Option Investor
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Daily Newsletter, Thursday, 06/08/2000

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The Option Investor Newsletter                   Thursday 6-8-2000
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)
******************************************************************
       6-08-2000           High     Low     Volume Advance Decline
DOW    10668.70 - 144.20 10823.70 10635.70   849,391k 1,334  1,587
Nasdaq  3825.56 -  13.70  3890.02  3797.41 1,394,997k 1,822  2,125
S&P-100  785.33 -   5.80   794.03   782.73    Totals  3,156  3,712
S&P-500 1461.67 -   9.69  1475.65  1456.49            46.0%  54.0%
$RUT     514.54 -   2.00   519.63   513.59
$TRAN   2750.68 -  46.67  2798.55  2746.49
VIX       25.71 +   0.52    26.87    25.40
Put/Call Ratio       .40
******************************************************************

It was not pretty but the Nasdaq held the line.

Everything was going according to the plan until the Dow opened
down this morning. The Nasdaq continued to consolidate with a
small pull back on Wednesday morning, rallied right on cue into
the close with a strong finish at 3835. Moving past 3800 was our
buying signal and with the gap open this morning it looked like
we were right on target. The odor you smelled during the day was
the Dow. The Dow gapped down over -100 points and then traded
sideways for the rest of the day. We tested 10650, under 10700
support, twice today. The Dow stink from lack of deodorant sales
by PG, caused Nasdaq investors to hold their nose and not their
stock today and the index bled points all day accelerating just
before the close.







The tone was set before the open as Proctor & Gamble warned
that they would miss earnings substantially for the second
quarter in a row. The reasons given were over aggressive growth,
restructuring, sales targets too aggressive and new brands with
no name recognition. It was odd they did not blame anything on
the Fed which would have been a natural scapegoat. Instead the
CEO resigned after seeing the stock price drop by half in the
last five months. 35 points of today's Dow drop was due to the
drop in PG stock.

Microsoft tried to help. On the day after the judge reacted as
expected with a breakup demand the stock opened up +$2 but lost
ground during the day as dueling analysts argued over the impact
of the verdict. Some are calling it dead money while others still
maintain price targets between $100 and $140. I vote for the $140
level to maximize value on my leaps!

Adding to the Dow slide was the financial sector. Investors
afraid of more rate hikes are moving money back into the tech
sector and out of financials. This is a no-win situation. No
real long term rally has ever materialized without help from
the financial stocks. JPM led the drop with a -4.38 loss.

Motorola had their estimates cut by -.01 shortly after 11:AM
and promptly lost -$3 intraday but appeared to find a bottom
at $35.50. It was only one analyst and only -.01 but the impact
was dramatic. On a side note, did anyone see Ron Ensana on CNBC
last Tuesday report that growth estimates for NSM had been cut
to only +6% to +8%? I saw it and reported the estimate drop in
the Tuesday newsletter. But, I had several readers write in and
ask me where I got the info and when I went to the news services
I could not find any confirmation. None, zero, zip, nada. Did
anybody else see this or was I day dreaming in the Twilight Zone?
I am serious, if you heard this or have any news links for it, I
would love to see them.

The PG warning today was a big, ugly, highly visible event. This
should be ample sign that we are moving into that trying period
called earnings warnings season. PG was not the first and surely
will not be the last. The problem is the current rate hike
scenario. Of the past six rate hikes only two have really been
felt in the economy. Fully 9-12 months is required to see the
impact of any rate increase. The last four are nowhere near being
felt yet and the Fed is still on the firing line with at least
one increase left in their gun. This means a total of five hikes
still have to filter down from the Fed level. This equates to
weaker profits, higher unemployment and lower stock prices.
Since the market discounts events in advance the future hike
still needs to be factored into stock prices. The Fed can almost
raise rates in June for free since it is almost a 100% chance
according to analysts. This would be seen as the last hike and
clear the decks for the rest of the summer and fall. With an
election in progress the Fed is not likely to want to take any
further action until after the winner is known. The only unknown
now is the +.25% or +.50% discussion.

With the PPI scheduled for Friday the Fed watchers will be
looking for signs that will dictate the size of the rate increase.
The PPI is expected to be +.2% and anything in that range would
only rate a +.25% hike. The PPI is a leading indicator for the
CPI next week and a tame number tomorrow would point to a tame
number on the CPI as well. The sell off today was probably
heightened by cautious investors moving to the sidelines with
some of the +26% Nasdaq gains since June began. Historically
today's close would have been bullish and the lack of a closing
rally today is confusing. The Nasdaq did hold over 3800 and I
think that is bullish. The Nasdaq has been trading in a 170 point
range since the big gains last week and it is showing no signs
of a sell off. I like that! The longer we hold at 3800 the more
support we will create. When we do start moving up from here it
is likely to be explosive. The strong moves by many independent
stocks is a sign of growing investor optimism. Pray for a tame
PPI and CPI and the bottom will definitely be behind us.

Good luck and sell too soon.

Jim Brown
Editor


Current long positions include:

NOK, VOD, VIGN, MSFT, YHOO



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

Thursday, June 8, 2000

Don't Fight the Tape!

Stocks finished on a sour note Thursday, thanks to an earnings
warning from Proctor & Gamble as well as the Microsoft verdict.
The Dow slumped -144 points, while the NASDAQ gave up minor gains
to close slightly in the red. Volume was lighter than average, as
many traders are preparing for Friday's Producer Price Index.

Earnings warnings continue to come in at an above average rate
this week, as Circuit City, Electronics for Imaging, Proctor &
Gamble, Lands End, and H&R Block have all warned of poorer times
ahead. Electronic Data Systems (EDS, -5 3/8) earnings were
trimmed by several major brokerage firms today as well, which is
a nicer way to lower the expectation bar than by having the
company prerelease later in the quarter. However, the result is
usually the same, but the means differ. Now, we are still a few
weeks away from the major prerelease season, but if the early
going is any indication, we may have a large number of
corporations missing expectations this quarter or indicating some
pessimism about future quarters.

Regardless, for those of you who don't fight the tape
(Greenspan), the tape may be truly indicating a slowing economy.
Obviously, we'll have more information after tomorrow, and there
are several key indicators next week, but the early tally seems
to be indicating that the rate hikes are working, and when
looking at the bond market, they seem to be indicating that rate
hikes may already be done with. We'll have more data to digest
very shortly, but enjoy Friday's trading action, as it may be the
most active day of the week!


BULLISH Signs:

Interest Rates (5.875):
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 (25.71):
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.


Mixed Signs: None


BEARISH 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. This has just occurred as Circuit City, Electronics for
Imaging, Proctor & Gamble, and Lands End all warned of slower
growth ahead.

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        15.35
Overhead Resistance (775-800)     5.74        2.25         2.36

OEX Close                       792.69      783.39       785.43

Underlying Support  (745-770)     1.28        1.45         1.77
Underlying Support  (715-740)     3.47        3.89         5.10


What the Pinnacle Index is telling us:
Both overhead resistance and support are light, indicating that
the OEX can move 15 points in either direction with relative
ease. However, both OTM support and resistance are strong,
indicating that these levels should hold.


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


CBOE Total P/C Ratio             .41        .47        .40
CBOE Equity P/C Ratio            .32        .41        .36
OEX P/C Ratio                   1.18       1.08       1.36


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

Puts                740  / 8,382  740 / 8,897     720 / 8,910
Calls               800  / 6,553  800 / 8,703     795 / 8,988
Put/Call Ratio        1.29          1.02             0.99



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 8, 2000                            25.71


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

As of Market Close - Thursday, June 8, 2000

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

DOW Industrials   10,200  11,400  10,670    Neutral   5.05
SPX S&P 500        1,350   1,500   1,462    Neutral   5.30
OEX S&P 100          725     800     785    Neutral   5.30
RUT Russell 2000     450     550     515    Neutral   5.05
NDX NASD 100       3,000   4,000   3,707    Neutral   5.30
MSH High Tech        800   1,050   1,006    Neutral   6.06

XCI Hardware       1,250   1,600   1,496    Neutral   5.30
CWX Software       1,050   1,300   1,281    Neutral   6.06
SOX Semiconductor    850   1,200   1,143    Neutral   5.30
NWX Networking       900   1,100   1,136    BULLISH   6.02
INX Internet         500     800     616    Neutral   5.30

BIX Banking          530     600     601    BULLISH   6.01
XBD Brokerage        400     500     478    Neutral   5.05
IUX Insurance        540     620     644    BULLISH   5.16

RLX Retail           850   1,000     863    Neutral   6.02
DRG Drug             355     400     376    Neutral   4.28
HCX Healthcare       710     800     771    Neutral   4.28
XAL Airline          140     155     167    BULLISH   5.25
OIX Oil & Gas        265     300     310    BULLISH   5.11

Posture Alert
A negative earnings announcement by Proctor & Gamble and the
Microsoft verdict sent the Dow lower Thursday, as traders used
these events as excuses to clear positions ahead of Friday's
Producer Price Index. The recent trading range will most likely be
tested tomorrow, as a heavy weighting on the economic indicators
will propel this market in either direction. There are no current
changes in posture.



