Option Investor

Daily Newsletter, Wednesday, 05/10/2000

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The Option Investor Newsletter           Wednesday  5-10-2000
Copyright 2000, All rights reserved.
Redistribution in any form strictly prohibited.

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

Also provided as a service to The Online Investor Advantage
MARKET WRAP  (view in courier font for table alignment)
       5-10-2000           High     Low     Volume Advance Decline
DOW    10367.80 - 169.00 10533.10 10292.10 1,006,469k   887  2,099
Nasdaq 3,384.73 - 200.28  3584.83  3367.06 1,580,113k   912  3,254
S&P-100  739.91 -  17.91   757.25   735.46    Totals  1,799  5,353
S&P-500 1383.05 -  29.09  1410.53  1375.14            25.2%  74.8%
$RUT     474.28 -  16.58   490.86   470.57
$TRAN   2863.17 -  40.99  2905.95  2851.20
VIX       33.30 +   1.59    34.83    31.37
Put/Call Ratio       .68

Is This Big Game Over For The Summer?

There was a winner in the Big Game lottery last night, but
winners on Wall Street were harder to find.  In fact, whoever
took home that record $366 million dollar lottery prize
probably did better than anyone CEO on Wall Street today.  The
markets went lower once again on interest rate and Fed worries.
I know, it sounds like a broken record.  Believe me I would
rather write about a more interesting catalyst, but that is the
dagger still sticking in the market's back.  Some are expecting
this summer lull to...well, last the entire summer.  So the
question is, should the new lottery millionaire be heading to
their broker to invest the prize or are they better off stuffing
it under their mattress?

The big fear out there today was the PPI, pending release on
Friday.  This was the report that started the carnage last
month before the CPI really dropped the hammer.  The higher oil
prices had finally cut into producer prices, signaling the
dreaded "I" word is flowing down the pipeline.  But, there are
others who are less fearful of the PPI.  Those are probably the
same individuals who are buying off support at the 200-dma on
the NDX.  Their feeling is that oil was hitting highs in March
near $35 a barrel and thus hindered the March PPI.  By mid-
April though, oil was back to $25 a barrel and thus should
translate into a more subdued PPI for April.  Even if it comes
in at estimates, you could get a relief rally based on how
high the fear level is.  Traders are digging in for a mammoth
number.  Not to mention, the Fed meets on Tuesday and that has
never been something to gleefully anticipate.  And bingo!  We
have a VIX that closed over 33.

This is tough market, no doubt about it, but I am leaning to
the side of the optimists, thinking a calm PPI and 50-point
move by the Fed may signal the end of the near-term troubles.
Yes, we could be in a Nasdaq bear market, but how long have
these Nasdaq bear markets really lasted in recent years?

One of the key technical indicators that we've been watching
is the 200-dma on the Nasdaq 100.  It has bounced off this
level during the recent crisis and did so again today.  The
NDX closed at 3245, a touch below the 200-dma at 3252.  The
Nasdaq closed heading lower once again and finished at 3384,
down 200.  That is a 5.6% move today and a 10.6% drop on the
week for the Composite.  Volume was still awful at 1.1 billion.
Volume continues to get weaker and weaker, which makes me wonder
if the sellers are running out of steam as most technicians
would suggest.  It makes sense too.  Buyers strike on one end
and diminishing sellers on the other.  Here is a chart of the
NDX and its recent ability to hold at the 200-dma.

The NYSE went along for the ride.  The DJIA dropped 168 points
to 10,367 on volume of 693 million shares.  There isn't a lot
to get excited about here.  Financials, Transports and Techs all
went down amidst the rate fears.  Utilities and Retail held up
a little better.  The S&P 500 lost 29 points while the bond
rose slightly to yield 6.17%.

The big loser of the day was Motorola.  MOT was hammered today on
news of a downgrade from Salomon Smith Barney analyst, Alex Cena.
In a change of heart, Cena foresees a negative latter half of 2000
for MOT.  Although he still believes that MOT will be among the
winners in the future wireless world, Cena is no longer
comfortable with his high-end estimates, which were based on
expectations of increased profit-margin improvement.  Cena
attributes his reconsideration to two things:  supply problems
and a lost contract.  MOT intends on being a frontrunner in the
move to data-enabled phones, yet they are finding that key
component supplies are already spoken for, or under-produced.
The main reason, according to Cena, is that MOT lost its contract
with Nortel Networks(NT) for a 3rd generation wireless network.
As a result, he cut MOT's rating from a Buy to an Outperform.
He also lowered his 12-month price target to $120 from $200, a
fairly significant move.  MOT took it on the chin today in a
volatile trading session, ending down $18.50 at $86.

