Option Investor

Daily Newsletter, Thursday, 07/20/2000

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The Option Investor Newsletter                 Thursday 07-20-2000
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MARKET WRAP  (view in courier font for table alignment)
        07-19-2000        High      Low     Volume Advance/Decline
DJIA    10843.90 +147.80 10874.60 10700.70 1.06 bln   1698/1137
NASDAQ   4184.56 +128.93  4184.56  4106.63 1.70 bln   2214/1773
S&P 100   812.99 + 10.04   814.73   802.71   totals   3912/2910
S&P 500  1495.47 + 13.51  1501.92  1483.90           57.3%/42.7%
RUS 2000  534.75 +  6.89   534.82   527.86
DJ TRANS 2794.06 - 11.67  2841.03  2789.27
VIX        22.06 -  0.46    22.80    21.41
Put/Call Ratio       .46

Buyers Return! But Will It Last?

The markets rallied today, but a fresh dose of earnings reports
after the market today may bring post-earnings selling back
on Friday.  Check out some of the names that turned in their
report card after the close...AOL, SUNW, BVSN, INKT, SCNT, TQNT
and SDLI.  And some of numbers were impressive to say the least,
especially from the big boys like AOL and SUNW which we will
cover in more depth below.  Today typically puts us over the
hump relative to the number of major companies left to report
and brings about the mid-July slump.  It's time to see if this
trend will hold once again.  So far we've had a sideways-to-
up market for the past two months and have been able to avoid
the major dips.  The question on every traders mind...Can we
avoid a major dip in the next couple weeks?

Alan Greenspan spoke before Congress today and markets didn't
seem to mind.  His comments again suggested that inflationary
expectations remain modest outside of energy prices and that
demand is moving more into line with supply, suggesting that
imbalances in the economy are being corrected.  He said,
"Aggregate demand may be moving closer into line with the rate
of advance in the economy's potential."  But we aren't out of
the woods just yet because Alan loves to sit the fence as he
does with this statement..."it is much too soon to conclude that
these concerns are behind us."  All in all, the comments were
mild and the markets didn't use it as a reason to sell-off.

In fact, investors decided to end the two-day slide on the
Nasdaq and turn in a 3.17% rally.  The Composite finished at
4184.56, up 128.93, on good volume of 1.70 billion shares.  Most
of the gains took place in the first hour, but it managed to
hold those gains for the entire session, slowly moving higher,
and end right at the day high.  This puts the index back above
the all major moving averages after a successful bounce off the
100-dma on Wednesday.  It's nice to see those gains come on
stronger volume as well.  The challenge now will be to see if
the techs can rally this index past resistance between 4215 and
4290.  A move over 4300 would be shocking and would have to be
considered bullish.  Some analysts are sticking out their necks,
saying the Nasdaq will rally to the April 10th high of 4475.
A move over 4290 and that could easily be tested.  Although, you
are likely to find a barrage of sellers at that higher level.

The Industrials also took to the skies today on the Greenspan
comments, back over 10,800 again.  This index has alligator's
blood of late as it continues to rally.  It has only had two
down days in the past ten sessions.  Today saw a gain of 147.79
to 10,843.87.  Volume crept over 1 billion shares too.  I am
hesitant to scream bull market knowing where we are in mid-July,
but you have to be impressed with the DJIA lately.  The chart
below shows today's close is actually above the closing highs
of early June.  This is a bullish sign for the big 30, which
was helped to gains today by a positive move in IBM and the

Another major story that helped to lift the markets today was
JDS Uniphase, which was added to the S&P 500.  This helped the
stock surge by 20% during today's trade.  They will be replacing
Rite Aid after the market close on the 26th.  This helped SDLI
(who JDSU is acquiring) put on a cool $68.44 to end at $428.06.
SDLI also reported earnings after the market close today and
beat the street by reporting $0.33 cents a share.  The stock
was trading down slightly after-hours to $423.

SUNW appears to be the big earnings winner.  The estimate was for
$0.33 and they turned in $0.39.  That is a whopper of a number
and SUNW is rallying sharply after the regular session close of
$98.06.  You know our rule of never holding over earnings because
seven out of ten companies will drop.  Well, this is going to
be one of the three that likely go up tomorrow.  SUNW is currently
at $103.88.  "In every important metric, including market share
gains, we had in incredible quarter," said Scott McNealy, Sun's
chairman and chief executive in a statement. "Sun's position
as one of the Internet's leading innovators has never been

America Online was a close second though as they reported numbers
that pleased most analysts.  AOL reported net income of $334 mln,
or $0.13 cents a share, surpassing estimates of $0.11 cents.
That's also up from 7 cents a year ago and 11 cents in the
previous quarter.  There were some cause for concern though as
ad and commerce revenue came in below the highest expectations.
But AOL did add 992K net new subscribers, slightly ahead of
Henry Blodget's forecast of 987K.  AOL was down from it's $61.56
close to about $59 in post-session trades.

Unfortunately for Agilent Tech, there is always a daily loser.
They get to wear the crown today with an earnings warning
released after the close.  According to a company statement,
demand is extremely strong, but the company does not have the
capacity and parts to fulfill the demand.  The company also
said demand in the healthcare-solutions business remains weak,
particularly in the U.S. patient-monitoring market.  "Results
in our healthcare business are simply unacceptable," said Robert
Walker, executive vice president and CFO.  "Overall market
demand continues weaker than we anticipated, and we're not
expecting near-term improvement in market conditions.  While
we've taken some actions already, it's clear that additional
actions are required, and we'll be making announcements in
this area in the next few weeks."  That is not the most
inspiring comment to ever flow from a CFO's mouth and the
stock will likely get whacked tomorrow.  The current indication
is for Agilent to open around $55, down from a close of $73.

I could go on and on about the earnings reports tonight, but
there are just too many.  We will just have to see how all
these numbers shake out in the morning.  SUNW will have the
greatest impact to the upside if it holds some of these after-
hours gains, as much as $7 at one point.  But AOL is dipping
slightly after their good number.  My feeling is we will get
a mixed response amongst the individual stocks, but Nasdaq
may come under selling pressure again.  Remember, seven out
of ten of these companies reporting will drop, if only for
a couple of days.  That gives us the downside bias.

The Industrials are another story.  This index doesn't seem
to care about what it is "supposed" to do.  Onward and upward
is it's motto of late.  Fair enough, we won't argue the trend.
Besides it is only 30 stocks.  Hopefully though, it's strong
sentiment will bring investor attention back to the markets
and carry the Nasdaq higher (the market we really care about).

The VIX closed again near the low end at 22.06.  It has been
holding down near the sell signal for a couple weeks, which is
interesting in that it did the same thing last year right before
the market rolled over into a major decline.  The VIX quickly
spiked up to 30 by months end.  We could have the same thing
setting up again.  Don't get too comfortable with it being able
to sustain this level.  Tomorrow should be a key day to see how
stocks react on July expiration.  I will be taking the market
at face value.  A sell-off being negative for next week and a
rally being somewhat positive, with the former being more likely.
Prepare a plan and trade accordingly.

Ryan Nelson
OI Editor

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Fresh Hors d’oeuvres At The Party
By Austin Passamonte

Zzzzzzz... oh, good evening! I must have nodded off for a bit.
Last thing I remember, Greenspan was answering questions
about the economy. Did I miss him disclose August rate hike
plans? Let me clear the dictionary & thesaurus off my lap and
we’ll begin with fresh data.

Nothing for bulls to complain about today. This was the kind
of earnings-week performance they fantasize about. Pick the
right stock yesterday, catch the rotation and it’s off to the
races. Want to get in on tomorrow’s action? Better have placed
your bets tonight prior to close, beating the gap-up on tomorrow’s
open for the next hot plays of the day.

Not much new in either direction to cover so we’ll be brief.
Our summer rally remains alive & well. The party Jim spoke
about in Saturday’s Market Wrap had the food trays looking
kind of peaked and all the top-shelf drinks were drained
the past two days. IBM, JDSU and others made a late-night
supply run that kicked festivities back to high gear today.
Still looks favorable from here.

If only the VIX weren’t sagging this low. It’s been around 22
for so long, can’t we just ignore it? I wouldn’t do that
Sparky! Interesting to see how it moves on Monday when OEX
options contracts reshuffle. The blended-average used to
gauge the VIX has a 30-day mean calculation as it’s base,
but I’ve noticed slight fluctuations in value after each
recent front-month rollover. Perhaps a reading then might
waver a bit in either direction.

Ride the rally while it lasts. Maybe this one truly has legs
lasting deep into the summer. An August Fed meeting with no
further increase might surely do the trick. Few traders would
buy the "ever-vigilant" bluff no matter how strongly it was
worded from there. That’s not to say it will be all up the
charts between now and then. The next two session’s action
will be critical. Further strength on strong volume will be
needed to quash seasonal summer sell-off patterns after July
expiration Friday. We’ll know more next Tuesday.

Calls and puts, puts and calls. Regardless which direction,
thank heavens the markets are moving once again!


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.

Tues 7/18 close: 22.55              Thur 7/20 close: 22.06

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         Sat
Strike/Contracts            (7/18)      (7/20)       (7/22)

CBOE Total P/C Ratio         .51         .46
Equity P/C Ratio             .45         .40

Peak Volume (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        Sat
Strike/Contracts     (7/18)        (7/20)      (7/22)

All index options     1.46          1.05
OEX Put/Call Ratio    1.39           .93

OEX Maximum Open Interest Strikes/Contracts:

Puts                  800/6,839      800/7,371
Calls                 825/16,857     825/14,660
Put/Call Ratio          .41             .50

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:               (7/18)       (7/20)    (7/22)

Overhead Resistance:
(840 - 820)               25.27       168.76
(815 - 800)                 .93          .95

OEX Close:                 807          813

Underlying Support:
(800 - 785)                1.75         2.08
(780 - 760)                5.18         5.86

What the S/R measure indicates: Net open-interest ratios
are astronomical above 820 OEX level while underlying
support is light until 780. The OEX has downside pressure
from 820 with growing upward support from 780. A large move
in either direction seems unlikely until option expiration.

