Option Investor

Daily Newsletter, Sunday, 08/20/2000

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The Option Investor Newsletter                  Sunday  08-20-2000
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        WE 8-18          WE 8-11           WE 8-4          WE 7-28
DOW    11046.48 + 18.68 11027.80 +260.05 10767.75 +256.58  -222.39
Nasdaq  3930.34 +140.87  3789.47 +  2.11  3787.36 +124.36  -430.86
S&P-100  813.64 +  8.89   804.75 +  8.90   795.85 + 19.67  - 28.37
S&P-500 1491.72 + 19.88  1471.84 +  8.91  1462.93 + 43.04  - 60.30
W5000  13907.40 +210.60 13696.80 + 84.90 13611.90 +359.60
RUT      515.51 +  5.24   510.27 +  6.64   503.63 + 13.41  - 32.48
TRAN    2837.14 - 90.36  2927.50 + 40.69  2886.81 +117.28  - 38.89
VIX       19.42 -  1.77    21.19 -   .35    21.54 -  2.76  +  2.83
Put/Call    .57              .41              .59

Caution, now entering the twilight zone!

The Dow ended the week totally directionless and only +18 points from
where it started on Monday. Other than the brief jump over 11100 on
Monday the Dow traded in a very narrow range between 11000-11100 all
week. The Dow is consolidating from the +650 point gains over the last
several weeks. The Nasdaq had a pretty good week gaining over +140
points and edging ever closer to 4000. The intraday high on Friday
was 3980 and after trading over its 200DMA it slipped -20 points back
below the 3949 barrier.

Higher oil prices hit the transports again this week and the index
has now bounced off upper resistance at 2930 four times since March.
With inventories at low levels and expectations of even higher
heating oil prices for winter, Dow theory followers are looking
at a drag on future Dow rallies. The challenge now is the low
inventories. Nobody wants to buy oil for today's high prices and
then be forced to sell it cheaper later if OPEC raises output. The
lack of buying could turn into a race to fill winter requirements
once OPEC direction is clear. If they are not going to raise output
then some analysts project oil could run as high as $50 a barrel by
winter. The prospect of even higher oil prices has put a cloud of
uncertainty over the market. Somewhat higher oil actually helps the
Fed by putting price pressures on the market. This requires fewer
interest rate hikes from the Fed. However, over $35 the Fed would
start squirming as those prices started filtering through the
economy and become critical.

Oil prices did not put any pressure on the semiconductor sector this
week as Merrill Lynch joined the crowd upgrading the sector. Merrill
said on Friday the mid-cycle correction on the chip sector was over
and recommended that investors buy chips more aggressively going
forward. Late to the party but a good call. With the sector up
strongly for the last six days we cold see some profit taking any

The bluest of the blue chips were in the news on Friday. AT&T was
rumored to be in merger talks with British Telecom. With T trading
near a three year low at $31 it is not surprising considering the
consolidation taking place in the telecom sector. The companies
acknowledged that talks had taken place but there was no current
deal. Also grabbing a share of the spotlight on Friday was GM after
Carl Ichan said he was going to buy up to 15% of the outstanding
GM stock. Now that is a trading account to covet!! The reason for
the move according to analysts was to force GM to complete the
spin off of the remaining portion of GM Hughes (GMH) that it still
owns. Analysts theorize that a quick spin off could produce a 22%
profit for Ichan. We should teach him about option leverage if he
thinks 22% is a good deal! Of course with options he would not have
the leverage against the company that actually owning the stock
would produce. Also, I would not doubt that he probably will end
up with quite a few long calls as well before the deal is over.

The bluest chip on the Internet lost some of its shine on Friday
with a -$6 drop. Yahoo experienced a wave of selling as the Thursday
rating filtered into portfolios. Decreased advertising rates and
volume is impacting Internet companies across the sector but as the
most visible sector leader Yahoo may lead the decline. As YHOO
goes, so goes the sector. This is just another round of deflation
as business plans meet reality. We have seen what happened to the
E-commerce sector with stocks like ETYS, EFTD, FLWS, BNBN, VSHP and
PLRX after they failed to follow through with profits as expected.
The Internet stock slide will continue to be a drag on the Nasdaq
as investors who bought the expectation and rumors are now faced
with selling the news.

The slowing economy is slowing? Yes, that is the newest wave of
analysis by economists. The slowing is slowing and actually may
be reversing into growth mode again. Where most analysts expect
no movement on interest rates next Tuesday, some were even expecting
the next move to be a rate cut. Now there is a growing rumor that
there could actually be more rate hikes after the election. OOPS!
Where did that come from? Earnings have been stellar and productivity
is still soaring. Employment is still very tight and retail sales
are still increasing. Actually the impact of the rate hikes is
almost invisible. Previously a string of rate hikes like we have
had in the last year could have put a serious dent not only in the
economy but also in the markets. Don't look now but the Dow is
only about -650 points from its all time high and looking like it
is poised to breakout. The Nasdaq is still trading at more than
-25% off its highs but most of those highs were Internet related
and we all know what is happening there. The rate hikes just have
not had the intended impact. The slowing "slowing" is going to bite
us eventually.

With the Dow only a couple hundred points from an eight month
high and the VIX at a 52-week low (19.42) I went back and revisited
the Aug-Sept-Oct period from the last two years. Was there really a
Labor Day rally? Did a rate hike or no hike at the August FOMC
meeting have any impact? What can we really expect next week?
Will we have a rally or a "sell on the news" event? What I found
was not pretty.

In 1999 the Fed met on August 24th and raised interest rates. The
Dow hit an all time high of 11365 on that same Tuesday. Go figure?
However, two days later the Dow began a better than -10% drop to
a low of 9976 on October-18th. Still in the middle of this drop
there was a +410 rally from the Sept-2nd intraday low to the
Sept-9th intraday high. The Dow lost -1100 points in the next
four weeks. The Nasdaq dropped slightly after the Fed rate hike
but basically traded flat to up until Sept-23rd when the crashing
Dow finally took its toll. Even in this rate hike environment both
indexes managed to rally for the week after Labor Day.

in 1998 the Fed met on August 18th and did not raise rates. On
that day the Dow hit 8753 which was a three week high and almost
the high for the month. By September first the Dow had fallen to
an eight month low of 7401 or a -1300 point drop. This happened
without a rate hike. Beginning on Sept-4th the Dow rallied +781
points by Sept-24th to 8182 only to fall off into the October
abyss the following week. The Nasdaq dropped after the Aug-18th
meeting from 1874 to a Sept-1st low of 1475 or -400 points. From
Sept-1st to Sept-23rd the Nasdaq rallied regaining +300 of those
points before hitting the October crash. There was no rate hike
but the market crashed after the meeting in August but rallied
after Labor Day.

At both meetings the Dow was at or near its highs. In 1999 the
VIX spiked the day after the meeting to a low of 20.31 as bullish
sentiment reigned supreme even in the face of the rate hike. A
better than -10% drop began the next day. In 1998 the markets
were undergoing extreme volatility and the VIX on the meeting
day hit a low of only 26.39 but then soared as the market dropped
-1300 points to a high of almost 61, yes, sixty-one! That was
and still is the all time high for the VIX on Oct-4th 1998.
The previous high was 53.06 on Sept-1st 1998, twelve days after
the no-hike Fed meeting and at the market low for the year of

Now that I have bored you with all the important market stats I
think the case is clear for a post Labor Day rally. HOWEVER, I
also think you could create a very good case for a serious dip
between the meeting and Labor Day. The similarities are simply
too clear and too precise. The only things in our favor are the
recent market sell off earlier this year and the general feeling
that the next Fed move may be a cut and not a hike. Now think back
to the earlier paragraph where I discussed the murmuring of
another hike in our future. Maybe a Fed on hold is not such a
sure thing. In 1998 the markets had rallied all spring and summer
were very over bought. In 1999 the markets had rallied in the
spring and then traded sideways through the summer. This year
we hit our high in January and traded sideways or down in a
decreasing range ever since.

The big question remains the Fed. If the Fed says something in
their release on Tuesday that can be taken as indications of a
future hike then the remaining August outlook may be grim. The
last two weeks of August don't have history on their side
regardless of the Fed direction. Factor in worry about $50 oil
and that becomes the joker in our stacked deck. If the soft
landing the Fed wants becomes a fly by instead then Greenspan
will act aggressively in the future. Alan will get a chance to
speak to the markets this week at the Kansas City Fed meeting
on Thursday and should he desire to use words instead of rates
to hold back the markets this would be the day. With the markets
nearing recent highs on the rallies from the last several weeks
there is a good chance that the expected "no hike" is already
priced in. If that is the case then we are setup for a classic
"buy the rumor, sell the news" event. Still, if the Fed does
the expected and Greenspan stays mum then the "why wait for
Labor Day" sentiment may prevail. At this point, I am not
betting on that outcome. The extreme net short positions of
institutional S&P traders along with the 52-week low for the
VIX is weighing on my subconscious. I hope it weighs on yours
as well. I am not saying don’t trade since a short covering
rally for those institutions would be huge but just keep your
eyes open to intraday market conditions and your finger on
the trigger. Consider the next two weeks an episode of the
Twilight Zone where the least unexpected event is the most
likely occurrence.

It is with great pleasure that I announce the fall seminar
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If your city fills up, please consider selecting another location
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Unfortunately we cannot be in all cities all the time and
it may be quite some time before we get back to your area.
All the remaining seminars this year are three days due to
the number of requests. We believe this is the best Technical
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Jim Brown


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For a double witching options expiration week the volatility
was very light. If you were playing the right stocks there
were some big moves but others just went without a pulse.

The DNA play died a disgusting death. It never recovered above
the $167 target for re-entering the play and it has been ruled

MERQ also died a quick death. After the drop the prior week
it never recovered over our $105 target for re-entry.

The new play last week was Coherent. Listed at $68.94 it dipped
to $66.88 on Tuesday giving us an entry point and then ran to
slightly over $73 on Wednesday. Since Wednesday the technicals
have worsened and we would advise exiting the play. While is
may still be a longer term hold we feel it is not currently a
trading play.

Coherent - Prior week

This week


EPNY $99 Call play

EPNY is building a classic formation that can produce some
explosive trades. Once sellers at $100 run out of stock the
pent up buying pressure can move quickly. Many traders are
sitting back watching the battle and will entr this trade
once $100 has been broken. It needs to hold over $100 for a
period of time before entering since you can see where it has
broken $100 for a few ticks several times while the sellers
enteres new orders. Wait for it to hold over $101 for at least
30 min.

EXDS - $60.44 Call play

Exodus is building the same formation as EPNY only over a
longer time frame. If the Nasdaq remains positive Exodus
could rally on a breakout to $70 before hitting resistance
again. I would only buy on a positive market and positive
stock holding over $60.


With the Fed meeting this week I would strongly recommend
waiting for the announcement before making any long plays.
We could get a pullback on Monday which could give us better
entry points should the market rally after the announcement.

Try to maintain a market neutral outlook and react to what
the market gives us instead of trying to force plays to fit
your market view.

Jim Brown

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Tuesday 8/22, 14:15:00 Hours - Bring It On!
By Austin Passamonte

Was that really expiration Friday? What a boring day. This
makes two months straight of more action on Wednesday &
Thursday prior to Friday's non-event.

Thursday's expiration of European-style options (SPX & DJX
among others) may have a bit to do with this. We'll keep
that in mind for next month's week of high-speculation.

Back to option investing. The day of FOMC's reckoning draweth
nigh. Will there be any rate surprise? 28 out of 29 Primary
Fed-Bond dealers polled say no. There's always one vote of
dissention in every bunch. These are pros closest to the
action if we had any lingering doubts otherwise.

Customary to our reports here lately this is a two-part story.
We hope you'll enjoy at least one of them.

The entire financial world fully expects a major rally to
ensue. Tons of cash on the sidelines, summer is ending and
interest rates may fall before they rise again. There really
isn't one single fundamental reason why these major markets
won't be headed up to parts unknown. Can you think of any? We

Still, we're troubled. Something stinks around here and for
once it's not the dog. Last government reports disclose
institutional traders in the Dow, S&P 500, 30-year bond and
10-year note futures arena are all extremely net-short.

Why are the biggest market pros in the game so bearish? Can
we assume they are crazy, stupid, the most daring gamblers
in the world or what? I am truly perplexed by their sentiment
but it scares the bull out of me regardless.

The VIX closed at its lowest point since July 16th last year.
Big deal, you say; we've been harping that point for weeks now.
Well let's just take a little trip down history lane.

Including July 16th 1999 the VIX has been near this low
five times. 7/19, 1/14, 2/4, 3/3 and today. The first four
times all saw Dow corrections within days of 6.3%, 7.2%,
11.2% and 6.6% off their highs. How many of these events do
you think were anticipated or predicted as markets soared to
new recent highs?

All components were in place for leadership stocks to keep
making new highs. But if stocks continued to run every time
they made new highs, when would they ever pull back?

Will history repeat? It very well may not. Nothing is for
sure, but how do you wish to lay your bets? Each time we've
seen the VIX at this point the Dow pulled back an average
of 7.83% That would be 865 Dow points below our close on

Our job here in "Market Sentiment" is to provide you with
pertinent mathematical facts and we take that very seriously.
Math is an exact science that does not lie. Here is the data,
research and assimilate it as you wish.

For all we know the markets may rally to the stratosphere
while VIX plunges into negative numbers. It could happen. Is
that how you want to place your bets? Pay close attention
to your charts, ignore media mantra and play any direction
this market chooses to go. It promises to be a big one soon!


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 8/17 close: 20.04           Sat 8/19 close: 19.42

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            (8/15)      (8/17)       (8/19)

CBOE Total P/C Ratio         .55         .59          .45
Equity P/C Ratio             .46         .53          .41

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       (8/15)        (8/17)      (8/19)

All index options       .80           .95         .92
OEX Put/Call Ratio     1.50          1.06        1.11

OEX Maximum Open Interest Strikes/Contracts:
Puts               800/6,942        790/6,376   800/3,947
Calls              810/6,564        810/7,603   800/4,772
Put/Call Ratio       1.06              .84         .83

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. Numeral
listed for resistance is the ratio of calls to puts. Support
is ratio of puts to calls. Values above "10" considered firm.
Divergence of numbers may indicate future market direction.

OEX                      Tues         Thurs         Sat
Benchmark:               (8/15)       (8/17)       (8/19)

Overhead Resistance:                             (September)
(900-835)                1,064       2,072+        173.59
(830/810)                    5.12       11.11        5.70

OEX close:                   811         815         813

Underlying Support:
(805-785)                    1.56        1.07        1.13
(780-760)                   10.21        8.97        7.75

What the S/R measure indicates: Net open-interest ratios
are firm above 810 and very high above 835 already. A large
move has downside clearance to 785 with relative ease.

We consider a test of the 830 range an excellent put entry
while a test of 785 might be a strong call entry.

30-yr Bond:          5.69%

Light, Sweet
Crude, Barrel:     $31.95

200 Day Moving Average (as of 8/08)
The 200 DMA is widely considered the major benchmark for
critical support in a market.

DOW:   10,792          11,067       11,055      11,046
NASDAQ: 3,936           3,851        3,940       3,930
NDX:    3,672           3,722        3,830       3,807
SPX:     1434            1484         1496        1491
OEX:      773             811          815         813

CBOT Commitment Of Traders Report: Friday 8/11
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;    +116 (long)        - 599 (short)
Total Open
Interest %          2% net-long       3% net-short

Net contracts;    - 1,854 (short)      + 1455 (long)
Total Open
Interest %          18% net-short       4% net-long

S&P 500
Net contracts;     + 44,924 (long)     -51,720 (short)
Total Open
Interest %           24% net-long       9.5% net-short


Recent Rally
Week's end strength in the NASDAQ 100 is especially encouraging.
11,000 support level on the Dow has weathered several tests.

Interest rates
5.69% on the 30-year Treasury Bond signal rate fears are nil.
Fed-Fund futures are pricing no chance a near-term rate hike.
We'll learn for sure this week.

Benign Government Reports
Latest statistics hint the economy is cooling and no further
rate hikes may be needed.

COT Report - NASDAQ 100
Sentiment reversal with small speculators growing net-short
while commercials increase accumulation may suggest expected
strength in the sector over the next weeks or months.



Thursday’s close below 20 has us in EXTREME danger zone. Last
four times this low resulted in serious market corrections.

End Of Earnings Season
Lack of positive news will direct market focus on August
FOMC fears Tuesday should CPI prove bearish.

Third-Quarter Earnings Warnings
A number of companies pre-warning slowed earnings later in
the year are being met with extreme selling pressure.

Energy Prices
Prices are soaring. This affects profit margins and inflation.
Light, Sweet Crude closed $31.95 today. All petroleum expected
to be very high this fall. Prices in low $20s would be welcome
relief but may not arrive.

COT Report - S&P 500 & DJX
Latest updated figures show small spec traders remain heavily
long S&P 500 contracts while commercial traders continue
to hold ten-year extreme short position. DJX commercials added
to net short while small specs added to net long holdings.
Widened divergence strongly implores market turn in favor of
commercials. The market's bottom may still lie ahead.


As of Market Close - Sunday, 08/20/2000

                                  Key Benchmarks
Broad Market           Last     Support/Resistance   Alert

DOW   Industrials      11,047      10,600  11,200
SPX   S&P 500           1,492       1,450   1,505
COMPX NASD Composite    3,931       3,650   4,000
OEX   S&P 100             813         790     822
RUT   Russell 2000        515         485     540
NDX   NASD 100          3,809       3,500   3,900
MSH   High Tech         1,068         975   1,095     **

BTK   Biotech             662         570     700
XCI   Hardware          1,556       1,450   1,580
GSO.X Software            439         385     455
SOX   Semiconductor     1,135       1,000   1,160     **
NWX   Networking        1,321       1,210   1,400
INX   Internet            519         460     565     **

BIX   Banking             585         550     610
XBD   Brokerage           615         570     635
IUX   Insurance           706         680     725

RLX   Retail              833         810     875
DRG   Drug                388         365     415
HCX   Healthcare          799         795     855
XAL   Airline             161         156     172
OIX   Oil & Gas           306         280     320

The MSH, SOX and INX hit our resistance points on Friday, and
the INX got hit hard at the 532 level.  If you believe that the
smaller cap RUT and the INX represent the pulse of aggressiveness
in the market, Friday’s activity in the Internets and lackluster
movement of the RUT is saying "don’t speculate."  Some of the
better results have come from buying support in strong sectors,
with stops in place.  Raising support (COMPX, SOX) Raising
resistance (MSH, SOX, INX)  Lowering resistance (RLX) which was
not reflected in Thursday’s update.

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Bullish Until the Last Minute
By Buzz Lynn

Anybody else sweating bullets over the VIX?  Don't look now, but
it's just hit a 52-week low.  That it could get this low indicates
a whole bunch of confidence on the continued prosperity of this
market.  Contrarians must be licking their chops just waiting for
the NASDAQ rocket to burn up in re-entry!  Maybe, but consider
this.  Most of us have heard it enough times that we could repeat
it in a dead sleep - VIX is low, time to go; VIX is high, time to
buy.  That's mostly true.  However sharply rising markets are
perfectly capable of spiking the VIX too.  Though it's rare, it's
not unheard of.  While statistics and empirical evidence suggest
the big downer is the most likely outcome, nothing prevents it
from being a big upper if Greenspan and company leave rates alone,
and lead investors to interpret that the next meeting in the New
Year may actually yield a rate CUT!  That's a budding, but not yet
widely accepted theory on the Street.

Love him or hate him, Greenspan has been a master of giving the
Street exactly what it expects.  Nonetheless, history has shown us
that announcements have been greeted with a sense of relief
immediately following the meeting.  If there is a runup into the
meeting, the likely outcome is that investors will "sell the news"
no matter what the news as long as it confirms the expectation.
If no runup (and we haven't really seen a big one yet), a small
relief rally could ensue.  It's a little like being a kid and
learning there really isn't a monster under the bed.  Complacency
sets in, and ahhh, relief.  (Oh, and the VIX drops further yet!)

So what's our expectation on the market's direction from here?
Frankly, we don't know for sure, but we do know there is a wall of
worry (about the VIX) in which for prices to climb.  It is also
quite possible that Fed will leave just enough doubt about the
future to keep the markets from doing their best impression of a
runaway freight train with a stuck throttle.  With traders most
likely to pump up the volume after returning from a battery-
charging summer vacation in early September, we could very well
see a major gain in September anyway.  A growing number, but still
a minority of investors share that view.  Business is good, rates
are dropping and earnings are still rising as inflation remains
under control.  That's good for stock prices in the long run.

Still a growing number of investors and traders are scared of that
low VIX (rightfully so), and like Pavlov's Dogs, are conditioned
to think a spike is coming along with a huge stock selloff.
That's the conventional and mostly accurate wisdom.  However, we
leave you with this thought and rule to guide you.  In the words
of money manger and long standing Forbes columnist, Ken Fisher
(son of legendary value investor, Phil Fisher), the market is The
Great Humiliator and will seek to prove wrong and embarrass as
many people as possible.  That means that if we're all on the
bandwagon that the VIX can't possibly go any lower and a selloff
is immanent, we could be the embarrassed majority as VIX slips
again to another low, and the markets to new highs.  Even Yahoo!
ceased to rise into earnings just when we thought we had the
pattern all figured out.  The moral is the VIX can go lower still
and markets can rise even if the VIX spikes.

That is not a prediction, just the least expected and contrarian
point of view.  Expect the unexpected, but be prepared to sell too
soon if the VIX repeats history.

I'll return to this column for the Tuesday, August 29th update.
In the meantime, the skills and insights of Austin Passamonte will
grace this page in my absence.  For the few who haven't read his
work, it is outstanding and exceptionally educational.  Best
trading wishes to all of you this week!

Index             Last    Mon    Tue    Wed    Thu    Fri    Week

QQQ NASDAQ-100    95.25   1.94   0.00   1.00   1.75  -0.50   4.19
HHH Internet     108.88   2.94   1.75   0.94   0.88  -1.69   4.81
BBH Biotech.     173.38  -1.00  -3.44  -4.06   2.63  -3.50  -9.38
PPH Pharm.        95.06  -0.81   0.00   0.75   0.25   0.00   0.19
TTH Telecom       64.50   0.81  -0.19  -0.63  -0.44  -0.06  -0.50
IAH I-net Arch.   99.25   0.94  -0.25  -0.13   2.44   0.69   3.69
IIH I-net Infr.   54.69   1.00   0.13   1.50   0.38   0.19   3.19
BHH B2B           46.50   0.69   0.25  -1.31   1.00   0.31   0.94
BDH Broadband     94.94   2.63   0.69   0.25   2.13   0.75   6.44
SMH Semicon.      97.44   5.06   2.88   2.63   1.81   2.38  14.75
RKH Reg. Banks   103.75   1.13  -0.69  -2.00   0.19  -0.88  -2.25
UTH Utilities    103.56   1.69   0.81  -0.25   0.88   0.06   3.19


QQQ - NASDAQ 100 $95.25 (+4.19 last week) The NASDAQ and the Q's
lost ground on Friday, but only marginal amounts - down 10 to
3930, and down $0.50 to $95.25, respectively.  That was also the
first time since last Friday we saw a down day on either index, so
it wasn't unexpected.  That they both held at or near their
supporting averages on a summer Friday in front of an FOMC meeting
is technically a win.  What's supporting the market now is the
continued good analyst projections specifically for the
semiconductors and optical sectors, and technology in general.
Speaking of that, the technical trend remains in tact too.  Though
the NASDAQ is encountering mild turbulence at its 200-dma of 3949,
QQQ has broken clean through its 200-dma of $92.21 this past week.
The generals are leading the charge and the troops are not
following as willingly.  Keep your eyes on MSFT, INTC, CSCO, DELL,
WCOM, SUNW and ORCL since these will determine the NASDAQ and
QQQ's direction.  As of Friday's close, QQQ still managed a close
above it's 50-dma of $94.09, the 30-dma of 94.05 and its 5-dma of
$94.19.  The convergence of these three averages should lend
considerable support going forward, especially since it is also a
level of previous resistance.  If that doesn't hold, the next
level of support is around the 200 and the 10-dma between $92 and
$92.50.  Next major resistance is at $98.50.

