Option Investor
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Daily Newsletter, Thursday, 06/01/2000

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The Option Investor Newsletter                   Thursday 6-1-2000
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)
******************************************************************
       6-01-2000           High     Low     Volume Advance Decline
DOW    10652.20 + 129.90 10673.40 10513.10   958,953k 2,070    904
Nasdaq  3582.50 + 181.59  3583.27  3400.91 1,581,798k 2,730  1,274
S&P-100  777.59 +  16.04   777.59   764.41    Totals  4,800  2,178
S&P-500 1448.81 +  28.21  1448.81  1425.53            68.9%  31.1%
$RUT     492.47 +  16.29   492.47   476.18
$TRAN   2776.71 +  66.72  2777.01  2710.29
VIX       24.74 -   1.83    26.35    24.74
Put/Call Ratio       .47
******************************************************************

June arrives with a bang on tame economic numbers!

With more evidence daily that the economy may actually be 
slowing the money is gradually coming back to the market. 
Tech stocks are shaking off the last of the sellers and the 
rally is broadening. Internet stocks, telecom stocks, chip
stocks, almost any sector is benefiting from the rally with
the possible exception of the drug sector. Advances are
strongly beating declines and volume is slowly increasing.


 


 

This was a great day if you were long in the market. The 
economic reports today all showed indications that the rate
hikes are finally slowing the economy. Combined sales from
the top three auto makers showed the first decline since Aug
1998. Ford was the only positive number with an increase of
+1.1%, GM dropped -5.8% and DCX posted a drop of -2%. 

The NAPM report also showed a drop to 53.2 for May after 
coming in at 54.9 for April. This was the lowest level 
in more than a year. The prices paid component was
also lower. This indicates a slowing in the manufacturing
sector and a leading indicator for economic growth. 
Construction spending also slowed as well as a jump in
the weekly unemployment claims. Greenspan gets to be the
hero again if the non-farm payroll numbers come in weaker
than expected as well. The current estimates from 18 
economists surveyed are for +375,000 new jobs and a 3.9%
unemployment rate. 

With all the positive news out today it may not matter what
the jobs report has to say. Hewlett Packard held an analyst
meeting yesterday and the results were amazing. They said
business was so good that estimates for +15% growth were
probably too low. The analysts could not say enough good
things and the stock rocketed +$14 accounting for over 70
Dow points. 

A management meeting at Motorola gave that stock a boost by
confirming that demand for cell phones was very strong and
showed no signs of easing. MOT gained +$5. This also boosted
stocks like Nokia, Ericsson and Vodaphone. The chip sector
benefited indirectly from this as well. Micron also set
a new high as DRAM prices continued to soar as demand for
chips increases.

BestBuy soared over +$6 after saying first quarter sales
were so good that earnings estimates were now too low.
Do you see a trend here? Maybe a contradiction of trends?
How can the economy be cooling if HWP, MOT, BBY and others
are telling analysts that business is so strong that estimates
are too low? It is not up to me to resolve this quandary but
it appears to be the best of both worlds. Big ticket items
like cars and homes are slowing and small ticket items like
cell phones are growing. PC sales are pulling out of their
slump as more users logon to the Internet generation.

To go along with the booming business sector was the news
that Oracle was having a great quarter supplying software
to the Internet sector. This prompted Internet stocks to
bounce as evidenced by YHOO, ICGE, INKT, ITWO. This
sector is still down -36% from its highs so there is plenty
of room for investors to profit. ORCL soared +$6 on the news.

Another leading indicator for the rally was the Banking
Index $BKX. Up +10% from its lows and gaining daily this
indicator seems to be forecasting an end to Fed rate hikes.

As if we were transported back in time to last fall when
nothing could go wrong, even new IPO stocks soared on
opening day. Well, it was only one, but it did soar +237%,
up +$57 from the offering price. ONIS did what no IPO has
been able to do for three months, overcome investor pessimism!

So what is wrong with this picture? Maybe nothing but we 
have gone from oversold to overbought in only three days.
Some of the leaders have been tacking on double digits
every day and profit taking has got to be just around the 
corner. Clearly this is a seasonal rally as I mentioned
last week. Historically this is a bullish week but the
following weeks are not as positive. We are setting up
for a buy the rumor (tame jobs report) sell the fact event.
Once the news is out tomorrow morning the focus will move
to the PPI/CPI next week. Even if the jobs report is tame
the ensuing rally may suffer from profit taking before the
close. It is simply too much too fast to not expect some
consolidation. Last week's low of 3042 to today's close
of 3582 is a whopping +540 point gain in five days. Profit
anyone? 

The Nasdaq stumbled at the 3500-resistance level on Wednesday
but cleared it cleanly today on the weak economic numbers.
It appeared to be rolling over this afternoon but once the
trend reversed upward about an hour before the close there
was actually panic buying. Really! Since everybody expected
it to roll over at 3500 resistance once it appeared to be
heading higher at the close there was a rush of orders as
some investors expecting tame numbers on Friday rushed to
buy in order not to be left behind. Wow, what a concept.
Panic buying! 

The Dow rallied on the strong performance by HWP which
added +70 points to the Dow. We are getting ever so closer
to upper resistance at 10700, only 53 points away. Take
away the HWP points and the Dow would have been much
tamer at +59 and the Nasdaq may have reacted differently
as well. Still, we won't complain.

While everything rests on the jobs numbers tomorrow I
don't think anything but a blowout will make much difference.
The market wants to run and the bias is now bullish. This
is the problem. Remember last week when I painted the 
negative picture of the market but reminded you
that "it is always darkest before the dawn"? It was
dark and we had a great dawn. Now the reverse is also
true. When everything appears to be going our way we
are just not looking in the right direction. While we
are laying on our blow up rafts basking in the brightness 
of the current rally and riding the gentle swells up and
down, the shadow of danger may be approaching. Is that a 
shark fin I see in the water heading for us? Do you hear 
ominous music in the background? Does the term VIX mean
anything to you? The VIX, at 25.14 is at the lowest point
it has been since mid-March when this sell off started.
At 25 it is not in a danger zone yet but at 22 I would 
start getting worried. It was 41 on Apr-17th and almost 
32 last week. The trend is definitely down. As is the 
put/call ratios at .47. Not a danger zone but not a
bullish signal either. 

The most telling indicator is the volume. At 1.6 bln the
Nasdaq is starting to look healthy again but still
significantly under the 2 bln plus from the glory days.
The biggest reason for the bullish change is the Fed
outlook. Many analysts are now calling for no rate hike
on Jun-28th and that is music to investors ears. That
wonderful music may change to Fed rap if the jobs report 
is too high and is followed by a stronger than expected
PPI/CPI next week. We all know how disruptive Fedspeak
can be. Just picture Greenspan at the first luncheon after
a strong report. Actually an image of Mr. Magoo may be 
easier for this analogy. Now add the voice of Snoop
Doggy Dog and you get Fed rap at its worst. You supply
the words, nobody can understand Greenspan or Rap, but 
the end result is more rate hikes and a retest of the 
recent market lows. Not the kind of music investors want 
to dream by.

The bottom line? I would not be a buyer on Friday. If
the market has legs they will still be there next week.
Patience is king and many investors, as indicated by
lack of heavy volume, are not yet convinced. Everything
moves in cycles and it should cycle down, even if it
is only a couple hundred points, soon. 

Good luck and sell too soon.

Jim Brown
Editor
  

Current long positions include: 

NOK, VOD, VIGN, MSFT, YHOO, SDLI, PMCS, CIEN



***********************
Regional Seminar Series
***********************

The Houston Technical Analysis, Stock and Option 
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June 22-24 Los Angeles     3 day
June 27-28 Washington DC   2 day
July 3-6   London England  3 day
July 13-15 New York        3 day
July 21-23 Seattle         3 day
July 27-29 Atlanta         3 Day
Aug  11-12 Pittsburg PA    2 day
Aug  17-19 Orlando         3 day
Aug  24-26 Dallas          3 day
Aug  28-29 Detroit         2 day  

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

Thursday, June 1, 2000

A double-edged Sword!

