Option Investor

Daily Newsletter, Sunday, 10/01/2000

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The Option Investor Newsletter                  Sunday  10-01-2000
Copyright 2000, All rights reserved.                        1 of 5
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        WE 9-29          WE 9-22          WE 9-15           WE 9-8
DOW    10650.92 -196.45 10847.37 - 79.63 10927.00 -293.65  - 18.13
NASDAQ  3672.82 -130.94  3803.76 - 31.47  3835.23 -143.18  -255.92
S&P-100  759.83 - 14.25   774.08 - 15.69   789.77 - 23.13  - 16.93
S&P-500 1436.51 - 12.21  1448.72 - 17.09  1465.81 - 28.69  - 26.27
W5000  13613.40 - 64.80 13678.20 -135.50 13813.70 -236.50  -279.70
RUT      521.37 +  2.55   518.82 - 12.06   530.88 -  4.82  -  6.21
TRAN    2521.64 - 75.50  2597.14 - 74.32  2671.46 - 61.32  + 19.86
VIX       23.85 -   .32    24.17 +  2.24    21.93 +  1.24  +  1.24
Put/Call    .59              .56              .65              .52

The New Trend Continues Its Terror

Three days down, one day up for the Nasdaq seems to be the
new trend in the market.  It's the theme that has haunted the
Nasdaq all September and has now effectively wiped out the
gains for the month of August.  There's nothing like a perfect
reversal to put you right back where you started.  You may
recall, the Nasdaq started the month of August at 3686 before
making a monstrous run up to 4250, only to get dumped back to
a close today at 3672.  And, although the market has already
suffered some degree of pain, it may have a little more to go
in the short-term.  Today's QQQ close right near the day low
doesn't bode well for Monday morning.

The DJIA didn't fare much better either with the index giving
back three-fourths of Thursday's gain and also closing right
at the day low.  The blue chips settled at 10,650, down a
mere 173.  Volume was heavy once again at 1.13 bln shares,
while the ADV/DEC line remained even.  The typical defensive
plays were up on the day, stuff like Drugs, Utilities, etc.
Most of the damage was in the tech sector, thanks again to the
Apple Computer warning.  The S&P 500 closed down over 21 points
and the Russell 2000 finished down a modest 2.44.

As was mentioned all over the news today, AAPL was the stock
that really put the pressure on the Nasdaq today.  This wasn't
just an average earnings warning, but a biggie.  Business will
be down across all geographics according to Apple.  This just
gives more credence to the words of Intel from a week earlier
that said demand was slowing.  Fortunately, the Nasdaq didn't
have a major gap down, which allowed for trades to be put on
before the real sell-off got underway.  It was one of those
slow, bleeding types that squelched all the buyers.  The final
numbers on the Nasdaq showed a loss of 105.50 to 3672.82 on
volume of 1.97 bln.  That is another high volume day this
week.  Now if we could only get this thing to turn around with
the recent return of volume, we would be ready for take-off!
Like I have been saying all summer, show me a couple days in a
row of 2 bln share days, and I will be ready to actively
trade again.  In fact, now that the VIX is starting to act
more lively, I have seen more traders returning to work.

More economic numbers sent up a red flag this morning.  Spending
rose in the month of August by a rate of 0.6% versus an estimate
of 0.5%.  And incomes did not keep pace.  They rose by only 0.3%
versus an estimate of 0.4%.  "It's just a continuation of what
we've seen since Labor Day," said John Shaughnessy, chief
investment strategist at Advest.  "This is a combination of the
concerns about third-quarter earnings reports, the implications
of rising oil prices for the economy and corporate profit and
the implications of the weak euro."  Couldn't have said it better
myself.  These are some typical concerns that keep markets down.

Now are you ready for the post-market news on Friday?  Yep, you
guessed it.  Another earnings warning, and from a company that
calls the Dow 30 its home.  Caterpillar said it expects third-
quarter results will miss Wall Street's current estimates, but
says it remains on track to meet projections for the year.  They
expect the third quarter profits to be about 15 percent below
analysts' consensus estimate of 68 cents per share.  The company
cited a number of factors for the reduced outlook, including
weakness in the euro and British pound, continued softness in
the North American construction and global mining industries,
weakness in the market for truck engines, high energy costs and
competitive price pressures.  CAT also said it is redoubling its
efforts to aggressively reduce costs this year, although that
isn't likely to help ward off sellers on Monday.  CAT closed
the regular session at $33.81, down fractionally, but is trading
$31.25 in after-hours.

Did you know there was a FOMC meeting on Tuesday?  As the least
talked about Fed meeting in years approaches, we have yet to
hear even a peep out of the Fed governors.  It is easy to deduce
the reasoning as the Presidential election nears, but some are
still interested in the comments that will be released.  Notice
how I skipped right to the comments as the verdict on rates
seems to be fixed in stone.  No one expects a move on Tuesday.
But with the soaring Euro, high oil prices, and a wobbly market,
the directive of the Fed will be of interest.  Many would like
to see the committee step back down to a neutral stance from
a hawkish one.  That outcome wouldn't surprise me at all and
could help stabilize the equity markets.

Now let's get to what is really important.  You are likely
reading this on the first day of October.  The most exciting
and potentially disastrous month of the year.  Ask anyone.
Even someone with little stock market knowledge may be able
to point out the big crashes that have occurred in October.
I think everyone keeps something in the back of their minds
where they are suspicious of such an event.  That is why the
fear level is high and the bottom is typically put in during
this month.  Let's take a closer look here at the evidence.

Ok, we had a bullish winter of 1999-2000 where volume and
optimism hit extreme highs.  This was followed by a summer of
extreme retracements and sluggish volume.  Now we have entered
the 3Q warnings season where we are getting bombarded with
talk of slowing PC and, thus, semiconductor sales.  High tech
is taking it on the chin and investors are wondering it we will
retest the lows of earlier in the year.

This sounds familiar you say?  That is because it is the same
story all the time.  In fact, this is the classic scenario for
this time of year.  For example, just last year the Nasdaq
moved up 100% from the October lows to the March highs.  The
year before that it was 86% from the October lows to the April
highs.  And from October 1997 to April 1998, the Nasdaq cruised
up 32%.  And back then that was considered a mammoth move!
Funny how times are a changing.

Anyway, back to the short-term.  It's hard to say when exactly
we may get a bottom in October.  They have come early in the
month to late in the month and everywhere in between.  With
the Fed speaking on Tuesday, you are best to wait for a trend
to start to develop.  I say this because if you would have
traded in August based on the movement of July, you would have
gotten slaughtered.  The same goes for September as it was an
antonym for August.  Let's see what direction it wants to take.
Also, I will be watching the volume carefully.  Some may say
that the high volume during this down week is not a good sign,
but I disagree.  We've watched the market whipsaw around for
the past six months on weak volume.  I want to see some more
conviction, either way.  But again, if we are going on data
from previous years, the return of volume is what sets off the
big rallies.

Therefore, start warming up that index finger for a winter of
clicking the trade button on your online broker.  I have begun
the journey back, trading more in the past week than I did
for all of June.  I still sense that money managers and the
like will be back in the saddle to move these stocks for us

Ryan Nelson

DENVER - Oct 27-30th

Here is the list you have been waiting for. The guest speakers
and the course outline for the October Workshop Expo. The list
of guest speakers is outstanding. Here they are:

Steve Nison - Steve Nison is not only the world's foremost
expert on Candlestick Charting techniques, he's the author
of the two top selling, definitive books on the topic:

Japanese Candlestick Charting Techniques and Beyond Candlesticks.
He has trained and lectured investors and investment firms around
the world on how to integrate these methods into their investment

Steve will be speaking on "Spotting Early Reversal Signals."


Gregory Spears - Author of the Spear Report. Gregory developed a
unique "consensus" concept for picking stocks in the early 90's
while trying to make sense of the myriad of financial newsletters
in his mailbox. His unique "consensus" system has developed an
average gain of 100% for his recommendations over the normal
holding period which is about six months. The Spear Report is
quoted or featured in dozens of financial publications and Greg's
financial workshops are "standing room only."

Greg will be speaking on the top market gurus, "What they are
saying and why they are wrong."


Dick Arms - Richard Arms is the inventor of the Arms Index,
otherwise known as the TRIN. He has been analyzing the market
for over 35 years and is a constant visitor to CNBC as a
market commentator. His work in technical analysis is older
than most of the brokers now trading with his tools. His newest
invention is the Equivolume charting system, the first new
charting system since the 1930s.

Dick will be explaining the TRIN and how we should use it to
trade as well as his new Equivolume charting system. This will
be an interactive session with plenty of attendee questions
that Dick will answer.


Stan Kim - Stan has a MBA from UCLA and worked for IBM for many
years. He realized he did not want to work for anybody else and
did not want anybody working for him. He has been a full time
trader ever since. He is the founder of the Snail Trader system
of trading and is currently working on a new book. Stan consults
and mentors traders and investment firms.

His topic will be, "How to Trade for a Living When You Are Not
a Stock Guru."


Jim Crimmins - Jim is president of TradersAccounting.com and a
noted authority on tax issues for traders. Jim is an expert on
gaining Trader Status and puts on seminars on "Tax Free Trading"
around the country. If you have been to a money show you have
probably seen Jim with flocks of people around him.

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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

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Well, a volatile week it was!  After three days of selling on
high volume, the NASDAQ managed a nice recovery on Thursday, only
to slide to a triple digit loss on Friday.  Quite honestly, I
have stayed away from my favorite QQQ trades this week for a
couple of reasons.  First, window dressing by funds, indicative of
high volume, is an extraordinary event that happens four times a
year and results in wider, more unpredictable swings.  When will
they buy, when will they sell?  Who are they dumping, who are
they accumulating?  The other reason is that the NASDAQ just gave
up last Monday, after the previous Friday's impressive recovery on
the gap down from INTC's warning.  That was what convinced me that
we had not put in a bottom that Friday, as many market pundits
chattered about.  But, don't get me wrong, the QQQs were tradable,
I just opted to sit back and watch, sticking to more conservative,
value oriented plays.

Here is a chart of the QQQs last week.  It was significantly
rangebound and offered many good entry and exit points.  My
psychology for staying out, whether right or wrong, was as
follows.  Obviously, the market rebounded from the INTC warning,
but I felt that it was a much more significant macro-concern
that shouldn't be dismissed and overlooked by a one-day rally.
(AAPL's warning later confirmed this.)  So I skeptically challenged
the market to prove to me on Monday that we could shake off the
bad news.  But as soon as the market gapped up on Monday morning,
traders sold into the strength for three days straight.  Breaks of
$90 were okay to buy puts on, yet the $88 level has provided
support and buyers.  You can take those two points on a day trade,
but I want to get that breakdown to $84 for a big clip.  I learned
my lesson in rangebound trading this past summer, and making those
quick intraday trades require constant attention.  I will be
watching the QQQs on Monday for a break of $88.  If this occurs, I
will be ready to play those QQQ puts.


COMS - Long Call Play $19.19 (+4.38 last week)

I have been watching 3Com closely for the past couple weeks in
anticipation of their earnings announcement last Tuesday.  What
attracted me to COMS was the limited downside and the potential
for great upside.  After their spin-off of PALM, investors left
COMS to die.  At $14 a share, COMS approximate market cap was
$5.25 bln, with a cash hoard around $3 bln!  Talk about
undervalued!  With a PE of 15 and a restructuring in the making,
COMS couldn't be kept down for long.  Tuesday's report of a
lower-than-expected loss of 12 cents versus estimates of -$0.33
and positive comments from the company were confirmation that
the company has restructured and re-focused their business.
Institutions certainly liked the news, and the value.  They have
been piling into the issue for three days, accumulating the stock.
One more quarter like this, and COMS could be gone as investor
interest picks up.  I am playing it both short term and long term.


SEBL - Long Call Play $111.31 (+6.31 last week)

Siebel Systems has long been one of my favorite stocks to play.
Great volatility and a overall long term uptrend.  I have this
on my call list for this coming week and will be looking for
an entry point.  SEBL has continued to push higher even after its
recent split.  Now, I was eyeing SEBL that past Friday after the
INTC warning.  As it jumped over the $100 level that morning after
the gap down, I was a fraction of a micro-impulse from pulling the
trigger on the OCT-105 calls.  AHHHHHH!  Shoulda woulda coulda!
Well, I am kicking myself, no doubt.  But, I didn't want to chase
the stock throughout last week, even though it was breaking to new
highs.  I just didn't like the overall market.  What I like about
the chart is the normal profit taking that takes the stock back
to support and then more buying.  Tuesday, SEBL managed to close
back above $105, and then late on Friday it bounced from $110.
I will be looking for a bounce from $110 to gain an entry, or
another strong move over $115, if I'm not so lucky to get a
pullback.  It is worth noting that the 10-dma is at $105.88, and
a pullback on profit taking to that level, with a bounce, would
be a dream entry.  SEBL has remained extremely resilient and
relatively stable during last week's NASDAQ turbulence.


In closing, this coming week will be very telling as to where we
might be headed next.  Last week's window dressing gave an added
twist to the market.  I will feel more confident in placing trades
now knowing that the massive institutional positioning for quarter
end is over.  But, don't expect it to be any less volatile as we
enter the notorious month of October and earnings begin to flow.
Be smart and attentive, as these markets like to turn on a dime.

Good luck!

Matt Russ

Miami - Tuesday - October-10th.
Phoenix/Scottsdale - Tuesday - October 17th

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Bullish? Bearish? Seasick?
By Austin Passamonte

The correct answer is C: all the above. Depending on which day
we're talking about here of course. Did you mean Wednesday's
sell off, Thursday's monster rally or Friday's plunge? Our job
could be pretty easy if we flipped a coin and it landed right
on any given day.

But that's not how we work. There must be some method to all
this madness!

There are times when technical signals are screaming at us that
the market is about to rally or plunge. This isn't one of them.
We have more mixed metaphors in front of us than that last party
conversation eight Tangueray & sevens later. Let's try to clear
the blur.

Forget major indexes and moving averages. These marks don't hold
for more than one session and practically all of them are now
overhead to boot.

Oscillators? Every time they peak their heads above oversold it
gets tromped down by another wave of earning's-miss selling.

Trendlines? We've drawn enough of those on our charts to grid
out the search for Blackbeard's gold and nothing appears that
we'd gamble a second mortgage on.

Gut instinct? Let's not do that, unless you want the ultimate
contrarian indicator.

VIX? Riding in it's neutral zone closer to the upper Bollinger
band than lower, a good sign for market bulls.

Option S/R disparity? The entire free world is loaded with puts
at or below recent market lows and the volume of overhead calls
is creeping up. We may see a near-term trading range develop at
least until expiration.

Recent market lows? They have bounced forcefully off support and
bulls can only hope this continues to hold.

COT report? We'll see this Friday, Oct 6th when latest figures
are released. A return towards flat or long for the S&P 500
commercials will all but guarantee rising prices from the point
which that happens. Has it begun? Stay tuned.

Inside trading? On Wednesday this week a block of 1,000 OEX Oct
770/765 put credit-spreads were sold in the market place. At least
one major player out there is gambling we will close at or above
the OEX 770 mark by expiration in three weeks. A rising tide lifts
all boats.

Earnings warnings? We saw some late ones last quarter and cannot
blame anyone this time for balking at their trip to the woodshed.
Traders aren't armed with willow switches these days, they are
toting .45/70 govt. lever actions and plenty of spare ammo as well.

Earnings run? We could see our surprise rally rise from the depths
of depravity any day now. It happened like this in May, July and
August. The markets can't sell out forever.

Can they? Our crystal ball got swapped for a Brunswick by mistake.
Hefty reward offered for safe return of our Market Insight. Paid
in cash, no questions asked.

As always be prepared to buy calls or puts as market conditions
dictate. Each of them can make you rich or break your heart in
equal fashion!


Friday 9/29 close; 23.85

CBOE Equity Put/Call Ratio
The CBOE equity put/call ratio is a contrarian-sentiment
indicator. Small traders are majority of equity-option players.
Numbers above .75 are considered bullish, .75 to .40 neutral
and bearish below .40
                                        Thurs         Sat
Strike/Contracts                        (9/28)       (9/30)
CBOE Total P/C Ratio                     .48          .59

Equity P/C Ratio                         .44          .54

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
                                        Thurs        Sat
Strike/Contracts                        (9/28)      (9/30)
All index options                         .85        1.38

OEX Put/Call Ratio                        .86         .84

30-yr Bonds
Friday 9/29 close; 5.87%

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)
800 - 785               14,366        5,140        2.79

780 - 765                7,972       11,078         .72

OEX close: 759.83

755 - 740                1,523       17,873       11.74
735 - 720                   31       11,958      385.74***

Maximum calls: 800/6,893
Maximum puts : 750/8,453

Moving Averages
 10 DMA  771
 20 DMA  790
 50 DMA  800
200 DMA  783

NASDAQ 100 Index (NDX/QQQ)
 97 - 95                24,148       22,950        1.05
 94 - 92                24,234       18,303        1.32
 91 - 89                20,846       37,334         .56***

QQQ(NDX)close: 88.3/4

 87 - 85                 1,849       20,346       11.00
 84 - 82                   266       10,073       37.87***
 81 - 79                   472       14,029       29.72

Maximum calls: 95/12,349
Maximum puts : 90/17,257

Moving Averages
 10 DMA 90
 20 DMA 93
 50 DMA 93
200 DMA 95

S&P 500 (SPX)
1500                    18,882       17,859        1.05
1475                    19,147       14,393        1.33
1450                     8,909       12,446         .72

SPX close: 1436.51

1425                     7,535       18,889        2.51
1400                     1,268       11,677        9.21
1375                     1,043       10,015        9.60

Maximum calls: 1475/19,147
Maximum puts : 1425/18,889

Moving Averages
 10 DMA 1444
 20 DMA 1467
 50 DMA 1473
200 DMA 1447


CBOT Commitment Of Traders Report: Friday 9/22
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 %        13.37% net-long    11.78% net-short

Total Open
Interest %          .04% net-long     8.90% net-short

S&P 500
Total Open
Interest %        29.07% net-long    10.57% net-short

What COT Data Tells Us: Commercial positions in S&P 500 and
DJIA remain at or above five-year extreme short levels. NDX
commercials continue to go shorter.

Small specs continue to build net-long extremes in SP00S but
have given ground in DJIA and switched over to heavily net-
short in NDX. Weak hands are shaking out, only a matter of
time in our opinion before they crumble.

(Not Shown) Commercial positions in 10-Year Note and 30-Year
Bond markets at or near five-year extreme net-short levels.
Small specs build net-long.

Summary: "Smart money" insiders expect stock market to decline
and interest rates to rise. Small traders directly opposite,
creating diverse set up favoring commercial sentiment for
future market direction. *Update on 10/6 by COT release

Fed's finished
Benign government reports
Disparity in overhead call/put ratios

Oil Prices (falling)
COT reports (changing?)
Recent pre-warnings, downgrades (crushing)
Broad market's break of critical M/A support
Market leaders breakdown


As of Market Close - Sunday, 10/01/2000

                                  Key Benchmarks
Broad Market           Last     Support/Resistance   Alert

DOW   Industrials      10,650      10,550  10,850
SPX   S&P 500           1,436       1,415   1,465
COMPX NASD Composite    3,672       3,600   3,950
OEX   S&P 100             759         754     780
RUT   Russell 2000        521         500     525
NDX   NASD 100          3,570       3,500   3,800
MSH   High Tech           951         945   1,020

BTK   Biotech             769         740     820
XCI   Hardware          1,296       1,240   1,380     **
GSO.X Software            449         440     470
SOX   Semiconductor       851         850   1,000
NWX   Networking        1,164       1,140   1,250
INX   Internet            490         475     545

BIX   Banking             617         585     635
XBD   Brokerage           657         620     665     **
IUX   Insurance           775         720     790     **

RLX   Retail              812         800     875
DRG   Drug                412         370     425     **
HCX   Healthcare          850         805     860     **
XAL   Airline             140         136     152     **
OIX   Oil & Gas           310         296     332

Six alarms were triggered on Friday.  Believe it or not, four were
at resistance and just two (XCI, XAL) were at support.  Six
support alarms have been triggered on the XCI in September, so it
wasn’t a surprise when AAPL warned yesterday.  Lowering support
(XCI, XAL) Lowering resistance (XCI) Raising support (DRG) Raising
resistance (XBD, IUX, DRG, HCX).

