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Daily Newsletter, Tuesday, 06/27/2000

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The Option Investor Newsletter                   Tuesday 6-27-2000
Copyright 2000, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com
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MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       6-27-2000           High     Low     Volume Advance Decline
DOW    10504.50 -  38.50 10615.80 10504.50 1,026,470k 1,642  1,278
Nasdaq  3858.96 -  53.16  3945.75  3858.95 1,474,978k 1,683  2,344
S&P-100  784.94 -   4.27   792.67   784.94    Totals  3,325  3,622
S&P-500 1450.55 -   4.70  1463.44  1450.55            47.9%  52.1%
$RUT     508.08 -   8.28   518.57   507.88
$TRAN   2680.97 +  66.42  2689.05  2608.27
VIX       24.88 +   0.16    25.02    23.95
Put/Call Ratio       .57
******************************************************************

Will they or won't they? The Fed bears test the porridge.

Too hot, too cold or just right? Is the economy still too hot
or has the economy cooled off enough to allow the Fed to go
back to business as usual. The official consensus is the Fed
will pass on raising rates tomorrow but may move back into
rate hike mode at the next meeting in August. Inflation news
today came in the form of the Consumer Confidence Index which
dropped from 144.7 in May to 138.8 in June. The weakening in
the consumer confidence is usually felt with a corresponding
drop in retail sales and a backup in product inventory. The
Consumer Confidence today is just one more sign that the
economy is slowing but many Fed watchers feel the Fed will
still apply one more tap on the brakes in August. While the
decision this week is a yawner with everyone expecting no
hike, the indecision for August will provide more market
instability the closer we get. The decision this week is
a non-event since the Fed always telegraphs their direction
in advance and they have been very quiet this cycle. A hike
on Wednesday would be very bad since traders had no warning.








The recent trend of a rally the two days before the Fed announcement
fell short with both major indexes rolling over in the late afternoon.
The Nasdaq closed at the low of the day and the Dow was very close.
The down markets the day before a possible change in rate policy by
the Fed is troubling. Several recent meetings with almost 100% chance
of a rate hike were met with rallies into the announcement. What held
the market back? Could it be the changing of focus from the Fed to
earnings?

Other factors, which have been impacting the market, include the July
1st reshuffling of the Russell indexes as well as window dressing
by portfolio managers for the end of the second quarter. Normally
these are bullish events but the markets have not been following
the script. The Russell adjusts the top three indexes on July 1st
and the shakeup causes many index funds to buy and sell stocks to
adjust their fund ratios. The Russell-1000 is the top 1000 stocks
by capitalization, the Russell-2000 the next 2000 stocks and the
Russell-3000 is the combination of both. Funds following these
indexes amount to about $200 billion. Not all of this money changes
hands by far but there is quite a bit of shuffling. If a company
moves into the Russell-1000 from the Russell-2000 the funds must
buy to fill any R1000 requirement and sell to close any R2000
requirements. These movements across the different indexes then
impact the weightings of stocks that did not move causing minor
buying and selling. If you are an index fund you could literally
be forced to trade hundreds of stocks in various amounts. Still this
volume is not showing up in the market or regular trading has been
so minor as to hide it.

The end of quarter window dressing has also been nominal. Fund
managers like to show leaders in their portfolio at the end of
the quarter instead of cash. By buying leading large caps they can
remain liquid and move out of them just as quick after the quarter
end passes. One of the biggest tech leaders is IBM and they sold
off over -$4 today on earnings and currency worries. Intel also
lost almost -$3 and CSCO -$.50.  One of the few sectors to show
strength was the retail sector, go figure? With retail sales down
for two months in a row the retail sector had been devastated. It
appears the big money is looking for a sector with a bottom and
retail was nominated. Sounds defensive to me! GPS +2.13, WMT +3.06,
TIF +3.81, Sears even added to a three day streak with a +.81.
(nice 60 min chart on S, could be a bottom)

Oil is still a problem with August crude moving over $32 a bbl
today. Analysts are expecting the continued high prices to start
pressuring the inflation numbers with a critical number being $34,
the same high we hit last March.

The big news today was the WCOM/Sprint merger wreck. The Justice
dept filed suit to block the merger on the grounds that it would
be anti-competitive for the consumer. Lets see, if one company
controlled 80% of the long distance traffic, could that impact
prices in the Internet economy? While many analysts thought it
would not matter, the Justice dept took exception. The merger
is all but dead but many other smaller companies just became
targets. VoiceStream VSTR, Nextel NXTL, Alamosa PCS APCS to
name several. There is still a rumor that DT is looking for an
American outlet as well.

After the bell today Phelps Dodge (PD) and Tenneco (TEN) both
warned that they would miss estimates for the quarter. Yawn!
COMS did announce and beat estimates, we think, by a couple
cents. There was some discussion after the announcement by First
Call on some one-time charges and did they apply to the estimate
but the final decision was a better than expected number for COMS.
They were up slightly in after hours trading.

The Fed announces their interest rate decision at 2:15 ET tomorrow
and will have to compete with president Clinton for airtime. The
president announced today he would hold a full scale news conference
at 1:30 tomorrow. Since they usually start with a speech and then
open the floor to questions it is entirely possible he will still
be speaking when the Fed makes their announcement.

Once the Fed is done the focus will immediately move to earnings
which start in force the second week in July. Even though we have
had some high profile earnings warnings the number is still less
than normal. This should either lift expectations that we are
going to have a good crop of earnings OR more companies than
usual will miss earnings after expected last minute orders never
materialized. Regardless of the expectation there are only seven
days left for an earnings run to occur.

I got a lot of hate mail from people objecting to my bearishness
last Sunday. Good! If that many people had to take a minute to
actually decide if I was off base and then write me then it shows
you are not just blindly buying calls just because they are in
the newsletter. I got several emails saying "why do you have calls
in the newsletter if summer trading is so tough?"  1. Because most
of our readers don't care what the market is going to do, they
just want to buy something. Believe it! 2. Just because prior
summers have been tough to trade does not mean this summer can't
be different. We could start a rally tomorrow that could run till
October. Elvis could also come back to life too. 3. Yes, you can
make money trading in the summer even if the market is choppy.
Nothing goes up or down OR SIDEWAYS in a straight line. Look at
the Dow chart or the Nasdaq chart above. Both have several trading
rallies in the last several weeks even though they are both moving
sideways. You can still make money, it is just much harder.

It is ENTIRELY up to you to decide what to buy and when to buy it.
The newsletter gives you 20-30 prescreened plays as a starting
point to do your own research. You decide when and if you bet
(not invest) your money and how much you are willing to lose.
Sometimes I spend hours researching plays the night before and
when the market opens it goes against me. I must decide if I
want to try and force a play or wait for the next day. You have
heard me say many times that the entry point is the key. In tough
times it is even more critical. I certainly do not expect everyone
to stop trading for the summer. I simply advise more caution than
normal. For a new trader it is difficult not to confuse a bull
market with genius. Last fall anyone with a blindfold and darts
could have made money in options. Choppy sideways markets like
we are seeing right now is what builds experience and character.
Remember the old saying, "Good judgement comes from experience
and experience comes from bad judgement." Your results in this
market will be 100% related to how you approach it.

Good luck and sell too soon.

Jim Brown
Editor


Current long positions include:

NOK, VOD, MSFT



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

The Market Lost, But IPOs Gained
By Ryan Nelson

The Industrials and Composite both gave up ground, accelerating
into the close, but the initial public offering market mirrored
strength seen in days gone by.  There were five deals today and
most were received very well.  The biggest came from Marvell
Technology (MRVL) which gained more than 260% above its offering
price.  It priced at $15, traded as high as $63.31, before
settling out at $56.63.  This chipmaker for the communications
sector wasn't alone either.  Here is the list of the five IPOs
today and where they priced.

Company 	   Symbol  IPO Price   Close    Return

Marvell 	   MRVL      $15      $56.63    277.53%
Stratos Lightwave  STLW      $21      $33.63     60.14%
Click Commerce     CKCM      $10      $17.63     76.30%
EFunds 	  	   EFDS      $13      $13.06      0.05%
Busybox.com        BUSY      $5       $ 5.75     15.00%

IPO followers have pointed out that only strong deals are left
after the multiple cancellations of April and May.  Speaking
of strong deals, another is set to debut tomorrow.  All eyes
will be on GTE Unit, Genuity, which is scheduled for a $2.3
billion dollar issuance.  This is perceived to be a high
quality deal and should again garner investor interest as
sentiment in this area begins to pick up.  In fact, there will
be up to 15 offerings this week vying for investor dollars.
Some of the bigger names include Exfo (EXFO), Accord Networks
(ACCD), and Virage (VRGE).  Remember, the IPO market is key in
gauging investor interest in the markets and is known for being
a leading indicator to market sentiment.  Thus, this kind of
interest is a positive development for the markets.

The other key factor to focus on this week is how end of the
quarter portfolio rebalancing will affect trading.  More commonly
known as "window dressing", this reshuffling is to due to fund
managers clearing out their portfolio of the losers and filling
it with winners for the upcoming prospectus.  This activity
will result in above average volume in the broad markets this
week, as well as in the blue chip stocks in each sector.

Throw in the Fed decision tomorrow and volatility should be
expected.  The Nasdaq still doesn't look good as it screams
failed rally.  Without a strong post-Fed rally, we may have to
continue to fight the range-bound conditions.  Play it safe
until further conviction arrives.


BULLISH SIGNALS

The end of earnings warnings
The time has come for warnings to end and profits to appear.
Most of the pre-announcements should have trickled out by the
end of the week.

Interest rates
5.94% on the 30-year treasury may be signaling the rate fears
are over.

IPO sentiment
As mentioned above, a possible precursor to the market rallies.


MIXED SIGNALS

Volatility Index (24.82)
Right smack in the middle...no over enthusiasm, no panic.  This
creates a relative level playing field for individual stock
picking.


BEARISH SIGNALS

Failing Nasdaq
Although it hasn't broken major support levels, it hasn't shown
any life for the past four sessions.  We will likely need a move
back over 4,000 on strong volume to convince traders to return.

Energy Prices
Still no major relief.  It will be difficult to curb inflation
with gas and oil prices remaining high.  Ultimately, this will
affect profit margins.  August Crude climbed 43 cents to $32.06
on Tuesday.


