Option Investor

Daily Newsletter, Wednesday, 09/27/2000

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The Option Investor Newsletter               Wednesday  09-27-2000
Copyright 2000, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        09-27-2000        High      Low     Volume Advance/Decline
DJIA    10628.40 -  2.90 10678.70 10579.50 1.17 bln   1500/1332
NASDAQ   3656.30 - 32.80  3750.61  3622.66 1.95 bln   1543/2452
S&P 100   758.63 +  1.76   763.68   754.84   totals   3043/3784
S&P 500  1426.57 -  0.64  1437.22  1419.44           44.6%/55.4%
RUS 2000  508.13 -  1.76   513.65   506.71
DJ TRANS 2514.53 -  3.54  2523.75  2498.90
VIX        24.36 -  0.72    25.65    24.06
Put/Call Ratio       .67

I Can't Do It Captain, I Need More Power

More power?  Shatner and company, Priceline.com(PCLN), need more
revenue!  Taking the honors today, PCLN was the next in line to
warn about 3rd quarter revenue.  Their reason: lower-than-expected
airline ticket sales.  While the company expected September to be
their strongest airline ticket sales month, it actually turned out
worse than both July and August.  We can deduce that the indirect
culprit is...you guessed it...higher oil prices.  Now, who would
have thought that oil prices could catch up with a dot.com?
Captain Kirk?

As a result, PCLN gapped down and lost an astounding 42% on the
day, closing at $10.75.  That was enough to spark a sell-off in
the Internet Sector.  No one was spared and it was a burden on
the NASDAQ.  EBAY was down $7.19(-10%), CMGI fell $3.81(-12.5%),
AOL lost $2.21(-4%), and YHOO broke down to levels not seen
since last November, chalking up a 12% loss.  Merrill Lynch
analyst Henry Blodget downgraded his intermediate rating on PCLN
from a Buy to an Accumulate.  Jefferies also downgraded the stock
as a result of the lower revenue estimates.  It has gotten very
ugly out there on the NASDAQ as traders have continually sold
into strength.  Ryan mentioned in last night's Wrap that it has
been a steady bleed for the tech index.  On the chart below, you
can clearly see that every time the NASDAQ gaps up on positive
news, traders take advantage of the opportunity and sell
positions.  After the INTC disappointment, many market pundits
said that the gap down and recovery to 3800 was reason to buy,
especially after a 2 bln share day last Friday.  Yet, I would
caution putting too much merit in these gaps down because they
really don't sell-off to that level, rather simply open lower as
supply takes over.  It is evident that Friday's euphoria didn't
carry over to this week.  The NASDAQ gapped right up into the
downtrend line on Monday and we've bled since then.  Trading
continues to be choppy, unpredictable, and like I mentioned last
week, volatile.

The bad news seems to be outweighing the good news.  Sellers are
in control despite the massive amounts of cash that lie on the
sidelines.  Looking ahead to the rest of the week, we can expect
it to be volatile.  The recent selling that has hit the NASDAQ
has managed to give a little pop to the VIX.X.  Today was the
fifth session in a row that the NASDAQ was in the red.  It is
the third time this has occurred this year.  On a short term basis,
the markets look oversold.  A bounce tomorrow and into the weekend
would seem logical and probable.  Ralph Bloch of Raymond James was
on CNBC this afternoon and commented that the markets appear to
be the most oversold he has seen, even more so than March.  Yet,
with the NASDAQ at 3656, it is dangerously close to 3600.  If that
support is violated, the tech index may retest early August's lows
of 3521.  On top of that, based on the past trading range, a buy
signal isn't triggered until the 30 area on the VIX.X.  The NASDAQ
Advance-Decline line continues to be concerning for technicians as
decliners outpaced advancers today by a margin of 6-4.  Volume has
been coming back, coming in at 1.9 bln share at the NASDAQ.  This
indicates that there is a real battle going on between buyers and
sellers, resulting in increasing volatility.

