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Daily Newsletter, Sunday, 09/03/2000

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Option Investor Newsletter Sunday 09-03-2000 Copyright 2000, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/090300_1.html Entire newsletter best viewed in COURIER 10 font for alignment ****************************************************************** MARKET STATS FOR LAST WEEK AND PRIOR WEEKS ****************************************************************** WE 9-1 WE 8-25 WE 8-18 WE 8-11 DOW 11238.78 + 46.15 11192.63 +146.15 11046.48 + 18.68 +260.05 Nasdaq 4234.33 +191.65 4042.68 +112.34 3930.34 +140.87 + 2.11 S&P-100 829.83 + 6.28 823.55 + 9.91 813.64 + 8.89 + 8.90 S&P-500 1520.77 + 14.31 1506.46 + 14.74 1491.72 + 19.88 + 8.91 W5000 14329.90 +238.70 14091.20 +183.80 13907.40 +210.60 + 84.90 RUT 541.91 + 16.80 525.11 + 9.60 515.51 + 5.24 + 6.64 TRAN 2712.92 - 77.25 2790.17 - 46.97 2837.14 - 90.36 + 40.69 VIX 19.45 + .35 19.10 - .32 19.42 - 1.77 - .35 Put/Call .53 .50 .57 .41 ****************************************************************** Roaring into September? Not quite. We made it to the weekend but just barely! Both major indexes managed a positive close but were well off the session highs. Not a problem in my book, just simple profit taking going into the long holiday weekend. The positive Employment Report and the shrinking PMI were a positive influence and the lack of major moves was simply due to a lack of traders. The NYSE only managed to trade 771 million shares but shook off a major drop by yesterday's big winner, JPM -6.31, and held its ground. Two days in a row and three out of the last five the Dow has bounced off resistance at 11300 but the up trend is still clear. Since August 11th the Nasdaq has managed a beautiful stealth rally of over +500 points and only one day was a triple digit gain. Your attention please, now entering into investor Nirvana! The Fed was dealt a death blow Friday with the double tap of the Employment Report and the PMI numbers. The Employment numbers showed a drop of -105,000 new jobs last month. This was the largest drop in nine years. Even if you factor out the major strikes and the census workers you would only have had an increase of +102,000 jobs which is substantially under previous estimates. The unemployment rate rose to 4.1% and the average hourly wages only rose +.3%. The PMI dropped into negative territory with a 49.5. Any number below 50 indicates contraction in the economy and very Fed friendly. Typically whenever the PMI is below 50 three months in a row the Fed follows with a rate cut. Add to this the slowing retail sales, a drop in retail jobs of -35,000, the NAPM report showing slowing across the board and construction spending dropping -1.6% and you have a prime example of a Goldilocks economy. You would think the Fed was a faint memory, and they may be soon, but a survey of the top 29 bond dealers showed that only four are expecting a rate cut as the next Fed action and 25 are still calling for another rate hike. Eight expect a rate hike this year. Come on guys, get with the program! I even heard the "D" word several times Friday. If we can get enough people using "deflation" in their daily commentaries then we can get those 25 dealers to change their votes pretty quickly. Any takers? The votes from the investing public may not count to Alan Greenspan but the economic conditions, which appear to be moderating, definitely have him smiling. The soft landing he was orchestrating appears to be heading for success. The only fly in the soup is the oil prices which closed at a six-month high of $33.38 a barrel. This jump came even though Saudi Arabia is expected to push OPEC for a higher than expected increase in global oil supplies. With cooler weather coming and oil prices still rising this one price component is likely to maintain the inflation watch. While we are not expecting a +3% GDP any time soon we are expecting the markets to react favorably to today's economic news when everyone returns from vacation on Tuesday. The economic calendar next week is very light with only the Productivity Report on Wednesday and Wholesale Inventories on Thursday. Not exactly market movers and shakers! With record cash inflows into equity funds in the last four weeks the outlook is good. According to TrimTabs.com over $17.6 billion came into equity funds in August compared to only $9.2 billion in August of 1999. With August normally a sleepy month the influx of cash has created a steady up trend. Not all this money has made it into the market yet and a rousing open on Tuesday could prompt money managers to open the spigot. Many have expressed concern about the recent rally as they sat in cash waiting for the summer doldrums to be over. Fearing they have missed the train, they may throw September caution to the winds if we get a strong Labor Day week. These money managers may not be jumping into Yahoo after continued warnings from analysts that Internet advertising is dropping rapidly. With much of Yahoo's earnings coming from banner advertising their earnings and very high PE of 364, which has already fallen from over 500, are in jeopardy. Where is the bottom for YHOO? Previously it has bottomed around $105 between earnings runs but with all the negative publicity we will probably see this trend tested. Internet stocks other than YHOO have been on a run recently with many gaining +25% or more in the last two weeks. This is a good sign that speculators feel the correction is over and they are willing to buy the sector again, just more selectively. Proving what goes up quickly may come down just as fast was JPM which dropped -6.31. This equates to about 35 Dow points. While the speculation cooled on JPM, other brokers continued upward with LEH making yet another new high. MWD is only $1 away, as well as BSC. Brokerage stocks not considered take over targets like Schwab are stuck in a trading range as attention is focused elsewhere. Anybody with any doubts about the strength of the Nasdaq rally need only look at a couple dozen charts of the market leaders. They bear an uncanny resemblance to the move out of the October lows of last year. Check out the charts for big gainers from Friday. Yes they are up strong for the last two weeks but they are showing no signs of slowing. While many are waiting on the sidelines for Labor Day many of these have added $20-30-40-50 even +$60 over the last three weeks. ITWO, HGSI, MLNM, PMCS, ARBA, CIEN, JNPR, TIBX, IDTI, SNDK, ABGX, DISH, BRCD, CHKP, MRVC, BEAS, QLGC, AAPL. Even their NYSE friends look the same, GLW, LH, HWP, CRA and CLS. While this looks good on paper we could be setting ourselves up for a fall five trading days from now. Until then we could see these stocks accelerate into next week. The markets continued their staging for next week as each major index moved even closer to its current resistance level. The Dow is still struggling with 11300 but the OEX is only .40 shy of closing over 830 which has been a problem since March. Breaking over 830-833 appears to be a slam dunk for Tuesday with any market movement at all. The S&P-500 (SPX) closed only -6 below its all time closing high set back in March as well. The Nasdaq edged about +28 points closer to the July resistance of 4289. A breakout close over 4300 on Tuesday would be the equivalent of the starters gun for pole sitters. The first week of September is normally a winner but once the earnings warnings start in earnest around the 11th things get a little dicey. These warnings and then the missed earnings in early October lead to the recent mid-October disasters. The economic calendar for the week after next is loaded with PPI, CPI, Import/Export Prices, Retail Sales, Business Inventories, Capacity Utilization, Industrial Production and Michigan Sentiment. Plenty of chances for confirmation of the current slow down or a reversal of the trend. In case I have not painted a clear enough picture above, I think we should have a pretty good week but the following week could be a nail biter. Those that have been playing the current list of calls should be very happy and profitable. I would expect this to continue BUT there is always the possibility of a high profile earnings warning or news event that could stop the rally cold. We saw some selling into the rally on Friday which means not everyone is of the same mindset. According to Austin Passamonte in the market sentiment section this weekend the large commercial traders are still short the S&P. It takes guts and a lot of money to short a rising market over the last 30 days and they are seldom wrong. This sets up a confusing set of possibilities. While almost every retail trader is expecting a rally next week commercial traders are betting millions on a market drop. I actually think that is a good thing. I would love to see a short squeeze of titanic proportions. Still we need to always be aware that what we expect may not always come to pass. Just because the mantra for the last three weeks has been "just wait till traders come back after Labor Day" does not mean they left their brains on the beach. They will evaluate the stocks they like and the current market posture. They will then vote for a rally by spending money or vote to wait for a pullback by continuing to sit on the sidelines. Lately traders have been perfecting the "buy on the rumor, sell on the news" trick and even the killer Employment report today was a selling opportunity. Could we see a "sell on the news" event Tuesday? It is possible and it would not be the first time but historically the next three days are up days. However, when everybody expects the market to do something like the expected rally next week, there is always the possibility that the opposite will happen. Let's hope history repeats itself! Trade smart, sell too soon. Jim Brown Editor ********************************************** Live in Boston - HAVE LUNCH WITH OIN SEPT-19th ********************************************** Busy in Boston? Have lunch with on us Tuesday September-19th. OptionInvestor.com, Preferred Trade and DTN-IQ will hold a FREE seminar on Tuesday complete with handouts, freebies, door prizes and over six hours of solid information which can improve your trading results. Lightning trades, real time quotes, the best option strategies and a FREE BREAKFAST and LUNCH! How can you go wrong? It is free but you have to register so we can order food. http://www.OptionInvestor.com/seminar/dtn **************** SEMINAR SCHEDULE **************** Excitement in Chicago! September 14-16th! Here is your chance to learn from the pros. The three day Technical Analysis Stock and Option Fall Seminar Series. Three days of indepth education. Don't miss it! We guarantee you will not be disappointed. The class size is small so you will get plenty of individual attention from Chris Verhaegh, Steve Rhoads and staff. At less than the cost of a bad trade you can learn how to analyze stocks and trade options like the pros. Don't wait, do it now. Date City Sep 14-16 Chicago Sep 21-23 Austin Tx. Sep 28-30 Boston Oct 12-14 Charlotte NC Oct 19-21 San Francisco Nov 02-05 Phoenix Nov 09-12 Miami FL Dec 07-09 Philadelphia Dec 14-16 San Antonio Australia coming soon! Has the market been beating you up? Did you give back your gains from April? Would you like to understand all the technical indicators our writers use? Does the alphabet soup of technical terms like RSI, DMA, MACD, ROC, Stochastics, Bollinger bands, sound like Greek to you? You can learn from the experts how to interpret all these indicators, read charts, pick stocks and which option strategies to use on those stocks for less than the cost of one bad trade. Reserve your seat now for one of our regional seminars. Click here for more info: http://www.OptionInvestor.com/seminar/seminar.asp ********************************Advertisement******************** Option trades starting at only $15.50, stock trades as low as $9.95! Mr. Stock provides key advantages to the serious option investor. Along with complex option trading online, fast executions, advanced charting capabilities and the ability to trade from any screen, we now offer some of the best commissions on the Internet. Our staff understands the sense of urgency required in today's market and will respond quickly to your most important trading needs. http://mojofarm.mediaplex.com/adserver/click_thru_request/565-58-1875-3 ***************************************************************** ************** EDITOR'S PLAYS ************** A pretty good week over all! EPNY rebounded off support as we expected and EXDS continued to the upside. The downer was HUF which suffered profit taking all week. 2 out of 3 is still a decent average and would make you rich over the long term. This week I added Celestica and Verisign as long plays. CLS had some very positive press on Friday after the close and VRSN is a possible dead cat bounce from a drop of -$13 on no news. ************** Existing plays ************** EPNY - Call play Remember EPNY was building a bullish wedge three weeks ago when I first wrote about the play. The next week the wedge broke down not out and EPNY fell back to support. Support held and aggressive traders were given an excellent entry point. Conservative traders were advised to wait for it to break $101 before entering the play as confirmation of a break out trend. Either way you should be profitable and poised for an attack on $120 once the resistance at $112 is broken and assuming the market cooperates. Good Job! EXDS - Call play This is the third week we have been following EXDS. We started our play recommendation when it was just under $60 and ready to breakout. The suggestion was to close the play at $70 which was about $2 under resistance and then wait for a break over $70 before starting a new play. Friday got us real close when it hit $69 before falling back on profit taking. I think EXDS will continue up to $80-82 market permitting. If you are not in this play I would view the current $66 as an entry point. The downside risk is minimal and you are not trying to protect profit from the existing run. My next sell stop would be $79 to $80, just before resistance. That would give us a $13-15 run from here and could happen next week. I would not plan on holding over $80 because of not only resistance but the possibility of a market downturn in two weeks. HUF - Huffy - Long stock play Huffy, up +200% on strong gains over the last two months chose this week for profit taking and obliterated this play. The stock gapped open on Monday to $13.50 and then fell back which should have made new ivestors wary and cautious. When you are looking to start a new play and it gaps open I would advise waiting for the pullback and then wait for it to climb back up over the opening gap before entering. In this instance it would have had to trade over $13.50 later in the day before I would have felt it safe to enter. I warned that it was high risk due to the possibility of profit taking and be sure to use stops, I hope you did if you entered this play. Chalk this one up as a loss and a drop. ********* NEW PLAY ********* CLS - New call play Celestica is a solid momentum play which received some really good press on CNBC after the close on Friday. Their component shortages are easing and sales and earnings are accelerating. They spiked on good news the prior week and profit taking took some of the steam out of the move. Now it appears over and CLS is right back on track and appears ready to breakout to a new high over $82 this week. Wait for confirmation of the breakout before starting a new position. I would want to see it hold over $83 for more than a few minutes. Patience is king! Verisign - Dead cat bounce?? The -$13 drop by Verisign on Friday was a huge bounce off resistance at $200. There was no news and no indications why the drop was so severe. The volume was almost 9 million shares or almost three times normal. While I don't claim to be psychic, this looks like the start of a possible entry point. Most of the selling was at the open and volume slowed midday. The up volume increased at the close. I would be a buyer above $187 and I would sell if it fell under $187 again. Let that be your execution trigger and all your other decisions will be easy. We may never know why there was such a large sale imbalance. There could be some news disaster awaiting us on Tuesday and this was insiders bailing out. It could have just been profit taking just as easy. When we don't know why something happens we should always WAIT and WATCH. Don't rush in blindly. Wait for $187. Wait for it to HOLD over $187 for more than just a few minutes. ************ The market this week is expected by everyone to be in rally mode. When "everyone" expects something the opposite may come to pass. 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 ************************Advertisement************************* Attention Online Traders: NobleTrading.com has become the first online trading firm to offer both Direct Access Trading, and web based trading to its customers. Trade Direct using any ECN, SOES, and SelectNet, or trade right through your browser using our web based trading application. FREE DSL service for active traders. Visit our website and sign up for a Free real-time demonstration! http://www.sungrp.com/tracking.asp?campaignid=377 ************************************************************** **************** MARKET SENTIMENT **************** Do We Feel Raindrops, Noah? By Austin Passamonte We are tottering on the verge of our next major market move. Have you heard that here before? Hope the last nails are hammered in that ark, we hear thunder in the distance. Markets under pressure eventually explode like those whole beets we put in the microwave this week. Major action we were definitely not prepared for. The buying season is about to begin. Cash piles of historical proportions are in place and ready to work as witnessed on Thursday. Everyone and their broker is straining at the bit. Will that be enough? The SPX index is within a hair of closing in record territory and talk of the Dow and NASDAQ close behind is the latest repeated mantra. Will that be enough? The economy has slowed, the Fed is dead and historically such times begin the next major bull rally leg to unprecedented heights. The coast is certainly clear, how many more benign reports do traders need for confirmation? Commercial traders in the S&P 500 futures market have record net-short holdings. If institutions blink and decide to pull their plug, the mother of all short-squeezes could push the SPX towards 1700 in a heartbeat. Small speculators are wildly long. A near-term correction could see these weak hands bail in an equally powerful long-squeeze. Every rally today was met with aggressive selling. Some of the big-cap techs have been strong but are meeting stiff resistance. The OEX index has impenetrable overhead near 835 and has met swift & fierce rejection on multiple tests. Will this overhead hold or break? Third quarter earnings have begun to leak out and it's more than just a trickle already. What may the official confession season harbor for us? The VIX hovers near 19 and few analysts are concerned. Extreme complacency of traders has spread to the media. Should we worry or relax? Jane Fox, a fellow OIN reader and experienced data analyst compiled a spreadsheet study of the VIX/OEX relationship. She was diligent enough to go back to 7/19/95 studying extreme moves of each to discover possible direct or inverse movement of each respective index. Her research uncovered roughly 60 such extreme VIX swings as we witness currently. Of these 60 data points, 54 showed an inverse movement and 6 had parallel movement between the two. That means 9 out of 10 times during this period the VIX reached extreme range it resulted in an opposite move of magnitude for the OEX. VIX moves up, OEX moves down. As the OEX, so goes the DOW. With the VIX at 19 for this long, we have a 90% chance of correction in the major markets,10% chance of release from extreme without adverse market moves according to this data. Lay your bets as you see fit. Can you feel the tension? This is much bigger than what we think CSCO's going to do next week. Major capitulation could lie around the corner. Hundreds of index points in either direction grow more likely every session. As always, Market Sentiment could care less which way it plays. Calls or puts are equally-powerful financial vehicles when the opportunity arises. Be prepared to buy either, set stops and hold. Things could get very interesting in a hurry! 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 8/31 close: 19.28 Sat 9/02 close: 19.45 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 (8/29) (8/31) (9/02) ************************************************************* CBOE Total P/C Ratio .55 .43 .53 Equity P/C Ratio .47 .37 .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 (8/29) (8/31) (9/02) ************************************************************** All index options 1.88 1.27 1.77 OEX Put/Call Ratio 2.32 1.48 1.63 OEX Maximum Open Interest Strikes/Contracts: Puts 800/5,906 790/6,111 790/6,057 Calls 800/4,873 800/4,543 800/4,358 Put/Call Ratio 1.21 1.35 1.39 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: (8/29) (8/31) (9/02) Overhead Resistance: (920-855) 203.77 128.44 124.53 (850/830) 3.76 4.68 4.02 index close: 827 827 829 Underlying Support: (825-805) 1.66 1.50 1.72 (800-780) 2.21 2.47 2.62 What the S/R measure indicates: Net open-interest ratios are firm above 830 and impenetrable above 850 while very light all the way to 780. A large index move has downside clearance to 780 or below with relative ease. We could see 805 in a heartbeat. We still consider continued failed tests near the 835 range an excellent put entry. 30-yr Bond: 5.75% 5.68% 5.66% Light, Sweet Crude, Barrel: $32.72 $33.10 $33.40 200 Day Moving Average (as of 8/29) The 200 DMA is widely considered the major benchmark for critical support in a market. DOW: 10,816 11,216 11,215 11,238 NASDAQ: 3,980 4,082 4,206 4,234 NDX: 3,728 3,952 4,077 4,099 SPX: 1440 1510 1517 1520 OEX: 778 827 827 829 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; +7,165 (long) - 10,913 (short) Total Open Interest % 17.43% net-long 24.29% net-short NASDAQ 100 Net contracts; +1613 (long) +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 show the economy is cooling and no further rate hikes may be needed. Friday's batch 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. Very bullish behavior ****** BEARISH SIGNALS VIX Friday's close near 19 has us still 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 $33.40 today. All petroleum expected to be extremely high this fall. Prices in low $20s would be welcome relief but remain beyond reality. Seasonal patterns are rising prices soon as well. 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 - Friday, 09/01/2000 Key Benchmarks Broad Market Last Support/Resistance Alert **************************************************************** DOW Industrials 11,238 11,000 11,400 SPX S&P 500 1,520 1,485 1,550 COMPX NASD Composite 4,234 4,000 4,300 OEX S&P 100 829 814 845 RUT Russell 2000 542 520 575 ** NDX NASD 100 4,099 3,900 4,300 MSH High Tech 1,115 1,080 1,170 BTK Biotech 786 690 800 XCI Hardware 1,640 1,500 1,680 GSO Software 487 450 500 SOX Semiconductor 1,142 1,000 1,200 NWX Networking 1,397 1,325 1,400 ** INX Internet 579 495 600 BIX Banking 602 550 610 XBD Brokerage 685 660 700 IUX Insurance 715 680 725 RLX Retail 802 770 815 DRG Drug 391 380 415 HCX Healthcare 812 795 855 XAL Airline 154 148 168 OIX Oil & Gas 310 280 320 Other than a big move on the open, light volume kept trading relatively quiet on Friday. The Networking issues continued their torrid rise. Plus, the small cap Russell 2000 broke out above resistance. We will have to wait and see if any there are any major changes in trends after the Holiday. ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at Preferred Capital Markets Stop Losses based on the option price or the stock price. Move your trading into the next millennium with Preferred Capital Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************* SECTOR TRADER ************* Change is in the Wind By Buzz Lynn Contact Support OK, bad news first. HOLDRS are a stable way to participate in the success of a hot sector. Unfortunately for us option traders, it has not been as wildly successful as we'd originally anticipated for a couple of reasons. First, since the mix of components will never change for the life of the HOLDER, once hot component companies have turned cold which drags down the performance of the HOLDR. With about 24% of its makeup, just look at the effect LU has had on the BDH - talk about a wet towel! That problem will never go away as long as LU lags. If not LU, another once high flyer may fall on hard times. Yep, one rotten apple spoils the bunch and that applies to every HOLDR we've covered. The never changing mix is a play wrecker. If HOLDRs had been invented 100 years ago, it doesn't take much of an imagination to see the challenge of trying to trade a basket of 20 of the hottest buggy- whip stocks now that cars had been invented. Second, with only a couple of exceptions, HOLDR trading volume, while liquid, isn't enough to sustain big price moves. Many HOLDR's volumes have fallen since their inception. The once mighty PPH (pharmaceuticals) traded just 33 K shares on Friday while the RKH (regional banks) traded just 9300 shares total. We really don't want to trade options on that kind of volume of the underlying. Tradability is a big problem if there are no (or few) buyers or sellers to move prices and keep investor interest stimulated. Despite our interest in option trading different sectors FOR A PROFIT, HOLDRS no longer fit the bill. So how do we solve these two challenges? Now for the good news! The answer is to begin trading indices instead. Why's that? First, on a regular basis, laggard companies or companies that no longer fit a particular index's mold are eliminated and replaced with companies that do. That keeps a fresh supply of winners replacing the losers so an index never stagnates, and thus keeps investors interested. By keeping investors interested, the second challenge of providing sufficient tradable volume is automatically overcome. It's the same principle as seeing "new and improved" on the cereal box when you were a kid (except that after 20 years, indices really change while Captain Crunch doesn't). It keeps us going back for more. To that end, we'll be keeping the QQQ and writing up our usual possible trades on that index. In addition we'll provide a similar format on the OEX (S&P 100) for a number of plays too. While the successful OEX Skybox will remain fully intact as a neutral trading system, the Sector Trader OEX write-up will now have what we think are other possible ways to make money like naked puts, straddles, strangles, calendar spreads and bull/bearish debit and credit spreads. By focusing on just these two, the QQQ and OEX for starters, we hope to offer more detail on how to profitably play these sectors. We will add a third index on occasion in the near future if we think there is a reasonable expectation of a successful trade. Let us know your favorites! With that in mind, say good bye to the HOLDRS this weekend and G'Day to OEX starting in Tuesday's update. Best Trading Wishes this coming week! Index Last Mon Tue Wed Thu Fri Week QQQ NASDAQ-100 102.63 0.47 0.63 0.00 2.94 1.00 5.03 HHH Internet 113.75 -4.19 -0.13 4.13 -0.88 -3.00 -4.06 BBH Biotech. 202.25 -2.44 -1.50 3.06 6.38 0.31 5.81 PPH Pharm. 94.75 -0.88 -1.38 0.00 -0.06 0.19 -2.13 TTH Telecom. 67.63 0.56 -0.69 0.75 0.56 0.75 1.94 IAH I-net Arch. 107.50 2.19 0.06 0.00 2.63 0.69 5.56 IIH I-net Infr. 62.06 0.25 1.13 2.56 2.06 -0.44 5.56 BHH B2B 53.75 -0.44 0.13 4.00 0.31 1.31 5.31 BDH Broadband 96.31 0.13 -0.25 -0.88 1.56 1.13 1.69 SMH Semicon. 97.88 0.50 -0.75 -0.94 1.88 -0.81 -0.13 RKH Reg. Banks 106.13 0.31 -1.56 0.88 2.50 -1.00 1.13 UTH Utilities 105.63 1.56 -1.06 0.25 1.50 0.88 3.13 ************** Updates ************** QQQ - NASDAQ 100 $102.63 (+5.03 last week) Still cruising through the ionosphere (that's higher than the stratosphere), NASDAQ and QQQ continue to eke out gains on respectable volume. Total NASDAQ volume on Friday was just shy of 1.5 bln shares. Not bad for last ditch vacationers on a summer Friday. If you think volume looks good now, just wait for the next two weeks when traders return to the markets! Particularly encouraging is the low number of new lows - only 48 on the NASDAQ and fewer than 30 on the NYSE - very bullish. QQQ just closed at its highest level since April 7th at $102.63. That represents a breakout over the June and July tops that had previously offered resistance. Technically, MACD is still trending up, while the stochastic has flattened, but directionally positive volume is advancing. The likelihood of $100-$101 holding as new support is getting stronger. Dips into that region should see a bounce. Assuming support holds, new resistance isn't clearly evident until $105-$107. Want some confirmation that the market is moving in your direction? Look mostly to CSCO as the 800-lb. gorilla that most closely reflects the QQQ just as GE tends to reflect the Dow. It won't hurt to watch the other gorillas either - INTC, MSFT, ORCL, SUNW, DELL and WCOM. Calendar Spread: Support in the $100-$101 range is building. In fact, even Friday, $101.50 held. Calendar spreads work best in neutral to mildly bullish trending patterns, however QQQ is getting beyond mild. Even so, we can still profit from this trade by "legging in". That means to buy a long term underlying call option and sell a near term call option. But you don't have to do it simultaneously. Time decay will act much more quickly on the short-term option, while decaying minimally on the long-term option. That means that if you sell a near term option every month, you will eventually take in enough premiums to fully pay for the underlying position if all goes according to play. However, we don't ever want to be called out of one unlike a covered call. If the sold (short) call loses its time value or nears expiration ITM, you will need to keep reserves on hand to buy it back. Keep in mind that as this short call rises in value, so too does the long term by an equal or greater amount. Remember your objective is time decay of the short position. Dips to $100 could be an ideal entry for the long leg, while a pullback from $105 might be the time to execute the short leg. Just make sure you see the rollover. ***September options expire in 2 weeks*** BUY CALL DEC-100 QVO-LV OI= 8993 at $10.75 SELL CALL SEP-100 QVO-IV OI=11586 at $ 4.50, ND = 6.25 or less SELL CALL SEP-102 QVO-IX OI=12491 at $ 3.00, ND = 7.75 or less SELL CALL SEP-105 QVO-IA OI=11883 at $ 1.50, ND = 9.25 or less SELL CALL OCT-110 QVO-JF OI= 673 at $ 2.75, ND = 8.00 or less Long Call: There's an awful lot of momentum on the QQQ right now and its all pointing up to more gains. While we should exhibit a good bit of caution in the coming week since nothing goes up (or down) forever in a straight and the VIX is still under 20, a return of traders with wallets full of cash should continue to advance the index. Dips to $100-$101 could be a buying opportunity. Look for telecom, software and (yep) Internet and infrastructure stocks to support the index going forward. The semiconductors may not be such a willing participant. Watch CSCO, INTC, MSFT, ORCL, DELL, and WCOM for direction. ***September options expire in 2 weeks*** BUY CALL SEP-100 QVO-IV OI=11586 at $4.50 SL=2.75 BUY CALL SEP-105 QVO-IA OI=11883 at $1.50 SL=0.75 BUY CALL OCT-100 QVO-JV OI= 1850 at $7.25 SL=5.00 BUY CALL OCT-105 QVO-JA OI= 619 at $4.75 SL=2.75 SELL PUT SEP-100 QVO-IV OI=11586 at $4.25 SL=2.50 Average Daily Volume = 18.9 mln ----- SMH - Semiconductor $96.31 (+1.69 last week) Unfortunately semis did not participate in Friday's gains. INTC, AMAT, MU, and especially BRCM gave up some of the week's earlier gains. That would help to explain why SMH again failed to penetrate resistance at $100 and fell back to $97, but not quite getting to our target shooting spot at $95. No trades available on Friday. It's worth noting however that on the 30 and 60-min charts that MACD and stochastic may be within a day or so of putting in a near-term trading bottom. When you see the lines cross back out of the "oversold" position, that will be the signal to take a position. If the overall market cooperates next week, get ready to jump in since no wide-scale advance will happen without the semis participation. Support still at $95 and resistance at $100 still hold. ***September options expire in 2 weeks*** BUY CALL SEP- 95 SMH-IS OI=123 at $ 5.00 SL=3.00 BUY CALL SEP-100 SMH-IT OI=748 at $ 2.19 SL=1.00 BUY CALL OCT-100 SMH-JT OI=371 at $ 6.50 SL=4.50 BUY CALL NOV-100 SMH-KT OI=174 at $ 8.63 SL=6.00 Average Daily Volume = 405K K ----- BDH - Broadband $96.31 (+1.69 last week) What do you know. . .a move over resistance at $96! Remember we weren't entirely convinced with Thursday's doji at $95. Unfortunately this still is probably not the time to get in. Volume was still under 100 K shares on Friday and the MACD and stochastic technicals are showing signs of a breakdown on the 30 and 60-min chart despite the gains in both LU and NT on Friday. Combined with the gains in SCMR, GLW, PMCS and CIEN, the sector is looking pretty strong. We just wish it would move faster. Fundamentals good - technicals bad. Stand aside until the volume rises back over the ADV, and the MACD and stochastic again point north. ***September options expire in 2 weeks*** BUY CALL SEP- 90 BDH-IR OI= 17 at $7.13 SL=5.00 BUY CALL SEP- 95 BDH-IS OI=272 at $3.50 SL=1.75 BUY CALL OCT- 95 BDH-IS OI= 97 at $6.50 SL=4.50 BUY CALL OCT-100 BDH-JT OI= 43 at $4.00 SL=2.50 Average Daily Volume = 114 K ----- BBH - Biotech $202.25 (+5.81 last week) BBH gave us pretty mixed results on Friday and traded pretty flat. Nonetheless it was a good week as BBH closed a recent new high not seen since last March when BBH was getting kicked into the basement. Yes, another sector breaking out. Even so, the short term 30 and 60-min MACD and stochastic indicate maybe a day or two of weakness while the daily chart is still trending positive. Like the BDH above, look for these two indicators to turn back positive on a 30/60-min chart from an oversold position before entering. IDPH, MLNM, and HGSI are the rocket ships of the bunch while AMGN, DNA, BGEN and IMNX are currently fractional movers serving to cancel each other out. If you are a skilled trader, you might even consider trading just a couple of the components. Support is at $200, resistance at $207. Wait for a pullback, then make your move. ***September options expire in 2 weeks*** BUY CALL SEP-195 BBH-IS OI= 188 at $12.88 SL= 9.50 BUY CALL SEP-200 BBH-IT OI= 726 at $ 9.88 SL= 6.75 BUY CALL OCT-200 BBH-JT OI= 391 at $17.13 SL=12.25 Average Daily Volume = 632 K ************** No Play ************** HHH PPH BHH IIH IAH TTH RKH UTH ************* COMING EVENTS ************* For the week of September 4, 2000 Monday None Scheduled Tuesday NAPM Services AUG Forecast: N/A Previous: 55.5% Wednesday Productivity-Rev. Q2 Forecast: 5.4% Previous: 5.3% Thursday Initial Claims 9/2 Forecast: N/A Previous: 318K Wholesale Inventories JUL Forecast: N/A Previous: 1.0% Friday Consumer Credit JUL Forecast: $9.8B Previous: $12.0B Week of September 11th Sep 13 Export Prices ex-ag. Sep 13 Import Prices ex-oil Sep 13 Current Account Sep 14 Retail Sales Sep 14 Retail Sales ex-auto Sep 14 PPI Sep 14 Core PPI Sep 14 Initial Claims Sep 15 CPI Sep 15 Core CPI Sep 15 Business Inventories Sep 15 Industrial Production Sep 15 Capacity Utilization Sep 15 Michigan Sentiment FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to "Contact Support" with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html

