanced Micro Devices $87.50 (+9.13)(+12.38)

Advanced Micro Devices is a leading semiconductor manufacture.  
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.  

AMD took flight this week breaking through opposition and 
setting new highs with NASDAQ advances.  Initially OIN began 
coverage of AMD in expectation of a split announcement following 
the shareholders' meeting Thursday.  Although this isn't an ace-
in-the-hole play.  Analyst and money managers alike are hot for 
this company's prospects.  Over the past six months investors 
have bid up the share price four-fold and ignored the March-
April corrections to boot.  Their earnings on April 12th were 
exceptional.  They blew away even the highest expectations by 
over a 100% coming in at $1.15 p/s.  While rival, Intel, may 
have perked up a bit after its analysts meeting on Thursday, AMD 
is certainly emerging as the leader in the semiconductor sector. 
In trading this week, AMD soared above the strong resistance at 
$79-$80 and set new 52-week records in 3 out of 5 sessions.  
Technically near-term support is developing at $87, but firmer 
at $85.  Keep the 5-dma line in mind when planning entries.  So 
far it's proven to be a fair gauge.  You can also watch the 
Philadelphia Semiconductor Index ($SOX) which is a key barometer 
for the sector.  If by chance we see a pullback into deeper 
territory near the 10-dma ($79.46), then put up your radar.  
You'd definitely want to be prudent and wait for another  
confirming upward move before adding positions.  There's no 
doubt though that professionals and individual investors are hot 
for this stock.  Look for AMD to continue making advancements on 
pure momentum.  The next goal is for it to shattered the $90 

On Monday AMD announced it demonstrated a prototype processor 
platform, the Athlon, which features 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 go to market in the 2nd 
half of 2000. 

BUY CALL MAY-80 AMD-EP OI=7608 at $11.75 SL=8.75
BUY CALL MAY-85*AMD-EQ OI=3335 at $ 8.75 SL=6.00
BUY CALL MAY-90 AMD-ER OI=7918 at $ 6.50 SL=4.50
BUY CALL MAY-95 AMD-ES OI= 967 at $ 4.50 SL=2.75
BUY CALL JUN-90 AMD-FR OI= 327 at $10.38 SL=7.50
BUY CALL JUN-95 AMD-FS OI=  61 at $ 8.38 SL=5.75

Picked on April 21st at  $78.38    P/E = 62
Change since picked       +9.13    52-week high=$88.88
Analysts Ratings     7-10-5-0-0    52-week low =$15.63
Last earnings 04/00   est= 0.46    actual= 1.15
Next earnings 07-14   est= 1.09    versus=-1.10
Average Daily Volume = 5.14 mln

TER - Teradyne Inc. $110.00 (+8.56)

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 sector of the year award, the Semis might have
already won.  The chip stocks have single handedly carried the
NASDAQ from its lows and lead the market higher.  The profits
coming from the group seem to have no limits.  Late last week,
NOK and ERICY, the two Nordic cell phone giants, crushed earnings
estimates.  Its important that business is good for the cell
phone manufacturers because they buy chips from the chip makers
who in turn buy equipment from TER to make the chips.  There are
no signs of weakness in global demand for handsets, that means
demand for the system chips and other silicon devices that go
into cell phones is increasing.  All good news for TER.  The
Semiconductor equipment stocks got an additional boost last week
from two chip manufacturers, INTC and AMD.  INTC told analysts
that the company plans to begin selling an Intel-branded machine
for online access and AMD revealed its new processor family for
both home and business applications.  It seems that nothing but
good news continues to flow from the Semis.  In what is normally
a very cyclical business, analysts suggest the Semiconductors
will experience years of solid growth due to the explosion of the
Internet and wireless applications.  It seems every time we check
in on TER the stock makes a new high.  Well it happened again
last Friday as TER sailed past resistance at $110 and hit an
all-time high of $112.  To gain entry into the play, look for a
bounce off support at $107 or a strong move above $112 on heavy

One caution flag was raised last week when a director for TER
filed to sell $26 mln worth of stock.  However, most investors
dismissed it as a one time event, and argue that more insiders
would be selling if the stock was truly at a peak.

BUY CALL MAY-105*TER-EA OI=801 at $13.38 SL=10.00
BUY CALL MAY-110 TER-EB OI=176 at $10.88 SL= 7.75
BUY CALL MAY-115 TER-EC OI=769 at $ 8.63 SL= 6.00
BUY CALL JUN-110 TER-FB OI-  8 at $16.38 SL=12.00 low OI

SELL PUT MAY-105 TER-QA OI=2542 at $ 7.88 SL=10.50
(See risks of selling puts in play legend)

Picked on Apr 25th at   $103.38    P/E = 70
Change since picked       +6.63    52-week high=$112.00
Analysts Ratings      9-9-0-0-0    52-week low =$ 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

BRCM - Broadcom, Inc. $172.38 (+19.88)(+30.25)

Broadcom Corporation is a provider of highly integrated, silicon 
solutions that enable broadband digital transmission of voice, 
data and video content to and throughout the home and within the 
business enterprise.  In other words, they make communications 
chips with integrated software.  Broadcom's products enable the 
high-speed transmission of voice, data and video content over 
existing communications infrastructures, most of which were not 
originally intended for digital transmission.  Broadcom designs, 
develops and supplies integrated circuits for some of the most 
significant broadband communications markets, including the 
markets for cable set-top boxes, cable modems, high-speed office 
networks, home networking, digital subscriber line, direct 
satellite broadcast and terrestrial digital broadcast.

We noted Thursday that volume was beginning to fade, and the 
trend continued Friday such that volume was just 7% over the ADV 
of 4 mln shares.  No matter, BRCM had a great Thursday, gaining 
over $10 in a bullish engulfing candlestick pattern.  It would 
have been no surprise then to see the market take some of that 
back, but it didn't.  Instead BRCM eked out a $1.63 gain.  Even 
that was hard won given the $3 gap open and selloff at the close.  
The point is that BRCM may be moving into a flat spot following 
stellar earnings the week before last.  As noted, the falling 
volume tends to support that.  Of course if volume picks up 
again, which is entirely possible since BRCM's CEO will be 
presenting at this week's big Hardware Heaven Event, sponsored by 
Merrill Lynch, then it's probably safe to get back in the water.  
The stochastic too is in neutral territory on the long-term 
chart, and slightly oversold (from Friday's close) on the short-
term chart.  That may mean that BRCM still has room to run, 
however, direction is hard to ascertain right now.  The lows are 
getting higher and that looks good to us.  Support is at $165, a 
previous level of resistance that was cleared earlier Thursday.  
Otherwise $158 is the next level down.  Both may make good target 
shooting entries, depending on your risk profile.  Expect some 
resistance at $180 though.  A shareholder meeting held on April 
27th to increase the authorized shares makes BRCM a split 
candidate too.

In the news, B of A Securities reiterated its Strong Buy rating 
and price target of $300 when BRCM introduced the industry's 
first 8 port Gigabit Ethernet switch-on-a-chip last week.  That 
helped a bunch, and we hope the Merrill Lynch Hardware Heaven 
conference will too.

BUY CALL MAY-165 RDU-EM OI= 390 at $19.13 SL=14.00
BUY CALL MAY-170*RDU-EN OI= 903 at $16.63 SL=12.00
BUY CALL MAY-175 RDU-EO OI=1532 at $14.38 SL=10.50
BUY CALL JUN-170 RDU-FN OI=  70 at $26.38 SL=18.00
BUY CALL JUN-175 RDU-FO OI=  17 at $24.13 SL=16.50 low OI

SELL PUT MAY-150 RDW-QJ OI=1291 at $ 5.13 SL= 7.25
(See risks of selling puts in play legend)

Picked on Apr 18th at  $152.50     P/E = 395
Change since picked     +19.88     52-week high=$253.00
Analysts Ratings    7-15-1-0-0     52-week low =$ 29.00
Last earnings 04/00  est= 0.16     actual= 0.17 surprise=6% 
Next earnings 07-18  est= 0.17     versus= 0.09
Average Daily Volume = 4.0 mln

RMBS - Rambus Inc. $230.00 (+62.50)(+11.25)

Rambus Inc. develops and licenses high bandwidth chip connection 
technologies to enhance the performance of computers, consumer 
electronics and communications products.  Current Rambus-based
computers supported by Intel chipsets include Dell, Compaq,
Hewlett-Packard, and IBM PCs and workstations.  Sony's
PlayStation(r) video game system uses Rambus memory. Providers
of Rambus-based integrated circuits include the world's leading
DRAM, ASIC and PC controller manufacturers. Currently, eight of
the world's top-10 semiconductor companies license Rambus

Did you take advantage of 37% move in RMBS this week?  If not,
hang in there you may have another chance.  For investors that
don't mind a little volatility, the Nasdaq and RMBS provided
excitement and profits for there time.  RMBS once again tested
the $150 level on Monday.  The bounce late in the day turned
out to be a fantastic buying opportunity.  As we mentioned last
weekend a move though the $180 level and RMBS could be off 
to the races.  Well, we got that on Tuesday, and by the end of
Friday's session RMBS had hit a high of $238.13.  While we are
very pleased with our play so far, remember this is a stock 
that was trading at $471 just under 2 months ago.  Will it
return to that level?  It's certainly possible, but for now,
we will take one step at a time.  There was little in the way
of company news this week, however the fact that buyers had
found RMBS an attractive alternative to the NYSE stocks, was
probably news enough.  What's ahead for our play?  Earnings
are out of the way as they reported earlier this month.  
For the week ahead RMBS may take its cue from the Nasdaq and 
the broad market.  If you have current open positions in
RMBS, move your stops up.  Support is found at $200, with the
10-dma sitting back at $181.  Resistance doesn't show up until
the 50-dma at $268.  As we said RMBS is volatile, but for
traders with a risk profile that fits, the volatility can
obviously provide a great return.  In establishing new plays,
be prepared to sell too soon should we see a choppy market
as investors wait for economic data.   

Some of the previous weakness in RMBS was due to speculation
that chips based on its technology might not be adopted as the
industry standard, as was predicted last year.  Keep in mind
the jury is still out on that one, but for now investors
have began to test the waters in bidding the price of Rambus
back higher.

BUY CALL MAY-220*BYQ-ED OI= 349 at $34.00 SL=24.75
BUY CALL MAY-230 BYQ-EF OI= 827 at $29.88 SL=21.75
BUY CALL MAY-240 BYQ-EH OI= 371 at $25.50 SL=18.50
BUY CALL MAY-250 BYQ-EJ OI=1137 at $22.00 SL=16.00
BUY CALL AUG-250 BYQ-HJ OI= 168 at $55.00 SL=39.75

SELL PUT MAY-200 BYQ-QT OI= 781 at $12.88 SL=18.00
(See risks of selling puts in play legend)

Picked on Apr 23rd at   $167.50    PE = N/A
Change since picked      +62.50    52 week high=$471.00
Analysts Ratings      1-1-2-0-0    52 week low =$ 51.50
Last earnings 04/00   est= 0.14    actual= 0.15 
Next earnings 07-12   est= 0.16    versus= 0.08
Average daily volume = 3.21 mln

ADI - Analog Devices $76.81 (+12.06)

ADI is a semiconductor company.  They design, manufacture, and 
market analog and digital integrated circuits (ICs) including 
digital signal processors.  Most of the company's components are 
used by original equipment manufacturers (OEMs) and include such 
clients as 3Com, Hewlett-Packard, and Electrolux.  Analog 
Devices has operations in the US, the Philippines, Taiwan, and 

ADI may be one of the last to report this earnings' season, but 
this doesn't put it on the bottom of our list!  ADI was blessed 
with a constant stream of momentum this week and is now geared 
up for a strong run ahead of its earnings.  The company is 
confirmed to announce its Q1 numbers on May 17th, before the 
opening bell.  This gives us plenty of opportunity to profit 
from the momentum.  For the most part volume wasn't phenomenal, 
but there was no mistaking the classic bull charge straight up 
from the open in the past two sessions.  This surge catapulted 
ADI to an intraday high of $77.53 on Friday crushing overhead 
opposition at $70 from the word 'go'.  Usually the 10-DMA is a 
good indicator for call plays, but in the case of ADI we want 
to pay attention to the 30-DMA, which is currently hovering at 
$74.29.  At the end of March ADI violated this technical line 
and until Friday wasn't able to penetrate it.  Therefore it's 
important that ADI maintain a strong stance above this mark in 
the near-term.  Sure it's likely ADI will naturally experience 
some mild profit taking after such solid gains, but it shouldn't 
slip back to $65 either.  Be patient for your entry into this 
momentum/pre-earnings' run.

Company news was scarce this week, but on Thursday Analog 
Devices announced the availability of the industry's highest 
performance ADC (analog-to-digital converter).  The new AD6644 
is part of ADI's recently announced SoftCell multi-carrier 
transceiver chip set.

BUY CALL MAY-70 AKI-EN OI=314 at $10.75 SL=8.00
BUY CALL MAY-75*AKI-EO OI=439 at $ 7.88 SL=5.75
BUY CALL MAY-80 AKI-EP OI=798 at $ 5.50 SL=3.50
BUY CALL JUN-75 AKI-FO OI=503 at $11.38 SL=8.75
BUY CALL JUN-80 AKI-FP OI=720 at $ 9.00 SL=6.25

Picked on April 30th at  $76.81    P/E = 109
Change since picked       +0.00    52-week high=$94.69
Analysts Ratings     12-7-1-0-0    52-week low =$17.38
Last earnings 12/99   est= 0.45    actual= 0.50
Next earnings 05-17   est= 0.29    versus= 0.23
Average Daily Volume = 2.25 mln


ARBA - Ariba, Inc. $74.19 (+5.19)(+6.75)

A leading provider of Intranet and Internet based B2B e-commerce
solutions, ARBA enables organizations to automate the procurement
cycle through the company's Operating Resource Management System
(Ariba ORMS).  The recently launched Ariba.com network is a
global B2B e-commerce network that enables buyers and suppliers
of operating resources to automate transactions on the Internet.
Among the company's more notable customers are DuPont, Federal
Express, Chevron and Hewlett Packard.

