Option Investor

Daily Newsletter, Sunday, 05/21/2000

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The Option Investor Newsletter              Sunday  5-21-2000
Copyright 2000, All rights reserved.                   1 of 5
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         WE 5-19         WE 5-12          WE 5-5          WE 4-28
DOW    10626.85 + 17.41 10609.37 + 31.51 10577.86 -156.05 -110.14
Nasdaq  3390.40 -138.65  3529.07 -287.75  3816.82 - 43.84 +216.78
S&P-100  752.95 -  8.72   761.67 -  8.12   769.79 - 11.63 +  4.30
S&P-500 1406.95 - 14.01  1420.96 - 11.67  1432.63 - 19.80 + 17.89
RUT      479.70 - 11.24   490.94 - 21.90   512.84 +  6.59 + 24.41
TRAN    2742.00 -132.02  2874.02 -  2.09  2876.11 + 26.10 + 16.76
VIX       28.77 -  1.23    29.95 -  0.44    30.42 +  1.64 +   .37
Put/Call    .89            .53              .53               .51

It's All About Interest Rates

Investors who thought last week's early trading action was a
precursor of good things to come were sorely disappointed.
Stocks began the week rising on cautious optimism ahead of the
Federal Reserve FOMC meeting.  The rally was extended through
Tuesday, as stocks finished near their highs for the day after
recovering from a brief sell-off when the Fed's interest rate
decision hit the wires.

For those traders vacationing on the moon last week, the
central bank raised its target short-term interest rate by an
expected half of a percentage point to 6.5 percent, the first
such increase since 1995 after five 25 basis point increases
since June 1999.  In a press release that followed, the Fed let
it be known in no uncertain terms that more hard hitting rate
strikes could be in the cards.

Once everyone had time to ponder the Fed's actions, the mood
quickly turned from cautious optimism to outright pessimism.

Taking the interest rate news hard were the once impervious
tech issues.  From Tuesday's close, the Nasdaq Composite Index
(COMPX) fell nearly 300 points, putting it solidly back below
its 200-day moving average and within a whisker of its April 14
low of 3,321.29.  Things got especially ugly on Friday when the
tech-heavy index tumbled 148.31 points, or 4.2 percent, to

Leading the COMPX's fall from grace were some formerly
untouchable big-cap tech issues.  Networking equipment king
Cisco Systems (CSCO) tumbled $6.50 to $53.44, which followed a
nearly eight-point retreat in the prior week.  Cisco, once
anointed by Wall Street to be the most likely first trillion
dollar company, has seen $200 billion of its market value
evaporate since reaching its peak of $82.00 per share set back
in March.

Cisco wasn't the only big-cap tech issue that got roughed up
last week.  Sun Microsystems (SUNW) got pinched for $4.25 to
$77.25, following a nine-point loss in the prior five sessions.
Internet B2B come-lately Oracle (ORCL) closed off $4.00 to
$70.00.  And Microsoft (MSFT) finished the week down $3.75 to
$65.06.  What's more, the software giant suffered the indignity
of hitting a new 52-week low on Friday.

Bucking the trend was chip maker Intel (INTC), which managed
to eke out a gain for the week of $2.88 to $117.88.  However,
in Friday trading, Intel lost $6.06 after the company said in
a filing with the Securities and Exchange Commission that it
reduced its fiscal first-quarter earnings by a penny to $0.77
per share after it had to write down inventory and reverse some

Ironically, while many tech stocks, with their pristine balance
sheets and "sky-is-the-limit-prospects," were getting routed,
many old-economy stocks were holding their ground.  For the
second straight week, the Dow Jones Industrial Average (INDU)
ended slightly higher, reflecting continuing investor rotation
into more traditional growth and value sectors.  For the week,
the INDU added 17 points to 10,626.85, despite getting clocked
on Friday with a 150.43 point sell-off.

Strong INDU performers for the week include former pariah
Philip Morris (MO), which added $3.25 to close at $27.50.
Another big winner was Merck (MRk), which rose $4.25 to $72.44,
putting the pharmaceutical giant 20 points above its March low.

The volatile week left the INDU down 9.4 percent from its
January 14 high and off 7.6 percent for the year, while the
COMPX is down 32.8 percent from its March 10 high - mired in
bear-market territory - and off 16.7 percent for the year.

Despite all of the pre-Fed excitement, volume remained
extremely light all week, which shows that investors continue
to remain non-committal.  With that said, on Friday, volume
increased 8 percent on the NYSE and 12 percent on the Nasdaq
from Thursday's levels, with 853 million shares changing hands
on the NYSE and 1.36 billion on the Nasdaq.

Overall, though, the trend has been for investors to watch the
action from the sidelines.  It has been more than two weeks
since the last billion-share day on the NYSE.  Over on the
Nasdaq, the falloff in volume has been even more pronounced;
after several days in excess of 2 billion shares, the average
volume lately has been around 1.2 billion.

As for Friday's actions, market breadth was miserable on both
major exchanges, with decliners outnumbering advancers by a 19
to 9 margin on the NYSE and by a 29 to 12 margin on the Nasdaq.

Leading the old-economy issues lower were some big-name
financials and pseudo-financials.  General Electric (GE), whose
GE Capital unit is the largest non-bank finance company, fell
$1.25 to $51.88.  American Express (AXP) slid $1.50 to $50.31
and J.P. Morgan (JPM) tanked $4.25 to $129.31.

As for new-economy issues, there was plenty of blame to go
around, with Internet and telecommunication stocks shouldering
most of it.

Leading the downdraft was Internet bellwether Yahoo! (YHOO),
which got blistered on Friday, closing down $11.69 to $120.31.

Meanwhile, Network Appliance (NTAP) gave back $3.88 to $65.13
after posting fourth-quarter earnings of $0.07 per share late
Thursday, which beat the First Call estimate by a penny.  On
top of that, the company was upgraded by Salomon Smith Barney
to a "buy" from an "outperform" rating while A.G. Edwards upped
the company to a "buy" from an "accumulate."  Que sera sera.

Another stock losing ground despite reporting strong earnings
was Autodesk (ADSK), which slipped $3.06 to $35.56.  The
company posted late Thursday first-quarter earnings of $0.48
per share, beating the First Call estimate of $0.46 per share.

In the telecom sector, Ciena (CIEN) got crushed, falling $20.81
to $116.50.  The maker of equipment to boost fiber-optic
network capacity cut new-product sales for fiscal year 2000 to
$50 million from $100 million.

Shares of WorldCom (WCOM) lost $1.81 to $37.75, extending
Thursday's declines, which came on the news that Justice
Department investigators are reportedly prepared to recommend
against WorldCom's $115 billion purchase of Sprint amid
concerns about market concentration in the long-distance and
Internet-backbone businesses.

Sycamore Networks (SCMR), a maker of fiber-optic equipment,
tumbled $11.31 to $80.94 despite reporting third-quarter
earnings after the market close on Thursday that beat the First
Call estimate by four pennies.

Falling in sympathy with the aforementioned telecoms were
Nortel Networks (NT), which tumbled $4.00 to $52.44, and Lucent
Technologies (LU), which lost $0.81 to $55.

To be fair, the news wasn't all bad.  There were a few silver
linings among the tech black clouds.  Kana Communications
(KANA) rose $3.75 to $43.25 on news ING Barings upped the
company to a "strong buy" rating from a "buy."  Portal Software
(PRSF) surged $.13 to $47.13.  Late Thursday, the company
reported quarterly earnings of $0.02 per share compared to the
First Call estimate of a loss of a penny per share.

In the credit markets, Treasuries closed modestly higher
Friday, benefiting from investor concerns with equities.  The
losses in the stock market prompted a short flight to safety.
Prices turned higher in late afternoon trading Friday.  The 10-
year Treasury note edged up 9/32 to yield 6.51 percent and the
30-year bond inched ahead 3/32 to yield 6.23 percent.

On the economic front, Friday saw the release of the March
trade numbers, which produced yet another record, with
Americans importing $30.18 billion more goods and services than
they were exporting.  Additionally, the February trade deficit
numbers were downwardly revised to $28.71 billion from $29.24

In other news, confirming that the Fed is indeed inflation-
phobic, New York Federal Reserve President William McDonough
said in a speech in New York on Friday that demand is still too
strong and that the increases in interest rates are aimed at
restoring a better balance between supply and demand.

Looking ahead, the May consumer confidence numbers are due out
Tuesday at 10:00 AM ET.  Traders will be looking for a cooling
of consumer sentiment that may show that the economy might be
starting to slow.  Then, on Thursday, the Commerce Department
will be reporting revived GDP numbers.  Don't look for either
data sets to have much of an impact on investor sentiment.

With little economic news to focus on, many analysts believe
that the market will continue to fret about the prospect of
more interest rate hikes after the Federal Reserve ratcheted up
borrowing costs by a half percentage point last Tuesday.

Thus, without a catalyst to give the market the support it
needs over the short-term, observers expect a tight trading
range to hold over the next week or two, which really isn't all
that unusual.  Contrary to popular belief, there isn't always a
trend to play.  Believe it or not, the market trades sideways
nearly 70 percent of the time.

On a brighter note, one indicator that may portent an abatement
in near-term bearishness is the put/call ratio at the CBOE,
which finished at a historically high 0.88.  This could mean
that the wall of worry is finally sufficiently high enough that
some investors may want to take a crack at climbing it.

Another indicator pointing to a possible rally are individual
investors, who apparently haven't lost their appetite for
equities.  An estimated $13.1 billion flowed into U.S. stock
funds in the week ended Wednesday, up from $5.2 billion the
previous week, according to TrimTabs.

Nevertheless, with the interest rates on the rise and many
investors still sitting on their hands, it's going to take a
lot of chutzpah to trade this market over the next few weeks.

S.P. Brown
Senior Writer

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Mandelay Bay Resorts Crushes Estimates
By Matt Paolucci

With the U.S. economy growing at a breakneck pace, consumers
are spending like never before. And with their newfound
wealth, folks are apparently heading over to Las Vegas. Well,
judging from its earnings report late yesterday, one
particular hotel and casino on the Vegas strip is grabbing
more than a fair share of consumers' gambling dollars.

Mandalay Resort Group (MBG) reported first-quarter earnings
obliterating Wall Street estimates by 18 cents per share, due
to big crowds at its casinos in Las Vegas and Detroit and an
aggressive stock buyback plan.

For the first quarter ended April 30, Mandalay reported its
highest quarterly profit ever with net income of $48.9 million
or 58 cents per diluted share compared with a net loss, after
charges, of $4.9 million or 5 cents per share in the year-ago
first quarter.

Operating earnings were 58 cents per share versus 43 cents per
share, excluding charges, in the year-ago period. Analysts had
expected MBG to post first quarter earnings of 40 cents per
share, according to First Call/Thomson Financial.

Revenues were $639.6 million in the first quarter versus
$471.3 million a year ago.

Company officials, who barred reporters from their investor
and analyst conference call, were unavailable to comment on
the results.

"Given the dramatically different performance of the company's
properties over the last two quarters, it is clear that the
strength of the company's earnings are dependent on a healthy
Las Vegas," Bear Stearns analyst Jason Ader said.

Bear Stearns raised its rating from Neutral to Attractive,
while Wasserstein and Perella raised MBG shares to Buy from

Mandalay said its major Las Vegas resorts showed strong
results, partly driven by an overall increase in visitors to
the city. MBG's assets include the Luxor (Egyptian-theme),
Circus-Circus Las Vegas, Excalibur (Medieval), the Monte Carlo
(jointly-owned with Mirage Resorts Inc. (MIR), and its year-
old flagship property, Mandalay Bay resort.

The company said its resorts in Illinois, Detroit,
Mississippi, Reno, Nev., and Laughlin, Nev., also showed
strong results.

"This was obviously a very strong quarter, with significant
upside surprise driven by higher than expected room prices in
Las Vegas and very healthy trends in Detroit," Ader added. "As
such, we believe Mandalay Bay will continue to experience
solid earnings growth through the second quarter."

Mandalay Bay, the company's flagship property which opened a
little over a year ago, generated $30.5 million in operating
cash flow versus $22.6 million a year ago.

In Reno, Nev., the company generated a total of $13.4 million
in operating cash flow against $9.2 million in last year's
first quarter, an increase of almost 46 percent. In Laughlin,
Nev., the company's two properties, Colorado Belle and
Edgewater, reached cash flow of $12.4 million compared with
$11.4 million in the prior year period.

Separately, Mandalay's Board of Directors authorized an
additional 15 percent stock repurchase. During the first
quarter, the company purchased 11.9 million shares at an
average price of $16 per share.

Shares of Mandalay Bay Resorts closed down $0.13 at $21.88 per


May I ask you a question?
By Eric Utley

Are we having fun yet?  Last Friday afternoon, after the market
plummeted on extremely light volume over fears of rising interest
rates, I hit rock bottom.  For the past two months, the mighty
bear has sucked the financial life from me.  Not literally, I've
managed to buy a few puts here and there, and minimized the
damage to my long positions.  But figuratively, the growling Ursa
has taken away everything I've grown to love about investing and
trading, particularly endless profits from rocketing tech stocks.
For now, it appears the king of bulls has decided to lie down
beside the market trough and try to cool off during the hot
Summer months.  But, just because the mighty steer has stopped
charging higher, it doesn't mean I can't have fun anymore with
this market.  And for me, if I'm not having fun trading stocks, I
might as well be working.  So last Friday, I decided to ignore
what Mr. Greenspan has to say, hit the mute button on my remote
and disregard the market rhetoric spewing from CNBC, and start
having fun - again - with my investing and trading.  I've found
that when I have a positive outlook, my trading profits seem to
follow.  I just have to be careful not to let my darn ego get in
the way.

So I suggest to all of you, first and foremost, have fun.  And
there is no better way to have fun with the market than to make
money.  So how do we make money given the current market
environment?  As you'll see below, two of our readers sent in
stocks that are actually moving higher.  The common theme with
the recent market leaders is they all have strong fundamentals.
I think this market is favoring companies with accelerating
earnings growth selling at reasonable valuations.  So if you're
a bull, look for stocks with solid fundamentals reaching new
highs, or breaking out of basing prices.  On behalf of the bears
out there, I'd like to thank Mr. Jim Brown and the OIN staff for
including puts in the play list.  There is plenty of profit
potential in buying puts in this market.  There is little sign of
negotiations from the buyers currently on strike.  So as the
sellers continue driving prices down, don't forget the puts.
Before I ramble on any further, most importantly, have fun!

I apologize for not writing my usual column last Wednesday.  As
you may know I wrote the Market Wrap section that day.  But I
didn't forget about my loyal readers, so keep sending your
requests to asktheanalyst@OptionInvestor.com.  Please put the
symbol in the subject line of the e-mail.


JDS Uniphase - JDSU

What is the analyst long and short-term for JDSU?  What can be
The low and do you think it will be back to $153 this year?
Thanks for your wonderful job. - Ali

Well thank you for your nice comments Ali.  Unfortunately I don't
set price targets on stocks.  I think the job of establishing
price targets is one of the most difficult and inexact sciences
in the financial world.  So I don't do it.  But, I'd be more
than happy to take a look at JDSU and tell you where I think it
is headed.

As you know, JDSU is one of the leaders in the new fiber-optic
technology sector.  As Internet users push increasingly higher
amounts of voice, video, and data over the Web, the demand for
capacity and high-speed networks continues to accelerate.  That's
where JDSU comes in, the company produces equipment that
increases capacity and the speed of fiber-optic networks.  The
incredible demand for high-speed network products is growing so
swiftly that JDSU has considered increasing output by four-fold.
And the company is expanding through acquisitions as well.  In
the past ten months, JDSU has completed a blistering nine
acquisitions.  You probably heard that the CEO, Kevin Kalkhoven,
announced his retirement last week.  Don't let that concern you,
Kalkhoven is leaving to seek a "slower pace".  Analysts see the
retirement as a non-event since JDSU has a solid business
strategy and a sound management team.  From a contrarian
perspective, Kalkhoven's retirement may be viewed as a bullish
sign because the pace of business at JDSU is so darn fast.

The long-term prospects for JDSU look promising.  The company is
expected to grow earnings by nearly 50% over the next five years.
Just last week, the CFO told analysts to expect upwards of 80%
year-over growth and said, "Business remains very strong."
Clearly, JDSU is a good stock to buy for the long-term if you
don't mind the volatility.  In the near-term, the stock appears
to have settled into a trading range between roughly $80 - 100.
Will it get back to $153 this year?  Maybe.  If Wall Street turns
bullish on the stock again it will sail.  Although the company is
growing at a break-neck speed, the high valuation does present a
risk.  Six more months of consolidation might provide a good base
for a bull-run into 2001.  But for now, you could probably trade
the stock between its range and take profits.


Trimble Navigation Limited - TRMB

Please comment on TRMB. Thanks. - Vishal

Thank you for your many e-mails Vishal.  I'm happy to finally be
able to take a look at one your requests.  I'm also happy to take
a look at a stock that has managed to move higher in the past
month.  To be quite honest, I had never heard of TRMB until I
read your e-mail.  I should know more about the company since
I've been known to lose my way while venturing into the great
outdoors.  TRMB designs and develops products enabled by GPS
technology.  The company makes electronic products that determine
precise geographic location.  It turns out that "map making" is a
very profitable business for TRMB.  Over the past three quarters,
TRMB has surpassed analysts' estimates by an average of 68%!
And the company is expected to grow earnings at an amazing 48%
over the next five years.  The company has a strong balance sheet
with very little debt.  And with a market capitalization of $869
mln, there is room to grow!

Fundamentally, TRMB looks great.  So let's take a look at how the
chart stacks up.  And wouldn't you know it, technically TRMB
looks great.  I'd like to thank you again for requesting this
stock Vishal, it solidifies the fact that money can still be
made in a bear market.  I apologize for the emotions, it's just
really nice to see a stock move higher in the face of the
growling bear.  Enough of the mushy stuff, back to the chart.
Heavy volume has confirmed the up-trend.  TRMB is cruising higher
using its 10-dma as support.  I'd view a fall below the 10-day as
a bearish sign, but other than that, the chart looks great.  I
would like to point out the high volume event in conjunction with
the gap higher in price.  That gap higher came on the heels of
TRMB's first quarter earnings report.  Such a strong rally
combined with massive volume is a good indicator of higher


Vishay Intertechnology - VSH

Could you please comment on these two stocks, KEM and VSH?
Thanks very much.  Faithfully yours. - Q.T. Fang

Thank you Q.T., we are faithfully here for you.  We have looked
at a few of your requests in the past, and I just couldn't pass
up VSH.  After looking at TRMB above, the idea of keeping with
winning stocks sounded better than analyzing fallen leaders.
Despite the almighty bear, VSH just keeps going and going.  So,
what led to VSH's incredible bull-run?  One word:  earnings.
With the chip sector booming, VSH is expected to grow earnings an
amazing 293% for fiscal 2000.  The only thing that concerns me
with VSH is the possibility of a slowdown in the semiconductor
sector.  Earnings are expected to slow over the next five years,
analysts estimate that VSH will grow only 20% next year.  But, it
seems that every week analysts move their estimates for VSH
higher, followed by upgrades and higher price targets.