Calendar Spread:

With the support level at $94 where most of the moving averages
converge, and the 200-dma not far behind at $92-$92.50, one of
these levels (pick your favorite dependent on your risk profile)
could make an excellent place to target shoot the long leg of the
bullish call spread position.  We can simultaneously short a near-
term call, or wait for a rise back to and rollover from resistance
at $95-96 to "leg in".  This trade is just like a covered call,
except that instead of buying the stock outright, we buy a longer-
term call as our long position instead.  The other difference is
that unlike a covered call, we don't seek to get called out of
this one.  At or near expiration date of the short term sold
strike, we must buy back the position if it is in the money or
when its time value approaches zero.  The idea here is to let time
decay on the short position defray the cost of the long position
month after month.  Do this for a couple of months and you have a
free long-term option.  Don't worry that the price you pay to buy
back the short is more than what you sold it for.  Your underlying
option will also be increasing in value by a greater amount.  Just
be sure to keep some reserves on hand so you can cover.  At the
end of the month, you will have defrayed your net cost by the
dollar amount of time decay on the short.  This is a mildly
bullish play with a margin of safety, but you still need to set a
mental if not actual stop to exit the whole position in case the
Q's make a severe downward about face

BUY  CALL DEC- 90 QVQ-LL OI= 2662 at $13.50

SELL CALL SEP- 96 QVQ-IR OI= 4451 at $ 4.38, ND = 9.13 or less
SELL CALL SEP-100 QVO-IV OI= 7447 at $ 2.63, ND =10.88 or less

Long Calls

So what's not to like?  Ok, QQQ could have risen, but the loss on
a Friday before a Fed meeting was negligible.  Slowly and
methodically, QQQ took out resistance all week long.  Now with the
convergence of the 5, 30, and 50-dma converging just over $94,
that appears to be an excellent area of new support and
technically justifiable target at which to shoot.  It was barely
tested yesterday and it held.  While the overall trend appears to
be up for now, a severe hiccup (like maybe nervousness before or
just after the FOMC meeting?) down to the 10-dma and 200-dma at
$92-$92.50 could also make an excellent entry.  As long as
technology stays strong and the interest rate environment is
predictable,  QQQ is poised for more gains.

BUY CALL SEP- 90 QVQ-IL OI=16596 at $ 8.00 SL=5.75
BUY CALL SEP- 95 QVQ-IQ OI=13257 at $ 4.88 SL=2.75
BUY CALL SEP-100 QVO-IV OI= 7447 at $ 2.63 SL=1.25

Average Daily Volume = 21.75 mln


SMH - Semiconductor $97.44 (+14.75 last week) You've got to love
this party and everybody at it - even Salomon Smith Barney's
Jonathan Joseph, who after starting the semis sliding about a
month ago with a bearish outlook, joined in the fun with positive
comments on Friday.  Let's just hope we haven't found a new
contrarian indicator much like Ralph Acampora from last year.  In
fairness, even the best aren't correct all the time.  But J.J.
came to the table with an upgrade on MU noting that two OEMs
picked up their order pace from MU the first week in August.  That
came on the back of other analysts' sector upgrades all week.
While we've been enjoying the love-fest in this sector, there are
some technical gremlins present that could spoil the party.
First, SMH broke out of the Bollinger band to the upside,
indicating there may be some points to give back soon.  Second,
the large gap-up on Friday may need to be filled before SMH can
move up.  Finally, a doji star formed on Friday's daily
candlestick indicating investor indecision is setting in, and
bulls may be getting tired from charging.  $99 resistance proved
impenetrable as did support at $96.50.  The next level of
historical support is at $94.50, then $93.50.  It isn't until
$92.85 that it runs into it first dma for support - the 5-dma.
The rest are below that.  For an entry, you can pick your favorite
level of support based on your risk tolerance - just wait for the
bounce.  Otherwise, wait for the break over $99.

BUY CALL SEP- 90 SMH-IR OI= 67 at $10.25 SL=7.25
BUY CALL SEP- 95 SMH-IS OI= 96 at $ 7.13 SL=5.00
BUY CALL SEP-100 SMH-IT OI=168 at $ 4.75 SL=3.00
BUY CALL NOV-100 SMH-KT OI= 82 at $ 9.38 SL=6.50

SELL PUT SEP- 90 SMH-UR OI= 52 at $2.50 SL=4.00

Average Daily Volume = 333K K


IAH Internet Architecture $99.25 (+3.69 last week) HWP, SUNW, FDRY
and SCMR lit up the sector last week, while CSCO, the largest
component straggled a bit.  IBM was Friday's loser too keeping the
hard work of the others on a less than stellar pace.  One rotten
apple can spoil the bunch.  Even so IAH eked out a gain Friday,
partially on SUNW's 2:1 split announcement on Thursday after the
close.  Technically, IAH is above all its major moving averages
with historical support at $98.50-$99.50 - in short, now in
congestion.  Popping its head out over $100 would be a good sign,
but a breakout over $101 would shove all recent resistance aside
and might make a good entry.  There is also solid support at $97,
but wait for the bounce if you are going to plan your entry there.
Be careful with this one.  If it can't break $100, it may roll
over and dive for support as low as $95 on any bad news.  We can't
advise entering at this current level, but a strong move up from
here might confirm an entry.  Of course, confirm market direction
and use stops to protect your profits.

BUY CALL SEP- 95 IAZ-IS OI=10 at $ 8.38 SL=6.00
BUY CALL SEP-100 IAZ-IT OI= 2 at $ 5.38 SL=3.25
BUY CALL SEP-105 IAZ-IA OI=55 at $ 3.25 SL=1.75

Average Daily Volume = 54 K

New Play

BDH - Broadband $94.94 (+6.44 last week) We mentioned this as a
sympathy play to IAH in Thursday's update.  Hopefully you got it
on your radar, but didn't make an entry.  While optical stocks
like JDSU, GLW, SDLI. BRCM, SCMR, and AMCC really lit up BDH, its
two biggest components, LU and NT cancelled each other out.  LU is
slurping canal water while NT is slowly powering higher.
Technically, though up on Friday, it came in the form of a gap
followed by flat trading.  To that end, BDH may need to fill that
gap first before moving convincingly higher.  The good news is
that it is sitting right on previous solid support at $95, and
only needs to go to $94 to fill the gap.  A bounce from there
would confirm that old resistance at that level is now also solid
support.  A little lower down, BDH may find some support in the
$92-$93 range.  That's where all the moving averages are hanging
out, indicating that BDH may be slightly over-extended.  Target
shoot to your level of comfort.  Resistance is at $97.50, the top
of the Bollinger band.

BUY CALL SEP- 90 BDH-IR OI= 22 at $8.00 SL=5.75
BUY CALL SEP- 95 BDH-IS OI=235 at $5.00 SL=3.00
BUY CALL SEP-100 BDH-IT OI=158 at $3.00 SL=1.50

Average Daily Volume = 116 K

Dropped Plays

BBH - Biotech $173.88 (-9.38 last week) This was a crummy play to
be in most of last week.  We were looking for a bounce at
historical support of $171-$172.  BBH is almost there, but
lawsuits from one biotech company to another are flying.  The
sentiment and technical outlook has deteriorated since we brought
it into the lineup last week.  HGSI, MEDI, AFFX, and DNA are all
in need of therapy.  When their sentiment mutates back to the
positive, we can give it another look.

No Play



For the week of August 21, 2000


None Scheduled


FOMC Meeting - 9:00am ET    Forecast:    ---    Previous:   ---


None Scheduled


Durable Orders       Jul    Forecast:  -6.0%   Previous:   9.7%
Initial Claims       08/19  Forecast:   305K   Previous:   313K
FOMC Minutes         06/28  Forecast:    ---   Previous:    ---


GDP - Revised        Q2     Forecast:   5.2%   Previous:   5.2%
GDP Chain Deflator   Q2     Forecast:   2.5%   Previous:   2.5%
Existing Home Sales  Jul    Forecast:  5.20M   Previous:  5.23M

Week of August 28th

08/28 Personal Income
08/28 PCE
08/29 New Home Sales
08/29 Consumer Confidence
08/30 Leading Indicators
08/31 Initial Claims
08/31 Chicago PMI
08/31 Factory Orders
08/31 Help-Wanted Index
09/01 Auto Sales
09/01 Truck Sales
09/01 Nonfarm Payrolls
09/01 Unemployment Rate
09/01 Hourly Earnings
09/01 Average Workweek
09/01 NAPM Index
09/01 Construction Spending
09/01 Michigan Sentiment

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The Option Investor Newsletter                   Sunday 08-27-2000
Sunday                                                      2 of 5

To view this email newsletter in HTML format with imbedded
charts and graphs, click here:


Looking For A Real Rally
By Mary Redmond

There seems to be a dwindling of opportunities to make money
in the market, and some indicators which point to a possible
consolidation or correction ahead.  Many traders have been
worried about the VIX.X for weeks now.

It is often said that the two emotions which move the market
are fear and greed.  Of the two emotions, fear is the more
powerful.  This is perhaps why the VIX.X can spike sharply
when put buying is at high levels.  The volatility increases
because the movements to the downside are usually faster and
more intense than slow, gradual movements to the upside.

There are a number of companies which made very large run ups
from last Fall to Spring, and had major corrections following.
Some of these stocks are trading at or near their 52-week lows.
For example, both CMGI and QCOM had dramatic run ups and double
top chart patterns this Spring before making sharp corrections.
For the last two months, both stocks have been relatively flat.
I have been watching the implied volatilities of these options,
and this month is the first time this summer when the implied
volatility of the options is lower than the historical volatility
of the stocks.  A stock's options can reflect a large downward
movement in the implied volatility numbers, which can increase
the price of call options even though the stock may be near a

For example, in September of 1999 CMGI had an historical
volatility of 64.  This means the market was anticipating that
the stock would move 64% above or below its current price in
the coming year.  QCOM had an historical volatility of 70 in
the same month.  By April of 2000, CMGI's historical volatility
had moved to over 155, and QCOM's had moved to over 103.  The
historic volatility stayed high with both stocks until just
recently, as they have both been basically flat this summer.
The implied volatility of CMGI's October call options is 85.7
and the historic volatility of the stock was 94 last month.
QCOM's call options have an implied volatility of 66 while the
historic volatility last month was 97.

Basically, this means that the market is now anticipating that
these stocks will not move the way they did in the past.  If
they surprise the market, the call options could be highly
profitable.  However, if the stocks stay flat, the implied
volatility could go even lower, which means the call options
would lose even more value.  The volatility numbers can be
useful in combination with other analytical tools, but are not
indicative of possible future stock performance.

Since Sycamore reported earnings Thursday night, there were some
wild swings in the stock price this whole week.  During the
after-hours trading Thursday evening and Friday morning, the
stock sold down below $150 at one point.  If you had been
highly nimble, there was an opportunity to make several points
Friday morning after the stock opened, as the red candlestick
shows a clear move way outside of the Bollinger bands before
the market even opened, from which the stock moved up over 4
points.  They key here is that as soon as the market opened,
the stock jumped up from 151 to over 155 before settling down
into a range.  This would have been a trade to get in and out
of very quickly.  It will be interesting to see what type of
pattern develops in this stock, as it has not been a publicly
traded stock for very long.

The whole week has just been pretty boring in the markets as
people who started trading in the last couple of years may not
be used to markets which only move 20 to 50 points a day.  It
can feel like an aberration from the real rallies of the past.
While there are a few stocks making big daily moves, we may need
higher cash flows to the market to see the Dow and NASDAQ move
up over 100 points a day.

The IPO schedule was practically non-existent this week with only
a few issues raising under $200 million.  This was helpful to
the market, as the cash flows to equity funds continue to be
slow.  AMG Data reported that last week's cash flows to equity
funds totaled $3.3 billion.  The weekly moving average of cash
to equity funds is approximately $2.25 billion.

In addition, the cash keeps pouring into money market funds.  The
Investment Company Institute reported that over $9 billion went
into money market funds last week.  The weekly moving average of
cash to money market funds is over $12 billion.  The total cash
in money market funds is currently $1.747 trillion, up over $70
billion from a couple of months ago.  There is no shortage of
cash out there.  People just aren't putting as much into the

It is important to note that 13 stocks will begin trading in
decimals on Monday, August 28.  These are APC, FCE A, FCE B, FDX,
GTW, HUG, MNS, RBC, PMD, GBT, ONT, EMA, and MEG.A.  Some market
analysts have raised questions about the possible impact of
decimalization on the equity markets and brokerage firms.  The
most obvious impact will be in the spread between bid and ask.
Previously, the current spread on the NYSE between bid and ask
was generally 1/16, although there have been stocks which traded
in 1/32 and 1/64 of a point.  Now the spread between bid and
ask could be as low as one cent.  This may result in more
competitive pricing.  APC, FDX, and GTW have options, so we
will have an opportunity to see how decimalization impacts

Contact Support


These Grapes Taste Sour
By Molly Evans

The bogus release of damaging news about EMLX is obviously the
story of the week.  Approximately half an hour into the trading
day Friday, the stock began a steep plummet that left those of
us watching the descent questioning our vision.  EMLX began red
on the day, down only about 3 - 4 points.  The darling of the
past several days was due for a pullback so there was no surprise
in how it initially opened.  However, within moments of an
official looking, yet very damaging press release on InternetWire,
Comtex and then Bloomberg, the stock fell into a tailspin.
The author of the press release had written all the buzzwords:
"revised earnings from profits to loss," "accounting
irregularities" and "CEO stepping down."  The stock plummeted 62%
within a fifteen minute time span at which time trading was halted
for over two hours.

For those of us watching at home on our screens, there was first
no news, then there was THE news, and then there was the REAL
news.  What an utterly confusing time.  Not only were fortunes
being lost and amassed in EMLX trading within that one half-hour,
portfolios containing IMNX, QLGC and BRCD were gyrating wildly
too.  IMNX, symbol for the biotech company Immunex, dropped over
confusion about the similar sounding names.  QLGC and BRCD, same
sector companies, fell in sympathy but then recovered rather
quickly, though both were still down on the day.

I was caught up personally in this debacle and I'm sorry to say,
I was on the wrong side.  Somebody wins so somebody has to lose.
There were lots of both.  The person or persons responsible for
the fraud will most likely have a lot of time to marvel at
their 15 minutes of fame locked in a jail cell, but for those of
us swept up in the drama, the trades stand and a lot of money
traded hands over this saga.  Personally, I sold EMLX longs and
bought puts on Thursday afternoon.  "Great!" you say?  I suppose.
But I am not a greedy trader.  EMLX is a strong stock and buying
puts is pretty risky when the market has been so strong.  Sure,
it was overextended and was due for a pullback, but nutsy gets
nutsier sometimes, therefore I am reticent to overstay my welcome
in put land.  I had my order in for two points above my buy point
and couldn't get back in fast enough to change it when I saw it
plummet.  My puts, just sold for $8.00, were bid at $53.63 by the
time the stock was halted.  Trying to be smart and capitalize
yet another way, I wanted to sell naked puts but couldn't get
through to the broker on the phone so I went in to buy calls.
I'd just had a big cup of coffee and the adrenalin was pumping
so I could barely get my hands to steady my little roller ball
mouse to put in the darned order!  I got it in, saw twenty
contracts for the UML-II (Sept 45 calls) go through for $5
and was so pleased.  Pleased until I found out that wasn't my
fill.  I did get through to my broker then and lo and behold,
wouldn't you know it?  I was informed that trading had been
halted just thirty seconds before my market order hit their

I'm not crying about missed money.  What I AM crying about is
the loss of my QLGC shares when it got trashed in sympathy.  I
saw it dropping fast too and not knowing what the news was dumped
my long QLGC shares for $93.50.  In fast markets like this, who
knows how far it can go down and why?  I've learned my lesson
both ways, staying in and getting out.  This "lesson" cost me
$6 Grand.  It's the chicken or the egg story.  There was no news;
was there a sector problem?  Was there a shady deal going on
between Emulex and QLogic?  Who knew?  I could find nothing on
the news sources at that moment.  Finally, a friend on a chat line
told me about restated earnings and blah, blah, blah.  Nothing
about QLGC of course, but the facts spoke for themselves; QLGC
had been slightly down within amateur hour and now it was
torpedoing its way into deep waters too.  I wasn't going to watch
my QLGC drop 60% as, in my mind, inevitable questions would
surface regarding the sector and tech stocks in general.  How can
you think when the red bars are just getting longer and longer?
I did feel a sense of relief when I glanced at QLGC trading at
$75 and went in to buy back there - but no, it was $100 range
within seconds.  Unbelievable.

My story is very small potatoes here.  The fact that all trades
on the stock and options were being honored, points to the
dramatic opportunities and risk of the market.  It's a whole
new world when some sick schmuck can pen one page of blasphemy
and bring a stock crashing down 60% of its market value.
InternetWire itself issued a statement of apology for running
the story and they're crying that they too are victims of fraud.
They ran the story; I don't want to hear it.  CNBC later had
guests who lectured viewers about trading on rumor.  Excuse me
but when someone's portfolio is being sliced up, he is not a cool
head.  People see their stock plummeting and they're trying to
stop the hemorrhaging like EVERY investment and trading advisement
recommends.  Save your lectures.  I'm not dissing the ones who
legitimately warn about buying on "hot tips," that's a whole other

These were lectures about how investors should check out the story
before they act.  Even Emulex CEO Paul Folino had the audacity to
tell the viewing public that people should have checked out the
story before trading.  I'll give the guy a break, I'm sure it was
one heck of a day, but Sir, these are your shareholders!  They see
a story on an otherwise apparently reputable news service, they're
not going to call up and say, "Hey Paulie, what's goin’ down there
besides my entire IRA?"  What about all of those people who had
conservatively placed GTC stop loss orders while they trudged off
to work everyday?  Sometimes you do everything right and you still
get spanked.

Only one other time, with PAIR, has a false story been leaked
sending the shares tumbling.  How many times has the story been
true?  Let's look at some of those equities.  Let's see...umm...
does MSTR, CTXS, PG, LGTO, LHSP, DIAL, or VISX ring any bells?
I wonder how many of those shareholders paused to wonder if it
was really true that their company was issuing a warning.  If they
did, they choked on the dust of their fellow shareholders who left
them holding the bag.  So once again, it is the little guys who
take the fall while the older and wiser and pompous and arrogant
berate us all for sins of trying to make a dollar in their world.

And what about the press?  The press tells us that oh no, they're
not in any way a part of this problem.  Well, is this the first or
even second time that a false press release has caused market
turmoil?  Are there no safeguards in the media industry?  They
don't have to check fax numbers, especially on something that is
truly BAD news like that?  Wow.  I guess we all just live and learn
the hard way.  In retrospect, I made a bad split second decision
in selling my QLGC, but this is the market we are faced with and
seconds can mean thousands of dollars.  Nobody said it had to be
fair.  It can be a pretty mean sandbox.  Actually, maybe we should
look at it this way: in a business where you can lose it that
quickly, it means you can also win just as quickly.

By the end of the day, those Sept 45 UMLII $5 calls that I tried
to scoop were bid at $60.63.  Austin, I now have my own fish
story for you...but he got away.

Contact Support

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Call Play of the Day:

SDLI - SDL, Inc. $402.13 -9.75 (+6.88 this week)

See details in sector list

Put Play of the Day:

UK - Union Carbide $41.06 (-1.75 last week)

See details in sector list

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Index      Last  Week
Dow    11192.63 146.15
Nasdaq  4042.68 112.34
$OEX     823.55   5.81
$SPX    1506.46   5.55
$RUT     525.11   9.60
$TRAN   2790.17 -46.97
$VIX      19.10  -0.31


CIEN     197.94  21.25  Increasing its stronghold on optic-networks
JNPR     190.94  20.13  Pure momentum equals pure profits
VRSN     176.38  16.63  Continuation of last week's uptrend
ITWO     166.50  16.50  New, stair-step rally over the $160 level
INKT     123.94  15.00  New, "Content Bridge" kickstarts interest
NEWP     154.00  14.75  New, institutions accumulating with fervor
PLXS     142.50  11.88  Splits after Friday's close, August 31st
IMCL      99.88  11.38  New, on the verge of a breakout from $100
QLGC     103.88  10.88  Quite a dose of volatility from EMLX news
BRCM     268.13  10.00  Infrastructure stocks see incredible growth
VRTS     116.94   9.81  Since clearing $115, looking for momentum
TIBX      96.25   7.31  New, residual move from positive B2B news
VTSS      89.25   7.19  New, having had a great month, $90 is next
SDLI     402.13   6.88  Looking for it to hold its head above $400
NTAP     100.81   6.88  Making it to higher ground above $100 level
LSCC      74.25   6.63  Definitely a brighter Semi star on Friday
DIGX      86.00   5.44  In the midst of a powerful momentum run
IDTI      78.25   5.38  Semi sentiment bringing new highs for IDTI
BEAS      59.63   5.13  New, B2B stocks have enjoyed stealth rally
EXDS      65.19   4.75  Future growth prospects not factored in?
GSPN     133.00   2.63  Bouncing around the $130s in techical trade
SUNW     124.75   2.38  Profit takers we warned about showed up
EMC       91.50  -3.44  Dropped, lack of strength may be early sign


AT        50.81  -5.25  A simple repeat of February outlook hurts
KO        56.00  -4.31  New, has lost some of investors' fizz
UK        41.06  -1.81  Distaste for Chemicals is clearly evident
QCOM      58.88  -0.88  Recent bounces just not convincing yet


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.


EMC $91.50 (-4.44) Meandering between support and resistance
all week on low volume, EMC's lack of strength this week was
disappointing.  As the major indices managed to claw their way
higher, EMC managed to take one step forward and two steps
back.  Wednesday morning did see our play trace a new intraday
high, but there was no conviction to the move, and the profit
taking that ensued took the price down to $91 before finding
any support.  Although support at $90 is still intact, the fact
that our play couldn't hold above the 10-dma ($91.91), leads
us to think the stock may be weaker than it looks on the
surface.  With so many other great plays out there, we decided
to drop EMC this weekend and take our profits.


No dropped puts today.


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.

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.


