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Daily Newsletter, Sunday, 05/14/2000

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The Option Investor Newsletter              Sunday  5-14-2000  
Copyright 2000, All rights reserved.                   1 of 5
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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
         WE 5-12          WE 5-5           WE 4-28          WE 4-20          
 DOW    10609.37 + 31.51 10577.86 -156.05 10733.91 -110.14  +538.28 
 Nasdaq  3529.07 -287.75  3816.82 - 43.84  3860.66 +216.78  +322.59 
 S&P-100  761.67 -  8.12   769.79 - 11.63   781.42 +  4.30  + 45.18 
 S&P-500 1420.96 - 11.67  1432.63 - 19.80  1452.43 + 17.89  + 77.23 
 RUT      490.94 - 21.90   512.84 +  6.59   506.25 + 24.41  + 28.12 
 TRAN    2874.02 -  2.09  2876.11 + 26.10  2850.01 + 16.76  +106.21 
 VIX       29.95 -  0.44    30.42 +  1.64    28.78 +   .37  - 10.92 
 Put/Call    .53              .53              .51              .75          
******************************************************************

Retail Sales Fine, PPI Good...Now Bring On The Fed

The numbers are in with a market-friendly bias, so now we are 
officially on Fed watch.  Ok, let's all stop and synchronize 
our watches.  The Fed decision will come Tuesday afternoon 
at 2:15pm EST, after their one-day May meeting.  The big 
question isn't if they are going to raise rates, but by how 
much?  Out of 10 economists polled by CNBC this last week, 
eight voted for a 50-basis point tightening.  While this is 
highly likely, the chatter on Wall Street on Friday was about 
the benign Retail sales numbers on Thursday and an inflation-
free PPI on Friday.  Oddly enough, traders were disappointed 
by this turn of events.  I know, I know, why can't we live 
in harmony for just one day!  Here is their thinking and it 
is justified.  If these reports had signaled more inflation 
filtering its way down the pipeline, then the Fed would have 
had no choice but to move by 50 points.  Now that we saw a 
decline in both the Retail Sales and Producer Price Index, 
traders are wondering if Greenspan will only make a 25-point 
move.  Although you might initially find that as a positive, 
all it does is keep the Street fearful of another move by 
the Fed in June.  Thus is the dilemma and we will cover this 
further below.

There was no dilemma on Wall Street Friday though after the 
PPI was released before the market open.  It came in with a 
decline of 0.3% versus estimates of a 0.1% loss.  This was the 
biggest decline in the index since February of 1999.  On the 
good news, the futures were up big and the market didn't 
disappoint by rallying for most of the day.  We did get the 
typical Friday afternoon sell-off that we have become accustomed 
too over the past month or so to wash out some gains, but the 
major indices still closed on the plus side.  The DJIA closed 
up 63.40 to 10,609.37 on weak volume of 859 million shares.  
The Nasdaq finished up 29.48 to 3529.06 on volume of 1.2 billion 
shares.  This doesn't paint an accurate picture though as the 
intraday highs were much higher.  The DJIA was up 127 on its 
high and the Nasdaq was up 119 intraday.  Here are the charts 
for the month of May. 


 


 

The S&P 500 added 13 points to close at 1420.  Speaking of the 
S&P, it was announced Friday morning that MEDI would be added 
to the prestigious index.  They are going to replace Central & 
South West Corp.  Never heard of them?  That is why they are 
being dropped.  This news gave MEDI a nice $10 gap up opening 
on Friday and made us happy since it is on the call list.  It's 
no Big Game prize, but congrats to all who were long calls or 
short puts.  The other S&P 500 whisper was that Agilent (A) is 
the next in line for such an announcement.  Proving that rumors 
are stronger than the actual event, Agilent was up over $20 
intraday before closing with a $14 gain, or 18%.  It's hard to 
say if this will come true or not, but it would be difficult 
to imagine any further gains based on this news as it seems to 
now be priced in.  

What may spur investors this week are some key earning reports.  
Agilent will report on Tuesday along with HWP, BEAS, HD, JCP, 
and KSS.  On Wednesday will hear about LCOS, ADI, ADCT, and 
AEOS.  Followed by SCMR, PRSF, CIEN, and NTAP on Thursday.  We 
expect the trend of strong earnings to continue.  Stocks are 
so battered in some groups that we are actually seeing prices 
rise after earnings.  DELL is the prime example.  They reported 
decent numbers on Thursday, after the close, and were met with 
a strong reception by investors on Friday.  DELL climbed over 
$5 on strong volume.  We may see more of this affect, but again 
market sentiment lies in the hands of Greenspan.  

One aspect of the market that didn't react positively to the 
tame wholesale inflation news was the bond market.  The 30-year 
sold off ahead of the Fed meeting.  It lost 24/32 to yield 6.21%.  
It has been climbing on a regular basis for a few weeks now and
is continuing to hold financial stocks underwater.  Oil prices 
are doing a little creeping up of their own.  They are back to 
nearly $30 a barrel.  This is a little disheartening because 
it will negatively affect the PPI in May and June.  How about 
we ignore this issue because if we focus on it, we will ruin 
any chance we have for one day of serenity.  We need to think 
happy thoughts to bring the buyers back and kick start this 
market.  

The VIX looks pretty good as it is still sitting above 30.  The 
last time it hit 20 was in early December.  Can you believe 
it?  The last time it was even below 25 was mid-March.  I would 
love to see a monster post-Fed rally back to 20 to bring buying 
interest back to the street.  You would probably see the stock 
piles of cash get thrown into the markets in a hurry if that 
happened.  

Here are some reasons why I am hopeful of a rally this week.  
Granted, I have my fingers crossed under the desk because 
there are equal reasons to stay range-bound, but I see the 
glass as half full here, not half empty.  First, there is the 
Fed.  My guess is they are going to do the right thing, which 
is to raise by 50 points and step back for awhile to see how 
this affects the market.  Some are calling for a 50-point move 
in May and June.  That would be very irresponsible in my mind.  
Let's stop and think for a second.  Why has Alan been raising 
rates for nearly a year when we haven't seen signs of inflation 
until recently?  It's because these moves take time to have 
an impact.  If he were to rattle off two 50-pointers in a row, 
he could have us in a recession in six months.  Also, half of 
the reasoning behind the moves, even though he may not admit 
it, is to calm the euphoria that was going on in the markets.  
Fair enough, it was getting out of hand there for awhile, but 
the market has paid the price.  The last thing Greenspan wants 
is to scare the Nasdaq down to 2500 and be remembered for 
killing the markets.  And if that happened, he would probably 
be forced to cut rates, which would nil the hikes.  He knows 
this and will continue to be a gradualist like he has all along.  

There are two other facts to this story.  His last move during 
a series of moves in 94-95 was a 50-pointer.  After that move 
he stood pat for a year and a half.  Second, we are entering 
presidential election time.  Greenspan doesn't want to get 
caught in the cross-fire.  Easier to move 50 now, and let the 
debate and election take their own course.  Besides, every 
presidential election year since 1950, the markets have gone up 
between May and December.  Coincidence or was it premeditated?  
Maybe a little of both, but it puts the bias on our side.  

OK, enough with the Fed.  You know where I stand, a 50-point 
move to spark a REAL rally.  The evidence will need to come by 
a volume day of around 2 billion shares and a breakout over 
the down-trending line in the Nasdaq chart above.  If either of 
those two criteria are not met, then I will turn my computer 
off and head out for a round of golf.  If this last month has 
taught us anything, it is that you can't fight the tape.  I 
will stick to some covered call strategies, LEAP plays, and 
possibly some spread plays, but front month call buying will 
be a dangerous place to play.  

One final note, we have the April industrial production and 
capacity utilization on Monday, followed by the April CPI and 
Fed meeting on Tuesday.  But, after that the week is pretty 
calm in economic data.  This helps to set the stage for a 
rally after Tuesday, barring a Fed or CPI disaster.  No news 
is good news right now.  So keep your fingers crossed too, but 
when in doubt...get out.

Ryan Nelson
Asst. Editor
    

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***********
JIM'S PLAYS
***********

What a week!  After sitting out most of last week while
on a business trip the first three days of this week were
exciting. Not wanting to buy in after a three day rally
I was glad to buy the dip on Tuesday afternoon.  If ever
there was a poster boy for buying to soon, I have been
it lately!  The -200 point Nasdaq drop on Wednesday was
actually not too painful.  The stocks I bought on Tuesday
did not drop much so I was only stopped out of three
positions.  I was waiting with my finger on the mouse
button when the Nasdaq started rebounding from 3360 on
Thursday.  I backed up the truck in preparation for a
post Fed relief rally.  The Nasdaq bounce at the open Friday
was nice to watch but with the weekend ahead I knew it
would probably sell off.  Still all but two positions
were well over where I bought them on Thursday.  I used
the Friday afternoon dip to add to several that looked
strong.

Since I will be at the Money Show in Vegas all week I
wanted something I could set stops on and forget.  If
you have been reading me long then you know I favor
selling naked puts on big dips to capture the intrinsic
value on the rebound.  I Sold June puts where I could
but in order to get the deep in the money positions I
wanted I had to sell some July/Aug strikes as well.

I have set stops based on the stock price at about $5
less than where I bought on the dip so unless Monday
produces another sell off before the Fed I should be
ok.  Several stocks are already way ahead.  Like RMBS,
SDLI, CIEN, GLW which had great two day runs.  I am
writing this while waiting for my plane so I am going
to be brief.  No big list of charts just a list of my
positions and you can use whatever charting program
you want to do the analysis.


Stock Strike Premium Received

AMCC Jun-160 70.75
AETH Aug-250 125.63
ARBA Aug-150 80.81 - underwater 
BRCD Jun-160 50.00 - underwater - bought Friday
BRCM Jun-230 83.13
CHKP Jun-200 51.63
CIEN Jun-170 43.69
CREE Jun-160 40.63
DNA  Jun-200 70.19 - underwater
EBAY Jun-175 53.00 - underwater - bought Friday
ETEK Jun-220 51.50 - underwater
EXDS Jun-150 72.50 - underwater 
GLW  Jun-220 42.88
ITWO Jun-150 56.63
JNPR Jun-220 68.63
PMCS Jun-220 79.50
PDLI Aug-200 93.13
RMBS Jun-250 85.62
SCMR Jun-150 78.00
SDLI Jun-220 62.88
SNE  Jun-300 83.13
YHOO Jun-180 53.25 - underwater

Calls

SFE  Jun-40 
YHOO Jul-125
NOK  Jan-2002-$40
VOD  Jan-2002-$30
MSFT Jan-2002-$65

I closed the open NTAP calls for $1.19 that I had sold
for $6.00 and sold the NTAP stock when it dropped below
$62 again.

Nasdaq 3800 is still the entry point for new long positions
for conservative traders.  Before the Nasdaq can move to
5000 it has to pass 3800.  If you wait for that confirmation
you will avoid the "is this just a bounce" problem that
the high risk players have to deal with.

If you are in Las Vegas stop by our booth at the Ballys
and say hi!

Sell too soon

Jim Brown



***********
IN THE NEWS
***********

The Gentle Art of Discounting
By S.P. Brown

The science of investment valuation is, shall we say, a soft 
science.  The truth is, there are as many different ways to 
value an investment as there are investors.  Some folks use 
charts, some use financial statements, some use mathematical 
algorithms, heck, some even use astrology.  Subjectivity rules.  

With that said, there is one "academically correct" valuation 
methodology that stands above the rest--if only because it's 
drummed into every finance student's head--and that's 
discounting future cash flows back to the present to arrive at 
an intrinsic investment value.    

Theoretically, anyone purchasing an investment is only interested
in the investment's future, which intuitively makes sense.  After 
all, if most investors were interested in only the here and now, 
money-losing enterprises like Red Hat(RHAT) and Amazon.com(AMZN) 
would never get off the ground.  

The premise of discounting cash flows is that a company's value 
can be estimated by forecasting future performance of the 
business and measuring the surplus cash flows generated by the 
company.  These cash flows are then discounted back to a 
present value and added together to arrive at a valuation. 

So, how does this work?  The first step is to look at the 
financial statements.  Working from these, an investor will 
estimate projected cash flows that extend for as far as he 
plans on holding his investment.   

Each year's cash flow, which is generally represented by 
earnings before interest, taxes, depreciation and amortization 
(EBITDA).  Interest income and expense, as well as taxes, are 
ignored because cash flow is designed to focus on the operating 
business and not secondary costs or profits. 

As for depreciation and amortization, these are non-cash 
charges, as the company is not actually expending any cash.    
Rather, depreciation is an accounting convention for tax 
purposes that allows companies to get a break on capital 
expenditures as plants and equipment age and become less 
useful.  Amortization becomes an issue when a company acquires 
another company at a premium to its shareholder's equity--a 
number that's accounted for on its balance sheet as goodwill 
and is forced to amortize over a set period of time.

Once individual yearly cash flows are determined, a terminal 
value for the company is estimated at the end of the investment 
horizon.  The terminal value is the market value of the company 
if it were offered for sale at the end of the final year of the 
holding period. 

Since it's impractical to project company operations out beyond 
three to five years in most cases, some assumptions must be 
made to estimate how much value will be contributed to the 
company by the cash flows generated after the last year in the 
projections.  One way is to just apply a simple multiple to the 
final year's cash flow.  Another, is to treat the last year's 
cash flow as perpetuity, which assumes that the cash flow of 
the last projected year will continue forever.   

Once the cash flows are projected, a discount rate must be 
chosen.  This discount rate should reflect the business and 
investment risk involved.  The riskier the business, the  
higher the rate.  

There is no hard and fast rule to selecting an appropriate 
discount rate.  Generally, the rate is influenced by the extent 
of risk attributed to the investment, the rates of return for 
alternative investments, market sentiments, inflation 
expectations and overall economic conditions.  

As a guide, many investors will use a firm's weighted average 
costs of debt and equity capital.  If a company's after tax 
cost of debt is 10 percent and its estimated cost of equity is 
20 percent (often represented by its earnings yield) and it 
plans to raise capital on a 50/50 split between the two, its 
cost of capital would be 15 percent.   

An example is in order:  

ABC Enterprises has projected after tax cash flows of $5 mln, 
$10 mln and $15 mln over the next three years, respectively.  
What's more, it's believed that ABC could be sold for 10 times 
its final year cash flows, or $150 mln (terminal value) at the 
end of the third year.  Assuming investors expect a return of at 
least 15 percent to compensate for their risk, a 15 percent 
discount rate is applied to ABC's future cash flows.  Here's the 
equation:

ABC value =  $5/(1.15) + $10/(1.15)^2 + $165(1.15)^3 
          =  $120,339,441

Now, if ABC had 10 million shares outstanding, then each share 
should theoretically be worth $12.03.  This is ABC's intrinsic 
value.  If ABC is selling at a higher (lower) price, an 
argument can be made that the company is over (under) valued.  

It's important to note that with a shorter investment horizon, 
a higher percentage of the intrinsic value comes from the 
terminal or sale value.

Like any other valuation method, the discounted DCF analysis 
has its shortcomings.  For one, since it focuses only on the 
generation of cash flow, it ignores outside factors that affect 
company value, such as price-earnings ratios, asset values and 
other internal factors that can reduce or increase company 
value.

Additionally, valuations based on the future performance of a  
company are extremely difficult to do because they require the 
investor to make numerous assumptions about the future (which 
is one reason Warren Buffett avoids tech issues).  Erroneous 
cash flow estimates can produce an intrinsic value that's way 
off base. 

The biggest weakness of the discounting method, though, is that 
it ignores simple supply and demand influences.  The fact is, 
any asset is only worth what the market is willing to pay at a 
given time.  At the present, the market is obviously willing to 
value some stocks outside of the confines of discounted cash 
flow analysis, which means DCF analysis isn't the greatest 
short-term trading tool.  

Nevertheless, for long-term investors, employing discounted 
cash flow analysis can prove invaluable for estimating a 
company's value for the reason it incorporates the two most 
important variables in determining present value - the future 
and the time value of money.    



***************
ASK THE ANALYST
***************

Will The Bottom Hold?
By Eric Utley

Will Mr. Greenspan break the mold?  Several of our questions will
be answered next week.  With some of the uncertainty removed,
hopefully we'll see volume return to the market.  I'd like to 
see a few of those money managers and institutions commit to
positions, and spend their cash they have been stockpiling.
Market pundits suggest that removing the Fed ambiguities from the
market will fuel a relief rally.  Remember what happened with
the ECI and the jobs report?  The market rallied despite the bad
news.  Wall Street will be listening closely to Greenspeak for
hints of future Fed actions.  If Greenspan hints the Fed is far
from done raising rates, we may have a whole new set of issues
to deal with.  For the time being, we can relish the fact that
the NASDAQ traced a higher low last week.  Albeit on weak volume,
but I'll take it.

I receive many e-mails from our readers asking me if XYZ is a
good buy.  Seems appropriate since I write the Ask the Analyst
column.  Anyway, some of the e-mails I read say something like
this, "What do you think of ABC, reported great earnings, good 
fundamentals, what's wrong."  I think one of the biggest mistakes
investors make is being reactionary as opposed to anticipatory in
making investment decisions.  Don't take that wrong, I'm not on a
high-horse, and I don't claim to know it all.  Believe me, I've
discovered this through introspection.  But, the market is less
concerned with the past, it's focused on the future.  I suggest
that you develop a forward-looking mindset when making investment
choices.  Like a mad scientist, the investor needs to gather all
facts and make a hypothesis about the direction of a stock.
Essentially, what I'm trying to say is work hard.  The amount of
hard work and research you put into your choices is directly 
proportional to your success as an investor, no matter the
current market environment.

I'd like to commend the readers for your persistence.  I chose
two stocks that two of our readers have sent in more than once.
If I haven't analyzed one of your stocks yet, keep sending your
requests to asktheanalyst@OptionInvestor.com.  Please put the
symbol in the subject line of the e-mail.

----------------------------

Commerce One - CMRC

I'd like your opinion on Commerce One.  I own some of the stock
and have been trying to no avail to make some money on options
plays.  Just when I think it can't possibly go any lower it does!
Thank you. - Ken

First of all Ken, I'd like to thank you for your persistence in
sending in your request.  As you well know Ken, B2B is thought to
have trillions of dollars of potential.  But, investors have
shifted away from the "concept" stocks like the B2Bs into stocks
that have earnings and a positive cash flow.  Along with the
unprofitability investors are unclear on which revenue model will
actually work for the B2Bs.  For example, will the "transaction
fee" model be more profitable than the "software licensing"
model?  Investors were burned by the promise and potential of the
business-to-consumer stocks such as ETYS and AMZN.  Investor's
don't want potential, they want profits.  In the long-term, some
of the B2Bs will be profitable, until then, there is a lot of
uncertainty and risk built into the sector.

The uncertainty in CMRC is clearly visible on the chart.  The
stock has lost nearly 70% of its value since its March peak.
That is far more than the average tech stock.  Will CMRC ever
reach those lofty levels again?  Not in the near-term, unless the
company starts turning a profit ahead of schedule.  But, CMRC
isn't expected to be profitable for another two, maybe three
years.  So what might move CMRC higher in the near-term?  We
could see consolidation in the industry, considering the low
levels at which the B2Bs currently trade.  Or, investors could
simply rekindle their interests in the sector.  But I find that
highly unlikely, it never really happened with the B2Cs.  Let's
take a look at the chart, and see if it reveals anything.


 

----------------------------

Akamai Technologies - AKAM

What is going on with this stock?  It went way down.  I couldn't
find any bad news.  - Rauch

I'd also like to thank you Rauch, for sending in your request
more than once.  I wish I had better news for you about AKAM, but
I don't.  You mentioned that you couldn't find any bad news about
AKAM while it was going down.  That's because nothing
fundamentally changed about the company.  The omniscient market
decided AKAM was too highly valued, and it was time for a
decline.  You can see that volume progressively got higher and
higher throughout April.  That high relative trading in
conjunction with a steep sell-off is a sure sign of institutional
selling.  It's another case of investor sentiment shifting away
from the techs such as AKAM.

And if you thought it couldn't worse, there is more.  AKAM's
lockup period was set to expire at the end of April.  However,
executives decided to postpone the expiration until July.  The
lockup would have opened the flood gates for an additional 70 mln
shares of AKAM to come to market.  That's nearly ten times the
number of shares that currently trade.  The postponing of the
lockup was a smart move by AKAM executives, but they still have
to unlock the stock.  And when they do, it could get worse for
AKAM.  Unless of course sentiment drastically shifts from now
until July.


 

----------------------------

Knight/Trimark Group - NITE

Good fundamentals I think - tripled earnings in Q1 but heading
south - is it the market forces?  It is down 26% since I bought,
expecting it to rise steadily after earnings.  Thanks. - Kevin

NITE is where the trade gets done.  The company is reaping huge
rewards from the online trading boom and has established itself
as the premier market maker for online brokers.  NITE has an
incredible propensity to blow away earnings estimates.  Look
over the last five quarters and you'll find that NITE has
surpassed estimates by an average of 35%.  Also, the company's
forward-looking P/E is in the single digits.  Let me say that
one more time.  NITE is expected to grow earnings by about 25%
over the next five years and trades at about nine times next
year's earnings.  I'll tell you this Kevin, you're not going to
find much higher growth at such a cheap price.

But, with that high growth comes high risk, namely volatility.
NITE's profits are directly linked to the overall direction in
the market.  As a bull market climbs, more and more people trade
and invest.  Volume surges and so do profits for NITE.  But when
the bear starts growling, investors run from their computers and
wait for a new bull to emerge.  In fact, just last week Charles
Schwab (SCH) reported a drastic drop in trading activity in
April.  SCH executives told analysts that trading activity was
even slower in May thus far, compared to the same time in April.
However, we have seen this cyclical pattern develop over the
past two years, where trading activity comes to a grinding halt
during the summer doldrums.  If you're looking for a long-term
investment, and don't mind the volatility, NITE is worth
considering.  Be warned though, if we enter into a prolonged
bear market, the brokerage stocks will be hit the hardest.