The OEX appears to remain between 800 and 820 near-term
for discretionary spread or directional play consideration
if the index nears these benchmarks of support/resistance.

30-yr Bond:           5.91%            5.81%

Light, Sweet
Crude, Barrel:      $30.64            $30.50

200 Day Moving Average (as of 7/17)
The 200 DMA is widely considered the major benchmark for
critical support in a market.

DOW;   10,750          10,739*         10,843
NASDAQ; 3,831           4,177           4,184
NDX;    3,551           3,960           3,995
SPX      1417            1493            1495
OEX       762             807             813

CBOT Commitment Of Traders Report: Friday 7/14
Biweekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the
Chicago Board Of Trade. Small specs are the general trading
public with commercials being financial institutions.
Commercials are historically on the correct side of future
trend changes while small specs are not. Extreme divergence
between each signals a possible market turn in favor of the
commercial trader’s direction.

                  Small Specs    Commercials
DOW futures
Net contracts;    +326 long        +59 long
Total Open
Interest %        2.3% net-short   .4% net-long

Net contracts;    +6,183 long      -10,731 short
Total Open
Interest %        4.9% net-long    11.9% net-short

S&P 500
Net contracts;    +36,908 long      -44,272 short
Total Open
Interest %        9.8% net-long    11.8% net-short


Broad Market Strength:
Major indices showed strength today on rally with high volume.

Interest rates
5.81% on the 30-year Treasury Bond may be signaling the rate
fears are over. Fed-Fund futures are pricing a 50% chance of
one or more rate hikes, .25 basis at this time.

Corporate Earnings
Last quarter earnings expected to be very strong, especially
for the tech sector. Major stalwarts in the Dow and NASDAQ
began the three-week session last week. Many issues beating
the street with a majority still to report.

Recent IPO’s have been met with positive enthusiasm.



Today’s close near 22.06 still warns of impending market top

Energy Prices
Prices are still too high. Ultimately this affects profit
margins and inflation. August Crude closed $30.50 today.
Seasonal energy patterns typically bottom by late summer,
but heating & fuel oil expected to be very high this fall.

COT Report
Latest updated figures show small spec traders heavily
long S&P 500 contracts while commercial traderss continue to
build five-year extreme short position. Widening divergence
in NASDAQ 100 futures market with commercials becoming heavily
net-short. Divergence suggests possible market turn in favor
of commercials soon.

Seasonal Tendency The last two years have seen expiration
Friday result in market decline through fall. Next few session’s
strength will be vital to prevent this.


As of Market Close - Thursday, July 20, 2000

                                  Key Benchmarks
Broad Market           Last     Support/Resistance   Alert

DOW Industrials      10,843      10,550  10,950       **
SPX S&P 500           1,495       1,435   1,520
OEX S&P 100             813         775     822
RUT Russell 2000        534         500     550
NDX NASD 100          3,995       3,580   4,100
MSH High Tech         1,056         965   1,100

XCI Hardware          1,574       1,440   1,600
CWX Software          1,263       1,160   1,360
SOX Semiconductor     1,146       1,060   1,281
NWX Networking        1,333       1,250   1,400
INX Internet            588         470     637

BIX Banking             566         540     580       **
XBD Brokerage           566         500     590
IUX Insurance           652         610     660

RLX Retail              919         860     960
DRG Drug                387         385     430
HCX Healthcare          802         800     880
XAL Airline             168         156     178
OIX Oil & Gas           286         285     315

Comments -  DOW broke resistance of 10,850
            BIX broke resistance of 565

Support Revisions    (DOW, NDX, NWX, BIX, XBD, XAL)
Resistance Revisions (DOW, BIX, XAL)


Someone Turned On The Furnace This Summer
By Molly Evans

Don’t even try to figure it out.  The market just is.  You can
study it, have light bulbs turn on in your brain, feel like
you know what you’re doing but then it’s still going to make
a mockery of you.  If all of those people who dumped shares
yesterday believed prices would go up even further today, no,
they wouldn’t have wouldn’t have done that.  Don’t feel bad.
(yeah, right!)  Afterall, the sell signals had been generated
and folks have been clobbered with warnings that the summer is
typically less than a favorable time for the markets.  It’s been
a smart trader’s dream and an investor’s stomachache.  The rally
continues on with but a slight stumble the past couple of days.
Let’s recount the numbers.  After advancing nearly 7% the first
two weeks of the month on the Nasdaq, the composite fell back from
an escalated trend back to the one it's been on since it gapped up
the second of June.  With the retracements of the previous two
days, the composite was up 2.3% and the Dow up 2.4% on the month
(as of yesterday's close).  The S&P 500 had been really cooking
along well too, up 3.8% for the first half of the month but as of
the close yesterday, it had a haircut to half of that.  Now, today
comes along and we’re back up 3.8% on the Dow, 5.5% on the Nasdaq
and 2.9% on the S & P.  And how about June huh?  Huh, huh??
The Nasdaq climbed 16.6%.  Wasn’t everyone asking when we would
get on with a summer rally?  In my book, that spells R-A-L-L-Y.
Aargh!  Sorry, I can’t help it.  But, didn’t I just say, "The
market just is"?  So that’s it, the up to the date score.

The last time we talked, this escalated rally was just getting
started and I mentioned that I’d discuss the seasonal cycles of
market movements.  As promised, this passage will discuss the
historical swings of the markets during the third quarter or more
specifically, July, August and September.  First, if, as an
investor, this summer's gyrations in the indices and individual
stocks has you reaching for the Mylanta bottle, here's a sound
piece of advice but one I know you’ll never take.  I’ll say it
anyway for the effect though:  just go to cash and come back in
November.  Some investors have a strict discipline to participate
in the stock market at only certain times of the year.  The best
six months to be invested are November to April.  This has been
tested and postulated to be the best ever mechanical system to
investing.  The "2000 Stock Trader's Almanac" put out by The Hirsch
Organization at www.stocktradersalmanac.com has a nice summary of
what this would have returned on the S&P since 1950.  If one had
taken $10,000 and invested it for just those six months every year
from 1950, by the end of the 1998 period studied it would have
grown to $776,390.  On the contrary to that, if the same $10,000
had been invested in like fashion for the months of May through
October, 1950 - 1998, only $9808 would remain.

Markets do rally in every season of the year.  However, as our
markets had taken such a beating and experienced wide swings in
sentiment in the spring, this summer's rally was especially hoped
to have broad shoulders to lift the outlook and portfolios of all
its participants.  Historically, however, the typical summer rise
in U.S. indices is the weakest of all seasonal high tides.
Election years do their part to cloud the picture a bit too so it
would be remiss not to include those statistics where they are
applicable.  For example, that worst six-month period each year
that I discussed previously is less bad in election years.

Since 1950, the first month of each of the first three quarters
has been the most bullish for the S & P composite.  Hirsh reports
that the average return for that first month of each of these
quarters has been 1.47% on average.  The average second month has
been only 0.17% and the average third month has been 0.33%.  For
the Dow, and dating back to 1991 this time, the gains have been
even better.  The first month's average return was 2.46% while the
second and third months managed only 0.57% and 0.97% respectively.
This takes care of nine months but the fourth quarter behaves
differently as it is affected by year-end portfolio adjusting and
of course, the elections in even numbered years.

When one starts delving into these numbers for return on any
one month, it does get messy.  Resources used to compile this
report have a number of ways of looking at the data.  The time
frames are the most significant factor for discerning how a
particular month has behaved.  Since 1915, July has been the
second strongest month after December for the Dow.  But from the
days of our bull run, 1982 until 1999, July is only the fourth
best month, behind December, January, and April respectively.
Then, to complicate the picture even further, July has been the
worst month in election years.  It's been a down month six of the
last eight election years.  It remains to be seen whether or not
the topping of the three major indices was July 17, 2000 as it
was in both 1998 and 1999.  Last year at this time, the Nasdaq
fell 13% until mid August but then reversed to tack on those
stellar gains we all watched with wide-eyed wonderment.  In 1998,
the Nasdaq plummeted 30% until it caught an updraft in October
and regained all of that and more too.  Actually going back on
the Nasdaq weekly charts to 1991, one finds that summer, on the
average is more a time of consolidation and modest gains.

Before we get ahead of ourselves, we must look at August.  Back
in 1900, Hirsch notes that 35% of the population was farming and
the money flow from their harvests made August a terrific month
for the markets.  However, only 2% of our population is involved
in farming now and August is the second worst month for the S & P
and is the worst month of the year for the Dow.  You can probably
vividly recall that the shortest bear market in history ended in
August of 1998 with the composite down 14.6%, the Dow down 15.1%
and the Nasdaq strangled with a 19.9% decline.  The bear markets
of 1982 and 1984 likewise ended in August but consequently
witnessed their best gains (11.5%) and (9.8%) in that month.
Worthy of mention here is that there is a "Post-Convention-to-
Election-Day Forecaster."  Supposedly the direction of the Dow
reflects voter sentiment from the close of the last convention and
the Election Day.  Hirsch reports that of the sixteen presidential
elections since 1900, where the incumbent parties were victorious,
rising stock prices were observed in fourteen or 7/8 of those
periods.  Those two exceptions were minor down too - (-0.5%) in
1948 and (-2.3%) in 1956.  When the incumbent party is on its way
out, six out of nine times or 2/3 the markets declined.  The
Democratic National Convention will end on Thursday August 17th.
Perhaps the markets like stability you think?  One more point
about August is this:  after a series of interest rate raises by
the Fed in 1994, the summer session rallied very nicely through
out the whole summer, consolidated, corrected and then blasted
into 1995.  This year has often been compared to the climate of
the markets as they were in 1994.