The Option Investor Newsletter                   Sunday 09-03-2000
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
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**************
TRADERS CORNER
**************

High Cash Flows Propelled The Markets
By Mary Redmond

CMGI appeared to awaken from the dead slumber it had been in for
the entire summer on Wednesday, when the internet sector started
to take off.  This will be an interesting stock to watch in the
coming weeks.  CMGI successfully cleared the 50 DMA of 43.81 on
Wednesday on strong volume.  The arrow points to what would have
been a successful entry point when the stock moved out of the
Bollinger bands.  Jan 02 50 leaps purchased two weeks ago at
$12.5 sold for $18.5 on Thursday.  The company had experienced
extreme selling since April, and had seemed to reach a bottom
between 35 and 38.




The stock had basically stayed between 35 and 50 since July, and
the volume had consistently been declining on the down days
which indicated that selling was dwindling down.  A two year
leap had relatively low downside risk at this point, and would
retain most of its time value for the next six months.  However,
one issue will be whether or not the company will clear the 200
DMA which is a long way off at 66.  It will take alot of strength
to hold above the 50 DMA and power up to this level.  If it does,
the implied volatility of the options should increase which could
make the options highly profitable.  If it can't reach the 200
DMA the stock may exhibit further weakness.





It is also interesting to note the change in implied volatility
from the price move this week.  The implied volatility of the
October 50 call options last week was 85.7.  The current implied
volatility is 82.5.  However, the implied volatility of the Jan
02 50 leaps increased to 88.4 on Thursday.  The leaps have a
delta of approximately 64, which means the leaps should move about
64 of a point for every point move in the stock.  Since the leap
moved up 6 points for a 7 point move in the stock part of the
gain in the option's price may be due to an increase in the
implied volatility.  In addition, it is important to note that
the implied volatility of the leap increased while the implied
volatility of the near term option went down.

Another interesting situation developed this week with NXLK.
You can see in the chart below the extreme tightening of the
Bollinger Bands when the stock almost stopped moving.  One way
or the other, the probability of the stock moving out of this
range was very high.  The question was in which direction.
The stochastic and MACD indicators seemed to point to a general
downward move.







This seems to be a situation in which there are both strong
bullish and strong bearish indicators.  Many options traders
and other short term traders have been worried about the VIX.X
for weeks now, and some are starting to wonder if it even
matters anymore.  This reminds me of last winter, when the
Nasdaq was roaring to new highs every day and we heard the
same story about the advance/decline line deteriorating daily.

On the other hand, the Fed's program of interest rate hikes
seems to have been effective in slowing the rate of economic
growth to a level which satisfies them.  It is also important
to note that the levels of cash on the sidelines have been
increasing to astronomical levels, and the market has rallied
at the same time.  What can this indicate?  Maybe an even
stronger rally could come later on.

We may need to consider that the ipo market was practically non
existent for the last two weeks, which freed up cash to enter
the market.  That is going to end in September.  After Labor
Day the ipo market is going to heat up big time.  Over 280
companies are scheduled to go public this fall, with over 80 in
September alone.  In addition, over $50 billion in previously
restricted ipo stock will be unlocked for sale in September by
over 40 new companies.  We might need to see higher cash flows
to the markets in order to counter the impact of the ipos and
newly unrestricted stock.

It is important to note that this was the first week in over
two months when the money market funds experienced a net outflow
of over $7 billion.  Retail money market funds experienced a
net outflow of $2.38 billion, and institutional money market
funds experienced a net outflow of $5.25 billion.  This can
indicate that retail and institutional investors are entering
the markets.  There is still plenty of money left, as the
Investment Company Institute reported that over $1.74 trillion
is still safely tucked away in money market funds.  In addition,
AMG Data Services reported that over $4.9 billion in cash went
into equity funds last week, with the majority of the money
going into growth funds.  So we had an inflow of over $12 billion
in cash going into the market, and very little going out in the
form of ipos.  If the ipo schedule heats up we may need an even
higher level of cash to keep the markets rallying.

Contact Support


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




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

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

INKT - Inktomi Corp $130.75 (+6.81 last week)

See details in sector list

 


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

AT - Alltel Corp $49.81 (-1.00 last week)

See details in sector list

 


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

Dow    11238.78 22.47
Nasdaq  4234.33191.65
$OEX     829.83  6.28
$SPX    1520.77 14.31
$RUT     541.91 16.80
$TRAN   2712.92-66.54
$VIX      19.45  0.40

Calls

CIEN     230.13 32.19  Networking index nearing an all-time high
JNPR     221.63 30.69  How can you argue with this return??
CHKP     149.44 17.06  A long awaited breakout has begun
NEWP     168.94 14.94  Wild ride last week culminated w/ purchase
NTAP     115.50 14.69  Emerging gorilla in the storage sector??
IDTI      92.56 14.31  Analyst comments propel stock
IWOV      98.00 13.00  $90 to $100, the path of least resistance
ITWO     179.25 12.75  B2B has once again captured investor hearts
QLGC     116.00 12.13  Nice post-EMLX recovery for Q-logic
TIBX     108.06 11.81  Nice recovery with the Nasdaq rally
BEAS      70.75 11.13  Right sector at the right time
ISSX      84.13 11.13  Security sector picking up again
MRVC      80.38 10.25  Starting to perk up above resistance
VRSN     185.94  9.56  A little profit-taking, but still ok
ORCL      92.63  8.00  Moving up without even a stutter
DISH      53.06  7.94  Strong subscriber based growth continues
SNDK      88.50  7.75  Storage sector has been strong
INKT     130.75  6.81  The ascent continues on Internet momentum
AAPL      63.44  6.63  Excitement over the release of the OS X
NEON      37.75  5.19  Four out of five up days isn't bad
VRTS     121.75  4.81  Trying to find footing above $120
LSCC      77.69  3.44  Stock split announcement fuels stock

Puts

MMM       92.50 -3.25  Short-term rotation out of the cyclicals
KO        54.25 -1.75  Seems to have lost some carbonation
UK        39.56 -1.50  An exodus from chemicals continues
AT        49.81 -1.00  Earnings may be a touch below forecasts
NTLI      48.38  4.13  Dropped, the trend is at an end


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

No dropped calls this weekend.


PUTS

NTLI $48.38 (+4.13) NTLI confirmed in Friday's session it was on
the rebound.  After spiking on news of a competitive marketing
alliance with ON Digital and topping out at $44.44 on Thursday,
the stock returned center-stage Friday for an encore
performance.  It bullishly climbed straight up from the open
stopping short just under the $50 mark.  NTLI's previous
breakdown on acquisition scuttlebutt is obviously no longer
effecting the share price.  The bright side of the scenario
is that you likely weren't given the opportunity to begin a
play and therefore, avoided getting the proverbial pie in the
face.

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

CHKP - Check Point Software $149.44 (+17.06 last week)

Check Point Software Technologies, Ltd is in the Internet security
business.  They develop, market and support Internet security
solutions for enterprise networks and service providers, which
also include Virtual Private Networks and Managed Service
Providers.  There are three main product lines for CHKP and they
are security products, traffic control for bandwidth management,
and finally management products.  In a nutshell, Check Point
delivers solutions that enable secure, reliable and manageable
business-to-business communications over any Internet Protocol
network including the Internet, intranets and extranets.

