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Daily Newsletter, Thursday, 07/06/2000

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The Option Investor Newsletter                  Thursday 7-06-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       7-06-2000           High     Low     Volume Advance Decline
DOW    10481.50 -   2.10 10527.80 10393.10   949,477k 1,642  1,234
Nasdaq  3960.57 +  97.47  3961.10  3820.34 1,482,192k 2,073  1,866
S&P-100  789.92 +   6.55   792.58   780.17    Totals  3,715  3,100
S&P-500 1456.67 +  10.44  1461.65  1439.56            54.5%  45.5%
$RUT     523.32 +   5.07   523.32   513.66
$TRAN   2806.63 +  36.50  2809.32  2736.92
VIX       24.20 +   0.57    24.96    23.87
Put/Call Ratio       .56
******************************************************************

And Back To The Top Of The Range We Go

Just when you thought the market was ready to breakdown, the
Nasdaq rebounded back to the top of the recent trading range.
I hate to report this once again, but we are still range-bound,
and with no relief in sight.  I guess I should be happy the
markets didn't breakdown yesterday as it teetered on the edge,
but at least it would have offered some direction.  Anyway,
today's action is somewhat positive and the bulls did return,
albeit cautiously.  The Nasdaq finished up 97 points while
the DJIA rallied in the afternoon to nearly wipe out the
morning losses by finishing down only 2 points.

Here is the scenario that you should be thankful for if you have
a bullish bias.  Yesterday, amidst a slew of unexpected earnings
warnings, the Nasdaq Composite began to breakdown.  It gapped
down and lost 125 points on Wednesday, taking it to the low end
of the current range around 3840.  Today, with the backdrop
of even more bad earnings news from the likes of VWNK and FWIS,
the Nasdaq pushed below this key level and was in serious
jeopardy of letting go.  You can see the piercing of support in
the first couple hours this morning.  Fortunately, the move ran
out of gas in a hurry and the Nasdaq had a great looking trend
after 11am EST today, closing right at the high.  You could
make a case to be excited about the recovery if it wasn't for
the fact that we are already back to resistance between 3950
and 4000.







Here is a closer look at today's closing numbers and the market
internals.  The Dow Industrials closed at 10481.47 on volume
of 947 million.  The Nasdaq is at 3960.57 with 1.48 billion
shares changing hands.  The S&P 500 ended at 1456.67, while the
Russell 2000 is 523.32.  Advancers beat decliners on both the
NYSE and Nasdaq by a narrow margin.  The 10-year Treasury Note
dipped by 14/32 to yield 6.04%, but trading was relatively
muted ahead of the Employment Report released Friday morning.
Oil was a bright spot for the markets as it continued to fall
on the news of increased production for Saudi Arabia.  August
Crude fell $0.62 to $30.05, slightly off the lows for the day.

The real story for the day was about tomorrow's Employment data.
I have heard estimates ranging anywhere from 400,000 non-farm
payrolls created on the high end to about 176,000 on the low
end.  Either way it is likely to be above May's number of
231,000, which was surprisingly low.  You see, this is the big
dilemma.  If June numbers snap back to a robust level, let's
say 300K or more and the unemployment rate dips back to towards
3.9% or so, economists will say that May was an aberration and
the Fed needs to keep tightening.  So much for the hopes of a
rally on that kind of news.  The flip side would be for another
soft number, let's say 275K or less with unemployment of 4.0%
or higher.  That would back up the other recent economic reports
that show a slowing economy.  The great thing about the Jobs
report is, this is very fresh data and considered very important
to the Fed in determining economic growth.  So it will have a
serious impact on trading tomorrow.

But before we get ahead of ourselves, let's finish up today's
action to set the stage.  The Semis, Software and Oil sectors
all bounced back from Wednesday's losses, plus the Financials
continued to rebound.  In fact, Merrill Lynch hit a new 52-week
high today on strong volume.  It would be rare to see the DJIA
breakdown with MER hitting new highs.  The problem is with
shares of IBM.  They continued to slide, hitting $100 a couple
times during today's session before bouncing.  Rumors are that
a typical slow second quarter for Big Blue may be slightly
worse than expected.  This is all just a rumor right now, but
a collapse below $100 on some sort of warning would be a
significant blow to the DJIA.  Other losers today include the
Drug sector, which can be expected in an up day for the tech
stocks as the Drugs are considered defensive.

In other economic news released this morning, Retail sales had
an impact on the market today.  Shoppers held back in the month
of June, but the big name retail stocks rallied nevertheless.
I think this quote said it best, "Investors have been anticipating
this for a long time," said PaineWebber retail analyst Jeffrey
Edelman. "The thinking is, it didn't get any worse so I'll buy
now."  That has never been my favorite reason to buy stocks,
but it was good enough for a relief rally for the sector.  The
biggest gainer, and a perfect example of that quote, was
Abercrombie and Fitch (ANF).  They reported a loss of 4% over
last year's same store sales for June, but analysts had been
expecting as much as a 15% loss.  Therefore, bad news becomes
good news and the stock soars 23%.

Ok, so where do we go tomorrow?  Obviously it depends on the
Jobs data, but until the market breaks out of its current range,
it might be irrelevant.  My vote is for a non-farm payrolls
somewhere between 250K-280K.  I know, I know...right on the
meaty part of the curve with everyone else.  The point is that
I don't expect a blockbuster number either way.  Although, if
we do get a biggie, I would hope it would be on the side of
a slowing economy.  The reason it may be irrelevant is I don't
expect to break out of the current Nasdaq range on Friday
regardless of the news.  The range I am talking about is 3800
on the downside and 4000 on the upside.  Although, you may
remember from Monday that I said I am waiting for the close
above 4075 (the last rally's peak) to be safe.  Conservative
investors may want to do the same.  The reason being is that
the move over 4000 on June 20th was a false alarm and I really
want to see some confirmation this time.  It got me last time
and I am not falling for it twice.  But, the chart does show
that 4000 has been short-term resistance over the past two
weeks.

Other indicators to watch include the VIX.  Hovering in the
middle of the road at 24.11.  This really hasn't been a factor
this week, but can move suddenly at any time.  The next factor
to watch is Yahoo.  Believe it or not, but earnings are just
three trading days away and YHOO is considered the kick-off to
the Internet earnings season.  We've suffered through a few
last minute warnings for tech companies so let's see if Yahoo
can turn the tide.  I don't expect YHOO to go up after earnings,
but if they have strong earnings it could excite investors to
start earnings' runs for other stocks.

Trade smart and sell too soon.


Ryan Nelson
Editor

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

We're Getting Closer
By Austin Passamonte

You can just feel how badly the bulls want to rally this
market. Tests of support were met with buying today that
closed near the high for NASDAQ but slid back below water
for the Dow. Will this be the tale of two markets again?
The bulls hope any sequel to the last epic will have the
ending rewritten.

With all eyes on the job report tomorrow, early action is
likely to be fast & furious but who knows where we'll end
up. Technical charts remain ominous for the Dow & SPX but
fundamental news and behavior for the tech sector is keeping
everyone afloat.

As for the slowing economy, have you stood in line at any
Wal-Mart stores lately? For that matter try to walk through
the isles without getting run over by stuffed shopping carts.

Have you noticed "help wanted" signs on windows at just about
every business establishment large and small? Merely simple
observations I can't help noticing amongst my travels.

All sinners who confess to earnings shortfall are not
absolved or forgiven; they are burned at the stake. It
might be hard to reach prior market highs with so many
issues stripped of market cap daily. Bulls can hold out
hope that favorable earnings will offset such purges
with massive rallies for those who please the street. Beating
that all-important whisper number will certainly be key.

If this market were on trial in a court of law, there is
Ample evidence to convict most defendants guilty of a looming
correction. That being said, the witnesses change their
sentiment so quickly these days a long-awaited rally may very
well begin and tomorrow's open could hear the starting gun.



MARKET SENTIMENT INDICATORS
---------------------------

VIX
The CBOE Market Volatility Index measures certain S&P 100
option pricing to determine investor sentiment. Historically,
readings near 30 signal possible market bottoms while levels
near 20 indicate possible market tops.

Fri 6/30 close: 22.26          Thur 7/06 close: 24.2


CBOE Equity Put/Call Ratio
The CBOE equity put/call ratio is a contrarian-sentiment
indicator. Numbers above .75 are considered bullish, .75 to
40 neutral and bearish below .40

*************************************************************
                             Tues       Thurs         Fri
Strike/Contracts            (7/04)      (7/06)
*************************************************************

CBOE Total P/C Ratio         .48          .56
Equity P/C Ratio             .47          .51


Peak Open Interest (OEX)
CBOE index put/call ratio is a contrarian-sentiment indicator.
Numbers above 1.5 are considered bullish, 1.5 to .75 neutral
and bearish if below .75

**************************************************************
                      Tues         Thurs         Fri
Strike/Contracts     (7/04)        (7/06)
**************************************************************

All index options      .97          .75
OEX Put/Call Ratio     .61          .69


OEX Maximum Open Interest Strikes/Contracts:

Puts                770 / 5410    770 / 5496    790 / 4989
Calls               800 / 3949    790 / 6370    790 / 6485
Put/Call Ratio        1.37           .86           .77


OEX S/R (Support/Resistance) Ratio Index
The OEX S/R ratio is a formula to gauge possible support
or resistance based on open-interest disparity. Values
above 5 considered excessive. Divergence of numbers may
indicate future market direction.


