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Daily Newsletter, Sunday, 06/18/2000

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The Option Investor Newsletter                   Sunday  6-18-2000
Copyright 2000, All rights reserved.                        1 of 5
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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
         WE 6-16          WE 6-9           WE 6-2          WE 5-26
DOW    10449.30 -164.76 10614.06 -180.70 10794.76 +495.52  -327.61
Nasdaq  3860.56 - 14.28  3874.84 + 61.46  3813.38 +608.27  -185.29
S&P-100  788.74 +  9.04   779.70 - 12.99   792.69 + 56.61  - 16.87
S&P-500 1464.46 +  7.51  1456.95 - 20.31  1477.26 + 99.24  - 28.93
RUT      513.74 -  9.32   523.06 + 10.03   513.03 + 55.66  - 22.33
TRAN    2673.19 -116.98  2790.17 - 39.19  2829.36 +141.81  - 54.45
VIX       23.55 -  1.64    25.19 +  1.08    24.11 -  3.38  -  1.28
Put/Call    .53              .45              .41              .65
******************************************************************

Get out the Raid, the cockroaches are running.

The market was staggered this week as a flurry of cockroach
sightings sent institutional traders to the sidelines. The
earnings warnings sent shivers up the spine of even the most
aggressive traders. The problem is not so much the ones that
warned as the ones that have not warned yet. Using whatever
analogy you want, cockroaches, mice or moths, there is
never just one. If you see one you can bet there are many
others still in hiding. Roger Perry calls this the "cockroach
theory." When referring to earnings warnings the analogy is
very true. When one company in a sector warns it is likely
only the first one to appear. Using the warnings in the
financial sector recently you can see how this works. One
broker warns that slowing volume would impact earnings and
others follow suit on the heels of analysts downgrades of
the sector. A major bank warns this week and smaller banks
follow suit. Sector downgrades after the announcements push
prices down even further.







Last week I said any Dow rally would have to be led by the
financials which were already bloody. After the Wachovia
warning this week the financials are still leading the Dow,
down not up. Sector leaders were racing toward the cellar
on Friday on fears of the continued impact of higher interest
rates. JP Morgan had a huge drop of -$9 along with the most
recent earnings warning UnionBanCal also -$9. Adding to the
overall stink was TER which said bookings would be flat for
the second quarter compared with previous estimates of +10%.
Xerox joined the parade with a warning that earnings would
be below estimates due to soft sales.

As more and more companies confessed their sins, investors
became more unsure of which way to jump. The only sectors
that were showing strength were Oil Service, on $31 oil,
and some defensive stocks like drugs. There simply appeared
to be no safe haven. Tech stocks, which are very susceptible
to warnings, managed to hold their own but the Dow drag
prevented any rally. The Dow, which had been flat on good
economic news Wed/Thr, dove at the open then firmed at lunch
as bargain hunters came off the sidelines. The bears slammed
the door behind them as the waves of selling began again about
one hour before the close. The volume was heavy with over
one bln shares trading on the NYSE. The end of day volume
was very heavy for a summer Friday. There were huge order
imbalances at the close with large blocks of "sell on close"
and almost no buyers. The Dow was showing -234 at the bell
but dropped another -30 points as trades settled out over
the next 10 minutes. Closing at the absolute low of the day
on exceptionally strong closing volume does not bode well for
open on Monday. Some analysts think it could have been due
to the triple witching options expiration but it would be
contrary to this weeks action over the last year. Volatility
due to witching has been taking place earlier in the week
for quite some time and heavy Friday trading has been non
existent. I think it was fear of future warnings that
finally pushed some institutions over the edge.

Economic reports on Friday were very market friendly on the
surface. With housing starts coming in at the lowest in a
year, down -3.9%, and housing permits dropping -4.3% you
would have expected the market to rally as Fed fears decrease.
What overcame investor optimism was the worry that the
economy was slowing too fast. The ripple down impact of
just the housing drops would hurt wood and paper companies
as well as appliances, furniture, etc. Some analysts are
now predicting only a +12% growth in earnings for the S&P
compared with previous estimates of +18%. This is a huge
drop of -33% and considering the heaviest warnings do not
occur for two more weeks the worst may still be ahead of us.
The most warnings occur the last week of June and the first
week of July.

I started planning this commentary with a bullish bias, again.
However, my outlook changed the farther I got into my research.
On the positive side I felt the Nasdaq was still building
support just under 3900 and preparing for an explosive
breakout. To support my positive market bias I felt the OEX
and SPX, which are better indicators of the broader market,
were also building support at the higher end of their recent
ranges. Also the QQQ failed to break support at $90.










What changed my view was the high volume selling at the close
Friday and the realization that the worst is still ahead of
us in terms of warnings. Now remember it is the perception
of reality that governs our fate, not reality. If institutional
investors feel that the next three weeks are going to be very
rough and they move to the sidelines then it makes no difference
if the warnings actually come to pass. The move to the sidelines
in advance will control the market direction next week. Factor
in the Fed meeting on the 27/28th and you get another rocky
week. It makes no difference that most expect no hike from the
Fed. It is the Fed dread that causes the volatility.

A bull could look at the three charts above and visualize
a possible breakout since all are trading at or near the
high points in their range. A bear would look at the three
charts and visualize a possible roll over on each since that
is the current trend. A bounce off upper resistance and
fall back again.




The key here is still "planning your trades and executing
your plan." Our plan from last Sunday was to be market neutral.
I suggested that 3900 was the current target benchmark. A
breakout over 3900 on strong volume would be a signal to go
long and I suggested staying flat under 3900. If you took my
advice you saved a lot of time, money and emotional headaches
last week. With the Dow looking like an EKG and likely to
continue back down to a retest of 10300 we want to be very
careful in the market. By setting a benchmark like 3900 it
takes all the complicated decisions out of the market. The
Dow will drag on the Nasdaq so the one we want to watch is
the Nasdaq. By focusing on the 3900 you eliminate the noise
of the market. Last week was VERY NOISY. If you attempted to
trade it your results may not have been very satisfactory.
Sure there were individual winners like SDLI but overall it
was very choppy.

The game plan for this week is still the same. Wait for a
breakout over 3900 on strong volume and then go long. The
economic calendar is very light which could give us some
positive bias but institutional investors will be listening
with a stethoscope for signs of possible earnings warnings.
WHEN they come, the sector for each offender will be hit
with downgrades and selling. Your stock may not warn but
if another leader in the same sector warns then your stock
will drop in sympathy.

Trade smart, don't buy too soon.

Jim Brown
Editor


P.S. This week I am reprinting my "Exact Instructions" Options 101
article from last fall. This article was in answer to readers
requests on how to turn $10,000 into $50,000 in one year using
options. Check it out on the website.

http://www.optioninvestor.com/page/oin/education/opt101/1999/12-05.html


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**************
EDITOR'S PLAYS
**************

I took my own advice last week and waited patiently for 3900
which never came. I did get stopped out of my VIGN and YHOO
plays on the Tuesday dip. I was in no hurry to jump back into
the fray. I am currently flat with the exception of my LEAPS
on MSFT, NOK, VOD.

MSFT $72.56



VOD $49.56



NOK $58.75




**********

I am paitiently waiting for 3900 and heavy volume. Choppy
summer markets are very hard to trade and you must follow
the plan. Sure, I will probably lose some potential profits
on a couple stocks that break the rules I can't lose any money
sitting on the sidelines. Patience is a virtue. It is not
fun but it is cheap. Cash is king!

Good Luck

Jim



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

Oracle, Tibco, and Micron Technology!

Blue chips ended the week on a sour note, as the DOW got
clobbered for -265 points while the NASDAQ closed up +14 points
on average volume. Volume was above average for the NYSE, as
Xerox led the active list after pre-releasing earnings that would
disappoint Wall Street. The list of negative pre-announcements
continues to grow at an above average rate, and with several
weeks before the July earnings run we will probably see quite a
few more disappointments ahead.

Even though we are still several weeks from the major earnings
run, there will be a handful of companies that are due to report
their earnings. Now, below is a small list of equities (that
should be reporting their earnings this next week) and our
Pinnacle Index for those particular stocks. The Pinnacle Index is
a proprietary product that determines current market sentiment
and expectations for underlying equities and indexes, which is
based upon speculation in the option markets. Also included are
their expected earnings, the infamous whisper number (if
available), their estimated earnings release date, as well as the
put/call ratio if available.

What we look for are liquid stocks/options that garner a lot of
interest from the investment community. Most of the issues are
high tech, and are thus more aggressive. We then filter out many
of the equities, only to show stocks with excessive optimism or
pessimism. From a contrarian standpoint (a high number is a good
indication of extreme optimism, and a low number is a good
indication of extreme pessimism) you should buy when its low, and
sell when its high. Last quarter, we highlighted some stocks with
a Pinnacle Index that were stratospheric (as high as the upper
20's). Needless to say, these stocks had so much pent-up
enthusiasm, that after their earnings, they tanked. It is the old
adage, buy the rumor - sell the news. There were also numerous
companies with a Pinnacle Index less than one. However, once
these companies came out with their bad quarter, the stocks
rallied due to the oversupply of pessimism.


Company     Symbol  Pinnacle     Expected    Whisper#:   Put/Call
                    Index(PI):   Earnings:                Ratio:

Oracle      ORCL       4.45         .26        .28        0.56
Tibco Soft  TIBX       1.30         .01        .02        n/a
Manugistics MANU       2.23        -.04       -.03        0.63
Micron Tech MU         3.16         .34        .37        0.78


Now looking at the above list, there is neither an extremely
optimistic or pessimistic security in the group. They are all
middle of the road, which is consistent with the sentiment that
is being witnessed in the market currently. Tibco Software's
Pinnacle Index is the lowest out of this group, which may
indicate the potential for a rally, but considering the positive
move that the stock has made during the last week makes us a
little more cautious. Micron Technology and Oracle both show
signs of being a high expectation stock, so the chance of these
issues selling off after earnings is greater than average. Not
only are their Pinnacle Indexes slightly higher than average, but
their whisper numbers are expecting a blowout quarter. The
perfection that is priced into these companies is great, and
should they hint at a slowdown or mention any other negatives, a
fall could be in store. We will watch the activity in these
issues at the beginning of the week, because the two trading days
ahead of earnings is when the biggest speculators come out to
play, which then could dramatically change the sentiment.
However, until a change occurs, we will continue to play the put
side on this market. Have a good week!


BULLISH Signs:

Interest Rates (5.875):
With the long bond breaking below the crucial 6% benchmark, fears
of higher rates may finally be subsiding.

NASDAQ Short Interest:
As of May 15, the level of short sales not yet closed out, known as
short interest, climbed 4.80% to 2,780,161,105 shares. 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.

BEARISH Signs:

Slowing Economy:
If the economy is truly slowing down, we will start feeling the
effects once corporate earnings report over the next couple of
quarters. This has just occurred as Circuit City, Electronics for
Imaging, Proctor & Gamble, Lands End, H&R Block, McDonalds,
Electronic Data Systems, Mylan Labs, Harmonic Lightwave, NBC
Internet, Wachovia Bank, Perot Systems, Xerox, and Qualcomm have
all warned of poorer times ahead or have had earnings cut by
analysts.

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                        (6/16)      (6/20)       (6/22)
*****************************************************************
Overhead Resistance (805-825)    10.47
Overhead Resistance (775-800)     1.38

OEX Close                       788.74

Underlying Support  (745-770)     1.32
Underlying Support  (715-740)     4.53


What the Pinnacle Index is telling us:
Overhead is still strong, but with June expiration done with,
the July data is a little light to be evaluating.  We will be
interested to see what side the speculators choose this upcoming
week.


Put/Call Ratio
*****************************************************************
                                Friday      Tues       Thurs
Strike/Contracts               (6/16)      (6/20)      (6/22)
*****************************************************************


CBOE Total P/C Ratio            .53
Equity P/C Ratio                .47
OEX Put/Call Ratio             1.23


Peak Open Interest (OEX)
*****************************************************************
                     Friday          Tues            Thurs
Strike/Contracts     (6/16)         (6/20)           (6/22)
*****************************************************************

Puts                680 / 4,419
Calls               800 / 2,669
Put/Call Ratio        1.66



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

June 16, 2000                           23.55



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

As of Market Close - Friday, June 16, 2000

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

DOW Industrials   10,200  11,400  10,449    Neutral   5.05
SPX S&P 500        1,350   1,500   1,464    Neutral   5.30
OEX S&P 100          725     800     789    Neutral   5.30
RUT Russell 2000     450     550     514    Neutral   5.05
NDX NASD 100       3,000   4,000   3,787    Neutral   5.30
MSH High Tech        800   1,050     998    Neutral   6.06

XCI Hardware       1,250   1,600   1,517    Neutral   5.30
CWX Software       1,050   1,300   1,258    Neutral   6.06
SOX Semiconductor    850   1,200   1,158    Neutral   5.30
NWX Networking       900   1,100   1,180    BULLISH   6.02
INX Internet         500     800     587    Neutral   5.30

BIX Banking          520     640     524    Neutral   6.09
XBD Brokerage        450     495     498    BULLISH   6.15
IUX Insurance        540     620     624    BULLISH   5.16

RLX Retail           900   1,000     840    BEARISH   6.09
DRG Drug             355     400     399    Neutral   4.28
HCX Healthcare       710     800     819    BULLISH   6.15
XAL Airline          140     155     160    BULLISH   5.25
OIX Oil & Gas        265     300     317    BULLISH   5.11

Posture Alert
Several earnings warnings sent the Dow into a tailspin Friday, as
the blue chip index closed down -265 on above-average volume. The
NASDAQ held up like a champ, but it too is a few pre-announcements
away from selling off. Regardless, sectors showing continued
strength were Oil & Gas (+2.66%), Semiconductors (+2.28%) and
Networking. On the downside Friday was the Banking and Insurance
indexes, which posted losses of -6.37% and -3.82%.



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

Biotechs Provide the Leadership, as Internets Prove There is No
Free Lunch.
By Buzz Lynn

Index             Last    Mon    Tue    Wed    Thu    Fri    Week

QQQ Nasdaq-100    93.78  -2.69   3.13  -1.75   1.63   0.50   0.81
HHH Internet     118.88  -7.06   1.19  -1.19   1.00   0.38  -5.68
BBH Biotech      164.00  -7.75   5.75  -2.06   2.06   6.00   4.00
PPH Pharm         98.81  -0.69   3.44   1.69   0.13   0.38   4.94
TTH Telecom       77.25  -0.94   1.81  -0.13  -0.19  -0.06   0.50
IAH I-net Arch    91.00  -1.06   0.94   0.06   2.06   0.50   2.50
IIH I-net Infr    55.75  -4.06   1.19  -0.13   0.38   0.25  -2.38
BHH B2B           38.13  -2.44   0.81  -1.38  -0.31  -0.31  -3.62
BDH Broadband     88.50   0.88   2.13  -2.44   2.13   0.25   2.94
SMH Semicon       96.00  -3.81   4.00  -4.25  -0.81   0.63  -4.25

**************
New Plays
**************

TTH - Telecom $77.19 (+0.44 last week) Not optionable.  Put this
one on your short candidate list.  It's not as though the sector
forgot how to grow and utilize bandwidth.  However SBC, AT&T (T)
and WCOM carry the most weight in TTH's composition, all which act
as the ball and chain on the index.  FON isn't helping since it is
unlikely to get anti-trust clearance to merge with WCOM.
Meanwhile BEL and GTE were finally given FCC approval to merge,
but not without first agreeing to spin off some long distance and
Internet assets.  There should be no doubt that the long-term
outlook over a period of years is good.  Nonetheless, on a short-
term sentimental and technical basis, this HOLDR is rolling over.
$77-$78 is providing tremendous resistance.  That figure use to
provide support until a breakdown in early May from which TTH
hasn't been able to recover.  While the 10-dma has held as support
(currently $76.50), the 50-dma (currently at $78.53) is in descent
mode and will likely provide resistance.  The recent gains have
come on low volume with last week's consolidation on lower volume
still.  The last three days show a series of lower highs.  There
just isn't any interest here, yet the stochastic is deep in
overbought territory.  That means that if interest wanes further,
selling volume could increase noticeably.  That could take TTH
down to support around $74 in a hurry - perhaps $73 if it decides
to fill the gap created from the gap up two weeks ago.  Look for a
descent below $76.50 with a general market rollover.  That would
confirm the direction.

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

QQQ - NASDAQ 100 $94.50 (+0.94 last week) Optionable.  We feel
like Christopher Columbus insisting the world is NOT flat,
although the NASDAQ is proving us wrong on that score.  In fact,
the NASDAQ world is proving to be flat, flat, flat.  QQQ has been
stuck in range between $91 and $94 in general, and $90-$95 in the
extreme, and currently near the top of its range at $94.  Though
despite the weakness in the Dow on Friday, NASDAQ has shown
remarkable staying power all week by establishing a series of
higher lows.  That's a good sign.  Yet still the NASDAQ and QQQ
continue to bump their heads on firm resistance - $95 in the case
of QQQ.  That said, we would not be surprised to see QQQ continue
to trade in this narrow range until some of the uncertainty on the
Fed's next move is eliminated.  While we see plenty of signs that
inflation is well in check (meaning that Greenspan has no reason
to raise rates again), four of the last six rate hikes have yet to
take effect while the price of oil is marching up again.  Both
speak volumes about corporate profit growth going forward.  It's
pretty hard for stocks to rise when profits are slowing.
Accordingly, we look for the narrow trading to continue.  Here's
what to look for if you want to play the Q's.  Watch for a move
over $95 with swelling volume if you contemplate going long or
buying calls.  Friday didn't count because of the volume
substantially under the ADV coupled with typical triple witching
volatility.  Otherwise look for a bounce at $90 or $91.  If
contemplating going short or buying puts, watch for the breakdown
at $95, like on Friday afternoon, or for a breakdown under $91.
Sound too tough to trade?  It is.  There is no shame in sitting
out until a trend is established.

At Support:
BUY CALL JUL-88 QVQ-GJ OI=  854 at $10.00 SL=7.00
BUY CALL JUL-90 QVQ-GL OI= 2511 at $ 8.50 SL=6.00
BUY CALL JUL-91 QVQ-GM OI= 1046 at $ 7.88 SL=5.75

SELL PUT JUL-86 YQQ-SH OI=20957 at $ 2.44 SL=1.25, Huge OI

At Resistance:
BUY PUT  JUL-98 QVQ-ST OI=  505 at $ 7.63 SL=5.25
BUY PUT  JUL-95 QVQ-SQ OI=  706 at $ 5.88 SL=4.00
BUY PUT  JUL-94 QVQ-SP OI= 1116 at $ 5.50 SL=3.50

Average Daily Volume = 27.74 mln
/charts/charts.asp?symbol=QQQ

------

BBH - Biotech $163.75 (+5.75 last week) Optionable.  Forget the
stairway to Heaven.  We'll take the double helix route to profits.
BBH finally broke out of the trading range by piercing $160 to the
upside.  Helping confirm the move were two nice bounces at $161
intraday.  Volume exceeded the ADV by 18% too.  While it isn't
stellar, it's a welcome site.  So what's it all about?  Banc of
America Securities re-initiated their biotech coverage.  Two of
BofA's favorites, AMGN and IMNX are two of the largest components
of the BBH, which sent the index soaring.  It didn't hurt either
that most of the other issues acted in sympathy to BofA's strong
sector recommendation.  Overall, we expect that sentiment to
continue for the next few days, which could keep the sector
advancing.  It's amazing what a whole sector upgrade can do to
change sentiment.  DNA was the only drag on the index.  That
happens if you announce that your heart drug failed in trials.
While Friday's BBH close looks strong going forward, it could
encounter mild resistance at $164, the same level encountered at
a recent peak on June 6th.  Good technical support can be found
at the 5-dma and 10-dma, both of which are at about $157.50.
Historical support is at $160 and $161.  Consider target shooting
at these levels depending on your level of risk tolerance.
Otherwise, look for the move over $164 as a sign of confirmation
to make your entry.

At support:
BUY CALL JUL-155 BBH-GK OI=  93 at $18.25 SL=13.25
BUY CALL JUL-160 BBH-GL OI= 157 at $15.63 SL=11.25
BUY CALL JUL-165 BBH-GM OI=  95 at $13.13 SL=10.00

At resistance:
BUY PUT  JUL-165 BBH-SM OI=  42 at $13.50 SL=10.25
BUY PUT  JUL-160 BBH-SL OI=1257 at $10.88 SL= 8.25
BUY PUT  JUL-155 BBH-SK OI=  58 at $ 8.50 SL= 6.00

Average Daily Volume = 654 K
/charts/charts.asp?symbol=BBH

------

IAH - Internet Architecture $91.50 (-1.38 last week) Not
optionable.  We're still hard pressed to call this a breakout
though it did technically break resistance.  Nonetheless, Friday's
trading range remained mostly higher than Thursday's close, which
by definition means it didn't fall through previous resistance in
failure - thus we're keeping it.  IAH is encountering mild
resistance now at its intraday high of $92, while inching up to a
more solid resistance level at $93.  The biggest component, CSCO
appears on the right track for more gains.  However, despite HWP's
whacking at someone's utterance of revenue shortfall, analysts and
investors alike are coming to its defense, which should keep it
and IBM (golden by association) moving up in the coming days.  We
like IAH's newfound support at $91, but that could give way to
$89 on a bad day, so be careful if the NASDAQ shows any weakness.
That said, greet any pullbacks to $89 as a target shooting
opportunity.  Otherwise, it might be better to wait until IAH
moves over $92 with some conviction before taking a position,
especially if it's a recovery bounce from a lower number.

Average Daily Volume = 71 K
/charts/charts.asp?symbol=IAH

------

BDH - Broadband $88.50 (+2.94 last week) Not optionable.  Despite
our favorite broadband issues like JDSU, CMTN and GLW giving back
ground on Friday, the monsters (LU and NT) held their ground.
Coupled with nice gains in CNXT and RFMD, BDH squeezed in a higher
low before turning back up into a decent finish.  The volume was a
little low for our liking though.  So make sure the general market
is moving in your favor before you pull the trigger.  The overall
technical picture is that the lows are getting higher as the highs
get capped at $89 - a slowly ascending wedge.  We sure like the
continued bounces off the 10-dma (currently $86.88) as BDH has
been moving up.  Look for that support to continue.  Even the 5-
dma of $87.58 worked on Friday.  You might want to target shoot
one of those levels based on your risk tolerance (not like there's
a big difference) for the best entry.  Otherwise, it might be best
to wait for a move over $89.50 to get in.  For those who missed
Thursday's write-up, here's a trader trick that might make/save
you money if you employ it.  It's pretty much universal and not
just limited to this play.  "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."

Average Daily Volume = 197 K
/charts/charts.asp?symbol=BDH

**************
DROPS
**************

IIH - Internet Infrastructure $56.00 (-2.38 last week) Not
Optionable.  This rat in a cage got frustrated.  IIH continues to
flatline and would have dropped substantially on Friday had the
EXDS component not been up over $10.  With EXDS splitting this
week, it won't be long until it runs out of gas too leaving
nowhere to go but down for the whole index.  While we'd expect a
breakout, we don't know in which direction that will happen, so
we're taking off the play list this weekend until we see a new
trend.  Our best guess says that IIH breaks to the downside, but
there isn't enough evidence to label this as a short play either.