Put/Call Ratio
*****************************************************************
                                Friday      Tues       Thurs
Strike/Contracts               (6/23)      (6/27)      (6/29)
*****************************************************************


CBOE Total P/C Ratio            .61         .57
Equity P/C Ratio                .53         .47
OEX Put/Call Ratio             3.04         .91


Peak Open Interest (OEX)
*****************************************************************
                     Friday          Tues            Thurs
Strike/Contracts     (6/23)         (6/27)           (6/29)
*****************************************************************

Puts                790 / 5,449    700 / 6426
Calls               880 / 6,293    880 / 6308
Put/Call Ratio        0.87           1.02



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 27, 2000                           24.82



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

As of Market Close - Thursday, June 22, 2000

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

DOW Industrials   10,200  11,400  10,504    Neutral   5.05
SPX S&P 500        1,350   1,500   1,450    Neutral   5.30
OEX S&P 100          725     800     785    Neutral   5.30
RUT Russell 2000     450     550     508    Neutral   5.05
NDX NASD 100       3,000   4,000   3,699    Neutral   5.30
MSH High Tech        800   1,050     995    Neutral   6.06

XCI Hardware       1,250   1,600   1,500    Neutral   5.30
CWX Software       1,050   1,300   1,238    Neutral   6.06
SOX Semiconductor    850   1,200   1,173    BULLISH   6.20
NWX Networking       900   1,100   1,190    BULLISH   6.02
INX Internet         500     800     546    Neutral   5.30

BIX Banking          520     640     546    Neutral   6.09
XBD Brokerage        450     515     497    Neutral   6.22
IUX Insurance        600     650     628    Neutral   6.20

RLX Retail           900   1,000     855    BEARISH   6.09
DRG Drug             355     400     407    Neutral   4.28
HCX Healthcare       710     800     828    BULLISH   6.15
XAL Airline          140     155     163    BULLISH   5.25
OIX Oil & Gas        265     300     305    BULLISH   5.11

Posture Alert
Not much has changed since Sunday as most of the indices
remain at almost identical levels.  This is standard pre-Fed
jitters as investors take a wait-see-attitude.  Biotechs
lost 3.77%, Semiconductors dropped 3.58% and the NDX lost
1.92%.  This was off set by gains in Retail, Airlines and
Banks.



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

Using Options To Hedge Long-Term Stock Investing
By Mary Redmond

One of the most frequently asked questions in this investing
period is  "Should I hold long term or sell and take a profit
when I have one?"  There are advantages to each of these
strategies.  Studies of the trading volume on the exchanges
have shown that the turnover rate of shares on the NYSE is
higher than it ever has been.  This seems to indicate that
increasingly fewer people are true long term investors.

Many of the very wealthy people today are long term investors.
For example, Bill Gates did not become a multi billionaire by
using Microsoft as a day trading stock.  He held the shares
from the company's ipo until it was worth at its peak over
$500 billion in market capitalization.  A company's market
value does not usually grow from $10 or $20 million to $100
or $200 billion in a few months.  It takes a certain amount of
patience to hold a stock until this type of growth is acheived.

However, there are other considerations.  The volatility in
today's stock market is unprecedented.  Companies are growing
their revenues and market value at a pace which would have
seemed unbelievable even a few years ago.  For example, Cisco
achieved a market value at its peak of over $500 billion in
approximately 10 years, less than half of the time it took
Microsoft to acheive this value.  Stock prices move up and
down over 50% in a few days or weeks.  In previous decades
this was almost unheard of, unless there was a takeover.

In addition, the downside to this volatility can be severe, as
we recently witnessed in the market downturn this year.  Many
people lost over 50% of the value in their retirement accounts.
It is difficult to experience this type of loss without being
concerned.  Another consideration is the fact that technological
advances occur so rapidly nowadays that it is difficult to
know which technologies will become obsolete in the future.

In certain cases, you may be able to structure your portfolio
using option strategies so that you can profit from the upside
potential of a stock while protecting yourself on the downside.
The simplest way of doing this has been to buy a stock and a
put option at the same time.  However, in today's volatile
market many put options are too expensive to make this feasible.

One strategy to consider is the use of convertible preferred
stock and convertible bonds.  In certain cases, convertible
debt instruments may pay enough of a dividend or interest to
cover the cost of a put.  Many high tech companies have issued
convertible bonds, including AOL, Amazon, Double Click, Cypress
Semiconductor, Human Genome Sciences, Safeguard Scientifics,
Level 3 Communications and Veritas Software.  There are also
many convertible preferred stocks, and they are usually listed
in the newspapers or companys' annual reports.

Convertible securities can be complex.  You need to consider
the debt rating, the interest or dividend paid, whether or not
the security is callable, the conversion parity, and the
current price.  For example, some analysts expressed concern
this week that Amazon's convertible bonds may be at risk of
default.  In this case, the bond holders would not receive the
dividend.  It is usually best to stick with bonds which have
a B rating or higher.

At issuance, a conversion price is established.  The price
determines the number of shares of stock the bondholder can
receive upon converting the bond.  The number of shares which
will be received is the conversion ratio.  The conversion ratio
always equals the par value of the bond (1000) divided by the
conversion price.

As a simple example, Cypress Semiconductor has a B rated
convertible maturing in 2005 paying 4% interest.  The bond is
convertible into 21.62 shares of common stock.  When the stock
was $42, the bond was trading at 125 and yielding 3.20.%  If you
receive 4% interest per bond, this would be $40.00 per year.
If you bought 5 bonds you would receive $40 X 5 or $200.00
per year, assuming the company did not default.  You could use
the interest to partly cover the cost of a put.  This would
not provide a perfect hedge, however it might provide some
protection against severe losses in a market downturn.

A couple of years ago I bought AES 4.5% convertible bonds
maturing in 2005 in my retirement account when the stock was
around 45.  The stock has since doubled and split, and the
bonds are trading at 160, or $1600 per bond.  The interest is
$45.00 per bond.  Suppose you purchased five bonds, you would
receive $225.00 per year, which would cover the cost of a
Nov AES 40 put, or part of the cost of a Feb 40 put.

Or suppose you were interested in Phillip Morris, and thought
that the Nabisco takeover would add value to the stock.  Phillip
Morris pays a hefty dividend of $1.92 per share, or $192.00
for 100 shares.  This would almost cover the price of a Jan 01
25 MO put, or a Jan 02 20 MO put.  You could use the dividend
to help cover the cost of a put, which could give you downside
protection, assuming the company did not have to cut the
dividend.  Another example might be Citigroup.  If you look in
the paper you will see many different series of preferred
stocks, some yielding as much as 8%.

Options have many uses.  They can be used by speculators,
professional traders and retail investors for many purposes.
In this volatile market environment, the use of put options
can sometimes substantially decrease the risks of stock
market investing.

Contact Support


*****

Entering & Exiting Trades
By Austin Passamonte

It appears yesterday's discussion raised more questions
than it answered. Better shelve the topic I had in mind for
tonight (it can wait) and finish up some loose ends left
dangling.

First let me say that brokers offer a wide range of stop
usage for stocks and options. I cannot recommend specific
ones but will go one step better. George Fontanills book,
"Trade Options Online" available from OIN's bookstore in the
"Resources" section is the best $20 you'll ever invest for
choosing a broker. This book interviews and outlines a large
number of brokerages giving a complete breakdown on features,
prices and overall ratings. A must-have for every trader.

Getting stopped out is a fact of life for equities trading.
Learn to like small losses and you'll never suffer from
large ones again. The way to like small losses usually comes
from suffering enough large ones to sear the pain in your
heart. I'm sorry to say it took several brandings in my
trading career before I caught on.

Whether we like to hear it or not, entry points are the biggest
key to proper stop usage. I know, I know, wouldn't it be nice
if we could just buy wherever we feel like and set stops
that limit adverse moves to small losses from there? The good
news is you can. The bad news is you'll endure far too many
small losses to ever catch enough big gains that compensate.

I would refer you to the excellent piece Jim Brown recently
blew the dust off titled, "Entry point, entry point, entry
point" located in the Options 101 link under "Education" section
dated June 11th. That pretty much sums up the topic of buying
right. Remember the adage, "Anything bought right is already
half sold"!

The proper way to decide on stop settings is to start from
the top down. Before choosing any particular play we must
assess our financial plan. The plan is to buy low and sell
high - yes I know that, thanks for telling me. We better make
arrangements just in case this doesn't happen, though.

Take a hypothetical account balance of $20,000. Feel free to
add or subtract zeros as you see fit. Personally I'm willing to
risk 5% or $1,000 in total loss per trade on that balance. The
criteria are the trade MUST have a good chance for some amount
of profit and reasonable odds of a 2/1 or better return. In other
words I'm willing to risk $1,000 if I can make $2,000 or more
with better than even odds (in my opinion) of closing out flat
or with small gains to the downside. Adjust your level of risk
to suit yourself.

When sensible (relatively speaking for option traders) the
play is chosen once the maximum risk is settled upon. It
makes no sense to buy ten $1,000 contracts with a daily
range of 3 point swings. Protecting this position with $100
per contract stop is not going to win over the long run.

Sadly, this type of transaction is what I attempted last week
on the OEX. The numbers were different but the ideas similar.
Too many contracts for the level of loss I was willing to incur.
My stop was hit and the trade went profitable by $700 per option
the next two days. Instead of risking 2.5 stop loss on too many
contracts I should have risked 5 on half as many. The profit
target was 12 points best-case scenario and 7 points were
reached. That would merit risking 5 points on a stop-out if it
fit within my percent of drawdown via account balance.

Once we decide on our risk/reward parameters it's time to
narrow down the trade. Hey, plays are dime a dozen; pick one
that suits you instead of trying to fit yourself into one that
doesn't meld.

High-priced volatile options are great for short-term action
but proper entry is paramount. If that's your game, here are
the rules. Know the underlying behavior of the market. Pro
option traders usually follow a small stable of equities but
understand them implicitly.

Not that I'm part of their league, but my big stakes all get
placed on markets I know well. Don't get me wrong, I'm willing
to trade anything optionable but when it's time to bet heavy I
lean towards what I know best. After watching the OEX heartbeat
so long I can pretty much draw bar charts from memory. Give me
current levels for the DOW & COMP and I'll guess the OEX market
within one point. I'll bet Wendy's jewelry collection (easy for
me to say) a number of readers here can do even better on
stocks they follow. This comes from watching the action over
a period of time and learning intricacies.

Once a feel has developed we can identify average trading
ranges and points of recent support and resistance. Buying
calls or puts near these extremes give the best chance of
catching reversals without much slippage against us.

You can opt to buy near-the-money options that fit your
criteria. A $100 call option on XYZZ stock may have range of
$8 - $12 as the stock bobs from 80 to 90 over the past week.
You think it's ready for breakout and wait until a pullback
near 80 again. Sure enough, the stock returns to 83 and rests
on support as the underlying sector shows strength. What do
we buy?

Recent price range has shown a 4-point daily spread. If we're
sure the market should rally and can buy near the bottom of
this zone a 3-point stop should keep us in the action until
profits grow or complete reversal pops us out.

100 call prices are 9 - 10 and you enter a limit order at 9.5
for three contracts and fill. A protective stop is placed at
6.5 for each option. That's a risk of $900 with the other $100
in place for slippage. The stock falls to 80 and 79 as your
option price shrinks to 7.5 bid. I'd say it's time to walk
away from the screen, remove temptation to cancel the stop.
That's a NO NO!