 

----------------------------

DISCLAIMER:
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.



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

As of Market Close - Friday, May 12, 2000 

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

DOW Industrials   10,000  11,400  10,609    Neutral   5.05
SPX S&P 500        1,400   1,500   1,421    Neutral   5.05
OEX S&P 100          750     800     762    Neutral   5.05    
RUT Russell 2000     450     550     491    Neutral   5.05    
NDX NASD 100       3,200   4,000   3,406    Neutral   5.05    
MSH High Tech        860   1,000     891    Neutral   5.05

XCI Hardware       1,360   1,600   1,390    Neutral   5.05    
CWX Software       1,100   1,300   1,171    Neutral   5.05
SOX Semiconductor    960   1,200     982    Neutral   5.05    
NWX Networking       900   1,100   1,007    Neutral   5.05
INX Internet         550     800     572    Neutral   5.05

BIX Banking          530     600     560    Neutral   5.11  
XBD Brokerage        400     500     458    Neutral   5.05    
IUX Insurance        540     620     609    Neutral   3.16

RLX Retail           900   1,000     910    Neutral   5.11   
DRG Drug             355     400     379    Neutral   4.28    
HCX Healthcare       710     800     771    Neutral   4.28    
XAL Airline          140     155     149    Neutral   3.10
OIX Oil & Gas        265     300     307    BULLISH   5.11  
 
Posture Alert    
This last week was witness to severe volatility on below average 
volume. Looking ahead, we would expect to see a pick up in volume 
after the Fed announces the interest rate hike on Tuesday. 
Regardless, the posture board is entirely neutral; with the 
exception of Oil & Gas, as this market continues its trading 
range bound ways. There are no current changes in posture. 



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

Sunday, May 14, 2000

Lycos, Hewlett-Packard, Agilent, and more!

This last week was witness to severe volatility, yet volume on 
all the major indexes made things quite boring, especially for us 
hyper-active traders. Regardless, we should see more action this 
week, as the bond/stock markets prepare for Greenspan and Co. A 
50-basis point hike is already priced in, so the only real 
uncertainty is whether the buyers stop watching from the 
sidelines and start participating with a vengeance. If we don't 
get a significant uptick in price and volume, we may be trading 
range bound for awhile.  

Below is a small list of equities (that should be reporting their 
earnings this next week) and our Pinnacle Index for those particular 
stocks. The Pinnacle Index is a proprietary product that determines 
current market sentiment and expectations for underlying equities and 
indexes, which is based upon speculation in the option markets. Also 
included are their expected earnings, the infamous whisper number (if 
available), their estimated earnings release date, as well as the 
put/call ratio if available. 

What we look for are liquid stocks/options that garner a lot of 
interest from the investment community. Most of the issues are high 
tech, and are thus more aggressive. We then filter out many of the 
equities, only to show stocks with excessive optimism or pessimism. 
From a contrarian standpoint (a high number is a good indication of 
extreme optimism, and a low number is a good indication of extreme 
pessimism) you should buy when its low, and sell when its high. Last 
quarter, we highlighted some stocks with a Pinnacle Index that were 
stratospheric (as high as the upper 20's). Needless to say, these 
stocks had so much pent-up enthusiasm, that after their earnings, they 
tanked. It is the old adage, buy the rumor - sell the news. There were 
also numerous companies with a Pinnacle Index less than one. However, 
once these companies came out with their bad quarter, the stocks 
rallied due to the oversupply of pessimism.  


Company*         Symbol  Pinnacle   Expected   Whisper#:  Put/Call
                         Index(PI): Earnings:             Ratio:

Agilent           A        0.98       .32        .36       1.09               
Autodesk          ADSK     1.02       .45        .49       1.04 
Brocade Comm.     BRCD     1.14       .07        .12       0.31
Hewlett Packard   HWP      1.00       .82        .84       1.71
Home Depot        HD       1.98       .27        .28       0.64
Lycos             LCOS     7.28       .04        .06       0.28
Network Appliance NTAP     2.43       .06        .07       0.35
Sycamore Networks SCMR     3.62       .01        .02        N/A

Looking at the list above, Lycos is easily the highest expectation 
stock for the week. Not only is their put/call ratio extremely 
optimistic, but their Pinnacle Index is indicating heavy bullish 
activity. Granted, much of this call buying can be attributed to the 
merger rumors this last week, but regardless, Lycos may be setting up 
for a fall should anything sound negative in their earnings or 
conference call. 
 
Low expectation stocks this week include Hewlett-Packard, 
Autodesk, Brocade, and Agilent. All of these issues have a low 
Pinnacle Index, suggesting bearish sentiment heading into 
earnings. With the exception of Brocade, they all have a bearish 
Put/Call Ratio as well. This bodes very well for the contrarian 
trader. Now the reason Brocade Pinnacle Index greatly differs 
from the put/call ratio, is the fact that open interest is 
skewing the put/call ratio. For example, Brocade is trading at 
106, yet there are over 9,000 contracts for the May 200 call that 
expires this week. Now, these (May-200, zero-bid) contracts 
affect the put/call ratio, but not the Pinnacle Index. Have a 
good trading week!   

BULLISH Signs: 

Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of 
analyst expectations. Walmart and Cisco Systems are the latest 
bellwethers to beat expectations.

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:

Volatility Index (29.95):
Up until recently, the VIX has proved that the low 30's are an 
excellent buying opportunity, and the low 20's continue to be a 
great selling opportunity. However, new highs (41.53) were just 
recently reached, so we may be at the beginnings of a new trading 
range.


BEARISH Signs:

Interest Rates (6.199):
With the long bond breaking significant support levels, new highs 
may be attempted in the near future.

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                        (5/12)      (5/16)       (5/18)
*****************************************************************

Overhead Resistance (805-830)     6.65
Overhead Resistance (775-800)     2.06

OEX Close                       761.67

Underlying Support  (745-770)     1.46
Underlying Support  (715-740)     8.74

What the Pinnacle Index is telling us:
Based on the above statistics, direct overhead resistance and 
direct underlying support both remain light, while OTM support 
and resistance levels are extremely strong. This suggests that 
this trading bound market may continue in the short term. 



Put/Call Ratio 
*****************************************************************
                                Friday      Tues       Thurs
Strike/Contracts                (5/12)      (5/16)     (5/18)
*****************************************************************


CBOE Total P/C Ratio             .53        
CBOE Equity P/C Ratio            .44
OEX P/C Ratio                   1.38


Peak Open Interest (OEX)
*****************************************************************
                     Friday          Tues            Thurs
Strike/Contracts     (5/12)         (5/16)           (5/18)
*****************************************************************

Puts                700 /  7,010
Calls               800 / 10,855
Put/Call Ratio        0.65



Market Volatility Index (VIX)
*****************************************************************
                    Major
Date                Turning Point       VIX
*****************************************************************
October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   
May 14, 1999        Top                 25.01 
July 16, 1999       Top                 18.13 
August  5, 1999     Bottom              32.12 
October 15, 1999    Bottom              32.06
January 28, 2000    Bottom              29.09
April 14, 2000      Bottom?             39.33

May 12, 2000                            29.95



*******************************************
Fed Briefing - By Pinnacle Capital Advisors
*******************************************

Sunday, May 14, 2000

The Light at the End of the Tunnel!

For the last several weeks, investors have been watching from the 
sidelines, feeling the negative effects of a declining portfolio. 
These gyrations that has been witnessed in this marketplace 
continues to amaze all the professionals; however, all focus has 
been placed on the bond market and the Federal Reserve. Recently, 
every economic indicator has moved the equity markets in a 
dramatic fashion either up or down. This trend will most likely 
continue, as the fear of future hikes continues to prevail.

Looking to this FOMC meeting this week, there is about a 90% 
chance that the Fed will raise rates by 50-basis points. If you 
look at the chart below, the market seems to be telling us that 
there will be at least two more rate hikes (25-bp) after this 
one. This negative sentiment surrounding the bond market is the 
reason why the equity markets have behaved so poorly. What this 
market needs now is a continuation from Friday's PPI. We need 
more economic figures to point towards a slowing economy. When 
the street finally sees the light at the end of the tunnel (in 
terms of no more rate hikes), is when we will witness the 
institutional players spending their cash reserves. We think that 
light will be coming soon!   


Federal Funds Rate              Discount Rate  
FOMC Meeting        Forecast    FOMC Meeting    Forecast
Current             6.00%       Current           5.50%
May 16              6.50%       May 16            6.00%
June 28             6.75%       June 28           6.25%
Oct. 3              7.00%       Oct. 3            6.50%
                                    


*************
COMING EVENTS
*************

For the week of May 15, 2000


Monday

Industrial Production    Apr    Forecast:   0.8%    Previous:   0.3%
Capacity Utilization     Apr    Forecast:  81.8%    Previous:  81.4% 
 
Tuesday

FOMC Meeting (9:00 am ET start time)             
CPI                      Apr    Forecast:   0.1%    Previous:   0.7%
Core CPI                 Apr    Forecast:   0.2%    Previous:   0.4%
Housing Starts           Apr    Forecast: 1.650M    Previous: 1.604M
Building Permits         Apr    Forecast:    N/A    Previous: 1.579M

Wednesday

None Scheduled

Thursday

Initial Claims           05/12  Forecast:   285K    Previous:   297K
Philadelphia Fed         May    Forecast:   13.3    Previous:   13.8
Treasury Budget          Apr    Forecast: $160.0B   Previous: $113.5B 
FOMC Minutes             03/21  Forecast:    --     Previous:  --

Friday

Trade Balance            Mar    Forecast: -$29.7B   Previous: -$29.2B


Week of May 22nd

05/25 GDP-Revised
05/25 GDP Chain Deflator
05/25 Initial Claims
05/25 Existing Home Sales
05/25 Help-Wanted Index
05/26 Durable Orders
05/26 Personal Income
05/26 PCE
05/26 Michigan Sentiment



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DISCLAIMER
***********

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

The Option Investor Newsletter                      5-14-2000  
Sunday                                                 2 of 5


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

Liquidity On A Weekly Basis
By Mary Redmond

If you took a survey of the how many people reading this 
newsletter that are holding a significant percentage of their 
investing capital in cash right now, I think it would be over
about 75%.  That's the problem.  If you and your neighbor and
your fund managers are all holding cash multiplied by millions
of people that means the buying momentum is about half of what 
it was a few months ago.  There is an astonishing correlation
between liquidity and market performance in today's market on
a monthly basis.  Let's take a look at what happened over the
last 12 weeks on a weekly basis.

Tracking fund flows is one of the most productive ways to do 
this.  Mutual funds are not the only buyers in this market, but
there is a close correlation between people sending money into
their funds and people putting money in the market.  Most 
people nowadays have several brokerage accounts and mutual 
funds, and tend to move money in and out of both at the same time.

Take a look at the chart of the last three months:

Approximate			Approx. %change in 	
Cash flows to funds	S & P 500         	%change in Nasdaq
week ending:

2/9/2000				
$8 bln			2/14-2/18 	 -9.6%		 -1.3%
majority to tech

2/16/00				
$7.5 bln			2/21-2/25    +5.7%		 +8.6%
$2 bln to tech

2/23/00				
$3.8 bln			2/28-3/3     -1.0%		 +6.7%
$2 bln to tech

3/01/2000
$10.9 bln			3/6-3/10     +4.9%		 +2.2%
$2.6 bln to tech

3/8/2000
$5.4 bln			3/13-3/17    +4.3%		 -0.6%
$2.8 bln to tech

3/15/2000
$5 bln			3/20-3/24    +1.8%		 +9.1%
$2.4 bln to tech

3/22/2000
$13.7 bln			3/27-3/31    +1.2%		 -7.0%	
$3 bln to tech

03/29/2000
$5 bln			4/3-4/7     -10.0%		 +3.5%

04/06/2000
Net outflow: 		4/10-4/14    +1.6%		-17.5%
$271 mln			

04/19/2000
$6 bln inflow		4/24-4/28    -1.3%		 +4.7%		
4/26/00
$4.5 bln inflow		5/1-5/5      -1.7%		 -4.3%


See how weak the market got when the money started coming out?
The week ending April 7 was the first week in the year with
net outflows and the following week the Nasdaq dropped 17.5%.
While the weekly flows are not precisely correlated to the 
movement of the market, the four week moving averages of fund
flows gives a better picture.

4 week MA of	    3/22    4/26       %decline	   
fund inflows	    (in billions)	     in flow	    

Equity               11.90    4.80         60	    
Technology            2.97    0.93         69 (Nasdaq declined 34%)    
Small Cap             2.10    0.58         58
Aggressive Growth     3.80    1.77         53
Large Cap Growth      2.20    2.14          2

The week of March 22 was when the Nasdaq hits its peak above
5000 and has been on a decline ever since to the low around
3300.  This is directly correlated with the decline in fund
flows from a weekly average of $2.97 bln to a weekly average
of $0.93 bln.  The reason the monthly figures are more accurate 
is that fund managers can sometimes sit on cash for a few days 
or weeks, but usually not for an entire quarter.

If you look at the weekly and monthly inflows you can also see
that fund inflows are somewhat like stocks in that they can
start out slowly and pick up momentum.  Once the momentum gets
going and the flows start coming in regularly, the movement
feeds on itself.  The one clear pattern that I see from the
above numbers is that the weeks following net redemptions have
been weeks to be extra cautious.

This week ending May 10, the reports are that the money is
slowly starting to trickle in, but not the levels seen 
previously.  Approximately $1.6 bln went into equity funds last 
week, and approximately $8.4 bln went into money market funds.  
People are still scared to buy.  As long as there is not a net
redemption this should help to buoy the market, but we really 
need to see that $8.4 bln that went into money market funds go 
into equity funds.

This reminds me of October of last year when people were still 
concerned that the Y2K computer bug could cause widespread 
computer disruptions.  As a result, they held on to cash.  When 
the money started to come in, it started relatively slowly.  As 
the market continued to rise more and more, money came in until 
it turned into a flood.  Hopefully the "Fed" bug will turn out to 
be as innocuous as the Y2K bug. 

Contact Support


*****

OEX and Mother's Day
By Lynda Schuepp

What is the one thing Mom's are noted for?  I'll tell you, if 
you don't realize--it's patience to explain.   I got a ton of 
emails last week asking me questions about OEX and Skybox.  The 
majority of you did not understand what the OEX is and how the 
Skybox trading system worked.  I have to admit, I had a hard time
understanding it when I first read about it, but maybe that's 
because it was not explained by a "Mom".  Thursday night I 
attended the Boston Options club meeting and was also deluged 
by questions from attendees regarding the Skybox and how I trade 
the OEX.  I guess because I trade the OEX, that's makes me an 
expert at the Skybox.  So in commemoration of Mother's day, I 
will explain the system from a "mom's perspective" and give you 
some much needed background on the OEX.

First, a little background on the OEX.  The index was invented by 
the CBOE on March 11, 1983 and was composed of 100 large stocks, 
all which had options listed on the CBOE.  Today, the OEX index 
is known as the Standard and Poor's 100 Index but still trades 
under the symbol, "OEX".  I have not been able to find out what 
OEX stands for.  My guess is Option Exchange IndeX.  If anyone 
knows, please enlighten me.  Trading the index allows the 
individual investor to make a market direction prediction.  The 
risk when trading a single stock is that you can buy a call 
or Leap on a really great company and lose half of your value 
overnight after a news announcement.  How many of you, besides 
myself, are holding severely depressed Microsoft Leaps?  By 
trading the index, you are less susceptible to large swings 
created by news of a given stock.

The CBOE site has a listing of the S&P 100 stocks in the OEX and 
their percentage in the index.  The following is the definition 
of the OEX from their site:  The Standard & Poor's 100 Index is 
a capitalization-weighted index of 100 stocks from a broad range 
of industries.  The component stocks are weighted according to the 
total market value of their outstanding shares.  The impact of a 
component's price change is proportional to the issue's total 
market value, which is the share price times the number of shares
outstanding.   

It is important to know what makes up the OEX.  First of all, 
there are only FIVE Nasdaq stocks in the S&P 100.  However, they 
make up 28% of the market cap.  These leaders are: Microsoft 8.4%, 
Cisco 8.1%, Intel 6.7%, Oracle 4% and Amgen at 1%.  So even though 
the OEX is predominately made up of NYSE stocks, it is quite well 
correlated to the QQQ intra-day because of it's five Nasdaq 
leaders.   

The top FIVE NYSE stocks are: GE 7.8%, Exxon Mobil 4.1%, 
Wal-Mart 3.8%, IBM 3.3%, Citigroup 3.1%.  By following just these 
10 stocks, you can see that they represents 50% of the S&P 100 
and hence where the OEX is trading.  Because all email systems 
do not read charts properly, I can't add my spreadsheet to the 
newsletter but if you would like a full listing of the stocks, 
you may email me and I'll send you the excel spreadsheet with 
all the stocks and their weighting.

Now that you understand what makes up the OEX, you will be able to 
have a better feeling which way the index will go, based on 
following the prices of it's leaders you will have a better 
understanding to trade the Skybox. 
 
The Skybox is a systematic mechanical trading system using options 
on the OEX and can be found under strategies at the OIN website.  
I will try to explain each section of the Skybox for you, just 
the way dear old Mom would try to explain why the sky is blue.   

Key Benchmarks: 
The key benchmarks are merely key support and resistance levels.   
For instance, by going to the site, on Friday you would see that 
the OEX closed Thursday at 761.67.  The key benchmarks are 760 
(resistance) and 740 (support).  Since the beginning of March, 
the OEX has had a daily range from high to low of 20 points.  
Therefore, you can see the significance of these "key" benchmarks.  
The OEX also trades more heavily at the even numbered strikes and 
each 10 points represents some degree of support/resistance.  If 
you look at the volume and open interest of the options you will 
see 2-3 times the volume at strikes of 760 and 770 than at 765.  
More volume = more liquidity = smaller spreads.  Therefore, when 
you make a trade, you should buy the even numbered strikes. 

Triggers:
The Bullish triggers are those resistance levels +2 points.  When 
a stock trades through a resistance level, you would be bullish 
and buy a call.  It is no different for the OEX, because it is 
made up of stocks that obviously are trading higher.  When the 
OEX trades through 762 (760 resistance level plus 2 points) you 
would buy a call.  Conversely, if the OEX traded below 738 
(740 support level less two points) you would interpret this 
as bearish and would buy a put.  The other trigger levels are 
the 10-point increments above and below "KEY" benchmarks levels.  

Entry, Target, Stops:     
I refer to this section as ready, aim, fire.  The entry point is 
what the option should cost (if priced fairly) at the time the 
OEX trades at that trigger level.  These suggested retail prices 
prevent you from overpaying for an option.  Remember, when 
theoretical value (calculated using historical volatility) equals 
the market price, the option is fairly priced.  The target price 
is the price that you should sell your option if the OEX goes in 
the right direction and the Stop is the price you should sell it 
for if the OEX moves in the wrong direction after buying the 
option.  These guidelines help you to let your profits run and 
to take your losses early.  A lesson we all need to learn and 
re-learn!  Remember a good mechanical system will be wrong most 
of the time but the wins will be much bigger and the losses will 
be much smaller.   Sell too soon (if you reach your stops) and 
let your profits run (up to the target). 

IMPORTANT: Don't forget your Moms this weekend!

Contact Support



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

Trade Small, Win, Trade Bigger...
By Janar Wasito

Marty Schwartz, a former Marine and leading options & futures 
trader(see his book "Pit Bull"), advocates a money management 
technique that would help all traders--particularly beginning 
traders.  The technique is to trade small until you start winning,
then trade bigger.  How does this work?

Let's assume that you have your $15,000 options account.  That's 
a limited percentage of your assets to protect you while you 
learn the ins and outs of options trading.  You have the 
logistical set up--Qcharts, Preferred Trade, a high speed 
Internet connection, perhaps even a wireless modem.  Now, let's 
say that your last 10 trades weren't so hot--7 losers, 2 winners, 
and 1 more or less a draw.  You dropped $6,000 in capital in the
process of those trades.

That's a situation that all traders can relate to.  The markets 
have been volatile.  Perhaps you held that QCOM play over the 
weekend after entering at 108 last week.  Say you had May 
contracts, and the stock died under 100.  What do you have to do 
to make sure that you are trading at your peak?

First of all, you need to guard against one bad decision leading 
to another bad decision.  I like to think of my opponent as the 
index.  But, at the end of the day, we may be our own worst 
enemies. If you trade in a state of continual stress, the spring 
will get pulled too far, too often, and you will begin to lose 
you ability to make good decisions.  So, if holding QCOM was a 
bad decision, will it lead to holding JDSU too long also?  If it 
begins to look that way, then just sit out for a day or more.  As 
one friend who spent some time on Wall Street before grad school 
would tell me, "you need to get your psychology straight first."

OK, now let's say that you have taken a weekend trip to forget 
about the market.  You've read the newsletter, outlined some 
trades, loaded them into Qcharts.  You're ready to go.  Well, as 
Renee has been writing, not every market was meant to trade.  One 
sure way to end the month with $15,000 in your options account is 
not to trade.  That might not be a bad approach.  I would have 
made more money last year if I did that in 9 of 12 months. 

But, let's say that you are going to trade.  OK.  What's the most
important factor in your success or failure?  Finding the next 
QCOM (ah, in 1999, please)?  No.  The most important link in the 
chain is the face in the mirror every morning.  Trade small, get 
the rhythm, using whatever system works for you.  Put in say, $500 
or $1000 into each trade.  5% or 10% of your available capital.