The NASDAQ outperformed the other major benchmarks today, as the 
technology index added +5.34% to this week’s already impressive 
gains. Most sectors across the board participated, and were up 
significantly. Volume picked up a bit, as the NASDAQ traded 1.6 
billion while the NYSE was just shy of a billion. Now considering 
how many people we have spoke to who have been (momentarily) 
shaken out of this market, as well as the rumors of daytraders 
and other short-term traders who have been looking for new 
careers, we view today’s action on the NASDAQ to be quite 
bullish. It would still be nice to crack the 2-billion mark, but 
we’ll take it one step at a time!

Many of today’s gains were on the heels of economic reports 
indicating that our economy is slowing down. This is very bullish 
for the stock market in the short term, as the Greenspan storm 
cloud, which has suppressed this market for so many months, may 
finally clear up and head somewhere else. However, this is a 
double-edged sword. If the economy is slowing down, we’ll start 
feeling the effects during the July earnings run, as many 
companies will start pre-releasing negative news about the 
future. Nobody, especially Wall Street, wants to own stocks that 
are missing earnings expectations. Now granted, many analysts 
have already started lowering expectations on earnings in 
anticipation, however, we will see if they can lower them quick 
enough to meet the slowdown in the economy. One major analyst we 
spoke to last night is starting to fear that the Fed.’s 
infatuation with slowing down the wealth effect will lead to a 
RECESSION in the first quarter of 2001. Now we do not think the 
big “R” will come into play, especially with the world riding on 
our coattails, but it is food for thought.       

There have been numerous bullish implications that we have 
witnessed this week. First of all, volume is starting to pick up, 
which is a big positive. But more importantly is the leadership 
by the “Generals” that we spoke about in Tuesday’s letter. Also, 
the Volatility Index appears to be heading back into the trading 
range of old, which will be very useful in buy/sell decisions. 
And last, the 30-yr Treasury broke below the infamous 6% 
benchmark, indicating that higher interest rates may soon be a 
thing of the past. This also corresponds well to the Banking 
Index (BIX) breaking into Bullish territory in our Market Posture 
section. 


BULLISH Signs: 

Interest Rates (5.949):
With the long bond breaking below the crucial 6% benchmark, fears 
of higher rates may finally be subsiding. 

NASDAQ Short Interest:
As of May 15, the level of short sales not yet closed out, known as 
short interest, climbed 4.80% to 2,780,161,105 shares. Should this 
market get any kind of propelling good news, we could see a 
severe and swift rally as shorts run to cover.


Volatility Index (24.74):
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. It appears that the VIX is heading back to the 
trading range of old, after spending numerous weeks in uncharted 
waters. 


Mixed Signs:

Slowing Economy:
If the economy is truly slowing down, we will start feeling the 
effects once corporate earnings report over the next couple of 
quarters.


BEARISH Signs:

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:
$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. 


*****************************************************************

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                        (5/26)      (5/30)       (6/1)
*****************************************************************

Overhead Resistance (775-800)     4.26        5.25        5.52

OEX Close                       736.08      761.42      777.59

Underlying Support  (745-770)     1.20        1.29        1.30
Underlying Support  (715-740)     2.85        2.97        3.40


What the Pinnacle Index is telling us:
Underlying support is light (745-770), indicating any pullback 
will be met with light resistance. Also, overhead resistance is 
strong, indicating that we probably won’t clear the 800 mark 
until after June expiration. 


Put/Call Ratio 
*****************************************************************
                                Friday      Tues       Thurs
Strike/Contracts                (5/26)      (5/30)     (6/1)
*****************************************************************


CBOE Total P/C Ratio             .65        .43        .47
CBOE Equity P/C Ratio            .61        .36        .39
OEX P/C Ratio                   1.20        .60       1.19


Peak Open Interest (OEX)
*****************************************************************
                     Friday          Tues            Thurs
Strike/Contracts     (5/26)         (5/30)           (6/1)
*****************************************************************

Puts                740 / 7,555    740 / 7,788    680  / 8,335
Calls               800 / 6,388    800 / 6,680    800  / 6,465
Put/Call Ratio        1.20           1.17             1.29



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

June 1, 2000                            24.74


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

As of Market Close - Thursday, June 1, 2000 

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

DOW Industrials   10,200  11,400  10,652    Neutral   5.05
SPX S&P 500        1,350   1,500   1,449    Neutral   5.30  
OEX S&P 100          725     800     777    Neutral   5.30 
RUT Russell 2000     450     550     492    Neutral   5.05    
NDX NASD 100       3,000   4,000   3,519    Neutral   5.30 
MSH High Tech        800   1,000     958    Neutral   5.30 

XCI Hardware       1,250   1,600   1,419    Neutral   5.30 
CWX Software       1,050   1,300   1,251    Neutral   5.30 
SOX Semiconductor    850   1,200   1,067    Neutral   5.30 
NWX Networking       900   1,100   1,084    Neutral   5.05
INX Internet         500     800     570    Neutral   5.30 

BIX Banking          530     600     614    BULLISH   6.01 **  
XBD Brokerage        400     500     455    Neutral   5.05    
IUX Insurance        540     620     651    BULLISH   5.16

RLX Retail           900   1,000     890    BEARISH   5.23    
DRG Drug             355     400     388    Neutral   4.28    
HCX Healthcare       710     800     792    Neutral   4.28    
XAL Airline          140     155     160    BULLISH   5.25 
OIX Oil & Gas        265     300     312    BULLISH   5.11  
 
Posture Alert    
The market enjoyed another solid day Thursday, as the NASDAQ 
climbed +5.34% on volume of 1.596 billion. Fears of rising 
interest rates are starting to subside, and with those declining 
fears came the buyers. Leaders for Thursday include Semiconductors 
(+6.89%), Internet (+6.77%), and Software (+6.24%). With this most 
recent action, we have upped Banking to Bullish from Neutral.  



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

Best Buy to Top Forecasts
By Cindy Christ

Shares in Best Buy, the nation's No. 1 electronics retailer,
jumped more than 10 percent Thursday after the company said
quarterly results would top estimates due in part to strong
sales of digital products and personal computers.

The company said in a statement it expects fiscal first-
quarter 2001 earnings to jump by more than 50 percent over
last year to roughly 34 cents a share.

Wall Street estimates called for the specialty retailer to
earn 28 cents a share for the quarter ended May 27, according
to First Call/Thomson Financial.

Best Buy earned 22 cents a share in the year-ago quarter.

"These results reflect the higher sales, continued improvement
in gross profit margins and lower than expected selling,
general and administrative expenses," said Best Buy Chief
Financial Officer Allen Lenzmeier.

Lenzmeier said fiscal first quarter sales totaled $2.96
billion, up 24 percent from $2.39 billion in 1999.

Comparable same store sales moved up 9.5 percent on top of the
13.3 percent reported in last year's first quarter.

Among product categories, home office gear comprised the
biggest share of first-quarter revenues at 35 percent of
sales. Consumer electronics made up 31 percent of quarterly
revenues while entertainment software totaled 18 percent.

Analysts reviewing the report said Best Buy benefited from a
change in product mix shifting cameras and photographic
equipment to the consumer electronics category. The opening of
four new stores also helped lift company results.

In addition, Best Buy said that 56 new stores are slated to
open in fiscal 2001, with a dozen launching in the second
quarter and 44 in the third.

Going forward, the company said e-commerce sales should also
rev up performance.

"During the first quarter, the company completed development
and testing of its e-commerce site and is in final preparation
for public launch in the next few weeks," Lenzmeier said.

Minneapolis-based Best Buy will report full financial results
before the market opens on June 13.

Separately, U.S. retailers reported mixed same-store sales for
the month of May, with some posting gains and others losses.
Only Kohl's (KSS) department stores and women's specialty
retailer Talbots Inc. (TLB) outdid Best Buy in comparable
store figures with increases of 9.8 percent and 29.4 percent
respectively.

Analysts said Fed rate hikes are beginning to make consumers
more cautious about spending because of higher credit card
interest rates.

Shares in Best Buy (BBY) closed up $6.69, or 10.5 percent, at
$70.69.

