Option Investor

Daily Newsletter, Thursday, 06/15/2000

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The Option Investor Newsletter                  Thursday 6-15-2000
Copyright 2000, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
       6-15-2000           High     Low     Volume Advance Decline
DOW    10714.80 +  26.90 10763.70 10669.20   993,636k 1,417  1,459
Nasdaq  3845.74 +  48.33  3849.94  3763.74 1,420,678k 1,817  2,151
S&P-100  798.88 +   8.53   801.55   790.56    Totals  3,234  3,610
S&P-500 1478.60 +   8.06  1482.04  1464.62            47.3%  52.7%
$RUT     512.25 +   2.58   512.28   504.13
$TRAN   2704.53 -  43.76  2758.16  2704.53
VIX       23.18 -   1.33    24.94    22.94
Put/Call Ratio       .51

To The Point That CNBC Is Turning Interesting

You probably know what I am talking about, as it's the point
where CNBC becomes more interesting than watching your trades.
What is it going to take to kick the Nasdaq out of the current
range?  I guess I shouldn't be so picky as there are still
plenty of stocks making big moves.  This is an individual stock
pickers market and it is hard to complain about that.  But, if
the Nasdaq could kick start itself over 3900, everything would
be a potential call play.  Or a breakdown under 3700 to bring
the Bears to life.  Until then, we are forced to wait for signs
of direction.

Today's market gave us little in the way of clues to figure
out which way the tide will turn, but it did produce a decent
rally.  Let's start with the Nasdaq.  A slump on the open down
to 3763 turned into steady climb from 11am EST up until 2pm
when the Nasdaq topped out once again at 3850.  Back down into
boredom we go, right?  Fortunately no.  A final 30 minute rally
blossomed and took us back right near the day high, closing at
3845.74, up 48.33.  This rally wasn't subtle either.  Many
stocks took off with a vengeance to close right at or near
their highs.  Volume wasn't too shabby either at 1.4 billion.
A close like this one, as you know by now, typically spills
over to the next morning.  So once again, I have to point out
what I mentioned on Tuesday.  We are at a level where we could
blow through 3900.  It didn't pan out Tuesday, but we never
really sold off either.  Check out what the Nasdaq has done
since Tuesday's close.

Here is the longer term view of this range we have been caught
in for over two weeks.  Is this chart we are looking at one of
a major market index or of an irregular heart beat?  It makes
it a little tougher to spot a trend.  I won't even attempt to
draw on this one.  You get the picture...3900 top, 3700 bottom.

And how about the DJIA?  It rallied right out of the gates this
morning and spent nearly the entire day over the unchanged line.
Volume was solid at 1 billion shares.  The Dow Industrials
finished at 10714, up 26.87.  This was despite a weak day for
Bank stocks, thanks to a warning from Wachovia Corp.  You can
see that this index is also stuck in limbo waiting to make a
move.  The big drivers today were the tech stocks like MSFT,
HWP, IBM, and INTC, which all posted gains.  In fact, MSFT is
showing nice strength now that they are entering the appeals
stage of their case.

The economic news of the morning didn't help the sentiment
towards the Fed standing pat, but didn't hurt it much either.
Industrial Production numbers rose by 0.4% instead of the 0.3%
decline expected, but operating capacity remained unchanged.
Also, the Labor Department reported that 296,000 Americans
filed for unemployment benefits last week, signaling the
tight labor market continues.  And although these numbers
weighed on the bond, it wasn't anything major.  The 10-year
Treasury note edged up to 6.07% from 6.03% on Wednesday.
Bond traders also had to digest comments from Fed governor
and voting member, Alfred Broaddus.  He said that some of
the cooling effects in the economy could just be temporary.
He is a long time hawk though and could be just trying to talk
down the markets.  Remember, there are less than two weeks to
the FOMC meeting on June 27th and 28th.

QCOM took it on the chin again today.  Nothing like a lowered
price target and lowered earnings estimates to scare off the
buyers.  H&Q took the honors for kicking the stock while it is
down.  Chase H&Q analyst, Edward Snyder, put a $50 price target
on shares of Qualcomm and lowered his fiscal 2000 and 2001
earnings estimates.  This caused QCOM's stock to fall by nearly
13% today.  This comes after Bear Sterns lowered its estimates
on Wednesday, when QCOM shares dropped 13% yesterday as well.
He said the slowdown in Korea could reduce CDMA handset sales
by 10 to 15%.

There was a major earnings report after the close today as
well.  Adobe beat the street by 0.03 cents in their second
quarter and painted a bright picture for the future.  They
told investors to expect sales growth of at least 25% for
the coming two quarters.  ADBE had a record $300.1 million
in revenue and a profit of $65.8 million, or $0.51 cents per
share.  This always active stock was bouncing after-hours too,
trading as high as $126.50 and then back down near $121, after
closing the regular session at $124.13.  This is the second
major company that reported solid earnings as CMGI did the
same on Tuesday.  Although, it hasn't done much for their stock

In looking at the charts, you can see how tight the range has
formed on both the DJIA and Nasdaq.  This is interesting and
not something we are used to seeing lately.  As I said Tuesday,
I side with the Bulls.  The inability for the market to sell-
off bodes well for an earnings run.  With that said, you are
more safe viewing this in a market neutral stance.  Let the
breakout happen in either direction and play it accordingly.
Stocks don't have to have an earnings run as we viewed last

Many sectors still look good to me.  Drugs and Tech stocks,
especially Fiberoptics, are strong.  Can anything stop SDLI,
up another $20 today?  Or how about GLW tacking on another
$12.75.  The one thing that has gone somewhat unnoticed is the
VIX.  It is on the way down, currently at 23.18, closing right
on the day low.  This is the lowest level since mid-March.  So
maybe I'm not the only bull in town.  But, it is getting down
to the turning point, which we all know to watch out for, down
near 20.

In reviewing the calls and puts with Jim today, we didn't see
many stocks that were rolling over.  Some were going up, while
some were staying range-bound.  That leaves us in a stock
pickers market, like I mentioned above.  And hey, that is not
a bad thing.  It is a leveling of the playing field for stocks
to move on their own news and momentum.  I am hoping for a
breakout to the upside, but will trade the individual movers
based on the technicals until the indices make there move.  If
it is lower, that is fine.  I don't buy many puts ahead of
earnings season, but I am always in search of that perfect
entry point!  Once again, the battle lines are drawn for the
markets so plan your trades accordingly.

Ryan Nelson
Asst. Editor

P.S.  Look for Jim's analysis in the weekend edition of the
Market Wrap.


Where is the Easy Money?

The broad market ended on a whimper, even though the major
indexes closed in the green today. The volume did tick up
slightly, which is positive, but could very easily be attributed
to traders clearing positions ahead of option expiration.
Regardless, this consolidation being witnessed the last 10 days
is still positive, especially after the size of the run-up we had
two weeks ago. Now after speaking to many professionals, it seems
to be the consensus opinion that many investors/traders are
waiting for the Fed meeting before making any significant
investments. Now whether they are waiting for the Fed meeting or
the July earnings run remains to be seen, but the broad market is
acting very positive, even though many individual equities are

Regardless, the sentiment that is being displayed in the current
marketplace is not rewarding the general public, and is
especially not rewarding the buy and hold investor. This has
become a stock (or option) pickers market, long gone from the
days of throwing a dart at the Wall Street Journal and hitting a
home run. We are witnessing many stocks that are making mild
moves to the upside, while many are getting destroyed to the
downside. This risk to reward level that we spoke about Tuesday
continues. As an example, Tuesday evening, CMG Information
Systems pre-released earnings and revenues that were above
expectations, however, the stock ended up selling off and closed
down the next day. The risk is great, yet the reward was
negative. Those are not the kind of statistics we like to see.
Now what about the companies that are mentioning negative news,
these stocks are getting destroyed! Qualcomm (QCOM) is the
latest, as it has shed about $20 since we last wrote (48 hours
ago) and even had an analyst slap a price target that is still
$12 lower than where it closed today. Unless you are the perfect
stock picker (i.e. Corning, SDLI etc.), the easier money to be
made at the moment is currently on the put side, because the
risk-to-reward level is significantly skewed to that side.
However, things can change quickly, but until then, we know where
we will be participating in the market.


Interest Rates (5.918):
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.

Mixed Signs:

Volatility Index (23.18):
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. Based solely on the VIX, we are getting close to a
selling opportunity.


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, Wachovia Bank, Perot Systems, and Qualcomm 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        24.54
Overhead Resistance (775-800)     2.53        2.67         1.91

OEX Close                       779.76      789.43       798.88

Underlying Support  (745-770)     1.89        2.25         3.09
Underlying Support  (715-740)     5.71        5.67         6.36

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

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

CBOE Total P/C Ratio            .45        .48          .51
Equity P/C Ratio                .42        .53          .43
OEX Put/Call Ratio              .77        .64         1.06

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

Puts                740 / 8,917  740 / 9,124      740 / 10,033
Calls               795 / 9,394  785 / 8,364      795 /  7,758
Put/Call Ratio        0.95          1.09              1.29

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

June 15, 2000                           23.18


As of Market Close - Thursday, June 15, 2000

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

DOW Industrials   10,200  11,400  10,715    Neutral   5.05
SPX S&P 500        1,350   1,500   1,479    Neutral   5.30
OEX S&P 100          725     800     799    Neutral   5.30
RUT Russell 2000     450     550     512    Neutral   5.05
NDX NASD 100       3,000   4,000   3,752    Neutral   5.30
MSH High Tech        800   1,050     999    Neutral   6.06

XCI Hardware       1,250   1,600   1,514    Neutral   5.30
CWX Software       1,050   1,300   1,261    Neutral   6.06
SOX Semiconductor    850   1,200   1,132    Neutral   5.30
NWX Networking       900   1,100   1,175    BULLISH   6.02
INX Internet         500     800     588    Neutral   5.30

BIX Banking          530     640     559    Neutral   6.09
XBD Brokerage        400     500     501    BULLISH   6.15  **
IUX Insurance        540     620     649    BULLISH   5.16

RLX Retail           900   1,000     859    BEARISH   6.09
DRG Drug             355     400     398    Neutral   4.28
HCX Healthcare       710     800     819    BULLISH   6.15  **
XAL Airline          140     155     162    BULLISH   5.25
OIX Oil & Gas        265     300     309    BULLISH   5.11

Posture Alert
The broad market ended Thursday on a positive note as volume
ticked up both on the NYSE and the NASDAQ. The rally witnessed was
quite mild, but many stocks did feel the pain on the downside.
Today, Wachovia, the North Carolina bank, warned the Street that
its earnings would be lower than expected. As such, the Banking
Index led the loser list with a -5.33% loss. With this most recent
action, we have upped Healthcare and Brokerage to Bullish from


Buy Low...What a Crock!
By Molly Evans

Will I never learn?  It's been said that money lost in the
markets is tuition only if you learn from the mistakes and
don't repeat them.  If you repeat, well, they're just losses,
plain and simple.  I must be REALLY dense!  How many times
do I have to catch a falling knife to know, DON'T DO THAT!
I'm mad at myself and mad at my school.  The market is so
news driven.  One cannot be privy to all the news!