Average Daily Volume = 301 K
/charts/charts.asp?symbol=IIH

------

SMH - Semiconductor $96.00 (-2.63 last week) Not optionable.  We
noted Thursday, "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."  After Friday's successive
lower high, we're calling it a trend.  Support is still good at
$93.50, but SMH can't gather a head of steam to carry it over
$100.  With all the "hot money" excitement coming earlier in the
month, it appears as though the 5-dma ($95.91) and 10-dma ($96.43)
are setting up to provide resistance now.  Time to step aside and
wait for a clear trend to emerge.

Average Daily Volume = 195 K
/charts/charts.asp?symbol=SMH

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

BHH
HHH
PPH



*************
COMING EVENTS
*************

For the week of June 19, 2000

Monday

None Scheduled

Tuesday

Trade Balance      Apr   Forecast:  -$29.5B  Previous:  -$30.2B
Current Account    Q1    Forecast:  -$109.5B Previous:  -$99.8B
Treasury Budget    May   Forecast:  -$2B     Previous:  -$24B

Wednesday

None Scheduled

Thursday

Initial Claims    06/17  Forecast:   N/A     Previous:   296K

Friday

None Scheduled


Week of June 26th

06/26 Existing Home Sales
06/27 FOMC Meeting
06/27 Consumer Confidence
06/28 Durable Orders
06/29 GDP - Final
06/29 GDP Chain Deflator
06/29 Initial Claims
06/29 New Home Sales
06/29 Help-Wanted Index
06/29 FOMC Minutes
06/30 Personal Income
06/30 PCE
06/30 Chicago PMI
06/30 Michigan Sentiment



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DISCLAIMER
***********

This newsletter is a publication dedicated to the education
of options traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in
options. It is possible at this or some subsequent date, the
editor and staff of The Option Investor Newsletter may own,
buy or sell securities presented. All investors should consult
a qualified professional before trading in any security. The
information provided has been obtained from sources deemed
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely
information to its subscribers but cannot guarantee specific
delivery times due to factors beyond our control.
The Option Investor Newsletter                    Sunday 6-18-2000
Sunday                                                      2 of 5

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

Watch The Money Flow And Volume
By Mary Redmond

It is always important to become familiar with the trading
pattern of each stock before placing trades.  Some stocks have
more predictable patterns than others, and the better you
know the company, the more likely you are to trade profitably.

For example, in the last couple of weeks I made over 100% return
on an original purchase of NT leaps.  I had been watching the
stock carefully for several months.  On January 13th the stock
traded at $50 (split adjusted).  The third week in March it hit
a high of over $71.  The week of the April crash the stock hit
a low of $45.  However, it did not dip below the 200-DMA of
$43.57, which I interpreted as a sign of technical strength.
From April to May it basically traded in a tight range from $50
to $60.  When the Nasdaq was down to 3100, I bought NT Jan-01,
$60 leaps at $8.75 when the stock dipped to $48.

The stock crossed the 50-DMA of $54.98 on May 31th on strong
volume.  From there it easily cruised up to $60 as the Nasdaq
recuperated.  I sold my Jan-01, $60 leaps at $13 and bought
Jan-02, $70 leaps at $16.  The stock pushed through resistance
at $60, possibly on the steady stream of good news which was
released in the last few weeks.  This week NT has continued
to climb on steady volume.  Currently the leaps are trading
at $20.50.  I think the stock may move further in the next
few weeks, so I wanted to hang onto my leaps.  However, it is
usually best to sell at a profit when you can.  If you can't
resist hanging onto a winning position, sometimes you can
sell half of your position.  For example, if you bought 10
leaps which are at a profit, you can sell 5 of them and
keep the rest.  With short term options it is always best
to take a profit when you have it.

One of the reasons I felt the company had solid technical
strength was the fact that the on-balance volume was steadily
increasing as the price was rising.  This is a measure of
the money flowing into a security.  When a security closes
higher than the previous day and the volume is also higher,
this is considered up volume.  This indicator can actually
become very complicated, but you can get a basic idea of the
money flow and the on-balance volume on the OIN live charts.
In addition, watching the daily volume can give an indication
of institutional buying.  NT had consistently high volume
for the last several weeks.  In fact, almost every day in the
last couple of weeks it was one of the most actively traded
stocks on the NYSE, and almost each day showed a gain.

The money flow index indicator is also published in many
financial newspapers, and measures the dollar value of
composite uptick trades minus the dollar value of composite
downtick trades.  In Wednesday's Wall Street Journal, several
stocks were included in the positive money flow index.  One
of these was Qwest communications, a stock which has recently
moved up over ten percent.

It is also important to note that a stock with a very large
market capitalization will generally require a larger inflow
of money to move the price than a small cap company does.  It
takes a lot more money to move a company like Cisco up a point
than it does to move a two or three billion dollar company's
stock up the same amount.  This is one of the reasons that it
is more difficult for a mega-capitalization company to become
increasingly bigger at the same rate as a small one.

AMG Data reported another large inflow of $8.6 billion into
equity mutual funds for the week ending June 14th.  Over 58% of
the total went into growth funds.  In addition, the investment
company institute's web site reported a large outflow from
money market mutual funds for the week ending June 15th.  Retail
money market funds experienced a net outflow of $6.56 billion,
and institutional money market funds experienced a net outflow
of $4.57 billion.  It seems likely that this money is flowing
into the market.  There is still plenty of cash left on the
sidelines, as the ICI reports that $1.682 trillion is deposited
in US money market funds.

I think the retail investing public as well as the institutional
investors have become far more sophisticated in the last decade.
Most Americans have at least a percentage of their net worth in
the stock market.  Stock market investing has become a national
pastime, and most people watch the news or read the newspaper to
get some idea of market fundamentals.  Due to the popularity of
market TV shows and bestselling books on investing, many people
have a basic concept of investing principles.  I think the public
is becoming more attentive to the actions of the Fed, and market
sentiment, and the pattern of cash flows seems to confirm this.
It is likely that many people feel this may be a good time to
invest.

Contact Support


******

Straddling Volatility
By Lynda Schuepp

Volatility trading is a secret known to most successful option
traders.  Currently, volatility is actually quite low now.  Look
at the QQQ'.  The implied volatility is .49 and the historical
is .66 (1 month).  Similar numbers exist for OEX and SPX.  In
fact, most stocks are wedged in a narrow range, with the bollinger
bands quite narrow.  Narrow bands means low volatility.

See chart below on QQQ's




When implied volatility is low (cheaper than historical) then
options are cheap.  Volatility tends to revert towards the mean.
That means that volatility will increase and the cost of
comparable options will also increase.  How do we use this to
our advantage?  BUY options!  You can make a directional trade
by buying calls or puts, or making a non-directional trade by
buying a straddle.

Although many stocks have consolidated and one would think they
are poised for a run up, there are several factors that may
prevent them from doing so.  First is Mr. GreenSPAM!  Oil is over
$30 a barrel and gas is up to $2 a gallon at the pumps, labor is
still tight, and consumers are still spending.  Housing prices
haven't come down yet.  The estimate for debt in the good ole'
U S of A is $35 trillion.  If interest rates continue up -that
won't be good.  But there are gaps to the downside in most charts
that might need to get filled, and it is summertime, and the
living is easy.  On the other hand, it's an election year and
the discount rate is at 6% now.  History has shown that when
the discount rate goes above 6%, the stock market goes south
and potentially the economy goes into a recession.  So the real
question is would Big Al rather wrestle with inflation or a
recession?  All this translates into confusion and lack of
apparent direction for the market.

So how does one use this period of low volatility and make an
option play?  My bet is straddles for two reasons.  I hate to
lose money and I like to be right.  Let me explain.  By playing
straddles, your only risk is if we continue sideways-volatility
would remain stable and your options would decrease in time
value.  However, consolidation can't last forever and when
stocks breakout, it will be with a big bang.  The question is
to which direction.  Because I like to be right, I give myself
plenty of time.  When buying a straddle, it is good to go out
3-4 months, that way if the stock doesn't move in the first
month, you can bail out with a minimal loss or stay in if you
feel the move is impending.

Lets look at what can happen, using the QQQ's and analyze the
three scenarios that can happen.  The three scenarios are:
1. QQQ's go up
2. QQQ's go down
3. QQQ's stay range bound.

We will look at the "at the money" strike (95) for all three
scenarios and assume a 10 point move in the QQQ's.  The Jan01
calls are selling for about 15-1/8 and the puts for about 12-5/8,
total cost of the straddle equals 27-3/4.

Scenario 1: The QQQ's move up 10 points in the next month.

With that kind of move you would expect that volatility would
revert back to its mean and that the options would go up in
price.  We can project what our options would be worth by looking
at the December options with a strike that is 10 points LOWER
than our current strike price. Unfortunately, there are no Dec 85
strikes, so we'll have to average the price of the 84 and the
86 strikes.  The estimated December 85 calls are worth about
19-3/8 and the puts are worth 7-5/8.  However, using the higher
volatility, those options would more likely to be priced at
22-7/8 and 11-7/8.  Now lets' calculate our potential profit in
this scenario.  Our initial cost was 27-3/4 (15+12-5/8).  The
value of our straddle one month later would be worth 34-3/4
(22-7/8 + 11-7/8)for a 7 point profit in one month or a 25%
monthly return.

Scenario 2: The QQQ's move down 10 points in the next month

Again with that kind of move you would expect that volatility
would revert back to its mean and that the options would go up
in price.  We can project what our options would be worth by
looking at the December options with a strike that is 10 points
HIGHER than our current strike price of 95. Unfortunately, once
again there are isn't a 105 strike, so we'll have to average the
price of the 104 and the 106 strikes.  Using the projected prices
with the higher volatility, the 105 calls are worth about 14-5/8
and the puts are worth 23-3/8 for a total of 38 or a 10-1/4 point
profit or 37% monthly profit.  Note that the value of calls
hardly dropped and that the value of the puts did not accelerate
as quickly.  Because of a general upward bias to the market, it is
more likely here that the QQQ's will go up not down.  Therefore,
the calls are priced higher and the puts are "cheaper".

Scenario 3:  The QQQ's stay at the same level

Since the price did not change, one can expect that volatility,
a measure of the underlying price change would remain about the
same.  We could project what our straddle would be worth by
looking at an "at the money" strike in December.  Once again,
there is no 95 strike so we will average the 94 and 96 strikes.
The calls would be worth 13-7/8 and the puts would be worth about
11-15/16 for a total of 25-13/16 or a loss of 1-15/16.  You could
take your loss or let this ride for another month since there is
still considerable time value left.

Now let's look if we did the directional play.  Had you bought
the calls and the QQQ's went up 10 points you would have made
7-7/8 points versus the 7 points on the straddle.  If you had
bought the puts and the QQQ's went down 10 points you would have
made 10 3/4 versus the 10-1/4 points on the straddle.  The choice
is yours.  Since I am a more conservative investor, and I really
hate to lose money, I would buy the straddle and take my chances
of winning between 7-10 points without having to be right on
market direction.  Of course, I would tie up more money, but for
my portfolio, this strategy makes sense.  Remember the higher the
risk, the higher the gain but the higher the potential of greater
losses.  After coming through April and May moderately scarred,
my money is on the straddle here.

Contact Support



***********
OPTIONS 101
***********

This is a reprint of an article I wrote last fall and
has been in the top five most requested since then. Since
we have so many new readers recently we are reprinting
the Options 101 series I did from reader requests. The
stocks and charts used in the examples are from December
when this article was first written but for example purposes
they are still very valid. Take the points discussed in
this article and apply them to the picks from this weekend
and see if your results improve.


Exact instructions
By Jim Brown

Hi Jim, You wrote: "I estimate that a trader who will follow
instructions EXACTLY can net $50,000 on a $10,000 account every
year without fail. Notice I said follows instructions EXACTLY. "

If you give me your exact instructions I would follow them. I seem
to be floundering in the wind with the worst picks, worst entries,
and worst exits. I actually do worse now that I think I know
something. So what are those Exact instructions?

(sentiments sent by dozens of different readers after an
article I wrote last fall)

Now before you read this article, remember I said EXACTLY.

If you have decided that buying options has profit possibilities
but you just do not seem to be able to get the right combination
of techniques to work in your favor then maybe it is time for
the teacher to appear. Many readers find us, take the trial and
then just start blindly buying options just like they would stock.
This is not the same as stock investing. It is not even close.
This is also why the returns are so much greater. Readers that
blindly buy call options on faith after reading two or three
newsletters have about as much chance of success as a novice
bettor walking up to a craps table in Vegas and putting $2,000
down on the pass line. Actually your odds would be better on
the craps table.

An educated options trader however should profit from 70% of
their trades. It is all a question of timing. Like a surfer
facing endless waves or a batter in batting practice, eventually
you will get that perfect setup. You may swing at a few extra
pitches that were not perfect out of boredom but if you wait
long enough that perfect pitch will arrive. A surfer on a calm
day may sit on his surfboard for long periods of time waiting
on the best wave. The memory of the time and effort he spent
just getting to his launch point hundreds of yards off the coast
will force him to wait for the right one.

So our task is to prepare ourselves to execute and execute only
when the time is right. I know I lost half of the readers with
that last sentence. The type "A" personalities would rather
throw money at dozens of plays, hoping that the winners made
up for the losers, instead of only playing the winners. In
reality they need to make more money, more often in order to
make up for those losers. This is failure at a fast pace.

It never ceases to amaze me how so many people can read the
same play recommendation and get a different answer. People
emailed me asking for "exact instructions" because they were
losing on almost every play and others are emailing us with
success stories on the same plays. If you have not read the
Traders Corner articles by Janar you should stop and do that
right now. I don't know if it is his marine training or
something else but when he reads the newsletter he "reads"
the newsletter. He follows the instructions exactly on each
play and he is constantly profitable. In his case the
key is discipline. He waits for the entry points, EXACTLY.
He sells for a profit. He cuts his losses quickly. He is not
in the market every day. The data you need to have successful
investments is in the newsletter. It is up to me to show you
how to use it.


These are the points you need to focus on in order to succeed.
I will cover each in detail.

Selection
Targets
Plays
Entry point
Stop loss
Expectations
Selling for a profit


Selection:

The type of stock YOU decide to play is crucial to your success.
A fact we have discovered since we started publishing the
newsletter is people with small accounts take the biggest risks.
Investors with large accounts tend to be less aggressive and
manage risk better. I think the people with only $5,000 are
so driven to double or triple their capital that they will
play only the high risk - high reward plays. The large account
holders are content with 20%-30% per month safely because they
don't need the money to make their mortgage payments or Porsche
lease. This proves the old axiom "the rich get richer and the
poor get poorer" again but on a different scale.

Since the number of emails I received appeared to be from
traders that were not having much success I am going to slant
this article to traders with less than $10,000 to invest. If
you use more than that to trade options this will still give
you a basic understanding of the right way to trade.

When selecting a stock/option trade you need to take into
account the difference between the bid and ask (spread) on
the options. If you can only afford to lose $500 on a trade
then a stock like QCOM with a spread of $2.00 is not where
you want to be. Yes, options on QCOM can be profitable due
to the trading range but the spread is tough to overcome
when the trade goes against you.  If there is a $2 spread
when the stock is moving up, then there is likely a $5 hit
when the stock turns sharply down.

I know you have seen it. Take this example:

QCOM $384 DEC-390 call AAF-LX Bid=$16.13 x Ask=$18.13

You buy the call and imediately you are down -$2.00 from
the spread alone. If the stock turns down and you know QCOM
can drop $5 in mere seconds, the ask may drop to $16 and the
Bid to $14 before you can even see it and react. If you have
several contracts you can be down -$2,000 in a heartbeat.
Don't even take into account stop losses on this stock until
you are profitable. The intraday option price swings can be
$10 and will knock you out for a loss and then rebound in
seconds. This is a stock not to play with a $10,000 account.
Does this mean you can't score the big gains? Of course not.

Using the example above only 2 contracts would cost you
$3,600 or 1/3 of your trading capital. Using the same capital
in a lower risk stock will let you sleep better and you can
still make the same returns.

Example:

VOD $49 - Jan-50 Call VOD-AJ Bid=$3.25 Ask=$3.38

You can buy longer calls (Jan) and get 10 contracts for less
money. ($3,250) Now a $2.00 move in VOD x 10 will net you the
same as a $10 move in QCOM x 2 contracts. Now what is the
difference in risk? The spread is only $.13 -NOT- $2.00. You
can set a stop at -$.50 below the ask and not get thrown out
on intraday swings. If you do get stopped out you only lose
$500 not 1/3 of your investment. If you buy farther out, April,
July, etc, it will cost you more money and lower your margins
but you have the implied safety of time working for you.
Personally I feel more than two months out is a waste of money
because you should never hold an option for two months under
any circumstances. If it is flat you should sell it and enter
another play. If it goes up over 200% you should sell it and
use half of the money to enter a higher strike. You have no
risk at the higher strike because you already took your initial
investment off the table. If you keep the first position your
entire investment is still at risk. Invest smart not greedy.

When VOD was $53 a couple weeks ago the VODAJ option was $6.25.
Remember, we are going to buy it at $3.38 while VOD is at $49.00.
When it hits $53 again next week the option will again be $6.00.
That is a 75% return on your investment in two weeks or less
and it is very safe. Why would you want to be reckless?

Recap: To get a 400% return on your investment in one year
you need to invest WISELY not recklessly. Minimize spreads,
maximize contracts to get the same returns safely.


TARGETS:

When a duck hunter has a flock of ducks fly overhead he does
not just jump up and start firing at the whole flock. He must
single out one bird, identify it as to type, lead it according
to range and speed and then fire.

The same is true with the 3,000 optionable stocks. You must
narrow your universe to a manageable number. Normally ten
stocks is all a normal person can follow without missing the
moves. The more you follow, the more you miss. The fewer you
follow the more you get to know the individual characteristics
of each stock. There are people who make a good living only
trading AOL. Many others only trade Dell. They may only be in
a trade one or two weeks out of the month but when they are
in a trade they know exactly what to expect and when to get out.

Pick five stocks you want to trade from the current newsletter
plays. Watch them carefully for a week. Chart their support
and resistance. See how close you can come to timing their
next pull back. Practice, practice, practice.

Recap: To get a 400% return on your investment in one year
you need to invest WISELY not recklessly. Narrow your targets
to only 5-7 choices and study them closely.


PLAYS:

If does not make any difference how much money you have to
invest. We have found that the more positions you try to manage
the smaller your overall returns. To maximize your returns on
a $10,000 account you should never play more than three positions
at any time. Two positions at $3,500 each is optimal for a
$10,000 account. This does not put all your capital at risk.
It gives you "breathing room" and lets you sleep at night.
Only having two positions will not impact your returns over
a years time. If you trade according to the plan you should
be out of every position every two to three weeks or less.
With two positions every two weeks you have 52 trades per year.
If 25% are stopped out for a 25% loss and the other 75% avg
a 40% gain using $3,500 as an average position you will have
a $43,225 gain at year end.

52 * 25% = 13 losers  @ 25% = -$ 875 x 13 = -$11,375
52 * 75% = 39 winners @ 40% = +$1400 x 39 = +$54,600

Net profit = $43,225 + $10,000 capital = $50,000

Yes, this is just an example.
Yes, the ratio of losers/winners may vary BUT not by much if
you follow the plan.
Yes, there may be some plays that are flat but there will also
be some plays that will rocket for more than the 40%. What if
you owned RMBS last Friday?
Yes, this is only calculated on 2 open plays of $3500 each at
any one time for one year.
Yes, you could increase your position size (and risk) or the
number of open plays (and amount of risk). Increasing the
size of your positions is acceptable within limits. Increasing
the number of open positions over three is not acceptable.
The more you have at risk, the more likely you will lose it.

Recap: To get a 400% return on your investment in one year
you need to invest WISELY not recklessly. No more than three
positions and preferably only two.


ENTRY POINT:

A good entry point is 90% of the trade. Failing to wait for
a good entry point causes 90% of the losses. If you did not
read my Entry Point article four weeks ago please GO BACK
AND READ IT before going forward.

You can pick the best stocks at the wrong time and still
lose money.

Repeat after me - Every stock will correct. Nothing goes up
in a straight line. I can wait, I can wait, I can wait.
You need to remind yourself of this every trading day.
The penalty for not waiting is loss of money. If you rush
into a position you will have to rush out as well. If you
wait for the proper entry point then everything else is easy.




This chart of Nokia shows two great entry points in the last
ten days. I you bought on five of the last ten trading days
you would have been profitable. If you bought on the other
five days you could have been stopped out when the stock
corrected.




BEAS gave us a great entry point when it pulled back to support
at $80 on Tuesday. The previous entry point on the 12th-16th
would also have provided a good profit.

EVERY CHART YOU LOOK AT WILL SHOW YOU PAST POINTS OF ENTRY
IT IS YOUR RESPONSIBILITY TO PICK THE NEXT ONE BASED ON THE
3-5-7 DAY RULES. That means every stock cycles every 3-7 days
and all you have to do is WAIT for the next cycle.

Do you remember the cartoon with the two vultures sitting high
up in a tree and the caption was "To hell with patience, I am
going to kill something"? In the markets "If you don't have
patience, you will get killed".

If you can't stand to wait then expand your possibles list
and look at more stocks. In any ten stocks there should be
at least one at an entry point every day.

Recap: To get a 400% return on your investment in one year
you need to invest WISELY not recklessly. You MUST wait for
an entry point before making a play.


STOP LOSS:

I am not going into this very deep since I covered it just
recently. The most important thing to remember is to set a
loss limit before you enter a trade. The thought process should
be something like, "If I buy this for $3.50 then my stop will
be $2.50 for a -$500 loss" I can live with that. Once you make
the buy then place your stop. Don't change it downward!

Once the play starts moving upward then you can move your stop
loss up higher each day as well. When the play finally corrects
you will be stopped out for a profit. This is called a trailing
stop. If you are using plays like the VOD mentioned above then
a -25% stop loss is more than adequate. That is -$850 on a
$3380 position. It would take a major event to drop the price
that far in one day. On a play like QCOM it can drop that far
on one large order.

The most important thing about stop losses is to have one and
stick to it. Money management is the only thing between you
and a broken account. If you can't force yourself to sell a
losing position then you do not need to be trading options.
Get a high performing, high tech mutual fund and let them make
the decisions for you.

Recap: To get a 400% return on your investment in one year
you need to invest WISELY not recklessly. You must use stop
losses to save capital in case of a bad entry or serious news
event.


EXPECTATIONS:

Be realistic in your expectations about the play. Every play
is not going to double in the next two weeks. It may never
double. Expectations start with the stock. Using the VOD
example and the chart below a reasonable expectation would be
for VOD to trade in the $52-53 range in the next week or so.
It may have trouble breaking out of that range but a close
over $53 could signal a move to a new and higher range. I
would not go into the play expecting $60.