Options volume also was active with 1,016 contracts in the
June 60 (BBYFL) and 2,577 in the June 75 (BBYFO) calls traded
by the end of the session.



*************
READERS WRITE
*************

Regarding Low Risk, Combination Strategies

Dear OIN,

I do not have naked call authority, so I cannot write calls on 
LEAPS.

My main strategy has been selling covered-calls on stock, and 
lately I have become more attuned to the need to set my goals 
lower to also lower risk.

By targeting an ITM written call at a 3% return if called-out, 
I am buffered TO AN EXTENT against drops.  But if the stock 
drops much harder than that, I am still at significant risk.  
SO.... please comment on the following strategy:

(hypothetical example):

Sell covered-call ATM on the stock, while also buying a LONG-
TERM PUT on the stock at a strike about 10% below the stock 
price.  The idea being, if the stock went WAY down, the put 
would buffer me significantly, and the cost of the put, although 
increasing my overall cost basis, would be averaged out over 
its long-term length, while selling ATM calls month-to-month.

Anyway, I'm trying to find a fairly safe strategy to milk call 
premium, but not have the bottom drop out.  I don't have a 
Preferred Trade account (only place I know where you can stop 
loss out of a covered-write).... I have a problem with stop 
losses, since they can stop you out at a loss then bounce
up, so i'm looking for something that I can ignore... but by 
the same token, I don't know what I would do with my idea if 
the stock did drop - would I sell the put for a profit and put 
a stop loss on the stock, hoping for its recovery?

------

Concerning Hedged Positions:

First, when you sell a call on a LEAP you already own (long), 
it is considered "covered" and not "naked."  You would need 
spread trading ability - ask your broker what you need to do 
so you can enter spreads - as selling a call on a LEAP is 
simply a form of "calendar" spread.

Second, there is no perfect way to eliminate risk.  We use a 
very conservative approach for selling covered-calls but there 
still is risk.  There are two main problems many traders have 
with covered-calls: one, it limits profit potential; and two, 
it reduces, but doesn't eliminate risk.

If you are going to protect the downside of a covered-call with 
puts (often called a "long collar"), why limit your upside by 
selling a call?  I have done that and it is very frustrating when 
the stock climbs $20 before expiration.  Besides, if the call 
is expensive (otherwise there would be no point in selling it), 
then the put will generally be overpriced too.  In most cases, 
the covered-call technique requires a neutral to bullish outlook.  
If you believe a significant downside is forthcoming, don't sell 
a call, sell the stock.

To increase your knowledge of the various combination techniques, 
I suggest McMillan's "Options: As a Strategic Investment."  It 
is well worth reading and available in the OIN bookstore.

Regards,
OIN



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

Index      Last     Tue     Wed     Thu    Week
Dow    10652.20  227.89   -4.80  129.87  352.96
Nasdaq  3582.50  254.37  -58.57  181.59  377.39
$OEX     777.59   25.34    0.13   16.04   41.51
$SPX    1448.81   44.43   -1.85   28.21   70.79
$RUT     492.47   19.33   -0.52   16.29   35.10
$TRAN   2776.71   54.15  -31.71   66.72   89.16
$VIX      24.74   -0.96    0.04   -1.83   -2.75

Calls               Tue     Wed     Thu    Week

SDLI     249.69   24.13    4.69   23.13   51.94  On fire!!!
RMBS     197.44   25.25  -12.00   21.19   34.44  Not a bad week
CHKP     196.75   26.25   -0.88    8.88   34.25  A renewed desire
CIEN     130.19   21.81   -1.81   10.50   30.50  Positive comments
RBAK      96.06   10.25    1.56   12.19   24.00  Hoooo Doggies!
ITWO     116.75   10.44    0.44   10.38   21.25  Internets back
TQNT     104.38   13.78   -2.56   10.00   21.22  Buyers piled in
AMCC     110.00   13.44   -3.88   10.75   20.31  Breakout looks real
EXDS      79.25    5.88    2.69    8.69   17.25  Robust volume
ADI       83.00    7.06    2.00    6.00   15.06  Turbo-charger
SCMR      90.06   13.50   -6.38    6.44   13.56  Like clockwork
MU        74.00    3.81    1.50    4.06    9.38  New
SEPR     100.25    3.06    1.38    4.63    9.06  Traders bullish
CPN      109.06    1.81    3.19    3.06    8.06  New
YHOO     120.06    4.94   -3.94    7.00    8.00  Good start
DNA      108.13    1.88    2.88    0.75    5.50  Dropped
PGR       97.69    0.81    0.57    3.81    5.19  New

Puts

CL        53.31   -1.63   -1.50    0.69   -2.44  Rolling over
MRK       72.44    0.44   -0.38   -2.19   -2.13  New
TRW       49.69    0.06    0.44    1.19    1.69  Entry pts. Abound
ICIX      28.88    1.00   -0.94    3.88    3.94  Dropped
DCLK      45.75    3.44   -2.31    3.50    4.63  Internet strength
EXTR      49.50    4.06    0.75    0.63    5.44  Reversal or entry?
PCLN      41.94    3.13   -1.13    3.88    5.81  Dropped
HLIT      48.88    3.00    3.69    4.19   10.88  Dropped


PICKS WE DROPPED
****************
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.


CALLS:
*****

DNA $108.25 +0.75 (+5.63) Pffttt.  That the sound of a dud 
firecracker extinguishing itself.  It's also the sound of DNA 
getting pulled from the call play lineup.  Don't get us wrong.  
We still like DNA and a $5.63 gain for the week isn't a bad 
thing.  Where we have trouble is that it's moving very slowly 
compared to the rest of the NASDAQ and the biotech sector.  
Volumes have remained historically low with today's volume 
clocking in at just 42% of the ADV.  Investors are staying away 
from the issue.  We expected more volume and greater gains from 
such an industry leader.  With over 500 points gained on the 
NASDAQ (yes, DNA is an NYSE stock) since its low last week, there 
is an increasing possibility of profit taking tomorrow.  For that 
reason, we're sending this double-helix drug developer back to 
the petri dish.  Time to find a more profitable play.


PUTS:
*****

HLIT $48.88 +4.19 (+7.88) The strong updraft through short-term 
resistance of $41 and $42 was swift and unforgiving in the past 
two sessions.  Fortunately if you used the 10-dma line as a 
stop, then you avoided the potentially large losses amid the 
broad rally conditions.  This put play was however profitable 
while it lasted.  After slipping under a bottom support level of 
$50 on May 18th, we were rewarded with dips as low as $35 last 
week.  Investor's concerns about this company's future have 
obviously become overshadowed by the market conditions and 
HLIT's competitive share price.  It's time to move on and ride 
another downtrend.

ICIX $28.88 +3.88 (+3.94) ICIX finally succumbed to the upward 
market pressure.  Last week it closed out trading with an 
intraday low of $24.88, which was promising.  And while the 5-
dma indicator was beginning to develop as overhead resistance 
this week, ICIX couldn't penetrate the new bottom target.  Today 
was the clincher as it came off lows not seen since the end of 
1999 and violated the 10-dma technical ($28.20), which you may 
recall, should've put you on red alert.  In conclusion, the 
strong tech rally and a line of buyers with some cash to spread 
around stopped this play in its track.  

PCLN $41.94 +3.81 (+5.81) Even a brick rises if it's in an 
elevator going up.  As the NASDAQ has risen, so too has PCLN 
despite what we think is a flawed business model.  As we 
cautioned Tuesday, "if the market continues to rally, PCLN will 
get dragged upward with it."  In short, PCLN never gave us the 
rollover below the $37 range in which to make an entry.  
Moreover, with $40 providing resistance in the past, but failing 
today, PCLN broke through the barrier on volume approximately 
equal to its ADV of 3.7 mln shares conveying that there is a 
renewed interest in these shares.  We still don't like the long-
term looks of the company, but we won't fight the tape either, so 
we're cutting it loose tonight.  Too bad we can't name our own 
price for the stock.



