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Daily Newsletter, Sunday, 10/08/2000

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The Option Investor Newsletter                  Sunday  10-08-2000
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       WE 10-06          WE 9-29          WE 9-22          WE 9-15
DOW    10596.54 - 54.38 10650.92 -196.45 10847.37 - 79.63  -293.65
NASDAQ  3361.04 -311.78  3672.82 -130.94  3803.76 - 31.47  -143.18
S&P-100  750.97 -  8.86   759.83 - 14.25   774.08 - 15.69  - 23.13
S&P-500 1408.99 - 27.52  1436.51 - 12.21  1448.72 - 17.09  - 28.69
W5000  13142.10 -471.30 13613.40 - 64.80 13678.20 -135.50  -236.50
RUT      491.02 - 30.35   521.37 +  2.55   518.82 - 12.06  -  4.82
TRAN    2543.65 + 22.01  2521.64 - 75.50  2597.14 - 74.32  + 19.86
VIX       25.67 +  1.82    23.85 -   .32    24.17 +  2.24  +  1.24
Put/Call    .75              .59              .56              .65
******************************************************************

It's Always Darkest Before The Dawn

The air is getting colder, the leaves are changing colors, and
technology stocks are getting hit...it must be October.  Not
only are we seeing the same signals and warnings that are common
for this time of year, but the feeling of despair is the same
too.  Why is it that investors always feel the economic world
is about to end this time of year?  Who knows why traders do
what they do sometimes, but if history repeats itself, the
market could be setting up for a bottom in both the short and
long-term.  That is what has always struck me as bizarre in
trading during this time of year.  How one week the trading
world is coming to an end and the next week the future could
not look brighter.  Nevertheless, let's dissect the carnage and
separate fact from fiction.

Like always, the Nasdaq will get the first look.  Obviously,
it has been stuck in a downward range for five weeks.  Here is
the chart of the Composite that I posted in last Sunday's Wrap.

 


Now compare it to this week's chart.  Yep, the same trend is
in tact.  In trading the recent market, this indicator has been
my first stop.  It is the ever-exciting, range-bound action,
culminating in a 300-point loss for the Nasdaq this week.  The
news has been bad and the volume has been big.  Still, we have
held true to this range for weeks and it is telling us that
we are currently at the bottom of the range.  That should give
an upside bias for the coming week, but remember this is still
a downtrend.  A successful week in a down-trending range just
means you will be lucky to end the week flat on that index.




This is a very tough market for traders to make money on.  The
more likely scenario is that you will get swung in and out of
trades constantly for little profits.  But it is an exciting
time as well, considering that big moves may be waiting in the
wings.  So now let's move on to the longer-term view, which
seems to be coming to a head here against the short-term pattern.

This next chart shows just what I have been waiting weeks for.
We are headed into the second week of October and fear is rising.
The VIX is back above 25 and the Nasdaq has traded down over
20% since September 1st.  We have been stuck in the pattern
mentioned above, but will face strong long-term support shortly.
Some analysts have been talking about retesting the May lows
down around 3150.  It looks like they may get their wish.  With
the Nasdaq at 3361 and maintaining the current trend, we should
be there late this week or early the following week.  Does that
mean we will have a major event?  Not necessarily, but the odds
are definitely increasing as the two forces collide.  Either the
support has to hold and shoot the Nasdaq up and out of the current
range or the support will fail and the losses will accelerate.
Which will happen?  I will make my prediction below, but it is
important to recognize the factors at work.  Here's the chart...




The strong Jobs report was the kicker on Friday.  Analysts had
expected a gain of 235K new jobs and unemployment at 4.1%.
Instead it got 252K and a shocking 3.9% number on unemployment.
Traders didn't really know how to react to this and it produced
some choppy action.  Fortunately, there was an absence of wage
pressure or trading may have been real dicey.  "Job gains were
very strong in the services industry, but the overall employment
change was tempered by widespread job losses in manufacturing,"
the government agency said.  This report can't make the Fed
happy, but there are factors to keep the Fed sidelined, like a
sinking stock market.  While this report wasn't good, it didn't
strike me with a sense of fear like it did for some.  The market
has likely already factored these numbers in.

The DJIA had a rough day on Friday too, dropping 130 points.
This is unfortunate due to the fact that it had been trying
to move up and out of a consolidation period from the past two
weeks.  Volume was steady at 1.15 million shares.  The omission
of major analysis on this index is not an oversight.  Let's
face it, it's October and traders are talking tech.  I have seen
too many traders burned when buying the supposedly "defensive"
plays in this month.  While a break of support at 10,500 would
be discouraging and require a deeper look into the crystal ball,
until it happens we will keep focused on techs.  Besides, the
DJIA will again run into a lot of technical congestion soon
after such a breakdown.

Now we are about to kick-off the earnings season in earnest
next week.  We will see International Paper, General Motors
and General Electric from the Dow Industrials.  Plus many big
names in the Nasdaq like Yahoo, Juniper, DoubleClick, Veritas,
PMC Sierra and KLA-Tencor.  Not to mention some tech stocks
sitting on the big board like Gateway, Motorola and Seagate.
The hope here is that some solid earnings numbers will help
to curb the tide of negativity that is sweeping across Wall
Street right now.  First Call noted that even though negative
pre-announcements have been heavy, the impact on aggregate
estimate revisions has been relatively light.  And expectations
for earnings growth were trimmed no more than the normal amount.
The number of negative pre-announcements currently stands at
351, up 25% from the same time last year.  Expectations for
3Q growth in S&P 500 companies are now at 15.9% versus the
18.8% growth rate expected on July 1st.

As mentioned in previous articles, you never know when the
October fear will subside, but it will come eventually.  The
first indication will be the Nasdaq breaking out of the above
range.  I breakout to the upside should mean the emergence of a
new trend and the end of the selling pressure.  Markets cycle
and the current range (lasting nearly six weeks) is getting old
in a hurry.  That should encourage buyers.  On a similar but
different note, a breakdown out of the range may also have
positive implications.  If we were to see a real capitulation
where the Nasdaq gets slammed and trades 3000 (or less!), then
you have got a situation that many will point to as being way
oversold and a buying opportunity.  Is my bias showing?  Either
way, I want to see a move out of the this down-trending channel.

The more bleak analysts paint the picture, the more I want to do
some buying.  Some are feeling the pain as the Nasdaq nears 35%
off the year high, but some of my favorite companies are trading
at prices I wouldn't have been able to imagine a couple months
ago.  The last time I felt this fear/opportunity feeling in my
gut was last October.  And that was the entrance to the biggest
bull run on record.  Will it happen again?  No one knows for
sure, but I have just one remaining thought..."Those forget the
past are condemned to repeat it."  Therefore, I am looking for
that gut feeling where the sentiment switches back to bullish.
Some of you may know what I am talking about.  It is like a
switch was flipped and the mood and markets reverse on a dime.
It may take days or weeks for confirmation and knowing when the
timing is right is half the battle, but you always remember the
instant it turned.  Until then, don't buy too soon.

Also, Jim sent in two articles from the John Dessauer Seminar in
Switzerland today, be sure to look for them.  One is listed below
and the other is in Editor's Plays.


Ryan Nelson
Editor

******

Tales From the Far Side
By Jim Brown

I just completed a week in Grindelwald Switzerland where I spoke at
a John Dessauer Dream Swiss Seminar. It was quite different from the
seminars we produce. John Dessauer has a very loyal following for
his stock newsletter (www.dessauerinvestorsworld.com) and this month
he is celebrating his twentieth anniversary issue. Twenty years is a
long time to be a newsletter writer. The Dow was under 1000 in Oct,
1980. There has been a lot of water and money under the bridge since
then. If you could go back in time to 1980 with knowledge of the
performance history of five stocks to provide you with a trading
income, which ones would you take back? It would be a hard choice.
IBM maybe? Microsoft, Intel and certainly Cisco and Dell. All of
these were trading at mere fractions of their current prices or in
the case of Dell, not at all. Talk about a ground floor opportunity!

Many of the people here have been taking John's newsletter for many
years. Newsletter readers are very loyal. When you find something
that works you want to stick with it. Many of our subscribers have
been with OIN since our first year. In the newsletter business you
suffer with the peaks and valleys in the markets as though you had
caused them. Readers accustomed to making money in bullish markets
lose money in bearish markets, like we have seen in September. The
market shifts for traders not in the market every day are subtle and
devious. Multiple down days with triple digit relief rallies often
convince traders the worst is over, come on back, when the market
has cleverly set a bear trap to steal your meager funds. Warnings
from editors to stay on the sidelines are ignored as too bearish and
traders charge back into battle. After getting mauled by the bears
traders must find someone to blame and the newsletters are the easy
target. It must have been the picks, the picks were bad. Just not
the quality they used to have. Many run to other newsletters in
hopes of finding fortune from a different Pied Piper. Little do
those traders realize that readers from that newsletter are looking
for another source as well while licking their wounds from different
plays.

The market treats us all the same. The best of plays today are
tomorrow's earnings warnings. The dogs today are tomorrow's value
plays. Investing is a game of common sense where only the investors
who have survived multiple market downturns and garnered wisdom from
painful losses survive. I have been warning of the September drop
since July and forecasting a bottom between October 10th-28th for
over a month. Do you think that prevented anyone from buying calls
with abandon? No! Traders with short memories have been jumping in
on every rally day with the hope that this was the real thing only
to see their positions dwindle with the next wave of selling.

If you think the last six weeks have been rough think about the
readers to John Dessauer's 20 year old newsletter. While we have
only seen moves of a few hundred points recently, John's readers
have seen the Dow move from 800 points to the recent stratospheric
heights of 11800. The Nasdaq has soared to over 5000 and seems
determined to retest 20 year lows this week. Since John is
steadfastly bullish you would think all his readers were
multimillionaires from following his advice to stay fully invested
over the long term. Many are but because the market does not always
do in the short term what we long term thinkers expect there are
always those readers leaving to find a better mousetrap. I spoke
to many who had left only to return years later to find the same
stocks they had dumped when leaving to be up +200% or +300% on
their return.

While buy and hold stock investors are not guaranteed returns over
the short term it is almost impossible to not prosper eventually.
John Dessauer is not a short term stock picker based on somebody
else's recommendations. John does his own leg work traveling around
the globe and investigating companies individually. He talks to the
people who know and then he even researches the economies of the
countries involved by talking to the public at large. This Columbo
like dogged determination has produced many winners over the years
but John's research like any stock picker is at times trashed by
the market. Nobody is perfect, nobody has an unblemished record.
Whether is be Michael Murphy, Louis Navalier, John Dessauer or
myself we are all at the mercy of the market. We do our best
spending thousands of hours and hundreds of thousands of dollars
in research so you don't have to. Still the readers listen with
selective hearing and flee at the slightest mention of bearishness.

After being involved with over 100 of John's longtime readers for
the last week I am impressed with their dedication. They all laugh
in pain at stocks like RiteAid and Cendant which should have gone
up but didn't. It is a common bond, a kinship of sorts. They talk
about their basis on John's stocks they have held for years. How
would you like to have a basis of $.18 cents in Proctor & Gamble?
Some here brag of that. Do the winners outweigh the losers? You bet!
With the market down huge from the beginning of this year John's
portfolio of stocks is still positive. Sure there have been losers
but the winners outweigh them. Nobody is perfect, we only need to
look at the holes in our own portfolios to prove that, but I think
John has the right idea for the buy and hold investor. Buy good
stocks with a bright outlook on market dips and hold on. Sounds
simple but many other stock pickers fail at this every year. John
has weathered 20 years and still going strong. My hats off to him
and in the cut throat world of competing stock pickers and back
stabbers I feel fortunate to have him as a friend.