My expectation would be to plan on closing the play on any
weakness around $53. If it ran up to $53 and then started
dropping again I would close and wait for another entry.
There is a nice pattern of higher lows shaping up. $42 was
the low in Oct, $43 in early Nov, $46 in late Nov. The next
pull back could bring it back to $48. I would look to re-enter
the play with a bounce off $52-53 around $48-49. The pattern
on VOD should be to take a $2-3 profit in the option price
and wait for another entry point. If you go into a play with
unrealistic expectations you will lose. You will always be
waiting for that big bounce that never comes. (read the
turkey hunter article at the bottom) If your expectation
is to just make $2-3 profit in each play then you will be
more successful than the person that is expecting a homerun
on every play.




Recap: To get a 400% return on your investment in one year
you need to invest WISELY not recklessly. You must lower your
expectations to something realistic and plan your trades
accordingly.


SELLING FOR A PROFIT:

This is one of the most difficult things to do in beginning
option trading. The greed factor is running full speed and
coupled with the hype factor it is almost a guaranteed failure.
Traders do not make 100%-200%-300% profits in option trades on
purpose. It does happen but it is an accident. In every major
stock move somebody bought at the previous low and then sold
at the exact high. This lucky person should buy a lottery
ticket. Unless they had insider knowledge AND were psychic
to know exactly where the top was going to be then they were
just lucky. The other 98% of us have to be content with grabbing
a profit out of the middle and then setting up for the next play.
More likely than not the trader with the windfall 400% win will
put it all back in trying to pick bottoms and tops of the next
ten stocks they play. It is like the new slot machine gambler
who walks in to the casino and gets $20 in coins. They walk
up to a bank of machines and "invest" a few. Suddenly the bells
start ringing and they have thousands of coins falling into
their tray. Did they have inside knowledge? No. Did they have
a special technique? No. Could they do it again if they played
every day for a month? No. They were lucky but the casino will
get tens of thousands of dollars of advertising for the couple
thousand the player won. The promise of big winners lures
thousands to the casino ready to reap the same rewards as
player X. Did the casino really lose the money? No. Did you
know that 94% of the people who win jackpots put the money
right back into the machines and go home with less money
than they came with? This is the same with huge gains in
options.

Once a new trader scores a double or triple they are ruined
as traders. Their sights are now set on the stars and they
will swing for the fences with every play, no longer content
with the already huge 25%-40% monthly returns that normal
traders take home routinely.

Fighting the greed factor is hard work. After you have been
burned over and over with large gains evaporating before your
eyes, you will start to view selling for a profit in a different
light. Once you understand the idea of cash flow and compounding
you will see that 25% gains every two weeks really does add up
to big numbers over a years time.

25% every two weeks is 650% per year with out compounding. That
means if you only invested $3500 in every play and only made
one play every two weeks and all were successful (this is just
an example) you would have almost $25000 in 12 months.

You need to learn to treat option trading like a weekly
paycheck and not like a lottery ticket. After all, how many
readers do you think won the lottery last week? But almost
all of them got a paycheck from somebody!

Recap: To get a 400% return on your investment in one year
you need to invest WISELY not recklessly. You must sell for
a profit before the profit becomes a loss.


Conclusion:

This may seem very basic for many readers but there are many
people who still think this is a get rich quick scheme. It is
a get rich scheme but just not as quick as most would hope.
If it was as easy as some claim then there would be no profit
in it. With every investment there are not equal parts of
risk and reward. If that was the case then you would be better
off throwing darts at the Wall Street Journal options page to
decide your next play. Option trading is very profitable to
those who will listen, learn and then put into practice what
they learned. Option trading is very expensive for traders
who think they know it all and don't bother to learn the rules.
Which path you take is entirely up to you and nobody but you
will ever know. Do you want to trade or do you want to be
successful? There is a difference.


Be successful!

Jim Brown
Editor



HUMAN NATURE

The Turkey Story
from Fred Kelly's classic book Why You Win or Lose.

"I learned that men (or women) win or lose not so much because
of economic conditions as because of human psychology".

It dawned on me that my behavior was almost exactly the same
as that of an old man I knew in boyhood. He had a turkey trap,
a crude contrivance consisting of a big box with the door hinged
at the top. This door was kept open by a prop to which was tied
a piece of twine leading back a hundred feet or more to the
operator; a thin trail of corn scattered along a path lured
turkeys to the box. Once inside, they found an even more plentiful
supply of corn. When enough turkeys had wandered inside the box,
my friend would jerk away the prop and let the door fall shut.
Having once shut the door, he couldn't open it again without
going up to the box, and this would scare away any turkeys
lurking outside.

The time to pull away the prop was when as many turkeys were
inside as one could reasonably expect. I remember going out
with the old man one day and seeing a dozen turkeys in his box.
Then one sauntered out, leaving eleven.
'Gosh, I wish I had pulled the string when all twelve were there,'
said the old man. 'I'll wait a minute and maybe the other one will
go back.'
"But while he waited for the twelfth turkey to return, two more
walked out on him. 'I should have been satisfied with eleven,'
the trapper said. 'Just as soon as I get one more back, I'll pull
the string.' "But three more walked out. Still the man waited.
Having once had twelve turkeys, he disliked going home with less
than eight. He couldn't give up the idea that some of the original
number would return. When finally only one turkey was left in the
trap, he said: 'I'll wait until he walks out or another goes in,
and then I'll quit.' "The solitary turkey went to join the others,
and the man returned empty-handed."

Know anyone like this? This market is high. The purpose of trading
is to make money, not get all the turkeys or the highest price.
Kelly wrote his book in 1930. Most of it could have been written
yesterday. Are we turkey hunters or turkeys?



*******************
OPTIONS CLUB UPDATE
*******************

Update from Salt Lake City

Additional Meeting To See More "CANDLESTICK CHARTING CD"

For those of you who attended I  hope you enjoyed the CD on
charting.  The info presented by Gary Griffeth was great.
Thanks Gary!!  I hope he will come back to give us more info
in the near future.  Since we only watched two segments of
the CD, there was discussion about getting together again
and watching several more segments.  (I'LL BRING SPEAKERS
THIS TIME).  One of our new attendees said he has access to
an LCD projector and I've e-mailed him to find out when it
would be convenient.   Let me hear from you if you are
interested and give me two pieces of info.

(1)  When it would be convenient.  Which evenings or perhaps
 Saturday AM or PM.

(2)  What area you are in so we can schedule to be closest to
the majority of the people.  Perhaps we can get a meeting room
at one of the libraries.

I tentatively scheduled a room at the U of U for our downtown
meeting on July 13th or do you have a better suggestion for a
meeting room.  An agenda is needed.  A voulunteer to present
that agenda is needed.  Let me hear from you!!!

Carol Mortensen
SLC OIN Group Organizer




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

Concerning: Technical Analysis - Moving Averages

Hello OIN,

Could you please explain the dma figure that OI uses and how
is it derived?  I think it is a daily moving average index but
I am not sure.  Probably best explained at one of OI's seminars
that I will attend in the near future.

Keep up the good work!

DH

------

Regarding: Moving Averages

Moving averages are one of the simplest and most useful technical
indicators available. The basic definition of a moving average is
that it is the average price of a security at a specific point in
time. The purpose of the moving average is to show a trend over a
given time period and display it in a smoothed fashion. The most
common time periods are probably 15, 30, and 150 days. Each time
span tells a different story and traders use different numbers to
suit their individual needs. The shorter time span produces a more
sensitive moving average while the longer time span reflects a
smoother history.

There are many types of moving averages but the most common is the
'simple' average (not weighted) that is based on the closing price
of the stock for that particular day. Moving averages can become
more powerful when multiple histories are plotted on one chart. An
example would be 'stochastics', but stock-price reversals in the
direction of a moving average are usually more reliable than the
moving average crossover. Remember, false signals can occur when
using moving averages, so successful traders use other indicators
to confirm the direction of price.

Most experts agree that the average itself can act as an area of
support and resistance. Just like a trend-line, the more times a
moving average is touched, the greater the significance of any
violation. A violation of the moving average is usually a warning
that a change in character may be taking place but confirmations
of trend changes should also be sought from alternative technical
indicators.

You can learn more about technical analysis in "Secrets
Of Profiting In Bull And Bear Markets" by Stan Weinstein,
available in the OIN bookstore.

Good Luck!



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

Xerox Earnings Troubles Continue
By Matt Paolucci

Shares of Xerox Corp. (XRX) stock dropped more than 18 percent
Friday after the global document company warned its second-
quarter earnings would fall short of Wall Street's estimates.

The Stamford, Conn.-based business machines colossus owns more
than 30 percent of the copier/printer/scanner/fax machine market.
Its digital copiers which, with other digital equipment, make up
about 55 percent of sales, dominate the US market. Xerox also
provides document outsourcing, network management, and consulting
services.

Xerox said its second-quarter earnings per share, before non-
recurring items, would be similar to its first-quarter figures
of 30 cents per share. According to First Call/Thomson Financial
estimates, the Company was projected to earn 42 cents a share
in the second quarter.

The Company said that a shortfall in the sales of its high-end
printing and publishing products is more than offsetting expected
strong revenue growth from document outsourcing, color copiers
and printers, thus, reducing gross margins.

Compounding the problem is the fact that Xerox has shifted more
towards sales of lower-margin products and services.

Xerox's sales force realignment, now 18 months into its
implementation assigned sales representatives by industry, rather
than geography. A spokeswoman from the Company, Christa Carone,
said the company still believes in the idea, but acknowledged
that the transition has taken longer than expected. The
realignment also has taken place while competitors were bringing
out new products.

"Our new team is focused on initiatives that will stabilize the
direct sales force, stimulate sales productivity, and streamline
the sales support operations," said Paul Allaire, Xerox's newly
installed chairman and chief executive officer.

Problems in its Mexican market have also been a drag on earnings.
Xerox spokeswoman Christa Carone said the Company is doing an
internal investigation of possible accounting irregularities.

On the bright side, Xerox expects later this month to announce
its next-generation of Document Centre digital multifunction
devices, and the company will launch a new family of
technologically advantaged inkjet printers for small and home
offices supported by an aggressive and edgy marketing campaign.

Despite the lower earnings projections, Allaire tried focus on a
few positives, adding that document outsourcing continues to
grow, turnover of its sales force is declining, sales of color
inkjet and office color printer placements are up, and
performance continues to improve in Brazil and Fuji Xerox.

Allaire added, "It will take time to resolve our issues, but they
are largely within our control and will be fixed. We will
continue to focus aggressively on our productivity initiatives
and improving cash flow. Our technology, products and solutions
are world-class. Now our execution must, and will, improve."

Wall Street is lukewarm on Xerox, for obvious reasons. Nine of
the sixteen analysts who follow shares of XRX rate the stock a
Hold. The other seven rate the shares either Strong Buy or Buy.

With the Company's restructuring taking longer than expected,
problems with Mexico, and a sales force now forced to play catch
up the competition, it's probably going to be a while before the
stock has any chance of reaching its 52-week high of $60.31 per
share.

Xerox stock was down $4.75 a share at $20.56 in late Friday
afternoon trading on the NYSE.



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

Index      Last    Week
Dow    10449.30 -164.76
Nasdaq  3860.56  -14.27
$OEX    788.74    9.04
$SPX    1464.46    7.51
$RUT     513.74   -9.32
$TRAN   2673.19 -116.98
$VIX      23.55   -1.64

Calls              Week

SDLI     299.88   49.88  Well, this one certainly had quite a week
GLW      246.00   23.75  A week of blistering gains
SEBL     157.06   12.75  The epitome of "New Economy"
EXDS     103.25   10.50  Dropped, splitting after Tuesday close
NXTL      67.63   10.25  New, by no means a victim of the split
JDSU     120.19    9.63  Savvy strategies has the Street smiling
MRVC      55.38    9.38  A 20% jump in its first week on the list!
NT        67.56    8.31  So little volume, so little effect
CIEN     145.25    5.38  "The premier play in optical networking"
PWR       62.06    4.69  Less expensive way to play fiber-optics
MSFT      72.56    3.75  We're believers in the upside potential
ADCT      80.88    3.69  New, step up and meet our new friend
PLXS     102.63    3.44  Turning visions into realities
RBAK     119.00    3.13  Mirroring the NASDAQ with slight incline
LLTC      69.44    2.31  "I think I can, I think I can!"
PDLI     164.00   -1.56  Turbulent week for this high flyer!
BRCD     144.94   -2.06  The waiting game continues
YHOO     140.94   -2.25  May be getting ready to break loose
HGSI     133.50   -6.06  Brief decline leaves play in good shape
ABGX     114.50   -7.00  Watch for a breakout over $115
CHKP     213.75  -11.75  Dropped, taking profits to the bank
CMTN      82.50  -13.06  Dropped, watching and waiting and gone
MUSE     128.38  -16.00  Dropped, getting the boot
VRSN     164.56  -31.44  Volatility is the name of the game

Puts

DCLK      38.50  -11.56  New, a painful year for investors
A         62.63   -8.75  New, fell from March pedestal
FON       57.56   -8.31  Reality has arrived
HON       48.50   -3.31  New, will investors make up their minds!
UTX       58.88    1.00  Finished lackluster week like it began


STOCKS ADDED TO THE PICK LIST
*****************************

Calls

ADCT - ADC Telecommunications
NXTL - Nextel Communications

Puts

HON  - Honeywell
A    - Agilent
DCLK - Doubleclick


***************************
PICKS WE DROPPED THIS WEEK
***************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS

CHKP $213.75 (-11.75 last week) Other than a marginal attempt
to rally late Tuesday and early Wednesday, our play drifted
sideways to lower for the rest of the week.  On one hand, CHKP
is building a bit of a base just above $210.  The other side
of the coin shows a stock has lost its pizzazz, at least for
the short-term.  Obviously, things could change in the next
day or two, however, with only 633K shares traded on Friday
investors aren't really willing to buy or sell.  A reiteration
of a Buy rating by analysts at Dresdner Kleinwort Benson
Securities on Friday also did little to bring money back to the
table.  Intraday charts show that some buyers need to show up
soon before it falls under its own weight.  For those with open
positions wanting to continue on, we would consider the area near
$208 a potential breaking point.  For our purposes, we will take
these nice profits to the bank.

EXDS $103.25 (+10.50) We're exiting EXDS with a bang!  The share
price steadily rose 10.8%, or $10.13 in Friday's session as many
investors moved back into some of the Internets.  The catalyst
for EXDS is its upcoming 2:1 stock split this Tuesday, after the
close.  This event is obviously generating some excitement!
EXDS moved through the first line of opposition at $95 with ease
and then was propelled above the psychological $100 mark on a
spike in volume to finish just a fraction from its intraday
high.  You may be able to catch a bit more upswing before the
actual split, but nevertheless be prepared to close your
positions no later than Tuesday.

MUSE $128.38 (-16.00) Prudence and patience proved to be virtues
this week.  On Thursday, MUSE held up fairly while flirting at
what we considered a bottom support ($130) for the play.  We
suggested waiting for definitive bounces off higher levels
before entering, which turned out to be wise.  From Friday's
lackadaisical behavior, it's easy to see that MUSE is apparently
lost in the Internet shuffle.  Playing it safe in this
comfortable zone is not what we want for a momentum play.
Therefore, MUSE is getting the boot this weekend for its lack of
performance.

CMTN $82.50 (-13.06) We've been watching and waiting for
something to happen with CMTN as it has been caught in an
ever narrowing trading range for the past 2 weeks.  Well, we
got some action on Friday, but it was in the wrong direction.
Covad Communications got slammed for a 25% loss on news that
they will be acquiring Bluestar Communications for $202 mln.
CMTN got caught in a guilty-by association downdraft(both
companies are in the DSL market), and lost over 11% as it
plunged through multiple levels of support on 4 times the
average daily volume.  We think the selling was overdone, but
arguing with the market can be a painful and costly mistake.
With the dramatic change in sentiment, we have to let CMTN go
this weekend.


PUTS

No dropped puts this weekend.



STOCKS WITH UPCOMING SPLITS
****************************

We don't list all splits available, only those we
feel may have play possibilities.

Symbol - Stock          Splits/Date
AVX  - AVX Corp. 2:1 06-01-00 ex-date 06-02
KEM  - KEMET Corp. 2:1 06-01-00 ex-date 06-02
MOT  - Motorola 3:1 06-01-00 ex-date 06-02
AES  - AES Corp. 2:1 06-01-00 ex-date 06-02
KEI  - Keithley Inst. 2:1 06-01-00 ex-date 06-02
EMC  - EMC Corporation  2:1 06-02-00 ex-date 06-05
PWER - Power-One Inc. 3:2 06-02-00 ex-date 06-05
MEDI - Medimmune 3:1 06-02-00 ex-date 06-05
DA   - Danone Group 2:1 06-05-00 ex-date 06-06
ROIA - Radio One 3:1 06-06-00 ex-date 06-07
NXTL - Nextel Comm. 2:1 06-06-00 ex-date 06-07
FKL  - Franklin Capital 3:2 06-07-00 ex-date 06-08
KPN  - KPN Telecom 2:1 06-08-00 ex-date 06-09
CPN  - Calpine Corp. 2:1 06-08-00 ex-date 06-09
CAKE - Cheesecake Fctry 3:2 06-08-00 ex-date 06-09
AA   - Alcoa, Inc. 2:1 06-09-00 ex-date 06-12
CMB  - Chase Manhattan 3:2 06-09-00 ex-date 06-12
LMGA - Liberty Media 2:1 06-09-00 ex-date 06-12
VSH  - Vishay Intertech 3:2 06-09-00 ex-date 06-12
ANEN - Anaren Mic. 3:2 06-09-00 ex-date 06-12
RHI  - Robert Half Intl 2:1 06-12-00 ex-date 06-13
IBOC - Int'l Banc 5:4 06-12-00 ex-date 06-13
HC   - Hanover Comprsr  2:1 06-13-00 ex-date 06-14
RMBS - Rambus, Inc. 4:1 06-14-00 ex-date 06-15
JNPR - Juniper Networks 2:1 06-15-00 ex-date 06-16
MXT  - Metris Companies 3:2 06-15-00 ex-date 06-16
IFIN - Investors Fincl. 2:1 06-15-00 ex-date 06-16
CYBE - CyberOptics Corp 3:2 06-15-00 ex-date 06-16
HSP  - Hispanic Brdcast 2:1 06-15-00 ex-date 06-16
NXLK - Nextlink Comm. 2:1 06-15-00 ex-date 06-16
IPAR - Inter Parfums 3:2 06-15-00 ex-date 06-16
CKH  - Seacor Smit 3:2 06-15-00 ex-date 06-16
TMS  - Thomson Multi. 2:1 06-15-00 ex-date 06-16
DOW  - Dow Chemical 3:1 06-16-00 ex-date 06-19
CHP  - C&D Tech. 2:1 06-16-00 ex-date 06-19
TSM  - Taiwan Semi.   32:25 06-16-00 ex-date 06-17
RHB  - RehabCare Group  2:1 06-19-00 ex-date 06-20
MTZ  - MasTec, Inc      3:2 06-19-00 ex-date 06-20
MEAD - Meade Instrumnts 2:1 06-19-00 ex-date 06-20
SEIC - SEI Investments  3:1 06-19-00 ex-date 06-20
POOL - SCP Pool Corp.   3:2 06-19-00 ex-date 06-20
DLTR - Dollar Tree      3:2 06-19-00 ex-date 06-20
RHB  - RehabCare Grp.   2:1 06-19-00 ex-date 06-20
MTZ  - MasTec Inc.      3:2 06-19-00 ex-date 06-20
SEIC - SEI Investments  3:1 06-19-00 ex-date 06-20
POOL - SCP Pool Corp.   3:2 06-19-00 ex-date 06-20
MEAD - Meade Inst.      2:1 06-19-00 ex-date 06-20
EXDS - Exodus Comm      2:1 06-20-00 ex-date 06-21
AAPL - Apple Computer   2:1 06-20-00 ex-date 06-21
KG   - King Pharma.     3:2 06-21-00 ex-date 06-22
CDWC - CDW Computer     2:1 06-21-00 ex-date 06-22
NVDA - NVIDIA Corp.     2:1 06-26-00 ex-date 06-27
MRCL - Micrel Inc.      2:1 06-27-00 ex-date 06-28
BRL  - Barr Lab.        3:2 06-28-00 ex-date 06-29
GMH  - Hughes Elec.     3:1 06-30-00 ex-date 07-03
REMC - REMEC, Inc.      3:2 06-30-00 ex-date 07-03
AMFC - AMB Financial    3:2 06-30-00 ex-date 07-03
ABGX - Abgenix, Inc.    2:1 07-07-00 ex-date 07-10
TQNT - TriQuint Semi.   2:1 07-11-00 ex-date 07-12
IWOV - Interwoven       2:1 07-13-00 ex-date 07-14
XETA - Xeta Corp        2:1 07-17-00 ex-date 07-18
TBL  - Timberland Comp. 2:1 07-17-00 ex-date 07-18
TIF  - Tiffany and Co.  2:1 07-20-00 ex-date 07-21
INTC - Intel Corp.      2:1 07-28-00 ex-date 07-31
AIG  - American Intl.   3:2 07-28-00 ex-date 07-31
POS  - Catalina Mktg.   3:1 08-17-00 ex-date 08-18

For a complete list of all the coming splits check out the
"split calendar" on the side of the online edition newsletter
page.



********************
THE PLAYS OF THE DAY
********************

Call Play of the Day:
**********************

PDLI - Protein Design Labs $164.00 (-1.56 last week)

See details in sector list

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


Put play of the day:
********************

UTX - United Technologies Corp. $58.88 (+0.19 last week)

See details in sector list

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



***********
DEFINITIONS
***********

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
TP/P= True premium or Time premium
RRR = Risk/Reward/Ratio
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5
Analysts who follow each stock rate it and these rating are
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell"

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.



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****************************
SEE DISCLAIMER IN SECTION ONE

The Option Investor Newsletter                    Sunday 6-18-2000
Sunday                                                      3 of 5


**********
CALL PLAYS
*********

********
HARDWARE
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NT - Nortel Networks $67.38 (+8.00 last 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
utilities.

How can so much volume have so little effect?  Concerns about
interest rates, the slowing economy and declining profits are
keeping the broad markets range-bound.  This sentiment finally
had its effect on shares of NT as the week drew to a close.
Considering the strong volume (nearly 2.5 times the ADV) on
Friday, the price action was pretty boring.  With a high-to-low
range of only $1.50 on NT, it is clear that investors were
unconvinced that the market was ready to head higher.  On a
positive note, it was nice to see the stock hold above intraday
support at $66.50.  In the absence of any significant news or
improving market sentiment, expect NT to have trouble scaling
the wall of worry that is being built up in investors' minds.
Support is still being provided by the ascending 5-dma ($64.75),
and this is confirmed by historical support near $64.  Intraday
dips near this level look attractive for new entries, but wait
for the bounce before putting your money at risk.  A more
conservative strategy would be to wait for the momentum to
return, pushing NT above $68.  Volume will be the key here, and
when it does return, NT should be able to quickly scale
resistance at $72, the highs seen back in March.