There are a few items in the news recently that are worth noting.
First of all, VSH directors declared a 3-for-2 stock split last
Thursday.  The company said it will distribute split shares on
June 9th.  Secondly, and more interesting, VSH issued 5.8 mln
shares of common stock on May 10th, priced at $73.50.  The
company plans to pay down its debt with the proceeds from the
offering.  Which I think is a good move by management for the
long-term health of the company.  The large offering of stock
didn't adversely affect VSH too much.  In fact, the new supply of
stock was met with high demand.  After the offering, VSH quickly
rebounded to trace a new 52-week high.  As for the chart, as long
as VSH stays within its ascending channel we could see higher
prices.  Every bull loves to see the pattern of higher highs and
higher lows.


This column is an information service only.  The information
provided herein is not to be construed as an offer to buy or
sell securities of any kind.  The Ask the Analyst picks are not
to be considered a recommendation of any stock or option but an
information resource to aid the investor in making an informed
decision regarding trading in options.  It is possible at this
or some subsequent date, the editor and staff of The Option
Investor Newsletter may own, buy or sell securities presented.
All investors should consult a qualified professional before
trading in any security.  The information provided has been
obtained from sources deemed reliable, but is not guaranteed
as to its accuracy.


As of Market Close - Friday, May 19, 2000

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

DOW Industrials   10,000  11,400  10,626    Neutral   5.05
SPX S&P 500        1,400   1,500   1,407    Neutral   5.05
OEX S&P 100          750     800     753    Neutral   5.05
RUT Russell 2000     450     550     480    Neutral   5.05
NDX NASD 100       3,200   4,000   3,261    Neutral   5.05
MSH High Tech        860   1,000     872    Neutral   5.05

XCI Hardware       1,360   1,600   1,333    BEARISH   5.19 **
CWX Software       1,100   1,300   1,143    Neutral   5.05
SOX Semiconductor    960   1,200     950    BEARISH   5.19 **
NWX Networking       900   1,100     962    Neutral   5.05
INX Internet         550     800     553    Neutral   5.05

BIX Banking          530     600     557    Neutral   5.11
XBD Brokerage        400     500     456    Neutral   5.05
IUX Insurance        540     620     624    BULLISH   5.16

RLX Retail           900   1,000     904    Neutral   5.11
DRG Drug             355     400     392    Neutral   4.28
HCX Healthcare       710     800     795    Neutral   4.28
XAL Airline          140     155     144    Neutral   3.10
OIX Oil & Gas        265     300     309    BULLISH   5.11

Posture Alert
Complacency is continuing to kill this market, as investors both
large and small watch from the sidelines, while sector after
sector breaks down. Winners Friday were limited to the Drug,
Healthcare, and Oil & Gas sectors. Losers were abundant, and were
led by Internet (-6.37%), Semiconductors (-5.21%), the NDX (-
4.84%), and Networking (-4.47%). With this most recent action, we
have lowered the Hardware and Semiconductor sectors to Bearish
from Neutral.


Sunday, May 21, 2000

We are at a Critical Moment!

Friday capped off the week on a sour note, as the major indexes
closed down significantly, with no end in sight. The NASDAQ
suffered a -148 point loss to close the week out below its 10-
month moving average. Down volume was almost eight times greater
than up volume, and 2,883 decliners eclipsed 1,169 advancers.
Technology bellwethers that made new lows Friday include
Microsoft and Worldcom, which is an unlikely duo. Cisco Systems
was also a poor performer this week, and closed below the lows
from April 14th, which is also a very poor sign. Interest rate
jitters continue to plague this market and institutional
participation is almost non-existent, with the exception of
mutual funds that are anticipating redemptions, which is giving
extra selling pressure to this already illiquid market.

We are nearing a critical moment in this market, as the recent
lows in the NASDAQ may be tested this upcoming week. Previously,
many of the leading technology stocks were forming higher lows,
which is a bullish sign. However, when we start to see some of
the leaders breaking down (like the few mentioned above), it may
just a matter of time before they drag the rest of the market
with them. Monday and Tuesday could be very important, especially
for technology shares, because if we can bounce significantly, it
will relieve the pressure and tension that is currently building
up. This market has been in a pretty consistent trading range the
last 6 weeks, which is probably the most optimistic scenario that
we could wish for. But if we break the previously established
lows set in April, we may see some extremely large selling
pressure in a very swift manner, so stay prepared!

On Thursday, Pinnacle highlighted the most recent sentiment,
which is best portrayed by the Investors Intelligence Survey.
Sentiment is on the downswing, but it going to have to get worse
before it gets better. What we need now is to flush out all the
weak hands, and build up the bear's camp to a more significant
level. Once this bearish level builds up to a point that is
comparable to market lows in previous years, is when this market
is ready to turn to the upside. Until then, it is going to be a
trading range market, with an emphasis on the bearish side. With
all the complacency in the market, we are still cautious in
regards to the April lows, and would not be surprised to see
those levels taken out.

As of late, this market has been pushed in both directions on
very light volume, and with no economic indicators until
Thursday, we may rally again to start the week off. A few quick
factors that may support this bullish side would be the excessive
levels of put buyers the last couple of days. Friday's Put/Call
ratio stood at a whopping 0.89, suggesting extreme bearish
sentiment. On equities, it stood at 0.81, which is a level we
have not seen in a long time. If this trend continues, it may
suggest that a bottom may be forming at these current levels.
Have a good trading week!


Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of
analyst expectations. Hewlett-Packard and Dell Computer 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 (28.77):
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. The VIX may now be attempting to get
back to the old trading range.


Interest Rates (6.227):
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 April, 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                        (5/19)      (5/23)       (5/25)

Overhead Resistance (805-830)     7.20
Overhead Resistance (775-800)     2.12

OEX Close                       752.95

Underlying Support  (745-770)     1.91
Underlying Support  (715-740)     2.90

What the Pinnacle Index is telling us:
Open interest for the June series is extremely low, indicating
poor sentiment across the board and less reliable statistics.
Regardless, both direct overhead and both underlying support
levels are light, indicating this market will most likely
continue on its trading range bound ways, with a emphasis on the
bearish side.

Put/Call Ratio
                                Friday      Tues       Thurs
Strike/Contracts                (5/19)      (5/23)     (5/25)

CBOE Total P/C Ratio             .89
CBOE Equity P/C Ratio            .81
OEX P/C Ratio                   1.64

Peak Open Interest (OEX)
                     Friday          Tues            Thurs
Strike/Contracts     (5/19)         (5/23)           (5/25)

Puts                740 / 6,368
Calls               800 / 4,692
Put/Call Ratio        1.36

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

May 19, 2000                            28.77


For the week of May 22, 2000


None Scheduled


None Scheduled


None Scheduled


GDP - Revised            Q1     Forecast:  5.2%   Previous:  5.4%
GDP Chain Deflator       Q1     Forecast:  2.7%   Previous:  2.7%
Initial Claims           05/20  Forecast:  278K   Previous:  276K
Existing Home Sales      Apr    Forecast: 4.84M   Previous: 4.83M
Help Wanted Index        Apr    Forecast:   N/A   Previous:    87


Durable Orders           Apr    Forecast: -0.2%   Previous:  3.5%
Personal Income          Apr    Forecast:  0.6%   Previous:  0.7%
PCE                      Apr    Forecast:  0.4%   Previous:  0.5%
Michigan Sentiment       May    Forecast: 110.5   Previous: 110.9

Week of May 29th

05/30 Consumer Confidence
05/31 New Home Sales
05/31 Chicago PMI
05/31 Leading Indicators
06/01 Initial Claims
06/01 Auto Sales
06/01 Truck Sales
06/01 NAPM Index
06/01 Construction Spending
06/02 Nonfarm Payrolls
06/02 Unemployment Rate
06/02 Hourly Earnings
06/02 Average Workweek
06/02 Factory Orders

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

The Option Investor Newsletter                      5-21-2000
Sunday                                                 2 of 5


The Money Flow Indicator
By Mary Redmond

I think the money flow indicator is one of the most important
technical indicator to watch these days.  This may be partly
because there is so much more money around nowadays than in
previous markets.  In this investing period, the liquidity
flows are much more powerful and pronounced.

You can look at macro money flow indicators, like cash flow
to various sectors of the market as well as money flow to an
individual stock.  The weekly and monthly cash inflows into
equity funds is a fairly reliable indicator of current market
sentiment.  There are other factors which influence liquidity
such as initial public offerings, and cash takeovers.  In the
last two months, the number of IPOs dropped dramatically, as
the market and IPO demand dried up.  This can leave additional
cash which would have gone to the IPOs to be invested in the
market.  In addition, the number of cash takeovers (as opposed
to stock swap takeovers) increased.  Both of these factors may
help the liquidity of the market to a certain degree.

In addition to looking at the money flow, you can sometimes
make a reasonably reliable estimate as to the money flowing
to a particular stock.  Sometimes this is very easy, you can
get an idea of what is going on simply by watching the daily
volume and price.  If the price is going up dramatically at
the same time as the volume is increasing it usually means
buyers are outweighing sellers.  And a big decrease in stock
price with heavy volume can mean selling by institutions or
large individual investors.

There is also a money flow index which can be used on stocks
or indices to give an idea of the strength of money movement
in a security over a specified period of time.  The typical
price of the security or index over a period of time is
calculated, then the money flow using the price multiplied by
the volume, and finally you get the money flow index.  You can use
the interactive charts on the OIN web site to look at the money
flow in a stock or index.  Click on the interactive charts under
Tools and pick Money Flow as the lower indicator.  For example,
using the Nasdaq 100(QQQ) around the third week in March the
index hit a high of 117 and the money flow index was way above
10.  As the market started to drop, the money flow index grew
weaker.  On April 14, the index hit a low near 80, and the money
flow index was zero.  This is one more technical tool you can use
when analyzing your stocks.

It is also useful to look at which funds are taking in the
most money, and what their typical buying patterns are.
For example, last December, the Janus fund family took in
approximately one third of the total cash flow to all US
domestic equity funds, a total of approximately $9.9 bln.
Some of the top holdings of this fund family during that
period were JDS Uniphase, Nokia, Cisco, Sun Microsystems,
Veritas and Texas Instruments, all stocks which performed
well during the latter part of 1999 and the first quarter of
this year.

Mutual funds usually do not have to disclose their stock
positions until several months after they make their
purchases.  For example, when you receive a prospectus from
a fund they generally show what their holdings were as of
the prior quarter.  This rule is in place because of the
potential market disruptions which could occur if funds
revealed everything they were doing the day the trades were
executed.  However, if you see that volume is heavy and
large block trades are being executed on days when the
stock prices are increasing this can mean institutional

For the month of April, the Janus and Vanguard fund families
were the clear cut leaders, both taking in over $3.3 bln in cash.
Janus has a number of different funds, but their top funds tend
to invest in large cap high growth technology stocks which are
leaders in their industries and have consistent earnings growth.

You can believe that I breathed a sigh of relief when I
checked the numbers for the week ending May 17.  Finally, we
got a strong inflow of approximately $7.9 billion in cash
to equity funds.  Just what the stock market doctor ordered!
Over 51% of the money went into growth funds, and over 44%
went into international global growth funds.   Of course,
this is just a start and we need to see it continue, but
it is certainly a more optimistic indicator than the wimpy
inflows we have been seeing lately.  If this only manages to
keep up, we could be off to the races again.

Contact Support


Has the Fat Lady Started To Sing Yet?
By Lynda Schuepp

On Friday, the Nasdaq, S&P 500 and DJIA all were down on greater
volume than the day before.  This is one of O'Neil's criteria of
a distribution day.  It isn't until the generals fall that we can
pick ourselves back up and start this bull market going again.
Cisco, the darling of Wall Street, was one of the last stocks to
fall during the 1998 correction.   Cisco on Friday closed at
$53.31, which was lower than it's low of April 14th.  I did a scan
on the S&P 100 and Nasdaq 100 (which includes all the Dow stocks)
and found that the following stocks are at their lowest point for
the last 50 days: WCOM, T, QCOM, PRD, NOVL, MSFT, MOLX, MCLD,
NOVL, T and WCOM are below their 250-day lows!  The infantry is
the first to fall, then the generals.  Could this now be a signal
of the end of the year 2000 correction?  Only time and hindsight
will tell.

I, for one, am tired of the bleeding.  I'm sick of discussions on
CNBC trying to figure out if we are in a bear market.  By the
time those clowns do figure it out, we'll have been in a bull
market for 3 months.

Last week, I got so many emails asking for a system or which
indicators I use that I decided to give you some information.  I
learned this at a seminar that I attended quite some time ago by
a gentleman who has done pretty well trading OEX options.  One of
his criteria is an extreme intra-day tick reading in combination
with a bullish candlestick pattern on the S&P 500.  His criteria
are an intra-day tick reading of -900 on the NYSE or lower and a
second day with low readings (within 4 business days).  The
second day must have a tick reading of at least 70% of the first
day AND must coincide with a bullish candlestick pattern.  This
combination constitutes a bottom.  Guess what?  This happened on
4/14! See the chart below.

On April 14th, a low tick reading of -1229 was reached intra-day.
The following business day(4/17), an intra-day tick reading of
-1095 was reached.  A reading of -860 would be needed
(70% of -1229) so the reading of -1095 is even stronger.  The
candlestick pattern was a tweezer bottom and the candle was a
piercing pattern (closed higher than mid-point of previous
day).  Both of these constitute bullish patterns.  As you can now
see with proper hindsight this was a bottom.  What most people
aren't sure of is whether we have to go lower still or not.

Another indicator that I follow is the ARMS index.  The ARMS
index is also called TRIN.  The formula for you "gotta know the
nitty-gritty" is a simple fraction over a fraction.  The top
fraction is: Advancing Issues/Declining Issues.  The bottom
fraction is: Advancing Volume/Declining Volume.  Don't worry,
these numbers can be obtained from most charting services.
Interpretation is as follows: a number less than .5 means that
most volume is going into a narrow advancing leadership, which
typically signifies a short-term top.  An arms reading between
5 and 1.3 is balanced and therefore neutral as an indicator.
An arms reading greater than 1.3 signifies a short-term bottom.
Friday's TRIN was 1.7!

Adding the TRIN (ARMS) readings for the past five days gives us
even more insight.  Readings near 4.5 or less are usually found
near tops.  On March 23rd the 5 day reading was 4.4, indicating
a major high.  On March 24th the reading was 4.5 and now we can
see that was a high, confirmed by a Doji candlestick pattern,
which is bearish.  Readings of 6 or more are usually found near
a major bottom.  For instance, October '98 and April 14th saw
5-day TRIN readings of 8!  The current 5-day reading as of Friday
was 5.1!  If Monday closes with a 1.4 or more, we would have yet
another strong buy signal.

Bottoms are typically re-tested and the April 14th bottom has been,
only each of the tests is somewhat higher.  Note a pennant is being
formed, much like the one that was formed during February and March.
This could be another good sign.  Note on Friday we got an intraday
tick reading of -981.  I will be looking for a reading of -686 or
lower (70% of first day) with a bullish candle to confirm this
new bottom and then I think the worst will be over.

I think the fat lady is about to sing, so I'm getting ready to
leave this bear market behind.  Remember, I am an extreme optimist
and am probably looking too deeply to find a bottom.  If I am
right, I will be a heroine, if I'm wrong, call me a misguided

Contact Support


Market Psychology, A Book to Read and Bearish Thoughts
By Molly Evans

In 1904, Ivan Pavlov, a Russian psychologist won the Nobel
Prize for his discovery of the conditioned reflex in dogs.
At the ringing of a bell, the dog's salivary glands wetted
in response to the usual custom of receiving a piece of meat.
After awhile, the dog would salivate upon hearing the bell
no matter if the meat was coming or not.  The dog had been
psychologically programmed to expect his dinner at the sound
of a bell.  As you might imagine, this was quite a
breakthrough in psychological science.  The experiments
have been validated in other ways too.  One gives a mouse
some cheese when it finds its way through a maze.  The mouse
memorizes the path to get there efficiently to collect his
reward.  However, the inquisitive scientist then begins to
shock the mouse and still the mouse returns because he
remembers that at one time he used to give cheese and maybe
that will return.  Now you know where I'm leading.  We used
to go to that great big slot machine known as the Nasdaq
market, simply paid the price and then collected a nice
monetary reward.  But, market gyrations are direct results
of human psychology.  What made Yahoo worth $250/share on
Jan 4, 2000?  Now it's worth less than half of that.  It
didn't split, it didn't miss earnings nor did it have
"accounting irregularities".   A fifty basis point interest
rate raise does affect it but not nearly as much as what the
perceived effect does.  The herd psychology has changed and
the fallout of market sentiment is making us all seasick.
We're still seeing the "buy the dip" mentality, hence, sucker
rallies and headfakes.  The mouse keeps going back for
the cheese even though he's being shocked.  There will be no
bottom or at least no strong uptrend until the economy shows
signs of slowing, the Fed is happy and investors feel the
stock market is a safe haven for their money again.

That's little consolation for traders of the market.  We
fancy ourselves smart enough to "read" the market by our
technical analysis and to pull out fast ones as the market
might allow.  I'm sure some of you are doing quite well yet
many of you have been quite humbled.  This market isn't
about making hay right now, it's all about surviving to
trade another day, limiting losses and learning.  The
brokerage commercials are starting to ring pretty hollow
now whereas they once amused and made us all feel gooey
about doing our own financial planning and trading online.
Fabulous riches, empowerment, putting fatcat brokers in
their place and self destiny are the themes of these
advertisements.  Somehow that just doesn't seem as wonderful
as it did just a couple of months ago.  I'm not advocating
that you quit trading all together.  I'm just warning that
it's buyer beware.  You all know that.  I decided about four
or five weeks ago to park some money into far out MSFT calls.
MSFT was at about $67 yet holding strong support at $65.  Safe
place to park some money, right?  Ha!  What a joke.  MSFT is
still above 65 but my calls are down 30%.  Options are wasting
time bombs and nothing is safe or sacred in this market.  I
was asked just this morning, why, if options are designed to
expire worthless to the beholden, do people utilize this method
of investment?  Ahh!  What a terrific question.  It's because
an option player is the type of person who isn't afraid to
risk in anticipation of the higher rewards that options can
return to us.

It would be interesting to see a group psychological
profile of option traders as opposed to mainstream buy
and hold investors.  We're the ones who embrace the
challenge of outwitting the professionals at their own
games and strive to master the many complicated aspects
of market analysis, money management and trading.  You've
got to love the idea to make it all work for you.  It takes
study, discipline and time to be successful at this.  No
one promised that it was easy.  We just had a powerful bull
market that lulled many an unsuspecting victim to the trough.
Vegas does it too.  The house doesn't win every time but
it slowly eats at your capital if you're not paying attention.
It's psychological warfare out here in the marketplace.  You
know what the cruelest part of all this is?  It's that our
rocket ride to higher wealth isn't likely to return
anytime soon.  Yes, I suppose that until the last person
out there stops buying all the dips we'll still have the
rallies and bear traps but an 80% gain on the Nasdaq year
again?  Nah.