As for the INDU, it continues to be volatile as well.  The trading
range today was 100 points and the INDU managed to close above the
key support level of 10600.  It was the same scenario at the NYSE,
traders selling into strength and taking the index right back to
support.  Although trading in a 100 point range, the INDU closed
down only 2.96 at 10628.  Market watchers will be keeping their
eyes on that support of 10600, since a clean break from there will
likely attract sellers to 10500.  Over at the NYSE, advancers
actually outpaced decliners by a narrow margin of 15 to 13, on
1.17 bln shares.

Driving most of the choppy trading this week has been window
dressing before the end of the quarter, which is this Friday.  As
fund managers unload their losers and add to their winners, the
markets tend to experience more volatile conditions.  Given that
the past three days have resulted in much selling, we can speculate
that a bounce may be imminent as fund managers put some of that
sideline cash to work.  Typically, mutual fund investors don't like
to see their fund managers holding too much cash, but rather be
fully invested, and we know that fund managers aim to please.  This
may give an added boost technically to the market in the coming

Today's news that the Labor Department botched its calculation of
the CPI over a period from December 1999 to August 2000 didn't seem
to command much of a market reaction.  The Labor Department issued
a slightly upward revision to 2.7% from 2.6% for that period, which
appears negligible.  These miscalculations were attributed to
software erroneously calculating rent components in its index.
This was a non-event for the markets, especially now that more
global concerns hang over the market, namely oil prices and the

The road ahead looks rocky.  What is the catalyst going to be to
get this market out of the funk that all of these earnings warnings
put us in?  We're due for a bounce, yet everyday there's a new
company lining up at the confessional booth to tell of its woes.
Window dressing the next two days will also be a factor, hopefully
to the upside.  Expect volatility, tests of key support, and a
continuation of the heated, high-volume battles between the
bulls and the bears.  This type of market is difficult to trade,
especially with huge funds positioning themselves for Friday's
close, so exercise caution.  There will be more answers for the
market once we make it to October and earnings announcements begin
to come in.

With the end of the month and quarter drawing near, October is just
around the corner.  I wanted to mention that I will be speaking at
the Advanced Option Seminar in Denver at the end of the October on
how market-makers price options, based on my experience in the IBM
pit in Chicago.  I look forward to meeting many of you.  As time
continues to fly on by, it will probably be sooner than later.  See
you there.

Matt Russ

DENVER - Oct 27-30th

We will be announcing the speaker lineup and the topics they will
cover in the Thursday newsletter. The current list includes 16
speakers and the amount of critical option education will be

The guest speakers are going to blow you away. You will not
want to miss this event. The current roster of staff instructors

Ryan Nelson - Managing Editor, OptionInvestor.com
Chris Verhaegh - Options 101/102 Writer and Option Strategist
Steve Rhoads - Technical Analysis Instructor
Molly Evans - OIN Staff writer
Lee Lowell - OIN Staff writer
Austin Passamonte - Editor IS, Staff Writer
Buzz Lynn - Editor, Sector Trader, Staff Writer
Mark Phillips - Leaps Editor, OIN
Vince Dowd - Spreads Specialist
Louis Horkan - Managing Editor, Premier Investor
Steve Pekarek - Editor, SplitTrader.com
Jeff Bailey - Editor, Premier Briefing
Matt Russ - Editor, OptionInvestor.com
Jim Brown - Head Option guy

This is not the complete list. We still have several topics
and sessions in the race for the final cut. Add in a roster
of guest speakers, names you will recognize from routine
appearances on CNBC and CNN, and you will have a weekend to
remember. In March we had John Dessauer, Mark Leibovit, Harry
Browne, Howard Ruff. We are going to do even better in October!

The workshop is scheduled for the last weekend in October.
Four days of intense, power packed option education.

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 more than 15 speakers and
special guests to educate you on every option strategy.

