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Daily Newsletter, Sunday, 08/27/2000

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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
        WE 8-25          WE 8-18          WE 8-11           WE 8-4
DOW    11192.63 +146.15 11046.48 + 18.68 11027.80 +260.05  +256.58
Nasdaq  4042.68 +112.34  3930.34 +140.87  3789.47 +  2.11  +124.36
S&P-100  823.55 +  9.91   813.64 +  8.89   804.75 +  8.90  + 19.67
S&P-500 1506.46 + 14.74  1491.72 + 19.88  1471.84 +  8.91  + 43.04
W5000  14091.20 +183.80 13907.40 +210.60 13696.80 + 84.90  +359.60
RUT      525.11 +  9.60   515.51 +  5.24   510.27 +  6.64  + 13.41
TRAN    2790.17 - 46.97  2837.14 - 90.36  2927.50 + 40.69  +117.28
VIX       19.10 -   .32    19.42 -  1.77    21.19 -   .35  -  2.76
Put/Call    .50              .57              .41              .59
******************************************************************

Welcome to the Twilight Zone Mr. Folino!

The economy is rolling right along neither gaining nor slowing more
than expected according to the GDP report on Friday. The economy
grew +5.3% in the second quarter meeting economists expectations
and only slightly faster than the +4.8% first quarter rate. No big
deal in terms of market movement. Existing home sales dropped -9.8%
in July, much lower than expected. The Fed is on hold and the reports
just keep confirming their decision. The report made public before
the market open set the stage for the Nasdaq to finally achieve
liftoff at the open. Just as the Nasdaq appeared destined to hit
4200 before the day was out, a severe case of bad news stopped
it dead. Just like it hit a brick wall. News that the EMLX CEO had
resigned and they would restate earnings showing a loss instead of
a profit was such a shock to the market that those traders who were
not on vacation quickly started clearing the decks of not only EMLX
but QLGC and BRCD, which are in the same sector, on fear that the
virus might be catching. After dropping -$67 from $110 to a low of
$43 Nasdaq halted trading. A -61% drop, billions in market cap, gone
in a heartbeat.

The rest of the story is history. The press release was bogus.
CEO Paul Folino showed up at his office around 7:30 and turned
on CNBC only to discover on TV that he had resigned and EMLX
had lost over half its market cap. Can you hear the twilight zone
theme playing in the background? So much for a sleepy, casual
Friday. Thousands of investors lost millions of dollars to a hoax.
Savings accounts, IRAs, funds, nobody was safe. Whoever did this
better hope he can find a deserted island and hide. When the FBI,
SEC and friends find this person they will be voted off the planet,
not just the island. The most amazing part? The market did not die.
Yes, the story pulled the plug on a very promising rally but the
market did not die. A Friday in late August is not normally a rip
roaring trading day but the possibility of profit taking day was
good. But, it still did not happen. Earnings warnings, bogus press
releases, vacation Friday, but the market held. A miracle in my book!







If that sounds bullish it is. We dodged a very big bullet on Friday.
Even though the announcement was a hoax it could have had serious
market consequences. Even CSCO dropped on the news. When news comes
out of left field completely unexpected the first reaction is to
sell quickly and wait for the smoke to clear and see what the fall
out will be. Yes, there was a lot of broad selling but it was
quickly stopped even before the real news was clear. The knee jerk
reactions were met with strong buying and that was market positive.
There is a bottom under this market boys and girls. That is the
silver lining in today's cloud. This doesn't mean there will not be
any dips in our future but the evidence is pointing to only small
ones. Now that I have gone out on the limb is that a chainsaw I hear?
The VIX hit another 52 week low intraday at 18.89. I think we have
passed the point where anybody cares anymore. Volatility is so low
it is off the scale but that does not mean it can't go lower. The
low point in 1999 was in July with a 17.70 and the low for 1998 was
also in July with 16.73. We are a month late but the patterns are
almost identical. Using that as a guide it is entirely possible we
can see much lower numbers in the next couple weeks as the market
responds to a Fed on hold and traders coming back from vacation.
There are no negative market factors other than the coming earnings
warning season.

Confessions started trickling in today with Lear Corp (LEA) and
Lowes Cineplex (LCP) announcing after the close that earnings will
not be up to par. These were in addition to downgrades on several
stocks by analysts faced with a slowing economy. Coke (KO) earnings
estimates were cut by Salomon Smith Barney after they said volume
growth was slowing. Several analysts talked about the shift from
carbonated to non-carbonated beverages and the impact on KO and
PEP as the major players. It is a strange turn of events when
bottled water sells for more than a Coke. For that matter water
costs more than gasoline even at the current inflated prices!
KO dropped -$2 on the news.

The only two lurking problems which may become major market problems
in September are oil prices and slowing earnings. At least these
are the only two that traders are willing to talk about. Oil rose
+$.40 to settle at $32.03 today and the time to start laying in
those supplies of heating oil is fast approaching. At $32 oil is
a nuisance, at $35-$38 it starts to be a major problem and over
$40 a disaster. Like the VIX, oil is just a smoldering ember which
under the right conditions could blossom into a raging fire and
consume the current market momentum.

The other problem is about two weeks away. Earnings warning season.
It starts officially Sept 11th. Unofficially there is no real date
but confessions will start in earnest about 30 days before earnings
are announced. Smack dab at the end of Labor Day week. With the
economy slowing earnings estimates must drop. Someone will be the
leader in every sector and once they confess, estimates for every
one else in the sector will drop as well. It is a cascade effect.
Add the fact that summers are normally tough on sales and that is
why September is typically a rough month. In the last 49 years
September is the worst performing month with a total loss of
-10.5% based on the S&P-500. Compare that with December which is
up +87.6% over the same period.

Mr. Fed himself, Alan Greenspan, gave a speech on Friday in Jackson
Hole, Wyoming and made some bullish comments. He said increasing
productivity is showing no signs of tapering off but then qualified
it by saying that when it did the problems would begin. Come on
Alan. Be a sport! Trees grow to the sky, really!
http://www.bog.frb.fed.us/boarddocs/speeches/2000/20000825.htm

Even in spite of the economic reports, news hoaxes and speeches
the Dow traded in only a 55 point range. 55 points! The Nasdaq only
managed two points more with a 57 point range. The Volume was
positively anemic with only 676 million shares traded on the NYSE
and 1.2 bil on the Nasdaq. This low volume is adding to the lack
of volatility but also building the pressure. The major indexes
are slowly creeping up and passing previous resistance points
without much fanfare. By slowly overcoming resistance points
without those wild spurts we have seen in the past it is setting
the stage for a blowout soon. Investor confidence is growing by
leaps and bounds and traders burned in the spring and summer are
starting to come back into the market. Retail volume at brokers
is starting to grow and anticipation is building. Stocks which
have been pounded this year are slowly breaking out again. Take
a look at all the charts for the calls this weekend. This is an
incredible group of plays. There are so many good plays it is
impossible to pick just one or two. My personal play list for
next week is huge. Way more than I could ever play. My personal
sentiment indicator, subscriptions, is growing. Stock split
announcements are increasing with dozens more due out soon. You
would think it was the fall rally already! Somebody pinch me
please! There has to be a dip here somewhere!

Enough bullishness! Even the best laid plans fail for unexpected
reasons. With the Nasdaq closing over 4000 for three days now
it has all the appearances of impending acceleration. Trade it
if it comes but consider closing those positions if we break
4000 again. The Nasdaq has been up 9 of 11 days and those two
down days were minimal. Low volume could exaggerate any profit
taking should the market makers want one more test before Labor
Day but Friday would have been a prime opportunity and they passed.
Any dip should be considered a buying opportunity. The major
economic reports for next week are the Personal Income/Spending
on Monday and the Employment Report for August on Friday.

Sectors in which to be most careful would be biotech and
semiconductors due to their recent strong gains. The sector to
watch for the upside would be the fiber optics. There is a major
fiber optic conference this week which could have market moving
news. (markets move both ways on this news, not just up) Have
fun but always be watchful.