Today was MSFT's opportunity to propose its own remedy for its
antitrust violations.  The company asked a federal judge to throw
out the government's proposal to break up the software giant,
stating that such a punishment is not warranted.  In its filing,
MSFT said, "Unlike the government's requested relief, which seeks
to reengineer the entire software industry and impose extremely
burdensome restraints on Microsoft that are wholly unrelated to
the case that was tried, Microsoft's proposed final judgment
fully redresses the antitrust violations found in this case."
They also vowed to appeal U.S. District Court Judge Jackson's
April ruling that MSFT violated antitrust laws.  MSFT's proposal
basically states that a break up remedy is extreme and that a
fair remedy would be imposing restrictions on the company's
future business conduct.  The software giant also argued that the
government has no justification for expediting its proposal.  The
government has until May 17th to respond.  MSFT's stock was off
$1.63, closing at $66.19.

AMAT posted record earnings for its second fiscal quarter after
the bell on Wednesday.  The company was in line with Street
estimates of $0.55 per diluted share, a net income of $454 mln, up
37.5% from first quarter earnings of $0.40.  Yet in today's market,
the motto is "beat or be beaten," and that's exactly what happened.
During regular session trading, AMAT was down $6 to close at
$84.63.  In after-hours trading, investors reacted to the report
by beating down AMAT shares another 9%, or $7.63, to $77.  Looking
at the company numbers, AMAT had record net sales of $2.19 bln, up
87% from the same period last year.  They also had record new
orders of $2.93 bln.  This is indicative of what AMAT CEO James
Morgan calls "a major industry upturn."  He expects to see
continued strong demand for semiconductor devices that enable
Internet-related and telecommunication products.  Regardless, AMAT
and other semiconductor stocks are coming under selling pressure
in after-hours trading.

In considering the thought that the we may continue to be range-
bound for awhile, keep these facts in mind.  Since 1950, the
markets have always gone up from May to December during a
presidential election year.  Greenspan knows this and his goal
may be to hike by 50-basis points to finally end this recent
run of hikes.  His last move during the 1994-1995 hikes was
by 50 and the Fed then sat pat for over a year before cutting
rates.  Also, traders love to jump the gun.  Any buying spurt
could feed off itself and quickly take the markets back up.  It
will definitely be selective buying, but when you get a chance
to buy companies like MOT 60% off the highs, it doesn't take
much enticing.  This still reminds me of October 1998 when so
many solid companies were trading down 50-70% and everyone was
sitting around scratching their heads as to why.  Needless to
say, that was one of the last buying opportunities for long-
term investors.

So watch cautiously for a jump-the-gun, don't fear the PPI, VIX
is at 33, relief rally.  You know, one of those everyday garden
variety types.  If the markets decide to tank big tomorrow then
I will be sitting here scratching my head as well.  On the bright
side, if the Nasdaq heads towards 3000, you have to wonder if
Greenspan would really hike rates by 50 in such an environment.
In times of panic, he has typically been market-friendly.

A quick morning market meltdown based on AMAT's earnings could
provide entry points, just make sure it starts to turn first.
I imagine it will be a quick dip.  Still not the kind of market
you would want to be putting on any big positions.  And in all
cases, when in doubt...get out.

Ryan Nelson
Asst. Editor


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IP Sweetens Offer For Champion
By Matt Paolucci

Champion International Corp. (CHA) on Wednesday said it
received a $75 a share bid from International Paper Co. (IP),
challenging Champion's merger plans with UPM-Kymmene Corp. of

The IP offer represents an almost 14 percent premium over
Champion's Tuesday closing price of $65.94 on the NYSE.
International Paper's shares fell $1 to close at $37.25, which
is also traded on the NYSE.

International Paper said its new bid values Champion at about
$7.3 billion, excluding $2.3 billion in net debt. Champion
International said its board believes the International Paper
proposal is superior to the UPM-Kymmene proposal.

UPM-Kymmene's offer works out to be roughly $70 per Champion

But UPM, the world's third biggest paper and board maker after
world leader IP and second-ranked Stora Enso, said the game
was not over and it would consider making a counter bid by the
close of business, New York time, on Friday.

"We are considering the situation," UPM's Senior Vice
President for Investor Relations, Kari Toikka, told Reuters.

Analysts were uncertain whether UPM-Kymmene would make a new
bid or walk away from the table, but it seemed that the all-
cash offer would not be enough to beat IP's part-cash-part-
stock offer.

"The situation is difficult for UPM as the bids for Champion
have raised the relative price level in the United States and
potential new aquisition targets know how much more they could
ask for," said analyst Eva Makela at Leonia Bank.

IP said back on Monday that it signed a confidentiality
agreement with Champion. UPM would get a break-up fee of
around $200 million if Champion decides to team up with IP.

The battle for Champion is part of an intensifying race by the
leading overseas and U.S. paper industry groups to lead
consolidation of the still-fragmented industry.