Step back 3 days later, and ask yourself are you winning?  If you 
nail 3 good trades, good.  Think about what you are doing right.  
Is it because you are consistently scalping 25% profits because 
you set those limit sells automatically after every buy?  Good. 
Say out of your next 4 trades, 2 are wins too, and the losers are 
less than 10% because you used good discipline in cutting your 
losses on the other 2 trades.  Say you have increased your 
grubstake(a Marty Schwartz term) from $15k to $17k.

Now is the time to increase your position size while maintaining 
the discipline.  Instead of $1000 per trade, now use $2000 or 
$2500.  Keep taking 25% profits.  Keep taking 10% losses.  Keep 
following the entry points closely, follow your way of watching 
the markets.  See if you can compound those returns on $2500 
trades for 3 to 5 trades.

And then, perhaps after the post-FOMC rally fades, quit.  Just 
quit.  Take $500 and buy your child or spouse something nice.  
Take a longer weekend.  Chill out.  Relax.

That's the idea behind trading small, winning, then trading 
bigger.

Contact Support


*****

And the Learning Continues
By Molly Evans

It's become increasingly difficult for the writers of newsletters
and web site commentary to pen intelligent and useful information
regarding the market.  The message has been the same everyday
for a few weeks . . . trading volume is thin and it's unknown
what the markets will do in response to the Fed's decision 
regarding interest rates.  Thankfully, this time next week 
we'll have a lot more direction and something new to talk about.  
There're so many theories out there postulating what will happen.  
Suppose they do raise rates 50 basis points; will the markets
rally as a response to investor's confidence that the Fed is 
keeping the economy in check?  What if they raise just a quarter
point?  Do we rally because a half point has already been assumed
or do we falter and at least stay "rangebound" as the wall of 
worry stands solid?  I'm going to put my vote in the 25 basis
point camp.  It's a win/win for both the economy and for the 
Fed.  While there has been certain evidence that inflation has 
been sneaking in, so too have there been reports (albeit weak) 
indicating that the raises thus far have already started to tap 
the brakes of a strong economy.  Greenspan and peers don't want 
to overdo it and be blamed for a recession, not in an election 
year and not with the world economies depending on us for 
gradual cooling.  With a .25% increase, Greenspan knows the 
markets will stay in its worried state as it contemplates another 
hike in June.  Wouldn't he love that?  I vote quarter point and
cautious wording.  Maybe they'll go ahead and do the half point 
AND cautious wording.  I don't know!  That's what the Fed would 
like, to keep us guessing.  Let that and Barron's corral the 
bulls.  

There's very little in the way of good news being printed out 
there.  Well, outside of great earnings for great companies.  
That just doesn't matter now it seems.  AMAT announced record
sales, record earnings and it tanked of course.  It just doesn't
matter.  The thing is, while we, the traders and obsessors of 
the markets guess and speculate and worry and fret, the average
Joe Q Investor out there isn't concerned.  When I go to work
at the hospital, I interface with some very intelligent people, 
but they don't know squat about the market.  They ask me how I'm
doing out of respect and casual conversation but they wave off
my raised eyebrows with a "Feh!  Don't worry about it!"  Granted,
these doctors and nurses don't follow every news item or even
know which channel is CNBC.  They tell me that their mutual fund 
has done very well and there will their money stay.  No fear.  
A well-respected friend and business owner told me that he can 
gauge the public sentiment by his employees.  When they call him 
and ask for market advice about what to buy, he knows the hysteria 
and mania is rampant and a sign of topping.  When they ask him if 
their 401K money is ok or express the desire to run, there's a 
near term bottom right at hand.  Neither scenario is happening for 
him either.  So what's that mean?  I think it means that we're 
destined to stay right here.  Up, down, big down, big up and right 
back down.  That's supposed to be a trader's dream.  Not a 
nightmare!  I said dream.  Shoot.

The interesting thing that I see is the divergence in sentiment 
now.  It's funny to think back to that day at the Denver OIN
conference that Austin Tanner of Pinnacle Advisors asked 
everyone who was bullish to raise their hands.  A sea of hands 
flew up - I'd guess 90% or more.  The other ten percent were 
bears or "market neutral".  Now, market neutral is the vogue 
posture.  Are you playing it that way?  It's a tough game.  
Many people, I know, have never played the downside and are 
accustomed to simply buying long and waiting.  Now, I see a 
wide range of sentiment out there amongst the message boards 
and my trading friends.  Some are all long and just waiting 
it out, some are all short and others are just plain cash.  
I'm doing all three actually.  I've as much as admitted that 
I was roadkill at the turn of the trend, having never been in 
a bear's path.  I'm a quick study though.  No, I'm not making
gazillions by shorting but I have learned a few things along 
the way here.

First of all, I'd like to think that I now have a healthy dose
of respect for the markets.  Just when you think it's too easy 
and fun is when it's going to maul you.   Don't trust a screaming 
market.  Furthemore, didn't Jim just say, "never short a dull 
market?"  Yes, I distinctly remember that and that too has gone 
down in my little book of wisdom.  Secondly, when the money is 
really important to you and you're just not sure, you really do 
need to get out.  I think that THE smartest single move I have
made in my trading career occurred on one of those early 
volatile days.  I looked at my screen and was dumbfounded about 
"why" this was happening and it occurred to me that, "I'm not 
smart enough to play a market like this . . . and I'll fall on 
my own sword or fight to the death on my own accounts but this 
darned market isn't going to hurt one little hair of my kids' 
heads."  Their online brokerage accounts are empty and their 
checks are sitting in my tax free money market account - 
completely AWAY from the market.  I didn't get their all time
highs but I did take their 30% profit and principle off the table 
to where I can't gamble it away on speculation and rampant fear.  
I simply didn't trust myself to not see a "can't miss" and then 
miss and be a very unhappy girl.  Lastly, I've learned how to 
daytrade and to do it on both sides.  

I had the good fortune to be home most of this week but didn't
think I'd be trading much.  Then again, I told you that I'd fall 
on my own sword in my own accounts so I ventured into the quarrel 
to see what damage I could do.  We had yet another horrible 
Wednesday but if you look hard enough, opportunities do present 
themselves.  Undoubtedly you heard the news or rumor that 
ATHM was going to be bought, acquired or whatever.  The stock 
just shot up within minutes.  


 

I've watched this happen before and I've always thought it 
ridiculous and have wanted to short it.  I wanted to short or 
buy puts on RMBS when it was doing its rocket shot to the moon 
late this past winter.  Whew.  Glad I didn't.  But ATHM has been 
stuck on $17 - $19 since forever.  All of the sudden it's $27 - 
$28?  In this market?  No way!  Too good to be true.  Yep, it was.
They wouldn't give me the shares to short nor would they sell me 
the puts at ask.  Darn.  Oh well.  I've never shorted a stock 
anyway.  That is until Agilent Technology (A) exploded yesterday.


 

I keep 5 minute real time charts on my Q charts page, watching 
my favorite ten to fifteen stocks.  I've been watching Agilent 
lately as I've seen their ads all over my anesthesia journals.  
I was thinking I needed to get into that one long but then, this 
opportunity came along and I had the visions of ATHM fresh in my 
mind.  I bought puts AND shorted the stock.  Not cowgirl quantities 
anymore, mind you, but enough to keep my attention here.  It was
very interesting to see how the volatility pricing came into play
as the stock dropped and held support for a bit then dropped. I
think I might have done better just shorting more of the stock but
it was a great lesson.  One other opportunity that I saw and it's 
a great chart, is JNPR.  I'll let the chart explain itself.


 

Enough of me!  Hope you all are doing well and we'll talk again
next weekend!  Good luck!

Contact Support




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

Index      Last    Week
Dow     10609.37   31.51
Nasdaq   3529.07 -287.75
$OEX      761.67   -8.12
$SPX     1420.96  -11.67
$RUT      490.94  -21.90
$TRAN    2874.02   -2.09
$VIX       29.95   -0.44

Calls              Week

PLXS       81.00    9.38  New, solid momentum run in short-term
CDWC      118.25    8.62  Possible split candidate at these levels
DNA       129.00    5.06  New, on the road to recovery
FAST       69.38    3.50  New, institutions "nuts" over this one
AMGN       62.38    2.82  New, trends well once established
SEPR      102.25   -1.00  Remains in a pattern we love to see
FLEX       53.25   -1.25  Business is simply great...and strong
WLA       117.25   -1.82  Strong trend in pharmaceutical sales
MSFT       68.81   -2.31  The worst appears to be over
BSX        24.06   -2.49  Dropped, flat-lined and dead for now
BVSN       45.75   -3.88  Analysts like the sector...and the stock
SEBL      129.00   -4.44  New, building an ascending wedge
MEDI      164.50   -5.75  Into the S&P they go...and a 5/18 split
AMD        85.69   -6.88  Dropped, slammed into wall of resistance
JDSU       86.00   -7.81  Investors are chomping at the bit
AMCC      101.31  -12.37  A fast and furious mover ready to go
MERQ       72.25  -12.75  Dropped, selling pressure before weekend
AFFX      140.22  -15.84  Big trading range & intraday opportunity
KANA       39.00  -16.34  Convincing future outlook and growth
RMBS      188.94  -18.69  New, the high-flier is back again!!
ABGX       91.00  -21.88  Dropped, momentum has vanished

Puts

NXTL       92.88  -26.88  New, rolling over w/lack of follow-thru
AKAM       70.50  -26.56  New, just can't hold on to any gains
FDRY       68.13  -22.01  Questioning their competitiveness
EBAY      121.31  -12.69  Dropped, showed signs of recovery
CMRC       44.38  -11.51  Declining 5-dma continuing to pressure
PLCM       58.38   -9.88  New, technically driven momentum play
SBL        45.06   -4.69  Institutional sponsorship fading
GCI        61.94    1.19  Dropped, enough is enough


STOCKS ADDED TO THE PICK LIST
*****************************

Calls

SEBL - Seibel Systems
PLXS - Plexus Corp
FAST - Fastenal Company
AMGN - Amgen
RMBS - Rambus Inc.
DNA  - Genetech 

Puts

AKAM - Akamai Inc
NXTL - Nextel Communications
PLCM - Polycom Inc


***************************
PICKS WE DROPPED THIS WEEK
***************************

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.


CALLS

BSX $24.06 (-2.50) BSX flat-lined Friday.  The sell-off can be
attributed to a report issued by Prudential earlier in the day.
Analysts said the FDA is seeking more information from BSX about
two of the company's products under development.  The FDA said
that BSX needs to work out the details of Taxol before starting
trials.  The new product isn't expected to be released for quite
some time.  Though Prudential didn't change their ratings or
earnings estimates for BSX, the report prompted traders to unload
the stock.  In fact, the entire medical product sector showed
weakness Friday, despite the broad market rally.  What appeared
to be profit taking Thursday turned into a full fledged sell-off
Friday.  It's time to leave BSX before the stock goes into
cardiac arrest.

AMD $85.69 (-6.56) After staging a terrific comeback on 
Thursday, AMD slammed into a wall of resistance at $90 on  
Friday morning.  The backlash was unmistakable and AMD skated 
down from there.   The stock returned to near-term support at 
the 5-dma ($85.13), a level it may be finding quite comfortable. 
It's possible AMD could rally again and make a charge for the 
all-time high at $93.  But with such uncertainty in the markets 
and AMD finding the $90 mark quite formidable, we're dropping it 
this weekend to make room for more profitable momentum plays.

ABGX $91.00 (-21.88) Our hopes and expectations for this 
momentum play have vanished.  Initially we added ABGX to our 
call list last weekend on promising technicals and its strong 
breakout.  However as the week progressed it eventually slide 
back to firmer support at $85 and $90.  We had put ABGX on a 
"tight leash" mid-week, but now it's time to cut the yoke.  
While there were some bright spots in trading where ABGX 
challenged last Friday's intraday high of $115, the stock seems 
to have run out of steam.  ABGX is officially a drop this 
weekend. 

MERQ $72.25 (-12.75) MERQ's chances of staying on our list
decreased substantially in the last half hour of trading 
on Friday along with the price of their stock.  As traders
prepared to head for the exits going into the weekend, they
sold shares of MERQ in better than average numbers.  It could
have been that many of the players just didn't want to go into
the weekend ahead of the Fed meeting "long", and they will
take there chances to buy back in next week, or it could be
that they are simply going to put their money to work 
elsewhere.  Whatever the reason we are going to concentrate
our time and energy in other areas for now.  Keep in mind
the company votes for an increase in the amount of authorized
shares later this month, so a split may be in the works.


PUTS

EBAY $121.31 (-12.69) Well, that didn't last long.  Two up days 
for the NASDAQ caused EBAY to recover to the level at which we 
picked it.  While it violated a previous level of support which 
may yet hold until the Fed removes interest rate uncertainty on 
Tuesday, EBAY has shown signs of recovery.  Still, volume remains 
low, which tells us that hardcore buying has not yet returned to 
the issue.  The point is that there is still weakness with the 
stock, just not enough to induce us into opening any new plays.  
Thus, we're dropping it today.  Consider closing the play on any 
weakness, or especially on any new strength over $124.50.

GCI $61.94 +1.13 (+1.19) Seems as though the proverbial worm
has turned on this play.  While the longer term trend is still
south, GCI has began to attract a few new buyers and may be
in the process of reversing its course.  The lack of follow-
through selling after Tuesday's low at $58.31 on better than
average volume suggests it is probably time to step back.  
While we were expecting a bounce up to between $62 and $64
the volume behind the move has been a bit more than we would
like to have seen, considering the activity in the broad
markets.  On Thursday, analysts at CIBC World Markets initiated
coverage of Gannett with a Buy rating which may have attracted
new attention to the beaten down company.  While we really didn't
get much of a chance to profit from this play, sometimes the best
course of action is knowing when to say enough is enough.     


STOCKS WITH UPCOMING SPLITS 
****************************

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

Symbol - Stock          Splits/Date  
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
PCCC - PC Connection    3:2 05-23-00 ex-date 05-24
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
SCH  - Charles Schwab   3:2 05-30-00 ex-date 05-31
IBI  - Intimate Brands  2:1 05-30-00 ex-date 05-31
LTD  - The Limited      2:1 05-30-00 ex-date 05-31
KEI  - Keithley Inst.   2:1 06-01-00 ex-date 06-02
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
PWER - Power-One        3:2 06-02-00 ex-date 06-05
EMC  - EMC Corp         2:1 06-02-00 ex-date 06-05
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
RHI  - Robert Halg Intl 2:1 06-12-00 ex-date 06-13
RMBS - Rambus           4:1 06-14-00 ex-date 06-15
MXT  - Metris Companies 3:2 06-15-00 ex-date 06-16
JNPR - Juniper Networks 2:1 06-15-00 ex-date 06-16
IPAR - Inter Parfums    3:2 06-15-00 ex-date 06-16
NXLK - Nextlink         2:1 06-15-00 ex-date 06-16
SEIC - SEI Investments  3:1 06-19-00 ex-date 06-20
POOL - SCP Pool Corp.   3:2 06-19-00 ex-date 06-20
MEAD - Meade Inst.      2:1 06-19-00 ex-date 06-20
EXDS - Exodus Comm      2:1 06-20-00 ex-date 06-21
AAPL - Apple Computer   2:1 06-20-00 ex-date 06-21
TQNT - TriQuint Semi.   2:1 07-11-00 ex-date 07-12
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
page.



********************
THE PLAYS OF THE DAY 
********************


Call play of the day:
*********************

WLA - Warner-Lambert Co $117.25 (-5.00)

See details in sector list

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


Put play of the day:
********************

FDRY - Foundry Networks Inc. $68.13 (-22.00)

See details in sector list

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



*************
DEFINITIONS
*************

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
weeks

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.

RISKS of SELLING PUTS:
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.





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****************************
SEE DISCLAIMER IN SECTION ONE



The Option Investor Newsletter                      5-14-2000  
Sunday                                                 3 of 5



**********
CALL PLAYS
**********

********
HARDWARE
********

FLEX - Flextronics International $53.25 (-1.25)

Flextronics is one of the world's leading providers of contract
electronics manufacturing services.  The company offers design,
manufacturing, and distribution services for electronics makers
in such industries as networking, telecommunications, computers,
consumer electronics, and medical instrumentation.  Customers
include Philips, Ericsson, and Cisco.  Customers outside Asia
account for almost 80% of sales.  FLEX's recent acquisition of
rival The DII Group made it the world's #4 contract manufacturer.

FLEX was a headline presenter at the Merrill Lynch Annual
Connector/Passive Components Industry Conference last week.  The
CEO of FLEX, Michael Marks spoke with analysts and said that
business is simply great.  Marks went on to say that he believes
FLEX has the largest and most efficient electronics manufacturing
operations outside the United States.  He went on to say that the
recent acquisitions of The DII Group and Palo Alto Products have
been successfully integrated into FLEX's operations.  FLEX's CFO,
Robert Dykes also had good news for the analysts.  Dykes said
the financial fundamentals of the FLEX remain strong.  Although
component shortages are still affecting business, Dykes said the
company remains comfortable with analysts' estimates of 30%
earnings growth.  As a result of the optimistic views from FLEX
executives, Raymond James upgraded the stock last week from a Buy
to a Strong Buy.  The upgrade sent FLEX into rebound mode then
subsequently into rally mode.  The stock gapped $2 higher Friday
to close the week on a strong note.  We're looking for the
momentum to build from the recent rebound.  After the steep
decline in early May, FLEX doesn't have much resistance
preventing it from moving higher.  The stock will face minor
congestion in the $57 - 58 range, but not much thereafter.  Look
for an entry near current levels if FLEX shows signs of
continued momentum.  Although FLEX rallied Friday, the gains
came on light volume.  Make sure to confirm upward movement with
heavy volume, a sign that momentum is building.

FLEX's solid earnings from operations may receive a boost from
the recent sale of investment securities.  FLEX announced last
week that the company had filed to sell nearly 1 mln shares of
Calico Commerce (CLIC).  Chase H&Q will handle the transaction.

BUY CALL JUN-50 QFL-FJ OI= 950 at $7.50 SL=5.25
BUY CALL JUN-55*QFL-FK OI=2073 at $4.88 SL=3.00
BUY CALL JUN-60 QFL-FL OI= 268 at $3.00 SL=1.50
BUY CALL JUL-55 QFL-GK OI= 347 at $7.00 SL=5.00

Picked on May 11th at    $51.13    P/E = 49
Change since picked       +2.12    52-week high=$79.75
Analysts Ratings     14-5-1-0-0    52-week low =$21.25
Last earnings 03/00    est=0.29    actual=0.30
Next earnings 07-17    est=0.34    versus=0.17
Average Daily Volume = 2.76 mln
/charts/charts.asp?symbol=FLEX


CDWC - CDW Computer Centers $118.25 (+8.63)

Providing customized computing solutions to its customers, CDWC
is a direct marketer of over 80,000 computer products, including
hardware, software, peripherals, networking/communication and
accessories.  The company provides a nearly endless list of
products, from companies such as Apple, Canon, Epson,
Hewlett-Packard, IBM, Microsoft, Adobe, Cisco, and 3Com.
Using catalogs, telesales, and the Internet, the company has
over 630,000 customers and receives most of its business
online.

Investors in CDWC seem to have been ignoring the weakness in the
broad markets and with good reason.  The drop on April 14th,
took the issue down to the 100-dma and that is the last time it
has been anywhere near that level.  As a matter of fact, CDWC
hasn't closed below its 10-dma ($109.25) since April 17th.  If
you are looking for the catalyst for the strong performance,
we've got a double whammy for you.  First came earnings on the
24th of April and they were impressive.  Posting its 27th
consecutive quarter of sequential sales growth, with 60% growth
in net sales, a 155% increase in Internet sales, and a 79%
increase in net income is the kind of news that gets investors'
attention.  With the strong growth, the company is expanding
its management team and investors are applauding with their
wallets.  The other half of the story is excitement about a
potential split announcement (see below).  After testing support
near $105 a couple times Thursday morning, it was off to the
races as CDWC quickly ran up to tag new 52-week highs on both
Thursday and Friday.  The slow bleed Friday afternoon sapped
away all the day's gains, but this was simply due to a lack of
buyers, not a rush for the exit.  Weakness ahead of Tuesday's
FOMC meeting could provide another nice entry point if prices
pull back to near-term support in the $112-114 area.  If the
buyers are still hungry next week though, consider new positions
as the stock pushes through resistance at $122.

Adding to the good news is the Annual Shareholder Meeting on May
24th.  There will be a vote to increase the number of
outstanding shares, and this could very likely be followed by
a split announcement.  CDWC is historically a split candidate
above $80, and the strong move over the past few weeks puts the
stock deep into this territory.

BUY CALL JUN-110 DWQ-FB OI= 1 at $16.00 SL=11.50
BUY CALL JUN-115*DWQ-FC OI=28 at $13.38 SL=10.00
BUY CALL JUL-110 DWQ-GA OI= 0 at $22.88 SL=17.25
BUY CALL JUL-115 DWQ-GB OI=33 at $19.63 SL=14.25

SELL PUT JUN-105 DWQ-RA OI=10 at $ 4.75 SL= 6.75
(See risks of selling puts in play legend)

Picked on May 11th at $118.75     P/E = 46
Change since picked     -0.50     52-week high=$118.75
Analysts Ratings    4-2-0-0-0     52-week low =$ 35.25
Last earnings 04/00 est= 0.64     actual= 0.79
Next earnings 07-24 est= 0.76     versus= 0.51
Average Daily Volume =  321 K
/charts/charts.asp?symbol=CDWC


*************
SEMICONDUCTOR
*************

AMCC - Applied Micro Circuits $101.31 (-12.38)

AMCC is a global provider of high-performance, high bandwidth 
silicon connectivity solutions for the telecommunications, data 
communications, and military markets.  Their products are 
designed to respond to the growing demand for high-speed 
networking applications for established WAN standards and 
Automated Testing Equipment.  The company, which began 
operations in 1979, is extending its reach through acquisitions.  
Its blue-chip clientele includes Nortel, Raytheon, 3Com, Alcatel,
Cisco, and Lucent.  