Showing that persistence pays off, ARBA finally broke through
resistance at $70 on Friday.  On the back of a strong Internet
sector and a healthy resurgence of interest in tech issues, the
Internet software company tacked on over $4 as it moved up to
the next resistance level at $75.  In the aftermath of the
recent NASDAQ meltdown, investors are more willing to take a
risk on the companies like ARBA that make Internet B2B software
rather than the dot-com company of the week.  Signs of inflation 
and the corresponding fears of more interest rate hikes motivated
investors to move back towards the high growth areas represented
by the Internet and Software stocks as the week wound to a
close.  Moving as high as $76.38 on strong volume, ARBA found
support throughout the day at $73 as it mimicked the behavior
of the CBOE Internet Index.  The daily chart is now showing us
the beginning of a nice higher lows and higher highs pattern,
but use caution; the markets are still unsettled and volatile.
Intraday pullbacks to support at $73 or $70 are buyable, but
make sure you get a bounce first.  Wait for buyers to step up 
and indicate that they are willing to help push ARBA higher.  
More cautious players will wait for ARBA to break through 
resistance at $76 before jumping on board.

Adding to their market presence, ARBA has teamed with TriNET,
a full service, B2B e-commerce solutions integrator.  TriNET
will host, resell, and implement ARBA B2B e-commerce solutions,
providing mid-market and corporate buyers with more efficient
trading mechanisms and commerce processes more adaptable to
economies of scale.  Adding to the positive sentiment on
Tuesday, ARBA received an upgrade from Buy to Strong Buy 
from Sands Brothers.

BUY CALL MAY-70*IUR-EN OI=2438 at $ 9.38 SL=6.50
BUY CALL MAY-75 IUR-EO OI=2116 at $ 7.25 SL=5.00
BUY CALL MAY-80 IUR-EP OI=1605 at $ 5.00 SL=3.00
BUY CALL JUN-75 IUR-FO OI= 283 at $11.00 SL=8.25
BUY CALL JUN-80 IUR-FP OI= 126 at $ 8.88 SL=6.25

SELL PUT MAY-65 IRU-QM OI= 452 at $ 2.75 SL=4.50
(See risks of selling puts in play legend)

Picked on Apr 23rd at    $69.00     P/E = N/A
Change since picked       +5.19     52-week high=$183.34
Analysts Ratings     9-12-1-0-0     52-week low =$ 15.25
Last earnings 04/00   est=-0.08     actual=-0.06
Next earnings 07-12   est=-0.08     versus=-0.12
Average Daily Volume = 5.30 mln

CMGI - CMGI Inc. $71.25 (+13.56)

The original Internet incubator firm, CMGI is one of the chief
architects of the Internet.  The firm nurtures companies
in-house and invests in others through its capital venture arm,
@Ventures.  CMGI has stuffed its portfolio with stakes in more
than 60 Internet companies concentrated in marketing,
advertising, content, e-commerce, and technology.  Among the
more prominent companies in its nest are Lycos, AltaVista and
Raging Bull.  Fully 80% of the firm's revenue comes from
fulfillment and mailing list services.

Supported by, and contributing to the recovery in the Internet
sector, CMGI is looking better all the time.  With one last
retest of the $50 support level on Monday, CMGI took off and
ran as high as $65 by Wednesday.  Investors took some money off
the table ahead of Thursday's economic reports, but after a
brief dip in the morning to test support at $55, CMGI was off
to the races again.  Moving strongly for the remainder of the
week, CMGI managed an impressive 23.5% gain.  After gapping up
to resistance near $68 at the open on Friday, investors kept
shares of the Internet incubator firm trading in a quiet range
until the early afternoon.  Then with a spurt of buying volume,
CMGI was pushed up near $70 where it stayed until the final 15
minutes of trading.  Closing the day with a burst of volume that
pushed the stock up over $71 adds to the positive picture going
forward.  Although the daily volume was rather light, the
pattern of increasing volume accompanying increasing prices is
encouraging for the week ahead.  A retest of support at the $68
or even $65 levels may be necessary before CMGI is ready to head
higher and would provide an attractive entry point.  Holding
above $70 could indicate that buyers are ready to put their
money to work and very quickly push the stock to the next level
of resistance near $75.

Continuing to expand and grow, the latest news on CMGI is that
its Alta Vista access server had registered 2.5 million unique
users and is signing up some 10,000 users per day while the
access service operates some 4000 dial-up connections.  The
Alta Vista network now boasts 60 million users worldwide, a
58% increase since the October launch of its new network.  
CMGI holds 83% of the Alta Vista service.

BUY CALL MAY-70*GCB-EN OI=1851 at $6.50 SL=4.50
BUY CALL MAY-75 GCB-EO OI=1182 at $4.50 SL=2.75
BUY CALL MAY-80 GCD-EP OI=2189 at $2.69 SL=1.25
BUY CALL JUN-70 GCB-FN OI=1133 at $8.50 SL=6.00
BUY CALL JUN-75 GCB-FO OI= 643 at $6.88 SL=4.75

Picked on Apr 27th at    $66.19     P/E = 130
Change since picked       +5.06     52-week high=$163.50
Analysts Ratings      4-6-0-0-0     52-week low =$ 33.13
Last earnings 03/00   est=-1.28     actual=-0.74
Next earnings 06-08   est=-1.60     versus=-0.14
Average Daily Volume = 7.22 mln

MERQ - Mercury Interactive Corp. $90.00 (+17.63)(+13.63)(-27.81)

Mercury Interactive Corp. is the leading provider of Web
performance management solutions that help e-businesses deliver
a positive user experience.  Mercury Interactive solutions enable
its customers to turn Web application performance, scalability
and user experience into competitive advantage. The company's
performance management products and hosted services are open 
and integrated to best test and monitor business-critical Web

As a Lehman Brothers analyst put it, bad news for Microsoft isn't
necessarily bad news for the software industry or other software
makers.  If investors were anticipating bad news for MSFT they
were buying shares of MERQ.  MERQ finished the day with a 6.5%
gain, and added just over 24% for the week.  Even as MSFT warned
that sales growth is slowing, companies like MERQ were receiving
upgrades and Buy ratings from Neil Herman, an analyst at Lehman
Brothers.  Other than the comments from Herman, it was a quiet
week, as far as news was concerned.  We mentioned Thursday, that
for now we may have to rely on the technical picture as our
guide.  Other than the 50-dma average sitting in our way it's
a very pretty picture.  Another encouraging aspect of the week's
action was the volume.  As MERQ was making its way up the chart
the volume was solid, with nearly twice the norm on Tuesday
and Wednesday.  We would look for new chance to join in this
play.  Keep in mind in the past two weeks MERQ has seen a gain
of about 53%, and a pullback may be in order.  If we see a 
positive attitude return with traders at the Nasdaq next week,
then MERQ could join in.  If not look for bounces off support
as a chance to enter or add to existing position.  Intraday
support levels are sitting at $86 and $82 and a bounce with 
good volume could provide an attractive entry point.

No other news at this time.
BUY CALL MAY-80 RQB-EP OI=465 at $14.88 SL=11.00
BUY CALL MAY-85 RQB-EQ OI=166 at $11.25 SL= 8.50
BUY CALL MAY-90*RQB-ER OI=337 at $ 8.63 SL= 6.00
BUY CALL MAY-95 RBF-ES OI=100 at $ 6.88 SL= 5.00
BUY CALL JUL-90 RQB-GR OI=376 at $17.63 SL=12.88

SELL PUT MAY-80 RQB-QP OI= 42 at $ 3.88 SL= 6.00
(See risks of selling puts in play legend)

Picked on Apr 16th at    $58.75    PE = 205
Change since picked      +31.25    52 week high=$134.50
Analysts Ratings      9-3-1-0-0    52 week low =$ 12.25
Last earnings 04/00   est= 0.11    actual= 0.10 
Next earnings 07-13   est= 0.12    versus= 0.09
Average daily volume = 1.55 mln

SFE - Safeguard Scientifics $42.00 (+5.88)

Safeguard is a leader in incubating and operating premier
developing technology companies in the Internet infrastructure
market with a focus on three sectors: software, communications,
and e-Services.  Safeguard's network of Internet infrastructure
companies offers solutions, seamless connectivity, and e-Services
to businesses engaged in electronic commerce.  They develop and
operate Internet infrastructure companies and integrate these
companies into a broader partner network of more than 200
companies.  SFE's aggressive acquisition strategy has resulted
in a critical mass of companies within the infrastructure
space, each of which has the potential to be a leader in its

How's that saying go...April showers bring May flowers?  Well
the storm clouds that have hovered over SFE this past month, may
have brought a very good opportunity.  A look at the chart, and
you can see that SFE is like many other Nasdaq issues that have
been pummeled this month.  So what makes it any different than
the rest?  A 3-for-1 split of the company's stock, and a sell-off
in the Nasdaq have bought this one to us on a silver platter.  
Safeguard is uniquely positioned as the only incubation and
management company focusing exclusively on the infrastructure
market.  With over 200 companies in their network, and a strong
acquisition and management process, returns should continue to
thrive.  Prior to the sell-off in the Nasdaq, SFE had brokerage
companies upgrading the company from an Accumulate to a Strong
Buy at Prudential, while analysts at Lehman initiated coverage
with a Strong Buy as well, with a price target of $100.  The
point we are trying to make is, at current levels SFE could be
tremendous buying opportunity.  On Thursday, Sanchez Computer 
Associates(SCIA), a partner with Safeguard, reported first
quarter revenues increased 54%, while losses came in well
below analysts estimates.  SFE is scheduled to report quarterly
results on May 11th.  Depending on the sentiment in the broad
markets, SFE could begin to garner momentum over the next
couple of weeks.  We would point out, that the bounce off recent
lows has come on lighter than average volume.  Friday's close
brought the company back over its 200-dma for the first time in
nine sessions.  SFE has support at $41 and back at $35.  Overhead
there are several levels that come into play between $50 and $60,
but we will worry about those when the time comes.       

Earlier this month, SFE said it's on to new things.  The company
has invested in 25 Internet infrastructure companies, a dozen of
which were acquired in the first quarter.  The company went on to
say they will still be extremely supportive to the B2B e-commerce
sector through its large network of partner companies, especially
Internet Capital Group.

BUY CALL MAY-30 SFE-EF OI=2314 at $12.50 SL=9.50
BUY CALL MAY-35 SFE-EG OI= 396 at $ 8.13 SL=5.75
BUY CALL MAY-40 SFE-EH OI=1180 at $ 5.13 SL=3.00
BUY CALL MAY-45*SFE-EI OI= 633 at $ 2.75 SL=1.50
BUY CALL JUN-40 SFE-FH OI=  93 at $ 7.50 SL=5.25

SELL PUT MAY-40 SFE-QH OI= 560 at $ 2.63 SL=4.00
(See risks of selling puts in play legend)

Picked on Apr 30th at    $42.00    PE = 39
Change since picked       +0.00    52-week high=$99.00
Analysts Ratings     11-3-0-0-0    52-week low =$15.85
Last earnings 02/00   est= 0.19    actual= 2.09 
Next earnings 05-11   est=  N/A    versus= 0.24
Average daily volume = 1.35 mln


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The Option Investor Newsletter                     4-30-2000  
Sunday                                                4 of 6



ADBE - Adobe Systems Inc. $120.94 (+8.31)(+14.81)(-27.19)

Adobe Systems is a leader in desktop publishing software, the
company's Acrobat Reader is popping up all over the Internet as
users clamor to display portable document format (PDF) documents
on the Web.  Three of Adobe's products, Photoshop, Illustrator,
and Page Maker generate about 60% of its sales.  The company also
markets print technology to OEMs and has stakes in a string of
technology firms whose products complement its own offerings.
Adobe is hoping a restructuring effort and the introduction of
its InDesign publishing package will spur sales and accelerate
its product growth track record.

ADBE remains one of the few bright spots in the NASDAQ this year.
The stock is up over 80% while the composite index trades in
negative territory.  Investor sentiment has shifted from concept
stocks with endless losses to companies that actually make money
like ADBE.  The company has seen revenues and profits skyrocket
with the explosive growth of the Internet.  Company executives
recently guided analysts to expect upwards of 25% growth in
ADBE's revenues.  With the positive outlook set by ADBE officials
many analysts expected ADBE to continue its ascent noting the
lofty price targets they set.  The volatility in the stock has
provided plenty of trading opportunities recently but for the
last month ADBE has been consolidating between $100 and $120.  
Some of the weakness in ADBE can be linked to the MSFT debacle.
Since the ruling was issued last Friday, traders can refocus, and
ADBE should benefit.  ADBE finally broke out of its month long 
congestion last Friday, but retreated late in the day, ahead
of the MSFT ruling.  ADBE has resistance at the $125 level and
again at $127.  A move above $127 would send ADBE to a new high.
Watch for the stock to clear that level on healthy volume as a
possible entry point.  The stock closed Friday just above support
at $120, consider a trailing stop after entering the play.  Watch
the direction in broader market, particularly the NASDAQ, before
entering into the play and confirm volume in the stock as it
breaks away from congestion.

