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Daily Newsletter, Sunday, 09/10/2000

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The Option Investor Newsletter Sunday 09-10-2000 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/091000_1.asp Entire newsletter best viewed in COURIER 10 font for alignment ****************************************************************** MARKET STATS FOR LAST WEEK AND PRIOR WEEKS ****************************************************************** WE 9-8 WE 9-1 WE 8-25 WE 8-18 DOW 11220.65 - 18.13 11238.78 + 46.15 11192.63 +146.15 + 18.68 Nasdaq 3978.41 -255.92 4234.33 +191.65 4042.68 +112.34 +140.87 S&P-100 812.90 - 16.93 829.83 + 6.28 823.55 + 9.91 + 8.89 S&P-500 1494.50 - 26.27 1520.77 + 14.31 1506.46 + 14.74 + 19.88 W5000 14050.20 -279.70 14329.90 +238.70 14091.20 +183.80 +210.60 RUT 535.70 - 6.21 541.91 + 16.80 525.11 + 9.60 + 5.24 TRAN 2732.78 + 19.86 2712.92 - 77.25 2790.17 - 46.97 - 90.36 VIX 20.69 + 1.24 19.45 + .35 19.10 - .32 - 1.77 Put/Call .52 .53 .50 .57 ****************************************************************** September is living up to its reputation already. By Jim Brown Earnings warning fears routed the markets as chips, networkers, Internet, computers and telecom stocks all headed lower. The rash of prewarnings tipped the balance of power and the Nasdaq support at 4000 fell at the bell. Even the promise of an increase in output by OPEC which dropped oil prices by -1.76 to 33.63 was not able to spark the market. The bullishness from this time last week is all but forgotten and fear is rampant again. A prime example of how quickly market sentiment can change with just one major news event. The Intel downgrade on Tuesday is still moving down through the sectors that depend on PC sales. Thank you again Ashok Kumar. It was not all due to the Intel downgrade. That was simply the first domino to fall and the rest are following suit. The flurry of warnings on Thursday, TRW, SFAM, ZOOX took the wind out of the chip sector and the networkers. Today the high profile culprit was National Discount Brokers (NDB) who warned that they would report a loss of between -.06 and -.09 when analysts had expected a profit of +.09. OOPS! That was a serious change and NDB dropped -$8 to $27.44 or -22%. Just when you thought the financial sector was bullet proof. EGRP and AMTD had been gaining on upgrades and the NDB warning reversed that trend. Remember what I said last week about analysts jumping in front of stocks they expect to warn? UBS Warburg went on record that they expect Dow component Honeywell to miss estimates. The key was a warning by Invensys, a British automation company that competes with Honeywell. Analysts are expecting many companies to warn based on the high cost of oil currently making its way through the price chain. Another Dow component that is suspect is MMM. No one has downgraded them but after Dupont this week many feel they are the next confessor. Oil prices fell on the expectations that OPEC would agree to increase oil production by 500,000 to 700,000 barrels per day at their meeting on Sunday. With world oil consumption running at 75 million barrels per day a 700,000 increase is barely a drop in the huge bucket. The oil price dropped -1.76 to $33.63 but it is not expected to go much further. It takes 60 days for an increase in production show up at the pump and with colder weather coming the increase in consumption is expected to be more than the increase in production. OPEC is expected to try and keep prices in the $28 range and to do that they have to keep supplies tight, just not critical. The Friday drop was unfortunately on strong volume, again. The NYSE traded 963 million and the Nasdaq 1.5 billion shares. The expected higher post Labor Day volume was expected to be up volume but we got the opposite. One floor trader said he saw more shorts on Friday than he had seen in some time. The Nasdaq closed near the lows of the day for the third time this week. The one day rebound on Thursday was simply an oversold bounce and traders sold into it and ran for cover. The selling intensified into the close and many stocks are showing long red candles in the last few minutes. The chip sector is now down -8.6% for the month followed by the Internet sector at -5.9%. The Nasdaq has dropped -5% for the month. Are we having fun yet? Don't look now but we are dead in the middle of the worst month for the market historically over the last 49 years and traders are looking for cover. The sell off we had been expecting for next week jumped forward in time four days and caught many traders off guard. The Nasdaq fell under the psychologically important 4000 level and closed at the low of the day. The reason for the drop was a big cap explosion. CSCO, ORCL, WCOM, MSFT, INTC, DELL and SUNW all helped drop the Nasdaq composite. Add in the huge drops in chips, fiber optics and networkers like SDLI -21, CIEN -15, GLW -14, JNPR -17, EXTR -9, AMCC -13, PMCS -10, BRCM -8 and it was amazing the damage was not worse. The outlook does not look good. The lack of confidence in the market coupled with the huge amounts of cash on the sidelines has the market primed to produce ulcers. Volatility is increasing and the alternating 100 point days we had last fall are returning. Each major drop like Friday's sets us up for a trading rally and then another drop. There are too many sellers dumping good stocks to expect that Friday was a bottom. The extreme short positions by institutional traders are still growing. This, coupled with the expected October drop is scaring investors and prompting them to stay on the sidelines. The majority of the earnings warnings are still ahead of us and we will probably see lower numbers soon. The coming weeks will test your trading ability and quickness in entering and exiting positions. The Nasdaq is likely to be range bound with large intraday swings. As each warning appears the stocks in that sector will be guilty by association and drop accordingly. Hopefully we will reach a point soon where traders will feel all the bad news is priced into the market and they will start bottom fishing for tech stocks. We all know how powerful tech rebounds can be. We can trade these rebounds but with October in our immediate future we need to trade these rebounds like hit and run bandits. Sometime in the next 50 days the market will form a bottom and the fall rally will emerge. The Fed is on hold, the soft landing is here and oil prices will eventually fall. The outlook is outstanding we just do not know the start date yet. The October low in 1999 was on the 18th, 1998 on the 8th and in 1997 on the 28th. There is no convincing pattern other than October produced the low point in the fourth quarter for the last five years. 1994 was the last year that saw lower numbers after October. Getting from here to October is the challenge. Next weeks economic reports could take investors focus off the earnings warnings if the reports are good. Monday/Tuesday are report light with the majors coming later in the week. Wednesday we have Import/Export prices, Thursday PPI and Retail Sales and Friday CPI, Business Inventories, Industrial Production. This sets the stage for a rebound on Monday afternoon or Tuesday in anticipation of a rally on good PPI news. September rallies should be viewed with caution. Believe it or not I am still very bullish about the market. I just feel the next four weeks could be very bumpy. Be sure to keep your seat belt fastened and watch for those sharp turns. 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 **************** Go south for the winter! At least September 21-23rd! Chicago is sold out and next up is Austin Texas. Here is your chance to learn from the pros. The three day Technical Analysis Stock and Option Fall Seminar Series. Three days of in-depth 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 ** Sold Out ** 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 ************** This week produced mixed results but with the Nasdaq down -255 points you knew that already. Due to the expected choppy week there are no new plays but CLS and VRSN are both setting up to be great rebound plays when the market gets well. ************** Existing Plays ************** EXDS - Call play Prior week Last week Exodus died with the market and did not recover. We would recommend waiting for a new trend to appear and some market support before entering a new play on this stock. CLS - call play Last week CLS did exactly as we expected and did it in the face of a really bad Nasdaq week. After trading over our entry point of $83 on Monday CLS continued as high as $87 on Friday before profit taking. I would view this as another entry point and try to target shoot for under $80 on any market weakness on Monday. Verisign - Dead cat bounce?? Prior week Last week No stress, no strain. VRSN never hit our $187 entry point which would have been positive confirmation of a rebound from the sell off. Therefore you never should have entered the play. After the continued drop on the Nasdaq sell off VRSN did stop at about $168 and then again at $170 on Friday. This sets up a strong chance that the drop is over and VRSN will rebound on any positive market. We set our new entry point at $180 and only on a positive market. We know that aggressive traders will want to enter on any positive move from here but we suggest waiting for a hold over $180. Your choice. ************ This week the market could go either way but the continued outlook for September is choppy. This means no direction and stocks can be very sporadic. 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.nobletrading.com/newaccount/optioninvest.html ************************************************************** **************** MARKET SENTIMENT **************** Your New Market Sentiment By Austin Passamonte The only constant in life is change. In our continuing effort to be the best in our industry, Market Sentiment has undergone considerable change. We hope the added effort will translate into better trading information for you. To hit the highlights, our major addition has been to include the SPX and QQQs in open-interest S/R tables along with OEX. This should give us a glimpse to market direction bias going forward, starting with an interesting setup tonight. More on that in a bit. Four major moving averages are included for each index giving us an idea where significant resistance or support may lie. Strike prices with maximum open interest on put/call options serves to do the same. Equity option ratios are considered contrarian indicators predominantly traded by small speculators. However, index options are tools of choice for large funds and institutions, the real "smart money" in our business. With that in mind we will consider index option-volume figures to be leading indicators from this point forward. Considerable research has shown that shifts within index option ratios can foretell near-term market movement in that direction. Meow.. Is The Bouncing Cat Finally Dead? We think not. Which leads us to the week ahead. Broad markets enjoyed a reverse-rally (put-option talk) with tech darling NDX leading the plunge. Our daily charts which forecast so well Thursday night still show considerable downside may lie ahead. Lower Bollinger Band values for the following markets are; OEX 804, NDX 3,633/QQQ 90, SPX 1474, DJIA 10,980 and Comp 3,768. Seem like low numbers to reach? Hey, that's where technical tools point to as next extreme support. Look out below! But not all at once. Market Sentiment smells a relief-rally early next week, possibly late Monday or Tuesday. S/R option values in the NDX and OEX show unusual put-call ratios directly overhead that suggest scant resistance. Too many puts in place that gained value over the last session or two. Liquidation of these could create a "short squeeze" in a hurry. They also reflect massive short-buying in the stock market Friday as well. There remains record amounts of cash sitting idle in Fund manager hands. Should the next round of reports give favorable surprise or stocks start looking cheap there is very little immediate overhead to break. In harmony with this is a heavier than usual buying of index call options Friday afternoon. Index put/call ratios are now skewed more towards calls than anytime recently. This suggests "smart money" is laying some upside bets or hedging shorts. Our fantasy setup is further selling at Monday's open and a bounce off support from there. We could see a powerful rally soon if only for one day. Better get used to that action, autumn volatility is here! ***** VIX Sat 9/09 close: 20.69 CBOE Equity Put/Call Ratio The CBOE equity put/call ratio is a contrarian-sentiment indicator. Small traders are majority of equity-option players. Numbers above .75 are considered bullish, .75 to .40 neutral and bearish below .40 ************************************************************* Tues Thurs Sat Strike/Contracts (9/05) (9/07) (9/09) ************************************************************* CBOE Total P/C Ratio .52 Equity P/C Ratio .47 Peak Volume (Index & OEX) CBOE Index & OEX put/call ratio is now a "smart money" sentiment indicator, as majority of buying done by institutional traders. Numbers above 1.5 are considered bearish, 1.5 to .75 neutral and bullish below .75 ************************************************************** Tues Thurs Sat Strike/Contracts (9/05) (9/07) (9/09) ************************************************************** All index options .78 OEX Put/Call Ratio .97 30-yr Bonds Fri 9/08 close; 5.70% Support/Resistance Indicator The Index Support/Resistance(S/R)Ratio is a formula used to gauge possible support or resistance based on open-interest disparity. Ratio listed is percentage of calls to puts or puts to calls respectively. Support is factored from dividing puts by calls at strike levels beneath index closing price. Resistance is factored from dividing calls by puts at strike levels above current closing price. (Open Interest) Calls Puts Ratio S&P 100 Index (OEX) Resistance: 850 - 835 10,747 698 15.40 830 - 815 12,995 17,027 .76 ** OEX close: 812.90 Support: 810 - 795 10,248 18,443 1.80 790 - 770 2,117 20,985 9.91 Maximum calls: 820/6,797 Maximum puts : 820/4,236 800 Moving Averages 10 DMA 822 20 DMA 819 50 DMA 806 200 DMA 781 NASDAQ 100 Index (NDX/QQQ) Resistance: 105 - 103 21,437 8,650 2.48 102 - 99 35,916 21,508 1.67 98 - 95 28,976 45,909 .63 * QQQ(NDX)close: 95.125 Support: 94 - 91 11,336 33,058 2.92 90 - 88 16,834 38,098 2.26 87 - 85 2,283 20,122 8.81 Maximum calls: 100/14,921 Maximum puts : 90/25,101 Moving Averages 10 DMA 3957 20 DMA 3876 50 DMA 3808 200 DMA 3763 S&P 500 (SPX) Resistance: 1550 17,772 2,606 6.80 1525 14,498 8,056 1.80 1500 58,227 49,558 1.17 1475 SPX close: 1494 Support: 1450 20,069 19,665 .98 1425 4,664 8,985 1.93 1400 29,119 19,236 .66 Maximum calls: 1500/58,227 Maximum puts : 1500/49,558 Moving Averages 10 DMA 1506 20 DMA 1499 50 DMA 1480 200 DMA 1443 ***** CBOT Commitment Of Traders Report: Friday 9/08 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 DJIA futures Net contracts; +791 (long) - 2,700 (short) Total Open Interest % 11.5% net-long 12% net-short NASDAQ 100 Net contracts; -3,427 (short) -2033 (short) Total Open Interest % 21.74 net-short 4.84% net-short S&P 500 Net contracts; + 46,014 (long) -52,185 (short) Total Open Interest % 21.36% net-long 8.95% net-short What COT Data Tells Us: Commercial positions in S&P 500 and DJIA remain at or above five-year extreme short levels. NDX commercials continue to go shorter. Small specs continue to build net-long extremes in SP00S but have given ground in DJIA and switched over to heavily net- short in NDX. Weak hands are shaking out, only a matter of time in our opinion before they crumble. (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 future market direction. Bullish: Trim Tab money-flow Fed's finished Benign government reports Oversold market levels soon Bearish: Oil Prices COT reports Recent pre-warnings, downgrades This week's failed rally ************** MARKET POSTURE ************** As of Market Close - Sunday, 09/10/2000 Key Benchmarks Broad Market Last Support/Resistance Alert **************************************************************** DOW Industrials 11,220 11,050 11,450 SPX S&P 500 1,494 1,485 1,535 COMPX NASD Composite 3,978 3,900 4,300 ** OEX S&P 100 812 802 832 ** RUT Russell 2000 535 520 575 NDX NASD 100 3,813 3,700 4,150 MSH High Tech 1,054 1,040 1,130 ** BTK Biotech 751 690 790 XCI Hardware 1,539 1,500 1,660 ** GSO.X Software 461 450 495 SOX Semiconductor 1,039 1,000 1,140 ** NWX Networking 1,280 1,220 1,350 ** INX Internet 553 550 605 BIX Banking 635 575 640 XBD Brokerage 689 660 710 IUX Insurance 729 705 730 RLX Retail 850 790 870 ** DRG Drug 377 365 410 HCX Healthcare 788 760 815 XAL Airline 156 152 168 OIX Oil & Gas 312 284 320 Seven alarms were triggered on Friday. This time the bulls were shopping in the RLX, but the bears sold the other six. There have been more earnings warnings lately and that has traders nervous. Lowering support (COMPX, OEX, MSH, XCI, SOX, NWX) Lowering resistance (OEX, SOX, NWX) Raising support (IUX, RLX) Raising resistance (RLX). ************************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 ************* Patience, Not Panic By Buzz Lynn sectortrader@OptionInvestor.com Chalk up Friday's losses to fear of the unknown. For starters, OPEC convenes on Sunday in a series of meetings to determine oil production increases for the foreseeable future. $35 per barrel is the target price of some smaller producing nations, and Saudi Arabia has already made it known that production increases will be targeted to around 700 K barrels. Despite previous proclamations that OPEC would like oil to stabilize at $25, that new figure could take hold. In short 700 K isn't enough to satisfy world demand, which means prices may continue to rise. We've said it before, but oil is the lifeblood of the western world. Without it, we'd still be driving covered wagons, communicating by telegraph, and chasing dinner with a musket. Add to that a long list of economic reports this week, including retail sales, initial jobless claims, PPI, CPI, and business inventories, and you have a proverbial childhood monster under the bed. The good news is that all of this unknown will be known by the end of the week. Good things happen when the unknown becomes known. We've seen this before prior to Fed meetings. Investors get scared of what might happen to the Goldilocks economy and push equity prices down only to breath a sigh of relief when they discover there really is no monster under the bed. While the price of oil is certainly a concern, anticipation of the worst possible outcome is far worse than the actual outcome. Don't get us wrong. Rising oil prices are definitely inflationary, but they also act like actual interest rate hikes in that they slow down the economy by cutting profits. It's highly unlikely Alphonso the Great (Greenspan) would raise rates if the economy is slowing. That said, let's focus on the positive. NASDAQ held roughly 4000 all day long on a Friday going into an OPEC meeting and major economic reports in the coming week. Only in the last ten minutes did it make a final nosedive under that figure to close at 3978. Volume was fairly benign at 1.5 bln shares. This is not the stuff major selloffs are made of. While we'd expect some weakness to carry over into next week, NASDAQ is getting closer to a technical bottom, and could reverse on it own accord in that natural cycle of markets. OEX is behaving similarly. VIX...notable, but not meaningful. There may be some opportunities for quick put plays based on short-term oscillators. However, most of us are waiting for another crack at good call entries. If fear remains until Tuesday or Wednesday, Thursday and Friday's economic data could produce the positive news to shake the current negative sentiment. While that doesn't mean buy and hold, the point here is to be patient and not panic out. More importantly, be ready to execute your trades when the market delivers your entry or exit point. Just remember to use stops Best trading wishes for the coming week! ************** QQQ ************** QQQ - NASDAQ 100 $95.13 (-7.50 last week) This was a tough week for the NASDAQ with semiconductors casting a gray hue over technologies immediate economic performance. General market fear of higher oil costs and uncertain economic reports also took their toll on an index that by all rights was due for a pullback. The good news is that despite a decided breach of 4000 at Friday's close, volume was low and the market remains at support. Translated to the QQQ, $95 held, but not without a fight. For the Q's, volume was about 20% over the ADV. While we'd expect some weakness to carry over into next week, the unknown becoming known should help. Meanwhile, we need to look lower at $94, $93, $91.50 and finally, $90 as levels of support. $94 is the 200-dma and $90 is historic. Resistance should be at $97.50, then $99.50 to $101. The downtrending stochastic pattern on the daily, 60, and 30-min charts point to continued weakness for the next few days too. Though on the 30 and 60-min charts, a bullish short-term day trade or swing trade from the oversold position may be possible if we see a reversal. Same for MACD. Let the reversal of both indicators be your guide there. Calendar Spread: Unless you bought your long-term call last month and have been selling short-term calls on the way down, this strategy has been a grind. Buy high and sell low isn't fun. Cheer up! While there may be more weakness early in the week, the MACD and stochastic are likely headed for the oversold position on a daily chart. They have already partially done so on the 30 and 60-min charts. We will be looking for the daily chart to enter the oversold position, then reverse. When that happens, it could make an excellent entry for the long leg of the calendar spread. If you are already in the trade, it may be an opportunity to buy back the short position too at reduced cost. As noted above, $94, $93, $91.50 and finally, $90 are support levels. $94 is the 200-dma and $90 is historic. Resistance should be at $97.50, then $99.50 to $101. Remember, this strategy is just like a covered call except you don't want to get called out here and will need to buy back the short position (if it's ITM) when time value approaches zero or expiration nears, whichever happens first. For those short ITM September strikes against the underlying, this means you! Buy low, sell high, let time decay be your friend. BUY CALL JAN- 95 QVQ-AQ OI= 2868 at $10.63 SELL CALL OCT-100 QVO-JV OI= 3626 at $ 3.63, ND = 7.00 or less SELL CALL OCT-105 QVO-JA OI= 1740 at $ 1.94, ND = 8.69 or less Long Call: While the daily chart remains in descent mode on a technical basis, the 30 and 60-min charts are showing a MACD and stochastic entry into oversold territory. It is unlikely to remain there for long and may thus make a good call entry for a day or swing trade. The increasing number of open interests for each successive strike listed below may be indicative that investors expect the market to move higher by October. However, you may be better served by waiting for the cross over of the short and long term lines in oversold territory on the stochastic. Seek confirmation from a reversal of MACD. If you want to target shoot the "old-fashioned" way (yes, this still works!), support is at $94, $93, $91.50 and $90. Just don't attempt to catch a falling knife. Wait for a bounce first at your favorite level and confirm market direction. BUY CALL OCT- 90 QVQ-JL OI= 228 at $9.00 SL=6.25 BUY CALL OCT- 95 QVQ-JQ OI= 2267 at $5.88 SL=3.75 BUY CALL OCT-100 QVO-JV OI= 3626 at $3.63 SL=2.00 Bullish Put Credit Spread: Kids, don't try this at home. Despite being a bit sexier, it's also a riskier trade if you don't understand it going in. Here's how it works. First, you must be convinced that the slide is halted and that QQQ is going to turn positive (watch for a stochastic and MACD reversal). You then sell an OTM put, say an OCT-90 and collect a premium - in this case $3.13, and simultaneously buy a lower strike, say OCT-85 for $2.00. This puts $1.13 in your pocket. The danger is that QQQ closes under $90, or worse, under $85 at expiration and the stock is put to you at $90. However you have the right to put it to someone else at $85 so your maximum loss is $5 minus your initial credit of $1.13, or $3.87. However, you can completely close the position early if the trade gets away from you and reaches your level of pain prior to maximum loss. You need a margin account to do this. At a close over $90 at expiration, you keep the whole $1.13. It's like a naked put only with an insurance policy that lets you sleep a bit better at night. You will give up some return for the downside protection. The returns increase if you can skillfully leg in dependant on market direction. SELL PUT OCT-90 QVQ-VL at $3.13 BUY PUT OCT-85 YQQ-VG at $2.00 Net Debit = $1.13 or better Average Daily Volume = 18.4 mln ************** OEX ************** OEX - S&P 100 812.90 (-14.51 last week) Oil prices and fear of next weeks economic reports pushed the index lower. However, behind the dark cloud of last week's loss is a silver lining. The unknown becoming known (economic reports, oil production) may cause the oversold short stochastic on the daily chart to cross back out of negative territory. It has only been this deep in negative territory twice this year, once in late February, once in late July. To boot, the daily candlestick may hit the lower Bollinger band at the same time. That would be a strong bullish signal. The gains were large in the month following. We could be setting up for the same thing here. In the meantime, it looks like the downward trend may continue early in the week. After breaking 815 on Friday, 807, 804, then 800 (very solid) are the next levels of support. Resistance looks to be at 815 and 820. Look at oil, economic news, stochastic and MACD as the catalyst for a reversal to the upside. In the meantime, day and swing trades are available based on the stochastic and MACD trends on 30 and 60-min charts. VIX? Only appears to be a mild correlation lately. It's worth noting, but don't trade on it alone. Long Call: We'll keep this brief since most of the meat is contained above. Day or swing trades will work when an oversold stochastic and MACD on a 30 or 60-min chart reverses to the upside. Watch for the crossover on stochastic to signal an entry and confirm it with the MACD crossover. Note that the daily chart is still headed down so don't linger on the shorter-term trades if they go against you. Play the technicals or target shoot to your favorite level of support at 807, 804, then 800. Based on open interest of the selected strikes, investors don't believe it will stay at 800 for long. Pray for abundant and cheap oil! BUY CALL OEX-JT OCT-800 OI= 470 at 32.75 SL=23.00 BUY CALL OEX-JB OCT-810 OI=3188 at 25.88 SL=18.00 BUY CALL OEX-JD OCT-820 OI=3222 at 20.00 SL=14.50 Bullish Calendar Spread: Just like the QQQ above, our job is to collect monthly credits to offset the cost of the underlying long-term call until our net cost is zero. We want to buy the long-term long leg low (say that 10 times real fast!) and sell the short-term short leg high while letting time decay do the work. Economic reports and a predictable oil price may give us our bottom signal along with a reversal in the stochastic and MACD from an oversold position. That may make an excellent entry on the long leg of the trade. If you like trading and your timing skills are pretty good, you can use a 30-min stochastic and MACD chart to trade in and out of the short for small profits, thus accelerating the payback for the underlying. Otherwise, you can sell the short leg on a bounce down from resistance levels of 815, 820 and 825. For those with short September strikes still open, be sure to buy those back if they are ITM by expiration day (Friday). You do not want to exercise out of your long-term position to pay for it. Getting called out is not part of this strategy, unlike a covered call. BUY CALL DEC-840 OEX-LH OI=586 at $25.88 SELL CALL OCT-840 OEX-JH OI= 762 at $10.13, ND=15.75 SELL CALL OCT-850 OEX-JJ OI= 858 at $ 6.75, ND=19.13 Bullish Put Credit Spread: Gunslingers delight (but wear a kevlar vest)! This is a short- term speculative play and only for those willing to assume a lot of, however limited, risk. It's not for those just getting started in the options business. If you are convinced the market has bottomed (maybe midweek?) and the OEX will finish above 800 on Friday, then step right up. The concept here is to sell a put and cover it by buying a lower strike put while taking in a credit. Your expectation should be that both positions expire worthless. You'll have to watch for a technical entry based on a MACD and stochastic crossover. However, be sure to use a stop loss if OEX moves under 800. Support there is pretty strong. Also note that this trade was available at the close on Friday and may not be available due to re-pricing Monday morning. We couldn't resist the price disparity for a five day hold so long as the market doesn't dig a big crater. SELL PUT SEP-800 OEX-UT OI=5240 at $3.25 BUY PUT SEP-795 OEX-US OI=1910 at $2.44 Net Debit = $0.81 or better Average Daily Volume = 1269 ************* COMING EVENTS ************* For the week of September 11, 2000 Monday None Scheduled Tuesday None Scheduled Wednesday Export Prices ex-ag. Aug Forecast: NA Previous: 0.2% Import Prices ex-oil Aug Forecast: NA Previous: 0.3% Current Account Q2 Forecast: -$108.0B Previous:-$102.3B Thursday Retail Sales Aug Forecast: 0.3% Previous: 0.7% Retail Sales ex-auto Aug Forecast: 0.3% Previous: 0.6% PPI Aug Forecast: 0.1% Previous: 0.0% Core PPI Aug Forecast: 0.2% Previous: 0.1% Initial Claims 9-Sep Forecast: NA Previous: 316K Friday CPI Aug Forecast: 0.2% Previous: 0.2% Core CPI Aug Forecast: 0.2% Previous: 0.2% Business Inventories Jul Forecast: 0.7% Previous: 0.9% Industrial Production Aug Forecast: 0.0% Previous: 0.4% Capacity Utilization Aug Forecast: 82.0% Previous: 82.3% Michigan Sentiment Sep Forecast: 106.5 Previous: 107.3 Week of September 18th Sep 19 Housing Starts Sep 19 Building Permits Sep 20 Trade Balance Sep 20 Fed Beige Book Sep 21 Initial Claims Sep 21 Philadelphia Fed Sep 21 Treasury Budget ***********************ADVERTISEMENT************************ Save Up To 80% Off At Everything Wireless! Click On The Link Below For Store Wide Discounts. The largest range of accessories and products you use every day including Cellular and PCS phones, batteries, chargers, hands-free kits, wireless data products and more. http://www.sungrp.com/tracking.asp?campaignid=424 ************************************************************ 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 09-10-2000
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/091000_2.asp

