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Daily Newsletter, Tuesday, 06/13/2000

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The Option Investor Newsletter                   Tuesday 6-13-2000
Copyright 2000, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
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MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       6-13-2000           High     Low     Volume Advance Decline
DOW    10621.80 +  57.60 10653.66 10492.80   914,116k 1,742  1,185
Nasdaq  3851.07 +  83.15  3851.43  3695.35 1,397,255k 2,049  1,988
S&P-100  789.43 +  15.18   790.13   772.35    Totals  3,791  3,173
S&P-500 1469.44 +  23.44  1470.42  1442.38            54.4%  45.6%
$RUT     513.75 +   5.24   513.76   500.91
$TRAN   2754.87 -  26.63  2796.98  2746.19
VIX       24.37 -   1.00    26.36    24.10
Put/Call Ratio       .61
******************************************************************

A Cool Down In Spending Spurs Market Rally

All eyes were on the Retail Sales report due out this morning
and the outcome further signaled the economy is slowing.  It
was apparent that consumers kept their wallets idle this past
month as sales fell 0.3% versus an expected 0.1% rise.  The
icing here was an unexpected downward revision for April Retail
numbers.  They were revised down from an 0.2% decline to an
0.6% decline for the month.  All of this was construed on
Wall Street as further evidence that the Fed's rate hikes were
doing their job and, perhaps, no further hikes are needed.
Despite that, the market was nervous about the CPI report due
out tomorrow and most major indices spent the morning below
the unchanged line.

So where did the rally come from?  The main man himself, Alan
Greenspan, spoke to the New York Association of Business
Economics early this afternoon.  In prepared remarks, he said
there's evidence of an improvement in the productivity growth.
What?  He went on to say that "most of the gains in the level
and the growth rate of productivity in the United States
since 1995 appear to have been structural, largely driven by
irreversible advances in technology."  Wait a minute.  Did I
hear that correctly?  Is he now stating that productivity will
help curb the tide of inflation?  Many analysts walked away
unsure as to what he may do this month at the FOMC meeting,
but you can tell from Wall Street that some are assuming
Greenspan feels less inclined to make a move.

This speech from the Fed Chair put the buyers into action and
they quickly erased the losses.  When it was all said and done,
the DJIA climbed by 57.63 to 10,621.  Volume was so-so at 915
million shares.  The Nasdaq really started to cook on those
comments and closed right smack-dab on the day high at 3851.07,
up 83.16 on the day.  Volume came in just under 1.4 billion.
The S&P 500 finished up 23.44 to 1469.44.  All in all, it was
an encouraging day for stocks, despite many players sitting
out ahead of tomorrow's CPI.

For those that know me (or for those that don't), I am a Nasdaq
watcher and I like the looks of today's action.  We have been
stuck in a range for some time, but 3700 support held up just
fine today.  The levels I am watching are support at 3700 and
resistance at 3900.  Some of the individual charts are just
as pleasing to look at, most breaking out over resistance.
SDLI took off again after some recent consolidation, +21.09
today.  RMBS broke out over $240 on a nearly $30 move.  CHKP
rallied by $18.41 and is sitting right under resistance at
$230.  RBAK scorched a $15.15 gain from yesterday, but more
like a $20 move from the intraday lows.  Thank goodness we
had the four highest point gainers on our call list, right?
Even GLW added another $9 after yesterday's mammoth move.




One of the sectors that looked strong included the Drug group.
Shares of large U.S. drugmakers jumped because investors are
concerned about a possible slowdown in the U.S. economy and
rotated into the sector, which is considered a safe harbor.
Other sectors on the move were Retail, Insurance, Fiberoptics,
and Healthcare.  The losers included Transports and Cyclicals.

The individual stories were just as impressive with big moves
all around.  NBCI sticks in my mind as the loser of the session
after they warned they will miss estimates.  The company blamed
a soft advertising market and expenses due to acquisitions as
the culprit.  Investors took it out on their stock by sending
NBCI down $7 to $17.63.  First call had expected a $0.70 loss
for the quarter.  Hewlett-Packard also dropped today on word
that investment firm Sanford Bernstein cut their rating and
earnings numbers for the HWP.  This caused the stock to drop
seven dollars to $119 and took about 35 points off the DJIA.

There were winners in this market too.  Shares of ENT jumped
more than 14% on takeover rumors.  The report says that either
Global Crossing or France Telecom are the potential suitors.
ENT finished up $6.75 to $49.13.  CMGI was the big news after
the close today.  The Internet incubator reported earnings
far ahead of expectations with a loss of $1.53 per share.  This
was $0.30 better than First Call expectations, but down versus
last quarter when they only lost $0.74.  The real numbers to
watch were the revenues which grew by nearly 50% from the first
quarter.  They reported net revenue of $225.9 million for the
fiscal third quarter ending April 30th.  Shares of CMGI were
being well received in after-hours trading, moving up to $60
from a $56.63 regular session close.

The interesting thing about some of the big movers from today
is, given the two weeks of consolidation, they haven't really
got away from us.  I don't endorse running out and buying
something that traded up $25 in one session, as we've all been
skinned doing that before.  But, considering some of the
individual charts is what is leaving me with an upside bias.
Lots of stocks are looking healthy as we head into July on
an earnings run.  CMGI will definitely help that cause with
their stellar report.  Nothing like 47% quarter-over-quarter
revenue growth to justify the current PE levels.

Obviously though, the key will be the CPI.  The expectation
is for a gain of 0.2%, with the core rate also growing by 0.2%.
With the PPI coming in under expectations on Friday, I don't
expect the CPI to be out of line.  The question is, how will
traders react?  Strong volume would be nice.  Maybe to the
tune of 2 billion shares like we did in the old days...way
back in March!  A breakout over 3900 is the key.  The lines
have been drawn between buyer and seller at this level for the
past week.  A good CPI and the inability to crack resistance
at 3900 would be disheartening.  Speaking of disheartening,
one of those gap up openings that slowly bleed and leave you
with the high of the day on the first trade would do the trick
too.

As for me, barring any CPI disaster, I expect a rally.  It
could be delayed with a sell-the-news morning, but I doubt it.
Support on the Nasdaq has been strong and an earnings run is
starting to take shape.  One of the sectors I have been watching
for past two weeks and that will continue to stay on the top
of my radar is Fiber-optics.  The momentum is strong in this
group of late.

Two quick items on after-hours news which will be important
in tomorrow's action.  First, NVLS was added to the S&P 500
to replace Champion, who is being purchased by International
Paper.  America Online will take the place of CHA in the
S&P 100 as well.  Tiffany (TIF) is also being added to the
S&P 500.  The second big non-earnings news was on Microsoft.
It was announced that the U.S Circuit Court of Appeals, acting
at the earliest opportunity, would hear MSFT's appeal of the
breakup order imposed last week.  This was announced even
before Judge Thomas Penfield Jackson could hear the government's
case to bypass the Court of Appeals.  The court said it was
acting "in view of the exceptional importance of these cases."
Needless to say, this is a legal victory for MSFT.  After-hours
MSFT was up $2.50 to $70.25, NVLS was up $4.50 to $56, AOL
traded up fractionally, while TIF had not traded.

Keep your eyes on 3900 tomorrow.  As I said above, this is the
battle line and something has to give eventually.  Plan your
trades accordingly.


Ryan Nelson
Asst. Editor



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

Tuesday, June 13, 2000

Risk to Reward Level!

Equities closed higher Monday, thanks in part to Greenspan's speech,
which included some optimistic comments regarding productivity growth
that many pundits thought to be positive. The war on inflation seems to
be working, and like we've stated before, the bond market is acting
like the war is already won!

With the slowing economy, comes slowing profits. This has been
evident as numerous companies have already pre-released negative
news during the last two weeks. This weeks' blowups include
Citrix Systems, Harmonic Lightwave (analyst's comments), and NBC
Internet, which all got pounded heavily. Now when stocks start
giving back many months (or even years) of positive gains in a
short time frame, you know your risk-to-reward level is not even.
Just ask shareholders of any of these companies.




However, there will always be good growth opportunities even in a
slowing market. We now have had several technology companies'
pre-release positive news these last two days. Fiber-optics
company Corning (GLW) made strong remarks Monday, as did Kemet
(KEM) and now CMG Information Systems (CMGI) after the close
today. We think there will be many good opportunities such as

these in the weeks to come. But with the risk-to-reward level
being so poor, we would be very cautious before jumping on any
potential land mines, especially during this time of the pre-
release season. We will be interested to see how CMGI performs in
the near term, now that good news it out.  Will it go up +20 on
this good news? Doubtful! Would it have gone down -$20 if it
warned the street like Citrix Systems? Yes! Now that, is our
point when we refer or talk about the risk-to-reward level.
Nobody can precisely predict what will happen with the stock
market or individual equities in the future, but you can watch
the potential risk-to-reward on the companies that are making
news now!

BULLISH Signs:

Interest Rates (5.937):
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. Many
individual equities will continue to show major (and quick) gains
as stocks get squeezed.


Volatility Index (24.37):
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, Lands End, H&R Block, McDonalds,
Electronic Data Systems, Mylan Labs, Harmonic Lightwave, and NBC
Internet, have all warned of poorer times 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                        (6/9)       (6/13)       (6/15)
*****************************************************************
Overhead Resistance (805-825)    16.42       18.67
Overhead Resistance (775-800)     2.53        2.67

OEX Close                       779.76      789.43

Underlying Support  (745-770)     1.89        2.25
Underlying Support  (715-740)     5.71        5.67


What the Pinnacle Index is telling us:
With only a couple of days until June expiration, we would expect
the OEX to stay trading range bound similar to the last couple of
weeks.