We were expecting a split announcement from ADBE officials last
Wednesday.  Shareholders authorized enough shares for a split,
but management said the market conditions were too volatile.  As
the NASDAQ continues to improve, we'll watch closely for a split.

BUY CALL MAY-115*AXX-EC OI=2054 at $14.00 SL=10.50
BUY CALL MAY-120 AXX-ED OI= 687 at $11.25 SL= 8.25
BUY CALL MAY-125 AXX-EE OI= 258 at $ 8.88 SL= 6.25
BUY CALL MAY-130 AXX-EF OI= 301 at $ 7.00 SL= 5.00

Picked on Apr 11th at   $119.50    P/E = 60
Change since picked       +1.44    52-week high=$127.88
Analysts Ratings      4-7-3-0-0    52-week low =$ 27.50
Last earnings 03/00   est= 0.43    actual= 0.47
Next earnings 06-15   est= 0.47    versus= 0.35
Average Daily Volume = 2.41 mln

TIBX - Tibco Software $89.06 (+21.19)(+19.56)

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

B2B's favorite Internet plumber established a new noticeably 
upward trend last week - no flat lining allowed, especially since 
CSCO will be reporting earnings on May 9th.  Huh?  What's CSCO 
got to do with it?  Aside from Reuters owning 60% of the company, 
CSCO is the largest outside shareholder at 6.9%, and CSCO has 
incorporated TIBX software into many of its hardware products.  
If CSCO makes a nice move into its May 9th earnings date, (and we 
expect they will given their recent foray into optical switching 
and routing gear), by virtue of CSCO's use of TIBX products, TIBX 
could ride CSCO's coattails.  It isn't just CSCO though.  The 
biggest names in B2B commerce including HWP, AT&T, Yahoo, Ariba, 
Delta Airlines, and Sun Microsystems, all use TIBX software as 
the guts of their systems.  Technically, the chart looked great 
last week since TIBX continued forming higher lows to converge 
with resistance of $82.  Bingo!  It broke through Friday morning 
and held up at $89 into the close on strong volume.  It looks 
like an institution took anything in site at $89.  Careful though 
the stochastic while still moving up is now in "overbought" 
territory.  It's no cause for alarm - just something to make note 
of.  Intraday support can now be found at $85 or stronger support 
at $82 (old resistance equals new support theory) - nice targets 
at which to shoot.  Are you a bit more conservative?  Just wait 
for volume to fill the sails and try a limit/buy order just over 
$92, slightly higher than Friday's high.  The next resistance is 
way up at $100.  At that point TIBX becomes a split candidate 
too.  Fortunately, their shareholders just voted April 12th to 
increase the outstanding shares to 1.2 bln shares.  That's more 
than enough to effect another 3:1 sometime before earnings 
scheduled in mid-June.

No news or any upgrades to report this week.

BUY CALL MAY-85*PIW-EQ OI=295 at $14.13 SL=10.50
BUY CALL MAY-90 PIW-ER OI=317 at $11.75 SL= 8.75
BUY CALL MAY-95 PIW-ES OI=201 at $ 9.75 SL= 6.75
BUY CALL JUN-90 PIW-FR OI=  0 at $17.25 SL=12.50 Wait for OI!
BUY CALL JUN-95 PIW-FS OI=  0 at $15.13 SL=11.00 Wait for OI!

SELL PUT MAY-80 PIW-QP OI=152 at $ 5.75 SL= 8.00
(See risks of selling puts in play legend)

Picked on Apr 18th at   $61.25     P/E = N/A
Change since picked     +27.81     52-week high=$147.00
Analysts Ratings     3-0-0-0-0     52-week low =$  6.56
Last earnings 03/00  est= 0.00     actual= 0.01 
Next earnings 06-19  est= 0.00     versus= N/A
Average Daily Volume = 1.6 mln


CMVT - Comverse Technology Inc. $89.19 (+9.13)(+6.13)

Comverse Technology has become an all-star in voice messaging.
The #1 voice mail firm makes enhanced telecommunications systems
that let telecom providers offer call answering, voice/fax mail,
and other services.  The company also makes telecom software 
for information processing applications.  CMVT's customers 
include AT&T, Deutsche Telekom, and Compaq.  Interestingly, 
Israel accounts for more than half of the company's sales.  
Comverse has been buying complementary companies to expand 
its product and geographical reach.  Recently, CMVT took its 
telecom network software subsidiary, Ulticom (ULCM), public.

With a forward looking PE of 47, CMVT provides growth at a
reasonable price in the telecom equipment sector.  The company
has been growing at over 30% for the past several years.  That
growth rate has helped CMVT to beat earnings estimates for the
last six quarters.  And we're looking for CMVT to surpass
estimates again when they next report earnings.  The company is
scheduled to report on May 8th.  We're about half way through
the earnings run for CMVT.  The stock usually takes off about a
month before the report, and sells off after the announcement.
We're looking for the momentum to really pick up in the coming
week.  If we get some cooperation from the broader market in the
next week, CMVT could take off.  The stock closed last Friday
just below major resistance at $90.  CMVT has had trouble
clearing that level for the past month.  If CMVT can get above
$90, we'll see resistance again at $95.  A move above $90 would
provide a good entry point for a more aggressive trader.  While
a more conservative trader might wait for CMVT to move above $95
before entering the play.  Either way, confirm any move with
heavy volume.  The volume has been a good indicator of the
direction CMVT will move.  Heavy trading has usually been on up
days, while we've seen lighter volume on down days.  If the 
stock doesn't burst through $90 early next week, watch for it 
to steadily climb using its 10-dma as support.  In the past, the
10-day has proved to be a good place to look for an entry point
as CMVT is likely to bounce higher from that level.

Proof that earnings will be good for CMVT came last week when 
the telecom equipment giant, NT, reported earnings that crushed
estimates.  The good numbers from NT may be a catalyst for
launching CMVT higher.  NT beat estimates by 25% and told
analysts to expect 30-35% growth this year, good news for CMVT!

BUY CALL MAY-85*CQZ-EQ OI=147 at $ 8.88 SL=6.25
BUY CALL MAY-90 CQZ-ER OI=384 at $ 7.63 SL=5.25
BUY CALL MAY-95 CQZ-ES OI=641 at $ 5.00 SL=3.00
BUY CALL JUN-90 CQZ-FR OI= 20 at $12.38 SL=9.00

SELL PUT MAY-80 CQZ-QP OI= 86 at $ 2.75 SL=4.00
(See risks of selling puts in play legend)

Picked on Apr 16th at    $73.94    P/E = 69
Change since picked      +15.25    52-week high=$123.88
Analysts Ratings     10-3-0-0-0    52-week low =$ 25.75
Last earnings 02/00   est= 0.28    actual= 0.30
Next earnings 05-08   est= 0.34    versus= 0.24
Average Daily Volume = 1.47 mln

ADCT - ADC Telecommunications $60.75 (+6.88)

ADC Telecommunications makes systems that crank up the rate at
which voice, data, and video signals are transmitted.  Cable TV,
Internet and telephone access providers use ADC's software and
hardware to build high-speed multiservice networks.  ADC's
products are used deep within networks as well as in "the last
mile," between central offices and customers.  The company also
provides design and installation services.  Customers include the
regional Bell operating companies.

ADCT has everything going its way right now.  The company has an
impeccable track record of strong earnings growth.  The stock
continues to show unrelenting relative strength, and institutions
continue to accumulate the stock at a rapid pace.  Those three
elements combine set up a perfect play for an earnings run.  A
sign of things to come for ADCT was seen last week when ERICY
pummeled estimates with a 366% jump in first-quarter profits.
The company's gains were fueled by booming sales for new
generation mobile and wireless technologies.  Demand for
telecommunication services and products, particularly wireless,
continues to grow at a break-neck pace, with companies like ADCT
set to reap huge rewards.  The excitement surrounding earnings
helped ADCT to breakout of a month long congestion last Thursday,
but after reaching a new high Friday, the stock sold off.  Part
of the weakness may have come from a large hedge fund, that held
positions in the tech and telecom sectors, that said Friday it
was closing shop.  We're looking for the strength to return 
to ADCT in the coming week, especially with earnings fast
approaching.  However, if ADCT continues to show weakness, watch
for a bounce of the 10-dma for an entry point.  If the stock
continues upward, look for a move above $63 as a possible entry
point and confirm with heavy volume as the stock is lifted from

Keeping with the company's focus on wireless, ADCT officials
announced last week several new initiatives to expand its
wireless offerings.  ADCT's push into the wireless arena is
expected to generate additional revenues for the company and 
has been welcomed with open arms by industry analysts.

BUY CALL MAY-55 TLQ-EK OI=1831 at $8.25 SL=5.75
BUY CALL MAY-60*TLQ-EL OI=2094 at $5.38 SL=3.50
BUY CALL MAY-65 TLQ-EM OI=   8 at $2.94 SL=1.50 low OI
BUY CALL MAY-70 TLQ-EN OI=1010 at $1.44 SL=0.75

Picked on Apr 27th at    $62.69    P/E = 111
Change since picked       -1.94    52-week high=$64.50
Analysts Ratings    10-11-1-0-0    52-week low =$17.19
Last earnings 01/00   est= 0.33    actual= 0.36
Next earnings 05-18   est= 0.24    versus= 0.16
Average Daily Volume = 3.42 mln


DHR - Danaher Corp. $57.13 (+4.19)(+4.88)

Danaher Corporation operates in two business areas: Process/
Environmental Controls and Tools and Components.  The company's 
Tools and Components segment produces and distributes general 
purpose mechanics' hand tools and automotive specialty tools.  
Among the household names they are responsible for are Sears' 
Craftsman line, Allen wrenches, and NAPA hand tools.  The 
Process Controls division, led by Veeder-Root, makes leak 
detection systems for underground storage tanks, as well as
sensors, switches, measurement devices, and communications and
power protection products.

With apparent indifference to the travails of the DJIA, DHR
continued higher throughout the week.  Although appearing to
lose a little momentum towards the end of the week, the stock
is still being supported by the ascending trendline that began
on April 17th.  Earnings came in stronger than expected on April
19th and DHR has been moving higher ever since.  Of some concern
is the fact that volume has been dropping off the past 2 days,
barely posting half the ADV on Friday.  The stock is running
into some resistance between $57-59, and will likely need the
extra push of increasing volume to break through.  There has
been no post-earnings weakness in the past week and a half, but
remain vigilant.  The recent light volume could be an indication
that DHR needs to take a break before heading higher.
Technically our play still looks good as DHR is using the 5-dma
(currently $55.69) as support, but keep your stops in place to
protect those profits.  Use dips to support between $55-56 as
opportunities to open new positions, but exercise caution until
volume picks up.  A more conservative approach at this juncture
would be to wait for volume to pick up and push DHR through

Aside from the Market Perform rating from Goldman Sachs on April
14th, news has been sparse.

BUY CALL MAY-50 DHR-EJ OI=  0 at $7.63 SL=5.25 Wait for OI!
BUY CALL MAY-55 DHR-EK OI= 27 at $3.75 SL=2.25
BUY CALL MAY-60 DHR-EL OI=  0 at $1.25 SL=0.00 Wait for OI!
BUY CALL*JUN-55 DHR-FK OI=320 at $4.88 SL=3.00
BUY CALL JUN-60 DHR-FL OI=  0 at $2.25 SL=1.00 Wait for OI!

Picked on Apr 23rd at   $52.94     P/E = 30
Change since picked      +4.19     52-week high=$69.00
Analysts Ratings     6-5-1-0-0     52-week low =$36.44
Last earnings 04/00  est= 0.46     actual= 0.49
Next earnings 07-19  est= 0.53     versus= 0.45
Average Daily Volume =   452 K

NOC - Northrop Grumman $70.88 (+5.00)

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.

Some of the money that has left the dying dot coms and other
highflying stocks has found its way in the elder economy stocks
like NOC.  The defense sector has benefited from several events.
First of all, money left the volatile and risky concept stocks
and moved into stable and defensive stocks, no pun intended!  And
secondly, the consolidation taking place in the defense sector,
namely between European and US companies, has been greeted with
enthusiasm by investors and analysts.  NOC's most recent alliance
with a European defense contractor came last week when the
company announced that it had partnered with DaimlerChrysler.
The announcement marks the second such alliance with a European
company.  The first came last February when NOC and Airbus joined
forces.  NOC is also taking advantage of the sweeping technology
changing the world, and integrating it into defense systems.
The stock had been on a steady path upwards last week until the
blue chips came under pressure after the ECI data was released
Thursday.  We're looking for NOC to regain its footing and
continue its march higher.  For entry into the play, look for NOC
to move above resistance at $74, or wait for a bounce off support
at $70.  Confirm direction in the blue chips before entering.

Recently in the news, NOC announced late last week that it had
successfully completed its government funded advanced radar
effort.  The four-year, $42 mln contract allowed NOC to design,
develop, and test a new radar system.

BUY CALL MAY-65*NOC-EM OI=309 at $6.88 SL=5.00
BUY CALL MAY-70 NOC-EN OI=244 at $3.38 SL=1.75
BUY CALL MAY-75 NOC-EO OI= 95 at $1.31 SL=0.50
BUY CALL JUN-70 NOC-FN OI=  0 at $4.63 SL=2.75 Wait for OI!

Picked on Apr 25th at   $72.56    P/E = 9
Change since picked      -1.69    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

GE - General Electric Co. $157.25 (-1.00)(+7.75)

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.