TIBX - TIBCO Software $96.25 (+7.31 last week)

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

This B2B software company has seen its stock gyrate along with the
rangebound NASDAQ during the past month.  Since peaking at $129 on
July 14th, TIBX has followed the lead of the general market in a
whippy, trade-range fashion.  The most recent decline brought
TIBX below its 100-dma on Monday, August 21st on heavy volume,
indicating that many of the weak hands have been shaken out.  The
very next day, TIBX came roaring back with strong buying volume,
fueled by positive comments by a Bear Stearns analyst.   While
TIBX was not directly mentioned in the commentary to Bear Stearns
clients, the analyst believes that the sector will exploit
network scale economies and reduce costs of intensive business
tasks.  TIBX saw a residual move from the comments that has
revived this B2B favorite.  Since then, TIBX has been trading
along a modest upward trendline with heavy volume.  Friday's dip
to $90.50 just touched that trendline to bounce back and climb
above intraday resistance at $96.  Aggresively, bounces from $95
could provide entry.  Yet, considering the intraday price swings,
look for enter off of bounces near intraday support at $93-$94.
This would be near the current trendline, and also the 10-dma at
$93.43.  Below this, $92 has provided intraday bounces, with the
5-dma at $91.16.  Overhead, $100 will be resistance and
conservative players may want to wait until TIBX surges through
the century mark on stronger volume before entering.  The 50-dma
at $102.94 will be the next level of contention.  Use the NASDAQ
sentiment as an indication of TIBX's direction, as well as the
other B2B stocks like ARBA and CMRC.

Last Monday, TIBX made another stride at making B2B e-commerce
easier with its launch of TIB/RendezvousTX (RVTX).  It is a
robust backbone that enables rapid development and deployment
of real-time, reliable e-business systems that can manage
customizable B2B transactions.  This proves TIBX's continued
efforts to provide comprehensive, reliable, and dynamic software
to the business community.

BUY CALL SEP- 90*PIW-IR OI=409 at $11.75 SL=9.50
BUY CALL SEP- 95 PIW-IS OI=239 at $ 8.75 SL=6.75
BUY CALL SEP-100 PIW-IT OI=439 at $ 6.50 SL=4.75
BUY CALL OCT-100 PIW-JT OI=422 at $12.00 SL=9.50
BUY CALL OCT-105 PIW-JA OI= 18 at $10.00 SL=7.50

SELL PUT SEP- 85 PIW-UQ OI= 72 at $ 2.50 SL=3.50
(See risks of selling puts in play legend)

Picked on August 27th at  $96.25    P/E = N/A
Change since picked        +0.00    52-week high=$147.00
Analysts Ratings       5-2-1-0-0    52-week low =$  6.58
Last earnings 06/00    est= 0.01    actual= 0.04
Next earnings 09-21    est= 0.05    versus=-0.01
Average Daily Volume  = 1.55 mln

BEAS - BEA Systems, Inc. $59.63 (+5.13 last week)

Founded in 1995, BEA Systems, Inc. has become widely known as a
leading provider of middleware for enterprise applications.  This
is largely because of the success of BEA Tuxedo and BEA WebLogic,
which together comprise approximately 46 percent of the
transaction server market (according to IDC).  But the vision of
BEA's founders has always been bigger than middleware.  Their
goal from the beginning was to provide a comprehensive
infrastructure for development and deployment of reliable,
scalable business applications for e-commerce.

With so much talk this month about the semiconductor and biotech
sectors driving the market higher, the business-to-business
stocks have largely been ignored in the public eye.  Despite
this, B2B stocks have enjoyed a sort of stealth rally.
Contributing its fair share to help the NASDAQ higher, shares of
B2B companies have quietly appreciated so far this August.  While
previously B2B issues needed the help of the media to generate
excitement and momentum for price appreciation, the move up this
time is with little controversy or fanfare.  Noticeably missing
are the debates on the viability of the B2B business model.  And
while the volume in general has quieted down compared to last
month's feeding frenzy(thanks to ARBA's blowout earnings report),
the buying interest is there.  In the B2B space, BEAS has been
one of the more volatile issues lately, much to a trader's
chagrin (or delight).  Much of this volatility can be attributed
to BEAS reporting earnings on August 15th.  BEAS's month started
off with a bounce off the $40 area after a late-July sell-off.
From there, the stock had a mini earnings run.  Encountering
resistance at $57, BEAS headed lower as profit-takers took their
money off the table early.  BEAS found support and closed right
on its 50-dma (now at $51) on the eve of its earnings report.  For
the quarter, BEAS more than tripled its profit from $6 mln, or
2 cents a year ago to $21.9 mln, or 5 cents per share.  Despite
only beating the Street by a penny, the Street was pleased and the
next day, the stock jumped higher.  It was likely aided by an
upgrade from Deutsche Banc Alex Brown.  This past week has seen
BEAS bounce above its 50-dma support.  Since that successful test
on Monday, the stock has been heading higher, using the 5- and
10-dma (near $57 and $55.50) as support.  A bounce off those
levels could serve as an aggressive entry point.  A break through
resistance at $60 on strong volume would be an ideal conservative
entry point.  Above that, there is resistance at $62.50 and then

It's been a busy week for BEAS.  On Tuesday, the company made a
presentation of WAPBuyBeans, its wireless commerce application,
at the Intel Developer Forum.  Wednesday was an announcement of
the expansion of an alliance with AMS Inc., as well as a
significant customer milestone reached with partner Driveway.com.

BUY CALL SEP-55 BUC-IK OI=1616 at $ 6.38 SL=4.50
BUY CALL SEP-60*BUC-IL OI=2423 at $ 3.38 SL=1.75
BUY CALL SEP-65 BUC-IM OI= 942 at $ 1.50 SL=0.75
BUY CALL OCT-60 BUC-JL OI= 221 at $ 6.75 SL=4.75
BUY CALL OCT-65 BUC-JM OI= 367 at $ 4.75 SL=2.75

Picked on August 27th at $59.63    P/E = N/A
Change since picked       +0.00    52-week high=$78.88
Analysts Ratings     11-4-0-0-0    52-week low =$ 5.50
Last earnings 08/15   est= 0.04    actual= 0.05
Next earnings   N/A   est= 0.06    versus= 0.03
Average Daily Volume = 5.57 mln

VTSS - Vitesse Semiconductor $89.25 (+7.19 last week)

The name Vitesse, French for speed, expresses what the company
epitomizes: the pursuit of ever faster integrated circuits for
high-bandwidth, high-performance communications systems.  Today,
virtually every long distance call passes, at some point, through
a Vitesse IC.  Most of the world’s telecom systems use Vitesse
2.5Gb/s chips.  Vitesse plays a critical role in the
superhighway, leading the industry in gigabit datacom and 10Gb/s
telecom ICs.  Since 1984, the company has pioneered volume
manufacturing of gigabit per second VLSI.

It's been a great month for the semiconductors, and VTSS is no
exception.  Since bouncing off the $50 level in early August, the
stock has pretty much moved steadily up, with regular visits to
the 5-dma and once in awhile short dips near the 10-dma.  While
VTSS started the month below its 50-, 100-, and 200-day moving
averages (now at $73, $66 and $65), it has since cleared them all
successfully and moved strongly forward.  At this point, VTSS is
right about where it was before reporting earnings last month on
July 13th.  For its third quarter, VTSS reported profits of $32.1
mln, or 17 cents a share.  This was more than double last year's
net income of $15.2 mln, or 8 cents per share.  Despite the strong
earnings, expectations on the Street were high and the company was
only able to match Street estimates.  In a market where merely
matching consensus number, no matter how unreasonable, is viewed
as a sign of disappointment, the stock spent the rest of the month
selling off.  This past week saw VTSS attempting to get through
resistance at $85.  After four attempts, the fifth time was a
charm as VTSS cleared that resistance point on Friday, moving up
5.31% on 153% of ADV.  For those looking to enter this play, there
are numerous opportunities.  For traders looking enter on a
bounce, support can be found at $85, the 5-dma at $83.30 and the
10-dma in the $80 area.  Make sure buying volume confirms a bounce
before entering though.  Conservative traders will want to see
VTSS clear $90 on strengthening volume before entering.  Looking
ahead, resistance can be found at $95 and then the psychological

In the news this week, VTSS along with Intel, Seagate Technology
and APT Technologies premiered the first Serial ATA disc drive,
providing a taste of things to come in the future of ATA disc
drive technology.

BUY CALL SEP- 85*VQT-IQ OI=1255 at $ 8.50 SL=6.00
BUY CALL SEP- 90 VQT-IR OI= 974 at $ 5.38 SL=3.50
BUY CALL OCT- 90 VQT-JR OI=1089 at $ 9.75 SL=6.75
BUY CALL OCT- 95 VQT-JS OI= 370 at $ 7.63 SL=5.25
BUY CALL OCT-100 VQT-JT OI= 619 at $ 5.63 SL=3.50

SELL PUT SEP- 80 VQT-UP OI= 125 at $ 2.00 SL=3.75
(See risks of selling puts in play legend)

Picked on August 27th at $89.25    P/E = 141.25
Change since picked       +0.00    52-week high=$115.69
Analysts Ratings     11-6-0-0-0    52-week low =$ 32.25
Last earnings 07/13   est= 0.17    actual= 0.17
Next earnings 10-12   est= 0.19    versus= 0.13
Average Daily Volume =  4.4 mln

NEWP - Newport $154.00 (+14.75 last week)

Newport makes precision components and automated assembly,
measurement, and test equipment used in the aerospace, fiber-
optic communications, and semiconductor manufacturing industries,
and by researchers.  Industrial components, including lenses and
other optics and devices for vibration and motion control,
account for two-thirds of sales.  With its key markets booming,
Newport is expanding its production facilities.

Looking for the next QCOM?  NEWP is up over 900% in 2000.
Although NEWP provides a wide array of products over a broad
spectrum of Tech-related industries, it's the company's Fiber
Optic-related operations that has caught Wall Street's attention.
The company is benefiting from the explosive growth in the
optical networking arena.  NEWP makes the test equipment and
components that are necessary in the manufacturing of high-speed
optical networking equipment.  Wall Street has caught onto NEWP's
blistering earnings growth, which has lead to institutions
accumulating the stock with great fervor.  NEWP has been under
heavy accumulation since late May, which has carried the stock
into the stratosphere.  Most recently, NEWP broke out of triple
top resistance at $120 a little over two weeks, and hasn't looked
back since.  Wall Street bestowed encouraging words on the stock
last week, which boosted NEWP to higher highs.  Warburg Dillon
Reed reiterated their Buy rating on the stock and raised their
price target to $170.  The stock has run 30% since breaking out
of resistance two weeks ago, and with such rallies, the threat of
profit taking remains.  However, the momentum investors appear to
be willing to take NEWP higher.  The stock finished strongly last
Friday, and if the buyers return early next week, you might look
for an entry if NEWP rallies above its day old 52-week high at
$155.50.  If, on the other hand, the profit takers rear their
ugly heads, NEWP has strong support just below at $150, and again
near its 5-dma at $149.  Aggressive traders might look to any
pullback to gain entry into the play after a round of profit
taking runs its course.

NEWP joined the list of split candidates by breaking above the
$120 level two weeks ago.  The company has plenty of shares to
authorize a 2-for-1 should the board decide to declare a split.
The last time NEWP split its stock was back in February of this
year, when it was trading at $112.13

BUY CALL SEP-145 NOQ-II OI=242 at $18.25 SL=13.25
BUY CALL SEP-150*NOQ-IJ OI= 87 at $15.00 SL=11.00
BUY CALL SEP-155 NOQ-IK OI=  0 at $11.50 SL= 8.75  Wait for OI
BUY CALL OCT-150 NOQ-JJ OI=  4 at $25.00 SL=18.75
BUY CALL OCT-155 NOQ-JK OI=  0 at $22.00 SL=16.50  Wait for OI

Picked on August 27th at $154.00    P/E = 359
Change since picked        +0.00    52-week high=$155.50
Analysts Ratings       2-3-0-0-0    52-week low =$  5.00
Last earnings 06/00    est= 0.12    actual= 0.14
Next earnings 10-19    est= 0.21    versus= 0.08
Average Daily Volume  = 1.33 mln

ITWO - I2 Technologies $166.50 (+16.50 last week)

I2's RHYTHM supply chain management software helps manufacturers
plan and schedule production and related operations such as raw
materials procurement and product delivery.  Companies that use
RHYTHM include:  3M, Dell, Ford, and Motorola.  Maintenance,
training, and other services account for more than a third of
sales.  I2 is using acquisitions of complementary technologies
and companies to position itself as a leader in the market for
Internet-based production process applications.

The ITWO breakout that alluded us a week ago finally transpired
last Friday.  We dropped ITWO last Tuesday after a round of
profit taking stopped our play out.  However, the selling has
since subsided and ITWO subsequently rallied in a stair step
fashion to breakout above $160.  The news that boosted ITWO into
breakout mode was the company's formation of three auto industry
exchanges last week.  ITWO said it would provide DaimlerChrysler
(DCX) with software to form its FastCar program, which is
expected to ramp the auto giant's manufacturing.  ITWO also said
it would build a parts marketplace for Toyota (TM).  Finally, the
third exchange created was for Volkswagen, who requested ITWO's
assistance in building a private supplier network.  The three
contracts reinforced ITWO's leadership role in the B-2-B sector.
The news scared away the profit takers and prompted the bulls to
take charge.  ITWO has moved convincingly higher over the last
three sessions on relatively healthy volume, despite the waning
Summer trading activity.  But, given ITWO's three consecutive
sessions of substantial rallies, the ever-present threat of
profit taking looms.  If the annoying profit takers do return to
ITWO early next week, the stock has near-term support at $165 and
major support near its breakout point at $160.  Traders might
consider entering the play on a pullback confirmed with light
volume with a bounce off either support levels.  On the other hand,
ITWO did finish Friday near its day highs on a surge of volume in
the final moments of trading.  Although ITWO faces some congestion
above its current levels, an aggressive trader might consider
entering the play early next week at current levels if Friday's
late day buyers return to take the stock higher.

ITWO will be attending two high-profile events in the coming
weeks.  First, the company will be presenting at the Ariba 2000
conference in Miami.  Second, ITWO is slated as a headline
presenter at the eB-2-B Marketplace World, which is attended by
industry consultants and analysts.

BUY CALL SEP-160*QYI-IL OI=562 at $13.63 SL=10.25
BUY CALL SEP-165 QYI-IM OI=373 at $10.50 SL= 7.75
BUY CALL SEP-170 QYI-IN OI=544 at $ 8.25 SL= 5.75
BUY CALL OCT-165 QYI-JM OI= 20 at $20.38 SL=14.75
BUY CALL OCT-170 QYI-JN OI= 44 at $17.88 SL=12.75

Picked on August 27th at $166.50    P/E = 520
Change since picked        +0.00    52-week high=$223.50
Analysts Ratings     10-18-3-0-0    52-week low =$ 15.13
Last earnings 06/00    est= 0.08    actual= 0.10
Next earnings 10-20    est= 0.11    versus= 0.06
Average Daily Volume  = 3.55 mln

IMCL - Imclone Systems $99.88 (+11.38 last week)

Engaged in the research and development of novel cancer
treatments, IMCL focuses on growth factor inhibitors,
therapeutic cancer vaccines and angiogenesis inhibitors.  The
company’s lead product candidate, IMC-C225, is a therapeutic
monoclonal antibody that inhibits stimulation of a receptor for
growth factors upon which certain tumors depend.  Phase I/II
clinical trials have been promising.  The lead candidate for
angiogenesis inhibition, IMC-1C11 is an antibody that binds
selectively and with high affinity to KDR, a principal
Vascular Endothelial Growth Factor (VEGF) receptor, thus
inhibiting angiogenesis.

Despite patent-related concerns in the drug sector, the Biotechs
have been on fire again this past week.  IMCL is an example of
what it takes to shine in this sector.  Earnings are still
secondary as investors try to value the companies according to
expected future revenues, so any positive surprises in the
development cycles of major products has a tendency to boost the
stock price.  Accordingly, IMCL got a nice FDA-related injection
of emotional capital a couple weeks ago (see news below), and
the company's actual earnings announcement 3 days later went
largely unnoticed.  Since the gap up on August 14th, positive
sentiment has been in abundance and the stock is using the
5-dma (currently at $94.91) as support for its ascent.  The
action on Thursday and Friday brought shares of IMCL right up
to resistance at $100-$102, and the light volume was insufficient
to scale that wall.  Historical support sits at $95, and $92,
with the $90 level backed up by the rising 10-dma at $89.94.
Volume in the markets is expected to be light next week, so it
looks like we could see some consolidation ahead of the Labor
Day weekend.  Use any weakness as an opportunity to enter the
play at a discount, and target shoot new entries on any bounce
at support, determined according to your risk tolerance.  Should
IMCL go against the conventional wisdom and surge higher from
current levels, wait for the conviction of strong buying volume
to push the price through $103 before playing.

On August 15th, IMCL reported a wider-than-expected loss for the
second quarter, but the stock held its recent gains and within
days had resumed its uptrend.  The major reason investors were
buying so vigorously was that 4 days earlier, the company met
with the FDA to present results from its ongoing Phase II
clinical trials of its leading drug candidate, C225, in patients
with refractory head, neck, and colorectal cancers.  According
to Merrill Lynch analyst Eric Hecht, the interim data leads the
FDA to believe that the Phase II studies may qualify for
accelerated approval for the indications listed above.  This
could allow the company to bypass Phase III trials, speeding the
time to market, putting C225 on the market as soon as the fourth
quarter of 2001.

BUY CALL SEP- 95 QCI-IS OI=286 at $ 9.75 SL= 6.75
BUY CALL SEP-100*QCI-IT OI=687 at $ 7.25 SL= 5.25
BUY CALL SEP-105 QCI-IA OI=  8 at $ 4.88 SL= 3.00
BUY CALL NOV-100 QCI-KT OI=202 at $14.25 SL=10.50
BUY CALL NOV-105 QCI-KA OI=158 at $12.25 SL= 9.25

SELL PUT SEP-90 QCI-UR OI=  93 at $ 2.63 SL= 4.00
(See risks of selling puts in play legend)

Picked on August 27th at $99.88     P/E = N/A
Change since picked       +0.00     52-week high=$171.98
Analysts Ratings      3-3-0-0-0     52-week low =$ 16.25
Last earnings 08/00   est=-0.43     actual=-0.46
Next earnings 11-14   est=-0.04     versus=-0.44
Average Daily Volume    = 552 K

INKT - Inktomi Corp $123.94 (+15.00 last week)

Inktomi develops and markets scalable software applications to
intensify and strengthen larger networks.  Their Internet search
engine, which provides a fast and customizable Web search, is
used by Yahoo!  Other products include a large-scale network
caching application for ISPs (like AOL) and corporations that
need help addressing capacity constraints in high-traffic
network routes.  Inktomi operates in the US and UK.

Shares of INKT jumped 8.2%, or $9.13, Wednesday on news of a
"Content Bridge" alliance it entered to improve the delivery,
intelligence, and efficiency of Internet content.  Other major
players include America Online (AOL), Digital Island (ISLD), and
Exodus Communications (EXDS).  Under the agreement, Inktomi will
deliver the network infrastructure technology, which will let
customers deliver information across each other's private
distribution networks.  CEO and president of Inktomi remarked
that "the industry is saying it's standardizing Inktomi's
architecture, this is what enables the networks to communicate
with each other.  It says the Internet is growing so fast that no
one player can do it themselves, it's going to take the collective
efforts of all the major players."  Bottom-line: this news
launched INKT out of its lull and propelled it through the tough
resistance found at the $115 and $120 levels.  The volume, at two
to five mln shares exchanging hands, is currently backing the
moves.  Look for similar activity to confirm future upside action.
If you want to play conservatively, look for old resistance at
$120 or the current level at the 100-dma ($123.30) to develop as
short-term support before entering aggressively on deep pullbacks.
Keep a tight rein on INKT.  This Internet can be a quick mover!

On Thursday, INKT got a boost from analysts at Friedman,
Billings, Ramsey & Co with a Buy reiteration.

BUY CALL SEP-120*KYQ-ID OI=1079 at $10.00 SL= 7.00
BUY CALL SEP-125 KYQ-IE OI= 691 at $ 8.00 SL= 5.75
BUY CALL SEP-130 KYQ-IF OI=2118 at $ 5.75 SL= 3.75
BUY CALL OCT-125 KYQ-JE OI= 609 at $15.88 SL=11.50
BUY CALL OCT-130 KYQ-JF OI= 401 at $13.75 SL=10.25

Picked on August 27th at $123.94    P/E = N/A
Change since picked        +0.00    52-week high=$241.50
Analysts Ratings      10-6-2-0-0    52-week low =$ 46.91
Last earnings 06/00    est= 0.69    actual= 0.73
Next earnings 10-23    est= 0.05    versus=-0.05
Average Daily Volume  = 2.95 mln

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The Option Investor Newsletter                   Sunday 08-27-2000
Sunday                                                      3 of 5

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SDLI - SDL, Inc. $402.13 -9.75 (+6.88 this week)

SDL's products power the transmission of data, voice, video and
Internet information over fiber optic networks to meet the needs
of telecommunications, cable television and satellite
communications applications.  They enable customers to meet the
bandwidth needs of increasing Internet, data, video and voice
traffic by expanding their fiber optic communications networks
much more quickly and efficiently than would be possible using
conventional electronic and optical technologies.  SDL's optical
products also serve a variety of non-communications applications,
including materials processing and printing.

SDLI hasn't given up yet!  On July 10th, JDS Uniphase proclaimed
its intent to acquire SDLI in a stock-for-stock transaction worth
$41 bln.  Ever since then, the stock has been on a roller coaster,
climbing to a 52-week high of $460.50 on July 24th.  Clearly, the
profit takers took their cue at that point, sending the stock as
low as $315 on July 31st.  SDLI peaked at $421.75 last Tuesday,
and the stock continues to go up and down like a yo-yo.  That
about sums up this play: volatile and risky.  Wednesday, SDLI
traded in a range of $13.63, hitting a low of $393 and a high of
$406.63.  Following a similar pattern Thursday, the stock hit a
low of $399.31 before noon on strong volume.  It then regained
steam on a second volume surge late in the day, which pushed
the stock to the day high of $413 moments before the bell.
Following the broader markets Friday, SDLI was relatively quiet,
making no strong volume moves after the first half hour of the
day.  Although the stock violated the 5-dma of $405.49, hitting a
day low of $398.88, it recovered midday, peaking at $408.  We were
encouraged to see SDLI hold its head above the $400 level, which
has been offering intraday support.  Below that, $398 has also
been providing some buying bounces.  The nearest technical support
is the 10-dma at $391.69.  Continue to look for entries to the
play on dips towards the day lows, which consistently seem to
occur before noon.  If you are feeling hesitant, look for a
convincing drive through $410 as an indication of continued
strength in the stock before taking action.  As we have stated
previously, stops are a must on this play!

On Thursday, Antitrust regulators requested additional
documentation from both JDSU and SDLI concerning the proposed
merger.  Both companies dropped on the news.  Calling the request
rare, but not unexpected in a deal that could foster significant
concentration in an industry, both companies committed to respond
promptly to the inquiry.  Watch the sector for clues of profit
taking.  As always, a strong NASDAQ and strong volume in the stock
will be indicative of favorable conditions.

