Option Investor

Daily Newsletter, Wednesday, 05/17/2000

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The Option Investor Newsletter                Wednesday 05-17-2000
Copyright 2000, All rights reserved.			1 of 1
Redistribution in any form strictly prohibited.

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

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MARKET WRAP  (view in courier font for table alignment)
       5-17-2000           High     Low     Volume Advance Decline
DOW    10769.70 - 164.90 10930.60 10752.60   817,840k 1,000  1,882
Nasdaq 3,644.90 -  72.60  3717.57  3616.27 1,201,780k 1,470  2,511
S&P-100  772.53 -  11.70   784.23   769.45    Totals  2,470  4,393
S&P-500 1447.79 -  18.24  1466.04  1441.67            36.0%  64.0%
$RUT     499.66 -   6.32   505.98   497.57
$TRAN   2840.43 -  24.84  2880.67  2832.95
VIX       27.20 +   0.49    28.10    26.69
Put/Call Ratio       .55

A New Perspective

Let's try to stay away from the usual market rhetoric.  You know,
the market declined on unusually light volume over concerns of
the Federal Reserve's future interest rate policy.  Instead,
let's focus on the internal picture of the market.  The trading
range we've come to love in the DJIA is narrowing.  The
Industrial Average ran into resistance Tuesday at 11,000, right
on schedule.  Wednesday's consolidation may have been warranted,
considering the four day rally we enjoyed.  If the pattern of
higher lows is going to continue, the DJIA should next find
bottom somewhere near 10,450.  The wedge formation in conjunction
with declining volume is indicative of a trading range.  With
the DJIA quickly approaching the apex of its wedge, we should see
a breakaway from congestion in the next few weeks.  Whether it's
going to be up or down remains to be seen.


The NASDAQ is forming the same wedge pattern, except it is much
tighter than the Dow's.  If the NASDAQ's trading range is going
to hold, the next bottom should be traced near 3450.  Despite the
recent rally, many of the NASDAQ's generals, such as CSCO, MSFT,
and DELL are trading just above key support levels.  The next
several trading days will be critical for the NASDAQ.  If the
index traces a higher low, and rebounds, we may see a small
breakout above congestion.  But with so many market participants
sitting on the sidelines, it's going to be hard to make a move
with any substance.


The consensus among Wall Street professionals is that the market
will remain range bound well into the Summer.  The uncertainty
surrounding the Federal Reserve and continued questioning of the
high valuations in the tech sector has many market participants
straddling the fence.  The indecisiveness among investors points
to range bound trading.  Many analysts believe that a sideways
market is good for the long-term health of the market.  In that,
the sky-high multiples seen in the tech stocks will come back to
earth as earnings catch up with valuations.  While the churning
of the market may be good for the long-term bull, it has many
traders stepping away from the market.  Margin and momentum
players have been scared away from the market, and day traders
have been humbled.  That doesn't mean you can't make money in
this market, it's simply a matter of working harder than the next
trader, and honing your skills.  And continue doing the things
that make you money. 

Profit taking and interest rate worries were the themes on CNBC
Wednesday.  But there were a few other factors that weighed on
the major indices.  HWP was a drag on the DOW after reporting
results Wednesday.  Some analysts questioned the quality of HWP's
earnings report.  Pointing out the slew of one-time charges to
profits.  HWP was also hurt by the sell-off seen in Agilent (A),
H-P's spin-off.  Revenue concerns surfaced after A reported
earnings that met expectations.  Analysts cut their price targets
over concerns of problems in the healthcare group and flattening
margins in its test and measurement unit.  LCOS set the tone for
the Net stocks Wednesday.  LCOS tumbled 20% after analysts
downgraded the stock.  Analysts said the stock is reasonably
valued for the short-term considering the buyout offer from Terra
Networks (TRRA) and the risk associated with the deal.
Additionally, LCOS reported better-than-expected earnings after
the bell Wednesday.  The Internet portal reported 7 cents per
share profits, versus a 5 cent estimate.  LCOS edged slightly
higher in after-hours trading.

The controversial Salomon Smith Barney analyst, Jack Grubman,
sent a shock through the telecom sector Wednesday.  Grubman
lowered his revenue and earnings estimates for AT&T (T).
Grubman said T is unprepared to meet the demands for high-speed
data transmission.  The bearish comments sent T lower by $0.69 to
$38.06, just above its 52-week low.  But the rest of the telecom
sector suffered greatly.  NXLK lost 12%, NXTL fell 8%, and WCOM
lost $1 closing at $42.