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This newsletter is a publication dedicated to the education 
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********************
PLAY UPDATES - CALLS
********************

ITWO $116.75 +10.38 (+21.25) The Internet sector came back with
a vengeance Thursday.  The broad tech rally spread its wings
Thursday to push most of the sectors into rally mode.  ITWO
edged higher during Wednesday's trading then extended those
gains Thursday morning with a gap higher by $3.  After the
bullish opening, ITWO went straight into rally mode, clearing
several resistance levels along the way.  The gap higher
Thursday morning came after DLJ reiterated its Buy rating and
set a near-term price target of $125 on the stock.  ITWO
lined-up yet another contract Wednesday when IBM said it would
form an online business exchange for computer and electronic
parts using ITWO's software and e-commerce services.  Thursday's
trading left ITWO just below major resistance at $120, the stock
has had trouble with that level in the past.  From here, wait
for a move above $120 to look for new entry points.  ITWO
doesn't have near-term support below until $110, be sure to 
set your stops!

CIEN $130.19 +10.50 (+30.50) CIEN dipped slightly lower along
with the tech sector weakness Wednesday despite the positive
analyst comments and a reiteration of a Strong Buy rating by SG
Cowen.  CIEN bolted into rally mode Thursday as the Telecom
sector rallied on the back of the chip sector.  Additionally,
the fiber optic sector received another boost Tuesday with the
bullish debut of ONI Systems (ONIS).  The networking company
soared over 200% in its IPO, sending bullish sentiment through
the sector.  The positive economic data reported Thursday
morning caused CIEN to gap higher by $5 and to easily clear
resistance at $120.  While trading activity remains somewhat
muted in the broader market, volume has been steady during
CIEN's rally over the past three sessions.  Going forward, the
stock will face congestion in the $130 - 140 range.  If the
momentum continues consider an entry at current levels and use
the intraday volatility to shoot for entry points.  Make sure 
to set your trailing stops as the stock has run-up.

SEPR $100.25 +4.63 (+9.06) Positive analyst comments helped SEPR
edge higher during Wednesday's session.  A report issued by
Prudential turned traders bullish on SEPR in the past two days.
Analysts said that SEPR will receive new product approvals this
year and the company is in trials with several new products.
Analysts went on to say that SEPR is positioned well and has
possibly the largest product pipeline in the Biotech industry.
The positive outlook helped SEPR to finally break-away from its
head-and-shoulders bottom formation that we have been talking
about in the past week.  The stock rose above its right shoulder
at $96 Thursday morning on the heels of a gap higher by $2.5O.
After the breakout, SEPR didn't look back, and rose smartly
above the century mark.  We know that volume has been weak in
the broader market, but SEPR's breakout came on really light
volume, making it a little less convincing.  However, with its
bold move above $100 the stock might gain more momentum.  Look
for an entry if momentum carries SEPR above $100, or consider a
bounce from current levels for a possible entry, and you also
might consider using a stop to protect profits.

EXDS $79.25 +8.69 (+17.25) Robust volume, a continuing tech 
rally, and a stock primed for recovery equal a solid momentum 
run for EXDS.  The stock's trading volume returned to normal 
levels by Wednesday and EXDS reached higher topping out at $74.  
The definitive move through $70 should have woken up even the 
more prudent Internet traders (if such an animal exists!).  
Analyst Prabhas Panigrahi at Dresdner Kleinwort Benson 
Securities took notice and started new coverage on EXDS with a 
Buy rating.  He also issued a 12-month price target of $120.  
Today the momentum not only provided huge gains of 12.3%, but 
also cleared a path of resistance through the $80 mark.  Now 
without putting a damper on these advancements, the following 
needs to be said.  Protect your gains and take painstaking care 
if you choose to open new positions at these higher levels!  
EXDS hasn't traded above the 30-dma (currently at $78.44) in 
over two months and some investors may be looking to take 
profits.  So practice caution and be patient for entries.  On 
the wire, WorldSite.WS, better known as "The Alternative to 
.com", announced that it contracting with Exodus Communication 
for Web connectivity, maintenance and availability in 
preparation for its expected explosive growth.

ADI $83.00 +6.00 (+15.06) ADI engaged its turbo-charger and put 
the petal to the metal!  At the onset however, there was concern 
as to whether ADI could maintain the higher share prices and 
stay above the fierce resistance of $70.  But as ADI rounded 
the first perilous turn, it was obvious that the momentum was 
building.  It took advantage of the cooperating market sentiment 
and easily solidified its stance above the 50-dma (now at 
$71.31).  Today it broke another speed record as it powered past 
$80.  Will it shatter the all-time high $94.69 set just two 
months ago?  Ok, ok perhaps we're getting a little ahead of 
ourselves.  From a more practical perspective, we cannot place 
all bets on an unwavering climb in the very short-term.  The 
big upswing is likely to be tempered by menacing profit takers 
and, of course, natural consolidation.  Therefore take heed 
in opening new positions and practice patience in these ever-
changing market conditions.  Again today ADI was in the news 
with more product advancements proving it's a leader in the 
industry.  Analog Devices will get the opportunity to showcase 
its portfolio of broadband, Internet access, data security and 
widely acclaimed wireless and RF (radio frequency) silicon 
solutions from June 6-8 at Supercomm '00 in Atlanta.

AMCC $110.00 +10.75 (+20.31) The breakout looks like it is for
real.  After stuttering yesterday at the descending trendline
near $102, AMCC moved strongly through that level today, and
closed above $110 for the first time in over 2 weeks.  The
NASDAQ continued its rally from Tuesday, aided by strength in
the Semiconductors, and stocks like AMCC were leading the
charge.  Today’s gain pushed the stock through resistance at
$107-108, and it bounced here late in the day before climbing
again towards the end of the session.  Stronger support is
found near $100, and the next level of overhead resistance sits
between $116-118.  Volume was respectable too, as traders
exchanged just over 4 million shares in today’s session.  With
that said, we have to inject a word of caution.  We are up over
20% in the last 3 sessions and the recovery is still tenuous.
Look for a pullback to support before initiating new positions,
and for those of you with open positions, use stops to protect
your gains.

TQNT $104.38 +10.00 (+21.22) Semiconductor stocks have been 
on fire this week, and have been a major contributor to the
fledgling NASDAQ recovery.  After breaking out of its descending
wedge pattern on Tuesday, TQNT consolidated yesterday in
preparation for another strong gain today.  Now up over 30% in
the past week, the stock was still looking good into the close.
Buyers piled on in the last hour, trading over 300K shares on
the way to bidding the price higher by more than $5.  The daily
volume picture tempers our enthusiasm though.  In the midst of
strong volume on many Semiconductor stocks, TQNT traded 20%
fewer shares than the ADV, and this may be an early sign that
the stock’s rise is slowing.  The large gain in the past week
has brought TQNT up near resistance at $110, and a pullback
would not be unexpected.  Use caution in opening new positions -
this is not the runaway market we saw early in the year, and
investors are being rewarded for waiting for good entry points.
Look for a pullback to near-term support at $99 or $95 before
opening new positions.  If you already caught a good entry point
and have open positions, keep your stops in place to protect
those profits.

CHKP $196.75 +8.88 (+34.25) Nothing new on the news front, just 
a renewed desire to own tech stocks, or is it?  The rally this
week has certainly provided traders entering this play with
some reasonable returns for their efforts.  We're now sitting
at a crossroads, with Check Point banging up against the very
top of its trading range, from back on April 10th.  The high 
at $200 proved to be a tough nut to crack in April as well as
today.  The volume today lagged a bit compared to the fist two
days of the week, coming in with 1.3 million shares traded.
Many of the technical indicators are pointing higher, suggesting
a continuation of the new trend.  We believe the  real test for
CHKP will be its ability to break above the $200 mark and stay
there.  The economic data out in the morning could either give
CHKP the strength to continue higher, or could let some air out
of our play.  Check Point has moved about 22% higher this week.
Profits have been a little hard to come by recently so if you
have some in CHKP, be prepared to keep them in your account.

