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Daily Newsletter, Sunday, 09/24/2000

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The Option Investor Newsletter                  Sunday  09-24-2000
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        WE 9-22          WE 9-15           WE 9-8           WE 9-1
DOW    10847.37 - 79.63 10927.00 -293.65 11220.65 - 18.13  + 46.15
NASDAQ  3803.76 - 31.47  3835.23 -143.18  3978.41 -255.92  +191.65
S&P-100  774.08 - 15.69   789.77 - 23.13   812.90 - 16.93  +  6.28
S&P-500 1448.72 - 17.09  1465.81 - 28.69  1494.50 - 26.27  + 14.31
W5000  13678.20 -135.50 13813.70 -236.50 14050.20 -279.70  +238.70
RUT      518.82 - 12.06   530.88 -  4.82   535.70 -  6.21  + 16.80
TRAN    2597.14 - 74.32  2671.46 - 61.32  2732.78 + 19.86  - 77.25
VIX       24.17 +  2.24    21.93 +  1.24    20.69 +  1.24  +   .35
Put/Call    .56              .65              .52              .53

Wow! Can We Repeat Friday At Least Once A Week?
By Jim Brown

Just another Fall Friday? Not hardly! Futures lock limit down,
media pundits calling for an end to civilization as we know it
and bulls huddling together for protection from the bears. This
was BEFORE the open. After the opening minutes, with record volume
delaying the opening of hundreds of stocks, the market reverberated
with shock waves of capitulation selling. When the smoke cleared and
floor traders and market makers came out from hiding they were greeted
by buyers. Waves of buyers. Bargain hunters galore. The NASDAQ hit
-214 at the open but never looked back. The second dip came at 10:00
as the index bounced off 3700 but just minutes later the day traders
phoned home for more money to take advantage of the bargains and the
NASDAQ rallied over 3700 and held. Considering the Dow was not having
the same rebound as the NASDAQ this was good news. It was not until
almost noon that the Dow shook off the -13 point Intel driven slump
and charged ahead. Once the Dow took off the NASDAQ buyers opened
the gates and the stampede began. The rebound off 3700 was strong and
caught all the market naysayers off guard. Even noted bear Barton
Biggs was amazed at the strength of the rebound in the face of Intel's

So what happened to "black Friday?" There were several factors and
all combined together to bring traders off the sidelines and back
into the fray. First, a surprise G7 central bank intervention to
bolster the falling Euro. Do you think Greenspan called in a favor
to head off a market disaster? Would not surprise me at all. In a
move aimed at halting a brewing global recession, most of the G7,
participated in the intervention. While experts are split on the
effectiveness of this type of move the markets took this as a sign
that things would be better soon. Dow consumer multinationals like
MCD, KO, BA, PG and JNJ rallied on the news. Financials firmed
and C, JPM and GE helped power the Dow to positive ground.

Second, almost every major tech company came out with affirmation
of profit targets on track. HWP, TXN, EMC, DELL, CPQ all said they
were on track in Europe and sales were fine. HWP said they were on
track to hit their +15% growth estimates and announced a $1 billion
stock buy back. Bullish buy backs in times of trouble never hurt
and have been known to reverse bear markets. IBM has done it in
the face of certain market crashes and helped stabilize the moment.
HWP soared +9.19 from the after hours low of $94 for +45 Dow points.
National Semi. (NSM) also announced an 8 million share buyback. Compaq
said their worldwide momentum was continuing and Europe was on track.
This circling of the wagons by the major tech stocks led analysts and
investors alike to believe that the problem was with Intel and not
the PC market.

Third, President Clinton decided to release 30 million barrels of
oil from the U.S. strategic stockpile. Is this an election year?
For whatever the reason the announcement knocked over -$1.40 off the
price of oil and added fuel to the rally. Higher oil was depressing
economies worldwide with over 1300 bankruptcies of trucking firms
in the U.S. and over 35,000 owner operators have turned in their
keys. The situation was becoming grim with $50 oil now being
mentioned. 30 million barrels of the 570 million in the stockpile
is only a drop in the bucket considering the 600 million the U.S.
consumes each month but to investors but it must be the thought
that counts. Intervention in the Euro, intervention in oil prices
and a joint declaration of solidarity by the major tech stocks all
led investors to jump back into the market. There is a possible
fall rally in the future and everyone thought this would be a good
entry point.

Intel captured a first place record today. No, not the biggest
one day drop ever but the most shares traded on one day. Over 308
million shares were traded and the -13 drop removed over -$88
billion in market cap. The top three largest companies are now
GE, CSCO, MSFT with Intel falling into fourth place. The previous
daily volume record holders were JDSU 200 million, Comparator 180
million and ORCL 171 million. Intel has moved so far into the lead
that they are not likely to lose the top spot anytime soon. The
problems for Intel are only just beginning. Credibility with
analysts has taken a serious setback. Just two weeks ago when
Ashok Kumar announced his downgrade Intel went on record with
analysts that the third quarter was on track. It is unthinkable
that they did not know at that time that trouble was brewing. Just
like it is not nice to fool Mother Nature it is very fool hardy to
lie to analysts. If they will misrepresent the facts to investors
about something so simple as increased expenses and weak European
sales then what other more serious problems might they have that no
one has tripped over yet. Some possibles would include design flaws
in P4, memory interface problems or exaggerated performance claims
of the new products not yet delivered. Once you open the Pandora's
box of questions some will not return unanswered and those answers
could cause even more problems for Intel investors. The PE for
Intel dropped a whopping 11 points (-20%) on Friday from 53 to 42
and if any other problems come to light it could drop even further.
Analysts were speculating privately that the drop in the NASDAQ
over the last two weeks was what prompted Intel to warn. Recently
they have been pumping up their earnings by selling stock they
own in other companies. With the NASDAQ off -500 points from the
September highs they may have elected to hold off on those sales
until better times or they were not able to generate as much profit
from those sales as in the past. We will not know the answer until
Intel posts earnings in October.

The rush of analysts to the spotlight to brag on the market rebound
is almost scary. When even Barton Biggs speaks glowing words about
the NASDAQ and the coming rally it is enough to make you sell short.
Barton Biggs bullish has got to be a contrarian indicator. Al Goldman
at AG Edwards put it in pure English. "The correction is over,
investors will spend the weekend deciding where they want to put
their money and next week should be the start of the Fall rally."
Pretty far out on the limb there Al! Actually he is in good company.
About the only market spokesman I did not hear Friday was Ralph
Acompora. The fix is in if you believe stocks follow money. AMG
Data said today that the week ended Sept 20th had the largest inflow
of cash into growth funds in the last 14 weeks. Over $7.6 billion
in new cash was deposited and over $16 billion was moved from
money market funds into equity funds. This $20+ billion moving
into stock funds through Wednesday should have been put to work
Friday. The rebound was incredible and the very short time we spent
at the 3614 bottom Friday should be seen as a preview of things
to come.

With the very successful retest of the August 3rd lows under very
negative conditions today it is hard to imagine a sell off any
time soon. The Dow, which could have really fallen with the tech
leaders INTC, MSFT, HWP, CPQ all losing multiple dollars, did not
even get close to the 10567 low from Wednesday. The low from Friday
of 10621 is not likely to be seen again soon. The volume on both
indexes was huge with the NASDAQ posting 2.1 billion shares and
the NYSE almost 1.2 billion. Strong recoveries on strong volume
are always a welcome sign. Given that most traders will see Friday
as a bottom and mutual funds putting all their cash to work before
the end of the quarter next Friday we could have a pretty good
week. The key word here is "could."

The knee jerk rebounds like we saw Friday catch the shorts by
surprise and everybody runs for cover. You have to imagine that
anyone short at the open on Friday was celebrating all night
Thursday night and when the market started rebounding from the
opening bell they ran to place their orders to cover. This only
accelerated the rebound causing an age old short squeeze. Just
look at some of the huge gains. GLW +27, BRCD +20, HGSI +20,
EXTR +19, ARBA +16, JNPR +15. JNPR was rolling over on Thursday
and ARBA has flat lined for two weeks. There was no positive
trend and no indication of pending $20 moves. Companies that
could have benefited from all the positive earnings press like
SUNW only gained +1.56. Other NASDAQ big caps which should have
joined the party but didn't included CSCO -.81, Dell -2, MSFT
-.94. If the rally was so strong why didn't CSCO bounce off its
support at $60 for a huge run? I am betting on a short squeeze as
the primary mover. Whatever the reason we will take a trading day
like Friday every week. Just let us know a day in advance please!

We do not care what lit the fire under this rocket we only care
about how far it will fly. The positive impact of the cash moving
into position for an expected October rally and the quarter end
window dressing by the mutual funds should help us maintain
positive momentum next week. With no major economic reports next
week other than the GDP traders will have one eye focused on the
rear view mirror at the 3600 retest and the other on the road
ahead looking out for the next earnings warning. The readers poll
yesterday picked IBM almost 2:1 as the next warning target. IBM
has huge exposure to Europe and they have been struggling with
earnings for some time. They have been aggressively buying back
stock to increase their EPS and many analysts fear they will miss
estimates. We don't know if IBM will be the next one to confess but
you can be sure there are more to come. I wonder who had planned to
warn on Friday afternoon but held off because of the market reaction
to Intel? We will know next week. If the GDP report confirms the
slowing economy then the Fed should be done for the rest of the
year and traders would have just one more reason to celebrate.

The NASDAQ recovered +189 of the -214 point drop at the open and
the Dow rebounded +229 points off its lows. Triple digit rebounds
on both major indexes, does that bring back memories of last year?
The VIX soared to 27 briefly before falling back to neutral at 24.
The Dow closed over its 200 dma and back above the ascending
support dating back to March. At 3800 the NASDAQ is back above
ascending support dating back to May. If you had scripted the
rebound you would have been hard pressed to wish for numbers this
good. The second dip came just as expected and 3700 acted as an
intraday floor just like we wanted. It does not get any better than
this. That may be the problem. This was too easy, too perfect. The
big intraday moves from the capitulation selling at the open to the
big spikes at the close were $10, $20, $30 on some stocks and
if the rally stalls on Monday or Tuesday the profit taking will
come immediately. Strong momentum moves go a long way to convince
traders the rally is for real but any slowing and stalling will
bring back the paranoia in spades. 3900 is still the real confirming
number we must reach. Any failure before then will bring the October
bears back in force. One new challenge to the market next week will
be the huge slate of 22 IPOs. These will soak up plenty of the cash
that is currently flowing into the general market. September is not
the month I would choose to IPO and I am sure there were many Maalox
moments on Thursday night after the Intel warning. With every
analyst on the street calling for a rally this week there seems
to be nothing left to do but go long. But do you remember the
last time this happened? Right, the week before Labor Day and
everyone was lined up on the same side of the boat shouting rally.
Lets hope this week works out better than that disaster. The key is
still earnings warnings. If there are no big cap confessions this
week then we might get out of September alive. Should IBM or MSFT
feel the need to clear their conscience then things could get a
little choppy! The Intel problem may remain a cloud over the market
for another week as investors have a little more time to think about
it. Keep those life preservers handy until we dock.

Trade smart, sell too soon.

Jim Brown

DENVER - Oct 27-30th

The Advanced Options Workshop in Denver is coming fast. The last
weekend in October is going to be power packed and full of the
finest option education you can get.

This is not your standard seminar. We start by putting you up
in a luxury hotel and feeding you five times a day. We feed your
mind from a fire hose as well with over a dozen speakers and
special guests to educate you on every option strategy.

We will teach high profit strategies from how to safely buy calls
to the even less risk associated with spreads and straddles. Do
you want to maximize your returns by selling put? Learn Jim's
Deep In The Money strategy for maximum returns. Want to protect
your portfolio from the next market downturn without having to
sell your stock positions? Want to go beyond Delta Neutral an
obtain Delta Zero? We will show you how.

How about selling calls against your leaps in an IRA? Day trading
Options? How about Trend Trading using multiple time frames or
Swing Trading with retracement/expansion tools. Sound like Greek?
We will even teach you all the greeks you need to know to be a
better option trader.

Did you know Index options offer a lower tax rate? How about
disaster recovery? What should you do when a position turns
against you when you are not watching? How can you tell when the
market is ready to run instead of a bear trap rally?

There is something for everybody. Just mingling with over a dozen
professional option traders for four days is worth the price of
admission. We even pay for the entire room, all meals and you
will get a professionally produced set of videos of the entire

If you have not been to one of our Denver Expo seminars before
here are some comments from previous attendees:

The words herein are totally inadequate to express what I am
feeling about you and all the OptionInvestor organization.
But this medium is all I have. Thank you more than these few
simple words can say.

Wow, what a seminar!  In my 25 years of investing I have
attended many instructional conferences, but I have never,
never experienced one like your Options Expo.  The instructors
were absolutely tops.  Subjects, generally were on target.
Especially for me, the Skybox, index funds/options and the
early morning strategies and trading were particularly great.
The attention to the many details and nuances were especially
evident, and I guess most of the credit that area goes to your
great support team.

Now, the real challenge is to apply and implement the powerful
knowledge I was exposed to.

Sincerely and warmly,
Kevin Hughes, Denver


Jim & Staff,
I am sitting in the hotel room after a great 3 days in your
seminar. I can't tell you how pleased I am and want to thank
each of you for a job well done.
Having been responsible for events like this, albeit on a much
smaller scale, I can recognize all the hard work that went into
the seminar. Each member of the staff is to be congratulated!!
The seminar confirmed my belief that the OIN staff really cares
about the success of their subscribers. Jim, you all should be
proud of the work you do to enrich the lives of so many people.
It is one thing to amass a personal wealth. It is a much higher
calling to help others meet their goals in life.
I was very impressed that you were emotional in your closing
remarks. You have so much to be proud of -- helping people fish
all over the world!
Thanks again and I look forward to attending another seminar
in the future.
My best reagrds,
Jim Boettcher
Austin, Texas


I must say, that your seminar was outstanding!!!  Sign me up
for next year.
It is rare that a person of your position would share so generously
your knowledge of his trade.  I hope that I will be able to put into
place much of what you taught.
Every aspect of the seminar was first class, from the hotel, to the
food, the instructors and the luncheon speakers.  One of the biggest
surprises was your generosity in handing out material, and gifts.

Two weeks ago I attended a competing option seminar in Chicago and
all I got from the was coffee at the morning break,  No handouts,
no food and half of the final day was promoting their web site and
additional classes.  I must say your seminar far exceeds what I got
from them.
Sincerely yours,
Mike Lillis


Please pass on my thanks to the entire OIN group for a fabulous EXPO.
The seminar far surpassed any expectation that I would have fathomed,
had I attempted to! OIN has the right attitude and the obvious ability
to be a leader and I look forward to many years of positive experiences
with you folks.

Kind regards,
Gwen Richardson


I described this event to my friends as a life changing event!
(options aside) ,the quality of people, dedication, sacrifice of
their time (the second 40+ hours a week they don't have to work
but do) they do this because they care, wanting to help others
change their life dramatically (My wife thinks I was oxygen
deprived up there !) I came back a different person for those
who know me that says a lot.
now for the options side
I have to admit there was so much info to absorb, most of it
came to me on the 2000+- mile ride home it all started to fall
into place I feel Very confident (yes Jim this can be bad but
I know this now!) Notice the patience here guys! that's one
change I have a plan to stick to !
Allan O'Neill


Wow what a week!  It has taken me this long to recover.  I cannot
begin to tell you how much I appreciate all the effort that was
put forth to make the OPTIONS EXPO 2000 seminar a success, but,
I'm sure to no ones surprise, I'll try.

Chris Verhaegh - You could not have found a better person to set
the tone for the entire seminar.  I went to the options boot camp
with the idea in mind that it would help me get ready for the "real"
learning in the seminar.  Boy, was I wrong!  I learned enough in the
boot camp alone to justify what I paid for the whole seminar.

Austin Tanner - What a perfect foil for Jim!  I swear if one of them
would have said the sun would come up tomorrow the other would have
shown statistics indicating the likelihood of an eclipse.  And this
was exactly what I needed.  I was one of the many that went from a
raging bull to market neutral in the process of three days.  I am
now more inclined to let the market tell me where it is going rather
than me telling it where to go.

Lynda Schuepp - She truly surprised me.  I expected to get nothing
out of this section.  Covered calls seemed too boring and with my
physique any strategy with NAKED in its title is an immediate turn-off.
I don't plan on starting a new workout physically, but I have become
more comfortable with naked puts thanks to Lynda's presentation.

James Brown - It is said of James Brown the singer, that he is the
hardest working man in show business.  That must mean that James
Brown the investor is the hardest working man in dough(money) business.
Whenever I got to the seminar room it seemed like the first person I
saw was James.  And it seemed like he was always the last one out of
the room in the evening.  I will never forget looking over at James
while he was helping Chris go over the XAU index with us and see how
tired he looked.  But he never complained about it or got short with
us because of it.  An example for all of us on how to deal with
adversity with dignity.

Jim Brown - It is said that those who can do and those who can't
teach.  It is also said that there are exceptions to every rule,
and Jim is certainly the exception to the rule.  Nowhere else will
you see how an instructor performs the tasks he is telling you to do.
The live planning and trading sessions were just great!  And the chalk
talks were a great way to wrap up the day.  This group of speakers
and instructors could not have been gathered by anyone else.  Just as
birds of a feather flock together, quality people are drawn to quality
people.  The love and concern for his fellowman that Jim so readily
displays, radiates throughout the OptionInvestor.com family.  And that
brings me to my final clichi.  Behind every great man is a great woman.
And this was never more true than with Sondra Brown.  She worked
tirelessly and thanklessly not only to insure that the seminar was a
success but also that all attendees were made as comfortable as possible.
So from the silent majority please accept our humble thanks for all you

To all those who attended the seminar thanks for making it a pleasure
to be with you.  I met a lot of new friends and fellow investors who
have already enriched my life with their kindness and hopefully will
do the same in the future for my portfolio with their guidance and
advice.  To those who did not attend either of the seminars I will
simply say, "You were missed" and ask why you chose not to come.  If
you could not afford the cost of the seminar how can you justify the
cost of trading?  If you feel like you know it all already please give
Jim a call so he can teach it to the rest of us!  Whatever the case I
hope to see you at OPTIONS EXPO 2001.

Pat Robertson


Need we say more? If you want to learn how to be a better trader,
making more and losing less then you should come to this seminar.
We guarantee you will not be disappointed!

For more info:


Charlotte - Wednesday - September-27th.

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.



The Boston seminar is September 28/30th. Options
expiration is over and earnings still a week 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.

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 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:


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What a week! The big drop on Monday gave us an ideal entry point
on just about anything we wanted to play. The naked put candidate
list from last Sunday was almost a 100% winner. The SNWL play was
a no go from my stand point. When I was screening charts I did
not look at the individual news on each company and SNWL had a
2:1 split on Monday. Still, had you sold puts at the bottom on
Monday you would be up about $5 today. This was a screening error
on my part.

Here is the table of possibles from last week showing the
lows at the bottom on Monday (high premiums) and the close
on Friday. Holding these on Thursday night would have caused
serious heartburn but almost all would still have been
profitable even if the market had not rebounded as much.

Stock Price Strike Premium
SNWL	$60	$90	$32 no play
CMRC	$70	$100	$30 - $40 Monday, $25 today, $15 move
VRTX	$80	$90	$17 - $20 Monday, $10 today, $10 move
VRTS	$122	$140	$22 - $25 Monday, $ 9 today, $16 move
IDTI	$90	$105	$17 - $17 Monday, $ 9 Wed, 12 today
INKT	$120	$150	$31 - $31 Monday, $20 Wed, 25 today
VRSN	$180	$210	$38 - $46 Monday, $25 today, $21 move
MUSE	$170	$200	$36 - $35 Monday, $27 today, $ 8 move
ITWO	$172	$200	$31 - $40 Monday, $27 today, $13 move
SDLI	$328	$400	$76 -$100 Monday, $76 today, $24 move
GLW	$297	$350	$55 - $70 Monday, $47 today, $23 move
BRCM	$233	$280	$53 - $63 Monday, $38 today, $25 move
JNPR	$201	$240	$43 - $53 Monday, $26 today, $27 move

The only one I played, simply because of a busy work schedule,
was BRCM. I sold the OCT-280 put @ $56 on Monday and closed
it on Friday for $41 after a rather panic filled day.


Yahoo was one of the stocks that got the stuffing knocked out of
it on Friday. With earnings only three weeks away and no earnings
run yet I thought the dip would be a good time to buy calls. I
was not around a PC at the opening dip but I was able to pick up
some OCT-100 calls @ $12.50 at midday. With the big dip the premiums
were deflated and made calls a fairly safe play.

JNPR - Oct-200 calls

Same story with JNPR. I was not around a PC when the morning drop
made it a real bargain and had to jump in midday when the market
started moving at lunch time. When JNPR pulled back over $215 I
bought the deep in the money $200 October calls for $26.50. When
I do play calls I only play deep in the money to minimize premium
deflation on a stalled stock. A falling stock will hurt me worse
with almost 100% delta but that is what stop losses are for.


My plays this week will be confined to the first three days. I
will be be speaking at a John Dessauer Investor Conference in
Switzerland next week and I need to clear the table before I

My plan will be to sell some more naked puts on Monday, assuming
the market continues to rally. Call premiums have inflated again
with expectation of the rally. I have narrowed my target list
to only six and I should be able to get a couple that will move.

