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Daily Newsletter, Sunday, 07/23/2000

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The Option Investor Newsletter                  Sunday  07-23-2000  
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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
        WE 7-21          WE 7-14           WE 7-7          WE 6-30
DOW    10733.56 - 79.19 10812.75 +176.77 10635.98 +188.09  + 43.14
Nasdaq  4093.86 -152.32  4246.18 +222.98  4023.20 + 57.09  +120.77
S&P-100  804.55 - 10.97   815.52 + 12.52   803.00 + 12.75  +  9.18
S&P-500 1480.19 - 29.79  1509.98 + 31.08  1478.90 + 24.30  + 13.12
RUT      522.70 - 19.93   542.63 + 14.41   528.22 + 10.99  +  6.82
TRAN    2808.42 -110.62  2919.04 +134.40  2784.64 +139.27  + 14.66
VIX       21.47 -  1.14    22.61 +   .79    21.82 -   .44  -  3.63
Put/Call    .59              .38              .48              .48
******************************************************************

Up One Day And Right Back Down The Next
By Eric Utley

Buyer beware, this is not a friendly market!  Investors scrambled
to salvage their recent gains in the Tech sector Friday.  The
fading of Greenspan's voice coupled with a host of new earnings
warnings prompted a profit taking sell-off Friday.  The news of
profit short-falls was enough to grab the attention of the bears
and bring that formidable group out of hiding.  Needless to say,
we didn't get the follow-through day we needed after last
Thursday's impressive rally.  While the major indices didn't
suffer serious technical harm after Friday's sell-off, it did
suggest that investors are not quite ready to plow back into the
market just yet.

Over half of the S&P 500 and DOW companies have now reported
their second-quarter numbers.  According to First Call, around
another 130 companies will report their results next week which
we'll expand upon below.  Of the companies that have reported
their quarterly results thus far, amazingly, only 8% have
disappointed.  Historically, that number has stood closer to 25%.
However, it seems that the small percentage of companies that
have warned of lower-than-expected profits have had a much larger
impact on the market than the majority that have surpassed 
estimates.  Earnings warnings took their toll on the Tech sector
Friday, led by the cautionary comments from A, LXK, and ERICY,
not to mention the carryover of LU's disappointment on Thursday.
HWP weighed heavily on the Industrials Friday in part from the
warning issued by its spin-off A, and also from the cautionary
tone from fellow printer maker LXK.  Merrill Lynch issued a
report Friday morning stating that HWP might suffer from LXK's
warning.  And suffer it did, HWP shed -$6.  Among the other DOW
losers were MSFT -$2.50, INTC -$4.50, HON -$1.50, JPM -$2.25, and
EK -1.88.


 

The DOW appears to be narrowing its three-month trading range.
The index has been churning between the 10,500 and 11,000 levels
since mid-April.  The big decline Friday doesn't look too
promising and could send the Industrials to retest its near-term
support level at 10,700.  A failure of support at that level
might send the blue chip investors packing for a late-summer
vacation and the DOW back down to 10,500.

If the DOW's performance on Friday made you queasy, the NASDAQ
might just put you over the edge.  The Tech-laden index gave
back all of its gains from Thursday's stellar rally.  The COMPX
finished the week in negative territory for the first time in
four weeks.  The warnings from A and ERICY rattled Tech
investors, which prompted them to exit the NASDAQ.  ERICY warned
that its handset division would lose money this year, which
erased 12% off the stock.  The Semiconductor sector continues to
show signs of weakness.  The Philly Semi Index shed 12.8% last
week, which contributed mightily to the NASDAQ's losses.  It
would appear that the once beloved Chip stocks have lost their
leadership role.  If it weren't for SUNW, the NASDAQ would have
finished the day a lot lower Friday.  In an atypical fashion,
SUNW rallied over 6% after reporting better-than-expected profits
and guiding analysts to higher growth estimates for the remainder
of the year.  The only standout winner on the NASDAQ Friday was
the Biotech sector, which was ignited by the debut of several
genomic related IPOs and anticipation of positive profits.  The
winners in the group included AMGN +$3.94, MEDI +$3.63, and IMNX
+$2.81.


 

While the NASDAQ's decline was a precipitous one, the volume was
less than convincing.  Which is about the only positive thing I
can say about Friday's losses.  Its two-month trend of higher
prices is still intact, but like the DOW, the NASDAQ is looking a
little top-heavy right now.  It's those types of big rounding
tops, that is clearly evident on the current chart, that bodes
poorly for the index.  Support at 4000 is both a psychologically
and technically important level for the NASDAQ to trade above.  A
failure at 4000 might break the COMPX's string of higher lows,
and could, dare I say, bring on the dreaded dip we have been
fearing.  After the big gap up in early June, there is little in
the way of support preventing the NASDAQ from slipping back to
the 3500 level.

Along with Friday's nasty decline in the major indices, there
are a few other cautionary flags being waved by the market.
First, you may have noticed that a few IPOs have made their way
to the headlines on CNBC.  If you haven't noticed, the IPO market
is showing signs of life.  While it may be good for specific
sectors of the market, it also means more supply of stock is
making its way into investors' hands.  And, like we mentioned
above, investors' demand for stock is somewhat questionable right
now.  Moreover, the VIX is still hovering near relatively low
levels.  And, would you believe, the fear gauge actually dropped
during Friday's sell-off.  The complacency with which market
participants met Friday's decline does not bode well for the
market early next week.  The CBOE equity Put/Call ratio did spike
up Friday, but it's still reading fairly low numbers.

One positive item I must bring to your attention  is the recent
action in the Long-bond.  After Greenspan's hints of easing up
on his rate rising binge, the Thirty-year bond rallied Thursday
and again Friday, which of course sent yields lower. The 20-dma
moving average of the yield of the 30-year turned downward last
week, which may indicate a stabilizing of interest rates.  And,
of course, stabilizing or lower interest rates generally have
positive implications for stock prices.  After the final round
of major earnings announcements are released next week, the
market will give its full attention to the Federal Reserve
meeting looming in the distance.  Pay close attention to the
action in the bond market.  Many analysts have suggested that the
Fed will only act according to what the market tells them to do.
Although Greenspan has been criticized recently for trying to
suppress stock prices, the bond market might be saying, "Hey Al,
it's time to ease up."  Those sweet nothings being whispered
by the bond market into Greenspan's ear might signal the Fed
chief to lighten up on rates.  If so, the market might be poised
for a big fall rally.


 

We still have plenty of earnings reports next week that could
sway the market one way or another.  Of the companies expected to
report next week, JDSU will most likely be one of the bigger
releases.  The fiber optic giant is scheduled to report after the
close of the market Wednesday, which is coincidently, the same
day the stock is being added to the S&P 500.  Some of the other
big names reporting next week include TXN, MRK, NT, XOM, T, NOK,
EBAY, AMZN, WCOM, and AMGN.

Along with the fresh crop of earnings announcements next week,
two key economic reports are will be released.  The Labor
Department will report the second quarter employment cost index
on Thursday.  Most economists expect the ECI to rise between 1%
to 1.2%.  And on Friday, an advanced reading of second quarter
gross domestic product will be released by the Commerce
Department, which is expected to record an increase of about
3.6%.  Also, Greenspan will grace the airwaves again when the
chairman testifies to the House Banking Committee on Tuesday.
Existing home sales and durable good orders for May will also be
reported next week.

Molly Evans wrote a fantastic article about the market's seasonal
tendencies in her Traders Corner column last Thursday.  If you
haven't already, I highly suggest reading Molly's column, she
puts out some great stuff! In her article, you will discover that
the odds of a major market rally transpiring over the next
several months are slim.  However, if you must trade, may I offer
the following.  You've read the axioms several times here at OIN,
such as 'don't fight the tape' and 'the trend is your friend'.
They are general trading guidelines, but I've found the simpler
rules are generally the most profitable.  I'm also often reminded
that the market is never wrong, only my opinions about it.  With
that said, whichever way the market decides to turn for the
remainder of the summer let the tape be your guide.  Ride the
trend, cut your losses, and let profits run.

May all your trades be profitable!

Eric Utley
Research Analyst


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

Here we are ending the third week of July with the market looking 
poised for a drop.  The Tuesday/Wednesday sell-off this past 
week was pretty convincing, unlike the Thursday rally.  On 
expiration Friday, the action wasn't any better as the Nasdaq 
sunk into the close, finishing under 4100 intraday support.  
In checking out last year's late-July meltdown, I noticed some 
similarities.  Check out the charts below which show the VIX 
last year versus the VIX this year.

1999 VIX chart for July

 

2000 VIX chart for July

 

You can see the similarities in both patterns.  This goes along 
with the QQQ put play we were looking for this week.  Remember, 
we were looking for an entry for either Thu/Fri/Mon.  While 
watching the sell-at-all-costs action on Tuesday and Wednesday, 
I was waiting for a rebound to open a position.  Sure enough 
we got it on Thursday and I went long QQQ puts on Friday.  

Last week's QQQ chart

 

This week's QQQ chart

 

As we scanned for new plays for the Calls and Puts this week, 
we have been pressed to find anything that looks good on the 
call side.  When you look at 200 charts and find about five 
that look good enough to go long on, you learn to start taking 
the hint.  If the market weakness persists, I will let these 
puts run.  


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

PVN - Providian Financial

Here is an old friend we haven't seen in awhile.  We used to 
play this stock all the time before they ran into legal trouble 
for over-charging fees to their customers.  Now they are moving 
again as many Financial stocks are at or near new highs (MER, 
JPM, AXP, C and GS).  The thing that caught our eye was the 
move above $100 on increasing volume.  The play here is easy.  
We want to see $100 hold and the volume continue to increase 
as the stock moves up.  


 

******

The QQQ puts are the only position I have right now.  I am 
waiting for a dip to go long on some of my favorites again.  
I didn't list them because I don't expect to reach a short-term 
bottom in the coming week.  I've said it before and I will say 
it again, I am looking for great entry points in the coming 
months to open positions for the fall rally.  Until then, I 
will be picky about when and where I put my money.

Jim was out-of-town this weekend, but will be back on Tuesday.
  
Good luck!

Ryan Nelson
Editor


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

Firing On All Seven Cylinders 
By Austin Passamonte

Well, Friday’s action pretty much summed up follow through 
on good volume from Thursday’s close. Smack-dab in the heart
of earnings season, Pamplona on Wall Street but the bulls 
just can’t pull a sustained stampede together.

Yes there were some solid days leading in but now what? Here
we are in the middle of things, time to solidify our direction
and go. All tech leaders, financials and stalwarts need to 
step in tune with each other. Taking turns each day is just
treadmill behavior.

Reminds me of my very first car, a 1970 Pontiac LeMans. Had a
350 4-bbl carb and 4:88’s in a posi-rear. Man that car would
fly! Top end speed easily buried the 140 mph speedometer, or
so I was told. Until the time arrived when one cylinder 
began to lose compression and like dominos, the other seven 
followed suit.

If this summer rally is ever going to launch it needs to do
so right now with all cylinders firing at once. Simple as
that. No more waiting for the next report, Greenspan’s cryptic
speech or any other lame excuse. A hard rally right off the
starting line, right now. It’s a long ways until the next Fed
meeting otherwise, folks.

Let me ask you a serious question. Be honest now. If you had
to guess where this market will head based on all the evidence,
what would your verdict be? If 100% of your retirement fund 
was riding on the correct answer, what’s your reply? One roll 
of the dice, win or lose, all or none. What would your call 
be?

That’s exactly the way we need to analyze facts and data 
leading away from here. Our future does depend on where the
markets head to some degree or another. There can be no
place for blind bias, hope or prayer. The market will do as
it pleases and we can either ride the avalanche or get buried
under it regardless of direction. Objectivity is money!

I could clip & paste several prior “Sentiment” paragraphs
to share with you again. As usual, there remain two major
factors of concern.

Yes the VIX. It slides lower & lower each day. Take a peek
at historical charts when the VIX hits these levels and see
how the DOW and OEX respond when it finally releases. Make
up your own mind, don’t trust my lying eyes.

Commercial traders on the S&P 500. They stubbornly added to
a ten-year net short position right before the Dow & Comp 
heavyweights lined up to report. Are all these financial 
institutions daft, stupid or what? There’s a very good chance
some of that money comes from your own bank loans or even 
401K plans. Can we honestly believe they are acting like 
drunken conventioneers in Vegas?

Those massive short positions likely consist of front and
back-month futures contracts, some hedged with options. The
giants scaled their way short as prices rose just like you 
and I cost-averaged JDSU down while it fell to $95. Did we 
have strong feelings the announced buyout of SDLI wouldn’t
keep prices depressed very long? How’d that move turn out 
for us so far?

The commercials are entrenched deeper short than any point 
this decade. More so than October of ’98, ’99 or the spring
of 2000. That’s a pretty heavy bet on their part. Care to
raise them & ante? I’ll fold and wait for a show of hands,
thank you very much. The cards may begin turning face up on 
the table starting next week. Read ‘em and weep or gloat, 
depends on which side you buy in. Objectivity is money!
     

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.

Thur 7/20 close: 22.06               Sat 7/22 close: 21.47
                       

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          .59
Equity P/C Ratio             .45         .40          .55


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        1.29
OEX Put/Call Ratio    1.39           .93        1.06


OEX Maximum Open Interest Strikes/Contracts:

Puts                  800/6,839      800/7,371     A790/5,794
Calls                 825/16,857     825/14,660    A800/3,187
Put/Call Ratio          .41             .50           1.82


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     17.20 
(815 - 800)                 .93          .95      1.47

OEX Close:                 807          813         804

Underlying Support:
(800 - 785)                1.75         2.08       1.51
(780 - 760)                5.18         5.86       2.43 


What the S/R measure indicates: Net open-interest ratios 
are firm above 820 OEX level while underlying support is 
light. New volume this week will adjust these figures soon.


The OEX appears to remain below 820 for discretionary spread
or directional play consideration if the index tests this 
benchmark of resistance. 

30-yr Bond:           5.91%            5.81%        5.79%      

Light, Sweet 
Crude, Barrel:      $30.64            $30.50        $28.56


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   10,733          
NASDAQ; 3,831           4,177         4,184    4,094
NDX;    3,551           3,960         3,995    3,908
SPX      1417            1493          1495     1480
OEX       762             807           813      804


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

NASDAQ 100       
Net contracts;    - 689 short      - 5,578 short
Total Open
Interest %        2.6% net-long     38% net-short          

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


BULLISH SIGNALS 


Interest rates
5.79% 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.

IPO’s
Numerous IPO’s have been met with positive enthusiasm.


******

BEARISH SIGNALS

VIX
Today’s close near 21.47 is getting worse. We may have seen
the market top, near term.

Energy Prices
Prices are still too high. Ultimately this affects profit 
margins and inflation. August Crude closed $28.56 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. Broad market
strength this week will be vital to prevent history from
repeating.

Broad Market Weakness
All major indexes and most of the individual sector leaders
are suffering extreme weakness on a sustained basis.



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

As of Market Close - Sunday, July 23, 2000 

                                  Key Benchmarks
Broad Market           Last     Support/Resistance   Alert
************************************************************

DOW Industrials      10,733      10,550  10,950                
SPX S&P 500           1,480       1,435   1,520           
OEX S&P 100             804         775     822           
RUT Russell 2000        522         500     550           
NDX NASD 100          3,908       3,580   4,100         
MSH High Tech         1,034         985   1,100           

XCI Hardware          1,540       1,440   1,600           
CWX Software          1,211       1,160   1,360         
SOX Semiconductor     1,082       1,060   1,281         
NWX Networking        1,313       1,250   1,400         
INX Internet            568         470     605           

BIX Banking             558         540     580          
XBD Brokerage           571         500     590             
IUX Insurance           633         610     660           

RLX Retail              914         860     960            
DRG Drug                390         385     430             
HCX Healthcare          808         800     880             
XAL Airline             169         156     178           
OIX Oil & Gas           279         264     308       **       

Comments -  Oils (OIX) broke support and didn’t mount much of 
a fight.  Being in the right sectors and assessing risk remains 
critical.  If institutions are indeed selling the Oils, they 
will be putting the money somewhere else.  

Upward Support Revisions (MSH from 965)
Downward Resistance Revisions (INX from 637)(OIX from 315)
Downward Support Revisions (OIX from 285)


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

Volatility Changes Ahead
By Buzz Lynn
sectortrader@OptionInvestor.com

Have you been looking for a directional trade to buy low and sell 
high?  With the exception of maybe a well-timed, but short-term 
Biotech (BBH) or Broadband (BDH) call, it's been tough to earn a 
buck as volatility has fallen to recent lows - that is unless 
you've been selling time rather than buying it.  By selling puts 
and calls instead of buying, time value in options decreases on 
the other guy, not on us, with just the passage of time.  That 
premium evaporates right into our pocket even as we sleep.  
Sounds like a great plan.  Why would we want to do anything else?  
The answer is "volatility change".  How important is it?  
Volatility (generally measured as the VIX, or volatility index, 
but every option has its own implied volatility) determines the 
time value component of the option's price.  When volatility is 
high, options are expensive.  When volatility is low, options are 
cheap.  

With the VIX now at 21.47, its lowest closing level since March 
3rd, options have become relatively cheap on a historic basis.  
Remember the VIX has a typical range of roughly 20-30.  Here's 
the rub.  The VIX also generally signals a breakout or breakdown 
when it reaches either extreme, but it does not always accurately 
predict market direction.  The market could move either up or 
down.  With earnings more than half over (a few more biggies left 
to report this week, including TXN, NT, AMZN, JDSU, and WCOM), 
and many companies getting clobbered if they don't blow away the 
numbers, we don't see much of a reason for prices to rise, except 
perhaps on a few well-picked stocks with great outlooks.  "Summer 
Rally" may have already come cleverly disguised as earnings 
season.  Also, as Austin Passamonte has pointed out in the Market 
Sentiment many times, the COT indicates a big divergence between 
retail long positions and commercial short positions.  Right now, 
commercials are heavily short and usually right in their 
anticipation of market movement.  While we'll stop short of 
calling for a market reversal to the downside, it could happen.  
But no matter what direction, volatility is sure to reverse and 
rise with any big market move.

That said, it reasonable to conclude that buying cheap and 
selling dear is a smarter plan right now than selling cheap and 
buying dear, especially if the market decides it wants to head 
back under 4000.  Consider closing those short strangle positions 
before increasing volatility makes the value of the sold position 
more expensive.  The point is that with volatility low, now is 
the time to consider buying cheap premiums with the idea that any 
increase in volatility will increase the time value, and thus the 
total value of the option.

To that end, our HOLDR selection has stayed the same, but we're 
changing the nature of some of the plays to take advantage of 
what we think will be an increase in volatility coupled with a 
breakdown of the current trading range (at least on the NASDAQ).  
So that time decay doesn't affect our positions that much, we are 
going to look at longer time horizons on a few of them in order 
to give ourselves enough time to be right and not suffer 
catastrophic losses if we are wrong.  Our intent is to say 
hedged.

Can you say "Long Straddle"?  Sure, we knew you could!  Read on!

Want more understanding of volatility?  Be sure to read past 
columns by Lynda Schuepp, Mary Redmond, Austin Passamonte, and 
Chris Verhaegh.


