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Daily Newsletter, Thursday, 08/03/2000

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The Option Investor Newsletter                 Thursday 08-03-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        08-03-2000        High      Low     Volume Advance/Decline
DJIA    10706.60 + 19.10 10744.30 10623.40 1.05 bln   1327/1529
NASDAQ   3759.88 +101.42  3761.07  3521.14 1.83 bln   1753/2197
S&P 100   791.14 +  8.12   793.39   776.71   totals   3080/3726
S&P 500  1452.56 + 13.86  1454.19  1425.43           45.3%/54.7%
RUS 2000  499.45 -  0.77   500.22   489.24
DJ TRANS 2887.11 + 12.57  2890.10  2860.18
VIX        22.79 +  0.03    23.81    22.46
Put/Call Ratio       .50
******************************************************************

Capitulation anyone?

It does not get much better than this. After a blowoff drop at the
open this morning the Nasdaq rallied back from a -140 drop to post
a triple digit gain of +101. The Nasdaq gave us the entry point we
have been writing about for over a week at 3521, dead center in my
3500-3550 projected support range. The open was a classic. Futures
down leading into a huge gap down open with the leaders touching
lows not seen in several months.







If you want to see the leader capitulate and then rebound to lead
the rally then you have to look no farther than today. CSCO traded
as low as $58.50 fifteen minutes after the open only to rebound to
a high of $64.88 near the end of the day. The bounce for CSCO
occurred almost exactly on its 200 DMA of $58.75. Intel also took
part in the drop with a low of $60.44 at the open and a high of
65.38 near the close. Dell traded as low as $37.63 and ORCL had
a low of 71.63 but closed +4.31 at $77.50. SUNW mounted an
incredible $98 to almost $108 swing and was shooting up strongly
at the close. As big as these swings were for the big cap leaders,
they were nothing compared to the hot sectors like the networking
stocks.

Brocade, BRCD, dropped on the open to $162.25 only to close +28
higher at $190. SCMR hit $101.38 and closed 25% higher at $123.81.
Juniper, JNPR, traded in a $20 range between $118.06 and $141.63
near the close. Semiconductor stocks were hit hard at the open
with the $SOX losing almost -8% to a low of 880 but rebounded to
close almost even at 950. AMCC for example traded as low as $116
but closed at the high of the day $141.12, +25 points higher.

There were the required winners and sinners on the earnings front
and the market took most of them in stride. The big name for the
morning was Motorola. Lehman Brothers said MOT had a conference
call with suppliers and told them they would only produce 80-85
million handsets compared with previous estimates of 100 million.
While the 80-85 million was what analysts were basing their earnings
estimates on, the bigger number was common knowledge and suppliers
all traded down on the decreased outlook. Suppliers SSTI, AMD,
SNDK and TQNT all dropped early but recovered well off their lows
after several analysts reiterated their ratings. Also warning was
The Gap Stores. GPS said they would miss 2Q earnings by 2-3 cents
and the stock got killed dropping -$8 from $38 to $30. KLIC also
warned of delayed shipments impacting earnings and dropped -35%
from $22 to $13.56 but recovered slightly after positive comments
by several brokers.

The big winner after hours was Disney. The mouse network roared
with earnings that beat the street significantly. Posting $.21
versus estimates of $.14 DIS traded as high as $43 in after hours
up from a close of $40.75.

The retail sector was mixed with apparel retailers taking it on
the chin as results showed that consumers were buying less clothes
but more hard goods. Blame it on the weather, the Fed or the market
down turn, many did, but whatever the reason the sector was a black
eye on the market.

The IPO calendar rumbled forward with nine issues coming to market
today. Only 5 of 9 finished higher with Screaming Media being one
of the high profile issues that did poorly. SCRM dropped -1.50 to
close at $10.50. If you look at an intraday chart on SCRM you can
see someone, probably the firm that brought them to market, setting
a solid bottom at $10.50 all afternoon. With out that bottom it
could have been really ugly with the low for the day under $10.
With the barely better than breakeven winners and losers for today,
promoters may think twice before pricing some of the weaker issues
for next week without a soaring market.

The Dow, suffering from the Motorola news, traded down substantially
at the open but quickly rebounded and moved up slowly the rest of
the day UNTIL THE NASDAQ STARTED TO RALLY! Once the Nasdaq broke
3700 the flight out of the old economy stocks began. Fair weather
investors fled the blue chips in favor of the Nasdaq once the tech
rally appeared to have legs. The gold star definitely went to the
Nasdaq. The gap down to 3521 was exactly what traders wanted to
see. Actually they wanted to see if 3500 would hold and if money
would come off the sidelines. Considering the nonfarm payrolls
are Friday morning this was a gutsy move. The last several months
have produced a rally on the announcement and I am sure this was
part of the incentive to buy the dip as strongly as they did.

I said it was a gutsy move based on the surge in Factory Orders
this morning. The report showed a +5.5% jump in June which was
the biggest advance in nine years since July 1991. This was led
by a +42.2% increase in orders for aircraft and other transportation
products. Do you think maybe there was an increase in jobs to
produce those orders? The Factory Orders report was tamed by
a lag in retail sales in what has been a disappointing summer
for retailers. The key here of course is the view that the Fed
may not raise rates again in August. If the nonfarm payrolls
comes in stronger than expected, +68,000, then the market could
start adding 2+2 with stronger GDP, factory orders, durable goods,
the biggest increase since 1991 as well and jobs, etc and start
factoring in another rate hike two weeks from now. The PPI/CPI
reports start next week as well and will provide the last real
solid info for Greenspan.

Still this was an amazing rally today. The strong bounce off
support at 3500 could, and I repeat "could", be the bottom
of the July/August correction. Money is waiting on the sidelines
with an eye toward a fall rally and at 3500 the risks are
perceived as very light. The millionaire question that will
stump all the analysts tonight is "can the market hold these
gains?" Remember there is still the contingent out there that
is calling for a Nasdaq 3200 before September. Somebody, of
course, is always wrong and provides the wall of worry for the
market bulls to climb. I personally stated that I would be a
buyer at the 3500 level and I stand behind that. If this is
a bear trap rally then it is one of the best I have ever seen.
I like the sideways action since the 28th with the blowoff
capitulation today. Call me a sucker but if we get a decent
jobs number on Friday I think we may have seen the bottom.
From the intraday high of 4289 on July 17th to the low of
3521 today was a -768 point drop of -18%. To those of you who
took my warnings in early July, when everyone else was yelling
summer rally, congratulations. But before you jump back on the
bandwagon with both feet I should caution you that the Nasdaq
has not broken the prior weeks resistance at 3750. Yes, it
closed 9 points over but that is a technicality. A good jobs
report could catapult it significantly upward and break the
3750 jinx but just be aware. Secondly, the VIX is back down
at 22.79 and may give the OEX traders a headache. Just like
when everything looked bleak last Sunday we said it is always
"darkest before the dawn." Things look "too good to be true"
for the Nasdaq at this point. Let’s just hope that saying
doesn’t come to pass also.

The Orlando seminar is sold out. Due to strong demand
we have changed the Detroit seminar Aug-28th to a full
three day advanced seminar instead of the two day that
was scheduled.

Good luck and sell too soon.

Jim Brown
Editor


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

A Wild Day Of Trading
By Ryan Nelson

Raise your hand if you thought a crash was upon us when the
Nasdaq futures were down 92 before the open this morning.  With
the SOX.X breaking below the 200-dma and the Nasdaq breaking
short-term support, it looked grim early.

Surprise, the Nasdaq ends up over 101 point!  How about that
for a reversal.  There were some stocks that had 20-40 point
intraday moves with all the volatility.  Scott Bleier, chief
investment strategist at Prime Charter, said it best..."There
was tremendous pessimism in the market early in the day.  It
reached a climax, producing a wave of short-covering."  A wave
that rippled into a 2.8% gain for the Nasdaq.

The early dip gave the Treasury market a lift ahead of Friday's
employment report.  This new data is one of the few big reports
left ahead of the next FOMC meeting.  A polling of economists
would currently reveal a less than 50% chance of a rate rise.
The key word being "currently" as economists are known for
changing on a dime.  The 10-year note gained 5/32 to 103 29/32
and a yield of 5.92%.  The 30-year rose 11/32 to 107 7/32 with
a yield of 5.74%.

There was a strong showing in the IPO department today with
Resonate gaining 72%.  The e-business software application firm
was the standout among the eight new deals that went public
today.  We saw a total of 19 deals done in a heavy week.  The
IPO market usually begins to pick up in full effect in September.

Watch out for a false rally after the employment report in the
morning.  Today was a perfect example of how fierce a market
reversal can be.

(Editor's note:  Austin P. was traveling today, but will be back
the helm for the weekend edition of Market Sentiment.)


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

As of Market Close - Thursday, August 3, 2000

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

DOW   Industrials      10,706      10,400  10,950
SPX   S&P 500           1,452       1,410   1,470
COMPX NASD Composite    3,759       3,400   4,000
OEX   S&P 100             791         770     810
RUT   Russell 2000        499         470     540
NDX   NASD 100          3,623       3,250   3,900    **
MSH   High Tech           984         925   1,025

BTK   Biotech             652         560     700
XCI   Hardware          1,469       1,360   1,550
GSO.X Software            420         385     445
SOX   Semiconductor       950         880   1,060
NWX   Networking        1,232       1,150   1,270
INX   Internet            495         440     580    **

BIX   Banking             568         525     575
XBD   Brokerage           587         550     590
IUX   Insurance           695         660     705

RLX   Retail              843         835     910
DRG   Drug                413         385     430
HCX   Healthcare          851         800     855
XAL   Airline             168         158     178
OIX   Oil & Gas           282         264     304

The NDX and INX broke support levels this morning, but the
reward/risk ratio for further damage was minimal and fueled short
covering.  The SOX and NWX came within a fraction of support
levels and they too were snapped up on early weakness.  Watch the
Financials here they are very close to resistance once again.
Lowering support (COMPX, NDX, INX). Lowering resistance (SPX,COMPX,
NDX, MSH,XCI,CWX,SOX,NWX,INX). Raising support (SPX,OEX,MSH,CWX).