What should we say about September?  My little almanac says,
"Last two days of August murderous three years in a row."  But
then says, "September opens strong four years in a row."  What
a welcome!  Furthermore, "Day after Labor Day up five straight
years, after five losses in a row."  That will fit right in to
this market.  Play for the day and/or live and die by the
particular day.  Up, down, up, down.  You know what I'm talking
about.  So what do we say about September as a whole then?  It's
the biggest loser for the S & P for 49 years but the last four
have all been positive.  Not stellar, just slightly positive.
Since 1915, September has been a negative month on average for
the Dow but has slightly improved that performance since 1982 to
a barely positive number.

It's all well and good to look at the market in terms of seasonal
cycles but the story that remains is the Fed, the economy, and
corporate earnings.  The interpretation of those pillars is
what ultimately and decisively determines the market direction.
The particular days and the weeks that go by are but minor
factors to the overall tenor of the market.   It can fire up in
August just as it can plummet in December.  Afterall, the market
just is.

Contact Support


The More Things Change, the More They Remain the Same
By Buzz Lynn

No changes tonight in our lineup, but we'd suggest caution going
into Friday.


Index             Last    Mon    Tue    Wed    Thu    Fri    Week

QQQ NASDAQ-100    99.44   1.06  -2.69  -2.88   2.25   0.00  -2.25
HHH Internet     121.56   0.44  -1.88  -2.06   5.88   0.00   2.38
BBH Biotech.     183.25   4.06   1.13  -6.88   1.19   0.00  -0.50
PPH Pharm.        95.81   2.75  -1.25  -0.69  -2.19   0.00  -1.38
TTH Telecom.      73.69  -1.94   0.06  -0.63  -1.06   0.00  -3.56
IAH I-net Arch.  100.75   1.38  -2.38  -1.19   5.25   0.00   3.06
IIH I-net Infr.   66.00   0.06  -1.19  -3.38   4.75   0.00   0.25
BHH B2B           51.69  -0.19   1.00  -4.00   2.75   0.00  -0.44
BDH Broadband     97.63   3.06  -3.63  -2.25   0.31   0.00  -2.50
SMH Semicon.      93.44   1.63  -4.56  -3.50  -1.69   0.00  -8.13
RKH Reg. Banks   100.00  -1.69  -1.38   1.25   2.25   0.00   0.44
UTH Utilities     94.00   0.06   0.06   1.63  -0.75   0.00   1.00


QQQ - NASDAQ 100 $99.44 +2.25 (-2.25 this week) Home, home on the
range?  QQQ remains in the $97 to $102 neighborhood, with a bullish
twist following today's action.  Along with earnings comes the
"sell the news mentality".  That's exactly what investors did
yesterday on INTC's and MSFT's earnings news from Tuesday night,
despite their moves up after hours on Tuesday.  While we thought we
might see a nice bounce from previous support at $99, it was not to
be as QQQ groped for previous support at $97.50 before finally
heading up again at $96 yesterday.  That was about $1 higher than
what we thought might be the next level of support at $95 - nicely
bullish.  So if you didn't buy the dip yesterday on the bounce up
into the close, today's gap open in the $97.50 range looked pretty
good by the end of amateur hour for an entry into a number of our
listed positions.  Greenspan's dove-ish testimony on Capitol Hill
today also seemed to convince investors that inflation is under
control and that future rate hikes are less probable (but not out
of the question).  That's a sentimental change to the bullish side,
and can be readily seen in the VIX, which went as low as 21.41
today.  We may be getting close to a market reversal given the
overly bullish tone of the VIX, but until then, the market should
try to hang on for at least another eight seconds.  Then it will be
time to send in the rodeo clowns to protect the cowboys.  While it
may sound like we're talking out of both sides of mouth, tomorrow
is Friday and subject to some pullback as traders close positions
in order go home flat for the weekend.

Short Strangle:

While Tuesday's close looked like a potential entry to us, little
did we know that yesterday' move down on the NASDAQ would have made
an even better entry.  Thus you can see the risk of trying to leg
out of positions if you are wrong on the expected market direction.
Buying back a lower short put and reselling a higher short put
would have been painful.  Nonetheless, $97 to $102 seems to be
holding as the current trading range making the short strangle
still an attractive play.  We still like the position as time value
continues to decay.  However, there appears to be a bit of a
bullish tinge as noted above, which could keep QQQ moving up during
this earnings season.  So be prepared to roll up on your short
calls if need be.  That said, $101.66 (backed up by $102
resistance) is the top level of the Bollinger band and could have
QQQ moving back down again.  You could play the 97P/102C however,
given the bullish investor bias, we're sticking with the 98P/103C
for listing purposes.

SELL CALL AUG-103 QVO-HY OI= 158 at $ 3.75
SELL PUT  AUG- 98 QVQ-TT OI=3719 at $ 3.88

Net Credit = $ 7.63 or better
Stop Loss  = $10.25

Covered Call:

QQQ dipped under the $97.50 support level yesterday, but regained
support at $96 - better than the anticipated $95 level of the past
support.  So did you take advantage of the buying opportunity?  Not
to worry.  QQQ appears rangebound between $98 and $103.
Greenspan's comments today went a long way to adding back a bullish
tilt.  That said, $102 looks like the next level of resistance.  If
you have the stomach to leg in (first buy the stock low, then sell
the call high), feel free.  Otherwise, the trusty buy/write, where
you simultaneously do both, should do the trick.  Just remember to
close your position if your position value falls below your
personal threshold of pain.  That should not be too far under your
net debit cost.  Support is still at $97.50 over the near term.

QQQ = $99.44

SELL CALL AUG- 98 QVQ-HT OI= 1272 at $ 6.38, ND = 93.06 or less
SELL CALL AUG-100 QVO-HV OI= 6250 at $ 5.25, ND = 94.19 or less
SELL CALL AUG-103 QVO-HX OI=  158 at $ 3.75, ND = 95.69 or less

Calendar Spread:

Almost the same as a covered call, except that you DON'T want to
get called out of your long underlying call.  The objective here is
to sell a new strike every month using the collected premium to
reduce the net cost of the underlying position to zero.
Ultimately, it's paid for and additional premiums are gravy.  That
can't happen if you get called out.  So it's important to buy the
front month short call back when the time premium gets really low.
That's usually just before expiration or whenever the premium moves
deep into the money.  While you may be paying more to buy it back,
remember your long position has been gaining an equal or greater
value too as the stock has moved up.  Support is $97-$98.  Resistance
is $102-$103.

BUY  CALL DEC- 94 QVQ-LP OI= 1597 at $16.50

SELL CALL AUG- 98 QVQ-HT OI= 1272 at $ 6.38, ND = 10.13 or less
SELL CALL AUG-100 QVO-HV OI= 6250 at $ 5.25, ND = 11.75 or less
SELL CALL AUG-103 QVO-HX OI=  158 at $ 3.75, ND = 12.75 or less

Long Calls

As we noted Tuesday, we considered the pullback to $99 to be a
buying opportunity to go long on calls . . that is unless investors
change their minds on the INTC and MSFT earnings announcement,
which they did in fine fashion yesterday.  $97.50 support we were
looking for was violated to the downside, however was quickly found
at $96 rather than the $95 we'd expected.  Still we suggested
walking away at $97.50.  Any guess as to what happened after
amateur hour today?  Right!  A recovery to $97.50 that held and
moved up.  There's a definite bullish bias now, which could make a
good entry at even the current level.  Intraday support is $99, but
we might be inclined to wait for $97-$98 to show up again.

At Support:
BUY CALL AUG- 98 QVQ-HT OI= 1272 at $6.75 SL=4.75
BUY CALL AUG-100 QVO-HV OI= 6250 at $5.38 SL=3.25

Naked Puts

Nothing's changed here since Tuesday.  "We're thinking that while
this is a buying opportunity for calls, it may also be a selling
opportunity for puts.  $95 is excellent support as is $97.50 during
this earnings season rally.  If you are patient and have to stomach
to endure gyrations (a.k.a. risk tolerant) while you allow time
value to shake out of AUG strikes, you might even consider selling
AUG-100 strikes (ATM)".  Except, now July is over.  We need to move
to August strikes.

SELL PUT AUG- 95 QVQ-SQ OI= 2109 at $2.88 SL=4.50
SELL PUT AUG- 97 QVQ-SS OI=  874 at $3.50 SL=5.50
SELL PUT AUG-100 QVO-TV OI= 2768 at $4.75 SL=6.75

Average Daily Volume = 24.77 mln


BBH - Biotech $183.25 +1.19 (-0.50 this week) Ugly as this may
initially look on the chart, we're going to let this one ride into
the weekend for technical reasons.  It's iffy, but potentially
playable.  Note the support in the $182 to $184 range.  BBH is
right in the middle of it.  Second, note the quasi-doji (literary
license) on today's candlestick indicating a possible reversal.
That was coupled with almost twice the daily volume, which also
usually means a reversal.  It's an indicator that many investors
rushed in to support the price as many others were exiting.  This
could in fact be an entry level.  Watch $182-$184 carefully for a
move over $184 to confirm the move.  But before you put your market
order in to buy first thing in the morning (just kidding, don't do
that), realize there is a very real possibility of further decay.
Note the descending wedge pattern over the last six trading days,
which could portend a breakdown.  It doesn't look good.  At this
point, if you haven't already been stopped out, consider moving up
the price of your stop.  A break under $182 would be our cue to
walk away.

