Option Investor

Daily Newsletter, Tuesday, 06/06/2000

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The Option Investor Newsletter                    Tuesday 6-6-2000
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)
       6-06-2000           High     Low     Volume Advance Decline
DOW    10735.60 -  79.70 10822.60 10707.70   943,286k 1,520  1,392
Nasdaq  3756.37 -  65.39  3884.01  3749.18 1,595,176k 1,937  2,097
S&P-100  783.39 -   7.36   790.54   781.06    Totals  3,457  3,489
S&P-500 1457.84 -   9.79  1471.36  1454.74            49.8%  50.2%
$RUT     511.65 -   1.65   523.05   511.49
$TRAN   2766.54 -  33.80  2800.04  2756.96
VIX       25.14 +   0.24    25.85    24.89
Put/Call Ratio       .47

Not so fast there partner! The Fed is alive and well!

Just when you thought it was safe to go back into the market
the Fed heads, led by Parry and two others, took center stage
with comments detrimental to the market. Parry said it was
too soon to assume the Fed was done raising rates. This was
a small comment but enough to punch a hole in the rally balloon
and attempts by analysts to repair the verbal damage were not
successful. Parry said one month's data or even one quarter's
data would not be enough to show a lasting trend. With earnings
warnings and signs of slipping sales on almost every front, the
possibility of even more rate hikes and the resulting profit
slow down sent investors heading for the exits.

Picture this. A conference call between Greenspan and associates
over the weekend. Greenspan talking, "as you can determine from
the rapid escalation of speculative equity values over the last
four days that the financial markets are expanding at rates that
exceed the targets we established from years of empirical data and
I am concerned that the rapid cessation of worry in the financial
arena about future Fed policy will encourage a continued rise
in equity values above our established norms." Say what? In English,
"Wow, did you see that +800 point gain in the Nasdaq?, we need
to hit the lecture circuit and talk this puppy back down." Kelly,
you hit them on the jobs report. Figure out some way to down play
that data! Right boss! Everybody else, fire (talk) at will!

Today, Kelly said that the Jobs report data was encouraging but
it is not a soft landing yet. There is still a lot of data we
need to see before moderating the interest rate policy. While
others are worried about a crash landing "I see no signs of the
economy falling off a cliff." Interpretation = "no signs" means
there is nothing yet that would tell us we have gone too far in
rate hikes. If they don't see "any signs" of serious slow
downs then they are not done yet! The number of analysts that
were leaning toward no rate hike at the June-27th meeting just
took a serious turn downward. The sentiment turned on a dime
and now almost all the Fed watchers expect a +.25% hike in June.
Fed sentiment can change faster than weather in Colorado when
analysts decide they made a wrong turn at the last economic

While the Feds have seen no major signs of a slow down the
investing public saw a vivid display today. Circuit City
announced today that May sales were flat and earnings would
suffer. They said they were also seeing lower margins and a
big slow down in large appliances. Appliances are one of the
first signs of a slow down in consumer purchasing. Big ticket
items are the first to get axed when money starts to tighten.
CC lost -$12.50 or -24% of its value on the news. Immediately
the rest of the retail sector reacted and prices slid across
the board. Many analysts think the problem is simply Circuit
City and they may be losing sales to Sears and others but all
retailers took a hit.

EFII also warned today and lost -10.81 or -31% of its value.
National Semi (NSM) warned after the bell that it was
experiencing slower growth and margin squeeze. This should
impact the otherwise hot chip sector on Wednesday. The offset
to this was an announcement by Microsoft today that they were
seeing PC growth running at a +12% to +15% growth rate. This
positive news as well as comments from the CEO that they
expect to win the breakup case on appeal, added +2.75 to the
stock price. MSFT filed what was expected to be their last
brief in the breakup case before the Judge issues his ruling.

The financial sector took a hit today as well after Merrill
Lynch expressed concerns about future profits. Citing past
times of multiple rate hikes, the banking sector suffered
from fewer deals, fewer loans and fewer trades which all
contribute to weaker profits. The sector had been in rally
mode with anticipation that the Fed was done. Looks like the
rally was premature.

In spite of the way the markets turned out today we should
be thankful that the damage was not worse. With an active
Fed and huge profits from last week we could easily have
lost a couple hundred points on both indexes. On the Dow
we have back filled about half of the big gains made since
the Jobs Report last Friday. The Nasdaq has only given back
about -100 points of the +300 gained. As of the Tuesday
close we are just profit taking and consolidating from those
big gains, even if the analysts tell us it is Fed dread
causing the problems. What happens on Wednesday will tell
us if we have the guts and conviction to hold the line.
Conviction is something we have been lacking, even when the
rally was on fire. Traders are taking positions but running
for cover whenever there is the slightest bit of negative
news. Without conviction we have no chance of holding our
gains. Until traders feel they can hold through the next
dip we are doomed to maintain the extreme volatility.

The volume was still decent today with 1.6 bln on the Nasdaq
and 945 mln on the NYSE. But, decent volume on a down day is
not a good sign. But were the markets really down? The advance
decline line was exactly flat with equal advancers and
decliners. After a record +19% gain last week you would
expect a bigger drop if traders were very nervous. The cash
is still on the sidelines and the next major economic report
is Friday. The PPI report will give the Fed one more piece
of important data on which to base their decision. Recently
the PPI has been a leading indicator for the CPI which
follows next week. Should the PPI come in lower than expected
investors would expect the CPI to be lower also and this
would set us up for another possible rally. Recent PPI
reports have been preceded by rallies the day before as
traders placed their bets on a benign number. We will see
if traders are as convinced this time around by the market
activity on Thursday. Wednesday is anybody's guess since we
closed on the lows of the day. Futures are up slightly but
there is a lot of dark before morning. If we have an uptrend
over 3800 in the afternoon I would feel positive about a
follow through rally on Thursday as well.

In our seminars we have a saying, "trade what you know not
what you don't know." This means you should not "gamble"
money by holding over earnings announcements, economic
reports or Fed speeches. You should only place your bets
when you are in control or fully aware of as many pieces
of the puzzle as possible. The things you do not have
control over are the things that will bite you. Nobody will
ever eliminate 100% of the risk of investing in the market
but you can reduce it to a very small amount with the right
attitude. Should you hold over the PPI report? Those that
do will either win big or lose big depending on the numbers.
Personally I think they will be market neutral but I am not
willing to bet the farm on it. Are you? This is where the
term risk capital comes into play. If the market is up on
Wednesday afternoon and Thursday, take a smaller position
than you would normally. If it works in your favor, add to
it. If it goes down you will lose less.

Good luck and sell too soon.

Jim Brown

Current long positions include:


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Tuesday, June 6, 2000

Greenspan's Slowing Economy!

The broad markets suffered some profit taking Tuesday, as traders
and investors stayed on the sidelines, waiting for some real
economic data to be reported. Some of today's selling pressure
can be attributed to Circuit City (CC, -12 ) and Electronics for
Imaging (EFII, -10 13/16), which both got hit as they prereleased
negative news.

Greenspan's slowing economy was evidently felt by both of these
companies named above, which in turn sent many sectors lower
today. This double-edged sword is what we spoke about last week.
That is, if the economy truly is slowing, that's great for the
interest rate environment, but bad for corporate earnings. With
the (major) negative-prerelease season soon upon us,
we will be witnessing more debacles such as Circuit City and
Electronics for Imaging very soon, so stay protected.

In the Pinnacle Index section for the OEX, our indicators were
indicating an overbought market heading into this week, at least
for the OEX. The 800 benchmark seemed like a level that would
cause some significant resistance to the S&P 100. Well, the put
buyers came out in force the last couple of days, as the Pinnacle
Index for the OEX (775-800) fell from 5.74 to 2.25. This is a
pretty significant drop, and we will be monitoring this region
closely over the next couple of days. If we witness more negative
activity such as this over the next couple of days, and if we get
a good Producer Price Index on Friday, we may have another strong
rally in the works. Until then, stay cautious, as Greenspan's
slowing economy may finally be effecting our country in the way
they see fit.


Interest Rates (5.909):
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. With the
tame inflation numbers posted this past week, it was quite
evident that a major short squeeze was occurring.

Volatility Index (25.14):
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

Mixed Signs: None


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. This has just occurred as Circuit City and Electronics
for Imaging both warned of slower growth.

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                        (6/2)        (6/6)       (6/8)
Overhead Resistance (805-825)    24.20       25.40
Overhead Resistance (775-800)     5.74        2.25 **

OEX Close                       792.69      783.39

Underlying Support  (745-770)     1.28        1.45
Underlying Support  (715-740)     3.47        3.89

What the Pinnacle Index is telling us:
Direct overhead did drop dramatically, indicating a better
potential for the OEX to break through. However, OTM resistance
is still extremely strong, so until option expiration next week,
we would doubt that the OEX would significantly test this level.