On Thursday, Intel (INTC) rocked the NASDAQ with news it was 
launching an Internet media services business.  That shot of 
adrenaline propelled AMCC off its lows ($85).  By the end of the 
session it surpassed the sector leader for total points gained 
($12.19) for a 14.1% advance.  All in all, AMCC demonstrated 
just how spunky it could get in a rallying market.  On Friday 
there was more of the same.  AMCC shot through the psychological 
$100 level on better-than-average volume.  While the weekend 
profit taking didn't take AMCC back below $100, the stock did 
encounter resistance at the 10-dma ($106.48).  Currently AMCC is 
sandwiched between this line and the 5-dma ($96.88).  The 
stock's move through the 5-dma did however provide further 
validation that AMCC can stretch higher with a sustaining rally.  
Recall this technical previously served as a formidable line of 
opposition.  Therefore, dips followed by upward bounces off the 
5-dma should provide reasonable entries.  Keep in mind that 
firmer support is much lower at $85, so if it there's a reversal 
look out below!  Also pay attention to the Philadelphia 
Semiconductor Index ($SOX) as it demonstrates how the whole 
sector is reacting.  Of course be aware too of the broad market 
sentiment.  OIN has high expectations for this momentum play.  
If the economic data continues to establish a "buyable" market 
and the Feds don't do anything too outlandish on Tuesday, then 
AMCC should challenge resistance at the $120 mark in the short-
term.  AMCC can be a fast and furious mover so consider this 
play HIGH-RISK!

On Monday the company announced the addition of a new product to 
its complete line of AMCC Solutions for DWDM Optical Switch 
Interface Applications.  The S2080 is the industry's first super 
high-speed Silicon Germanium (SiGe) 34 x 34 differential 
crosspoint switch with full broadcast switching capability.  
Earlier in April, Robertson Stephens reiterated a Strong Buy 
rating and CSFB raised its price target to $200 from $150.  Both 
analysts cited the solid earnings report delivered on April 19th 
in which AMCC came in at $0.16 p/s beating the consensus 
estimate by $0.02.

BUY CALL JUN- 95*AEX-FS OI= 33 at $19.13 SL=13.75
BUY CALL JUN-100 AEX-FT OI=101 at $16.88 SL=12.25
BUY CALL JUN-105 AEX-FA OI= 69 at $14.63 SL=10.75
BUY CALL JUN-110 AEX-FB OI=233 at $12.75 SL= 9.50

Picked on May 11th at    $98.81    P/E = 252
Change since picked       +2.50    52-week high=$158.88
Analysts Ratings     10-4-0-0-0    52-week low =$ 12.19
Last earnings 03/00   est= 0.14    actual= 0.16
Next earnings 07-15   est= 0.17    versus= 0.06
Average Daily Volume = 3.60 mln
/charts/charts.asp?symbol=AMCC


RMBS - Rambus Inc. $188.94 (-18.69) 

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 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
technology.

We said Tuesday that we looked forward to its return.  Well it
didn't take long for RMBS to rejoin our little family.  During
its brief but volatile hiatus, Rambus fell to $164.50 and has
now bounced back, and could be positioning itself to fly.  RMBS
found itself in hot water on Wednesday.  Intel said it had 
discovered problems with a chip called the memory translation
hub, or MTH, inside several Pentium III-based PCs.  Technically,
the flaw exists in a chip designed by Intel, so how did Rambus
get mixed up in the mess?  Intel made the chip for computer
makers that wanted to adopt Intel's latest chipset, designed to
speak Rambus' language, without using the more expensive form
of high-speed memory.  In the long run while it could cost Intel
millions to replace the motherboards, replacing memory could
escalate the cost.  PCs that contain Rambus memory or other 
chipsets should be unaffected.  Investors don't like controversy
surrounding a company.  Take the Intel news and a bunch of folks
that are already jumpy, and you have all the makings for a trip
south.  The volume on the way down was fairly substantial, but
also wasn't to shabby on the return back up.  The economic data
on Thursday and Friday brought investors back to the market, if
only for a few hours.  The action during the past two days 
suggests that traders are willing to buy stock.  The pullback 
late Friday, still left RMBS with a respectable gain for the day.  
We believe RMBS may be back on track, although until Fed decision 
is out of the way, things could be a little choppy.  The 
technicals haven't changed much since Tuesday, with the 100-dma
at $186.50 and $177 level providing support, while the 10-dma at
$196.72 and the $200 area showing up as a potential stumbling 
block.  Bounces off intraday support levels or a solid move 
higher could provide a suitable entry point, while more
conservative types may prefer to wait for the Fed before entering 
a new play.

Other than the Intel problems, there was little in the way of
other news for Rambus this week.  Although the 4-for-1 split
was announced back in March and is not scheduled until the 
middle of June.  The company does have an upcoming board meeting
scheduled for May 23, to vote on the issue.

***May Strikes expire on Friday***

BUY CALL JUN-180 BYQ-FP OI=171 at $33.75 SL=24.75
BUY CALL JUN-190 BYQ-FR OI= 56 at $29.50 SL=21.50
BUY CALL JUN-200*BYQ-FT OI=465 at $25.00 SL=18.00
BUY CALL AUG-195 BYQ-HS OI= 36 at $45.13 SL=33.00

SELL PUT MAY-180 BYQ-QP OI=488 at $ 7.25 SL=10.25
(See risks of selling puts in play legend)

Picked on May 14th at   $188.94    PE = N/A
Change since picked       +0.00    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 = 3.80 mln
/charts/charts.asp?symbol=RMBS


********
INTERNET
********

KANA - Kana Communications $39.00 (-16.34)(+12.78)(+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.

Kana's recovery took a breather this week and is clearly in a 
consolidation phase.  After succumbing to Tuesday sell-off, the 
stock slithered back to old resistance at $38-$40 and is holding 
firm.  There wasn't any news event or major upset to have caused 
the pullback.  This in itself is a good indication that buyers 
will likely step back in at these bargain prices.  Why?  Because 
the company has a convincing future outlook and is growing 
rapidly in the area of Web-based software.  By the beginning of 
the millennium, Kana Communications had acquired three other 
ECRMs (e-customer relationship management) companies to broaden 
its product line.  And on April 25th, it reported a solid 
earnings report beating consensus estimates by 0.04 cents.  The 
analysts are also upbeat on this infrastructure stock and have 
given it good reviews recently.  Moving forward, KANA should 
climb back through the $45 mark and bounce off the 10-dma 
($46.08) with ease.  Recall that in this case, the 10-dma is an 
important line to monitor.  During its March and April downward 
spiral, KANA never saw the upside of this technical.  So for the
interim, we need to be patient and watch for a conclusive 
direction before opening new position.  The more aggressive 
traders may choose to take positions on solid bounces off the 5-
dma ($43.11), but be careful and keep the stops in place.

This week Kana communications announced that Office Depot(ODP), 
the global office product leader, is implementing Kana's 
eBusiness System across all communication channels.  The company 
also reported it inked a co-marketing and e-media product 
integration deal with Witness Systems, a provider of recording 
and analysis software. 

BUY CALL JUN-35 URW-FG OI= 28 at $ 9.38 SL= 6.50
BUY CALL JUN-40*URW-FH OI=169 at $ 6.00 SL= 4.00
BUY CALL JUN-45 URW-FI OI=188 at $ 4.13 SL= 2.50
BUY CALL JUN-50 URW-FJ OI=272 at $ 2.81 SL= 1.50

Picked on April 30th at  $42.56    P/E = N/A
Change since picked       -3.56    52-week high=$175.50
Analysts Ratings      5-2-0-0-0    52-week low =$ 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 = 1.20 mln
/charts/charts.asp?symbol=KANA


BVSN - Broadvision Inc. $45.75 (-0.13)(+5.69)

Headquartered in Redwood City, California, BroadVision, Inc. is 
the self-proclaimed leader in personalized e-business 
applications.  That means they are in the customer relationship 
management (CRM) software business.  BroadVision's comprehensive 
suite of integrated applications is built for delivery via the 
Web and wireless devices.  Companies using BroadVision's 
applications get to market quickly, launching innovative e-
commerce, self-service and enterprise information sites.  These 
sites enable personalized interactions and transactions with 
customers, partners, suppliers and employees.  BroadVision One-
To-One (TM) applications power business-to-consumer and business-
to-business sites for many of the world's top companies in the 
financial services, telecommunications, electronics, 
manufacturing, retail and travel industries.  BroadVision 
applications are available in more than 120 countries worldwide. 

This play is all about "The Buzz" getting back in the B2B sector 
following the H&Q tech conference.  Ian Morton, H&Q's analyst 
covering e-business-enabling solutions, is bullish on the online 
customer loyalty (CRM) market.  He further believes that merger 
and acquisition activity is going to accelerate.  Favorites?  
Among five others, BVSN makes his list.  CSFB noted on May 2nd 
that they believe "the stage is set for BVSN to emerge as one of 
the top guns in the e-commerce platform industry."  Two upgrades 
helped to keep the technical picture focused on the positive 
sentiment too (see news below).  Support remains rock-solid at 
$40 following Wednesday's retest of the April lows, and is 
further bolstered by the 200-dma at $38.17, which is also on the 
rise.  While volume remains slightly below average, intraday 
support remains at $45.  This was Thursday's high (old resistance 
equals new support theory) and slightly below Friday's open, 
which held all day.  Resistance is at $50 with a near-term 
breakout occurring at $51.38.  Consider taking a position on dips 
under $45 (wait for the bounce) prior to the FOMC meeting or wait 
for a move over $50 backed by volume, which would most likely 
occur after any interest rate announcements from the FOMC meeting 
on Tuesday.  As always, confirm market direction before entering 
the play

In the news, Red Herring has selected BroadVision for the Red 
Herring 100, the magazine's annual list of the top private and 
public companies in the technology industry.  Not only that, but 
from the prior week, Goldman upgraded BVSN to its Recommended 
List based on "its strategic positioning and the ongoing strength 
of its pipeline and business momentum".  Remember too that CSFB 
upgraded the stock to a Strong Buy with a price target of $70 on 
May 2nd.  According to Briefing.com, recent implementation of 
tiered partner program (Jan'00) is driving enhanced revenue 
visibility for BVSN as Tier 1 partners are dedicating set 
minimums for license revenue in CY00 (some in excess of $25 mln).  
It isn't all good news.  Needham and Co. initiated coverage of 
BVSN to Hold based on valuation only and notes that fundamentals 
need to catch up - nothing wrong with the company though.

***May Strikes expire on Friday***

BUY CALL JUN-40*BDV-FH OI= 949 at $ 9.75 SL=6.75
BUY CALL JUN-45 BDV-FI OI=1527 at $ 7.25 SL=5.25
BUY CALL JUN-50 BZV-FJ OI=2598 at $ 5.25 SL=3.25
BUY CALL SEP-50 BZV-IJ OI=1177 at $11.75 SL=8.75

SELL PUT MAY-40 BDV-RH OI=1085 at $ 3.00 SL=5.00
(See risks of selling puts in play legend)

Picked on May 2nd at   $ 49.63     P/E = 433
Change since picked      -3.88     52-week high=$93.25
Analysts Ratings    9-12-1-0-0     52-week low =$ 4.44
Last earnings 04/00  est= 0.02     actual= 0.04 surprise= 100% 
Next earnings 07-26  est= 0.02     versus= 0.01
Average Daily Volume = 8.3 mln
/charts/charts.asp?symbol=BVSN


*********
SOFTWARE
*********

MSFT - Microsoft $68.81 (-2.31)

If you are reading this newsletter, you know Microsoft.  Founded 
in 1976, MSFT is the world's largest software company.  Their 
software products include the Windows operating system, Internet 
Explorer and the MS Office suite of solutions, including Word, 
Excel, PowerPoint, Access, and Outlook, not to mention Encarta 
and Money.  They also run online services and e-commerce portal, 
MSN, WebTV, and have substantial holdings in other technology 
companies, including Vignette, Phone.com, Infospace, Expedia, and 
yes, even 5% of AT&T.  They aren't just for your PC anymore.

MSFT shares have been hammered over the last six months thanks to 
the anti-trust trial spurred by MSFT's competitors and a willing 
accomplice, Judge Jackson, on the bench.  Recently the Dept. of 
Justice filed its proposed remedy to break MSFT into two parts - 
an applications and operating system divisions.  In the minds of 
the legal community, the DOJ has substantially overstepped it 
boundary.  MSFT countered with a remedy of its own to decouple 
the operating system from the browser, which is what MSFT was 
judged "guilty" of.  The meat to be taken from the situation is 
that the DOJ, if successful, would lose on the appeal.  In short, 
the worst seems to be over and MSFT is free to resume an 
improvement in the stock price based on business.  How is 
business?  From an Upside Today article, here's e-business 
infrastructure analyst, Chris Galvin's view from the H & Q 
conference.  "Microsoft is still the center of the universe," he 
said, adding that he expected strong growth from Windows 2000, 
which is jump-starting a major server-upgrade cycle.  He also 
believes the company's decision to downgrade earnings 
expectations for 2001 is an effort to "play possum" so it doesn't 
look as strong as it really is during the remedy phase of the 
Department of Justice skirmish.  Asked what he thought about 
Microsoft's recent stock slide, Galvin said it was a good time to 
buy more shares.  We agree.  Support is rock-solid at $65.  While 
volume dwindled to less than half the ADV on Friday, the price 
has been moving up since Wednesday's low of $65.75.  Feel free to 
take a position on any intraday weakness before the Fed meeting 
as we think the Fed will provide us a nice relief rally and a new 
leg up for MSFT going forward.  Slight resistance should be 
encountered at $74.  Volume will be the key to breaking through.  
Careful though.  Any Fed surprise can squash this play quickly.

In case you missed Thursday's write-up, ING Barings reiterated 
their Strong Buy rating and price target of $135.  Furthermore, 
Madison Securities reiterated their Buy rating and price target 
of $90 and cites that due to tremendous amount of negative news 
which has been factored into stock price, the stock represents an 
attractive buying opportunity for investors per comment from 
briefing.com.

BUY CALL JUN-65 MSQ-FM OI=4723 at $6.38 SL=4.25
BUY CALL JUN-70*MSQ-FN OI=9053 at $3.50 SL=1.50
BUY CALL JUN-75 MSQ-FO OI=7542 at $1.63 SL=0.75
BUY CALL SEP-70 MSQ-GN OI=6543 at $5.25 SL=3.25
BUY CALL SEP-75 MSQ-GO OI=4193 at $3.13 SL=1.50

SELL PUT JUN-65 MSQ-RM OI=5008 at $1.94 SL=3.75
(See risks of selling puts in play legend)

Picked on May 11th at    $67.88    P/E = 41
Change since picked      +$0.94    52-week high=$119.94
Analysts Ratings     0-16-4-0-0    52-week low =$ 65.00
Last earnings 04/00   est= 0.41    actual= 0.43  
Next earnings 07-19   est= 0.41    versus= 0.40
Average Daily Volume = 40.8 mln
/charts/charts.asp?symbol=MSFT


SEBL - Siebel Systems $129.00 (-4.44)

Call it The King of CRM (customer relations management) software.  
Siebel Systems, Inc. is the world's leading provider of eBusiness 
applications software.  Siebel provides an integrated family of 
eBusiness applications enabling multi-channel sales, marketing 
and customer service systems to be deployed over the web, call 
centers, field, reseller channels, retail and dealer networks.  
Siebel Systems' sales and service facilities are deployed locally 
in more than 28 countries. 

We ran SEBL as a call play in March.  It's back thanks to a 
wedgie of the more pleasant kind - an ascending wedge formed over 
the last two weeks on the technical chart (actually four weeks if 
you count the low of April 17 at $75.38).  On a longer-term 
chart, it appears a bit range bound, but notice the lows have 
been moving up.  Notice too that overhead resistance at $130 has 
been tough to break through.  However, we're entering this play 
by banking on the idea that there will be a relief rally once the 
Fed acts on interest rates Tuesday.  It's a bit risky given that 
the Fed could raise questions about the future by leaving the 
door open to more rate hikes, especially if they dish out only a 
.25% rate hike this time.  The point is that if we get a rally, 
which seems to have the highest probability right now, SEBL could 
give us that breakout we've been looking for.  The good news is 
that prices haven't gone any lower even as volume has decreased 
to a trickle, hitting less than 50% of the ADV on Friday.  
Sellers have all but disappeared.  Aggressive traders may want to 
target shoot mild support levels at $122.50, $124, and $127 and 
buy any weakness.  If you are more conservative, wait for the 
clean break over $130 with volume.  If you get in prior to the 
FOMC meeting, be sure to have your stops set on Tuesday on the 
small chance we get a nasty Fed surprise.  To be really safe, 
$134 is your number, as that would clear an intraday spike price 
of $133.56 from Friday, a week ago.  But if you are that 
conservative, you may want to consider a less volatile play.

From the H&Q conference last week, H&Q's own analyst notes that 
SEBL is working on an interactive sales lead management 
application that can be combined with other functions of their 
CRM applications in a package called Sales.com.  Helping too to 
bolster the price is the announcement that SEBL will replace CBS 
in the S&P 500.  That should keep institutions busy buying the 
issue for their index funds. 

BUY CALL JUN-125*SGW-FE OI=611 at $16.13 SL=11.50
BUY CALL JUN-130 SGW-FF OI=507 at $13.63 SL=10.25
BUY CALL JUN-135 SGW-FG OI= 80 at $11.50 SL= 8.75
BUY CALL AUG-130 SGW-HF OI=826 at $21.75 SL=15.25
BUY CALL AUG-135 SGW-HG OI=221 at $19.63 SL=14.50

SELL PUT JUN-120 SGW-RA OI= 65 at $ 8.88 SL=11.75
(See risks of selling puts in play legend)

Picked on May 14th at   $129.00    P/E = 200
Change since picked       $0.00    52-week high=$175.13
Analysts Ratings     14-3-0-0-1    52-week low =$ 19.94
Last earnings 04/00   est= 0.14    actual= 0.17  surprise= 21%
Next earnings 07-18   est= 0.18    versus= 0.12
Average Daily Volume = 4.78 mln
/charts/charts.asp?symbol=SEBL


**************
DRUG & BIOTECH
**************

WLA - Warner-Lambert Co $117.25 (-5.00)

If you've ever experienced heartburn, bad breath, or one of 
those colds you just can't shake then you're likely familiar 
with Warner-Lambert.  Some of the popular consumer health care 
products include Zantac, Listerine, Clorets, and Certs, and 
Sudafed.  The company operates three main business segments: 
consumer healthcare products, confectionery products, and  
pharmaceuticals.  Its Parke-Davis and Goedecke pharmaceuticals 
divisions make analgesics, anesthetics, and homeostatic agents, 
as well as cholesterol treatments, which includes best seller 
Lipitor.  This division accounts for more than 60% of sales.

Look at a chart and notice how WLA bucked the March-April 
correction.  There was good reason why WLA was swaggering around 
in the bullpen and reaching newer heights.  Let's take a step 
back in time to February 7th when WLA announced a $93 bln merger 
with Pfizer (PFE).  This arrangement ended a three-month 
takeover battle that revolved around Lipitor and ultimately, 
pushed American Home Products (AHP) out of the picture.  It also 
was clearing the way for Pfizer to challenge Merck & Co as the 
world's #1 drugmaker.  Under the terms of the agreement, Warner-
Lambert shareholders will receive 2.75 Pfizer (PFE) shares for 
each share of WLA they own.  In the meantime, shares of WLA 
reached historical split-levels.  Unfortunately there wasn't a 
split announcement alongside the company's earnings' release on 
April 19th.  Although earnings were solid and showed a 35% gain 
in operating profits, confirming a strong trend in pharmaceutical 
sales throughout the industry.  WLA came in at $0.58 and beat 
consensus estimate by $0.02 p/s and the whisper number by $0.01.
Analysts at Dain Raucher Wessels liked the numbers enough to tag 
the stock with a Strong Buy rating.  And just a week later on 
April 27th, Pfizer's shareholders overwhelmingly backed the 
merger acquisition to ultimately create the US's largest drug 
firm and the world's second largest.  Then on Friday, the 
shareholders of Warner-Lambert voted on and approved the takeover
offer, which currently has $109 bln price tag.  The European 
Commission will rule on the merger on May 22nd.  Assuming all goes
according to plan, the acquisition could be completed as early as 
May 24th.  Technically, the chart is still very bullish despite 
the mild pullback of the last few trading sessions.  After WLA 
reached a new high at $126.25 on Monday, profit takers and market
pressure effected the share price.  However, WLA remains perched 
near the 5 & 10 DMAs, $119.72 and $118.55 respectively, and is 
poised for another bounce off near-term support ($115).  Keep the 
rose-colored glasses in your pocket though and confirm solid 
upward moves before opening new positions.  If the Feds gyrate 
from the expected 50-basis point hike, then all could go to pot 
very quickly.  

Besides the merger scuttlebutt surrounding WLA, Japanese drug 
maker Yamanouchi Pharmaceutical said it would start marketing 
the blockbuster anti-cholesterol drug Lipitor in Japan this 
week.  Lipitor is currently available in about 70 countries and 
had global sales of $3.7 bln in 1999.  With the introduction 
into the Japanese market, sales are expected to jump to $5 bln in 
2000. 