Champion International can't terminate its merger agreement
with UPM-Kymmene and accept the International Paper proposal
until after 5 p.m. ET on Friday. This is based on an original
agreement that lets UPM-Kymmene submit a counter proposal.

On Tuesday, Champion International said that if it accepts the
International Paper proposal, International Paper will make a
$75 a share cash tender offer for two-thirds of its shares
outstanding. A merger would follow which would convert the
remaining shares into International Paper common shares with a
market value of $75.

Champion said if IP's shares fall below $34.50 per share at
the time of the merger, each remaining Champion share would be
converted into 2.1739 International Paper shares.

International Paper expects to immediately start a tender
offer for the cash portion of its proposed transaction after
the three-day termination period between Champion and UPM-
Kymmene ends.

IP said the acquisition of Champion would generate savings of
$425 million a year because of integrated manufacturing
operations, reduction in overhead costs and improved
purchasing efficiencies.

The deal would add to International's Paper's earnings in the
first full year after completion.

In late day trading, IP shares were down $0.81 at $36.44,
while shares of CHA were $5.88 higher at $72.19.


Dear Boic Members ---

This Thursday, we are fortunate to have Mike Starr, Senior Vice
President of Options at Gruntal in NYC come to present information
to us about options.  (RSVP*) in our headline means RSVP if you
haven't already done so at 

Here are the essential details:

DATE:   May 11, 2000 -- Thursday night

TIME:   6 - 10 p.m.


ADMISSION:  $20 for members, $25 for nonmembers

DIRECTIONS:  Newton Sheraton is literally right on top of the
Mass Pike at Newton Corner exit.   Their telephone number is:
617-969-3010.   If you're coming from Route 128, you take Mass
Pike east to Newton Corner exit.  Go straight, and bear left;
when you hit the lights, bear left again, but not sharp left
because that will take you back on the Pike. Instead, go middle-
left, down Washington Street and you'll see the entry to the
hotel just past Applebee's on your left.  You can park in the
garage for a fee, or park on the street and walk over to the

MIKE's TOPICS for Discussion:

1)  Strategies for Today's Volatile Markets - Protective
    Puts and Hedgewrapper Strategies

2)  Common Option Misconceptions - Trading Stock Splits
    with Options

3)  Revisiting a Conservative Options Strategy - The
    Covered Write

4)  Insights into Equity Trades Through the Use of Unusual
    Option Premiums and Volume


Michael Starr is a Senior Vice President with a focus on Option
and Equity Trading for the Private Client Group at Gruntal & Co.,
LLC.  He also holds a Series 4 (Registered Options Principal
Classification).  Since joining the firm in 1992, Michael has
worked with both Institutions and Individuals to develop
strategies to both protect and enhance portfolio value.

Prior to joining Gruntal, Michael gained invaluable experience
working on the floor of the New York Stock Exchange for LIT

Michael has a Bachelor of Science in Management Degree from
Tulane University's A.B. Freeman School of Business.

Please send me all your questions that are relevant to these
topics so that Michael can address them: 

For example, I can think of one I'd like answered:  How do you
pick which strike prices and months to use when buying protective
puts or creating a hedgewrapper?

If you send me questions tomorrow, I can forward them to Mike
in time for Thursday night's event.

See you there!



How low will it go?
By Eric Utley

We've been digging, but have we found bottom?  The NASDAQ is
approaching its low of 3227 traced on April 17th.  Is it time
to buy the dip, or wait for the market to rise from the mire?
Let's take a look at a few indicators and see what they reveal.
First of all, Investment Advisor Sentiment is converging.
According to Investors Intelligence, around 48% of advisors are
bullish and 32% bearish.  The 32% bearishness is coming from an
April 14th low of 26%.  Secondly, the equity put/call ratio is
hovering around 0.64.  That's not real high, I'd like to see a
number above 1 to confirm a bottom.  Finally, there's that
V-word, volume.  The lack of selling capitulation suggests we
may drift lower on light trading, unless of course the buyers
return.  My final prognosis, be patient.

Well, CSCO beat estimates when they weren't expected to, and
traders sold the stock.  The downgrade of MOT and the
motherboard problems of INTC didn't help CSCO's cause Wednesday.
Of course the concerns over CSCO's valuation looms in traders'
minds.  It seems good earnings is not good enough.  While we're
on earnings, AMAT reported in-line profits after the market
closed Wednesday.  AMAT was expected to beat estimates, you
guessed it, the stock sold-off in after hours trading.  I think
the odds of winning the $350 mln lottery were a little better
than trying to pick a winning stock in this market.  Believe it
or not, there are still a few stocks reaching new highs.  The
energy sector has shown impressive relative strength in the past
few weeks, and the homely paper stocks have shown signs of life.
If you must go long right now, look for stocks making new highs
or breaking out of solid bases on heavy volume.