Index             Last    Mon    Tue    Wed    Thu    Fri    Week

QQQ NASDAQ-100    97.56   1.06  -2.69  -2.88   2.25  -2.75  -5.00
HHH Internet     117.50   0.44  -1.88  -2.06   5.88  -4.38  -2.00
BBH Biotech      188.00   4.06   1.13  -6.88   1.19   4.50   4.00
PPH Pharm.        96.75   2.75  -1.25  -0.69  -2.19   0.94  -0.44
TTH Telecom       74.13  -1.94   0.06  -0.63  -1.06   0.44  -3.13
IAH I-net Arch.  100.19   1.38  -2.38  -1.19   5.25  -0.63   2.44
IIH I-net Infr.   63.69   0.06  -1.19  -3.38   4.75  -2.75  -2.50
BHH B2B           49.00  -0.19   1.00  -4.00   2.75  -2.94  -3.38
BDH Broadband     97.69   3.06  -3.63  -2.25   0.31  -0.13  -2.62
SMH Semicon.      89.63   1.63  -4.56  -3.50  -1.69  -3.81 -11.94
RKH Reg. Banks    98.63  -1.69  -1.38   1.25   2.25  -1.44  -1.00
UTH Utilities     93.75   0.06   0.06   1.63  -0.75  -0.25   0.75


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

QQQ - NASDAQ 100 $97.56 (-5.00 last week) Let's get right to it.  
Resistance lately has made itself known around $100, with 
extremes reaching to $102.  Support has been pretty good at $96 
with the next level hovering in the $92-$93 range.  While it 
doesn't appear to be a larger trend, $97 held up well over the 
last two days.  With earnings season already more than half over 
and winding down this week, an upside breakout of the QQQ appears 
unlikely any time soon.  By definition then, it remains 
rangebound with the possibility of further declines.  While CSCO 
and DELL won't report for a while longer, MSFT and INTC did 
nothing to bolster confidence in the tech sector when they 
reported last week.  Those two, along with CSCO make up a big 
chunk of the NASDAQ-100, and will often lead the broader moves.  
Couple that with a low VIX, and a preponderance of commercial 
shorts and we can see the storm clouds of breakdown forming on 
the horizon.  Nonetheless, there are bright spots with JDSU 
(which promised to exceed analyst estimates) reporting earnings 
on Wednesday.  At least the optical arena should remain strong 
until then.  However, that cannot compensate for a weak broader 
market.  With the possibility of volatility increases, we'll 
stick to buying cheap this weekend and avoid selling premiums 
that could cost more to buy back on a volatility spike.

Short Strangle:

While we love the concept of time decay working in our favor, 
options have become cheap enough with the possibility of becoming 
more expensive in the near-term that we no longer suggest taking 
any new short strangle or straddle positions.  It doesn’t mean 
you shouldn't do it as long as you thoroughly understand the 
risks and can move quickly if the trade goes against you.  We 
simply favor buying cheap and hedging over selling cheap and 
hedging.  You may want to consider closing any open straddle or 
strangle positions so the premiums don't re-inflate on you, 
making it more expensive to cover.  If you are in a play already, 
no worries!  Simply be prepared to cover if one of your sold 
strikes goes in the money by an uncomfortable amount.  Only you 
can determine that level based on your own risk profile and 
strike price.

Long Straddle:

A straddle is the simultaneous purchase of a put and a call at 
the same strike price.  Our desire is to see a big breakaway from 
the strike price - big enough to cover the cost of both the put 
and call, and give us profit in the process.  Profits naturally 
come from an intrinsic value move, but the gravy here is that we 
get even more value if increased volatility increases the amount 
of time premium we own.  Cheap time is what we want to take 
advantage of when we buy.  That market condition exists now as 
indicated by the low VIX.  That's the second of three conditions 
to satisfy before entering.  The first is that we must expect a 
big move in either direction with the expectation that volatility 
will increase.  The third is that we must give ourselves enough 
time to be right, say 30 days, without having our purchased 
premiums decay significantly on us.  Thus we need to sell at 
least 60 days before expiration.  By definition, that means we 
buy strikes at least 90 days, or three months out - preferably 
120 if it's affordable.  Remember though these look expensive on 
the surface, a volatility spike will increase their value even if 
the underlying issue doesn't budge.  Can you see that if options 
are expensive and the price of the underlying doesn't move, it's 
much more difficult to profit?  That's why premiums need to be 
historically cheap.  For starters, you may want to buy ATM 
strikes.  If you are more aggressive and expect a bigger move, 
you could enter a long strangle on this position too.  That would 
keep the premiums cheaper, but it means we'd need a bigger move 
to be profitable.  

Straddle:
BUY CALL DEC- 96 QVQ-LR OI= 981 at $13.63
BUY PUT  DEC- 96 QVQ-XR OI=4875 at $10.00
Net Debit = $23.63 or less

BUY CALL DEC- 98 QVQ-LT OI=1829 at $12.50
BUY PUT  DEC- 98 QVQ-XT OI=  80 at $11.00
Net Debit = $22.50 or less

Strangle:
BUY CALL DEC-100 QVO-LV OI=4667 at $11.50
BUY PUT  DEC- 94 QVQ-XP OI=1525 at $ 9.13
Net Debit = $20.63 or less


Covered Call:

Yes, QQQ is still rangebound.  With earnings winding down at the 
end of the week and the possibility of slump afterwards, if you 
are not already in a position, there may be a better buying 
opportunity this coming week.  Should QQQ take a dip, two things 
would happen.  First, you could buy the QQQ cheaper.  Second, 
while you would lose some intrinsic gain potential, selling ATM 
strikes might get you a better yield thanks to increased time 
value premium in the sold strike.  Consider dips to $96 or even 
$92-$93 as a buy/write opportunity.  If you are a bit more 
aggressive, you could buy the QQQ on a dip and sell calls on the 
rebound.  Resistance is mild at $99 and stronger at $100.  The 
good news is that you can still make money whether the volatility 
is high or low since you still collect a premium.  The danger is 
that QQQ continues to fall below your net debit cost.  So be 
prepared to exit when you reach you pre-determined level of pain.  
That might mean a 3% loss of position value from the time of 
purchase.  Use that as a rough guideline.  Everyone is different.  
The point is you don't want your $93 net debit position to get to 
$80.  Sell too soon if the trade goes against you.

QQQ = $97.56 

SELL CALL AUG- 97 QVQ-HS OI=  552 at $ 5.75, ND = 91.81 or less
SELL CALL AUG- 98 QVQ-HT OI= 1462 at $ 5.13, ND = 92.43 or less
SELL CALL AUG-100 QVO-HV OI= 6652 at $ 4.13, ND = 93.43 or less
SELL CALL AUG-103 QVO-HX OI=  181 at $ 2.94, ND = 94.62 or less

Calendar Spread:

This one acts much like 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.  Again, consider waiting to buy the dip.  Once 
you do, you could buy the underlying long-term call.  Support is 
at $96, then again at $92-$93.  Then you could simultaneously 
sell a near-term call, or wait for a bounce up to sell a higher 
priced strike.  Resistance is at $99, then $100.  It's important 
to remember to cover by buying back the sold strike if the 
underlying stock (QQQ) significantly exceeds the strike value or 
if the time portion of the total premium gets really low in a 
hurry.  Hopefully you won't wait that long as it could become 
painful in the latter situation.  Sell too soon.

BUY  CALL DEC- 94 QVQ-LP OI= 1602 at $14.63

SELL CALL AUG- 97 QVQ-HS OI=  552 at $ 5.75, ND =  8.88 or less
SELL CALL AUG- 98 QVQ-HT OI= 1462 at $ 5.13, ND =  9.50 or less
SELL CALL AUG-100 QVO-HV OI= 6652 at $ 4.13, ND = 10.50 or less
SELL CALL AUG-103 QVO-HX OI=  181 at $ 2.94, ND = 11.69 or less

Long Calls

You can trade these at support and resistance - $96 support 
followed by $92-$93; resistance is at $99 and $100.  However, 
when the market is locked in a trading range.  This is a tough 
way to earn a buck.  Friday had a bit more NASDAQ selling volume 
than we'd like to see and the market lost its bullish bias on 
that down day.  You need to be agile here and possess some good 
trading skills to earn a living with this strategy, but it can 
still be profitable.

At Support:
BUY CALL AUG- 93 QVQ-HO OI= 1055 at $8.13 SL=5.75
BUY CALL AUG- 98 QVQ-HT OI= 1462 at $5.13 SL=3.00
BUY CALL AUG-100 QVO-HV OI= 6652 at $4.13 SL=2.50

At Resistance:
BUY PUT  AUG-100 QVO-TV OI= 2965 at $6.25 SL=4.25
BUY PUT  AUG- 98 QVQ-TT OI= 3866 at $5.38 SL=3.50
BUY PUT  AUG- 93 QVQ-TO OI=10893 at $3.13 SL=1.50

Naked Puts

Premiums are getting to cheap to sell with the risk of a reversal 
in volatility, not to mention the potential for a drop in stock 
prices after earnings season winds down.  No naked puts to sell.

Average Daily Volume = 24.77 mln


-----

BBH - Biotech $188.00 (+4.00 last week) Hmmm.  Looks like a $180-
$190 trading range has started to develop for BBH.  The good news 
is that BBH found support just over $183 and confirmed the move 
up by breaking back over $184 convincingly.  That would have made 
a nice entry.  Intraday, $187 held as support.  Since BBH is once 
again nearing resistance, we'll want to be protective of our 
profits by keeping a stop in place, say for any move under $187.  
At that point we will have to evaluate the reason for staying 
long the BBH, and perhaps turn it into a straddle/strangle play.  
But for now we stay long calls.  If BBH can break $191.50, the 
closest point of resistance, that would be a cue to consider 
going long for a ride into blue sky.

BUY CALL AUG-180 BBH-HP OI= 46 at $16.50 SL=12.00
BUY CALL AUG-185 BBH-HQ OI= 65 at $13.75 SL= 9.00
BUY CALL AUG-190 BBH-HR OI= 99 at $11.13 SL= 8.25

Average Daily Volume = 605 K


-----

HHH - Internet $117.50 (-2.00 last week) With YHOO, ATHM, and AOL 
already reporting earnings, this sector should have taken a 
beating, but it hasn't.  Support at $117, then $115 is holding 
well.  Careful though.  PCLN reports Monday; EBAY and ELNK report 
Tuesday and AMZN reports Wednesday.  Any of these that disappoint 
could send HHH on fast trip to the basement.  Until then the 
anticipation should keep the sector on solid ground if the rest 
of the market cooperates.  Dip buying could work well here on 
Monday as long as HHH remains above $115.  Move on if it doesn't.  
Resistance is at $122, so HHH has room to run.

BUY CALL AUG-115 HHH-HC OI= 48 at $ 9.13 SL=6.25
BUY CALL AUG-120 HHH-HD OI=222 at $ 6.75 SL=4.75
BUY CALL AUG-125 HHH-HE OI=123 at $ 4.75 SL=3.00

Average Daily Volume = 928 K


-----

BDH - Broadband $97.63 (-2.62 last week) While BDH has been 
finding support at $96 for the last two days, those days may be 
numbered - but not until LU and JDSU report earnings Tuesday and 
Wednesday, respectively.  JDSU has already promised to beat 
estimates, while SDLI's conference call was a big winner too.  
Sequential growth was over 30% without acquisitions figured in.  
Gross margins went form a high 52% to a lofty 57%.  SDLI is one 
money making machine.  Where there is one cockroach, there are 
many, so look for continued strength through Wednesday.  
Technically, BDH's pullback and bounce off its 10-dma of $96.40 
is a good sign, especially in a weak market like we saw on 
Friday.  However $100 is tough resistance.  We think BDH is 
playable now or on any pullback under $97.  But if you are more 
conservative, you may want to wait for a breakout over $98 before 
getting in.  If you sell puts, get ready to cover by mid week on 
any post-earnings depression form NT and JDSU.

BUY CALL AUG- 95 BDH-HS OI= 41 at $ 7.88 SL=5.50
BUY CALL AUG-100 BDH-HT OI= 38 at $ 5.25 SL=3.25
BUY CALL AUG-105 BDH-HA OI= 43 at $ 3.38 SL=1.75

SELL PUT AUG- 95 BDH-TS OI= 30 at $ 4.13 SL=6.00

Average Daily Volume = 153 K


-----

IAH - Internet Architecture $100.19 (+2.44 last week) With DELL 
and CSCO yet to report earnings (early August), and with its soul 
mate, BDH on a good run, we stay long on IAH.  Technically, while 
resistance has been formidable at $101 the last two days, the 5-
dma of $98.50 continues to hold.  It's still showing strength in 
the face of market weakness.  That said, feel free to buy dips to 
that level (for those with itchy trigger fingers) or wait for 
another pullback to the historical support level of $97.  
Likewise, a breakout over $101 would leave smooth sailing all the 
way to the next resistance at $105.  Looking good.  Relatively 
cheap options too.

BUY CALL AUG- 95 IAH-HS OI=40 at $7.13 SL=5.00
BUY CALL AUG-100 IAH-HT OI=31 at $4.13 SL=2.50
BUY CALL AUG-105 IAH-HA OI=44 at $2.06 SL=1.00

Average Daily Volume = 44 K



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

PPH
IIH
BHH
SMH
TTH
RKH
UTH



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

For the week of July 24, 2000

Monday

None Scheduled

Tuesday

Existing Home Sales      Jun    Forecast:  4.80M    Previous:  5.09M
Consumer Confidence      Jul    Forecast:  139.0    Previous:  138.8

Wednesday

None Scheduled

Thursday

Initial Claims           07/22  Forecast:   285K    Previous:   311K
Employment Cost Index    Q2     Forecast:   1.4%    Previous:   1.4%
Durable Orders           Jun    Forecast:  -0.4%    Previous:   6.0%
Help Wanted Index        Jun    Forecast:     NA    Previous:     83

Friday

GDP                      Q2     Forecast:   3.7%    Previous:   5.5%
GDP Chain Deflator       Q2     Forecast:   2.5%    Previous:   3.0%
Michigan Sentiment       Jul    Forecast:  108.0    Previous:  108.0
 

Week of July 31st

07/31 Chicago PMI
08/01 Personal Income 
08/01 PCE
08/01 Auto Sales
08/01 Truck Sales
08/01 Construction Spending 
08/02 New Home Sales
08/02 Leading Indicators
08/03 Initial Claims
08/03 NAPM Services
08/03 Factory Orders
08/04 Nonfarm Payrolls
08/04 Hourly Earnings
08/04 Average Workweek 


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This newsletter is a publication dedicated to the education 
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Sunday                                                      2 of 5

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TRADERS CORNER
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Profiting from puts after earnings
By Mary Redmond

Since many stocks go down after their earnings are reported
it is often possible to profit by buying a put on a stock the
day after earnings are reported.  This strategy is best used
in a down trending market.  If the markets are trending lower
you can look for stocks which have just reported earning which
were below the analysts expectations, or in some cases earnings
which only match the expectations. 
 
Broadcom reported earnings on Tuesday evening.  The earnings
were excellent, which was probably expected because the stock
has a history of superb earnings in a rapidly growing industry.
This is part of the reason Broadcom has grown to be a $50 
billion dollar company from a $10 billion dollar company in 
only a couple of years.

On Wednesday Broadcom traded at $145 in the morning.  The Dow
and Nasdaq were both trending lower.  The VIX was 22.  BRCM's
technicals were giving sell signals.  For example, the MACD
histogram was starting to move to the negative from the 
positive.  The stochastic oscillator lines were both crossing
the high level to the low level.  

In addition, Broadcom had recently moved up nearly 100 points in
two months.  It seemed highly likely that the stock was due for
a sell off the day after earnings in a down trending market.  
So I sold BRCM at $145 and the stock dropped over 8 points for 
the day.  

It is possible to make money buying calls or stocks in a down
market, or puts in an up market, but the percentage gain will
usually be less.  It is usually easier to make money by following
the trend of the market, the sector and the stock.  Before you
buy calls it is usually best to see both the Dow and Nasdaq up
(ideally) or at least the Nasdaq if you are trading tech stocks.

There are exceptions to this rule.  For example, on Friday the 
Dow and Nasdaq were both lower and JDSU was trending higher.  
The live charts showed the trades going through fast and furious,
with people breaking down the doors to get in to this stock. The 
day before news came out about the stock being added to the S&P 
500, and over 70 million shares traded.  Buying a call on Friday 
morning was one of the easiest trades I ever made.  However, 
opportunities like this don't come along very often.

It is also important to use as many technical indicators as
possible.  None of the technical indicators are accurate 100%
of the time.  A combination of technical indicators works best.
For example, the stochastic oscillator can be a buy signal if
the lines move from an oversold condition (approaching 0) to
the middle line of the chart.  But the stochastic alone is not
as accurate as the stochastic together with the MACD histogram.
Ideally, you should have an understanding of the company's 
business model along and trading pattern, and use this in 
conjunction with as many technical indicators you can.

The simplest way to make money on the downside is probably to
buy put options.  Some traders sell stocks short when they 
think the stock will drop.  If you sell a stock short when it
is going down and the market is going down you may be able to
buy it back cheaper.  However, it is highly risky to hold a 
short position overnight in today's highly volatile market. 
This is because stocks gap up at the opening frequently if news
is released prior to the market open.  For example, if you had
sold JDSU short on Wednesday, you might have had to buy it
back at a much higher price the next day.

AMG Data reported that last week's inflows to equity funds were
higher than they had been over the last two weeks.  A total
of $3.2 billion in net cash went into equity funds for the
week ending July 19th.  This included a net inflow to technology
and growth funds, with net outflows from biotech, health care
and international funds.  The investment company institute's 
web site reported that retail money market funds had a net
inflow of $3.63 billion and institutional money market funds
had a net outflow of $1.9 million.  The flows were slightly
lower than the flows reported in June, but the net level is
still positive, and the four week moving average into equity
funds is a positive of approximately $2.5 billion.

Margin debt at NYSE firms in June rose $6.5 billion or 2.7%
to $247.2 billion in June from the end of May.  In addition,
withheld income tax collections rose to $48.2 billion during 
the first eight business days of July, a 12.2% gain over last
July.  This is important because it can indicate whether or 
not businesses are slowing down, which can slow down cash flows
to 401K plans and retirement contributions.  If these numbers
slow to a single digit net gain from last year it may indicate
that flows to the market might slow.  

The ipo market was also robust this week.  The new public stocks
included DCGN, TBIO, AGNT, SPRT, VASC, AIRN,and ERJ, all of which 
traded at a strong premium from the opening price.  Many more 
ipos have been priced to start trading in the next few weeks.
If ipos start trading at high opening prices this is usually 
a short term bullish indicator.  However, it is worth noting
that many more ipos are being priced than are actually coming
to market, which means institutional and retail selectivity 
remains high.  It also indicates that the ipo market may not
be drawing as much cash away from the market as it did in 
previous quarters.

If you talk to most retail and professional traders as well as
fund managers most of them would probably say that they expect
the markets to rally this fall.  Those same people would most
likely say that they expect a correction at some point between 
now and next November.  It seems like many traders are hanging 
in there and trying to eke out the last little bit of profit 
they can get before taking off for vacation, and yet no one 
wants to miss the rally they expect in the fall.

Contact Support


******

Butterfly, Butterfly, Where Did You Go?
By Lynda Schuepp

On July 2, I wrote an article about a butterfly spread on GE 
as an appropriate strategy for a sideways market.  I never 
dreamed it could have turned out so perfectly.  Imagine making 
146% in a sideways market on a stable blue-chip stock?  Let’s 
review, shall we? 

In a sideways market, the trading range is typically support 
and resistance.  An appropriate and simple sideways spread 
is a long butterfly, which consists of a bull and bear spread, 
using all calls or all puts.  Details can be found in my past 
article from July 2nd: “Where did they put Ole Jesse James”.  

To review, the structure of a butterfly spread consists of a 
body made up of 2 short options and one long option for each 
wing, using all calls or all puts, all expiring in the same 
month.  In the article I selected GE calls to construct this 
spread.  Based on the criteria given in the article, I selected 
the July 50, 55, and 60 calls.  We bought one unit of the July 
50 calls, sold two units of the 55’s, and bought one unit of 
the 60.  The bottom half of the butterfly is nothing other than 
bull call spread.  You are buying the July 50 call and selling 
the July 55 call.   The top half is a bear call spread-selling 
the July 55 call and buying the July 60 call.  The downside 
break-even was 51-5/8 (50 plus the cost of 1-5/8), and the upside 
breakeven is 58-3/8 (60 less the cost of 1-5/8).  The maximum 
profit is obtained if the stock closed at 55, the middle strike. 
GE closed at 54-1/8; it doesn’t get much better than that!  