Put/Call Ratio
*****************************************************************
                                Friday      Tues       Thurs
Strike/Contracts                (6/9)      (6/13)      (6/15)
*****************************************************************


CBOE Total P/C Ratio            .45        .48
Equity P/C Ratio                .42        .53
Index Put/Call Ratio            .77        .64


Peak Open Interest (OEX)
*****************************************************************
                     Friday          Tues            Thurs
Strike/Contracts     (6/9)          (6/13)           (6/15)
*****************************************************************

Puts                740 / 8,917  740 / 9,124
Calls               795 / 9,394  785 / 8,364
Put/Call Ratio        0.95          1.09



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 13, 2000                           24.37


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

As of Market Close - Tuesday, June 13, 2000

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

DOW Industrials   10,200  11,400  10,621    Neutral   5.05
SPX S&P 500        1,350   1,500   1,469    Neutral   5.30
OEX S&P 100          725     800     789    Neutral   5.30
RUT Russell 2000     450     550     514    Neutral   5.05
NDX NASD 100       3,000   4,000   3,766    Neutral   5.30
MSH High Tech        800   1,050   1,002    Neutral   6.06

XCI Hardware       1,250   1,600   1,499    Neutral   5.30
CWX Software       1,050   1,300   1,251    Neutral   6.06
SOX Semiconductor    850   1,200   1,171    Neutral   5.30
NWX Networking       900   1,100   1,150    BULLISH   6.02
INX Internet         500     800     592    Neutral   5.30

BIX Banking          530     640     586    Neutral   6.09
XBD Brokerage        400     500     483    Neutral   5.05
IUX Insurance        540     620     654    BULLISH   5.16

RLX Retail           900   1,000     843    BEARISH   6.09
DRG Drug             355     400     390    Neutral   4.28
HCX Healthcare       710     800     800    Neutral   4.28
XAL Airline          140     155     164    BULLISH   5.25
OIX Oil & Gas        265     300     314    BULLISH   5.11

Posture Alert
A Greenspan inspired rally sent many of the indexes higher
Tuesday, as most of Monday's losses were all wiped out. Sectors on
the move include Semiconductors (+5.05%), Software (+3.76%), Drugs
(+3.26%), and Healthcare (+3.17%). There are no current changes in
posture.



*************
SECTOR TRADER
*************

"Oh, Henry!" Ending, But Still a Rangebound Market
By Buzz Lynn

For those who e-mailed, or tried to e-mail comments to
sectortrader@OptionInvestor.com, thank you in advance for your
input.  Unfortunately, due to a faulty link in the introductory
column, we were not able to receive them.  If you have comments
or suggestions, we would still like to hear from you so that we
can make Sector Trader a really useful tool in your trading
arsenal.  Please try sending that e-mail one more time!  Thanks
again for your support!

We've already made a small but helpful change to the site.  Now
it is broken up into New Plays, Updates, Drops, and No Play,
which should make it easier to track a play through its life
cycle.  Again, let us know what you think!

Now, off to the plays.


Index             Last     Mon     Tue     Wed     Thu    Week

QQQ nasdaq-100   94.25   -2.88    3.88                   0.56
HHH Internet    118.69   -7.06    1.19                  -5.88
BBH Biotech     158.00   -7.75    5.75                  -2.00
PPH Pharm.       97.00   -0.69    3.44                   2.75
TTH Telecom      77.56   -0.94    1.81                   0.88
IAH I-net Arch.  90.00   -1.06    0.94                  -0.13
IIH I-net Infr.  55.50   -4.06    1.19                  -2.88
BHH B2B          40.13   -2.14    0.81                  -1.63
BDH Broadband    88.56    0.88    2.13                   3.00
SMH Semicon.     98.81   -3.81    4.00                   0.19


**************
Updates
**************

QQQ - NASDAQ 100 $94.19 +3.44 (+0.63) optionable.  The NASDAQ
gave us that rollover we were looking for and promptly started
back up again from roughly $90, keeping us firmly in the $90 to
$94 range yesterday and today.  Nice tweezer bottom if we do say
so ourselves.  Here's what we mean.  On a daily candlestick
chart, you'll see one red candlestick going down (sometimes
followed by a doji star the next, but not this time), and a white
candlestick going back up the next day.  The psychology behind it
is that sellers have taken it down as far they can before buyers
regain confidence and take it back up.  The bulls just tuckered
out the bears.  Making it all the more telling of a real bottom
is that support came just under $90, which coincides with near-
term historical support, and the 50-dma of $89.71.  After today's
retail sales release, it's pretty clear that the economy is
slowing, making it less necessary for the Fed to raise rates.
The final positive technical sign is that QQQ closed at its high
of the day.  The only big technical negative is the high
stochastic, which usually portends a downturn.  Careful.  Going
forward, there is mild resistance here at $94; $95 would be the
next level for the QQQ to test.  While today was bullish, history
suggests that it will turn back down again at $95.  If it can
clear that however, the breakout would be a strong bullish signal
that money is again moving off the sidelines into equities.  Just
make sure you see market-wide volume as a confirmation.

At Support:
BUY CALL JUL-86 YQQ-GH OI=  561 at $11.88 SL=9.00
BUY CALL JUL-88 QVQ-GJ OI=  751 at $10.50 SL=7.75
BUY CALL JUL-91 QVQ-GM OI=  857 at $ 8.25 SL=6.00

SELL PUT JUL-86 YQQ-SH OI=20674 at $ 2.81 SL=4.50, Huge OI

At Resistance:
BUY PUT  JUL-98 QVQ-ST OI=  525 at $ 8.38 SL=6.00
BUY PUT  JUL-95 QVQ-SQ OI=  631 at $ 6.75 SL=4.75
BUY PUT  JUL-94 QVQ-SP OI=  944 at $ 6.25 SL=4.25

Average Daily Volume = 27.1 mln
/charts/charts.asp?symbol=QQQ

------

BBH - Biotech $158.00 +5.75 (-2.00) Not optionable.  AMGN +4.69,
DNA +4.56, BGEN +3.38, IMNX +1.69. . .is it any wonder this index
is up so strong today?  While it is not immune to market
pressure, this is one sector that still holds a lot of
sentimental strength.  Technically, it looks strong too.  From
Sunday, we noted, "the support level will now likely be closer to
April and May's resistance of $148 to $150.  Watch that level for
new support and consider a long position if it bounces up from
there."  Sometimes it's better to be lucky than smart.  As if on
cue, BBH descended all of yesterday, opened low this morning,
sank to $150.25, then ascended steadily into its close at $158,
also its high of the day (strong sign).  This would have made a
beautiful entry if you were watching.  We especially like the
successful retest of $150 since it also happens to be BBH's 10-
dma.  With resistance at $160, a breakout may not be far off if
tomorrow's CPI, coupled with today's finishing momentum, carries
BBH through and holds $160 tomorrow.  Feel free to take a
position then.  Careful though.  Since this index is capable of
moving over $5 per day, it's possible that it could test higher
resistance too at $165, then fall.  Just be sure to use a stop so
you don't lose your shirt on an equally quick descent under $160.

Average Daily Volume = 701 K
/charts/charts.asp?symbol=BBH

------

IAH - Internet Architecture 90.00 +0.94 (-0.13) Not optionable.
Just like getting your truck stuck in the mud, it's going to take
some rocking to get it unstuck.  $90 is proving to be strong
resistance and we had suspected that IAH would need to retest $82
before it would be safe to take a position.  It looks more like
$87 made a better figure today.  As the lows get higher, the case
gets stronger that a breakout will occur from here ($90).  We may
yet see that tomorrow morning on favorable CPI numbers.  Just
don't get tripped into a play during amateur hour (the first hour
of trading) only to see the issue fall back under $90 following
an initial spike.  We need to see $90 hold.  That would confirm
the "old resistance equals new support" theory and perhaps give
us a satisfactory entry.  If it doesn't hold $90 and the rest of
the market rolls over with it, it will confirm the resistance, in
which case you may want to consider going short and covering at
$87.  For the gunslingers, you can consider hanging in there down
to $83 (that's the opening gap from two weeks ago), but no
guaranties.  Internet stocks are currently getting a bit of a
cold shoulder from investors.  Since this index isn't moving up
with the market, we think there is better potential for a
downside play here.

Average Daily Volume = 77 K
/charts/charts.asp?symbol=IAH

------

IIH - Internet Infrastructure $55.50 +1.19 (-2.88) Recall that we
were looking for resistance and a rollover at $60.  Sure enough,
we got the rollover we were looking for yesterday right from the
open at nearly $59, which continued down this morning taking IIH
under what we thought would be good support at $53.50.  Wrong!
Try $51.81.  Despite today's improved market, IIH did not keep
pace.  The lows get lower and it can't get back up to $57.50, its
previous level of intraday support.  We look for more relative
weakness for now.  Assuming we get a rally on good CPI numbers
tomorrow, we would again consider going short at $60 or any
rollover from a lower value.  Just make sure IIH is NOT keeping
pace with the market before you take a position.  Within the
components of the index, volumes are generally above the ADV on
the losers and below the ADV on the gainers indicating greater
overall selling conviction than buying conviction.  While overall
the index went up today, it doesn't look good for the future,
especially with the overbought stochastic indicator.  Keep it on
your short candidate list and wait for an entry.