I have selected a couple of fallen leaders for the charts.
You'll notice that several of the stocks we look at are trading
at key technical levels.  If you have a stock you want analyzed,
send your requests to Contact Support.  Please
put the symbol in the subject line of the e-mail.


Qualcomm - QCOM

Thanks for loads of fine information thoughtfully done by you
and the OIN people.  What about QCOM, I own a load of it and
wonder if it is washed up, will come back or is has been?
Thanks a million, you folks are very good. - Jay

First of all Jay, thank you for the accolades, they are much
appreciated.  QCOM became an overnight sensation last year when
the company's code division multiple access (CDMA) wireless
technology gained acceptance.  Optimism among analysts remains
high for QCOM.  The company sold its cellular infrastructure and
handset businesses late last year.  Since both of those divisions
were unprofitable, QCOM's EPS is up substantially.  QCOM's CDMA
technology is becoming the wireless standard.  The company has
penetrated European and Asian markets with much success.
QCOM has been thought of solely as a cell-tech company.  But the
company is evolving into a major Internet force.  QCOM has
developed a high data rate (HDR) technology that enables wireless
access to the Web at extremely high speeds.  The company is
positioned to take advantage of two of the hottest sectors in
tech right now, wireless and the Internet.  QCOM was founded in
1985, and has since reinvented itself several times.  As long
as the company continues to execute and evolve, it should remain
a good long-term holding.

In the near-term, I don't think the QCOM story looks nearly as
rosy.  After Wednesday's sell-off, QCOM fell through the key
support level of $100, and is hovering above critical technical
levels.  The stock gapped down Wednesday morning, and volume was
higher than the past five trading days.  If the low of $92 holds,
QCOM might bounce back into its trading range between $100 and


Oracle - ORCL

Thanks. - Jack

I see you're a man of few words Jack, I like that.  I'll try to
provide a succinct analysis of ORCL.  But first, a little fun.
The battle of America's richest person is tightening as Oracle
CEO Larry Ellison is filling the gap on Bill Gates.  ORCL
introduced the $199 Internet machine last Monday.  The company
will target the education and consumer markets.  An ORCL
executive said, "We're going to sell a gazillion of these."  If
they succeed in selling a gazillion units, Ellison will probably
be worth more than Gates.

Forgive me, I'll get serious now.  ORCL is one of the strongest
and most profitable companies in tech sector right now.  The
stock has a strong long-term trend-line intact, but is in danger
of breaking it.  Also, ORCL is in the early stages of developing
a wedge.  The stock needs to continue to trade above its support
levels if it's going to move higher.  One thing that worries me,
the stock gapped down Wednesday morning, and traded lower on
relatively high volume.  Watch the stock closely in the next few
trading days to see if the long-term trend-line holds.


Conexant Systems - CNXT

Could you please let me know what your outlook is for Conexant.
It has good news about the company but the stock keeps going
down. - Ray

As you know, the semiconductor industry is an extremely cyclical
business.  Over the past month, a conflicting view about the
future of the semis has developed among analysts.  Many feel
that the chip business has peaked, and the good times are soon
to end.  While other analysts believe that the semis have
another two - three years of growth ahead.  If you look at the
analyst actions over the past two months, you'll see a host of
upgrades and downgrades.  I think it reinforces the fact that
Wall Street is uncertain about CNXT's future prospects.

Part of CNXT's decline in the past three months can be
attributed to a slew of acquisitions the company made during its
fiscal second quarter.  CNXT beat the 19 cent estimate by
reporting profits of 21 cents per share on April 19th.  But, if
you account for the merger related expenses, CNXT actually lost
$132 mln for the quarter ending March 31st.  Executives gave
analysts positive guidance during their last earnings
announcement, and said to expect around 25% earnings growth in
the coming year.  But traders have reacted with a more cynical
attitude recently.  The negative sentiment is clearly visible on
CNXT's chart.  You can see the big gap down in late March, and
the continued selling down to current levels.  Like the previous
charts of ORCL and QCOM, CNXT also is hovering above a critical
support level.  The next few days will be a trying test for the
stock.  If support holds, the stock might bounce.  But if it
fails, CNXT could easily fall to $30 or even lower.


VISX, Incorporated - VISX

VISX has been beaten down due to the insider trading suits.  It
shows that its earnings are still improving and has recently
received FDA approval of the next round of laser surgery
equipment.  It also has an attractive PE ratio.  Should this be
considered a long-term portfolio play or should it be avoided
due to the uncertainty about the outstanding suits? - Cleve

Once a darling of Wall Street, VISX has definitely seen better
days.  But, prospects may be improving for the laser maker.  The
company reported last week that they had settled several
lawsuits.  VISX settled the antitrust violations, the patent
dispute, and the breach of contract claims.  Wall Street is once
again warming up to the stock, seen by the three analyst
upgrades in as many months.  Most recently, Chase H & Q upgraded
the stock to a Buy on May 5th.  You're right about the
attractive PE ratio, at 15 times earnings, VISX is a compelling
value.  If the company can get its earnings growth back in line
it might be a good long-term investment.