Sure enough you're analysis was right. Analysts rate your
stock a hot buy and the market takes off. Stock prices hit
the next point of resistance near 110 and your calls now price
at 15 bid. You have choices and I like them both. Move the stop
up to 13 or so and let greed keep you in the market. That's a
good move for issues like RMBS or GLW lately. Or sell the calls
near 15 and pocket a nice $1500+ return for your $1,000 risked.

By the same token, what if you didn't wait for a pullback and
bought the same option at 11 when the stock still traded near
90? Where's a good place for your stop? Beats me, you either
risk too much or endure an early exit as the price hits a low
of 7.5 bid before rallying. With that in mind, how can we ever
justify buying options away from support or entries given by
technical signals? Not sure about you but I'll figure out
some excuse next time I fall prey to such weakness!

I don't believe a trader can select a play and then pick an
arbitrary figure of risk on a stop to enjoy long-term success.
Buying the wrong part of a move will lose no matter what stop
percentage you use. Consistent small losses with no solid
winners is still unprofitable trading. Hence the importance
of proper entries BEFORE setting stops. Forcing trades and
protecting them with stop losses is a slow, steady path to
broke. Choose your entry with care and protecting the downside
becomes easy!

ACTION ALERT: I'll cover this subject in detail next Monday
for sure but want to point out the fact tonight. Commercial
traders of S&P 500 futures contracts are near a ten-year
level of net short positions. This is an early indication of
how the Funds and Institutions are playing the next several
weeks market action. Commercial players in the SPOOS
historically win and are betting the downside in a major
way!

The summer rally may be alive & well and could last awhile.
However, if the broad markets begin selling off you might
think twice trying to buy any dips. The big boys in this
game are betting the farm that bottom might be near some
figures we haven't seen in awhile. Just one factor to be
aware of.

See you Monday!

Contact Support



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

Oxygen Starved Investors Need Fresh Air
By Buzz Lynn
Sectortrader@OptionInvestor.com

A breath of air is on the agenda tomorrow courtesy of Alan
Greenspan.  Just make sure it's fresh before you suck it in.



Index             Last    Mon    Tue    Wed    Thu    Fri    Week

QQQ NASDAQ-100    92.72   2.50  -1.28   0.00   0.00   0.00   1.22
HHH Internet     109.25  -3.18   2.63   0.00   0.00   0.00  -0.56
BBH Biotech      172.25   5.75  -5.00   0.00   0.00   0.00   0.75
PPH Pharm.       101.06   2.19   0.81   0.00   0.00   0.00   3.00
TTH Telecom       75.50  -0.25  -0.50   0.00   0.00   0.00  -0.75
IAH I-net Arch.   89.88   1.94  -1.69   0.00   0.00   0.00   0.25
IIH I-net Infr.   58.25  2.385  -0.63   0.00   0.00   0.00   1.75
BHH B2B           38.00  -0.81  -0.63   0.00   0.00   0.00  -1.44
BDH Broadband     88.31   2.06  -1.81   0.00   0.00   0.00   0.25
SMH Semicon.      94.38   0.00  -3.13   0.00   0.00   0.00  -3.13
RKH Reg. Bank     96.69   0.75   0.81   0.00   0.00   0.00   1.56
UTH Utilities     89.13  -0.25  -2.88   0.00   0.00   0.00  -3.13

------

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

QQQ - NASDAQ 100 $92.72 -1.28 (-1.22 this week) Anybody turning
blue from holding their breath so long?  We are.  Much as we
suspected, QQQ has remained rangebound between $92 and $94 for the
last two days in front of the FOMC meeting, the only exception
being a brief pop to $95 this morning during amateur hour.  We
don't advocate trading during this period since one will often pay
the high of the day.  Wait, isn't that a good time to sell?  Yes!
As a seller, you will often get the best price too.  Anyway, to
make any money here, we really need to see a breakout and we won't
know the direction until tomorrow's interest rate announcement.
At that time, you may want to wait 30 minutes for the dust to
settle and then pick the correct direction.  Our inclination is to
wait for a breakout over $95 to go long, or for a drop back under
$90 to go short.  Watch MSFT, CSCO, INTL, QCOM, ORCL and JDSU for
direction.  They account for 35% of the index.

At Support:
BUY CALL JUL-90 QVQ-GL OI= 2778 at $6.63 SL=4.75
BUY CALL JUL-95 QVQ-GQ OI= 7212 at $3.88 SL=2.25
BUY CALL AUG-95 QVQ-HQ OI=  267 at $6.38 SL=4.25

SELL PUT JUL-90 QVQ-SL OI=18181 at $3.13 SL=5.00, Huge OI

At Resistance:
BUY PUT  JUL-95 QVO-SV OI= 4817 at $5.75 SL=3.75
BUY PUT  JUL-90 QVQ-SL OI=18181 at $3.38 SL=1.75
BUY PUT  AUG-90 QVQ-TL OI=  768 at $5.63 SL=3.75

Average Daily Volume = 27.68 mln
/charts/charts.asp?symbol=QQQ

-----

HHH - Internet $109.25 +2.63 (-0.56 this week) While we haven't
seen it in the calm seas of the pre-FOMC meeting, HHH's test of
$105.50 gave us a nice little profit for the day.  Unfortunately,
today it returned to its comfort zone around $109.  Like most
other traders, we're waiting for the FOMC meeting to give a
tradable direction before initiating any play.  We tend to favor
the downside here since dot coms, starting with AMZN and finishing
with YHOO, have been weak.  They stand to get weaker thanks to
investors recent discovery that most of their business plans are
not scalable - meaning every additional dollar of revenue is not
creating a higher marginal return.  That is proving to be the case
with many of these companies, especially AMZN and many other e-
tailers.  While there is mild support at $105.50, today's assault
back over previous support at $110 to $111 was a failure in our
opinion.  It soon turned to resistance and fell back to $109.25
during the last hour of trade, thus setting HHH to fallback to
$105 and ultimately to retest $100.  Watch for the break under
$108 or a bounce south of $110 - preferably after the FOMC's
announcement.  Otherwise, you can consider getting long or buying
calls on a move back over $112, but it may encounter some
congestion in the $113-$115 range.

At Support:
BUY CALL JUL-105 HHH-GA OI= 21 at $ 9.38 SL=6.50
BUY CALL JUL-110 HHH-GB OI= 61 at $ 6.75 SL=4.75
BUY CALL AUG-110 HHH-HB OI= 36 at $ 9.88 SL=6.75

At Resistance:
BUY PUT  JUL-110 HHH-SB OI=434 at $ 7.13 SL=5.00
BUY PUT  JUL-105 HHH-SA OI=240 at $ 4.63 SL=2.75
BUY PUT  AUG-105 HHH-TA OI=282 at $ 7.88 SL=5.75

Average Daily Volume = 1.19 mln
/charts/charts.asp?symbol=HHH

-----

TTH - Telecom $75.50 -0.50 (-0.75 this week) A teaspoon of wine in
a barrel of sewage is called sewage.  A teaspoon of sewage in a
barrel of wine is still sewage.  Such is the case with TTH thanks
to the stink at AT&T from raising its consumer long distance
rates.  Unfortunately for the put side of this play, WCOM and
FON's announcement that they would no longer seek a merger
coincided with the Janet Reno Joel Klein's announcement
(Department of Justice fame) that they would seek to block it
anyway.  Hmmm. . .the horse is out of the barn, so let's close the
door?  Anyway, the announcement sparked a $2.19 gain in WCOM,
while even T eked out a fractional gain.  All that said, the 10-
dma and the 50-dma continue to act as resistance and force the
price down.  However, $75 offered a bit of support today.  What to
do?  Our thinking is that today's bounce south of $77 would have
made a good entry and that there is perhaps room to fall to $74,
the next historical level of support.  After that, $72 then $68.
We want to caution you though that a favorable FOMC outcome might
send this index back up.  So you may want to wait until a rate
announcement to take a position.  While we think the telecom
sector in general still has a bright future, beware the copper
dinosaurs that still weight this index.

At Support:
BUY CALL JUL-75 TTH-GO OI= 0 at $3.00 SL=1.50, no OI
BUY CALL JUL-80 TTH-GP OI=24 at $0.81 SL=0.00

At Resistance:
BUY PUT  JUL-80 TTH SP OI= 0 at $5.63 SL=3.75, no OI
BUY PUT  JUL-75 TTH SO OI= 0 at $2.50 SL=1.25, no OI

Average Daily Volume = 79 K
/charts/charts.asp?symbol=TTH

------

BBH - Biotech $172.25 -5.00 (+0.75 this week) Hmmm. . .right back
where we started yesterday.  The big sector news is that Celera
(CRA) yesterday announced the completion of sequencing of the
human gene.  This has been equated to the milestone of landing
people on the Moon.  It's a big deal.  Most biotech stocks were up
yesterday (except CRA).  Nonetheless, "sell the news" set into the
sector today with CRA again turning up as the big loser.  We still
think that given the sentimental favoritism this sector enjoys
that it will be back at the first signs of life in the market
(presumably following the FOMC announcement).  Technically, a
beautiful entry presented itself yesterday exactly at the 10-dma
(then $166.96) where we thought it might.  There is also new
ntraday support developing at $172, which is where it stands
today.  Meanwhile, the highs get lower, a situation we've come to
expect when the market gets on pins and needles in front of an
FOMC meeting. Don't read too much into it right now.  Our thinking
is that you may want to consider buying a bounce from $171 (the
new 10-dma) as we think that can continue to hold.  If not then
$165 followed by $160 are the next levels down.  Target shoot
there if you like or you can play BBH as a quick short on the way
down too.  The latter carries more risk though.

At support:
BUY CALL JUL-165 BBH-GM OI= 109 at $15.38 SL=11.25
BUY CALL JUL-170 BBH-GN OI=1264 at $12.75 SL= 9.50
BUY CALL AUG-170 BBH-HN OI=   5 at $18.38 SL=13.25, low OI

At resistance:
BUY PUT  JUL-175 BBH-SO OI=  86 at $13.50 SL=10.25
BUY PUT  JUL-170 BBH-SN OI= 116 at $10.88 SL= 8.00
BUY PUT  AUG-170 BBH-TN OI=   7 at $18.25 SL=13.25, low OI

Average Daily Volume = 637 K
/charts/charts.asp?symbol=BBH

------

IIH - Internet Infrastructure $58.25 +2.38 (+1.75 this week)
Miracles do happen.  Accordingly, here's an Internet-related
basket of goods that has done well this week.  While IIH violated
its 10-dma on Friday, it made some effort at recovery yesterday
and today in a series of higher lows.  Can you say relative
strength compared to NADSAQ?  This is a fair example.  In the
process of its recovery, it now rests just below its new 10-dma of
$58.35 and moved nicely back over historical support at $57.50.
The bad news is that after moving up to $59 during amateur hour,
IIH fell throughout most of the day.  OK, so go short or go long?
We wish we had the answer.  Given the market's refusal to budge
from the current range in front of the FOMC meeting, we didn't
think it would be fair to yank IIH from the play list until we see
the direction it could take following the Fed's pronouncement on
interest rates.  Stay tuned and watch for volume.  A move over
$59.50 might be the key to going long while a move under $57 would
set the stage to test mild support at $55 then $53.50 to the down
side.