OEX                      Tues         Thurs     Sat
Benchmark:                            (7/6)    (7/8)

Overhead Resistance:
(830 - 815)               38.41       39.90
(810 - 790)                4.84        3.27

OEX Close:             789.92

Underlying Support:
(790 - 770)                2.28        2.28
(765 - 750)                1.90        3.13


What the S/R measure indicates: Net open-interest ratios are
very high above 810 OEX level while underlying support is
comparatively light. The OEX has considerable downside pressure
from 810 with little upward support in comparison. A large move
in either direction seems favored to the downside.


200 Day Moving Average
The 200 DMA is widely considered the major benchmark for
critical support in a market.

DOW;   10,738                    10,481*
NASDAQ; 3,777                     3,960
NDX;    3,491                     3,793
SPX      1409                      1456
OEX       756                       789



CBOT Commitment Of Traders Report: Friday 6/30
Biweekly COT report discloses positions held by small specs,
large specs and commercial traders of index futures contracts
on the Chicago Board Of Trade. Small specs are the general
public, large specs primarily funds with commercials being
financial institutions. Commercials are historically on the
correct side of future trend while small specs are not.
Extreme divergence between each signals a possible market turn
in favor of commercial trader's direction.


                 Large Specs    Small Specs    Commercials
DOW futures
Total O/I;        7,161          8,435           28,719
Net contracts;    2,219 short    1,281 short      3,501 long
%long/short;        31% short      15% short        12% long

NASDAQ 100
Total O/I;       10,771          17,334          89,812
Net contracts;    4,777 long      6,423 long     11,200 short
Percent S/L         44% long        37% long        12% short

S&P 500
Total O/I;       35,404          215,951         613,538
Net contracts;      840 long      36,659 long     37,498 short
Percent S/L;         2% short        17% long         6% short


BULLISH SIGNALS

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

Interest rates
5.91% on the 30-year Treasury Bond may be signaling the rate
fears are over. Fed-Fund futures are pricing in 44% chance of
one more hike, .25 basis at this time, down from 80% last week.

Corporate Earnings
Last quarter earnings expected to be very strong, especially
for the tech sector.

IPO's
Some recent IPO's have been met with positive enthusiasm.
******

BEARISH SIGNALS

Struggling NASDAQ
Although it hasn't broken major support levels, failure to
return or hold above 4,000 is a concern. A close above this
crucial mark would be important.

Struggling Dow
The Dow remains considerably below it's 200 DMA with several
Components near 52-week lows.

Energy Prices
Relief may be coming but are still high. It will be difficult
to curb inflation with gas and oil prices remaining high.
Ultimately, this affects profit margins. August Crude closed
$30.05 Thursday amid recent reports of more production.
Seasonal energy patterns typically bottom by late summer.

COT Report
Friday's updated figures show small spec traders heavily
long S&P 500 contracts while commercial positions remain
at several-year lows, net short. Divergence suggests possible
market turn in favor of commercials.

OEX Put/Call Ratio
Thursday's OEX put/call ratio remained below the .75 neutral
zone at .69, considered bearish territory.



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

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

DOW Industrials   10,250  10,650  10,481    BEARISH   6.29
SPX S&P 500        1,420   1,490   1,456    BEARISH   6.29
OEX S&P 100          750     806     790    BEARISH   6.29
RUT Russell 2000     455     535     522    Neutral   5.05
NDX NASD 100       3,300   4,000   3,793    Neutral   5.30
MSH High Tech        965   1,030     997    Neutral   6.06

XCI Hardware       1,440   1,550   1,495    Neutral   5.30
CWX Software       1,160   1,360   1,229    Neutral   6.06
SOX Semiconductor  1,060   1,300   1,119    Neutral   6.29
NWX Networking     1,095   1,250   1,228    BULLISH   6.02
INX Internet         525     605     537    BEARISH   5.30

BIX Banking          505     600     538    BEARISH   6.30
XBD Brokerage        450     515     505    Neutral   6.22
IUX Insurance        575     660     632    Neutral   6.20

RLX Retail           810     955     874    BEARISH   6.09
DRG Drug             345     430     419    BULLISH   6.27
HCX Healthcare       755     870     856    BULLISH   6.15
XAL Airline          140     172     168    BULLISH   5.25
OIX Oil & Gas        270     320     291    Neutral   6.30

Posture Alert
Economic data may be what it takes to move the major indices
above resistance or through support.  We tightened up some
bearish and bullish levels and expect a move very soon.  No
posture changes until the markets can prove a breakout.  Drugs,
Healthcare, Networking and Airlines are groups to be looking
long in and pullbacks can be expected.  Software and Oil stocks
have started to weaken and we'd want to see some firming before
going long.


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

Daily Gyrations Help the Gunslinger, But the Sideways Trend
Remains a Thorn for the Rest of Us
By Buzz Lynn
sectortrader@OptionInvestor.com

Even so, we can profit in a rangebound market.

Index             Last    Mon    Tue    Wed    Thu    Fri    Week

QQQ NASDAQ-100    94.50   1.81   0.00  -3.88   2.94   0.00   0.88
HHH Internet     108.00   2.00   0.00  -4.13   1.88   0.00  -0.25
BBH Biotech      192.00   4.50   0.00   5.25   4.50   0.00  14.25
PPH Pharm.       104.69  -0.94   0.00   1.69  -1.88   0.00  -1.13
TTH Telecom       76.00   1.75   0.00   0.50  -0.63   0.00   1.63
IAH I-net Arch.   89.38   0.94   0.00  -3.38   0.31   0.00  -2.13
IIH I-net Infr.   61.19   0.81   0.00  -2.75   0.69   0.00  -1.25
BHH B2B           39.19  -0.28   0.00  -1.19  -0.81   0.00  -2.28
BDH Broadband     89.13   2.69   0.00  -3.31  -0.06   0.00  -0.69
SMH Semicon.      92.25   2.13   0.00  -7.50   3.63   0.00  -1.75
RKH Reg. Banks    96.00   3.19   0.00   0.75   0.31   0.00   4.25
UTH Utilities     89.75   0.88   0.00  -0.75   1.31   0.00   1.44

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

QQQ - NASDAQ 100 $94.50 +2.94 (+0.88 this week) We've had three
trading days since our last update, where a lot happened on a day-
to-day basis.  But if you look at the general trend, it' remained
the same - stuck flat between $90 and $95.  Last Sunday, we
introduced a naked strangle wherein we simultaneously sold a $95
call and a $90 put.  Our desired outcome is that QQQ remains in
the trading range and both options expire worthless.  Even with
the VIX.X rising slightly to 24.11 today, time decay (theta) is
beginning to take its toll on the sold premiums - so much so that
we could now cover the position at the ASK price which now totals
$5.75 for a breakeven trade.  While today's NASDAQ recovery looked
pretty strong, so did yesterday's selloff, which leaves us
rangebound in the end.  While we aren't suggesting you cover yet,
recent history says to look for a move back down.  However, should
history choose not to repeat, and QQQ moves over $96, be prepared
to close the position.  On the other hand, if we get a bounce
south from $95, feel free to enter a new strangle position.  What
if your broker won't let you put on a naked strangle?  Another
strategy that can work well in a sideways market is selling a
current month at-the-money (ATM) covered call, or better yet,
buying a strike price a few months out to act as your long
position in effect creating a calendar spread.

Short Strangle:

SELL CALL JUL-95 QVQ-GQ OI= 7794 at $ 3.50
SELL PUT  JUL-90 QVQ-SL OI=21936 at $ 1.88

Net Credit = $5.38 or greater
Stop Loss  = $7.25

Covered Call:

SELL CALL JUL-95 QVQ-GQ OI= 7794 at $ 3.50

Net Debit = $91.00 or less

Calendar Spread:

BUY  CALL DEC-90 QVQ-LL OI= 1458 at $16.00
SELL CALL JUL-95 QVQ-GQ OI= 7794 at $ 3.50
Net Debit = $12.75 or less

Average Daily Volume = 26.9 mln


-----

PPH - Pharmaceuticals $104.69 -1.88 (-1.13 this week) Reaching as
high as $106.63 yesterday, PPH has been on the move this week -
that is until today's pullback.  The big guys, JNJ, LLY, SGP, and
MRK all gave up over $1 in today's trading, which the little guys,
ADRX, AGN, and JMED could not overcome despite their gains.
Nonetheless, this sector is far from dead as some tech-weary
investors rotate in.  It doesn't hurt that Congress voted last
week on a watered down drug program for seniors rather than the
full-blown handouts that are so prevalent near election time.
Technically, support is still holding at $104 despite the slight
breach of the 5-dma at $105.14.  That's still a long way from the
10-dma at $102.40, in which case a violation would be our cue to
exit.  For now, the trend remains intact as refugees from other
sectors seek shelter from the slowing economy.  For those
interested, the FDA has approved LLY's drug, Prozac, under a new
name (Sarafem) for treatment of severe PMS.  Look for an entry at
a bounce from the current level or from a bounce at the 10-dma
($102.40).  Those already with a position in PPH may want to
tighten up the stops in case of profit taking.  You can always re-
enter at a lower price.

