Option Investor

Daily Newsletter, Tuesday, 05/23/2000

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The Option Investor Newsletter              Tuesday 5-23-2000
Copyright 2000, All rights reserved.                   1 of 2
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
       5-23-2000           High     Low     Volume Advance Decline
DOW    10422.30 - 120.20 10557.40 10416.80   869,926k 1,336  1,576
Nasdaq  3164.55 - 199.66  3389.60  3163.97 1,328,339k 1,262  2,757
S&P-100  732.55 -  15.49   750.40   732.45    Totals  2,598  4,333
S&P-500 1373.86 -  26.86  1404.04  1373.60            37.5%  62.5%
$RUT     459.01 -  12.66   474.17   459.01
$TRAN   2754.27 +  34.11  2776.41  2715.44
VIX       29.30 +   0.47    29.52    27.86
Put/Call Ratio       .48

Still waiting?

If you took my advice over the last three weeks to wait until
the Nasdaq rallied back over 3800 again before opening any new
long call positions then you are still sitting comfortably on
the sidelines. The rest of us will be attending the next meeting
of "Traders Anonymous" as soon as we can scrape up the $2.00
admission fee.

Are we having fun yet? I leave you guys home alone for a week
to do to the Vegas money show and I come back to a Nasdaq
disaster! My first day back and the Nasdaq closes at the low
for the year, down -37% from the March 10th high. If a correction
is -10% and a bear market is -20%, what do you call a -37%
market? A really ugly buying opportunity? I wish that were all
it was but the possibility exists that we should be rethinking
the concept of fighting the Fed.

The Nasdaq is breaking support levels daily and the generals
like CSCO and INTC are dropping left and right. Even the
previous standouts like PMCS and SDLI are losing double digits.
What happened to the +200 point rally off the session lows on
Monday? It was just a dead cat bounce it appears as traders in
denial try to pick the bottoms on every dip.

There are multiple problems confronting the market. First is
the never ending Fed rate hike scenario. After the +0.50% hike
last week there was no verbiage about it being a last hike
leading many to think that there are still some more on the
way. Actually the Fed Funds futures have declined a little bit
as a few analysts feel we may be nearing an end. Still the
hikes over the last year are now having their desired impact
as some stock analysts are now lowering their estimates for
this years earnings. Cut backs are in the range of -2%, from
+14% to only +12%. With stock earnings estimates dropping as
a result of higher interest rates the valuations of stocks as
a multiple of earnings must be reduced. The time proven adage
of "don't fight the Fed" is proving true again. The Fed ALWAYS
gets what it wants. It will just keep raising rates until the
economy and as a by product, the stock market, slows/drops to
an acceptable level.

Another factor in the current market drop is the volume. There
is no volume! Institutional buyers are simply waiting on the
sidelines. There are actual reports of professional fund managers
and traders going on vacation for the first time in years. They
are simply not buying even at these prices. They are waiting
on the next Fed move and the summer doldrums. The NYSE only
managed 866 mln shares today and the Nasdaq 1.3 bln. The
market bleeding to death slowly due to lack of interest.

Liquidity is also evaporating. I spoke with a noted tax
accountant at the Money Show and he said many of his clients
were in deep trouble. Literally hundreds of them made hundreds
of thousands of dollars in the +86% Nasdaq rally last year
but failed to pay any estimated quarterly taxes. Assuming
they would ride out the April earnings run, sell enough stock
to pay their taxes and then do it again this year, they were
caught off guard by the market correction. Now their stocks
are back to last years levels and they have no money to pay
their taxes. Not only were they forced to sell devalued stocks
to pay taxes on profits they don't have, they now have less
in their portfolio than they had this time last year. Their
extra "trading capital" is gone and they are nursing their
remaining cash and stocks like hoarded gold. No wild, risky
bets. No high flying tech stocks. They are moving into defensive
stocks like WEN, SWY and BUD. Having been burned by Internets,
Biotechs and Tech stocks several times this year already the
risk takers are rethinking their game plans.

We were hoping that the April drop had already been factored
into the normal May weakness and we would get an earlier start
to the July earnings run once the Fed meeting was over. It did
not happen and it appears there may still be some weakness left.
The put/call ratio is only .48, the VIX is only 29.30 and the
TRIN is neutral at 1.20. No daylight here. There is simply no
reason to buy. With the Nasdaq setting new lows and the Dow
approaching its last line of support at 10300, investors are
giving up on buying the dips. After being tripled dipped lately
with lower lows after every drop, risk investor capital is
shrinking from the losses and with each failed rally. We lose
several percentage points of the gambling population with each
down turn of the market.

I think the market technicals are terrible. Just looking at
the charts would strike fear into any reasonable investor. Now
before you go rushing into bonds I should remind you that it
is always darkest before the dawn. Just when things look like
they can only get worse they normally get better. The Nasdaq
has gone from overbought on the pre-Fed rally to over sold in
the space of only five days. While I sit here painting a picture
of doom and gloom there are also traders, those with money left,
who are deciding what bargains they will buy when the market
does turn. When it does get better it could do so quickly.
Did you see how fast YHOO and EBAY rose on the bounce yesterday?
I looked at EBAY up +$3 when the bounce started and thought it
was already done. When I looked back a few minutes later to see
it up +$18 I was in shock. This could happen to any of the leaders
if an unexpected rally breaks out. There is another old adage,
"never short a dull market." Once the starters pistol fires the
prices tend to rocket as all the cash piled on the sidelines
tries to find a stock to buy.

If you are still sitting on the sidelines waiting for 3800,
good for you! The rest of us wish we were as smart as you!

If you have not signed up for the Denver 2 day, Technical
Analysis, Stock and Option seminar this week (thr/fri) you
can still do so. We have several seats left and we guarantee
you will not be disappointed. The class size is only 20 so
you will get plenty of individual attention from Chris Verhaegh
and the staff. It is at the Marriott DTC again and they did
a great job for us last month. At less than the cost of a bad
trade you can learn how to analyze stocks and trade options
like the pros. Don't wait, do it now. For those in Texas the
Houston seminar is next week, June 1st & 2nd. Don't miss it.


Good luck and don't buy too soon.

Jim Brown

Current long positions include: (today was not a fun day!)



Tuesday, May 23, 2000

Probing for a Bottom!

The market continues on its poor pace, as the NASDAQ closed down
for a 5th straight day. Volume was once again poor, and many
bellwethers continue to make new millennium lows. Violations of
key support levels continue to be the norm, as many issues have
now broken or are nearing the infamous 200-day moving average.
This trend will continue in the near term, because when you
witness many of the Generals breaking down (Microsoft, Oracle,
Cisco Systems, Qualcomm, etc.), you shouldn't be surprised when
the 2nd or 3rd tier performers are getting crunched as well.

The culprit of this week's surge downward is news, that is, a
lack of it. There is no news to filter through, let alone debate
on. This lack of information is keeping the institutional money
on the sidelines, as many fund managers are using their incoming
cash as just that, cash. The sentiment bestowed on the
institutional side continues to be extremely poor. Until
confidence can be restored to the institutional side, or until we
have a catalyst to push the envelope, we can be sure that we will
continue to be in a trading range market with the bears in

Another bearish sign from today's activity was the put/call
ratio, which stood at 0.48. This level of optimism in the face of
a selloff may indicate that we have more downside in the making.
However, Monday's intra-day rebound indicates to us that the
market is probing for a bottom, and when this market does
reverse, it will be swift and furious. Until then, stay cautious
and pick your entry/exit points carefully.

BULLISH Signs: (None)

Mixed Signs:

Volatility Index (29.30):
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 recently broke the 52-week
high, so patience is prudent until the VIX establishes a new
trading range or gets back to the range.

Corporate Earnings:
Corporate earnings continue to be solid; however, there has been
no upside as most equities have sold off even in the wake of good


Interest Rates (6.172):
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       12.12
Overhead Resistance (775-800)     2.12        3.25
Overhead Resistance (745-770)     1.91        1.17

OEX Close                       752.95      732.55

Underlying Support  (715-740)     2.90        3.16
Underlying Support  (680-710)     n/a        22.70

What the Pinnacle Index is telling us:
Underlying support is starting to pick up more bears, indicating
we could be close to a bottom. OTM underlying support is
extremely strong, indicating many are betting on a market crash.
Direct overhead is light, so if a rally were to occur, it would
not be met with great resistance.

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

CBOE Total P/C Ratio             .89        .48
CBOE Equity P/C Ratio            .81        .41
OEX P/C Ratio                   1.64        .92

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

Puts                740 / 6,368   740 / 7,532
Calls               800 / 4,692   800 / 6,084
Put/Call Ratio        1.36           1.24

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 23, 2000                            29.30


As of Market Close - Tuesday, May 23, 2000

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

DOW Industrials   10,000  11,400  10,422    Neutral   5.05
SPX S&P 500        1,400   1,500   1,374    BEARISH   5.23 **
OEX S&P 100          750     800     733    BEARISH   5.23 **
RUT Russell 2000     450     550     459    Neutral   5.05
NDX NASD 100       3,200   4,000   3,023    BEARISH   5.23 **
MSH High Tech        860   1,000     827    BEARISH   5.23 **

XCI Hardware       1,360   1,600   1,263    BEARISH   5.19
CWX Software       1,100   1,300   1,068    BEARISH   5.23 **
SOX Semiconductor    960   1,200     869    BEARISH   5.19
NWX Networking       900   1,100     920    Neutral   5.05
INX Internet         550     800     514    BEARISH   5.23 **

BIX Banking          530     600     581    Neutral   5.11
XBD Brokerage        400     500     441    Neutral   5.05
IUX Insurance        540     620     632    BULLISH   5.16

RLX Retail           900   1,000     892    BEARISH   5.23 **
DRG Drug             355     400     388    Neutral   4.28
HCX Healthcare       710     800     788    Neutral   4.28
XAL Airline          140     155     146    Neutral   3.10
OIX Oil & Gas        265     300     308    BULLISH   5.11

Posture Alert
No news is equivalent to bad news, as the market has started off
the week under pressure. Many of the major bellwethers are now
trading below the April lows while some are even below key support
levels such as the 200-day moving average. Sectors taking the
brunt today were Internet (-8.24), Semiconductors (-7.73%),
Hardware (-5.02%), and the NASDAQ 100 (-7.39%). With this most
recent action, we have lowered Retail, Internet, Software, Morgan
Stanley High Tech, S&P 100, S&P 500, and the NDX to Bearish from


Philips Buying 60 Percent of MedQuist
By Matt Paolucci

Philips Electronics NV of the Netherlands (PHG) has agreed to
pay about $1.2 billion to acquire 60 percent of MedQuist Inc.
(MEDQ), in hopes of transforming the Marlton, N.J.-based
company into a technology-based provider of medical document
services over broadband networks.

Medquist Inc. is the largest medical-transcription service
firm in the U.S. The Company converts free-form medical
dictation into electronically formatted patient records.
Medquist's Medical Transcription System (MTS) technology
encompasses the tasks of initial data capture, conversion of
data into an electronic format, editing of data and routing of
electronically formatted reports to the client's computer

Philips said it will pay $51 per fully diluted share, roughly
a 30 percent premium to Medquist's Monday closing price of
$39.125. The $51 per share works out to roughly 21.2 million
MedQuist shares, including 3 percent of the holdings of the
company's senior management.

"It (the purchase price) represents a significant premium for
our shareholders," John Emery, CFO of MedQuist, said.

Philips said it would bolster MedQuist's growing European
presence and broaden its services to include sales of in-house
speech recognition software and others.

