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Daily Newsletter, Wednesday, 08/23/2000

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The Option Investor Newsletter               Wednesday  08-23-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        08-23-2000        High      Low     Volume Advance/Decline
DJIA    11144.70 +  5.60 11172.30 11059.70  866 mln   1289/1496
NASDAQ   4011.01 + 52.80  4011.75  3902.11 1.46 bln   1946/2003
S&P 100   822.81 +  4.23   823.71   814.02   totals   3235/3499
S&P 500  1505.97 +  7.84  1507.20  1489.52           48.0%/52.0%
RUS 2000  517.88 +  0.42   518.00   513.95
DJ TRANS 2735.35 - 87.73  2822.24  2730.04
VIX        19.86 +  0.24    20.58    19.63
Put/Call Ratio       .50
******************************************************************

A Classic Day in Rangebound, Technical Trading

One day after the NASDAQ closed at its 200-dma at 3958, technical
traders commanded the market.  I think I'll just step aside while
those trading desks do their stuff.  Yet, what initially looked
like a boring day, turned out to be rather interesting.  It's
beginning to feel like things are slowly starting to heat up as
September quickly approaches.  So what does this mean for the
direction of the market?  Let's look at a variety of developments
that have the markets moving.

First, the Fed is out of the picture at least until November with
Monday's announcement being a non-event.  Investors can check that
worry off the list.  Like Jim said last night, you knew it was
coming, and many investors and traders took the opportunity to
sell into the close yesterday, and somewhat this morning.  Today
was picture perfect, rangebound, technical trading.  Traders
brought the NASDAQ down to 3900 within the first hour and from
there, it bounced solidly on buying interest.  And they kept
buying and buying until about 3980, blowing past the 200-dma at
3962.  Looking at the intraday chart below, you can see that the
sellers took the NASDAQ back to test the 200-dma as support twice
within a half hour, just to be sure.  The rest of the afternoon
was a steady climb to the next opposition of 4000.  Now, as it
slowly approached that level, I curiously watched the chart's
every tick.  What were these trading desks going to do?  Would
they headfake on the buy side, then pull their bids to jump on
the ask?  After a few minutes at 3999, they continued to bid the
index right on through 4000.  The NASDAQ closed at the high of
the day, up 52.80 at 4011, a rather significant feat considering
that it hasn't closed over 4000 since July 25th.  Another trading
fact is that the NASDAQ traded in a 100 point range, after being
down 56 points at the lows.  Haven't had that since August 3rd.
So we are seeing some interesting developments as Labor Day
approaches.







Granted, volume on the NASDAQ was a light 1.43 bln shares, it does
have a solid uptrend since August 3rd.  The tech stocks are
strengthening and September seasonally is a good month to own them.
While the NASDAQ most likely will be rangebound until after the
Labor Day weekend, the upside bias is clear and investors may have
begun to snatch up some of those beaten down high-fliers.  Semi
stocks have been on that list.  Yesterday, after the close, the
Book-to-Bill ratio for North American chip manufacturers was
released for July and it came in at 1.23 versus June's 1.27.  In
layman's terms, this means that orders for chips were 23% higher
than shipments for the month of July.  Typically, this figure
drops in July as the cycle slows, but this is a rather neutral
move showing that future orders should remain strong.  To add to
that, Merrill Lynch analyst Brett Hodess notes that the decline
from July came more from "an acceleration in shipments (rather)
than from slowing orders."  Further confirming the demand in the
sector, the WSJ reported that a shortage of INTC's Pentium III
XEON microprocessors is creating tremendous backlogs.  INTC said
that they have been aware of this for nine months, as well as
their customers, and that they are "ramping up manufacturing
across the entire product line."  The Semi Index(SOX.X) was up
almost 3% today, given the outlook.  Individual issues had buyers
flocking to them: INTC(+2.50), AMAT(+3.44), KLAC(+4.69),
NVLS(+3.06), and TER(+3.69).  Eat your heart out, Jonathan Joseph!
Doesn't look like this cycle is slowing!

Over at the NYSE, the INDU managed to squeak out a 5.50 gain
today on light volume of 864 mln shares, closing at 11144.  It
was an up-and-down session for the INDU as well, but the trend
was decidedly up after the index fell out of bed this morning.
Generally mirroring the NASDAQ, the INDU hit its low of 11059
by 10:10am EDT, only to recover throughout the day.  During
today's climb, the index paused to drop back and establish
intraday support at 11100.  But, without the Financials, which
have been leading the market, it was difficult to cover any new
ground for the INDU.  Financials came under pressure from profit
takers, who decided to clip some of their proceeds.  JPM was down
$2.50 and C fell $1.94, coming off recent highs.  Yet, it's time
for the Financials to take a breather, considering the strong
rally they have had over the past month.  A little consolidation
before September wouldn't hurt one bit.  We will be watching this
sector carefully to reestablish its leadership to drive the
markets higher in the Fall.  Technically, you can see on the chart
below that August has brought an impressive rally to the INDU,
and establishes it soundly above 11000.




Propping up the INDU today was XOM(+1.38).  The October crude oil
future contract gained 80 cents to close at $32.02, after hitting
an intraday high of $32.80.  This comes after the American
Petroleum Institute(API) released data showing a 7.8 mln barrel,
larger-than-expected decline in oil inventories, bringing it to a
24 year low of 279 mln barrels.  The Energy Department only
reported a 4.1 mln barrel decrease and an inventory of 284 mln.
This lower inventory causes short-term price inelasticity in
supply, resulting in greater price volatility.  Also, concerns
over the hurricane season in the Gulf, a key production area,
can add uncertainty to oil prices, translating into volatility.
For consumers, this means that relief at the pump may be further
off than expected.  For oil service stocks, it means new all-time
highs and continued uptrends.

Some interesting developments in the world of high speed Internet
access came from SBC Communications.  The company announced that
it would start testing its "neighborhood gateways" that will allow
them to reach more businesses and consumers with DSL connections.
There are ten other phone companies that will participate in the
tests to be performed in California and Texas.  SBC ensures that
rivals will be able to take advantage of these "gateways," in
order to ease FCC concerns over stifling competition.  Right now,
DSL can only be offered within a 3.5 mile radius from the central
office, in general, so there are constraints on the reach of high
speed Internet access.  SBC wants to connect "neighborhood
gateways," or sub-stations, to the central office, and then
connect from there to the consumers.  The end-result should be
more DSL connections to the consumer quicker.  SBC was up $0.56 to
$40.19.