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Get Out A Pencil And Paper
By Eric Utley

Traders quiz number two awaits you.  There's a lot to cover today,
so I'll keep the chit chat to a minimum.  I've thought up a second
trading problem to help you learn what drives your decision making
when putting on, and closing out trades.  At first read, the
following problem might sound simple.  But, beware, the following
conundrum is one of the traders biggest enemies.  Feel free to
send an e-mail with your answers.

You've been watching your favorite fiber optic stock, Bull Fiber
Optic Company (BFOC), climb for the past two months to one record
high after another.  Amazingly, BFOC has not fallen below its
10-dma during the last two months.  You decide that it's finally
time to reap the sweet rewards of the fiber optic sector and
purchase calls on BFOC.  In your search for the ideal entry
point, you decide to buy BFOC the next time the stock bounces off
its 10-dma...After a weak opening on the NASDAQ, due to a profit
warning from some fruit-related computer company, BFOC gaps down,
and like clockwork finds support at its 10-dma.  You notice the
buyers are stepping in near the 10-dma with good volume, and BFOC
begins to drift higher.  And like that, you're in for 10 front-
month, at-the-money calls... After returning from your usual hour-
long lunch break, you flip on your computer screen to discover
that after bouncing off its 10-dma, BFOC ran into resistance and
headed southward in a big way, following a major sell-off in the
NASDAQ.  Upon closer inspection, you discover BFOC has fallen
nearly two points below its 10-dma for the first time in two
months.  As a result of the market dip and BFOC's trip, your
calls are now worth 30% less than you paid for them earlier in
the day.  Do you:

A) Cut your losses and get out of town

B) Double up your position in hopes of a quick rebound

C) Hold tight and see what happens

In an attempt to make up some lost ground in moving this column to
the weekend, I covered six stocks, mostly winners but one loser,
and desperately tried to fill each review with useful, and
hopefully profitable, information.  If you have suggestions for
this column, or would like to read about something I have not yet
covered, please feel free to send an e-mail.  Along with any
questions or comments, make sure to send some stock requests to
Contact Support.  Don't forget to put the
symbol of your request in the subject line of the e-mail.


EMC Corp - EMC

Thank you for a very informed column.  I am inquiring about both
EMC and JNPR, both have had excellent runs thus far.  Could you
please comment, and would you take positions at these levels? -
Thanks, Larry

First off, Larry, thank you for your kind comments.  I work hard
to put together an informed and useful column.  JNPR has been
acting very well lately, hence its inclusion in the OIN call list.
In the two stock requests to follow below, I reviewed competitors
of JNPR's in the Networking Equipment space.  I urge you to read
the review of EXTR as it pertains to JNPR.  Similar to JNPR's
recent performance, EMC has also been acting very, very well
despite the turmoil in the Tech sector.  In fact, EMC's largest
two competitors, Network Appliance (NTAP) and Seagate (SEG), have
also been rallying in the face of the Tech bears.  The reason
behind NTAP's, SEG's, and of course EMC's recent strength is
demand for data storage is not letting up.  The equipment required
to perpetuate the growth of the new economy is built by EMC.  And,
the growth of the Internet is STILL exploding, which is driving
EMC's business and its stock price higher.  On a side note, I
think the reason that the NTs, LUs, and SCMRs of the market have
been knocked down lately is their respective markets have become
saturated with competition, thus oversupplied, leading to lower
prices and margins.  However, demand is still outpacing supply in
the Data Storage arena because it's such a specialty product and
there exists little competition; a market, by the way, in which
EMC is the clear leader.  Moreover, as I have stated in previous
reviews of EMC, the company has one of the best management teams
in all of the Tech world.  Simply put, EMC's CEO, Mike Ruettgers,
knows how to execute a business strategy.

Now you know how I feel about EMC, and its prospects going
forward, let's talk about the chart.  EMC has run nearly 100%
since its bottom during the correction last spring.  The stock
has been bumping around $100 for the past month, which doesn't
surprise me because a little consolidation was due.  The simple
fact that EMC has been able to hold its ground during the bearish
month of September presents a bullish case for the stock.  I think
once EMC substantially clears the ever-important $100 level the
stock will go to $150 within a year, with cooperation from the
broader Tech sector, of course.  I've provided a few possibilities
to gain entry into the stock on the chart below.


3Com - COMS

I've noticed the volume has picked up in COMS.  After a good
earnings, where do you see the stock going? - John

After the infamous Palm spin-off, COMS, in a way, had to reinvent
itself.  And, judging by the company's earnings report and
conference call last week, the transformation is going much better
than previously expected.  Several bold and bullish statements
flowed from COMS' conference call.  Interestingly, COMS' CEO said,
"Our view of the market does not reflect what was reported, or
what was assumed to be reported, by Intel."  That's good!  Also,
COMS reported 70% quarter-over-quarter growth in its new business
lines of wireless and broadband equipment.  That's very good!
Most importantly, COMS told analysts to raise revenue estimates by
$200 million for its fiscal 2001 year.  That's what I like to
hear!  Furthermore, a few days after issuing such a gleaming
earnings report, COMS CEO, Eric Benhamou, said he would step down
by year's end and be replaced by COMS current COO.  While others
may argue with the claim, management shakeups are almost always
good for a stock price.  Do you remember a week back when rumors
circulated that AT&T's chief, Michael Armstrong, was going to be
ousted?  Do you think it was a coincidence the stock rose on the
rumors?  I don't!  For COMS, which is now post PALM, new
management, growing margins, and an upward revisions of revenues
should lead to bullish tidings ahead.

Since conveying such a bullish message in last week's earnings
report, COMS has fallen under heavy institutional accumulation,
which explains the increase in volume you mentioned, John.  We
can confirm such a speculation by noting the significant
increase in volume in conjunction with COMS' recent, and
substantial, rally.  When monitoring COMS' volume on the weekly
chart I have provided below, we must also take into account the
PALM spin-off, which generated a great deal of trading activity
through arbitrage efforts.  Although it's hard to see on the
weekly chart because of the PALM-related trading, you can view
the spike in volume last week.  Keep in mind that COMS' 30-day
average daily volume is around 10 million shares; the three days
after its earnings announcement, COMS traded roughly 37, 16, and
18 million shares, respectively.  That, my friends, is
institutional accumulation.  And, where the big players are
buying, the retail investors are wise to follow.


Extreme Networks - EXTR

Please advise what are the reasons behind EXTR strength and the
steady rise. - Regards, Sunil

Although I reviewed EXTR in my last column, for you, Sunil, I'll
do it again.  EXTR's recent and extraordinary performance gives
us an opportunity to study two market phenomena that I have
written about.  The first is end-of-the-quarter window dressing
by portfolio managers.  In the Market Wrap last Monday, I wrote,
"As fund managers load up on the quarter's biggest winners, their
buying will most likely drive the market's recent leaders higher."
Much of EXTR's roughly 20% rise over the last two weeks has to do
with window dressing.  Portfolio managers report their holdings to
their biggest investors at the end of each quarter.  Those
managers don't like to explain why they own the LUs, Ts, WCOMs,
and other market dogs.  As such, money managers like to make their
funds look attractive as possible through owning recent market
leaders such as EXTR.  Even though their fund is down for the year
because they owned the LUs and Ts, they still like to spruce
things up at the end of a quarter to appease their big investors.
It's a stupid game that Wall Street plays, I know!  But, retail
investors, like you and I, can capitalize on the phenomenon by
attempting to pick recent market leaders about two weeks before
the end of a quarter.  I failed to mention the window dressing-
effect in my review of EXTR two Wednesdays ago, and regret not
doing so.  I'm sorry.  Believe me, I'll remember to mention it
in the second week of December in an attempt to help OIN readers
make money.

Enough with the apologies!  Since you're a regular reader of
this column, Sunil, I bet you remember a while back when I wrote
of the importance of buying stocks in leading sectors of the
market.  The recent performance of EXTR, and its networking
brethren, qualifies as market leading.  Check the charts of JNPR,
CFLO, JNIC, and BRCD.  The aforementioned have two things in
common:  they're specialty network equipment makers and their
prices are near 52-week highs.  For some time now, the market has
really, really liked EXTR, JNPR, CFLO, JNIC, and BRCD.  We could
analyze each company and find reasons for their respective
advances.  We could even blame it on window dressing.  But, more
importantly, we need to focus on the bigger picture, i.e. what the
market is telling us.  And since early September, the market has
been telling us to buy certain networking stocks such as EXTR, not
the old favorites such as CSCO, NT, or LU, they're all having
their own problems.  The market wanted the new, young networkers
who were capturing market share from the giants.  I know that
might sound...well, goofy.  But, what I'm trying to convey is that
sometimes we don't know why a stock, or a sector, advances until
after the fact.  All we have, as traders and investors, is what
the market tells us.  And when the market tells us to buy, we have
to buy!  So, let's take a look at the chart of EXTR and see what
the market is telling us now.


Sun Mircrosystems - SUNW

Please comment on Sun Microsystems if you could. - Thanks, Scott

Will Sun Microsystems (SUNW) test 110? - Anonymous

SUNW is one of the last NASDAQ leaders standing after September.
CSCO, MSFT, DELL, WCOM, and of course INTC have all felt the wrath
of the bears.   The aforementioned are all facing very real and
significant threats in their respective market places.  And, SUNW
is not!  The differences between SUNW and its fallen NASDAQ
brethren are:  the network server market is still growing, SUNW
has very little competition in that server market, and SUNW
continues to innovate with new products and services, which is a
reflection of the company's brilliant CEO, Scott McNealy.  SUNW
not only continues to fend-off competitors such as Hewlett Packard
and IBM, but also continues to take market share from those very
companies.  SUWN is, by far and away, the clear leader in network
servers.  Moreover, SUNW edged a little further ahead of its
competitors last week when the company introduced its UltraSparc
III microprocessor, for use in high-end network servers.

The fundamentals for SUNW's business have never looked better.
I think that might explain why the stock has been able to hold up
so well during the past month, despite the terrible performance in
nearly every other Tech general.  Let us not forget that SUNW
had a nice 30% run from the middle of July to the beginning of
September.  So, I think four weeks of consolidation is perfectly
normal after a 30% run.  The fact that SUNW has held well above
its mid-July pivot point of $100 argues a strong bullish case for
the stock.  SUNW's chart is very similar to EMC's, in that both
stocks are trading near their all-time highs and have been
consolidating for the past month.  Similar to how I feel about
EMC, I think SUNW will continue to march higher, especially
when the NASDAQ bulls return for an extended period of time.


Genzyme General - GENZ

Missed an opportunity to buy below $60.  Short term charts look
good, but possibly overbought?  Safest play to wait for breakout
over $76??? - George

Genzyme is a rather interesting company that actually has four
separate business segments that are publicly traded with four
separate stocks.  They are:  Genzyme General (GENZ), Genzyme
Tissue Repair (GZTR), Genzyme Molecular Oncology (GZMO), and
Genzyme Surgical Products (GZSP).  I didn't know that!  Anyway,
George, your request was for a review of Genzyme General, so let
us get to it.  But, before I review the chart of GENZ, I wanted
to briefly touch on the company's background.  Because of its
broad range of product offerings and services, GENZ is one of
the most diversified Biotech stocks on the market.  GENZ is also
one of the oldest Biotech concerns; the company was founded in
1981.  Because of its broad presence in virtually all aspects of
the Biotech arena and nearly 600 products and services on the
market, GENZ is a great way to gauge the broader Biotech sector.
So it follows that GENZ has been on a steady climb since the bear
market bottom last spring, and is trading near its 52-week high,
just like the Amex Biotech Index ($BTK).  Furthermore, GENZ is a
unique Biotech company in that it actually makes money.  Earnings
have been on steady rise recently, just like GENZ's stock price,
and EPS is expected to grow by 20% over the next several years.
With all the developments and new technology in the Biotech space,
I think investors will be well served by investing in the area.
GENZ is a great way to play the Biotech boom because the company
is profitable and in an explosive growth sector.

Now for your question about the chart, George.  To be quite honest,
it's hard to say whether GENZ is overbought at current levels.  I
wouldn't use a Stochastic reading to gauge whether GENZ is
overbought because I think the stock is in a definite upward trend.
And, Stochastics are NOT meant to be used in trending markets, only
in bracketed markets, i.e. trading ranges.  Like many stocks in
today's column, GENZ is forming a series of higher relative lows,
yet continually finding resistance at the $70 level.  The ensuing
ascending wedge is generally a bullish chart formation.  With that
said, a solid breakout above overhead resistance at $70 might
provide a quick trade up to the $76 level.  But, $76 is the only
resistance left, after that, it's blue sky!



Could you please comment on CMGI?  11 analysts recommend it as
Buy or Strong Buy, the weekly charts turned positive recently,
they're reorganizing towards profitability, but the trend is
still down?  Is this just a day traders play or is there
something I'm missing?  Thanks so much for your analysis. -

I'm going to touch on the importance of listening to the market,
again, in reviewing CMGI.  The sell-side of Wall Street (the 11
analysts) have been telling investors to buy CMGI through their
ratings.  The omniscient market is telling investors to sell!
I'm listening to the market!  Analyst ratings and comments impact
stock prices over the short-term, that's why you read about Buy
ratings and higher price targets in the OIN plays.  But, in the
end, the market, and only the market, will dictate future prices
of stocks.  And lately, the market has been dictating that it
doesn't like CMGI.  You bring up a good point, Spencer, about
CMGI announcing it would reorganize to focus on profitability,
but the market didn't buy the announcement.  As I have said
before about CMGI, if you're a long-term believer in the growth
of the Internet and perpetuation of the Web-based products and
services, CMGI is a good stock to own for years to come.  What's
more, CMGI's CEO is one heck of an innovator.  However, if CMGI
does flourish over the long-term, you will have to endure plenty
of volatility like we have witnessed recently.  The volatility
that CMGI, and most Web stocks, is notorious for does make it a
day trader delight.  However, for the time being, and given the
market's distaste for CMGI, I think it might be wise to stay
away from the stock.  Like you said, Spencer, the trend is still


This column is an information service only.  The information
provided herein is not to be construed as an offer to buy or
sell securities of any kind.  The Ask the Analyst picks are not
to be considered a recommendation of any stock or option but an
information resource to aid the investor in making an informed
decision regarding trading in options.  It is possible at this
or some subsequent date, the editor and staff of The Option
Investor Newsletter may own, buy or sell securities presented.
All investors should consult a qualified professional before
trading in any security.  The information provided has been
obtained from sources deemed reliable, but is not guaranteed
as to its accuracy.


For the week of October 2, 2000


Auto Sales             Sep  Forecast:   6.7M     Previous:   6.8M
Truck Sales            Sep  Forecast:   7.6M     Previous:   7.8M
NAPM Index             Sep  Forecast: 50.00%     Previous: 49.50%
Construction Spending  Aug  Forecast:  0.50%     Previous: -1.60%


FOMC Meeting           ---  Forecast:   ---      Previous:   ---
New Home Sales         Aug  Forecast:   895K     Previous:   944K
Leading Indicators     Aug  Forecast: -0.10%     Previous: -0.10%


NAPM Services          Sep  Forecast: 60.50%     Previous: 60.00%
Factory Orders         Aug  Forecast:  1.70%     Previous: -7.90%


Initial Claims      30-Sep  Forecast:   300K     Previous:   287K
FOMC Minutes        22-Aug  Forecast:   ---      Previous:   ---


Nonfarm Payrolls       Sep  Forecast:   225K     Previous:  -105K
Unemployment Rate      Sep  Forecast:  4.10%     Previous:  4.10%
Hourly Earnings        Sep  Forecast:  0.30%     Previous:  0.30%
Average Workweek       Sep  Forecast:  34.4      Previous:  34.3
Consumer Credit        Aug  Forecast: $10.0B     Previous:  $9.4B

Week of October 9th

11-Oct  Wholesale Inventories
12-Oct  Initial Claims
12-Oct  Export Prices ex-ag.
12-Oct  Import Prices ex-oil
13-Oct  Retail Sales
13-Oct  Retail Sales ex-auto
13-Oct  PPI
13-Oct  Core PPI
13-Oct  Michigan Sentiment

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The Option Investor Newsletter                   Sunday 10-01-2000
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:


Using Window Dressing To Our Advantage
By Mary Redmond

The IPO market was robust this week, with 16 new issues raising
over $3 bln.  Seven IPOs raised over $500 mln on Friday.
It is worth noting that several IPOs were also withdrawn.
The majority of the new issues scheduled to debut this Fall
are technology issues.  The public's appetite for technology
stocks and issues has become more subdued, so it is difficult
to judge how many companies will be brought public each week.

A healthy IPO market can indicate institutional bullishness.
However, too many new issues can cause serious liquidity
problems, as they drain cash away from other stocks in the
indexes.  A chart of the S&P on top of a chart of dollars
raised in new issues had an inverse relationship to a
startling degree last year.

However, we may be able to support a large IPO calendar and
a market rally this fall, as circumstances have changed.  We
have ended a cycle of Federal Reserve interest rate hikes.
In addition, the Nasdaq and internet stock crash we had this
Spring is likely to increase investor scrutiny of new issues
for a very long time to come.  Certainly the amount of cash
in money market funds can easily support a market rally and
a heavy new issue schedule, if investors decide to devote
these funds to the equity market.

We will also have significantly less newly unrestricted stock
coming unlocked in October and November than we did in September.
We also need to consider that over $350 bln was raised
in IPOs and secondaries from June of 1999 to June of 2000.
Many of these companies were internet stocks which have fared
poorly since April.  While insiders can generally sell their
shares after six months, it can take far longer than that for
weaker company stocks to be completely sold after becoming
unlocked.  This can put a drag on the market for months.  If we
have a light IPO schedule in 2000, this is likely to benefit
the market in 2001.

AMG Data reported that equity funds had a net outflow of
$3.1 bln last week.  Most of the outflow came from the
international sector, where investors redeemed $1.8 bln.
The four week moving average of cash to equity funds is more
indicative of investor sentiment.  The four week moving
average of cash flows to equity funds is approximately $2.1
bln.  We may need to see a higher weekly moving average of cash
to equity funds to have a strong rally.

The Investment Company Institute reported that retail money
market funds had a net outflow of $24 mln, and institutional
money market funds had a net outflow of $4.51 bln.  This is the
second week of outflows of money market funds, which can indicate
that some investors are starting to move into the market.

It is interesting to note that GE has maintained support over $57
while the markets sold off in September.  GE is considered a
bellwether for the S&P 500 index and an indicator of broad market
strength.  If GE breaks down, it can be interpreted as bad news
for the market.

Some market analysts have been saying that several large cap
tech stocks are below their 50 and 200 DMA.  This can be
interpreted as an indicator of Nasdaq weakness.  However, look at
some of the mid cap tech stocks and you will see a different
picture.  For example, PMCS, NTAP, JNPR and CIEN are all strongly
above the 50 and 200 DMA and showing a high level of technical
strength.  Maybe the Nasdaq is not showing weakness.  Maybe new
leadership is emerging, as impatient investors grow tired of the
$500 bln market cap giants and look for newer, faster growing

As traders, we may sometimes be able to use the window dressing
phenomenon to our advantage.  This can cause extreme high and
low volatility in certain stocks.  Fund managers who want to
remove certain stocks from their portfolio may need to execute
the trades before the settlement date of the quarter.  Sometimes
the trading pattern of certain stocks may indicate that heavy
selling is occurring.  In addition, if a stock has had poor
performance for a quarter, it is likely that it will be a
candidate to be thrown out like garbage by funds.

