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Daily Newsletter, Sunday, 09/17/2000

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The Option Investor Newsletter Sunday 09-17-2000 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/091700_1.asp Entire newsletter best viewed in COURIER 10 font for alignment ****************************************************************** MARKET STATS FOR LAST WEEK AND PRIOR WEEKS ****************************************************************** WE 9-15 WE 9-8 WE 9-1 WE 8-25 DOW 10927.00 -293.65 11220.65 - 18.13 11238.78 + 46.15 +146.15 Nasdaq 3835.23 -143.18 3978.41 -255.92 4234.33 +191.65 +112.34 S&P-100 789.77 - 23.13 812.90 - 16.93 829.83 + 6.28 + 9.91 S&P-500 1465.81 - 28.69 1494.50 - 26.27 1520.77 + 14.31 + 14.74 W5000 13813.70 -236.50 14050.20 -279.70 14329.90 +238.70 +183.80 RUT 530.88 - 4.82 535.70 - 6.21 541.91 + 16.80 + 9.60 TRAN 2671.46 - 61.32 2732.78 + 19.86 2712.92 - 77.25 - 46.97 VIX 21.93 + 1.24 20.69 + 1.24 19.45 + .35 - .32 Put/Call .65 .52 .53 .50 ****************************************************************** Our soft landing is becoming painful. By Jim Brown Just another fun Friday? Not in my book. This September is starting to look more like an October instead. Institutional investors have a long memory, unlike retail investors, and this long memory leads to earlier decisions based on previous pain. We tend to play more loose with our own money but those whose are held accountable for investing the savings of others tend to be more careful as markets become unstable. Especially in times of historical instability, like September and October, they are far more focused on potential problems instead of potential profits. The converging market stories are now coming together like the different plot lines in a Steve Clancy novel. Oil prices at $36, power shortages driving prices up, the Euro going down faster than the Titanic, the Thai Bot at a two year low, Iraq declaring war on Kuwait (deja vu), bonds falling on weaker than expected economic data (twilight zone?), tech stocks warning, bulls turning bearish. Do you see a common thread here? Investors did and the move to the sidelines accelerated. The fall rally came early this week, everything was falling. Bad joke, sorry. It was not a pretty sight. OptionInvestor readers still profited nicely from some big winners like call plays ITWO, CFLO, CHKP and put plays SCMR and CMTN. The very positive CPI report acted like a catalyst but in the wrong direction. The CPI headline number was -0.1% and well below the estimates for a +0.2% gain. The core rate was unchanged at +0.2%. The drop in the headline number was the first time in 14 years and the market should have soared on friendly economic data which has put the Fed on hold for at least six months according to analysts. So what happened? All of a sudden the soft landing engineered by the Fed is starting to look more like an impending train wreck. Factors out of Fed control have suddenly mushroomed into serious challenges. The oil problem is refusing to die. Oil futures hit $36 Friday even after OPEC has said production will be increased. The tropical storm in the Gulf of Mexico, a huge oil and natural gas production area, has buyers running to cover requirements quickly. As in any supply and demand equation the market prices are reflecting the imbalance. These higher prices, three times higher than just a year ago, are starting to be seen in the profit warnings in many companies. One oil analyst forecast $41 oil before increased production drops prices. Commodities, the raw materials companies need to make their products, are soaring due to the higher energy costs required to produce them. Another vicious cycle as every higher price in the supply chain begets yet another higher price on the finished product. Add to this the shortage of natural gas and even, believe it or not, a shortage of electrical power has sent the Dow Jones Utility average to an all time high in September. Increasing the oil tensions IRAQ said Kuwait was stealing oil from IRAQ by drilling along its borders and warned that it was going to take action. And that action would be what? Saddam is going to moon a picture of the Kuwait royal family? With the U.S. still bombing anything military that appears in the southern half of the country the biggest weapon he has close to Kuwait is probably a mail truck. The Euro hit another all time low against the dollar and every penny it drops is another penny that the multinationals will lose in profits. The non-stop drop is putting pressure on the earnings and every day we are getting closer to a major earnings warning from some company that will shift the current market sentiment from concerned into full panic. The front page of "Economist Magazine" this week shouts "Euro Shambles" and the inside article shows that inflation is rampant in Europe and the Euro still has no bottom. The rebalancing of the S&P indexes on Friday created the third day this week where the volume on the NYSE exceeded one billion shares. Friday 1.23 bil shares traded and the Nasdaq volume at 1.75 billion was also very heavy. Advances lagged declines by almost 1:2 on both indexes. Without the strong buy on close orders due to the rebalancing both indexes would have closed on the lows of the day. The Dow closed below 11,000 for the first time since August 10th and is exactly where it was in May of 1999. The Nasdaq did manage to hold at 3800 again and closed at 3835. This is the same area we were breaking out of on August 14th. We have now given back all of the August gains and the index is down -9.8% from the September high of 4252 on Sept-1st. The Dow lost -293 for the week and the Nasdaq -143. The individual big cap stocks on the Nasdaq were looking pretty grim. The down trend for the week showed no letup. Intel fell to a new five month low of $57.50. Dell finished only fractionally above its low for the day of $35.25 and is only $.69 above a 52 week low. Microsoft traded as low as $63.31 and only $3 from a 52 week low. WCOM finally broke under $30. Oracle pulled a classic post earnings announcement drop losing -$6.63 to $78.31 even after posting blowout earnings and a 2:1 split. The bright spot on the Nasdaq was CSCO which gained +1.50 but don't start cheering yet. A rumor hit the market just before the bell that NTOP and CSCO were going to announce a joint venture and create a new company called ADIR Technology. Over 11 million shares of CSCO traded in the last 30 min and CSCO spiked +2.50 on the news. After the bell the story became clearer and it appears that NTOP will spin off the company and CSCO will only be a minority investor in the new effort. This brief rally could only be a spike as these same speculators bail out on Monday. Financial stocks have been a major component in the recent Dow rise and most of that rise was fueled by the JPM rumors. Alright already! JPM has been a rumor for two years since Citicorp bought Travlers. It is over, done, finished, kaput. Don't expect help from financials as long as the "R" word is being whispered. A recession may or may not be in our future but we have been hearing it several times a day this week. The combination of falling merger speculation and the possibility of a recessionary crash instead of a soft landing, cratered these brokerage stocks on Friday. Lehman -7.50, MER -2.75, GS -4.12, BSC -5, MWD -6.44. Brokers don't do well in bear markets. The economic reports scared the bond market into swapping yield curves for the first time in the last two months. The 30 yr bond is now yielding more than the shorter term notes and closed the day with a 5.90% yield. With the recent forecast of lower interest rates ahead the bond yields had been falling. Now that the future landing may be a crash the bond is falling as the future becomes more cloudy. Over 6% yields will start pulling cash out of stocks and into the safe haven until the markets recover. Good news, bad news, there seems to be no difference. Good news about earnings is being looked at with skepticism and bad news is being dealt with harshly. A perfect picture of a wall of worry building. The fact that tech stocks are not immune to earnings problems in a slowing economy has finally struck home to some newer traders. When the economy is slowing, PE ratios shrink due to decreased expectations. A stock with a PE of 12 has very little risk but a tech stock with a PE in the triple digits can move in increments more appropriate to the Richter Scale. The bad news continued on Friday with AMSY, ANAD and MUI warning about slowing profits. We have two weeks left in the warning season and we can expect next week to increase in intensity. The outlook is still mixed for those of us who are permanently bullish. When the markets are being driven by events not market related the standard technical analysis is less reliable. What was support weeks ago when global events were not a factor is not really support. It was support where buyers and sellers had arrived at a standoff based on market factors then, not now. Yes, CSCO has bounced off support at $60 for four months but factors are different now. Real support for CSCO may be $50 not $60. Support in a falling (not slowing) economy is when investors with cash decide it is too good a deal to pass up. The key here is "cash." Where is support on Intel? That depends. Support in a rising economy or a slowing economy. If Intel chips are going to sit on a shelf unsold then support will be much lower than when Intel could not make them fast enough. Which is it now? A month ago Intel said they could not make them fast enough and it was setting a new all time high. Sept-5th Ashok downgraded INTC and said PC sales would be falling with the economy and pricing would become malignant, his words. That means excess supply would cause price cutting and profit margin erosion. Everybody else disagreed but Intel fell -23% since that downgrade. Friday after the close Gateway sliced prices on its most popular models and increased the CPU speed as well as doubled the memory. They are spending more on components and selling them for less. Was Ashok right? We will not know for some time but the question now is "what is support for Intel now?" The strongest past support is $54 and that is not far away from the $57.50 Friday close. The point I am trying to make here is the standard "retest recent lows" rhetoric may be accurate but they may not be looking at the correct lows. The lows in a Goldilocks economy are not the same as the lows in a possible recessionary economy. Before you toss this article in the trash can, rest assured I am still bullish. My personal bias of course has no impact on reality. I just feel that all this gloom and doom is over done. I would point to the current well being of the American consumer, the very recent earning cycle where beating the estimates was the norm and the Fed on hold for the next several months. Oil will eventually fall simply from OPEC cheaters if for no other reason. This is normally the gloom and doom season. One only has to look at this period in the last four years for proof. I keep warning that September is historically the worst month over the last 49 years. I just don't think saying "worst month" translates into "markets will fall for four weeks" when people read it in print. That is like saying oil went from $35 to $36 per barrel. You see the numbers but you don't immediately think that gas will go up another nickel. We get so used to hearing oil will go up/down that we don't actually think through the process to cost per gallon, dollars per tank, cost per week, monthly Texaco bill, ouch! It comes to you when you stop for a fill up three weeks from now and it costs you twice what you expected. Reality check! The reality of September, for whatever the yearly reason, is that investors lose money because the market goes down. When we read "worst month" we should think "my options may go down, I should set stops." Now, what are we going to do about it. Sit on the sidelines and wait, (heresy I know) or trade smarter. (oh sure another glib answer) No seriously. In theory we will see a market bottom sometime in the next four weeks. That depends of course on the soft landing scenario regaining some credibility. Still in any market there are trading rallies. With the Nasdaq at 3800 and holding we could see another trading rally as soon as Monday. Nothing goes down in a straight line and even if we are going to 3500 again there are plenty of opportunities to make $2-3 two or three times a week. No, I don't see those $20-30 gains from long steady moves over the next four weeks but I can see several opportunities for playing over sold events while we are waiting for the October bottom. I was encouraged by the Nasdaq hold over 3800. I was encouraged by the lack of major losers on the Nasdaq. Of the 300 stocks I watch every day there are normally dozens with double digit losses on a day like Friday. There were only two on Friday, EPNY -10, AVNX -11. The majority of the losers were in the -2 to -3 range. Big deal. I did look at charts on all 300 and there was no real trend. Not a large group of big drops at the close but also very few with gains into the close. Just no direction. The biggest trend I saw was a fall back to previous support over the last week and then a slowing of movement. This means there is no big selling crush. Momentum traders are waiting and buy and holders are doing just that. We have not fallen far enough to create that selling climax as people throw in the towel. That means we could fall some more. Still, the greed principle is still in effect. Traders have become accustomed to buying the dips over the last several years and they have also developed very little patience when it comes to staying out of the market. This creates the strong trading rallies like the two we had in the last two weeks. We just have to be more proactive in cutting our trades short and getting out with a profit on any big move. We need to be more aggressive in picking stocks that hold up on bad days and move fast on good days. We need to anticipate support levels and be ready with limit orders when those selling dips occur. The Nasdaq held twice last week right on ascending support at 3800. This support dates back to May-24th. There was no capitulation on Friday so we cannot accurately call this a bottom. It may be but we won't know until a week from now. The best scenario for Monday would be a huge downward spike with heavy selling in all the big caps. A rebound from that spike would be a buying opportunity. The volatility is normally higher on the Monday after a triple witch options expiration as traders square positions from option assignments. The most probable scenario will be continued weakness but no heavy selling. This may lead to a low volatility Nasdaq rally like we had in August. Steady gains with minor routine profit taking. The Nasdaq is on the verge of oversold and a trading rally by Tuesday is a good possibility. I do not expect any big rally before the October surprise but there is a lot of cash on the sidelines and the term "burning a hole in their pocket" certainly applies. This cash may trickle into the market as individual stocks start showing positive trends. I would suggest opening smaller positions than usual and wait to see what the market is going to give us. Cash is king for the next four weeks. Cash gives us options whenever there is a serious dip. (yes, a weak pun) If you are stuck in a losing position and the market dips you are more concerned about the loser and unable to profit from the dip. I am hoarding cash but getting very restless. I feel like a hunter two weeks before opening day. Guns have been cleaned several times, all the gear has been pack and repacked, several times. I find myself looking at charts on companies I have no interest in trading just like a hunter trolling through sporting goods stores looking for that special item that he does not need but must have on opening morning. My advice, spend the next week reviewing your trading plan and making preparations for the fall rally. The yearly super bowl of investing is about to begin. Profit from it! I received an email this week that caused me to reevaluate what I have been doing in the editors plays section. Some time ago I had switched from writing about my personal plays because my personal strategies are different than most of our readers. I had switched to choosing several current OIN plays and trying to educate the readers on how I would play them, entry points, exit points, etc. To put it into this readers words, "boring." Actually his words were much stronger than that and not printable. Still he made a good case that readers of this section wanted to see the real stuff, good or bad. Win some, lose some, but go for the gusto. So be it. starting this weekend I will go back to the scorched earth reality concept and simply warn you, "do as I say, not as I do." OIN has gone global with our regional seminars. We are announcing this weekend a four day seminar in Dubai, UAE for November. Due to the new rules concerning private ownership of stock in that area, trading is now gaining favor. Chris Verhaegh just came back from a two week trip to the UAE and the demand is incredible. He visited the new stock exchange in Dubai and they had 12 listed stocks, 14 brokers and traded by fax. This is what it means by getting in on the ground floor! November 20-23, Dubai, if you live there, and we have many readers that do, you should come. If you know somebody in the Dubai area then please tell them we are coming. We should have the Australia date locked in by Tuesday now that post Olympics bookings are available and we will be updating the schedule accordingly. Join us for lunch and a free trading seminar! Boston - Tuesday September-19th. Charlotte - Wednesday - September-27th. San Francisco - Wednesday - October-4th OptionInvestor.com, Preferred Trade and A-T Attitude will hold a FREE seminar 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 Trade smart, sell too soon. Jim Brown Editor ********************* FALL SEMINAR SCHEDULE ********************* The Austin TX seminar is September 21/23rd. Options expiration is over and earnings still several weeks away. 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! Some comments from recent attendees: I want to thank Chris, Steve and Scott for the excellent workshop held in Detroit last week. Having been to the Expo in Denver in March (which was fabulous), I was ready for a smaller, hands-on approach to hone my less-than-perfect skills. I was not disappointed. One can never get too much education in options investing, and Chris and Steve offer terrific, unique approaches. Laurie Chris & Steve, I would like to thank both of you for a great experience at the Atlanta Workshop. I learned more in the three days of the workshop about investing and trading than all of my undergraduate and graduate courses combined. It was a lot of information in a short time and I hope to put it to use very soon. Mike I attended the Atlanta seminar and wanted to forward my positive comments. The seminar "really lit my fire". I have been a trader for 20 years and often go to seminars and this was the first one that really taught me the most. Dr Lloyd Jim, I had the good fortune of attending the meeting in Orlando. Like your newsletter, it was a CLASS ACT. Chris and the others did a great job. Chris was by far the best performer but the gentlemen beside me was an option trader with several seminars under his belt and almost freaked out when Chris finished his Index Presentation. JC I am writing this note to compliment you and your staff on the great job they did in Atlanta. But more importantly I would like to single out Steve Rhoades as one of the finest speaker/teacher on technical analysis that I have ever had the pleasure of hearing. I am doing my best to persuade other members of the two investment clubs that I belong to, to attend the Detroit seminar. Sincerely, ML 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 21-23 Austin TX Sep 28-30 Boston Oct 12-14 Charlotte NC Oct 19-21 San Francisco Nov 02-04 Phoenix Nov 09-11 Miami FL Nov 20-23 Dubai, UAE (Special 4 day seminar) 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************************* Attention Online Traders: NobleTrading.com has become the first online trading firm to offer both Direct Access Trading, and web based trading to its customers. Trade Direct using any ECN, SOES, and SelectNet, or trade right through your browser using our web based trading application. FREE DSL service for active traders. Visit our website and sign up for a Free real-time demonstration! http://www.sungrp.com/tracking.asp?campaignid=486 ************************************************************** ************** EDITOR'S PLAYS ************** I currently am 95% in cash. I only have one position and that is a value play on Telescan (TSCN). They announced weaker than expected earnings do to a reorganization of some under performing assets. They then announced a merger with GlobalNet Financial (GLBN) in a 2:1 stock deal. Telescan is a provider of financial information to websites and hosts quite a few as well. One of the sites they built and currently host is CNBC.com. TSCN is currently trading at $4.63 and a PE of 7. I personally think the news sell off was over done and I expect the stock to go back up once the merger road show begins. Options are VERY cheap. Risky but cheap. The Oct $5.00 call closed Friday at $.63 and the January $5 call is only $1.00. Since the stock will trade based on GLBN and the merger there is risk that GLBN will drag them down due to a lack of U.S. focus. I actually think GLBN will be a plus fot TSCN since they have plenty of idle cash and a global market to play in. Pure speculation, let your conscience be your guide. **************** Plays last week **************** My only play last week was ITWO. I take my own cautions about being in the market in September seriously. I am hoarding cash and I plan on being ready when the time is right. On Monday when ITWO broke support at $160 after a sell off on profit taking I noticed long green candle at the end of the day and with the Nasdaq oversold I expected a bounce at the open. I bought 10 of the Sept-60 calls for $4.75. The market and the stock gapped open on Tuesday and when everything rolled over after lunch I sold them for $9.25. There was noting sexy about this play. The market was due to bounce and ITWO looked like the vehicle to play. It had already dropped -$30 on profit taking five days earlier and then held at $160. I decided the risk was as minimal as holding anything overnight in September can be. Yes, I could also have sold them for $10 more if I had held until Thursday but my crystal ball said take a 100% profit and run. ******************* NEW PLAYS NEXT WEEK ******************* I do expect a relief rally by Tuesday. Personal opinion. Because option prices are very high on the first day of the month I would not buy calls if my life depended on it. The movement into current month (October) options by the front month players will cause volumes to spike and prices to drop over the first couple days of the week. Any call option without a stock moving up strongly will decline 25% in premiums in the next week. The front month time decay clock starts Monday. My solution to this is sell naked puts. You can also sell calls on a stock that is not moving but that requires more capital and nerves of steel in an oversold market. I plan to wait and see if we will get a triple witch inspired sell off on Monday and then sell into any rebound. I need stocks that have bottomed and look ready to rally if the market picks up. My favorite tactic for those who have not been readers long is to sell deep in the money options. I mean really deep. In a bull market I have been known to sell $100 deep in the money. This is not a bull market. I will probably try $20 to $30 DITM and plan to be out at the first sign of trouble. I am not confident enough that the Nasdaq will hold 3800 to try and ride out any storms. My candidates for Monday are: Stock Price Strike Premium SNWL $60 $90 $32 CMRC $70 $100 $30 VRTX $80 $90 $17 VRTS $122 $140 $22 IDTI $90 $105 $17 INKT $120 $150 $31 VRSN $180 $210 $38 MUSE $170 $200 $36 ITWO $172 $200 $31 SDLI $328 $400 $76 GLW $297 $350 $55 Split 10/3 BRCM $233 $280 $53 JNPR $201 $240 $43 I will put these in a hot list and watch for the ones that show the most strength and WHEN/IF THE MARKET STARTS UP those are the ones I will play. I will go into detail about why I use this strategy next week. It has caused a lot of controversy in the past but I think it is the closest thing to free money in the market. ************ 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************************ Get a NextCard Visa, in 30 seconds! 1. Fill in the brief application 2. Receive approval decision within 30 seconds 3. Get rates as low as 2.9% Intro or 9.9% Fixed APR http://www.sungrp.com/tracking.asp?campaignid=464 ************************************************************ **************** MARKET SENTIMENT **************** Everyone Hates The Weatherman By Austin Passamonte We have some promising news for all our die-hard bulls that they certainly don't want to miss. But first a note from your local market-meteorologist. Out on the golf course early this morning, a foursome of young men were ready to begin an 8:00am tee-time. All were stylishly dressed in designer short-sleeve shirts and shorts. That works in many instances but not today when temperatures were still below 50F. "Man it's cold... I thought the temperature was supposed to be warm out today" one grumbled to the other. "Weatherman said it's going to be in the 70's. Boy, was he wrong" said another. They shivered, moaned and complained throughout the match but were too proud or stubborn to don warmer clothes left laying in the back seat of their cars. On the other hand, a few men and all the women were sensibly dressed and enjoying themselves immensely. The day's high did reach 80F just as predicted, long after our freezing foursome had departed. There has never been a better time in history for mankind to accurately predict the weather. Isn't it amazing what strides we've made in just the past decade? Not without fail because such is impossible, but endless hours of scientific study are compiled and condensed into a five-minute summary for preparation of your weekend golfing pleasure. Heed this advice or risk suffering the result of dismissing it. (Keep reading bulls, you'll like the ending) So goes Market Sentiment. We spend numerous hours (honestly) of extensive research, analysis and number-crunching to give you the very best prediction of market direction we possibly can. There's nothing we'd love more than to forego all our effort and write, "the markets are sure to rally tomorrow, load up on CSCO, QCOM and DELL calls once again". Wouldn't that be fantastic? Unfortunately no one can create reality as the hokey tv hit, "Survivor" series so aptly proved. We've heard considerable groaning over Ralph Bloch's market call last week which proved to be very accurate. We also saw him just a few weeks ago call for the NASDAQ to reach 4,200 and the Dow to challenge 11,300 which was also accurate. Do you recall any verbal uproar then? Just a thought. Joe, David, Maria & CNBC's gang are shocked over this recent failed rally. Apparently they aren't avid readers of Market Sentiment. If so, they would have known that institutional traders were historically short equities and interest-rate markets while small specs were directly opposite. They would have followed the VIX plunge to 19 and 18 for over a week's time. They'd have heard about bearish candle patterns and technical chart signals warning of a pending fall. We here at Market Sentiment like to think they would have heeded our advice, prepared to buy puts with reckless abandon and profit wildly from it like a few traders we know did. How amply rewarding all our intensive time & effort would be if this were so. Hopefully they didn't ignore all of this, staunchly put their bullish blinders on and throw a beach party in the face of Hurricane Sell-off instead. ***** Time To Get Excited, Bulls! We're going to skip all other factors and give you our two minute forecast here. The VIX refusal to release and daily chart signals on the Dow warn us that more downside is likely. That being said, we see pending formation of our #1 favorite market-reversal signal on the daily charts of the Comp, NDX, SMH (semi-conductors) OEX and to a lesser extent the SPX. That would be stochastic/price action divergence. Check it out for yourself. Daily stochastic values are currently at equal or lower-lows while price action is at much higher-lows than the previous time in late July. This is almost infallible leading bullish-reversal signal if the pattern completes before further massive declines negate it. Remember late July? That's the last time media hounds were calling for the summer slide and retest of market lows. Market Sentiment is stepping outside our norm and beating our chest for the bulls. We called the recent market decline in other sections of OIN archived for validity due to bearish divergence in the exact same patterns. It is now our position that a high probability exists for a measurable rally soon. Further selling is likely but we are closer to the bottom than most may think. We'll continue to invest endless hours watching this pattern develop and upon its completion plan to personally bet our farm on call & LEAP options. Anyone out there want in on that with us? Stay tuned. ***** VIX Sat 9/16 close; 21.93 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 Wed Sat Strike/Contracts (9/12) (9/13) (9/16) ************************************************************* CBOE Total P/C Ratio .60 .66 .65 Equity P/C Ratio .52 .58 .59 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 Wed Sat Strike/Contracts (9/12) (9/13) (9/16) ************************************************************** All index options 1.34 1.32 1.11 OEX Put/Call Ratio 1.07 .85 1.47 30-yr Bonds Friday 9/15 close; 5.90% 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: 830 - 815 5,276 4,182 1.26 810 - 795 7,524 4,781 1.57 OEX close: 789.77 Support: 785 - 770 172 2,344 13.63 *** 765 - 750 32 5,086 158.94 *** Maximum calls: 810/4,118 Maximum puts : 750/3,371 Moving Averages 10 DMA 810 20 DMA 816 50 DMA 807 200 DMA 782 NASDAQ 100 Index (NDX/QQQ) Resistance: 100 - 98 6,752 8,786 .77 97 - 95 7,340 18,997 .39 94 - 92 2,485 13,447 .18 *** QQQ(NDX)close: 91.7/16 Support: 91 - 89 2,515 14,601 5.81 88 - 86 194 7,762 40.01 *** 85 - 83 47 4,861 103.43 Maximum calls: 100/4,071 Maximum puts : 95/11,969 Moving Averages 10 DMA 95 20 DMA 96 50 DMA 95 200 DMA 94 S&P 500 (SPX) Resistance: 1525 3,499 2,087 1.68 1500 17,469 17,610 .99 1475 9,180 10,622 .86 SPX close: 1465.81 Support: 1450 2,168 11,071 5.11 1425 1,155 9,969 8.63 1400 904 7,267 8.04 Maximum calls: 1500/17,469 Maximum puts : 1500/17,610 Moving Averages 10 DMA 1491 20 DMA 1498 50 DMA 1483 200 DMA 1445 ***** 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: Fed's finished ? Benign government reports ? Oversold market levels soon ? Disparity in overhead call/put ratios Bearish: Oil Prices*** COT reports**** Recent pre-warnings, downgrades** Broad market's break of critical M/A support** Market leaders breakdown** Low VIX*** Technical chart indicators*** ************** MARKET POSTURE ************** As of Market Close - Sunday, 09/17/2000 Key Benchmarks Broad Market Last Support/Resistance Alert **************************************************************** DOW Industrials 10,927 10,830 11,350 ** SPX S&P 500 1,465 1,450 1,495 ** COMPX NASD Composite 3,835 3,650 4,050 OEX S&P 100 789 774 814 ** RUT Russell 2000 530 520 550 NDX NASD 100 3,676 3,500 3,900 MSH High Tech 1,016 1,000 1,065 BTK Biotech 743 690 780 XCI Hardware 1,446 1,400 1,520 ** GSO.X Software 450 435 475 SOX Semiconductor 974 960 1,140 NWX Networking 1,259 1,180 1,305 INX Internet 554 525 605 BIX Banking 616 600 645 XBD Brokerage 673 625 710 ** IUX Insurance 739 705 760 RLX Retail 860 830 890 DRG Drug 380 365 410 HCX Healthcare 796 765 815 XAL Airline 151 144 162 OIX Oil & Gas 324 296 332 ** Six alerts were triggered on Friday, with the OIX setting off its alert at resistance on renewed higher energy prices. The alarm triggered at support on the XBD marks the first "support alarm" for this index since it was triggered at resistance at the 515 level. Lowering support (DOW, SPX, OEX, XCI, XBD) Lowering resistance (DOW, SPX, COMPX, OEX, NDX, MSH, XCI, GSO.X, IUX) Raising support (MSH, NWX, RLX) Raising Resistance (OIX). ************************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.sungrp.com/tracking.asp?campaignid=472 ************************************************************** ************* SECTOR TRADER ************* The Great Humiliator Strikes Again By Buzz Lynn Contact Support Triple witching plus negative inflation rate plus technically oversold equals. . .more selling? What's wrong with this picture? Triple witching is just a fun name for a big option expiration day, which typically supports prices. The CPI came in at -0.1%, the lowest rate since 1986. And the technical charts are deep into oversold territory indicating that we are nearing a rebound. All good news, right? Sadly no. What goes up must come down. And what comes down can come down further. Remember, the market's job is to humiliate as many of us as possible. It is doing a splendid job. Despite that ORCL exceeded earnings expectations and announced a 2:1 split last night, revenue fell about $50 mln short of expectations. That helped set a harsh tone for technology issues. ADBE beats earnings by $0.05? Who cares. Adding a more shrill noise was ANAD's announcement they would fall short of expectations thanks to ERICY, ANAD's largest customer accounting for about 53% of revenues (MOT is #2), delaying or canceling some orders as a result of a fire at another supplier's manufacturing facility (Phillips Electronics). . .got to keep the supply chain moving smoothly, and this was a big disruption. ANAD lost 20% of its value right from the open. Without thinking it through clearly, investors assumed other wireless stocks like NOK, MOT, TQNT, and PCS should also suffer - they did. But it wasn't just that. Oil at $36 per barrel with no relief in sight and a falling Euro are putting pressure on previously robust earnings. In fact, 30 companies warned last week. Need more? Adding to investor fears that the Fed hasn't humbly crawled under a rock until November, Richmond Fed President Broaddus suggested that "demand remains strong", which coincided with the rollover to triple-digit losses. The trouble with cockroaches is that where there is one, there are likely many. We don't know of an exterminator yet that can reduce oil and production costs, keep the dollar affordable, and maintain low interest rates, while trying not to poison the people it's vapors are seeking to protect. Despite Presidential assurances that the economy won't be affected by the highest oil prices in 10 years, higher pump and heating prices dissuade many from buying a high margin SUV (so profitable for car companies) or a bigger home, especially when earnings-squeezed corporations may squeeze the Christmas bonus too. In short, there's a whole new nest of roaches to get rid of, not just one. As we noted Thursday, this is bigger than a line on a technical chart. That said, what can we expect? We don't have the immediate answer. One thing seems certain though. As long as earnings warnings continue as a result of increased production costs, higher crude prices, and poor currency exchange ratios, the situation likely won't improve unless positive earnings show up in October. Interesting that hasn't affected the VIX much. That can change in a hurry. On the other hand, the OEX and NASDAQ are deep in oversold territory on the technical chart and are due for a bounce. The longer this trend continues, the more compressed the spring becomes until someone comes along to release the pent up energy. Don't try to anticipate the bottom. High volume capitulation hasn't happened yet; neither has a high volume recovery. Reminds us of a commercial: "Help, I've fallen and I can't get up". When investors and news services begin reporting about a bright spot or a silver lining on the cloud, that is when we will likely turn the corner. Be selective in your plays and vigilant in your entries. Good luck in the coming week! ************** QQQ ************** QQQ - NASDAQ 100 $91.31 (-3.81 last week) While ORCL and ANAD didn't deliver the goods investors were looking for, ultimately that was just an excuse for general fear of higher crude and production cost, not to mention currency risk. All of a sudden cheers of "Yippee, the economy is slowing" are being met with squawks of "Boo, hiss, the economy is slowing". It took a while but investors now realize that a slowing economy means weaker profits. Conventional wisdom says this doesn't look good, so expect conventional wisdom to remain mired in that thought for a few more days. 3800 held despite the triple digit loss at one point during Friday's trading. 1.7 bln shares, though normally considered heavy, didn't carry as much meaning on a triple witching Friday when volume was expected to be much higher. Translation: no capitulation, not enough fear, and more room to fall. Roughly 3725 is the next level of support. In QQQ terms, roughly 91 held; 90 represents solid support. The pony in this pile is that the NASDAQ is deep in oversold territory on the daily stochastic and MACD charts (settings: 10(3),5; and 8,18,6, respectively). That means we could see a technical bounce any day now when the short stochastic crosses the oversold line up through 20%. While that's a cue to get ready for a rally, we still need to see confirmation with a positive-turning MACD to gain a degree of comfort in a new trend. Calendar Spread: You can get more details above, but watch CSCO as a proxy for the whole index. It is now considered the GE of the NASDAQ and saved the bacon for this index Friday while MSFT and INTC were sent to the meat packer. CSCO turned technically positive on the daily stochastic chart by crossing out of the oversold position. MACD is following but may need another day for confirmation. This is our first sign that the worst may actually be over and that the QQQ may be on the road to recovery in the next few days. If that is true, $90-91 looks like the bottom for QQQ and we can now consider an entry of the long leg of our spread. That said, wait for QQQ to break from the oversold stochastic (not CSCO) and confirm with a positive MACD. Our objective is buy the long leg cheap at the low and sell the short leg dear at resistance (ideally just before a rollover, while letting time decay pay down the cost of the whole position month after month. The next resistance is around $95-$95.50, then $97.50. This strategy is similar to a covered call, except we use a long-term call instead of the security for our long leg. Don't get called out of this one. You should consider covering when the time value of the short leg approaches zero or with a day or two of expiration, whichever occurs first. BUY CALL JAN- 90 QVQ-AL OI= 4991 at $11.13 SELL CALL OCT- 95 QVQ-JQ OI= 4958 at $ 3.63, ND = 7.50 or less SELL CALL OCT- 97 QVQ-JS OI= 6033 at $ 2.75, ND = 8.38 or less SELL CALL OCT-100 QVO-JV OI= 4766 at $ 1.88, ND = 9.25 or less Long Call: What's good for a long leg of a spread is good for a long call. While nobody is a winner at picking a bottom 100% of the time, statistical odds improve if you use the charts. The daily chart tells us that QQQ is oversold at $90-91 and is very close to giving us a stochastic breakout of the oversold position. Wait for the short stochastic to cross over the 20% mark followed by a confirmation of the MACD crossover to a positive signal. If you can stomach a bit more risk, anticipate and front-run the MACD move, or consider letting CSCO be your guide. Keep in mind, the fundamental reasons for the current decline can, and so far have, overpowered lines on a chart. Careful. BUY CALL OCT- 90 QVQ-JL OI= 3062 at $6.00 SL=4.00 BUY CALL OCT- 95 QVQ-JQ OI= 4958 at $3.75 SL=2.25 BUY CALL OCT-100 QVO-JV OI= 4766 at $2.06 SL=1.00 Bullish Put Credit Spread: With the technical indicators MACD and stochastic indicating an oversold position, and the QQQ currently holding $90-91, logic tells us that the next likely trend is to the upside. Unfortunately markets aren't always logical and fundamentals could take QQQ down further. That said, this play is only for traders willing to assume some risk. You will need a margin account. The objective is to sell an OTM put and simultaneously buy a lower OTM put for a net credit to your account. It's a bit like a naked put, but safer. For our purposes, we would consider selling the OCT-90 put and buying the OCT-85 put. Our maximum loss should we fail to close out a losing position early would be $5 ($90-$85) minus our credit of $1.56 ($4.13-$2.56), or $3.44. Don't let the spread get that big though. Consider closing the position when you reach a threshold of pain SELL PUT OCT-90 QVQ-VL OI=7439 at $4.13 BUY PUT OCT-85 YQQ-VG OI=2530 at $2.56 Net Credit = $1.56 or better Average Daily Volume = 18.8 mln ************** OEX ************** OEX - S&P 100 $789.77 (-23.13 last week) While the stochastic has flattened out in oversold territory, the MACD is still in a parallel line dive and not about to pull out. . .at least not yet. Like QQQ, investors no longer cheer when news of a slowing economy hits the airwaves. It used to mean inflation is under control and no more rate hikes. Now it means slowing corporate profits and earnings warnings thanks to currency risk and crude prices. Again, the fundamentals are stronger than lines on a chart. $800, $798, and $791 failed to hold in Friday's triple-witching action. Here's evidence that what goes low can go lower. 200-dma support comes in at $783, with historical support in the $775-$780 range. Until we see a MACD crossover back to positive or a solid bounce from support borne of a silver lining on currently dark economic cloud, we could consolidate or fall further from here (under $800) for few more days. Nonetheless, technicals do not remain oversold forever and the market will be looking for an excuse to rally, even if just for a day. Long Call: Same story, different day. "Unfortunately, fundamental news like oil and currency may keep it here a bit longer. However, we believe it is only a matter of time until it reverses, perhaps as early as next week." That was our story Thursday and we're sticking to it. Stochastic and MACD are firmly planted in oversold territory. Normally, that would tell us the clouds would soon break open and we could then drink up the sunshine. Not yet. The MACD is still in a power dive without having begun a pullout. When that happens, that will be our cue to consider an entry. The next level of support is at the 200-dma of $783, with further historical support at $775-$780. Wait for a fast stochastic crossover out of the oversold position too (above 20%). BUY CALL OCT-780 OEZ-JP OI= 165 at 26.00 SL=18.25 BUY CALL OCT-790 OEZ-JR OI= 617 at 19.25 SL=14.00 BUY CALL OCT-800 OEX-JT OI=1750 at 14.00 SL=10.50 Bullish Calendar Spread: Ouch! More pain on Friday and perhaps more to come if oil prices and exchange rates remain on the radar screen. No matter, our job is to buy the long-term position cheap at support and sell the short position dear at resistance. The intent is have time decay of the short reduce the expense of the long as we collect premiums month after month. It doesn't always work that way though, which is why we must have a plan to cover if the trade moves against us. Technicals are still deep in oversold territory indicating a reversal to the upside may be near. Like the long call play though, MACD is stuck in a nosedive and must pull up first (not to mention having the stochastic cross above the 20% line out of oversold range) before we enter a long leg. Once done we will be free to sell the short at resistance, now $791, $798 and $800. Support for the long is at $783 (200-dma) and $775-$780 (historical) BUY CALL MAR-800 OEX-CT OI= 8 at $50.13 SELL CALL OCT-800 OEX-JH OI=1750 at $13.75, ND=36.38 SELL CALL OCT-820 OEX-JD OI=3682 at $ 6.00, ND=44.13 Bullish Put Credit Spread: Not yet. Wait for a technical reversal of the MACD and stochastic then help yourself. Just remember, this is a dicey play as some of you may have discovered last week. Reflexes need to be lighting fast and without hesitation if the trade moves against you. Remember the objective is to sell the higher strike put and protect your downside with a lower strike put, taking in a credit in the process. Consider it a naked put with protection, but don't be complacent about exiting a losing position. It's still a risky play until the slide is halted. SELL PUT OCT-775 OWZ-VO OI= 152 at $11.50 BUY PUT OCT-770 OEZ-VN OI= 939 at $10.38 Net Credit = $1.13 Average Daily Volume = 1266 ************* COMING EVENTS ************* For the week of September 18, 2000 Monday None Scheduled Tuesday Housing Starts Aug Forecast: 1.54M Previous: 1.512M Building Permits Aug Forecast: NA Previous: 1.497M Wednesday Trade Balance Jul Forecast:-$31.0B Previous:-$30.6B Fed Beige Book --- Forecast: --- Previous: --- Thursday Initial Claims Sep16 Forecast: NA Previous: 324K Philadelphia Fed Sep Forecast: 9.00% Previous: 14.10% Treasury Budget Aug Forecast: $0.5B Previous: -$2.8B Friday None Scheduled Week of September 25th Sep 25 Existing Home Sales Sep 26 Consumer Confidence Sep 27 Durable Orders Sep 28 GDP-Final Sep 28 GDP Chain Deflator Sep 28 Initial Claims Sep 28 Help-Wanted Index ************************Advertisement************************* Attention Online Traders: NobleTrading.com has become the first online trading firm to offer both Direct Access Trading, and web based trading to its customers. Trade Direct using any ECN, SOES, and SelectNet, or trade right through your browser using our web based trading application. FREE DSL service for active traders. Visit our website and sign up for a Free real-time demonstration! http://www.sungrp.com/tracking.asp?campaignid=479 ************************************************************** 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 09-17-2000
Sunday                                                      2 of 5