Looking forward, I think it will be of the essence to watch these
markets very closely the next two weeks.  We are at an inflection
point as the summer end draws near.  Financials and Techs are
what will drive this market into the Fall.  I will be waiting for
an entry opportunity, hopefully after a pullback and/or a
consolidation.  Once the volume comes back to add conviction to
these recent moves, we could be off to the races.  Yet, for now,
as I mentioned above, we are still rangebound and the big-money
trading desks are running the show.  Will it be 4200 first or
3800?  Volume has been light, and its return will indicate that
money managers are back with their shopping carts.  Another
indicator that continues to be of concern is the VIX.X, closing at
19.88.  It's screaming over-bought!  We will have to wait and see
as September draws near.  I'm not bearish here, just cautious
as the summer has humbled many.  Until a discernable trend makes
itself clear, remember, when in doubt, stay out.


Matt Russ
Asst. Editor


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***************
ASK THE ANALYST
***************

How to spot the future winners.
By Eric Utley

Do your homework, and you'll make money.  Last week I mentioned
there were stocks emerging as new leaders, which might carry the
market during the next bull run.  Joan wrote in, "Will you please
list these newer stocks... I'm looking for stocks that are worth
monitoring and would like to know the names."  While I cannot
list the stocks I think will lead the market higher, I can tell
you exactly what I look for when picking stocks for my investing
account.  In my humble opinion, the single most important factor
in picking winning stocks is finding companies with growing
earnings.  After all, when it gets right down to it, common stock
holders share in the profits of a corporation.  Earnings are what
matters!  That's why I always try to highlight a company's
earnings picture when I review stocks in this column.  Along with
growing profits, you have to look for company's operating within
growing sectors of the economy.  That's vague, I know, but it's
important.  There are always sectors of the economy that are
emerging, slowing, or dying; make sure you're in the former.
A few sectors that have recently emerged as winners, in no
particular order: Generic Drugs, Asset Managers, Commercial
Schools, Dental Services, Biotech Instruments and Software, and
of course, Fiber Optics and the host of Chip sectors.  It's
important to fragment the market into specific sectors, and key
in on the winners within the group.  Once you find a few
candidates within a given group, it pays to glance over the
balance sheet and make sure the company is not mired in debt.
After you have found the emerging sectors, picked the leaders,
and reviewed their fundamentals, the next step is to bring in
the time and price elements of technical analysis in an attempt
to pick the best entry points.  More on that next week.  In the
meantime, a good place to screen for the next market leaders is
the new 52-week high list.  Buy high and sell higher!

I maintain OIN readers are the best of the bunch.  Keep those
questions and stock picks coming by sending your requests to
Contact Support.  Please put the symbol of the
stock in the subject line of the e-mail.  Thanks!

----------------------------

Cisco Systems - CSCO

What's wrong with CSCO...Short and long term analyst...what do
you think of the PE? - Thanks Ali

CSCO, of course, is the King of the Internet, the mother of all
infrastructure plays, one of the Four Horseman of the NASDAQ.
The problem with CSCO right now (it's really not a problem) is
that the stock is one of the Tech sector winners that has come a
long, long ways over the past several years.  And, it takes time
to digest big runs like CSCO experienced last Fall and through
the Spring.  Market leading stocks, such as CSCO, need to
consolidate after such runs in order for fundamentals to catch up
with valuations.  As for the CSCO's P/E Ali, the trailing
multiple (last four quarters of earnings) is a lofty 120, and the
stock's forward looking P/E (next four quarters of earnings) is
a still-expensive 89.  Furthermore, all the good news has
already been discounted into the stock price.  Which means, the
bulls aren't real motivated to take CSCO higher right now.  But,
that can change quickly.  The fact is, CSCO consistently grows
earnings around 30% per year, and has one of the best management
teams in the world.  What's more, the company acts as an
investment bank in the way of mergers and acquisitions.  CEO John
Chambers is renowned for purchasing competing and complimentary
companies in order to beef up CSCO's product offerings and market
breadth.  In short, there is nothing wrong with CSCO!

CSCO is the kind of stock you could probably buy at its current
levels, forget about it, and sell it a lot higher five years from
now.  It is also a highly tradeable stock, with its massive runs
that is has become notorious for.  I've actually pulled up a
weekly chart on CSCO below, which goes back to the Fall of 1998.
Looking at the chart, I see several entry opportunities for both
the short-term or swing traders and the long-term investor.
First, CSCO has established solid support at the $60 level.  A
trader, and a long-term investor for that matter, might consider
buying a dip down to that support level.  The stock has had a
hard time clearing resistance at $70; again, which might also
provide entries for both the traders and investors upon a strong
rally above that level.  But, the real hurdle for CSCO will be
clearing the $80 level.  A burst above $80 would signal a
breakout and possibly the beginning of CSCO's next major leg up.
Of course, I'm following the mantra I described above of buying
high and selling higher.  Before CSCO breaks out, though, I'd
like to see the stock consolidate for another two to three
months.  A six month consolidation might build the right base to
launch CSCO into the heavens.  In the meantime, the churning
between CSCO's support and resistance levels might provide some
trading profits.




----------------------------

America Online - AOL

Could you please analyze AOL chart and give us your targets for
the year end 2000. - Thanks Rachuru

The AOL - Time Warner (TWX) merger is expected to be completed in
early November.  The completion of the merger will transcend AOL
to a traditional media company opposed to an Internet bellwether.
The upcoming transformation has hindered AOL's stock over the
past several months because investors aren't quite sure how to
value the combined entity.  Of course, the arbitrageurs haven't
helped AOL since the merger was announced.  In essence, TWX is a
holding company, with six areas of operations: Cable, Cable and
Networks, Publishing, Music, Filmed Entertainment, and Digital
Media.  AOL is having a hard time integrating TWX's fragmented
businesses smoothly.  Furthermore, the Federal Communications
Commission is reviewing the merger with a microscope, which
might lead to certain stipulations and restraints as requested
by rival Disney.  And, consumer advocate groups are screaming the
horrid 'monopoly' word.  Isn't it ironic that AOL CEO Steve Case,
who testified against Microsoft, is now being accused as a
monopolist.