"It's a scarcity premium. This is the only company with 8,000
transcriptionists," said Stephen DeNelsky, an analyst with
Credit Suisse First Boston. Philips may have been willing to
pay up "because of the importance of transcription in
tomorrow's health care."

By integrating Philips' speech conversion capability and other
technologies into MedQuist's MTS and DTS technologies, both
companies hope to benefit from each other's core competencies.

At present, MedQuist is limited by the number of qualified
transcriptionists it can hire. Philips' speech conversion
technology would circumvent this restriction.

"It's a logical fit," said Stephen Denelsky, an analyst at CS
First Boston, who has a "strong buy" rating on MedQuist.

The idea behind Philips' purchase is that physicians will
someday dictate medical reports into handheld, Internet-linked
computers, and their speech will be converted into text on the
other end by computers and humans. By combining Philips'
speech-recognition technology with MedQuist's experienced
transcriptionists, the firms could potentially have
physicians' attention on a daily basis, as well as on the

A spokesman for Philips said it is paying "a fair price" and
that the investment will add to shareholder value. MedQuist
plans to "aggressively roll out Philips' speech and other
technologies," Philips said.

According to an interview with The Wall Street Transcript,
MedQuist CEO David Cohen said the market for medical
transcription services is $6.6 billion and just $1 billion is
currently outsourced. Clearly, Philips is after a piece of
that business. PHG plans to make MEDQ a multinational company
and expand sales by coupling its speech and related technology
with MedQuist's software and services.

MedQuist posted sales of $330 million in 1999, boasting 13.7
percent net profit margins. Philips booked revenues of $31.4
billion in 1999, with net margins of 6.1 percent.

In midday trading, shares of Medquist were up $4.38 to $43.50,
while shares of Philips were higher by $0.81 at $40.00.


Update from Sacramento/New Orleans

Hello Club Member,

We had another great breakfast meeting.  Tons and tons of great
information was shared.  I can truly say that, it doesn't matter
how long you have been trading, you will never leave one of
our sessions without a page full of notes.

One of our members shared with us information about The Money
Show held this past week in Las Vegas.  She attended a panel
luncheon that had some of the top managers of tech stock and
each had their top 5 picks that they shared. The next Money Show
for the bay area will be held the first weekend in Aug.  Let's
all plan on attending that one, huh?

We discussed in detail "Open Interest".  The individual who
suggested this topic wasn't with us this time due to a prior
commitment, however, I did some extensive research on the topic
and found a couple of pages of material on various websites about
the subject.  It is very interesting and noteworthy to make the
right play at the right strike price for easier exit later.

Picks that were shared for future play were CEGE, COVD, WIND,
VRTS, VRSN, and GLW.  Do your own research and play at your own
discretion.  The consensus was that we will see the market
continue to trend down for the next couple of weeks.  Last
Thursday the bell weathers such as Cisco, Intel and Sun Micro
systems all broke their support resistant lines and it looks
like this will mean a continued downward pull for a while.  We
will see.

Our next breakfast will be at 8 a.m. on June 17th. The details
of our next mid-month training session will be e-mailed to you
later.  Have a great month and happy trading.

Marlin Lindsay




DATE: SATURDAY - - - - JUNE 10, 2000




(504) 349-5912

TIME: 1:00 PM UNTIL 4:00 PM



(For this topic, Gabe Rivera would like everyone to chose one
stock they would like or have made an option play on [either
paper or real] between the dates of May 21 to May 26.  Make a
copy of the Stock Chart the day before or the day of your
"possible" trade.  Then on June 8th or 9th make another copy
of that particular Stock Chart, and bring both Charts to the
Club meeting. [You should make at least 20 copies of both Charts
{if you can}...so we can follow along as we discuss].  We will
discuss why you chose that particular Stock versus another Stock
and good entry and exit

points throughout that 3 week period that were profitable or
could have been profitable for you the Option Trader.)
Please make sure on your Charts that "Volume" is included as a
parameter when your Chart is printed.


All OIN Members are asked to bring $5.00 to help defray the cost
of the meeting room and refreshments. Couples from the same
household only pay one $5.00 fee.  OIN Members may bring another
Option Trader guest(s) if they wish, they do not have to be a
member of OIN.

First time Guests are Free.

Steve Johnson
Contact Support



DATE:     THURSDAY, JUNE 8, 2000
TIME:     6:30 PM TO 8:30 PM
          9875 SOUTH 240 WEST,  ROOM #127

At our last meeting Mike Lundquist gave us "A Strategy for
Success".  It was well worth our time as Mike presented some
great information on how to identify and play fear, greed and
uncertainly in this market.  One of the things that he suggested
was that we learn to read Candle stick charts.  Consequently
I'm putting together a presentation on this technique.  Please
let me know if you are interested in sharing your knowledge on
this subject.  I have a great CD that shows the different

The reason for the change from using one of the libraries is
that it was difficult to book a room and they do not have the
equipment that is available at the University locations.  The
Sandy U of U only charges $5.00 per hour for the LCD projector
and $10.00 per hour for the room.  As I mentioned before, when
we use the University facilities, we cannot "teach" any program
that is currently being taught at the University.   Since we
are just sharing knowledge this should work for us.

DIRECTIONS:  Go to Yahoo, Maps, enter address in "Map a new
address", then Get Map.   From State St. turn West on West Sego
Lily Drive (10000 South).  Then North or RH on 240 West.  There
are 2 large parking lots for the Sandy city complex on the East
side of the road.  Then you will see the Univeristy building.
Parking to the South, North and East.   Room is in middle of
building so any lot or door is fine.

Hope to see you Thursday June 8th at 6:30 PM.   Our July 13th
meeting will be scheduled for the downtown  area.  Once you become
familiar with the campus it is quite easy to find the meeting
room.  If you have any ideas for an agenda or want to do a
presentation, please let me know.   I could really use some help
in this area.  Thanks.

Carol Mortensen
SLC Organizer


Dear OIN,

Please help me understand the calculations on a covered that
was listed on the Sunday Covered Call newsletter:

Price picked 13.31
Last Price     19.29
Call Month    May
Strike Sold   12.50
Price Picked   1.44  (premimum)
Profit/Loss       .63
Monthly Return 11.5%

Since the price is in the money and the last price is 19.29,
how do you arrive at the proft/loss at 0.63.  The profit should
be 144/1331 = 10.8% per unit.  Also, is there not a capital
gain since the strike price and last price is so much different
(19.29  - 12.50) = 6.79.

Question:  How does one arrive at the calculation 0.63 profit
and the 11.5% gain?

Your help will be greatly appreciated.



Concerning Covered-calls: the Petco play:

PETC - Petco Animal Supplies $13.31  *** Buyout Rumors? ***

Petco Animal Supplies is a specialty retailer of premium pet
food and supplies.  Petco operates more than 500 specialty food
and supply stores in 39 states and District of Columbia.  Petco
offers a category-dominant national chain of community pet food
and supplies superstores.  Petco reported favorable earnings last
quarter showing continued strong comparable store sales growth
and gross profit margin improvement.  The company continues to
expand and recently celebrated opening its 500th store.  There
was no news to explain Friday's break-out but the message boards
have a few people mentioning a buyout.  The heavy volume Friday
suggests there may be something to the rumors.  Speculators only!

MAY 12.50 QPT EV LB=1.44 OI=733 CB=11.87 DE=14 MR=11.5%

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

The position was offered on May 7, 2000

PETC -  Price picked $13.31
May's Closing Price   $19.29 (MAY 19, 2000)

Original option sold - May $12.50 call
Premium received for the option - $1.44


We bought the stock at $13.13...sold the $12.50 call for $1.44.
That means our cost basis was $11.69.  The stock finished above
our sold strike at expiration and was called away at $12.50.
We earned $0.81 on $11.69 invested.  The position was offered
on May 7th, thus it was a two week play with a 6.9% return;
approximately a 11.5% monthly return  (double that on margin).




Is the Bear Coming or Going?
By Mary Redmond

I have heard the following question repeatedly in the last few
weeks:  Are we heading for a bear market?  However, a case could
be made that we are already in a bear market and have been for
some time now.  The real question people should be asking is,
are we coming out of a bear market?

Take a look at the three major indexes:  The Dow is down over
5% for the 52 weeks.  This classifies as an old fashioned bear
market.  The S&P is up only by approximately 6% for the last
52 weeks.  Maybe that's not a bear market, but it is hardly a
raging bull market either.  The NASDAQ is the only major index
up for the 52 week period, but it is lead by a small group of
stocks, and many of the key sectors in the NASDAQ are down.
The average NYSE stock is down for the last 52 weeks.  The
Wilshire 5000 is up approximately 7%, again no raging bull market

In case you're not aware of just how bad it is, if the quarter
were to close today, it would be the worst first half of the
year for the Dow since 1984, and for the NASDAQ since 1986.
It sure seems like the first half of 2000 is a bear market.

A major advantage to trading in this market is that it is
a buyer's market.  You used to have to haggle with the market
makers to buy an option or leap at slightly under the ask, now
they are sometimes happy to give the option to you at the bid.

If you realize how market-makers and specialists earn their
living, you can have a better understanding of how the financial
markets work.  Market-makers and specialists both keep an
inventory of the stocks they make a market in.  Generally, they
both will trade for their own accounts and make a profit by
buying at the bid and selling at the ask.  For instance, if you
see a quote of Bid $50 Ask $50.50, then the market-maker may buy
it from the seller at $50 and sell it to the buyer at $50.50.
This may not seem like much, but when you do it all day long
it adds up.

The main difference between the specialist and the market-makers
is that the specialists use their judgement in terms of deciding
when to open a particular stock.  For example, I trade NT a lot.
Sometimes it opens 5 to 15 minutes after the market opens.  If
there is a large imbalance between buy and sell orders, the
specialist may sometimes wait to open the stock until 30 minutes
after the market open.  On the NASDAQ it is more of a free for
all, with stocks opening as the buy and sell orders come in.
Most NASDAQ stocks have several market makers, but NYSE stocks
generally have one specialist.

In addition, the NYSE has trading curbs which halt computerized
sell programs that institutions use so they do not perpetuate
a market sell-off.  The NASDAQ does not have trading curbs, which
means it could move as much as 1000 points or more either up or
down.  The specialists are required by the exchange to make an
orderly market in their stock.  Recently, questions have been
raised about the safety of after hours trading.  Since there are
fewer buyers and sellers after hours, there are frequently huge
differences between the after hours prices and closing prices.

Both market-makers and specialists are required to put the
customers' orders ahead of their own.  They are also required
to give you fair pricing.  This means if you put in an order to
buy at the market, they have to give it to you at the quoted ask
price the second they receive the order.  The question which
sometimes arises is, how much do they have to give you before
increasing the bid and ask.  This is different in every case and
depends on the liquidity of the security you are buying.  For
instance, if you put in an order to buy 1000 shares at the market
when the market is $49.88 to $50.13, you might get 100 at $50.13
and 900 at $50.50.  If you don't want to take the risk of having
a large market order filled at different prices, using a limit
order at the ask will help avoid this.

This can be even more important when trading options.  Options
market-makers are required to provide a market for the public,
no matter what the size is.  Unlike stocks, there is no set volume
or inventory for options.  Option volume is determined by public
customers, which results in open interest.  Market-makers take
the opposite positions from the customers when they fill public
orders.  They also have to hedge that trade by an offsetting stock
position.  If a public customer buys 100 calls, the market-makers
must sell 100 calls.  In turn, they buy the stock as a long hedge.

If you were to place a market order to buy a large lot, say 100
options, market-makers are only required to fill 10 contracts at
that current price.  Depending on the liquidity of the option and
the number of market-makers in a crowd, they may only fill half of
the order at the current ask before moving the ask price higher.
This is why option orders for any more than one option should
generally be put in at a specific price.