Stk Price Strike Premium
BRCD 254 	300 	$47
NTAP 147 	160 	$26
BRCM 248 	300 	$61
ABGX  85 	105 	$26
CIEN 120 	160 	$45
VRSN 194 	250 	$58

The main reason I use this strategy is the premium decay. I want
the decay woring for me not against me as in buying calls. With
the volatile market any direction change or stalling with cause
call premiums to deflate at a rapid rate.

Put premiums tend to move slower. They should not move any
different than calls but they do. If the stock is moving up
even slightly or even just standing still the premiums start

The margin required with my broker is 25% of the stock price.
That means to sell one contract on a stock that is $100 requires
$25000 in margin. However you get immediate cash into your
account which draws interest while you are holding it. You
can't use it but you do get the interest. If you sold a $120
put with the stock at $100 you would likely receive a $25
premium or $25,000. If you have a large account you can sell
a lot of premium with very little risk if you do it right.

The concept is to wait for a stock to bounce off support
before selling the put. (I know, my targets above are not
exactly at support. Do as I say, not as I do.) This support
is your life preserver. If the stock runs up a few dollars
and something terrible happens to the market then it will
likely fall back to support which is where you started the
play. No harm, no foul. If you are agressive like me then
look for the high flyers that are moving $10 a day and just
watch them closely.

The key to the "deep in the money" method is delta. The
deeper in the money the greater the delta. If you are $40
in the money and the stock moves +$20 then your option
premium will shrik by almost $20. It is the reverse of
a deep in the money call that suffers a catastrophic -20
drop and all the intrinsic premium evaporates in minutes.
Only when selling naked puts you want the premium to

There are many different factors that go into this strategy
such as when to sell and how to manage stop losses. This
is a strategy I will teach at the Denver Workshop in October
and it is the closest thing I can think of to free money.

I think those of you who saw me teach this in March would
agree. I don't know why anybody would go back to just plain
calls again.


Try to maintain a market neutral outlook and react to what
the market gives us instead of trying to force plays to fit
your market view.

Jim Brown

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Technically Speaking
By Austin Passamonte

Friday's session didn't bode well for bulls. Shades of April's
meltdown loomed large. We honestly expected the sell off to
last all day and worsen into the close. Listening to media hype
from 5:00pm onward surely fueled our fear.

Our guess now? We just saw the near-term bottom form right
before our eyes. News of titanic proportion couldn't do any
worse damage than one spike down and gradual recovery from
there. Divergence in any manner within market action is a
strong harbinger of things to come. Markets failing to tank on
bad news are poised to rally soon.

Technical indicators we chronicled in Thursday's article
told a clearer picture than all the flashy media combined.
Our data suggested than open-interest disparity on underlying
put-option contracts was huge, offering firm support below.

Long-term ascending trend lines dating back to February and
March lows had repeatedly held all of the market dips from
then on. The VIX had twice spiked through its daily upper
Bollinger Band as the OEX hit a bottom. Technically, things
really didn't look too bad.

I guess that's not how the post and pre-market "sell-the-farm
at any price" crowd saw things. Wonder if they would like to
have those bailed-out positions back just a few hours later?
Hindsight, of course.

At this point, the Dow remains above its 200 DMA at 10,821 and
the long-term ascending trendline. Possibly the healthiest
looking index of the four majors right now.

The NASDAQ 100 closed Friday resting smack-dab on it's ascending
support line dating back from intraday lows in late-May. All
major moving averages lie overhead and it will be a struggle
when each one is met, but open interest S/R disparity on the
QQQs shows solid support and scant immediate overhead resistance.
A move to 98 in the QQQs has plenty of room to fly.

The SPX closed two index points above its 200 DMA. That in
itself is a major victory considering how tech-heavy it has
become. Immediate support is very solid with overhead resistance
almost nil is demonstrated in S/R option values.

The OEX made a picture-perfect touch and bounce from it's long
term ascending trendline dating from mid-April as well. The
200 DMA is three points above at 783 and the 20 & 40 DMAs are
touching near 805. Still far better than what was projected.

S/R disparity overhead on the OEX is extremely light to 790+
while underlying support below 770 is solid to impenetrable
from 750 down. Its next big move prior to option expiration
now greatly favors the upside. Do we notice a pattern here?

Our sentiment indicator VIX spiked above 27 for a high on
Friday, early on we might add. This very well could be the
panic release we've long awaited. Its close above 24 has us
out of worry-mode for awhile. Isn't that refreshing?

Also, the bi-weekly COT report showed commercial S&P 500
traders at new 10-year high net short positions as of Tuesday
9/19 when the data is compiled for release on Friday. Commercial
DJIA were also at five-year net short holdings as well. We think
it's safe to assume many of these shorts were covered by now as
panic stricken small specs dumped their massive longs to lose the
battle once again. We'll be interested to see the next report in
two weeks.

Incidentally, this data will be released by the COT every Friday
beginning in October due to high demand from traders in all
markets. For the sake of clarity and brevity, Market Sentiment
will cease to compile exact data but continue to update the
bottom line of net positions each Friday instead. Traders who
wish to compile the entire stats are welcome to visit a free
information-only site at www.commitmentsoftraders.com

(By the way, a major short squeeze in live cattle is about to
begin for our meat & grain traders out there.)

Everything we see points to pending strength in the market.
Straight up from here? Not likely. Volatility will prevent that
but this factor is what makes trading the finest vehicle of
all in potential. Execution is up to us.

Everything we discussed is the data used by floor traders and
institutions. If we want to win like them, we must think & trade
like them. Until our facts tell us otherwise, Market Sentiment
is now knee-deep in lush green pastures of bullishness. Move
it back into the cave for all those bears!

As always, trade carefully and prepare to play either direction,
your primary strength as an Option Investor!


Sat 9/23 close: 24.17

CBOE Equity Put/Call Ratio
The CBOE equity put/call ratio is a contraire-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            (9/26)      (9/28)      (9/23)
CBOE Total P/C Ratio                                 .56

Equity P/C Ratio                                     .48

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           (9/26)        (9/28)      (9/23)
All index options                                     1.36

OEX Put/Call Ratio                                    1.45

30-yr Bonds
Friday 9/22 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)
810 - 795               12,456       5,358         2.32

790 - 775                6,201       6,885          .90

OEX close: 774.08

770 - 755                 210        8,236        40.98 ***
750 - 730                  66       16,026       242.82 ***

Maximum calls: 810/4,903
Maximum puts : 740/6,010

Moving Averages
 10 DMA  790
 20 DMA  806
 50 DMA  805
200 DMA  783

NASDAQ 100 Index (NDX/QQQ)
101 - 99              12,794         3,535         3.62
 98 - 96              13,686        16,924          .81
 95 - 93              14,737        24,324          .61 ***

QQQ(NDX)close: 92.15/16

 92 - 90              15,471        29,940         1.94
 89 - 87               2,912        19,075         6.55
 86 - 84                 482        15,946         5.18

Maximum calls: 100/9,360
Maximum puts : 90/16,551

Moving Averages
 10 DMA 91
 20 DMA 92
 50 DMA 92
200 DMA 95

S&P 500 (SPX)
1500                   20,276       18,551         1.01
1475                   11,855       10,971         1.08
1450                    6,080       13,068          .47

SPX close: 1448.72

1440                     105         2,839        27.04 ***
1425                   1,669        18,529        11.10
1400                   1,262         8,593         6.81

Maximum calls: 1500/20,276
Maximum puts : 1500/18,551

Moving Averages
 10 DMA 1465
 20 DMA 1486
 50 DMA 1480
200 DMA 1446


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
Total Open
Interest %       + 13.4% (long)     - 11.8% (short)

Total Open
Interest %       -  8.9% (short)     + 0.4%  (flat)

S&P 500
Total Open
Interest %       + 29.1% (Long)      - 11.8% (short)

What COT Data Tells Us:
Commercial traders built bigger net-short positions while
small specs continued their bullish ways as of last data
compilation Tuesday 9/19 market close. Plenty may have changed
since then and we await the next COT release with anticipation.

Feed's finished
Benign government reports
Oversold market levels right now
Disparity in overhead call/put ratios
VIX above 24
Friday's major bounce
Technical chart pictures

Oil Prices (falling?)
COT reports (easing?)
Recent pre-warnings, downgrades (INTC!)
Market leaders breakdown


As of Market Close - Sunday, 09/24/2000

                                  Key Benchmarks
Broad Market           Last     Support/Resistance   Alert

DOW   Industrials      10,847      10,600  11,150
SPX   S&P 500           1,448       1,420   1,495     **
COMPX NASD Composite    3,803       3,600   4,000     **
OEX   S&P 100             774         758     790     **
RUT   Russell 2000        518         500     550     **
NDX   NASD 100          3,701       3,500   3,850
MSH   High Tech           997         950   1,055     **

BTK   Biotech             772         690     780
XCI   Hardware          1,401       1,350   1,520     **
GSO.X Software            465         430     470
SOX   Semiconductor       926         880   1,060     **
NWX   Networking        1,202       1,160   1,250     **
INX   Internet            539         510     580     **

BIX   Banking             601         580     635
XBD   Brokerage           642         610     685     **
IUX   Insurance           750         720     760

RLX   Retail              852         815     890
DRG   Drug                410         365     415     **
HCX   Healthcare          848         785     855     **
XAL   Airline             145         140     152
OIX   Oil & Gas           305         296     332

Twelve alarms were triggered on Friday, with the DRG and HCX hitting
resistance alerts.  "Momentum" traders should keep an eye on the BTK,
GSO.X and IUX, while "support" traders may want to be alert on the
BIX.  Lowering support (SPX, COMPX, OEX, RUT, MSH, XCI, SOX, NWX, INX,
XBD) Lowering resistance (SPX, OEX, NWX) Raising support (DOW, IUX,
RLX, HCX) Raising resistance (DRG, HCX)

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Intel Thunderstorm Followed by Clearing Skies
By Buzz Lynn
Contact Support

If today's Intel-based selloff wasn't the mother of all
capitulation and recovery, it was at least the eldest daughter.
The strength of the recovery is better than just a ray of sunshine
going forward.  It's a blue sky opening up.  Under the worst
possible circumstances, The NASDAQ rallied up over 185 points from
its low of the day at 3614 to close at its high of the day at
3803.  From the big gap down this morning, we didn't even see
continued selling through amateur hour.  It was straight uphill
from the open where the NAZ hovered around the 3725 level for most
of the morning.  Then late in the afternoon, bullish horns really
got sharp to poke the NAZ back to 3801 by the close.  For a
pessimistic market concerned about faltering demand for
technology, the price of oil, currency risk, rising production
costs, etc., it blew it all off in fine style.  In short, the
market tested 3600 support and held, 3700 resistance, which it
cleared easily, and 3800 resistance where it stands now.

When a market is oversold and can stage a nearly 200 point
vertical rebound in one day on over 2 bln shares (yes, INTC
accounted for over 300 mln, but that's another story), this is one
instance where we feel comfortable calling a bottom.  It wasn't
just the NASDAQ either.  The Dow rallied back almost 230 points
from an opening low of 10,621 to close at resistance of 10,850,
while the OEX found support at 760 from the starting line and
moved up to close at 772, a support level well-tested over the
last three months.

The only nagging little question remaining is will these former
levels of support act as support again, or become points of
resistance from which to roll?  Like a good pilot, we'll let the
instruments be our guide.  The short term stochastic has crossed
the long one and also crossed above the oversold 20% line in each
of the three indices.  That is our standard buy signal.  The MACD
too has crossed to positive figures on the 60-min charts to
confirm the move.  Frankly, the 60-min chart isn't as reliable as
the daily.  However, with all three indices making the same move,
those factor in our favor to tempt us to jump the gun rather than
wait for a daily chart confirmation.  That's the technical part
and the whole reason we were not willing to play index puts in
Thursday's update.  Trust your instruments.  They'll be right a
higher percentage of the time when looking for a long-term trend.

The fundamentals too show that sellers have run their course and
despite the lingering profit pessimism, buyers are ready to
support all three indices at these levels.  We don't know how long
it will last, and dark clouds have been known to show up over the
weekend.  Remember that the Federal Reserve came to the rescue of
the Euro Friday and President Clinton authorized release of 30 mln
barrels of oil from our strategic oil reserve, which may have put
some optimism in Friday's gains.  What the government giveth, it
can take away quicker, which has the potential to fog the trading
atmosphere.  But for now, the skies are opening up.  Economic
reports are abundant next week but not as critical as the PPI/CPI
(early October).  Monday - Existing home sales.  Tuesday -
Consumer Confidence.  Wednesday - Durable Orders.  Thursday - GDP
and Initial Claims.  Friday - Personal Income.

Fundamentally and technically, it looks like the markets are ready
to move up.  Enjoy the ride while it lasts!

***note we have the MACD set at 8,18,6 and the stochastic set at
10(3),5 for all our technical references in this section.***


QQQ - NASDAQ 100 $93.06 (+1.81 last week) Like nothing ever
happened last week, right?  Whew what a ride.  Following INTC's
warning, the whole tech market sold off on a gap down open Friday
morning.  The good news is that it opened at the low and proceeded
to move up from the starting gun.  Yes, nearly 2.2 bln shares
traded in what looked like a major capitulation and rebound - that
is until you notice that INTC accounted for 308 mln shares.
Subtracting that out, and adding back 150% of the ADV, we get an
adjusted volume under 1.9 bln shares - still respectable, but not
very many people jumping from windows or unloading their wallets
on everything in site.  That's what makes it the eldest daughter
and not the mother of all selloffs/recoveries.  It will suffice.
While the NASDAQ was holding 3600 and 3700, QQQ bounced
immediately from $88 and held $90 until the afternoon where it
moved up to close at almost $93. The short stochastic has turned
bullish by crossing over the long stochastic and the 20% oversold
line.  Hourly MACD confirms the entry and hopefully the daily will
follow that movement on Monday.  Support is still at $90-91, then
$88.  50 and 200-dma resistance are nearly equal around $94.69.
$94.50-$95.50 provides historical support, the $97, then $99-$101.
Barring the daily market ups, downs, and surprises, we think QQQ
could have a pretty good week.  Still be on the lookout for
earnings warnings.

Calendar Spread:

Finally, a bottom to buy the long leg of our spread.  If you were
brave enough to pull the trigger at $88 support this morning, you
have a beautiful entry.  Two ways to play here.  First, you can
day trade the short position at support and resistance from a 30
or 60-min chart.  From above, support is still at $90-91, then
$88.  50 and 200-dma resistance are nearly equal around $94.69.
$94.50-$95.50 provides historical support, then $97, then $99-
$101.  We favor a longer term approach and would choose to wait
until the daily stochastics gets to oversold territory (above 80%)
then look for the short to cross the long and descend back under
80%.  Confirm that with the MACD rolling negative.  That may be a
few days and patience will pay off here.  Heck, even if you jump
the gun at resistance, time decay will still work in your favor as
the time component evaporates on the buyer right into your pocket.
Remember to cover when the time value approaches zero or
expiration nears.  You don't want to get called out of this unlike
a covered call.

BUY  CALL JAN- 95 QVQ-AQ OI= 3282 at $ 9.38

SELL CALL OCT- 95 QVQ-JQ OI= 7611 at $ 3.38, ND = 6.00 or less
SELL CALL OCT- 97 QVQ-JS OI= 7500 at $ 2.69, ND = 6.69 or less
SELL CALL OCT-100 QVO-JV OI= 9360 at $ 1.69, ND = 7.69 or less

Long Call:

Dij` vu all over again.  Based on a turn-up in the stochastic and
MACD, we have a technical entry.  We hope you got a piece of the
spectacular recovery.  Support is at $88, then $90-$91, followed
by $93.  Resistance is at $94.50-$95.50, then $97.50, and roughly
$100.  Pick your favorite level to target shoot, then enjoy the
ride to resistance.  At that point you'll make your decision to
stay in for more on strength of get out on a rollover.  Remember
to use those stops that can protect you if the play doesn't go
your way.  For now, it looks like we'll get a nice rise until the
stochastic reach overbought and rollover.  It will be like our buy
signal only in reverse.

BUY CALL OCT- 90 QVQ-JL OI= 7551 at $6.38 SL=4.25
BUY CALL OCT- 95 QVQ-JQ OI= 7611 at $3.63 SL=2.00
BUY CALL NOV- 95 QVQ-KQ OI=  251 at $6.00 SL=4.00
BUY CALL NOV-100 QVO-KV OI=  341 at $4.00 SL=2.50

Bullish Put Credit Spread:

It's back!  That was fast.  Recall we dropped this play until we
found a bottom following INTC's warning.  This play is a bit
advanced and is similar to a naked call.  Only a credit spread has
limited loss potential in exchange for giving up some of the
reward.  Be sure you understand the entry and the exit before you
trade it.  Here's the deal.  First, we need to be convinced that
QQQ will rise from here and that it will close at over $90 on
expiration day.  Then we want to sell an OTM put to collect a
premium.  Simultaneously, we'll buy an even lower price strike for
less money just in case the market falls apart.  In this case, we
might sell a $90 put and buy an $85 put for a credit in our
account.  The loss potential is limited to the difference between
the strike prices minus our credit.  Still, we must remember to
use at least a mental stop to take us out of the trade if the
value of the spread gets too high for our risk tolerance level.
Ideally, we want both strikes to expire worthless.

SELL PUT OCT-90 QVQ-VL OI=16551 at $2.94
BUY  PUT OCT-85 YQQ-VG OI= 9258 at $1.88

NET DEBIT = $1.06 or more

Average Daily Volume = 19.5 mln


OEX - S&P 100 $774.08 (-15.69 last week) Ouch!  This index
definitely felt the pain, especially when it reached just a few
ticks below 760 on Friday.  The good news is the rebound was
steady and solid and financials participated.  How were they
helped?  Greenspan to the rescue to prop up the Euro!  Not widely
reported is that that may have been the cause of strength in the
financials, which in turn helped out the OEX.  If the FED
discontinues its support, that may trigger losses in the
financials and thus the OEX.  That's a possible gotcha.  Other
than that, the recovery gains were broad based, lending much
support to the fundamental picture.  Technically, OEX looks great
too.  Like the QQQ, our buy signal was finally triggered when the
slow stochastic crossed through the fast line and the 20% oversold
line on a daily chart.  MACD confirmed the move on the 60-min
chart and should confirm too Monday on the daily.  Support is
strong at 760, and previously at 775-780.  OEX is a shade below it
now.  Cautious traders may want to see the OEX trade back over 775
before opening any trades.  But otherwise the instruments tell us
we ought to be bullish for now after Friday's reversal and as long
as the charts cooperate.  Resistance comes again at 782, 790, 795
and 800.

Long Call:

OEX movement couldn't have been scripted better - gap down open
immediately followed by steady gains through the day.  On a
technical basis, the daily stochastic and MACD charts are saying
that the market has turned bullish.  How do we know?  The short
stochastic has crossed the long stochastic and moved up through
the 20% oversold line.  MACD has yet to cross positive on a daily
chart, but looks great on the 60-min.  Since the recovery worked
equally well on all indices, we feel comfortable in not waiting
for the daily to confirm the signal.  That said, we're looking for
a nice run.  You can target shoot for support at a lower level,
but don't quibble over pennies when earnable dollars are at stake.
Resistance is at 782, 790, 795, and 800.  We think waiting for a
move over 775 after amateur hour is sufficient given the chart
pattern.  Enjoy the ride while it lasts.  But please don't be
complacent.  Stop orders are still important to take us out of a
trade when it moves against us.

BUY CALL OCT-770 OEZ-JN OI= 112 at $23.00 SL=16.00
BUY CALL OCT-780 OEZ-JP OI=1544 at $16.75 SL=12.00
BUY CALL NOV-780 OEZ-KP OI=  35 at $27.13 SL=19.00
BUY CALL NOV-790 OEZ-KR OI=  50 at $20.50 SL=14.75

Bullish Calendar Spread:

Once again, a stellar recovery from Friday's INTC induced selloff
has led the technical recovery on the daily chart and given us an
entry signal.  As above, that happened when the slow stochastic
crossed the fast stochastic line and penetrated the 20% oversold
line back into bullish territory.  A 60-min MACD chart confirms
it.  Now that OEX seems ready to run with the bulls, today would
have made a great day to enter the long call leg of the trade.
Our objective now is sell a short call leg at resistance and let
time decay work on the other guy who bought it!  Of course, you
could day trade the short leg based on the 30 and 60-min charts
using MACD and stochastic, but we favor a longer-term trade to
catch the major trend.  Our short sell signal will be generated
once the daily chart stochastics (both lines) cross over the 80%
oversold line, then cross over each other with the fast stochastic
falling under 80%, and confirmed with the MACD turning negative.
Remember to buy back you short position just prior to expiration
or when the time value approaches zero (whichever first).  You do
not want to be called out of this unlike a covered call.

BUY  CALL MAR-800 OEX-CT OI=  16 at $44.25

SELL CALL OCT-800 OEX-JT OI=4602 at $ 7.38, ND = 36.88
SELL CALL OCT-810 OEX-JB OI=4903 at $ 4.50, ND = 39.75

Bullish Put Credit Spread:

Once again, this play is a bit more advance, but it's a bit like
selling naked puts, only with protection to limit the downside.
Don't play this until you fully understand how this trade works.
Here we go!  First, we must have a general belief that that OEX
has bottomed.  Our intent to get both positions to expire
worthless.  To accomplish this, we sell say a 765P and take in a
premium.  We then use part of that premium to simultaneously buy a
lower strike, say a 760P.  That gives us a credit that goes
straight into our account and will be ours to keep as long as the
OEX closes above 765 on October 20th.  (We choose this combination
because it yields the highest disparity and thus the highest
credit.)  Your loss is limited to the difference in strike prices
minus the credit.  Of course you will want to cover if the OEX
drops such that the sold strike is ITM or when value of the credit
exceeds your threshold of pain.