For those who take John's newsletter I have taken his top picks
for October and created a special editors plays section this
weekend. Since this is an option newsletter I have charted each
one and listed the options I would play in lieu of owning stock.
The plays listed are more long term than I would personally
normally recommend but with the market in the tank this is an
ideal time for some long term thinking.

Good Luck from Grindelwald Switzerland!

Jim Brown


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This is a power packed event from morning till night.
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Here is the quest speaker list:

Steve Nison - Steve Nison is not only the world's foremost
expert on Candlestick Charting techniques, he's the author
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Candlesticks. He has trained and lectured investors and
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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
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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.

Jim IS the authority on tax accounting for traders!
Jim will be speaking on Trader Status, Mark to Market and
IRS do's and don'ts for traders.

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

Add to this distinguished list above the fifteen plus speakers
from OptionInvestor and you have an event you cannot afford to
miss.

The current roster of staff instructors includes:

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

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**************
EDITOR'S PLAYS
**************

Looking At John Dessauer's Picks

Watching the market from Switzerland this week was a exercise in
frustration. The U.S. markets open at 3:30PM and close at 10:PM
Swiss time. While that has some advantages for traders who like
to sleep late the disadvantage for U.S. traders is watching CNN
in Swiss/German and not understanding a word. October is playing
out just like I expected and the earnings warnings continue to
hammer tech stocks and non-tech stocks alike. Once earnings start
and numbers are reported that are not as bleak as thought the
bottom will form and we will be off to the races again. The fourth
quarter is expected to be a good quarter and those expectations
will start the ball rolling. The last three years the low for the
quarter has been either October 8th, 18th and 28th. While I do
not think the lucky "8" series will continue I do expect a bottom
in the next week or two. This makes long term plays entered over
the next two weeks pretty safe if I am right. The plays below
range from simple LEAPs to combination plays to take advantage
of the dips and reduce the cost of each play. Consider your own
risk factor and account parameters before writing puts on these
stocks. Conservative investors can simply buy the calls/LEAPS and
aggressive investors can utilize the combinations.

These are John Dessauer's top picks for October. These picks
are for long term stock investors and I am putting the option
spin on them for OIN readers. Now you have the best of both
worlds.

Leverage is the name of the option game! Read and believe.

*******

Nokia - $37.69 Jan-2003 $45 LEAP

Nokia is the largest cell phone company in the world and has been
beat up by the perception that cell phones are slowing. John feels
that cell phones are going to be just like any other disposable
electronic gadget. With new features coming out daily the phone
you have today is probably not the phone you will have next year.
This will promote upside surprises for cell phone makers. John's
recommendation is to buy NOK under $42 and Fridays sell off gives
us a great entrypoint for this play.




ERICY - 2003 $15 Call LEAP

Ericsson is the other half of the cell phone duo. John is recommending
buying equal amounts of NOK and ERICY to cover all the bases. His buy
is for ERICY under $15. By selling the put you can decrease the cost of
your investment to only $1.00. Worst case you will be put the stock at
$20 but after deducting the $5 premium received you will have a $15
basis and still have the $6 leap as well.



GBLX - 2003 $30 Call LEAP @ $7.50

Global Crossing is the fiber leader for worldwide connections. Much
more reliable than satellites GBLX is positioning to be the carrier
of choice in this decade. GBLX may retest $25. Try to limit buy the
2003-$30 call leap at $7.50. Aggressive players can sell the Nov-$25
put for $30 on the same dip to redce your cost in the leap to $4.50.
Worst case you own GBLX stock at $22 if you are put.





AT&T (T) $30 2003 Call Leap

Sorry John, I don't think AT&T has found a bottom yet. With another
downgrade on Friday we still have a good chance of seeing $25. I think
institutions will see the value there and hold the line. Wait for $25
and buy the $30 2003-LEAP for $5.00 and aggressive players can sell
the $30 2001 put for $5.00. This gives you a free play if T can get
back to $30 before January expirations.



Lucent - 2003 $30 Call LEAP

Lucent appears to have found a bottom and now might be a good time
to open a long term leap position. The 2003 leaps are expensive
given the possibilities of Lucent going back to $60-$80. Aggressive
traders could sell the 2001 $40 put for $7.63 to reduce the call
expense.





LSI - 2003 $30 call leap

LSI Logic is still declining and real support should be in the $22-$23
area. Wait for that price and place a limit order of $9.00 for the 2003
$30 call leap. You should also be able to sell the Jan-2001 $25 put for
about $5 and decrease the cost of the play to $4.00. Worst case you own
the stock for $20 and still have the leap. WAIT FOR THE BOTTOM!



PHG - April $40 call @ $4.00

Phillips is rapidly approaching support at $37. Wait for that
support to hold before starting this play. Buy the $40 April calls
@ $4.00 (cheaper then) since PHG has no leaps. Aggressive players
can sell the April $40 puts for about $6.00 and have an immediate
profit on the play of $2.00. If you are put you will own the stock
at $34. WAIT FOR SUPPORT TO HOLD





NOVL - Jan-2002 $10 Call LEAP @ $3.63

Novell is dead on strong support at $8 and should only go up from
here when the market recovers. NOVL is rapidly building out new
products to steal business from the current networking leaders.
Once the story is known the stock could retrn to recent highs.
Buy the 2002 $10 leap for $3.63 and sell the 2001 $10 put for
$1.63 to reduce your cost to $2.00.



PPE - April $12.50 Call

Park Place Entertainment has been beaten up by the market drop and
profit taking from the recent run. Appoaching support at $12 and
lack of expectation on this stock also provides us a cheap option.
Today's price is only $1.81 and should go to $1.25 or less once
$12 is tested. WAIT FOR THE BOUNCE OFF SUPPORT!





RAD - 2003 Call leap @ $2.12

Dead on suport at $4.00 and no where to go but up. Great same store
numbers last week and new things happening at the company. You can
get into this play for free and anything over $5.00 two years from
now is profit. This is a real company with real potential.





CD - May 2001 $10 Calls

Cendant is another Dessauer turnaround hopeful. At $2 for a May call
it is a cheap bet. Sell the put as well and have a free play. This
is for aggressive players only since CD is unloved at this time.
Cash value of the company is a majority of the stock price so there
is limited risk but still risk.



SFA - March $55 call

SFA has been on a roller coaster but found support at $53. A high
risk play would be the March $55 call at $10.00. Lots of premium
but not as much time as a leap. (no leaps on SFA) Sell the Mar $55
put for $10 as well and have a free play but the risk is owning
SFA at $55 if it trades under $55 in March.





AHO - March $30 call

Royal Ahold does not have leaps but the March $30 call is very cheap
at $1.88. Sell the March $25 put for $1.00 and your cost is only $.88
to play this stock for five months.



FTU - 2003 $35 call leap

First Union looks like it is trying to mount a recovery after a
two year decline. The 2003 leaps could be a big winner if it comes
true. No put play here. Just buy the leaps for $6.75 and sell them
if FTU drops under $30 again.





BGP - May $15 call @ $1.50

Any time you can get a $1.50 call for seven months of time
you have minimum risk. Borders Group has held support with
the Nasdaq crashing daily. Sell the May $15 put for $2.50
and have a $1.00 profit on the trade and seven months to
watch.





AXA - April $55 call

Axa Financial is maintaining a positive trend in a terrible market.
The April $55 call at $2.75 is a value buy I would BUY a January
$50 put as insurance that the stock does not crater on profit
taking soon. If it does sell the put for $5.00 or more and keep
the call for a free play.



AVE - April $70 Call

Aventis is also maintaining a positive trend in a down market. Buy
the April $70 call for $13.38. You will have $5 of intrinsic value
already. Aggressive players sell the put for $11.88 and decrease
your cost to $1.50 for the play.




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

The following table shows the cost of each play using the
agressive option and selling puts to reduce your cost. As
you can see you can control 17,000 shares of stock worth
over $500,000 for just slightly over $32,000 in capital.
There is some margin requirement for holding the positions
but most brokers only require 25% or $125,000. There is
risk associated with options and especially with selling
naked puts but as stock traders who would buy this stock
anyway at these numbers using ohn Dessauer's recomendtions
you have no down side risk. Today's prices are the price
you would own the stock is the put is exercised. Assume
25% go down and 75% go up (we are near a market bottom)
then you would capture the upside on 12,000 shares and
only suffer from the 5,000 that went down. Assuming John
is right about these stocks over the next two years there
could be significant upside potential for minimum expense.
As always consider the risk before entering any trade and
consult your broker about the suitability of options in
your account.

(assumes 10 contracts of each)
Stock Option Stock 1000 
    Cost(10) Price Shares 

AHO 880 28.12 28120 
AVE 1500 76.75 76750 
AXA 4880 51.75 51750 
ERICY 1000 15.38 15380 
BGP -1000 13.25 13250 
CD 0 9.88 9880 
NOVL 2000 9.50 9500 
LSI 4000 28.25 28250 
FTU 6750 32.44 32440 
NOK 2120 37.69 37690 
GBLX 4500 27.00 27000 
T 0 27.25 27250 
LU 7000 33.25 33250 
PHG -2000 38.50 38500 
PPE 1250 13.13 13130 
RAD -250 3.94 3940 
SFA 0 53.94 53940 

TOTAL $ 32,630 $500,020

Good Luck

Jim Brown 
Editor


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****************
MARKET SENTIMENT
****************

A Giant's World
By Austin Passamonte

Do you want us to make our market bulls feel good or just tell
the truth? Considering we report without bias here, we'll do our
best to accomplish both.

Individual traders are predominantly bullish by nature and are
hoping & praying for the sell off to stop. It will do so when
good and ready, which could be any day or some distance into the
future.

Technical signals are dismal. All moving averages lie overhead
and now offer resistance instead of support. Flat and inclined
trend line measures of support are falling left and right.
Bullish and/or neutral wedge formations have been violated to the
downside. Not pretty.

The VIX has not spiked out of it's daily Bollinger Band over the
past several sessions even as we expect it to soar. Fear hasn't
reached the panic stage just yet.

Commercial traders within the equity and interest-rate markets
continue to hold record net-short positions and in some case
built upon them as of Tuesday, 10/03 data compilation. Some of
these shorts may have been covered for massive gain since then
but not nearly all. It takes time to scale in and out of these
huge holdings, and that's what we now await.

The very moment S&P 500 institutional traders go from extreme net
short to flat or long we can be sure our next firm bottom is in
place. Not a moment before.

Will the markets completely crash from here? It's possible but we
expect a relief rally to ensue first. One like May or August
would be nice for the bulls but might be asking for much.

The media are doing an admirable job of trying to stem the slide
but to no avail. Friday saw most of CNBC's anchors working hard
to steer bullish words out of analysts' mouths. Even Ralph Bloch
got led pretty hard, but didn't bite. Non-biased reporting? Might
they depend on momentum traders and unabashed call buyers to
thrive?

A bit of reality news; Friday just past 11:00am EST a major
player bought 3,000+ OEX Oct 750 puts for 10 points each. He or
she didn't try to wish the market, they just plunked down over $3
million in the direction it wanted to go. Well before the close
these contracts traded at 13 for a cool $900,000+ increase to the
trade. To our knowledge it remains open.