Good news could come on Monday as NT will be hosting a Wireless
Internet summit in Paris, France.  According to the newswires,
the company will make several technology and business related
announcements at the event, and this could provide just the fuel
needed to juice the stock.  Last week, the company announced two
important contracts.  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=5829 at $5.75 SL=4.00
BUY CALL JUL-70*NTV-GN OI=2763 at $3.13 SL=1.50
BUY CALL JUL-75 NTV-GO OI= 279 at $1.63 SL=0.75
BUY CALL SEP-75 NTV-IO OI=1921 at $4.25 SL=2.75

SELL PUT JUL-65 NTV-SM OI= 599 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        +0.38     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= 0.14     versus= 0.14
Average Daily Volume = 10.00 mln
/charts/charts.asp?symbol=NT


BRCD - Brocade Communications $144.94 (-2.06 last week)

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

The waiting game continues.  As investors wait for the other
shoe to drop (the FOMC meeting June 27 and 28), BRCD is
meandering in a continually tightening trading range.  The lows
are getting higher and the highs are getting lower, with
Friday's range a mere $4.50 from high to low.  Volume is
reflecting this indecision as it continues to drop -- Friday saw
less than two-thirds the average number of shares change hands.
While it is encouraging to see BRCD hang onto its gains from
late May and early June, it is frustrating to see the lack of
conviction.  This will be necessary to push it through resistance.
The NASDAQ is having a hard time getting moving and this is being
felt throughout individual issues like BRCD as well.  Support is
firming near $140, with stronger support at $135, but the stock
is having a hard time getting back above the $145 level.  A
breakout still looks imminent, but you may want to wait for a
return of volume and a NASDAQ move through 3900 convincingly.
Don't forget though that risks also bring rewards.  Current
positions can be traded in the range for quick profits.  Look for
buying volume to increase and push BRCD through $147 before
initiating new positions.  If the breakout comes and actually has
some strength, BRCD should be able to easily scale the early June
highs near $155.

BRCD got a boost on Tuesday when news emerged that the company
entered into a technology development agreement with Cisco.
Under the terms of the agreement, the 2 companies will jointly
develop a Fibre Channel interface for Cisco's 6000 family of
high-performance multilayer switches, facilitating the
interconnection of islands of Storage Area Networks (SANs)
over IP-based network infrastructures.  Then on Wednesday, the
company announced a strategic alliance with Emulex to advance
connectivity and end-to-end interoperability for SANs.

BUY CALL JUL-140 UBZ-GH OI= 981 at $20.88 SL=15.50
BUY CALL JUL-145 UBZ-GI OI= 460 at $18.63 SL=13.50
BUY CALL JUL-150*UBZ-GJ OI=4437 at $16.00 SL=11.50
BUY CALL JUL-155 UBZ-GK OI=1264 at $14.25 SL=10.50
BUY CALL OCT-155 UBZ-JK OI= 787 at $28.63 SL=21.50

SELL PUT JUL-135 UBZ-SG OI=  31 at $13.13 SL=18.00
(See risks of selling puts in play legend)

Picked on June 6th at   $138.88     P/E = 656
Change since picked       +6.06     52-week high=$185.00
Analysts Ratings      8-4-2-0-0     52-week low =$ 13.88
Last earnings 05/00   est= 0.08     actual= 0.11
Next earnings 08-14   est= 0.12     versus= 0.01
Average Daily Volume = 3.21 mln
/charts/charts.asp?symbol=BRCD


GLW - Corning Inc. $246.00 (+23.00 last week)

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

The red-hot glowing fiber optic stocks cooled down Friday after
a week of blistering gains.  GLW's meteoric rise came after the
company raised the proverbial bar and told analysts they had it
all wrong.  Demand for GLW's optical equipment has been so high
that the company told Wall Street last week that it would handily
beat second quarter estimates.  If the revision of earnings
weren't enough, rumors spread last Tuesday that GLW was in talks
to buy optical-parts maker SDLI.  Interestingly, both GLW and
SDLI rallied on the speculation, receiving Wall Street's
premature approval.  However, in retrospect, the lack of
arbitrage selling in GLW was warranted.  Consolidation is
sweeping through the fiber optic arena as larger companies use
acquisitions to diversify their product offerings to provide
fully-integrated solutions.  GLW is already the largest supplier
of fiber lines, and buying SDLI would only strengthen the optical
giant's market position.  Ergo investors' enthusiasm.  The merger
talks and earnings guidance propelled GLW to new highs last week.
Although GLW has the earnings momentum and dominant market
position, there's no hiding the fact that the stock is expensive.
However, the size of the Internet is doubling every six months
and the insatiable demand for bandwidth shows no signs of slowing.
Like we previously mentioned, GLW is trading near all-time highs.
In order to gain entry into the play, watch for GLW to clear
resistance at $250.  If GLW's consolidation continues next week,
look for a pattern of higher lows to develop and watch for a
bounce off support at $240 or lower at $235. GLW experiences wide
intra-day swings trading at such high levels, use the volatility
to your advantage and target shoot for entry points.

Roger Ackerman, CEO of GLW, appeared in an interview on CNBC
Friday morning.  Ackerman told reporters that since demand for
his company's equipment is doubling every six to nine months he
sees no end in sight for the world wide build out of fiber optic
networks.  Ackerman was asked when the market for his company's
products will reach capacity, he succinctly responded, "Who
knows?  We are in the infancy."

BUY CALL JUL-240*GRJ-GH OI= 649 at $23.75 SL=17.25
BUY CALL JUL-250 GRJ-GJ OI= 542 at $19.00 SL=13.75
BUY CALL JUL-260 GRJ-GZ OI= 506 at $15.00 SL=11.00
BUY CALL AUG-250 GRJ-HJ OI=1447 at $22.63 SL=16.50

Picked on June 6th at   $217.25    P/E = 133
Change since picked      +28.75    52-week high=$249.94
Analysts Ratings      8-5-0-0-0    52-week low =$ 54.56
Last earnings 04/00   est= 0.55    actual= 0.64
Next earnings 07-24   est= 0.67    versus= 0.49
Average Daily Volume = 3.04 mln
/charts/charts.asp?symbol=GLW


CIEN - Ciena Corp $145.25 (+5.38 last week)

Ciena makes multiplexing systems that increase the capacity of
long-distance fiber-optic telecommunications networks.  The
company's systems transmit signals simultaneously over the same
circuit.  Customers such as Sprint, Bell Atlantic, and MCI
Worldcom, use its lines for long-distance optical transport and
for shorter distances.  The company is expanding its product and
geographic breadth as it transforms itself from niche market
specialist to optical networking supplier.

In 1996, CIEN developed its first dense wavelength division
multiplexing (DWDM) system.  With its DWDM technology, CIEN
turned fiber into a revenue generator that met telecom carriers'
need for bandwidth.  Now with no end in sight for the growth of
the Internet, CIEN's new challenge is to manage optically enabled
bandwidth.  With its suite of LightWorks networking products,
CIEN is meeting the challenge.  The company offers a superior
product and has an infallible business strategy that has
propelled its stock 400% higher in the past year.  While CIEN has
come a long way, its target markets are enormous, leaving room
for growth.  CIEN is turning to international markets to expand
its revenue base.  The company announced Friday that it's
expanding into Central and Eastern European markets.  During the
press conference concerning the European expansion, CIEN's CEO,
Patrick Nettles said the firm is expecting strong growth in
revenues and earnings this year and that the company will easily
meet consensus estimates for its current quarter and fiscal year.
Despite the encouraging guidance, CIEN slipped fractionally lower
Friday.  Volume was muted during last week's trading as CIEN
digested its gains from its impressive rally a week prior.
Despite the basing price action, CIEN managed to hold its pattern
of higher lows.  But, the stock continues having problems putting
the $145 level behind.  The stock did edge above resistance
Friday, you might consider an entry at current levels if CIEN
shows signs of rallying early next week.  Otherwise, wait for
CIEN to clear the $150 for a more conservative entry point.

The airwaves were a buzz with chatter about fiber optic stocks
Friday.  Mark Herskovitz, a Dreyfus fund manager, appeared on
CNNfn touting CIEN as the premier play in the optical networking
space.  And the reputable David Kaslow appeared on the same
network telling viewers to buy, buy, buy CIEN.  A little
encouragement always helps!

BUY CALL JUL-140 UEE-GH OI= 801 at $20.00 SL=14.50
BUY CALL JUL-145 UEE-GI OI= 920 at $17.50 SL=12.50
BUY CALL JUL-150*UEE-GJ OI=3438 at $15.50 SL=11.25
BUY CALL OCT-145 UEE-JI OI= 720 at $31.75 SL=23.00

SELL PUT JUL-130 UEE-SF OI= 258 at $ 8.88 SL=12.00
(See risks of selling puts in play legend)

Picked on May 25th at   $104.50    P/E = 855
Change since picked      +40.75    52-week high=$189.00
Analysts Ratings     11-8-1-0-0    52-week low =$ 26.81
Last earnings 04/00   est= 0.10    actual= 0.12
Next earnings 08-17   est= 0.16    versus= 0.01
Average Daily Volume = 6.63 mln
/charts/charts.asp?symbol=CIEN


RBAK - Redback Networks $119.00 (+3.13 last week)

Founded in 1996 and headquartered in Sunnyvale, Calif., Redback
Networks is a leading provider of advanced networking solutions
that enable carriers, cable operators, and service providers to
rapidly deploy broadband access and services.  The company's
market-leading Subscriber Management Systems (SMSs) connect and
manage large numbers of subscribers using any of the major
broadband access technologies such as Digital Subscriber Line
(DSL), cable, and wireless.  To deliver integrated transport
solutions for metropolitan optical networks, Redback's SmartEdge
multi-service platforms leverage powerful advances in
application-specific integrated circuit (ASIC), IP, and optical
technology.  With this product portfolio, Redback Networks is the
first equipment supplier focused exclusively on developing
integrated solutions for the New Access Network.

With a chart that mirrors the NASDAQ, RBAK is climbing higher
with an ever-so slight incline.  The intraday chart of RBAK shows
plenty of trading opportunity as it whips between $105 and $120.
Ahhh, volatility.  It's what makes option traders' hearts pump.
Like the NASDAQ, RBAK has been consolidating in this whippy
trading range.  This is a very good sign as buyers are most
certain to pick this stock up when it gets to the $105 area.  On
Thursday, buyers were propping up the stock at the $110 level.
Then on Friday, $115 showed support.  Each of these five dollar
levels are important as they provide good bounces and entries.
When preparing for exits, $120 has proved to be a difficult task
for RBAK to run through.  Look at the intraday chart for the past
ten days.  It tells a story of option trading heaven.  This type
of option trading does require some attention though as the stock
can get away from you quickly.  Like on Tuesday for example.
Buyers lifted RBAK from $105 and within a half hour, drove it
clear up to $115.  A half-hour dream trade.  So watch these key
levels to determine good entries.  This stock can be traded rather
often with its current volatility.  And based on the first
sentence of this paragraph, the NASDAQ is a good indicator of
RBAK's movement.  Currently at $119, RBAK certainly could push
through $120 on Monday if the NASDAQ rallies.  Strength through
that level would probably take the stock to the next five dollar
area, $125.  If it slips, look for bounces from $115 and $110 to
enter.  Don't be afraid to take you short term profits and then
jump in again.

RBAK joined Singapore's newly formed National Cable Standards
Committee(NCSC) as a pioneer member.  They are strongly positioned
to play a significant role in defining Singapore's broadband
network.  The committee is comprised of industry experts and
members from research institutes which will meet quarterly to
discuss related issues.

BUY CALL JUL-110 BUK-GB OI= 193 at $21.88 SL=17.00
BUY CALL JUL-115 BUK-GC OI= 131 at $19.25 SL=15.00
BUY CALL JUL-120*BKK-GD OI= 549 at $16.00 SL=12.50
BUY CALL JUL-125 BKK-GE OI= 122 at $14.63 SL=11.25
BUY CALL OCT-140 BKK-JH OI=1376 at $23.50 SL=18.25

SELL PUT JUL-105 BUK-SA OI=  69 at $ 8.50 SL=11.00
(See risks of selling puts in play legend)

Picked on May 28th at   $72.06     P/E = N/A
Change since picked     +46.94     52-week high=$198.50
Analysts Ratings     9-3-1-0-0     52-week low =$ 20.00
Last earnings 04/00  est= 0.03     actual= 0.05 surprise = 33%
Next earnings 07-12  est=-0.06     versus=-0.05
Average Daily Volume = 2.7 mln
/charts/charts.asp?symbol=RBAK


MRVC - MRV Communications $55.38 (+9.38 last week)

MRV Communications, Inc. is a world-class leader in optical
network components and systems.  The company has leveraged its
early leadership in fiber optic transmission into a well-focused
range of solutions, integrating switching, routing, access
servers and optical transmission systems.  MRV has initiated and
funded cutting edge start-up companies including Zaffire, Inc.,
Charlotte's Networks, Hyperchannel, Zuma Networks and most
recently RedC Optical Networks, Inc., Optical Crossing and All
Optical, Inc.

MRVC jumped about 20% for its first week on our playlist.  As we
said in the updates this week, MRVC happens to be in a hot sector
and benefited from industry rumors and speculation.  An article
in Briefing.com referred to MRVC as the "CMGI of fiber optics."
Over the past two years, the company has adopted a business model
of creating and managing several start-up companies as well as
forming independent business units in order to take them public.
Some of the enthusiasm this week came on speculation that MRVC
would do just that, spin-off its Luminent division.  First
Security Van Kasper recently published a report in which they
expect MRVC to file papers within the next month or so to
spin-off Luminent.  Luminent is a leading manufacturer of single
mode fiber-optic components.  Investors speculating on the
spin-off believe that leaves the door wide open for a continued
run-up in shares of MRVC.  At this point, nothing has been filed,
but MRVC jumped 20% and appears to be headed higher.  MRVC has made
its way into overbought territory, however, we can't discount the
current momentum behind our play.  If traders return next week with
the idea of pulling some money off the table, intraday support near
$53, $50 or back at $48, could provide an ideal entry point for
new plays.  If the momentum continues, we would also look for
opportunities to enter new plays or add to existing positions.

The article mentioned in Briefing.com went on to say that even
if a Luminent spin-off doesn't take place, MRVC holds a
considerable stake in iTouch Communications.  iTouch is a leading
provider of next generation Internet infrastructure solutions.
MRVC also has interest in Zaffire, a new optical networking
company showing a lot of promise using breakthrough technology.
Both companies are in hot sectors and could help lead MRVC higher.

BUY CALL JUL-45 VQX-GI OI=1413 at $14.63 SL=10.75
BUY CALL JUL-50*VQX-GJ OI=1767 at $10.75 SL= 8.00
BUY CALL JUL-55 VQX-GK OI=1117 at $ 8.25 SL= 6.00
BUY CALL OCT-55 VQX-JK OI= 424 at $15.75 SL=11.25

SELL PUT JUL-55 VQX-SK OI=  50 at $ 6.63 SL= 9.75
(See risks of selling puts in play legend)

Picked on Jun 11th at    $46.00    PE = N/A
Change since picked       +9.38    52 week high=$97.44
Analysts Ratings      1-1-0-0-0    52 week low =$ 5.00
Last earnings 04/00   est=-0.01    actual= 0.03
Next earnings 07/27   est= 0.03    versus= 0.01
Average daily volume = 1.92 mln
/charts/charts.asp?symbol=MRVC


ADCT - ADC Telecommunications $80.88 (+3.69 last week)

ADC is The Broadband Company. ADC's network equipment, software
and integration services make broadband communications a reality
worldwide by enabling communications service providers to deliver
high-speed Internet, data, video and voice services to homes and
businesses. ADCT has annual sales of over $2.3 billion and employs
more than 16,900 people worldwide. ADC's stock is included in the
Standard & Poor's 500 Index and the Nasdaq-100 Index.

Step up and meet our new best friend.  We challenge anyone to
even try to draw a better chart than this.  Start from the first
of December in the lower left hand corner and trace a straight
line through to the right upper corner.  That's ADCT's chart.  It
doesn't go straight up, it just marches to its own beat at a
nice, steady pace.  With a recent stock split announcement, we
think it's poised to move higher.  The 10-dma has proven to be a
reliable entry point for the better part of a month.  Friday was
a down day for ADCT, but it didn't quite hit the 10-dma as we
would have liked to have seen for a really great entry.  Traders
may want to watch for entry around the 10-dma, currently $76.16,
or look for a volume surge through the all-time high of $83.13,
set on Friday.  After a three day pullback in the first week of
June, ADCT has climbed steadily forward, falling back a hair
every other day.  Conservative traders may want to confirm this
ascending trend with a breakout that continues the march to higher
ground.

Last Wednesday, the ADC Board of Directors approved a 2 for 1
split and traders rewarded the stock by sending it to a 52-week
high.  Strong buy ratings abound, so barring any detrimental news,
we're along for the ride to the split scheduled for July 17.

BUY CALL JUL-75 TLQ-GO OI= 809 at $10.00 SL=7.00
BUY CALL JUL-80 TLQ-GP OI= 841 at $ 7.50 SL=5.25
BUY CALL JUL-85*TLQ-GQ OI=3282 at $ 6.00 SL=4.00
BUY CALL AUG-80 TLQ-HP OI= 234 at $10.13 SL=7.00

SELL PUT JUL-70 TLQ-SN OI= 193 at $ 2.50 SL=3.50
(See risks of selling puts in play legend)

Picked on Jun 18th at  $80.88      PE = 128
Change since picked     +0.00      52-week high=$83.13
Analysts Ratings 13-10-1-0-0      52-week low =$17.19 
Last earnings 5/00  est= 0.25      actual=0.29
Next earnings 8-17  est= 0.29      versus=0.19
Average Daily Volume  = 4.55M
/charts/charts.asp?symbol=ADCT


NXTL - Nextel Communications Inc $67.63 (+10.25 last week)

Nextel is the largest independent digital and wireless
communications service company in the US.  The company is
setting itself apart from its cellular competitors by
undercutting its prices and providing users with wireless phone
service, two-way radio dispatch, and text messaging all on one
handset.  Nextel recently added wireless Internet access and
international roaming capabilities.  It boosts over 5 mln
subscribers and also has wireless holdings in Canada, Asia, and
Latin America.  Motorola (MOT) owns 14% of Nextel and Craig
McCaw still retains a 13% stake.

NXTL was by no means a victim of post-split depression this time
around.  On June 7th, NXTL split its stock 2:1 and it took only
a couple of sessions for the share price to balance out.  After
the tame PPI data was released on that following Friday, NXTL
was on the run again.  By the end of this week, the share price
moved through the $63 and $64 resistance level.  Obviously, there
isn't much that should hold NXTL down.  Analyst Peter Friedland
at WR Hambrecht & CO agrees.  He reiterated a Buy recommendation
for NXTL and issued a $100 six-month target price.  On Friday,
in particular, traders just couldn't get enough of NXTL during
regular hours.  The stock made the TOP TEN list for after-hours
activity.  When a stock is fashionable, then watch the momentum
push it to new heights.  So simply put, this play is based on
pure momentum and the growing sentiment by investors to once
again dip into the technology stocks.  Near-term support is
evolving at $63-$64 and provides a good entry if there's no
pullback.  Otherwise, look to get into this momentum play at the
firmer support level of $60, which is sandwiched nicely between
the 10-dma ($58.01) and the 5-dma ($62.08).

This week, Nextel Online wireless Internet service designed
specifically for business was launched in Pittsburgh.  With its
arrival, "business customers can now easily receive and act on
the critical information they need to do business while they are
away from the office" said Linda Marshall, Great Lakes Area
president, Nextel Communications.  And on the global front,
Nextel Communications, along with other U.S. telecommunications
companies pledged to invest millions in the Argentine market.
The company plans on contributing $150 mln before the year's end
to complete its own expansion in Argentina.

BUY CALL JUL-60*FZC-GL OI=1341 at $10.38 SL=7.50
BUY CALL JUL-65 FZC-GM OI= 743 at $ 7.38 SL=5.00
BUY CALL JUL-70 FZC-GN OI=1312 at $ 5.00 SL=3.00
BUY CALL AUG-70 FZC-HN OI=2728 at $ 7.25 SL=5.00

SELL PUT JUL-60 FZC-SL OI= 104 at $ 2.94 SL=4.00
(See risks of selling puts in play legend)

Picked on June 18th at   $67.63     P/E = N/A
Change since picked       +0.00     52-week high=$92.94
Analysts Ratings     13-7-4-0-0     52-week low =$19.59
Last earnings 03/00   est=-0.84     actual=-0.83
Next earnings 07-17   est=-0.36     versus=-0.64
Average Daily Volume = 5.10 mln
/charts/charts.asp?symbol=NXTL


********
SOFTWARE
********

SEBL - Siebel Systems $157.06 (+12.75 last 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.

SEBL is the epitome of "New Economy".  SEBL is a leading provider
of eBusiness products and services.  Companies across a broad
spectrum, both large and small, turn to SEBL seeking a
competitive advantage.  SEBL helps companies leverage information
to increase sales, improve marketing, and manage operations.
SEBL's software has become available only recently, and the
market for such products is wide open.  With the eBusiness
services market in its infancy, SEBL is positioned well with its
leading market share of 17%.  Unlike many companies operating on
the cutting edge of the Internet, SEBL is profitable.  No, make
that very profitable.  The company is expected to grow its
bottom-line by 58% this year, but that growth doesn't come cheap.
At its current levels, SEBL has a trailing P/E of 244.  Yet, on a
relative growth basis, SEBL is cheap compared to the rest of the
Computer-Software sector.  If the NASDAQ is going to rise from
the mire we call a trading range, it's going to be stocks like
SEBL leading the way.  SEBL displayed its impressive relative
strength Friday by tacking on another substantial gain despite
the relatively weak market.  Interestingly, the same action
unfolded Friday afternoon as we saw during Thursday's closing
moments.  That is, the stock began to rollover in the final hour
of trading, finding support near $154, then rallying in the final
thirty minutes of trading with a surge in volume to close near
its day high.  Akin to our Play of the Day last Thursday, SEBL's
late day rally deserves our consideration.  Watch for a
continuation of momentum Monday morning, and consider an entry if
SEBL clears resistance at $158.  If SEBL stumbles, watch for a
bounce off support at $150, or the 10-dma at $145.

Wall Street continues to give our play a helping hand.  In a
late call Thursday, Thomas Weisel initiated coverage on SEBL
with a Strong Buy rating.  That follows a price target of $190
set by Piper Jaffray the same day.  It never hurts to have the
analysts on our side!

BUY CALL JUL-155 SGW-GK OI=370 at $16.00 SL=11.50
BUY CALL JUL-160*SGW-GL OI=496 at $13.63 SL=10.00
BUY CALL JUL-165 SGW-GM OI=  0 at $11.00 SL= 8.25
BUY CALL AUG-160 SGW-HL OI=653 at $19.00 SL=13.75

Picked on June 11th at  $144.31    P/E = 244
Change since picked      +12.75    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
/charts/charts.asp?symbol=SEBL


MSFT - Microsoft Corp $72.56 (+3.75 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.