Here is the Chart I used to determine the spread on 7/2:


 

GE had been in a trading range since the third week in March 
with support at 48 and resistance at about 55.  GE closed at 
53 on July 2nd.  At that time, I had decided to take the higher 
range of strikes 50-55-60 instead of 45-50-55 because I was 
more bullish after that large up candle on June 30th.  Remember, 
maximum profit is obtained if the stock closes at the middle 
strike.  Since GE was already at 53, I thought it was more 
likely for GE to close at 55 versus 50. 

Based on the option prices at that time, the July 50 calls 
would have cost about 2-1/2 each; the July 55 calls could have 
been sold for about 1/2 each; and the July 60 calls would have 
cost about 1/8.  Total cost for the spread was about 1-5/8.  
The maximum reward was 3-3/8, (5 less 1-5/8). 

An updated chart of GE till expiration on Friday is shown:


 

Notice GE stayed in that same channel and never broke below 48 
or above 55. The next couple of days after putting on the spread, 
GE danced around the lower break-even and got as low as 49-1/2, 
but never hit the stop, which was set at resistance of 48.

At expiration on Friday, the 50 calls closed at 4-1/8 x 4-3/8.  
We could have sold them for at least 4-1/8.  In fact they traded 
as high as 4-5/8 during the day.  The 55 calls closed at 1/16 
and traded as high as 3/16 during the day.  You could have let 
the 55 calls expire worthless, but for such small change it is 
always better to buy back the short option.  The 60 call closed 
at an ask of 1/16, which you never would have been able to get 
and probably wouldn’t have been worth the commission for most 
people to do so.  The 60 calls would obviously have expired 
worthless.

Let's summarize:

The July 50 calls could have been bought at 2-1/2 and sold 
at 4-1/8, profit 1-5/8 per contract.  The July 55 calls could 
have been sold at 1/2 each and bought back at 1/16, profit 7/8 
per contract. The 60 calls could have been bought at 1/8, loss 
of 1/8.  Total profit was 2-3/8 per contract.  That is a 146% 
return in only 19 days on a very conservative strategy in a 
sideways market.  Annualize that return and you will find that 
it translates to over 2000%!      

Since GE is a bell-weather stock, a lot of analysts use it as 
a barometer of the overall market.  With Greenspan not definitive 
(is he ever), it is highly likely that GE will continue to trade 
sideways with a slight bias to the upside. The butterfly spread 
still might be an appropriate strategy to use for August using 
the 50-55-60 calls again, but be careful because stocks and 
markets don’t stay range-bound forever.  It the stock closed 
below support or above resistance, get out and don’t look back.

If I were to put on this same spread for August it would cost 
about 2-5/16, that’s the total risk.  Maximum reward is 2-11/16 
(5 less 2-5/16) or about 115%.  My minimum criterion is a 
150-200% return on this strategy.  Even though the price of GE 
is close to what is was when the spread was put on in July, the 
cost of the spread is a little too high.  The reason for this is 
two-fold.  First, there is more time until the August expiration 
so the “in-the-money” call (August 50) will be proportionately 
more expensive because of time value and secondly, GE is 1-1/8 
higher than it was when the July spread was put on, so the 
“in-the-money” call (August 55) will also have more intrinsic 
value.  I will be watching GE to see if there is an entry a 
little later on this week.  It is possible that if GE goes up 
to 55 or 56, the short calls (August 55’s) will offset the 
cost of the August 50.  Good luck and always keep learning.  

P.S.  I have updated the orginal spreadsheet on GE with the 
expiration information as well as the August prices as mentioned 
in the article.  I would be happy to e-mail anyone interested in 
it.  Also a reader send me a dynamite update of my old spread-
sheet, but I must have zapped it, so if you are that reader, 
please re-send to me, I would love to update my spreadsheet 
before sending my new one out to readers.

Contact Support


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

Update from St. Louis

Hi folks:

We had our regular fortnightly meeting on July 10.  Our next meeting will be
July 24 where we will review additional information on the Bollinger Bands.
Meeting is 7:00 pm at our regular location.  Our meetng attendance continues
to increase.  Reminder of our Thursday lunches at Ozzie's.  I have our room
reserved through August.

At our meeting we reviewed the first part of the Bollinger Band video.  The
segment we viewed traced the history of various means of banding stock
prices including Keltner, Bomar and finally Bollinger Bands.  The Bollinger
Bands are created such that they are not a fixed distance from the moving
average, but instead are calculated based upon price volatility;
specifically the bands are calculated based on 1.5, 2.0 or 2.5 standard
deviations of the closing price relative to the moving average over the
duration of the period.  The recommendation is that short term traders might
consider using 10 period intervals and bands that are 1.5 standard
deviations on either side of the moving average, intemediate term traders
might select 20 period intervals and 2 standard deviations with long term
traders picking 50 intervals with 2.5 standard deviations.  The period can
represent days, weeks, 15 minute intervals or whatever the trader may be
interested in.  Backtesting with a 10, 20 and 50 period interval is
recommended to see what works best with a given security to identify price
trends and breakouts.

We also discussed several upcoming seminars.  Information is available from
various members.

We are considering the start of a resource library including books and tapes
contributed by members of the group as well as those we may buy as a group.
The location and accounting is to be determined.

A collection was taken up at the end of the meeting to offset the cost of
the Bollinger tapes.  At future meetings we will pass an envelope asking
that attendees (other than first timers) contribute $5.  Denny Fischer
volunteered to be the treasurer and donated the collected funds from the
last meeting as seed money for a club checking account from which we can pay
for subsequent educational materials or other expenses.  An envelope will be
routed beginning next meeting.  Payment will be on the honor system.

We are still waiting for a response from OIN for a guest speaker.

The indices have shown they have no intention of revisiting 9k or 3k.  I
believe we will see it flat to down over the next couple of months as the
past gains are digested, the earnings outlook improves and the political
landscape becomes clearer.  Good time to sell covered puts and calls.  I
expected MO to turn up after the Fla jury rewarded smokers for their habit
(some of the jurors were smokers-isn't that a conflict of interest?).  I
still believe we will see it move strongly when the appeal information is
firmed and they begin showing improvements with their other divisions (of
course everybody knows I'm long the LEAPS).  Lots of good stocks with good
propects.

Anyone with plays or comments they want to share, pleas pass on.  Attached
is the information Vernon discussed at the last meeting from TC 2000.

Good trading.  I'm off to the island of Margaritaville tonight to see JB.

Maris

Contact Support



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

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

HGSI - Human Genome Sciences $162.50 (+9.25 last week)

See details in sector list




Put Play of the Day:
********************

CMOS - Credence Systems $46.69 (-9.63 last week)

See details in sector list




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

Index      Last    Week
Dow    10733.56  -79.19
Nasdaq  4094.45 -151.73
$OEX     804.55  -10.97
$SPX    1480.19  -29.78
$RUT     522.70  -19.93
$TRAN   2808.42 -110.62
$VIX      21.39   -1.22

Calls

CRA      112.38   20.06  New, strong sector and Aug.3rd earnings
HGSI     162.50    9.25  Biotechs buck trend with 2 day rally
PVN      102.38    7.88  New, blow out numbers and analyst talk
VRTX     120.19    5.19  MUST exit this play by Tuesday's close
COF       55.81    4.81  New, "Charge It!" is music to COF's ears
MRVC      75.50    2.88  Keeps on running before Thursday earnings
NT        81.25    2.06  MUST exit this play by Tuesday's close
DISH      44.94    0.75  "Dishing" up another earnings play
SCMR     138.75    0.56  Stealing optical market share from LU
ARBA     124.81    0.25  Consolidation and breakout pattern intact
BRCD     199.88   -6.06  Dropped, long and profitable run
CREE     138.44  -10.75  Dropped, falling on increasing volume
GSPN     133.94  -12.06  Patient traders got numerous entry points
CFLO      70.00  -13.00  Dropped, plunged through major support
TIBX     112.00  -15.00  Dropped, appears to have lost momentum
KANA      54.00  -16.44  Dropped, can't ignite further euphoria
CMTN      84.38  -30.88  Analysts still like the DSL company

Puts

CMRC      53.38  -16.56  New, freefall after earnings is the play
RFMD      75.38  -13.19  New, will Jon Joseph get the last laugh?
ELON      39.00  -10.81  New, didn't even run up into earnings!
CMOS      46.69   -9.63  Could it be, just maybe, the semis peaked?
CHV       78.50   -5.22  Dropped, performed like a trooper
GTW       62.88   -3.50  It's been a tough summer for box makers
IP        34.75   -0.84  Nice try by bulls, bears still in charge
AETH     183.00    1.63  Dropped, earnings Tuesday BEFORE the bell


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

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


CALLS

KANA $54.00 (-16.44) Any last minutes hopes for an upswing have 
evaporated.  KANA's slump on Friday put it well below the near-
term DMAs.  If you had any existing positions, your stops should 
have certainly bailed you out.  Even though there's three 
sessions left to trade, an entry off this level is not wise.  
KANA would have to ignite an astonishing display of euphoria, 
and at that, you'd have to exit so quickly and precisely that 
it's just not worth the risk.  So move on to greener pastures.  
There are other opportunities out there from which to profit.  
The company is reporting earnings this Wednesday, after the 
market, so close open positions prior to the close.

BRCD $199.88 (-6.06) We have had a long and very profitable run
on our BRCD play, but it is time to move on.  Since picking the
stock in early June below $140, we have watched in amazement as
buyers have flocked to the stock, driving the price as high as
$211.25 early last week.  Although there is still more than 3
weeks until the company announces earnings in mid-August, the
stock is looking a bit top-heavy at these lofty levels.  The
price action over the past several days has become more and
more directionless (or less directional, whichever you prefer),
making us think that we may be near a top.  Although there may
still be more profit in the play, the deteriorating sentiment
in the broader markets is making us nervous.  Rather than hold
on in hopes of another spurt as earnings approach, we are
content to take our profits and go searching for a new play
that isn’t quite so long in the tooth.

TIBX $112.00 (-15.00) The darling known as TIBX has appeared to
have lost its momentum.  After successfully rallying for nearly
four straight weeks, TIBX succumbed to profit taking and the B-2-B
bears last week.  There was no specific news to spur the selling
last week, rather, traders decided to lock in their gains after
TIBX's fantastic run.  The stock closed well below its 10-dma
for the first time in over a month.  Friday's slide below $115
should have triggered some of our stops and protected gains.  And,
although TIBX's recent decline has come on weak volume indicative
of profit taking, we don't want to hang around to see our gains
erased.  TIBX has treated us well, but it's time to take profits.

CFLO $70.00 (-13.00)  The late-day buying we witnessed Thursday
afternoon failed to return Friday morning.  CFLO plunged in the
first hour of trading en route to taking out support at $75, and
falling below its 10-dma.  The stock actually dipped below its
next major support level at $70 in early trading.  We saw several
of CFLO's major support levels fail last week in part from nasty
profit taking and a generally weak Tech sector.  What was a
beautiful up-trend last week has turned into an ugly downtrend.
With Friday's slide, CFLO traced yet another lower low in what
appears to a developing descending channel.  Needless to say, the
CFLO bears are growling and we are dropping the play.

CREE $138.25 (-10.94)  CREE received some positive press Friday
evening on CNBC from Robert Loest of the IPS Millennium Funds.
Too bad he didn't speak up earlier in the day!  The Semiconductor
sector suffered another blow from the bears Friday which caught
up with our CREE play.  CREE held its own last Thursday despite
the heavy selling in the chips.  But, Friday's bloodletting was
too much.  The stock fell out of its trading range after slipping
below major support at $145.  The losses mounted towards the end
of trading as CREE fell further going into the weekend.  What's
especially disconcerting was CREE fell on increased volume.  With
earnings just around the corner, we're selling too soon before
the losses mount.


PUTS

AETH $183.00 (-1.63)  When we started this put play, the stock
was drifting down on low volume, breaking through key resistance
points with ease.  Now we find the stock drifting upwards on low
volume through those same resistance levels.  On a weak Friday
for most issues, AETH moved up on higher volume, helped by a buy
rating initiated by Thomas Weisel.  Despite encountering
resistance at $185, AETH managed to close above the key
resistance level of $180.  In doing so, AETH also closed above
the 5- and 10-dmas as well as the 100-dma.  Since AETH is set to
report earnings on Tuesday before the bell, we are closing this 
play.  Despite its recent upward movement, a negative NASDAQ next 
week could bring it down for a relatively good exit, but based on 
the upside performance, we must drop our coverage.

CHV $78.50 (-5.25)  Nice play!  CHV performed like a trooper 
and provided us with ample opportunity to make some gains.  The 
play offered entry points starting at $82 on a decline, then 
followed up on Friday with a slide under light support at $80.  
Friday's close at $78.50 was smack on the low of the day.  This 
coupled with the strong volume on the decline is certainly 
bearish; and perhaps CHV will make a break for firmer support at 
$70 next week.  However, it's time to start planning an exit if 
you have any open positions.  Chevron is reporting its earnings 
BEFORE the open on Tuesday, so you need to be out by Monday's 
close.  Please don't take a chance and hold over the 
announcement.  This event and the attractive share price could 
trigger a reversal.   


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

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

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

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

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

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

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



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

CRA - Celera Genomics $112.00 (+19.25 last week)

Celera's mission is to become the definitive source of genomic,
proteomic and related biological and medical information.  Celera
uses this information for an integrated information and discovery
system available to researchers in pharmaceutical, biotechnology,
and academic institutions on a subscription basis.  The discovery
and information system includes software tools that provide the
ability to view, browse and analyze this information in an
integrated way to facilitate discovery.  Celera also offers a
variety of services to customers to assist in the analysis and
interpretation of the data.

Ever since the biotech sell-off this past March, many of the
genomics issues have recovered nicely.  Stocks such as HGSI,
MYGN, and PDLI have moved strongly off those March lows and the
biotech index has almost doubled since then.  No longer do they
have to beware the Ides of March.  With the genomics sector hot
again, one would think that Celera would be a prime beneficiary
of the move.  After all, Celera's middle name is "Human Genome",
after accomplishing the landmark achievement of completing the
map of the human genome much sooner than expected, the stock
moved lower as traders celebrated with a sell-on-the-news party. 
Building a base and finding strong support at $90 (currently its
200-dma) for the greater part of this month, the stock now looks
poised to move on up, bouncing off its 50-dma, currently at $92. 
Breaking through resistance at $110, CRA also broke out above its
100-dma, currently at $105.  The $105 point has been a thorn in
the side of CRA.  Testing it unsuccessfully numerous times this
past month, it is heartening to see it finally break through on
strong volume.  Support levels abound for the stock, with the
5-dma currently at $103.75 and 10-dma at the psychological level
of $100.  An ensuing rally for the stock will find the 5- and
10-dma to provide support and bounces off these levels can be
bought by aggressive traders.  Looking ahead, the next level of
resistance for the stock is $120.  A break through $120 will
leave a clear path to $130.  With so many support levels below
the stock and little resistance, any positive news from the
company could move the stock up, and fast, if Thursday serves as
an example.

Not content to stay within its own little niche, this week saw
analysts announcing on behalf of Celera its interest in joining
the business of drug-making.  The analysts made their predictions
on Friday based on comments by Celera's President and Chief
Scientific Officer Craig Venter when he commented that he and his
company were considering whether or not to branch out into making
drugs for cancer and other diseases.  Kind words from Eric
Schmidt, a pharmaceuticals analyst for SG Cowen Securities and
Winton Gibbons, an analyst for William Blair & Co., are also
helping the stock.  As the market welcomed Celera's possible
widening of their business model and continues to discount the
future based on it, investors and traders alike could benefit
from the prospects of positive future cash flows.

BUY CALL AUG-110*CZA-HB OI=253 at $14.88 SL=11.00
BUY CALL AUG-115 CZA-HC OI=247 at $12.75 SL= 9.75
BUY CALL AUG-120 CZA-HD OI=143 at $10.50 SL= 7.50
BUY CALL SEP-115 CZA-IC OI= 92 at $19.75 SL=14.50
BUY CALL SEP-120 CZA-ID OI=243 at $16.00 SL=11.50

SELL PUT AUG-100 CZA-TT OI=379 at $ 6.50 SL= 9.50
(See risks of selling puts in play legend)

Picked on July 23rd at  $112.00     P/E = N/A
Change since picked       +0.00     52-week high=$276.00
Analysts Ratings      5-3-0-0-0     52-week low =$ 10.25
Last earnings 04/26   est=-0.51     actual=-0.44
Next earnings 08-03   est=-0.35     versus=-0.32
Average Daily Volume = 1.88 mln



COF - Capital One Financial $55.81 (+4.81 last week)

As one of the top 10 credit card issuers in the U.S., Capital
One’s secret weapon is its vast databases.  The company uses
this data to match a potential Visa or MasterCard customer to
any one of its thousands of cards, varying in annual percentage
rates, credit limits, finance charges and fees.  Ranging from
platinum and gold cards for preferred customers to secured and
unsecured cards for customers with poor credit histories, the
company has a credit card for just about anyone.  The company
also sells wireless phone services, mortgage services, and
consumer lending products.

The words "Charge it!" are music to Capital One’s ears, as the
bulk of the company’s business is credit card related.  As proof
that the American consumer is still spending (at least on
plastic) prolifically, COF announced solid earnings on July
12th, posting year-over-year revenue growth of more than 26%.
This is part of a recurring theme in the Financial sector as
company after company has come in with strong earnings.  While 
the tech-heavy NASDAQ continues to struggle in its trading range, 
many of the Financial stocks are performing well, including COF.  
After a slight post-earnings dip, the stock has charged (pun 
intended) to new highs on strong volume.  Thursday’s move brought 
the stock above resistance at $55, and it was encouraging to see 
it hold above this level in light of the weakness in the broader
markets on Friday.  The 5-dma (currently at $53.44) has been 
providing support ever since the stock broke out in early July.  
With the recent strength, COF looks like it is due for a pullback 
as the price has been riding the upper Bollinger band for the past 
4 days and the Stochastics are buried deep in the overbought
zone.  The 5-dma sits just above chart support at $52-53, so
dips to this level look attractive for new entries.  Just make
sure that strong buying volume continues to support the price
before jumping into the play.

After meeting earnings estimates on July 12th, COF got a boost
from Alyssa Sibley at Morningstar.com.  Citing the company’s 
consistent profitability, 24% long-term expected growth rate and 
the fact that the stock trades at just 18 times its projected 
2001 earnings, Sibley urged investors to check out COF.  Over just 
the past week, the company has launched credit card products with 
iWon.com and Major League Soccer, and announced its 22nd 
consecutive quarterly dividend, payable on August 21st.

BUY CALL AUG-50 COF-HJ OI= 185 at $7.13 SL=5.00
BUY CALL AUG-55*COF-HK OI=1745 at $3.75 SL=2.25
BUY CALL AUG-60 COF-HL OI=1539 at $1.69 SL=0.75
BUY CALL SEP-55 COF-IK OI= 809 at $5.38 SL=3.25
BUY CALL DEC-55 COF-LK OI= 212 at $8.25 SL=5.75

Picked on July 23rd at  $55.81     P/E = 28
Change since picked      +0.00     52-week high=$56.38
Analysts Ratings   13-10-1-0-0     52-week low =$32.06
Last earnings 07/00  est= 0.54     actual= 0.54
Next earnings 10-11  est= 0.58     versus= 0.45
Average Daily Volume  =  908 K



PVN - Providian Financial Bancorp $102.38 (+7.88 last week)

Providian Financial Corporation provides consumer lending 
products such as home loans, credit cards, and other fee-based 
products. The Company mainly issues secured credit cards to 
customers with not-so-perfect credit histories and charges a 
high fee and high interest rates. With the use of direct-mail, 
phone solicitations and online advertising, Providian has been 
able to attract more than 12 mln customers.  The company has 
operations in the US and the UK.  