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

Buy A Call, Sell A Put or Sell A Call, Buy A Put?
By Molly Evans

That is the question these days isn't it?  Which should I use,
which way is this market going?  I really don't know but at
least I knew to bail on all of those puts I had this morning.
Whew!  Taking a solid position (either way) in this market could
be hazardous to your wealth.  I got out with my clothes on but
the dogs were sure tugging at the hem of my dress!  Geez!  What
a run!  Ok.  Enough of that, I’ll spare you and won’t harp on
this tonight.  I'll drop my obsessions about market psychology
and direction and will try my hand at playing teacher.  Here's
the question put to me the other day:

Is buying a call nearly the same thing as selling a put and
would selling a call be pretty much the same thing as buying a
put?

The short answer is "no" but I would, of course, love to expand
upon this.  Let's pick apart the first example:  When one is
bullish on a stock, believing that it will appreciate sometime
in the near future, he or she may wish to buy a call or sell a
put.  Both are ways of capitalizing on a rise in stock price.
If one is bearish in sentiment towards a stock's price, he may
want to either sell a call or buy a put.  That's where the
similarities end.  Depending on prevailing market conditions at
the time that one is introduced to options trading, he is likely
to be familiarized first with buying a call or a put.  Buying
options is a fairly straightforward strategy.

Bullish Sentiment:  Buying Calls

The call is the contract that provides you the right to purchase
100 shares of stock at a specified and fixed price by a specified
date in the future.  When you purchase a call, you're putting up
money that says you believe that said stock will be above both a
strike price that you purchased and the amount that you had to
pay for the option.  You retain the right to sell the option at
any time from point of purchase to the date of expiration or you
may choose to carry it to the specified date so that you may
purchase shares of stock at the call's strike price.  As a call
buyer, you believe the stock's price will rise and the option
will rise along with that, resulting in a profit oftentimes at
a much higher percentage of gain in the call than in the stock.
That's leverage.  That's what we love about buying options in
stocks that move.

There are a couple of problems inherit with buying calls.  The
first is that there is usually a sizable bid/ask spread.  One is
immediately in the red when the purchase of the call is made
at the ask or at least over the next highest bidder.  You need
to be fairly accurate as to the entry point to not go deeper in
the hole when you buy a call.  You are not making any money until
that stock price rises and the bid is upped.  The other nasty
about being a buyer of options is that they are wasting assets.
A call's price is basically determined by the amount that it is
"in the money" the amount of underlying volatility in the stock,
and the amount of time that is left until expiration (ex - a $50
strike price call when the stock price is $65 is $15 ITM so the
call would cost $15.00 plus time value and an amount for
volatility pricing if any).  If the stock does not move or moves
down, the call's value declines incrementally with the stock and
does so more quickly as the time to the expiration date
approaches.  The call holder has a couple of choices: hold onto
the call in the hopes that the stock will rise before expiration
or sell the call now and take the limited losses as opposed to
forfeiting the entire amount that was paid when the time of
expiration arrives if the stock has not moved to the strike.

So, buying calls is easy.  You pay your money; you want the price
to go up; the option's value goes up too and you either sell the
call to take the profits or you have the right to acquire the
stock at the strike price you specified by purchasing.  The risk
to capital is limited to the amount that was paid for the call(s).

Bullish Sentiment:  Selling Puts

Another way one can capitalize on stock price appreciation is by
selling puts.   To understand why it's so attractive to sell puts
when bullish you have to keep in mind those aspects that are
unattractive about buying calls.  Again, the spread on the bid
and the ask comes to mind.  When you're a seller, you're the one
doing the asking.  You don't have to agonize whether that's a
fair price to pay for rights to a stock.  You're the seller, ask
what you want.  Consider also that when you buy calls, your outlay
of cash is heavy, and that's why we play options, to use less
capital to control more shares = leverage.  However, when you
sell puts, the buyer pays YOU, your account, for time and his
right to sell you 100 shares of stock at the strike you're
selling by the expiration date.   Just as your time value of
calls bought decays with each passing day, so too does the time
value of the puts you sold.  That is to your advantage.  If the
stock isn't dropping, those put values are.  You sold them and
you can buy them back cheaper to close out the position if and
when the stock price goes up or the time value is lost.  The risk
to putting on this bullish play is that you could wind up having
to buy stock at the specified price if you are exercised.  Don't
sell puts on stock you wouldn't mind owning.  The other negative
to this method is that your broker requires the highest level of
trading privileges (I even have to call my online broker to do
it)and the broker requires a lot of margin to back this up should
you be "put" the shares.  Margin requirements vary from broker to
broker but if you're wrong about the move of the stock, you could
very well receive a not-so-friendly note from Mr. Margin Call
and/or end up having to buy shares of stock at a price higher than
market value.  This is a great play and one that many of the more
experienced options traders utilize.  To be a seller of time and
volatility...you can't beat it!

Depending how aggressive you want to be determines how you pick
the strike price to sell.  Jim has talked in the past about
selling deep ITM puts.  I'd be selling OTM puts below support.
Jim has much deeper pockets than does Molly obviously.  That's
a whole nother kettle of fish though and we can talk about that
sometime if there is an interest . . . in ITM and OTM puts that
is, not how deep Jim’s pockets or mine are.  Moving right
along...

Bearish Sentiment: Selling Calls

As stated previously, option sellers grant rights to the buyer
to claim 100 shares of a specified stock, at a fixed price per
share by a specified date.  In return, the seller is paid a
premium but has the obligation to furnish those shares if the
buyer wishes to exercise his right.  If the market value of the
underlying stock rises, the call option rises too.  The buyer
likes this but the seller realizes that he’s potentially going
to have to deliver those shares.  An option will be exercised
if the stock’s current market value is higher than the striking
price.  If the seller has the shares at hand, he is simply called
out and is paid the strike price for his shares.  This is the
"covered call."  The shares were already covered or already owned.
Again, the advantages to doing this for the seller is that time
decay is working for him.  He would like to see those calls expire
worthless, thus keep his stock and do it all over again for the
next month.  He just keeps raking in some money and lowering the
cost basis for his own shares until he is eventually, but maybe
not, called out of his shares.  The seller always has the right
to cancel his position at any time up to the expiration moment by
buying back the calls sold.  He hopes to have sold them at a
crest and then is able to close out that position for a reduced
outlay and pocket the difference.  This scenario isn’t really
considered "bearish" as the seller is simply taking the chance
of being called to tack on higher percentage gains overall of
stock ownership.  When a seller is feeling particularly bearish
and brave, he may sell naked calls.  That is, he doesn’t own the
underlying stock.  This is considered the riskiest of options
strategies as the potential loss is unlimited.  Stocks have
been known to take fantastic leaps in a short time frame and
if the seller is "short" an uncovered call position, it could
be very costly for him to have to go in and buy those shares
or calls at market price to stop the bleeding of that trade.

From a broker’s standpoint, the selling of calls matters a great
deal in terms of whether or not there are already shares present
in the account.  Covered call selling is considered the safest
and therefore it is very easy to obtain those privileges.  You
can do that in an IRA and in minor’s accounts.  Uncovered call
writing is the riskiest in the eyes of a broker and the privilege
is reserved for those who have a nice pad of capital and the
experience to understand and deal with the risk.

Bearish Sentiment:  Buying Puts

Buying puts is the opposite of buying calls.  One would have
enough foreboding about the future of a particular stock to buy
puts just as he would have to be bullish enough to buy calls.
The same principles apply as to call buying: there would have to
be enough downside in the stock to overcome the spread of the bid
and the ask to be profitable and once again, time is working
against the buyer.  Puts may be traded just like calls but their
real purpose is to grant the buyer the right to "put" his shares
of long stock at the specified price to the seller should the
stock price take a dive by the expiration date of the option.
Let’s say I own 100 shares of INKT at $150 and I had then let it
run up to $160 and bought myself a protective $150 put for $12.00.
Now INKT is down around $100 and I’m thinking I don’t like that
any more.  I can exercise my put (which raised my cost basis on
INKT to $162) and get back $150/share now.  I’m out only $1200 on
100 shares instead of the $5000 I would be if I were to dump INKT
at market now.