Another point to remember is that when the market-maker has a lot
of open orders on the book, a market order will take precedence.
For example, a couple of months ago I was closing out a bullish
put credit spread.  I had sold a put for $3 and was buying it back
for $0.13, the current ask.  I put a limit order in at the ask but
never got filled, even after 15 minutes.  I had to put it in at the
market to get immediate execution.

Contact Support


The Art of Investing and Trading
By Molly Evans 

"I'm giving you the medicines that will lull you off to sleep now.
Just close your eyes, relax, and breathe the oxygen.  Pick out a
nice dream.  We're going to take very good care of you."  That's
what my patients hear, my soft but confident voice as they drift
off to their drug induced slumber.  The practice of anesthesia is
a mixture of both art and science.  The science is the objective,
fact based data.  It's easy to master if one studies the books,
commits dosages, techniques and standards to the hard drives of
the brain and then pays attention.  The art of the practice takes
time to develop.

It's the subtle acquisition of a sixth sense.  It's the ability to
detect a problem before it's a problem.  It's art to have the
patient wake up right on cue when the dressings are going on, and
then ask if we've started his scheduled procedure yet.  It's that
little butterfly in my gut or a nagging doubt in my mind to dig a
little further.  It's the characteristic of art that makes my job
look so easy to the casual observer.  It's not until one tries to
do it (monkey see, monkey do) that one finds it's not exactly
child's play.  A caregiver isn't truly comfortable in their
practice until they've acquired at least some good measure of
what is known as "art".

It's the same in the market.  We immerse in the science of what
we're doing first, learning about the companies and industry of
where we'd like to put our money to work and how to place buy and
sell orders.  Just as anyone can learn to give an anesthetic, so
too can anyone learn to actively invest and trade.  The science
is all rather simple.  The art is what bungles most people.

Now "art" as it relates to investing and trading is a subjective
concept.  What is art in trading?  Is it having all the answers
and making fabulous entry and exit points?  I think we'd all agree
it isn't that.  To me, the development of art in the investment
sense means one can read the big picture and trade in accordance
with the winds of that assessment.  Yet at the same time, it means
remaining true to predetermined goals and risk management.  It's
being consistent in the plan, trading what you know but having an
open mind to new concepts, whether it be sectors or technical
indicators.  There is no room for emotion in this business.
That's because it IS business.  It's numbers.  It's better than
gambling because while you still place a "bet", it's a calculated
bet since you can choose the most favorable odds to play.  Art is
knowing the rules and living by them so that they are second nature.

How often have you heard advice here?  You know the rules as well
as I do:  don't be greedy;  cut losses quickly and decisively;  be
patient;  don't risk more than 2-3% of your capital in any one
play;  plan your trade and trade your plan.  On and on and on and
on.  The development of art in investing is an advanced
characteristic obviously.  It will save you countless headaches
and expensive lessons.  But, if we might be quite frank here, in
my humble opinion, you don't really acquire the art until you've
lived through those headaches and mistakes.

Now, with that said, I'm ready to divulge a personal story to the
world.  Back in early March, the NASDAQ started showing the first
signs of weakness.  I bailed on many positions only to watch it
steamroll higher the next two days.  Yet, I "knew" it was coming
so at the first sign of weakness I was out of there.  That lasted
one day.  I  couldn't stand it.  The NAS was climbing higher and
I wasn't on board.  I got back in and enjoyed the ride.  All the
while patting myself on the back, I knew I was here to watch it
and could get out if we got a really big rollover.  Doom and gloom
began creeping into the airwaves and the print media.  I don't
know who I thought I was kidding.

I've never seen or participated in a real down market.  I had been
a long term investor before and simply stuck my head in the sand
when I had heard it had been a bad day on Wall Street.  I just
didn't look at my brokerage statements for a few months.  No big
deal.  Anyway, I was back riding the train in late March and had
sold out of all positions on that last nice Friday, April 7th when
we had a 178-point gain.  I was incredulous but pleased to sell
into strength.  On the following Monday, everything started going
on sale.  I bought the dip and was quite smug with my entries.
But this time something was wrong.  It didn't recover quite as
strongly.  "Fewww!  I'll just wait it out," I thought.  As you all
know now, this was not the time to be waiting anything out.  This
is the week that billions of dollars went to dollar heaven.  I
watched in misery as the once very kind numbers in my account
dwindled to half of what they had been;  everything I had gained
in the preceding six months just went away but I still held a
strong belief that it would come back.  The bull always came back.

I wasn't being emotional.  I was being sensible and refusing to
sell at the bottom.  Not me.  On Wednesday, April 13th, I guess
I'd had enough.  Three days of big losses seems like an eternity
of time and I snapped.  After a failed rally on the open, I went
into my account that I'd sworn I'd not touch and methodically
blasted every last holding out at market price.  And poof, it was
gone.  It was like I was in a tunnel, I didn't think about it.  I
just coldly pulled the trigger on my own account.  There was a
rally again as soon as I had finished.

I quickly came out of my fog and realized I had just panicked,
selling at the low of the day.  I was sick.  I ran out of the
house to the park, crying and retching along the way.  I had
choked.  Me.  I never choke.  One time, a nurse in my OR room had
panicked and called a condition blue when she saw that a patient's
heart rate was 15.  She didn't know that I knew exactly why it had
happened and that I had already given the rescue drugs.  It was a
non-event.  She panicked, not me.  I snarled at them all, "Nobody
panics in here unless I panic, THAT'S when you know we're in
trouble and need help."  Of course, now we know that panicking on
April 13th was fine as we went much lower on the 14th.  I had cash
on the sidelines to buy that capitulation.  It didn't matter
though.  I didn't mind the monetary loss so much as I minded the
break of my spirit.  I felt like a failure and knew I had much to

Here we are one month later.  It's been a tough month for
everyone.  Professional fund managers have lost their jobs over
this correction.  Is it a correction or is the bear really clawing
at the door?  I don't know.  I may write a bearish article because
it's what I'm reading and seeing out there.  I'm still trying to
develop that art thing.  I read.  I look at the indicators.  I
look at the sentiment.  I see "BEAR" so I load up on short plays.
On Monday, the NAS is down 200 points and I'm thinking, "Good!
That's what I thought would happen."  Then, out of nowhere there
is a rally and it's coming up hard and fast.  I'm not sitting
there thinking, "What the heck?  This is crazy!"  No, not at all.
I'm bailing out of my short plays, taking the profits and not
waiting for it to turn against me as it so often has in the past.
No emotion, just reacting to what the markets are showing me.

Who am I to question it?  I know people won't let the bull die
easily and we're due for a relief rally, however brief it may
last.  I don't want to be on the wrong side of the play, though I
am not buying a bunch of calls either.  I just got out of the way
of a falling tree again.  There seems to be a lot of those in this
forest.  It has finally dawned on me why there is no volume.
People have simply stopped playing this game for a while.  I know,
we've been hearing it but hey, I was still playing so why weren't
they?  The risk adverse individual has simply drawn the line in
the sand and said, "I'm not going to be prey any longer."  I've
had time to reflect on my own mistakes and by gosh, I'm still
making them but with less frequency.  I'm quicker to realize and
correct them.  No one said it would be easy.  Nothing worth doing
or having ever is.

I wish you all much artful culture.

Contact Support


OEX Debit Spreads: Here We Go!
By Austin Passamonte

No wasting words - time to dive right in!  I hope you did a
little brushing up on spread trading basics, if necessary,
but we'll hit the highpoints first.

Our primary strategy is to identify which direction the OEX
will likely take between the time of purchase and expiration.
We then want to buy a bull call spread if we think the market
is going up or a bear put spread if the market seems to be headed
down.  These are both debit spreads that we will be long.

The idea is to buy an OEX option near the current index level
while selling one ten points further away at the same time.  We
are now long an option nearest the money which is higher priced.
Conversely, we sold the same month's option ten points further
out of the money which is lower in price.  That means we paid
the difference in price between the two in order to have our
spread position.

Now we own a spread with ten points distance between the two
options.  This means that at the time of expiration or shortly
beforehand, the one we own will be ten points deeper in the money
than the one we sold if the market moves our way.  Upon expiration
our long option will be worth up to ten points more than our
short option, which is indeed our maximum profit.  If the market
moves against us and both options expire out of the money our
spread dies totally worthless and we lose up to 100% of the
debit paid to purchase it.  Here are some actual examples:

On Monday, May 1st, the OEX was trading at a high of 796 but it
drifted down to close the day at 781.  If your market analysis
indicated further weakness was ahead, here are some OEX spread
plays you might have taken by 4:15 EST.  You could have bought the
May 780 put and sold the May 770 put for a debit cost to your
account of 4.50 points per spread.  Want to play a bit deeper?
Buy the May 770 put and sell the May 760 put for a net debit of
3.25.  Think the market might really tank?  Buy the May 760 put
and sell the May 750 put for a debit of 2.63.  Sit back, relax and
see what happens next.  Remember, you have 18 calendar days before
the options expire...lots of time for such a move to occur.

Fact is you didn't need all 18 days.  By the following Thursday,
May 11th, the OEX plunged to 739.  Pretty big move in eight
trading sessions but we've seen more in less time as well.  Wonder
how your spreads would have fared?  Let's see...

The OEX 780 long/770 short put spread bought for 4.50 points bid
was now selling for 8.75 ask, almost 100% return.  770/760 spread
bought for 3.25 sold for 7.38, again almost 100%.  The 760/750
spread bought for 2.63 is now bringing 5.88, over 100% profit.
Not bad for a few days "work"!  How many of each would you like
to have purchased?

Now the question begs to be asked, "why not just buy puts
instead"?  You could, but the spread offers a few perks we might
just prefer.

Each position had an actual bid/ask return of 100% or greater.
If you had simply bought puts instead, your return would have
likely been somewhat equal to the spreads due to the 10
calendar-day time decay in place.  A straight 780 put purchased
when the OEX closed at 781 would have an intrinsic value of 41
points, but how many of us would pay ATM prices for OEX options
and sit on them for over a week?  Gutsy play indeed.

I can assure you that put play would have been sold by me many
days prior on the first spike up the index took.  It would have
never lived to see 41 points intrinsic or even 100% return
because I promise you I'd sell too soon!  Any of these small
point debit spreads can be held without a super-size bottle of
Pepto sitting half empty on my computer stand.

So we sat tight from the 1st until the 11th and cashed out at
100% profit on our positions.  Now what?  Hey, the fun's just
about to begin - expiration is only a week away!

On May 16th, the market finished a roller-coaster day with the OEX
closing at 784.  The next day, weakness began to show and the
index slipped to close at 772.  Want to play the downside?  The
May 770/760 put spread was selling for 3 at Wednesday's close.
This was a nice conservative play that could finish a three-bagger
if the OEX ends at 760 or less two days later at expiration.  A
twelve point move in two sessions?  We've seen that happen 30
minutes or less in numerous sessions lately.

For braver souls, the May 760/750 put spread was priced to go
at 1.38 per spread.  Remember, only two sessions until it dies
but have you seen the charts?  Let's buy!  Say we have an account
of $10,000 and decide to risk 10% on this trade.  Seven spread
orders are entered at the ask of 1.38 and filled.  With
commissions we've spent under $1000 or we need a new broker!

The May 760 put is selling for 2.38 ask, so we could afford four
of them with our $1,000 budget, if we chose the straight play.

Thursday, May 18th, the index traded up to 778 and falters back
to 766.  One day left - come on baby, pray for red candles all
the way!