Check Point was the first company to offer easily installable
software designed to place a firewall between a corporate
network and the Internet.  This company is growing like a weed!
Revenue for the second quarter this year came in at $90.7 mln
compared to $50.1 mln for the second quarter last year,
representing an 81% increase in revenues.  Furthermore, they are
truly a leader in Internet security with a reported market share
of 52%, in the VPN market.  On April 4th, CHKP hit an intraday
low of $57.97.  Trading then remained choppy until May 30th, at
which time CHKP closed at $94.38, above its 50-dma ($87.10 at
that time).  From there, it has remained somewhat range-bound
between $102 and $132.  This recent assault at new highs began
on August 17th, as CHKP closed above its 10-dma.  Since then all
closes have settled above the 10-dma (currently at $137.80).
This baby can trade!  We saw four nice up days last week, with
the only exception being a small $2.50 pullback on Wednesday.
Wednesday’s pullback was on the heels of Tuesday’s explosive $8
move to the upside.  Thursday saw a nice $3.19 move to the upside
on 2.2 mln shares (1.4 times ADV) and Friday CHKP traded up $3.63
to close at an all time high of $149.44.  Conservative traders
may want to look for a pullback on light volume to the 10-dma
(currently at $137.80), along with a bounce, for an ideal entry
point. You will be waiting until $121.80, if you want to see a
pullback to the current 50-dma.  Aggressive traders might find
an intraday pullback to $144-$145, as a suitable entry point.
Look for a continued upside move with strong volume, as there is
now no overhead resistance on this chart.  This stock is volatile
at times so keep an eye out for profit taking, both in CHKP and
the NASDAQ.

This week CHKP and Intrusion.com announced a partnership to
jointly develop and deliver a new class of low-cost security
appliances targeted at the small and medium business (SMB) market.
On August 4th, further accolades were given by the brokerage
Community as Sands Brothers reiterated coverage with a Strong
Buy and price target of $170.

BUY CALL SEP-145 KGE-II OI=396 at $ 9.50 SL= 7.00
BUY CALL SEP-150*KGE-IJ OI=428 at $ 6.75 SL= 5.00
BUY CALL SEP-155 KGE-IK OI=125 at $ 4.75 SL= 3.50
BUY CALL OCT-155 KGE-JK OI= 83 at $14.88 SL=11.00
BUY CALL JAN-160 KGE-AL OI= 11 at $24.63 SL=18.50

SELL PUT SEP-140 KGE-UH OI=186 at $ 3.50 SL= 6.00
(see risks of selling puts in play legend)
 	     		
Picked on Sep 3rd at   $149.44     P/E = 194
Change since picked      +0.00     52-week high=$149.63
Analysts Ratings    13-4-0-0-0     52-week low =$ 14.40
Last earnings 06/00   est=0.21     actual=0.25
Next earnings 10-20   est=0.25     versus=0.15
Average Daily Volume = 1.58 mln



MRVC - MRV Communications, Inc. $80.38 (+10.25 last week)

MRV Communications is in the business of creating and managing
growth companies in optical technology and Internet
infrastructure.  The company has created several start-up
companies and independent business units in these areas.
MRVC's core operations include the design, manufacture, and
sale of products in these areas, primarily Network Element
Management, and physical layer, switching and routing
management systems in fiber optic metropolitan networks.
The company also produces fiber optic components for the
transmission of voice, video and data across enterprise,
telecommunications and cable TV networks.

August has been a great month for most tech stocks, and MRVC is
no exception.  A post-earnings sell-off saw the stock end the
month of July in the red.  Bouncing off the $48 area and its
100-dma to begin the month, the stock quickly recovered above its
50-dma.  From there MRVC has been moving higher and now as we
begin September, the stock finds itself back in the area it was
at before reporting earnings.  For the second quarter, MRVC
posted revenues of $73,935,000 compared to $73,251,000 in the
previous year.  While the earnings report was nothing to write
home about, investors have been excited at the prospect of MRVC
repositioning itself as an incubator of optical networking
companies.  With almost insatiable interest and demand for fiber
stocks these days, MRVC seems to be making the right moves.  A
major force likely to drive the stock in the near term is the
anticipation of MRVC's spin-off of its Luminent division, which
filed for IPO on July 26th.  For the year, Luminent's sales have
grown 78% and has been profitable for the past five years.  After
clearing the $80 level to end the week, the next level of
resistance for MVRC will be $82.  A conservative trader will want
to wait for MRVC to clear that level with conviction before
making an entry.  For aggressive traders, there are a number of
possible ways to gain entry.  A bounce off support at $75 is
one possibility.  Make sure there is volume to confirm a bounce
before jumping in.

Aside from the upcoming Luminent IPO, there has been little
specific news for MRVC.  Watch for the stock to move in sympathy
with the NASDAQ as well as with its peers in the fiber-optics
industry such as CIEN, GLW and JDSU.

BUY CALL SEP-75 RVY-IO OI=2329 at $ 8.38 SL= 6.00
BUY CALL SEP-80*RVY-IP OI=1677 at $ 5.38 SL= 3.50
BUY CALL SEP-85 RVY-IQ OI= 450 at $ 3.25 SL= 1.50
BUY CALL OCT-80 RVY-JP OI= 229 at $11.63 SL= 8.75
BUY CALL OCT-85 RVY-JQ OI= 293 at $ 9.38 SL= 6.50

Picked on Sep 3rd at     $80.38     P/E = N/A
Change since picked       +0.00     52-week high=$97.44
Analysts Ratings      1-0-0-0-0     52-week low =$ 8.25
Last earnings 07/27   est= 0.03     actual= 0.02
Next earnings 10-26   est=  N/A     versus= 0.01
Average Daily Volume = 2.56 mln



SNDK - SanDisk Corporation $88.50 (+7.75 last week)

Founded in 1988, SanDisk pioneered industry development of flash
memory cards for data storage and played a key role in setting
many flash industry standards.  It was the first company to
introduce a removable flash MultiMediaCard, an ultra-small size
form factor memory card.  SanDisk embedded flash data storage
devices also are widely used for numerous commercial and
industrial applications in various markets.  Market research
firms have concluded that SanDisk is the flash card market
leader with approximately 28% share of the market.

To say that it's been a great month for SNDK would be an
understatement.  From basement to ceiling, SNDK gained over 63%
in August.  Finding a bottom in the early part of last month at
the $55 level, the stock had a lot of work to do to erase a bumpy
and volatile July.  Sitting below its 50-, 100-, and 200-dma (now
at $67, $70.68 and $71.40), there was a lot of overhead
resistance to overcome.  First to go was the 50-dma.  It took a
week and a half for SNDK to move above that level.  From there,
the 200-dma was surpassed a day later.  A day after that SNDK
broke through its 100-dma.  From there the stock took off,
breaking through resistance not only at $75 but at $80 as well.
Since then the stock has been trading in a range from $80 to $85.
After spending the better part of the week trading sideways,
SNDK finally broke out on Friday, closing above the $85 mark.
Throughout SNDK's rally, it has been using the 5-dma (currently
at $84.25) as a launching pad for its sudden bursts of strength.
A successful bounce off that level would be a great entry point
for an aggressive trader, as would a bounce off $85.  Additional
support can be found at the 10-dma at $81.20 as well as the key
support level of $80.  With its all time high at $169.63, there
is a lot more room to move up, with the next levels of resistance
in increments of $5 at $90, $95 and then psychological level of
$100.  Conservative traders looking for confirmation of continued
upward momentum will want to see SNDK clear $90 on high volume
before entering.

Company-specific news this week was abundant.  On Monday SNDK was
recognized by Fortune magazine as one of the top 100 fastest
growing companies in the nation.  Tuesday saw SNDK extend its
reach as it signed its first product distributor in China with
World Peace Industrial Co., Ltd.  Wednesday's announcement of a
new PDA by Sony helped SNDK as demand for Sony's new PDA would
likely mean increased demand for SNDK's flash memory products.
SNDK was also helped by the Seybold conference in San Francisco
as many of the new products displayed are dependent on SNDK's
storage solutions.

BUY CALL SEP-80 SWQ-IP OI=2360 at $9.50 SL= 6.50
BUY CALL SEP-85*SWQ-IQ OI= 980 at $6.50 SL= 4.50
BUY CALL SEP-90 SWF-IR OI= 784 at $4.25 SL= 2.50
BUY CALL OCT-90 SWF-JR OI= 672 at $9.63 SL= 6.50
BUY CALL OCT-95 SWF-JS OI= 172 at $7.63 SL= 5.25

Picked on Sep 3rd at     $88.50     P/E = 23.19
Change since picked       +0.00     52-week high=$169.63
Analysts Ratings      2-2-0-0-0     52-week low =$ 18.88
Last earnings 07/19   est= 0.22     actual= 0.33
Next earnings 10-18   est= 0.27     versus= 0.10
Average Daily Volume = 2.69 mln



AAPL - Apple Computer $63.44 (+6.63 last week)

Apple ignited the personal computer revolution in the 1970s with
the Apple II and reinvented the personal computer in the 1980s
with the colorful Macintosh.  Other products include the Mac OS
operating system, the portable iBook, and a variety of
multimedia tools.  Apple is committed to bringing the best
personal computing experience to students, educators, creative
professionals and consumers around the world through its
innovative hardware, software and Internet offerings.  The
company is still run by the original founder, Steve Jobs.

The "Apple" is ripening to revisit its old highs.  In recent
months, the press concerning an industry wide slowdown knocked
AAPL down more than a few notches as well as other key players
including Dell (DELL), Gateway (GTW), and Compaq (CPQ).  It sure
has been a tough go for the PC stocks.  But AAPL, with its
strong growth prospects it's apparently escaping from the
carnage.  After missing analysts' whisper numbers in the 2Q,
management quickly justified the shortfall.  Consumers were
simply holding off purchases in anticipation of the newer iMac
models expected later in the year.  Steve Jobs subsequently
received bullish reviews after his presentation at the MacWorld
conference that followed that earnings release.  And so here we
are in the midst of a strong recovery.  Regardless of the
broader industry outlook, AAPL is steadily returning to price
levels not seen since early March.  The brass ring at $75.19
isn't too far out of reach.  On Monday, shares of AAPL jumped in
excitement in anticipation of another keynote address by its
CEO, this time the Seybold conference in San Francisco.
According to David Bailey at Gerard Klauer Mattison, "whenever
Steve speaks, it generates a lot of excitement, which could be
contributing to the stock running up."  By Thursday's session,
AAPL broke the formidable resistance at $60.  Take a look at a
three-month chart and you can visually confirm how AAPL failed
to penetrate this level both in June and July.  The next task is
to move through light opposition at $65 before it challenges the
$70 level.  The strong close just a fraction from its intraday
high on Friday and the positive economic outlook should foster
more gains over the short-term.  Take aggressive entries off the
5-dma line (currently at $60.24) if AAPL retraces.  Else use the
developing intraday support at $62 as a launching point to gain
entry in a rising market.

Apple's CEO, Steve Jobs, announced plans to release a public
test version of the much delayed OS X operating system on
September 13th.  Earlier in the month, analyst Jason Wells at
Wit SoundView upped his rating on AAPL to a Strong Buy from a
Buy.  He maintained a 2000 EPS of $1.85 and his six-month price
target of $76.

BUY CALL SEP-55 AAA-IK OI=3538 at $9.00 SL=6.25
BUY CALL SEP-60*QAA-IL OI=6240 at $4.63 SL=2.75
BUY CALL SEP-65 QAA-IM OI=1428 at $1.75 SL=1.00
BUY CALL OCT-60 QAA-JL OI=5094 at $7.75 SL=5.50
BUY CALL OCT-65 QAA-JM OI=2549 at $5.13 SL=3.00
BUY CALL OCT-70 QAA-JN OI=1892 at $3.00 SL=1.50

Picked on Sep 2nd at     $63.44    P/E = 31
Change since picked       +0.00    52-week high=$75.19
Analysts Ratings     10-7-2-0-0    52-week low =$28.72
Last earnings 07/00   est= 0.44    actual= 0.45
Next earnings 10-13   est= 0.45    versus= 0.26
Average Daily Volume = 4.57 mln
/charts/cahrts.asp?symbol=AAPL


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The Option Investor Newsletter                   Sunday 09-03-2000
Sunday                                                      3 of 5

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

NEON - New Era of Networks, Inc. $37.75 (+5.19 this week)

NEON, otherwise known as New Era of Networks Inc., currently
supplies over 2500 customers worldwide with Internet
infrastructure software and services.  Their products and
services enable the integration of Internet-facing appliances
and core operational systems for goods and services providers.
Through the use of these products, businesses can automate their
end-to-end processes such as fulfilling an order at the speed
and volume their respective e-business environment requires.
Their customers encompass all the major industries including,
financial services, healthcare and telecommunications, to name
a few. Established reseller and joint marketing relationships
with complementary e-business entities such as a BEA, BroadVision,
Commerce One, IBM, Microsoft and Sun Microsystems, further
strengthen and fuel NEON's business.

Four out of five ain't bad!  Technically, Neon is beginning
to show improvement.  After hitting an intraday high of $95.25
on March 14th, NEON plummeted to an intraday low of $17.88 on
April 17th.  Since April, trading in NEON has been choppy and as
a result it has been stuck in a trading range between $21 and
$45, the current 200-dma.  This week NEON closed higher every
day except for Thursday, but most impressive has been NEON's
ability to crossover and close above its 50-dma (currently
$32.30) every day this week.  Wednesday, the stock hit an
intraday high of $39.13 before pulling back late in the day
to close at $37.25, followed by a day of rest for the stock
on Thursday.  This was the only down day for the week as it
closed $2.19 lower to finish at $35.06.  Friday's advance of
$2.69 was on lighter than normal volume to close at $37.75.
Future moves in NEON may meet with some minor resistance at
the $40 level, however, if it surpasses that level on strong
volume, it should be clear sailing to $45, the current 200-dma.
Conservative traders might look for a low-volume pullback to
intraday support of $34 or to the 50-dma, along with a bounce,
for a nice entry point.  Aggressive traders should watch for
any reasonable intraday pullbacks for entry or possibly a break
above Wednesday's intraday high of $39.13 with volume as a
possible entry point.  Carefully monitor NASDAQ movement and
sentiment before entering any trades as we may be faced with
profit-taking at any time.

NEON's customer list is impressive with the likes of IBM,
Citibank, GTE, JP Morgan and Monsanto Company.  On August 14th,
IBM and NEON further strengthened their alliance with major
customer wins.  Analysts expect that the continued public
proclamations of this alliance confirm the health of their
relationship.  On Tuesday, Webvertising selected NEON as their
strategic partner for their XML and Internet-Based Solutions.

BUY CALL SEP-30 QNO-IF OI=763 at $8.13 SL=6.00
BUY CALL SEP-35*QNO-IG OI=872 at $4.00 SL=3.00
BUY CALL SEP-40 QNO-IH OI=242 at $1.50 SL=1.00
BUY CALL OCT-35 QNO-JG OI=941 at $6.38 SL=4.75
BUY CALL JAN-40 QNO-AH OI=363 at $8.00 SL=6.00
			
Picked on Aug 29th at  $36.44     P/E = N/A
Change since picked     +1.31     52-week high=$96.25
Analysts Ratings    3-6-0-0-0     52-week low =$12.13
Last earnings 06/00  est=0.04     actual= 0.06
Next earnings 10-18  est=0.07     versus=-0.17
Average Daily Volume =  867 K



DISH - Echostar Communications $53.06 (+7.94 this week)

DISH is commonly known as the company that sells those great
satellite dish television systems that give you access to 500
channels of digital video and CD quality audio programming.
However, DISH currently operates three interrelated businesses,
with over 8,000 employees worldwide including the DISH Network,
Echostar Technologies Corporation and Satellite Services.  DISH
network is the subscription based portion of the business(i.e.
paying them monthly for T.V. cable service).  The other two
divisions deal with the design of the set top boxes/satellite
receivers and the delivery of the video, audio and data services
to business television customers and other satellite users.

DISH has been blessed this year with strong growth of their
subscriber base.  They reported during the second quarter of
this year, that their subscriber base grew to 4.3 million
subscribers, up from 2.6 million in the second quarter last
year.  In an effort to continue their growth momentum, DISH has
negotiated further distribution agreements, for their satellite
dish television systems, with the likes of Bradlees (a 105 store
retail chain),  H.H. Gregg (an electronics retailer in the
Midwest), and P.C. Richard & Son (a 42 store chain in New York
and New Jersey).  However, DISH has struggled technically since
March.  The stock hit a 52-week high of $81.25 on March 27th and
then drifted lower, for the next few months, to an intraday low
of $30.75, on June 28th.  On July 6th, DISH moved up convincingly
and closed at $35.94.  Since then, DISH has been stuck in a
trading range between $36 and $46.63, held captive by its
200-dma (currently at $47).  After a slow start to the week for
DISH on Monday, Tuesday and Wednesday, the Bulls decided they
were ready to take this baby higher, with the broader market.
On Thursday, DISH crossed over and closed above its 200-dma for
the first time since June 2nd.  Volume Thursday came in at 3.1 mln
shares (1.3 times ADV) as it closed near the top end of its
intraday trading range, at $48.25.  Friday, DISH looked even
more impressive advancing $4.36 on volume of 4.6 mln shares (2
times ADV), to close near its intraday high at $53.06.  It has
definitely benefited from the recent bullish moves in the NASDAQ.
Conservative traders may want to look for a low-volume pullback
to the 200-dma (currently at $47), along with a bounce, before
entering a trade.  However, if the NASDAQ keeps climbing, a
pullback to that level may not be in the cards.   Aggressive
traders may want to look for a pullback to around the $49 level
and enter a trade there, in conjunction with a volume backed
bounce.  In any case, keep a watchful eye out for profit taking
after such strong gains in the NASDAQ.

There was no material news regarding DISH this week, however,
during the month of August the brokerages came out and showed
their love for DISH.  CIBC World Markets reiterated coverage
with a Strong Buy and a $60 target, Merrill Lynch resumed
coverage with a NT Buy/LT Buy and a target of $56 and finally
Lehman Brothers reiterated their Buy rating and target of $85.

BUY CALL SEP-40 UAB-IH OI= 984 at $13.63 SL=10.00
BUY CALL SEP-45 UAB-II OI=2773 at $ 8.63 SL= 6.50
BUY CALL SEP-50*UAB-IJ OI= 330 at $ 4.50 SL= 3.25
BUY CALL OCT-50 UAB-JJ OI=1328 at $ 7.75 SL= 5.75
BUY CALL DEC-55 UAB-LK OI=1093 at $ 8.88 SL= 6.50
         		
Picked on Aug 31st at   $48.75     P/E = N/A
Change since picked      +4.94     52-week high=$81.25
Analysts Ratings     9-7-0-0-0     52-week low =$14.00
Last earnings 06/00  est=-0.32     actual=-0.28
Next earnings 11-01  est=-0.34     versus=-0.28
Average Daily Volume = 2.3 mln



TIBX - TIBCO Software $108.06 (+11.81 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%.

TIBX got some traction this week as it advanced over $11 for the
week, finishing higher every day last week except for Tuesday.
Good fundamental news and a climbing NASDAQ helped TIBX this
week.  IWOV and TIBX announced a strategic alliance to provide
comprehensive solutions in the B2B marketplace.  Furthermore,
TIBX also inked a multi-year agreement with ARBA to bundle its
infrastructure software with ARBA's buy-side application, Ariba
Buyer 7.0.  From a technical perspective TIBX is starting to look
better and better, keeping its head above water as it traded
comfortably above its 100-dma, (currently at $86.80) all week.
However, most impressive this week was its ability to crossover
and close above its 50-dma, (currently at $104.50) for the first
time since August 11th, on Friday.  Volume was light all week,
but, that may change as TIBX has cleared resistance and should
look to stabilize over that key technical support line.  Further
advances here may be met with overhead resistance at the $114
level and again at $122.  TIBX's trading range can whip you around
like a bad carnival ride, so, conservative traders should watch
for a pullback to the 50-dma, currently $104.50, along with a
bounce, to serve as an entry point.  The more aggressive trader
may want to use an intraday pullback to $106 or the 50-dma to
enter a trade here.  In any event, I would watch for confirmation
of this move through increasing volume as we continue to stabilize
above the 50-dma.  Furthermore, keep a watchful eye out for profit-
taking or sentiment shifting in the NASDAQ.