Puts, like calls in a bullish market, are great in a bearish
market.  Stock prices typically go down much faster than they go
up.  However, one must be quick to take the profit because the
market is usually looking for an excuse to rally.  There is a lot
of money on those sidelines and buyers have been waiting for a
moment to seize an opportunity.  I had put positions but could
feel the energy in that comeback this morning and my puts were
leaving ITM status rather quickly.  Volatility was the only thing
to hold the premium prices up for me to get out even to slight
profitability.  Having been burned on the bull side in the
spring, I realized that if any kind of a rally got underway here,
I’d repeat all those same mistakes from the spring just from
the opposite side.  Nuh uh.  No more.  This is a trader’s market
and it’s a very fast game.  Puts, calls, they all work but
once again, the man behind the screen (yourself) is the one
who determines the outcome of the play.  Trade smart and take
your profits soon.  This isn’t a market of five baggers no matter
how you’re playing it.  At least it’s not yet.

molly@optionivestor.com


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

Mother of All Headfakes or Bullish Reversal?
By Buzz Lynn
sectortrader@OptionInvestor.com

You'll find both opinions on our staff as most of us sit on the
fence waiting to jump in one direction or the other following
tomorrow's job news.  25% of us are of the belief that this may
be a short-term reversal and that tomorrow numbers will support a
rally back over 3750.  50% are tentative/iffy/undecided - name
your favorite instinct.  The remaining 25% say we've hit
resistance again at 3750 and to expect a rollover.  That same 25%
also think that if there is a rally, it will be short-lived since
investors will forget any euphoria in front of the PPI numbers
next week, not to mention the end of earnings season and the FOMC
meeting, which will also keep a lid on unbridled optimism.  So,
how are we going to play it?  By sitting on the fence and waiting
for direction.  Personally, I'm in the latter 25% camp, which
explains why we left the put plays in place tonight and have
added no new call positions.  That does not mean to enter market
orders for puts at tomorrow's open.  Don't do that!!  What it
does mean is to wait patiently for an entry to the downside if
the market begins to turn over from roughly 3750 after amateur
hour tomorrow morning.  If this were at the middle of the trading
day, it would look like the starting line of a car race with 30
seconds to go before the green flag.  You have to see the flag
waving before you step on the gas, but you're pretty sure it's
coming unless something postpones the start.  That would be good
for the drug sector if NASDAQ does turn down.  With that in mind,
still watch PPH - it was flat yesterday and today and showed a
doji on the candlestick chart - indecisive investors right now.
HHH on the other hand could easily turn into a call play on a
move over $106.  But that's only going to happen if the market
moves up on well-received jobs numbers, and would likely be a
short-term swing play until sometime next week.  Don't jump the
gun unless you are a gun-slinging, market-timing expert.
Otherwise watch the 3750 level, trading volume, and the direction
of the market leaders comprising your targeted HOLDR.  Our job as
traders first and foremost is to preserve capital.  The VIX is
historically under average and still needs to move up closer to
30 to signal a market bottom.  Don't buy too soon!

*************
Results
*************

Index             Last    Mon    Tue    Wed    Thu    Fri    Week

QQQ NASDAQ-100    90.81   2.63  -1.38  -1.50   4.13   0.00   3.88
HHH Internet     104.88   2.13  -1.31  -0.50   3.38   0.00   3.69
BBH Biotech.     182.00   0.19   8.38   2.13   3.00   0.00  13.69
PPH Pharm.       102.50  -1.25   3.75   0.75   0.38   0.00   3.63
TTH Telecom.      68.75   0.75   0.50   0.06   0.19   0.00   1.50
IAH I-net Arch.   92.25   2.56  -1.69  -1.88   3.44   0.00   2.44
IIH I-net Infr.   51.50   1.19  -2.44  -0.31   2.81   0.00   1.25
BHH B2B           44.94   2.13  -1.50   1.50   2.06   0.00   4.19
BDH Broadband     87.38   1.88  -1.25  -0.19   1.19   0.00   1.63
SMH Semicon.      80.88   2.69  -2.81  -0.81  -0.13   0.00  -1.06
RKH Reg. Banks   100.88  -0.06   1.00   0.56   4.13   0.00   5.63
UTH Utilities     97.50  -1.50   2.38   2.13   1.19   0.00   4.19

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

QQQ - NASDAQ 100 $90.81 +4.13(+3.88 this week) Finally, a decent
show of strength in the NASDAQ recovery, yet it remains firmly
planted at resistance of 3750.  That extra 10 points gained in
the final two minutes before the close came on weak volume for
that time period, and was probably borne of "not gonna miss that
train" euphoria.  We don't put much weight in it.  The fact is
that resistance is still at $90-$91 on a historical basis, while
the 50 and 200-dma ($92.89 and $90.60, respectively) have yet to
be penetrated.  That will likely be tough to get through.  Yet,
it's anyone's guess what might have happened with another hour
left to trade.  That said, only tomorrow will tell.  If QQQ (read
that NASDAQ-100) takes off tomorrow after amateur hour - great -
don't enter a put play.  If it starts to roll over or otherwise
show signs of weakness, that would be a clue to buy those puts,
or sell the short call on any combination positions you may have
been trying to enter.  Resistance is $90-$91 with a bunch of
congestion at $94-$95; support is $87, then $85.  Now for the
plays.

Long Straddle:

As long as volatility doesn't budge, watching these
straddle/strangle plays can turn an otherwise energetic afternoon
into a snooze-fest.  This is a play in which you can go to the
beach and forget about having a drastic move up or down kill your
position.  In fact, a drastic move is exactly what we want to
make this play profitable since any increase in implied
volatility will inflate the time value component of the premiums
we bought.  Remember though, we must be expecting a big move in
QQQ over the next 30 days.  Second, we must be buying cheap
(relative to historic volatility) time premium in our options.
Third, we must still have some time value left to sell back to
the market if we are wrong in our assessment of condition #1.
Thus we pick options with strikes 90-120 days out.  We list only
one straddle tonight since it is almost exactly at the money.
However, if you want and you have a directional bias of your own,
you can pick a straddle (same strike price on put and call) a few
dollars out of the money in either direction since the total
value of the put and call will be roughly the same.  Remember,
this play is all about buying cheap time for a good entry and
selling expensive time as an exit.  Resistance is $90-$91 with a
bunch of congestion at $94-$95; support is $87, then $85.

Straddle:

BUY CALL DEC- 90 QVQ-LL OI=1875 at $12.25
BUY PUT  DEC- 90 QVQ-XL OI=2419 at $ 9.50
Net Debit = $21.75 or less

Strangle:

BUY CALL DEC- 94 QVQ-LP OI=1778 at $10.13
BUY PUT  DEC- 86 YQQ-XH OI=1411 at $ 7.50
Net Debit = $17.63 or less

Calendar Spread:

This is real similar to a covered call, except you don't want to
get called out of the underlying position here as you might with
a covered call.  The reason is that you have likely spent a small
fortune in time value to buy the underlying long-term option.
You don't want to exercise it to cover your short position
because then you lose all that time value.  Your objective should
be to sell short-term time premiums (ATM, ITM) month after month
to have it buy down the cost of the long-term position.  The idea
is to end up with a free underlying option.  For those of you
taking our suggestion to "leg in" to the position, we had a great
opportunity to buy the long-term underlying leg near yesterday's
close, and especially this morning when QQQ tanked to $83.31.
Here's the math.  The DEC-86C would have cost $10.25 this morning
on leg one.  Leg two - selling an AUG-90 near today's close would
have credited $4 to your account against the long position for a
net debit of $6.25.  Ideally the $90 August call expires
worthless in two weeks.  You then sell the September strike for a
similar amount on a price spike, and so on for each successive
month.  The only catch is that sometime you may be forced to
repurchase the short if the QQQ exceeds the strike price near or
at expiration.  That's OK though because while it may seem like
you are losing money by paying more to buy back something that
you sold "cheap", remember the underlying value has been growing
in value slightly more than the sold position.  You are still net
money ahead on a net basis.  Legging in works well if you wait
for the buying opportunity at support, and selling opportunity at
resistance.

BUY  CALL DEC- 86 YQQ-LH OI= 1422 at $14.25

SELL CALL AUG- 90 QVQ-HR OI= 6243 at $ 4.25, ND = 10.00 or less
SELL CALL AUG- 92 QVQ-HR OI= 2427 at $ 3.25, ND = 11.00 or less

Long Puts

Until we see that the recovery is for real, we remain on the put
side.  $90-$91 remains resistance, which would make current
levels an excellent buying opportunity on a rollover after
amateur hour.  Just make sure you see the rollover first.  Don't
enter if NASDAQ moves through $92.  On the other hand, with the
50-dma at 92.90, any significant bounce down from there might
still make a good put entry.  But unless you understand the
chart, volume and trade pattern, better stand aside at $92.

At Resistance:
BUY PUT  AUG-92 QVQ-TN OI= 3744 at $4.38 SL=2.75
BUY PUT  AUG-90 QVQ-TL OI=10419 at $3.38 SL=1.75
BUY PUT  AUG-86 YQQ-TH OI= 9490 at $1.81 SL=1.00

Average Daily Volume = 22.01 mln


-----

IAH - Internet Architecture $92.25 +3.44 (+2.44 this week)
Technically, the recovery today in IAH was stellar.  IAH opened
under $87 and traded as low as $85.88 before it staged its
recovery.  We have yet to get a good entry on the put side unless
you took a chance and bought at yesterday's close, then sold in
this morning's open - profitable yes, but not recommended if you
are just learning these strategies.  So why keep it?  The NASDAQ
is at resistance; so to is IAH at historical resistance of
$92.50.  If it moves over $93, probably ought to pass.  If it
breaks down from $93 and moves under $92, feel free to jump on
the put side.  A move under $90 would be really solid as that
would again violate the 50-dma.

BUY PUT AUG-95 IAZ-TS OI= 30 at $3.63 SL=2.00
BUY PUT AUG-90 IAZ-TR OI= 88 at $1.63 SL=0.75
BUY PUT SEP-85 IAH-UQ OI=300 at $2.44 SL=1.25

Average Daily Volume = 45 K


-----

IIH - Internet Infrastructure $51.50 +2.81 (+1.25 this week)
Same story here as IAH.  No good entry unless you were fast on
the draw last night and this morning to accidentally swerve into
this morning's selloff.  Still, with NASDAQ running into
resistance at 3750 and IIH doing the same at $51.50, this is not
the time to go long on calls.  In fact, if the market rolls over,
it will be a put buying opportunity.  We just don't see a reason
to be euphoric if the job figures aren't well accepted.  Nor do
we see a reason to get that way in front of the PPI next week and
the FOMC meeting two weeks later.  Wait for the rollover to enter
or for any bounce down from $53.  Despite the technical bounce
and today's good-looking candlestick, IIH still needs to break
back over its 50-dma at $56.97 (a long way off) to clear any
congestion.  Watch for market pain, then pounce.  Otherwise find
another play.