BUY CALL JUL-100 PPH-GT OI=124 at $5.13 SL=3.25
BUY CALL JUL-105 PPH-GA OI=135 at $2.13 SL=1.25
BUY CALL AUG-105 PPH-HA OI= 28 at $4.00 SL=2.50

SELL PUT JUL-100 PPH-ST OI= 0 at $0.44 SL=1.00, no OI

Average Daily Volume = 118 K


-----

BBH - Biotech $192.00 +4.50 (+14.25 this week) Wow!  You have to
take your hat off to a sector that can deliver this kind of
performance in the midst of market flatness.  Investors just can't
get enough of these issues as indicated by volumes in excess of
their ADV's.  BGEN, IMNX, CHIR, GENZ, GILD, SEPR, IDPH, and ENZN
were all up between $2 and nearly $7 each today.  BBH's volume
exceeded its ADV by 75%.  The only big loser was AFFX, down $6.94
on news that PE Corp, parent company of CRA, had filed a patent
infringement suit against it.  CRA suffered too with a loss of
$4.75.  Nonetheless, the sector remains technically on fire as BBH
made a perfect bounce off $184 this morning and never looked back,
breaking many levels of resistance on the way up.  $184 and $187
were critical and held up beautifully.  The next level of
resistance is at $196 and should easily get there with any good
news on the job front tomorrow.  It could even do so without good
news, but BBH has had four up days in a row and may see some
profit taking in front of the weekend.  If you still want to play,
target shooting $187 could yield the best entry.  If you are
already in, you may want to tighten up your stops so you don't
have to give your profits back.  Otherwise, there's still room to
run.

BUY CALL JUL-185 BBH-GQ OI= 145 at $12.75 SL= 9.75
BUY CALL JUL-190 BBH-GR OI= 290 at $10.00 SL= 7.00
BUY CALL JUL-195 BBH-GS OI= 144 at $ 7.75 SL= 5.50
BUY CALL AUG-195 BBH-HS OI=  31 at $15.00 SL=11.00

SELL PUT JUL-170 BBH-SN OI= 329 at $ 1.31 SL=2.50

Average Daily Volume = 637 K


------

IIH - Internet Infrastructure $61.19 +0.69 (-1.25 this week) Much
as we had suspected, this play ran out of steam at $63, and was
further clobbered this morning when it fell as low as $58.50.  Its
saving grace was the almost miraculous recovery back over $60
support to close at $61, putting in yet another higher low.  Thus,
we won't drop it tonight.  However, it needs to shape up quick and
hold its current position above the current 5-dma of $61.78 and
10-dma of $60.36.  What we are looking for is a breakout of the
ascending wedge with current resistance at $63.  We would look for
an entry at a bounce up from $60 or a strong move over $63.
Unfortunately, sentimentally, IIH lost some friends yesterday as
the stink of ENTU's earnings warning rubbed off on VRSN, one of
IIH's larger components.  If IIH can't move up from here, you may
want to think about a short strangle until investors again feel
the love for this growing business sector.

BUY CALL JUL-60 IIH-GL OI=203 at $3.63 SL=1.75
BUY CALL JUL-65 IIH-GM OI= 46 at $1.56 SL=1.25
BUY CALL AUG-60 IIH-HL OI=  4 at $5.88 SL=3.75
BUY CALL AUG-65 IIH-HM OI=  8 at $3.75 SL=2.25

Average Daily Volume = 284 K


**************
Drops
**************

TTH - Telecom $76.00 -0.63 (+1.63 this week) Dead money.  That's
our description of this sector for the foreseeable future.  In the
announcement that WCOM and FON won't complete their merger,
investors found the courage to tread into these issues again.
Even so, other scuttlebutt nagging investors are the questions of
who will be Deutsche Telekom's new acquisition target; will AT&T
and WCOM spin off their long distance business; will Q buy someone
or be bought; and how will GTE and BEL perform now that they have
combined to become VZ?  Too many cloudy and speculative issues
here to call a play.  Not only that, but our caution on entering
any new short plays came to pass as TTH broke out of its slump
finding support at $73.  Time to hang up on this sector for now.

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

IAH
BHH
SMH
BDH
HHH
TTH
RKH
UTH



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

Index      Last     Mon     Wed     Thu    Week
Dow    10481.47  112.78  -77.07   -2.13   33.58
Nasdaq  3960.57   25.82 -128.83   97.47   -5.54
$OEX     789.92    5.78  -12.66    6.55   -0.33
$SPX    1456.67   14.72  -23.09   10.44    2.07
$RUT     523.32    6.81   -5.79    5.07    6.09
$TRAN   2806.63   59.46   65.30   36.50  161.26
$VIX      24.20    0.07    1.30    0.57    1.94

Calls

TIBX     114.00    2.78   -0.50    4.50    6.78  Marching on
ISSX     102.00    1.25   -2.94    5.00    3.31  New
RSAS      71.50    5.00   -5.38    2.63    2.25  Earnings soon
NT        70.00    4.03   -0.75   -1.88    1.40  Moving up
AGIL      72.00    3.44   -2.38    0.25    1.31  Momentum play
MSFT      80.94    0.00   -1.50    2.44    0.94  Softee rebounds!
SEBL     164.38    1.06    0.00   -0.25    0.81  New
KANA      62.56    3.00    2.00   -4.31    0.69  Convincing
CIEN     164.06    4.31   -6.19   -0.75   -2.63  Valiant battle
ARBA      94.75    0.84   -1.63   -2.50   -3.28  Sights on $100
JPM      116.94   -5.63   -0.44    1.63   -4.44  New
PRSF      58.94   -0.94   -1.06   -2.94   -4.94  Back for a test
JNPR     140.31   -0.56   -3.63   -1.06   -5.25  Consolidation
BRCD     175.38   -5.59    1.06   -3.56   -8.09  Hark! Entry point
MRVC      59.00    0.75   -3.00   -6.00   -8.25  Dropped
GSPN     113.75    0.31  -15.38    6.75   -8.31  Strong close
GLW      248.00    9.50  -17.25   -9.63  -17.38  Profit taking
RBAK     155.81   -1.69  -26.06    5.56  -22.19  Dropped
ENTU      38.13   -5.63  -40.50    1.50  -44.63  Dropped

Puts

LCOS      49.25   -0.69   -4.44    0.38   -4.75  New
PHCM      63.50    6.38   -3.88   -4.13   -1.63  Buckle up!
ICIX      29.06   -0.13   -0.25   -0.31   -0.69  Rolling over
DD        44.06    1.25    0.06   -1.00    0.31  Old economy blues
DCLK      38.81    1.63   -2.25    1.31    0.69  Dropped
F         46.31    0.94    0.88    1.50    3.31  Dropped
IMNX      62.38    3.81    3.06    6.06   12.94  Dropped



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


CALLS:
*****

RBAK $155.81 +5.56 (-23.32) After almost 7 weeks of near
invincibility, our superhero finally got a taste of kryptonite.
Finding strong resistance and stalling at the $180 level last
Friday, investors on Wednesday came back and took profits.
Today saw the stock finding bottom once again above the $145
level and closing above its 10-dma.  Having initiated this call
play when the stock was at $72, RBAK has given us an amazing run,
to say the least.  So at this point, considering the recent
weakness, we will be taking our profits.  We would not be
initiating new positions here, yet current positions can still be
played out.

MRVC $59.00 -6.00 (-8.25) What happened to the momentum?  After
building a nice uptrend over the past month, somebody yanked
the rug out from under MRVC and it plunged back to the $55
support level over the past 2 days.  There was a nice solid
bounce at the close, allowing the price to recover from the
day's lows, but the momentum seems to have been dealt a fatal
blow.  Rather than hope and wait, we will let MRVC go tonight,
and move on to stronger plays.