The aim of AOL and TWX is to merge television and the Internet
into one.  And, if they succeed, the combined entity will be a
media powerhouse.  AOL's 23 mln subscribers combined with TWX's
breadth of media offerings will create a force to be reckoned
with, which is why Disney so vehemently opposes the merger.  And,
if the consumer advocate groups are right and the combination of
AOL and TWX becomes a monopoly, that could mean big profits for
investors in the coming years.  But, the possibility of a
monopoly being formed represents risks in and of itself.  The
hurdles challenging AOL, namely government scrutiny and
valuation concerns, have the stock trading at a discounted level
relative to the broader market.  If all goes well with the
merger, AOL might be a bargain at its current levels.  Further,
the closing of the merger in early November will alleviate the
selling pressure from the arbitrageurs.  But, I don't expect AOL
to greatly outperform the market by year's end, as it has done in
the past.  AOL is no longer the highflying Internet stock that
made the Janus and Legg Mason funds a ton of money over the last
five years.  Before loading up on the stock, I think it might be
prudent to wait and see how the market views the completion of
the merger.  If AOL starts climbing out of its six month slump it
might be time to jump on board.  Rachuru, let the market set
AOL's price target, not the analysts.  Let the market tell you
when it's time to buy, sell, or hold.




----------------------------

Vodafone Airtouch - VOD

Please comment on VOD.  What is it's problem?  Recovery? - Thank
you Wanda

Wanda, the European Telecom operators are a bad, bad place to be
right now.  A few casualties of war over in Europe are Telefonica
(TEF), Deutsche Telecom (DT), France Telecom (FTE), and your
VOD.  Don't bother looking at the charts of the aforementioned
stocks, they are too much to bear, no pun intended.  The most
recent bout of selling in VOD was spurred by the recent auction
of third-generation mobile phone licenses in Germany.  The German
regulators charged an exorbitant $46 bln for six licenses.  For
better or worse, VOD won a license to operate.  Now, there are
two problems with VOD paying such a high duty to operate in
Germany.  First, profit margins shrink to razor thin levels, and
the company needs to raise cash to pay for the licenses.  The
European Telcom companies, including VOD, are issuing huge
amounts of stock and debt in order to raise funds for the
purchase of the licenses.  A huge supply of stock is expected to
come to market over the next year.  There simply not enough
demand to meet the new supply of stock.  And, VOD's debt is
mounting.  Credit analysts, Standard & Poor's and Moody's,
recently downgraded their respective ratings on VOD's debt.  The
two aforementioned credit rating services are much more telling
than your run of the mill equity analyst.  You want to pay
special attention when bonds are downgraded.

The aim of VOD in buying the wireless licenses in Germany is to
tap into the country's rich consumer base, and sell them Internet
services and cell phone services.  VOD knows that it needs a
presence in all of the major European markets (Britain, France,
Germany, and Italy) in order to make money.  But, some analysts
question whether or not the traditional Telecom Service Providers
such as VOD will ever profit from wireless Internet services in
the European markets.  What's more, VOD will have to continue to
pay up huge amounts of cash as more and more licenses are freed
up by European regulators.  Wanda, I hate to say this, but I
can't argue a bullish case for VOD from any angle.  The stock is
now almost 50% off its yearly high, and I don't see the selling
subsiding.  In fact, the technicals suggest more downside to
come.




----------------------------

Calpine - CPN

Could you recommend some good call plays on Calpine (CPN) and
Dynergy (DYN).  These utility stocks have been on a steady rise
of late.  - Jim

In retrospect, I should have included the Utilities sector in my
list of leading sectors above.  CPN is an independent power
producer that sells electricity across the country.  Now, CPN is
not your father's utility stock.  CPN is a 'New Economy' utility
company with a 40% earnings growth rate.  The company has a
history of increasing earnings, and has thrown in several upside
surprises.  In its last quarter, CPN surprised Wall Street with
a profit report 58% above estimates.  The company is benefiting
from the deregulation of the power industry and the need to
rebuild the country's energy infrastructure.  Also, electricity
is in high demand.  All of those little gadgets we've come to
love (like the computer I'm using now) need a lot of power to
turn the wheels.  CPN has a stronghold on two of the largest and
fastest growing markets, California and Texas.  Deregulation has
allowed CPN to build more power plants in those key markets in
an attempt to fulfill the current surge in demand for
electricity.  Merrill Lynch recently called CPN the single best
way to play the deregulation and build-out of the power industry.
I tend to agree with Merrill's views, especially with the kind of
fundamentals CPN has.  The company has been on an acquisition
binge lately to help spread its reach in the power industry.  In
less than a month, CPN has acquired Quintana Minerals, a Canadian
natural gas company, a power plant in San Jose, California along
with 205 bln cubic feet of natural gas reserves, and two natural
gas-fired power plants in the Northeastern United States.

CPN's fundamentals are in place, and despite the stock's recent
run, it still sells at a relatively cheap price.  And, the chart
is just beautiful.  To me, it looks like CPN has caught the
attention of the momentum investors.  As always Jim, I cannot
give specific call recommendations, but I can tell you where you
might look for entry points.  After breaking from its most recent
consolidation in late July, it looks like a good strategy has
been to buy the dips.  The stock is using its 5-dma for support,
which might provide an entry into the stock upon a dip down to
that level.  Since CPN is at a new 52-week high, there's no
resistance above, just clear blue sky.  The stock generally
advances in a stable fashion during intra-day climbs, making
entry into CPN in the morning possibly profitable if the Utility
sector continues its climb into record territory.  One last
thing, CPN is a candidate to be added to the S&P 500!