The stock has formed an interesting chart pattern over the past
two months.  VISX has formed a picturesque cup-and-handle.  Some
technicians think that the cup-and-handle is the most reliable
chart pattern.  The stock has clearly formed the cup portion,
and should take about 2 - 4 weeks to form the handle, if it is
a true formation.  A breakout above $20 needs to be confirmed
by 1.5 times ADV or higher.  Additionally, the stock has the
unfilled gap above $20, which means there is very little
resistance above current levels.  Watch the stock closely in
the coming weeks for a breakout.


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.


Deja Vu
By David Popper

When we were kids, we would often play basketball.  Sometimes we
would be standing on the foul line imagining that if we hit the
shot, our team would win the NBA finals.  Often, we would miss and
then take a "do over."  A "do over" permitted us to relive the
experience and make it right.  With enough "do overs" our team
always won.  Unfortunately, life does not often provide "do overs".
A mistake on the job can cost you your career.  An unkind word can
cost you a friendship.  But in the market, a "do over" is always
possible.  The market does not remember your past mistakes and
does not care.  Substantially the same situation will emerge and
reemerge.  Though no situation is always identical, understanding
the tendencies of the market and how your particular stock acts
in that environment can help you trade more effectively the second
time around.

I am sure that it comes as no surprise to you that in the last
three months we have experienced a serious uptrend, a serious
downtrend, sideways action, another weak uptrend and now, another
downtrend.  These sudden changes can damage one trader's account
and yet be a boon to others.  I personally know many people who
have lost in excess of $1 million in the past two months.  I also
know those who have made substantial amounts of money.  Most of
those who made money this year suffered major losses in 1987, 1997,
or 1998.  In the debris of the losses, these serious students were
able to analyze their trades in light of the market conditions and
zero in on their cause of failure.  They realized, maybe for the
first time, that there is no easy way to make money.  There are
no gimmicks.  There are no magic formulas or eight secret steps
to market success.  Instead, they realize that there are 1,001
different ways to trade the market.

Based on one's temperament, one can trade options (long or short
or in the form of spreads, strangles, straddles, etc.), trade
futures, indexes, commodities, etc.  Every strategy has its owns
strengths and weaknesses that can only be learned through reading
and actual trading.  These traders analyzed not only their
trading strategies, but also their money management and emotional
makeup.  They eventually learned which strategies they are most
comfortable with and how much money they feel comfortable placing
at risk.  From experience, they learned to adhere to strict
trading rules, such as those constantly preached on this website.
They further developed their own list of favorite stocks which
hopefully are leading stocks in leading sectors of the economy,
such as networking, semis, etc.  They learned the tendencies of
these particular stocks and can recite almost from memory
their different levels of support resistance.

Finally, they have different strategies in trading these stocks
under different market conditions.  In essence, these traders
have learned how to take as much of the guess work out of their
trading as is possible.  By incorporating all that they have
learned, these traders are much more comfortable in any market
environment and exude a certain confidence that can only
be developed through such preparation.

These days, it is obvious that the volume is low on the up and
downside.  Institutions simply have not bought in yet.  The
market will be choppy between now and the upcoming Fed meeting.
In short, this is a day trader's market.  Perhaps after May 16
there will be a rally.  The point is that rally techniques will
not work in a day trader's market.  We have seen the same
situation last October and also in April.  If you are successful
during these downturns, trade the same way.  If you are not
successful, trade differently or do not trade at all.  Try to
survive this downturn better than you have any other downturn in
the past.

Personally, in this volatile time, I prefer to trade only half of
my account, leaving the other half to buy the bounces after dips.
Currently, I own BRCM and PMCS with covered calls against the
positions.  When support levels are broken, I repurchase the
calls cheaper and buy puts.  Specifically, I purchased BRCM at
$150 and PMCS at $152 two weeks ago.  I sold the May 180 calls on
PMCS for $22 and on BRCM for $22.75.  Both of these positions are
worth about $6 today.  Yesterday, I purchased puts at the $150
strike price in both stocks.  The idea is to allow the calls to
depreciate and the puts to appreciate.  The options have all moved
the correct way but I have lost ground on the stock.  This is
still better than I handled the last downturn, but maybe a
straddle would have been better.  At least owning strong stocks
that I know gives me at least the confidence that any downturn
should be temporary.  The learning continues.

In short, downturns will happen often.  You will have a chance
for another "do over".

Contact Support


ADBE - Adobe Systems $106.19 -6.13 (-13.50 this week)

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.