GE, long used as a temperature gauge for the rest of the market 
caught a chill right after we picked it.  Fortunately, strong 
support remains at $150 and $155 and has held up well too.  $157 
also happens to be the 10-dma, which also provides a technical 
support level.  This may be the entry point we've been looking 
for, though we have to admit to keeping a stiff upper lip in 
order to plow through our slight disappointment.  Why keep it on 
the list?  Management announced a 3:1 split way back in December 
that most investors lost track of.  The good news is that the 
split is again at the forefront thanks to the now confirmed split 
date of May 5th (this Friday).  In short, we're looking for a 
split run to move GE up throughout the week.  Since GE hasn't 
split since 1997, look for the buzz to build around the issue 
as the date nears.  Don't abandon good judgement though.  We 
still need to confirm that the market is moving in our direction 
since GE will also reflect downward market movement too.  

There is no news that will make a difference.  This play is all 
about a 3:1 split.

BUY CALL MAY-150 GE-EU OI=2642 at $11.25 SL=8.50
BUY CALL MAY-155*GE-EK OI=1808 at $ 7.75 SL=5.50
BUY CALL MAY-160 GE-EV OI=3289 at $ 5.25 SL=3.25
BUY CALL JUN-155 GE-FK OI=1990 at $11.25 SL=8.50
BUY CALL JUN-160 GE-FV OI=3375 at $ 8.88 SL=6.25

SELL PUT MAY-150 GE-QU OI=5440 at $ 3.13 SL=5.00
(See risks of selling puts in play legend)

Picked on Apr 25th at   $166.00     P/E = 48
Change since picked       -8.75     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 = 7.50 mln


By: Mark Phillips
Contact Support

Have you been sitting at your computer, finger on the 'Buy'
button, not quite sure if the recovery is real this time?  If
so, you are not alone.  Uncertainty is keeping many investors
out of the market, either in anticipation of one more dip or
fear that this rally could be the last until after Greenspan
scares the markets again in May.  Either way, it is providing
some very tempting entry points for us LEAPS players.  With
stocks like QCOM (Leap of the Week) hitting a low of $92.25,
JDSU dropping below $75, and NT dipping south of $90, it is
only a matter of time before those itchy trigger fingers
twitch and hit the 'Buy' button.  The sentiment in the market
is changing as inflation and the attendant interest rate
fears are being renewed.  Rising interest rates tend to be
harder on old economy stocks and as investors look for a safe
haven for their money, strong growth (can you say technology?)
stocks will likely be at the top of the short list.  With the
VIX off of the extreme levels of a couple weeks ago, we are
hopefully settling into our familiar 18-32 range.  The action
on Thursday would seem to confirm this theory as the VIX spiked
to 31.81, and quickly started moving down, closing the week at
28.78.  This spike corresponded to great entry points in many
of our LEAP plays as the tech sector ran with the ball for the
remainder of the week.  We aren't out of the woods yet, but
evidence is mounting that the worst may be behind us.  Trade
smart and choose your entry points wisely.

Current Plays


EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $69.25   350.26%
                 JAN-2002 $ 90  WUE-AR   $19.00   $69.75   267.11%
GPS    11/07/99  JAN-2001 $ 40  ZGS-AH   $ 5.75   $ 6.38    10.96%
                 JAN-2002 $ 45  WGS-AI   $ 7.88   $ 9.13    15.86%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $24.25    77.92%
                 JAN-2002 $110  WIB-AB   $16.50   $30.25    83.33%
CSCO   11/14/99  JAN-2001 $ 40  ZCY-AH   $ 9.56   $34.75   263.49%
                 JAN-2002 $ 45  WIV-AI   $11.00   $35.88   226.18%
GE     11/21/99  JAN-2001 $150  ZGR-AU   $16.25   $27.63    70.03%
                 JAN-2002 $150  WGE-AU   $25.50   $40.00    56.86%
NT     11/28/99  JAN-2001 $ 75  ZOO-AO   $22.25   $51.63   132.04%
                 JAN-2002 $ 75  WNT-AO   $30.25   $62.50   106.61%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $ 8.25   -23.26%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $14.00   - 6.67%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $66.13   197.21%
                 JAN-2002 $120  WGZ-AD   $28.50   $74.13   160.11%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $39.38    67.57%
                 JAN-2002 $100  WFU-AT   $27.25   $45.25    66.06%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $26.38    49.63%
                 JAN-2002 $ 90  WJX-AR   $22.00   $33.50    52.27%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $21.50   135.49%
                 JAN-2002 $ 40  WSY-AH   $12.63   $28.00   121.69%
ERICY  01/30/00  JAN-2001 $ 65  ZYD-AM   $19.75   $32.25    63.29%
                 JAN-2002 $ 65  WRY-AM   $27.00   $44.50    64.81%
NSM    02/27/00  JAN-2001 $ 70  ZUN-AN   $18.50   $14.63   -20.92%
                 JAN-2002 $ 70  WUN-AN   $24.25   $24.88   - 2.60%
AOL    03/12/00  JAN-2001 $ 60  ZKS-AL   $14.00   $12.75   - 8.93%
                 JAN-2002 $ 65  WAN-AM   $18.63   $17.88   - 4.03%
AXP    03/12/00  JAN-2001 $130  ZXP-AF   $21.75   $36.38    67.26%
                 JAN-2002 $140  WXP-AH   $28.00   $43.63    55.82%
WM     03/19/00  JAN-2001 $ 25  ZWI-AE   $ 5.00   $ 5.00     0.00%
                 JAN-2002 $ 30  WWI-AF   $ 5.38   $ 5.50     2.23%
QCOM   03/26/00  JAN-2001 $150  YQO-AJ   $39.25   $17.00   -56.69%
                 JAN-2002 $160  XQO-AL   $52.88   $29.25   -44.69%
AMD    04/16/00  JAN-2001 $ 70  ZVV-AN   $17.50   $32.63    86.46%
                 JAN-2002 $ 70  WVV-AN   $26.00   $42.38    62.92%
CMGI   04/16/00  JAN-2001 $ 50  ZB -AJ   $21.50   $32.00    48.84%
                 JAN-2002 $ 55  WCK-AK   $27.75   $38.25    37.84%
JDSU   04/16/00  JAN-2001 $ 80  XJU-AP   $27.50   $43.00    56.36%
                 JAN-2002 $ 80  YJU-AP   $39.63   $57.38    44.79%
VSTR   04/16/00  JAN-2001 $ 90  ZTB-AR   $23.88   $34.13    42.92%
                 JAN-2002 $ 90  WWP-AR   $35.00   $45.38    29.66%

To review the play description on any of our current plays, 
go to the LEAPS section for the date the play was added.

Option Selection: Notice that many of our LEAP plays have moved
considerably since initially being picked.  The listed options
may therefore be deep in the money and very expensive.  When 
entering a new position, look to buy LEAPS according to your 
suitability level, but note that we typically initiate strikes 
that are slightly out of the money from the stock's current 

Leap of the Week

QCOM - Qualcomm Inc. $108.44

The king of CDMA technology is a little beat up, but looks
ready to go a few more rounds.  After we picked it at the end
of March, the NASDAQ took a nosedive, pulling even the big boys
like QCOM with it.  It was a rough start to the week for QCOM,
but it provided a couple of nice entry points.  Monday
afternoon, we were rewarded with a dip to $92.25, a solid level
of support going all the way back to December of last year.
This was also right on the 200-dma, and the recovery back above
$100 was quick, supported by strong volume and a nice recovery
on the NASDAQ.  Things weakened somewhat over the next couple
days, but the low on Wednesday morning at $94.50 provided the
higher low we were looking for.  The rest of the week looked
much better as QCOM moved up to challenge resistance at $108.
Intraday support has started forming near $105, so look for a
bounce near this level to trigger your entry.  For those
wanting confirmation before playing, wait for QCOM investors
to show their conviction by pushing the price above $110 on
increasing volume.

BUY LEAP JAN-2001 $110.00 ZQJ-AB at $29.50
BUY LEAP JAN-2002 $120.00 WSY-AD at $39.00

New Plays

YHOO - Yahoo Inc. $130.25

Many of you were probably wondering when we would get around to
adding this Internet mainstay.  We have been waiting for some
indication that the selling was done.  Both the NASDAQ and the
Internet sector appear to be regaining some of their past luster
and on Friday Yahoo finally closed back above its 200-dma ($128).
Volume is still on the anemic side, but does pick up each time
the price starts increasing.  Putting in a double bottom at $109
and then posting a higher low at $113 has the earmarks of a
stock getting ready to head higher.  The weakness over the past
month has created overhead resistance at $135 and $145.  Look
for a bounce near support at either $126 or $120 to trigger your
entry into the play and then hold on.

BUY LEAP JAN-2001 $140.00 ZYM-AH at $32.13
BUY LEAP JAN-2002 $140.00 WYZ-AH at $46.38


GPS $36.75 After weathering the stormy markets throughout the
month of March, wherein GPS used the 100-dma as support, the
specialty retailer managed to move as high as $53.13 in early
April.  That provided a tidy profit on our play but it was the
end of the good news.  The stock shed nearly $8 following the
resignation of the company's COO and the announcement of a drop
in same store sales for the month of March.  Support at the
200-dma failed, as did support near $38.  Although the carnage
may be approaching an end, the shift in sentiment back to the
technology sector has left laggards like GPS out in the cold.
As we approach the end of the April earnings cycle, there
appears to be little to motivate buyers of GPS, so we'll move
on as well.


Put plays can be very profitable but have a larger risk than call 
plays. When a stock is falling the entire investment community 
(except the shorts) is hoping it will reverse and start back up. 
The company management is also doing everything they can to shore 
up their stock price. The company issues press releases, brokers 
talk it up, analysts try to put a positive spin on everything. 
Then of course there is the death knell, the "buy recommendation" 
simply because the price has dropped to some level that analysts 
feel attractive again. Buyers who like the stock wait until it 
appears a bottom has been reached and then jump on it in a feeding 
frenzy. They may already have a large position and are averaging 
down. Many factors can stop a free falling stock in mid drop.


ADRX - Andrx Corp $51.19 (-3.75)

Andrx develops and commercializes time-released pharmaceuticals.  
It formulates generic versions of such high volume brand-name 
drugs as Cardizem and Dilacore.  Currently they have 17 
bioequivalent versions of drug products in the pipeline.  While 
waiting for FDA approval Andrx primarily derives revenues from 
Anda, its generic drug distributor, and sales from third party 

We added ADRX to put list on the historical basis that the odds 
are stacked for a stock to go down in a post-event depression.  
And in this case, we also saw ADRX follow just that pattern 
earlier in the month.  After a quick rise to stardom ($67.25) 
following its 2:1 split on April 4th, the stock skated to bottom 
support at $50.  Along those lines, take a look at a one-month 
chart and it's déjà vu this week.  In anticipation of solid 
earnings on Tuesday morning, ADRX banged on the door of 
resistance at $60 but there was no answer.  The stock was 
quickly kicked back to the curb cowering down as low as $47.38 
by Thursday.  And bear in mind, this was despite beating 
estimates by a whopping $0.10 and showing an increase in net 
income of 136%!  Andrx posted 1Q earnings of $0.25 versus $0.11 
same quarter last year.  From a technical perspective too, ADRX 
violated the previous support of $50 on strong volume.  And this 
was in a rallying market too.  Now conservatively, yes it'd be 
best to see ADRX move deeper and spike down towards the next 
stop at $45 because the question of 'where is the bottom' always 
remains.  Some analysts are now coming out with recommendations 
on ADRX because of the attractive share price, so be cautious of 
this sentiment.  This week Wasserstein Perella Securities 
reiterated a Strong Buy rating and Gruntal & Co reiterated their 
Outperform.  Both firms also issued price targets at $82 and 
$87, respectively.  On the other hand, if you're looking to jump 
in the game now and play the prevailing range, enter on downward 
bounces off the 10-dma ($53.43) and the 5-dma ($52.88). 

BUY PUT MAY-55 QAX-QK OI=105 at $9.38 SL=7.00
BUY PUT MAY-50*QAX-QJ OI=305 at $4.25 SL=2.50
BUY PUT MAY-45 QAX-QI OI= 21 at $3.13 SL=1.50

Average Daily Volume = 583 K

PG - Procter & Gamble $59.75 (-9.19)

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.

An earnings warning is a sure way to lose unhappy investors,
but PG is evidence that it can actually get worse.  After the
warning in early March, the stock dropped into the low $50's.
Just as it was beginning to show some life, the actual earnings
came out last week, barely matching the reduced estimates.
Citing increasing costs and decreasing margins didn't endear
the company to investors this week as the stock gave up $9.19
and moved below the 30-dma ($61.68).  The stock is now below all
of its moving averages and will have a hard time scaling the
many levels of resistance now above it.  With interest rate
fears gaining more focus, investors are moving out of the "old
economy" stocks and into high growth NASDAQ stocks.  The summer
doldrums are just around the corner and there appears to be
little to motivate investors to place their money in stocks
like PG.  Adding more weight to the load PG must move to
impress investors was the AG Edwards downgrade on Wednesday.
The stock is now sitting right at the $59-60 support level and
further weakness in NYSE stocks could be the catalyst to push
PG down even further.  The only positive factor for PG is the
fact that selling volume appears to be slowing.  Keep this in
mind as it could be an indication of a bottom forming.  Further
declines will likely be met with support near $57 and then $55.
Use failed rallies to resistance near $62 as an opportunity to
enter new positions.