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

Liquidity Drain and Earnings Warnings
By Mary Redmond

We were deluged by newly unrestricted stock this week.  15 new
companies had their shares unlocked for sale for the first time
since they went public.  IPRT, RVDP, HOMG, OPHM, SLTL, ONIS,
OTGS and DTAS have charts which showed large spikes of volume
and wild price swings indicating heavy selling.  30 additional
companies will be unlocked in the next three weeks.  This is
over $50 bln of stock which could potentially be sold by insiders
and drag the markets down further.

The IPO schedule was light this week, probably because investment
bankers wanted to test the waters after Labor Day before selling
new IPOs.  Further weakness in the NASDAQ may delay additional
IPOs.  However, there are over 80 companies waiting in the
wings to be priced in September, and if the investment banking
community is very aggressive, this is going to drain additional
liquidity from the markets, most likely the NASDAQ.

Statistics released from the Investment Company Institute
indicate that American and foreign investors are still making
regular contributions to equity funds.  It is important to note
that the year-to-date cash flows to equity funds totaled over
$200 bln, which is more than the amount deposited during 1999.
During January, February and March of 2000 equity funds showed a
net monthly inflow of over $40 bln.  February was the highest
month on record, with over $54 bln going into equity funds.

For the last four months, the cash flows into equity funds have
been consistently between $17 and $22 bln.  The majority of the
money is being deposited to aggressive growth and growth funds.
Value funds are taking in practically no money, which may indicate
that the main sectors to invest in continue to be growth sectors,
as that is where the money is flowing.

It is interesting to note that over the last 12 months, over
$250 bln went into equity funds and over $350 bln went into money
market funds.  This is more than double the levels from five years
ago.  As the stocks in the major averages increase in market
capitalization, it takes higher levels of cash flow to drive the
prices higher.  When the Dow was 8000, volume of 1 bln shares a day
was sufficient to move the average up by a significant percentage.
With the Dow at 11,200 it may take up to 20 to 30% more volume to
drive the index higher.

In August of 1999, money market funds had $1.481 trln in assets.
Last month, money market funds had $1.747 trln in assets.  It is
also interesting to note that the rate of flow to money market
funds has increased over the last three years.  Also, the
percentage of money deposited to money market funds increased, as
compared to that deposited to equity funds.  Currently, money
market funds are taking in significantly more cash than equity
funds.  At year end 1998, the percentage of money in money market
funds compared to equity funds was 23%.  At year end 1998, it was
25%.  Currently, money market funds have over 40% of the total
assets in the mutual fund universe.  If you look at a chart of the
Dow since 1995, you can see that just around the time when the Fed
started their program of increasing interest rates last year, the
Dow started stalling and the money market funds started taking in
increasing levels of cash.




Considering the fact that retail and institutional investors
are contributing heavily to money market funds, and are only
contributing moderate amounts of cash to equity funds, we may
have a liquidity problem with the IPO lockup expirations.  Last
week, the Investment Company Institute reported that retail money
market funds took in $8.74 bln and institutional money market
funds took in $5.73 bln, to bring the total up to $1.756 trln.  At
the same time, AMG Data reported that equity funds received only
$600 mln in cash, nowhere near the previous levels.

Since most analysts are convinced that the Federal Reserve's
program of interest rate hikes is over, the attention will turn to
the Fed's post-election action.  The 10-year bond yield is
currently under the Fed Funds rate.  The last three times this
happened, in 1989, 1995, and 1998, the Fed reacted by reducing
rates.  There are some analysts who are convinced the Fed will
reduce rates in 2001.

The question for option traders now seems to be is the implied
volatility of the options we want to target low enough yet?  If
a stock has recently made a sharp move down, the options can be
overpriced, as the volatility moves higher whenever the stock is
volatile.  The ideal time to buy an option may be several weeks
after the stock has sold off when it has been flat for a long
enough time for the implied volatility of the option to decrease.

Sycamore sold off this week for no apparent reason other than
overall market weakness.  This can be a fun stock to trade because
of the erratic swings in price.  It has now broken the uptrend of
the last two months which means it could exhibit further weakness.
Once it broke through support at $135, the next support level was
$125.  Once that was broken, it was all downhill.  There is support
at $110, and if that is broken it may be possible to buy the stock
at $100.




Next week is options expiration week, and this may effect
individual stocks more than the indexes.  For example, CMGI has
been unable to penetrate $50 for the last couple of weeks.  This
may be due in part to the large number of Sept 50 calls
outstanding.  The Sept 50 calls are 25 cents and there are 11,918
options outstanding, a call to put ratio of over 5 to 1.  When
these either expire or are exercised next week, this could help
to remove overhead resistance, as the October 50 call open
interest is lower.  Options expiration may give an upward bias to
the market, but unless we see higher cash flows to the market, we
might be in for a rough market this month.

Contact Support


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

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

IDTI - Integrated Device Technology $93.13 (+0.56 last week)

See details in sector list




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

DIGL - Digital Lightwave $73.75 (-15.88 last week)

See details in sector list




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

Index       Last    Week
Dow     11220.65   21.09
Nasdaq   3978.41 -255.92
$OEX      812.90  -16.93
$SPX     1494.50  -26.27
$RUT      535.70   -6.21
$TRAN    2732.78   31.00
$VIX       20.69    1.24

Calls

AFL        60.25    6.81  New, 52-week high on strong volume
CMRC       71.38    5.38  New, investors looking at this B2B bull
COF        65.16    5.03  New, finance stocks enjoying prosperity
CFLO      113.38    3.88  Rallying into the end of the week
AZA        78.00    1.44  Specialty drug stock in sweet spot
IDTI       93.13    0.56  Delightful performance despite $SOX
CHKP      146.25   -3.19  Rolling despite NASDAQ problems
AGIL       70.88   -3.88  Holding up well, consolidating
VRTS      117.25   -4.50  Dropped, Too many support violations
AAPL       58.88   -4.56  Jobs at it again touting the Mac
MERQ      121.38   -5.13  Good day trade candidate lately
ORCL       86.56   -6.06  Dropped, further weakness in store???
VERT       48.50   -6.25  Dropped, solid support yet to be seen
SNDK       81.31   -7.19  Bulls and bears fighting for control
BEAS       63.06   -7.69  B2B sector might have some bounce left
TIBX       98.31   -9.75  Dropped, poor technical position
YHOO      104.13   -9.81  Added Wednesday as news related play
INKT      119.00  -11.75  Dropped, sell-off sealed its fate
ITWO      160.50  -18.75  Painful last week, ready for rebound?
JNPR      197.63  -24.00  Dropped, earnings jitters and weak NAZ
CIEN      199.63  -30.50  Dropped, Telecom spending worries

Puts

SCMR      116.25  -26.56  New, lower revenues and slower growth
DIGL       73.75  -15.88  New, quickly eroding - Telecom worries
CREE      123.25   -7.75  Chip with a lot of overhead resistance
CMTN       50.50   -7.63  New, shorts love it, bulls avoid it
PCS        47.09   -3.41  Bounce last week, entry near resistance?
MMM        89.94   -2.56  Break below 200-dma, bias is down
UK         38.00   -1.56  Earnings warnings, downgrades, new lows
AT         51.75    1.94  Dropped, found bottom - we're finished


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

CIEN $199.81 (-30.31) We feel the pain in CIEN.  The bears argued
a compelling case last week by knocking CIEN down four
consecutive days on increasingly heavier volume.  The rumors of a
slowdown in capital expenditures by the telecom service providers
took a toll on the equipment makers last week.  The Kings of
Networking including NT, CSCO, LU, and our CIEN, all shared
punches from the bears.  Let's not forget that CIEN warned of a
six cent EPS shortfall early last week, which only complicated
matters.  CIEN's four straight days of selling last week might
lead to a bounce early Monday.  If the stock does bounce, you
might look to exit the play on strength as CIEN faces major
resistance just above at $210.

ORCL $86.56 (-6.06) Stumbling out of the gate on Tuesday, ORCL
was looking a bit weak right from the start.  Finding support
near $89, our play recovered enough on Thursday to stay in the
race.  That brief stability wasn't long-lived though as ORCL
was knocked down and trampled by the rampant selling on the
NASDAQ.  Giving up nearly $5 on heavy volume is not a good sign,
as our play plunged through the 10-dma, a level that had acted
as support since the beginning of August.  Friday's close at
the low of the day leads us to believe that further weakness
is in store, with the $84 support level being a logical
recovery point.  While ORCL may recover and head higher, this
is a sprint, not a marathon, and we don't have the patience to
watch and hope.

VERT $48.50 (-6.27) As it turned out, the bounce on Thursday
was just a waypoint on VERT's trip down to more solid support,
which is yet to be seen.  Although $51 support was looking like
the final destination Friday afternoon, that concept went out
the window with the nearly $3 decline in the final 30 minutes.
As if the point decline wasn't bad enough, it came on heavy
volume (over 400K shares) and VERT ended up closing very near
the low of the day.  With several support levels in the
rear-view mirror now (including the 10-dma), our play is resting
just fractionally above the converged 30-dma and 50-dma.  We
were looking for our play to start moving vertically, but down
was not what we had in mind.  It wouldn't be surprising to see
more weakness before the buyers return, and there are too many
great plays out there to keep waiting for VERT to recover.

INKT $119.00 (-11.75) INKT shadowed the NASDAQ's pullback this
week.  It ultimately retraced back under earlier resistance of
$120 signaling this momentum play is over.  By Wednesday, INKT
was perched on 10-dma line and we warned of an impending
collapse.  Friday's performance sealed the fate.  INKT broke
down despite a promising report from its CFO, Jerry M. Kennelly,
at the Robertson Stephens Net conference.  Kennelly said new
products would focus on delivery of "rich media content".
Remember the previous headlines of a content "Bridge Alliance"
with EXDS and AOL ignited a fire under INKT.  The more recent
news, unfortunately, didn't spark another run to challenge $135.
So all in all, we're back where we started and it's time to move
on.

JNPR $197.63 (-24.00) A perfect example of how the Net stocks
can wield a wretched wrath.  Ok that may be a bit much.  But
here's a stock that provided lots of profitable prospects and
then stomps out of the play range with a -$17 point loss in
one session.  On Friday, the NASDAQ's slump below the
psychologically key 4,000-level (for the first time since mid-
August) and earnings' jitters cut the legs off JNPR.
Nevertheless, those traders playing this momentum runner knew
that along with the great profit opportunities came HIGH-RISK.
JNPR's position is currently under former resistance of $200 and
the 10-dma ($206.76).  When it shows signs of rebounding and
once again confronting its recent all-time high of $228, we'll
bring JNPR back aboard.  Until then, it's time to exit this
lucrative mover.  Earnings are expected around October 12th.