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A Few Good Trades In A Weak Market
By Mary Redmond

There was a lot of excitement in the telecom equipment sector
early this week.  Starting last Friday and continuing into
Monday and Tuesday, Nortel, Lucent, JDSU and others in the sector
sold off heavily.  The news services reported that institutional
blocks of NT were offered for sale, and people were puzzling
to figure out why.  Part of the reason may have been due to an
article which was published stating that capital spending on
telecom equipment would likely slow due to a slowing economy.

However, although large blocks of stock were being sold, it was
a relatively small percentage of the amount of stock held by
institutions.  44% of the float of NT is owned by institutions.
This equals 1.835 bln shares, or approximately $82.8 bln in stock
market value.  A few block trades of 500,000 shares is a
relatively small percentage of the institutional ownership, and
can be absorbed.

While people were running around in a tizzy trying to find out
if anything was wrong, the CEO of NT was at an analyst conference,
and stated that the company was on track to meet the previously
announced expectations for earnings and revenue growth this year.
So what was all the excitement about?  Possibly institutional
profit taking.  The important thing to remember is that any
information nowadays can cause major disruptions in the market,
regardless of the source or the accuracy.  As traders, we can
profit from movement as long as we follow the rules.

In this particular situation, a put or downside play could have
been profitable, but not necessarily the best strategy.  A put
on a company which has been fundamentally and technically strong
for a long period of time and is experiencing temporary selling
can be a bad idea unless it is a one day strategy.  It is best to
find out if the company has stated anything about their forward
projections, or if there were just a few rumors floating around.

A better play might have been to wait until the selling trend
abated and buy cheap calls or LEAPs.  How do you know?  There
is no way to be 100% accurate about anything in the market, but
using several different tools as guidelines you can often make a
trade when a pivot point occurs which has a high probability of
success.

For example, the selling seemed to abate as NT hit 66.  You see
the big spike of volume where the bullish candlestick formation
is?  This is right when the stochastics and MACD turned to the
positive from negative.







In this situation, LEAPs bought at $12.5 on Tuesday sold for
$17.5 on Thursday.

We have to remember when using the technical indicators such as
stochastics, MACD and Bollinger bands that they work best on
a particular type of stock.  This is generally a stock which
has been public for several years, has a large daily trading
volume, a somewhat predictable trading pattern, and a large
market capitalization.  The tools are sometimes useless on
companies which just went public and illiquid or microcap stocks.

It is not surprising that the IPO market was light this week.
This may signify that investment bankers may be finding it
difficult to raise interest in IPOs.  Remember, a market crash as
intense and severe as the one we experienced this Spring can leave
memories of being scalded that can last a very long time.  In
addition, we had over 22 companies' lock up periods expire in the
last two weeks, and over 20 more will expire in the next two weeks.
This is a lot of stock to hit a nervous market.

We have had very low flows of cash to equity funds over the last
two weeks.  AMG Data reported that last week equity funds had an
outflow of $527 mln.  The four week moving average of cash to
equity funds is approximately $2.9 bln.

The cash keeps pouring into money market funds in record amounts.
Last week, the Investment Company Institute reported that retail
money market funds took in $3.53 bln, and institutional money
market funds took in $9.28 bln.  For the last several weeks,
with the exception of one week, we have had flows of nearly $12
bln per month in to money market funds.  If this continues by the
end of the year, we will have $2 trln in money market funds.
Currently, money market funds have $1.769 trln in investors' cash,
and are taking in nearly $50 bln per month.  This is a sign of a
nervous market.  If investors were to deposit about half of the
money they are putting in money market funds into equity funds, we
could have a good run up in the market.  However, the cash deposits
to money market funds seem to be in a strong uptrend, and this
pattern may not be broken easily.