Average Daily Volume = 311 K
/charts/charts.asp?symbol=IIH

------

BDH - Broadband $88.56 +2.13 (+3.00) Not optionable.  Despite a
gap up two weeks ago, BDH has refused to backfill the island.  In
fact, the lows keep getting higher as it continues to bump its
head against $88.50 resistance.  Hmmm. . .look familiar?  Yep!
An ascending wedge.  The good news is that today's move came as a
steady ascent, not a gap up, which lends more credibility to the
move.  It wasn't a grade-school dog pile, but a growing
sentimental belief that BDH components really are good companies.
NT (+3.06) was the heavy weight winner today, but smaller
components, GLW (+16.00) and SDLI, (+21.20) took center stage on
rumors that SDLI was in GLW's acquisition gunsites.  JDSU was
also a winner (+5.81).  Not only that, but the rumor reminded
investors that smaller players were ripe for the picking too in
what analysts think will be a wave of consolidation.  Since
closing at its high today, BDH sits right on the edge of a
breakout.  A move over $89 would be our signal to take a
position.  With the CPI out tomorrow, we could see that.  Careful
though.  With big moves in SDLI, GLW, JDSU, and NT, these four
are subject to some pullback, which would make it tough for BDH
to advance.  Keep these four on your radar as indicators.  If the
sector experiences any weakness, a pullback to support of $86
from yesterday might make a good entry - we favor waiting for the
pullback to go long over taking a position at the breakout, but
both are acceptable risks in our book.

Average Daily Volume = 202 K
/charts/charts.asp?symbol=BDH

------

SMH - Semiconductor $98.81 +4.00 (+0.19) Not optionable.  Of the
20 in this group, only four were in the red today - three of them
fractionally, with only AMKR down more than $2.  The rest were
BIG GREEN, led by none other than INTC (+6.44) and TXN (+4.13) on
news that DRAM prices had risen substantially overnight.  Yet it
only made up for yesterday's losses.  Where do we stand?
Bullish.  SMH closed at its high today not far from stiff $100
resistance.  With any positive action tomorrow from what we hope
is a favorable CPI, we could see that easily penetrated.
Especially encouraging was that SMH again found support at
$93.50, a level of old resistance and now intraday support from
last week.  On a daily candlestick chart, this is a perfect
tweezer bottom, which makes the future look good in real and
relative terms.  Our thinking from Sunday still holds.  Consider
taking a position on a breakout over $100 backed by volume, or
target shoot support at your level of risk tolerance ($93-$94 or
$96).  $95.75 is also the 10-dma, which could lend good support
for this sentimental favorite.

Average Daily Volume = 208 K
/charts/charts.asp?symbol=SMH


**************
No Play
**************

BHH
HHH
PPH
TTH



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

Things Are Different And Possibly The Same
By Mary Redmond

In the last week we have had several companies warn investors
that their earnings and profits might not meet expectations.
This is probably one of the main reasons the market has not
moved higher on benign economic data.  Some people think that
companies have to continuously project and report increasing
earnings in order for their stocks to rise.  In certain cases
this may be true.  We have all witnessed how a company's stock
price can lose billions in market capitalization merely by
missing estimates by as little as a few cents.

However, there is another interesting point to consider.  Some
market analysts have compared the present market conditions
to those which existed in February of 1995.  At that point, the
Federal Reserve raised rates for the last time after a series
of rate hikes during 1994.  The circumstances are different
this time, as they are different every time the market rallies
and corrects.  However, if you examine the earnings growth of
the S & P 500 in 1995 and the market during that period you will
see an interesting and perhaps surprising correlation.

From February 1995 to February 1996, the profit growth of the
companies in the S & P 500 index decreased on average from
approximately 20% to approximately 10%.  And yet, the S & P 500
rallied over 30% during those same twelve months.  In fact, the
market rallied from 1995 to 1998 without a major correction.
This doesn't necessarily mean that the same thing will happen
after the Fed stops raising rates, or raises for the last time in
June(hopefully!).  But, it is indicative that the markets can
rally in an environment of decreasing earnings and profit
growth.

There are several possible explanations for this.  One is that
the market tends to rally on expectations.  The Dow average and
the S & P 500 have been nearly flat for over a year.  They were
also flat in 1994 during a period of multiple rate hikes.  It
is possible that the market may rally in the second half of this
year if investors' expectations are that the rate hikes are over
for a while.  For example, many financial service stocks have
performed poorly for the last twelve months due to the ongoing
expectation of increasing interest rates.  If the expectations
change to a perception of stabilizing, or possibly decreasing
rates, the financials may be able to rally.

In the meantime, some options traders may have felt frustrated
in the last couple of weeks.  Many people I know lost up to
50% of their capital during the severe correction, and have
only made back a fraction of the amount lost.  In a choppy
market, some traders use certain strategies such as writing
covered calls on LEAPs to take advantage of mispriced short term
options.  One point to consider when using this strategy is that
there is always a risk that you will be assigned.

If you buy an option, you have the right but not the obligation
to buy 100 shares of the underlying stock at or before the
expiration.  If you sell a call or put option, you could be
assigned any time at or before expiration.

In most cases, assignment will not occur until the Saturday
following expiration.  For example, suppose you bought a QCOM
Jan '01 80 call at $21.  You could write a QCOM July 100 call at
$3.13.  This would be a possible way to earn income from your
longer term call.  If QCOM closed below $100 on the third Friday
in July, you would keep the 3.13 points.

However, any time you sell a call you have to realize that you
may be assigned by the Options Clearing Corp, which means you
would have to exercise your leap or longer term call and deliver
the shares.  If some phenomenal news comes out tomorrow or next
week which drove the price of QCOM over $100, you might not have a
chance to buy back the short term call.  You could end up losing
your longer term call.  This could be very disappointing if the
call ended up worth five or ten times more than you paid for it.
Usually, if I have very high expectations for a LEAP and I think
it could increase by 400% or 500% in a year, I don't write shorter
term calls to earn a few points.  However, in certain instances
it can be a profitable strategy.

Assignment usually does not happen in the middle of the option's
expiration period.  One of the reasons for this is that some
professionals have to pay a holding cost for keeping stocks.
However, it does happen on occasion.  This is one of the reasons
brokerage firms require a fairly high margin for naked call and
put writing.  If a person is assigned and does not have enough
money to cover, the clearing firm can be at a substantial risk.

Contact Support



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

Index      Last     Mon     Tue    Week
Dow    10621.84  -49.85   57.63    7.78
Nasdaq  3851.07 -106.93   83.16  -23.77
$OEX     789.43   -5.45   15.18    9.73
$SPX    1469.44  -10.95   23.44   12.49
$RUT     513.75  -14.55    5.24   -9.31
$TRAN   2754.87   -8.67  -26.63  -35.30
$VIX      24.37    0.18   -1.00   -0.82

Calls               Mon     Tue    Week

SDLI     283.19   11.97   21.22   33.19  Steaming freight train
GLW      242.00   17.75    9.00   26.75  Wowed Wall Street!
RMBS     248.56  -14.75   29.75   15.00  Dropped, split tomorrow
JDSU     121.38    5.00    5.81   10.81  New, fiberoptics hot again
RBAK     123.78   -7.38   15.28    7.90  Spiking buying volume
SEBL     150.25   -4.94   10.88    5.94  Conquered $145 resistance
PLXS     104.44    0.25    5.00    5.25  Battle of analysts
CIEN     144.94   -0.50    5.56    5.06  Ready to breakout!
CHKP     228.59  -15.31   18.41    3.10  Continuing stellar gains
MU        82.75   -0.81    3.50    2.69  Earnings on June 22nd
LLTC      69.56   -3.00    5.44    2.44  Now that's more like it
MRVC      48.38   -2.56    4.94    2.38  How about a pop?
ADI       94.50   -2.22    2.00   -0.22  Is this déjà vu?
BRCD     145.75  -12.69   11.44   -1.25  Nice recovery!
CMTN      93.50   -1.81   -0.25   -2.06  Quiet trading after lunch
MUSE     142.25   -1.75   -0.38   -2.13  Holding support
EXDS      89.56   -3.63    0.44   -3.19  Still time before split
YHOO     139.50   -5.75    2.06   -3.69  Blodgett to the rescue
ITWO     124.44   -8.56   -0.44   -9.00  Dropped, dot com blues
ABGX     111.50  -12.88    2.88  -10.00  Just a normal pullback
PDLI     155.13  -14.56    4.13  -10.44  Waiting to exhale
HGSI     128.50  -12.69    1.63  -11.06  Slight pullback
SEPR     104.97  -16.56    5.03  -11.53  Dropped, full circle
VRSN     167.06  -23.06   -5.88  -28.94  New, a vital stock

Puts

CTXS      24.94  -18.94    2.69  -16.25  Dropped, fast money
UTX       57.19   -0.38   -1.06   -1.44  New, bang that fizzled
NXLK      73.13   -5.38    4.13   -1.25  Entry point bounce
MMM       81.88    0.00   -0.06   -0.06  Channeling along
TGT       56.63   -1.75    2.13    0.38  Retail data does help
MMC      103.13   -0.44    2.63    2.19  Dropped, found bottom


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:
*****

SEPR $104.97 +5.03 (-11.53) We've come full circle with our play
in SEPR.  The stock shed nearly 15% Monday after Bank of America
downgraded the stock to a Market Performer from a Buy rating.
Analysts at Bank of America said SEPR had reached full valuation
after the recent run-up in the Biotech sector.  Analysts at
Montgomery Securities jumped on the bandwagon and also downgraded
SEPR on a valuation basis.  Sometimes analysts can be convincing
enough to have a big impact on a stock.  Unfortunately, Monday
was one of those cases.  In light of the cold shoulder from Wall
Street, we too must leave SEPR.

ITWO $124.44 -0.44 (-9.00) ITWO suffered from a case of the dot
com blues Monday.  The stock sank right at the opening Monday,
and found solid support at $125 for most of the day.  But, support
failed in the final moments of trading Monday, and ITWO continued
to fall into Tuesday's trading.  ITWO announced Monday that it
had completed its acquisition of Aspect Development, and instead
of helping our cause, it hurt our play.  Investors raised concerns
over the merger Monday which provided undue pressure to ITWO.
The B-2-B sector rallied Tuesday but left ITWO behind.  With its
poor relative showing Tuesday and concerns over the completed
merger, we've decided to leave ITWO behind.