BUY CALL AUG-180 BBH-HP OI= 34 at $14.50 SL=10.75
BUY CALL AUG-185 BBH-HQ OI= 62 at $11.88 SL= 9.00
BUY CALL AUG-190 BBH-HR OI= 95 at $ 9.50 SL= 6.50

Average Daily Volume = 605 K


HHH - Internet $121.56 +5.88 (+2.38 this week) Tough to tell if
that was an entry yesterday.  But it probably was given the selloff
in the rest of the market while HHH maintained itself at support.
Recall we were looking for the 30 and 50-dma to act as support.  It
happened yesterday on a doji candlestick formation, indicating a
bottom may have been formed.  From there, it has risen into
resistance territory at $122 largely on the strength of YHOO, EBAY,
INKT, and EXDS.  While the sentiment looks positive going forward
from here, exercise some caution since the candlestick pattern is
mashed at the high side of the Bollinger band indicating a possible
reversal.  Volume was low today too.  It may make some sense to
tighten up your stop.  On the other hand, if HHH can hold this
level and move over say $123 with increased volume, the next likely
level of resistance would be $128.

BUY CALL AUG-115 HHH-HC OI= 41 at $11.88 SL=8.75
BUY CALL AUG-120 HHH-HD OI=212 at $ 9.00 SL=6.25
BUY CALL AUG-125 HHH-HE OI=119 at $ 6.75 SL=4.75

Average Daily Volume = 928 K


BDH - Broadband $97.63 +0.31 (-2.50 this week) We noted Tuesday's
ugliness and suggested that LU could make this sector look really
ugly.  Bingo!  LU, which makes up around 25% of BDH dropped $10
today on an earnings warning, yet BHD gained.  JDSU and thus SDLI
saw spectacular gains on news that JDSU would be added to the S&P
500.  LU problems are strictly Lucent's and we think the worst may
be over for them.  That would leave the sector free to move up on
strength in the optical end - something we expect since JDSU has
pre-announced that they will beat the street's loftiest estimates.
With LU perhaps bottomed, and BDH at support at its 10-dma of
$75.80, look at dips to $96, or any move over $98 (a former level
of resistance) as a potential entry.

BUY CALL AUG- 95 BDH-HS OI= 41 at $ 7.88 SL=5.75
BUY CALL AUG-100 BDH-HT OI= 39 at $ 5.25 SL=3.25
BUY CALL AUG-105 BDH-HA OI= 35 at $ 3.50 SL=1.75

SELL PUT AUG- 95 BDH-TS OI= 30 at $ 4.25 SL=6.25

Average Daily Volume = 153 K


IAH - Internet Architecture $100.75 +5.25 (+3.06 this week) Absent
Lucent in this sector of bandwidth development, IAH faltered with
the rest of the NASDAQ yesterday, but boomed ahead today finding
support at $97 and breaking out to a recent new high.  While that
looks great, this level is also a former level of resistance that
could push IAH back down to $97 support again.  Again, we'd
consider that a target shooting opportunity.  A clean break over
$101 would also give us the entry sign and set IAH up to test the
next level of resistance at $105.  It's blue sky breakout from
there.  Still it pays to be somewhat cautious - SUNW reports
earnings tomorrow after the bell.  It could put a drag on the whole
sector though we think that's unlikely to happen since even IBM,
who has struggled lately, also beat estimate.

BUY CALL AUG- 95 IAH-HS OI=54 at $7.63 SL=5.50
BUY CALL AUG-100 IAH-HT OI=21 at $4.63 SL=3.00
BUY CALL AUG-105 IAH-HA OI=42 at $2.50 SL=1.25

Average Daily Volume = 153 K

No Play


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Index      Last    Mon     Tue     Wed     Thu    Week
Dow    10843.87  -8.48  -64.35  -43.84  147.79   31.12
Nasdaq  4184.56  28.49  -97.50 -121.54  128.93  -61.62
$OEX     812.99   2.23  -10.56   -4.24   10.04   -2.53
$SPX    1495.47   0.52  -16.75  -11.78   13.51  -14.50
$RUT     534.75   2.55   -8.90   -8.42    6.89   -7.88
$TRAN   2794.06 -18.77   -0.90  -93.64  -11.67 -124.98
$VIX      22.06  -0.55    0.49   -0.03   -0.46   -0.55


ARBA     133.88  -1.21    3.75   -0.94    8.31    9.91  New
MRVC      78.56   2.19   -4.81    7.81    0.75    5.94  Lovely
HGSI     159.00   6.13    2.44  -11.06    8.25    5.75  Intact
VRTX     118.50   5.31    2.31   -6.81    2.69    3.50  7/25 earn.
SCMR     140.00  11.88   -7.94   -7.06    4.94    1.81  Popped
DISH      44.63  -0.69   -1.88   -0.13    3.13    0.44  New
NT        78.75   0.75   -2.13   -1.31    2.25   -0.44  Steady
CREE     148.00   1.66   -3.72   -2.50    3.38   -1.19  Light volume
PRSF      67.81   1.13   -0.69   -9.13    6.13   -2.56  Dropped
BRCD     201.81   3.75   -6.81  -10.38    9.31   -4.13  Recovered
AMSC      52.25   1.44   -5.22   -0.72   -1.50   -6.00  Dropped
CFLO      76.63   1.00   -4.81    3.81   -6.38   -6.38  Profit take
GSPN     138.03  -0.25   -6.63   -9.81    8.72   -7.97  Entry point
KANA      60.00  -2.25   -5.38   -6.19    3.38  -10.44  Reports 7/27
TIBX     116.44  -2.00   -8.44   -3.13    3.00  -10.56  Coming back
CMTN      89.63   8.44  -29.50    1.13   -5.69  -25.63  New


CMOS      46.00   2.56   -2.88   -6.31   -3.69  -10.31  New
AETH     176.50  -2.94  -13.38    1.94    9.50   -4.88  Drifting
CHV       80.00  -1.06   -1.22    0.50   -1.94   -3.72  Looks good
GTW       63.13  -1.31   -1.56    0.25   -0.63   -3.25  Rolled over
IP        34.06   0.44   -0.72   -0.69   -0.56   -1.53  Declining

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.


PRSF $67.81 +6.13 (-2.57)  Dead cat bounce?  Yesterday, PRSF
followed the NASDAQ down, selling off $9.13, or almost 13%.  It
came on strong volume and sliced through the 5-dma and 10-dma
support like a hot knife through butter.  In doing so, PRSF also
made a clean break from its uptrend channel.  PRSF also broke
through support at $67.50 on Wednesday, which we mentioned as a
key level in Tuesday's update.  Today, the stock bounced but on
lower than average daily volume, finding resistance at the 5-dma,
currently at $68.50.  Considering Wednesday's expansive breakdown
on stronger volume, we will exit this play on the bounce today.

AMSC $52.25 -1.50 (-6.00)  After declining for most of the week
on NASDAQ weakness, AMSC finally popped up this morning on solid
volume.  If you jumped in yesterday when the stock was bouncing
on the $54 support level, today’s early move gave a nice, albeit
small profit.  Unfortunately, there was an oversupply of sellers
and AMSC gave back all its gains, and then some, by the close.
In light of the strength on the NASDAQ today, it was rather
disheartening to see our play unable to hang on to its gains.
Earnings are confirmed for next Thursday, but the stock’s lack
of staying power forces us to drop AMSC tonight.


No dropped puts today.

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This newsletter is a publication dedicated to the education
of options traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock or option but an information resource to aid the
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The Option Investor Newsletter                 Thursday 07-20-2000
Copyright 2000, All rights reserved.                        2 of 2
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GSPN $138.03 +8.72 (-7.97)  Thanks for the entry point!  On
Tuesday, we mentioned $127.50 as a strong line of support for
the stock and a bounce off that level would be an excellent
entry point.  The very next day the stock moved down in sympathy
with the broader market on light volume.  Finding a bottom at
exactly $127.50, the stock bounced closing slightly higher at
$129.31.  Today, the stock gained back almost all of yesterday's
losses.  GSPN may be volatile, but it is behaving as expected,
finding support at anticipated areas and any moves down are on
light volume.  This test of its breakout support level was not
only healthy, but provided aggressive traders with a great trade.
Look for $140 to be a strong level of resistance, which is also
near where the 5-dma currently resides.  A breakout over $140
with conviction is the target for the conservative with the next
resistance level at $150.

CFLO $76.63 -6.38 (-6.38) Despite the sweeping rally in the Tech
sector Thursday, CFLO slid lower.  The positive profit report we
were looking for was delivered by CFLO's peer, FDRY, late
Wednesday evening.  The fellow cache-making company blew past
estimates which resulted in a harsh round of profit taking.
Unfortunately, the heavy selling in FDRY spilled over into our
play Thursday.  The good news is that CFLO's major support level
at $75 held strong.  The stock dipped below that level late in
the day only to rally back above $75 to recover lost ground.  The
strong showing near the close of trading Thursday might be an
indication of a quick rebound heading into the weekend.  After
enduring a week of heavy profit taking thus far, traders might be
ready to bull CFLO going into the weekend.  The volume was
particularly heavy Thursday, so we'll want to watch for the late
day buyers to return early Friday.  Confirm direction in the
morning, and if the bulls show up consider entry.  For a more
conservative entry point wait for CFLO to clear resistance at $80
before entering the play.