Yes indeed, we're believers in MSFT's upside potential.  We're
looking at it from this perspective.  It's pretty safe to assume
the Justice Dept. won't be pulling any more rabbits out of their
hats.  The District of Columbia Appeals Court is willing to accept
the landmark case for review, which would stall Judge Thomas
Penfield Jackson's ruling that the company must be broken up into
two separate entities.  And it's now known the only move the
government has left is to 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.  Therefore, all the bad news revolving around
the anti-trust issues of Microsoft Corporation is out of the bag.
Furthermore, we believe the stock price bottomed out at $65 and
is now on the road to recovery.  The positive move through $72 on
Thursday followed by Friday's intraday high of $73.13 insinuates
that MSFT is getting geared up.  The stock's recent finishes in
close proximity to its daily highs are bullish signs too.
Importantly, the technical break above the 50-dma ($70.94) and
the robust volume adds credence that the momentum is building.
MSFT is, however, at a resistance point that it has yet to crack
since the devastation of last April.  A breakout from this level
would provide a conservative entry.  Otherwise, targeshoot the
intraday dips from solid support at $70.

In the industry, Red Hat, a developer of the free Linux computer
operating system that competes with Microsoft's Windows,
reported its 1Q loss widened.  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 unveiled 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 the 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=11267 at $9.13 SL=6.25
BUY CALL JUL-70 MSQ-GN OI=36151 at $5.25 SL=3.25
BUY CALL JUL-75*MSQ-GO OI=33835 at $2.63 SL=1.25
BUY CALL JUL-80 MSQ-GP OI=34245 at $1.19 SL=0.50
BUY CALL OCT-85 MSQ-JQ OI= 7939 at $3.25 SL=2.50

SELL PUT JUL-70 MSQ-SN OI=16041 at $1.94 SL=3.75
(See risks of selling puts in play legend)

Picked on June 15th at   $72.38    P/E = 44
Change since picked       +0.19    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
/charts/charts.asp?symbol=MSFT


*************
SEMICONDUCTOR
*************

JDSU - JDS Uniphase $120.19 (+9.63 last week)

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

The fiber optic industry is currently facing a capacity shortage.
The demand for fiber optic equipment far exceeds what the
industry is capable of producing.  The challenge for companies
such as JDSU is trying to grow fast enough to keep up with the
market demand.  According to JDSU's CFO, Anthony Muller, the
company is doing all the right things.  Muller recently said, "We
certainly do not plan on falling short of meeting our customers'
needs.  We invest aggressively.  We make acquisitions to
strengthen our strategic position and give opportunities to do
more for our customers."  JDSU's management has earned the
respect of Wall Street with its savvy strategies and efficient
business execution.  JDSU's management will get a chance to
build upon its reputation this coming Thursday when the company
hosts its analyst meeting.  The conference could act as a
catalyst for our play in the coming days.  With the recent upward
revisions of earnings by the likes of SDLI and GLW, many are
looking for JDSU to pre-announce at the meeting.  The company's
next earnings report is a few weeks away, and the analyst meeting
would give JDSU the chance to pre-announce any good news.  While
its mere speculation that the company will surprise analysts, the
anticipation may be enough to lift the stock higher.  JDSU closed
just above the $120 level Friday.  The stock's pattern of higher
lows remains firm, but it had problems hurdling $120 last week.
An aggressive trader could look for a bounce off $120 early next
week for an entry point.  While those of you seeking less risk
might wait for JDSU to clear resistance at $125 before entering
the play.  Trading activity has been an accurate indicator as of
late, make sure to confirm a rally with above normal volume.

Analysts were busy expressing their views of JDSU ahead of the
company's meeting next week.  PaineWebber reiterated its Buy
rating and set a $200 price target Friday morning.  In an
informal announcement on CNBC late Friday, Paul Meeks of Merrill
Lynch made his feelings known by reiterating his Buy rating on
JDSU and establishing a price target of $175.

BUY CALL JUL-115 UCQ-GC OI=2782 at $14.50 SL=10.75
BUY CALL JUL-120 UCQ-GD OI=5802 at $11.75 SL= 8.50
BUY CALL JUL-125*UCQ-GE OI=2743 at $ 9.63 SL= 6.50
BUY CALL SEP-125 UCQ-IE OI=1884 at $18.38 SL=13.25

SELL PUT JUL-105 UCQ-SA OI=1072 at $ 4.75 SL= 6.75
(See risks of selling puts in play legend)

Picked on June 13th at $121.38    P/E = 366
Change since picked      -1.19    52-week high=$153.38
Analysts Ratings   20-13-2-0-0    52-week low =$ 16.75
Last earnings 03/00  est= 0.10    actual= 0.11
Next earnings 07-26  est= 0.12    versus= 0.06
Average Daily Volume =  19 mln
/charts/charts.asp?symbol=JDSU


SDLI - Spectra Diode Laboratories Inc. $299.88 (+49.88 last week)

SDL's products power the transmission of data, voice and
Internet information over fiber optic networks to meet the needs
of telecommunications, DWDM, cable television and satellite
communications applications.  They enable customers to meet the
bandwidth needs of increasing Internet, data, video and voice
traffic by expanding their fiber optic communications networks
more quickly and efficiently than would be possible using
conventional electronic and optical technologies.  SDL's optical
products also serve a variety of non- communications applications,
including materials processing and printing.

Well, this one certainly had quite a week.  Speculation that SDLI
could be acquired by rival Corning drove our play over 19% higher.
Corning also issued a pre-announcement that earnings would come
in ahead of current estimates.  This helped propel SDLI and fellow
fiber companies higher as well.  Jafar Rizvi, an analyst at Sands
Brothers & Co. initiated coverage of SDLI with a Strong Buy
rating.  In commenting on the potential merger, Rizvi said "the
market is so huge that two or three players can all fit in at
the same time and grow at high rates."  U.S. Bancorp Piper Jaffray
analyst Conrad Leifur said the Corning-SDL speculation "has been
out there for a while" and he didn't think an agreement was near.
Together the two "would emerge as the clear No. 2" to JDSU,
Leifur said.  Neither company would comment on the merger
speculation.  So we have a play that made a new high everyday
this week, with the latest coming at $300.63, and added almost
20% to its market cap in five sessions.  How do we proceed?  If
the momentum continues, we would consider following the trend.
Yet, the volume did fall off a little on Friday, indicating
a round of profit taking could be on the horizon, which could
give traders with patience a better entry point.  Intraday
support has developed near $290, $285, $275, with the 10-dma
back at $267.25.  We would not ignore further moves higher,
just be prepared to pocket any profits.  Friday, James P.
Parmelee, of Credit Suisse First Boston chimed in with a
reiteration of his Buy rating for SDLI.  Although no 12 month
price target was given, the majority at this time have the
fiber company pegged near $325.  Another item to keep in mind is
the company held its annual meeting in late May.  On the agenda
was a proposal to increase the number of authorized shares from
140 mln to 280 mln.

The only other news this week for SDLI came Thursday when the
company announced it had completed an agreement with Siemens
Information and Communications Networks Group to supply high-
speed optical modulators for SIEMENS'10Gb/s DWDM transmission
systems.  The agreement plan is for years 2000 and 2001.

BUY CALL JUL-280 QJV-GP OI=251 at $48.13 SL=35.00
BUY CALL JUL-290 QJV-GR OI=143 at $43.25 SL=31.50
BUY CALL JUL-300*QJV-GT OI=807 at $38.00 SL=27.50
BUY CALL SEP-300 QJV-IT OI=784 at $62.75 SL=45.50

SELL PUT JUL-280 QJV-SP OI= 97 at $25.88 SL=35.75
(See risks of selling puts in play legend)

Picked on May 21st at   $196.00    PE = 600
Change since picked     +103.88    52 week high=$300.63
Analysts Ratings     14-8-0-0-0    52 week low =$ 23.50
Last earnings 04/00   est= 0.16    actual= 0.22
Next earnings 07-19   est= 0.27    versus= 0.09
Average daily volume = 3.88 mln
/charts/charts.asp?symbol=SDLI


LLTC - Linear Technology Corp. $69.44 (+2.31 last week)

Linear Technology designs, manufactures, and markets a broad
line of standard high performance linear integrated circuits.
These circuits translate analog data (such as sound, pressure,
temperature, and speed) into digital information that can be
used by electronic devices, and to regulate and control power
and voltage.  The company's amplifiers, regulators, interface
circuits, and other chips are used in a wide variety of
products, including cellular phones, radar systems, satellites,
computers, and factory automation systems.  Primarily through
its distributor network, LLTC sells its products to more than
15,000 manufacturers, with more than 50% of sales generated by
non-US customers.

"I think I can, I think I can" seems to be LLTC's attitude.
Mirroring the action of the Semiconductor sector over the past
2 days, the stock has continued to edge higher.  After
Wednesday's slide, the bulls reappeared Thursday morning, proving
that the $63-64 level is still providing support.  We got a nice
entry point as buyers continued to appear in ever increasing
numbers, pushing the stock up to close at the high of the day, but
the daily volume was still a bit weak.  Friday was almost a
non-event, as the upward momentum halted at $71, and LLTC
gradually declined throughout the remainder of the session.  We
are still in a holding pattern and waiting for a convincing
breakout over $70.  Yet, it was encouraging to see the price hold
above the highs from Tuesday and Thursday as traders packed up for
the weekend.  The pattern of higher highs and higher lows is
intact, but in the absence of strong volume, LLTC will have a hard
time moving significantly higher.  Intraday support is beginning
to form near $67, which is just below the 5-dma, while stronger
support is confirmed by the 10-dma ($65.44).  Remember this play
is based on the momentum that began in the last week of May,
and entry points can still be had as the stock bounces at support.

This play is entirely momentum and technically driven, as there
hasn't been so much as a peep in the news about LLTC since the
company posted record sales numbers with its April earnings
report.  The company's CEO, Robert H. Swanson impressed
investors by stating, "The March quarter was an outstanding
quarter for us as we achieved record levels of bookings, sales
and profits with sales increasing 14% and profits 17%
sequentially from the December quarter."  With numbers like
that, it's easy to see why investors are making a bee-line for
shares of LLTC.

BUY CALL JUL-65 LLQ-GM OI= 684 at $8.50 SL=6.00
BUY CALL JUL-70*LLQ-GN OI= 545 at $5.88 SL=4.00
BUY CALL JUL-75 LLQ-GO OI=1201 at $3.88 SL=2.50
BUY CALL AUG-75 LLQ-HO OI= 543 at $6.38 SL=4.25

SELL PUT JUL-60 LLQ-SL OI= 275 at $2.31 SL=3.75
(See risks of selling puts in play legend)

Picked on June 11th at   $67.13     P/E = 89
Change since picked       +2.31     52-week high=$71.00
Analysts Ratings     7-10-2-0-0     52-week low =$27.63
Last earnings 04/00   est= 0.22     actual= 0.23
Next earnings 07-18   est= 0.25     versus= 0.17
Average Daily Volume = 4.00 mln
/charts/charts.asp?symbol=LLTC


********
INTERNET
********

YHOO - Yahoo! Inc. $140.94 (-2.25 last week)

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

Friday's gain of $1.25 would appear to have done little to
further our cause.  A closer look reveals our play in YHOO just
may be getting ready to break loose.  The volume was a little
better with 6.9 mln traded, although it probably can be attributed
to expiration.  Not only was the bounce off support near $135
refreshing, but the buying in the last 15 minutes of the session.
Again, it could be tied back to expiration activity.  Other than
a brief test of support at $132, YHOO has been quietly building
support between $135 and it's 200-dma at $137.95 for most of the
week.  Some suggest the lack of follow-through early in the week
when our favorite stubbed its toe near $145, may signal coming
weakness.  That may be, however, the amount of buying seen each
time Yahoo! approached support indicates to us that the Internet
company could be garnering the momentum necessary to move higher.
The FED is still in the picture, but for a week where warnings
seemed to capture the headlines, YHOO held up pretty well.
Granted some say with all the good economic data this week, the
broad markets should have taken flight.  What they should have
done and did do are two different things.  So you must play the
hand you dealt.  YHOO is forming a triangle pattern and a
breakout over the area between $143 and $145 would indicate a
move higher.  A move below previously mentioned support near
$135 and it may be time to step back, at least temporarily.
Confirm the volume in either case.  With uncertainty or
consolidation, many times its better to pick a point and
say "I'm long here and out of the at this level" and stick to
it, rather than try to out-guess investors' reactions to news
and events.

Yahoo! and four others got a bit of a shot in the arm this
week from Henry Blodget of Merrill Lynch.  The noted analyst
reiterated his Near-term Buy and Long-term Buy on the company
saying the B2C industry is transitioning from hyper-growth to
Long-term growth.  Moving into the fall, Blodget believes things
should be more solid in terms of numbers and catalysts.

BUY CALL JUL-130 YMM-GF OI=1282 at $19.00 SL=13.75
BUY CALL JUL-135*YMM-GG OI=4147 at $16.00 SL=11.50
BUY CALL JUL-140 YMM-GH OI=4034 at $13.88 SL=10.50
BUY CALL JUL-150 YMM-GJ OI=5895 at $ 9.50 SL= 6.50
BUY CALL OCT-145 YMM-JI OI=1075 at $23.63 SL=17.25

SELL PUT JUL-140 YMM-SH OI=5979 at $11.63 SL=16.25
(See risks of selling puts in play legend)

Picked on May 28th at   $112.06    PE = 641
Change since picked      +28.88    52 week high=$250.06
Analysts Ratings    16-14-3-0-0    52 week low =$ 55.00
Last earnings 04/00   est= 0.09    actual= 0.10
Next earnings 07-11   est= 0.10    versus= 0.05
Average daily volume = 10.1 mln
/charts/charts.asp?symbol=YHOO


VRSN - VeriSign, Inc. $164.56 (-31.44 last week)

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

Internet security is vital to the growth of e-commerce, and
even the government is coming to realize that fact (see news
below).  As digital signatures and documents receive the same
legal status as handwritten signatures and documents, companies
like VRSN will see their business grow at a continued brisk
rate.  Recent hacker attacks and security breaches have served
to heighten awareness of the risks inherent in electronic
commerce and investors have taken notice.  After surging higher
with the NASDAQ in late-May and early June, VRSN has settled
into a consolidation pattern as investors wait for a reason to
drive the price higher.  The stock continues to move in a
tradable range, finding resistance near $180 and support near
$162.  The heavy volume seen early in the week gave way to
rather light trading on Friday, as the buyers stood aside and
let the bears have their way.  After an opening spike to the
$180 level, the price gradually declined all day, with a sharp
drop of over $5 at the close.  This closing action is a bit
disconcerting, and we will need to see buyers step back in next
week to confirm support.  If volume picks back up, consider
initiating new positions as the price bounces at support, as
we continue to trade the range available to us.  Until some
news emerges to push the stock out of this range, you'll want
to consider taking profits as VRSN runs out of steam near $180.

The House passed the Electronic Signature Bill last Wednesday,
granting electronic signature and records the same legal status
as handwritten signatures and paper documents.  The Senate is
expected to pass the bill and President Clinton has indicated
his support as well.  This will likely increase e-commerce
transactions and security companies like VRSN will benefit
directly.

BUY CALL JUL-160 XVR-GL OI=381 at $21.63 SL=16.75
BUY CALL JUL-165 XVR-GM OI=745 at $19.25 SL=13.75
BUY CALL JUL-170*QVZ-GN OI=382 at $17.25 SL=12.25
BUY CALL JUL-175 QVZ-GO OI= 89 at $15.38 SL=11.25
BUY CALL SEP-180 QVZ-IP OI=151 at $24.88 SL=18.50

SELL PUT JUL-155 XVR-SK OI= 68 at $13.50 SL=18.75
(See risks of selling puts in play legend)

Picked on June 13th at  $167.06     P/E = N/A
Change since picked       -2.50     52-week high=$258.50
Analysts Ratings    10-10-1-0-0     52-week low =$ 27.25
Last earnings 04/00   est= 0.02     actual= 0.02
Next earnings 07-19   est=-0.02     versus= 0.00
Average Daily Volume = 4.59 mln
/charts/charts.asp?symbol=VRSN


*******
BIOTECH
*******

ABGX - Abgenix Inc $114.50 (-7.00 last week)

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

The Biotech sector came back to life Friday in the face of
options expiration and a weak market.  The rally in the group
came on the heels of a Banc of America research note Friday
morning.  Eric Ende, senior analyst at BofA said conditions in
the industry have "never been better".  Ende explained that
developments in the sector should accelerate profitability for
many companies and the outlook for the industry should continue
improving over the next five to seven years.  While Ende didn't
specifically mention ABGX, his report carried enough clout to
lift the entire sector, which is relevant to our play since the
group moves in unison.  With the human genome nearing completion,
new discoveries are made on a daily basis, positioning genomics
such as ABGX in a lucrative place.  With profitability expected
next year, ABGX has Wall Street's attention.  But, profits may
come sooner for ABGX, noting the company's history of surpassing
estimates by a wide margin.  ABGX's next earnings report is a
ways off, so we're looking for sector momentum to carry our play
higher.  After the late day rally we mentioned in Thursday's
update, ABGX gapped higher Friday morning and gained momentum
into the weekend.  What's more, the late day buying returned
Friday as ABGX soared nearly $5 in the final fifteen minutes of
trading.  After a week of consolidation, the Biotech sector may
be ready for another run given Friday's late buying and favorable
analyst comments.  Be on your toes Monday morning, and watch for
a breakout above $115.  You might wait for sector momentum to
build and look for ABGX to clear resistance at $123 for a more
favorable entry.  On the downside, ABGX has support at $110 and
again at $105, where you may find entry if the stock bounces.

The recently fallen, but still influential financier George Soros
had good things to say about the Biotech sector in a rare
interview on CNBC late Thursday.  Soros said he believes there
are many opportunities in the group, and investors will be well
rewarded ten years from now by investing in Biotech sector.

BUY CALL JUL-110 AXY-GB OI= 51 at $18.63 SL=13.25
BUY CALL JUL-115 AXY-GC OI= 45 at $16.38 SL=11.75
BUY CALL JUL-120*AXY-GD OI=153 at $14.38 SL=10.75
BUY CALL OCT-120 AXY-JD OI=  7 at $29.00 SL=21.00

SELL PUT JUL-100 AXY-ST OI= 56 at $ 8.00 SL=10.50
(See risks of selling puts in play legend)

Picked on June 8th  at  $112.00    P/E = N/A
Change since picked       +2.50    52-week high=$206.50
Analysts Ratings      3-3-0-0-0    52-week low =$  7.38
Last earnings 03/00  est= -0.11    actual= -0.09
Next earnings 07-27  est= -0.05    versus= -0.11
Average Daily Volume  =   801 K
/charts/charts.asp?symbol=ABGX


HGSI - Human Genome Sciences $133.50 (-6.06 last week)

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

Considering the previous move up the chart, last week's 4.3%
decline, or we should say consolidation, leaves our play in good
shape.  HGSI did retest the $116 area on Tuesday, giving traders
another chance to jump on board.  While investors spent most of
the week reacting to earnings warnings, earnings is one thing that
HGSI and others can temporarily keep on the backburner.  If you
remember, our play hit the list after Celera Genomics announced
earlier this month that it expects to complete an outline of the
human genome.  While Celera may be the leader in the industry in
terms of being the most aggressive, some investors seem to favor
HGSI for their ability to stay in the game for the long haul.
Some suggest they are more established and may deliver on their
promises to the market.  It was a slow week for the analysts'
comments or news concerning HGSI, but the move up on Friday came
on just over 1 mln shares, which was better than mid week.  What
lies ahead for our play?  The buying seen late in the day on
Friday was very encouraging as HGSI surged $5 on volume of about
350K shares in the last half hour of trading.  The close near
the high of the day is also a plus going into the new week.
Intraday support is building between $120 and $125 which also
suggests the momentum may return to our play.  The sentiment in
the broad markets could also be the key, however, HGSI held up
pretty well this week with the broad market sentiment in question.
If HGSI begins the week where it left off, we would look for
chances to participate.  For those with open positions, keep your
stops in place.

The latest brokerage firm to comment on HGSI came from analysts
at AG Edwards.  Alex Hittle and Craig West initiated coverage
of HGSI with an Accumulate rating and a price target between $140
and $150 per share.

BUY CALL JUL-130 HHA-GF OI=453 at $19.88 SL=14.50
BUY CALL JUL-140*HHA-GH OI=305 at $15.50 SL=11.50
BUY CALL JUL-150 HHA-GL OI=348 at $12.25 SL= 9.25
BUY CALL OCT-130 HHA-JF OI=190 at $36.00 SL=26.00

SELL PUT JUL-120 HHA-SD OI=195 at $10.75 SL=14.25
(See risks of selling puts in play legend)

Picked on June 8th at   $117.56    PE = N/A
Change since picked      +15.94    52 week high=$232.75
Analysts Ratings      1-5-2-0-0    52 week low =$ 19.38
Last earnings 04/00   est=-0.33    actual=-0.35
Next earnings 07/27   est=-0.20    versus=-0.05
Average daily volume = 2.16 mln
/charts/charts.asp?symbol=HGSI


PDLI - Protein Design Labs $164.00 (-1.56 last week)

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

It was a turbulent week in the markets for PDLI!  But, the
intraday volatility and wide spreads offered lots of opportunity
for solid entries and profitable exits - if you were day
trading.  For those of you not hot-glued to your terminal, this
is a time in the play where PDLI is considered to be consolidating.
However, the range is wide with lows on Wednesday dipping near
$140 and heights just exceeding $165 on other days.  PDLI is fast,
furious mover and simply not for the more conservative type.  Since
it began its charge upwards this month, PDLI tacked on almost a 80%
premium to its share price.  Thus, you want to be especially
careful not to buy at the upper levels in case of a nasty reversal.
While a freefall is not anticipated, the market never makes any
guarantees.  Look at a chart.  The rising 5-dma at $156.75 has
acted as a launching point for PDLI during the uptrend.  But, you
should also note that in recent sessions the share price has
slipped lower to the 10-dma ($150.97) before bouncing back up.
It was promising to see PDLI propel itself through the 5-dma on
Friday.  Unfortunately, it once again failed to penetrate $165
and hold the gains.  It came close though, so look for
confirmation with more positive moves off the current level.  In
other words, plan carefully and at least have a mental stop on
your agenda.

On Thursday, the company held its Annual Meeting and shareholders
voted on a proposal to increase the number of authorized shares
from 40 mln to 90 mln.  As of this write-up, there's no word on
the outcome.  Technically, at $150, PDLI is a split candidate.
This kind of news would surely give PDLI a big shot of adrenaline.