BUY CALL SEP-400 OSL-IT OI=1244 at $24.13 SL=18.50
BUY CALL SEP-410*OSL-IB OI= 587 at $19.00 SL=14.75
BUY CALL SEP-420 OSL-ID OI=1471 at $14.88 SL=11.50
BUY CALL OCT-400 OSL-JT OI=   1 at $42.75 SL=33.50
BUY CALL DEC-400 OSL-LB OI=1454 at $59.13 SL=47.00

SELL PUT SEP-360 OSL-UL OI= 258 at $ 6.13 SL= 8.00
(See risks of selling puts in play legend)

Picked on August 17th at $383.38    P/E = 549
Change since picked       +18.75    52-week high=$460.50
Analysts Ratings      12-8-0-0-0    52-week low =$ 30.83
Last earnings 07/20    est= 0.30    actual= 0.33
Next earnings 10-26    est= 0.37    versus= 0.10
Average Daily Volume = 5.5 mln

GSPN - GlobeSpan, Inc. $133.00 (+2.63 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 it possible to
do the things that technology companies have been promising for
years - real-time video conferencing, telecommuting, high-speed
Internet surfing, and video-on-demand.  Unlike cable, wireless,
and direct broadcast satellite transmission services, DSL
operates over the "local loop," the vast network of over 800
million copper telephone lines that connect end users to central
office switching centers.

For the most part, it's been a week of sideways movement for GSPN.
Monday was a low-key day which saw the stock trade in a narrow
range on low volume.   On Tuesday, an early morning sell-off
provided traders with an opportunity to enter on a bounce from
support in the $125 area.  Just after lunch, the stock rallied
in an attempt to get through resistance at $135, but some late-day
profit-taking brought GSPN back to the $130 area.  Another
attempt at $135 on Wednesday was unsuccessful, but on Thursday,
strong buying during amateur hour allowed the stock to finally
clear $135.  Encountering resistance at $140, GSPN headed lower
but managed to bounce off the $135 level.  On Friday morning, GSPN
made another attempt at $140, yet without volume to support the
move, the stock spent the rest of the day heading lower, closing
down $5.25, or 3.80%, on only 47% of ADV.  In doing so, this put
GSPN below the $135 mark as well as its 5-dma at $133.53.  So
we're pretty much right back where we started last week.  While
the close on Friday below the 5-dma could be a cause for concern,
the light volume indicates little conviction.  Those looking for
an aggressive entry may want to targetshoot for a bounce off
$130, which is just above its 10-dma.  A move above the 5-dma
would also be another aggressive entry point.  Those looking for
some confirmation of strength before entering will want to see
GSPN clear $135 on high volume before making a play.  Above $135,
resistance for GSPN can be found in increments of $5 at $140,
$145 and $150.

As there has been little material news for GSPN lately, the
stock has for the most part moved in step with the NASDAQ.
Make sure market direction is in your favor before entering.

BUY CALL SEP-125 GHY-IE OI= 50 at $15.63 SL=11.25
BUY CALL SEP-130*GHY-IF OI=280 at $12.88 SL= 9.75
BUY CALL SEP-135 GHY-IG OI=221 at $10.25 SL= 7.00
BUY CALL OCT-135 GHY-JG OI=  1 at $19.50 SL=14.50
BUY CALL OCT-140 GRX-JH OI=  6 at $17.25 SL=12.25

SELL PUT SEP-125 GHY-UE OI= 12 at $ 6.50 SL= 9.50
(See risks of selling puts in play legend)

Picked on August 17th at $129.38     P/E = N/A
Change since picked        +3.63     52-week high=$167.00
Analysts Ratings       3-6-0-0-0     52-week low =$ 16.31
Last earnings 07/31    est= 0.04     actual= 0.11
Next earnings 10-30    est= 0.10     versus= 0.00
Average Daily Volume =  1.20 mln

NTAP - Network Appliance $100.81 (+6.88 last week)

As indicated by its name, NTAP pioneered the concept of the
network appliance, an extension of the industry trend toward
specialized devices that perform a specific function in the
network.  NTAP designs, manufactures, markets and supports high
performance network-attached data storage and access devices.
These products, including the company's NetApp file servers
provide fast, simple, reliable and cost-effective file service
for data-intensive network environments.  The company is also
embracing online business through its NetCache Web caching
appliances, which are designed to ease Internet bandwidth demands
by storing information physically closer to users.

Though a volatile ride, the storage sector has been where it's at.
While the rally this month in shares of NTAP has not been as fast
and furious as month's, there also hasn't been the deep
profit-taking like the one served up in the last week of July.
From a low in the $70's to a high in the $110's and back
again, July could be described as one wild rollercoaster ride.
Whereas August has been more of a steady climb.  Beginning the
month under its 100-dma (now at $78), the stock made a dip to
test $70 support before powering up to resistance at $95.  While
it took a few attempts to break above that point, NTAP was
finally successful this week, managing to close above the
psychological $100 level.  Reporting earnings on August 14th, NTAP
sold off the next day to close right below its 50-dma(now at $90).
Since then, the stock has moved to higher ground.  At this point,
there are a number of support levels contributing to the strength
of the stock.  Traders looking to enter on intraday bounces have
found the 5-dma at $98.25 to be the target to shoot for.  There is
strong support at former resistance level of $95 which is further
reinforced by the 10-dma at the same level.  Those looking for a
little more confirmation will want to wait until NTAP makes it
past $105 with strong volume to confirm continued upward momentum.
Above that is resistance at $110 and then $115.

As mentioned on Thursday, news this week was good, with FastLane
Technologies Inc. announcing support for NTAP products through
their FastLane DM/Consolidator 2.5 applications and a Wednesday
announcement of a new customer in OpenGrid Inc.

BUY CALL SEP- 95 ULM-IS OI=1004 at $11.25 SL= 8.50
BUY CALL SEP-100 ULM-IT OI=2460 at $ 8.13 SL= 5.75
BUY CALL SEP-105*ULM-IA OI=2499 at $ 5.88 SL= 4.00
BUY CALL OCT-105 ULM-JA OI= 141 at $12.13 SL= 9.00
BUY CALL OCT-110 ULM-JB OI= 134 at $10.00 SL= 7.00

SELL PUT SEP- 90 ULM-UR OI= 451 at $ 2.50 SL= 4.00
(See risks of selling puts in play legend)

Picked on August 24th at $101.69    P/E = 564.93
Change since picked        -0.88    52-week high=$124.00
Analysts Ratings      17-4-0-0-0    52-week low =$ 14.56
Last earnings 08/14    est= 0.07    actual= 0.09
Next earnings   N/A    est= 0.09    versus= 0.05
Average Daily Volume   = 5.5 mln

VRSN - VeriSign, Inc. $176.38 (+18.69 this week)

VeriSign is the leading provider of Internet trust services
and digital certificate solutions needed by Web sites,
enterprises and individuals in order to conduct secure
electronic commerce and communications over IP networks.  VRSN
has used its secure online infrastructure to issue over 100,000
of its Website digital certificates and over 3.5 million of its
digital certificates for individuals.  The company also offers
the VeriSign Onsite service, which allows an organization to
leverage the companys trusted service infrastructure to develop
and deploy customized digital certificate services for use by an
organizations employees, customers and business partners.  To
date, over 300 enterprises have subscribed to the OnSite service
and VRSN has strategic relationships with industry leaders
including Cisco, Microsoft ,RSA, Security Dynamics, and VISA.

This past week has seen the continuation of the uptrend that
began in the previous week.  Using the 5-dma for support, VRSN
has been moving steadily up.  Encountering resistance at the
$162-163 area during the prior week, VRSN started the week and
remained above that level.  Spending the better part of the
week in a mini consolidation, the stock touched its 5-dma on
Wednesday and from there, blasted upwards to close just below
resistance at $175.  The next day, that level was easily surpassed
on a Thursday morning gap up.  From there, the stock attempted
unsuccessfully to break through resistance at $180.  This level
is clearly the next hurdle to overcome as Friday's attempt failed
to clear it.  This led to a move lower as profit-takers stepped
in before bouncing off the $173 level.  Ending the week on a quiet
note, VRSN closed down $2.06 on 56% of ADV.  If the current trend
continues to hold, then a successful bounce off the 5-dma (now at
$171.43) could provide for the ideal entry point.  For the more
aggressive, a bounce off the $173-174 area could be the target to
shoot for.  Conservative traders will want to see VRSN clear that
hurdle at $180 with convincing volume before making an entry.
After $180,  resistance could be encountered $183, $185 and $188.
Connecting the highs and lows since finding a bottom in mid-August
at the $140 level, the stock has traded higher in an upward
regression channel spanning 15 points from top to bottom.  The
5-dma has closely followed the bottom of the channel, currently
near $169, putting the top of the channel near $184 and moving up
fast.  Nonetheless, even the aggressive player looking to buy a
bounce off the lower part of the channel will want to see the
stock clear the 5-dma as confirmation before entering.

In the news this week, VRSN received an upgrade from Merrill
Lynch analyst Mark Fernandes from Accumulate to Buy and a price
target of $210.  Tuesday was news of an alliance with Response
Marketing Group to market matching web site addresses with
toll-free numbers in a cross-marketing deal.  As well, an
announcement of multilingual domain names may extend VRSN's reach
in the international market for web addresses.  On Friday,
competitor Register.com responded to VRSN's Tuesday
cross-marketing deal with a similar one with TeleDomains.com.

BUY CALL SEP-170 QVZ-IN OI= 976 at $13.88 SL=10.25
BUY CALL SEP-175*QVZ-IO OI=1380 at $11.25 SL= 8.50
BUY CALL SEP-180 QVZ-IP OI=1156 at $ 8.75 SL= 6.00
BUY CALL OCT-180 QVZ-JP OI= 122 at $20.63 SL=14.75
BUY CALL OCT-185 QVZ-JQ OI=  43 at $18.63 SL=13.75

SELL PUT SEP-170 QVZ-UN OI= 496 at $ 6.38 SL= 9.50
(See risks of selling puts in play legend)

Picked on August 24th at $178.44    P/E = 1274.55
Change since picked        -2.06    52-week high=$258.50
Analysts Ratings     14-11-1-0-0    52-week low =$ 43.75
Last earnings 07/26    est=-0.01    actual= 0.07
Next earnings 10-25    est= 0.05    versus= 0.01
Average Daily Volume   = 4.1 mln

SUNW - Sun Microsystems $124.75 (+2.38 last week)

SUNW is a leading maker of UNIX-based, number crunching
computers, storage devices, and servers for powering corporate
computer networks and Web sites.  The company is the largest to
make computers that use its own chips and operating systems.
SUNW's most talked about product is Java, a programming language
intended to create software that can run unchanged on any kind of

We certainly hadn't been missing it, but the inevitable profit
taking we had been warning of showed up last Friday.  SUNW's 3
point drop last Friday came with volume that was less than half
the ADV, hardly convincing.  In fact, weakness was rampant across
the recently rallied Tech sector, with SUNW taking the brunt of
the selling because of its recent, and very impressive, run-up.
The Goldman Sachs Computer Hardware Index ($GHA) slipped into the
red after a week-long rally.  But, like we have been mentioning
during the duration of our play, buying SUNW's dips has been
working.  Going forward, the main catalyst for our play will be
the health and direction of the broader Tech sector, with
particular emphasis laid on the NASDAQ.  The chance for a split
run is still a little off in the distance, given the payable date
is later in November.  But, as long as the NASDAQ continues to
edge its way higher, SUNW should continue to lead the charge.
There are several possible scenarios to watch for next week in
order to gain new entry into our play.  SUNW stopped right at its
5-dma last Friday, which is located at $124.69.  An aggressive
trader might look for a quick bounce off that level early Monday
morning if the Tech sector shows signs of rallying.  If the
sellers continue to lock in their profits, SUNW has major support
just below at the $124 level, and again at its 10-dma, which is
currently at $121.  Make sure to confirm any continued dip with
light volume, and wait for the selling to cease before entering
on a bounce.  A more conservative trader might wait for SUNW to
resume its rally and target shoot for an entry on any move above
resistance at whole levels, including $125, $126, and $127.
Confirm a rally with the return of volume as a sign traders are
ready to take SUNW to higher highs.

SUNW will kick off its Fall conference season next week with the
Real-Time Computer Show, which will focus on data applications.
The company will then holds its second Dot-Com Your Business
Conference and Exhibition, which will demonstrate SUNW's products
that create new opportunities for businesses on the Internet.

BUY CALL SEP-120*SUX-ID OI=7461 at $ 8.25 SL=5.75
BUY CALL SEP-125 SUX-IE OI=5236 at $ 5.25 SL=3.25
BUY CALL SEP-130 SUX-IF OI=5043 at $ 2.94 SL=1.50
BUY CALL OCT-125 SUX-JE OI=3377 at $10.63 SL=8.00
BUY CALL OCT-130 SUX-JF OI=3227 at $ 8.25 SL=5.75

SELL PUT SEP-120 SUX-UD OI=6091 at $ 2.44 SL=4.00
(See risks of selling puts in play legend)

Picked on August 13th at $112.19    P/E = 116
Change since picked       +12.56    52-week high=$128.63
Analysts Ratings     12-10-1-0-0    52-week low =$ 36.38
Last earnings 06/00    est= 0.33    actual= 0.39
Next earnings 10-16    est= 0.25    versus= 0.17
Average Daily Volume  = 13.7 mln

IDTI - Integrated Device Technology $78.25 (+5.38 last week)

The company's high-performance semiconductor products and modules
are found in computers, peripherals, and communications and
networking devices.  About 70% of sales are from communications
and high-performance logic components, specialty memory, clock
management circuits, and networking devices. IDTI also makes
static random-access memories (SRAMs).

What a difference a month makes.  Think back to July, you might
remember the downgrade heard around the Semi sector by Jonathan
Joseph.  It's safe to say he was early.  July's "Chip correction"
proved to be nothing more than extended profit taking and a brief
pause in the Semi sector's incredible renaissance.  Leading Chip
stocks have moved on to new highs, including our lovely IDTI.
Last week marked a complete reversal of sentiment in the Semi
sector.  Wall Street's outlook for the Chip stocks had much more
of a bullish ring.  SG Cowen and AG Edwards issued favorable
reports on the entire group, which argued a convincing case for
higher prices.  Contained within the AG Edwards report, analyst
Christopher Chaney said, "Fundamentals within the Semiconductor
sector remain quite strong."  If it's fundamentals Wall Street is
after, IDTI has got them.  The company maintains enviable
earnings growth with the specialty communications chips it
manufactures.  IDTI's fundamentals are in place to extend the
stock's recent breakout.  IDTI ran as high as $80 last week,
which marked an all-time high.  Of course, the profit takers had
to show up last Friday, who took a little steam out of IDTI's
momentum.  But, buying IDTI's dip might prove to be a profitable
proposition.  The stock has major support just below its current
level at $78, again at $76, and at its 5-dma near $75.50.  A
bounce off one of IDTI's support levels might provide a solid
entry into the play after any light selling subsides.  Another
possible way to gain entry into the play is to watch for a rally
to new highs, past the $80 level.  Make sure to confirm direction
in the Semi sector, and look for strong volume on a rally above
$80 before entering new positions.

IDTI received plenty of praise in the latter half of last week.
Robinson Humphrey reiterated their Strong Buy rating based on
IDTI's tracking of their third-quarter and added a $100 price
target.  And, SG Cowen also reiterated their Strong Buy rating
along with adding a $100 price target.

BUY CALL SEP-75 ITQ-IO OI= 439 at $ 7.00 SL=5.00
BUY CALL SEP-80*ITQ-IP OI= 378 at $ 4.38 SL=2.75
BUY CALL SEP-85 ITQ-IQ OI= 359 at $ 2.31 SL=1.25
BUY CALL NOV-80 ITQ-KP OI= 259 at $10.88 SL=8.25
BUY CALL NOV-85 ITQ-KQ OI=2741 at $ 8.50 SL=6.00

SELL PUT SEP-75 ITQ-UO OI= 786 at $ 3.13 SL=5.00
(See risks of selling puts in play legend)

Picked on August 15th at $66.88    P/E = 43
Change since picked      +11.38    52-week high=$80.00
Analysts Ratings      6-1-0-0-0    52-week low =$15.06
Last earnings 06/00   est= 0.47    actual= 0.58
Next earnings 10-16   est= 0.70    versus= 0.18
Average Daily Volume = 3.17 mln

EXDS - Exodus Communications $65.19 (+4.75 last week)

Exodus provides Internet system and network management
solutions for companies with mission-critical Internet
operations.  The company offers sophisticated systems along
with technology professional services to provide optimal
performance for customers’ Web sites.  Exodus has a long
list of customers, including:  EBAY, YHOO, SUNW, and AMAT.
The company continues to expand its business through
acquisitions and expansion overseas.

The Internet sector is re-emerging as a leader of the broader
markets.  After suffering painful losses last Spring, momentum
investors are moving back into the group with haste.  The fact is
the Internet is big, and it's still growing at a breakneck rate.
The explosive growth of the Internet is clearly seen in the Web
hosting and services segment, in which EXDS dominates.  The
company continues to win high-profile contracts and line-up
equally lucrative partnerships.  Just last week, EXDS teamed up
with two of the biggest Tech heavyweights in the sector, SUNW and
EMC.  EXDS hopes to collaborate with the two Tech giants in an
attempt to make the Web an even bigger and better place.
Investors applauded EXDS's efforts, and so did Wall Street.
Paine Webber reiterated their Strong Buy rating, spurred by the
announcements of the alliances, and set a $112 price target on
EXDS.  Despite its 45% run since the beginning of August, many on
Wall Street feel that future growth prospects are not fully
factored in the EXDS's stock price.  That fact might lead to an
extension of EXDS's recent rally.  The stock pulled back ever so
slightly last Friday on extremely light volume.  Buying the dips
has been profitable over the last month, and Friday's might
provide the aggressive trader with a good entry into the play.
If the profit takers show up again early next week, watch for a
bounce off current levels at $65.  An extended pullback might
take EXDS back down to its support at $64, which might be a solid
spot for entry.  EXDS did finish Friday on another burst of late
day buying, which might position the stock to test its channel
highs.  Watch for a rally in conjunction with robust volume back
above the $66 level for an entry into the play if EXDS resumes
its climb early Monday.

Don't believe the Internet sector is back?  Greg Kyle does.  The
analyst from Pegasus Research recently published a book titled,
"100 Best Internet Stocks to Own."  Among Kyle's favorites are
AOL, YHOO, AMZN, and, of course, EXDS.

BUY CALL SEP-60*QED-IL OI=4966 at $7.13 SL=5.00
BUY CALL SEP-65 QED-IM OI=5645 at $3.88 SL=3.00
BUY CALL SEP-70 QED-IN OI=4725 at $1.75 SL=1.00
BUY CALL OCT-65 QED-JM OI= 432 at $7.25 SL=5.25
BUY CALL OCT-70 QED-JN OI= 333 at $5.13 SL=3.00

Picked on August 15th at $57.13    P/E = N/A
Change since picked       +8.06    52-week high=$89.81
Analysts Ratings     26-5-1-0-0    52-week low =$15.06
Last earnings 06/00  est= -0.12    actual= -0.10
Next earnings 10-23  est= -0.17    versus= -0.07
Average Daily Volume = 8.36 mln

CIEN - Ciena Corp $197.94 (+21.31 last week)

Ciena makes multiplexing systems that increase the capacity of
long-distance fiber-optic telecommunications networks.  The
company's systems transmit signals simultaneously over the same
circuit.  Customers such as Sprint, Bell Atlantic, and MCI
Worldcom, use its lines for long-distance optical transport and
for shorter distances.  The company is expanding its product and
geographic breadth as it transforms itself from niche market
specialist to optical networking supplier.

CIEN's stronghold on the optical networking market appears to be
increasing.  Rival equipment maker, SCMR, reported its quarterly
results late last Thursday, which confirmed CIEN's dominance.
Despite beating consensus estimates by two pennies, SCMR's
recurring revenues actually fell by 4%.  Furthermore, during the
conference call, analysts questioned whether SCMR had lost a
crucial contract to supply networking gear to Williams
Communications (WCG), who has been rumored to have switched to
CIEN.  The two polar reactions to CIEN's and SCMR's respective
conference calls reinforces the fact that the former is emerging
as a clear leader in the network equipment space, which could
lead our play to higher prices in the near-term.  Also, let us
not forget that CIEN will be splitting 2-for-1 in about four
weeks.  While the post-split announcement effect may have run its
course last week, there exists the potential for a pre-split run
to develop over the course of the next several weeks.  Despite
the confirming report from SCMR, CIEN's momentum took a breather
last Friday just as we had cautioned.  The $195 level continues
to be strong support, off which CIEN bounced last Friday
morning.  Aggressive traders might continue to look for entries
on bounces from support levels at $195 or near $190, which is
near CIEN's 5-dma.  Make sure to confirm any pullback with light
volume as was the case Friday.  A more conservative trader might
look for an entry early Monday morning if CIEN resumes its climb
and rallies back above the $200 level.  Thereafter, the only
resistance in CIEN's way is Friday's intraday, and new 52-week
high, at $201.38.

CIEN executives will be busy on the road in the coming weeks
attending several investor and industry conferences.  The
company is scheduled to be a headline presenter at the National
Fiber Optical Engineers Conference, which begins early next week.
The company will also be presenting to analysts at Dain Rauscher
Wessels, DLJ, and SG Cowen over the course of the next two weeks.
Positive press from any of the aforementioned events might boost
our play well above the $200 level.

BUY CALL SEP-195 UEE-IS OI=2135 at $15.38 SL=11.25
BUY CALL SEP-200*UEE-IT OI=3722 at $12.63 SL= 9.50
BUY CALL SEP-210 UEE-IB OI= 659 at $ 8.25 SL= 5.75
BUY CALL OCT-200 UEE-JT OI=6717 at $22.38 SL=16.75
BUY CALL OCT-210 UEE-JB OI= 700 at $18.00 SL=13.00

Picked on August 24th at $201.06    P/E = 495
Change since picked        -3.13    52-week high=$201.31
Analysts Ratings      9-11-1-0-1    52-week low =$ 29.38
Last earnings 07/00     est=0.17    actual=0.19
Next earnings 10-20     est=0.24    versus=0.03
Average Daily Volume  = 5.20 mln

QLGC - QLogic Corporation $103.88 (+10.88 last week)

Somebody has to make the equipment that lets your computer talk
to all its peripheral equipment, and QLGC does it well.  A
leading designer and supplier of semiconductor and board-level
input/output (I/O) management products, QLGC has been providing
SCSI-based connectivity solutions to this market sector for over
12 years.  QLGC’s I/O products provide a high performance
interface between computer systems and their attached data
storage peripherals, such as hard disk and tape drives,
removable disk drives and RAID (redundant array of independent
disks) subsystems.  The company is also the market share leader
in Fibre Channel host bus adapters, a market segment that is
receiving tremendous attention from investors.