At Support:
BUY CALL JUL-55 IIH-GK OI= 1 at $5.88 SL=3.75, rock bottom OI
BUY CALL JUL-60 IIH-GL OI= 1 at $3.13 SL=1.50, rock bottom OI
BUY CALL AUG-60 IIH-HL OI= 0 at $5.00 SL=3.00, no OI

At Resistance:
BUY PUT  JUL-60 IIH-SL OI= 0 at $4.88 SL=2.75, no OI
BUY PUT  JUL-55 IIH-SK OI= 1 at $2.38 SL=1.75, rock bottom OI
BUY PUT  AUG-55 IIH-TK OI= 0 at $3.88 SL=2.25, no OI

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

------

BDH - Broadband $88.31 -1.81 (+0.25 this week) Not much
improvement here though we did see a brief move up to $90
yesterday.  Unfortunately, today it gave it all back.  We still
can't bring ourselves to go short this issue given its strength,.
Yet we noted we'd give it the boot on Tuesday if it didn't start
to perform with a move over $88.50.  In the end, and by executive
decision, we're keeping it until after the FOMC interest rate
announcement when we'll make a determination for Thursday.  That
said, continue to look for support at $88.50.  A move from here
over $90 would suggest we go long until BDH finds resistance again
at $92.  A move down under $87 would suggest we go short to retest
$85.  It's still on double secret probation.

At Support:
BUY CALL JUL-85 BDH-GQ OI= 0 at $7.13 SL=5.25, no OI
BUY CALL JUL-90 BDH-GR OI=29 at $3.63 SL=2.25,
BUY CALL AUG-90 BDH-HR OI= 0 at $6.88 SL=4.75, no OI

At Resistance:
BUY PUT  JUL-90 BDH-SR OI= 3 at $5.88 SL=3.75
BUY PUT  JUL-85 BDH-SQ OI= 1 at $3.38 SL=1.75, rock bottom OI
BUY PUT  AUG-85 BDH-TQ OI= 0 at $5.88 SL=3.75, no OI

Average Daily Volume = 189 K
/charts/charts.asp?symbol=BDH

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

IAH
BHH
PPH
SMH
RKH
UTH



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

Index      Last      Mon      Tue    Week
Dow     10504.46   138.24   -38.53   99.71
Nasdaq   3858.96    66.78   -53.16   13.62
$OEX      784.94     8.14    -4.27    3.87
$SPX     1450.55    13.77    -4.70    9.07
$RUT      508.08     5.95    -8.28   -2.33
$TRAN    2680.97   -16.16    66.42   50.26
$VIX       24.88    -1.17     0.16   -1.01

Calls

BRCM      183.31    13.75     4.50   18.25  New, Bluetooth future
GLW       253.25    20.19    -6.94   13.25  Massive Monday rally
RBAK      147.25    19.06    -7.31   11.75  Launching higher
TIBX       98.94     3.90     5.53    9.44  New, stellar earnings
MRVC       62.06    11.00    -3.94    7.06  "Baby JDSU"
BRCD      161.88     3.50     2.38    5.88  Continues to impress
RSAS       68.38     4.00     1.88    5.88  New, earnings coming up
AETH      196.00    -0.06     5.38    5.31  Good news bucks trend
NT         67.63     2.25    -0.63    1.63  Achieved wireless first
ARBA       90.06     3.63    -2.13    1.50  Wheelin' and dealin'
QLGC       69.00     7.56    -6.13    1.44  "Feel-good" buying
MSFT       78.81     1.81    -0.69    1.13  Teaming up
YHOO      125.94    -6.00     6.63    0.63  Healthy bounce back
AGIL       61.38     1.19    -1.50   -0.31  Resistance turns support
JDSU      119.00     2.19    -6.63   -4.44  Dropped, broke down
LNUX       41.75    -4.69    -0.69   -5.38  Support at $40
MERQ       89.00    -2.88    -2.69   -5.56  Dropped, time to bolt
HGSI      134.03    -2.00    -9.34  -11.34  Watching for a bounce
PDLI      161.00    -8.69    -2.94  -11.63  Giving it a few more
ABGX      122.19    -5.47   -10.38  -15.84  Patents and splits
INKT      120.69   -25.31     5.63  -19.69  New, right at support

Puts

PHCM       68.00    -0.63    -6.00   -6.63  New, lost its footing
WY         45.63    -0.31     2.44    2.13  Dropped, bottom search
DCLK       39.94    -0.38     2.69    2.31  Valiant attempt failed
AMZN       36.50     0.06     2.56    2.63  Dropped, found support
NKE        39.94     1.94     0.94    2.88  Dropped, spoiled




PICKS WE DROPPED
****************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

MERQ $89.00 -2.69 (-5.56) MERQ bolted out of the gates Tuesday
morning with a surge of early buying.  However, MERQ's morning
rally lasted for only the first half hour of trading, as the
stock weakened through the day, culminating with a rollover in
afternoon trading.  The late day selling was spurred by the usual
culprits, namely profit taking and Fed fears.  There was no
detrimental news out Tuesday afternoon to prompt the selling, in
fact, Wit Soundview reiterated its Buy rating on MERQ and set a
$110 price target.  But, the analyst praise was to no avail as
MERQ fell along with the Tech sector.  We too must bolt, before
MERQ falls any lower.

JDSU $119.00 -6.63 (-4.44) JDSU received a host of positive
analyst comments early this week.  Robertson Stephens and DLJ both
reiterated their Buy ratings ahead of the company's completion of
its merger with ETEK.  The stock staged a modest rally Monday
with help from a relatively stable Tech sector.  Despite the
upbeat comments from Wall Street Tuesday, JDSU rolled over in
mid-day trading, and subsequently fell below support at $120.
Volume surged in the final hour of trading as traders locked in
their profits in JDSU ahead of the FOMC meeting.  Tuesday's
decline marked a lower low in JDSU's ascending channel.  Given
JDSU's relative weakness Tuesday and its technical breakdown,
it's time to sell too soon.



PUTS:
*****

AMZN $36.56 +2.63 (+2.69) Wet and wild.  Since picking AMZN for
the ride down last Thursday, it has quickly fallen over 13% on
heavy volume.  On Monday, after some early morning volatility for
the first half-hour, the stock settled down to trade in a narrow
range on about three times the average daily volume.  Like the
volatility, most of the volume came early in the day.  Today, saw
AMZN rallying in sympathy with a strong move up in the retail
sector on over twice the average daily volume.  With the selling
pressure drying up in a retail sector that is firming, the worst
may be over as AMZN has found support at $32.50.  With some nice
gains in our play already, we say goodbye to this prescient play
in search of greener pastures.

NKE $39.94 (+2.88) Our put play was spoiled by boisterous
analysts Monday morning.  Ahead of NKE's earnings report this
Thursday, Bank of America analyst Susan Silverstein made several
positive comments concerning the beleaguered shoe giant.  After
reiterating her Strong Buy rating, Silverstein set a $51 price
target and called the recent weakness an "excellent buying
opportunity."  Additionally, Dain Rauscher jumped in to reiterate
its Strong Buy rating on NKE.  Needless to say, all the bullish
noise from the analysts Monday boosted NKE.  The stock extended
its new-found rally Tuesday, which gave further reason to bow out
ahead of NKE's earnings Thursday.

WY $45.63 +2.44 (+2.13) Our new play began the week with a
small drop on Monday, but not the kind of decline we would like
to have seen.  Today, WY did bounce up to the $46 area, but the
anticipated return of weakness did not appear.  In fact, WY closed
in the upper end of its range, suggesting there could be more
follow-through from the bulls.  Does this mean WY has finally put
in a bottom?  It's a little early to tell for sure, but if the
buyers continue to come to the aid of WY, a move up to the $52 to
$55 would not be out of line.  The volume today wasn't particularly
strong with slightly over 1.0 mln shares changing hands.  The move
up does suggest that for now, WY may be attempting to find a
bottom and the risk versus the reward simply is now longer on our
side.



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

The Option Investor Newsletter                   Tuesday 6-27-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


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

AETH $196.31 +5.38 (+5.31) A gap up in the morning and AETH
managed to post a gain as the NASDAQ sold off on Fed fears.
Helping AETH buck the trend today was W.R. Hambrecht, which
initiated coverage with a Buy rating and a 12-month price target
of $275.  Separately, AETH and MSFT jointly unveiled a new
wireless service for Window-powered pocket PCs.  The announcement
was made at the PC Expo in New York this morning.  This service
would deliver unlimited Internet access to business users for a
monthly fee of $39.99.  While we would have liked to have seen
AETH hold the $200 level, we'll take the positive news.
Technically, if AETH falls prior to the Fed announcement, look
to support at $190.  Bounces from this point would be sound
entries.  Below that, look to $185.  On the upside, cracking
$200 shouldn't be too hard, but watch to see if it can hold.
If AETH rallies, overhead resistance is very thin to $215, and
if we cross our fingers, $230 could be next.  Yet, be aware of
the Fed's looming presence in the market.  This is the type of
market in which you must take your profits when you have them.

GLW $253.25 -6.94 (+13.55) GLW plowed to a new all-time high
Monday after announcing the company had won a four year deal
worth over $1 bln.  GLW said it had signed a deal with the Denver
based networking company, Aerie Networks.  Aerie is forming a
nation wide high-speed fiber optic system and the company said it
will use GLW's optical cable in doing so.  The announcement sent
traders scrambling to accumulate the stock, sending GLW past
several key resistance levels.  The stock did consolidate its
gains Tuesday, but that was expected considering Monday's massive
rally.  In the coming days, there are two possible ways to gain
entry into the play.  First, if the Tech sector weakness drags
GLW down Wednesday morning, look for the stock to find support at
$250, and consider entry if the stock bounces.  Or, if GLW goes
into rally mode, look for an entry if the stock clears resistance
at $255, or at $257.50 for more conservative traders.  With a
little cooperation from the Fed, and the freshly signed $1 bln
contract as the fuel, we might see GLW continue its climb into
new high territory.