BUY CALL JUL-160 RPV-GL OI= 73 at $27.63 SL=21.50
BUY CALL JUL-165 RPV-GM OI= 33 at $24.00 SL=18.75
BUY CALL JUL-170*RPV-GN OI=100 at $23.38 SL=18.25
BUY CALL JUL-175 RPV-GO OI=  6 at $17.13 SL=12.25
BUY CALL AUG-180 RPV-HP OI= 33 at $25.00 SL=19.50

SELL PUT JUN-150 RPV-SJ OI= 24 at $15.13 SL=20.75
(See risks of selling puts in play legend)

Picked on June 4th at   $125.13    P/E = N/A
Change since picked      +38.87    52-week high=$338.00
Analysts Ratings      2-2-4-0-0    52-week low =$ 19.88
Last earnings 03/00   est=-0.04    actual= 0.04
Next earnings 08-04   est= 0.19    versus=-0.14
Average Daily Volume = 1.41 mln
http://www.optioinvestor.com/charts/charts.asp?symbol=PDLI


*********************************
CALLS - CONTINUED IN SECTION FOUR
*********************************



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*******************************
SEE DISCLAIMER IN SECTION ONE

The Option Investor Newsletter                    Sunday 6-18-2000
Sunday                                                      4 of 5


*****************
CALLS - CONTINUED
*****************

****
MISC
****

PWR - Quanta Services $62.06 (+4.69 last 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.

Quanta is a widely diversified firm.  The company provides
specialized contracting services, delivering network solutions
for telecommunications, cable television and electric power
industries.  It's the company's telecom network services division
that has caught Wall Street's attention.  PWR plays an integral
role in the current build-out of high-speed networks.  The
company provides services such as installing fiber optic cable,
and building DSL networks and wireless telecom towers.  Wireless
communications and Internet services are two of the fastest
growing segments of technology and PWR is behind the scenes,
building the necessary infrastructure to make it all work.  While
the sexier names in fiber optics, such as JDSU or SDLI, are
expected to grow well over 100% this year, PWR is predicted to
improve its bottom-line by nearly 50%, not too shabby.  Unlike
the aforementioned stocks, PWR trades at a modest value.  And
PWR's high growth, low multiple, and price momentum are the
catalysts behind our play.  Many analysts see PWR as a less
expensive way to play the fiber optic boom, and Wall Street's
increasing sponsorship is driving the stock higher.  PWR is
tracing new 52-week highs on increasingly heavier volume as
institutions horde the stock.  PWR broke out from a six week base
last week, and edged to a new high Friday despite the volatile
triple witching trading.  Watch for the professionals to continue
accumulating the stock next week and consider an entry at current
levels if momentum carries PWR higher.  If a round of profit
taking ensues, watch for PWR to bounce off support at $60 or
below at $58.  Confirm the pattern of higher lows and target
shoot for entry if PWR resumes its climb.

Historically, PWR has rallied into its earnings announcement.
The company has beat Wall Street's estimates each of its last
five quarters.  Considering the ongoing boom in the fiber optic
arena, this time around should be no different.  With earnings
less than a month away, we'll watch for mounting anticipation
to carry the stock higher.

BUY CALL JUL-55 PWR-GK OI=131 at $ 9.88 SL=7.00
BUY CALL JUL-60*PWR-GL OI=120 at $ 6.88 SL=5.00
BUY CALL JUL-65 PWR-GM OI=  0 at $ 4.63 SL=2.75
BUY CALL AUG-60 PWR-HL OI= 21 at $ 8.63 SL=6.00

SELL PUT JUL-55 PWR-SK OI= 27 at $ 2.19 SL=3.75
(See risks of selling puts in play legend)

Picked on June 15th  at $61.50    P/E = 52
Change since picked      +0.56    52-week high=$62.13
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  =  511 K
/charts/charts.asp?symbol=PWR


PLXS - Plexus Corp $102.63 (+3.45 last week)

Plexus is a contract developer and manufacturer of electronic
products for companies in the medical, telecom, industrial, and
computer markets.  The company operates in two divisions: product
design and engineering, and assembly of circuit boards, memory
chips, and other electronic components.  Lucent and GE account
for 16% and 12% of sales respectively.  Plexus is ramping up
manufacturing in efforts to establish an international presence.

PLXS helps the likes of Lucent and Motorola realize their
potential.  Leading companies in the Tech sector come to PLXS
with a product idea.  PLXS, in turn, takes their visions and
turns them into realities.  PLXS absorbs the costs of research
and development for its customers, and turns a nice profit along
the way.  The company recently completed its acquisition of
Elamex, an electronics contract manufacturer located in Mexico.
The addition of Elamex's operations will allow PLXS to provide
customers with a low-cost labor solution for manufacturing.  The
acquisition is expected to accelerate PLXS's revenue growth.
Wall Street embraced the acquisition with much enthusiasm as
several brokerage houses upgraded PLXS after the announcement.
Since the completion of the acquisition, PLXS has charged to new
highs.  Volume has steadily increased while PLXS has charted new
highs, suggesting institutions have been accumulating the stock.
While earnings are still a month away, the sheer momentum PLXS
has displayed in the past month is enough to hold our attention.
The professionals took a break from buying PLXS in Friday's
trading as the stock meandered on meager volume.  The stock
briefly dipped below $102 as traders squared their positions
Friday, but managed to rally in the final moments of trading to
close the week back above support.  You might consider an entry
at current levels if momentum returns to PLXS early Monday
morning.  Otherwise, wait for the stock to clear resistance at
$105 for a more conservative entry point.  Make sure to watch the
trading activity closely, confirm any rally with above average
volume as a sign the "Big Boys" are buying.

The bulls argued their case for PLXS Friday.  CIBC World Markets
reiterated its Strong Buy rating and raised its price target to
$120 from $88.  Despite the attempt from analysts, PLXS slipped
Friday.  If CIBC has any clout, traders may revisit the revised
price target next week, and take PLXS higher.

BUY CALL JUL-100 QUA-GT OI= 53 at $12.38 SL= 9.25
BUY CALL JUL-105*QUA-GA OI=220 at $ 9.38 SL= 6.50
BUY CALL JUL-110 QUA-GB OI=  0 at $ 7.78 SL= 5.75
BUY CALL SEP-105 QUA-IA OI= 22 at $16.13 SL=11.50

SELL PUT JUL-105 QUA-SS OI=  6 at $ 6.13 SL= 8.50
(See risks of selling puts in play legend)

Picked on June 11th at  $99.19    P/E = 78
Change since picked      +3.44    52-week high=$106.25
Analysts Ratings     9-5-1-0-0    52-week low =$ 24.44
Last earnings 03/00  est= 0.45    actual= 0.49
Next earnings 07-19  est= 0.52    versus= 0.39
Average Daily Volume  =  294 K
/charts/charts.asp?symbol=PLXS



*****
LEAPS
*****

Weakness in Financials = Entry Point and a New Play

By Mark Phillips
Contact Support

I know you think I'm nuts, adding another Financial stock after
the way the sector tanked the DJIA on Friday, but bear with me
and I think you'll see the light.  The markets historically have
been unable to rally significantly without the support of the
Financials.  So, if we still have a long-term bullish outlook,
we should be able to profit from a recovery in the strongest of
the Financial stocks.  Look at our AXP and WM plays; they both
got dragged down near major support levels, due to
guilt-by-association with some of the weaker Financial stocks.
Call me crazy, but I think this is setting us up for another
nice entry point in these two plays.  Ok, so what's going on in
the NASDAQ market?  The tech sector has actually held up
surprisingly well, as it continues to inch closer to the
ever-elusive 3900 level.  There are spots of strength (Optical
is on fire), but this has become a stock-picker's market.  This
tide is not raising all boats, only those with a tight hull
and a competent crew.  So what is on the horizon, you ask?
Investors are still largely standing aside, waiting for the
outcome of the June FOMC meeting and hoping that Greenspan and
company will give us the all clear.  July earnings are
approaching and barring an ugly economic event, I'm leaning
towards some actual earnings runs this quarter.  Before you run
out and start loading up on YHOO LEAPS, let's have a sanity
check.  This means looking at our trusty VIX volatility index.
Have you noticed it is gradually creeping down towards the
lower end of its range?  After spending all week in a gradual
downtrend, the VIX is now sitting at 23.55, still above the
danger zone (18-20), but definitely no place near the typical
buy zone (low 30's).  This is the time for discretion and
patience.  By now you have likely picked the LEAP plays you
want to enter.  This market is not likely to run away from us
like it did last December.  Decide where you want to enter
those plays and wait for them to come to you.  In the long
run, you'll be glad you did.


Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2001 $ 40  EMB-AH   $ 7.69   $42.25   449.41%
                 JAN-2002 $ 45  WUE-AI   $ 9.50   $44.50   368.42%
IBM    11/07/99  JAN-2001 $100  IBM-AT   $13.63   $23.63    73.37%
                 JAN-2002 $110  WIB-AB   $16.50   $29.25    77.27%
CSCO   11/14/99  JAN-2001 $ 40  CYQ-AH   $ 9.56   $31.13   225.63%
                 JAN-2002 $ 45  WIV-AI   $11.00   $33.25   202.27%
NT     11/28/99  JAN-2001 $37.5 ZOO-AU   $11.13   $33.00   196.50%
                 JAN-2002 $37.5 WNT-AU   $15.13   $37.88   150.36%
TXN    12/12/99  JAN-2001 $ 55  TNZ-AK   $11.13   $31.38   181.94%
                 JAN-2002 $ 60  WGZ-AL   $14.25   $35.88   151.79%
SUNW   12/19/99  JAN-2001 $ 80  SUX-AP   $17.63   $23.75    34.71%
                 JAN-2002 $ 90  WJX-AR   $22.00   $30.25    37.5%
CY     01/16/00  JAN-2001 $ 40  ZSY-AH   $ 9.13   $14.88    62.98%
                 JAN-2002 $ 40  WSY-AH   $12.63   $22.00    74.19%
ERICY  01/30/00  JAN-2001 $16.3 RQC-AO   $ 4.94   $ 7.00    41.70%
                 JAN-2002 $16.3 WRY-AO   $ 6.75   $ 9.38    38.96%
NSM    02/27/00  JAN-2001 $ 70  NSM-AN   $18.50   $13.50   -27.03%
                 JAN-2002 $ 70  WUN-AN   $24.25   $23.50   - 3.09%
AOL    03/12/00  JAN-2001 $ 60  AOO-AL   $14.00   $ 7.63   -45.50%
                 JAN-2002 $ 65  WAN-AM   $18.63   $13.25   -28.89%
AXP    03/12/00  JAN-2001 $43.3 AXP-AP   $ 7.25   $15.75   117.24%
                 JAN-2002 $46.6 WXP-AQ   $ 9.33   $18.38    95.95%
WM     03/19/00  JAN-2001 $ 25  WM -AE   $ 5.00   $ 4.88   - 2.40%
                 JAN-2002 $ 30  WWI-AF   $ 5.38   $ 5.00   - 7.06%
QCOM   03/26/00  JAN-2001 $150  AUA-AJ   $39.25   $ 3.13   -92.03%
                 JAN-2002 $160  XQO-AL   $52.88   $10.25   -80.62%
AMD    04/16/00  JAN-2001 $ 70  AMD-AN   $17.50   $27.25    55.71%
                 JAN-2002 $ 70  WVV-AN   $26.00   $37.50    44.23%
CMGI   04/16/00  JAN-2001 $ 50  ZB -AJ   $21.50   $17.88   -16.84%
                 JAN-2002 $ 55  WCK-AK   $27.75   $25.75   - 7.21%
JDSU   04/16/00  JAN-2001 $ 80  XJU-AP   $27.50   $53.25    93.64%
                 JAN-2002 $ 80  YJU-AP   $39.63   $68.13    71.92%
VSTR   04/16/00  JAN-2001 $ 90  UVT-AR   $23.88   $62.63   162.27%
                 JAN-2002 $ 90  WWP-AR   $35.00   $78.75   125.00%
YHOO   4/30/00   JAN-2001 $140  YMM-AH   $32.13   $33.38     3.89%
                 JAN-2002 $140  WYZ-AH   $46.38   $52.13    12.40%
MOT    5/14/00   JAN-2001 $33.3 MOT-AY   $ 6.58   $ 7.25    10.18%
                 JAN-2002 $36.6 WMA-AZ   $ 9.54   $10.63    11.43%
NOK    5/21/00   JAN-2001 $ 50  NZY-AJ   $10.25   $15.50    51.22%
                 JAN-2002 $ 50  IWX-AJ   $17.25   $22.75    31.88%
HD     5/28/00   JAN-2001 $ 50  HD -AJ   $ 6.25   $ 7.63    22.08%
                 JAN-2002 $ 50  WHD-AJ   $11.38   $13.13    15.38%
XLNX   5/28/00   JAN-2001 $ 70  ZIZ-AN   $14.63   $26.25    79.43%
                 JAN-2002 $ 70  WXJ-AN   $23.38   $37.38    59.88%
NXTL   6/11/00   JAN-2001 $ 60  FZC-AL   $12.25   $18.50    51.02%
                 JAN-2002 $ 60  YFG-AL   $19.25   $26.00    35.06%


Spotlight Play

JDSU - JDS Uniphase $120.19

Unless you've been living under a rock, you know that the
Optical sector has been on fire since the end of May, and JDSU
has joined in the party with other leading stocks like SDLI and
GLW.  Adding fuel to the JDSU ascent was Monday's announcement
from GLW that its 2nd quarter profits would easily top estimates
due to strong demand.  Sands Brothers then initiated coverage of
JDSU with a Buy rating and Raymond James followed suit with a
Strong Buy.  This served to propel the share price up to the
next level of resistance, at $120-122.  Volume began declining
as the week wore on, but it was encouraging to see the price
continue to be supported by the ascending 5-dma (currently at
$119).  Use any market weakness as an opportunity to enter new
positions on a bounce from support near $115. If you prefer
confirmation first, wait for continuing enthusiasm to lift JDSU
through resistance.

BUY LEAP JAN-2001 $120.00 XJU-AD at $33.25
BUY LEAP JAN-2002 $130.00 YJU-AF at $50.38

New Plays

C - Citigroup, Inc. $63.00

Citigroup is a diverse enterprise, providing financial services
such as banking, insurance, and investment services to consumer
and corporate customers in over 100 countries. The company's
strong business model and earnings growth, combined with an
impressive long-term chart make C the type of stock we are
looking for to lead the Financials higher in support of a broad
market recovery.  After the sharp pullback in the Fall of 1998,
C has a beautiful chart with a consistent stair-step pattern of
higher highs and lows.  After surging higher, the stock pulls
back to find support at the highs of the previous run up,
before repeating the process.  The 100-dma (currently at $58.31)
frequently provides support for a move higher, and if this
pattern holds (which we have every reason to believe it will),
look for C to find support between $58-60.  The company's
continued strong financial performance allowed the stock to
trace a new all-time high of $67.63 last week before earnings
and revenue concerns began to spread through the Financial
sector.  There may yet be more downside for the Financials
before they recover, so wait for market sentiment to improve
and for C to bounce from support before initiating new
positions.  When the recovery does come, look for C to lead
the charge to new highs.

BUY LEAP JAN-2001 $65.00 ZRV-AM at $ 7.63
BUY LEAP JAN-2002 $65.00 WRV-AM at $13.75


Drops

QCOM $65.75 Oh how the mighty have fallen!  After its meteoric
rise at the end of last year, QCOM had to come back to earth,
but this is ridiculous.  After 3 months of consolidation between
$120-160, the stock looked ripe for a recovery going into April
earnings.  No sooner had we added the stock to our playlist, and
the NASDAQ tanked, dragging QCOM with it, all the way down to
the 200-dma at $95, also the site of major support.  This gave
us a couple of nice entry points as QCOM bounced from support
and moved higher.  Unfortunately, more bad news was right around
the corner.  China Unicom announced they would be dragging their
feet on rolling out CDMA, and that support level was dashed on
the rocks.  The ensuing selloff once again triggered our stops
and slammed the stock all the way to the $60 level on very heavy
volume before anyone was willing to step forward and start
buying.  It then looked like all the bad news was out and
factored in when QCOM began moving higher 2 weeks ago.  "At
last!", we thought as the upgrade to Buy came from AG Edwards,
"This is the ultimate entry point for our CDMA hero."  Alas, it
wasn't to be.  After we rode the recovery up to the low $80's,
the company CFO came along to poke another hole in our
inflatable raft.  On Wednesday, he stated at the Bear Stearns
technology conference that a failure of the Globalstar venture
would impact FY2001 earnings by a dime a share.  As if that
wasn't bad enough, Chase H&Q analyst, Edward Snyder, came out
Thursday morning, lowering his earnings estimates and issuing
a price target of $50.  Ouch!!  The ensuing selloff triggered
our stops again, and quite frankly, that's all the pain we can
take.  Fundamentally we still like QCOM over the long term, but
there is no sense continuing to tilt at windmills.  We have to
let QCOM go this weekend and we will stand aside while the dust
settles.



*********
PUT PLAYS
*********

Put plays can be very profitable but have a larger risk than call
plays. When a stock is falling the entire investment community
(except the shorts) is hoping it will reverse and start back up.
The company management is also doing everything they can to shore
up their stock price. The company issues press releases, brokers
talk it up, analysts try to put a positive spin on everything.
Then of course there is the death knell, the "buy recommendation"
simply because the price has dropped to some level that analysts
feel attractive again. Buyers who like the stock wait until it
appears a bottom has been reached and then jump on it in a feeding
frenzy. They may already have a large position and are averaging
down. Many factors can stop a free falling stock in mid drop.

****

UTX - United Technologies Corp. $58.88 (+0.19 last week)

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

UTX finished a lackluster week in much the same way it began.
Although our play has made little headway, the damage has been
negligible as well.  UTX doesn't offer the excitement of double
digit gains or losses in the course of a day, like many of the
tech stocks, but we believe the potential for profit is still
in sight.  Traders bid the price up to resistance near the 50-dma
on Thursday only to see investors click on the sell button late
in the day and again on Friday.  The volume picked up a bit
and the close in the lower end of the day's range suggests
the short side of this stock is the place to be.  UTX managed
to find support just above its 200-dma at $58.17 and we would
like to see that level penetrated with conviction to keep
our play on track early next week.  After only three comments
from analysts since the beginning of the year, UTX has had
two in the past 10 days.  Salomon Smith Barney reiterated their
Buy rating, after the conglomerate completed its acquisition
of the engine maintenance center of Braathens ASA.  Thursday,
Sam Pearlstein, at First Union Securities initiated coverage
with a Strong Buy rating and a twelve month price target of $80.
The analysts comments may have got investors attention, but
caused few to pull out the checkbook, at least for now.  So how
do we play this one?  Investors need a reason to buy stock, and
right now we see little reason to jump head first into UTX.  That
leaves us with two other choices, sideways or down.  UTX may
continue to consolidate between $62 and $56, however, the pattern
of lower highs since mid May is still intact.  Continued weakness
or declines off the resistance should be considered for new
entry's.

BUY PUT JUL-65 UTX-SM OI= 10 at $7.00 SL=5.00
BUY PUT JUL-60*UTX-SL OI= 49 at $3.38 SL=1.75
BUY PUT AUG-65 UTX-TM OI= 65 at $7.63 SL=5.25

Average daily volume = 1.69 mln
/charts/charts.asp?symbol=UTX


FON - Sprint Corp $57.56 (-8.31 last 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.

Reality has arrived.  After hours on Friday, it hit the wire
that Bell Atlantic Corp (BEL) won conditional regulatory approval
to buy GTE Corp (GTE) for $80.5 bln.  The implications of the deal
are enormous for the telecom industry.  The merger creates the
largest U.S. phone company with control of more than one-third,
or 63 mln of local lines and one-quarter of mobile customers.  It
replaces SBC Communications (SBC) as the largest U.S. local
carrier too.  The new company, to be called Verizon
Communications, will extend its reach across 31 states, the
District of Columbia and Puerto Rico.  This combination will
provide consumers with one-stop shopping for communication
services.  The offerings will include the full gamut of local,
long-distance, wireless and high-speed Internet access.  The
mega-merger is expected to be completed by the end of this
month.  This "deal of the century" is putting serious pressure
on the other telecoms.  Prior to the official announcement on
Friday, the rumbles on the Street were enough to knock FON's
share price down 16.4% since it peaked at $67 on June 7th.  And
as FON loses ground, trading volume is gyrating;  at times it's
reached nearly double the ADV.  As of Thursday, FON sunk below
its last technical life-line at the converged 30 and 50-dmas
($60.01 & $60.02, respectively).  These latter indicators acted
as upper resistance in Thursday's session, however, by Friday,
near-term resistance developed much lower.  First, $58.50 was the
ceiling, then it crunched down to $57.50 within the last hours
of trading.  If there's a positive bounce back to $60, then look
for entries at this level after confirming downward movement.
If the downtrend line simply resumes, then you can look to
intraday spikes for entry, but be careful.  There is some bottom
support at $55.  Another piece of dissenting news is the distinct
possibility that FON's own proposed merger with MCI WorldCom, to
create the second-largest U.S. long-distance carrier, is not going
to happen.  While this event is unlikely to directly effect FON's
trading in the short-term, it's always good to know what's behind
the curtain.

BUY PUT JUL-65 FON-SM OI=121 at $8.25 SL=5.75
BUY PUT JUL-60*FON-SL OI=228 at $4.38 SL=2.75
BUY PUT JUL-55 FON-SK OI=184 at $1.75 SL=0.75

Average Daily Volume = 2.63 mln
/charts/charts.asp?symbol=FON


***********************************************************
NEW PUTS
***********************************************************

A - Agilent Technologies Inc. $63.00 (-8.75 last week)

Agilent Technologies Inc. is a diversified technology company,
resulting from Hewlett-Packard Company's plan to strategically
realign itself into two fully independent companies.  With
approximately 43,000 employees serving customers in more than
120 countries, Agilent Technologies is a global leader in
designing and manufacturing test, measurement and monitoring
instruments, systems and solutions, and semiconductor and
optical components.  The company serves markets that include
communications, electronics, life sciences and healthcare.

Agilent began to fall from its pedestal in early March.  After
all, investors funding a run-up from $40 to $160 in just over two
months do deserve to put some money in the bank.  At that point,
the decline was viewed as pure profit taking.  With the company
announcing a new optical switching solution about the same time,
the Hewlett-Packard spin-off appeared to be ready to stand on
its own.  HWP was able to slow the decline for a day in early
April when it announced it would distribute its stake in Agilent
to HWP shareholders on June 2.  The bears stayed in control until
mid-May with Agilent finally hitting $54.  Traders bid the price
higher on speculation and finally the announcement that the
company would join the S&P 500 Index on June 2.  Once managers
of the mutual index funds bought all of Agilent they needed
in order to balance their portfolio's, the bears came back out of
hibernation and took control again.  Losses in their health care
unit, an increase in the number of shares available for trading,
and an uncertain broad market sentiment have Agilent facing an
up-hill battle.  Last month the company reported earnings in
line with estimates, but many were expecting an upside surprise.
This seems to have left a bit of a cloud over Agilent.  Several
analysts and many traders are questioning what they believe to be
too high a valuation.  Yes, investors do pay attention to
valuations, from time to time.  Agilent announced this week it
would move some of its production to Singapore in an effort to cut
costs, but investors were unimpressed and continued selling shares
of A.  The warning that PC sales were slowing took its toll on HWP,
the broad markets, and it certainly didn't help Agilent earlier
last week.  Our new play appears to be preparing to challenge its
recent low at $54.  Intraday charts are getting a bit oversold,
so a bounce up to between $64 and $66 would not be out of line.
Technically, the 10-dma at $68.84 could also present a stumbling
block and be viewed as an entry point on a failed bounces.