BUY PUT MAY-65*PG-QM OI=2514 at $6.00 SL=4.00
BUY PUT MAY-60 PG-QL OI=2260 at $2.94 SL=1.50

Average Daily Volume = 7.45 mln

HNZ - H.J. Heinz Company $34.00 (-3.63)

H.J. Heinz has more than 5,700 products.  Heinz is one of 
the world's top food producers.  The company makes ketchup,
condiments, infant foods, and pet food.  Heinz gets nearly half
its sales from overseas operations, mainly in Australia, Canada,
New Zealand, the UK, and Northern Europe.  The company is
emphasizing its expansion in developing markets where ketchup 
and other processed foods aren't yet standard dinner fare.

The distasteful food stocks can't seem to catch up with the rest
of the market.  For the past year, as tech stocks have blossomed,
the food sector has fallen out of favor.  Snack food maker,
Nabisco (NA) reported a 66% increase in earnings last week and
easily surpassed Wall Street estimates, yet the stock fell.  The
same story holds for Kellogg (K), the company beat analysts views
but the stock lost ground after the announcement.  Credit Suisse
First Boston food industry analyst, David Nelson, actually has
a Sell rating on K.  For a stock like K to actually garnish a
Sell rating bodes poorly for the rest of the sector.  In fact,
HNZ also has an analyst recommending a Sell.  Those Sell ratings
are few and far between on Wall Street, make perfect stocks for 
a put play.  The problems faced by K and NA also hamper HNZ.  The
company faces slowing revenue growth and is suffering from a lack
of new products.  But most importantly, HNZ continues falling
because of sector weakness.  As K, NA, and the other food stocks
continue to fall, so goes HNZ.  With the resurgence in big name
tech stocks last week, investors have left the food group and
moved back into the companies that are growing 30-40% a year.
Turning to the chart, we'll see that HNZ enjoyed a brief rally as
the tech sector got hammered two weeks ago.  But the weakness has
returned to HNZ as money has left the stock.  Watch for support
to fail, a move below $34 may provide a good entry point.  If
the stock rallies, look for it to bump against resistance at
$36, wait for it to reverse and confirm direction as a second
entry point.

BUY PUT MAY-40 HNZ-QH OI= 10 at $6.25 SL=4.00 low OI
BUY PUT MAY-35*HNZ-QG OI=151 at $1.88 SL=0.75 

Average Daily Volume = 1.55 mln

LOW - Lowe's Companies Inc. $49.50 (-5.81)

Lowe's Companies is the world's second largest home improvement
retailer, serves more than four million do-it-yourself retail
and commercial business customers weekly through more than 580
stores in 39 states.  Headquartered in Wilkesboro, N.C., Lowe's
is the 18th largest retailer in the U.S. as well as the 40th
largest retailer worldwide.  The 54-year-old company employs 
more than 98,000 people.

How "low" can they go?  Ok we'll stop, but you get the idea.
Lowe's share price has fallen on tough times recently.  Their
main competitor Home Depot hasn't faired much better, but LOW
seems to have taken the brunt of the decline so far.  The 
whole retailing sector has suffered since the middle of April
when selling in the broad markets began.  There has been no
company specific news to push Lowe's down, simply a lack of
buyers.  Some point to the Greenspan effect as being the culprit,
behind the recent weakness.  Others believe investors have
began to focus on tech issues leaving the retailers and the
the old world stocks in the dust.  Several analysts have actually
upgraded LOW in the past two weeks.  CIBC World Markets recently
initiated coverage with a Buy rating and price target of $80.
AG Edwards upgraded Lowe's from a Maintain to a Buy rating with
a price target of $75.  Both firms said they believe the company
is well positioned to gain market share and compete successfully
head-to-head with Home Depot(HD) within most, if not all markets.
While over the long-term we would tend to agree with most of
the analysts, LOW is heading south now.  Most signs still point
for the slide to continue.  LOW lost 7% on Friday, on heavy
volume.  Breaking the $52 area, that had provided support in
the past, was not a good sign for those looking for LOW to
turn-around.  Lowe's may be getting somewhat oversold and a
bounce back to the $52-$54 area followed by further weakness,
could provide a very good entry point.  There is little in the
way of major support until the $40 level.  Unless buyers come
to the rescue, that could be the next stopping point and the
answer to the question of just how "low", Lowe's can go.

BUY PUT MAY-55*LOW-QK OI=228 at $6.25 SL=4.25
BUY PUT MAY-50 LOW-QJ OI=578 at $2.94 SL=1.50

Average daily volume = 2.05 mln

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The Option Investor Newsletter                     4-30-2000  
Sunday                                                5 of 6


Charting Basics: An Introduction to Candlesticks..

Candlestick charts are relatively simple to interpret and the
analysis techniques are useful to all types of investors.  The
study of historical candlestick patterns can be used alone or in
combination with other types of charting to provide clues about
future market direction.  

The most significant difference in candlesticks is the manner in
which an issue's open, high, low, and close alters the look of
the individual chart.  This unique and exciting visual depiction
is often described as an enhanced, three dimensional bar-chart.
The similarities between these two common systems are numerous
but the major difference is that candlestick charts can convey
signals not available from simple bar charts.  In fact, there are
a number of patterns that provide much better entry signals than
more traditional charting techniques.  Drawing a daily bar chart
requires an opening price along with a high, low, and close.  The
same data is used to construct a candlestick chart but the final
result is much more revealing.  The thick part of the candlestick
line is called the "real body."  It represents the range between
that session's opening and closing prices.  When the real body is
filled-in (or black), the close of the session was lower than the
open.  When the real body is empty (or white), the closing price
was higher than that of the open.  The thin lines above and below
the body are called the "shadows."  The shadows reflect the high
and low price extremes during the day's trading.  The top of the
upper shadow denotes the high of the session while the bottom of
the lower shadow is the low of the session.  In most cases, the
real body is the essential price movement whereas the shadows are
generally considered less relevant fluctuations in price.


The chart above illustrates some common candlestick lines.  The
long, black candlesticks reflect a bearish period in which the
market opened near its high and closed near its low.  In contrast,
the open bodies represent bullish periods.  Candlesticks with
short bodies (spinning tops) are generally neutral indications
of the closely fought battle between buyers and sellers.  Lines
with horizontal bars instead of real bodies are called doji's.
A doji occurs when the issue opens and closes at or very near the
same price (although the lengths of the shadows can vary).  Some
technicians also refer to the candlesticks as yin and yang lines.
The yin line, referred to as "in-sen" in Japan, is simply another
name for the black candlestick.  The yang line or "yo-sen" is the
Japanese term for the white candlestick.

As with most forms of technical analysis, the key premise is that
past price behavior can be used to forecast future trends.  The
wonderful feature of candlestick charting is most traders can
easily discern price tendencies or patterns that would have been
difficult or impossible to identify by more conventional means.
As with any system, these signals should always be viewed with
regard to other indications from the instrument being evaluated.
With dedication and commitment, you will discover which patterns
work best for your style of trading and the market in which you
participate.  Next week, we will help you begin that process.

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return! 

Stock  Price  Last   Call  Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

SPGLA   7.81   8.25   MAY   7.50  1.19  *$  0.88  14.4%
SPLH   12.06  12.88   MAY  10.00  2.69  *$  0.63   7.3%
MATK   15.50  14.38   MAY  12.50  4.13  *$  1.13   7.2%
WWFE   15.63  17.06   MAY  12.50  3.88  *$  0.75   6.9%
UGLY    7.50   7.59   MAY   7.50  0.50  *$  0.50   6.2%
BBBY   39.06  36.69   MAY  32.50  8.25  *$  1.69   6.0%
ANET   10.56  12.38   MAY   7.50  3.63  *$  0.57   6.0%
PSSI    9.13   8.59   MAY   7.50  2.19  *$  0.56   5.8%
IM     18.88  19.69   MAY  17.50  2.25  *$  0.87   5.7%
MATK   16.63  14.38   MAY  12.50  4.75  *$  0.62   5.7%
APC    35.81  43.44   MAY  35.00  2.88  *$  2.07   5.5%
LPNT   16.38  17.13   MAY  15.00  2.25  *$  0.87   5.4%
NUHC   22.13  17.88   MAY  17.50  6.00  *$  1.37   5.3%
CAR    20.81  22.25   MAY  20.00  1.94  *$  1.13   5.2%
PIR    10.50  11.38   MAY  10.00  1.00  *$  0.50   4.6%
MRL    26.88  26.00   MAY  25.00  3.25  *$  1.37   4.2%
ACF    17.63  18.69   MAY  15.00  3.13  *$  0.50   3.7%
BSX    21.75  26.50   MAY  20.00  2.50  *$  0.75   3.4%
DGX    44.50  58.19   MAY  40.00  6.00  *$  1.50   3.4%
CNJ     8.13   6.06   MAY   7.50  1.50   $ -0.57   0.0% 

*$ = Stock price is above the sold striking price.


Cole National (CNJ) continues to weaken and the issue is testing
the February low of $6.00.  Friday's heavy volume on a down day is
a worrisome indication; an exit may be prudent.  Monitor Bed Bath
& Beyond (BBBY) as it moves towards support.  Marine Drilling (MRL)
managed a small rebound but without much volume support.  Rolling
down to the June $22.50 strike is a viable option, offering a new
cost basis of $21.56.  Nu Horizons (NUHC) is also a candidate for
roll-out/down, with the June $15 strike providing a new cost basis 
of $14.06.  As with any trading strategy, the game plan often 
changes from making money to preserving capital.


Sequenced by Company

Stock  Last  Call  Strike Option  Last Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid  Intr Basis Expiry  Return

ALSC   20.38  MAY  17.50  ASU EW  3.63 248  16.75   21     6.5%
ANET   12.38  MAY  10.00  QTE EB  2.88 512   9.50   21     7.6%
BWEB   23.44  MAY  15.00  UBW EC  9.00 46   14.44   21     5.6%
CEGE   18.69  MAY  15.00  UCG EC  4.50 48   14.19   21     8.3%
MXTR   11.94  MAY  10.00  MQL EB  2.38 526   9.56   21     6.7% 
PSIX   23.19  MAY  15.00  SQP EC  8.88 0    14.31   21     7.0% 
RXSD   19.25  MAY  15.00  RKQ EC  5.13 1044 14.12   21     9.0%

Sequenced by Return 

Stock  Last  Call  Strike Option  Last Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid  Intr Basis Expiry  Return

RXSD   19.25  MAY  15.00  RKQ EC  5.13 1044 14.12   21     9.0%
CEGE   18.69  MAY  15.00  UCG EC  4.50 48   14.19   21     8.3%
ANET   12.38  MAY  10.00  QTE EB  2.88 512   9.50   21     7.6%
PSIX   23.19  MAY  15.00  SQP EC  8.88 0    14.31   21     7.0% 
MXTR   11.94  MAY  10.00  MQL EB  2.38 526   9.56   21     6.7% 
ALSC   20.38  MAY  17.50  ASU EW  3.63 248  16.75   21     6.5%
BWEB   23.44  MAY  15.00  UBW EC  9.00 46   14.44   21     5.6%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even 
point, DE-Days to Expiry, MR-Monthly Return.


ALSC - Alliance Semiconductor $20.38 *** Change of Character ***

Alliance Semiconductor designs, develops and markets high
performance memory and memory intensive logic products to the
networking, telecommunications and instrumentation, and personal 
computer industries.  They produce static random access memories
and dynamic random access memories, as well as a group of single
power supply flash memory products.  Alliance's fourth quarter
revenues increased 23% from the previous quarter and 108% from 
the same quarter last year.  The company continues its share
buy-back program and an about face upgrade by Needham & Co. bodes
well for the future.  The recent rally on heavy volume that
crested last week's high suggests a bullish change of character.

MAY 17.50 ASU EW LB=3.63 OI=248 CB=16.75 DE=21 MR=6.5%

Chart =


ANET - ACT Networks $12.38 *** Favorable Earnings ***

ACT Networks develops, manufactures, and markets multi-services
access products that enable the convergence of voice, video and
data onto one managed network. Service providers and enterprise
customers use their products to build converged networks that 
are bandwidth efficient, cost-effective and easy to manage.  
ACT Networks has reversed its downtrend and Tuesday's earnings
report showed revenue increased sequentially, up 29%, as the 
company beat estimates and reported a $0.04 loss.  Gross margins
increased to 53.5% this quarter and recently announced contracts
suggest the trend will continue.  The technical breakout was on
strong volume and completed a "W" bottom formation with a neck-
line above the sold strike.

MAY 10.00 QTE EB LB=2.88 OI=512 CB=9.50 DE=21 MR=7.6%

Chart =


BWEB - BackWeb Technologies $23.44 *** Internet Turnaround? ***

BackWeb Technologies is a provider of Internet communication
infrastructure software and application-specific software that
enables companies to communicate business-critical, time sensitive 
information throughout their extended array of customers, partners,
and employees.  Its products efficiently disseminate this info 
across a network of any speed by automatically adapting the rate 
of transmission to match available bandwidth.  Increased demand 
for BackWeb's e-business solutions across all of its core markets
drove revenue growth to 117% over the prior year and 13% growth 
over last quarter.  BackWeb's products are used by many businesses,
including Cisco, Compaq, and Hewlett-Packard.  With "media" (CNBC)
speculation that the Internet sector has bottomed, BackWeb climbed
$5.00 Friday on heavy volume after its favorable earnings report. 
A pullback next week should offer a better entry point.