ABGX $122.19 -10.38 (-15.88) The Biotech sector fell victim to
the cliche of buy on the rumor sell on the news Monday.  After
the rough draft of the Human Genome was announced, traders
decided to lock in profits within the group.  ABGX managed to
rally after briefly dipping past support at $120 Monday, but
continued to slide Tuesday.  Despite the recent sell-off there
are several issues that could prove beneficial to our play.
First, ABGX announced Tuesday that the company has received its
second patent on its core technology for producing human
antibodies.  Second, the 2-for-1 split is less than two weeks
away.  And finally, the $120 support level has proved to be a
good entry point over the last week.  ABGX has touched $120 twice
in the last week, subsequently rallying to $140 thereafter.  A
word of caution though, the Biotech sector has suffered two
straight days of losses.  Make sure that ABGX bounces off the
$120 level before entering the play.  Conservative traders might
wait for ABGX to clear congestion at $125 before entering the
play.  Don't forget to protect your profits.

QLGC $69.00 -6.13 (+1.44) What some are calling the "feel-good"
buying, following last week's early termination grant of its
waiting period to acquire Ancor Communications (ANCR) from the
FTC and Justice Department, has evidently spilled over into late
afternoon trading on Monday.  QLGC rose $7.56, or 11.2% before
profit taking set in this morning.  The flat trading that
preceded the surge offered a nice entry off the 5- and 50-dma
lines.  The pullback in today's session not only offered new
entry opportunities, but it also demonstrated the stock can hold
a higher intraday support level of $69-$70.  And now that the
first line of resistance at $72.25 is cracked and QLGC flirted
with the 200-dma line in today's action, we want to see a
bullish close through this opposing technical.  There's no doubt
it would provide further confirmation that QLGC's momentum can
indeed move mountains.  The company is expected to report
earnings next month around July 17th, after the bell, which
could also generate some excitement.  In other news, QLGC
announced it's supplying the Fibre Channel connectivity
solutions for the Intel Server Applications Enabling Program.
Together the companies have worked with other industry leaders
to develop "recipes" to improve OEM customers' confidence.

PDLI $161.00 -2.94 (-11.63) The long-anticipated biotech
breakthrough finally came to center stage on Monday.  PE Corp's
Celera Genomics (CRA) and President Bill Clinton jointly
announced that U.S. and European researchers had completed a
blueprint of the human genetic code mapping out 3 bln different
sequences.  This map offers developmental insight into treatment
for cancer and other dilapidating diseases, which will
ultimately help all of the biotechnology community.  However, at
the moment, some of the biotechs took a one-two punch from
investors.  PDLI led the slumping AMEX Biotechnology Index($BTK)
lower.  The stock itself dipped to intraday lows of $149.75 and
overall finished down 5%, or $8.69.  Except for a brief spike to
$168.38 today, PDLI mostly traded in a narrow range between $160
and $162.  Considering how fast and furious PDLI can move, keep
your reins in check.  If all goes well with the FOMC meeting and
PDLI resumes an uptrend, it should easily move back through $173
and $175.  Wait for confirmation and keep tight stops to protect
your profits.

AGIL $61.38 -1.50 (-0.31) Range bound pretty much sums up AGIL's
trading behavior of the last two sessions.  On the bright side,
the 200-dma, which just recently acted as impregnable
resistance, is now a rather stable support level.  Additional
support is lower at $57 and $58.  The lackluster volume at less
than 50% of the norm is however a bit of concern.  Before
starting new positions, err on the side of caution and wait for
increasing volume to drive the share price higher.  Expect some
resistance at $66.19, Thursday's intraday high.  We entered this
play based on its recent recovery and the positive sentiment
surrounding the company.  Its technical breakout also added to
the excitement, but now we need to see some more action on the
upside.  Keep in mind too that Greenspan speaks tomorrow and
this always adds a twist to the market sentiment.

MSFT $78.81 -0.69 (+1.13) We've got to ask ourselves a key
question.  Is MSFT's "range boundness" of the past three sessions
a temporary condition - simply the result of the upcoming
Greenspan prattle?  Or is this a new comfy zone where MSFT will
linger while the Supreme Court contemplates the software giant's
anti-trust case?  The answer to our question should come within
the next few days.  From a technical standpoint, MSFT's share
price is managing well above the 10-dma ($76.07), but is having
difficulty taking a permanent position above the 5-dma ($79.33)
this week.  If you play more conservatively, please wait for
definitive moves through the $80 mark and also a break above
$82.19, the resistance set last Wednesday.  Pay attention to
volume levels as well.  Since the company unveiled its blueprint
for the future last Thursday, trading activity has noticeably
waned.  Today there was more good news however.  AT&T's Liberty
Media Group and Microsoft announced they would merge their
respective Japanese cable interests, Tokyo-based Jupiter
Telecommunications and Titus Communications to provide broadband
services throughout the country.  The stock-for-stock deal is
expected to be completed by September 1st.  Under the terms,
Titus (60% owned by MSFT) would become a wholly owned subsidiary
of Jupiter and retain a 24% stake.  Liberty's John Malone and
Jupiter's Sumitomo would each own 35% of the new company.  The
combined company, with an estimated worth of about $5 bln, would
likely initiate an IPO in the near future.  On the domestic front,
MSFT's MSN Internet network entered an alliance with DELL to
co-brand an Internet service called Dellnet by MSN.

RBAK $147.25 -7.31 (+11.75) Like last Monday, RBAK blasted
through what seemed like formidable overhead resistance.  Last
week the hurdle was $120.  This week it was $145.  Both of them
were easily overcome thanks to strong buying volume.  Most of
RBAK's rally on Monday came at the close, ending the day up over
14% or $19.06.  The next hurdle is now set at $155.  After hitting
this level twice in the last two days, the stock saw profit
taking on slightly lower than average volume and moved down in
sympathy with the Nasdaq.  Despite the profit taking today, RBAK
found support right at its former resistance level of $145,
bouncing at $145.50.  Look for this area to continue to be a
level of support.  Other support levels below this can be found
at the 5-dma, currently at $141, and the 10-dma at $133 which has
been the launching pad of any breakouts in RBAK's continuing
pattern of breakout and consolidation.  If RBAK successfully
breaks through 155 resistance on strong volume, it will encounter
its next obstacle at 160 and then 170.

BRCD $161.88 +2.38 (+5.88) As the broader markets continue
to meander in advance of the FOMC meeting which began today,
BRCD continues to impress.  Friday's drop gave us several
entry opportunities near $152 as the stock bounced right on the
10-dma.  A gradual recovery yesterday, still supported by the
10-dma, got an additional boost from news that the company
enhanced its industry-leading Fabric operating system for
Storage Area Networks (SANs).  The new features include Fabric
Watch, which provides a robust platform to simplify SAN
management through intelligent monitoring of SAN resources.
Another enhancement is Extended Fabrics, which extends SAN to
SAN native fibre connectivity from 10 to 100 Kilometers.  Today
the company followed up with an end-to-end interoperability
program for SANS, called Fabric Aware, which was immediately
endorsed by 25 industry partners including EMC, Hewlett-Packard,
Sun Microsystems, and VERITAS Software.  As if that wasn't
enough to get the share price moving, Chase H&Q initiated
coverage of the stock with a Buy rating today.  Investors took
notice, bidding shares higher right from the open, driving the
price as high as $165.50 before Fed dread took over and shaved
some of the gains from BRCD's share price.  Volume was light
again today, but it was encouraging to see the stock bounce
higher from the $160 level, very close to yesterday's high.
Weakness ahead of the Fed's decision on interest rates could
provide another entry as the stock bounces at support, first
at $160, then at $155.  Watch the intraday volume as its trend
will likely telegraph the strength of any move, whether up or
down.

NT $67.63 -0.63 (+2.44) After a nice double bounce at the
$64 support level on Friday, NT got moving again early this
week.  The second bounce at the end of trading on Friday turned
out to be an excellent entry point as the stock traded sharply
higher at the open yesterday.  The strength continued right
up to the close, allowing the company to tack nearly $3 onto
its share price.  Part of the move may have been due to good
news on the wireless front.  NT and Australia's Telstra achieved
a world first, demonstrating live Wireless Internet applications
at speeds in excess of 50 kilobits/second on a GPRS (General
Packet Radio Service) system, over 5 times faster than is
currently available over GSM wireless networks.  GPRS is a
packet-based, next generation communications platform which
overlays a GSM network to provide high-speed wireless data
access.  General market weakness today dragged the share price
down for another entry point as the stock bounced at $66.25
before heading higher for the rest of the afternoon.  The
rebound came on strong and increasing volume and looks like
the beginning of a strong move.  Consider new entries on
additional bounces from support near $67 and then $66.
More conservatively, wait for strong buying volume to lift
the share price through the $69 resistance level before playing.

ARBA $90.06 -2.13 (+1.50) Monday began with a bang for Ariba when
it announced that it was going to buy privately held
SupplierMarket.com for $581 mln in stock.  While the newly issued
shares to pay for this transaction may seem like a large amount,
it is actually less than three percent of its currently fully
diluted shares outstanding.  The companies expect the deal to be
completed by the third quarter.  For this, the stock was rewarded
with a 4.09% or $3.63 gain, closing right above its 5-dma.  Today,
the stock saw some slight weakness on about half of average daily
volume as nervous investors hold their breath on the heels of the
Fed tomorrow.  This is despite the news that ARBA announced a
partnership with B2B infrastructure startup EC Company to connect
small and mid-sized suppliers to its online trading networks,
allowing them to electronically transact with their large buying
customers.  There is overhead resistance currently at the $95
level and after that, the magic number is the psychological $100.
Look for support at $87.50 which has held up over the past week
and the 10-dma line just above $85.

YHOO $125.94 +6.63 (+0.63) YHOO's decline on Monday was ushered
in with 11.7 mln shares traded.  The bounce off the $117 area
late in the day and this morning provided traders with that
opportunity we mentioned last weekend.  We realize it can be
tough to trust a bounce off a decline of more than $8, but those
that participated were rewarded quite nicely by the close of
business today.  As expected, YHOO launched its corporate portal
services.  It unveiled the new enterprise package with some heavy
hitters as partners.  Inktomi, Critical Path, Tibco Software, and
Citrix Systems are all contributing to the overall package
development.  During the session, YHOO stuck its nose back over
its 50-dma at $128.10 before finishing with a 5% gain.  Is the
bounce for real, or will it prove to be another head-fake?  Once
the FOMC meeting is out of the way, traders MAY be able to focus
on earnings.  With the recent news and earnings for the Internet
company less than 2 weeks away, YHOO could tag along with the
broad markets, if a rally begins.  For traders that initiated new
positions, keep your stops in place.  Conservative traders may
prefer to wait until YHOO crosses its 10-dma near $135.41, as
long as strong volume is present prior to entering new plays.