I picked up a terrific book about all this the other day.
Robert Shiller's "Irrational Exuberance" is a must read.
Now let me temper my comments here.  If you read this book,
you'll be loading your portfolio with all put plays and I
don't think you should do that exactly.  However, Mr. Shiller
makes some powerful and convincing arguments about where our
markets are headed.  Perhaps you should read Harry Dent's
"Roaring 2000s" to counter the emotion of reading this opinion.
What I found fascinating was Shiller's painstaking research
on the history of the American markets.  There has been no
price escalation of the markets like what we have witnessed
in our own markets in the last ten years.  There was a runup
in prices throughout the 1920s and we all know how that ended
in 1929.  No, I'm not sounding the foghorn here.  I know this
is a hot spot for many people to compare the 90s to the 20s.
Let me present his evidence though.  In the 1920s, a new
technological revolution was being born.  The radio was
developed in 1926, the automobile was on the street for
private use, phones were invented, airplanes were in the air
and the chain store was conceptualized.  There had been no
bear market in over eight years and people were crazy about the
market.  There's a famous story that Joseph Kennedy knew it
was time to get out of the market when the boy shining his
shoes started talking to him about stocks and which he should
buy.  According to Shiller, there was a quadrupling of real
earnings for companies from 1921 - 1926.  The price to earnings
ratio (PE)is the objective measurement of a company's ability
to produce earnings in relation to the price of their stock.
It's a yardstick and throughout 1999 as it presumably was
back in the late 1920s, the PE ratio didn't matter.  Shiller
has a great chart in chapter one detailing the enormous spikes
in PE ratio for the market in the last 100 plus years.  He was
so kind as to grant permission for it's duplication here.

I'm scared.  How about you?  Shiller calmly explains this
with these words, "In the latest data on earnings, earnings
are quite high in comparison with the Graham and Dodd measure
of long-run earnings, but nothing here is startlingly out
of the ordinary.  What is extraordinary today is the behavior
of price, not earnings."  For much of the last year, there was
the omission of fundamental speak by the media.  The "PE
doesn't matter" camp is dead wrong.  Old economy vs new economy
chatter and media hype drove this market to unprecedented levels
and deep down, we all know the market is very expensive.  The
coming months will tell us all just how uncomfortable we are
with that fact.

What we write here is in no way the conventional thinking of
the OIN staff.  The views in individual author's commentaries
are their own.  I still hold longs and shorts but my eyes are
wide open.  Good luck to you all.

Contact Support


Index      Last    Week
Dow     10626.85   17.41
Nasdaq   3390.40 -138.65
$OEX      752.95   -8.72
$SPX     1406.95  -14.01
$RUT      479.70  -11.24
$TRAN    2742.00 -132.02
$VIX       28.77   -1.23

Calls              Week

SDLI      196.00   22.00  New, a rapidly growing market
AFFX      154.50   14.28  The big swings continue for Biotechs
PDLI      132.63   13.19  Skillful, volatility lovers only
UNH        76.38    5.00  New coverage and new interest
ABT        41.56    4.56  New, technical breakout over $40
IMCL       96.75    4.38  The Biotech sector may be back
ANDW       32.88    3.88  Pulled back, but held support at $32
AMCC      101.63    0.31  Dropped, support is starting to thin
PLXS       80.50   -0.50  Split candidate with momentum
FLEX       51.19   -2.06  Dropped, weak volume = no movement
FAST       66.88   -2.50  Investors turning bullish on Retail
SEPR       99.75   -2.50  Annual shareholder meeting this week
BVSN       42.75   -3.00  Dropped, breakdown instead of breakout
DNA       126.00   -3.00  Held its own late in the week
CDWC      115.00   -3.25  We sense a split announcement coming
JDSU       82.00   -4.00  Dropped, CIEN ruined the Fiber-optics
ALTR       79.81   -4.25  Dropped, head-fake lured us in
GLW       182.44   -5.25  Dropped, CIEN's big drop killed this one
SEBL      123.25   -5.75  Typically, one of the first to rebound
RMBS      173.75  -15.19  Shareholder meeting on Tuesday


HLIT       46.13  -17.75  More concerns that qrowth will slow
NTLI       54.75  -17.63  Falling with the rest of the Telecom
ANAD       44.25  -14.00  New, fundamental issues related to ERICY
OPTV       51.81  -12.81  Concerns about the pending merger
INCY       57.75  -11.00  Giving away genome research for free??
NTOP       31.13   -9.13  New, trouble brewing with ISP access
AZPN       22.38   -6.81  It doesn't get much uglier than this
FDRY       65.50   -2.63  Continues to dive to lower levels
CMRC       44.00   -0.38  Dropped, been stubborn about falling



ABT  - Abbott Labs


NTOP - Net2phone
ANAD - Anadigics


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.


GLW $182.44 (-5.25) We had a short and sad run with GLW.  With
the sharp early morning sell-off, and broad tech sector weakness
Friday, you should have avoided entry into the GLW play.  We
inaccurately reported that JDSU reported earnings Thursday and
guided analysts to a higher growth rate which in turn gave GLW
a boost.  JDSU did guide analysts to a higher growth Thursday,
but did not report earnings.  We apologize if this caused any
confusion.  Though the fiber-optic sector holds great potential
and high growth, the current market environment is too harsh to
continue to play GLW.  When Wall Street wakes up and sees the
light, we may revisit GLW, until then we'll wait.  Also, CIEN
had traded up initially after-hours based on a strong earnings
report, but instead of lifting the sector, CIEN lost over $20
on Friday.  This killed the GLW play before it even got started.

FLEX $51.19 (-2.06) Our rebound play in FLEX ran flat last
week, culminating with a gap down Friday morning by $1.  What's
disconcerting about the sell-off Friday is that it came on
extremely heavy volume.  Traders exchanged over 1.5 times the ADV
during Friday's decline.  That is quite concerning considering
the light trading in the broader market.  The heavy selling
suggests that institutions are unloading the stock after the
rebound last week.  FLEX might have also been hurt by the options
expiration Friday.  Traders may have sold FLEX lower considering
the large amount of open interest in May contracts.  Due to the
heavy selling its time to leave and flex our capital elsewhere.

BVSN $42.75 (-3.00) Once again, no volume equals no breakout.
In fact, BVSN suffered a breakdown rather than a breakout by
falling below $46, its last higher low that kept the ascending
wedge in tact.  Not even Thursday's upgrades to Buy by Southwest
Securities and First Union could keep BVSN afloat.  While solid
support at $40 could give BVSN a bounce from here, you may want
to exit on that strength since the basis for the play (ascending
wedge) has evaporated.

ALTR $79.81 (-4.25) ALTR failed to make any attempt to rise at
least back to near-term support at $87 and $88.  Conversely
the share price moved lower along with the Philadelphia
semiconductor index, which closed at 950.24.  ALTR's current
level is well below the intersecting 5 and 10 DMAs and is now
sitting on bottom support.  Since this play was based purely on
a recovery and the future possibility of a split, we've decided
to move on in consideration of the market environment.  The
bright light at the end of the tunnel is for the BoD to announce
a stock dividend, but until then time and money can be better
used elsewhere.

AMCC $101.63 (+0.31) Since we added AMCC, we've seen some nice
spikes in the share price with rallying market conditions and
positive moves in the sector.  Although with the tech sector
once again getting sliced and diced, it's time to exit this
play.  Overall AMCC managed to sustain itself fairly well with
the market gyrations.  At the moment however it's perched
precariously near the 10-dma ($101.58), so if you have open
positions set the stops.  In a correction AMCC could stumble
as low as $85-$90 and you don't want to get hung out to dry.

JDSU $82.00 (-4.00) A market with little or no leadership makes
for the going a bit rough for investors wanting to participate.
The same may be said for JDSU, as the company announced this
week that Kevin Kalkhoven, its CEO and co-chairman was leaving.
He will be replaced by Jozef Straus, who has been the president
and COO.  Kalkhoven's departure was termed a "retirement".
Whether investors decided to sell on the news or JDSU simply
sold off in sympathy with the broad markets, we really aren't
sure.  As the weekend approached the selling picked up, which
not a good sign for our play.  For traders wanting to see if
JDSU will bounce or if the $80 area will once again provide
support feel free to hang on.  At this point under the current
market conditions we would be a bit suspicious of a bounce
that's not accompanied by strong volume and an overall change
in sentiment.  For now we will put JDSU back on the shelf,
and look for other tools to do the job.


CMRC $44.00 (-0.38) In light of the persistent NASDAQ weakness
the past 3 days, CMRC has had rock-solid support at $41.
Buying interest picked up today, posting the highest volume day
(actually above the ADV) since May 10th.  Unfortunately, this
is a put play and that is not the kind of action we are looking
for.  CMRC stubbornly refuses to revisit the lows posted in
mid-April, and with volume picking up, the stock looks like it
is forming a solid bottom.  We had a couple opportunities to
profit as CMRC rolled over near its 10-dma, but it looks like
the action has just about dried up.  We'll take this opportunity
to pack up our gear and go look for a new fishing hole.


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

Symbol - Stock          Splits/Date
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
KEM  - KEMET            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
CPN  - Calpine Corp.    2:1 06-08-00 ex-date 06-09
CAKE - Cheesecake Fact. 3:2 06-08-00 ex-date 06-09
VSH  - Vishay Intertech 3:2 06-09-00 ex-date 06-12
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
HC   _ Hanover Comp.    2:1 06-13-00 ex-date 06-14
RHI  - Robert Halg Intl 2:1 06-12-00 ex-date 06-13
RMBS - Rambus           4:1 06-14-00 ex-date 06-15
IFIN - Investors Fin.   2:1 06-15-00 ex-date 06-16
CYBE - CyberOptics      3:2 06-15-00 ex-date 06-16
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
RHB  - RehabCare Grp.   2:1 06-19-00 ex-date 06-20
MTZ  - MasTec Inc.      3:2 06-19-00 ex-date 06-20
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
NVDA - NVIDIA Corp.     2:1 06-26-00 ex-date 06-27
TQNT - TriQuint Semi.   2:1 07-11-00 ex-date 07-12
XETA - Xeta Corp        2:1 07-17-00 ex-date 07-18
TBL  - Timberland Comp. 2:1 07-17-00 ex-date 07-18
TIF  - Tiffany and Co.  2:1 07-20-00 ex-date 07-21
INTC - Intel Corp.      2:1 07-28-00 ex-date 07-31
AIG  - American Intl.   3:2 07-28-00 ex-date 07-31
POS  - Catalina Mktg.   3:1 08-17-00 ex-date 08-18

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


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

Call plays of the day:

SEPR - Sepracor Inc. $99.75 (-2.50)

See details in sector list

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


RMBS - Rambus Inc. $173.75 (-15.19)

See details in sector list

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

Put play of the day:

AZPN - Aspen Technology $22.38 (-6.81)

See details in sector list

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


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

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

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

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

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

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

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

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

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

Anything else is too slow!



The Option Investor Newsletter                      5-21-2000
Sunday                                                 3 of 5



CDWC - CDW Computer Centers $115.00 (-3.25)(+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

After battling to a virtual standstill for the first half of
the week, the bears finally extracted their pound of flesh from
the bulls.  Beginning in the last 10 minutes of Thursday's
session and continuing with Friday's open, CDWC quickly lost as
much as $9, giving us a nice entry point as the price solidified
near $109.  This is a solid support level and buyers ruled the
remainder of the day as the stock gradually recovered, closing
above the $112-114 support area.  In light of the continued
sell-off in the broad markets, the resurgence in CDWC is
encouraging and is likely due to anticipation of a potential
split announcement next Wednesday (see news below).  The strong
move over recent weeks is likely due to the impressive earnings
posted on April 24th.  Shining like a beacon in the night, CDWC
thrilled investors by posting its 27th consecutive quarter of
sequential sales growth, with 60% growth in net sales, and a
79% increase in net income.  That news has likely given the
stock all the fuel it can, and investors are now focusing on
the technical strength and the pending Shareholder meeting.
Given the turmoil in the broad markets, CDWC could very well
retest support before heading higher.  Once volume picks up
and confirms the bounce, feel free to jump aboard what has now
become a short-term play.

The good news is the Annual Shareholder Meeting on May 24th.
The bad news is there are only 3 days left to trade CDWC before
this event.  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=15 at $12.25 SL=9.00
BUY CALL JUN-115*DWQ-FC OI=35 at $ 9.88 SL=7.00
BUY CALL JUN-120 DWQ-FD OI=15 at $ 7.38 SL=5.00
BUY CALL JUL-120 DWQ-GD OI= 3 at $11.75 SL=8.75
BUY CALL JUL-125 DWQ-GE OI=18 at $ 9.63 SL=6.75

SELL PUT JUN-105 DWQ-RA OI=10 at $ 5.63 SL=7.75
(See risks of selling puts in play legend)

Picked on May 11th at $118.75     P/E = 44
Change since picked     -3.75     52-week high=$126.00
Analysts Ratings    4-2-0-0-0     52-week low =$ 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 =  337 K


PLXS - Plexus Corp $80.50 (-0.50)(+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.

We initiated coverage on PLXS last week in anticipation of a
momentum run coupled with its prospects as a split candidate.
After reporting stellar earnings and a solid forecast on April
18th, investors began taking more notice of PLXS.  The share
price got the boost it needed to climb over the historical
split-levels of $50-$55.  As it stands now, the company has 60
mln shares authorized and only 17.7 mln issued so there's plenty
for a stock dividend.  We're not sure when to expect a split
declaration, but if the uptrend continues there is a chance of
an announcement preceding the July 19th earnings release.  If
this turns out to be the case, we're in an ideal position for
a longer-term play.  But getting back to the present, PLXS
attention first came to our attention last Friday, May 12th,
when it toppled the prevailing resistance at $80.  The volume
levels had also been building that week with activity at two or
three times the ADV.  The analysts too were cheering for PLXS.
Three leading firms gave PLXS Buy or Strong buy ratings.  On
Monday it was a "Bulls Eye" with early morning entries off
firmer support of $75-$78 followed by heights reaching above the
next level of resistance ($90).  On Tuesday morning, PLXS set
another all-time high peaking at $91.50 on almost double the
normal volume.  The rest of the week PLXS experienced some back-
filling and on Friday, PLXS took a cut with rest of the tech
sector.  So what's a trader to do in this predicament?  Wait!
This may be somewhat disheartening for those with itchy trigger
fingers, but at this point PLXS is sitting at its old resistance
level, which also happens to be in the proximity of the 10-dma
($81.99).  If our split-candidate's momentum is going to re-
ignite it should bounce up from here and move back through the
supportive 5-dma ($85.84).  The uptrend should be backed by an
intensifying trading volume.  Recall that support is firmer at
$75-$78, but this would be a more risky entry in light of the
anxiety running amongst the tech investors.

No company news to report this week.

BUY CALL JUN-70 QUA-FN OI=303 at $17.25 SL=12.25
BUY CALL JUN-75*QUA-FO OI= 28 at $13.75 SL=10.25
BUY CALL JUN-80 QUA-FP OI= 35 at $ 7.88 SL= 5.75
BUY CALL JUN-85 QUA-FQ OI= 51 at $ 5.88 SL= 4.00

Picked on May 14th at   $81.00    P/E = 59
Change since picked      -0.50    52-week high=$91.50
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 =   262 K

RMBS - Rambus Inc. $173.75 (-15.19)(-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

We said the late day selling on Thursday didn't bode well for
RMBS going into Friday.  Unfortunately we were right.  RMBS
lost another 6.6% Friday and closed in red ink for the third
day in a row.  The lack of any solid buy orders keeps exerting
pressure on RMBS and the tech stocks.  Most of what we see
happening is not so much a problem with RMBS, as a lack of any
reason to buy in general.  The point here is with the overall
market sentiment in its present condition, the way we play the
markets from the long side changes.  Friday afternoon as Rambus
approached support near $170, the sellers took a break.   Traders
brave enough to take a stand, bid the price back up about $8.
That move did provide some folks with a decent day trade.  We are
by no means advocating that as the way to "play" the markets, as
trying to catch a falling knife, obviously can prove hazardous.
For traders with the time and resolve to approach the markets
in that manner, RMBS and others can provide profitable trading
opportunities.  For others it's a test of patience.  It will
take either company news, or improved market sentiment to turn
things around.  Intel was not much help this week, as it met
Wednesday with memory chip makers to discuss the Rambus's
controversial high-speed memory technology.  Intel has been a
big proponent of the memory.  However others have complained
about the cost and the difficulty of implementing the technology.
RMBS memory sells for up to three times the cost of traditional
memory.  Memory makers say they are charging what they need
to make a profit.  The chance of RMBS technology becoming the
standard any time soon, seems to be on hold as well.  At this
point the next level of support comes into play near $164,
followed up at $150.  A move back through $180 accompanied by
better volume, as well as another bounce off the $170 area may
provide a good entry point for new plays.  Also, RMBS has a
shareholder meeting on Tuesday to approve the 4:1 split.  This
should keep investors interested this week.

Analyst Drew Peck of SG Cowen, said today the Intel problem with
faulty chipsets may be just the "tip of the iceberg."  Peck said
it's likely that Intel will replace the faulty motherboards with
new ones containing Rambus memory, boosting the cost to Intel.

BUY CALL JUN-160 BYQ-FL OI= 42 at $31.25 SL=22.50
BUY CALL JUN-170 BYQ-FN OI= 48 at $24.50 SL=17.75
BUY CALL JUN-180*BYQ-FP OI=110 at $20.88 SL=15.00
BUY CALL AUG-175 BYQ-HO OI=167 at $40.75 SL=29.50

SELL PUT JUN-170 BYQ-RN OI= 71 at $18.38 SL=25.00
(See risks of selling puts in play legend)

Picked on May 14th at   $188.94    PE = N/A
Change since picked      -15.19    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 = 3.64 mln

SDLI - SDL Incorporated $196.00 (+22.00)

SDL's products power the transmission of data, voice and
Internet information over fiber optic networks to meet the needs
of telecommunications, DWDM, cable television and satellite
communications applications.  They enable customers to meet the
bandwidth needs of increasing Internet, data, video and voice
traffic by expanding their fiber optic communications networks
more quickly and efficiently than would be possible using
conventional electronic and optical technologies.  SDL's optical
products also serve a variety of non- communications applications,
including materials processing and printing.

The long and short-term reasons that make SDLI attractive are
certainly in place.  The market has had on ongoing love affair
with SDLI and many of its peers in the fiber-optics industry.
Until Friday, SDL had faired pretty well for the week.  Even
then it managed a gain of 12.6%.  The strong move up the ladder
on Wednesday came with over 6.1 million shares traded.  So what
makes SDL so special?  They are fast becoming a leader in their
industry, which includes the likes of JDS Uniphase, E-Tek
Dynamics and Corning.  None of these stocks are cheap by most
investors standards.  The ever increasing need for bandwidth
expansion, along with continued consolidation in the industry
seems to have kept SDLI and others at the top of investors lists.
Speaking of consolidation, last week SDLI announced it was
buying Photonic Integration Research for $1.8 billion in cash
and stock.  Company Chairman and CEO Don Scifres said, "We view
it as a strategic acquisition in a very rapidly growing market,
and very complimentary to our present business."  SDL plans to
use a silicon chip made by Photonic that allows for information
to be channeled through a single fiber.  The chip would replace
several components inside SDL products.  The following day no
less than six brokerages firms came out with Buy and Strong
Buy recommendations or reiterations on SDLI.  Since that time
SDLI has climbed from the $155 area to a high last Tuesday
at $217.  Although some technical indicators suggest a continued
pullback or consolidation for our new play, we believe this
one's worth keeping an eye on.  If the sell button continues
to be the one most frequently pushed early next week, and SDLI
moves lower, support can be found at $190, $185 and $171.  We
realize that sounds like a broad range for support, however
this one can obviously be a bit volatile.  A move back through
the $200 level with better than average volume could indicate
the up trend has resumed.  If we do get a bounce early in the
week, be prepared to take a profit.  Going into a holiday
weekend the liquidity will only get worse as the week

The recent strength in SDLI has also come on the heels better
than expected earnings and strong top-line growth.  This past
quarter SDI beat street estimates by 37%.  The company has
beat the analysts estimates and the so called "whisper" number
for some time now.  Either the company guidance needs to change
or the analysts need to sharpen their pencil, but the bottom
line still shows solid growth, which is what Wall Street seems
to be looking for.