BUY CALL JUN-115 WLA-FC OI=162 at $7.00 SL=5.00
BUY CALL JUN-120*WLA-FD OI=246 at $4.50 SL=2.75
BUY CALL JUN-125 WLA-FE OI=617 at $2.81 SL=1.50
BUY CALL JUL-120 WLA-GD OI=370 at $6.88 SL=5.00
BUY CALL JUL-125 WLA-GE OI= 78 at $5.00 SL=3.00

Picked on May 9th at    $121.38    P/E = N/A
Change since picked       -4.13    52-week high=$126.25
Analysts Ratings     13-4-7-0-0    52-week low =$ 60.81
Last earnings 03/00   est= 0.56    actual= 0.58
Next earnings 07-24   est= 0.51    versus= 0.63
Average Daily Volume = 3.31 mln
/charts/charts.asp?symbol=WLA


SEPR - Sepracor Inc. $102.25 (-1.00)(+11.25)

Sepracor develops and commercializes new, patented forms of
existing pharmaceuticals by purging them of nonessential
molecules.  The company's products can reduce side effects,
provide new uses, and improve safety, performance, and dosage.
Sepracor focuses its efforts on gastroenterology, neurology,
psychiatry, respiratory care, and urology.  The company is also
developing its own new drugs to treat infectious diseases and
conditions of the central nervous system.

In April, the Federal Trade Commission (FTC) closed its
investigation of the license agreement between Eli Lilly (LLY)
and SEPR.  The agreement had called for LLY to be the sole
developer of a new entity called fluoxetine.  The compound is a
modified form of an active ingredient found in Prozac.  The FTC
ruled that SEPR will receive an up-front license fee of $20 mln
and also receive up to $70 mln in additional payments based upon
the development of fluoxetine.  The positive developments
revolving around fluoxetine have been reflected in the stock over
the past month.  SEPR bucked the bear that dragged the broader
market lower during the month of April.  As a result of the
settlement with LLY, the stock climbed from a low of $60 in early
April to its current levels.  After dipping below $100 early last
week, SEPR rallied into the weekend, back above the century mark.
Despite the decline earlier in the week, SEPR remains in a
pattern we love to see, higher highs and higher lows.  We're
looking for SEPR to build momentum after crossing the always
important $100 level.  Before moving higher though, SEPR will
need to clear minor resistance at $104 and again at $107.  If the
stock clears those resistance levels it could very easily retest
its recent high of $110, thereafter we could see smooth sailing.
From here, there are two possible ways to gain entry into the
play.  First, watch for a bounce off support at $100.  Or, if the
momentum from last Friday continues, look for SEPR to clear $104.
Either way, target shoot to your risk level and confirm volume
with any rally.

One event that may help SEPR clear its various resistance levels
is the upcoming Annual Shareholder Meeting.  Investors will meet
on May 24th to vote on the proposal to increase the number of
authorized shares.  If the market stabilizes, a split
announcement could add fuel to SEPR's fire.

***May Strikes expire on Friday***

BUY CALL JUN-100*ERU-FT OI=110 at $14.75 SL=10.75
BUY CALL JUN-105 ERU-FA OI= 74 at $12.50 SL= 9.25
BUY CALL JUN-110 ERU-FB OI=  4 at $10.38 SL= 7.25
BUY CALL JUL-110 ERU-GB OI= 67 at $11.75 SL= 8.50

SELL PUT MAY- 95 ERU-QS OI= 36 at $ 2.31 SL= 4.00
(See risks of selling puts in play legend)

Picked on May 7th  at   $103.25    P/E = N/A
Change since picked       -1.00    52-week high=$126.81
Analysts Ratings      5-4-2-0-0    52-week low =$ 27.50
Last earnings 03/00   est=-0.96    actual=-0.76
Next earnings 07-24   est=-0.55    versus=-0.56
Average Daily Volume = 1.09 mln
/charts/charts.asp?symbol=SEPR


*********************************
CALLS - CONTINUED IN SECTION FOUR
*********************************




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*******************************
SEE DISCLAIMER IN SECTION ONE




The Option Investor Newsletter                      5-14-2000  
Sunday                                                 4 of 5


*****************
CALLS - CONTINUED
*****************

AFFX - Affymetrix Inc. $140.22 (-15.84)(+21.00)

AFFX has established itself as a worldwide leader in the 
field of DNA chip technology.  The Company has developed and 
intends to establish its GeneChip system as the platform of 
choice for acquiring, analyzing and managing complex genetic 
information in order to improve the diagnosis, monitoring and 
treatment of disease.  The Company's GeneChip system consists 
of disposable DNA probe arrays containing gene sequences on a 
chip, certain reagents for use with probe arrays, a scanner 
and other instruments to process the probe arrays, and software 
to analyze and manage genetic information from the probe 
arrays.  The company sells its products to Drug and Biotech 
companies involved in gene research.

The waiting game continues as investors refuse to place their
bets in advance of the FOMC meeting on Tuesday.  The volume is
anemic and so AFFX is drifting with the whim of the broader
markets, finding support in the high $120's and resistance at
the high $150's.  If you are thinking "that's a $30 range, it
must be tradable", then you are reading my mind.  The support
and resistance levels have been consistent since the beginning
of the month, so all it takes is patience and discipline.  The
moves are choppy, but as you have heard so many times before,
good entries make position management so much easier.  That is
fine from a technical perspective, but let's recap why we like
this play in the first place.  Providing the products and
information needed by companies involved in genetic research,
AFFX is well positioned to profit from the growth in the Biotech
sector, much like companies like CSCO and EMC are profiting from
the growth of the Internet.  AFFX began recovering with the
sector after the mid-April lows and has spent the past 2 weeks
dueling with the 200-dma (currently $142.56).  In order to move
through this level with any conviction, we need to see the
volume pick up significantly and hopefully the trigger will be
the FOMC meeting next week.  Everyone seems to be expecting a
50-point hike, but the removal of uncertainty could be the
catalyst for buyers to return to neglected issues like AFFX.
Aggressive traders can consider a pullback to support to be a
good entry point, as long as the price bounces.  If you prefer
a more cautious approach, wait until after the FOMC meeting,
look for improving market sentiment, and then pull the trigger
as AFFX shows its intention to participate in what we hope will
be a significant recovery in the Biotechs.

It is starting to sound like a broken record, but there is very
little in the way of recent news on AFFX.  The latest goes all
the way back to the first of May, and we have repeated it here
for reference.  Gene Logic Inc., a leading provider of genomic
information, announced last Monday that they will exercise an
option in their GeneChip agreement with AFFX to include access
to custom GeneChip probe arrays.  GeneLogic will provide
proprietary information from its internal sequence database to
AFFX so that the company can design and manufacture a series of
custom arrays.  These custom arrays will allow AFFX to expand
their current 60,000 human gene set, which consists of current
sequences emerging from the Human Genome Project.

***May Strikes expire on Friday***

BUY CALL JUN-140 FIQ-FH OI= 31 at $22.50 SL=16.75
BUY CALL JUN-145 FIQ-FI OI=  8 at $20.38 SL=14.75
BUY CALL JUN-150*FIQ-FZ OI= 78 at $18.00 SL=13.00
BUY CALL AUG-150 FIQ-HZ OI=409 at $30.50 SL=22.75
BUY CALL AUG-160 FUE-HL OI=  8 at $25.13 SL=18.75

SELL PUT MAY-130 FIQ-QF OI=144 at $ 4.50 SL= 6.50
(See risks of selling puts in play legend)

Picked on May 4th at    $150.09     P/E = N/A
Change since picked       -9.88     52-week high=$327.00
Analysts Ratings      2-6-2-0-0     52-week low =$ 32.50
Last earnings 04/00   est=-0.26     actual=-0.14
Next earnings 07-20   est=-0.12     versus=-0.32
Average Daily Volume = 1.07 mln
/charts/charts.asp?symbol=AFFX


MEDI - MedImmune Inc. $164.50 (-5.75)(+10.31)

MedImmune is a biotech company focused on developing and
marketing products that address medical needs in areas such as
infectious disease, autoimmune disorders, cancer, and
transplantation medicine.  The company has six products on the
market and a diverse product development portfolio.  The
products currently on the market include Synagis, CytoGam,
RespiGam, Ethyol, Neutrexin, and Hexalen.

It was a rough week for MEDI, as well as the Biotech sector,
but the week ended on a positive note.  The fledgling recovery
is still alive, aided on Friday by news that MEDI will be added
to the S&P 500 (see below).  The lack of volume is still the
culprit behind the weakness we are seeing, but hopefully that
will come to an end on Tuesday, when the FOMC meeting removes
the cloud of uncertainty about interest rates.  Another positive
factor is the pending 3-for-1 stock split, which is payable on
May 18th.  The split is contingent on the shareholder approval,
which should be forthcoming at the Annual Shareholder Meeting on
May 18th.  MEDI is having a hard time getting through the 50-dma
(currently $165.69), but the good news and pending split along
with the return of buyers next week could be just the fuel we
need to get our play moving.  Vacillating early in the week, the
lack of volume got the better of our play as it fell through
support at $160 and tagged $150 before finding support and
beginning to claw its way higher.  Fortunately, the pattern of
higher lows is still intact, and once investors start coming
back into the market, MEDI should be able to move higher on
enthusiasm for their addition into the S&P.  Look to initiate
new positions as MEDI bounces near the $160 support level, or
wait for improving sentiment to push the price through near-term
resistance at $170.

On Thursday, Standard and Poors announced that MEDI would
replace Central & South West Corp. in the S&P 500 Index on a
date to be announced.

BUY CALL JUN-165 MEQ-FM OI=429 at $17.50 SL=12.75
BUY CALL JUN-170*MEU-FN OI=190 at $14.75 SL=11.00
BUY CALL JUN-175 MEU-FO OI=280 at $13.00 SL= 9.75
BUY CALL JUN-180 MEU-FP OI=209 at $11.13 SL= 8.25
BUY CALL JUN-185 MEU-FQ OI=218 at $ 8.88 SL= 6.25

SELL PUT JUN-150 MEQ-RJ OI=647 at $ 8.75 SL=11.50
(See risks of selling puts in play legend)

Picked on May 7th at    $170.25     P/E = 108
Change since picked       -5.75     52-week high=$228.75
Analysts Ratings     12-1-0-0-0     52-week low =$ 55.00
Last earnings 04/00   est= 0.75     actual= 0.80
Next earnings 07-19   est=-0.07     versus=-0.19
Average Daily Volume = 1.52 mln
/charts/charts.asp?symbol=MEDI


AMGN - Amgen $62.38 (+2.81)

Amgen is a global biotechnology company that discovers, develops,
manufactures and markets cost-effective human therapeutics based
on advances in cellular and molecular biology.  The Company
manufactures and markets four human therapeutic products, Epogen,
Neupogen, Infergen and Stemgen. 

All things considered Amgen had a great week.  The company
gained about 5%, which compared to most of the major indices,
isn't a bad performance.  Since testing its 200-dma in late April,
it has quietly moved from $50 to over $62 on Friday.  AMGN does
not typically provide the excitement and volatility of many of
the tech issues, but is a stock that trends very well once a
pattern is established.  The activity seen the past couple
of weeks in the markets has seemed to have had little effect on
AMGN, which is part of what drew our attention to the bio-tech
company.  The Drug and Bio-tech sectors have done reasonably
well lately, but Amgen has again outperformed many of its peers.
The recent strength came after a Federal judge ruled that
Transkaryotic Therapies(TKTX) infringed on one of Amgen's patents
when it developed its own version of their anemia drug Epogen.
The ruling was the first, but an important step in the final
determination of company's claims against Hoechst and TKT.  The
next event adding momentum to AMGN, came in the form of favorable
first-quarter earnings.  Results were in line with analysts
estimates as revenues rose 9.2%.  The following day three
different brokerage firms came out reiterating Buy or Strong Buy
ratings on the company.  Although the volume continues to be
light, on Friday the drug company managed to clear the 100-dma
at $61.99 on a closing basis, with strong buying seen the last
15 minutes of the session.  Intraday charts show support building
between $60 and $61, with followed up at the $58 level.  The next
resistance comes into play near $66.  The momentum appears to be
in our favor and any further moves higher could be viewed as a
buying opportunity.

On Wednesday Amgen received a nice mention from the folks at
Janus.  Their Global Life Fund closed this week, which is a 
health care and biotech fund.  Although the past 3 months
has been rough, it is still up 10% for the year.  Amgen topped
the list as one of the top holdings in their current portfolio.

BUY CALL JUN-55 YAA-FK OI= 478 at $10.00 SL=7.00
BUY CALL JUN-60*YAA-FL OI=8052 at $ 6.25 SL=4.25
BUY CALL JUN-65 YAA-FM OI=1818 at $ 3.75 SL=2.00
BUY CALL JUN-70 YAA-FN OI=2147 at $ 2.06 SL=1.00
BUY CALL JUL-60 YAA-GL OI=4734 at $ 9.00 SL=6.25

SELL PUT JUN-60 YAA-RL OI= 309 at $ 3.63 SL=5.50
(See risks of selling puts in play legend)

Picked on May 14th at    $62.38    PE = 60
Change since picked       +0.00    52 week high=$76.50
Analysts Ratings    11-12-7-0-0    52 week low =$26.06
Last earnings 04/00   est= 0.25    actual= 0.25 
Next earnings 07-25   est= 0.27    versus= 0.25
Average daily volume = 11.6 mln
/charts/charts.asp?symbol=AMGN


DNA - Genentech $129.00 (+5.06)

Genentech, is a leading biotechnology company that discovers,
develops, manufactures and markets human pharmaceuticals for
significant unmet medical needs.  Thirteen of the approved
products for biotechnology stem from Genentech science.  
Genentech markets seven products directly in the United States.
The company has headquarters in South San Francisco, California.

Their stock has been under the weather lately, but may now be on
the road to recovery.  Since early March, Genentech has suffered
like many of the biotech issues, dropping 60% from its recent
highs.  Besides profit taking and a change of investor sentiment,
DNA has attempted to fight off some bad press.  Late last week
concerns hit the trading floors over the safety of a drug called
Herceptin, which is used in the treatment of breast cancer.
Genentech warned U.S. doctors about 15 deaths from allergic
reactions linked to Herceptin.  They went on to say there had
been 62 serious reactions reported among the 25,000 patients who
had been given the drug.  Analysts at SG Cowen rushed to the aid
of DNA saying that the Herceptin news was not new, noting that
adverse events have occurred in less than 1% of those treated.
Besides the obvious, why all the fuss?  Herceptin's sales rose
72% in the first quarter helping Genentech achieve better than
expected earnings.  On Wednesday, DNA got another dose of bad
news.  A U.S. Appeals Court denied Genentech's motion for an
injunction against Bio-Technology General Corp., pending the
outcome of its appeal of a court decision earlier this year.
It's more in-depth than we will go here, but could be viewed as
another stumbling block for the company.  Amazingly, with all
its had to face in the past six sessions, DNA has managed to gain
about 13%.  So how do we approach our new play?  After putting in
a bottom at $97, Genentech has formed good support between its
200-dma at $116.33 and $118.  In the midst of recent negative
sentiment, DNA has continued to find buyers.  Intraday support is
also found near $121.  With the renewed interest seen in Genetech
and the biotech sector, we would view further advances as an
opportunity to buy calls.

In other news, ImmunoGen Corp. announced a collaboration with
Genentech to develop tumor-activated prodrugs.  The relationship
will give DNA broad access to ImmunoGen's maytansinoid Tumor-
Activated Prodrug(TAP) technology for use with proprietary 
antibodies.

BUY CALL JUN-120 DNA-FD OI= 50 at $16.25 SL=11.75
BUY CALL JUN-125*DNA-FE OI=237 at $13.75 SL=10.00
BUY CALL JUN-130 DNA-FF OI=279 at $13.00 SL= 9.75
BUY CALL JUN-135 DNA-FG OI= 33 at $ 9.38 SL= 6.25
BUY CALL SEP-125 DNA-IE OI=416 at $25.38 SL=18.50

SELL PUT JUN-120 DNA-RD OI=700 at $ 9.00 SL=12.00
(See risks of selling puts in play legend)

Picked on May 14th at   $129.00    PE = N/A
Change since picked       +0.00    52 week high=$245.00
Analysts Ratings      4-6-4-0-0    52 week low =$ 58.25
Last earnings 04/00   est= 0.26    actual= 0.28 
Next earnings 07-12   est= 0.29    versus= 0.28
Average daily volume = 1.37 mln
/charts/charts.asp?symbol=DNA


****
MISC
****

FAST - Fastenal Company $69.38 (+3.50)

Fastenal operates nearly 800 stores in 48 states, Puerto Rico,
and Canada.  Its stores stock over 130,000 products, including
treaded fasteners such as screws, nuts, and bolts.  Other sales
come from power tools, cutting blades, hydraulic and pneumatic
parts, electrical, and welding supplies.  Its customers usually
come from the construction and manufacturing industries.  FAST
also sells through catalogs and its Web site.

Though not a tech stock, our new play is quickly approaching
stardom.  With its impressive showing in the past month, FAST's
relative strength rating has shot through the proverbial roof.
In the face of a growling bear market, FAST managed to claw its
way higher throughout the month of April and into May thus far.
FAST doesn't host Web sites, they don't make fiber optic
equipment, nor do they manufacture semiconductors.  FAST makes
nuts and bolts.  From its humble beginning selling nuts and
bolts through a vending machine, FAST has emerged as a
powerhouse in the industrial supplies market.  The company has
an enviable annual growth rate of 20%, which has been sustained
for the past 18 years.  FAST's recent rally stems from the
company's positive earnings report late last month and strong
institutional interest.  It seems that money managers can't buy
FAST - fast enough.  Volume has soared to record levels in the
past month as institutions accumulate the stock.  There have
also been rumors circulating on trading desks that FAST is a
possible takeover target.  Though just rumors, the talk could
propel the stock higher.  FAST closed at a new 52-week high in
Friday's trading on nearly three times ADV.  The stock had
reached as high as $70.50 until succumbing to profit taking in
the final hours of trading.  From here, look for entry as
momentum carries FAST higher, or watch for a bounce off support
at $68.  Watch the volume carefully to confirm that institutions
are still interested in FAST.

By reaching new highs in the past month, FAST has entered into
split territory.  The company last split its stock in 1995, when
it was trading at $49.  Though the company doesn't yet have
enough shares for a split, we'll be watching for an announcement.

BUY CALL JUN-65 FQA-FM OI= 55 at $7.13 SL=5.00
BUY CALL JUN-70*FQA-FN OI=114 at $4.38 SL=2.75
BUY CALL JUN-75 FQA-FO OI=  0 at $2.06 SL=1.00
BUY CALL AUG-70 FQA-HN OI= 45 at $7.00 SL=5.00

Picked on May 14th at   $69.38    P/E = 36
Change since picked       0.00    52-week high=$71.50
Analysts Ratings     4-2-1-0-0    52-week low =$34.00
Last earnings 03/00   est=0.50    actual=0.53
Next earnings 07-12   est=0.55    versus=0.45
Average Daily Volume  =  339 K
/charts/charts.asp?symbol=FAST


PLXS - Plexus Corp $81.00 (+9.38)

Plexus provides product realization services to original 
equipment manufacturers (OEMs) in the telecommunications, 
medical, industrial, computer, and transportation electronics 
industries.  Its Plexus Technology and SeaMED subsidiaries 
provide the product design and engineering, while its Plexus 
Electronic Assembly subsidiary handles manufacturing.  Lucent 
and GE account for over 25% of sales.  

All the recent good news, solid business forecasts, and positive 
analyst coverage finally sunk into investors' minds this week.  
PLXS continually tackled strong resistance at $79 and $80 then 
toppled the opposition in Friday's session.  The volume was 
never below the ADV (247 K) and typically reached two or three 
times the norm during the ensuing battle.  This aspect is very 
encouraging when making trades on a momentum play.  Plus if you 
consider the overall light volume in the broad markets then it's 
even more of a bullish demonstration.  The stellar performance 
on Friday hinted that intraday support could evolve at $80, but 
near-term it's stronger at $75 and $78.  The 5-dma ($78.14) and 
10-dma ($74.24) are in-line with this level.  Therefore, at this 
time, it's practical to use these technical indicators as entry 
gauges on the climb.  There's also a bit of icing to put on the 
cake.  Ever since reporting 1Q earnings, PLXS is once again 
considered a split-candidate.  On April 18th, the company beat 
analyst expectations by $0.04 and came in at $0.49 versus $0.38 
same quarter last year.  The good numbers and positive outlook 
gave PLXS the boost it needed to climb over $50-$55 and 
establish itself as a split candidate.  The last time Plexus 
split its stock was in the summer of 1997.  The company 
currently has 60 mln shares authorized with 17.7 mln shares 
issued so there's plenty of shares for a stock dividend.  While 
this isn't the basis of the play, it certainly lends to a 
favorable opportunity.  After watching PLXS spike off its lows 
of $65 on May 5th, we're anticipating the uptrend will continue 
especially now that the previous resistance at $80 is shattered.  
PLXS was propelled upward that day by the new Strong Buy-
Aggressive Risk coverage put out by equity analyst David T. 
Parrish of Dain Rauscher Wessels and his issuance of a $103 
price target.  Earlier in April, Robertson Stephens reiterated 
a Buy rating with a price target of $90 and  Needham & Co 
reiterated a Strong Buy rating and upped their price target to 
$80 from $70.  Prudential Securities also has confidence in PLXS 
and upgrades the stock to a Strong Buy from Accumulate and 
tagged on a $90 price target.  If the market conditions are 
advantageous for call plays and the analyst's projections are 
correct, then PLXS could experience a solid momentum run over 
the short-term.

As was initially mentioned, Plexus was bestowed with good news 
recently.  On May 1st, it completed its acquisition of Agility 
Inc., a privately-held Boston-area electronic manufacturing 
services provider.  The immediate benefit to the company is the 
ability to provide existing and future customers in the New 
England market with a full range of manufacturing services.  The 
following day, Plexus announced it was presented with two 
prestigious Service Excellence Awards at the Nepcon West 2000 
show by Technology Forecasters and Circuits Assembly Magazine.  