BUY PUT AUG-55 IIH-TK OI= 56 at $5.38 SL=3.25
BUY PUT AUG-50 IIH-TJ OI=111 at $2.38 SL=1.25
BUY PUT SEP-55 IIH-UK OI=185 at $7.13 SL=5.00

Average Daily Volume = 207 K


-----

BDH - Broadband $87.38 +1.19 (+1.63 this week) LU, a major
component of BDH hit a new low today on 150% of the ADV, however
was counterbalanced by huge gains in the optical and chip sectors
with JDSU, GLW, SDLI, BRCM, SCMR, and AMCC leading the charge.
NT excluded.  BDH gapped down big-time this morning to $82.50
where it found equally big-time support.  The only reason we
don't drop it tonight is that it ran right up to historical
resistance of $88, with its 50-dma of $88.88 ready to block that
run should the market and sector fail.  That's another way of
saying BDH is again at resistance and has a good chance of
rolling over.  Wait for the market to do so first or consider a
move under $86 as a put buying opportunity.

BUY PUT AUG-90 BDH-TR OI=31 at $5.00 SL=3.00
BUY PUT AUG-85 BDH-TQ OI=71 at $2.56 SL=1.25
BUY PUT SEP-90 BDH-UR OI= 3 at $7.38 SL=5.25

Average Daily Volume = 130 K


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

BBH
HHH
PPH
BHH
TTH
SMH
RKH
UTH


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

Index      Last     Mon     Tue     Wed     Thu    Week
Dow    10706.58   10.81   84.97   80.58   19.05  195.41
Nasdaq  3759.88  103.99  -81.47  -27.06  101.42   96.88
$OEX     791.14    6.46    1.37   -0.99    8.12   14.96
$SPX    1452.56   10.95    7.27    0.60   13.86   32.68
$RUT     499.45   10.42   -2.87    2.45   -0.77    9.23
$TRAN   2887.11   88.56   17.35   -0.90   12.57  117.58
$VIX      22.79   -0.86   -0.57   -0.11    0.03   -1.51

Calls

ABSC      99.44    4.94    5.25    6.56    7.13   23.88  New
IDPH     135.88    6.81    5.94    5.69    1.44   19.88  New
LEH      119.25    3.88    0.75    5.75    0.75   11.13  Upgrade
MER      130.81    7.25   -3.63    1.38    3.81    8.81  New
GENZ      73.13    4.31    0.31    1.38    2.00    8.00  Confirmed
HWP      112.00    1.94   -1.38    4.63   -0.50    4.69  Entry
AMGN      70.19   -1.44    4.06    1.31   -0.13    3.81  Snuffed
FRX      113.19   -3.25    5.19    0.88    0.13    2.94  Intact
AFL       55.31   -1.50    2.88   -0.38    0.88    1.88  New
PVN      105.06   -1.69    1.88   -2.19    3.44    1.44  Opportunity
IVX       49.75    0.81    2.69   -1.75   -0.50    1.25  Resting
COF       56.38    1.78   -1.03   -2.00    0.81   -0.44  $54 support

Puts

AFFX     132.38   -7.97   -1.59    2.25   -4.81  -12.13  Sliding
AMD       65.50    1.50   -5.13   -5.63    2.75   -6.50  Bounced
CMOS      39.00    0.75   -1.50    7.50   -9.75   -3.00  Dropped
EMLX      47.56    0.63   -2.00    0.00   -0.44   -1.81  Dropped
MRVC      57.25   -0.63   -5.75    1.25    3.88   -1.25  Amateur Hr.
GTW       55.63    0.06   -1.00   -1.69    3.13    0.50  Got relief
TERN      55.81   -2.88    0.19    2.13    2.50    1.94  At resist.
CMRC      46.03   -0.81   -1.38    2.94    2.41    3.16  Dropped
ELON      36.31    4.50   -1.13    0.44   -0.13    3.69  Dropped
ARBA     123.06    8.31   -2.94    1.81    8.25   15.44  Dropped
VRTS     109.06   14.25   -1.94    0.56    8.50   21.38  Dropped


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

CALLS:
*****

No dropped calls today.

PUTS:
*****

CMOS $39.00 -9.75 (-3.00) It has been a wild two days for our
CMOS play.  The folks at Standard & Poor's announced late Tuesday
evening that CMOS would replace COMSAT in their S&P MidCap 400
Index.  The news spurred traders to accumulate CMOS with passion
Wednesday, which drove the stock to nearly $50.  But, the table
turned quickly on CMOS Thursday morning after fellow chip
equipment maker KLIC warned of slower growth.  The cautionary
comments sent a cataclysm through the capital equipment issues,
which prompted a 20% sell-off in CMOS.  In light of the wild
trading, we feel good about exiting our CMOS play at current
levels.

ARBA $123.06 +8.25 (+15.44)  A B2B bounce.  Since finding bottom
above the psychological $100 level on Monday, Ariba has held its
ground and is clawing its way back up.  On Wednesday, ARBA made an
attempt to break heavy resistance at the key support level of
$120.  Getting there in the early hours of trading, the stock
spent the rest of the day drifting down as volume eased off.
Despite this lack of conviction, ARBA managed to finish up $1.81,
or 1.60%, on 75% of the ADV.  While it may not have seemed like a
major move price-wise, it was important technically, as ARBA
closed above its 5-dma (now at $115) for the first time in a
little over a week when this downtrend first began.  With a
strong NASDAQ today, buyers were more interested, sending the
stock up 7.19% on about 113% of ADV.  This large move up allowed
ARBA to break not only its 10-dma in the $117 area of resistance,
but also the formidable resistance level of $120.  The stock was
helped by news today of Ventro's joint venture with American
Express.  The new joint venture MarketMile will license
e-commerce technology from ARBA.  With a close above key support
level of $120, volume increasing to the upside, and good news
driving the stock higher, we're heeding the change in sentiment
and moving on.

VRTS $109.06 +8.50 (+21.38)  Where the NASDAQ leads, Veritas
follows.  The chart for VRTS has mirrored the tech index move for
move this past week.  Wednesday saw the stock rally in the early
morning.  Finding tough resistance at a key level of $105 during
the middle of the day, VRTS rolled over in the final hours of
trading to close up only fractionally on average volume.  That
put VRTS right in between support at the 5-dma (now $99.75) and
resistance at the 10-dma ($103.20).  Today after an early morning
gap down, buyers stepped in, bidding the stock back up to $105
resistance by mid-day.  After a brief pause there, VRTS charged
through to the close on accelerating volume to finish up 8.45%.
Today's large move up, despite the average volume, signaled an
end to the current downtrend.  Closing above the 10-dma for the
first time in over 2 weeks, VRTS also put itself back in the good
graces of its 200-dma at $103.  With strong support now at the
$105, $103 and $100 levels, improving sentiment in technology
issues and the clear break in its downtrend, we are closing this
play.

ELON $36.31 -0.13 (+3.68) ELON might not be in the upper "echelon"
of stocks right now, but support has proven to be strong for the
stock near $32.  Though the stock has had problems closing above
its 10-dma at $36.20, it did so today, after bouncing again off
its support.  Yes, we do know the stock closed down today on a
strong tech rally, but its not as much as the end result but how
it got there.  ELON shares opened near the low of the day and
then proceeded to rise throughout the rest of the day to close
near its high of the day.  There just doesn't seem to be enough
reward here and we will say goodbye to find better stocks to
play.

CMRC $46.00 +2.38 (+3.12) We mentioned in our last write-up that
this stock had hit a key support point and to be aware.
Unfortunately for this play, CMRC did bounce off $40 and has
risen the last two days.  Since this support looks like it is
likely to hold, we are dropping this stock as a put play.
Giving the stock a boost today, Deutsche Banc Alex Brown rated
CMRC as a Buy today.  At any rate, we will exit this play, which
provided plenty of opportunity, on a winning note.

EMLX $47.56 -0.44 (-1.81) After giving us one last entry point
yesterday afternoon, EMLX broke out of its tight range this
morning.  The stock gapped down hard along with just about
everything technology related, hitting a low of $43.06.  The
bulls finally chased away the bears and took control for the
remainder of the day, as EMLX gradually recovered, making up
nearly all of its losses by the regular close, ending at $47.56.
The company announced earnings tonight after the close, and it
appears the results were well received.  EMLX is looking like
one of the few companies that bucks the trend and actually moves
up after announcing earnings; this is likely due to the negative
sentiment surrounding the stock prior to the announcement, and
the good news easily floated the stock higher with assistance
from the recovering sentiment on the NASDAQ.  Given the uptrend
today, hopefully stop losses cut the position, as earnings
approached.  In the after-hours session, the stock was trading as
high as $55, which is above both the 5-dma ($48.56) and the 10-dma
($52.31), making it clear that it is time to move on to other
plays.