Speaking of watching, watch for the beginning of decimalization
on Monday. Decimalization is the changing of the way stock
prices are reported from fractions to decimals. No more trying
to figure out what 15/32 or 23/64 actually means. This was
scheduled for last year but delayed until after the dreaded Y2K
event to avoid problems. Now that the date is upon us the SEC
is overseeing the change to ensure an orderly transition.
Hopefully it will have about as much impact as Y2K. Notice
they chose the last week in August to implement the first
test? Obviously they can read volume charts too. The SEC has
picked 13 NYSE stocks and 3 options for the test. No, they did
not pick IBM, T, C or AXP for this test. High volume stocks
were avoided. Several of the candidates you probably never
heard of. Here is the list in order of Fridays share volume:

Forest City Enterprises A&B (FCE.A, FCE.B), 600 shares
MSC Software (MNS), 10,000
Media General (MEG.A), 10,500
Psychemedics (PMD), 16,000
Regal Beloit (RBC), 17,000
eMagin (EMA), 21,300
Hughes Supply (HUG), 34,800
Global Light (GBT), 137,900
ON2.com (ONT), 159,700
FedEx (FDX), 691,000
Anadarko Petroleum (APC), 1,002,000
Gateway (GTW), 1,663,000

These stocks will begin trading in pennies on Monday instead
of the 1/8 or 1/16 increments. Options on FDX, APC and GTW
will also be decimalized with options over $3.00 trading in
$.10 increments and options under $3.00 will trade in $.05
increments. The test is expected to expand on Sept-25th to
include another 50-100 NYSE stocks. The conversion for all
stocks and options is expected to begin as early as December
but the deadline is April 9th, 2001. Expect that to be beaten
once the initial hurdles are overcome.

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Trade smart, sell too soon.

Jim Brown
Editor


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

What an exciting week - NOT!

The EPNY play broke out - to the down side!

The EXDS play worked just like we scripted it.

50/50 is not bad since we never got the entry on EPNY.

The new play tonight is a stock play for those with
IRA accounts.

Actually, we have an IRA stock site in the works and
will be announcing that real soon!


**************
EXISTING PLAYS
**************

EPNY $99 Call play

Prior week



Last week



EPNY broke down instead of out but came to rest exactly on support
at $88 and then started up again. I think this is bullish but we
do not have enough trend to make an intelligent decision. Risk
takers could enter this play now after confirming upward movement
but the wise play would be to wait for our $101 target. Once EPNY
breaks out then it wold be a safer play.


EXDS - $60.44 Call play

Previous week



Last week



Exodus is heading for $70 which could be the next resistance point.
We got the breakout we were expecting after $60 served as a price
magnet for options expiration. If you are in the play I would
consider setting a sell at $70 and wait for a break through
before re-entering the play. Next stop $90.


*********
NEW PLAY
*********

HUF - Huffy - Long stock play



Huffy is not optionable but margin on HUF is only $6 at this
level and you can play this in your IRA. Huffy is riding the
current scooter craze. I am sure you have seen them in your
neighborhood. Those compact light weight scooters that are
the current rage for the 7-12 yr old age bracket. Analysts
estimate that sales of the scooters alone could add $500
million to Huffy's revenue not counting all the helmets, pads
and accessories. Huffy had been depressed with dropping sales
as the higher dollar bicycle consumer over looked their "cheap"
offerings. The scooter boom is an unexpected windfall for Huffy.

I only bring this to your attention because of the email I
get complaining that many brokers will not let you trade
options in your IRA. Stocks like options have risk and HUF
is a risky play because of the recent gains. Be sure to use
stop losses.


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

The key to the market this week will be volume. If volume
continues to drop it is likely to be a boring week. The
employment report on Friday will be a focus but most will
be looking for Labor Day weekend as well. There will be
a battle between those leaving the market to concentrate
on the holiday and those trying to sneak into the market
before the post Labor Day rush.

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

Small Range Days Lead To Large Range Days
By Austin Passamonte

That's an adage we learned fifteen years ago. It's so true.
Look at any chart/any symbol and this fact is apparent; a
series of small-range days inevitably spawns a string of
large range days soon after.

That being the case, we're due for some serious market swings
following this week's non-action. Small range, doji days occur
during "rests" in the market due to uncertainty of near-term
and future direction. This is a nervous market.

Such coiling builds pressure that leads to significant
moves when it breaks. Which way is the question.

We've always felt that a good salesman or attorney (is there
a difference?) can take either side of a case and debate with
equal conviction. Let's do our best to perform that straddle
for market direction right here.

Market Sentiment believes we are very close to a dramatic
move. Based on the arguments below, your job is to act as a
jury of one to weigh evidence presented. No weaseling your way
out of this duty!

Market Rally:
The Fed is done raising rates for good. Economy on track for
a soft landing, inflation signs are nil. Even Greenspan
admits new economy productivity thwarts previous inflation
pressure and growth ceilings. Next step; rate cuts.

It's an election year. Adage is stocks always rise during
these times, especially in the fall.

Summer doldrums are nearing an end. Big players end vacation
and return to buy up everything in sight. High volume before
long.

Money pours into market funds. Tons of cash sits on sideline
waiting to be unleashed. Much of that might be yours.

Bell-weather leaders showing considerable strength. GE leads
the pack, other Dow heavyweights enjoying new-found highs.
Fundamental behavior is excellent.

Numerous stocks reaching or surpassing all-time highs.


Market Decline:
Earnings season is over. Pre-warning is next and could be an
ugly one. Shades of P&G last time around and more.

September and October historically toughest months of the year.
Worst crashes ever occurred then.

Election year bias is a myth. Studies show it's a coin-toss
at best.

Just enjoyed large percentage gains in all major indexes with
very little profit taking.

Commercial traders in S&P 500, DJIA futures arena remain at
five year net-short extremes or greater. Market giants bet
heavily on nearby decline. Small specs extreme net-long.

Commercial traders in Ten-year Note and 30-Year Bond futures
arena at five year extreme net-short positions. Market giants
bet heavily on interest rates going up. Small specs extreme
net-long.

Oil prices above $30 per barrel with no relief in sight. U.S.
stockpiles at historical lows. Astronomical heating & fuel
bills are certain.

VIX indicator riding at 19 level for days. Almost never returns
to high 20s without significant market correction in overall
process.

Technical chart indicators show broad markets overbought,
ROC & Momentum indicators losing steam.

Overwhelming bullish sentiment in the media/public. Everyone
piled heavily to one side of the canoe. A slight tip rolls it
instantly. How deep is the water below?

Prosecution and defense rests. We await the jury's verdict.


MARKET SENTIMENT INDICATORS
---------------------------

VIX
The CBOE Market Volatility Index measures certain S&P 100
option pricing to determine investor sentiment. Historically,
readings near 30 signal possible market bottoms while levels
near 20 indicate possible market tops.

Thurs 8/24 close: 19.10         Sat 8/26 close: 19.10


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            (8/22)      (8/24)       (8/26)
*************************************************************

CBOE Total P/C Ratio         .55         .43          .50
Equity P/C Ratio             .47         .38          .43


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       (8/22)        (8/24)      (8/26)
**************************************************************

All index options       1.47          1.22        1.52
OEX Put/Call Ratio      1.77           .71         .81


OEX Maximum Open Interest Strikes/Contracts:

Puts                 800/4,291      790/6,293    790/5,665
Calls                810/4,796      800/4,852    800/4,846
Put/Call Ratio          .89            1.30         1.17


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:               (8/22)       (8/24)       (8/26)

Overhead Resistance:
(920-865)                1,483       1582.75      1620.67
(860/840)                52.59         49.34        47.10
(835/820)                 5.13          2.11         1.56

OEX close:                 818           825          823

Underlying Support:
(815-800)                 1.06          1.25         1.30
(795-780)                 2.44          2.84         2.79


What the S/R measure indicates: Net open-interest ratios
are firm above 840 and ridiculous above 865 while very
light all the way to 780. A large index move has downside
clearance to 780 or below with relative ease.