Put/Call Ratio
                                Friday      Tues       Thurs
Strike/Contracts                (6/2)      (6/6)      (6/8)

CBOE Total P/C Ratio             .41        .47
CBOE Equity P/C Ratio            .32        .41
OEX P/C Ratio                   1.18       1.08

Peak Open Interest (OEX)
                     Friday          Tues            Thurs
Strike/Contracts     (6/2)          (6/6)            (6/8)

Puts                740  / 8,382  740 / 8,897
Calls               800  / 6,553  800 / 8,703
Put/Call Ratio        1.29          1.02

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

June 6, 2000                            25.14


As of Market Close - Tuesday, June 6, 2000

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

DOW Industrials   10,200  11,400  10,736    Neutral   5.05
SPX S&P 500        1,350   1,500   1,458    Neutral   5.30
OEX S&P 100          725     800     783    Neutral   5.30
RUT Russell 2000     450     550     512    Neutral   5.05
NDX NASD 100       3,000   4,000   3,646    Neutral   5.30
MSH High Tech        800   1,000     987    Neutral   6.06 **

XCI Hardware       1,250   1,600   1,468    Neutral   5.30
CWX Software       1,050   1,300   1,272    Neutral   6.06 **
SOX Semiconductor    850   1,200   1,112    Neutral   5.30
NWX Networking       900   1,100   1,106    BULLISH   6.02
INX Internet         500     800     602    Neutral   5.30

BIX Banking          530     600     606    BULLISH   6.01
XBD Brokerage        400     500     476    Neutral   5.05
IUX Insurance        540     620     636    BULLISH   5.16

RLX Retail           850   1,000     873    Neutral   6.02
DRG Drug             355     400     375    Neutral   4.28
HCX Healthcare       710     800     772    Neutral   4.28
XAL Airline          140     155     163    BULLISH   5.25
OIX Oil & Gas        265     300     312    BULLISH   5.11

Posture Alert
Stocks suffered some profit taking Tuesday, as a slowing economy
hurt Circuit City's profit outlook, which entail, helped send the
Retail Index down with a -3.46% loss. This negative sentiment soon
spread to other sectors, as many were down by 2 to 3%. With this
most recent action, we have lowered both Software and the Morgan
Stanley High Tech to Neutral from Bullish.


Analyzing A Profitable Call Trade
By Mary Redmond

In order to trade options successfully, you need to have an
understanding of many different technical and fundamental
analytical tools.  You also have to watch the direction of the
market, the stock's sector, and the individual stock's unique
trading pattern.  Then, make a judgement based on as many factors
as possible.

There are hundreds of different technical tools.  None of
them are 100% accurate all of the time.  However, if you
combine technical and fundamental analysis, you are in a
stronger position.  Fundamental analysis generally refers to
an understanding of the company's business model and earnings
projections.  Technical analysis is usually used on a short
term basis and generally refers to a stock's trading patterns.

For example, the week prior to Memorial Day, I purchased two
year LEAPs on two stocks I follow, CMGI and NT.  I thought
the market was going to rally last week and this week for a
number of reasons.  The economic indicators released had been
pointing to a general slowing of the economy, which could lead
to a market perception that the Fed's program of increasing
rates would end soon.  I thought the NASDAQ had bottomed at
around 3100, as the volume was decreasing on the down days and
increasing on the up days.  In addition, I think that the cash
inflows to the market and equity funds will likely be high for
a few weeks, which could give a much needed liquidity boost to

The CMGI trade was an example of a trade executed primarily
on the basis of fundamentals.  The company's technicals were
weak.  It had violated both the 50 and 200-dma many weeks ago.
When I watched the live charts, I could see that many of the
trades being executed were sell orders.  The stock was down
over 60% from it's high of the year.  The market was almost
valuing the stock as if they were just another dot-com start up
doomed for failure.

However, I had been watching CMGI and its holding companies
for a long time, and reading the quarterly and annual reports
as well as research reports published on the company.  The
management has consistently demonstrated their ability to
make venture capital stage companies profitable.  I bought the
Jan '02 100 LEAPs at $13.50 when the stock dropped below $45 the
week before Memorial Day.

My risk?  The employment report could have been a bomb, the
company could have experienced further selling pressure, and
the NASDAQ could have failed to rally.  With two year LEAPs,
I estimated that the risk could be equal to about half of my
investment if the stock dropped to around $35.  As it was, the
position returned a 45% reward in less than two weeks time,
a reward which occurred when the stock moved up 15 points, or
30%.  The two year LEAPs were $19.75 yesterday.  Whenever
you have a large profit in an option, it is wise to sell the
option and lock in on the profit.  However, I think the stock
could move further as earnings are due to be reported next week.
So I sold half my position and held on to the rest.

My NT trade was done on the basis of both fundamental and
technical reasons.  I have been watching the stock and it's
trading pattern for a long time.  I continue to be very
impressed by the company's consistent pattern of predictable
earnings increases in the high growth sector of optical
networking equipment.  I purchased a Jan '01 60 call at
$8.75 when the stock was $48.  On Thursday of last week, NT
moved above its 50-dma on strong volume.  In fact, the
volume on this stock was one of the highest on the NYSE last
week.  By watching the live charts, I could ascertain that
many of the trades going through were large buy orders.

Last week, the stochastic indicators predicted a move up, as
NT's %K bar moved above the %D bar after dipping below it.
The blow out employment report pushed the stock up 8 points
for the week.  I sold the Jan '01 60 calls at a 50% profit.
I don't like to miss another potential for profit when I think
the stock could move further.  So I took some of the profit
and bought Jan '02 70 calls.

I think the NASDAQ is going to move up this month, and although
NT is an NYSE listed stock, it tends to trade with the NASDAQ
movement, as most of the telecom equipment stocks are listed
on the NASDAQ.  I think we are going to have strong fund flows
every week this month, and that may help to buoy the market.
If I am wrong, NT may drift down, but probably not much more
than 5 or 10 points.  If it can clear $70, my Jan '02 70 LEAPs
could increase by 75% in a relatively short period of time.  If
it drops by 50% I could break even, as I left part of the profits
in cash.

In summary, there are probably as many ways to trade options
as there are option traders.  If you use options properly, you
can make more money in a shorter period of time than you can
in almost any other investment strategy.  If you use options
to gamble blindly, it is likely that your losses could be
severe.  Generally speaking, LEAPs are safer to trade than
short-term expiring options, and sometimes can give greater

Contact Support


Strangling The OEX
By Austin Passamonte

Believe me, there have been occasions when I would've loved
to do that in the physical sense. Let's spare such tales of
woe and explore what I feel is a great tactic to profit from
volatile moves when market direction is uncertain.

A strangle by definition is the act of buying a call and a put
on the same underlying equity. True straddles would have the
call and put purchased at the exact same strike price, i.e.
the 790 call and 790 put on the OEX. To strangle a market is
to buy calls and puts for different strike prices that "collar"
or "fence" the underlying current price.

If the OEX is at 790 today and we feel a big move in some
direction is imminent, buying the 800 call and 780 put will
allow us to capture that move and profit handsomely if we
manage our position well. Therein lies the tricky part.

Personally, I prefer entering strangles instead of straddles
for a few reasons. I like my positions to be of equal cost
or close to it on either leg. This allows me to plan entry &
exit targets for profit or loss. Options one or two strikes
OTM will give a greater return than ATM contracts due to gamma.
If you buy a true straddle, it's tough to meet both criteria.
Should that straddle be purchased on options ATM (790 call &
790 put when the OEX rests at 790 +/-), our return is limited
for capital at risk. By the same token, if a straddle is away
from the index price (780 call & 780 put when the index rests
at 790) one leg is ITM, one leg is OTM and purchase prices
for each are greatly skewed. Great if the expensive leg wins,
but maybe not if the cheap leg can't offset the expensive
leg's loss going the other direction.

There are sound reasons and logic for placing these types of
trades, but let's focus on true strangles today.

Our objective is to profit from a large market move in either
direction. We understand that one leg will win and the other will
lose in the process, so our overall profit and odds of reaching
it must be favorable. Ideal conditions form within the last two
weeks of an option's life when markets coil before news events.
Seen anything like that lately?

We have two main choices: do we strangle with straight calls
& puts or with spreads? There are good reasons for each,
depending on circumstance.

Again, it's my preference to use debit spreads to strangle a
market in almost every case. The exception might be when
playing options on the very day of expiration. OTM premiums
are so cheap that I simply buy, sell or let expire at will
under the same parameters outlined below. If premiums are
rich, you must set tight stops on each in order to exit the
losing leg for profit to occur in the winning one.

I've seen volatile markets whipsaw both open legs through their
respective stops within minutes. The May 19th Fed meeting market
reaction was a prime example. An open contract spread with stops
would have been blown out on either side in short order. Forgo
using stops? Brief trading career ahead for you!

Using debit spreads within two weeks of expiration to strangle
a market allows one to buy close to the index mark using
limited capital. This is vital for many traders. Some people
might label these lottery plays, but I disagree. Your odds of
winning a jackpot are some 13.7 million to 1. The odds of
profit on these strangles are better than that, I promise!

The parameters I look for are few but rigid. Each leg must be
within reasonable reach for the index to trade completely
through. This is an arbitrary figure arrived at in many ways,
but I rely on the tools discussed in my section last week.
Each strangles price MUST be less that 6 points total cost,
hopefully with each leg balanced in price.

An example of this setup would be entering this Friday's
action. The PPI report will likely stir the markets in
advance of next week's CPI. There is a definite bullish bias
right now leading in but overhead resistance for the OEX is
strong and growing. Clearly the index could make a strong move,
but can we really tell which way from here? Not me!