MRVC $62.06 -3.94 (+7.06) This one just gets more interesting by
the day.  On Monday, traders ran shares of MRVC 20% higher as the
communications company soared $11.  When stocks surge 20%, there
is usually some kind of news or report behind the move.  Not this
one.  Well, actually there was an article floating around a few
Web sites with positive comments about the company.  The article
called MRVC a "baby JDSU", and an "optical CMGI."  The article
was posted on several message boards.  As we said, by the end of
the day our play had picked up $11 after running into resistance
near its most recent high of $67.  Today, traders took some money
off the table, but traded in a narrow range between $62 and $64
for most of the session, finally giving back just $3.75 of
Monday's gain.  The lack of any follow-through is somewhat
troubling, however, the profit taking certainly could have been
worse.  So how do we proceed?  Much of that depends on the Fed.
On further strength through the $64 or $66 area, we would
consider entering or adding to existing positions.  If profit
taking drops our play back through the 10-dma at $59.06, it may
be time to stand back and wait for new opportunities.

HGSI $132.03 -9.34 (-11.34) How many times have we heard the
term "buy the rumor, sell the news"?  While Friday's 9% surge
was not based on rumor, the move did come on anticipation of
good things to come, as the genomics company will begin testing
patients with immune systems disorders.  Traders began the week
taking profits, dropping the price of HGSI all the way back to
a low of $126 on Monday.  After recovering to $143, the bears
that didn't participate on Monday had their way with HGSI today.
So where does that leave our play?  We're encouraged that the
previous support area between $130 and $132 brought a few buyers
back to the table.  As we said this weekend, our play isn't out
of the woods just yet.  Investors realize that although the
recent announcements from HGSI and the genomics companies are
very positive, there is still a long way to go before there is
any commercial value for the HGSI and others.  Technically, a
look at intraday charts shows our play coming to oversold
territory.  We would consider scaling into new plays on bounces
off support or continued moves higher.  A trip south through $130
with momentum and it may be time to move to the sidelines and
wait for our play to stabilize.

LNUX $41.75 -0.69 (-5.38) Investors found out so far this week,
what goes up, also can come down.  At this point, however, we
aren't viewing the 11.5% decline as a negative.  To the contrary,
LNUX could be setting up to provide a very good entry for new
plays.  The plus so far is that the $40 level of support held
quite nicely early this morning.  For the balance of the session
Linux moved slowly higher.  Another positive can be seen in the
light volume as the profit taking set in, compared to what was
seen during last weeks 44% increase.  We believe the potential
for this play is still excellent, but there still is the little
gap between $38 and $40 that could get filled should investors
decide to unload a few more shares of LNUX.  A report today from
International Data Corp, did little to bring buyers back.  The
report suggested the breakup of Microsoft could actually hurt
Linux.  IDC noted PC makers would no longer fear a Microsoft
backlash from increasing their Linux sales, which would in effect
increase competition for LNUX.  As for new plays, we would consider
entering on bounce from current levels with solid volume.  If
profit taking continues, let the area between $37 and $38 prove
itself as support prior to entering a new play.



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

DCLK $39.94 +2.69 (+2.31) Investors made a valiant attempt to
push shares of DCLK higher today, but resistance was just too
strong.  After moving as low as $35.50 yesterday, buyers
re-emerged and gradually pushed shares off the low of the day.
Then, with a surge of buying this morning, buyers took a run at
the $40 resistance level.  There just wasn't enough momentum to
carry the move though, as it ran out of steam at $41 and fell
back at the close, ending the session barely above the converged
5-dma ($39.88) and 10-dma ($39.81).  These averages have been
pressuring DCLK to the downside lately, so if the trend is to
remain intact, look for the price to fall through this level
tomorrow.  Support is building at the $35 level, while today's
action confirmed that the $40 resistance level is still intact,
but being challenged.  Today's trading came on strong volume,
above the ADV and heavier than it has been since the stock last
had an up day (last Wednesday).  Consider new entries if the
price heads down from current levels, but make sure the move
is confirmed by strong selling volume.  If the Fed announcement
is well received tomorrow, DCLK could make a run up to the
$45 resistance level before rolling over again.



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

RSAS - RSA Security $68.38 +1.88 (+5.88 this week)

RSA Security Inc. is a trusted name in e-security, helping
organizations build secure, trusted foundations for e-business
through its two-factor authentication, encryption and public
key management systems.  As the global integration of Security
Dynamics and RSA Data Security, RSA Security has the market
reach, proven leadership and unrivaled technical and systems
experience to address the changing security needs of e-business
and bring trust to the new, online economy.  A global company
with more than 5,000 customers, RSA Security is renowned for
providing technologies that help organizations conduct e-business
with confidence.

With no recent Internet virus in the news, what made investors
find RSAS so appealing?  Many times when a new virus hits the
Internet we see shares of RSAS and the like spike for a day or
two.  So why are investors jumping back into RSAS?  It could
be earnings or several other variables that has placed our new
play on many radar screens.  First, RSAS is scheduled to report
earnings in about two weeks.  Notice we said they are going to
report earnings.  Yes, they have real earnings, unlike several
others in the industry.  Some suggest that RSAS is simply a very
good buy at current valuations and believe long-term investors
are recognizing the company as a truly exceptional value.  It
very well could be a great buy for the long-term investor at
current levels.  For our purposes, we believe the buyers have
returned for several other reasons as well.  So far this month
the company has announced strategic relationships with many
new companies.  Several of the names that come to mind are
i2 Technologies, BroadJump and Alcatel.  The latest came on
Monday as the company announced E.piphany(EPNY) had licensed
RSAS software.  The agreement was met with buyers knocking
at the door to get into shares of RSAS.  On the news, RSAS gained
$4, and added another $1.88 today.  The volume today was heavier
with 933K shares changing hands.  Recently, RSAS has signed an
abundance of new agreements, and contracts.  Quite frankly,
investors seemed to be setting up and taking notice.  Technically,
our new play broke through resistance at the $70 level before
falling back to close just over $68.  If we see consolidation,
support is found at $68 and again at $64.  If the bulls remain
friendly, we would consider initiating new plays.  If profit
taking enters the picture, we wouldn't expect it to last long.

While only four analysts have RSAS rated a Strong Buy, the
latest comments came from Prudential Securities.  Paul Merenbloom
reiterated his rating from early March as a Strong Buy with a
12-month price target of $89.00 on June 14th.

BUY CALL JUL-60 QSD-GL OI=455 at $10.38 SL=7.25
BUY CALL JUL-65*QSD-GM OI=517 at $ 7.13 SL=5.00
BUY CALL JUL-70 QSD-GN OI=480 at $ 4.50 SL=2.75
BUY CALL AUG-65 QSD-HM OI=160 at $ 8.13 SL=5.75
BUY CALL OCT-70 QSD-JN OI=563 at $11.13 SL=8.25

SELL PUT JUL-65 QSD-SM OI=283 at $ 4.13 SL=6.25
(See risks of selling puts in play legend)

Picked on June 27th at $68.38    P/E = 17
Change since picked     +0.00    52-week high=$93.06
Analysts Ratings    4-6-3-0-0    52-week low =$15.88
Last earnings 04/00  est=0.19    actual=0.20
Next earnings 07-13  est=0.21    versus=0.15
Average Daily Volume =  529 K
/charts/charts.asp?symbol=RSAS


TIBX - TIBCO Software $98.94 +5.50 (+9.88 this week)

TIBCO's ActiveEnterprise enables businesses to connect resources
with customers and automatically deliver event-driven information
across networks and the Web in real-time.  The company also
offers e-commerce, consulting, and support services.  Customers
license the software to integrate, personalize, and distribute
content.  TIBCO is enhancing its business-to-business trading
capabilities.  Reuters owns more than 60% of the company, and
Cisco holds a minority stake of 7%.

Some analysts argue that the B-2-B sector is fading.  TIBX likes
to think otherwise.  TIBX has been on rally since bottoming in
early May, and is showing few signs of letting up.  Of course,
surpassing earnings estimates by 300% helps the cause for a
company's stock price.  And that's exactly what TIBX did last
Wednesday when the company reported its second quarter results.
TIBX reported 30% sequential revenue growth, and told analysts to
raise their estimates for this year and the next.  Wall Street
took the cue from TIBX as a slew of analyst upgrades and upward
earnings revisions hit the wires the next day.  It's is no small
feat for a business services company to surpass estimates by
such a wide margin, especially while many of its B-2-B brethren
languish in losses.  The current market is saying, "Show me the
money".  And for the companies that deliver, Wall Street rewards
accordingly.  On top of TIBX's earnings momentum, the stock
received further fuel Monday when Yahoo unveiled its new
corporate information portal.  The new venture will enable
corporate users to integrate content from their intranets with
news and information from Yahoo.  TIBX said it had deepened its
standing agreement with Yahoo, and will provide services and
software to create the new portal.  The announcement caused TIBX
to gap higher Monday morning, and to continue to rally into
Tuesday.  Despite the overwhelming weakness in the broad Net
sector, TIBX marches higher.  Look for an entry point if TIBX
clears the ever-important $100 level Wednesday morning.  If the
profit takers return from hibernation,look for TIBX to find
support first at $95, and lower at $90.  Consider a bounce off
support for a possible entry.

With its impressive rally over the past week, TIBX charged right
into split territory.  The company has more than enough shares to
announce a split.  If the stock continues on its ascending path,
we may be hearing from the Board of Directors in the coming
weeks.  With a stellar earnings report, and a new contract with
Yahoo, a split could be the catalyst to take our play to the
next level.

BUY CALL JUL- 90 PIW-GR OI=262 at $15.38 SL=11.25
BUY CALL JUL- 95*PIW-GS OI=163 at $12.25 SL= 9.00
BUY CALL JUL-100 PIW-GT OI=388 at $ 8.88 SL= 6.25
BUY CALL AUG-100 PIW-HT OI=376 at $15.00 SL=11.00
BUY CALL NOV-105 PIW-KA OI= 14 at $23.75 SL=17.25

SELL PUT JUL- 85 PIW-SQ OI=104 at $ 4.00 SL= 6.00
(See risks of selling puts in play legend)

Picked on June 27th at   $98.94    P/E = N/A
Change since picked        0.00    52-week high=$147.00
Analysts Ratings      4-0-1-0-0    52-week low =$  6.56
Last earnings 05/00   est= 0.01    actual=  0.04
Next earnings 09-21   est= 0.12    versus= -0.01
Average Daily Volume = 1.74 mln
/charts/charts.asp?symbol=TIBX


BRCM - Broadcom $182.94 +4.13 (+17.88 this week)

Broadcom's integrated circuits are used in over 90% of cable
modems and digital set-top boxes.  They are also used in digital
subscriber lines, satellite broadcasting, home networking, and
wireless devices.  Motorola and 3Com account for 28% and 18% of
sales, respectively.  Other customers include Cisco, Samsung, and
Scientific Atlanta.  Broadcom continues to use acquisitions to
beef up its offerings.