ENTU $38.13 +1.50 (-44.63) Unfortunately this is an illustration
of what can happen when on the wrong side of a sharp reversal.
Those who used stops were at least saved from getting hit by the
full brunt of Intuit's earnings' warning on Wednesday.  John Ryan,
president and CEO, stated that " second-quarter results were
affected by delays in closing PKI system extension sales.
The issue here is simply revenue timing, not lost business."  By
the end that trading session, ENTU's share price was cut by a
staggering 52.5% with total dollar losses equaling $40.50.
There's no doubt this scenario qualifies for a thunderous "Thank
God For Stop Losses"!  Intuit is set to report its official
earnings' numbers on July 18th, after the market closes.  This
play actually was decent for us, but we were just unlucky.

PUTS:
*****

F $46.31 (+3.31) The big three U.S. auto makers reported June
monthly sales figures last Monday, and as expected, sales dropped
for the second consecutive month.  F said that it expected sales
to continue to slow in the second-half of the year.  Despite the
bearish outlook, F has staged an impressive three-day rally so
far this week, en route to breaking out of its slump.  It appears
that investors have discounted the slowing of sales into the
stock price and are looking down the road for improvements in F's
business.  The new found optimism in F has proved detrimental to
our put play.  It's time to jump out of the way before we get run
over.

IMNX $62.38 +6.06 (+12.94) When we initiated this put play, the
stock had been drifting lower on a combination of lack of news
for IMNX and the sell-on-the-news action that had plagued many
biotechs after the monumental human genome announcement.  But, in
a stunning turnaround for IMNX and the biotech sector, we now
close this put play.  Monday saw the stock move up $3.81 but on
low volume in a thinly traded and shortened market day.  On
Wednesday, in the midst of a strong day for the biotechs and news
of IMNX licensing rights to UroCor's cancer-derived antigens in
order to develop monoclonal antibodies directed against prostate
cancer, IMNX rallied tacked on $3.06 in gains, this time on
stronger than average volume.  Today, IMNX and the biotech sector
rallied again, this time on even stronger volume.  With the
positive price-volume action on IMNX as well as the biotech
sector in general, we are moving on in search of sectors and
stocks displaying weakness as opposed to the strength we have
seen here for prospective put plays.

DCLK $38.81 +1.31 (+0.69) There have been ample opportunities
to profit on our play, but it appears that the downward momentum
is abating.  DCLK is refusing to move below the $37 level and
is beginning to respond to the direction of the broader markets.
Increasing volume is now accompanying the upward moves, and
pressure appears to be building for a breakthrough of resistance
at $40-41.  Both the 5-dma and 10-dma have flattened out near
today's close, and may begin to support the price going forward.
At this point, we are content to take our profits and move on
to other plays.


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

CIEN $164.06 -0.75 (-2.63) CIEN fought a valiant battle with the
bears Thursday.  The Telecom sector sank Thursday, with
particular weakness in the fiber optic related issues.  The
bears' fury was somewhat extinguished Thursday after Dresdner
initiated coverage on CIEN with an Add rating.  It's not a Strong
Buy, but we'll take any help we can get.  Like many other leading
fiber optic related stocks, CIEN bounced off a key support level
Thursday morning, and rallied into the close of trading.  An
encouraging sign to say the least!  Despite the recent sell-off,
CIEN's ascending channel remains intact.  The recent round of
profit taking may prove to be a good entry point if the fiber
optic group can regain its momentum.  After bouncing off support
at $155 Thursday morning, CIEN charged into the close of trading,
just falling short of eclipsing resistance at $165.  The stock
did, however, edge past that level in after hours trading.  An
entry at current levels might be considered if the bulls show up
early Friday morning.  Otherwise, wait for CIEN to clear
resistance at $170 before entering the play.

TIBX $114.00 +4.50 (+6.75) Like a drummer marching to a different
beat, TIBX has continued its ascent with little hesitation,
despite the whipsaws in the Tech sector.  It's rare for a Net
stock, let alone a B-2-B, to display such impressive relative
strength in the current market.  We mentioned last Sunday that
TIBX's institutional sponsorship has been on the rise recently.
Noting the stock's healthy volume this week, it appears the
professionals are still accumulating TIBX.  That institutional
accumulation has helped TIBX to effortlessly clear heavy
congestion above its current levels.  And don't forget, TIBX is
trading well into split territory.  A split announcement at this
time would only add to our play's momentum.  Like we've been
explaining, TIBX faces congestion above its current levels.  You
might consider entry at current levels if TIBX's momentum
continues Friday morning.  For a more conservative entry point,
use the intra-day pullbacks to target shoot.  TIBX has major
support at $110 which may provide an entry if the stock stumbles
on profit taking.

GLW $249.25 -8.38 (-14.75) The fiber optic stocks slipped for the
second consecutive day Thursday, despite the revival of the Tech
sector.  GLW lead the way southward Thursday, falling below
support at its 10-dma.  The selling seen in GLW over the past two
days can be directly linked to profit taking.  Two words that
call holders never like to hear.  But, given the fact that GLW
rallied nearly 40% since the first of June, maybe a little
consolidation was in order.  Furthermore, despite falling past
its 10-day Thursday, we did see an encouraging sign.  GLW bounced
like a rubber ball off support at $240 Thursday morning.  Traders
allowed GLW to fall only so far before stepping in for a bargain.
The $240 level was crucial for GLW to hold, and we remain bullish
after the sharp rebound Thursday.  But, before immediately
jumping into the play, make sure to consider your risk level.  An
aggressive trader might look for entry at current levels as there
is only slight congestion above at $256, near the 10-dma.  The
$260 level will prove to be resistance for GLW, which upon
clearing, a conservative trader might look for an entry.

ARBA $94.75 -2.50 (-3.28) The psychological $100 level is proving
to be a formidable resistance level for ARBA.  After failing to
break through it on Monday and Wednesday, the stock moved
slightly lower today, but still maintaining its pattern of
consolidation and breakout.  In the past, we have seen that this
stock has consolidated for a little over two weeks before
breaking out.  If this pattern holds, then expect ARBA to break
out in the coming week.  Astute traders will also notice that in
the past month, ARBA has traded in a 13-14 point range. In early
June, the range was from $69 to $83.  The current range is at $87
to $100. Aggressive traders can play bounces off these levels as
the stock continues its pattern of consolidation and breakout.
Those who want to play the breakout will want to enter the stock
when it breaks $100 on strong volume.  Support can also be found
at the 10-dma level, currently at $93.85.  Last week, the stock
moved up strongly with the help of positive news from the
company.  So far the stock has held on, despite the lack of news
this week.  Look for positive news to be a driver for the stock
price.

GSPN $113.75 +6.75 (-8.31) The stock encountered strong resistance
at $128 on Monday, and on Wednesday, it shed $15.38 or 12.56%.
The reason for the selloff can be attributed to news of the
company detailing plans for a secondary stock offering.  GlobeSpan
registered with the SEC to sell 8 mln shares, 1.5 mln from the
company and 6.5 mln from shareholders.  Also, they announced the
completion of GSPN's acquisition of iCompression, Inc.  Today saw
GSPN testing the psychological $100 support level successfully
early in the trading day, after which it spent the rest of the
day moving up in a stair-step fashion.  While it did pierce the
20-dma, currently at $103.32, buyers stepped in, eager and
willing to bid the stock up not only above that level, but also
over the 10-dma, currently at $108.41.  Looking ahead, bounces
off the 10 and 20-dma lines can be a good entry points.
Resistance is overhead at the its 5-dma at $116.64 and above that
at $120 and $122.50.  Conservative traders may want to wait for
the stock to clear $118 before entering.  Intraday, GSPN has a
range of 13-14 points so aggressive traders can profit from the
bounces off support and resistance levels within the range.

PRSF $58.94 -2.94 (-4.94) After breaking through the elusive $57
level last week, PRSF found resistance at $65 this past Friday.
Now, we find the stock re-testing its $57 support level.  Today,
the stock sold off early in the morning, successfully bouncing at
$58 and edged up for the rest of the day to close higher.  The
relative low volume to the downside this week would suggest that
the stock is continuing to hold its current trend.  Support can
be found just below the 10-dma, currently at $57.37.  Throughout
last month's rally, PRSF's 20-dma of $54.50 has been solid.  If
the current trend continues, then bounces off that level offer
strong buying opportunities.  Overhead resistance is at $61.50,
which is also the 5-dma.  Conservative traders will want to see
the stock break through this level on strong volume before
entering.  A break through will send the stock to challenge $65
again.

BRCD $175.38 -3.56 (-8.09) Hark!  Is that another entry point?
After last week's strong move to new highs near $185, BRCD was
due for some profit-taking.  Broad market weakness pressured the
stock right through today's open, but after a bounce at $169
during amateur hour, the price firmed near $171.  Then, in the
last hour, buying interest was renewed, propelling the shares
to a close over $175 and yielding a close back over the 5-dma
($174).  Although the volume today was a bit lighter than
the daily average, it was encouraging to see the way buying
volume ramped up in the final hour.  The markets are nervous
in front of the Employment Report due out tomorrow morning, but
barring a bad report, BRCD looks like it is ready to take
another run at new highs.  Consider another bounce in the
$171-173 to be a good entry, but wait for the bounce.  A more
cautious approach would be to wait for investors' enthusiasm
to push the price through resistance at $180 before jumping
into the play.