RMBS $248.56 +29.75(+15.19) Depending on your trading style, you
may have been stopped out yesterday or this morning when Rambus
fell through several areas of support.  For traders looking for
a last minute split run, the opportunity came their way late this
morning when the chip company bounced off $210.  After being down
-$8.25 for the session, RMBS began to move up the chart with
solid volume adding momentum to the move.  We are dropping RMBS
tonight, as the company will begin trading on a split adjusted
basis on Thursday morning.  Those wanting to hang on for that
last minute profits will find intraday support near $233.  A
decline back through that level could also signal it's time to
go.  RMBS once again provided us with a great play, and could be
back again soon.


PUTS:
*****

CTXS $24.94 +2.69 (-16.25) When we picked this play less than
a week ago, we were looking for continuing concerns about the
company's ties to the Microsoft woes to create downward pressure
and maybe test the $39 level.  In light of the carnage on
Monday, we were way too conservative.  After the sharp selloff
on Friday, CTXS really got brutalized on Monday after the
company warned of an earnings shortfall.  The company admitted
to overestimating sales related to the Microsoft new server
operating systems  Company executives said their missteps will
set the company back by around six months (an eternity in this
market) in terms of targeted growth.  So why are we dropping the
play tonight?  After hitting bottom at $21.69 yesterday on
nearly 95 million shares of trading volume, the stock firmed and
actually headed gradually higher all day today on very strong
volume.  After bouncing from major support near $22, it looks
like the stock has reached bottom, and we are more than happy to
take our profits and move on to the next play.

MMC $103.13 +2.63 (+2.19) Continuing to drift lower throughout
yesterday's session, MMC found a bottom this afternoon.  Traders
came back from lunch in a better mood, and began buying as the
stock touched the $100 support level.  Although still below
resistance at $104, today's positive move came on increasing
volume and looks like confirmation of support at $100.  Economic
reports are indicating that the economy is slowing, lending
credence to the theory that the string of interest rate hikes
may be nearing an end, giving support to the Insurance sector.
In light of the improving economic picture, MMC looks like its
downside is limited, so rather than fight the market, we are
dropping it tonight.



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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                   Tuesday 6-13-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


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

RBAK $123.50 +15.00 (+7.63) What can we say?  After a rocky
morning of trading, RBAK shot up and blew right through $110.
The search for some driving news on the wires turned up nothing.
Then, after a brief rest near $115, RBAK overtook $120.  Quite an
incredible burst of buying!  So what's driving this?  Maybe a
change of sentiment.  Maybe investors are finally starting to put
some of that sidelined money to work.  Volume was coming in
throughout the afternoon.  No matter what the reason is, a late
session rally in techs had all the charts turning up, including
the NASDAQ.  Very positive.  Maybe a preemptive CPI rally.  At
any rate, RBAK's engulfing candlestick today is a good technical
indicator, especially closing at the high.  Look for possible
entry points on any pullbacks to the $118 level.  Confirm with
overall market trends and a bounce.  If the NASDAQ rallies
tomorrow, RBAK could break for $130 with little resistance
overhead.  It looks like a bit of volatility is creeping back
into the market, so be prepared to trade in and out, taking
intraday profits if the market turns.

SEBL $150.25 +10.88 (+5.94) SEBL stumbled Monday in unison with
the weak Tech sector.  The stock dipped below support at $140
near the close, and continued to slide into Tuesday's trading.
SEBL's brief dip turned into a good entry point as the stock
regained its early morning losses and rallied higher during the
latter half of trading Tuesday.  SEBL's resurgence came on the
heels two announcements.  Nice Systems said it planned to form a
new technology for managing customer contacts, the company
established partnerships to promote the product, including an
agreement with SEBL.  Also, in a midday announcement, SEBL said
it had aligned with LEXIS-NEXIS to provide its Siebel eBusiness
2000 product.  The latter of the two announcements sent SEBL into
rally mode as the stock sailed past resistance at $148, to close
near its day high.  Given the strong showing into the close
Tuesday, consider an entry at current levels if the momentum
continues.  However, if the CPI spooks investors, look for SEBL
to find support at $145 and again at $140.  Wait for a bounce off
support, and consider an entry if the stock turns north.

PLXS $104.44 +5.00 (+4.75) The battle between the analysts
intensified Monday when Robert W. Baird downgraded PLXS from a
Strong Buy to a Market Outperform rating.  But, CIBC stepped in
and defended PLXS by reiterating its Strong Buy rating, raising
its earnings estimates, and setting a $120 price target.  PLXS
set another 52-week high at $105.13 Monday despite the downgrade,
but gave back much of its gains in what appeared to be a case of
profit-taking in conjunction with a weak Tech sector.  But, PLXS
resumed its rally Tuesday with a little help from CIBC.  After
bouncing off support at $95, PLXS rallied sharply higher into the
close of trading Tuesday.  The volume picked up considerably in
the final hour of trading, confirming the strong interest in the
stock.  Going forward, look for PLXS to continue to march higher
despite the conflicting views of analysts.  Watch for a strong
move above resistance at $105.  PLXS's nearest support is at
$100, look for entry if the stock bounces from that level.

CIEN $144.94 +5.56 (+5.06) CIEN gapped $5 higher Monday morning
on the back of the early morning rally in the Telecom sector and
positive analysts comments from DLJ.  Yet, the stock ran into
resistance at $145, and finally broke down in the final hour of
trading as the tech sector sank.  Tuesday's trading proved to be
a little more constructive for our play.  CIEN provided a nice
entry point after tracing a double bottom at support at $135.
After hitting bottom at $135 for the second time Tuesday, CIEN
erased its morning losses to finish the day with a substantial
gain.  The stock closed just below $145 Tuesday, a level that has
proved to be major resistance for the stock in the last two
weeks.  Watch closely Wednesday morning for a breakout above
$145, and confirm any rally with volume.  Target shoot for entry
points by using the wide price swings in the stock.  If the
Telecom sector weakens Wednesday, look for CIEN to bounce from
support at $140 or again at $135.

GLW $248.00 +15.00 (+33.00) GLW wowed Wall Street Monday by
announcing it would surpass second-quarter earnings estimates of
69 cents.  GLW said due to strong demand for its optical fiber
and cable the company would earn between 78 and 80 cents per
share.  Additionally, the company told analysts to expect between
35% and 45% earnings per share growth for the full year.  The
upward earnings revision announcement sent the analysts alight
Tuesday.  First Union reiterated its Strong Buy rating and set a
$300 target, and Sands Brothers initiated coverage with a Buy.
The earnings announcement Monday morning sent GLW into orbit as
the stock gapped over $17 at the open.  Investors were rewarded
with a new 52-week high in Tuesday's trading, and volume returned
to confirm the breakout.  GLW closed right near its day high
Tuesday, look for the momentum to continue to carry the stock
higher.  Use intra-day dips to target shoot for entry points.
Should GLW stumble, the stock will find support first at $240 and
again at $235.

ABGX $111.50 +2.88 (-10.00) The Biotech sector fell flat on its
face Monday as traders took profits from the group.  But,
considering the Biotech sector is up 50% since its April lows,
maybe a little consolidation isn't such a bad idea.  In fact,
several analysts said Monday that the decline in the group was
just a normal pullback which was expected after the recent run-
up.  Since there no was detrimental news on ABGX Monday, the
drop was simply caused by sector weakness and profit taking.
ABGX did manage to regain its footing Tuesday to erase some of
Monday's losses.  Technically, ABGX remains strong, as the
stock continues to trace higher highs.  Consider an entry at
current levels if momentum returns to the Biotech sector.  A more
conservative trader might wait for ABGX to clear congestion in
the $114 range before entering the play.  If the profit taking
persists, watch for a bounce off support at $105 for a possible
entry.

BRCD $145.75 +11.44 (-1.25) Nice recovery!  After a big selloff
yesterday, BRCD managed to firm this morning near $128, and
then meandered aimlessly right through the noon hour.  Buyers
must have had spinach for lunch, because when they came back,
they handily beat back the bears and drove shares of BRCD up
for the remainder of the day.  Volume increased throughout the
afternoon, and by the closing bell, BRCD had tacked on over $18
from the daily low on volume exceeding 4 mln shares.  Add
to this the fact that the stock closed at the high of the day,
solidly above resistance at $140-141, and BRCD is looking good.
Driving the move higher this afternoon was news that the company
entered into a technology development agreement with Cisco.  Under
the terms of the agreement, the 2 companies will jointly develop a
Fibre Channel interface for Cisco's 6000 family of high-performance
multilayer switches, facilitating the interconnection of islands
of Storage Area Networks (SANs) over IP-based network
infrastructures.  As long as the market can stay healthy in the
face of tomorrow's CPI report and the continuing string of
earnings warnings, look for BRCD to hold support near $140, and
use bounces near this level as your trigger for new entries.

CMTN $93.50 -0.25 (-2.06) Even tame Retail Sales numbers this
morning were not enough to allay investor concerns, and CMTN
followed the NASDAQ lower at the open.  Finding support between
$88-89, CMTN saw quiet trading until after lunch.  Buyers
returned in a better mood than when they left, and spent the
afternoon driving the share price modestly higher.  The
strength continued right into the close, pushing CMTN back
above the $92 level, and hopefully this level will hold as
support as the week progresses.  Near-term resistance is firmly
entrenched at $96, and we will need to see some conviction (in
the form of strong volume) to clear this level.  Conservative
traders will want to wait for CMTN to move through resistance
before initiating new positions.  More aggressive players may
want to target shoot intraday dips to today's support levels
as a way to get a better entry.  The one concern today is the
relatively light volume.  We need to see it above the daily
average of 1.6 mln shares to confirm the strength of any move
higher.