**************
TRADERS CORNER
**************

Vroom Vroom! Well...Not Quite That
By Molly Evans

Are we going to tank or are we going to get on with it?
We need to know these things.  It's just dumbfounding the
number of conflicting views concerning market direction
in print and press.  I'm so sick of the noise.  CNBC is
turned on in the early morning and off at the opening
bell when Maria starts screaming out initial numbers.  I
watch the market.  It tells the tales.  Higher highs and
higher lows in selected issues, unconvincing volume overall
and definable trading ranges.  Oh come on institutions!  You
know you want a bite!  Got all that money under your tufts
and you think us lemmings are going to crater it for you so you
get better entries, eh?  We're holding it up on our own.  Nobody
sell!  If this market does actually find its bull legs, I
don't know if I'll be able to write for you.  It's been such
a headache in the marketplace since I started writing about
it.  I'm afraid I wouldn't know what to say.  You wouldn't
know me anymore!

Last week was confusing early on.  We had been told by those
in the know that we'd retest lows, stay low, and that everyone
was on vacation.  Well, they must have phoned orders in from
their sunny beachside lounges.  The NASDAQ advanced 800
points.  Ok fine.  I turned the TV back on.  I promised the
kids we'd go bowling or to the pool because I'd have discipline
to not bargain hunt since the sale would still be there when I
got back.  Hmmph!  Wait a sec boys, go wait in the car, I just
have to see something here.

Here comes Joe Battipaglia.  "Interest rate hikes are done.
The good numbers being seen in this market are a result of
the public's confidence of a good economy and sound federal
policy.  We'll see the NASDAQ at 5500, the Dow at 12,500 and
the S&P at 1625 by year end.  The Fed need not be feared.
We're going to have a huge summer rally.  Go 40% tech and
pharmaceutical stocks, 20% financials, 20% consumers and
durable goods.  We've retraced the lines of advancement back
to November of '99 and we should be smooth on out to the end
of the year."  That was the essence of his message.

Next up...Harry Dent, author of "Roaring 2000's".  Oh, he's a
bull alright but surprisingly enough he was saying that this
correction would go further.  We'd find trading ranges in the
3100 - 4100 range for a bit on the NASDAQ and (gulp) a tank
down to the upper 7000s for the Dow was not out of the question.
But don't despair, unless you're holding summer option contracts
because the Dow will still be a conservative 25,000 by January
2009.  The high estimate is 35,000 for that date.  Wow.

I liked Roger McNamee of Integral Capital Partners best.
This guy talks in a language I understand.  He basically said
that there were a lot of sound and solid companies whose
stock prices had seen tremendous correction.  In view of the
economy, the forecasts for their future and the exciting time
of technological advancement we're in right now, there are many
good buys in the marketplace.  He said that now is not the time
to be a hero and they weren't interested in calling a market
bottom.  Instead, they just wanted to be buying it.  I loved
that.  Me too.

It's interesting that the VIX is stuck right in the middle of
it's customary range too.  I think that the VIX is just like all
the forces of the media, half on this side and half on the other.
VIX means "Voice Index," doesn't it?  Every commentator makes
convincing arguments and I can be swayed by whatever I'm reading
or listening to at the moment.  Anyone can make his or her point
sound logical, as there are a lot of "facts" out there to support
each theory.  Depending what you believe, it can make for either
some great entry points or catch you in a plain ol' lousy trap.
Personally, I'm impressed by the number of stocks in various
sectors that are breaking out of their trading ranges and setting
up to burst out of their bases.  It's happening, we just need to
get the broader market to quit being all jittery about every
little number that's due out in the next day or two.  Today, it's
tomorrow's PPI.  Then, it'll be Tuesday's CPI or something else
after that.  Aarrgghh!  Enough already.

If you're in a quandary and don't know what to do...well, you've
heard it a thousand times here...when in doubt, stay out.  A
summer rally would be rather nice for everyone's mental health,
but then again...that might be too "pretty";  we haven't gotten
to enjoy many gifts in the first half of this year.  Safe is on
the sidelines.  In my own little world, I've always got that bit
of doubt.  Yet, each day I'm becoming more and more of a bully and
I simply can't keep myself out of the quarrel.  We've given back
precious little ground to that tremendous run last week and it
looks like we're just digesting those gains.  Investors hate to
think that they're buying the very tip of a rally, so a little
give back in the frontrunners is very healthy for continued
strength.  That's fine as long as it isn't overdone.  On the flip
side, it's summer:  a typical time for the stock market to go to
sleep as traders are all too happy to take their profits.  Let's
say I'm just cautiously optimistic.  I'm certainly not in up to
my neck, but I'm not playing front month contracts either.  That
little insidious sick feeling of fear leaving the screen unattended
is slowly dissipating as the markets behave a little more
rationally now.  Fingers are crossed and the boys are in the car
waiting to go to the pool.  It's really nice to be able to leave
without having too much fear that you'll return home to find you're
worth half of what you were when you left.  Continued good fortune
to all of you.

Contact Support



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

Regarding: Calculations for Covered Calls - Monthly Returns....

Dear OIN,

I am a relatively new subscriber and trying to understand the
Covered-Call section of your site.  How do you calculate the
monthly return on your covered call picks?  When I plug your
numbers into the covered-call calculator on the investor
advantage site I get much lower numbers for profit.  Your
monthly returns seem inflated to me.  Am I missing something?
Your insight is much appreciated.

Thanks, I look forward to hearing from you.

-----

Concerning Covered-Call Returns (ROI):

Return On Investment (ROI) for covered calls is determined by
two circumstances, Return if Called (RC), and Return not Called
(RNC).  Most traders use RNC to evaluate plays since there is
no assumption made on the movement of the underlying equity.
Essentially, you take the net premium received and divide it
by the cost basis.  The cost basis is the cost of the stock
minus the premium received which is the amount of equity tied
up for the duration of the play.

For in-the-money (ITM) RC, net premium is the option premium
'minus' the difference between the cost of the stock and the
strike price.  RNC is the same as RC since the sold strike is
already in the money...and this is the
best return possible.

ITM example:  XYZ  @ $12.00, strike = $10.00,
option premium = $2.50
net premium = 2.50 - (12 - 10) = 0.50
cost basis = 12.00 - 2.50 = 9.50
RC = 0.50/9.50 = 5.26% after multiplying by 100.
RNC = the same.

For OTM (out-of-the-money) RC, the net premium is the option
premium 'plus' the difference between the cost of the stock and
the strike price, and assumes the stock will move up!  OTM RNC
uses just the option premium and assumes the stock price remains
unchanged.

OTM example RC:  XYZ @ $12.00, strike = $12.50,
option premium = $1.00
net premium if called = 1.00 + (12.50-12) = 1.50
cost basis = 12.00 - 1.00 = 11.00
RC = 1.50 / 11.00 = 13.64%
RNC = 1.00 / 11.00 = 9.09% (stock price unchanged).

Since all of our recommendations are ITM, which fits with our
very conservative approach, and no stock movement is required
for maximum profit, we just show a monthly-based return.  To
calculate a monthly return: divide the potential return of the
covered call by the number of days to expiration, multiply by
365, and then divide by 12.  A return of 4% for 20 days equates
(4 / 20 * 365 / 12) to a 6.1% monthly return.  Our goal is to
target 5% (without margin) each month.

Good Luck!

OIN

PS:  We have a free calculator for Covered Calls, Naked Puts
and other combination strategies available for download.