As the light trading activity continues, the online brokers
suffer.  Stocks such as SCH, NITE, EGRP, and AMTD have been in a
downward spiral since volume began drying up last month.  And
Wednesday proved to be another slow volume day, consequently the
online brokers continued to slide.  SCH dropped $1.94 to close at
$43.75 and NITE lost nearly 4%, closing at $29.94.

There were a few bright spots in the market Wednesday.  INTC
reversed early-day losses after the Board of Directors declared a
stock split and dividend increase.  INTC said the 2-for-1 split
will be payable on July 30th.  Shareholders will vote on the
proposal to increase authorized shares at the company's annual

Mattel (MAT) jumped over 13% after the company named Robert
Eckert as the new Chairman and CEO.  Veritas (VRTS) rose $7 to
$111 after the company announced a deal with IBM to supply
enterprise computing solutions.  Shares of Analog Devices (ADI)
bucked the earnings sell-off cliche and surged 8% higher
Wednesday after the company beat expectations and forecasted
higher third-quarter results.  ADI said that the booming demand
for chips should continue and revenues could rise more than 65%
in the next year.

Another event to keep an eye on is the MSFT courtroom hearing
expected to commence next week.  MSFT has made it clear that they
plan to appeal Judge Jackson's findings.  MSFT claims the
proposal to split the company isn't warranted by the evidence
that has been presented by the Justice Department.  Instead, MSFT
has counter-proposed a plan to restrict its business practices.
Jackson set a remedy hearing for May 24th.   The government filed
its final arguments Wednesday.

So what is it going to take to get us out of this trading range?
About a month ago, Jim suggested that we will be stuck in
congestion until second quarter earnings season.  We're still
about a month away until we get the next wave of earnings
reports.  And there is no major economic news due out for the
next couple of weeks.  Simply put, there is no reason to buy or
sell right now.  With the Summer slowdown approaching and a lack
of catalysts to push the market either way, we're probably stuck
in this trough for a while.  Unless a few of those money managers
who have been stockpiling cash put some money to work before
their Summer retreat to the beach.  With such an illiquid market,
institutions can move stock prices very quickly.  If the
professionals decide to commit to new positions, we could see a
break from congestion.

While there isn't any major market moving event in the next few
weeks, we will face options expiration on Friday.  The May
expiration probably won't move the market substantially, but it
will provide more volatility.  And where there is volatility,
there is opportunity to profit.  Speaking of profits, there are
still a few remaining earnings reports yet to be announced.
ADC Telecom (ADCT), Barnes and Noble (BKS), Ciena (CIEN), and
Network Appliance (NTAP) will report earnings Thursday followed
by Sycamore Networks (SCMR) on Friday.  The Trade Gap numbers for
March will be reported Friday.  Wall Street's consensus estimate
for the Trade Gap is $29.4 bln.

So what is a trader to do?  I agree with what Matt suggested in
Tuesday's Market Wrap.  Watch for entry and exit points near
support and resistance levels.  Money can still be made in a
sideways market, it just requires more work and a lot of
patience.  While there is volatility, there is room for taking
profits from the market.  There are still plenty of stocks
trading with wide intra-day ranges.  And believe it or not,
there are a few stocks emerging from congestion and tracing new
highs.  In fact, right now may be a good time to look for new
market leaders before the next bull run begins.  But before you
commit you hard earned capital to new positions, consider your
risk tolerance.  Wait for the stocks that you are watching to
cross key pivotal points and practice patience in this market.
No one ever became poor taking profits.  Sell too soon, and save
your money for another day.

Trade smart!

Eric Utley
Research Analyst


A Federal Reserve Primer
By S.P. Brown

Unless you've been living in Antarctica for the past year, 
you've undoubtedly become acquainted with the Federal Reserve 
and interest rate hikes.  It seems a day doesn't go by anymore 
where Fed Chairman Alan Greenspan's name isn't featured in a 
news headline or a business roundtable discussion.

Nevertheless, despite the omnipresence of Greenspan & Co., 
there are still many investors who really don't understand what 
the Federal Reserve does, or what its purpose is.    

With that said, here's a truncated look at the Fed's structure 
and its modus operandi.

Most countries have a central banking authority that regulates 
its money supply and conducts monetary policy.  The United 
States is no different.  Here, that central bank is the Federal 

The major purpose of the Fed, or any central bank, is to 
provide a monetary climate that's in the best interest of the 
economy.  To that end, Congress has instructed the Fed to 
conduct monetary policy in a manner that promotes "full 
employment and price stability."