Perhaps the market will rally or sell off Thursday afternoon
as traders jockey for position ahead of the reports. I'll be
watching the action carefully, especially the final hour of
trading. If technical analysis and charting indicates a clear
direction for Friday's open, I might enter a linear play to
catch an opening pop.

More likely the outcome will be ambiguous as equal bets are
hedged. Still a strong move either way to open the session on
Friday is expected. In this case, I'll look to enter a debit
spread strangle giving me the best chance to win.

Suppose action is heated and the index closes at 790 on
Thursday. Let's check the cost of a 780 long/770 short put
spread and an 800 long/810 short call spread. Even though
each spread is equidistant from the strike, one may have a
slight price skew from the other. There are volatility, O/I
imbalance and carry-charge factors at work that I don't
fully understand, nor do I need to. All I want to know is
can I buy the position balanced for a total of 6 points or

Suppose it turns out the ASK price for the 780/770 put debit
is 2.75 and the 800/810 call debit is 3.25. We can buy one
pair of each for a total debit of 6 to complete our strangle.
Now what?

Well, the OEX must close at/above 806 or at/below 784 in order
for us to break even before expenses. My first question is
always what does it take to get my money back? Does the
upcoming event and market conditions indicate this minimum
move can be possible? You decide.

If the index closes anywhere between 780 and 800 we lose the
entire 6 points risked. How many 6 point plays does your budget
allow you to risk total loss? Again, you decide. This is the
base of our initial decision. If the answer to any question is
none, we skip the trade.

If the index expires at/beyond 770 or 810 or trades deeper
before expiration, each winning leg has a potential value of
10 points. That means each strangle has a maximum profit
potential of +4 points in one direction with what I feel are
pretty good chances of occurring.

Personally, if I enter any straddles before next Tuesday, I'll
only buy them at six or less and set a close-sell limit price
of 9, GTC. If a sharp move runs one leg over and this 3 points
profit is hit, check please! I've seen market reversals too many
times to leave this on the table. By the same token that other
leg of the strangle is now virtually worthless but still has life.
Who knows, stranger things have happened...a market turn is
unlikely but possible, and we now have a free play protecting the
other side of the market should it reverse engines and fly.

There you have it. A spread strategy to collar any volatile
market poised for a breakout in unknown direction. Our chance
to buy close to the action is cheap. Potential for 50% profit or
slightly better with favorable odds of performing. How does
this seem to you?

Next week, we'll clean up some odds & ends on spreads, strangles
and various other solid questions I've fielded lately. With
the big reports and triple-witch Friday looming ahead, my guess
is we're in for some serious action. Hopefully, you now have an
extra idea or two in mind for profiting from it.

I'll  also share my spread plays and why I entered them. Expect
good, bad & ugly. See you Monday!

Contact Support

P.S.  General answers to a volume of questions:

The stochastic settings I rely on are the standard 14(1)3
in Qcharts, or 14 and 3 instead of 21 and 14 on the live chart
applet under "Tools" in OIN features column.

Everyone asking for candlestick book recommendations, OIN's
bookstore lists the "bibles" on this topic..."Beyond Candlesticks"
by Steve Nison and "Japanese Candlestick Techniques..." by Nison
in title-search box. The latter title is the first edition
covering all basics, and "Beyond Candlesticks" takes over from
there. Comprehensive, easy to digest books that are a must read
for understanding the subject.


Index      Last     Mon     Tue    Week
Dow     10735.57   20.54  -79.73  -59.19
Nasdaq   3756.39    8.38  -65.37  -56.99
$OEX      783.39   -1.94   -7.36   -9.30
$SPX     1457.84   -9.63   -9.79  -19.42
$RUT      511.65    0.27   -1.65   -1.38
$TRAN    2766.54  -29.02  -33.80  -62.82
$VIX       25.14    0.79    0.24    1.03

Calls               Mon     Tue    Week

PDLI      137.88    8.38    4.38   12.75  The CEO talks of earnings
GLW       217.25    2.13    6.25    8.38  New, looking for entry
BRCD      138.88    3.50    1.38    4.88  New, short-term uptrend
SEPR      110.63    8.06   -6.25    1.81  Moving with the sector
YHOO      135.06    2.81   -2.25    0.56  Drifting with the markets
CIEN      137.88   -4.69    4.25   -0.44  Looking for the bounce
ITWO      127.00    5.69   -7.81   -2.13  The Street remains bullish
MU         77.00    1.94   -4.19   -2.25  Upgraded today, target $100
ADI        84.88   -1.75   -2.38   -4.13  Watch for an entry on Wed.
EXDS       82.06   -0.13   -4.94   -5.06  Another nearing support
SDLI      255.00   -8.38    3.00   -5.38  Is there no stopping SDLI?
TQNT      108.00    2.75   -9.13   -6.38  Pullback was overdue
RBAK      106.00    1.00   -7.56   -6.56  Closing the gap to $100
MERQ       85.00    0.31   -7.75   -7.44  Right at support at $85
PGR        85.50   -5.31   -2.31   -7.63  Dropped, sector reversal
SCMR      102.00   -7.06   -0.94   -8.00  More sector consolidation
CPN       102.69  -13.31    4.69   -8.63  Dropped, time to split
RMBS      202.00   -3.38  -12.00  -15.38  Splits in just over a week
AMCC      106.81   -6.19  -15.81  -22.00  Dropped, acting funny
CHKP      205.94  -17.69  -10.06  -27.75  Needs to hold above $200


MMM        82.31    0.75   -2.75   -2.00  New, broke support
CAH        62.94   -1.44    0.81   -0.63  Possible bullish reversal
CL         54.56   -1.44    1.50    0.06  Dropped, flight to safety?
MRK        69.59    0.25    0.41    0.66  Going nowhere fast
BUD        74.50    1.69   -0.19    1.50  Bounce up to resistance

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.


AMCC $106.81 -15.81 (-22.00) Another reminder of the importance
of stop losses, AMCC pulled back sharply today, giving up over
$15 on volume 50% greater than the daily average.  After the
strong move last Friday (with a greater than $13 gap up), AMCC
was due for a pullback this week.  Yesterday's direction-less
market gave investors an opportunity to lock in their profits
ahead of today's carnage.  Things were looking all right until
the last hour today; then the selling volume increased, slicing
more than $10 off the share price as AMCC violated support at
$110.  The decline halted at the 30-dma ($106), but today's
negativity really put a damper on last week's momentum.  Looking
rather weak compared to other Semiconductor stocks, we are
dropping AMCC tonight.

PGR $85.50 -2.31 (-7.63) Another victim of the fickle finger
of fate, the Insurance sector has fallen out of favor this
week, and PGR is leading the decline.  It looks like investors
started paying more attention to the CS First Boston downgrade
from last Friday and their appetite for the stock has
diminished significantly.  The $91 support level got smashed
yesterday and the decline continued today, putting this
insurance stock right on the $85 support level.  While this
level may hold and PGR could head higher, the momentum that
attracted us to the play is gone.  With enthusiasm returning
to the NASDAQ, our play is suffering from neglect, and it is
time to move on.  There are way too many great plays out there
to waste any more time on PGR.

CPN $102.69 +4.69 (-8.63) Our split-run in CPN ran out of gas
early this week.  The relative weakness in the utilities sector
finally caught up with CPN.  DB Alex Brown attempted to boost CPN
Monday by reiterating its Strong Buy rating and urging investors
to buy the stock on the dip.  Despite the help from analysts, CPN
shed over $13 during Monday's trading.  The stock received more
help Tuesday from CS First Boston, who reiterated their Strong
Buy rating as well.  CPN did rally on the news Tuesday, but was
unable to hold onto much of its early day gains, and weakened
into the close.  In light of the poor showing so far this week
it's time for us to split.


CL $54.56 +1.50 (+0.06) CL extended its losses Monday as capital
flowed from the consumer staples sector.  Wall Street then turned
on a dime Tuesday, as Fed fears returned, and investors sought
out shelter in the defensive sectors.  Traders' concerns over a
slowing economy led to money returning to defensive plays such as
CL.  With Tuesday's rally, CL managed to edge, ever-so-slightly,
above its 10-dma, by tracing an intra-day high of $54.75.  The
10-day has proved to be major resistance over the past two weeks,
and Tuesday's move above that level is somewhat concerning for
us on the short side.  With the PPI number Friday, traders might
continue their shift into defensive plays, so we'll step aside.

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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
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The Option Investor Newsletter                    Tuesday 6-6-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


TQNT $108.00 -9.13 (-6.38) Overdue and expected, the NASDAQ
headed lower late in the day today, and was led by the
Semiconductors.  TQNT held up rather well in light of its gains
last week, and bounced repeatedly from support at $105-106.
Increasing volume accompanied the afternoon decline, and it
was reassuring to see support hold.  The close left TQNT
resting on its 5-dma ($107.63) and if buyers return later in
the week, this could be a nice level to open new positions.
The Semis will likely lead the much hoped for Summer rally,
and TQNT looks well positioned to lead the charge.  We may need
to see the stock fill the remainder of Friday's gap up, which
would mean a bounce near $104.  Aggressive traders may want to
target shoot intraday dips to this level, although we could see
a retest of support near $100, as investors wait and hold their
breath ahead of Friday's PPI Report.  Watch the NASDAQ and the
Semiconductor sector for confirmation of investor sentiment
and wait for support to firm before playing.