LLTC $69.56 +5.44 (+2.44) Now that's more like it.  After
allowing the share price to drift lower all day yesterday,
buyers drew their line in the sand at the $62 support level.
The market weakness today kept LLTC from moving strongly higher
all morning, as volume remained weak.  Then the buyers got
serious after lunch, pushing through resistance at $67 on
increasing volume.  The day's total volume was still only
two-thirds of the daily average, but the intraday volume is
much rosier, consistently rising throughout the afternoon, with
more than 500 K shares changing hands in the final 20 minutes
of trading.  The strong close today puts LLTC at a new 52-week
high, and if the Semiconductors continue to be strong, our play
should be able to ride the wave higher.  Intraday dips to
support at $67 and then $64 are the most likely levels to
provide new entries.  This is a momentum-driven play, so look
for increasing volume to confirm the bounce before jumping on
board.

EXDS $89.56 +0.44 (+3.19) On Monday, it appeared EXDS was
providing a solid entry into a pending split run.  The share
price waggled down to shorter-term support at $90 and even
dipped to $88.25 at one point.  The downside was the lack of
trading activity, which only reached about 43% of its ADV.  The
good news was new Buy coverage by analyst Kevin Giboney at D.A.
Davidson & Co.  He also issued a 12-month price target of $145.
Today actually turned out to be a better day for EXDS, volume
wise anyway.  Buyers came back into the game after the share
price parlayed down to $83 and took our nerves to the limit.
The upward bounce on strong volume was the saving grace.  Now
we've got to see confirming moves first through the 5-dma
($91.14), then $95 to signal another charge towards the century
mark.  There's still time left to capture profits.  We have 7
trading days left until EXDS splits 2:1 on June 22nd.  In the
news, EXDS announced it added Streaming Media Performance
Monitoring to its award-winning SM-WEB measurement offering and
is expected to be available in 3Q 2000.  This new capability is
in response to the growing need to measure and optimize
streaming Web content performance levels.

PDLI $155.13 +4.13 (-10.44) Waiting to exhale, and exhale it did
on Monday.  PDLI cast off 8.8% or in monetary terms, a hefty
$14.56, although the volume was light.  The downdraft continued
in this morning's session.  However it was evident that when
PDLI hit $140 the temptation was too much for buyers to ignore!
And let's keep this all in perspective.  The pullback to the
first two levels of support was healthy.  Take into
consideration the astonishing gains (+78%) in mere weeks and you
really can't scold traders for taking some cash off the table.
Plus the downdraft provided a multitude of entry points to get
your foot in the door for another momentum rush.  On Thursday
the shareholders will vote on a proposal to increase the number
of authorized shares to 90 mln at the company's Annual Meeting
of Shareholders.  If it's approved then we've got a potential
splitter in our midst!

MUSE $142.25 -0.38 (-2.13) The stock's ability to maintain
itself at its short-term support levels is promising.  Remember
MUSE's been a NASDAQ shadow lately and so the downdraft of the
past two days was easily anticipated.  First $140 held, then as
the market sunk deeper MUSE managed well at the $135 level.  The
master key was the stock's upward bounce today.  It proved the
momentum was intact and that MUSE could potentially challenge
the resistance at $150.  Positive moves off the current level,
which is now corresponding to the 5-dma ($141.78) indicator,
provide reasonable entries into this momentum driven play.
Although it's vitally important that you confirm the market
sentiment and direction.  There was good news on the wire about
Micromuse yesterday too.  The company announced it received ISO
9001 certification from the International Standards Organization
for its core software development facilities and processes based
in London.  Helen Fairclough, Micromuse's Senior Vice President,
Customer Care, commented that "this accreditation underscores
Micromuse's commitment to provide products and services
recognized worldwide for their standard of quality in design,
development, integration, testing, installation and support".

MRVC $48.38 +4.94 (+2.38) How about that pop up in the last
15 minutes of trading today?  MRVC joined the broad markets
in drifting lower on Monday, but today was a whole different
story as investors bid the price over 11% higher by days end.
No company news, but the rumors the were flying concerning
potential takeover deals in the industry.  Whether anything
will develop remains to be seen, but one thing is for sure,
buyers returned late today gathering shares of MRVC and the
fiber companies in mass.  The volume today was solid with 3.2
million shares changing hands. The late day rally certainly
suggest the momentum could continue.  Economic data due out
in the morning could push MRVC higher, however the benign data
today really didn't do much after the opening minutes of the
session.  Support is now sitting at $46, $44 and $43.  If
investor sentiment stays strong, new positions could be
considered on further moves higher.  If not bounces off support
could be considered as long as the participation is solid.

HGSI $128.50 +1.63 (-11.06) Remember stocks rarely go up in a
straight line.  The pullback yesterday and today could have
provided traders with a much better entry point.  At this time
the action the past two days does not appear to be a change of
trend, rather profit taking after last weeks, 32% gain.  With
the 10-dma and 100-dma sitting near $114, HGSI found buyers
willing to return to the market late this morning as the
genomics company hit a low of $116.50.  Technically, HGSI is
still sitting in overbought territory, but the volume and the
momentum behind the late day move suggests higher prices.  If
the bulls get edgy a move back through the $123 area could
signal its time to step aside and wait for a new entry point.
More conservative traders may choose to wait until HGSI takes
out the $134 area with solid buying before entering a new
trade.

YHOO $139.50 +2.06 (-3.69) Here's another company struggling
from the earnings warning season.  No, YHOO didn't pre-announce,
but NBCI did earlier today.  The warning seemed to set the tone
for YHOO and the Internet sector.  After dropping to support
near $131, traders began to test the waters once again, bidding
shares of our current favorite back to a more respectable level.
We may have Henry Blodget at Merrill Lynch to thank for the
bounce.  Late this morning the respected analyst reiterated his
near-term Buy rating on YHOO.  With investors focusing more
on earnings Yahoo! is one of only four major Internet companies
showing a profit at this time.  While YHOO penetrated its 200-dma
at $136.93, the fact it managed to come back and close above
that number is a plus for our play.  YHOO could continue to
consolidate or may catch fire and move higher.  The $130 level
of support is becoming increasingly important.  A decline
through that mark and it may be time to stand back and take
another look.  If sentiment gets more positive, then we would
certainly look to buy calls, as long as the volume is present.

SDLI $283.19 +21.44 (+33.19) Mix an upgrade, an award, and
a potential acquisition and what do you get?  What you get
is a stock that jumps better than 13% in two days.  That's
the case with this one.  This morning analysts at Sands Bros,
a private investment bank initiated coverage of SDLI with
a Buy rating.  The company also initiated coverage of JDSU
and Corning with Buy ratings as well.  Speaking of Corning,
industry analysts and observers expect the company to acquire
SDLI, in an attempt to keep pace with JDSU.  A day after
Corning issued a pre-announcement that earnings would come in
higher than current estimates, rumors were flying concerning
a possible buyout of SDLI.  Naturally neither company would
comment on the rumors, however it did bring buyers back to
the table with over 7.54 million shares traded.  The award?
SDLI was honored by the Silicon Valley Chapter of the Association
for Corporate Growth(ACG), with the Emerging Growth Company
Award.  The award recognizes a company with a distinctive
strategic positioning and superior growth, dynamic evolving
leadership, and a sharply focused organization.  SDLI hit a
new high today at $285.  Support now shows up at $275, $270
and $263.  If you have open positions, move your stops up.
This is a stock that's absolutely on fire.  New positions
could be considered with continued momentum, however a
pullback to a support level may provide a better entry for
new plays.

CHKP $228.59 +18.41 (+3.09) Here's another that tagged along
with the major indices the past two days.  The one thing that
sets this one apart, is once investor sentiment improved a bit
early this afternoon, traders bid the price higher by over 8%.
What we are saying is that CHKP followed the broad markets
lower yesterday and today, but when the bulls get loose, they
run right back to recent favorites.  Now the question comes up,
was the strength late today another head-fake?  It doesn't
appear to be that way, but honestly we won't know until
tomorrow.  The only news came in the form of a company press
release, that Internet Security Systems had chosen CHKP
SiteManager-1 as its managed security solution to address the
needs of the small to medium size business market.  Nice,
but not enough to move the stock 8% today.  Technically
support is seen at $221 and back at $210.  Prior to entering
new plays we would check not only the movement in CHKP but
the in the Nasdaq as well.

MU $83.50 +4.00 (+3.50) Greenspan didn't mention the much feared
notion of future rate hikes and analyst John M Geraghty at
Gerard Klauer Mattison & Co upped the FY00 and FY01 EPS for MU.
The estimate hike is likely in response to the industry's
positive revenue outlook despite the US International Trade
Commission's decision to block plans to impose punitive duties
on certain semiconductor imports from Taiwan.  He also
maintained his Buy recommendation and 12-month price target of
$95.  Now what else could you ask for to boost a stock's trading
activity to nearly double the ADV?  Well to top it all off,
Micron confirmed it's reporting earnings on Thursday June 22nd,
after the bell.  A momentum turned earnings' run is always a
great bonus!  MU gained 5% and closed just a fraction from its
daily high amidst the day's excitement.  The climb was classic
straight up bull-style on nearly double the normal volume to
boot.  Near-term support is at $80 and $81, but MU should
demonstrate strength with upward bounces off $82 or better.  The
overhead opposition is at today's new all-time high of $83.69 so
be prepared for a little bit of resistance.  In other news Texas
Instruments (TXN), who has a 15% stake in Micron, took advantage
of MU's rising share price (which have more than doubled this
year) and sold about $120.5 mln worth of its holdings after the
market close yesterday.  The sale was not unexpected as TXN
never planned on being a long-term holder of MU.