To achieve this heady goal, the Fed has into three major 
decision-making centers: (1) the Board of Governors, (2) the 
district and regional banks and (3) the Federal Open Market 

Without a doubt, the leading decision-making center of the 
Federal Reserve System is the Board of Governors.  This 
powerful cabal consists of seven members.  Each member is 
appointed to a staggered 14-year term by the U.S. President 
(with the approval of Congress).  The President also appoints 
one of the seven members as chairman for a four-year term.  Of 
course, the current chairman is Alan Greenspan.  

It's difficult to understate the power of the Fed Board, for 
this body establishes the rules and regulations applicable to 
all depository institutions.  It sets the reserve requirements 
and regulates the composition of the asset holdings of these 

Because of the importance of monetary policy and the power of 
the Board of Governors wields over the financial markets, the 
Fed chairman is often said to be the second most influential 
(and in Greenspan's case, the most influential) person in U.S.   

The Fed is physically structured into 12 district banks with 25 
regional branches spread throughout the nation.  These 
districts and regional branches operate under the supervision 
of the Board of Governors.  These district banks are 
essentially bankers' banks; commercial depository intuitions 
and the federal government are the only banking customers of 
the Fed (so, don't go there looking to open a checking 

To that end, the Fed plays an important role in clearing checks 
through the banking system.  The district and regional banks 
handle approximately 85 percent of all check-clearing services 
of the banking system.  

The focal point for policy-making within the Federal Reserve 
system is the FOMC, the Federal Open Market Committee.  This 
committee consists of seven members of the Board of Governors, 
whose chairman is also chairman of the FOMC, and five of the 
presidents of the 12 district banks, though all 12 district 
bank presidents participate in the FOMC meetings. 

The FOMC meets every five to eight weeks.  And as many market 
watchers are well-aware, through the FOMC comes those much 
anticipated decisions on interest rates.   

The interest rate most often targeted is the federal funds 
rate, which is the rate one bank will charge another for a 
short-term loan (generally, up to seven days).    

The other rate often mentioned in the same breath as the fed 
funds rate is the discount rate, the rate at which banks can 
borrow from the Fed, which doesn't happen often.  In fact, 
borrowing from the Fed amounts to less than one-tenth of 1 
percent of the available loanable funds to commercial banks.
So, in essence, the discount rate is a symbolic rate at best.

Since the Fed operates primarily on the short end of the yield 
curve, its initial impact is on short-term interest rates, e.g. 
credit cards and variable-rate credit instruments.  However, 
the effects on long-term or intermediate interest rates may be 
much attenuated and late to arrive.   

Many, though by no means all, economists believe that it's the 
long-term rather than the short-term interest rate that has the 
biggest impact on investment and price stability, which has 
many economists questioning the Fed's interest rate policies.    

Countering this belief is Robert Hall of Stanford University, 
who has argued that it's the short-term interest rate that is 
relevant for investment decisions.  Hall reasons that in any 
one year a firm has to decide whether to invest this year or 
postpone the investment until next year.  In theory, then, a 
firm compares the yield from investing this year with the costs 
of investing this year instead of next year.  

Even though interest rates are the headline grabbers, the Fed 
has two other powerful tools at its control for manipulating 
the economy - reserve requirements and open market operations.

The Fed requires banking institutions to maintain reserves 
against the demand deposits of their customers.  Banks are 
required to maintain reserves to meet any sudden increase in 
withdrawals and to prevent bankers from making imprudent loans. 

More importantly to the Fed, though, it can use reserve 
requirements to alter the money supply.  Since we live in a 
fractional reserve banking environment, a change in reserve 
requirements will change the amount of funds a bank has to 
lend.  An increase in reserve requirements will force banks to 
extend fewer loans, while a decrease in reserve requirements 
will allow banks to extend more loans.  

In recent years, the Fed has seldom used its regulatory power 
over reserve requirements to alter market liquidity.  

The Fed can also alter market liquidity through its open market 
operations, which is the buying and selling of U.S. Treasury 
securities on the open market.  Unlike everyone else, the Fed 
can actually write a check without funds in its accounts.  So, 
when the Fed buys a Treasury security it creates money.    

The reason being, the Fed's buying of Treasury securities 
affects both the supply of money directly and the reserves 
available to the banking system.  When the Fed purchases a 
Treasury security, it injects "new money" into the economy in 
the form of an increase in either the currency in circulation 
or the deposits with commercial banks.  