MAY 15.00 UBW EC LB=9.00 OI=46 CB=14.44 DE=21 MR=5.6%

Chart =


CEGE - Cell Genesys $18.69 *** Technicals Only ***

Cell Genesys is engaged in the development and commercialization
of gene therapies to treat major, life threatening diseases,
including cancer and AIDS.   Their clinical programs include GVAX
cancer vaccines in Phase I/II studies to treat  specific types of
cancer, and T cell gene therapy for AIDS, which is undergoing
Phase II testing.  Cell Genesys has moved into a Stage I base
after correcting from its (and the biotech sector) meteoric rise 
in February.  Buying pressure has returned since the end of March
and the technicals suggest a lateral to slightly bullish future.
As with any biotech stock, thorough research is required.  

MAY 15.00 UCG EC LB=4.50 OI=48 CB=14.19 DE=21 MR=8.3%

Chart =


MXTR - Maxtor $11.94 *** Disk Drive Sector ***

Maxtor is a leading supplier of information storage solutions.  
The Company has been the fastest-growing supplier of hard disk
drives over the past two years, more than doubling its share of
the desktop market during that time.  Maxtor reported favorable
earnings this week and the merger announcement of Komag and HMT 
only added fuel to the rally fire.  Contracts with Dell and HP
suggest that gross margins will continue to improve.  Will the
speculation on future mergers within the disk drive sector help
propel the price higher?  The technical picture is bullish with
Friday's action completing a "W" bottom formation on heavy volume.

MAY 10.00 MQL EB LB=2.38 OI=526 CB=9.56 DE=21 MR=6.7% 

Chart =


PSIX - PSINet $23.19  *** Metamor Merger! ***

PSINet is a global provider of Internet access services and
related products to businesses.  They provide dedicated and dial
up Internet connections in 90 of the 100 largest metropolitan
statistical areas in the United States, and in 12 of the 20
largest global telecommunications markets, with operations in
Canada, Europe and Asia.  PSINet appears to have bottomed when
it reacted favorably to Metamor Worldwide's (MMWW) comments that
the company plans to complete its merger with PSINet.  When 
PSINet acquires Metamor, it will gain a controlling interest in
Xpedior (XPDR), Metamor's "e-commerce" consulting arm.  Revenue
at Xpedior reportedly grew 83% this quarter to $51 million.  
This is for speculators only who feel PSINet is undervalued at
$23.19, and would be even more so at a cost basis of $14.31.

MAY 15.00 SQP EC LB=8.88 OI=0 CB=14.31 DE=21 MR=7.0% 

Chart =


RXSD - Rexall Sundown $19.25 *** High Volume Breakout! ***

Rexall develops, manufactures, markets and sells vitamins, 
nutritional supplements and consumer health products.  They 
distribute their products through sales to retailers, direct
sales through independent distributors and mail order.  With
favorable earnings, a law suit dismissed, new coverage, and 
the unloading of its mail order division to NBTY, Rexall is
climbing out of a rounded bottom formation (look at a two year
weekly chart).  Friday's move on heavy volume almost took out
last year's high and suggests a possible Stage II breakout.  We
favor a cost basis near the 150 dma which has provided technical
support over the last several months.

MAY 15.00 RKQ EC LB=5.13 OI=1044 CB=14.12 DE=21 MR=9.0%

Chart =


By: Matt Russ

Stock  Stock   Strike Option   Option Margin Percent Support
Symbol Price   Price  Symbol   Price  At 25% Return  Level  

ADBE   120.94   110   AXX-QB    5.13   3024   17%     110
AETH   166.44   145   HEX-QI   12.38   4161   30%     160
AFFX   135.06   120   FIQ-QD    8.13   3377   24%     120
AKAM    98.88    85   RWU-QQ    4.75   2472   19%      80
ALTR   102.19    95   LTQ-QS    4.50   2555   18%      90
AMAT   101.88    90   ANC-QR    3.88   2547   15%      90
AMCC   128.81   115   AZV-QC    5.88   3220   18%     115
BRCD   123.63   110   UZB-QB    6.13   3091   20%     105
BRCM   172.31   160   RDU-QL    8.38   4308   19%     160
CHKP   173.31   155   YKE-QK   10.63   4333   25%     160
CIEN   123.56   110   EUQ-EB    5.38   3089   17%     110
CREE   145.50   130   RNC-QF    6.50   3638   18%     125
EBAY   158.88   145   QXB-QI    6.13   3972   15%     155
ETEK   204.75   185   FNY-QQ    8.75   5119   17%     180
GLW    197.50   190   GRJ-QR    8.63   4938   17%     180
INKT   153.94   140   KYQ-QH    7.25   3849   19%     140
ITWO   129.19   110   QYJ-QB    4.75   3230   15%     110
JNPR   212.63   190   JUX-QR    8.75   5316   16%     190
MNMD   122.94   115   MAQ-QC    5.88   3074   19%     120
MU     139.50   130    MU-QF    6.25   3488   18%     130
NSOL   148.00   130   JNV-QF    6.00   3700   16%     130
PDLI   101.50    85   PQI-QQ    4.63   2538   18%      85
PHCM    84.00    70   UGE-QN    3.50   2100   17%      70
PMCS   191.88   170   SZI-QN    7.13   4797   15%     170
PWAV   208.00   180   AHV-QP    9.50   5200   18%     180
QLGC   100.31    90   QLC-QR    5.50   2508   22%      90
RFMD   104.00    90   RFX-QR    4.38   2600   17%      90
SDLI   194.94   175   YAL-QO    9.50   4874   19%     180
SWCM    80.88    65   UGM-QM    4.63   2022   23%      75
TER    110.06   100   TER-QT    5.75   2752   21%     100
TERN    93.00    80   TUN-QP    5.63   2325   24%      85
VRSN   139.50   120   XVR-QD    5.75   3488   16%     120
VRTS   107.25    95   VUQ-QW    4.38   2681   16%      95
VSTR    99.00    85   UVT-QQ    4.50   2475   18%      85
YHOO   130.19   120   YMM-QD    5.13   3255   16%     120

To download an excel spreadsheet version of this list, click 
here:  http://www.OptionInvestor.com/downloads/hpapr-30.xls



AGGRESSIVE   SELL PUT MAY-115 AXX-QC at $7.00 = 23%    
MODERATE     SELL PUT MAY-110 AXX-QB at $5.13 = 17%



AGGRESSIVE   SELL PUT MAY-100 LTQ-QT at $6.50 = 25%    
MODERATE     SELL PUT MAY- 95 LTQ-QS at $4.50 = 18%



AGGRESSIVE   SELL PUT MAY-135 MU-QG at $8.25 = 24%    
MODERATE     SELL PUT MAY-130 MU-QF at $6.25 = 18%

DISCLAIMER:  Before entering any of the positions listed above, 
you need to understand your risk tolerance.  Selling puts can 
be a High-Risk endeavor depending on the strike you choose to 
sell.  For a greater return, you run a higher risk of being 
exercised.  Therefore, please consider other strikes than the 
ones listed below if you aren't comfortable with the one we 
choose.  We are gearing these towards higher-risk players.  In 
any case, you can always select a lower strike with a lower 
return if it better meets your suitability.


Trading Strategies: The Basics of Success...

Most people lose money in the market because they get caught up
in the excitement of the moment, acting on a whim or emotional
impulse rather than sound judgment and well planned strategy.

Regardless of scientific advances and world economic growth, the
more the stock market changes, the more it remains the same.
Companies, industries and technologies change.  Fashions, styles,
and trends come and go, but the fundamental characteristics that
identify a successful trading strategy remain basically the same.
The reason is simple.  The price of almost every market instrument
is determined by public demand and as long as people let hope,
greed and fear affect their judgment, stocks and options will
continue to be miss-priced, providing favorable opportunities for
those who use simple, proven strategies to profit in the market.
In most cases, a long-term outlook is essential to success.  Only
time can reveal the basic relationships that short-term gyrations
suppress.  History demonstrates how the market responds to a large
number of events such as inflation, recession, market crashes and
corrections, wars, presidencies and scientific discoveries.  From
the study of the past, future direction becomes clear.  Of course
history rarely repeats itself but the same types of events occur
again and again, creating similar market cycles.

There are many ways to trade and investment advice assails us from
an endless number of sources.  The difficulty is determining what
what really works and in most cases, experience is the only valid
teacher.  Fortunately, there is a more methodical, scientific way
to participate in the options market and build a diverse portfolio.
Here is a brief guide for options trading that may improve your
arsenal of strategies and techniques.

-Strive for a consistent, stable approach to portfolio profits.
The probability of success in most long-term strategies is much
better than those techniques that depend on a correct forecast
of the more immediate market outcome.

-Always follow a trading plan and use sound principles of money
management.  A trading plan will help you limit losses due to
emotion and impulse and greatly enhance the profits in winning

-Before opening any position, determine a profit/loss objective.
The use of proven techniques in developing profit targets and
stop-loss limits will significantly increase the probability of

-Be meticulous in your analysis of the market, its direction and
character before choosing a strategy or trading technique.  Let
the market tell you where it is going based on recent technical
patterns, trends in volatility and public sentiment.  Don't make
predictions without a thorough study of proven indicators.

-Trade with the trend and adjust your plan to the current market
conditions.  One benefit of trading options is you can change
strategies to fit the technical character and outlook for the
market.  The key is to be very selective with your positions
and initiate new trades only when circumstances indicate the
best opportunities.  Fortunately, there are numerous techniques
that work in all kinds of markets, trending, flat, volatile and

-The most important component of successful investing is to feel
comfortable with any strategy in which you participate.  You
should utilize only the techniques that appeal to your personal
philosophy of trading.  Using methods which you make you uneasy
will only lead to losses and frustration.  Trading too large a
position, selling premium in volatile markets, or buying time
value when the instrument is range-bound will eventually cause
grief and dismay.  In this business, poor judgment is quickly
punished and the only way avoid this outcome is with diligent
analysis and mechanical execution of the appropriate techniques.

Good Luck!

                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


Stock  Price  Last   Put   Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

ACF    17.63  18.69   MAY  15.00  0.75  *$  0.75  15.8%
ANLY    9.81  11.13   MAY   7.50  0.38  *$  0.38  14.1%
PPDI   15.56  16.81   MAY  12.50  0.56  *$  0.56  13.1%
OCR    14.31  15.19   MAY  12.50  0.50  *$  0.50  12.3%
LPNT   16.38  17.13   MAY  15.00  0.81  *$  0.81  11.8%
LYNX   20.88  24.00   MAY  12.50  0.50  *$  0.50  11.6%
PAIR   21.69  24.88   MAY  17.50  0.50  *$  0.50  10.9%
KR     19.06  18.56   MAY  17.50  0.75  *$  0.75   9.6%
RDC    26.69  27.94   MAY  22.50  0.63  *$  0.63   7.7%
CQ     19.75  24.44   MAY  15.00  0.38  *$  0.38   7.6%
VANS   17.06  15.13   MAY  15.00  0.56  *$  0.56   7.6%
SUPX   30.06  31.00   MAY  17.50  0.69  *$  0.69   7.5%
TOS    32.06  32.06   MAY  30.00  0.75  *$  0.75   7.1%
CYBX   23.81  20.38   MAY  17.50  0.50  *$  0.50   6.9%
VTS    28.06  24.00   MAY  20.00  0.56  *$  0.56   6.6%
BBBY   39.06  36.69   MAY  27.50  0.50  *$  0.50   6.5%
AFWY   20.06  18.63   MAY  17.50  0.38  *$  0.38   5.7%
JAKK   23.75  18.38   MAY  20.00  0.88   $ -0.74   0.0%

*$ = Stock price is above the sold striking price.


Many of the above listed stocks have corrected and appear to be
moving into a lateral consolidation phase.  Jakks Pacific (JAKK)
has moved back below its 150 dma and a close below $17.00 may be
an exit signal.  Of course, exiting now to preserve capital may
also be a prudent course of action.


Sequenced by Company

Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

CCCG   13.88  MAY  10.00  KDQ QB  0.31  0     9.69   21    14.5%
DRTE   22.88  MAY  17.50  DEQ QW  0.50  105  17.00   21    14.3%
ELNT   40.50  MAY  32.50  UET QZ  0.63  75   31.88   21    10.3%
EXCA   35.50  MAY  25.00  XQA QE  0.63  0    24.37   21    11.8%
NTPA   41.75  MAY  30.00  NQD QF  0.56  65   29.44   21     9.1%
RAMP   20.00  MAY  15.00  MUB QC  0.38  45   14.62   21    12.6%
TSEM   22.06  MAY  15.00  TWQ QC  0.50  0    14.50   21    14.7%

Sequenced by Return  

Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

TSEM   22.06  MAY  15.00  TWQ QC  0.50  0    14.50   21    14.7%
CCCG   13.88  MAY  10.00  KDQ QB  0.31  0     9.69   21    14.5%
DRTE   22.88  MAY  17.50  DEQ QW  0.50  105  17.00   21    14.3%
RAMP   20.00  MAY  15.00  MUB QC  0.38  45   14.62   21    12.6%
EXCA   35.50  MAY  25.00  XQA QE  0.63  0    24.37   21    11.8%
ELNT   40.50  MAY  32.50  UET QZ  0.63  75   31.88   21    10.3%
NTPA   41.75  MAY  30.00  NQD QF  0.56  65   29.44   21     9.1%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even 
point, DE-Days to Expiry, MR-Monthly Return.


CCCG - CCC Information Services  $13.88  *** On The Rebound! ***

CCC Information Services Group, formerly InfoVest Corporation,
is a supplier of automobile claims, information and processing
services and claims management software and other communication
products.  CCC Information's services enable automobile insurance
companies, automobile dealers and repair facilities to improve
efficiency, manage costs and increase consumer satisfaction in
the management of automobile claims and restorations.  CCCG is
organized into three divisions: Insurance Services, Automotive
Services and Consumer Processing Services.  Earnings are in and
the reports were favorable with record revenues and a bullish
forecast.  The chart suggests our cost basis is a reasonable
price at which to own the issue.