This flight to the safety of money market funds may not be
coming entirely from U.S. investors.  Europeans are more likely
to deposit their cash in to U.S. money market funds because their
own currency has depreciated dramatically.

In addition, over $50 bln is expected to be raised in European
debt and equity issuance over the next several weeks.  Billions
in American IPOs are waiting on the sidelines to be brought public.
If the market sentiment remains weak, it is possible that some of
these companies will not be brought to market in the near future.

It is interesting to note that the Treasury yield increased by
two full basis points in two days, lifting the yield to a high of
5.90%.  This may have been caused in part by the increase in oil
prices which may cause inflation.  In addition, over $10 bln
in high yield corporate debt hit the market this week, and there
are expectations for additional large bond offerings in the coming
weeks.  Several European telecom companies are attempting to issue
corporate bonds.  This can impact the bond market by raising the
rates on 10 year bonds and Treasuries.


******

Sometimes It's Better to Pay Your Taxes
By Lynda Schuepp

Fortunately, or unfortunately, depending on how you view it, I
was scrambling all week to meet the September 15th deadline for
tax extensions for my corporation, and because of that I wasn't
trading.  My aversion for paperwork means that I always file my
returns on the last possible day of the extension.  The market
was pretty nasty this past week so I'm glad I wasn't in it.  I am
now sitting down in my office with my coffee and looking back
over the week and trying to set a game plan for the coming week.

First, I like to look at price trend using a 10, 50 and 200 day
moving averages.  Next, I look over the past week and determine
some short-term support and resistance lines.  Volume is the next
most important indicator so I like to run a 10-day moving average
on the volume to see where each day's volume falls in relation to
the average.  Ideally you would like to see volume trending in
the same direction as prices.  A divergence can signal a possible
reversal of the trend.

The QQQ's are a pretty good representation of the Nasdaq.  I like
to look at the OEX for the broader market, but you can't see
volume so I look at GE, which is highly correlated and tends to
track the market pretty closely.

Daily chart for the QQQ:



Looking at the chart for the QQQ's above, we see that the QQQ's
are below the 10, 50 and 200-day moving averages.   The QQQ's
have been in a downtrend since 9/1 and have been down 7 out of
the last 9 days on above average volume.  There is some decent
support at 90 and 87 and 84.  The peak on 9/1 was on extremely low
volume.  In fact, the volume has been decreasing since 8/3 when
a short-term bottom was hit.  After its peak on 9/1, the prices
dropped 14 points while the volume steadily increased, a classic
sign of distribution.  The question remaining is this now a
bottom?  We have closed below the 200-day moving average for the
last 5 days.  Wednesday, the QQQ's dipped down to 90 and bounced
up to close at 93-1/2 still under the 200 day moving average.
This might have been a dead cat bounce.  If prices continue down,
I will wait for volume to decrease.  If the QQQ's turn back around,
I will make sure there is plenty of volume.  I hate trading a
choppy, sideways market.  Volume will lead the way, regardless
of direction.

Next lets look at the daily chart for GE:



GE is a long way from its 200 day average and hasn't touched it
since March, and then, only briefly.  Friday's action was rather
nasty and on about double the average volume.  However, when we
look back, we see the number of up days with greater than average
volume far exceeds the number of down days with heavy volume.  It
looks like the big boys are accumulating, so it can't be all bad.
The next level of support is 56, just about the 50-day moving
average.  It is key that GE holds here or we could be looking
at 52.  On the upside, 60 will be a key level of resistance.
Don't expect the market to move unless GE is moving.

So going forward this week, I will remain cautious.  You must
be patient and let the market give you the clues.  Don't try
to force fit your hunches.  My guess is that Monday we'll get
a bounce, but watch the volume to ascertain where it is
legitimate.  Monday is usually an up day so we have that working
for us.  Remember this is just a "guess" and you should never
trade off of guesses, particularly somebody else's.  If your not
confident, don't feel bad, you are not alone.  Most of my friends,
many of whom I have a great deal of respect for are also scratching
their heads trying to figure out their next move.  You don't have
to trade everyday.  Your broker won't like to hear me saying that
but it's your money that is playing the game, so don't be gambler.
Wait for your favorite indicators to show you the way and enjoy
the time to polish up on your trading skills by picking up a good
book or video, or maybe reviewing one you've already read.


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

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

SEBL - Siebel Systems Inc. $99.00 (+5.44 last week)

See details in sector list




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

CREE - Cree, Inc. $115.94 (-7.31 last week)

See details in sector list




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

Index       Last    Week
Dow     10927.00 -133.18
Nasdaq   3835.23 -143.18
$OEX      789.77  -23.13
$SPX     1465.81  -28.69
$RUT      530.88   -4.82
$TRAN    2671.46  -27.30
$VIX       21.93    1.24

Calls

ITWO      172.19   11.69  Solid last week, entry point at 10-dma
CFLO      122.38    9.00  Persistence pays off, roll on CFLO!
PEB       106.50    8.84  New, momentum building after breakout
ABGX       79.63    8.09  Profit taking pullback, entry point?
CDWC       83.50    6.75  New, steady climb despite Tech turmoil
CORR       60.44    6.06  New, bright spot in Biotech sector
SEBL       99.00    5.44  New, B2B on the verge of breakout
PALM       50.13    5.13  Climbing, entry on recent pullback?
CHKP      151.25    5.00  Market weakness Friday, possible entry
QCOM       66.25    4.69  New, CDMA back in business in Asia
AGIL       75.25    4.38  Happy about performance last week
YHOO      105.88    1.75  Yahoo, keep on rolling!!!
BEAS       64.06    1.00  Dropped, sideways trading
AFL        60.88    0.63  Holding at $60 support level
NT         72.69    0.44  New, optic play about to light up
COF        64.00   -1.16  Dropped, bulls quit, bears at work
CMRC       70.19   -1.19  Big B2B conferences this week
IDTI       91.00   -2.13  Battled the bears, split Friday???
NTRS       85.25   -2.38  Dropped, Financials fading
AZA        75.25   -2.75  Dropped, momentum has dissipated

Puts

SCMR      105.50  -10.75  Lashing in the Telecom Equipment sector
PWAV       37.06  -10.00  New, breakdown on big volume Friday
CMTN       43.00   -7.50  Sliding lower on increased volume
CREE      115.94   -7.31  A lot of resistance above current level
MMM        85.13   -4.81  Old-line hurt by euro of oil prices
LVLT       74.56   -4.75  Poor technicals and pessimism to boot
PCS        45.44   -1.66  Bears mounting an attack on Telecoms
UK         36.59   -1.41  Euro slide and high oil - bears delight
DIGL       72.88   -0.88  Buoyed by upgrade, biding time above $70


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

NTRS $85.25 (-2.38) Once the fate of JP Morgan (JPM) became
known, the clouds moved in on the Financials.  NTRS was holding
firm at the elevated near-term support of $88 and $89, but in
Friday's session it finally succumbed to the negative pressure
of the broader markets.  The analyst firm, Robinson Humphrey,
began coverage on NTRS with an Outperform rating too, however it
had no positive effect on trading.  The share price eventually
slid back to former resistance at $85 and violated the 10-dma
line ($86.46).  NTRS needs to go into early retirement this
weekend; especially considering that JPM is no longer pumping up
the DOW, and the NASDAQ is on shaky ground to boot.

BEAS $64.06 (+1.00) For the most part, BEAS held up strong this
week in the face of a down market for most Tech issues.  This was
most likely helped by sector sympathy as B2B stocks fared much
better than issues in weaker sectors such as the Semiconductors
or the old-school Internets.  While the stock appeared to find
bottom at the $60 level and bounced strongly, it has since failed
to break through light resistance at $68.  Despite being up a
dollar for the week, it's been basically a week of sideways
trading.  Sideways trading means decaying premiums on options.
Volume has also been light suggesting that interest in BEAS may
have waned.  As well, the up-trend line from early August has not
only been broken, but is now acting as resistance.  Rather than
watch our calls possibly lose value due to sideways movement, we
are moving our money elsewhere to more promising opportunities.

AZA $75.25 (-2.75) It looks like the 2-for-1 split announced on
Tuesday was AZA's last hurrah.  After the announcement, the
bulls made one last run at the $80 resistance level, but the
Biotech sector was in an uncooperative mood and it dragged our
play back to the $76 support level, where it spent most of the
day on Friday.  We were on the fence as to whether we should
keep the play until the selling at the end of the day pulled AZA
below support.  While it is a small violation and a positive
market on Monday could push the stock higher, we've lost
patience with a play that has essentially gone sideways for over
a week.  It looks like the momentum that pushed AZA to a new
high a week ago has dissipated, leaving the stock to drift
aimlessly.  Rather than wait for a significant breakdown, we're
putting AZA on the drop list this weekend and moving on to more
lively plays.

COF $64.00 (-1.16) Putting together anything approaching a
strong rally in this market has been tough for our COF play.
Tuesday's gains took the price to a new high, but just barely,
and after one last attempt on Wednesday morning, the bulls
appear to have given up and gone home.  In typical "sell the
news" fashion, the Financial sector lost its luster shortly
after Wednesday morning's Chase/JP Morgan merger announcement
and dropped for the balance of the week.  Although none of
COF's major support levels were broken this week, the momentum
that propelled shares to a new high has disappeared, and it
looks like the probable direction next week will be down.
Rather than wait for the chart to get ugly, we'll get out this
weekend while the getting is good.


PUTS

No dropped puts today


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

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

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

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

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

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

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


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

QCOM - Qualcomm Inc $66.25 (+4.69 last week)

Qualcomm develops and manufactures communications technologies
and products.  It's best known for its CDMA (code division
multiple access) technology which is the industry standard for
mobile communications.  This technology is used in cellular
phones, wireless telephone system equipment, and satellite
ground stations.  In addition, Qualcomm provides the trucking
industry with a monitoring system call OnmiTRACS and is
currently in a joint venture to develop a low-earth-orbit
satellite communication system called Globalstar.  They are also
the #2 supplier of digital cell phones following Nokia.

Who can forget the maniacal fervor that sent shares of QCOM up
more than 20-fold in 1999, making it the fastest rising stock on
the NASDAQ?  But that was before the abrupt setbacks in Asia and
the slower-than-expected acceptance of Qualcomm's current CDMA
technologies.  Can the exuberance that propelled QCOM to
astonishing levels return?  Qualcomm has seen its share price
dwindle 64%, dropping from $200 in January to its current $60
range.  According to money manager Graham Tanaka, who heads
Tanaka Capital management, QCOM is poised for a strong comeback.
He cited China's long-awaited decision to use CDMA for wireless
phones coupled with the rising sales of wireless products in
Korea as positive signs.  The go-ahead by the Chinese
government opens the door for Qualcomm to gain exposure to seven
mln existing customers as well as access to the fastest growing
wireless market in the world.  Also, there's the next generation
of CDMA technology to be introduced in 2001, which will provide
full wireless Internet access.  In his recent interview with
Business  Week, Tanaka forecasted that shares of QCOM will hit
$150 within three years.  Prudential Securities also estimates
that by the year 2005, royalties from the CDMA licenses will
bring the  company upwards of $3.1 bln a year, up from an
estimated $632 mln in 2000.  Granted some investors may sit on
the sidelines until there's proof of the pudding, so to speak.
But it's the technical and momentum traders that we're
anticipating will start nibbling on QCOM over the short-term.
Friday's strong break above the stubborn $65 level signals QCOM
may be getting revved up for a run.  The recovery potential is
promising.  The first adversary is the 100-dma line ($71.61),
followed by an $80 objective.  Consider taking aggressive
positions on strong dips off the converged 10 & 50 DMAs, which
are in-line with a firmer support level at $61 and $62.
Otherwise, use the former resistance at $64 and $65 as a
launching platform on high-volume moves.

On Wednesday, Sands Brothers began coverage with a Buy
recommendation, but offered no other comments.  Qualcomm is
expected to report earnings late October, early November.

BUY CALL OCT-60 AAO-JL OI=19684 at $ 9.38 SL=6.50
BUY CALL OCT-65 AAO-JM OI=28705 at $ 6.63 SL=4.75
BUY CALL OCT-70*AAO-JN OI=12715 at $ 4.25 SL=2.50
BUY CALL JAN-65 AAO-AM OI= 3471 at $12.38 SL=9.25
BUY CALL JAN-70 AAO-AN OI= 6275 at $10.13 SL=7.00

Picked on Sep 17th at    $66.25    P/E = 91
Change since picked       +0.00    52-week high=$200.00
Analysts Ratings     8-10-4-0-0    52-week low =$ 43.00
Last earnings 06/00   est= 0.27    actual= 0.27
Next earnings 11-02   est= 0.24    versus= 0.23
Average Daily Volume = 15.3 mln



CDWC - CDW Computer Centers $83.50 (+6.75 last week)

CDWC is a direct marketer of multi-brand microcomputer products
including PCs, printers, software, and networking equipment.
They sell mostly through catalogs and online, however the
company also has two retail showrooms in Illinois.  Nearly 95%
of sales is derived from big business, government, and
institutional customers.  Founder and CEO Micheal Krasny
currently maintains a 40% stake in the company.

You've got to give CDWC much-deserved recognition for its steady
climb from the depths of $47.  After shedding nearly 40% of its
share price, despite beating 2Q estimates in July, the outlook
was dismal.  However, the strong NASDAQ rally in August prompted
investors to take another look at CDWC.  And so, the stock's
recovery took a foothold.  Then two weeks ago, the gains came to
an abrupt halt as the share price neared the $80 level.  Without
the NASDAQ's power to drive it upward, it appeared the stock's
own momentum was limited.  But, the Techs weren't to stay down
for long.  On Wednesday, as the NASDAQ tried to regain composure
above the 4000 level, CDWC's momentum was resuscitated.  The
momentum regained its energy and the stock was launched through
$80 on strong volume.  And you can't beat this week's track
record either.  In the previous four sessions, CDWC set a series
of new 52-week highs.  The record stands at $83.75, just a
fraction from Friday's strong close!  CDWC currently sits above
the 5 and 10 DMAs at $80.39 and $78.28, respectively.  Use these
supportive indicators as entry gauges to take positions into
this momentum play.  A lower entry is quite risky.  CDWC is
expected to report earnings next month around October 19th.

CDW Computer Centers announced it climbed 32 positions to #23 on
this year's InformationWeek 500 list.  The magazine ranks the
most innovative corporate users of information technology.
Earlier in August, Banc of America Securities reiterated a
Strong Buy recommendation.  MSDW also restated an Outperform
rating and issued a $70 price target, which CDWC recently
surpassed.

BUY CALL OCT-75 DWQ-JO OI=225 at $13.00 SL= 9.75
BUY CALL OCT-80 DWQ-JP OI=190 at $10.00 SL= 7.00
BUY CALL OCT-85*DWQ-JA OI=105 at $ 7.50 SL= 5.25
BUY CALL JAN-80 DWQ-AP OI= 22 at $15.88 SL=11.50
BUY CALL JAN-85 DWQ-AA OI= 40 at $14.63 SL=10.75

Picked on Sep 17th at   $83.50    P/E = 57
Change since picked      +0.00    52-week high=$83.75
Analysts Ratings     3-3-0-0-0    52-week low =$21.59
Last earnings 06/00  est= 0.44    actual= 0.39
Next earnings 10-19  est= 0.45    versus= 0.30
Average Daily Volume  =  641 K



SEBL - Siebel Systems Inc. $99.00 (+5.44 last week)

Siebel Systems, Inc., is a provider of eBusiness applications.
Their products are used by organizations that wish to enhance
their ability to sell to, market to and service their customers
across multiple channels such as the Web, call centers, resellers,
retail and dealer networks.  The unique thing about these
applications is that they are designed in and available in
industry-specific versions.  The founder and CEO, Mr. Siebel got
his start as a salesman for the Oracle Corporation.

Most recently, SEBL announced that Gemplus, a provider of
plastic and smart card-based solutions will use Siebel
eBusiness Applications to standardize its customer-facing
operations on a worldwide scale.  Also of note, on September 11th
Siebel announced it would be acquiring Canadian based Janna
Systems Inc., (TSE:JAN), a provider of eBusiness solutions for
the Financial industry, for approximately $1.4 bln Canadian.
SEBL recently split its shares two-for-one on September 8th.
This chart is a thing of beauty.  You can see the pattern of
higher highs and higher lows on the chart since the beginning of
the year.  The 200-dma, currently at $65.20 has held all closes
this year and there have only been 6 closes below the 50-dma,
currently at $86, since June 1st.  Pretty impressive considering
the volatility in the marketplace this Summer.  Friday, SEBL
really flexed its muscles, bucking the negative sentiment in the
NASDAQ, by moving up $4.19 to close at $99.00 near its high for
the day.  The boost for SEBL Friday may have occurred in sympathy
with the strong earnings reports of one of Siebel's competitors,
Oracle.  Their numbers were above the estimates although investors
sold the stock off on Friday, as they may not have been up to the
whisper levels.  If this type of strength continues, it should be
fairly easy for SEBL to eclipse its last bit of overhead
resistance, at the old high of $101.25.  If SEBL decides to
pullback and rest a bit first, watch for a move down to the 5-dma
or 10-dma, currently $93 and $94.40, respectively, along with a
volume-supported bounce from there as an ideal entry point.  The
current 50-dma is a ways away at $86.  In any event, it is
imperative to monitor NASADAQ sentiment and market direction
before entering new trades.

Revenues for the 2nd quarter of 2000 came in at $387.4 mln, up
from $176.7 mln in the 2nd quarter of 1999, a 119% increase.
Last week SEBL was the recipient of two brokerages initiating
coverage.  JP Morgan initiated coverage with a BUY rating and a
target of $115 and ING Barings initiated coverage with a Strong
Buy and a target of $125.

BUY CALL OCT- 90 EZG-JR OI= 587 at $14.63 SL=10.75
BUY CALL OCT- 95 EZG-JS OI=1612 at $11.50 SL= 8.50
BUY CALL OCT-100*EZG-JT OI=1500 at $ 8.50 SL= 6.00
BUY CALL JAN-105 EZG-AA OI= 602 at $15.38 SL=11.00

SELL PUT OCT- 90 EZG-VR OI= 757 at $4.50 SL=6.00
(see risks of selling puts in play legend)

Picked on Sep 17th at    $99.00     P/E = 868
Change since picked       +0.00     52-week high=$101.75
Analysts Ratings     15-4-0-0-0     52-week low =$ 15.92
Last earnings 06/00   est= 0.09     actual= 0.11
Next earnings 10-17   est= 0.11     versus= 0.07
Average Daily Volume = 8.25 mln



NT - Nortel Networks Corp. $72.69 (+0.44 last week)

Nortel Networks is a leading global supplier of data and
telephony network solutions and services.  Covering all the
bases, its business consists of the design, development,
manufacture, marketing, sale, financing, installation,
servicing and support of networks for both carrier and
enterprise customers.  With a presence in over 150 countries,
NT serves local, long-distance, personal communications
services and cellular mobile communications companies as well
as cable television companies, Internet service providers and
utilities.

It's been a dark month so far for Nortel Networks but it appears
that things are about to light up.  The stock had been selling
off relentlessly on accelerating volume since the beginning
of the month, riding down the 5-dma and breaking below major
moving averages with ease.  First to go was the 50-dma (now at
$77.45), then the 100-dma (at $68.39).  This past Wednesday saw
NT get close to its 200-dma near $62.  At this point however,
bargain hunters stepped in and the stock has since made a
complete about-face.  On Thursday, the stock saw the right side of
the 5-dma for the first time this month.  In doing so, the stock
also closed above its 100-dma.  On Friday, the stock held up
strong all day, trading sideways until some last-minute buying
came in to close the stock up $1.19 or 1.66% on almost twice the
ADV.  An aggressive entry could be had on a bounce off the 100-dma
or the $70 level, which is just above the 5-dma.  NT encountered
resistance near the 10-dma at $73.50. A break through this level
with volume would be the signal for conservative traders to make
an entry.  Overhead, the stock may also encounter some resistance
at the $75 level but the real test is the 50-dma.  Looking at the
intraday charts, it can clearly be seen that any major moves in
the stock has been accompanied by high volume so in making an
entry, make sure the volume is in your favor.  The recovery this
week has been strong and in evaluating the risk/reward ratio, it
appears that the potential upside greatly outweighs the potential
downside.

News this Friday that NT would take its fiber-optics unit public
by next year may have given traders something to be excited
about.  The unit is valued at about $100 billion.  Nortel plans
to sell 10 to 15 percent of its stake through the IPO.

BUY CALL OCT-70 NTV-JN OI=3650 at $ 7.75 SL=5.50
BUY CALL OCT-75*NTV-JO OI=4310 at $ 5.13 SL=3.00
BUY CALL OCT-80 NTV-JP OI=5507 at $ 3.00 SL=1.50
BUY CALL DEC-75 NTV-LO OI=2844 at $ 8.13 SL=5.75
BUY CALL DEC-80 NTV-LP OI=3517 at $ 5.88 SL=4.00

Picked on Sep 17th    at $72.69     P/E = N/A
Change since picked       +0.00     52-week high=$89.00
Analysts Ratings    19-10-3-1-0     52-week low =$23.00
Last earnings 06/00   est= 0.14     actual= 0.18
Next earnings 10-24   est= 0.17     versus= 0.14
Average Daily Volume = 11.2 mln



CORR - COR Therapeutics $60.44 (+6.06 last week)

CORR is engaged in the discovery, development and
commercialization of novel pharmaceutical products to
establish new standards of care for the treatment and
prevention of severe cardiovascular diseases.  The company's
research and development programs target critical needs in
diseases such as unstable angina, acute myocardial infarction,
venous thrombosis and restenosis.  Leading the company's
portfolio of product candidates is INTEGRILIN, currently
being copromoted with Schering-Plough.  The next product
likely to emerge from the pipeline is an oral glycoprotein
IIb-IIIa inhibitor for the prevention of platelet aggretation.