Essentially, the seller of a Treasury security receives a check 
drawn on the Fed.  If a seller cashes the check, the amount of 
currency in circulation expands because money has to be 
manufactured to cover the check.  

On the other hand, if, as is more likely to be the case, the 
seller deposits the check with a commercial bank, the supply of 
checking-account deposits increases and new bank reserves are 

If the Fed wants to remove liquidity, it sells Treasury 
securities.  When the Fed sells a Treasury security, the buyer 
usually pays for it with a check drawn on a depository 
institution.  As the check clears, both the buyer's checking 
account and the reserves on the bank on which the the check was 
written decline.  Thus, reducing the amount of money in 

In a nutshell, through buying and selling Treasury securities, 
changing bank reserve requirements and manipulating short-term 
interest rates, the Fed can add or subtract liquidity from the 
market, which, in turn, has a direct effect on the economy's 
ability to grow. 


Surviving a Sideways Market
By David Popper

For weeks, I have talked about the need to eliminate emotion from 
trading.  I confess to you that my trading goes from good/adequate
(meeting my goals) to poor when emotions invade my thinking.

Over the past several weeks, I have discussed possible "systems" 
that can be utilized in sideways markets to reduce emotions and 
thus, increase your chances of success.  Now, I would like to 
review several of these items:

1.  In a sideways market set reasonable goals for each account 
based on time parameters and based on market conditions.  Is your 
goal cash flow on a monthly basis or, alternatively, is it long 
term accumulation?  Long term accumulation is a much easier goal 
to attain.  Time can make up for many mistakes.  Trading for
monthly cash flow in a sideways market requires much more acumen.  
I would suggest initially that your monthly goal should be broken 
into twelve mini goals.  I realize that there are twenty trading
days in a month, but some days stocks just won't cooperate.  It 
is unreasonable to think that you can win every day in a sideways
market, so shoot for 60%.  I would suggest that once your mini 
goal on any day is met, the trade should be exited unless there is 
a darn good reason for you to remain in the trade.  Nothing is 
more disheartening than attaining your goal, yet staying in the 
play because there is a chance for a big hit, only to see your 
profit dissolved.

2.  In a sideways market trade only stocks that are leading stocks 
in leading sectors of the economy.  When you only trade leaders, 
a great deal of pressure is removed.  If, for some reason, you make 
a mistake and are left holding the stock--it is still a great stock.
Avoid trading stocks that you would not like to own, no matter how 
good the chart looks at the time.  If you are trading only great 
stocks and the stock takes an unexpected turn and you fail to exit
properly, the chances are excellent that the stock will eventually
return and place you in a profitable position.

3.  In a sideways market trade only a small amount of	stock.  A 
small amount of stock can easily help you reach your short term 
goals.  For example, I have traded PMCS over the past month and 
have managed about a $500 profit per day.  This stock is rated 
either a "buy" or "strong buy" by nearly every analyst and is 
considered one of the strongest stocks in its sector.  The stock 
has a high relative strength and technically is in a trading 
range between $140 and $190.  This stock maintains a great deal 
of volatility and typically will trade in a range of twelve to 
twenty points per day.

4.  Pay attention to events affecting your stock.  Events such 
as earnings, splits, analyst meetings, and participation in 
conferences can affect your stock.  Additionally, news on other 
stocks within the sector will have an impact on the stock you are

5.  Have a plan if things go south.  Many people enter a trade 
without considering the	potential downside of such a trade.  There 
are a myriad of books that discuss when to sell stocks, including 
many advertised on this website.  Personally, since I am trading 
a small amount of	stock within a well defined trading range, I
typically will sell the stock only when it breaches the trading 
range on the downside for more than a day.  At that point, I feel 
that the stock can no longer be trusted and perhaps there may be 
a fundamental problem with this stock.  It may have changed  
from being a leading stock to a has-been.  Before making this
decision, however, I will look at the sector and the market as a 
whole to determine whether this stock is trading in sympathy with 
the larger forces or whether it is suffering for its own sins.  
In any event, I have a lot of leeway because I am only trading a 
small amount of stock.

In short, if you can follow these above rules, you will have 
designed a system which should be profitable and which should 
usually protect you from any devastating loss.  Living within such 
a system should increase your confidence and allow you to trade 
with much less emotion.

Contact Support


SEBL - Siebel Systems $138.13 -2.69 (+9.13 this week)

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. 