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

Index      Last     Mon     Tue    Wed     Thu    Week
Dow     10668.72   20.54  -79.73  77.29 -144.14 -126.04
Nasdaq   3825.56    8.38  -65.37  82.89  -13.70   12.20
$OEX      785.33   -1.94   -7.36   7.74   -5.80   -7.36
$SPX     1461.67   -9.63   -9.79  13.52   -9.69  -15.59
$RUT      514.54    0.27   -1.65   4.89   -2.00    1.51
$TRAN    2750.68  -29.02  -33.80  30.81  -46.67  -78.68
$VIX       25.71    0.79    0.24   0.05    0.52    1.60

Calls               Mon     Tue    Wed     Thu    Week

MUSE      146.00    0.69    3.44   4.50   12.38   21.00  New
BRCD      151.38    3.50    1.38  10.75    1.75   17.38  Remarkable
PDLI      142.00    8.38    4.38   9.13   -5.00   16.88  Biotech
ABGX      112.00    4.00    9.81  -4.69    6.69   15.81  New
RMBS      229.75   -3.38  -12.00  11.50   16.25   12.38  Splitter
HGSI      117.56    7.56    8.50  -5.88    1.44   11.63  New
YHOO      144.00    2.81   -2.25   9.44   -0.50    9.50  Earnings
EXDS       94.50   -0.13   -4.94   7.81    4.63    7.38  Momentum
ITWO      135.00    5.69   -7.81  11.25   -3.25    5.88  Volatile
ADI        94.69   -1.75   -2.38   3.75    6.06    5.69  Nice move
CMTN       94.19   -0.50    2.00   1.19    2.56    5.25  New
GLW       213.00    2.12    6.25  -6.00    1.75    4.13  At support
RBAK      116.13    1.00   -7.56  11.31   -1.19    3.56  Entry??
SEPR      112.00    8.06   -6.25   0.75    0.63    3.19  Biotech
MU         80.75    1.94   -4.19  -1.06    4.00    0.69  Earnings
TQNT      111.88    2.75   -9.13   0.69    3.19   -2.50  Semi play
CIEN      135.13   -4.69    4.25  -6.44    3.69   -3.19  Fiberoptic
CHKP      226.25  -17.69  -10.06  15.06    5.25   -7.44  Climbing
SCMR      101.75   -7.06   -0.94  -2.50    2.25   -8.25  Use caution
MERQ       83.50    0.31   -7.75   0.13   -1.63   -8.94  Dropped
SDLI      250.00   -8.38    3.00   3.06   -8.06  -10.38  Still up

Puts

CTXS       51.56    2.25   -5.44   4.44   -8.13   -6.88  New
MMM        81.75    0.75   -2.75  -0.56    0.00   -2.56  Falling
CAH        63.00   -1.44    0.81   0.56   -0.50   -0.56  Still weak
MRK        69.31    0.25    0.41   0.91   -1.19    0.38  Dropped
BUD        78.69    1.69   -0.19   2.56    1.63    5.69  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:
*****

MERQ $83.50 -1.63 (-8.64) The reason we're dropping MERQ is
simple, yet very disappointing.  OIN added this potential
powerhouse because of its ability to make the money.
Unfortunately as it turned out, we weren't able to get a solid
entry into the play.  The quick spike through resistance during
amateur hour on Monday was a head fake.  For those just joining
us, the ensuing slide did bring MERQ to an optimum entry level
by Tuesday, but the following days didn't produce even a small
bounce, never mind a solid move through the 5-dma ($87.76), for
upward confirmation.  Therefore, we have no choice but to exit
this play tonight.  If you keep an eye on the company news,
Mercury Interactive and Akamai announced that they're teaming up
their respective technologies and forming a strategic alliance
to maximize how Web properties manage and evaluate site
performance.


PUTS:
*****

BUD $78.69 +1.63 (+6.00) Perhaps investors got thirsty during the
dry spell this week, and maybe it was an upbeat analysts meeting
that one of its competitors held Tuesday.  Although the volume
hasn't really been stellar shares of BUD have managed to gain
about 8% this week.  The move up looks as though it could have
more room to go.  Coors came out late Tuesday saying they are
anticipating better earnings and revenues, which seem to have
ignited a fire under BUD as well.  It could be just a head fake,
but for now the momentum seems to have switched to the bulls.
If strength returns to the broad markets, BUD could become a
whipping boy again, but for now we will focus our efforts
elsewhere.

MRK $69.31 -1.19 (+0.38) Wednesday's announcement that research
at Merck identified an enzyme that plays a key role in the
chemical process thought to cause Alzheimer's disease, has put
an end to our play in the drug company.  Experts warned the
research won't lead to a quick new treatment, but did seem to
bring a few buyers back to the market.  Although MRK did fall
back over 1.5% today, the 50-dma at $69.12 did provide support.
The other reason it's time to say so-long to this play is it
simply isn't going anywhere.  With so many other opportunities,
we will turn our attention elsewhere for now.



********************
PLAY UPDATES - CALLS
********************

GLW $213.00 +1.75 (+4.13) Like our Play of the Day write-up
suggested Wednesday, GLW shot out of the gate Thursday morning.
The stock continued to rally through the morning, reaching an
intraday of $217.94.  However, the weakness in the tech sector
finally reached GLW and dragged the stock lower through late-day
trading.  GLW briefly dipped below support at $210, but rallied
back above that level in the final moments of trading Thursday.
JP Morgan helped our cause by reiterating its Buy rating on GLW
and raising its profit estimates.  Also, GLW lined up two more
contracts in past two days.  LightSpeed Network announced it
would use GLW's technology to build a fiber optic network and
Telergy said it planned to deploy GLW's MetroCor to create a
broadband network in the Northeastern US.  The fundamentals are
in place for a rally, if we get cooperation from the economic
data released Friday morning, GLW could move higher.  Target
shoot for entry points Friday morning if GLW rallies and momentum
returns to the stock.  A conservative trader might wait for GLW
to clear resistance in the $217 range or again at $220.  Consider
your risk level when picking an entry point.

ITWO $135.00 -3.25 (+5.88) ITWO rallied Wednesday on the heels
of positive analyst comments made by ING Barings.  The brokerage
house reiterated its Strong Buy rating and raised its earnings
estimates for fiscal 2000.  Additionally, ITWO said Wednesday
that it had joined forces with ARBA to provide technology
services for an e-marketplace for the computer, electronics and
telecom industries to be called E2Open.com.  The rally pushed
ITWO past resistance at $135 Wednesday afternoon.  ITWO stumbled
at the opening Thursday, and continued to slide throughout the
day.  It appears the stock fell victim to profit taking combined
with weakness in the tech sector as their was no news to induce
the selling.  ITWO dipped below $135 twice Thursday, but managed
to climb back above resistance in the final hour of trading.
If the tech sector rallies Friday morning, you might consider
entering the play at current levels.  Otherwise, wait for a
strong move above resistance at $140 for a more conservative
entry point.

CIEN $135.13 +3.69 (-3.19) CIEN struggled in Wednesday's trading
as the telecom equipment sector drifted lower.  After the closing
bell Wednesday, Robertson Stephens suggested buying CIEN, saying
the company received heavy traffic at the SuperComm 2000
conference.  Additionally, SG Cowen added their two cents by
reiterating their Strong Buy rating on the stock and saying they
see no slow down in the demand for CIEN's products.  After the
bullish comments from analysts Wednesday evening, CIEN gapped
higher by $4 Thursday morning.  The stock then fell into a
trading range between $132 - 136, ahead of the PPI report Friday.
CIEN did manage to climb towards the high-end of its range in the
final ten minutes of trading Thursday in conjunction with a spike
in volume.  Watch closely for an entry point Friday morning if
CIEN rallies above $136.  If the stock stumbles, watch to see if
support holds at $132, and consider an entry if CIEN bounces from
that level, but make sure to confirm direction in the sector.

SEPR $112.00 +0.63 (+3.19) After closing near its support levels
Tuesday, SEPR slid during Wednesday's trading.  The stock did
provide a nice entry point Wednesday afternoon after establishing
solid support at $110 and bouncing higher into the close.  SEPR
slightly extended its gains Thursday by showing impressive
relative strength despite the profit taking seen in the Biotech
sector.  The stock edged higher in mid-day trading, ahead of
the company's presentation at the PaineWebber Life Sciences
conference Thursday afternoon.  We didn't hear any official
comments from analysts after the meeting.  But, we'll look for
any positive announcements Friday morning that may act as a
catalyst for SEPR.  The stock ran into resistance twice at the
$114 level Thursday.  If we get a positive PPI report Friday
morning, you might consider an entry if SEPR breaks out above
$114.  A more conservative entry point might be found if SEPR
rallies above $118 on healthy volume.

BRCD $151.38 +1.75 (+17.38) Defying gravity after Tuesday's
bearish candle formation, BRCD moved higher all day yesterday.
Continuing higher with the open today, the stock succumbed to
selling pressure, but held nicely above $148.  Tuesday's high
of $147.50 is looking like it will provide support going
forward, as investor nervousness in the tech sector appears to
be dissipating ahead of the upcoming PPI/CPI reports.  BRCD's
pattern of higher highs and lows, which began in late May, is
still intact and the stock is continuing to stay above the
5-dma (currently at $142.25).  Resistance at $155 is proving
to be a difficult level to scale without market strength backing
it up, but benign PPI/CPI numbers could be just the catalyst for
BRCD to break out to the upside.  It is encouraging to see the
stock hold onto its gains, especially with the solid trading
volume seen all week.  Aggressive traders can consider new
entries on a renewed bounce from the $147-148 level, although
any market weakness could cause a retest of support between
$138-140 before the upward move can continue.