How can you tell if heavy institutional selling is occurring?
There is no way to be absolutely certain, but some technical
indicators may give clues.  For example, Lucent has a large
percentage of its shares held by institutions, and has had
abysmal performance this year.  Many fund managers might think it
is better to dump the stock than to have their shareholders think
they are daft.  The chart shows that the on balance volume
indicated heavy selling.  Lucent would have been an excellent
put candidate early in the week, particularly after it broke
through support at $30.

If you were quick Thursday morning, you could have made several
points as it looked as if the selling had abated, and Lucent
jumped several points from a severely oversold condition.  One
clue occurred Wednesday near the close when the on balance
volume started to turn positive.  Also, Thursday morning the
MACD histogram started to move strongly to the upside after
being nearly flat for several days.  This indicated that the
buying was stronger than the selling at that point.

The VIX.X can be used as a short term trading tool as well as
a signal of a possible oversold or overbought market.  The
chart below shows two points at which the VIX deviated from
its normal trading range and spiked to the upside, which would
have been good buying opportunities.  However, it can be
dangerous to use this alone, as the VIX could spike a lot higher
if earnings warnings or economic news was released which could
impact the market.

It is possible that upside volatility scares investors into
depositing money into money market funds almost as much as
downside volatility.  It has really been since 1998 that stocks
started gaining and losing billions in market value overnight
as a relatively frequent occurrence.  Money market funds currently
hold nearly $1.8 trln in cash.  This is 24% of the total mutual
fund holdings including bond funds, and approximately 40% of the
total equity fund holdings.  We will be watching these money
flow numbers very closely as we head into the most volatile month


Reflections of Canobie Lake
By Lynda Schuepp

These past two month reminds me of one of my fondest memories
growing up in New Hampshire--riding the wooden roller coaster at
Canobie Lake.  Maybe that's why I like to trade.  August was like
going up the first big hill on the roller coaster--climbing up so
steeply that you can't see the top and then whiplash once you
crested the hill for the ride down.  September has been the
thrilling downside of that ride.  Like riding the coaster, we are
cautious on the way up, not knowing where the top is and scared all
the way down.  The rest of the ride isn't usually as thrilling.
My bet is after an October correction, we should be off to the
races to the end of the year.

I was at a seminar this week in Las Vegas so I didn't trade until
I got back on Thursday.  Thanks to my new friends out in Vegas
for all the warm kudos, I'm glad you are reading OIN.  It's kind
of ironic that the seminar was held in the "city of gamblers."
It is also ironic that I stayed at the New York, New York because
my room had a view of the roller coaster, hence the inspiration
for this article.  Quite frankly, the town has a little too much
glitter, tinsel and cosmetic surgery for my tastes.

When I got back on Thursday, after flying on the red eye, I
couldn't believe Thursday's nice run-up.  I felt out of touch
after not looking at a computer screen for almost a week so I
didn't want to make any directional moves until I could get a
good grasp of the market.  So I decided to do a butterfly with a
little twist on Rite Aid (RAD).  Rite Aid had been flat lining
since April and I had been looking at the premiums before I left,
but didn't enter the trade.  RAD looked like it might be ready to
make a move, but I decided to wait until I got back.  RAD made a
nice move up on Thursday (up 17%) so the shorter month premiums
got a little juiced.

Normally, a butterfly spread consists of one long contract of a
lower strike plus two short contracts of a higher strike and one
long contract of an even higher strike, using all calls or all
puts all expiring in the same month.

Here is my variation on a typical butterfly spread.  I bought ten
contracts of the Jan'03 5 put for $2.38 and ten contracts of the
Jan'03 10 put for $6.63.  Normally, I would sell 20 contracts
of the middle strike (Jan '03 7-1/2).  The Jan '03 7-1/2 puts were
selling for $4.25.  Instead, I sold the Jan '02 7-1/2 puts.  The
Jan'02 puts could be sold for $4.13 and the Jan '03 puts were
selling for $4.25!  Only 1/8 of point difference for 1 more year
of time value.  Since the 7-1/2 strike was the short leg, you want
faster theta decay that occurs in the closer time frame.  The cost
of time value was proportionately much higher in the Jan'02 which
is an advantage to the seller.  At the time I put on the trade,
RAD was selling for about 4.  The whole spread cost me a whopping
$75 a contract.

My breakevens are $5.75 on the bottom and $9.25 to the topside.
Breakevens in butterflies are calculated as follows:

LOWER BREAKEVEN =debit plus the lowest strike
HIGHER BREAKEVEN =highest strike minus debit

That means, that if RAD is trading anywhere between $5.75 and
$9.25 by Jan '02, I make money.

Maximum profit on a normal butterfly is calculated as follows:
Difference between two consecutive strikes less the debit paid.

In this case, it would be $1.75 (7-1/2 strike less 5 strike less
debit of 3/4).  That's a 233% potential profit.  Not bad, but not
real exciting for 2 years.  However, the twist is that I can buy
back the Jan '02 puts at any time and sell the Jan '03 puts if
there are changes in volatility.  The other possibility, which is
more exciting, is that the Jan '03 puts will not erode as quickly
and they too will have value.  If RAD is at $7.50 at expiration
of the short leg, I could additionally sell the Jan '03 puts that
I am still long.

To calculate the potential profit of my butterfly you have to
estimate the value of the '03 puts at expiration in '02.  Let's
make some assumptions.  If RAD is at $7.50 we know the Jan '02
puts expire worthless.  The Jan '03 10 put would have 2-1/2 points
of intrinsic value and 1 year left of time value.  By looking at
the current Jan '02 puts, you can determine that the value would
be somewhere between $3.50 and $4.  The Jan'03 put would be worth
somewhere between a 1/2 and 1 point.  So if the spread was closed
out at expiration in Jan '02, I would get somewhere between $4 on
the low end and $5 on the high end.  That's a return of between
500% and 600%.

I haven't found anything written on this variation of a butterfly,
so I'm going to copyright the name "Butterfly Twist," unless
someone has a better suggestion or has seen anything written on
this before.

Enjoy the ride.

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Call Play of the Day:

VRSN - VeriSign Inc $202.63 (+7.75 last week)

See details in sector list

Put Play of the Day:

CMOS - Credence Systems $30.00 (-5.88 last week)

See details in sector list

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Index       Last    Week
Dow     10650.92 -196.45
Nasdaq   3672.82 -130.94
$OEX      759.83  -14.25
$SPX     1436.51  -12.21
$RUT      521.37    2.55
$TRAN    2521.64  -75.50
$VIX       23.85   -0.32


AGIL       89.94    9.94  Moving higher without NASDAQ or news
MUSE      200.94    9.31  New, inspiring, close to breakout
MERQ      156.75    7.81  New highs- blue sky lay ahead
VRSN      202.56    7.69  Broke above $200, earnings run???
SEBL      111.31    6.31  New highs are coming frequently to SEBL
CFLO      143.00    5.81  Old resistance at $140 is new support
CHKP      157.50    5.06  Good-bye SEP, hello OCT, breakout???
RATL       69.38    2.94  New, market rewarding certain Techs
CIEN      122.81    2.06  CIEN prevails over the bears, again
AFL        64.63    1.81  Dropped, taking a breather
ITWO      187.06    0.88  Fought off the bears last week
QCOM       71.25   -1.75  Testing our patience, waiting for break
VRTS      142.00   -1.75  New, data storage sector on fire
PEB       116.50   -2.50  Rough trading last week, breakout ahead?
FRX       114.69   -4.75  Dropped, failed to break above $121
BRCM      243.75   -5.00  Day trade delight with $15 price swings
ENZN       66.00   -5.06  Dropped, surrendered $68 support level
IDTI       90.50   -5.44  Dropped, chip bears took control
JNPR      218.94   -6.69  Faired better than most Tech last week


DIGX       46.88  -14.56  New, no mercy for Web hosting
CPTH       60.75   -9.06  Rebounded Friday, possible entry point
MU         46.00   -6.44  Still falling, earnings Wednesday!!!
CMOS       30.00   -5.88  $30 support level is pivotal to our put
OMC        73.00   -3.81  Auspicious October date approaching
AFCI       37.88    0.25  Dropped, stabilized price last Friday


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.


IDTI $90.50 (-5.44) Chase H&Q previewed IDTI's fiscal second-
quarter earnings report last week with a bullish bias.  The Chip
analysts at Chase reiterated their Strong Buy rating on IDTI and
said the company is likely to exceed consensus estimates when
IDTI reports on October 18th, which is a confirmed date.  Despite
the bullish remarks, IDTI continued lower after topping out two
weeks ago at the $104 level.  Although IDTI can move very quickly
in the matter of days, we're dropping our profitable play given
the current condition of the Semi sector.  The Chip bears finally
caught up with our long and profitable play, and alas, we are no
longer initiating new positions.  However, aggressive traders
might continue to hold IDTI to its earnings announcement, if the
Chip sector rebounds next week.  On the other hand, if IDTI falls
below its near-term low at $86.44 and succumbs to the bears,
traders might do well to take profits and run.

AFL $64.63 (+1.81) The goose is gone.  After picking up this play
up on a breakout over $60, this steady mover climbed to an all-
time high of $67.50.  Now, let's see, those OCT 65 must have
swelled!  Since its volume-backed move to new highs, AFL has
come under normal profit taking pressure that it typically
encounters after large gains.  This has been on lighter volume
as well.  In fact, buyers stepped in at $64 Friday.  AFL may be
taking a little breather to allow its 10-dma, currently at $63.01,
to catch up a bit and offer some technical support.  We are opting
to drop this from our play list to make room for more volatile
issues; yet don't be mistaken, this play is still technically
healthy and looks to be taking some time to consolidate.  The
goose has done us well in a turbulent market so we will take our
profits and go.

FRX $114.69 (-4.75) Having failed four times now to break
through the $121 resistance level, FRX is looking weaker by
the day.  As the week progressed, the daily lows kept creeping
lower, while the highs remained below resistance, and our play
consistently failed to close above last Friday's $119.44 close.
The technicals are starting to deteriorate, with Stochastics,
MACD and RSI all rolling over, and to make matters worse, volume
is on the rise.  We think the stage is set for FRX to have a
technical failure, and we don't want to be around to witness it
firsthand.  We are dropping FRX until we see the buyers return,
and push the stock through resistance.  Given the carnage in
select issues in this market, it's safer to watch the show from
a distance.

ENZN $66.00 (-5.06) The selling hit hard late in Friday's
session and ENZN cracked under the pressure.  Near the close,
ENZN surrendered its position at the $68 support level on a
high-volume downward spike.  Previously, buyers stepped in at
the price level, but this time it appears the bargain hunters
had other stocks on their shopping list.  The weakness and
slide under the intersecting 5 and 10 DMAs clearly indicates
upward momentum is fizzling.  We're giving ENZN the boot this
weekend for its failure to maintain strength amid adversity.


AFCI $37.88 (+0.25) Our suspicions of stabilized price action
in AFCI last Thursday were confirmed during Friday's massacre
in the NASDAQ.  Despite the triple digit losses on the NASDAQ,
AFCI held its own around the $38 level Friday.  Part of AFCI's
stabilizing price could be attributed to the rebound in the
Telecom sector.  The major carriers showed improvement last
Friday, which might signal a turnaround for the equipment makers
such as AFCI.  If AFCI does fall from the $38 level next week,
traders might look to the $37 area for an exit point from the
trade.  However, we are now longer initiating new positions in
AFCI given the stock's relatively strong performance last Friday.


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.


VRTS - Veritas Software $142.00 (-1.77 last week)

As an independent supplier of storage management software,
VRTS develops and sells products that protect against data
loss and file corruption, allowing rapid recovery after disk
or computer system failure.  The company's products provide
continuous data availability in clustered computer systems with
shared resources. This enables IT managers to work efficiently
with large file systems, making it possible to manage data
distributed on large computer network systems without harming
productivity or interrupting users.  VRTS provides products for
most popular operating systems, including UNIX and Windows NT,
as well as a full range of services to assist its customers in
planning and implementing their storage management solutions.

Benefiting from continued strength in the enterprise storage
arena, VRTS looks poised to run strongly as October earnings
approach.  Scheduled early in the cycle, the maker of software
solutions for the network attached storage (NAS) and storage
attached network (SAN) is expected to post 14 cents vs. 9 cents
in the year ago period.  VRTS' release date is confirmed as
October 12th, after the close.  With revenue growth consistently
in the 70-80% range, expectations are high, and the consensus
calls for more than 50% growth in earnings over the year-ago
period.  Storage needs are still growing at a phenomenal rate,
making it clear that Internet-related growth is still alive and
well.  While much of the demand is in the enterprise market,
rather than the dot.com world, this is an arena where VRTS
shines.  With strong management, excellent products and
insatiable demand for those products, this looks like a solid
candidate for a run into earnings.  Looking at the chart, you
can see that it is common for the stock to run $8-10 in a day,
providing numerous target shooting opportunities.  After
bottoming near $110, our play has enjoyed a steady rise,
stepping higher and then consolidating before repeating the
process.  While the past week has been more volatile, the string
of higher lows is still intact, providing some decent levels of
support to work with.  While mild intraday support exists at
$140, we think a stronger level to target shoot new entries is
$137, as this is also the site of the 10-dma.  For more cautious
investors, the $149 level will be your focus point.  VRTS is
finding resistance at this level, but once it breaks through, it
could be a quick run to the next level of resistance at $155.

Busy on the news front last week, VRTS started off on Monday
by announcing that Larry Kubo will take over as VP and general
manager for the company's new Appliance Software division.
Kubo, a veteran marketer with experience in storage and desktop
appliances from both Network Appliance and Sun Microsystems'
Network Computer Systems group will oversee the new VERITAS
Software division.  Then on Wednesday, VRTS announced that
Digital Island has selected VRTS' Volume Manager, File System,
and File Server Edition products as the primary data
availability solution for its Footprint Content Delivery

BUY CALL OCT-140 VUQ-JH OI=2943 at $11.88 SL= 9.00
BUY CALL OCT-145*VUQ-JI OI=4483 at $ 9.25 SL= 6.25
BUY CALL OCT-150 VUQ-JJ OI=4347 at $ 7.13 SL= 5.00
BUY CALL NOV-145 VUQ-KI OI=1552 at $15.25 SL=11.00
BUY CALL NOV-150 VUQ-KJ OI=2114 at $13.25 SL=10.00

SELL PUT OCT-130 VUQ-VF OI=8820 at $ 5.13 SL= 7.25
(See risks of selling puts in play legend)

Picked on Oct 1st at    $142.00     P/E = N/A
Change since picked       +0.00     52-week high=$174.00
Analysts Ratings    10-11-1-0-0     52-week low =$ 32.39
Last earnings 07/00   est= 0.12     actual= 0.13
Next earnings 10-12   est= 0.14     versus= 0.09
Average Daily Volume = 5.66 mln

MUSE - Micromuse, Inc. $200.94 (+9.31 last week)

Founded as a network management solutions reseller, Micromuse has
become the leading provider of real-time fault and service-level
management software.  It is one of the fastest-growing companies
in the software industry.  Micromuse's Netcool suite helps
telecommunications and Internet service providers ensure the
uptime of network-based customer services and applications.
Managing these service levels is important in environments where
business services are provided over a network infrastructure.

It was an inspiring week for MUSE last week, as a flood of good
news lifted the stock in spite of a soft NASDAQ.  After breaking
through resistance at $190 last Friday, the stock managed to
successfully test that support to end the week near its new all-
time highs.  Monday saw MUSE break through the psychologically
important $200 level, helped by an expanded agreement with
America Online, who uses the company's Netcool/Impact software
for the management of real-time network events.  Hitting
resistance at $205, the next couple of days were spent
consolidating, as the stock digested its newfound gains.  On
Thursday, a dip to support at $180 was quickly bought up as
the stock not only erased the day's losses, but moved strongly
higher to close at a new all time high.  On Friday, MUSE succumbed
to the weight of the NASDAQ, giving back $7.69 or 3.68% on 156%
of ADV.  Connecting the highs and lows since early August, MUSE's
up-trend remains firmly intact.  Thursday's action put MUSE at
the top of its channel but Friday's profit taking gave the stock
some breathing room.  There is strong support at $190, reinforced
by the 10-dma.  A pullback to that level could be an ideal entry
point.  There is also support at $200, with the 5-dma close by.
An aggressive entry could be had at this level.  Intra-day, the
stock has also found support at $197.50 but make sure it bounces
before entering.  Resistance can be found in increments of $5 at
$205 and $210.  In a volatile market such as this one, make sure
you know your entry point and keep your stops tight.

Tuesday saw the company announcing the launch of its
Netcool/Precision v2.0 software.  On Wednesday, MUSE announced
A new customer in Prodigy Communications Corporation.  This past
week saw companies in the software infrastructure sector such as
CFLO and VRTS move higher in spite of a down market.  Keep an eye
on sector-wide movements when considering a play.

BUY CALL OCT-195 UZQ-JS OI=100 at $18.50 SL=13.25
BUY CALL OCT-200*UZQ-JT OI=111 at $15.75 SL=11.25
BUY CALL OCT-210 UZQ-JB OI=206 at $10.88 SL= 8.25
BUY CALL NOV-200 UZQ-KT OI= 15 at $26.63 SL=20.00
BUY CALL JAN-200 UZQ-AT OI=  1 at $39.25 SL=29.50

SELL PUT OCT-190 UZQ-VR OI= 12 at $ 9.25 SL=12.00
(See risks of selling puts in play legend)

Picked on Oct 1st at   $200.94    P/E = 695
Change since picked      +0.00    52-week high=$210.00
Analysts Ratings     9-3-0-0-0    52-week low =$ 29.75
Last earnings 06/00  est= 0.09    actual= 0.10
Next earnings 10-24  est= 0.11    versus= 0.06
Average Daily Volume =   597 K

RATL - Rational Software Corp. $69.38 (+2.94 last week)

Rational Software Corporation, the e-development company, helps
organizations develop and deploy software for e-business,
e-infrastructure, and e-devices through a combination of tools,
services and software engineering best practices. Rational's
e-development solution helps organizations overcome the
e-software paradox by accelerating time to market while improving
quality.  Rational's integrated solution simplifies the process
of acquiring, deploying and supporting a comprehensive software
development platform, reducing total cost of ownership.

While demand for computers and networking hardware has been
called into question recently, it appears the market has been
rewarding certain segments of the enterprise-level software
sector.  With most Tech issues down across the board, stocks such
as RATL have been quietly making gains.  With volume edging higher,
the stealth rally in these issues may not be a secret for long.
After a 2-for-1 stock split in early September, RATL traded in a
narrow range between $55 and $60.  With the 50-dma moving up fast,
the stock took off, breaking through not only $60 resistance, but
$65 as well.  This past week saw RATL digesting last Friday's
gains.  Once again we find RATL trading in a narrow range between
$65 support and $70 resistance.  On Friday, the stock gained $2.75
or 4.13% on healthy volume.  A continuation of that range next
week would see a bounce off $65 with volume to be an aggressive
entry point.  Bounces off the 5-dma at $68 or the 10-dma at $64
are also possible targets to shoot for.  Intra-day, the stock has
also found support at $66.  Overhead, the only resistance point
can be found at $70.  A break through that level with conviction
would put RATL at a new all-time high, providing conservative
traders with the confirmation necessary to make an entry.  In
playing a bounce off support, make sure that RATL's peers are
confirming the direction before jumping in.

RATL's second-quarter earnings announcement is scheduled for
October 11th.  With just 10 days left before earnings, we
are looking for continued momentum to carry us into a possible
earnings run.  Mark this date on your calendar, as we will look
to exit, selling into the strength before the company announces
its quarterly results.