Most Recent Write-Up

Breakout!!!  Pull up a chart and look at the action starting around 
2:00 ET Monday.  A big move above $130 with huge volume to back 
it up made this a textbook breakout.  It moved up to $140 where it 
held flat until the Fed announcement.  Despite a re-test to $134 
immediately following the Fed rate hike announcement, the 
rebound was swift and actually pushed SEBL through $140, a previous 
level of resistance.  Despite low overall daily volume, this is a 
technically bullish pattern.  Why?  Because not only did the move 
occur at a historical level of resistance, it also occurred at 
the 50-dma (then about $127) and held.  When you have a technical 
wedge, historical support, and a moving average at roughly the 
same place, volume is a slightly less important factor in the 
equation for a breakout.  Every technical trader in world was 
probably all over this one.  We look for the technical trend to 
continue with the next resistance level at the late March (just 
before the first selloff) high of $147.  A target shooting level 
of support is harder to find. 


After Monday's breakout to the $140 level, SEBL has found support
in the last two sessions around $135.  Today, SEBL traded in a 
$5 range.  It bounced early in the day off of $135.50 and then
found its second bounce later at $137, just about where it opened.
Both of these levels are short-term support that represent good 
entry points, depending on risk profiles.  More intermediate 
support is below at the 10-dma of $131.88.  Conservative traders 
may want to wait for the surge through $140 on strong volume 
before entering, but the return of volume may not be necessary for 
this uptrend to continue.  

BUY CALL JUN-130 SGW-FF OI=734 at $16.75 SL=13.00
BUY CALL JUN-135*SGW-FG OI=327 at $14.00 SL=11.25
BUY CALL JUN-140 SGW-FH OI=884 at $11.63 SL= 9.25
BUY CALL JUN-145 SGW-FI OI=155 at $ 9.38 SL= 7.00
BUY CALL AUG-150 SGW-HJ OI=487 at $17.13 SL=13.25

SELL PUT JUN-120 SGW-RA OI=110 at $ 4.50 SL= 6.00
(See risks of selling puts in play legend)

Picked on May 14th at   $129.00    P/E = 200
Change since picked       $9.13    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


Now that interest rates are higher, where will the market go?

Lets hope today is no indication as stocks stumbled while traders
took profits from the recent rally.  The weakness was expected
with many investors simply trying to lock-in returns from last
week's gains.  Some find it strange that stocks rallied Tuesday
when the Fed raised interest rates 50 basis points, the highest
increase in five years.  Generally, any increase in borrowing
costs is bad for corporate earnings; in the end it reduces net
profits.  Investors had bid the market higher on the hopes that
this hike would be the last for some time.  Unfortunately, the
FOMC left just enough doubt about their inflation outlook that
most analysts are speculating on another increase in June.  With
the earnings season almost over, the summer doldrums will soon be
upon us and the potential for a future rise in rates may indeed
threaten stock prices.  Based on that perspective, our approach
can only be one of cautious optimism and we will draw upon that
attitude in today's selection of plays.

Summary of Previous Picks:

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

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

BBRC    MAY    60    57.56   63.25   $2.44   8.1%
TIN     MAY    50    48.88   54.13   $1.12   7.7%
CY      MAY    45    42.06   50.13   $2.94   7.1%
INSUA   MAY    35    32.19   34.75   $2.56   6.5%
PLXS    MAY    70    68.75   86.88   $1.25   6.1%
SEPR    MAY    75    70.75  108.00   $4.25   6.1%
AMD     MAY    60    55.25   85.00   $4.75   5.9%
TQNT    MAY    80    76.65   92.00   $3.35   5.8%
CGNX    MAY    55    51.34   54.94   $3.60   5.8%
TER     MAY    85    81.56   91.50   $3.44   5.6%
NVLS    MAY    50    48.06   51.31   $1.94   5.3%
PDLI    MAY    85    82.71  140.56   $2.29   5.3%
PLXS    MAY    65    62.56   86.88   $2.44   5.2%
PVN     MAY    85    80.38   90.19   $4.63   4.7%
BRKS    MAY    70    66.88   72.00   $3.12   4.7%
AHP     MAY    55    52.75   56.75   $2.25   4.3%
CSCO    MAY    68    62.88   58.00  -$4.88   0.0% At 150 dma

ARBA    JUN    55    51.63   67.25   $3.37   5.4%


Naked Puts:

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

PLXS    MAY    70    68.50   86.88   $1.50  20.8%
TIN     MAY    50    48.94   54.13   $1.06  18.4%
YHOO    MAY   100    98.75  137.81   $1.25  14.1%
CIEN    MAY   100    99.00  144.13   $1.00  12.6%
CY      MAY    40    38.56   50.13   $1.44  12.6%
SEBL    MAY   105   103.88  137.81   $1.13  12.4%
BBRC    MAY    55    54.06   63.25   $0.94  10.8%
PLXS    MAY    60    58.75   86.88   $1.25  10.1%
NVLS    MAY    45    44.06   51.31   $0.94   9.7%
TER     MAY    75    73.50   91.50   $1.50   9.0%
SEPR    MAY    65    63.25  108.00   $1.75   8.8%
INSUA   MAY    30    29.06   34.75   $0.94   8.7%
TQNT    MAY    70    68.87   92.00   $1.13   7.5%
PDLI    MAY    70    69.19  140.56   $0.81   6.9%
STT     MAY    85    84.31  112.44   $0.69   6.0%
BRKS    MAY    60    58.94   72.00   $1.06   5.9%
AHP     MAY    50    49.12   56.75   $0.88   5.8%
PVN     MAY    70    68.75   90.19   $1.25   5.2%
CGNX    MAY    45    44.25   54.94   $0.75   4.8%

ARBA    JUN    50    48.00   67.25   $2.00  10.6%

Naked Calls:

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

PWAV    MAY    80    81.46   66.63   $1.46  21.0% Adj for 3-1 split
CMTN    MAY   115   117.19   87.63   $2.19  12.4%
JNPR    MAY   260   262.25  167.81   $2.25  10.4%
BRCM    MAY   220   222.00  162.19   $2.00  10.2%
TDS     MAY   120   121.13  107.25   $1.13  10.1%
ITWO    MAY   185   187.25  116.25   $2.25   9.5%
CHKP    MAY   270   273.25  182.75   $3.25   9.3%
AAPL    MAY   145   146.56  101.38   $1.56   7.8%
AMAT    MAY   125   126.13   89.63   $1.13   7.8%
NEWP    MAY   160   161.25  144.44   $1.25   7.3% 2 days left...

New Candidates:

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


BULLISH PLAYS - Covered Calls & Naked Puts

AFFX - Affymetrix  $159.94  *** Own This One! ***

Affymetrix 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 GeneChip
system consists of disposable DNA probe arrays containing gene
sequences on a chip, certain reagents for use with the probe
arrays, a scanner and other instruments to process the probe
arrays, and software to analyze genetic information from the
probe arrays.  Affymetrix commenced commercial sales of the
GeneChip system for research use in April 1996 and currently
sells its products to pharmaceutical and biotechnology companies,
academic research centers and clinical reference laboratories
primarily in the United States and Europe.

The last few months have been tough for Biotech's and Affymetrix
suffered with the rest of the group, losing 2/3 of its value in
just over one month.  Now the selling appears to have abated and
many of the most promising companies are beginning to recover.
Unfortunately, most biotech's are not profitable and they hold
valuations based upon anticipated growth rather than current
earnings.  AFFX is one of the few stand-outs with cutting-edge
technology and profitability expected in the near future.  Based
on the bullish technicals, investors agree that AFFX is one of
the leading issues in the speculative arena of drug development.

AFFX - Affymetrix  $159.94

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

Sell Put  JUN 105  FIQ RA  0         2.06   102.94     6.1% ***
Sell Put  JUN 110  FIQ RB  18        2.88   107.12     8.4%
Sell Put  JUN 115  FIQ RC  5         3.88   111.12    11.0%
Sell Put  JUN 120  FIQ RD  109       5.00   115.00    13.7%

Chart =
NEWP - Newport Corporation  $144.44  *** On The Move! ***

Newport Corporation, together with its consolidated subsidiaries,
is a global supplier of high precision components, instruments,
micro-positioning and measurement products and systems to the
fiber optic communications, computer peripherals, semiconductor
equipment and scientific research markets.  The company designs,
manufactures and markets components and systems that enhance
productivity and capabilities of automated assembly and test
and measurement for high precision manufacturing and engineering
applications.  Newport also provides sophisticated equipment to
commercial, academic and governmental research institutions
worldwide.  The company operates in three business segments, two
comprising domestic operations, Components and Subassemblies,
and Instruments and Systems.  The third business segment is
comprised of the Company's Europe operations.

In early April, Newport reported that first-quarter profits more
than tripled, easily beating analyst's expectations, as sales to
the optical communications and semiconductor equipment markets
soared.  The company's sales rose 55% on strength in the fiber
optic and chip sectors.  Looking ahead, Newport said it expects
revenue in the second quarter to rise sequentially based on its
current backlog and anticipated sales in their target markets.