SELL PUT OCT-765 OEZ-VM OI= 495 at $12.25
BUY  PUT OCT-760 OEZ-VL OI=2031 at $10.75

NET DEBIT = $1.50 or more

Average Daily Volume = 1266


For the week of September 25, 2000


Existing Home Sales Aug   Forecast:   4.95M      Previous:  4.79M


Consumer Confidence Sep   Forecast:  141.2       Previous: 141.1


Durable Orders      Aug   Forecast:   2.00%      Previous:-12.40%


GDP-Final            Q2   Forecast:   5.30%      Previous:  5.30%
GDP Chain Deflator   Q2   Forecast:   2.60%      Previous:  2.60%
Initial Claims   23-Sep   Forecast:    315K      Previous:   308K
Help-Wanted Index   Aug   Forecast:     NA       Previous:    82


Personal Income     Aug   Forecast:   0.30%      Previous:  0.30%
PCE                 Aug   Forecast:   0.50%      Previous:  0.60%
Chicago PMI         Sep   Forecast:  48.50%      Previous: 46.50%
Michigan Sentiment  Sep   Forecast:  108.8       Previous: 108.8

Week of October 2nd

Oct 02  Auto Sales
Oct 02  Truck Sales
Oct 02  NAPM Index
Oct 02  Construction Spending
Oct 03  FOMC Meeting
Oct 03  New Home Sales
Oct 03  Leading Indicators
Oct 04  NAPM Services
Oct 04  Factory Orders
Oct 05  Initial Claims
Oct 05  FOMC Minutes


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The Option Investor Newsletter                   Sunday 09-24-2000
Sunday                                                      2 of 5

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Is There A Light At The End of The Tunnel?
By Mary Redmond

The bright light at the end of the tunnel this week seemed to be high cash
flows into the market from equity funds and cash moving out of money market
funds.  AMG Data reported that over $7.6 bln in cash was deposited to growth
funds during the week ending September 20th, which was the largest flow in
14 weeks.  In addition, the Investment Company Institute reported a very
large flow of cash out of money market funds last week for the first time in
several weeks.  Retail money market funds reported a net outflow of $6.75
bln, and institutional money market funds reported a net outflow of $9.96
bln.  There are two possible explanations for the outflow of cash from money
market funds, margin related selling and retail and institutional investors
moving into the market.  It seems unlikely that margin selling is as
prevalent as it was in April.
If investors deposit money into equity funds, then the fund managers are
obligated to spend the money.  Even last April, the Investment Company
Institute reported that equity funds kept only 4.9% of their assets in cash.
This can indicate that while the retail investors were selling, there was
still institutional buying taking place.
Ultimately, this can be a strong boost to the market, as approximately
$24.31 bln flowed into the market this week.  If we see these flows
continuously, then it will be difficult for the market to stay flat.
It is interesting to note that we have heard very little about initial
public offerings in the last few weeks.  While there are hundreds of
companies which have filed to go public, it seems that the institutional and
retail demand for IPOs has changed dramatically from six to nine months ago,
when we saw between $20 and $30 bln dollars raised every month in new stock.
While this may be having little effect on the market this month, it may be
highly beneficial to the market six to twelve months from now.  Ultimately,
the fewer IPOs are issued, the more cash is available to enter the stocks in
the indexes.  In addition, toward the end of October the schedule for
unrestricted stock coming on the market will lighten up.  In November, the
IPO lockup expirations are less significant.
This week we had seven IPOs, OMNY, TTMI, ZNGN, VRYA, COD, CURN, and IRNG,
raising $642 mln in total.  It is particularly impressive that two IPOs
started trading on Friday, a day in which several analysts expected to see
major selling.
Many people may not realize that we have been in a range bound market for
over a year now.  In addition, the correction we experienced this Spring was
worse in percentages than 1987, and will go down as one of the worst market
corrections in two decades.  The only difference is that it recuperated more
In a way, quick daily trades may even be safer in this highly volatile
environment.  If you want to hold a company long term, meaning many years,
you can weather out the mania which rules the markets day by day.  However,
if you are doing position trading, meaning holding positions overnight you
are subjecting yourself to unprecedented levels of risk.  It is almost
impossible to predict which company will warn of lower-than-expected
earnings these days, as the analysts' estimates vary widely.  It is also
impossible to predict the market's reaction to analysts' reports and company
There are many stocks which make sufficient daily moves to make day trading
profitable.  If you follow certain highly accurate technical indicators, you
can often make trades which have a high probability of success.  Stocks
which have a market cap in the range of $20 to $100 bln, a high earnings
growth rate, and a consistently high daily volume tend to respond better to
technical indicators.
For example, Friday morning there were many stocks which had entry points
for quick trades, as the bad news from Intel was largely discounted by the
positive news that the U.S. Treasury, EU and Bank of Japan had intervened to
boost the Euro.  The NASDAQ opened down over 200, and within minutes NTAP,
PMCS and several others bounced from the severely oversold level to their
normal trading range. It is important to recognize that without the
Treasury's intervention into the currency markets, the markets might not
have recovered.

Ultimately, investors' greed may draw money into the market again.  While
Intel warned of earnings which would be lower than the previous
expectations, many other companies have stated that they expect their
earnings to be above expectations.  At some point, people will get tired of
earning 5.5% from their money market funds and move to the market.
During the last several months we have seen significant moves in many
networking and other high tech companies with market capitalizations in the
range of $25 to $100 bln.  This may indicate that investors may be growing
tired of the giants and looking for new leadership.  For example, Cisco has
been range bound for months now around $60.  GE and Intel also hit a
sticking point at around $500 bln and retreated.  It seems that $550 bln is
a hard market capitalization to cross.
Even if Cisco can increase its earnings 50% annually ad infinitum, it may be
difficult for the stock to show the level of gains it has in the past.  It
is really related more to market mechanics than the performance of the
company.  On the other hand, it is relatively easy for a company to lose
$100 bln in market value overnight, as we saw on Friday.
This is one of the reasons Wall Street loves spin-offs.  It is often easier
for several companies to grow at a rate that one company might not be able
to.  Remember when AT&T, Lucent and the Baby Bells were one company? (Most
of us are too young to remember but the AT&T monopoly was broken up and the
Baby Bells like Bell Atlantic were distributed to shareholders.) This
separation unlocked more market value than AT&T probably would ever have
been able to deliver on its own.

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Call Play of the Day:

ITWO - I2 Technologies $186.19 (+14.00 last week)
See details in sector list

Put Play of the Day:

MU - Micron Technology $52.00 (-7.13 last week)
See details in sector list

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Index       Last    Week
Dow     10847.37 -161.48
Nasdaq   3803.76  -31.47
$OEX      774.08  -15.69
$SPX     1448.72  -17.09
$RUT      518.82  -12.06
$TRAN    2597.14  -84.01
$VIX       24.17    2.24

MERQ      148.94   24.44  New, all-time high Friday, Impressive!
BRCM      248.75   16.69  New, what slowdown in Chip demand?
CFLO      137.19   14.81  Defying gravity in the Tech space
ITWO      186.19   14.00  Bullishness mounting for ITWO's Q3 EPS
CIEN      120.75   13.53  New, exploring potential in optic land
PEB       119.00   12.50  Bulls back into the Biotech sector
FRX       119.44    9.75  New, bulls love the generic drug makers
QCOM       73.00    6.75  Comeback not quite yet complete
SEBL      105.00    6.00  Bullish news carries stock to new highs
YHOO      111.44    5.56  On the verge of breakout above $112
IDTI       95.94    4.94  No split, but bounced back big Friday
AGIL       80.00    4.75  Uptrend intact despite Tech volatility
CAH        92.38    4.38  Momentum reigns supreme and CAH climbs
ENZN       71.06    2.19  New, safe haven of the Drug sector
AFL        62.81    1.94  Insurance sector bulled by Wall Street
PALM       51.81    1.69  Dropped, earnings after bell Monday
CHKP      152.44    1.19  CHKP buyers regain confidence
CORR       59.44   -1.00  Dropped, wandered aimlessly all week
CDWC       79.09   -4.41  Dropped, momentum dwindled last week

PCS        28.00  -16.81  Sliding down the hill to its 52-week low
CMOS       35.88   -8.00  New, bears growling in Chip Equipment
AFCI       37.63   -7.44  Tough week in Telecoms, again
MU         52.00   -7.13  New, vulnerable to Chip turmoil
DITC       39.50   -6.25  DITC just doesn't have 'it'
DIGL       69.06   -3.81  Back as square one, before breakdown
PWAV       33.63   -3.44  Bad for PWAV, good for us
EPNY       82.19   -1.81  Riding its 5-dma downward
LVLT       72.88   -1.69  Dropped, we hear the bulls
UK         37.13    0.53  Euro up, oil down... UK stabilizes
CMTN       46.19    3.19  Dropped, found bottom Friday
SCMR      117.69   12.19  Dropped, stock recovery continued


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.

CDWC $79.09 (-4.41) The powerful momentum that recently carried CDWC to new
heights dwindled last week.  The $77 bottom appeared to be holding firm
during consolidation, but Friday's bearish performance indicates the
momentum may not rekindle anytime soon.  A weak opening below the $75 mark
and a feeble attempt to regain position back above the converged 5 & 10 DMAs
just didn't happen.  While we'd like to see CDWC challenge Monday's all-time
record at $86.13, we don't want to hang around with our fingers crossed.
It's time to exit and move on to more favorable plays.
CORR $59.44 (-1.00) Reaching its zenith just as we initiated our play last
weekend, CORR ran out of gas and wandered aimlessly all week.  After just
falling shy of a new high a week ago Friday, the stock has struggled with
weak volume and a lack of enthusiasm - all in the midst of a solid Biotech
recovery.  It appears that as soon as the Biotech sector came back into
favor, the defensive nature of this specialty pharmaceutical company was no
longer able to attract more investor dollars to continue its rise.  Given
CORR's inability to participate in the strong recovery that took place on
Friday, we think it is a sign of relative weakness.  With so many great
momentum plays emerging on Friday, we are dropping CORR and putting our
money to work elsewhere.
PALM $51.81 (+1.69) After briefly moving above $55 on Thursday, PALM's
earnings run fell sick and the stock drifted lower ahead of Monday's
quarterly results.  Oddly enough, it appears that the INTC warning was not
the culprit in this stock's weakness.  The first virus targeting Palm users
was discovered by antivirus researchers at McAfee.com and Finland-based
F-Secure on Thursday night.  A real, replicating virus, Phage.936 erases
third-party applications on infected Palm systems, filling the display
screen with a dark gray box.  The news struck just in time to sideline PALM,
preventing it from having one more run before Monday's announcement.  Even
as the broad markets continued to rebound Friday afternoon, PALM shares were
unable to move higher and declined into the close.  While the news may turn
out to be inconsequential and no technical levels were broken, we are simply
out of time on our play.  We are dropping PALM this weekend, so make sure
you close any open positions before the earnings report Monday after the

CMTN $46.19 (+3.19) The monumental gap down on the NASDAQ Friday morning
provided a solid exit point for our CMTN put play.  After the Tech bulls
stepped in near CMTN's bottom around the $44 level early Friday, they
carried the stock past several key resistance levels going into the weekend.
Although CMTN finished the day slightly lower last Friday, the buyers showed
up in a big way near the close of trading, which could present further
problems to those us on the short side going forward.  CMTN has established
solid support just below at the $45 level, and again at $44 shortly
thereafter.  Use a pullback to the aforementioned levels as an exit point.
SCMR $117.69 (+12.19) We held SCMR over Thursday night in anticipation that
INTC's warning would drag down the Networking sector.  But, INTC's warning
didn't pack the punch we were anticipating.  Unfortunately, the negative
sentiment plaguing INTC didn't extend to SCMR on Friday.  So instead of a
freefall, SCMR's share price continued to recover.  Recall that on Thursday,
Salomon SB annihilated our play on SCMR.  The firm started SCMR with a Buy
recommendation and a $165 target price.
The bullish comments put the cherry on the sundae.  The
profitable decline was dramatically reversed.  The play is over;
there's no longer any ifs, ands, nor buts about it
LVLT $74.56 (-1.69) Even the INTC-induced selloff on Friday was unable to
crater LVLT, as the stock once again found support at $68.  If LVLT was
truly weak, then the market selloff should have been able to break the back
of this support level, and its inability to do so tells us that LVLT is not
as weak as it appears on the surface.  With market sentiment becoming
significantly more positive throughout the day on Friday, LVLT moved up into
the close, ending right at the resistance created by the converged 30-dma
and 50-dma.  The faint rumble we heard as the week drew to a close sounds
like distant stampeding bulls, and we will take this opportunity to drop
LVLT and get out of the way.


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.
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.


BRCM - Broadcom Corporation $248.75 (+16.69 last week)
Sitting in the sweet spot between the Broadband and Semiconductor sectors,
BRCM is a provider of highly integrated silicon solutions that enable
broadband digital transmission of voice, video and data to and throughout
the home and within the business enterprise.  These integrated circuits
permit the cost-effective delivery of high-speed, high-bandwidth networking
using existing communications infrastructures that were not originally
designed for the transmission of broadband digital content.  Using
proprietary technologies, the company designs, develops and supplies
integrated circuits for several markets including digital cable set top
boxes, cable modems, high-speed office networks, home networking, and
digital subscriber lines.
Pulled down from its late August highs, BRCM looks like it is on the road to
recovery.  Not only that, but it looks like it is in the fast lane.
Regardless of the saga of the dueling Semiconductor analysts, there is
clearly no slowdown in the demand for BRCM's semiconductor products, which
make possible the miracle of high-speed Internet access for individuals and
businesses.  If you haven't experienced high speed Internet access, then you
are missing out.  It is the difference between a skateboard and a brand new
Ferrari.  Once you get a taste of the good life, you'd fight pretty hard to
keep the new high-speed link to the electronic world we know as the
Internet.  BRCM knows this because the demand for their products is
insatiable, prompting the company to continue to forge alliances (see news
below) to expand its manufacturing capacity.  The NASDAQ weakness in recent
weeks helped to bring the stock back down to support near $220 before buyers
with itchy mouse fingers couldn't stand it any more and started clicking the
buy button.  The rise over the past week and a half has been choppy, but
Friday's action fairly screamed "Buy Me".  Dropping with the rest of the
market on the INTC earnings warning, BRCM retested support at $229-230 and
then shot back to $240 in the next 2 hours.  After a brief rest to allow the
stragglers to get on board, BRCM ran strong and hard for the rest of the
day, clearing the 50-dma at $238.83 and the 30-dma at $242.63, on its way to
a close just below the $250 resistance level.  While below the ADV, buying
volume looked strong on the intraday chart, and if the market continues to
recover next week, resistance at $250 could be quick to fall.  With mild
support at $244 and stronger support at $240, bargain hunters may want to
try target shooting intraday dips near these levels.  The more conservative
entry strategy will be to wait for the buying volume to continue to increase
next week, propelling BRCM through resistance.  Once this happens, jump on
board for what is likely to be an impressive ride into earnings, currently
scheduled (but unconfirmed) for October 17th.
As a sign of the growing demand for its products, BRCD inked a multi-year
supply agreement with Singapore-based Chartered Semiconductor Manufacturing
on Tuesday.  Under the agreement, Chartered will provide semiconductor
products for cable set-top boxes, cable modems, high-speed office networks
and home networking products to BRCM.  This gives BRCM the increased
manufacturing capacity it needs to meet its customers' growing demand.
BUY CALL OCT-240 RDU-JH OI100 at $23.38 SL=.50
BUY CALL OCT-250*RDU-JJ OI=83 at $18.00 SL=.00
BUY CALL OCT-260 YRL-JL OI=02 at $13.00 SL= 9.75
BUY CALL NOV-250 RDU-KJ OI= 710 at $27.63 SL .75
BUY CALL NOV-260 YRL-KL OI= 798 at $23.13 SL=.25
BUY CALL NOV-270 YRL-KN OI= 241 at $19.63 SL=.25
SELL PUT OCT-230 RDU-VF OI= 665 at $ 8.13 SL=.75 (See risks of selling puts
in play legend)
Picked on Sep 24th at   $248.75     P/E = 379
Change since picked       +0.00     52-week high=$297.94
Analysts Ratings     9-11-0-0-0     52-week low =$ 52.50
Last earnings 07/00   est= 0.19     actual= 0.23
Next earnings 10-17   est= 0.24     versus= 0.13
Average Daily Volume = 5.34 mln

MERQ - Mercury Interactive $148.94 (+24.44 last week)
As a provider of integrated performance management solutions that enable
businesses to test and monitor their Internet applications, MERQ is looking
for growing e-commerce demand to continue to fuel its business.  The
company's products perform such tasks as analyzing and eliminating Web site
performance bottlenecks and automating quality assurance testing.  MERQ's
client base spans a wide range of industries including Internet companies
such as Amazon.com and America Online, infrastructure companies Ariba and
Oracle, as well as Apple Computer, Cisco Systems and Ford Motor Company.
In a market such as the one we've had this past week, stocks that ended the
week higher are few and far in between, let alone ones that that have
managed to make new all-time highs.  That is exactly what MERQ has done.
Resistance at $130 this month has been formidable but on Tuesday, MERQ
managed to break through this level to close above its previous all-time
high at $134.50.  From there, it was blue-sky territory as the stock
continued higher, clearing $135 and $140 with ease.  Thursday saw a bit of
profit taking on a weak market day but on Friday, a successful test of
support at $130, reinforced by the 10-dma, brought in the buyers, who bid
the stock up strongly to make yet another new all-time high.  Closing up
$8.63 or 6.15% on 156% of ADV was impressive indeed.  For the week, MERQ
gained 19.63% while most stocks would have been content to end the week
flat.  Volume has been increasing in conjunction to the stock price, which
is a sign that interest in the stock is on the rise.  Look for volume to be
a key factor if the stock is to continue higher.  Bounces off the 5- and
10-dma (currently at $138.14 and $129.27) are aggressive entries while a
break through $150 on strong volume would be a buy signal for the more risk
averse.  Support can be found at $140, $135 and lower near $130.  A break
above $150 would once again put MERQ in blue-sky territory.
Good news last week may have played a key role in MERQ's rise.  On Tuesday,
MERQ announced its partnership with ARBA has so far been successful, with
ARBA integrating MERQ's web performance management solutions into its Ariba
Buyer 7.0 eCommerce system.  DELL gave MERQ's LoadRunner system the
thumbs-up on Friday, as it was featured in Michael Dell's keynote at the
DirectConnect Conference.
BUY CALL OCT-140 RBF-JH OI&0 at $19.75 SL=.50
BUY CALL OCT-145 RBF-JI OI18 at $17.13 SL=.25
BUY CALL OCT-150*RBF-JJ OIb3 at $14.50 SL=.00
BUY CALL NOV-145 RBF-KI OI=  1 at $23.25 SL=.50
BUY CALL NOV-150 RBF-KJ OI14 at $20.63 SL=.50
SELL PUT OCT-140 RBF-VH OI= 27 at $ 9.00 SL'.00 (See risks of selling puts
in play legend)
Picked on Sep 24th at   $148.94     P/E = 286
Change since picked       +0.00     52-week high=$151.94
Analysts Ratings      9-3-1-0-0     52-week low =$ 26.25
Last earnings 07/00   est= 0.12     actual= 0.14
Next earnings 10-17   est= 0.16     versus= 0.11
Average Daily Volume = 1.83 mln

FRX - Forest Laboratories $119.44 (+9.75 last week)
One of many specialty pharmaceutical companies, Forest Laboratories
develops, manufactures and sells both branded and generic forms of ethical
prescription and non-prescription drug products.  . Some of the company's
more notable products are Celexa (for depression), Tiazac (for hypertension
and angina), and respiratory products Aerobid, Aerochamber and Tessalon.
Additionally, the company produces Infasurf, a lung surfacant for the
treatment and prevention of respiratory distress syndrome in premature
infants.  FRX markets its products directly to physicians using the
company's own specialized sales force.
Finally emerging from the shadow of the early August LLY-induced drug stock
selloff, FRX is once again charging to new highs.  It took nearly a month
for investors to shake off the lingering jitters, but they started nibbling
at FRX again a little over 2 weeks ago.  After consolidating between
$93-102, the buyers pushed through the $102 resistance level and they
haven't looked back since then.  Well, there was a bit of indecision near
the $111 resistance level, prompting a quick intraday test of the $102
level, but then the stock really got moving.  After trading as low as
$102.63 on Tuesday, FRX tacked on some impressive back-to-back gains,
closing out the week by posting another all-time high and closing just below
$120.  Volume, while still below the ADV is steadily climbing, and this
looks like the beginning of a decent run.  Even the sharp intraday declines
last week failed to induce a violation of the 10-dma (at least on a closing
basis), and it looks like it should continue to support the price going
forward.  Earnings are currently scheduled (and confirmed) for October 17th,
giving us plenty of time to get positioned for the expected run.  The
expectations are for a strong quarter, as the company continues to push
forward with nearly 50% year-over-year revenue growth.  While we would love
to see an intraday decline to the $111 support level to provide a more
attractive entry point, we think the more prudent strategy is to buy the
breakout over $121.  Use the intraday volume picture to gauge the strength
of the stock's movement, as it frequently is a leading indicator of
significant price movement.  Pullbacks will occur, so make sure to use
Chase H&Q, who upgraded FRX from Buy to Strong Buy in the week after the
LLY-induced drug selloff in early August, took a step back on September
15th.  After shares of the specialty pharmaceutical company had recovered
from $93 to $110, Chase dropped their rating back to a Buy.
BUY CALL OCT-120*FRX-JD OI= at $7.00 SL=5.00
BUY CALL OCT-125 FRX-JE OI= at $5.00 SL=3.00
BUY CALL OCT-130 FRX-JZ OI= at $3.50 SL=1.75
BUY CALL NOV-125 FRX-KE OIR at $7.88 SL=5.50
BUY CALL NOV-130 FRX-KZ OI= 1 at $6.25 SL=4.25
SELL PUT OCT-110 FRX-VB OI= at $2.75 SL=4.50 (See risks of selling puts in
play legend)
Picked on Sep 24th at   $119.44     P/E = 88
Change since picked       +0.00     52-week high=$121.00
Analysts Ratings      9-5-4-0-0     52-week low =$ 41.75
Last earnings 07/00   est= 0.27     actual= 0.31
Next earnings 10-17   est= 0.49     versus= 0.32
Average Daily Volume =    886 K