We would consider a failed test near the 835 range an
excellent put entry.


30-yr Bond:          5.71%         5.66%         5.67%

Light, Sweet
Crude, Barrel:      $31.22        $31.63        $32.03


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      11,182      11,192
NASDAQ: 3,936           3,851       4,053       4,042
NDX:    3,672           3,722       3,949       3,931
SPX:     1434            1484        1508        1506
OEX:      773             811         825         823


CBOT Commitment Of Traders Report: Friday 8/25
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;    +1249 (long)        - 2542 (short)
Total Open
Interest %         25.24% net-long       8.5% net-short

NASDAQ 100
Net contracts;    - 1613 (short)         +38 (long)
Total Open
Interest %         11.85% net-long       .098% net-long
                                              (flat)
S&P 500
Net contracts;     + 44,989 (long)     -47,946 (short)
Total Open
Interest %         25.24% net-long       8.5% net-short

What COT Data Tells Us: Commercial positions in S&P 500 and
DJIA remain at or above five-year extreme short levels. Small
specs continue to build net-long extremes.

NDX commercials went from net-long to flat while small specs
went from net-short to net-long the past two weeks.

(Not Shown) Commercial positions in 10-Year Note and 30-Year
Bond markets at or near five-year extreme net-short levels.
Small specs build net-long.

Summary: "Smart money" insiders expect stock market to decline
and interest rates to rise. Small traders directly opposite,
creating diverse set up favoring commercial sentiment for
near-term market direction.


BULLISH SIGNALS

Interest rates
5.66% on the 30-year Treasury Bond make equity markets the only
game in town. Fed-Fund futures are pricing slight chance of
further rate hikes and dwindling.

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

Strength In Financial Sector, Many Dow Components
Financial leaders approach or exceed all-time highs as plenty
of old-economy stocks enjoy strong price leadership

Broad Market Strength
All major indexes are well above 200 DMAs and enjoying solid
gains almost every day.


******

BEARISH SIGNALS

VIX
Thursday’s close near 19 has us in EXTREME danger zone.

End Of Earnings Season
Earnings season has all but ended with pre-warning cycle
to begin in two weeks. It may not be pretty this time, due
to..

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 still too high. Ultimately this affects profit
margins and inflation. Light, Sweet Crude closed $31.63 today.
All petroleum expected to be extremely high this fall. Prices
in low $20s would be welcome relief but remain just a dream.

COT Report - S&P 500 & DJIA
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.

COT Report - NASDAQ 100
Sentiment reversal with small speculators switching to net-
long while commercials go flat may suggest near-term weakness.


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

As of Market Close - Sunday, 08/27/2000

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

DOW   Industrials      11,191      10,950  11,400     **
SPX   S&P 500           1,507       1,475   1,520
COMPX NASD Composite    4,042       3,650   4,100
OEX   S&P 100             823         814     830
RUT   Russell 2000        524         485     540
NDX   NASD 100          3,931       3,500   4,050
MSH   High Tech         1,098         975   1,110

BTK   Biotech             750         640     770     **
XCI   Hardware          1,586       1,450   1,620
GSO.X Software            459         405     470
SOX   Semiconductor     1,143       1,000   1,200
NWX   Networking        1,325       1,290   1,350
INX   Internet            563         495     600     **

BIX   Banking             589         550     610
XBD   Brokerage           614         570     635
IUX   Insurance           689         680     725

RLX   Retail              830         805     860
DRG   Drug                398         365     415
HCX   Healthcare          822         795     855
XAL   Airline             159         148     168
OIX   Oil & Gas           310         280     320

The DOW, BTK and INX hit our resistance levels on Friday, but
were not able to close above those levels.  All in all, 15 alarms
were triggered this week, with 13 of them at resistance.  Only
the XAL and RLX triggered support alarms, and both of these indexes
closed higher from those levels.  Raising support (DOW, OEX, NWX,
INX) Raising resistance (DOW, BTK, INX) Lowering resistance (NWX).


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

Peak Over My Shoulder
By Austin Passamonte

Well, it's my final set of downs in the backup role here at
Sector Trader. We've had some fun, picked a few dud plays,
passed up a nice one but caught part of the next move. Why
not spend this session playing it safe before taking off
our helmet and grabbing the clip board once again.

(Forgive the football metaphors for non-fans. I'm limited in
scope but will work on figure-skating knowledge soon)

The very first thing I do before considering any trade at all
is take the underlying temperature. I want to see how its
technical tools line up and look for price behavior and chart
patterns within as well.

Here's exactly what I see for three of the most liquid and
tradable HOLDRs heading into next week;

(Daily Chart, BBH)



Biotechs offered another nice advance added to Thursday. Did
I mention how that call play got screened out on Wednesday?
It was a very strong 4th in a three-play contest. Ouch!

BBH broke its neutral wedge to the upside and shows no sign
of stopping yet. Those who feel late to the party can see the
slow bar stochastic (red line) and MACD still have plenty of
room to run.

If this play breaks 200 it's new territory and who knows where
the top is? We might measure call/put option ratios to find out.
Open interest at 200 and 210 strikes runs heavy to calls as we'd
expect. If 200 is broken, BBH might reach 210 before serious
drag occurs.

Overall option O/I is light compared to major indexes but it
still gives insight to current trader's sentiment.

I'd still be a buyer here although it may be late. Very high
odds of at least a few more points to the upside lead me to
feel a test of the market should be a win or par exit on
trailing stops. A positive BBH market past 10:30 on Monday
will tempt me greatly.

(Daily Chart, BDH)



BDH is an interesting event about to unfold. It has coiled into
the very point of a neutral wedge. Daily tech studies lean a bit
to the negative side:

MACD is fading and might roll over. The stochastic lines show
negative divergence to actual price action. Stochastics reach
higher highs from last extreme but actual price comparison isn't
even close. Stochastic is overbought as well, indicating limited
upside left.

This neutral wedge has a wide-end range from 82 to 102. That
gives us a 20-point spread target objective from the break out
of this pattern. Prudent traders would go long or short at a
convincing break and target 74 area to the downside or 114
area to the upside. Watch, wait and jump in when BDH makes its
choice!

(Daily Chart, SMH)



SMH just won't give up the ghost! We picked the short side of
this one twice to no avail. Still can't convince us it isn't
due for a drop with one caveat.

The last three sessions traded within tight support/resistance.
Half a long candle pattern and two small dojis prove that. It
can't remain here forever, decision time draweth nigh.

Negative stochastic divergence remains and MACD histogram is
on the decline showing momentum on the wane. Stochastic deep
in overbought range indicates limited upside left without
correction.

Can you see any long-term positive indication? I can't but that
doesn't mean SMH won't rise from here. Not shown are the 30/60
minute charts both converging with buy signals to the upside.
What that means to me is SMH has very short-term potential to
pop up a few more points before all three charts align.

Long-term players could buy SMH puts and weather a few
points move against them with wider stops. Would that
make sense? We'd rather wait until all three top out for
the best odds of buying puts right at the very crest of a
market top.

Again, sit the fence and wait for clear confirmation of change.
A price close outside the three-day wedge or large intraday
move might be enough to convince me.

I'd like to personally thank Buzz for entrusting me to sub
for him in this role. I had fun, learned a bunch and look
forward to the return of our resident expert. Hope your vacation
was incredible and look forward to your guidance again next
Tuesday!

Gimme my gatorade and point me to the showers...game day is
finished.