Volatility anyone?  In what was shaping up to be a quiet and
directionless day in the financial markets, QLGC got quite a
dose of volatility due to the EMLX story (see news below).
Shares of EMLX were halted during the day, and once the halt
was lifted the price skyrocketed above the opening price,
making entry points nearly impossible after the news story
was exposed as a fraud.  QLGC was an entirely different story,
as the stock traded continuously all day long.  Volume nearly
6 times the ADV accompanied the panic selling and then the
ensuing panic buying as QLGC plunged from an opening price
above $108 to an intraday low of $74, before rocketing back to
$107 -- all within the first 90 minutes of trading!  A lot of
people got hurt because of the news story, but vigilant
investors that could piece together what was happening (a rare
breed, indeed), were presented with an unexpected entry point
just before 11am EDT.  A solid bottom formed near $79 at the
same time that stories were coming out on the newswires that
the original press release was a hoax and that there was
nothing wrong with QLGC.  It was definitely a HIGH RISK play,
but those that jumped aboard were rewarded with a very
profitable day trade.  So, enough history, where do we go from
here?  Ignoring the major dip, QLGC still had a negative day
on Friday, but admirably held above the $99 level on a closing
basis.  This is the level that we were focusing on for a
breakout earlier in the week.  Not only that, but the close
was above the 5-dma (currently at $102.63), which has been
providing support to the stock's recent ascent.  QLGC still
looks like a great play, as the company operates in the red-hot
Storage Area Network (SAN) arena, a sector that is showing no
signs of slowing down.  Below $99, there is support at $94 and
then $90, and although intraday dips to support look buyable,
make sure volume is confirming the bounce before playing.
Friday's action should provide a stark reminder of what can
happen when you try to catch a falling knife.  Waiting for a
breakout may be the most prudent course of action at this point.
If that fits your risk profile, wait for buying volume to push
QLGC through $107, or even $112 before playing.

The major story of the week was the EMLX fake press release,
which cratered shares of the stock by more than 60% before the
fraudulent story was exposed and the stock recovered to nearly
unchanged on the day.  At the same time, QLGC saw its share
price slashed by more than 30% at its low.  The company could
provide no reason for the sharp intraday decline, other than
the fact that it operates in the same industry group as EMLX.

BUY CALL SEP-100*QLC-IT OI= 716 at $12.38 SL= 7.50
BUY CALL SEP-105 QLC-IA OI= 311 at $ 9.63 SL= 5.75
BUY CALL SEP-110 QLC-IB OI= 922 at $ 7.25 SL= 4.00
BUY CALL OCT-105 QLC-JA OI= 229 at $15.88 SL=10.25
BUY CALL OCT-110 QLC-JB OI= 514 at $14.00 SL= 8.75

SELL PUT SEP- 95 QLC-US OI= 263 at $ 5.13 SL= 7.00
(See risks of selling puts in play legend)

Picked on August 22nd at $98.00     P/E = 127
Change since picked       +5.88     52-week high=$203.25
Analysts Ratings      3-3-0-0-0     52-week low =$ 32.50
Last earnings 07/00   est= 0.24     actual= 0.27
Next earnings 10-18   est= 0.26     versus= 0.35
Average Daily Volume = 2.83 mln

BRCM - Broadcom Corporation $268.13 (+10.00 last week)

Sitting in the sweet spot between the Broadband and
Semiconductor sectors, BRCM is a provider of highly integrated
silicon solutions that enable broadband digital transmission
of voice, video and data to and throughout the home and within
the business enterprise.  These integrated circuits permit the
cost-effective delivery of high-speed, high-bandwidth networking
using existing communications infrastructures that were not
originally designed for the transmission of broadband digital
content.  Using proprietary technologies, the company designs,
develops and supplies integrated circuits for several markets
including digital cable set top boxes, cable modems, high-speed
office networks, home networking, and digital subscriber lines.

Who says Internet stocks are dead?  Sure the dot.coms have
fallen out of favor, because the revenue streams have become
quantifiable, but stocks of the companies that are building
out the infrastructure are still seeing incredible growth.
BRCM is a perfect example of investors' seemingly insatiable
appetite, as it is up more than 133% from the Spring lows.
Although Friday was a down day for the stock, before it fell
back, the bulls managed to push it up to trace another 52-week
high at $274.75, fractionally eclipsing Thursday's new high.
Given the light volume (less than half the ADV), the pullback
on Friday looks very healthy, as it brought the stock back from
the upper Bollinger band to bounce right on the 5-dma ($266.75).
This is right below the near-term support of $267-268, and if
buying volume comes back on Monday, looks like an acceptable
entry point.  With expected light market activity next week,
ahead of the Labor Day weekend, we could get lucky with a dip
to stronger levels of support at $265 and then $258-260.  With
the VIX still lurking below 20, there is still the potential
for a broad market decline, and such an event could produce a
drop as low as major historical support at $250.  As always,
volume will be the key to good entry points.  Rather than trying
to pick the bottom, wait for buying volume to increase and
confirm the bounce before playing.  Should BRCM head up from
here, consider new entries as the stock clears resistance and
moves above $275.

Aside from the latest installments of BRCM's ambitious
acquisition strategy there has been little relevant news
recently.  In the past 3 weeks, the company has snatched up
Altima Communications, Silicon Spice, and NewPort Communications,
a privately-held company not to be confused with NEWP on our
play list.  BRCM has been very astute in its acquisition strategy
up to this point, and the frequent comparisons to CSCO in this
arena only seem to further whet investors' appetites for shares
of the company.

BUY CALL SEP-260 YRL-IL OI=1029 at $19.00 SL=14.75
BUY CALL SEP-270*YRL-IN OI=1035 at $13.50 SL=10.25
BUY CALL SEP-280 YRL-IP OI= 993 at $ 8.88 SL= 6.25
BUY CALL SEP-290 YRL-IR OI= 578 at $ 5.50 SL= 3.50
BUY CALL OCT-270 YRL-JN OI=  13 at $25.63 SL=19.25
BUY CALL OCT-280 YRL-JP OI=  21 at $20.63 SL=15.50

SELL PUT SEP-250 RDU-UJ OI= 885 at $ 5.50 SL= 7.75
(See risks of selling puts in play legend)

Picked on August 24th at $273.63     P/E = 425
Change since picked        -5.50     52-week high=$274.75
Analysts Ratings      8-12-0-0-0     52-week low =$ 51.56
Last earnings 07/00    est= 0.19     actual= 0.23
Next earnings 10-17    est= 0.23     versus= 0.13
Average Daily Volume  = 5.25 mln

LSCC - Lattice Semiconductor $74.25 (+6.63 last week)

Customization is the name of the game for LSCC.  The company
makes programmable logic devices (PLDs), logic integrated
circuits that manufacturers can program to perform specific
functions.  The company is one of the world’s top suppliers of
in-system PLDs, which can be configured and reconfigured even
after being attached to a circuit board.  LSCC also sells the
software needed to customize its chips, which are used in
computing, communications, industrial, and military
applications.  The company focuses its efforts on design and
testing, outsourcing its manufacturing to factories in Asia.

Shining like a beacon in the night, LSCC was definitely one of
the brighter stars in the Semiconductor sector on Friday.
While many of the stocks that have been leading the SOX out of
the abyss fell victim to profit taking ahead of the weekend,
LSCC continued to soar.  Okay, maybe that is overstating it a
little, as our play did actually give up a fraction, but it
came on anemic volume of less than half the ADV.  The final 30
minutes of trading tell a different story as volume ramped up
and the stock managed to tack on $1.63 to close out the session
very near the high of the day.  The Semiconductor sector has
had an incredible rally over the last 2 weeks, with the SOX
gaining an impressive 22%.  In that same time, LSCC has managed
to plow through resistance at $68, $70, and $72. These levels
should now behave as support levels on any pullback, providing
attractive entry points for the next surge higher.  The stock
is riding the upper Bollinger band, Stochastics are deep in
overbought territory, and Friday's close is more than $4.50
above the 5-dma (down at $69.69).  All of the other moving
averages are far below, with the nearest being the 10-dma and
50-dma, at $66.38 and $67, respectively.  The next levels of
resistance to scale are $76-77, followed by $80.  Although LSCC
could charge higher from here, a pullback looks like the more
likely scenario in the near term.  Wait for the profit taking
to subside, and then consider new positions as the buying
volume returns.

On Wednesday, S&P announced several changes to its indexes,
with LSCC moving up from the SmallCap 600 Index to the MidCap
400 Index, replacing Santa Fe Snyder.  Other than that, there
has been little in the way of company specific news since early
August.  On August 3rd, First Security Van Kasper released their
Select List, where they list LSCC as a Strong Buy.  For now, we
are focused on the positive commentary coming from analysts
about the Semiconductor sector.

BUY CALL SEP-70*LQT-IN OI=341 at $ 7.13 SL=5.00
BUY CALL SEP-75 LQT-IO OI=773 at $ 4.38 SL=2.75
BUY CALL SEP-80 LQT-IP OI=492 at $ 2.25 SL=1.25
BUY CALL DEC-75 LQT-LO OI= 35 at $12.50 SL=9.50
BUY CALL DEC-80 LQT-LP OI= 44 at $ 9.88 SL=7.00

Picked on August 15th at $62.44     P/E = 33
Change since picked      +11.81     52-week high=$83.38
Analysts Ratings     10-3-2-1-0     52-week low =$14.19
Last earnings 07/00   est= 0.55     actual= 0.61
Next earnings 10-16   est= 0.64     versus= 0.23
Average Daily Volume = 1.08 mln

VRTS - VERITAS Software $116.94 (+9.81 last week)

VERITAS Software is the industry's leading enterprise-class
application storage management software provider.  They
furnish storage management software for protection against
data loss and file corruption, efficient file processing
and networks back-up.  VERITAS (Latin for "truth") has made
its name by partnering with such technological heavyweights
as Hewlett-Packard, Microsoft, and Sun Microsystems, all of
which have licensed and embedded VERITAS products in their
operating systems.  Its purchase of the network and storage
management software group of disk drive maker, Seagate
Technology, doubled VERITAS's size and gave Seagate an
approximate 33% stake in the company.

Let's talk DMAs when it comes to our momentum play on VRTS.  On
Thursday, VRTS gave a convincing close above the 50-dma and
prompted us to add it to our call list.  This technical line,
which hovered around the $115 mark, has recently served as a
staunch adversary ever since the share price broke down
following 2Q earnings on July 18th.  No matter how active the
trading, VRTS just couldn't penetrate that opposition.  Now that
VRTS broke to the upside, we're anticipating more traders will
start nibbling and generate enough momentum to drive the share
price upwards.  While the $100 level is solid support, there's a
strong base at $108 and $112.  Use this level on a pullback,
where the 100 & 200-dmas converge, to get a more aggressive
entry.  Of course, look for respectable volume at about 2+ mln
shares intraday to provide bullish confirmation.  Immediate
resistance is now at $118.50, Friday's intraday peak.  Our
objective is to move through $125 and return to the price levels
seen prior to the 2Q earnings' release.

VERITAS announced its family of desktop backup solutions last
week.  The Simple Backup, Backup Exec Desktop, and Backup Exec
Desktop Pro each provide customers different levels of
protection and functionality.  These next-generation solutions
augment the company's offerings of desktop to data center
protection.  Earlier in the month, Daniel Morgan at Noble
Financial Group reiterated a Buy recommendation on VRTS.

BUY CALL SEP-110 VUQ-IB OI= 1022 at $11.63 SL= 9.25
BUY CALL SEP-115 VUQ-IC OI=12603 at $ 8.75 SL= 6.00
BUY CALL SEP-120*VUQ-ID OI= 1359 at $ 6.25 SL= 4.25
BUY CALL SEP-125 VUQ-IE OI= 2970 at $ 4.38 SL=2.75
BUY CALL OCT-115 VUQ-JC OI=   77 at $15.13 SL=11.00
BUY CALL OCT-120 VUQ-JD OI=  218 at $12.75 SL= 9.50

Picked on August 24th at $115.69    P/E = N/A
Change since picked        +1.25    52-week high=$174.00
Analysts Ratings     10-12-1-0-0    52-week low =$ 24.92
Last earnings 06/00    est= 0.12    actual= 0.13
Next earnings 10-12    est= 0.14    versus= 0.09
Average Daily Volume  = 5.52 mln

PLXS - Plexus Corp $142.50 (+11.88 last week)

Plexus provides product realization services to original
equipment manufacturers (OEMs) in the telecommunications,
medical, industrial, computer, and transportation electronics
industries.  Its Plexus Technology and SeaMED subsidiaries
provide the product design and engineering, while its Plexus
Electronic Assembly subsidiary handles manufacturing.  Lucent
and GE account for over 25% of sales.

If you like excitement, then PLXS was your play last week.  The
intraday gyrations offered the more aggressive traders a
multitude of entries on pullbacks to the 5-dma line.  The
subsequent moves to all-time highs, first on Tuesday and then on
Friday, provided the opportunity for hefty profits.  Besides the
flourishing market environment, it's evident that the company's
upcoming 2:1 stock split is generating the momentum.  But, time
is running out quickly, so pay heed to the split date, August
31st after the close.  We never recommend holding over the split
date.  It's much too risky to expose your positions to the
possibility of a  post-split decline.  If you trade over the next
four sessions, it's important to be aware of other potential
risks.  Recall that PLXS's strong momentum has taken it from $90
to over $140 in less than a month's time.  And while Prudential
analyst, Ellen Chae's, downgrade of PLXS to an Accumulate last
week didn't effectively keep it down for more than a few hours of
trading, she made a good point.  "Although we are impressed with
PLXS' capabilities and are confident in the company's ability to
maintain its growth momentum, we are concerned that upside on
the shares may be limited by valuation."  If you have open
positions or are considering jumping in on dips at the 5-dma
($138.73), watch for resistance at $144.38, the new 52-week

Despite Prudential's rating cut on PLXS last week, it maintained
its 12-month price target of $160.

BUY CALL SEP-135 QUA-IG OI= 95 at $13.13 SL= 9.75
BUY CALL SEP-140*YQH-IH OI= 83 at $10.50 SL= 7.50
BUY CALL SEP-145 YQH-II OI=116 at $ 7.75 SL= 5.50
BUY CALL OCT-130 QUA-JF OI= 15 at $23.38 SL=18.00
BUY CALL OCT-135 QUA-JG OI=  3 at $20.13 SL=14.50

Picked on August 17th at $132.00    P/E = 86
Change since picked       +10.50    52-week high=$144.38
Analysts Ratings       6-8-1-0-0    52-week low =$ 24.44
Last earnings 06/00    est= 0.52    actual= 0.57
Next earnings 10-27    est= 0.59    versus= 0.41
Average Daily Volume   =   368 K

JNPR - Juniper Networks, Inc. $190.94 (+20.13 last week)

Juniper Networks develops and provides next-generation Internet
infrastructure systems that are designed to meet the
scalability, performance, density, and compatibility
requirements of IP networking systems.  The company's M40 and
M20 Internet backbone router use JUNOS network traffic
management software, ASICs.  Its clients include some of the
world's leading service providers such as Ericsson and

Pure momentum equals pure profits when it comes to JNPR.  Give
JNPR a favorable environment and watch it prosper!  The party
went into full swing on Tuesday with a 7.3%, or $12.63 advance.
The spike confirmed the momentum on our play and opened the door
for JNPR to stretch into new territory.  On Wednesday, JNPR
catapulted again to set the newest 52-week record at $194.25
before consolidation set in for the remainder of the week.
However, JNPR is demonstrating strength at $188 and $191, which
provides bullish confirmation that the momentum is intact.  For
those readers who've been following JNPR, you know the two
important variables of this play.  Look for exceptional volume
levels, at 2+ mln intraday, to forecast an upside breakout and
pay attention to the NASDAQ's sentiment.  If you're just joining
us, BEWARE.  JNPR is a HIGH-RISK Internet play and not suited
for anyone.  A conservative entry for this aggressive Internet
play could be attained with a high volume breakout over $195 as
it surges toward $200.

This week SG Cowen commented that Juniper gained a 6% market
share of Core routers from Cisco (CSCO).  The firm maintains a
Strong buy rating for JNPR. David Toung, on the other hand,
analyst at Argus Research came forwarded on Thursday and
downgraded the stock to a Hold from Buy, but offered no comment.

BUY CALL SEP-185*JUD-IQ OI= 641 at $13.88 SL=10.50
BUY CALL SEP-190 JUD-IR OI=1553 at $11.00 SL= 8.25
BUY CALL SEP-195 JUD-IS OI= 593 at $ 8.63 SL= 5.00
BUY CALL SEP-200 JUD-IT OI=1737 at $ 6.50 SL= 4.50
BUY CALL OCT-190 JUD-JR OI=1136 at $21.13 SL=16.00
BUY CALL OCT-200 JUD-JT OI= 805 at $16.63 SL=12.00

Picked on August 15th at $169.75    P/E = 2246
Change since picked       +21.19    52-week high=$194.25
Analysts Ratings      15-3-0-0-0    52-week low =$ 28.25
Last earnings 06/00    est= 0.04    actual= 0.08
Next earnings 10-19    est= 0.09    versus=-0.01
Average Daily Volume   =   6 mln

DIGX - Digex Inc $86.00 (+5.44 last week)

DIGX is a leading provider of hosting services to businesses and
organizations operating mission critical, multi-functional Web
sites and Web-based applications. Their hosting services are
used by some of the leading Internet companies.  The company
also offers value-added enterprise and professional services,
including performance and security testing, monitoring,
reporting and networking services.  They operate two data
centers in the US and one in the UK that house more than 2,300
company-owned and managed servers.  Digex clients include
Forbes, J. Crew, and Nissan.

Recent performance leaves little doubt we're in the midst of a
powerful momentum run!  After DIGX consolidated at the $80 level
for a few days last week, it broke to the upside with a vengeance.
The share price stopped just short of the $90 mark on Thursday
before settling back to the vicinity of the 5-dma ($84.15).  The
downgrade to Maintain from Buy and comments by Joe Eshoo at AG
Edwards on Friday very likely influenced the trading activity.
He believes "the recent strength in Digex shares over the past
two days are due to rumors that Exodus is again looking at
acquiring Digex" and that "Digex trades up on takeover rumors."
In other words, be careful of short-term deflation.  Of course, we
have to be aware of a downdraft, however, volume remains healthy
and light support at $85 firmed intraday despite the analyst's
remarks.  If still reserved about entering at this level, then
wait for a break through $90 before opening new positions.
Otherwise, intraday dips to $85 or $80 accompanied by a bounce
would provide a nice aggressive entry.  There is historical
resistance at $95, but the real obstacle is higher at the century

Gerard Klauer Mattison started new coverage on DIGX this week
with a Buy recommendation and a 12-month price target of $102.

BUY CALL SEP-80*UOM-IP OI= 655 at $ 8.38 SL= 5.75
BUY CALL SEP-85 UOM-IQ OI= 252 at $ 6.13 SL= 4.00
BUY CALL SEP-90 UOM-IR OI= 625 at $ 3.88 SL= 2.50
BUY CALL OCT-85 UOM-JQ OI= 195 at $13.00 SL= 9.75
BUY CALL OCT-90 UOM-JR OI= 163 at $10.50 SL= 7.50

Picked on August 20th at $80.56    P/E = N/A
Change since picked       +5.44    52-week high=$184.00
Analysts Ratings     11-5-1-0-0    52-week low =$ 21.19
Last earnings 06/00   est=-0.56    actual=-0.54
Next earnings 11-01   est=-0.62    versus=-0.36
Average Daily Volume  =   882 K

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The Option Investor Newsletter                   Sunday 08-27-2000
Sunday                                                      4 of 5

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KO - Coca-Cola Company $56.00 (-4.31 last week)

The Coca-Cola Company is the largest manufacturer, distributor
and marketer of soft drink concentrates and syrups in the
world.  Finished beverage products bearing the company's
trademarks have been sold in the U.S. since 1886, and are now
sold in nearly 200 countries.  KO also markets and distributes
juice and juice-drink products.  Of the nearly 48 billion
beverage servings of all types consumed worldwide every day,
KO products account for more than one billion.

Investors in KO have been "having a Coke and a smile" over the
last several months, as shares of the beverage company have
enjoyed a nice stealth rally.  Part of the impetus for the rally
was the uncertainty in the broad markets, particularly
technology-related issues.  Now that the broad markets are
breaking out of their recent trading ranges, KO has lost some
of its fizz.  After putting in a bottom of $42.25 in the middle
of March, the stock started moving higher and got into a well
defined uptrend by early May.  Since the momentum started
flowing, KO has been able to post higher highs and higher lows,
using the 30-dma (currently $60.38) as support on the pullbacks.
Investors started losing their thirst for Beverage stocks in
general and KO specifically about 2 weeks ago.  The first signs
of weakness can be seen on the daily chart where the bulls
couldn't push through resistance at $63, and the price fell
back.  Rather than regrouping at the 30-dma for another push
higher, the bulls were nowhere to be found as they let the price
fall right through this level of support and then the 50-dma at
$58.88.  Then on Friday, Salomon Smith Barney lowered its volume
growth estimates for the company from the 5.0-5.5% range to a
level of 4.5%.  Although the firm continues to rate KO a Buy,
with a price target of $68, investors were not in wait-and-see
mood.  KO gapped down at the open, dropped through the 200-dma
(currently $55.56) and lost as much as 5% intraday, before
finding support just above the 100-dma (currently $54.63).
After bottoming near $55, KO shares managed to gradually regain
some of their losses, marking the $55 level as new-found
support.  The 10-dma, 30-dma, and 50-dma are all converging
between $59-61, and this will likely create formidable overhead
resistance going forward.  Use rallies as entry points and
initiate new positions as the stock runs out of juice and rolls
over.  Conservative investors may want to wait for selling
volume to confirm the stock's weakness and a volume-backed
penetration of support at $55 could be just the ticket.

BUY PUT SEP-60*KO-UL OI=3544 at $4.38 SL=2.75
BUY PUT SEP-55 KO-UK OI=2228 at $1.19 SL=0.00

Average Daily Volume = 4.09 mln


QCOM - Qualcomm Inc. $58.88 (-0.88 last week)

Qualcomm Incorporated is a leader in developing, delivering, and
enabling innovative digital wireless communications products and
services based on the Company's digital technologies.  As the
pioneer of Code Division Multiple Access (CDMA), the technology
of choice for next-generation wireless communications, Qualcomm
continues to lead the industry in the development of voice, data,
and wireless Internet products and solutions.  Qualcomm is also
transforming industries through its various satellite businesses
and technology partnerships.