SCMR $140.00 +4.94 (+1.81) For the second consecutive day, the
bears had their way with the Fiber Optic sector Wednesday.  The
renewed Greenspan fears coupled with harsh profit taking took
their toll on our play.  However, the 10-dma came to the rescue
yet again early Wednesday morning by providing support near the
$132 level.  The bounce off the 10-day proved to be the entry
point we have been looking for.  The stock plowed higher into
Thursday's session and moved back to support at the $140 level.
If the optimistic bulls show up early Friday morning to carry
the market higher into the weekend, you might consider an entry
into our SCMR play at its current levels.  Make sure to confirm
direction in the Fiber Optic sector before doing so, using the
likes of CIEN and JDSU as reference.  A more conservative entry
might be provided if SCMR rallies above resistance at $144.  If
the profit takers return, consider an entry if SCMR bounces off
its sturdy support at its 10-dma, which is now near $134.68.

HGSI $159.00 +8.25 (+6.38) The leaders in the Biotech sector
returned Thursday to aid the Tech bulls' cause.  After suffering
from the profit taking blues Wednesday, HGSI reasserted itself
Thursday with a strong showing early on.  Despite the sell-off
Wednesday, HGSI's ascending channel remained intact.  The series
of higher lows bodes well for our play.  However, in the latter
part of this week, HGSI has settled into a trading range between
the $150 and $160 levels.  With Thursday's advance, HGSI moved
back into positive territory for the week.  HGSI has added to its
handsome gains from last two weeks, but for the most part, the
stock has been consolidating this week.  A few days of
consolidation may be just what the market ordered for HGSI's
next leg up.  A quick rally above $160 Friday morning might
provide an entry if the stock breaks from its two-day range.
HGSI has congestion around the $165 level.  A return of momentum
might push HGSI past $165 and provide a more conservative entry.
A bounce off support at $150 is also worth considering if the
selling pressure returns.

CREE $148.00 +3.38 (+1.19) The Philadelphia Semi Index ($SOX)
slid into negative territory Thursday, dragged down by the likes
of MU and AMAT.  Yet, despite the weak performance of the
overall Chip sector our CREE play managed to hold onto its modest
gains.  Although CREE edged higher Thursday, the buying came with
little conviction.  A mere 319K shares traded hands, versus an
ADV around 750K.  Nevertheless, we'll take the gain.  CREE's
relative strength Thursday might be an indication of investors'
anticipation ahead of the company's earnings report next week.
CREE is schedule to report next Thursday, which has been
confirmed.  The stock has churned between the $145 - 150 range
this week.  The expectations of a positive profit report might be
the catalyst to break the stock out of its range.  A breakout
above $150 might provide an entry into the play.  CREE will again
face light congestion around $152.50 and resistance at $155.
Consider your risk levels and target shoot for entry as CREE
clears its various resistance levels.  Make sure to confirm any
breakout with heavy trade!

TIBX $116.44 +3.00 (+10.31) The B-2-B bears wreaked havoc on TIBX
Wednesday for the third consecutive day.  The stock continued its
early-week slide on relatively light volume.  The positive profit
report from CMRC provided little in the way of support Wednesday.
But, the B-2-B sector came charging back Thursday with solid
gains across the group.  Our friends on Wall Street came to the
rescue of our play Thursday morning.  Wasserstein Perella
initiated coverage on TIBX with a Buy rating and set a $150 price
target.  The stock gapped over $3 higher on the heels of the
positive analyst comments, but gave back much of its gains near
the close of trading.  Thursday marks the third straight day that
we have seen a big seller in TIBX near the close of trading.
With that said, approach the play with caution.  An aggressive
trader might consider entry if TIBX bounces higher from its
current levels, or if the stock moves back above its 10-dma at
$118.38.  A more conservative trader might wait for TIBX
to regain its footing and move back above the $120 level.  Make
sure to set your stops accordingly, we don't want to give back
our healthy gains since initiating the play!

BRCD $201.81 +9.31 (-4.13) BRCD keeps throwing entry points our
way.  The latest came as the stock dropped late yesterday to
bounce at $192, as investor nervousness increased ahead of Alan
Greenspan’s testimony this morning.  As it turned out, it was
largely a non-event and with the strong earnings report from
storage giant EMC yesterday morning, BRCD took off mid-way
through amateur hour.  Quickly tacking on $8, the stock then
continued to rise throughout the day, finally pausing to rest
as it once again reached resistance near $205-206.  The pullback
at the close brought our play within striking distance of
another entry point, and it was encouraging that it managed to
get back above the 10-dma at $198.75.  Consider new positions
on renewed bounces near the $199-200 support level, but confirm
the bounce with volume.  As we saw earlier in the week, the low
$190’s is the next level of support and a market downdraft could
have us there in two shakes.  Earnings will be announced on
August 16th, so there is still time to get positioned for the
much-hoped-for earnings run.

MRVC $78.56 +0.75 (+5.94) Throwing a lovely entry point at us
during amateur hour yesterday, MRVC bounced at the $68 support
level and quickly moved up to consolidate at $70.  Then the
buyers came back after lunch in a much better mood, quickly
running the price as high as $82, before the pre-Greenspan
nervousness emerged, and MRVC settled down to close above the
$76 support level.  Largely rangebound today, the stock gave us
little to work with until the final half-hour.  On a surge of
buying volume, the buyers pushed MRVC up to close just below
the high of the day at $78.56.  The chart is still showing a
pattern of higher lows and higher highs, but we still haven’t
seen the strong move that we expect to presage the beginning
of an earnings run.  With earnings confirmed for next Thursday
after the close, this could be the beginning of our long-awaited
earnings run.  The $76 level still looks good for new entries,
although more conservative traders may want to wait for a
volume-backed move above $80 before jumping aboard.

NT $78.75 +2.25 (+1.00) Slow and steady wins the race, and NT
is proving that point.  It doesn’t move fast, but it is
consistent.  Hopefully you didn’t wait too long with the entry
point that NT gave us yesterday.  Investors took some profits
off the table ahead of Greenspan’s testimony this morning, and
NT fell back to support just above $76.  As the volume picked
up towards the close, it became clear that this was as good an
entry point as we were going to get.  With the strength in the
Networking sector that emerged this morning, NT really got
moving and almost made it to the $80 resistance level before
giving some of it back towards the close.  Volume was just
below the ADV, and it was encouraging to see the stock close
back above the supportive 5-dma (currently at $78.50).  Even
the bad news on fellow networker Lucent (LU) couldn’t dampen
buyers enthusiasm for NT.  Earnings are set to be announced
next Tuesday after the close, so we are running out of time on
our play.  Look for a bounce from support to initiate new
positions, but make sure that volume is confirming the move.

KANA $60.00 +3.38 (-10.44) KANA responded nicely today along
with the rest in the B2B sector.  And yesterday the stock
received a Buy reiteration from analyst Brent Thill at CSFB.
Currently though, KANA is at a base support and is hovering just
below the intersecting 5-dma ($63.61) and 10-dma ($63.73).
However, if you're one of the more aggressive option traders,
then you could consider using this base level as an entry (as
risky as it may be) and try to catch a ride upward over the next
couple trading sessions.  The play is to profit on the earnings
run next week.  KANA reports Wednesday, July 26th, after the
bell.  Remember the limited time frame and keep stops in place
for protection.

VRTX $118.50 +2.69 (+3.50) Keep it short and sweet!  There's
only three trading sessions to get a solid entry and to exit
with a profit.  Our immediate play on VRTX is to enter on upward
bounces off the current level and ride a wave of excitement into
the earnings' announcement.  VRTX is scheduled to announce this
Tuesday, after the market close.  Keep in mind, this is a very
RISKY play as the open interest is rather low and the time frame
is tight.  Despite what may happen over the next few days, there's
still a bit of sunshine peaking over the horizon.  Last Thursday,
the BoD announced a 2:1 stock split payable for August 23rd.  The
icing on the cake would be to see a powerful momentum surge take
the share price into the clouds.  But no matter, don't take
unnecessary chances and hold over the earnings' release.  You
can always jump back in later.

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AETH $176.50 +9.50 (-4.88)  Since we began this play on Tuesday
when the stock sold down, the stock has been drifting though in a
range of about 10 points intraday, bouncing up off the $158 and
$165 support levels we mentioned.  So far, all the action has been
on low volume, but it is heartening to see resistance at $180
holding up strongly and providing an entry point.  The stock
closed just above the $175 level today where it will likely
attempt at breaking $180.  Note that AETH closed above its 5- and
10-dma today and even though it is on low volume, make sure that
the resistance at $180 holds before entering.  A break below $175
with a negative sentiment would be a good entry on the way to
retesting support at $170.  Earnings watchers will note that next
week AETH will announce its earnings on July 25th before the
market opens.

GTW $63.13 -0.63 (-3.25) GTW announced Wednesday that it had
expanded its eServices for small businesses with the addition of
high-speed Internet access service plans.  That news, coupled
with the anticipation of IBM's profits helped to stabilize GTW.
The upbeat profit report from IBM caused GTW to gap modestly
higher at the opening of trading Thursday.  However, as expected,
IBM reported revenues that were lower than expected, due to
disappointing sales of PCs.  While Big Blue didn't suffer from
the revenue shortfall, the more PC-dependent GTW paid the price.
Upon further examination of IBM's PC sales numbers, traders sold
GTW lower.  The stock rolled-over at the half-way point of
trading and subsequently plunged below support at $64.  GTW
bounced along the $63 level into the close of trading.  Given
GTW's weak showing in a strong Tech sector Thursday, an
aggressive trader might look for entry if the stock slips past
support at $63 Friday morning.  For a more conservative entry,
point wait for GTW to fall below $62.

IP $34.06 -0.56 (-1.75) There’s nothing like a predictable play
to make you happy.  It isn’t moving fast, but after rolling over
at the 100-dma a week ago, IP is continuing to decline.  After
posting solid earnings last week, there has been nothing to
support the stock and it has resumed its long-term downtrend.
Today’s decline dropped the paper company through the 50-dma
(currently at $34.13), and it is now sitting just above support
at $33.  As earnings season has progressed, enthusiasm seems to
be returning to the technology sector and old-line cyclical
stocks are being left behind.  The decline seemed to lose
momentum over the last half of the day today and intraday
support seems to be building near $34.  With the light volume
(about two-thirds of the ADV) lately, consider tightening up
your stops on open positions.  If you are looking for new
entries, wait for the stock to drop through support before
jumping into the play.