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

For the week of August 28, 2000

Monday

Personal Income       Jul  Forecast:   0.3%      Previous:   0.4%
PCE                   Jul  Forecast:   0.5%      Previous:   0.5%

Tuesday

New Home Sales        Jul  Forecast:   840K      Previous:   829K
Consumer Confidence   Aug  Forecast:  141.5      Previous:  141.7

Wednesday

Leading indicators    Jul  Forecast:   0.0%      Previous:   0.0%

Thursday

Initial Claims       8/26  Forecast:   305K      Previous:   314K
Chicago PMI           Aug  Forecast:  53.5%      Previous:  52.0%
Factory Orders        Jul  Forecast:  -3.8%      Previous:   5.4%
Help-Wanted Index     Jul  Forecast:    N/A      Previous:     81

Friday

Auto Sales            Aug  Forecast:    N/A      Previous:   6.8M
Truck Sales           Aug  Forecast:    N/A      Previous:   7.4M
Nonfarm Payrolls      Aug  Forecast:   -20K      Previous:  -108K
Unemployment Rate     Aug  Forecast:   4.0%      Previous:   4.0%
Hourly Earnings       Aug  Forecast:   0.3%      Previous:   0.4%
Average Workweek      Aug  Forecast:34.4Hrs      Previous:34.4Hrs
NAPM Index            Aug  Forecast:  52.5%      Previous:  51.8%
Construction Spending Jul  Forecast:   0.2%      Previous:  -1.7%
Michigan Sentiment    Aug  Forecast:  108.2      Previous:  107.8


Week of September 4th

Sep 05 NAPM Services
Sep 06 Productivity-Rev.
Sep 07 Initial Claims
Sep 07 Wholesale Inventories
Sep 08 Consumer Credit


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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:
http://www.OptionInvestor.com/htmlemail/082700_2.html

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

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
low.

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
market.

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
options.

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
desk.

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
issue.

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

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

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

Calls

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

Puts

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


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

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


CALLS

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.


PUTS

No dropped puts today.


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

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

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

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

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

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

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


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

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
$64.

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
$100.

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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**********

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http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html

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

To view this email newsletter in HTML format with imbedded
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******************
CURRENT CALL PLAYS
******************

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
computer.

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
record.

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
MCIWorldcom.

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
mark.

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


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html

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

To view this email newsletter in HTML format with imbedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/082700_4.html


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

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



*****************
CURRENT PUT PLAYS
*****************

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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chargers, hands-free kits, wireless data products and more.

http://www.everythingwireless.com/wireless/homepage?id=1601002
************************************************************


*****
LEAPS
*****

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
market.

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

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

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
breakout.

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

Drops

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.


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

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

ITWO
JNPR
GSPN
INKT
NEWP
VRSN
VTSS
BRCM
IMCL
NTAP


Candidates That Are Not Current Plays

BRCD
PVN
LEH
NVDA
SCMR
ARBA
DNA


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

PLCM     PLXS     SNWL     ORBK
SAPE     NETE     SEBL     EXBD
ABMD     PKE      ERTS     SONS
XTO      CIEN     MYGN     PCP
HWP      GLW      SUNW     SMTC
MCHP


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


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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**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html

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

To view this email newsletter in HTML format with imbedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/082700_5.html

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

Trading Basics: Plan for Success...
By Mark Wnetrzak

The recent volatility in the market has magnified the need for a
well designed trading plan.  As with any structure, the key to a
successful system is in its foundation.  In any approach to the
financial markets, a number of issues must be resolved.  First,
how much risk do you want to incur?  What ratio of success do you
expect to achieve?  What style or method of trading will you use
to accomplish your goals?  Do you plan to utilize technical
analysis, trading ranges or trends?  Will you focus on volatility
or disparity in option pricing, selling premium when the market
is active and buying potential when the trend is stagnant?  These
decisions will significantly affect the fundamental design of your
system.  As an example, if your stop-loss limits are relatively
liberal, then your potential success ratio will be increased.  At
the same time, the possibility of substantial loss will also be
magnified.  The best way to find a happy medium is to start with
realistic expectations and build a pattern of success before you
worry about increasing the potential returns.

Regardless of the type of markets you trade, the same fundamental
approach can apply to a number of different systems.  The basic
requirements for a successful design are determined by its core
objectives.  With trading systems, you need a market outlook, a
strategy with which to profit, and a method for timing the entry
and exit.  Then you must decide on a money management system - a
set of rules or guidelines for determining potential risk.  Most
experts suggest that ideally you should not risk more than 3-5%
of your capital on any one trade, to avoid the possibility of a
catastrophic loss.  In addition to these details, you should also
outline a stop-loss policy and a method to determine the correct
position size for a particular transaction.  The administration
of stop-losses will often define the success of your system.  In
fact, the placement of the stop is vitally important, because if
the stop is vulnerable, then so is the entire system.  It would
follow that the relationship between your entry point and profit
target or exit stop is the key to profitability.  Unfortunately,
this is the essential element that cannot be reached simply by
logic, rather it evolves through observation, critical study, and
continuous testing and refinement.  The ultimate arrangement will
be strict yet flexible, with a plan for adjustments as the trade
progresses.  The ideal process entails far more than a mechanical
system that simply follows the trend and waits for a stop to be
hit.  In every case, it should identify the proper entry point and
manage the position for maximum profit.

The first step in constructing a profitable system is observation.
Study the rhythms and cycles of the market.  Examine how specific
stocks and sectors are behaving in the current environment and
try to identify the best ways to take advantage of the activity.
The simplest approach to directional trading is through the use
of technical analysis.  Identifying trading ranges and trends is
a relatively easy task, but then you must define how to profit
from them.  With trading ranges, it's best to look for extremes
and enter opposing positions when these peaks (or valleys) are
reached.  With trends, traders generally initiate new positions
when a particular system indicates that the primary movement is
well established and the correct bias is in place.  Obviously,
trends can be defined in a number of different ways but the most
important aspect of this type of trading is selecting the correct
time frame.  After the time frame is identified, you can analyze
the appropriate periods for specific trading signals.  Long-term
data is more stable and will provide very accurate indications
with regard to primary trends or market direction.  In contrast,
most short-term statistics are generally better for entry and
exit timing and strategies that profit from correctly identifying
reversals or changes in momentum.  Despite the shortcomings of
each individual approach, traders have a variety of indicators
with which to determine the future character of the market.  The
most difficult task is to choose those indicators that will best
help achieve one's objectives.

Next week we will continue our discussion of trading systems and
the techniques that professionals use in position management.

Good Luck!



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

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

XICO    7.81  11.69   SEP   7.50  1.56  *$  1.25  17.4%
GSTRF   8.44  10.50   SEP   7.50  1.63  *$  0.69  11.0%
PCTL    5.78   6.41   SEP   5.00  1.19  *$  0.41   9.7%
LPTH   41.13  44.31   SEP  35.00  8.50  *$  2.37   7.9%
DRMD    5.72   6.97   SEP   5.00  1.13  *$  0.41   7.8%
SGNT   12.00  11.75   SEP  10.00  2.63  *$  0.63   7.3%
PCTL    6.03   6.41   SEP   5.00  1.38  *$  0.35   6.5%
ECLP   12.00  15.06   SEP  10.00  2.75  *$  0.75   5.9%
SFAM   18.63  19.69   SEP  15.00  4.38  *$  0.75   5.7%
ROBV   13.63  13.25   SEP  10.00  4.13  *$  0.50   5.7%
XLNK   18.00  16.69   SEP  12.50  6.25  *$  0.75   5.5% (DLK)
ORG    14.38  16.03   SEP  12.50  2.75  *$  0.87   5.4%
FHS    16.06  17.19   SEP  15.00  1.94  *$  0.88   5.4%
ROS    15.75  14.88   SEP  15.00  1.88   $  1.01   5.3%
CCUR   14.63  16.13   SEP  12.50  2.69  *$  0.56   5.1%
NOVN   35.00  29.88   SEP  35.00  2.88   $ -2.24   0.0%

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

Comments:

Keep an eye on Rostelecom (ROS) as it is at key moment.  A move
lower would violate a trend-line (June low - July low - Aug low)
and signal a short-term bearish character change - evaluate your
long-term outlook.  Noven Pharmaceuticals (NOVN) continues to
weaken and has now moved below its 30 dma and is approaching its
50 dma.  Those cautious investors who waited for a post-earnings
entry point (as suggested), will have a much better cost-basis or
would have avoided the sector all together with the LLY induced
sell-off.  We will exit the Noven position if it violates its 50
dma on a closing basis.