When there's a strong earnings report, a lot of positive coverage, 
and interested buyers, a stock is inclined to breakout.  PVN did 
just that on Thursday after announcing blow-out numbers before 
the market opened.  The company reported record 2Q net income 
(before one-time charge) at 187.6 mln, or $1.29 p/s, beating the
Street's estimates by $0.04!  Providian increased its net income 
by 48% over 126.5 mln, or $0.87 p/s, in the same quarter 1999.  
Buyers were lined up to get a piece of PVN right from the open.  
The two-day buying spree pushed PVN through the resistance level 
of $95 and set the tone for the possibility of a stock split.  
PVN was already considered a split candidate above $90, but the 
break out above $100 and the new 52-week high ($102.88) may seal 
the fate.  As far as the immediate future, PVN is clearly a 
momentum play driven by good news, so look for additional analyst 
coverage, strong volume, and a positive market sentiment to propel 
PVN higher next week.  Shorter-term support is at $98-$102, but 
much firmer at the 10-dma level ($95.38).  Enter on intraday 
weakness, but be careful of dips below the 5-dma line (currently 
at $97.56). 

On Friday, three influential firms gave PVN star coverage.  There 
was AG Edwards with an upgrade to a Buy from an Accumulate.  And 
First Union Securities reiterated its Strong Buy recommendation 
and $125 price target.  While Lehman Brothers maintained its 
Neutral rating, it raised PVN's price target to $125 from $95.

BUY CALL AUG- 95 PVN-HS OI=  97 at $9.88 SL=7.00
BUY CALL AUG-100*PVN-HT OI= 309 at $6.50 SL=4.50
BUY CALL AUG-105 PVN-HA OI=2587 at $3.88 SL=2.50
BUY CALL SEP-105 PVN-IA OI=  85 at $6.75 SL=4.75
BUY CALL SEP-110 PVN-IB OI= 303 at $4.88 SL=3.00

Picked on July 23rd at  $102.38    P/E = 27
Change since picked       +0.00    52-week high=$118.50
Analysts Ratings     16-7-2-0-0    52-week low =$ 58.13
Last earnings 06/00   est= 1.25    actual= 1.29
Next earnings 10-19   est= 1.34    versus= 1.04
Average Daily Volume = 1.04 mln



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*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************
The Option Investor Newsletter                   Sunday 07-23-2000  
Sunday                                                      3 of 5

To view this email newsletter in HTML format with imbedded
charts and graphs, click here: 
http://www.OptionInvestor.com/htmlemail/072300_3.html

************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at Preferred Capital Markets
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with Preferred Capital

Anything else is too slow!

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************

******************
CURRENT CALL PLAYS
******************

CMTN - Copper Mountain Networks $84.38 (-30.88 last 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.  

For a skydiver, a rapid descent may be the ultimate rush.  For
a stock reporting better-than-expected earnings, it is more like 
jumping without the parachute opening.  Although Copper Mountain
is a relatively young stock compared to it's competitors, the 
company retains the largest market share in the industry.  The 
company reported record second quarter earnings on July 17th 
after the close, with revenue of $80.2 mln and pro forma
diluted net income of $0.24 per share.  The stock ran up to 
a year high of 125.72 in the pre-earnings period, but encountered
profit takers who sold CMTN on Tuesday despite continued support 
from analysts.  Tim Savageaux at W.R. Hambrecht and Co. maintains 
a Strong Buy rating on the stock, and raised his earnings and 
revenue forecasts for the company for both 2000 and 2001.  
Similarly, Dain Rauscher Wessels analyst Sanjiv Wadhwani raised 
his estimates, boosting his 2000 and 2001 estimates while 
maintaining a Strong Buy-Aggressive rating on the stock.  One of 
the fears driving the descent of the stock was the supposition by
others in the communications equipment industry that CMTN can 
only serve a specific niche of the market compared to its 
competitors.  Analysts beg to differ, stating that CMTN continues 
to post impressive results and is focused on maintaining its 
market leadership position in the DSL marketplace.  They think 
the company is well positioned to offer multi-services over DSL 
with its IP-aware access concentrators.  We are anticipating 
CMTN finding a bottom after being oversold.  Overhead resistance 
is close with the 100-dma at $86.63.  A strong volume move above 
that technical could be a break of the downtrend.  This is a more
aggressive play.  Patience may payoff so be cautious when 
entering.  Wait for a positive NASDAQ and be aware that the stock
bottomed in late June near $78.  A bounce from this level could 
prove to be a very profitable entry.  Conservative traders may want 
to wait for a move through $90 before initiating a position.
 
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 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 
workers.  

BUY CALL AUG- 85*KUA-HQ OI= 149  at $9.00  SL= 6.75
BUY CALL AUG- 90 KUA-HR OI= 692  at $6.88  SL= 5.25
BUY CALL AUG- 95 KUA-HS OI= 411  at $5.25  SL= 3.50
BUY CALL AUG-100 KUA-HT OI= 503  at $4.00  SL= 2.50
BUY CALL SEP- 95 KUA-IS OI= 188  at $8.25  SL= 6.25

SELL PUT AUG- 80 KUA-TP OI= 262  at $8.13  SL=10.50
(See risks of selling puts in play legend)

Picked on July 20th at   $89.63    P/E = 138
Change since picked       -5.25    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. $124.81 (+0.25 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 trend continues.  The past two months of Ariba's rally, which
has seen the stock almost triple, has been following a pattern:
consolidate for about two weeks, break out strongly, and
consolidate for another two weeks before breaking out strongly
again.  After the post-earnings rally ARBA experienced when it
posted record profits and marked itself as the Yahoo of the B2B
sector, the stock spent the week in consolidation mode.  Moving
down and testing support at $110 early in the week, buyers rushed 
in on huge volume, taking advantage of the temporary discount and 
were rewarded handsomely.  The rest of the week was spent 
successfully bouncing off support at $120 numerous times.  The 
stock spent this week consolidating.  One item of note this week 
is the heavier than average volume in ARBA's consolidation 
period.  Perhaps this is due to the increased coverage and 
interest in B2B issues posting stellar earnings (such as ITWO 
and PPRO), as well as the renewed validation and excitement of 
the future of the B2B business model.  Yet, it appears that 
ARBA's upward momentum remains intact, with low volume down moves
and high volume up moves.  Assuming the current trend of 
consolidation and breakout holds, expect another week of sideways 
movement for the stock.  The key for ARBA will be holding support 
at $120.  Bounces off this level can be bought, but a break 
through $120 may find the stock moving to $110.  The 10-dma, 
currently at $117.80 is moving up fast and may also provide support 
for the stock.  Aggressive traders hoping for a replay of last 
week can buy bounces off the 5-dma, currently at $126.90.  There 
is formidable resistance at $135, as that level was tested in 
last Thursday's session.  A break through $135 on strong volume 
will have ARBA trying for resistance at $140.

A news item of interest this Friday came as insiders at Ariba,
including CEO Keith Krach, announced that they filed with the SEC
to sell a combined 1.05 mln common shares.  According to
Ariba's public relations department, "They are taking advantage
of an open trading window to diversify their portfolios, and the
sales are not an indication of any problem with the company." 
While the stock did sell off on Friday, volume was light and
support at $120 held.  Look for this support level as a key
barometer of the stock's health.

BUY CALL AUG-120*RBU-HD OI=2246 at $14.38 SL=10.75
BUY CALL AUG-125 RBU-HE OI= 842 at $11.88 SL= 9.00
BUY CALL AUG-130 RBU-HF OI=1008 at $ 9.63 SL= 6.50
BUY CALL NOV-125 RBU-KE OI= 249 at $25.25 SL=20.25
BUY CALL NOV-130 RBU-KF OI= 487 at $23.25 SL=18.25

SELL PUT AUG-115 RBU-TC OI= 660 at $ 6.13 SL= 8.50
(See risks of selling puts in play legend)

Picked on July 20th at  $133.88      PE = N/A
Change since picked       -9.06      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=-0.05      versus=-0.03
Average Daily Volume = 6.17 mln



GSPN - GlobeSpan, Inc. $133.94 (-12.06 last week)

GlobeSpan, Inc. is a leading provider of integrated circuit,
software, and system designs for digital subscriber line (DSL)
applications which enable high-speed data transmission over
existing copper wire telephone lines at rates over 100 times
faster than today's 56 Kilobit modems.  Globespan's business is
accelerating communications through high-speed solutions based on
DSL technologies.  The company's innovations make possible
real-time video conferencing, telecommuting, high-speed Internet
surfing, and video-on-demand.

Patience is rewarded.  Those who were patient with GSPN this week
found a variety of great entry points.  The key support level of
$127.50 has been holding strong all week providing for excellent
entry points off the bounce.  Aggressive traders buying bounces 
off the 10-dma were also rewarded with quick profits on this 
volatile issue.  This has been a week of consolidation for the 
stock as it drifted sideways on low volume.  As mentioned, it held 
its support at $127.50 and has been a technical trader's dream. 
While the stock has traded in a very wide range, it has found
support where we expected it while down days were accompanied by
low volume.  Conversely, the up days were accompanied by stronger
volume.  This confirms the continuation of GSPN's breakout and
consolidation pattern that has lasted throughout its two month
rally.  Looking at its previous two moves from breakout to
consolidation, GSPN's last two up moves were preceded by about 6
days of consolidation.  If this trend continues, then look for
GSPN to break out of its slumber next week.  There is formidable
resistance at $150, but once broken, look for the stock to 
challenge its all-time high at $167.  But for now, $140 must be 
conquered first.  The last few trading sessions has seen the
10-dma (currently at $133.75) continue to serve as support while
the 5-dma (currently at $137.50) has been acting as resistance. 
This is consistent with GSPN's 8 week long uptrend.  If the
trend continues to hold, then a clean break through the 5-dma
resistance on strong volume will signal the next up move. 
Conservative investors, however, will want to wait for GSPN to 
break through $140 with conviction before entering.

Aside from the appointment of Brian Laperriere as Vice President
of Human Resources, there has been no news for the stock and as
such, the stock has moved in sympathy with the NASDAQ, along with
its own technical support and resistance levels.  Traders looking
to play this issue will want to make sure that the general market
direction is on their side before entering.

BUY CALL AUG-130*GHY-HF OI= 56 at $19.13 SL=13.75
BUY CALL AUG-135 GHY-HG OI= 40 at $16.88 SL=12.25
BUY CALL AUG-140 GRX-HH OI=213 at $14.50 SL=10.75
BUY CALL NOV-135 GHY-KG OI=  5 at $32.50 SL=27.00
BUY CALL NOV-140 GRX-KH OI=302 at $30.38 SL=25.00

SELL PUT AUG-125 GHY-TE OI=  9 at $10.50 SL=14.00
(See risks of selling puts in play legend)

Picked on July 2nd at   $122.06     P/E = N/A
Change since picked      +11.88     52-week high=$167.00
Analysts Ratings      2-4-0-0-0     52-week low =$ 14.31
Last earnings 03/00   est= 0.01     actual= 0.03 surprise=200%
Next earnings 08-01   est= 0.04     versus=-0.14
Average Daily Volume = 1.12 mln



VRTX - Vertex Pharmaceuticals Inc $120.19 (+5.19 last week)

Vertex Pharmaceuticals discovers, develops and markets small 
molecule drugs that address unmet medical needs. Vertex has nine 
drug candidates in clinical development to treat viral diseases, 
inflammation, cancer, autoimmune diseases and neurological 
disorders. Vertex has created its pipeline using a proprietary, 
information-intensive approach to drug design that integrates 
multiple technologies - biology, chemistry, biophysics, and 
computer-based modeling - aimed at increasing the speed and 
success rate of drug discovery.  Vertex Pharmaceuticals has 
collaborative agreements with major drug companies like 
Novartis, Eli Lilly, Kissei Pharmaceuticals, and Schering AG.

Yes indeed, next week's earnings release suggests that VRTX could 
run up on Monday and Tuesday.  The increasing trading volume is 
also a bullish sign, however, VRTX hasn't yet penetrated the 
recent 52-week high at $132.75.  Now if it does comes off the 
current level on Monday and breakout, there's still a 12+ point 
spread in which to profit before VRTX faces the ultimate 
resistance.  So there's potential.  Choose entries carefully and 
heed the tight time frame if you're going to make a play.  Keep it
short and sweet.  Vertex Pharmaceuticals is set to report this 
Tuesday, July 25th, after the closing bell.  It would be prudent
to close all call positions before the market closes on Tuesday, 
despite the positive outlook for a profitable 2Q.  The company 
announced on July 11th that they expect to come in between $0.40 
and $0.50 p/s, which will beat the $0.23 projection by First Call.
Still it's essential to exit PRIOR to the announcement.  Never 
take the chance of getting your capital swept away in a post-
earnings sell-off.

As mentioned above we have the earnings' release on the 
immediate horizon.  But next month should also take VRTX by 
storm.  On July 14th, the BoD announced a 2:1 stock split!  
While the company doesn't have an ex-date nailed down, the 2:1 
stock dividend is payable on August 23rd.  

BUY CALL AUG-115 VQR-HC OI= 30 at $15.88 SL=11.50
BUY CALL AUG-120*VQR-HD OI=105 at $13.13 SL= 9.75
BUY CALL AUG-125 VQZ-HE OI= 42 at $11.00 SL= 8.25
BUY CALL OCT-130 VQZ-JE OI=  4 at $19.88 SL=14.50

Picked on July 18th at $122.63     P/E = N/A
Change since picked      -2.44     52-week high=$132.75
Analysts Ratings     4-5-1-0-0     52-week low =$ 22.13
Last earnings 03/00  est=-0.58     actual=-0.62
Next earnings 07-25  est= 0.23     versus=-0.43
Average Daily Volume =   628 K



DISH - Echostar Communications Corp $44.94 (+0.75 last 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.  

We're "dishing up" another earnings' play.  DISH caught our 
attention after demonstrating consistent moves following the 
July 4th holiday this month.  The share price has steadily 
advanced nearly 30% and its chart is impressive too.  When we 
added this new call play on Thursday evening, we mentioned a 
technical obstacle - the 200-dma.  On Friday, DISH did in fact 
move through this DMA during intraday trading;  however, a 
fractional break isn't definitive confirmation.  It's important 
that we see DISH shatter this technical line.  In the recent 
past, the 200-dma (currently at $45.39) proved to be a 
formidable opponent and has kept DISH range bound.  Therefore, 
you can understand why it's essential to be conservative and 
wait for a breakout on high volume moves.  Another bright spot 
on Friday was the higher-low at $44.25 and the stock's ability 
to maintain trading activity primarily above the $45 mark.  If
DISH does not establish a short term support level at $45, a 
drop to support at $43 would be a good entry, provided there is
a bounce.  Also, we've got some leeway with this earnings' play.  
The release date isn't until August 1st, BEFORE the bell, which 
gives us all week to trade DISH.

A big boost for the company's ego was the recent launch of the 
EchoStar VI on July 14th.  This unit is the most powerful direct 
broadcast satellite ever manufactured.  Charlie Ergen, CEO and 
chairman of EchoStar, reported its success and commented 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".  

BUY CALL AUG-40*UAB-HH OI=1379 at $7.50 SL=5.25
BUY CALL AUG-45 UAB-HI OI=1089 at $4.50 SL=2.75
BUY CALL AUG-50 UAB-HJ OI= 648 at $2.63 SL=1.25
BUY CALL SEP-45 UAB-II OI=1490 at $6.88 SL=5.00
BUY CALL SEP-50 UAB-IJ OI= 606 at $4.50 SL=2.75

Picked on July 20th at   $44.63    P/E = N/A
Change since picked       +0.31    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



MRVC - MRV Communications $75.50 (+2.88 last 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.

Every time we think our play on MRVC has run out of steam, it
surprises us and comes back with a vengeance.  After running as
high as $77.69 on Monday, the stock fell victim to selling
pressures that dragged it all the way back to support at $68.
That was all the ground the bulls were willing to give up and
if you jumped in on the bounce, you profited nicely from the
recovery back above $75.  The stock then spent the remainder of
the week oscillating between support at $74-75 (site of the
5-dma) and resistance at $80 (the top Bollinger band).  It looks
like support is firm at the 5-dma, and with continuing strength
in the Optical sector, we are looking for our play to give us
one more run before the company announces earnings.  The
announcement is scheduled for Thursday after the close, giving
us a few days remaining in our play.  As always, we recommend
closing any open positions prior to the announcement, in order
to avoid the normal post-earnings selloff.  Volume continues to
be a good indicator of the direction our play is headed, surging
on the strong up days, and falling back considerably on the
inevitable corrections.  Consider new entries as MRVC bounces at
the $74-75 support level as long as the bounce is confirmed by
increased buying volume.  There is also support at the 10-dma
(currently $72.56), but we would be concerned with any drop
below that level, especially so close to earnings.

Just so you won’t miss it in the body of the play tonight,
we’ve reiterated the earnings information here.  MRVC will
announce earnings on Thursday, July 27th after the close.  That
gives us half a week to enjoy the play before we need to be
thinking about our exit strategy.  The Optical sector has been
on fire lately on the news about JDSU/SDLI, and with the strong 
SDLI earnings out this past Thursday, it is entirely possible that 
MRVC will have a nice run right up to the finish.  Just don’t play 
the "hold over earnings" game.  Investors are fickle and like 
we’ve said many times in the past, holding over earnings is a high
risk, ill-advised gamble.

BUY CALL AUG-70*RVY-HN OI=3530 at $12.88 SL= 9.50
BUY CALL AUG-75 RVY-HO OI= 488 at $10.38 SL= 7.25
BUY CALL AUG-80 RVY-HP OI=1031 at $ 8.50 SL= 6.00
BUY CALL OCT-80 RVY-JP OI= 376 at $14.88 SL=11.00
BUY CALL OCT-85 RVY-JQ OI= 108 at $13.38 SL=10.00

SELL PUT AUG-65 RVY-TM OI= 238 at $ 4.75 SL= 6.75
(See risks of selling puts in play legend)

Picked on July 13th at   $74.88     P/E = N/A
Change since picked       +0.63     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 = 2.12 mln



NT - Nortel Networks $81.00 (+3.25 last week)

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

There’s nothing like a successful play to fatten your wallet and
NT has given us one nice, consistent ride.  After we picked it
in mid-June, the stock co-operated nicely by dropping sharply to
give us an attractive entry point near $64, before heading
higher.  Although the move sputtered a few times, buyers
continued to step up to the plate, allowing NT to trace a
pattern of higher highs and higher lows over the past month.
What makes this such a great play is that the stock moves in a
nice predictable pattern, moving higher and then pulling back to
give those stragglers another chance to jump on board.  Last
week, we got another opportunity as the broad market weakness
pulled NT back to bounce at the $76 support level before
heading higher.  With earnings rapidly approaching, investors
all but ignored what was happening in the broad markets on
Friday, and they propelled NT to another all-time high of
$81.31, and the stock closed just fractionally below this
level.  Volume has been an excellent indicator as pullbacks
come on markedly reduced volume while strong gains have been
accompanied by average to above average volume.  Earnings
really are close at hand - NT reports its quarterly numbers on
Tuesday after the close, so new entries should not be considered
by the risk-averse.  If you feel compelled to play new positions
in the next two days, look for bounces near the 5-dma to trigger
your entry.  Use any strength in the next two days as an
opportunity to milk a little more profit out of the play, but
make sure you close any open positions prior to the close on
Tuesday.

If you caught any financial news this week, you are likely aware
that NT’s competitor, Lucent beat downwardly-revised earnings
estimates on Thursday, but the conference call was less than
stellar.  LU got punished to the tune of a 20% loss, while NT
continued to rise.  This highlights the relative strength NT
enjoys in its market niche, and confirms that investors think
the company’s future is bright.  One last reminder - NT has
earnings Tuesday after the close, so make sure you are out of
any open positions before then.