Thursday, TIBX announced the opening of its new KOREAN Technical
Learning in Seoul.  This will help TIBCO meet the growing demand
from its Asia Pacific customers, including Samsung and Hyundai.

BUY CALL SEP- 95 PIW-IS OI= 335 at $15.75 SL=11.75
BUY CALL SEP-100*PIW-IT OI= 489 at $11.75 SL= 8.75
BUY CALL OCT-100 PIW-JT OI= 725 at $18.63 SL=14.00
BUY CALL OCT-105 PIW-JA OI=  33 at $16.13 SL=12.00
    	
Picked on Aug 27th at    $96.25     P/E = N/A
Change since picked      +11.81     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. $70.75 (+11.13 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.

Those who have been playing BEAS couldn't have asked for a better
week.  A flat Monday provided a perfect entry for those looking
to enter early into this play.  Tuesday saw the stock clear the
$60 mark.  This set BEAS up for a Wednesday break through the
$62.50 level, a high last seen over six weeks ago.  From there
the bulls took control on Thursday, helped by a strong NASDAQ,
as late-day buying propelled the stock sharply higher.  Ending
the week on a positive note, BEAS moved ever higher on Friday,
closing up $2.69 or 3.95% on over 135% of ADV.  Speaking of
volume, there's been plenty of it for BEAS this past week as
advances in the stock price have been accompanied by
strengthening in trading volume.  This is a good sign as momentum
has clearly been in BEAS' favor.  Aside from a strong market,
sector sympathy also played a key role as the so-called "stealth
rally" in high-quality B2B stocks became much less of a secret,
with leaders such as ARBA and CMRC tallying impressive gains for
the week.  Add to that a string of positive announcements and
you've got a solid week of rallying for BEAS.  The 5-dma (now at
$64.67) has provided support for BEAS' move higher these past
couple of weeks, with bounces off that line almost daily.  On
Friday BEAS skipped that line all together and just gapped
higher.  A visit to the 5-dma is possible and aggressive buyers
may want to enter on a bounce off that level.  There is also
support at $70 and $65.50.  A break above $75 will likely see
BEAS challenge its all-time high at $78.88.

In the news this week, on Monday the company unveiled a new web
site for the e-generation as well as a new partner in dynamic
commerce solutions provider Moai Technologies Inc.  Tuesday saw
British Telecommunications selecting BEAS as Its Global
E-Commerce Platform.  Wednesday saw news of a strategic alliance
with e-commerce software company Access Commerce Inc.

BUY CALL SEP-65 BUC-IM OI=1615 at $7.13 SL=5.00
BUY CALL SEP-70*BUC-IN OI=1510 at $3.50 SL=1.75
BUY CALL SEP-75 BUC-IO OI=1655 at $1.75 SL=1.00
BUY CALL OCT-70 BUC-JN OI=  78 at $7.25 SL=5.00
BUY CALL OCT-75 BUC-JO OI= 154 at $4.75 SL=2.75

Picked on Aug 27th at    $59.63    P/E = N/A
Change since picked      +11.13    52-week high=$78.88
Analysts Ratings      1-4-0-0-0    52-week low =$ 5.81
Last earnings 08/15   est= 0.04    actual= 0.05
Next earnings 11-14   est= 0.06    versus= 0.03
Average Daily Volume = 5.86 mln



IWOV - Interwoven, Inc. $98.00 (+13.00 last week)

Interwoven is a leading provider of software products and
services that help businesses and other organizations manage the
information that makes up the content of their Web sites.  In
the Internet industry, this is often referred to as "Web content
management."  Interwoven designs software products to help
companies rapidly and efficiently develop, maintain and extend
large Web sites that are essential to their businesses.
Interwoven's principal product, TeamSite, incorporates widely
accepted Internet industry standards and is designed with an open
architecture that allows it to support a wide variety of Internet
software products, including Web authoring tools and Web
application servers.

Ever since starting this play on Tuesday, it's been a nice ride
up.  Traders who were watching IWOV closely on Wednesday were
able to take advantage of a quick bounce off the 5-dma.  After
spending the whole of Tuesday trading sideways and flirting with
resistance at $90, IWOV took off on high volume as late day
buying on Wednesday propelled the stock higher, closing not only
above $90 but above $95 as well.  The move put IWOV in position
to challenge its all-time high at the psychological resistance
level of $100.  On Thursday the bulls attempted to take the stock
into brand new territory.  Getting as high as $99.75 brought in
the sellers, eager to take profits gained from the previous day.
From there IWOV found support at $95.  Friday saw IWOV touch the
century mark for the first time since March.  Unfortunately the
stock was not able to maintain that level to the close.  Despite
this, IWOV gained $2 or 2.08% on average volume.  Conservative
traders looking to enter this play will want to see IWOV break
above $100 on strong volume before entering.  Another likely
scenario is that IWOV could regroup at its 5-dma (now at $93.65)
or support at $95 before making another attempt to break out.  A
bounce off support confirmed by volume may serve as an aggressive
entry point.

News in the early part of the week, along with a strong market,
likely contributed to IWOV's gains.  Monday was a busy day as the
company announced that Taiwan Semiconductor selected IWOV's
products to manage its web content.  This came on the heels of
news that ChipCenter had successfully integrated IWOV's TeamSite
solution.  Along with this came an announcement of a partnership
with leading broadband media company Chuckwalla.  On Tuesday IWOV
announced a strategic alliance with TIBCO software to supply
products and services to the B2B market.

BUY CALL SEP- 95*IQG-IS OI= 71 at $ 7.25 SL= 5.00
BUY CALL SEP-100 IQG-IT OI=156 at $ 4.63 SL= 2.75
BUY CALL SEP-105 IQG-IA OI= 34 at $ 2.88 SL= 1.50
BUY CALL OCT- 95 IQG-JS OI= 12 at $14.25 SL=10.75
BUY CALL OCT-100 IQG-JT OI= 44 at $12.00 SL= 9.00

Picked on Aug 29th at  $90.25    P/E = N/A
Change since picked     +7.75    52-week high=$100.00
Analysts Ratings    4-2-0-0-0    52-week low =$ 18.38
Last earnings 07/18 est=-0.09    actual=-0.02
Next earnings 10-17 est=-0.02    versus=  N/A
Average Daily Volume =  743 K



NTAP - Network Appliance $115.50 (+14.69 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.

Where the NASDAQ leads, NTAP follows.  Or is it the other way
around?  As part of the Nasdaq 100, this emerging gorilla in
the storage industry affects, and is affected by the fortunes
of the bluest of the blue chip tech stocks.  So with the NASDAQ
moving higher this past week, where else could NTAP go but up?
This past week has been a successful campaign not only for the
tech index, but especially for NTAP.  Monday saw the stock
successfully test support at the psychological $100 level.
From there the stock rebounded strongly, which allowed NTAP on
Tuesday to break through resistance at $105, while encountering
resistance at $110.  Wednesday saw the stock clear the $110 area,
only to find formidable resistance at $112.  This was a level not
seen since July before a steep sell-off.  This was not a problem
however, as NTAP gapped up above that area on Thursday thanks to
a strong NASDAQ.  On Friday NTAP encountered its next formidable
level of resistance at $120.  Hitting a ceiling at $119.88 in the
early hours of trading, profit-takers and bears alike came in to
sell the stock.  Finding support above its previous resistance
level of $112, the stock recovered to close down only $1.50 or
1.28% on 77% of ADV.  At this point a break above $120 on strong
volume would be the buy signal for conservative traders.
Aggressive traders will look for a bounce off support at $112,
$110 or the 5-dma at $111.30 with confirmation before entering.
Breaking above $120 will find NTAP ready to challenge its
all-time high at $124.

Positive news in the early part of the week helped lift the stock
higher.  On Monday, NTAP joined the Content Alliance, which
includes companies such as CSCO, ISLD, EXDS, NAVI and PSIX.  As
well, Continental Airlines selected NTAP products and solutions
for their storage needs.  On Tuesday NTAP entered into an
alliance with Zack Networks, whereby the two companies will work
to co-develop an Internet content delivery product by combining
information applications from Zack with caching hardware from
NTAP.

BUY CALL SEP-110 ULM-IB OI=3303 at $ 9.25 SL= 6.25
BUY CALL SEP-115*ULM-IC OI=1784 at $ 6.13 SL= 4.00
BUY CALL SEP-120 ULM-ID OI=1453 at $ 3.75 SL= 2.00
BUY CALL OCT-115 ULM-JC OI= 250 at $14.13 SL=10.50
BUY CALL OCT-120 ULM-JD OI= 419 at $11.88 SL= 9.00

Picked on Aug 24th at   $101.69    P/E = 650
Change since picked      +13.81    52-week high=$124.00
Analysts Ratings     17-4-0-0-0    52-week low =$ 15.63
Last earnings 08/14   est= 0.07    actual= 0.09
Next earnings 11-13   est= 0.09    versus= 0.05
Average Daily Volume = 5.36 mln



VRSN - VeriSign, Inc. $185.94 (+9.56 last 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
organization's 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.

Four steps forward, one step back.  Despite the give back on
Friday, investors in VRSN had much to be thankful about.  Four
straight days of rallying on increasing volume gave way to
profit-taking before the long weekend.  Monday was business as
usual, with VRSN making its almost routine bounce off the 5-dma
before moving higher.  In doing so VRSN broke through resistance
at $180.  Tuesday was more of the same - a bounce like clockwork
off the 5-dma followed by a break through resistance at $185.
While the stock encountered resistance at $190, this was but a
memory by Wednesday's close.  Breaking its trend of touching the
5-dma before moving higher, VRSN gapped higher on Thursday to
challenge formidable resistance at the bicentennial level of
$200.  Getting as high as $199.63, the stock closed at $198.88.
On Friday morning, VRSN hit $199.88 before the sellers came in
force, selling down the stock before it bounced at $182.38 to
close above support at $185.  This put VRSN below its 5-dma at
$189.34.  At this point conservative traders will wait for VRSN
to move back above $190 with strong buying interest before
entering.  Aggressive traders will likely look for a bounce off
support at $185 or $180.  Whether aggressive or conservative
however, Friday's loss of $12.94 or 6.51% on over twice the ADV
should elicit caution when considering this play.  The close
below the 5-dma may suggest that the current up-trend may be over
so it is important for VRSN to close above this level.  As well,
staying above the 10-dma near key support at $180 is vital to the
health of this play.

On the news front, on Tuesday VRSN announced partnerships with
two companies.  First with B2B portal eConstructors to offer a
low-cost web site solution, and then with online reverse auction
service netgenShopper to expand its network of sellers.

BUY CALL SEP-180 QVZ-IP OI=1095 at $13.00 SL= 9.75
BUY CALL SEP-185*QVZ-IQ OI= 740 at $ 9.88 SL= 7.00
BUY CALL SEP-190 QVZ-IR OI=1302 at $ 7.88 SL= 5.75
BUY CALL OCT-185 QVZ-JQ OI=  68 at $23.25 SL=18.75
BUY CALL OCT-190 QVZ-JR OI= 216 at $21.13 SL=15.75

SELL PUT SEP-175 QVZ-UO OI= 799 at $ 4.38 SL= 6.50
(See risks of selling puts in play legend)

Picked on Aug 24th at  $178.44    P/E = 1420.54
Change since picked      +7.50    52-week high=$258.50
Analysts Ratings   14-11-1-0-0    52-week low =$ 47.75
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



CIEN - Ciena Corp $230.13 (+32.19 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.

The Networking Index ($NWX) flirted with record territory last
Friday, lead by a charge in CIEN.  With record profits, upbeat
conference calls, and Wall Street's praise, the Optical
Networking sector has taken off into the blue sky over the
past month.  In fact, last Friday's rally marked a nearly $100
gain for CIEN during the month of August.  In spite of CIEN's
recent rally into record territory, Goldman Sachs called the
stock cheap late last week.  Goldman said CIEN represented a
compelling value relative to next year's revenue estimates.
With no signs of growth slowing in the Optical Networking sector,
CIEN is positioned to lead the NASDAQ higher into the end of
the year.  Also blowing in CIEN's sails of momentum is the
upcoming 2-for-1 stock split.  The payable date for the split
is a mere three weeks away.  We might see a split run develop
in the coming weeks, which might be a key catalyst in carrying
our play higher.  Speaking of higher, CIEN is coming off back
to back days of new 52-week highs.  The stock's charge higher
late last week might lead to some consolidation in the coming
days.  If the profit takers return from their holiday retreat
early next week, look for CIEN to find support first at $225,
next at $220, or lower near its 5-dma at $216.75.  Aggressive
traders might look to gain new entry into the play if CIEN falls
on light selling then bounces off one of its several support
levels.  CIEN did finish last Friday right at its day and new
52-week high.  If the buyers show up again after the holiday,
watch for a bounce off the $230 level or target shoot for entry
on a quick rally out of the gates early in the day.

The news from the National Fiber Optical Engineers conference
provided a few fireworks for our play early last week.  CIEN
will be appearing at several other investor conferences in the
coming weeks, which might provide an additional catalyst to
carry our play into the profit zone.  CIEN will visit with Dain
Rauscher, DLJ, and SG Cowen in the coming weeks.  A positive
presentation from CIEN might lead to upgrades by the preceding
brokers, and higher prices for our play.

BUY CALL SEP-220 UEE-ID OI=1018 at $16.88 SL=12.25
BUY CALL SEP-230*UEE-IZ OI= 769 at $11.13 SL= 8.25
BUY CALL SEP-240 UEE-IH OI= 443 at $ 7.00 SL= 5.00
BUY CALL OCT-230 UEE-JZ OI= 881 at $23.25 SL=17.50
BUY CALL OCT-240 UEZ-JH OI= 126 at $18.13 SL=13.00

Picked on August 24th at $201.06    P/E = 554
Change since picked       +29.06    52-week high=$230.13
Analysts Ratings      9-10-1-0-1    52-week low =$ 29.38
Last earnings 07/00     est=0.17    actual=0.19
Next earnings 10-20     est=0.25    versus=0.03
Average Daily Volume =  5.00 mln



IDTI - Integrated Device Technology $92.56 (+14.31 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).

Judging by the recent analyst comments bestowed upon IDTI, one
might speculate that Wall Street has officially returned to
its bullish love affair with the Semi sector.  In the last
week no less than three major Wall Street firms have commented
on IDTI's promising future.  SG Cowen got the ball rolling a
week ago with the reiteration of their Strong Buy rating and
establishment of a $100 price target, based on IDTI's solid
tracking of its current quarter.  Then came Chase H&Q last
Thursday, who initiated coverage on IDTI with a Strong Buy and
$125 price target, citing the company's stronghold on the
communications chip market.  Finally, Salomon Smith Barney
jumped on the bullish bandwagon Friday morning by reiterating
their Buy rating on IDTI and throwing in a $110 target price,
after raising their year-end EPS estimates.  The reports issued
by Chase and Solly late last week spurred a buying binge in
IDTI, which culminated with a bolt into record territory Friday.
IDTI's two day bull stampede late last week might lead to a
pullback early next week if the profit takers return from
vacation.  IDTI established solid support just below at $92
and has help again at the $90 level.  A light round of profit-
taking might provide a solid entry on a bounce off either of
IDTI's near-term support levels.  If the profit takers sell
heavily, watch for IDTI to stabilize at $85, or lower near
its 5-dma at $82.31.  On the other hand, if IDTI extends its
late-week rally, target shoot for entry upon an advance past
the $93 level.  Make sure to confirm any IDTI rally with healthy
volume before entering the play.  And, although IDTI bucked
the sell-off in the $SOX last Friday, watch the direction in
the broader Semi sector before initating new positions.  Also,
watch for new OTM contracts to be added to IDTI's options chain
early next week, and wait of OI to build before jumping in.

Only three more weeks until IDTI holds its Annual Meeting of
Shareholders.  On the schedule of events is a vote to increase
the number of authorized shares to 360 mln.  An increase in
authorized shares can often preceed a stock split.  And, given
IDTI's recent - and impressive - rally, a split announcement
might not be too far off.

BUY CALL SEP-80 ITQ-IP OI= 539 at $13.00 SL= 9.75
BUY CALL SEP-85*ITQ-IQ OI= 623 at $ 9.00 SL= 6.25
BUY CALL SEP-90 ITQ-IR OI= 162 at $ 5.88 SL= 4.00
BUY CALL NOV-85 ITQ-KQ OI=2743 at $16.13 SL=11.50
BUY CALL NOV-90 ITQ-KR OI= 386 at $13.63 SL=10.25

Picked on August 15th at $66.88    P/E = 48
Change since picked      +25.69    52-week high=$93.56
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 = 3.26 mln




ITWO - I2 Technologies $179.00 (+12.50 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 B-2-B sector has once again captured the interests of
investors in a big way.  This time around, though, Wall Street
is doing their buying a little more carefully.  Investors are
focusing on the B-2-B players with proven business models and,
more importantly, profits.  Of the B-2-B universe, the supply
chain managment providers are benefitting the most in terms of
business growth and Wall Street adoration.  ITWO, of course,
is the clear leader in the supply chain management space, which
comes with no surprise given the stock's recent performance.
After suffering from a rumor-based analyst report early last
week, ITWO rebounded quickly to charge onto new highs in its
ascending channel.  Momentum appears to be building as ITWO
distances itself from the nearly five month consoldation it
has been stuck in.  The company will be presenting at several
investor conferences over the course of the next two weeks,
which might act as a catalyst to take our play higher in the
near-term upon the release of any bullish news.  ITWO finished
the week strongly last Friday, near its day high.  If the B-2-B
bulls show up early next week, watch for an ITWO rally with
strong volume above the $180 level to gain entry into the play.
ITWO has not seen levels above $180 since early March, which
leaves minor resistance above current levels.  A conservative
trader might wait for ITWO's momentum to build and target shoot
for entries on a rally above $185.  Make sure to confirm any
rally attempt with healthy volume, and watch the direction in
the broader Tech sector, before entering new positions.  A
pullback on profit taking to support at $175 or lower at $170
might also provide the aggressive traders with a solid entry
into the play.  Wait for any light selling to subside before
buying an ITWO dip.

ITWO's big rally last week carried the stock further into split
territory.  The company has plenty of shares to authorize a
2-for-1, and my do so if the stock continues its climb.  The
recent host of split announcements have been received by the
market in general, which bodes well for our ITWO play should
the Board decide to declare.

BUY CALL SEP-175 QYI-IO OI=1137 at $11.75 SL= 8.75
BUY CALL SEP-180*QYI-IP OI= 358 at $ 9.00 SL= 6.25
BUY CALL SEP-185 QYI-IQ OI= 556 at $ 6.88 SL= 5.00
BUY CALL OCT-180 QYI-JP OI= 106 at $20.00 SL=14.50
BUY CALL OCT-185 QYI-JQ OI=  11 at $17.88 SL=12.75

Picked on August 27th at $166.50    P/E = 520
Change since picked       +12.50    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 =  3.56 mln



NEWP - Newport $168.94 (+14.94 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.