In addition, stockholders have approved an increase in the number
of authorized common shares to 75 million from 20 million.  The
increase makes possible a previously announced 3-for-1 split of
the company's common stock and with the potential for a pre-split
rally, this is one to watch!

NEWP - Newport Corporation  $144.44

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

Sell Call JUN 110  QNW FB  29       40.00   104.44     5.4% ***
Sell Call JUN 115  QNW FY  5        36.63   107.81     6.8%

Sell Put  JUN 85   QNW RQ  2         1.50    83.50     5.0%
Sell Put  JUN 90   QNW RR  0         2.19    87.81     7.1%
Sell Put  JUN 95   QNW RS  10        3.00    92.00     9.5% ***
Sell Put  JUN 100  QNW RT  0         4.00    96.00    12.3%
Sell Put  JUN 105  QNW RA  0         5.00   100.00    15.0%
Sell Put  JUN 110  QNW RB  53        6.63   103.37    18.9%
Sell Put  JUN 115  QNW RY  0         8.13   106.87    22.3%

Chart =
NVDA - Nvidia  $110.50  *** Split Rally? ***

NVIDIA designs, develops and markets 3D graphics processors,
graphics processing units and related software that set the
standard for performance, quality and features for every type of
desktop personal computer user, from high-end machines to low
cost PCs.  Their 3D graphics processors are used in a wide
variety of applications including games, the Internet and
industrial design.  The NVIDIA TNT2, TNT2 M64 and Vanta graphics
processors deliver high performance 3D and 2D graphics at a
reasonable cost, making them the graphics hardware of choice for
a wide range of applications for consumer and commercial use.

This week Nvidia announced record revenues and earnings for
the first quarter of fiscal 2001.  Revenues increased 109% to
$148.5 million, and earnings were $0.47 per share, well above
the same quarter results last year of $0.18 per share.  Nvidia
has also approved a 2-for-1 stock split and the company was
upgraded by several analysts after the bullish announcement.

Note: The stock closed up almost $17 today so there is likely
to be a pull-back in the next few sessions.  Use the movement
to lower your cost basis in the issue.

NVDA - Nvidia  $110.50

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

Sell Call JUN 90   UVA FR  179      25.00    85.50     5.3% ***

Sell Put  JUN 75   UVA RO  29        1.31    73.69     5.7%
Sell Put  JUN 80   UVA RP  50        2.13    77.87     8.9% ***
Sell Put  JUN 85   UVA RQ  36        3.00    82.00    12.1%
Sell Put  JUN 90   UVA RR  7         4.50    85.50    16.2%

Chart =
RFMD - RF Micro Devices  $115.00  *** Growing To Meet Demand! ***

RF Micro Devices designs, develops, manufactures and markets
proprietary radio frequency integrated circuits, or RFICs, for
wireless communications applications such as cellular and
personal communication services, cordless telephony, wireless
local area networks, wireless local loop, industrial radios,
wireless security and remote meter reading.  They offer a broad
array of products, including amplifiers, mixers, single chip
transmitters, receivers and transceivers, which represent a
substantial majority of the RFICs required in wireless subscriber
equipment.  As of March 1999, they marketed 158 products, with 50
more in various stages of development.

RF Micro Devices is poised for growth and to meet the demand for
their products, the company recently opened a new engineering
design center.  Located in Chandler, Arizona, the new facility
is staffed with design engineers developing state-of-the-art power
amplifiers, circuitry and other products used in cellular and PCS
telephones.  The additional design capacity is critical for the
company to serve their growing customer base and it allows them to
leverage premier design talent from around the country.

The issue is on the move technically and analysts are bullish on
its fundamental outlook.  CSFB, First Union, U.S. Bancorp Piper,
and Paine Webber all have aggressive "buy" ratings on the company
and it appears that investors agree with their outlook.

RFMD - RF Micro Devices  $115.00

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

Sell Call JUN 95   RFZ FS  58       24.50    90.50     5.0% ***
Sell Call JUN 100  RFZ FT  151      21.13    93.87     6.6%

Sell Put  JUN 80   RFZ RP  94        1.31    78.69     5.5%
Sell Put  JUN 85   RFZ RQ  131       2.06    82.94     8.3% ***
Sell Put  JUN 90   RFZ RR  41        3.13    86.87    12.1%
Sell Put  JUN 95   RFZ RS  39        4.63    90.37    15.3%
Sell Put  JUN 100  RFZ RT  58        6.00    94.00    16.4%

Chart =
SDLI - SDL Inc.  $208.38  *** New Acquisition! ***

SDL, Inc. is a provider of solutions for optical communications
and related markets.  Their products power the transmission of
data, voice, and Internet information over fiber optic networks
to meet the needs of telecommunication, dense wavelength division
multiplexing (DWDM), cable television and metro communications
applications.  Their solutions enable customers to meet the need
for increasing bandwidth by expanding their fiber optic networks
more quickly and efficiently than by using conventional
electronic and optical technologies.  Its revenue comes from two
principal markets: fiber optic communications and industrial
laser products.