NT $70.00 -1.88 (+1.13) Moving up with the rest of the tech
sector, NT managed to tag a new 52-week high above $72 on
Monday.  Adding fuel for the upward move was news that NT had
completed its acquisition of Architel Systems.  The combination
creates the industry's most comprehensive solutions for
enabling service commerce.  The much awaited follow-through
never materialized and traders spent much of yesterday's session
taking profits.  The shares of the networking company slide all
the way to $68 by mid-day today.  Confirming that this is becoming
a reliable support level, buyers came back in and pushed the price
higher for the balance of the day.  As the NASDAQ continued to
recover late in the day, NT went along for the ride, and a
benign Employment report tomorrow could be just the ticket for a
move back towards the highs seen earlier this week.  Market
weakness could produce another retest of support at $68 or even
$66.  A bounce at either of these levels looks buyable for new
entries.  Just confirm the health of the market and sector before
playing.

RSAS $71.50 +2.63 (+2.25) If you missed your entry on RSAS last
week, the earnings warning from Entrust Technologies (ENTU)
gave you another chance yesterday.  The warning caused a drop
to $66 (also the site of the 10-dma) during amateur hour before
the stock solidified above the $68 support level.  This level
has provided good support ever since the company inked a
licensing deal with E.piphany early last week.  RSAS has shown
good strength relative to other Internet security issues in
the aftermath of ENTU's warning, and this may be due to the
fact that July earnings (scheduled for July 13th) are rapidly
approaching.  The recovery yesterday continued into today's
session as the stock continued to march higher, closing back
above $71.  Keep an eye on the sector and market.  Their
reaction to the Employment numbers tomorrow morning will
likely be a good indicator of which way RSAS will head as the
weekend approaches.  Renewed bounces at $68 still look
attractive for new entries, but given the rapidly approaching
earnings, we may have to settle for opening new positions on
strength.  A strong move (can you say volume?) through the
$74 level would be a good indicator that the move has legs,
and a good level for initiating new positions on strength.

KANA $62.56 -4.31 (+0.69) KANA's trading performance this week
was convincing and certainly welcome.  It pushed through
overhead resistance at $62.68 after the holiday break and
established a higher support level at $61 and $62.  Volume was
also moderate to strong, which indicates the momentum is not
diminishing.  The test of the $70 target area on Wednesday is
also promising.  There was some profit taking in today's
session, however, that's not too alarming.  It's typical for a
stock to cycle a bit after hitting a new peak.  Wait for bounces
off the 5-dma ($63.08) before adding new positions.  Confirming
moves off that level should provide reasonable entries into this
momentum play.

JNPR $139.50 -1.87 (-6.06) JNPR experienced some consolidation
this week, but that's alright.  Recall JNPR closed last week at
highs it hadn't seen in nearly three months.  Some selling was
to be expected.  Plus the downdraft afforded traders a multitude
of entries into this momentum/earnings play.  Yet, the rather
swift dip during amateur hour today was unnerving.  The good
news was JNPR's steadfast "I'm not diving any lower" bounce off
firm support at $130.  Look for upward moves off the current
level ahead of the company's earnings' release next week.
Juniper Networks is set to report on July 13th, after the market
closes.

MSFT $80.94 +2.44 (+0.94) Softee rebounds!  A positive close
ABOVE the $80 mark provides some conviction that MSFT will rally
higher in the near-term.  The company's earnings are also now
confirmed for Tuesday, July 18th, after the closing bell.  We're
anticipating this event to generate some momentum as the date
approaches.  That gives us eight more trading days to play
MSFT.  The immediate goal is for MSFT to break through the
overhead resistance at $82.19, the intraday high set June 21st.
Also look for volume to become stronger; especially if you play
more on the side of caution.  In the news, both Microsoft and
the European Commission are denying any reports that antitrust
regulators will block the company's $3 bln investment in Telewest
Communications, a British cable television company.

AGIL $72.00 +0.25 (+1.31) Momentum is our play on AGIL.  The
uptrend continued into this week with additional gains of almost
6%.  And the 5-dma technical also proved to be a solid support
platform.  At the higher end of the spectrum, $70 and $72 are
becoming established levels of shorter-term support.
Conservatively, look for additional entries after AGIL moves
through the proximate resistance of $74.25.  A definitive
breakout above this mark would provide better confirmation that
AGIL is poised to stretch higher on the momentum alone.
Remember, Agile is not expected to report earnings until late in
August.


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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
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information provided has been obtained from sources deemed
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely
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delivery times due to factors beyond our control.
The Option Investor Newsletter                  Thursday 7-06-2000
Copyright 2000, All rights reserved.                        2 of 2
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*******************
PLAY UPDATES - PUTS
*******************

ICIX $29.06 -0.31 (-0.69) CIBC World Markets reiterated its
Strong Buy rating on ICIX Thursday morning.  ICIX gapped
marginally higher after the analyst praise only to roll over in
midday trading and extend its losses.  ICIX was plagued by broad
weakness in the Telecom sector Thursday, particularly in the CLEC
related issues.  ICIX's recent decline comes with no surprise as
consolidation sweeps through the CLEC sector.  ICIX is faced with
increasingly stiffer competition from the likes of SBC and the
newly formed Verizon (VZ).  ICIX's resources are limited when its
has to contend with the aforementioned powerhouses.  And, the
prospects of a larger telecom provider buying ICIX doesn't seem
very likely given the company's haphazard ventures.  Speaking of
ventures, ICIX's Web hosting unit DIGX staged a modest rally
Thursday.  It didn't help the parent company's stock though.
Given the weak showing Thursday, an aggressive trader might
consider entry at current levels.  Otherwise, wait for ICIX to
fall below support at $28 before entering the play.

DD $44.13 -0.94 (+0.38)  DD benefited from a pre-holiday rally
in the blue chips Monday, and extended its gains Wednesday with
a post-holiday pop.  But, the celebrating came to an abrupt halt
Thursday once money flowed back into the Tech sector, leaving
the old-line names like DD languishing.  The dichotomy between
the old and new economy stocks has returned to some extent.  The
separation of investors' capital is even more evident in stocks
that are struggling to win Wall Street's approval.  Fortunately
for us, on the short side, DD is one of those faltering companies
that Wall Street has turned bearish on.  DD continues to face
opposition at its 10-dma, currently at $45.00.  The stock briefly
climbed above the 10-day Wednesday, only to fall back below that
level near the close of trading.  DD has support just below its
current levels at $44.  Look for an entry point if DD falls below
that level.  For the aggressive traders, look for an intra-day
entry if the stock rallies then bumps into resistance at its
10-dma.

PHCM $63.50 -4.13 (-1.63) Buckle up!  Here we go again.  After 
two sessions in which PHCM tried desperately to rebound, the 
downtrend has resumed.  PHCM was cut down 6.5% in today's 
session and the volume was exceptional at 4.53 mln shares being 
exchanged - the ADV is approximately 2.65 mln.  The downslide 
pushed the share price to $62.88, which is below Friday's 
intraday low of $64.25.  The negative behavior is promising  
that PHCM can shatter the strong bottom at the $60 mark.  Let's 
not however lose our heads!  Keep the stops tight to protect our 
profit and capital.  It's not inconceivable that this news-
driven momentum play could reverse its trend - the share price 
is rather attractive.  



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

JPM - JP Morgan & Co $116.94 +1.63 (+6.81 this week)

JPM is a premier international banking firm headquartered in the 
New York. It is a holding company for subsidiaries engaged in 
global banking and investment.  They offer financial services to 
corporations, institutions, and the high net worth individuals.

We're initiating coverage of JPM for those who enjoy quick 
in-and-out plays.  The company is reporting earnings next 
Thursday, July 13th, BEFORE the market opens.  Therefore, there's
only four trading sessions to make our entries and exits 
profitable.  The clear-cut move on Monday off its lows at $110, 
coupled with the overall strengthening of the financial sector 
puts a few more chips in our corner too.  JPM closed on the 
upside of both the 5-dma ($114.13) and 10-dma ($115.78) today, 
so look for more positive moves off these technicals to confirm 
an uptrend.  There may be a bit of a struggle in the vicinity of 
$119, so be prepared for some resistance.  In other words, if 
you’re reserved about playing a financial stock, then wait for a 
conclusive breakout above $119 before opening positions.  After 
that obstacle is unblocked, the road is clear until JPM faces 
June 26th's intraday high of $126.69.  Be patient if you're 
anticipating an entry tomorrow.  Remember the Street is awaiting 
the Jobs Report data, a key economic report, and this news can 
certainly shake up the markets.