I had a really nice entry in QCOM a couple of weeks ago.
It had been consolidating and holding support right at $69
to $70.  I entered.  Good news starts to issue forth and
we got a nice rally on volume.  It runs $14 - $15 from my
buy and my calls are looking great.  I never buy front month
options so I think to myself, "Be patient, let this guy run,
they're just getting back on their feet and the market is
firming up everyday.  You've got time."  Shoot!  Not only
am I dense, I'm greedy.  As one of my friends told me last
night, "MOLLY!  That's all you get!  You made the right call,
get out."  Duh!  Can we turn back the hands of time?  Here
am I watching the market yesterday and I see this big sell
program come in on QCOM.  Hmmmph!  Is there any news?  Nope,
no news.  Well of course there's news!  When a stock is
tanking ten percent and the rest of the market is cooking
along ok, somebody knows something and they don't like it.

I've seen it time and time again and I still hadn't learned.
Maybe because I'm putting it into black and white, I will
finally have etched this bad boy scenario into my brain.
Not only did I not dump those calls quickly, I bought a
couple more AND I bought long shares just for the imminent
bounce.  No, I didn't pick the bottom as the news hadn't
come out yet.

I know I'm not alone.  I know you too are out there.  Who
bought CTXS the other day before they prewarned?  Someone
knew something because it started plummeting before they
ever released the news.  I saw that one and thought better
of it.  I patted myself on the back when they did go ahead
and put forth the warning.  "Aha!  I knew something was
fishy there!"  Another time I got caught holding ANCR calls.
The market was humming along nicely yet that stock started
to plummet.  I didn't even bother to ask questions with this
one, I sold immediately.  So if I'm so smart, why did I do
this with QCOM?  GEEZ!

Alright, alright, alright.  I'll stop this ranting and talk
about what I'm going to do about it.  I watched QCOM in the
premarket.  My mouth was just hitting the floor.  It's $64
now!  "Oh come on!  Stop that!"  I made up my mind, "I will
not overreact.  I'm not going to do anything in the first
hour - amateur hour.  They're overreacting, they're
irrational.  I'll be rational."  Well, it's now past the
first hour.  Mark one up for the amateur.  He's out $3.50
higher than I am at this point.  What to do, what to do?
It's time to do some damage control here.  As I see it,
I've got three options.  Actually I'm holding five but that's
beside the point.  I can 1) blow them out, take my lumps and
get on with life; 2) hold them, pray that QCOM discovers the
frigging fountain of youth over the weekend; or 3) roll down,
putting on a bull spread.

While I'm inclined to just take the loss and move on, I do
need to critically analyze this.  On the one hand, a very
profitable position that quickly moves to a big loss is
demoralizing and to have to look at it everyday only wears
on me.  I could take what's left and put it into something
that's moving or should I say something that hasn't released
their bad news YET?  However, I started out being rational
this morning, let's continue with that process.

We know that the crowd always overdoes it both ways.  They
overbuy and they oversell.  It's one thing to have your stock
tank, it's another to find that you were the very last one to
sell and have it rebound big on you.  Let's not compound our
mistakes.  I know, I'm a fine one to talk about that!  I could
just buy more calls at the "discounted price" and greatly
increase my chances for a recovery on a rebound in price.
Luckily for me, my calls are still in the money and the delta
is much better than if they had fallen out of that range.  The
calls will move much better when they're ITM.  I could buy
lower strike calls and do even better.  Yet, unless QCOM
rebounds big and quickly, the market maker is going to take
me for what I have to pay for volatility.  That's what stinks
here.  QCOM can get up and move, it's just the question of
when it's going to do that.  As soon as the volatility is
priced out of the options probably.  Wow, I'm dark this
morning!  That being said, any reputable investment advisory
book or service generally frowns upon averaging down because
many times beaten down stocks have received their beating for
a reason.  I'm not going to do this.

Let me run through a bull spread.  I'd have to sell two calls
of my present strike for every one of another ITM call I'll
buy.  As McMillen's book says, "This is the key to implementing
the roll-down strategy-that one be able to buy the lower strike
call and sell two of the higher strike calls for nearly even
money."  Now I'd be short the calls I previously owned and
would be long the ITM call.  The position becomes long one 50
QCOM call and short one 60 QCOM call.  In making this trade,
I have lowered my break-even point significantly without
increasing the risk.  While the overhead profit potential is
limited in this play, recovery of some or all of the original
capital is my goal.  The expectation of this spread is that if
QCOM rises, the deeper ITM call appreciates the most.

Let's do the math:

I own 5 calls of QCOM Jul 60-cost basis of $15.25 = $7625 debit

I sell 10 of those calls now bid at $8.50 =         $8500 credit

I buy 5 of the ITM Jul 50 calls asked at $15.50 =   $7750 debit

Total adjusted cost basis for ITM calls now = $14.00/sh $7000

Now, let's say that QCOM closes at $75 by July OE.  The 50s
are worth $25.00 = $12,500.  Great.  Not so fast there Judy,
the dude who bought my 60s now wants to exercise his options.
I have to go in and exercise my contracts too.  I buy the
shares at $50/share and sell them to him for $60/share.  So,
it costs me another $25,000 plus commissions to go in and get
them for delivery.  I get back $30,000 from him.  Easy, that's
$5,000 profit.  Not.  Remember, I paid $7000 for the right to
buy those shares at the low, low price of $50/share.  I need
QCOM to run a lot more than that to break even.  My loss at
that point would be $2000 which is better than the $3375 +
commissions that I'm out right now on those calls and don't
even remind me about the longs that I'm holding.  I don't know.
For $1375 less of a loss, I'm thinking there are better plays
to be made.  There's no guarantee that QCOM will suddenly pull
it out of the bag and rebound even to $75.  It could certainly
go lower.  I told you about my MSFT woes in an earlier whine
session, I did move out of those and into JDSU, making back
those lost $$$ in about seven trading days.

At this point, I'm probably going to dump these sorry things
and get on with life.  I hate looking at something, just
wishing and hoping.  That tactic never seems to work for me.
My wise friend that told me I should have sold out when QCOM
stalled also once told me that to learn from your own mistakes
is smart, but to learn from someone else's is brilliant.  I
hope everyone else are geniuses.

Until next time...

Contact Support


Time To find out what's On The Poo Poo Platter
By Lynda Schuepp

A funny thing happened when I ordered a Poo Poo Platter while
having lunch with a friend and her 3-year-old son.   The three
year old started laughing hysterically because he couldn't
imagine eating "poo-poo".  Since that time, I can't order that
appetizer without a fit of laughter.

If you've only been trading options for a year or two, you
probably are a bit frustrated right now.  I think it's time to
order the Poo Poo platter.  We have been trading in a screaming
bull market.  Some of us, thought we were brilliant, doubling
our money every quarter, only to lose a major percentage by
April 14th.  Know that you are not alone.  You are in good
company.  Even the big institutional investors are scratching
their heads.  Of course, their average age is 27, so they've
never traded in anything other than a bull market.

If you keep doing what you're doing, you'll keep getting what
you're getting.  So, if you don't like what you've been getting
since April, now is the time to read and learn and research
other option strategies.  Learn about all the different things
available on that Poo Poo platter.  Option trading is very
complex, that's what makes it really exciting.  If it were
easy, anybody could do it, and you are not just anybody.  By
subscribing to OIN, you realize that education is key to being
successful over the long run.

The typical investor starts out with an order of chicken chow
calls and pork fried puts.  I daresay you've probably bought
more calls than puts and made more money on the calls than the
puts, because of the bull market.  Once the market turned, you
probably kept ordering those chicken chow calls when you should
have been selling them.  The reason you should have sold the
calls instead of buying the puts was because implied volatility
is very high when the market turns.  This is the second stage
an option trader has to go through, learning how to play

Expensive options should be sold and cheap options should be
bought.  If the market goes up and options are cheap, you buy
calls.  If the market goes up and the options are expensive you
sell puts.  Reverse these for a down trending market (buy puts
or sell calls).  That doesn't mean buy an option for $3 and
sell an option if it's $20!  The $20 option may be cheap and
the $3 option may be expensive.  Cheap options are those
options whose implied volatility is less than their historical
volatility.  The $3 option maybe only worth $2.50 and the $20
option should be priced at $24!  There are complicated formulas
that do option pricing, but don't worry about trying to
understand them because there are sites that publish the
implied volatility relative to its historical volatility.
That's really all you need to know.  Don't make it more
complicated that it has to be.  If historical volatility is
less than implied volatility then the option is expensive,
vice versa for cheap options.

Next appetizer on the platter--don't fight the trend.  Think of
those salmon swimming upstream.  Most don't make it- they get
eaten by the bears (sound familiar?)  In other words, don't buy
puts in a screaming bull market, because even the lousy stocks
will rise and don't buy calls in a strong down trending market.
Now that's the harder lesson to learn.  When you get a big drop
in the market, you think, what a bargain!  But the bargain
turns out to be expensive for two reasons.  First, you bought
when volatility was high and secondly, the drop probably wasn't
over.  Realize that it is impossible to consistently call the
tops and bottoms.  Be happy and trade the middle of the band,
in the direction of the trend.  For some this might mean
staying out of the market.  If you've never shorted and don't
know your margin requirements then this is a great opportunity
to read and paper-trade those strategies until you are really
comfortable or until the bear market is over.  Since bear
markets don't last very long, it is likely that you might not
get a chance to try these strategies out using anything other
than monopoly money.  That's Ok, you have permission to stay
out of the market if you are not confident.  This is the
perfect time to read or re-read some of those archived articles
on the OIN website.

Appetizer #4-don't be pig-headed and hold your position if your
option is below your stop.  This is the lesson that is probably
the hardest to learn.  In fact, I'm not sure you can ever learn
it 100%.  The first time you use "mental" stops and your stock
stocks gaps at the open and you get burned, it's hard to exit.
God knows how many times that has happened to me.  My advice is
to make sure you use a broker that accepts stops on options and
use them.

Now you're ready for an entrée, try schezuan spread trading,
it's hot and spicy.  A lot of people don't like to do spreads,
because they don't understand all the complexities.  They think
you have to hold for long periods of time and the rewards are
small.  Nothing could be further from the truth.  There are
spreads that have limited downside and unlimited upside.  There
are spreads designed for a short-term 1-2 day volatility crush.
There are spreads designed to protect your long-term portfolio.
There are spreads designed for your IRA account.  The issue is
this, spread trading is far more complex than it looks on the
surface and that's the reason most traders never really learn.
It requires tons of reading, listening, going to seminars, but
the rewards are worth it.  Spreads are not a strategy you use
exclusively or all the time, it is merely one more selection on
that Chinese menu.  The trick is to know which strategy is best
for the current market condition.