VRTS $117.25 (-4.50) Too many violations and they don't give you
anymore "get of jail free" cards.  The 10-dma infractions and
VRTS's inability to recover on Friday was the final straw.  VRTS
was not only unable to hold the near-term support of $121 and
$122, but also couldn't move back through the $120 mark to save
its life.  The evidence is clear - we've cashed in about all we
can on VRTS recent momentum.  Plus there is the economic
pitfalls to contend with next week.  Since VRTS is unlikely to
escape further scarring, we're dropping VRTS this weekend.

TIBX $98.31 (-9.75) Taken Out Behind the Woodshed, The
Sequel!  It was a rough  week for the NASDAQ and TIBX followed
suit.  Tuesday, Tibco closed at $110.13, the closing high for the
week.  It was all downhill  from there!  On Wednesday, TIBX
closed down over $8, flat on Thursday and Friday got slammed.
Friday's  close occurred below the 5-dma, 10-dma, and 50-dma,
(currently $104.80, $100.90 and $105.20), respectively.  The next
levels of support could possibly be found at the 100-dma or the
200-dma (currently $88.40 and $79.80, respectively).  What is
more  troubling than the recent breach of and the closing below
support is the potential triple-top formation.  This formation
began on July 14th with an intraday high of $129, then a lower
high was traced on August 9th  at $119 and finally this week the
third lower high was clocked in at $111.38 on Tuesday.  Add the
poor NASDAQ sentiment, together with the poor technical action in
TIBX and it feels like a good time to step aside.


PUTS

AT $51.75 (+1.94) On Thursday, we reported on Alltel's guidance
call concerning a projection of missed estimates.  The company
boosted its spending to add a greater number of wireless
subscribers than previously anticipated.  The gyrations in
trading reflected the investors' uncertainty about the overall
outlook.  However on Friday, the storm settled and AT rebounded
on long-term sentiment.  Fred Moran, an analyst at Jefferies &
Co, commented that "when management acknowledged that it would
have some negative impact -- but the impact would not be
devastating -- that's when the stock bounced back.  The
uncertainty was scaring investors".  With that said, AT plowed
through the $52 ceiling and advanced $3.00, or 6.2% in heavy
trading.  Analyst John Bright at Johnson Rice & Co also
reiterated a short-term Buy for AT.  The recent series on new
52-week lows was indeed rewarding, but now that AT found a
bottom the play is finished.


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

COF - Capital One Financial $65.16 (+5.03 last week)

As one of the top 10 credit card issuers in the U.S., Capital
One's secret weapon is its vast databases.  The company uses
this data to match a potential Visa or MasterCard customer to
any one of its thousands of cards, varying in annual percentage
rates, credit limits, finance charges and fees.  Ranging from
platinum and gold cards for preferred customers to secured and
unsecured cards for customers with poor credit histories, the
company has a credit card for just about anyone.  The company
also sells wireless phone services, mortgage services, and
consumer lending products.

With interest rate fears rapidly becoming a distant memory,
Financial stocks are enjoying continued prosperity.  As if that
wasn't enough, continued speculation of mergers and
acquisitions is adding still more fuel to the sector.  COF is
enjoying the party too, and rightly so.  With the bulk of the
company's business being credit card related, stable interest
rates just means stable and, more than likely, increasing
profits.  We last played COF in late July and early August,
and as it turned out, we might have been a bit too quick with
the eject button.  After putting in a solid bottom at $55 in
the middle of August, buyers have been propelling the stock
higher, and after closing above $60 for the first time on
Tuesday, every day is seeing new highs.  If you love to see
increasing volume to confirm your trades, then you are going to
love COF's chart over the past week, as the volume continues to
increase.  Although volume weakened a bit on Friday (probably
due to the day of the week), traders still managed to exchange
20% more shares than the daily average.  The 5-dma (currently
$62.56) is supporting the stock's rise, and the 10-dma
(currently $61.13) isn't far behind.  Combine these moving
averages with a volume-backed move above $60, and it looks like
the $60 support level may have some staying power.  Look to
open new positions as the stock pauses to consolidate near the
5-dma, and then jump on board as the volume picks up again.
More conservative players will wait for our play to tick off
another new high, and enter the play as COF moves above $66.

Although PaineWebber downgraded COF from Attractive to Neutral
on Thursday, investors hardly noticed, as they pushed the stock
to another all-time high on Friday.  Of the 26 analysts that
follow COF, 24 rate the stock either a Buy or a Strong Buy,
putting PaineWebber in a very small minority.

BUY CALL OCT-55 COF-JK OI=  31 at $10.75 SL=8.00
BUY CALL OCT-60 COF-JL OI= 296 at $ 7.50 SL=5.25
BUY CALL OCT-65*COF-JM OI=1056 at $ 4.38 SL=2.50
BUY CALL DEC-60 COF-LL OI= 856 at $ 9.88 SL=7.00
BUY CALL DEC-65 COF-LM OI=2699 at $ 7.00 SL=5.00

Picked on Sep 10th at   $65.16     P/E = 33
Change since picked      +0.00     52-week high=$65.88
Analysts Ratings   12-12-2-0-0     52-week low =$32.06
Last earnings 07/00  est= 0.54     actual= 0.54
Next earnings 10-11  est= 0.58     versus= 0.45
Average Daily Volume  =  967 K



CMRC - Commerce One Inc $71.38 (+5.38 last week)

Commerce One has become one of the signature names in the
emerging B2B environment.  They provide e-commerce solutions
that enable buyers and suppliers of goods and services direct
access to trading communities over the Internet.  Founded in
1994 as DistriVision, the company was renamed Commerce One in
1997 and is based in Walnut Creek, CA.

Major players in the B2B arena recently surged in anticipation
of another round of strong quarterly results.  B2B analyst
Patrick Walrayens at Lehman Brothers commented, "If you look
at any of these companies individually, all of them are going to
have a strong September, and people are getting a sense of
that."  Granted CMRC is at depressed levels and is way off its
split-adjusted high of $165.50 reached last year, but it appears
investors are taking another look at CMRC.  There's the
partnership between Commerce One and Germany's Sap, plus the big
industry exchange concept that may revolutionize the B2B market.
The concept is coined "direct B2B" and involves buying and
selling major supplies, like steel for the big auto makers,
instead of the typical office supply paraphernalia.  Whether
it'll catch on and work is another matter.  But for now, there
are signs that sentiment is shifting in Commerce One's favor.
Our objective is to take advantage of the volatility and parlay
some profits.  In the coming weeks, there'll likely be a lot of
developments with upcoming conferences and earnings to report.
The projection is for a sizzling hot run-up.  But since it's
impossible to predict concrete results, it may be a good idea to
set stops for protection.  If you recall from last Spring's
slaughter, this sector is not only fast and furious, but also
merciless.  Simply put, don't be blinded by Greed.  It's
absolutely essential to play the up-trend with your rose-tinted
glasses in your pocket.  Light support is at $70 and $71 with a
firmer platform at $65 for the more aggressive entries.  The
conservative will however wait for a bullish move through
immediate resistance at $75 before opening positions.  The
volume's been just fantastic with levels reaching three and four
times the ADV on the up take, so look for continued activity to
back another breakout.  More positive comments from analysts
would also be welcome.  This week Dain Rauscher Wessels
reiterated its Buy rating and upped the price target on CMRC to
$75 from $56.  Salomon Smith Barney also initiated coverage on
the stock with a Buy recommendation.

Commerce One announced it linked up with another German firm,
Intershop Communications, who specializes in sell-side products
for the e-commerce market.  The agreement expands the scope of
their global strategic alliance to connect suppliers to e-
marketplaces.  Intershop's enfinity software is tailored to sell
products, which enhances the overall marketing and sales ability
of suppliers.  In addition, the deal includes some other
technical integration of the firm's products.  CMRC also
reported that Trade Alliance, its global MarketSite partner in
Singapore, successfully launched its global e-marketplace on
August 17th and successfully completed $500 mln in transactions,
the first day of operations.

BUY CALL OCT-60 RJC-JL OI=1934 at $15.88 SL=11.50
BUY CALL OCT-65 RJC-JM OI=1140 at $12.50 SL= 9.25
BUY CALL OCT-70*RJC-JN OI=8251 at $10.13 SL= 7.00
BUY CALL OCT-75 RUC-JO OI=3188 at $ 8.00 SL= 5.75
BUY CALL JAN-75 RUC-AO OI= 465 at $15.88 SL=11.50

Picked on Sep 10th at    $71.38    P/E = 91
Change since picked       +0.00    52-week high=$102.25
Analysts Ratings    12-15-0-0-0    52-week low =$ 11.44
Last earnings 06/00   est=-0.10    actual=-0.14
Next earnings 10-18   est=-0.12    versus=-0.08
Average Daily Volume = 8.14 mln



AFL - Aflac Inc. $60.25 (+6.81 last week)

American Family Life Assurance Company of Columbus (AFLAC) is a
subsidiary of the parent corporation AFLAC, Inc.  AFLAC's primary
business is supplemental life and health insurance marketed in
both the U.S. and Japan.  They believe they are the world's
leading writer of cancer expense insurance.  In addition to the
supplemental life and health insurance, AFLAC also sells products
such as, accident and disability, long term care, short term
disability and hospital intensive care insurance, to name a few.
In short, AFLAC's insurance is designed to provide supplemental
coverage for people who already have major medical or primary
insurance coverage.  AFLAC is a Fortune 500 company with over
40 million insured worldwide.

Aflaac! Aflaaac! Aflaaaac!  If you don't recognize this company
yet, surely you have seen their recent round of TV ads this year.
You know the ones.  For instance, the one with the guys in the
sauna talking about insurance and in comes the star of the
show, the Duck, starring as the towel rack.  I must admit, the
ads are fantastic!  Earlier this year the CEO was interviewed on
CNBC and he admitted that the ads were a little on the aggressive
side for a conservative business like AFLAC's, but, that they were
effective.  If stock price is any indicator, it is telling us that
the ads are working and business is robust.  Furthermore, a
potentially benign interest rate environment going forward would
be deemed as a huge positive for AFL.  After hitting an intraday
low in March of $33.56, AFL has been in a steady uptrend.  On July
6th, AFL did pullback to touch its 200-dma ($45.40 at that time),
after having run up to an intermediate high of $53.94, June 2nd.
Since that time AFL has continued its ascent, breaking out into
new high territory again on August 1st and running to a higher
high of $58.81, on August 14th, all the while providing investors
with minor pullbacks along the way, to gain entry.  Late this
week, AFL defied gravity and the market by moving into new high
territory again.  Friday's tape action was where it all happened
as it advanced $2.75 on volume of 1.56 mln shares (3.5 times ADV)
to close on the high for the day.  You have a couple of options
for entry at this point.  For aggressive traders, an intraday
pullback to the $58.81 area, the site of the old intraday high
from August 14th, may provide a good entry.  Conservative traders
may want to witness a light-volume move back down to the 5-dma
(currently at $56) or the 10-dma (currently at $54.90), followed
by a volume supported bounce from there to gain entry.  The 50-dma
and 200-dma are currently, $52.80 and $46.80, respectively.  As
always, watch for profit taking and market and sector sentiment
as you look to enter new trades.

Thursday AFLAC Inc. announced that AFLAC Japan has entered into
an agreement to form a strategic marketing alliance with Dai-ichi
Mutual Life Insurance Company.  Friday, Raymond James started
coverage with a Market Perform rating.  Earlier this year they
were added to the S&P 500.

BUY CALL OCT-50 AFL-JJ OI=  0 at $11.13 SL=8.25  Wait for OI!
BUY CALL OCT-55 AFL-JK OI= 10 at $ 7.25 SL=5.50
BUY CALL OCT-60*AFL-JL OI= 39 at $ 4.25 SL=3.25
BUY CALL NOV-55 AFL-KK OI=943 at $ 8.25 SL=6.25
BUY CALL NOV-60 AFL-KL OI= 48 at $ 5.63 SL=3.50

Picked on Sep 10th at  $60.25    P/E = 27
Change since picked      0.00    52-week high=$60.25
Analysts Ratings    6-2-9-0-0    52-week low =$33.56
Last earnings 06/00  est=0.58    actual=0.59
Next earnings 10-24  est=0.61    versus=0.52
Average Daily Volume  =  446K



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The Option Investor Newsletter                   Sunday 09-10-2000
Sunday                                                      3 of 5

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

YHOO - Yahoo! Inc. $104.13 (-9.81 last week)

Laying claim to the top spot among Internet portals, YHOO draws
more than 120 million visitors every month.  With more than
5000 advertisers, the company is one of those rare Web-based
companies that is operating in the black.  Offering a wide range
of services, from e-mail, chat rooms and online shopping to
personal Web pages and Web-based audio and video, YHOO has
earned its position as one of the most recognized brands
associated with the Internet.  Collaborating with Kmart's
BlueLight.com, the company has also entered the free ISP arena.

As we mentioned on Thursday, this stealth play may look unfamiliar
since we added it on Wednesday, at the bottom of the Matt Russ
Market Wrap.  Given the news-related after-hours trading on
Wednesday, we decided that the valuation of YHOO, brought upon
by what we consider unwarranted selling, was an attractive point
to gain entry into this call play.  In case you haven't read the
recent updates on this YHOO play, it is based on comments made by
YHOO CEO Tim Koogle at the Robbie Stephens Internet Conference.
Many analysts mistook his comments for an admission that YHOO would
have earnings problems going forward and YHOO dropped to a low near
$103 in after hours trading.  Then, Koogle appeared on CNBC in an
interview clarifying that Yahoo in no way has changed their
guidance.  Consolidation in the market place will actually help
YHOO since they will be able to dictate terms from a stronger
position and use their strength to offer advertisers more benefits
due to scale that smaller companies cannot.  With YHOO earnings on
October 10th confirmed, we felt that these pre-earnings-run price
levels offered a good entry and limited downside risk.  On July
10th, YHOO made a dip just below $100, and subsequently recovered
to $140.  Prior to that, YHOO hadn't traded at $100 since November
of last year.  Typically, YHOO finds momentum going into the
earnings announcement, and at these levels, a recovery may very
well be in the works.  To gain entry, look for any pullbacks to
$102 accompanied by a bounce.  This level appears to be holding
at intraday support.  On Friday, YHOO dipped to $100.56 where it
received high volume buying ($99.75 was a bad tick).  Overhead
resistance may be found at $113, and then at the 10-dma at $117.63.
A breakdown and close below $100 would be concerning, and we would
probably stay away.  A bounce around that level, however, would be
buyable.

All news that is fit to print can be found above.  On Friday,
SG Cowen analyst Scott Reamer said that advertising growth may be
coming down permanently, likely affecting media players like
YHOO and DCLK.  Yet, on the contrary, Robbie Stephens senior
Internet analyst Lauren Cooks Levitan confirmed that Koogle's
comments on Wednesday were "consistent with comments that [Koogle]
and other management have been making" and "that their outlook for
their potential online advertising remains very robust."

***September contracts expire this week***

BUY CALL OCT-100 YHV-JT OI= 524 at $12.75 SL=10.25
BUY CALL OCT-105 YMM-JA OI= 461 at $10.25 SL= 7.50
BUY CALL OCT-110*YMM-JB OI=1310 at $ 8.25 SL= 6.25
BUY CALL OCT-115 YMM-JC OI= 802 at $ 6.50 SL= 4.75
BUY CALL JAN-120 YMM-AD OI=2351 at $12.13 SL= 9.50

SELL PUT SEP-100 YHV-UT OI=1854 at $ 2.13 SL= 3.50
(See risks of selling puts in play legend)

Picked on Sep 6th at    $107.88    PE = 281
Change since picked       -3.75    52 week high=$250.06
Analysts Ratings    17-16-3-0-0    52 week low =$ 55.00
Last earnings 07/00   est= 0.10    actual= 0.12
Next earnings 10-10   est= 0.12    versus= 0.07
Average Daily Volume = 8.47 mln



IDTI - Integrated Device Technology $93.13 (+0.56 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).

Simply put, we're delighted with the performance of our beloved
IDTI last week.  Despite the 9% drubbing in the $SOX, our IDTI
edged ever-so slightly higher.  IDTI's relative strength bodes
extremely well for the health of our play going forward.  As
we've seen in the past, IDTI spends a few days in consolidation
after making a big run.  IDTI's basing action last week might
position the stock for a big rally next week if the $SOX
stabilizes or even rallies.  The fact that IDTI is trading near
its all-time high of $95.25, which was traced last Thursday, also
presents a bullish case for our play going forward.  To gain new
entry into the play, aggressive traders might consider getting
in early Monday morning if the $SOX shows signs of strength.  A
dip down to support at $90 might also provide a favorable entry
into the play for those willing to take on a little more risk.
For the risk averse OIN readers, wait for IDTI to gain momentum
and look to enter the play on a rally to new highs.  Watch for a
momentum-based move accompanied with healthy volume above the
$95 level.  Pay close attention to the action in the $SOX; a
reversal in the Chip index might unleash the IDTI bulls and carry
the stock substantially higher.  Also of note, for those of you
who've been in the play for awhile consider using a trailing stop
to protect the big profits we have accumulated.

IDTI attended the Salomon Smith Barney Seventh Annual Global
Technology Industry Conference last week.  Although no specific
analyst actions came from the conference, IDTI must have told a
good story, which might explain the stock's strong relative
performance last week.  Over the next two weeks, IDTI will be
attending two more analyst conferences with SG Cowen and Bank of
America Securities.  If the results of the two preceding
conferences are similar to the outcome of the SSB conference last
week, we might see IDTI headed even higher.

***September contracts expire this week***

BUY CALL OCT- 90 ITQ-JR OI= 729 at $12.13 SL=9.00
BUY CALL OCT- 95*ITQ-JS OI=  92 at $ 9.88 SL=7.00
BUY CALL OCT-100 ITQ-JT OI= 329 at $ 7.75 SL=5.75
BUY CALL NOV- 95 ITQ-KS OI=2338 at $12.38 SL=9.25
BUY CALL NOV-100 ITQ-KT OI=  26 at $10.13 SL=7.25

SELL PUT SEP- 90 ITQ-UR OI= 242 at $ 2.31 SL=3.75
(See risks of selling puts in play legend)

Picked on August 15th at $66.88    P/E = 51
Change since picked      +26.25    52-week high=$95.25
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 = 3.22 mln



ITWO - I2 Technologies $160.50 (-18.50 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.

To see ITWO shed nearly $20 last week was painful.  However,
to glance over ITWO's chart and see its month-long string of
higher lows intact is, in a word, impressive.  Despite the
bloodbath in the B-2-B sector in later-half of last week, ITWO's
relative strength has convinced us to hang around a little longer.
For the most part, ITWO's bloodletting last week stemmed from the
weakness in the broader Tech sector, particularly the NASDAQ.
The concerns surrounding the Semi and Telecom sectors spread
throughout the broader market to impact our play in a bearish
way.  With no real clear and present danger in the B-2-B sector,
ITWO might be ready for a quick rebound if the NASDAQ stabilizes
next week.  What's more, there has been no fundamental change to
ITWO, or the B-2-B sector for that matter, over the past week,
which presents a compelling case for a quick ITWO rebound.  Wall
Street attempted to get the ITWO ball rolling last Friday;
Dresdner initiated coverage on the stock with a Buy rating.  If
the B-2-B bulls return early next week aggressive traders might
look for a quick entry into the play on a bounce off support at
the $160 level.  The $160 level is significant in that it marks a
higher low in ITWO's ascending channel.  Buying ITWO's dips has
been a profitable strategy over the past month and might continue
to produce.  However, consider your risk level before entering
into ITWO's recent dip.  Another possible entry might be provided
on a quick pop back above the stock's 10-dma at $166.50.  The
conservative traders among us might consider waiting for ITWO to
regain its momentum and look to enter the play on a strong rally
out of its trading range and above the $170 level.  Make sure to
confirm any ITWO rally attempt with healthy volume as a sign the
B-2-B bulls are back.