MAY 10.00 KDQ QB LB=0.31 OI=0 CB=9.69 DE=21 MR=14.5%

Chart =


DRTE - Dendrite Intl.  $22.88  *** On The Move! ***

Dendrite International develops, implements and services advanced
electronic territory management systems in the United States and
around the world.  The company combines advanced software products
with specialized support services including customization and
implementation services, technical and hardware support services
and sales force support services.  Dendrite's Healthcare Division
supplies sales force effectiveness solutions to the pharmaceutical
industry while the Consumer Division serves the over-the-counter
drug, cosmetics and consumer packaged goods industries.  Series 6,
the core software product offered to pharmaceutical customers, is
designed to be modular, allowing the customer to select a set of
functions most appropriate to its business requirements.  Solid
earnings and a new upgrade have helped this issue recover from the
recent sell-off.

MAY 17.50 DEQ QW LB=0.50 OI=105 CB=17.00 DE=21 MR=14.3%

Chart =


ELNT - Elantec Semiconductor  $40.50  *** Entry Point! ***

Elantec Semiconductor designs, manufactures and markets high
performance analog integrated circuits primarily for the video,
optical storage, integrated DC and xDSL markets.  The company
offers amplifiers, drivers, transceivers and multiplexers, most
of which are available in multiple packaging configurations.  The
company targets high growth commercial markets in which advances
in digital technology are driving increasing demand for speed,
high precision and low power consumption analog circuits.  Most
electronic system manufacturers in these markets typically have
requirements for analog circuits with precision, linearity, speed,
power and signal amplification capabilities.  The recent Nasdaq
pummeling had only a short-term effect on the bullish trend and
now the issue appears to be resuming its upward momentum.

MAY 32.50 UET QZ LB=0.63 OI=75 CB=31.88 DE=21 MR=10.3%

Chart =


EXCA - Excalibur Technologies  $35.50  *** Own This One! ***

Excalibur Technologies designs, develops, markets and supports
enterprise-wide, accurate, and secure knowledge-retrieval and
digital asset management software solutions.  Their comprehensive
suite of products include a number of unique products that enable
individuals to quickly capture, analyze, index, catalog, browse,
access, search, retrieve and use relevant information residing on
an enterprise's networks, Intranets, Extranets and the Internet.
The company licenses its software products directly to commercial
businesses and government agencies in North America, Europe and
other parts of the world and also distributes its products to end
users through license agreements.  A technically sound stock with
excellent upside potential.

MAY 25.00 XQA QE LB=0.63 OI=0 CB=24.37 DE=21 MR=11.8%

Chart =


NTPA - Netopia  $41.75  *** Sector Speculation! ***

Netopia provides Internet and electronic commerce infrastructure
that enables small and medium-size businesses to easily and cost
effectively connect to the Internet, establish and enhance their
presence, and conduct business and electronic commerce on the Web.
The company offers high-speed, multi-user, plug-and-play Internet
connectivity products and Web platforms for creating and hosting
Websites, creating and hosting electronic commerce stores, and
conducting real-time Internet communications.  NTPA's Internet
connectivity products enable small and medium-size businesses to
take advantage of high-speed Internet access technologies and, in
particular, digital subscriber line (DSL).  Its DSL Internet
connectivity products, including routers, digital service units,
filtering bridges, security appliances and modems, provide a
flexible and scaleable platform that can be integrated into
existing business infrastructures.  This position is simply a
speculation play on a severely oversold issue.

MAY 30.00 NQD QF LB=0.56 OI=65 CB=29.44 DE=21 MR=9.1%

Chart =


RAMP - Ramp Networks  $20.00  *** A New Range? ***

Ramp Networks is a leading provider of shared Internet access
solutions for the small office market.  The WebRamp product
family allows multiple users in a small office to share the same
Internet connection simultaneously while optimizing each user's
access speed.  The company's WebRamp product family is a flexible
and scaleable platform that provides software-based routing and
bridging functionality to deliver Internet-enabled applications
and services.  The products support existing analog phone lines,
as well as integrated services digital networks and emerging
access technologies such as digital subscriber line and cable
modems.  Their Optimized Link Technology enables multiple users
to access the Internet simultaneously through regular phone lines
and analog modems at up to three times the access speed of a
single analog connection.  Ramp is growing with the Internet and
DSL shipments boosted their revenue growth during the quarter
while new orders for broadband solutions exceeded expectations.

MAY 15.00 MUB QC LB=0.38 OI=45 CB=14.62 DE=21 MR=12.6%

Chart =


TSEM - Tower Semiconductor  $22.06  *** Entry Point! ***

Tower Semiconductor is an independent foundry provider of
semiconductor integrated circuit manufacturing and related
design services.  The company manufactures integrated circuits
(IC) on silicon wafers using its CMOS process technologies and
production capability and the proprietary designs of its
customers, specializing in embedded non-volatile memories and
CMOS image sensors.  In addition, the company also offers
certain integrated circuit design services.  Tower recently
signed a wafer supply agreement with National Semiconductor to
utilize Tower's core CMOS and Non-Volatile Memory technologies.
Tower will manufacture IC wafers for NSM over the next two years
and that will significantly enhance their revenues.  This play
simply offers a favorable cost basis for the issue.

MAY 15.00 TWQ QC LB=0.50 OI=0 CB=14.50 DE=21 MR=14.7%

Chart =


Title:  Blue-chips Slump as Technology Rally Continues...

Friday, April 28
Industrial stocks ended lower Friday on concerns of inflation and
rising interest rates.  Meanwhile the Nasdaq posted big gains as
bargain hunters shopped aggressively for technology stocks.  The
Dow closed down 154 points at 10,733 while the Nasdaq Composite
ended up 86 points at 3860.  The S&P 500 Index fell 12 points to
1452. Trading volume on the NYSE was light at 977 million shares,
with advances beating declines 1,751 to 1,181.  Nasdaq volume hit
1.57 billion shares with advances beating declines 2,626 to 1,539.
The 30-year U.S. Treasury rose 12/32, bid at 103 30/32, where it
yielded 5.95%.

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

Adobe Systems   ADBE  MAY95P/MAY100P   $0.68   credit   bull-put
Cypress Semi.   CY    MAY40P/MAY45P    $0.62   credit   bull-put
Temple Inland   TIN   MAY60C/MAY55C    $0.75   credit   bear-call

Our new positions benefited from the volatility in the morning
session.  Adobe and Cypress both opened higher but eventually
consolidated, allowing favorable entry opportunities in each
position.  With the small rally in the underlying issue, our
speculation play on Temple Inland also provided an entry at the
suggested target price.

Portfolio plays:

The Nasdaq continued its recent recovery today on strength in
biotech stocks and industry-leading issues.  The rally in big
name companies was sustained by solid earnings reports and
forecasts of future growth in the industry.  Most of these
issues have fallen significantly from highs earlier in the year
and investors are now taking advantage of the lower valuations.
With the renewed momentum, the technology index has moved through
a key resistance level near 3800 and based on the new confidence
in the group, many analysts are expecting the trend to continue.
In contrast, the Dow industrials closed in negative territory
for a third consecutive day as traders avoided the Old Economy
stocks.  On the S&P 500, industrial power, waste management and
insurance stocks advanced, while retail, banks and oil industry
issues consolidated.  Fears of rising interest rates resurfaced
after a new report, the Employment Cost Index, suggested there
was potential for increased inflation.  Once again the question
is when and by how much the Federal Reserve will raise interest
rates.  Some analysts believe the next increase will be in a
larger increment because the Fed does not want to influence the
election process by tightening monetary policy later in the year.
Blue-chip financial issues succumbed to profit-taking today and
interest-rate-sensitive stocks endured the worst losses.  Our
portfolio has two stocks in the group, Banc One (ONE) and Summit
Bank (SUB).  Fortunately, both of these issues are trading above
the sold strikes in our bullish, long-term positions.  Of course
most of our current plays are once again in the technology group
and based on the recent rally, the portfolio is in great shape.
Computer software stocks continued to rebound and the leaders in
that group were Network Associates (NETA) and Computer Associates
(CA).  The majority of small and mid-cap technology issues also
moved higher with Arrow (ARW), Andrew (ANDW), and Vodaphone (VOD)
leading the way.  Surprisingly, the top performer in the section
was Sepracor (SEPR) which rallied $8 to close near an April high
at $95.  Other positions in the Major Drug Sector also benefited
from the return to biotechnology stocks.  The Straddles Section
deserves mention as the newest winner in that group, MasTec (MTZ)
rose again Friday, moving the profit in our debit position to $5.

Questions & comments on spreads/combos to Click here to email Ray Cummins
                         - NEW PLAYS -
OXHP - Oxford Health Plans  $19.00  *** Earnings Break-out! ***

Oxford Health Plans is a managed healthcare company providing
health benefit plans to approximately two million members in an
around the Eastern United States.  Oxford's products include its
point-of-service plans, the Freedom Plan and the Liberty Plan,
traditional health maintenance organizations, along with third
party administration of employer-funded benefit plans, Medicare
and Medicaid plans, and dental plans.  The Freedom Plan is a
point-of-service health care plan that combines the benefits of
Oxford's HMO's with some of those conventional indemnity health
insurance by giving members the option at any time of using
the HMO plan or exercising their freedom to choose physicians
not affiliated with Oxford.  The Liberty Plan is a unique point
of service plan that offers lower premiums that the standard
Freedom Plan by allowing member groups to choose from a smaller
network of in-network providers.

Earlier this week, Oxford Health reported earnings that easily
surpassed expectations and its share value gapped-up and out of
a recent range on the news.  Officials at the company attributed
the performance to a capital restructuring and reduced medical
and administrative costs.  For the quarter, net income rose to
$28.8 million, or $0.34 a share, up from $3.2 million, or $0.04
a share a year earlier.  The consensus estimate was $0.26.  In
the wake of the earnings announcement, traders moved quickly
into call options while investors purchased the underlying issue.
Now the question is whether the stock will hold above its recent
consolidation area or succumb to a slow, post-earnings sell-off.

This position is based on recent increased activity in the stock
and underlying options.  From a technical viewpoint, this play
offers favorable risk/reward potential but it should also be
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and trading style.

PLAY (aggressive - bullish/debit spread):

BUY  CALL  MAY-15.00  OQX-EC  OI=3008  A=$4.00
SELL CALL  MAY-17.50  OQX-EW  OI=3349  B=$1.93
INITIAL NET DEBIT TARGET=$1.88-$1.93  ROI(max)=25% B/E=$17.00

Chart =


OCLR - Ocular Sciences  $16.50  *** Cheap Speculation! ***

Ocular Sciences manufactures and markets a broad line of soft
contact lenses.  Ocular sells its weekly disposable lenses under
the Hydron Biomedics, Clinasoft, Procon Softview, Flexvue and
Mediflex brands and other private label brands.   The company
has also introduced a lens to be marketed for daily replacement
in Japan, expects to introduce a lens for daily disposal in
Europe in 1999, and is evaluating introduction of such a product
in the United States.  Ocular is also a leading provider of soft
lenses marketed for annual replacement.  These lenses incluse
three brand names, Edge III, UltraFlex and Hydron.  Specialty
lenses include the Ultra T brand, designed to correct vision for
people with astigmatism, bifocal contact lenses that are sold
under the Echelon name, and Versa-Scribe tinted lenses.

In mid-March Wesley Jessen VisionCare 
(WJCO ) 
announced that it would will buy Ocular Sciences in an all-stock 
deal valued at about $413 million, forming the second-largest soft 
contact lens company in the world.  The two companies focus on 
different areas of the market and together, they would have combined 
annual sales of almost $500 million.  The acquisition would also 
give Wesley Jessen a broader line of products, enabling its sales 
force to maximize profitability with its line of goods.

Under the terms of the agreement, Wesley Jessen will exchange
0.721 share of its stock for each share of Ocular Sciences stock.
That values Ocular Sciences at $28 a share.  But it's not that
simple as there is now a suitor for Wesley Jessen.  Bausch & Lomb
has made a recent offer for the company and although there have
been problems with the negotiations, Bausch & Lomb is again ready
to submit its best price for Wesley Jessen.  Analysts have said
they expect Bausch & Lomb to offer as much as $40-$42 per share.
If you think that isn't complex, Wesley Jessen also says it is in
talks with an unnamed third party about a possible transaction.

In any case, we think Ocular will eventually benefit from all the
activity and this position offers a low-risk opportunity to
speculate on the outcome.

PLAY (speculative - bullish/debit spread):

BUY  CALL  MAY-15.00  QLO-EC  OI=195  A=$2.56
SELL CALL  MAY-17.50  QLO-EW  OI=660  B=$1.38
INITIAL NET DEBIT TARGET=$1.00-$1.06 ROI(max)=150% B/E=$16.00

Chart =


MTSN - Mattson Technology  $49.12  *** Reader's Request ***

Mattson Technology is a supplier of advanced, high productivity
semiconductor processing equipment used in the fabrication of
integrated circuits.  The company provides its customers with
semiconductor manufacturing equipment that delivers higher
productivity and advanced process capability.  Nearly all of its
tools are built on a single system, known as the Aspen platform.
Each Aspen system shares the same principal architecture, along
with the main mechanical design, robotics, systems software,
wafer handling interfaces and wafer flow design.  The Aspen
platform is designed to deliver high throughput and low cost of
ownership, enhancing the ability of manufacturers to achieve
productivity gains.  The company's other products include strip,
etch, deposition, rapid thermal processing and Epi systems.