Positions Closed:

None



NEW PICKS
*********


Sequenced by Company
*****

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

ASKJ   25.13  SEP  22.50  AKU IX  4.00  751  21.13   21     9.4%
BOUT   37.63  SEP  35.00  AUB IG  5.00  514  32.63   21    10.5%
CLPA   30.25  SEP  25.00  QJC IE  6.13  375  24.13   21     5.3%
DRXR   18.31  SEP  17.50  RXQ IW  1.50  177  16.81   21     5.9%
OSIP   45.56  SEP  40.00  GHU IH  7.75  642  37.81   21     8.4%
PLNR   19.88  SEP  17.50  PNQ IW  3.25  70   16.63   21     7.6%
SPLN   18.56  SEP  17.50  QSP IW  2.19  568  16.37   21    10.0%

Sequenced by Return
*****

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

BOUT   37.63  SEP  35.00  AUB IG  5.00  514  32.63   21    10.5%
SPLN   18.56  SEP  17.50  QSP IW  2.19  568  16.37   21    10.0%
ASKJ   25.13  SEP  22.50  AKU IX  4.00  751  21.13   21     9.4%
OSIP   45.56  SEP  40.00  GHU IH  7.75  642  37.81   21     8.4%
PLNR   19.88  SEP  17.50  PNQ IW  3.25  70   16.63   21     7.6%
DRXR   18.31  SEP  17.50  RXQ IW  1.50  177  16.81   21     5.9%
CLPA   30.25  SEP  25.00  QJC IE  6.13  375  24.13   21     5.3%


Company Descriptions

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

*****
ASKJ - Ask Jeeves  $25.13  *** FORD asks Jeeves! ***

Ask Jeeves provides online personal service infrastructure for
companies seeking to target, acquire, and retain customers
online.  The online personal service infrastructure allows
companies to connect users to information through automated
search, decision advisory support and interaction with live
customer care representatives.  Ask Jeeves' answer to the
Internet cash-burn-rate concerns was an excellent earnings report,
beating the Street by 5 cents.  Revenues for the 2Q were $25.9
million, an 817% increase over last year and their cash position
totaled $141.6 million, which the company believes will preclude
the need for future financing.  The stock rallied this week
after Ford Motors announced it had selected Jeeves Relevant
Answers(SM), Ask Jeeves' intuitive question answering service, to
help power its e-commerce and e-support services for Ford Division
customers.  The details weren't disclosed but it sounds like
more revenue to me.

SEP 22.50 AKU IX LB=4.00 OI=751 CB=21.13 DE=21 MR=9.4%


 
*****
BOUT - About.com  $37.63  *** Internet stocks in vogue? ***

About.com operates a Web platform comprised of more than 700
highly-targeted, topic-specific Web sites.  The sites provide
high-quality original articles, moderated forums and chat rooms,
newsletters, tools, and easy access to related sites.  According
to Media Metrix, approximately 13.2 million unique users visited
ABOUT.COM in January 2000, making it the tenth largest Internet
property overall.  Each of the topic-specific sites is overseen
by a guide who is knowledgeable about the site's topic.  The
Internet stocks appear to be gaining favor and About.com is no
exception.  The rally over the last few days has pushed About.com
above its recent short-term base and has provided a reasonable
cost basis for those interested in higher reward (risk) issues.

SEP 35.00 AUB IG LB=5.00 OI=514 CB=32.63 DE=21 MR=10.5%


 
*****
CLPA - Cell Pathways  $30.25  *** New Drug Speculation! ***

Cell Pathways Holdings is a pharmaceutical company focused on
the research, development and commercialization of products to
prevent and treat cancer.  CPI's technology may also prove to
have applicability beyond the field of cancer.  Their technology
is based upon its discovery of a novel mechanism which they
believe can be targeted to induce selective cell death in pre-
cancerous and cancerous cells without affecting normal cells.
Cell Pathways continues to prepare for the commercialization of
Aptosyn(TM), its lead drug candidate which has shown to inhibit
a novel pattern of over-expressed cyclic GMP phosphodiesterases
in cancerous and precanerous cells.  The FDA continues to review
the pending NDA for Aptosyn.  With the recent Chiron buyout of
PathoGenesis, there is speculation on who could be the next
merger candidate.  Could that be the reason for Friday's heavy
volume rally?  We simply favor the stage I base formation with
support near our cost basis.

SEP 25.00 QJC IE LB=6.13 OI=375 CB=24.13 DE=21 MR=5.3%


 
*****
DRXR - Drexler Tech  $18.31  *** Technicals Only! ***

Drexler Technology manufactures LaserCard optical memory cards
used for immigration, ID/access, healthcare, automotive and other
digital read/write wallet-card applications.  The LaserCard
product line currently consists of optical memory cards, optical
card read/write drives, optical card data systems, chip ready
hybrid smart cards and related system software and peripherals.
Drexler reported favorable earnings in July, showing net income
rising 70%, revenues rising 38%, and cash equivalents of $8.9
million with no debt.  Drexler appears to be on the move again
as the stock has rallied to a new multi-year high.  Though the
volume was strong, Drexler is a thinly traded issue.  There is
no news to explain the move over the last two weeks, but the
tape suggests someone is interested in accumulating this stock.

SEP 17.50 RXQ IW LB=1.50 OI=177 CB=16.81 DE=21 MR=5.9%


 
*****
OSIP - OSI Pharma  $45.56  *** Bracing for a rally? ***

OSI Pharmaceuticals is a research and development company that
utilizes a comprehensive drug discovery and development capability
to rapidly and cost effectively discover and develop novel, small-
molecule drug candidates for commercialization by major pharma-
ceutical companies.  OSI conducts its drug discovery and product
development programs independently as well as in conjunction with
major pharmaceutical companies.  Their efforts are primarily
focused in the areas of cancer, diabetes, cosmeceuticals and
G-protein coupled receptor, or GPCR, directed drug discovery.
In June, OSI announced that Pfizer, in order to meet requirements
for its merger with Warner-Lambert, granted all development and
marketing rights to OSI for CP-358,774 (OSI-774).  The compound is
the most advanced clinical development candidate arising from the
Pfizer alliance and is currently in clinical trials.  Robertson
Stephens believes this is a transforming event and a fundamental
positive for OSIP, as growth factor inhibitors are the next major
wave of cancer therapeutics.  Adams Harkness must feel the same
way as both investment firms have rated OSI a "strong buy."

SEP 40.00 GHU IH LB=7.75 OI=642 CB=37.81 DE=21 MR=8.4%


 
*****
PLNR - Planar Systems  $19.88  *** Stage II - What's up? ***

Planar Systems is a provider of high performance electronic
information displays, display sub-systems and complete display
systems.  They market a variety of display technologies including
active matrix liquid crystal displays, electroluminescent flat
panel displays, and several others, which are marketed in Planar's
core medical, transportation and industrial markets.  What is it
about Michael Franzi, Planar Systems' newly appointed VP of
North American Sales & Marketing, that was cause for a 5 point
rally on heavy volume?  Again, not much news out there but the
tape rarely lies.  Someone is interested in this stock and the
technical outlook is bullish, with support near the March and
July highs (our cost basis).

SEP 17.50 PNQ IW LB=3.25 OI=70 CB=16.63 DE=21 MR=7.6%


 
*****
SPLN - SportsLine.com  $18.56  *** Stage I base ***

SportsLine.com, is an Internet-based sports media company that
provides branded, interactive information and programming as well
as merchandise to sports enthusiasts worldwide.  SportsLine
produces and distributes original, interactive sports content,
including editorials, radio shows, contests, games, fantasy
league products and fan clubs, as well as distributing a broad
range of sports related news and other data.  SportsLine.com
has been in a stage I base since April and is now showing signs
of life.  Last month's earnings showed SportsLine had record
revenue (up 160%) and site traffic (up 76%).  With the Internet
sectors gaining momentum as traders speculate on the next merger-
buyout candidate or earnings report, this play offers an entry
point in a technically improving issue.  Besides, we are moving
into a seasonably favorable time frame...football, hockey, The
World Series, basketball, The Olympics...must I go on?