CHV $80.00 -1.94 (-3.75) Today, we got an entry on downward moves
off $82 and are now situated smack on $80.  So far so good.  And
of course, you've set stops for protection and have an exit point
in mind.  The current price level, as many of you know, serves
as light support.  It's imperative that CHV slide under this
mark and make a move for $70, pronto.  It's now confirmed that
Chevron will report earnings BEFORE the market, on Tuesday.
Therefore, tomorrow is a crucial trading session for this put
play.  It'd be taboo to have any positions remain open
during/after the announcement - you just don't want to take the
chance that this event could trigger a reversal despite the
lowering oil prices.  In the news, Chevron announced some
management changes.  Corporate VP and Treasurer George K. Carter
decided to retire after a nearly 40 years in financial
management.  He will be succeeded by David M. Krattebol, a 30-
year veteran of Chevron currently serving as president of
Chevron San Jorge in Buenos Aires, Argentina.  In a separate
action, Corporate Comptroller Stephen J. Crowe was named a
corporate VP.


CMTN - Copper Mountain Networks $89.63 -5.63 (-25.63 this week)

Copper Mountain Networks, develops and markets a comprehensive
family of DSL solutions that enable high-speed internetworking
over existing copper facilities.  The company's mission is to
enable carriers and other service providers to offer a full
range of high-performance, cost-effective data and voice
services over DSL that are easy to deploy, use, and manage.
Copper Mountain's CopperRocket CPE family addresses the bandwidth,
reliability, ease-of-use, and cost concerns of remote offices
and users.

While relatively new to the market, Copper Mountain has proven
to be a leader in the DSL industry, giving competitors like
Cisco, Lucent, and Nokia a run for their money.  The stock rose to
a 52-week high on July 17th of $125.72, but quickly made an about
face, going a rapid tailspin on Tuesday after the company
reported second quarter earnings on Monday, July 17th after the
close.  Despite reporting earnings of $0.24 per share and posting
a four-fold increase in sales, not to mention beating First Call's
estimate of $0.22 by $0.02, fears arose that the stock may be
overpriced.  This caused the stock to fall $29.50 on Tuesday,
closing at $94.19.  Overall, the stock finished with a 24% drop.
Bearing all this in mind, however, the stock appears to be
oversold after reporting what should have been interpreted as
good earnings.  Today, the stock traded at to eight session low,
bouncing from the area where the 50-dma and the 100-dma lie,
$87.25 and $86.66 respectively.  Typical of CMTN after prior
earnings, the stock will most likely trade within a $10 to $15
range, making it a good short term play.  We are anticipating
CMTN finding a bottom after being oversold.  Overhead, resistance
is thin until the 10-dma at $98.06.  A strong volume move above
that technical would be a renewed uptrend.  Look for an entry
on bounces from the $87 level near the 50- and 100-dma.  This is
a more aggressive play by nature, so conservative traders may
want to wait for that move through $98.

The latest plug for the company has been the announcement that
Copper Mountain will supply DSL concentrators to NewPath
Communications, a newly-formed Data Local Exchange Carrier (DLEC)
based in Chicago, Ill.  NewPath will use Copper Mountain's
CopperEdge (R) 200 DSL concentrators throughout its network across
14 states in selected markets in the Midwest.  NewPath will then
offer both retail and wholesale DSL services to small and medium
sized businesses as well as to telecommuters and home office

BUY CALL AUG- 85 KUA-HQ OI= 149 at $12.38 SL=9.50
BUY CALL AUG- 90*KUA-HR OI= 652 at $ 9.63 SL=7.50
BUY CALL AUG- 95 KUA-HS OI= 318 at $ 7.63 SL=5.75
BUY CALL AUG-100 KUA-HT OI= 446 at $ 6.00 SL=4.50
BUY CALL SEP-100 KUA-IT OI=1510 at $ 9.13 SL=7.00

SELL PUT AUG- 80 KUA-TP OI= 246 at $ 4.63 SL=6.00
(See risks of selling puts in play legend)

Picked on July 20th at   $89.63    P/E = 151.29
Change since picked   +0.00    52-week high= $125.72
Analysts Ratings      3-6-1-0-0    52-week low = $ 35.15
Last earnings 07/17   est= 0.22    actual= 0.24
Next earnings 10-19   est= 0.24    versus= 0.09 
Average Daily Volume = 1.57 mln

ARBA - Ariba Inc. $133.88 +8.31 (+9.31 this week)

As a leading provider of B2B solutions and services to leading
companies around the world, including more than 20 of the FORTUNE
100, Ariba helps companies cut through the complexity of
opportunities presented by the new economy.  Ariba provides the
most comprehensive and open commerce platform to build B2B
marketplaces, manage corporate purchasing, and electronically
enable suppliers and commerce service providers on the Internet.
Made up of a complete set of integrated commerce solutions and
open network-based commerce services, the Ariba B2B Commerce
Platform™ offers a single system for managing buying, selling,
and marketplace eCommerce processes.

The B2B boys are back in town!  B2B stocks have been rocking so
far in the summer and those long dark days of spring are quickly
being forgotten.  With Ariba posting a stellar earnings report
last Wednesday, ringing up revenue growth up over six times that
of last year, it has re-validated the potential of the B2B
business model.  The on-again, off-again love affair with the
beloved B2B's is back on.  Stock prices of most B2B stocks
have responded, with Ariba touted as the leader of marketplace
creation through its software and expertise.  But it's not just
ARBA.  Other companies in the B2B sector such as ITWO and PPRO
are also posting blowout earnings and being rewarded handsomely
with higher valuations, much to the delight of traders.  In fact,
PPRO was described to have "pulled an Ariba" in reference to
their beating the Street.  While the comment was meant to be a
compliment to PPRO, one can not help but think that Ariba has
become to the B2B sector what Yahoo is to the more old-school
Internets.  After trying a number of times these past five
trading sessions to break through resistance at $130, the stock
finally made it over the hump on about 150% of average daily
volume.  After some tentative early morning jiggling on low
volume, the stock spent the rest of the day moving steadily up on
increasing volume.  Support, of course, can now be found at the
former resistance level of $130.  Below that is the 5-dma at
$126.50 and 10-dma at $115.  With $130 now broken, the next
test for ARBA will be at $140.  Even for those who are aggressive,
be sure to wait for the bounce before entering, especially since
Friday is expiration of July options.

Not to rest on its laurels, Ariba has been proclaiming good news
this week.  On Tuesday, there was news of a partnership with Fleet
Global Services which will use the Ariba system to manage its
procurement operations on the Internet with its suppliers.
Wednesday was another alliance, this time with Epylon
Corporation, a leading provider of hosted eBusiness solutions, to
develop an integrated platform specifically designed for public
sector procurement.  The current rally in Ariba is not just a
one-stock phenomenon but rather, sector-wide so traders will want
to keep an eye on other B2B issues for cues.

BUY CALL AUG-125 RBU-HE OI= 788 at $17.50 SL=12.00
BUY CALL AUG-130*RBU-HF OI= 962 at $14.88 SL=11.00
BUY CALL AUG-135 RBU-HG OI= 849 at $12.50 SL= 9.50
BUY CALL NOV-135 RBU-KG OI=1324 at $27.00 SL=22.25
BUY CALL NOV-140 RBU-KH OI= 283 at $25.00 SL=20.25

SELL PUT AUG-125 RBU-TE OI= 307 at $ 7.50 SL=10.50
(See risks of selling puts in play legend)

Picked on July 20th at  $133.88     PE = N/A
Change since picked       +0.00     52-week high=$183.31
Analysts Rating     15-11-1-0-0     52-week low =$ 16.56
Last earnings  07/12  est=-0.09     actual=-0.05
Next earnings  10-19  est=-0.06     versus=-0.03
Average Daily Volume = 6.22 mln

DISH - Echostar Communications $44.63 +3.13 (+0.44 this week)

Dishing up to 500 channels of satellite TV heaven on the DISH
Network is what EchoStar is all about.  EchoStar is the #2
satellite broadcast provider in the US - DIRECTV hold the #1
ranking.  They provide direct broadcast satellite (DBS) access
to about 10 mln subscribers.   In addition, their partnership
with Microsoft allows customers to surf the Internet from the
couch potato position through WebTV.  CEO Charles Ergen owns 51%
of the company and retains over 85% of the voting power.

Ready, Set, Go!  DISH is on the mark for a run into its earnings.
After a pre-holiday lull, the share price began a steady
progression and has advanced nearly 30%.  The July chart clearly
demonstrates that momentum is intact, but there's one technical
obstacle in our path:  the 200-dma.  While this potential hazard
at $45.29 is merely a fraction away, it cannot be discounted.
Since last Friday's challenge, this technical line proved to be
a formidable opponent and has kept DISH range bound.  Therefore,
it's essential to wait for the breakout on high volume moves -
currently trading activity is only moderate.  The company's
earnings are confirmed for August 1st, before the bell, so we're
adding DISH now to give readers plenty of time to prepare for a
strategic entry.

Besides the advances on the NASDAQ, DISH's upsurge last Friday
was likely in response to its successful satellite launch.  The
EchoStar VI, the most powerful direct broadcast satellite ever
manufactured, was put into orbit early that morning.  Charlie
Ergen, CEO and chairman of EchoStar, reported the success,
commenting that "our sixth satellite will serve our fast-growing
number of DISH Network satellite television customers" and "will
increase our broadcast signal power and backup capacity as well
as allow for expanded coverage to Alaska and Hawaii."  More news
like this would certainly be welcome, especially ahead of the
earnings report!