BUY CALL JUN-180*QZL-FP OI=154 at $31.88 SL=23.00
BUY CALL JUN-190 QZL-FR OI= 96 at $26.00 SL=19.00
BUY CALL JUN-200 QZL-FT OI=388 at $21.63 SL=15.75
BUY CALL SEP-205 QZL-IA OI=247 at $43.88 SL=32.00

SELL PUT JUN-190 QZL-RR OI= 43 at $17.75 SL=24.50
(See risks of selling puts in play legend)

Picked on May 21st at   $196.00    P/E = 390
Change since picked       +0.00    52 week high=$244.75
Analysts Ratings     14-9-0-0-0    52 week low =$ 21.63
Last earnings 04/00   est= 0.16    actual= 0.22
Next earnings 07-19   est= 0.22    versus= 0.09
Average daily volume = 2.39 mln


SEBL - Siebel Systems $123.25 (-5.75)(-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.

Ouch!  That wasn't any fun.  Recall that SEBL closed Thursday
right at support of $130 from where we expected a rebound.
Unfortunately, it fell below the next level of support at $127
and continued down from there on Friday.  The technical picture
doesn't look so hot since that ascending wedge and breakout
pattern for which we'd been playing SEBL was destroyed on Friday.
So why keep it?  We're expecting a market rebound from the bottom
of the trading range on Monday or Tuesday.  Since this is a light
economic reporting week and SEBL has lately been one of the first
to rebound with the market, we think the upside potential is
pretty good.  Despite Friday's whacking, volume remained low
indicating buyers had gone home, but sellers weren't lining up
either.  The next level of support is $122.50 and we're not far
off.  $130 is the level of heavy resistance (again).  Consider
dips to $120 as a buying opportunity, but wait for the bounce.
We don't want to be in the position of holding SEBL if it falls
to $119, $118, etc. on continued market weakness.  For the more
conservative, you may want to wait for a move over $127 or even
a move back over $130 backed by strong volume before taking a
position.  Just remember that without volume, moves north of $130
probably aren't as sustainable.  On another note, SEBL is also
a split candidate since it has greatly exceeded its last August
split announcement price of roughly $70.  There is a shareholder
meeting scheduled for June 7th, from which an announcement could

Analysts were quiet on SEBL this week, but the Buy and Strong Buy
ratings from mid-April still hold along with $185 price targets.
In the news, SEBL announced the completion of the purchase of
OpenSite Technologies, a web-based pricing solutions provider
for roughly $500 mln.

BUY CALL JUN-120*SGW-FD OI=751 at $13.13 SL= 9.75
BUY CALL JUN-125 SGW-FE OI=572 at $10.50 SL= 7.50
BUY CALL JUN-130 SGW-FF OI=749 at $ 9.38 SL= 6.50
BUY CALL AUG-125 SGW-HE OI=227 at $19.00 SL=13.75
BUY CALL AUG-130 SGW-HF OI=806 at $17.00 SL=12.25

SELL PUT JUN-120 SGW-RD OI=129 at $ 9.13 SL=12.25
(See risks of selling puts in play legend)

Picked on May 14th at   $129.00    P/E = 200
Change since picked       -5.75    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 = 4.67 mln


AFFX - Affymetrix Inc. $154.50 (+14.28)(-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.

Range-bound is not normally a word we like to use in reference
to a call play, but it is hard to be unhappy with a $30+ range.
One look at the weekly change numbers above is all that is
necessary to see that opportunities for profit exist, even on
a stock that has only tacked on $4.41 since we picked it on
May 4th.  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.  The most
recent quarter saw a 115% year-over-year increase in revenues,
largely due to strong sales of the company's GeneChip probe
arrays.  In this case market volatility is combining with the
strength of AFFX to give us a large and eminently tradable
range.  The mid-week surge to the low $160's expanded the
envelope a bit, but $130-160 still describes AFFX's trading
range, leaving us with plenty of opportunities for profit.
Support firmed near $135 on Monday and then it was off to the
top of the range, where volume waned and profit-taking appeared.
After pulling back to near-term support at $148, the stock
bounced and moved as high as $159 before being pulled down by
the broad market weakness near the close.  Volume remains weak,
as there doesn't seem to be any conviction in either the bull
or bear camp.  Once volume returns, the move could be explosive,
but at this point there is no indication of whether it will be
up or down.  For now, take advantage of the range we have at
hand, and trade smart by taking small profits often.  Consider
new entries as AFFX bounces at support, and then exit when the
sellers reappear near resistance.

The newswires have been virtually silent, with the latest news
on AFFX dating all the way back to the first of May.  Gene Logic
Inc., a leading provider of genomic information, announced
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

BUY CALL JUN-150*FIQ-FZ OI=279 at $24.13 SL=18.00
BUY CALL JUN-155 FUE-FK OI=  0 at $21.25 SL=16.00
BUY CALL JUN-165 FUE-FM OI= 15 at $16.13 SL=11.50
BUY CALL AUG-160 FUE-HL OI= 11 at $32.88 SL=24.50
BUY CALL AUG-165 FUE-HM OI=  6 at $31.38 SL=23.50

SELL PUT JUN-130 FIQ-RF OI= 46 at $ 8.00 SL=10.75
(See risks of selling puts in play legend)

Picked on May 4th at    $150.09     P/E = N/A
Change since picked       +4.41     52-week high=$327.00
Analysts Ratings      2-6-2-0-0     52-week low =$ 34.00
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

SEPR - Sepracor Inc. $99.75 (-2.50)(-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.

Oh yes, the allure and luster of the almighty biotechs.  From an
everyday, main street perspective, the Biotech companies of the
21st century hold great promise.  The thought of extending
life-spans, the curing of incurable diseases, and the general
improvement of everyday life has the public anxiously awaiting
new products from the proverbial pipeline.  As for Wall Street,
the Biotechs have taken a bumpy, roller coaster ride.  Biotechs
shined brightly earlier in the year when many stocks sailed to
unimaginable heights.  Now that the volatility has subsided, Wall
Street has focused on the companies with a deep line of products,
a viable business model, and high potential for profit.  It just
so happens that SEPR meets the aforementioned criteria.  Which
could explain the stock's impressive showing over the past month.
Furthermore, while the NASDAQ has fallen nearly 35% from its
Spring high, the AMEX Biotech Index ($BTK) has managed to hold
on to its gains with stocks such as SEPR leading the way.
Despite the minimal profit taking seen late last week, SEPR
remains within its ascending channel.  We're looking for further
profit potential from SEPR noting the strong institutional
sponsorship and exciting developments in the biotech arena.
Within the next month, we can expect to see the first draft of
the recently completed human genome.  This Biotech breakthrough
could provide a catalyst for the sector.  Consider an entry into
the play at current levels if momentum returns and carries SEPR
back above the ever-important $100 level.  Or wait for SEPR to
clear resistance at $104 before entering the play.

An event that may bring momentum back to our SEPR play is the
company's upcoming Annual Shareholder Meeting, scheduled for May
24th.  Investors will vote on the proposal to increase the number
of authorized shares from 140 mln to 240 mln.  The announcement
of a split could add a little fuel to SEPR's fire.

BUY CALL JUN- 95 ERU-FS OI= 35 at $13.50 SL=10.00
BUY CALL JUN-100*ERU-FT OI=211 at $10.88 SL= 8.25
BUY CALL JUN-105 ERU-FA OI=166 at $ 9.13 SL= 6.25
BUY CALL JUL-105 ERU-GA OI=125 at $13.00 SL= 9.75

SELL PUT JUN- 95 ERU-RS OI=160 at $ 7.13 SL=10.00
(See risks of selling puts in play legend)

Picked on May 7th  at   $103.25    P/E = N/A
Change since picked       -3.50    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

PDLI - Protein Design Labs, Inc. $132.63 (+13.19)

PDLI develops humanized (part mouse) and human monoclonal
antibodies to prevent and treat various disease conditions and
gene-based molecule compounds to treat microbial infections.
Zenapax, an antibody created by PDLI and licensed exclusively to
Hoffmann-La Roche, is approved in many countries including the
U.S. and most European nations for the prevention of rejection
episodes in kidney transplants.  PDLI receives royalties on
Roche's Zenapax sales.  From fundamental patents, PDL has granted
nonexclusive licenses to more than 20 companies that either have
independently developed humanized antibodies or have collaborated
with PDL to humanize their antibodies.

Volatile play ahead!  For those who saw the introduction of this
play on Thursday, please forgive the repeat.  However, it's worth
noting that PDLI earns revenues from the issuance of licenses to
its patents and currently receives royalties from sales of two
independently developed and marketed antibodies: Synagis, an
antibody developed by MedImmune, Inc. for the prevention of a
specific respiratory virus in infants, and Herceptin, an antibody
developed by Genentech for the treatment of breast cancer.
That's a lot to remember, so let's make it simple.  In the
Biotech sector, PDLI is about as volatile as they get, ranging
from $52 on the April 4th sell-off to $152 on Thursday, then back
as low as $128 yesterday.  The play is based on a high volume
breakout of the ascending wedge formed by higher lows and
resistance at $125 last Tuesday.  Even so, closing support at
$130 held while PDLI closed just gnat's behind short of the 5-dma
of $133.  The 10-dma is providing backup support at $125.  We
think dips below $130 (but not lower than $125) are buyable.
We'd like to see volume over the ADV return though.  We'll chalk
up Friday's volume shortfall to...well, Friday.  One thing to
be careful of on PDLI is the $2.50-$3.00 spreads in the option
prices.  Roughly translated, that means the stock needs to move
up about $6 just to break even on an ATM strike.  It also means
that the first $5 loss in the stock will translate to roughly a
$5 loss in the option price, so be careful.  Again, skillful
volatility lovers only.

The big news on PDLI this week was their announcement that AHP
exercised its option to market an existing antibody humanization
process in Japan and Asia will provide real revenue (currently at
$42.2 mln ttm) to the income stream.  CIBC World Markets also
reiterated their Strong Buy rating with a price target of $309.

BUY CALL JUN-120*PQI-FU OI=501 at $25.88 SL=17.75
BUY CALL JUN-130 PQI-FW OI= 10 at $20.63 SL=15.00
BUY CALL JUN-140 PQI-FZ OI=346 at $16.88 SL=12.00
BUY CALL AUG-130 PQI-HW OI= 74 at $31.25 SL=21.50
BUY CALL AUG-140 PQI-HZ OI= 36 at $27.50 SL=19.50

SELL PUT JUN-100 PQI-RT OI= 22 at $ 4.13 SL= 6.25
(See risks of selling puts in play legend)

Picked on May 18th at  $131.03     P/E = N/A
Change since picked      +1.60     52-week high=$338.00
Analysts Ratings     4-2-1-0-0     52-week low =$ 17.19
Last earnings 04/00  est=-0.04     actual= 0.04 surprise=200%
Next earnings 07-17  est= 0.02     versus=-0.14
Average Daily Volume = 1.2 mln

DNA - Genentech $126.00 (-3.00)(+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.

A look at the chart really doesn't tell the whole story about
what's going on inside this play.  DNA lost 2.3% this week.  The
lack of liquidity and buyers in the markets have provided a rough
road for many stocks at the NYSE and the Nasdaq.  Genentech did
find a few more bears lurking in the bushes at the opening bell
on Friday.  After dropping to support near $121 early in the
session, buyers re-entered, bidding the price back over $131 late
in the day, with strong volume behind the move.  The last 15
minutes traders took profits going into the weekend with Genentech
closing down $0.38 for the day.  The significance here is that
very few stocks saw that kind of buying interest at all on Friday.
According to traders on the floor not only was there a lack of buy
orders, but very few even wanting to bid on stocks.  This is a
definite plus for our play.  Analysts and investors will be paying
close attention to Genentech and the biotech stocks, as the Annual
meeting of the American Society of Clinical Oncology got underway
on Saturday.  Genentech will be presenting research on vascular
endothelial growth factor.  Investors will focus particular
attention to Phase II data on DNA's antiangiogenesis antibody
anti-VEGF in treating relapsed metatstatic breast cancer patients.
Those patients have cancer that has spread in the body.  So how
do we approach this play?  The cancer conference goes through
Tuesday.  Any positive news to come out of the meeting could
ignite a fire under Genentech, even if the broad market sentiment
remains negative.  If little news is presented, then a pullback
may be in order since the recent buying seems to have been
spurred by anticipation of an important announcement that
could come out of this weekend's conference.  DNA closed smack dab
on support at $126.  Resistance is overhead near $135, however if
buyers show up in numbers, that will be the least of our worries.

Genentech will also present data on Rituxan, another antibody,
that's used to treat non-Hodgkin's lymphoma this weekend.
Rituxan was developed by IDEC Pharmaceuticals.  Several analysts
said they expect no "major breakthroughs" this weekend, however
with more therapies than ever before, a number of new approaches
may bring more hope for patients suffering from the disease.

BUY CALL JUN-120 DNA-FD OI=  54 at $14.88 SL=10.75
BUY CALL JUN-125 DNA-FE OI= 237 at $12.13 SL= 9.00
BUY CALL JUN-130*DNA-FF OI= 321 at $ 9.88 SL= 6.75
BUY CALL JUN-140 DNA-FH OI=2809 at $ 6.38 SL= 4.25
BUY CALL SEP-125 DNA-IE OI= 416 at $24.63 SL=17.75

SELL PUT JUN-120 DNA-RD OI=1017 at $ 7.63 SL=10.50
(See risks of selling puts in play legend)

Picked on May 14th at   $129.00    PE = N/A
Change since picked       -3.00    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

IMCL - ImClone Systems $96.75 (+4.38)

ImClone Systems Incorporated is advancing oncology care by
developing a portfolio of targeted biologic treatments, which
address the medical needs of patients with a variety of cancers.
The Company's three programs include growth factor blockers,
cancer vaccines and anti-angiogenesis therapeutics. ImClone's
strategy is to become a fully integrated biopharmaceutical
company, taking its development programs from the research
stage to the market. ImClone Systems is headquartered in
New York City with manufacturing facilities in Somerville,
New Jersey.

There's an old adage that says, "Hope Springs Eternal."  For
cancer patients and investors that is exactly what they "hope"
will come out of the 36th Annual Meeting of the American Society
of Clinical Oncology.  The conference began Saturday and runs
through Tuesday in New Orleans.  Data on the latest advances in
clinical cancer research will be presented at the conference,
which is expected to highlight breakthroughs in breast, lung,
kidney and stomach cancers.  ImClone is expected to present
compelling data on human trials of their experimental cancer
treatment IMC225.  IMC225 could win approval from the Food and
Drug Administration as early as next year, according to company
officials.  Jim McCamant, an analyst with the Medical Technology
Stock Letter, said "The ImClone data is a big deal."  "If they
do the job they are going to try and do, people will see that
it is some of the most important work in cancer, treating cancer
at the molecular level of the disease."  As for our play, IMCL
moved through an important technical level on Thursday.  Friday,
there was no follow-through buying as traders took profits,
shaving 4.6% off the price of IMCL stock.  The selling picked
up in the last half-hour of the day which doesn't bode well for
Monday.  Although our new play gave back much of Thursday's gain
on Friday, IMCL is still above its 10-dma at $93.53, with many
of the technical indicators still pointing higher.  However, as
we said earlier, this play really isn't based on the technical
picture, rather the anticipation of positive news, or events
coming out of the cancer conference, which may draw attention
to IMCL and the biotech sector.  If the bears try have their
way with Imclone, stand back and be patient.  Support sits near
$96 and $92.  Traders may begin to buy on further advances,
however it may take a breakout over $104, with strong volume,
to signal a green light.

ImClone reported earnings last Monday, and unfortunately the
results came in well below analysts estimates.  However, traders
have a short memory as far as earnings when potential cancer
breakthroughs are on the line, which may be the case for IMCL.
While we choose to take this and other plays one day at a
time, chat rooms and several analyst suggests IMCL could be on
track to challenge its old high near $171.

BUY CALL JUN- 90 QCI-FR OI=182 at $16.63 SL=12.00
BUY CALL JUN- 95*QCI-FS OI=349 at $14.25 SL=10.25
BUY CALL JUN-100 QCI-FT OI=392 at $12.13 SL= 9.25
BUY CALL AUG-100 QCI-HT OI=327 at $20.75 SL=15.00

SELL PUT JUN- 90 QCI-RR OI=358 at $ 8.38 SL=11.00
(See risks of selling puts in play legend)

Picked on May 18th at $101.50    P/E = N/A
Change since picked     -4.75    52-week high=$171.98
Analysts Ratings    2-6-0-0-0    52-week low =$ 16.25
Last earnings 05/00 est=-0.32    actual=-0.43
Next earnings 08-15 est= 0.46    versus=-0.36
Average Daily Volume =  912 K


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The Option Investor Newsletter                      5-21-2000
Sunday                                                 4 of 5



UNH - United Healthcare Group $76.38 (+5.00)

United Healthcare owns and manages a broad spectrum of health
care plans and services across in the United States and
internationally.  This global enterprise provides employers
products and resources to plan and administer employee benefit
programs.  They operate distinct business segments:  United
Healthcare manages HMO, point-of-service, and preferred provider
plans; Ovations is Medicare and Medicaid options provider;
Uniprise handles health plans for large companies; and
Specialized Care offers the specialized plans.

Unlike many of its counterparts, UNH didn't get put in traction
or suffer the typical post-earnings infirmity after reporting
earlier this month on May 4th.  United Healthcare achieved
record revenues and came in at $0.95 p/s, up 32% from same
quarter last year, easily overshooting the $0.90 consensus
estimate.  Salomon Smith Barney applauded the company's success
with an upgrade to Buy from Outperform.  Chairman and CEO
William McGuire, M.D. noted that the "strong results reflect
the continuing growth and momentum evident in each of our
businesses, as well as our attention to continuous productivity
improvement and capital structure".  His future outlook for UNH
was extremely positive.  He added that they "now project full
year EPS growth will approach 25 percent in 2000".  The positive
business outlook and upgrade clearly jump-started the stock's
momentum.  Coming off its lows of $60, UNH has steadily and
consistently climbed to new heights.  Standing alone it's a
notable feat that UNH bucked all the market downdrafts of the
past couple weeks; especially when you consider the wild
gyrations. Yet we didn't consider it a call play until UNH
made a move through April's formidable resistance of $70.
Definitive confirmation came on Tuesday as UNH stepped into the
limelight and set an all-time high at $77.50.  By Thursday, it
improved the record with a late-day crest to $78.56.  UNH is
managing to hold these higher share prices and with a sustaining
market there's little doubt UNH has the potential to power
higher.  But as many traders have found out in these turbulent
markets, there's never any guarantees.  While all arrows point
to more profits in the short-term, be patient.  Look for upward
moves off the current level and 5-dma ($75.75) before opening
positions.  If you're HIGH-RISK oriented and more aggressive,
then dips to the 10-dma ($72.16) may be your entry choice.  Keep
in mind old resistance is at $70 and a return to this level
should raise the red flags.  This is purely a momentum play.