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The Option Investor Newsletter                 Thursday 08-03-2000
Copyright 2000, All rights reserved.                        2 of 2
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********************
PLAY UPDATES - CALLS
********************

HWP $112.13 -0.38 (+4.88) HWP led the bounce back in the blue
chips Wednesday.  The company announced that it had formed a
joint venture with AT&T to provide applications for Web systems
management.  The agreement calls for T and HWP to introduce
simpler electronic business solutions to larger companies.  The
news caused HWP to bolt out of the gates and clear resistance at
its 10-dma, at $112.  However, the Tech bears showed up early
Thursday morning to wreak havoc on our play.  The stock gapped
down by over $3, which turned out to be a great entry.  HWP
battled back as the day wore on to close back above resistance at
$112.  The reversal in the Tech sector Thursday bodes well for
our play as we approach earnings.  An aggressive trader might
look for a quick bounce off the current levels if the Tech sector
extends its rally Friday morning.  A move above resistance at
$115 might provide a more conservative entry, with a breakout
above $116 also worth considering.

AMGN $70.19 -0.13 (+3.81) AMGN led the rebound in the Biotech
sector Wednesday with a strong rally above resistance at $70.
We would have liked to seen a little more volume to confirm the
rally, but we'll take the gain nonetheless.  The stock marched
higher Thursday morning in an attempt to close over its 10-dma
at $70.48, but failed to eclipse that level after a light round of
profit taking snuffed momentum.  Although AMGN slipped modestly
lower, the Amex Biotech Index ($BTK) posted gains for the third
consecutive session Thursday, reflecting investors' renewed
enthusiasm for the group.  Thursday's brief pause might provide
a good entry as AMGN managed to hold above support at $70.  The
stock still faces resistance just above its current levels at
$72.  An aggressive trader might look for a quick bounce off $70
if AMGN resumes its climb Friday morning.  While a more
conservative trader might wait for a breakout above $72 with
healthy volume.

IVX $49.75 -0.50 (+1.25)  After its break to a new all-time high
on Tuesday, the stock needed a rest.  Wednesday saw profit takers
come in, as IVX encountered resistance at $53 in the early
morning.  The stock spent the rest of the day moving lower, but
still closing above the 5-dma near the $50 level.  IVX closed down
$1.75, or 3.37%, on slightly higher-than-average volume.  Today,
the stock opened late (at about 10:20 AM EST) due to trading
imbalances.  When it did open on a gap down below its 10-dma
(currently at $48.80), investors were tentative, letting the
stock drift in a narrow range.  By the end of the day, market
sentiment had improved and buyers rushed in, sending the stock
back above its 10-dma.  IVX closed down 1% on about 137% of ADV.
Today's move below the 10-dma may be a caution signal, but looking
back in the past 2 months of trading, is still consistent with
its uptrend.  Support for the stock can be found at $48.80, $48
and $47 with resistance at $50, $50.75 and $51.25.  Traders
looking for a conservative entry point will look for a move above
$50 with conviction before entering.  Aggressive traders may want
to buy bounces above the 10-dma.

FRX $113.31 +0.13 (+6.31) FRX continues to hold up despite a
bit of a bungee jump earlier in the week.  Setting a low of
$105.75 early in the week, the stock managed a nice recovery
yesterday and today, closing above the 5- and 10-dmas of
$111.14 and $110.51.  Still, its sights are set on last
Thursday's intraday high of $114.50, as FRX broke through both
resistance levels to today's high of $113.75.  Opening the day at
$111.50, the stock was off to the races, dipping to the intraday
low of $110.43 and whipping back to the day high of $113.75, all
within the first 90 minutes of trading!  It then took a long
lunch, hitting the low again midday, and failing to break through
resistance of $112 again until after 2:00.  Shortly after 3:00,
however, FRX found its feet and rallied to close near the high of
the day.  With this strong close, FRX continues to show bullish
signs.  Look for entry on bounces off of the 5-dma of $111.14.
With the market in an uncertain environment until interest rate
fears are calmed, make sure the  buyers are present to continue
this uptrend with strong volume.

GENZ $73.13 +2.00 (+8.00) Confirmation!  After breaking through
and closing above $70 on Wednesday, GENZ confirmed the move by
rising on Thursday.  GENZ's two dollar move on Thursday took the
stock to a new all-time high.  The stock also gave us a great
entry point by bouncing nicely off the 10-dma at $69.36.  Volume
wasn't very strong on today's move, a possible sign of caution,
but closing at your day's high is a bullish sign.  GENZ shares
have also been a beneficiary of subsidiary Genzyme Molecular
Oncology's (GZMO) three licensing agreements to provide non-
exclusive access to its cancer diagnostic patent rights.  If we
get some profit taking, look for $70 to provide some support,
with a subsequent bounce a possible entry point.

PVN $105.06 +3.44 (+1.44) PVN has been in a short-term range
between $100 and $107 for over a week and has offered some great
trading opportunities.  After Wednesday's mild drop where the
stock found support at $102, it popped up over $3 on Thursday
with increasing volume into the close.  Today's gain also moved
PVN back above the 10-dma at $102.27.  The $106 level provided
intraday resistance today as the stock tried twice to break
through.  When looking for entry into this call play, watch for
bounces off support at $104.  If that fails to provide a bounce,
look to support at the 10-dma near $102 for an entry bounce.
More conservative traders may want to wait for a high volume
break through the $106 level to jump onboard.  Watch to see how
the stock reacts to tomorrow's Employment Report.

LEH $119.25 +0.75 (+11.13) LEH shares gapped open to the upside
on Wednesday following news they were teaming with three other
brokers to build an electronic trading platform for all-types
of mortgage and asset-backed securities.  Yet, the primary reason
that LEH caught buyers' eyes was an upgrade from Bear Stearns from
an Accumulate to a Buy.  The stock soared $5.75 on
better-than-average volume, bringing it back above its 10-dma near
$115.  Today's trading was a bit more subdued as investors digested
yesterday's impressive gains.  If the stock retreats back to
intraday support at $117, look for a bounce on stronger volume for
an aggressive entry.  If you are more conservative, wait for the
stock to move through July 25th's high of $121.75 before entering.
Confirm a positive Financial sector prior to putting on a position.

COF $56.38 +0.81 (-0.44) Managing to keep itself in play, COF
bounced both yesterday and today right above the $54 support
level, before heading higher into today’s close.  The negative
tone in the markets this morning quickly gave way to enthusiasm
and COF recovered to close more than $2 off its lows.  Strength
in Financial stocks contributed to the recovery, and a benign
Employment report tomorrow morning may be just the catalyst for
further gains and a breakout to new highs.  Volume is still
clocking in above the ADV, with today’s volatile session seeing
over 1.5 million shares trading hands.  Although closing
fractionally below the 10-dma yesterday, today’s recovery kept
COF’s string of higher lows intact and maintains the 10-dma
(currently $55.88) alive as a good point to initiate new
positions.  Resistance is sitting above at $59.25, the high
from Monday’s session.  Consider new entries on a bounce from
either the $54 support level or the 10-dma, but make sure that
volume continues to be strong.



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

GTW $55.63 +3.13 (+0.50) The PC makers fell under heavy scrutiny
again Wednesday after DELL received its second downgrade this
week.  USB Piper Jaffray downgraded the behemoth box maker to a
Buy rating, citing long-term revenue growth concerns.  The DELL
syndrome quickly spread throughout the sector, which carried GTW
below support at $53.  However, Prudential stepped in to
stabilize GTW by reiterating its Strong Buy rating and setting a
$92 price target.  After gapping modestly lower Thursday morning,
GTW rolled along the $52 level, then surged nearly $4 higher near
the close of trading before running into resistance at $56.  The
late-day rally might give reason to pause before initiating new
plays if the buying persists Friday morning.  However, an
aggressive trader might consider entering the play if GTW rolls
over at the $56 level.  A more conservative entry might be found
if the sellers return in strength and GTW falls below support at
$55 or lower at $54.50.  Make sure to confirm weakness in the PC
sector before entering the play.

AMD $64.50 +2.00 (-6.50) AMD slipped further into the void
Wednesday as the Semi sector continued its woeful ways.  The
analysts were busy coming to the defense of AMD Thursday
morning.  Chase H&Q reiterated its Strong Buy rating and set a
$150 price target, and Josephthal & Co reiterated its Buy rating.
Yet, despite the attempts from the analysts, AMD gapped down by
over $4 after several warnings were issued within the sector.
Once the broader Chip sector stabilized Thursday morning, AMD was
able to recoup some of its losses from Wednesday.  Also, the
company said Thursday that its Duron chip won't be available to
PC makers until late September or October.  The late delivery of
chips will cause AMD to miss the back-to-school rush of computer
purchases, which also might weigh on the stock if the bulls lose
power in the Chip sector.  If the Semis fall under the bears
control again consider entering the play if AMD falls below
support at $64.  A more conservative entry might be found if a
sell-off accelerates and AMD falls below $62.

AFFX $132.33 -4.81 (-12.17) For those who kept their eye on AFFX
throughout the week, it has proven to offer a number of great
entry points.  Although the stock appeared to be on an uptrend
earlier in the week on positive news concerning their first launch
of a Genechip that can be used in agricultural research, it has
failed to hold up, continuing last week's downward slide following
a bad earnings report.  Closing today at $132.33, it's lowest point
in months, AFFX is still well below all technical support levels.
The stock opened Monday at $145, which was already below Monday's
5-dma of $150.43.  It has traded in a range between $129 and $147
during the week, but has settled in between $130 and $140 since
Tuesday.  Hopefully, some were able to capitalize on the spikes
above $140 throughout the week as an entry point to the play.
Today's high was $137.75, just above the 5-dma currently sitting
at $137.11.  After a spike down to $129, AFFX settled in and
flat-lined near $132.  This flat-line action normally would raise
our concerns, yet given the market rally today, we are encouraged
that AFFX ended in the red.  Continue to look for entry points on
rollovers near resistance at $135 and $137.  A conservative trader
would want to wait until the stock moved convincingly through the
$130 level on strong volume.  As always, with a stock like AFFX,
keep your eye on the Biotech sector's performance.