After the market today, Wasserstein Perella started new coverage 
on JPM with a Buy recommendation.  

***July contracts expire in two weeks***

BUY CALL JUL-110 JPM-GB OI= 177 at $8.63 SL=6.00
BUY CALL JUL-115 JPM-GC OI= 468 at $5.13 SL=3.00
BUY CALL JUL-120*JPM-GD OI=1342 at $2.50 SL=1.25
BUY CALL AUG-115 JPM-HC OI= 140 at $8.13 SL=5.75
BUY CALL AUG-120 JPM-HD OI= 175 at $5.75 SL=3.75

Picked on July 6th at   $116.94    P/E = 11
Change since picked       +0.00    52-week high=$146.00
Analysts Ratings      2-2-7-0-1    52-week low =$104.69
Last earnings 03/00   est= 2.68    actual= 3.37
Next earnings 07-13   est= 2.45    versus= 2.52
Average Daily Volume = 1.41 mln



SEBL - Siebel Systems $164.38 -0.25 (+0.81 this week)

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

We're back in SEBL, looking for a run.  SEBL has been busy
recently lining up contracts for its e-business software.  The
company said Wednesday that UrbanMedia, an On-Site Service
Provider, had selected SEBL's e-business applications to support
its nationwide operations.  And again Thursday, SEBL said it had
allied with Sprint PCS (PCS) to from a joint venture to market
and sell nationwide access to SEBL's e-business applications.
The ever-increasing demand for Customer Relationship Management
(CRM) software has kept SEBL busy recently.  And the numerous
contracts that SEBL has been winning lately are pushing the
company further into profitability.  SEBL is one of the few
Internet services concerns that has an expanding bottom-line, and
investors will be looking for increased profits when the company
reports earnings in a little over two weeks.  The company has
surpassed analysts' estimates in its last five quarters, and
Wall Street will be anticipating another positive surprise from
SEBL this time around.  That expectation of better-than-expected
profits is the catalyst that can carry our play higher.  Along
with the earnings driver, SEBL's stock is currently trading well
into split territory.  The company has plenty of authorized
shares to announce a split, and the directors could sweeten our
play if they decide to declare.  Technically, SEBL is positioned
well for an earnings run.  The stock has been consolidating its
recent gains by basing between $160 - $165.  We saw a surge of
late-day buying Thursday afternoon which positioned SEBL to break
out from its trading range.  Look for an entry Friday morning if
SEBL clears resistance at the $165 level.  A more conservative
entry might be found if SEBL can hurdle resistance at $170.  Make
sure to confirm a breakout with heavy volume!

In the ratings game recently, we saw two analysts change their
recommendations to Strong Buys over the last two weeks ahead of
SEBL's second quarter earnings report.  And Thursday, Wit
SoundView reiterated its Strong Buy rating on SEBL and set a $210
price target.  We don't want to sound too greedy, but SEBL at
$210 is alright with us!

***July contracts expire in two weeks***

BUY CALL JUL-160 SGW-GL OI= 723 at $11.63 SL= 8.50
BUY CALL JUL-165*SGW-GM OI= 751 at $ 8.75 SL= 6.25
BUY CALL JUL-170 EZG-GN OI=1130 at $ 6.63 SL= 4.50
BUY CALL AUG-165 SGW-HM OI=1263 at $16.25 SL=11.50
BUY CALL NOV-170 EZG-KN OI=  62 at $27.63 SL=20.00

Picked on July 6th at   $164.38    P/E = 261
Change since picked        0.00    52-week high=$175.13
Analysts Ratings     15-3-0-0-0    52-week low =$ 24.19
Last earnings 03/00   est= 0.14    actual= 0.17
Next earnings 07-21   est= 0.18    versus= 0.12
Average Daily Volume = 4.67 mln



ISSX - Internet Security Systems $102.00 +5.00 (+3.31 this week)

Internet Security Systems is a global provider of security
management solutions for protecting e-business.  The company’s
Adaptive Security Management approach to information security
protects distributed computing environments from attacks, misuse
and security policy violations, while ensuring the
confidentiality, privacy, integrity and availability of
proprietary information.  ISSX delivers an end-to-end security
management solution through its SAFEsuite security management
platform coupled with around-the-clock remote security
monitoring through the company’s managed security services
offerings.

The tenuous recovery that began in late May finally looks
like it is ready to get moving.  After the selloff in
technology stocks dragged ISSX down near its 200-dma in
mid-April and then again in late May, investors have been
gradually getting their feet wet in Internet security stocks
again.  After finally getting above the 30-dma and 50-dma, the
stock needed to test this support level on June 26th before
heading higher.  The stock got a boost 2 days later, as the
company’s RealSecure product was recognized with the 2000
Frost & Sullivan Market Engineering Award for Marketing
Strategy.  ISSX began using the 10-dma (currently $91) as
support on its march upwards.  And despite the earnings warning
from Entrust Technologies (ENTU) yesterday morning, ISSX has
continued its ascent.  The buying volume has really picked up
in the past 2 weeks, and today clocked in at nearly double the
ADV as the stock pushed through and closed above the $100
resistance level.  We would like to see this level act as
support, but any market weakness could produce some profit
taking, given the recent gains.  Support exists at $95, and
then at $90.  Consider a bounce from support with the
conviction of strong buying volume as an opportunity to enter
the play.  If the strength continues unabated, aggressive
traders can consider entering on strength, but watch out for
profit taking.  With earnings rapidly approaching on July 18th,
this could be the beginning of a powerful earnings run.

After receiving the Frost & Sullivan Award last week, ISSX
got more good news on Monday.  Microsoft has licensed key
components of ISSX’s RealSecure intrusion detection technology
for inclusion in its new Internet Security and Acceleration
(ISA) Server 2000.  This move makes the RealSecure product the
leading commercial intrusion detection component embedded
within a multi-purpose security server.

***July contracts expire in two weeks***

BUY CALL JUL-100 ISU-GT OI=160 at $ 8.75 SL= 6.25
BUY CALL JUL-105*ISU-GA OI=235 at $ 6.50 SL= 4.50
BUY CALL JUL-110 ISU-GB OI= 50 at $ 4.88 SL= 3.00
BUY CALL AUG-105 ISU-HA OI= 15 at $12.25 SL= 9.25
BUY CALL OCT-105 ISU-JA OI= 26 at $19.13 SL=13.75

SELL PUT JUL- 95 ISU-SS OI= 11 at $ 4.13 SL= 6.00
(See risks of selling puts in play legend)

Picked on July 6th at   $102.00     P/E = 458
Change since picked       +0.00     52-week high=$141.00
Analysts Ratings      7-2-0-0-0     52-week low =$ 20.00
Last earnings 05/00   est= 0.06     actual= 0.07
Next earnings 07-18   est= 0.08     versus= 0.05
Average Daily Volume = 533 K




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

LCOS - Lycos, Inc. $49.25 +0.38 (-4.75 this week)

Founded in June 1995, Lycos was one of the earliest search and
navigation sites designed to help people find information more
easily and quickly on the World Wide Web.  The core Lycos
technology, which identifies and categorizes online information,
was developed at Carnegie Mellon University.  Through its
acquisitions of Tripod, Inc., and WhoWhere, Inc., in 1998, the
Lycos Network has become the largest and fastest growing online
community with more than 5 million registered Tripod and
Angelfire members.

Long-suffering Lycos shareholders were rewarded in the middle of
May with news of a takeover by Terra Networks which sent the
stock flying, if only for just one day.  Ever since that
announcement, however, volume on the stock has been lethargic,
moving up only when the stock is selling off, as it did in the
middle of June.  Using that area as a local top, a downtrend
channel spanning 12 points from top to bottom can clearly be
drawn.  After finding support at $52 last week and trading in a
narrow range for the rest of the week, the stock found resistance 
at the 10-dma, also the top of its downtrend channel.  Moving 
lower this week, the stock not only broke through support at $52,
but also the psychological level of $50.  On Wednesday, the stock 
sold off on negative news that Bertelsmann CEO Thomas Middelhoff 
said that the commitment of the deal with LCOS-TRRA remained firm, 
even though the German media company's legal obligations in the 
deal were scaled back last week.  When the LCOS-TRRA deal was 
announced, Bertelsmann said it would spend $1 bln over the next 
five years on advertising and e-commerce services.  However, a 
filing dated June 28 disclosed that Bertelsmann is only obliged 
to pay $325 mln, and that Terra's parent, Telephonica SA, would
replace up to $675 mln worth of orders Bertelsmann might cancel.
Shareholders did not like the news and sold the stock down over 
8%.  It was done so lethargically, on only about half of the 
average daily volume.  Entry points for this put play can be 
found at the 5-dma, currently $51.91 and at the 10-dma, currently 
at $53.68, both actings as strong resistance.  Support lies at 
$45, which it bounced off of today.  Breaking through that level 
could bring the stock at the $40 level in short order.  