On Tuesday the analyst firm, Chase H&Q, initiated new coverage
on UNH.  They started it with a Strong Buy rating and issued a
$92 price target.  In other news this week, UnitedHealth Group
jointly introduced with Cole Managed Vision, the managed care
division of Cole Corporation, new vision care services for AARP
members that provide significant savings.  Also in the company
news arena, it crossed the wire that Jeannine Rivet, CEO of UNH,
filed to sell 44,430 shares of her company stock, worth
approximately $3 mln.

BUY CALL JUN-65 UNH-FM OI= 570 at $12.38 SL=9.25
BUY CALL JUN-70*UNH-FN OI=1676 at $ 8.38 SL=5.75
BUY CALL JUN-75 UNH-FO OI= 847 at $ 5.00 SL=3.00
BUY CALL JUN-80 UNH-FP OI=  80 at $ 2.75 SL=1.25

Picked on May 18th at    $77.50    P/E = 22
Change since picked       -1.13    52-week high=$78.56
Analysts Ratings     14-5-2-0-0    52-week low =$39.38
Last earnings 03/00   est= 0.90    actual= 0.95
Next earnings 08-03   est= 0.98    versus= 0.76
Average Daily Volume = 1.03 mln

ABT - Abbott Laboratories $41.56 (+4.56)

Abbott Laboratories is one the leading healthcare products
makers in the US.  It operates five business segments:
Pharmaceuticals, Diagnostics, Hospitals, Ross products, and its
International division.  More than 40% of sales is derived from
the pharmaceuticals and hospital products and includes the drug
Norvir, which treats HIV.  Some well-known brands like Similac
(infant formula) and Ensure (nutrition supplement) can be found
on most supermarket shelves.

The drug stocks are experiencing a healthy breakout and ABT is
a top pick among investors.  You can visually confirm this
sentiment by taking a look at a one-week chart.  The bullish
breakout is unmistakable.  On Thursday ABT advanced a
significant 5.2%, or $2.00 leading the Amex Pharmaceutical Index
($DRG) to its own gain of nearly 1%.  The sector's momentum
continued to propel ABT higher still on Friday as the appetite
for old economy stocks became more voracious.  The trading
activity was robust too with levels exceeding the ADV by 45% to
70%.  ABT's convincing progress through historical resistance
of $39 and $40 further promotes a solid outlook over the short-
term.  While this level may develop as a bouncing platform for
entries into this momentum play on a pullback, we should see
near-term support establish itself higher.  Conservatively the
first line of opposition to be tackled is at $42, then it's the
52-week record of $48.50 set in September 1999.  For now confirm
the trend and pick your entries carefully.  It's important to
pay attention to the drug sector's overall direction as well
as ABT's individual behavior.  If you're looking for some
added protection, ABT it's a good candidate for stop losses
since it doesn't experience wide intraday swings like the
high-flying Internets.

FDA approval is always good news for the drugmaker and its
investors.  On Monday Abbott Laboratories and SangStat, a
Transplant company, announced the FDA approved Gengraf capsules,
an immunosuppressant for the prevention of organ rejection in
kidney, liver and heart transplants.  The drug was also given an
AB rating, which means the product is therapeutically equivalent
to or interchangeable with a reference drug.  In this case, the
competing drug is Neoral marketed by Novartis.  Sales of this
class of drug are about $480 mln annually.  It's expected the
lower-cost of Abbott's version should result in a hearty piece
of that lucrative pie.  In other news, Abbott Laboratories held
its Annual Shareholders' Meeting on April 28th.  Chairman and
CEO Miles D. White took the opportunity to review the company's
business environment and future direction, as well as re-
emphasize Abbott's commitment to science.

BUY CALL JUN-35 ABT-FG OI=  56 at $7.00 SL=5.00
BUY CALL JUN-40*ABT-FH OI=1657 at $2.94 SL=1.50
BUY CALL JUN-45 ABT-FI OI= 659 at $0.75 SL=0.00 High Risk!
BUY CALL AUG-40 ABT-HH OI=3260 at $4.50 SL=2.75
BUY CALL AUG-45 ABT-HI OI=1120 at $2.38 SL=1.25

Picked on May 21st at    $41.56    P/E = 26
Change since picked       +0.00    52-week high=$48.50
Analysts Ratings     10-8-5-0-0    52-week low =$29.25
Last earnings 03/00   est= 0.44    actual= 0.44
Next earnings 07-10   est= 0.44    versus= 0.42
Average Daily Volume = 3.75 mln


ANDW - Andrew Corporation $32.88 (+3.88)

Andrew Corporation is a global supplier of communications
systems equipment and services.  Major markets are wireless
communications which includes cellular, government and military
end use, antennas and complete earth stations for satellite
communication systems, personal communications services,
electronic radar systems, communication reconnaissance systems,
connectivity devices for use in communication systems, and
related ancillary items and services, and common carrier.

After last week's strong gains, ANDW was due for some
consolidation.  To its credit, the stock held support at $32,
which is encouraging in light of the continued selling
throughout the market.  Volume continues to hold near double
the daily average and most of the volume is coming on upward
price moves.  Carving up their own little slice of the
broadband pie, ANDW really began getting investors' attention
with their December 1999 acquisition of Conifer Corporation,
a leading manufacturer of MMDS (Multichannel Multipoint
Distribution Service).  While the bulk of the tech sector
corrected during the month of April, ANDW held up well,
repeatedly finding support at the 100-dma.  The current move
really got under way a week ago when the stock punched through
resistance at $30 on strong volume.  Since then, strong volume
has continued to propel the stock to new highs, and Thursday's
intraday peak at $35.06 has defined the next resistance level.
Support is coming from the ascending 5-dma ($32.88), which is
precisely where the stock closed on Friday.  As the NASDAQ
continues to search for strength, ANDW could see more selling,
and we would look at a pullback to the $30 support level as a
great entry point.  ANDW's momentum is being fueled by strong
buying volume, which will be critical to the stock moving higher
from here.  Continued buying interest that pushes the price
through resistance would be a good trigger for more conservative
players to jump into the play.

On May 9th, ANDW received a contract from World Wide Wireless
Communication (WLGSE) to supply infrastructure equipment for
a broadband, high-speed Internet access network in Lima, Peru.
The services offered will be cellular two-way wireless systems
for high-speed, broadband access to the Internet and other
networked data services.  According to WLGSE's CEO, this
relationship will enable a quick build-out of the Lima market
as the company pursues its aggressive penetration of the Latin
American market.  In this case, it looks like what is good for
WLGSE is good for ANDW.

BUY CALL JUN-30 AQN-FF OI= 540 at $4.25 SL=2.50
BUY CALL JUN-35 AQN-FG OI= 136 at $1.69 SL=0.75
BUY CALL JUL-30*AQN-GF OI=2786 at $5.13 SL=3.00
BUY CALL JUL-35 AQN-GG OI=1721 at $2.88 SL=1.50

Picked on May 18th at    $34.69     P/E = 46
Change Since Picked       -1.81     52-week high=35.06
Analysts Ratings      2-2-3-0-0     52-week low =11.19
Last Earnings 04/00   est= 0.16     actual= 0.21
Next Earnings 07-20   est= 0.23     versus= 0.18
Average Daily Volume = 1.20 mln

FAST - Fastenal Company $66.88 (-2.50)(+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.

FAST has one of the highest relative strength ratings in the
retail sector.  The company has an unparalleled earnings growth
history.  In fact, FAST is on track to grow earnings over 25% in
the next five years.  Despite the threat of rising interest rates,
the stock has managed to climb higher since early March.  All the
while, the broader market has headed south.  While the long-term
outlook remains rosy for FAST, the short-term prospects are still
worth considering.  As traders continue to rotate from the highly
valued tech sector into stocks with strong fundamentals, FAST
stands to benefit.  But, not even high earnings growth nor
impressive relative strength could keep FAST afloat Friday.
The last three days we have seen the retail sector take a hit due
to fear or rising interest rates.  Many stocks in the group slid
into the weekend as the S&P Retail Index lost 1.1%.  Although
FAST did stumble a bit late last week, we're looking for the
stock to continue its climb higher.  Over the past two months,
FAST has dipped below its 10-dma on three occasions, last Friday
marks the fourth.  What's more, every time FAST has fallen
beneath that level it has smartly rebounded to continue climbing
higher.  We're looking for the same pattern to repeat.  Also
worth noting, every time FAST edged below its 10-day the volume
has all but disappeared.  We've seen volume drastically dry-up in
the past three trading sessions.  In fact, traders exchanged a
mere 100 K shares last Friday, versus an ADV of 366 K.  Watch
for a quick rebound from current levels, or wait for FAST to
move back above its 10-dma, currently at $68.  Watch the volume
closely to confirm that the buyer's have returned from their
strike and FAST has resumed its ascent.

In the face of fears over rising interest rates, investors have
turned bullish on the retail sector in the past month.  Several
stocks such as KSS, WMT, and RAD, along with our FAST play, have
managed substantial gains since the beginning of May.  Watch the
action in the retail group to confirm a rally in FAST.

BUY CALL JUN-65*FQA-FM OI= 18 at $5.50 SL=3.50
BUY CALL JUN-70 FQA-FN OI=180 at $3.13 SL=1.50
BUY CALL JUN-75 FQA-FO OI= 11 at $1.94 SL=1.00 High Risk!
BUY CALL AUG-70 FQA-HN OI= 50 at $5.88 SL=4.00

Picked on May  14th at $69.38    P/E = 36
Change since picked     -2.50    52-week high=$73.31
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 =  366 K


By Mark Phillips

Seems like we've been here before.  With the NASDAQ approaching
3300 for the fourth time in six weeks, we desperately need to
see volume pick up.  Unfortunately, there doesn't seem to be a
catalyst we can point to; April earnings are over, and even
getting past the Fed meeting failed to provide an upside bias.
Continued inflation/interest rate rhetoric is keeping the buyers
in check and as a result, the trading range on all the major
indices is getting narrower.  The continued pressure is keeping
even our strongest plays from moving higher, and we are seeing
major support levels being challenged.  CSCO is approaching its
200-dma, QCOM violated its 200-dma and is right at major support
dating back to November,1999.  Selecting the right play is more
critical than ever; investors are being rewarded for waiting for
the right entry point, and punished for chasing stocks higher.
LEAPS are more forgiving of less-than-perfect entries than
short-term options, indiscriminately buying and hoping is still
a recipe for capital depreciation.  Except for Monday, when the
markets rallied ahead of the FOMC meeting, the VIX is gradually
trending higher, closing the week at 28.77.  In last year's
stock market, I would say we are approaching a good entry point
(based on the VIX), but with the lack of consistent strength,
it is becoming increasingly difficult to pick individual entry
points based on market-wide indicators.  We could very well be
range-bound until the next earnings cycle gives the bulls a
reason to buy, so pick your plays AND your entry points very
carefully.  Don't get emotionally attached to your positions,
and if they move against you, cut your losses and wait for a
better play.  Cash is still king, and we want to be able to
take advantage of the move when sentiment improves.

Administrative Note: Many of you have asked about the addition
of 2003 LEAPS and when they will be available.  According to
CBOE, they should be listed starting on Monday.  That's the
easy part.  As the next year's LEAPS get added, the front year
(2001) LEAPS become regular call options and the exchange
changes the symbols.  Unfortunately, this is not as smooth a
process as we might hope.  The symbol change began last Monday,
and you will see the new symbols reflected in SOME of our
Current Plays.  Even though trading has ceased on the old
symbols, not all of our plays have been issued new symbols yet.
As a result, the prices listed for NT, CY, NSM, and VSTR 2001
LEAPS do not reflect Friday's closing price and you will notice
some anomalies in the Current Price and Return columns of the
Current Plays.  This situation should be rectified by early
next week and we will correct the Play List by next week.

Current Plays


EMC    11/07/99  JAN-2001 $ 80  EMB-AP   $15.38   $49.88   224.32%
                 JAN-2002 $ 90  WUE-AR   $19.00   $52.00   173.68%
IBM    11/07/99  JAN-2001 $100  IBM-AT   $13.63   $20.13    47.69%
                 JAN-2002 $110  WIB-AB   $16.50   $26.13    58.36%
CSCO   11/14/99  JAN-2001 $ 40  CYQ-AH   $ 9.56   $19.38   102.72%
                 JAN-2002 $ 45  WIV-AI   $11.00   $22.88   108.00%
NT     11/28/99  JAN-2001 $37.5 ZOO-AU   $11.13   $23.13   107.82%
                 JAN-2002 $37.5 WNT-AU   $15.13   $26.25    73.50%
VOD    12/05/99  JAN-2001 $ 50  VOD-AJ   $10.75   $ 3.63   -66.23%
                 JAN-2002 $ 50  WHV-AJ   $15.00   $ 7.75   -48.33%
TXN    12/12/99  JAN-2001 $110  TNZ-AB   $22.25   $45.50   104.49%
                 JAN-2002 $120  WGZ-AD   $28.50   $54.75    92.11%
SUNW   12/19/99  JAN-2001 $ 80  SUX-AP   $17.63   $15.88   - 9.93%
                 JAN-2002 $ 90  WJX-AR   $22.00   $23.13     5.14%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $18.00    97.15%
                 JAN-2002 $ 40  WSY-AH   $12.63   $21.63    71.26%
ERICY  01/30/00  JAN-2001 $16.3 RQC-AO   $ 4.94   $ 5.75    16.40%
                 JAN-2002 $16.3 WRY-AO   $ 6.75   $ 7.88    16.74%
NSM    02/27/00  JAN-2001 $ 70  ZUN-AN   $18.50   $12.75   -31.08%
                 JAN-2002 $ 70  WUN-AN   $24.25   $21.38   -11.84%
AOL    03/12/00  JAN-2001 $ 60  AOO-AL   $14.00   $ 8.25   -41.07%
                 JAN-2002 $ 65  WAN-AM   $18.63   $13.63   -26.84%
AXP    03/12/00  JAN-2001 $43.3 AXP-AP   $ 7.25   $13.38    84.55%
                 JAN-2002 $46.6 WXP-AQ   $ 9.33   $14.75    58.09%
WM     03/19/00  JAN-2001 $ 25  WM -AE   $ 5.00   $ 5.13     2.60%
                 JAN-2002 $ 30  WWI-AF   $ 5.38   $ 5.38     0.00%
QCOM   03/26/00  JAN-2001 $150  AUA-AJ   $39.25   $ 7.88   -79.92%
                 JAN-2002 $160  XQO-AL   $52.88   $18.25   -65.49%
AMD    04/16/00  JAN-2001 $ 70  AMD-AN   $17.50   $29.00    65.71%
                 JAN-2002 $ 70  WVV-AN   $26.00   $40.38    55.31%
CMGI   04/16/00  JAN-2001 $ 50  ZB -AJ   $21.50   $18.25   -15.12%
                 JAN-2002 $ 55  WCK-AK   $27.75   $26.88   - 3.14%
JDSU   04/16/00  JAN-2001 $ 80  XJU-AP   $27.50   $26.00   - 5.45%
                 JAN-2002 $ 80  YJU-AP   $39.63   $39.50   - 0.33%
VSTR   04/16/00  JAN-2001 $ 90  ZTB-AR   $23.88   $43.50    82.16%
                 JAN-2002 $ 90  WWP-AR   $35.00   $49.88    42.51%
YHOO   4/30/00   JAN-2001 $140  YMM-AH   $32.13   $23.38   -27.23%
                 JAN-2002 $140  WYZ-AH   $46.38   $41.50   -10.52%
MOT    5/14/00   JAN-2001 $100  MOT-AT   $19.75   $15.50   -21.52%
                 JAN-2002 $110  WMA-AB   $28.63   $24.13   -15.72%

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

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

Leap of the Week

JDSU - JDS Uniphase $82.00

Even industry leaders such as JDSU have been caught in the
market downdraft, but the future is bright for our optical
hero.  Sitting right in the middle of the rapidly growing
fiber-optic communications, the company provides many of the
components necessary for the construction of the fully optical
network.  JDSU is well positioned to profit from this area and
the broad market weakness is serving up a delicious entry point
for vigilant investors.  After hitting a low of $73.13 on April
17th, the stock has struggled to break out higher.  The $80
level is emerging as very strong support, as buyers continue
to buy whenever this level is reached.  The 200-dma, down at
$73.50 has not been touched, and combined with the pattern of
higher lows, JDSU looks strong relative to the rest of the tech
sector.  The highs are also getting lower and the stock looks
like it will break out of the pennant formation within the next
week.  Consider a bounce from support to be a good entry point,
and then look for confirmation of the move as JDSU breaks
through its upper trendline.

BUY CALL JAN-2001 $90.00 XJU-AR at $22.50
BUY LEAP JAN-2002 $90.00 YJU-AR at $36.75
BUY LEAP JAN-2003 $90.00 ------ at $--.--  **Wait for Strike**

New Plays

NOK - Nokia $49.88

In this weak and apathetic market, relative strength is the
name of the game.  NOK is the de-facto leader in wireless
handsets, and their market dominance combined with strong
growth and fat profit margins are providing the prescription
for what ails investors.  Even in the face of weakness in the
European markets, followed by more carnage in the Telecom
sector on Friday (prompted by the Justice Department's
opposition to the WCOM/FON merger), NOK is still holding near
its 100-dma ($50.31).  The stock hasn't spent more than a day
below this level since the NASDAQ weakness began in early March.
The current bearish sentiment on the sector could serve up a
nice entry point if NOK tests long-term support at $45.  The
volume on Friday's decline is a bit disconcerting, but we think
this is due to sector weakness, rather than a reflection of
sentiment towards NOK.  We don't want to try to catch a falling
knife, but a bounce (confirmed by increasing volume, of course)
near $45 looks like a good target to set your sights on.  This
may be a bit optimistic though, and we would also consider new
positions if buyers show up on Monday and push our wireless hero
back above the 100-dma.  At the risk of repeating myself,
remember that volume is paramount; if it isn't confirming the
price movement, the conviction isn't there.

BUY CALL JAN-2001 $50.00 NZY-AJ at $10.25
BUY LEAP JAN-2002 $50.00 IWX-AJ at $17.25
BUY LEAP JAN-2003 $55.00 ------ at $--.--  **Wait for Strike**


VOD $36.31 What was looking like a great entry point for our
VOD play last week, turned into an ugly head fake as the
Telecom sector took a beating.  Downward revenue revisions by
AT&T and the Justice Department's stated intention to block the
WCOM/FON merger served to sour investor sentiment towards the
whole sector.  A week ago, VOD seemed to have good support near
$40, but continued weakness (both here and in Europe) caused
the stock to plunge through this level with barely a whimper.
Nothing fundamental has changed with the company and the Verizon
venture looks as bright as ever.  There is no sense arguing with
market sentiment though, so we are hanging up on VOD this


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.


AZPN - Aspen Technology $22.38 (-6.81)

Aspen Technology builds computer systems that assist process
manufacturers in designing and automating their plant
operations.  Among the companies using AZPN's software are
Chevron, Dow Chemical, and Proctor & Gamble.  Not only does
the company's software find more efficient methods of
production and management, but it also lets manufacturers
explore "what if" scenarios without reassembling their
facility.  Receiving nearly 60% of its revenues from
consulting and other services, AZPN has operations in more
than 20 countries and more than half of all sales come from
outside the U.S.