In summary, I will tell you which strategies work best for the
different type of markets.  In a screaming bull market the
strategies that work best are to buy OTM calls or sell naked
"in the money" puts, depending on volatility.  In a side ways
market, you can put on bull put spreads, bull call spreads,
and covered calls.   These are also effective in a moderate
bull market.  Because you have a short leg and a long leg,
volatility is not a real issue here.  In a strong down trending
market, you can sell naked calls, or buy puts, depending on
volatility.  Remember, down trending markets are quite short
lived relative to an up-trending market, so be careful here.
Always buy as much time as your can afford but sell options
with very little time to take advantage of time decay.  Time
decay is not linear.  If you think you can't afford time,
either buy fewer contracts or don't buy at all.  This lesson
usually has to be learned and relearned over many years.

And now the message in the fortune cookie: A couple of bear
markets will convince you to find out what else is on that
Poo Poo platter.


I Think I can.  I Think I can.  OK, Maybe Not.
By Buzz Lynn

With the NASDAQ nearing 3900, the DOW bouncing south of its 200-
dma, and the OEX near 800, history suggests a rollover.


Before we get started on the plays, I want to thanks those who
wrote in with their comments and suggestions.  We appreciate it
and want to continue developing this section to help you, the
sector trader.  So keep those cards and letters (OK, e-mails)
coming to sectortrader@OptionInvestor.com!

On a housekeeping note, thanks to an astute reader pointing out
their availability, we now bring you options on the biotech
HOLDRS.  Happy trading!

Index             Last     Mon     Tue     Wed     Thu    Week

QQQ nasdaq-100    93.78   -2.69    3.13   -1.75    1.63    0.31
HHH Internet     118.50   -7.06    1.19   -1.19    1.00   -6.06
BBH Biotech      158.00   -7.75    5.75   -2.06    2.06   -2.00
PPH Pharm         98.81   -0.69    3.44    1.69    0.13    4.56
TTH Telecom       77.25   -0.94    1.81   -0.13   -0.19    0.56
IAH I-net Arch    91.00   -1.06    0.94    0.06    2.06    2.00
IIH I-net Infr    55.75   -4.06    1.19   -0.13    0.38   -2.63
BHH B2B           38.44   -2.44    0.81   -1.38   -0.31   -3.31
BDH Broadband     88.25    0.88    2.13   -2.44    2.13    2.69
SMH Semicon       95.38   -3.81    4.00   -4.25   -0.81   -4.88


QQQ - NASDAQ 100 $93.63 +1.50 (+0.06) Optionable.  Sometimes even
a blind squirrel gets an acorn.  As though we planned it, the QQQ
spiked up Wednesday to $94.88, then rolled over to tag $91 on a
few occasions this morning before finding its legs and moving
back up to $94.  Those of you new to trading are now making the
discovery of why it is hard to make money in a range-bound
market.  As long as investors can't decide what the future holds,
this tug of war is likely to continue.  The big events that could
help establish a new trend are the OPEC meeting on June 21st to
decide on production increases, followed by the FOMC meeting on
June 28th to decide the fate of interest rates.  Until investors
get the conviction to establish a new trend, look for this
sideways action to continue.  It is tradable, but requires
discipline and strict adherence to trading at points of support
and resistance.  Resistance is pretty firm at $95, while support
rests mildly at $91 with $90 providing a solid floor.  The only
hiccup would be in the market realizing the probable decrease in
the growth rate of corporate profits.  If that sentiment sets in,
it would be quite possible to drop under support of $90 to fill
the gap from $88 two weeks ago.  If you play calls, keep your
stops set to avoid having the rug pulled out from under you.

At Support:
BUY CALL JUL-86 YQQ-GH OI=  555 at $11.38 SL=8.50
BUY CALL JUL-88 QVQ-GJ OI=  767 at $10.00 SL=7.00
BUY CALL JUL-91 QVQ-GM OI= 1044 at $ 8.00 SL=5.75

SELL PUT JUL-86 YQQ-SH OI=20920 at $ 2.75 SL=4.50, Huge OI

At Resistance:
BUY PUT  JUL-98 QVQ-ST OI=  453 at $ 8.25 SL=5.75
BUY PUT  JUL-95 QVQ-SQ OI=  657 at $ 6.63 SL=4.75
BUY PUT  JUL-94 QVQ-SP OI=  996 at $ 6.13 SL=4.25

Average Daily Volume = 27.4 mln


BBH - Biotech $158.00 +2.06 (-2.00) Optionable.  Hmmm. . .right
where we left off on Tuesday, which means yesterday wasn't so
great considering today's mostly higher move by a majority of
components.  The mutant issues today were DNA (-3.88) and AFFX (-
10.38).  The rest were largely positive, excepting factional
losses in a few of the smaller components.  Can you say range-
bound?  Sure, we knew you could.  $150 continues to offer good
support with $153 to $154 providing nice intraday support on most
occasions.  Likewise, $160 continues to provide resistance, but
that resistance level has been moving down since hitting $164
nearly two weeks ago to $161.50 last Friday to $160 yesterday.
Trading in a narrow and tightening range is really tough to do
unless, like in the QQQ, you pay strict attention and trade on
support and resistance levels for small profits.  This sector is
still well loved but investors nonetheless are having a hard time
finding reasons to send BBH higher.  Currently, we look for
range-bound trading to continue until some news breaks to
establish a reason for a new trend.  Watch $160 for a breakout,
and $150 for a breakdown if that happens.  In the meantime trade
what you know to be the range, or sit out.  This isn't a good
place to cut your trading teeth.

At support:
BUY CALL JUL-150 BBH-GU OI= 142 at $17.63 SL=12.75
BUY CALL JUL-155 BBH-GK OI=  82 at $15.00 SL=11.00

At resistance:
BUY PUT  JUL-160 BBH-SL OI=1257 at $13.63 SL=10.25
BUY PUT  JUL-155 BBH-SK OI=  52 at $11.00 SL= 8.25

Average Daily Volume = 658 K


IAH - Internet Architecture $91.00 +2.06 (+0.88) Not optionable.
We noted Tuesday, that the case was getting stronger for a
breakout at the $90 level.  Unfortunately, without investor
conviction (noted by increased volume over the ADV), the $91
level we see today cannot be considered a breakout since volume
was only one third the ADV of 73 K shares.  While the highs get
higher and the lows get higher too, BBH appears to have reached
the top of its trading range again.  The stochastic lends
credibility to that theory based on its overbought reading of 96
on a daily chart.  Even so, it's nice to see only one notable
loser, FDRY, down $6.56 on slight higher than average volume, and
three other fractional losers out of 20 issues.  However, the
condition of the rest of the market doesn't lend any strength to
the idea that we'll get that breakout here either.  Watch $87.50
for support and perhaps a good entry point to go long (that is
unless the market is moving down), then again at $85.  In either
case, wait for the bounce.  Conversely a break under $85 would
spell bad news as it would set up IAH to fill the gap down to $83
(though technically, a substantial move to the downside is
becoming less likely on a pure chart formation basis).  On the
positive side, if this issue can muster more volume and continue
to move up establishing higher lows, consider a long position on
any move over $91.50.

Average Daily Volume = 73 K


IIH - Internet Infrastructure $55.75 +0.38 (-2.88) Not
optionable.  Ever see a rat in cage moving quickly right to left
and back again only eventually to give up in frustration hours
later and then stand there?  IIH is becoming a rat.  Much as we
expected $57.50 support from last Friday to hold, it became
resistance this week while (surprisingly) $53.50 became support
again.  The range is narrowing making this an extremely difficult
play to enter on the short and the long end right now.  This
flattening out of the range naturally makes for a weak play (but
not weak enough to drop) until a new direction is established..
A positive market and a move over $60 would be our clue to
consider a long position; a bounce down from there would be our
clue to consider a short position, as would a move under $51.50.
Conversely, if it moves down to $53.50 or $51.50, then bounces
up, that would be another invitation to go long.  The point is we
don't know the ultimate direction that will allow us to launch a
trade, so wait for a clear signal.  If you want our best educated
guess (not our endorsement), the lower highs over the week,
resistance at the 5-dma of $55.86 and oversold stochastic have us
leaning toward the downside on a technical basis.

Average Daily Volume = 304 K


BDH - Broadband $88.25 +2.13 (+2.69) Not optionable.  Still
flirting with $88.50 resistance, BDH's lows are moving up ever so
slowly at $0.50 per day on average.  While that's a bullish sign
telling us the ascending wedge is still under formation, it isn't
dependable or confirmed yet.  So what about that move yesterday
morning over $89.50, wasn't that an entry?  In short, no.  Here's
a trader trick to help you tell.  Following a spike up through
resistance during amateur hour, then a pullback where a stock
again finds support at its former resistance, look for it move
above its amateur hour high by $0.25 to $0.75.  If it does and
you see a flood of buyers rushing in at that level to take it
cleanly over the earlier morning high, it's more than likely a
real breakout.  If on the other hand, you see it roll over. it
probably isn't for real.  One of the simplest ways to enter this
kind of trade is to enter a buy/stop order so that your entry is
triggered only when the issue trades substantially through that
earlier amateur hour high.  It doesn't always work, but the odds
are better than guessing.  Back to the index - LU, NT, and MOT
were the biggies that joined in GLW, SDLI, and JDSU's party that
they started earlier this week.  The perception is that economic
slowdown or not, optics will remain in high demand and will do
well in any circumstance.  Support remains at $85; resistance now
at $89.50.  While this sector promises to shine, it can only
outperform on a relative basis.  That means that if the market
tanks, BDH will only tank less than the rest, but it will still
tank.  You still need to keep a stop set to get you out if the
trade moves against you.   Upside is favored here, but wait for
the breakout or the bounce from resistance.

Average Daily Volume = 200 K


SMH - Semiconductor $95.38 +0.81 (+0.19) Not optionable.  Here's
another case of support holding, but highs falling - a descending
wedge, which doesn't normally look good for the technical future.
However, this one is so short term, we're hesitant to even call
it a trend.  The fact is, that like other sectors in the overall
market, SMH too has shown sideways movement over the last two
days.  $100 resistance two weeks ago has shrunk to $99, which
shrunk to $97 today.  Nonetheless, support is holding firm at
$93.50.  Winners and losers were split about 50/50.  INTC and AMT
up; TXN and BRCM down.  Within the smaller components, the up
half gained an average of $2-3, while the down half lost only
about $1 on average.  We look at today's bounce from $93.25 as a
buying opportunity and hope you were able to snag a position.
While today's close wasn't particularly strong, the world still
needs semiconductors and prices were on the rise earlier this
week.  Play the support and resistance for small daily profits.
But be careful of tomorrow as it is a triple witching day and
could produce a higher level of volatility.  Target shooting will
most likely yield the best entry unless SMH gives us a volume
breakout over $100 (Don't count on it.).