Our put play on QCOM just received a stay of execution.  After
spending the early part of the week riding down the 5-dma, the
stock found buyers just below the $55 level.  From there, the
stock made a strong bounce on Thursday to close not only above
its 5-dma (at $58.31), but its 10-dma (at $59.60) as well.  In
addition to this, QCOM closed above the $60 level.  When we last
looked at this play on Thursday, we were trying to determine the
nature of the bounce.  Was this a genuine bounce thanks to strong
buyer support or was it of the dead cat variety?  At this point
the results are...inconclusive, but $60 certainly is resistance.
An early attempt to rally on Friday morning was met with selling
for the rest of the day.  Bouncing off the 5-dma, the stock moved
slightly higher in its final hour of trading to close down $1.75
on 42% of ADV.  Volume in general was light for the NASDAQ and
Friday's close brought QCOM to close again below the $60 level, as
well as its 10-dma.  While QCOM did bounce strongly on Thursday,
it was merely a temporary relief, and we see the stock continuing
to drift lower.  Aggressive traders looking to enter this play may
want to enter on a failed rally to the $60 mark.  As well, an
inability for QCOM to make it back up above its 10-dma could serve
as an entry.  Those who want to see more proof of weakness will
want to see QCOM break below its 5-dma on strong selling volume
before entering.  A break below $57 could see the stock re-testing
the conviction of buyers who stepped in at the $55 level.  A
follow-through day on strong volume that sees the stock close
well above $60 could be the signal to close this put play.

BUY PUT SEP-65 AAO-UM OI=2515 at $7.25 SL= 5.25
BUY PUT SEP-60*AAO-UL OI=4954 at $3.75 SL= 2.00
BUY PUT SEP-55 AAO-UK OI=5598 at $1.44 SL= 0.75

Average Daily Volume = 18.46 mln

UK - Union Carbide $41.06 (-1.75 last week)

Chemical giant Union Carbide, which Dow Chemical is buying, keeps
a hand in basic chemicals and specialty chemicals.  The company
produces wire insulation, cleaners, catalysts, personal care
items, paint and adhesives, and solvents.  UK leads the world in
ethylene oxide production, which is used in the making of
polyester fibers, as well as ethylene glycol, which is used in
the manufacturing antifreeze.

UK was booted out of the Dow Jones Industrial Average last
October and replaced by younger and faster growing companies.
It's a good thing.  The blue chip index might be a lot lower this
year if UK had remained a member of the lustrous group.  The
lowly Chemicals sector has taken a beating this year for its
inability to produce attractive earnings.  The bottom-line is
that investors want earnings, and UK's 5% EPS next year isn't
sufficient.  In fact, UK is expected to experience a -36% quarter
over quarter decline in profits when the company reports its
fourth-quarter results.  Consolidation was thought to spur
investors' interests earlier this year when Dow Chemical (DOW)
made a bid for UK.  Unfortunately for UK shareholders, the DOW
offer was an all-stock proposition.  The same problems that have
plagued UK over the past year have also hurt DOW.  And,
stockholders have suffered.  Investors' distaste for the
Chemicals sector was clearly evident last week as both UK and DOW
fell to new 52-week lows on heavy volume, despite the attempts
from several Wall Street brokerages.  The big institutional
sellers took an early break going into the weekend last Friday as
UK edged ever slightly higher on relatively light volume versus
what we have seen during the stock's down days.  If the light
buying continues early next week, an aggressive trader might look
for UK to bump against resistance in its descending channel at
its 5-dma at $41.50, and consider entering the play if traders
fade the stock's rally.  A more conservative trader might wait
for the professional selling to resume before entering the play.
Look for UK to resume its downward ways, and consider entering
the play if the stock falls below support at its current level of
$41, or lower below its 52-week low at $40.50.

BUY PUT SEP-45*UK-UI OI= 57 at $4.50 SL=2.75
BUY PUT SEP-40 UK-UH OI= 15 at $1.25 SL=0.50

Average Daily Volume = 800 K

AT - Alltel Corp $50.81 (-5.25 last week)

Alltel is an information technology company that offers
telecommunication services in the US.  Its operations span 23
states, mainly in the Southeast and Midwest. The company offers
its wireline and wireless services, which include local, long
distance, cellular, as well as Internet access and paging, to
over 9 mln customers.

The truth may set you free, but that doesn't mean you won't get
put through the wringer.  Last Wednesday, August 16th, AT dropped
9.3%, or $5.81, after company executives repeated an outlook for
2000 EPS during a conference call with analysts.  The estimate
at $2.70 a share for the year is currently below Wall Street's
forecast.  Because Alltel had reported solid results in the
first and second quarters of 2000, many analysts upped their
estimates to $2.73 a share for the year.  However, Alltel is
steadfast on their outlook it first put out in February.
Inquiries prompted a spokesman for Alltel to reiterate the
declaration, "we've said we're going to be $2.70 and we're not
changing that."  The shares plummeted in heavy trading that day
and hit $55.56, the first in a series of new 12-month lows
before basing.  Frank Louthan at First Union quickly cut his
rating on AT down to a Buy from a Strong Buy, but offered no
additional comments.  Last week, the situation grew dimmer.
Volume levels perked up and on Tuesday, AT cracked the $55 base
support.  By Thursday, even $54 failed to hold.  With the Telecom
sector not at its best, AT edged even deeper in Friday's session
and dug down to $50.50.  The bearish close at a mere fraction
from that all-time low provides further confirmation that next
week's action could be fatalistic.  With no historical bottom
left to offer support, the million-dollar question is how far
can AT fall?  Therefore, it's imperative to keep the stops in
place for protection against bargain hunters.  The nearest DMA
to Friday's intraday resistance ($51.50) was the 5-day line at
$53.83.  Either of these marks could be used as potential entry
points.  Confirm the downtrend line before opening new positions.

BUY PUT SEP-60 AT-UL OI=715 at $9.63 SL=6.50
BUY PUT SEP-55*AT-UL OI=367 at $5.00 SL=3.00

Average Daily Volume = 986 K

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EMLX Hoax Steals The Show On A Quiet Summer Friday
By Mark Phillips
Contact Support

The expected quiet of our next to last summer Friday was
shattered by the release of a fraudulent and very damaging press
release on EMLX shortly after the open.  The details are covered
in Molly Evan's Trader's Corner article this weekend and provide
a strong reminder of the potential risks and rewards of the
arena in which we have chosen to play.  I won't rehash any of
the details here, but strongly recommend reading her article, as
it is a good gut check if you are considering new plays in this

Much of the story this week remains the same, with the
Semiconductors continuing to show strength, and the resurgence
in the Biotech sector helping to propel the NASDAQ above the
4000 level.  The Internet sector is showing strength, although
the real story here is in infrastructure plays (see our new play
on BRCD below).  Even the DJIA is looking healthy, as it is
threatening to break above resistance at 11200.  Volume is still
weak, but what do you expect for the second half of August?

Although there are many factors pointing to more strength ahead,
we can't avoid the facts that the Commercials (thanks Austin)
are still holding 10-year net short positions and the VIX is
continuing to drill into the basement, closing on Friday at
19.10.  These two factors combined with the substantial rise on
the major indexes lately should have you thinking "DANGER,
Profit Taking Ahead".

If you have been waiting patiently for new entry points to
materialize, the week ahead could be your reward.  Just make
sure you don't try to jump in and catch a falling knife.  The
decline this past spring should still be fresh enough in your
mind to keep you out of that trap.

We are still in the process of weeding out the non-performing
plays to make room for those that we think should provide the
impressive returns you have come to expect from investing in
LEAPS.  Accordingly we are jettisoning HD and PCS this weekend,
and NXTL is in danger of getting the axe next weekend.

As we mentioned a couple months ago, we have continued to track
the returns on the 2001 options through the month of August.
This is the last newsletter before we usher in the month of
September and it is also the last week that we will track those
2001 options.  Due to the inherent time decay risk associated
with the proximity of those options' short-term status, we can
no longer advocate initiating or holding those options, at least
not when we are focusing on the long term performance of LEAPS.

One final note, and a shameless plug.  Have you noticed the
glowing comments in the newsletter about the Summer and upcoming
Fall seminars?  I have, and it really whetted my appetite to
further my own education.  Therefore, I'll be traveling to
Boston to take in the wisdom of Chris and the rest of his team
during the weekend of September 28-30.  I hope to see you there.

In the meantime, trade smart and preserve your capital.

Current Plays


EMC    11/07/99  JAN-2001 $ 40  EMB-AH   $ 7.69   $52.63   584.33%
                 JAN-2002 $ 45  WUE-AI   $ 9.50   $53.13   459.21%
                 JAN-2003 $ 90  VUE-AR   $35.50   $34.88    ------
CSCO   11/14/99  JAN-2001 $ 40  CYQ-AH   $ 9.56   $27.88   191.58%
                 JAN-2002 $ 45  WIV-AI   $11.00   $29.50   168.18%
                 JAN-2003 $ 70  VYC-AN   $25.13   $21.75    ------
NT     11/28/99  JAN-2001 $37.5 NT -AU   $11.13   $46.75   320.04%
                 JAN-2002 $37.5 WNT-AU   $15.13   $50.13   231.30%
                 JAN-2003 $ 80  ODT-AP   $28.63   $32.13    ------
SUNW   12/19/99  JAN-2001 $ 80  SUX-AP   $17.63   $49.00   177.94%
                 JAN-2002 $ 90  WJX-AR   $22.00   $53.13   141.48%
                 JAN-2003 $105  VSU-AA   $40.63   $55.63    ------
ERICY  01/30/00  JAN-2001 $16.3 RQC-AO   $ 4.94   $ 5.13     3.74%
                 JAN-2002 $16.3 WRY-AO   $ 6.75   $ 7.38     9.26%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 5.88   -14.61%
NSM    02/27/00  JAN-2001 $ 70  NSM-AN   $18.50   $ 3.00   -83.78%
                 JAN-2002 $ 70  WUN-AN   $24.25   $10.13   -58.25%
                 JAN-2003 $ 40  VSN-AH   $16.50   $22.38    ------
AOL    03/12/00  JAN-2001 $ 60  AOO-AL   $14.00   $ 6.88   -50.89%
                 JAN-2002 $ 65  WAN-AM   $18.63   $12.50   -32.90%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $22.00    35.61%
AXP    03/12/00  JAN-2001 $43.3 AXP-AP   $ 7.25   $15.38   112.07%
                 JAN-2002 $46.6 WXP-AQ   $ 9.33   $18.25    95.61%
                 JAN-2003 $ 60  VAX-AL   $18.38   $15.63    ------
WM     03/19/00  JAN-2001 $ 25  WM -AE   $ 5.00   $ 9.25    85.00%
                 JAN-2002 $ 30  WWI-AF   $ 5.38   $ 8.38    55.67%
                 JAN-2003 $ 35  VWI-AG   $ 7.63   $ 8.25    ------
AMD    04/16/00  JAN-2001 $ 70  AMD-AN   $17.50   $14.13   -19.29%
                 JAN-2002 $ 70  WVV-AN   $26.00   $25.88   - 0.48%
                 JAN-2003 $ 90  VVV-AR   $36.75   $27.38    ------
JDSU   04/16/00  JAN-2001 $ 80  XXZ-AP   $27.50   $50.63    84.09%
                 JAN-2002 $ 80  YJU-AP   $39.63   $64.75    63.39%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $55.25     0.00%
MOT    05/14/00  JAN-2001 $33.3 MOT-AY   $ 6.58   $ 6.38   - 3.12%
                 JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 9.50   - 0.42%
                 JAN-2003 $ 40  VMA-AH   $13.38   $11.25    ------
NOK    05/21/00  JAN-2001 $ 50  NZY-AJ   $10.25   $ 3.25   -68.29%
                 JAN-2002 $ 50  IWX-AJ   $17.25   $ 9.00   -47.83%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $13.00   -26.76%
HD     05/28/00  JAN-2001 $ 50  HD -AJ   $ 6.25   $ 6.50     4.00%
                 JAN-2002 $ 50  WHD-AJ   $11.38   $12.50     9.84%
       08/06/00  JAN-2003 $ 60  VHD-AL   $15.25   $12.75   -16.39%
NXTL   06/11/00  JAN-2001 $ 60  FZC-AL   $12.25   $ 6.50   -46.94%
                 JAN-2002 $ 60  YFG-AL   $19.25   $13.25   -31.17%
                 JAN-2003 $ 60  VFU-AL   $21.88   $17.75    ------
C      06/18/00  JAN-2001 $ 65  C  -AM   $ 7.63   $14.75    93.32%
                 JAN-2002 $ 65  WRV-AM   $13.75   $22.13    60.91%
                 JAN-2003 $ 75  VRN-AO   $20.50   $21.50    ------
AMGN   07/02/00  JAN-2001 $ 75  YAA-AO   $10.75   $10.88     1.16%
                 JAN-2002 $ 75  WQY-AO   $20.75   $21.75     4.82%
                 JAN-2003 $ 70  VAM-AN   $28.75   $31.00     7.83%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $64.00   - 3.40%
                 JAN-2003 $180  OVS-AP   $88.00   $82.50    ------
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $ 5.13   -59.42%
                 JAN-2003 $ 60  VDL-AL   $15.38   $ 7.63   -50.42%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $23.50    37.19%
                 JAN-2003 $ 70  OZG-AN   $23.13   $29.75    28.62%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $36.25    28.32%
                 JAN-2003 $120  VHP-AD   $32.63   $41.00    25.65%
PCS    07/30/00  JAN-2002 $ 60  WVH-AL   $11.88   $ 8.25   -30.56%
                 JAN-2003 $ 65  VVH-AM   $14.38   $10.75   -25.24%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $28.50    37.35%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $32.88    29.53%
MFNX   08/06/00  JAN-2002 $ 40  WOF-AH   $13.75   $12.75   - 7.27%
                 JAN-2003 $ 45  VKW-AI   $15.63   $15.25   - 2.43%
GM     08/06/00  JAN-2002 $ 65  WGM-AM   $ 9.88   $17.75    79.66%
                 JAN-2003 $ 65  VGN-AM   $13.25   $21.63    63.21%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $28.75   - 8.38%
                 JAN-2003 $100  VFB-AT   $37.38   $35.00   - 6.37%

Spotlight Play

JDSU - JDS Uniphase $125.31

Three cheers for our Optical hero!  After the exciting times
that accompanied JDSU's earnings in July (not to mention being
added to the S&P 500), volatility has come back to earth and
the stock has resumed its uptrend.  Major support near $107
was confirmed on August 3rd, as the stock dropped to put in a
solid bounce right on the ascending long-term trendline.  Since
then, the stock has been tracing higher highs and higher lows
as it drags all its moving averages back into ascent mode.  The
first major support level is at $121-122, which also happens to
be the convergence point of the 10-dma ($122.31) and the 30-dma
($121.31).  Close behind is the 50-dma (currently at $119.69),
reinforcing support near $120.  Barring a major negative market
event, bounces at these support levels (according to your
individual risk tolerance) look like a good time to initiate
new positions.  Should a more drastic decline ensue (after all,
the VIX is barely over 19 now), look for JDSU to bounce on the
ascending trendline, currently sitting at $116.  Of course the
enthusiasm for the Optical sector is showing no signs of letting
up and with the benefits of the pending SDLI merger, JDSU could
very likely head north from current levels.  Although you can
consider entering on a breakout over resistance at $128 or $130,
we think the more prudent strategy will be to wait for the stock
to pull back to confirm these levels as support after the

BUY LEAP JAN-2002 $130.00 YJU-AF at $40.88
BUY LEAP JAN-2003 $130.00 VEQ-AF at $55.25

New Plays

BRCD - Brocade Communications $211.88

Brocade is a major supplier of Fibre Channel switching solutions
for Storage Area Networking (SANs), which apply the benefits of
a networked approach to the connection of computer storage
systems and servers.  Unless you slept through the market action
on Friday (or had to be at work), you saw some incredible action
in some of the major players in the SAN market.  Sure, most of
the action was attributable to the fraudulent news story on EMLX
(see Molly Evans' Trader's Corner article this weekend for the
detailed story), but what was impressive was BRCD's strength
relative to competitor QLGC.  Although the fake news and
subsequent panic led investors to shave as much as $12 from the
share price intraday, the $210 level, with the 10-dma ($209.75)
backing it up, held up well as support.  The stock has had an
impressive run since it last tested the 200-dma (then at $90.13)
in late May, and the refusal of investors to jump ship, even at
the stock's lofty levels, speaks to its impressive strength.
Any return to the vicinity of the $210 support level looks like
an attractive entry point, but make sure that buyers are still
in abundance before jumping aboard.  A more conservative
strategy would be to wait for the bulls to propel the stock
through resistance at $220 before pulling the trigger.

BUY LEAP JAN-2002 $220.00 YNU-AD at $65.38
BUY LEAP JAN-2003 $220.00 OMW-AD at $86.50

INKT - Inktomi Corporation $123.94

It's hard to find a good quality Internet play in today's
market, but INKT looks like a good candidate.  The company
provides scalable software applications designed to enhance
the performance and intelligence of large-scale networks,
particularly the Internet.  Beaten up with the rest of the
Internet sector, INKT looks like it is about to get moving in
the right direction again.  After struggling since the selloff
this spring, the stock has made some impressive strides in the
past week.  After consolidating near $105, shares of the company
got a news-related boost last Wednesday and surged through the
30-dma, 50-dma, and 200-dma, then at $113.50, $117.81, and
$119.88, respectively.  The news that prompted the bullish move
centered on an alliance called "Content Bridge" with AOL, ISLD
and EXDS, among others, and is focused on ensuring that Internet
users receive the most up-to-date information available on the
Web.  INKT continued to move higher for the remainder of the
week, scaling the last of its moving averages, the 100-dma at
$123.31 on Friday.  The fledgling breakout will need continued
strong buying volume to sustain it, and with a quiet week
expected ahead of the Labor Day weekend, a pullback to support
would seem likely.  Support should hold at the 200-dma (now at
$120.50) or near $117, where the 5-dma and 50-dma are
converging.  Unless volume is strong, any move above current
levels this week will likely be hard to sustain, as there is
substantial resistance at $126 and then $130-133.

BUY LEAP JAN-2002 $130.00 XOR-AF at $50.13
BUY LEAP JAN-2003 $140.00 VFR-AH at $60.88


HD $50.50 Giving us three very profitable runs, HD performed
exactly as we expected.  After we added it in late May near $47,
the stock quickly surged to $54, before succumbing to market
pressures and falling back for another entry point near where
our play started.  Then riding the recovery of the DJIA, HD ran
up to $57 before falling back near the $50 support level and
then ran as high as $58.75 ahead of earnings on August 14th.
These last two runs gave us gains of 75-100%, depending on entry
and exit points.  The company's earnings report essentially
spelled the end of our play as recent interest rate hikes and a
slowing economy are beginning to take their toll, leading to
reduced revenue expectations for the remainder of the year.
With the markets continuing to move incrementally higher and HD
failing to participate, now looks like as good a time as any to
drop the play and move on to more exciting possibilities.

PCS $48.94 The Telecom sector continues to look sickly, and our
play on PCS has definitely been infected.  When we added it at
the end of July, the stock was bouncing at the 200-dma and we
were playing it for a bounce and recovery with the rest of the
market.  After 2 up days, the stock rolled over at the 10-dma
(near $57) and has continued to be pressured over the past
month.  Even the 200-dma was largely ignored as a support level,
as PCS continued to decline on ever increasing volume.  Last
week's decline actually began with a rollover at the 200-dma,
and although support may hold at $47-48, this is clearly a
broken play.  There are too many exciting and healthy stocks
out there to keep our money tied up in a loser like PCS.


It's Only A Matter Of Time
By Ryan Nelson

With the VIX trying to move below 19, you can expect some
cautious words.  The funny thing is, the VIX has been in the
danger zone for two and a half months while the Nasdaq has
gained nearly 550 points in the past three weeks.  Go figure.
That is why this Great Game is not an exact science.  So while
the starring contest with the VIX continues, we will continue
to ride the momentum until someone blinks.  On another topic,
congrats to all who benefitted from the split run moves in
PLXS and PLCM that we highlighted last week.  PLXS has been
moving up steadily, while PLCM broke out on Friday to a big
gain.  It is time to start looking for an exit on both though
as the ex-date is rapdily approaching.

Current Split Run Plays

PLXS - 09/01 ex-date
CIEN - 09/19 ex-date
SUNW - 12/06 ex-date

Current Split Candidate Plays


Candidates That Are Not Current Plays


10 Most Recent Announcements We Predicted

SUNW - 08/17 (most recent announcement)
GLW  - 08/16
HWP  - 08/16
CIEN - 08/15
SEBL - 08/08
SAPE - 08/01
AMD  - 07/19
PDLI - 07/11
TXN  - 04/20
CMVT - 03/07

Major Announcements So Far This Month = 21

ABMD     PKE      ERTS     SONS
XTO      CIEN     MYGN     PCP
HWP      GLW      SUNW     SMTC

For our complete stock split calendar, click here...

Symbol  Company Name                Splits  Payable    Executable
IMPH  - Impath Inc.                   2:1  08/28/2000  08/29/2000
MPWR  - Mpower Communications         3:2  08/28/2000  08/29/2000
SAPE  - Sapient Corporation           2:1  08/28/2000  08/29/2000
BELM  - Bell Microproducts Inc.       3:2  08/31/2000  09/01/2000
VSAT  - ViaSat, Inc.                  2:1  08/31/2000  09/01/2000
MER   - Merrill Lynch & Co., Inc.     2:1  08/31/2000  09/01/2000
INCY  - Incyte Genomics, Inc          2:1  08/31/2000  09/01/2000
PLXS  - Plexus Corp.                  2:1  08/31/2000  09/01/2000
PLCM  - Polycom, Inc.                 2:1  08/31/2000  09/01/2000
RATL  - Rational Software             2:1  09/01/2000  09/05/2000
NETE  - Netegrity, Inc.               3:2  09/01/2000  09/05/2000
MARY  - St Mary Land & Exploration Co 2:1  09/05/2000  09/06/2000
RARE  - Rare Hospitality INC.         3:2  09/05/2000  09/06/2000
KVA   - K-V Pharmaceutical Co         3:2  09/07/2000  09/08/2000
KVB   - K-V Pharmaceutical Co.        3:2  09/07/2000  09/08/2000
PSEM  - Pericom Semiconductor         2:1  09/08/2000  09/11/2000
SEBL  - Siebel Systems, Inc.          2:1  09/08/2000  09/11/2000
ERTS  - Electronic Arts Inc.          2:1  09/08/2000  09/11/2000
PWER  - Power-One, Inc.               2:1  09/11/2000  09/12/2000
MYGN  - Myriad Genetics, Inc.         2:1  09/11/2000  09/12/2000
LIC   - Lynch Interactive Corporation 2:1  09/11/2000  09/12/2000
NDSN  - Nordson Corp                  2:1  09/12/2000  09/13/2000
FCEL  - FuelCell Energy, Inc.         2:1  09/13/2000  09/14/2000
EXBD  - Corporate Executive Board Co  2:1  09/15/2000  09/18/2000
SNWL  - SonicWALL Inc                 2:1  09/15/2000  09/18/2000
ORBK  - Orbotech Ltd                  3:2  09/15/2000  09/18/2000
BUD   - Anheuser-Busch Companies Inc  2:1  09/18/2000  09/19/2000
NSIT  - Insight Enterprises Inc.      3:2  09/18/2000  09/19/2000
ACLNF - A.C.L.N. Limited              5:4  09/18/2000  09/19/2000
XTO   - Cross Timbers Oil Co.         3:2  09/18/2000  09/19/2000
CIEN  - CIENA Corporation             2:1  09/18/2000  09/19/2000
HAR   - Harman Intl Industries        2:1  09/19/2000  09/20/2000
IIVI  - II-VI, Inc.                   2:1  09/20/2000  09/21/2000
SBSE  - SBS Technologies, Inc.        2:1  09/20/2000  09/21/2000
PCP   - Precision Castparts Corp.     2:1  09/21/2000  09/22/2000
EMKR  - EMCORE Corporation            2:1  09/25/2000  09/26/2000
SMTC  - Semtech Corporation           2:1  09/25/2000  09/26/2000
MCHP  - Microchip Tech.               3:2  09/26/2000  09/27/2000
MAPS  - MapInfo Corporation           3:2  09/28/2000  09/29/2000
ABMD  - Abiomed, Inc.                 2:1  09/29/2000  10/02/2000
CUZ   - Cousins Properties Inc.       3:2  10/02/2000  10/03/2000
GLW   - Corning Incorporated          3:1  10/03/2000  10/04/2000
SONS  - Sonus Networks Inc.           3:1  10/06/2000  10/09/2000
FLEX  - Flextronics International Ltd.2:1  10/16/2000  10/17/2000
HWP   - Hewlett-Packard Company       2:1  10/27/2000  10/30/2000
PSC   - Philadelphia Suburban         5:4  12/01/2000  12/04/2000
SUNW  - Sun Microsystems              2:1  12/05/2000  12/06/2000

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The Option Investor Newsletter                   Sunday 08-20-2000
Sunday                                                      5 of 5

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Charting Basics:  Looking for signals...
By Mark Wnetrzak

In response to recent requests for discussions about technical
analysis, today we will review another type of candlestick
reversal pattern.