The highly anticipated investor and analyst conferences we've
been waiting for will swing into full gear over the next two
weeks.  ITWO will be attending the Ariba 2000 and the eB2B
Marketplace conferences in the coming weeks, which could result
in upgrades and higher price targets.  A little encouragement
from the Wall Street crowd might be enough to get our B-2-B play
bouncing higher.

BUY CALL OCT-155 QYI-JK OI=  4 at $19.75 SL=14.50
BUY CALL OCT-160*QYI-JL OI=104 at $17.50 SL=12.50
BUY CALL OCT-165 QYI-JM OI=146 at $15.13 SL=11.00
BUY CALL NOV-160 QYI-KL OI=218 at $30.13 SL=22.50
BUY CALL NOV-165 QYI-KM OI=299 at $22.00 SL=16.50

Picked on August 27th at $166.50    P/E = 500
Change since picked        +6.00    52-week high=$223.50
Analysts Ratings     11-19-3-0-0    52-week low =$ 15.19
Last earnings 06/00    est= 0.08    actual= 0.10
Next earnings 10-20    est= 0.10    versus= 0.06
Average Daily Volume =  3.57 mln



AZA - ALZA Corporation $78.00 (+1.44 last week)

As a research-based pharmaceutical company, AZA applies its
leading drug delivery technologies to develop products with
enhanced therapeutic value for its own portfolio and many of
the world's leading drug companies.  The company commercializes
products it develops, as well as those it acquires from third
parties.  AZA is currently focusing its sales and marketing
efforts on products for urology and oncology disorders, as well
as products for the treatment of pediatric and central nervous
system disorders.

Sitting in the sweet spot between the big pharmaceutical
companies and the profitless Biotechs, AZA is what is known as
a specialty pharmaceutical company.  Unlike the Biotechs, these
companies are typically profitable and AZA is no exception.  In
contrast to the big drug companies, which can't afford to bring
a new product into production unless the market for the product
exceeds $1 billion, firms like AZA can profitably market a new
drug with a $200-300 million annual demand.  AZA has a strong
pipeline of new products and continues to receive positive
press and analyst coverage.  Benefiting from the strength in
the Biotech sector lately, AZA has a unique feature.  Moving up
when the Biotechs have a good day, our play just consolidates
when the sector has a bad day.  Need proof?  Look at the action
on the first 2 days of last week.  AZA barely moved, closing
both Tuesday and Wednesday at $76 (fractionally below Friday's
close), while the Biotech Index (BTK.X) gave up over 10% in the
same period of time.  Then, as the Biotechs recovered, AZA
started moving again too, checking off new highs both Thursday
and Friday.  Our play closed out the week in fine fashion,
eclipsing the $80 level and posting a new all time closing high
on solid volume.  The 5-dma ($76.81) continues to be supportive,
with the 10-dma ($74.50) not far behind.  Given the strong rise
into new high territory over the past month, it is hard to find
historical support, with the exception of intraday levels found
at $76 and then the $71-72 range.  Target shoot dips to your
favorite support level (moving average or chart support), but
keep in mind that nothing moves in a straight line.  If selling
volume increases dramatically and support levels aren't holding,
stand aside until the dust settles.  More conservative players
will want to buy on strength, so look for continued strong volume
to push AZA back above $80 before playing.

As if AZA needed any more help last week, the stock got a nice
boost a week ago Thursday from the reported positive results
from clinical trials of the company's flagship incontinence
drug, Ditropan XL.  This followed positive analyst comments on
August 29th and 30th.  First, SG Cowen issued a Strong Buy
rating, and then Banc of America Securities added the stock to
its Fresh Money List and issued a Buy rating.

BUY CALL OCT-70 AZA-JN OI=1631 at $10.38 SL=7.50
BUY CALL OCT-75*AZA-JO OI=  63 at $ 6.75 SL=4.75
BUY CALL OCT-80 AZA-JP OI= 217 at $ 4.13 SL=2.50
BUY CALL JAN-75 AZA-AO OI= 191 at $10.88 SL=8.25
BUY CALL JAN-80 AZA-AP OI= 159 at $ 8.13 SL=5.75

Picked on Sep 7th at     $77.25     P/E = 64
Change since picked       +0.75     52-week high=$80.19
Analysts Ratings      8-5-3-0-0     52-week low =$26.00
Last earnings 07/00   est= 0.35     actual= 0.44
Next earnings 10-19   est= 0.44     versus= 0.40
Average Daily Volume = 1.65 mln



MERQ - Mercury Interactive $121.38 (-5.13 last week)

As a provider of integrated performance management solutions
that enable businesses to test and monitor their Internet
applications, MERQ is looking for growing e-commerce demand to
continue to fuel its business.  The company's products perform
such tasks as analyzing and eliminating Web site performance
bottlenecks and automating quality assurance testing.  MERQ's
client base spans a wide range of industries including
Internet companies such as Amazon.com and America Online,
infrastructure companies Ariba and Oracle, as well as Apple
Computer, Cisco Systems and Ford Motor Company.

Looking for a profitable day trade?  MERQ has delivered a nice
$10 range over the past 3 days with consistent support at $120
and resistance at $130.  Although it didn't make for a
profitable position trade last week, more nimble players
managed a healthy profit for their troubles.  After moving
through the $120 resistance level a little over a week ago, it
is encouraging to see this level successfully transition to
support, especially in light of the NASDAQ weakness.  The strong
volume that accompanied MERQ's rise over the prior two weeks has
fallen off significantly, and this was an early sign that the
stock would need to consolidate a bit before making a run at its
all time high of $134.50.  Friday's profit taking dropped our
play down for a bounce at the 10-dma ($120.19), so we need to
see this level hold as support going forward.  Although there is
some mild intraday support near $114, the next level of solid
support is found at $110.  A drop to these levels would provide
a great entry point if the recovery was immediate, but more than
likely it would represent an end to MERQ's recent upward
momentum.  Continue buying the bounces near $120, and tighten
up your stops as the stock approaches $130.  If MERQ can get
through that obstacle, new highs will likely be close at hand.
Don't forget, MERQ could very well be a candidate for a split,
as it typically does so over the $90 level, and there are more
than enough shares authorized.

Adding to its first rate management team, MERQ announced on
Thursday that Doug Smith, former Chase H&Q Internet Group
managing director, would be joining the company as the Executive
VP of corporate development.  The real driver for recent price
action has been the positive sentiment created by IDC's report
on August 25th which stated that MERQ was the 1999 worldwide
leader for automated software quality tools, with a 41% market
share and 55% revenue growth from 1998 to 1999.

***September contracts expire this week***

BUY CALL OCT-120 RBF-JD OI=509 at $14.75 SL=10.75
BUY CALL OCT-125*RBF-JE OI=342 at $12.50 SL= 9.50
BUY CALL OCT-130 RBF-JF OI=384 at $10.00 SL= 7.00
BUY CALL JAN-125 RBF-AE OI=113 at $23.38 SL=17.50
BUY CALL JAN-130 RBF-AF OI= 99 at $21.38 SL=16.00

SELL PUT SEP-120 RBF-UD OI=158 at $ 4.13 SL= 6.00
(See risks of selling puts in play legend)

Picked on Sep 5th at    $129.06     P/E =265
Change since picked       -7.69     52-week high=$134.50
Analysts Ratings      9-3-1-0-0     52-week low =$ 26.25
Last earnings 07/00   est= 0.12     actual= 0.14
Next earnings 10-17   est= 0.16     versus= 0.11
Average Daily Volume = 1.78 mln



AGIL - Agile Software Corp. $70.88 (-3.88 last week)

Agile Software is the leading provider of Collaborative
Manufacturing Commerce solutions that speed the "build" and "buy"
process across a virtual manufacturing network, thereby improving
time to volume, customer responsiveness and cost of goods sold.
Agile's solutions manage product content, and the critical
communication, collaboration and commerce transactions among
Original Equipment Manufacturers (OEMs), Electronic Manufacturing
Service (EMS) providers, suppliers and customers in Internet
time.  Current customers include Agilent Technologies, Dell
Computer, Flextronics International, GE Medical Systems,
Hewlett-Packard, Jabil Circuit, Lucent Technologies, Philips, and
Texas Instruments.

While many Tech stocks this week were treated to a post Labor Day
bellyache, AGIL has been holding up well, spending this shortened
week digesting its breakout of the previous Friday.  With many
stocks breaking below their up-trends started in early August, it
is encouraging to see that AGIL's is still in place.  Since the
high volume roar over the $70 resistance level, volume has
drifted ever-lower.  This is good news for our play considering
the heavier volume accompanying the sell-off in the broader
market.  Despite being down for the week, at this point AGIL's
movements are well within the parameters of a consolidation,
though just barely.  On Friday AGIL continued lower in sympathy
with the NASDAQ, losing $2.19 or almost 3% on 95% of ADV.
Selling off sharply during amateur hour, the stock attempted to
come back.  Encountering resistance at $73, the bears took over
to close the day.  In doing so, AGIL finished below its 5- and
10-dma, currently at $73.17 and $71.43, respectively.  Despite
this, support at $70 is still holding.  At this level, aggressive
traders may find this to be an attractive entry, but make sure it
bounces before entering.  Below $70, there is support at $67 and
then the 50- and 200-dma in the $65 area.  Another aggressive
entry might be found on a strong break above $71.43; the 10-dma.
Conservative traders will want to make sure that AGIL can break
through the $73 area and the 5-dma with conviction before entering.
From there, resistance can be found at $75.  With a shaky market,
it cannot be stressed enough to make sure that volume confirms a
bounce before entering.

Only one piece of news to report last week.  On Monday, AGIL
announced a partnership with Andersen Consulting to promote and
deliver e-commerce solutions to manufacturing firms around the
world.

BUY CALL OCT-65 AUG-JM OI=25 at $12.25 SL= 9.00
BUY CALL OCT-70*AUG-JN OI=61 at $ 9.50 SL= 6.50
BUY CALL OCT-75 AUG-JO OI=48 at $ 6.75 SL= 4.75
BUY CALL JAN-70 AUG-AN OI=30 at $18.50 SL=13.50
BUY CALL JAN-75 AUG-AO OI= 0 at $16.50 SL=11.75  Wait for OI!

Picked on Sep 5th at      $74.06     P/E = N/A
Change since picked        -3.19     52-week high=$112.50
Analysts Ratings       2-7-0-0-0     52-week low =$ 18.31
Last earnings 08/17    est=-0.04     actual=-0.03
Next earnings 11-16    est=-0.02     versus=-0.05
Average Daily Volume   =   519 K



BEAS - BEA Systems, Inc. $63.06 (-7.69 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.

Connecting the highs and lows of BEAS since the beginning of
August, an upward sloping regression channel can easily be
discerned.  Spanning approximately 13 points, the stock hit the
top of that channel last Friday.  Since then, BEAS has moved to
the bottom of the channel in the space of just four days.  Volume
has been decreasing on the way down and this compares well to the
previous week, when the stock was gaining share price on
accelerating volume.  On Friday BEAS followed the NASDAQ lower as
it said goodbye to $3.50 or 5.26% on 66% of ADV.  Some of its
peers such as ARBA and ITWO also drifted lower on light volume.
Others such as CMRC and PPRO were able to buck the trend and move
up on strong volume.  That suggests the B2B sector might have some
strength after all.  Nonetheless, Friday saw BEAS close below its
10-dma (at $64.50) for the first time since mid-August.  This may
not be of great concern since BEAS has managed to overcome that
level on previous failures.  As well, there is strong support at
$62.50, and it is holding.  The 5-dma (now at $66.50) however, has
been acting as resistance for the past couple of days.  At this
point, depending on the whims of the market and the B2B sector,
this could either be the perfect entry point or the end of the
up-trend, so make sure your stops are in place if you enter.  As
further precaution, confirm bounces with strength in the B2B
sector.  For those who want to make sure, wait for BEAS to move
back above its 5-dma before entering the play.

BEAS was busy on Tuesday as the company announced an alliance
with KPMG Consulting to develop enterprise products based on
the company's software.  On Friday, BEAS extended its partnership
with data caching software maker TimesTen to speed up performance
in data-driven Internet-enabled applications.

BUY CALL OCT-60*BUC-JL OI= 430 at $10.13 SL=7.00
BUY CALL OCT-65 BUC-JM OI= 600 at $ 5.50 SL=3.50
BUY CALL OCT-70 BUC-JN OI= 571 at $ 3.63 SL=1.75
BUY CALL DEC-65 BUC-LM OI=5590 at $ 9.38 SL=6.50
BUY CALL DEC-70 BUC-LN OI=1074 at $ 7.25 SL=5.25

Picked on Aug 27th       $59.63    P/E = N/A
Change since picked       +3.44    52-week high=$78.88
Analysts Ratings     11-4-0-0-0    52-week low =$ 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 = 5.88 mln



CFLO - CacheFlow Inc. $113.38 (+3.88 last week)

CacheFlow Inc. designs, manufactures, and markets Internet
caching appliances.  These easy-to-use appliances speed Web page
response times, while saving network bandwidth.  Because of these
key benefits, caching appliances are becoming an integral
component of the network infrastructure - much like routers and
switches.  Explosive growth is forecasted for the caching
appliance market, with revenues projected to exceed $3 billion by
2003.  Company partners include Akamai, Alcatel, CSC, EDS,
Hewlett-Packard, Lucent, Real Networks, Secure Computing Websense
and Westcon.  CacheFlow is a global organization with offices
throughout Asia, Europe, and North America.

Did you get your entry point?  After powering through resistance
at $110 on Thursday, CFLO continued higher into end the week,
even in the face of a weak NASDAQ.  When we started this play on
Thursday, we mentioned a number of possible ways to enter this
play.  Aggressive traders were able to take advantage of an early
morning dip to its 5-dma.  From there the stock bounced, and even
attempted to rally.  Encountering resistance in the $115-116
area, the cash flowed out of the stock and then settled down to a
narrow trading range to close the day up fractionally.  Volume
came in at 89% of ADV.  Even in a shaky market, it's hard not to
be bullish on this play.  This stock finds support where you
expect it and for the past couple of weeks, has been breaking
through resistance points with conviction.  Fans of candlestick
charting will notice that there are more white candles on CFLO's
chart than evening Mass at St. Patrick's Cathedral.  This is not
an invitation to pray but rather, a comment on CFLO's ability to
consistently close above its opening price on any given day.  As
well, with an upward regression channel spanning almost 30
points, if this stock decides to move up, it has plenty of room
to do so. Aggressive traders will continue to find a bounce off
the 5-dma (now at $110.35) to be an attractive entry point.  A
bounce off the 10-dma near support at $105 is another possible
entry point as is a successful test of support at $110.  Overhead
resistance can be found in increments of $5 at $115, $120 and
$125.  A break through the $115-116 area on high volume would be
a safer entry point.

On Thursday CFLO announced that it had formed a partnership with
Top Layer Networks Inc.  In doing so, the two companies will team
up to provide solutions to speed up delivery of Internet content
to their respective clients.

***September contracts expire this week***

BUY CALL OCT-110*FUJ-JB OI=304 at $14.88 SL=11.00
BUY CALL OCT-115 FUJ-JC OI= 12 at $12.63 SL= 9.50
BUY CALL OCT-120 FUJ-JD OI= 33 at $10.25 SL= 7.25
BUY CALL JAN-110 FUJ-AB OI=  0 at $24.00 SL=18.00  Wait for OI!
BUY CALL JAN-115 FUJ-AC OI=200 at $21.50 SL=16.00

SELL PUT SEP-110 FUJ-UB OI= 40 at $ 2.38 SL= 4.00
(See risks of selling puts in play legend)

Picked on Sep 7th at     $113.00     P/E = N/A
Change since picked        +0.38     52-week high=$182.19
Analysts Ratings       3-4-0-0-0     52-week low =$ 27.00
Last earnings 08/16    est=-0.17     actual=-0.14
Next earnings 11-15    est=-0.11     versus=-0.22
Average Daily Volume   =   593 K



SNDK - SanDisk Corporation $81.31 (-7.19 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.

Volatility, thy name is SanDisk.  This shortened week has seen
the bulls and bears take turns riding the stock.  Monday began on
a positive note as the stock broke through resistance at $90 on
strong volume.  SNDK came storming out of the gates, trading up
sharply in the first hour of trading.  Encountering resistance
just below the $95 mark brought in the sellers and for the rest
of the day the bulls and bears battled it out with the decision
a stalemate.  On one hand, SNDK managed to close above the $90
mark.  On the other hand, the stock barely made it, at $90.06.
The next day, it was apparent that the bears had won the contest,
if only for a day.  Selling down strongly during amateur hour,
the stock spent most of the day in a narrow trading range but in
the final hour of trading, continued lower.  On Thursday, it was
the bulls' turn to take command, though the stock appeared to
find resistance at $87.50.  Friday saw the advantage switch again
to the bears' favor as the stock gapped down at the open.  From
there the stock attempted to rally but encountering resistance at
$83.50, sold off to close down $5.19 or 6% on 81% of ADV.  There
is strong support at $80, which if tested successfully, would be
the ideal aggressive entry.  The next support below that would be
at $75.  On Friday SNDK encountered resistance at its 10-dma
near $84.  A break through on strong volume is another possible
entry point.  This past week of trading has formed the beginnings
of a downtrend channel.  Currently the top of that channel has
converged with the 5-dma at $85.75.  Those who are more risk
averse will want to make sure SNDK has enough momentum to clear
this level before entering.

Thursday and Friday were made especially bumpy as Lexar Media
filed a patent infringement lawsuit against SNDK.  In response,
SNDK called the suit unfounded and lacking in merit.  SNDK
President and CEO Eli Harari described the suit as a desperation
move.  While it may seem that SNDK is on the defensive, it should
be noted that a court has previously ruled that Lexar's current
CompactFlash and PC card products infringe on SNDK's patents.

***September contracts expire this week***

BUY CALL OCT-80 SWQ-JP OI= 476 at $10.13 SL= 7.00
BUY CALL OCT-85*SWQ-JQ OI= 571 at $ 7.75 SL= 5.50
BUY CALL OCT-90 SWQ-JR OI= 901 at $ 6.13 SL= 4.00
BUY CALL JAN-85 SWQ-AQ OI= 149 at $15.50 SL=11.25
BUY CALL JAN-90 SWQ-IP OI=2297 at $13.63 SL=10.00

SELL PUT SEP-80 SWQ-UP OI= 318 at $ 2.25 SL=4.00
(See risks of selling puts in play legend)

Picked on Sept 3rd at      $88.50     P/E = 24.03
Change since picked         -7.19     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  =  2.62 mln



AAPL - Apple Computer $58.88 (-4.56 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.