There is something for everybody. Just mingling with over 15
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

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:


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Oscillators vs S/R Trading Models
By Austin Passamonte

A concern many traders have is fear of developing a trading
system that burns out. We've all seen numerous times where
trading systems or methods are offered for sale to a "limited
number" of lucky recipients in order to prevent the secret
system from being overused.

That my friends is simply a huckster's call-to-action sales
ploy, nothing more. It is literally impossible to have any
particular trading method "saturate" an equity financial
market. Why? Liquidity is the answer.

First of all, the vast majority of small traders do not use
any disciplined system to trade with. That's one reason why
so many fall by the wayside. The cliché of chat-room tips,
rumors and news moving traders to buy & sell are based on
fact. That is precisely how most stocks and options are
bought & sold, purely through gut instinct.

Secondly, astute traders who use technical tools or trade
chart breakout patterns use a wide array of signal values,
time frame settings, subjective trend lines of resistance
and support, etc. Even if millions of traders are using
stochastics for example, the extremes between each end of
signals given by different value settings create a wide span
of entries as the next market move occurs.

The secret to success seems to be getting in "early", well
before the buying or selling crowd arrives. Well, define
early enough. Too early is bad as too late and both are worse
than no entry at all. The easiest way to consistently take
profits is buy picking out chunks from the middle of a move.

Let's assume thousands of traders are watching our exact
same signal settings. Are they all trying to trade our
markets? Sometimes it may seem that way but I promise you
it's not. I focus most of my attention on the OEX, SPX and
QQQ markets with my system. Do I care if a few hundred or
thousand other traders attempt the same? Of course not!

Each of us will make our reads when to enter differently.
We will select different strike prices or even straight calls
and puts or spread strategies as well. I might be in the OEX
while others hit the SPX or vice-versa. Trust me, we will
not move the markets as institutions enter their 1,000 and
2,000 contract block orders. Unless that's you buying 1,000
SPX calls @ 25 apiece, we will not push the pile. (If that is
you buying those multi-million $$ blocks, why are you reading
this? Please give us your advice!)

Reality is, tens of thousands individual traders could use
our exact same setup and never affect us one bit. With all
the different individual stocks, sectors and indexes to target
this remains flat impossible to happen.

If we were trading an illiquid market like feeder cattle
that has very little volume and hundreds of traders focused
on the exact same thing, now there's a problem. That's why
I'm in the equity world instead of meats & grains.

One of my favorite stocks to swing trade is PDLI. This one
has some frightening premiums and bid/ask spreads but I love
the way it behaves within my chosen tools. How many traders
you figure target that symbol with the exact same setup I do
versus buy at support/sell at resistance? A paltry few, I'm
willing to wager.

Which brings up the topic of trading support & resistance.
This is an excellent, simple method that has worked forever
and will continue to do so from here.

That being said, how many buy-stop and sell-stop orders do
you think CSCO had sitting near the $60 strike range this
week? I would guess many thousands of traders played the
exact same stop-order points on this baby.

Can you remember any guest analysts on CNBC take questions
from callers who don't ask about CSCO, QCOM or JDSU? What does
that tell us about level of interest there? Think any of them
draw the exact same trend lines to buy or sell with? And yet
this system still performs very well, the key being massive
liquidity. Far more "traders" simply buy in because it's
cheap or sell because of market panic. Our charting tools
actually quantify this sentiment as it develops.

The act of trading chart patterns and buying support &
selling resistance differs from our oscillator approach,
but each work equally well. The beauty is that one catches
the beginning of a move while the other catches its end. If
you're really good and become proficient at each, it's the
best of both worlds.

Oscillator systems are designed to show us price reversals
at the time they occur or shortly after. This means we are
trying to buy somewhere near the bottom of a current price
movement. Seldom does the action go straight up or down.
Once we are in, the first change of direction that goes
against us is an exit we should heed. No telling if it's
just a slight pause before the move resumes or a reversal.
Cash out and hitch the next ride is my motto.