RMBS $197.44 +21.19 (+34.44) A 21% gain so far this week is not
a bad start for our play in RMBS.  Much of the strength has come
as investors have begun to test the waters in the tech issues,
specifically the chip and chip related stocks.  While we are
very pleased with the our play so far, we haven't forgotten the
previous bounces the past couple of months.  Don't misunderstand,
we are not trying to scare anyone off.  We would suggest the
days of just picking a call or a stock to play, and then letting
the profits roll up may be gone for a while.  The bounce 
Wednesday off the $175 area, gave investors another chance to
enter our play.  Today's 12% gain came a day after the company
announced that Vitesse Semiconductor Corp.(VTSS) has licensed
the Direct Rambus ASIC for use in network ICs.  Those network
ICs are targeted at high performance communications systems 
such as optical switches and routers which require extremely
high bandwidth solutions.  RMBS did see solid buying the last
thirty minutes of the session today, as it approached its 100-dma
at $200.41.  Support shows up on intraday charts at $185, $180
and back at $175.  Should we see profit taking, we would look
for bounces off support with good volume to new positions.

SDLI $249.69 +23.13 (+51.94) Some called Tuesday's rally a
relief rally.  Traders that entered our play must certainly
be relieved, as the rally has continued.  With an improved 
sentiment toward the tech stocks and a few upgrades, SDLI has
managed to pick up about 26% this week.  If you entered our
play and have profits sitting in your account, congratulations!
We would suggest moving your stops up, to protect your hard
earned gains.  Today's new 52-week high was definitely a very
positive event, however the volume was the lightest of the week
so far with 6.7 million shares traded.  That's not to say it 
won't continue higher, however traders may pull some money off
the table, especially if the jobs data in the morning is negative.
SDL has left its moving averages in the dust, but has good
intraday support at $236 and $225.  Alan Bezoza, an analyst with
CIBC World Markets, had positive thing s to say about SDLI and
a few optical component players.  "The Telecom companies are
still spending significantly to upgrade their networks, so these
are real companies, not dot-commers."  Among his favorite stocks,
(you guessed it) SDLI.

YHOO $120.06 +7.00 (+8.00) Traders started the day out yelling
Yahoo! and finished the session in much the same manner.  While
Tuesday's gain was a good start to the week, Today was the first
real sign that YHOO and some of the Internet stocks may have 
found new life.  This morning, Softbank, Japan's dominant 
Internet investor, said they sold an estimated $373 million worth
of its holdings in YHOO, to fuel its global expansion efforts.  
News of the sale hit yesterday which seem to put a cloud over our
play.  Many analysts seem to be hung up on the volume.  Today’s
$7 move showed 8.3 million shares traded which compared to what
we've seen recently really isn't to bad.  YHOO is still about
$14 under its 200-dma at $134.34, but at least is headed in the
right direction, with most of the technical indicators just 
coming out of an oversold condition.  To stay in favor we would
like to see our play move through today's high with conviction.
A solid bounce off support at $116 could also provide a good 
entry for new plays.

SCMR $90.00 +13.50 (+13.50) The more we prepare, the luckier we 
get!  We noted that SCMR could fall back yesterday from the big 
run it had on Tuesday, and that it could fall below $88 
congestion to the $83 range where it had previous support.  Like 
clockwork, it tanked yesterday afternoon with five minutes left 
in trading to $83.75 creating a perfect buying opportunity - that 
is if your gun-slinging finger could pull the trigger fast 
enough.  SCMR is not an easy target to hit.  But if you did, 
congratulations on your entry!  Nonetheless, SCMR continues to 
bump its head on closing resistance of $90.  While it has been to 
$93 intraday, it hasn't been able to hold there even as $87 to 
$88 provides support.  The question for SCMR now is can it break 
out of the ascending wedge over $93 and hold?  Or is the NASDAQ's 
500-point gain since last week too much for investors to pass up 
in a juicy round of Friday profit taking - a scenario that could 
take SCMR down with it?  That said, keep your stops close to 
protect your profits, and consider an entry only when you see a 
real breakout over $93 with volume, or a substantial dip followed 
by (you guessed it) a volume backed rebound.  Volume is the key 
and it's looking good right now.

RBAK $96.06 +12.19 (+24.00) Hooo Doggies!  Redbull Networks 
(errr, RedBACK Networks) came charging out of the chute yesterday 
like a rodeo bull single-mindedly focused on dumping its rider.  
Only in RBAK's case, it was dumping the shorts.  It opened at $80 
yesterday and never looked back, tacking on roughly $19 in two 
days in a steady buying ascent.  In after hours trading today, it 
was up to $99.25.  Check a 60-min Qchart to see what a nearly 
perfect ascending wedge breakout looks like.  Note the huge 
volume (50% to nearly 100% over the ADV) over the last three days 
that powered the breakout and the simultaneous gain back over the 
200-dma.  That's why we always look for big volume to back the 
move.  Even so, $100 is going to provide some historical and 
psychological resistance, especially since the market (and RBAK) 
is now susceptible to profit taking thanks to the big run this 
week.  Technically, RBAK is looking strong - maybe too strong now 
that it's $26 over its 10-dma ($73.51) and $20 over its 5-dma 
($80.85).  A pullback going into the weekend wouldn't surprise 
us.   While we think the run can last now that RBAK has cleared 
its 200-dma, you still want to keep your stops in place to 
protect your big gains and consider waiting for a nice pullback, 
say to $90, before making an entry.  



*******************
PLAY UPDATES - PUTS
*******************

CL $53.31 +0.69 (-2.44) Volume swelled during Wednesday's
trading as CL continued its losing ways.  However, Wall Street
came to the rescue Thursday as Goldman Sachs upgraded CL to 
its recommended list, revising its previous rating of Market
Outperformer.  On the heels of the upgrade, CL gapped higher by
$1.50 Thursday morning.  CL reached as high as $54.94 during
Thursday's session, but the bullish sentiment soon dissipated as
the stock rolled over to fill much of its morning gap.  The
roll-over pushed CL back below its descending 5-dma, the level
that continues to provide resistance.  In light of the relative
weakness after the upgrade Thursday morning, we're looking for
CL to continue its slide lower.  CL has support at $52.50 and
again at $51.50.  Consider your risk level and target shoot for
entry points as CL falls below its various support levels.

DCLK $45.75 +3.50 (+4.63) The Goldman Sachs Internet Index ($GIN)
rose 6.8% Thursday, and that was reason enough for traders to
buy DCLK.  Not only did sweeping strength in the Net sector lift
DCLK, the stock got a little help from Wall Street as well.
In the past two days, several brokerage firms have reiterated
their bullish ratings on the stock and set optimistic price
targets.  For example, ING Barings set a price target of $120
and reiterated its Strong Buy rating, and CSFB reiterated its
Strong Buy rating.  What's interesting is that the bullish
comments come two days after Wit Soundview downgraded the stock.
It appears that Wall Street is confused.  With the danger of the
Senate Commerce Committee looming in the shadows, this may be a
good entry point.  But approach the stock with caution, if the
Web sector continues to rally, DCLK may follow.  Wait for the 
for the sellers to return, if you're an aggressive trader look 
for a fall from current levels, otherwise, wait for DCLK to 
fall beneath support at $40.

EXTR $49.50 +0.63 (+5.44) Is it a reversal, or is this the entry
point we’ve been waiting for?  After bottoming at $42.38 last
week, EXTR has moved up this week on the back of the NASDAQ
recovery.  The 10-dma (currently $50) is right at near-term
resistance and proved to be too much for the bulls to overcome
over the past 2 days.  Near term support is found between
$45-46, followed by the $42 level (near the lows from last
week).  The stock continues to be weak compared to other
networking companies, largely due to disappointing comments
from the company relative to future revenues and earnings.
Volume is hovering right at the daily average, and with the
uncertain nature of the NASDAQ recovery, we would consider new
entries if EXTR fails to penetrate the $50 level.  If the
buyers can push through this resistance level, especially on
strong volume then prepare to stand aside.