BUY CALL JUN-70 QUA-FN OI=303 at $13.38 SL=10.00
BUY CALL JUN-75 QUA-FO OI=  8 at $10.38 SL= 7.25
BUY CALL JUN-80*QUA-FP OI= 80 at $ 8.13 SL= 5.75
BUY CALL JUN-85 QUA-FQ OI= 10 at $ 6.38 SL= 4.50

Picked on May 14th at   $81.00    P/E = 60
Change since picked      +0.00    52-week high=$81.75
Analysts Ratings    10-5-0-0-0    52-week low =$24.44
Last earnings 03/00  est= 0.36    actual= 0.38
Next earnings 07-17  est= 0.52    versus= 0.39
Average Daily Volume =   247 K
/charts/charts.asp?symbol=PLXS


**********
NETWORKING
**********

JDSU - JDS Uniphase $86.00 (-7.81)

JDS Uniphase is a high technology company that designs, develops,
manufactures and distributes a comprehensive range of products
for the growing fiberoptic communications market.  These products
are deployed by system manufacturers worldwide to develop
advanced optical networks for the telecommunications and cable
television industries.  Their products include semiconductor
lasers, high-speed external modulators, transmitters, amplifiers,
couplers, multiplexers, circulators, tunable filters, optical
switches and isolators for fiberoptic applications.  The Company
also supplies its OEM customers with test instruments for both
system production applications and network installation.

If you entered our new play on Friday, you at least had the
chance for a day-trading opportunity.  If not, then just hang
in there as this one could be just be getting warmed up.  As
we said Thursday, the recent bounce off the $80 level of support
has given us confidence that JDSU may have put in a bottom and
be gearing up to had north.  After moving up to $91.13 on Friday,
the Fed clouds came rolling back in.  The last 90 minutes of
trading, saw JDSU loose its momentum, pulling back to close
down $0.50 for the session.  Normally that kind of action late
in day would be viewed as a negative, especially closing at
or near the low of the day.  In this case, going into a weekend,
two days ahead of the Fed meeting, we believe traders were 
simply pulling their money off the table and going home for
the weekend.  If they come back after the weekend feeling a
little blue, and we get a dip, we would again look for the $80
area to attract buyers.  We really believe investors are just
chomping at the bit to buy shares of this company.  The Fed
is keeping the skies overhead just clouded enough for the long
term investors to think that perhaps they may be able to load
the boat at a better price.  The short-term folks are in and out 
in a day or so, just like normal.  Once the skies clear we would 
look for JDSU to take flight again.  The analysts overwhelmingly 
back the company with Strong Buy and Buy ratings, and the public 
seems to have its own love affair going on with JDSU.  As for our 
play, a successful retest of the $83 area or the $80 level could
certainly provide a suitable entry point.  Until the Fed decision
is out on Tuesday, further advances could also be a good entry 
point, but be prepared to sell in the event of surprise.

Not much company specific news this week, but on Thursday, an
analyst at DLJ initiated coverage of JDSU with a Buy rating.
Hasan Imam also said he projected a 12-month price target of 
$120 for the company.  Imam joins thirty-three other analysts
that have JDSU currently listed as a Buy or Strong Buy.
They believe JDSU will emerge in the top three merchant vendors
for optical components and modules.

BUY CALL JUN-75 XXZ-FO OI=2909 at $17.50 SL=12.75
BUY CALL JUN-80*XXZ-FP OI=3126 at $14.38 SL=10.75
BUY CALL JUN-85 XXZ-FQ OI=2623 at $11.75 SL= 8.50
BUY CALL JUN-90 XXZ-FR OI=2739 at $ 9.13 SL= 6.25
BUY CALL SEP-80 XXZ-UP OI=2064 at $14.25 SL=10.75

SELL PUT MAY-85 XXZ-QQ OI=7591 at $ 3.38 SL=5.50
(See risks of selling puts in play legend)

Picked on May 11th at    $86.50    PE = N/A
Change since picked       -0.50    52 week high=$153.42
Analysts Ratings    19-14-2-0-0    52 week low =$ 15.20
Last earnings 04/00   est= 0.10    actual= 0.11 
Next earnings 07-25   est= 0.12    versus= 0.06
Average daily volume = 16.6 mln
/charts/charts.asp?symbol=JDSU


*****
LEAPS
*****


May 14th - LEAPS
By Mark Phillips
leaps@OptionInvestor.com

Investors are holding their breath (and their cash) in
anticipation of Tuesday's FOMC meeting and the lack of volume
is serving to gradually reduce the volatility to more palatable
levels.  Since hitting a high of 41.53 on April 14th, the peaks
on the VIX are getting lower, increasing our conviction that the
worst may be over.  The VIX actually managed to close out the
week just below 30 (29.95), and once the Fed announces their
decision on interest rates, we could be in for a decent
recovery.  The NASDAQ is still flirting with its 200-dma (3590),
which is right near the 3600 support level.  The drop in
volatility is bringing option premiums down from the
stratosphere, while the market sorts out its future direction.
This is exactly what we like to see as LEAPS investors, because
we can pick our targets carefully and profit from the recovery
whether it is slow or quick.  Many of our favorite tech names
like TXN, CSCO, EMC, QCOM and JDSU are holding near major
support levels, which is encouraging in the face of the current
market conditions.  The longer these support levels hold, the
stronger they become, and the lower the likelihood they will
be violated.  The return of volume will be a prerequisite to
any significant rally, so keep a sharp lookout for an increase
in buying activity.  Pick your targets ahead of time, so that
when the conditions are right, you can pounce on the
opportunity.  One note about the playlist; several of our plays
have had recent splits, so the strikes have changed and the
"Picked" prices have been changed accordingly.


Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2001 $ 80  ZOH-AP   $15.38   $57.13   271.46%
                 JAN-2002 $ 90  WUE-AR   $19.00   $61.63   224.37%
IBM    11/07/99  JAN-2001 $100  ZIB-AT   $13.63   $18.88    38.52%
                 JAN-2002 $110  WIB-AB   $16.50   $24.50    48.48%
CSCO   11/14/99  JAN-2001 $ 40  ZCY-AH   $ 9.56   $25.38   165.48%
                 JAN-2002 $ 45  WIV-AI   $11.00   $28.25   156.82%
GE     11/21/99  JAN-2001 $ 50  ZGR-AJ   $ 5.42   $ 8.75    61.44%
                 JAN-2002 $ 50  WGE-AJ   $ 8.50   $12.75    50.00%
NT     11/28/99  JAN-2001 $37.5 ZOO-AU   $11.13   $19.88    78.62%
                 JAN-2002 $37.5 WNT-AU   $15.13   $24.50    61.93%
VOD    12/05/99  JAN-2001 $ 50  ZAT-AJ   $10.75   $ 6.13   -42.98%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $11.00   -26.67%
TXN    12/12/99  JAN-2001 $110  ZTN-AB   $22.25   $47.13   111.82%
                 JAN-2002 $120  WGZ-AD   $28.50   $57.50   101.75%
NXTL   12/19/99  JAN-2001 $ 90  ZFU-AR   $23.50   $24.88     5.87%
                 JAN-2002 $100  WFU-AT   $27.25   $31.25    14.68%
SUNW   12/19/99  JAN-2001 $ 80  ZJX-AP   $17.63   $19.00     7.77%
                 JAN-2002 $ 90  WJX-AR   $22.00   $26.13    18.77%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $18.88   106.79%
                 JAN-2002 $ 40  WSY-AH   $12.63   $24.13    91.05%
ERICY  01/30/00  JAN-2001 $16.3 ZYD-AO   $ 4.94   $ 5.88    19.03%
                 JAN-2002 $16.3 WRY-AO   $ 6.75   $ 8.13    20.44%
NSM    02/27/00  JAN-2001 $ 70  ZUN-AN   $18.50   $10.63   -42.54%
                 JAN-2002 $ 70  WUN-AN   $24.25   $18.00   -25.77%
AOL    03/12/00  JAN-2001 $ 60  ZKS-AL   $14.00   $ 8.88   -36.57%
                 JAN-2002 $ 65  WAN-AM   $18.63   $14.75   -20.83%
AXP    03/12/00  JAN-2001 $43.3 ZXP-AP   $ 7.25   $12.13    67.31%
                 JAN-2002 $46.6 WXP-AQ   $ 9.33   $14.63    56.81%
WM     03/19/00  JAN-2001 $ 25  ZWI-AE   $ 5.00   $ 5.25     5.00%
                 JAN-2002 $ 30  WWI-AF   $ 5.38   $ 5.50     2.23%
QCOM   03/26/00  JAN-2001 $150  YQO-AJ   $39.25   $12.13   -69.10%
                 JAN-2002 $160  XQO-AL   $52.88   $23.13   -56.26%
AMD    04/16/00  JAN-2001 $ 70  ZVV-AN   $17.50   $30.63    75.03%
                 JAN-2002 $ 70  WVV-AN   $26.00   $42.00    61.54%
CMGI   04/16/00  JAN-2001 $ 50  ZB -AJ   $21.50   $19.50   - 9.30%
                 JAN-2002 $ 55  WCK-AK   $27.75   $27.00   - 2.70%
JDSU   04/16/00  JAN-2001 $ 80  XJU-AP   $27.50   $29.38     6.84%
                 JAN-2002 $ 80  YJU-AP   $39.63   $43.00     8.50%
VSTR   04/16/00  JAN-2001 $ 90  ZTB-AR   $23.88   $37.75    58.08%
                 JAN-2002 $ 90  WWP-AR   $35.00   $50.38    43.94%
YHOO   4/30/00   JAN-2001 $140  ZYM-AH   $32.13   $26.50   -17.52%
                 JAN-2002 $140  WYZ-AH   $46.38   $44.25   - 4.59%
       
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 
price.

Leap of the Week

VOD - Vodaphone $42.06

It has been a rocky road for our play on VOD since early March.
Declining steadily in sympathy with the NASDAQ, the Telecom
giant is finally showing signs of life.  The company has a
strong global presence in the Wireless market and the demand
for their services is anticipated to have strong growth going
forward.  Adding to the positive sentiment is the recent rollout
of the Verizon joint venture.  VOD and Bel Atlantic recently
joined their wireless businesses to create Verizon Wireless, a
behemoth organization that provides wireless services in 96 of
the nation's top 100 markets.  By year's end, the two companies
are expected to take Verizon to the market in what is
anticipated to be the biggest IPO ever.  With the positive
outlook for the future, VOD looks like a bargain at current
prices.  Any market weakness that produces a dip to support near
$40-41 looks like a very attractive entry point.  If the
recovery continues, look to step into the play as buyers push
the price through resistance at $43.

BUY LEAP JAN-2001 $45.00 ZAT-AI at $ 7.75
BUY LEAP JAN-2002 $50.00 WHV-AJ at $11.00


New Plays

MOT - Motorola $95.69

There's nothing like a notable downgrade on a great stock to
clear out the last of the sellers.  On Wednesday, Alex Cena at
Salomon Smith Barney lowered his rating from Buy to Outperform
and his price target from $200 to $120.  He cited the loss of
Nortel as a customer and an aggressive product rollout in
mobile phones as major obstacles to a continuation of the recent
growth rate.  The carnage was quick and decisive as MOT dropped
as low as $86 on nearly 4 times the average daily volume.  This
represents a major support level and investors spent the balance
of the week taking advantage of the rare bargain.  The stock is
now almost $10 above its low, and the buying volume has been
strong, indicating that the selloff was likely overdone.
Friday's strong move pushed shares of the company into the lower
end of the gap that was created on Wednesday and the price held
up rather well in light of the deterioration seen in many tech
stocks.  Any further weakness ahead of the FOMC meeting on
Tuesday could produce some attractive entry points if MOT pulls
back to support near $92.  Otherwise, the stock looks attractive
at current prices and this seems a good place to jump on board
as MOT continues its recovery.

BUY LEAP JAN-2001 $100.00 ZMA-AT at $19.75
BUY LEAP JAN-2002 $110.00 WMA-AB at $28.63


Drops

NXTL $119.75 Having reported strong earnings and revenues at
the end of April, it looked like our play on NXTL was ready to
soar.  Unfortunately, the 100-dma proved to be too large an
obstacle in this uncertain market and the stock spent the past
week falling back to earth.  Even the 200-dma (currently $99.56)
wasn't enough to arrest the decline, and this violation really
paints our play in a negative light.  Wireless demand isn't
going away and NXTL will likely recover, but for now we have to
let it go in favor of stocks that have a more positive outlook.

GE $50.94 We got a nice ride out of GE since picking it as our
Leap of the Week in late February.  After bouncing repeatedly
just above the 200-dma, the corporate giant took off in
anticipation of the 3-for-1 split which occurred a week ago.
After moving above $165 (pre-split)in anticipation of the split,
the broad market weakness took its toll and the price has been
dropping ever since.  In light of the split being over and
future interest rate hikes looming on the horizon, we'll take
our profits and move on to other plays.



*********
PUT PLAYS
*********

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.

****

SBL - Symbol Technologies Inc. $45.06 (-4.69)

Symbol Technologies is the world leader in portable data
terminals (50% of sales) and bar code scanners (40%).  Its
products retrieve data, such as product and price information,
everywhere from the grocery store to the stock market.  The
company serves customers in such industries as warehousing and
distribution, postal service, retail, and health care.  The
company has recently attempted to increase its distribution,
reseller, and manufacturing channels.

SBL has lost much of its institutional sponsorship in the past
two months.  After hitting a high of $69 in early March, SBL
followed the broader market southward.  But SBL's decline came
on much higher volume than the average tech stock.  Professional
money managers began to liquidate their positions in SBL during
early March, and continue to do so.  After reporting earnings in
late April, Merrill Lynch downgraded SBL from a Buy to an
Accumulate rating.  The downgrade stemmed from concerns over
slowing growth and only reinforced the heavy selling.  The
downward momentum pushed SBL to a critical support level of $40.
That level was the breakout point when SBL began to run last
February.  Traders feel that failure of support at $40 may prove
to be detrimental for SBL.  After slipping through that level
last Wednesday, SBL rebounded into the weekend.  But the recent
rally came on light volume relative to the past two months of
selling.  In fact, Friday's ascent came on 490 K shares, well
below the stock's ADV.  From here, we're looking for the recent
rally to fail as institutions continue to leave SBL.  However,
if SBL continues higher, it will most likely find resistance at
$48, Friday's high.  You might consider an entry if SBL bumps
against resistance, then turns downward.  But if you want to
minimize directional risk, wait for SBL to fall past $40 before
entering the play.  Watch the volume for confirmation that the
sellers have returned, pay special attention to trading activity
on any move downward.

BUY PUT JUN-50*SBL-RJ OI= 59 at $7.13 SL=5.00
BUY PUT JUN-45 SBL-RI OI=  0 at $4.00 SL=2.50
BUY PUT JUN-40 SBL-RH OI=170 at $1.88 SL=1.00 

Average Daily Volume = 724 K
/charts/charts.asp?symbol=SBL


CMRC - Commerce One $44.38 (-11.50)

Providing global e-commerce solutions for businesses, CMRC is
endeavoring to create a network of interoperable marketplaces,
trading communities and commerce portals called the Global
Trading Web.  The company has developed the Commerce One
Solution to automate the procurement cycle between multiple
buyers and sellers.  The company also provides services
including content management, order availability information,
status tracking and transaction support.

How many different ways can you say "buyer's strike"?  Although
that doesn't entirely describe the problems with CMRC, it is a
big part of it.  More to the point though, is investors' shift
in sentiment towards the B2B sector as a whole.  Although the
potential is huge, that potential (which is greater now than
during the huge run up a few months ago) isn't enough in the
market anymore.  Investors want tangible results, but the youth
of the sector means that companies like CMRC are unable to
produce those results in the near term.  Industry groups are
venturing into the B2B marketplace on their own and this is
creating uncertainty about the potential for companies that are
building their business on the delivery of B2B services.  The
net result is a declining share price as buyers refuse to play.
The declining 5-dma (currently $46.94) is continuing to pressure
the share price, and in the event of a brief rally, the 10 and
30 day moving averages are looming above at $52.50 and $53.63
respectively.  Consider opening new positions as CMRC fails to
break through overhead resistance near $52.  Support may be
building near $42, so conservative traders will want to wait for
prices to drop through this level before playing.  As always,
keep your eye on the volume as it continues to be a good
barometer of the strength of price movement.

BUY PUT JUN-50*RJC-RJ OI=202 at $10.13 SL=7.00
BUY PUT JUN-45 RJC-RI OI=123 at $ 7.00 SL=5.00
BUY PUT JUN-40 RJC-RH OI= 26 at $ 4.38 SL=2.75

Average Daily Volume = 4.84 mln
/charts/charts.asp?symbol=CMRC


FDRY - Foundry Networks Inc. $68.13 (-22.00)

Foundry Networks Inc. is a leader in high performance end-to-end
switching and routing solutions including Internet routers, Layer
3 switches and Layer 4-7 Internet Traffic Management switches.
Foundry products are installed in the some of the world's largest
ISPs including AOL, EarthLink, AT&T WorldNet, MSN, and Cable and
Wireless.  Their products are also installed in large enterprise,
entertainment, pharmaceutical and manufacturing companies as well
as search engines, e-commerce sites, universities and government
organizations.

So what's the story with FDRY?  Apparently, it's lack of buyers
and selling that got a bit out of hand.  Most of the analysts
that follow the company have them rated as either a Buy or Strong
Buy.  PMG recently initiated coverage of FDRY with a LT Buy
rating and a price target of $100.  They said solid sequential
revenue growth and an operating margin in excess of 40% made
the company attractive.  At that time, FDRY was trading near
the $80 level.  Well, if that's the case it should be a screaming
Buy at current levels.  FDRY had its IPO in late September last
year and traded as high as $212 in early March.  The stock has 
run out of gas as investors seem to be questioning their ability
to compete in the market place.  One of its competitors in the
industry, ArrowPoint Communications joined forces with CSCO.
Some of the chat rooms question FDRY's ability to continue to
compete head-to-head, while others point to recent insider
selling as a potential reason for the decline.  Technically, FDRY
has become somewhat oversold, with divergence beginning to appear
in several indicators, suggesting a near term bottom could be
be near.  However, remember technical indicators don't buy and
sell stock, people do.  People with real dollars and real
emotions.  Until the emotions and sentiment changes, FDRY could
continue to struggle.  A check of the volume shows most bounces
since then end of March have come on average or lighter volume,
while the down days have seen much stronger numbers.  The 5-dma
and 10-dma are back at $75.09 and $82.35 respectively, so a
continuation of Friday's bounce may not be out of line.  However,
this bounce will probably be met with another round of selling.
Intraday resistance is also seen near $72, $75 and again at $77.

BUY PUT JUN-80 OUJ-RP OI=62 at $17.88 SL=12.88
BUY PUT JUN-75 OUJ-RO OI=12 at $14.50 SL= 9.75
BUY PUT JUN-70*OUJ-RN OI=48 at $11.38 SL= 8.50

Average daily volume = 1.39 mln
/charts/charts.asp?symbol=FDRY


NXTL - Nextel Communications $92.88 (-26.88)

Nextel has come a long ways since its humble beginnings as a
radio dispatch company.  Providing mobile phone service,
two-way radio dispatch, and paging services to business users;
all through one Motorola handset, the company is growing into
a major digital wireless services provider.  NXTL's digital
network (Digital Mobile Network) constitutes one of the
country's largest integrated wireless communications systems
utilizing a single transmission technology.  NXTL has
specialized mobile radio spectrum holdings in and around every
major business and population center in the U.S., including
all of the top 50 metropolitan areas.

Reporting record first quarter results normally would be the
catalyst for an increasing stock price, but that isn't the case
with NXTL.  The conference call pointed to an increasing
subscriber base, good customer retention, and strongly growing
revenues.  With the current market climate, this was only enough
to push NXTL up to its 100-dma (currently $121.63), and the past
week was really ugly.  Giving up over $26 in share price is bad
enough, but the latter half of the week saw increasing volume
as the wireless service provider watched its stock plummet
through the 200-dma (currently $99.56).  Buyers attempted to
rally the stock on Friday, but the lack of follow-though paints
a bleak picture.  As NXTL rolled over near $104, the volume
increased, and the decline accelerated for the remainder of the
day.  Closing near the low of the day, NXTL is sitting right on
support that dates back to early January.  If support at $92
fails to hold, the next level to watch is $83.  Use failed
rallies up to resistance near $100 as opportunities to open new
positions, as long as increasing volume confirms the decline.
In light of the pending FOMC meeting on Tuesday, continuing
weakness could serve to continue Friday's decline.  If NXTL
moves down through support at $92 on strong volume, consider it
a sign of further weakness and a good point to jump on board.

BUY PUT JUN-95 FQC-RS OI=18 at $10.50 SL=7.50
BUY PUT JUN-90*FQC-RR OI=63 at $ 7.88 SL=5.50
BUY PUT JUN-85 FQC-RQ OI=72 at $ 5.63 SL=3.50

Average Daily Volume = 4.40 mln
/charts/charts.asp?symbol=NXTL


PLCM - Polycom Inc $58.38 (-9.88)

Polycom develops, manufactures and markets network solutions and 
communication tools such as tele-conferencing products that 
facilitate communication over long distances.  Its Web-based 
products offer business users a full range of high quality 
conferencing choices that provide immediate interactive 
communication.  Polycom recently entered the DSL access market 
and has acquired the NetEngine line of DSL integrated access 
devices.