TQNT $111.88 +3.19 (-2.50) Everybody loves an entry point!
The late-day weakness on Tuesday had dissipated by the open
on Wednesday, and TQNT headed higher from the $100 support
level (then the site of the 10-dma).  Continuing strength
early today acted to push the stock back above $110, where it
spent the rest of the session consolidating.  The market was
fairly quiet today, as investors wait for tomorrow's PPI
report, which will hopefully provide more evidence that the
economy is slowing.  This would make it harder for the Fed to
raise interest rates at its June meeting, and if the recent
cycle of rate hikes comes to an end, investors could have a
party as they put their cash to work again.  TQNT found
resistance early in the week near $120, but a benign PPI report
could be just the ticket to push prices through this level.
We'd like to see the $110 support level hold going forward,
but intraday weakness could cause a retest of support at $100,
giving us another attractive entry point.  Consider target
shooting intraday dips, but pay attention to volume and the
direction of the overall market.  It won't do to try catching
a falling knife if investor sentiment deteriorates.

RBAK $116.13 -1.19 (+3.56) On Wednesday, sellers showed up early
and sold RBAK, just like we thought.  But, the good news was that
the bears could only take the stock down to $105 before the bulls
bellied up to the table.  At midday, they lifted RBAK from those
levels and it soared to close just off its highs, while breaking
through previous resistance at $115.  While RBAK briefly dipped
through $115 today, it managed to hold that level for the most
part.  Support at $105 appears to be solid, but that gap from
last Friday still remains.  Covering that gap would take RBAK to
the $100 level.  Resistance is fairly light on the upside and if
the market decides to rally tomorrow on the PPI number, RBAK
could see clear sailing to $125.  Look for entry on pullbacks to
support levels at $110 and $105.  A move through $120 with decent
volume would be confirmation of a continued uptrend.  Yesterday
in the news, Telica, a broadband switching system developer,
announced a strategic relationship with, and an investment by
RBAK.  This will strengthen RBAK's market presence, yet tomorrow's
trading will be dictated by the PPI number and the broad market's
reaction.

SCMR $101.75 +2.25 (-8.25) After weakness on Wednesday when the
stock slipped to $95, SCMR bounced from that level.  It traded
as high as $107.88 and retreated with the broad market, bouncing
several times at $100.  SCMR has seen a sideways trading pattern
throughout the week, showing a lack of conviction before the PPI
number due out tomorrow.  That will be the driving catalyst for
the direction on Friday.  News of the Sirocco deal had little
impact on the actual stock price.  If the market reacts positively
to the PPI, this incredible two-week rally may continue.  Look to
enter the play on any intraday dips.  More conservatively, a move
through the 100-dma at $104.80 would be opportunistic.  If the
market heads south after the PPI, watch to see if $95 holds as
support.  Bounces from that level with volume spikes would provide
good entry.  Yet, keep in mind that an aggressive sell-off tomorrow
may result in closing that gap from last week.  That would bring
SCMR to $90, and a bounce from there certainly would provide a
great entry into this call play.

YHOO $144.00 -0.50 (+9.50) We mentioned last weekend we would
like to see our play break through the $140 area and hold.  Late
today, YHOO traded down to $140.50 when traders began to once
again enter buy orders.  The move up on Wednesday in the broad
markets, showed  Yahoo! join in quite nicely with the volume
exceeding 10.3 million shares.  Wednesday's bounce off of $135
ended up providing traders with a chance participate in a better
than $12 move.  Today proved to be a bit of a grind, although the
$0.50 loss came on light volume suggesting the short-term trend
could remain intact.  The pullback today could very well have
been setting up for a repeat performance from last Friday, if
the economic data due out in the morning is positive.  Overall
YHOO has held up very well, considering the profit taking that
was expected to take place this week.  Technically overhead
resistance comes in at the 50-dma at $152.12 with the support
at $140 and the 200-dma now sitting at $135.98.

SDLI $250.00 -8.06 (-10.38) Very few stocks ever go straight
up, without stopping to catch their breath.  That seems to be
the case with SDLI.  SDL made a new high on Monday and has spent
most of the week back-filling.  While it can sometimes be a bit
nerve-wracking its a natural course of events.  Some analysts
are questioning whether SDLI and many of the Nasdaq stocks can
regain the momentum that began late last week.  At this point
several technical indicators suggest we could see more of a
pullback or profit taking.  However as we've pointed our before,
technical indicators don't buy stock, investors do.  If a
positive sentiment returns, the bulls will more than likely be
standing in line to add shares of SDLI to their portfolio.  A
plus for our play shows the area between $242 and $245 providing
good support the past two days, although the volume was a little
light with only 3.3 million shares traded today.  If we see
strength in the morning, we would look for a pullback and bounce
prior to entering a new play

RMBS $229.75 +16.25 (+12.38) Some analysts suggest the strength
RMBS and others in the chip sector is due to increasing consumer
demand for PCs.  As one commentator today said when describing
today's better than 7% move, "Well it's Rambus, what else can you
say."  RMBS has recently began to find buyers willing to test the
waters.  Some suggest since its fall from $471 in early March, the
chip company is a screaming buy at current levels.  The move through
$220, on just under 6.0 million shares certainly suggest there may
be more of the same ahead.  We believe the current momentum is
probably more a result of the upcoming 4-for-1 split, which is
scheduled for June 15th.  Another plus for our play showed up
on Wednesday when RMBS fell below the $200 level and not only found
buyers waiting in the wings, but in pretty good numbers as well.
Need another sign of the strength?  With the bulls taking the day
off in many of the Nasdaq stocks and at the NYSE, RMBS found
more traders ready to put their money on the line going into the
last thirty minutes of the session, which is definitely a plus.
Support is now found at $220, 215 and could be viewed as potential
entry point should we see any profit taking.

CHKP $226.25 +5.25 (-7.44) Our play in CHKP managed to buck the
trend today.  Chat room participants indicated the strength came
on the heels of another virus warning for consumers who receive
e-mail on their telephones.  As we've mentioned most when word
of a virus is in the air. Check Point and others seem to do well
for a few days.  Whatever the reason behind the move it certainly
hasn't gone unnoticed by the brokerage companies.  This morning
analysts at Robinson-Humphrey initiated coverage of Check Point
with A Buy rating.  The twelve month price target came in at
$280.00, according to Wayne Johnson III, the analyst initiating
the coverage.  So what's in store for our play?  Today's close
is just $10 below last Friday's high.  With wholesale inflation
numbers due out in the morning, we believe the our play could
be on track to challenge last weeks high.  If for some reason
the data is negative, then we would stand back and be observers
rather than participants in the session tomorrow.  Technically
support shows up at the 5-dma at $220.58 and near $217.00.

EXDS $94.38 +4.50 (+7.25) Another rebound by EXDS!  In two
sessions, the share price shot up 15%, or $12.31 in heavy
trading.  Near-term support is established at $85 and $87, yet
today EXDS first tested the waters at $90, then $93.  So what's
behind the momentum of this strong recovery play?  Yesterday it
hit the press that shareholders approved an increase in the
company's number of authorized shares of common stock to 1.5
bln.  The runway is now clear for the previously approved 2:1
stock split to commence!  EXDS will split on or about June 20th.
So let's put on our rocket suits in anticipation that traders'
excitement will propel the stock back into space.  Separately,
Exodus announced that Don Casey joined the company as President
and COO and Sam Mohamad was promoted to President of Worldwide
Sales and International Field Operations.  If you're interested
in finding an entry into this play, be cautious ahead of the
economic data.  Look for intraday pullbacks to the 5-dma
(currently at $87.95) and watch for the bounce.  The overall
market will play a significant role in trading over the next few
days, so be patient for an entry.