Another company sandwiched between the big Pharmaceuticals and
the Biotechs, CORR's central (or core) focus is in providing
drugs to improve the survivability of cardiac related ailments.
Although the Biotech sector had a rough week, CORR was a bright
spot, tacking on more than 11% while the rest of the market
languished.  Buying volume was strong all week, with more than
1.2 million shares trading hands on Friday.  Setting a new
closing high is encouraging, especially when you consider the
number of stocks getting punished on Friday.  MACD and
Stochastics are still looking positive, but some late day
selling pulled the price back from the upper Bollinger band, to
form a doji candlestick pattern.  This could portend some
weakness in the near future, so we would look for a pullback to
support before initiating new positions.  Mild support is found
at $58, with the rising 5-dma ($57.69) close behind.  The 10-dma
(currently at $55.25) may provide some help on a sharper
pullback, but we need to look at $54, and then $52 for strong
support.  This market is known for doing the opposite of what
we expect, so it wouldn't be out of the question to see our play
continue to charge higher from here.  If that does happen,
conservative players may want to nibble at new positions as
CORR charges though $62 on its way to new highs.  As always,
strong volume will be the key; its absence will be an early
warning that the bulls are weakening.

In their daily stock update on September 6th, Robertson Stephens
reiterated their Buy rating on CORR, citing rapid acceptance of
Integrilin in both the ER and the cath lab.  This came the day
after positive results of the PUSUIT study were released,
showing that the addition of Integrilin to the traditional
unstable angina treatment regimen, significantly reduced the
chance of heart attack.

BUY CALL OCT-55 CHQ-JK OI=137 at $ 9.13 SL=6.25
BUY CALL OCT-60*CHQ-JL OI= 97 at $ 6.38 SL=4.25
BUY CALL OCT-65 CHQ-JM OI= 54 at $ 4.13 SL=2.50
BUY CALL JAN-60 CHQ-AL OI=164 at $11.13 SL=8.25
BUY CALL JAN-65 CHQ-AM OI= 15 at $ 8.88 SL=6.25

SELL PUT OCT-50 CHQ-VJ OI=209 at $ 1.50 SL=3.00
(See risks of selling puts in play legend)

Picked on Sep 17th at   $60.44     P/E = N/A
Change since picked      +0.00     52-week high=$63.00
Analysts Ratings     1-6-0-0-0     52-week low =$ 8.44
Last earnings 07/00 est= -0.29     actual= -0.24
Next earnings 10-18 est= -0.06     versus=  0.01
Average Daily Volume  =  704 K



PEB - PE Biosystems Group. $106.50 (+8.84 last week)

PE Biosystems Group is engaged in the development, manufacture,
sale and service of instrument systems and associated consumable
products for life science research.  The company's products are
used in various applications including the synthesis,
amplification, purification, isolation, analysis, and sequencing
of nucleic acids, proteins, and other biological molecules.  PEB
consists of four business units; Applied Biosystems, PerSeptive
Biosystems, PE Informatics, and Tropix.  Although each unit
serves essentially the same customer base, each is responsible
for the development and marketing of products within its
particular business area, and there is amazingly little overlap
in their respective product offerings.

Gradually emerging from the depths of the spring decline, PEB
has been following the Biotechs higher for most of the past
three months.  Higher highs and lows are always a good sign,
and with Friday's close above the $105 resistance level, our
play is looking fairly healthy.  Even though the sector traded
flat last week, PEB managed to tack on a healthy gain of more
than 9%, indicating the relative strength of this research
equipment supplier.  The company provides many of the tools
that are needed for research in the rapidly growing
Biotechnology field, making it an ideal "pick and shovel"
play.  The strong run over the past week is being supported by
both the 5-dma ($101.31) and the 10-dma ($98.31), making a
strong case for support near the $100 level.  It looks like
our play may need to consolidate a bit before running higher,
as evidenced by the doji candlestick pattern on Friday and the
relatively weak volume over the past week.  Although volume has
been on the light side, buying volume has been increasing over
the past 3 sessions, with Friday's action back above 80% of the
ADV.  Recent gains have pushed PEB into its upper Bollinger
band, and fast Stochastics have just entered the overbought zone
on a daily chart.  So you can see we are at a bit of a
crossroads here.  Which way PEB goes next week will likely be
determined by the strength of the broader market, but we are
favoring a pullback to support before entering new positions.
Once PEB confirms support, new positions can be opened as buying
volume returns and our play takes a run at the $110-111
resistance level.

The positive analyst ratings on PEB have been flying fast and
furious recently.  On Sept 6th, CS First Boston initiated
coverage of the stock with a Strong Buy Rating, and this came
the day after Dain Rauscher Wessels initiated coverage with a
Buy rating.  These announcements followed that of Robert W.
Baird, who initiated coverage on August 25th with a Strong Buy.

BUY CALL OCT-105*BVE-JA OI= 355 at $10.25 SL= 7.25
BUY CALL OCT-110 BVE-JB OI=1256 at $ 7.75 SL= 5.50
BUY CALL OCT-115 BVE-JC OI= 351 at $ 6.00 SL= 4.00
BUY CALL DEC-110 BVE-LB OI= 798 at $14.75 SL=10.75
BUY CALL DEC-115 BVE-LC OI=  15 at $12.75 SL= 9.50

SELL PUT OCT-100 BVE-VT OI=  53 at $ 3.88 SL= 5.75
(See risks of selling puts in play legend)

Picked on Sep 17th at   $106.50     P/E = 121
Change since picked       +0.00     52-week high=$160.00
Analysts Ratings      9-4-1-0-0     52-week low =$ 30.63
Last earnings 07/00   est= 0.26     actual= 0.26
Next earnings 10-26   est= 0.18     versus= 0.14
Average Daily Volume = 1.57 mln



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

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

The Option Investor Newsletter                   Sunday 09-17-2000
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/091700_3.asp


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Attention Online Traders:

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

IDTI - Integrated Device Technology $91.00 (-2.13 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).

Amazingly, IDTI fought off the Tech bears last Friday to finish
the week on a positive note.  While nearly every major Tech sector
suffered the bears' fury Friday, including the Semi sector, IDTI
held strong.  Albeit the volume was a little lackluster, but we'll
take the gain nonetheless.  IDTI's relatively strong performance
in spite of the broad market sell-off speaks of just how strong
our play is.  A reversal in the $SOX could very well send IDTI
above the century mark.  However, IDTI might not need any help
from the $SOX next week.  The company will be presenting at both
the SG Cowen Technology Conference and the Bank of America
Investment Conference over the course of next week.  Positive
press in the way of upgrades or comments from either conference
might lift IDTI to record highs.  What's more, IDTI will hold its
highly anticipated Shareholder Meeting on Friday.  What's
exciting about the meeting is that investors will vote on a
proposal to increase IDTI's number of authorized shares.  IDTI
became a split candidate when the stock crossed $50.  So, a split
announcement is likely given the stock's recent run.  Although a
split announcement is possible, we still must use sound trading
skills to gain entry into the play.  IDTI has been bouncing around
the $90 level and its 10-dma, which is currently at $88, for the
past two days.  Aggressive traders might consider buying a bounce
off $90 if IDTI stumbles a bit early Monday.  The stock has had
a hard time clearing the $95 level, which might be a good exit
point if IDTI rolls over.  However, if IDTI breaks resistance at
$95 on convincing volume, the more conservative traders might
consider jumping into the play.

Another possible catalyst for our IDTI play is the IPO of
Monolithic System Technology (MOSY), a memory chip company.
MOSY filed with the SEC last week for IPO.  IDTI is one of
MOSY's biggest investors, which means if MOSY pops on its
first day of trading, IDTI might receive a nice boost.

BUY CALL OCT-85 ITQ-JQ OI= 303 at $12.88 SL=9.50
BUY CALL OCT-90*ITQ-JR OI= 832 at $10.13 SL=7.00
BUY CALL OCT-95 ITQ-JS OI= 864 at $ 7.88 SL=5.75
BUY CALL NOV-90 ITQ-KR OI= 526 at $13.13 SL=9.75
BUY CALL NOV-95 ITQ-KT OI=2343 at $11.00 SL=8.25

Picked on August 15th at $66.88    P/E = 51
Change since picked      +24.13    52-week high=$95.25
Analysts Ratings      7-1-0-0-0    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 = 3.29 mln



ITWO - I2 Technologies $172.19 (+11.69 last week)

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

The big news in the Tech sector late last week was the blowout
number reported by Oracle.  The enterprise software giant blew
past consensus estimates with a boost in sales of its application
software.  Although ORCL was slaughtered by the bears last Friday,
its excellent earnings report foreshadows good numbers for fellow
application software maker ITWO.  ITWO also felt the pain of the
bears last Friday, but its sell-off was more market-related.
With that said, ITWO's dip last Friday might have provided a
favorable entry into the play given the prospects for a blowout
quarter when the company reports its results about a month from
now.  In fact, several analyst have publicly stated that ITWO
should have a blockbuster third-quarter earnings report.  Melissa
Eisenstadt of CIBC World Markets spoke on ITWO last Friday, and
told of the company's prospects for a strong third and fourth-
quarter.  We might hear more from the Wall Street crowd early
next week as ITWO will be attending several high-profile investor
conferences, which we'll detail below.  If the analysts bring out
the bulls early next week, aggressive traders might look to enter
the play if ITWO breaks back above the $175 level.  A more
conservative trader might wait for ITWO to gain momentum and look
to enter the play on a breakout above $180.  On the other hand,
if the Tech bears continue to wreak havoc on the NASDAQ early
Monday, aggressive traders might look to enter the play if ITWO
bounces from its major support level at $170, or a little lower
near the 10-dma at $167.50.

The Fall investor conference season is in full swing.  ITWO was a
premier presenter at the Ariba-sponsored Miami Live conference
this weekend, which might lead to some analyst noise early Monday.
ITWO will also be attending the eB2B Marketplace World gather
on Monday and the Logistics 2000 conference in the same day.
Later in the week, ITWO will show its face at the DellDirect
conference.  All the events this week should lead to some
discussion amongst the analyst, which might lead to upgrades.

BUY CALL OCT-170 QYI-JN OI=348 at $18.88 SL=13.75
BUY CALL OCT-175*QYI-JO OI=188 at $16.63 SL=12.50
BUY CALL OCT-180 QYI-JP OI=255 at $14.50 SL=11.00
BUY CALL NOV-175 QYI-KO OI=159 at $23.63 SL=17.75
BUY CALL NOV-180 QYI-KP OI=247 at $21.50 SL=16.00

Picked on August 27th at $166.50    P/E = 500
Change since picked        +5.69    52-week high=$223.50
Analysts Ratings     12-19-3-0-0    52-week low =$ 18.25
Last earnings 06/00    est= 0.08    actual= 0.10
Next earnings 10-20    est= 0.10    versus= 0.06
Average Daily Volume =  3.63 mln



CMRC - Commerce One Inc $70.19 (-1.19 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.

It's been a fun-filled week packed with news and analyst
comments.  On Monday it was "Welcome to Breakout City"!  The
FTC's approval of an Internet auto-exchange in conjunction with
an upgrade from Prudential launched CMRC out of its five-month
consolidation period.  The stock peaked at $78.13 before the
weakening broad markets brought the party to an untimely close.
Nevertheless, with all said and done, CMRC remains perched
at light support of $70 and $72.  And there was a roar of
bullish comments on the Street too.  USB Warburg, Bear Stearns
and Thomas Weisal all reiterated Buy recommendations early in
the week.  On Friday, SG Cowen initiated coverage on CMRC with a
Strong Buy recommendation and a $94 price target.  They stated
that Commerce One is a "leading player in accelerating
eProcurement/eMarketplace space.  Seeing success in landing big
consortia accounts with potential for high recurring revenue.
Positive indicators include key alliance with SAP, international
presence & partners, and strong top-line growth".  There's
obviously not a lack of optimism surrounding CMRC!  And coming
up next week, Commerce One and Ariba will kick off conferences
to showcase what's in their product pipeline, expand on recent
developments, and boast about partnerships and customer wins.
The excitement before and during these events generally creates
an upswing in the company's share price.  This coupled with the
anticipation of another round of strong quarterly results within
the sector is keeping CMRC on our docket.  CMRC is expected to
report next month on October 18th.  All in all, it's the
optimism of things to come that's keeping many of the B2B's in
the limelight.  Consider taking an aggressive entry on high-
volume moves through $72 or else look to enter the play on
definitive bounces off the first line of opposition at $75.
More conservative traders might want to confirm strength in the
NASDAQ before taking positions and then target shoot into the
play.  Remember, the resistance becomes more prominent as CMRC
nears the $80 mark.  But once it penetrates this critical level,
the path is clear for CMRC to make its way back to its split-
adjusted high of $165.50!  Alright, that may be too optimistic,
but there is technical support around $100-$110.

Some news highlights include CMRC's plans to develop a global
content network to compete with a partnership made last week
between IBM, I2 Technologies, and Ariba to form an online
business exchange directory.  The company also announced it
completed its stock-for-stock acquisition of AppNet (APNT), a
leading provider of end-to-end Internet services.  The addition
of AppNet's comprehensive services is expected to dramatically
accelerate CMRC's ability to bring marketplaces online and
improve business functionality.  The deal is valued at
approximately $2 bln.

BUY CALL OCT-65 RJC-JM OI=1072 at $11.00 SL= 8.25
BUY CALL OCT-70*RJC-JN OI=8387 at $ 8.50 SL= 6.00
BUY CALL OCT-75 RUC-JO OI=4175 at $ 6.50 SL= 4.50
BUY CALL OCT-80 RUC-JP OI=6063 at $ 4.75 SL= 2.75
BUY CALL JAN-70 RJC-AN OI=1285 at $16.38 SL=11.75
BUY CALL JAN-75 RUC-AO OI= 585 at $14.50 SL=10.75

Picked on Sep 10th at      $71.38    P/E = N/A
Change since picked         -1.19    52-week high=$165.50
Analysts Ratings      10-16-0-0-0    52-week low =$ 11.96
Last earnings 06/00    est= -0.10    actual= -0.14
Next earnings 10-18    est= -0.12    versus= -0.08
Average Daily Volume  =  8.72 mln



AGIL - Agile Software Corp. $75.25 (+4.38 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.

Considering the rough week had by many stocks on the NASDAQ,
traders of AGIL have much to be happy about.  This week could be
summarized in one phrase: entry point followed by a breakout.
Early in the week, AGIL moved lower with the Tech sector.
Despite this, volume on the downside was low.  In fact, as the
Stock price drifted lower, volume dropped to anemic levels.
Monday and Wednesday saw the stock successfully bounce above its
200-dma (currently at $66.07), offering traders with an ideal
entry point.  There was some minor resistance at the $71-72 area,
which was easily cleared on Thursday.  Starting the day above that
level, the stock spent the rest of the day moving ever higher on
accelerating volume.  In doing so, formidable resistance at $75
was cleared on high volume.  For the day, AGIL was up 8.54% on
541% of ADV.  While Friday's open was below the $75 support, the
stock bounced off its 5- and 10-dmas (both in the $73.50 area).
Spending most of the day in a narrow trading range, AGIL moved up
strongly an hour before the close but some last minute
pre-weekend profit-taking erased part of the move up.  AGIL ended
the day down $1.81 or 2.35% on over twice the ADV but managed to
close above $75 support.  At this point, trading volume in AGIL
has increased greatly.  This is a bullish sign as previous
rallies have been accompanied by strong volume.  Support at $75
is strengthening, thanks to the rising of the 5- and 10-dma.  A
bounce off the two moving averages or $75 support could be a
buying opportunity, but make sure the volume supports the bounce
and market sentiment is in your favor before entering. There
appears to be resistance at the $77-78 level and then at $80.

Only one news item to report for AGIL this week.  On Tuesday, the
company announced that it signed a contract worth over $1 million
with Universal Scientific Industrial Ltd.  AGIL will implement
its Agile Anywhere and Agile Buyer solutions worldwide.

BUY CALL OCT-70 AUG-JN OI= 61 at $11.88 SL= 9.00
BUY CALL OCT-75*AUG-JO OI= 61 at $ 8.50 SL= 6.00
BUY CALL OCT-80 AUG-JP OI=549 at $ 6.50 SL= 4.50
BUY CALL JAN-75 AUG-AO OI=  2 at $17.25 SL=12.25
BUY CALL JAN-80 AUG-AP OI=309 at $15.38 SL=11.25

SELL PUT OCT-65 AUG-VM OI= 40 at $ 3.75 SL= 2.00
(See risks of selling puts in play legend)

Picked on Sep 5th at      $74.06     P/E = N/A
Change since picked        +1.19     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   =   532 K



CFLO - CacheFlow Inc. $122.38 (+9.00 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.

This week's action in CFLO is a storybook example of how
persistence can pay off.  The sellers put up a good fight this
week but the buyers put up an even better one.  Prior to this
past Thursday, CFLO had spent the past four trading sessions
attempting to break through formidable resistance at $115.
Each and every time the bulls were denied, as any visits near
that level were swiftly and strongly rebuffed.  Not to give up
easily, the buyers kept on pushing all week long.  With support
building up and strengthening at the $105 to $110 levels and the
relentlessness of the buyers, the good guys finally broke through
on Wednesday as some late-day buying pushed the stock up to close
just 13 cents above $115, providing conservative traders with an
excellent entry.  Thursday saw the stock move up strongly in the
first hour of trading.  Spending the rest of the day digesting
its gains, the stock rallied again in the last hour of trading to
close up 4.62% on 150% of ADV.  On Friday, CFLO bucked the trend
of a down market and gained another $1.81.  Trading in the past
couple of days has seen CFLO find support at $117.  Traders
looking to enter this play on a bounce may target shoot off $115
or $117.  A bounce off $120 or the 5- and 10-dma at $115.38 and
$113.04 is an aggressive entry possibility.  Overhead, resistance
can be found in increments of $5 at $125 and $130.

While there was no news for CFLO this week, the charts in
themselves tell an interesting story.  Despite the NASDAQ
struggling, CFLO broke through strong resistance and moved
higher.  The upward regression channel connecting the highs and
lows since early August suggests that if the market is in our
favor, there is a lot of potential upside to this play.  This is
not an invitation to throw caution into the wind but rather,
pointing out the upside potential above and strengthening
support below.

BUY CALL OCT-120 FUJ-JD OI= 41 at $13.63 SL=10.00
BUY CALL OCT-125*FUJ-JE OI= 11 at $11.00 SL= 8.25
BUY CALL OCT-130 FUJ-JF OI=313 at $ 9.13 SL= 6.25
BUY CALL JAN-125 FUJ-AE OI=100 at $22.75 SL=16.75

SELL PUT OCT-110 FUJ-VB OI= 12 at $ 5.50 SL= 7.75
(See risks of selling puts in play legend)

Picked on Sep 7th at    $113.00     P/E = N/A
Change since picked       +9.38     52-week high=$182.19
Analysts Ratings      4-3-0-0-0     52-week low =$ 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  =   617 K



PALM - PALM, Inc. $50.13 (+5.13 last week)

Known for its ubiquitous Palm-branded handheld devices, PALM
brought handheld computing to the masses.  Although Apple
pioneered the concept of the Personal Digital Assistant (PDA)
with its ill-fated Newton series, PALM, which was spun off
from 3Com (COMS) in March, has managed to convince consumers
they can't live without these little electronic gadgets.  The
company's product offerings have grown and now include the
Palm III, Palm V, and the Internet-enabled Palm VII product
families.  These pocket-sized PDAs allow users to use pen-based
input and to copy and synchronize information between the
device and a personal computer.  The company's primary
competition comes from Windows CE devices manufactured by the
likes of Hewlett-Packard, Casio, Compaq.

Remember the IPO fever from last spring?  It was responsible
for propelling PALM as high as $165 on its first day of trading,
but the next three months were painful for those who
participated in the buying frenzy.  Shares of the leading PDA
company finally bottomed in late May and have been gradually
recovering ever since.  The latest run, which began about a
month ago, has propelled PALM from a low of $32 to nearly $53.
A 65% run in less than a month; now that's not too shabby!
After 3 strong days of gains last week, it looks like PALM
finally agreed to pull back and give us a shot at an entry
point.  Nothing goes up forever, and our play was due for a
bit of profit taking, especially in light of the weakness in
the broader markets on Friday.  Volume above the ADV has been
fueling the run higher, so it was good to see Friday's decline
come on significantly lower volume.  PALM had moved deep into
oversold territory on the daily Stochastics chart and Thursday's
trading pushed the price well above the upper Bollinger band,
making our play ripe for selling, especially on a
triple-witching Friday.  Intraday, the stock found support near
$49, which is supported by the rising 5-dma (currently $48.44).
The next support level looks like the 10-dma (currently $45.81),
reinforced by historical support at $45.  Overhead resistance
now sits at $53, just above Thursday's high, and waiting for
strong buying volume to penetrate this level looks like the
best conservative entry strategy.

Highlighting PALM's efforts to drive handheld industry
developments in the areas of wireless and communication
technologies in the international marketplace, the company
announced on Friday the election of Jean-Jacques Damlamian to
the PALM Board of Directors.  Damlamian is a group executive VP
for France Telecom, and is expected to provide a European
perspective on mobile communications and technical expertise
in the telecom industry.  According to Eric Benhamou, PALM's
Chairman of the board, these assets will be vital to PALM's
immediate and long-term growth.