It's obvious PLCM is not on the "buyer's list" this month.  
Since experiencing a freefall on May 3rd, the downward momentum 
continues to grow.  On Tuesday, PLCM violated the 200-dma 
($62.47), a line that acted as bottom support during April.  And 
even with a sharp upswing in Friday's session, the share price 
couldn't penetrate the 5-dma ($58.42).  The spike was likely a 
response to the Strong Buy reiteration issued by analyst Doug 
Van Dorsten of Thomas Weisel Partners the previous day.  This is 
purely a technically driven momentum play.  Be careful before 
starting new plays.  PLCM should show definitive signs in the 
next few sessions that it's heading lower.  For instance, moves 
through $53 and $52 would provide the very conservative with 
solid confirmation.  At these lower price levels you never know 
when bargain hunters will start nibbling.  From a different 
angle, the more aggressive traders may use downward bounces off 
the 5-dma as entries to play the current range.  Just be sure 
PLCM is maintaining this lower trading channel.  There's really 
no news to report that could have effected trading recently.  
However, this Thursday the company is holding a Shareholders' 
Meeting and will vote to increase the number of authorized 
shares from 50 mln to 175 mln. 

***Wait for OI***

BUY PUT JUN-65 QHD-RM OI= 0 at $16.63 SL=12.00
BUY PUT JUN-60 QHD-RL OI= 0 at $13.13 SL= 9.75
BUY PUT JUN-55*QHD-RK OI= 0 at $ 9.75 SL= 6.75
BUY PUT JUN-50 QHD-RJ OI= 0 at $ 6.88 SL= 5.00

Average Daily Volume = 504 K
/charts/charts.asp?symbol=PLCM


AKAM - Akamai Technologies $70.50 (-26.56)

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

Our loyal readers know we're back where we started in the 
case of AKAM.  But it's now crystal-clear, AKAM can't hold onto 
any gains.  After a very sweet, but short two-day spectacle on 
4/28 & 5/1 where it pinnacled at $113.38, AKAM relinquished its 
leadership position in the Internet infrastructure sector.  The 
stock is once again below its IPO prices.  The next stop on the 
way down is $60, with a bottom at $56.63.  Of course you know the 
disclaimer, there are no guarantees!  And if you followed AKAM 
previously you know how its direction can turn on a dime.  So its 
absolutely imperative you know your portfolio's risk tolerance 
before considering this VOLATILE Internet play.  The descending 
5-dma (currently at $78.19) appears to be a good entry guideline 
if have the stomach to jump back into this play.  Take a look a
one-month chart for visual confirmation.  Please stack as many
odds in your favor and pay close attention to the overall market.
In the news this week, Intel announced it will spend $200 mln 
this year on services to help companies put audio and video on
the Internet at faster speeds and with fewer glitches.  This is
rivaling companies like Akamai Technologies and Digital Island. 

BUY PUT JUN-75 RUG-RO OI= 53 at $12.88 SL=9.75
BUY PUT JUN-70*RUG-RN OI=110 at $ 7.25 SL=5.00
BUY PUT JUN-65 RUG-RM OI= 25 at $ 5.13 SL=3.25
BUY PUT JUN-60 RUG-RL OI= 20 at $ 4.75 SL=3.00

Average Daily Volume = 1.11 mln
/charts/charts.asp?symbol=AKAM




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*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************

The Option Investor Newsletter                      5-14-2000  
Sunday                                                 5 of 5

*************
COVERED CALLS
*************

Candlestick Charting Basics: Reversal Patterns...

The majority of technicians use historical price charts to reflect
the daily movement and volume action in a specific instrument.  A
chart is simply a representation of the conditions that exist in
the underlying instrument.  Technicians watch for price clues that
alert them to changes in the market psychology and primary trend.
Unfortunately, while they can be helpful in projecting potential
movement and character, chart patterns cannot predict the future.

A reversal signal implies that a prior trend or its character is
likely to change in the near future.  Common bar-chart reversal
indicators include "double top" (or bottom), "head-n-shoulder,"
and "island" formations.  Although the term "reversal pattern" is
commonly used to identify a relatively abrupt change in direction,
most trend reversals occur over a slightly longer period, often
days or even weeks.  Primary trends usually transition to sideways
price actions or consolidation patterns before continuing with a
definitive directional movement and for this reason, it is more
accurate to think of reversals as simply changes in the current
trend.

Recognizing the emergence of reversal patterns is a valuable tool
that will help increase profits in all of your trading positions.
With timely knowledge of a prospective change in character, you
can adjust your trading style to reflect the new outlook for the
issue.  There is one important fact to remember.  When a potential
change is underway, new positions should be opened only when the
reversal pattern signals a move towards the direction of the major
trend. 

The majority of candlestick patterns are trend-change or reversal
indicators.  Two of the most common formations are the "hammer"
and "hanging-man."  These candlesticks have long lower shadows
and small real bodies that are near the top of the daily range.
The color of the body is not as important but it is slightly more
bullish if the body of the hammer is white, and in contrasts, more
bearish if the body of the hanging man is black.  The long lower
shadow should be twice the height of the real body and it ideally
it will have almost no upper shadow.  The longer the lower shadow
and the smaller the real body the more meaningful the indication.
 
These candlestick lines can be bullish or bearish depending on
when they appear in a trend.  When this candlestick emerges in a
downtrend, it is a signal that a bullish change in character may
soon occur.  If this line appears after a rally, the bullish move
may be at an end.  It may seem strange that the same candlestick
can identify both bullish and bearish reversals but the outlook is
based on results similar to those that follow "Island" formations
in standard bar charts.

In recent weeks, the hanging man has been an important tool for
timing profitable exits.  As with any technical indication, it is
important to confirm the bearish trend with this type of signal.
The difficulty is determining when the actual reversal will occur
as a hanging man generally appears while the market is inundated
with bullish optimism.  In most cases, the issue opens near the
daily highs, then declines sharply, and finally rallies to close
back at the high.  How do you know if the recovery will continue
or falter?  If the stock opens significantly lower the next day,
investors who purchased shares at the open (or close) will be in
a losing position and may decide to cut their losses quickly.  The
potential for a new downtrend is based on the distance between the
real body of the hanging-man and the opening price the next day.
The greater the distance, the higher the probability for a bearish
change in character.


 


This unique pattern is just one of the ways in which candlesticks
measure the emotional element of a specific issue.  The names are
simply a colorful mechanism used to describe the character of the
market at the time these patterns are formed.  After hearing the
phrase "hanging man", what trader wouldn't go running for cover?
Next week, we will review another group of technical indicators
and as we progress to more advanced formations, you will discover
which patterns work best for your style of trading and the market
in which you participate.

Good Luck!  


SUMMARY OF PREVIOUS PICKS
*****
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   7.63   MAY   7.50  1.19  *$  0.88  14.4%
PETC   13.31  13.06   MAY  12.50  1.44  *$  0.63  11.5%
CEGE   18.69  18.81   MAY  15.00  4.50  *$  0.81   8.3%
CEGE   21.50  18.81   MAY  17.50  4.63  *$  0.63   8.1%
PLCE   21.00  18.31   MAY  17.50  4.13  *$  0.63   8.1%
WGR    18.75  20.63   MAY  17.50  1.88  *$  0.63   8.1%
ANET   12.38  12.94   MAY  10.00  2.88  *$  0.50   7.6%
GENE   20.13  17.50   MAY  15.00  5.63  *$  0.50   7.5%
SPLH   12.06  12.13   MAY  10.00  2.69  *$  0.63   7.3%
MATK   15.50  16.75   MAY  12.50  4.13  *$  1.13   7.2%
PSIX   23.19  25.00   MAY  15.00  8.88  *$  0.69   7.0%
WWFE   15.63  18.00   MAY  12.50  3.88  *$  0.75   6.9%
MXTR   11.94  11.69   MAY  10.00  2.38  *$  0.44   6.7%
WLV    16.06  16.94   MAY  15.00  1.50  *$  0.44   6.6%
UGLY    7.50   7.94   MAY   7.50  0.50  *$  0.50   6.2%
BBBY   39.06  38.94   MAY  32.50  8.25  *$  1.69   6.0%
ANET   10.56  12.94   MAY   7.50  3.63  *$  0.57   6.0%
PSSI    9.13   9.09   MAY   7.50  2.19  *$  0.56   5.8%
IM     18.88  19.63   MAY  17.50  2.25  *$  0.87   5.7%
MATK   16.63  16.75   MAY  12.50  4.75  *$  0.62   5.7%
BWEB   23.44  18.13   MAY  15.00  9.00  *$  0.56   5.6%
APC    35.81  50.44   MAY  35.00  2.88  *$  2.07   5.5%
LPNT   16.38  20.31   MAY  15.00  2.25  *$  0.87   5.4%
NUHC   22.13  18.75   MAY  17.50  6.00  *$  1.37   5.3%
CAR    20.81  21.56   MAY  20.00  1.94  *$  1.13   5.2%
PIR    10.50  11.13   MAY  10.00  1.00  *$  0.50   4.6%
MRL    26.88  29.00   MAY  25.00  3.25  *$  1.37   4.2%
ACF    17.63  18.75   MAY  15.00  3.13  *$  0.50   3.7%
BSX    21.75  24.06   MAY  20.00  2.50  *$  0.75   3.4%
DGX    44.50  67.00   MAY  40.00  6.00  *$  1.50   3.4%
ALSC   20.38  16.88   MAY  17.50  3.63   $  0.13   1.1%
NCNT   17.00  11.44   MAY  12.50  5.13   $ -0.43   0.0%

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

Comments:

Spiegel (SPGLA) is holding up well though the technicals indicate
heavy selling pressure.  Closing the position now would offer a
profitable exit (May $7.50 call is $0.25 x $0.50) though there is
only one week until option expiration.  Children's Place (PLCE) is
testing support after moving back under its 150 dma - monitor the
position closely as the technical picture has weakened.  Maxtor
(MXTR) appears ready to end its consolidation phase and resume the
uptrend.  Backweb Technology (BWEB) is testing the April low but
the technicals remain positive.  Anadarko Petroleum (APC) is off
to the races!  We should have just bought calls!  The same can be
said for Quest Diagnostics (DGX).  Alliance Semiconductor (ALSC)
has broken below its 150 dma and is at a key moment - monitor the
position closely.  Netcentives (NCNT) is testing the April low,
another key moment!

Positions Closed: 

Cole National (CNJ). 



NEW PICKS
*********


Sequenced by Company
*****

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

ADEX   19.56  MAY  17.50  QDE EW  2.44  40   17.12    7     9.6%

ANET   12.94  JUN  12.50  QTE FV  1.13  68   11.81   35     5.1%
BEAM   12.44  JUN  10.00  BAQ FB  3.00  2448  9.44   35     5.2%
CAIR   22.88  JUN  17.50  HHU FW  6.38  78   16.50   35     5.3%
CENT   11.81  JUN  10.00  EQH FB  2.50  120   9.31   35     6.4%
DRIV   18.81  JUN  15.00  DQI FC  4.75  64   14.06   35     5.8%
SMRT    8.53  JUN   7.50  STQ FU  1.50  384   7.03   35     5.8%

Sequenced by Return 
*****

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

ADEX   19.56  MAY  17.50  QDE EW  2.44  40   17.12    7     9.6%

CENT   11.81  JUN  10.00  EQH FB  2.50  120   9.31   35     6.4%
DRIV   18.81  JUN  15.00  DQI FC  4.75  64   14.06   35     5.8%
SMRT    8.53  JUN   7.50  STQ FU  1.50  384   7.03   35     5.8%
CAIR   22.88  JUN  17.50  HHU FW  6.38  78   16.50   35     5.3%
BEAM   12.44  JUN  10.00  BAQ FB  3.00  2448  9.44   35     5.2%
ANET   12.94  JUN  12.50  QTE FV  1.13  68   11.81   35     5.1%


Company Descriptions

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

*****

ADEX - ADE Corporation  $19.56  *** One Week Play! ***

ADEX designs, manufactures, markets and services metrology and
inspection systems for the semiconductor wafer manufacturing
industry.  The Company is also a supplier of metrology systems
to the semiconductor device, data storage and optics industries.
Its systems analyze and report product quality at manufacturing
process steps, sort wafers and disks and provide manufacturers
with quality certification data.  Ade's systems are designed to
deliver the throughput, reliability and information and analysis
necessary to meet the demands of complex and time-sensitive
manufacturing processes.  Ade officials recently announced that
Daniel F. Harrington resigned (VP and CEO) to accept a position
with a privately held technology firm.  The news appears to be
a positive move for the company as the share value has rebounded
since the move.  The change in technical character is favorable
and the position offers an excellent risk/reward outlook.

MAY 17.50 QDE EW LB=2.44 OI=40 CB=17.12 DE=7 MR=9.6%

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

*****

ANET - ACT Networks $12.94  *** Clarent Buys ANET! ***

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. ANET
has agreed to by acquired by Clarent (CLRN) under terms that are
subject to a "collar" which values ACT Networks' shares between
$14 and $18.  The deal is expected to close in the third quarter
of 2000, pending shareholder approval.  This should cause ACT
Networks to trade in a very narrow range near $14.  We favor a
conservative entry point with a reasonable return.

JUN 12.50 QTE FV LB=1.13 OI=68 CB=11.81 DE=35 MR=5.1%

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

*****

BEAM - Summit Technology $12.44  *** Break-out! ***

Summit Technology is in the business of vision correction and
sales of contact lenses and related products.  They also service
laser systems and related products to correct vision disorders
and collect per procedure license fees from users of their
systems.  In 1999, they became the first commercial excimer laser
manufacturer to receive FDA approval for the popular LASIK
procedure.  The recent upgrades after reporting favorable earnings
suggest a brighter future for Summit.  Last week, Summit received 
FDA approval to expand its studies of vision improvement using its
CustomCornea Wavefront System and its LADARVision System.  The 
technicals reflect a bullish break-out on heavy volume and the
previous resistance at $10 should now become support.

JUN 10.00 BAQ FB LB=3.00 OI=2448 CB=9.44 DE=35 MR=5.2%

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

*****

CAIR - Corsair Communications  $22.88  *** Pre-paid Wireless ***

Corsair Communications is a leading provider of software and
system solutions for the wireless industry.  Their PhonePrint
system provides highly effective cloning fraud prevention to
wireless telecommunications carriers by using proprietary radio
frequency (RF) signal analysis technology.  Corsair's PrePay
solution has an advantage over most other competitive offerings
since it enables carriers to use existing switch infrastructure
equipment rather than requiring costly additional adjunct 
switches and voice trunk resources.  Corsair attributed its 
strong first quarter earnings to the growth and acceptance of
their PrePay product.  The technicals remained bullish during
Corsair's recent pullback and a resumption of the up-trend
appears forthcoming.

JUN 17.50 HHU FW LB=6.38 OI=78 CB=16.50 DE=35 MR=5.3%

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

*****

CENT - Central Garden & Pet Company  $11.81  *** Spin-Off! ***

Central Garden & Pet Company offers a broad array of proprietary
branded lawn and garden and pet supply products; Pennington, Four
Paws, Zodiac, Kaytee, Nylabone, and Grant's.  Central also is the
leading national distributor of lawn and garden and pet supply
products.  Central's operations are grouped into three business
segments: the lawn and garden branded products business, the
distribution business, and the pet branded products business.
Recent solid earnings with improving revenues due to some new
acquisitions and an upcoming spin-off of Central's distribution
business to shareholders make this a unique speculation play.

JUN 10.00 EQH FB LB=2.50 OI=120 CB=9.31 DE=35 MR=6.4%

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

*****

DRIV - Digital River  $18.81  *** B2B Speculation ***

Digital River is a provider of comprehensive electronic commerce
outsourcing solutions. It is an application service provider
that enables its clients to access its proprietary electronic
commerce system over the Internet.  They provide a suite of
electronic  commerce services to its clients, including Web store
development and hosting, transaction processing, electronic
software delivery, and other similar services.  Last quarter's
earnings were favorable with sequential growth in sales and 
gross margin.  Digital River anticipates their Software Division
will reach profitability by December of this year.  With over
$50 million in cash and investments and no debt at quarters end,
they expect to have the capital to reach their profitability
targets without needing to raise additional funds.  Investors
have taken notice, pushing the stock off its April low.  The
hammer bottom (weekly chart) a couple weeks ago suggests the
downtrend has ended.

JUN 15.00 DQI FC LB=4.75 OI=64 CB=14.06 DE=35 MR=5.8%

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

*****

SMRT - Stein Mart $8.53  *** Retail Sector (Hedge) Play ***

Stein Mart is a 182-store retail chain that offers fashionable,
current-season, primarily branded merchandise comparable in
quality and presentation to that of traditional department and
fine specialty stores at prices typically 25% to 60% below those
regularly charged by such stores.  Their assortment of merchandise
features moderate to designer brand-name apparel for women, men 
and children, as well as accessories, gifts, linens, shoes and
fragrances.  Stein Mart appears to be on the right track and has
reversed its downtrend after reporting a favorable fourth quarter 
at the end of February.  An extension of its share repurchase 
plan also has helped.  In April, Stein Mart reported net sales
increased 15% for the first quarter of 2000.  Several new stores
have already opened which bode well for the second quarter.  We
favor the technical support above our cost basis as Stein Mart 
nears a new 52 week high.

JUN 7.50 STQ FU LB=1.50 OI=384 CB=7.03 DE=35 MR=5.8%

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



******************
BIG CAP NAKED PUTS
******************

This section will return next week.



***********************
CONSERVATIVE NAKED PUTS
***********************

Trading Strategies: This Market Takes No Prisoners!

In times like these, it's important to review your goals, your
limitations and the basic methods of successful trading.  As with
any speculative endeavor, before you participate in the options
market it is essential to realize that no system or technique
offers a pathway to easy money.  Investing involves hard work and
mental discipline and the market has a remarkable ability to
return a proportionate amount of profit, based on the sum total
of personal effort and commitment.  Trading options requires even
greater resolve as it is both an art and a science.  The science
is knowing how an option works; its time decay and volatility
characteristics.  The art is gained by experience, including how
to achieve the best prices for option orders in different markets;
how to use disparity in option pricing; and which strategies work
the best in specific market conditions.     

The market is plagued with limitless methods for achieving success
but unfortunately, no one can say exactly what strategies are
right for you.  Many techniques are unsuited to the majority of
traders and to build a profitable portfolio, you must define each
objective carefully and select those strategies best suited for
your level of experience and risk/reward attitude.  Every person
has a different risk tolerance, based on fundamental issues such
as income, age and net worth along with specific factors such as
trading capital and collateral holdings.  Both short and long-term
goals are important aspects in determining how you participate in
the market, what type of positions you buy and sell and at what
point you will exit a trade for profit or loss.  If your goals are
short-term, it may be prudent to utilize conservative techniques
with limited risk and high liquidity.  Strategies that take longer
to evolve, with corresponding higher potential rewards may not be
suitable for those traders who require access to their assets on
a frequent basis.  Regardless of your approach and trading style,
it is important to understand the fundamental relationship between
risk and reward.  Lower risk usually translates into lower reward.
The average investor will normally do well with a position that
has limited risk and the potential for large rewards because one
successful trade can easily overcome a series of limited losses.

Obviously, the investment objectives are more essential than the
merits of the technique itself.  If the strategy is not suitable
for the investor, then it should not be utilized, no matter how
attractive it appears.  At the same time, it's important to match
the strategy to the technical pattern and character of the market.
Buying options is often the simplest and most effective technique
for instruments with low volatility in the beginning stages of a
new trend.  However, as conditions change there are other methods
that provide a better risk/reward ratio with a higher probability
of profit.  Trends will range from flat to vertical and as option
volatility varies, disparities will occur between strike prices
of the same group or series.  A successful trader must be able to
adjust his approach to the market using the appropriate strategies
to exploit the occasions that provide the most favorable profit
opportunities.  In all cases, you must let the market determine
the trend and trade with it, not against it.  The reason is quite
simple: One can make many errors of judgment when establishing
positions in concurrence with the basic direction of the market.

In the beginning, we are all overwhelmed with the vast complexity
of this type of investing and the mental willpower that it takes
to be successful.  Those who apply dedication, courage, honesty
and patience find that all things are possible.  The key is to
evaluate the roles of these virtues in your daily trading and
decide how they contribute to a portfolio with suitable risk
levels that produces consistent returns.  In short, the manner in
which you develop and implement proven techniques will have the
most impact on your success in building wealth and prosperity.

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.