Friday's futures indicate a weak open and the market tumbles.
Yes!  The index fell steadily, bounced around 753 and fell to
748.  It grew legs and bounced back to 754 several times in the
afternoon.  Ever see that commercial with the guy watching his
screen in angst until he jumps out the first floor window?
That's us today!

Finally, the OEX slid back to 753 at close.  Those 760 options we
bought in our spread had a par value of $700 each and we had seven
of them.  The 750 puts we sold expired worthless and out of the
money.  Net profit: $4,900 or almost a 50% increase to our account
with 10% at risk.  Imagine if the OEX closed at 750 or lower and
each spread was worth $1,000 profit?  What would the new account
balance be?

The May 760 puts hit a high bid price of 14 and if you sold
at that exact point, the profit for each would be about $1150.
Remember, you could afford four with your budget, so the net
profit would be $4,600.  If the index plunges deeper, you beat
the spread.  Miss that one fleeting spike down and you miss
much more than the spread.  As it is, the spread's total profit
to your account was greater this day.

Sadly, there was never a time we could have sold our spread in
the market for more than $700 net because the 750 put traded
at-the-money and held extrinsic greeks value right to the close.
Had we bought the 770/760 spread or if the OEX traded below 745
we could have sold each spread at any time for a $1,000 profit,
but we would have missed all that excitement!  Who says spread
trading is boring?

Once again, we have pushed our space so we'll resume this topic
to cover details, specifics and odds & ends next Monday.  Brush
up on you spread trading knowledge if you're rusty and I look
forward to visiting with you then!

Trade the right direction with massive gamma-leverage.


Getting Your Feet Wet
By Robert J. Ogilvie

In today's volatile markets it is often prudent to enter into
a position lightly if at all.  The phrase, "getting your feet
wet" may be applied to how one might enter into positions in
a volatile market. Jumping into a volatile market headfirst
(committing all of your money) can be like jumping into the
shallow end of a cold pool.  Entering one foot at a time in
order to test the water can be a useful tool without committing
too much capital. This is referred to as partial position trading.
Complete the position by buying the other half, third, etc.
once confirmation in direction has been confirmed.

Sometimes in an up-trending market, buying more of a position
on a dip can be considered.  The good feature in adding to the
position is that it lowers the cost basis.  This is sometimes
referred to as doubling down.  However, doubling down is what
you do in blackjack. Option trading is speculative investing,
not gambling.  Adding to a position is often referred as
"throwing good money after bad."

An example of this strategy is intending to buy 10 contracts
but initially buying 5 contracts.  If correct in predicting the
direction of the underlying security, then buy the other 5
contracts.  This also works with selling the position.  In
addition, the strategy can be applied when entering short
covered or uncovered calls or puts (Uncovered or naked positions
are subject to higher account approval levels and may not be
available to all investors).  If wrong in predicting the
direction, then one's negative return is a fraction of the
intended exposure.  Each investor has different goals,
objectives, and risk tolerance.  Entry as well as exit points
are subject to an investor's risk and goal parameters.  In
addition, the point in which one completes the partial position
is also subject to the same parameters of the investor.

If you have any additional questions regarding this article,
please feel free to contact me at 877-925-0880 or E-Mail
.  Neither Presidential Brokerage, Inc. nor Robert
J. Ogilvie makes any representation as to the accuracy reliability
or completeness of any charts, formulas, and /or research opinions
presented herein.  This article is intended solely for educational
purposes.  Nothing herein should be construed as an offer or
solicitation to buy or sell any securities.


Index      Last     Mon     Tue    Week
Dow     10422.27  -84.30 -120.28 -204.58
Nasdaq   3164.55  -26.19 -199.66 -225.85
$OEX      732.55   -4.91  -15.49  -20.40
$SPX     1373.86   -6.23  -26.86  -33.09
$RUT      459.01   -8.03  -12.66  -20.69
$TRAN    2754.27  -21.84   34.11   12.27
$VIX       29.30    0.06    0.47    0.53

Calls               Mon     Tue    Week

STT       119.25    2.87    3.25    6.13  New, hard to deny
ALL        28.69    1.00    0.94    1.94  New, sector revival
ABT        42.75    1.19    0.19    1.38  Holding up against market
P          54.13    1.25   -0.31    0.94  New, slow but steady
UNH        75.44   -0.06   -0.88   -0.94  Strong sector performance
ANDW       31.88    0.00   -1.00   -1.00  Relative strength vs. market
PLXS       76.50   -1.00   -3.00   -4.00  Trading in a tight channel
FAST       62.13   -1.38   -3.38   -4.75  Dropped, below 10-dma
CDWC      110.13    1.50   -6.38   -4.88  Possible split announcement
SEPR       90.00   -6.63   -3.13   -9.75  Shareholder meeting Wed.
IMCL       77.31  -14.69   -4.75  -19.44  Dropped, even upgrade fails
RMBS      150.63   -2.88  -20.25  -23.13  Waiting for a recovery
PDLI      109.13   -6.94  -16.56  -23.50  Dropped, tough trading
SEBL       99.50  -10.00  -13.75  -23.75  Dropped, disastrous fall
SDLI      170.25   -4.00  -21.75  -25.75  Entry points are everything
AFFX      128.00  -11.50  -15.00  -26.50  Dropped, Biotech bashing
DNA        96.00  -17.50  -12.50  -30.00  Dropped, product problems


ANAD       28.69   -6.50   -9.06  -15.56  Look out below!!
INCY       50.00   -3.63   -4.13   -7.75  Shriveling in the sun
HLIT       39.00   -2.19   -4.94   -7.13  Pattern gives promise
OPTV       44.97   -3.34   -3.50   -6.84  Pessimistic view of merger
FDRY       58.88   -5.81   -0.81   -6.63  No complaints here
NTOP       26.06   -3.88   -1.19   -5.06  Tanked along with the techs
PCLN       40.50   -0.31   -3.94   -4.25  New, below all support
ICIX       28.19   -1.07   -1.63   -2.70  New, dying with Digex
AZPN       20.13   -1.00   -1.25   -2.25  Technical picture is gloomy
NTLI       53.00    3.63   -5.38   -1.75  Telecoms continue to slide

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


SEBL $99.50 -13.75 (-23.75) Recent drowning victim, SEBL, was
swamped with successively lower bids while the broader market
died of volume thirst over the last two days.  We were looking
for $122.50 to hold as support, but never even got a chance to
enter following yesterday's declining open.  While there was a
brief recovery back to $117 at today's open, it didn't last long.
In fact after hovering most of the day in the $112 range, SEBL
was drenched by lack of buyers at the end of the day for a close
under $100.  Do we expect a rebound?  Maybe, but not until mild
support at $95, then the 200-dma at $84.  Either way, this call
play has ceased to be a winner and we're dropping it tonight.

PDLI $109.13 -16.56 (-23.50) Trading PDLI is difficult in good
times due to its volatility, and darn near impossible in bad
times.  The spread between bid/ask prices eats traders alive.
That giant sucking sound you hear is cash getting quickly removed
from trading accounts across the country.  We hope you made a
dash to the exit quickly with stop orders.  Nothing particularly
wrong with the company - just another sector taken to the
woodshed and severely punished.  Notice that Biotechs did not
participate at all in yesterday's rally.  It was a big clue that
the sector had fallen out of favor and that PDLI would not likely
buck the trend.  That said, don't look for improvement anytime
soon.  It's time to find a more profitable trade in a more
favorable sector.

FAST $62.13 -3.38 (-4.75) We were looking for FAST to rebound
after dipping below its 10-dma last Friday.  It turned out that
interest rate worries proved to be detrimental to our play.  The
uncertainty revolving around future Fed policy sent a ripple
through the retail sector Monday and again in Tuesday's trading.
Without any buyers to boost the stock price, FAST fell as sellers
flooded the market.  What's more, Tuesday's decline came on
higher volume.  We fear that the decline could accelerate
considering the higher trading activity Tuesday and the fact
that FAST is hovering just above a key support level at $60.

AFFX $128.00 -15.00 (-26.50) After giving us a very tradable
range for the past 3 weeks, AFFX finally succumbed to the
market-wide malaise.  As the Biotech sector has rolled over in
the past 5 sessions, AFFX went along for the ride and has now
broken the $135 support level.  Volume remains on the light
side, but we are seeing heavy selling volume and almost
non-existent buying volume.  The tentative Biotech recovery
looks sickly and the negative effects are keeping many of the
sector leaders home in bed.  In the absence of any strength,
and with the violation of major support, we have no choice but
to drop AFFX tonight.

DNA $96.00 -12.50 (-30.00) Well our worst fears came true.
As we mentioned Genentech made their presentation at the
cancer conference this weekend.  Although the results were
preliminary, Herceptin, as a single agent was 26% effective
in treating women with HER2-positive metastic breast cancer.
On the news investors sold shares of DNA, dropping 16% off
the price on Monday.  Seems the buy the rumor sell the news,
mentality is alive and well in the markets.  Today, Genentech
announced they had signed a pact with Vysis covering the
extended use of a Vysis breast cancer test kit.  Although
not a huge deal, it didn't help either as traders knocked
another 11.5% off DNA stock.  Needless to say, this is one
we will walk away from.

IMCL $77.31 -4.75 (-19.44) A Strong Buy rating from analysts
at Prudential couldn't save our play in Imclone.  Robert J.
Toth at Prudential came out this morning with a huge upgrade of
IMCL, from an Accumulate to a Strong Buy.  IMCL joined others
in the biotech sector yesterday and today in seeing investors
knock the legs out from underneath the price of their stock.
As we planned the company did make a positive presentation at
the meeting of the American Society of Clinical Oncology.
Investors returned on Monday with one thing on their mind, SELL.
Unfortunately this is one of those time when buy the rumor, sell
the news, really hurts.  For now we will lick our wounds, and
move on.


No dropped puts this evening.

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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              Tuesday 5-23-2000
Copyright 2000, All rights reserved.                   2 of 2
Redistribution in any form strictly prohibited.


SEPR $90.00 -3.13 (-9.75) The Biotech sector was hampered by
weakness in the broader market, again.  The Amex Biotech Index
($BTK) fell for the fifth consecutive trading day Tuesday,
losing 6.8%, despite the good news flowing from the meeting of
the American Society of Clinical Oncology.  Several companies
have announced key product developments and research findings
at the Biotech conference this week.  If the market stabilizes a
bit, some of that good news could resurface and carry the sector
higher.  While the BTK shed 6.8% Tuesday, our SEPR play held
up relatively well.  Some of SEPR's relative strength stemmed
from traders' anticipation of the company's annual shareholder
meeting scheduled to take place Wednesday.  We might get a split
announcement from SEPR, but given the current market conditions
the company may wait to declare.  Consider an entry at current
levels if SEPR rebounds quickly in the coming days.  Otherwise
wait for SEPR to cross $100 before entering into the play.

ANDW $31.88 -1.00 (-1.00) The roller-coaster ride on the
NASDAQ yesterday gave us a picture perfect entry on ANDW.
Sellers piled on early in the day, driving the stock down to
the $30 support level.  Volume dried up mid-day and then surged
in the afternoon pushing shares up to consolidate near $32.
This level held well as support today, although the broad
market weakness kept ANDW from moving higher.  Near-term
resistance at $33 was tested twice before the sellers returned,
pushing the share price back to near-term support.  Investor
nervousness is keeping the enthusiasm muted, but in light of
the broad market weakness, our play still looks healthy.
The only dark cloud is the increasing volume seen during the
late-day decline, which brought the issue down to the $32
level.  Intraday dips to support continue to provide attractive
entry points, but we need to exercise caution in light of the
weakness on the NASDAQ.  Waiting for a strong move (volume) to
push ANDW through resistance at $33 (also the site of the 5-dma)
still looks like the best conservative entry strategy.