BUY CALL OCT-65 RAZ-JM OI=147 at $7.38 SL=5.25
BUY CALL OCT-70*RAZ-JN OI=193 at $4.63 SL=2.75
BUY CALL OCT-75 RAZ-JO OI=131 at $2.75 SL=1.25
BUY CALL NOV-70 RAZ-KN OI= 45 at $7.50 SL=5.25
BUY CALL NOV-75 RAZ-KO OI= 54 at $5.38 SL=3.50

Picked on Oct 1st at     $69.38    P/E = 145
Change since picked       +0.00    52-week high=$70.63
Analysts Ratings      9-1-1-0-0    52-week low =$13.94
Last earnings 07/12   est= 0.11    actual= 0.14
Next earnings 10-11   est= 0.14    versus= 0.10
Average Daily Volume = 1.25 mln

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Please read our disclaimer at:

The Option Investor Newsletter                   Sunday 10-01-2000
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
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ITWO - I2 Technologies $187.06 (+0.88 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.

Last Thursday morning, analysts at Robert W Baird initiated
coverage on ITWO with a Market Outperform rating, and set a $215
price target.  The following day, First Union initiated coverage
on ITWO with a Buy rating after setting a $230 price target.
What's more, Lehman Brothers issued a report late last week that
highlighted the likely candidates to be added to the S&P 500.
You guessed it, ITWO was on the list, along with JNPR, VRSN, and
CIEN.  Whether ITWO is added to the S&P is purely speculation,
however, the inclusion of ITWO into the index would greatly add
to our profits in ITWO.  With or without the S&P speculation, it's
quite obvious that Wall Street is bullish on ITWO, noting the
recent rash of analyst actions and comments just last week.
Volume continues to clock in at high levels, which confirms Wall
Street's bullishness in the form of institutional accumulation.
As long as ITWO continues to garner big buying from Wall Street
the stock will continue higher.  The steady buying we have
benefited from since the inception of our play has set ITWO to
retest the psychological $200 level, and possibly position the
stock to retest its 52-week high.  Despite the waning action in
the NASDAQ over the past month, ITWO's steady ascending action
bodes well for our play going into October.  The NASDAQ's
weakness last Friday did, however, catch up with ITWO and carried
the stock lower into the close of trading on a surge in volume.
We want to make sure the bears have retreated before entering
any new positions in ITWO.  Although the stock's long-term trend
is very bullish, our goal is to find the most profitable entry
point, thus the concern over last Friday's sell-off.  If the bears
return early next week, watch for ITWO to find support just below
at $185, around its 10-dma at $182.50, or lower near the $180
level.  Wait for the stock to bounce, and consider entering the
play if the bulls return.  If, on the other hand, the NASDAQ
rallies early next week, aggressive traders might enter new ITWO
plays on a pop back above $190, or a momentum-based move above
$195.  The more conservative traders might wait for ITWO to rally
above $197, its near-term high, which would position the stock
for another breakout.

As ITWO approaches its all-time high, the stock, once again, is
trending into split territory.  The last time ITWO split its
stock was back in January, when it was trading at $215.  The
company has plenty of authorized shares for another 2-for-1 and
might decide to declare if the stock continues climbing.  At
this point, a split announcement could be the catalyst to take
our play to the next level, and our profits higher too!

BUY CALL OCT-185 QYI-JQ OI= 300 at $15.50 SL=11.25
BUY CALL OCT-190*QYI-JR OI= 538 at $13.00 SL= 9.75
BUY CALL OCT-195 QYI-JS OI= 255 at $10.88 SL= 8.25
BUY CALL NOV-190 QYI-KR OI=1006 at $20.38 SL=14.75
BUY CALL NOV-195 QYI-KS OI= 154 at $18.13 SL=13.00

Picked on August 27th at $166.50    P/E = 585
Change since picked       +20.56    52-week high=$223.50
Analysts Ratings     13-20-3-0-0    52-week low =$ 18.63
Last earnings 06/00    est= 0.08    actual= 0.10
Next earnings 10-20    est= 0.10    versus= 0.06
Average Daily Volume =  3.69 mln

CHKP - Check Point Software $157.56 (+5.06 last week)

Check Point Software 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.

Despite the meltdown in the NASDAQ during the month of September,
CHKP has managed to hold its ground.  In fact, after looking over
CHKP's chart, it's safe to say the stock spent last month in
consolidation mode.  Now that September is behind, and CHKP has
spent time resting, the stock might once again be ready to run.
CHKP spent most of September churning between support at the $140
level and resistance near the $160 level.  While CHKP's range
bound trading provided many profit opportunities (and may continue
to do just that), we're looking for the stock to breakout from its
four-week base and move onto to new highs.  CHKP's market defying
direction last Thursday and Friday might foreshadow higher prices
ahead.  The stock bounced from a low at $141 last Thursday, and
quickly rebounded to retest its trading range high at $160, before
pulling back on profit taking.  The fact that CHKP was able to
muster a modest advance last Friday and hold onto its gains into
the close gave reason to take notice of the stock's potential.  If
the NASDAQ sides with the bulls early next week and marches higher,
CHKP could breakout into new territory.  The aggressive traders who
wish to take on a little more risk might consider entering new
positions if CHKP to rallies above the $160 level, the upper-bounds
of CHKP's trading range.  Those traders seeking less risk and more
confirmation might wait for CHKP to move above its 52-week high at
$163.38.  Make sure to confirm bullish sentiment in the NASDAQ and
wait for heavy buying volume before jumping into CHKP's on a
breakout.  If the NASDAQ continues its woeful ways early next week
and pulls CHKP down, look for the play to find support first at
$155, and lower near the $150 level.  Before entering new call
plays on a CHKP pullback, make sure the stock bounces off one of
the aforementioned support levels on strong volume.

CHKP's appearances at several conferences next week might be the
catalyst to boost our play into breakout territory.  CHKP will
present at IBM's SecureWorld event Monday, the company will also
be speaking at Compaq's ETS 2000 conference later in the week.  We
will be listening for an upgrade or bullish comments of any type
on CHKP early next week.

BUY CALL OCT-150 KGE-JJ OI=1905 at $15.50 SL=11.25
BUY CALL OCT-155*KGE-JK OI= 215 at $12.38 SL= 9.25
BUY CALL OCT-160 KGE-JL OI= 644 at $ 9.75 SL= 6.75
BUY CALL NOV-155 KGE-KK OI=   6 at $19.13 SL=13.75
BUY CALL NOV-160 KGE-KL OI= 155 at $16.75 SL=12.00

Picked on Sep 3rd at    $149.44     P/E = 198
Change since picked       +8.13     52-week high=$163.38
Analysts Ratings     13-5-0-0-0     52-week low =$ 20.13
Last earnings 06/00   est= 0.21     actual= 0.25
Next earnings 10-20   est= 0.26     versus= 0.15
Average Daily Volume = 2.00 mln

SEBL - Siebel Systems Inc. $111.31 (+6.31 last week)

Siebel Systems 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.

SEBL has been dominant in overcoming resistance from the Tech
bears during the last three weeks, which was epitomized Friday
morning with a new all-time high over $118.  Of course, the Strong
Buy reiteration by Wit SoundView helped SEBL to its new 52-week
high.  But, try as it might, SEBL finally succumbed to the
weakness in the Tech sector.  SEBL was not along in its battle
with the bears last week.  Several counterparts, including ITWO,
MSFT, and ORCL, felt the bears fury.  However, despite the heavy
selling that dragged SEBL lower last week, the stock is still in
a clearly defined up-trend and should continue to rally as long
as the NASDAQ cooperates.  As such, SEBL's pull back last Friday
could prove to be a profitable entry point as third-quarter
earnings season approaches.  If SEBL's month-long pattern of
relatively higher lows continues, the lowest the stock should fall
is right at its 10-dma, currently located at $106.44, which also
happens to be the site of SEBL's last low.  With that said,
aggressive traders could look for a bounce off support just below
at $110, of if that fails, watch for SEBL to bounce off the
pivotal $106.44 area.  A more conservative entry might be found
if the NASDAQ strengthens early next week and SEBL rallies back
above the $114 level.  It might be worth monitoring the direction
of SEBL's sector before entering new long plays.  Watch the
action in MSFT, ORCL, and ITWO before entering new positions.

Over the course of the next two weeks, SEBL officials will be
busy on the road presenting to customers, investors, and analysts.
The company is scheduled as a headline presenter at the National
Defense Transportation Association meeting next week, the Banking
Solutions 2000 Conference, the Financial Technology Expo, and also
the I2 Planet 2000 gathering.  If SEBL delivers a bullish message
during its appearances in the coming weeks, the stock could very
easily continue on its path to higher highs, with or without the

BUY CALL OCT-105 EZG-JA OI=4365 at $11.13 SL=8.25
BUY CALL OCT-110*EZG-JB OI=4489 at $ 7.88 SL=5.75
BUY CALL OCT-115 EZG-JC OI=2067 at $ 5.50 SL=3.50
BUY CALL NOV-110 EZG-KB OI=1627 at $12.63 SL=9.50
BUY CALL NOV-115 EZG-KC OI=1177 at $10.25 SL=7.25

Picked on Sep 17th at    $99.00     P/E = 506
Change since picked      +12.31     52-week high=$118.44
Analysts Ratings     17-5-0-0-0     52-week low =$ 15.88
Last earnings 06/00   est= 0.09     actual= 0.11
Next earnings 10-17   est= 0.11     versus= 0.07
Average Daily Volume = 4.78 mln

PEB - PE Biosystems Group. $116.52 (-2.48 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.

After surging over the $125 mark at the open on Monday, PEB had
a rough go of things last week.  The broader markets were
definitely not cooperating with those that wanted to enter new
directional plays, but day-traders were once again rewarded with
large intraday price swings.  Did you take profits on Monday
morning in anticipation of the decline that was coming?  At a
minimum, your stops should have taken you out of the play making
it possible to re-enter for the next move up.  While it couldn't
really make any headway last week, neither did our play suffer
any kind of technical breakdown.  As a matter of fact, the
intraday lows are gradually moving higher, and with the highs
topping out near $120, we can see that this resistance level is
still intact.  As evidence that the trading in PEB last week was
little more than a consolidation of recent gains, we can see
that the daily trading volume steadily declined all week,
posting a measly 1 million shares on Friday.  Old resistance
levels have been transformed into support, first at $112,
reinforced by the 10-dma at $112.83.  Then we have the
$108-109 support level which was confirmed by the Tuesday
bounce, right on the 10-dma.  Going forward, consider renewed
bounces from support to be attractive entry points, but make
sure that volume is coming back into the stock before playing.
More conservative players will want to wait for PEB to break
back above $120 on solid volume before jumping into the play.
With analyst upgrades (see news below), and earnings warning
season officially over, PEB should have a much better week,
market permitting.

With some help from analysts, PEB got a boost early last week.
Salomon Smith Barney analyst Meirav Chovav initiated coverage
with a Buy rating and a $135 price target on Tuesday, and UBS
Warburg added their vote of confidence with a new Buy rating
on Wednesday.  Citing a strong management team, few formidable
competitors, and robust growth, Chovav believes Applied
Biosystems (formerly PE Biosystems) is well positioned to
capitalize on the genomics revolution.

BUY CALL OCT-115 BVE-JC OI= 696 at $ 8.13 SL= 5.75
BUY CALL OCT-120*BVE-JD OI=1145 at $ 5.63 SL= 3.50
BUY CALL OCT-125 BVE-JE OI= 195 at $ 3.63 SL= 2.25
BUY CALL NOV-120 BVE-KD OI=  69 at $11.13 SL= 8.25
BUY CALL NOV-125 BVE-KE OI= 127 at $ 8.75 SL= 6.00

SELL PUT OCT-110 BVE-VB OI=  40 at $ 4.00 SL= 6.00
(See risks of selling puts in play legend)

Picked on Sep 17th at   $106.50     P/E = 140
Change since picked      +10.02     52-week high=$160.00
Analysts Ratings      9-6-1-0-0     52-week low =$ 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 = 1.36 mln

JNPR - Juniper Networks $218.94 (-6.70 last week)

As a provider of Internet infrastructure solutions, JNPR serves
Internet service providers and other telecommunications service
providers, helping them to meet the demands resulting from the
rapid growth of the Internet.  The company delivers next
generation Internet backbone routers that are specifically
designed for service provider networks.  JNPR's flagship product
is the M40 Internet backbone router, which complements the
recently-introduced M20, which is a router built specifically
for emerging service providers.  The routers provided by the
company combine the features of the JUNOS Internet Software,
high performance ASIC-based packet forwarding technology and
Internet-optimized architecture into a purpose-built solution
for service providers.

It may not sound impressive, but hooray for our play in not
getting killed last week.  Prominent companies continued to
warn about disappointing results for the third quarter, and
each that did was promptly taken out behind the woodshed and
beaten severely.  Each of these confessions had the effect of
keeping investors jittery, and it is hard to find a stock that
was able to completely ignore the effect and just march steadily
higher last week.  The real measure last week seemed to be
whether a stock could hold important technical levels.  JNPR
pulled this off nicely, closing out the week just above the
10-dma (currently $218.83).  While this still represents a loss
for the week, given the unsettled nature of the markets we'll
take advantage of the overall weakness to land a better entry
point.  So what do we owe this impressive strength to?  Look no
further than the analyst community, with glowing comments coming
from Lehman Brothers and Salomon Smith Barney (see news below).
Some analysts see JNPR as a CSCO-beater, and some of their
router products are arguably superior to the wares being hawked
by CSCO.  If true, this is the kind of thing that will drive
JNPR's profits strongly upward, and we won't have long to wait
for the company's results.  They are early in the cycle and
their release date is confirmed for October 12th, after the
close.  Large intraday moves are the norm for JNPR, so needless
to say, this play is not for the faint of heart.  Below current
levels, JNPR has support near $215, and then $208.  Target shoot
new entries according to your risk tolerance, but make sure
strong buying volume confirms the bounce.

In the wake of the Intel earnings warning, investors have moved
their money into technology stocks with strong analyst ratings,
adding fuel to JNPR's meteoric rise.  Despite a PE north of
2600, all 18 analysts following the stock rate it either a Buy
or a Strong Buy.  Then last Monday, Salomon Smith Barney
analyst, B. Alexander Henderson raised his price target from
$245 to $310, citing extremely strong demand for the company's
router products.  He also expects the company to post extremely
strong earnings in October and sees the company grabbing even
more of CSCO's high-end market share.  Lehman Brothers confirmed
the bullish sentiment on Friday, stating that they expect JNPR
to beat current earnings estimates for the third quarter due to
strong sales momentum and improved margins.

BUY CALL OCT-220*JUD-JD OI=2472 at $16.75 SL=12.00
BUY CALL OCT-230 JUD-JF OI=3967 at $12.00 SL= 9.00
BUY CALL OCT-240 JUD-JH OI=2352 at $ 8.75 SL= 6.25
BUY CALL NOV-230 JUD-KF OI= 416 at $21.38 SL=16.00
BUY CALL NOV-240 JUD-KH OI= 511 at $17.25 SL=12.50

SELL PUT OCT-200 JUD-VT OI=2411 at $ 8.75 SL=11.75
(See risks of selling puts in play legend)

Picked on Sep 26th at   $230.50     P/E = 2682
Change since picked      -11.56     52-week high=$240.00
Analysts Ratings     15-3-0-0-0     52-week low =$ 30.00
Last earnings 07/00   est= 0.04     actual= 0.08
Next earnings 10-12   est= 0.09     versus=-0.01
Average Daily Volume = 7.71 mln

BRCM - Broadcom Corporation $243.75 (-5.00 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.

A day-trader's delight, BRCM has returned to its habit of moving
$10-15 per day.  While it is certainly exciting, position
traders are tearing their hair out in huge clumps; thankfully
that September is over, and hopefully October will bring more
stability.  Things were looking encouraging on Monday morning,
as our play opened above the $250 resistance level, but selling
over the next three sessions proved that it was going to be a
tough level to hold.  Much like the broader markets over the
past week, BRCM has had trouble moving up for more than one day
at a time.  While the bounce late on Wednesday afternoon at the
$242-243 support level looked like a decent entry, after a
one-day run, the bears came out with a vengeance on Friday,
pushing our play back down to close just above support again.
Further support can be seen at $238 and $235 on an intraday
chart, so consider target shooting dips to your level of
comfort.  Numerous attempts to break through the $260 resistance
level have all been turned back, and now we have technicals like
MACD and Stochastics turning south.  On top of that, Friday's
close was below the 30-dma ($244.56) for the first time since
breaking above it a week ago.  The $250 level has turned into a
no-man's land as it is being criss-crossed on a daily basis.  So
why is it still on our play list, you ask?  Simple, relative
strength.  While the markets have been far from healthy as
earnings warning season has wound down, our play has managed to
hold its ground, rather than sell off like so many other
technology stocks.  Earnings are less than 3 weeks away, with
expectations for BRCM to nearly double the year-ago number.
Those with cast-iron stomachs can continue to target shoot new
entries near support, but we would recommend waiting for volume
to approach healthier levels first.  Although you will give up
the early part of the move, waiting for BRCM to push through
resistance should provide for a lower risk entry.

In its latest salvo against Intel on Monday, BRCM asked a
California Superior court for a preliminary injunction to
stop Intel (INTC) from selling products that are allegedly
the result of stolen trade secrets.  Demonstrating why it
commands such a high valuation on Tuesday, BRCM delivered
its newest product, the world's lowest power, dual-port
Gigabit Ethernet-over-copper transceiver.  Complete with
intelligent network functions, the new product doubles port
density while reducing the power and size of Gigabit
transceivers by 50%.

BUY CALL OCT-240 RDU-JH OI=2976 at $18.25 SL=13.25
BUY CALL OCT-250*RDU-JJ OI=1464 at $13.13 SL= 9.75
BUY CALL OCT-260 YRL-JL OI=1743 at $ 9.13 SL= 6.25
BUY CALL NOV-250 RDU-KJ OI= 735 at $22.75 SL=17.00
BUY CALL NOV-260 YRL-KL OI= 812 at $18.38 SL=13.25

SELL PUT OCT-230 RDU-VF OI=1457 at $ 8.50 SL=11.25
(See risks of selling puts in play legend)

Picked on Sep 24th at   $248.75     P/E = 405
Change since picked       -5.00     52-week high=$297.94
Analysts Ratings     8-11-1-0-0     52-week low =$ 53.00
Last earnings 07/00   est= 0.19     actual= 0.23
Next earnings 10-17   est= 0.24     versus= 0.13
Average Daily Volume = 5.29 mln

AGIL - Agile Software Corp. $89.94 (+9.94 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.

Lack of news and a weak NASDAQ didn't stop AGIL from moving higher,
thanks to its strong technicals.  Last week we mentioned that
volume had been tapering off and that in order for AGIL to
continue higher, the buyers would have to return in large
numbers.  Spending the first half of the week in consolidation
mode, the stock found support from a rising 10-dma while
attempting to break through formidable resistance at $85.  A
quick glance at AGIL's chart reveals that it had been forming an
ascending triangle pattern.  On Thursday, AGIL blasted though $85
resistance, closing up $10.19 or 12.45%.  With volume coming in
at 230% of ADV, the buyers were back in force.  Friday saw some
end of month profit-taking and general market weakness.  Spending
the first 90 minutes of trading heading lower, the stock found
support at $87 and made an attempt to recover, closing down $2.06
on 263% of ADV.  While volume for the down day was high, the
intra-day chart on AGIL reveals that the morning dip was on light
volume while the end of day recovery attempt was backed by strong
volume.  Connecting the highs and lows since early August shows
that AGIL has been trading in an upward sloping regression
channel.  With the stock near the top of its channel, a little
consolidation may be necessary for the stock to move higher,
providing traders with possible entry points.  With support at
$87 and $85, a bounce off these levels could be a target to shoot
for.  As long as the current up-trend holds, bounces off the 5-
or 10-dma (at $86.19 and $82.65) will continue to be aggressive
entry points.  Conservative traders will want to see AGIL clear
$92 with conviction before entering new positions.