BUY CALL AUG-40*UAB-HH OI=1469 at $7.13 SL=5.00
BUY CALL AUG-45 UAB-HI OI=1006 at $4.63 SL=2.75
BUY CALL AUG-50 UAB-HJ OI= 604 at $2.50 SL=1.25
BUY CALL SEP-45 UAB-II OI=1501 at $6.75 SL=4.75
BUY CALL SEP-50 UAB-IJ OI= 605 at $4.75 SL=2.75

Picked on July 20th at   $44.63    P/E = N/A
Change since picked       +0.00    52-week high=$81.25
Analysts Ratings      9-5-0-0-0    52-week low =$14.00
Last earnings 03/00   est=-0.36    actual=-0.40
Next earnings 08-01   est=-0.34    versus=-0.20
Average Daily Volume = 4.17 mln


CMOS - Credence Systems $46.00 -3.69 (-10.31 this week)

Credence makes test equipment and testing software that is used
in the high-volume production of semiconductors.  The company's
products test digital logic, mixed-signal, and nonvolatile memory
circuits used in such products as televisions, PCs, cameras, and
telephones.  CMOS sells its products primarily to chip
manufacturers, assembly houses, and test services companies.

Have the semis peaked?  Judging by the recent performance of the
chip equipment makers, some investors might answer yes to that
question.  In a paradoxical fashion, fate would have it that
business is a little too good in the Chip sector right now.  The
problem that companies like CMOS are facing is that demand is
outstripping supply.  CMOS is having problems keeping up with its
customers' orders which may cause a revenue shortfall when the
company reports its quarterly results on August 10th, which has
been confirmed.  The warning of a peak in the Semi sector came to
light two weeks ago when Salomon Smith Barney analyst Jonathan
Joseph downgraded the entire sector.  Of course, several other
brokerage houses came to the defense of the semis in the
following days, which helped CMOS to regain some of its lost
ground.  It would appear the group's relief rally has run its
course, noting the red in the SOX Index Thursday in what was a
tremendous day for techs.  CMOS suffered its second consecutive
day of painful loss Thursday, en route to violating several key
support levels.  Interestingly, SG Cowen came to the defense of
CMOS Thursday by reiterating its Strong Buy rating on the stock
and establishing a $56 price target.  Despite the attempt from
Cowen, CMOS shed over 7% on more than double its average trade.
The heavy selling pushed CMOS below key support at $50.  The
stock finished Thursday right near its day low, which warrants
consideration for entry at current levels if the bears return
Friday morning to cause more damage.  CMOS has near-term support
around $45; thereafter is no help on the chart until the $40
level.  A more conservative entry might be found if CMOS falls
below $45.  Confirm a continued slide with heavy volume!

BUY PUT AUG-50*CQS-TJ OI= 30 at $5.88 SL=4.00
BUY PUT AUG-45 CQS-TI OI=247 at $3.63 SL=2.00
BUY PUT AUG-40 CQS-TH OI= 27 at $2.69 SL=1.25

Average Daily Volume = 1.06 mln


MRVC - MRV Communications $78.56 +0.75 (+5.94 this week)

MRV Communications is in the business of creating and managing
growth companies in optical technology and Internet
infrastructure.  The company has created several start-up
companies and independent business units in these areas.
MRVC’s core operations include the design, manufacture, and
sale of products in these areas, primarily Network Element
Management, and physical layer, switching and routing
management systems in fiber optic metropolitan networks.
The company also produces fiber optic components for the
transmission of voice, video and data across enterprise,
telecommunications and cable TV networks.

Most Recent Write-Up

Throwing a lovely entry point at us during amateur hour yesterday,
MRVC bounced at the $68 support level and quickly moved up to
consolidate at $70.  Then, the buyers came back after lunch in a
much better mood, quickly running the price as high as $82, before
the pre-Greenspan nervousness emerged, and MRVC settled down to
close above the $76 support level.  Largely rangebound today, the
stock gave us little to work with until the final half-hour.  On
a surge of buying volume, the buyers pushed MRVC up to close just
below the high of the day at $78.56.  The chart is still showing
a pattern of higher lows and higher highs, but we still haven’t
seen the strong move that we expect to presage the beginning of
an earnings run.  With earnings confirmed for next Thursday after
the close, this could be the beginning of our long-awaited
earnings run.  The $76 level still looks good for new entries,
although more conservative traders may want to wait for a
volume-backed move above $80 before jumping aboard.


After yesterday's expansion breakout, MRVC managed to add on
another $0.75.  Not bad considering the 12% move on Wednesday.
We are looking for MRVC to carry on its momentum into earnings
next Thursday.  The next resistance that the stock is eyeing is
at $80.  Today, $75 provided intraday support and any bounces
from that level would be nice entries.  Target shoot on intraday
dips and watch $80.  A strong volume move through $80 would be
very bullish confirmation.

BUY CALL AUG-70 RVY-HN OI=3430 at $15.75 SL=12.25
BUY CALL AUG-75*RVY-HO OI= 478 at $13.00 SL=10.00
BUY CALL AUG-80 RVY-HP OI= 998 at $10.50 SL= 8.25
BUY CALL OCT-80 RVY-JP OI= 358 at $16.75 SL=13.00
BUY CALL OCT-85 RVY-JQ OI= 107 at $15.63 SL=12.00

SELL PUT AUG-65 RVY-TM OI= 232 at $ 4.25 SL= 5.50
(See risks of selling puts in play legend)

Picked on July 13th at   $74.88     P/E = N/A
Change since picked       +3.69     52-week high=$97.44
Analysts Ratings      1-1-0-0-0     52-week low =$ 6.50
Last earnings 04/00   est=-0.01     actual= 0.03
Next earnings 07-27   est= 0.03     versus= 0.01
Average Daily Volume = 2.14 mln

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Market Soars on Bullish Outlook!

U.S. equities rallied today amid optimism over Fed Chief Alan
Greenspan's positive remarks.

Wednesday, July 18

The stock market ended lower today as investors sold for profits
following a slew of mediocre earnings reports.  Technology stocks
endured the heaviest selling pressure, with the Nasdaq Composite
falling 121 points to 4,055 amid weakness in a number of leading
companies.  The Dow slumped 43 points to 10,696 as blue-chip
stocks were swept into the broader sell-off.  The S&P 500 Index
finished down 11 points at 1481.  Trading volume on the NYSE hit
905 million shares with declines beating advances 1,682 to 1,121.
Activity on the Nasdaq was average at 1.43 billion shares traded,
with declines beating advances 2,557 to 1,430.  In the U.S. bond
market, the 30-year Treasury fell 4/32, pushing its yield up to

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

Flowers Ind.  FLO    OCT16C/AUG20C   $0.00   debit   diagonal
AG Edwards    AGE    NOV45C/NOV45P   $7.12   debit   straddle
Caremark RX   CMX    DEC10C/AUG10C   $0.75   debit   calendar

AG Edwards and Caremark both offered favorable entry points in
today's session but our bullish position in Flowers was one day
too late.  Shares of both Keebler Foods and Flowers Industries
rallied sharply on expectations the #2 U.S. cookie and cracker
maker will be a hot property for potential buyers.  On Tuesday,
Flowers Industries, which owns 55% of Keebler, effectively put
Keebler up for sale.  The plan calls for a takeover of Flowers
Industries, which would spin-off its Mrs. Smith's Bakeries and
Flowers Bakeries businesses, leaving Keebler as its remaining
operation.  FLO finished up $3.12 at $22.50.

Portfolio Plays:

Stocks slumped again today as investors moved to lock-in profits
before the Summer doldrums begin in earnest.  Mediocre revenue
forecasts plagued the market and analysts continued to question
the quality of the earnings for a number of companies, many of
which have included large investment gains.  Four Dow companies
had posted better-than-expected results before the market open
but the news failed to prevent industrial stocks from the being
swept into the downward momentum.  Investors also began bracing
for Thursday's key speech on monetary policy and the economy by
Federal Reserve Chairman Alan Greenspan.  Traders said concerns
the FOMC may increase interest rates again in August provoked
additional selling.  Blue-chip stocks struggled in the broad
market slide and the Nasdaq was hampered by losses in bellwether
technology issues.  Tobacco, computer peripheral and personal
care issues were the strongest groups on S&P 500 Index while
healthcare, software and airline stocks generally moved lower.

Our portfolio saw declines across the board but the majority of
positions were well above a break-even cost basis and there was
little chance of loss on the downside.  Plantronics (PLT) was
the standout issue, up $14 to $141 after the company announced
record earnings for the first quarter of 2001.  First quarter
revenues totaled $100 million, up 34% over the $74 million in
revenues in the first quarter last year.  Net income was $20.1
million and Plantronics' earnings per share were $1.15 for the
first quarter in comparison to $0.85 in the year ago quarter, a
35% increase.  Our bullish position at $95 is relatively safe for
now.  Bank One (ONE) was another big winner on the earnings front
even though the company reported it lost $1.27 billion, or $1.11
a share, in the second quarter.  In conjunction with the report,
Bank One moved decisively to halt a year of profit declines by
halving its dividend and taking a $2 billion charge.  The charge
encompasses write-offs in its credit card and corporate banking
divisions.  These areas have pulled down its profits in recent
quarters and the intent of the move is to reduce costs by some
$500 million.  Investors applauded the change, pushing the issue
up $2.50 to $32.50 and our long-term, bullish diagonal spread
is at maximum profit above $25.  Vodaphone (VOD) was another
issue worth mentioning and today the stock edged back above our
sold strike (at $45) in the Covered-calls with LEAPS position.
The current value of the spread is $6.00, and with the cost
basis at $2.00, the current return for the position is 300%.