TERN $55.81 +2.50 (+1.93) The last two days, TERN shares have
bounced off support at $50, closing at $55.81.  We have decided
the stock may be setting up to fail at resistance near $57-$58.
Look for this to occur at the 10-dma of $56.90, which would be a
ideal entry if we get the rollover.  We would caution entering any
new plays until we see the stock reverse its course and continue
the downtrend.  Maybe the saying is something like don't try to
short a rising star.  Volume has increased on the last two day's
gains, so confirm the reversal rollover before buying puts.  To
reiterate, this play is on a short leash so use caution when
initiating a new position.  Wednesday, the stock did receive a Buy
reiteration at Oscar Gruss & Son, Inc. with a 12-to-18 month
price target of $155 per share.

MRVC $57.25 +3.88 (-1.25) Need proof that opening new positions
during amateur hour is dangerous?  Just look at our play on
MRVC.  It has gapped down at the open over the past 2 days,
only to recovery nicely for the balance of the day.  Support
is being confirmed at the $49 level, which is just above the
100-dma ($48).As a result, we really haven’t gotten a good
entry point yet, but one may be lurking just around the corner.
The surge in volume in the final hour of trading today pushed
MRVC through resistance at $56, and allowed the stock to close
above the 50-dma ($56.50) for the first time in over a week.
Additional resistance sits just above at $58.50, followed by
$64, which is currently sandwiched between the declining
10-dma ($63.93) and 30-dma ($66).  The volatility in the
technology sector is making it tough to pick a direction,
and tomorrow’s session is likely to be ruled by the outcome
of the Employment report.  Wait for a clear reading on
investor sentiment and then consider opening new positions
if MRVC rolls over near resistance.  Don’t try to jump the gun
and pick a high; wait for investor sentiment to indicate the
direction of the broad market in general and MRVC specifically.
Follow the path of volume - its strength will light the way to
profits if you give it the chance.


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**************
NEW CALL PLAYS
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AFL - Aflac, Inc. $55.31 +0.88 (+1.88 this week)

Aflac, Inc. provides supplemental insurance to individuals
in the United States and Japan. The Company's products help fill
gaps in consumers' primary insurance coverage. AFLAC's products
include cancer expense insurance, care plans, supplemental
general medical expense plans, and living benefit plans.  This
insurance company has recently unveiled a new ad campaign that
features its notorious talking duck.

AFL announced earnings on the 25th of July that beat estimates
by a penny.  The positive news has helped push AFL up to a new
52-week high.  All the major moving averages are pointing up,
a sign a nice trend is underway.  Investors recently have been
rotating into insurance stocks as they have sold the techs.  The
S&P Insurance Index, IUX.X, is trading at recent highs near 700
and looks poised for a breakout again.  Since a new high has been
achieved for AFL, there really isn't any upside resistance, but
profit taking might take the stock to short-term support near $54.
Any pullbacks to this level, accompanied by a bounce would provide
good entries into this call play.  Although this stock is not a
fast mover, it does have a strong uptrend in place.  Be patient
with AFL and well-thought-out entries and exits can pay off
handsomely.  The time values priced into these options are
neglible, therefore, intrinsic gains will be the rewards with
this uptrending stock.  As it currently stands, the August 50
call option is in-the-money $5.31, yet costs just $6.  This means
only $0.69 is being paid for time.  Watch the Insurance Index to
see the market sentiment.

News on the stock is hard to find, though the company was
reiterated as a Buy at PaineWebber on July 27th with a $58 price
target.

BUY CALL AUG-50*AFL-HJ OI=654 at $6.00 SL=4.00
BUY CALL AUG-55 AFL-BK OI=230 at $2.25 SL=1.25
BUY CALL SEP-50 AFL-IJ OI= 90 at $6.63 SL=4.50
BUY CALL SEP-55 AFL-IK OI= 41 at $3.25 SL=1.75

SELL PUT AUG-55 AFL-TK OI= 10 at $1.38 SL=3.00
(See risks of selling puts in play legend)

Picked on August 3rd at  $55.31    P/E = 25
Changed since picked      +0.00    52-week high=$55.75
Analyst Ratings       7-3-5-0-0    52-week low =$33.56
Last Earnings 07/25   est= 0.58    actual= 0.59
Next Earnings 10-24   est= 0.61    versus= 0.52
Average Daily Volume    =  667K



IDPH - IDEC Pharmaceuticals Corp $135.88 +1.44 (+19.88 this week)

Based in San Diego, IDEC Pharmaceuticals Corporation is a
biopharmaceutical company engaged primarily in the research,
development and commercialization of targeted therapies for the
treatment of cancer and autoimmune and inflammatory diseases. The
Company's first commercial product, Rituxan, and its most
advanced product candidate, Zevalin (ibritumomab tiuxetan,
formerly IDEC-Y2B8), are for use in the treatment of certain
B-cell non-Hodgkin's lymphomas (NHL). The Company is also
developing products for the treatment of various autoimmune
diseases (such as psoriasis, rheumatoid arthritis and lupus).

Tech stocks got you down lately?  Perhaps we have the antidote.
With a number biotech and pharmaceutical stocks holding up
despite last week's tech sell-off, IDPH could just be the right
prescription.  After reporting earnings last month on July 17th,
the stock became range-bound, trading between $110 and $128.  For
the quarter, IDPH earned $13.3 million, or 26 cents per share on
revenues of $37.4 million compared to last year's $19.9 million,
or 40 cents a share, on revenues of $35.3 million.  This was good
enough to beat the Street consensus by 8 cents or 45%.  However,
after failing to break through resistance at $135 in its
pre-earnings run-up, the stock moved lower into and during
post-earnings.  Finding a bottom at $110, the stock has since not
only recovered, but has broken through some key resistance
levels.  First to go was $128, breaking IDPH out of its almost
three week range.  Next up was the $130 mark which was struck
down yesterday with conviction on 150% of ADV.  Today, the elusive
$135 mark was finally surpassed, and while the volume backing the
move was lighter than usual (at only 75% of ADV), the close above
a key technical support level cannot be ignored.  Aggressive
traders looking for an entry point will find bounces off the 5-dma
this week (now at $127.35) to be worthy entry points.  There is
also support for the stock at $135, $130, and its 10-dma in the
$125 area.  Conservative traders may want to wait for IDPH to
move above $137 on high volume before entering.  Resistance
ahead is lurking in increments of $5 at $140, $145, and $150.

With little news of importance from the company since reporting
earnings, movement in IDPH's stock price will largely depend on
sentiment in the biotech and pharmaceutical sectors.  As well,
the stock's own technical picture will play a key role in its
movements so confirm the technicals with sector strength
before when planning your entries.

BUY CALL AUG-130 IDK-HF OI=782 at $13.50 SL=10.00
BUY CALL AUG-135*IDK-HG OI=378 at $10.50 SL= 7.00
BUY CALL AUG-140 IDK-HH OI=180 at $ 8.13 SL= 5.75
BUY CALL SEP-140 IDK-IH OI= 24 at $15.25 SL=11.00
BUY CALL SEP-145 IDK-II OI= 14 at $13.38 SL= 9.00

SELL PUT AUG-125 IDK-TE OI=101 at $ 4.13 SL=6.00
(See risks of selling puts in play legend)

Picked on August 3rd at  $138.88    P/E = 200.65
Change since picked        +0.00    52-week high=$173.00
Analysts Ratings       6-5-0-0-0    52-week low =$ 42.75
Last earnings 07/17    est= 0.18    actual= 0.26
Next earnings   N/A    est= 0.35    versus= 0.15
Average Daily Volume  = 1.15 mln



ABSC - Aurora Biosciences $99.44 +7.13 (+23.38 this week)

ABSC develops and sells drug-discovery technologies and services.
Along with such collaborators as Bristol Myers, Eli Lilly, Merck,
and Pfizer, ABSC is developing a system using fluorescent assay
technologies to allow researchers to overcome many limitations of
traditional drug-discovery processes.  Many of ABSC's tests are
designed to be performed with living mammalian cells to better
model human disease processes.

ABSC is one of the few profitable Biotech firms.  The company's
earnings momentum combined with its stock price momentum has
attracted our attention.  Last Monday, ABSC reported its third
consecutive quarter of profitability with a bang.  The company
surpasses estimates by a full 140%.  With those kinds of numbers
it's no wonder ABSC didn't suffer from the typical post-earnings
blues.  The company attributed its surge in profits to its new
collaboration with JNJ, and to its existing alliances with
several drug heavyweights, including PFE and AHP.  After
reporting blockbuster second-quarter results, ABSC received a
host of praise from Wall Street.  DB Alex Brown reiterated its
Strong Buy and Warburg Dillon Reed reiterated its Buy rating,
raised 2000 EPS estimates, and established a $100 price target.
WDR might have to revisit their $100 price target soon as ABSC is
poised to burst through that level.  The renewed interest in the
Biotech sector has strengthened ABSC's already impressive
technical position.  The stock broke out from a four-week
consolidation Thursday by rallying above its pivot point at $90
on more than double its ADV.  The stock flirted with the ever-
important $100 level near the close of trading.  Look for a
catapulting rally above the century mark combined with healthy
volume to gain entry into the play.  The profit takers have been
in hiding for the last week.  If ABSC stumbles on light selling,
the stock has strong support at various levels below, including
$95, $90, and major support at its 10-dma around $85.  Consider
entering the play if the stock bounces off one of its several
support levels after any profit taking.