Support/Resistance trading is designed to catch moves other
than the first. Think about it. Prices bounce off support
and ascend on strong volume before we buy. By the time our
confirmation occurs here we should already be in with an
oscillator system.

However, we will probably ride this trade a bit further up
with the next resistance level as our target. Same size
chunk of profit, just different sections from the middle.

Support/Resistance shines when price action stalls around
resistance as oscillators are buried in overbought range and
then break resistance to the upside. Oscillators give us no
upside entry signals, but prices breaking resistance on good
volume is our cue to go long again or stay in if we didn't

Meanwhile, oscillators still register overbought and we wait
for the market to reverse. We may wait for quite some time,
as witnessed these days with markets grossly oversold but
continuing their decline.

Just when you think S/R trading is superior, along comes
the final market action. Prices keep rising or flatten out
while oscillator signals reverse from overbought and begin to
turn down. Chartists following this action are early again to
the party as they close longs and play the downside well before
the S/R crew catches wind of any change.

The ultimate solution? Don't know that there is one but I
think it pays to be aware of both approaches. As I write
these words my oscillator charts are all oversold and still
turning down from here. It looks like we'll rally soon but
define soon?

Meanwhile, different markets have been breaking key levels
of support on accelerating volume, a sign that doesn't bode
well for a turn today. Such behavior could have us try a few
more put plays or stay with those already open until oscillator
signals begin to advance upward once again.

It pains me to say there is no one ultimate trading system
or method to buy & sell market tops and bottoms. Lord knows
I've wasted enough money on over-priced hype methods to learn
that fact the hard way.

There do exist numerous simple methods to pick off chunks
of profit from the midst of price moves more often than
not. From there, proper account money-management is the key
to long-term success.

Personally, I like to focus primarily on one approach and
be the best I can at that. Superstar traders we hear about
might be able to juggle complex strategies and multiple
approaches but not me. I pretty much have one short-term
trading approach and another for longer term positions. The
type of trade I choose can vary widely but the setup is all
the same.

There are so many different trading methods and markets to
play in that it quickly becomes overwhelming. Focus your
attention on a few with laser-like clarity and I believe
success is inevitable. Try to catch every rabbit that runs
past and your tongue will hang lower any market levels we've
seen in years.

See you next week & best trading wishes,

Contact Support

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SEBL - Siebel Systems Inc. $108.56 +3.31 (+3.56 this week)

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

Most Recent Write-Up

SEBL got caught up in the selling in the latter-half of trading
yesterday and finished well off its highs at $107.75, up $2.75 for
the day.  Tuesday morning, SEBL announced an agreement with Nokia
to offer Wireless eBusiness Solutions through an alliance that
will include worldwide joint marketing, collaborative selling, and
the extensive development of mobile eBusiness applications.  SEBL
also announced that LookTrade, a leading developer of B-to-B Web
sites, had signed on as a reseller for the Siebel Dynamic Commerce
solutions.  On the brokerage front, UBS Warburg started coverage
of SEBL with a Buy rating and a 12 month target of $135.  The
Nasdaq weakness caught up SEBL as some profit taking took place
in early trading Tuesday and by the half way point SEBL was down
$2.25 to $105.50 on light volume.  As we progressed to the end of
the day, SEBL did pullback to an intraday low of $103.13 before
bouncing to close at $105.25, down $2.50 for the day, on lighter
than normal volume of 5.6 mln shares.  An ideal entry point would
be a pullback to the 5-dma at $103.30 followed by a bounce from
there on strong volume.  Be aware, there is minor resistance
between here and the old intraday high of $114.25.  Watch for
profit taking and Tech sector sentiment before opening new


As traders sold into NASDAQ strength today, SEBL stood tall and
bucked the trend, finishing at a closing high.  With no news out
today as a catalyst for SEBL's gains, we are very pleased.  On an
intraday basis, SEBL found support at $106, and entries can be
attained on bounces from that level.  Yet, if profit takers step
in tomorrow, a pullback to $104 along with a bounce could provide
a good entry.  With five straight sessions of selling, the NASDAQ
is due for a bounce and this could send SEBL above resistance at