Most Recent Write-Up

ADBE's relative strength is simply amazing. Over the last 12
months, ADBE has managed to outperform over 93% of stocks in the
 market. Though a strong performer, ADBE isn't completely immune
to external factors affecting stock prices. The Barron's article
proved to be one of the events that can push ADBE lower. The stock
 gapped down Monday morning, and sold-off into Tuesday. Traders
fearing that ADBE is overvalued remembered that the stock sports
a P/E of 53, much lower than the average tech stock. That
revelation by investors sent ADBE into rally mode late Tuesday,
as the stock gained over $7 in less than an hour of trading.
However, the stock did give back much of its early gains in the
last ten minutes of trading Tuesday. It appears that the selling
was nothing more than profit taking, noting the weak volume in
the last ten minutes. The scare by Barron's wasn't enough to knock
ADBE out of its ascending channel that we've come to love. From
here, an aggressive trader might look for ADBE to rebound quickly
from its current levels. A conservative trader might wait for the
 valuation concerns to dissipate and watch for ADBE to clear
resistance above $117 before entering the play.


As the NASDAQ has sold off by 11% during the past three sessions,
ADBE has followed the selling trend.  Fortunately, it has found
support at $105, just above its 50-dma of $104.63.  That is a
solid level there.  Below that is $100.  ADBE is still in a decent
uptrend and entry on intraday dips could provide good trading
opportunity.  Resistance lies at $115.  Tomorrow's open will
probably be down, but look for the NASDAQ to find a bounce, as
well as individual tech stocks.  Use caution in entering any play
as the NASDAQ is sitting right at support.  Targetshoot based on
individual risk levels.

***May contracts expire in 2 weeks***

BUY CALL MAY-100 AEQ-ET OI= 149 at $10.00 SL=7.50
BUY CALL MAY-105 AXX-EA OI=  78 at $ 7.00 SL=5.25
BUY CALL MAY-110*AXX-EB OI= 732 at $ 4.38 SL=2.75
BUY CALL MAY-115 AXX-EC OI=1247 at $ 3.00 SL=1.50
BUY CALL JUN-115 AXX-FC OI=  88 at $ 9.88 SL=7.50

SELL PUT MAY-100 AEQ-QT OI= 505 at $ 3.38 SL=4.75
(See risks of selling puts in play legend)

Picked on Apr 11th at   $119.50    P/E = 58
Change since picked      -13.31    52-week high=$125.00
Analysts Ratings      4-7-3-0-0    52-week low =$ 27.50
Last earnings 02/00    est=0.43    actual=0.47
Next earnings 06-15    est=0.47    versus=0.35
Average Daily Volume = 2.41 mln


When even the good news is bad...

Equity markets fell sharply today on concerns of valuations in
technology stocks and fears of higher interest rates.  Both the
Dow and the Nasdaq suffered from extensive profit-taking after
bellwether issues IBM and Motorola forecast declines in future
growth.  Post-earnings activity in Cisco was also disappointing
and the long time market favorite continued to slide after a
story in Barron's magazine said the stock no longer commands a
premium share value.  Bargain-hunting lifted the major averages
from their midday lows but technology issues eventually pulled
the market to its knees.  Now the possibility of a test of the
April lows seems almost a certainty and the key is how to time
the recovery.  Until a major trend is reestablished, our focus
will be on conservative positions that have a high probability
with little downside risk.

Summary of Previous Picks:

Covered Calls: (Margin would double the listed Monthly Return)

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

BBRC    MAY    60    57.56   60.19   $2.44   8.1%
CY      MAY    45    42.06   48.31   $2.94   7.1%
INSUA   MAY    35    32.19   34.63   $2.44   6.2%
SEPR    MAY    75    70.75   97.50   $4.25   6.1%
AMD     MAY    60    55.25   79.94   $4.75   5.9%
TQNT    MAY    80    76.65   82.31   $3.35   5.8%
PDLI    MAY    85    82.71  107.13   $2.29   5.3%
PLXS    MAY    65    62.56   78.63   $2.44   5.2%
NVLS    MAY    50    48.06   49.81   $1.75   4.8%
AHP     MAY    55    52.75   58.19   $2.25   4.3%
TER     MAY    85    81.56   84.00   $2.44   4.0%
BRKS    MAY    70    66.88   69.06   $2.18   3.3%
PVN     MAY    85    80.38   81.56   $1.19   1.2% Weakening
CGNX    MAY    55    51.34   51.88   $0.54   0.9% Weakening
CSCO    MAY    68    62.88   58.50  -$4.38   0.0% at 150 dma