ITWO $127.00 -7.81 (-2.13) The theme of Tuesday's trading in the
B-2-B sector was profit taking.  Broad selling swept through the
group Tuesday as traders locked in their gains after Monday's
extension of last week's rally, but the selling came on
relatively light volume.  Although ITWO lost ground Tuesday, Wall
Street remains bullish over the company's long-term prospects.
Analysts point to the fact that ITWO is one of the few B-2-B
players that is actually profitable, and the company has a ton of
cash, currently $638 mln on hand.  Additionally, ITWO continues
to line-up contracts at a break-neck pace.  In fact, the company
said Tuesday that it would provide e-commerce and supply chain
technology for MetalSpectrum, the new online specialty metals
marketplace.  With the renewed investor interest in the leading
B-2-B stocks, ITWO could move higher from here.  If the profit
taking persists Wednesday, watch for a bounce off support at $124
for a possible entry.  Otherwise, wait for ITWO to turn north,
and look for an entry point if the stock clears resistance at

CIEN $137.88 +4.24 (-0.44) Investors bid shares of CIEN higher
Tuesday despite the broad market weakness.  The fiber optic
sector displayed strong relative strength in part from investors'
anticipation of the SuperComm 2000 Conference.  The
communications mecca slipped into full-swing Tuesday as high-tech
companies gathered in Atlanta to display their new products and
services.  Wall Street will be listening closely for bullish
comments from CIEN executives and looking for signs that the
company is continuing to expand through new product innovation.
CIEN stumbled a bit Monday in what appeared to be profit taking,
noting the light volume.  After the massive rally last week, a
little consolidation was expected.  The sell-off Monday pushed
CIEN back down to its 5-dma, currently at $132.  The $140 level
has proved to be a staunch resistance level for CIEN.  Watch for
an entry if CIEN clears resistance Wednesday on the heels of any
positive news from SuperComm and confirm upward momentum.  If
the market weakness catches up with CIEN Wednesday, look for a
bounce off support at the 5-dma for a possible entry.

SEPR $110.63 -6.25 (+1.81) While SEPR stumbled a bit Tuesday,
the Biotech sector extended its gains on the heels of several
positive developments within the group.  With no detrimental
news Tuesday, SEPR's decline appears to be nothing more than a
case of profit taking.  And after last week's impressive showing,
it comes with no surprise.  Although SEPR fell over $6 Tuesday,
its pattern of higher highs and higher lows remains intact.  The
stock is still trending upward, above its 5-dma.  With the
Biotech sector coming back into fashion on Wall Street, we're
looking for SEPR to continue to march higher.  The return of
momentum in this group may carry the stock higher, but we'll
also listen for news coming from the PaineWebber Life Sciences
conference this week.  Watch for a bounce from current levels
as SEPR closed Tuesday at strong support.  If you want
confirmation that momentum has returned to SEPR, wait for the
stock to clear congestion at $118 before entering the play.

SCMR $102.00 -0.94 (-8.00) We "knew" it was too good to last.
OK, we didn't "know" it for certain, but it was a reasonable
expectation since SCMR came up so far so fast.  If you were in
the play, you should have been stopped out yesterday.  Profit
taking was bound to set in.  Sure enough, SCMR found support at
$100 yesterday and today, not counting today's amateur hour.  In
fact it popped up to just under $106 on today's news that it
would acquire privately held Sirocco systems for $2.88 bln in
stock.  Why the excitement?  Sirocco has the metro optical
networking access technology that SCMR is currently missing.
CNBC would have you believe that's too rich a price for a company
without a finalized product line and no revenues.  Frankly, we
think that's short sighted given the demand for that type of
equipment.  Not only that, CSCO paid nearly $7 bln for Cerent
with just $10 mln in cumulative sales to get into that business.
In the 12 months since the purchase, Cerent will deliver over $1
bln in sales to CSCO - smart deal.  But we digress.  Technically,
SCMR held on at $102 while the rest of the NASDAQ began to roll
over on Fed rate hike fears.  While that is a sign of strength
for SCMR, it may not hold up if the market selling turns ugly
before Friday's PPI release.  On the other hand, if today was
just an attempt to scare the bulls, $100 to $102 could make a
good entry assuming the market turns back in call buyers' favor
(not likely, but possible).  With SuperComm 2000 this week and
Sirocco in the sweet spot of optical networking, we would expect
SCMR to have a strong recovery.  That said, wait for your entry
at support of $100, $97, or $94 depending on your risk profile.

RBAK $106.00 -7.63 (-6.56) Here's another successful player in
the metro optical networking equipment sweet spot.  Unlike SCMR,
most of RBAK's loss this week came today where it fell $7 in the
last hour with half of that in the last five minutes on a big
volume surge - over 100 K shares.  This is a great example of how
a sell stop order can save your trading account.  Tomorrow's
opening won't likely be pretty.  Recall that $106 is the gap open
price from last Friday that created a $6 "island" down to $100
where no trades occurred.  That gap needs to be filled, and we
could easily see RBAK dip to $100 on any market weakness.
However, where there is ugliness, there is sometimes opportunity.
The 5-dma (currently $103) could provide support.  So too could
there be stronger support at $100.  That level looks buyable to
us as long as we see a rebound and the rest of the market
cooperates. The next level?  Grab your parachute (and set your
stops) - try $92.  Helping matters greatly this week is the focus
on all things optical at the SuperComm 2000 conference.  RBAK is
currently giving live demonstrations of its latest offering in
the metro optical networking line (the new SmartEdge 800) at
the conference, which should keep interest in the issue high.
Perhaps there will be a big sales announcement to follow from one
of their major carrier customers, including SBC, GTE, UUNET, and
Q.  No guaranties, of course.  This is really all about buzz,
momentum, and a reported first mover advantage.  But we need the
market's cooperation first, and that isn't likely until the PPI

MERQ $85.00 -7.75 (-7.44) MERQ woke up bright and early on
Monday smashing its top resistance at the $90 level like a bug
on the sidewalk.  It just missed shattering that ever elusive
$100 mark by a mere fraction.  Then ka-boom!  A prime example of
why you NEVER buy during amateur hour.  MERQ saw a quick and
merciless sell-off that extended into today's session.  The
free-fall however put MERQ at its near-term support of $84 and
$85, which is an excellent level to start looking for entries.
But hold up!  There's perhaps some turmoil approaching in the
next few days - a possible downdraft in the markets and a
pullback ahead of the PPI data on Friday.  So let's be picky and
choosy.  Definitive moves off the current level, or even better
through the 5-dma (now at $87.91), are potential points of entry
for the more risk-oriented.  Otherwise wait for it to move back
above $90 in a positive market.  New readers be warned, this
Internet momentum play is HIGH-RISK and not for the faint of
heart.  In the news CarsDirect.com, an automotive e-commerce
retailer that puts consumers in control of the total car
buying experience, announced it adopted the LoadRunner(R)
ActiveTest(TM) for stress testing its consumer-focused
automotive pricing and purchasing Web portal.

PDLI $137.88 +4.38 (+12.75) PDLI was a big shot amongst the
techs this week.  Primarily the shift in sentiment towards
biotechs is, without a doubt, the driving force behind the
intense momentum.  However the company's positive revenue
outlook didn't go without notice from investors' today.  CEO
Laurence Korn reported that company revenues are expected to
reach $35 mln in the first half of 2000, which matches revenues
in all of 1999.  He said in an interview that revenues were
"bolstered by growing royalties from monoclonal antibodies it
has licensed to other pharmaceutical firms, including Genentech
(DNA) breast cancer treatment Herceptin and MedImmune (MEDI)
Synagis for the prevention of a respiratory virus common in
infants".  PDLI peaked at $148.38 on nearly double the ADV
before feeling some downward pressure as a result of broad
market selling.  The market saw fantastic gains last week and as
a result, the next few days may be stormy.  Stay on your toes if
you have open positions.  Take a look at a daily chart and you
can visually confirm that near-term support is much lower at
$125-$130 and even firmer at old resistance of $110-$115.
In other words, hang on to your hat if PDLI suffers a big
correction.  It's more likely thought that after clearing the
first line of opposition at $135 on Monday and plowing through
$140 today, PDLI is poised for a strong breakout once the clouds
clear.  Nevertheless, strap on your life preservers and be
prepared for to ride out a potential storm.

ADI $84.88 -2.38 (-4.13) So far so good.  Near-term support
evolved at these higher levels of $83 and $85.  Volume ebbed
away to moderate, however this is a good sign in light of the
mild downdraft from Friday's all-time high.  And the good news
surrounding ADI still abounds.  At the Supercomm 2000 today, ADI
announced that its ADSL sales for 2000 are growing at three
times the rate of the industry.  They also took it a step
farther and reiterated expectations for xDSL silicon sales to
grow by as much as 700% from 1999.  The company also joined the
CDMA Development Group (CDG), a consortium of more than 115
companies joined together to lead the global adoption and
evolution of CDMA (Code Division Multiple Access) wireless
technology.  Getting back to our momentum play, let's keep an
eye on the current level for strength over the next few days.
Worst case is for ADI to trend down to old resistance at $80.
The PPI data is coming out this Friday and it's not unthinkable
that the markets could pullback in anticipation; especially when
you overlay it with a normal correction period.  So if you have
itchy trigger fingers, please use prudence in adding new
positions this week.