----------------------------

SDL Incorporated - SDLI

Can you review SDLI and the potential of this as an option play
as the stock is trading significantly below the projected rate
of exchange if JDSU completes the merger? - Thanks Rick

JDSU agreed to pay 3.8 shares of its stock for each share of
SDLI.  Based on Wednesday's closing prices, SDLI is worth around
$465, about a 17% premium above the actual closing price.  The
17% premium might not seem like a lot because of SDLI's high
price, but, options players can use leverage to exploit that
spread, which is why SDLI was recently added to the OIN call
list.  In order for that spread to continue to narrow, the market
needs to be convinced that the deal will go through as planned.
JDSU has fallen under Justice Department scrutiny in the past for
its history of buying its largest competitors, such as ETEK.
But, JDSU also has a history of appeasing government regulators
through stipulations and spin-offs, which might have otherwise
given the company a monopoly over certain segments of the Fiber
Optic market.  The proposed merger hasn't faced very much
scrutiny from the DOJ yet.  So, for the time being, it looks like
the deal will go through, which makes the current spread an
attractive proposition.  JDSU recently said the merger is on
track to close in the December quarter.  Of course, JDSU needs to
remain at its current levels or even trade higher for an
arbitrage trade to be profitable.

If you're looking to SDLI for more than a trade, I think the
stock represents a good long-term investment.  Given the current
spread in the deal, it's a cheap way to buy JDSU.  Essentially,
by buying SDLI, you're buying JDSU at a nice discount relative to
its actual price.  Furthermore, the combined JDSU-SDLI entity
will be the 600 lb gorilla of the Fiber Optic Components market.
And that market is showing no signs of slowing.  Both companies
are having a hard time keeping up with demand from network
builders.  By joining forces, JDSU and SDLI will benefit from
synergies, which will combine to ramp production and development
efforts to better meet the demand of the glowing Fiber Optic
market.




----------------------------

DISCLAIMER:
This column is an information service only.  The information
provided herein is not to be construed as an offer to buy or
sell securities of any kind.  The Ask the Analyst picks are not
to be considered a recommendation of any stock or option but an
information resource to aid the investor in making an informed
decision regarding trading in options.  It is possible at this
or some subsequent date, the editor and staff of The Option
Investor Newsletter may own, buy or sell securities presented.
All investors should consult a qualified professional before
trading in any security.  The information provided has been
obtained from sources deemed reliable, but is not guaranteed
as to its accuracy.


***********
OPTIONS 101
***********

A Plug
By David Popper

Last week, I had the opportunity to go to the option seminar
in Orlando.  Chris, Steve and Scott ran the show.  This
seminar had a little bit for everyone, from the experienced
investor to the novice.  Steve and Scott spoke about stock
trading, while Chris dealt with options.  Specifically, Steve
calls himself a Gamma Trader.

As far as the stock trading portion of the seminar is concerned,
Steve concentrated on a number of strategies, some of which are
proprietary.  These strategies center around recognizing and
trading divergences between the price action on the one hand,
and indicators such as RSI, MACD, ROC, etc. on the other.
Steve’s premise is that when there are divergences, such as
the price moving up while the indicators are down or vice versa,
an extreme condition exists, which makes the stock ripe for
reversal 70% of the time.

Steve began by describing and giving examples of extreme
conditions generally.  He then spent the bulk of two days
migrating from simple strategies to strategies that became more
and more refined.  The simple strategies could be used by almost
anyone immediately.  The more refined strategies were more
profitable, but take time to master.  In short, the simpler
strategies require less monitoring, but are less profitable.  The
more refined strategies are more profitable but require much more
maintenance.  As Chris stated, "you can make a living on the
simple strategies, but you can make a fortune on the refined
strategies."  In my opinion, the simplest divergence system
provides easy to understand entry and exit points that should
substantially enhance any strategy that is currently being used.

For example, I may use a simple divergence strategy to enhance
covered call or naked put writing.  I believe that even a basic
understanding of Steve’s strategies would have saved me more money
in March than the cost of the seminar.  Thrown into the mix was a
proprietary strategy, which is easy to use, and when is used
properly makes it difficult to lose money.  I wish that I could
talk about it, but as an attorney, especially one that lives in
Orlando, I am acutely aware of the dangers of revealing
proprietary information.  Incidentally, I think Disney recently
learned a similar lesson.

Chris spent the last day talking about options.  Chris discussed
the option basics, such as fundamentals about puts and calls,
pricing, etc.  Particularly interesting was the discussion about
how market makers go about their business.  Understanding
options from the market maker’s perspective, and believe it or
not, understanding the role that a dividend plays in an option
price is helpful.  Further understanding "the Greeks" should
enhance everyone’s option performance.

Finally, Chris introduced a LEAP option play, where the upside
potential is enormous, but the downside risk is minimal.  Again,
it is good enough to be proprietary.

Before I attended the seminar, my preconceived notion was that I
would receive a lot of high risk strategies that could kill me
if incorrectly executed.  I felt that if I learn a trick or two
it may be worth it.  I was surprised when the speakers emphasized
safety above all else.  In their minds, safety does not mean to
refrain from trading, it means trading with understanding.  So
the seminar was helpful, now how will I use it?  Will I throw
out every other strategy that I use?  No.  I have strategies that
I have used for a long time and I am comfortable.  Will I use
the information to enhance the strategies that I already use?
Absolutely!  Should I be more profitable?  Yes.  Will I go again?
Yes.  Should you go?  If at all possible.  We trade for our
families.  If trading can be more than a hit or miss adventure,
our financial futures are more secure.  Learning systems for
profitable trading was what this weekend was all about.

Contact Support


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

Education In Options Trading
By Austin Passamonte

"Can you believe the price of coffee?"  That statement jolted
me from a meandering daydream recently as I sat slumped and
bored at a family gathering.  Did I miss something?  Were coffee
futures about to make a run on a freeze-scare short covering?

Nope.  Just one family member relating to another how their
morning dose of caffeine recently jumped from 80 cents all the
way to 96 cents at a small-town breakfast stop they frequent.
Land sakes, a 16 cent price increase?  Heaven help us!

I was annoyed at being distracted from my thoughts.  I was
mentally replaying the last losing trade stopped out not long
ago at $250 per option and I held ten of them.  These guys are
worried about 96 cent cups of coffee while one wrong guess cost
me $2500 in the blink of an eye - are we still on the same
planet here together?  I'd happily pay $96.50 for a stinkin'
java cup just to have that trade back again.

Fact is we traders do exist in a different world than most.  Think
about it; how many of your non-trading friends have the privilege
to make or lose a weekly, monthly or yearly median U.S. income
on a single trade?  My own inner circle counts exactly zero such
people beyond the trading world.