ADI $94.69 +6.06 (+5.69) After hitting the wall at the $90 mark
yesterday, ADI quickly returned to the fast track today.  Taking
off with a bang, ADI accelerated to a higher level of short-term
support at $92.  Then our racer steadily made its way to the
winner's circle with another all-time high!  ADI shattered
Friday's record of $95.31 by almost a full point when it
sprinted to $96.25 on robust volume towards the end of the
trading day.  Yesterday, a big player in the industry, Texas
Instruments (TXN), forecasted acceleration in 2Q revenue growth
as a result of an explosion in wireless communications.  While
this announcement didn't effect ADI directly it's good news for
chipmakers.   And ADI tooted its own horn today.  Not only is
Analog Devices the fastest growing DSP supplier, but also it
just came out with a new member of its DashDSP Family, the
ADMCF5xx, which is based on breakthrough low power and ADI's
distinguishing flash memory.  Good news always makes for a more
favorable momentum play as is evident by ADI's recent progress
in the markets.  But let's not forget the importance of overall
conditions.  There's economic data to consider as well as normal
cycles.  Granted ADI is pumping up its share price with style,
but support is still firmer at the lower levels of $85 and $87,
which is just below the rising 5-dma ($88.89).  So be choosy of
where you enter this play in the upcoming sessions.  And if ADI
doesn't make a pit stop, expect some resistance at the illusory
$100 mark.

MU $80.63 +3.88 (+1.38) Analysts comments can surely pump up
investor's interest.  Earlier in the month it was Dan Niles
powerful comments that initiated this momentum run.  And again
today another analyst put in his two cents.  Gregory Mischou at
UBS Warburg LLC reiterated his Buy rating and issued a 12-month
target price of $110.  Shares of MU traded as high as $80.94
before settling for a strong close just a fraction from the
daily peak.  Still the number to beat is Monday's all-time high
of $82.50.  Resistance is formidable at this level, so
conservatively look for a break through here before opening any
new positions.  For those who are betting the company's
earnings' release during the week of June 19th will generate
another run-up, perhaps you too may want to play more on the
side of caution.  The current level at the 5-dma at $79 is
indeed a nice launching point.  Although if there's a pullback
in front of the economic reports, then $74 and $75 are more
likely to hold up as firm support.

PDLI $142.00 -5.00 (+16.88) The renewing sentiment amongst the
Biotechs in the past couple weeks sent PDLI on sizzling pace
to recovery.  Coming from devastating lows of $93 and $95 at
the end of May, PDLI developed a clear uptrend advancing an
astonishing 52.7%, or $49 in record time.  So it's not too
unnerving to see PDLI give back a few dollars today.  The share
price too has held firm at a higher support level of $140 and
$142 in recent days.  Perhaps the Strong Buy reiteration and
$309 price target issued by analyst Matthew Geller of CIBC World
Markets helped sustain PDLI.  Nonetheless, the stock is rising
to the occasion.  If you want in, consider target shooting
intraday for quick in-and-out moves at these levels.  Or else,
play it safe.  Be patient and look for pullbacks to the $135-
137 range, near the rising 5-dma ($137.10) then enter on a
definitive bounce.  Although even this strategy doesn't provide
a safeguard against a reversal.



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DISCLAIMER
**********
This newsletter is a publication dedicated to the education
of options traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in
options. It is possible at this or some subsequent date, the
editor and staff of The Option Investor Newsletter may own,
buy or sell securities presented. All investors should consult
a qualified professional before trading in any security. The
information provided has been obtained from sources deemed
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely
information to its subscribers but cannot guarantee specific
delivery times due to factors beyond our control.
The Option Investor Newsletter                   Thursday 6-8-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


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

CAH $63.00 -0.50 (-0.56) Watching grass grow is more exciting
than watching the CAH chart this week.  Support and resistance
levels at $61 and $64 respectively, are keeping the stock
tightly corralled and investor interest has been anemic.
Volume is only hitting 50-60% of the ADV, as investors appear
to be waiting for direction from tomorrow's PPI report.  This
apathy has infected the whole Pharmaceutical sector, so use
the sector direction as a confirmation before initiating new
positions.  An increase in volume will also provide some
confirmation of investor sentiment towards CAH.  The 10-dma
($64.13) has now rolled over and will likely pressure the stock
price going forward.  Consider new entries as CAH rolls over
near the $64 resistance level.  More cautious investors may
want to wait for a drop through $61 to confirm the stock's
weakness before playing.

MMM $81.34 -0.00 (-2.56) MMM barely saw the upside of $83 in
early trading on Monday and has since edged lower.  If you
didn't catch an entry off that rise, then unfortunately $82
proved to the only choice.  As it turned out, this mark is now
serving as strong overhead resistance.  A definite pattern of
lower-lows and lower-highs is evolving since MMM's insidious
tumble under historical support of $84 on Tuesday.  Volume
levels are still only at average levels, but the downward moves
are nonetheless encouraging.  We're still anticipating further
downdrafts in coming sessions.  Storm clouds are brewing ahead
of the economic reports and MMM is technically poised to move
lower.  Stack as many odds in your favor - confirm market
sentiment and stock direction before adding new positions.



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

CMTN - Copper Mountain Networks $94.19 +2.56 (+5.25 this week)

Copper Mountain develops and markets a comprehensive family of
DSL solutions that enable high-speed internetworking over
existing copper facilities.  The company's mission is to enable
carriers and other service providers to offer a full range of
high-performance, cost-effective data and voice services over
DSL that are easy to deploy, manage and use.  A leader in DSL
communications products for telecommunications and Internet
service providers, CMTN sells its products directly (77% of
sales) and through manufacturers and distributors.  The company
has partnerships with 3Com and Lucent, with Northpoint
Communications accounts for about 40% of CMTN's sales.

CMTN managed to hold its own rather well while the rest of the
tech sector continued to deteriorate after the April earnings
cycle.  What kept the stock afloat?  Strong growth in the
company's client base helps, but the real key seems to be the
strong earnings growth (beating April estimates of $0.11 by a
full 9 cents).  After bouncing near the 200-dma (then at $57)
in mid-April, CMTN showed its true colors by beginning to scale
the wall of worry built up in investors' minds.  After moving
as high as $92 in early May, the stock began to consolidate
its gains in deference to concerns about the economy.  After
falling back to confirm support near $70, CMTN has moved up
strongly over the past 2 weeks, and today's trading pushed
the DSL provider through the $92 resistance level.  The 5-dma
(currently $90.75) is supporting the stock's rise over the
past 2 weeks, with the 10-dma perched comfortably at $85.88
(just below longer-term support at $86).  Increasing volume
accompanied the move until Tuesday, when investors began
standing aside, allowing volume levels to atrophy while they
wait for the latest round of economic numbers (PPI on Friday
and CPI on Tuesday).  As long as the stock remains strong and
the economic numbers are benign, consider intraday pullbacks to
support near $86 to be good entry points.  A more conservative
approach will be to wait for the return of strong buying volume
to push the price through resistance at $95.  Expectations
for a summer rally are increasing and CMTN looks poised to
participate in a big way as July earnings approach.

CMTN likely got an added boost this week from its positive
showing at the this week's Supercomm 2000 conference in
Atlanta.  On Tuesday, Paul Johnson of Robertson Stephens
raised his 2000 earnings estimates from $0.91 to $0.93, citing
strong financial performance and the company's growing customer
base.

***June contracts expire next week***

BUY CALL JUN- 90 KUA-FR OI=1834 at $ 7.63 SL= 5.25
BUY CALL JUN- 95 KUA-FS OI= 826 at $ 4.75 SL= 2.75
BUY CALL JUN-100 KUA-FT OI= 368 at $ 2.94 SL= 1.50
BUY CALL JUL- 95*KUA-GS OI=  87 at $11.63 SL= 8.75
BUY CALL JUL-100 KUA-GT OI= 141 at $ 9.75 SL= 6.75
BUY CALL SEP-100 KUA-IT OI= 159 at $16.13 SL=11.50

SELL PUT JUN- 90 KUA-RR OI= 118 at $ 3.00 SL= 5.00
(See risks of selling puts in play legend)

Picked on June 8th at    $94.19     P/E = 199
Change since picked       +0.00     52-week high=$115.00
Analysts Ratings      3-5-0-0-0     52-week low =$ 26.13
Last earnings 04/00   est= 0.11     actual= 0.20
Next earnings 07-18   est= 0.22     versus= 0.05
Average Daily Volume = 1.60 mln
/charts/charts.asp?symbol=CMTN


ABGX - Abgenix Inc $112.00 +6.69 (+15.81 this week)

Abgenix uses genetically engineered mice to develop antibody
theraputics for inflammatory and autoimmune disorders, cancer,
and transplant-related conditions.  The company's four antibody
products use the XenoMouse technology, which Abgenix bought from
Japan Tobacco.  Treatments for disorders, cancer, and psoriasis
are in clinical trials.  The company has alliances with
Millennium Pharmaceuticals, Pfizer, and Amgen.