MU $77.31 -3.88 (-1.94) Three times is a charm!  For the third
consecutive session, investor enthusiasm propelled MU into new
territory.  In a late day push on Monday, the share price
climbed to $82.50 on moderate volume.  Today MU opened lower,
but intraday it further established a near-term support at $77
and $78.  This level, above the 5-dma ($76.24), is relatively
safe for the time being.  But there's no guarantee that MU won't
dip down to firmer support in the $71 to $74 range.  We have to
expect some consolidation in consideration of the stock's recent
gains and overall market conditions - remember stocks and
markets move in cycles.  Dan Niles of Lehman Brothers did
however soothe investor's fears of a sharp pullback with a
reiteration of his Buy rating today.  He also restated a six-
month price target of $100 for MU.  Be patient to ride the next
rebound.  As of today, Micron's Corporate Affairs doesn't have
an earnings' date nailed down.  The company is however targeting
the week of June 19th and should have a confirmed release date
by next week.

EXDS $82.06 -4.94 (-5.06) This recovering stock is performing
like clockwork after its dynamic momentum thrust it upwards
40.5%, or $25.13 last week.  On Monday EXDS stabilized at its
short-term support of $86 and $87, then blew off some steam as
traders took some cash off the table.  The volume was light to
moderate, which is a good sign that the momentum will return.
Even with today's mild profit taking, EXDS is hovering above
firmer support at $78 and $80.  It'd be nice to see EXDS make
a move off the 5-dma (currently at $81.19) on a rebound.  But
don't get too giddy.  Now is the time it ere on the side of
caution.  Be careful if you choose to begin new plays in front
of the PPI data on Friday and have stops in mind.  Honestly the
ride may be too rocky for some traders over the next few days,
so be aware of your personal risk profile.

YHOO $135.69 -1.63 (+1.19) The first two days have provided
little excitement and little direction for our play.  Both
yesterday and today YHOO tried to rally through $140 early
in the day, only to get turned back by those seeking profits.
On the bright side the profit taking expected to take place
hasn't developed, yet.  Late today the bears did step in,
driving YHOO back to $135 at the close.  Closing near its
low of the day could indicate the serious profit taking is
just around the corner.  However with a pullback could come
new opportunities.  With two days of little or no conviction
in the market, gunslingers could certainly try their hand at
bounces off the $135 area.  That said, we would make sure to
keep your stops in place as investors that have been waiting
for YHOO and the major indices to extend last week's gains
could become restless, and pull some money off the table at
any time.  For those with more patience, a bounce off $130
or $127 accompanied by better than average volume may provide
a more suitable entry for new plays.

SDLI $255.00 +3.00 (-5.38) The new week hasn't really started
out quite like we had expected.  Today SDLI was able to make
another new high at $272.63 before the profit taking set in.
The late day selling in the broad markets dropped our play back
to a support area formed the past two days at $255.00.  The
question for traders now becomes, is that all there is to the
pullback, analysts were looking for?  Honestly, we really aren't
sure.  At this point we would not ignore further moves higher,
however we would definitely be prepared to take profits if a
bounce turns out to be a head fake.  On further profit taking
we would look for $250 and $240 to provide support.  On Monday
SDLI said it had completed the closing of its acquisition of
Photonic Integration Research, which had been announced in
early May.  The news was already in the market, however did
seem to bring buyers back early today.

RMBS $202.00 -12.00 (-15.38) Early on Monday, Rambus made one
futile attempt to stick its head over the $220 mark.  It did
so with little conviction and began to pullback and consolidate
just like we had hoped.  This morning's gap down to $200 came
on the news that Intel was delaying the launch of its Timna
processor chip that had been scheduled for the second half of
this year.  This was not a total surprise as investors had
speculated last month's recall of nearly 1 million motherboards
by Intel, could disrupt production on the new processor.  RMBS
was able to shake off the news and began to recover until late
day selling in the major indices drug our play back down near
support at $200.  Remember another reason for keeping RMBS near
the top of our list is for it 4-for-1 split, which is scheduled
for June 15th.  With the major indices drifting for much of the
past two sessions, we would take our cue from the broad markets
as well, when considering new plays.  Should we see more profit
taking support comes into play near $200, $190 and $185.  A move
back through $215 accompanied by strong volume could clear the
way for new positions as well.

CHKP $205.94 -10.06 (-27.75) While the broad markets have been
searching for direction, there has been little doubt as to the
mood of investors holding CHKP stock so far this week.  After
last weeks explosion we really aren't concerned about the move
as our play was due for profit taking.  The overall negative mood
in the markets does seem to be dwindling and we view the pullback
in CHKP as healthy round of profit taking.  Now with that said,
if the selling picks it would definitely get our attention.  CHKP
close just below its 5-dma but still remains well above its 10-dma
at $186.04.  We previously the importance of CHKP staying above
the $200 level of support but would also look to establish call
positions on bounces off the $195 or $185 area as long as they are
accompanied by solid volume.  On Monday Certicom Corp. announced
it would market a security system that will enable wireless devices
to connect securely with corporate intranets. The company said it
is working with a number of companies including Check Point to
develop its "VPN handheld client, which will allow corporations
to securely connect with sensitive private networks from handheld
wireless devices.


CAH $62.94 +0.81 (+0.63) After last Friday's large drop, CAH
has spent the first 2 days this week in a holding pattern.
Reflecting investor indecision, trading has been subdued.
Less than 900 K shares traded hands today, which is only 75%
of the ADV.  A potential bullish reversal pattern has developed
over the past 2 days.  Yesterday's small loss was followed
today with a larger gain, and the two candlesticks create a
pattern known as a Bullish Outside Day.  This occurs when the
high and close on the second day are both greater than the high
and close from the preceding day.  Completing the picture, the
open and low for today were both below the corresponding prices
from yesterday.  This pattern frequently precedes a bullish
reversal, so tighten your stops accordingly.  In order to
initiate new positions, we need to see CAH roll over at
resistance near $64 (on strong volume) or fall through support
at $61.  Confirm market direction before playing, as the stock
may very well follow the broad markets ahead of Friday's PPI

MRK $69.59 +0.41 (+0.66) Going nowhere fast is the best way to
describe this one.  Merck did begin the week in an oversold
environment, so the bounce on Monday came as no surprise.  The
drug company made it up to near $71 before sellers stepped in.
The real problem with this one is the overall lack of conviction
in the markets so far this week.  Not that its a bad thing, but
days like we seen this week can test the patience of traders
looking for or wanting something to happen.  Our best advice is
not to try to force anything.  If you bought puts on Monday's
bounce hang in there.  If you are still waiting, another bounce
to resistance at between $71 and $72 followed by more weakness
could give you another chance to enter our play.  The volume has
been very light so far, with the area between $68.50 and $69.50
providing support.  The point here is not many people wanted to
put their money on the line at those levels, so it may not take
much to break though the bottom of the recent range if with
better participation.  MRK announced today it has signed a deal
with PETNet Pharmaceuticals, to open a radiopharmaceuticals
manufacturing and distribution center near Merck's research
and development division in West Point, Penn.

BUD $74.50 -0.19 (+1.81) The bounce today up to its 5-dma may
have provided traders with a good entry for our new play.  So
far for the week BUD has picked up about 2.5%.  The one main
problem for the bulls as we see it is the light volume behind
the move.  Granted the markets so far have been a bit boring
in the first two session and could change at any moment.
The widely expected pullback that many were looking for in the
broad markets has yet to develop.  We actually were hoping for
a better bounce followed by weakness, for opportunities to
enter this play.  In industry news this morning, British brewing
and leisure group Bass Plc, said it is close to selling its
beer division to Belgium's Interbrew, for approximately $3.34
billion.  Interbrew is already the world's fourth largest brewer
behind BUD and others.  As for our play, be patient, let the
broad markets find a direction, and look for chances
to participate on further weakness or failed rallies.


GLW - Corning Inc. $217.25 +6.25 (+8.75 this week)

Corning provides communications technology at light speed.  The
materials pioneer is one of the world's top makers of fiber-optic
cable, which it invented more than 20 years ago.  Corning's
Telecom unit (about 50% of sales) makes optical fiber and cable
and photonic components.  The company's Advanced Materials unit
makes industrial and scientific products, including semiconductor
materials.  Its Information Display segment makes glass products
for TVs, VCRs, and flat-panel displays.  The company operates 40
plants in 10 countries.