Advance and retreat, advance and retreat.  That describes AAPL's
interesting trading behavior of late.  A quick review concludes
it was news and events that generated recent spikes while, for
the most part, overall sector persuasion took the share price to
the downside.  Last weekend we began coverage on APPL based on
its  strong recovery prospects.  Despite industry wide concerns
over  slowing PC sales, the solid presentations and keynote
addresses by Steve Job pumped up AAPL's momentum.  The share
price is returning to levels not seen since early March.
Furthermore, the research firm, IDC, reported an expected rise
in worldwide PC shipments for the 3Q. They estimate that growing
unit volume should reach 33.4 mln in the 3Q, resulting in an
18.5% increase over the same year-ago period.  The reason behind
this resurgence is pretty simple.  According to Bruce Stephen,
IDC group VP for Worldwide Personal Systems research, "consumer
demand for PCs is especially strong in Asian markets, and US
home PC volume is expected to improve based on back-to-school
sales".  Plus, the upcoming holiday season is typically good for
PC manufacturers.  The timing couldn't be better!  APPL is now
trading at the key resistance level of $60.  In the next few
sessions, near-term support should solidify at $61 and $62
accompanied by high-volume moves through the next line of
opposition at $65.  We're anticipating this Apple will ripen and
revisit old highs.  Be patient for better confirmation.

Next week the Apple Expo opens in Paris.  The renowned city is
gearing up for the launch event of the Mac OS X public beta.
It's being presented as the first truly international event for
the Mac community in Europe.

BUY CALL OCT-50 AAQ-JJ OI=1955 at $11.00 SL=8.25
BUY CALL OCT-55 AAQ-JK OI=3743 at $ 7.63 SL=5.25
BUY CALL OCT-60*QAA-JL OI=5066 at $ 4.88 SL=3.00
BUY CALL OCT-65 QAA-JM OI=3076 at $ 2.94 SL=1.50
BUY CALL JAN-65 QAA-AN OI=1894 at $ 7.25 SL=5.00

Picked on Sep 2nd at     $63.44    P/E = 29
Change since picked       -4.56    52-week high=$75.19
Analysts Ratings     10-7-2-0-0    52-week low =$28.72
Last earnings 06/00   est= 0.44    actual= 0.45
Next earnings 10-13   est= 0.45    versus= 0.26
Average Daily Volume = 4.46 mln
/charts/cahrts.asp?symbol=AAPL


CHKP - Check Point Software Tech Ltd. $146.31 (-$3.19 last week)

Check Point Software Tecnologies, 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.  Furthermore, they are truly a leader
in Internet security with a reported market share of 52% in the
VPN market.  Revenue for the second quarter this year came in at
$90 mln compared to $50 mln for the second quarter last year,
representing an 81% increase in sales.  On April 4th, CHKP hit
an intraday low of $57.97.  Trading 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 climb and
breakout to all-time highs began on August 14th, when CHKP closed
above its 10-dma.  Since that day all closes have settled above
the 10-dma (currently at $145.20).  That is not to say that there
is no volatility in this stock.  Last week's action could be
likened to that of a yo-yo.  For example, Tuesday +$5.06,
Wednesday -$8.48, Thursday +7.17 and Friday -$6.94.  Even in the
face of the steep NASDAQ sell-off last week and specifically
Friday's down move, CHKP managed to close down just -$3.19 for
the week at $146.31.  Not too bad for a volatile issue like this
one.  Traders may want to look for a pullback on light volume to
the 10-dma (currently at $144), along with a bounce, for an ideal
entry point.  It is possible that we could see a pullback to
last week's intraday low of $140.75, so watch for a volume-backed
bounce off the above mentioned levels for confirmation.  You will
be waiting until $123.70, if you want to see a pullback to the
current 50-dma.  In any event, it is imperative that you watch
the NASDAQ for sentiment and market direction before entering new
trades this coming week.  Always keep a watchful eye out for
profit taking.

CHKP is co-sponsoring a six-city Microsoft Exchange Security
Seminar Tour that begins this week on September 12th.

BUY CALL OCT-145 KGE-JI OI= 313 at $16.75 SL=12.50
BUY CALL OCT-150*KGE-JJ OI=1780 at $14.38 SL=10.75
BUY CALL OCT-155 KGE-JK OI=  98 at $12.38 SL= 9.25
BUY CALL OCT-160 KGE-JL OI= 119 at $10.25 SL= 7.25
BUY CALL JAN-160 KGE-AJ OI=1540 at $26.75 SL=20.00

SELL PUT OCT-140 KGE-VH OI= 211 at $10.63 SL=13.25
(see risks of selling puts in play legend)

Picked on Sep 3rd  at   $149.44    P/E = 194
Change since picked       -3.13    52-week high=$158.50
Analysts Ratings     13-4-0-0-0    52-week low =$ 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



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The Option Investor Newsletter                   Sunday 09-10-2000
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
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*************
NEW PUT PLAYS
*************

CMTN - Copper Mountain Networks $50.56 (-7.56 last week)

CMTN helps its clients climb to the peak of connectivity.  The
company is a leader in digital subscriber line (DSL)
communications products for telecom and Internet service
providers, which enable high-speed broadband connectivity over
existing copper phone lines.  The company has partnerships with
3Com and Lucent.  NorthPoint Communications accounts for about
40% of CMTN's sales.

The once mighty CMTN now looks more like a tarnished mole hill.
Once adored by Wall Street as a king of the DSL buildout, CMTN
has become a favorite of the shorts over the past two months.
The story starts way back in early July when CMTN was attacked by
the bears in a vicious way.  The company announced second-quarter
results that edged past estimates, but fell short of the whisper
number.  Apparently the whisper number was more important than
once thought as CMTN has fallen under control of the shorts ever
since missing.  Now, to add to CMTN's bearish momentum, the bears
are pointing to the slowdown in capital expenditures of the
telecom service providers.  Simply put, phone companies are
buying less networking equipment from the likes of CMTN.
Analysts at Morgan Stanley brought the fears to surface early
last week with a research report.  Morgan predicted the Telecom
carriers' spending would peak later this year, and start to slow
down early next year.  Of course the market loves to discount
future events and that's exactly what happened to CMTN last
week.  More fear and compounded worries about a slowdown in
capital spending might continue to pressure CMTN in the coming
week.  Although the bearish sentiment is mounting in CMTN, the
stock has one last level of support we need to be cognizant of.
The $50 level marks CMTN's low during the bear market last
spring.  The shorts almost pushed the stock below that level last
Friday with their 9% attack on two times the ADV.  If the bears
show up with strength early Monday, look to enter the play on a
fall below the key $50 level and make sure to confirm a sell-off
with heavy volume.  If the stock bounces like a dead cat next
week, the more aggressive traders might target shoot for an entry
on a bump against resistance at $52, or higher near $54.

BUY PUT OCT-55 KUA-VK OI=402 at $10.00 SL=7.00
BUY PUT OCT-50*KUA-VJ OI=297 at $ 7.13 SL=5.00

Average Daily Volume = 2.48 mln



DIGL - Digital Lightwave $73.75 (-15.88 last week)

Digital Lightwave serves the growing fiber-optic networking
industry.  It provides products and technology monitor, maintain
and facilitate the management of voice, data and multimedia
communications networks.  The cost-effectiveness of the
company's products are used to effectively verify and qualify
service during network installation and to ensure optimal
performance.  The company is headquartered in Clearwater, FL.

For a stock that was recently trading at impressive split-level
prices, DIGL is quickly eroding.  Back in August, DIGL diverged
from the NASDAQ's bullish path and headed south.  Perhaps the
management changes around that time acted as a catalyst and
sparked some controversy.  But nonetheless, it spurred a
downtrend that has brought DIGL to the brink of destruction.
The stock's current disposition is however directly related to
the discouraging news swirling in the telecom sector.  The
forecast is that capital spending amongst the major telecoms
will drop into the single digits from about 30% this year.  A
pullback of that magnitude would effectively create a ripple
effect through the whole Networking sector; and thus, lower
revenues.  The adverse technical perspective further adds
credence that DIGL will take more hits over the short-term.  On
Thursday, it slipped under the 100-dma ($83.34) and followed up
with detrimental losses in Friday's session.  The $6.44, or 8.7%
decline cracked the 200-dma line ($74.81).  Look for the volume
levels to remain robust and confirm the decline before opening
positions.  Take entries into this momentum play on downward
bounces off Friday's intraday resistance at $75-$76 in a
cooperating market.  If there's an uprising, confirm the
downtrend before entering off the higher levels near the 5-dma
($82.02).  The extremely bearish close on Friday, recent
technical infractions, and overall sentiment within the sector
prompted us to add DIGL to our put list this weekend.

BUY PUT OCT-75 DGU-VO OI=43 at $9.63 SL=6.50
BUY PUT OCT-70*DGU-VN OI=22 at $5.13 SL=3.00
BUY PUT OCT-65 DGU-VM OI=52 at $4.75 SL=2.75

Average Daily Volume = 824 K



SCMR - Sycamore Networks $116.25 (-26.56 last week)

Sycamore Networks was founded in 1998 and is headquartered in
Chelmsford, Massachusetts.  The company combines significant
experience in data networking with expertise in optics to
develop intelligent optical networking solutions for carriers
and service providers.  Sycamore's products are based on a
common software foundation, enabling concentration on the
delivery of services and end-to-end optical networking.
Chairman Gururaj Deshpande and CEO Daniel Smith each have a 20%
stake in the company.

You better live up to expectations while you're in the spotlight
or be prepared for a severe lashing.  Sycamore Networks should
have taken that advice to heart before it reported earnings on
August 25th and disappointed investors.  Despite beating the
consensus estimate by $0.02 and hitting profitability in its
first year as a public company,  investors still had some bones
to pick.  How could that be with revenue at $90.4 mln,
reflecting the sector's incredible growth this year?  It's a
little word called deferred revenues, which slipped $1.3 mln, or
4%.  It's a measurement of future sales in the pipeline and with
all the other numbers rocking, this decline could be the warning
signal of slowing growth ahead.  Investors' radar piqued and
went on full-alert.  Subsequently they cut SCMR down an
astounding $41.75, or 26.4% since report hit the press.  In
other news, Sycamore Networks also announced it completed its
acquisition of privately-held Sirocco Systems, which develops
and markets optical access aggregation, switching and network
management products.  Under the terms of the merger agreement,
SCMR exchanged approximately 28.4 mln shares of common stock for
all the outstanding shares of Sirocco.  Now granted the market
was on the downslide, but this news obviously didn't help SCMR's
fate.  The share price took another severe hit with a $8.75, or
6.7% drop that day.  To add insult to injury, the WSJ reported
the following day that telecommunications-equipment makers could
be threatened by slower increases in spending by big telecom
companies.  The forecast that capital spending will drop into
the single digits from about 30% this year was initiated by MSDW
analyst, Simon Flannery.  Other analysts are skeptical because
these concerns repeatedly resurface this time every year.  An
analyst from CSFB even reiterated a Buy, but it didn't generate
any enthusiasm.  Altogether though, the bearish sentiment
sprinkled stinging salt on SCMR's already bleeding wounds.  The
share price sunk below $120 on more than double the normal
volume in Friday's session.  Thursday's volume was nothing to
sneeze at either.  The downtrend line is convincing.  The first
objective to move towards the lower-lows of recent months at the
100-dma ($111.25) technical, then look out below.  Take
aggressive entries off the upper resistance at $122 and $120 or
enter on high-volume moves off SCMR's current level.

BUY PUT OCT-120 QSM-VD OI=214 at $16.25 SL=11.75
BUY PUT OCT-115*QSM-VC OI=224 at $13.00 SL= 9.75
BUY PUT OCT-110 QSM-VB OI=301 at $10.63 SL= 7.50

Average Daily Volume = 4.64 mln



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

UK - Union Carbide $38.00 (-1.56 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 of antifreeze.

The last thing the Chemicals sector needed was a high-profile
earnings warning.  Late last week, DuPont (DD) told analysts that
the company would fall well short of third-quarter EPS estimates.
Among DD's explanations for the earnings shortfall included,
rising oil prices, a slowing domestic economy, and foreign
currency pressures.  Industry analysts expect to see more
earnings warnings from the major Chemicals makers as the quarter
progresses.  To fuel the aforementioned speculation, several Wall
Street firms cut their ratings across the Chemicals sector last
Friday, following the DD warning.  DLJ and UBS Warburg both
slashed their EPS estimates on DuPont, and, PaineWebber lowered
its earnings estimates for Dow, the UK acquirer.  Had the NASDAQ
not bled so much red last Friday, UK might have felt a lot more
pain from the Dow downgrade.  As it was, the Tech sector took a
beating late last week, which in turn stabilized the UK free
fall through sector rotation.  If the Tech sector stabilizes
early next week, look for traders to leave the Chemicals sector
to the bears, and consider entering new positions at UK's
current levels.  The bearish sentiment surrounding the Chemicals
might not yet be fully discounted into the stock prices, given
last week's flight to value due to the NASDAQ sell-off.  UK's
intraday rallies to resistance levels proved to be profitable
entry points during last week's trading.  If UK advances early
Monday,  an aggressive trader might look to enter the play on a
bump against resistance at $39, or higher near the 10-dma around
the $40 level.  Make sure to watch for light volume during any
rally attempt before entering the play on an advance.  As for the
conservative traders, wait for UK to fall below its $37.38 low
and confirm such a move with continued heavy volume.

BUY PUT OCT-45 UK-VI OI=39 at $7.00 SL=5.00
BUY PUT OCT-40*UK-VH OI=75 at $3.38 SL=1.75

Average Daily Volume = 802 K



MMM - Minnesota Mining and Manufacturing $89.94 (-2.56)

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.

Look out below!!  The recovery in shares of MMM on Wednesday,
being analyst related, ended up being a head fake and a great
entry point for those who took it.  The analyst at CS First
Boston initiatied coverage on the stock with a Buy rating.
While it initially got investors' attention, it turned out they
had the attention span of ferrets (that would be very short),
and by the time they came back from lunch, had transitioned back
to sell mode.  Rolling over right at the $95 resistance level,
MMM gave us a great technical signal with MACD and Stochastics
rolling over on an hourly chart.  Support held at $92 on
Thursday, but the continued string of earnings warnings from the
likes of Dupont made investors nervous enough to slice another
$2 from the stock's price on Friday.  MMM is now sitting just
fractionally below the 200-dma ($90.06), and with the heavy
economic calendar next week, it looks like the bias is down.
Solid support sits at $86.50, followed by $84, with lots of
congestion between here and there.  Use any failed rally next
week as an opportunity to buy puts, but wait for the selling to
start again before jumping into the fray.  If the selling
intensifies next week from current levels, consider new entries
as the stock moves down from the $90 level.

BUY PUT OCT-95 MMM-VS OI=137 at $6.63 SL=4.50
BUY PUT OCT-90*MMM-VR OI=374 at $3.63 SL=2.00

Average Daily Volume = 1.19 mln



CREE - Cree, Inc. $123.25 (-7.75 last week)

Cree is the world leader in the development and manufacture of
silicon carbide (SiC), which is a base material used in the
fabrication of the Company's blue light emitting diodes (LEDs),
wafers and gemstone materials.  The company was formed in 1987 by
a group of researchers from North Carolina State University, who
were pioneers in the development of single crystal silicon
carbide.  Cree's vertical integration throughout the
manufacturing process from crystal growth to device package and
test, allows total control over all aspects of the production
process.  Products currently under development include microwave
transistors, power devices and lasers.

It's been said that a rising tide lifts all ships.  That being
said, it would make sense that if the tides waned, it could be a
rocky ride.  With a turbulent NASDAQ providing a stormy backdrop,
our CREE play has provided a number of ideal entry points.
Thanks to a down market on Friday, are play is now nicely in
profitable territory.  Ever since breaching support at the 5- and
10-dma the previous Friday, CREE has encountered formidable
overhead resistance all week long.  First there was strong
opposition at the $135 level, reinforced by the 10-dma (now at
$132.40) earlier in the week.  If that wasn't enough, there was
even stronger resistance at the $130 level as the 5- and 100-dma
converged to form an impenetrable barrier.  We mentioned the
failure of CREE to break through $130 as an entry point.  We were
given a couple of chances this week to get in at that level.  On
Friday, the stock sold-off during the first hour of trading.  It
attempted to recover but by mid-day, CREE was dragged down by the
rest of the Tech sector to close down $5.88 or 4.55% on 73% of
ADV.  It appears that the 5-dma (now at $125.98) is acting as
resistance as well.  With so much overhead resistance, a failure
to rally above any one of these points could be an aggressive
entry.  The next level of support for CREE is at $120.  A break
through $120 on a strong downdraft would be conviction enough for
conservative traders to enter.  From there the next strong level
of support is all the way down at the $112 area.  Aside from
negative momentum, this week has been punctuated by a lack of
news for CREE.  As a result, technical factors and guidance from
the NASDAQ will play an important role in the movements of the
stock.

BUY PUT OCT-125 RNC-VE OI=118 at $15.38 SL=11.25
BUY PUT OCT-120*CQR-VD OI= 36 at $12.63 SL= 9.25
BUY PUT OCT-115 CQR-VC OI= 47 at $10.00 SL= 7.00

Average Daily Volume = 1.1 mln



PCS - Sprint PCS Corp. $47.13 (-$3.45 last week)

Sprint PCS Group is a subsidiary of its parent company, the
Sprint Corporation.  The formation of the Personal Communication
Group was approved back in 1988, so that the performance of the
domestic wireless operations could be recognized separately.  They
currently operate a digital wireless network in the U.S. and at
the end of 1999 operated PCS systems in over 360 metropolitan
markets, including the 50 largest United States metropolitan
areas.  In short, Sprint PCS is engaged in the wireless mobile
telephone business.

Recently, PCS announced the availability of PCS phones in Target
Stores nationwide and furthermore announced an agreement with
Charles Schwab & Co. Inc., to provide customers with nationwide
Access to Schwa1s PocketBroker mobile investing services via the
Sprint PCS Wireless Web.  Unfortunately, none of this news has
been influential enough to get investors interested.  To say this
chart is choppy may be an understatement.  It appears that a
potential triple top formation was formed and completed between
March 31st and July 17th.  On March 31st an intraday high was
logged at $66.94, then on June 19th, PCS made a failed attempt to
clear the high with a move to $65 intraday.  Finally, on July 17th
PCS tried again to move past the March high but failed, only
reaching $65.88.  If you are a skier you will recognize the look
of this chart from July 17th to today, as it is straight down for
the most part.  Both the 50-dma and the 200-dma, (currently $55.10
and  $54.30, respectively) have been violated to the downside,
with the violation of the 200-dma being most recent occurring on
August 21st.  In addition, the current 5-dma at $48.30 and the
10-dma at $48.70 have been breached to the downside.  A weak case
could be made that prayerful support could be found at the $44
level, the site of an intraday low made on April 14th, but we
think you can see this might be a bit of a stretch.  Last week PCS
traded down 3 out of 4 trading days.  The intraday low for the
week was $45 and occurred Thursday.  Friday was the lone up day,
as it traded up $1.25 on volume of 3.6 mln shares, maybe a small
oversold bounce of sorts.  Adding fuel to this fire has been the
continuing concern in the marketplace that handset sales are
slowing.  A failure from here to rally above its current 5-dma or
10-dma along with volume to confirm might provide an aggressive
entry point.  A conservative option may be to wait for a failed
rally attempt, with weak volume up to the $49-$51 range before
entering a new trade.  A PCS rally above the $51 level with
volume would wave a big red flag.