Who's afraid of a little mouse?  ABGX isn't!  The company has
developed a technology that uses the cells of mice to create
humanized monoclonal antibodies.  There are a lot of companies in
the biotech arena that need ABGX's technology.  Because of the
huge demand for its technology, ABGX's management decided to
license it as much as possible.  And with management's savvy
decision, ABGX is on the fast track to profitability, unlike many
biotech companies.  There's no hiding the fact that the biotech
sector has taken investors for a wild ride this year.  After the
massive sell-off in the sector last spring, Wall Street is
re-examining the prospects of leading biotech firms.  ABGX has
caught the eye of analysts because of the company's increasing
cash flow which should lead to profitability within one year and
its $500 mln in cash on its balance sheet.  The company's strong
fundamentals helped carry the stock higher from its April lows.
As Wall Street re-embraces the biotech sector, ABGX could lead
the rally higher as momentum builds within the group.  The stock
is in the process of emerging from a three month consolidation,
and with Thursday's rally, ABGX is poised for a breakout.  The
stock will face resistance at $115 before moving higher.  After
that level, ABGX will again face congestion at $120.  Consider
your risk tolerance and look for entry points as ABGX clears its
various resistance levels.  The stock has had a nice run since
late June, if the profit takers spoil things look for ABGX to
find support at $110 and again at $105.  If the stock does
retreat, consider an entry if the bulls step in and buy the dip
as they have done in the past, confirm direction before doing so.

Analysts love ABGX's management team and its shrewd business
strategy of licensing its technologies to more than 20 partners,
which could eventually lead to royalties on as much as $5 bln in
sales.  The company is estimated to have over 250 target uses for
its technology, which in theory would give ABGX one of the
broadest pipelines in the Biotech sector.

***June contracts expire next week***

BUY CALL JUN-105 AXY-FA OI=43 at $13.00 SL= 9.75
BUY CALL JUN-110 AXY-FB OI=50 at $ 9.00 SL= 6.25
BUY CALL JUL-110*AXY-GB OI=13 at $18.25 SL=13.25 low OI
BUY CALL JUL-115 AXY-GC OI= 0 at $16.25 SL=11.50 Wait for OI!
BUY CALL OCT-120 AXY-JD OI= 6 at $27.50 SL=19.00 low OI

Picked on June 8th at   $112.00    P/E = N/A
Change since picked       +0.00    52-week high=$206.50
Analysts Ratings      3-3-0-0-0    52-week low =$  7.38
Last earnings 03/00  est= -0.11    actual= -0.09
Next earnings 07-27  est= -0.05    versus= -0.11
Average Daily Volume =    783 K
/charts/charts.asp?symbol=ABGX


MUSE - Micromuse Inc $146.00 +12.38 (+21.00 this week)

Founded as a network management solutions reseller, Micromuse
today is a leading provider of real-time fault and service-
level management software.  Its Netcool suite helps
telecommunications and Internet service providers ensure the
uptime of network-based customer services and applications.  The
company's software is used in the OSS and NOC centers of many of
the world's leading service providers such as AOL, Cellular One,
and Charles Schwab.

When the NASDAQ said "jump", MUSE asked "how high?".  That was
back on May 30th and ever since, MUSE's been a loyal
constituent.  Rising out of the trenches at $80, to an easy
passage through tough resistance at the $100 level, prompted
momentum and technical traders alike to join the ranks.  The
slew of new clients and upgraded services shouldn't go unnoticed
either.  MUSE is, without doubt, a leader in its sector.  In the
past two days alone, MUSE got the attention of analysts.  First
Wendell Laidley at CSFB reiterated his Strong Buy recommendation
and issued a target price of $150.  And yesterday, Hampton Adams
at CIBC World Markets initiated new coverage with a Strong Buy
rating.  Today's break out of its mild consolidation sparked our
interest.  We're adding MUSE simply as a pure momentum play.
After marching through all the technical DMAs with confidence
last week, MUSE continued to cover more ground.  Granted the
next few trading sessions may be treacherous, but we're betting
MUSE will rise above the others.  Of course, don't buy too soon.
Wait for the signals: advancers beating decliners, positive
market sentiment, and stock direction for starters.  Near-term
support is much lower than today's close.  But $125 and $130, in
the proximity of the 5-dma ($131.89) should hold firm, so look
there for possible entries.

As mentioned above, Micromuse announced the addition of new
clientele in the past week.  Urban Media selected Micromuse's
Netcool(R) software to manage its nationwide voice and data
network as well as did Demon, an Internet service provider in
the UK.  Also the leading communications company, Cable &
Wireless, selected it to provide real-time monitoring of its Web
hosting center in London.  The new center, which is one of
Europe's largest, will have the capacity to host every Web site
currently running in the UK.  In other news, Micromuse and
Singlepoint LTD, a leading provider of critical event
notification software, announced an agreement to integrate
Singlepoint's AlarmPoint natural language network event
notification system with the Netcool suite.  But the company's
big news is the availability of Netcool/OMNIbus for Voice
Networks(TM), a real-time fault monitoring solution designed
specifically for carrier-class network environments.

***June contracts expire next week***

BUY CALL JUN-125 UZQ-FE OI= 0 at $13.50 SL=10.00
BUY CALL JUN-130 UZQ-FF OI=16 at $19.25 SL=14.00
BUY CALL JUL-140 UZQ-GH OI= 7 at $22.20 SL=17.50
BUY CALL JUL-145 UZQ-GI OI=12 at $20.00 SL=14.50
BUY CALL JUL-150 UZQ-GJ OI=25 at $11.38 SL= 8.50
BUY CALL JUL-155 UZQ-GK OI  0 at $ 9.75 SL= 6.75

Picked on June 8th at  $146.00     P/E = N/A
Change since picked      +0.00     52-week high=$206.00
Analysts Ratings     8-5-0-0-0     52-week low =$ 18.63
Last earnings 03/00  est= 0.07     actual= 0.08
Next earnings 07-19  est= 0.09     versus= 0.05
Average Daily Volume =   654 K
/charts/charts.asp?symbol=MUSE


HGSI - Human Genome Sciences $117.56 +1.44 (+11.63 this week)

Human Genome Sciences, Inc., founded in 1992, is a pioneer in
the use of genomics, the study of all human genes, and the
development of new pharmaceutical products.  They are a leader
in moving these genomics-based drugs into patient-based clinical
trials.  In 1999, three HGS drugs were tested in patients.  Their
goal is to become a global pharmaceutical company that discovers,
develops, manufactures and sells our own genomics-based drugs.

If you follow HGSI then you know it's been a volatile ride for
investors in the genomics company.  Since the first of the month
HGSI has gained about 35%.  After its fall from a high of $232
in early March, investors began testing the waters in mid April
and into early May.  After the decline its seems as though traders
were less willing to jump back into a company that had made many
a small fortune during its run to unprecedented levels earlier
this year.  It's the kind of the "burn me once shame on you, burn
me twice shame on me" mentality, that has gripped not only the
Biotech sector but the broad markets as well.  Last Friday with
the better than expected economic data one of the stocks that
attracted better than expected attention was HGSI.  HGSI has
managed to climb another 15% this week.  It has been and still
is a favorite among some of the fund managers that spend their
money and time focused on bio-tech stocks.  One of the most
widely noticed funds has been the Fidelity Select Fund, which
has gained approximately 18.4% year to date.  One of its top
holdings?  You guessed it HGSI.  HGSI has also received recognition
from the analysts this week.  One from Merrill Lynch, who upgraded
the company from a Long-term Accumulate to a Long-term Buy.  AG
Edwards initiated coverage of the company with an accumulate rating,
and a $140 to $150 price target.  They called the genomics company
a top pick, due to the recent enthusiasm for the company and the
industry as a whole.  So how do we approach our new play?  HGSI's
low today was near its 100-dma at $113.98.  Support is also seen
near $107.  If we see any profit taking either level could provide
a good entry, on a bounce supported by good volume.  If the economic
data due out in the morning is positive, HGSI could continue to
climb up the chart.  If that's the case we would then look for
opportunities to buy calls.