Do you sometimes find yourself as I do with one foot still in
each world?  Hopefully, this outlook doesn't include the investment
cost of your trading education.

I'm not talking about money...the price we must pay to succeed
is time, our most precious commodity of all.  There's a literal
sea of money out there that you & I watch flow past us every
day.  Learning to safely & effectively capture our share &
then some is the tricky part.

In my time, I've searched out endless financial & trading
websites.  This activity has actually intensified over the
last few weeks via a personal project.  One thing has become
increasingly clear: to my discovery yet there doesn't exist a
trading site filled with more pure education than right here in
OIN.

This isn't some promotional article for OIN lest it seem that
way.  OIN has done just fine before me and will continue to
long beyond.  I'm merely a paid subscriber who contributes
material on a free-lance basis.  With that in mind, let me share
some personal experience with you.

I had traded options successfully for some time prior to
discovering OIN by chance.  My educational library compiles
more than 100 books and videos on trading subjects across the
spectrum.  Over a decade of trading & following stocks and
commodities lies under my young belt, besides.

There was little doubt option trading would be yet another
level to learn and probably the most complex study of all.
Even so, I was a bit on the cocky side about the whole
thing.  Can you sense what's coming next?

Well, getting started trading equity options in a bull
market will hide plenty of mistakes.  Missed the best entry
point on those calls?  No problem, if we bought enough time
the markets will come back before long.  Remember those days?

After getting burned a few times, I realized there was more to
this than most how-to books divulge.  Right about then was my
discovery of OIN.

I took advantage of the trial period and signed up well
before it expired.  This was truly the source of "in the
trenches" info I'd been searching for.

Over a few weeks (and I do mean weeks, I spent every night
with few exceptions squirreled away in my home office going
back through OIN archives reading every single article, news
release and chat-room string available.  Without question I
learned more from that study than my entire trading library
combined ever taught me.

You don't have time for such massive study?  Forgive me but
that would not be stating a fact.  It's stating a preference.
Free time is a myth; we each use our allotted 24 hours daily
already.  How we choose to carve it up and invest or squander
such is strictly up to us.

Do you think any option traders out there who feel they have
too little time for study might tune into "Survivor" three-
hour episode & follow up tonight?  I'd bet all my trading
accounts a bunch of them are glued to the screen even as these
words sit idle waiting to be read.

I'm sure it's a wonderful show and everything but I've yet to
watch a single minute of it and probably never will. Personally,
I don't have time NOT to study options trading.  Using three
hours of my life tonight to learn who of the four wins one
million dollars does not move me one inch closer to my first
million, now does it?  Spotting the next incredible trade on my
charts just might.

I receive a fair stream of email from readers on a daily basis
and enjoy them all. Every question where money's concerned is
a good one and we field plenty.  It is clear to me many readers
never take time to sift back through OIN archives and glean the
wealth of information in there.  Colossal waste of incredible
learning resources!

New readers should immediately begin with the "Education,"
heading in the front page and click on every link below,
methodically reading & taking notes from all articles
contained within.  Those who do so with dedication will soon
be within the top 10% of all equity traders in education by
study's end.  How do I know?  That's easy; 90% of all traders
just plunk their money down on "hot" calls they hope will
appreciate.

Again, I'm sure a number of traders still feel there's no
time for that.  Hey, isn't the purpose of OIN to click in,
skim for plays and enter such with the broker for tomorrow's
execution?  Not hardly.  No question in my mind that's exactly
what a majority of men do.

Notice I said men.  Women are much better at study & research
as a general rule.  We prefer to cut corners, especially when
it comes to "investing".  No time to learn - the markets are
flying by.  Just take a hot tip from chat room strangers and
throw money at the market, it's sure to throw even more back!

Those of you still left reading at this point are among
the potential elite.  Others sifted themselves out many words
ago to find the next hot trade in five minutes or less.
After all, we can get rich trading options by studying the
markets during Monday Night Football commercials.  That's
what one prominent options "course" touts.  Five minutes
a day to wealth...oh really?  I must be stone stupid then
because it took endless hours to claw my way to this point.

I know, I know - your good friend's rich buddy made a fortune
in the markets over the past two years and he doesn't know
squat about trading.  Just took some tips on CSCO, JDSU and a
bunch of others from his broker or golfing buddies.  Worked
for him!

Marvelous.  By the way, how's he doing so far this year?  We
always have lottery winners in every aspect of life but is
that how you intend to bet your financial future?  The markets
will dish out easy money just enough times to suck it all
back and plenty more besides soon as the neophyte thinks
he's an expert.  Margin calls, anyone?

If I had to choose between OIN archives and every trading
book in my library for a sole source of education, there'd
be a massive pile of books burning in the backyard post-haste.
Are you tapping into this resource?  Can you afford to invest
your time dedicated to earning incredible wealth from this
complex pursuit?  Can you afford NOT to?

Invest the time necessary to research this site and the
reward could be more time freedom than you ever imagined as
a result.

Incidentally, we're pulling for Rudy to win it all tonight.
The crusty ex-SEAL is a Rochester, NY native who promises to
donate most of the jackpot to young family and charity. Who
said I'm lifeless and out of touch?

austinp@OptionInvestor.com


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

DIGX - Digex Inc $85.00 +4.56 (+4.44 this 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.

Most Recent Write-Up

Let the games begin!  We're in the midst of a battle as DIGX
consolidates at its new price level.  Average volume is typically
around 816K shares, but this week they reached 2.05 and 1.07 mln
shares, respectively.  After DIGX spiked through the overhead
resistance ($81.81) during amateur hour on Monday, traders were
effectively offered an optimum entry.  DIGX came off a low of
$75.88 and made immediate headway to the $80 support level, just
above the former opposition at the 200-dma.  Then again today,
DIGX dipped under the $80 mark to tag $77.63 offering another
opportunity.  On this rebound, however, the stock tested the
ceiling three times before settling at the close.  This is a
bullish sign.  Although, if you're considering entering on
upside action, it would be wise to wait for the upper resistance
(now $82.88) to be shattered before opening new momentum plays on
DIGX.