BUY CALL OCT-50*UPY-JJ OI= 3438 at $4.50 SL=2.75
BUY CALL OCT-55 UPY-JK OI=  643 at $2.56 SL=1.25
BUY CALL OCT-60 UPY-JL OI=  737 at $1.31 SL=0.75
BUY CALL NOV-50 UPY-KJ OI=15637 at $6.00 SL=4.00
BUY CALL NOV-55 UPY-KK OI= 3150 at $4.13 SL=2.50
BUY CALL NOV-60 UPY-KL OI= 9004 at $2.81 SL=1.50

Picked on Sep 12th at    $47.13     P/E = 604
Change since picked       +3.00     52-week high=$165.00
Analysts Ratings      6-2-1-0-0     52-week low =$ 19.88
Last earnings 06/00   est= 0.00     actual= 0.03
Next earnings 09-25   est= 0.02     versus= N/A
Average Daily Volume = 8.57 mln



YHOO - Yahoo! Inc. $105.88 (+1.75 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.

Keeps on rollin'.  Picking up where it left off on Thursday, YHOO
completed another "S" curve today.  The stock sold off with the
broader markets in the morning before it flattened out near the
$104.50 level that we mentioned in Thursday's update.  In the
final 15 minutes, buyers flooded the market and the stock jumped
over a buck on almost 600K shares.  Friday's NASDAQ slide was
targeted at the big caps like ORCL, INTC, MSFT, and YHOO.  There
were few spared in the broader selling.  By now, most of you know
that the play was initiated on a valuation basis, with a limited
downside.  As the stock rolled between $104 and $110 last week,
this play offers quick intraday and one day trades for more
aggressive traders.  Even in the face of a downtrending NASDAQ,
YHOO has managed to find support at the $104.50 level.  On a
daily chart, you can see that YHOO has been in a consolidation
mode for the past week.  As we mentioned on Thursday, the MACD on
a daily chart was nearing a crossing point, and on Friday, the
fast line just crossed over the signal line fractionally.  With
this occurring, along with the 10-dma very near at $108.69, YHOO
may be due for a break.  The strong volume into Friday's close
was encouraging.  If YHOO continues its pattern of trading in
an "S" curve, it should be ready to challenge technical resistance
at the 10-dma.  To trade this play, look for YHOO to continue its
rounding up that began in the final 15 minutes of trading on
Friday.  If this occurs, look to enter at current levels, with
the 10-dma resistance in mind.  A strong, high volume move through
the 10-dma could trigger the momentum we are looking for, and a
conservative entry.  Remember that $110 was the top last week, so
until YHOO breaks above that level, it may still be trading in
rolling range.

YHOO earnings are confirmed for Tuesday, October 10th, which
leaves three full trading weeks left.  We are looking for momentum
of an earnings run to begin and drive the stock higher.  Although
YHOO hasn't been dictated by the NASDAQ woes, any positive turn
in the NASDAQ could help spark interest in this call play.

BUY CALL OCT-100 YHV-JT OI= 865 at $12.88 SL=10.50
BUY CALL OCT-105 YMM-JA OI=1034 at $ 9.75 SL= 7.25
BUY CALL OCT-110*YMM-JB OI=1959 at $ 7.50 SL= 5.75
BUY CALL OCT-115 YMM-JC OI=1707 at $ 5.88 SL= 4.25
BUY CALL JAN-120 YMM-AD OI=3123 at $12.50 SL=10.00

SELL PUT OCT- 95 YHV-VS OI=2935 at $ 4.13 SL= 5.50
(See risks of selling puts in play legend)

Picked on Sep 6th at    $107.88    PE = 281
Change since picked       -2.00    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



ABGX - Abgenix, Inc. $79.63 (+8.08 last week)

Abgenix Inc., is a biopharmaceutical company that develops and
intends to commercialize antibody therapeutic products for the
treatment of a variety of disease conditions, including
transplant-related diseases, inflammatory and autoimmune
disorders, cardiovascular disease, infectious diseases and
cancer.  XenoMouse technology is a proprietary technology they
have developed that produces antibodies with fully human protein
sequences. There are four antibody candidates that are currently
under development internally, known as ABX-CBL, ABX-IL8, ABX-EGF
and ABX-RB2, respectively.

In the last month, ABGX has entered into numerous agreements with
companies such as ImmunoGen, CuraGen and SangStat.  Most recently,
they announced a collaboration with ImmunoGen, giving ABGX
access to their Tumor-Activated Prodrug technology to use with
Abgenix's fully human antibodies generated with XenoMouse
technology.  ABGX will pay ImmunoGen a $5 mln dollar technology
access fee as well as potential milestone payments and royalties
on net sales of any resulting products.  Abgenix also agreed to
purchase $15 mln dollars of ImmunoGen common stock at $19 a share.
Technically, ABGX is looking fantastic.  It has been in a
beautiful uptrend since hitting an intra-year low of $25.91 on
April 4th.  Since that time, ABGX has spent equal amounts of time
above and below its 50-dma, currently $64.40, however the stock
has not closed below its 200-dma, currently $51.20, since April
17th.  Thursday, Abgenix broke above the double top it had formed
beginning with an intraday high back on July 11th of $79.94 and
then another high on September 5th at $80.25.  This occurred
Thursday on convincing volume of 1.86 mln shares (2.7 times ADV).
Friday, ABGX was affected by the overall negative tone in the
marketplace as it slid $4.88 to close at $79.63, just off its
lows of the day.  Trading was choppy last week but, Abgenix did
manage to tack on over $8 as it was up 3 days last week and down
2 days.  There is resistance overhead at the high set Thursday at
$84.50, then again between $90 and $92.  Beyond that level, the
old high of $103.25 will act as the last bit of resistance.
Traders want to look for a low-volume pullback to the 5-dma or
10-dma, currently $76.20 and $74.90 respectively, followed by a
bounce, as a way to gain entry to this trade.  In any event,
watch market sentiment and direction for confirmation before
entering new trades.

It is interesting to note that back in March, Abgenix signed an
agreement providing Millenium Pharmaceuticals, Inc., with
extensive access to their XenoMouse technology for the creation
of fully human antibodies.  They received an undisclosed upfront
payment and potential future payments that could reach $100 mln
plus royalties on product sales.

BUY CALL OCT-75 AXY-JO OI=155 at $12.25 SL= 9.00
BUY CALL OCT-80*AXY-JP*OI=101 at $ 9.50 SL= 6.50
BUY CALL OCT-85 AZU-JQ OI= 55 at $ 7.50 SL= 5.25
BUY CALL JAN-85 AZU-AQ OI=843 at $16.25 SL=11.50

SELL PUT OCT-75 AXY-VO OI=  7 at $ 5.88 SL= 7.50
(see risks of selling puts in play legend)

Picked on Sep 14th at    $84.50     P/E = N/A
Change since picked       -4.88     52-week high=$103.25
Analysts Ratings      1-3-3-0-0     52-week low =$  8.03
Last earnings 06/00  est= -0.03     actual= -0.01
Next earnings 11-01  est=  0.05     versus= -0.02
Average Daily Volume   =   695K



AFL - Aflac Inc. $60.88 (+$0.63 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 worlds
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.  we 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.  Two weeks ago,
AFL defied gravity and the market by moving into new high
territory again.  Friday September 8th was when 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.  This last week AFL did not get
shaken no matter what the market sent its way, ending up 4 out of
5 days on the week and continuing to close above the old high set
on September 8th of $60.25.  A new yearly high was logged in on
Wednesday at $61.38.  There is not much in the way of technical
resistance overhead, other than the high of $61.38, so you have
a couple of options for entry at this point.  Traders may want to
witness a light-volume move back down to the 5-dma (currently at
$60.70) or the 10-dma (currently at $58.40), followed by a
volume-supported bounce from there to gain entry.  The 50-dma
and 200-dma are currently, $54.20 and $47.10, respectively and
should offer further support for Aflac and potentially viable
spots for entry.  As always, watch for profit taking and market
and sector sentiment as you look to enter new trades.

Many industry watchers are expecting AFL to capitalize on the
deregulation of the Japanese insurance market.  Analysts on the
street expect AFL to benefit because of its strong presence in the
Asian markets.

BUY CALL OCT-50 AFL-JJ OI=  5 at $11.75 SL=8.75
BUY CALL OCT-55 AFL-JK OI= 19 at $ 7.50 SL=5.25
BUY CALL OCT-60*AFL-JL OI=304 at $ 4.13 SL=2.50
BUY CALL NOV-55 AFL-KK OI=948 at $ 8.25 SL=6.00
BUY CALL FEB-60 AFL-BL OI=582 at $ 7.75 SL=5.75

Picked on Sep 10th at   $60.25     P/E = 27
Change since picked      +0.63     52-week high=$61.38
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  =  446 K



CHKP - Check Point Software Tech Ltd. $151.25 (+$5.00 last week)

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

Check Point was the first company to offer easily installable
software designed to place a firewall between a corporate
network and the Internet.  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
$90.7 mln compared to $50.1 mln for the second quarter last year,
representing an 81% increase in revenues.  On April 4th, CHKP hit
an intraday low of $57.97.  Trading then remained choppy until
May 30th, at which time CHKP closed at $94.38, above its 50-dma
($87.10 at that time).  From there, it had 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 except for
two, have settled above the 10-dma (currently at $148.50).  That
is not to say that there is no volatility in this stock, as
evidenced by last weeks action which provided us with 3 up days
and 2 down days.  Monday CHKP got off to a bad start finishing the
day down over $8, but, stabilized by midweek.  On Thursday CHKP
even mustered enough strength to hit another all time high, at
$159.  Even though the NASDAQ struggled for the week, Check Point
did manage to tack on +$5.00 for the week.  Not to bad for a
volatile issue like this one.  As long as Check Point continues
to exhibit this kind of strength, traders may want to look for a
pullback on light volume to the 5-dma or 10-dma (currently at
$147.20 and $148.50, respectively), along with a bounce, for an
ideal entry point.  You will be waiting until $128.50, 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.

This week CHKP benefited from an announcement stating that a
subsidiary of Computer Horizons Corp., known as eB Networks,
Inc., would be expanding it relationship with Check Point.
Furthermore, they released a new product on Tuesday for new
startup businesses known as "SVN Solution Pack for Startups."

BUY CALL OCT-145 KGE-JI OI= 327 at $18.25 SL=13.00
BUY CALL OCT-150*KGE-JJ OI=1816 at $15.38 SL=11.00
BUY CALL OCT-155 KGE-JK OI= 121 at $13.38 SL= 9.75
BUY CALL JAN-150 KGE-AJ OI= 374 at $29.38 SL=22.00

SELL PUT OCT-140 KGE-VH OI= 679 at $ 8.00 SL=10.00
(see risks of selling puts in play legend)

Picked on Sep  3rd at   $149.44     P/E = 194
Change since picked       +1.81     52-week high=$159.00
Analysts Ratings     13-4-0-0-0     52-week low =$ 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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**********
DISCLAIMER
**********

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

The Option Investor Newsletter                   Sunday 09-17-2000
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/091700_4.asp


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

PWAV - Powerwave Technologies $37.06 (-10.00 last week)

Powerwave Technologies designs, manufactures, and markets
advanced radio frequency (RF) power amplifiers for use in
wireless communications networks worldwide.  Powerwave has one of
the broadest and most diverse product offerings of any
independent supplier in our industry. Powerwave's products
continue to set new standards for performance, service, and price
while carving out a rock solid reputation for reliability.  Their
production released products cover all major global air interface
standards in all major frequency bands.  They are used in
cellular, Personal Communications Services (PCS), and Wireless
Local Loop (WLL) base stations in both digital and analog
networks.

September has been a rough month so far for PWAV, and there is
little to suggest that this will change soon.  Ever since failing
to break through resistance at $50, the stock has sold off
strongly, with few if any up days.  For the most part, it has
been riding down the 5-dma, now at $43.27.  Violations of major
moving averages have also been the theme of the month.  First to
go was the 100-dma, now at $48.63.  From therel it was a quick
trip down below the 200-dma (now at $42.40), as it broke through
that point Thursday.  Friday, the stock broke below support at $40,
which also happens to be near its 50-dma.  Volume to the downside
had previously been light but this week, has been steadily
accelerating.  On Friday, the stock lost $4.69 or 11.23% on
roughly 125% of ADV.  Along with the moving averages, resistance
for the stock can be found in increments of $5 at $40 and $45.
Those looking for an ideal entry into this play may want to
target-shoot a failed rally above $40.  An aggressive entry can
also be had on a bounce off the 5-dma but make sure volume
confirms a roll-over before entering.  Looking below, support for
the stock can also be found in increments of $5 at $35 and then
$30.  Conservative traders may want to wait to see if PWAV moves
below $35 with conviction before entering.  With little news
this week for the company, sector sympathy will play an
important role.  Look to peers such as RFMD for clues on possible
short-term direction.

BUY PUT OCT-40*VFQ-VH OI=188 at $6.38 SL=4.50
BUY PUT OCT-35 VFQ-VG OI= 63 at $3.63 SL=1.75
BUY PUT OCT-30 VFQ-VF OI= 10 at $1.75 SL=1.00

Average Daily Volume = 2.01 mln



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

UK - Union Carbide $36.63 (-1.41 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 Chemicals sector has been bruised and battered by the high
cost of energy over the past month.  Now, a new threat has entered
the group.  The sliding euro is causing concern that multinational
companies will suffer from currency woes.  Fortunately for us on
the short-side, UK is very much a multinational company, thus very
much susceptible to currency fluctuations.  The currency concerns
that entered the market last week were enough to push UK below its
6-day long support level at $38, and carry the stock to a new 52-
week low.  The breakdown of UK's support level last Friday might
foreshadow lower prices ahead.  What's more, volume picked up
during Friday's punishing trading, which might suggest the
institutional sellers have returned.  Going forward, any further
decline in the euro would act as a downward catalyst and drive UK
lower.  We're not currency analysts here, but it might be
conducive to monitor the level of the euro before entering any
new positions in UK.  The price of oil will also be worth
watching as an indicator of UK's direction.  If you can't monitor
the prices of the aforementioned, continue to watch the price and
volume action of UK.  As we've been writing, volume tends to swell
during UK's sell-offs.  Consider entering the play at current
levels early next week as UK finished at its day lows last Friday.
However, make sure to confirm heavy volume with any downward move.
Aggressive traders might consider entering the play after UK fails
to rally above its nearest resistance level at $37.  Make sure to
wait for the stock to rollover before entering on a rally.

BUY PUT OCT-40*UK-VH OI=75 at $4.13 SL=2.50
BUY PUT OCT-35 UK-VG OI= 8 at $1.44 SL=0.75

Average Daily Volume = 831 K



CMTN - Copper Mountain Networks $43.00 (-7.50 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.

Not too long ago, the Telecom Equipment sector captivated the
bulls on Wall Street.  The endless growth of the Internet coupled
with the high demand for bandwidth drove stocks within the sector
to stratospheric heights.  However, the hoopla and excitement over
many of the equipment providers is a distant memory as the harsh
reality of a capital spending slowdown has entered the forefront.
While the news of a slowdown in spending by the big Telecom
carries is several weeks old, it is still working its way into the
market.  CMTN fell in all five days of trading last week, on
volume that was more than convincing.  In fact, CMTN slipped lower
last Friday nearly twice its ADV.  The swell in trading activity
last week in conjunction with CMTN's falling price suggests
institutions are running scared from the stock.  The fact that
CMTN is stuck in a descending channel and the Tech sector as a
whole is a little shaky, bodes very well for our put play next
week.  CMTN losses decelerated somewhat in the latter part of last
week's trading.  However, the stock did sink in the final moments
of trading last Friday combined with a surge in volume.  If those
late-day sellers return early next week, aggressive traders might
consider entering new put positions in CMTN at current levels.
The more conservative traders might wait for CMTN's slide to
accelerate and look to enter the play if the stock falls below
support at $42 on heavy volume.  Also, pay close attention to the
direction in the NASDAQ and watch the action in the broader
Telecom Equipment sector by monitoring LU, CIEN, SCMR, and CMVT.

BUY PUT OCT-50 KUA-VJ OI=998 at $10.50 SL=7.75
BUY PUT OCT-45*KUA-VI OI=191 at $ 7.25 SL=5.25
BUY PUT OCT-40 KUA-VH OI=463 at $ 4.50 SL=2.75

Average Daily Volume = 2.73 mln



DIGL - Digital Lightwave $72.88 (-0.88 last week)

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

We initiated coverage on DIGL when the dismal forecast amongst
the major telecoms further impacted its already depressed share
price.  Earlier in the month, some analysts suggested that
capital spending would pullback with enough magnitude to
effectively ripple through the Networking sector.  Hence, a
sell-off.  The adverse sentiment first sent DIGL reeling through
the 100-dma ($84.58).  It's found some light support at the 200-
dma ($75.88), but the technical line continues to fail.  This
week, the intraday gyrations offered target shooters a multitude
of entries and exits.  On Monday and Thursday, DIGL peaked at
$79.38 and $79.16, respectively, yet made regular sweeps to the
low $70s.  Although it was Wednesday's session that got the gold
star.  The stock opened in a weakened state and tumbled below
$70 to set the near-term bottom of $68.  Despite the
profitability of the point spreads, DIGL is showing signs of
finding support around $73.  Take a look at last week's chart
for visual confirmation.  Granted the 10-dma, now lower at
$78.14, is serving as a formidable ceiling.  However, it's
essential that DIGL break to the downside and kick-start the
momentum.  The more adventurous could take entries off the
above-mentioned 10-dma, but take into account that any strength
over $80 spells BIG TROUBLE.  Consider waiting for DIGL to
violate $70 on strong volume, unless your strategy is to play
the spread.

BUY PUT OCT-75 DGU-VO OI=97 at $9.00 SL=6.25
BUY PUT OCT-70*DGU-VN OI=89 at $6.63 SL=4.50
BUY PUT OCT-65 DGU-VM OI=74 at $4.37 SL=2.75

Average Daily Volume = 873 K



SCMR - Sycamore Networks $105.50 (-10.75 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.

The proverbial lashing continued this week as shares of SCMR
lost more ground.  The combination of an earnings report that
didn't meet the Street's expectations on August 25th and the
threat of decreased spending by the major Telecoms knocked SCMR
off its feet.  The share price has lost almost $60, or 36% of
its recent value. SCMR is steam-rolling downhill and there's
still more room to fall in the near-term.  The next level of
support is found about 10 points away at June's lows of $95 and
$100.  The critical slide under $110 in Friday's session marked
the passing of the 200-dma line, which was SCMR's last hope for
a buoy.  This technical indicator, currently at $110.30, should
now begin to serve as immediate resistance, with a stronger
ceiling developing at the 100-dma line ($113.45).  The volume
continues to back the decline and perpetuate a convincing
downtrend line.  Trading levels have been peaking at more than
2.5 times the ADV.  Look for this robust activity to
characterize future  moves to the downside.  Consider taking
entries on high-volume moves off $110 or utilize an intraday
upswing for entry points; although it may be too risky to enter
above the $117 mark.

BUY PUT OCT-110 QSM-VB OI=785 at $15.13 SL=11.00
BUY PUT OCT-105*QSM-VA OI=324 at $12.38 SL= 9.25
BUY PUT OCT-100 QSM-VT OI=547 at $ 9.63 SL= 6.50

Average Daily Volume = 4.88 mln



CREE - Cree, Inc. $115.94 (-7.31 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.

Our put play journeyed deeper into profitable territory this
week, with help from weakness in the NASDAQ and the Semiconductor
sector.  Even for those who have been just watching this play
from the sidelines, it serves as an excellent example of how
profits can be better gained in going with the flow of the market
and direction in sector sympathy.  CREE's chart also serves as a
textbook on overhead resistance.  With the 100-dma near $130, the
50-dma and 200-dmas near $125, and the 10-dma near $122, CREE has
a lot of work ahead if the stock is going up.  Failures to
rally above these levels have and continue to be ideal entry
points.  The stock did however, find support on Wednesday at the
$109-110 level.  Bouncing strongly on Thursday, CREE failed to
rally above the 10-dma and 50-dma.  Friday saw market and sector
sympathy take over again as the stock gave back $2.56 or 2.16% on
a light volume day.  At this point, a cursory glance at CREE's
chart shows that since the beginning of the month, the stock has
been riding down on the back of the 10-dma.  With reinforcement
from the 50- and 200-dmas just above, this level would be the
ideal target to shoot for but make sure the stock confirms the
rollover before entering.  The more risk-averse will want to see
CREE break below $109-110 with conviction before making an entry.
From there, the next major level of support would be at the
psychological $100.  As there has been no news of material this
week for the company, look for sector sympathy and market
direction to continue to influence movement in the stock price.

BUY PUT OCT-120 CQR-VD OI=374 at $15.00 SL=11.00
BUY PUT OCT-115*CQR-VC OI= 96 at $11.00 SL= 8.25
BUY PUT OCT-110 CQR-VB OI=322 at $ 8.50 SL= 6.00

Average Daily Volume = 1.1 mln



LVLT - Level 3 Communications $74.56 (-4.75 last week)

Billing itself as a major bandwidth merchant, LVLT is building
more than 20,000 miles of fiber-optic networks in the US and
Europe.  Based on Internet protocol (IP) communications, the
company's network also includes undersea capacity across both
the Atlantic and Pacific oceans.  Thinking ahead, LVLT has
packed its network with fiber and conduits for future upgrades.
Currently serving such data-intensive customers as ISPs and
telecom carriers, the company's services include dedicated
circuits, Internet access, server and network equipment
collocation, and dark fiber leasing.