CIEN - Ciena Corp $120.75 (+13.53 last week, split adjusted)
CIENA Corporation's market-leading optical networking systems form the core
for the new era of networks and services worldwide. CIENA's LightWork
architecture enables next-generation optical services to transmit signals
simultaneously over the same circuit.  This multiplexing system changes the
fundamental economics of service-provider networks by simplifying the
network and reducing the cost to operate it.  About 45% of sales comes from
outside the US markets.
It's true, we never recommend holding over a split date because of the high
probability of post-split depression.  But now that CIEN is trading ex-div
and the pitfall is behind us, we're free to explore future potential.
Following 2:1 stock split on September 19th, CIEN bucked the typical trend.
Being one of the "bullet proof" stocks in the Fiber Optic sector, CIEN
powered upwards during regular trading hours.  Basically, investors are once
again taking a look at these optical stocks for their upward potential.
After getting slammed into oblivion by the Telecom scare, the current price
is very attractive because it leaves room for lucrative profits.  And from
an investor's perspective, it's wise to invest in a sector whose sales
growth outpaces nearly every other industry.  As the week progressed, CIEN
consistently set new all-time highs, three to be exact.  The record stands
at Friday's peak of $121.06.  The robust volume levels also indicate that
the momentum is snowballing.  If the share price is going to move through
the immediate resistance, this buying spree needs to maintain its intensity.
Currently the 5-dma, in the proximity of $113 and $114, is serving as
near-term support.  Consider taking entries on strong bounces off this
technical line on intraday dips.  The more cautious should only buy into
strength as CIEN rallies through $120 and $121 on respectable volume.
Salomon SB started coverage on CIEN with a Buy recommendation on Thursday.
Looking ahead, we see CIEN as a split candidate again at $100.
BUY CALL OCT-115 UEE-JC OI907 at $13.88 SL=.50
BUY CALL OCT-120*UEZ-JD OI(52 at $11.00 SL= 8.25
BUY CALL OCT-125 UEZ-JE OIH51 at $ 9.00 SL= 6.25
BUY CALL NOV-120 UEZ-KD OI#73 at $15.25 SL=.00
BUY CALL NOV-125 UEZ-KE OI=92 at $13.00 SL= 9.75
Picked on Sep 24th at   $120.75    P/E = 595
Change since picked       +0.00    52-week high=$121.06
Analysts Ratings     11-9-2-0-0    52-week low =$ 14.69
Last earnings 06/00   est= 0.17    actual= 0.19
Next earnings 12-07   est= 0.24    versus= 0.03
Average Daily Volume = 5.87 mln

ENZN - Enzon Inc $71.06 (+2.19 last week)
Enzon is a biopharmaceutical company that specializes in developing,
manufacturing, and marketing enhanced therapeutics for life-threatening
diseases.  The application of its proprietary PEG (polyethelene glycol)
technology modifies existing pharmaceuticals by attaching a non-reactive
polymer, which essentially wards off the immune system's radar and prolongs
the drug's life in the blood.  Current FDA-approved products are treating
leukemia and the rare "Bubble Boy Disease".  Their pipeline is full of
possible treatments for cancer, heart disease, and AIDS.
A gradual, but distinct uptrend developed after ENZN announced earnings on
September 6th.  They posted a 4Q net loss of $1.2 mln, or -$0.03 per share
versus a net loss of $1.5 mln, or -0.04 per share  from the same quarter
last year.  The improvement was a direct effect of the increased sales of
Enzon's approved products and increased interest income, resulting from its
recently completed public offering.  Although, ENZN's rise isn't based on
this alone.  In the broadest sense, the price levels amid the industry were
beaten down in the wake of stiff competition from the generic drug makers
and politicians rallying against the high cost of pharmaceuticals.  As it
stands now, the drug stocks are a great value.  Investors are taking more
notice of this under-appreciated industry as the market struggles for
direction.  And Intel's (INTC) warning on Thursday literally scared more
investors towards the safe haven of the drug and other health-related
stocks.  More specifically, for our purposes, ENZN's strong break through
$70 prompted us to add it to our call list.  On almost double normal trading
volume, ENZN crack the above-mentioned resistance on Thursday and powered to
another all-time high in Friday's session.  Short-term support is at $70 and
$71.  A more stable foundation is found lower at the $65 mark.  Depending on
your risk portfolio, consider taking entries on pullbacks off the 10-dma
($67.46) or higher at the 5-dma ($68.61).  If ENZN shoots higher without
taking a breather, take positions as it moves through $72.  Set stop losses
for protection.
On the analyst front, ENZN is faring well.  UBS Warburg recently upgraded
the stock to a Buy from Hold and raised the target price to $80 from $60.
Evolution Capital matched the $80 target price set by UBS Warburg and also
reiterated their Strong Buy recommendation on September 13th.
BUY CALL OCT-65 QYZ-JM OI= 483 at $ 8.88 SL=6.25
BUY CALL OCT-70*QYZ-JN OI= 687 at $ 5.13 SL=3.00
BUY CALL OCT-75 QYZ-JO OI= 446 at $ 3.63 SL=2.00
BUY CALL NOV-65 QYZ-KM OI= 59 at $11.13 SL=8.25
BUY CALL NOV-70 QYZ-KN OI= 434 at $ 7.88 SL=5.75
BUY CALL NOV-75 QYZ-KO OI= 124 at $ 5.63 SL=3.50
Picked on Sep 24th at    $71.06     P/E = N/A
Change since picked       +0.00     52-week high=$72.75
Analysts Ratings      7-0-3-0-0     52-week low =$22.75
Last earnings 06/00  est= -0.04     actual= -0.03
Next earnings 11-10  est= -0.01     versus= -0.05
Average Daily Volume  =   550 K

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The Option Investor Newsletter                   Sunday 09-24-2000
Sunday                                                      3 of 5

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IDTI - Integrated Device Technology $95.94 (+4.94 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).

The split announcement we had been speculating over never
transpired Friday.  Although, IDTI shareholders did approve the
proposal to increase authorized shares, the Board decided not
to declare.  It is quite possible the Intel warning prevented
our dreams of stock splits from turning into reality.  However,
now with enough shares to authorize a split, IDTI directors could
very well decide to declare in the coming weeks after the tremor
from Intel dissipates.  Along with the potential for a split
announcement, we're very impressed with IDTI's relatively strong
finish in the wake of the Intel warning last Friday.  The stock
did gap down, which was expected, but steadily rose throughout the
day, nearly closing its gap.  IDTI finished the day near its highs,
which left the stock pinned on its crucial $96 level.  The fact
that IDTI managed to hold above $96 bodes extremely well for our
play.  The $96 level is a pivotal point for IDTI and marks the
stock's most recent breakout early last week.  With that said,
aggressive traders might look to enter new positions in IDTI early
Monday if the stock looks strong, as there is little resistance
immediately overhead after last Friday's gap down.  Make sure to
wait for positive direction in the NASDAQ and confirm direction in
the $SOX before entering the play.  If IDTI sails smoothly back
above the $100 level, the more risk averse traders might consider
entering the play.  Make sure to confirm any rally with volume as a
sign the IDTI bulls are still in control.  If however, IDTI pulls
back on light selling pressure, an aggressive entry might be found
on a bounce off the 10-dma near $95, or lower near the support
level at $92.

The reaction to the Intel warning was mixed across the Semi sector
Friday.  However, the Semi makers specializing in communications
chips held up relatively well.  IDTI's competitors ADI and AMCC
quickly rebounded last Friday after the big gap down, which might
signal higher prices early next week.

BUY CALL OCT- 90 ITQ-JR OI= 615 at $12.88 SL= 9.75
BUY CALL OCT- 95*ITQ-JS OI=1239 at $10.25 SL= 7.00
BUY CALL OCT-100 ITQ-JT OI=1244 at $ 8.00 SL= 5.75
BUY CALL NOV- 95 ITQ-KS OI= 940 at $14.00 SL=10.50
BUY CALL NOV-100 ITQ-KT OI= 537 at $11.63 SL= 8.75

Picked on August 15th at $66.88    P/E = 54
Change since picked      +29.06    52-week high=$104.00
Analysts Ratings      7-1-0-0-0    52-week low =$ 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 = 3.38 mln

ITWO - I2 Technologies $186.19 (+14.00 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 press releases and media announcements were filled with
bullish grandeur last week as the Fall investor conference
season officially opened.  The bullish buzz among analysts last
week might have helped to lift ITWO, but, the report from
Manugistics (MANU) certainly solidified the bulls' case.  MANU,
who is ITWO's closest competitor, reported second-quarter
results late last Thursday that were stellar, to say the least.
Analysts consensus estimate was for MANU to break-even; the
company earned three cents per share.  The report from MANU was
great news for ITWO shareholders.  Earlier in the week, ITWO
announced that it had captured 72% market share in the Tech
marketplace for supply-chain software.  So, if business is
blockbuster for MANU, it should be as equally bullish for the
dominant market leader in ITWO.  For that very line of logic,
Robinson Humphrey reiterated their Buy rating on ITWO last
Friday morning and raised their fiscal 2000 earnings estimates.
Analysts for Robinson Humphrey said they expected ITWO to have
a blowout quarter when the company reports later in October. JP
Morgan followed suit and initiated coverage on the stock with a
Buy rating.  The analyst comments helped ITWO to shrug off the
Intel warning last Friday and ultimately positioned the stock for
a major breakout.  A rally above the $188 level would mark a
breakout for ITWO from its six-month long consolidation.  With
that said, watch closely for a momentum-based move above $188
early Monday, and make sure to confirm a breakout attempt with
relatively strong volume.  A profit taking pullback on light
volume to support at $180 might also provide a profitable
entry point.  If the broader Tech sector weakens next week and
drags ITWO lower, watch for the stock's string of higher lows to
continue and consider looking for entry near the 10-dma, which
is currently located at $176.

In between the analyst comments and media releases last Friday,
ITWO announced it had teamed with answerthink (ANSR) to build an
online B-2-B marketplace.  The announcement of new contracts next
week might be the catalyst we need to boost ITWO into breakout

BUY CALL OCT-180 QYI-JP OI=404 at $19.38 SL=14.25
BUY CALL OCT-185*QYI-JQ OI=288 at $17.00 SL=12.25
BUY CALL OCT-190 QYI-JR OI=360 at $14.75 SL=11.00
BUY CALL NOV-185 QYI-KQ OI=105 at $23.75 SL=17.75
BUY CALL NOV-190 QYI-KR OI=965 at $21.38 SL=16.00

Picked on August 27th at $166.50    P/E = 500
Change since picked       +19.69    52-week high=$223.50
Analysts Ratings     12-20-3-0-0    52-week low =$ 18.56
Last earnings 06/00    est= 0.08    actual= 0.10
Next earnings 10-20    est= 0.10    versus= 0.06
Average Daily Volume =  3.68 mln

AFL - Aflac Inc. $62.81 (+1.94 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.

Last week, Banc of America analysts Jason Zucker and Brian Meredith
stated that after a couple of tough years of lagging the overall
market, life insurance and commercial and property casualty
insurance stocks are turning around.  Aflac, on Thursday, said
that they were filing a shelf registration statement with the
Japanese authorities for the issuance of up to Y100 billion of
yen-denominated bonds.  Aflac said they anticipate using the
proceeds of any issuance to repurchase common shares or for
general corporate purposes.  Like water off a duck's back, this
stock remained steady all week, posting a positive gain for the
week and a new closing high on Friday, using the converged 5-dma
and 10-dma from Thursday (then $60.50) as a springboard to new
highs.  Volume Friday was a robust 1.31 mln shares (1.21 times
ADV) and we are now in breakout territory.  There is no
resistance overhead, so, aggressive traders could use a continued
move up from here backed by strong volume as a way to get
involved in the play.  The conservative approach might be to
look for a small pullback to the 5-dma or 10-dma (currently
$61.20 and $60.90), along with a nice bounce supported by volume,
as an ideal entry point.  Keep a watchful eye out for profit
taking as this play develops.

BUY CALL OCT-55 AFL-JK OI= 19 at $8.63 SL=6.00
BUY CALL OCT-60*AFL-JL OI=319 at $4.75 SL=3.00
BUY CALL NOV-55 AFL-KK OI=948 at $9.75 SL=7.00
BUY CALL NOV-60 AFL-KL OI=364 at $6.63 SL=4.50
BUY CALL FEB-60 AFL-BL OI=581 at $8.75 SL=6.25

Picked on Sep 10th at   $60.25     P/E = 27
Change since picked      +2.56     52-week high=$62.81
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= 1.08 mln

CHKP - Check Point Software Tech Ltd. $152.48 (+1.19 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.

On Monday, Check Point unveiled VPN-1/FireWall-1(R) SmallOffice,
a software solution that extends the company's Secure
Virtual Network (SVN) architecture to bring comprehensive
Internet security to enterprise small remote offices and small
businesses.  "Companies of all sizes connecting to the Internet
are looking for world-class robust Internet security," said
Asheem Chandna, vice president of business development and
product management for Check Point.  The trading week was choppy
to say the least, with 3 up days and 2 down days, as the movement
in the stock somewhat paralleled the Nasdaq market.   However,
by week's end, CHKP was in positive territory, using the 10-dma at
$150.00 as wonderful support, and closing above that level every
day last week.  Friday, CHKP got pummeled early on, as the Tech
market sold off due to Intel's pre-announcement.  But, by day's
end, the Tech sector had bounced off the lower levels and that
helped Check Point buyers regain confidence.  They pushed CHKP
up by $1.38 Friday, to close at $152.48 on strong volume of
4.23 mln shares (1.94 times ADV).  There is overhead resistance
at the current 5-dma of $154.10 and all the rest of the way up
to CHKP's old high of $163.38.  Traders will want to use intraday
pullbacks to the 10-dma (currently $150.60), as entry points.
Let volume confirm the bounces and subsequent moves off of these
support levels as you consider entry and keep an eye on Nasdaq
sentiment this coming week.

Activis, a global provider of managed security services, will
integrate Check Point's Provider-1(TM) into its extensive
managed Internet security service offering.  Furthermore,
Enstar, a leading e-Security Monitoring firm will integrate
Check Point's FireWall-1 software into their new eSM service.

BUY CALL OCT-145 KGE-JI OI= 346 at $16.88 SL=12.25
BUY CALL OCT-150*KGE-JJ OI=1912 at $14.25 SL=10.50
BUY CALL OCT-155 KGE-JK OI= 219 at $11.88 SL= 9.00
BUY CALL NOV-150 KGE-KJ OI=   8 at $20.75 SL=14.75
BUY CALL NOV-155 KGE-KK OI=   0 at $18.00 SL=13.00  Wait for OI!

SELL PUT OCT-140 KGE-VH OI= 692 at $ 5.63 SL= 7.00
(see risks of selling puts in play legend)

Picked on Sep 3rd at    $149.44     P/E = 198
Change since picked       +3.04     52-week high=$163.37
Analysts Ratings     13-4-0-0-0     52-week low =$ 19.31
Last earnings 06/00   est= 0.21     actual= 0.25
Next earnings 10-20   est= 0.25     versus= 0.15
Average Daily Volume = 2.18 mln

SEBL - Siebel Systems Inc. $105.00 (+6.00 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.

A news-filled week for SEBL and a solid showing for the stock to
boot.  They announced a number of new alliances this week,
beginning with an expanded relationship/partnership with Great
Plains, an e-business solutions provider and announced a decision
by Fujifilm France to standardize its customer-facing activities
in France on Siebel eBusiness Applications.  Late in the week,
they disclosed that Berkeley Enterprise Partners joined the
Siebel Alliance Program as a Premier Partner while Interactive
Intelligence joined the Alliance Program as a Siebel Software
Partner.  Sounds like a good news week for a company that
grew revenues in the 2nd quarter of this year at 119% over the
same quarter last year.  That being said, it should be of no
surprise that SEBL tacked on a $6 gain for the week, in a rough
Tech market and closed at a new high on Friday.  SEBL had only
one down day this week, Wednesday, and it was only down $0.88.
Friday, Siebel did sell down piercing through the 5-dma and
10-dma ($101.90 and $97.40) in the morning as the Nasdaq gapped
down over 200 points, but, it recovered by day's end along with
many of the Tech sector leaders.  The final tally for Friday
showed SEBL up $2.25 at $105, a new closing high, on average
volume of 8.14 mln shares.  There is no overhead resistance on
the chart, so, traders may want to look for a continued climb
supported by strong volume as an aggressive way to enter the
play.  However, a more conservative approach would be to watch
for an orderly pullback to the support levels between $102
and $103, the site of former resistance.  Alternatively, you
could use a move back to the 5-dma or the 10-dma (currently
$101.90 and $97.40) along with a volume-supported bounce as
an ideal entry point.  Watch for profit taking and Nasdaq
sentiment before establishing a play.

Siebel Systems has formed a strategic partnership and provided
an investment in the Everdream(TM) Corporation, a provider of
outsourced information technology (IT) services to small and
medium offices.

BUY CALL OCT- 95 EZG-JS OI=1425 at $14.00 SL=10.50
BUY CALL OCT-100 EZG-JT OI=2024 at $10.25 SL= 7.00
BUY CALL OCT-105*EZG-JA OI=5106 at $ 7.50 SL= 5.25
BUY CALL JAN-105 EZG-AA OI= 909 at $18.13 SL=13.00

SELL PUT OCT- 95 EZG-VS OI=2539 at $3.00  SL= 4.00
(see risks of selling puts in play legend)

Picked on Sep 17th at    $99.00     P/E = 901
Change since picked       +6.00     52-week high=$105.00
Analysts Ratings     15-4-0-0-0     52-week low =$ 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 = 8.40 mln

CAH - Cardinal Health Inc 92.38 (+4.38 last week)

Cardinal Health is the nation's leading provider of products and
services that support the health-care industry.  They operate
under four distinct business segments:  Pharmaceutical
Distribution and Provider Services, Medical-Surgical Products
and Services, Pharmaceutical Technologies and Services, and
Automation and Information Services.  Clients include
independent and chain drugstores, hospitals, alternate care
centers, and the pharmacy departments of supermarkets and mass

Give it some gas and get out of the way!  The stellar
performance this week gives credence to the power of momentum.
Let's count the ways..6, 7, 8!  Yes, eight days of new records
for this drug wholesaler.  The fuel that ignited this hotrod
came from a succession of bullish comments and upgrades earlier
in the month.  On September 12th, the convincing gains first
appeared.  It was Lehman Brothers who first issued a Buy
recommendation and upgraded price target of $98.  Then, as the
week progressed, First Union Securities and MSDW restated Strong
Buy and Outperform ratings, respectively, along with higher
price targets.  The influential remarks propelled the share
price through the oppressive resistance at $85.  Although at
this point in the run, it's pure dynamism driving CAH to new
heights.  Pay attention to the trading activity.  During the run
up, volume levels have reached upwards of 1.5 times the ADV.
Therefore, look for high-volume moves to precipitate a breakout.
Near-term support is now higher at $91 and $92, which is
following the rising 5-dma line.  There is better support at $89
and $90, but be careful of taking a position below the 10-dma
($88.50).  CAH is a steady climber, yet at the same time doesn’t
move with the volatility or intensity of an Internet stock.  In
other words, it might not be able to recover quick enough to
elicit profit.  Still some profit taking should be expected.
The 5-dma support level should hold on a pullback.  If not, wait
for upward confirmation.  Conservative traders may consider
buying into strength as CAH climbs past $93 and rallies through
the all-time at $93.88.

In the news last week, Cardinal Health filed with the SEC to
sell $1 bln of common stock and unsecured debt securities,
including $250 mln of unsold debt and securities previously
registered.  The company will use the proceeds for general
corporate purposes or acquisitions.