BUY CALL AUG-75 NTV-HO OI=6676 at $ 8.88 SL=6.25
BUY CALL AUG-80*NTV-HP OI=3596 at $ 6.00 SL=4.00
BUY CALL AUG-85 NTV-HQ OI=1971 at $ 3.75 SL=2.25
BUY CALL SEP-75 NTV-IO OI=3285 at $10.38 SL=7.50
BUY CALL SEP-80 NTV-IP OI=1104 at $ 7.50 SL=5.25
BUY CALL SEP-85 NTV-IQ OI= 970 at $ 5.13 SL=3.00

SELL PUT AUG-75 NTV-TO OI= 227 at $2.38 SL=4.00
(See risks of selling puts in play legend)

Picked on June 15th at   $67.00     P/E = N/A
Change since picked      +14.00     52-week high=$81.31
Analysts Ratings    19-10-3-1-0     52-week low =$19.91
Last earnings 04/00   est= 0.19     actual= 0.23
Next earnings 07-25   est= 0.14     versus= 0.14
Average Daily Volume = 9.87 mln



SCMR - Sycamore Networks $138.75 (+0.56 last week)

Sycamore markets optical networking products that enable network
service providers to upgrade their existing fiber-optic networks
to offer more bandwidth.  Its SN 6000 transport node helps
companies provide high-speed services.  The company also designs
add/drop nodes, optical switches, and network management
software.  The company targets telecom service providers,
Internet service providers, and cable operators.

It was a wild week for the Fiber Optic sector.  GLW began the
week with a bang by blowing away its estimates last Monday, which
sent the stock into orbit.  But, then came the warning from LU
Thursday.  For the third time in under a year, LU warned analysts
that the company would fall short of estimates.  The company said
it had failed to recognize the shift from traditional telecom
equipment to the new optical networking gear.  LU said rival
telecom equipment makers have been selling the optical components
in force and taking market share.  One of those competitors that
has been stealing LU market share just happens to be our SCMR.
In an ironic way, the LU warning is great for our play.  The
news that LU has been losing market to rival optical firms bodes
well for SCMR going into the company's earnings report scheduled
later in August.  Investors will be expecting good numbers from
SCMR, which might continue to carry our play higher.  Despite all
the volatility in the Tech sector last week, SCMR ended with a
slight gain.  The stock traded slightly lower Friday on under 2
mln shares exchanged.  That's compared to an ADV of more than 4
mln.  The light selling Friday might have provided us with a good
entry point going into next week.  Investors' insatiable demand
for Fiber Optic plays helped stabilize SCMR Friday in what was a
tumultuous day for anything Tech.  The stock stopped right at its
major support at $135 which is near its 10-dma, and bounced
higher into the close Friday.  An aggressive trader might look
for an entry point if SCMR can rally above the $140 level on
healthy trade.  While a more conservative trader might wait for
SCMR's momentum to build and look for an entry if the stock
clears congestion and moves above the $145 level.  If the Tech
sector weakness drags our play lower, consider entry if SCMR
bounces off its 10-day near $135.

All eyes will be focused on JDSU Wednesday.  The optical
equipment behemoth is scheduled to report its second-quarter
results after the close of the market on July 26th.  The company
is expected to surpass estimates, which would confirm the
continued boom in the optical networking arena.  A positive
report combined with up-beat guidance might set the tone for the
sector next week and take our SCMR play higher.

BUY CALL AUG-135 QSM-HG OI= 224 at $15.75 SL=11.25
BUY CALL AUG-140*QSM-HH OI=1143 at $13.25 SL= 9.75
BUY CALL AUG-145 QSM-HI OI= 168 at $11.13 SL= 8.25
BUY CALL SEP-140 QSM-IH OI= 500 at $18.75 SL=13.50
BUY CALL SEP-145 QSM-II OI= 101 at $17.75 SL=12.75

Picked on July 16th at  $138.19    P/E = 144
Change since picked       +0.56    52-week high=$199.50
Analysts Ratings      7-4-2-0-0    52-week low =$ 47.25
Last earnings 04/00   est= 0.02    actual= 0.05
Next earnings 08-18   est= 0.06    versus=  N/A
Average Daily Volume = 4.39 mln



HGSI - Human Genome Sciences $162.50 (+9.25 last week)

HGSI licenses a proprietary database of gene sequences to such
pharmaceutical heavyweights as SmithKline Beecham and Merck.  The
company has eschewed the race to decode the entire human genome
in favor of focusing on patenting gene sequences involved in
disease.  HGSI is one of the few genome companies involved in
developing gene-based therapeutics, its four compounds in
clinical trials are intended to limit the toxic effects of
chemotherapy, promote repair of damaged cells, stimulate antibody
production, and spur re-growth of blood vessels.

Despite the tumultuous market last Friday, the Biotech sector
rallied for the second consecutive day.  The Amex Biotech Index
($BTK) gained over 2% fueled by positive profit reports within
the group.  HGSI benefited from the broad rally within the sector
and also from the news that the company might earn royalties from
a licensing agreement it shares with MedImmune (MEDI).  Last
Thursday, SmithKline Beecham signed an agreement under which MEDI
would provide vaccine technology.  HGSI stands to earn a portion
of the estimated $30 mln in payments.  The announcement prompted
HGSI to gap higher Friday morning and extend its gains for the
week.  Yet another positive development for our play was the
bullish debut of several biotech IPOs last week.  Variagenics
(VGNX) enjoyed a first-day pop last Friday by surging over 75% in
its debut.  The high demand for biotech-related IPOs bodes well
for our HGSI play as investors' craving for genomic-related
issues appears to be alive and well.  Although HGSI finished last
week with a gain, for the most part, the Biotech sector spent its
time consolidating its recent gains.  However, Friday's
impressive showing in the wake of a weak Tech sector might lead
to a continued rally in the group next week.  HGSI's uptrend
remains healthy with solid support at $160 and again at $155.
The stock had trouble clearing congestion around $165 last
Friday.  Look for a bold move above that level for entry.  A more
conservative entry point might be provided upon a strong rally
above the $170 level on healthy volume.  Confirm the overall
movement in the Biotech sector before entering the play.  Like
many biotechs, HGSI is influenced by the general sector
direction.

By charging higher last week, HGSI surged further into split
territory.  Like we have mentioned in the past, the company has
plenty of shares to authorize a 2-for-1.  The stabilized market
conditions have prompted more and more companies to announce
splits as you may have noticed from the OIN split section.  We'll
continue to monitor the wire for a declaration by HGSI.  The
company last split its stock in January when it was trading at
$149.

BUY CALL AUG-155 HHA-HM OI=199 at $20.50 SL=14.75
BUY CALL AUG-160*HBW-HL OI=469 at $18.00 SL=13.00
BUY CALL AUG-165 HBW-HM OI= 41 at $16.00 SL=11.50
BUY CALL OCT-160 HBW-JL OI=488 at $34.63 SL=25.00
BUY CALL OCT-165 HBW-JM OI= 33 at $26.25 SL=19.00

SELL PUT AUG-150 HHA-TL OI=120 at $ 9.63 SL=12.50
(See risks of selling puts in play legend)

Picked on July 13th at  $153.75    P/E = N/A
Change since picked       +8.75    52-week high=$232.75
Analysts Ratings      1-5-4-0-0    52-week low =$ 24.88
Last earnings 03/00  est= -0.33    actual= -0.35
Next earnings 08-08  est= -0.22    versus= -0.05
Average Daily Volume = 1.70 mln



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*****************************
The Option Investor Newsletter                   Sunday 07-23-2000  
Sunday                                                      4 of 5

To view this email newsletter in HTML format with imbedded
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http://www.OptionInvestor.com/htmlemail/072300_4.html

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NEW PUT PLAYS
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RFMD - RF Micro Devices, Inc. $75.38 (-13.13 last week)

RF Micro Devices, Inc. is a leading supplier of radio frequency
integrated circuits (RFICs) for the wireless, broadband and cable
communications industries.  RFMD designs and manufactures
components for many communications applications, from cellular to
CATV.  The ever-expanding RFMD product line includes power
amplifiers, linear amplifiers, LNA/mixers, quadrature
modulators/demodulators, upconverters, front ends, attenuators,
switches and transceivers.

Will Jonathan Joseph get the last laugh?  When the Salomon Smith
Barney analyst recently made the unpopular call of downgrading
the entire semiconductor sector, it was initially shrugged off as
the index moved higher.  However, since making a double top this 
past week, semiconductors for the most part have moved lower.  
One of the reasons to account for this is a post-earnings slump. 
While the earnings posted so far have been strong, apparently
they were not strong enough to allay fears of an impending
slowdown.  RFMD reported its own earnings this past Tuesday and
the numbers were decidedly good.  Sequential quarterly revenues
increased 15.8% to a record $98.2 mln, gross profit increased
by 91.5% to $50.6 mln, and gross margin climbed 51.5%.  With
numbers like those, one would think the Street would be
impressed.  But despite these numbers, RFMD only beat the
consensus estimate by a penny, matching the dreaded whisper
number of 19 cents.  In a market environment where the name of
the game is to obliterate the whisper number or be obliterated,
the stock has sold off after earnings on steadily increasing
volume.  Friday was not helped by handset maker Rescission’s
announcement that their third-quarter earnings would disappoint. 
As over 90% of RFMD’s revenues are tied in to the wireless
sector, a portion of Friday's 7.52% drop on heavy volume can be
attributed to the warning.  The technical picture doesn't look
too good either.  Breaking a key support level of $80 on Friday
morning, the stock spent the rest of the day moving steadily
lower, continuing a steep downtrend that has plagued the stock
all week.  Failed rallies above the $80 level are an ideal target
to shoot for.  The 5- and 10-dma are both sitting at the $85
level which will also provide strong resistance.  Early this
past week also saw RFMD break its 200-dma, currently at $92. 
Looking below, RFMD could find support at $73 after which the
next level of support is at $67.  With strong overhead resistance
and weakening support, this could be a fun ride down.

BUY PUT AUG-80*RFZ-TP OI=1344 at $11.50 SL=8.75
BUY PUT AUG-75 RFZ-TO OI= 584 at $ 8.88 SL=6.25
BUY PUT AUG-70 RFZ-TN OI= 422 at $ 6.38 SL=4.50

Average Daily Volume = 3.52 mln



CMRC - Commerce One Inc $53.38 (+16.56 last week)

Commerce One has become one of the signature names in the 
emerging B2B environment.  They provide e-commerce solutions 
that enable buyers and suppliers of goods and services direct 
access to trading communities over the Internet.  Founded in 
1994 as DistriVision, the company was renamed Commerce One in 
1997 and is based in Walnut Creek, CA.

The last minute freefall prior to its earnings' release spilled 
over into after-hours trading on Tuesday evening.  Yes, the B2B's
were fighting the overall tech weakness, but a 6+ point drop in 
minutes is frightening.  After the announcement, it was evident 
that CMRC lost the battle with Ariba (ARBA).  However, CMRC's 
numbers were nothing to shush away.  The company reported a 2Q 
upside surprise with a narrower-than-expected loss.  Commerce 
One came in at -$0.10 versus the estimated -$0.14 and proved it 
was receiving real money for real services.  USB Piper Jaffray 
even started new coverage with a Strong Buy recommendation.  But 
nonetheless, CMRC suffered a typical post-earnings sell-off 
after running up days before the release.  This is a good 
example of why it's not wise to hold a call position over an 
earnings' announcement!  Anyway, CMRC shed almost 24% of its 
share price last week and has room left to fall.  By Wednesday, 
the stock submerged itself below the near-term DMAs with its 
closest ally now at the 10-day line ($56.10).  On Friday, 
intraday support established itself around $52.50.  So 
conservatively, first look for a slide under this mark, followed 
by moves toward firmer support at $45.  If you're itchy to jump 
into this post-earnings decline and want to enter more 
aggressively, downward bounces off the above-mentioned 10-dma, 
or $56 mark should suit your style.  

BUY PUT AUG-60 RJC-TL OI=1177 at $10.50 SL=7.50
BUY PUT-AUG-55*RJC-TK OI= 280 at $ 7.25 SL=5.00
BUY PUT-AUG-50 RJC-TJ OI= 207 at $ 4.50 SL=2.75

Average Daily Volume = 6.44 mln



ELON - Echelon Corp $39.00 (-10.81 last week)

Echelon designs systems and software that control automated 
networks for buildings, industrial equipment, and transportation 
industries. Its products include transceivers, routers, network 
interfaces can sense, monitor, and direct such equipment as 
automatic doors, lighting, security systems, industrial 
conveyors, and rail cars.  Customers include well-known 
companies like Honeywell and Raytheon.  CEO Kenneth Oshman 
maintains a 16% controlling stake in Echelon. 

ELON didn't even run-up before its earnings release!  To the 
contrary, this stock was already in a general downtrend cycle 
and things only got worse after the announcement on Thursday. 
Echelon reported a 29% revenue increase for the quarter ending 
June, 2000 at $12.7 mln versus same period 1999 of $9.8 mln.  On 
a per share basis this is actually -$0.01 for 2Q 2000 compared 
to -$0.02 in 2Q 1999.  The actual numbers weren't too shabby, 
but the forecast was rather glum.  Robertson Stephens' analyst 
Paul Johnson brought ELON to its knees on Friday.  He commented 
that he now expects the company to only break even a share this 
year, downgrading his earlier forecast for earnings of $0.01!  
This poor coverage put even more pressure on the share price.  
On Thursday, ELON was already under the gun.  It had suffered 
along with the rest of the techs in late trading and was bracing 
for its after-hours earnings release.  The $45 near-term 
support level was cracked and it was poised for further 
devastation.  As of now, we have a stock that is looking for a 
bottom.  With the 200-dma ($41.17) now shattered, the next 
safety net is at a historical support level of $30.  Take a look 
at four-month chart and you can see how ELON traded at this 
level during April and May.  The trading volume following the 
recent events was very strong on the decline, so watch for 
continued action to foretell further drops.  Market weakness 
would be the icing on the cake to keep this downward momentum 
intact.  As for entries:  on Friday, $40 served as overhead 
resistance.  Therefore, if all goes according to plan and ELON 
continues to bump its head at this mark, then $40 is a viable 
point of entry.  Although it's imperative to wait for ELON to 
show weakness below $38 before opening positions.

BUY PUT AUG-45*EUL-TI OI=364 at $9.38 SL=6.50
BUY PUT AUG-40 EUL-TH OI=151 at $6.00 SL=4.00
BUY PUT AUG-35 EUL-TJ OI=275 at $3.38 SL=2.50

Average Daily Volume = 1.37 mln
/charts/charts.asp.symbol=ELON


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CURRENT PUT PLAYS
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IP - International Paper $34.75 (-1.06 last week)

International Paper is a global paper and forest products
company that is complemented by an extensive distribution
system.  The company produces printing and writing papers,
pulp, tissue, paperboard and packaging and wood products.
Additionally, the company makes specialty chemicals, panels,
and laminated products.  Its primary manufacturing and
distribution operations are in the United States, Europe
and the Pacific Rim

Declining all week long, IP has had a hard time finding any
strength.  Finally on Friday, the buyers got their day in the
sun, but the clouds quickly appeared on the horizon.  After a
valiant attempt by the bulls to break IP out of its downtrend,
the bears came back to confirm who is in charge.  The buyers
managed to briefly move the price up to $35.94, just below the
100-dma ($36.31) before the price began rolling over.  In light
of the broad market weakness on Friday, this performance really
isn’t too bad, especially given the stock’s refusal to break
below the $34 support level the day before.  The chart is
starting to look congested, with only $2.31 between the
declining 100-dma (which has been creating resistance) and
support at $34.  Volume has declined to about 75% of the ADV,
and any increase in volume will indicate the strength of the
current move.  Something will likely have to give soon, and
with the deteriorating market sentiment, our crystal ball still
says the breakout will be to the downside.  After all, with
earnings winding down, there is little on the horizon that
could be seen as supportive to the stock’s price.  Target new
entries as the price rolls over near the 200-dma, or wait for
the sellers to break the $34 support level on strengthening
volume.

BUY PUT AUG-40 IP-TH OI= 139 at $5.88 SL=3.00
BUY PUT AUG-35*IP-TG OI=3543 at $2.06 SL=1.00

Average Daily Volume = 3.36 mln



CMOS - Credence Systems $46.69 (-9.63 last 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.

Could it be, just maybe, that the semis have peaked?  According
to Semiconductor Equipment and Materials International (SEMI)
orders for chip fabrication equipment fell for the third
consecutive month in June.  In a report released last Thursday
evening, SEMI said that the major U.S. chip equipment
manufacturers shipped $126 of product for every $100 of orders
received.  Also known as the book-to-bill ratio, it reported $128
in shipments for the month of May.  Although the decline is a
modest one, it's a decline in business nonetheless.  Moreover,
many analysts expected the Chip boom to cease during the summer
in what has traditionally been a slow time of year for the semis.
However, it's that slowdown that we are attempting to capitalize
upon from the short-side on CMOS.  The stock suffered greatly
last week from the heavy selling in the semis.  Wall Street's
concerns over a slowdown in the Chip sector prompted a series of
downgrades last week.  Most notably, Robertson Stephens downgraded 
TER, one of the chip equipment bellweathers.  The downgrade was 
the second high-profile warning on the Chip sector in as many 
weeks.  CMOS has been sliding lower on increased volume as 
investors vacate the Semi sector.  The stock did stabilize 
somewhat last Friday after a late-day rally rescued CMOS.  The 
threat of a slowdown in orders may continue to carry CMOS lower.  
Watch for the selling to resume early next week and look for an 
entry if CMOS falls below support at $44.  Upon a continuation of
Friday's late-day rally, an aggressive trader might look for an 
entry if CMOS runs into resistance at $48 and subsequently rolls 
over.  Make sure to confirm direction in the Chip sector before
entering the play!

BUY PUT AUG-50 CQS-TJ OI= 30 at $7.75 SL=5.50 
BUY PUT AUG-45*CQS-TI OI=247 at $5.13 SL=3.00
BUY PUT AUG-40 CQS-TH OI= 27 at $2.56 SL=1.25

Average Daily Volume = 1.11 mln



GTW - Gateway $62.88 (-3.50 last week)

Gateway is the #2 direct marketer of PCs in the U.S. behind the
leader Dell.  The company sells products directly to computer
users ordering by phone or Web site, which helps to cut markup
costs.  Gateway makes desktop and portable PCs and network
servers.  The company also sells component add-ons such as CD-ROM
drives and offers services such as Internet access, Web hosting,
and e-commerce solutions.  About half of its products are sold
to consumers.

It has been a tough summer for the box makers.  Wall Street's
suspicion of slowing sales of PCs was confirmed last week when
several of the largest computer makers reported their quarterly
results.  On the surface, it was reported that most of the
companies exceeded profit estimates.  However, upon digging a
little deeper into the numbers it was revealed that many box
makers fell short on revenues and also warned of a continued
slowdown in PC purchases.  And, since GTW has focused its
business on the home PC market, the stock has suffered from the
warnings.  AAPL reported slightly lower revenues last week and
IBM confirmed the decline in PC sales by stating it has
suffered from weakened consumer demand.  CPQ is scheduled to
report its numbers next week, which could have an impact on our
play.  Although we are entering into the busy time of year for
the PC makers, with back to school shopping and the holiday
season approaching, the current slowdown might not be completely
factored into the stock prices.  A glance over GTW's chart just
might confirm our suspicions.  The stock enjoyed a steep advance
into its quarterly report two weeks ago and has subsequently
slipped into a downtrend.  There is still some empty space below,
which may lead to further downside in the stock.  GTW bounced off
support at $62 early Friday morning.  An entry point might be
provided if the stock falls below that level.  A more
conservative entry might be found if GTW dips below $60.  An
aggressive trader might look for entry if GTW rolls over after
running into resistance at $64 after any intra-day rally.

BUY PUT AUG-65*GTW-TM OI= 432 at $5.25 SL=3.25 
BUY PUT AUG-60 GTW-TL OI= 469 at $2.88 SL=1.50
BUY PUT AUG-55 GTW-TK OI=1154 at $1.31 SL=0.75

Average Daily Volume = 1.61 mln



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*****
LEAPS
*****

As Earnings Wind Down, It’s Time for Some House Cleaning
By Mark Phillips
Contact Support

July earnings has been a mixed bag for our LEAPS portfolio, with
some plays charging to new highs, while others have failed to
even acknowledge that it is earnings season.  Even after their
earnings announcements, heroes like EMC and SUNW have continued
to impress, while others (particularly the Semiconductors) like
XLNX and AMD have endured selloffs of truly painful proportions.
This is confirmation of Jim’s advice of NEVER holding a position
over earnings - even stellar numbers can be insufficient to
please the market and 7 out of 10 companies will sell off after
announcing their results.