NEWP's wild ride last week culminated with the announcement of
an acquisition Friday morning.  NEWP said it would buy Unique
Equipment CO., a specialized systems company that makes products
for the fiber optics and semiconductor industries.  Not by
conincidence, the two aforementioned industries are among the
hottest in the economy.  For that very reason, investors applauded
the announcement from NEWP by rallying the stock to an all-time
high on relatively impressive volume.  We might hear it from the
analysts early next week regarding NEWP's acquisition of Unique.
If the brokerages bestow their approval on the proposed acquisition,
NEWP might be headed higher early next week.  Another possible
catalyst for our play in the near-term is the possibility of a
split announcment.  With Friday's surge into record territory,
NEWP is trading well into split territory.  The company last
split its stock back in February, when NEWP was trading around
$112.  Also with Friday's surge came the inevitable threat of
profit-taking.  NEWP's two consecutive days of big rallies might
prompt the vicious profit takers into selling the stock lower
early next week.  If NEWP falls on light trading, watch for
the stock to find support first at $164 then lower near $160.
Aggressive traders might target shoot for entry on a bounce off
one of the aforementioned support levels after the profit-takers
run out of steam.  If, however, NEWP extends its rally from last
week, consider entering the play on a bounce off current levels
at $168, or wait for a momentum-based rally to carry NEWP to new
highs above $172.  Confirm the return of healthy volume with any
attempted rally to new highs before entering the play.  Also,
look for a new series of options to be issued next week, and
wait for OI to build in the OTM contracts before initiating
new positions.

NEWP will be attending CS First Boston's Technology Group
Communication Technology Conference in the latter half of next
week.  NEWP is slated as a headline presenter at this year's
event.  Positive press from the gathering might lead to analyst
praise late next week, which could carry NEWP even higher.

BUY CALL SEP-155 NOQ-IK OI=63 at $20.63 SL=15.00
BUY CALL SEP-160*NOQ-IL OI=75 at $17.38 SL=12.50
BUY CALL SEP-165 NOQ-IM OI= 0 at $13.88 SL=10.50
BUY CALL OCT-160 NOQ-JL OI=11 at $30.00 SL=22.50
BUY CALL OCT-165 NOQ-JM OI= 0 at $27.63 SL=20.75

Picked on August 27th at $154.00    P/E = 359
Change since picked       +14.94    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



VRTS - VERITAS Software $121.75 (+4.81 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.

This "comeback kid" of the computer storage industry is once
again attempting to find a foothold on the topside of $120 and
$125 and it looks like it's going to make it this time around.
Ever since VRTS dived off a cliff at $171 and smashed headlong
into a ledge at $82 in mid-April, VRTS has struggled to regain
its seat on a pristine pedestal.  In recent times, the staunch
opposition at $120 proved to be too much for VRTS to overcome.
But that all changed towards the end of this week.  The strong
challenges to the above mentioned mark on Thursday and Friday
confirmed however the momentum is alive and well.  The intraday
highs at $122.03 and $123.88, respectively, hint VRTS is poised
to break to the upside in the short-term.  Plus intraday support
is currently establishing itself at $120 and $122, which further
indicates a growing momentum.  There's also the sentiment of
some analysts who think the share price is under-valued by the
market.  Salomon Smith Barney analyst H. Clinton Vaughn, for
example, says VERITAS is "one of the four horsemen of the
computer storage industry, alongside such heavyweights as
Brocade Communications (BRCD), EMC Corp (EMC), and Network
Appliance (NTAP).  Solid entries into this pure momentum play
are still considered viable off light support at $118 and the 5-
dma ($118.60).  More aggressive pullbacks may be too risky for
some, but an entry off the 10-dma at $116 could prove lucrative
if we're afforded such a deep cut.

In the news this week, Mark Leslie, Chairman and CEO of VERITAS,
was recognized as Entrepreneur of the Year in the technology
category by local Silicon Valley business professionals.
VERITAS and Infogain, a leader in eCRM and eBusiness
connectivity, also announced they have completed over 100
nationwide High-Availability projects in the last six months
within the manufacturing, financial service, telecommunication,
and wireless technology industries.

BUY CALL SEP-115 VUQ-IC OI=12812 at $ 9.88 SL= 7.00
BUY CALL SEP-120*VUQ-ID OI= 2320 at $ 6.50 SL= 4.50
BUY CALL SEP-125 VUQ-IE OI= 3203 at $ 4.25 SL= 2.50
BUY CALL OCT-115 VUQ-JC OI=  355 at $14.63 SL=10.75
BUY CALL OCT-120 VUQ-JD OI=  146 at $12.13 SL= 9.00

Picked on Aug 24th at   $115.69    P/E = N/A
Change since picked       +6.06    52-week high=$174.00
Analysts Ratings    11-12-1-0-0    52-week low =$ 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 = 5.38 mln



LSCC - Lattice Semiconductor $77.69 (+3.44 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.

Scaling yet another level of resistance, LSCC is continuing
its pattern of higher highs and higher lows.  The stock doesn't
move in a straight line, shooting sharply higher and then
consolidating for a few days in order to make the next run up.
Prompting the latest surge was Thursday's 2-for-1 split
announcement (see news below).  This enabled the stock to bounce
from support at $71-72, and handily clear resistance at $76, all
in one day.  After Thursday's strong $5.81 run, the bulls took
time for a breather on Friday, and it was encouraging to see
that the profit taking didn't drop LSCC below its newfound
support at $76.  The Stochastics have been buried in overbought
territory for the past 2 weeks, MACD continues to head north,
and each pullback just serves to pull the price off of the upper
Bollinger band to make room for the next leg up.  The volume
picture over the past week has become a bit erratic, but we
think that is more a product of the last week of summer than
any indication of weakness in the stock.  With the return of
more normal volume on Tuesday (we hope), look for volume to be
a more reliable measure of buying and selling pressure.  Look
at pullbacks to support or the 5-dma ($74.06) as buying
opportunities, and initiate new positions as buying volume
returns.  Since leaving the 10-dma (now at $71.88) behind in
mid-August, LSCC hasn't touched it on any of its pullbacks, so
a violation of this moving average would likely be a bad sign
for our play.  Waiting to enter on strength is the more
conservative strategy and a move through resistance at $80 will
be your cue that LSCC still has room to run.

Just when investors were looking a little tired, LSCC pulled
another rabbit out of their hat on Thursday, announcing a
2-for-1 stock split.  The dividend will be payable on October
11th to shareholders of record as of September 20th.

BUY CALL SEP-75 LQT-IO OI=797 at $ 5.63 SL=3.50
BUY CALL SEP-80*LQT-IP OI=751 at $ 3.13 SL=1.50
BUY CALL SEP-85 LQT-IQ OI=322 at $ 1.56 SL=0.75
BUY CALL DEC-80 LQT-LP OI= 89 at $12.00 SL=9.00
BUY CALL DEC-85 LQT-LQ OI=162 at $ 9.50 SL=6.75

Picked on August 15th at $62.44     P/E = 34
Change since picked      +15.25     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 = 1.18 mln



ORCL - Oracle Corporation $92.63 (+8.00 last week)

According to the company's ads, "Software powers the Internet".
ORCL is a supplier of software for information management,
servicing two broad product categories - systems software and
business applications software.  Systems software is a complete
Internet platform to develop and deploy applications for
computing on the Internet and corporate Intranets.  Business
applications software automates the performance of specific
business data processing functions for customer relationship
management (CRM), supply chain management, financial management,
procurement, project management, and human resources management.

Now that's a nice breakout!  Without so much as a stutter, ORCL
powered through the $90 resistance level on Thursday, closing
the day at $90.94 and posting above average volume.  Then on
Friday, as if the major indices were still in strong rally mode,
the bulls pushed the stock up another $1.69 to close very near
the high of the day.  For those of you just joining us, Friday's
close represents a new all-time high and more importantly, a
breakout above a resistance level that has been in place since
March.  Volume was a bit weak on Friday, but this is likely due
to the fact that traders wanted to leave early for the holiday
weekend.  If traders come back in a buying mood, ORCL is likely
to be one of the key beneficiaries.  The company is sitting in
that sweet spot of the Internet, providing the building block
software that powers the non-stop innovations.  As if demand
for their products wasn't enough to get investors' attention,
earnings should do the trick.  ORCL confirmed on Friday that
their first quarter results would be reported September 14th
after the close.  Want more?  How about a possible split?
That's right, ORCL is typically a split candidate over $80, and
the company has more than enough shares authorized to effect a
3-for-1 split.  We think a 2-for-1 is the more likely outcome,
but we'll take whatever we happen to get.  The company is
expected to have strong earnings, and that would seem to be an
ideal time to announce a split.  ORCL is now in blue-sky
territory, and enthusiasm over the next two weeks could very
well propel the stock higher.  Entering on strength (continuing
higher from current levels) looks like a pretty good strategy
right about now, although we sure wouldn't turn our nose up at
a pullback and bounce at the $90 level.  As always, keep your
eye on the volume.  If our play is going to shoot further into
the stratosphere, its going to need strong volume to power
those engines.

Continuing to innovate, ORCL turned the Sales Automation market
upside down on Monday by offering free online sales software.
The new product, OracleSalesOnline.com, delivers the core
sales application of the Oracle E-Business Suite as a free,
online service.  This radically changes the sales force
automation (SFA) market by offering basic SFA services free to
medium and large-size enterprises.  On Friday, Frost Securities
initated coverage of ORCL with a Buy rating and a price target
of $125.

BUY CALL SEP- 90 ORY-IR OI=28306 at $ 5.75 SL=3.75
BUY CALL SEP- 95*ORY-IS OI=18443 at $ 3.00 SL=1.50
BUY CALL SEP-100 ORY-IT OI=10676 at $ 1.31 SL=0.75
BUY CALL OCT- 95 ORY-JS OI= 2299 at $ 6.50 SL=4.50
BUY CALL OCT-100 ORY-JT OI=15019 at $ 4.13 SL=2.50
BUY CALL DEC- 95 ORY-LS OI= 9866 at $10.00 SL=7.00

SELL PUT SEP- 90 ORY-UR OI= 2472 at $2.56 SL=4.00
(See risks of selling puts in play legend)

Picked on Aug 29th at     $87.75     P/E = 44
Change since picked        +4.88     52-week high=$92.94
Analysts Ratings     12-15-4-0-0     52-week low =$19.44
Last earnings 06/00    est= 0.26     actual= 0.31
Next earnings 09-12    est= 0.13     versus= 0.04
Average Daily Volume = 18.80 mln



JNPR - Juniper Networks Inc $221.63 (+30.69 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.

Lots of excitement and price-moving events sparked an explosive
momentum run this week!  On Monday the party began with a strong
break out of its consolidation period and a nice pop over the
$200 level.  From then on, JNPR stretched into new territory
each session.  The fifth consecutive 52-week record at $222.63
was set as the week long gains extended ahead of the long
weekend.  JNPR closed like a champion just a mere fraction away
from that pinnacle.  Traders are buying up shares of JNPR as
they relish the bias that the Feds are done with the adjusting
the interest rates.  Besides the broad view of a positive
economic situation, Juniper Networks, whose share price has
climbed almost 35-fold since its first came aboard in June 1999,
JNPR was named a component of the NASDAQ-100 Index on Wednesday.
Trading was heavy all week, but peaked at 9.6 mln shares
exchanging on that day.  Juniper will join the NASDAQ-100 on
September 7th and replace Visx, a maker of laser eye-surgery
equipment that's delisting from the NASDAQ.  This news
ultimately ignited the explosive moves at the end of the week,
which are likely to extend as JNPR is officially added to the
NASDAQ-100 list next Thursday.  Look for near-term support to
hold up at $210, just above the 5-dma ($206.85).  If the current
trend maintains its velocity, enter on intraday dips, but keep a
tight rein on the play.  An unforeseen market event could cut
the legs off JNPR in minutes. JNPR is, without a doubt, a HIGH-
RISK momentum play and not for the more cautious traders.

Juniper's overall success is obvious.  It has emerged as the
leading competitor to the #1 network-equipment maker, Cisco
Systems (CSCO), in the Internet router market.  Recently Senior
VP and Portfolio Manager for Sentinel Advisors Company, Robert
Lee, noted in his examination of portfolio strategies that the
market is, by some estimates, doubling every four months and
currently Juniper is growing faster that Cisco.

BUY CALL SEP-200 JUD-IT OI=1964 at $26.00 SL=20.25
BUY CALL SEP-210*JUD-IB OI=1341 at $18.63 SL=13.50
BUY CALL SEP-220 JUD-ID OI= 627 at $13.13 SL= 9.75
BUY CALL SEP-230 JUD-IF OI=1527 at $ 8.50 SL= 6.00
BUY CALL OCT-220 JUD-JD OI=1422 at $24.75 SL=19.25
BUY CALL OCT-230 JUD-JF OI= 355 at $20.00 SL=14.50

Picked on Aug 15th at   $169.75    P/E = 2608
Change since picked      +51.88    52-week high=$222.63
Analysts Ratings     15-3-0-0-0    52-week low =$ 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 = 6.25 mln



QLGC - QLogic Corporation $116.00 (+12.13 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.

Like a phoenix rising from the ashes, QLGC managed to shake off
the deleterious effects of the EMLX hoax this week.  By
Wednesday, buyers had returned in sufficient numbers to push the
price back above the closing price on the previous Friday.
Although Thursday's stellar $8 gain was largely due to strength
on the NASDAQ, news that the perpetrator of the EMLX hoax had
been caught in less than a week may have helped to lift
investors' spirits.  Thankfully, we can now put that story
behind us and get on with the business at hand.  Thursday was
certainly an encouraging day, as the bulls charged right through
the $110 resistance level as though it wasn't even there.  The
pullback on Friday was to be expected as investors were more
interested in heading out for the last weekend of summer.  Given
the supposed lack of interest, it was certainly encouraging to
see all the major indices close positive on Friday, and QLGC's
picture mirrored that of the NASDAQ in that profit takers were
unable to push prices below Thursday's closing price.  Going
forward, QLGC is almost out of the congestion zone created by
the market turmoil that began this past spring.  Resistance at
$117.50 is the next level to scale, followed by $125.  The next
formidable level sits at $145, and QLGC will need all engines
on full to clear this level as we head into the fall.  The best
entries will be had if QLGC decides to take a break and retest
support before heading higher.  The first and most logical
target will be $110, with the rapidly ascending 5-dma at
$107.63 backing it up.  Over the past month, the 10-dma
(currently $105.13) has provided consistent support on pullbacks
(EMLX hoax day excluded), and we wouldn't rule out another test
of this level before our play heads higher.  Of course, if
investors and traders come back next week in a buying mood, all
bargain hunting ideas will be out the window, and we would look
to open new positions as buying volume pushes our play through
resistance at $117.50.

More analysts are coming into the fold, recommending shares
of QLGC.  On Thursday, Salomon Smith Barney came to the party,
initiating coverage of the company with a Buy rating and a $140
price target.  This follows BB Robertson Stephens' Buy rating
which came on August 20th.

BUY CALL SEP-115*QLC-IC OI= 338 at $ 8.13 SL= 7.50
BUY CALL SEP-120 QLC-ID OI= 490 at $ 5.63 SL= 5.75
BUY CALL OCT-115 QLC-JC OI=1022 at $16.13 SL= 4.00
BUY CALL OCT-120 QLC-JD OI= 586 at $13.75 SL=10.25
BUY CALL OCT-125 QLC-JE OI= 161 at $12.00 SL= 8.75
BUY CALL JAN-120 QLC-AD OI= 255 at $25.75 SL=16.50

SELL PUT SEP-105 QLC-UA OI= 249 at $ 2.69 SL= 4.25
(See risks of selling puts in play legend)

Picked on Aug 22nd at    $98.00     P/E = 142
Change since picked      +18.00     52-week high=$203.25
Analysts Ratings      5-2-0-0-0     52-week low =$ 32.50
Last earnings 07/00   est= 0.24     actual= 0.27
Next earnings 10-18   est= 0.25     versus= 0.35
Average Daily Volume = 2.79 mln



INKT - Inktomi Corp $130.75 (+6.81 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.

We started coverage on INKT as its momentum perked up on news of
a "Content Bridge" alliance it entered to improve the delivery
and efficiency of Internet content over networks.  America
Online (AOL), Digital Island (ISLD), and Exodus Communications
(EXDS) were also involved and the news woke INKT from its recent
respite.  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. I think it
demonstrates our leadership and innovation in bringing all the
parties together".  As far as trading, all was going well after
INKT moved through the first line of opposition at $115 and
$120.  But then Cisco dropped a bomb.  News hit the wire that
Cisco (CSCO) may be entering Inktomi's market.  As it turned
out, this was a minor setback.  Convincing comments from
analysts and INKT took off with a vengeance.  Share prices have
increased 9.7% since the pair of brokerage firms upgraded the
stock to a Buy rating on Wednesday.  First Union Securities
raised its recommendation to a Buy from a Market Perform while
Lehman Brothers started INKT in new coverage and issued a 12-
month price target of $150 p/s.  The momentum should stay intact
after the long holiday too.  Typically the bulls come charging
back from vacation and prompt a fall rally.  Take entries off
the 5-dma ($124.85) on a deep dip, otherwise use the near-term
support at $128 as your take-off point into this momentum play.
If INKT stays on course, then its historical split-level of $150
could be attained sooner than expected.

Earlier in the month, INKT got also received a Buy reiteration
from analysts at Friedman, Billings, Ramsey & Co.

BUY CALL SEP-125 KYQ-IE OI= 776 at $ 9.75 SL= 6.75
BUY CALL SEP-130*KYQ-IF OI=2676 at $ 7.50 SL= 5.25
BUY CALL SEP-135 KYQ-IG OI=1837 at $ 5.13 SL= 3.00
BUY CALL OCT-130 KYQ-JF OI= 504 at $15.50 SL=11.25
BUY CALL OCT-135 KYQ-JG OI= 474 at $13.00 SL= 9.75

Picked on Aug 27th at   $123.94    P/E = N/A
Change since picked       +6.81    52-week high=$241.50
Analysts Ratings     11-7-1-0-0    52-week low =$ 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 = 2.90 mln



ISSX - Internet Security Systems $84.13 (+11.13 last week)

Internet Security Systems, formerly ISS Group, is the pioneer
and leading supplier of adaptive security management systems.
They provide enterprise-wide information protection software and
are a worldwide innovator of security solutions designed to
augment the security performance of existing systems by
complementing security safeguards such as firewalls,
authentication and encryption.  The ISS SAFEsuite family of
products empowers organizations to proactively monitor, detect
and respond to the growing number of network vulnerabilities and
threats to enterprise information.  The Company is based in
Atlanta, GA.

We added ISSX as a recovery play on the merits of its strong
climb from a recent low of $51.13 to current price levels above
the $80 mark.  Above $80 ISSX is also considered a split-
candidate too, which is always a nice feature to pump up the
existing momentum.  As of Thursday, the current trading price
was at a precarious point.  Take a look at a three-month chart
and you can visually confirm the "V" formation that existed.
Past tense.  In Friday's session, ISSX opened strong and tackled
higher territory at $86.25.  Consistent and steady trading near
the $84 mark deemed this level should evolve as short-term
support from which entries could be had going into next week's
market.  However $80, at the converged 50 & 200 DMAs, provides a
better entry on a pullback.  If your more conservative, then
wait for the stock to advance through $85 and challenge $90.

Internet Security Systems announced its acquisition of privately
held ISYI, an Italian leader in advanced network security
services for large network and eBusiness environments. This
acquisition represents an important development in the Italian
security industry.  Also in the news this month, Individual
Investor, in its seventh annual ranking, announced ISSX is among
this year's list of 100 fastest growing companies in the US.
They gave ISSX a "thumbs up" vote too, which means they expect
the share price to continue to grow.