With the earnings season in full swing and companies dying by
the numbers, Mattson Technology was not to be outdone.  The
report reflected a third consecutive quarter of record bookings
that produced net sales of $42 million, compared to $14 million
for the first quarter of 1999, an increase of 198%!  Mattson
reported a gigantic net income of $4 million compared to a net
loss of $2.4 million for the first quarter of 1999.  The income
for the first quarter also represents a three-fold increase over
last quarter.  Unfortunately, backlogs increased 140% percent to
$70.9 million, compared to $29.5 million in the first quarter of
At least they have business for the coming year.  The company
CEO said the strong financial results this quarter reflect the
effectiveness of their programs it appears that Mattson is well
positioned to benefit from the industry's incredible growth.

One of our subscribers requested a bullish position in this issue
and we think it warrants greater attention with the recent
technical break-out.  There is some indication of an overbought
condition but any consolidation should meet with additional
buying near the March and April highs ($43).  Our spread remains
in-the-money to allow a small amount of downside margin while
retaining a fair profit potential.

PLAY (aggressive - bullish/debit spread):

BUY  CALL  MAY-40  QQM-EH  OI=227   A=$9.62
SELL CALL  MAY-45  QQM-EI  OI=1092  B=$5.38
INITIAL NET DEBIT TARGET=$4.00  ROI(max)=25% B/E=$44.00

Chart =

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on these
issues.  Please review each play individually and make your own
decision about the future outcome of the position.
PDLI - Protein Design Labs  $101.50  ** On The Rebound! ***

Protein Design Labs uses computer modeling and unique genetic
engineering to develop SMART humanized antibodies, which combine
the binding site of a mouse antibody (the small part of the
antibody that attaches to its target) with approximately 90% of
a human antibody.  Clinical studies with SMART antibodies have
confirmed the hypothesis that because SMART antibodies use only
a very small amount of a mouse antibody, they will not cause the
immune responses common with mouse antibodies that have been used
in the past.  PDL's partner Hoffmann-La Roche currently markets
the first humanized antibody created by PDL, Zenapax, in the U.S.,
Switzerland and other countries.  Other PDL humanized antibodies
in clinical testing include SMART Anti-CD3 for transplantation
and autoimmune diseases and SMART M195 for myeloid leukemias.
Complementary to its expertise in antibodies, PDL also has a
program to develop novel antibiotics to treat infections.

The market has punished the biotech sector in recent weeks but it
appears the selling may have finally come to an end.  Investors
are now focusing on progress in each company's developmental
technologies and the most promising issues will recover soon.
PDLI's rally on Friday suggests that activity may already be

In this position, the option prices vary to a great extent so we
will simply place a target entry credit and monitor the position
for potential adjustments on Monday.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-60  PQI-QL  OI=72   A=$1.38
SELL PUT  MAY-70  PQI-QN  OI=196  B=$2.12
INITIAL NET CREDIT TARGET=$0.88-$1.00  ROI(max)=11% B/E=$69.00

Chart =


HAL - Halliburton  $44.19  *** Oil Sector Hedge ***

Halliburton provides a wide variety of services, maintenance,
equipment, engineering and construction to energy, industrial
and governmental customers.  The company offers its products
and services through three major business segments: the Energy
Services Group, which provides discrete services and products
and integrated solutions to customers in the exploration,
development and production of oil and gas; the Engineering and
Construction Group, which provides services to energy and
industrial customers and government entities worldwide; and the
Dresser Equipment Group, which designs, manufactures and markets
highly engineered products and systems, primarily for the energy

Last week Halliburton reported earnings and although they were
not exactly stellar, at least they beat the Street's consensus
estimates.  The company also announced the potential sale of the
Dresser Equipment Group and a share "buy-back" program.  While it
is not readily apparent as to what caused the rally, Halliburton
share value moved up and out of a recent trading range near $42.
In the event the stock falls back into the consolidation area,
we may choose to accept assignment and simply write calls on the
issue until a profit is returned.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-35  HAL-QG  OI=1504  A=$0.25
SELL PUT  MAY-40  HAL-QH  OI=925   B=$0.68
INITIAL NET CREDIT TARGET=$0.50  ROI(max)=11% B/E=$39.50

Chart =

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The Option Investor Newsletter                     4-30-2000  
Sunday                                                6 of 6


OEX Skybox: The Framework
Austin Passamonte

Let's decide if Skybox is for you. First of all, this environment 
is located at the home page of OptionInvestor's website.  For 
those who still can't locate the link, the listing for it is in 
the lefthand, shaded column beneath "Strategies" header.  If you 
don't see that column or icon, I'd expect your personal access 
might differ from a direct subscriber.

Skybox is a simple system but it's not easy...there is a big-time
difference!  If one trades it with hope of mirroring historical 
results as today's markets allow it must be followed verbatim.  
This requires discipline, patience and a complete understanding of 
the index market mechanics and behavior.  These factors are
critical for success!  Any breakdown or shortcut on the trader's 
part will reduce favorable returns.

In the Game Plan section a brief market summary is followed with 
a set of three benchmarks in both directions listing specific 
entry instructions.  For example, Friday April 28th saw the OEX 
market at 790.  A bearish entry point at 798 instructs us to 
purchase May 790 put options if the market trades into that point 
on its way up from 797 or lower.  If the market gaps open from  
790 to 798 or greater, we stand aside the put purchase.  Should 
the market trade into the 798 point AND we can fill our option 
order at a price of 15 ½ or less per contract, we are in.  A stop 
order is immediately placed at 13 and the trade is complete.  If 
the market then reverses, we are heading towards our profit 

Should the market continue to rise and trade into the 802 range, 
we then want to buy May 810 call options IF we can get them for 15 
or less per contract.  A stop order is placed at 12.75 and that
trade is complete. 

Here is where confusion lies.  Most traders are reluctant to buy a 
put while the market is rising into and possibly beyond the target
price.  People assume you only take a benchmark trade in the 
direction the market is moving at the time.  I understand the 
contradiction of logic here, but study this market for awhile and
you'll be amazed how many times the OEX moves steadily in a given
direction, hits one of these benchmark points and bounces right 
off to move sharply in the reverse direction!

These benchmarks aren't chosen at random: they are points of 
congestion you can see for yourself on the CBOE option chain 
provided in this website. Enter the OEX chain and look for larger 
volume and open interest contracts--that's right, you'll commonly 
find it at the benchmark strike prices.  This open interest on 
OEX option contracts may identify points of congestion that may 
act as support or resistance.

Let's say you & I go fishing on a favorite lake.  Our objective is
to catch a few big fish(winning trades) while tossing the little 
fish back (losing trades) soon as possible.  We are using live bait
(money) which is limited in supply.  The spot we choose to throw 
our lines in (benchmarks) are known to be big-fish holding areas. 
Our objective is to preserve our bait by using as little as 
possible on the small fish while waiting for big ones to bite.

We'll soon head home empty-handed if we simply gob the bait on our 
hooks and toss it in the water at random.  Big fish are far less 
numerous than little ones, so we must concentrate on fishing where
lunkars are likely to be found.  It wouldn't make sense to catch a
small fish or two and hold onto them hoping they will grow into 
big fish.  We all know what happens to most fish we hang onto over 
time.  That's right, they die, they stink and the aroma lingers 
too long.  Better to toss them back quickly and prepare for the 
next big one.  Trophy fish can't be caught while little ones 
malinger on your line.

That, my friends is the key to Skybox success.  You must use a 
very disciplined approach, follow all of the guidelines and take 
each trade without question.  It's impossible to tell which is the 
next big fish without casting your line and setting the hook when 
they nibble.

If you're unable to enter the market because an option's bid/ask 
is above the suggested entry price, this tells you that pricing
volatility is in favor of the sellers.  Should you choose to pay 
more for these options and hold them over the close of that 
trading day, you'll witness the price structure sag or even 
collapse at the end as market makers adjust their pricing back to 
"fair value".  In other words, if the Skybox suggests you pay 15 
for Friday's call options at the 802 benchmark and you decide to 
pay 16.50 at 802, this might work if you sell them later that day. 
However, if the market treads water from there and closes at 804 
you'll likely see the bid/ask spread slip to 15.50 - 16.50 after
4:00pm.  What did you accomplish?  Now you head into tomorrow's 
trading still holding today's over-valued option.  At best it 
will reduce the potential profit margin;  at worst it will 
accentuate your loss.  See the need for price discipline?

When the market is fair-valued and your target price splits the 
bid/ask spread you will usually get filled depending on the speed 
of your broker's execution, the market's pace and whether trading 
flutters around the target point long enough for you to be 
executed at that price.  Many of the variables on execution depend 
on which broker you use, which we'll cover fully in the tomorrow's 
section.  I can't and won't endorse specific brokers, but will 
suggest features to look for when choosing your own. 

In the scenario we're following now, you own both calls and puts 
around the key benchmark.  This type of straddle is actually a 
"long strangle" so let's use that term to keep it separate from 
actual straddles (call and put on same strike price, not different
ones) which we'll mention.  All we do now is sit back and wait for 
the market to move--we've got 'em surrounded! 

The stop loss prices we entered usually kick us out of the non-
performing leg of this strangle when the OEX price moves a point 
or two beyond the opposite leg's entry point.   Chances are very 
good the market has now penetrated mild resistance and the 
performing trade has added to mild support back at the benchmark. 
We hope for this one to move profitably into our targeted sale 
price soon.

A number of people have told me they simply buy a "long strangle"
at the middle of the benchmark for whatever cost average they 
choose and hang onto both. The hope here is to close one leg out 
profitably and then wait for the market to reverse and win on the 
other leg as well.  Folks, if you plan to do that on a regular 
basis I'd suggest you just close out the losing trade and mail me
half the money because you'll still get to keep the other half.   
Hold OEX options waiting for the market to return and you'll have 
the pleasure of watching precious premium melt away like ice in 
Phoenix this afternoon. The voice of experience speaks here.  
Trust me, in today's volatile markets you might get out with only 
a partial loss half the time you try this if fortune blesses you. 
Don't think so?  How would you like to still be holding May 710 
puts bought towards the bottom on April 17th when the index dove 
from 769 to 723 in a single day?   If you didn't sell that day or 
the next you are now out a small fortune!  What about the people 
who bought April 830 calls when the index was trading above 820? 
Do you think they held on long enough so far to get out intact? 
Look at the price charts and see for yourself.

It's possible to buy a long strangle of options listed in the 
Skybox at the key benchmark level IF you immediately place stops 
on both to ensure one will get kicked.  In this case, if the OEX 
index traded through 798, 799 and into 800 under Friday's 
instruction you can buy a strangle at an average price of the 
two suggested for each contract combined.  You'd pay a bit more 
for one and a bit less for the other and need to adjust stops 
accordingly, but the total cost would remain the same.  Understand 
this is an advanced, complex strategy to use and a tough order to
execute smoothly.  It is beyond most option trader's ability to 
pull this off consistently and I don't advise it.  The main 
negative is that without exception you always take at least one 
small loss per position, which sharply limits your overall 
profit/loss average.   

The other point where discipline is challenged takes place when 
the index trades back and forth repeatedly through a benchmark. 
It is our intention to enter and hold one suggested position any 
time the market moves through our target zone AND we can get our 
listed purchase price.  For example, if we got stopped out on a 
call or put position earlier but the market now comes back through 
our zone, we will then try to buy that position again if price 
conditions permit.  Should we still hold the calls or puts while 
the market moves back through them we do not buy a second similar
position...only one per type held at a time. 

These are times when personal fortitude will be tested greatly. 
The OEX has a habit of hanging around a given benchmark and 
chopping through it during sideways market conditions.  This is 
akin to catching one small fish after another while our bait 
supply slowly dwindles.  The historical data I've reviewed for 
Skybox shows a maximum of five consecutive losing trades before 
the next big win, and that occurred more than once.  A possibility
always exists that this historical drawdown streak could be 
exceeded in the future.  Even the very best traders can be tempted 
to stray a little from the system in hopes of breaking the streak.
Confidence and mettle will be tested each time it happens. 

Here's where undisciplined traders will wash out of this trading
system.  They freak out after waiting patiently to enter planned 
trades only to see one after another stopped for a loss.  If this 
goes on over a period of several days there are too many hours for 
the human mind to run the emotional gamut.  Think you're immune 
from this yourself?  During the crash week of October 1987 one of 
the biggest traders in our time, a multi-billionaire broke down 
and sold giant blocks of long S&P 500 futures contracts near the 
bottom of the market for a loss of several hundred million 
dollars.  This trade is legendary in the futures world.  Watching 
the market seesaw for several days was more than this icon's 
nerves could take and he threw in the towel just before the 
market began to recover. Do you agree that total discipline is 
not always an easy task when trading live with real money on the 
line? Yet this is exactly what it requires to stay in the water 
long enough to land three or four trophy fish in a row after that.

We've gone as far today as we can without discussing trading 
within limitations your brokerage may have.  Tomorrow we'll cover 
different scenarios that commonly occur and how we can deal with 
them.  That will conclude coverage of the Skybox, and we will 
finish up with conservative strategies part-time and discretionary
traders can use while using the Skybox platform as a valuable tool 
and indicator.  A discussion of money-management will be the most
important subject I can think of as well.  Study the OEX index's 
action today, and we'll visit soon!  
Trade the right direction. 

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

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

Anything else is too slow!




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