Comments

Well, the battle today was won by the bulls as they used the $80
support level as a launch pad.  Once the NASDAQ made its own test
of the 3900 level, it was clear sailing for DIGX.  Volume remained
steady throughout the day.  Intraday support was established at
$84, so any pullbacks and bounces from there, along with a strong
NASDAQ, would be a good entry.  If that doesn't hold, look to
$82.50 and then $80 for bounces.  More conservatively, a trader
may want to wait for DIGX to barrel through the $85 level with
convincing volume before entering.  Watch the NASDAQ for an idea
of direction.

BUY CALL SEP-80 UOM-IP OI= 615 at $10.63 SL= 8.25
BUY CALL SEP-85*UOM-IQ OI= 429 at $ 8.00 SL= 6.25
BUY CALL SEP-90 UDX-IR OI= 141 at $ 5.75 SL= 4.00
BUY CALL OCT-85 UOM-JQ OI= 180 at $12.75 SL=10.25
BUY CALL OCT-90 UOM-JP OI= 156 at $10.25 SL= 7.75

Picked on August 20th at  $80.56    P/E = N/A
Change since picked        +4.44    52-week high=$184.00
Analysts Ratings       9-6-0-0-0    52-week low =$ 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   =   816 K



*****************************************
BIG CAP COVERED CALLS & NAKED PUT SECTION
*****************************************

The "Chips" try to lead the Market out of the dip...

The market edged higher today amid anemic activity as confidence
in a late Summer rally waned.  Analysts remain optimistic that the
Fed will provide a soft landing for the economy but most investors
are not inclined to overweight their portfolios with stocks at
this time of the year.  Even though the FOMC suggested that the
likelihood of an interest rate hike is slim in the near future,
it appears that the trading public is willing to wait for the next
round of earnings before committing any substantial funds to the
equity market.  Some speculation surfaced in semiconductor and
Internet shares and those groups continued to sustain the recent
Nasdaq rally.  A number of well-known analysts commented on the
July semiconductor capital equipment book-to-bill ratio, which
declined slightly from last month's numbers.  CS First Boston
said the report supports the view that industry fundamentals are
healthy and that the longevity of the cycle continues unabated.
Donaldson Lufkin & Jenrette commented that they still expect the
leading chip-makers to meet or exceed earnings expectations over
the next few quarters.  Biotechnology stocks also enjoyed small
gains after the U.S. National Institutes of Health approved new,
controversial guidelines for human embryo stem cell research
funding.  Human embryos contain stem cells, which promise medical
advances in drug development and the decision is expected to end
the uncertain future for many biotech companies.  Solid advances
were seen in oil industry stocks.  Shares were boosted by a jump
in crude oil prices in the wake of another plunge in inventories.
Merrill Lynch said it remains bullish on the energy group and
reported that although the sector is not as favorable as it was
earlier in the year, the larger stocks in the industry are seen
as inexpensive.  On the downside, finance and brokerage shares
consolidated while paper, retail and airline shares slumped.

Based on the lack of conviction among major indicators, we will
continue to focus on conservative entry points into technically
bullish charts, with reasonable monthly returns.


Summary of Previous Picks:

Covered Calls: (Margin would double the listed Monthly Return)

***  NOTE:  August prices as of Friday's Expiration

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

PROX    AUG    75    73.43  92.34    $1.57   7.2%
GMST    AUG    60    56.06  74.13    $3.94   7.1%
EXTR    AUG   140   137.31 178.13    $2.69   6.6%
CALP    AUG    50    47.84  53.06    $2.16   6.0%
CALP    AUG    50    48.50  53.06    $1.50   5.9%
TUTS    AUG    90    88.50  98.44    $1.50   5.7%
ITWO    AUG   115   109.00 150.00    $6.00   5.6%
ENE     AUG    75    72.88  86.94    $2.12   5.5%
NTAP    AUG    90    85.44  93.94    $4.56   5.4%
IDPH    AUG   120   116.94 131.94    $3.06   5.0%
VRTA    AUG    55    52.18  60.69    $2.82   4.4%
VSTR    AUG   135   127.25 123.38   -$3.87   0.0% Ouch!

ARTG    Closed
AWRE    Closed
AETH    Closed

METHA   SEP    45    41.50  52.69    $3.50   8.6%
PHCM    SEP    85    78.25  85.50    $6.75   7.1%
SMTC    SEP    80    75.43 103.38    $4.57   6.1%
MIPS    SEP    45    42.88  57.63    $2.12   5.0%
NAVI    SEP    45    42.87  43.25    $0.38   0.9% At support


Naked Puts:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

PROX    AUG    75    73.75  92.34    $1.25  17.1%
SAPE    AUG    95    93.12 124.56    $1.88  13.7%
TUTS    AUG    85    84.12  98.44    $0.88  11.8%
ENE     AUG    75    73.12  86.94    $1.88  11.8%
TUTS    AUG    70    68.81  98.44    $1.19  11.8%
CALP    AUG    45    43.88  53.06    $1.13  10.9%
CALP    AUG    45    44.31  53.06    $0.69  10.4%
VRTA    AUG    55    53.81  60.69    $1.19   9.6%
IDPH    AUG   110   108.50 131.94    $1.50   9.2%
NTAP    AUG    80    78.12  93.94    $1.88   8.7%
VRTA    AUG    50    48.38  60.69    $1.62   8.4%
EXTR    AUG   130   129.12 178.13    $0.88   8.1%
GMST    AUG    50    48.87  74.13    $1.13   7.7%
AMCC    AUG   120   118.31 174.13    $1.69   6.5%
SEBL    AUG   115   113.94 172.31    $1.06   6.5%
MACR    AUG    75    73.32  76.25    $1.68   6.2%
ITWO    AUG    95    93.31 150.00    $1.69   6.1%
MERQ    AUG    85    83.32 101.44    $1.68   5.8%
SAPE    AUG    85    83.56 124.56    $1.44   5.7%
VSTR    AUG   110   108.31 123.38    $1.69   5.6%
MERQ    AUG    80    78.87 101.44    $1.13   5.2%
TIBX    AUG    90    87.63  88.94    $1.31   4.2%

ARTG    Closed (Ended up profitable - Murphy's Law)
AWRE    Closed (Ditto - hindsight!)
CLRN    Closed (Ditto - sigh)
AETH    Closed