That's what we must do. Trade puts when the market insists on
going down and prosper. There was a time in the distant past when
only calls would work but those days may be gone for quite
awhile.

The next rally will emerge exactly from market conditions like
these and could happen this week. Favorable earnings and fourth-
quarter projections would be just the ticket. Anything less might
not be.

This is and will continue to be a volatile trader's market. We
are traders and should revel in that fact. Follow the day's
action without bias and generous profits are right there for the
taking in front of us!

*****

VIX
Friday 10/06 close; 25.67

30-yr Bonds
Friday 10/06 close; 5.85%

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.

                                   Saturday
                                 (10/07/2000)
  (Open Interest)        Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
790 - 775               13,120       6,245           2.10

770 - 755                8,880      14,253            .62

OEX close: 750.97

Support:
745 - 730                   89       1,523         118.24***
725 - 710                   10      13,502        1350.20***

Maximum calls: 800/8,331
Maximum puts : 720/5,574

Moving Averages
 10 DMA  761
 20 DMA  775
 50 DMA  796
200 DMA  783


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 92 - 90                40,364      27,610           1.46
 89 - 87                16,194      35,995            .45
 86 - 84                 7,195      27,032            .27***

QQQ(NDX)close: 83.00

Support:
 82 - 80                 1,442      17,116          11.87
 79 - 77                   128       8,329          65.07***
 76 - 74                   295      11,017          37.35

Maximum calls: 90/15,459
Maximum puts : 90/16,408

Moving Averages
 10 DMA  87
 20 DMA  89
 50 DMA  92
200 DMA  94


S&P 500 (SPX)
Resistance:
1475                    22,346      17,246           1.30
1450                    13,274      11,422           1.16
1425                     8,793      15,322            .57

SPX close: 1408.99

Support:
1400                     1,689      12,444           7.37
1375                       993       8,916           8.98
1350                       522      22,374          42.86***


Maximum calls: 1475/22,346
Maximum puts : 1350/22,374

Moving Averages
 10 DMA  1432
 20 DMA  1449
 50 DMA  1470
200 DMA  1447

*****

CBOT Commitment Of Traders Report: Friday 10/06
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
Open Interest
Net Value               848                   -753
Total Open
Interest %        (12.82% net-long)      (5.15% net-short)

NASDAQ 100
Open Interest
Net Value              -204                   -708
Total Open
Interest %        (1.22% net-short)       (2.10% net-short)

S&P 500
Open Interest
Net Value              50277                 -57890
Total Open
Interest %        (29.17% net-long)       (9.76% net-short)

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

Small specs continue to build net-long extremes in SP00S but
have given ground in DJIA and switched over to net-short in NDX.

(Not Shown) Commercial positions in 10-Year Note and 30-Year
Bond markets at or near five-year extreme net-short levels.
Small specs are building 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. *Data compiled on 10/03 by COT

(Canadian Dollar commercial traders entering five-year extreme
net-long positions. Expect this currency to rally, possibly mild
affect on U.S./Canadian based-companies in trade exchange)

Bullish:
Fed's finished
Benign government reports
Large disparity in overhead call/put ratios

Bearish:
Oil Prices (falling)
COT reports
Recent pre-warnings, downgrades (brutal)
Broad market's break of critical M/A support
Market leaders major breakdowns


**************
MARKET POSTURE
**************

As of Market Close - Sunday, 10/08/2000

                                  Key Benchmarks
Broad Market           Last     Support/Resistance   Alert
****************************************************************

DOW   Industrials      10,596      10,500  10,900     **
SPX   S&P 500           1,408       1,390   1,445     **
COMPX NASD Composite    3,361       3,250   3,750
OEX   S&P 100             750         735     770     **
RUT   Russell 2000        491         485     525
NDX   NASD 100          3,311       3,250   3,700
MSH   High Tech           902         890     975

BTK   Biotech             669         650     790
XCI   Hardware          1,222       1,200   1,350     **
GSO.X Software            398         385     445
SOX   Semiconductor       799         775     960     **
NWX   Networking        1,131       1,105   1,210     **
INX   Internet            419         385     510     **

BIX   Banking             601         585     635     **
XBD   Brokerage           615         595     655     **
IUX   Insurance           762         735     790

RLX   Retail              784         765     835     **
DRG   Drug                409         370     425
HCX   Healthcare          842         825     860
XAL   Airline             145         138     152
OIX   Oil & Gas           305         296     332

Ten alerts were triggered at support on Friday, but risk/reward
characteristics are starting to favor the bulls and at some point,
the bears will be locking in their gains.  Since September 01, 88
support alerts were triggered compared to just 28 alerts at
resistance. Lowering support (DOW, SPX, OEX, XCI, SOX, NWX, INX,
BIX, XBD, RLX) Lowering resistance (SPX, OEX, MSH, XBD). There
were no upward adjustments made to support or resistance.


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In The Coming Season Of Ghosts and Ghouls, Remember...
By Eric Utley

Trading losses are evil and must be exorcised.  The majority of
responses I received to last week's trading problem involved
cutting the hypothetical loss right away.  For those who missed
the problem last week, here it is.  We'll discuss the situation
below.

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

I'm sure you have read about the importance of cutting losses
many times here at OIN.  As such, the problem with BFOC might
seem somewhat simple or even rudimentary.  However, the ability
to cut losses quickly and decisively is often what separates
successful traders from other market participants.  The
reason losses are so difficult to take is that hope too often
clouds objective judgment and decision making.  Hope and fear
are the two most driving emotions in financial markets, and the
biggest threats to traders.  Hope is so dangerous because it is
generally relied upon at the wrong time in trading decisions.
If traders are looking at a loss in a position, the only emotion
to rely upon is fear - that is the fear of losing more money.
The fact that BFOC fell right after we bought calls, and
subsequently fell through its 10-dma, should've revealed a
serious warning and change in the market.  When the market tells
us we made a wrong trading decision in the form of a loss, we
must heed its warning and cut losses for fear of greater declines
in our trading capital.

In our BFOC problem, as in all trading decisions, a multitude of
factors will influence the direction of the trade.  When faced
with a loss, traders need to step back in an objective manner
and take the best course of action through either cutting their
loss or holding onto a losing position if conditions warrant.
The old adage, 'profits take care of themselves, but losses
never do' is one of the most important cliches to remember.
Losses are much more difficult to attend, but are necessary to
contain for the vitality of your trading account.  For what
it's worth, my answer to the BFOC problem is the same as the
majority of the responses I received from OI readers, which was
A - cut losses and get out of town.

Most of the charts you're about to read below are pretty ugly
as a result of the current market environment.  I'd like to
see a few "good looking" stocks sent in for review next week
to Contact Support.  Please put the symbol of
your requests in the subject line of the e-mail.

----------------------------

Emulex - EMLX

This stock looks good now - what do you think? - Ed

EMLX, of course, was the victim of the notorious hoax back in
late August.  Unfortunately for EMLX shareholders, the stock
suffered bearish ramifications from the false news release for
nearly two weeks after the actual event.  However, EMLX appears
to have shaken off the ill-effects of the hoax, and has held up
very well over the past month in spite of the weakness in the
broader tech sector.  EMLX manufactures a broad line of products
used in data storage applications.  The data storage area, as
highlighted in my review of EMC last week, continues to be a good
place to put money to work in this current market.  What's more,
EMLX announced a 2-for-1 stock split after the close last Friday,
which sent the stock over $5 higher in after hours trading.  I
have wrote in the past that I'm a big fan of stock splits when
announced at the right time relative to the market environment
and recent stock performance.  I like the fact that EMLX declared
a split after the stock had rallied from its August lows by over
100%.  However, the current market is fickle, which presents risks
in several forms.  Though, EMLX's split announcement could help
the stock to outperform early next week.  Furthermore, the
company announces earnings on October 18th, which could also be a
near-term catalyst.

The EMLX chart below was created using a weekly timeframe, which
goes all the way back to 1997.  The majority of the charts I will
use today are weekly charts.  I thought it would be pertinent to
step back and take a look at the bigger picture in light of the
recent market conditions through using longer time frames on our
chart observations.  EMLX has traced a very interesting chart
pattern over the course of this year's trading.  The stock
suffered huge losses during last spring's bear market, but has
since rebounded to recover almost 50% of its lost ground.  Let
me repeat that.  EMLX has retraced nearly 50% of its losses
from last spring.  EMLX's big drop last spring and subsequent
retracement is the only thing that gives me reason to pause.  The
company has great fundamentals and is in a great sector of
technology, but it's weekly chart is somewhat concerning.  EMLX
wll definitely be an interesting stock to watch into the end of
the year.  If EMLX gets above the $130 level, it could be in the
clear for takeoff.  Otherwise, if the stock begins to rollover
at $130, it might be wise to get out of the way.




----------------------------

Genentech - DNA

Any thoughts on DNA (Genentech)?  I have been following this one
lately, and am wondering when a good time to position might be?
Once again, thanks for your help. - Larry

Genentech is one of the leading biotech stocks with earnings, a
deep product line, and strong research and development efforts.
The company gathers human genetic data and transforms that
information into medicines to treat various diseases and ailments.
Genentech has a total of nine pharmaceuticals, which include the
likes of Rituxan for the treatment of non-Hodgkins lymphoma and
Herceptin, which is used to help treat breast cancer.  Genentech's
deep product pipeline and already existing blockbuster drugs will
help the company increase earnings by about 25% over the next
several years.  The company trades at a fairly high valuation
relative to its earnings growth.  But, the stock is cheap relative
to competitors IMNX and MEDI.

As I have stated in the past, I'm bullish on the long-term outlook
for the biotech sector.  And, when I say long-term, I'm talking
about five, maybe ten years down the road.  As such, I think DNA
is an excellent way to reap long-term rewards from the biotech
sector.  But, in the near-term, DNA might experience some
problems.  The biotech sector has held up relatively well during
the past month while the broader market fell under control of the
bears.  However, it would appear that the bears are beginning to
claw their way into the biotech sector based upon the trading of
the BTK.X (Amex Biotech Index) and DNA last week.  DNA has been
on a course of relatively higher lows and highs since late May.
However, that course might be in danger given DNA's big drop
last Friday.  However, DNA's upcoming 2-for-1 stock split might
save the stock from a sell-off.  The distribution date for the
split is October 24th.




----------------------------

Cisco Systems - CSCO, Oracle - ORCL, Intel - INTC

I picked CSCO, ORCL, and INTC.  The reason I picked these three
because I evaluate them based on their past earnings and their
market cap.  I know that these three are very volatile, yet I am
confident that I will make money from them soon.  The past weeks,
these three stocks that I picked are not doing so well.  In other
words, I'm losing money on all of them.  Do you think I will have
a chance to gain my principle next year?  Can you please give me
more insights on these three tech stocks?  Thank you so much for
your time. - Cristina

I normally don't fulfill multiple requests due to a lack of space
and time.  However, Cristina, the three stocks you requested are
widely held and watched, and have been the center of recent
debate.  The leadership ability of CSCO, ORCL, and INTC has come
into question lately and has caused problems for the broader
indices, especially the COMPX.  Both CSCO's and ORCL's
fundamentals and respective business lines appear to bullish as
ever, aside from the attack on the latter last week.  INTC on the
other hand, has suffered a serious setback because of its earnings
warning.  Albeit small, it was a warning nonetheless.  Let's
take a close look at the three charts of CSCO, ORCL, and INTC and
see what the market is trying to tell us.  It's hard to say
when you'll earn your money back, Christina.  However, by looking
over the charts, we can see what risk might be left in owning the
stocks.