CDWC $110.13 -6.38 (-4.88) Sure it is having a hard time this
week, but CDWC is actually holding its ground fairly well.
The market weakness has dragged the stock down to support at
$108-110, and we need to see this level hold to keep our play
alive.  So what is keeping CDWC afloat?  Remember the annual
shareholder meeting which occurs tomorrow?  There will be a
vote on increasing the number of shares and we could very
likely get a split announcement after the meeting.  CDWC is
in historical split territory above $80, and the stock is deep
into this area.  The other driver for our play is CDWC's strong
growth and as long as revenues and profits remain strong, CDWC
should continue to be a winner.  Overhead resistance between
$114-116 is reinforced by the 5-dma ($114.88) and the 10-dma
($116.38).  Intraday dips to support are buyable, but don't
try to catch a falling knife.  The NASDAQ closed at its lowest
point this year, and continuing weakness is likely to rub off,
draining positive sentiment from our play.  A more conservative
approach would be to wait for buying volume to push CDWC
through support.

RMBS $150.63 -20.25 (-23.13) One analyst today said the declines
seen in the Nasdaq has come on light volume, so they might not
be as meaningful.  Well technically that may be right.  If you
have a position in RMBS, or any other issue, you losses are very
real and very meaningful.  Hopefully, if you tried to buy one
of the dips yesterday or today you had your stops in place and
nursing your wounds.  If you didn't get stop out, thinking it
has got to bounce back, you are now left to begin a disaster
recovery mission.  We mentioned this weekend RMBS had support
at $164 and $150.  So much for $164.  The closing bell helped
keep RMBS from penetrating $150 today, however tomorrow is
another day.  Intraday analysis shows RMBS finally getting a bit
oversold.  A bounce up to resistance at $160 could allow those
with open positions to help repair the damage.  If you have
been patiently sitting on the sidelines waiting for an entry
point, then a bounce off support at $150 could prove to be
an appealing entry for a new play.  However, given the current
investor sentiment if there ever was a time to be prepared to
sell too soon, it would be now.  RMBS did announce after the close,
that shareholders have approved an increase in the number of
authorized shares to 500 million.  The company can now proceed
with it's previously announced 4-for-1 split, which may bring
some buyers back to the table.

SDLI $170.25 -21.75 (-25.75) SDLI was added this past weekend,
and we would hope you have let patience be your guide.  Remember
our place is not to try and convince anyone that they should jump
into a play, just because it showed up on our list.  Entry points
are the key to success.  The fact is this one is down 13% so far
this week and a bottom may or may not be in place yet.  The volume
on the decline the first two days of the week has exceeded 13
million which is fairly substantial indicating their may be more
room to move to go.  Long and short term fundamentals have not
changed.  Unfortunately at this point SDLI is just like many of
the tech issue that have suffered from Fed fears, and a lack of
buying interest.  There is economic data and a speech by Alan
Greenspan in the next few days, which could help bring a few
buyers back to the market.  No company news so far this week to
help prop up the stock, although in these markets it would have
to be darn good news to make a difference.  SDLI closed on support
at $170.  The next levels show up between $155 and $160.  If we
do get a move up, be ready to take profits at a moments notice.
If we see further weakness, continue to be patient.

ABT $42.75 +0.00 (+1.19) In spite of the cynical attitude in
the markets, ABT managed to retain its convincing stance above
historical resistance of $39-$40.  More importantly, the stock
successfully tackled its first line of opposition at $42 and
established a higher level of near-term support.  The next
objective is to see a solid run for the all-time record.  $48.50
is an attainable goal for ABT.  But let's put the odds in our
favor and not throw caution to the wind.  Watch the drug
sector's trend for continuing affirmation.  And if you see a
return to the $40 level, wait for a conclusive direction before
adding more positions.  The 5-dma ($41.24) and 10-dma ($39.71)
can be used as gauges too.  The former technical as an entry
platform and the latter as a blinking warning sign.  Remember
stop losses can be saviors in these wary markets.

PLXS $76.50 -3.00 (-4.00) PLXS is currently hunkered down at
firm support.  This in itself isn't too bad considering we've
seen the share price spike rather quickly off this level in
recent trading.  However PLXS should make a move in the next few
sessions, so be patient.  Look for trading intensifying volume
to signal the next breakout through the intersecting 5 and 10
DMAs, which have recently acted as resistance in the $81-$82
vicinity.  Otherwise you could get caught trading in a very
tight channel.  On the analyst front, Needham & Co is still
confident that PLXS can power higher in the short-term.  On
Monday John McManus reiterated his Strong Buy recommendation and
upped the price target to $98 from $80.  Remember there's still
the chance of a split announcement to give this momentum play a
shot of adrenaline.

UNH $75.44 -0.88 (-0.94) This healthcare provider is not getting
the shaft yet.  The trading range is rather frustrating as the
spreads are generally within a point or two, but take notice UNH
is not succumbing to the negative pressure in the markets.  The
stock has yet to return to old resistance at $70 and is poised
to climb.  This week, UNH's daily highs flirted with last
Thursday's new 52-week record ($78.50) and volume remains
lively.  Of course it's imperative that UNH make a move through
overhead opposition to demonstrate its momentum is intact.
Definitive bounces off the 5-dma ($76.05) are reasonable entries
into this pure momentum play, assuming the market direction and
sentiment are advantageous for calls.  Otherwise, you may want
to play it safer and wait for another break above $78 amid
stronger trading activity.


OPTV $44.97 -3.50 (-6.84) Uncertainty over interest rates,
concerns about high valuations, and pessimistic views over a
pending merger all add up to profits for holders of OPTV puts.
And let's not forget about the flood of stock coming from
insiders now allowed to sell their shares.  All of the
aforementioned events nearly pushed OPTV to its 52-week low
during Monday's trading.  The stock rebounded late Monday
afternoon only to stumble early Tuesday morning.  Also, we saw
OPTV lose over $2 in the final fifteen minutes of trading Tuesday
in conjunction with a spike in volume.  As we previously
mentioned, OPTV is hovering above its 52-week low of $41.25.
That level has proved to be major support for OPTV as we saw in
Monday's trading.  If you're looking for new entry into the play
wait for OPTV to fall past its 52-week low.  If the stock
rebounds from current levels, consider locking in profits if OPTV
moves back above resistance at $50.

NTLI $53.00 -5.38 (-1.75) Rumors circulated last weekend that
NTLI was in the running to buy the UK's biggest Internet service
provider, Freeserve.  Britain's Sunday Times reported that a
person close to Freeserve said NTLI was a serious contender to
buy the company.  NTLI officials made no comments regarding the
speculation of a buyout.  The rumor talk helped NTLI to buck the
market trend Monday as the stock rallied over $3.  But the merger
talk quickly dissipated Tuesday as investors were reminded of
the problems that NTLI currently faces.   NTLI edged closer to
its 52-week low of $51.06 during Tuesday's trading.  If NTLI
continues to slide, you might consider an entry at current
levels.  However, if you're looking for a more definitive entry
point, wait for traders to push NTLI below its 52-week low before
entering into the play.  If the merger talk resurfaces, watch for
NTLI to bump into resistance at $59, consider an entry at that
level if the sellers return.

ANAD $28.69 -9.06 (-15.56) Look out below!  Tech stocks tumbled
Tuesday in part from a slowdown in the chip sector.  The fuel
for the tech sell-off was provided by the book-to-bill ratio for
semi equipment makers for the month of April.  The semis reported
$142 in orders for every $100 of product shipped in April,
compared with $146 of orders in March.  Investor sentiment has
left the semi sector faster than it arrived, leaving the weaker
companies to die.  Okay, ANAD isn't dying, but the company is
struggling to stay alive.  Faced with slowing demand from
customers, specifically slowing orders from ERICY, ANAD is
sinking fast.  The concern over ANAD's future has been reflected
in the past two days as traders turned over four times its ADV
during Tuesday's 24% decline.  That's after ANAD fell on five
times its ADV during Monday's meltdown!  The selling is in full
swing, consider an entry at current levels if the selling
continues.  However, if ANAD enjoys a relief rally, wait for the
rally to subside and watch for the selling to return.

INCY $50.00 -4.13 (-7.75) Like a grape in the hot summer sun,
INCY is shriveling into the perfect raisin and withering on the
vine - just what we like in a put play!  As a member of the
unloved biotech sector, don't look for that trend to reverse
anytime soon.  While efforts to pop its head above water were
somewhat successful through this morning's opening bell where it
reached $57.81, the drowning continued in the sector.  INCY lost
$6 in the last hour of trade as intraday volume spiked up, even
as daily volume remained very low compared to the ADV.  It's not
that sellers are dumping at any price, but the buyers are nowhere
to be found.  Bid prices keep dropping with spreads increasing.
If the market remains crummy for a few days, consider an entry on
a bounce south of $53.  There is no support from here all the way
to $43, so enjoy the ride.  Just beware of a market and/or sector
reversal that could come from nowhere to derail this play.  It
wouldn't hurt to keep your eye on the BBH (biotech sector HOLDRS)
for clues in addition to your other indicators.

AZPN $20.13 -1.25 (-2.25) Continuing to slide further downhill,
AZPN is rapidly approaching major support.  The bottom of the
descending channel coincides with support at $18, which dates
back to November of last year.  The technical picture is gloomy
as volume continues to be heavy (60% over the ADV) and the
string of red candlesticks is getting longer by the day.  Adding
to the downside pressure is the overall market weakness, driven
by the continuing lack of buyers.  Periodic news announcements
relating to products and industry alliances have been ignored
by investors as they continue to unload AZPN shares.  Throughout
the most recent decline, the 5-dma ($22.63) has provided
consistent overhead resistance.  Use this level as a good point
to initiate new positions as AZPN rolls over and resumes its
slide.  Today, the stock looked to be building intraday support
near $20, so exercise caution and keep your stops in place to
preserve your profits.

FDRY $58.88 -0.81 (-6.63) Here's a play we won't complain about.
The sentiment in the broad markets has helped to push FDRY further
south.  Foundry is now hit another support area from last fall near
$58.00.  In watching FDRY trade the past two sessions, it really
appears to be trying to find a bottom.  FDRY is down another 10%
for the week, with the trend still pointing south.  If you have
open positions in FDRY move your stops down, and enjoy the ride.
If for some reason, (right now we don't know exactly what it
would be) we do see a change in sentiment or a big bounce in the
major indices, it certainly is possible Foundry would participate.
Technically FDRY is oversold and over due for a bounce.  We didn't
say a turn-around, we said a bounce, although long-term players
could begin top dabble at these levels.  According to Forbes.com
Foundry did make gains in repositioning itself in the networking
industry in the first quarter, at the expense of Nortel.  As long
as buyers continue to be a scarce commodity on Wall Street, we
would view further weakness as a chance to join in.

NTOP $26.06 -1.19 (-5.06) NTOP tanked along with the rest of the
techs on Monday as apprehensive investors watched from the side-
lines.  The overall Market volume was thin, yet NTOP traded on
average activity.  Immediately at the open, NTOP took a running
leap off the 5 and 10 DMAs and landed on the $25 ledge.  The
swift descent left a narrow window of opportunity to get into
this technical play.  However entries off the intraday highs
near the $28 level could be found in today's session.  The next
stop for support is at $20 before it rivals the all-time low of
$15.  Again recall NTOP hasn't seen the underbelly of $40 since
the IPO days of July/August 1999.  With that in mind, use
trailing stops to protect against a buying spree.  Look for
subsequent downward moves on stronger volume for confirmation.
In the news, Net2Phone announced that retailer CompUSA will
distribute its new YAP (Your Alternative Phone) Internet
telephony product line nationwide.