METHA   SEP    40    38.37  52.69    $1.63  14.0%
MIPS    SEP    40    38.87  57.63    $1.13   9.9%
NAVI    SEP    40    39.00  43.25    $1.00   8.9% At support
EMLX    SEP    55    53.75  98.25    $1.25   7.9%
SMTC    SEP    70    68.62 103.38    $1.38   6.9%
MMCN    SEP    55    53.94  80.94    $1.06   6.7%
MXIM    SEP    65    63.75  84.06    $1.25   6.6%
PHCM    SEP    65    63.50  85.50    $1.50   6.2%


Naked Calls:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

MRVC    AUG   100   102.44  70.19    $2.44  19.4%
IMCL    AUG    90    90.69  88.50    $0.69  15.8%
VRSN    AUG   175   176.00 159.75    $1.00  11.2%
RBAK    AUG   155   156.13 147.50    $1.13   8.7%
ADBE    AUG   135   135.69 122.56    $0.69   8.2%
MUSE    AUG   195   196.31 129.88    $1.31   5.9%
HWP     AUG   150   151.00 112.00    $1.00   5.7%


New Candidates:

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.  (We monitor the positions marked with ***).

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

BULLISH PLAYS - Covered Calls & Naked Puts

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

ADBE - Adobe  $126.06  *** Bracing For A Rally? ***

Adobe Systems is a provider of graphic design, publishing, and
imaging software for Web and print production.  They offer a
line of application software products for creating, distributing,
and managing information of all types. Adobe licenses its
industry-standard technologies to major hardware manufacturers,
software developers, and service providers, and offer integrated
software solutions to businesses of all sizes.

Not much news on well-known this issue but last week the company
announced the release of a significantly enhanced version of its
award-winning professional Web authoring software, Go Live 5.0,
as well as its sponsorship of the 2000 ESPN Summer X Games.  The
company also recently filed a lawsuit against Macromedia (MACR),
a leading maker of Internet software, for allegedly violating a
patent on how information is displayed on a computer screen.  The
case is complex and will undoubtedly take a significant amount of
time to resolve, and as is the case with most patent trials, will
most likely end up with a settlement rather than a judgement.

From a trend and momentum viewpoint, today's move suggests there
may be additional upside potential in the future of this issue
and a cost basis near technical support will suit us just fine.

ADBE - Adobe  $126.06

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call SEP 115  AXX IC  1271     16.38   109.68     6.4% ***

Sell Put  SEP 105  AXX UA  844       2.25   102.75     9.4% ***
Sell Put  SEP 110  AXX UB  905       3.50   106.50    12.2%
Sell Put  SEP 115  AXX UC  1474      4.88   110.12    14.6%

Chart =
 

******

INKT - Inktomi  $120.75  *** On The Rebound! ***

Inktomi provides scalable software applications designed to
significantly enhance the performance and intelligence of large
scale networks, particularly the Internet.  Inktomi provides
applications in the areas network products and portal services.
Their network products consist of the Traffic Server network
cache platform, Content Delivery Suite and associated Traffic
Server extensions, which are intended to provide a complete
infrastructure solution for the distribution, delivery and
management of content and applications.

Inktomi responded positively to the announcement of a new deal
today, rallying almost $10 to close near $120 on heavy volume.
The alliance is called "Content Bridge," and is with America
Online Digital Island, and Exodus Communications.  The pact was
formed to help ensure Internet users receive the most up-to-date
information available on the Web.  Under the new, multilateral
agreement, Inktomi will deliver network infrastructure technology
for the system.

Technically, the issue is showing increasingly bullish indications
and today's move above the August high suggests the stock is moving
back into the previous trading range.  We also favor the support
provided by the recent consolidation near $105 and the favorable
sector outlook.

INKT - Inktomi  $120.75

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  SEP 100  KYQ UT  978       1.38    98.62     6.3% ***
Sell Put  SEP 105  KYQ UA  191       2.25   102.75     8.6%
Sell Put  SEP 110  KYQ UB  180       3.38   106.62    10.9%

Chart =
 

******

MIPSB - Mips Technologies (B)  $52.38  *** On The Move! ***

MIPS Technologies is one of the leading designers of high
performance processors, cores and related intellectual property
for use in a wide variety of increasingly sophisticated consumer
devices and business equipment.  Its designs are based on its
reduced instruction set computing (RISC) architectures.  Its
64-bit RISC architecture is the volume leading architecture for
64-bit processors.  MIPS licenses its designs and related
intellectual property to semiconductor companies and system
original equipment manufacturers.  Its licensees currently offer
over 60 standard processors based on its RISC architecture, which
have a cumulative installed base of over 120 million units.

Earnings are one of the primary movers of stock prices and last
month, MIPS reported stellar results for the quarter.  Revenue
for fiscal year 2000 grew 25% to a record $89 million and when
the royalties from Nintendo were excluded, revenues increased
over 100% compared to fiscal 1999.  Contract revenue jumped 176%
and accounted for 38% of the total revenue.  Quite simply, MIPS
Technologies completed its strongest quarter and fiscal year
since their IPO and future growth in the fundamental business is
forecast to be excellent.

If you favor the bullish outlook for the issue, this conservative
position in the company's [B] issue offers an excellent entry
point, considering the current market volatility.

MIPSB - Mips Technologies (B)  $52.38

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call SEP 45   QOS II  41        9.13    43.25     5.4% ***

Sell Put  SEP 45   QOS UI  5         1.63    43.37    14.2% ***
Sell Put  SEP 50   QOS UJ  0         3.50    46.50    21.0%

Chart =
 

******

QLGC - Qlogic  $106.38  *** Breakout! ***

QLogic is a designer and supplier of semiconductor and board
level input/output(I/O) and management controller products.
Their I/O products provide an interface for the direct attachment
or networking of computer systems and their data storage
environments.  Additionally they design and market baseboard and
enclosure management products that monitor and communicate
management information related to components that are critical to
computer system and storage subsystem reliability.