As long as CSCO trades above the $50 level I think the stock will
be fine.  If $50 breaks, look out below!  CSCO has had an
incredible run during the great bull market, and it appears the
stock has fallen into an extended consolidation.  That tells us
the stock simply needed to take a break, which is perfectly
normal.  Sometimes the break (consolidation) can last for several
years.  The important thing is for CSCO to remain within its
trading range, and not fall below key support levels; $50 is THE
key support level.  Furthermore, the long-term trendline which
CSCO has used to roll higher for the past three years is very
well intact.  Despite the recent turmoil in the Tech sector, I
think CSCO looks pretty good here.  This might be a good place to
look for a long-term entry point.  But, again, if CSCO falls
below $50, look out!




ORCL is another stock that has held up relatively well despite
the bear attacks and rumor mongers last week.  ORCL has spent
the last six months trading between a low of $60 and a high of
$80.  With that said, the $60 level is the key support area for
ORCL.  If ORCL falls below $60, the stock could easily fall to
$40.  Aside from the possibility of the $60 level failing, ORCL
doesn't look too bad right here.  Akin to CSCO, ORCL is simply
digesting extraordinary gains that were earned over the past
two years.  The fact that the stock is not giving back the
majority of its gains bodes very well for its long-term
outlook.  Profits might be taken from ORCL using its
trading range between $60 and $80.  As for the long-term
outlook, as long as the stock trades above $60, all is well,
you'll just have to wait for the bull market to return.




INTC's situation is somewhat different from both ORCL's and
CSCO's, and we can conclude so just by looking at the chart.
INTC, the greatest manufacturing company in the history of the
world, warned of lower earnings about two weeks ago.  INTC's
warning cause serious, serious damage to the stock.  Since
INTC has been a publicly traded company, its stock has never
fallen with the magnitude as it has during the last four
weeks.  I think INTC's recent miss has changed the stock for
quite some time to come.  I could be very wrong, though.
However, the market is telling us that something has changed
with INTC.  And, it may be for the worse.




----------------------------

Yahoo! - YHOO

I have liked following Yahoo in the past.  It's been in a down
trend lately.  Could you give your comments? - Thanks, Cheryl

You are absolutely correct, Cheryl, YHOO is in a definite
downtrend.  Will earnings break the bears' hold on YHOO?  Maybe.
I have heard the polar extremes of bullish and bearish cases
argued for YHOO ahead of the company's earnings report.  The
bulls say the concerns over a slowdown in online advertising
spending has been blown out of proportion, and YHOO is due for
a quick rebound back above $100.  The bulls argue that Wall
Street will receive confirmation of YHOO's solid business and
growth prospects when the company YHOO reports its third-quarter
results next Tuesday.  The bears, who by the way refer to the
stock as BOO HOO, are calling for YHOO to fall as low as $20.
I'm not making that up!  I've read reports that suggest YHOO
could fall as low as $20.  Of course, the market will be the
final judge, but it's scary to think of the ramifications of
YHOO at $20.  Until recently, YHOO was one of the last standing
Internet generals.  But, over the past two weeks the stock has
traced one new 52-week low after another.

For nearly five months, YHOO spent most of its time between
the $120 and $130 levels.  That means a great deal of investors
put on positions around those levels, which made it a place of
value and efficiency.  However, the fact that YHOO's value area
failed in early September, and the stock subsequently slide
below $100 tells me something has seriously changed with the
stock.  The market is definitely testing the pain tolerance of
YHOO bulls.  If the bulls prevail, YHOO could move back above
$100, where I'd like to see it trade for several weeks and
form a new value area.  However, if the bears win, YHOO could
be headed for serious trouble.




----------------------------

DISCLAIMER:

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.


*************
COMING EVENTS
*************

For the week of October 9, 2000

Monday
======

None Scheduled


Tuesday
=======

None Scheduled


Wednesday
=========

Wholesale Inventories  Aug  Forecast:  0.60%     Previous:  0.30%


Thursday
========

Initial Claims       7-Oct  Forecast:    NA      Previous:    NA
Export Prices ex-ag.   Sep  Forecast:    NA      Previous: -0.20%
2Import Prices ex-oil  Sep  Forecast:    NA      Previous:  0.10%


Friday
======

Retail Sales           Sep  Forecast:  0.40%     Previous:  0.20%
Retail Sales ex-auto   Sep  Forecast:  0.40%     Previous:  0.30%
PPI                    Sep  Forecast:  0.40%     Previous: -0.20%
Core PPI               Sep  Forecast:  0.10%     Previous:  0.10%
Michigan Sentiment     Oct  Forecast:    NA      Previous:  106.8


Week of October 16th

16-Oct  Business Inventories
17-Oct  Industrial Production
17-Oct  Capacity Utilization
18-Oct  CPI
18-Oct  Core CPI
18-Oct  Housing Starts
18-Oct  Building Permits
19-Oct  Trade Balance
19-Oct  Initial Claims
19-Oct  Philadelphia Fed


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The Option Investor Newsletter                   Sunday 10-08-2000
Sunday                                                      2 of 5

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Watch The Bond And Stock Offerings
By Mary Redmond

After suffering through September, the markets seem to be at
a critical turning point.  One way or the other, the indices
will probably make a big move in the fourth quarter.  In order
to gain some insight into market money flows and internals,
it can be instructive to watch the stock and bond market new
offerings along with other money flow indicators.  We are
starting to see indications that it is becoming increasingly
difficult for corporations to finance their expansion needs
through stock and bond offerings.

This week may have been a litmus test for near term IPO issuance.
According to Edgar online, approximately $1.8 bln was raised
in IPOs, which is significantly less than the amount scheduled
to debut.  Eight new companies were brought public, including
three large high-profile IPOs, which had successful debuts with
strong after market performances.  However, several IPOs were
withdrawn.  Investment bankers can't force IPOs out the door if
the institutional demand isn't there.  This can free up cash to be
invested in other stocks in the indices.  The moderation of IPO
demand may benefit the market in the coming months.  It is an
optimistic sign that AGCX started trading Friday afternoon amidst
the sell off.  If institutions were bearish, there would be far
less stock successfully brought public.

Equity mutual funds took in approximately $2 bln last week,
with the majority of the money going to growth funds.  The
four week moving average of cash to equity funds is $2 bln,
steady and consistent, but far lower than previous levels. The
Investment Company Institute reported that retail money market
funds took in $3.06 bln, and institutional money market
funds took in $8.35 bln.  The cash deposits to money market
funds continue to be significantly larger than deposits to
equity funds.

There is a lot of interesting information on the Treasury's web
site.  Of particular interest to traders and investors is the
U.S. savings rate and capital flow.  The current savings rate is
around 6%.  In addition, we have experienced a strong flow of
capital into U.S. securities from foreigners, which seems unlikely
to abate in the near future.

Last year, foreign investors purchased approximately $107 bln
worth of U.S. securities.  This year the net purchases have
already totaled over $90 bln in the first two quarters.  In
contrast, U.S. investors have been net sellers of foreign
securities with the exception of corporate takeovers and stock
swaps.  Money is flowing into the U.S. market in huge quantities.

Although the Treasury Dept. has stabilized the Euro, it seems
unlikely to rally anytime soon.  Historically, the U.S. stock
market has performed best during periods when the dollar was
strong against other currencies.  The flows to the U.S. markets
from foreign investors are likely to increase if our markets
rally further.

The market seemed to overreact to the Fed's hawkish statements
about inflation this week.  The statements seemed surprising,
considering that the recent economic indicators have been benign.
Perhaps more important than economic indicators is the spread
between Treasuries and high yield corporate bonds.

Last month, high yield corporate debt rates were averaging
around 13.6%.  The current high yield corporate debt rate is
averaging 12.5%.  Medium risk corporate debt is averaging 9.4%
and low risk (BBB or better) is averaging 9.12%.  High yield
bond issuance has fallen by approximately 50% this year.

High yield corporate debt rates are holding down some sectors
like CLECs and some internet stocks which otherwise might be
rallying.  This can hinder corporate expansion in some areas,
and ultimately decrease the rate of economic growth.

The credit situation is also hurt by the net outflow from bond
funds we have seen this year.  Bond funds have experienced a
net outflow of over $40 bln in the last 12 months.  This
limits available capital for corporate financing needs.  Junk
bond funds have had serious redemption problems for months.

Some people seem to be concerned about the Fed's bias toward
tightening (although it isn't really called a bias anymore.)
However, considering the potential credit crunch developing,
more interest rate hikes in the near term future seem unlikely.
A credit crunch could ultimately decrease our GDP, and there is
a real possibility of a rate cut in 2001.

We may need to consider another factor.  The Treasury has been
buying back government bonds aggressively since January of 2000.
This has helped to keep long term rates low.  With the election
approaching, and both parties discussing the taxation and spending
programs they think are most likely to get them elected, there may
be a perception of uncertainty regarding the continuance of this
program.  The public's perceptions of future budget surplus
projections can vary depending on the mood of the moment, and
future projections can never be completely accurate or precise.

There are options on the Treasury yield, which are generally
not as liquid as the futures.  However, if someone anticipated
higher or lower interest rates then purchasing a yield option
could be a strategy.  For example, the March TYX 60 puts made
a slight move up this week.  If rates went to 5.5% this could
be profitable.  However, it is generally not wise to buy Treasury
yield options without any experience in the bond markets.

It is interesting to look at the implied volatility of Greenpoint
Financial(GPT) since it can reveal some surprising facts about
options pricing and volatility.  GPT got clobbered earlier this
year during the severe rotation from "old economy" to "new
economy" stocks.  In April, the implied volatility of the options
increased to 60, partly due to the steep drop it experienced.
The steeper the rise or fall, the bigger the change in the
implied volatility numbers.  The stock has moved up over 10 points
to over $29 in the last few months, and the implied volatility of
the options has actually dropped from 60 to 28.5.  This is partly
because the move up was slow, steady and gradual.

Anyone who kept an eye on the VIX would have noticed that it
moved up out of the daily trading range it had been in for the
last few weeks of 23.5 to 24.5.  Some traders can use the VIX
as a daily trading tool, as high and low spikes are often
accurate buy and sell signals.  However, a high VIX toward the
end of the day in a down trending market could be a dangerous
buy signal, unless it is used in combination with other technical
indicators.




Last year, the Nasdaq entered October just under 3000 and ended
the year at 4000 by rallying over 1000 points from late October
to the end of December.  Many people were concerned about Y2K
computer problems.  In fact, some market analysts actually
predicted a world wide recession in 2000 because of this problem.
The year before the Nasdaq rallied nearly 80% from November to
the Spring.  So there is still hope, despite the chronic grumbling
of the bears.


******

OEX Spread Trading in a Volatile Market
By Lynda Schuepp

You can make money even when you're wrong if you trade spreads.
I was dead wrong about market direction, but by legging out of
the spread I made about a 40% return in a week.  My favorite
trading vehicle is the OEX because of its liquidity and manageable
volatility (most of the time).  Because it is made up of the
S&P 100 stocks, you inherently have diversification.

I put on a bullish put spread on the OEX a week ago Thursday and
took half of my position off on Friday and actually made money,
even though I was wrong about market direction.