Friday saw AGIL break its news drought as First Union Securities
initiated coverage on the stock with a Buy rating.  With buying
volume outnumbering selling volume and strong support a $85, a
little good news could provide the catalyst for another breakout.

BUY CALL OCT-85 AUG-JQ OI=137 at $11.38 SL= 8.50
BUY CALL OCT-90*AUG-JR OI=254 at $ 8.38 SL= 6.00
BUY CALL NOV-85 AUG-KQ OI= 20 at $15.38 SL=11.25
BUY CALL NOV-90 AUG-KR OI=348 at $13.00 SL= 9.75
BUY CALL JAN-90 AUG-AR OI= 36 at $18.75 SL=13.50

SELL PUT OCT-80 AUG-VP OI=  7 at $ 3.63 SL= 5.50
(See risks of selling puts in play legend)

Picked on Sep 5th at     $74.06     P/E = N/A
Change since picked      +15.88     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  =   630 K

CFLO - CacheFlow Inc. $143.00 (+5.81 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.

CFLO's action last week is a textbook example of how resistance
becomes support.  The previous week saw CFLO struggling to break
through resistance at $140.  Attempting to do so unsuccessfully
three times, the fourth time turned out to be a charm as the
stock started this week with a bang.  CFLO gapped up above $140
at Monday's open to close up $13.84 on three times the ADV,
thanks to Credit Suisse First Boston analyst Amit Chopra, who
boosted the 12-month target price from $125 to $190.  Tuesday
saw Robertson Stephens analyst Dane Lewis reiterate a Strong Buy
rating, helping the stock gain another $5.97 on strong volume.
Encountering resistance at $160 brought in the profit takers who
took the stock down on Thursday.  CFLO bounced strongly when it
got near $140 and managed to do so again on Friday. Overhead,
there is resistance at $150, which is reinforced by the 5-dma,
and also at $153.  A break above $150 with conviction would be
the target for conservative traders.  Past $153, CFLO will find
itself once again challenging formidable resistance at $160.
Looking at CFLO's upward sloping regression channel since early
August shows that the bounce off resistance at $160 on Tuesday
happened at the top of that channel.  The pullback of the past
couple of days has put the stock closer to the lower-middle of
the channel.  A strong bounce off key support at $140, now
reinforced by the 10-dma, could be a rare buying opportunity,
but make sure that level holds before entering.

On Friday, CFLO announced an alliance with ATON and AKAM.  The
three companies will be hosting seminars to e-commerce companies,
enterprises, and service providers to demonstrate how their
products can cost-effectively manage and deliver content on a
relevant and timely basis.

BUY CALL OCT-140 FUJ-JV OI=149 at $12.88 SL= 9.75
BUY CALL OCT-145*FUJ-JW OI= 34 at $10.13 SL= 7.00
BUY CALL OCT-150 FUJ-JX OI=357 at $ 8.13 SL= 5.75
BUY CALL NOV-145 FUJ-KW OI=  0 at $16.88 SL=12.25  Wait for OI!!
BUY CALL NOV-150 FUJ-KX OI=  4 at $14.88 SL=11.00

SELL PUT OCT-135 FUJ-VU OI= 34 at $ 7.13 SL=10.00
(See risks of selling puts in play legend)

Picked on Sep 7th at     $113.00     P/E = N/A
Change since picked       +30.00     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  =    743 K

MERQ - Mercury Interactive $156.75 (+7.81 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.

The blue-sky territory we mentioned last week turned into green
for traders as MERQ continued to make new all time highs.
Traders who paid close attention to the stock last week were
rewarded with the most beautiful of entry points.  Last week also
saw MERQ hop into a steeper and sleeker upward trending regression
channel.  On Monday and Tuesday, the stock edged higher but with
volume decreasing, it seemed to lack conviction.  This led to some
profit taking on Wednesday, which gave investors a slight scare,
but MERQ more than made up for it.  On Thursday, the stock bounced
off strong support at $140, giving aggressive traders a rare visit
to its 10-dma.  Buyers eagerly accumulated the stock, which more
than wiped out the previous day's losses.  After such a volatile
week, Friday was a relatively quiet day as MERQ bucked the actions
of a weak market to close up fractionally on low volume.
Connecting the highs and lows since the beginning of August
Reveals the upward sloping regression channel which MERQ had been
trading in.  Connecting the highs and lows since early September,
we see the action in MERQ has picked up as it has moved to a
steeper channel.  At this point, the only resistance for MERQ is
at $160.  A break above that point would confirm upward momentum
and provide conservative traders with an entry point.  Aggressive
traders looking to buy off a bounce can find support at $150, the
5-dma at $153.47, and the 10-dma at $145.62.

With little news to drive the stock last week, it's been all
about momentum, and MERQ has plenty of it.  While the top of the
new steeper channel is well north of $160 resistance, keep in
mind that at this point MERQ is closer to the top of the channel
than the bottom.  As nothing goes straight up, a slight pullback
would not be a surprise, offering a buying opportunity.  Volume
this week has been easing off so make sure there is buying
pressure to support a bounce before making an entry.

BUY CALL OCT-150 RBF-JJ OI=641 at $17.25 SL=12.25
BUY CALL OCT-155*RBF-JK OI=118 at $14.50 SL=10.75
BUY CALL OCT-160 RBF-JL OI=216 at $12.00 SL= 9.00
BUY CALL NOV-155 RBF-KK OI= 13 at $21.38 SL=15.50
BUY CALL NOV-160 RBF-KL OI=383 at $19.00 SL=13.75

SELL PUT OCT-145 RBF-VI OI= 36 at $ 7.25 SL=10.00
(See risks of selling puts in play legend)

Picked on Sep 24th at   $148.94     P/E = 319
Change since picked       +7.81     52-week high=$157.94
Analysts Ratings      9-3-1-0-0     52-week low =$ 28.38
Last earnings 07/00   est= 0.12     actual= 0.14
Next earnings 10-17   est= 0.16     versus= 0.11
Average Daily Volume = 1.82 mln

VRSN - VeriSign Inc $202.63 (+7.75 last week)

VeriSign provides Internet-based trust services that
authenticate and protect data so secure transactions and
communications can be conducted over the Internet,
intranet, and extranets.  Websites, enterprises, government
agencies, and even individuals use VeriSign's digital ID's
(digital certificates) with the encrypted information as
cybersafeguards for such activities as e-mail, home
banking, and credit card transactions.  Visa represents 14%
of total sales.

Verisign's tailor-made e-commerce solutions become increasingly
indispensable as consumers purchase more goods and services
online.  With a strong business model and an anticipated revenue
growth of 55% over the next 3 years, VRSN is considered a
favorite among market participants.  The bullish sentiment has
kept the share price at the higher trading range of $150 to
$200.  But it was Thursday's big rally that broke the stock
out of its trappings.  The strong momentum launched VRSN through
the upper resistance and it steadily climbed to $209.56.  The
bullish close, at a mere fraction from its intraday peak,
hinted that VRSN was destined for more advances.  On Friday,
VRSN broke the immediate resistance at the opening bell and
stretched upward to $214.38 before settling down.  The
subsequent trading had a strong show primarily between $205 and
$210.  The expected profit taking left VRSN in a good position
by the late afternoon.  The close above $200 demonstrated
strength; yet provided an opportunity to take reasonable
positions.  Consider taking entries on bounces off the current
level, just above the former resistance, or buying into strength
as VRSN moves through the $210 level.  On aggressive pullbacks,
$188 and $190 mark solid support, bolstered by the rising 10-dma
at $193.13.  Look for respectable volume at 4+ mln shares or
better to move the stock higher.  Keep in mind, VRSN is a split-
candidate above $200.  The company presently has 1 bln shares
authorized and 194 mln outstanding, which is more than enough to
pay a stock dividend.  Sometimes this reality can incite
momentum of its own.  Look too for positive statements, like
CSFB's Strong Buy recommendation this week, to encourage more
upside action.

The law that makes your digital "John Hancock" legally binding
goes into effect on Sunday.  Most industry watches agree that
companies may be slow to adopt the use of virtual signatures,
but its application is inevitable.

BUY CALL OCT-200 QVZ-JT OI=3763 at $17.00 SL=12.25
BUY CALL OCT-210*QVZ-JB OI=1272 at $12.75 SL= 9.75
BUY CALL OCT-220 QVZ-JD OI=1028 at $ 8.75 SL= 6.25
BUY CALL NOV-210 QVZ-KB OI= 359 at $21.38 SL=16.75
BUY CALL NOV-220 QVZ-KD OI= 233 at $17.75 SL=12.75

Picked on Sep 28th at   $208.38    P/E = N/A
Change since picked       -5.75    52-week high=$258.50
Analysts Ratings    13-11-1-0-0    52-week low =$ 48.81
Last earnings 06/00   est=-0.01    actual= 0.07
Next earnings 10-23   est= 0.06    versus= 0.02
Average Daily Volume = 3.96 mln

CIEN - Ciena Corp $122.81 (+2.06 last week)

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 come from outside the US markets.

The optical-related stocks prevailed in this week's wobbly
marketplace; although it was CIEN that took the gold!  On
Monday, Ciena announced a huge deal with Korea Telecom to supply
it with fiber-optic gear for networks in seven cities, including
Seoul.  CIEN advanced a whopping 12.8%, or $15.50 and set a new
52-week record on the news.  The volume was exceptional at
almost three times the ADV.  Consequently, the near-term support
level was elevated from $113-114 to $124-$128.  However, the
safety net is lower at $120-$122, just above the 10-dma
($119.65).  Resistance is developing at the $130 mark, so
conservatively, look for a break through here on strong volume
to confirm the momentum.  Otherwise, take more aggressive
positions on intraday dips near the 5-dma line, which is now at
$126.11, or off the current level.  Tuesday's intraday peak at
$134 and the new 52-week high at $136.25 represent the next line
of opposition on an upswing.  The play on CIEN is pretty basic.
There's the strong sentiment within the fiber-optic sector and
it's expected that many of the companies will beat the earnings
estimates.  Plus, many investors are very bullish on a sector
that, so far, continues to outpace sales growth in nearly every
other industry.  But remember, not even the sexy stocks can
stay on top forever.  After the WSJ's recent article on this hot
sector, some investors may believe they've seen their run and
cash in.  The bears are always looming, so keep stops in place.

Analysts speculated this week that Ciena and its rival, Juniper
Networks, were leading candidates to join the S&P 500 Index.
Both companies have market values greater than most of the
current members and less than 50% of their respective
outstanding shares are owned by insiders, which are two
important criteria for the index.

BUY CALL OCT-120 UEZ-JD OI=2782 at $11.75 SL= 9.00
BUY CALL OCT-125*UEZ-JE OI=3841 at $ 9.38 SL= 6.50
BUY CALL OCT-130 UEZ-JF OI=1527 at $ 7.38 SL= 5.25
BUY CALL NOV-125 UEZ-KE OI=1562 at $14.00 SL=10.50
BUY CALL NOV-130 UEZ-KF OI= 678 at $11.88 SL= 9.00

Picked on Sep 24th at   $120.75    P/E = 605
Change since picked       +2.06    52-week high=$136.25
Analysts Ratings     11-9-2-0-0    52-week low =$ 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 = 6.69 mln

QCOM - Qualcomm Inc $71.25 (-1.75 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.

Qualcomm is testing our patience; yet we're not ready to exit
this potential gold mine.  For those readers who've been
following this play, you know QCOM got our attention after it
spiked up on news of a comeback.  However, after clearing the
resistance at $75, it stopped short at $78.75.  The snag?
An unyielding line of opposition at $80.  Take a look at a chart
for visual confirmation.  It's been five months since QCOM
traded successfully above this level.  Our objective is to play
QCOM on a strong move through $80 and ride the momentum up.  If
the stock breaks this barrier then the run could extend into
earnings, which are confirmed for November 2nd, after the
market.  For the cautious type, wait for QCOM to move to the
upside of this formidable resistance before taking a stake.  If
you'd rather position yourself more offensively, consider
shooting for entries off near-term support at the converged 5
and 10 DMAs at $72.51 and $72.98, respectively.  Look for volume
levels of three to four mln intraday to signal another breakout.

On the Asian front, China United Telecommunications Corp,
China's 2nd largest mobile phone company, said it will take over
and upgrade a handful of cellular networks that use Qualcomm's
technology.  While this is a good sign that things are moving
forward in Asia, the company's CEO, Yang Xianzu, declined to
comment about reviving plans for a large-scale network
potentially worth billions of dollars to Qualcomm.  In other
news, Agilent Technologies (A), a test and measurement equipment
maker, announced they entered into a multi-million dollar deal
with Qualcomm.  Under the terms of the agreement, it will allow
Agilent to use patents, software and chipsets to expand its line
of Code Division Multiple Access (CDMA) test equipment.

BUY CALL OCT-65 AAO-JM OI=17662 at $8.63 SL=6.25
BUY CALL OCT-70*AAO-JN OI=22700 at $5.38 SL=3.50
BUY CALL OCT-75 AAF-JO OI=16179 at $3.13 SL=1.50
BUY CALL NOV-75 AAF-KO OI= 3628 at $6.25 SL=4.25
BUY CALL NOV-80 AAF-KP OI= 3417 at $4.50 SL=2.75

Picked on Sep 17th at    $66.25    P/E = 84
Change since picked       +5.00    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 = 14.4 mln

Attention Online Traders:

NobleTrading.com has become the first online trading firm to
offer both Direct Access Trading, and web based trading to its
customers. Trade Direct using any ECN, SOES, and SelectNet, or
trade right through your browser using our web based trading
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Please read our disclaimer at:

The Option Investor Newsletter                   Sunday 10-01-2000
Sunday                                                      4 of 5

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DIGX - Digex Inc $46.88 (-14.56 last week)

DIGX is a leading provider of hosting services to businesses and
organizations operating mission critical, multi-functional Web
sites and Web-based applications. Their hosting services are
used by some of the leading Internet companies.  The company
also offers value-added enterprise and professional services,
including performance and security testing, monitoring,
reporting and networking services.  They operate two data
centers in the US and one in the UK that house more than 2,300
company-owned and managed servers.  Digex clients include
Forbes, J. Crew, and Nissan.

DIGX's vitality was zapped as news of WorldCom's (WCOM)
successful bid for it and its parent, Intermedia Communications
on September 5th.  There was no mercy.  DIGX investors sold off
the issue on incredible volume.  Trading activity was ten times
the ADV at 11.46 mln shares.  The share price was cut down
19.7%, or $16.63 by the time all was said and done.  Since then,
DIGX has progressively stepped lower.  The last-minute, $6 bln
bid for Digex was great for WCOM, who prevailed over other Web-
hosting rivals attempts to acquire DIGX's global voice and data
network.  In response, Exodus (EXDS) recently acquired Global
Crossing's (GBLX) GlobeCenter for $6.53 mln dollars to
strengthen its position as the world's biggest operator of
companies' Web sites.  The resulting announcement on Thursday
sent DIGX through the last technical line, the 5-dma ($52.99)
and its historical support of $50.  The volume was heavy at 3.9
mln shares exchanging hands.  DIGX even received a Buy
reiteration by Gerard Klauer Mattison & Co, but it was to no
avail.  The downward momentum continued into Friday's session.
The high-volume and losses extended amid a moderate trading
spread.  Consider buying into the weakness as DIGX slides under
the $45 mark and challenges $42.50, the site of Thursday's
intraday low.  There is light support around $35 and $40, so be
prepared for buyers coming in off the sidelines.  In this wobbly
market it's a good idea to set stops.

BUY PUT OCT-55 UOM-VK OI=235 at $11.00 SL=8.25
BUY PUT OCT-50*UOM-VJ OI= 85 at $ 7.25 SL=5.00
BUY PUT OCT-45 UOM-VI OI= 37 at $ 4.25 SL=2.50

Average Daily Volume = 1.14 mln


CMOS - Credence Systems $30.00 (-5.88 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.

Our CMOS put plan played out with near perfection last week.  The
post Intel warning-effect we were gaming carried over and dragged
the Chip Manufacturers lower.  Sure enough, CMOS closed at exactly
the target price of $30 last Friday, giving us a healthy one-week
gain.  However, in light of the Apple (AAPL) warning late last
Thursday and subsequent bear raid in the PC and Semi sectors, we
think CMOS could be headed even lower.  What's more, CMOS
continues to trace lower lows on increasingly heavier volume,
which suggests we're trading in the direction of the institutions.
However, even though CMOS looks very weak at its current levels,
we must be cognizant of the $30 level.  Last week, we touched
upon the fact that CMOS' pivot point is the $30 level; the site of
the stock's major breakout last fall.  The strength of the $30
level was reiterated Friday as bulls defended their long positions
by pinning CMOS at $30.  If CMOS falls below the $30 level, the
stock could easily retest support at $25.  But, the first sign of
CMOS stabilizing or even rebounding off $30 might give reason to
run with profits.  Although, aggressive traders might consider
entering new positions if shorts cover and CMOS edges higher up to
resistance at $31, or higher near the $32 level.  Confirm a short
covering rally with light volume, and wait for CMOS to rollover at
one of the aforementioned resistance levels before entering new put
plays.  The more conservative traders will obviously wait for CMOS
to fall below $30 on heavy volume before entering the play.  Look
to enter new put positions if CMOS falls below its near-term low at
$29.56.  Confirm bearish sentiment in the both the NASDAQ and $SOX
before entering new put positions and consider confirming direction
in CMOS' competitors such as AMAT, TER, and LRCX.

BUY PUT OCT-40 CQS-VH OI= 40 at $10.13 SL=7.00
BUY PUT OCT-35*CQS-VG OI=471 at $ 6.38 SL=4.50
BUY PUT OCT-30 CQS-VF OI= 10 at $ 3.13 SL=1.50

Average Daily Volume = 1.61 mln

MU - Micron Technology $46.00 (-6.00 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.

We've read this play like a book.  All week long, intraday spikes
above the $50 level have given great entry points into this put
play.  Fundamentally, the Semi sector has a dark cloud that
doesn't appear to be clearing.  The AAPL warning is making waves
in the box maker market, weighing on component providers like MU.
Thursday's close at $50.94 and the AAPL warning after the bell
combined to give us a perfect Play of the Day on Friday.  With
a gap down to open at $48.25, the break below $50 was indication
to jump on in, as we mentioned in the Thursday update.  MU didn't
think about stopping at $47, and went right for a low of $44.50,
a level not seen since February 29th.  Now this play has become
somewhat interesting.  MU has earnings on October 4th, which is
Wednesday after the bell.  After Friday's drop, MU slowly
recovered and held the $45 - $46 area in a tight range for the
rest of the day.  Now, as the NASDAQ accelerated to the downside
at the close, MU held that range.  Volume was strong as MU lost
another 7% on Friday.  Therefore, given that earnings are
Wednesday, the way to play this going forward is to look for
entries on rollovers from intraday resistance at $49 and $50.  If
MU breaks $45 again with good volume, look for the sellers to take
MU lower, and an entry point.  But, if MU looks positive on Monday
and breaks above $50 convincingly, use caution.  It may rollover
at $51 or $52 resistance, but high volume buying at these levels
without a rollover may indicate some preemptive earnings euphoria.
Without a rollover at resistance levels over $50, we would not
initiate new plays.  Use stop orders to protect profits accrued in
this play and to limit any losses.

BUY PUT OCT-50*MU-VJ OI=4839 at $7.00 SL=5.25
BUY PUT OCT-45 MU-VI OI=2977 at $4.00 SL=2.50

Average Daily Volume = 7.30 mln

CPTH - Critical Path, Inc. $60.75 (-9.06 last week)

Critical Path, Inc. is the dominant global provider of
business-to-business Internet messaging and collaboration
solutions for the wireless, Internet-centric, telecommunication
and corporate markets.  Critical Path, founded in 1997, helps
businesses maximize the communication and revenue potentials of
messaging while minimizing costs.  Critical Path has built an
industry-leading global infrastructure with mail centers
connected to key Internet exchange points around the world.
Critical Path’s technology currently reaches more than 125
million end-users through its customer relationships and more
than 25 million wireless devices.