With the recent acquisition of Ancor, Qlogic will complement its
existing Storage Area Network (SAN) product lineup with a number
of new Fibre Channel switch systems.  QLogic already offers the
broadest line of SAN components in the industry with a range of
products including PCI host bus adapters, controller chips and
software solutions.  Being a one-stop shopping source for host
bus adapters and switches positions the company uniquely among
SAN component suppliers.  The potential is high for the sum to be
more than the parts.  Their unique status in the industry allows
them to deliver and service complete, open-standard, end-to-end
infrastructure solutions that can be tailored to complement the
diverse requirements of OEMs, system integrators and resellers.

That says a lot about the fundamental outlook for the company but
we simply favor the bullish chart pattern and the increased volume
on today's technical "breakout."

QLGC - Qlogic  $106.38

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  SEP 85   QLC UQ  164       1.50    83.50     8.7% ***
Sell Put  SEP 90   QLC UR  209       2.56    87.44    11.8%
Sell Put  SEP 95   QLC US  120       4.00    91.00    15.0%

Chart =
 

******

TUTS - Tut Systems  $110.94  *** Up, Up and Away! ***

Tut Systems develops and markets advanced communications products
that enable high-speed data access over the copper infrastructure
of telephone companies, as well as the copper telephone wires in
homes and businesses. Their products incorporate high-bandwidth
access multiplexers, associated modems and routers, Ethernet
extension products and integrated network management software.

Expansion is the key to success in telecom networking and Tuts
recently announced it will use its swelling Nasdaq market cap to
buy privately-held ActiveTelco, a maker of unique telephony and
messaging products.  The move is expected to enhance Tut's next
generation multi-service platform by allowing service providers
to offer additional voice and telephony services to their major
customers.  With the acquisition, the company is poised to offer
an entire portfolio of products which can deploy integrated
communications services to virtually every type of building or
facility.  These solutions provide cost-effective, high-quality
alternatives for service providers in the fast growing market of
telecommunications networking.

This company is one of our favorites for long-term portfolios
and the recent demand for Communications Equipment Providers
has boosted the bullish issue out of a previous trading range.
The fundamental outlook is very positive - revenues are expected
to grow 100% year over year - and the stock should see higher
prices in the future.  The current technical trend is favorable
and we offer this position as a "second chance" entry, based on
the chart indications.  The stock is slightly over-extended but
a reasonable, short-term cost basis exists near the previous
resistance area at $85.

TUTS - Tut Systems  $110.94

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  SEP 80   QSS UP  176       1.06    78.94     6.0%
Sell Put  SEP 85   QSS UQ  57        1.81    83.19    10.0% ***
Sell Put  SEP 90   QSS UR  42        2.63    87.38    13.3%
Sell Put  SEP 95   QSS US  76        4.13    90.88    16.8%

Chart =
 

******

VRTX - Vertex  $145.06  *** Drug Sector Hedge ***

Vertex Pharmaceuticals designs, develops and commercializes
novel small molecule drugs that address significant markets with
major medical needs, including the treatment of viral diseases,
cancer, autoimmune and inflammatory diseases and neurological
disorders.  Vertex has discovered and advanced nine drugs
into clinical development, including one product, the HIV
protease inhibitor Agenerase (amprenavir), which has reached the
market.  It has 7 drugs in Phase II clinical development. Vertex
has significant collaborations with Glaxo Wellcome, Aventis,
Schering AG (Germany), Eli Lilly, and Taisho that provide it with
financial support and other valuable resources for its research
programs and the marketing and sale of its drugs.

Vertex develops small molecule therapeutics.  Its current product
is an anti-HIV protease inhibitor, Agenerase, which was approved
by the FDA in 1999.  In the coming months, Agenerase is expected
to get European approval, and a second-generation formulation is
scheduled to enter Phase III testing before the end of the year.
In addition to Agenerase, Vertex has built a broad pipeline of
drug candidates for treatment of cancer, inflammation, autoimmune
diseases, hepatitis C and neurological diseases.  The company
anticipates that a number of new drug candidates could enter
clinical testing before the end of 2001.  Vertex also intends to
position itself in the post-genomics era, using new, structural
information for a particular protein to discover information
about other proteins in similar families.  The benefit of such
an approach is that it reduces the time required to devise the
precise three-dimensional structure of all proteins of interest
for possible therapeutic development.

Vertex Pharmaceuticals also recently announced that its board has
authorized a two-for-one stock split.  The CEO says the split was
initiated to increase the liquidity of Vertex common stock and to
broaden their shareholder base.  This move is intended to reflect
the enthusiasm for Vertex's opportunities for continued growth as
well as a long-term commitment to building shareholder value.  The
split will be in the form of a stock dividend and new shares will
be distributed on August 23, to shareholders of record on August 9,
2000.

VRTX - Vertex  $145.06

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  SEP 110  VQR UB  15        1.31   108.69     5.7%
Sell Put  SEP 115  VQR UC  23        2.13   112.87     9.0% ***
Sell Put  SEP 120  VQR UD  24        2.88   117.12    10.6%
Sell Put  SEP 125  VQZ UE  15        3.88   121.13    12.2%

Chart =
 

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

BEARISH PLAYS - Naked Calls

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

SNWL - SonicWall  $74.00  *** Technicals Only! ***

SonicWall designs, develops, manufactures and sells Internet
security infrastructure products designed to provide secure
Internet access.  Their SonicWall solution is a high performance,
solid state appliance that provides robust, reliable,
easy-to-use and affordable Internet security.  SonicWall sells
its products to customers in the small to medium enterprise,
branch office, telecommuter and education markets.

There's not much news in the recent history of SNWL to explain the
precipitous sell-off.  The sector is performing well and in late
July, the company posted record quarterly revenues and profits for
its second quarter.  In addition, the company said its board had
declared a two-for-one stock split, to be paid on September 15 to
shareholders of record as of August 25, 2000.  Even as the market
was moving higher, SonicWall experienced another major sell-off in
today's session, on higher-than-average volume.  With the issue
now trading below an intermediate-term moving average, it appears
the trend has further downside potential.  The volatile activity
in the stock has produced some excellent premiums in the OTM call
options and we will use the current speculative interest to open a
conservative, short-term position with a bearish outlook.

SNWL - SonicWall  $74.00

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call SEP 90   UWL IR  394       2.94    92.94    21.9%
Sell Call SEP 95   UWL IS  53        2.00    97.00    15.7%
Sell Call SEP 100  UWL IT  273       1.31   101.31    10.8% ***

Chart =
 


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