Despite the market meltdown beginning in early March, GLW has
held its ground.  The stock is trading near its all-time high of
$226.44, revealing investors' insatiable appetite for companies
operating in the fiber optic arena.  With expanding profits,
investors have been rewarded with GLW.  And with the announcement
Tuesday, GLW's bottom-line may grow even more.  The company said
Tuesday that Marconi Communications, a supplier to 80% of the
world's telecom organizations, will use GLW's PurePath technology
in Marconi's next generation systems.  The announcement helped
GLW to buck the tech weakness Tuesday.  Also, the highly
anticipated SuperComm 2000 conference commenced Tuesday.  GLW is
a headline presenter at the gathering of leading-edge telecom
companies where investors await good news.  With the resurgence
of the tech sector last week, GLW broke out from a two month
trading range between $160 - 200.  After gapping above the $200
level last Friday, the stock hasn't looked back.  Volume has
steadily increased over the past five trading days as GLW has
rallied.  Despite the deteriorating conditions in the tech sector
Tuesday, GLW managed to hold onto much of its early day gains.
The stock did run into resistance at $220 as the day wore on.  In
the coming days, look for a bold move above $220 combined with
healthy volume for an entry point, if GLW can clear that level we
could see a retest of its 52-week high.  If, however, the
weakness in the broad market brings GLW down, the stock has minor
support at $215 and major support at $210.  These are the levels
we will be watching tomorrow for a chance to jump aboard.

With the rally above $200 last week, investors have been a-buzz
with split talk.  At GLW's annual meeting last April shareholders
approved the proposal to increase the number of authorized shares
to 1.2 bln from 500 mln.  Amazingly, GLW has not split its stock
since 1992, when it was trading around $60.  Since the market has
stabilized over the past week, we may get a split announcement
which could help our cause.

***June contracts expire in less than two weeks***

BUY CALL JUN-210*GRJ-FB OI=834 at $13.00 SL= 9.75
BUY CALL JUN-220 GRJ-FD OI=616 at $ 7.50 SL= 5.25
BUY CALL JUN-230 GRJ-FF OI=253 at $ 4.00 SL= 2.50
BUY CALL JUL-220 GRJ-GD OI=586 at $19.63 SL=14.00
BUY CALL AUG-230 GRJ-HF OI=306 at $22.00 SL=15.50

Picked on June 6th at   $217.25    P/E = 113
Change since picked       +0.00    52-week high=$226.44
Analysts Ratings      8-5-0-0-0    52-week low =$ 54.56
Last earnings 04/00   est= 0.55    actual= 0.64
Next earnings 07-24   est= 0.67    versus= 0.49
Average Daily Volume = 2.97 mln

BRCD - Brocade Communications $138.88 +1.38 (+4.88 this week)

Brocade Communications is a provider of Fibre Channel switching
solutions for Storage Area Networks (SANs), which apply the
benefits of a networked approach to the connection of computer
storage systems and servers.  The company's family of SilkWorm
switches enables companies to cost-effectively manage growth in
their storage capacity requirements and improve the performance
between their servers and storage systems.  This provides the
ability of increasing the size and scope of a company's SAN,
while allowing them to operate data-intensive applications,
such as data backup and restore, and disaster recovery on the

Helped along by the NASDAQ recovery last week, BRCD finally
broke out of its pattern of lower highs that began in early
April.  After one final bounce at the 200-dma on May 25th, the
stock has moved up nicely in the past two weeks.  Friday's gap
up on strong volume put the stock into breakout mode and the
momentum continued Monday and right up through the middle of
today's session.  The late-day NASDAQ weakness today finally
took its toll, dragging the stock down to close just $1.38
above the day's opening price.  The gains over the past 2 weeks
have been supported by the 5-dma (currently $129.38), and a
pullback and consolidation is possible before the stock is
ready to move higher.  Looking at a daily chart, the shooting
star candlestick pattern (normally a bearish reversal signal)
raises a caution flag.  Investors may be nervous ahead of the
PPI Report coming out on Friday, and we would use any weakness
as an opportunity to open new positions at a better price.
Near-term support is found at $137, followed by $131.  Longer
term support can be found near $120, and vigilant investors
could be rewarded with a very nice entry point if BRCD gets
caught in a market-wide downdraft ahead of the PPI numbers.
Aggressive traders can consider entries on a volume-backed
bounce from support, while more cautious investors may want
to wait for BRCD to push the $148 resistance level, near
today's high.

On Monday, BRCD announced the appointment of David de Simone
to the newly-created position of vice president of Platform
Development.  With over 20 years of experience in managing
hardware and software development, testing, and program
management, de Simone will be responsible for the hardware
strategy for BRCD's SilkWorm family of FibreChannel fabric

***June contracts expire in less than two weeks***

BUY CALL JUN-135 UBZ-FG OI=390 at $11.25 SL= 8.25
BUY CALL JUN-140*UBZ-FH OI=471 at $ 8.75 SL= 6.00
BUY CALL JUN-145 UBZ-FI OI=230 at $ 7.00 SL= 5.00
BUY CALL JUL-140 UBZ-GH OI=878 at $19.00 SL=13.75
BUY CALL JUL-145 UBZ-GI OI=312 at $16.75 SL=12.00

SELL PUT JUN-130 UBZ-RF OI=241 at $ 4.75 SL= 6.75
(See risks of selling puts in play legend)

Picked on June 6th at   $138.88     P/E = 631
Change since picked       +0.00     52-week high=$185.00
Analysts Ratings      7-5-2-0-0     52-week low =$ 12.91
Last earnings 05/00   est= 0.08     actual= 0.11
Next earnings 08-14   est= 0.12     versus= 0.01
Average Daily Volume = 2.99 mln


MMM - Minnesota MNG & MFG Inc $82.31 -2.75 (-2.00 this week)

The Minnesota Mining and Manufacturing Company (3M) is a leading
manufacturer of a variety of industrial, consumer and medical
products.  With operations in more than 60 countries, 3M is a
major player in the global economy.  The Company's technologies
have spawned a seemingly endless flow of groundbreaking products
with more than 50,000 products in its cache.  From Scotch tape
to industrial sandpaper, 3M has had an influence on the daily
lives of consumers worldwide.  The company was founded at the
turn of the century in 1902 in Two Harbors, MN.

Every major sector participated in last week's broad rally
except for Oil, Drugs and defensive stocks.  Now let's take it
closer to home.  A defensive stock like MMM may have been
fashionable while the techs were taking their lashings, but that
sentiment seems to be on the wayside.  As the NASDAQ and DOW
make valiant efforts to recoup, it's the blue chips and techs
paving the road ahead.  For MMM it's not looking so good.  For
months $84 always held as a firm bottom.  Then today the
negative pressure brought it down a consequential notch.  MMM
slipped under the governing 5-dma ($84.46) and 10-dma ($84.87).
And to add insult to injury, the 52-week record low (set in mid-
march) is a mere 4+ points away.  Volume is currently only at
average levels, however this could change in a heartbeat and
invite a strong downtrend.  Basically we're adding MMM in
anticipation of further downdrafts in consideration of the
perilous week ahead.  Look for downward moves off the above
mentioned technicals for entries.  If today's overall negative
sentiment extends into tomorrow, we should see some immediate
profits.  In company news, the 3M Foundation BoD approved over
$7.5 mln for educational institutions and programs throughout
the US and over $1.7 mln for the support of art organizations.

***June contracts expire in less than two weeks***

BUY PUT JUN-90 MMM-RR OI=151 at $8.13 SL=3.75
BUY PUT JUN-85*MMM-RQ OI=265 at $3.63 SL=2.00

Average Daily Volume = 1.62 mln


MERQ - Mercury Interactive Corp $85.00 -7.75 (-7.44 this week)

Mercury Interactive is the exterminator of the software
industry.  The company offers a comprehensive line of automated
testing tools that address the full range of quality needs for
testing complex applications throughout the business enterprise.
Essentially the tools help companies build better applications,
from Internet/e-business transaction systems to informational
Web sites.  All of its research and development is conducted in
Israel, however the company is based in California.

Most Recent Write-Up

MERQ woke up bright and early on Monday smashing its top
resistance at the $90 level like a bug on the sidewalk.  It just
missed shattering that ever elusive $100 mark by a mere fraction.
Then ka-boom!  A prime example of why you NEVER buy during
amateur hour.  MERQ saw a quick and merciless sell-off that
extended into today's session.  The freefall however put MERQ at
its near-term support of $84 and $85, which is an excellent level
to start looking for entries.  But hold up!  There's perhaps some
turmoil approaching in the next few days - a possible downdraft
in the markets and a pullback ahead of the PPI data on Friday.
So let's be picky and choosy.  Definitive moves off the current
level, or even better through the 5-dma (now at $87.91), are
potential points of entry for the more risk-oriented.  Otherwise
wait for it to move back above $90 in a positive market.  New
readers be warned, this Internet momentum play is HIGH-RISK and
not for the faint of heart.  In the news CarsDirect.com, an
automotive e-commerce retailer that puts consumers in control of
the total car buying experience, announced it adopted the
LoadRunner(R) ActiveTest(TM) for stress testing its
consumer-focused automotive pricing and purchasing Web portal.


The NASDAQ began slipping at the end of day and many tech stocks
rolled over with it.  After testing $100 on Monday, MERQ has
slowly drifted down to its current level.  If the NASDAQ continues
its slide to retrace Friday's gap, look for MERQ to find support
at $83 which it held last Thursday.  Below that lies the 100-dma
at $81.44 and the 50-dma at $78.  A bounce from these levels
would provide good entry opportunities.  On the upside, $90 will
have resistance and a move through that level along with a
surging NASDAQ will be a good indication to enter the call play.
The NASDAQ will be the key tomorrow as technicians and investors
watch to see if it closes that very wide gap from 3600.