Thursday, July 20

U.S. Equities rallied today amid optimism over Fed Chief Alan
Greenspan's positive remarks.  Strong earnings from IBM gave
the Dow a boost and the industrial average closed up 147 points
at 10,843.  The Nasdaq also recorded a healthy gain, up 128
points to 4184.  The S&P 500 Index added 13 points to close at
1495. Trading volume on the NYSE reached 1.06 billion shares,
with advances beating declines 1,699 to 1,139.  Activity on the
Nasdaq was heavy at 1.71 billion shares exchanged.  Technology
advances beat declines 2,220 to 1,774.  In the bond market, the
30-year Treasury surged 1 16/32, pushing its yield down to 5.80%.

Portfolio Plays:

The market rallied today as concerns over interest rates faded
amid bullish comments from Fed chair Alan Greenspan.  Speaking
before the Senate Banking Committee on monetary policy, Greenspan
said inflationary expectations remain modest outside of energy
prices and that demand is moving more into line with supply,
suggesting that imbalances in the economy are being corrected.
He also anticipates the U.S. economy will grow for at least 18
more months and suggested the slowdown that has emerged from
recent economic data is real.  Tech issues led the advance with
impressive gains in a number of Internet and computer hardware
stocks.  Biotechnology stocks also rallied and the financial
components on the Dow, American Express, Citigroup and J.P.
Morgan boosted the blue-chip group.  On the downside, the major
drug sector retreated, unable to respond positively to a batch
of positive earnings.

A rally in shares of International Business Machines (IBM) led
the market from the start of trading and that issue was one of
our few remaining concerns for the month of July.  IBM reported
a second-quarter profit of $1.06 per share, which beat the First
Call estimate of $1.00 per share.  Big Blue made $0.91 in the
year-ago period.  As expected, revenue was slightly lower and
overall sales growth was essentially flat.  Fortunately, the
issue rallied $8 to $117 and our credit-spread strangle is now
expected to finish at maximum profit.  Another big surprise was
AM/FM (AFM).  The stock jumped $5.31 to $71 on strength in the
media group and Clear Channel (CCU), its merger partner.  Radio
companies are expected to report extremely strong second-quarter
results and vigorous advertising sales along with new prospects
for the current period.  Regardless of the reason for the move,
we were very happy to see the issue move well clear of our sold
position in the bullish credit spread.  Juniper Networks (JNPR)
and Network Appliances (NTAP) led our technology group, both up
over $12 during the bullish session.  In the case of Juniper, we
will need a finish above $171.50 to close the play profitably.
If the issue begins to sell-off early in tomorrow’s session, we
will simply sell the AUG-$150 calls (currently bid at $25) to
reduce our cost basis in the stock position.

Allstate (ALL) made a nice move today, up $1.50 to $25 after the
company reported improvements in the outlook for future revenues.
Allstate's revenue for the second quarter increased 9% to $7.18
billion, up from $6.59 billion in the year-earlier period.  ALL’s
operating earnings were $0.58 per share compared with $0.75 from
the previous year.  The results showed favorable premium growth
and slightly outpaced the consensus estimates.  Another company
that rallied in anticipation of an earnings report was American
Online (AOL).  After the close, America Online reported record
results for its fiscal fourth quarter as revenue climbed 39% to
$1.9 billion.  Profit more than doubled to $334 million, $0.13 a
share, up from $155 million in the year-ago quarter.  Operating
income for the quarter climbed 108% to $466 million and income
from advertising, commerce and other revenues improved 95% to
$609 million.  In addition, AOL’s advertising backlog, made up of
revenues to be recognized at scheduled future dates, doubled over
the year to $3 billion, with growth of $300 million in the last
three months alone.  That report should boost the outlook in the
Internet sector substantially.

Secure Computing (SCUR) deserves mention.  The company rallied
$2.38 to $18.43 on speculation of the earnings report after the
bell.  As expected, the results were favorable.  Secure Computing
announced second quarter revenues of $8.8 million, a 60% increase
over last year, and a 17% increase over the prior quarter.  The
company’s products and services revenue, a primary emphasis, was
$7.6 million, a 59% increase when compared to last year.  SCUR’s
net loss for the second quarter was or $0.23 per share, compared
to a loss of $0.45 per share in the year ago quarter, and well
below analyst’s estimates of a $0.28 loss.  Of course the effect
of today’s news will not be seen until tomorrow and we noticed a
few spread positions being closed in anticipation of a sell-off.
It will be interesting to see where the issue finishes at August

Questions & comments on spreads/combos to Contact Support

                         - NEW PLAYS -

IRF - International Rectifier  $63.06  *** Big Earnings! ***

International Rectifier designs, manufactures and markets power
semiconductors which switch or condition electricity at high
voltage and current levels.  The company's HEXFET power Metal
Oxide Semiconductor Field Effect Transistors and insulated gate
bipolar transistors products comprised approximately two-thirds
of current sales.  The company also supplies high-voltage ICs,
high-performance diodes, high-power rectifiers and thyristors.
Its products are used in numerous major market sectors including
industrial, automotive, computer/peripherals, office equipment,
consumer electronics, lighting and communications.

Today International Rectifier reported an outstanding increase
in fourth-quarter profits from a year ago, easily beating Wall
Street's estimates.  The power management devices and systems
company recorded net income of $33.9 million, or $0.52 a share,
for the quarter.  The consensus expectation was $0.48.  Sales
were $232 million, up 57% from $147.5 million in 1999 and for
fiscal 2001, the company targets a sales increase of 40%.  The
company also said orders in the quarter increased 76% overall,
demonstrating the incredible demand for the company’s products.

Our outlook for the issue is bullish but after any earnings
rally, a consolidation is expected.  We hope to increase the
credit for the spread to a favorable amount and our initial
target will be $1.25.  Of course, adjustments may need to be
made, based on Friday’s opening prices.

PLAY (aggressive - bullish/credit spread):

BUY  PUT  AUG-45  IRF-TI  OI=60   A=$0.93
SELL PUT  AUG-50  IRF-TJ  OI=195  B=$1.81
INITIAL NET CREDIT TARGET=$1.12-$1.25  ROI(max)=28% B/E=$48.88

Chart =


CSCO - Cisco Systems  $69.50  *** Own This One! ***

Cisco Systems and its subsidiaries are engaged in networking for
the Internet.  Cisco creates hardware and software solutions that
link computer networks so that people have easy access to basic
information without regard to differences in time, place or type
of computer system.  The company's product portfolio offers
end-to-end networking products and services.  Cisco’s breadth of
product offerings enables it to configure hardware and software
features to meet customer requirements.  The company is now also
delivering video and voice capabilities in its products, allowing
customers to transition their data networks to a other single
multi-service data, voice and video network.

Cisco is a giant in the networking and communications industry.
They have a market value that's much bigger than all of their
customers and they are going to be a dominant player in a number
of sectors, either through their own innovation or acquisition.
The company’s recent moves in the cable market; their investment
in Liberate (LBRT) and the Comcast equipment contract, suggest
that it intends to have an all-encompassing role in the future
construction of networks for the Internet.  Cisco is also adding
capability in the digital subscriber line (DSL) market, and the
company’s high-speed networking technology will soon be a part
of every major communications systems in the world.

Based on the recent technical trend, our outlook for the issue
is bullish and the current upward momentum should propel the
share value well clear of our target cost basis.  In the event
of further consolidation, this company would certainly be a
candidate for any long-term portfolio.

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-55  CWY-TK  OI=6487  A=$0.50
SELL PUT  AUG-60  CWY-TL  OI=8900  B=$1.00
INITIAL NET CREDIT TARGET=$0.62 ROI(max)=14% B/E=$59.38

Chart =


MO - Phillip Morris  $25.50  *** Trading Range? ***

Philip Morris is a holding company whose principal wholly owned
subsidiaries, Philip Morris Inc., Philip Morris International,
Kraft Foods, and Miller Brewing Company, are engaged in the
manufacture and sale of various consumer products.  The company's
products include cigarettes, tobacco, a broad range of packaged
food products, and beer.  Another wholly owned subsidiary, Philip
Morris Capital Corporation, engages in various financing and
investment activities.  The company's industry segments include
domestic tobacco, international tobacco, North American food,
international food, beer and financial services.

Earlier this week, tobacco and food giant Philip Morris reported
a 5.5% rise in underlying quarterly earnings, meeting analysts'
expectations, on strong performance across all of its units.  The
New York-based company, the world's largest cigarette maker with
the top-selling Marlboro brand, said profits rose to $0.95 per
share, up from $0.85 per share a year ago.  The company also said
they are in an excellent position to meet the growth targets for
the year.  From an "earnings outlook" standpoint, that appears to
favorable for the issue in the short-term.  However, last Friday
a Miami jury said Philip Morris must pay smoking victims $73.96
billion in damages, the largest such award in history.  Of course,
lengthy appeals are likely to reduce and delay the pay-outs but
the cost to defend and settle the case will be exorbitant in the
end.  In addition, Philip Morris recently agreed to buy Nabisco
Holdings in another complicated and potentially expensive deal.

This position was discovered with one of our primary scan/sort
techniques; identifying potentially failed rallies on issues
with bullish options activity.  In this case, the premiums for
the (OTM) call options are slightly inflated and the potential
for a successful (technical) recovery is significantly affected
by the resistance at the sold strike price; a perfect condition
for a bearish credit spread.

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-30.00  MO-HF  OI=3793  A=$0.31
SELL CALL  AUG-27.50  MO-HY  OI=4780  B=$0.62
INITIAL NET CREDIT TARGET=$0.43 ROI(max)=20% B/E=$27.93

Chart =

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