BUY CALL OCT-100 EZG-JT OI=1839 at $12.25 SL= 9.50
BUY CALL OCT-105*EZG-JA OI=4807 at $ 9.00 SL= 6.75
BUY CALL OCT-110 EZG-JB OI=4904 at $ 6.38 SL= 4.50
BUY CALL NOV-115 EZG-KC OI=1179 at $ 9.00 SL= 6.75

SELL PUT OCT-100 EZG-VT OI=2877 at $ 2.88 SL= 4.00
(See risks of selling puts in play legend)

Picked on Sep 17th at    $99.00     P/E = 901
Change since picked       +9.56     52-week high=$114.25
Analysts Ratings     15-4-0-0-0     52-week low =$ 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


Do you hear singing? "...ashes, ashes, we all fall down!"

Stocks slumped today in a volatile session characterized by a
rotation to favored sectors.  Concerns over future revenue
shortfalls spurred selling pressure in a number of bellwether
issues as investors tried to sort out their profit worries.
Third-quarter earnings are likely to fall short of Wall Street's
expectations in almost every major industry and there is little
conviction that the outlook will improve in the near future.
Both major indices edged higher in early trading but eventually
turned negative as reports of additional profit warnings began
to dominate the news.  Pacing the decline in technology stocks
were shares of Priceline.com (PCLN), which revealed that third
quarter revenues would come in below expectations.  At the same
time, Kodak (EK), whose profit warning sent the market tumbling
Tuesday, slumped another $4, extending its recent decline.  Dow
industrial components Caterpillar (CAT), AT&T (T), and Honeywell
(HON) also fell as investors braced for lower earnings.  On the
Nasdaq, bargain-hunting traders were unable to stem the losses
in the semiconductor group and the sector's early gains quickly
eroded.  In the broader market, utility, retail and biotechnology
stocks edged their way into the positive column while airline and
financial issues slid lower.  Oil shares advanced as crude prices
rebounded after four straight days of declines.  Analysts say the
current economic outlook, along with concerns over the Euro, is
significantly affecting the market's valuation, and this weakness
will likely continue until the upcoming earnings reports start to
provide a positive perspective for investors.  With volatile and
divergent moves expected in the coming weeks, we will focus on
high probability positions and conservative entry points in our
quest for consistent, low risk monthly returns.

Summary of Previous Picks:

Covered Calls: (Margin would double the listed Monthly Return)

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

OSIP    OCT    45    42.06  67.75    $2.94   5.7%
ALXN    OCT    85    80.25 106.38    $4.75   4.9%
NMSS    OCT    65    59.75  58.31   -$1.44   0.0%

Naked Puts:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

ALXN    OCT    80    76.75 106.38    $3.25  11.4%
OSIP    OCT    40    38.56  67.75    $1.44  10.0%
NMSS    OCT    55    53.00  58.31    $2.00   8.4%
AGIL    OCT    60    58.56  81.81    $1.44   8.3%
METHA   OCT    45    43.06  44.69    $1.63   8.1%
VRTS    OCT   110   107.94 141.25    $2.06   7.0%
NTAP    OCT   115   112.81 128.13    $2.19   6.8%
RMBS    OCT    60    58.50  79.50    $1.50   6.7%
PDLI    OCT    72.5  70.87 119.13    $1.63   6.6%
RIMM    OCT    60    58.37  85.03    $1.63   6.4%
EXTR    OCT    82.5  81.06 112.25    $1.44   6.2%
BLDP    OCT    90    88.50 109.06    $1.50   6.2%
PALM    OCT    40    39.12  48.88    $0.88   6.1%
AVNX    OCT   115   111.50 105.00   -$6.50   0.0%

Naked Calls:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

TUTS    OCT   120   122.31  74.88    $2.31   9.8%
MRVC    OCT    85    86.00  49.06    $1.00   8.2%

New Candidates:

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.  (We monitor the positions marked with ***).