Average Daily Volume = 195 K

No Play



Index      Last     Mon     Tue     Wed    Thur    Week
Dow    10714.82  -49.85   57.63   66.11   26.87  100.76
Nasdaq  3845.74 -106.93   83.16  -53.65   48.33  -29.09
$OEX     798.88   -5.45   15.18    0.92    8.53   19.18
$SPX    1478.60  -10.95   23.44    1.10    8.06   21.65
$RUT     512.25  -14.55    5.24   -4.08    2.58  -10.81
$TRAN   2704.53   -8.67  -26.63   -6.58  -43.76  -85.64
$VIX      23.18    0.18   -1.00    0.14   -1.33   -2.01

Calls               Mon     Tue     Wed    Thur    Week

SDLI     291.06   11.97   21.22  -11.88   19.75   41.06  Relentless
GLW      249.75   17.75    9.00  -12.00   12.00   26.75  Momentum
JDSU     120.69    5.00    5.81   -4.38    3.69   10.13  Good news
SEBL     153.75   -4.94   10.88   -3.56    7.06    9.44  Climbing
NT        67.00    0.87    3.00    1.25    2.63    7.75  New
MRVC      53.00   -2.56    4.94    5.50   -0.88    7.00  Nice week
CIEN     145.50   -0.50    5.56   -0.50    1.06    5.63  Solid
PLXS     104.06    0.25    5.00   -2.44    2.06    4.88  Growing
PWR       61.50    0.37   -0.06    0.87    2.94    4.13  New
MSFT      72.38   -1.93    1.00    2.62    1.88    3.56  New
RBAK     118.13   -7.38   15.28  -10.28    4.63    2.25  Amazing
LLTC      68.69   -3.00    5.44   -4.56    3.69    1.56  Recovered
EXDS      93.13   -3.63    0.44   -1.19    4.75    0.38  Split 6/22
MU        78.00   -0.81    3.50   -2.38   -2.38   -2.06  Dropped
CMTN      93.00   -1.81   -0.25    1.13   -1.63   -2.56  No cigar
YHOO     139.69   -5.75    2.06    0.00    0.19   -3.50  Tight range
BRCD     143.00  -12.69   11.44   -7.63    4.88   -4.00  Breakout?
ADI       87.50   -2.22    2.00   -5.25   -1.25   -6.72  Dropped
MUSE     136.13   -1.75   -0.38    0.25   -6.38   -8.25  Entry point
PDLI     155.50  -14.56    4.13    3.00   -2.63  -10.06  Patience
HGSI     127.63  -12.69    1.63    1.25   -2.13  -11.94  Late buying
CHKP     211.00  -15.31   18.41  -11.22   -6.38  -14.50  No buyers
ABGX     105.50  -12.88    2.88   -4.94   -1.06  -16.00  Consolidate
VRSN     172.44  -23.06   -5.88   -0.94    6.31  -23.56  Which half?


FON       58.56   -2.13   -0.12   -1.94   -3.13   -7.32  New
UTX       59.63    0.38   -1.06    2.56   -0.13    1.75  Not yet
TGT       60.06   -1.75    2.13    1.38    2.06    3.81  Dropped
NXLK      78.38   -5.38    4.13    3.69    1.56    4.00  Dropped
MMM       86.44    0.31   -0.37    2.31    2.25    4.50  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.


MU $77.88 -2.50 (-2.13) A quick turn of sentiment and it's off
to the glue factory.  The semiconductors could begin to weaken
amid renewed concerns of the economy's outlook.  Greenspan may
not have mentioned or even whispered "rate hike", but investors
are now in a huff about future corporate earnings after the CPI
report signaled that inflation may be in check.  MU looks to be
getting a little weak and started to roll over.  It's possible
MU could get fired up ahead of its earnings' release on June
22nd (after the bell).  However, to be on the safer side of
the trade, we're exiting tonight.

ADI $87.50 -1.25 (-7.22) A mixed technology market and in
particular, a couple of weak sessions for the semiconductors
equals a cooling effect for ADI's momentum.  As investors ponder
whether or not to cheer the slowing economy or worry about
future earnings, many stocks are pushed to the sidelines.  ADI
suffered a strong downdraft in yesterday's session that extended
into this morning.  The unquestionable violation of the 5 and
10-dmas, currently at $91.59 and $90.24 respectively, has cast
quite a foreboding cloud over this play.  We're not going to
ignore the possibility of a tight trading range in the short-term
or worse, a further pullback.  ADI is officially a drop this


TGT $59.81 +1.81 (+3.88) Just when it looks like you may have it
"made in the shade", something gets in the way to hinder the
progress.  In this case, it's a stock split.  Today, Target
Corp's BoD approved a 2:1 stock dividend payable on July 19th.
They also raised the cash dividend to 5.5 cents p/s on a post-
split basis, which will pay out on September 10th.  Chairman and
CEO, Bob Ulrich, further commented that Target's "consistent
implementation of our core strategies" is continuing "to
generate superior value for our shareholders over the long
term".  Couple these events with the retails' slight rebound in
yesterday's market and it equals a drop for this put play.

MMM $86.44 +2.25 (+4.50) What we've got here is a simple rotation
story.  The lack of clear-cut direction on the economic front
prompted some investors to take some cash back out of the techs.
Consequently, this defensive stock became a reasonable choice.
The big push came today as MMM jumped through the 30-dma ($85.02),
which is definitely a bullish indication.  Take a look at a daily
chart for visual confirmation.  The upsurge is just too powerful
to keep MMM on our put list.  We've no choice but to drop it

NXLK $78.38 +1.56 (+4.00) Well, NXLK finally managed to put
together a split run, if you can call it that.  The company
begins to trade tomorrow morning at split adjusted levels.
This was a short-term play and did provide a decent day
trade earlier this week, but not exactly what we were looking
for.  We are dropping NXLK tonight due to the split.  The
telecom company did find a few buyers late in the session,
which could indicate the trend is changing as well.  NXLK
tried hard to stick its head above its 200-dma at $78.25, but
couldn't quite find enough buyers to do it convincingly.
Split or no split the trend is still down, however for now
we will close up shop and look for other opportunities.

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This newsletter is a publication dedicated to the education
of options traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in
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editor and staff of The Option Investor Newsletter may own,
buy or sell securities presented. All investors should consult
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information provided has been obtained from sources deemed
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely
information to its subscribers but cannot guarantee specific
delivery times due to factors beyond our control.
The Option Investor Newsletter                  Thursday 6-15-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


RBAK $118.13 +4.63 (+2.25) This stock continues to amaze us.
Right when we think it might be a drop, this mysterious volume
comes in and shoots the stock higher.  It happened today just like
on Tuesday at almost the exact same time of the day, about 1pm EDT.
Tuesday's pop occurred at the $107 level and today's was at $112.
There are some big buyers out there and they like RBAK.  This
stock's trading pattern has been a day trader's dream.  Before the
buying surge, RBAK traded for most of the morning around $110.
There appears to be good support there.  In the final hour, RBAK
found some buyers at the $113 level.  Keep these levels in mind
when looking for entry.  Overhead resistance is $120.  Great place
exit if the stock fails to go through.  A convincing move above
that level with volume and a positive NASDAQ could take RBAK to
$130.  The way this stock has been moving, you could get off
multiple trades during the day.

YHOO $139.69 +0.19 (-3.50) Are we bored yet?  Unless you were
particularly adept at trading the $5-$6 range seen the past
two days, you had little reason to pay much attention to this
play.  If there is a plus, at this point it would have to be
the bounce off $135 early this morning.  The move back up to
$141.75 did provide traders with a reasonable day trade.
Unfortunately, we just didn't see any follow through buying
today.  That doesn't mean it won't come tomorrow, but volume
just hasn't come back to the market in full force yet.  Henry
Blodget of Merrill Lynch commented on B2B Internet issues again,
citing that of the approximately 300 companies only five are
profitable at this time.  He suggested once again sticking with
the big boys like YHOO, but that did little to stir up
participation in our favorite.  Technically, YHOO continues to
distance itself from its 200-dma at $137.60.  Support still comes
into play at $135 and $130.  Until the volume comes back, we are
very likely to see more of the same range trading.

SDLI $291.06 +19.75 (+41.75) Looking for a stock that's on the
move?  Well, look no further.  In the last 14 sessions, this one
has gained about 74%.  It just goes to show, you can't keep a
good stock down.  SDLI benefited from the solid buying based on
upgrades earlier this week.  Today's 7.3% move set another new
high at $293 and it came on better than average volume of 6.89 mln
shares.  Again, the buying seen late in the session would suggest
the momentum should continue.  With the better than $123 move in
the last two weeks, we would assume greed would set in at some
point and SDLI would have a bit of a pullback.  However, the
current mentality suggests traders just can't seem to get enough
of this good thing.  Until true profit taking sets in, traders may
look at bounces off intraday support at $285, $280 or $275 as a
chance to join in on one of our better plays.  SDLI and Siemens
announced the completion of an agreement today for SDLI to supply
high speed optical modulators to Siemens through 2001.

CHKP $211.00 -6.38 (-14.50) The question that comes to mind for
this play is, are investors really wanting to sell shares of the
company's stock or are they doing so out of shear boredom?  There
has been little reason to buy shares of CHKP this week, considering
the current broad market sentiment.  Yes, the long term folks that
check the stock pages once a week are probably still hanging onto
shares of CHKP.  However, for those of us that have seen good
economic data hit the Street this week with no major reaction, it's
been a challenge to hang in there.  As one trader mentioned earlier
today, "if it isn't going up, we will get out until we have a
reason to get back in."  With that in mind, take your option
profits and trade the intraday moves.  No specific company news or
analysts comments the past two days, just a lack of buyers.  CHKP
did bounce off of $205 late today and new plays may be considered
on further moves higher.  However, until we see buyers return in
numbers be prepared to take profits on any new plays.

HGSI $127.63 -2.13 (-11.94) Sometimes we have to look hard to
find something positive on weeks like this.  Don't misunderstand
our place is not to "sugar-coat" any play in our publication.
The 8.5% pullback this week is not necessarily bad for HGSI.
HGSI is experiencing the same thing seen in the broad market, a
lack of conviction and an unwillingness to lay money on the table.
We actually saw some nice buying interest in the biotechs during
the final moments of today's trading.  With the amount of money
that's piling up on the sidelines, we will take the eternal
optimists point of view.  When that money hits the trading floors,
we expect some of that to go towards HGSI and others in the
genomics industry.  There has been no negative news or earnings
warnings from the company or those in the industry which is a bit
of a plus.  Basically, what we are saying is if you have current
positions, keep you stops in place.  HGSI penetrated its 10-dma
today at 122.74, but did find buyers to bid the price higher late
in the day.  For now, look for bounces off $120 or $115, or a
breakout over $130 on solid volume as potential entries for new

MRVC $53.00 -0.88 (+6.00) Remember the old saying "you are
judged by the company you keep?"  Traders with money burning a
hole in their pockets have bought shares of MRVC, bidding the
price about 13% higher this week.  Most of the strength
continues to come from the strength seen in the heavy hitters
like GLW and JDSU.  MRVC jumped $5.50 on Wednesday on strong
volume of 4.6 mln shares, and the $0.88 pullback suggests
traders weren't willing to cash in just yet.  We do believe
the momentum should continue.  At this point, there is a "gap" in
the charts between $48.50 and $50.  If the buying continues, that
won't be an issue for now.  If we do see profit taking, we would
look for the gap to be filled.  The 5-dma is now placed at $48.98
and could provide support and a good entry for new plays,should we
have a retracement.