SUMMARY OF PREVIOUS PICKS 
*****

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

CENT   11.50  11.81   MAY  10.00  0.50  *$  0.50  30.2%
VRTL   19.13  17.00   MAY  12.50  0.44  *$  0.44  22.4%
BBSW   16.94  14.00   MAY  12.50  0.31  *$  0.31  18.2%
ACF    17.63  18.75   MAY  15.00  0.75  *$  0.75  15.8%
HYSL   29.13  23.81   MAY  22.50  0.44  *$  0.44  15.2%
TSEM   22.06  19.50   MAY  15.00  0.50  *$  0.50  14.7%
TBI    19.00  20.81   MAY  17.50  0.44  *$  0.44  14.6%
CCCG   13.88  12.38   MAY  10.00  0.31  *$  0.31  14.5%
DRTE   22.88  25.25   MAY  17.50  0.50  *$  0.50  14.3%
ANLY    9.81  10.38   MAY   7.50  0.38  *$  0.38  14.1%
PPDI   15.56  17.25   MAY  12.50  0.56  *$  0.56  13.1%
RAMP   20.00  20.06   MAY  15.00  0.38  *$  0.38  12.6%
OCR    14.31  16.06   MAY  12.50  0.50  *$  0.50  12.3%
EXCA   35.50  33.25   MAY  25.00  0.63  *$  0.63  11.8%
LPNT   16.38  20.31   MAY  15.00  0.81  *$  0.81  11.8%
LYNX   20.88  25.38   MAY  12.50  0.50  *$  0.50  11.6%
PAIR   21.69  25.88   MAY  17.50  0.50  *$  0.50  10.9%
ELNT   40.50  38.00   MAY  32.50  0.63  *$  0.63  10.3%
KR     19.06  20.03   MAY  17.50  0.75  *$  0.75   9.6%
CLPA   34.00  29.38   MAY  22.50  0.31  *$  0.31   9.5%
NTPA   41.75  31.31   MAY  30.00  0.56  *$  0.56   9.1%
RDC    26.69  30.63   MAY  22.50  0.63  *$  0.63   7.7%
CQ     19.75  25.25   MAY  15.00  0.38  *$  0.38   7.6%
VANS   17.06  15.00   MAY  15.00  0.56   $  0.56   7.6%
SUPX   30.06  34.00   MAY  17.50  0.69  *$  0.69   7.5%
TOS    32.06  32.13   MAY  30.00  0.75  *$  0.75   7.1%
CYBX   23.81  18.00   MAY  17.50  0.50  *$  0.50   6.9%
VTS    28.06  27.56   MAY  20.00  0.56  *$  0.56   6.6%
BBBY   39.06  38.94   MAY  27.50  0.50  *$  0.50   6.5%
AFWY   20.06  17.25   MAY  17.50  0.38   $  0.13   1.9%

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

Comments:

Keep an eye on Broadbase Software (BBSW) as it approaches the
April low - a quick exit may be needed.  Hyperion Solutions
(HYSL) is testing the April low near the sold strike though
the technicals remain positive.  With the semiconductor sector
under some pressure, Elantec (ELNT) is now consolidating and
may test the April low, hopefully after next week.  Netopia
(NTPA) appears to have successfully tested the April low.  Look
for a follow through next week or consider exiting the position.
VANS is under selling pressure and remains at a key moment; also
a candidate for an early exit.  It appears Tosco (TOS) my have
successfully tested its 30 dma.  Cyberonics broke through its
150 dma - a bearish move, and is on the verge of breaking a long
term trendline (2yr weekly chart).  Even with one week to go, an
early exit may be prudent.  American Freightways (AFWY) appears
to have successfully tested its 50 dma though it isn't out of the
woods yet - monitor closely.

In the case of Omnicare (OCR), we suggested a "target shooting"
entry price of $0.50 for the JUN-$12.50 Put, providing an initial
cost basis of $12.00.  The highest bid observed during the week
was $0.43, and thus the position, although positive, will not be
listed in the monthly summary.

Positions Closed: 

Jakks Pacific (JAKK).


NEW PICKS
*********

Sequenced by Company
*****

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

ADEX   19.56  JUN  15.00  QDE RC  0.69  0    14.31   35    13.0%
CLPA   29.38  JUN  15.00  QJC RC  0.63  45   14.38   35     8.4%
TBI    20.81  JUN  17.50  TBI RW  0.38  0    17.12   35     6.1%
TRMB   36.00  JUN  25.00  TRQ RE  0.44  22   24.56   35     5.0%
VRTL   17.00  JUN  10.00  TUJ RB  0.31  0     9.69   35     7.3%
WLV    16.94  JUN  15.00  WLV RC  0.50  10   14.50   35     8.1%
XTO    17.69  JUN  15.00  XTO RC  0.38  1000 14.62   35     6.9%

Sequenced by Return  
******

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

ADEX   19.56  JUN  15.00  QDE RC  0.69  0    14.31   35    13.0%
CLPA   29.38  JUN  15.00  QJC RC  0.63  45   14.38   35     8.4%
WLV    16.94  JUN  15.00  WLV RC  0.50  10   14.50   35     8.1%
VRTL   17.00  JUN  10.00  TUJ RB  0.31  0     9.69   35     7.3%
XTO    17.69  JUN  15.00  XTO RC  0.38  1000 14.62   35     6.9%
TBI    20.81  JUN  17.50  TBI RW  0.38  0    17.12   35     6.1%
TRMB   36.00  JUN  25.00  TRQ RE  0.44  22   24.56   35     5.0%


Company Descriptions

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

*****

ADEX - ADE Corporation  $19.56  *** Own This One! ***

ADEX designs, manufactures, markets and services metrology and
inspection systems for the semiconductor wafer manufacturing
industry.  The Company is also a supplier of metrology systems
to the semiconductor device, data storage and optics industries.
Its systems analyze and report product quality at manufacturing
process steps, sort wafers and disks and provide manufacturers
with quality certification data.  Ade's systems are designed to
deliver the throughput, reliability and information and analysis
necessary to meet the demands of complex and time-sensitive
manufacturing processes.  Ade officials recently announced that
Daniel F. Harrington resigned (VP and CEO) to accept a position
with a privately held technology firm.  The news appears to be
a positive move for the company as the share value has rebounded
since the move.  The change in technical character is favorable
and the position offers an excellent risk/reward outlook.

JUN 15.00 QDE RC LB=0.69 OI=0 CB=14.31 DE=35 MR=13.0%

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

*****

CLPA - Cell Pathways  $29.38  *** Drug Speculation! ***

Cell Pathways Holdings is a pharmaceutical company focused on
the research, development and commercialization of products to
prevent cancer and to treat cancer.  CPI's technology may also
prove to have applicability beyond the field of cancer.  The
company's technology is based upon its discovery of a novel
mechanism which may eventually be targeted to induce selective
apoptosis, or programmed cell death, in cancerous cells without
affecting normal cells.  CLPA has also created a new class of
selective apoptotic anti-neoplastic drugs and has synthesized
over 500 new chemical compounds in this new class.  CLPA has
a number of products in the pipeline and the sector appears to
be recovering from the recent slump.  As with any speculative
issue, due diligence is a mandatory requirement before opening
this position.

JUN 15.00 QJC RC LB=0.63 OI=45 CB=14.38 DE=35 MR=8.4%

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

*****

TBI - Tuboscope  $20.81  *** Oil Sector ***

Tuboscope is the world's leading supplier of oilfield internal
tubular coating and tubular inspection services; oilfield solids
control equipment and services; and coiled tubing and pressure
control equipment to the petroleum industry.  Additionally, the
company provides in-service inspection of pipelines; constructs
high pressure fiberglass tubulars; leases/sells advanced in-line
inspection equipment to makers of oil country tubular goods; and
provides quality assurance and inspection services to a diverse
range of industries.  In mid-April, Tuboscope reported excellent
earnings with solid revenues and a bullish forecast.  The company
is also beginning to experience an increase in demand for coiled
tubing capital equipment, a bonus for future earnings.  The chart
is favorable and the cost basis appears to be a good entry point
for those who want to own the issue.

JUN 17.50 TBI RW LB=0.38 OI=0 CB=17.12 DE=35 MR=6.1%

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

*****

TRMB - Trimble Navigation  $36.00  *** X Marks The Spot! ***

Trimble Navigation Limited designs and develops innovative
products enabled by GPS technology.  Trimble designs, produces, 
and markets electronic products that determine precise geographic
location.  Their principal products, which utilize substantial
amounts of proprietary software and firmware, are integrated
systems for collecting, analyzing and displaying position data
in forms customized for specific end-user applications.  In late
April, Trimble trounced the consensus estimates for quarterly 
earnings and their forecasts for future revenues are excellent.
In addition, the recent removal of sensitivity limitations on
satellite resolution is likely to bring billions of dollars in
productivity gains.  The GPS industry's sales this year are
projected to double to $16 billion by 2003 and new acquisitions
suggest Trimble is prepared to become one of the industry leaders.

JUN 25.00 TRQ RE LB=0.44 OI=22 CB=24.56 DE=35 MR=5.0%

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

*****

VRTL - Vertel  $17.00  *** B2B Speculation! ***

Vertel is a provider of telecommunications network management
software and solutions.  The company offers multiple software
technologies supporting network management for operations support
systems.  Vertel's solutions are deployed worldwide by service
providers, network operators, telecom equipment manufacturers,
independent software vendors and systems integrators.  Vertel
delivers turnkey management applications that fit individual
customer requirements and provides professional services that
include system analysis and design, source code portation and
interface, custom application development, conformance and
certification testing and technical support services.  Vertel's
solutions also support seamless network operation and management
over diverse transmission media and protocols.  The stock moved
up recently on rumors that the company is likely to win orders
from Ericsson and Nortel Networks.  Now we will speculate on
the resumption of the bullish trend.

JUN 10.00 TUJ RB LB=0.31 OI=0 CB=9.69 DE=35 MR=7.3%

Chart =

*****

WLV - Wolverine Tube  $16.94  *** Oil Sector ***

Wolverine is a leading North American manufacturer and distributor
of copper and copper alloy tube.  Wolverine believes that it offers
the broadest product line of any North American tube manufacturer 
and focuses on custom-engineered, high value-added tubular and 
fabricated products, which enhance performance and energy efficiency
in many applications.  The company also manufactures and distributes 
copper and copper alloy rod, bar, and strip products.  Wolverine Tube
beat the street by $0.04 this quarter due primarily to strong demand
for its industrial tube and cost reduction programs.  The stock 
moved off its March low shortly after announcing new technical tube
products: Turbo-CSL(TM) and Turbo-CLF(TM).  Wolverine has rallied
above the November - January consolidation area which should now
provide technical support.  A favorable cost basis for those who
would like to own the issue.

JUN 15.00 WLV RC LB=0.50 OI=10 CB=14.50 DE=35 MR=8.1%

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

*****

XTO - Cross Timbers Oil  $17.69  *** Technicals Only! ***

Cross Timbers and its subsidiaries are engaged in the acquisition,
development, exploitation, and exploration of oil & gas producing
properties, and in the production, processing, marketing, and 
transportation of oil and natural gas.  The Company's proved 
reserves are principally located in relatively long-lived fields
with well-established production histories in the United States.
In late April, the company announced record production levels,
earnings, and cash flow.  Upgrades from Solomon Smith Barney and
Merrill Lynch followed the news and now the issue is headed to
a test of the all-time high near $20.  The recent bullish departure
from a long-term "W" pattern suggests the outcome will likely be
favorable.

JUN 15.00 XTO RC LB=0.38 OI=1000 CB=14.62 DE=35 MR=6.9%

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



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

Next Stop: Super Tuesday!

Friday, May 12

Stocks ended higher for the second consecutive day after benign
economic data eased investors concerns over rising interest rates.
The Dow closed up 63 points at 10,609 and the Nasdaq climbed 29
points to 3529.  The S&P 500 Index added 13 points to end at 1420.
Volume on the NYSE remained light Friday with just 861 million
shares exchanged.  NYSE advances beat declines 1,605 to 1,316.
Trading on the Nasdaq was light with just 1.22 billion shares
changing hands.  Advances beat declines 2,122 to 1,907.  The 30
year Treasury was last down 25/32, bid at 100 19/32, pushing its
yield up to 6.17%.


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

ADE Corp.  ADEX  MAY15C/MAY17C   $0.00    debit   bull-call
Texaco     TX    OCT40C/MAY55C   $15.00   debit   diagonal
Apache     APA   JUN40P/JUN45P   $0.62    credit  bull-put

The morning rally in equity markets did little to help our new
spread positions.  ADE opened higher and within ten minutes, the
issue was trading up almost $1.  The target entry was unavailable.
Texaco moved in much the same manner but with the long-term time
frame, we decided to open the position at a slightly higher debit.
The current spread has little potential for profit but at next
Friday's expiration, we will adjust the play to a more favorable
position.  Apache dipped just a few minutes after the open and
the target credit was easily achieved.


Portfolio plays:

The market posted modest gains today as investors cheered tame
inflation news.  The producer price index fell 0.3% in April,
marking the first decline since February 1999 and matching the
consensus forecast.  The core PPI also met the forecast gain of
0.1% as car, aircraft and drug prices all rose.  The report was
greeted favorably by market analysts and experts now believe next
Tuesday's rate hike may be the last one until after the election.
Strong earnings from Dell Computer (DELL) gave the tech sector an
added boost and shares of General Motors (GM), J.P. Morgan (JPM)
and AT&T (T) led the Dow higher.  In the broad market, industrial
power, tobacco and computer hardware stocks advanced while retail,
household and telecom issues consolidated.

A number of large-cap technology companies advanced during the
session and our portfolio was led by Teradyne (TER) which moved
up $5 to close near $87.  The majority of stocks in the hi-tech
group also participated in the rally.  Andrew Corporation (ANDW),
Arrow Electronics (ARW), Cabletron (CS), SCM Microsystems (SCMM),
and Vodaphone (VOD) all enjoyed bullish activity.  Issues in the
Major Drug sector performed well with Sepracor (SEPR) and Warner
Lambert (WLA) leading the way and our top conglomerate, General
Electric (GE) appears to be finding support near the $50 range.
Oil industry issues continued to advance and Smith International
(SII), Nabors (NBR) and Tuboscope (TBI) were the leaders in that
group.  The standout small-cap issues were Ocular Sciences (OCLR)
with a $1.38 move to $17 and Oxford Health (OXHP) which rallied
$1 to a recent high near $20.  Overall, it was a great way to end
the week and with luck, the FOMC meeting will dispel the current
attitude of interest-rate uncertainty.  Only then will we be able
to focus on the best companies and their fundamental merits as
opposed to daily concerns over inflation and other economic data.

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

******************************************************************
                         - NEW PLAYS -
******************************************************************

NGH - RJR Nabisco Holdings  $19.69  *** Merger Speculation ***

RJR Nabisco Holdings is a company whose subsidiaries are engaged
principally in the manufacture, distribution and sale of cookies,
crackers, and other food products.  NGH is organized in three
operating segments: Nabisco Biscuit, the U.S. Foods Group and the
International Food Group, which are segregated by both product
and geographic location.  The food business is conducted by the
operating subsidiaries of Nabisco Holdings.  Their businesses in
the United States are comprised of Biscuit and the U.S. Foods
Group.  Business outside the United States is conducted by their
International group.

On Friday, Nabisco's share value jumped $2 after mogul Carl Icahn
sweetened his offer for the company to $6.5 billion, an increase
of 37% in the bidding for the nation's largest maker of cookies
and crackers.  The financier said he was increasing his offer for
the Nabisco Group shares he doesn't already own to $22 per share.
That's well above the current value but analysts predict the price
will go higher, with the company fetching at least $25 per share
before the deal is done.  Analysts also said the deadline for
first round bids in the current auction is May 15.  They believe
a firm pact may emerge in late June or July.

Our position is based on favorable premium disparities and the
recent increased activity in the stock and its underlying options.
The increase in options volume has provided a number of favorable
positions and in this case, we are going to open with a short-term
bullish outlook and hope for a brief consolidation prior to next
week's expiration, when we will roll forward to June positions.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  SEP-15  NGH-IC  OI=1388  A=$5.38
SELL CALL  MAY-20  NGH-ED  OI=33    B=$0.62
INITIAL NET DEBIT TARGET=$4.62 TARGET ROI=50%

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

*****

BFO - Best Foods  $64.75  *** Food Group Mergers II ***

Bestfoods is among the largest U.S. consumer food companies with
operations in more than 60 countries of North America, Europe,
Latin America, Asia, the Middle East, and Africa and products
sold in about 110 countries.  Bestfoods markets various leading
food brands, and operates over 115 plants around the world
through retail outlets and its foodservice business.  Their
products include Knorr soups, sauces, bouillons and related
products; Hellman's and Best Foods dressings; Mazola corn and
canola oils; Skippy peanut butter; Entenmann's sweet baked
goods; Thomas' English muffins; Oroweat, Arnold, and Freihofer's
breads; Mueller pasta products; Maizena corn starches; Boboli
Italian pizza crusts; Alsa desserts; Pfanni potato products;
and Pot Noodle instant hot snacks.  Of course they are known for
their Mayonnaise but Bestfoods is also the largest fresh premium
baker in the United States.

The world's second largest consumer products group, Unilever says
it is still trying to get Bestfoods management to the table to
negotiate a deal after the U.S. firm rejected its initial $18.41
billion bid.  BFO is currently the merger target of Anglo-Dutch
Unilever and there is also renewed interest in the company from
Heinz (HNZ), the famous maker of ketchup from Pittsburgh.  That
company is urging BFO to consent to a friendly merger valuing the 
Hellmann's mayonnaise and Knorr soups group at up to $72 a share.
A number of analysts suggest that Bestfoods investors would favor
Unilever's cash offer rather than a revival of the Heinz-Bestfoods
deal which ended last September.

The continuation of Unilever-Bestfoods talks are likely to hinge
on price, with analysts seeing Unilever able to afford up to $75
a share.  Currently, Bestfoods is expected to explore all of its
options before agreeing to any deal and based on that outlook,
we are going to offer another speculative position.  The downside
risk for this position is relatively small as there is little
chance the issue will trade much below its current price in the
next few weeks.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-50  BFO-RJ  OI=1745  A=$0.68
SELL PUT  JUN-55  BFO-RK  OI=1203  B=$1.12
INITIAL NET CREDIT TARGET=$0.56-$0.62 ROI(max)=14% B/E=$54.38

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

*****

ASH - Ashland Oil  $35.38  *** A Second Try! ***

Ashland is a specialty chemical and crude oil refining firm.  The
company's businesses are divided into numerous industry segments.
These include APAC, which performs contract construction work;
Ashland Distribution, which distributes industrial chemicals,
solvents, ingredients, thermoplastics and resins, fiberglass
materials and fine ingredients in North America and plastics in
Europe; Ashland Specialty Chemical, which manufactures and sells
performance chemicals, resins, products and services and certain
petrochemicals; Valvoline, a marketer of branded, packaged motor
oil and automotive chemicals, automotive appearance products,
antifreeze, filters, rust preventives and coolants; Refining and
Marketing, which involves the operation of seven refineries; and
Arch Coal, a coal producer in the United States.  Additionally,
Ashland recently formed the Service Businesses Division.  This
new division will be responsible for managing businesses that
provide a wide range of unique services to their customers.

Ashland reported earnings last month and although second quarter
income rose sharply, the results were still shy of Wall Street 
expectations.  The company reported net income of $25 million,
or $0.35 a share compared with net income of $0.08 a share, for
the same quarter a year ago.  Analysts were forecasting $0.36 per
share, slightly above the actual earnings, but investors appeared
to focus on the outlook rather than past performance.  With the
industry's profit margins expected to increase during the next
few months, revenues for the top companies in this group should
continue to improve.

Our position is based on the recent bullish trend and last week's
move above the previous trading range.  When the broad market
falters, investors generally pour money into the hedge sectors
and oil stocks are currently one of the leaders in that group.
 
PLAY (aggressive - bullish/debit spread):

BUY  CALL  JUN-30  ASH-FF  OI=2    A=$6.00
SELL CALL  JUN-35  ASH-FG  OI=107  B=$2.38
INITIAL NET DEBIT TARGET=$3.38  ROI(max)=47% B/E=$33.38

Our plan is to open the position with a repeat of our recent
diagonal approach.  In this manner we can benefit from the
one-week premium at the MAY-$35 call before moving into the
conservative call-debit spread.

PLAY (aggressive - bullish/diagonal spread):

BUY  CALL  JUN-30  ASH-FF  OI=2    A=$6.00
SELL CALL  MAY-35  ASH-EG  OI=726  B=$1.25
INITIAL NET DEBIT TARGET=$4.62  INITIAL TARGET ROI (monthly)=32%

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

*****

CIEN - Ciena  $137.25  *** Earnings Rally? ***

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 rallied big to end the week after announcing the company
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.  The company is expected to
report first-quarter results of $0.10 per share, according to the
consensus estimates.  

Analysts at Donaldson, Lufkin & Jenrette are bullish on the issue
and they recently recommended the optical networking company with
a "top pick" rating.  We agree with the outlook but the earnings
report can have a significant effect on the share value so we are
going to participate in a very conservative manner.  With any luck,
the expected FOMC rate decision will propel the market into a
recovery rally and the stock will finish far above our sold strike
at the June expiration.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-85  EUQ-RQ  OI=38  A=$1.43
SELL PUT  JUN-90  EUQ-RR  OI=97  B=$2.06
INITIAL NET CREDIT TARGET=$0.75  ROI(max)=17% B/E=$89.25

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

******************************************************************
                    - INDEX OPTION SPREADS -
******************************************************************

As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time. The buyer has the rights and the seller
the obligations. With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
market industry or on the market as a whole. Spread strategies can
be made with index options similar to those made with individual
stock options. Many professional traders employ index spreads as a
hedge strategy. We favor debit positions on the SPX for momentum
and hedge or longer-term plays and OTM credit spreads on the OEX
when the risk/reward is favorable. Low ROI disparity spreads will
be listed (when available) for the conservative index trader.

*****

OEX - S&P 100 Index  $761.67     OTM Credit-Spreads

The Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries. The component
stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding. 

OBSERVATIONS:

For OTM credit spread trades, we like to use the actively-traded
S&P 100 Index options because they contain much more premium than
options on individual stocks and provide an underlying instrument
less prone to huge, gapping moves.  Review the 'Market Sentiment'
section for specific technical information on the S&P 100 Index.

Note: The quoted prices between the Bid and Ask (spread) appear
to be extremely wide for OEX options but when trading begins on
Monday morning, they will return to the normal range.
 
Aggressive...

PLAY (Bearish):
BUY  CALL  JUN-805  OEX-FT  OI=358   A=$7.75
SELL CALL  JUN-800  OEX-FA  OI=3548  B=$8.75
NET CREDIT TARGET=$1.25-$1.50 ROI=33%

PLAY (Bullish):
BUY  PUT  JUN-710  OEZ-RB  OI=434   A=$7.75
SELL PUT  JUN-720  OEZ-RD  OI=1926  B=$9.00
NET CREDIT TARGET=$1.50-$1.75 ROI=17%

By combining two credit spread positions, you can participate
in a popular neutral strategy known as the Long Iron Condor. It
is often used with range-bound positions and is a limited risk,
limited profit strategy that gives you a wide range for success.
The play is based solely on the current price and trading range
of the S&P-100 Index and the recent technical trend.  Current
news and market sentiment will have an effect on this position.
Review the market outlook thoroughly and make your own decision
about the future outcome of this position.

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




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*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************

DISCLAIMER

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

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