***June contracts expire next week***

BUY CALL JUL-115 HHA-GC OI=245 at $21.25 SL=15.50
BUY CALL JUL-120*HHA-GD OI=389 at $19.13 SL=13.75
BUY CALL JUL-125 HHA-GE OI=150 at $16.88 SL=12.25
BUY CALL OCT-120 HHA-JD OI=256 at $33.13 SL=24.00
BUY CALL JAN-120 HHA-AD OI=204 at $41.63 SL=30.00

SELL PUT JUL-115 HHA-SC OI= 50 at  $17.25 SL=24.00
(See risks of selling puts in play legend)

Picked on June 8th at   $117.56    PE = N/A
Change since picked       +0.00    52 week high=$232.75
Analysts Ratings      1-5-2-0-0    52 week low =$ 19.38
Last earnings 04/00  est= -0.33    actual= -0.35
Next earnings 07/27  est= -0.21    versus= -0.05
Average daily volume = 2.22 mln
/charts/charts.asp?symbol=HGSI



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

CTXS - Citrix Systems $51.56 -8.13 (-6.88 this week)

Supplying application server products and technologies that
enable effective and efficient enterprise-wide deployment and
management of Microsoft Windows applications is Citrix Systems'
core business.  The company's MetaFrame and WinFrame product
lines, developed under license and strategic alliance agreements
with Microsoft, permit organization to deploy Windows
applications without regard to location, network connection, or
type of client hardware platforms.  It's products are marketed
through multiple indirect channels such as distributors,
value-added resellers and original equipment manufacturers in
the United States, Europe and the Asia-Pacific region.

Unable to dodge the weakness in the broad technical markets over
the past 3 months, CTXS is being further pressured by its close
association with the beleaguered giant, Microsoft.  The NASDAQ
recovery last week helped to lift the stock off its early-May
lows near $40, but the continuing jitters related to the MSFT
judgment was too much, and the sellers prevailed.  Running into
resistance at $62, CTXS began declining on Tuesday and today
was then things got truly ugly today.  The stock gave up over
$8 on heavy volume, nearly triple the ADV, and closed under the
$55 support level.  Today's decline also puts the price under
the 200-dma ($57.38) and this opens the door for a retest of
support at $45, followed by $39, near the lows from a month ago.
The MSFT situation will likely continue to create downward
pressure, so look for entry points as the stock rolls over near
$55 again.  There is tenuous support near $49, and a more
conservative entry strategy would be to wait for sellers to push
the price below this level before playing.  Volume will be key
to our play, so use it as your guide for both entry and exit
points.  When the selling begins to abate, it will likely be a
sign that the downward momentum is beginning to slow.

***June contracts expire next week***

BUY PUT JUN-55 XSQ-RK OI=1182 at $5.75 SL=3.75
BUY PUT JUN-50 XSQ-RJ OI=1298 at $3.00 SL=1.50
BUY PUT JUL-55*XSQ-SK OI= 104 at $9.00 SL=6.25
BUY PUT JUL-50 XSQ-SJ OI= 125 at $6.25 SL=4.25

Average Daily Volume = 5.98 mln
/charts/charts.asp?symbol=CTXS



**********************
PLAY OF THE DAY - CALL
**********************

PDLI - Protein Design Labs $142.00 -5.00 (+16.88 this week)

Protein Design Labs develops human and humanized monoclonal
antibodies to prevent and treat diseases.  The FDA approved the
company's first humanized antibody product, Zenapax
(daclizumab), for the prevention of kidney transplant rejection
and there are seven other antibodies in the developmental
pipeline.  Global patents have been issued for the PDLI's
humanization technology and currently they have business
agreements with Eli Lilly and Genentech.

Most Recent Write-Up

The renewing sentiment amongst the Biotechs in the past couple
weeks sent PDLI on sizzling pace to recovery.  Coming from
devastating lows of $93 and $95 at the end of May, PDLI developed
a clear uptrend advancing an astonishing 52.7%, or $49 in record
time.  So it's not too unnerving to see PDLI give back a few
dollars today.  The share price too has held firm at a higher
support level of $140 and $142 in recent days.  Perhaps the Strong
Buy reiteration and $309 price target issued by analyst Matthew
Geller of CIBC World Markets helped sustain PDLI.  Nonetheless,
the stock is rising to the occasion.  If you want in, consider
target shooting intraday for quick in-and-out moves at these
levels.  Or else, play it safer.  Be patient and look for pullbacks
to the $135-137 range, near the rising 5-dma ($137.10) then enter
on a definitive bounce.  Although, even this strategy doesn't
provide a safeguard against a reversal.

Comments

What a great week for PDLI and the biotechs!  Simply put, the
entire market will be nervously awaiting the PPI number due
out at 8:30am EDT.  The broad market will set the trend for
the day.  With the NASDAQ closing at 3825, any test of 4000
should spark some profit taking.  Keep this level in mind if
you are intraday trading PDLI in order to determine when this
market may turn around.

***June contracts expire in 1 week***

BUY CALL JUN-140*PQI-FZ OI=590 at $12.88 SL=10.25
BUY CALL JUN-145 RPV-FI OI= 16 at $10.25 SL= 7.50
BUY CALL JUL-145 RPV-GI OI=  7 at $23.75 SL=18.50
BUY CALL JUL-150 RPV-GJ OI= 19 at $21.63 SL=16.75

SELL PUT JUN-125 PQI-RV OI= 12 at $ 2.75 SL= 4.25
(See risks of selling puts in play legend)

Picked on June 4th at   $125.13    P/E = N/A
Change since picked      +16.88    52-week high=$338.00
Analysts Ratings      2-2-3-0-0    52-week low =$ 18.25
Last earnings 03/00   est=-0.04    actual= 0.04
Next earnings 08-04   est= 0.19    versus=-0.14
Average Daily Volume = 1.41 mln
http://www.optioinvestor.com/charts/charts.asp?symbol=PDLI



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

Wake Me When Something Happens...

Wednesday, June 7

Strength in technology and financial stocks helped the market
rally today in another session characterized by light volume.
The Dow closed up 77 points at 10,812 and the Nasdaq ended 82
points higher at 3839.  The S&P 500 Index added 13 points to
end at 1471.  Trading volume on the NYSE was 851 million shares,
with advances beating declines 1,619 to 1,297.  Activity on the
Nasdaq was slightly below average at 1.41 billion shares traded.
Technology advances led declines 2,307 to 1,699.  In the bond
market, the 30-year Treasury rose 3/32 pushing its yield down to
5.89%.


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

Interstate   IBC    OCT12C/JUN17C   $3.88   debit   diagonal
Celgene      CEGE   JUL22C/JUL25C   $2.00   debit   bull-call
Texaco       TX     JAN60C/JUN60C   $4.75   debit   calendar
Texaco       TX     JAN45C/JUN60C   $13.75  debit   calendar

Our new plays offered a mixed lot of opportunities during the
subdued session.  The Interstate Bakeries position did not reach
our target debit but a relatively favorable entry was available
near 1:00 P.M.  There were two possible positions in Texaco; a
bullish diagonal spread and a calendar spread.  We currently have
a long-term diagonal spread in the issue so we chose the latter.
The target debit in the bullish calendar spread was observed near
10:00 A.M.


Portfolio plays:

The market moved higher today as investors shopped technology
stocks in anticipation of a rally after the release of Friday's
economic report.  On the Nasdaq, biotech issues continued their
recent ascent with shares of Immunex (IMNX) enjoying a surprise
rally amid news the company received FDA approval for its new
arthritis drug Enbrel.  Semiconductor equipment stocks were also
generally strong after Lehman Brothers said several the leading
companies could benefit from significantly higher earnings over
the next 12 months.  Financial stocks also put in an impressive
performance Wednesday after being pummeled Tuesday on the heels
of negative comments from Merrill Lynch.  Online brokerage issues
rallied after Donaldson, Lufkin & Jenrette initiated coverage of
the e-finance group and said that the recent dips have presented
a buying opportunity.  In the broad market, agricultural product
and computer stocks advanced while building materials, electronic
and metals and mining issues consolidated.  Oil stocks were also
lower after an impressive performance Tuesday.

Our portfolio enjoyed a number of bullish moves in the technology
group and many of the cyclical issues also rallied during the
session.  Vodaphone (VOD) and Covad Communications (COVD) were
the hi-tech leaders while Medimmune (MEDI) topped the drug group
with a surprising $2.38 move in its 5th consecutive day of gains.
Nabisco (NGH) edged up another $1.25, taking center stage in the
current Food and Beverage Group "merger wars" and remarkably,
Campbell Soups (CPB) bounced back, up $2 to $31.62.  Our bullish
calendar spread achieves maximum profit at $32.50.  The finance
group performed well and our new bullish position, Paine Webber
(PWJ) was the leader in that group, up over $2 to a recent high
near $50.  Allstate (ALL) moved $1.25 to close just below $30
and Bank One (ONE), Keycorp (KEY) and Summit Bancorp (SUB) also
participated in the upside activity.  The surprise of the day
was Novoste (NOVT), which gapped to $44 on no news.  Our bearish
call-credit spread is short at $45 but the issue has yet to move
above the technical resistance at that price.  Based on previous
rallies (followed by failures) and the current trading history,
we expect the issue to consolidate in the next few sessions.