***July contracts expire in two weeks***

BUY PUT JUL-55*QWL-SK OI=2527 at $6.75 SL=4.75
BUY PUT JUL-50 QWL-SJ OI=1321 at $3.38 SL=2.00
BUY PUT JUL-45 QWL-SI OI= 427 at $1.50 SL=0.75

Average Daily Volume = 4.07 mln



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

MSFT - Microsoft Corp $80.94 +2.44 (+0.94 this week)

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

Softee rebounds!  A positive close ABOVE the $80 mark provides
some conviction that MSFT will rally higher in the near-term.
The company's earnings are also now confirmed for Tuesday, July
18th, after the closing bell.  We're anticipating this event to
generate some momentum as the date approaches.  That gives us 
eight more trading days to play MSFT.  The immediate goal is
for MSFT to break through the overhead resistance at $82.19, the
intraday high set June 21st.  Also, look for volume to become 
stronger, especially if you play more on the side of caution.
In the news, both Microsoft and the European Commission are 
denying any reports that antitrust regulators will block the
company's $3 bln investment in Telewest Communications, a 
British cable television company. 

Comments

When MSFT challenged the $80 level today, buyers made sure that
there would be no resistance.  The stock blew through it on very
strong volume and didn't stop until it bumped into its 100-dma at
$81.64.  Closing over $80 is key and we will be looking for MSFT 
to conquer the 100-dma next.  Bounces off $80 support could 
provide excellent entries.  Below that, buyers have been stepping
in at $79.  MSFT has been quietly heating up and today's close
brings the stock up to a level not seen since April 19th.

BUY CALL JUL-75*MSQ-GO OI=31827 at $ 6.88 SL=5.00
BUY CALL JUL-80 MSQ-GP OI=55749 at $ 3.13 SL=1.50
BUY CALL JUL-85 MSQ-GQ OI=51931 at $ 1.19 SL=0.00
BUY CALL AUG-80 MSQ-HP OI= 5678 at $ 5.25 SL=3.50
BUY CALL AUG-85 MSQ-HQ OI= 4224 at $ 3.00 SL=1.50

Picked on June 15th at   $72.38    P/E = 48
Change since picked       +8.56    52-week high=$119.94
Analysts Ratings     9-16-2-0-0    52-week low =$ 60.38
Last earnings 03/00   est= 0.41    actual= 0.43
Next earnings 07-19   est= 0.42    versus= 0.40
Average Daily Volume = 36.7 mln




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

Revenue shortfalls plague industrial issues...

Technology stocks recovered but blue-chips slumped amid concerns
over quarterly earnings and upcoming economic data.

Monday, July 3

Industrial stocks ended higher today amid evidence of a slowing
economy.  The Dow closed up 112 points at 10,560 and the Nasdaq
finished up 25 points at 3991.  The S&P 500 Index was 14 points
higher at 1469.  Trading volume on the NYSE reached 449 million
shares, with advances beating declines 1,983 to 799.  Activity
on the Nasdaq exchange was light at 598 million shares, with
advances beating declines 1,984 to 1,766.  In the bond market,
the 30-year Treasury rose 15/32, pushing its yield down to 5.86%.


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

Int. Business   IBM   JUL95/JUL100P   $0.43   credit   bull-put
Int. Business   IBM   JUL125C/J120C   $0.56   credit   bear-call
Plantronics     PLT   JUL90P/JUL95P   $0.25   credit   bull-put
Secure Sol.     SCUR  AUG15C/AUG20C   $2.68   debit    bull-call
Telmex          TMX   AUG45C/JUL55C   $0.00   debit    diagonal

There were few favorable entry opportunities in our new spread
positions.  Investors bid up financial stocks and also American
Depositary Receipts of Mexican companies amid signs of a smooth
transition to a new ruling party after Sunday's election.  Our
bullish play in TMX was unavailable as the issue opened $4.38
higher and closed up $5.75 for the session.  PLT also rallied
in early trading and the target credit was not achieved.  The
SCUR debit was based on a 10-contract transaction near 10:15 A.M.
and both IBM positions offered fair entry credits at various
times throughout the day.


Portfolio plays:

Blue-chip issues rallied today after a benign economic report
gave investors confidence in the long-term outlook for inflation
ahead of the Fourth-of-July holiday.  The National Association of
Purchasing Management (NAPM) said its index of economic activity
fell to 51.8 in June, slightly below the number economists had
forecast.  The price component fell to 61.2 in June from 65.8 in
May, well below the 67.0 expected by analysts.  The move suggests
the industrial sector of the economy continues to grow but at a
more moderate pace, in the wake of recent interest rate hikes.
Analysts say the data is encouraging but most expect investors to
remain cautious ahead of the upcoming employment report and the
beginning of second-quarter earnings next week.

On the Dow, financial stocks were atop the leader-board after a
dismal showing last week.  J.P. Morgan (JPM) and Citigroup (C)
were the best performers.  On the Nasdaq, semiconductor stocks
were bullish after Merrill Lynch made positive comments on the
group, saying it continues to believe that share values will
increase after a DRAM supply shortage later this year.  Computer
software issues were strangely unproductive with Oracle (ORCL)
leading the downdraft.  In the broader market, jewelry, steel,
and telephone issues advanced, while retail, electric equipment
and auto parts stocks consolidated.  Our portfolio enjoyed a
number of favorable moves and most of the activity came from the
small-cap group.  Conseco (CNC) continued its recent rally, up
another $1.43 to close at $11.25.  The issue has moved up over
100% since we opened the diagonal spread in late June and the
position should be closed.  Cytogen (CYTO) is another surprising
stock, now trading above $10 and providing a 30% profit for our
bullish position in just under two weeks.  Our new position in
Thermo Electron (TMO) is also positive with the issue trading
near $22.   The Major Drug group led our big-cap portfolio with
Sepracor (SEPR) up $5.12 to $125 and Imunex (IMNX) $3.75 higher
at $53.25.  Both of these plays are at maximum profit.  The Noven
Pharmaceuticals (NOVN) straddle achieved profitability in less
than one week as the stock dropped below $28.  Our exit target
for July will be approximately a 25% overall credit ($6.50).


Tuesday, July 4

Independence Day - Market Closed


Wednesday, July 5

Technology stocks slumped leading the broader market lower after
a slew of profit warnings and a downgrade of the chip industry.
The Dow closed down 77 points at 10,483 and the Nasdaq ended 128
points lower at 3863.  The S&P 500 Index fell 23 points to 1446.
Trading volume on the Nasdaq reached 1.33 billion shares, with
declines beating advances 2,453 to 1,618.  Volume on the NYSE was
active at 1.0 billion shares.  Broad market advances led declines
1,502 to 1,446.  The 30-year Treasury rose 4/32, pushing its yield
down to 5.85%.


Portfolio plays:

Equity markets slid further today, pressured by lower oil prices
and a weakness in technology stocks.  Corporate earnings reports
also played a major role in the sell-off after three computer
software companies told investors their quarterly revenues would
fall short of previous projections.  Computer Associates (CA) was 
the big loser, falling $21 to $29.50 after it said results would
be far below Wall Street expectations.   Business software maker
BMC Software (BMCS) also warned its profits would be well shy of
expectations and BMC shares dropped $14 to $21.31.  Both companies
cited weakness in sales of software for mainframes as the reason
behind their shortfalls and that announcement sent International
Business Machines (IBM) $6 lower to $104.  Our new credit-spread
strangle is short at $100 and the play should be monitored for a
further decline in the underlying issue.  The chip sector fared
no better after Salomon Smith Barney lowered its rating on four
stocks to “neutral” from “outperform.”  The brokerage cited a
slowdown in unit shipments and chip price declines.  Industrial
stocks also ended lower amid weakness in Exxon-Mobil (XOM).  Oil
stocks languished as oil prices fell sharply on news that Saudi
Arabia may increase oil production by 500,000 barrels per day.
Our long-term (bullish) spreads in Texaco (TX) were affected by
the news and unless a short-term recovery occurs, we will plan to
roll down and forward in each of the positions.  In the broader
market, biotech, healthcare and airline issues were strong while
computer software, semiconductor and oil issues consolidated.

The glut of profit warnings unnerved investors at precisely the
wrong time, just before the start of the second-quarter earnings
reporting season.  Traders are wondering when the effects of a
slower pace of economic growth will begin to weigh on corporate
revenues.  Despite the concerns, analysts say the second quarter 
continues to look robust, with First Call expecting earnings to
grow 19% year over year.  Our portfolio has a number of plays
that will be significantly affected by earnings announcements
and it is safe to say that our outlook is less optimistic than
a few weeks ago.  Those of you that have positions in issues
with upcoming reports should consider the risk versus reward of
holding through the earnings date at a time when companies are
being severely punished for even the slightest indiscretion.
The current issues on our watch-list are Secure Computing (SCUR)
and International Business Machines (IBM).  Both of these stocks
have sold off substantially in the wake of recent announcements
and it remains to be seen whether investors will return to their
enthusiastic ways after the earnings reports become public.  We
can only watch and wait.