BUY CALL OCT-85 CAH-JQ OI=718 at $8.50 SL=6.00
BUY CALL OCT-90*CAH-JR OI=215 at $5.63 SL=3.50
BUY CALL OCT-95 CAH-JS OI=752 at $2.94 SL=1.50
BUY CALL NOV-90 CAH-KR OI=  3 at $6.75 SL=4.75
BUY CALL NOV-95 CAH-KS OI= 12 at $4.38 SL=2.75

Picked on Sep 19th at   $92.31    P/E = 39
Change since picked      +0.07    52-week high=$93.88
Analysts Ratings    12-7-1-0-0    52-week low =$37.00
Last earnings 06/00  est= 0.71    actual= 0.72
Next earnings 10-26  est= 0.65    versus= 0.53
Average Daily Volume =   987 K

QCOM - Qualcomm Inc $73.00 (+6.75 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 called 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.

Where's the crystal ball when you need one?  Will QCOM break to
the upside of $80 and jump into the limelight once again?
That's the ultimate question.  Since the beginning of the year,
QCOM's share price shrunk from $200 to a base line of $60 in
recent months.  Now there's talk of a comeback.  First there was
money manager Graham Tanaka, who heads Tanaka Capital
management, citing China's long-awaited decision to use CDMA
technology for wireless phones coupled with the rising sales of
wireless products in Korea as positive signs.  And now, the 83-
15 Senate vote to give China permanent access to US markets,
which opens the door for vast opportunities for sales and growth
in Asia, seals the fate.  There's seven mln existing customers
plus the world's most populous market to target.  Pretty good
odds for success.  And in the pipeline is the next generation of
CDMA technology, which will provide full Internet access in
2001.  Qualcomm is also in talks with Via Technologies of Taiwan
to design chipsets with high-speed wireless access that
eliminates the need for separate Ethernet chips.  But quite
honestly, this news concerns the company's long-term agenda.  So
what's the play?  Simple.  This scuttlebutt entices traders to
take a good look at QCOM and its bare-bottom price.  And if they
like what they see, then the momentum starts to snowball.  And
that's just what happened.  QCOM re-emerged as a Tech favorite
among market participants this week and hurdled through several
key resistance areas.  The major opposition is however at the
near-term high of $78.75 and above, at the $80 mark.  While this
play is considered a potential gold-mine, QCOM hasn't seen the
upside of $80 since June.  Therefore, it's essential that QCOM
break above this level very soon.  The more conservative traders
might consider waiting until QCOM moves through this formidable
opposition.  Others who want a more aggressive entry should
look for opportunities on strong bounces off the trailing 5-dma
($73.46) and the current level.  Near-term support is firm at
$69 and $70.

It's confirmed.  Qualcomm will report earnings on November 2nd,
after the market.  In other news, Mark Roberts at First Union
Securities gave QCOM a nice boost this week with a Strong Buy

BUY CALL OCT-65 AAO-JM OI=17774 at $10.63 SL=7.75
BUY CALL OCT-70 AAO-JN OI=21960 at $ 7.25 SL=5.00
BUY CALL OCT-75*AAF-JO OI=14507 at $ 4.75 SL=2.75
BUY CALL OCT-80 AAF-JP OI=13898 at $ 3.00 SL=1.50
BUY CALL NOV-75 AAF-KO OI= 2954 at $ 7.50 SL=5.25
BUY CALL NOV-80 AAF-KP OI= 1495 at $ 5.75 SL=3.75

Picked on Sep 17th at    $66.25    P/E = 86
Change since picked       +6.75    52-week high=$200.00
Analysts Ratings     10-9-4-0-0    52-week low =$ 45.33
Last earnings 06/00   est= 0.27    actual= 0.27
Next earnings 11-02   est= 0.24    versus= 0.23
Average Daily Volume = 15.2 mln

AGIL - Agile Software Corp. $80.00 (+4.75 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.

In the face of a shaky market this week, AGIL managed to hold up
well and in the process, even made some progress.  The first half
of the week saw the stock move steadily higher, using its 5-dma
for support.  With formidable resistance at $75 cleared, the next
to go was $77.  On Wednesday, AGIL attempted to break out
strongly.  Clearing $80 in early morning trading, the stock moved
higher.  Encountering resistance at the $83 level brought in the
profit-takers.  Thursday saw AGIL make another attempt to break
above $83.  Unable to do so, the sellers managed to get the stock
to close in the red, breaking its 6-day winning streak.  Friday
saw AGIL gap down at the open.  Successfully bouncing off support
at $75 provided aggressive traders with an ideal entry point.
From there, AGIL spent most of the day trading sideways until the
last half-hour when the stock took off to close the day up
fractionally.  This was no easy feat considering the recovery
necessary to end the day in the positive.  Volume came in at 125%
of ADV.  Depending on the market next week, AGIL at its current
level could be a solid entry point.  The $75 mark continues to be
a key support level.  There is also support from the 10-dma at
$76 as well as light support at $77.  Above that the 5-dma rests
at $79.28.  A confirmed bounce off a support level could provide
for an aggressive entry point.  For those who want to make sure,
a break above $83 with conviction would be the target to shoot for.

There was no news for AGIL this week, leaving momentum as the
driving force behind the stock's advance.  While the stock looks
poised to continue higher, volume has been tapering off so in
making a play, make sure that the volume returns to support a move

BUY CALL OCT-75 AUG-JO OI=140 at $11.63 SL= 8.50
BUY CALL OCT-80*AUG-JP OI=582 at $ 8.75 SL= 6.25
BUY CALL OCT-85 AUG-JQ OI= 90 at $ 6.63 SL= 4.50
BUY CALL NOV-80 AUG-KP OI=  5 at $12.50 SL= 9.25
BUY CALL NOV-85 AUG-KQ OI=  4 at $10.25 SL= 7.00

SELL PUT OCT-70 AUG-VN OI= 50 at $ 3.88 SL= 6.00
(See risks of selling puts in play legend)

Picked on Sep 5th at     $74.06     P/E = N/A
Change since picked       +5.94     52-week high=$112.50
Analysts Ratings      2-6-0-0-0     52-week low =$ 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  =   608 K

CFLO - CacheFlow Inc. $137.19 (+14.81 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.

There is a certain art to defying gravity, and it appears that
CFLO has mastered it, at least for last week.  While Monday was a
day of rest, the stock spent the rest of the week moving ever
higher, despite weakness in all things Tech.  The $117 level
proved to be the launching pad as a successful test of that point
on Monday and Tuesday morning set the stock up to rocket higher.
Resistance at $130 encountered on Tuesday was easily cleared by
Wednesday afternoon.  Thursday was yet another up day for CFLO as
It attempted to blast off.  Getting as high as $144.75 brought in
the sellers to close the stock at $135.  On Friday, CFLO bucked
the trend of a strong down market and continued its advance to
close up 1.62% on 114% of ADV.  Last week we mentioned that CFLO's
trading channel suggested the possibility of great upside
potential.  While the stock made some impressive gains this week,
CFLO is just in the middle of its trading channel.  While this is
no guarantee that it will continue higher, the strong up-trend in
the stock is difficult to ignore.  Aggressive traders will note
that bounces off the 5- or 10-dma (at $130.67 and $122.80) have
proven to be ideal entry points.  Conservative traders may want to
wait for CFLO to clear resistance at $140 before entering.
Support can be found in increments of $5 at $135 and $130.
Resistance can also be found in increments of $5 at $140 and $145.

In the news last week, CFLO introduced the Server Accelerator
family of products allowing Web sites to use their current
infrastructure to serve 5-10 times more content.  Tuesday saw
Internet marketer Crystal Ball Inc. join CFLO's Adaptive Content
Exchange (ACE).  On Thursday, CFLO added yet another member to the
ACE, this time, Internet traffic management device maker HydraWEB.

BUY CALL OCT-135 FUJ-JU OI=20 at $13.25 SL=10.00
BUY CALL OCT-140*FUJ-JV OI=20 at $10.75 SL= 8.25
BUY CALL OCT-145 FUJ-JW OI=14 at $ 8.63 SL= 6.25
BUY CALL NOV-140 FUJ-KV OI= 5 at $16.75 SL=12.25
BUY CALL NOV-145 FUJ-KW OI=00 at $14.88 SL=11.00

SELL PUT OCT-125 FUJ-VE OI=46 at $ 5.38 SL= 7.50
(See risks of selling puts in play legend)

Picked on Sep 7th at    $113.00     P/E = N/A
Change since picked      +24.19     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  =   663 K

PEB - PE Biosystems Group. $119.00 (+12.50 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.

Renewed life in the Biotechs got PEB moving again this week,
as investors have pushed the price higher over the past 4 days.
Regardless of who makes the discoveries in the Biotech arena,
PEB is poised to profit handsomely as the company makes many of
the tools and supplies needed for Genomics and Proteomics
research.  As long as the research continues, PEB will continue
to sell its products and increase its profits.  The Oxford
Glycosciences deal (see news below) is just the most recent in
a series of supply deals the company has entered into over
recent weeks.  Analysts are helping to fuel enthusiasm for the
stock as CSFB and Robert W. Baird have issued Strong Buy ratings
and Dain Rasuscher Wessels chimed in with a Buy - all in the
past month.  The effect can be seen clearly on the chart, as PEB
has marched nearly 20% higher since the first of the month.
Buying volume is on the rise again, confirming the price action,
which now shows PEB above the $112 resistance level.  Riding the
5-dma (currently $110.25) higher for more than 2 weeks now, the
stock is being propelled by the anticipated demand for its
products.  The 10-dma (currently $105.75) sits just above the
$105 support level, but it appears unlikely this level will be
tested in the near future.  We consider a pullback to $112 or
$110 to be an attractive entry point, and would look to open
new positions as buying volume increases near these levels.  Of
course, given PEB's increasing strength, the stock could be
headed further up the charts before any weakness emerges.  If
$120 appears in the rear-view mirror next week and the volume
is still strong, feel free to buy on strength and join the
bulls.  Just remember that nothing moves in a straight line,
so keep your stops in place to protect your gains.

Perhaps helping the move in PEB over the past few days was
Tuesday's announcement that Oxford Glycosciences will become
an early access customer for PEB's next generation MALDI
TOF/TOF mass spectrometer.  This system is intended to enable
higher throughput with enhanced informational content for
researchers pursuing a better understanding of proteins and
their role in the onset and treatment of disease

BUY CALL OCT-115 BVE-JC OI=644 at $10.38 SL= 7.50
BUY CALL OCT-120*BVE-JD OI=555 at $ 7.75 SL= 5.50
BUY CALL NOV-115 BVE-KC OI= 40 at $15.25 SL=11.00
BUY CALL NOV-120 BVE-KD OI= 45 at $12.63 SL= 9.50
BUY CALL DEC-115 BVE-LC OI= 66 at $17.88 SL=13.00
BUY CALL DEC-120 BVE-LD OI=317 at $15.13 SL=11.00

SELL PUT OCT-110 BVE-VB OI= 19 at $ 3.63 SL= 5.50
(See risks of selling puts in play legend)

Picked on Sep 17th at   $106.50     P/E = 132
Change since picked      +12.50     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 = 1.42 mln

YHOO - Yahoo! Inc. $111.44 (+5.56 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.

Well, YHOO gapped down in the morning and continued higher
throughout the day, like most NASDAQ stocks.  It was an ideal
entry point off the open at $103.88, which also happened to be
the low for the day.  The NASDAQ soared higher out of the gates
as both short covers and bargain hunters flooded the market with
volume.  As a result of today's trading, YHOO covered the entire
span of its range, from the $104 area to $112.  The stock met
intraday resistance at $112 once again, and backed off to close
slightly lower.  Today's move is very encouraging, especially
considering YHOO closed near the highs.  Given the INTC warnings
and a slew of downgrades, many other NASDAQ "generals," including
YHOO, fell and recovered, setting up a bullish scenario.  With
YHOO earnings less than three weeks away, the stage is being
set.  A strong recovery, a little bit of volatility, and a boatload
of money on the sidelines, and we've got ourselves an earnings
run.  If you're looking to play YHOO, a strong break through
$112 would offer a conservative entry and a bullish confirmation.
This would indicate that momentum is behind our play.  Traders
can also look for pullbacks to intraday support at $110 and $108.
Below that, $106 should provide a bounce.  Look for strong volume
bounces from these support levels for entry.  Overhead, continue
to monitor the trading at $112.

Today, YHOO filed for a shelf offering that would allow the
company to sell on occasion up to $1 bln in common and preferred
stock, depositary shares, debt securities and warrants.  Funds
would be used for general corporate purposes, including debt
repayment, acquisitions, and capital spending.  On a separate
note, some Wall Street analysts are estimating that the recent
Barnesandnoble.com deal could be worth up to $20 mln a year for
Yahoo.  That's quite an increase from the $6.3 mln per year that
Amazon was paying YHOO to be the "premier" bookseller on the

BUY CALL OCT-105 YMM-JA OI=4084 at $12.13 SL= 9.50
BUY CALL OCT-110*YMM-JB OI=4887 at $ 9.25 SL= 6.75
BUY CALL OCT-115 YMM-JC OI=5062 at $ 6.88 SL= 5.00
BUY CALL NOV-120 YMM-KD OI= 105 at $ 8.75 SL= 6.50
BUY CALL JAN-125 YMM-AE OI=6830 at $12.88 SL=10.25

SELL PUT OCT-100 YHV-VT OI=8800 at $ 3.25 SL= 4.50
(See risks of selling puts in play legend)

Picked on Sep 6th at    $107.88    PE = 281
Change since picked       +3.56    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

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The Option Investor Newsletter                   Sunday 09-24-2000
Sunday                                                      4 of 5

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MU - Micron Technology $52.00 (-7.13 last week)

Micron is one of the world's leading makers of semiconductor memory
components. Two-thirds of the companies revenues come from dynamic
random-access memory (DRAM), flash memory, and other chips. MU has
added the newer Rambus DRAM and Synchronous DRAM products to its
line, and it is developing embedded memory for the digital video
and other markets. The other third of the company's sales come from
Micron Electronics (61% owned by MU), which makes PCs and laptop
computers and offers Internet related business services.

Unfortunately for MU, the INTC warning wasn't the only bad news.
Not only did INTC's demise bring down other Tech and Semi brethren,
various brokerages came out and whacked MU.  With speculation and
concerns over the Semi cycle slowing, INTC's earnings warning was
the evidence that quiets the debates and seals the Semi's fate.
When the 800 lbs Semi gorilla becomes vulnerable, then the other
monkeys in the Semi canopy certainly will too.  A softening in
the PC market will, without fail, lead to a softer DRAM market.
This has come to light in the DRAM spot market recently, falling
from $8.50 to $6.  Major questions linger:  where's the demand?
who will be hurt by this?  MU will.  As a result, Salomon Smith
Barney cut its rating on MU from a Buy to an Outperform, and
lowered its 12-month price target to $75 from $125.  Prudential
took MU down to an Accumulate from a Strong Buy and more than
halved its price target from $150 to $68.  Well, you get the
picture.  Hard times are upon MU and we don't think the stock
has settled down yet.  Any price recovery should meet resistance
at $53 and $54.  To play this put, look for a rollover at these
levels as sellers step in.  With the global outlook for Semis
rather grim, a drastic recovery appears doubtful.  Therefore,
take advantage of spikes up for entry points.  On an intraday
basis Friday, MU traded to a low of $50.25.  Watch this level
for support.  A break to the downside of $50 could create a
scenario in which shorts will feel more comfortable stepping in.
Sub-$50s would merit entry even for conservative traders as
downward momentum builds.  From there, the next stop could easily
be $45.  MU will likely offer plenty of trading opportunities
given the uncertainty of the Semi sector.

BUY PUT OCT-55 MU-VK OI=3006 at $7.25 SL=5.50
BUY PUT OCT-50*MU-VJ OI=1962 at $4.50 SL=2.75

Average Daily Volume = 7.30 mln

CMOS - Credence Systems $35.88 (-8.00 last week)

Credence's automatic test equipment and testing software are used
in the high-volume production of semiconductors.  Marketed under
several names, Credence's products test digital logic, mixed
signal, analog, and nonvolatile memory integrated circuits used in
such products as televisions, cars, PCs, telephones, and cameras.
Using a direct sales staff in the US and global distributors, the
company sells its products primarily to chip manufacturers.

The Tech bears staked claim to the Chip Equipment sector long
before the Intel warning last Friday.  Since hitting an all-time
high last Spring, CMOS has successively traced a pattern of lower
highs and lows.  Remarkably, the stock has not been able to break
from its six-month long descending channel.  All the while,
business for the capital equipment makers appeared to be
flourishing as the case has been for the past two years.  However,
the market has been anticipating a slowdown in spending on
capital equipment for some time now.  It's the market's
anticipation that has been the bears' catalyst to short the Chip
Equipment sector, and also on which we'll attempt to capitalize
upon.  The warning from Intel late last week, followed by a host
of downgrades, pushed CMOS below several key support levels.
We're looking for a carryover move early next week to take CMOS
even lower.  The stock has minor technical support and
psychological help below at the $30 level.  Below $30, CMOS will
find major support near $25, which is the stock's pivotal breakout
point from last Fall.  As such, If the bears circle their wagons
around CMOS, the stock could be headed a lot lower that its
current levels.  There are several possibilities to gain entry
into the play.  If the Chip sector bounces back early Monday, an
aggressive traders might look for CMOS to rollover near resistance
at $36.50.  Be careful though, thereafter the stock has an
unfilled gap up to $40.  If, on the other hand, the bears Monday
morning, consider entering the new positions if CMOS falls below
support at $35.  The more conservative traders might wait for CMOS
to fall below its near-term low at $34 before entering the play.
Wait for the sentiment in the Chip Equipment sector to turn bearish
and use CMOS's competitors TER and KLAC as references.

BUY PUT OCT-40*CQS-VH OI=40 at $6.13 SL=4.00
BUY PUT OCT-35 CQS-VG OI= 0 at $3.00 SL=1.50  Wait for OI!

Average Daily Volume = 1.51 mln


UK - Union Carbide $37.13 (+0.53 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.

Investors sought refuge in the defensive sectors last Friday
after the Intel profit warning shook the Tech and Telecom sectors.
UK was the beneficiary of the 'flight to safety' buying that lead
market participants back into the Chemicals sector.  Furthermore,
the government intervention in the sliding euro last Friday in
conjunction with easing prices in the oil market combined to
bring relief to the Chemicals sector and boost UK from its yearly
lows.  However,we haven't heard the last about the falling euro
nor the sky high prices in the oil market.  The action in UK next
week will greatly depend upon the euro's direction and the price
of oil.  If the euro starts sliding again, and the price of oil
resumes its climb, we'll want to be on red alert for entry
points.  Additionally, many analysts have speculated Dow Chemical
(DOW) could have taken an earnings hit from the sliding euro.  Of
course it's purely speculation, but another warning in the
Chemicals sector could be the catalyst that carries UK lower.  If
UK does continue to inch higher early next week, the stock is
likely to find major resistance near its breakdown point at $37.75
from two weeks ago.  The aggressive traders might consider entering
new put plays if UK rolls over at resistance near $37.75.
Alternatively, if the macro economic conditions fall into place,
traders might consider buying puts if starts sliding UK.  First,
consider entering new positions if UK falls back below its support
at the $37 level.  The more conservative traders might wait for
UK's slide to accelerate and look to enter the play if the stock
falls past its 52-week low at $35.75.

BUY PUT OCT-40*UK-VH OI= 93 at $3.75 SL=2.25
BUY PUT OCT-35 UK-VG OI=525 at $1.31 SL=0.75

Average Daily Volume = 816 K

AFCI - Advanced Fibre Comm. Inc. $37.63 (-7.44 last week)

Advanced Fibre takes care of what's known as the "local loop."
That means they design and manufacture end-to-end distributed
multi-service access solutions for the portion of the telecomm
network between the carrier's central office and you at home.
They also design and manufacture environmentally hardened
outside plant cabinets and technology and indoor cabinets.  They
compete with the likes of ADC Telecom, Cisco, Lucent and Northern

Last week was kind of tough for AFCI, down over $7 for the week,
possibly due, in part, to Sprint's recent pre-announcement of a
bad quarter, Telecomm spending concerns and the general Nasdaq
deterioration.  AFCI had been trying to hold onto support at the
5-dma (then $45.40) early in the week, but, Thursday the sellers
came out in force and drove it down by $6.50 to finish the day at
$38.69.  There was strong support at the $43 level, which was
pierced Thursday as volume picked up to 5.79 mln shares or two-
and-a-half times ADV.  There is currently support down near the
$35-$37 range.  Friday's action was volatile, offering a low of
$36.94 and a high for the day of $39.88, but, as the day finished
up, AFCI closed down $1.06 at $37.63, on volume of 3.84 mln shares
(1.65 times ADV), just above support.  Aggressive traders may try
to catch this one on an intraday bounce, such as the short covering
rally that occurred during trading Friday morning.  The more
conservative approach would be to watch for a failed rally up to
the intraday support levels at $40 or to the stronger support level
at $43 as a way to gain entry.  Alternatively, you may wish to
enter the play only after AFCI drops through the $35 support level
on strong volume.  Continue to watch the Nasdaq sentiment and
specifically, the sentiment within the Telecomm sector before
entering new trades.

BUY PUT OCT-40*AQF-VH OI=301 at $5.63 SL=3.50
BUY PUT OCT-35 AQF-VG OI=267 at $3.13 SL=1.50

Average Daily Volume = 2.33 mln

PCS - Sprint PCS Corp. $28.00 (-17.44 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.