BULLISH PLAYS - Covered Calls & Naked Puts

CTIC - Cell Therapeutics  $59.38  *** Entry Point! ***

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.  Earlier this year, the
company announced that the FDA had accepted its application for
its lead drug candidate, Arsenic TriOxide (ATO), for acute
promyelocytic leukemia, and had granted priority review for the
application.  PG-TXL, in clinical trials in the United Kingdom,
links paclitaxel, the active ingredient found in Taxol, to a
polyglutamate polymer.  Taxol is the world's most widely used
cancer drug.  Phase II clinical trials are expected to start in
the United States and United Kingdom later this year.

Shares of Cell Therapeutics soared this week after the company's
new drug, Trisenox, which is used to treat a severe form of
leukemia, received approval from the U.S. FDA.  The drug benefits
patients who have a recurrence of acute promyelocytic leukemia or
who have failed to respond to common treatment.  APL, a malignant
disorder of the white blood cells, is found in 10% to 15% of the
more than 10,000 patients diagnosed with acute myeloid leukemia
every year.

CTIC is a HOT stock in favorable sector and based on the recent
bullish activity, investors favor the outlook for the company.

CTIC - Cell Therapeutics  $59.38

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  OCT 45   CUC VI  25        0.81    44.19     8.5% ***
Sell Put  OCT 50   CUC VJ  12        2.00    48.00    16.2%


ELNT - Elantec Semiconductor  $99.81  *** New High! ***

Elantec Semiconductor designs, manufactures and markets high
performance analog integrated circuits primarily for the video,
optical storage, integrated DC:DC, and xDSL markets.  The offer
around 150 items, including amplifiers, drivers, faders,
transceivers and multiplexers, most of which are available in
multiple packaging configurations.  Elantec targets high growth
commercial markets in which advances in digital technology are
driving increasing demand for high speed, high precision and low
power consumption analog circuits.

Elantec is an industry leader in the design of high performance
analog integrated circuits and today they debuted a number of new
products for video signal processing.  These unique high-speed
amplifiers complete the company's new current feedback families.
With high bandwidths and slew rates, modest power consumption and
competitive prices, the products are ideal for next-generation
video designs as well as other high-bandwidth applications.
Another recently offered product is their new DSL line driver for
high-density, low power, central office line card designs.  The
unique miniature design is a testament to the company's focus to
provide a wide range of innovative products with high capacity
manufacturing for the line driver needs of the xDSL technologies.

In other news, Elantec recently announced a public offering of
1,600,000 shares of its common stock at $81.25 per share on the
Nasdaq National Market.  Of this amount, 1,520,000 shares were
offered by the company and 80,000 shares were offered by selling
stockholders.  Elantec has also granted the underwriters an option
to purchase an additional 240,000 shares of its common stock to
cover over-allotments. Robertson Stephens is acting as the lead
underwriter of the offering.  The co-managers are Banc of America
Securities, Thomas Weisel Partners, and Adams, Harkness & Hill.

ELNT - Elantec Semiconductor  $99.81

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  OCT 75   UET VO  0         0.75    74.25     4.8%
Sell Put  OCT 80   UET VP  13        1.38    78.62     8.5% ***
Sell Put  OCT 85   UET VQ  40        2.44    82.56    11.7%


EXTR - Extreme Networks  $112.25

Extreme Networks is engaged in the design, development,
manufacture and sale of high performance networking products based
on Gigabit Ethernet technology.  They provide end-to-end switching
solutions that meet the requirements of enterprise LANs, ISPs and
content providers.  Theirs Summit and BlackDiamond switches share
a common ASIC, software and management architecture that allow
a relatively short product design and development cycle, thereby
reducing the time-to-market for new products and features.