SEP 17.50 QSP IW LB=2.19 OI=568 CB=16.37 DE=21 MR=10.0%


 


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

Success Basics: Position Selection, Timing and Management
By Ray Cummins

Each week we receive numerous E-mails from investors that have an
abundance of excellent trading strategies and yet their positions
fail to produce consistent profits.  The most common traits
identified in each of these cases is the failure to select the
best possible candidates and manage losses properly.

Successful trading is a relatively simple activity.  There are
very few rules to follow and the process itself is not difficult
to comprehend.  The reason we find it so hard to succeed is that
it is difficult for us to follow those simple rules.  Emotions
such as hope, greed and fear are integral parts of our existence
and each of these instinctual responses has a major influence on
our trading decisions.  The struggle to overcome these feelings
is a constant battle that all traders wage on a daily basis and
those who can reduce their adverse affects will find it easier to
follow the essential rules.  Unfortunately, this task is easier
said than done.  It is simple enough to devise a sensible set of
rules for trading, so why do most investors fail to succeed when
the facts appear so obvious?  We all know that it is impossible
to predict the market in every case so the key is to take small
profits regularly and prevent losing plays from significantly
eroding capital.  Losses are bound to happen and in fact, they
are inevitable!  However, that shouldn't keep anyone from being
successful in the market.  The truth is, it's very difficult for
novice investors to close out losing positions early and that's
a major obstacle to achieving consistent profits.  Experienced
traders know there is no reason to hang on to a losing position
when there are so many other profitable plays that deserve their
attention.

One of the primary reasons that novice investors lose money is
they fail to plan for unforeseen events and the adjustments that
are often necessary to ensure a profitable outcome.  In addition,
the majority of new traders become complacent after the initial
position is in place.  The temptation to relax is based on the
belief that the work has already been completed.  Of course, the
responsibility to manage a trade does not end until the position
has been closed out with a profit or loss.  In most cases, the
odds of successfully completing a specific task are greatly
enhanced when the procedure is rehearsed.  By mentally planning
for all the possible alternative outcomes, a trader will be in a
more objective position to assess the changing conditions and not
be overwhelmed by an unexpected setback.  Using this technique, a
new investor can become better prepared to anticipate potential
problems and make the appropriate corrections before substantial
losses occur.

Trade selection and timing are also fundamental components of a
successful trading system.  The first step in mastering these
concepts is to find a time frame that you are comfortable with
and use the appropriate form of analysis to generate trading
signals for that particular period.  In the stock market, there
are a number of cycles (or rhythms) which continuously repeat.
These range from the very short term, to the very long term and
nearly all of them are non-linear in time.  These rhythms help
astute traders identify key reversal points and also allow them
to anticipate recurring highs and lows in specific time periods.
In addition to trading in a time frame that is well suited to
your personality and circumstances, it is also important to use
only the best signals when entering new positions.  Most methods
of analysis produce a variety of indications, with the quality
of entry and exit signals ranging from excellent to borderline.
The key is to overcome the enthusiasm that clouds one's judgment
and participate only in the best prospects.  In cases where the
pattern is clear and well-defined, market activity tends to be
much more direct and easy to predict.  Conflicting indications
are difficult to interpret and generally produce poor results in
the long run.  Trading only those situations when the outlook is
superb allows you to proceed with confidence, and the margin for
error is far greater with regard to mistimed entries and exits.

Next week, we will review the most common "timing" techniques.

Good Luck!



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


SUMMARY OF PREVIOUS PICKS
*****

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

GSTRF   7.63  10.50   SEP   5.00  0.31  *$  0.31  14.6%
CTIC   39.25  41.75   SEP  30.00  1.38  *$  1.38  13.0%
IMAX   28.06  27.25   SEP  22.50  0.94  *$  0.94  12.4%
FNSR   29.00  44.00   SEP  22.50  0.94  *$  0.94  12.1%
JDEC   21.88  24.63   SEP  17.50  0.69  *$  0.69  11.8%
LPTH   41.13  44.31   SEP  30.00  1.00  *$  1.00  11.8%
FNSR   37.50  44.00   SEP  30.00  0.81  *$  0.81  10.6%
RHAT   23.44  24.19   SEP  17.50  0.50  *$  0.50  10.5%
GZTC   38.00  39.13   SEP  30.00  0.81  *$  0.81  10.5%
SIPX   37.50  39.88   SEP  30.00  0.75  *$  0.75   9.9%
TLXN   19.88  20.13   SEP  15.00  0.44  *$  0.44   7.2%
CRUS   27.44  28.00   SEP  22.50  0.50  *$  0.50   6.6%
CS     34.75  36.75   SEP  27.50  0.44  *$  0.44   6.5%
REGN   33.13  33.00   SEP  25.00  0.38  *$  0.38   5.9%
NDC    30.06  29.56   SEP  22.50  0.38  *$  0.38   5.2%

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

Comments:

Now why didn't we just buy calls on Finisar Corp. (FNSR)?

Positions Closed:

None


NEW PICKS
*********

Sequenced by Company
*****

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

CLTR   26.56  SEP  22.50  QCE UX  0.38  90   22.12   21     7.9%
CYTO    9.03  SEP   7.50  UOR UU  0.31  488   7.19   21    18.8%
DCLK   41.81  SEP  35.00  QWE UG  0.69  849  34.31   21     9.4%
ICIX   20.88  SEP  15.00  QIX UC  0.38  954  14.63   21    11.9%
MSTR   26.88  SEP  20.00  EOU UD  0.44  527  19.56   21    11.0%
PL     28.19  SEP  25.00   PL UE  0.50  35   24.50   21     8.4%
SIMG   32.06  SEP  25.00  GUD UE  0.38  20   24.63   21     8.0%

Sequenced by Return
******

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

CYTO    9.03  SEP   7.50  UOR UU  0.31  488   7.19   21    18.8%
ICIX   20.88  SEP  15.00  QIX UC  0.38  954  14.63   21    11.9%
MSTR   26.88  SEP  20.00  EOU UD  0.44  527  19.56   21    11.0%
DCLK   41.81  SEP  35.00  QWE UG  0.69  849  34.31   21     9.4%
PL     28.19  SEP  25.00   PL UE  0.50  35   24.50   21     8.4%
SIMG   32.06  SEP  25.00  GUD UE  0.38  20   24.63   21     8.0%
CLTR   26.56  SEP  22.50  QCE UX  0.38  90   22.12   21     7.9%


Company Descriptions

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

*****
CLTR - Coulter Pharmaceutical  $26.56  *** Big Day! ***

Coulter Pharmaceutical is engaged in the development of novel
drugs and therapies for the treatment of cancer and autoimmune
diseases.  The company currently is developing a family of
therapeutics based upon two primary drug development programs:
therapeutic antibodies and targeted oncologics.  The company's
most advanced product candidate is Bexxar(TM), a monoclonal
antibody conjugated to a radioisotope.  Coulter's therapeutic
antibodies program includes an interferon receptor antagonist.
Initial efforts in the targeted oncologics program are based on
tumor activated and tumor specific targeting technologies.
Coulter intends to seek expedited Biologics License Application
review and marketing approval for Bexxar while simultaneously
pursuing clinical trials to expand the potential use of the drug
to other indications.  Coulter and SmithKline Beecham recently
announced the start of Phase II investigational trials of Bexxar
in combination with CHOP chemotherapy as a first-line treatment
of patients with intermediate-grade non-Hodgkin's lymphoma.  The
U.S. Patent office also issued another patent relating to CD20
antibody therapy for the treatment of lymphoma.  CLTR rallied
$2.38 on Friday with no news to account for the move.  We will
target shoot the position at $0.50 credit initially, and adjust
the price based on Monday's activity.