Thursday, July 6

Technology stocks recovered but blue-chip issues slumped amid
concerns over quarterly earnings and upcoming economic data.  The
the Nasdaq closed up 97 points on strength in the semiconductor
group but the Dow failed to retain early advances, slipping into
negative territory late in the session.  The S&P 500 Index rose
10 points to close at 1456.  Trading volume on the Nasdaq reached
1.48 billion shares, with winners beating losers 2,080 to 1,871.
Activity on the NYSE was moderate at 947 million shares.  Broad
market advances led declines 1,648 to 1,238.  In the bond market,
the 30-year Treasury fell 23/32, pushing its yield up to 5.90%.


Portfolio plays: 

A rebound in the semiconductor and computer software groups gave
the market a boost today.  The rally in technology issues pushed
the Nasdaq to a recent high near 3900 and helped the industrial
average remain in positive territory for most of the day.  Some
bullish comments from Merrill Lynch bolstered the recovery in
semiconductor stocks.  The brokerage reported that although a
mid-cycle correction seems to be occurring, it’s hard to find
evidence of a real end to the upturn in the industry that began
in late 1998.  Further, they see no evidence of any inventory
problems and their analysis of available wafer capacity for the
year yielded favorable results.  Merrill strongly believes that
the sector will be at new highs before the end of the year and
they told investors to treat any weakness as an opportunity to
build positions at attractive prices.  Some analysts were less
than convinced by the outlook, saying that today’s rally was
anemic considering the magnitude of the recent decline.  Many
experts suggest the industry is poised for further downside and
recent profit-taking appears to support that contention.  Beyond
the semiconductor group, software companies paced the Nasdaq’s
advance after being hammered in the previous session.  Strength
among blue-chips came in defensive growth areas such as major
drugs and tobacco.  The broader market saw buying interest in
oil, retail, and utility issues while on the downside, biotech
and financial stocks consolidated.

Our portfolio enjoyed a number of positive moves with the rally
in technology issues.  The majority of positions are profitable
and only a few plays have been affected by the recent “earnings”
concerns.  Today’s victim was Emulex (EMLX) and shares fell as
much as $12 before recovering ground in the afternoon as traders
attempted to digest a downgrade of the company.  Dain Rauscher
Wessels cut the stock’s rating to a “buy”, saying they expect
flat revenues in Emulex’s hub business for the June quarter.  In
contrast to their rating, the investment firm expects the June
quarter to track ahead of their original expectations and raised
revenue and earnings estimates to $39 million and $0.22 a share.
After positive conversations with several of the firm’s channel
partners, Dain Rauscher said it anticipates strong demand on the
systems integration side as well as healthy growth from some of
Emulex’s key partners.  Hmmm...that doesn’t seem like a reason
to downgrade the stock.  On the bright side, Paine Webber (PWJ)
and Texaco (TX) both rebounded, bringing our bullish positions
on those issues back into favorable territory.  Today’s leaders
were in the Major Drug group with Sepracor (SEPR) up over $7 and
Imunex (IMNX) close behind with a $6 rally.  Aetna (AET), AM/FM
(AFM) and Convergys (CVG) also contributed solid performances.

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

This week I received two requests for new calendar spreads.  When
the outlook for the underlying issue is favorable, the technique
can be one of the most conservative option trading strategies
available to novice traders.  The following plays are based on
well-known companies in favorable industries.  Each position is
evaluated for probability of profit using the current price and
trading range of the stock and the recent technical history or
trend.  News and market sentiment will have an effect on these
issues.  Review each play individually and make your own decision
about the future outcome of the position.

******************************************************************
COMS - 3Com Corporation  $57.19  *** Palm Spin-off ***

3Com is a broad-based supplier of local area network (LAN) and
wide area network (WAN) systems. 3Com's networking solutions
are marketed to large enterprises; corporations, educational
institutions, and government sectors, along with other small
businesses, consumers, and telecommunications and Internet
service providers.  3Com offers a range of products, which are
grouped into two general categories: Network Systems Products
and Personal Connectivity Products.  Among 3coms’s networking
products are switches, hubs, remote access systems, routers,
network management software, network interface cards, modems
and handheld connected organizers.  

Coms has been in rally mode since the company’s publicly traded
subsidiary, Palm, reported a better-than-expected profit in the
fourth quarter.  Earlier this year, 3Com completed the spin-off
of Palm into a Nasdaq issue and following the transaction, 3Com
owned approximately 532 million shares, or 95% of the company.
3Com will spin-off its remaining 532 million shares of Palm to
shareholders on July 27 and the record date for the spin-off is
July 11.  With the option expiration period coming between those
two dates, this position offers an interesting opportunity for
speculation.  Based on the premium disparities in front-month
options, there is a high probability that we can profit from the
time value erosion in the July options, provided the underlying
issue trades in a relatively small range.
  

PLAY (aggressive - bullish/calendar spread):

BUY  CALL  AUG-60  THQ-HL  OI=2004  A=$4.50
SELL CALL  JUL-60  THQ-GL  OI=7526  B=$2.06
INITIAL NET DEBIT TARGET=$2.25-$2.31  TARGET ROI=20%

Chart =

******************************************************************
K - Kellog Company  $29.81  *** Merger Rumors! ***

Kellogg Company is engaged in the manufacture and marketing of
ready-to-eat cereal and convenience food products on a worldwide
basis.  The principal products of the company are ready-to-eat
cereals and convenience food products, which are manufactured in
20 countries and distributed in more than 160 countries.  Kellog
products are marketed under the Kellogg's and Morningstar Farms
names, and are sold principally to the grocery trade through
direct sales forces for resale to consumers.  The company uses
broker and distribution arrangements for certain products, as
well as in less-developed market areas.  In the United States,
in addition to ready-to-eat cereals, the company produces and
distributes toaster pastries, frozen waffles, frozen pancakes,
crispy marshmallow squares, cereal bars and meat alternatives.
The company also markets other convenience food products in
various locations throughout the world.

One of the names that has made the rounds lately as a takeover
target is Kellogg (K) and the company’s options continue to see
high volatility levels.   Volume in the Kellogg call options was
substantially higher than normal earlier in the week and retail
traders continue to speculate on the possibility of a merger or
buy-out.  The optimistic outlook is based primarily on the recent
consolidation in the food industry and Kellogs is also part of
the movement.  Late last month, the cereal giant bought Kashi
Company,  a California-based natural cereal and convenience foods
company for an undisclosed amount of money.  The acquisition of
Kashi will give Kellogg leadership in a growing segment of the
ready-to-eat cereal category.  Kashi is a growing company and is
expected to deliver strong double-digit growth in the year 2000.
The acquisition boosts Kellogg's growing natural foods product
lineup.  Last November, the company acquired Worthington Foods,
the nation's leader in the vegetarian foods category.

This position is based on recent increased activity in the stock
and underlying options.  Although the play offers favorable risk
versus reward potential, it must also be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.


PLAY (conservative - bullish/calendar spread):

BUY  CALL  SEP-30  K-IF  OI=427   A=$2.68
SELL CALL  JUL-30  K-GF  OI=1020  B=$1.12
INITIAL NET DEBIT TARGET=$1.38-$1.43  TARGET ROI=25%

Chart =

******************************************************************
VITR - Vitria Technology  $62.62  *** On The Move! ***

Vitria is a leading provider of eBusiness infrastructure software.
The company's product, BusinessWare, provides the infrastructure
which enables incompatible information technology systems to
exchange information over corporate networks and the Internet.
BusinessWare enables this exchange to take place automatically,
without human intervention.  This eliminates manual entry of
information into multiple IT systems, and eliminates the need to
manually exchange information with customers and business partners
using phone, facsimile or mail.  BusinessWare is designed to
provide business managers with a software infrastructure that
gives them complete control and visibility of their business
operations, enabling them to reduce time to market, rapidly
respond to change, and manage the growing complexity of business
interactions with partners and customers.

Vitria is one of the premier companies in the high profile group
of eBusiness software companies and a number of industry analysts
are bullish on its long-term outlook.  The recent trading range
break-out near $50 defines this position as a relatively safe
play in the volatile Internet sector.  Our position offers a low
risk cost basis with a reasonable expectation of profit.  After
today’s $4 rally, a brief consolidation should occur in the next
few sessions.  With any luck we can increase the credit for the
spread to a favorable amount.  Our initial target will be $0.50
and we will make adjustment based on tomorrow’s opening prices.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-45  TKU-SI  OI=470  A=$0.75
SELL PUT  JUL-50  TKU-SJ  OI=82   B=$1.12
INITIAL NET CREDIT TARGET=$0.50  ROI(max)=11% B/E=$49.50

Chart =




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