Extreme has been one of the best performing Nasdaq issues over
the last year and the company has been hailed as a technology
leader, receiving an unprecedented number of industry awards.
Extreme was named the "Fastest Growing Company in Silicon Valley"
based on three-year revenue growth by the Silicon Valley Business
Journal, and EXTR is the only company to win the Networld+InterOp
"Best of Show" Award back-to-back for four years.  In addition,
Extreme was ranked #2 in Deloitte & Touche's most prestigious
"Rising Star" category for its "Fast 50" Program for the Silicon
Valley, a listing of the 50 fastest growing technology companies
in the area.  Rankings are based on the percentage of growth in
revenues from the last five years and Extreme's sales have grown
from $300,000 in fiscal 1997 to $262 million in the most recent
quarter.  The tremendous growth is based on the industry's wide
acceptance of the company's vision of " Ethernet Everywhere" for
next generation networks delivering broadband communications.

With the recent bullish activity in the issue, it's obvious that
investors believe EXTR is destined to be one of the top companies
in the industry and we favor the recent technical support near the
target cost basis.

EXTR - Extreme Networks  $112.25

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  OCT 82.5 EXR VX  36        0.94    81.56     5.3%
Sell Put  OCT 85   EXR VQ  166       1.25    83.75     7.0% ***
Sell Put  OCT 87.5 EXR VY  71        1.63    85.87     9.0%
Sell Put  OCT 90   EXR VR  344       2.06    87.94    11.0%


MEDX - Medarex  $115.88  *** Bracing for a Rally! ***

Medarex is a biotechnology company that is developing therapeutic
products for cancer, autoimmune disease, secondary cataracts and
other life-threatening and debilitating diseases based on
proprietary technology in the field of immunology.  Their products
are currently under development and will need approval from the
FDA prior to commercial sale.  Their technology uses genetically
engineered mice to produce fully human monoclonal antibodies.

Medarex uses a monoclonal antibody technology to turn genomic
discoveries into new treatments for cancer and other life
threatening and seriously debilitating diseases.  Because their
technology is the fastest and the most efficient way to move
from genomic discovery to new treatments for disease, their
products are very attractive to many companies in the biotech
and pharmaceutical industries.  They currently have 22 corporate
partners working with them on the technology including many of
the largest pharmaceutical and biotech companies such as Novartis,
Johnson & Johnson, Bristol-Myers, Amgen, and Immunex.  They are
currently in discussions with a long list of potential partners,
and the company expects to be announcing additional partnerships
in the future.  Genomic discovery is changing medicine the way
the Internet changed communications and Medarex is poised to be
most efficient developer of new genomic medicine, thanks to its
unique human antibody technology.

In addition, Medarex announced that its Board of Directors has
approved a two-for-one split of the company's outstanding shares
of common stock.  The stock split will entitle each shareholder
of record on September 27, 2000, to receive one additional share
of common stock for every share held.  The shares are expected to
be distributed on October 18, 2000.

MEDX - Medarex  $115.88

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  OCT 95   MZU VS  94        1.38    93.62     6.8% ***
Sell Put  OCT 100  MZU VT  100       2.44    97.56     9.8%
Sell Put  OCT 105  MZU VA  23        3.75   101.25    12.6%


RBAK - Redback Networks  $168.00  *** On The Move! **

Redback Networks is a provider of advanced networking systems that
enable carriers, cable operators and service providers to rapidly
deploy high-speed access to the Internet and corporate networks.
Their Subscriber Management System and SmartEdge products combine
networking hardware with sophisticated software.  Redback's
product lines are designed to enable customers to create regional
networks that support all major broadband access technologies, as
well as the new services that these high-speed connections will

Earlier in the month, S.G. Cowen analyst Christin Armacost said
she was initiating coverage of Redback Networks with a rating of
"strong buy" and a price target of $185.  Based on the optimistic
presentation at a recent technology conference, her outlook was
correct.  The discussion identified the company's new products,
positioning, and growth opportunities and provided an overview of
their Subscriber Management System (SMS) platform of broadband
aggregation equipment and the SmartEdge optical transport device.
Comments after the presentation suggested that Redback is rapidly
building its internal infrastructure to support future growth and
the company is on track to become profitable by the fourth quarter.