BUY CALL SEP-80 ISU-IP OI=155 at $ 8.38 SL=6.00
BUY CALL SEP-85*ISU-IQ OI= 37 at $ 5.88 SL=4.00
BUY CALL SEP-90 ISU-IR OI= 57 at $ 4.00 SL=2.50
BUY CALL OCT-85 ISU-JQ OI= 42 at $11.13 SL=8.25
BUY CALL OCT-90 ISU-JR OI=101 at $ 9.13 SL=6.25

Picked on Aug 31st at   $81.00    P/E = 331
Change since picked      +3.13    52-week high=$141.00
Analysts Ratings     6-4-0-0-0    52-week low =$ 22.50
Last earnings 07/00  est= 0.08    actual= 0.09
Next earnings 10-23  est= 0.10    versus= 0.05
Average Daily Volume =   691 K



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

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

The Option Investor Newsletter                   Sunday 09-03-2000
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/090300_4.html


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

MMM - Minnesota Mining and Manufacturing $92.50 (-3.25 last week)

Commonly known as the maker of the ubiquitous, adhesive-backed
Post-It Notes, MMM is also a leading manufacturer of a variety
of industrial, consumer, and medical products.  Reflective
sheeting on highway signs, respirators, spill-control sorbents,
and Thinsulate brand insulations are just some of the company's
industrial products.  MMM also makes microbiology products,
making it easier for food processors to test for the
microbiological quality of food.

Failing once again to penetrate resistance at $97, MMM is headed
south once again.  Concerns over a slowing economy will not be
good for cyclical stocks and bearish analyst comments last week
about the paper sector are not helping.  If the stock repeats
its performance from this past spring, we could get a ride all
the way down to support at $85.  But before we get ahead of
ourselves, $90 is the next support level that needs to be
penetrated.  After putting in a double top at $97 on Monday,
shares of the Post-It maker headed south in a hurry, and every
day last week represented one more failure to close above the
10-dma (now $94.63 and falling).  Friday's trading represented
yet another technical failure, as the price fell to close below
the 30-dma ($92.88) on heavy volume.  The $90 level is looking
like it will provide some support as the 50-dma ($90.44) and the
200-dma ($90.25) have converged to reinforce the historical
support found at this level.  If last week's pattern continues,
a rollover near the 10-dma looks like the best entry.  If the
decline continues from here though, we wouldn't be opposed to
opening new positions as MMM fails to move above the 30-dma.
Keep your eye on the volume as it will be your indicator of the
strength of any move, whether up or down.

BUY PUT SEP-95*MMM-US OI=234 at $3.38 SL=1.75
BUY PUT SEP-90 MMM-UR OI=472 at $0.94 SL=0.00 High Risk!

Average Daily Volume = 1.21 mln



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

KO - Coca-Cola Company $54.25 (-1.75 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.

Have you ever had a Coke after all the carbonation is gone?
It's really hard to enjoy the experience, as KO investors found
out this week when Sanford C. Bernstein analyst William
Pecoriello siphoned off the last of KO's fizz.  Following the
recent reduction in volume growth by Salomon Smith Barney,
Pecoriello lowered his 2001 earnings forecasts for KO and
revised his outlook onsoft drink companies based on summer
sales and currency weakness.  This helped to push KO shares down
by as much as $2.75 on Thursday, before buyers stepped in late
in the day.  Although it was a marked improvement from
Thursday's decline, Friday's action clearly didn't have much
conviction behind it.  After gapping up at the open, KO traded
flat for most of the session, as sellers took advantage of the
recovery to get out of their position before the holiday
weekend.  Although dropping off considerably from Thursday's
level, more than 5 million shares traded hands Friday in a
fairly active session.  With the bulls and bears essentially
fighting to a standstill, we are left with a technical picture
that is essentially unchanged.  Stochastics are buried deep in
oversold territory, and MACD is continuing south at a steady
rate.  More consolidation is possible before KO resumes its
decline, as the stock waits for the 5-dma ($54.88) to catch up
and continue exerting downward pressure.  It is worth noting
that even with the high volume recovery that occurred on Friday,
buyers couldn't drive the price high enough to test even the
5-dma, much less the 200-dma (now at $55.50), which has once
again turned south.  Look to initiate new positions as KO rolls
over from the vicinity of the 5-dma and selling volume picks
up.  Although another rollover from the 200-dma would provide
a better entry point, we don't think the stock has the strength
to get there.  The 10-dma (currently $56.50) is headed south in
a hurry, and once it crosses through the 200-dma, the technical
picture will be even darker for KO shareholders.  More
conservative players may want to wait for the bears to take out
Thursday's closing price of $52.63 on the downside before
playing.  Below current levels, support should be decent near
$50, and then very solid between $45-46.

BUY PUT SEP-60 KO-UL OI=3436 at $6.13 SL=4.00
BUY PUT SEP-55*KO-UK OI=4000 at $1.81 SL=1.00

Average Daily Volume = 4.24 mln



AT - Alltel Corp $49.81 (-1.00 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 downward pressure is weighing heavy on AT's share price and
all because the company gave an honest and respectable earnings
outlook.  On August 16th, AT was cut a hefty 9.3% after
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 and expected the company to raise theirs as well.  But
Alltel remained firm on its numbers.  And so the butchering has
persevered.  On Monday we saw a nice slide to the underside of
$50, however it wasn't to happen again until Friday's session.
Mid-week some good news, consolidation, and strong market
sentiment kept AT afloat.  News came on Thursday of a 10-year
software pact between Alltel and Bank One Corp (ONE) announced
they entered into.  Bank One will utilize Alltel's Advanced Loan
System (ALS) for its key lending functions in an effort to
reduce turnaround time and maximize cost efficiency.  But
despite it all, AT's upper resistance continues to moves to the
downside from $52 to Friday's lower ceiling at the $50 mark.
And the series of new all-time lows continues to rage on as AT
loses more ground.  High volume at over 2 mln shares exchanging
marked the strong downtrend in that session with intraday lows
reaching $48.75 and near-term support developing at $49.  Look
for the selling to remain in high gear and enter on downward
bounces of the 5-dma ($50.60), which has proved to be a reliable
gauge for entries.  Keep stops tight to protect profits and
capital.

BUY PUT SEP-60 AT-UL OI=715 at $10.13 SL=7.00
BUY PUT SEP-55*AT-UK OI=577 at $ 6.13 SL=4.00
BUY PUT SEP-50 AT-UJ OI= 42 at $ 2.06 SL=1.00

Average Daily Volume = 1.14 mln



UK - Union Carbide $39.56 (-1.50 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.

The exodus from the Chemicals sector continued late last week
as traders fled to the flashier Technology sector.  Both UK,
and its proposed acquirer DOW, fell to new yearly lows.  What's
more, the trading activity continues to remain robust as UK
sinks.  Volume eclipsed the ADV last Friday, which was quite
a feat given it was the day before the last big Summer holiday
weekend.  Unfortunately for UK, a few institutional sellers
hung around the office to unload their stock.  There was no
major news to spur the sell-off late last week, rather, the
renewed strength in the Tech sector continued to draw investors'
attention away from the old-line names such as UK, along with
their trading capital.  Going forward, as long as the Tech
sector continues to move higher, investors should continue to
leave the Chemicals sector to the bears.  Of course, the proposed
merger between UK and DOW could potentially have an impact on
our play if the deal is closed in the coming weeks.  However,
the merger has not yet received government approval, and until
it does, an arbitrage-induced spread will likely keep UK modestly
depressed from the actual rate of exchange for DOW shares.  If
the Tech sector shows signs of strength early next week, wait
for traders to start their counter-selling in the Chemicals
sector.  Target shoot for entry into UK if the stock falls below
$39.50, or wait for heavy selling to drive the stock below $39.
If the Tech sector pulls back on profit taking next week, traders
might buy the Chemicals sector in an attempt to hedge their bets.
If UK rallies, aggressive traders might consider entering the
play on a bump against resistance at $40, or near the descending
5-dma at $40.50.  Confirm any rally with weak volume and wait
for the big sellers to return before entering the UK play on
strength.

BUY PUT SEP-45*UK-UI OI= 88 at $4.88 SL=3.00
BUY PUT SEP-40 UK-UH OI=114 at $1.75 SL=1.00

Average Daily Volume = 800 K



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*****
LEAPS
*****

OK, September's Here, Let's Rally!
By Mark Phillips
Contact Support

Summer is officially over, the economy is making a convincing
case that it is slowing enough to keep the Fed off our backs,
all the major indices are testing resistance, and we could see
the return of some serious volume as early as next week.
Thursday's nearly 1.9 billion share day was nothing to sneeze
at and hopefully is just a taste of more to come.

Sure, we have the nagging negative factors to deal with, not
the least of which is the VIX continuing to lurk in the danger
zone south of 20.  The respectable gains over the past 2 weeks
have only managed to push it further down, closing out the week
at 19.59.  Lest you forget how long it has been down here, it
hasn't closed above 20 in two and a half weeks.  The last time
we were able to make a statement like that was in July 1998.  Do
you remember what happened to the major indices in the
succeeding 6 weeks?  Well, to refresh your memory, the NASDAQ
dropped 25%, while the DJIA lost nearly 20%.  There's nothing
to say that history will repeat itself, but ignoring it can be
hazardous to your financial health.

Before you start thinking I have been loitering in Bear Country,
let me reassure you that I think the recent rally actually has
some legs to it.  But I also think we will have pockets of
weakness and profit taking until we clear the Ides of September,
also known as earnings warning season.  Then we have the
psychological spectre of fear associated with October before
putting on those rally shoes and sprinting for NASDAQ 5000.

In the meantime, we need to be judicious in picking our entry
points as we position our portfolios for the much-anticipated
fall rally.  Your first clue to our sentiment going forward
should be the high flying stocks we have added to the playlist
over the past 2 weeks - INKT and BRCM last week and VERT this
week.  The key to stellar returns is to pick this year's high
flyers, not the tired heroes from last year.  Even though they
would have been very profitable last year, the likes of YHOO
and QCOM just don't belong in our LEAPS portfolio any more.
We need fresh young stocks that are ready to run if our
portfolio is going to have another stellar year.

While we are talking about the playlist, there are some
housekeeping items to cover.  Since August is over, you will
notice that we have jettisoned all of our 2001 LEAPS.  As we
have mentioned several times in recent months, these strikes
are too short-term to qualify as LEAPS, and if you are still
holding them, you are thinking more like a short-term option
trader than a LEAPS investor.  Stay vigilant on those plays,
because any pullback will likely have an unpleasant effect on
the premiums.

We have also dropped some of the 2003 LEAPS from the playlist.
We had been listing 2003 LEAPS on all of our plays, even on
those plays that haven't been updated since the 2003 strikes
became available.  Examples of this are EMC, NT, CSCO, and SUNW.
These plays just hadn't pulled back enough to qualify as a
Spotlight play, so there was no way to list a 2003 LEAP and
logically track the return.  So this week, you will only find
2003 LEAPS listed in the playlist that have been listed in a
play writeup.  If you own 2003 LEAPS on any of our active plays
that no longer have a 2003 LEAP listed, don't worry.  This
doesn't mean that we are not recommending the purchase of these
long-term LEAPS; it is just a housekeeping item so that we can
realistically track the returns on all of the LEAPS listed in
the portfolio.

Some other recent changes to the playlist involve C and AMD.
Both stocks have recently split - AMD on August 21st, and C on
August 25th.  Therefore, the symbols and strike prices have
changed, and the playlist has been updated accordingly.

So where do we go from here?  While it looks like the next week
or two could see some decent gains in the market, the looming
earnings warnings that are bound to occur are likely to cause a
hiccup or two.  Keep this in mind as you continue to look for
entry points on your favorite plays.  Although I know it sounds
like a broken record, I'll restate it once again - pick your
plays and entry points while the markets are closed.  This makes
it much easier to pull the trigger during market hours and feel
comfortable that you did the right thing.  Trying to shoot from
the hip during market hours can be dangerous to your account as
entry decisions are more likely to be based on emotions than
sound judgment.

This process applies equally well to exit strategies too.  When
you enter a new position, you should know exactly what
conditions (profit or loss) would make you want to exit the
position.  If you take the time to record these conditions in
your trading journal (all serious traders should have one), and
preferably place GTC orders with your broker, you will find
yourself trading with more confidence and suffering less from
indecision when the time for action arrives.  This type of
discipline will free you to be on the prowl for new trades
instead of continuing to nurse losing positions that should
have been cut loose weeks ago.

Molly Evans made a convincing case for keeping an investing
journal in her Trader's Corner article on August 24th.  How
many of you were motivated by her article to start keeping a
trading journal, or renew your efforts in this department?  I
know she refocused my attention.  If you are serious about
making money in the stock market and you don't have a trading
journal, I would strongly recommend reading her article.
Having a written record of your actions and the reasoning
behind them can be invaluable in the long run.

Now that summer is over, I would recommend finding one of the
fall seminars to attend.  Chris and his team are obviously
doing a fantastic job, and the glowing comments from recent
attendees is proof of the value provided in one short weekend.
I'm counting the days until the Boston Seminar, so that I can
spend some time soaking up new trading ideas for the fall rally.

As always, plan your trades and stick to the plan.


Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $58.38   514.47%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $31.50   186.36%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $50.63   234.60%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $56.38   156.25%
ERICY  01/30/00  JAN-2002 $16.3 WRY-AO   $ 6.75   $ 8.13    20.37%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 6.50   - 5.52%
NSM    02/27/00  JAN-2002 $ 70  WUN-AN   $24.25   $10.50   -56.70%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $11.00   -40.96%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $20.00    14.29%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $19.63   110.34%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $ 9.38    74.26%
AMD    04/16/00  JAN-2002 $ 35  WVV-AG   $13.00   $14.75    13.46%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $62.75    58.34%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $52.88     0.95%
MOT    05/14/00  JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 9.38   - 1.73%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $12.00   -30.43%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $16.25   - 8.45%
NXTL   06/11/00  JAN-2002 $ 60  YFG-AL   $19.25   $14.00   -27.27%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $16.88    63.68%
AMGN   07/02/00  JAN-2002 $ 75  WQY-AO   $20.75   $23.00    10.84%
                 JAN-2003 $ 70  VAM-AN   $28.75   $32.25    12.17%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $70.88     6.98%
       09/03/00  JAN-2003 $190  OVS-AR   $86.63   $86.63     0.00%
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $ 6.75   -46.56%
                 JAN-2003 $ 60  VDL-AL   $15.38   $ 9.38   -39.04%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $24.75    44.48%
                 JAN-2003 $ 70  OZG-AN   $23.13   $31.00    34.03%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $40.75    44.25%
                 JAN-2003 $120  VHP-AD   $32.63   $45.50    39.44%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $29.25    40.96%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $33.50    31.99%
MFNX   08/06/00  JAN-2002 $ 40  WOF-AH   $13.75   $13.63   - 0.91%
                 JAN-2003 $ 45  VKW-AI   $15.63   $16.25     3.97%
GM     08/06/00  JAN-2002 $ 65  WGM-AM   $ 9.88   $18.63    88.51%
                 JAN-2003 $ 65  VGN-AM   $13.25   $22.75    71.70%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $26.50   -15.55%
                 JAN-2003 $100  VFB-AT   $37.38   $31.50   -15.73%
BRCD   08/27/00  JAN-2002 $220  YNU-AD   $65.38   $78.25    19.68%
                 JAN-2003 $220  OMW-AD   $86.50   $99.38    14.88%
INKT   08/27/00  JAN-2002 $130  XOR-AF   $50.13   $54.13     7.97%
                 JAN-2003 $140  VFR-AH   $60.88   $65.13     6.97%


Spotlight Play

VRSN - Verisign $185.94

Showing their enthusiasm for Internet security stocks, investors
spent the past 3 weeks pushing shares of VRSN up by as much as
45%.  That's some serious buying, when you consider the stock
started out north of $135.  As the government comes into the
digital age, digital signatures and documents are poised to
receive the same legal status as handwritten signatures and
documents.  Companies like VRSN that secure the integrity of
these documents will see their business grow by leaps (pun
intended) and bounds.  After dropping to put in a double bottom
near $135 in early August, shares of VRSN have been on a near
vertical climb, scaling every one of its moving averages in the
process.  Friday's action, which involved a loss of almost $13
on extremely heavy volume, finally gave us another opportunity
to jump aboard the play.  Apparently finding support near $182,
just above the 10-dma ($180.56), VRSN looks attractive for new
entries as buyers re-emerge and push the price up through
resistance near $187-188.  For those eternal optimists, market
weakness early next week could produce a dip to the next level
of support (between $177-180) before the stock heads higher.
Use any such dip as an opportunity to buy at a discount, but
make sure buying volume is confirming your bullish sentiment
before playing.

BUY LEAP JAN-2002 $190.00 YVS-AR at $70.88
BUY LEAP JAN-2003 $190.00 OVS-AR at $86.63


New Plays

VERT - VerticalNet $54.75

Since the spring decline, VERT has been more horizontal than
vertical, but that trend may be ready to change.  The B2B
sector regained new life this week, and this vigor should rub
off on VERT as the sector continues to recover.  The company
owns and operates 55 industry-specific Wev sites designed as
on-line B2B communities, known as vertical trade communities.
Each of these communities is individually branded, focuses on
one business sector, and caters to professionals responsible
for selecting and purchasing highly specialized,
industry-related products and services.  The challenge for the
company will be to see whether it can build depth in these
vertical markets, and if it can, the rewards could be exciting.
VERT's chart presents some interesting opportunities, as the
stock has been trading in a gently ascending channel since the
middle of April.  The lows are getting higher and the ascending
trendline (now sitting at $41) is providing consistent support.
On the high side, the 200-dma (currently $65.56) has been
capping the rallies in a consistent fashion.  This provides a
healthy $20 range in which to rake in profits until the stock
breaks out to the upside.  With the stock now trading in the
middle of this channel you may want to use bounces from the
supportive 5-dma (currently $54) as an entry point.  Any profit
taking next week could produce a drop to support near $51, (also
the site of the 10-dma), and this would be a good point for
aggressive traders to grab a better entry.  Keep a tight reign
on the play until it clears resistance at $59 and then watch out
for profit taking near the 200-dma.  If the improving sentiment
in the B2B sector has legs, look for a breakout over the 200-dma
to be the precursor to a powerful fall rally.

BUY LEAP JAN-2002 $60.00 YER-AL at $22.13
BUY LEAP JAN-2003 $60.00 OER-AL at $28.88

Drops

None


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

A View From The Top
By Ryan Nelson

This market reminds me of hiking in the mountains as we head
out of the valley and back near the top.  This is where it
becomes more exciting too as investor interest climbs with
the Nasdaq.  In fact, there are so many stocks climbing that
we are likely to have another rash of split announcements soon.
52-week highs are now becoming the norm once again.  Out of the
current split runs, CIEN is hard to overlook.  Plus, ERTS and
SEBL are beginning to look interesting.  We need to confirm the
market wants to keep rallying after Labor Day, but it wouldn't
hurt to start looking for entry points.


Current Split Run Plays

CIEN - 09/19 ex-date


Current Split Candidate Plays

ITWO
JNPR
INKT
NEWP
VRSN
NTAP
CHKP
TIBX
IWOV
ORCL
QLGC


Candidates That Are Not Current Plays

BRCD
LEH
NVDA
ARBA
DNA
VRSN
MUSE
EXTR


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 = 1

LSCC


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


Symbol  Company Name                Splits  Payable    Executable
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  09/30/2000  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
RY    - Royal Bank of Canada          2:1  10/05/2000  10/06/2000
SONS  - Sonus Networks Inc.           3:1  10/06/2000  10/09/2000
LSCC  - Lattice Semiconductor         2:1  10/11/2000  10/12/2000
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 09-03-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/090300_5.html

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

Trading Basics:  The KISS method...
By Mark Wnetrzak (Apologies to Paul Stanley and Gene Simmons)

Option trading offers numerous opportunities to profit in the
market regardless of whether you are a speculator, a hedger, or
simply a novice investor.  Those who fail to achieve consistent
returns are generally guilty of trading the wrong positions or
incorrectly timing the market.  Inexperienced traders purchase
out-of-the-money options because they appear "cheap" but rarely
do these positions produce the extravagant rewards that often
lure beginners into the options market.  At the same time, those
participants who gain the crucial knowledge of pricing theory
frequently have trouble developing timing systems that provide
accurate entry and exit signals.  There is however, another type
of trading - the complex approach - that repeatedly generates
problems for players that are new to the game.