Who said all Net related issues were dead money?  If you've seen
the action in BRCM lately, you'd know otherwise.  It just happens
that BRCM manufactures networking chips, an area that Wall Street
has turned bullish upon.  In fact, every analyst covering BRCM
rates the stock either a Strong Buy or Buy.  Aside from the
growing demand for its broadband chips, BRCM has a new product
offering in the works.  With its acquisition of Pivotal
Technologies earlier this year, BRCM took a giant leap into the
Bluetooth arena.  Bluetooth is a short-range wireless technology
used to connect electronic devices.  Essentially, Bluetooth will
allow greater access to the Internet through wireless devices,
such as cell phones, laptops, and pagers.  Analysts expect
manufacturers such as Motorola, Ericsson, and 3Com to introduce
a flood of new Bluetooth related products towards the end of this
year.  The aforementioned manufacturers will need the necessary
chips to complete their offerings.  That's where BRCM fits in.
As we mentioned above, BRCM bought Pivotal Technologies earlier
this year, a company that specializes in Bluethooth technologies.
Analysts predict millions of devices could come to the market in
the coming years, all requiring Bluetooth enabled chips.  The
numbers alone are staggering, and could provide further momentum
for BRCM in the near-term.  BRCM rallied sharply last week after
being added to the S&P 500.  The stock extended its rally so far
this week using its enviable relative strength.  BRCM's next
level of resistance is just above at $187.  Look for an entry
point if BRCM clears that level in the coming days.  If the stock
succumbs to profit taking, look for a bounce off support at $180
or lower at $175.

BRCM is quickly approaching split territory yet again.  The last
time the company split its shares was in January of this year.
Given the stock's recent run-up, and the fact that the company
received approval from shareholders to double its number of
authorized shares at its last meeting, we could get a split
announcement in the coming weeks.  A stabilized market could
increase the probability for a split, we'll monitor the wires
closely for a possible announcement.

BUY CALL JUL-180*RDU-GP OI=1867 at $18.25 SL=13.00
BUY CALL JUL-185 RDU-GQ OI= 393 at $15.88 SL=11.50
BUY CALL JUL-190 RDU-GR OI=1215 at $13.75 SL=10.00
BUY CALL AUG-185 RDU-HQ OI= 486 at $24.13 SL=17.50
BUY CALL NOV-190 RDU-KR OI=  45 at $38.25 SL=27.75

Picked on June 27th at  $182.94    P/E = 388
Change since picked        0.00    52-week high=$253.00
Analysts Ratings    10-11-0-0-0    52-week low =$ 50.75
Last earnings 03/00   est= 0.16    actual= 0.18
Next earnings 07-18   est= 0.17    versus= 0.07
Average Daily Volume = 5.32 mln
/charts/charts.asp?symbol=BRCM


INKT - Inktomi Corporation $120.69 +5.63 (-19.69 this week)

Inktomi develops and markets scalable applications that are core
to the Internet infrastructure, enabling end users to easily find
information and access it more quickly.  Inktomi's software is
designed for use by global enterprises, media companies and
service providers in the Internet access, backbone, broadband,
hosting and content markets.  The Inktomi mission is to build
scalable software applications that are core to the Internet
infrastructure.  Its applications fall into two broad categories,
network products and portal services.  Network products
applications consist of the Traffic Server network cache
platform, Content Delivery Suite and associated Traffic Server
extensions.  These products are intended to provide a complete
infrastructure solution for the distribution, delivery and
management of content and applications.

Investors in Inktomi were served a rude awakening on Monday
morning when shares of the Internet blue chip gapped open down
over 12% or $17.62 and ending the day down over 18% or $25.31 on
about four times the average daily volume.  This came on the news
that Internet leader Yahoo switched from Inktomi for its web
searching functions for its Yahoo portal to privately held Google
Inc.  Yahoo also said it would continue to use Inktomi's search
services on corporate systems that use Yahoo as a home page, as
well as on Yahoo's own corporate system.  And while Yahoo is not
Inktomi's largest customer, traders did not care as a rush of
selling panic drove the stock down with relentless selling,
finding a bottom just above $112.  Historically, INKT has found
strong support at its 200-dma which currently rests at $108.75.
Bounces off and above that level will provide for a good entry
point. We believe that Monday's selling was overdone for a number
of reasons.  First of all, history.  Last year, INKT lost Microsoft
as a customer and during that time, there was not the same effect
to this stock.  The company eventually regained Microsoft's
business.  Even without Yahoo's business Inktomi has over 50% of
the search engine market and while losing Yahoo's business will
not impact earnings over the next two quarters after which it
will lead to a 2-3% decline in earnings.  As mentioned, the stock
has temporarily found a bottom just above $112 and 200-dma is at
$108.75.

Today found INKT bouncing up on almost twice the average daily
volume confirming our suspicions that this sell-off has been
overdone.  Overhead there is resistance at $125 and then $130.

BUY CALL JUL-115 KYQ-GC OI= 898 at $14.88 SL=11.00
BUY CALL JUL-120*KYQ-GD OI=1566 at $12.50 SL= 9.50
BUY CALL JUL-125 KYQ-GE OI= 571 at $10.13 SL= 8.00
BUY CALL AUG-120 KYQ-HD OI= 103 at $17.38 SL=12.50

SELL PUT JUL-110 KYQ-SB OI=1483 at $6.00 SL= 8.50
(See risks of selling puts in play legend)

Picked on June 27th at $120.69    P/E = N/A
Change since picked      +0.00    52-week high=$241.50
Analysts Ratings    10-6-1-0-0    52-week low =$ 43.69
Last earnings 03/00  est=-0.02    actual= 0.01
Next earnings 07-18  est= 0.02    versus=-0.05
Average Daily Volume =   3.80M
/charts/charts.asp?symbol=INKT



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

PHCM - Phone.com $68.00 -6.00 (-6.63 this week)

Phone.com develops and markets software that enables wireless
operators to access the Internet and corporate Intranets.  In
other words, no matter where you are, Phone.com can help you
access the Internet and obtain information on everything from
the weather to your favorite sports team via your mobile phone.
The company developed much of the technology behind the wireless
application protocol (WAP) standard and has quite an impressive
list of blue-chip clients.  The vast majority PHCM's sales
(about 60%) come from maintenance and support.  Customers that
are licensing its technology include Matsushita, Ericsson,
Alcatel, Motorola, Samsung and Siemans.

Many stocks in the wireless sector are known for their seesawing
behavior with the broader markets.  Take for instance PHCM.  The
share price is having obvious difficulty holding above the
pestilent resistance levels.  Ever since the devastating
March/April correction, it's primarily channeled between $75 and
$85.  And when it did break through the $85 mark, it couldn't
hold the higher share price.  That brings us forward to the
present.  On Friday, PHCM lost its footing even more and
fractionally edged under the firm support of $75.  This
technical snafu caught our attention, but it wasn't enough to
persuade OIN to add PHCM to the put list.  This week, however,
PHCM developed a distinct downtrend.  The share price
deteriorated further and slid under the $70 mark today on nearly
double the normal volume.  What's more interesting is that PHCM
has received Buy or Strong Buy ratings in recent days and is not
responding to the coverage.  First on June 22nd, CSFB reiterated
a Strong Buy and then the next day Frost Securities came out
with a new Buy rating and a $117 price target.  The positive
recommendations didn't have much of an impact and PHCM continued
to be range bound.  Today, another Strong Buy rating was tacked
onto PHCM.  Analyst Peter Friedland at WR Hambrecht initiated
the coverage with a $125 price target and positive comments
about the company's dominant position licensing QAP gateways to
wireless carriers.  Nonetheless, PHCM lost $6.00, or 8.1% in
active trading today.  There is a strong bottom at $60 so even
if the heavy sell-off continues in the next few days watch this
level carefully.  On a successful slide through this barrier,
PHCM would likely bounce up from April's bottom of $50.  Look
for entries on downward moves off $71 and $70, but keep stops in
place for protection.  A dissenting market resulting from FOMC
worries and concerns would of course play into our hands.
Nevertheless, expect this to be quick in-and-out action.

BUY PUT JUL-75 UGE-SO OI=150 at $11.25 SL=8.25
BUY PUT JUL-70*UGE-SN OI=206 at $ 8.13 SL=5.75
BUY PUT JUL-65 UGE-SM OI= 75 at $ 5.63 SL=3.50
BUY PUT JUL-60 UGE-SL OI=233 at $ 3.75 SL=2.00

Average Daily Volume = 2.57 mln
/charts/charts.asp?symbol=PHCM



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

BRCD - Brocade Communications $161.88 +2.38 (+5.88 this week)

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

Most Recent Write-Up

As the broader markets continue to meander in advance of the FOMC
meeting which began today, BRCD continues to impress.  Friday's
drop gave us several entry opportunities near $152 as the stock
bounced right on the 10-dma.  A gradual recovery yesterday,
still supported by the 10-dma, got an additional boost from news
that the company enhanced its industry-leading Fabric operating
system for Storage Area Networks (SANs).  The new features
include Fabric Watch, which provides a robust platform to simplify
SAN management through intelligent monitoring of SAN resources.
Another enhancement is Extended Fabrics, which extends SAN to SAN
native fibre connectivity from 10 to 100 Kilometers.  Today, the
company followed up with an end-to-end interoperability program
for SANS, called Fabric Aware, which was immediately endorsed by
25 industry partners including EMC, Hewlett-Packard, Sun
Microsystems, and VERITAS Software.  As if that wasn't enough to
get the share price moving, Chase H&Q initiated coverage of the
stock with a Buy rating today.  Investors took notice, bidding
shares higher right from the open, driving the price as high as
$165.50 before Fed dread took over and shaved some of the gains
from BRCD's share price.  Volume was light again today, but it
was encouraging to see the stock bounce higher from the $160
level, very close to yesterday's high.  Weakness ahead of the
Fed's decision on interest rates could provide another entry as
the stock bounces at support, first at $160, then at $155.  Watch
the intraday volume as its trend will likely telegraph the
strength of any move, whether up or down.

Comments

BRCD managed a bounce near the $160 level in midday trading
and actually traded up into the close as the broader markets
sold off.  The stock has remained strong even as some of the
blue-chip techs have come under pressure.  Tomorrow's Fed
decision will be looming over the market so watch how the
broader markets trade prior to the 2:15pm EDT announcement.
Spreads are wide on these options, so try splitting them and
take profits as this market can turn on a dime.