Those of you who favor the outlook for the company can speculate
on the outcome of the recent bullish activity with this relatively
low risk position.

RBAK - Redback Networks  $168.00

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  OCT 125  BKK VE  334       1.38   123.63     5.2% ***
Sell Put  OCT 130  BKK VF  113       1.69   128.31     6.3%


VRTS - Veritas  $141.25  *** Own This One! ***

Veritas Software is an independent supplier of storage management
software, and is the leading provider of data availability
software.  Their products offer protection against data loss and
file corruption, allow rapid recovery after disk or computer
system failure, enable IT managers to work efficiently with large
numbers of files, and make it possible to manage data distributed
on large networks without harming productivity or interrupting
users.  Veritas develops and sells products for most popular
operating systems, including versions of UNIX and Windows NT.
They also provide a full range of services to assist customers
with their storage management solutions.  Veritas is currently
achieving annualized revenue run rates well in excess of $1
billion, and now ranks as one of the top-ten independent software
companies in the world by revenue and top-five by market

Last week, Lehman Brothers initiated coverage on Veritas with a
"buy" rating.  Perhaps not coincidentally, at an awards ceremony
on the same day, Veritas was named one of the fastest growing
technology companies by Deloitte & Touche's "Fast 50" Program for
the sixth year in a row.  Veritas was also honored as the only
company to receive the "Fast 50" award for six consecutive years.
Mark Leslie, chairman and CEO of Veritas, noted at the ceremony
that the company estimates their annual growth to be in excess of
50% per year and based on that incredible expansion, they plan to
invest $3.9 billion in new research and development over the next
five years.  In addition, Veritas has engaged in a number of new
collaborative efforts with several companies this month, among
them Digital Island, Microsoft, and Hewlett-Packard.  All of these
agreements are expected to bolster the company's bottom line in
the coming quarters.

Traders who favor the bullish fundamental outlook for Veritas
can use this position to establish an acceptable cost basis in
the underlying issue.

VRTS - Veritas  $141.25

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  OCT 105  VUQ VA  337       1.06   103.94     4.8%
Sell Put  OCT 110  VUQ VB  905       1.69   108.31     7.5% ***
Sell Put  OCT 115  VUQ VC  857       2.38   112.62     9.6%



AETH - Aether Systems  $105.00  *** Looking for a Bottom! ***

Aether Systems provides wireless data services, systems and
software enabling the use of handheld devices for mobile data
communications and real-time transactions.  Aether operates
TradeRunner, a real-time wireless trading and financial
information service offered to online customers of Morgan Stanley
Dean Witter Online, and the Reuters MarketClip service for
financial market price quotes, alerts and information.  They are
developing wireless trading and financial services for other major
financial institutions, including Charles Schwab.  Through recent
acquisitions, Aether has expanded into the healthcare, sales force
automation and transportation logistics and delivery industries.

There is no definitive reason for the recent decline in Aether's
share value but one thing is for sure, the technical outlook is
not favorable.  Obviously, the issue has performed well in the
past and it will likely recover in the future.  However, the
current indications are neutral-to-bearish and the company's
fundamental situation is less than outstanding.  We will utilize
the current downward trend and the overpriced option premiums to
profit from these relatively conservative, bearish positions.
The probability of the share value reaching our target strike
appears rather low but there is always the possibility of a
recovery rally so monitor the issue daily for any changes in
technical character.

AETH - Aether Systems  $105.00

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call OCT 135  HEX JG  654       2.25   137.25    12.8%
Sell Call OCT 140  HEX JH  303       1.50   141.50     8.8%
Sell Call OCT 145  HEX JI  96        1.31   146.31     7.8% ***


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