The downward slide continues with every attempted rally swatted
down by the bears.  AZPN shareholders haven't had much good
news to crow about since the company posted strong earnings in
late January.  After a push to $55.38 in early February, the
volume faded and so did the share price, thrusting AZPN into
a descending channel from which it seems unable to escape.
Strong April earnings drove the last visit to the top of the
channel, but the excitement faded quickly, renewing the decline
as AZPN failed to penetrate the declining 30-dma (then at
$35.94).  The broad market weakness persisted on Friday,
without a hint of the upward bias normally afforded by options
expiration, and AZPN went along for the ride.  The Fed
continues to rattle the inflation/interest rate saber, and
investor indecision is the result.  Friday's action produced
a Long-legged Doji candlestick pattern, graphically showing
the indecision as AZPN lost $0.81.  The bulls played their
hand early, pushing the price right up to the first level of
resistance at $24.75.  Their inability to challenge even the
200-dma ($26.31) gave us our entry point and allowed sellers
to dominate the remainder of the day.  The late-day bounce from
$21.75 couldn't hide the fact that there was no conviction in
the early mini-rally, and we were rewarded with a low of $21.38.
As long as volume remains robust, consider a violation of
Friday's low as an opportunity to enter the play.  With the
broad market likely to remain range-bound in the near term, use
any failed intraday rallies as your signal to grab an even
better entry point.

BUY PUT JUN-30 ZQP-RF OI= 0 at $ 8.63 SL=6.00 Wait for OI!
BUY PUT JUN-25*ZQP-RE OI=40 at $ 5.13 SL=3.00

Average Daily Volume = 294 K

OPTV - OpenTV Corp. $51.81 (-12.81)

OpenTV develops software for interactive digital television
systems.  With its software, one can use a remote control to surf
TV channels, access interactive services (such as shopping,
banking, and e-mail), and even control camera angles and instant
replays during sporting events.  The company offers integration,
application development, and other services.  Corporate investors
include Sun Microsystems, America Online, News Corp, Motorola,
and Time Warner.  OpenTV plans to buy Internet software pioneer
Spyglass (SPYG).

After breaking away from its top head-and-shoulders formation
early last week, shares of OPTV have taken a turn for the worse.
The stock has sharply sold-off amid cynical views by investors
over the pending SPYG merger.  Many investors feel that SPYG
will drain cash from the operations of OPTV.  Essentially, SPYG
is seen as a cash drain opposed to a cash cow for shareholders of
OPTV.  Investors have called on management of OPTV to call off
the merger.  But it appears that OPTV has no plans of canceling
the merger, so we're looking for the selling to go on.  And
individual traders may not be the only people selling OPTV.
Insiders are now allowed to sell their recently unlocked shares.
OPTV's IPO lock-up period recently expired which may pave the way
for further downside.  With few bids meeting the supply of new
stock, OPTV does not yet appear to have stabilized from its
recent sell-off.  As a result of the insider selling, we see
further downside from here.  Turning our attention to the chart,
after enjoying a dead-cat bounce in mid-April, OPTV has fallen
into a descending channel that has carried the stock lower for
nearly a month now.  After Friday's 10% drop, OPTV is sitting
just above its last major support level at $50.  Ironically, that
level was the intra-day low during OPTV's IPO last Winter.  If
the stock falls below support at $50, OPTV could very well retest
its 52-week low of $41.25, traced in mid-April.  OPTV has very
little support below its current levels.  You can consider an
entry at current levels, or wait for support to fail as a sign
that the selling is in full swing.  You might also watch for
heavy volume to return to confirm a failure of support.

BUY PUT JUN-55*OUZ-RK OI=45 at $10.75 SL=7.50
BUY PUT JUN-50 OUZ-RJ OI= 0 at $ 7.63 SL=5.25 Wait for OI!
BUY PUT JUN-45 OUZ-RI OI=22 at $ 5.25 SL=3.25

Average Daily Volume = 534 K

NTLI - NTL Inc. $54.75 (-18.63)

NTL is the UK's #3 cable and TV operator.  The company recently
purchased the residential cable business of Cable & Wireless
Communications.  The acquisition is expected to challenge phone
giant British Telecom by using cable and fiber-optic networks to
provide local and long-distance telephone service and Internet
access.  The company also offers leased lines, frame relay, and
other corporate data services.  NTL will expand in Europe with
the purchase of Cablecom, a Switzerland cable provider.

What happens when a company can't meet customer demand?  Those
customers find a firm that can meet their needs.  Oh yea mighty
capitalism, and its ability to differentiate between winners and
losers.  Unfortunately, NTLI is approaching the latter group.
But fortunately for us, the masters of the investing universe
invented puts.  NTLI faces the economic quandary of supply versus
demand.  The explosive growth of the Internet in Europe has
customers signing up for Web access at a furious pace.  NTLI is
facing capacity issues as the company underestimated the demand
for Internet access.  The problem that NTLI is presented with is
similar to what AOL faced several years ago.  But, unlike AOL,
NTLI has competition in the European market, aka - alternatives
for unhappy customers.  There are infinite ISPs in Europe that
are offering a far superior service to what NTLI brings to the
table.  For example, an ISP like Comet offers a competitive
service that is far more reliable than what NTLI offers.  As if
the capacity concerns weren't enough, investors have had to
digest a slew of acquisitions recently made by NTLI.  Last week
NTLI announced it had acquired Swisscom, and Internet directory
firm.  In a wicked twist of fate, Swisscom announced earnings
last Friday, and told analysts to expect widening losses.  The
news, combined with a weak market, sent NTLI plummeting past
support at $55 Friday.  NTLI is now set to retest its 52-week low
of $51.06.  Below that level is nothing but empty space.  Feel
free to enter the play at current levels as volume remains
healthy.  Otherwise, wait for NTLI to fall past its 52-week
low and into darkness.

BUY PUT JUN-60*IQS-RL OI=110 at $6.63 SL=4.00
BUY PUT JUN-55 IQS-RK OI=100 at $4.00 SL=2.25

Average Daily Volume = 1.88 mln

INCY - Incyte Pharmaceuticals, Inc. $57.75 (-11.00)

Quick version: Incyte provides information about genes, related
data management software, verified copies of genes and related
reagents and services to pharmaceutical and biotechnology
researchers.  Details: INCY is a leading provider of an
integrated platform of genomic technologies designed to aid in
the understanding of the molecular basis of disease.  Incyte
develops and markets genomic databases, genomic data management
software, microarray-based gene expression services, and related
reagents and services.  These products and services assist
pharmaceutical and biotechnology researchers with all phases of
drug discovery and development including gene discovery,
understanding disease pathways, identifying new disease targets
and the discovery and correlation of gene sequence variation to

While Biotech remains generally a hot sector, herd instinct gives
it momentum in both directions.  In the case of INCY, the
direction is down and the play has become technical since INCY
violated what was previously solid support at $65, then again at
$60.  It doesn't help that INCY announced May 9th that they
would provide genomic sequencing free to the public.  It doesn't
mean INCY will give away their research to anyone for the asking,
but that they will provide raw data from the National Institute
of Health Human Genome Sequencing Project free of charge.  We
noted on Thursday to "consider waiting for a breakdown under $60
and for the volume to increase, or look for a rollover from a
dead cat bounce say at previous support at $65."  The breakdown
happened right from the open taking INCY all the way to $56,
which really didn't provide us an entry.  However the rollover
following its weakness once it had moved back to $60 would likely
have made a good entry.  Further weakness in the last 15 minutes
makes the Monday picture not so rosy either.  What to do?
Consider an entry if INCY fails at $60 again or wait for a clear
descent below $57, its April 4th low.  It could find support
there, but if it doesn't the next mild support is at $52, then
(gulp!) $43.  Here's the land mine.  If the market reverses
course with solid gains on big volume this week, biotech is going
to heat up and INCY will likely rise in sympathy at best, or
catch fire with daytraders at worst.  Either will be bad news
for this play, so keep your stops in place if you can't watch.

BUY PUT JUN-65 IPQ-RM OI= 17 at $13.25 SL=10.00 low OI
BUY PUT JUN-60*IPQ-RL OI=171 at $10.00 SL= 7.00
BUY PUT JUN-55 IPQ-RK OI=  3 at $ 7.13 SL= 5.00 low OI

Average Daily Volume = 1.40 mln

FDRY - Foundry Networks Inc. $65.50 (-2.63)(-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

Friday, the bears woke up and continued selling shares of FDRY.
Compared to what we've seen recently, they came back in pretty
substantial numbers as well.  FDRY fell another 6% with over
1.1 mln shares changing hands.  While our play did make a low of
$61.31 during the day, buyers bid the price back up to close at
$65.50.  Friday's move definitely suggests the downtrend is
intact, however, the closing area was support for Foundry from
mid-October, shortly after its IPO.  Are we giving up on our
play?  Nope, just trying to make you aware of an important
support level in the past.  FDRY is obviously facing the same
thing as many other issues at the Nasdaq and NYSE, a lack of
buyers.  Unless you're a long-term investor and feel like FDRY
is a great buy a current levels, there really is no reason to
jump head first into the company's stock.  For now, that's the
scenario FDRY must deal with.  After the selling began in early
March, every bounce since the first part of April has been met by
more sellers, attempting to recoup part of their losses.  The
company press release on Thursday did little to bring buyers back
to the market.  FDRY announced that a report published by the
Dell'Oro Group, a "leading network market research firm," said the
company has captured a 53.5% market share worldwide based on the
total number of Web switch ports shipped.  The company CEO said
"the report clearly establishes Foundry as the market leader
in the Web switching market."  That may be true, but for now
it didn't bring buyers to the table.  Until the company can
come up with something for investors to hang their hat on, or
the overall market sentiment changes, our put play will continue
to flourish.  Although its over seven months back, support
shows up at $65 and near $59.  A bounce back up to the 5 or
10-dma at $69.19 and $72.16 respectively, followed by more
weakness could provide good entry into a new play.

BUY PUT JUN-75 OUJ-RO OI=12 at $12.63 SL=9.50
BUY PUT JUN-70*OUJ-RN OI=60 at $11.00 SL=8.25
BUY PUT JUN-65 OUJ-RM OI=54 at $ 8.13 SL=5.88

Average daily volume = 1.35 mln

HLIT - Harmonic Lightwaves $46.13 (-17.75)

Harmonic designs, manufactures and markets digital and fiber
optic systems for delivering video, voice and data over cable,
satellite and wireless networks.  The company is headquartered
in Sunnyvale, CA where it also operates an R&D center and a
manufacturing facility.  It maintains several sales and support
centers worldwide including its subsidiaries in Israel and
the UK.

Investors have big concerns that the recent $1.74 bln
acquisition of DiviCom will be a drag on Harmonics revenue
growth.  DiviCom, formerly a unit of C-Cube Microsystems, makes
equipment used for video compression by satellite-TV companies
like Hughes Electronics and EchoStar Communications.  The deal
was completed on May 3rd, although it was day of the Fed meeting
that HLIT went through the shredder.  On Tuesday, traders
unloaded shares of HLIT at a phenomenal rate.  The trading
volume was more than 10 times the norm.  The share price dropped
a whopping $10.88, or 16.5% in one session and HLIT closed at
$54.88.  The following sessions have left HLIT significantly
lower.  By Thursday it shed another $3.38 and slithered under a
bottom support of $50.  The falling NASDAQ has helped out this
play tremendously.  The additional 6.1% drop in Friday's trading
placed HLIT in a price range dating back to the summer of 1999.
While this isn't the stock's 52-week low, which is much further
down at $23.25, we must pay heed to the ever-looming question of
"where is the bottom?"  Essentially this play is being driven by
the investors' fears and concerns of Harmonic's future value.
The uncertainty in the market is also factor that could help
pressure HLIT lower in the near-term.  It'll be important to
look for more negative moves off Friday's close to confirm the

BUY PUT JUN-50*LOQ-RJ OI=565 at $ 9.00 SL=6.25
BUY PUT JUN-45 LOQ-RI OI=212 at $ 5.63 SL=3.50

Average Daily Volume = 1.83 mln

ANAD - Anadigics Inc. $44.25 (-14.00)

Anadigics produces radio-frequency (RF) integrated circuits that
allow more functions on a single circuit.  The company's products
are used to transmit signals in a variety of high-volume
communications applications, including wireless and fiber-optic
telecommunications, cable television, and satellite TV systems.
The company sells direct to customers such as Ericsson, Motorola,
and Palm.  Most of its sales come from customers outside North

After Friday's sell-off, ANAD is teetering on the brink.  That
is, the brink of collapse.  Like most tech stocks, ANAD peaked in
late March and subsequently slid into the abyss.  However, unlike
most tech stocks, ANAD's sell-off is a little more disconcerting,
and the outlook for the company is turning dim.  The uncertainty
in ANAD can be linked to ERICY.  The Swiss cell phone giant is
ANAD's largest customer.  ERICY held their analyst meeting last
Thursday and lowered expectations for revenues and earnings.
ERICY told analysts that the handset business will fall short of
expectations.  This is relevant to our play since ANAD supplies
ERICY with RF circuit solutions, to be implemented into handsets.
Another major problem hindering ANAD is the weakening of the Euro
versus the good old American Greenback.  Most of ANAD's sales
come from European customers, as their buying power decreases,
ANAD's revenues potentially suffer.  So, ANAD not only faces a
harsh environment for highly valued tech stocks, it also faces
fundamental issues with operations.  The uncertainty surrounding
ANAD is clearly seen in the chart.  Ahead of the ERICY analyst
meeting last Thursday, ANAD fell sharply lower on above average
volume.  And the selling spilled over into Friday's trading as
ANAD sank lower on nearly double its ADV.  The stock now teeters
above critical support at $40.  Feel free to enter the play if
ANAD continues to fall from its current levels.  If you're
looking to minimize risk, wait for ANAD to fall past $40 on heavy
volume.  We should see a new series of contracts added to ANAD's
option chain in the coming days.  Wait for OI to build in the
newly minted JUN options before entering the play.

BUY PUT JUN-50 DQA-RJ OI= 0 at $9.13 SL=6.25 Wait for OI!
BUY PUT JUL-45*DQA-SI OI=13 at $7.88 SL=5.75
BUY PUT JUL-40 UAU-SH OI=30 at $5.00 SL=3.00

Average Daily Volume = 593 K

NTOP - Net2Phone $31.13 (-9.13)

Net2Phone provides its 325,000+ customers with the ability to
make phones call through the Internet using personal computers,
faxes or telephones at a much lower cost than wireless or hard-
line calling.   The company is the #1 Internet telephone carrier
and is expanding internationally through an alliance with AT&T
and Sprint.  The long-distance company, IDT, still retains 48%
of NTOP.

Does Internet access really have protection from taxation?
That's the big question buzzing around the Street.  From one
viewpoint, The House of Representatives did pass a bill on
Tuesday to permanently ban the Federal Communications Commission
from taxing Internet service providers on a per-minute basis.
However, the bill failed to bar the FCC from imposing so-called
access fees on ISPs, which in the long run means consumers could
still pay a tax on Internet access someday.  This is bad news
for Internet Telecoms like NTOP.  So far these Internet Telecoms
have avoided charging customers these fees, and thus, have a
big competitive advantage over traditional and local phone
companies.  As a result, NTOP is no longer riding high on the
hog.  Investors swiftly cut the share price down this week.  The
selling pressure pushed NTOP below $40!  The significance of
this price level is simple.  Since the IPO in July 1999 and its
rapid rise from the record low of $15 to the all-time high of
$92.38 in August, NTOP has never seen a close on the underside
of $40 until this week.  This technical breakdown is not
comforting to investors who are already jittery from the recent
tech lashings.  Look for downward moves off the 5 and 10-dmas at
$36.08 and $38.58, respectively, as potential entry points.

BUY PUT JUN-45*UPT-RI OI=503 at $11.00 SL=8.25
BUY PUT JUN-40 UPT-RH OI= 45 at $10.00 SL=7.00

Average Daily Volume = 575 K

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The Option Investor Newsletter                      5-21-2000
Sunday                                                 5 of 5


Trading Tactics: Things that seem easy rarely are...

The primary goal for most option traders is correctly timing the
future movement of an underlying stock or index.  Unfortunately,
the majority of new participants fail to realize there is also a
need for accurate position analysis.  Once the decision to buy an
option has been made, the average investor will have difficulty
determining which series to buy or sell.  The ability to choose
the correct option is one skill that many traders are completely
lacking.  The general public buys options without paying much
attention to Risk/Reward, Fair Value and Implied Volatility.  As
a result, they purchase overpriced options with little potential
for profit and often lose money even when they are correct about
the underlying issue's price direction.

To be a successful trader, you must be able to select favorable
option positions based on option pricing components and the time
horizon of your particular market opinion.  Using call options as
an example, a seasoned speculator might purchase positions with
only days or hours remaining until expiration.  In contrast, an
investor that uses fundamental analysis to make decisions would
generally buy longer-term options or LEAPS.  The majority of
traders fall somewhere in between, using technical analysis and
market trends to generate entry and exit signals for the purchase
of intermediate-term option positions.

After determining the correct time frame, you must still decide
which option to purchase.  In most cases, your results will be
much better overall if you buy in or at-the-money options.  If
the stock moves up at all, you will most likely profit whereas
an out-of-the money option might fall in value if that movement
is only moderate or takes some time to occur.  Another concern
is the cost of time.  It's important to know that the highest
theoretical time value occurs in the at-the-money option and it
decreases substantially the farther in the money we go.  With an
in-the-money option, you simply spend less for time.  Another
advantage of using an in-the-money option is that it has a high
delta.  Delta measures the rate of change in an option's price
compared to a one point movement in the underlying stock.  That
means an in-the-money option will closely follow the movement of
the underlying issue, so even a small favorable change in the
stock price will produce a profit.  Some traders try to a avoid
in-the-money options because they are expensive but the truth is,
the risk/reward ratio is better than most other positions.

One of the most difficult concepts in option pricing is Implied
Volatility.  Many traders are completely unaware of the effects
of this pricing component on their position.  They continually
overpay for options that are in demand only to watch and wonder
as the premiums quickly fade.  The inflated prices are usually
based on short-term potential such as mergers and acquisitions,
earnings reports or split announcements.  Buying options in this
environment can be quite difficult to master and should be left
only to the most experienced traders.  Market-makers actually
thrive on the disparities created by this effect, selling-off
volatility for low risk, short-term gains.  The technique they
focus on is quite simple, selling an option for more than it is
worth during the anticipation of an event and buying it back at
a much cheaper price after the hype subsides.

The great thing about option trading is that most concepts are
mathematical and we have plenty of software and pricing models
to help us choose the right positions.  Next week we will review
some of the techniques that experienced traders use to select
the correct option positions.

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return!