Last week, ABSC released two separate announcements that caught
Wall Street's attention.  ABSC was awarded a $1.3 mln grant from
the National Cancer Institute to expand its project on
identifying certain 'target' genes to combat cancer, among other
diseases.  And, ABSC said it had recognized $1.7 mln in
investment gains from selling its stake in Cytovia to Maxim
Pharmaceuticals (MXIM).

BUY CALL AUG- 90 UDA-HR OI= 52 at $12.25 SL= 9.00
BUY CALL AUG- 95*UDA-HS OI= 51 at $ 9.38 SL= 6.50
BUY CALL AUG-100 UDA-HT OI= 57 at $ 6.75 SL= 4.75
BUY CALL OCT- 95 UDA-JS OI= 25 at $19.38 SL=14.00
BUY CALL OCT-100 UDA-JT OI=148 at $17.25 SL=12.25

SELL PUT AUG- 95 UDA-TS OI=  0 at $ 3.63 SL= 5.50
(See risks of selling puts in play legend)

Picked on August 3rd at  $99.44    P/E = 199
Change since picked        0.00    52-week high=$140.00
Analysts Ratings      3-2-0-0-0    52-week low =$  7.63
Last earnings 06/00   est= 0.05    actual=  0.12
Next earnings 10-30   est= 0.05    versus= -0.10
Average Daily Volume   =  445 K



MER - Merrill Lynch & Co. $130.81 +3.81 (+8.81 this week)

With its bull icon prominently displayed, many investors view
Merrill Lynch as the leader of herd.  The diversified Financial
powerhouse provides investment, financing, advisory, insurance
and related products and services on a global basis to both
individuals and institutions.  Its Corporate and Institutional
Client Group offers investment banking, brokerage and clearing
services to corporate and government clients.  MER has been
slow to move into the online world, entering the online trading
ring in 1999.

One of the few bright lights in the market, the Financials have
been holding up rather well, reflecting sentiment that the
recent string of interest rate hikes may be coming to an end.
The technology sector fell this morning, but stocks like MER
moved up nicely today.  After announcing strong earnings on July
18th, the stock has traded in sympathy with the broad market,
finding it hard to move higher.  After bouncing at the 30-dma
(then at $123.75) early this week, shares of the financial
conglomerate have managed to march higher, and today’s price
action puts the stock above the 10-dma, which is currently
sitting at $128.31.  Current price action seems to indicate
that investors expect tomorrow’s Employment report to be
favorable, making it harder for Greenspan to raise rates at
the August 22 FOMC meeting.  Even cautionary statements from
First Union Securities (see news below) couldn’t dampen
investor enthusiasm MER, as they continue to buy shares near
the 52-week high ($135.50).  This level will create resistance
going forward, and cautious investors may want to wait for
buying volume to push the stock above it before taking new
positions.  Support has been solidifying near $125, which is
backed up by the 30-dma at $124.56.  A bounce at this level
could provide a very attractive entry going forward.  Keep an
eye on the volume and only enter when both the market sentiment
and volume pattern on MER are favorable.

Company specific news has been rather sparse, and investors
in the Financial sector seem to be keying on each economic
report to help determine which way these stocks are likely to
move.  Tomorrow is the Employment report, and if it comes in
favorably, we would look for stocks like MER to charge to new
highs.  On Tuesday, First Union Securities initiated coverage
on MER with a HOLD rating.

BUY CALL AUG-125 MER-HE OI=1799 at $8.13 SL=6.00
BUY CALL AUG-130*MER-HF OI=2457 at $5.00 SL=3.00
BUY CALL AUG-135 MER-HZ OI=1260 at $2.69 SL=1.25
BUY CALL SEP-135 MER-IZ OI= 153 at $6.25 SL=4.25
BUY CALL OCT-140 MER-JH OI=1320 at $7.50 SL=5.25

SELL PUT AUG-125 MER-TE OI=2189 at $2.00 SL=3.50
(See risks of selling puts in play legend)

Picked on August 3rd at $130.81     P/E = 17
Change since picked       +0.00     52-week high=$135.50
Analysts Ratings      3-4-3-0-0     52-week low =$ 62.00
Last earnings 07/00   est= 1.71     actual= 2.01
Next earnings 10-17   est= 1.65     versus= 1.34
Average Daily Volume = 2.92 mln



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

No new puts today.

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

GENZ - Genzyme Corp $65.13 (-3.06 last week)

Genzyme is a biotechnology company that specializes in
developing drugs for rare genetic diseases.  And they actually
make money!  Their business strategy is to buy companies
that can contribute to its in-house development of niche
biopharmaceutical products.  They are also product diversified
with development, manufacturing and marketing capabilities in
therapeutic and diagnostic products, pharmaceuticals and
diagnostic services.

Most Recent Write-Up

Confirmation!  After breaking through and closing above $70 on
Wednesday, GENZ confirmed the move by rising on Thursday.  GENZ's
two dollar move on Thursday took the stock to a new all-time high.
The stock also gave us a great entry point by bouncing nicely off
the 10-dma at $69.36.  Volume wasn't very strong on today's move,
a possible sign of caution, but closing at your days high is a
bullish sign.  GENZ shares have also been a beneficiary of
subsidiary Genzyme Molecular Oncology's (GZMO) three licensing
agreements to provide non-exclusive access to its cancer
diagnostic patent rights.  If we get some profit taking, look for
$70 to provide some support, with a subsequent bounce a possible
entry point.

Comments

GENZ had a very nice intraday trend today, climbing higher with
higher lows and higher highs.  The stock dipped just below its
10-dma at $69.36 early in the session to spring higher.  Volume
was a little lighter today so look for entry on a pullback to the
$71 level, accompanied with a bounce.  Below that, support can be
found at $70, and then the 10-dma.  Today's close is an all-time
high for GENZ.  Look for higher volume to return and drive this
stock higher.

BUY CALL AUG-60 GZQ-HL OI=2201 at $13.75 SL=10.75
BUY CALL AUG-65*GZQ-HM OI=1561 at $ 9.00 SL= 6.75
BUY CALL AUG-70 GZQ-HN OI= 237 at $ 5.25 SL= 3.50
BUY CALL AUG-75 GZQ-HO OI= 207 at $ 2.63 SL= 1.25
BUY CALL SEP-70 GZQ-IN OI=  42 at $ 6.63 SL= 4.75

Picked on July 27th at   $71.31    P/E = 28
Change since picked       +1.81    52-week high=$73.13
Analysts Ratings      4-8-2-0-0    52-week low =$30.75
Last earnings 06/00   est= 0.53    actual= 0.72
Next earnings 10-19   est= 0.55    versus= 0.49
Average Daily Volume = 1.19 mln



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

A Rout Turns Into A Rally!

The Nasdaq staged a dramatic recovery today, rebounding from a
precipitous morning drop to an incredible closing rally.

Wednesday, August 2

Industrial stocks ended higher today as investors applauded the
favorable housing report.  The Dow Jones average closed up 80
points at 10,687.  The Nasdaq Composite finished 27 points lower
at 3,658 amid concerns about valuations in the technology sector.
The S&P 500 Index ended unchanged at 1,438.  Trading volume on
the NYSE hit 987 million shares, with advances beating declines
1,598 to 1,272.  Activity on the Nasdaq exchange was average at
1.47 billion shares traded.  Technology advances beat declines
2,059 to 1,923.  In the bond market, the U.S. 30-year Treasury
was down 18/32 on frustration that the government failed to make
the August 30-year issue its last sale of the year.  The closing
yield was 5.76%.

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

Mktg. Service  MSGI   FEB-7.50 Call   $1.12   debit   calendar
Polaroid       PRD    OCT20C/AUG20C   $0.93   debit   calendar
Lockheed       LMT    SEP25C/AUG30C   $3.88   debit   diagonal

Lockheed and Polaroid both offered favorable entry opportunities
during the session.  A two-contract position was observed near
the open in LMT and a five-contract trade in the Polaroid spread
was executed at $0.93 debit.  Marketing Service Group performed
much worse than expected and the premium for the SEP-$7.50 call
fell to 1/8 at the close.  There were no contracts traded in the
spread but we decided to initiate the long position (FEB-$7.50C)
at $1.12.  We will wait for a rally to sell the September option.

Portfolio Plays:

The market rotation continued today as blue-chip stocks posted
solid gains while technology issues slumped amid weakness in a
number of leading companies.  Favorable housing data increased
optimism the recent economic expansion has slowed, limiting the
need for another rate hike at the August meeting of the Federal
Reserve.  A tame inflation report boosted interest in old economy
stocks as investors believe those companies are less likely to
be affected by lagging earnings growth.  Hewlett-Packard (HWP)
was the Dow’s biggest gainer, rallying $5 after analysts raised
their earnings estimates on the company.  ExxonMobil (XOM) also
gave the blue-chip index a boost as oil stocks benefited from a
jump in crude oil prices.  On the Nasdaq exchange, semiconductor
and telecom companies contributed disappointing performances and
every rally attempt was thwarted by profit-taking.  Analysts say
the market will likely remain choppy as investors await upcoming
economic reports and the FOMC’s next move on monetary policy.

Our portfolio was plagued by the continued slump in technology
issues.  Fortunately, there were a few issues that opposed the
bearish trend.  Qlogic (QLGC) moved up almost $7 after a series
of declines and Altera (ALTR) rebounded $4 as investors began to
speculate on an end to the recent semiconductor correction.  The
morning rally also allowed traders who missed the first chance
another opportunity to make downside adjustments in our bullish
credit spreads.  Our primary focus during the session was a move
to September for the sold ($120) Put in Voicestream (VSTR).  The
new position is (short) SEP-$110 Put at $2.00 and the collateral
amount is unchanged.  Now, all of the big-cap technology spreads
have been rolled down and forward to avoid short-term losses and
we expect the recovery to begin near the upcoming meeting of the
FOMC.