IMNX - Closed

Naked Puts:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

CY      MAY    40    38.56   48.31   $1.44  12.6%
BBRC    MAY    55    54.06   60.19   $0.94  10.8%
PLXS    MAY    60    58.75   78.63   $1.25  10.1%
NVLS    MAY    45    44.06   49.81   $0.94   9.7%
TER     MAY    75    73.50   84.00   $1.50   9.0%
SEPR    MAY    65    63.25   97.50   $1.75   8.8%
INSUA   MAY    30    29.06   34.63   $0.94   8.7%
TQNT    MAY    70    68.87   82.31   $1.13   7.5%
PDLI    MAY    70    69.19  107.13   $0.81   6.9%
STT     MAY    85    84.31  103.81   $0.69   6.0%
BRKS    MAY    60    58.94   69.06   $1.06   5.9%
AHP     MAY    50    49.12   58.19   $0.88   5.8%
PVN     MAY    70    68.75   81.56   $1.25   5.2%
CGNX    MAY    45    44.25   51.88   $0.75   4.8%

Naked Calls:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

PWAV    MAY   240   244.38  162.06   $4.38  21.0%
CMTN    MAY   115   117.19   72.00   $2.19  12.4%
JNPR    MAY   260   262.25  156.38   $2.25  10.4%
BRCM    MAY   220   222.00  145.00   $2.00  10.2%
TDS     MAY   120   121.13  102.50   $1.13  10.1%
ITWO    MAY   185   187.25   93.31   $2.25   9.5%
CHKP    MAY   270   273.25  153.75   $3.25   9.3%
AAPL    MAY   145   146.56   99.31   $1.56   7.8%
AMAT    MAY   125   126.13   84.63   $1.13   7.8%
NEWP    MAY   160   161.25  106.75   $1.25   7.3%

Bad news: The returns for the new plays in the Naked Calls section
last week were not converted to a monthly basis.
Good news: With only two weeks to expiration, the returns were
double the value listed.

New Candidates:

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.

BULLISH PLAYS - Covered Calls & Naked Puts

ARBA - Ariba  $67.63  *** Calling The Bottom! ***

Ariba is a provider of Internet-based business-to-business
electronic commerce solutions.  The Ariba Network is a single
global business-to-business electronic commerce network that
allows buyers and suppliers to automate business transactions on
the Internet.  Its Operating Resource Management System, the
Ariba ORMS application, enables organizations to automate the
procurement cycle within their internal Internet Protocol computer
networks, lowering the costs associated with operating resources
and other materials.

When it comes to Internet B2b, Ariba is the leader of the pack.
Unfortunately, with the recent market demise, there isn't much
in the way of positive news to discuss.  Our opinion is simply
this; regardless of the current attitude toward technology
issues, Ariba is an industry leader and a stock we want in our
long-term growth portfolio.  Technically, the issue appears to
be successfully completing a consolidation phase and we expect
the share value to benefit significantly from the next market

ARBA - Ariba  $67.63   Note: June Strikes

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call JUN 55   IRU FK  1        16.00    51.63     5.4% ***

Sell Put  JUN 50   IRU RJ  54        2.00    48.00    10.6% ***
Sell Put  JUN 55   IRU RK  67        3.38    51.63    15.6%

Chart =


CIEN - Ciena  $129.44  *** Up On A Down Day! ***

CIENA operates in the optical networking equipment market.  They
offer products for telecommunications service providers worldwide.
CIENA's customers include long distance carriers, competitive
local exchange carriers, Internet service providers and wholesale
carriers.  CIENA's LightWorks architecture enables next-generation
optical services and increases the efficiency of service-provider
networks by simplifying the network and reducing the cost to
operate it.

Cienna roared to a $9 gain today after announcing the company
announced it has agreed to a multi-year contract with Qwest.
Ciena officials said Qwest will buy equipment that improves the
capacity and management of its network, including an optical
transport system and optical core switch.  A spokesman for the
company said the new contract could be worth hundreds of millions
of dollars over the next 18 to 24 months.  Of course investors
are focusing more on earnings recently and CIEN's report is
scheduled for May 18, a day before this months expiration.
With any luck, the expected FOMC rate decision will bully the
market into a recovery rally and the stock will finish far
above our sold position.

CIEN - Ciena  $129.44

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  MAY 100  EUQ QT  7948      1.00    99.00    12.6% ***
Sell Put  MAY 105  EUQ QA  815       1.50   103.50    17.6%

Chart =


PLXS - Plexus  $78.63  *** New All-Time High! ***

Plexus provides product realization services to original equipment
manufacturers in the medical, computer (primarily mainframes,
servers and peripherals), industrial, networking, telecom  and
transportation electronics industries.  Product realization
consists of taking a product idea through the entire development
process, including manufacturing.  PLXS offers product development
and design, material procurement and management, prototyping,
manufacturing and assembly, and functional and in-circuit testing.

Plexus is one of the few technology issues that has survived
the recent sell-off and today the share value achieved a new,
all-time high.  The momentum is based on a positive outlook
for future earnings and a number of analysts are bullish on
the stock.  Last week, Dain Rauscher Wessels analyst David
Parrish started coverage of electronic manufacturing services
companies and his initial recommendation for Plexus was a
"Strong Buy"; 6-month price target of $103.  The rating
concurs with recent recommendations from Prudential, Chase
H&Q, AG Edwards and Thomas Weisel.  The technical outlook also
agrees with their fundamental analysis.