Caught between a negative technical picture and weakness in the
Telecom sector, LVLT has had a rough go of it this month.
Concerns about slowing demand for Telecom equipment has
pressured many companies in the sector, so LVLT is simply
playing follow the loser.  What is more disturbing is seeing the
stock continue to show weaker performance on each attempted
rally.  Coming off the March highs above $130, the May and
June recoveries topped out near $94, but at least they managed
to, temporarily, clear the 200-dma.  Such was not the case with
the August rally, which turned on a dime at the 200-dma
(then $87.81), and headed back towards earth.  After rolling
over two weeks ago at the 200-dma, our play headed lower,
violating the 10-dma ($76.50), 50-dma ($74.69), and the 100-dma
($78.69) in the process.  The 30-dma at $72.06, is just over $2
below Friday's close, and if it fails to hold, we'll be looking
at $67 as the next level of support.  The tug of war between
buyers and sellers was fast and furious this week, as they
pushed and pulled LVLT between resistance at $79 and support at
$74.  The 10-dma (now at $78.81) is increasing the downside
pressure, and based on the action last week, victory appears to
be favoring the bears in this ongoing saga.  Thomas Weisel
initiated coverage on Friday with a Buy rating, and investors
responded by punishing the stock for a $4 loss.  Resistance near
$79 will be tough to penetrate in this market, and we would
consider a failed rally near this level to be an attractive
entry point.  With the negative market environment, we may not
get such an attractive opportunity, so conservative investors
may want to wait for support at $72 to fail before opening new
positions.

BUY PUT OCT-75*QHN-VO OI=344 at $6.75 SL=4.75
BUY PUT OCT-70 QHN-VN OI=462 at $4.50 SL=2.75

Average Daily Volume = 2.43 mln



MMM - Minnesota Mining and Manufacturing $85.13 (-4.81 last week)

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

Negative factors continue to plague old-line manufacturing
companies throughout the week, and MMM was no exception.  One
of the chief issues troubling this sector is sky-high energy
prices, and with the recent saber rattling coming from Iraq, it
could get worse before it gets better.  Higher energy costs are
increasing production costs, and that puts a crimp on profit
margins.  Then you have the Euro at all-time lows against the
dollar, which will impact profits due to the loss incurred when
foreign sales are converted back to dollars.  We are deep in the
heart of earnings warning season, and the line of confessors
last week was long and troubling, with energy costs and currency
problems showing up repeatedly on the list of corporate excuses.
With the recent warning from Dupont and the downgrade of
Colgate, the wolves are circling and it looks like it is only a
matter of time before we get some bad news from MMM.  Even
without any company specific news last week our play nose-dived
from $96 resistance to $84 support in seven days.  Friday's
candle is a mirror image of Thursday, as MMM held support at
$84 and closed the session just above $85.  We are waiting for
the declining 5-dma (currently at $86.75) to catch up, and
coupled with any negative news, it could drive MMM as low as
$80 before the stock finds any relief.  Selling volume continues
to be heavy, with Friday's action coming in at nearly twice the
ADV.  While the picture looks grim, we need to exercise caution
going forward.  MMM is deep in oversold territory and could
bounce on the slightest provocation.  If you've been riding the
play for a few days, tighten up your stops to protect your
profits in the event of a recovery.  Use any such recovery
as an opportunity to initiate new positions when the bulls fail
to penetrate resistance, first at the 5-dma, and then near $88,
also the site of the 100-dma.

BUY PUT OCT-90*MMM-VR OI=411 at $6.13 SL=4.00
BUY PUT OCT-85 MMM-VQ OI=714 at $3.00 SL=1.50

Average Daily Volume = 1.22 mln



PCS - Sprint PCS Corp. $45.44 (-$1.66 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 Schwab's 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 in at $66.94, then on June 19th PCS made a failed attempt
to clear that 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
$53.90 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
$46.80 and the 10-dma at $47.50 have been breached to the
downside.  A weak case could be made that prayerful support
could be found at the $44.06 level, the site of an intraday low
made on April 14th, but I think you can see this might be a bit
of a stretch.  Last week PCS traded down 4 out of 5 trading days.
The intraday low for the week was $44.31 occurring Friday.  We
had been waiting for a volume acceleration associated with a
downside move and Friday we got it as PCS closed down -$0.81,
to $45.44 on 4.98 mln shares (1.33 times ADV).  Adding fuel to
this fire has been the continuing concern in the marketplace,
that handset sales are slowing.  For example, Friday a company
known as Anadigics (ANAD) pre-announced a shortfall for their
quarter due to a slip in orders from their number one wireless
customer.  This type of announcement can really heighten the
negativity already associated with this sector.  A failure from
here to rally above its current 5-dma or 10-dma along with
volume to confirm may 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.  If PCS overcomes the $51 level with strong volume step
aside.

BUY PUT OCT-50 PCS-VJ OI= 133 at $5.88 SL=4.00
BUY PUT OCT-45*PCS-VI OI=  98 at $2.69 SL=1.25
BUY PUT NOV-40 PCS-WH OI= 860 at $1.63 SL=0.75

Average Daily Volume = 3.66 mln



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*****
LEAPS
*****

Alert!  Buying Opportunity Ahead
By Mark Phillips
Contact Support

Those who are vigilant will notice that our headline is the same
as last week.  The point I'm trying to make is that although we
are a week closer to that attractive buying opportunity, the
market has yet to reward us with convincing evidence that it is
ready to straighten up and fly right.  So the message is, a
buying opportunity is approaching, but we need to be vigilant to
make sure we don't jump in too early.  I personally think we
could see some attractive entries materialize as early as this
week, but for the most part I expect to sit on my hands due to
the host of bearish factors outlined below.

Investor concerns seem to have moved away from the prospects of
interest rate hikes and are now focused on the effect of those
hikes now making their way through the system, namely a slowing
economy.  Although this slowdown is good in the eyes of the Fed,
what investors see is slowing profits, and that is never good
for stock prices.  Further bearish sentiment is coming from the
energy sector, as crude oil continues to hit new highs, stopping
just shy of $36 per barrel on Friday.  Despite OPEC's promise to
add to current production levels by October 1st, with winter
rapidly approaching, we are unlikely to see any relief at the
pump before next year.  Unlike rising interest rates, every
sector of the market is affected by rising energy costs and this
will inevitably affect profits.  As if we needed another bearish
factor, we have the Euro trading at record lows against the
dollar, and the currency conversion will adversely affect
profits of companies doing business overseas.

The early birds started lining up at the confessional this week
with 30 companies informing investors that they will fail to
meet their estimates for the current earnings cycle.  The two
favorite excuses for lack of performance were (surprise,
surprise) energy costs and currency problems in Europe.  Expect
this parade to continue, as the underlying problems don't show
any signs of letting up.

The VIX isn't providing any guidance for the near term as it
stubbornly remains below 22, although it was encouraging to see
it move up Friday, closing out the week at 21.93.  The broad
markets have continued lower over the past 2 weeks, but if the
VIX is to be believed, there is more downside to come.  Combined
with the OEX, and NASDAQ approaching significant support levels,
we are left with the conclusion that it is a typical September;
treacherous waters indeed!

In the midst of all this bearish commentary, we have to inject a
note of optimism.  Select LEAPS plays are showing definite signs
of bottoming, with the NT the first to lead the recovery this
past week.  CSCO is looking better, and EMC's strength is
encouraging, to say the least.  It was tough deciding between
EMC and CSCO for the Spotlight play this week, but given its
stellar performance over the past 10 months, we thought it was
high time EMC made it back into the limelight.

If you've been following the Traders Corner articles by Austin
Passamonte lately, you will notice that many of our portfolio
plays are showing classic bottoming patterns.  From JDSU to
VERT, and CSCO to DELL, the price on many of these plays has
penetrated the lower Bollinger band and with Stochastics deep
in oversold territory, the list of possible entry points is long
and enticing.

The catch here is timing; just because a stock is heavily
oversold does not mean that it can't become more so.  Take the
time to review your short list of play candidates and if
necessary, update your desired entry points.  The remainder of
the month is likely to be just as treacherous, but the hidden
treasure is great entry points.  Set your plays up and wait.
Although you are unlikely to get them all, if you do your
homework ahead of time, you will be prepared to strike at
enough new plays over the next 6 weeks to swell your account
nicely in the last 2 months of the year.

When the markets are uncooperative (like they have been so far
this month), it is a great time to step back and improve your
education.  No matter what your level of trading expertise,
reading, studying charts, and attending seminars is the type of
activity that will pay for itself in spades when the markets
recover their footing.  Pick your favorite educational path and
take advantage of it over the coming weeks.  If you happen to
be in Boston in two weeks, you can join me at the seminar as I
assume the role of student and sit down to learn all I can from
Chris and his team of instructors.  I hope to see you there.

Remember, when in doubt, stay out.


Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $55.63   485.53%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $26.50   140.91%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $41.50   174.29%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $28.13     2.27%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $43.38    97.16%
ERICY  01/30/00  JAN-2002 $16.3 WRY-AO   $ 6.75   $ 5.75   -14.81%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 4.63   -32.78%
NSM    02/27/00  JAN-2002 $ 70  WUN-AN   $24.25   $ 9.88   -59.28%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 9.25   -50.35%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $18.13     3.57%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $20.00   114.63%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $10.13    88.20%
AMD    04/16/00  JAN-2002 $ 35  WVV-AG   $13.00   $ 8.25   -36.54%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $45.38    14.50%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $37.38   -32.35%
MOT    05/14/00  JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 8.50   -10.90%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 9.63   -44.20%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $13.63   -23.24%
NXTL   06/11/00  JAN-2002 $ 60  YFG-AL   $19.25   $11.88   -38.31%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $14.38    39.43%
AMGN   07/02/00  JAN-2002 $ 75  WQY-AO   $20.75   $16.75   -19.28%
                 JAN-2003 $ 70  VAM-AN   $28.75   $25.88   -10.00%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $65.63   - 0.94%
       09/03/00  JAN-2003 $190  OVS-AR   $86.63   $82.25   - 5.05%
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $ 3.50   -72.29%
                 JAN-2003 $ 60  VDL-AL   $15.38   $ 5.88   -61.80%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $18.63     8.73%
                 JAN-2003 $ 70  OZG-AN   $23.13   $24.75     7.00%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $24.88   -11.95%
                 JAN-2003 $120  VHP-AD   $32.63   $29.50   - 9.59%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $24.63    18.67%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $29.00    14.26%
MFNX   08/06/00  JAN-2002 $ 40  WOF-AH   $13.75   $ 7.50   -45.45%
                 JAN-2003 $ 45  VKW-AI   $15.63   $ 9.63   -38.42%
GM     08/06/00  JAN-2002 $ 65  WGM-AM   $ 9.88   $16.63    68.27%
                 JAN-2003 $ 65  VGN-AM   $13.25   $20.38    53.77%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $35.63    13.53%
                 JAN-2003 $100  VFB-AT   $37.38   $41.13    10.02%
BRCD   08/27/00  JAN-2002 $220  YNU-AD   $65.38   $69.13     5.73%
                 JAN-2003 $220  OMW-AD   $86.50   $88.75     2.60%
INKT   08/27/00  JAN-2002 $130  XOR-AF   $50.13   $46.63   - 6.99%
                 JAN-2003 $140  VFR-AH   $60.88   $56.63   - 6.99%
VERT   09/03/00  JAN-2002 $ 60  YER-AL   $22.13   $13.13   -40.68%
                 JAN-2003 $ 60  OER-AL   $28.88   $17.88   -38.10%
CMRC   09/10/00  JAN-2002 $ 80  YCU-AP   $30.13   $28.25   - 6.24%
                 JAN-2003 $ 80  OCU-AP   $38.75   $37.25   - 3.87%
PHCM   09/10/00  JAN-2002 $ 90  YPH-AR   $45.75   $40.25   -12.02%
                 JAN-2003 $ 90  OFO-AR   $52.50   $47.13   -10.24%


Spotlight Play

EMC - EMC Corporation $94.75

We figured it was high time we reviewed our play on EMC, and the
action in the markets this week has given us the perfect
opportunity.  A quick glance at the playlist will show you that
it was the first entrant to the portfolio, and its consistent
performance over the past 10 months has made it the most
profitable play as well.  Although the Internet sector has been
under continued pressure lately, it is not a reflection on the
rate of growth of the Internet itself.  It is still growing at
an incredible rate, and every new bit of new information
created; whether on the Web, a corporate intranet, or a B2B
marketplace, must be stored someplace.  This is where our play
on EMC comes in.  The company is still the undisputed leader
in enterprise storage systems, and investors' appetite for the
stock is showing no signs of diminishing.  Analysts love the
stock (27 of 28 that follow EMC, rate it either a Buy or a
Strong Buy), and given the stellar earnings reported in July,
it is no wonder.  Beating the street by 2 cents was good, but
the real meat came in the form of 30% year-over-year revenue
growth combined with bullish comments about the prospects for
the remainder of the year.  After a bit of indecision in the
first half of August, the bulls took charge and pushed the
stock above the $90 level, and even with the market-wide
carnage over the past two weeks, the bears have been unable to
push the stock back down to that level, which is now strong
support.  Testing the 30-dma (then at $92.50) on Wednesday was
the extent of the damage they could inflict this week,
highlighting EMC's impressive relative strength.  As if we
needed more incentive to feature EMC this week, we noticed
that the stock typically splits when it gets above $100, a
level that corresponds to the all-time high set on September
7th.  Given the rate at which companies have been issuing split
announcements lately and EMC's strength, we think it is more
than likely that we could be rewarded with another 2-for-1 with
the release of earnings, scheduled for October 18th.  After the
beating that many stocks took on Friday, it is encouraging that
our play was able to hold above the $94 support level, losing
only a fraction on the day.  Below that, we have solid support
at $92 and then $90.  While conservative investors will want to
wait for EMC to scale the $97 resistance level before playing,
better entries can be had by target shooting intraday dips to
support.  Just make sure that strong buying volume is
accompanying the bounce, so that you don't get caught trying to
catch a falling knife.

BUY LEAP JAN-2002 $100.00 YME-AT at $23.13
BUY LEAP JAN-2003 $100.00 VUE-AT at $32.75


New Plays

QCOM - Qualcomm, Inc. $66.25

Remember QCOM?  Last year's darling stock, which humbled many
investors this year as it fell through one support level after
another, looks like it may have found new life.  Central to the
conditions that precipitated the stock's decline earlier this
year was concern that China would not adopt CDMA (at least not
as quickly as originally estimated), and it seemed for a few
months that no support level would hold.  Turn the clock forward
to today, and the news is slanted the other way with China Unicom
coming back into the fold and embracing QCOM's narrowband CDMA
protocol, IS 95, over the competing W-CDMA that is favored by
Nokia and Ericsson.  With the change of heart seen in this large
and pivotal market, QCOM has seen investor interest pick up
substantially over the past week and a half, and it could be
readying itself for a nice recovery.  Bearing this out is more
positive press and analyst ratings, with Sands Brothers initiating
coverage at a Buy this past Wednesday and according to BusinessWeek
on Thursday, shares of the CDMA technology company should hit $150
within 3 years.  Support appears to be rock solid at $55, with good
support at $58 and then $60.  Congestion between $62-64 could provide
milder support with the encouragement of the converged 50-dma ($61.63)
and 10-dma ($61.88).  The buying interest this week propelled the
shares above the $65 resistance level for the first time in over a
month, an encouraging sign in light of the action in the broader
markets.  The relatively quiet trading over the past few months has
served to bring option premiums down out of the stratosphere, making
this a good time to pick up some LEAPS on the cheap before the momentum
kicks in.  Pick your favorite support level and consider intraday dips
as buying opportunities, so long as strong buying volume confirms the
bounce.

BUY LEAP JAN-2002 $70.00 WBI-AN at $22.50
BUY LEAP JAN-2003 $70.00 VLM-AN at $29.63


Drops

None


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

When The Earth Starts To Shake
By Ryan Nelson

Growing up in the San Francisco Bay Area, we had our share of
quakes and tremors.  The most interesting point of any earthquake
was the first split second when the trembling begins.  Your
mind instantly wonders, "is this the big one?"  Heading into
October with a sinking market can bring about the same feeling.
Friday afternoon as the Nasdaq plummeted down towards 3800, I
couldn't help but to think, "is this the big one?".  The support
at 3800 held on Friday, but the market nearing October gives
you the same uneasiness as a Calfornia quake.  Nevertheless,
there are stocks moving higher on split runs.  Ciena is the
first that comes to mind.  They will be going ex-dividend on
the 19th.  This may be the only real strong play to watch in
the short-term.


Current Split Run Plays

None


Current Split Candidate Plays

ITWO
CHKP
CDWC
IDTI
PEB


Candidates That Are Not Current Plays

BRCD
NEWP
ARBA
DNA
VRSN
MUSE
EXTR
MANU
GS
LEH


10 Most Recent Announcements We Predicted

ORCL - 09/14 (most recent announcement)
SUNW - 08/17
GLW  - 08/16
HWP  - 08/16
CIEN - 08/15
SEBL - 08/08
SAPE - 08/01
AMD  - 07/19
PDLI - 07/11
TXN  - 04/20


Major Announcements So Far This Month = 12

LSCC     PRHC     AVT      MLNM
AUDC     NUHC     MEDX     AZA
ASF      UTI      ADBE     ORCL


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


Symbol  Company Name                Splits  Payable    Executable
BUD   - Anheuser-Busch Companies Inc  2:1  09/18/2000  09/19/2000
NSIT  - Insight Enterprises Inc.      3:2  09/18/2000  09/19/2000
ACLNF - A.C.L.N. Limited              5:4  09/18/2000  09/19/2000
XTO   - Cross Timbers Oil Co.         3:2  09/18/2000  09/19/2000
CIEN  - CIENA Corporation             2:1  09/18/2000  09/19/2000
HAR   - Harman Intl Industries        2:1  09/19/2000  09/20/2000
IIVI  - II-VI, Inc.                   2:1  09/20/2000  09/21/2000
SBSE  - SBS Technologies, Inc.        2:1  09/20/2000  09/21/2000
FLSH  - M-Systems Inc.                2:1  09/21/2000  09/22/2000
PCP   - Precision Castparts Corp.     2:1  09/21/2000  09/22/2000
EMKR  - EMCORE Corporation            2:1  09/25/2000  09/26/2000
SMTC  - Semtech Corporation           2:1  09/25/2000  09/26/2000
MCHP  - Microchip Tech.               3:2  09/26/2000  09/27/2000
MAPS  - MapInfo Corporation           3:2  09/28/2000  09/29/2000
AVT   - Avnet, Inc.                   2:1  09/28/2000  09/29/2000
PRHC  - Province Healthcare           3:2  09/28/2000  09/29/2000
OCCF  - Optical Cable Corporation     3:2  09/28/2000  09/29/2000
ABMD  - Abiomed, Inc.                 2:1  09/30/2000  10/02/2000
CUZ   - Cousins Properties Inc.       3:2  10/02/2000  10/03/2000
UTI   - UTI Energy Corp.              2:1  10/03/2000  10/04/2000
GLW   - Corning Incorporated          3:1  10/03/2000  10/04/2000
RY    - Royal Bank of Canada          2:1  10/05/2000  10/06/2000
SONS  - Sonus Networks Inc.           3:1  10/06/2000  10/10/2000
AUDC  - AudioCodes                    2:1  10/06/2000  10/09/2000
MDZ   - MDS Inc.                      2:1  10/10/2000  10/11/2000
LSCC  - Lattice Semiconductor         2:1  10/11/2000  10/12/2000
ORCL  - Oracle Corporation            2:1  10/12/2000  10/13/2000
FLEX  - Flextronics International     2:1  10/16/2000  10/17/2000
ASF   - Administaff, Inc.             2:1  10/16/2000  10/17/2000
MLNM  - Millennium Pharmaceutical     2:1  10/18/2000  10/19/2000
MEDX  - Medarex, Inc.                 2:1  10/18/2000  10/19/2000
NUHC  - Nu Horizons Electronics       3:2  10/23/2000  10/24/2000
ADBE  - Adobe Systems, Inc            2:1  10/24/2000  10/25/2000
CMRO  - Comarco, Inc.                 3:2  10/27/2000  10/30/2000
HWP   - Hewlett-Packard Company       2:1  10/27/2000  10/30/2000
AZA   - ALZA Corporation              2:1  11/15/2000  11/16/2000
PSC   - Philadelphia Suburban         5:4  12/01/2000  12/04/2000
SUNW  - Sun Microsystems              2:1  12/05/2000  12/06/2000


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

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

The Option Investor Newsletter                   Sunday 09-17-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/091700_5.asp

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

Success Basics: Maximizing Profit - Limiting Loss
By Mark Wnetrzak

The process of becoming a systematic trader is something we all
must endure.  The objective of any trading system is to identify
and profit from, significant moves in a specific issue.  Methods
that allow big profits at the risk of occasional, limited losses
are generally the most successful.  However, there is a dilemma
that frequently prevents new investors from developing effective
techniques.  The problem is, if you want to formulate the most
productive system, you will likely need to focus on short-term
indicators, thus using less stable data, which eventually leads
to a higher probability of losing positions.  Trading methods
that rely on longer-term data are ordinarily more successful
but at the same time, their profits occur at a much slower rate.
The actual design of an efficient system need not be different
for longer term or shorter term purposes; the key is how you act
upon the data that is presented.  Experienced traders, who have
acquired patience, are content to wait for the correct signals.
They have great respect for money and will participate only when
the situation exhibits a superior potential for profit.  Novice
traders are a picture of contrast.  They see the stock market as
a means of getting rich thus, they rely primarily on instinctive
as opposed to intuitive thinking, and they are often in too much
of a hurry to wait for the correct signals.  These traders have
little respect for money and the market's complex nature, and
with that kind of irreverent attitude, they are often doomed to
failure.