BUY CALL JUL-155 UBZ-GK OI=1347 at $15.25 SL=11.75
BUY CALL JUL-160*GUF-GL OI=1575 at $12.00 SL= 9.50
BUY CALL JUL-165 GUF-GM OI= 611 at $ 9.50 SL= 7.00
BUY CALL AUG-165 GUF-HM OI= 182 at $17.88 SL=14.00

SELL PUT JUL-150 UBZ-SJ OI= 208 at $ 5.13 SL= 7.00
(See risks of selling puts in play legend)

Picked on June 6th at   $138.88     P/E = 726
Change since picked      +23.00     52-week high=$185.00
Analysts Ratings      8-4-2-0-0     52-week low =$ 18.75
Last earnings 05/00   est= 0.08     actual= 0.11
Next earnings 08-14   est= 0.13     versus= 0.01
Average Daily Volume = 3.24 mln
/charts/charts.asp?symbol=BRCD



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

Wall Street Awaits The Big Decision..

Tuesday, June 27

The market ended lower today as investor enthusiasm waned in a
late session sell-off.  The upcoming decision on interest rates
worried blue-chip buyers dropping the Dow 38 points to 10,504.
Weakness in semiconductor and biotech stocks pressured the index
of technology stocks with the Nasdaq closing down 53 points at
3858. The S&P 500 ended 4 points lower at 1450.  Volume on the
NYSE reached 1.04 billion shares with advances beating declines
1,664 to 1,269.  Trading activity on the Nasdaq hit 1.47 billion
shares and declines led advances 2,341 to 1,687.  In the bond
market, the 30-year Treasury rose 18/32 pushing its yield down
to 5.94%.


Portfolio plays:

Industrial stocks enjoyed a brief morning rally while technology
issues consolidated as investors searched for direction ahead
of the upcoming interest-rate decision.  The FOMC meeting began
this morning and with the announcement on rates set for tomorrow,
there was little commitment in any of the trading activity.  The
overnight lending rate is at its highest level in nine years and
most analysts believe the Fed will leave the target unchanged at
6.5%.  Experts are suggesting the market will focus more on the
economic outlook or policy statement rather than the outcome of
the federal funds rate.  The balance of indicators remain skewed
toward increasing inflation and in anticipation of the bearish
forecast, traders unloaded all but the most promising positions.
Blue-chip cyclical issues helped lead the Dow higher in early
trading but biotech, semiconductor, and computer software stocks
quickly pulled the Nasdaq into negative territory.  In the broad
market, chemical, retail, airline, financial and paper companies
climbed while utility and oil service issues slumped.

Our portfolio has enjoyed a number of positive events in the few
days of my absence.  The most significant announcements include:

Philip Morris (MO), Nabisco Group (NGH), Nabisco Holdings (NA)
and RJ Reynolds (RJR) reported Sunday that Philip Morris will
acquire Nabisco Holdings for $55 a share, plus the assumption of
about $4 billion in debt.  Philip Morris plans to combine Nabisco
with its Kraft Foods operation, and then seek an initial public
offering of nearly 20% of Kraft.  After Philip Morris acquires
Nabisco Holdings, RJ Reynolds will purchase the remainder of
Nabisco Group Holdings for $9.8 billion, or $30 per share.  RJ
Reynolds will receive about $11.7 billion generated from the sale
of Nabisco Group Holding's 80% stake in Nabisco Holdings, but will
also assume any liability for tobacco lawsuits aimed at Nabisco.
It's a complicated transaction but the end result is that our
bullish diagonal spread can now be closed near maximum profit.

Johnson & Johnson (JNJ) rallied almost $6 on Monday after Analyst
Dave Lothson at PaineWebber upgraded the stock to a "buy" rating.
Lothson said the company's opportunity in heart failure therapy
beginning in 2002 is a principle reason to own the stock.  He also
believes the company's earnings growth will outpace the market's,
beginning in the third quarter.  The move provided an opportunity
to roll up and forward to August options in our bullish, diagonal
spread.  The new position is JAN85C/JUL95C at a cost basis of
$8.00, and there is no upside risk in the play.

Obviously there have been a number of early-exit and adjustment
opportunities for issues that have been active in the last few
sessions.  While I can not possibly hope to account for all of
the portfolio moves, I will list those positions that have made
favorable gains or significant losses.  Plays that have traded
at (or near) our initial profit targets include:

Adac Labs     (ADAC)   AUG17C/JUL20C   $2.12   credit
Exodus        (EXDS)   JUL30P/JUL32P   $0.12   debit
Immunex       (IMNX)   SEP35C/JUL45C   $9.62   credit
Int. Silicon  (ISSI)   OCT25C/JUL35C   $9.50   credit
Int Bakeries  (IBC)    OCT12C/JUL15C   $3.12   credit
Lennox Intl.  (LII)    SEP12C/SEP10C   $2.12   credit
Nabisco       (NGH)    SEP15C/JUN22C   $7.25   credit
Red Hat       (RHAT)   SEP30C/JUL30C   $2.50   credit

The only issue currently on our watch-list is AM/FM (AFM).  The
stock began to fall last Wednesday and is now trading near our
sold strike in the bullish, put-credit spread; JUL60P/JUL65P.
Traders who track the issue technically might have exited the
long option when the stock broke below the declining 30 dma on
increasing volume.  A break-even exit would have been easily
achieved but we did not have the opportunity to observe the
actual prices.  The cost to close the spread during today's
session fell as low as $1.38 but we are hopeful the underlying
stock, and its soon-to-be parent company Clear Channel (CCU),
will eventually recover from the recent sell-off.

The most interesting activity in the portfolio came from our
new calendar spread on General Magic (GMGC).  On Friday, the
issue gave back a substantial portion of its recent gains to
profit-taking and today the stock dropped another $1.06 amid
a lack of public news.  From a technical viewpoint, the new
consolidation should end near $5.50 (18 dma) and that may offer
another opportunity to enter the bullish, long-term calendar
spread.  For the current position adjustments, we will monitor
the issue's ability to rebound and move through the most recent
resistance level near $8.50-$9.00.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
TMO - Thermo Electron  $21.56  *** Corporate Reconstruction! ***

Thermo Electron Corporation is a leading provider of analytical
and monitoring instruments used in a broad range of applications,
from life sciences research to telecommunications to food and
beverage production.  Thermo Electron reports its business in
four segments: Life Sciences, Optical Technologies, Measurement
and Control, and Power Generation.  The company addresses the
biotechnology and pharmaceutical markets, as well as the clinical
laboratory and healthcare industries, through its Life Sciences
segment.  Products within the Optical Technologies segment are
used in the scientific instrument, semiconductor, and telecom
industries to fabricate, analyze, and implement new materials.
The company also provides a range of real-time, on-line sensors,
monitors, and control systems in its Measurement and Control
segment.  The Power Generation segment owns and operates a number
of independent electric power-generation facilities, as well as
a natural gas gathering, storage, and marketing business.  In
addition, Thermo Electron serves the healthcare market through
a family of medical products, and is a major producer of paper
recycling systems and provides fiber-recovery products.

Thermo Electron is undergoing a major reorganization that will
transform it into one company focused on its core measurement
and detection instruments business.  The transition involves a
number of subsidiary purchases and stock transactions including
the acquisition of Thermedics (TMD), which provides numerous
unique products such as biomedical devices, security instruments,
and equipment that assures the quality of a variety of consumer
materials; and Thermo Instrument Systems (TMI), which develops,
manufactures, and sells measurement and detection instruments
used in virtually every industry to collect and analyze data
that provides knowledge for the user.

Investors appear to favor the reorganization and this week the
stock has rallied above a recent resistance level on increasing
volume.  Technically the issue has excellent upside potential
and based on the small disparity in front-month options, we can
participate in the future movement in a relatively conservative
manner.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  SEP-20.00  TMO-ID  OI=361  A=$2.93
SELL CALL  JUL-22.50  TMO-GX  OI=25   B=$0.75
INITIAL NET DEBIT TARGET=$2.00  INITIAL TARGET ROI(max)=25%

Chart =
/charts/charts.asp?symbol=TMO
******************************************************************
NUHC - Nu Horizons Electronics  $26.31  *** Big Earnings! ***

Nu Horizons Electronics is engaged in the distribution of high
technology electronic components.  The company is also an export
distributor of electronics and a contract assembler of circuit
boards and related electromechanical devices for various OEM's.
Active and passive components distributed by Nu Horizons include
memory chips, microprocessors, digital and linear circuits,
microwave, RF and fiber optic components, transistors and diodes,
capacitors, resistors and related networks.  These products are
utilized by the electronics manufacturers including industrial
instrumentation, computers and peripheral equipment, consumer
electronics, telephone and telecom equipment, satellite, cellular
equipment, medical equipment, automotive electronics, and audio
and video electronic equipment manufacturers.

Nu Horizons Electronics just reported blowout earnings for the
quarter with net sales increasing 100% and net income up almost
400%.  First quarter revenue was primarily driven by demand in
the electronics sectors of their customer base including telecom,
datacom, internet accessing equipment, PC's and peripherals and
consumer products.  Their sales of semiconductors benefited from
the combination of a robust chip industry and the execution of
a strategy to expand markets through a focus on niche technology
products.  The Components subsidiary increased sales of passive
electronics, such as capacitors, resistors and magnetics, to an
expanding base of high profile customers.  Based on their record
bookings and industry forecasts for sustained growth, Nu Horizons
is well positioned to capture additional market share for active
and passive electronic components and the CEO is optimistic that
their current strategies will allow the company to post excellent
sales and earnings growth for the balance of this fiscal year.

We simply favor the recent bullish trend and the disparity in
option premiums will allow us to speculate on the future of the
issue with a low cost position.


PLAY (conservative - bullish/calendar spread):

BUY  CALL  OCT-30  NTQ-JF  OI=165   A=$2.75
SELL CALL  JUL-30  NTQ-GF  OI=1331  B=$0.93
INITIAL NET DEBIT TARGET=$1.68-$1.75  TARGET ROI=25%

Chart =
/charts/charts.asp?symbol=NUHC
******************************************************************
EMLX - Emulex  $69.50  *** Reader's Request! ***

Emulex Corporation is a designer, developer, and supplier of a
broad line of fibre channel host adapters, hubs, ASICs and other
software products that enhance access and storage of electronic
data and applications.  The company's products, which are based
on internally developed ASIC technology and are deployable across
a variety of heterogeneous network configurations and operating
systems, support increasing volumes of stored data.  Emulex is
also a supplier of some traditional networking products that
include printer servers and network access products.  Emulex
sells its products worldwide to OEMs and end users, as well as
through other distribution channels including value-added
resellers, systems integrators, and industrial distributors.

Emulex appears to be in the early stages of a recovery rally and
one of our subscribers was kind enough to point out the bullish
activity in the issue.  He also requested that we identify some
favorable spreads in short-term options and based on the current
technical outlook and increased option interest, the easiest way
to profit from any future upside movement may involve one of the
most common forms of position trading.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  AUG-50  UML-HJ  OI=43    A=$22.25
SELL CALL  JUL-65  UMQ-GM  OI=1025  B=$8.50
INITIAL NET DEBIT TARGET=$13.50  INITIAL TARGET ROI(max)=11%

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



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