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

SPGLA   7.81   7.47   MAY   7.50  1.19   $  0.85  13.9%
PETC   13.31  19.25   MAY  12.50  1.44  *$  0.63  11.5%
CEGE   18.69  19.88   MAY  15.00  4.50  *$  0.81   8.3%
CEGE   21.50  19.88   MAY  17.50  4.63  *$  0.63   8.1%
PLCE   21.00  17.63   MAY  17.50  4.13  *$  0.63   8.1%
WGR    18.75  21.00   MAY  17.50  1.88  *$  0.63   8.1%
ANET   12.38  11.50   MAY  10.00  2.88  *$  0.50   7.6%
GENE   20.13  16.13   MAY  15.00  5.63  *$  0.50   7.5%
SPLH   12.06  12.00   MAY  10.00  2.69  *$  0.63   7.3%
MATK   15.50  18.81   MAY  12.50  4.13  *$  1.13   7.2%
PSIX   23.19  26.22   MAY  15.00  8.88  *$  0.69   7.0%
WWFE   15.63  16.88   MAY  12.50  3.88  *$  0.75   6.9%
MXTR   11.94  11.25   MAY  10.00  2.38  *$  0.44   6.7%
WLV    16.06  17.06   MAY  15.00  1.50  *$  0.44   6.6%
ALSC   20.38  20.00   MAY  17.50  3.63  *$  0.75   6.5%
UGLY    7.50   7.69   MAY   7.50  0.50  *$  0.50   6.2%
BBBY   39.06  36.00   MAY  32.50  8.25  *$  1.69   6.0%
ANET   10.56  11.50   MAY   7.50  3.63  *$  0.57   6.0%
NCNT   17.00  12.19   MAY  12.50  5.13   $  0.32   5.9%
PSSI    9.13   9.50   MAY   7.50  2.19  *$  0.56   5.8%
IM     18.88  19.94   MAY  17.50  2.25  *$  0.87   5.7%
MATK   16.63  18.81   MAY  12.50  4.75  *$  0.62   5.7%
BWEB   23.44  17.31   MAY  15.00  9.00  *$  0.56   5.6%
APC    35.81  51.25   MAY  35.00  2.88  *$  2.07   5.5%
LPNT   16.38  20.63   MAY  15.00  2.25  *$  0.87   5.4%
CAR    20.81  19.88   MAY  20.00  1.94   $  1.01   4.7%
MRL    26.88  27.50   MAY  25.00  3.25  *$  1.37   4.2%
ACF    17.63  17.63   MAY  15.00  3.13  *$  0.50   3.7%
PIR    10.50   9.88   MAY  10.00  1.00   $  0.38   3.5%
BSX    21.75  25.94   MAY  20.00  2.50  *$  0.75   3.4%
DGX    44.50  61.63   MAY  40.00  6.00  *$  1.50   3.4%
NUHC   22.13  16.88   MAY  17.50  6.00   $  0.75   2.9%
ADEX   19.56  16.38   MAY  17.50  2.44   $ -0.74   0.0%

CENT   11.81  10.88   JUN  10.00  2.50  *$  0.69   6.4%
DRIV   18.81  16.00   JUN  15.00  4.75  *$  0.94   5.8%
SMRT    8.53   8.25   JUN   7.50  1.50  *$  0.47   5.8%
CAIR   22.88  21.94   JUN  17.50  6.38  *$  1.00   5.3%
BEAM   12.44  12.13   JUN  10.00  3.00  *$  0.56   5.2%
ANET   12.94  11.50   JUN  12.50  1.13   $ -0.31   0.0%

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


Spiegel (SPGLA) closed just below the sold strike but with the
current bearish technical picture, selling the stock on any rally
may be prudent.  Netcentives (NCNT) appeared to test the April
low successfully, but the overall market conditions are not
helping the recovery.  Rolling down to the June $10 (or even the
$7.50) strike may be a viable alternative for investors that wish
to own the stock at a lower cost basis.  Carter-Wallace (CAR) has
given back almost all of its recent gains.  Strong support exists
at $18.00 and the July $17.50 strike closed on Friday with a bid
of $3.00.  The lowest available strike in June is at $20.  Pier 1
Imports (PIR) is moving towards technical support and its 150 dma
but unfortunately, there isn't much reward for rolling down to
the June $7.50 strike.  Nu Horizons Electronics (NUHC) is also a
candidate for an early exit next week.  If it breaks through the
neckline of the forming head-n-shoulders top, the next support
level would be near $12.  Ade Corp. (ADEX) broke through its 150
dma, suggesting a test of the April low is likely.  No news on
the reason for Act Networks' (ANET) drop on Friday...any ideas?

Positions Closed:

Cole National (CNJ).


Sequenced by Company

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

AAS    22.00  JUN  20.00  AAS FD  2.88  20   19.13   28     5.0%
BCC    36.44  JUN  35.00  BCC FG  3.38  611  33.06   28     6.4%
CCCG   13.50  JUN  10.00  KDQ FB  4.00  0     9.50   28     5.7%
FHS    11.38  JUN  10.00  FHS FB  2.13  1785  9.25   28     8.8%
LPNT   20.63  JUN  17.50  PUN FW  3.75  0    16.88   28     4.0%
PSSI    9.50  JUN   7.50  PYQ FU  2.63  326   6.87   28    10.0%
WGR    21.00  JUN  17.50  WGR FW  4.13  144  16.87   28     4.1%

Sequenced by Return

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

PSSI    9.50  JUN   7.50  PYQ FU  2.63  326   6.87   28    10.0%
FHS    11.38  JUN  10.00  FHS FB  2.13  1785  9.25   28     8.8%
BCC    36.44  JUN  35.00  BCC FG  3.38  611  33.06   28     6.4%
CCCG   13.50  JUN  10.00  KDQ FB  4.00  0     9.50   28     5.7%
AAS    22.00  JUN  20.00  AAS FD  2.88  20   19.13   28     5.0%
WGR    21.00  JUN  17.50  WGR FW  4.13  144  16.87   28     4.1%
LPNT   20.63  JUN  17.50  PUN FW  3.75  0    16.88   28     4.0%

Company Descriptions

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

AAS - AmeriSource $22.00  *** Bullish Technicals! ***

AmeriSource, with over $10 billion in operating revenue, is one
of the nation's leading, full-service wholesale distributors of
pharmaceutical products and related healthcare services.  The
Company serves its base of 21,000 customers accounts through a
national network of 24 strategically located distribution
facilities.  AmeriSource is the industry's largest provider of
pharmaceuticals to the acute care/institutional market.  Last
quarter, AmeriSource reported record results with revenue, net
income, and EPS rising 20% on average.  The company appears
to operate in a solid industry with good fundamentals, and
is well-positioned in the healthcare supply channel.  AAS plans
on forming an Internet initiative with for other companies and
is expanding its buying group alliances.  This week, Banc of
America upgraded AmeriSource to a "strong buy" rating.  The
resulting bullish move has almost taken out the January high.

JUN 20.00 AAS FD LB=2.88 OI=20 CB=19.13 DE=28 MR=5.0%

Chart =
BCC - Boise Cascade $36.44  *** Merger Speculation ***

Boise Cascade is a distributor of office products and building
materials, and an integrated manufacturer and distributor of
paper and wood products with domestic and overseas operations.
They produce and market office and computer supplies, various
products that are used for construction, packaging papers,
newsprint, and many other products.  What we have here is
a great recipe:  add positive earnings, an upgrade by Paine
Webber, a completed acquisition, a touch of positive comments
from analysts, and a pinch of merger speculation in the Paper
Industry.  The result is a favorable entry point with a cost
basis below recent technical support.

JUN 35.00 BCC FG LB=3.38 OI=611 CB=33.06 DE=28 MR=6.4%

Chart =
CCCG - CCC Information Services $13.50  *** Hammer Bottom! ***

CCC Information Services Group, formerly InfoVest Corporation,
is a supplier of automobile claims, information and processing
services and claims management software and other communication
products.  CCC Information's services enable automobile insurance
companies, automobile dealers and repair facilities to improve
efficiency, manage costs and increase consumer satisfaction in
the management of automobile claims and restorations.  CCCG is
organized into three divisions: Insurance Services, Automotive
Services and Consumer Processing Services.  Earnings are in and
the reports were favorable with record revenues and a bullish
forecast.  CCC is one of three companies creating an independent
auto parts marketplace called ChoiceParts - a virtual auto parts
warehouse that will allow auto repair and body shops to locate
and order car parts via the Internet.  CCC's weekly chart shows
a hammer, suggesting a bottom is in place, and the strong support
near $10 makes this a favorable speculation play.

JUN 10.00 KDQ FB LB=4.00 OI=0 CB=9.50 DE=28 MR=5.7%

Chart =
FHS - Foundation Health Systems  $11.38  *** Break-out! ***

Foundation Health is a managed health care company.  FHS offers
a wide range of healthcare services.  They also own six health
and life insurance companies, and provide health benefits to
over 5.8 million individuals through group, individual, Medicare
risk, Medicaid and CHAMPUS programs.  Early this month, Foundation
reported that its first-quarter operating profits rose 22 percent,
meeting Wall Street estimates, driven by higher pricing for health
plans and lower costs.  The health care sector is showing signs
of strength and gaining attention.  This week, Foundation had
coverage initiated at a "buy" rating by Chase H&Q.  The stock has
now closed above the January high and has completed a bullish
"double-bottom" formation.

JUN 10.00 FHS FB LB=2.13 OI=1785 CB=9.25 DE=28 MR=8.8%

Chart =
LPNT - LifePoint Hospitals  $20.63  *** Still Climbing! ***

LifePoint Hospitals is comprised of 23 general, acute care
hospitals and related health care entities.  In 21 of its 23
markets, LifePoint's hospital is the only hospital in the
community.  All but seven of LifePoint's hospitals are located
in states that have certificate of need laws, which laws may have
the effect of limiting the development of competing facilities.
With increasing revenue, LifePoint is drawing the attention of
several analysts resulting in upgrades and new coverage.  The
Rural Hospital sector is strong and LifePoint's chart is a case
in point.  LifePoint continues its uptrend on strong volume and
the weakness of the last few days may offer an entry point.  We
remain conservative and favor a cost basis closer to support.

JUN 17.50 PUN FW LB=3.75 OI=0 CB=16.88 DE=28 MR=4.0%

Chart =
PSSI - PSS World Medical $9.50  *** Buyout Candidate? ***

PSS World Medical is a specialty marketer and distributor of
medical products to physicians, alternate-site imaging centers,
long-term care providers, home care providers, and hospitals
through 111 service centers to customers in all 50 states and
three European countries. Back in January, PSS announced that
it has engaged DLJ Securities to advise its Board in considering
various strategic alternatives to maximize shareholder value,
including alternatives which may involve the entire Company or
its separate operating divisions.  This was after PSS missed
earnings and was subsequently downgraded.  The stock dropped
nearly a third and had been languishing around $6.75.  Until
April.  No news and a 50% rise in price?  PSS said they
wouldn't comment further on the strategic alternative process
"until it is completed."  Is the tape telling us something
that the company isn't saying?  The message boards are alive
with rumors and speculation...and the price keeps climbing.

JUN 7.50 PYQ FU LB=2.63 OI=326 CB=6.87 DE=28 MR=10.0%

Chart =
WGR - Western Gas Resources $21.00  *** Still a Natural Gas ***

Western Gas Resources is an independent gas gatherer and processor,
producer, transporter and energy marketer providing a full range of
services to its customers from the wellhead to the sales delivery
point.  The Company designs, constructs, owns and operates natural
gas gathering, processing and treating facilities in the major gas
producing basins of the United States.   The company is in position
to reap a rich bounty as the fundamentals for natural gas prices
strengthen.  This quarter's earnings were quite favorable with
revenues increasing 32% over the first quarter last year as the
company posted an EPS of $0.32 vs. a loss of $0.15.  There was no
technical pause after earnings as WGR continued its uptrend and
closed at a new 52-week high.  We favor a cost basis near technical

JUN 17.50 WGR FW LB=4.13 OI=144 CB=16.87 DE=28 MR=4.1%

Chart =


By Matt Russ

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

ADBE   109.56   100   AEQ-RT    6.38   2739    23%     105
AFFX   154.50   140   FIQ-RH   11.63   3863    30%     145
AMCC   101.63    90   AEX-RR    7.63   2541    30%      95
BRCD   110.19   100   UBF-RT    7.50   2755    27%     100
BRCM   139.63   125   RDW-RE    7.13   3491    20%     125
CHKP   161.38   145   YKE-RI    9.63   4035    24%     150
CIEN   116.50   105   EUQ-RA    7.63   2913    26%     110
CMTN    76.00    70   KUA-RN    4.88   1900    26%      75
CREE   122.13   115   CQR-RC    8.13   3053    27%     115
DITC    98.38    90   DUI-RR    6.88   2460    28%      95
EBAY   118.50   110   QXB-RB    8.38   2963    28%     110
ETEK   171.50   160   FNY-RL   10.13   4288    24%     160
GLW    182.44   180   GRJ-RP   10.88   4561    24%     180
HGSI    85.75    75   HHA-RO    6.00   2144    28%      78
HWP    126.19   120   HWP-RD    5.50   3155    17%     120
IMCL    96.75    90   QCI-RR    8.38   2419    35%      91
INKT   116.13   110   KYQ-RB    8.00   2903    28%     113
ITWO    98.06    85   QYJ-RQ    5.75   2452    23%      85
JDSU    82.44    80   XXZ-RP    7.13   2061    35%      80
NEWP   128.63   120   QNW-RZ   11.00   3216    34%     120
NSOL   131.63   125   JNV-RE    8.38   3291    25%     125
PDLI   132.63   120   PQI-RU   10.25   3316    31%     125
PMCS   147.00   135   SZI-RG    9.13   3675    25%     137
RFMD   102.50    90   RFZ-RR    5.38   2563    21%      90
RMBS   173.75   155   BYQ-RK   11.63   4344    27%     155
SCMR    80.88    70   SMZ-RN    4.88   2022    24%      70
SDLI   196.00   185   QZL-RQ   15.50   4900    32%     185
SEBL   123.25   120   SGW-RD    8.88   3081    29%     120
SSTI    89.00    85   SSU-RQ    6.13   2225    28%      84
TER     84.75    80   TER-RP    5.38   2119    25%      82
VRSN   125.00   125   XVR-RE   12.50   3125    40%     125
VRTS   102.13    95   VUQ-RW    6.00   2553    23%      97
VSTR   103.31   100   UVT-RT    5.25   2583    20%      99


AGGRESSIVE   SELL PUT JUN-125 PQI-RV at $13.63 = 41%
MODERATE     SELL PUT JUN-120 PQI-RU at $10.25 = 31%


AGGRESSIVE   SELL PUT JUN-190 QZL-RR at $17.75 = 36%
MODERATE     SELL PUT JUN-185 QZL-RQ at $15.50 = 32%


AGGRESSIVE   SELL PUT JUN-95 QCI-RS at $10.88 = 45%
MODERATE     SELL PUT JUN-90 QCI-RR at $ 8.38 = 35%

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


Success Basics: Form With Flexibility...

One of the most common obstacles to developing an objective stance
occurs when we adopt a preconceived idea for market direction and
character.  This approach is quite different from evaluating
several scenarios for future outcomes based on a specific set of
circumstances.  The latter practice implies a more flexible method
of analysis and almost always produces better results.  The
crucial fallacy with any preconceived opinion is that we are apt
to block out of the evidence that leads to a different or
conflicting conclusion.  Unfortunately, by the time we begin to
question our original (often erroneous) belief the market has
usually moved against us, inflicting a considerable dose of
financial suffering.  As such, a trader who holds to an inflexible
viewpoint; a bias inconsistent with the desired state of
impartiality is likely doomed to failure.

The nature of humans is such that we dislike uncertainty.  Stocks
are a unique test of that concept because their market values can
generally be viewed as the sum total of the attitudes, hopes and
fears of each shareholder.  Investors attempt to justify their
opinion of an issue's future movement through a number of various
means but it is difficult to eliminate the original bias because
we are all influenced by the events of the market and the media
that reports its daily activities.  The best way to approach an
investment is to study proven indicators that react in a known
fashion to technical or fundamental changes in the instrument or
its underlying market.  Careful review of its historical patterns
will help establish a set of objective criteria, making it less
likely for a trader to try to conform the market to his opinion.
As an example, value investors may base their decisions on a
specific set of fundamental earnings and revenue criteria that
have proven to be profitable.  In contrast, technicians might use
a specific buy or sell system based on historical price, character
and volume activity.

Obviously there are a plethora of favorable techniques but the
underlying goal is to utilize a well established philosophy or
trading approach to view the position on an objective basis.  Only
then can one make an unbiased decision free of impulses based more
on external criteria rather than key impartial evidence.

Good Luck!

                      *** WARNING ***

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


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

CENT   11.50  10.88   MAY  10.00  0.50  *$  0.50  30.2%
VRTL   19.13  15.38   MAY  12.50  0.44  *$  0.44  22.4%
BBSW   16.94  17.38   MAY  12.50  0.31  *$  0.31  18.2%
ACF    17.63  17.63   MAY  15.00  0.75  *$  0.75  15.8%
HYSL   29.13  25.25   MAY  22.50  0.44  *$  0.44  15.2%
TSEM   22.06  19.69   MAY  15.00  0.50  *$  0.50  14.7%
TBI    19.00  21.00   MAY  17.50  0.44  *$  0.44  14.6%
CCCG   13.88  13.50   MAY  10.00  0.31  *$  0.31  14.5%
DRTE   22.88  25.69   MAY  17.50  0.50  *$  0.50  14.3%
ANLY    9.81   9.63   MAY   7.50  0.38  *$  0.38  14.1%
PPDI   15.56  18.50   MAY  12.50  0.56  *$  0.56  13.1%
RAMP   20.00  17.88   MAY  15.00  0.38  *$  0.38  12.6%
OCR    14.31  17.19   MAY  12.50  0.50  *$  0.50  12.3%
EXCA   35.50  32.75   MAY  25.00  0.63  *$  0.63  11.8%
LPNT   16.38  20.63   MAY  15.00  0.81  *$  0.81  11.8%
LYNX   20.88  22.00   MAY  12.50  0.50  *$  0.50  11.6%
PAIR   21.69  24.63   MAY  17.50  0.50  *$  0.50  10.9%
ELNT   40.50  40.00   MAY  32.50  0.63  *$  0.63  10.3%
KR     19.06  20.06   MAY  17.50  0.75  *$  0.75   9.6%
CLPA   34.00  27.19   MAY  22.50  0.31  *$  0.31   9.5%
NTPA   41.75  36.88   MAY  30.00  0.56  *$  0.56   9.1%
RDC    26.69  30.50   MAY  22.50  0.63  *$  0.63   7.7%
CQ     19.75  23.63   MAY  15.00  0.38  *$  0.38   7.6%
SUPX   30.06  35.13   MAY  17.50  0.69  *$  0.69   7.5%
TOS    32.06  32.50   MAY  30.00  0.75  *$  0.75   7.1%
CYBX   23.81  18.69   MAY  17.50  0.50  *$  0.50   6.9%
VTS    28.06  27.63   MAY  20.00  0.56  *$  0.56   6.6%
BBBY   39.06  36.00   MAY  27.50  0.50  *$  0.50   6.5%
VANS   17.06  13.88   MAY  15.00  0.56   $ -0.56   0.0%
AFWY   20.06  15.50   MAY  17.50  0.38   $ -1.62   0.0%

ADEX   19.56  16.38   JUN  15.00  0.69  *$  0.69  13.0%
CLPA   29.38  27.19   JUN  15.00  0.63  *$  0.63   8.4%
WLV    16.94  17.06   JUN  15.00  0.50  *$  0.50   8.1%
VRTL   17.00  15.38   JUN  10.00  0.31  *$  0.31   7.3%
XTO    17.69  18.06   JUN  15.00  0.38  *$  0.38   6.9%
TBI    20.81  21.00   JUN  17.50  0.38  *$  0.38   6.1%
TRMB   36.00  37.81   JUN  25.00  0.44  *$  0.44   5.0%

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


VANS offered a small-loss exit on Wednesday after failing to
move above the late April high.  American Freightways (AFWY)
weakened immediately with the general market and Friday's
bearish move below its 150 dma on heavy volume should have
signaled an immediate exit.  Keep an eye on Ade Corp. (ADEX)
as the stock price has moved below its 150 dma.  A test of
the April low may be forthcoming.