Ever since encountering resistance at $80 in late August, CPTH
has been making lower lows.  Until recently, the stock had also
been making higher lows.  Connecting the highs and lows since the
middle of August, we see a symmetrical triangle pattern, which we
saw CPTH breaking to the downside on Tuesday.  This led to
further weakness on accelerating volume as on Wednesday, the
stock broke below both the 50- and 200-dma (now at $63 and
$65.51).  The break below $63 was especially important since that
area had previously provided support in the earlier part of
September.  Thursday saw this level act as resistance as CPTH
continued lower.  On Friday, the stock got a slight reprieve as it
managed to bounce off of the $57 support level we mentioned in
Thursday's write-up.  Considering the oversold condition of the
stock at the time, this bounce could be temporary and provide
traders with an ideal entry point.  There are many levels of
overhead resistance to choose from, the 50-dma at $63, the 200-
dma at $65.51, then at $67 and finally the 10-dma at $67.68.  A
failure to rally above one of these levels could be the target to
shoot for but make sure the rollover is confirmed before jumping
in.  Conservative traders will continue to wait and see if CPTH
can break below $57 with conviction before making a play.  The
next level of support below that is the 100-dma at $56.15.  In
the news this week, CPTH completed its acquisition of software
company PeerLogic on Tuesday and followed it up with an alliance
with Elron Software on Thursday.  With weak technicals and its
parent company CMGI near its all-time lows, we are looking for
negative momentum to continue.  Look for sector sympathy to
confirm direction when considering a move.

BUY PUT OCT-60*UPA-VL OI=228 at $6.13 SL=4.00
BUY PUT OCT-55 UPA-VK OI=100 at $4.13 SL=2.50
BUY PUT OCT-50 UPA-VJ OI=104 at $2.31 SL=1.25

Average Daily Volume = 1.01 mln

OMC - Omnicom Group Inc $72.94 (-4.06 last week)

Omnicom Group is one of the world's largest advertising
organizations.  Its companies create and produce world-class
advertising campaigns for high-profile clients like PepsiCo,
Anheuser-Busch, and Nissan.  The company also offers marketing
consultation and research services through its Diversified
Agency Services unit, which includes Communications Consulting
Worldwide, the world's largest public relations organization.

Early in the week, strong losses dominated the scene.  By
Wednesday morning, OMC shed a total of 11.5%, or $8.88 on
accelerating volume.  Trading activity reached levels of 2.7
times the norm on the decline.  Wednesday's intraday low of
$68.13 marks OMC's bottom support.  It's likely the NT Buy
recommendation by analyst Lauren Rich Fine at Merrill Lynch
influenced trading and enticed some buyers to take a nibble on
Thursday.  Despite the positive analysis, the subsequent rise
found tough resistance at $74, reinforced by the trailing 10-dma
($74.94).  OMC currently appears to be finding light support at
$72, just below the 5-dma ($73.16).  Our objective is to play
the downtrend as the auspicious October 6th approaches.
Recall OMC and True North (TNO) are either to be fierce
competitors for the previously shared DaimlerChrysler ad account
or as some speculate, join forces and increase their scale.
It's anticipated that this uncertainty and the floundering
market will continue to put negative pressure on the share
price.  However, err on the side of caution.  Consider waiting
for OMC to demonstrate more conclusive weakness under the $72
mark before planning an entry.

BUY PUT OCT-80 OMC-VP OI=309 at $ 7.88 SL=5.75
BUY PUT OCT-75*OMC-VO OI= 79 at $ 4.50 SL=2.75
BUY PUT OCT-70 OMC-VN OI= 66 at $ 2.13 SL=1.00

Average Daily Volume = 799 K

Attention Online Traders:

NobleTrading.com has become the first online trading firm to
offer both Direct Access Trading, and web based trading to its
customers. Trade Direct using any ECN, SOES, and SelectNet, or
trade right through your browser using our web based trading
application. FREE DSL service for active traders.

Visit our website and sign up for a Free real-time demonstration!


Apple Warns and Heaps More Misery on the NASDAQ
By Mark Phillips
Contact Support

By now you've already heard that Apple Computer (AAPL) warned
that they would fail to achieve earnings projections for the
current quarter.  This was just the latest in a long string of
reminders that September is a tough month for the bulls.  Now
that the month is over, how should we view the next one?
October normally conjures up fears of market crashes, but we've
had a tremendous amount of negative activity in the market over
the past month.  Could it be that the beginnings of actual
earnings announcements in a little over a week could be just
the catalyst to kick this market back into ascent mode?  We'd
like to hope so, but those of you that have ever had a worthless
expiration know that 'hope' is a four-letter word.

I didn't do any trading this past week, due to other commitments
and my travel schedule, and in retrospect, I'm glad I was too
busy.  The level of pain being inflicted on certain stocks is
staggering.  AAPL warns and gets more than a 50% haircut.  YHOO
plunges through the $100 support level, giving the stock the
distinction of the making the quickest trip of any LEAPS play
from the New Play list to the Drop list.  See below for details.

How about DELL?  It is now trading fractionally above $30, and
it hasn't been there since late 1998.  If support at $30 can't
hold, look for that stock to get the boot in the near future.
ERICY is another out of favor play, losing ground to both NOK
and MOT in terms of relative strength.  It is also being placed
on a short leash this weekend, and if it fails to hold above
$14, we'll be cutting it loose next week.

I've spent the past 3 days at the Boston seminar cramming all
the new information that I could into my already overloaded
brain.  What wouldn't fit, had to be scribbled in the margins
of the course manual.  Now I consider myself to be a primarily
technical trader, and pride myself on my understanding of a
wide assortment of indicators and their use, but I was amazed
at all I didn't know.

Here's a sample of some of the "Ah-Ha" moments that were
particularly valuable to me.  I now know which duration
intraday charts to use and which ones NOT to use, and why.
Do you know the reasons behind the settings on the technical
indicators like MACD or Bollinger Bands?  I do now, and will
spend a good part of the evening tonight changing all my
settings in Qcharts.  Speaking of Qcharts, Chris covered
aspects of the application that I never knew existed...you
know, the type of features that you didn't know you needed,
but once they have been pointed out, you have no idea how you
lived without them.

And this was all before Chris launched into any of his clever
option strategies.  If you have read his columns in Options 101
or Options 201, you know that he comes up with some interesting
and provocative trades.  Well, I can tell you that I was far
from disappointed in this respect!  How about a strategy that
allow you to buy LEAPS on volatile stocks, and the more volatile
they are, the cheaper the trade gets.  Ditto for time to
expiration - doing the trade with 2003 LEAPS is actually cheaper
than doing the trade with 2002 LEAPS.

How have you been doing with entry points on your favorite
plays?  How about trimming your losses and taking profits?
Would you like to be able to put on positions that you can
literally walk away from and not look at for a year?  If you've
been considering going to one of Chris' seminars, get off the
fence.  You won't be disappointed, and you can easily pay for
the course with one or two trades; either good ones after the
course, or bad ones without it.

The VIX spent most of the week north of 22, and closed out
Friday's session at 23.85.  We've lately looked at the VIX and
wondered if it was broken as an indicator, but clearly, based
on recent action, it appears to be just fine.  The real key is
not just the value of the VIX, but where it is in its historical
range.  Sure, it is unusual for it to be below 20, but it has
only been below 26 for about 4 months.  Look back to 1998, and
you can see that it spent fully 6 months below 25, before the
huge volatility expansion that accompanied the selloff in August
and September.  If there is one thing that remains true, it is
that cycles repeat.  Unfortunately, chaos theory is alive and
well, so the repeating cycles do not do so in an orderly
fashion.  That is why we must watch a variety of factors from
technical indicators to money flow to the VIX to economic
reports to try and determine which way the market is headed.

While we are now officially out of the earnings warning season,
that doesn't mean the danger has passed.  Right now, we know
which companies have been forthright in admitting their
shortcomings.  There will likely be others in the weeks ahead,
who fail to impress investors and they will be likely be
summarily dismissed along with a fat portion of their market

Now, in all honesty, I am growing more bullish by the day.  As
I watch chart after chart, I see good bottom formations on many
of those that I follow.  Barring an unforeseen event like the
Euro going to 70 cents basis the dollar, I think the bottom is
near, and will be looking for opportunities to add to my
long-term LEAPS holdings.

Keep your eyes peeled for entry points on the plays you want,
and then be ready to take the plunge when everything lines up.
Just make sure you don't jump the gun, trying to force entries
that aren't quite ready yet.

Have a great week!

Current Plays


EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $59.75   528.95%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $35.38     8.02%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $20.50    86.36%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $30.75   103.24%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $20.25   -26.36%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $46.75   112.50%
ERICY  01/30/00  JAN-2002 $16.3 WRY-AO   $ 6.75   $ 3.75   -44.44%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 3.13   -54.58%
NSM    02/27/00  JAN-2002 $ 70  WUN-AN   $24.25   $ 7.88   -67.53%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 8.50   -54.37%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $17.30     1.14%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $21.00   125.08%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $12.88   139.31%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $38.25     3.48%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $31.63   -42.76%
MOT    05/14/00  JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 4.75   -50.21%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 7.75   -55.07%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $11.25   -36.62%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $13.75    33.37%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $12.25     0.00%
AMGN   07/02/00  JAN-2002 $ 75  WQY-AO   $20.75   $17.13   -17.47%
                 JAN-2003 $ 70  VAM-AN   $28.75   $26.38   - 8.26%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $78.50    18.49%
       09/03/00  JAN-2003 $190  OVS-AR   $86.63   $97.63    12.70%
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $ 2.25   -82.19%
                 JAN-2003 $ 60  VDL-AL   $15.38   $ 4.25   -72.37%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $19.75    15.29%
                 JAN-2003 $ 70  OZG-AN   $23.13   $25.75    11.33%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $21.13   -25.22%
                 JAN-2003 $120  VHP-AD   $32.63   $25.88   -20.70%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $16.00   -22.89%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $20.50   -19.23%
MFNX   08/06/00  JAN-2002 $ 40  WOF-AH   $13.75   $ 5.38   -60.91%
                 JAN-2003 $ 45  VKW-AI   $15.63   $ 7.38   -52.82%
GM     08/06/00  JAN-2002 $ 65  WGM-AM   $ 9.88   $12.50    26.52%
                 JAN-2003 $ 65  VGN-AM   $13.25   $16.13    21.70%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $39.63    26.27%
                 JAN-2003 $100  VFB-AT   $37.38   $44.63    19.38%
BRCD   08/27/00  JAN-2002 $220  YNU-AD   $65.38   $80.38    22.94%
                 JAN-2003 $220  OMW-AD   $86.50   $102.25   18.21%
INKT   08/27/00  JAN-2002 $130  XOR-AF   $50.13   $39.50   -21.20%
                 JAN-2003 $140  VFR-AH   $60.88   $50.38   -17.26%
VERT   09/03/00  JAN-2002 $ 60  YER-AL   $22.13   $ 9.00   -59.32%
                 JAN-2003 $ 60  OER-AL   $28.88   $13.63   -52.81%
CMRC   09/10/00  JAN-2002 $ 80  YCU-AP   $30.13   $33.25    10.36%
                 JAN-2003 $ 80  OCU-AP   $38.75   $43.00    10.97%
PHCM   09/10/00  JAN-2002 $ 90  YPH-AR   $45.75   $57.38    25.41%
                 JAN-2003 $ 90  OFO-AR   $52.50   $63.63    21.19%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $25.63    13.89%
                 JAN-2003 $ 70  VLM-AN   $29.63   $33.75    13.90%
BRCM   09/24/00  JAN-2002 $250  YRR-AJ   $77.13   $74.63   - 3.25%
                 JAN-2003 $260  OYG-AL   $95.63   $93.75   - 1.97%

Spotlight Play

C - Citigroup $54.06

After giving us a stellar run into its 4-for-3 split a month
ago, it was natural that C would have to face some profit
taking.  Following its historical pattern, the stock looks like
it is finding good support right at the 100-dma (currently
$51.31), and just above the $50 historical support.  Financial
stocks needed to come down a little, and now that they have, it
looks like it may be time for them to run again.  With its
impressive financials and strong management team, C looks like
it has plenty of room to run.  We aren't alone in this opinion,
as Banc of America Securities initiated coverage with a Buy
rating 2 weeks ago, while ING Barings began coverage on Friday
with a Strong Buy.  There seems to be some decent support at $52
as well, giving us a couple good levels to target shoot new
entries.  More conservatively, wait for buying volume to propel
C through the 30-dma ($55.63) and the 50-dma ($54.91) before
initiating new positions.

BUY LEAP JAN-2002 $60.00 WRV-AL at $ 8.25
BUY LEAP JAN-2003 $60.00 VRN-AL at $12.25

New Plays

COMS - 3com Corporation $19.19

3Com received a lot of investor attention back in March when
it spun off the PALM handheld computing division.  Since then,
the company has refocused on home-networking, high-speed modems
and wireless and Internet telephony.  After the hype that
surrounded COMS' spinoff of the PALM division in March, the
stock had two factors to overcome - the typical post-spinoff
depression and the weakness in the technology sector as a whole.
Gradually recovering throughout the summer, the string of higher
lows and higher highs got snapped with the post-Labor day
selloff.  Plunging back to support at $14, our new play had new
life breathed into it in the form of a stellar earnings report
last Tuesday.  Posting a loss of only 12 cents vs. estimates in
the 19-25 cent range, galvanized buyers, and prompted an upgrade
from Morgan Stanley Dean Witter.  In their conference call, the
company stated that they have turned the corner and are headed
back towards profitability.  With volume still clocking in at
more than double the ADV on Friday, COMS has seen nearly a 50%
surge in its share price in the past 3 days, which puts it above
the early August highs.  This definitely puts our play into
rally mode, and we would be looking for attractive entry points
in the near future.  Continued strong moves over the $20 level
are definitely buyable, as are dips to support at $18 or $17,
followed by a resumption of the uptrend.

BUY LEAP JAN-2002 $20.00 WTH-AD at $6.38
BUY LEAP JAN-2003 $25.00 VTH-AE at $7.13

WCOM - Worldcom Inc. $30.38

We've been watching WCOM for months now, waiting for a bottom
to form, and it looks like we got the perfect setup late this
week.  Telecom stocks have been utterly decimated in recent
months, and select stocks like WCOM seem to have been
excessively punished.  After tracing a low of $25.25 in the
middle of last week, the bulls couldn't take it any more and
rushed in to take advantage of the bargain.  Volume was strong
throughout Thursday and Friday, as we witnessed the stock gain
20% from its extremely oversold position.  WCOM is a
telecommunications powerhouse, with the right attitude about
the market in which they operate.  Unlike AT&T, WCOM has
embraced the paradigm that voice traffic is declining and the
future of any Telecom provider will depend on their ability to
serve up data and other forms of rich-media content to their
subscribers.  By Friday afternoon, everything on the chart was
looking rosy, with Stochastics and MACD turning positive, the
price moving back up through the $30 support level, and volume
well above the daily average.  We need to see the $30 level hold
as support, and would consider any upward move off of this level
as an attractive buying opportunity.  The options are so cheap
that with only a $10 move in the stock, the 2002 LEAP will be
sitting at 100% profit.  Those of you with more modest trading
accounts will really appreciate the beauty of this play.

BUY LEAP JAN-2002 $35.00 WQM-AG at $6.75
BUY LEAP JAN-2003 $35.00 VQM-AG at $9.88


YHOO $91.00

Making the round trip from New to Drop in record time, we are
throwing YHOO off the list for misbehaving.  While we thought
the $100 level looked like a support level that would hold, the
bears had other ideas in mind and promptly violated it on
Wednesday morning.  Far from being a short trip, YHOO spent
the remainder of the week underwater, closing out the month of
September at its lowest point in nearly a year.  We didn't get
anything approaching a decent entry on our play, and rather than
look for a new level of support that might hold up better, we
are cutting the strings on a clearly busted play.


"A Gentle Rapping At My Door"
By Ryan Nelson

Straight out of the Raven by Edgar Allen Poe, many are hoping
to avoid an unwelcome visit of a market debacle.  The only
momentum currently in the market is to the downside as warnings
have bruised market sentiment.  That has made it difficult
for split plays to gain their footing.  I mentioned GLW and
AVNX as possible plays last week, but they disappointed.  I
guess this will have to be one of those "if you liked them
at that price, you'll love them at this price" deals.  But,
I would wait for strong signs of a reversal in all stocks
that have a similar trend as the Nasdaq.  No point in jumping
the gun though or your portfolio will be "nevermore".

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 = 23

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

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

Symbol  Company Name                Splits  Payable    Executable
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
BVF  - Biovail Corporation            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
DST  - DST Systems, Inc.              2:1  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 10-01-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:


Conservative Option Trading: A Simple Strategy...
By Mark Wnetrzak

Success in the stock market depends on many things and those who
have learned how to consistently profit in this game are few and
far between.  There are numerous approaches to determining market
direction including: charting with technical trend or momentum
indicators, contrarian systems that use sentiment indexes or put
and call ratios, and valuation techniques such as fundamental
analysis.  One of the most important issues that new investors
overlook is, regardless of the method, the stock market is very
difficult to predict and the value of time spent trying can often
outweigh the gains from the outcome.

We all use different systems to determine when to buy and sell
specific issues (most of them based on technical analysis) but
to profit with directional option trading, a trader must correctly
predict the movement of the underlying issues as well as the time
frame in which the move will occur.  A successful trader must also
have a solid understanding of implied volatility in order to enter
the position at a fair price and determine a reasonable goal for
the outcome of the play.  Even with the best techniques, this type
of trading involves above average skill and timing, including the
initial selection of the position (and its size) along with risk
management in identifying target exit points and the correct use
of stops to preserve capital.  To complicate matters, some experts
suggest that success from directional strategies can be virtually
impossible on a regular basis and the inconsistency of returns
will prevent all but the most wealthy traders from surviving the
short-term losses.

With all of the difficulties involved in directional trading, are
there any techniques that offer the average investor a reasonable
opportunity to profit in a comfortable, low maintenance strategy?
We believe that writing covered-calls fits this description quite
successfully.  A strategy based on stock ownership is much easier
to manage on a day to day basis than directional trading and it
offers a favorable balance of risk versus profit potential for
those who attempt to predict stock movement and magnitude.  The
strategy is more conservative than just buying stock, due to the
fact that a premium is collected, lowering the break-even price on
the stock position and the concept is attractive to the investor
who is willing to limit his upside potential in exchange for some
downside protection.  In addition, the technique is well suited
for individual retirement and Keogh accounts.

Investors that hold large positions in a specific stock can choose
a form of risk/reward diversification by spreading the sold calls
over time as well as different strike prices.  A trader can gain
several benefits by writing a portion of the calls near-term and
the remaining calls further in the future.  In the event of large
stock price fluctuations, all of the various positions will not
need to be adjusted at the same time.  This activity may include
either having the stock called away, or buying back a particular
written call and selling another.  Another advantage is that the
level of option premiums may become more favorable than when the
original series of calls were written.  At worst, only one group
of options would be sold when the premiums are low and hopefully
they would increase in value before the next expiration period.
This type of diversification will also allow an investor to own
various positions at different prices, smoothing the portfolio
balance as the market fluctuates cyclically.  This also prevents
all of one's stock from being committed at a single price.  With
these unique combination positions, the covered write offers an
excellent balance between potential return and favorable downside

Although this approach might not be suitable for everyone, many
investors will find the technique fits their comfort level and
lifestyle much better than other stock option strategies.