At the time, the OEX had just come off a double bottom and broke up
through the 200 period moving average.  I said to myself, "At last,
the bottom has come."  You have to understand I am a hopeless
optimist who has a hard time being bearish.  If I didn't do
spreads, I'd be dead because of my strong bullishness.  In fact,
I lost a lot of money simply trading directionally (naked puts).
Trading spreads allows you to make a bet on market direction, but
because you have a long and a short leg, you have a built in
insurance policy.  If you're wrong, the other leg will make up
most of your loss.

My plan was to sell an October At-The-Money(ATM) put, expecting the
market to rise before the October sell off, and at the same time
buy an In-The-Money(ITM) November put that could be sold after the
October bloodshed.  It looked to me that the market was poised for
a run-up.  The OEX was trading at about 770, so I bought 10
contracts of the November 760 put, 10 points in-the-money for
$15.75.  I like to buy as much time as I can afford.  This allows
me time to be wrong OR right(hopefully).  Next, I sold 10 contracts
of the October 770 put for $12.88.  The net debit was $2.88.  The
reason I chose the October 770 strike was because first, it was
ATM which gives you the highest time value premium, and secondly I
thought that this would be a significant support level on the way
back down.




After I initiated the trade, the OEX climbed to 775 and then turned
over and broke down through the 200 period moving average.  The
OEX continued down, with the 200 MA now acting as resistance.  The
pattern continued until Tuesday's gap up open.  During that time,
the value of my spread remained relatively unchanged.  What I lost
on the short leg, I gained on the long leg.

When Tuesday morning came, I began to feel confident again.  The
OEX climbed back up to 774 but then did a nose-dive.  The OEX fell
17 points to 757.  I froze.  I questioned my judgment, but when I
checked my position, it was actually up, because of the increase
in volatility.  However, the market makers had widened the bid-ask
spread so much that it was questionable whether I'd get a good
fill, so I sat on my position.




Thursday morning, the OEX made it's first tweezer bottom at 752.
This is a bullish signal.  The OEX rose back above the 200 MA to
a high of 768 which was above the 200 MA.  This was more like it.
In my past life, I would have sold my long puts here and rode the
short put (now naked) up for the ride.  Actually, this could have
been successful IF AND ONLY IF I could have foreseen the top on
Friday morning before the meteoric plunge.  Having been burnt
badly on this strategy in the past, I now leg out short leg first.

The unemployment figures came out at 8:30 AM EDT.  The futures
whipsawed up and down in the pre-market, indicating great
uncertainty.  This market is very fragile right now.  Any piece of
bad news causes further declines while the good news doesn't seem
to buoy up the market.  I expected the market to drop once they
were done "spinning" the numbers,  so I bought back 5 contracts of
my short leg near the open for $12.38.  After commissions, this was
about a break even.  I watched the OEX tank to 752.  Next came a
second tweezer bottom at the same level as the one on Wednesday, a
really bullish sign.  Also 750 is a very significant level for the
OEX.  I thought the fact that it bounced indicated very strong
support so I sold five contracts of my long puts for $17, for a
profit of 1.25 points.  That's a 43% profit in a little over a
week.  If I wasn't so blindly bullish, I could have ridden my long
put all the way to $28.50 for an 80% profit!  But I really can't
complain.

I now have 5 contracts of the 760/770 spread left and my adjusted
cost is almost nothing ($0.63), so I can afford to play this one
out.  I'm still bullish and think that we will see a run up.  If
so, I can buy back my 770's for a profit and then let the October
mayhem kick in and then I can sell my 760 puts.  Hopefully, we
aren't seeing the October bloodbath a little early this year,
because I'm really tempted to sell my long puts at this level but
I keep telling myself, "don't do it, you've been burned before."


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

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

NT - Nortel Networks $62.31 -4.44 (+2.81 last week)

See details in sector list




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

CRA - Celera Genomics $79.38 (-20.25 last week)

See details in sector list




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

Index       Last    Week
Dow     10596.54   74.00
Nasdaq   3361.01 -311.81
$OEX      750.97   -8.86
$SPX     1408.99  -27.52
$RUT      491.02  -30.35
$TRAN    2543.65   46.66
$VIX       25.67    1.82

Calls

QCOM       77.81    6.56  Breakout from ascending wedge last week!
NT         62.31    2.81  $61 level could launch NT into earnings
LLY        82.94    1.81  Benefiting from rotation out of Tech
CHKP      157.81    0.31  Minor victory last week bodes well
ADBE      147.63   -7.63  Split in 12 days, and lookin' for a run
CIEN      110.56  -12.25  Coiled spring ready to burst
MERQ      143.00  -13.75  Leading Tech stock with rebound potential
SEBL       92.44  -18.88  Capable of quick rebound to recent high

Puts

AETH       82.25  -23.25  Couldn't hold the century mark!!!
INKT       91.00  -23.00  New, high Tech equates to high risk
CRA        79.38  -20.25  New, breakdown below trendline looks bad
AKAM       36.19  -16.32  Pain in AKAM last week, loss accelerating
QLGC       74.25  -13.75  Deteriorating in a weak Tech sector
CPTH       50.75  -10.00  Path of least resistance is down
DIGX       36.94   -9.94  Consolidation not helping DIGX much
CMOS       24.19   -5.81  Dropped, stabilized last Friday
JBL        51.25   -5.50  Guilty with weak box makers and chips


**************************
PICKS WE DROPPED THIS WEEK
**************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS

No dropped calls

PUTS

CMOS $24.19 (-5.81) Despite the bloodshed in the broader tech
sector last Friday, CMOS finished modestly higher.  The bounce
in CMOS can be attributed to the firming up of the Chip
Equipment sector, which was induced by favorable analyst remarks.
Both Bank of America and Robertson Stephens commented on the Chip
Equipment sector Friday, which buoyed CMOS and its closest
competitors TER and AMAT.  Despite Friday's advance, CMOS'
current slide could continue and take the stock to the $20 level.
However, in light of the CMOS' impressive showing last Friday,
we're playing it safe and taking our well-earned profits off the
table.  A near-term bottom might be signaled should CMOS advance
back above the $25 level, while a failure at $22.50 could carry
the stock lower.


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

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

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

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

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

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

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



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

No new calls today


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

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

The Option Investor Newsletter                   Sunday 10-08-2000
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/100800_3.asp


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

CHKP - Check Point Software $157.81 (+0.31 last week)

Check Point Software is in the Internet security business. The
company develops, markets and supports Internet security solutions
for enterprise networks and service providers.  CHKP's three main
product lines include security products, traffic control for
bandwidth management, and finally management products. CHKP
delivers solutions that enable secure, reliable and manageable
communications over any Internet Protocol network including the
Internet, intranets and extranets.

In light of the NASDAQ's 8.5% slide last week, CHKP's minor gains
could be viewed as a major victory.  Although, CHKP's small
triumph didn't come easy.  The bulls and bears fought a fierce
battle last week, which lead to volatile trading in CHKP.  The
stock traded as high as $171 (its 52-week high) and as low as
$143.81 over the course of last week's trading.  CHKP's increase
in volatility created plenty of profit opportunities and generated
several solid entry points.  And, until the NASDAQ finds bottom,
we'll continue to look to CHKP's wide swings for profit
opportunities.  However, as proved last week, we must exercise
prudent judgment going forward and take full advantage of stops
to minimize risk.  The rebound from day lows in the NASDAQ late
last Friday boosted CHKP $4 higher and back above its 10-dma at
$156.  CHKP's ascending 10-dma could be a good area to trade
around as the stock continues to churn higher along that line.
Given CHKP's close above its 10-dma, and the NASDAQ's late-day
rebound last Friday, aggressive traders might consider entering
new positions at current levels, or wait for a pop back above the
$160 level.  A more conservative approach might be to wait for
CHKP to gain momentum and look to enter new positions if the stock
trades above $162.50, after confirming strength in the NASDAQ.  If
however, the NASDAQ continues to fall earlier next week, watch for
CHKP to find support at its 10-dma ($156) or a little lower at the
$155 level.  If the $155 support level fails, traders might
consider waiting for CHKP to stabilize around lower support levels
at $150 or $145.  No matter the entry strategy, consider using
stops to protect profits and/or limit losses.

Bullish comments from analysts at Robinson Humphrey last Friday
could portend a rally ahead of CHKP's third-quarter earnings
report.  The analysts said CHKP will likely exceed revenue
estimates, which should lead to an upside surprise in EPS.  CHKP
has surpassed estimates by a substantial margin in its last four
quarters and, anticipation for upside earnings could be the
catalyst we need to take our play higher.  CHKP will report its
third-quarter results on October 18th, before the market opens.

***October contracts expire in 2 weeks***

BUY CALL OCT-150 KGE-JJ OI=1721 at $14.38 SL=10.75
BUY CALL OCT-155*KGE-JK OI= 273 at $11.13 SL= 8.25
BUY CALL OCT-160 KGE-JL OI= 759 at $ 8.50 SL= 6.00
BUY CALL NOV-155 KGE-KK OI=  10 at $18.25 SL=13.25
BUY CALL NOV-160 KGE-KL OI= 168 at $15.88 SL=11.50

Picked on Sep 3rd at    $149.44    P/E = 205
Change since picked       +8.38    52-week high=$171.00
Analysts Ratings     13-5-0-0-0    52-week low =$ 20.25
Last earnings 06/00   est= 0.21    actual= 0.25
Next earnings 10-20   est= 0.26    versus= 0.15
Average Daily Volume = 2.17 mln



SEBL - Siebel Systems $92.44 (-18.88 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. SEBL's products and services are
available in industry-specific versions. The founder and CEO,
Mr. Siebel got his start as a salesman for the Oracle Corporation.

There's no denying the fact that SEBL suffered the brunt of the
bears' attacks on the NASDAQ last week.  What's more, the earnings
warnings from competitors Computer Associates (CA) and BMC
Software (BMCS), plus the rumors surrounding ORCL, compounded to
wreak utter havoc on our play.  The +19 points we had worked so
hard for two weeks ago were just as swiftly taken away last week
by the bears.  However, SEBL is very capable of rebounding, which
is the reason the stock remains on the call list.  If the NASDAQ
bounces back from last week's bruising, SEBL could very well lead
the bulls' charge higher.  Furthermore, SEBL has a five-month
trendline that began at its May lows during the last bear raid.
SEBL has tested its trendline several times over the last five
months, with Friday's decline marking the fifth such retest.  The
supportive trendline now sits near the $90 level, which was the
site of SEBL's intraday low last Friday.  After SEBL traded down
to its trendline last Friday, the stock quickly rebounded $2
higher into the close.  SEBL's rebound was encouraging to witness
and it might project higher prices ahead.  Given SEBL's bounce off
the $90 level, aggressive traders could consider entry at current
levels or on a rally above resistance at $95.  The more
conservative traders might wait for SEBL to regain lost ground and
look to enter new positions if the stock trades above $100.  But,
be cognizant of SEBL's descending 10-dma at $101, which might
present problems.  Additionally, if the NASDAQ's slide continues
next week and SEBL falls below its trendline at the $90 level, it
might be wise to step aside from the play.

Dain Rauscher Wessels issued positive comments on SEBL late last
Friday, which might help the stock to rebound early next week.
Analysts at the brokerage reported they were bullish on SEBL's
prospects in the near-term.