As traders, our primary task is to identify potentially profitable
situations.  The basic goal of a trading system is to determine
when and at what price to place the initial order and how to take
profits efficiently with limited losses.  There are a number of
different approaches to developing an effective system but they
all have one thing in common; a method to control losses.  The
most popular method of managing a position is through the use of
trailing stops but many traders have difficulty with the correct
placement of these simple exit orders.  Of course, there are many
popular techniques to determine the proper entry and exit points
including: arbitrary, fixed dollar amounts; a percentage of the
price level; or a calculated value based on the volatility of the
issue.  Most professional traders prefer the use of consistent,
similarly sized stops in a particular system however, the actual
value of the loss-limit is not crucial to long-term performance.
It's much more important to examine the risk of the system as a
whole, following the procedure through multiple trades until an
effective, yet cautious exit strategy can be determined.

The most difficult aspect of profit target/loss limit development
is that strategies which provide the highest potential return are
also the ones that let the trade, in a short-term system, retreat
back to the point where the initial stop-loss is activated.  Even
when the position is substantially profitable, there is a chance
that the trend will reverse and turn the trade into a loss.  A
system of that type will generally provide the greatest net profit
in the long run however, it's not as easy to manage as a procedure
that uses a trailing stop.  Obviously, the easiest way to achieve
large gains is to make sure you capture all of the major moves in
the positions that you enter, but that is easier said than done.
Unfortunately, the use of a trailing stop can prematurely close a
position that could eventually produce a much larger return.  In
fact, the primary drawback of this approach is that potentially
profitable trades are often "stopped out" at much lower prices,
before they have chance to fulfill their original expectations.
Many traders prefer to exit with a "limit" order when a position
is moving in their favor.  However, that also presents a problem
because it prevents the trade from achieving maximum profit when
the market moves substantially in the forecast direction.  At the
time, if the market reacts violently against the trade, the system
must limit the affects of the unexpected activity, closing the
position quickly and with relatively little loss.

The best trading mechanisms are those that achieve a degree of
consistency, using effective exit routines that provide a high
percentage of winning trades and at the same time, prevent big
winners from turning into losers.  Most professional traders
prefer systems that allow the position to achieve maximum return
initially, and as the market consolidates, also provide a method
for locking-in gains at a profitable level.  With this approach,
the goal is to exit the trade while the issue is moving favorably,
before the eventual retreat significantly erodes position profits.
The end result is that portfolio growth is more consistent, and
in my experience, that's the best way to approach the market.

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  11.50   SEP   7.50  1.63  *$  0.69  11.0%
BOUT   37.63  37.88   SEP  35.00  5.00  *$  2.37  10.5%
PCTL    5.78   6.81   SEP   5.00  1.19  *$  0.41   9.7%
ASKJ   25.13  25.06   SEP  22.50  4.00  *$  1.37   9.4%
OSIP   45.56  57.75   SEP  40.00  7.75  *$  2.19   8.4%
LPTH   41.13  44.81   SEP  35.00  8.50  *$  2.37   7.9%
DRMD    5.72   6.75   SEP   5.00  1.13  *$  0.41   7.8%
PLNR   19.88  18.44   SEP  17.50  3.25  *$  0.87   7.6%
PCTL    6.03   6.81   SEP   5.00  1.38  *$  0.35   6.5%
NOVN   35.00  41.00   SEP  35.00  2.88  *$  2.88   6.5%
VITR   48.94  49.25   SEP  40.00  9.88  *$  0.94   6.1%
DRXR   18.31  19.69   SEP  17.50  1.50  *$  0.69   5.9%
ECLP   12.00  12.25   SEP  10.00  2.75  *$  0.75   5.9%
XLNK   18.00  13.63   SEP  12.50  6.25  *$  0.75   5.5% (DLK)
ORG    14.38  15.00   SEP  12.50  2.75  *$  0.87   5.4%
FHS    16.06  17.50   SEP  15.00  1.94  *$  0.88   5.4%
CLPA   30.25  28.38   SEP  25.00  6.13  *$  0.88   5.3%
CCUR   14.63  19.94   SEP  12.50  2.69  *$  0.56   5.1%
SGNT   12.00   9.13   SEP  10.00  2.63   $ -0.24   0.0%
SPLN   18.56  15.88   SEP  17.50  2.19   $ -0.49   0.0%
ROBV   13.63   7.75   SEP  10.00  4.13   $ -1.75   0.0%

NEOF    5.81   4.94   OCT   5.00  1.94   $  1.07  20.0%
NETS    6.25   5.75   OCT   5.00  1.75  *$  0.50   7.2%
GLGC   24.75  23.50   OCT  20.00  6.38  *$  1.63   6.4%
EPTO   14.00  14.13   OCT  12.50  2.50  *$  1.00   6.3%
WDC     5.75   5.38   OCT   5.00  1.19  *$  0.44   6.2%
VNTR   17.00  14.38   OCT  15.00  3.75   $  1.13   6.2%
WAVX   24.06  20.38   OCT  20.00  5.63  *$  1.57   6.2%
LBRT   30.00  32.19   OCT  22.50  9.13  *$  1.63   5.7%
IMGN   21.81  26.19   OCT  17.50  5.50  *$  1.19   5.3%
MSTR   31.38  29.31   OCT  25.00  8.25  *$  1.87   5.2%
WGAT   22.88  25.50   OCT  17.50  6.63  *$  1.25   5.0%
RHAT   26.69  21.19   OCT  22.50  6.00   $  0.50   1.6%
TIVO   26.88  20.50   OCT  22.50  6.13   $ -0.25   0.0%

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

Comments:

It is that time again to re-evaluate your outlook on those
stocks that were not called away and act accordingly.  Larry
McMillan's book, "Options: As a Strategic Investment," is an
excellent resource, detailing several different options.

Positions Closed Early:

Rostelecom (ROS) - at break-even, SpeedFam-IPEC (SFAM)



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

EFCX   11.88  OCT  10.00  FUS JB  2.63  135   9.25   35     7.0%
GSTRF  11.50  OCT  10.00  YVQ JB  2.25  2280  9.25   35     7.0%
IMGN   26.19  OCT  22.50  GMU JX  5.50  256  20.69   35     7.6%
NTOP   33.81  OCT  30.00  UPT JF  5.88  539  27.93   35     6.4%
PRST   20.13  OCT  17.50  PQK JW  3.63  333  16.51   35     5.2%
SYNM   20.75  OCT  17.50  QSH JW  4.38  62   16.37   35     6.0%
WPZ     5.19  OCT   5.00  WPZ JA  0.94  470   4.25   35    15.3%

Sequenced by Return
*****

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

WPZ     5.19  OCT   5.00  WPZ JA  0.94  470   4.25   35    15.3%
IMGN   26.19  OCT  22.50  GMU JX  5.50  256  20.69   35     7.6%
EFCX   11.88  OCT  10.00  FUS JB  2.63  135   9.25   35     7.0%
GSTRF  11.50  OCT  10.00  YVQ JB  2.25  2280  9.25   35     7.0%
NTOP   33.81  OCT  30.00  UPT JF  5.88  539  27.93   35     6.4%
SYNM   20.75  OCT  17.50  QSH JW  4.38  62   16.37   35     6.0%
PRST   20.13  OCT  17.50  PQK JW  3.63  333  16.51   35     5.2%


Company Descriptions

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

*****
EFCX - Electric Fuel  $11.88  *** The Next Mania! ***

Electric Fuel with corporate and sales offices in New Jersey, and
manufacturing and R&D facilities in Israel and Alabama, is a world
leader in the application of primary and refuelable zinc-air
battery technology to innovative energy solutions.  The company's
popular line of Instant Power disposable batteries for cellular
telephones is available through selected outlets in the U.S.,
Europe, South America and Israel. Electric Fuel also recently
announced plans to sell a new Instant Power universal powerpack
for cellphones and PDAs that will let wireless users keep talking
or working, even as their rechargeable battery runs down.  With
the price of Oil skyrocketing...alternative fuel stocks are
fast becoming the next investment mania.  It seems somebody was
anticipating Electric Fuel's announcement Friday, that the German
Government has issued a contract to undertake a cooperative all-
electric hybrid vehicle development and demonstration program.
Electric Fuel's Electrical Vehicle Division will help implement
the program.  We simply favor the bullish breakout above a
short-term technical base.

OCT 10.00 FUS JB LB=2.63 OI=135 CB=9.25 DE=35 MR=7.0%


*****
GSTRF - Globalstar Telecom  $11.50  *** Speculation! ***

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

OCT 10.00 YVQ JB LB=2.25 OI=2280 CB=9.25 DE=35 MR=7.0%


*****
IMGN - ImmunoGen  $26.19  *** 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 last 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 22.50 GMU JX LB=5.50 OI=256 CB=20.69 DE=35 MR=7.6%


*****
NTOP - Net2Phone  $33.81  *** Change of Character? ***

Net2Phone provides services that enable high-quality, low-cost
telephone calls over the Internet.  This service enables customers
to call individuals and businesses worldwide using their personal
computers or traditional telephones.  They are leveraging their
telephony expertise to integrate real-time voice communication
capabilities into the Web.  Net2Phone distributes its Software
free of charge through the Internet and through agreements to
include its software with products sold by its strategic partners.
In August, AT&T paid $1.4 billion for a 32% stake in Net2Phone.
That was followed by a rumor that Net2Phone plans to form a new
company with Cisco Systems.  This Friday, the rumor appears to
have become fact!  The stock has rallied strongly off its August
low (successfully testing the May low) and the current technical
picture suggests the downtrend has ended.

OCT 30.00 UPT JF LB=5.88 OI=539 CB=27.93 DE=35 MR=6.4%


*****
PRST - Presstek  $20.13  *** Technical Breakout! ***

Presstek is engaged in the development, manufacture and sale
of its proprietary PEARL direct imaging technology.  This direct
imaging technology is currently being used in a variety of both
on-press and off-press applications.  PRST has also recently
developed its next-generation DI technology, the ProFire imaging
system, a highly advanced laser imaging technology combining all
the components of a thermal imager in one compact package.  No
news explains the August reversal nor the current breakout above
Presstek's 150 dma on high volume.  But, as I like to say, the
"tape tells all," and it is saying somebody wants this stock so
much that they keep bidding the price higher!  A reasonable
cost basis for those who wish to speculate conservatively.

OCT 17.50 PQK JW LB=3.63 OI=333 CB=16.51 DE=35 MR=5.2%


*****
SYNM - Syntroleum  $20.75  *** Guilty by Association! ***

SYNM developed and owns a proprietary process (the Syntroleum
Process) designed to catalytically convert natural gas into
synthetic liquid hydrocarbons (GTL).  The Syntroleum Process
is a simplification of traditional GTL technologies aimed at
substantially reducing both the capital cost and the minimum
economical size of a GTL plant, as well as plant operating
costs.  They have license agreements with ARCO (now part of
BP), Enron, Kerr-Mcgee, Marathon, Texaco, and several other
companies.  Another example of the high price of Oil driving
investors towards the alternate fuel stocks as they speculate
on the next Cinderella story.  How long will this current
wave of Euphoria last?  Who knows?!?  We simply favor the
current technical strength and a conservative entry point.

OCT 17.50 QSH JW LB=4.38 OI=62 CB=16.37 DE=35 MR=6.0%


*****
WPZ - WorldPages.com  $5.19  *** Cheap Speculation! ***

WorldPages is a leading Internet infrastructure services and
Yellow Pages directory company, providing online and print
directory advertising and electronic commerce solutions to
small- and medium-sized businesses.  WorldPages facilitates
transactions between consumers and businesses worldwide through
Internet and print directory advertising, Web site production
and e-commerce.  They are the fourth largest independent print
Yellow Pages publisher in the US, publishing approximately 7
million directories in 42 markets.  The recent rally started
after WorldPages announced that AltaVista has selected them to
be the exclusive content provider for co-branded online People
Search directories on the AltaVista Network.  Earlier this year,
AltaVista selected WorldPages as its exclusive content provider
for co-branded online Yellow Pages.  WorldPages, through an
agreement with Network Solutions, also announced plans to offer
domain names to its customers.  Investors appear to be pleased
with these recent bullish developments.  Cheap speculation for
the investor who believes WorldPages is turning the corner.

OCT 5.00 WPZ JA LB=0.94 OI=470 CB=4.25 DE=35 MR=15.3%




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*************************
NAKED PUT PERCENTAGE LIST
*************************

Naked Put Percentage List
By Matt Russ

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

ABGX    79.63    75  AXY-VO    5.88   1991   30%      75
ADBE   132.63   125  AXX-VE    7.38   3316   22%     125
ATON   131.94   120  UAO-VD    5.00   3299   15%     120
BRCM   232.06   220  RDU-VD   12.63   5802   22%     220
CDWC    83.50    75  DWQ-VO    3.88   2088   19%      75
CFLO   122.38   115  FUJ-VC    7.38   3060   24%     115
CHKP   151.19   145  KGE-VI   10.00   3780   26%     145
CIEN   215.00   200  UEE-VT   11.50   5375   21%     200
CPN     99.63    95  CPN-VS    4.38   2491   18%      95
DNA    162.00   155  DNA-VK    7.75   4050   19%     155
GLW    297.00   280  GWD-VP   13.00   7425   18%     280
GSPN   115.25   110  GHY-VB   10.13   2881   35%     110
IMCL   109.06   100  QCI-VT    5.50   2727   20%     100
ITWO   172.19   165  QYI-VM   12.00   4305   28%     165
JNIC    81.00    75  JOQ-VO    6.25   2025   31%      75
JNPR   201.69   190  JUD-VR   11.88   5042   24%     190
MUSE   170.88   160  UZQ-VL   12.38   4272   29%     150
NT      72.94    65  NTV-VM    2.44   1824   13%      65
NTAP   118.00   110  ULM-VB    7.13   2950   24%     110
PDLI   111.69    95  RPV-VS    7.88   2792   28%      95
PMCS   202.69   200  SZI-VT   16.25   5067   32%     200
QCOM    66.25    60  AAO-VL    2.50   1656   15%      60
SDLI   328.19   300  QJV-VT   16.00   8205   20%     300
SEBL    98.75    90  EZG-VR    4.63   2469   19%      95
VRSN   180.63   170  QVZ-VN    9.38   4516   21%     170


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

System Trading: Rules are NOT made to be broken...
By Ray Cummins

Developing a reliable and effective trading system is the first
step in becoming successful in the stock market.  Managing a
winning portfolio requires planning, patience and good judgment.
In addition, you must use proven trading techniques and consistent
methods for realizing profits and limiting losses.

The first step in constructing a profitable system is to identify
the proper risk/reward perspective and select a favorable trading
strategy.  Next, you must develop a technique for managing the
position that fits your experience level and portfolio outlook.
There are a number of factors necessary for a successful trading
plan but the most important components are: planning the trade,
entering the position, and establishing the exit points.  Each of
these phases should be created (and modified) to fit the needs of
a particular situation, and they must all be present in order to
achieve consistent results.  A successful system is one that will
identify the most appropriate time to enter the market, when the
potential for profit is favorable, and exploit winning trades for
maximum return while at the same time, limiting losses in those
positions that don't progress as expected.

Learning when to enter and exit specific issues requires a solid
understanding of technical analysis and market trends.  The setup
for a specific trade should indicate that market conditions have
become favorable for entering a new position.  It should also help
determine what actions to consider, based on the character of the
selected issue or instrument: trending or consolidating, stagnant
or volatile.  The appropriate trading strategy will profit from a
correct forecast of the issue's future price action thus, it is
crucial to initiate new positions only in those situations where
the probability of success is highest.  A precise, detailed plan
for identifying these conditions will save money, time, and most
importantly, it will prevent you from participating in the market
when circumstances are less than ideal.

The target entry point is based on criteria identified in the
planning stages of a potential trade.  It is usually determined
through a combination of technical analysis and an assessment of
current market trends.  The profit/loss targets (exit points) are
also based on criteria established in pre-trade objectives and in
many cases, they are determined prior to initiating the position.
Defining the correct exit points is generally the most important
part of preparing to execute a profitable trade but new investors
rarely devote much effort to completing this task.  Most rely on
spontaneous profit targets and the casual placement of trailing
stops.  For those of you who are unfamiliar with this technique,
a trailing stop (sell order) is placed a fixed distance below the
current price of a (long) stock or option position.  As the issue
moves higher, the trailing stop is raised, locking in potential
profits.  This type of (sell) order closes out the position when
the price of the issue falls to the level of the stop.  There is
an alternative to exiting positions with a trailing stop.  Some
traders use a profit target, exiting the trade when the issue's
price reaches a specified objective.  A favorite combination
involves selling half of the position at a specified target and
when that order is executed, using a conservative trailing stop
to maximize profits in the remaining portion of the position.

There is of course, the need to follow the rules once they have
been established.  It doesn't matter how well your system works
if you can't follow the rules with perfect discipline on a daily
basis.  Most traders do not like to take losses, even small ones
but the fact is, every investor, professional or novice will, at
one time or another, participate in positions that turn out to be
losers.  It is very important to realize that anyone who trades,
in any type of financial market, will end up with a percentage of
losing positions.  The difference between successful traders and
those who eventually fail, is how they react to unfavorable plays
and the manner in which they manage losses.  For most of us, (and
I am included) that aspect of trading is usually learned the hard
way...

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  25.50   SEP  20.00  0.63  *$  0.63  23.1%
CYTO    9.03   7.50   SEP   7.50  0.31   $  0.31  18.8%
GSTRF   7.63  11.50   SEP   5.00  0.31  *$  0.31  14.6%
MSTR   31.38  29.31   SEP  25.00  0.38  *$  0.38  14.5%
CTIC   39.25  42.19   SEP  30.00  1.38  *$  1.38  13.0%
ADVP   27.38  30.88   SEP  25.00  0.44  *$  0.44  12.4%
IMAX   28.06  25.00   SEP  22.50  0.94  *$  0.94  12.4%
FNSR   29.00  41.94   SEP  22.50  0.94  *$  0.94  12.1%
ICIX   20.88  28.88   SEP  15.00  0.38  *$  0.38  12.1%
JDEC   21.88  26.50   SEP  17.50  0.69  *$  0.69  11.8%
LPTH   41.13  44.81   SEP  30.00  1.00  *$  1.00  11.8%
MSTR   26.88  29.31   SEP  20.00  0.44  *$  0.44  11.0%
FNSR   37.50  41.94   SEP  30.00  0.81  *$  0.81  10.6%
RHAT   23.44  21.19   SEP  17.50  0.50  *$  0.50  10.5%
GZTC   38.00  31.69   SEP  30.00  0.81  *$  0.81  10.5%
SIPX   37.50  49.66   SEP  30.00  0.75  *$  0.75   9.9%
DCLK   41.81  38.00   SEP  35.00  0.69  *$  0.69   9.4%
PL     28.19  30.38   SEP  25.00  0.50  *$  0.50   8.4%
SIMG   32.06  32.00   SEP  25.00  0.38  *$  0.38   8.1%
CLTR   26.56  36.75   SEP  22.50  0.38  *$  0.38   7.9%
TLXN   19.88  17.31   SEP  15.00  0.44  *$  0.44   7.2%
CRUS   27.44  32.88   SEP  22.50  0.50  *$  0.50   6.6%
CS     34.75  33.00   SEP  27.50  0.44  *$  0.44   6.5%
REGN   33.13  36.00   SEP  25.00  0.38  *$  0.38   5.9%
NDC    30.06  29.94   SEP  22.50  0.38  *$  0.38   5.2%
VNTR   17.00  14.38   SEP  15.00  0.38   $ -0.24   0.0%
TIVO   26.88  20.50   SEP  22.50  0.56   $ -1.44   0.0%

PLNR   19.75  18.44   OCT  15.00  0.69  *$  0.69  10.8%
ALLP   16.50  17.00   OCT  12.50  0.50  *$  0.50   8.5%
WAVX   24.06  20.38   OCT  17.50  0.63  *$  0.63   8.4%
CMNT   21.00  20.75   OCT  17.50  0.56  *$  0.56   7.4%
GOTO   22.75  18.69   OCT  17.50  0.50  *$  0.50   7.2%
DRXR   19.06  19.69   OCT  15.00  0.38  *$  0.38   6.6%
STAT   20.00  20.25   OCT  15.00  0.44  *$  0.44   6.4%
SCUR   26.25  26.25   OCT  17.50  0.50  *$  0.50   6.3%
VITR   48.94  49.25   OCT  30.00  1.00  *$  1.00   6.0%

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

Comments:

The question, if you now own Cytogen (CYTO), is will it bounce off
its 150 dma and offer a rally to exit?  Not an easy decision!  The
October 20 call for Tivo (TIVO) offers a new cost basis near
$19.32 - not much protection.  Ventro (VNTR) is testing support
and there is a reasonable October 12.50 call which will provide
a new cost basis near $11.38.  Time to evaluate your long term
outlook for the stock, the sector, and the market.