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

IMGN   26.19  34.19   OCT  22.50  5.50  *$  1.81   7.6%
EFCX   11.88  10.75   OCT  10.00  2.63  *$  0.75   7.0%
CTIC   50.13  66.69   OCT  40.00 12.50  *$  2.37   6.8%
GLGC   24.75  23.00   OCT  20.00  6.38  *$  1.63   6.4%
EPTO   14.00  13.19   OCT  12.50  2.50  *$  1.00   6.3%
WDC     5.75   5.88   OCT   5.00  1.19  *$  0.44   6.2%
SYNM   20.75  20.38   OCT  17.50  4.38  *$  1.13   6.0%
BCGI   20.00  19.25   OCT  17.50  3.38  *$  0.88   5.8%
LBRT   30.00  28.94   OCT  22.50  9.13  *$  1.63   5.7%
NIKU   23.69  24.38   OCT  20.00  4.63  *$  0.94   5.4%
GNSS   19.31  18.25   OCT  17.50  2.63  *$  0.82   5.3%
IMGN   21.81  34.19   OCT  17.50  5.50  *$  1.19   5.3%
PRST   20.13  19.19   OCT  17.50  3.63  *$  1.00   5.3%
MSTR   31.38  27.31   OCT  25.00  8.25  *$  1.87   5.2%
CYBS   12.69  11.31   OCT  10.00  3.13  *$  0.44   5.0%
WGAT   22.88  21.00   OCT  17.50  6.63  *$  1.25   5.0%
AAS    42.28  47.00   OCT  40.00  4.00  *$  1.72   4.9%
TRIH   32.38  29.38   OCT  30.00  3.50   $  0.50   1.9%
WPZ     5.19   4.25   OCT   5.00  0.94   $  0.00   0.0%
NEOF    5.81   3.72   OCT   5.00  1.94   $ -0.15   0.0%
GSTRF  11.50   8.63   OCT  10.00  2.25   $ -0.62   0.0%
NETS    6.25   3.81   OCT   5.00  1.75   $ -0.69   0.0%
TIVO   26.88  19.38   OCT  22.50  6.13   $ -1.37   0.0%
WAVX   24.06  16.75   OCT  20.00  5.63   $ -1.68   0.0%
VNTR   17.00  11.00   OCT  15.00  3.75   $ -2.25   0.0%
RHAT   26.69  17.06   OCT  22.50  6.00   $ -3.63   0.0%

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


The current bearish conditions may exaggerate normal corrections,
but money management (and capital preservation) dictates exiting
issues that have failed technically.  Red Hat (RHAT) has broken
below the July low as well as the May-July trend-line: we will
show the issue closed.  Ventro (VNTR) has broken recent support,
closing at a new low.  We would use the current rally to adjust
the cost basis or obtain a less painful exit.  Wave Systems (WAVX)
appears to have made a successful test of the August low but has
broken through a major trend-line starting with the May low; an
early exit may be the best remedy.  Tivo (TIVO) has yet to move
below the August low or the April-August trend-line; maintain a
daily vigil on the issue and evaluate rolling down/forward.  The
key to financial success is stemming the outflow of capital - a
lesson we all must frequently relearn!


Sequenced by Company

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

ASPX   12.38  OCT  10.00  XUM JB  2.75  813   9.63   21     5.6%
CCUR   19.00  OCT  17.50  URC JW  2.38  662  16.63   21     7.6%
ISIP   11.50  OCT  10.00  QIS JB  1.81  123   9.69   21     4.7%
KOSP   19.75  OCT  17.50  KQW JW  2.81  190  16.94   21     4.8%
NIKU   24.38  OCT  17.50  NFU JW  7.50  0    16.88   21     5.3%
RCOT   15.81  OCT  15.00  ROQ JC  1.44  152  14.37   21     6.4%
SVGI   26.31  OCT  20.00  VQQ JD  7.38  0    18.93   21     8.2%

Sequenced by Return

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

SVGI   26.31  OCT  20.00  VQQ JD  7.38  0    18.93   21     8.2%
CCUR   19.00  OCT  17.50  URC JW  2.38  662  16.63   21     7.6%
RCOT   15.81  OCT  15.00  ROQ JC  1.44  152  14.37   21     6.4%
ASPX   12.38  OCT  10.00  XUM JB  2.75  813   9.63   21     5.6%
NIKU   24.38  OCT  17.50  NFU JW  7.50  0    16.88   21     5.3%
KOSP   19.75  OCT  17.50  KQW JW  2.81  190  16.94   21     4.8%
ISIP   11.50  OCT  10.00  QIS JB  1.81  123   9.69   21     4.7%

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 $12.38   *** Entry Point! ***

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.  Recently, 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
estimates.  The company just completed a private placement of
its common stock realizing gross proceeds of $90.1 million and
that should help fund future growth.

OCT 10.00 XUM JB LB=2.75 OI=813 CB=9.63 DE=21 MR=5.6%

CCUR - Concurrent Computer  $19.00  *** Video-On-Demand ***

Concurrent Computer is a leading provider of high-performance
computer systems, software, and servers.  Concurrent Computer's
XSTREME Division is a leading supplier in the emerging digital
video server marketplace.  Concurrent is also a leading provider
of high-performance, real-time computer systems, solutions, and
software for commercial and government markets.  The company
provides sales and support from offices throughout the world.
Concurrent has reported seven consecutive quarters of growth
in Video-On-Demand (VOD) revenue from its XSTREME Division.
The future for this division looks bright with the commercial
launch of VOD service in the Tampa Bay region by Time Warner
and the preliminary deployment with Cox Communications in San
Diego.  Recently, Lufthansa Flight Training has purchased a
Concurrent MediaHawk Video Server, a leading VOD system, for
use in emergency training for crews.  Jefferies & Co. rated
Concurrent a "buy" in new coverage with a $25 price target.

OCT 17.50 URC JW LB=2.38 OI=662 CB=16.63 DE=21 MR=7.6%

ISIP - Isis Pharma  $11.50  *** Biotech Speculation! ***

Isis Pharma is exploiting its expertise in RNA to discover and
develop novel human therapeutic drugs.  Isis has commercialized
its first product, Vitravene(TM) (fomivirsen), to treat CMV
induced retinitis in AIDS patients.  In addition, Isis has 11
products in its development pipeline, 6 of which are in Phase II
human clinical trials.  Isis has a broad and proprietary patent
estate of over 700 issued and allowed patents worldwide.  Isis
recently announced the licensing of its 3rd generation antisense
chemistry, Peptide Nucleic Acid (PNA), to Pantheco A/S, a Danish
biotechnology company.  Isis will receive 9 million DKK, or $1.1
million, payable in Pantheco shares, on approval and completion
of Pantheco's financing.  On Thursday, Isis announced that Coley
Pharmaceutical will pay a total of $10.7 million for the sale of
patents concerning the use of phosphorothioate oligonucleotides
for activating the immune system.  The potential for near-term
revenue generation from Isis' intellectual property portfolio is
a key component of their financial strategy as they continue to
realize substantial funds from their investment in a wide range
of antisense biological discoveries and chemistry inventions.

OCT 10.00 QIS JB LB=1.81 OI=123 CB=9.69 DE=21 MR=4.7%

KOSP - Kos Pharma  $19.75  *** New Drug Application ***

Kos Pharmaceuticals is a fully integrated specialty pharmaceutical
company engaged in developing and commercializing proprietary
prescription pharmaceutical products, primarily for the treatment
of chronic cardiovascular and respiratory diseases.  Kos has drug
delivery capabilities in both solid and aerosolized formulation
technologies.  Currently, the company's success depends primarily
upon its ability to successfully market and sell its Niaspan.
product, with last quarter showing a growth of $6.1 million in
net sales.  The stock rallied after reporting favorable earnings
in August and has recently moved to a new six-month high on heavy
volume.  On Tuesday, Kos and DuPont Pharma finally submitted the
anticipated NDA for a new cholesterol product (formerly called
Nicostatin) combining Kos' Niaspan and Lovastatin, with an
expected commercial release by the end of 2001, assuming FDA
approval.  Due diligence is a must!

OCT 17.50 KQW JW LB=2.81 OI=190 CB=16.94 DE=21 MR=4.8%

NIKU - Niku  $24.38  *** Bracing For A Rally? ***

Niku Corporation provides Internet software products as well as
an online marketplace for the sourcing, management and delivery
of professional services.  These services include consulting,
financial, medicine, law, advertising and other industries.
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.
The Niku 2000 Users Conference, which was booked to capacity,
kicks off on Sunday, October 1.

OCT 17.50 NFU JW LB=7.50 OI=0 CB=16.88 DE=21 MR=5.3%

RCOT - Recoton  $15.81  *** Stealth Rally? ****

Recoton is a global leader in the development, manufacturing and
marketing of consumer electronic accessories, loudspeakers and car
audio products.  Recoton's more than 4,000 products feature highly
functional accessories for audio, video, car audio, camcorder,
multi-media/computer, home office, cellular and standard telephone,
music and video game products and 900 MHz wireless technology
headphones and speakers.  The Company also produces and markets
audio components, high fidelity loudspeakers, home theater
speakers, and car audio speakers and components.  No news since
reporting favorable earnings on August 9, yet the stock has
doubled in price.  Even the message boards are rather quiet.
This week's jump of $1.56 also remains unexplained, but it moved
the stock above last February's resistance.  The tape tells all,
and somebody appears to be listening.

OCT 15.00 ROQ JC LB=1.44 OI=152 CB=14.37 DE=21 MR=6.4%

SVGI - Silicon Valley  $26.31  *** Big Rally! ***

Silicon Valley Group is a leading manufacturer of automated wafer
processing equipment for the worldwide semiconductor industry.
The company designs, manufactures and markets sophisticated
equipment used in the early stages of semiconductor manufacturing.
Its products include photolithography exposure tools; photoresist
processing equipment; oxidation, diffusion and low-pressure
chemical vapor deposition processing systems; atmospheric pressure
chemical vapor deposition systems and precision optical components
and systems.  In early September, Silicon Valley announced that
its 157 nm lithography program received an order for its Micrascan
157 full-field step-and-scan lithography system from the leading
Taiwanese pure-play foundry.  That's it for September; no other
news!  So what's up with the high volume rally on Thursday and
Friday?  Maybe a "non-warning" relief rally or mutual-fund markup?
There was heavy call volume on Friday for many of the strikes,
with 200 contracts opening up on the October $20 series.  This
position takes advantage of the overpriced option to speculate
conservatively on Silicon Valley's move.

OCT 20.00 VQQ JD LB=7.38 OI=0 CB=18.93 DE=21 MR=8.2%

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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   80.81     75  AXY-VO    4.63   2020   23%      75
AGIL   89.94     80  AUG-VP    3.63   2249   16%      80
AMCC  207.06    200  AZV-VT   10.25   5177   20%     190
ARBA  143.25    135  RBU-VG    8.63   3581   24%     135
ARTG   94.75     90  ARY-VR    5.25   2369   22%      85
BRCM  243.75    240  RDU-VH   12.13   6094   20%     240
CFLO  143.00    140  FUJ-VV    8.38   3575   23%     140
CHKP  157.56    150  KGE-VJ    6.63   3939   17%     150
CIEN  122.81    120  UEZ-VD    7.63   3070   25%     118
CREE  116.25    110  CQR-VB    4.25   2906   15%     110
EMLX  122.50    115  UMQ-VC    5.75   3063   19%     115
EXTR  114.50    110  EXR-VB    7.25   2863   25%     110
GILD  109.69    105  GDQ-VA    5.75   2742   21%     105
GLW   298.00    290  GWD-VR   16.00   7450   21%     290
GSPN  122.00    110  GHY-VB    5.75   3050   19%     110
HGSI  173.13    165  HBW-VM    8.75   4328   20%     165
ITWO  187.06    180  QYI-VP   10.00   4677   21%     180
JNPR  219.06    210  JUD-VB   12.13   5477   22%     210
MEDX  117.31    110  MZU-VB    4.63   2933   16%     110
MERQ  156.75    145  RBF-VI    7.25   3919   19%     145
MLNM  146.06    140  QMR-VH    7.50   3652   21%     140
MUSE  200.88    190  UZQ-VR    9.25   5022   18%     190
PDLI  120.50    115  RPV-VC    8.13   3013   27%     115
PMCS  215.44    210  SZI-VB   10.88   5386   20%     215
QCOM   71.50     70  AAO-VN    3.50   1788   20%      70
RBAK  163.94    160  BKK-VL    9.38   4099   23%     160
SCMR  108.00    100  QSM-VT    4.75   2700   18%     100
SDLI  309.31    300  QJV-VT   16.25   7733   21%     300
SEBL  111.31    105  EZG-VA    3.88   2783   14%     105
VRTS  142.00    135  VUQ-VG    6.88   3550   19%     135
WEBM  115.13    110  OUW-VB    6.75   2878   23%     110
XLNX   85.63     80  XLQ-VP    3.25   2141   15%      80


Stock Buying Basics: A Balanced Perspective...
By Ray Cummins

Determining when to enter the market is one of the most difficult
tasks that new investors encounter in their quest for success.  A
thorough grasp of technical analysis is only one aspect of the
knowledge and skill required to prevail in the current volatile
environment.  For any trader, the end objective is profit and the
most effective method to achieving this result is to form a view
that eventually proves to be accurate.  At the same time, one must
also be positioned to obtain the greatest return from the correct
forecast of future market trends.  That step requires a complete
mastery of trading techniques and the ability to correctly apply
a specific strategy to any particular situation.  With this simple
approach, the route to consistent profits is simply a matter of
identifying the trend and using a proven trading system to exploit
each position for maximum potential.

Before an investor can successfully initiate a position, there are
a number of factors to consider.  The most important being the
overall condition of the market and the economy in general.  What
types of indications are bonds, basic commodities and currencies
offering in relation to the outlook for equities?  Is the market
falling in expectation of higher interest rates or has the Fed's
prolonged attack on inflation expended its maximum effect?  Will
the influence of the weakening Euro significantly reduce profits
in the leading American corporations over the long-term and more
importantly, how will their bottom line growth be affected by the
rising cost of energy?  Finally, is all of the available economic
information reflected in the current share values or is the recent
market slump simply due to the majority's present interpretation
of the most popular news items.  In all cases, an investor must
possess a basic understanding of market fundamentals to interpret
and act upon the numerous statistical releases and daily analysis
of financial trends.

Technical and sentimental analyses are also very effective means
to determine the future direction of the market.  The key is to
identify situations in which the trend is really "your friend" and
conversely, when it is more appropriate for a contrarian approach.
Some questions that should be answered include: Is the underlying
market currently in a strong trend and if so, how far can it go?
Has the ideal opportunity already passed or is it viable to enter
a new position at this time?  In short, how many traders have the
same outlook and have they previously acted on that assessment or
is there additional potential for favorable activity in the issue?
A common a rule of thumb is that when all the retail participants
finally begin to support the movement, it is generally a good time
to think about exiting the position.  One concept that can not be
overlooked is the value of historical indicators.  Professional
traders pay serious attention to them and they have too great an
impact on equity markets to be disregarded.  All investors should
understand at least the basic chart patterns, such as support and
resistance and simple moving averages.  Complex indicators such as
Stochastics and Moving Average Convergence/Divergence (MACD) can
be used as a trader gains experience, to help identify overbought
and oversold situations.  In addition, information sources need to
be studied as part of the process of market awareness.  Analysis
from well known gurus, screening services, charting products and
statistics and other related data can provide valuable assistance.
Stocks and their respective industries, and the overall condition
of the market are so intertwined that in most cases, the need to
remain in tune with current attitudes is paramount to success.

Determining the future direction of the market is only the first
step in profiting from a particular position.  Investors need to
consider a variety of issues that will affect the strategy used
to achieve the highest return from an accurate forecast of market
trends.  First, what is the time frame of the expected movement
and is it critical to enter the trade at specific point or can
the position be initiated gradually as the activity progresses?
What constitutes the ideal "buy" or "sell" signal and is there
a chance the indications will be incorrect?  What is the likely
size of the movement, and is the market expected to gap or move
slowly in the predicted direction?  Is there any limitation to
the magnitude of the movement (resistance/support) and are there
any upcoming events or circumstances that might cause a reversal
in the market?  If the position is based on technical analysis,
where should the stop-loss limits and profit targets be placed?
Will it be practical to exit the trade incrementally, achieving
some profit from future favorable movement, or will quick actions
and minimal exposure be more successful overall?  Finally, how
convinced are you that the outlook for the position is correct
and that the risk is worth the potential reward?

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

ASPX   12.25  12.38   OCT  10.00  0.50  *$  0.50  17.2%
WGAT   23.31  21.00   OCT  17.50  0.56  *$  0.56  11.7%
AND     8.88   7.65   OCT   7.50  0.31  *$  0.31  10.9%
PLNR   19.75  18.63   OCT  15.00  0.69  *$  0.69  10.8%
LBRT   32.44  28.94   OCT  22.50  0.63  *$  0.63   9.6%
NITE   37.00  36.00   OCT  30.00  0.88  *$  0.88   8.8%
ALLP   16.50  15.25   OCT  12.50  0.50  *$  0.50   8.5%
UNM    25.00  27.25   OCT  22.50  0.63  *$  0.63   8.4%
NERX   23.00  24.50   OCT  17.50  0.38  *$  0.38   8.3%
CMNT   21.00  34.38   OCT  17.50  0.56  *$  0.56   7.4%
CDN    27.13  25.69   OCT  25.00  0.81  *$  0.81   7.4%
PRBZ   29.44  30.25   OCT  25.00  0.50  *$  0.50   6.9%
WGR    26.25  25.06   OCT  22.50  0.56  *$  0.56   6.7%
DRXR   19.06  19.06   OCT  15.00  0.38  *$  0.38   6.6%
STAT   20.00  22.63   OCT  15.00  0.44  *$  0.44   6.4%
SCUR   26.25  26.06   OCT  17.50  0.50  *$  0.50   6.3%
NIKU   24.88  24.38   OCT  17.50  0.38  *$  0.38   6.2%
VITR   48.94  46.63   OCT  30.00  1.00  *$  1.00   6.0%
XRX    17.75  15.00   OCT  15.00  0.31   $  0.31   5.8%
CTIC   50.13  66.69   OCT  35.00  0.56  *$  0.56   5.7%
CLTR   36.75  28.88   OCT  30.00  1.13   $  0.01   0.1%
WAVX   24.06  16.75   OCT  17.50  0.63   $ -0.12   0.0%
GOTO   22.75  16.50   OCT  17.50  0.50   $ -0.50   0.0%

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


Goto.Com (GOTO) appears to have made a successful test of the
August low though exiting on any rally is the only sure way to
avoid owning the issue.  Wave Systems (WAVX) appears to have
made a successful test of the August low but has broken through
a major trend-line starting with the May low; another candidate
for an early exit.  Coulter Pharma (CLTR) is testing its 50 dma;
a key moment.  Closing below this technical support should be
considered a bearish indication.  Xerox (XRX) has lost momentum
quickly and is now testing the August low; another one to watch
closely.  Monitor Cadence Design (CDN) and Andrea Electronics
(AND) for signs of technical failure.