TRW $49.69 +1.19 (+1.69) Entry points abound as TRW continues
to bump into resistance at the 200-dma (currently $50.94).
After bottoming at $47.50 on Tuesday, value investors have
started picking up shares of this low P/E (currently less
than 9) stock.  Volume is hovering near the ADV, and every
time the price approaches resistance, the selling volume
picks up, indicating there is still a bearish bias.
Yesterday’s morning star candlestick pattern indicates that
there are not enough buyers to sustain any upward moves.
Adding to the negative picture is the fact that the declining
10-dma ($50.81) crossed through the 200-dma today, and this
should continue to pressure the share price.  As long as the
pattern continues, look to enter new positions as TRW fails
to penetrate resistance and rolls over.  Keep a sharp eye on
volume as TRW approaches support at $47-48.  Declining volume
near support will likely indicate that the selling interest 
is drying up.



**************
NEW CALL PLAYS 
**************

CPN - Calpine Corp $109.06 +3.06 (+8.19 this week)

Calpine is an independent power producer.  The company is 
the world's top geothermal operator, and it owns the largest
producing geothermal resource, The Geysers, in northern
California.  Calpine has a net generating capacity of about 900
MW from geothermal plants, the company has additional capacity
through its gas-fired plants.  The company has 238 bln cubic
feet of proved reserves, of which 90% are natural gas.

While consumers crank-up their air conditioners, CPN cranks-out
profits.  While CPN is not your typical high-flying tech stock,
at the same time, its not your typical utility either with its 
30% earnings growth rate.  Investors have found solace in the
utilities sector ever since the bear reared its ugly claws in
early March.  CPN has been on a tear over the past two months in
part from the company's strong fundamentals and the high level 
of natural gas futures.  CPN's huge inventory of natural gas has
turned traders bullish on the stock as future prices hover near
record levels.  Because of the bullish investor sentiment CPN has
the highest relative strength rating within the utilities sector
and an upcoming event may propel the stock even further.  The
Board of Directors announced a 2-for-1 stock split on May 18th
and shareholders approved the proposal a day later.  The board
set the payable date for the split for June 8th.  We're looking
for momentum to build in the stock as we approach the split.
Technically, CPN is positioned well for a split run.  After
experiencing a brief natural reaction last week the stock has
since rebounded back above the psychologically important $100
level.  The stock finished Thursday's session just below minor
resistance at $110.  It will again face resistance above that
level at $113, its near-term high.  Consider your risk levels
and look for entry points as CPN clears its various resistance
levels.  Additionally, watch the direction in the utilities
sector and look for volume to return to confirm the upward
momentum.  If the stock does stumble due to profit taking,
consider a bounce off support at $106 for a possible entry.

CPN has received approval from Wall Street as of late.  Recently,
DB Alex Brown reiterated its Strong Buy rating and PaineWebber
upgraded the stock from a Neutral to a Strong Buy rating.  Also,
Morgan Stanley raised its earnings-per-share estimates to $2.30
from $1.65 in 2000 and raised its rating on the stock to a Strong
Buy.

BUY CALL JUN-105*CPN-FA OI= 65 at $ 7.50 SL=5.25 
BUY CALL JUN-110 CPN-FB OI=159 at $ 5.13 SL=3.00
BUY CALL JUN-115 CPN-FC OI= 64 at $ 2.88 SL=1.50
BUY CALL JUL-110 CPN-GB OI= 99 at $ 8.75 SL=6.00
BUY CALL OCT-115 CPN-JC OI= 16 at $12.88 SL=9.75

Picked on June 1st at  $109.06    P/E = 55
Change since picked      +0.00    52-week high=$123.00
Analysts Ratings     6-4-1-0-0    52-week low =$ 24.56
Last earnings 03/00  est= 0.28    actual= 0.27
Next earnings 07-31  est= 0.42    versus= 0.33
Average Daily Volume =   888 K
/charts/charts.asp?symbol=CPN


PGR - Progressive Corp. $97.69 +3.81 (+5.19 this week)

Traditionally a leader in non-standard, high-risk personal auto
insurance, PGR has moved into standard-risk and preferred auto
insurance, as well as other personal use vehicle coverage, 
such as motorcycles and recreational vehicles.  The company’s
property-casualty insurance products protect its customers
against collision and physical damage to their vehicles and
liability to others for personal injury or property damage.

Bottoming at $45 in early March, PGR began recovering into its
April earnings.  Earnings came in far short of expectations and
precipitated a slew of analyst downgrades, dropping the stock
back to support near $60.  The most recent recovery began in
mid-May, helped by an upgrade from Goldman Sachs on the 16th.
After moving up through the 200-dma on May 15th, PGR has moved
steadily higher and has been using the 5-dma (currently $93.81)
as support.  The economy is showing tentative signs of slowing,
lending strength to the idea that we may be approaching the end
of the string of interest rate increases.  The prospect has
rejuvenated financial stocks and PGR is going along for the
ride.  The buyers ran out of steam last Wednesday near $100,
and the stock pulled back to establish a new base near $91.
Today saw the share price move up nicely, supported by market
strength and encouraging economic reports.  Volume over the
past week has been light, indicating that there could be a
pullback to support in the near future.  A bounce near the $92
support level is buyable as long as volume confirms the bounce.
If you would rather wait to enter new positions on strength,
look to open new positions as buying volume pushes the share
price through resistance at $100.

Building out its online presence, last Friday PGR introduced
the first ever, online insurance program for boats and personal
watercraft.  Adding to their online image, on Tuesday, the
company was granted a license to display the BetterWeb Seal on
its website.  This informs consumers that the site complies
with the BetterWeb disclosure standards for sales terms,
privacy, and security policies.  On May 16th, PGR received an
upgrade from Perform to Outperform by Goldman Sachs.

BUY CALL JUN- 95*PGR-FS OI=50 at $6.63 SL=4.50
BUY CALL JUN-100 PGR-FT OI=50 at $3.88 SL=2.25
BUY CALL JUN-105 PGR-FA OI=55 at $1.38 SL=0.75
BUY CALL JUL- 95 PGR-GS OI=19 at $8.38 SL=6.00
BUY CALL JUL-100 PGR-GT OI=37 at $2.38 SL=1.25

Picked on June 1st at  $97.69     P/E = 49
Change since picked     +0.00     52-week high=$152.13
Analysts Ratings   3-3-16-0-0     52-week low =$ 45.00
Last earnings 04/00 est= 0.14     actual=-0.50
Next earnings 07-18 est= 0.42     versus= 1.32
Average Daily Volume =  668 K
/charts/charts.asp?symbol=PGR


MU - Micron Technology Inc $74.00 +4.06 (+9.38 this week)

Micron is one of the world's leading makers of semi-conductor 
memory components.  They design, manufacture, and market a 
variety of complex circuit boards, memory modules, system level 
assemblies, and PCs.  Although approximately two-thirds of its 
sales revenues come directly from the dynamic random-access 
memory (DRAM) components and other related chips.  To keep 
competitors Hyundai and Samsung on their toes, Micron is 
developing embedded memory for the digital video market.  
Texas Instruments and Intel both have interests Micron.

The influential semiconductor analyst, Dan Niles, spoke 
on Tuesday and everyone listened attentively to his 
recommendations.  And on top of the list was the #1 DRAM maker.  
In a research note, he stated that "Micron is our best 
investment idea in the computer hardware space.  We believe that 
Micron currently is approaching 25% market share and can earn 
nearly five times as much money at the peak of this cycle, 
leading to a stock price that could be four to five times higher 
as well".  MU was then graced with a new Buy rating and $100 
price target.  DLJ analyst Boris Petersik also noted that he 
expects to see a strengthening in DRAM prices as the year 
progresses due to lower inventory levels and post Y2K PC demand.  
Other analysts agreed that increasing PC demand was effectively 
driving up prices for processors and memory chips.  Investors 
just itching for a good reason to buy jumped on the bullish 
comments.  They've been backing up the trucks for MU ever since. 
And the inspiring tech rally is bringing more optimists out of 
the wings.  This is clearly evident by the increased activity in 
call options.   The momentum was so strong today it propelled MU 
to a new 52-week high at $74, where it notably closed for the 
session.  The volume too is backing the incredible gains with 
levels nearly reaching double the ADV.  Tomorrow the non-farm 
payrolls' date is expected.  This data could have a great impact 
on crowd sentiment so be aware of the broad sentiment.  
Therefore, an entry around the $70 mark could prove profitable, 
however be patient for stock and market direction to take 
course.  Keep in mind, MU is in new territory and recently 
experience huge gains.  Although the near-term future should 
fare well for this play.  Micron is targeting a 3Q earnings 
release for the week of June 19th, after the bell.  It'd be 
quite a play if the strong momentum of today can carry it 
forward into an earnings' run.