BUY PUT JUL-70 A-SN OI= 886 at $11.50 SL=8.50
BUY PUT JUL-65*A-SM OI=2248 at $ 8.50 SL=6.00
BUY PUT JUL-60 A-SL OI=1717 at $ 5.75 SL=3.75

Average daily volume = 3.07 mln
/charts/charts.asp?symbol=A


HON - Honeywell International $48.75 (-3.31 last week)

Honeywell International (formerly Allied Signal) is a global
manufacturer of control systems and components for the home and
industry, including the aerospace and aviation sectors.  For
example, they develop and supply the advanced-technology products
for building-security and fire systems and other services
designed to conserve energy, protect the environment, and improve
productivity.  Honeywell operates facilities in over 100 countries
and about 40% of total revenue is derived from international
sales.

Will investors just make up their minds!  Do they want the
golden speckled techs or the traditional cyclical stocks in
their portfolios?  It appeared from last week's trading that
investors were moving back into some of the technology stocks.
And therefore, many cyclicals like HON were sent off to the
sidelines to watch the game from the bench.  Proctor & Gamble's
(PG) profit warning on June 8th and cautious comments from
analysts certainly didn't render a warm and fuzzy feeling
either.  HON's trading volume has yet to take on a zealous
disposition, however, there's no question that the share price is
suffering.  All this week, HON continuously violated the 10-dma
($52.28).  The overall weakness in the DOW on Friday brought HON
to its knees.  It slipped under the 5-dma ($50.43), which parallels
the stock's old resistance levels of February and March, and
closed smack on its daily low.  Assuming the short-term trend to
move back into the techs stays intact, then HON is likely to fall
lower.  The first goal line is at $45, then extra points would be
awarded at the bottom support level near $40.  Look for downward
bounces off the $50 mark to get an entry.  And please pay
attention to the DJIA's sentiment and direction before making your
play.  There was a bit of company news last Tuesday involving
Honeywell.  A federal jury found Air Transport Systems of Phoenix,
a Honeywell company, 8% responsible for the 1995 crash of an
American Airlines jetliner in Colombia.

BUY PUT JUL-55 HON-SK OI=258 at $7.38 SL=5.25
BUY PUT JUL-50*HON-SJ OI=703 at $3.50 SL=1.75
BUY PUT JUL-45 HON-SI OI= 22 at $1.06 SL=0.00

Average Daily Volume = 2.35 mln
/charts/charts.asp?symbol=HON


DCLK - DoubleClick, Inc. $38.50 (-11.56 last week)

Providing comprehensive Internet advertising solutions for
advertisers and Web publishers, DoubleClick wants to double
how many times you click on online banner ads.  The company has
two principal service offerings, the DoubleClick Network and
DART Service.  The DoubleClick Network consists of highly
trafficked Web sites grouped together by DCLK in defined
categories of interest.  The DART Service provides Web
publishers, advertisers, and ad agencies with the ability to
control the targeting, delivery, measurement and analysis of
their online marketing campaigns.  This is all done in real-time
by dynamically targeting and delivering ads to Web users based
on pre-selected criteria.

It has been a painful year for DCLK investors as the company
has been forced to deal with a government probe related to
privacy issues.  In February, the Federal Trade Commission (FTC)
opened an inquiry into the company's privacy policies.  Concerns
about Internet privacy in general and how these issues might
hamper the company's attempts to target advertising at Internet
users has been a continual drag on the stock.  After this news
emerged, shares of DCLK declined rapidly, not finding support
until the $40 level, 70% off the highs seen in January.  Then, in
late May, the stock finally got a boost on optimism that the
company was close to reaching an agreement with the FTC on the
privacy issue.  However, the excitement was short-lived.  Buying
interest dried up by early June and the decline resumed.  Selling
volume has been increasing over the past week and served to push
the share price under support at $40.  This came after the FTC
testified on Tuesday that it is encouraging industry
self-regulation by Internet ad-server companies on issues of
online privacy and online profiling.  The failure of this news
to move shares upwards opens the door for further declines, and
we could see a return to the 52-week low of $30.25.  Look for
new entries to materialize as the stock moves up to and rolls
over at the $40 resistance level.  This level is backed up by
the 5-dma ($41.50), which has been pressuring the price over the
past week.

BUY PUT JUL-40 QWE-SH OI=1162 at $6.25 SL=4.25
BUY PUT JUL-35*QWE-SG OI=1202 at $3.38 SL=1.75

Average Daily Volume = 3.74 mln
/charts/charts.asp?symbol=DCLK



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*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************
The Option Investor Newsletter                    Sunday 6-18-2000  
Sunday                                                      5 of 5

*************
COVERED CALLS
*************

Candlestick Basics: The All Important Doji

Last week, we discussed the significance of the "star" and its
tendency to indicate a trend reversal.  Another powerful reversal
indicator is the doji: a candlestick in which the opening and 
closing prices are the same or very close.  A doji can be a
significant warning, especially at important market junctions or
during the mature portion of a bull or bear move.  The likelihood
of a reversal increases if subsequent candlesticks confirm the
doji's potential for marking a change in character.  

The Doji's greatest value is its ability to indicate market tops.
This is especially important after a long white candlestick
during an uptrend, where a doji represents indecision.  If buyers
become uncertain about the future of the issue, and the current
trend is overbought, there may not be enough momentum to sustain
the rally.  Most forms of Western technical analysis don't infer
any conclusions from a session with the same opening and closing
price.  To the Japanese, such an occurrence, especially after a
sharp advance, is a critical reversal sign.

There are other important indications associated with rare doji
candlesticks such as the Long-legged Doji (Rickshaw Man) and the
Gravestone Doji.  The long-legged doji has extended upper and
lower shadows, which indicate indecision.  This type of doji is
especially important near market tops and known resistance areas.
If the opening and closing are in the center of the session's
range, the line is referred to as a Rickshaw Man.  The Gravestone
Doji is another distinctive candlestick where the opening and
closing prices are at the low of the day.  Though it may be found
at market bottoms, it's best used for signaling market tops.  The
longer the upper shadow (especially if it hits a new high), the 
more the bearish the signal given by the Gravestone Doji.  Yes,
the Gravestone Doji looks like a Shooting Star near the top of a
trend, but it has no real body and is considered to be a more
bearish indication.  An Evening Star made with a Gravestone Doji
does not bode well for the bulls.


 


At significant tops and bottoms, Doji tend to define new support
and resistance areas.  However, Doji candlesticks are not as
accurate at indicating potential reversals in downtrends and thus
it is advisable to obtain other forms of technical confirmation
when attempting to identify a market bottom with this pattern.
Those who follow a more conservative trading style should wait for
additional verification of a trend change.  The trade off for less
risk, of course, is the potential for less reward.

Steve Nison's "Japanese Candlestick Charting Techniques" is an 
excellent resource for learning technical analysis.  The book is
available in the OIN bookstore.

Good Luck!



SUMMARY OF PREVIOUS PICKS
*****
NOTE: Using Margin doubles the listed Monthly Return! 

Stock  Price  Last   Call  Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

ITXC   40.06  35.63   JUN  35.00  6.75  *$  1.69  11.0%
ARTT   18.38  15.97   JUN  15.00  3.75  *$  0.37  11.0%
PSSI    9.50  10.09   JUN   7.50  2.63  *$  0.63  10.0%
FHS    11.38  13.13   JUN  10.00  2.13  *$  0.75   8.8%
NERX   14.75  15.56   JUN  12.50  2.69  *$  0.44   7.9%
HSIC   18.25  17.75   JUN  17.50  1.31  *$  0.56   7.2%
STAA   13.50  13.63   JUN  12.50  1.38  *$  0.38   6.8%
CYBS   14.94  17.13   JUN  12.50  3.00  *$  0.56   6.8%
EGOV   15.44  15.63   JUN  12.50  3.50  *$  0.56   6.8%
CENT   11.81  11.00   JUN  10.00  2.50  *$  0.69   6.4%
SMRT    8.53  10.25   JUN   7.50  1.50  *$  0.47   5.8%
CCCG   13.50  11.19   JUN  10.00  4.00  *$  0.50   5.7%
WGR    22.50  22.00   JUN  20.00  3.25  *$  0.75   5.6%
MENT   18.31  19.69   JUN  17.50  1.25  *$  0.44   5.6%
CWST   12.63  13.00   JUN  10.00  3.00  *$  0.37   5.6%
CAIR   22.88  25.50   JUN  17.50  6.38  *$  1.00   5.3%
BEAM   12.44  18.63   JUN  10.00  3.00  *$  0.56   5.2%
ANET   12.94  13.69   JUN  12.50  1.13  *$  0.69   5.1%
AAS    22.00  29.44   JUN  20.00  2.88  *$  0.88   5.0%
WGR    21.00  22.00   JUN  17.50  4.13  *$  0.63   4.1%
LPNT   20.63  21.56   JUN  17.50  3.75  *$  0.62   4.0%
PXD    14.06  13.75   JUN  12.50  1.88  *$  0.32   3.8%
ADAC   17.38  21.75   JUN  15.00  2.75  *$  0.37   3.7%

MED     9.44   9.00   JUL   7.50  2.69  *$  0.75   6.9%
LYNX   32.63  32.75   JUL  25.00  9.75  *$  2.12   6.7%
CYTO    7.97   8.00   JUL   5.00  3.38  *$  0.41   6.5%
ZD     11.38   9.94   JUL  10.00  2.25   $  0.81   6.4%
GENE   27.75  26.13   JUL  20.00  9.25  *$  1.50   5.9%
TGEN   12.25  10.94   JUL   7.50  5.25  *$  0.50   5.2%
IBC    14.94  14.25   JUL  12.50  3.25  *$  0.81   5.0%
ALSC   26.88  25.75   JUL  22.50  5.88  *$  1.50   4.4%

*$ = Stock price is above the sold striking price.

Comments:

Ccc Information (CCCG) not only didn't go lower, but rallied above
the sold strike.  Lifepoint Hospitals (LPNT) demonstrated a text-
book bounce off its 50 dma to resistance.  For July, Ziff-Davis's
(ZD) drop on Friday is worrisome and a test of the May low now
seems likely.  Alliance Semiconductor (ALSC) has pulled back and
is testing the support of the March high.  As always, mind your
stop loss points, unless you intend to be a long-term investor.

Positions Closed:

Exiting Boise Cascade (BCC) after it broke its 150 dma and closing
the Digital River (DRIV) position near "break-even" proved to be 
good lessons in the value of money management.



NEW PICKS
*********


Sequenced by Company
*****

Stock  Last  Call  Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

BCGI   14.56  JUL  12.50  QGB GV  2.88  71   11.68   35     6.1%
CAIR   25.50  JUL  20.00  HHU GD  6.63  107  18.88   35     5.2%
CEGE   25.56  JUL  20.00  UCG GD  6.88  715  18.68   35     6.1%
FHS    13.13  JUL  12.50  FHS GV  1.63  8293 11.50   35     7.6%
FSII   18.25  JUL  17.50  FQH GW  2.63  501  15.62   35    10.5%
PGO    19.00  JUL  17.50  PGO GW  2.25  49   16.75   35     3.9%
RHAT   25.00  JUL  20.00  RCV GD  6.38  480  18.62   35     6.4%

Sequenced by Return 
*****

Stock  Last  Call  Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

FSII   18.25  JUL  17.50  FQH GW  2.63  501  15.62   35    10.5%
FHS    13.13  JUL  12.50  FHS GV  1.63  8293 11.50   35     7.6%
RHAT   25.00  JUL  20.00  RCV GD  6.38  480  18.62   35     6.4%
BCGI   14.56  JUL  12.50  QGB GV  2.88  71   11.68   35     6.1%
CEGE   25.56  JUL  20.00  UCG GD  6.88  715  18.68   35     6.1%
CAIR   25.50  JUL  20.00  HHU GD  6.63  107  18.88   35     5.2%
PGO    19.00  JUL  17.50  PGO GW  2.25  49   16.75   35     3.9%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even 
point, DE-Days to Expiry, MR-Monthly Return.

*****
BCGI - Boston Communications  $14.56  *** Wireless Services ***

Boston Communications is the leading provider of prepaid services 
to wireless carriers in North America. BCGI provides wireless 
carriers with a range of resources and support services targeted
to address the unique needs of this growing industry.  Boston
Communications reported a record quarter in April and investors
are now anticipating another bullish earnings report in mid-July.
There is also speculation on BCGI exploring strategic business 
alternatives related to its Teleservices Division.  BCGI is in
a rally mode as it has climbed above the March and May highs on
strong volume.  Reasonable speculation in a bullish stock in a
bullish sector with a cost basis at technical support. 

JUL 12.50 QGB GV LB=2.88 OI=71 CB=11.68 DE=35 MR=6.1%

Chart =
 /charts/charts.asp?symbol=BCGI
*****
CAIR - Corsair Comm. $25.50  *** Wireless Services - Part II ***

Corsair Communications is a leading provider of software and
system solutions for the wireless industry.  Their PhonePrint
system provides highly effective cloning fraud prevention to
wireless telecommunications carriers by using proprietary radio
frequency (RF) signal analysis technology.  Corsair's PrePay
solution has an advantage over most other competitive offerings
since it enables carriers to use existing switch infrastructure
equipment rather than requiring costly additional adjunct 
switches and voice trunk resources.  Corsair attributed its 
strong first quarter earnings to the growth and acceptance of
their PrePay product.  Corsair's technical picture continues 
to brighten as Friday's close above the late March high appears
to complete a bullish head-n-shoulders bottom.

JUL 20.00 HHU GD LB=6.63 OI=107 CB=18.88 DE=35 MR=5.2%

Chart =
 /charts/charts.asp?symbol=CAIR
*****
CEGE - Cell Genesys  $25.56  *** Biotech Sector ***

Cell Genesys is engaged in the development and commercialization
of gene therapies to treat major, life-threatening diseases,
including cancer and AIDS.  Cell Genesys currently has two gene
therapy programs, the clinical programs and the pre-clinical
programs.  The clinical programs include GVAX(TM) cancer vaccines
in Phase I/II studies to treat specific types of cancer, such as
lung and prostate cancers, and T cell gene therapy for AIDS,
which is undergoing Phase II testing.  Cell Genesys also develops
and commercializes human monoclonal antibodies for pharmaceutical
applications, including inflammation, auto-immune disorders and
cancer.  The biotechnology group is on the move and traders have
become interested in the issue amid reports the company's factor
IX blood-clotting protein performed well in recent tests, with no
discernible ill effects.  The technical outlook is still bullish
with support above the sold strike.  Cell Genesys is expected to
report earnings during the last week in July.

JUL 20.00 UCG GD LB=6.88 OI=715 CB=18.68 DE=35 MR=6.1%

Chart =
 /charts/charts.asp?symbol=CEGE
*****
FHS - Foundation Health Systems  $13.13  *** Break-out! ***

Foundation Health is a managed health care company.  FHS offers
a wide range of healthcare services.  They also own six health
and life insurance companies, and provide health benefits to 
over 5.8 million individuals through group, individual, Medicare
risk, Medicaid and CHAMPUS programs.  In May, Foundation reported
that its first-quarter operating profits rose 22 percent, meeting
Wall Street estimates, driven by higher pricing for health plans
and lower costs.  The Health Care sector rallied this week after
the U.S. Supreme Court ruled that patients cannot use a federal 
law to sue their HMOs for giving doctors bonuses to cut costs, 
which may result in inadequate medical care.  FHS has recently
completed a bullish “double-bottom” formation on strong volume
and has become a bullish, stage II stock.

JUL 12.50 FHS GV LB=1.63 OI=8293 CB=11.50 DE=35 MR=7.6%

Chart =
 /charts/charts.asp?symbol=FHS
*****
FSII - FSI International  $18.25  *** Chip Sector! ***

FSI International designs, develops, manufactures, markets and
supports microlithography, spin-on dielectric and surface
conditioning equipment for the fabrication of microelectronics,
such as advanced semiconductor devices and thin film heads.  FSI
Surface Conditioning Division sells equipment and applications
using wet, vapor and cryogenic chemistry techniques to clean,
strip or etch the surfaces of silicon wafers for subsequent
processing.  The Microlithography Division supplies photoresist
processing equipment and services for the semiconductor and thin
film head markets, and dielectric materials deposition equipment
and services for applications in the semiconductor industry.
FSI's earnings are expected later this week and based on recent
contracts and agreements, the report and conference call should
be favorable.  Our cost basis provides a low risk opportunity
for speculation on the company's future financial outlook.

JUL 17.50 FQH GW LB=2.63 OI=501 CB=15.62 DE=35 MR=10.5%

Chart =
 /charts/charts.asp?symbol=FSII
*****
PGO - Petroleum Geo-Services  $19.00  *** Oil Sector ***

Petroleum Geo-Services is a technologically focused oilfield 
service company principally involved in two businesses: geophysical
seismic services and production services.  PGS acquires, processes,
manages and markets 3-D, 4-D and 4-C seismic data and owns four 
floating production, storage and offloading systems as well as
operates numerous offshore production facilities for oil and gas 
companies.  PGC's recent rally started in May after achieving first
oil on its Kyle field contract for Ranger Oil.  With the current 
strength in the oil sector, the outlook for PGS is bullish.  The
stock been in a stage I base for almost two years and is showing
signs of moving into a stage II rally.  We favor a conservative
entry point and a cost basis below the 150 dma near a strong
historical support area.

JUL 17.50 PGO GW LB=2.25 OI=49 CB=16.75 DE=35 MR=3.9%

Chart =
 /charts/charts.asp?symbol=PGO
*****
RHAT - Red Hat  $25.00  *** 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.
On Thursday, Red Hat reported better-than-expected earnings, 
reporting a 95% increase in its first quarter revenue, suggesting
the company is on track to meet its goal to double revenues and 
become profitable by the end of calendar 2001.  On Friday, Red Hat
did what few stocks have been able to do, continue to rally on the
good news.  With improving technicals, the short-term outlook is 
bullish and this position offers a speculative entry point into a
stock forming a stage I base.

JUL 20.00 RCV GD LB=6.38 OI=480 CB=18.62 DE=35 MR=6.4%

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



*************************
NAKED PUT PERCENTAGE LIST
*************************

Naked Put Percentage List
By Ryan Nelson

Stock  Stock  Strike Option  Option Margin Percent Support
Symbol Price  Price  Symbol  Price  At 25% Return  Level  

AETH   186.00  180   HEX-SP  25.25   4650   54%     180
BRCD   144.94  140   UBZ-SH  13.25   3624   37%     140
CHKP   213.75  220   YKE-SU  27.13   5344   51%     210
CIEN   145.25  140   UEE-SH  13.25   3631   36%     140
ETEK   260.19  250   FNY-SJ  17.63   6505   27%     245
EXDS   103.75   95   DUB-SS   7.25   2594   28%      95
EXTR    85.00   80   EUT-SP   6.88   2125   32%      80
GLW    246.50  240   GRJ-SH  16.13   6163   26%     243
HGSI   133.50  130   HHA-SF  15.63   3338   47%     120
IDPH   104.56  100   IDK-ST  12.50   2614   48%      96
INCY    86.50   80   IPQ-SP  10.75   2163   50%      82
ITWO   115.63  110   QYJ-SB  11.13   2891   39%     110
JNPR   113.00  110   JUY-SB  10.38   2825   37%     108
MERQ    90.31   90   RQB-SR   9.25   2258   41%      88
MLNM   120.00  115   QMR-SC  11.75   3000   39%     115
NVDA   149.75  140   RVU-SH  13.38   3744   36%     142
PDLI   164.00  160   RPV-SL  24.25   4100   59%     160
PHCM    82.50   80   UGE-SP   7.25   2063   35%      80
PMCS   184.06  180   SZI-SP  16.63   4602   36%     180
RBAK   119.00  115   BUK-SC  12.75   2975   43%     115
RFMD   100.38  100   RFZ-ST  13.25   2510   53%     100
SDLI   299.88  280   QJV-SP  25.88   7497   35%     280
SEBL   157.06  150   SGW-SJ  10.00   3927   25%     150
TQNT   103.81  105   TNN-SA  11.63   2595   45%     100
VRSN   164.75  160   XVR-SL  15.13   4119   37%     160
VRTS   134.00  135   VUQ-SG  13.75   3350   41%     128
VRTX    90.00   85   VQR-SQ  10.13   2250   45%      86
YHOO   140.94  140   YMM-SH  11.63   3524   33%     136



***********************
CONSERVATIVE NAKED PUTS
***********************

Option Trading Basics: You can STOP the losses...

Some of the most commonly asked questions we receive are related
to protective "Stop-Loss" limits.  New investors often request a
specific formula for limit placement and advanced traders simply
want to compare techniques for position management.  The recent
volatility in the market provides a catalyst to discuss trading
stops and today we will review some of the basic uses of this
unique tool.

Stop-loss orders are simply a method to follow the movement in a
stock or other instrument while insuring some profit (or limited
loss) if the primary trend changes character.  Generally, we
recommend taking profits when the position produces the target
return and stops are an excellent way to remove the emotional or
reactive trading that often occurs in short-term trading.  When
the technical outlook for the instrument changes or a correction
becomes likely, one may tighten the stop (closer than usual) to
guarantee a reasonable profit (if stopped out) and still allow
for a greater gains and a possible resumption of the trend.  Of
course some movements can occur so quickly that the order will
not be filled at the desired price.  The problem of volatility
is further compounded by the improper use of the two most common
stop-loss orders.  Here are the basic explanations of each order:


STOP ORDER

An option stop order is an order to buy or sell option contracts
when the market for a particular contract reaches a specified
price, called the stop price.  A stop order to buy becomes a
market order when the option contract trades or is bid at or
above the stop price.  A stop order to sell becomes a market
order when the contract trades or is offered at or below the
stop price.


STOP-LIMIT ORDER

An option stop-limit order is an order to buy or sell option
contracts at a specified price or better, after a given stop
price has been reached or exceeded.  A stop-limit order to buy
becomes a limit order when the option contract trades or is bid
at or above the stop-limit price.  A stop-limit order to sell
becomes a limit order when the contract trades or is offered at
or below the stop-limit price.  An option stop-limit order is a
combination of a stop order and a limit order.  Stop-limit orders
that have been triggered and converted into limit orders will
execute if the option is thereafter offered at or below the ask
price for buy orders or at or above the bid price for sell orders.

In layman's terms; If you use a STOP order and the instrument
trades at or below your stop, the order will become a “market”
order.  This is not the case with a stop-limit order.  If you use
a stop-limit order and the issue moves too quickly to trade at
the limit price, the order will not be executed.