***October contracts expire in 2 weeks***

BUY CALL OCT- 90*EZG-JR OI= 543 at $ 8.25 SL=6.00
BUY CALL OCT- 95 EZG-JS OI=2211 at $ 5.75 SL=3.75
BUY CALL OCT-100 EZG-JT OI=2103 at $ 3.88 SL=2.50
BUY CALL NOV- 95 EZG-KS OI= 700 at $10.38 SL=7.50
BUY CALL NOV-100 EZG-KT OI=2326 at $ 8.25 SL=6.00

Picked on Sep 17th at    $99.00    P/E = 429
Change since picked       +6.56    52-week high=$118.44
Analysts Ratings     17-5-0-0-0    52-week low =$ 16.88
Last earnings 06/00   est= 0.09    actual= 0.11
Next earnings 10-17   est= 0.11    versus= 0.07
Average Daily Volume = 5.38 mln



MERQ - Mercury Interactive $143.00 (-13.75 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.

Let it be said that we are not afraid of volatile stocks.  In
fact, as option traders, we thrive on volatility.  Which is why
despite the 30+ point range from top to bottom in MERQ's trading
last week, we are holding the play.  With many Tech stocks
declining since early September, MERQ for the most part has
bucked the trend, moving ever higher until last week.  MERQ's
recent rally was backed by a string of positive news.  With a
complete lack of announcements last week, MERQ's fate was left
in the hands of the NASDAQ, with its earnings warnings and
general weakness.  Despite last week,  there is much to be
positive about in looking at MERQ's chart.  The $130 level was
a strong resistance level for MERQ, which recently became
support.  The support held up when MERQ hit that level on
Wednesday morning, leading to a strong bounce.  Friday's close
above $140 on 130% of ADV, suggests that buyers are willing to
step back into MERQ, even in current market conditions.  But
make no mistake, this is a volatile high-risk stock so make sure
stop losses are set after entering positions.  Friday's close
put MERQ back above it's 5-dma at $142.64.  Conservative traders
will be watch for MERQ to rally above its 10-dma, near strong
resistance at $148 before entering, but make sure the buyers are
back in force.  Aggressive traders and bargain hunters could set
their sights on a bounce off support at $130 and $135, with the
more risk tolerant considering a bounce off $140.

MERQ's earnings date is confirmed for October 17th, less than 10
days away.  If market sentiment turns positive, an earnings run
is not out of the question.  As well, any positive news from the
company could see the stock return to its upward trending ways.

***October contracts expire in 2 weeks***

BUY CALL OCT-140 RBF-JH OI=271 at $12.75 SL= 9.75
BUY CALL OCT-145*RBF-JI OI=331 at $10.38 SL= 7.50
BUY CALL OCT-150 RBF-JJ OI=632 at $ 8.00 SL= 5.75
BUY CALL NOV-145 RBF-KI OI= 23 at $17.75 SL=13.00
BUY CALL NOV-150 RBF-KJ OI=399 at $15.63 SL=11.25

SELL PUT OCT-135 RBF-VG OI= 71 at $ 7.38 SL=10.50
(See risks of selling puts in play legend)

Picked on Sep 24th at   $148.94     P/E = 285
Change since picked       -5.94     52-week high=$162.50
Analysts Ratings      9-3-1-0-0     52-week low =$ 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 = 1.57 mln



LLY - Eli Lilly & Co. $82.94 (+1.81 last week)

Lilly is a leading innovation-driven pharmaceutical corporation.
They are developing best-in-class pharmaceutical products by
applying the latest research from their own worldwide
laboratories and from collaborations with well-known scientific
organizations.  As their products save and improve lives, they
also save overall health care costs: they are often less
expensive than other forms of health care, such as surgery and
hospitalization.  Lilly employs more than 31,000 people worldwide
and markets their medicines in 179 countries.  Lilly has major
research and development facilities in 9 countries and conducts
clinical trials in more than 30 countries.

While Tech stocks have been in decline since the beginning of
September, LLY has been quietly putting together impressive
gains.  In recovering from a 29% one-day plunge in early August
when the Federal Appeals court ruled in favor of Barr
Laboratories, allowing them to sell a generic version of Prozac,
LLY had much overhead resistance to overcome.  Finding support
above the $65 level in early September, LLY did just that,
trading in an upward sloping regression channel as investors
ran to leading drug stocks for shelter.  Even in a slowing
economy, the demand for medicine is perceived as inelastic.  As
a result, peers such as MRK, PFE and SGP have also traded higher
in recent weeks.  Now, near the bottom of the trading channel,
with Tech fears becoming more feverish, the possibility for LLY
extending its rally is likely.  When we started this play on
Thursday, one of the entry points we mentioned was a bounce off
strong support at the 50-dma, now at $81.30.  We got just that
on Friday as some early morning jitters, due to the jobless rate
hitting a 30-year low, brought on the sellers.  Looking at the
30-minute chart, we can see the turnaround as selling during
amateur hour led to a recovery, confirmed with volume.  Friday's
close did however, put LLY back below its 100-dma, at $84.50.  A
break above that level would provide conservative traders with
an entry while aggressive traders will be watching for a bounce
off the 100-dma.  A bounce off the 5-and 10-dma, converged near
$82.50, is another target to shoot for but confirm the bounce
with volume.

With earnings scheduled for October 19th, positive sector
sentiment, and strong moving average support, a break above the
100-dma could see LLY rally to the top of its trading channel,
currently at $90.

***October contracts expire in 2 weeks***

BUY CALL OCT-75 LLY-JO OI=2559 at $8.50 SL=6.00
BUY CALL OCT-80*LLY-JP OI=4780 at $4.38 SL=2.75
BUY CALL OCT-85 LLY-JQ OI=4385 at $1.69 SL=0.75
BUY CALL NOV-85 LLY-KQ OI= 620 at $3.50 SL=1.75
BUY CALL NOV-90 LLY-KR OI=1136 at $1.81 SL=1.00

Picked on Oct 5th at     $84.56     P/E = 31
Change since picked       -1.63     52-week high=$109.00
Analysts Ratings    6-11-13-0-0     52-week low =$ 54.00
Last earnings 06/00   est= 0.60     actual= 0.61
Next earnings 10-19   est= 0.71     versus= 0.62
Average Daily Volume = 3.81 mln



ADBE - Adobe Systems $147.63 -0.88 (-7.63 last week)

A long-time leader in desktop publishing software, ADBE
provides graphic design, publishing, and imaging software
for Web and print production.  Offering a line of application
software products for creating, distributing, and managing
information of all types, the company generates nearly 75% of
sales through publishing software products such as Photoshop,
Illustrator, and PageMaker.  Its Acrobat Reader, which uses
portable document format (PDF) is popping up all over the
Internet, as businesses shift from print to digital
communications.  In addition, ADBE licenses its industry
standard technologies to major hardware manufacturers,
software developers, and service providers, as well as
offering integrated software solutions to businesses of all
sizes.

An inauspicious beginning to our split run, ADBE finally fell
victim to profit taking.  Just to recap, ADBE announced a
2-for-1 stock split with their earnings report three weeks ago,
and the good news was followed by a buying frenzy that propelled
shares to a new all-time high of $170.19 last Tuesday.  As the
stock ran out of willing buyers, profit taking came into play,
and coupled with weakness on the NASDAQ, our play was down more
than 17% at its low Friday.  After plunging through support at
$145, ADBE successfully tested the $140 support level Friday
morning, and fortunately it held.  Following such a swift
decline, only aggressive traders with nerves of steel would have
bought that bounce, as the requisite volume confirmation was
nowhere in sight.  But, by the end of the day, the stock had
stumbled its way to a recovery over the $145-146 support level,
and on volume nearly double the ADV.  While not exactly a strong
recovery, it was enough to keep our play alive to fight another
day.  So where do we go from here?  The NASDAQ is still looking
weak, and ADBE has seen both its Stochastics and MACD move
sharply into negative territory, so we need to exercise extreme
caution in initiating new plays.  Rather than buying dips near
the $140 level, should they materialize next week, a more
prudent strategy would seem to be waiting for buying volume to
push our play up from current levels first.  In the absence of
a supportive market, our play will have a hard time clearing
the congestion that exists between $147-152.  Cautious
traders will want to wait for ADBE to clear this zone before
initiating new positions.  Once our play gets its head back
above water, we expect it to have a nice run into its split
which is now only 12 trading days away.

Showing up a little late to the party, Tucker Anthony initiated
coverage on ADBE with a Buy rating on Wednesday.  That was the
day after the stock reached a near-term peak near $170, and
finally succumbed to the law of gravity and profit taking.
Nevertheless, ADBE has widespread support from the analyst
community, with 11 of the 13 who follow the stock rating it
either a Buy or Strong Buy.

***October contracts expire in 2 weeks***

BUY CALL OCT-145 AXX-JI OI=910 at $10.25 SL= 7.25
BUY CALL OCT-150*AXX-JJ OI=695 at $ 7.75 SL= 5.50
BUY CALL NOV-150 AXX-KJ OI=252 at $13.88 SL=10.50
BUY CALL NOV-155 AXX-KK OI= 93 at $11.63 SL= 8.75
BUY CALL JAN-150 AXX-AJ OI=525 at $22.13 SL=16.50

SELL PUT OCT-135 AXX-VG OI=692 at $ 3.25 SL= 5.25
(See risks of selling puts in play legend)

Picked on Oct 3rd at    $163.44     P/E = 62
Change since picked      -15.81     52-week high=$170.19
Analysts Ratings      5-6-2-0-0     52-week low =$ 53.44
Last earnings 09/00   est= 0.52     actual= 0.57
Next earnings 12-14   est= 0.58     versus= 0.46
Average Daily Volume = 1.74 mln



NT - Nortel Networks $62.31 -4.44 (+2.81 last week)

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

No longer just a little Canadian upstart, NT has managed to
carve itself a nice leadership position in the Optical
Networking space.  Through both strong internal growth and
an acquisition strategy that is second only to that of rival
CSCO, NT has built a business that leads its industry in terms
of technology, while still growing revenue and earnings at a
blistering pace.  While our play is having a hard time
advancing, its impressive strength relative to the broader
technology market is attributable to the strength of the
Optical Networking sector and NT's impressive track record of
increasing revenue growth.  Revenue growth is now running just
below 50% year-over-year, and the company has met or exceeded
earnings estimates every quarter since the 4th quarter of 1996.
This is the kind of consistency that investors are looking for
in this unsettled market.  In an environment where stocks are
being downgraded left and right, NT continues to enjoy almost
universal support from the analyst community (see news below).
Considering that the continued bearish market sentiment handed
the NASDAQ an 8.5% loss, NT actually had a pretty decent week.
The low from September 28th ($57.94) wasn't challenged all week,
and we are seeing support materialize near $61.  Though well
below its July high of $89, our play looks like it is building
a base for a run into its next earnings report, scheduled for
October 24th.  The bulls and the bears are battling for control,
resulting in volume 25% above the ADV all last week.  This tug-
of-war will likely be resolved in favor of the bulls, but the big
question is when.  Aggressive traders can take advantage of dips
to support, opening new positions as the buyers regain control
and propel the price higher on strong volume.  A more cautious
approach may be the most prudent however.  If that sounds like
it is more your style, wait for the buyers to wrest control and
push through resistance near $67.  No matter which way you play
it, keep a tight reign on your position with stop losses.  As we
have seen recently, this market can turn on a dime, and even
leading stocks suffer casualties.

NT announced Thursday that it has completed its acquisition of
Alteon WebSystems, adding yet another notch to the leading
optical networking company's belt.  If you think that analyst
upgrades are the fuel of stock appreciation, then NT should be
just about topped off by now.  On Tuesday, CSFB reiterated their
Strong Buy rating, followed by ING Barings initiating coverage
with a Strong Buy and Sands Brothers starting coverage with a
Buy rating yesterday.  NT now has a total of 35 analysts
following the stock of which 31 of them rate the stock either a
Buy or Strong Buy.