The World Semiconductor Trade Statistics group announced this 
week that it expects global chip sales to increase 31% to $195 
bln this year.  They also stated that the anticipated growth 
should continue through 2003 as sales of mobile phones and 
Internet-related networking equipment lead the demand for 
computer chips.

BUY CALL JUN-70 MU -FN OI=4391 at $7.38 SL=5.75
BUY CALL JUN-75 MUY-FO OI=1595 at $4.63 SL=2.75
BUY CALL JUN-80 MUY-FP OI=2213 at $2.75 SL=1.25
BUY CALL JUL-75*MUY-GO OI=2271 at $8.88 SL=6.25
BUY CALL JUL-80 MUY-GP OI= 800 at $6.88 SL=5.00

Picked on June 1st at    $74.00    P/E = 92
Change since picked       +0.00    52-week high=$74.00
Analysts Ratings      9-6-5-1-0    52-week low =$18.00
Last earnings 03/00   est= 0.81    actual= 0.58
Next earnings 06-20   est= 0.31    versus=-0.05
Average Daily Volume = 5.92 mln
/charts/charts.asp?symbol=MU



*************
NEW PUT PLAYS 
*************

MRK - Merck & Co $72.44 -2.19 (-2.13 this week)

Merck & Co., Inc. is a global, research-driven pharmaceutical
company that discovers, develops, manufactures and markets a
broad range of human and animal health products, directly and
through its joint ventures, and provides pharmaceutical benefit
services through Merck-Medco Managed Care.  Merck's cholesterol
drugs Zocar and Mevacor, and its hypertension drugs Vasotec and
Prinivil are their top sellers.   They main competition comes
from Aventis, Bristol-Myers-Squibb and Novartis.

Is it a consolidation or a change in investor sentiment?  That's
the question that many investors in Merck may be asking.  Since
the early March our new play has formed a nice channel higher.
Several things drew our attention to this drug company.  After
seven attempts in as many days, traders have tried unsuccessfully
to push MRK through the $75 level.  Given what appears to be
a change in sentiment this week, investors have been pumping 
money into the tech stocks and easing their way out of MRK and
the drug sector.  There really has been no company specific
news that would drive the price lower, however traders seem to
be looking another direction.  A press release today showed a 
class action lawsuit had been filed against Bristol-Myers Squibb.
The suit alleges that the company issued false or misleading
statements concerning the effectiveness of a drug, VANLEV.  While
Merck is in no way connected to the suit, investors sometimes
shy away from the sector as a whole, when a leader in the industry
stubs its toe, or is involved in legal issues.  Another negative,
at least for now had MRK loosing just under 3.0% on a day the
major indices were able to chalk up respectable gains.  The
technical picture shows MRK had hit an over-bought area and is
due for a bit of a pullback.  The weakness today, seems to suggest,
it could be more than a consolidation.  The decline came on only
3.8 million shares with the volume picking up the last half-hour.
MRK has intraday resistance $74 and $75.  We would look for 
opportunities to buy puts on further declines or failed bounces
up to resistance.

BUY PUT JUN-75 MRK-RO OI= 1407 at $3.63 SL=1.75
BUY PUT JUL-75*MRK-SO OI= 3015 at $5.00 SL=3.00
BUY PUT JUL-70 MRK-SN OI= 8714 at $2.56 SL=1.25

Average daily volume = 6.21 mln
/charts/charts.asp?symbol=MRK



*********************
PLAY OF THE DAY - PUT
*********************

CL - Colgate Palmolive $53.31 +0.69 (-2.44 this week)

Colgate-Palmolive is the #1 seller of toothpaste and a world
leader in oral care products.  Colgate is also a major supplier
of personal care products (baby care, deodorants, shampoos, and
soaps).  Its Palmolive is a leading dishwashing soap brand
worldwide.  In household cleaning products (bleaches, laundry
products, and soaps), Colgate is a top producer of bleach and
liquid surface cleaners (including Ajax).  Foreign sales account
for about 80% of Colgate's total revenues.
 
Most Recent Write-Up

Volume swelled during Wednesday's trading as CL continued its 
losing ways.  However, Wall Street came to the rescue Thursday 
as Goldman Sachs upgraded CL to its recommended list, revising 
its previous rating of Market Outperformer.  On the heels of the
upgrade, CL gapped higher by $1.50 Thursday morning.  CL reached 
as high as $54.94 during Thursday's session, but the bullish 
sentiment soon dissipated as the stock rolled over to fill much of
its morning gap.  The roll-over pushed CL back below its 
descending 5-dma, the level that continues to provide resistance.  
In light of the relative weakness after the upgrade Thursday 
morning, we're looking for CL to continue its slide lower.  CL 
has support at $52.50 and again at $51.50.  Consider your risk 
level and target shoot for entry points as CL falls below its 
various support levels.

Comments

CL popped up to $55 today and quickly retreated.  Tomorrow will
be an interesting trading session as the markets have had a nice
run-up this week.  If CL moves higher, look for entry into the 
play as it faces resistance at $55.69 and $55.92, its 10-dma and
200-dma, respectively.  More conservative entry can be made as 
CL moves through its support levels mentioned above.

BUY PUT JUN-60 CL-RL OI=  61 at $7.75 SL=6.00
BUY PUT JUN-55*CL-RK OI=1086 at $3.13 SL=1.50

Average Daily Volume = 2.23 mln
/charts/charts.asp?symbol=CL



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

Another Big Day!

Wednesday, May 31

The market ended lower Wednesday amid consolidation in technology
issues after a record-breaking rally earlier in the week.  The
the Nasdaq ended 58 points lower at 3400 and the Dow Industrials
closed down 4 points at 10,522.  The S&P 500 Index slid 2 points
to 1420.  Trading volume on the NYSE hit 972 million shares with
advances beating declines 1,730 to 1,265.  Trading on the Nasdaq
was active with 1.53 billion shares exchanged.  Declines among
technology issues beat advances 2,099 to 1,954.  In the U.S. bond
market, the 30-year Treasury rallied fiercely on the back of the
benign economic data.  The long bond was last up 1 8/32, bid at
103 11/32, where it yielded 5.99%.


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

Golden State   GSB   JAN20C/JUL20C   $1.62   debit   calendar
Keycorp        KEY   SEP20C/JUL22C   $1.88   debit   diagonal
Adac Labs      ADAC  AUG17C/JUL20C   $1.50   debit   diagonal

Although none of the target debits were achieved, each of our new
positions offered relatively favorable entries during the session.
Adac Labs was the only issue that proved interesting as the stock
began to rally shortly after the market opened.  Our entry price
was recorded near 9:40 A.M.

Portfolio plays:
 
The market slumped today after a resounding recovery during the
previous session.  Favorable economic data offered new indications
that the economy may be slowing but trading volume remained light,
reflecting the lack of confidence in the rally.  Activity in the
pits was relatively quiet as traders looked for direction in the
recent inflation reports.  Economic data released earlier in the
week encouraged optimism but analysts noted that the Fed still has
more data to analyze before its next policy meeting in June.  The
central bank has singled out the tight U.S. labor market as a key 
concern as it fights inflation and the monthly employment numbers
are due out on Friday.  That report is expected to offer further
clues about the direction of monetary policy.

While the majority of technology stocks consolidated, there were
a few bullish issues in the industrial group.  Walmart (WMT) rose
to a recent high near $58 on strength in the retail sector and
financial giants American Express (AXP) and Citigroup (C) also
enjoyed favorable advances.  In the broader market, oil issues
rallied after Merrill Lynch recommended several major companies
suggesting they offer a powerful combination of positive earnings
momentum and compelling valuation.  On the downside, Healthcare,
computer networking and footwear stocks consolidated.  The Nasdaq
had a few pockets of speculation but our portfolio saw the biggest
gains in the oil sector.  Apache (APA) rose $3.50 to $61, Texaco
(T) moved up $1.62 to close at $57.50 and Falcon Drilling (FLC)
ended $1.43 higher at $23.50.