BUY PUT OCT-55 PCS-VK OI= 35 at $9.75 SL=6.75
BUY PUT OCT-50*PCS-VJ OI=133 at $4.88 SL=3.00
BUY PUT OCT-45 PCS-VI OI= 78 at $2.19 SL=1.25

Average Daily Volume = 3.66 mln



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*****
LEAPS
*****

Alert!  Buying Opportunity Ahead
By Mark Phillips
Contact Support

With the NASDAQ moving sharply lower last week, it doesn't take
a rocket scientist to look at the historical market patterns and
see that there may be more weakness in the near term, with more
attractive buying opportunities making their appearance as the
October earnings season approaches.  The key will be deciding
which stocks (or LEAPS) to buy, and WHEN.

As the NASDAQ rolled over and headed nearly nonstop for the
basement last week, the Financial and Energy related stocks
continued to shine.  The $64,000 question (anybody else remember
that show?) is whether the NASDAQ will be able to hold the 4000
level, or if further selling is in store.  I know, it didn't
quite hold it at the close on Friday, but I'm willing to cut it
a little slack in light of it being a September Friday.

The vote seems to be in on the economy, and the consensus is
that the Fed is on hold at least until next year.  In a stable
interest rate environment, Financial stocks tend to do well,
and the current market behavior is proving this rule.  Adding
to the positive interest rate picture, mergers and speculation
about mergers has injected new life into the sector, with JPM
being the most recent target.  Even our little WM play is
continuing to shine, as it gets ready to take another run at
the $37 resistance level.

Strength in the Energy sector is a doubled-edged sword as it is
coming from the continued supply crunch of petroleum products.
Low stockpiles of Crude Oil have gasoline prices well above $2
per gallon here in Northern California, and Natural Gas and
Heating Oil are trading 100% and 75%, respectively, above where
they started the year.  Heading into the Fall and Winter, this
is not a good sign.  While OPEC is meeting this weekend to
decide on further increases to Crude Oil production, even if
they do come to an agreement to open the spigots further, it is
unlikely to affect the supply/demand equation here until next
year.  And this agreement will have limited effect on Natural
Gas prices, as most reserves and production of this commodity
are based here in North America.

No matter how you slice it though, high prices for energy will
inevitably creep into the bottom line of many companies,
squeezing profit margins, and from there, earnings.  Dupont and
TRW have already jumped the gun on the earnings warning season
(not scheduled to start until this next week), letting Wall
Street know that they will be unable to meet expectations for
the current quarter and citing energy prices as one of their
excuses.  They may be the first, but they definitely won't be
the last.

The VIX finally asserted its influence last week, as it moved
off its lows and ran as high as 22.96 on Wednesday.
Unfortunately, it has once again headed lower, and closed out the
week at only 20.68, still clearly in the danger zone.  For those
that have just recently joined us, the VIX is an indicator of
market volatility, and is a good indicator of caution and
complacency in the broader markets.  The saying  "the VIX is
high, time to buy, and the VIX is low, time to go" refer to the
20 and 30 levels.  The VIX rarely stays above 30 for long
without the markets putting in a near-term bottom, and it rarely
stays below 20 for long without the markets putting in a
near-term high.  Sure enough, both the NASDAQ and S&P 500 rolled
over and headed lower, just as the VIX was moving off its lows
near 19.

So where do we go from here?  Remember that there are two
components to trading profitably.  The first is to find the
leading high-growth stocks, and the second is to pick high
reward/risk entry points.  Our play list is an excellent place
to find the stocks that are likely to excel over the long term,
but going out and buying any of these plays at the open on
Monday is unlikely to be a profitable venture.  That is why we
spend so much time covering the ingredients necessary for a good
entry into each of our plays.  LEAPS give you the flexibility of
time, but that doesn't extent to allowing you to make bad entry
points and ride your plays down in a correction.  The quality of
your entry points will make or break your investment plan, and
some would argue, are even more important than your stock
selection criteria.

We provide detailed descriptions of what we are looking for on
new entries for two reasons.  First it gives you a starting
point for deciding where to enter any given play.  But more
importantly, since we can't update all the plays on a weekly
basis, we hope that the details we cover will help you to learn
how to identify your own entry points.  When you can do that,
I will consider myself having done a good job.

NT has been on our list since November, and with the recent
pullback, it looks like we are getting close to a good buying
opportunity.  The key word here, is CLOSE.  As of Friday's
close, the stock (and many others on our playlist) do not look
like they are quite done heading south.  But when they do, entry
points will abound.  You need to have your entry strategies
ready to go at that point, so that you can profit from the
recovery as we move into the final months of the year.

One final note.  I enjoy all of your emails, and look forward
to continuing to help you move forward on this continuing
journey.  Along those lines, I would like to know how I can make
this section even more valuable.  What would you like to see?
What would you like to see added, changed, or deleted?  Drop me
a line and let me know.

Trade smart, and I'll see you at the Boston seminar.



Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $57.88   509.21%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $27.63   151.14%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $40.50   167.68%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $49.50   125.00%
ERICY  01/30/00  JAN-2002 $16.3 WRY-AO   $ 6.75   $ 6.63   - 1.85%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 5.25   -23.69%
NSM    02/27/00  JAN-2002 $ 70  WUN-AN   $24.25   $10.88   -55.15%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 9.75   -47.67%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $18.50     5.71%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $21.00   125.08%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $ 9.75    81.23%
AMD    04/16/00  JAN-2002 $ 35  WVV-AG   $13.00   $11.13   -14.42%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $55.00    38.78%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $45.75   -17.19%
MOT    05/14/00  JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 7.75   -18.76%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 9.13   -47.10%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $12.88   -27.46%
NXTL   06/11/00  JAN-2002 $ 60  YFG-AL   $19.25   $13.00   -32.47%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $15.38    49.13%
AMGN   07/02/00  JAN-2002 $ 75  WQY-AO   $20.75   $21.75     4.82%
                 JAN-2003 $ 70  VAM-AN   $28.75   $31.63    10.00%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $60.75   - 8.30%
       09/03/00  JAN-2003 $190  OVS-AR   $86.63   $76.13   -12.12%
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $ 4.75   -62.39%
                 JAN-2003 $ 60  VDL-AL   $15.38   $ 7.13   -53.67%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $17.88     4.35%
                 JAN-2003 $ 70  OZG-AN   $23.13   $24.25     4.84%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $37.63    33.19%
                 JAN-2003 $120  VHP-AD   $32.63   $42.50    30.25%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $25.63    23.49%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $30.25    19.19%
MFNX   08/06/00  JAN-2002 $ 40  WOF-AH   $13.75   $10.75   -21.82%
                 JAN-2003 $ 45  VKW-AI   $15.63   $13.13   -16.03%
GM     08/06/00  JAN-2002 $ 65  WGM-AM   $ 9.88   $18.88    91.04%
                 JAN-2003 $ 65  VGN-AM   $13.25   $22.63    70.75%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $32.00     1.98%
                 JAN-2003 $100  VFB-AT   $37.38   $37.13   - 0.68%
BRCD   08/27/00  JAN-2002 $220  YNU-AD   $65.38   $68.00     4.01%
                 JAN-2003 $220  OMW-AD   $86.50   $87.25     0.87%
INKT   08/27/00  JAN-2002 $130  XOR-AF   $50.13   $45.63   - 8.99%
                 JAN-2003 $140  VFR-AH   $60.88   $56.00   - 8.02%
VERT   09/03/00  JAN-2002 $ 60  YER-AL   $22.13   $18.00   -18.64%
                 JAN-2003 $ 60  OER-AL   $28.88   $23.75   -17.75%


Spotlight Play

NT - Nortel Networks $72.25

Remember when Lucent (LU) was the leading optical networking
company?  It's amazing how quickly the landscape can change in
today's fast-paced technology market.  While LU has failed to
execute over the past year, it's stock price has languished,
recently falling to its lowest point in nearly 2 years.  NT has
taken advantage of the opportunity, increasing its market share
and continuing to stay at the forefront of the technology curve
through internal innovations and intelligent acquisitions.
After leapfrogging all of its competitors with the release of
its OC-192 product line (capable of carrying data traffic at
10Gbps) last year, NT's stock has been on a steady rise as the
company continues to strengthen its industry-leading position.
The company's latest acquisition, Alteon Web Systems (ATON)
will strengthen NT's position in the rapidly growing data
storage market  The deal, announced in late July and set to
close sometime in the fourth quarter, is a significant blow to
LU (they previously had a joint sales agreement with ATON), and
pits NT head-to-head with long-time rival Cisco (CSCO) in the
access and data storage market.  We've been carefully watching
NT for a pullback to give us another entry into this winning
play, and last week's drop looks like a great setup.  Solid
support sits at $71, fractionally below Friday's low, and this
is backed up by even stronger support between $68-69, the low
point seen in early August.  Wait for the stock to stabilize
at support before opening new positions, and then get your
piece of the pie as the buying volume returns.

BUY LEAP JAN-2002 $75.00 YNZ-AO at $20.25
BUY LEAP JAN-2003 $75.00 ODT-AO at $27.50


New Plays

CMRC - Commerce One $71.38

The spring decline hammered B2B stocks along with the rest of
the e-commerce stocks and CMRC felt the pain too.  Since
mid-April though, the stock has undergone a gradual recovery
with the broader sector, posting higher lows, and finding
resistance at $70.  In case you missed it, we've got another
ascending wedge pattern that has developed, and CMRC looks like
it is about to break out to the upside.  Friday's close at
$71.50, above the 200-dma ($68.50), is the stock's highest
close since late March, and the incredible volume (nearly triple
the ADV) for the past week and a half is a good measure of
enthusiasm returning to this long-time OIN favorite.  CMRC is a
global leader in e-commerce solutions for businesses.  Through
its portals, products and services, CMRC creates access to
worldwide markets, allowing anyone to buy anything, anytime and
anywhere.  The Commerce One Global Trading Web is the world's
largest B2B trading community, providing unprecedented economies
of scale for buying organizations, suppliers, and service
providers around the globe.  Investors seem to have digested
CMRC's recent announcement that it will be acquiring AppNet
(APNT), a move that will enable the company to accelerate the
pace of implementation of its B2B exchanges.  In addition to its
strong market position, CMRC continues to impress Wall Street,
growing revenues at well over 1000% year-over-year.  Going
forward, we would like to see the stock hold above the $70
level, but market weakness in the near term could mean one more
test of support before heading higher.  Mild support exists near
$65, with the $57-58 area looking much stronger.  The August
consolidation near $50 looks almost impenetrable as it sits
nestled below the 30-dma ($52.69), the 50-dma ($51.81), and the
100-dma ($50.06).  If CMRC continues to run higher from current
levels, feel free to buy into the re-emerging strength.
Otherwise, target shoot entries at support, according to your
level of risk tolerance.

BUY LEAP JAN-2002 $80.00 YCU-AP at $30.13
BUY LEAP JAN-2003 $80.00 OCU-AP at $38.75

PHCM - Phone.com, Inc. $97.50

Are there any other tech-heads like me out there that can't wait
for the days when we can reliably browse the Internet from our
favorite portable device?  With one foot firmly planted on each
side of the fence, PHCM is clearly in a position to shape the
rapidly evolving mobile Internet landscape.  The company's UP
Browser, a micro browser embedded in wireless handsets, is being
supplied to all the major cell phone manufacturers, and is the
first half of the technology that makes possible the miracle of
Internet access from a mobile phone.  The other piece of
technology also belongs to PHCM - UP Link Server Suite is
software that installs on wireless carrier's networks, enabling
customers to access the Internet through wireless service
provider.  PHCM has the dominant position in this arena as
well, supplying its UP Link Server Suite to the likes of AT&T,
Sprint, Nextel, and Verizon.  Growing by leaps and bounds,
PHCM's market share now encompasses 45% of wireless subscribers
worldwide.  So now that you know WHY we love the company, I'm
sure you want to know HOW to play it.  The stock has been caught
in a familiar pattern over the past several months, an ascending
wedge.  When these patterns break, the move is usually
explosive, but keep in mind that it can go either way.  PHCM is
currently testing the upper boundary of its recent price action,
with resistance nestled between $100-102.  Ignoring the brief
dip in early July, the ascending trendline puts support near
$85, conveniently nestled between the 30-dma ($87.19) and the
50-dma ($84).  Our play is looking a little top heavy right now,
and with the heavy economic calendar next week, the odds favor
a return to support before taking a serious run at resistance.
Wait for the selling to abate near the above-mentioned moving
averages, and then take a position as buying volume comes in to
confirm the ascending trendline as support.  The market can
always throw a surprise our way, and the increasing volume that
accompanied the strong move upwards over the past 2 weeks could
portend a breakout sooner rather than later.  If buying volume
remains strong, buying the breakout over $102 is also a valid
entry strategy.

BUY LEAP JAN-2002 $90.00 YPH-AR at $45.75
BUY LEAP JAN-2003 $90.00 OFO-AR at $52.50

Drops

None


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


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

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

The Option Investor Newsletter                   Sunday 09-10-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/091000_5.asp

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

Stock Buying Basics:  Some thoughts on market mentality...
By Mark Wnetrzak

Over the years, various types of investing strategies have been
demonstrated to work better than others.  In many of the older
publications, much is made of the virtues of the "buy-and-hold"
approach.  While that may be an excellent technique for managed
funds, with individual stocks it works better in hindsight than
in the real world, where a company's fortunes constantly undergo
major changes.  In financial markets, nothing is forever except
the passage of time.  Companies, industries and entire economies
gain or lose prominence in the blink of an eye.  The darlings of
the past are quickly replaced by today's favorites and rarely do
they recover to become the great issues of the future.  Stocks
that investors once considered to be market leaders often find
their historic distinction diminished in today's dynamic economy.
Of course, that doesn't mean that investing in individual stocks
can't provide extremely high rewards if you do it well, but it
is far less likely when approached on a "buy-and-hold-forever"
basis.

While a short-term outlook is important in the current volatile
market, a perspective on historical trends is also necessary.
Major shifts in the primary trend occur slowly and we sometimes
fail to notice the transition, ignoring the signs of change in
the underlying cycle.  The key is to maintain a balanced attitude
with a near-term focus on the technical indications of specific
issues or industries and a basic awareness of the prevailing
economic or financial health of the market.  Valuation factors
such as earnings, revenue growth, cash flow, and asset ratios
generally determine stock prices over the long-term.  However, in
many cases, the critical decisions affecting your portfolio are
influenced by more immediate trends, those that are driven by
current emotions and expectations in the investing community.  To
be successful, you must be able to separate perceived worth from
actual value, since market momentum and investor enthusiasm are
are the factors that determine stock prices in the short-term.

Most experts believe that fundamental analysis is a requirement
for successful investing.  You should know whether a specific
company is growing in (asset) value and of course the odds favor
an investor who focuses on profitable companies.  Unfortunately,
identifying a good company does not mean you will automatically
profit from ownership of the underlying issue.  Appreciation in
fundamental value and stock price movement are rarely consistent.
Indeed, many investors have difficulty making the distinction
between a stock and the company it represents.  The stock price,
at any given time, is not an accurate measure of value but rather
a barometer measuring the hopes, fears and other emotions people
have about that stock and its parent corporation.  Ironically,
most people buy a stock because they believe in the company's
product or service and their expectation of future revenues is
often based on how well its fundamental outlook is promoted.  The
inherent goodness or financial health of the company frequently
blinds investors when it comes to accurately assessing the price
of the underlying stock.  Even though it may be a great company,
the key concern for the short-term trader should be valuation not
quality.  In fact, a good test to use in deciding whether to hold
or sell a particular stock is to ask yourself whether the issue
is enough of a bargain to purchase it at its current price.  If
the price isn't favorable, you should consider selling the issue,
regardless of how attractive the company's fundamentals might be.
Successful investors learn to separate the inherent value of the
company from the current price of the stock.

In addition to all the complexities and risks involved in buying
and selling individual stocks, investors face another formidable
barrier on a daily basis.  That obstacle is the "herd" mentality.
Whether it is related to the overall market or a single issue, we
seldom can summon the courage to "go long" near the market bottom,
when all the people around us are panicking.  At the same time,
it is very difficult to sell at a premium, near the peak of the
rally, when everybody is talking about their recent successes.
Disciplined investors learn not to follow or participate in mass
hysteria.  This also means not buying on the announcement of good
or exciting news.  Upcoming earnings, a new contract or product,
and particularly an upgrade by a major analyst will quickly drive
stock prices higher.  When the impact of the event is ultimately
dissipated, the stock price retreats substantially, occasionally
to levels below the previous trading range.  At that point, if
the announcement really did make the company more valuable, the
issue can almost always be purchased at a better price.  Chasing
the movement of a stock or the momentum of an entire industry is
similar to "buying the news."  In this case, the stimulus is not
a fundamental change in the value of underlying issue, but rather
the allure of the rising market itself.  Inexperienced investors
who pursue this approach are basically convincing themselves that,
"something good must be happening or the stock (or industry group)
would not be performing so well, and I should be on-board for the
ride!"  It is important for novice investors to learn to identify
these tendencies to ensure that their logically reasoned trading
decisions can be executed at favorable prices, without regard to
emotion and the excitement that comes from the herd mentality.

The stock market and its fundamental outlook are always changing
and for long-term investors, it's important that your portfolio
not become a collection of former champions.  We tend to become
comfortable with past winners, willing to forgive their current
shortcomings in the hopes that these companies will relive their
past glories.  Analysts only complicate matters, since they have
loyalties to companies for which their parent brokerages act as
investment bankers.  These firms always have a bullish bias and
a rosy outlook for a company they have underwritten, until its
finances are clearly in trouble.  Numerous issues are rated "buy"
right up to the point where disaster occurs and even after the
problems become public, analysts will inevitably refer to the
company's long history of success while downplaying the event.
Unfortunately, nostalgia will not revive a company fading into
financial "has been" status.  To be successful, you must accept
the fact you will have some losers, and that leads to one of the
most important decisions you will make in investing; determining
whether you truly are prepared to sell as easily as you buy.  If
this proves difficult for you to accomplish, stock ownership will
be financially unrewarding.  Selling is the most troublesome part
of investing because it denotes finality; a willingness to accept
the current score as final.  Buying is easy; it occurs with hopes
of great potential and is always accompanied by fervent optimism.
Selling for a loss is even more difficult because it requires you
to embrace the reality that all the time and energy spent in the
selection of the issue has produced a negative return.  The fact
that people have problems with this task is the main reason that
managed funds are so popular.  One can simply pay a professional
to agonize over the situation, and make the inevitable decision
to sell.  Hopefully, you will decide to control your own destiny.