Sequenced by Company

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

CERN   46.44  OCT  40.00  CQN VH  0.50  77   39.50   21     5.7%
CSTR   13.56  OCT  12.50  QLR VV  0.56  0    11.94   21    16.5%
ECLP   16.00  OCT  12.50  IQV VV  0.38  40   12.13   21    15.2%
FNSR   48.38  OCT  40.00  FQY VH  0.69  993  39.31   21     8.5%
GLGC   23.00  OCT  17.50  CYV VW  0.31  26   17.19   21     9.1%
NIKU   24.38  OCT  15.00  NFU VC  0.38  0    14.63   21    10.3%
NITE   36.00  OCT  30.00  QTN VF  0.63  8546 29.38   21    10.0%

Sequenced by Return

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

CSTR   13.56  OCT  12.50  QLR VV  0.56  0    11.94   21    16.5%
ECLP   16.00  OCT  12.50  IQV VV  0.38  40   12.13   21    15.2%
NIKU   24.38  OCT  15.00  NFU VC  0.38  0    14.63   21    10.3%
NITE   36.00  OCT  30.00  QTN VF  0.63  8546 29.38   21    10.0%
GLGC   23.00  OCT  17.50  CYV VW  0.31  26   17.19   21     9.1%
FNSR   48.38  OCT  40.00  FQY VH  0.69  993  39.31   21     8.5%
CERN   46.44  OCT  40.00  CQN VH  0.50  77   39.50   21     5.7%

Company Descriptions

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

CERN - Cerner Corporation  $46.44  *** New Trading Range? ***

Cerner designs, develops, markets, and supports information
technology, and content solutions for healthcare organizations
and consumers.  These solutions are implemented on individual,
combined or enterprise-wide systems and are accessible on the
Internet by consumers, physicians and healthcare providers.  The
company's integrated suite of solutions enable providers to
improve operating effectiveness, reduce costs, and improve the
quality of care as measured by clinical outcomes.  Cerner's
solutions are designed to provide the appropriate information
and knowledge to care givers, clinicians, and consumers the
correct management information to healthcare administration on
a real-time basis, allowing secure access to data by clinical
and administrative users in organized settings of care and by
consumers from their home.  Some bullish forecasts have boosted
this issue to a new trading range and we favor the opportunity
to own the stock at a lower cost basis.  Target a higher premium
initially to allow for a short-term consolidation.

OCT 40.00 CQN VH LB=0.50 OI=77 CB=39.50 DE=21 MR=5.7%

CSTR - Coinstar  $13.56  *** Ching! Ching! ($$$) ***

Coinstar develops, owns and operates a network of self-service
coin counting machines in the United States, the United Kingdom
and Canada.  The company's Coinstar coin counting units provide
consumers with a fun, accurate and convenient means of converting
accumulated change into cash.  With almost 200 retail partners,
primarily supermarket chains, the company currently operates more
than 7,000 Coinstar units in 85 regional markets across the U.S.
Coinstar is also conducting trials of eight Coinstar units in the
United Kingdom and 26 units in Canada.  Since its inception, the
Coinstar network has processed almost over 50 billion coins with
in more than 69 million customer transactions.  Not much activity
in the news but we like the bullish technical indications and the
current momentum should eventually propel the issue to a 52-week
high near $15.

OCT 12.50 QLR VV LB=0.56 OI=0 CB=11.94 DE=21 MR=16.5%

ECLP - Eclipsys Corporation  $16.00  *** Big Reversal! ***

Eclipsys is a leading healthcare information technology provider.
The company provides, on an integrated basis, enterprise-wide,
clinical management, access management, patient financial
management, health information management, strategic decision
support, resource planning management and enterprise application
integration solutions to healthcare organizations.  Additionally,
the company provides other information solutions including remote
hosting, outsourcing, networking technologies and other related
services.  Last week, Jefferies and Co. initiated coverage on the
issue with a favorable rating and just one day later, Eclipsys and
Mediware Information Systems, the leader in pharmacy information
management systems, announced they have signed an agreement for
Eclipsys to market Mediware's WORx Drug Therapy Management System.
The alignment of these healthcare information solutions vendors
will bring their customers improved clinical decision-making and
enable them to enhance the quality of care delivery throughout a
number of organizations.  We simply favor the recent technical
recovery in the issue.

OCT 12.50 IQV VV LB=0.38 OI=40 CB=12.13 DE=21 MR=15.2%

FNSR - Finisar Corporation  $48.38  *** New Entry Point! ***

Finisar is a leading provider of fiber optic subsystems and
network performance test systems that enable high-speed data
communications over Gigabit Ethernet-based local area networks,
and Fibre Channel-based storage area networks.  Finisar also
provides unique network performance test systems which assist
networking and storage equipment manufacturers in the design of
reliable, high-speed networking systems and the monitoring of
of these systems.  In early August, Finisar announced that it
had delivered the first SONET OC-48 Small Form Factor optical
transceiver units, opening another important market sector as
telecom companies begin the process of upgrading metropolitan
networks to handle the ever-increasing demand for bandwidth.  In
addition, the provider of fiber optics for high-speed networks
said it expects revenues for its most recent quarter to be up
about 95% over last year's results.  The fundamental outlook for
the company is great but we simply favor the bullish technical
condition of the issue and the chance to own it at a slightly
lower price.

OCT 40.00 FQY VH LB=0.69 OI=993 CB=39.31 DE=21 MR=8.5%

GLGC - Gene Logic  $23.00  *** Stage I Base ***

Gene Logic provides a variety of products and services in the
areas of gene information, data management and bio-informatic
software, and pharmacogenomics.  These products and services are
all designed to improve the efficiency and effectiveness of the
drug discovery and development process.  They may also be applied
to research and development in other sectors, such as diagnostics,
animal health, and agriculture.  The company's products combine
software tools with large-scale gene expression information,
which specifies the degree to which genes are active in a broad
range of normal, diseased, and treated conditions.  This unique
combination enables scientists to produce new biological knowledge
by integrating this proprietary expression information with a
growing array of biological information available on the Internet.
Early in September, Dain Rauscher Wessels initiated coverage on
Gene Logic with a "buy" rating and a 12-month price target of $40.
Tuesday, an alliance was announced with the Japanese subsidiary
of Amersham Pharmacia Biotech, granting Amersham distribution
rights to market and sell Gene Logic's products.  This should
provide a powerful platform for creating potential opportunities
in the Japanese pharmaceutical and biotechnology communities.

OCT 17.50 CYV VW LB=0.31 OI=26 CB=17.19 DE=21 MR=9.1%

NIKU - Niku  $24.38  *** Excellent OTM Premium! ***

Niku Corporation provides Internet software products as well as
an online marketplace for the sourcing, management and delivery
of professional services.  These services include consulting,
financial, medicine, law, advertising and other industries.
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 15.00 NFU VC LB=0.38 OI=0 CB=14.63 DE=21 MR=10.3%

NITE - Knight Trading Group  $36.00  *** Merger Speculation! ***

Knight Trading Group is one of the leading market maker in Nasdaq
securities and in the Third Market, which is the over-the-counter
market in exchange-listed equity securities, primarily those on
the New York Stock Exchange and the American Stock Exchange.  The
company has attained its leadership position as a market maker by
providing best execution services to brokers and institutional
customers through its proprietary trading methodology and systems.
The company makes markets in thousands of equity securities on the
Nasdaq and through Trimark, it makes markets in all NYSE and AMEX
securities in the Third Market.  Knight has received expressions
of interest from several potential buyers, but no formal offers
have been made.  Speculators say the likely suitors are willing to
pay $45 to $55 per share for the company and Friday's rumors of a
possible Bear Stearns (BSC) takeover have refueled the fire.  Use
this play to speculate on the outcome of the merger rumors in the
volatile Brokerage group.

OCT 30.00 QTN VF LB=0.63 OI=8546 CB=29.38 DE=21 MR=10.0%

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Just when things were looking up...

The stock market tumbled today after a profit warning from Apple
Computer (AAPL) added to the recent barrage of negative earnings

Friday, September 29

The stock market tumbled today after a profit warning from Apple
Computer (AAPL) added to the recent barrage of negative earnings
forecasts.  The Nasdaq ended down 105 points at 3,672 while the
Dow finished 173 points lower at 10,650.  The S&P 500 index ended
down 21 points at 1,436.  Trading volume on the Nasdaq was heavy
at 1.98 billion shares exchanged, with declines beating advances
2,170 to 1,906.  Activity on the NYSE was brisk with 1.13 billion
shares traded.  Strangely enough, broad market advances outpaced
declines 1,458 to 1,411.  In currency trade, the Euro was higher
against the dollar, despite Denmark's decision to reject the Euro
zone entry.  In the bond market, the 30-year Treasury was flat at
105 1/32, yielding 5.88%.

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

Mattel     MAT   APR12C/OCT12C     $1.19   debit   diagonal
Ariba      ARBA  OCT195C/OCT110P   $3.25   credit  strangle
Sepracor   SEPR  OCT95P/OCT100P    $0.43   credit  bull-put

Mattel threw a wrench into our plans, announcing before the open
that it would sell its Learning Company software unit for just a
fraction of the $3.5 billion paid for the firm just over a year
ago.  Mattel also reported it would cut 350 jobs and slash its
dividend as part of a comprehensive financial realignment plan
designed to generate substantial cost savings and improve the
company's profitability and cash flow.  There were a number of
contracts traded in the spread position but we did not observe a
simultaneous transaction at the target price.  It is difficult to
imagine that a $0.06 discount could not have been achieved with a
combination order.  The Sepracor spread fared no better and the
best observed credit was $0.43.  Ariba traded at our target and
higher as the stock slumped near the end of the session.

Portfolio Plays:

Just when it appeared there was light at the end of the tunnel,
personal computer company Apple (APPL) issued a profit warning,
effectively ending the momentum from Thursday’s bullish session.
Today, Apple's stock plunged over 50% after the company reported
that their fourth quarter earnings will be well below analysts'
consensus estimates.  The news caused all of the major averages
to give back most of their recent gains and initiated a sell-off
in other industry leaders such as Compaq (CPQ), Gateway (GTW),
Dell (DELL), and Hewlett-Packard (HWP).  On the Dow, bellwether
technology issues Microsoft (MSFT) and Intel (INTC) also slumped
amid weakness in the computer group.  Analysts say the slowdown
in PC sales is going to affect earnings in a number of companies
and the negative forecasts are expected to continue.  The rising
cost of energy is also becoming a threat to revenues and today’s
profit warning from United Airlines (UAL) clearly demonstrated
the affect of higher fuel costs on the transportation industry.
UAL said it expects to post a loss for the quarter, an unusual
occurrence for companies in that group.  Alaska Airlines (ALK),
Delta (DAL) and America West (AWA) were all downgraded after the
announcement, dragging the transport index to recent lows.  In
spite of the precipitous decline, there was some bullish activity
during the session with oil and oil service, chemicals, brokerage
and major drug stocks edging higher.

The Spreads/Combos portfolio enjoyed a few standout performances
and the most exciting issue was Research In Motion (RIMM).  The
company’s share value jumped $15 to a recent closing high at $98
after the maker of the popular Blackberry two-way wireless pager
demonstrated that costly marketing programs can produce results.
RIMM reported that its revenues in the second quarter rose 57%,
well above analysts' estimates, as 25,000 new wireless customers
were connected to corporate-based servers and the number of new
companies deploying the pagers rose 25%.  In addition, the firm
announced that America Online is scheduled to launch its version
of the Blackberry later this year and that will mark RIMM's first
major foray into the consumer market.  HNC Software (HNCS) was
another big mover, up almost $6 to $82 on continued momentum from
the recent distribution of Retek (RETK) common stock.  In the
finance and brokerage group, Knight Trading (NITE) experienced a
solid rebound, climbing back to the $36 range amid speculation of
new mergers in the sector.  In the small-cap category, Maxtor
(MXTR) rose $1.62 to $10.50 after Business Week reported that a
major data-storage company is preparing a $20 per share bid for
Maxtor’s common stock.  Our bullish calendar spread returned a
favorable early-exit profit as the issue moved through the sold
strike price.  Traders who expect further upside movement in the
issue can roll to a NOV-$12 call in the short position.  Another
surprise move occurred as Ventro (VNTR) came bouncing back, up
almost $2 to end near $11 as new coverage was initiated on the
company by UBS Warburg.  The unexpected rally provided a great
opportunity to adjust the position forward and down to a lower
cost basis.

One of our recent credit-spread issues is testing the bottom of
a current trading range and the outcome will likely determine a
new trend for the issue.  Plug Power (PLUG) has reached a key
technical moment and if the issue falls through support at $35,
we will roll out of the bullish spread or transition to a lower
strike price position in a future month.  Enzo Biochem (ENZ) is
another issue with similar characteristics and we will monitor
the stock’s technical character as it approaches the lower end
of a trading range in the next few sessions.  "Bull-put" credit
spreads are one of the most popular limited-risk strategies and
there are ways to reduce potential losses or even capitalize on
a reversal or transition to a downward trend.  There are three
common methods to exit or cover a losing credit spread and the
alternatives include "legging-out," rolling down and out to a
longer-term spread or "shorting" the underlying issue.  First,
you can simply close the position at a debit and register the
loss.  There is also Jim's popular technique; covering the short
position as the stock moves through the sold strike.  This is a
great method for bailing out on an issue that has unexpectedly
reversed course but you must also be prepared to buy it back in
the event of a recovery.  Another option is to "leg-out" of the
spread for profit (or at least a break-even basis).  To leg out
of a credit spread, place an order to close the short position
anytime the stock trades (and preferably closes) below technical
support or an established trend line (or moving average) on heavy
volume.  There are other, more precise exit signals that can be
used to initiate the trade but this technique is based on the
historical probability that once a primary trend is reversed, the
issue will continue to move in the new direction for at least a
short period.  After the sold (short) position is repurchased,
wait for the stock to lose momentum and sell the long position to
close the entire play.  It is a difficult technique to perform
when emotion enters the formula but it works well once you become
experienced with it.  The key to success is using the method at
known support levels or after obvious reversal signals.  Otherwise,
you are simply speculating about the stock's next move.

Remember, in all cases where an attempt to recover a losing play
is made, you must be prepared for further draw-downs and have
thorough knowledge of the strategy.  As with any technique, it
must also be evaluated for portfolio suitability and reviewed
with regard to your specific experience level and trading style.

Questions & comments on spreads/combos to Contact Support

                         - NEW PLAYS -
MXTR - Maxtor  $10.50  *** Takeover Play? ***

Maxtor is a supplier of hard disk drive storage products for
desktop computer systems.  The company's DiamondMax product
family consists of 3.5-inch hard disk drives with storage
capacities that range from 4.3 gigabytes to 60 gigabytes.  Some
of Maxtor's most popular products are the DiamondMax VL 30 and
Diamond Max 60, both 5,400 rpm products.  The DiamondMax VL 30
provides capacity of 7.5 gigabytes up to 30 gigabytes and
provides cost-optimized storage for the Entry and Mainstream
segments of the market.  The DiamondMax 60 provides up to 60
gigabytes of storage for high-end applications.

The tape data storage sector is HOT and Maxtor shares soared on
Friday after BusinessWeek's "Inside Wall Street" column reported
that a major computer data-storage company plans to bid $2.3
billion, or $20 per share, for the company.  Maxtor officials did
not comment but some traders speculated that Hewlett-Packard (HWP)
could be the buyer.  The BusinessWeek story said Maxtor is seen
as an attractive target because of its file serving and data
storage products.  We like the bullish technical breakout and the
favorable option premiums.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL  NOV-7.50   MQL-KU  OI= A=$3.88
SELL CALL  OCT-10.00  MQL-JB  OI= B=$2.00

BBC - Bergen Brunswig  $11.69  *** New Trading Range! ***

Bergen Brunswig is a diversified drug & health care distribution
organization.  The company is a wholesaler of pharmaceuticals,
medical-surgical supplies and specialty healthcare products to
the managed care and retail pharmacy markets, and also markets
pharmaceuticals to long-term care and seriously ill patients.
The company provides product distribution, logistics, pharmacy
management programs, consulting services and Internet fulfillment
services designed to reduce costs and improve patient outcomes
across the entire healthcare spectrum.

Bergen Brunswig rallied last week as Goldman Sachs raised its
investment rating on the company to "market out-performer" and
boosted its earnings estimates for the coming year.  Now the
issue is in a new trading range and after a brief period of
consolidation, it should continue to drift higher.  There are
favorable disparities in the front-month option premiums and
we will use this small advantage to open a bullish position in
the issue.  We offer this play for traders who are aware of the
potential adjustments necessary in a calendar spread and favor
active participation in longer-term positions.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  DEC-12.50  BBC-LV  OI=248  A=$0.88
SELL CALL  OCT-12.50  BBC-JV  OI=212  B=$0.31

ADVP - Advance Paradigm  $42.19  *** Entry Point! ***

Advance Paradigm is a provider of health improvement services,
offering its clients a comprehensive array of pharmacy benefit
management, disease management, clinical trials and research,
web-based marketing support and other health-related programs.
The company generates revenues from providing services to two
primary customer groups -- health benefit plan sponsors and
pharmaceutical manufacturers.  The broad range of health plan
sponsors the company markets to includes Blue Cross Blue Shield
and other managed care organizations, third-party administrators
of health plans, insurance companies, government agencies,
employer groups and labor union-based trusts.  The company
provides its clinical research services primarily to
pharmaceutical manufacturers.  The company also works closely
with pharmaceutical manufacturers in negotiating lower drug
prices for its health plan sponsor customers.

Advance Paradigm is striving to become the #1 company in its
niche industry and the upcoming acquisition of Rite Aid's PCS
Health Systems is expected to catapult ADVP to the top of the
heap in the highly competitive business.  In addition, Advance
Paradigm recently signed a multi-year agreement to provide
services to Empire BlueCross BlueShield.  The company will offer
enhanced capabilities through its unique solutions, generating a
better quality of care and improved costs to customers.  Their
long-term focus on quality, along with an ongoing commitment to
health improvement makes the company a true leader in the small
group of health service management providers.

Based on the recent bullish activity in the stock, investors
are confident about the future of the company.  We also have a
positive outlook for the stock but there will likely be a period
of consolidation as the issue faces profit-taking in the coming
sessions.  Target a higher premium initially, to enter the play.

PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-30  QVD-VF  OI=2   A=$0.38
SELL PUT  OCT-35  QVD-VG  OI=17  B=$1.06
INITIAL NET CREDIT TARGET=$0.88-$1.00  ROI(max)=25%

WCOM - WorldCom  $30.38  *** Reader's Request! ***

WorldCom provides a broad range of communications, outsourcing,
and managed network services to both U.S. and non-U.S. based
corporations.  WorldCom is a global communications company
utilizing a facilities-based, on-net strategy throughout the
world.  The company's core business is communications services,
which includes voice, data, Internet and international services.
From private networking (frame relay and asynchronous transfer
mode (ATM)) to high capacity Internet and related services, to
hosting for complex, high-volume mega-sites, to turn-key network
management and outsourcing, WorldCom provides one of the broadest
range of Internet and traditional, private networking services
available from any provider.

One of our subscribers noticed the increased buying activity in
the Telecom group and specifically in WordldCom.  He requested
that we identify some favorable spread positions in the issue
and based on the recovering technical outlook and increased
option interest, the easiest way to profit from future upside
activity may involve one of the most common forms of bullish
option positions.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  OCT-32.50  LDQ-JZ  OI=14967  A=$0.50
SELL PUT   OCT-27.50  LDQ-VY  OI=10737  B=$1.00

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $500 per contract.


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.

IBM - International Business Machines  $112.63  ** Going Down? **

International Business Machines Corporation uses advanced
information technology to provide customer solutions.  The
company operates primarily in a single industry using several
segments that create value by offering a variety of solutions
that include, either singularly or in some combination,
technologies, systems, products, services, software and
financing.  Organizationally, the company's major operations
comprise three hardware product segments, Technology, Personal
Systems and Server; a Global Services segment; a Software
segment; a Global Financing segment and an Enterprise
Investment segment.

Computer hardware companies have slumped in recent sessions as
earnings warnings from the industry leaders continued to plague
the group.  Investors have also moved away from these issues in
search of stocks that offer a safe haven from the effects of
high oil prices and the falling Euro.  IBM has not fared very
in the past few weeks and it now appears that a major downtrend
is well established.  We will use the current slump in buying
pressure and the overpriced option premiums to profit from this
relatively conservative, bearish position.  The probability of
the share value reaching our target strike appears rather low
but there is always the possibility of a recovery rally.  Monitor
the issue daily for any changes in technical character.

PLAY (conservative - bearish/credit spread):

BUY  CALL  OCT-130  IBM-JF  OI=20407  A=$0.81
SELL CALL  OCT-125  IBM-JE  OI=10528  B=$1.38
INITIAL NET CREDIT TARGET=$0.69-$0.75  ROI(max)=17%


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