The biggest surprise of the day was our new long-term Insurance
issue Aetna (AET).  The share value fell to a low near $62 during
the first hour of the session, offering a favorable cost basis in
the neutral calendar position; JAN65C/JUN65C.  Later in the day,
the stock rallied after a news report that the health insurer was
again in talks to sell part of its business to Dutch financial
services company ING Group (ING) for as much as $9 billion.  The
Amsterdam-based ING would buy AET’s profitable financial services
and international units and Aetna officials reportedly said they
would like to hammer out a deal by the end of next month.  Aetna
has been the subject of buyout speculation in the past.  In March,
ING offered to team up with WellPoint Health Networks (WLP) to buy
Aetna for $10 billion but Aetna rejected the offer.  It appears
Aetna may finally agree to some form of an arrangement and that
speculation will drive the issue higher in the coming weeks.  We
are going to take a bullish approach and roll-up to the JUL-$70
calls to maintain upside potential.  The new debit will be $7.75
for the JAN65C/JUL70C.  Keep in mind the position still has risk
above $70 and in the event of a significant rally, the spread will
need further adjustments.


Thursday, June 1

The market rallied today amid tame economic data and optimism that
inflation may be under control.  The Dow closed up 129 points at
10,652 and the Nasdaq climbed 181 points to 3582.  The S&P 500
Index added 28 points to close at 1448.  Trading volume on the
NYSE reached 984 million shares with advances beating declines by
a 2-to-1 margin.  Volume on the Nasdaq was active at 1.59 billion
shares and advances led declines 2-to-1.  In the bond market, the
30-year Treasury rallied on the back of the tame economic data.
The long bond was last up 26/32, bid at 104 3/32, pushing its
yield down to 5.96%.


Portfolio plays:

Stocks rallied across the board today as investors warmed to the
possibility that rising interest rates are successfully keeping
inflation in check.  Bargain-hunting buyers searched for market
leading issues that have been pummeled in recent weeks.  During
the last few days, the outlook for equities has improved as a new
group of inflation reports have suggested that the pace of the
nation's economic growth is slowing.  Most of the companies in the
retail industry reported lackluster sales for May and the National
Association of Purchasing Management issued data suggesting growth
in the industrial economy slowed last month.  In addition, the
report indicated that inflationary pressures for most industrial
supplies have peaked in the short-term.  Although the news is
positive, analysts say the most crucial information will be the
Labor Department's employment report for May, due on Friday
morning.  Any indications of slower growth will be seen as a
bullish signal and should help the market recover from the recent
slump.

Technology stocks led the market higher today and our portfolio
enjoyed a number of favorable moves.  Ciena (CIEN) was again at
the top of the heap with a $10 rally to finish near $130 on
strength in the optical networking group.  Ditech (DITC) rebounded
$7 to end at $89 and last month’s loser, SCM Microsystems (SCMM)
climbed back into the low 70’s with a $4 rally.  Small-cap issues
were also on the move with Andrew (ANDW) leading the pack.  The
bullish stock moved to a new all-time high near $37 and the trend
shows little sign of weakness.  Excite@Home (ATHM) surprised us;
up $2 to end at $20.50 and it appears the issue has successfully
tested support near the bottom of its recent trading range.  The
financial group also participated in the rally.  Our new positions
in Keycorp (KEY) and Golden State Bank (GSB) enjoyed big moves and
long-term plays on Summit Bancorp (SUB) and Bank One (ONE) were
beneficiaries of the upside activity.  The Food and Beverage group
deserves honorable mention.  Best Foods (BFO) climbed to the top
of a recent trading range near $65 and Dean Foods (DF) broke-out
to a three-month high at $31.69.  Those of you in the bullish
calendar spread can close the position for a favorable profit or
plan to make an upward adjustment if the issue continues higher.
 
Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -

With the incredible recovery this week and an important economic
report due tomorrow, it may not be prudent to open new bullish
positions.  However, we have found some issues that might go well
in a long-term portfolio and with a small consolidation, we may
be able to participate in future growth of these companies at a
favorable cost basis.

******************************************************************
HDC - Hadco  $95.50  *** Flying High! ***
 
Hadco Corporation is a North American manufacturer of advanced
electronic interconnect products.  Hadco offers manufacturing,
engineering and systems integration services to meet customers'
electronic interconnect needs.  Their principal products are
multilayer rigid printed circuits and back-plane and systems
assemblies.  Printed circuits are the basic platforms used to
interconnect microprocessors, integrated circuits and other
components essential to the functioning of electronic systems.
Back-plane assemblies are generally larger and thicker printed
circuits on which connectors are mounted to receive and
interconnect printed circuits, integrated circuits and other
electronic components.  Hadco’s system assemblies include the
back-plane, power supply, fan card, cabling and system chassis.

This issue is completely “out of control” and although we don’t
want to enter a new position at the current overbought levels,
there is a favorable disparity in the “out-of-the-money” put
options.  Based on the recent meteoric rise, a pullback should
occur and with any luck, the target credit will become available.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-80  HDC-RP  OI=2  A=$0.31
SELL PUT  JUN-85  HDC-RQ  OI=5  B=$0.88
INITIAL NET CREDIT TARGET=$0.75  ROI(max)=17%


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

Chart =
/charts/charts.asp?symbol=HDC
******************************************************************
XLNX - Xilinx  $81.75  *** On The Move! ***

Xilinx designs, develops and markets complete programmable logic
solutions, including advanced integrated circuits, software
design tools, predefined system functions delivered as cores of
logic and field engineering support.  Their programmable logic
components include field programmable gate arrays and complex
logic devices.  These components are standard ICs programmed by
Xilinx's customers to perform desired logic operations.  Xilinx
also markets HardWire devices, which are specifically programmed
during the manufacturing process and functionally equivalent to
programmed FPGAs.  The company's products are designed to provide
high integration and quick time-to-market for leading electronic
equipment manufacturers in the computer, peripheral, telecom,
networking, industrial control, instrumentation, military, and
consumer markets.

Semiconductor companies gained ground this week after several
analysts upgraded the leading chipmakers with new "buy" ratings.
New applications for computers and communications are expected
to augment the current demand and rising DRAM prices will help
bolster the bottom line.  The experts suggested many of the top
stocks could increase exponentially in value over the next few
quarters.  We believe XLNX is positioned to benefit from both
of these affects and for now it appears that investors agree.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-65  XLW-RM  OI=2688  A=$0.56
SELL PUT  JUN-70  XLW-RN  OI=758   B=$1.00
INITIAL NET CREDIT TARGET=$0.56  ROI(max)=12% B/E=$

Chart =
/charts/charts.asp?symbol=XLNX
******************************************************************
HYSL - Hyperion Solutions  $32.43  *** Entry Point! ***

Hyperion Solutions develops, markets and supports enterprise
analytic application software that helps companies better
understand, optimize and operate their businesses.  Hyperion’s
products integrate with and enhance most transaction-processing
applications, enterprise resource planning and other customer
relationship management packaged applications, and data
warehouses.  The company and its partners deliver client/server
and web-based products for a broad range of analytic applications
including budgeting and planning, financial consolidation and
reporting, activity-based management, performance management,
campaign management analysis, promotional analysis, sales
forecasting, demand planning, e-business analysis and other
industry-specific solutions.  Their unique solutions are used by
thousands of organizations in more than 100 countries around the
world.

There is little news to discuss but the fundamental outlook is
excellent and the bullish technicals suggest a recovery from the
recent sell-off is underway.  In this case we simply favor a
conservative entry into a solid company with a proven history of
success and superior long-term potential.


PLAY (conservative - bullish/covered-combination):

BUY  STOCK - HYSL  LAST=$32.43
SELL CALL  JUL-30  WQE-GF  OI=29  A=$5.38
SELL PUT   JUL-25  WQE-SE  OI=50  B=$1.00
COMBINED COST BASIS (approx)=$25.50 MAXIMUM ROI(margin)=13%

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



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************
See Disclaimer in section one
************

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