Dark Cloud Cover:

The Dark Cloud Cover is a two-candlestick pattern that signals
a bearish reversal after an up-trend or, at times, at the top of
a congestion area.  The first day of this formation is a strong
white real body (remember, shadows extend out from the body).
The second day's price opens above the high of the prior session
(in a perfect world that would be above the upper shadow) but
then closes near the low of the day and well within the previous
white body.  Many technicians require more than 50% penetration
by the black body (second candlestick) into the white body to
validate the signal.  In any case, the greater the degree of
penetration into the prior day's white body, the more likely a
top will occur.

As typical, the bulls were in complete control and even caused a
gap-up opening.  But, when the rally fails, and the stock closes
near the low of the day (well within the previous day's candle),
the longs begin to second guess their positions.  Those who were
waiting to short the issue now have a logical point at which to
place a stop loss; above the high of the second candle in the
Dark Cloud pattern.

Remember, the longer the up-trend prior to reversal pattern, the
more valid the signal.  If the black body of the second candle
completely covers the prior day's entire white body, a bearish
engulfing pattern will appear.  If the penetration is less than
50% into the previous white candle, another form of "bearish"
confirmation is recommended.  Any type of technical indication
that coincides with the current resistance levels would suggest
that buyers are still unable to gain control of the issue.  In
addition, heavy volume on the second day could be evidence of a
buying "blow-off."

Piercing Pattern:

There is an opposite formation to the Dark Cloud Cover and it is
called the Piercing Pattern.  This bottom reversal formation is
also composed of two candlesticks but appears in a falling issue
or market.  The first candle is a black real body and the second
is a long, white real body.  The white candlestick opens sharply
lower, under the low of the previous (black) session.  Then the
issue moves higher, creating a relatively long, white real body
that closes above the mid-point of the prior day's black real
body.  The majority of characteristics for the Dark Cloud Cover
apply to the bullish Piercing Pattern, only in reverse.

An ideal Piercing Pattern will have a white real body that pushes
more than halfway into the prior session's black real body.  A
strong signal is given when this bullish pattern appears at the
bottom of a long downtrend, especially near support.  However, if
the issue closes under the lows of the Piercing Pattern by way of
a long black candlestick, then another down-leg should resume,
and the reversal signal is nullified.

These reversal patterns can help an investor determine possible
changes in the character of a stock.  Short-term traders should
focus on daily or hourly charts, while covered-call writers or
long-term investors might do better with weekly, or even monthly
charts.  Regardless of the type of trading you favor, it is very
important to understand the fundamentals of candlestick analysis
and common market-timing strategies.

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return!

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

TMWD   59.50  56.94   AUG  45.00 18.63  *$  4.13  11.0%
HLYW    8.94   7.88   AUG   7.50  2.06  *$  0.62   9.8%
ASKJ   17.44  19.50   AUG  15.00  3.25  *$  0.81   8.3%
ACOM   21.75  23.81   AUG  15.00  7.50  *$  0.75   7.6%
CLTR   25.50  25.13   AUG  22.50  3.38  *$  0.38   7.5%
PX     43.00  43.50   AUG  40.00  3.63  *$  0.63   7.0%
ANTC   45.50  41.94   AUG  40.00  6.63  *$  1.13   6.3%
XLNK   16.75  16.00   AUG  12.50  5.25  *$  1.00   6.3% (DLK)
CGO    42.13  44.44   AUG  35.00  8.38  *$  1.25   5.4%
PSFT   18.38  24.50   AUG  15.00  4.38  *$  1.00   5.2%
WFR    18.38  18.19   AUG  15.00  4.38  *$  1.00   5.2%
PMTC   12.69  11.69   AUG  10.00  3.25  *$  0.56   5.2%
MCOM   33.00  33.19   AUG  25.00  9.25  *$  1.25   4.6%
OO     13.94  16.38   AUG  12.50  1.94  *$  0.50   4.5%
IGEN   20.69  17.63   AUG  17.50  3.88  *$  0.69   4.5%
REGN   29.38  33.13   AUG  25.00  4.88  *$  0.50   4.4%
CLTR   22.00  25.13   AUG  17.50  5.00  *$  0.50   4.3%
NPNT   14.63  12.06   AUG  12.50  2.75   $  0.18   3.3%
IMNR   11.00   7.38   AUG   7.50  3.88   $  0.26   3.2%
EPTO   15.13  12.25   AUG  12.50  3.38   $  0.50   3.1%
MCRE   13.06   9.75   AUG  10.00  3.50   $  0.19   2.2%
MAIL    9.44   7.06   AUG   7.50  2.50   $  0.12   1.5%
FRNT   18.44  17.00   AUG  17.50  1.50   $  0.06   0.5%
LOOK   23.00  16.50   AUG  17.50  6.25   $ -0.25   0.0%
GPX     5.81   3.88   AUG   5.00  1.25   $ -0.68   0.0%

XICO    7.81   9.13   SEP   7.50  1.56  *$  1.25  17.4%
DRMD    5.72   6.13   SEP   5.00  1.13  *$  0.41   7.8%
PCTL    6.03   5.78   SEP   5.00  1.38  *$  0.35   6.5%
ROS    15.75  15.19   SEP  15.00  1.88  *$  1.13   5.9%
ECLP   12.00  13.94   SEP  10.00  2.75  *$  0.75   5.9%
XLNK   18.00  16.00   SEP  12.50  6.25  *$  0.75   5.5% (DLK)
ORG    14.38  14.22   SEP  12.50  2.75  *$  0.87   5.4%
FHS    16.06  16.56   SEP  15.00  1.94  *$  0.88   5.4%
NOVN   35.00  32.69   SEP  35.00  2.88   $  0.57   1.3%

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


Tumbleweed (TMWD) made it through the month for maximum profit
though we will claim $2.31 on the early exit - hindsight makes
it look easy to manage these positions.  Memc Electronic (WFR)
rebounded nicely this week!  It is again time to decide which
issues you are still bullish on and develop a plan of action:
Roll forward, roll down, move to an OTM call, sell the stock and
take the current profit, or exit the position and move on.

Positions Closed:

Ivillage.com (IVIL); back in positive territory (Murphy's Law!),
Electric Fuel (EFCX), Bluestone Software (BLSW), and Itxc (ITXC).


Sequenced by Company

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

CCUR   14.63  SEP  12.50  URC IV  2.69  105  11.94   28     5.1%
GSTRF   8.44  SEP   7.50  YVQ IU  1.63  6936  6.82   28    10.9%
LPTH   41.13  SEP  35.00  HDU IG  8.50  246  32.63   28     7.9%
PCTL    5.78  SEP   5.00  PTQ IA  1.19  808   4.59   28     9.7%
ROBV   13.63  SEP  10.00  URV IB  4.13  165   9.50   28     5.7%
SFAM   18.63  SEP  15.00  FQF IC  4.38  709  14.25   28     5.7%
SGNT   12.00  SEP  10.00  GUS IB  2.63  838   9.38   28     7.2%

Sequenced by Return

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

GSTRF   8.44  SEP   7.50  YVQ IU  1.63  6936  6.82   28    10.9%
PCTL    5.78  SEP   5.00  PTQ IA  1.19  808   4.59   28     9.7%
LPTH   41.13  SEP  35.00  HDU IG  8.50  246  32.63   28     7.9%
SGNT   12.00  SEP  10.00  GUS IB  2.63  838   9.38   28     7.2%
ROBV   13.63  SEP  10.00  URV IB  4.13  165   9.50   28     5.7%
SFAM   18.63  SEP  15.00  FQF IC  4.38  709  14.25   28     5.7%
CCUR   14.63  SEP  12.50  URC IV  2.69  105  11.94   28     5.1%

Company Descriptions

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

CCUR - Concurrent Computer $14.63 *** Video-On-Demand ***

Concurrent Computer is a leading provider of high-performance
computer systems, software, and servers.  Concurrent Computer's
XSTREME Division is a leading supplier in the emerging digital
video server marketplace.  Concurrent is also a leading provider
of high-performance, real-time computer systems, solutions, and
software for commercial and government markets.  The company
provides sales and support from offices throughout the world.
On Thursday, Concurrent reported its seventh consecutive quarter
of growth (up 36%) in Video-On-Demand (VOD) revenue from its
XSTREME Division.  The future for this division looks bright with
the commercial launch of VOD service in the Tampa Bay region by
Time Warner and the preliminary deployment with Cox Communications
in San Diego.  Raymond James has started coverage on Concurrent
with an initial "buy" rating.  A favorable entry point in a
speculative stock.

SEP 12.50 URC IV LB=2.69 OI=105 CB=11.94 DE=28 MR=5.1%

Chart =


GSTRF - Globalstar Telecom  $8.44  *** Speculation! ***

Globalstar Telecommunications provides global mobile telephone
service.  Their satellites form a global telecommunications
network which can reach virtually every populated area of the
world.  Globalstar uses Qualcomm's patented CDMA technology, and
Qualcomm has agreed that they will be the only provider of mobile
satellite services to which it will license this technology.
Funding has been a problem for satellite communications companies
but in mid-July, Globalstar exercised an option giving them access
to $250 million in corporate loans.  The company said it expects
to end the year with a cash balance in excess of $100 million and
now they can pursue current business plans, working to establish
themselves as a potential competitor in the communications market.
The company also recently launched commercial service in Peru and
Russia and they now have roaming service in South America as well
as advanced coverage in the Caribbean.  For speculators only!

SEP 7.50 YVQ IU LB=1.63 OI=6936 CB=6.82 DE=28 MR=10.9%

Chart =


LPTH - LightPath Technologies $41.13 *** Own This One ***

LightPath uses its proprietary automated manufacturing processes,
including laser fusion and laser polishing, to provide optical
components and sub-assemblies to telecommunications manufacturers.
Their automated processes significantly increase volume production
with reduced cost and improved reliability and performance.  LPTH
reported favorable earnings this month, reporting a 109% increase
in total revenues to $2.3 million compared with $1.1 million from
the previous year.  Sales bookings increased by over 300% for the
4th quarter primarily due to new collimator and isolator orders
taken from Corning and Lucent Technologies.  LightPath also has
signed an agreement to acquire Geltech, Inc, a leading manufacturer
of precision molded aspherical optics, which should help LightPath
continue to provide a broad and comprehensive range of optical
product solutions to the telecom industry.  A reasonable entry
point for investors who have a long-term bullish outlook for a
growing company.

SEP 35.00 HDU IG LB=8.50 OI=246 CB=32.63 DE=28 MR=7.9%

Chart =


PCTL - PictureTel  $5.78  *** New Videoconferencing System ***

PictureTel is the world leader in developing, manufacturing and
marketing a full line-up of visual and audio collaboration
solutions.  Their products and services allow businesses,
schools, medical facilities, government and other organizations
to work together more effectively.  PictureTel markets a complete
line of videoconferencing systems, multi-location servers,
peripheral equipment and a broad spectrum of enterprise-wide
services.  After disappointing results the last several years,
PictureTel is hoping an improved videoconferencing system will
lead the company to profitability.  Intel collaborated on the
development of the new system, the PictureTel 900 Series, launched
July 31, which solves the traditional videoconferencing problems
and delivers a host of new functionality.  With its financing
secured and the future sale of the company's Starlight division,
PictureTel expects to be profitable by the first quarter 2001.
We like the technical breakout and the move above the 150 dma on
strong volume.

SEP 5.00 PTQ IA LB=1.19 OI=808 CB=4.59 DE=28 MR=9.7%

Chart =


ROBV - Robotic Vision $13.63   *** On the Rebound! ***

Robotic Vision Systems designs, manufactures and sells products
and systems that automate the inspection of semiconductors and
semiconductor packages, provide machine-vision-based scrutiny of
a broad range of commercial and industrial products where high
volume quality control can optimally be accomplished through
automated inspection.   Its products range from state-of-the-art
machine vision systems on a circuit board to wafer inspection
systems with fully automated output capabilities.  In July
Robotic Vision reported earnings with record revenues of $63.3
million (up 12% sequentially) and record net income of $5.8
million.  The company sees continued strong sales over the
balance of 2000 based on both semiconductor and machine vision
activities.  The outlook indeed appears bullish with ROBV being
added to the S&P SmallCap 600 Index.  The company has received
several new orders over the last few weeks and the technicals
suggest an upside resolution to the recent consolidation phase.

SEP 10.00 URV IB LB=4.13 OI=165 CB=9.50 DE=28 MR=5.7%

Chart =


SFAM - SpeedFam-IPEC $18.63 *** Are Semiconductors Back? ***

SpeedFam-IPEC designs, develops, manufactures, markets and
supports chemical mechanical planarization , CMP systems and
other high-throughput precision surface processing equipment.
These systems are used in the fabrication of next-generation
integrated circuits, and SpeedFam also manufactures high
throughput precision surface processing systems for the thin
film memory disk media, silicon wafer and general industrial
applications markets.  Not too much news on SpeedFam after
reporting favorable earning in June, reflecting record CMP
orders (up 22%) and revenue (up 35%).  SpeedFam continues
to take advantage of strong industry fundamentals and the
increasing capital spending by their customers.  With the
semiconductor sector showing strength, SpeedFam appears
ready to challenge July high.

SEP 15.00 FQF IC LB=4.38 OI=709 CB=14.25 DE=28 MR=5.7%

Chart =


SGNT - Sagent Technology $12.00 *** New Blood from IBM ***

Sagent is a provider of Real-time eBusiness Intelligence Solutions
that enable enterprises to win and retain new customers and improve
operational effectiveness.  Sagent's products and services enable
companies to analyze and respond to customer and operational
information in real-time.  In July, Sagent reported record revenues
of $17.5 million for the 2nd quarter, up 21% from last quarter and
up 77% from the same quarter last year, which was in line with
estimates.  On August 8, Sagent named Ben Barnes, a former general
manager for IBM's Business Intelligence Solutions unit, as president
and chief executive.  Shortly after, Chase H&Q analyst James M.
Pickrel upgraded the company to a "strong buy" with a $32 price
target.  This week, Sagent announced a 5-year requirements contract
to provide software and professional services with a potential value
of $10 million to a customer base of worldwide DOD Commands and
Activities.  Sagent offers a conservative entry point for investors
who have a long-term bullish outlook.

SEP 10.00 GUS IB LB=2.63 OI=838 CB=9.38 DE=28 MR=7.2%

Chart =

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Naked Put Percentage List
By Ryan Nelson

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

AKAM    78.94   75   RUG-UO   5.25   1974   27%     75
ARBA   140.31  135   RBU-UG   8.13   3508   23%    135
BRCD   210.06  200   GUF-UT  10.13   5252   19%    195
BRCM   258.13  250   RDU-UJ  11.75   6453   18%    250
CHKP   127.25  125   KGE-UE   8.00   3181   25%    122
DIGL   105.00  100   DGU-UT   7.25   2625   28%    100
DNA    162.00  160   DNA-UL   8.38   4050   21%    160
EXTR   178.13  170   EXR-UN  12.38   4453   28%    170
GSPN   130.38  130   GHY-UF  12.50   3260   38%    120
HGSI   124.63  120   HHA-TD   9.38   3116   30%    115
ITWO   150.00  145   QYI-UH   6.50   3750   17%    145
JNPR   170.81  165   JUD-UM   9.75   4270   23%    165
MUSE   129.88  130   UZQ-UF  14.50   3247   45%    128
NTAP    93.94   90   ULM-UR   6.75   2349   29%     84
PHCM    85.56   85   UMN-UQ   7.50   2139   35%     80
QLGC    93.00   90   QLC-UR   7.13   2325   31%     85
RBAK   147.50  145   BKK-UI  10.63   3688   29%    145
RMBS    82.25   80   BWR-UP   6.88   2056   33%     75
SAPE   124.56  125   SUJ-UE  12.13   3114   39%    124
SDLI   395.00  380   OSL-UP  20.75   9875   21%    370
SEBL   172.31  170   EZG-UN  11.38   4308   26%    170
SWCM   132.56  130   UGM-UF  11.13   3314   34%    130
TLGD   126.44  120   TQK-UD   9.00   3161   28%    120
TSTN   127.88  125   TUA-UE   9.75   3197   30%    123
TUTS    98.44   90   QSS-UR   6.13   2461   25%     94
VRSN   159.75  150   XVR-UJ  10.00   3994   25%    158
VRTX   143.19  130   VQZ-UF   9.25   3580   26%    130


Selling Puts:  A Simple Approach...
By Ray Cummins

One of our new subscribers requested a basic explanation of this
strategy.  In addition, he also suggested that we review the
reasons we recommend the "deep-out-of-the-money" technique to
conservative option traders.

Put writing (selling) is designed to complement a conservative
stock trading portfolio because it offers two different methods
for generating profits: collecting option premium by selling an
out-of-the-money Put or acquiring a stock at a reduced price.

The basic strategy involves selling a Put against funds or other
collateral held in your brokerage account.  The sole purpose of
the collateral is to assure that money is available to purchase
the stock should the Put be assigned to the account.  Generally,
the buyer of the Put will exercise the option if the underlying
stock drops below the sold strike price at expiration.  If the
share value remains above the sold strike price at expiration,
the Put will expire worthless and the option premium retained by
the seller constitute a profit.

Put writing takes advantage of the concept of time decay; the
time value premium of option declines as it approaches expiration.
Unlike stock trading, where an investor can hold on to a stagnant
issue indefinitely hoping it will rebound, the value of an option
will decline if the underlying stock fails to move in the correct
direction.  This premium erosion allows a trader to profit without
having to correctly predict the future movement of the underlying
issue, as long as it remains above the sold strike price.  Time
value premium decays at a predictable rate and falls rapidly in
the final month of option expiration.

Writing "naked" puts for monthly income generally involves selling
out-of-the-money options on a stock that the investor expects to
finish above the sold strike price.  With careful selection of the
underlying issue, most sold Puts will expire worthless, allowing
the investor to keep the premium and receive a reasonable profit,
without ever having to buy the underlying stock.  There is still
the margin requirement but this commitment of collateral funds is
almost always less than the outright purchase of an equivalent
number of shares.

An investor who is interested in buying a stock may also consider
selling a cash-secured put as another means of acquiring the issue.
Generally, when a person wants to buy a stock at a specific price,
he will use some type of "limit" order.  The problem is, after the
initial order is placed, the stock will not be purchased until it
trades at or below the limit price.  Instead of waiting for that
movement to occur, he could simply write a cash-secured put.  A
premium (the bid price of the option) will be paid to his account
for the obligation to buy the stock.  He has determined that the
cost basis (the sold strike price minus the option premium) is an
acceptable price at which to own this new stock, that he wants to
be a part of his portfolio.  This strategy is also used by fund
managers, as well as large corporations, because it pays them for
assuming the obligation to buy a particular stock that they intend
to eventually add to their portfolio.

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.


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

DRMD    5.75   6.13   AUG   5.00  0.31  *$  0.31  24.1%
HLYW    8.94   7.88   AUG   7.50  0.50  *$  0.50  20.6%
CLTR   24.00  25.13   AUG  20.00  0.56  *$  0.56  19.8%
GSTRF  10.56   8.44   AUG   7.50  0.56  *$  0.56  18.2%
WAVX   18.06  17.44   AUG  15.00  0.38  *$  0.38  18.2%
R      21.25  21.31   AUG  20.00  0.88  *$  0.88  15.7%
ZIXI   55.00  45.06   AUG  40.00  1.63  *$  1.63  14.0%
STLW   36.69  40.38   AUG  25.00  0.50  *$  0.50  13.9%
NFLD   17.50  15.13   AUG  15.00  1.00  *$  1.00  13.2%
ATMS   11.44   9.50   AUG   7.50  0.31  *$  0.31  13.0%
CMRC   46.25  50.00   AUG  35.00  0.56  *$  0.56  12.4%
PSFT   21.88  24.50   AUG  17.50  0.44  *$  0.44   9.9%
THC    31.19  30.63   AUG  30.00  0.81  *$  0.81   9.7%
DRTE   30.38  26.50   AUG  25.00  0.31  *$  0.31   9.5%
ICGE   39.94  30.44   AUG  30.00  0.75  *$  0.75   9.3%
ADPT   24.00  22.94   AUG  20.00  0.31  *$  0.31   7.6%
RHAT   25.31  23.44   AUG  17.50  0.38  *$  0.38   7.6%
JEF    26.56  27.19   AUG  25.00  0.50  *$  0.50   7.6%
MRVT   22.63  20.38   AUG  17.50  0.50  *$  0.50   7.2%
LAMR   49.88  48.78   AUG  45.00  0.50  *$  0.50   7.0%
GELX   28.56  34.88   AUG  25.00  0.38  *$  0.38   6.7%
NXLK   39.69  37.44   AUG  30.00  0.75  *$  0.75   6.3%
INFS   37.00  46.59   AUG  30.00  0.50  *$  0.50   5.2%
PILT   17.81  12.00   AUG  12.50  0.50   $  0.00   0.0%
SQST   14.00   9.50   AUG  10.00  0.50   $  0.00   0.0%
RAZF   22.25  15.94   AUG  17.50  0.56   $ -1.00   0.0%

GSTRF   7.63   8.44   SEP   5.00  0.31  *$  0.31  14.6%
CTIC   39.25  37.50   SEP  30.00  1.38  *$  1.38  13.0%
IMAX   28.06  27.00   SEP  22.50  0.94  *$  0.94  12.4%
FNSR   29.00  37.50   SEP  22.50  0.94  *$  0.94  12.1%
JDEC   21.88  23.63   SEP  17.50  0.69  *$  0.69  11.8%
TLXN   19.88  18.88   SEP  15.00  0.44  *$  0.44   7.2%
CRUS   27.44  28.69   SEP  22.50  0.50  *$  0.50   6.6%
NDC    30.06  30.00   SEP  22.50  0.38  *$  0.38   5.2%

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


The week resulted in a favorable bounce for many issues that
were testing support areas.  Of course, taking the early out
on Tidel Tech (ATMS) for half the profit shown above appears
a bit too conservative now.  Once again, you must evaluate the
long-term outlook on any positions that were not closed out.
Based on common exercise practices, there is a slim chance
Pilot Networks (PILT) or Sciquest (SQST) will not be assigned.