In most cases, a simple STOP order is the best method to limit
losses or protect profits.  The basic guidelines for establishing
protective stops suggest that the initial or opening limit should
be placed at a point where important technical support is evident.
Most often, this will be a relatively small range reflecting the
bottom of a basing pattern or trend-line established prior to
entering the position.  An important objective of this initial
stop-loss limit is to preserve capital if the play goes badly and
yet provide every opportunity for the position to achieve its
potential.

If the primary trend is directional, the placement of the first
stop will differ, depending on your overall risk/reward tolerance.
One should also take into account the historical volatility of the
issue when setting the initial loss limit.  On a bullish stock you
might trail the stop loss slightly below the previous day's low to
lock-in profits (or preserve capital) if the trend falters.  With
highly volatile instruments, this can be quite difficult as they
often fluctuate by large amounts.  As the move progresses in your
favor, the stop-loss price can be advanced more aggressively.  To
assist in placing these stops, we use generally use trend-lines,
minor lows, and support/resistance areas.

While these principles work well with the majority of situations,
there will always be those cases when even the most common rules
do not seem to apply.  In particularly fast-moving markets where
straight line advances make the placement of protective stops
difficult, an arbitrary buy or sell "at the market" might be more
advisable.  There are also "progressive" stop order systems for
traders who wish to fine tune the limit-setting process to allow
for brief periods of technical consolidation.  Regardless of the
manner in which you determine the placement of stops, there is one
fundamental principle of protective limits that remains inviolate.
After an initial profit is achieved, it is very important to avoid
placing stops below a point which, if violated on a closing basis,
indicates a change in the primary trend.  In addition, protective
stops under long positions are never moved down, nor are protective
stops over short instruments ever adjusted higher.

As Jim often says, "A dip today may be a buying opportunity or it
could be the start of something bigger.  You never know so always
set your stop losses and stick to them!"

Good Luck!
 

SUMMARY OF PREVIOUS PICKS 
*****

Stock  Price  Last   Put   Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

MED     9.44   9.00   JUN   7.50  0.38  *$  0.38  36.4%
BBSW   28.63  29.25   JUN  22.50  0.63  *$  0.63  21.5%
ITXC   40.06  35.63   JUN  30.00  0.69  *$  0.69  17.2%
ADAC   20.31  21.75   JUN  17.50  0.44  *$  0.44  16.6%
ADAC   17.38  21.75   JUN  15.00  0.56  *$  0.56  15.8%
ADVP   16.75  18.19   JUN  12.50  0.38  *$  0.38  14.8%
MSM    22.06  18.69   JUN  17.50  0.50  *$  0.50  14.7%
BBSW   17.00  29.25   JUN  12.50  0.38  *$  0.38  14.6%
MRVC   35.56  55.38   JUN  25.00  0.50  *$  0.50  14.3%
ADEX   19.56  18.81   JUN  15.00  0.69  *$  0.69  13.0%
BFO    65.13  69.69   JUN  55.00  1.00  *$  1.00  12.8%
TMAR    9.25  11.63   JUN   7.50  0.25  *$  0.25  12.3%
MATK   18.88  17.63   JUN  15.00  0.31  *$  0.31  11.0%
YRK    25.94  25.00   JUN  22.50  0.56  *$  0.56  10.8%
UNM    20.19  20.81   JUN  17.50  0.56  *$  0.56  10.2%
ADVP   17.13  18.19   JUN  12.50  0.31  *$  0.31   9.0%
GZMO   17.19  13.25   JUN  10.00  0.31  *$  0.31   9.0%
CLPA   29.38  21.94   JUN  15.00  0.63  *$  0.63   8.4%
WLV    16.94  15.75   JUN  15.00  0.50  *$  0.50   8.1%
CLPA   27.19  21.94   JUN  15.00  0.44  *$  0.44   8.1%
NGH    20.88  25.06   JUN  17.50  0.38  *$  0.38   7.7%
VRTL   17.00  17.75   JUN  10.00  0.31  *$  0.31   7.3%
NGH    21.19  25.06   JUN  17.50  0.25  *$  0.25   7.2%
XTO    17.69  20.44   JUN  15.00  0.38  *$  0.38   6.9%
VRC    20.81  24.88   JUN  17.50  0.38  *$  0.38   6.1% New ticker
ALL    26.75  22.38   JUN  22.50  0.44   $  0.32   5.0%
TRMB   36.00  46.25   JUN  25.00  0.44  *$  0.44   5.0%

EFCX   10.56  10.38   JUL   7.50  0.44  *$  0.44  12.5%
FSII   16.00  18.25   JUL  12.50  0.50  *$  0.50   8.4%
PILT   15.31  13.00   JUL  10.00  0.38  *$  0.38   8.0%
CREAF  28.00  25.69   JUL  22.50  0.69  *$  0.69   7.8%
OMKT   19.00  16.19   JUL  12.50  0.38  *$  0.38   6.6%
MPPP   19.19  17.19   JUL  10.00  0.38  *$  0.38   6.5%
SYMM   20.00  18.56   JUL  15.00  0.38  *$  0.38   6.3%
CEGE   27.25  25.56   JUL  17.50  0.44  *$  0.44   5.4%

*$ = Stock price is above the sold striking price.

Comments:

Allstate (ALL) moved sharply lower this week after warning about
Spring storm losses.  Friday's close within $0.12 of the sold 
strike makes it unlikely the position will be assigned, but if 
that occurs, it may be best to simply sell the issue for the 
current small profit.  Symmetricom (SYMM) gapped out of reach on
Monday but the recent consolidation inflated the July $15 strike
well above our listed price.  A test of its 30 dma seems likely.


NEW PICKS
*********

Sequenced by Return  
******

Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

FSII   18.25  JUL  15.00  FQH SC  0.75  20   14.25   35    13.6%
CAMP   29.00  JUL  22.50  UMP SX  0.81  53   21.69   35    10.6%
GENE   26.13  JUL  17.50  GUG SW  0.63  111  16.87   35     9.3%
NSS    20.13  JUL  15.00  NSS SC  0.44  52   14.56   35     8.6%
CAIR   25.50  JUL  17.50  HHU SW  0.44  0    17.06   35     6.9%
CLEC   28.13  JUL  20.00  QFU SD  0.44  0    19.56   35     6.3%
IMNX   44.69  JUL  30.00  IUU SF  0.56  377  29.44   35     5.1%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even 
point, DE-Days to Expiry, MR-Monthly Return.

*****
CAIR - Corsair Communications  $25.50  *** Wireless Services ***

Corsair Communications is a leading provider of software and
system solutions for the wireless industry.  Their PhonePrint
system provides highly effective cloning fraud prevention to
wireless telecommunications carriers by using proprietary radio
frequency (RF) signal analysis technology.  Corsair's PrePay
solution has an advantage over most other competitive offerings
since it enables carriers to use existing switch infrastructure
equipment rather than requiring costly additional adjunct 
switches and voice trunk resources.  Corsair attributed its 
strong first quarter earnings to the growth and acceptance of
their PrePay product.  Corsair's technical picture continues 
to brighten as Friday's close above the late March high appears
to complete a bullish head-n-shoulders bottom.  We favor an
entry point near the 150 dma.

JUL 17.50 HHU SW LB=0.44 OI=0 CB=17.06 DE=35 MR=6.9%

Chart =
 /charts/charts.asp?symbol=CAIR
*****
CAMP - California Amplifier  $29.00  *** Great Earnings! ***

California Amplifier designs, manufactures and markets a broad
line of amplifiers, down-converters, antennas and integrated
products.  These products are used in the reception, conversion
and amplification of microwave signals used in conjunction with
the reception of data transmitted from satellites or earth-based
transmitters using microwave signals.  CAMP also manufactures
and markets two-way voice and data transceivers used for wireless
communications between fixed locations.  In addition, the company
markets MultiCipher, a broadband analog scrambling system that
decodes all channels transmitted simultaneously, and a broad line
of antenna products used in GPS applications for tracking and
navigation.  Earlier this month, CAMP rallied after the company
reported that sales for the quarter jumped 147% over the year-ago
period due to continued strong demand for U.S. satellite products
and revenues from new European markets.  Based on the technical
outlook, this issue appears ready to rally.

JUL 22.50 UMP SX LB=0.81 OI=53 CB=21.69 DE=35 MR=10.6%

Chart =
 /charts/charts.asp?symbol=CAMP
*****
CLEC - US LEC  $28.13  *** On The Rebound! ***

US LEC is a competitive local exchange carrier that provides
switched local, long distance and enhanced telecommunications
services to its clientele.  CLEC serves a number of telecom
customers including universities, financial institutions,
hospitals, hotels, Internet Service Providers and government
agencies.  In addition to providing typical enhanced services
such as voicemail, call transfer and conference calling, US LEC
offers additional value-added enhanced products to complement
its core local and long distance services.  The company now has
switches in many Eastern U.S. cities and they are expanding on
a regular basis.  Telecom issues have rebounded in recent weeks
and it appears that CLEC has successfully recovered from the
sharp technical correction earlier in the year.

JUL 20.00 QFU SD LB=0.44 OI=0 CB=19.56 DE=35 MR=6.3%

Chart =
 /charts/charts.asp?symbol=CLEC
*****
FSII - FSI International  $18.25  *** Chip Sector! ***

FSI International designs, develops, manufactures, markets and
supports microlithography, spin-on dielectric and surface
conditioning equipment for the fabrication of microelectronics,
such as advanced semiconductor devices and thin film heads.  FSI
Surface Conditioning Division sells equipment and applications
using wet, vapor and cryogenic chemistry techniques to clean,
strip or etch the surfaces of silicon wafers for subsequent
processing.  The Microlithography Division supplies photoresist
processing equipment and services for the semiconductor and thin
film head markets, and dielectric materials deposition equipment
and services for applications in the semiconductor industry.
FSI's earnings are expected later this week and based on recent
contracts and agreements, the report and conference call should
be favorable.  Our cost basis provides a low risk opportunity
for speculation on the company's future financial outlook.

JUL 15.00 FQH SC LB=0.75 OI=20 CB=14.25 DE=35 MR=13.6%

Chart =
 /charts/charts.asp?symbol=FSII
*****
GENE - Genome Therapeutics  $26.13  *** Biotechs Are Hot! ***

Genome Therapeutics identifies and validates novel drug targets
by applying its integrated platform technologies of high
throughput sequencing, disease gene identification, and
functional genomics.  They also posses related proprietary
technologies, which they intend to use to identify and validate
gene targets.  Together with their partners (Schering-Plough,
bioMérieux and others), they plan to develop novel therapeutic,
vaccine and diagnostic products.  They focus on the discovery
and characterization of novel targets in pathogens that are
responsible for many serious diseases.  The drug stocks are
climbing again and a technical breakout from a stage I base,
supported by heavy volume suggests this issue is ready to rally.
We prefer to speculate near technical support and our cost basis
offers a conservative entry into this volatile issue.

JUL 17.50 GUG SW LB=0.63 OI=111 CB=16.87 DE=35 MR=9.3%

Chart =
 /charts/charts.asp?symbol=GENE
*****
IMNX - Immunex  $44.69  *** Own This One! ***

Immunex is a biopharmaceutical company that discovers, develops,
manufactures and markets innovative therapeutic products for the
treatment of human diseases including cancer, infectious diseases
and immunological disorders.  Their major product lines include
Enbrel, Leukine, Novantrone and Thioplex.  Immunex is currently 
developing new products to address ailments such as inflammatory
disease, infection, multiple sclerosis, asthma and cancer.  IMNX
jumped $7 Friday on the sales outlook for Enbrel, a drug to treat
rheumatoid-arthritis.  Immunex said sales could grow 15% in the
next quarter.  A "strong buy" rating from Banc of America also
helped drive the stock higher and we believe IMNX is an excellent
portfolio addition.  We will "target shoot" the position initially
at $0.75 credit.

JUL 30.00 IUU SF LB=0.56 OI=377 CB=29.44 DE=35 MR=5.1%

Chart =
 /charts/charts.asp?symbol=IMNX
*****
NSS - NS Group  $20.13  *** Technicals Only! ***

NS Group conducts business in three industry segments: the energy
products segment, the industrial products segment - special bar
quality products, and the industrial products segment - adhesives.
The energy products segment is a producer of tubular steel used
in the energy industry.  Products produced by this segment include
welded and seamless tubular goods, primarily used in oil and
natural gas drilling and production operations, referred to as oil
country tubular goods; and welded and seamless line pipe.  OCTG
products are produced in numerous sizes, weights, grades and end
finishes.  The industrial segment manufactures products for a
specialized niche of the SBQ market including custom water-borne,
solvent-borne and hot-melt adhesives and footwear finishes.  We
simply favor the bullish technical outlook for the issue and its
industry.

JUL 15.00 NSS SC LB=0.44 OI=52 CB=14.56 DE=35 MR=8.6%

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



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

Another Great Month...

Friday, June 16

Industrial stocks moved lower today as concerns over upcoming
earnings weighed heavily on investors.  In contrast, the Nasdaq
posted slim gains amid speculation that technology stocks would
be less affected by an economic slowdown.  The Dow closed 265
points lower at 10,449 while the Nasdaq finished up 14 points at
3860.  The S&P 500 Index was down 14 points at 1464.  Volume on
the NYSE was heavy at 1.2 billion shares as the "triple witching"
expiration of options boosted trading activity.  Declines led
advances 1,586 to 1,310.  Trading volume on the Nasdaq reached
1.4 billion shares, with declines edging advances 2,110 to 1,791.
In the bond market, the 30-year Treasury was up 23/32, pushing
its yield down to 5.87%.


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

CV Thera.  CVTX  JUL35P/JUL40P   $0.75   credit   bull-put
Red Hat    RHAT  SEP30C/JUL30C   $2.00   debit    calendar
Lennox     LII   SEP12C/SEP10P   $0.81   debit    straddle

Our new straddle in Lennox (LII) was very active and the position
is already profitable.  The combined cost for both options opened
near $0.81 and traded as high as $1.31 in the afternoon.  There
was also a few contracts of late session volume in the target
options suggesting that some of you took profits as the premiums
returned to theoretical value.  Rhat was less-cooperative and the
best observed price (on a simultaneous order basis) was in a 10
contract trade near 10:45 a.m.  CV Therapeutics moved in a small
range and there was little activity in our bullish position.


Portfolio plays:

Investors sold for profits today amid concerns that higher
interest rates may be slowing earnings more than expected.  The
banking sector pulled the Dow lower after analysts suggested
there would be future revenue shortfalls in the industry.  The
big loser was J.P. Morgan (JPM) with an $8 drop to $118.  Those
of you who participated in our bearish position earned a 17%
return for the month of June.  On the Nasdaq, Semiconductor
stocks moved higher on strength in Rambus (RMBS) which rallied
$26 after signing a new patent license agreement with Toshiba.
Our leading technology stocks were Exodus (EXDS) with a $10
spike to a recent high near $103 and SCM Microsystems (SCMM)
which rose $7 to $97.  Biotech stocks performed well in today's
session and Immunex (IMNX) led that group with a $7 move after
bullish analyst comments concerning sales of its popular drug
Enbrel.  Our top drug issue was Medimmune (MEDI) which moved
up $5 in an attempt to breach the all-time high.  Our bullish
covered-strangle ended at maximum profit.  Oil industry issues
managed mediocre gains even as the cost of crude dropped on
expectations that OPEC will increase production to curb rising
prices.  Positions in Apache (APA), Ashland (ASH), and Falcon
Drilling (FLC) all finished at maximum profit.  In the broad
market, computer hardware and telecom issues advanced while
photo imaging, tobacco and finance companies slumped.

There were a number of surprises during today's active session.
The most unusual move occurred in Covad Communications (COVD)
which slumped to $18 after the company said it will acquire
privately held Bluestar Communications, a provider of broadband
and Internet services for small and medium-sized businesses in
the Southeastern U.S.  Covad said Bluestar has a direct sales
model that will increase revenues but will lower future DSL line
growth.  Investors shunned the deal and those of you who did not
close the bullish debit position when the issue moved above $30
earlier in the month were shocked to see the stock trading in
the teens.  One issue that failed to participate in the chip
sector rally was Globespan (GSPN).  The stock fell $6, taking
our conservative call-debit spread well into negative territory.
This position had yet to provide a favorable early-exit return
and thus we endured a small "expiration day" loss.  On the good
side, Novoste (NOVT) fell $2.75, finishing well below the sold
option in our bearish credit spread.  The position finished at
maximum profit.  Ditech (DITC) was most peculiar, rallying $8
to close at $75.50, just above the short option in the bullish,
put-credit spread.  Unfortunately, we closed this play for a
small loss earlier in the week.  That's two consecutive months
in which we have thwarted the outstanding record of the Credit
Spread portfolio with our own inept trading.  All I can say is,
"Win some, lose some!"

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
IMNX - Immunex  $44.69  *** On The Rebound! ***

Immunex is a biopharmaceutical company that discovers, develops,
manufactures and markets innovative therapeutic products for the
treatment of human diseases including cancer, infectious diseases
and immunological disorders.  The company's major product lines
are Enbrel, Leukine, Novantrone and Thioplex.  Enbrel is a soluble
tumor necrosis factor receptor that reduces inflammatory activity
in patients with moderate to severe rheumatoid arthritis.  Leukine
is a yeast-derived granulocyte-macrophage colony-stimulating
factor that is used to stimulate infection-fighting white blood
cells.  Novantrone and Thioplex are chemotherapy drugs that are
used to treat pain in cancer patients.  Immunex is also currently
developing new products to address ailments such as inflammatory
disease, infection, multiple sclerosis, asthma and cancer.

IMNX jumped $7 Friday on the sales outlook for Enbrel, a drug to
treat rheumatoid-arthritis.  Immunex said sales could grow 15% in
the next quarter.  A "strong buy" rating from Banc of America also
helped drive the stock higher and after a brief consolidation, the
issue should be poised for further bullish activity .  We believe
IMNX is one of the best companies in the industry and among
Bio-tech investors, it is also one of the most popular holdings.
The current technical outlook is favorable and our conservative
position offers a way to participate in the issue with relatively
low risk.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  SEP-35  IUU-IG  OI=161  A=$14.25
SELL CALL  JUL-45  IUU-GI  OI=468  B=$5.25
INITIAL NET DEBIT TARGET=$8.75  INITIAL TARGET ROI(max)=14%

Chart =
/charts/charts.asp?symbol=IMNX
******************************************************************
TEK - Tektronix  $64.00  *** Earnings Rally! ***

Tektronix manufactures and distributes electronic products
through two major business divisions: Measurement and Video and
Networking.  Measurement products include a broad range of
instruments designed to allow an engineer or technician to
view, measure, test or calibrate electrical circuits, mechanical
motion, sound or radio waves.  Video and Networking products
include video distribution, production, storage and newsroom
automation products.

Tektronix is focused on providing advanced test, measurement
and monitoring solutions to the global telecommunications and
computer industries.  Their partnership with leading electronics
companies enables them to provide cost-effective test platforms
to businesses manufacturing the building blocks of today's
computer and telecommunications networking infrastructure.

Textronix is the premier company in the electronic equipment
testing and calibration industry and analysts are bullish on its
long-term outlook.  Friday’s move above the recent trading range
near $60 suggests the issue is ready to rally into the upcoming
earnings report. The momentum should carry the stock to a new,
all-time high and our position offers a low risk cost basis with
a reasonable expectation of profit.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-45  TEK-SI  OI=75  A=$0.38
SELL PUT  JUL-50  TEK-SJ  OI=5   B=$1.00
INITIAL NET CREDIT TARGET=$0.68-$0.75  ROI(max)=17%

Chart =
/charts/charts.asp?symbol=TEK
******************************************************************
AFM - AM/FM Inc.  $75.00  *** CCU Merger ***

AMFM, together with its subsidiaries, is a large national radio
broadcasting and related media company.  AMFM has operations in
radio broadcasting and media representation and growing Internet
operations, which focus on developing AMFM's Internet web sites,
streaming online broadcasts of AMFM's on-air programming and
other media, and promoting emerging Internet and new media
concerns.  In addition, AMFM owns an approximate a large equity
interest in Lamar Advertising Company, one of the largest owners
and operators of outdoor advertising structures in the U.S.

Radio and Television has been a strong sector among media shares
in recent weeks and AFM is one of the top companies in the group.
In late April, Clear Channel Communications (CCU) announced that
their stockholders voted to approve the merger with AMFM.  After
regulatory approvals, the merger is expected to be finalized by
September 30, 2000.  AMFM shareholders will receive 0.94 shares
of Clear Channel Communications stock, on a fixed exchange basis.

Clear Channel Communications is a diversified media company with
two business segments, broadcasting and outdoor advertising.  The
broadcasting segment includes both radio and television stations
for which the company is the licensee and radio and television
stations for which it programs and/or sells air time under local
marketing agreements or joint sales agreements.  The broadcasting
segment also operates radio networks.  The outdoor advertising
segment includes advertising display faces for which the company
owns and/or operates under lease management agreements.

Last month, the company announced that sports and entertainment
promoter SFX Entertainment (SFX) agreed to settle the pending
shareholder lawsuits, clearing the way for its planned merger
with CCU.  With approval of the transaction by SFX's stockholders,
the merger is expected to close in the next few months.  The
addition of both AFM and SFX is expected to significantly advance
Clear Channel’s industry-leading position.

We are going to participate in the bullish trend of CCU with AFM
options:


PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-60  AFM-SL  OI=40   A=$0.50
SELL PUT  JUL-65  AFM-SM  OI=270  B=$1.00
INITIAL NET CREDIT TARGET=$0.62  ROI(max)=14%

Chart =
/charts/charts.asp?symbol=AFM
******************************************************************
SEE - Sealed Air $53.81  *** Technicals Only! ***

Sealed Air Corporation is engaged in the manufacture and sale of
a wide range of protective food and specialty packaging materials
and systems throughout the world.  The company's principal food
and specialty packaging products are its flexible materials and
related systems marketed primarily under the Cryovac trademark
for a broad range of perishable food applications.  Products also
include the company's rigid packaging and absorbent pads; foam
trays used by supermarkets and food processors, absorbent pads
used for the retail packaging of meat, fish and poultry, and
rigid plastic containers for dairy and other food products.  The
company's protective packaging products include its cushioning
and surface protection products and other products.  These items
are used by a wide variety of customers, including manufacturing,
distribution and retail customers.

This play is simply based on the current price or trading range
of the underlying issue and its recent technical history.  The
position was discovered with one of our primary sort techniques;
identifying potentially failed rallies on issues with bullish
options activity.  In this case, the premiums for the (OTM) call
options are slightly inflated and the potential for a successful
(technical) recovery is significantly affected by the resistance
at the sold strike price; a perfect condition for a bearish credit
spread.


PLAY (conservative - bearish/credit spread):

BUY  CALL  JUL-65  SEE-GM  OI=348   A=$0.25
SELL CALL  JUL-60  SEE-GL  OI=2683  B=$0.75
INITIAL NET CREDIT TARGET=$0.62  ROI(max)=15%

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



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

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