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  10.13   SEP   7.50  1.56  *$  1.25  17.4%
GSTRF   8.44   9.88   SEP   7.50  1.63  *$  0.69  11.0%
BOUT   37.63  36.88   SEP  35.00  5.00  *$  2.37  10.5%
PCTL    5.78   8.00   SEP   5.00  1.19  *$  0.41   9.7%
ASKJ   25.13  25.00   SEP  22.50  4.00  *$  1.37   9.4%
OSIP   45.56  48.63   SEP  40.00  7.75  *$  2.19   8.4%
LPTH   41.13  44.13   SEP  35.00  8.50  *$  2.37   7.9%
DRMD    5.72   7.09   SEP   5.00  1.13  *$  0.41   7.8%
PLNR   19.88  19.75   SEP  17.50  3.25  *$  0.87   7.6%
SGNT   12.00  11.19   SEP  10.00  2.63  *$  0.63   7.3%
SPLN   18.56  17.19   SEP  17.50  2.19   $  0.82   7.3%
PCTL    6.03   8.00   SEP   5.00  1.38  *$  0.35   6.5%
NOVN   35.00  44.69   SEP  35.00  2.88  *$  2.88   6.5%
VITR   48.94  46.63   SEP  40.00  9.88  *$  0.94   6.1%
DRXR   18.31  19.06   SEP  17.50  1.50  *$  0.69   5.9%
ECLP   12.00  14.13   SEP  10.00  2.75  *$  0.75   5.9%
ROBV   13.63  11.31   SEP  10.00  4.13  *$  0.50   5.7%
XLNK   18.00  15.00   SEP  12.50  6.25  *$  0.75   5.5% (DLK)
ORG    14.38  15.84   SEP  12.50  2.75  *$  0.87   5.4%
FHS    16.06  18.19   SEP  15.00  1.94  *$  0.88   5.4%
CLPA   30.25  29.75   SEP  25.00  6.13  *$  0.88   5.3%
CCUR   14.63  16.94   SEP  12.50  2.69  *$  0.56   5.1%
SFAM   18.63  13.81   SEP  15.00  4.38   $ -0.44   0.0%

NETS    6.25   6.50   OCT   5.00  1.75  *$  0.50   7.2%
WDC     5.75   5.81   OCT   5.00  1.19  *$  0.44   6.2%
RHAT   26.69  24.13   OCT  22.50  6.00  *$  1.81   5.7%
MSTR   31.38  33.75   OCT  25.00  8.25  *$  1.87   5.2%
WGAT   22.88  20.81   OCT  17.50  6.63  *$  1.25   5.0%
TIVO   26.88  21.00   OCT  22.50  6.13   $  0.25   0.8%

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

Comments:

On Thursday, SpeedFam-IPEC (SFAM) reported that a delay in the
delivery of a number of tools during the quarter will negatively
impact operating results.  Interesting how it started selling off
on Tuesday - did somebody know something?  Was Friday's "dead cat"
bounce a second chance exit for a small loss?  We believe it was
and will show the position closed.  Sportsline.com (SPLN) is testing
a trend-line that connects all the lows from June - monitor the
position closely.  Keep an eye on Red Hat (RHAT) as it appears to
be weakening.  Tivo Inc (TIVO) experienced no follow-through from
last week's rally.  Is it time to exit or wait for a test of the
August lows (near $19)?

Positions Closed:

Rostelecom (ROS) - Proof a "break-even" exit is a good thing!



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

EPTO   14.00  OCT  12.50  QTP JV  2.50  934  11.50   42     6.3%
GLGC   24.75  OCT  20.00  CYV JD  6.38  141  18.37   42     6.4%
IMGN   21.81  OCT  17.50  GMU JW  5.50  428  16.31   42     5.3%
LBRT   30.00  OCT  22.50  IEY JX  9.13  505  20.87   42     5.7%
NEOF    5.81  OCT   5.00  NUB JA  1.94  142   3.87   42    21.1%
VNTR   17.00  OCT  15.00  UWV JC  3.75  198  13.25   42     9.6%
WAVX   24.06  OCT  20.00  AXU JD  5.63  203  18.43   42     6.2%

Sequenced by Return
*****

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

NEOF    5.81  OCT   5.00  NUB JA  1.94  142   3.87   42    21.1%
VNTR   17.00  OCT  15.00  UWV JC  3.75  198  13.25   42     9.6%
GLGC   24.75  OCT  20.00  CYV JD  6.38  141  18.37   42     6.4%
EPTO   14.00  OCT  12.50  QTP JV  2.50  934  11.50   42     6.3%
WAVX   24.06  OCT  20.00  AXU JD  5.63  203  18.43   42     6.2%
LBRT   30.00  OCT  22.50  IEY JX  9.13  505  20.87   42     5.7%
IMGN   21.81  OCT  17.50  GMU JW  5.50  428  16.31   42     5.3%


Company Descriptions

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

*****
EPTO - Epitope  $14.00  *** Back in Rally Mode! ***

Epitope develops, manufactures and markets oral specimen
collection devices and diagnostic products using its proprietary
oral fluid technologies.  Their primary focus is on the detection
of antibodies to the Human Immunodeficiency Virus (HIV), the
cause of Acquired Immune Deficiency Syndrome (AIDS).  Epitope's
lead product, the patented OraSure collection device, is used in
conjunction with screening and confirmatory tests approved by
the FDA.  The growing acceptance of Epitope's oral fluid testing
for HIV was reflected in last quarter's earnings and showed a
strong increase across existing markets.  Epitope plans to merge
with STC Tech which should leverage their expertise in oral fluid
technology.  The agreement with LabOne to jointly develop and
commercialize a laboratory-based oral fluid screening test for
Hepatitis C antibodies should further enhance Epitope's future.
The stock has resumed its stage II climb on heavy volume after
consolidating from a June-July rally.

OCT 12.50 QTP JV LB=2.50 OI=934 CB=11.50 DE=42 MR=6.3%


*****
GLGC - Gene Logic  $24.75  *** Stage I Base ***

Gene Logic provides a variety of products and services in the
areas of gene expression information, data management and
bioinformatic software, and pharmacogenomics.  These products and
services are all designed to improve the efficiency of the drug
discovery and development process.  Their information products
combine software tools with large-scale gene expression data,
which specifies the degree to which genes are active in a broad
range of normal, diseased, and treated conditions.  This
combination enables scientists to produce new biological
knowledge by integrating this information with a growing
amount of biological information available on the Internet.
Gene Logic corrected in July prior to reporting weaker than
expected earnings.  Though 2nd quarter revenue increased 26% to
$6.5 million, the increase was smaller than expected due to the
timing of closing deals.  Over the last several weeks, the
technical picture has improved as the stock continues forming
a stage I base.

OCT 20.00 CYV JD LB=6.38 OI=141 CB=18.37 DE=42 MR=6.4%


*****
IMGN - ImmunoGen  $21.81  *** Own This One! ***

ImmunoGen develops pharmaceutical agents, primarily for the
treatment of cancer.  Their product candidates are called
tumor-activated prodrugs (TAPs) and are based on its proprietary
technology platform.  TAPs are designed to deliver powerful
chemotherapy directly to a tumor.  Its 97% owned subsidiary,
Apoptosis Technology(ATI), develops additional technologies based
on the regulation of the biochemical signals.  ATI focuses its
research efforts on the identification of compounds for the
treatment of cancer and viral infections.  ImmunoGen's Tumor
Activated Prodrug for the treatment of colorectal, pancreatic
and certain non-small-cell lung cancers licensed to  SmithKline
Beecham, is currently progressing through Phase I/II clinical
trials.  Successful preclincal progress on ImmunoGen's small-cell
lung cancer product candidate, huN901-DM1, has the company
anticipating that their development partner, British Biotech, will
file an IND in 2000.  The stock received a boost this week when
an SG Cowen analyst initiated coverage with a "strong buy" rating.
A conservative entry point for those investors who believe IMGN's
technologies for creating cell-killing monoclonal antibodies
offer a prosperous future.

OCT 17.50 GMU JW LB=5.50 OI=428 CB=16.31 DE=42 MR=5.3%


*****
LBRT - Liberate Technologies  $30.00  *** TV Software Wars ***

Liberate Technologies is a leading provider of a complete software
platform for delivering Internet-enhanced content and applications
to information appliances, such as television set-top boxes and
game consoles.  LBRT's Internet-based client and server software
allows network operators, such as telecommunications companies,
cable and satellite television operators and Internet service
providers to provide consumers access to network operator-branded
applications and services.  Lots of news out on Liberate: new
partnerships; new coverage by Credit Suisse First Boston and ING
Barings as interactive TV companies gain favor; and speculation
that several software competitors, including Liberate, may be
quietly stealing Microsoft's thunder in the new TV software market.
On Saturday, Europe's largest cable TV operator UPC said it would
use digital TV software from LBRT, after software from Microsoft
was delayed.  Liberate has been forming a stage I base since April
and the recent rally has moved the stock above former resistance,
which now becomes support.

OCT 22.50 IEY JX LB=9.13 OI=505 CB=20.87 DE=42 MR=5.7%


*****
NEOF - Neoforma.com  $5.81  *** Cheap Speculation! ***

Neoforma.com is a provider of business-to-business e-commerce
services for medical products, supplies and equipment.  Their
services provide an online marketplace where manufacturers and
distributors can sell medical products.  With their Shop service
purchasers can easily locate and buy new medical products, and
suppliers have access to new customers and markets.  Their
Auction service provides a place for selling and buying used
and refurbished equipment and surplus medical products.  Their
Plan service provides interactive content to healthcare planners
and designers, including online interactive displays of rooms and
suites in medical facilities.  Now that is what I call a rally!
Was it a prelude to Neoforma and Novation announcing the addition
of 39 new healthcare facilities signed to purchase supplies from
Marketplace@Novation, the online purchasing solution powered by
Neoforma?  Looks possible as this figure exceeds Neoforma's goal
to have 56 hospitals signed onto Marketplace@Novation before the
end of the year.  We like the technical break-out on heavy volume
but prefer to remain cautious with a more favorable cost basis.

OCT 5.00 NUB JA LB=1.94 OI=142 CB=3.87 DE=42 MR=21.1%


*****
VNTR - Ventro  $17.00  *** Low Risk Entry! ***

Ventro Corporation engages in the business-to-business e-commerce
economy by building and operating companies that transform the
supply chain in businesses around the world.  Ventro operating
companies allow suppliers, buyers and enterprises to streamline
business processes, enhance productivity and reduce costs.  Their
companies offer complete E-2-E commerce solutions consisting of
extensive online marketplaces, electronic procurement, systems
integration to interface with third-party/back-office systems,
and comprehensive services and support.  The recovery in Ventro
began in early August when they agreed with American Express to
form a join venture to be called MarketMile, which will build and
operate Internet-based marketplaces offering business products
and services.  Ventro will own 35% of MarketMile and with the new
outlook, the issue appears to be returning to its past stature as
a leader in the industry.  There has also been talk of mergers in
the B2B sector with speculation that Ventro would be acquired by
VerticalNet.  We simply favor the bullish technical outlook for
the issue.

OCT 15.00 UWV JC LB=3.75 OI=198 CB=13.25 DE=42 MR=9.6%


*****
WAVX - Wave Systems  $24.06  *** On The Move! ***

Wave Systems offers powerful, next-generation solutions for
electronic commerce, making the process easier and more secure
for consumers as well as business-to-business applications.  They
are involved in the research, development, and market testing of
the Wave System, which performs the buying transactions in a
range of consumer electronic devices, including computers,
personal digital assistants, and interactive televisions.  They
operate the ishosphere.com and WaveDirect shopping websites,
which offer a wide selection of merchandise to consumers.  Last
week, WAVX announced it has completed the acquisition of Indigo
Networks, and its e-commerce network, iShopHere.com.  Indigo has
a proven e-commerce shopping platform and an impressive base of
more than 450 retailer relationships and the combination allows
access to leading merchants with Wave's unprecedented technology.
In addition, Wave Systems and Wavexpress are in the process of
deploying a wide variety of secure next-generation hardware and
software products to help companies distribute music, videos,
games, text, and entertainment programs with better protection
of payment processes and user information.  Based on the bullish
activity in the issue, investors favor the future outlook of the
company.

OCT 20.00 AXU JD LB=5.63 OI=203 CB=18.43 DE=42 MR=6.2%




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

Guaranteed Investments: Is a structured product right for you?
By Ray Cummins

One of our subscribers requested an explanation of this unique
investment vehicle.  Most people understand that investing in the
stock market is one way to increase personal wealth over the long
run.  Unfortunately, the downside risk of stock ownership keeps
many people from investing in this manner, even where long-term
growth, such as planning for retirement is the objective.  While
there are few investments that offer the potential for favorable
returns without the possibility of loss, a number of new products
such as "protected growth" trusts have been developed to attract
risk averse customers.  These financial instruments allow you to
profit from the growth of the stock market while insuring that
your principal investment is preserved in the event of a severe,
prolonged downtrend in the economy.

There are three main categories of these guaranteed investments:
Index Annuities offered by major insurance companies; Index CDs
offered by institutions (such as Banker's Trust); and Protected
Growth trusts offered by the larger brokerages.  Merrill Lynch
is the pioneer in this category and they offer a number of unique
products that combine participation in the appreciation potential
of stocks and other opportunities, with protection of principal.
Protected Growth assets are financial instruments with features
of both stocks and bonds.  The benefits of these complex issues
also include diversification, reduced minimum investment and
liquidity.  The most common products provide for a market-based
return linked to a range of potential growth opportunities such
as major indexes, individual stocks or other popular financial
indicators.  In most cases, the issues are tied to index funds
that are (initially) offered at $10 a share and usually mature in
seven years or less.  If you retain the issue to maturity, you
profit from the growth of the index.  In the event of substantial
price declines, these instruments guarantee repayment of their
principal amount at maturity.

The purpose of Protected Growth investing is simple, to allow the
pursuit of growth with less risk.  The low initial cost of these
assets provide investors an affordable means of participating in
the long-term performance of a number of financial instruments
and industry groups.  The diversification possibilities available
through these investments is often greater, and at a lower price
than that which could be achieved by purchasing individual issues.
The majority of these instruments are listed on the major stock
exchanges.  This feature allows you to trade the assets publicly,
as well as monitor their progress through daily price quotations
on the Internet or in the financial pages of major newspapers.

There are many advantages to investing with structured products
such as Protected Growth trusts, but they are complicated assets
requiring careful examination and specific strategies to maximize
potential profits.  One of the most critical factors associated
with many of the newer instruments is the "annual adjustment
factor."  Typically, a structured product allows an investor to
capture the percent increase of an index over the offering price,
any time up to the maturity date of the issue.  If there is no
increase, the principal investment is returned.  However, in the
case of recent products, an annual adjustment factor is used to
reduce the index value before the final cash settlement amount is
determined.  The adjustment factor will vary but even when the
amount is only 2% or 3%, the reduction in overall return can be
substantial.

When aversion to risk stands in the way of achieving long-term
personal goals, alternate solutions must be explored to remedy
the situation.  If your financial outlook dictates the need for
capital growth, but you are concerned about the volatility or
potential downside associated with stocks, you might consider
including structured products as part of your portfolio.  This
type of investing allows you to participate in numerous growth
opportunities that may otherwise be too extreme for your risk
tolerance.  Regardless of your personal financial outlook, a
sound investing strategy includes diversification and low-risk
capital appreciation, and these relatively unknown issues can be
an excellent and profitable way to achieve that objective.

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

WGAT   22.88  20.81   SEP  20.00  0.63  *$  0.63  23.1%
CYTO    9.03   8.25   SEP   7.50  0.31  *$  0.31  18.8%
GSTRF   7.63   9.88   SEP   5.00  0.31  *$  0.31  14.6%
MSTR   31.38  33.75   SEP  25.00  0.38  *$  0.38  14.5%
CTIC   39.25  44.81   SEP  30.00  1.38  *$  1.38  13.0%
ADVP   27.38  28.88   SEP  25.00  0.44  *$  0.44  12.4%
IMAX   28.06  25.38   SEP  22.50  0.94  *$  0.94  12.4%
FNSR   29.00  43.19   SEP  22.50  0.94  *$  0.94  12.1%
ICIX   20.88  29.25   SEP  15.00  0.38  *$  0.38  12.1%
JDEC   21.88  24.06   SEP  17.50  0.69  *$  0.69  11.8%
LPTH   41.13  44.13   SEP  30.00  1.00  *$  1.00  11.8%
MSTR   26.88  33.75   SEP  20.00  0.44  *$  0.44  11.0%
FNSR   37.50  43.19   SEP  30.00  0.81  *$  0.81  10.6%
RHAT   23.44  24.13   SEP  17.50  0.50  *$  0.50  10.5%
GZTC   38.00  34.44   SEP  30.00  0.81  *$  0.81  10.5%
SIPX   37.50  49.13   SEP  30.00  0.75  *$  0.75   9.9%
PL     28.19  30.69   SEP  25.00  0.50  *$  0.50   8.4%
SIMG   32.06  31.94   SEP  25.00  0.38  *$  0.38   8.1%
CLTR   26.56  30.13   SEP  22.50  0.38  *$  0.38   7.9%
TLXN   19.88  17.63   SEP  15.00  0.44  *$  0.44   7.2%
CRUS   27.44  34.13   SEP  22.50  0.50  *$  0.50   6.6%
CS     34.75  35.06   SEP  27.50  0.44  *$  0.44   6.5%
REGN   33.13  32.38   SEP  25.00  0.38  *$  0.38   5.9%
NDC    30.06  28.94   SEP  22.50  0.38  *$  0.38   5.2%
DCLK   41.81  33.69   SEP  35.00  0.69   $ -0.62   0.0%
TIVO   26.88  21.00   SEP  22.50  0.56   $ -0.94   0.0%

ALLP   16.50  15.25   OCT  12.50  0.50  *$  0.50   8.5%
STAT   20.00  20.38   OCT  15.00  0.44  *$  0.44   6.4%
VITR   48.94  46.63   OCT  30.00  1.00  *$  1.00   6.0%

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

Comments:

Worldgate Communications (WGAT) is testing support near our sold
strike.  With one week until expiration, monitor the position
closely.  Imax Corp's (IMAX) gap down on Thursday is worrisome
and appears to signal a change in character.  Of course, Bear
Stearns' downgrade to "neutral" didn't help.  Our cost basis is
relatively safe but the position should be monitored closely.
Genzyme Transgenics (GZTC) is testing its 50 dma and appears to be
forming a short-term top.  Hopefully Silicon Image (SIMG) - what
goes up must come down -  will not violate support.  Doubleclick
(DCLK) and Tivo Inc (TIVO) appear to be "early exit" candidates,
simply for preservation of capital.  Rolling forward/down to a
lower strike is another option (no pun intended), depending on
your long-term outlook.