Positions Closed:

None


NEW PICKS
*********

Sequenced by Company
*****

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

AND     8.88  OCT   7.50  AND VU  0.31  10     7.19   35    10.9%
CDN    27.13  OCT  25.00  CDN VE  0.81  38    24.19   35     7.4%
CLTR   36.75  OCT  30.00  QCE VF  1.13  469   28.88   35    10.8%
NIKU   24.88  OCT  17.50  NFU VW  0.38  10    17.12   35     6.2%
NITE   37.00  OCT  30.00  QTN VF  0.88  12361 29.13   35     8.8%
WGR    26.25  OCT  22.50  WGR VX  0.56  85    21.94   35     6.7%
XRX    17.75  OCT  15.00  XRX VC  0.31  2816  14.69   35     5.8%

Sequenced by Return
******

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

AND     8.88  OCT   7.50  AND VU  0.31  10     7.19   35    10.9%
CLTR   36.75  OCT  30.00  QCE VF  1.13  469   28.88   35    10.8%
NITE   37.00  OCT  30.00  QTN VF  0.88  12361 29.13   35     8.8%
CDN    27.13  OCT  25.00  CDN VE  0.81  38    24.19   35     7.4%
WGR    26.25  OCT  22.50  WGR VX  0.56  85    21.94   35     6.7%
NIKU   24.88  OCT  17.50  NFU VW  0.38  10    17.12   35     6.2%
XRX    17.75  OCT  15.00  XRX VC  0.31  2816  14.69   35     5.8%


Company Descriptions

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

*****
AND - Andrea Electronics  $8.88  *** Own This One! ***

Andrea Electronics develops audio input equipment and speech
enhancement software for speech-enabled communications.  Their
line of embeddable and scalable microphone software, utilizing
state-of-the-art audio techniques through DSP and USB processing,
allows users to operate applications such as such as desktop
speech recognition, in-vehicle communications, voice-enabled web
browsing and Internet telephony, while at a distance from the
microphone.  Their PureAudio and EchoStop products help to
eliminate background noise while enhancing the user's voice signal.
Andrea has worked to develop active noise reduction technologies
that benefit and enhance the audio quality for both commercial
and consumer applications, such as aircraft in-flight headsets,
portable audio devices and mobile communication devices.  In late
August, the company was rewarded with a major patent for their
Active Noise Reduction technology.  Andrea has been issued a new
patent with broader claims than preceding endorsements, further
validating the significance of the company's existing property
covering its ANR-Ready system and calibration methods.  Investors
appear to favor the outlook for the company and with the bullish
technical indications, this issue may be ready for further upside
activity.

OCT 7.50 AND VU LB=0.31 OI=10 CB=7.19 DE=35 MR=10.9%


*****
CDN - Cadence Design  $27.13  *** Entry Point! ***

Cadence provides comprehensive software and other technology and
offers design and methodology services for the product development
requirements of the world's leading electronics companies.  CDN
licenses its leading-edge electronic design automation software
and hardware technology and provides a range of services to help
its customers optimize their product development processes.  The
Company is a supplier of end-to-end products and services used by
others to design and develop complex chips and electronic systems.
Cadence is on the move and analysts have jumped on the bandwagon,
boosting the share value last week with bullish recommendations.
On Wednesday, Cadence was reiterated a "buy" by Garo Toomajanian
at Dain Rauscher Wessels with a price target of $29.  Friday, the
outlook was bolstered as Cadence was raised to the "recommended"
list by analyst Jessica Kourakos at Goldman Sachs.  Based on the
technical indications, the issue is slightly overextended and we
expect to lower the cost basis (higher premium) in this position
as the stock consolidates from its recent rally.

OCT 25.00 CDN VE LB=0.81 OI=38 CB=24.19 DE=35 MR=7.4%


*****
CLTR - Coulter Pharmaceutical  $36.75  *** Drug Sector ***

Coulter Pharmaceutical is engaged in the development of novel
drugs and therapies for the treatment of cancer and autoimmune
diseases.  The company currently is developing a family of
therapeutics based upon two drug development programs: therapeutic
antibodies and targeted oncologics.  The company's most advanced
product candidate is Bexxar(TM), a monoclonal antibody conjugated
to a radioisotope.  The company's therapeutic antibodies program
also includes an interferon receptor antagonist.  Initial efforts
in the targeted oncologics program are based on tumor activated
prodrug and tumor-specific targeting technologies.  Coulter intends
to seek expedited Biologics License Application ("BLA") review and
marketing approval for Bexxar while simultaneously pursuing clinical
trials to expand the potential use of Bexxar to other indications.
CLTR and SmithKline Beecham announced recently the start of Phase II
multicenter investigational trial of Bexxar in combination with CHOP
chemotherapy as a first-line treatment of patients with intermediate-
grade non-Hodgkin's lymphoma.  The U.S. Patent office also issued
another patent relating to CD20 antibody therapy for the treatment
of lymphoma.  With the recent bullish activity, this position offers
a relatively conservative entry point in a volatile issue.

OCT 30.00 QCE VF LB=1.13 OI=469 CB=28.88 DE=35 MR=10.8%


*****
NIKU - Niku Corporation  $24.88  *** Bracing For A Rally? ***

Niku Corp. provides Internet software products and an online
marketplace for the sourcing, management and delivery of
professional services.  These services include consulting,
financial services, medicine, law, advertising and other
industries in which intellectual capital is an important
element.  Their Internet software products are designed to
automate the business processes of professional services
organizations, small businesses and individual professionals.
The broad professional services industry, estimated at more than
$2 trillion, includes such verticals as information technology,
management consulting, advertising, media, public relations,
architecture, construction, engineering, financial services, law,
tax, audit, and health care.  Niku is targeting the unique area of
collaborative and customer-facing applications and the company has
seen its operations thrive as that customer base looks for tools
to optimize resources and reduce costs.  We believe the outlook
for the company is excellent and now that the issue has built a
technical base, the risk of a large downside movement is worth
the potential reward in this position.

OCT 17.50 NFU VW LB=0.38 OI=10 CB=17.12 DE=35 MR=6.2%


*****
NITE - Knight Trading Group  $37.00  *** Merger Speculation! ***

Knight Trading Group is one of the leading market maker in Nasdaq
securities and in the Third Market, which is the over-the-counter
market in exchange-listed equity securities, primarily those on
the New York Stock Exchange and the American Stock Exchange.  The
company has attained its leadership position as a market maker by
providing best execution services to brokers and institutional
customers through its proprietary trading methodology and systems.
The company makes markets in thousands of equity securities on the
Nasdaq and through Trimark, it makes markets in all NYSE and AMEX
securities in the Third Market.  Knight has received expressions
of interest from several potential buyers, including the Salomon
Smith Barney unit of Citigroup (C) and Morgan Stanley Dean Witter
(MWD), but a formal offer isn't on the table yet.  Speculators
say the top suitors are willing to pay $45 to $55 per share for
the company, or about $5.7 billion to $7 billion.  Use this play
to speculate conservatively on the outcome of the merger rumors.

OCT 30.00 QTN VF LB=0.88 OI=12361 CB=29.13 DE=35 MR=8.8%


*****
WGR - Western Gas Resources  $26.25  *** Oil Sector ***

Western Gas gathers, processes, treats, develops and produces,
transports, and markets natural gas and natural gas liquids.
WGR operates in major gas-producing basins in the US.  They design,
construct, own, and operate natural gas gathering systems and
processing and treating facilities in order to provide customers
with a broad range of services from the wellhead to delivery point.
Dain Rauscher Wessels analysts are expecting optimistic comments
at the firm's energy conference next week as high commodity prices
are turning oil and gas companies into cash cows.  Analysts say
that business has never been better, that pricing of oil is moving
up faster than in previous cycles, and the outlook is going to be
very strong.  Companies will be talking about the strength in oil
prices, although that's likely to take a back seat to natural gas
and Western stands to benefit from the positive outlook for the
industry.  We simply favor the recent bullish technicals.

OCT 22.50 WGR VX LB=0.56 OI=85 CB=21.94 DE=35 MR=6.7%


*****
XRX - Xerox  $17.75  *** More Merger Speculation! ***

Xerox is a leader in the global document market, providing
document solutions that enhance business productivity.  The
Company's Document Processing activities encompass developing,
manufacturing, marketing, servicing and financing a complete
range of document processing products and solutions designed
increase organizational efficiency for businesses worldwide.
Shares of Xerox jumped on Friday after a BusinessWeek story
pegged the colossal copy-machine seller as a takeover target.
Given Xerox's stock weakness, the company has been considered
vulnerable to a takeover and it has been said that Japan's Canon
wouldn't mind getting its hands on technology developed by the
joint venture between Xerox and Fuji Film.  Another article cited
one industry expert as saying talks have brought no conclusive
results but Investor group Silverlake could also be in the mix.
Speculators say Xerox could get $30-$35 per share, or the company
could split itself up and sell its assets.  Based on the volume
during the rally, the issue has further upside potential.  Target
a slightly higher premium to open the position.

OCT 15.00 XRX VC LB=0.31 OI=2816 CB=14.69 DE=35 MR=5.8%




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

Industrial Stocks Fall Amid Profits Warnings...

The Dow average closed below a key technical level on concerns
over sagging earnings and soaring oil prices.


******************************************************************
- MARKET RECAP -
******************************************************************
Friday, September 15

The Dow average closed below a key technical level on concerns
over sagging earnings and soaring oil prices.  The blue-chip
standard ended down 160 points at 10,927.  Meanwhile, the Nasdaq
Composite fell 78 points to 3,835 amid weakness in software and
semiconductor stocks.  The S&P 500 Index was down 15 points at
1,465.  Trading volume on the NYSE reached 1.23 billion shares,
with declines beating advances 1,746 to 1,094.  Activity on the
Nasdaq was heavy at 1.76 billion shares exchanged, with declines
beating advances 2,514 to 1,449.  The 30-year bond was down over
a point, bid at 104 28/32, yielding 5.89%.


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

HNC Software   HNCS   OCT40P/OCT45P   $0.50   credit   bull-put
Manugistics    MANU   OCT60P/OCT65P   $0.50   credit   bull-put
Research IM    RIMM   OCT60P/OCT65P   $0.88   credit   bull-put

Our new issues performed relatively well considering the decline
in technology stocks.  Unfortunately, the bullish activity also
limited the initial premiums in two of the positions, HNCS and
RIMM.  Manugistics slumped during the session and the spread
credit was within $0.06 of the target.


Portfolio Plays:

The stock market dropped precipitously today on concerns over
corporate earnings, surging energy costs and rising bond yields.
Investors have begun to worry that the leading companies will be
unable to maintain the profits and revenue growth they've become
accustomed to over the past quarters.  On the Dow, J.P. Morgan
(JPM), Hewlett-Packard (HWP), and General Motors (GM) topped the
losers as a slew of profit warnings weighed heavily on industrial
issues.  Briggs & Stratton (BGG), Pentair (PNR), and Maytag (MYG)
were among the companies warning of a revenue or profit shortfall.
The broad weakness in industrial issues was affected by declines
in technology components International Business Machines (IBM)
and Microsoft (MSFT), and that spilled over to Nasdaq stocks.  On
the composite index, application software companies slumped in
sympathy with Oracle (ORCL), which fell $7 to $78.31 as analysts
expressed disappointment with the firm's first-quarter revenues.
There were a few sectors that performed well amidst the selling
pressure.  Exxon-Mobil (XOM) led oil service issues higher amid
rising energy prices.  Crude oil jumped to 10-year highs on talk
that a storm in the Gulf of Mexico could hamper oil production.
Consumer products stocks, which fell lower yesterday, also gained
ground and utility and alternate energy stocks rallied as well.

It was a wild session for the Spreads/Combos portfolio and the
"triple-witching" expiration of options on stocks and indexes
simply added to the excitement.  Stock prices tumbled across the
board and there was little positive activity in any particular
group.  Fortunately, almost all of our large-cap technology
positions were deep-in-the-money and nothing short of a market
collapse would have prevented a favorable "expiration day."  In
the Credit Spread section, 14 of 15 positions ended profitably
and all of the October plays are performing well.  The expiring
debit spreads finished 100% successful and Regeneron (REGN) was
the standout in that group, climbing $5 to $36 in the last hour
of trading on speculation that a significant news announcement
is imminent.  Whatever the reason, investors were elated and
the position was one of our top percentage plays for the month
of September.  The Straddles and Strangles category was also a
portfolio standout with all of the positions expiring profitably.
Diagonal spreads closed this month included plays on Ryder (R),
Mail.com (MAIL), and Countrywide Credit (CCR), all of which
ended with positive returns.  The Calendar spread section had
only two expiring positions and the top performer was Landry's
(LNY), which finished within $0.25 of the sold strike for the
third consecutive month.  Polaroid (PRD) was the loser in that
category, as we closed the position 30 days early for a small
($0.25) loss.  We have two new sections in the Spreads/Combos
portfolio; Synthetic Positions and Debit Spread Combinations.
The top performing issues in those categories were Ameritrade
(AMTD), Echostar Comm. (DISH), and Red Hat (RHAT), all of which
achieved favorable "early exit" returns during the first week of
September.  In addition, Transkaryotics (TKTX) performed just as
expected, although we were unable to enter the position at the
target credit, and Voicestream (VSTR), a carry-over from last
month ended above our sold (put) strike, closing the extended
play at a small profit.

On the downside, there was some bad news in the portfolio today.
Appliance-maker Maytag (MYG) dropped another $2 after warning
its earnings could be down 8% to 10% in the third and fourth
quarters because of significant sales disruptions for retail
home appliances.  Circuit City (CC) and Heilig Meyers (HMY) are
the primary culprits.  Circuit City stopped selling appliances
and Heilig-Meyers announced recently it would close more than
300 of its 800 stores.  That's terrible news for the struggling
Maytag and although merger speculation has supported the issue
in past weeks, the buyers were nowhere to be found in today's
session.  Our bullish synthetic position can be closed for a
loss or a combination of offsetting spread positions (sell OTM
call - buy ITM put) can be initiated to stem the shortfall until
the stock recovers.  I won't venture to say which way the issue
is going in the near future but from a technical perspective,
there is little chance the stock will move above $40 without a
significant change in character.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
STJ - St. Jude Medical  $46.59  *** New, All-Time High! ***

St. Jude Medical, together with its subsidiaries, is a global
developer, manufacturer, and distributor of medical devices for
the cardiac rhythm management, cardiology and vascular access,
and heart valve disease management markets.  St. Jude has two
business segments: Cardiac Rhythm Management (CRM); and Heart
Valve Disease Management (HVDM).  The CRM segment, which includes
the results from the company's Cardiac Rhythm Management Division
and Daig Division, develops and manufactures bradycardia pulse
generator and tachycardia implantable cardioverter defibrillators
(ICD) systems, electrophysiology and interventional cardiology
catheters, and vascular closure devices.  The HVDM segment
develops, manufactures and distributes mechanical and tissue
heart valves and valve repair products, and is in the process of
developing suture-free devices to facilitate coronary artery
bypass graft anastomoses.

The Medical Devices sector has performed very well in the last
few months and we have decided to continue our search for unique
companies that will benefit from the growth of the industry.
St Jude is one of the leading developers in the field of heart
disease and cardiology and in late August, they received approval
to begin a new study of treatment for chronic atrial fibrillation,
an abnormal heart rhythm.  Atrial fibrillation is the most common
significant cardiac arrhythmia, affecting over 2 million people
in the U.S. and the study is designed to evaluate treatments for
patients who receive an "ablate and pace" procedure.  This is
the type of research that will keep the company in the forefront
of its industry and we that's we why favor the fundamental outlook
for its products.

Based on the recent bullish activity in the stock, investors
are confident about the future of the company.  We also have a
positive outlook for the stock but there will likely be a period
of consolidation as the issue transitions to a new trading range.
We offer this play for experienced traders only, who are aware
of the potential adjustments necessary in a calendar spread on
a relatively volatile issue.


PLAY (aggressive - bullish/calendar spread):

BUY  CALL  JAN-50  STJ-AJ  OI=311  A=$3.00
SELL CALL  OCT-50  STJ-JJ  OI=188  B=$1.19
INITIAL NET DEBIT TARGET=$1.62-$1.68  TARGET ROI=50%


******************************************************************
ABT - Abbott Labs  $48.00  *** A Big Day! ***

Abbott Laboratories is engaged in the discovery, development,
manufacture and sale of healthcare products and services.  Its
products are generally sold directly to retailers, wholesalers,
hospitals, healthcare facilities, laboratories, physicians'
offices and government agencies throughout the world.  The
company has five reporting revenue segments: Pharmaceutical
Products, Diagnostic Products, Hospital Products, Ross Products
and International.  It also has a 50% owned joint venture, TAP
Holdings.

Patients with the AIDS virus are about to get a new option that
may help those who have failed standard therapy: a drug called
Kaletra.  Kaletra is a combination of a new chemical called
lopinavir plus a small dose of Abbott's older AIDS drug Norvir.
The company mixed the two products to form a chemical than can
get to higher levels in the body than other protease inhibitors
without causing more side effects than a standard dose would.
On Friday, the FDA approved Kaletra for use by both adults as
well as HIV-infected infants and children.  Abbott officials
said the prescription-only medicine should be on pharmacy
shelves in the near future and that's the reason for the recent
speculation in the issue.  Quite simply, new drugs equal more
revenues!

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 (aggressive - bullish/credit spread):

BUY  PUT  OCT-40.00  ABT-VH  OI=164  A=$0.56
SELL PUT  OCT-42.50  ABT-VV  OI=145  B=$1.19
INITIAL NET CREDIT TARGET=$0.75  ROI(max)=42%


******************************************************************
                   - STRADDLES AND STRANGLES -
******************************************************************
BEN - Franklin Resources  $41.91  *** Which Way Now? ***

Franklin Resources provides investment advisory and related
services to retail mutual funds, institutional and private
accounts, and other investment products globally.  Related
services include transfer agency, fund administration,
custodial, trustee and fiduciary services.  This is its primary
business activity and operating segment.  The mutual funds and
other products that the company advises, collectively called its
sponsored investment products, are sold to the public under
three brand names, Franklin, Templeton and Mutual Series.  Its
secondary business activity and operating segment is banking
and finance. Its banking and finance group offers consumer
lending and selected retail-banking services directly to the
public.

One way investors can attempt to profit from periods of low
Implied Volatility in the market is to buy option "premium" on
the expectation that the underlying stock might move up or down
substantially in the near future.  In a debit-strangle, a trader
buys an "out-of-the-money" call and an "out-of-the-money" put
with the same expiration date.  The strangle is initiated with
the hopes of a significant move in the underlying issue, where
either position, the put or call, rises in value enough to offset
the premium originally paid for both options.

This position meets our criteria for favorable debit-strangles;
cheap option premiums, a history of adequate price movement and
future events or activities that may generate volatility in the
issue or its industry.  This selection process provides the best
combination of low risk and potentially high reward.  As with
any position, it should be evaluated for portfolio suitability
and reviewed with regard to your strategic approach and trading
style.


PLAY (aggressive - neutral/debit strangle):

BUY  CALL  JAN-45  BEN-AI  OI=81  A=$2.19
BUY  PUT   JAN-40  BEN-MH  OI=16  A=$2.19
MAXIMUM INITIAL NET DEBIT=$4.25  TARGET ROI=25%


******************************************************************
CLPA - Cell Pathways  $28.38  *** Drug Speculation! ***

Cell Pathways Holdings is a pharmaceutical company focused on the
research, development and commercialization of products to prevent
cancer and to treat cancer.  The company's technology is based
upon its discovery of a novel mechanism that it believes, based
on its research, can be targeted to induce selective apoptosis,
or programmed cell death, in precancerous and cancerous cells
without affecting normal cells.  CPI has created a new class of
selective apoptotic anti-neoplastic drugs (SAANDs) and has
synthesized over 500 new chemical compounds in this new class.
In screening assays, over 200 of these new compounds display
significantly greater apoptotic potency than CPI's lead drug
candidate, Aptosyn (exisulind).

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 new developments
and mergers in the industry, speculators are sure to keep the
premiums high in the OTM options.  The theoretical probability of
profit from this position is higher (80%-90%) than other plays in
the same strategy based on historical 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.  Due diligence is mandatory in this position!


PLAY (aggressive - neutral/credit strangle):

SELL CALL  OCT-60.00  QJC-JL  OI=343  B=$1.00
SELL PUT   OCT-17.50  QJC-VW  OI=417  B=$1.19
INITIAL NET CREDIT TARGET=$2.25-$2.38  ROI=28%
UPSIDE B/E=$62.25 DOWNSIDE B/E=$15.25


******************************************************************
GMST - Gemstar - TV Guide  $76.31  *** An Old Favorite! ***

Gemstar-TV Guide International, formerly Gemstar International
Group, develops, markets and licenses proprietary technologies
and systems that simplify and enhance consumers' interaction
with electronics products and other platforms that deliver video,
programming information and other data.  The company's first
proprietary system, VCR Plus+, introduced in 1990, is currently
incorporated into virtually every major brand of VCR sold
worldwide.  The company has also developed and acquired a large
portfolio of technologies and intellectual property necessary to
implement interactive program guides (Gemstar Guide Technology),
which enable consumers to navigate through, sort, select and
record television programming.

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 $90, we will buy the stock to cover our sold
options.


PLAY (aggressive - neutral/credit strangle):

SELL CALL  OCT-95  GST-JS  OI=285  B=$2.50
SELL PUT   OCT-55  GST-VK  OI=149  B=$1.19
INITIAL NET CREDIT TARGET=$3.75-$4.00 ROI=20%
UPSIDE B/E=$98.75 DOWNSIDE B/E=$51.25


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


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