HLIT $39.00 -4.94 (-7.13) The pattern on lower-highs and lower-
highs gives promise that we haven't yet reached the bottom of
this run.  The bearish sentiment and petrified traders are no
doubt playing right into our hands.  This is especially true
when it comes to HLIT, which has its own set of investor
worries.  In the past two sessions HLIT slipped another 15.5%,
or $7.13 on respectable volume!  The 52-week low is still quite
a ways down at $23.25, which leaves plenty of room for further
regression.  But first, we've got to get past the next level of
historical support in the vicinity of $30.  At this point, $43
and $44 are serving as intraday resistance so use these marks as
guides to potential entry points into this momentum play.
Conservatively look for a definitive descent through $38.75,
today's low, to confirm the downtrend.


STT - State Street Boston Corp. $119.25 +3.25 (+6.13 this week)

State Street has two primary business lines:  institutional
investor services and investment management.  The company caters
to the cash rich:  mutual fund and pension plan managers,
investment companies, large businesses, government organizations,
and high-net-worth individuals.  State Street has developed
advanced software to assist clients with assessing risk and
managing their investments.  A global player in the investment
world, it has offices across the US and in 23 other countries.

What interest rate worries?  Who's Alan Greenspan?  Since March
the market has headed south over concerns of rising interest
rates.  All the while, STT took a different path and headed
north.  And the stock just keeps climbing higher in the face of
the growling bear and rising interest rates.  Tuesday marked an
all-time closing high for STT, on healthy volume to boot.  Wall
Street remains bullish on STT, and here's why.  The company is
diversifying out of old economy banking activities and into
custodial services and money management.  STT is moving away from
the businesses of traditional banks, such as trading and lending.
Analysts believe that the company's new strategy will result in
an expanded multiple and an earnings growth rate of 15%.  The
bullishness over STT is evident among Wall Street analysts.
Last week, DB Alex Brown reiterated their Strong Buy rating on
the stock, and said STT is in the leading position in its market
and the stock continues to warrant a premium valuation.  The
stock broke away from a four-week consolidation earlier this
month, and has climbed to new highs ever since.  STT has used its
10-dma as support during its recent rally.  Over the past two
weeks, every time STT traced a new high it has subsequently
consolidated its gains back down to its 10-day.  That leaves us
with two ways to gain entry into the play.  First, look for an
entry point if momentum carries the stock higher, as the only
resistance STT faces is its intra-day high Tuesday of $121.25.
Or, if profit takers show up in the coming days, look for an
entry near the 10-day, currently at $112.50.  Make sure to
confirm any decline with light volume as a sign of profit taking!

Further proof that STT is moving into the new economy came
Tuesday when the company announced it has developed an advanced
electronic order management system for institutional investors.
The new software, named Global Link, is at the core of STT's
e-finance initiative for institutional investors and will
serve for introducing new applications and services.

BUY CALL JUN-110 STT-FB OI= 76 at $13.38 SL=10.00
BUY CALL JUN-115*STT-FC OI=178 at $10.50 SL= 7.25
BUY CALL JUN-120 STT-FD OI=209 at $ 7.88 SL= 5.50
BUY CALL JUL-115 STT-GC OI=  0 at $14.75 SL=10.75

SELL PUT JUN-110 STT-RB OI= 32 at $ 3.50 SL= 5.50
(See risks of selling puts in play legend)

Picked on May 23rd at  $119.25    P/E = 29
Change since picked      +0.00    52-week high=$121.25
Analysts Ratings     3-4-7-0-0    52-week low =$ 55.50
Last earnings 03/00  est= 0.87    actual= 0.92
Next earnings 07-14  est= 0.89    versus= 0.75
Average Daily Volume =   846 K

ALL - Allstate Corp. $28.69 +0.94 (+1.94 this week)

Allstate in engaged in three primary businesses; Property-
liability Insurance, Life Insurance, and the Savings Business.
The Property-liability segment provides private passenger auto
and homeowner insurance policies in all 50 states, Canada and
Germany.  Life insurance products include whole life and term
life insurance as well as universal life, and variable life
products.  In the savings area, ALL provides deferred and
immediate annuities and group pension products like guaranteed
investment contracts and retirement annuities.

After bottoming in mid-March, insurance stocks have been on the
rise, aided by investors' search for stability.  Tech stocks
continue to suffer amid valuation and interest rate concerns
and financial stocks appear to be one of the favorite safe
havens.  After consolidating between $22-25 for about six weeks,
ALL began attracting new cash in mid-May.  As volume picked up,
the share price pushed confidently through the 200-dma (then at
$25.88), and is now continuing its climb.  Support near $25
looks solid and despite weakness on all the major indices, ALL
has moved strongly over the past week.  Volume is picking up
again (just over the ADV today), and today's closing price marks
the stocks highest close since mid-November.  Resistance will
likely materialize near $30, followed by $32, but as long as
the financials remain in favor, look for ALL to be popular.  The
5-dma ($27.13) is supporting the current move, and with all of
the major moving averages turning up, and the stock closing at
today's high, ALL could be set for a nice run.  There has been
very little intraday weakness over the past week, so we would
consider a move through today's high as a good trigger for new
entries.  Near-term support near $27 will provide a better
entry in the event of profit taking, but make sure the stock
bounces before putting your money at risk.  Volume continues to
be the key; as long as it remains strong, expect the recovery
to continue.

Announcing a unique alliance today, ALL is teaming up with Home
Depot. The deal allows insurance adjusters to work directly with
Home Depot stores to provide repair materials and installation
at reasonable prices.

BUY CALL JUN-25 ALL-FE OI=5001 at $4.25 SL=2.50
BUY CALL JUN-30 ALL-FF OI=1987 at $1.44 SL=0.75
BUY CALL JUL-25*ALL-GE OI=7949 at $4.88 SL=3.00
BUY CALL JUL-30 ALL-GF OI=3035 at $2.38 SL=1.25

SELL PUT JUN-25 ALL-RE OI=1917 at $0.69 SL=1.50
(See risks of selling puts in play legend)

Picked on May 23rd at    $28.69     P/E = 10
Change since picked       +0.00     52-week high=$39.31
Analysts Ratings     7-6-13-0-0     52-week low =$17.19
Last earnings 04/00   est= 0.65     actual= 0.62
Next earnings 07-20   est= 0.68     versus= 0.75
Average Daily Volume = 3.33 mln

P - Phillips Petroleum $54.13 -0.31 (+0.94 this week)

Phillips is an integrated petroleum company engaged in oil
and gas exploration and production worldwide; gas gathering,
processing and marketing in the United States; refining,
marketing and transportation operations primarily in the United
States; chemicals and plastics manufacturing and sales around
the globe; and technology development.  Founded in Bartlesville,
Okla., in 1917, the company has 14,600 employees.

Can't believe your eyes?  That's right Phillips Petroleum is
on list of favorites.  Ok, so it's not a high flying tech stock
that's down 30 to 70% from its highs earlier in the year.  So
it moves at a snails pace, well, ok you got us there.  Care to
compare the gains in the last 60-90 days?  In all seriousness,
Phillips hit rock bottom in late February at $35.94.  With the
price of oil becoming another issue for investors to face, P
began to turn around in early March and has gained about 51%
since that time.  Many times flexibility can be a key to
profitable trading.  Not only knowing when to take a profit or
a loss but knowing when to look for other sectors or industries,
regardless of how exciting the plays may be.  The strength of the
move has not only come on the higher price of oil.  The analysts
have been pounding the table as well.  The most recent came earlier
this month when AG Edwards reiterated a Buy rating and a price
target of $60.  The petroleum company beat street estimates for
its most recent quarter by about 6%.  While we realize some of
this may be old news, it seems to be what has kept investors
in the market buying share of the company's stock.  The
uncertainty at the Nasdaq and the higher price of oil, have
made Phillips a very attractive buy for some time now.  A look
at the technical picture suggests today dip back to the $54
area could be providing us with attractive entry point as well
for our new play.  More traders seem to be giving "P" a chance,
as the volume has picked up to over 1.3 million shares the past
two days.  If we get a pullback, the refiner will find support
at $53 and $52.  As we said you find the volatile moves
seen in the tech stocks, but you may just find more dollars
in your account.

Last week the company found a gusher of demand in the corporate
bond market.  They sold $2.5 billion of bonds to help pay for
its $7.0 billion purchase of Atlantic Richfield Co's (ARCO)
Alaskan oil and gas assets.

BUY CALL JUN-50*P-FJ OI=1118 at $4.88 SL=3.00
BUY CALL JUN-55 P-FK OI= 257 at $1.63 SL=0.75
BUY CALL AUG-50 P-HJ OI= 395 at $6.38 SL=4.38
BUY CALL AUG-55 P-HK OI= 212 at $3.38 SL=1.75

Picked on May 23rd at  $54.13    P/E = 18
Change since picked     +0.00    52 week high=$57.25
Analysts Ratings   6-12-6-0-0    52 week low =$35.94
Last earnings 04/00 est= 1.00    actual= 1.06
Next earnings 07-27 est= 1.41    versus= 0.46
Average Daily Volume =  875 K


PCLN - Priceline.com $40.50 -3.94 (-4.25 this week)

Priceline.com has pioneered a type of e-commerce known as a
"demand collection system" that enables consumers to use the
Internet to save money on a wide range of products and services,
while enabling sellers to generate incremental revenue.  Using a
simple consumer proposition (name your price), PCLN collects
individual customer offers (guaranteed by a credit card) for
airline tickets, hotel rooms, groceries, long distance, and new
cars at a price set by the customer, then communicates that
demand directly to participating sellers or to their private
databases.  Consumers agree to hold their offers open for a
specified period of time to enable priceline.com to fulfill their
offers from inventory provided by participating sellers.  Once
fulfilled, offers generally cannot be canceled.  By requiring
consumers to be flexible with respect to brands, sellers and/or
product features, PCLN enables sellers to generate incremental
revenue without disrupting their existing distribution channels
or retail pricing structures.

William Shattner of Star Trek fame has made a second career out
of being a pitchman for PCLN.  While he's made PCLN "big, really
big", PCLN has not returned the favor to its shareholders in the
form of a higher stock price.  PCLN has a few flaws that the
market is beginning to notice.  First of all it reports revenues
in terms of gross ticket sales as opposed to commissions
collected from ticket sales.  That may cause PCLN to have to
restate sales in the future to satisfy SEC guidelines.  Second,
their "patented" technology isn't all that unique (and probably
unenforceable) - plenty of proxy shopping engines like My Simon
can already do comparison shopping for the best price.  Third,
Priceline's model is not in the best interest of consumers.  "OK,
you've gone too far.  How's that?"  Remember, consumers tell PCLN
what they want to pay.  Guess to low and you lose.  Guess too
high and you overpay.  Priceline pockets the difference.  If the
Internet is to be the great equalizer bringing down prices to
benefit consumers, it won't be long before consumers figure
out the best deal comes directly from the seller and not the
middleman like Priceline.  It's just like ECNs ultimately
replacing the trading floor specialist in stocks or options.  Oh
yes, did we mention that PCLN has over $1 bln in annual losses
compared to just $745 mln of sales?  Anyway, the technical
picture is no better now that PCLN has slipped under historical
support of $50 in the last four trading days, and closed at a new
all-time low today.  Like other Internet issues, a lack of buyers
is forcing the bid price down.  Low volume reflects this.  You
may want to wait for a better entry than the current price - say
if PCLN hits $45 then bounces south.  Otherwise, with the shabby
fundamentals and no support in site, we think PCLN is headed for
a free fall.  Use your stops just in case PCLN actually reports
some good news.