Positions Closed:

Jakks Pacific (JAKK).


Sequenced by Company

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

ADVP   17.13  JUN  12.50  QVD RV  0.31  81   12.19   28     9.0%
ALL    26.75  JUN  22.50  ALL RX  0.44  290  22.06   28     6.9%
CLPA   27.19  JUN  15.00  QJC RC  0.44  47   14.56   28     8.1%
GZMO   17.19  JUN  10.00  QGG RB  0.31  0     9.69   28     9.0%
NGH    20.88  JUN  17.50  NGH RW  0.38  1654 17.13   28     7.6%
TMAR    9.25  JUN   7.50  MUQ RU  0.25  34    7.25   28    12.3%
UNM    20.19  JUN  17.50  UNM RW  0.56  219  16.94   28    10.3%

Sequenced by Return

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

TMAR    9.25  JUN   7.50  MUQ RU  0.25  34    7.25   28    12.3%
UNM    20.19  JUN  17.50  UNM RW  0.56  219  16.94   28    10.3%
ADVP   17.13  JUN  12.50  QVD RV  0.31  81   12.19   28     9.0%
GZMO   17.19  JUN  10.00  QGG RB  0.31  0     9.69   28     9.0%
CLPA   27.19  JUN  15.00  QJC RC  0.44  47   14.56   28     8.1%
NGH    20.88  JUN  17.50  NGH RW  0.38  1654 17.13   28     7.6%
ALL    26.75  JUN  22.50  ALL RX  0.44  290  22.06   28     6.9%

Company Descriptions

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

ADVP - Advance Paradigm  $17.13  *** On The Rebound! ***

Advance Paradigm is a leading independent provider of health
benefit management services, providing pharmacy benefit
management, disease management and clinical research programs
to two primary customer groups: health plan sponsors and
pharmaceutical manufacturers.  ADVP supports a broad range of
health plan sponsors its pharmacy benefit management and
disease management services.  They also provide clinical
research services and work closely with pharmaceutical
manufacturers in negotiating lower drug costs for its health
plan sponsor customers.  Last week, ADVP said revenues rose to
$564 million, up from $229 million a year ago.  Earnings were
slightly ahead of expectations at $0.24 a share, up from $0.15
the previous year.  The bullish technical character suggests a
new trend is beginning.

JUN 12.50 QVD RV LB=0.31 OI=81 CB=12.19 DE=28 MR=9.0%

Chart =
ALL - Allstate  $26.75  *** Takeover Candidate? ***

The Allstate Corporation is engaged in the property-liability
insurance and life insurance and savings businesses.  Allstate's
Property-Liability insurance business consists of the PP&C and
Discontinued Lines and Coverages segments.  PP&C covers private
passenger auto and homeowners insurance while Discontinued Lines
and Coverages consists of business no longer written.  ALL's Life
insurance products include whole life and term life insurance as
well as universal life, variable life and other life products.
Savings products include annuities and group pension products
include guaranteed investment contracts and retirement plans.
The recent merger and acquisition speculation has found its way
to Allstate and the stock has rallied on the news.  Rumors have
surfaced of potential acquisitions in the financial services
group and investors say ALL may be a candidate.  With the recent
change in technical character, this play offers an excellent way
to participate in the bullish, merger speculation.  Target shoot
the entry at $0.50.

JUN 22.50 ALL RX LB=0.44 OI=290 CB=22.06 DE=28 MR=6.9%

Chart =
CLPA - Cell Pathways  $27.19  *** 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=0.44 OI=47 CB=14.56 DE=28 MR=8.1%

Chart =
GZMO - Genzyme Molecular  $17.19  *** Drug Speculation ***

Genzyme Molecular Oncology, a division of Genzyme Corporation, is
developing cancer products, with a focus on cancer vaccines and
angiogenesis inhibitors.  It has 3 products under development:
vaccines to stimulate the immune system to fight cancer, various
inhibitors that work on the blood vessels that tumors require for
growth, and pathway regulators that treat cancer by regulating
metabolic processes observed in the development of cancer cells.
Biotechs have been on the move lately and GZMO rallied last week
after an influential upgrade from SG Cowen.  The analyst offered
a "strong buy" recommendation and placed a $25 target on GZMO's
share value based on recent technology integration.  The outlook
is favorable and owning the issue near $10 appears to be a fair

JUN 10.00 QGG RB LB=0.31 OI=0 CB=9.69 DE=28 MR=9.0%

Chart =
NGH - RJR Nabisco Holdings  $20.88  *** 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.  Their businesses in the United States
are comprised of Biscuit and the U.S. Foods Group.  Outside the
United States, business is conducted by their International group.
Nabisco's share value has rallied since mogul Carl Icahn raised
his offer for the company to $6.5 billion, an increase of 37% in
the price for the nation's largest maker of cookies and crackers.
That's well above the current value but analysts say the offers
will go higher, based on interest from other companies, with the
company fetching at least $25 per share before the deal is done.
Analysts believe a firm pact may emerge in late June or July.

JUN 17.50 NGH RW LB=0.38 OI=1654 CB=17.13 DE=28 MR=7.6%

Chart =
TMAR - Trico-Marine  $9.25  *** Own This One! ***

Trico Marine Services is a leading provider of marine support
vessels to the oil and gas industry in the U.S. Gulf of Mexico,
the North Sea and offshore Brazil.  Due to various acquisitions,
Trico is now the second largest owner and operator of supply
boats in the Gulf and a leading operator in the North Sea.  The
Oil Services industry has rallied in the last few weeks as crude
prices approached $30 a barrel on expectations of strong summer
demand.  The rise in this group comes after a long awaited period
in which soaring crude oil and natural gas prices have made for
handsome earnings but have done little to bring the industry
leaders back to their historical share values.  With the profit
margins expected to increase during the next few months, revenues
for the top companies in this group should continue to improve,
bolstering their share value to higher levels.

JUN 7.50 MUQ RU LB=0.25 OI=34 CB=7.25 DE=28 MR=12.3%

Chart =
UNM - Unumprovident  $20.19  *** Booming Health Sector! ***

UNUMProvident is the parent holding company for a group of
insurance companies that collectively operate throughout North
America and in the United Kingdom, Japan, and Argentina.  This
group is the largest provider of group and individual disability
insurance in North America, the United Kingdom, and Japan. They
additionally provide a complementary portfolio of insurance
products, including long-term care and term life insurance.
Earlier this month, UNM's recovery rally was tested after the
leading disability insurer said its quarterly operating profit
fell 22%, in line with expectations, as its group disability
insurance unit suffered a higher loss ratio.  The company said
profits fell to $134 million or $0.56 per share, down from $172
million in the same quarter a year ago.  Now the CEO says they
are back on track and the bullish fundamental outlook is based
on several positive trends; strong investment performance,
disciplined expense management, improving claims management
effectiveness, and solid results from their Voluntary Benefits
segment.  For now, it appears investors agree with the CEO's
optimistic forecast.

JUN 17.50 UNM RW LB=0.56 OI=219 CB=16.94 DE=28 MR=10.3%

Chart =


Stocks Tumble On Inflation Woes...

Friday, May 19

The week ended on a sour note as inflation-fearing investors fled
the equity markets.  The Dow closed down 150 points at 10,626 and
the Nasdaq finished 148 points lower at 3390.  The S&P 500 Index
slipped 30 points to 1406.  Volume on the NYSE remained very thin
with just 855 million shares exchanged.  Declines beat advances
1,932 to 950.  Trading volume on the Nasdaq hit just 1.36 billion
shares, with declines swamping advances 2,884 to 1,169.  The U.S.
30-year Treasury rose 7/32, bid at 100 15/32, where it yielded

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

Mattel   MAT    JUL10C/JUN12C   $2.00   debit   diagonal
Covad    COVD   JUN20C/JUN22C   $1.88   debit   bull-call

The sharp market decline allowed entries at the target prices
in both of our new positions.  Unfortunately, the recent decline
in technology issues has once again gained momentum and it will
be difficult to oppose the trend.  Monitor Covad for a successful
test of the May low and in the event the issue breaks below that
support range, consider an early exit.

Portfolio plays:

Stocks moved lower today on concerns that the Federal Reserve
would continue to raise interest rates to slow the expanding
economy.  Revised estimates for growth and inflation created
additional anxiety of another 50 basis-point rate hike before
the end of the year.  Analysts say the market is beginning to
reflect that outlook and worries about overvaluation in the
technology sector also produced downward pressure during the
session.  The majority of sectors slumped with shares of Intel
(INTC), Hewlett-Packard (HWP), and J.P. Morgan (JPM) leading
the Dow lower.  Continued weakness in computer hardware issues
tugged the Nasdaq down and semiconductor stocks finished with
significant losses.  In the broad market; tobacco, steel and
healthcare stocks advanced while telecom and defense issues
retreated.  On the bright side, drug and oil stocks managed to
post slim gains and those are heavily weighted groups in our
current portfolio.

The final day of the expiration period was relatively kind to
the Spreads/Combos section.  Almost 90% of our May positions
closed profitably and the losses were minimal.  Some of the
most exciting activity occurred in the Credit Spreads group.
Applied Materials (AMAT) finished just above the sold strike
at $80 and as we suggested on Thursday, Temple Inland (TIN)
succumbed to Murphy's Law, falling to $54.06 at the close (the
position was profitable below $55).  Scm Microsystems (SCMM)
was the only losing issue in that section, and the position
was rolled down and forward to the JUN-$70 options to attempt
a break-even exit.  The bullish, Debit Spread portfolio enjoyed
similar success.  The losing position in that group was Mattson
Technology (MTSN).  Many of our best performers have been in
the Oil industry and Ashland (ASH) topped the Diagonal Spreads
category with a 28% return in just three weeks.  The remaining
positions in that group are all profitable.  Calendar Spreads
were difficult to find with the recent volatility but two of
the three plays in that section have far exceeded expectations.
Dean Foods (DF) and Magna International (MGA) both provided
profits well above the original targets.  The outcome of the
Landry's Restaurants (LDY) spread has yet to be decided.  Our
long-term plays suffered the most with LEAPS/CC's issues Boston
Scientific (BSX), Cabletron (CS), and Network Associates (NETA)
all falling in the recent technology slump.  Fortunately, the
highest loss in this time-selling portfolio is $0.75.

The Delta-neutral category produced mild success.  Both of the
credit strangles; Abgenix (ABGX) and Best Foods (BFO) expired
at maximum profit but based on that market character, many of
the debit straddles remained mired in range-bound trends.  The
top performers were Applex (APLX) with $2.50 returned on $6.50
invested and Mastec (MTZ) with a 45% profit in just one week.
The most surprising issue was National Computer Systems (NLCS).
Today the stock dropped 18% to $46.25 after reporting that the
firm's chairman, president and CEO, Russ Gullotti, will retire.
DLJ analysts downgraded the stock to "market perform" even as
the company reported a first-quarter profit of $0.26 per share,
inline with the consensus estimates.  Yesterday it was on the
verge of a break-out into a new trading range and now it is
right back where it started.  Such is life in the stock market!

Questions & comments on spreads/combos to Click here to email Ray Cummins
                         - NEW PLAYS -
NSI - National Service  $23.00  *** Conglomerate Hedge Play ***

National Service is a diversified service and manufacturing
company that, through its subsidiaries, is engaged in four
markets, lighting equipment, chemicals, textile rental and
envelopes.  The diversified company derives about half of its
sales from lighting fixtures for commercial markets (new
construction) and consumers. Its brand names include Lithonia
and Holophane.  NSI's chemicals unit makes specialty products
that include cleaners, sanitizers, and disinfectants.  The
company's National Linen Service subsidiary rents linens,
towels, mops, and other related products to the restaurant,
lodging, and health care industries.  NSI also makes office
products for the banking and other industries.  NSI provides
products and services throughout North America, as well as
Western Europe and Australia.

NSI is a solid fundamental company that achieved excellent
results in the second quarter, including double-digit revenue
growth and an increase in operating profit.  The CEO expects
improved performance in the second half of fiscal year 2000
with 8-10% growth in earnings.  Their success is based on
diverse interests in industries with increased productivity,
new product development, technological advances, and cost

We simply favor the bullish technical outlook and the low cost
opportunity for a favorable profit.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  SEP-25  NSI-IE  OI=149  A=$1.56
SELL CALL  JUN-25  NSI-FE  OI=724  B=$0.31

The basic premise in a calendar spread is simple; time erodes
the value of the near-term option at a faster rate than it will
the far-term option.

A less neutral and more bullish type of calendar spread is when
the underlying issue is some distance below the strike price of
the options.  This position is speculative with low initial cost
and large potential profits.  Two favorable outcomes can occur:
the stock rallies in the short-term and the position is closed
for a profit as time value erosion in the short option produces
a net gain or; the underlying stock consolidates, allowing the
sold option to expire and then eventually rallies above the long
option strike price.

It is generally best to establish this type of spread at least
2 - 3 months before the long option expires, capitalizing on the
ability to sell another option against the longer-term position.
That is the basic idea in this spread play; selling time value
in the options when they are overpriced (high implied volatility)
and buying it back (if necessary) when they return to intrinsic
value.  Ideally, we would prefer to have the stock finish just
below the sold strike when the near-term option expires. If the
short options are in-the-money at expiration, you will have to
buy them back to preserve the long-term position.

Chart =
MATK - Martek Biosciences  $18.80  *** Upcoming FDA Approval? ***

Martek Biosciences Corporation is engaged in the development and
commercialization of high value products derived from microalgae.
Martek's products are nutritional oils used as ingredients in
infant formula and foods, and as ingredients in, and encapsulated
for use as, dietary supplements.  Martek has licensed its
nutritional oils to six infant formula manufacturers.  Four of
these licensees are marketing term infant formula products
containing Martek's oils in seven countries and pre-term infant
formula products containing their oils in over 60 countries.
Additional applications of the Company's platform technology
include currently marketed products and technologies to assist in
drug discovery and diagnostics.

Martek rallied last week after a report in Barron's stated that
its share value could rise if the FDA approves its infant formula
containing DHA and AA fatty acids; supplements that could make
infant formula superior to mother's milk. The report also said that
Martek could earn $2 to $3 a share if formula supplemented with
DHA becomes popular in the U.S.  Martek has licenses with more
than half of all formula producers, including the two biggest U.S.
firms, Mead Johnson and Abbot Laboratories.

The Federal Drug Administration is now reviewing the issue and
is expected to rule by fall.  Based on the technical change in
character, investors think the outcome will be favorable.

PLAY (aggressive - bullish/credit spread):

BUY  PUT  JUN-12.50  KQT-RV  OI=30  A=$1.25
SELL PUT  JUN-15.00  KQT-RC  OI=5   B=$2.12
INITIAL NET CREDIT TARGET=$1.00  ROI(max)=66% B/E=$14.00

Chart =
PBY - The Pep Boys  $7.50  *** Manny, Moe and Jack! ***

The Pep Boys is an automotive retail and service chain.  Pep Boys
is involved in the retail sale of automotive parts, accessories,
automotive maintenance, service and the installation of parts.
The company is comprised of Pep Boys' Supercenters and Pep Boys
Express. Pep Boys' automotive product line includes tires,
batteries, new and rebuilt parts for domestic and imported cars,
chemicals, car accessories and hand tools, as well as a large
selection of truck, van and sport utility vehicle accessories.
In addition to selling branded products, they also offer an array
of products under the Pep Boys name and other private labels names
such as Prostart, Procool, Prostop, Elite, Pro Ryder, Varsity,
Cornell and Futura.  Pep Boys' services include engine diagnosis,
tune-ups, wheel alignments, installation and balancing of tires,
oil and lubrication, air conditioning, and electrical services.
Pep Boys' stores also offer repair services and the installation
of parts and accessories.

The recent rebound in Pep Boys began last week and now it appears
that investors are starting to take notice.  A reasonable bottom
has formed after a long period of declines and based on positive
divergences in technical indicators, the issue may try to make a
a substantial rally from this point.  Our position offers plenty
of time for the bullish recovery to occur.

This position is based on the current price or trading range of
the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on this
issue.  Review the play thoroughly and make your own decision
about the future outcome of the position.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL  OCT-5.00  PBY-JA  OI=226  A=$3.00
SELL CALL  JUN-7.50  PBY-FU  OI=160  B=$0.88

Chart =
                         - STRADDLES -

These positions meet our criteria for favorable straddles; cheap
option premiums, a history of adequate price movement and future
events or activities that may generate volatility in the issue
or its industry.  This selection process provides the foremost
combination of low risk and potentially high reward.  As with
any strategy, it should be evaluated for portfolio suitability
and reviewed with regard to your strategic approach and trading

LII - Lennox  $11.38  *** On The Move! ***

Lennox International is a global designer, manufacturer, and
marketer of a range of products for the heating, ventilation,
air conditioning, and refrigeration (HVACR) markets.  Lennox
participates in four business segments of the HVACR industry.
The first is North American residential heating, conditioning
and hearth products, in which the company manufactures and
markets a full line of products for the residential replacement
and new construction markets in North America.  The second is
the global commercial air conditioning market, in which the
company manufactures and sells rooftop products and applied
systems for commercial applications. The third is the global
commercial refrigeration market, which consists of unit coolers,
condensing units and other commercial refrigeration products.
The fourth is heat transfer products, in which the company
designs, manufactures and sells evaporator and condenser coils,
copper tubing, and related equipment.

Note: In this position we are using two out-of-the money options;
a "strangle," to open the position with a delta-neutral outlook.

PLAY (conservative - neutral/debit strangle):

BUY  CALL   SEP-12.50  LII-IV  OI=171  A=$0.81
BUY  PUT    SEP-10.00  LII-UB  OI=20   A=$0.62

Chart =
ICCI - Insight Comm.  $15.00  *** Looking For A Bottom! ***

Insight Communications is the eighth largest cable television
system operator in the United States based on customers served
after previously announced industry acquisitions.  The company
provides cable television services to approximately 935,000
customers, passing over 1.5 million.  ICCI has tightly grouped
clusters of cable television systems with approximately 98% of
its customers concentrated in the four contiguous states of
Indiana, Kentucky, Ohio and Illinois.  The company's systems
have a very high concentration of customers served by each
headend or technical center of the network allowing it to more
economically deliver an array of entertainment, information and
telecommunication services, including interactive digital video,
high-speed data access and telephone service products.

Note: The low open interest in the position may be a problem for
the initial entry but as time passes, the volume in options will
increase to an acceptable level.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  AUG-15  SCU-HC  OI=20  A=$2.06
BUY  PUT   AUG-15  SCU-TC  OI=0   A=$2.06

Chart =

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