PLXS - Plexus  $78.63

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call MAY 70   QUA EN  89        9.88    68.75     6.1% ***

Sell Put  MAY 70   QUA QN  11        1.50    68.50    20.8% ***

Chart =


SEBL - Siebel Systems  $125.38  *** On The Rebound! ***

Siebel Systems is a market leader in enterprise-class sales,
marketing and customer service information systems.  They help
organizations to focus on increasing sales, marketing and customer
service effectiveness in field sales, customer service, telesales,
telemarketing, call centers, and third-party resellers.  They
design, market, and support Siebel Enterprise Applications, a
web-based application software product family designed to meet
the sales, marketing and customer service information system
requirements of all sizes of international organizations.

SEBL is another industry-leading issue that has managed a decent
performance amidst the punishing sell-off in technology stocks.
Now the stock is beginning to gain institutional favor and the
block-volume buying has increased over the last few days.  Our
outlook for the issue is neutral to bullish and any market rally
should propel the share value well clear of our cost basis.  In
the event of further consolidation, this company would certainly
be a candidate for any long-term portfolio.

SEBL - Siebel Systems  $125.38

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  MAY 105  SGW QA  581       1.13   103.88    12.3% ***
Sell Put  MAY 110  SGW QB  1623      2.00   108.00    18.4%

Chart =


TIN - Temple Inland  $52.63  *** Merger Speculation ***

Temple-Inland is a holding company with interests in corrugated
packaging, bleached paperboard, building products, timber and
timberlands, and financial services.  The Paper Group consists
of the company's corrugated packaging and bleached paperboard
operations.  Corrugated packaging includes the manufacturing of
container-board that is converted into corrugated packaging and
point-of-purchase displays.  Their bleached paperboard operations
produce various grades and weights of coated/uncoated bleached
paperboard, bleached linerboard and bleached bristols.  Temple's
Building Products Group manufactures building products including
lumber, plywood, particleboard, gypsum wallboard and fiberboard.
The company's Financial Services Group consists of savings bank
activities, mortgage banking, real estate development and
insurance brokerage.

Today's news in the bidding war for Champion International gave
paper stocks a bullish lift and Temple Inland rallied to a short
term high during the session.  Companies in this industry gained
attention recently after Champion (CHA) received a $6 billion
takeover offer from industry giant International Paper (IP).
Now Champion has received a $75 per share acquisition proposal
from IP. If the proposal is accepted by Champion, International
Paper will make a $75 per share cash tender offer for two-thirds
of the outstanding Champion shares, to be followed by a merger in
which each remaining share will be converted into International
Paper common stock with a market value of $75.  However, if IP's
stock is trading at less than $34.50 per share at the time of the
merger, each remaining CHA share would be converted into 2.17391
International Paper shares.

With IP's offer to buy a major company in the industry, investors
are speculating on other issues in the group and it appears this
stock is now in a bullish trend for the near-term.  Our position
is conservatively optimistic with little downside and a favorable
risk/reward ratio.

TIN - Temple Inland  $52.63

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call MAY 50   TIN EJ  1134      3.75    48.88     7.7% ***

Sell Put  MAY 50   TIN QJ  12        1.06    48.94    18.4% ***

Chart =


YHOO - Yahoo  $118.88  *** How Low Is Too Low? ***

Yahoo is a global Internet communications, commerce and media
company that offers a comprehensive branded network of services
to more than 120 million users each month worldwide.  As the first
online navigational guide to the World Wide Web, www.yahoo.com is
a major guide in terms of traffic, advertising, household and
business user reach, and is one of the most recognized brands
associated with the Internet.  They also provide online business
services designed to enhance their clients' Web services,
including audio and video streaming, store hosting and management,
and Web site tools and services.

Some bullish comments by Yahoo CEO Tim Koogle at the Chase H&Q
conference in San Francisco lifted the company's share value
today, even as the majority of technology stocks moved lower.
An optimistic outlook is just what the company needs as its
market capital has fallen significantly over the past four
months.  With the recent technical history, it's strange the
issue showed up on our "bottom fishing" search; oversold stocks
with consolidating patterns.  In any case, we are going to include
this position, based on the short-term support near $110 and the
aloof manner in which the stock has performed throughout the
technology sell-off.

YHOO - Yahoo  $118.88

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  MAY 95   YHV QS  306       0.88    94.12    12.1%
Sell Put  MAY 100  YHV QT  2453      1.25    98.75    14.1% ***
Sell Put  MAY 105  YMM QA  2219      1.75   103.25    16.7%

Chart =

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