***October contracts expire in 2 weeks***

BUY CALL OCT-60*NTV-JL OI=21334 at $5.88 SL=3.75
BUY CALL OCT-65 NTV-JM OI=58750 at $3.00 SL=1.50
BUY CALL NOV-60 NTV-KL OI= 3018 at $8.63 SL=6.00
BUY CALL NOV-65 NTV-KM OI= 1995 at $6.00 SL=4.00
BUY CALL NOV-70 NTV-KN OI= 5502 at $4.00 SL=2.50

SELL PUT OCT-60 NTV-VL OI=21092 at $3.13 SL=5.00
(See risks of selling puts in play legend)

Picked on Oct 5th at      $66.75     P/E = N/A
Change since picked        -4.44     52-week high=$89.00
Analysts Ratings     21-11-2-1-1     52-week low =$24.78
Last earnings 07/00    est= 0.14     actual= 0.18
Next earnings 10-24    est= 0.16     versus= 0.14
Average Daily Volume = 13.10 mln



CIEN - Ciena Corp $110.56 (-12.25 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.

Is CIEN's "sexy" optical status losing out to the "safer"
economy stocks?  Traders recently rode CIEN up to another all-
time high ($136.25) on September 25th, but unfortunately profit
taking and a wobbly market took CIEN down a few notches.  Robust
volume ushered in both the stock's ascent and descent, which
indicates the battle of the bulls and bears is going strong.
The volatile share price is currently channeling primarily
between $110 and $120.  The coiling spring will eventually let
go and send CIEN on a fervent run.  The question of which
direction is obviously a concern.  On one hand, there's the
stock's strong moves amid rallying conditions, but on the other
is the peculiar coverage CIEN received this week.  First there
was Centennial Capital Management who started new coverage on
CIEN with a Sell and a one-to-three-month price target of $88.
Then came a ST Underperform and $103 price target from Bluestone
Capital Partners.  As weird as it sounds, we need to be
cautious; especially taking into account the market conditions.
Play it safe.  Consider waiting for CIEN to resume a definitive
uptrend and move through $120 before jumping into new plays.  If
you're strategizing a risky entry off the 30-dma ($110.69) or 5-
dma ($114.76), keep stops particularly tight.

This week, Cienna announced it will open a new office in Hong
Kong in an effort to increase its global presence and to keep
pace with the demand for its intelligent optical networking
systems.

***October contracts expire in 2 weeks***

BUY CALL OCT-105 UEE-JA OI= 2734 at $11.38 SL=8.50
BUY CALL OCT-110*UEE-JB OI= 2597 at $ 8.50 SL=6.00
BUY CALL OCT-115 UEE-JC OI= 3893 at $ 6.38 SL=4.50
BUY CALL NOV-115 UEZ-KC OI=  346 at $11.38 SL=8.50
BUY CALL NOV-120 UEZ-KD OI= 2607 at $ 9.25 SL=6.75

Picked on Sep 24th at   $120.75    P/E = 546
Change since picked      -10.19    52-week high=$136.25
Analysts Ratings      9-9-0-0-1    52-week low =$ 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 = 7.29 mln



QCOM - Qualcomm Inc $77.81 (+6.56 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.

QCOM's ascending wedge in the $71 to $75 range indicated a
potential strong volume break to the upside.  QCOM just needed
a burst of energy to make it over the $80 hill.  As the NASDAQ
violated key support and closed to the underside of 3400 this
week, QCOM held tight.  Given the recent selling, this was no
easy feat for a tech stock .  But she's the little engine that
could!  The NASDAQ's relief rally on Wednesday provided optimum
conditions for QCOM's coiling spring to burst.  The upward
propulsion sent QCOM soaring towards $80!  The fractional miss
was a letdown to the day's bullish performance.  However, QCOM
saw the topside of $80 on 2.3 times the average volume the next
day!  Despite the profit taking on Friday, QCOM closed strong
above previous resistance at $75 and the 5-dma ($76.59).  This
is certainly a bullish indication that QCOM can withstand the
gyrations of the broader markets.  Any relief in the NASDAQ
next week would certainly give QCOM a welcomed boost.  Another
strong break over $80 would warrant an entry, but given the
recent profit taking, utilize stop losses

More on the Asian front last week.  On Monday, Wu Jichuan, head
of China's Ministry of Information Industry, announced that
China is allowing its telecom companies to choose which CDMA
standard they want to use.  In other words, Qualcomm will
benefit no matter which standard is used because of CDMA
royalties.  In other news, the new Japanese telecom giant KDDI
announced it plans to launch the world's fastest mobile phone-
based data service.  They will use Qualcomm's high data rate
technology, which is 75 times faster than regular phone lines.

***October contracts expire in 2 weeks***

BUY CALL OCT-70 AAO-JN OI=21021 at $9.50 SL=6.50
BUY CALL OCT-75*AAF-JO OI=19296 at $6.00 SL=4.00
BUY CALL OCT-80 AAF-JP OI=16478 at $3.50 SL=1.75
BUY CALL NOV-75 AAF-KO OI= 4187 at $9.50 SL=6.50
BUY CALL NOV-80 AAF-KP OI= 4661 at $7.25 SL=5.00

Picked on Sep 17th at    $66.25    P/E = 92
Change since picked      +11.56    52-week high=$200.00
Analysts Ratings      8-9-3-0-0    52-week low =$ 47.25
Last earnings 06/00   est= 0.27    actual= 0.27
Next earnings 11-02   est= 0.24    versus= 0.23
Average Daily Volume = 14.5 mln



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The Option Investor Newsletter                   Sunday 10-08-2000
Sunday                                                      4 of 5

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

INKT - Inktomi Corporation $91.00 (-23.00 last week)

If you have a need for speed on the Internet, INKT is a highly
recognized company to consider.  They specialize in delivering
high content data through their caching application network at
high and reliable rates.  Reputable companies such as AOL and
Excite@Home have come to rely on INKT's technology to help them
meet their high speed customer demands online.  The company also
offers sophisticated search engines used by AOL and Lycos which
offer more detailed search criteria than the competition.

High risk, high-tech companies that have not been able to create
some stable fundamentals for investors have been especially hit
hard in our recent market environment.  INKT meets this criteria
and has paid the price as investors feel it's risky with numbers
of a slowing economy, weakening euro, and election uncertainty at
hand in the markets.  Volume that came in Friday well above its
average of 2.5 million shares caught our eye on the play.  Further
analysis shows why investors are leaving, as the stock has seen a
continued technical breakdown since September 25th.  At that time,
INKT was unable to break above the critical 200-dma resistance and
since has seen technical momentum building on the downside.  Last
Friday's decline broke below a key support level at $95, which many
investors had hoped would form a double bottom on the play from
August 3rd's rebound at that level.  Instead, a very bearish candle
bar formation occurred on 4-million shares, breaking support and
confidence in the stock.  INKT closed near its low of the day at
$90.18, a new 26-week low on the play.  Intraday charts show mild
support at $90, so investors will want to look for INKT to break
below this support before committing.  Overhead resistance is now
becoming formidable for INKT, as the 10, 50, and 100-dma's all
converge near the $115-mark.  This also offers opportunity to play
a resistance bounce off the top trend channel near $109, as INKT
did last Wednesday and Thursday.  Investors aren't expecting much
regarding earnings on Oct. 26th, as the company's recent $1.3
billion acquisition of FastForward Networks will be dilutive to the
bottom line for at least two quarters.  In summary, wait for INKT
to trade below $90 with continued negative momentum, or look for
the resistance bounce off $109.  Both should be accompanied by
negative market sentiment before entering new put positions.

***October contracts expire in 2 weeks***

BUY PUT OCT-100*KYQVT OI=3170 at $13.75 SL=10.50
BUY PUT OCT- 95 KYQVS OI= 722 at $10.38 SL= 7.00
BUY PUT OCT- 90 KYQVR OI= 698 at $ 7.63 SL= 5.25

Average Daily Volume = 2.30 mln



CRA - Celera Genomics $79.38 (-20.25 last week)

Celera was formed to usher in the digital age of medical science
through the development, analysis, and interpretation of genomic,
proteomic, and related biological and medical information.  By
combining its definitive information with proprietary
technologies in computer science, software, mathematical
algorithms, and molecular biology, Celera will help to accelerate
the drug discovery process, elucidate pathways of disease, and
transform molecular diagnostics and therapeutics into practices
that have a more personal and direct impact on our lives.

So far, October has not been kind to CRA.  Only five trading days
have passed, yet all of them have been to the downside.  We are
left to wonder what the rest of this much-dreaded month has in
store.  CRA is not alone, however.  With peers such as DNA, HGSI
and MLNM all finishing much lower last week, it appears that
sector sympathy is the name of the game.  The NASDAQ usually
rallies on the backs of the Semiconductors and Biotechs.  Recent
weakness in the Chip sector has now spread to the Biotechs, with
the Genomic issues taking the brunt of the damage.  CRA, as a
leading Genomic stock, is leading the way down.  A late
September attempt to recover back above the 200-dma was
unsuccessful, leading to a steady decline into October.  While
the volume during that time was low, the selling action picked
up last week.  Unable to make it back above the psychological
$100 level on Monday, CRA fell below its 50- and 100-dma on
Tuesday, closing just above support at the $88.  On Wednesday,
the stock opened below that level, leading to a tug-of-war
between the bulls and bears, ending the day in a stalemate.  An
early morning attempt to rally was quickly and easily rejected
on Thursday, leading to more selling, which continued into
Friday.  With the close below $80 support last week, CRA broke
to the downside and it appears there may be more selling to
come.  An entry at current levels could be considered, but make
sure that resistance at $80 holds CRA down before entering.  The
next level of support for CRA is at $75.  With the Merrill
Lynch Biotech HOLDR (BBH) sitting just above its 200-dma, a
break below that level could be the confirmation conservative
traders need to enter this play.

***October contracts expire in 2 weeks***

BUY PUT OCT-85 CZA-VQ OI=149 at $9.88 SL=7.00
BUY PUT OCT-80*CZA-VP OI=204 at $6.88 SL=5.00
BUY PUT OCT-75 CZA-VO OI=162 at $4.13 SL=2.50

Average Daily Volume = 1.19 mln



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

JBL - Jabil Circuit, Inc. $51.25 (-5.50 last week)

Founded in suburban Detroit in 1966, Jabil Circuit, Inc. provides
electronic manufacturing services for companies in the
communications, personal computer, computer peripheral,
automotive and consumer industries.  Jabil offers its customers
the total manufacturing solution including circuit design, board
design from schematic, mechanical and product design, sourcing
and procurement, prototype and volume board assembly, system
assembly, design and implementation of product testing, direct
fulfillment, warranty and repair services from 20 facilities in
North America, Latin America, Europe and Asia.  Jabil is one of
the world´s largest electronic manufacturing services providers.