JDSU $120.69 +3.69 (+10.13) JDSU is waiting for government
approval for its acquisition of ETEK.  The merger is expected to
go through, and once it does, analysts expect JDSU to have a good
summer.  In anticipation of the merger, several analysts made
their voices heard Thursday.  CS First Boston reiterated its Buy
rating and Wit Soundview made several positive comments.  In the
news Wednesday, JDSU said it had purchased a manufacturing
facility owned by Motorola.  The new facility will increase
JDSU's capacity to manufacture micro-systems.  Also, a report
issued late Wednesday said Lucent may be spinning out their
microelectronics division, which could raise $50 bln, and better
position them to compete with JDSU.  The rumors of the LU spinoff
had little effect on shares of JDSU as the stock gained momentum
in Thursday's trading.  After pausing Wednesday, JDSU found
support at $116 Thursday morning and bounced higher.  From here,
you might use the intra-day volatility to target shoot for entry
points at current levels, while a conservative trader might wait
for JDSU to clear resistance at $125.

SEBL $153.75 +7.06 (+9.44) SEBL churned in Wednesday's trading,
after traders digested the CPI report.  But, after bouncing off
support at $145 Thursday morning, the stock resumed its climb
higher.  The rally Thursday came after USB Piper Jaffray
initiated coverage on SEBL with a Strong Buy rating and set a
12-month price target of $190.  As SEBL has charged higher, the
stock is trading well into historical split territory.  SEBL last
split its stock back in November when it was hovering around
$125.  With more than enough shares authorized, we'll monitor the
wires closely for a possible split announcement.  We did see some
interesting intra-day action in SEBL Thursday.  The stock
steadily climbed higher throughout the day, but, in the final
hour of trading, SEBL plunged nearly $8.  It appeared an
institution unloaded stock.  However, once the selling subsided,
SEBL bounced back like a rubber ball to close the day near its
high, indicating there is plenty of buying interest in the stock.
Watch closely Friday morning to see if the buying continues, look
for entry if SEBL crosses $155.  If the stock retreats, watch for
a bounce off support at $150.

PLXS $104.06 +2.06 (+4.88) The need for contract manufacturers is
growing.  High tech companies turn to outsourcing for product
development and commercialization.  PLXS plays an integral role
in turning ideas into marketable products.  The company helps
the biggest names in the Tech sector turn visions into profits
and recently told analysts that they are working with 10 clients
on new and exciting products.  Its growing business is pushing
the stock into uncharted territory.  PLXS edged past resistance
at $105 to set a new high of $106.25 Wednesday, then drifted
lower into the close as the buyers disappeared.  The stock
rotated around $102 for much of Thursday's trading.  Then, in the
final fifteen minutes of trading, the stock took off.  It
appeared a larger buyer stepped in as PLXS surged over $2 higher
with a spike in volume.  Watch Friday morning to see if the
buying continues, look for an entry point if PLXS clears $105.
Consider a bounce off support at $102 for an additional entry.

CIEN $145.50 +1.06 (+5.63) Investors left the Telecom sector
Wednesday after an early morning rally.  CIEN climbed past
resistance at $145, only to face congestion at $148.  The stock
found solid support at $140 Thursday, which provided a base for
an afternoon rally.  In the news Thursday, it appears the class
action lawsuit CIEN has been battling for over two years has come
to an end.  A U.S. District Court dismissed a plaintiff's request
to appeal an earlier ruling in CIEN's favor.  The plaintiffs
alleged that CIEN made false comments in 1998.  However, the
judge ruled for CIEN, finally putting the case to rest.  CIEN
jumped over $2 after the announcement late Thursday.  The stock
managed to edge above resistance at $145 near the close of
trading Thursday.  Look for an entry point if CIEN continues to
climb from its current levels.  A more conservative entry point
may be found if CIEN clears resistance at $150.  The stock
continues to find support at $140 during pullbacks, watch for a
bounce from that level if the stock retreats.

GLW $249.00 +12.00 (+34.00) GLW took a breather Wednesday after
its stunning performance earlier in the week.  But, the momentum
returned Thursday after GLW bounced from support at $235.  Wall
Street continues to show its love affair for the fiber optic
area, specifically GLW.  Warburg Dillon Read reiterated its Buy
rating on GLW, set a price target of $290, and made favorable
comments about the rumors surrounding the merger talks with SDLI.
DLJ came out Thursday morning with a research note on GLW.  The
brokerage house reiterated its Buy rating, and raised 2000 and
2001 earnings estimates for the company.  They also said any dip
in the stock was seen as a buying opportunity.  GLW edged to a new
52-week high Thursday of $249.94, which proved to be resistance
for the remainder of the day.  Watch the trading closely Friday
morning to see if GLW clears resistance at $250.  If the stock
does stumble, look for the bulls to step in and buy the dip
around support at $245 or below at $240.

ABGX $105.50 -1.06 (-16.00) It has been a week of consolidation
for shares of ABGX.  For that matter, the entire Biotech sector
has taken a rest this week after its incredible rally earlier in
the month.  While ABGX hasn't performed as well as we would like,
the stock hasn't suffered any technical damage, and investor
sentiment remains bullish for the Biotech sector.  ABGX has
managed to stay within its wide trading range between $100 - 120
without tracing new lows.  What's more, the recent consolidation
has come on decreasing volume, indicative of basing price action.
Additionally, we saw over 100K shares cross the tape in the last
half hour of trading Thursday as the stock climbed nearly $3 to
move back above support at $105.  An aggressive trader might
look for an entry at current levels considering the late day
rally Thursday.  On the other hand, a conservative trader might
wait for momentum to return to the Biotech sector, and look for
entry points as ABGX clears congestion at $110 or above at $115.

EXDS $93.13 +4.75 (+0.38) The intraday volatility provides great
target shooting opportunities.  We've seen entries below the $85
mark (for the extremely risk-oriented) to solid bounces off
support levels at $88 and $90.  Resistance is still evident near
$95, but the continuous flow of positive analyst comments should
help fight this hindrance.  EXDS was back on the move today
despite the uncertainty in the tech sector.  Michael Turits at
Prudential Securities influenced the share price with his new
Strong Buy coverage and 12-month price target of $149.  CIBC
World Markets also reiterated a Buy recommendation and a hefty
$175 target price.  The definitive moves through the converged
5-dma ($90.59) and 10-dma ($89.33) also provide promise that EXDS
can stretch to new heights ahead of the upcoming 2:1 split date.
Be prepared however to close your positions before or no later
than June 22nd.

PDLI $155.50 -2.63 (-10.06) If your new to the game, then take a
look at this week's chart for PDLI and it spells out
CONSOLIDATION.  Actually for such a high-flyer, the pullback's
been rather tame and PDLI is holding the elevated levels quite
well.  The $150 mark, just above the 10-dma ($147.08), is
currently establishing itself as near-term support.  Recall this
is the star performer that amazingly added over $70 to its share
price in a matter of weeks!  If PDLI is going to make another
run then we should see conclusive moves first through the 5-dma
($157.06), then $164 with a show of volume.  Today the company
held its Annual Meeting and shareholders voted on a proposal to
increase the number of authorized shares.  So far there's no
word on the outcome, but we've got our fingers crossed for a
possible split announcement.  At $150, PDLI is a certain split
candidate.  This kind of news would no doubt wake up the
investors' enthusiasm.  For now though, it's best to be patient.

MUSE $136.13 -6.38 (-8.25) MUSE lagged behind today and
honestly, seemed to get lost in the Internet shuffle.  Although,
there was good news about the company.  MUSE made Business Week's
annual Information Technology 100 Index of the best performers for
the second time.  It ranked 18th in terms of total return to
shareholders and 95th overall.  And analyst Paul Rodriguez at CE
Unterberg Towbin reiterated a Strong Buy rating and issued a $175
price target.  So there's no doubt why the share price is
maintaining itself as some investors shift their other holdings
around.  Firm support at $130 proved a strong bottom today, but
wait for better entry on bounces off the $135 level near the
10-dma ($136.73).  This is certainly more conservative, but
perhaps wise at this point in the momentum play.  Remember look
for the NASDAQ to provide the ultimate direction.

BRCD $143.00 +4.88 (-4.00) Getting ready to breakout?  Caught
in the wave of indecision that has enveloped the markets this
week, BRCD is trading in a narrowing envelope, consisting of
higher lows and lower highs.  Although these wedge patterns
are more meaningful over a longer timeframe, this tightening
pattern looks like a precursor of a break one way or the other
in the next couple days.  Volume has been on the weak side over
the past 2 days, underscoring the lack of direction created by
the conflict between positive economic reports and continued
hawkish comments from the Fed.  It was encouraging to see buyers
step in after the morning selloff to push the price back above
the $140 level, which has alternated between support and
resistance over the past week.  BRCD is building intraday
support near $136, and repeated bounces at this level look good
for new entries, especially if volume ramps up to confirm the

CMTN $93.00 -1.63 (-2.56) Almost, but no cigar.  After the
late-day recovery on Tuesday, CMTN managed to break through the
$96 resistance level yesterday, tagging $99 before dropping
again at the close.  Ending the day just below $96 left the
resistance level intact, and continuing weakness this morning
dropped the stock below $91 before the buyers stepped back in.
The lows are gradually getting higher and the $90-91 support
level is looking stronger by the day.  Investors are caught in
a web of indecision, which is being created by the opposing
forces of hawkish Fed governor comments and positive economic
reports.  If they can shake it off, CMTN could be ready for a
nice run as we approach the July earnings season.  Volume was
weak again today, hitting only 60% of the ADV; we will need to
see strong volume accompany any sustained move higher.
Aggressive traders can consider repeated bounces at the $90-91
support level for new entries, while more conservative players
will want to wait for CMTN to close above resistance before
jumping into the play.

LLTC $68.69 +3.69 (+1.56) Getting close to a breakout, LLTC
continues to post higher lows as it once again approaches
resistance at $70.  Declining throughout yesterday's session,
the stock found support at $64 this morning and managed a decent
recovery that lasted right up to the close.  Even though volume
was below the ADV, increasing volume accompanied the move
higher, and the stock managed a close just below Tuesday's high
of $69.75.  Caught between fear of a slowing economy and hope
for an end to the string of interest rate hikes, investors are
having a hard time making up their mind about the future
direction of the financial markets.  In light of this
indecision, LLTC's performance is encouraging, and the stock
looks like it may be nearing a breakout.  The 10-dma ($65.06)
continues to support the move higher, and this looks like a
good level for initiating new positions.  If you would rather
wait for confirmation that LLTC is ready to run, look for a
breakout over $70 that is accompanied by strong volume.