A quick look at the Drop list this weekend will show you where
the pain was.  TXN, XLNX and CY all got the axe as nearly the
entire sector was in the red for the past four days.  The
details can be found below, but suffice to say that we are going
to take this opportunity to do some house cleaning, so that we
are ready to add new plays once the market starts to get healthy
again.  Those of you that have been with us for the past few
months will recall our urging to use any earnings runs as an
opportunity to lock in profits on your open positions so that
you will have cash in hand to buy the bottom later in the year.

Particularly vulnerable at this point are open JAN-2001
positions.  These are all regular calls now (refer to the article 
titled The New 2003 LEAPS, dated May 31st) and if the market 
repeats its usual summer pattern of flat-to-down, time decay 
on these options will begin to be very painful.  Accordingly, 
we are no longer recommending new positions in the 2001 options.  
They will behave more like short-term options (Can you say 
"accelerating time decay"?) from here on out, and they no longer 
fit with the longer term strategy of LEAPS investing.

We will continue to update the performance of the 2001 LEAPS in
the playlist through the end of August, but we DO NOT recommend
any new positions with these options.  It should be very
instructional to watch the way the performance of the 2001 calls
begins to diverge from the performance of the 2002 and 2003
LEAPS over the next 6 weeks.  The beginnings of this time decay
disparity can already be seen clearly on some of our laggard
plays like AOL and NSM.  Since we are no longer recommending new
plays on the 2001 options, we have added the 2003 LEAPS into the
playlist.  The exception to this is that the 2003 LEAPS have not
yet been issued for equities that trade on cycle 3.  These
include C, NT and JDSU and based on past experience, we expect
these to be issued by a week from Monday at the latest.  With
respect to the Return column, since listing the 2003 LEAPS
should not be construed as a new recommendation, we will not be
calculating returns for these options since this was not our 
original entry point.  Continue to watch the 2001 options and 
the 2002 LEAPS for updates to the Return column.  As time decay 
begins to accelerate on the 2001 calls, it will provide a good 
real world example of how the premiums are affected.

So what’s going on with the market?  Earnings continue to come
in very strong, but all but the most stellar numbers are being
met with selling, making this a very difficult market in which
to profit from a bullish outlook.  Adding to our woes is our old
nemesis (or friend, depending on the day), the VIX, which
continues to slide ever lower.  It hasn’t been above 24 for the
past two weeks, and Friday’s close at 21.47 is the lowest close
it has seen since March 3rd as the NASDAQ approached 5000 for
the first time.  Remember what happened to the index shortly
thereafter?  That’s right! It began the swift and painful slide
that gave many new investors their first taste of a bear market.
Recall that a VIX reading below 21 s a very reliable predictor
of near-term market tops, and we are frighteningly close to that
now.

With the VIX in the danger zone, the fattest part of earnings
season behind us, and investor nervousness alive and well, now
is not the time to be blindly initiating new positions, even in
LEAPS.  Instead, take advantage of the remaining earnings
reports to lock in profits or limit your losses and enjoy the
summer.  As Molly reminded us on Thursday, we are right in the
middle of the toughest 6 months for profitable trading in the
equity markets.  Now is a good time to step back from the 
markets and enjoy life.  Trust me!  When you come back refreshed, 
they will still be here and you’ll be happy to have a pile of 
cash ready to be put to work.  November through April is the best 
time to make money in the stock market (historically) and you’ll 
have plenty of time to put that money to work in new LEAPS 
positions as the markets find their footing once again in the 
months to come.


Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2001 $ 40  EMB-AH   $ 7.69   $50.38   555.14%
                 JAN-2002 $ 45  WUE-AI   $ 9.50   $55.00   478.95%
                 JAN-2003 $ 90  VUE-AR   $35.50   $35.50    ------
CSCO   11/14/99  JAN-2001 $ 40  CYQ-AH   $ 9.56   $30.88   223.01%
                 JAN-2002 $ 45  WIV-AI   $11.00   $32.88   198.91%
                 JAN-2003 $ 70  VYC-AN   $25.13   $25.13    ------
NT     11/28/99  JAN-2001 $37.5 NT -AU   $11.13   $45.38   307.73%
                 JAN-2002 $37.5 WNT-AU   $15.13   $49.75   228.82%
TXN    12/12/99  JAN-2001 $ 55  TNZ-AK   $11.13   $15.25    37.02%
                 JAN-2002 $ 60  WGZ-AL   $14.25   $20.75    45.61%
SUNW   12/19/99  JAN-2001 $ 80  SUX-AP   $17.63   $31.63    79.41%
                 JAN-2002 $ 90  WJX-AR   $22.00   $37.50    70.45%
                 JAN-2003 $105  VSU-AA   $40.63   $40.63    ------
CY     01/16/00  JAN-2001 $ 40  CY -AH   $ 9.13   $13.88    52.03%
                 JAN-2002 $ 40  WSY-AH   $12.63   $20.25    60.33%
ERICY  01/30/00  JAN-2001 $16.3 RQC-AO   $ 4.94   $ 5.50    11.34%
                 JAN-2002 $16.3 WRY-AO   $ 6.75   $ 7.88    16.74%
                 JAN-2003 $ 20  VYD-AD   $ 8.13   $ 8.13    ------
NSM    02/27/00  JAN-2001 $ 70  NSM-AN   $18.50   $ 3.75   -79.73%
                 JAN-2002 $ 70  WUN-AN   $24.25   $10.63   -56.16%
AOL    03/12/00  JAN-2001 $ 60  AOO-AL   $14.00   $ 7.63   -45.50%
                 JAN-2002 $ 65  WAN-AM   $18.63   $13.13   -29.52%
                 JAN-2003 $ 65  VAN-AM   $18.25   $18.25    ------
AXP    03/12/00  JAN-2001 $43.3 AXP-AP   $ 7.25   $18.50   155.17%
                 JAN-2002 $46.6 WXP-AQ   $ 9.33   $21.13   126.47%
                 JAN-2003 $ 60  VAX-AL   $18.38   $18.38    ------
WM     03/19/00  JAN-2001 $ 25  WM -AE   $ 5.00   $ 7.75    55.00%
                 JAN-2002 $ 30  WWI-AF   $ 5.38   $ 7.50    39.41%
                 JAN-2003 $ 35  VWI-AG   $ 7.63   $ 7.63    ------
AMD    04/16/00  JAN-2001 $ 70  AMD-AN   $17.50   $24.38    39.31%
                 JAN-2002 $ 70  WVV-AN   $26.00   $35.63    37.04%
                 JAN-2003 $ 90  VVV-AR   $36.75   $36.75    ------
JDSU   04/16/00  JAN-2001 $ 80  XXZ-AP   $27.50   $62.13   125.93%
                 JAN-2002 $ 80  YJU-AP   $39.63   $75.50    90.51%
VSTR   04/16/00  JAN-2001 $ 90  UVT-AR   $23.88   $68.13   185.30%
                 JAN-2002 $ 90  WWP-AR   $35.00   $77.63   121.80%
                 JAN-2003 $150  VLV-AJ   $59.13   $59.13    ------
MOT    05/14/00  JAN-2001 $33.3 MOT-AY   $ 6.58   $ 8.88    34.95%
                 JAN-2002 $36.6 WMA-AZ   $ 9.54   $11.38    19.29%
                 JAN-2003 $ 40  VMA-AH   $13.38   $13.38    ------
NOK    05/21/00  JAN-2001 $ 50  NZY-AJ   $10.25   $11.25     9.76%
                 JAN-2002 $ 50  IWX-AJ   $17.25   $18.38     6.55%
                 JAN-2003 $ 55  VOK-AK   $22.13   $22.13    ------
HD     05/28/00  JAN-2001 $ 50  HD -AJ   $ 6.25   $12.00    92.00%
                 JAN-2002 $ 50  WHD-AJ   $11.38   $17.88    57.12%
                 JAN-2003 $ 60  VHD-AL   $17.88   $17.88    ------
XLNX   05/28/00  JAN-2001 $ 70  ZIZ-AN   $14.63   $18.00    23.03%
                 JAN-2002 $ 70  WXJ-AN   $23.38   $27.75    18.69%
NXTL   06/11/00  JAN-2001 $ 60  FZC-AL   $12.25   $19.25    57.14%
                 JAN-2002 $ 60  YFG-AL   $19.25   $27.00    40.26%
C      06/18/00  JAN-2001 $ 65  C  -AM   $ 7.63   $11.75    54.00%
                 JAN-2002 $ 65  WRV-AM   $13.75   $19.00    38.18%
AMGN   07/02/00  JAN-2001 $ 75  YAA-AO   $10.75   $14.50    34.88%
                 JAN-2002 $ 75  WQY-AO   $20.75   $25.13    21.11%
                 JAN-2003 $ 70  VAM-AN   $28.75   $34.38    19.58%
VRSN   07/02/00  JAN-2001 $180  JSV-AP   $56.88   $56.00   - 1.55%
                 JAN-2002 $190  YVS-AR   $66.25   $67.88     2.46%
                 JAN-2003 $180  OVS-AP   $88.00   $88.00    ------
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $13.38     5.94%
                 JAN-2003 $ 60  VDL-AL   $15.38   $16.00     4.03%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $21.13    23.35%
                 JAN-2003 $ 70  OZG-AN   $23.13   $26.63    15.13%


Spotlight Play

ERICY - Ericsson Telephone $19.81

As further proof of the difficult market environment that
currently exists, ERICY announced earnings on Friday that beat
the street estimate by a penny and was promptly handed a 12%
haircut.  Although the numbers looked good on the surface, the
real catalyst for the drop was the company’s lowered guidance
for handset sales due to component shortages.  Although this is
tough in the short-term, what it tells us is that demand for
the company’s products is still strong.  Margin concerns are
also plaguing ERICY’s cell phone business, accounting for about
a third of the company’s revenue stream.  On the brighter side,
their Network Operations unit, making up the balance of ERICY’s
income stream, is making tremendous progress and looks like it
will continue to take market share from Lucent.  In just the
last year the company doubled their operating margins in the
Network Infrastructure arena, and this side of the business
looks much rosier.  If prices can firm near current levels, you
may want to consider nibbling at new positions.  However, with
the typical summer slowdown fast approaching, the prudent choice
might be to wait for a pullback to even stronger support near
$18, which is just a hair below the 200-dma.

BUY LEAP JAN-2002 $20.00 WRY-AD at $6.38
BUY LEAP JAN-2003 $25.00 VYD-AE at $6.88


New Plays

LU - Lucent Technologies $51.25

The love-hate relationship between LU and its shareholders got
another dose of reality last week when the company released
their earnings Thursday morning.  Although they managed to beat
the reduced estimates by a penny, the company let the other shoe
drop, admitting that its efforts to boost production of new
fiber optic products were taking longer than originally planned.
Exacerbating the company’s revenue problems, sales of
traditional telephone switches has been falling faster than
expected.  It seems like the management has finally quit
sugar-coating their outlook and the worst may be behind for the
company.  With Friday’s long-awaited announcement that the
company will spin off its $4 billion chipmaking and fiber optic
components unit, it looks like the company is successfully
narrowing its focus to what it does best.  This core skill is
supplying hardware and software to the telecommunications
service provider market, concentrating especially on broadband,
mobile Internet and infrastructure solutions.  It was
encouraging to see that the selling pressure couldn’t penetrate
the $50 support level, even on Friday.  As long as this support
level can hold, we would consider current levels as an
attractive entry point for what could be a very nice recovery
in the long-term.  Granted, this is a play on a potential
turnaround, but if the company can execute on its plans, we
could be in for a nice ride.

BUY LEAP JAN-2002 $55.00 WEU-AK at $12.88
BUY LEAP JAN-2003 $55.00 VEU-AK at $17.50


Drops

CY $45.94 Although it has been a solid performer for several
months, rapidly deteriorating sentiment in the Semiconductor
sector has decreed the end of our play in CY.  After announcing
blowout earnings and incredible revenue growth early last week,
the “sell the news” crowd has been out in force.  In just the
past four sessions, the stock has been given more than a 15%
haircut, making a powerful argument for not holding over
earnings.  It should also be a reminder of why we always
recommend using stop loss orders to lock in profits.  With no
news to resurrect the stock in the near term, it is time to
move this play to the sidelines until the market and sector
can regain some signs of life.

EMC $89.56 Ok, before you fire off those nasty emails, THIS IS
NOT A DROP of our play on EMC.  But we are no longer
recommending new positions in the JAN-2001 Calls.  For those of
you that have been with us awhile, you will recall that we have
recommended taking advantage of any July earnings run to lock
in profits on those (hopefully) few remaining 2001 LEAPS.  The
normal summer slowdown is fast approaching, and since the 2001
calls now only have 6 months of time value remaining, time decay
will be a very significant factor through the expected summer
decline.  If you were bold enough to hold over EMC’s earnings 
last week, you were rewarded with a very positive report and an 
attendant rise in EMC.  The run looks like it is running out of 
steam, as the stock is finding solid resistance at $90.  This 
looks like the best opportunity we will get to close out those 
2001 LEAPS at a profit and when a new entry presents itself 
(not this week!), roll up to the 2002 or 2003 LEAPS.

TXN $62.25 Another victim of the deteriorating sentiment in the
Semiconductor sector, TXN has been particularly disappointing
lately.  With earnings slated for Monday after the close, the
stock hasn’t even had a hint of an earnings run.  To make
matters worse, Friday’s action dragged the price below the
200-dma - for the first time since October of 1998!  The meaty
part of earnings season is now behind us, and it looks like the
summer weakness that we are so familiar with is close at hand.
The decline this past week should have stopped out any open
plays and we’ll take this opportunity to step aside from TXN
until the bulls decide they want to come back out and play.

XLNX $75.94 Do you notice a recurring theme here?  The
Semiconductors were a big red spot on the NASDAQ this week, as
several components reported strong earnings and were rewarded
with vicious selling after the fact.  In addition to the
typical “sell the news” mentality, XLNX suffered on Friday
from A WR Hambrecht downgrade.  Hambrecht analyst Jim Liang cut
XLNX to a Buy from a Strong Buy, citing the stock’s relatively
high valuation.  David Wu at ABN Amro jumped into the fray,
raising his price target on the stock to $120, but it was too
little, too late.  The sellers had already made up their minds
and the stock shed over 12% on extremely heavy volume.  Add that
loss to the $9.56 loss from earlier in the week, and it is clear
to us that it is time to put XLNX out to pasture.



***********
SPLIT PLAYS
***********

Another Big Week For Splits
By Ryan Nelson

We saw another healthy week for split announcements as the 
earnings announcements fueled the flames.  We had 15 major 
companies declare splits this past week, pushing the monthly 
total to 25.  We should see a few more next week before it 
starts to drop off, but what this does is set up for lots 
of split runs in the next six weeks.  You may have noticed 
that we haven't had any current split run plays yet this 
month, but that will change.  The one caution flag is the 
overall market, which may decide to retreat in the short-term.  
That is ok though and we will be watching for those entry 
points to play some of these split runs.


Current Split Run Plays
 
None


Current Split Candidate Plays

GSPN
HGSI
SCMR
CRA
ARBA
VRTX
PVN


Candidates That Are Not Current Plays

VRSN
BRCM
LLY
COHR
GLW
SEBL
BRCD
TIBX
SAPE
CREE
AKAM


10 Most Recent Announcements We Predicted

AMD (most recent announcement)
PDLI
TXN 
CHINA
CMVT
NT
VRTS
SEPR
YHOO
TMPW


Major Announcements So Far This Month

BMET     WAT      NMSS     PDLI     UVN
VRTX     ALTR     ACTU     CORR     INCY
CDT      BBBY     RATL     EXTR     PROX
MPWR     ATML     AMD      MNMD     MER
AFFX     TXCC     TSTN     C        INHL


For our complete stock split calendar, click here...
http://members.OptionInvestor.com/splits/index.asp


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

*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************
The Option Investor Newsletter                   Sunday 07-23-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with imbedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/072300_5.html

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

Stock Buying Basics: Trade Execution
By Mark Wnetrzak

Getting good "fills" is simple, just follow the most direct route
to your trading partner.  Today, we will examine one of the most
popular execution tools available to retail traders; the ECN or
Electronic Communication Network.  Prior to the late 1990's, this
avenue was largely unavailable to individual traders.  InstiNet,
which began in 1969, was the first venue for institutions in what
is commonly called the "third market."  However, in recent years,
there has been a major expansion in the number of companies
providing this type of direct market access.

Electronic Communication Networks are computerized systems that
anonymously match buyers and sellers of stocks.  In simple terms,
ECNs basically function as separate exchanges.  These networks
allow individuals to enter bids and offers directly on the NASDAQ
exchange, side by side with orders from market-makers and major
institutions.  These systems have changed the market considerably
and in what has become a major battle in the industry, the NASD
(NASDAQ's parent group) says ECNs are pilfering a substantial
amount of traffic, including orders from some major Wall Street
brokerages.  It is not unusual to have 25% of the NASDAQ's total
daily volume traded through ECNs and the reason is, prices quoted
on these systems are better than those on the main NASDAQ system.
Proponents say these networks improve prices for all traders but
of course the NASD is not about to give away its top spot in the
electronic trading market.  The group has recently proposed a new
"SuperMontage" computer trading system in which all orders would
be forced through the NASDAQ exchange.  Those in opposition of the
NASD's design complain that the routing procedure would create a
less inefficient, anti-competitive system eliminating the many
benefits that ECNs have provided to the trading public.

The development of electronic trading networks made it possible
for institutions to trade stocks without routing the transactions
to the floors of the exchanges and it wasn't long before someone
decided they could avoid the exchanges completely through the use
of these networks.  Obviously ECNs are powerful tools for retail
traders and now it is possible to trade virtually at all hours
with other people or institutions connected to the same network.
Most systems are based on trade-matching and the majority of these
networks function as "crossing" markets.  That is, your order is
filled if it corresponds with another opposing order.  The "active"
ECNs, such as Archipelago, use complex decision-making algorithms
and the SelectNet system to find the quickest way to execute a
trade, at the best possible price.  Individual investors also have
access to new types of orders that previously were reserved for
major institutions with high-priced, sophisticated software.  The
most popular trading packages offer direct access to the various
ECNS, while at the same time, allowing the user to decide which
route or exchange to use in the trade.

With the incredible advancements in trading technology, it's only
natural that the public would demand equal access to information
and techniques used by professionals.  Next week, we will review
one of the most popular networks for retail traders; Island ECN.

Good Luck!