BUY PUT JUN-45*PUZ-RI OI=6327 at $7.13 SL=5.00
BUY PUT JUN-40 PUZ-RH OI=1499 at $4.00 SL=2.50
BUY PUT JUN-35 PUZ-RG OI= 378 at $2.00 SL=1.00

Average Daily Volume = 3.7 mln

ICIX - Intermedia Communications $28.19 -1.63 (-2.69 this week)

Intermedia Communications is an integrated communications
provider headquartered in Tampa, Florida.  They offer local and
long-distance services, enhanced data transmission, Internet
access, and Web hosting to businesses and government agencies.
Its fiber-optic network stretches across 14 southeastern US
cities and they have a 5,000 mile long-haul microwave
transmission system in the Northeast.  Their services are
offered throughout the US and in select international markets.

The NASDAQ dive is providing the perfect environment for this
struggling telecom to track lower.  Last Thursday ICIX received
another nudge that sent it teetering precariously at a bottom
support of $32 and $33.  Fearful tech investors concerned about
future rate hikes that could come as early as next month and
with more economic date due out this week, ICIX didn't have a
chance.  Friday's volume levels on the decline were more than
double as ICIX shareholders sold off their holdings in a frenzy.
The share price lost a substantial 7.5%, which pushed it further
away from the 10-dma (now at $32.96).  This prevailing technical
line should be paid attention to in the upcoming days.  Any
positive move above this indicator warns of an impending
reversal.  While we don't expect that to happen keep it in mind.
Currently $30 is serving as the intraday resistance and today's
close of $28.19 is our near-term bottom.  ICIX's finish on its
intraday low is quite bearish, but a better show of volume would
have been the icing on the cake.  Look for ICIX to slip under
the $25 level on respectable volume and ultimately take a plunge
in the direction of the all-time low at $18.13.  As long as
there is uncertainty and apprehension in the coming days, ICIX
should fare well as a profitable put play.  Although always keep
a sharp look out though for those pesky, aggressive-oriented
bargain hunters!

BUY PUT JUN-35*QIX-RG OI=167 at $6.75 SL=4.75
BUY PUT JUN-30 QIX-RF OI=297 at $3.50 SL=1.75

Average Daily Volume = 1.27 mln


NTLI - NTL Inc. $53.00 -5.38 (-1.75 this week)

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.

Most Recent Write-Up

Rumors circulated last weekend that NTLI was in the running to buy
the UK's biggest Internet service provider, Freeserve.  Britain's
Sunday Times reported that a person close to Freeserve said NTLI
was a serious contender to buy the company.  NTLI officials made
no comments regarding the speculation of a buyout.  The rumor talk
helped NTLI to buck the market trend Monday as the stock rallied
over $3.  But the merger talk quickly dissipated Tuesday as
investors were reminded of the problems that NTLI currently faces.
NTLI edged closer to its 52-week low of $51.06 during Tuesday's
trading.  If NTLI continues to slide, you might consider an entry
at current levels.  However, if you're looking for a more
definitive entry point, wait for traders to push NTLI below its
52-week low before entering into the play.  If the merger talk
resurfaces, watch for NTLI to bump into resistance at $59,
consider an entry at that level if the sellers return.


NTLI will be testing its 52-week low of $51.06 if the selling
continues.  Today, it traded in a range between $58.63 and $53,
closing on its low.  Given this range, entry into the play can
be taken on intraday spikes.  A more conservative entry would be
after NTLI breaks through short-term support of $53.  Today's
volume was light across the board and buying interest appears to
be non-existent.  Investors continue to be weary of getting long
before the economic numbers on Thursday and the holiday weekend.

BUY PUT JUN-60*IQS-RL OI=110 at $8.75 SL=6.75
BUY PUT JUN-55 IQS-RK OI=111 at $5.38 SL=3.75

Average Daily Volume = 1.88 mln


The Stock Market: A Great Equalizer...

Monday, May 22

The market ended lower today as investors unloaded both industrial
and technology issues on concerns that rising interest rates will
affect future earnings. The blue-chip Dow Jones average dropped 84
points to close at 10,542, recovering from session lows after the
program trading curbs were initiated in the morning session.  The
Nasdaq composite ended down 26 points at 3,364.  The index dropped
to 3,172 during the session, a new midday low for the year.  The
broader measures of the market fell with the S&P 500 index down 6
points to 1,400.  Trading volume was moderate with the NYSE at 868
million shares while the Nasdaq enjoyed higher than average volume
of 1.62 billion shares.  The 30-year bond gained 8/32, with the
yield falling to 6.19%.

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

Lennox Intl.    LII    SEP12C/SEP10P   $1.25   debit   straddle
Insight Comm.   ICCI   AUG15C/AUG15P   $3.93   debit   straddle
National Svc.   NSI    SEP25C/JUN25C   $1.18   debit   calendar
Pep Boys        PBY    OCT5C/JUN7C     $2.25   debit   diagonal

Our new straddles, Lennox and Insight Communications both offered
reasonable entries in the morning session.  National Service and
Pep Boys were less cooperative with the initial debits slightly
higher than desired and we will continue to track the plays for
the target entry prices.  The Martek position did not provide an
adequate opening premium to warrant establishing the bullish
credit spread.

Portfolio plays:

Inflation fears, earnings worries and valuation concerns combined
to drive the market lower today.  The selling began early in the
session and brought both major indices lower.  Technology issues
were the hardest hit and at its worst level, the Nasdaq fell to a
new low for the year.  Fortunately, stocks rallied back as traders
decided prices were getting to levels low enough to discourage the
Fed from raising rates aggressively again at its policy meeting in
late June.  Analysts noted that much of the activity was generated
by retail buying and with little economic news to guide the market,
many experts believe investors will continue to worry about the
prospect of future interest-rate increases and how that would
affect corporate earnings.  Last week the Fed warned of more rate
hikes when it boosted the cost of borrowing by an aggressive 50
basis points.

The Dow's biggest loser was General Motors (GM) which fell almost
$10 after the auto-maker said the offer to exchange shares of GM
Hughes Electronics (GMH) stock was significantly oversubscribed.
Technology stocks were generally lower but in the broad market,
agricultural products, insurance and computer networking issues
moved higher.  Automobile, oil service and biotechnology stocks
consolidated but a number major oil stocks traded higher even as
crude oil prices fell.  The Spreads/Combos portfolio offered a
mixture of activity with big cap issues such as Ciena (CIEN) and
Sepracor (SEPR) falling to recent lows while Ditech (DITC) and
SCM Microsystems (SCMM) rebounded in afternoon trading.  Smaller
priced stocks also performed well in specific sectors.  Allstate
(ALL), Dean Foods (DF), Nabisco (NGH) and Summit Bancorp (SUB)
all moved higher.  A small group of mid-cap telecommunications
issues held their own during the bearish session.  Andrew (ANDW),
and Vodaphone (VOD) both performed well and for the moment, Covad
Communications (COVD) appears to have a fair chance of success.

National Computer Systems (NLCS) dropped $6 in the morning session
moving the overall credit for our straddle to $12.  That's a big
contrast to the $12 credit available just a few days ago when the
stock rallied above $57.  This position has exceeded all possible
expectations for a favorable straddle with a 35% change in price
in less than one week.  A small (simultaneous exit) profit was
available on both sides of the position and a total credit of $20
could have been achieved with aggressive trading.

Tuesday, May 23

Equity markets declined again today amid uncertainty about the
growth of the economy and future interest rates.  The Dow Jones
Industrial Average slipped 120 points to 10,422 and the Nasdaq
Composite Index tumbled 199 points to 3164.  The S&P 500 Index
dropped 26 points to 1373.  Market breadth ended negative on the
Big Board with declines outpacing advances 1,577 to 1,338 on
volume of 869 million shares.  Volume on the Nasdaq reached 1.3
billion shares with declines trouncing advances 2,765 to 1,268.
The 30-year bond rose 12/32 to 101 4/32, pushing its yield down
to 6.16%.

Portfolio plays:

The market's woes continued today as investors lightened their
portfolios amid interest rate worries and valuation concerns.  A
fast growing economy and the potential for future inflation have
combined to reduce the overall enthusiasm for stocks.  A number of
mini rallies began during the session with traders buying issues
that had been reduced to bargain prices but on the whole, there
was little conviction in the recovery.  Investors are simply no
longer interested in high-priced technology stocks; those that
appear overvalued in an environment of rising interest rates.
Many analysts now believe that even fast growth won't be enough
to justify their recent high prices.  Industrial stocks also
suffered as the flight to quality faded among lower earnings
forecasts and a pessimistic economic outlook.  Experts believe
this attitude will prevail at least through the end of the week
when the next wave of economic data becomes public.  On Friday,
the Commerce Department will issue its preliminary data on first
quarter gross domestic product, and the National Association of
Realtors will report on existing home sales for last month.  Both
reports could offer some indication of whether the Fed's interest
rate increases are successfully slowing the economy.

A number of market leading stocks slumped during the session and
our portfolio was affected by the sell-off.  Fortunately, we also
have a large selection of safety and hedge positions to offset the
market's recent decline.  MGA International (MGA) was the surprise
issue of the session.  MGA's share value rose $1.43 to a closing
price of $51.25, completing a recent bullish break-out.  Our new
calendar spread has doubled in value in just over one month.  In
the finance group, Allstate (ALL) rallied $1 to a recent high near
$29 as enthusiasm for the merger speculation continues.  Our cost
basis is near $22.  Bank One (ONE) and Summit Bancorp (SUB) also
participated in the upside activity.  Other sector specific issues
were on the move.  Mattel (MAT) climbed to a key technical area
near $13 and our new position in National Service (NSI) appears to
be on the right track.  A few of the oil service companies edged
higher and Falcon Drilling (FLC) was the top performer in that
group.  There are of course a few bullish spreads that may require
early exits.  The candidates are Ciena (CIEN), Ditech (DITC), SCM
Microsystems (SCMM) and Covad Communications (COVD).  These plays
now have the potential for closing trades, downward adjustments or
roll-outs to future expiration periods, depending on the activity
during the next few sessions.  Hopefully, the recent sell-off will
reach a climax in the coming days and the market will recover with
a new bottom firmly established for next month's FOMC meeting.