From a ski slope to a cliff!  That best describes PCS's recent
chart action.  Spurred on by a pre-announcement from the parent
company, Sprint, earlier this week, PCS, Wall Street's wireless
darling, got hammered for $17.  The pre-announcement stated that
PCS's net new subscribers would be about 800,000 for the quarter,
instead of 900,000 as originally projected.  The current
sentiment around the Telecomm sector in general sure didn't help
matters either.  The stock was down every day last week, but,
the real drubbing came on Wednesday, (pre-announcement day)
as PCS plummeted $7.31 on 33.1 mln shares (3.6 times ADV).
Thursday it was down $4.50 on over 27 mln shares and Friday the
volume lightened up to just over 15 mln shares as it finished at
$28, down $1.  The last day PCS was near a moving average was
on September 13th, the day it closed at $47.52 right above the
5-dma (then at $47.10).  Looking at a daily chart now, it is hard
to find any sort of support, however, on a weekly chart you can
find support down around the $20-$22 range.  Having just endured
a 38% haircut this week, albeit due to fundamental concerns
within its business, it is likely that PCS may experience a
short covering rally and/or a dead-cat bounce soon.  Traders
should use this type of a bounce, accompanied by light volume,
as a potential opportunity to enter into a trade in PCS.

BUY PUT OCT-35 PCS-VG OI=2043 at $7.38 SL=5.25
BUY PUT OCT-30*PCS-VF OI= 251 at $3.25 SL=1.50

Average Daily Volume = 9.16 mln

DIGL - Digital Lightwave $69.06 (-3.81 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.

By now, most of you know the play on DIGL, but let's reiterate
for our new readers.  Back in August, DIGL diverged from the
NASDAQ trail and headed south.  The already downcast stock then
got kicked the curb on news of a spending slowdown by the major
Telecoms.  The forecast that capital spending would drop to the
single digits from about 30% this year caused a ripple effect
throughout the sector.  DIGL was brought to the brink of
destruction and succumbed to the pressure.  The ensuing action
offered entry opportunities above the $75 mark followed by
significant downdrafts from which to take profits.  The
stock's disposition is, however, becoming a concern.  With the
exception of Friday's session, DIGL was churning in a narrow
channel between the upper resistance at the 10-dma ($71.96) and
a floor around $67.  Monday's intraday low of $66.50 appeared
impenetrable.  On Friday, we got the break.  DIGL opened lower at
$63.53, but to our dismay, the share price quickly returned to a
comfy zone ($67 to $69).  So, in essence we're back at square
one.  Granted, the pattern of lower highs is promising, but DIGL
needs to make a definitive break to the downside of $67.  Let's
continue to keep a tight rein on DIGL until we see the
confirmation.  Digital Lightwave is expected to report earnings
around October 17th.

BUY PUT OCT-75 DGU-VO OI=130 at $10.75 SL=8.00
BUY PUT OCT-70*DGU-VN OI=166 at $ 7.63 SL=5.50
BUY PUT OCT-65 DGU-VM OI= 81 at $ 5.00 SL=3.00

Average Daily Volume = 868 K

EPNY - E.piphany, Inc. $82.19 (-1.81 last week)

E.piphany is a leading provider of intelligent customer
interaction software for the customer economy.  E.piphany serves
more than 250 industry-leading enterprises in ecommerce,
financial services, communications, consumer-packaged goods, and
technology.  Delivering an integrated solution combining insight
and action software products, E.piphany's web-based analytic and
operational CRM portfolio provides global business with a single,
enterprise-wide view of each customer, to better understand and
proactively respond in real-time to customer and market

The 5-dma has been formidable resistance for EPNY.  Since
breaking below that line in early September, it has been riding
the moving average down through numerous support levels.  After
the strong break below its 100-dma last Friday (now at $94.45),
EPNY has continued ever lower on accelerating volume to the
downside.  Monday saw EPNY start the week with a minor bounce off
oversold conditions.  The next two days saw the stock head lower
during the open until midday when it would attempt and fail to
make a late-day recovery.  Finding support at $75 on Wednesday,
the stock attempted to rally above its 5-dma but was unsuccessful.
On Friday, EPNY once again bounced off support at $75 and from
there, rallied strongly to close up a dollar on 234% of ADV.  In
doing so, the stock finally managed to close above its 5-dma (now
at $82.11).  This week for the most part was spent in a trading
range with the bottom at $75 and the top at $85.  A rollover on a
failure to break $85 could be a signal for entry but confirm with
volume.  A break below its 5-dma is another possible entry.  A
break below support at $75 on volume would see the next strong
support at $63.  News was abundant for EPNY this week as the
company announced a partnership on Tuesday with eAssist.com.
Wednesday was another alliance, this time with marketer Maritz Inc.
Friday's positive action was likely helped by bullish comments from
CEO Roger Siboni, who is looking to target Europe in the next two

BUY PUT OCT-85*PEY-VQ OI=346 at $12.63 SL=9.25
BUY PUT OCT-80 PEY-VP OI=290 at $ 9.13 SL=6.25
BUY PUT OCT-75 PEY-VO OI= 32 at $ 6.75 SL=4.75

Average Daily Volume = 659 K

PWAV - Powerwave Technologies $33.63 (-3.44 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

It's been a rough week for PWAV, which means it's been a great
week for our put play.  After breaking below its 50-dma at $40
last Friday, the stock attempted unsuccessfully to rally above
this point on Monday.  On Tuesday the 50-dma was cleared but it
hit resistance at the 200-dma (now at $42.66).  This brought in
the sellers who sold the stock down and in doing so, pushed it
back below the $40 mark.  From there, the stock continued lower.
On Friday, PWAV shed $3.75 or over 10% on 2.3x the ADV.  This put
the stock below a key support level at $35.  Look for this point
to serve as resistance and a failed rally above this level as a
possible entry point.  PWAV has been unable to break the 10-dma,
now all the way up at $40.80.  Failures to make it above this
point as well as the 5-dma at $38.52 are also possible entry
points.  With $35 now broken, the next level of strong support is
at $30.  There has been no news this week and as a result, the
stock has moved down, largely due to a weak NASDAQ, especially in
the Wireless and Semiconductor sectors, which PWAV is a part of.
Look for sector sympathy to be a key factor in the movement of
PWAV's stock price.  With strong overhead resistance above, PWAV
will have a difficult time moving up.  But just as nothing goes up
in a straight line, so goes the same for stocks on the way down,
though it is likely that bounces from oversold could be
opportunities for entry.  Just make sure that sector sympathy is
on your side and volume confirms the rollover before jumping in.

BUY PUT OCT-40 VFQ-VH OI=400 at $8.00 SL=5.75
BUY PUT OCT-35*VFQ-VG OI=271 at $4.63 SL=2.75
BUY PUT OCT-30 VFQ-VF OI= 73 at $2.13 SL=1.00

Average Daily Volume = 2.01 mln

DITC - Ditech Communications $39.50 (-6.25 last week)

Making it easier to be heard, DITC's echo-cancellation products
eliminate the problem of echo in emerging and existing voice
networks.  With six standalone products in this arena, the
company provides solutions ranging from the third generation
18T1 and 18E1, all the way up to the system level Broadband
Echo Cancellation System, which employs the company's fourth
generation Quad T1 echo cancellation product.  The company's
optical communications networking products enable telephone
companies to expand network capacity quickly, and in a
cost-effective manner.  Included in the company's optical
offerings are optical amplifiers, wavelength division
multiplexers and demultiplexers, and a dense wavelength
division multiplexing monitor.

Relative strength is the name of the game in an unsettled
market, and DITC clearly doesn't have it.  While the rest of
the market dropped at the start of Friday's session on INTC's
earnings warning and then recovered through the afternoon,
DITC followed suit, but in a more subdued fashion.  Dropping
more than $2 at the open and an additional $3 before finding
support (that's more than 12%), DITC finally found its legs
with the rest of the NASDAQ and managed to claw its way back
above $39 at the end of the day.  While the recovery came on
solid volume, the stock couldn't get back over $40, a level
the stock hasn't seen since last October.  Positive news this
past week didn't even begin to arrest DITC's decline as the
stock fell through support at $45, and then $40.  On Wednesday,
the company announced a new 10 gigabit per second (OC-192)
optical amplifier.  This product will enable service providers
to significantly increase the distance between optical to
electrical signal regeneration points (up to 300 miles).  In
addition, these new amplifiers allow service providers to
replace intermediate electrical regenerators that are priced
in excess of $200,000 with DITC amplifiers at one-tenth the
price.  The Optical sector was one of the strongest on Friday,
but DITC was left in the dark, and this would seem to indicate
further weakness ahead.  Downside pressure is continuing to
mount in the form of the 5-dma (currently $43) and the 10-dma
(now at $45.31), just above the $45 resistance (old support)
level.  A positive market next week could help lift shares of
DITC, but we expect the rise to be short-lived.  Wait for
weakness to appear near resistance and then enter the play as
selling volume picks up, plunging DITC back into darkness.

BUY PUT OCT-45 DUI-VI OI=145 at $8.38 SL=6.00
BUY PUT OCT-40 DUI-VH*OI= 82 at $5.13 SL=3.00

Average Daily Volume = 823 K

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INTC Kicks the VIX Out Of The Danger Zone
By Mark Phillips
Contact Support

Ah, what a relief it was to see something move the VIX out of
the low 20's.  Rather than having to wait for another month to
drag by, INTC got the party started early by issuing an earnings
warning on Thursday after the close.  While the entire market
sold off at the open on Friday, it looked like a convincing
bottom for the NASDAQ as it opened at its low of the day (just
above 3600) and recovered steadily right into the close, which
just happened to be the high of the day.  The nearly 200 point
range kicked the VIX into gear, and it hit an intraday high of
27.04 before dropping back to end the week at 24.20.  While
this is not in the "screaming buy" zone (above 30), it is
definitely a lot better than watching it stubbornly remain
below 20.

Those that had been patiently sitting on cash were able to take
advantage of the buying opportunity and grab their favorite
plays at a bargain.  As the day rushed past, many of our
favorites like EMC, NT, JDSU, BRCD, and FRX posted impressive
recoveries, while many others put in convincing bottom
formations.  Volume was strong, and by the end of the day,
sentiment seemed to have improved remarkably in the space of
24 hours.

I am encouraged by the strength shown throughout the technology
sector on Friday, and unless you have suddenly gone blind, you
can see my bullish horns starting to show.  I think the bottom
on Friday could be the retest of support we have been so
patiently (yeah, right) waiting for.

Before you run off to spend your remaining cash on every play in
sight though, let's review where we are.  The NASDAQ is still
trading below every one of its moving averages, which are spread
out overhead between the 5-dma (3824) to the 200-dma (4028).  We
are still in the midst of earnings warning season and the list
of confessors is growing by the day.  Crude oil is still trading
at its highest level in a decade, despite Friday's announcement
that the government will start releasing some of its strategic
petroleum reserves to alleviate shortages.  The Euro finally got
a bit of relief on Friday from the Fed, but we need to remember
that what the Fed giveth, it can also take away.  And finally,
we are still in the month of September, which is historically
an unpleasant month for the bulls.

Despite all of that, I think it may be safe to poke our heads
out and start nibbling at our favorite plays.  While it is not
the time to buy with abandon, my bias has turned cautiously
bullish and I think the worst may actually be behind us.  The
market's resilience on Friday was very encouraging, but I want
to see it follow through in the coming week.  String together a
few more days of strong gains that are accompanied by volume
over 2 billion shares on the NASDAQ, and I'll be making a run
to the store for the party hats and horns!

In the meantime, start putting your action plan into motion and
take advantage of the entry points on your favorite plays as
they present themselves.  Stay away from those out of favor
sectors and stick with the leaders.  Telecom and Semiconductors
are still having a rough go of things, hence our decision to
drop both NXTL and AMD this weekend.  Both our spotlight play
(JDSU) and one of our new plays (BRCM) are in much more
favorable sectors, Optical and Broadband respectively.  Finalize
your target selection this weekend and get ready to profit as
we move steadily towards the most profitable part of the year.

By next weekend, my head will be full of new ideas I expect to
receive at the Boston seminar.  Who knows, I may find some
nuggets of wisdom that can improve our LEAPS plays.  Now
wouldn't that be a lovely way to usher in the holiday season?

Have a profitable week.

Current Plays


EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $62.13   553.95%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $37.13    13.36%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $24.63   123.86%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $37.00   144.55%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $24.24   -11.82%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $47.25   114.77%
ERICY  01/30/00  JAN-2002 $16.3 WRY-AO   $ 6.75   $ 5.38   -20.37%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 4.25   -38.23%
NSM    02/27/00  JAN-2002 $ 70  WUN-AN   $24.25   $ 8.88   -63.40%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 9.13   -50.99%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $18.00     2.86%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $19.38   107.66%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $10.25    90.52%
AMD    04/16/00  JAN-2002 $ 35  WVV-AG   $13.00   $ 6.63   -49.04%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $48.38    22.07%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $40.00   -27.60%
MOT    05/14/00  JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 6.50   -31.87%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 9.50   -44.93%
       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   $10.25   -46.75%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $12.75    23.67%
AMGN   07/02/00  JAN-2002 $ 75  WQY-AO   $20.75   $19.50   - 6.02%
                 JAN-2003 $ 70  VAM-AN   $28.75   $28.50   - 0.87%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $73.38    10.75%
       09/03/00  JAN-2003 $190  OVS-AR   $86.63   $90.88     4.91%
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $ 3.75   -70.31%
                 JAN-2003 $ 60  VDL-AL   $15.38   $ 6.13   -60.18%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $18.13     5.81%
                 JAN-2003 $ 70  OZG-AN   $23.13   $24.13     4.30%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $25.38   -10.18%
                 JAN-2003 $120  VHP-AD   $32.63   $30.13   - 7.68%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $23.50    13.25%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $27.75     9.34%
MFNX   08/06/00  JAN-2002 $ 40  WOF-AH   $13.75   $ 5.50   -60.00%
                 JAN-2003 $ 45  VKW-AI   $15.63   $ 7.50   -52.02%
GM     08/06/00  JAN-2002 $ 65  WGM-AM   $ 9.88   $14.75    49.29%
                 JAN-2003 $ 65  VGN-AM   $13.25   $18.63    40.57%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $43.63    39.02%
                 JAN-2003 $100  VFB-AT   $37.38   $48.38    29.41%
BRCD   08/27/00  JAN-2002 $220  YNU-AD   $65.38   $92.38    41.29%
                 JAN-2003 $220  OMW-AD   $86.50   $113.88   31.65%
INKT   08/27/00  JAN-2002 $130  XOR-AF   $50.13   $47.63   - 5.00%
                 JAN-2003 $140  VFR-AH   $60.88   $58.88   - 3.29%
VERT   09/03/00  JAN-2002 $ 60  YER-AL   $22.13   $11.38   -48.59%
                 JAN-2003 $ 60  OER-AL   $28.88   $16.00   -44.59%
CMRC   09/10/00  JAN-2002 $ 80  YCU-AP   $30.13   $32.00     6.21%
                 JAN-2003 $ 80  OCU-AP   $38.75   $41.38     6.77%
PHCM   09/10/00  JAN-2002 $ 90  YPH-AR   $45.75   $52.00    13.66%
                 JAN-2003 $ 90  OFO-AR   $52.50   $58.75    11.90%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $27.13    20.56%
                 JAN-2003 $ 70  VLM-AN   $29.63   $35.00    18.12%

Spotlight Play

JDSU - JDS Uniphase $107.00

It has been less than a month since we last visited JDSU, and
it has been a rough month at that.  Rather than holding the
$107 support level, the stock needed to come down one more
notch and test the $95-97 level before getting ready to run
again.  Our Optical hero tested this level twice last week,
first on Monday and then again on Friday during the
INTC-induced tech selloff.  Support held, and strength in the
Optical sector propelled JDSU up from its lows to close right
at its high of the day.  Friday's close puts the stock
fractionally below the 200-dma (currently $107.25), and
conservative traders will want to wait for buying volume to
push through this level before playing.  Target shooters can
look for intraday dips near the $100-102 level to initiate
positions, but we may not get that lucky again.  As long as
the market and sector can remain positive going forward, it
looks like JDSU may be ready to run into October earnings,
which are set for October 26th.

BUY LEAP JAN-2002 $110.00 YJU-AB at $35.13
BUY LEAP JAN-2003 $120.00 VEQ-AD at $43.75

New Plays

BRCM - Broadcom Corporation $248.75

It isn't often that we add a play to the LEAPS portfolio at the
same time that play is added to the list of Call plays, but BRCM
has such a distinction this weekend.  Sitting in the sweet spot
between the Broadband and Semiconductor sectors, BRCM is a
provider of highly integrated silicon solutions that enable
broadband digital transmission of voice, video and data to and
throughout the home and within the business enterprise.  These
integrated circuits permit the cost-effective delivery of
high-speed, high-bandwidth networking using existing
communications infrastructures that were not originally designed
for the transmission of broadband digital content.  Sounds like
a bunch of techno-jargon to me too, but here is the simple
version.  BRCM makes the stuff that makes the miracle of
high-speed Internet access possible.  Saying that demand for
the company's products is strong, would be like saying the
Internet is growing.  Sure, it is a true statement, but the
rate at which it is growing boggles the mind.  BRCM is at the
forefront of speeding it up and making it more accessible to
people like you and me.  This was one of the darlings of the
tech stock bonanza of last fall, gaining more than 400% from
November-March.  Can the stock do a repeat performance this
year?  Maybe, maybe not.  But the stock is looking like it is
on the cusp of a strong move, which will likely take it to new
all time highs.  The September decline on the NASDAQ dragged
BRCM down to test support at $220, but it has been slowly
recovering over the past week, and Friday's action was
downright impressive - gaining nearly $20 from its low of the
day to close just below the $250 resistance level.  In the
process, the stock cleared the 30-dma ($242.63) and the
50-dma ($238.83), putting the stock back above all its moving
averages.  Good historical support exists at $238, right at
the 50-dma.  As long as the markets can stay healthy, consider
target shooting intraday dips to support to get a better entry.
The $250 level may present some formidable resistance, but a
solid breakout will open the door for BRCM to take a run at its
all time highs near $275.  Such a breakout would also make for
an excellent entry point, so long as it is confirmed by strong

BUY LEAP JAN-2002 $250.00 YRR-AJ at $77.13
BUY LEAP JAN-2003 $260.00 OYG-AL at $95.63

YHOO - Yahoo! Inc. $111.44

An old OIN favorite, YHOO has had a rough time over the past 9
months.  After tagging a high of $221 back in early January, it
has been a long, and at times, rapid decline.  Each time the
stock appears to have built a new base from which to stage a
recovery, something happens to pull the rug out from under it.
Those that have been with us awhile will remember a few months
ago when we played the stock, using the support at $120 as our
floor as we looked for a breakout over $150.  Well, lo and
behold, there was still more downside in the stock and in July
we watched it fall to tag the $100 level for the first time
since last November.  Then earlier this month, we saw that level
tested again, and when it held, it got us thinking that maybe
this time the support will really hold.  The big concern for
Internet stocks is that declining online advertising revenue
from all the dot.coms that got zapped by the spring selloff will
affect the bottom line of those stocks that are still healthy on
the surface.  YHOO's management claims this isn't the case.
Rather, due to the size of the Yahoo! audience (read that as
number of eyeballs), the company will have an even stronger
bargaining position with advertisers.  If correct, it looks
like the Internet shakeout from earlier in the year could leave
YHOO sitting pretty and in a stronger position than ever before.
Even the selloff on Friday, prompted by Intel's earnings
warning couldn't crater the stock of the leading Internet
portal, and we watched with amazement as it recovered from its
low ($103.88) to close just below the high of the day.  Support
is looking solid at $103-104, and nearly impenetrable below
$100.  Unless the market goes into a nosedive, a bounce at
either of these support levels looks like an ideal entry for
a recovery that is overdue.  Resistance sits firmly entrenched
near the $120 level, but if YHOO can get through that, another
run into the $140's seems entirely possible in the months ahead.

BUY LEAP JAN-2002 $120.00 WYH-AD at $31.88
BUY LEAP JAN-2003 $120.00 VYH-AD at $43.00


AMD $26.00 The other shoe fell Thursday night as INTC warned
that they would fail to meet earnings estimates for the current
quarter.  Although the company cited weakness in Europe as the
principal cause for the shortfall, we think the problems may
run deeper.  Fear that it could be an industry-wide problem sent
many Semiconductor stocks sharply lower on Friday, and AMD,
which is INTC's primary competitor, felt the pain as well.
Unable to get a sustainable rally going since Jonathan Joseph's
bearish comments on the Semiconductors in mid-July, AMD has been
sliding sharply lower for the past 3 weeks, and Thursday's low
of $23 represents the stock's lowest level since early March.
While INTC's stumble could spell opportunity for AMD, we think
it is more likely that with declining PC demand these two
companies will be left behind as investors turn their attention
elsewhere.  While we had a couple nice runs between April and
July, the situation does not look favorable in the near term and
we can no longer advocate opening new positions at this time.
There are too many other great LEAPS plays out there to wait
and hope for a recovery in a sector (and stock) that has fallen
out of favor.