Option trading is a diverse, multi-faceted activity that offers
a wide range of techniques in which to be successful.  One can
initiate positions that profit if a stock rises above or falls
below a specific price, remains in a given range, or moves with
a certain character or volatility.  With all of this flexibility
comes a high degree of complexity and in many cases, a strategy
can be too elaborate to warrant its use by traders with a minimum
level of experience.  Of course, defining the point at which a
strategy becomes "too complex" can only be done on an individual
basis.  In most cases, a technique should not be used when it is
difficult for the trader to understand how he is going to profit,
and in what way the risks involved can be reduced or eliminated.

The reason most novice traders participate in complex positions
is because they believe that a particular strategy entails lower
risk or a higher probability of profit.  The most popular example
of this type of strategy is often referred to as "Combination" or
"Spread" trading.  Obviously, there is nothing wrong with trading
complex option strategies.  The most common techniques are sound
and can be very profitable if implemented and monitored properly.
The problems begin when inexperienced traders combine multiple
positions without fully understanding the profit/loss dynamics or
the potential implications of margin and collateral requirements.
Many conservative investors are drawn to these techniques because
of the apparent favorable odds.  However, most participants fail
to realize that strategies with low risk generally have limited
potential.  In contrast, techniques that appear most favorable
(premium selling is a popular example) often have unlimited risk,
if the market moves too far in one direction.

There are several things to consider before entering into complex
trading strategies.  First, regardless of what you have heard (or
read), there is no such thing as "risk-free" trading in the retail
options market.  I repeat, there are no option trading strategies,
simple or complex, available to the general public, that guarantee
profits, no matter how favorable the odds!  With option trading,
everything is relative and mathematical.  Pricing and potential
outcomes are based on statistics and historical probability.  For
example, a trader can buy inexpensive, out-of-the-money options
for increased leverage but the probability of profit will be small.
In contrast, he can sell deep-out-of-the-money options with a high
expectation of a relatively small return in exchange for virtually
unlimited risk.  While entering a position with a high probability
of success can be very comforting, the most important concept that
new traders overlook is not the likelihood of a successful outcome
but rather the extent of risk associated with an unexpected move
in the underlying issue.

To be successful in the options market, a trader must be able to
accurately assess their individual experience level and avoid
those strategies that are too complex.  The primary considerations
in evaluating a particular position are relatively simple.  First,
what is your reason for entering the trade?  Second, what is the
expected profit and the probability of achieving it?  Third, how
much downside potential does the strategy entail and what is the
likelihood that maximum loss will occur?  Finally, will the play
need adjustments and if so, what type and at what point will they
be initiated?  If you cannot answer these simple questions before
entering the trade, then the position should be avoided, no matter
how attractive it appears.  There are many intriguing techniques
but when you enter a trade in which you are not fully aware of the
potential outcomes or you are unprepared to deal with the negative
consequences, you are using a strategy that is too sophisticated.
In short, "Keep it simple, stupid!"

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  12.00   SEP   7.50  1.56  *$  1.25  17.4%
GSTRF   8.44   9.63   SEP   7.50  1.63  *$  0.69  11.0%
BOUT   37.63  44.25   SEP  35.00  5.00  *$  2.37  10.5%
SPLN   18.56  17.50   SEP  17.50  2.19   $  1.13  10.0%
PCTL    5.78   9.22   SEP   5.00  1.19  *$  0.41   9.7%
ASKJ   25.13  31.50   SEP  22.50  4.00  *$  1.37   9.4%
OSIP   45.56  48.00   SEP  40.00  7.75  *$  2.19   8.4%
LPTH   41.13  55.25   SEP  35.00  8.50  *$  2.37   7.9%
DRMD    5.72   6.56   SEP   5.00  1.13  *$  0.41   7.8%
PLNR   19.88  18.75   SEP  17.50  3.25  *$  0.87   7.6%
SGNT   12.00  10.50   SEP  10.00  2.63  *$  0.63   7.3%
PCTL    6.03   9.22   SEP   5.00  1.38  *$  0.35   6.5%
NOVN   35.00  41.75   SEP  35.00  2.88  *$  2.88   6.5%
DRXR   18.31  18.38   SEP  17.50  1.50  *$  0.69   5.9%
ECLP   12.00  13.88   SEP  10.00  2.75  *$  0.75   5.9%
SFAM   18.63  18.69   SEP  15.00  4.38  *$  0.75   5.7%
ROBV   13.63  12.44   SEP  10.00  4.13  *$  0.50   5.7%
XLNK   18.00  15.25   SEP  12.50  6.25  *$  0.75   5.5% (DLK)
ORG    14.38  16.25   SEP  12.50  2.75  *$  0.87   5.4%
FHS    16.06  17.31   SEP  15.00  1.94  *$  0.88   5.4%
CLPA   30.25  33.63   SEP  25.00  6.13  *$  0.88   5.3%
CCUR   14.63  17.63   SEP  12.50  2.69  *$  0.56   5.1%
ROS    15.75  14.00   SEP  15.00  1.88   $  0.13   0.7% Closing

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

Comments:

Rostelecom (ROS) continues to move lower and weaken technically.
Next week, we will show the position closed - a "break-even" exit
is a good thing!  Noven Pharmaceuticals (NOVN) - now that is what
I call a bounce off of the 50 dma!  Monitor Sportsline.com (SPLN)
and Sagent Tech. (SGNT) as they are both testing support levels.



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

VITR   48.94  SEP  40.00  TKU IH  9.88  340  39.06   12    6.1%

MSTR   31.38  OCT  25.00  EOU JE  8.25  988  23.13   47    5.2%
NETS    6.25  OCT   5.00  NTU JA  1.75  206   4.50   47    7.2%
RHAT   26.69  OCT  22.50  RCV JX  6.00  75   20.69   47    5.7%
TIVO   26.88  OCT  22.50  TUK JX  6.13  0    20.75   47    5.5%
WDC     5.75  OCT   5.00  WDC JA  1.19  8553  4.56   47    6.2%
WGAT   22.88  OCT  17.50  WAQ JW  6.63  55   16.26   47    5.0%

Sequenced by Return
*****

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

VITR   48.94  SEP  40.00  TKU IH  9.88  340  39.06   12    6.1%

NETS    6.25  OCT   5.00  NTU JA  1.75  206   4.50   47    7.2%
WDC     5.75  OCT   5.00  WDC JA  1.19  8553  4.56   47    6.2%
RHAT   26.69  OCT  22.50  RCV JX  6.00  75   20.69   47    5.7%
TIVO   26.88  OCT  22.50  TUK JX  6.13  0    20.75   47    5.5%
MSTR   31.38  OCT  25.00  EOU JE  8.25  988  23.13   47    5.2%
WGAT   22.88  OCT  17.50  WAQ JW  6.63  55   16.26   47    5.0%


Company Descriptions

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

*****
SEPTEMBER EXIPIRATION
*****
VITR - Vitria Technology  $48.94  *** On The Rebound? ***

Vitria is a leading provider of eBusiness infrastructure software.
The company's flagship product, BusinessWare, provides the means
to enable incompatible information technology systems to exchange
information over corporate networks and the web. After two months
of declines, Vitria is finally rebounding from its recent post
earnings sell-off.  While second-quarter revenues increased 400%
from the year-earlier period, investors did not favor the rise in
the company's "days-sales outstanding."  The recently announced
partnership with ActionPoint appears to be the catalyst for the
recent rally.  Vitria continues to enhance and strengthen its
technology which should bode well for the future now that analysts
and investors are realizing how important it is for the internal
systems at businesses to coordinate with one another, as well as
with the systems of online marketplaces.

SEP 40.00 TKU IH LB=9.88 OI=340 CB=39.06 DE=12 MR=6.1%


 
*****
OCTOBER EXPIRATION
*****
MSTR - MicroStrategy  $31.38  *** 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 last 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.  This week, MicroStrategy announced it would cut 10% of
its workforce, or 234 jobs, in an effort to lower costs by more
than $25 million.  We favor the opportunity to own this issue
at a conservative entry point.

OCT 25.00 EOU JE LB=8.25 OI=988 CB=23.13 DE=47 MR=5.2%


 
*****
NETS - YouthStream Media Networks  $6.25  *** Breakout! ***

YouthStream Media targets the young adult market, with a specific
focus on 18-24 year-old college and university students.  NETS
operates a national network of theaters on college campuses that
delivers entertainment and educational events via satellite for
display through high-resolution projectors or movie theater-sized
screens.  They also provide a comprehensive marketing service to
advertisers and entertainment companies by helping them target
young adults and college audiences.  This week, YouthStream made
another step towards profitability with the debut of a radically
new sixdegrees.com, a leading young adult web community with over
3 million members.  The wholly revamped site now includes the
unique features of mybytes.com, YouthStream's college destination
site, which will allow YouthStream to streamline operations and
reduce operating costs.  Somebody seems to like this move as the
stock rallied strongly, with Friday's rally breaking through near
term resistance.  This position offers reasonable speculation on
a bullish technical "breakout."

OCT 5.00 NTU JA LB=1.75 OI=206 CB=4.50 DE=47 MR=7.2%


 
*****
RHAT - Red Hat  $26.69  *** The Linux Connection! ***

Red Hat is a worldwide developer and provider of open source
software products and services.  Their product offerings include
Red Hat Linux and other related tools, open source software
applications, documentation, manuals and general merchandise.
Professional services offerings include technical support and
maintenance, custom development, consulting, training and basic
education, developer support and hardware certification.  The
company is a leader in the Linux software industry, commanding
almost 75% of the market.  In a bid to increase its dominance,
Red Hat recently disclosed plans to buy C2Net Software, the #1
company in the secure Web server market with a 30% share of the
industry.  On Wednesday, IBM, NEC, Intel, SGI, Dell Computer
and Hewlett-Packard announced they are joining with major Linux
companies to develop the operating system for high-end, multi-
processor machines.  The Open-Source Development Laboratory will
provide a location for independent programmers to help the Linux
system evolve into a major competitor in the industry.

OCT 22.50 RCV JX LB=6.00 OI=75 CB=20.69 DE=47 MR=5.7%


 
*****
TIVO - Tivo  $26.88  *** On The Move! ***

Tivo is a creator of personal television.  The Tivo Service
enables consumers control their television viewing by allowing
them to watch what they want, when they want it.  Using customer
selected preferences, Tivo automatically records programs the
viewer chooses to see, and enables them to pause, rewind, instant
replay and playback in slow motion any live television broadcast.
Lots of activity and speculation in this growing niche market and
recent developments with Replay TV and Universal Pictures, which
announced that it would launch a unique interactive television
advertising campaign through the digital set-top box service
beginning this fall, have brought traders to the group in droves.
The new interest in the industry bodes well for TIVO, which has
demonstrated that it's the clear market leader, and recently, the
Nielsen Media Research Company has agreed to measure viewers of
Tivo's personal video recorder service to determine the potential
for the unique viewing/recording technology.  We simply favor the
technical recovery in the issue and the bullish outlook for the
growing industry.

OCT 22.50 TUK JX LB=6.13 OI=0 CB=20.75 DE=47 MR=5.5%


 
*****
WDC - Western Digital $5.75 *** Cheap Speculation ***

Western Digital is a manufacturer of hard drives used for
information storage in desktop computers and home entertainment
electronic products.  Their hard drives are designed for the
desktop PC market and the high-end hard drive market.  Recently
they have developed hard drives specially designed for audio-
visual applications, such as new video recording devices.  Disk
Drive manufacturers have rallied strongly buoyed by optimism
that companies in this sector may return to profitability in the
second half of the year.  The recent strength in the box-makers
may be proof in the pudding.  We simply favor the recent bullish
move and the low risk entry point as WDC forges a stage I base.

OCT 5.00 WDC JA LB=1.19 OI=8553 CB=4.56 DE=47 MR=6.2%


 
*****
WGAT - WorldGate Communications $22.88  *** A Big Day! ***

WorldGate Communications is the founder of the WORLDGATE Service,
a television-based Internet product that delivers convenient,
high-speed Internet access through cable television systems.
WorldGate combines the cable infrastructure with the television
platform so subscribers are able to reach the Internet without a
personal computer or any additional phone lines.  Viewers receive
the Internet, interactive advertising and programming through a
set-top box and a remote control or wireless keyboard.  The new
system is popular because it provides a simple user interface and
is targeted at customers without computer experience, as well as
net savvy users.  In addition, Motorola's SURFview platform costs
only $99 for the set-top box, enabling cable operators nationwide
to provide Internet access at a very low monthly fee.  WorldGate
can also convert the user interface to the language and culture
required for an international marketplace.  Most recently, WGAT
was rated a "new buy" at PMG with a 12-to-18 month target price
of $75.

OCT 17.50 WAQ JW LB=6.63 OI=55 CB=16.26 DE=47 MR=5.0%


 


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

Put Writing: Simple and Effective...
By Ray Cummins

One of our subscribers requested an explanation of the basic
approach to selling Puts for monthly income and stock ownership.

Put writing is designed to complement a stock-trading portfolio
because it offers two methods for generating profits:  collecting
premium by selling out-of-the money options and/or acquiring a
stock at a reduced price.  In our current approach we focus on
OTM options with average returns of 5-8% per month.  We expect
you to initiate our positions at or near the premium that is
quoted in the play narrative.  That's one way you can guarantee
(initially) the overall return we are offering.

The easiest way to utilize this section is to take our wide range
of candidates and narrow them down through your own due diligence
until you find plays that meet your risk-versus-reward tolerance.
Always research the company and the calendar; upcoming events,
earnings dates, scheduled announcements.  When you have reliable,
up-to-date information about a stock and its industry, you are
way ahead of traders that buy and sell on rumors or comments from
the message boards.  Quite simply, "knowledge is power!" and with
the tools on the Internet, there is no excuse for not being well
informed about a company or its industry group.

After you have selected a candidate, you must decide how much
stock you are willing to potentially purchase through the sale of
Puts.  Usually it is a minimum of 5 to 10 contracts (to prevent
commissions from significantly affecting the ROI) and we suggest
that you place the opening order with your broker as a "limit"
rather than a "market" because some of the positions are thinly
traded.  After you are filled, monitor the play until it expires
or needs to be closed for other reasons.  We track the portfolio
on a weekly basis but we won't always make comments about current
positions after the initial recommendation.  The ongoing narrative
is a service we provide to help novice traders understand when and
why various plays might be opened and closed.  It is not intended
as a substitute for your personal trading techniques nor does it
replace your duty to manage the positions in your portfolio.


Early exits and adjustments...

A (naked) Put position generally requires the underlying issue to
remain above a specific price in order to generate profits.  You
must be confident of this outcome before initiating any play on
our candidate list.  In addition, anytime you participate in an
option trade, you should know at what (stock) price the position
will reach "break-even."  You should also determine the price the
underlying issue would have to reach to generate unacceptable
losses.  Ideally, you will enter a position and then simply wait
for expiration.  Unfortunately, it doesn't always work that way.
To be successful on a consistent basis, option positions must be
closed or adjusted if certain risk points are reached.  You must
be prepared to make these adjustments when they are needed, not
after the position has moved beyond a reasonable loss level.  Of
course, this type of money management requires advanced planning
and the discipline to execute predetermined strategies in adverse
conditions, regardless of emotional instincts.

With this form of trading, there is a large downside potential and
and in many cases, failure to adjust a position in a timely manner
can lead to catastrophic portfolio losses.  We publish the classic
"warning" paragraph in each week's play narrative for that reason
alone.  The last two sentences are paramount to success: "It is
also important that you consider using trading STOPS on any 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."  It is not uncommon for traders who have
enjoyed a long string of winning positions to get "wiped out" by
one bad play because they failed to limit their losses when the
market moved against them.  The problem is, the decision usually
has to be made under duress, at the worst possible moment.  The
only way to avoid this fate is to develop a plan with a target
exit (or adjustment) point, and stick to it.  This requirement is
difficult for new traders to adhere to but the simple fact is,
professionals use proven money management techniques to maximize
profits and limit losses and that's why they come out ahead in
the long run.

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

CYTO    9.03   8.94   SEP   7.50  0.31  *$  0.31  18.8%
GSTRF   7.63   9.63   SEP   5.00  0.31  *$  0.31  14.6%
CTIC   39.25  47.31   SEP  30.00  1.38  *$  1.38  13.0%
IMAX   28.06  26.75   SEP  22.50  0.94  *$  0.94  12.4%
FNSR   29.00  46.00   SEP  22.50  0.94  *$  0.94  12.1%
ICIX   20.88  22.88   SEP  15.00  0.38  *$  0.38  12.1%
JDEC   21.88  25.75   SEP  17.50  0.69  *$  0.69  11.8%
LPTH   41.13  55.25   SEP  30.00  1.00  *$  1.00  11.8%
MSTR   26.88  31.38   SEP  20.00  0.44  *$  0.44  11.0%
FNSR   37.50  46.00   SEP  30.00  0.81  *$  0.81  10.6%
RHAT   23.44  26.69   SEP  17.50  0.50  *$  0.50  10.5%
GZTC   38.00  37.50   SEP  30.00  0.81  *$  0.81  10.5%
SIPX   37.50  43.88   SEP  30.00  0.75  *$  0.75   9.9%
DCLK   41.81  39.56   SEP  35.00  0.69  *$  0.69   9.4%
PL     28.19  28.75   SEP  25.00  0.50  *$  0.50   8.4%
SIMG   32.06  37.44   SEP  25.00  0.38  *$  0.38   8.1%
CLTR   26.56  30.00   SEP  22.50  0.38  *$  0.38   7.9%
TLXN   19.88  20.06   SEP  15.00  0.44  *$  0.44   7.2%
CRUS   27.44  31.31   SEP  22.50  0.50  *$  0.50   6.6%
CS     34.75  37.13   SEP  27.50  0.44  *$  0.44   6.5%
REGN   33.13  34.13   SEP  25.00  0.38  *$  0.38   5.9%
NDC    30.06  29.50   SEP  22.50  0.38  *$  0.38   5.2%

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

Comments:

Maybe this section should focus on buying calls rather than
selling naked puts!  (We never said we were humble...)



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

ADVP   27.38  SEP  25.00  QVD UE  0.44  16   24.56   12    12.3%
MSTR   31.38  SEP  25.00  EOU UE  0.38  1327 24.63   12    14.3%
TIVO   26.88  SEP  22.50  TUK UX  0.56  10   21.94   12    20.5%
WGAT   22.88  SEP  20.00  WAQ UD  0.63  91   19.37   12    23.1%

ALLP   16.50  OCT  12.50  QSV VV  0.50  85   12.00   47     8.5%
STAT   20.00  OCT  15.00  TAQ VC  0.44  30   14.56   47     6.4%
VITR   48.94  OCT  30.00  TKU VF  1.00  0    29.00   47     6.0%

Sequenced by Return
******

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

WGAT   22.88  SEP  20.00  WAQ UD  0.63  91   19.37   12    23.1%
TIVO   26.88  SEP  22.50  TUK UX  0.56  10   21.94   12    20.5%
MSTR   31.38  SEP  25.00  EOU UE  0.38  1327 24.63   12    14.3%
ADVP   27.38  SEP  25.00  QVD UE  0.44  16   24.56   12    12.3%

ALLP   16.50  OCT  12.50  QSV VV  0.50  85   12.00   47     8.5%
STAT   20.00  OCT  15.00  TAQ VC  0.44  30   14.56   47     6.4%
VITR   48.94  OCT  30.00  TKU VF  1.00  0    29.00   47     6.0%


Company Descriptions

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

*****
SEPTEMBER EXIPIRATION
*****
ADVP - Advance Paradigm  $27.38  *** New Yearly High! ***

Advance Paradigm is a comprehensive provider of health
improvement services, providing its clients a wide range of
pharmacy benefit management, disease management, clinical trials
and research, web-based marketing support and other health
related programs.  They generate revenues by providing services
to customers such as the Blue Cross Blue Shield plans, insurance
companies, government agencies, employer groups, and labor unions.
Advance Paradigm expects to complete its $1 billion acquisition
of Rite Aid's PCS Health Systems no later than the first week of
October and bringing PCS into the fold will catapult ADVP, now
the fifth-ranked player in the industry, to the #1 position in
the highly competitive business.  When combined with PCS, Advance
Paradigm will manage $16 billion a year in drug expenditures from
more than 75 million insured people.  The larger scale ADVP will
be able to negotiate more favorable contracts and the resources
will allow the company to grow other lines of business.  Based on
the technical activity in the issue, investors agree with the new
outlook for the company.