VRSN $172.44 +6.31 (-23.56) Is the glass half empty or half
full?  Investors are expecting that the recent string of
interest rate hikes is coming to an end, and this has helped
VRSN to hold support at $160.  Fear of a slowing economy,
which would mean declining profits, is keeping the buyers in
check, and resistance at $180 in place.  Although not providing
large daily moves, this is still a very tradable range until
investors get some conviction.  This conviction may not come
until after the Fed announces its next interest rate decision
on June 27th.  In the meantime, we have to trade the market we
are given, and that means entries at support and taking profits
when the stock fails to break through resistance.  Volume on
VRSN has been strong this week, bolstering confidence that the
$160 level will hold as support.  If the stock bounces near this
level, consider jumping on board, but only if accompanied by
strong buying volume.  A failure to break through resistance at
$179-180 will be your cue to lock in profits and wait for the
next entry when VRSN once again bounces from support.


UTX $59.63 -0.13 (+0.94) For a stock that's taken it on the
chin as much as UTX, we aren't calling the buying seen the
past two days a reversal just yet.  Today, traders bid the
price right up just past the 50-dma at $61.52 when the bears
took over to spoil the party.  Part of the strength the past
two days came from a bill yesterday approved in the Senate.
It was a defense spending bill for 2001, and was called a
victory for several of the largest defense contractors.  The
weakness seen after the initial pop up this morning would
suggest there is now more downside available.  The overall
investor sentiment could also keep this play headed in our
favor.  UTX did close just above intraday support at $59,
however, there is a gap back near $57 that could be filled at
any time.  If UTX can scrape up a few more buyers, then we
would be somewhat cautious of any rallies back over the 50-dma.
Yet, the current trend is still intact, and we would look
for further opportunities to buy puts.


NT - Nortel Networks $67.00 +2.63 (+7.63 this week)

Nortel Networks is a leading global supplier of data and
telephony network solutions and services.  Covering all the
bases, its business consists of the design, development,
manufacture, marketing, sale, financing, installation,
servicing and support of networks for both carrier and
enterprise customers.  With a presence in over 150 countries,
NT serves local, long-distance, personal communications
services and cellular mobile communications companies as well
as cable television companies, Internet service providers and

Ignoring the market-wide indecision that is keeping many
technology stocks rangebound, NT is launching higher on the
back of very strong volume.  The past 3 days have seen strong
gains on more than double the average daily volume.  Stubbornly
refusing to follow the gyrations of the broad market, NT keeps
marching higher and has a beautiful intraday chart.  Volume
ramped up strongly towards the end of trading today, allowing
this Networking leader to close just fractionally below its high
of the day.  The recent gains are being fueled by the company's
ability to execute its business plan and continuing to close
those important deals with leaders in the industry such as
Global Crossing and BellSouth (see news below).  After one final
test of support near $48 in late May, NT has been moving
sharply higher, and is now firmly above all of its moving
averages.  Over the past week, the 5-dma (currently $63.06) has
been providing support, and the past 2 days have shown support
building near $65.  Use any profit taking as an opportunity to
enter this Networking play.  Look for a bounce from support,
confirmed by strong volume to trigger your entry.  Alternatively,
consider opening new positions if NT continues up from current
levels; just keep an eye on resistance, which is looming near $72.
In the absence of a strong market-wide move, it is unlikely that
NT will be able to crack this level on the first try.

NT is moving higher the old fashioned way:  by continuing to
move its product to market.  Today, BellSouth Mobility DCS
announced that it has chosen NT to expand its GSM network in
the southeastern United States under a three-year equipment
and services agreement valued at an estimated $200 mln.  As if
that wasn't enough, NT also penned an agreement with Global
Crossing for Europe's first ring-based Pan European dense wave
division multiplexing (DWDM) optical fiber solution for
metropolitan networks.  The contract extends NT's leadership
position in providing the Optical Internet with speed,
scalability and reliability.

BUY CALL JUL-65*NTV-GM OI=5395 at $5.88 SL=4.00
BUY CALL JUL-70 NTV-GN OI=1435 at $3.25 SL=1.50
BUY CALL SEP-70 NTV-IN OI=3415 at $6.25 SL=4.25
BUY CALL SEP-75 NTV-IO OI=1892 at $4.25 SL=2.75

SELL PUT JUL-65 NTV-SM OI= 411 at $2.63 SL=4.00
(See risks of selling puts in play legend)

Picked on June 15th at   $67.00     P/E = N/A
Change since picked       +0.00     52-week high=$72.09
Analysts Ratings    19-11-3-1-0     52-week low =$19.91
Last earnings 04/00   est= 0.19     actual= 0.23
Next earnings 07-25   est= 0.15     versus= 0.14
Average Daily Volume = 9.66 mln

PWR - Quanta Services $61.50 +2.94 (+2.63 this week)

Quanta installs, repairs, and maintains electric transmission
lines, cable TV, and telephone and data lines in North America.
Quanta also works on traffic control systems and designs and
installs communication towers.  Major customers include PG&E,
Enron, and Western Resources.  Other clients include contractors,
commercial establishments, and government entities.

PWR is in the business of digging ditches.  While not as
glamorous as say semiconductors or biotechnology, it turns out
ditch digging is a lucrative operation.  PWR's earnings have
skyrocketed with the intense build-out of telecommunications
networks in North America.  PWR is a leading contractor for
installing fiber optic cable, building DSL networks, and
erecting cellular telecommunications towers.  The company also
serves utility concerns by installing cable TV lines, electric
power lines, and natural gas distribution systems.  But, its from
the former area of operations that PWR is deriving increasing
amounts of revenues.  With the growth of the Internet and the
demand increasing for high-speed transmission of data, PWR is in
the field, laying the lines.  It's a dirty job, but PWR doesn't
mind doing it.  In fact, they love it!  The company is expected
to grow earnings by an astonishing 45% this year, and 25%
annually over the next five years.  PWR has beat Wall Street's
estimates by an average of 25% over the last five quarters, and
with earnings less than a month away, we could see a run develop.
The stock is in a strong technical position for an earnings run.
PWR emerged from a six week consolidation Thursday by tracing a
new all-time high on 1.5 times its ADV.  Given the breakout in
Thursday's trading, you might consider an entry at current
levels.  Support is located first at $60 and again near the $58
level.  A bounce from either may provide an additional entry
point.  With the bold move above $60 Thursday, PWR cleared its
highest series in July contracts.  Watch for new out-of-the-money
options to be issued in the coming days and wait for open
interest to build before entering the contracts.

With its impeccable earnings track record, PWR has garnered the
attention of Wall Street.  The stock has enjoyed recent upgrades
and coverage initiations by the likes of DB Alex Brown and First
Union.  And Thursday, Eugene Peroni, Director of Research at
Nuveen Investments, published his popular summer portfolio of
20 growth stocks to hold for one full year which included PWR.

BUY CALL JUL-50 PWR-GJ OI=145 at $13.38 SL=10.00
BUY CALL JUL-55*PWR-GK OI=131 at $ 9.75 SL= 6.75
BUY CALL JUL-60 PWR-GL OI=101 at $ 7.00 SL= 5.00
BUY CALL AUG-60 PWR-HL OI= 21 at $ 8.38 SL= 6.00
BUY CALL NOV-60 PWR-KL OI= 24 at $12.50 SL= 9.50

SELL PUT JUL-55 PWR-SK OI=  7 at $ 2.56 SL= 4.00
(See risks of selling puts in play legend)

Picked on June 15th  at $61.50    P/E = 49
Change since picked       0.00    52-week high=$61.88
Analysts Ratings     8-1-1-0-0    52-week low =$13.38
Last earnings 03/00  est= 0.21    actual= 0.28
Next earnings 07-10  est= 0.37    versus= 0.06
Average Daily Volume  =  507 K

MSFT - Microsoft Corp $72.38 +1.88 (+3.56 this week)

Microsoft is the #1 software company in the world.  They
develop, manufacture, license, and support a broad range of
software products including Windows operating systems, server
applications, the popular MS Office suite, and a Web Browser.
As most of you know, the company is presently involved in anti-
trust issues with the government.  CEO and co-founder, Bill Gates
still owns 15% of Microsoft.

After such treachery and verbal assaults, we can now safely
assume all the cards are on the table.  About as much bad news
has hit the press in recent, and not so recent times, concerning
the anti-trust issues of the Microsoft Corporation.  Additionally,
the District of Columbia Appeals Court is willing to accept the
landmark case for review.  This would stall Judge Thomas Penfield
Jackson's ruling that the company must be broken up into two
separate entities.  The only move the government has left is try
and implement a rarely-used 1974 law called the Expediting Act,
which allows federal antitrust cases to skip the lower appeals
court process and head straight to the Supreme Court.  With all
that said and done, we believe nonetheless that the stock price
has found a bottom at $65 and is poised to recover.  The positive
move through $72 today and the past three consecutive closes near
the daily highs is definitely bullish.  The technical break above
the 50-dma ($70.94) and robust volume also adds credence that the
momentum is building.  Conservatively, look for MSFT to clear
$74-$75, then the ever-illusive $80 mark.  But after that, the
runway should be cleared for takeoff.

In the industry, Red Hat, a developer of the free Linux computer
operating system that competes with Microsoft's Windows,
reported a lower-than-expected loss.  The loss was largely due
to soaring expenses in its effort to take the market share from
Microsoft, which it's far from doing in the near-term.  The
software giant's product menu continues to roll-out advances in
the midst of its fight with the Justice Department.  On
Thursday, Microsoft rolled out a new version of Windows CE 3.0,
its operating system for handheld devices, which offers more
features and lower prices.  This advanced platform demonstrates
it's not taking the competition from rival Palm Corporation
lightly.  Globally, Microsoft and Japan's largest electronics
maker, Hitachi Ltd, unveiled plans to enter into a joint venture
in the system solutions business.  This partnership unites two
of the biggest companies in the world's IT market and targets
annual sales exceeding $190 mln by 2003.

BUY CALL JUL-65 MSQ-GM OI=11290 at $8.75 SL=6.00
BUY CALL JUL-70*MSQ-GN OI=36047 at $5.25 SL=3.25
BUY CALL JUL-75 MSQ-GO OI=29120 at $2.75 SL=1.25
BUY CALL JUL-80 MSQ-GP OI=31745 at $1.38 SL=0.75

Picked on June 15th at   $72.38    P/E = 44
Change since picked       +0.00    52-week high=$119.94
Analysts Ratings    11-16-3-0-0    52-week low =$ 60.38
Last earnings 03/00   est= 0.41    actual= 0.43
Next earnings 07-19   est= 0.42    versus= 0.40
Average Daily Volume = 38.8 mln


FON - Sprint Corp $58.56 -3.13 (-7.31 this week)

Sprint Corporation is involved in worldwide communications
integrating long distance, local service, and wireless services.
Other activities include telecom equipment distribution,
directory publishing, and Internet access.  Sprint is based in
Westwood, Kansas and has roughly 65,000 employees nationwide.