NXTL $47.94 Probation revoked!  As we have mentioned recently,
we've become increasingly concerned with NXTL's performance and
the health of the Telecom sector as a whole.  Our "uncle" point
was the $50 support level, which got shattered on Monday
morning.  While support did emerge mid-week near $41, we can't
help but think our play is technically broken.  Since picking it
in mid-June, NXTL gave us only one decent run, and that was only
from $60 to $70 in early July.  Since then, sector weakness and
unsettled markets have dragged our play ever lower, and the
prospects do not look bright.  Lower highs and lower lows do not
make for a profitable play, so NXTL gets booted out of the play
list this weekend to make room for plays with brighter


The Truth Is Out There
By Ryan Nelson

Despite an Intel disaster, the markets were able to avoid a
massive sell-off.  Part of the "Plunge Protection Team" ahead
of the election as one of my paranoid friends would say.  My
guess includes less "conspiracy theory" and more historical
information.  What I mean is, many investors and traders share
the same bullish view that we will see a bottom in this market
in the coming four to five weeks.  If so, all dips should be
considered for potential buying opportunities.  Thus, Friday's
open was a gift.  We singled out Ciena last week as a split run
play and it didn't disappoint.  Staying in Fiberoptics, Corning
is due to split on Oct. 4th and is looking healthy.  Plus AVNX
may be a good split candidate with a meeting to increase shares
later in October.

Current Split Run Plays


Current Split Candidate Plays


Candidates That Are Not Current Plays


10 Most Recent Announcements We Predicted

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

Major Announcements So Far This Month = 20

LSCC     PRHC     AVT      MLNM
AUDC     NUHC     MEDX     AZA
ASF      UTI      ADBE     ORCL
LEH      PPRO     BSYS     TEK

For our complete stock split calendar, click here...

Symbol  Company Name                Splits  Payable    Executable
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
HGSI - Human Genome Sciences          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
PPRO - PurchasePro.com, Inc.          2:1  10/12/2000  10/13/2000
IMCL - Imclone Systems, Inc.          2:1  10/13/2000  10/16/2000
FLEX - Flextronics International Ltd. 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
GBBK - Greater Bay Bancorp, Inc.      2:1  10/18/2000  10/19/2000
ADX  - Adams Express Company          3:2  10/19/2000  10/20/2000
EXAR - Exar Corporation               2:1  10/19/2000  10/20/2000
PEO  - Petroleum & Resource Fund      3:2  10/19/2000  10/20/2000
MSS  - Measurement Specialties, Inc.  2:1  10/20/2000  10/23/2000
LEH  - Lehman Brothers Holdings, Inc. 2:1  10/20/2000  10/23/2000
BSYS - Bisys Group, Inc.              2:1  10/20/2000  10/23/2000
NUHC - Nu Horizons Electronics        3:2  10/23/2000  10/24/2000
RNBO - Rainbow Technologies, Inc.     2:1  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
TEK  - Tektronix, Inc.                2:1  10/31/2000  11/01/2000
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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The Option Investor Newsletter                   Sunday 09-24-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
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Position Exit Guidelines: When to close a play early...
By Mark Wnetrzak

One of the most common questions we receive from new readers
concerns the correct timing of early exits for Naked Put and
Covered Call positions.  While there is no perfect answer or
solution to this dilemma, one of the most practical closing
strategies is based on the target ROI for the position.  If a
play originates with a 15% monthly return target and a slightly
smaller but reasonable profit becomes available at an earlier
time (based on a lower yield and shorter time period), the play
is a candidate for early closure.  Of course, most positions
that meet this criteria will appear to be so successful they
can't possibly lose before expiration.  That aspect, along with
commission considerations and the overwhelming effects of human
nature - which urges you to simply hold the play and hope for
maximum profit - will prevent most traders from closing the
position early.  As many of you know, even when the underlying
issue moves in the forecast direction, an option position is
always at risk from a variety of unexpected events or changes or
in the market.  These effects are reduced with hedged positions
or limited risk strategies but the end result can still be very
unfavorable.  If the market conditions worsen and become bearish,
the early-exit concept may become more important in the coming
sessions.  There may be a number of examples in this month's
portfolio, that while currently at maximum profit, could likely
have been closed early in the interest of sound money management.

That brings us to an important question concerning the section
summaries (weekly profit/loss results) and portfolio management.
That is, how to determine when to exit a play (or identify when
one should have been closed) without the added mental baggage
that comes with the potential for financial failure.  It's easy
to trade successfully, based on unemotional technical analysis,
when your actions are not affected by the possibility of monetary
loss.  Without actually trading the positions, the best we can do
is follow the basic rules (Jim's "Top-Ten" trading axioms on the
OIN web-site are ageless!) and try to manage the plays just as we
would if they were in our own portfolio.  I mention this because
each week we receive numerous requests for advice or assistance
with various positions and unfortunately, the answer we must give
is simple: "Deciding when to enter and exit a play is a matter of
personal preference."  Fortunately, there is one secret to winning
in this game.  You must trade on your own terms and according to
your personal level of knowledge and experience!  You must not
allow the effects of outside opinion or extraneous information
influence your judgment!  You are the only one who can decide how
YOU will trade.  While professional traders generally strive for
consistent monthly returns of 10% to 15%, your specific style or
risk/reward attitude may require a less aggressive approach.  If
you can not afford the potential loss associated with a position,
don't make the trade!  It's difficult to foresee initially, but
success will come when you create a favorable balance of proven
strategies and sound money-management techniques.  As with any
worthwhile endeavor, the task requires patience and hard work,
and the fact is, many traders give up after only a few losing
plays, long before they have time to learn (and understand) the
various methods required for profitable trading.

It's easy to fall into that trap but fortunately, there is a way
out.  Read the newsletter, including articles in the back-issues
on the web site, especially Jim's commentary.  Subscribe only to
worthy publications and study all you can about option trading.
Review the current bibles: Options as a Strategic Investment, by
Lawrence McMillan; Option Volatility and Pricing Techniques, by
Sheldon Natenburg; Secrets for Profiting in Bull and Bear Markets,
by Stan Weinstein; and Trading for a Living, by Dr. Alex Elder.
Learn the rules and live by them, and repeat the things that you
do best.  Don't use complicated strategies just because they are
unique or intriguing.  Often the best course of action is the
simplest and it is important to remember that the objectives are
more important than the merits of the technique itself.  If the
strategy is not suitable for your portfolio, then it should not
be used, no matter how attractive it appears!

The complex subject of "exit strategies" certainly warrants
further discussion and we will review the most common approaches
to successful position management in future narratives.

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return!

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

WPZ     5.19   4.88   OCT   5.00  0.94   $  0.63  12.9%
IMGN   26.19  34.25   OCT  22.50  5.50  *$  1.81   7.6%
NETS    6.25   5.25   OCT   5.00  1.75  *$  0.50   7.2%
EFCX   11.88  11.63   OCT  10.00  2.63  *$  0.75   7.0%
GLGC   24.75  22.50   OCT  20.00  6.38  *$  1.63   6.4%
EPTO   14.00  13.06   OCT  12.50  2.50  *$  1.00   6.3%
WDC     5.75   5.63   OCT   5.00  1.19  *$  0.44   6.2%
SYNM   20.75  18.63   OCT  17.50  4.38  *$  1.13   6.0%
LBRT   30.00  32.44   OCT  22.50  9.13  *$  1.63   5.7%
IMGN   21.81  34.25   OCT  17.50  5.50  *$  1.19   5.3%
PRST   20.13  20.00   OCT  17.50  3.63  *$  1.00   5.3%
MSTR   31.38  26.38   OCT  25.00  8.25  *$  1.87   5.2%
WGAT   22.88  23.31   OCT  17.50  6.63  *$  1.25   5.0%
GSTRF  11.50   9.69   OCT  10.00  2.25   $  0.44   4.1%
NEOF    5.81   4.03   OCT   5.00  1.94   $  0.16   3.0%
VNTR   17.00  13.44   OCT  15.00  3.75   $  0.19   1.0%
WAVX   24.06  17.63   OCT  20.00  5.63   $ -0.80   0.0%
RHAT   26.69  19.50   OCT  22.50  6.00   $ -1.19   0.0%
TIVO   26.88  18.31   OCT  22.50  6.13   $ -2.44   0.0%

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


The pre-market drop in Net2Phone (NTOP) on Monday, followed by a
continued slide after the opening bell, closing near $26, ruined
any entry into the position.  Many of the above issues are testing
technical support or previous lows.  Depending on your long-term
outlook and risk-reward tolerance, a violation of these support
areas could (should?) be used for an exit (or adjustment) signal.


Sequenced by Company

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

AAS    42.28  OCT  40.00  AAS JH  4.00  64   38.28   28     4.9%
BCGI   20.00  OCT  17.50  QGB JW  3.38  88   16.63   28     5.7%
CTIC   50.13  OCT  40.00  CUC JH 12.50  322  37.63   28     6.8%
CYBS   12.69  OCT  10.00  CAQ JB  3.13  133   9.56   28     5.0%
GNSS   19.31  OCT  17.50  QFE JW  2.63  31   16.68   28     5.3%
NIKU   23.69  OCT  20.00  NFU JD  4.63  36   19.06   28     5.4%
TRIH   32.38  OCT  30.00  RIU JF  3.50  171  28.88   28     4.2%

Sequenced by Return

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

CTIC   50.13  OCT  40.00  CUC JH 12.50  322  37.63   28     6.8%
BCGI   20.00  OCT  17.50  QGB JW  3.38  88   16.63   28     5.7%
NIKU   23.69  OCT  20.00  NFU JD  4.63  36   19.06   28     5.4%
GNSS   19.31  OCT  17.50  QFE JW  2.63  31   16.68   28     5.3%
CYBS   12.69  OCT  10.00  CAQ JB  3.13  133   9.56   28     5.0%
AAS    42.28  OCT  40.00  AAS JH  4.00  64   38.28   28     4.9%
TRIH   32.38  OCT  30.00  RIU JF  3.50  171  28.88   28     4.2%

Company Descriptions

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

AAS - AmeriSource Health  $42.28  *** Stage II ***

AmeriSource Health is a full-service wholesale distributor of
pharmaceutical products and related services.  They have 21 drug
distribution facilities and three specialty products distribution
facilities nationwide.  They have a diverse customer base that
includes hospitals and managed care facilities (accounting for
48% of operating revenue in fiscal 1999), independent community
pharmacies (39%) and chain drug stores.  A recent nationwide
survey of hospital executives conducted by The Healthcare Equity
Research Team at Goldman Sachs, listed AAS with the highest
category ratings among pharmaceutical distributors.  Lehman
Brothers has now raised its 12-month price target on AmeriSource
to $42.  We favor the bullish breakout on heavy volume to a new
all time high (Blue Sky territory!).

OCT 40.00 AAS JH LB=4.00 OI=64 CB=38.28 DE=28 MR=4.9%

BCGI - Boston Communications  $20.00  *** Entry Point! ***

Boston Communications is a provider of prepaid services to wireless
carriers in America.  BCGI provides telecommunications carriers
with a range of resources, support services, and cutting edge
technology targeted to address the unique needs of the growing
prepaid, electronic, and mobile commerce industries.  BCGI provides
one or more of its services to the top five wireless carriers in the
United States, plus more than 80 additional carriers worldwide.
BCGI has upgraded its technological infrastructure by purchasing two
EMC 8730 Symmetrix storage units, which should help position itself
as an essential partner to companies interested in entering the
m-commerce arena, specifically in micro transactions.  We favor the
bullish technical outlook now that BCGI has reached a new all-time
high on heavy volume.

OCT 17.50 QGB JW LB=3.38 OI=88 CB=16.63 DE=28 MR=5.7%

CTIC - Cell Therapeutics  $50.13  *** Big Day! ***

Cell Therapeutics is focused on developing and commercializing
novel treatments for cancer.  Their research and in-licensing
activities are concentrated on identifying new, less toxic and
more effective ways to treat cancer.  Among some of their more
promising candidates is CT-2584 (Apra), a novel anti-cancer drug
in Phase II clinical trials for cancers which have become
resistant to conventional chemotherapy.  CTIC is simply a HOT
stock in favorable sector and last week the company announced a
public offering of 3,130,435 shares of common stock at a price
of $38 per share.  CIBC World Markets is acting as lead manager
for the offering, and due to increased demand for the issue, the
underwriter has exercised their over-allotment option.  The total
proceeds from the offering will exceed $136 million and the funds
will be used for new research and development, clinical trials,
expansion of their manufacturing facilities and to supplement
working capital.  Based on Friday's bullish activity, investors
favor the outlook for the company.

OCT 40.00 CUC JH LB=12.50 OI=322 CB=37.63 DE=28 MR=6.8%

CYBS - CyberSource  $12.69  *** On the Mend? ***

CyberSource is a leading developer and provider of enterprise
eCommerce transaction services, and a pioneer in the area of
Internet fraud detection.  More than 2,200 businesses throughout
the world have chosen to use the CyberSource eCommerce Transaction
Suite.  The CyberSource eCommerce Transaction Suite(SM) offers
customer-controlled, real-time services including, Payment, Tax
Calculation, Stored Value, Risk and Fulfillment Management.
CyberSource Global Professional Services develops comprehensive
eCommerce solutions that are built upon CyberSource's mission-
critical transaction services and tailored to each customer
environment to provide security, reliability, and extensibility
for rapid growth.  CyberSource has acquired privately held PaylinX
Corporation, a leading provider of enterprise payment software,
which should broaden CyberSource's market reach.  Earlier this
month, Pacific Crest initiated coverage with a "strong buy."
The near-term technical picture is improving as CyberSource
forges a stage I base.

OCT 10.00 CAQ JB LB=3.13 OI=133 CB=9.56 DE=28 MR=5.0%

GNSS - Genesis Microchip  $19.31  *** Stage I Speculation ***

Genesis Microchip designs, develops and markets integrated
circuits that process digital video and graphic images.  They
also supply reference boards and designs that incorporate their
proprietary integrated circuits.  Recently Genesis has targeted
the flat panel computer monitor market and other potential mass
markets.  Panasonic, Sony and Toshiba all use Genesis' microchips
in their DVD players, which should bode well for the next quarter
as the GNSS continues to target high-volume market opportunities.
We simply favor the improving technical picture as Genesis forms
a stage I base, and we believe a cost basis below its current
trading range offers a conservative entry point.

OCT 17.50 QFE JW LB=2.63 OI=31 CB=16.68 DE=28 MR=5.3%

NIKU - Niku Corporation  $23.69  *** 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 downside movement is worth the
potential reward in this position.

OCT 20.00 NFU JD LB=4.63 OI=36 CB=19.06 DE=28 MR=5.4%

TRIH - Triad Hospitals $32.38  *** Technicals Only! ***

Triad Hospitals provides health care services through hospitals
and ambulatory surgery centers located in small cities and
selected high growth urban markets in the southwestern, western
and south-central United States. Their facilities include 30
general, acute care hospitals and 14 ambulatory surgery centers.
This stock has been in a stage II climb since March and the
recent pullback in August only provided a buying opportunity.
The healthcare sector has been heating up as investors seek
safety, and Triad Hospitals isn't slowing down.  We still choose
to remain conservative and favor some downside protection with
reasonable return potential.

OCT 30.00 RIU JF LB=3.50 OI=171 CB=28.88 DE=28 MR=4.2%

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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   85.00     75  AXY-VO    5.38   2125   25%      75
AFFX   66.25     60  FIQ-VL    3.50   1656   21%      60
AGIL   80.00     70  AUG-VN    3.88   2000   19%      70
AMCC  198.50    190  AZV-VR   10.38   4963   21%     190
ATON  121.19    115  UAO-VC    6.13   3030   20%     100
BRCM  248.75    240  RDU-VH   12.88   6219   21%     235
CFLO  137.19    130  FUJ-VF    8.63   3430   25%     115
CHKP  152.75    145  KGE-VI    5.63   3819   15%     145
CIEN  120.81    110  UEE-VB    5.00   3020   17%     110
DNA   176.56    170  DNA-VZ   10.00   4414   23%     165
EXTR  123.88    110  EXR-VB    5.25   3097   17%     110
GLW   314.75    300  GWD-VT   14.00   7869   18%     300
GSPN  132.25    120  GHY-VD    6.88   3306   21%     120
IDTI   96.00     90  ITQ-VR    5.88   2400   25%      90
IMCL  120.38    110  QCI-VB    3.88   3010   13%     110
ITWO  186.19    180  QYI-VP   11.75   4655   25%     180
JNPR  225.56    210  JUD-VB   10.13   5639   18%     215
MEDX  106.00    100  MZU-VT    6.38   2650   24%     100
MERQ  148.94    140  RBF-VH    9.00   3724   24%     140
MRVC   57.94     50  VQX-VJ    2.88   1449   20%      50
MUSE  192.00    180  UZQ-VP   11.38   4800   24%     180
NEWP  189.00    170  NOQ-VN    7.25   4725   15%     160
NT     66.75     60  NTV-VL    2.13   1669   13%      60
NTAP  147.06    135  ULM-VG    5.75   3677   16%     135
PDLI  124.94    115  RPV-VC    9.25   3124   30%     115
PLXS   69.31     65  QUA-VM    5.13   1733   30%      60
PMCS  221.94    210  SZI-VB    9.75   5549   18%     215
QCOM   72.94     70  AAO-VN    3.50   1824   19%      70
RMBS   85.44     75  BYQ-VN    3.00   2136   14%      75
SDLI  344.38    320  QJV-VD   14.13   8610   16%     315
SEBL  105.00    100  EZG-VT    4.50   2625   17%     100
SWCM  167.44    165  BSW-VM   12.00   4186   29%     165
TIBX   78.44     70  PAV-VN    3.88   1961   20%      70
VRSN  194.88    185  QVZ-VQ    7.88   4872   16%     185


Option Trading Strategies: Covered-Puts
By Ray Cummins

One of our readers requested an explanation of this seldom-used
but occasionally necessary technique.

Put writing is an option trading strategy that involves selling
downside insurance for a premium, on an issue that the investor
expects to remain above the sold strike price.  The technique is
commonly known as "selling (naked) puts" and in most cases, puts
sold "out-of-the-money" expire worthless, allowing the investor
to keep the premium and receive a reasonable profit without ever
having to buy the underlying stock.  The strategy is used with
neutral to bullish issues and can generate consistent, low-risk
returns when applied correctly.  There is, of course, a margin
requirement but this commitment of funds is generally less than
the purchase price of an equivalent number of shares of the
underlying stock.  To ensure that the short position is covered
against a loss in value of the underlying issue, the broker
requires this collateral, usually about 40% of the value of the
security, to be posted in the form of equities or cash deposits
in the trader's account.

A put writer is also "covered" if there is a corresponding short
position in the underlying security, or its equivalent, in his
account.  Recall that a "short" sale is the sale of a security
that is not owned, with the intention of repurchasing it later,
at a lower price.  An investor borrows the stock from another
investor through a broker and then sells it in the open market.
Subsequently, the investor repurchases the stock and returns it
to the broker, replacing the borrowed position.  The use of a
short (stock) sale in conjunction with a sold put is a common
technique.  If a sold (short) put is exercised, and the stock is
delivered, it can be further assigned to replace the previously
borrowed equity.

The strategy of writing covered puts is a bearish technique that
profits when the underlying issue remains below the strike price
of the sold position.  A covered put writer's profit potential is
limited to the premium received from the sold option minus the
difference between the exercise price of the put and initial
price of the shorted stock.  The potential loss in this strategy
can be substantial when the share value of the underlying issue
increases significantly above the initial short price and remains
above the strike price of the sold put.  In this case, the short
position will generate losses offset only by the initial premium
received.  The covered put writing strategy is not used regularly
in bullish markets because the risk of upside loss far outweighs
the potential for limited gains.  However, in a predominantly
bearish market, deep-in-the-money covered puts are a potentially
favorable approach if the underlying issue has little chance of
finishing above the strike price of the sold put.


Strategy: Covered Put

Outlook:  A neutral-to-bearish underlying issue with above average
          volatility and subsequently overpriced option premiums.

Example:  Cell Pathways  (CLPA)

          Sell (short) stock    CLPA         Bid = $30.00
          Sell (short) option   OCT-40 Put   Bid = $12.00
          Position cost basis          (30 + 12) = $42.00
          Maximum position profit 12 - (40 - 30) = $2.00
          Collateral requirement = $34 per share (approx.)
          Return on investment = 6% (approx.)

Outcome:  If the value of the underlying issue is below $40 at
          expiration, maximum profit occurs.  The stock will be
          assigned through the short put.  It can then be used to
          replace the outstanding (borrowed) shares.

          If the value of the underlying issue is between $40 and
          $42, partial profit occurs.  The stock will not be
          assigned through the short put.  It must be bought at
          market value and then used to replace the outstanding
          (borrowed) shares.  The initial premium from the sold
          put is used to offset the additional cost of the stock.

          If the value of the underlying issue is above $42, the
          position incurs a loss and that loss increases with the
          price of the underlying issue.  The stock will not be
          assigned through the short put.  It must be bought at
          market value and then used to replace the outstanding
          (borrowed) shares.

The absolute necessary use of protective stops is obvious with
this strategy.  With a BUY-STOP on the stock, the chance of a
potential loss on the position is substantially reduced when the
price of the stock finishes significantly higher than the strike
price of the sold put.  It is recommended that the investor place
a "buy-to-cover" STOP on the sold stock no higher than the break
even basis (the underlying issues' initial short price plus the
original premium received from the sold put) to protect against
unexpected rallies or events such as mergers and takeovers.

This strategy is also frequently initiated to exit (or cover)
losing positions that involve short put options such as credit
spreads.  In fact, covering the short position (with the sale of
stock) as the underlying issue moves through the sold options'
strike is a common method for offsetting potential losses in
naked put positions.

For more information on basic option trading strategies, review
Options as a Strategic Investment, by Lawrence McMillan and
Option Volatility and Pricing Techniques, by Sheldon Natenburg,
both available in the OIN bookstore.