ADI $94.50 +2.00 (-0.22) Is it deja vu of last week?  Depending
on your risk portfolio, ADI's downdraft with its sector once
again offered ample opportunity for entry points into this
momentum play.  The big difference however was the elevated
support level.  ADI sustained itself first at $92 and then
showed strength at $90.  Today's pullback was a bit unnerving
since the share price took a nosedive under the 5-dma (currently
at $93).  However ADI's recovery was without doubt, momentous.
The charge upwards returned ADI to the higher end, which gives
it the stability to now challenge the first line of resistance
at $96.25, Thursday's new high.  Of course we're looking for ADI
to move through the $100 level and "officially" become a split-
candidate.  Wait for the confirming bounce and positive market
before opening any new positions.  You don't want to get caught
in the "bought too soon" trap.  ADI's latest product releases
once again showered the newswire this week.  Yesterday ADI
introduced the world's smallest and least expensive
micromachined tilt/motion sensor, the ADXL202E, and also
unveiled a new family of PLL (phase locked loop) synthesizers
that deliver the world's best phase noise performance for
wireless applications.  Importantly the company disclosed
technical details of its first chip targeting 3G cellular
terminal applications, which meets the performance requirements
for the Wideband CDMA (W- CDMA) system.  Today there was big
news revolving around Card Access and ADI's technology was at
the core.  ADI's DSP modem chipset and software is in the
industry's first Springboard(TM) modem module for the
Handspring(TM) Visor(TM) hand-held computer that operates
without external power.



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

TGT $56.63 +2.13 (+0.69) According to LJR Redbook Research's
report on Monday, same-store sales fell another 0.4% last week
from a month ago, further substantiating a slowing economy.  And
TGT's robust volume was again prevalent at nearly one and one-
half times the normal levels attesting that the stock is still
struggling to regain its composure.  We didn't get a clean break
through the 52-week low of $53.75 yet, which would be a more
definitive sign of TGT's ultimate breakdown.  However in both
sessions this week TGT traded down to $54.06 and $54.38,
separately, and found a lower level of upper resistance at
$56.88.  These are all good indications that TGT can slither
lower in these uncertain economic times.  Look for downward
moves off the current level or downward bounces off the 5-dma
($57.36).  If TGT breaks out above this technical put your radar
on full alert.  Today's slight updraft likely was a result of
the news that  the ISP bellwether, AOL, and Target Corp inked a
cross-marketing, co-branding Internet initiative.  Although
specific terms weren't disclosed, they revealed that Target.com
will be an AOL premier partner and its merchandise will be sold
through ShopAtAOL.  The two companies will also unveil a special
edition version of AOL's service marketed under both brand names
and distributed through Target stores.

MMM $81.88 -0.06 (-0.06) It's evident MMM is channeling - just
take a look at a daily chart.  The range however is bound
overhead by today's intraday high of $83.81, which is good.
Remember $84 served as a historical bottom support and so it's
imperative MMM maintain a stance below this mark.  Plus, today's
late day sell-off on increasing volume was another feather for
the cap.  If MMM is indeed finding a bottom in the proximity of
the 5-dma ($81.85) then of course we'll need to move on to more
lucrative plays.  But for now have a little patience.  As a
stock trades in a narrow channel its coil is tightening for a
 sharp move.  Therefore if MMM does breakdown further, it should
be able to manage a move (at least) through Thursday's low of
$80.44.  The ultimate challenge is at the all-time low of
$78.19!

NXLK $73.13 +4.13 (-0.25) Our play got off to a good start
yesterday.  Today, NXLK joined in with a bit bounce of about
6%.  At this point we aren't going to let that deter us
from keeping NXLK on our put list.  The trend is still intact
and after all the NXLK did fall about 15% last week, so a
bounce is in order.  While we are keeping NXLK on our list
we would suggest traders consider scaling into new plays
if we see the weakness resume.  The reason?  While the trend
is definitely south, NXLK splits 2-for-1 Friday, and investors
could decide at any minute to add the company to their portfolio.
The other piece of the puzzle is the deal with Concentric
Networks.  Concentric shareholders are schedule to vote on the
proposed merger Thursday.  For now we will stick with the trend
With NXLK approaching its 10-dma and 200-dma near the $77 area,
we would look to buy puts on any failed rallies.  Remember you
may want to close any open positions by Thursday, as the ex-date
for the split is Friday.



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

JDSU - JDS Uniphase $121.38 +5.81 (+10.81 this week)

JDSU makes laser subsystems and equipment for fiber optic
telecommunications, signal processing, and laser-based
semiconductor analysis.  The company's products include source
lasers and passive components for modifying signals.  JDSU also
sells equipment for testing optical components.  The company
sells to manufacturers including CIENA, Lucent, Nortel, and
Siemens.  About 60% of sales come from outside North America.

The fiber optic stocks are hot, again.  It all began May 26th
when optical equipment maker SDLI said it would beat second
quarter earnings estimates by more than 24%.  The announcement by
SDLI gave Wall Street a reason to revisit the beaten down fiber
optic stocks.  Then came the announcement from optical fiber and
cable maker GLW.  Monday morning, the company said it would beat
analysts' second quarter estimates by nearly 15%.  The
announcement by GLW really caught investors' attention.
Furthermore, wedding bells began ringing late Monday night as
rumors of consolidation spreading through the fiber optic arena
hit the street.  With sector momentum building, rumors of
consolidation, and accelerating earnings growth, we just couldn't
pass up the opportunity to play JDSU.  For the past two weeks,
JDSU has been telling analysts that the company is working around
the clock to keep up with customer demand.  And Wall Street likes
the story it has been hearing.  Analysts view JDSU as the
premiere optical components company.  Many believe that the
company's 75% growth rate is sustainable for the next 3 - 5
years, and some analysts have said they see at least 50% more
upside potential in the stock from its current levels.  Speaking
of current levels, JDSU has been cruising higher during the month
of June.  The stock is at a two month high, but will face
resistance at $125 going forward.  If the momentum continues in
the coming days, consider an entry at current levels.  A more
conservative entry point might be provided if JDSU clears $125.
We've seen a pattern of higher lows traced so far this month.
JDSU has support at $120 and below at $115.  If the stock
retreats, consider entry after a bounce off support.

Since the GLW announcement Monday, analysts have been scrambling
to revise their outlook for companies in the fiber optic arena.
Sands Brothers initiated coverage on JDSU Tuesday with a Buy
rating.  The brokerage house noted that JDSU has a strong
management team and is the leader in the optical components
arena.  Analysts also said JDSU's future growth strategy is well
in place.

BUY CALL JUL-115 UCQ-GC OI=2441 at $16.13 SL=11.50
BUY CALL JUL-120*UCQ-GD OI=4721 at $13.00 SL= 9.75
BUY CALL JUL-125 UCQ-GE OI=2611 at $11.25 SL= 8.25
BUY CALL SEP-125 UCQ-IE OI=1760 at $19.75 SL=14.25
BUY CALL DEC-130 UCQ-LF OI= 258 at $27.38 SL=20.00

SELL PUT JUL-105 UCQ-SA OI= 556 at $ 5.13 SL= 7.00
(See risks of selling puts in play legend)

Picked on June 13th at $121.38    P/E = 366
Change since picked       0.00    52-week high=$153.38
Analysts Ratings   20-13-2-0-0    52-week low =$ 16.75
Last earnings 03/00  est= 0.10    actual= 0.11
Next earnings 07-26  est= 0.12    versus= 0.06
Average Daily Volume =  19 mln
/charts/charts.asp?symbol=JDSU


VRSN - VeriSign, Inc. $167.06 -5.88 (-28.94 this week)

VeriSign is the leading provider of Internet trust services
and digital certificate solutions needed by Web sites,
enterprises and individuals in order to conduct secure
electronic commerce and communications over IP networks.  VRSN
has used its secure online infrastructure to issue over 100,000
of its Website digital certificates and over 3.5 million of its
digital certificates for individuals.  The company also offers
the VeriSign Onsite service, which allows an organization to
leverage the company's trusted service infrastructure to develop
and deploy customized digital certificate services for use by an
organization's employees, customers and business partners.  To
date, over 300 enterprises have subscribed to the OnSite service
and VRSN has strategic relationships with industry leaders
including Cisco, Microsoft ,RSA, Security Dynamics, and VISA.

Internet security is vital to the growth of e-commerce, and
even the government is coming to realize that fact (see news
below).  As digital signatures and documents receive the same
legal status as handwritten signatures and documents, companies
like VRSN will see their business grow at a continued brisk
rate.  Recent hacker attacks and security breaches have served
to heighten awareness of the risks inherent in electronic
commerce and investors have taken notice.  After several bounces
at the $100 support level in April and May, VRSN's stock is
recovering nicely, actually tagging the $200 level late last
week.  The lack of follow-through to last week's NASDAQ rally
triggered profit taking in VRSN, that culminated repeated
bounces at the $157-158 level today.  Increasing volume
accompanied each of the mini-recoveries and now that the company
has completed its acquisition of net-name registrar Network
Solutions (NSOL), we look for the stock to continue higher.  The
bounce today is encouraging in light of yesterday's large drop,
but we need to exercise caution going forward.  Volume will need
to confirm that the move is for real, and today's strong volume
gives the appearance of a solid bottom.  Consider new entries if
VRSN retests today's lows, but wait for the bounce before
jumping in.  More conservative investors will want to wait for
strong buying volume to push the share price through resistance
at $170 before playing.  Further resistance will be found at
$180 and $190.  If volume begins to abate at these critical
levels, it will likely indicate waning momentum.