Summary of Monthly Positions (as of May 19):

Stock  Pick     Last     Position    Credit   Cost    G/L   Status

ADBE  $123.44  $109.56  MAY95P/100P  $0.68   $0.00   $0.68  Closed
AFM   $70.31   $68.19   JUN55P/M60P  $0.56   $0.88  ($0.31)  Open
AMAT  $101.88  $80.19   MAY70P/M80P  $1.00   $0.00   $1.00  Closed
ANTC  $51.18   $48.13   MAY65C/M60C  $0.75   $0.00   $0.75  Closed
APA   $57.68   $58.88   JUN40P/M45P  $0.62   $0.75  ($0.12)  Open
ARW   $41.68   $36.50   MAY30P/M35P  $0.38   $0.00   $0.38  Closed
BFO   $64.75   $63.00   JUN50P/M55P  $0.56   $0.62  ($0.06)  Open
CCU   $76.18   $73.81   JUN65P/M70P  $1.00   $1.25  ($0.25)  Open
CIEN  $137.25  $116.50  JUN85P/M90P  $0.62   $1.38  ($0.75)  Open
CY    $52.93   $46.25   MAY40P/M45P  $0.62   $0.00   $0.62  Closed
DITC  $110.00  $97.50   JUN65P/M75P  $1.18   $2.25  ($1.06)  Open
GE    $55.33   $51.88   MAY48P/M50P  $0.23   $0.00   $0.23  Closed
HAL   $44.18   $50.88   MAY35P/M40P  $0.50   $0.00   $0.50  Closed
NBR   $40.68   $42.25   MAY35P/M37P  $0.50   $0.00   $0.50  Closed
OMC   $83.56   $83.75   MA105C/100C  $0.75   $0.00   $0.75  Closed
PDLI  $101.50  $132.63  MAY60P/M70P    No     Play   $0.00  Closed
RCOT  $9.44    $9.06    MAY15C/M12C    No     Play   $0.00  Closed
SCMM  $94.50   $76.69   JUN65P/M70P  $0.12   $1.88  ($1.62)  Open
SII   $83.68   $79.81   MAY70P/M75P  $0.50   $0.00   $0.50  Closed
TER   $103.38  $84.25   MAY65P/M75P  $0.93   $0.00   $0.93  Closed
TIN   $49.56   $54.06   MAY60C/M55C  $0.75   $0.88  ($0.12) Closed

Note:  The Temple Inland (TIN) play finished at maximum profit,
unfortunately, our position was closed early to potential losses.
The SCM Microsystems (SCMM) position was rolled forward and down
to attempt a "break-even" exit with June-$70 options.

A credit spread is profitable if the cost to close the position
is less than the initial premium received for the spread.  However,
because we track the plays based on the current closing cost/value,
the gains for credit spreads will rarely be reflected until the
play is closed.
Stock  Pick    Last     Position     Debit   Value    G/L   Status

DF    $27.50  $30.06  AUG30C/JUN30C  $0.38   $1.12   $0.62   Open
HAL   $40.18  $50.88      MAY40C     $4.31   $6.12   $1.81  Closed
LNY    $7.06   $8.44   OCT7C/JUN7C   $0.62   $0.50  ($0.12)  Open
MGA   $46.00  $51.06  AUG55C/JUN55C  $0.38   $2.12   $1.75   Open

Note:  The Halliburton position closed on the Monday following
April's expiration.

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position.  However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new option against the long position, the
net cost should decline or the position value should increase.
                    - COVERED-CALLS WITH LEAPS -
Stock  Pick    Last     Position    Debit   Value    G/L    Status

BSX   $28.31  $25.94  JAN22/JUN30C  $6.88   $6.25  ($0.62)   Open
CS    $25.43  $23.13  JAN15/JUN25C  $7.50   $10.12  $2.62    Open
JNJ   $81.50  $89.06  JAN85/JUN90C  $8.50   $8.00  ($0.50)   Open
MDT   $39.38  $52.88  JAN37/JUN50C  $3.00   $12.25  $9.25    Open
NETA  $32.31  $21.19  JAN15/JUN25C  $8.75   $8.00  ($0.75)   Open
NETA  $25.12  $21.19  JAN15/JUN25C  $3.00   $8.00   $5.00    Open
ONE   $28.56  $30.63  JAN20/JUN25C  $5.00   $5.00   $0.00    Open
SEPR  $84.00  $99.75  JAN60/JUN95C  $30.00  $36.50  $6.50    Open
VOD   $49.25  $36.31  JAN45/JUN45C  $2.00   $7.00   $5.00    Open
Stock  Pick    Last     Position     Debit   Value    G/L   Status

ANDW  $27.38  $32.88  JUL15C/JUN25C  $5.75   $9.50   $3.75   Open
ASH   $35.18  $34.94  JUN30C/MAY35C  $3.88   $5.00   $1.12  Closed
MAT   $13.06  $12.56  JUL10C/JUN12C  $2.00    New     Play   Open
NGH   $19.68  $20.88  SEP15C/JUN20C  $4.50   $4.00  ($0.50)  Open
SUB   $27.00  $26.13  JUL20C/JUN25C  $3.50   $4.25   $0.75   Open
TX    $55.00  $57.25  OCT40C/JUN55C $13.00  $13.50   $0.50   Open

* A number of these positions were closed early to protect profits
  or prevent (limit) potential losses.

The diagonal spread is profitable if the value of the position
exceeds the initial debit (or cost-basis) at the expiration of
the long position.  However, because we track the plays based on
the current closing cost/value, the gains for diagonal spreads
will rarely be reflected until the play closes.  Each month, as
we sell a new option against the long position, the net cost
should decline or the position value should increase.
Stock   Pick     Last     Position    Credit  Cost   G/L   Status

ABGX  $102.88   $88.00   MA145C/80P   $2.12  $0.00  $2.12  Closed
BFO    $63.75   $63.00   MAY65C/60P   $2.88  $0.00  $2.88  Closed

Credit strangles are profitable if both positions remain OTM until
expiration.  The cost-to-close price can be used to compare the
initial opening credit to the current spread value.
Stock  Pick    Last     Position    Debit   Value    G/L    Status

ALL   $26.00  $26.75   JUN20C/22C   $2.12   $2.00  ($0.12)   Open
ASH   $35.18  $34.94   JUN30C/35C   $2.88   $3.00   $0.12    Open
ATHM  $19.94  $19.88   JUN15C/17C   $1.75   $1.75   $0.00    Open
CA    $61.56  $49.44    MAY-55CC   $48.56  $49.44   $0.88   Closed
COVD  $26.88  $22.50   JUN20C/22C   $1.88    New     Play    Open
FLC   $24.06  $23.31   JUN17C/22C   $3.62   $3.62   $0.00    Open
K     $26.25  $28.00   MAY22C/25C   $1.88   $2.50   $0.62   Closed
MBK   $14.00  $12.69   MAY12C/15C   $1.38   $1.38   $0.00   Closed
MTSN  $49.12  $38.81   MAY40C/45C   $4.00   $3.75  ($0.25)  Closed
OCLR  $16.56  $16.31   MAY15C/17C   $1.50   $1.50   $0.00   Closed
OXHP  $19.06  $22.44   MAY15C/17C   $2.06   $2.50   $0.43   Closed
TBI   $18.88  $21.00   MAY15C/17C   $2.12   $2.50   $0.38   Closed
UCL   $30.19  $37.88   MAY25C/27C   $2.00   $2.50   $0.50   Closed
WLA  $103.94 $120.50   MAY85C/95C   $8.75   $9.88   $1.12   Closed

A debit-spread is profitable if the value of the position exceeds
the initial cost of the spread when the play is closed.  However,
because we track plays based on the current cost/value, potential
gains may not be reflected until both positions are closed.
Stock  Pick     Last    Position    Debit    M/V     C/V    Status

AEG   $80.50   $73.81  AUG80C/80P  $13.00  $12.75   $9.25    Open
APLX  $14.62    $6.75  JUL15C/15P   $6.50   $9.00   $8.25   Closed
JNY   $30.00   $27.13  AUG30C/30P   $7.12   $7.75   $6.25    Open
LIPO  $16.50   $15.44  AUG15C/17P   $5.88   $6.00   $5.75    Open
MTZ   $73.00   $76.56  JUL75C/70P  $13.00  $18.00  $12.25   Closed
NLCS  $49.56   $46.25  JUL50C/50P   $9.62  $10.75   $8.75    Open

          M/V = Maximum Value  C/V = Current Value

A debit-straddle is profitable when the value of the position
exceeds the initial cost.
Note: We trade the Spreads portfolio just as we would trade our
personal account and the ongoing narrative is a service we provide
to help novice traders understand how various positions might be
opened and closed.  It is not intended to substitute for your own
trading techniques nor does it replace your duty to manage the
positions in your portfolio.  We post a list of the current plays
after each expiration period and the summary is a reasonable
representation of the positions offered during the month.

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

These positions are based on recent increased activity in the
stock and underlying options.  Each of these plays offer favorable
risk/reward potential but they should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.

USB - U.S. Bancorp $25.06  *** Merger Speculation? ***

U.S. Bancorp is a multi-state bank holding company which offers
full-service brokerage services at approximately 100 offices
through a wholly owned subsidiary.  The company also has various
non-bank subsidiaries engaged in financial services.  U.S. Bancorp
provides banking services through its subsidiary banks to both
domestic and foreign customers and correspondent banks.  These
services include consumer banking, commercial lending, financing
of import/export trade, foreign exchange and investment services.
The company, through its subsidiaries, also provides services in
trust, commercial and agricultural finance, data processing,
leasing and brokerage services.

Even with the recent market demise, traders are speculating on USB
call options amid rumors of consolidation in the active Financial
Services group.  The Minneapolis-based company has been rumored as
a takeover target and last week TheStreet.com reported Firstar
(FSR) could be readying a merger offer for a large Midwestern bank.
USB was listed among Firstar's potential targets.  Regardless of
the rumors, this issue appears to have made a successful technical
recovery, moving above a recent resistance area near $22-23.  Our
play offers plenty of time to profit from the new bullish trend.

PLAY (long term - bullish/diagonal spread):

BUY  CALL  DEC-20.00  USB-LD  OI=9     A=$7.00
SELL CALL  JUN-27.50  AET-FY  OI=3935  B=$0.75

Chart =
SDW - Southdown  $63.25  *** Merger Speculation ***

Southdown operates a number of Portland Cement manufacturing
plants located in various areas of the United States plus an
extensive network of cement distribution terminals.  Southdown
also mines, processes, and sells construction aggregates and
specialty mineral products in the eastern half of the U.S. and
in California, and installs highway safety systems such as
guardrails, traffic signals, highway signage and lighting.  In
addition, the company markets ready-mixed concrete products in
two of its largest cement markets, California and Florida.

The second largest cement maker in the U.S. has been on the move
amid speculation of a takeover by the British company Blue Circle
Industries Plc (BCI).  Now the news is public with Sunday's report
that the two companies are in preliminary talks for a merger that
could be worth about $3 billion.  For Blue Circle, a merger with
Southdown would give it a major presence in the United States in
the consolidating cement industry and help strengthen its position
in the international market.  Blue Circle discussed a potential
merger with SDW late last year, but those talks broke down on
differences in valuation.  Southdown on declined to comment on the
new talks but the company has been on the auction block since March,
when it hired the Lehman Brothers Investment Brokerage to help it
find ways to boost shareholder value.

Speculation on the outcome of the current meeting should keep this
issue well above our cost basis for the next few weeks.

PLAY (very conservative - bullish/credit spread):

BUY  PUT  JUN-50  SDW-RJ  OI=28   A=$0.38
SELL PUT  JUN-55  SDW-RK  OI=278  B=$0.75
INITIAL NET CREDIT TARGET=$0.50 ROI(max)=11% B/E=$54.50

Chart =
BFO - Best Foods  $62.00  *** The Saga Continues! ***

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

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

Now there is a new rumor in the works.  Speculation has increased
this week amid a series of reports that Bestfoods was in meetings
with Britain's Diageo Plc (DGE) about combining their core bakery
businesses.  Bestfoods and Diageo declined comment but the share
value of Bestfoods fell as investors dismissed prospects that the
maker of Skippy peanut butter was close to finding a partner to
oppose the unsolicited advance from Unilever.  A source close to
the situation also denied a report in the Financial Times that
Bestfoods was preparing to unleash a defensive strategy this week.

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

PLAY (speculative - bullish/credit spread):

BUY  PUT  JUN-50  BFO-RJ  OI=2102  A=$0.81
SELL PUT  JUN-55  BFO-RK  OI=1458  B=$1.50
INITIAL NET CREDIT TARGET=$0.75-$0.81 ROI(max)=17% B/E=$54.25

Chart =

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