SEP 22.50 QCE UX LB=0.38 OI=90 CB=22.12 DE=21 MR=7.9%


 
*****
CYTO - Cytogen  $9.03  *** On The Rebound! ***

Cytogen is an established biopharmaceutical company with two
principal lines of business, proteomics and oncology.  They are
extending their expertise in molecular recognition to the
development of a new, proteomics-driven drug discovery platform.
Cytogen's mission is to set new standards in cancer care.  During
the first half of the year, Cytogen continued to invest in their
oncology and proteomics businesses.  Their primary objectives
include; AxCell Bioscience, a wholly owned subsidiary, which is
attempting to chart the protein signaling pathways in the human
proteome as a means of discovering new drug targets, and PMSA
(prostate specific membrane antigen) which, because of its unique
characteristics as a cancer marker, is expected to be utilized in
broad applications in the therapy and diagnosis of prostate cancer
and possibly other metastatic cancers.  In addition, the company
has retained a new sales force in order to market directly its
monoclonal antibody-based ProstaScint and OncoScint CR/OV cancer
imaging agents.  We just like the chart!

SEP 7.50 UOR UU LB=0.31 OI=488 CB=7.19 DE=21 MR=18.8%


 
*****
DCLK - DoubleClick  $41.81   *** Sector Rally! ***

DoubleClick provides comprehensive Internet advertising solutions
for advertisers and Web publishers worldwide.  Their DoubleClick
Network consists of highly trafficked Web sites grouped by
categories of interest.  Their DART Service provides Web
publishers and advertisers with the ability to target, deliver,
and evaluate online marketing campaigns on a real-time basis.
DoubleClick, often considered the leading online ad serving firm,
led the internet group higher last week after the latest Jupiter
Communications ad projections forecast online advertising to
expand at a compounded annual growth rate of 30% over the next
five years.  In addition, CS First Boston analyst Rich Petersen
said the company stands to benefit from the new relationship
between NBC and Quokka Sports (QKKA).  He also commented that
"things certainly are looking up for the advertising sector, and
DoubleClick in particular."  Based on the recent bullish activity,
investors agree with that outlook and we will use any short-term
pullback to increase the position credit.

SEP 35.00 QWE UG LB=0.69 OI=849 CB=34.31 DE=21 MR=9.4%


 
*****
ICIX - Intermedia Communications  $20.88  *** Bottom Fishing! ***

Intermedia Communications provides integrated data and voice
communications services to approximately 90,000 business and
government customers in the United States.  Their subsidiary
Digex is a leading provider of managed Web hosting services to
businesses.  Intermedia recently announced they are beginning to
implement the Sonus' complete suite of products, which allows
companies to transport voice traffic using packet technologies,
expand network coverage into new geographic markets, handle
IP-based long distance traffic from international carriers, and
offload modem-generated Internet traffic from the company's voice
network.  The new architecture will provide Intermedia's business
customers with a network that is scalable, fast to provision,
cost-effective and able to support advanced applications as they
are developed.  Based on the technical indications, investors
believe these new products will help the company get "back on
track" and our position allows a favorable way to speculate on
that opinion.

SEP 15.00 QIX UC LB=0.38 OI=954 CB=14.63 DE=21 MR=11.9%


 
*****
MSTR - MicroStrategy  $26.88  *** Own This One! ***

MicroStrategy is a worldwide provider of intelligent e-business
software and related services that allow business transactions
through Web, wireless, and voice communication channels.  Their
software platform, MicroStrategy 6, allows users to query and
evaluate the transaction-level databases, turning data into
business intelligence.  They also offer a comprehensive set of
consulting, education and technical support services.  Shares
of MSTR rallied this week after IBM announced plans to dedicate
as many as 250 people to set up and integrate MSTR's marketing
software.  When coupled with IBM's database software, MSTR's
products will help companies build applications for analyzing
large amounts of customer information.  It also lets companies
deliver targeted messages, including advertisements to customers
via the telephones, faxes, and the Internet.  IBM is expected to
become the company's largest reseller, both in terms of revenue
and by the number of outside people dedicated to selling its
software.  We favor the opportunity to own this issue at a low
risk entry point.

SEP 20.00 EOU UD LB=0.44 OI=527 CB=19.56 DE=21 MR=11.0%


 
*****
PL - Protective Life  $28.19  *** Insurance Sector Hedge Play ***

Protective Life is a holding company whose subsidiaries provide
financial services through the production, distribution, and
administration of insurance and investment products.  Protective
Life Insurance Company is their principal operating subsidiary.
The company operates seven divisions whose principal strategic
focuses can be grouped into three categories: life insurance,
specialty insurance products, and retirement savings - investment
products.  A strategic focus of the company is to expand its life
insurance operations through internal growth and acquisitions.  In
late July, Protective Life reported favorable earning with five of
their seven divisions achieving earning increases in the first six
months compared to last year.  While the issue may not be a stellar
performer in comparison to technology or major drug companies, this
position offers conservative, low maintenance speculation for
traders who want to avoid volatile stocks.

SEP 25.00 PL UE LB=0.50 OI=35 CB=24.50 DE=21 MR=8.4%


 
*****
SIMG - Silicon Image  $32.06  *** On The Move! ***

Silicon Image designs, develops and markets semiconductor
solutions for applications that need cost-effective, integrated
solutions for high-speed data communications.  Their PanelLink
technology provides scalable, all-digital connectivity between
computers, controllers, or other sources of video. Their products
have been incorporated into products of leading manufacturers
such as Apple, Compaq, IBM, Sharp, Sony, and many others.  SIMG
appears to be on the right track after beating the street last
quarter and then announcing a stock split.  Lehman Brothers then
initiated coverage with a buy.  This week, Silicon Image unveiled
its new multi-rate MSLPhy(TM) Serializer/Deserializer technology,
which is capable of operating at bandwidths from 1.0625 to 3.125
gigabits/sec.  With this versatility, the MSLPhy SerDes is capable
of meeting multiple standards in the storage and networking
markets.  The recent, high-volume rally suggests Silicon Image’s
consolidation phase may be ending.

SEP 25.00 GUD UE LB=0.38 OI=20 CB=24.63 DE=21 MR=8.0%


 


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


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

Bracing For A Rally?

The market consolidated today after a string of bullish sessions.


******************************************************************
- MARKET RECAP -
******************************************************************
Friday, August 25

The market consolidated today after a string of bullish sessions.
The Nasdaq closed down 10 points at 4,042 while the Dow closed up
9 points at 11,192.  The S&P 500 ended almost unchanged at 1,506.
Trading volume on the NYSE hit 674 million shares, with declines
beating advances 1,425 to 1,334.  Activity on the Nasdaq exchange
was light at 1.27 billion shares traded, with advances outpacing
declines 2,140 to 1,763.  The 30-year bond was down 6/32, bid at
108 7/32, yielding 5.67%.


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

Protein   PDLI   SEP67P/SEP70P   $0.25   credit   bull-put
Sapient   SAPE   SEP140C/SE85P   $3.75   credit   strangle
Maytag    MYG    JAN50C/JAN35P   $0.38   credit   synthetic

The bullish activity in biotechnology shares boosted PDLI early
in the session.  The position was not available at the target
credit.  Maytag moved in the opposite direction, falling almost
$2 at the open and the initial credit was slightly higher than
expected.  Sapient moved in a relatively small range and the
neutral credit strangle was available at the target entry price.


Portfolio Plays:

The major indices were uninspired today, wandering aimlessly in
a small range while investors became frustrated with the lack of
activity.  Subtle bullish indications suggest the market is due
for further gains but few participants were willing to commit
major funds to support that outlook.  Analysts commented that
although trading volume has been light, inflows have continued
to increase in mutual funds, implying that stocks will rally in
the coming weeks.  Fed Chairman Alan Greenspan also voiced his
optimism about the outlook for the U.S. economy, saying it was
hard to find "credible evidence" that the rate of structural
productivity growth has stopped increasing.  On the blue-chip
average, International Business Machines (IBM) led the way, up
almost $5 on no apparent news.  IBM is now trading at a new high
for the year and the recent strength in the bellwether issue is
regarded as a bullish sign for the broad market.  On the Nasdaq
Emulex (EMLX) shocked investors, plunging over 50% early in the
session on a report that the company had substantially revised
earnings and that their chief executive had abruptly resigned.
Emulex later confirmed that the report was a hoax but the damage
had already been done, with thousands of shares traded at prices
near both ends of the day’s range.  Biotechnology stocks boosted
the composite index, with the majority of issues in the sector
remaining strong after the Clinton administration said earlier
in the week that it would support research of human embryonic
stem cells.  In the S&P 500, brokerage, bank and semiconductor
stocks consolidated and oil service shares also retreated after
the recent rally.