Pall Corporation (PLL) was a surprise mover, climbing $1.56 to
$22.25 amid optimism surrounding the news for V.I. Technologies
(VITEX).  VITEX announced today that it has signed an agreement
with the American National Red Cross for a six year extension of
its distribution pact for the company’s new, virally-inactivated
transfusion plasma products.  VITEX is collaborating with Pall on
a red cell pathogen inactivation program and they are encouraged
by the progress in its most significant opportunity.  The program
for pathogen inactivation of red blood cells is currently in Phase
I clinical trials and VITEX believes it will be the first company
to receive FDA approval for Phase II/III clinical programs.  Our
neutral position is short at $22.50 and if the trend continues,
we will be forced to close the play early to remain profitable.
Thermo Electron (TMO) rallied $1.25 to a recent high near $22.50
and our bullish diagonal position traded at a $2.50 credit, a 100%
profit for the play in just under two months.  Consider the risk
of holding the position for further gains against an unexpected
loss due to the volatile market conditions.

Thursday, August 3

The Nasdaq staged a dramatic recovery today, rebounding from a
precipitous morning drop to an incredible closing rally.  The
technology index ended 101 points higher at 3,759 while the Dow
Jones industrial average ended up 19 points at 10,706.  The S&P
500 was also up 13 points at 1,452.  Volume on the Nasdaq hit
1.82 billion shares, with declines beating advances 2,205 to
1,760.  Activity on the NYSE reached 1.05 billion shares traded,
with declines beating advances 1,529 to 1,335.  In the bond
market, the 30-year Treasury was up 11/32, pushing its yield
down to 5.74%.

Portfolio Plays:

The Nasdaq rallied today in a volatile session that began with
triple-digit losses.  Bargain hunters surfaced near midday in
many of the big-cap technology companies with the majority of
interest coming in networking and computer hardware issues.
The Internet group also enjoyed substantial gains but selling
pressure remained in the semiconductor sector.  In the broader
market, bank, brokerage and biotechnology stocks rallied along
with conservative utility issues.  On the downside, retail and
gold stocks struggled to avoid major losses.

Juniper (JNPR) was today’s big mover, up $12 on strength in the
technical recovery of the networking group.  Our cost basis in
the flagging issue is just above today’s closing price and we
may use the current rally to move the position forward and down
to a lower strike price.  Technology stalwarts American Online
(AOL), Sun Microsystems (SUNW) and Cisco Systems (CSCO) also
rebounded significantly as investors went bargain hunting for
long-term portfolio issues.  Altera (ALTR) and Virata (VRTA)
deserve honorable mention as both issues rallied speculative
buying in the semiconductor sector.

In the small-cap group, American Eagle Outfitters (AEOS) jumped
almost $4 after the clothing retailer said on Tuesday that total
sales for the four weeks ended July 29 rose 18% to $66.6 million.
The performance prompted Credit Suisse First Boston to boost its
rating on the stock to "buy" from "hold" and investors responded
acoordingly.  Our bullish debit spread is at maximum profit above
$15.  Allstate (ALL) was another surprise, climbing almost $2 to
close at a recent high near $29 on strength in the Property and
Casualty Insurance industry.  Our bullish diagonal position has
returned a 25% in less than one month.  Home furnishing retailer
Bed, Bath and Beyond (BBBY) and software application developer
Peoplesoft (PSFT) also participated in the bullish activity.

The recent rally in Pall Corporation (PALL) ended in a short-term
hiatus today as the stock fell $0.88 to $21.  Traders who are
concerned with the recent (bullish) change in technical character
can close the credit strangle for a $0.50 credit.  That’s a 10%
profit in less than two weeks.  CSX Corporation (CSX) moved into
a profitable range near midday, trading as high as $26.43 during
the session.  The issue closed near a 180-day high at $25.75 and
our bullish diagonal spread achieves maximum return above $25.

Questions & comments on spreads/combos to Contact Support

******************************************************************
                         - NEW PLAYS -
******************************************************************

NPNT - NorthPoint Communications $12.69  *** Options Activity! ***

NorthPoint Communications is a national provider of high speed,
local data network services.  The company's networks use digital
subscriber line (DSL) technology to enable data transport over
telephone company copper lines at speeds up to 25 times faster
than common dial-up modems.  The company markets its network and
data services to Internet service providers, long-distance and
local telephone companies and network service providers.  The
company's customers can use its networks to provide continuously
connected, economical Internet access, and other data-intensive
applications to end-users.  NorthPoint currently operates its
DSL-based local networks in 33 major United States markets,
spanning 62 metropolitan statistical areas, and expects to reach
over 60 markets and 110 MSAs by the end of 2000.

Options activity has been extremely heavy in this issue going
into the company’s earnings announcement, scheduled for Tuesday
of next week.  The consensus estimate expects NorthPoint to lose
$0.84 a share but traders have been buying mostly call options
in anticipation of a rebound in the long-suffering issue.  The
company has also been the subject of takeover rumors in the past
and at the current valuation, it may indeed be a merger candidate.

We noticed a very large front-month disparity in the (OTM) call
options and if you have an aggressive portfolio, and a bullish
outlook for the issue, this position may offer exactly what you
need for cheap speculation.

PLAY (aggressive - bullish/calendar spread):

BUY  CALL  SEP-15  NUP-IC  OI=159   A=$2.00
SELL CALL  AUG-15  NUP-HC  OI=3475  B=$1.06
INITIAL NET DEBIT TARGET=$0.88  TARGET ROI=25%

Chart =


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

DISH - EchoStar Communications  $42.25  *** Ready To Go? ***

EchoStar Communications Corporation and its subsidiaries deliver
direct-to-home satellite television products and services to
customers worldwide.  The company has three closely interrelated
business units: the DISH Network, EchoStar Technologies (ETC),
and Satellite Services.  The DISH Network is a direct broadcast,
satellite subscription television service offered in the United
States.  ETC, the engineering division, is responsible for the
design of digital set-top boxes, and the satellite receivers,
necessary for consumers to receive DISH Network programming, and
the sale of set-top boxes to global direct-to-home satellite
operators.  Satellite Services provides video, audio and data
services to business television customers and other satellite
users.

Echostar’s share value has rebounded in recent sessions after
the popular satellite television service reported a net loss that
was smaller-than-expected and a 10% jump in subscribers for the
second quarter.  Echostar reported a net loss of $132 million, or
$0.28 a share, up from $76 million, or $0.20 a share, in the same
same period a year earlier.  The consensus of analysts surveyed
was a $0.34 per share loss.  In describing its success, Echostar
said it added roughly 445,000 new subscribers during the second
quarter, bringing its total subscriber base to 4.3 million.  In
addition, revenue for the quarter jumped 85% to $646 million.

The recent technical trend is favorable and with the positive
forecasts for growth in the company, this position offers a
unique speculative opportunity for traders who are bullish on
the issue.

PLAY (aggressive - bullish/debit spread combination):

BUY   CALL  SEP-42.50  UAB-IV  OI=107  A=$5.12
SELL  CALL  SEP-47.50  UAB-IW  OI=102  B=$3.12
SELL  PUT   SEP-35.00  UAB-UG  OI=522  B=$1.75

DEBIT SPREAD COST BASIS TARGET=$1.88  NAKED PUT TARGET=$1.88
OVERALL NET DEBIT TARGET=$0.00  ROI=25% (based on collateral)

We received a number of positive comments about this debit-spread
combination strategy in a recent edition.  In simple terms, the
play is nothing more than a sold (short) Put and a bullish, debit
spread.  The position is actually somewhat aggressive, based on
a bullish outlook for both components, but we use OTM options to
reduce the potential risk.  The premium from the sold put is used
to finance the purchase of the debit spread.  In this case, the
collateral requirement for the naked put is approximately $1,150
per contract.

Chart =


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

ITWO - I2 Technologies  $129.12  *** Solid Earnings! ***

i2 Technologies is a provider of intelligent eBusiness solutions
that help enterprises optimize business processes both internally
and among trading partners.  Its solutions enable enterprises to
operate more efficiently, more effectively collaborate with
suppliers and customers, and conduct business transactions over
the Internet.  They recently launched TradeMatrix, a robust
platform of business-to-business solutions, services and
marketplaces, which will allow customers, partners, suppliers and
service providers to do business together in real time.  Its
services include procurement, commerce, customer care, strategic
outsourcing, product development, and much more.

Earnings and revenues continue to dominate the market and late
last month, i2 reported the best quarter in its history, with
revenues of $242 million, up 84% compared with the prior-year
period.  i2 reported net income of $0.10 per share, well above
consensus estimates.  The acquisition of Aspect Development
added $11 million to the top line, but i2 would have exceeded
estimates even without those revenues.  The underlying reason
for i2's better-than-expected earnings were operating margins
that improved during the quarter and a new business model that
helped boost revenues.  The company is starting to generate a
recurring stream of subscription revenue based on the various
e-marketplaces it helps create and we think there is a bullish
future in store for the company.  Analysts say the best is yet
to come as i2 recently upped its projections for revenue growth
and based on the issue’s performance in the recent technology
sell-off, it appears that investors agree with the bullish
outlook.

PLAY (conservative - bullish/synthetic position):

BUY  CALL SEP-170  QYI-IN  OI=43  A=$4.75
SELL PUT  SEP-100  QYJ-UT  OI=31  B=$4.12
INITIAL NET DEBIT TARGET=$0.00 PROFIT TARGET=25%

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $3,000 per contract.

Chart =



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