***June contracts expire in 2 weeks***

BUY CALL JUN-85 RQB-FQ OI=439 at $ 5.38 SL=3.75
BUY CALL JUN-90 RQB-FR OI=417 at $ 3.50 SL=1.75
BUY CALL JUN-95 RQB-FS OI=344 at $ 1.88 SL=1.00
BUY CALL JUL-90*RQB-GR OI=408 at $10.13 SL=7.50
BUY CALL JUL-95 RBF-GS OI=179 at $ 8.38 SL=6.25

Picked on June 4th at    $92.44    P/E = 213
Change since picked       -7.44    52-week high=$134.50
Analysts Ratings      9-2-1-0-0    52-week low =$ 16.50
Last earnings 03/00   est= 0.10    actual= 0.11
Next earnings 07-17   est= 0.12    versus= 0.09
Average Daily Volume = 1.60 mln


Along With Any Sunshine, A Little Rain Must Fall...

Monday, June 5

The market consolidated today as a lack of economic news left
Wall Street searching for direction.  The Dow closed up 20 points
at 10,815 and the Nasdaq ended 8 points higher at 3821.  The S&P
500 Index fell 9 points to 1467.  Volume on the NYSE was a light
849 million shares, with declines beating advances 1,638 to 1,334.
Trading volume on the Nasdaq reached 1.45 billion shares, with
advances beating declines 2,237 to 1,832.  Economic data provided
further evidence the economy is slowing and boosted the 30-year
Treasury 11/32, pushing its yield down to 5.92%.

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

CD-Now         CDNW   JUL5C/JUL7C     $0.00   debit    bull-call
Globespan      GSPN   JUN80C/JUN90C   $8.00   debit    bull-call
Paine Webber   PWJ    JUL40C/JUL45C   $4.00   debit    bull-call
Novoste        NOVT   JUN50C/JUN45C   $0.50   credit   bear-call
Wellpoint      WLP    JUN80C/JUN70P   $2.12   credit   strangle

The consolidation in the market allowed favorable entries in the
majority of our new positions.  CD-Now was the most interesting
issue, and we had to rethink our opinion after company officials
made a public announcement near the opening bell.  The comments
tempered optimism about an upcoming deal concerning an investor
or a merger partner.  The report stated that CDNW discussed a
possible merger transaction with five different groups but has
not agreed on terms with any of these companies.  CDNW has also
requested final proposals from interested parties in order to be
able to reach an agreement on a transaction by the end of June.
Unfortunately, there can be no assurance that proposals will be
submitted, or that a transaction will be consummated in June or
at any time in the future.  The stock slumped after the news and
although our target entry was easily available, we opted to not
enter the position, based on the new information.  Of course, we
will monitor the issue for renewed optimism and a new opportunity
over the next week.

Portfolio plays:

After a range-bound session, stocks ended slightly higher Monday
amid gains in technology and telecom issues.  Trading was choppy
but analysts were confident in the market's refusal to correct
significantly after Friday's rally.  Investors may be convinced
that the tightening cycle is approaching an end, but a slowing
economy could result in weaker corporate earnings going forward.
A key barometer of the U.S. non-manufacturing economy declined
slightly last month, indicating that growth in that sector may be
moderating.  After the report became public, Federal Reserve Bank
President Robert McTeer said the economy may be able to grow at a
faster rate than it could in previous expansions without risking
higher inflation, partly because of increased productivity gains.
Jack Guynn, Federal Reserve Bank of Atlanta president, was not so
optimistic, suggesting that although recent data may point to a
slowing economy, there is a very real risk of inflation.  With a
lean calendar of reports this week, the market will likely trade
in a small range until a future direction is established.

The Nasdaq was the source of today's bullish activity with chip
and biotech companies leading the way on positive momentum from
last week.  In the broader market, gold mining, automobiles and
computer stocks advanced while electronics, drug, healthcare and
industrial power issues slumped.  Industrial stocks were most
affected as traders moved money into the technology group after
the recent recovery rally.  Rate-sensitive financials slipped
despite the benign economic data and one of our bearish issues,
J.P. Morgan (JPM) helped the downward trend in the Dow.  For now
it appears our new call-credit spread at $140 is safe but beware
of a technical rebound in the group.  A downgrade from Donaldson,
Lufkin & Jenrette affected a number of issues in the small-cap
banking sector and our remaining issue in the category, Keycorp
(KEY) moved lower on the news.  With the new concerns over future
profitability in this industry, it may be prudent to look for an
early exit opportunity.

The board of U.S. food manufacturer Bestfoods (BFO) is expected
to meet early this week to discuss a sweetened bid from Unilever
(UL), which is willing to offer Bestfoods shareholders up to $72
per share.  That makes our recent bullish positions in BFO much
more attractive but now reports have surfaced that Bestfoods is
close to acquiring long-ailing Campbell Soups (CPB).  Wall Street
analysts who follow the company say the match doesn't fit, and
that suggests that BFO is probably using the speculation as a
bargaining ploy to extract a higher offer from Unilever.  After
the news was announced, shares of Campbell Soups shot up to $33,
providing an interesting trading opportunity of those of you in
the bullish calendar spread.  Our position is short at $32.50, a
recent resistance area and it has yet to be threatened even with
the new speculation.  In the past, a BFO/CPB combination might
have made sense but it is unlikely to be worth $72 a share, and
that means the current CPB rally will probably fail.  Keep that
in mind when deciding whether to take profits (as we must) or
hold the position until expiration.

Our Straddles/Strangles section had a new winner today.  Lennox
International (LII) achieved a mid-session high near $14 and the
credit for our (September) debit strangle reached $1.56.  That's
a $0.31 profit on $1.25 invested in just over one week.  Another
issue in this section has been on the move recently.  Medimmune
(MEDI) split 3-for-1 this week and the stock has continued to
move higher even as the new shares were issued.  Our call option
position is short at (split adjusted) $63 and with the excellent
potential for bullish movement, we are now going to cover the
sold calls with purchased stock.  As you recall from the initial
narrative, we were optimistic about the future of the issue and
it appears the momentum from the current trend will continue to
a new trading range.  Our profit in the position will actually
increase if the stock finishes above the sold strike at $63.38.

Tuesday, May 6

The market slumped today as investors sold for profits after a
series of bullish sessions.  The Dow closed down 79 points at
10,735 and the Nasdaq was closed 65 points lower at 3756.  The
S&P 500 Index fell 9 points to 1457.  Volume on the NYSE ended at
951 million shares, with advances beating declines 1,522 to 1,402.
On the Nasdaq, trading volume reached 1.59 billion shares, with
advances beating declines 2,104 to 1,943.  In the bond market, the
30-year Treasury rose 3/32 pushing its yield up to 5.91%.

Portfolio plays:

The market moved lower today as investors took profits after a
string of bullish sessions.  Both the Dow and the Nasdaq edged
downward on speculation that a slowing economy may hurt certain
business sectors.  For almost a week, equities have rebounded on
hopes that the economy has slowed enough to persuade the Federal
Reserve to end its recent slew of interest rate hikes.  Now the
concerns have changed but for the most part, analysts believe
investors are simply regrouping after the rally of the past few
days.  Trading volume also remained relatively low as market
participants awaited information on the strength of the U.S.
economy before resuming their buying spree.  A crucial economic
report is due out on Friday, when the Labor Department issues
the results of the Producer Price Index.

Our recent bearish issue, J.P. Morgan (JPM) again led the Dow
retreat with a $4.12 drop to $133.  Unfortunately, the negative
bias affected a number of our bullish banking issues.  A Merrill
Lynch analyst told clients that periods of rising interest rates
are bad for investment banking revenue and that will certainly
affect the outlook for this group in the near-term.  Shares of
retailers also fell as analysts suggested that a slowing economy
could mean a lack of consumer buying and a future drop in revenue
and net profits.  Crude Oil stocks and other sector-specific
technology issues made up for most of the declining groups.  Our
positions in Texaco (TX), Apache (APA) and Falcon Drilling (FLC)
benefited from today's bullish activity and Cienna (CIEN) led the
the big-cap category with a rally to $137.

The bullish players in Bestfoods (BFO) received some excellent
news today.  Bestfoods, the maker of Skippy peanut butter and
Hellmann's mayonnaise, accepted a sweetened $20 billion bid from
giant Anglo-Dutch group Unilever (ULVR.L), ending a month-long
unsolicited takeover effort.  The deal will be the latest in a
series of acquisitions for Unilever, which pursued Bestfoods in
order to capture more top-name brands and boost revenue.  The
company agreed to pay $73 a share for BFO, up from an initial
offer of between $61 and $64, and shareholders expressed relief
that Bestfoods finally gave in popular demand.  The deal leaves
a handful of other food companies (including our Campbell Soups)
out in the cold because Bestfoods had been considered a buyer,
not a seller.  BFO had been exploring potential acquisitions in
an effort to deflect Unilever's approach and now they will no
longer be a potential suitor.

In a related story, our position in Nabisco (NGH) rallied amid
additional merger speculation in the Food and Beverage Sector.
The French food company Danone declined to comment on a recent
newspaper report it was teaming up with Cadbury-Schweppes to
make a joint bid for U.S. snack-maker Nabisco.  Sources close
to the company say a Danone-Cadbury team would make sense since
the French company is interested in Nabisco's biscuit business
and the British firm in its sauces, cereals and snack divisions.
Danone is not alone in eyeing Nabisco.  Tobacco firms Reynolds
(RJR) and Philip Morris (MO), currently the favorite, as well as
U.S. financier Carl Icahn have expressed interest in the company.
Icahn is the only one to have put a value on his offer, pricing
Nabisco at $6.5 billion or about $22, and that bid has virtually
guaranteed our success in the bullish, call-debit spread.