Thursday, June 8

The market retreated today as investors displayed caution ahead
of Friday's Producer Price Index.  Concerns about the upcoming
economic data sent the Dow Industrials into a dive with the Blue
Chip average finishing down 144 points at 10,668.  The composite
of technology stocks also ended in negative territory, down 13
points to 3825.  The S&P 500 fell 9 points to 1461.  Activity on
the NYSE was light at 854 million shares, with declines beating
advances 1,595 to 1,344.  Trading volume on the Nasdaq hit 1.39
billion shares, with declines edging advances 2,125 to 1,828.  In
the bond market, the U.S. 30-year Treasury rose 8/32, pushing its
yield down to 5.89%.


Portfolio plays:

Industrial stocks fell precipitously today led by steep losses in
Procter & Gamble (PG).  The company warned of possible shortfalls
in future earnings and investor concerns spread to other sectors.
Traders sold for profit in chip, networking and computer hardware
issues while financial and retail stocks pulled the Dow Average
lower.  Most of the major groups slumped with the exception of
Oil Service stocks, which enjoyed favorable gains.  The market
consolidation was attributed to a simple "lack of participation"
as traders moved to the sidelines to await the Producer Price
Index data, due out on Friday.

The chip sector kept the Nasdaq positive even as the Microsoft
news weighed heavily on the computer sector.  Shares of the
software giant traded lower after Judge Thomas Penfield Jackson
ordered the company to be split into two separate entities, one
centered on the Windows operating system and another based on
products in their application software businesses.  The ruling
places conduct restrictions on business negotiations and requires
Microsoft to submit a break-up plan within 4 months.  Technology
stocks in our portfolio were relatively unaffected but there were
some positive moves.  Ditch (DITC) rallied $7 after Wednesday's
big drop and our bullish credit spread has yet to require any
adjustments.  Globespan (GSPN) also rebounded from a recent
slump and it appears that our call-debit position (near $90) may
finish profitable.  Excite@Home (ATHM) rallied almost $2 as new
interest in web-based telephony made the headlines.  IP telephony
is the technology that allows consumers to place phone calls over
data networks rather than traditional circuit-switched telecom
networks and the unique technology is expected to be a strategic
component to maintain site traffic for major Internet portholes.

In the meantime, shares of consumer companies were under attack
but Johnson & Johnson (JNJ) managed a small gain.  Those of you
interested in moving to the JUL-$85 calls have a new opportunity
to sell the position for a favorable premium.  Banks and finance
stocks retreated today, relinquishing most of their recent gains.
One analyst had an optimistic view however, commenting that the
sector is simply consolidating after its recent healthy run-up.
Today's slide in J.P. Morgan (JPM) helped our bearish position
and once again, it appears that we are out of immediate danger.
The issue that gave us such a scare yesterday, Novoste (NOVT)
retreated to the middle of a recent trading range and for now,
it is no longer a threat.

Southdown (SDW) was our big winner, up $5 following a report
that Portuguese cement group Cimpor (CMPR.IN) was preparing a
new takeover offer for the company in alliance with Brazil's
Votorantim.  Southdown, which hired Lehman in March to help it
explore a possible sale of the company, declined comment on the
report in the Portuguese financial daily Diario Economico.  The
issue ended at $67 and our spread is at maximum profit above $55.
Oil stocks also rallied and our top performers were Texaco (TX)
and Falcon Drilling (FLC).  The bullish position in FLC is once
again trading at a favorable (closing) return.  Don't let it get
away!

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

This week I received two new requests for bullish credit spreads.
With favorable disparities in the July premiums, these positions
offer favorable returns for those who are bullish on the issues.

******************************************************************
NTAP - Network Appliance  $85.31  *** Hot Networking Sector! ***

Network Appliance and its subsidiaries are engaged in the design,
manufacturing, marketing and support of high performance network
data storage and access devices, which provide fast, reliable and
cost effective services for data-intensive network environments.
The company is a supplier of network attached data storage and
access devices called "filers."  Network Appliance's first filer
product was specifically designed to improve the storage and
accessibility of data stored on a network.  Their products include
entry-level filers targeted for workgroups and smaller application
environments along with systems for larger departments; and a new
enterprise class filer.  The company also has an Internet caching
appliance, NetCache, which achieves Internet bandwidth savings and
improves performance by moving data closer to end-users.

NTAP is one of the leading companies in the Networking group and
fundamentally, they are near the top of the heap.  Last month, the
data access services provider reported earnings that were ahead of
market expectations.  The company said net income rose 128% in the
first quarter to $24 million, up from $10 million a year earlier.
Sales more than doubled to $200 million and based on the positive
report, a number of brokerages upgraded the issue.  Merrill Lynch,
Needham, Solomon Smith Barney, SunTrust and A.G. Edwards all moved
their future earnings estimates higher with bullish price targets.

From our viewpoint, the sector outlook is excellent and the issue
appears to have made a successful technical recovery, moving above
a recent resistance area near $70-$75.  It appears there is little
chance the stock will test our sold strike during the next month
in this bullish, low risk position.


PLAY (very conservative - bullish/credit spread):

BUY  PUT  JUL-60  NUL-SL  OI=190  A=$1.62
SELL PUT  JUL-65  NUL-SM  OI=82   B=$2.12
INITIAL NET CREDIT TARGET=$0.62-$0.68  ROI(max)=15% B/E=$64.31

Chart =
/charts/charts.asp?symbol=NTAP
******************************************************************
ASWX - Active Software  $67.75  *** On The Move! ***

Active Software is a leading provider of eBusiness infrastructure
software that provides its customers with a platform to automate
end-to-end business processes inside their enterprise, with other
business-to-business trading partners and with customers over the
Internet.  Its unique ActiveWorks Integration System enables its
customers to accelerate their time to market for products and
services, enhance their relationships with customers, suppliers
and partners and substantially reduce their online operating and
information technology costs.  Active designed the ActiveWorks
Integration System to provide a highly flexible and adaptable
eBusiness infrastructure that can be deployed quickly and changed
easily in response to evolving business requirements.  ASWX also
partners with a broad range of system integrators and hardware,
software and service providers in order to offer its customers a
comprehensive eBusiness solution.

This bullish issue has made significant gains in the last week and
obviously, there is a potential for consolidation.  The first test
of technical strength will come near the January highs and as the
stock pulls back to attempt a continuation rally, we expect the
bottom will emerge near $45-$50.  Our long-term outlook for the
group is favorable and with leading B2B companies garnering new
interest, Active Software should eventually finish in range near
the trading boundaries defined earlier in the year (from $65-$85).


PLAY (aggressive - bullish/credit spread):

BUY  PUT  JUL-45  QGO-SI  OI=0  A=$1.81
SELL PUT  JUL-50  QGO-SJ  OI=5  B=$2.68
INITIAL NET CREDIT TARGET=$1.00  ROI(max)=25% B/E=$49.00

Chart =
/charts/charts.asp?symbol=ASWX
******************************************************************
                   - STRADDLES AND STRANGLES -
******************************************************************
JNPR - Juniper Networks  $238.00  *** Split Rally! ***

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

Juniper is on the move and the recent news that Nortel Networks
(NT) is discussing a co-marketing arrangement with the company
has bolstered the share value in recent sessions.  The meetings
are seen as an indication that the telecommunications equipment
company is retreating from the competitive market for now, and
that is viewed as a positive event for Juniper.  Investors are
also excited about the upcoming stock split.  Shareholders have
approved an increase in authorized shares which enables Juniper
to effect a two-for-one split of the company's outstanding stock.
The transaction will entitle each stockholder of record at the
close of business on May 15, to receive one additional share on
or about June 15, with the issue trading on a split-adjusted the
next day.

The recent activity has resulted in new interest in OTM options
and we will use the current speculation to profit from slightly
over-priced premiums with this relatively conservative, credit
strangle.  The probability of the share value reaching our sold
strikes is rather low but the pre-split rally should continue
through next week so monitor the position daily.  If the issue
moves through the resistance area near $300, we will simply buy
the stock to cover our sold options, creating a bullish position.


PLAY (conservative - neutral/credit strangle):

SELL CALL  JUL-350  JUD-GJ  OI=78  B=$5.00
SELL PUT   JUL-165  JUX-SM  OI=43  B=$4.25
INITIAL NET CREDIT TARGET=$9.50  ROI(max)=21%
UPSIDE B/E=$359.50 ($179.75)  DOWNSIDE B/E=$155.50 ($77.75)

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



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

DISCLAIMER

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