The House and Senate are poised to pass legislation granting
electronic signature and records the same legal status as
handwritten signatures and paper documents.  This will likely
increase e-commerce transactions and security companies like
VRSN will benefit directly.  Qualys, Inc., a leader in online
network security services announced yesterday that VRSN has
integrated a free one-month subscription to Qualys' new online
security auditing service, QualysGuard, with VRSN's Global Site
website service offerings.  This enhancement keeps VRSN at the
forefront of providing its customers with the most complete set
of secure e-commerce service available on the market today.

BUY CALL JUL-165 XVR-GM OI=607 at $21.63 SL=16.25
BUY CALL JUL-170*QVZ-GN OI= 51 at $19.38 SL=14.00
BUY CALL JUL-175 QVZ-GO OI= 36 at $17.38 SL=12.50
BUY CALL JUL-180 QVZ-GP OI=221 at $15.50 SL=11.25
BUY CALL SEP-180 QVZ-IP OI=105 at $26.75 SL=20.00

SELL PUT JUL-155 XVR-SK OI= 34 at $12.63 SL=17.50
(See risks of selling puts in play legend)

Picked on June 13th at  $167.06     P/E = N/A
Change since picked       +0.00     52-week high=$258.50
Analysts Ratings      3-5-0-0-0     52-week low =$ 24.00
Last earnings 04/00   est= 0.02     actual= 0.02
Next earnings 07-19   est=-0.02     versus= 0.00
Average Daily Volume = 4.54 mln
/charts/charts.asp?symbol=VRSN



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

UTX - United Technologies Corp. $57.19 (-1.50 this week)

United Technologies Corporation, based in Hartford, Connecticut,
provides a broad range of high technology products and support
services to the building systems and aerospace industries.  Those
products include Pratt & Whitney aircraft engines, space
propulsion systems and industrial gas turbines; Carrier heating,
air conditioning and refrigeration; Otis elevator, escalator and
people movers; Hamilton Sundstrand aerospace and industrial
products; Sikorsky helicopters and International Fuel Cells power
systems.

We welcome United Technologies to our list of new plays.
Unfortunately, it's not on the call side.  UTX started the month
off with a bang, which fizzled as investors took the chance to
sell into the spike up to $64.88.  What's the problem with UTX.
Well, it could be that late last week a federal jury awarded a
$22.9 mln verdict against the company over a fatal 1993 U.S.
Army helicopter crash in Wiesbaden, Germany.  The company had
tried to argue the crash was caused by pilot error, however, a
jury agreed the crash was caused by a design defect.  Some of
the chat rooms suggest the weakness is due to a report that
defense spending is going to be "lackluster".  Several analysts
point out the recent weakness is just cyclical in nature.
Some long-term investors suggest UTX is a very attractive buy
at current levels, however, for our purposes the only buy we
see is the opportunity to BUY PUTS.  UTX did recently complete
the acquisition of the engine maintenance center of Braathens
ASA.  For its efforts, George D. Shapiro, an analyst at Salomon
Smith Barney, reiterated a Buy rating on UTX.  Actually, the
majority of the analysts following UTX do have the company
rated a Strong Buy or Buy, but only three firms have come out
with reiterations or upgrades since the first of the year.
What we really see happening at this point is the recent news
has been negative, and there is little reason to buy.  With so
many other stocks to put money into, investors simply seem to
be choosing stocks where the return could be better. Today's
close put UTX back under water as far as the 200-dma at $58.28.
The volume wasn't heavy, but did come with 1.3 mln.  The ball
was set in motion on June 8th when UTX fell about 5% on over
twice its daily average.  Since then traders have view intraday
bounces as an opportunity to sell, and for now we would concur.
Resistance is seen between $58 and $59 with a "gap" back at
$60.  Until the sentiment changes continued weakness and bounces
up to resistance, followed by further selling could be considered
a chance to participate in our new play.

BUY PUT JUL-60 UTX-SL OI= 29 at $3.75 SL=2.25
BUY PUT JUL-55*UTX-SK OI= 99 at $1.44 SL=0.75
BUY PUT AUG-55 UTX-TK OI=340 at $2.13 SL=1.00

Average daily volume = 1.71 mln
/charts/charts.asp?symbol=UTX



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

YHOO - Yahoo! Inc. $139.50 +2.06 (-3.69 this week)

Yahoo! Inc. is a global Internet communications, commerce and
media company that offers a comprehensive branded network of
services to more than 145 million individuals each month
worldwide. As the first online navigational guide to the Web,
www.yahoo.com is the leading guide in terms of traffic,
advertising, household and business user reach, and is one of
the most recognized brands associated with the Internet. The
company also provides online business services designed to
enhance the Web presence of Yahoo!'s clients, including audio
and video streaming, store hosting and management, and Web
site tools and services. The company's global Web network
includes 22 local World properties outside the United States.

Most Recent Write-Up

Here's another company struggling from the earnings warning season.
No, YHOO didn't pre-announce, but NBCI did earlier today.  The
warning seemed to set the tone for YHOO and the Internet sector.
After dropping to support near $131, traders began to test the
waters once again, bidding shares of our current favorite back to
a more respectable level.  We may have Henry Blodget at Merrill
Lynch to thank for the bounce.  Late this morning the respected
analyst reiterated his near-term Buy rating on YHOO.  With
investors focusing more on earnings Yahoo! is one of only four
major Internet companies showing a profit at this time.  While
YHOO penetrated its 200-dma at $136.93, the fact it managed to
come back and close above that number is a plus for our play.
YHOO could continue to consolidate or may catch fire and move
higher.  The $130 level of support is becoming increasingly
important.  A decline through that mark and it may be time to
stand back and take another look.  If sentiment gets more
positive, then we would certainly look to buy calls, as long as
the volume is present.

Comments

Strength in the NASDAQ during the late-session rally was a very
good sign.  The NASDAQ heavyweights all turned up on the charts
and it appeared that some of that sideline cash was put to use.
If the CPI is benign and perceived as favorable, we could be
poised for a rally.  Any rally will certainly include the
internet leaders.  YHOO could also begin to attract buyers for
its earnings run.

***June contracts expire on Friday***

BUY CALL JUL-135 YMM-GG OI=3938 at $16.75 SL=13.00
BUY CALL JUL-140 YMM-GH OI=2864 at $14.00 SL=11.25
BUY CALL JUL-145*YMM-GI OI=1560 at $12.00 SL= 9.50
BUY CALL JUL-150 YMM-GJ OI=5389 at $10.38 SL= 8.00
BUY CALL OCT-150 YMM-JJ OI= 828 at $21.13 SL=16.50

SELL PUT JUN-135 YMM-RG OI=1740 at $ 1.81 SL= 3.00
(See risks of selling puts in play legend)

Picked on May 28th at   $112.06    PE = 651
Change since picked      +27.44    52 week high=$250.06
Analysts Ratings    16-13-3-0-0    52 week low =$ 55.00
Last earnings 04/00   est= 0.09    actual= 0.10
Next earnings 07-11   est= 0.10    versus= 0.05
Average daily volume = 10.2 mln
/charts/charts.asp?symbol=YHOO



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

Up And Down, Round And Round...

Monday, June 12

The market ended lower today in a subdued session with investors
avoiding equities ahead of the upcoming economic data.  Profit
warnings from leading technology companies pulled the Nasdaq down
106 points to 3767 and the Dow ended 49 points lower at 10,564.
The S&P 500 Index slipped 10 points to 1446.  Trading activity on
the NYSE was light at 762 million shares exchanged and declines
edged advances 1,482 to 1,415.  Volume on the Nasdaq reached 1.27
billion shares, with declines beating advances 2,575 to 1,534.
In the bond market, the 30-year Treasury rose 9/32, pushing its
yield down to 5.87%.


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

Convergys     CVG   JUL35C/JUL45C   $8.25   debit   bull-call
Int. Silicon  ISSI  OCT25C/JUL35C   $9.00   debit   diagonal
Exodus        EXDS  JUL60P/JUL65P   $0.75   credit  bull-put
Macromedia    MACR  JUL65P/JUL70P   $0.56   credit  bull-put


Our new plays in the technology group offered few opportunities
for participation in the range-bound market.  The credit for the
bullish Macromedia spread was less than our target and we expect
to enter the position at $0.62 credit in the next few sessions.
Integrated Silicon Solutions traded well beyond our suggested
entry price and the position has yet to be opened.  Convergys
dropped almost $2 early in the session and the target entry was
easily achieved.


Portfolio Plays:

Unfavorable earnings forecasts led the equity market lower with
investors beginning to question the future of corporate profits.
Rising interest rates have increased concerns that earnings will
be lower than expected in upcoming quarters, due to the cost of
borrowing and a slowdown in the economy.  Analysts suggested that
although the Fed is moving toward a neutral policy stance and the
rate hikes are likely at an end, the effects of reduced consumer
demand will weigh significantly on the fundamental performance of
many industries.

On the Dow, oil stocks were the big gainers with Exxon-Mobil (XOM),
leading the way.  Exxon-Mobil rallied to $80.75 after PaineWebber
raised its rating on the stock and increased earnings projections
for the company.  A number of issues in the oil group moved higher
amid rising crude oil futures and a sector upgrade from Deutsche
Banc Alex Brown.  Retail stocks were very weak and Home Depot (HD)
led that group lower.  On the Nasdaq, Citrix Systems (CTXS) was a
big loser, falling by almost 50% after warning that second-quarter
earnings would be well below analysts' estimates.  The bearish
news was unwelcome, coming in the wake of the recent warning from
Electronic Data Systems (EDS).  Biotech, chip and Internet stocks
also mover lower today and Major Drugs slid in sympathy with Amgen
(AMGN), which slumped after a federal judge handed down a negative
ruling in their patent infringement case against Transkaryotic
Therapies (TKTX).  In the broader market, healthcare and jewelry
stocks advanced while the majority of electronics issues declined.