The possibility of merger between GTE Corp (GTE) and Bell
Atlantic Corp (BEL) is becoming closer to a reality.  FCC
approval of the $67 bln merger is expected in the next few days.
The implications of such a deal are enormous.  If approved, the
new company, to be called Verizon Communications, will control
63 mln phone lines across 31 states and the District of Columbia.
Their communications offerings will include the full gamut of
local, long-distance, wireless, and high-speed Internet access.
The scuttlebutt alone is putting serious pressure on the other
telecom companies.  FON's share price, in particular, is already
showing signs of devastation from the impending "deal of the
century".  As FON loses more ground, trading volume has increased
to nearly double the ADV in recent sessions.  FON is now perched
under all the technical DMA lines.  The 50-dma at $60.09 is its
nearest crony, which also acted as upper resistance in today's
trading.  Confirm sentiment with downward bounces off this
indicator and pay attention to the newswire in regard to the
above-mentioned merger.  As a side-note, be aware WorldCom is
awaiting approval to acquire Sprint for $148 bln but this event
is not likely to effect FON's trading in the short-term.

BUY PUT JUL-65 FON-SM OI=118 at $7.63 SL=5.25
BUY PUT JUL-60*FON-SL OI=236 at $4.00 SL=4.00
BUY PUT JUL-55 FON-SK OI= 60 at $1.69 SL=0.75

Average Daily Volume = 2.63 mln


SEBL - Siebel Systems $153.75 7.06 (+9.44 this week)

Siebel is a leading provider of sales automation and customer
service software.  Its main product, Siebel Sales Enterprise,
offers client information and decision support across a
corporation's worldwide computer network.  Field personnel can
access Siebel applications through wireless devices as well.
Glaxo Wellcome, Prudential Insurance, and Lucent are among
Siebel's clientele.

Most Recent Write-Up

SEBL churned in Wednesday's trading, after traders digested the
CPI report.  But, after bouncing off support at $145 Thursday
morning, the stock resumed its climb higher.  The rally Thursday
came after USB Piper Jaffray initiated coverage on SEBL with a
Strong Buy rating and set a 12-month price target of $190.  As
SEBL has charged higher, the stock is trading well into historical
split territory.  SEBL last split its stock back in November
when it was hovering around $125.  With more than enough shares
authorized, we'll monitor the wires closely for a possible split
announcement.  We did see some interesting intraday action in
SEBL Thursday.  The stock steadily climbed higher throughout
the day, but, in the final hour of trading, SEBL plunged nearly
$8.  It appeared an institution unloaded stock.  However, once
the selling subsided, SEBL bounced back like a rubber ball to
close the day near its high, indicating there is plenty of buying
interest in the stock.  Watch closely Friday morning to see if
the buying continues, look for entry if SEBL crosses $155.  If
the stock retreats, watch for a bounce off support at $150.


If the move over $150 for SEBL was good, then the retest of
$150 on the afternoon dip was perfect.  Not only did it bounce,
but it bounced with a vengeance.  This breakout deserves a look
for an entry point.  Granted, the overall market outlook is the
ultimate variable right now, but SEBL looks strong.  If the
Nasdaq breaks out over 3900, this one should lead the charge.

BUY CALL JUL-145 SGW-GI OI=1791 at $19.75 SL=14.75
BUY CALL JUL-150*SGW-GJ OI= 274 at $16.88 SL=12.50
BUY CALL JUL-155 SGW-GK OI= 236 at $14.50 SL=10.75
BUY CALL AUG-155 SGW-HK OI= 580 at $19.50 SL=14.50
BUY CALL NOV-165 SGW-KM OI= 434 at $23.00 SL=17.00

Picked on June 11th at  $144.31    P/E = 222
Change since picked       +9.44    52-week high=$175.13
Analysts Ratings     13-4-0-0-1    52-week low =$ 23.44
Last earnings 03/00   est= 0.14    actual= 0.17
Next earnings 07-21   est= 0.18    versus= 0.12
Average Daily Volume = 5.00 mln


A Market Without Conviction...

Wednesday, June 14

Industrial stocks closed higher today as investors rotated into
blue-chip issues after benign data in the consumer price index.
The Dow closed up 66 points at 10,687 and the Nasdaq ended down
53 points at 3797.  The S&P 500 Index closed almost unchanged at
1470.  Trading activity on the NYSE reached 943 million shares
with advances beating declines 1,684 to 1,258.  Nasdaq volume hit
1.4 billion shares with declines beating advances 2,245 to 1,791.
In the bond market, the 30-year Treasury rose 17/32, pushing its
yield down to 5.90%.

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

Pss World   PSSI   NOV12C/JUL12C   $0.88   debit   calendar
Conseco     CNC    AUG5C/JUL7C     $1.62   debit   diagonal
FVC.com     FVCX   JUL5C/JUL7C     $2.12   debit   bull-call

All of our new positions offered favorable entry opportunities.
Conseco and FVC.com were opened in the morning session and the
Pss World Medical spread was available near the target late in
the afternoon.

Portfolio Plays:

Blue chips rallied today following the release of favorable
economic data and optimism that interest rates will remain
unchanged when the FOMC meets later this month.  News of a
slowing economy spurred investor enthusiasm and strength in
cyclical and financial stocks boosted the Dow.  Trading was
light amid continued profit warnings and investors remained
skeptical ahead of upcoming quarterly earnings reports.  The
majority of technology stocks pulled back as traders rotated
cash between sectors.  On the Nasdaq, biotech and chip issues
consolidated after a recent strong performance while select
telecom stocks moved higher.  In the broad market, aluminum,
investment banking and metals issues advanced but industrial
power and office equipment stocks slumped.  Oil issues ended
mostly higher as crude prices rose to $32.85 per barrel.

Our portfolio leaders were mostly industrial companies and the
Media Group produced a number of winners.  Amfm Inc. (AFM) and
Clear Channel (CCU) rallied in tandem to recent highs and it
appears both of these positions will finish at maximum profit.
Our selection of oil stocks continued higher with the price of
crude and the leader in that category was Apache (APA) with a
$2.12 rebound to $59.  Our bullish, credit-spread position is
at maximum profit above $50.  Ashland Oil (ASH) and Texaco (TX)
also participated in the upside activity.  Johnson & Johnson
(JNJ) again led the Major Drugs sector with a $2 move to close
near a recent high at $90.  Our long-term calendar spread is at
maximum profit near the current price.  Aetna (AET) rose $0.88
to close near $72 amid speculation they will split-up and sell
part of their insurance business.  Our short option at $70 is
"in-the-money" and the JAN65C/JUL70C diagonal spread should be
monitored for further upside adjustment.  Paine Webber (PWJ)
topped the Major Brokerages group with a $2.18 rally to a new
52-week high and our recent bull-call spread is now profitable.
Strangely enough, the small-cap financials have not performed
well in recent sessions and stocks such as Allstate (ALL) and
Keycorp (KEY) are turning bearish.  The Allstate position is
profitable above $22.12 but you may want to take the positive
return while it is available.  Our Keycorp diagonal spread;
SEP20C/JUL22C has plenty of time for recovery but you should
not hold the position if the technicals become bearish.  The
issue is at a "key" moment (couldn't resist that one!) and a
move below the 30 DMA (near $20) would suggest a failed rally.

Unfortunately, one of our recently slumping issues, Ditech
(DITC) continued lower during the session and we decided to
pull the plug on the costly position.  There was a potential
"roll-out" play for those who believe a recovery will occur,
but the current technicals suggest further downside movement
is forthcoming.  Our losing exit debit for the JUN-$75 PUT
was $2.81 and although the long position is almost worthless,
we will try to sell it during any further dips before Friday's
expiration.  Another position that remains "on the bubble" is
Novoste (NOVT).  The stock has hovered for days near our sold
strike at $45 and with the cost basis at $45.50, we are simply
waiting for the issue to demonstrate a new character; bullish
or bearish.  The lack of volume on the recent rally suggests
the move is being driven by public interest and with any luck,
the speculation of an upcoming buyout will soon fade.

Thursday, June 15

The market posted favorable gains today even as concerns of
declining corporate earnings weighed heavily on investors.
The Dow closed up 26 points at 10,714 and the Nasdaq Composite
ended 48 points higher at 3845.  The S&P 500 Index was up 8
points at 1478.  Trading volume on the NYSE reached 1 billion
shares with declines beating advances 1,464 to 1,421.  Nasdaq
trading activity was subdued at 1.41 billion shares exchanged.
Technology declines beat advances 2,158 to 1,821.  The 30-year
Treasury ..

Portfolio Plays:

Industrial stocks moved higher for a second consecutive day amid
strength in cyclical and computer-related issues.  The broader
market edged upward as investors rotated money into safe-haven
sectors and interest in defensive industries spurred rallies in
Major Drugs and Utilities.  Retail issues recovered from a slump
earlier in the week but oil companies consolidated after a strong
performance in the past few sessions.  A drop in bank stocks led
the market lower during morning trading and traders were cautious
after a number of earnings warnings circulated in media reports.
By afternoon, the pessimism had faded and the buying spree began.
In the technology group, semiconductor and computer issues topped
the leader-board and a small group of well-known issues led the
Nasdaq to a positive close.  The composite index has remained in
a bullish trend, consolidating after the rally early in the month
and now it appears that investors are ready to drive it higher.

With just one day to go in the expiration period, our portfolio
offered relatively little excitement.  The majority of issues in
the Spreads Section moved higher during the bullish session and
fortunately, almost all of the June plays are profitable.  Some
of the long-term spreads will need adjustments (into July) but
most of the profitable portfolio positions have previously been
closed to protect gains and limit losses.  The leaders were in
Major Drugs and Technology Stocks.  Sepracor (SEPR) rallied $5 to
a recent high near $105 on strength in the defensive sectors and
Network Appliances (NTAP) recovered $4 to close near $80 after a
number of brokerages came out in support of the stock.  Yesterday
the stock sank $10 after CEO Dan Warmenhoven said the company's
second-quarter book-to-bill ratio could be below 1, indicating
that orders are softening.  Analysts suggested the market's harsh
reaction failed to recognize that the decline in bookings is due
to normal seasonal factors and investors quickly moved back into
the issue.  Our bullish position in Hyperion Solutions (HYSL) is
back on track.  Today the stock rallied $3.68 to end at $32 after
the company announced a new alliance with Interwoven (IWOV).  The
pact with IWOV, a leading provider of content management software
and services for the enterprise Web, allows Hyperion to provide
Internet-based organizations with deeper insights into customer
behavior and preferences and help them turn those insights into
more profitable relationships.

Tomorrow's activity in the final day of June's option expiration
period is expected to be volatile and there is a potential for
substantial movement in both directions.  The recent gains in
blue-chip issues will likely be consolidated and the leading
technology stocks are expected to move higher on recent momentum.
Our portfolio should experience little excitement as the majority
of positions are "in-the-money" or have been closed for favorable
profits.  With any luck, the session will end on a bullish note
and we can record another profitable month of conservative,
spread trading.