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

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

EGAN   13.94  12.69   JUL  12.50  2.19  *$  0.75  13.9%
CYTO    9.69   7.81   JUL   7.50  2.94  *$  0.75  12.1%
FSII   18.25  18.63   JUL  17.50  2.63  *$  1.88  10.5%
ARQL   13.88  22.13   JUL  12.50  2.44  *$  1.06  10.1%
CCUR   13.13  13.13   JUL  12.50  1.38  *$  0.75   9.2%
TGEN   12.25  12.38   JUL  10.00  3.00  *$  0.75   8.8%
SCUR   18.81  18.25   JUL  17.50  2.19  *$  0.88   7.7%
FHS    13.13  14.31   JUL  12.50  1.63  *$  1.00   7.6%
ZD     11.38  13.88   JUL  10.00  2.25  *$  0.87   6.9%
LYNX   32.63  38.13   JUL  25.00  9.75  *$  2.12   6.7%
TKTX   39.00  31.13   JUL  30.00  9.88  *$  0.88   6.6%
CYTO    7.97   7.81   JUL   5.00  3.38  *$  0.41   6.5%
RHAT   25.00  25.31   JUL  20.00  6.38  *$  1.38   6.4%
CEGE   25.56  27.63   JUL  20.00  6.88  *$  1.32   6.1%
BCGI   14.56  16.13   JUL  12.50  2.88  *$  0.82   6.1%
GENE   27.75  25.75   JUL  20.00  9.25  *$  1.50   5.9%
BCRX   27.00  28.50   JUL  22.50  5.63  *$  1.13   5.7%
CLTR   20.50  25.00   JUL  17.50  3.63  *$  0.63   5.4%
CAIR   25.50  24.13   JUL  20.00  6.63  *$  1.13   5.2%
TGEN   12.25  12.38   JUL   7.50  5.25  *$  0.50   5.2%
IBC    14.94  15.75   JUL  12.50  3.25  *$  0.81   5.0%
NERX   18.88  19.75   JUL  15.00  4.38  *$  0.50   5.0%
IFCI   23.13  23.81   JUL  20.00  4.00  *$  0.87   4.9%
LCCI   27.31  27.19   JUL  22.50  5.50  *$  0.69   4.6%
ALSC   26.88  22.50   JUL  22.50  5.88   $  1.50   4.4%
BWEB   22.88  19.75   JUL  17.50  5.88  *$  0.50   4.3%
PGO    19.00  18.75   JUL  17.50  2.25  *$  0.75   3.9%
TSEM   30.69  30.38   JUL  25.00  6.50  *$  0.81   3.6%
LYNX   47.56  38.13   JUL  40.00  9.63   $  0.20   0.8%
MED     9.44   6.81   JUL   7.50  2.69   $  0.06   0.6%
GLGC   38.75  28.44   JUL  30.00 10.00   $ -0.31   0.0%

MAIL    9.44   8.63   AUG   7.50  2.50  *$  0.56   7.0%
DLK    16.75  24.00   AUG  12.50  5.25  *$  1.00   6.3%
BLSW   32.88  30.06   AUG  25.00  9.38  *$  1.50   5.5%
IVIL    8.94   7.31   AUG   7.50  2.13   $  0.50   5.3%
PSFT   18.38  21.88   AUG  15.00  4.38  *$  1.00   5.2%
WFR    18.38  17.94   AUG  15.00  4.38  *$  1.00   5.2%
PMTC   12.69  10.69   AUG  10.00  3.25  *$  0.56   5.2%
IMNR   11.00   9.94   AUG   7.50  3.88  *$  0.38   4.6%
EPTO   15.13  13.13   AUG  12.50  3.38  *$  0.75   4.6%
MCOM   33.00  37.81   AUG  25.00  9.25  *$  1.25   4.6%
EFCX   14.38  13.38   AUG  10.00  4.88  *$  0.50   4.6%
LOOK   23.00  23.75   AUG  17.50  6.25  *$  0.75   3.9%

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

Comments:

With Alliance Semiconductor (ALSC) closing exactly at the sold
strike, getting "called-out" is unlikely.  There are several
options available if you own the stock on Monday:  Selling the
stock and pocketing the profit, rolling forward, rolling down,
etc.  Technically, the stock appears a bit weak and the sector
is undergoing some selling pressure.  Lynx Therapeutics (LYNX),
E-Med Soft.Com (MED), and Gene Logic (GLGC) should each offer a
break-even exit next week.  In many cases, "not losing money"
becomes the goal!  As for August, Mail.Com (Mail) is undergoing
some profit taking and may test the June high near our sold
strike.  Ivillage's (IVIL) technical picture is turning bearish
and a test of the June low appears likely.  Parametric Tech
(PMTC) is moving lower after forming a bearish evening star and
is testing the June support area.  Remember, violating a support
area is a technical exit signal!  Epitope (EPTO) appears to be
successfully testing its 50 dma and may eventually recover.


NEW PICKS
*********

Sequenced by Company
*****

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

HLYW    8.94  AUG   7.50  HWQ HU  2.06  272   6.88   28     9.8%
IGEN   20.69  AUG  17.50   GQ HW  3.88  70   16.81   28     4.5%
ITXC   34.50  AUG  30.00  UXI HF  7.00  97   27.50   28     9.9%
LE     40.13  AUG  35.00   LE HG  7.00  330  33.13   28     6.1%
MCRE   13.06  AUG  10.00  MQZ HB  3.50  140   9.56   28     5.0%
OO     13.94  AUG  12.50   OO HV  1.94  132  12.00   28     4.5%
TMWD   59.50  AUG  45.00  DQW HI 18.63  1    40.87   28    11.0%

Sequenced by Return
*****

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

TMWD   59.50  AUG  45.00  DQW HI 18.63  1    40.87   28    11.0%
ITXC   34.50  AUG  30.00  UXI HF  7.00  97   27.50   28     9.9%
HLYW    8.94  AUG   7.50  HWQ HU  2.06  272   6.88   28     9.8%
LE     40.13  AUG  35.00   LE HG  7.00  330  33.13   28     6.1%
MCRE   13.06  AUG  10.00  MQZ HB  3.50  140   9.56   28     5.0%
IGEN   20.69  AUG  17.50   GQ HW  3.88  70   16.81   28     4.5%
OO     13.94  AUG  12.50   OO HV  1.94  132  12.00   28     4.5%


Company Descriptions

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

*****
HLYW - Hollywood Entertainment  $8.94  *** On The Rebound! ***

Hollywood Entertainment owns and operates hundreds of Hollywood
Video retail superstores across the United States, and is the
second largest retailer of rentable home videocassettes, DVDs and
video games in the United States.  Their transaction database
contains information on about 27 million United States member
accounts.  The company's recent acquisition, Reel.com, has gone
out of business, marking one of the first high-profile failures
of the click-and-mortar model of Internet retailing.  Officials
at HLYW said that as a result of the declines in the value of
publicly traded e-commerce companies, they did not believe it was
in their best interest to continue funding Reel from Hollywood's
strong video store cash flow.  It appears that investors agree
with the decision.

AUG 7.50 HWQ HU LB=2.06 OI=272 CB=6.88 DE=28 MR=9.8%

Chart =
 
*****
IGEN - IGEN International  $20.69  *** Breakout! ***

IGEN International develops, manufactures, and markets diagnostic
systems utilizing IGEN's patented ORIGEN technology, which is
based on electrochemiluminescence, a universal diagnostic
platform, which addresses many segments of the diagnostics
industry.  IGEN believes that ORIGEN-based diagnostic products
offer significant advantages over existing systems by providing
a combination of enhanced speed, sensitivity, flexibility,
throughput and cost effectiveness.  IGEN reported earnings in
May with a strong increase in revenue primarily due to a rise in
product sales led by the M8 analyzer, the first of the M-SERIES
line of proprietary instruments and consumable products based
on ORIGEN.  Two new board members were appointed near the end of
June and the news seems to have spurred investor interest.  We
favor the bullish move out of a stage I base on heavy volume with
technical support near our cost basis.

AUG 17.50 GQ HW LB=3.88 OI=70 CB=16.81 DE=28 MR=4.5%

Chart =
 
*****
ITXC - ITXC Corp.  $34.50  *** Talking Via Your PC ***

ITXC is a service provider for voice on the Internet.  ITXC
WWeXchange Service provides phone-to-phone wholesale call
completion for carriers and resellers and has been chosen by ten
of the top 12 U.S. facilities-based carriers, leading European
competitive carriers and PTTs worldwide to complete their
customers' calls.  ITXC webtalkNOW! Service enables portals,
ISPs and communications Websites to offer PC-to-phone calling
to their customers under their own brands.  This week ITCX
announced that it is now completing regional Bell operating
company originated international phone-to-phone calls over the
Internet.  With recent contract signings, ITXC has expanded its
customer base to include 13 of the 14 largest U.S. based
international carriers.  ITXC has been in a basing formation
for the last few months with strong support near our sold
strike.  The technicals suggest the trend will continue though
there are some signals suggesting upside potential.  We favor a
conservative entry and you may consider waiting for Tuesday's
earnings report before opening the position.

AUG 30.00 UXI HF LB=7.00 OI=97 CB=27.50 DE=28 MR=9.9%

Chart =
 
*****
LE - Lands' End  $40.13  *** What's up with Friday's Rally? ***

Lands' End is a direct marketer of traditionally styled, casual
clothing for men, women and children, accessories, domestics,
shoes, and soft luggage.  They offer their products through
multiple distribution channels consisting of regular mailings of
its monthly primary catalogs, prospecting catalogs, specialty
catalogs as well as through the Internet, its international
businesses, and its outlet retail stores.  Let see, Lands' End
has been quietly forming a stage I base with little or no news
and then Friday, it spikes up $4.12 on almost 3 times normal
volume?  Even the message boards are quiet!  An old sage used to
say, "the tape tells all".  Well, the tape is saying someone is
interested in this stock and we simply wish to participate in
the speculation with a reasonable cost basis.

AUG 35.00 LE HG LB=7.00 OI=330 CB=33.13 DE=28 MR=6.1%

Chart =
 
*****
MCRE - MetaCreations  $13.06  *** New Business Plan! ***

MetaCreations is a provider of e-commerce visualization solutions
for the World Wide Web.  MetaCreations' strategy is centered on
the Company's Metastream technology and software tools designed
to make the interactive use of photo-realistic 3D on the Web
practical and pervasive.  Last quarter, MetaCreations divested its
graphic software business to focus on launching the next version of
the Metastream technology and licensing model.  The launch of
Metastream 3.0 appears to be a success with Nike and Sony, to name
a few, adopting MTS 3 as their interactive marketing platform.
Investors appear to be pleased with this new business model and
are looking forward to the international conference on computer
graphics and interactive techniques (SIGGRAPH) where Metastream,
a subsidiary of MetaCreations, plans to present its latest advances
in technology and to make two major announcements.  A rather
speculative issue (earnings are due early next week) that offers
a conservative cost basis for a long-term entry point.

AUG 10.00 MQZ HB LB=3.50 OI=140 CB=9.56 DE=28 MR=5.0%

Chart =
 
*****
OO - Oakley  $13.94  *** The Glare of a Stage II Lift-off ***

Oakley is a designer, manufacturer and distributor of consumer
products that include high performance eyewear, footwear,
watches, apparel and accessories.  They have developed products
that demonstrate superior performance and aesthetics through
proprietary technology and styling. Its designs and innovations
are protected by more than 520 legal patents worldwide.  I almost
had to put my Oakley Sunglasses on to read the "bright" earnings
report on Wednesday:  Net sales increase 39 percent to a record
$100 million on strength of eyewear growth; net income for the
second quarter increased 75% to a record $18.5 million.  Of course
FS Van Kasper immediately changed their new coverage from a "buy"
to a "strong buy"...timely!  We were attracted by the glare of
the stage II breakout from a lateral consolidation phase on very
heavy volume - almost resembles a Saturn V blastoff!  But, since
we don't wish to chase the stock, we'll seek a lower risk entry
point with a favorable cost basis.

AUG 12.50 OO HV LB=1.94 OI=132 CB=12.00 DE=28 MR=4.5%

Chart =
 
*****
TMWD - Tumbleweed $59.50  *** Internet Business Solutions ***

Tumbleweed Communications provides advanced e-mail solutions for
business communications.  Its products enable businesses to
create secure online communication channels with established
e-mail networks and enterprise applications.  With Tumbleweed's
Integrated Messaging Exchange (IME), the Company combines an open
scalable messaging software platform, a suite of applications for
specific business processes, and a broad range of professional
services to provide a secure channel for sending and receiving
business critical information online.  On Thursday, Tumbleweed
reported its 2nd Quarter, meeting the Streets earnings estimates
and reporting a total revenue increase of 53% and a transaction
revenue increase of 108%.  Tumbleweed did have a post-earnings
sell-off on Friday though the downside appears limited with the
May and June highs providing near term support.  This issue tends
to be volatile and thus we suggest you evaluate your risk-reward
tolerance before entering the position.

AUG 45.00 DQW HI LB=18.63 OI=1 CB=40.87 DE=28 MR=11.0%

Chart =
 


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

Naked Put Percentage List
By Matt Russ

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

ADBE   134.63   130  AXX-TF    8.13   3366   24%     128
AETH   183.00   165  HEX-TM   13.63   4575   30%     165
AFFX   193.56   185  FUE-TQ   18.00   4839   37%     185
ARTG   121.00   110  ARY-TB    7.25   3025   24%     110
BRCM   229.94   220  RDU-TD   12.63   5749   22%     220
CDWC    60.31    55  DWQ-TK    3.13   1508   21%      55
CHKP   250.50   230  YKE-TV   14.50   6263   23%     225
CIEN   155.44   150  UEE-TJ   12.00   3886   31%     150
CMTN    84.38    80  KUA-TP    6.13   2110   29%      78
CRA    112.00   100  CZA-TT    7.00   2800   25%     100
DIGX    88.19    80  UOM-TP    5.38   2205   24%      80
DITC    83.25    80  DUI-TP    6.50   2081   31%      77
DNA    153.31   150  DNA-TJ    9.00   3833   23%     150
FDRY    90.00    80  OUJ-TP    4.50   2250   20%      75
GLW    283.25   270  GWD-TN    9.75   7081   14%     265
GSPN   133.94   120  GHY-TD    8.75   3349   26%     128
HGSI   162.50   150  HHA-TL    9.63   4063   24%     150
ISSX    85.69    80  ISU-TP    5.63   2142   26%      80
ITWO   144.13   130  QYJ-TF    7.00   3603   19%     128
JNPR   160.81   150  JUY-TJ    7.75   4020   19%     150
MLNM   112.88   105  QMR-TA    7.38   2822   26%     108
MUSE   156.88   150  UZQ-TJ   12.50   3922   32%     148
PDLI   165.00   160  RPV-TL   13.25   4125   32%     155
RBAK   139.38   120  BKK-TD    6.00   3485   17%     120
SCMR   138.75   120  QSM-TD    4.75   3469   14%     120
SDLI   442.31   400  OSL-TT   19.75  11058   18%     400
SEBL   159.56   150  SGW-TJ    9.50   3989   24%     150
SEPR   129.81   115  ERU-TC    5.88   3245   18%     120
TERN    62.06    60  TUN-TL    5.50   1552   35%      58
VRSN   180.44   170  QVZ-TN    9.75   4511   22%     170
VRTS   109.31   105  VUQ-TA    6.88   2733   25%     105



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

Success Basics: Market Philosophy
By Ray Cummins

Learning to trade profitably in the market is a great achievement
but in truth, it involves no secrets.  If you study the methods
of the most well known financial experts, you will find a number
of common characteristics.  The first attribute is a fundamental
knowledge of market economics and the basic concept of supply and
demand.  The second important trait is the use of a specific plan
or trading methodology.  Another worthwhile quality is patience,
and the discipline to execute the trading plan without regard to
emotion and other outside influences.  The final trait centers on
the ability to view the investment world in counterintuitive or
contrarian ways.  This capacity involves the need to be creative
and oppose the current of popular opinion.  In many ways, that is
the essence of any successful position management strategy.

One of the first concepts that novice traders must learn is to
separate the company from its stock.  Companies change relatively
little on a fundamental basis in the short term, but their share
values move substantially.  The primary point to remember is that
today's market price is not the company's value.  Price is simply
a reflection of the current state of the public's attitudes about
a specific company.  It is common knowledge that perceptions and
expectations are often completely out of line with absolute
valuations.  Understanding the differences between value and the
current market price is one of the initial steps to becoming an
independent thinker.

Another difficult influence to overcome is the vast amount of
information that we are faced with in today's technologically
advanced society.  Investors have access to a wide selection of
inexpensive online data; economic news, company announcements,
real-time quotes and professional quality charting services.
With the current revolution in communications, it is possible for
a trader to receive this information at almost any location on
the planet, with little or no delay.  Financial news services
featuring every conceivable expert and their opinions on the
latest developments are also available around the clock.  While
the value of such immediate (and hardly intellectual) analysis
is suspect, they continue to flood the airwaves with perpetual
appraisals of every event.  To maintain an appearance of wisdom,
market "gurus" try to justify each individual price movement with
logical reasoning.  Unfortunately, these experts can be motivated
by self-promotion and ego enhancement and thus the analysis often
exceeds common rationale.  In addition, the media is constantly
searching for stories or angles that will increase their exposure
and improve advertising ratings.  This leads to a sophisticated
and widely disseminated form of gossip that is not particularly
helpful from an informational point of view.

In simple terms, the investing public has extremely easy access
to news and analyses that tend to arouse emotions and overcome
one's intellect.  Regrettably, this appetite for real-time data
and market information becomes a kind of addiction on which our
emotional subconscious thrives.  As with any dependency, it takes
a greater amount of participation to maintain the same level of
excitement.  The overdose may be in the form of new services or
software and often, more expensive equipment.  Regardless of the
path to "information overload," the end result is generally the
same; a tendency to indulge in excess trading with a minimum of
actual research and planning.  The outcome is similar to a drug
addict's withdrawal symptoms but in this case, poor decisions
simply lead to financial ruin as the market brutally assaults
every hastily conceived position that you have initiated.

The best way to avoid the effects of outside influences is to
deliberately structure your trade selection process so that the
critical decisions are made only when the markets are closed.
The key is to set aside time for examination and analysis when
external events will have less influence on your judgment.  You
should also use proven strategies and sound money management
techniques to avoid situations that can be affected by external
elements.  A popular theory suggests that the average investor
may very well try to be rational but his rationality tends to be
hampered by emotional works and social influences.  That's not
something that you want working against you when it is time to
make an important trading decision.

Good Luck!


                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


SUMMARY OF PREVIOUS PICKS
*****

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

SIRI   44.31  43.00   JUL  35.00  1.88  *$  1.88  25.4%
DLK    16.75  24.00   JUL  12.50  0.38  *$  0.38  22.1%
ANCC   30.22  34.06   JUL  22.50  0.44  *$  0.44  14.8%
FSII   18.25  18.63   JUL  15.00  0.75  *$  0.75  13.6%
IMG    18.31  17.06   JUL  15.00  0.56  *$  0.56  13.3%
EFCX   10.56  13.38   JUL   7.50  0.44  *$  0.44  12.5%
CEGE   31.50  27.63   JUL  25.00  0.38  *$  0.38  12.4%
SCUR   15.88  18.25   JUL  12.50  0.38  *$  0.38  11.6%
MRVT   19.50  24.50   JUL  15.00  0.44  *$  0.44  11.0%
GENE   30.44  25.75   JUL  22.50  0.50  *$  0.50  11.0%
CAMP   29.00  39.38   JUL  22.50  0.81  *$  0.81  10.6%
TSEM   30.69  30.38   JUL  25.00  0.69  *$  0.69  10.3%
YRK    28.94  25.94   JUL  25.00  0.38  *$  0.38  10.3%
TGEN   14.88  12.38   JUL  12.50  0.38   $  0.26   9.5%
GENE   26.13  25.75   JUL  17.50  0.63  *$  0.63   9.3%
OAKT   20.94  22.88   JUL  17.50  0.44  *$  0.44   8.9%
LBRT   29.31  28.25   JUL  20.00  0.38  *$  0.38   8.8%
NSS    20.13  18.19   JUL  15.00  0.44  *$  0.44   8.6%
FSII   16.00  18.63   JUL  12.50  0.50  *$  0.50   8.4%
PILT   15.31  16.88   JUL  10.00  0.38  *$  0.38   8.0%
CBST   49.25  49.06   JUL  35.00  0.50  *$  0.50   7.0%
CAIR   25.50  24.13   JUL  17.50  0.44  *$  0.44   6.9%
MPPP   19.19  12.13   JUL  10.00  0.38  *$  0.38   6.5%
SYMM   20.00  23.19   JUL  15.00  0.38  *$  0.38   6.3%
VITR   48.13  54.94   JUL  30.00  0.56  *$  0.56   6.0%
SIPX   27.25  33.69   JUL  20.00  0.31  *$  0.31   5.8%
CLRS   38.88  41.81   JUL  30.00  0.69  *$  0.69   5.8%
CEGE   27.25  27.63   JUL  17.50  0.44  *$  0.44   5.4%
IMNX   44.69  57.75   JUL  30.00  0.56  *$  0.56   5.1%
TLCM   40.06  24.81   JUL  30.00  0.56   $ -4.63   0.0%

GSTRF  10.56   8.03   AUG   7.50  0.56  *$  0.56  18.2%
NFLD   17.50  15.94   AUG  15.00  1.00  *$  1.00  13.2%
SQST   14.00  10.56   AUG  10.00  0.50  *$  0.50  13.2%
WSTL   25.19  28.50   AUG  20.00  0.81  *$  0.81  12.0%
PILT   17.81  16.88   AUG  12.50  0.50  *$  0.50  10.7%
RAZF   22.25  19.19   AUG  17.50  0.56  *$  0.56   9.7%
MRVT   22.63  24.50   AUG  17.50  0.50  *$  0.50   7.2%
BLSW   32.88  30.06   AUG  22.50  0.56  *$  0.56   6.8%
NXLK   39.69  39.94   AUG  30.00  0.75  *$  0.75   6.3%
INFS   37.00  37.75   AUG  30.00  0.50  *$  0.50   5.2%

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

Comments:

Targeted Genetics (TGEN) dropped slightly below our sold strike
however, the chances are slim it will be assigned.  The big drop
in Telcom Semiconductor (TLCM) confirmed a "failed" rally this
week and an early exit would have avoided Friday's horrid, post-
earnings drop.  August Positions: (GSTRF) Globalstar Telecom is
testing the previous July low as it continues to form a stage I
base.  Northfield Labs (NFLD) is testing the May high and should
be monitored closely.  Sciquest.Com may be taking collateral
damage from its competitor, Ventro (VNTR) which recently reported
disappointing revenue.  Razorfish (RAZF) is pulling back as we
move towards Tuesday's earnings report but the technicals remain
bullish.