The recent rally in SDLI shares began last week after the company
announced that it would acquire Photonic Integration Research for
$1.8 billion in cash and stock.  SDL plans to use a silicon chip
made by Photonic that allows more information to be channeled
through a single fiber.  The unique device would replace several
components inside SDL's products and allow SDL to produce cheaper,
more reliable and better-performing network systems.  The move is
viewed as a strategic acquisition in a rapidly growing market and
very complimentary to their present business.  Photonic will add
to SDL's earnings immediately and based on Photonic's quarterly
revenue of $20 million, it will account for over 20% of sales and
profits in the combined company.

Analysts agree with the company's positive future and investors
have pushed the issue up 30% in just one week.  Our cost basis
allows a conservative position in an industry-leading company
with a bullish technical outlook.

SDLI - SDL Inc.  $208.38

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

Sell Put  JUN 130  YAL RF  1649      2.88   127.12     6.6%
Sell Put  JUN 135  YAL RG  51        3.00   132.00     6.8%
Sell Put  JUN 140  YAL RH  198       3.25   136.75     7.3% ***
Sell Put  JUN 145  YAL RI  151       3.63   141.37     8.1%
Sell Put  JUN 150  YAL RJ  95        4.13   145.87     9.1%
Sell Put  JUN 155  YAL RK  60        4.75   150.25    10.4%
Sell Put  JUN 160  YAL RL  63        5.88   154.12    12.5%

Chart =
YHOO - Yahoo  $137.81  *** Back On Track? ***

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

Yahoo is the dominant force on the World Wide Web but the recently
announced acquisition of U.S. Web network Lycos (LCOS) by Spanish
Internet group Terra Networks (TRRA) underscores the major reason
for Internet companies; global information.  Currently, the two
largest Web networks are Yahoo and American Online and with the
LCOS buyout, investors are once again realizing the potential for
Internet companies with strong international presence.

With the recent technical history, Yahoo is now firmly established
in our bullish portfolio of technology issues and we are going to
list these positions for those of you that missed it the first time.

YHOO - Yahoo  $137.81

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

Sell Put  JUN 110  YMM RB  901       1.56   108.44     5.4%
Sell Put  JUN 115  YMM RC  1124      2.25   112.75     6.6% ***
Sell Put  JUN 120  YMM RD  4926      3.13   116.87     7.8%

Chart =

BEARISH PLAYS - Covered Puts & Naked Calls

JNPR - Juniper Networks  $167.81  *** Searching For A Bottom ***

Juniper Networks is a leading provider of Internet infrastructure
solutions to Internet service providers and other telecom service
providers.  Juniper delivers next generation Internet backbone
routers that are specifically designed for service provider
networks.  The company's flagship product is the M40 Internet
backbone router.  The M40 combines the features of the JUNOS
Internet Software, high performance ASIC-based (application
specific integrated circuit) packet forwarding technology and
Internet optimized architecture into a purpose-built solution for
service providers.  Unlike conventional routers that are developed
for enterprise applications and are increasingly inadequate for
service provider use in public networks, Juniper's routers are
specifically designed to accommodate the size and scope of the

Although the majority of well-known technology stocks have fared
better than the broad market in recent sessions, there remains
a significant amount of technical damage to repair before the
sector leaders can recover.  Juniper is certainly one of the top
companies in the Internet Software group but for now the issue
is simply trying to find solid footing in this volatile market.

We will use the current consolidation period to benefit from
overpriced option premiums with these relatively conservative,
bearish positions.  The probability of the share value reaching
our sold strikes appears rather low but there is always the
possibility of a pre-split rally so monitor the position daily
for changes in technical character.

JNPR - Juniper Networks  $167.81

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

Sell Call JUN 250  JUY FJ  714       3.13   253.13     8.6%
Sell Call JUN 260  JUY FL  352       2.56   262.56     7.2%
Sell Call JUN 270  JUY FN  46        2.13   272.13     6.1% ***
Sell Call JUN 280  JUY FP  46        1.69   281.69     4.9%

Chart =

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