Questions & comments on spreads/combos to Contact Support
                         - NEW PLAYS -
RHAT - Red Hat  $23.38  *** They Beat The Street! ***

Red Hat is a developer and worldwide provider of open source
software products and services.  The company's product offerings
include Red Hat Linux and related tools, open source software
applications, documentation, manuals and general merchandise.
Professional services offerings include technical support and
maintenance, custom development, consulting, training along with
education, developer support and hardware certification.  Red Hat
has also built a comprehensive Internet site dedicated to the open
source software community.

Today the leading Linux software operating system distributor
reported better-than-expected earnings, suggesting the company was
on track to meet its goal of profitability by next year.  Red Hat
nearly doubled its quarterly sales from twelve months ago, posting
a first quarter operating loss of $2.5 million, or $0.02 per share.
Wall Street analysts had expected Red Hat to report an operating
loss of $0.04 cents per share and based on the announcement, the
stock is trading up in after-hours activity.  The CEO commented
that RHAT's quarterly performance represents continued execution
in a plan to leverage acquisitions to enter new markets and develop
additional revenue sources.  The overall goal is to double revenues
and become profitable by the end of calendar 2001.

RHAT's target is ambitious but based on the recent technical outlook
for the issue, investors believe that a recovery is underway.  Our
position is aggressive with a bullish outlook and based on inflated
front-month option premiums, we may be able to open a new calendar
spread with a favorable time-value disparity.  The option prices
will likely be different in the morning, so use good judgment and
participate in the position only if it meets your criteria for
portfolio suitability.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  SEP-30  RCV-IF  OI=564  A=$3.75
SELL CALL  JUL-30  RCV-GF  OI=747  B=$1.56

Chart =
CVTX - CV Therapeutics  $55.62  *** Reader's Request ***

CV Therapeutics is a biopharmaceutical company engaged in the
discovery and development of new small molecule drugs for the
treatment of cardiovascular diseases.  The company currently
is conducting clinical trials for two of its drug candidates,
including ranolazine, which is in its second Phase III trial.
In addition, CV Therapeutics has several other research and
pre-clinical development programs designed to bring new drug
candidates into human clinical testing.  Consistent with its
business strategy, the company currently retains United States
marketing rights to its two lead candidates, ranolazine and
CVT-510.  Since inception, substantially all of its resources
have been dedicated to research and development.  The company
expects its future sources of revenue to consist of payments
under corporate partnerships and interest income.

The rally in CV Therapeutics began late in May after the company
reported it successfully completed the first segment of Phase II
clinical trials of CVT-510, a product used to treat irregular
heart activity.  Irregular heart beats, or atrial arrhythmias
account for millions of hospitalizations every year and can be
potentially life threatening situations resulting in stroke or
heart-attack.  The new drug will become their second compound in
Phase III clinical trials, joining their lead product ranolazine.
Researchers say the compound shows little or no effect on blood
pressure, giving it potential to treat atrial arrhythmias by
slowing electrical impulses to the heart.  Analysts believe this
product could be a major discovery in the field of heart-attack
treatments and investors appears to agree with the outlook.  Our
position allows for some consolidation from the recent rally and
provides a conservative entry into this momentum-based speculative

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-35  UXC-SG  OI=56  A=$0.75
SELL PUT  JUL-40  UXC-SH  OI=12  B=$1.38
INITIAL NET CREDIT TARGET=$0.75  ROI(max)=17% B/E=$39.25

Chart =
                         - STRADDLES -

These positions meet our criteria for favorable straddles; cheap
option premiums, a history of adequate price movement and future
events or activities that may generate volatility in the issue
or its industry.  This selection process provides the foremost
combination of low risk and potentially high reward.  As with
any strategy, it should be evaluated for portfolio suitability
and reviewed with regard to your strategic approach and trading

LII - Lennox  $11.75  *** A Second Try! ***

Lennox International is a global designer, manufacturer, and
marketer of a range of products for the heating, ventilation,
air conditioning, and refrigeration (HVACR) markets.  Lennox
participates in four business segments of the HVACR industry.
The first is North American residential heating, conditioning
and hearth products, in which the company manufactures and
markets a full line of products for the residential replacement
and new construction markets in North America.  The second is
the global commercial air conditioning market, in which the
company manufactures and sells rooftop products and applied
systems for commercial applications. The third is the global
commercial refrigeration market, which consists of unit coolers,
condensing units and other commercial refrigeration products.
The fourth is heat transfer products, in which the company
designs, manufactures and sells evaporator and condenser coils,
copper tubing, and related equipment.

We recently offered this position based on the theoretical
discount in option premiums and the play earned a 40% profit
in just three weeks.  Now the stock has broken down after a
recent rally and the prices are once again favorable.  In this
neutral position we are using two out-of-the money options; a
"strangle," to open the position with a delta-neutral outlook.

PLAY (conservative - neutral/debit strangle):

BUY  CALL   SEP-12.50  LII-IV  OI=171  A=$0.38
BUY  PUT    SEP-10.00  LII-UB  OI=20   A=$0.31

Chart =


The Sopranos Take On Wall Street
By  S.P. Brown

When most folks hear the term "extortion and solicitation of
murder," they instinctively think of organized crime, and with
good reason.  These organizations are most likely to employ
such disagreeable tactics to secure payment from recalcitrant
debtors.  After all, it's highly unlikely a collection agency
would accept a receivable for gambling or prostitution

On the other hand, the term "extortion and solicitation of
murder" usually isn't associated with the securities industry,
that is, until yesterday.

In the largest one-day securities-fraud indictment ever, the
Justice Department charged members of the country's five
largest organized-crime families with brokers and investors
out of $50 million over five years.

The resourceful mobsters' digressions include controlling and
infiltrating broker-dealers, conspiring with issuers of
securities and individual stock brokers, scheming to defraud
union pension plans, manipulating stock prices and using
violence and intimidation - definitely not Emily Post-approved

Among the many issues manipulated, two bulletin board stocks,
Wamex Holdings (WAMX.OB) and E-Pawn.com (EPWN.OB), are
particularly noteworthy.  Both issues came to market in March
near the apex of Internet mania.  Wamex hit the street at $20
a share.  Soon after, the company split four-for-one in early
April.  Since then, Wamex has seen its shares slump to $1.63.

As for E-Pawn.com, it came public at $2 a share only to be
quickly chatted up to $10 before the mobsters closed their
positions.  The stock is now trading at $1.31 (I use the word
"trading" loosely, since the SEC has suspended trading in both

Both companies appeared to have the right business model (at
least for selling stock).  Wamex claimed it was about to begin
operating an alternative trading system so customers could
trade directly with one another, while E-Pawn.com claimed to
be a Web site designer and e-commerce software developer.

So, while getting caught perpetrating its latest scam might
prove embarrassing for the mob (mobsters generally dislike
publicity), it should also prove embarrassing for the Nasdaq,
which still appears to be overly cavalier in who it allows to
make markets in OTC stock, particularly in small-cap stocks
where there is often only one market maker.

In contrast, the NYSE's auction system makes it much more
difficult to manipulate price, regardless of size, because of
the close scrutiny the exchange applies to each specialist.
In fact, the specialist is mandated by the exchange to
maintain a fair and orderly market.  In other words, he's
mandated to bridge liquidity by entering alternative bids
and/or asks to narrow spreads and improve a stock's price
continuity.  No such mandate exists for OTC market makers.

I know the Nasdaq likes to portray itself as the market for
the next 100 years, but it could take a few pointers from the
stock market of the last 100 years by policing market making
activities more thoroughly.  Having mobsters making markets in
some of your securities can't be the greatest PR.


Strangle The Market, Not Yourself

With the market in such a tight trading range, more and more
people have been asking us, where is the market going now and
how do we make money while we are range bound?  To answer the
first question you to take a look at the technicals of the NASDAQ
and the DOW.  We have had quite a bit of market positive economic
data in the past two weeks.  All signs point to a slowing economy
and hopes are now that Uncle Al and Co. won't feel the need to
kill the markets any more than they already have.

It appears that we have set a bottom in place at the May 24th
low of 3042.  Additionally, We had a nice gap up on the 2nd of
June.  The most significant technical aspect of this gap up is
that we didn't continue to soar up in a straight line after the
gap as we did on the 14th of January and the 25th of April.  When
we did that, the rally eventually failed.  Instead, on this gap
up we have remained range bound for the past 9 or 10 days.  This
could be the beginning of a very important base from which we
might move higher. A cup and handle pattern could be forming.
Holding this new support level is very important. Volume continues
to be a bit concerning, but with many companies beginning to break
out of established bases, things are looking better.

The Dow:
Actually, the DOW has held up nicely during these past 3 months.
It has held support around the 10,200 level.  That is important
should the index start to head down to hold this level.  If not,
we could move back to the 9700 level.  Overhead supply is going
to prove to be tough resistance around the 11,200 level.

So how do we make money in this market?
Using stop losses is going to be key in any strategy but even
more so when the market is slow and range bound. Eventually, the
markets are going to move and you don't want to have calls or
puts hanging out there with no safety net in place.  Probably
one of the best strategies in this market right now is a covered
strangle.  It has been mentioned in previous issues of the
newsletter.  This is high return strategy and can really pay
off in a slow market.  Let's look at a real life example.

Now, keep in mind, my partner and I tend to use this strategy
more conservatively that other people might.  I'm going to
show you what we are doing for our clients right now.  Let's
take a look at YHOO.  A daily chart on YHOO shows a current
price of 135.13 (6-15-00 9:45 CDT) YHOO has resistance at about
154-155 per share.  It appears to have support around 110-112
per share.  What we are looking at doing is selling the July
155 calls for 6 5/8 (CBOE) and sell the July 110 put for 3 1/2
(AMEX).  Assuming you sell 10 contracts on each side of the
Strangle, you'd bring in 10 1/8, or $10,125 (before fees).

Now, this strategy does require some monitoring.  If the stock
really starts to move one way or the other, you have two choices
to help curtail losses.  The easiest is stop losses.  You could
do simple things like placing a 25% buy stop loss on both options.
Or, you could watch them more closely and cover the stock as it
moves beyond your strike price.  For example, if the stock starts
to make a pre-earnings run (July 11th after the close) and it
nears and crosses over 155 per share simply buy 1000 shares of
YHOO at 155 and now your naked call is covered and your Put will
likely expire.  On the other hand, if YHOO falls and goes to
110 per share, sell short 1000 shares of YHOO at 110.  Now, your
naked put is covered and the Call will likely expire.  As I said
earlier, this is a conservative way to play this strategy.  You
can certainly bring in more premium by lowering your strike on
the Call and raising your strike on the Put.  Obviously the risk
increases with doing this, but that is something each person has
to decide for themselves or with the help of a trained professional
who is seasoned in trading aggressive strategies.

Robert L. Norman
Vice President-Investments
J. Michael-Patrick L.L.C.
Contact Support

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See Disclaimer in section one


Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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