Positions Closed:

Us Lec Corp. (CLEC) and Open Market (OMKT).  Creative Tech (CREAF)
proved Murphy's Law remains in effect by rallying back above our
sold strike for a profitable outcome.


NEW PICKS
*********

Sequenced by Company
*****

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

ATMS   11.44  AUG   7.50  OUA TU  0.31  0     7.19   28    13.0%
HLYW    8.94  AUG   7.50  HWQ TU  0.50  36    7.00   28    20.6%
ICGE   39.94  AUG  30.00  EUE TF  0.75  688  29.25   28     9.3%
PSFT   21.88  AUG  17.50  PQO TW  0.44  280  17.06   28     9.9%
RHAT   25.31  AUG  17.50  RCV TW  0.38  0    17.12   28     7.6%
WSTL   28.50  AUG  20.00  QLW TD  0.56  210  19.44   28     9.7%
ZIXI   55.00  AUG  40.00  HQU TH  1.63  246  38.37   28    14.0%

Sequenced by Return
******

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

HLYW    8.94  AUG   7.50  HWQ TU  0.50  36    7.00   28    20.6%
ZIXI   55.00  AUG  40.00  HQU TH  1.63  246  38.37   28    14.0%
ATMS   11.44  AUG   7.50  OUA TU  0.31  0     7.19   28    13.0%
PSFT   21.88  AUG  17.50  PQO TW  0.44  280  17.06   28     9.9%
WSTL   28.50  AUG  20.00  QLW TD  0.56  210  19.44   28     9.7%
ICGE   39.94  AUG  30.00  EUE TF  0.75  688  29.25   28     9.3%
RHAT   25.31  AUG  17.50  RCV TW  0.38  0    17.12   28     7.6%


Company Descriptions

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

*****
ATMS - Tidel Technologies  $11.44  *** Own This One! ***

Tidel Technologies sells and supports products designed for
automated teller machines electronic cash security systems.
They provide ATMs that meet variety of demands in the
marketplace.  Chameleon, their most advanced ATM product, is an
interactive multimedia kiosk that combines the security of
traditional Electronic Funds Transfer banking networks with the
limitless options of the Internet.  For example, an ATM user
could make a cash withdrawal, and then buy airline tickets and
book a hotel reservation, all while receiving high-impact
advertising messages in broadcast-quality video and audio.
The company recently announced a new quarterly record for ATM
shipments and the CEO remarked that they are very pleased with
the pace of the current business.  He expects the momentum to
carry forward into the next quarter and based on the bullish
history, the issue should remain well above our cost basis.
Financial results for this quarter will be released on or about
July 26, 2000.

AUG 7.50 OUA TU LB=0.31 OI=0 CB=7.19 DE=28 MR=13.0%

Chart =
 
*****
HLYW - Hollywood Entertainment  $8.94  *** On The Rebound! ***

Hollywood Entertainment owns and operates hundreds of Hollywood
Video retail superstores across the United States, and is the
second largest retailer of rentable home videocassettes, DVDs and
video games in the United States.  Their transaction database
contains information on about 27 million United States member
accounts.  The company's recent acquisition, Reel.com, has gone
out of business, marking one of the first high-profile failures
of the click-and-mortar model of Internet retailing.  Officials
at HLYW said that as a result of the declines in the value of
publicly traded e-commerce companies, they did not believe it was
in their best interest to continue funding Reel from Hollywood's
strong video store cash flow.  It appears that investors agree
with the decision.

AUG 7.50 HWQ TU LB=0.50 OI=36 CB=7.00 DE=28 MR=20.6%

Chart =
 
*****
ICGE - Internet Capital Group  $39.94  *** Stage I Base ***

Internet Capital Group is an Internet company engaged in
business-to-business (B2B) e-commerce through a network of
partner companies.  They own interests in 49 B2B e-commerce
companies.  ICG owns two types of B2B companies. The first focuses
on creating Internet-based markets for the exchange of goods,
services and information.  The second allows service providers to
sell software and services to businesses engaged in e-commerce,
providing assistance in designing business practices to take
advantage of the Internet and in building and managing the
infrastructure needed to support B2B e-commerce.  E-commerce is
still a HOT industry and the sector represents the next major
wave in business automation with an expected multiyear cycle that
will influence larger populations and produce more far-reaching
implications than any wave of computing that has preceded it.  We
simply favor the neutral-to-bullish technical pattern in this
issue and the positive outlook for the sector.

AUG 30.00 EUE TF LB=0.75 OI=688 CB=29.25 DE=28 MR=9.3%

Chart =
 
*****
PSFT - PeopleSoft  $21.88  *** Own This One! ***

PeopleSoft designs, develops, markets and supports a family of
enterprise client/server and Internet based application software
products for use throughout large and medium sized organizations
including corporations worldwide, and education institutions, and
federal, state, provincial and local government agencies in North
America.  The company designs its products for the client/server
and Internet models of computing.  PSFT also delivers commercially
available application software products in for Business Management,
Supply Chain, Industry Solutions, and Product Architecture.  The
Company beat the consensus forecast by $0.01 in the second quarter
and revenue from human resource and financial software, a sector
targeted for future growth, improved 38%.  Supply chain management
revenue rose 44% and demand for their software was strong across
every product line and geography.  On Friday, the bullish issue was
upgraded by a number of brokers.

AUG 17.50 PQO TW LB=0.44 OI=280 CB=17.06 DE=28 MR=9.9%

Chart =
 
*****
RHAT - Red Hat  $25.31  *** They Beat The Street! ***

Red Hat is a developer and worldwide provider of open source
software products and services.  The company's product offerings
include Red Hat Linux and related tools, open source software
applications, documentation, manuals and general merchandise.
Professional services offerings include technical support and
maintenance, custom development, consulting, training along with
education, developer support and hardware certification.  Red Hat
has also built a comprehensive Internet site dedicated to the open
source software community.  In June, the leading Linux software
operating system provider reported better-than-expected earnings,
suggesting the company was on track to meet profitability goals
by next year.  Red Hat nearly doubled its quarterly sales from
twelve months ago, and the CEO commented that RHAT's quarterly
performance represents continued execution in a plan to leverage
acquisitions to enter new markets and develop additional revenue
sources.  We favor the low risk entry point.

AUG 17.50 RCV TW LB=0.38 OI=0 CB=17.12 DE=28 MR=7.6%

Chart =
 
*****
WSTL - Westell Technology  $28.50  *** Trend Reversal! ***

Westell Technologies provides telecommunications products and
services.  Westell Inc., their products business, supplies DSL
Equipment, Telephone Access Systems and equipment to monitor
and maintain telecommunications networks.  Conference Plus Inc.,
their service business, is an Application Service Provider,
hosting and providing audio, video, IP conferencing and support
services.  Last week, Westell reported second-quarter earnings of
$3.7 million, or $0.06 a share.  A First Call survey expected the
company to report a profit of $0.02 a share.  Revenue rose 347%
in the latest three months to $107.9 million, well above the $24
million in the same period a year earlier.  Telecom issues are
becoming popular again and with the recent positive ratings, it
appears investors are now bullish on this company.

AUG 20.00 QLW TD LB=0.56 OI=210 CB=19.44 DE=28 MR=9.7%

Chart =
 
*****
ZIXI - ZixIt Corporation  $55.00  *** New Trading Range! ***

ZixIt Corporation develops and markets products and services that
enhance privacy, security and convenience over the Internet.
ZixMail is a secure document delivery, private email and message
tracking service that enables Internet users to easily send and
receive encrypted and digitally signed email communications
without changing their existing email systems. ZixCharge, which
is currently under development, is a shopping portal and Internet
payment authorization system that enables consumers to use their
existing charge cards to purchase goods and services over the
Internet without being required to provide personal and charge
card information to Internet merchants.  In June, ZIXI received
a bullish upgrade based on the company's evolving product strength,
its impressive roster of recent investors, and a financial model
indicating significant revenue potential.  ZixIt has been stair-
stepping higher since May and appears ready for the next move up.

AUG 40.00 HQU TH LB=1.63 OI=246 CB=38.37 DE=28 MR=14.0%

Chart =
 


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

A broad market sell-off ends the rally!

The stock market closed sharply lower Friday after a string of
profit warnings gave investors new cause for concern.

Friday, July 21

The stock market closed sharply lower Friday after a string of
profit warnings gave investors new cause for concern.  The Dow
finished down 110 points at 10,733 while the Nasdaq ended 90
points lower at 4094.  The S&P 500 Index was down 15 points at
1480.  Trading volume on the NYSE hit 967 million shares, with
declines beating advances 1,774 to 1,095.  Trading activity on
the Nasdaq was average at 1.54 billion shares, with declines
leading advances 2,607 to 1,325.  In the bond market, the U.S.
30-year Treasury rose 9/32, pushing its yield down to 5.79%.


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

Cisco Systems    CSCO   AUG55P/60P   $0.62   credit   bull-put
Intl. Rectifier  IRF    AUG45P/50P   $0.88   credit   bull-put
Phillip Morris   MO     AUG27C/30C   $0.43   credit   bear-call

Cisco Systems traded in a relatively small range throughout the
session but there were a few opportunities to achieve a favorable
cost basis.  International Rectifier slid $2 at the open however,
the best available credit for the position was only $0.88.  The
Phillip Morris entry price was based on a 20-contract position
initiated near 10:20 A.M.


Portfolio Plays:

Technology stocks led the market lower today amid a slew of
mediocre earnings reports and revenue forecasts.  Frustration
over the lack of follow-through in the recent rally led many
investors to take profits even as the Summer rally was just
gaining momentum.  The stock market enjoyed bullish activity
earlier in the week after FOMC chair Alan Greenspan told the
Senate Banking Committee he expects economic growth to slow
next year.  But in classic style, he also commented that the
current tightness in the labor market could spur inflation.
Today analysts reviewed the speech, giving it a more sober
appraisal and now they are again speculating about what the
Fed is going to do with interest rates at their August meeting.
In the blue-chip group, Hewlett-Packard was the biggest loser,
falling almost $7 on speculation of weakness in their printer
business.  IBM and Intel also slumped after leading the market
higher earlier in the week.  Investors displayed unhappiness
with bellwether technology issues and the Semiconductor sector
endured the worst losses in that category.  In the broad market,
healthcare, biotech and investment management issues rallied,
while electronic and personal care stocks consolidated.

Friday was basically a "non-event" for the Spreads portfolio as
the majority of July positions are substantially "in-the-money"
or they have been previously closed to protect profits or limit
losses.  However, we did experience some exciting activity in
the Macromedia (MACR) spread.  Shares of the developer of web
software fell almost $30 after analysts expressed concerns about
the company's revenues, despite better-than-expected earnings.
Late Thursday, the company reported first-quarter earnings that
surpassed expectations and said it would see improved results
for the year as a whole.  Revenue increased 85% to $94 million
for the quarter, up from $51 million a year earlier.  Based on
the report, a US Bancorp Piper Jaffray analyst downgraded MACR
to a "buy", saying its revenues were slightly below to in line
with expectations.  Nada also said Macromedia was heading into
a seasonally weak period.  The negative review dropped the issue
to a low of $64 in the morning session and MACR was among the
top net and percentage losers on Nasdaq.  One analyst said that
the market reaction was a case of expectations getting out of
hand and we agree with that assessment.  Fortunately, the play
ended positive for the month.

Overall, the final day of the expiration period was relatively
kind to the Combos section.  A number of big-cap technology
issues suffered losses during the session but fortunately, the
majority of plays finished well beyond the maximum profit range.
Over 80% of our current positions closed profitably and the few
losses were minimal.  The remaining (August) plays were little
affected by the move and a small group of consolidating issues
offered new opportunities for roll-outs and adjustments.  Some
of our bullish small-cap stocks actually opposed the downward
market momentum, rallying to recent highs.  Overall, it was an
excellent end to another profitable month for this category of
the newsletter.

The summary of July's results along with the complete list of
current portfolio plays will be posted in next Tuesday's edition
of the OIN.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                       - READER'S REQUEST -

With the current uncertainty in the market, we decided to utilize
some of the recent issues that our subscribers have suggested as
candidates for this week's positions.
******************************************************************
SUNW - Sun Microsystems  $104.00  *** Big Earnings! ***

Sun Microsystems is a worldwide provider of products, services
and support solutions for building and maintaining network
computing environments.  The company sells scalable computer
systems, high-speed microprocessors and high performance
software for operating network computing equipment and storage
products.  They also provide support, education and professional
services.  The company's products are used for many demanding
commercial and technical applications in various industries
including telecommunications, manufacturing, financial services,
education, retail, government, energy and healthcare.

Earnings and revenues continue to dominate the market and Friday,
Sun Microsystems reported exceptional numbers as the computing
giant vaulted over analyst's estimates for its most recent quarter.
With record revenues of $5 billion, representing a growth of 42%
over the same quarter last year, Sun exceeded all expectations.
Strong server growth led the company and in every important
market, including telecommunications, financial services, retail
and manufacturing, they had an incredible quarter.  Analysts say
the best is yet to come as SUNW upped its projections for annual
revenue growth, with a target near 30% for the next fiscal year.


PLAY (conservative - bullish/synthetic position):

BUY  CALL OCT-125 SUX-JE  OI=574   A=$3.88
SELL PUT  OCT-85  SUX-VQ  OI=1288  B=$3.12
INITIAL NET DEBIT TARGET=$0.12-$0.25 PROFIT TARGET=20%

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $2,500 per contract.

Chart =

******************************************************************
BBBY - Bed Bath And Beyond  $39.69  *** Split Rally? ***

Bed Bath & Beyond sells domestics merchandise and other home
furnishings through stores across the U.S.  These stores are
on average approximately 42,000 square feet in size and carry
the company's full line of both domestics merchandise and home
furnishings.  Their domestic merchandise includes bed linens and
related services, bath items, and kitchen textiles.  BBBY's home
furnishings include kitchen and tabletop items, basic housewares,
and general home furnishings.  In each store, groups of related
product lines are presented together in separate areas of the
store, creating the appearance of several individual specialty
stores for different product lines.  The company believes that
its format of merchandise presentation makes it easy for its
customers to locate products, reinforces customer perception
of wide selection and a high level of customer service.

Bed, Bath, & Beyond is fundamentally sound and growing.  Last
quarter, BBBY exceeded analyst's estimates and its own internal
plans for expansion.  The company now operates 254 stores in
39 states, having opened 10 superstores during the latest
quarter, two more than analysts expected.  Bed, Bath, & Beyond
has also done an excellent job of inventory management and has
been financing its rapid growth using cash from operations
instead of debt.

This position is based primarily on the technical condition of
the issue and the potential for a pre-split rally.  Bed, Bath,
& Beyond is planning a two-for-one stock split to be effected in
the form of a 100% stock dividend, which will be distributed on
August 11, to shareholders of record on July 28.


PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-32.50  BHQ-TZ  OI=3795  A=$0.62
SELL PUT  AUG-35.00  BHQ-TG  OI=81    B=$0.93
INITIAL NET CREDIT TARGET=$0.38-$0.43  ROI(max)=18% B/E=$34.62

Chart =

******************************************************************
                      - Speculation Plays -

These positions are based on recent increased activity in the
stock and/or underlying options.  Both plays offer favorable
risk/reward potential but they should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.
******************************************************************
VSTR - Voicestream Wireless  $149.75  *** Merger Target! ***

VoiceStream Wireless provides personal communications services
(PCS) under the VoiceStream brand name in 11 urban markets,
including large cities such as Denver, Seattle, Salt Lake City
and Honolulu.  They hold 107 broadband PCS licenses covering
approximately 62.6 million persons.  VoiceStream Wireless'
services include rate plans, prepaid services, wireless e-Mail,
wireless data, and text messaging.

German telecommunications giant Deutsche Telekom AG has made a
bid for VoiceStream that values the company at over $50 billion.
Sources say the offer is over $200 per share of VSTR stock and
the two companies are reportedly holding serious talks about a
potential deal.  Deutsche Telekom plans to enter the U.S. market
and is expected to draw from an investment pool of $92 billion
to finance its most recent foray.  The Wall Street Journal said
Deutsche Telekom's offer could trigger a bidding war for VSTR
with NTT DoCoMo, the wireless affiliate of Japan's Nippon
Telegraph and Telephone.

VoiceStream will weigh the $50 billion cash and stock takeover
offer this weekend and a formal agreement could be reached as
early as next week.  The hitch is that politicians opposed to the
deal have introduced legislation to prevent any takeover of a U.S.
telecoms operator by a company more than 25% owned by a foreign
government.  In this case, the German government holds 58% of
Deutsch Telekom.

In our opinion, regardless of who buys the company, or even if
the U.S. government succeeds in blocking the foreign ownership,
the competition should hold the share value at or above its
current price, providing a relatively conservative "speculation"
position.  We will use the premium from the sold put to finance
the purchase of the debit spread.  The collateral requirement
for the naked put is approximately $3,200 per contract.


PLAY (conservative - bullish/debit spread combination):

BUY   CALL  AUG-160  BWU-HL  OI=1350  A=$7.25
SELL  CALL  AUG-165  BWU-HM  OI=3591  B=$4.75
SELL  PUT   AUG-120  UVT-TD  OI=161   B=$2.43

INITIAL NET DEBIT TARGET=$0.00 ROI=15% (based on collateral)

Chart =

******************************************************************
     - TECHNICALS ONLY -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current 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.
******************************************************************
PLL - Pall Corporation  $19.75  *** Rangebound? ***

Pall Corporation is a supplier of fine filters, principally made
by the company using its proprietary filter media, and other
fluid clarification and separations equipment for the removal of
solid, liquid and gaseous contaminants from a wide variety of
liquids and gases.  The company's business is best analyzed by
the principal markets, or industry segments, in which it sells
its products: Bio-Pharmaceuticals, Medical, Aeropower and Fluid
processing.  During the past five years, Pall has continued its
development and sale of fluid clarification and separations
products in a wide variety of markets.  The company also makes
metal and plastic housings and a wide variety of appurtenant
devices.

With favorable disparities in the front-month premiums, this
position offers a favorable speculation play for those who
are neutral on the issue.  Implied volatility is at a historic
high and call volume swelled last week with no reports or news
that might account for the increased options activity.  Pall is
not due to release earnings until late August and unless there is
a merger in the works, this position has a high probability of
closing profitably.


PLAY (aggressive - neutral/credit strangle):

SELL CALL  AUG-22.50  PLL-HX  OI=249  B=$0.93
SELL PUT   AUG-17.50  PLL-TW  OI=139  B=$0.68
INITIAL NET CREDIT TARGET=$1.62-$1.75  ROI(max)=30%
UPSIDE B/E=$24.25 DOWNSIDE B/E=$15.75

Chart =



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