Two of our credit positions made surprising moves today.  Ditech
(DITC) fell $7, breaking through a recent support area as the
Nasdaq finally gave way to profit-taking.  Our bullish position
at $75 is in jeopardy and we will move to exit (roll-out of) the
spread if the issue continues through the next level of technical
support at $74.  WellPoint (WLP) also slid $3 on weakness in the
Health Services Sector and it will likely test a recent trading
range bottom in the next few sessions.  A move below support at
$68 will be our initial early-exit signal.

Questions & comments on spreads/combos to Contact Support
                         - NEW PLAYS -

Today's positions are based on recent increased activity in the
stock and underlying options.  All 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.
TX - Texaco  $58.00  *** A Second Chance! ***

Texaco is engaged in the worldwide exploration for and production,
transportation, refining and marketing of crude oil, natural gas
liquids, natural gas and petroleum products, power generation and
gasification.  The company's worldwide operations encompass three
main businesses: Exploration and Production; Refining, Marketing
and Distribution; and Global Gas and Power (marketing of natural
gas and natural gas products).

A number of leading energy companies rallied today after Merrill
Lynch raised its earnings estimates for the major oil industry
issues citing an increase in oil prices.  The firm raised its
2000 and 2001 estimates after reports suggested crude oil prices
will remain near $30 a barrel amid strong summer demand.  The
bullish outlook moved through the entire sector with all major
energy indices posting significant gains.  The rise in these
groups comes after a long-awaited period in which soaring crude
oil and natural gas prices have made for handsome earnings but
have done little to bring the industry leaders back to their
historical share values.

Now it appears that a fundamental change is underway and energy
stocks are again on an upswing in anticipation that business will
flourish in the high-demand summer months.  Texaco has been the
focus of increased option trading interest and implied volatility
moved higher as the share value rallied.  There were both large
institutional buyers and retail participants.  The activity left
us with some favorable positions and in this second opportunity,
we are going to begin with a short-term bullish outlook and hope
for a move to the $60 range prior to next week's expiration, when
we will roll forward to July positions.

Two positions are available, based on your outlook for the issue.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL  JAN-45  TX-AI  OI=1168   A=$15.38
SELL CALL  JUN-60  TX-FL  OI=13484  B=$1.25

Or, if your opinion is less bullish and more neutral...

PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN-60  TX-AL  OI=3181   A=$6.25
SELL CALL  JUN-60  TX-FL  OI=13484  B=$1.25

Chart =
IBC - Interstate Bakeries  $15.25  *** Food Group Mergers! ***

Interstate Bakeries Corporation is one of the largest bakers and
distributors of fresh bakery products in the United States.  The
company produces, markets, distributes and sells a wide range of
breads, rolls, snack cakes, donuts, sweet goods and related
products.  These products are sold under national brand names
such as Wonder, Hostess and Home Pride, as well as regional brand
names, including Butternut, Dolly Madison, Drake's and Merita.

Interest in IBC options has increased markedly in the past few
sessions.  The current volatility is sharply higher than it was
a year ago and the average volatility over the past three weeks
has been near all-time highs.  The recent merger of Bestfoods and
Unilever and the expected takeover of Nabisco (NGH) are the most
likely reasons for new activity.  French food group Danone has
been rumored to be interested in Nabisco.  As part of its focus on
core activities, Danone has made new international development a
priority.  The company's aim is to become the world's leading firm
in each of its three businesses in every country.  While Danone is
#1 in the world in sweet biscuits, it is still absent from the U.S.
market where it has major positions in water and dairy products.
Of course, the speculation is that while Nabisco is the target,
IBC should also be a takeover candidate in this industry and our
conservative position offers a way to participate in the merger
speculation with relatively low risk.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL  OCT-12.50  IBC-JV  OI=0    A=$4.38
SELL CALL  JUN-17.50  IBC-FW  OI=469  B=$0.50

Chart =
CEGE - Cell Genesys  $25.00  *** Reader's Request ***

Cell Genesys is engaged in the development and commercialization
of gene therapies to treat major, life-threatening diseases,
including cancer and AIDS.  Cell Genesys currently has two gene
therapy programs, the clinical programs and the pre-clinical
programs.  The clinical programs include GVAX(tm) cancer vaccines
in Phase I/II studies to treat specific types of cancer, such as
lung and prostate cancers, and T cell gene therapy for AIDS,
which is undergoing Phase II testing.  The pre-clinical programs
include potential gene therapies for cancer, cardiovascular
disorders, hemophilia and Parkinson's disease.  Cell Genesys
also develops and commercializes, through its partially owned
subsidiary, Abgenix, Inc., human monoclonal antibodies for
pharmaceutical applications, including inflammation, autoimmune
disorders and cancer.

The biotechnology group is on the move and one of our faithful
subscribers pointed out the increased activity in front-month
CEGE options.  Traders have become interested in the issue amid
reports the company's factor IX blood-clotting protein performed
well in tests on primates, with no discernable ill effects.  In
particular, a potentially harmful immune response against the
gene therapy did not emerge in the tests.  The therapy, which was
delivered to the liver using CEGE's proprietary adeno-associated
viral gene delivery system, was shown to be safe and tolerated in
a variety of clinical assays.

The bullish technicals suggest a recovery from the recent sell-off
is underway and in this case we simply favor a conservative entry
into a momentum-based speculative position.

PLAY (aggressive - bullish/debit spread):

BUY  CALL  JUN-20.00  UCG-FD  OI=1500  A=$5.62
SELL CALL  JUN-22.50  UCG-FX  OI=3406  B=$3.50
INITIAL NET DEBIT TARGET=$2.00  ROI(max)=25% B/E=$22.00

Chart =


Computer Makers Poised to Cash-In on Booming Demand
By Cindy Christ

Global demand for personal computers is expected to expand
more than 15 percent in the second quarter driven by booming
sales to consumers in Japan, Asia and Latin America.

According to market research firm IDC, unit volume will reach
30.3 million in the second quarter, up 15.2 percent from a
year ago.

In a report released Tuesday, IDC said Japan will lead the
world in PC orders with demand up 41 percent on the strength
of consumer sales, new low-cost desktop models, and business
PC upgrades spurred in part by tax law changes.

The Asia/Pacific region, which excludes Japan, is expected to
expand by 25 percent amid price cuts and government-
sponsored programs in countries like Korea that promote PC

After a sluggish first quarter, sales in Western Europe are
projected to jump 16 percent as the commercial market shakes
off the Y2K effect and consumer demand remains high, sparked
by the Internet, employee purchase programs and aggressive
retail pricing.

Sequentially, IDC forecasts a slight decline in global PC
volume pegged to a component shortage in the United States.

"While the U.S. consumer market remains strong, we see a
tighter supply of desktop PCs due to current CPU shortages,"
said Bruce Stephen, IDC group vice president of Worldwide
Personal Systems Research.

IDC said that business demand for desktop PCs should remain
flat this quarter, but pick up in the second half of the year
as the Windows 2000 upgrade cycle moves into high gear.

Data show that computer makers most likely to capitalize on
the uptrend are those strongly positioned in consumer, Asian
and Latin American markets and those in the portable PC space.

"Ranking global vendors who can benefit from these growth
factors include Acer, Hewlett-Packard, Dell and Gateway," IDC
said in the report.

Headquartered in Taiwan, The Acer Group is the world's No. 3
computer maker.

Based on units shipped in the United States during the second
quarter, the top five computer makers are Dell with year-on-
year unit growth of 36 percent, Compaq with 18 percent,
Hewlett-Packard with 67 percent, Gateway with 13 percent and
eMachines with 83 percent.

In terms of worldwide unit sales, the leading vendors are
Compaq with shipments up 11 percent over last year's second
quarter, Dell up 30 percent, Hewlett-Packard up 57.6 percent,
IBM down 13.7 percent, and Fujitsu Siemens up 11.8 percent.

The study comes on the heels of a report from the
Semiconductor Industry Association showing a similar pattern
in global chip sales.

Sales of semiconductors reached an all-time high in April,
fueled by a global explosion in demand for mobile phones,
healthy PC sales, and growth in the Internet and electronic

In Tuesday trading action shares of Dell (DELL) helped lead
computer hardware issues higher, closing up $1.94, or 4.5
percent, at $44.69.

Dell June 40 calls on the Pacific Exchange (DLQFH-X) also were
advancing, finishing up 1 5/8 at 4 3/4 on volume of 2,272
contracts and open interest of 6,792.

Dell rival Gateway (GTW) jumped $0.94, or 1.8 percent, to
$52.81 after trading up to $55.62 intraday. Compaq Computer
(CPQ) climbed $1, or 3.7 percent, to $27.88.

Hewlett-Packard (HWP) slid $2.31, or 1.9 percent, to $118.

American Depositary Receipts in The Archer Group (ACEPPGDR)
added $0.25, or 2.6 percent, to $9.75 on the Taiwan Stock

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