Our portfolio was led by Aetna's (AET) $6 rally to a recent high
near $73.  Aetna was just one of a number of health maintenance
organizations that moved higher after a US Supreme Court ruling
that HMO patients can't use a federal employee-benefits law to
sue their health providers over business practices.  Following
the news, Salomon Smith Barney upped the company's price target
to $87 and investors flocked to the issue.  Our bullish diagonal
spread position is short at $70 and we will need to make further
upside adjustments if the recent rally continues.  Another big
surprise occurred in one of our delta-neutral positions.  Lennox
International (LII) rose to $13.62 during the session, bringing
the total credit for our new debit strangle to a $1.75.  That's
a $0.50 profit on $1.25 invested for just three weeks.  The only
position currently in jeopardy is the bearish credit spread in
Novoste (NOVT).  Our short option is now "at-the-money" with the
stock price at $45.  Fortunately, the issue remained in a small
range during the session and has yet to break above the current
technical resistance.


Tuesday, June 13

The market rallied today amid light trading among bargain hunting
investors.  The Dow ended up 57 points at 10,621 and the Nasdaq
closed 83 points higher at 3851.  The S&P 500 Index rose 23 points
to 1469.  Trading activity on the NYSE was light at 925 million
shares with advances beating declines 1,776 to 1,176.  Volume on
the Nasdaq reached 1.37 billion shares with advances outpacing
declines 2,049 to 1,994.  In the bond market, the U.S. 30-year
Treasury fell 1 1/32, pushing its yield up to 5.94%.


Portfolio Plays:

Technology stocks rallied today as buyers came out for bargains
in a volatile session marked by large swings in the major indices.
Computer hardware and Internet shares remained in a recent slump
but chip and networking issues posted modest gains, driving the
Nasdaq to a positive close.  Blue-chip issues also rebounded, led
by downtrodden companies in the drug and retail industries.  The
retail group has been hard hit in recent months amid concerns that
consumer spending will shrink as the economy slows and hurt the
industry's profit margin.  The defensive drug sector lifted the
broad market and oil service stocks rose in conjunction with the
three-month high in crude oil prices.  On the downside, banks,
airlines and paper stocks generally moved lower.

Our portfolio leaders came in Consumer Products, Major Drugs and
Technology.  Network Appliances rebounded $7 to a closing high
near $86.  After hours, the company announced they would acquire
Orca Systems, a developer of high performance virtual interface
architecture software for UNIX and Windows NT software systems.
Last month's credit spread roll-out, SCM Microsystems (SCM) rose
$7 after the company said it would buy U.S. memory card producer
Microtech International in a deal worth $20 million.   SCM said
it will acquire Microtech later this month to enter the consumer
market.  Microtech will produce flash data storage card readers
for digital photography.  Investment bank Goldman Sachs initiated
coverage of SCM with a price target for the company of 136 euros.
Johnson & Johnson (JNJ) and other drug companies rallied as the
report of falling retail sales boosted hopes that the Fed will
soon end its campaign of interest-rate increases.  The consumer
drug giant posted a $3 rally to close near $88, just short of our
sold option in the bullish, long-term position.  Medimmune (MEDI)
and Sepracor (SEPR) also participated in today's upside activity.
Medimmune rose $3.25 to end at a new high near $65 and Sepracor
recovered $5 of this week's losses to close at $104.

The surprise of the day was Integrated Silicon Solution (ISSI).
The developer of high performance memory devices slumped early in
the session, allowing a favorable entry opportunity in our new
diagonal spread position.  Then the issue rallied as technology
buyers moved back into the semiconductor group.  Now the question
is whether the industry can maintain the exponential growth rate
of the past few year.  Ditech (DITC) is once again on the "watch"
list as it has fallen to recent lows even as the technology group
rallied.  A close below the current trading-range bottom near $75
may indicate a new downward leg.  Our cost basis in the position
is near $74 and there are only 3 days remaining in the expiration
period so we will monitor the issue closely.

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

One of our subscribers requested that we identify some favorable
spread positions on bullish, small-cap issues.  Here are three
candidates for your review.  All of these plays offer excellent
risk/reward potential but they should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.

******************************************************************
FVCX - FVC.com  $10.12  *** New Financing! ***

FVC.com provides video-networking solutions that integrate video
with voice and data over existing network infrastructures.  The
company's video access products facilitate the connection of
traditional room systems, desktop video equipment and personal
computers to enterprise networks.  FVC's video server products
provide a range of critical video services such as multicasting,
recording, storage and translation across the Internet and into
corporate Intranets.  Their broad product line enables FVCX to
deliver end-to-end solutions for enterprise video applications
such as distance learning, tele-medicine, video marketing and
video manufacturing.

FVC.com shares surged this week after receiving a substantial
capital infusion million from Paul Allen's Vulcan Ventures.
Vulcan purchased a 16.5% stake in FVC for $27.4 million of
preferred stock, convertible into 3.4 million shares of common
shares at a price of $8.00 per share.  Vulcan also received
warrants to purchase an additional 850,000 shares of common
stock at $7.00 per share.  The Microsoft co-founder has spent
billions of dollars over the past several years in an attempt
to build a network capable of delivering high-speed data/voice
services.  His plan is to go after the same market as AT&T and
the combined America Online/Time Warner enterprise.  Now the
question is whether FVCX can put this money to good use and
the new opinion from analysts is a resounding "affirmative!"


PLAY (conservative - bullish/debit spread):

BUY  CALL  JUL-5.00  FXQ-GA  OI=10  A=$5.50
SELL CALL  JUL-7.50  FXQ-GU  OI=43  B=$2.25
INITIAL NET DEBIT TARGET=$2.12  ROI(max)=17% B/E=$7.12

Chart =
/charts/charts.asp?symbol=FVCX
******************************************************************
CNC - Conseco  $6.93  *** Bottom Fishing! ***

Conseco is a financial services holding company that conducts and
manages its business through two operating segments reflecting
its major lines of business, insurance and fee-based operations
and finance operations.  Insurance subsidiaries develop, market
and administer supplemental health insurance, annuity, individual
life insurance, individual and group major medical insurance and
other insurance products.  Conseco sells Medicare supplement and
long-term care insurance policies.  Their finance subsidiaries
originate, purchase, sell and service consumer and commercial
finance loans throughout the United States.  They also provide
financing for consumer purchases of manufactured housing, which
are structures, transportable in one or more sections, designed
to be a dwelling with or without a permanent foundation.  Conseco
provides home equity and improvement loans as well as consumer
and credit card products.

Conseco's share value rallied today on rumors that former General
Electric (GE) executive Gary Wendt was the most likely candidate
to take the job of chief executive.  Conseco has been looking for
a permanent chief executive since the company's past CEO Stephen
Hilbert and Chief Financial Officer Rollin Dick resigned in April.
Investors lost confidence in Conseco's management in March after
it announced it would sell its personal loan unit (originally
Green Tree Financial) for $6 billion, less than two years after
buying the company.

In addition to the speculation on a new chief, one analyst said
there is a high probability that the Conseco Finance unit will
be sold later this month.  Breider, Moore & Company believes that
the recently announced plans to sell the subsidiary will lead to
a definitive agreement in the near future.  The deal is expected
to help alleviate Conseco's current liquidity situation and allow
the company to refocus on their core Insurance business.


PLAY (aggressive - bullish/diagonal spread):

BUY  CALL  AUG-5.00  CNC-HA  OI=2471  A=$2.50
SELL CALL  JUL-7.50  CNC-GU  OI=2733  B=$0.75
INITIAL NET DEBIT TARGET=$1.62  TARGET ROI(max)=50% B/E=$6.62

Chart =
/charts/charts.asp?symbol=CNC
******************************************************************
PSSI - PSS World Medical  $10.31  *** Technicals Only! ***

PSS World Medical is a specialty marketer and distributor of
medical products to physicians, alternate-site imaging centers,
long-term care providers, home care providers, and hospitals
through 111 service centers to customers in all 50 states and
three European countries.  Physician Sales & Service, their
primary division, is a leading distributor of medical supplies,
equipment and pharmaceuticals to office-based physicians in the
United States.  Diagnostic Imaging is the leading distributor
of medical diagnostic imaging supplies, chemicals, equipment,
and service to the acute care and alternate-care markets in the
United States.  Gulf South Medical Supply is a leading national
distributor of medical supplies and related products to the
long-term care industry in the United States.

There is not much news to explain the recent rally in PSS World
Medical.  Earlier in the year, two of the company's subsidiaries
announced agreements which expand the range of products offered
by PSSI.  Diagnostic Imaging entered into a new agreement with
Philips Medical Systems to provide integrated services between
the organizations for an expanded breadth of products.  PSSI
also announced that Physician Sales and Service entered into
agreements with Elan Diagnostics and Ortho Clinical, a division
of Johnson & Johnson, to sell their chemistry analyzers.  The
pact provides PSS with a new source for the chemistry analyzers
to compliment a wide array of products that can meet the needs
of their diverse customer base.

As you can see, the news is less than overwhelming.  Fortunately,
the technicals are favorable.  In addition, the premiums for the
near-term (OTM) options are slightly inflated and the potential
for a successful (technical) breakout is reduced by resistance
at the sold strike price; a perfect condition for a bullish
calendar spread.


PLAY (conservative - bullish/calendar spread):

BUY  CALL  NOV-12.50  PYQ-KV  OI=886  A=$1.75
SELL CALL  JUL-12.50  PYQ-GV  OI=299  B=$0.81
INITIAL NET DEBIT TARGET=$0.81-$0.88  TARGET ROI=50%


The basic premise in a calendar spread is simple; time erodes
the value of the near-term option at a faster rate than it will
the far-term option.  A less neutral and more bullish type of
calendar spread is when the underlying issue is some distance
below the strike price of the options.  This position has low
initial cost and large potential profits.

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

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



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