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.


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

AND     8.88   7.63   OCT   7.50  0.31  *$  0.31  10.9%
CLTR   36.75  33.88   OCT  30.00  1.13  *$  1.13  10.8%
NITE   37.00  37.25   OCT  30.00  0.88  *$  0.88   8.8%
ALLP   16.50  16.50   OCT  12.50  0.50  *$  0.50   8.5%
WAVX   24.06  17.63   OCT  17.50  0.63  *$  0.63   8.4%
CMNT   21.00  27.00   OCT  17.50  0.56  *$  0.56   7.4%
WGR    26.25  23.94   OCT  22.50  0.56  *$  0.56   6.7%
DRXR   19.06  16.75   OCT  15.00  0.38  *$  0.38   6.6%
STAT   20.00  20.75   OCT  15.00  0.44  *$  0.44   6.4%
SCUR   26.25  24.03   OCT  17.50  0.50  *$  0.50   6.3%
NIKU   24.88  23.69   OCT  17.50  0.38  *$  0.38   6.2%
VITR   48.94  48.25   OCT  30.00  1.00  *$  1.00   6.0%
XRX    17.75  16.56   OCT  15.00  0.31  *$  0.31   5.8%
CDN    27.13  24.75   OCT  25.00  0.81   $  0.56   5.1%
PLNR   19.75  14.50   OCT  15.00  0.69   $  0.19   3.0%
GOTO   22.75  16.69   OCT  17.50  0.50   $ -0.31   0.0%

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


Several of the above issues are testing support areas.  Time to
evaluate your goals (stock ownership?) and risk-reward tolerance.
Issues that act weaker than expected or fall through technical
support levels become candidates for an early exit.


Sequenced by Company

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

ASPX   12.25  OCT  10.00  XUM VB  0.50  51    9.50   28    17.2%
CTIC   50.13  OCT  35.00  CUC VG  0.56  19   34.44   28     5.8%
LBRT   32.44  OCT  22.50  IEY VX  0.63  325  21.88   28     9.5%
NERX   23.00  OCT  17.50  XUO VW  0.38  114  17.12   28     8.3%
PRBZ   29.44  OCT  25.00  PQU VE  0.50  0    24.50   28     6.9%
UNM    25.00  OCT  22.50  UNM VX  0.63  203  21.87   28     8.4%
WGAT   23.31  OCT  17.50  WAQ VW  0.56  57   16.94   28    11.7%

Sequenced by Return

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

ASPX   12.25  OCT  10.00  XUM VB  0.50  51    9.50   28    17.2%
WGAT   23.31  OCT  17.50  WAQ VW  0.56  57   16.94   28    11.7%
LBRT   32.44  OCT  22.50  IEY VX  0.63  325  21.88   28     9.5%
UNM    25.00  OCT  22.50  UNM VX  0.63  203  21.87   28     8.4%
NERX   23.00  OCT  17.50  XUO VW  0.38  114  17.12   28     8.3%
PRBZ   29.44  OCT  25.00  PQU VE  0.50  0    24.50   28     6.9%
CTIC   50.13  OCT  35.00  CUC VG  0.56  19   34.44   28     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.

ASPX - Auspex Systems $12.25  *** On The Move! ***

Auspex Systems develops, manufactures, and distributes a line of
network file servers that include specialized software for
storing, serving and managing network data.  Two software options
can be purchased with their NS200 NAS product. DataGuard allows
users to continuously access data in the event of a disruption
with the host operating system.  NetServices 2.0 provides file
sharing between UNIX and Windows NT clients, reducing cost by
negating the need to replicate data on separate systems.  Data
storage is a booming sector and ASPX is one of the up and coming
companies in the group.  Last week, the stock received an upgrade
from Penn Merchant Group with a $30 price target.  Analyst Joel
Achramowicz said Auspex has bettered its cash position of late
and the company is expected to claim more than $100 million in
free cash on its balance sheet.  Achramowicz was also bullish
about the firm's quarterly performance, saying Auspex's revenue
could come in as high as $16 million, well above the current

OCT 10.00 XUM VB LB=0.50 OI=51 CB=9.50 DE=28 MR=17.2%

CTIC - Cell Therapeutics  $50.13  *** Big Day! ***

Cell Therapeutics is focused on developing and commercializing
novel treatments for cancer.  Their research and in-licensing
activities are concentrated on identifying new, less toxic and
more effective ways to treat cancer.  Among some of their more
promising candidates is CT-2584 (Apra), a novel anti-cancer drug
in Phase II clinical trials for cancers which have become
resistant to conventional chemotherapy.  CTIC is simply a HOT
stock in favorable sector and last week the company announced a
public offering of 3,130,435 shares of common stock at a price
of $38 per share.  CIBC World Markets is acting as lead manager
for the offering, and due to increased demand for the issue, the
underwriter has exercised their over-allotment option.  The total
proceeds from the offering will exceed $136 million and the funds
will be used for new research and development, clinical trials,
expansion of their manufacturing facilities and to supplement
working capital.  Based on Friday's bullish activity, investors
favor the outlook for the company.

OCT 35.00 CUC VG LB=0.56 OI=19 CB=34.44 DE=28 MR=5.8%

LBRT - Liberate Technologies  $32.44  *** Entry Point! ***

Liberate Technologies is a leading provider of a complete software
platform for delivering Internet-enhanced content and applications
to information appliances, such as television set-top boxes and
game consoles.  LBRT's Internet-based client and server software
allows network operators, such as telecommunications companies,
cable and satellite television operators and Internet service
providers to provide consumers access to network operator-branded
applications and services.  Lots of news out on Liberate: new
partnerships; new coverage by Credit Suisse First Boston and ING
Barings as interactive TV companies gain favor; and speculation
that several software competitors, including Liberate, may be
quietly stealing Microsoft's thunder in the new TV software market.
Liberate also posted favorable earnings earlier this month and
received positive reviews from a number of analysts.

OCT 22.50 IEY VX LB=0.63 OI=325 CB=21.88 DE=28 MR=9.5%

NERX - NeoRx  $23.00  *** Bracing for a Rally? ***

NeoRx is engaged in developing biopharmaceuticals for the
treatment of cancer, with an emphasis on improving efficacy and
reducing toxicities.  The company is developing a radio-labeled
small molecule that targets bone very specifically, and can be
used in conjunction with bone marrow transplants.  NeoRx has
also completed enrollment of Phase I and Phase II trials of its
Skeletal Targeted Radiation product, combined with chemotherapy
in patients with multiple myeloma.  In addition, the approval of
new patents in August, along with their exclusive license to a
patent from Stanford University that broadly covers the primary
pre-targeting methods, establishes a strong proprietary position
for the company in that area.  Technically, the issue appears
ready to move into a new trading range and our position offers
a conservative way to speculate on its future activity.

OCT 17.50 XUO VW LB=0.38 OI=114 CB=17.12 DE=28 MR=8.3%

PRBZ - ProBusiness Services  $29.44  *** Major Reversal! ***

ProBusiness Services is a provider of employee outsourced
administrative services for large employers. Their primary
service offerings are payroll processing, payroll tax filing,
benefits administrative services, human resources software and
self-service applications.  The company's PC-based payroll
system offers the cost-effective benefits of outsourcing while
providing the flexibility and control of an in-house system.
In early August, ProBusiness Services reported favorable fourth
quarter operating results, exceeding the expectations of the
primary brokerage tracking the company, Robertson Stephens.
The company also announced a major investment initiative aimed
at dramatically increasing its addressable market and growth
rate, and was promptly upgraded.  Based on fundamentals, the
company is apparently undervalued compared to its peers in the
industry.  Target a slightly higher premium to open the play
as the issue will likely consolidate in upcoming sessions.

OCT 25.00 PQU VE LB=0.50 OI=0 CB=24.50 DE=28 MR=6.9%

UNM - UNUMprovident  $25.00  *** Hot Sector! ***

UNUMProvident Corporation is the parent holding company for a
group of insurance companies that operate throughout North
America and in the United Kingdom, Japan, and Argentina.  With
its subsidiaries, it is the largest provider of group and
individual disability insurance in North America, the United
Kingdom, and Japan.  Insurance companies are performing well
and the recent technical indications in this issue suggests
UNUMProvident is ready to resume its up trend.  During its
recent consolidation period, the stock has traded in a narrow
range from 20 to 24 dollars, and Friday's breakout points to
a bullish resolution.

OCT 22.50 UNM VX LB=0.63 OI=203 CB=21.87 DE=28 MR=8.4%

WGAT - WorldGate Communications $23.31  *** Entry Point! ***

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

OCT 17.50 WAQ VW LB=0.56 OI=57 CB=16.94 DE=28 MR=11.7%

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Intel's revenue warning provides buying opportunity...

Industrial stocks rallied Friday after opening over 100 points
lower in a volatile session of trading.

Friday, September 22

Industrial stocks rallied Friday after opening over 100 points
lower in a volatile session of trading.  At the same time, the
Nasdaq staged an impressive comeback, recovering from an early
215 point loss to close down only 25 points at 3,803.  The Dow
ended 81 points higher at 10,847 on strength in Hewlett-Packard
(HWP) while the S&P 500 index finished almost unchanged at 1,448.
Activity on the Nasdaq was extreme at 2.1 billion shares traded
with declines beating advances 2,241 to 1,791.  Share swapping
on the NYSE reached 1.1 billion transactions with declines ahead
of advances 1,514 to 1,344.  In the bond market, the U.S. 30-year
Treasury fell 6/32, pushing its yield up to 5.91%.

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

Brocade     BRCD   OCT270C/OCT190P   $5.00   credit   strangle
Knight      NITE    OCT50C/OCT30P    $0.25   credit   synthetic
Tollgrade   TLGD   OCT100P/OCT105P   $0.62   credit   bull-put

Brocade surprised everyone with an incredible rally, up $20 to
$253 near the closing bell.  We anticipated a continuation of the
recent rally but nobody expected today's extraordinary activity.
Needless to say, the credit strangle was easily initiated at the
target price and now we are watching the issue for further upside
activity.  Knight opened lower and moved in a relatively small
range during the session.  A number of trades were observed near
the target entry price.  A 50-contract position was initiated in
the Tollgrade "bull-put" spread near 9:45 A.M.

Portfolio Plays:

The stock market endured heavy selling pressure at the open today
after Intel (INTC) warned late Thursday that quarterly revenues
would be much smaller than expected due to weak personal computer
sales growth in Europe.  The news prompted a number of analysts
to slash ratings on the company and almost every computer related
issue suffered initially from the unexpected announcement.  The
drama was short-lived however, as industrial stocks rebounded on
optimism over falling oil prices and a rejuvenated Euro.  Joint
intervention by the European Central Bank, the U.S. Treasury, the
Bank of Japan and the Bank of Canada buoyed the flagging currency
and almost simultaneously, oil futures plunged on reports of an
upcoming release of crude from the Strategic Petroleum reserve.
On the Dow, Hewlett-Packard (HWP) led the way, up almost $9 after
the company approved a $1 billion share buyback and said it is
confident of meeting its revenue targets and earnings estimates
for the fourth quarter.  Shares of J.P. Morgan (JPM), Boeing (BA),
and Coca-Cola (KO) also advanced and consumer stocks were boosted
by the new outlook for the Euro.  In addition, several technology
companies reiterated bullish forecasts for the future and trends
in the top performing issues appear to support that contention.
Internet and computer hardware stocks ended the day in the black
and biotech issues also rallied.  In the broader market, major
drug and healthcare stocks advanced while oil and oil service
shares consolidated.

Our portfolio enjoyed a number of favorable moves and the leader
in today's session was a popular technology issue.  Manugistics
Group (MANU) soared $21 to a new all-time high at $108 after the
company reported stronger-than-expected earnings and said it has
agreed to buy Talus Solutions, a privately held maker of pricing
and revenue optimization software.  Commerce One (CMRC) posted
solid gains, up 7$ to a recent high near $75 and Polycom (PLCM)
also rallied $6 to close at $62.  Our debit-spread combination
returns maximum profit with the issue above $60 and we will look
for an opportunity to close the play early with favorable gains.
HNC Software (HNCS), Qualcomm (QCOM), Qlogic (QLGC) and Virata
(VRTA) also participated in the bullish activity.  In the drug
group, Abbott Labs (ABT), Cell Pathways (CLPA), and Enzo Biochem
(ENZ) all moved higher and the unexpected star in finance issues
was Franklin Resources (BEN).  Our new debit strangle reached a
midday high of $5.62, an $0.88 profit on $0.75 invested in less
than one week.  Among the small-cap issues, Caremark RX (CMX)
climbed to a new yearly high near $10.50, and our conservative
calendar spread position has reached the profit target.  Now we
will try to manage the position for maximum gain.  Based on the
new bullish outlook for the issue, that may involve closing the
short option (OCT-10C) in anticipation of future upside activity.

Not surprisingly, investors continue to reward leading stocks
with additional buying support while punishing those issues
that produce less than stellar performances.  The margin between
winners and losers is increasing and examples of that mentality
can be seen in the treatment of previously favored stocks such
as Lucent (LU), Loral Space (LOR), and Maytag (MYG).  That's why
it is so important to adjust (or exit) bullish option positions
when the underlying stock closes below technical support or an
established trend-line (moving average) on heavy volume.  There
are other, more precise signals that can be used but the idea is
based on the historical probability that the issue will continue
to move in the new direction, once the previous trend has ended.
One stock that we are watching closely for signs of technical
failure is Engage (ENGA).  Our bullish position in this issue
has yet to be adjusted and now the stock is at a key moment.  A
close below the August lows (near $7.50) would likely signal a
new downward trend for the issue, suggesting an offset or exit
in the position.  Novell (NOVL) is another waning issue that is
approaching a decisive point technically but with any luck, new
speculation concerning a buyout or spin-off of some portion of
company will revive interest in its beleaguered shares.  In a
late Friday report, Cell Pathways (CLPA) received preliminary
notice that the U.S. Food and Drug Administration (FDA) has
completed its initial review of CLPA's New Drug Application (NDA)
for Aptosyn (exisulind) for the indication of familial polyposis.
The agency is expected to send the company a letter noting the
deficiencies in the NDA and indicating that it is not being
approved at this time.  Those of you that didn't take the quick
and easy $1 profit as noted in Thursday's narrative will have to
ride this one out!  It will be interesting to see where it ends
on Monday afternoon.

Questions & comments on spreads/combos to Contact Support
                         - NEW PLAYS -
SII - Smith International  $76.75  *** Oil Sector Hedge ***

Smith International is a worldwide supplier of premium products
and services to the oil and gas exploration and production
industry, the petrochemical industry, and other industrial
markets.  The company provides a comprehensive line of advanced
products and engineering services including drilling and
completion fluid systems, control equipment, waste management
services, three-cone and diamond drill bits, fishing services,
drilling tools, under-reamers, casing exit and multilateral
systems, packers and liner hangers.  The company also offers
supply-chain management solutions through an extensive branch
network providing pipe, valves, fittings, mill, safety and other
maintenance products.  Their operations are classified into two
segments: Oilfield Products and Services; and Distribution.

This month has seen record levels in the oil industry as crude
oil prices closed above $37 a barrel for the first time in ten
years.  Earlier in the month, concerns over shrinking heating
oil supplies produced extreme demand for the commodity and
crude futures rallied even higher as tensions increased between
two oil-producing nations in the Middle East.  Prices climbed
to their peak when a key inventory report showed an unexpected
drop in supplies.  The American Petroleum Institute recently
posted its petroleum supply data and the biggest surprise came
from crude-oil inventories, which fell 2.03 million barrels to
286,580 million barrels during the week of September 15, almost
3 million barrels shy of analysts' average estimate.  However,
the trend changed last Thursday when President Clinton ordered
an emergency release from the Strategic Petroleum Reserve for
only the second time in history.  Clinton ordered 30 million
barrels of crude oil to be released over the next thirty days,
as rising home energy costs came to the heart of the election
debate. The event may be more psychological than material but
it is currently helping soften prices and that's good for the
economy in the short-term.

Unfortunately, the decision to release oil from the Strategic
Petroleum Reserve has not helped the values of oil stocks and
we believe there is additional downside potential in the near
future.  Traders who agree with that outlook can use this
position to speculate on the movement of an issue that is
significantly affected by the price of oil.

PLAY (moderately aggressive - bearish/credit spread):

BUY  CALL  OCT-90  SII-JR  OI=2390  A=$1.00
SELL CALL  OCT-85  SII-JQ  OI=1079  B=$1.75
INITIAL NET CREDIT TARGET=$0.88-$1.00  ROI(max)=25%

MCHP - Microchip Technology  $59.75  *** Breaking Down! ***

Microchip Technology develops and manufactures specialized
semiconductor products used by its customers for a wide variety
of embedded control applications.  Their product portfolio
comprises micro-controllers, application-specific standard
products (ASSP), and related mixed-signal and memory products.
The company markets its products to the consumer, automotive,
office automation, communications and industrial markets.  The
company's embedded control products also offer small size, low
voltage operation and ease of development, enabling timely and
cost-effective product integration by its customers.  Microchip
Tecnology's ASSP products include a variety of specialized
integrated circuits, including its family of KEELOQ security
products for wireless communications.

The semiconductor sector has been the subject of much analysis
and discussion in recent weeks but there is little news to report
on this issue.  One upcoming event is a 3-for-2 stock split of
the company's common shares.  The stock split will be effected
on September 26 for shareholders of record after the close of the
market on September 5, 2000.  The company says the stock split is
being implemented to increase trading liquidity and to place the
stock in a more attractive trading range for retail investors.
In addition, the company's earnings are due to be reported on or
about October 12, one week prior to October option expiration.
Last month, the firm said it expects second-quarter sales and
earnings to come in above Wall Street expectations.  The company
anticipates earnings of $0.50 a share for the September quarter,
$0.02 ahead of the current average estimate of analysts polled by
First Call.  Revenue is forecast at $176 million, which would be
49% higher than revenues in same period last year.  The company
attributed the strong results to a favorable pricing environment
and robust demand for all of its product lines.

That sounds like great news but something must be amiss, based on
the recent bearish activity.  Those of you who agree with this
assessment can utilize the current consolidation period to profit
from this relatively conservative, bearish positions.

PLAY (very conservative - bearish/credit spread):

BUY  CALL  OCT-80  QMT-JP  OI=338  A=$0.43
SELL CALL  OCT-75  QMT-JO  OI=699  B=$0.88
INITIAL NET CREDIT TARGET=$0.50-$0.56  ROI(max)=11%

This position was discovered with one of our primary scan/sort
techniques; identifying potentially failed rallies on issues
with bullish options activity.  In this case, the premiums for
the (OTM) call options are slightly inflated and the potential
for a successful (technical) recovery is significantly affected
by the resistance at the sold strike price; a perfect condition
for a bearish credit spread.

ADBE - Adobe Systems  $149.56  *** Reader's Request! ***

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

Adobe is one of the most popular portfolio issues held by retail
investors and analysts are currently focusing on earnings and the
upcoming stock split.  Adobe just reported an impressive fiscal
third quarter and the company sees more of the same ahead.  In a
presentation last week at the Banc of America Conference, Adobe's
senior vice president of marketing said the software maker will
see at least 25% revenue growth in fiscal 2001 due to demand for
Web content.  That's impressive considering the recent revenue
warnings and the stock split just makes it better.  The company
has announced a two-for-one stock split, payable on October 24,
to shareholders of record on October 2.  The stock split occurs
just after the October option expiration and that's a favorable
sequence of events.

One of our subscribers was kind enough to point out the recent
bullish activity in this issue.  The reader also requested that
we identify a favorable, short-term spread position with a very
conservative outlook, that would provide a reasonable profit and
yet allow for a pullback in the stock from its current levels.
Here is a candidate for your review and based on the technical
outlook and heavy OTM option interest, the easiest way to profit
conservatively from a neutral to bullish movement may involve the
most common form of credit spreads. (Target a higher premium in
the position initially.)

PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-120  AXX-VD  OI=692  A=$1.19
SELL PUT  OCT-125  AXX-VE  OI=499  B=$1.62
INITIAL NET CREDIT TARGET=$0.62-$0.68  ROI(max)=14%


These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues.  Review each play individually and make
your own decision about the future outcome of the position.
DFG - Delphi Financial Group  $41.00  *** Stepping Up! ***

Delphi Financial Group is a holding company whose subsidiaries
provide integrated employee benefit services.  Delphi manages
all aspects of employee absence to enhance the productivity of
its clients and provides the related insurance coverage: both
ong-term and short-term disability, excess and primary workers'
compensation, group life and travel accident.  Their asset
accumulation business emphasizes individual annuity products.
The company offers its products and services in all fifty states
and the District of Columbia.  The company's two segments are
group employee benefit products and asset accumulation products.
The company's operating subsidiaries are Reliance Standard Life
Insurance Company, Safety National Casualty Corporation, and
Matrix Absence Management.

Delphi resides in one of the more preferable groups in the market
and investors appear to favor the long-term outlook for the
company.  Surprisingly, almost all of their faith must be based
on the technical indications of the underlying issue because
there is very little news to review.  In some cases, that's just
fine and with favorable disparities in the OTM option premiums,
this position offers an excellent speculation play for those who
agree with our technical assessment of the issue.

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  OCT-30  DFG-VF  OI=146   A=$0.38
SELL PUT  OCT-35  DFG-VG  OI=1510  B=$1.12

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