Positions Closed:

Westell (WSTL), Bluestone Software (BLSW)


Sequenced by Company

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

CS     34.75  SEP  27.50   CS UY  0.44  134  27.06   28     6.4%
FNSR   37.50  SEP  30.00  FQY UF  0.81  364  29.19   28    10.6%
GZTC   38.00  SEP  30.00  GEQ UF  0.81  57   29.19   28    10.5%
LPTH   41.13  SEP  30.00  HDU UF  1.00  24   29.00   28    11.8%
REGN   33.13  SEP  25.00  RQP UE  0.38  1    24.62   28     5.9%
RHAT   23.44  SEP  17.50  RCV UW  0.50  538  17.00   28    10.5%
SIPX   37.50  SEP  30.00  UQX UF  0.75  2    29.25   28     9.9%

Sequenced by Return

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

LPTH   41.13  SEP  30.00  HDU UF  1.00  24   29.00   28    11.8%
FNSR   37.50  SEP  30.00  FQY UF  0.81  364  29.19   28    10.6%
GZTC   38.00  SEP  30.00  GEQ UF  0.81  57   29.19   28    10.5%
RHAT   23.44  SEP  17.50  RCV UW  0.50  538  17.00   28    10.5%
SIPX   37.50  SEP  30.00  UQX UF  0.75  2    29.25   28     9.9%
CS     34.75  SEP  27.50   CS UY  0.44  134  27.06   28     6.4%
REGN   33.13  SEP  25.00  RQP UE  0.38  1    24.62   28     5.9%

Company Descriptions

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

CS - Cabletron Systems  $34.75  *** Spin-off Rally? ***

Cabletron Systems is a holding company for subsidiaries focused
on the new Internet economy.  These companies include Aprisma
Management Technologies, Enterasys Networks, GlobalNetwork
Technology Services and Riverstone Networks.  They enable CS to
focus on the high-growth areas of the communications marketplace,
including infrastructure management, enterprise e-business,
professional services and service providers.  Riverstone Networks
has been in the news recently, with analysts saying the initial
public offering papers are expected to be filed within the next
two weeks.  They also suggest that Riverstone is likely the most
attractive spin-off from Cabletron and will allow the parent
company to realize the potential it had two years ago as Yago,
before being acquired.  Riverstone may also benefit from growing
within a larger operation and based on the bullish activity in
CS, investors believe the new venture is poised to become the
next "hot" network equipment maker in the industry.

SEP 27.50 CS UY LB=0.44 OI=134 CB=27.06 DE=28 MR=6.4%

Chart =

FNSR - Finisar Corporation  $37.50  *** Second Chance! ***

Finisar is a leading provider of fiber optic subsystems and
network performance test systems that enable high-speed data
communications over Gigabit Ethernet-based local area networks,
and Fibre Channel-based storage area networks.  Finisar also
provides unique network performance test systems which assist
networking and storage equipment manufacturers in the design of
reliable, high-speed networking systems and the monitoring of
of these systems.  In early August, Finisar announced that it
had delivered the first SONET OC-48 Small Form Factor optical
transceiver units, which operate at data rates of 2.488 Gb/s
over single-mode fiber.  According to Finisar's CEO, this opens
another important market sector as telecom companies begin the
process of upgrading metropolitan networks to handle the enormous
demand for bandwidth.  In addition, the provider of fiber optics
for high-speed data networks said it expects revenues for its
most recent quarter to be up about 95% over last year's results.
The fundamental outlook for the company is great but we simply
favor the bullish technical condition of the issue.

SEP 30.00 FQY UF LB=0.81 OI=364 CB=29.19 DE=28 MR=10.6%

Chart =


GZTC - Genzyme Transgenics  $38.00  *** Biotech Sector ***

Genzyme Transgenics is a leader in the application of transgenic
technology to the development and production of recombinant
proteins for therapeutic and other biomedical uses.  GZTC has
produced numerous such proteins, both independently and through
collaborations with various commercial and academic organizations.
GTC also owns and operates a top pre-clinical contract research
organization, Primedica Corporation, which provides services such
as pre-clinical efficacy and safety testing, IN VITRO testing and
formulation development to pharmaceutical, biotechnology, medical
device and other companies.  The company recently announced that
quarterly earnings rose 26%, beating analysts' consensus estimates
on better-than-expected therapeutic drug sales.  The company's
record revenues were led by solid growth of Cerezyme, along with
sales of Renagel that surpassed expectations.  Those of you with
interest in the Biotech sector should consider this issue for a
long-term portfolio position.

SEP 30.00 GEQ UF LB=0.81 OI=57 CB=29.19 DE=28 MR=10.5%

Chart =


LPTH - LightPath Technologies $41.13 *** Optical Solutions ***

LightPath uses its proprietary automated manufacturing processes,
including laser fusion and laser polishing, to provide optical
components and sub-assemblies to telecommunications manufacturers.
Their automated processes significantly increase volume production
with reduced cost and improved reliability and performance.  LPTH
reported favorable earnings this month, reporting a 109% increase
in total revenues to $2.3 million compared with $1.1 million from
the previous year.  Sales bookings increased by over 300% for the
4th quarter primarily due to new collimator and isolator orders
taken from Corning and Lucent Technologies.  LightPath also has
signed an agreement to acquire Geltech, Inc, a leading manufacturer
of precision molded aspherical optics, which should help LightPath
continue to provide a broad and comprehensive range of optical
product solutions to the telecom industry.  A reasonable entry
point for investors who have a long-term bullish outlook for a
growing company.

SEP 30.00 HDU UF LB=1.00 OI=24 CB=29.00 DE=28 MR=11.8%

Chart =


REGN - Regeneron Pharmaceutical  $33.13  *** Own This One! ***

Regeneron Pharmaceuticals is a biopharmaceutical company that
discovers, develops, and intends to commercialize therapeutic
drugs for the treatment of serious medical conditions.  They are
currently expanding from an initial focus on complex degenerative
neuralgic diseases, and the company has recently broadened its
product pipeline to include drug candidates for the treatment of
obesity, rheumatoid arthritis, cancer, allergies, ischemia, and
other diseases and disorders.  Regeneron rallied last week after
John Burnham of the Burnham funds promoted the company as his
"double your money" pick on a CNBC report.  Investors apparently
agree with the optimistic outlook and a number of traders posted
positive comments about the company.  Their most promising drugs
include; Axokine, which has exhibited excellent phase I trials
and VEGF-Trap molecule, designed for the anti-angiogenesis of
tumor inhibition, which will be in trials next Spring.  This is
a great speculation play for those who are bullish on the issue.

SEP 25.00 RQP UE LB=0.38 OI=1 CB=24.62 DE=28 MR=5.9%

Chart =


RHAT - Red Hat  $23.44  *** Growing Linux Acceptance! ***

Red Hat is a worldwide developer and provider of open source
software products and services.  Their product offerings include
Red Hat Linux and other related tools, open source software
applications, documentation, manuals and general merchandise.
Professional services offerings include technical support and
maintenance, custom development, consulting, training and basic
education, developer support and hardware certification.  The
company is a leader in the Linux software industry, commanding
almost 75% of the market.  In a bid to increase its dominance,
Red Hat recently disclosed plans to buy C2Net Software, the #1
company in the secure Web server market with a 30% share of the
industry.  International Business Machines (IBM) recently said
it would sell computers packaged with Red Hat's Linux system and
Motorola (MOT) will also market their products.  A speculative
opportunity for traders who agree with the bullish outlook.

SEP 17.50 RCV UW LB=0.50 OI=538 CB=17.00 DE=28 MR=10.5%

Chart =


SIPX - Sipex  $37.50  *** Semiconductor Recovery! ***

Sipex designs, manufactures, and markets high performance analog
integrated circuits.  Sipex sells its products across the analog
semiconductor market and has targeted high-growth sectors that it
believes are especially compatible with its design and process
capabilities.  Applications for their products include networking,
telecommunications, computers, industrial instruments, aerospace,
and military.  Deutsche Banc Alex. Brown recently raised Sipex to
a "strong buy" due to confidence the company is making excellent
progress in its new California manufacturing.  The new facility
is expected to help Sipex meet strong demand and reduce overall
costs, increasing gross margins over the next two to three years.
Deutsche Banc also noted that business remains strong and Sipex
has a number of new products which should keep demand robust and
third quarter performance "on track."

SEP 30.00 UQX UF LB=0.75 OI=2 CB=29.25 DE=28 MR=9.9%

Chart =

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Another Great Month!

The volatile August recovery produced excellent results for the
Spreads/Combos portfolio.

Wednesday, August 16

Industrial stocks declined today as retailers slumped on concerns
of future earnings growth.  The Dow Jones industrial average was
down 58 points at 11,008.  The Nasdaq Composite index managed to
achieve small gains, closing up 9 points at 3,861 amid a rebound
in the chip sector.  The S&P 500 index was down 4 points at 1,479.
Trading volume on the NYSE reached 931 million shares with broad
market advances beating declines 1,606 to 1,239.  Activity on the
Nasdaq was average at 1.39 billion shares.  Technology advances
beat declines 2,039 to 1,903.  In the bond market, the 30-year
Treasury fell 15/32, pushing its yield up to 5.74%.

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

Red Hat     RHAT   SEP22C/25C   $1.50   debit   bull-call
Red Hat     RHAT    SEP-20NP    $1.00   credit  naked put
Regeneron   REGN   SEP25C/30C   $3.75   debit   bull-call

Red Hat traded higher from the open, offering little chance to
participate in the new combination position.  We will monitor
the issue for an entry point at the suggested price during the
next few days.  Regeneron moved in exactly the opposite manner,
slumping at the opening bell and our bullish debit-spread was
available near the recommended price.

Portfolio Plays:

The Dow industrials retreated today amid profit-taking from the
recent rally.  Tame economic data, which confirmed the view that
the Federal Reserve would not raise rates at the upcoming FOMC
meeting, had little impact on investors.  The retail group was
particularly weak with Home Depot (HD) leading the slump after
analysts downgraded the company, citing its rich valuation and
the slowing economy.  Our recent bearish pick, Hewlett Packard
(HWP) opposed the Dow’s decline and after the bell, the company
reported a third-quarter profit of $0.97 per share, well above
consensus estimates.  Hewlett Packard also announced a 2-for-1
stock split and based on the optimistic after-hours trading, our
position may not be so favorable tomorrow.  In the technology
sector, semiconductor issues continued to recover and with the
recent rally, a number of under-performing portfolio plays are
once again profitable.  One of our new positions, Sipex (SIPX)
is now comfortably in-the-money, providing an overall credit of
$1.62 in the bullish, debit-spread combination.  Wednesday’s big
surprise was Virata (VRTA), which see-sawed back down to the $65
range, and now it appears the issue will again test support at
$55.  Our cost basis in the current play is near $40, however we
have an obligation to buy the stock near that price until late
October.  Looking back, it may have been easier to close the
original position for a small loss, rather than accept the risk
of a (future) major correction.

One the positive side, Internet stocks also advanced Wednesday,
with Amazon.com (AMZN) and American Online (AOL) rallying after
Merrill Lynch analyst Henry Blodget said sentiment is improving
in the group.  Our bullish position in AOL reached a break-even
exit (our target) as the issue neared $55.  Of course, after we
closed the play, AOL continued to climb finishing just below the
session high at $55.50.

Thursday, August 17

Stocks moved higher today in a broad-based rally that saw almost
every sector achieve substantial gains.  Financial stocks pushed
the Dow 47 points higher to 11,055.  Technology issues were also
strong with the Nasdaq closing up 79 points at 3,940.  The S&P
500 index was up 16 points to 1,496.  Trading volume on the NYSE
reached 905 million shares with advances beating declines 1,616
to 1,220.  Activity on the Nasdaq exchange was moderate at 1.42
billion shares.  Technology advances outpaced declines 2,150 to
1,826.  In the bond market, the U.S. 30-year Treasury rose 16/32,
pushing its yield down to 5.705%.

Portfolio plays:

Industrial stocks recovered today and because financial issues
were the driving force in the move, some analysts are suggesting
the FOMC is done raising rates in the near term.  J.P. Morgan
(JPM) topped the blue-chip effort, up $4 after slumping during
the last two sessions.  The Wall Street Journal's "Heard on the
Street" column said the stock is cheap and currently trades at a
favorable price compared to other investment banks.  Meanwhile,
in the technology group, semiconductor and biotech stocks moved
higher and telecom shares also enjoyed bullish activity.  In the
fiber-optics sector, Ciena (CIEN) was a big gainer, climbing $15
to $179 after posting third-quarter earnings of $0.19 per share,
well above analysts' consensus estimates.  The recent 2-for-1
stock split announcement and the upside earnings surprise have
combined to push the issue far beyond our original expectations.
As we reported earlier in the week, our exit strategy began as
the issue crossed through recent technical resistance near $175.
We closed the short option (SEP-$190C) near that price range at
$10.75, and sold the long option (SEP-$195C) at $10.25 later in
the day.  The price of that option moved up near $11 before the
session ended but we were happy with a break-even exit.  There
is still a high probability that CIEN will fall short of $190 at
expiration but with all of the new optimism, it may be better to
avoid the risk entirely.

In another surprising outcome, shares of Hewlett-Packard (HWP)
slid to $108, one day after declaring a 2-for-1 stock split, as
analysts expressed disappointment with the firm’s third-quarter
revenues.  HWP reported a profit of $0.97 per share, including
investment gains, on revenues of $11.82 billion and First Call
was only looking for an $0.85 profit.  Banc of America analyst
Kurt King downgraded the stock saying that revenues were below
expectations and the company's optimism will now be viewed as
"less credible" after last quarter's results.  Regardless of the
reason for the decline, our new synthetic position closed at $1
profit and that is a favorable, one-week return, considering the
potential for loss that existed just one day ago.

Friday, August 18

Equity markets slid lower today in a listless session as traders
awaited the outcome of next week's FOMC meeting.  The Dow Jones
industrial average was down 9 points at 11,046 and the Nasdaq
ended 10 points lower at 3,930.  The S&P 500 index was also down
4 points to 1,491.  Trading was extremely light with volume on
the NYSE of only 817 million shares.  Broad market declines led
advances 1,603 to 1,183.  On the Nasdaq exchange, volume reached
1.4 billion shares with declines beating advances 2,093 to 1,878.
In the bond market, the 30-year Treasury rose 8/32, pushing its
yield down to 5.67%.

Portfolio Plays:

The majority of stocks traded aimlessly today as investors waded
through the session with caution ahead of the FOMC meeting next
Tuesday.  Almost all of the major companies in the market have
reported quarterly earnings and there was little incentive to
speculate prior to the upcoming interest rate decision.  On the
Dow, General Motors (GM) rallied after financier Carl Icahn said
he would buy $15 million of stock.  Analysts said the optimistic
move suggests there is additional value in the auto sector.  In
the technology group, Sun Microsystems (SUNW) was a very popular
issue, adding $3 to finish near $122 after declaring a 2-for-1
stock split.  Our bullish synthetic position in the issue has
returned a $9 profit in less than one month.  The semiconductor
group was strong again after positive industry forecasts from a
number of major brokerages.  Our combination position in Sipex
(SIPX) participated in the move and it is now trading at a $1.75
credit overall, well above the initial profit target.  In the
broader market, major drug, biotech and financial stocks slid
lower and surprisingly, oil companies also slumped even after a
report from Goldman Sachs suggested the risk of an oil shock to
the U.S economy is unusually high, and a 10% probability exists
that crude prices could exceed $50 a barrel within the next year.

The "double witching" expiration of options on stocks and stock
indexes had little impact on the market and in our portfolio,
there was little activity of significance.  A few remaining
adjustments were made in long-term positions but there were no
major changes in our outlook for any of the underlying issues.
A complete list of the current plays and a summary of results
for the August expiration period will be posted in Tuesday’s
edition of the OIN.

Good Luck!

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

One of our subscribers reported the increased bullish activity in
a number of small-cap magnetic storage companies.  We have also
observed increased option activity in that group and based on the
new technical outlook, there is a potential for upside activity
for many of those companies over the next few months.  Here are
two candidates for your review and as with any positions, they
should be evaluated for portfolio suitability and reviewed with
regard to your strategic approach and trading style.

MXTR - Maxtor  $7.44  *** Cheap Speculation! ***

Maxtor is a supplier of hard disk drive storage products for
desktop computer systems.  The company's DiamondMax product
family consists of standard hard disk drives with storage
capacities that range from 4.3 gigabytes to 60 gigabytes.  These
products have high-speed interfaces for greater data throughput,
a robust mechanical design for reliability, magneto-resistive
head technology to enable high recording density, and a digital
signal processor electronic architecture.  Their customers
include original equipment manufacturers, distributors, and
national retailers such as Compaq, Dell, IBM, Hewlett Packard,
Apple, Bell Micro, Ingram, Best Buy, Comp USA, and Staples.
Additionally, several smaller retailers and resellers carry
Maxtor products purchased through its distribution network.

It’s strange that stocks in this group are rallying because
Salomon Smith Barney recently lowered its ratings and price
targets on a number hard disk drive and component companies,
citing an equipment demand-supply imbalance.  Analysts reported
that historically, it takes two to four quarters to recover from
this condition but investors don’t appear to have any concerns
about the current fundamentals of the industry.  The optimistic
outlook can be clearly seen in the recent trading activity of
MXTR, which is up almost 20% in the past two sessions.

With favorable disparities in option premiums, this position
offers an excellent speculation play for those who are bullish
on the issue.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN-10.00  MQL-AB  OI=466  A=$1.43
SELL CALL  SEP-10.00  MQL-IB  OI=112  B=$0.25

The basic premise in a calendar spread is simple; time erodes
the value of the near-term option at a faster rate than it will
the far-term option.  A bullish type of calendar spread is when
the underlying issue is some distance below the strike price of
the options.  This position is speculative with low initial cost
and large potential profits.  Two favorable outcomes can occur:
the stock rallies in the short-term and the position is closed
for a profit as time value erosion in the short option produces
a net gain or; the underlying stock consolidates, allowing the
sold option to expire and then eventually rallies above the long
option strike price.  It is generally best to establish this type
of spread at least 2 - 3 months before the long option expires,
capitalizing on the ability to sell another option against the
longer-term position.

Chart =

RDRT - Read-Rite  $5.94  *** Conservative Ownership! ***

Read-Rite supplies magnetic recording heads for the hard disk
drive market.  The company designs, manufactures and markets
magnetic recording heads as head gimbal assemblies (HGAs) and
incorporates multiple HGAs into headstack assemblies.  Their
products are sold primarily for use in 3.5-inch form factor HDDs.
The company also supplies magneto-resistive tape heads for tape
drives including multi-channel heads for super digital linear
tape drives.  In addition, Read-Rite produces thin film MR tape
heads for use in QIC tape drives in the four gigabyte to 10 GB
range per cartridge.

Shares of disk drive manufacturers rallied last week, buoyed by
optimism that many of the companies in the sector may return to
profitability in the second half of the year.  Investors bought
both stock and stock-options in a number of downtrodden issues
just one week after Salomon Smith Barney downgraded the sector,
based on concerns that the industry will take longer to recover
than previously expected.  Obviously, someone is not reading
the analysts’ reports and those who choose to follow the tape
rather than the balance sheet may consider this position for a
conservative portfolio.

PLAY (very conservative - bullish/covered-combination):

SELL CALL  JAN01-5.00  RDQ-AA  OI=14004  B=$2.38
SELL PUT   JAN01-5.00  RDQ-MA  OI=5182   B=$1.25

Chart =

                        - CREDIT SPREADS -

LWIN - Leap Wireless  $73.44  *** New Trading Range? ***

Leap Wireless International is a wireless communications carrier
that deploys, owns, and operates in wireless networks in domestic
and international markets with strong growth potential.  Through
its operating companies, Leap has launched all-digital wireless
service in the United States, Mexico and Chile.  The company is
dedicated to bringing the benefits of reliable, cost-effective
and high-quality wireless communications services to domestic and
growth markets.

Originally a subsidiary of Qualcomm (QCOM), Leap now expects to
own, upon completion of pending asset acquisitions, wireless
communications licenses covering almost 140 million potential
customers in North America.  The company’s major license holdings
include: PEGASO, a joint venture formed to construct and operate
a wireless communications network in Mexico; SMARTCOM, a wholly
owned indirect subsidiary that offers PCS services in Chile; and
Chase Telecommunications, which owns spectrum licenses covering
almost 7 million potential customers in the Tennessee area.  In
domestic services, Leap’s strategy is to offer consumers a simple
and affordable wireless service plan that allows them to make all
local calls for a flat monthly rate.  The approach is unique in
that most wireless operators offer customers a bundle of services
including a maximum amount of usable minutes but with additional
charges imposed for using additional airtime.

One newsworthy item: Company officials recently announced they
will hold a special meeting of shareholders in late September to
approve an amendment to increase the authorized common stock of
the company from 75,000,000 to 300,000,000 shares.  Some traders
see this activity as an indication of a future stock split and
obviously, the increased liquidity may also boost institutional
interest in the company.

We simply favor the bullish, technical "breakout" and this play
offers a conservative method to speculate on the future movement
of the underlying issue.

PLAY (aggressive - bullish/credit spread):

BUY  PUT  SEP-60  UIN-UL  OI=42  A=$1.75
SELL PUT  SEP-65  UIN-UM  OI=19  B=$2.62
INITIAL NET CREDIT TARGET=$1.00-$1.12  ROI(max)=28%

Chart =

SMTC - Semtech  $94.00  *** Earnings Play! ***

Semtech is a supplier of analog and mixed-signal semiconductors.
Semtech designs, manufactures, and markets a range of products
for commercial applications, the majority of which are sold to
the communications, industrial and computer markets.  Their
semiconductors enable power management, testing, protection and
a range of other functions in products that require analog or
mixed-signal processing.

Semtech is very popular company in the Semiconductor industry
and many analysts favor its fundamental outlook.  The current
analyst ratings include positive recommendations from both Lehman
Brothers and Morgan Stanley Dean Witter.  Based on the bullish
activity in the issue, investors also believe Semtech is on track
to deliver future profitability.  Unfortunately, the company has
a common, undesirable trait.  The underlying share value usually
rallies prior to earnings, only to correct after the report is
issued.  The announcement date is on or about August 22, and we
plan to "target shoot" a credit of $1.25-$1.38, providing a cost
basis at the current technical support near $73-$74.

This speculative position offers excellent reward potential for
traders who favor the outlook for the semiconductor industry.

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-70  QTU-UN  OI=11 A=$1.25
SELL PUT  SEP-75  QTU-UO  OI=8  B=$1.93
INITIAL NET CREDIT TARGET=$1.25-1.38  ROI(max)=38%

Chart =

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