Our portfolio experienced little activity to report during the
listless session.  Most of the large-cap technology issues ended
the day lower but there were few moves of any significance.  In
the finance group, Ameritrade (AMTD) continued its recent rally
up almost $1 to a 4-month high near $18 and we will look for a
early-exit opportunity in the bullish, synthetic position.  On
the downside, Anheuser Busch (BUD) dropped through a key support
area and it appears the issue may run out of steam prior to the
upcoming two-for-one split on September 19.  We will monitor the
position for potential adjustments.  Previously slumping issues
Voicestream Wireless (VSTR) and WellPoint (WLP) both made small
technical recoveries, but it remains to be seen whether they can
transition into consolidation patterns rather than full scale
corrections.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************

PLCM - Polycom  $109.31  ** New Trading Range! ***

Polycom develops, manufactures and markets a full range of high
quality, media-rich communication tools and network solutions.
The company's broadband communication solutions enable business
users to immediately realize the benefits of video, voice and
data over rapidly growing converged networks.  The company is a
video conferencing and voice conferencing product provider, and
has recently entered the DSL access market, particularly in the
area of integrated voice appliances and broadband access devices.

Polycom resides in one of the hottest sectors in the market and
analysts are bullish on the stock.  Both Prudential Securities
and J.P. Mark, a telecommunications analyst at First Security Van
Kasper, have issued favorable recommendations on the company with
"Buy" ratings and targets as high as $300.  In addition, Polycom
recently announced that its Board of Directors has approved a
two-for-one split of its common stock, to be effected as a stock
dividend.  Shareholders of record as of the close of business on
August 15 will be issued one additional share for each share of
common stock held.  The shares will be distributed on August 31
and that’s probably the main reason for the recent interest in
the issue.

In any case, the current technical outlook is favorable and our
conservative position offers a way to participate in the future
movement of a volatile stock with relatively low risk.


PLAY (aggressive - bullish/debit spread combination):

BUY   CALL  OCT-115  QHD-JC  OI=42   A=$10.50
SELL  CALL  OCT-120  QHD-JD  OI=359  B=$8.25
SELL  PUT   OCT-80   QHD-VP  OI=2    B=$1.81

DEBIT SPREAD COST BASIS TARGET=$2.00  NAKED PUT TARGET=$2.00
OVERALL NET DEBIT TARGET=$0.00  TARGET ROI=25%

We have received many positive comments about this debit-spread
combination strategy.  In simple terms, the position is nothing
more than a sold (short) PUT and a bullish, debit spread.  The
play is actually somewhat aggressive, based on a bullish outlook
for both components, but we use out-of-the-money options to lower
the potential risk.  The premium from the sold PUT is used to
finance the purchase of the debit spread.  In this position, the
collateral requirement for the naked put is approximately $2,300
per contract.

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

MEA - Mead Corporation  $27.31  *** Options Activity! ***

Mead manufactures and sells paper, pulp, paperboard, lumber and
other wood products.  Mead also manufactures and distributes
consumer and office supplies.  Their Paper division manufactures
coated and uncoated papers, form bond and carbonless paper and
papers for conversion, cut-size copier paper and other uncoated
papers for conversion.  The Mead Packaging division designs and
produces multiple packaging and packaging systems primarily for
the beverage take-home market.  The Mead Consumer and Office
Products division manufactures and distributes a line of school
supplies, a line of office products, and computer accessories.
Outside of the United States and Canada, Mead and its affiliates
operate a paperboard sheeting facility and are engaged in the
manufacture of multiple packaging systems and folding carton
packaging in Europe, Asia and Latin America.  Mead Specialty
Paper also operates a decorative laminating and specialty paper
mill in England.

Speculators have been out in force, buying call options in this
issue while insiders suggest that a merger or buyout may be in
the short-term future for the flagging issue.  The forest and
paper products industry has been in a consolidation period for
some time, with a few sizable deals taking place this year.
In July, Georgia-Pacific announced its takeover of Fort James
and in February, Finnish-Swedish concern Stora Enso announced
its acquisition of Consolidated Papers.  Finland's UPM-Kymmene
is still looking for an asset to buy in the U.S., after it was
outbid by industry leader International Paper in a battle for
Champion.

Those of you that favor disparity plays in merger candidates
can participate in this position at a relatively low cost and
the generous time frame provides an excellent potential for
profit.


PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN-30  MEA-AF  OI=365   A=$2.75
SELL CALL  SEP-30  MEA-HF  OI=1051  B=$1.00
INITIAL NET DEBIT TARGET=$1.50-$1.62  TARGET ROI=50%



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

LOR - Loral Space  $8.41  *** On The Rebound? ***

Loral Space & Communications, together with its subsidiaries, is
a satellite communications company with substantial activities
in satellite manufacturing and satellite-based communications
services.  The company has assembled the building blocks that
are necessary to provide a seamless, global networking capability
for the information age.  The company's four operating segments
are Fixed Satellite Services; Broadband Data Services; Satellite
Manufacturing and Technology; and Global Mobile Telephone Service.

On Friday, Loral jumped $1.50 to close above $8 for the first
time in two months after Banc of America analyst J. Armand Musey
said the company's recent purchase of a satellite to cover the
Latin American market was a positive event, showing that LOR was
capable of doing deals and growing despite the many problems at
Globalstar.  The issues with Globalstar (GSTRF) and the recent
history of the industry (Motorola’s Iridium) have combined to
take this stock to an all-time low but based on the speculation
industry experts, the company may finally be turning the corner.

For those of you that are bullish on the underlying issue, this
is a relatively safe method in which to speculate on the future
movement of the share value, as long as you wouldn’t mind adding
to your portfolio.  Traders who support a favorable, long-term
outlook for Loral can use this synthetic position to profit from
upside activity, at the risk of owning the issue at a favorable
cost basis.  We will plan to enter the initial position on a
short-term pullback as the issue consolidates from Friday’s gains.


PLAY (conservative - bullish/synthetic position):

BUY  CALL  JAN-10.00  LOR-AB  OI=6969  A=$1.75
SELL PUT   JAN-7.50   LOR-MU  OI=2493  B=$1.38
INITIAL NET CREDIT TARGET=$0.00-$0.25  ROI TARGET=50%  B/E=$7.25

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $400 per contract.



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

PHCM - Phone.com  $88.38  *** Technicals Only! ***

Phone.com is a leading provider of software that enables the
delivery of Internet-based services to mass-market wireless
telephones.  The company's software products allow customers to
send Internet-based services to mass-market wireless telephones.
Their products include: UP.Link Server Suite, a service that
network operators use to connect their subscribers' mass-market
wireless telephones to Internet services; UP.Browser, a browser
that is embedded in mass-market wireless telephones and enables
wireless subscribers to access Internet services; UP.Smart, a
suite of software applications that delivers personal digital
assistant features to smartphones; and UP.SDK, a software
development kit that Internet content providers and third-party
developers use to create WML-compliant applications.

With a majority share in the rapidly expanding wireless Internet
arena's user interface software and hardware, Phone.com is the
"big dog" in a unique industry.  With a dominant market share,
exponentially increasing revenues and excellent management, the
company is sure to succeed.  However, this position is based on
the current price or trading range of the underlying issue and
the recent technical history or trend.  Current news and market
sentiment will have an effect on this issue so review the play
thoroughly and make your own decision about the future outcome
of the position.


PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-70  UGE-UN  OI=279  A=$0.88
SELL PUT  SEP-75  UGE-UO  OI=321  B=$1.43
INITIAL NET CREDIT TARGET=$$0.62-$0.68  ROI(max)=15%



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


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