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

VNTR   17.00  SEP  15.00  UWV UC  0.38  420  14.62    7    31.9%

CMNT   21.00  OCT  17.50  QDO VW  0.56  184  16.94   42     7.4%
DRXR   19.06  OCT  15.00  RXQ VC  0.38  61   14.62   42     6.6%
GOTO   22.75  OCT  17.50  GUO VW  0.50  16   17.00   42     7.2%
PLNR   19.75  OCT  15.00  PNQ VC  0.69  0    14.31   42    10.8%
SCUR   26.25  OCT  17.50  UQU VW  0.50  130  17.00   42     6.3%
WAVX   24.06  OCT  17.50  AXU VW  0.63  120  16.88   42     8.3%

Sequenced by Return
******

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

VNTR   17.00  SEP  15.00  UWV UC  0.38  420  14.62    7    31.9%

PLNR   19.75  OCT  15.00  PNQ VC  0.69  0    14.31   42    10.8%
WAVX   24.06  OCT  17.50  AXU VW  0.63  120  16.88   42     8.3%
CMNT   21.00  OCT  17.50  QDO VW  0.56  184  16.94   42     7.4%
GOTO   22.75  OCT  17.50  GUO VW  0.50  16   17.00   42     7.2%
DRXR   19.06  OCT  15.00  RXQ VC  0.38  61   14.62   42     6.6%
SCUR   26.25  OCT  17.50  UQU VW  0.50  130  17.00   42     6.3%


Company Descriptions

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

*****
SEPTEMBER EXPIRATION
*****
VNTR - Ventro  $17.00  *** Speculative Entry Point! ***

Ventro Corporation engages in the business-to-business e-commerce
economy by building and operating companies that transform the
supply chain in businesses around the world.  Ventro operating
companies allow suppliers, buyers and enterprises to streamline
business processes, enhance productivity and reduce costs.  Their
companies offer complete E-2-E commerce solutions consisting of
extensive online marketplaces, electronic procurement, systems
integration to interface with third-party/back-office systems,
and comprehensive services and support.  The recovery in Ventro
began in early August when they agreed with American Express to
form a join venture to be called MarketMile, which will build and
operate Internet-based marketplaces offering business products
and services.  Ventro will own 35% of MarketMile and with the new
outlook, the issue appears to be returning to its past stature as
a leader in the industry.  There has also been talk of mergers in
the B2B sector with speculation that Ventro would be acquired by
VerticalNet.  We simply favor the bullish technical outlook for
the issue.

SEP 15.00 UWV UC LB=0.38 OI=420 CB=14.62 DE=7 MR=31.9%


*****
OCTOBER EXPIRATION
*****
CMNT - Computer Network  $21.00  *** Entry Point! ***

Computer Network Technology is principally a provider of hardware
and software products for storage area networks (SANS).  CMNT
sells SAN products and its established channel networking
products, as well as developing and selling enterprise
application integration(EAI) software to automate the integration
of computer software applications.  It also markets its
traditional server gateways and tools, which allow interaction
between multiple desktop computers and mainframe terminals.
CMNT also offers professional consulting and support services.
Last quarter, CMNT continued its record-breaking pace of revenue
and profit improvements in networking solutions, based on success
in Storage Area Networking products and professional services.
In August, the company reported that quarterly revenues were up
26% over the second quarter of 1999, and 10% sequentially over
the first quarter of 2000.  Revenue from Networking Solutions
increased 45%, driven by strong gains in UltraNet profits.  Sales
of SAN-related products for both open systems and mainframes
increased 61% when compared to the second quarter of 1999, and
47% for the first half of 2000.  In addition, their relationship
with Compaq ramped up significantly, producing $1.6 million of
Fibre Channel over WAN product revenue in the first quarter.

OCT 17.50 QDO VW LB=0.56 OI=184 CB=16.94 DE=42 MR=7.4%


*****
DRXR - Drexler Tech  $19.06  *** Technicals Only! ***

Drexler Technology manufactures LaserCard optical memory cards
used for immigration, ID/access, healthcare, automotive and other
digital read/write wallet-card applications.  The LaserCard
product line currently consists of optical memory cards, optical
card read/write drives, optical card data systems, chip ready
hybrid smart cards and related system software and peripherals.
Drexler reported favorable earnings in July, showing net income
rising 70%, revenues rising 38%, and cash equivalents of $8.9
million with no debt.  Drexler appears to be on the move again
as the stock has rallied to a new multi-year high.  Though the
volume is healthy, Drexler is a thinly traded issue and there
is relatively little news to explain the upside activity over
the last few weeks.  In any case, the tape suggests someone is
interested in accumulating this stock and we like getting paid
for trying to own it at a great price.

OCT 15.00 RXQ VC LB=0.38 OI=61 CB=14.62 DE=42 MR=6.6%


*****
GOTO - Goto.com  $22.75  *** Hot Sector! ***

GoTo.com operates an online marketplace between the customers of
its Web site partners and Internet businesses.  GoTo provides
e-commerce services to Web site partners, such as Web site
search, comparison shopping, and auction search.  GoTo also
offers directory search and auction services for business
portals.  GoTo has relationships with approximately 29,000
active, paying advertisers, and has an estimated 24 million
unique users through its affiliate partners, which include
EarthLink/MindSpring, Microsoft, Netscape and Go2Net.  Last week,
Internet media and services provider America Online said it had
reached a $50 million multi-year agreement to place Internet
search service GoTo.com listings on the search result pages of
some of its brands, including AOL.com.  GoTo will now offer AOL's
subscribers its new online listing service, and if there are more
people looking at it and doing searches, they are more likely to
click on a GoTo.com listing, which translates into more revenue.
Investors and analysts are excited about the new deal and the
enthusiasm has boosted the issue out of a recent, Stage I base
on heavy volume.

OCT 17.50 GUO VW LB=0.50 OI=16 CB=17.00 DE=42 MR=7.2%


*****
PLNR - Planar Systems  $19.75  *** No News is Good News? ***

Planar Systems is a provider of high performance electronic
information displays, display sub-systems and complete display
systems.  They market a variety of display technologies including
active matrix liquid crystal displays, electroluminescent flat
panel displays, and several others, which are marketed in Planar's
core medical, transportation and industrial markets.  The recent
addition of Michael Franzi, Planar Systems' newly appointed VP of
North American Sales & Marketing, was apparently the cause of a 5
point rally in mid-August but there has been relatively little
news to sustain the move since that announcement.  The rally came
on heavy volume and the tape tells all.  Someone is interested in
this stock and the technical outlook is bullish, with support near
the March and July highs (our cost basis).

OCT 15.00 PNQ VC LB=0.69 OI=0 CB=14.31 DE=42 MR=10.8%


*****
SCUR - Secure Computing  $26.25  *** Own This One! ***

Secure Computing develops and sells computer software products
and services designed to provide secure extranets for companies
involved in electronic business.  Their secure extranet solutions
combine perimeter defense for business networks with scalable,
authenticated Web and application access control so that an
organization can safely conduct business with growing numbers of
customers, employees, partners and suppliers.  Their primary
security offerings are Sidewinder, SafeWorld and SmartFilter.
This issue has enjoyed favorable gains since reporting bullish
earnings and a positive outlook in mid-July.  Revenues were up
60% in the second quarter, compared to last year's results and 17%
higher than prior quarter revenues of $7.5 million.  The company
said that strong sequential products and services revenue growth,
and recent endorsements of their next-generation products suggest
future is bright.  Secure has been an industry leader in advanced
information security products and technologies for years and it
appears that investors expect the trend to continue.

OCT 17.50 UQU VW LB=0.50 OI=130 CB=17.00 DE=42 MR=6.3%


*****
WAVX - Wave Systems  $24.06   *** On The Move! ***

Wave Systems offers powerful, next-generation solutions for
electronic commerce, making the process easier and more secure
for consumers as well as business-to-business applications.  They
are involved in the research, development, and market testing of
the Wave System, which performs the buying transactions in a
range of consumer electronic devices, including computers,
personal digital assistants, and interactive televisions.  They
operate the ishosphere.com and WaveDirect shopping websites,
which offer a wide selection of merchandise to consumers.  Last
week, WAVX announced it has completed the acquisition of Indigo
Networks, and its e-commerce network, iShopHere.com.  Indigo has
a proven e-commerce shopping platform and an impressive base of
more than 450 retailer relationships and the combination allows
access to leading merchants with Wave's unprecedented technology.
In addition, Wave Systems and Wavexpress are in the process of
deploying a wide variety of secure next-generation hardware and
software products to help companies distribute music, videos,
games, text, and entertainment programs with better protection
of payment processes and user information.  Based on the bullish
activity in the issue, investors favor the future outlook of the
company.

OCT 17.50 AXU VW LB=0.63 OI=120 CB=16.88 DE=42 MR=8.3%




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

The rally comes to an end...

Technology stocks slumped today as worries about third quarter
earnings sent semiconductor stocks sharply lower.


******************************************************************
- MARKET RECAP -
******************************************************************
Friday, September 8

Technology stocks slumped today as worries about third quarter
earnings sent semiconductor stocks sharply lower.  The Nasdaq
ended down 119 points at 3,978.  The broader market also slid
lower as investors punished companies with inferior earnings
forecasts.  The Dow closed down 39 points at 11,220 and the
S&P 500 Index fell 8 points to 1,494.  Trading activity on the
Nasdaq was average at 1.5 billion shares exchanged.  Technology
declines beat advances 2,504 to 1,514.  Trading volume on the
NYSE reached 962 million shares, with declines beating advances
1,518 to 1,309.  In the bond market, the 30-year Treasury rose
9/32, pushing its yield down to 5.69%.


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

Crossroads    CRDS   OCT12C/OCT15C   $1.25   debit   bull-call
Crossroads    CRDS      OCT12-NP     $1.75   credit  naked-put
Qualcomm      QCOM   OCT50P/OCT55P   $1.00   credit  bull-put
Covad Comm.   COVD   OCT15C/OCT17C   $1.62   debit   bull-call

Crossroads fell almost $1.00 at the open and the issue never
recovered.  The initial credit in the combination position was
higher than expected.  Both Covad Communications and Qualcomm
traded higher in the morning session but eventually succumbed
to selling pressure in the technology group.  The target entry
prices were achieved late in the day.


Portfolio Plays:

The market moved lower today after a series of earning warnings
triggered profit-taking in both blue chip and technology stocks.
Several companies issued forecasts for lower revenues, creating
concerns about how much the slowdown in the economy will impact
earnings in the second half of the year.  In addition, analysts
noted that the economic environment is beginning to experience
pressures from higher rates and a loss of momentum in consumer
spending.  On the Nasdaq, chip stocks were the biggest losers as
analysts debated whether the business cycle for semiconductor
companies has peaked in the near-term.  Traders commented that
weakness in the top 15 stocks on the technology index weighed
heavily on the market as these issues account for almost half of
the Nasdaq's value.  On the Dow, industrial stocks moved lower
as investors sold blue-chip companies amid concerns about the
price of oil and how it will affect the economy and individual
companies.  DuPont (DD) fell to $40 after warning Thursday that
it would not meet estimates this year due to higher fuel costs.
Hewlett-Packard (HWP), General Motors (GM) and Honeywell (HON)
also pulled the average lower.

Our portfolio was also plagued by widespread selling pressure
in the market.  Earlier in the day, there were a number of
favorable moves but by the end of the session, the majority
of issues were negative.  In the technology group, Protein
Design Labs (PDLI) and Infocus (INFS) were the only issues
with major gains.  Commerce One (CMRC), Sapient (SAPE), and
Vitria (VITR) deserve mention simply for ending the day in
positive territory.  Some of the "old economy" stocks managed
small gains but they were few and far between.  One of the
small surprises was Anheuser Busch (BUD), which came back to
profitability on the heels of our "Murphy's Law" exit earlier
in the week.  As we said when the position was closed, "our
early departure from a (losing) position almost guarantees it
will recover for the benefit of the newsletter's subscribers."
Maytag (MYG) also ventured higher, closing near $38 as traders
sought refuge in stocks that might be less affected by the
broad market profit-taking.  In the small-cap group, Ventro
(VNTR) was the only bullish issue, edging back above $17 as
speculative investors used the recent consolidation to open
new positions prior to the next upward leg.  The company has
been the source of recent merger rumors in the B-2-B sector
and Verticalnet (VERT) was named as a possible suitor.

With one week until expiration, the majority of positions in
the portfolio are profitable.  At the same time, there are a
number of plays that have not performed as well as expected.
Some of the speculation plays on recovering issues have yet
to prove favorable and more specifically, Loral Space (LOR)
and Engage (ENGA) are dipping back towards recent lows.  In
the Reader's Request group, Lucent (LU) and Polaroid (PRD)
are testing long-term, technical bottoms and there is little
indication that they will recover anytime soon.  Novell (NOVL)
is at a key moment and Mail.com (MAIL) broke below a recent
support area on Friday and volume is increasing as the issue
moves lower.  An early exit on the bullish diagonal position
will provide a small profit and that's our plan at the open
on Monday.  Ryder group (R) is also weakening technically and
if you agree there is additional further downside potential,
consider the current profit of $0.50.  Virata (VRTA) is the
only other issue of concern, having fallen substantially with
the chip sector over the last few sessions.  Our cost basis is
slightly below $40 but with the recent downward momentum, that
level will be threatened soon.  We will monitor the position
for a potential adjustment in the coming week.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
SHOO - Steven Madden  *** Cheap Speculation! ***

Steven Madden designs, sources and sells fashion footwear under
the Steve Madden and David Aaron brands for women and girls of
ages six to 45 years.  The company's popular branded products
are designed to appeal to style-conscious consumers in the girls,
juniors' and women's market segments.  The company distributes
its products through its retail stores, and outlet stores, and
its e-commerce Website along with more than 3,000 department and
specialty store locations in the United States and Canada.  The
company's product line includes core products, which are sold
year-round, complemented by a broad range of updated styles that
are designed to establish or capitalize on market trends.  The
company's business is comprised of a wholesale division, a retail
subsidiary and a private label subsidiary.  The company also has
entered into licensing agreements for non-footwear accessory
products.

Steven madden is the second issue we have uncovered this week
with a complex background plagued by a slew of class-action suits.
Specifically, most of the complaints suggest that the defendants
failed to disclose an illegal scheme between the founder of the
company, and another individual who acted together in order to
gain control of a primary interest in the company's common stock
through a manipulation of the their Initial Public Offering.
In the case, while these claims may indeed be true, it appears
that investors are happy to buy the issue at what some traders
suggest are "bargain" prices.  If you agree with the recent
technical indications, there may be some accuracy in the bullish
outlook.

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


PLAY (conservative - bullish/calendar spread):

BUY  CALL  MAR-15.00  SEU-CC  OI=95  A=$1.75
SELL CALL  OCT-15.00  SEU-JC  OI=75  B=$0.56
INITIAL NET DEBIT TARGET=$1.00  TARGET ROI=50%


******************************************************************
ENZ - Enzo Biochem  $61.13  *** Biotech Sector! ***

Enzo Biochem is engaged in the development and manufacture of
innovative health care products based on molecular biology and
genetic engineering techniques, and in providing diagnostic
serves to the medical community.  The company has approximately
200 patents worldwide, many of which cover proprietary labeling
and detection products for gene sequencing and genetic analysis
and are sold to the life science market throughout the world.
The company's therapeutic division currently is conducting two
human clinical trials, one for HIV infected patients, and one
for patients infected with hepatitis B virus.  Other potential
future therapeutic applications of the company's proprietary
technologies are directed towards cholesterol management and
the treatment of inflammatory bowel disease, including Crohn's
disease and ulcerative colitis.  The company also holds a patent
covering a method and materials for correcting point mutations
or small insertions or deletions of genetic material, which
would allow for editing and correcting certain abnormalities in
genes.

The Biotech sector is expected to perform well for the next few
months and we have decided to look for unique companies that will
benefit from the growth of the industry.  Over the years, Enzo has
been awarded hundreds of patents worldwide and the company has a
similar number of patent applications pending.  This vast patent
estate is a major asset, allowing the company to play a major role
in the rapidly unfolding world of modern day genomics and chemical
diagnostics.  Of course, this is just one of the company's many
strengths and the recent approvals of additional patents is simply
validation for the broad array of products they are bringing to
market.

From a technical viewpoint, the issue has excellent support near
our cost basis and the over-priced option premiums will allow us
to speculate conservatively on the future movement of the stock.


PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-40  ENZ-VH  OI=140  A=$0.93
SELL PUT  OCT-45  ENZ-VI  OI=135  B=$1.50
INITIAL NET CREDIT TARGET=$0.68-$0.75  ROI(max)=17%


******************************************************************
                   - STRADDLES AND STRANGLES -

With only one week until expiration and a big surge in volatility
on Friday, we decided to offer some "premium selling" positions.
These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on these
issues.  Review each play individually and make your own decision
about the future outcome of the position.

******************************************************************
ORCL - Oracle  $86.56  *** Earnings Next Week! ***

Oracle is a supplier of software for information management.  The
company develops, manufactures, markets and distributes computer
software that helps major corporations manage and expand their
businesses.  The company's software products can be categorized
into two 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 automates the
performance of specific business data processing functions for
customer relationship management, supply chain management,
financial management, procurement, project management and human
resources management.

Based on analysis of the historical option pricing and technical
background, this position meets our fundamental criteria for a
favorable credit-strangle.  The issue has overpriced options, a
relatively well-defined trading range, and with earnings coming
out next week, speculators are sure to keep the premiums high in
the OTM options.  The probability of profit from this position is
higher (near 85%) than other plays in the same strategy based on
theoretical option pricing.  As with any recommendation, the play
should be evaluated for portfolio suitability and reviewed with
regard to your strategic approach and trading style.


PLAY (conservative - neutral/credit strangle):

SELL CALL  SEP-95  ORY-IS  OI=20371  B=$0.62
SELL PUT   SEP-75  ORY-UP  OI=7940   B=$0.43
INITIAL NET CREDIT TARGET=$1.00  ROI=5% (20% monthly)
UPSIDE B/E=$96.00 DOWNSIDE B/E=$74.00

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-$100)
will limit the potential for loss on the upside and reduce the
overall collateral requirement for the position.


******************************************************************
JNPR - Juniper Networks  $197.63  *** Own This One! ***

Juniper Networks is a provider of unique Internet infrastructure
solutions that enable Internet service providers and other
telecommunications service companies, to meet the critical
demands resulting from the rapid growth of the Internet.  The
company delivers next generation Internet backbone routers that
are specifically designed, or purpose-built, for service
provider networks.  The company's flagship product is the M40
Internet backbone router, and it recently introduced the M20,
an Internet backbone router purpose-built for emerging service
providers.  The company's Internet backbone routers combine the
features of the JUNOS Internet Software, a new high performance
ASIC-based packet forwarding technology and Internet-optimized
architecture into a purpose-built solution for service providers.

This play is simply based on the current price or trading range
of the underlying stock and its recent technical history.  We
favor the issue for a bullish position and have decided to sell
premium for credit and use the earned income to offset any losses
on the downside, in the event we are required to accept assignment
of the stock.  If the price of the issue moves through the current
resistance area near $220, we will buy the stock to cover our sold
options.


PLAY (aggressive - neutral/credit strangle):

SELL CALL  SEP-220  JUD-ID  OI=1831  B=$1.68
SELL PUT   SEP-170  JUD-UN  OI=1591  B=$1.25
INITIAL NET CREDIT TARGET=$3.00-$3.12  ROI=8% (32% monthly)
UPSIDE B/E=$223 DOWNSIDE B/E=$167

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-$230)
will limit the potential for loss on the upside and reduce the
overall collateral requirement for the position.




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