SEP 25.00 QVD UE LB=0.44 OI=16 CB=24.56 DE=12 MR=12.3%


 
*****
MSTR - MicroStrategy $31.38  *** 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 last 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.  This week, MicroStrategy announced it would cut 10% of
its workforce, or 234 jobs, in an effort to lower costs by more
than $25 million.  We favor the opportunity to own this issue
at a low-risk entry point.

SEP 25.00 EOU UE LB=0.38 OI=1327 CB=24.63 DE=12 MR=14.3%


 
*****
TIVO - Tivo  $26.88  *** On The Move! ***

Tivo is a creator of personal television.  The Tivo Service
enables consumers control their television viewing by allowing
them to watch what they want, when they want it.  Using customer
selected preferences, Tivo automatically records programs the
viewer chooses to see, and enables them to pause, rewind, instant
replay and playback in slow motion any live television broadcast.
Lots of activity and speculation in this growing niche market and
recent developments with Replay TV and Universal Pictures, which
announced that it would launch a unique interactive television
advertising campaign through the digital set-top box service
beginning this fall, have brought traders to the group in droves.
The new interest in the industry bodes well for TIVO, which has
demonstrated that it's the clear market leader, and recently, the
Nielsen Media Research Company has agreed to measure viewers of
Tivo's personal video recorder service to determine the potential
for the unique viewing/recording technology.  We simply favor the
technical recovery in the issue and the bullish outlook for the
growing industry.

SEP 22.50 TUK UX LB=0.56 OI=10 CB=21.94 DE=12 MR=20.5%


 
*****
WGAT - Worldgate Communications $22.88  *** A Big Day! ***

WorldGate Communications is the founder of the WORLDGATE Service,
a television-based Internet product that delivers convenient,
high-speed Internet access through cable television systems.
WorldGate combines the cable infrastructure with the television
platform so subscribers are able to reach the Internet without a
personal computer or any additional phone lines.  Viewers receive
the Internet, interactive advertising and programming through a
set-top box and a remote control or wireless keyboard.  The new
system is popular because it provides a simple user interface and
is targeted at customers without computer experience, as well as
net savvy users.  In addition, Motorola's SURFview platform costs
only $99 for the set-top box, enabling cable operators nationwide
to provide Internet access at a very low monthly fee.  WorldGate
can also convert the user interface to the language and culture
required for an international marketplace.   Most recently, WGAT
was rated a "new buy" at PMG with a 12-to-18 month target price
of $75.

SEP 20.00 WAQ UD LB=0.63 OI=91 CB=19.37 DE=12 MR=23.1%


 
*****
OCTOBER EXPIRATION
*****
ALLP - Alliance Pharmaceuticals $16.50  *** New Trading Range? ***

Alliance Pharmaceutical is a research and development company
that focuses on developing scientific discoveries into medical
products.  It then licenses these products to multinational
pharmaceutical companies in exchange for fixed payments and
royalties.  Alliance has developed three innovative products
and is in, or has completed, their respective clinical trials.
ALLP recently received notice from the FDA that its ultrasound
contrast agent, Imagent, is "approvable."  Imagent, first used
in clinical trials to improve ultrasound images of the walls of
the heart, is being developed by ALLP and Germany's Schering AG,
and the "approvable" status is typically one of the final steps
before the FDA grants clearance for marketing a new pharmaceutical
product in the U.S.  Alliance also announced earnings on Friday
afternoon and we have yet to see how investors will react to the
news.  Wait for the direction of momentum to be decided next week
before entering the position.

OCT 12.50 QSV VV LB=0.50 OI=85 CB=12.00 DE=47 MR=8.5%


 
*****
STAT - i-STAT  $20.00  *** Back On Track? ***

i-STAT develops, manufactures and markets medical diagnostic
products for blood analysis that provide health care technicians
with immediate and accurate critical diagnostic information. Their
"i-STAT" System consists of portable, hand-held analyzers and
single-use, disposable cartridges, each of which simultaneously
performs different combinations of routinely ordered blood tests
in approximately two minutes, providing a dramatic improvement
in timeliness compared to lab processed testing.  i-STAT recently
announced that revenues for the quarter increased approximately
30% to $14.8 million, up from $11 million in the same period in
1999.  Regarding the results, the CEO said, "Past quarter revenues
and cartridge shipments reached record levels, and our net loss
narrowed significantly."  In addition, he is also optimistic about
the balance of the year and i-STAT is accelerating the planned
addition of production capacity to meet the anticipated growth in
demand.  That sounds like an excellent outlook for the future but
we simply favor the bullish reversal and the long-term technical
trend of the issue.

OCT 15.00 TAQ VC LB=0.44 OI=30 CB=14.56 DE=47 MR=6.4%


 
*****
VITR - Vitria Technology  $48.94  *** Own This One! ***

Vitria is a leading provider of eBusiness infrastructure software.
The company's flagship product, BusinessWare, provides the means
to enable incompatible information technology systems to exchange
information over corporate networks and the web. After two months
of declines, Vitria is finally rebounding from its recent post
earnings sell-off.  While second-quarter revenues increased 400%
from the year-earlier period, investors did not favor the rise in
the company's "days-sales outstanding."  The recently announced
partnership with ActionPoint appears to be the catalyst for the
recent rally.  Vitria continues to enhance and strengthen its
technology which should bode well for the future now that analysts
and investors are realizing how important it is for the internal
systems at businesses to coordinate with one another, as well as
with the systems of online marketplaces.

OCT 30.00 TKU VF LB=1.00 OI=0 CB=29.00 DE=47 MR=6.0%


 


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

Stocks earn a well-deserved Labor Day vacation...

******************************************************************
- MARKET RECAP -
******************************************************************
Friday, September 1

The market edged higher today as tame economic data convinced
investors that the outlook for equities was favorable.  The Dow
closed up 23 points at 11,238 and the Nasdaq ended up 27 points
at 4,234.  The S&P 500 index finished relatively unchanged at
1,520.  Trading volume on the NYSE reached 771 million shares,
with advances beating declines 1,631 to 1,171.  Activity on the
Nasdaq was average at 1.47 billion shares traded, with advances
beating declines 2,233 to 1,746.  The 30-year Treasury closed up
4/32, pushing its yield down to 5.66%.


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

Engage   ENGA   DEC12C/DEC15C   $1.19   debit   bull-call
Engage   ENGA      DEC-10NP     $1.69   credit  naked put
Novell   NOVL   NOV10C/OCT12C   $1.88   debit   diagonal

Both of these issues dipped during the session, allowing entries
at the target prices.  A pleasant note from one of our readers
suggested that one possibility for the recent move in NOVL could
be the article in the Gildertech report, which was released in
mid-August.  Apparently, it was a very positive article and it
outlined the new direction of the company.


Portfolio Plays:

Stocks continued to rally today even as volume faded ahead of
the long holiday weekend.  Favorable jobs data provided signs of
a slowing economy and analysts expressed views that the FOMC is
unlikely to raise interest rates for the remainder of the year.
The U.S. non-farm payrolls fell 105,000 in August, which was
well above the estimated decline of 15,000.  At the same time,
jobs rose 140,000, well below the anticipated 190,000 increase.
Meanwhile, the NAPM index fell to 49.5 in August, from July's
51.8 reading.  A number below 50 indicates that the economy is
contracting.  In addition, U.S. construction spending fell for
the fourth consecutive month and analysts say the indications
are favorable for the economy in the long run.  On the Dow,
Hewlett-Packard (HWP), General Motors (GM) and International
Business machines (IBM) led the gainers while J.P. Morgan (JPM),
Intel (INTC) and Citigroup (C) slipped lower.  On the Nasdaq,
semiconductor and Internet stocks suffered from profit-taking
but the majority of groups edged higher.  In the broader market,
retail stocks were particularly strong after weakness in recent
sessions.

Our portfolio enjoyed a number of bullish moves and most of
the activity came in technology issues.  EchoStar (DISH), the
#2 satellite-television provider, jumped over $4 to $53 after
the company said it plans to offer customers free equipment and
installation when they agree to buy programming for one year.
EchoStar is offering its promotion to compete with DirecTV, the
#1 satellite-TV company, and also to win customers from cable-TV
leaders, such as AT&T, that are introducing digital service with
hundreds of channels, improved picture, and sound quality.  Our
debit spread combination is now trading at a $4 profit.  Red Hat
(RHAT) continued higher on momentum from the recent announcement
of a new commitment from computing heavyweights to develop the
Linux operating system.  Our bullish combination position is
approaching maximum profit.

A number of big-cap technology stocks moved higher during the
session.  Phone.com (PHCM) and Qlogic (QLGC) were the leaders
and Voicestream (VSTR) bounced back, finishing up almost $7 at
$119.  Infocus (INFS) and Vitria (VITR) topped the group of
computer hardware/software issues and in the biotech sector,
Protein Design Labs (PDLI) rebounded almost $5 to end at $80.
Polycom (PLCM) split 2-for-1 but the stock continued higher
after the new shares were issued.  Our bullish, combination
position is at maximum profit with the share value above $60.
The credit strangles in PMC Sierra (PMCS) and Sapient (SAPE)
are trading inside the sold positions, but the slump in SAPE
shares is threatening to take that position into negative
territory on the bullish side of the play.  We will monitor
the position closely in the coming sessions.

The rally in the finance group appears to be coming to an end
and with profits in a number of positions, we have decided to
close the remaining plays in that category.  Ameritrade (AMTD)
provided a $0.50 return in the CALL portion of the synthetic
position.  The sold PUT at $15 is expected to expire worthless.
Countrywide Credit (CCR) began to slide early in the session
and we decided to take the remaining profit in the position.
The bullish diagonal spread provided a $1.00 profit on $6.25
invested.  In the healthcare services sector, Caremark RX (CMX)
edged up $0.62 to $10.43 and our conservative diagonal spread
is offering a $1.12 credit, with over three months remaining
until the long option expires.

On the downside, Anheuser Busch (BUD) started lower at the open
and rather than ride the failing issue to expiration, we exited
the bullish credit spread at a small loss.  We hate to end the
chance for recovery with so much time remaining but in this case,
the technical indications suggest a bearish trend is beginning.
The day's movement did provide a modest credit in our closing
transaction and traders that decided to leg out of the position
on the downside should expect to achieve additional gains in the
coming sessions.  Of course, many times we close a play early for
a small loss and then Murphy's Law comes onto the scene and the
play unexpectedly recovers for our subscribers.  Our Reader's
Request positions have not fared very well this month.  Polaroid
(PRD) has retreated to recent lows and the optimistic outlook has
faded with the company's waning revenues.  Lucent (LU) managed a
small technical recovery in today's session but the issue has yet
to establish the renewed up-trend that other stocks in the group
are experiencing.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
TKTX - Transkaryotic Therapies   $39.34  *** Speculation! ***

Transkaryotic Therapies is a biopharmaceutical company that is
building a broad and renewable product pipeline based on three
proprietary development platforms: Gene-Activated proteins, Niche
Protein products, and Gene Therapy.  The company currently has
four products in clinical development: a unique, gene-activated
erythropoietin (GA-EPO) in Phase III trials for the treatment of
anemia; a second gene-activated protein (GA-II) in a Phase I
trial; Replagal (alpha-galactosidase A or alpha-gal) completed
Phase II trials for the treatment of Fabry disease; and Factor
VIII therapy in a Phase I trial for the treatment of hemophilia A.
The company has entered into collaborations with Aventis Pharma
with respect to its first two Gene-Activated proteins, and with
Sumitomo Pharmaceuticals for Replagal in Japan, and with Genetics
Institute for Factor VIII gene therapy in Europe.

Options have been very active in this issue in recent sessions as
there is potential for a resolution soon in the primary patent
infringement trial between Amgen (AMGN) and Transkaryotic over
Amgen's Epogen anaemia drug.  Amgen sued TKTX in 1997 seeking to
defend its patents covering the making and selling of Epogen, a
drug that uses erythropoietin to boost red blood cells and combat
anaemia.  TKTX says its EPO drug, which it wants to market under
the name GA-EPO, does not infringe Amgen's Epogen patents.  The
testimony in the trial is complete, except for two witnesses that
TKTX wants to question, but who cannot appear until September for
personal reasons. The trial is expected to resume on September 5
at the earliest but time is running short.  U.S. District Judge
William Young allotted 20 trial days for the case and fewer than
three days of trial time remain.  The lawsuit may or may not be
decided prior to option expiration and we are going to speculate
on the outcome with this bullish position.

In this unique combination, we are going to take a bullish stance,
selling the $25 Put for a premium of approximately $1.62.  In the
event of a negative outcome in the court case, the ensuing drop in
TKTX's share value may be substantial.  If the stock price falls
significantly, the profits from the debit spread will help offset
some of the potential loss in the (sold) Put position.


PLAY (aggressive - bullish/combination position):

SELL PUT  SEP-25.00  UFT-UE  OI=282  B=$1.62
BUY  PUT  OCT-22.50  UFT-VX  OI=45   A=$1.93
SELL PUT  OCT-20.00  UFT-VD  OI=100  B=$0.93
INITIAL NET CREDIT TARGET=$0.62  ROI(max)=18%


******************************************************************
SIRI - Sirius Satellite Radio  $52.13  *** Media Group! ***

Sirius Satellite Radio is building a subscription radio service
that will broadcast up to 100 channels of audio entertainment
directly from satellites to vehicles throughout the continental
United States.  Sirius Radio will offer a wide selection of music
formats and program types; commercial-free digital quality music;
and nearly seamless signal coverage across the continental United
States.  Sirius Radio will be broadcast over a frequency band, the
"S-band," which will augment conventional (terrestrial broadcast)
AM and FM radio bands.  The company holds one of only two licenses
issued by the Federal Communications Commission to build, launch
and operate a national satellite radio broadcast system.  Their
service will offer 50 channels of commercial-free, digital quality
music programming and up to 50 channels of news, sports, talk and
entertainment programming.  They expect to commence broadcasting
at the end of the fourth quarter of 2000.

Sirius shares slumped last week after the company said its backup
satellite was damaged during production.  The satellite, Sirius-4,
was damaged by Loral Space and Communications and although Loral
will be responsible for the cost of repairs, the lack of a spare
would reduce the chances of a successful deployment later in the
year.  Sirius said it needs three satellites to complete its radio
system and the remaining two are scheduled to go up in the next 60
days.  One analyst following the company said the satellites will
be launched from Kazakhstan by a Proton rocket which has a great
reliability rate.  The Proton has succeeded in all nine of its
launches this year and it is unlikely the spare will be necessary.

The analyst maintains a "strong buy" rating on the company, with a
12-month target price of $100.  While we don't see $100 in the near
future, $40 seems like a reasonable price at which to speculate on
the near-term movement of the issue.


PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-35  QXO-UG  OI=90   A=$0.56
SELL PUT  SEP-40  QXO-UH  OI=699  B=$1.06
INITIAL NET CREDIT TARGET=$0.62  ROI(max)=14% B/E=$39.38


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

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues.  Review each play individually and make
your own decision about the future outcome of the position.
******************************************************************
NSPK - Netspeak  $11.94  *** Very Cheap Speculation! ***

NetSpeak Corporation develops, markets, and supports advanced
telephony solutions for Internet Protocol (IP) networks.  The
company's solutions include Phone-to-Phone, PC-to-Phone, Voice
E-commerce and Internet Call Waiting.  Their unique products
include its suite of call management software.  The company's
call management platform enables service providers to quickly,
easily, and cost effectively deploy multiple revenue-generating
IP telephony applications.  NetSpeak's call management platform
offers enterprises the ability to reduce long distance calling
charges.  The primary end-users of the company's products and
solutions are service providers, including traditional and new
telecommunications carriers, business enterprises, cable
companies and OEMs.

Netspeak is in one of the high growth sectors of the market but
in the past few months, the issue has fallen from grace, losing
over 75% of its share value.  Now the company appears to be "back
on track" and with the recent investor interest, it may not be
long before the stock returns to its old trading range.  Traders
who support a favorable, long-term outlook for Netspeak can use
this synthetic position to profit from upside activity, at the
risk of owning the issue at a favorable cost basis.


PLAY (conservative - bullish/synthetic position):

BUY  CALL  NOV-20.00  NNQ-KD  OI=152  A=$0.38
SELL PUT   NOV-7.50   NNQ-WU  OI=93   B=$0.31
INITIAL NET CREDIT TARGET=$0.06-$0.12 ROI TARGET=50%  B/E=$7.38

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $275 per contract.


******************************************************************
                   - STRADDLES AND STRANGLES -
******************************************************************
SDW - Southdown  $62.31  *** Merger Speculation Continued... ***

Southdown operates cement manufacturing plants located across the
United States, plus an extensive network of cement distribution
terminals.  Southdown also mines, processes, and sells various
construction aggregates and specialty mineral products in the
eastern half of the United States and in California.  The company
also installs highway safety systems such as guardrails, traffic
signals, highway signage and lighting.  In addition, Southdown
markets ready-mixed concrete products in two of its largest cement
markets, California and Florida.

The most recent activity in Southdown began in late July amid
hopes that an investment by France's Lafarge (LAF) in Portuguese
cement company Cimpor, would help to keep Cimpor independent and
free to make a takeover bid for Southdown.  Earlier in the year,
Cimpor had been preparing a takeover bid for Southdown with the
help of Brazil's Votorantim.  Unfortunately, Cimpor itself became
the target of a takeover bid from Portuguese rival Secil, owned by
Semapa, and Swiss giant Holderbank Financiere Glarus AG.  Cimpor
eventually suspended its talks with Southdown and now the company
faces a long battle in its effort to thwart Secil's recent bid.
In mid-August, Swiss cement giant Holderbank, recently thwarted
in the takeover bid for Portugal's Cimpor, reaffirmed that it
remains interested in winning control of the cement group.  The
company is expected to compete for a 15% stake that the government
will sell at the coming auction of the remaining state holdings.

Lots of activity in the group but for now it appears that Southdown
will go it alone and we will continue to sell premium on the issue
until a buy-out offer occurs or the recent chart pattern changes
substantially.


PLAY (aggressive - neutral/credit strangle):

SELL CALL  SEP-65  SDW-IM  OI=1579  B=$1.50
SELL PUT   SEP-60  SDW-UL  OI=250   B=$1.38
INITIAL NET CREDIT TARGET=$3.00 ROI(max)=19%
UPSIDE B/E=$68.00 DOWNSIDE B/E=$57.00

Note: If you want to participate in the position but don't have
the ability to sell naked calls, consider a call-credit spread for
the bearish portion of the play.  The long option (SEP-$70) will
limit the potential for loss on the upside and reduce the overall
collateral requirement for the position.




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