Guilt by association is the theme for our play.  As a leading
supplier of components that go into PCs, earnings warnings from
Intel and Apple have helped in keeping JBL from breaking above
its 50-dma, currently sitting at $57.51.  Fears of a slowdown
for PCs have translated to the possibility of slowdown in demand
for JBL's components.  This possibility was all but confirmed
this past Wednesday when Dell, a major customer of JBL, announced
after the closing bell that sales would grow at a slower than
expected rate this year.  Prior to Dell's bombshell, JBL had been
in a tight trading range, between $54 and $60.  On Tuesday, JBL
broke below that range, with resistance at the 10-dma, now at
$54.67.  Since then, the downtrend has accelerated, with the
5-dma, now at $52.22 providing further resistance.  Dell's news
was not well received on Thursday as the stock broke below support
at the 100-dma, now at $51.93.  A Friday bounce off deeply
oversold conditions found resistance right at $51.93.  On Friday,
Deutsche Banc Alex Brown analyst Chris Whitmore initiated coverage
on JBL with a Buy rating.  While this helped the stock buck the
market trend for the day, resistance at the 100-dma held strong.
A failed rally above the 100-dma as well as the 5- and 10-dma
could provide opportunities for entry but confirm a rollover
before entering.  The next level of support for JBL is at the $45
level, just above its 200-dma.  Confirm downward direction in the
$SOX before entering new plays.

***October contracts expire in 2 weeks***

BUY PUT OCT-55*JBL-VK OI=1327 at $5.38 SL=3.50
BUY PUT OCT-50 JBL-VJ OI= 860 at $2.81 SL=1.50

Average Daily Volume = 1.38 mln



CPTH - Critical Path, Inc. $50.75 (-10.00 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.

The path of least resistance was clearly down last week for CPTH.
Coverage on the company was initiated by Adams Harkness on
Monday and then on Tuesday, by CIBC World Markets, both with
Strong Buy ratings.  The news was largely ignored as a Monday
open near resistance at the 5- and 10-dma led to a steady
decline.  By the end of the day, CPTH was below its last line of
moving average support, the 100-dma.  Tuesday was more of the
same, with intra-day attempts to recover met with resistance at
$58.50 and $56.50.  On Wednesday, CPTH bounced strongly off
support at the $49-50 level, ending the day up $6, putting the
stock back above its 5- and 100-dma.  This turned out to be a
one-day wonder, a devious trap set by the bears, and an excellent
entry into the play.  Wednesday's close was just below resistance
at $58.50.  By Thursday morning, when it failed to break above
that level, CPTH fell back below its 5- and 100-dma.  A last
ditch effort by the bulls to recover was denied at the $56.50
line.  This set the stage for Friday's big decline.  Dragged down
by a weak NASDAQ, CPTH lost nearly 8% on 140% of ADV, closing
just above the $50 mark.  While volume in CPTH's decline has been
light this past week, Friday's action bodes well for our put play.
That being said, CPTH spent the week in a highly tradable range
with lows at the $49-50 level and the highs at $58.50.  If this
range holds next week, aggressive traders will be watching for
bounces off resistance at $58.50 and $56.50 for an entry.  The
5-dma ($54.45) continues to weigh heavily on CPTH, as does the
100-dma ($56.78).  A bounce off these levels could also provide
entry points.  Conservative traders will be watching for CPTH to
break below $49-50 on strong volume before jumping in.  With
negative sentiment in the Internet sector, the bias is currently
to the downside but make sure to confirm sector sympathy before
initiating a play.

***October contracts expire in 2 weeks***

BUY PUT OCT-55 UPA-VK OI=109 at $7.50 SL=5.25
BUY PUT OCT-50*UPA-VJ OI= 75 at $4.38 SL=2.75

Average Daily Volume = 1.05 mln



AKAM - Akamai Technologies $36.19 -3.50 (-16.31 last week)

Using software based on the company's proprietary mathematical
algorithms, AKAM provides a global delivery service for Internet
content, streaming media and applications that improves Website
speed, quality, reliability, and scalability.  It even helps to
protect against Website crashes due to demand overloads.
Superior delivery of customer Web content and applications
through a worldwide network is achieved by locating the content
and applications geographically closer to users.  Exploiting the
fact that even on the Internet, the shortest distance between
two points is the fastest, AKAM monitors Internet traffic
patterns and delivers its customers' content and applications by
the most efficient route available.

With the accelerated selling on the NASDAQ on Friday, the pain
being felt by Internet investors intensified.  Once high-flying
stocks like AKAM continued their descent into the basement, as
buyers were nowhere to be found.  It doesn't matter whether it
is technical weakness in the stock, jitters over the Internet
sector, economic problems, or October.  Whatever the reason(s),
we have been handed the makings of a nice put play.  Since we
added it on Tuesday, selling volume has been on the rise,
clocking in at 65% above the ADV on Friday.  This is a nice
confirmation of the price action, which has seen our play
hitting new all-time lows for the past 3 days.  Stochastics is
drilling deeper into oversold territory, and the nearest moving
average, the 5-dma ($42.44), is more than $6 above Friday's
close.  Intraday resistance sits at $39, followed by $44.  The
10-dma shouldn't even be a factor, as it sits clear up at
$47.75.  Just as nothing goes up forever, neither does it go
down forever without a pause.  With AKAM so deep into oversold
territory, and the price action flattening out at the end of the
day on Friday, an oversold bounce could be close at hand.
Friday's low of $35 represents the only support level available,
and it is a weak one at that.  If the Internet-related selling
continues next week, which seems likely at this point, look for
AKAM to continue posting new lows.  Selling volume that
penetrates Friday's low, will provide a decent entry into the
play, but an oversold bounce could yield an even better entry
point as the upward momentum peters out near resistance.

***October contracts expire in 2 weeks***

BUY PUT OCT-45 RUG-VI OI=435 at $10.75 SL=8.00
BUY PUT OCT-40*RUG-VH OI=647 at $ 7.00 SL=5.00
BUY PUT NOV-40 RUG-WH OI=479 at $ 8.63 SL=6.00
BUY PUT NOV-35 RUG-WG OI= 28 at $ 5.38 SL=3.25

Average Daily Volume = 2.13 mln



DIGX - Digex Inc $36.94 (-9.94 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.

Typically a takeover can drive up a company's share price, but
in the case with DIGX, shareholders have vehemently sold off the
issue on strong volume.  The September 5th announcement of
Worldcom's (WCOM) successful $6 bln dollar bid for DIGX and its
parent, Intermedia Communications, sent investors into a frenzy.
On the news, DIGX was cut down a whopping 19.7%, or $16.63 on
volume levels at ten times the ADV.  The competitive move by
Exodus to acquire Global Crossing's (GBLX) GlobeCenter for $6.53
mln dollars the previous week also added fuel to DIGX's downward
momentum.  By the end of September, DIGX fell through the last
technical net at the 5-dma line and also, slid under the staunch
support level at $50.  Overall the share price has lost over 56%
of its value in its descent, so watch for a bottom.  There is
currently some light support around $35; although the bearish
sentiment that typically plagues the markets in October may help
drive DIGX down further in the short-term.  The ultimate
challenge is DIGX's 52-week record of $24.50.  Above, the 5-dma
($39.66) marks upper resistance and provides a reasonable
measurement for entry points.  But keep the stops tight if you
plan on buying into further weakness.  The recent lows and
upcoming earnings may bring in the bargain buyers.  The company
is scheduled to report third-quarter earnings on October 26th.

***October contracts expire in 2 weeks***

BUY PUT OCT-45 UOM-VI OI= 34 at $9.75 SL=6.75
BUY PUT OCT-40*UOM-VH OI= 22 at $5.50 SL=3.50
BUY PUT OCT-35 UOM-VG OI=110 at $2.69 SL=1.25

Average Daily Volume = 1.24 mln



AETH - Aether Systems Inc $82.25 (-23.25 last week)

Aether Systems is the company that offers information in the
palm of your hand.  They provide wireless data services and
systems enabling people to use wireless handheld devices for
real-time data communications and transactions.  The company also
designs and develops wireless data systems and software
engineered exclusively for healthcare, education and government.
AETH is based in Owings Mills, MD and has branch offices in New
York and Florida.

Here's a stock that not long ago once commanded a lofty
price of $345!  Now AETH cannot even hold a price above the
century mark.  A prime example of the merciless marketplace.
Recently too, the company staged a release of 24 mln shares into
the market following the lock-up period for March's secondary
offering.  This event is likely a contributing factor to the
downward momentum.  The bearish market is, of course, the
perfect environment for AETH to continue moving towards its IPO
prices found below the $80 mark.  The drama began on September
26th when the NASDAQ stumbled.  AETH came off higher support
above $120 and made a dramatic close at $106.69, down nearly 15%
on the day.  The sharp drop sent more investors running for
cover.  A distinct pattern of lower-highs and lower-lows
evolved.  There was some concern this week about short-term
support developing at $90, but the bounces toward $100 on
Wednesday provided a prime entry.  The more adventurous saw
their reward during Friday's session.  AETH plummeted $7.75, or
8.6%.  Even the more prudent traders saw the "jump on board"
sign.  The next objective is to move through the $80 level and
in the most perfect world, dive deep.  Conservative players
should wait for AETH to demonstrate further weakness before
jumping back into the momentum.  Otherwise, use the trailing 5-
dma ($89.89) for more aggressive entries.

***October contracts expire in 2 weeks***

BUY PUT OCT-90 HIZ-VR OI=38 at $13.75 SL=10.25
BUY PUT OCT-85*HIZ-VQ OI=52 at $10.50 SL= 7.50
BUY PUT OCT-80 HIZ-VP OI= 0 at $ 7.75 SL= 5.50  Wait for OI!!

Average Daily Volume = 1.15 mln



QLGC - Qlogic Corp $74.25 (-13.75 last week)

QLogic Corporation is the leading manufacturer of fibre channel
bus adapters.  The company is also a designer and supplier of
semiconductor and board level input/output (I/O) components
They've been designing and marketing SCSI-based (small computer
system interface) products for over 12 years and sells its
products to server, workstation, and date peripheral makers.
Blue-chip clients include Compaq, Dell, Hitachi, IBM, and
Quantum Corporation.

QLGC's share price rapidly deteriorated in this week's
marketplace.  Before Tuesday's tech sell-off, QLGC was holding
its own above the $85 mark.  But the downward pressure amid the
market was too much for this hardware-related stock.
The subsequent momentum resulted in a pattern of lower-highs
and lows.  By Thursday, not only had QLGC shattered any hopes of
finding support at the 100-dma ($78.54), but the technical line
is now serving as the upper trading band.  A move through
Friday's intraday bottom of $73 coupled with a slide under $70
would open the door for more QLGC losses and profits for our put
play.  The next line of support is found near the $60 mark.  More
cautious traders will wait for definitive moves through the above-
mentioned levels before taking additional positions.  Look too for
moderate to strong volume to back any further decline.  In an
industry besieged with earnings warnings and serious downgrades,
QLGC is poised for deeper cuts going into next week.  But, as
always, play it safe and set stops to protect against sharp
rallies.  The company is expected to report earnings around
October 23rd.

***October contracts expire in 2 weeks***

BUY PUT OCT-80 QLC-VP OI=625 at $10.13 SL=7.00
BUY PUT OCT-75*QLC-VO OI=630 at $ 6.88 SL=5.00
BUY PUT OCT-70 QLC-VN OI=431 at $ 4.25 SL=2.50

Average Daily Volume = 2.69 mln



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*****
LEAPS
*****

October Lives Up To Its Reputation
By Mark Phillips
Contact Support

The bears have been vindicated so far this month, as the selling
in the equity markets has intensified, dragging the INDU below
the 10600 level and bringing the NASDAQ within spitting distance
of its May lows.  While the selling on many issues seems to have
been overdone, it has served to weed out the strong players from
those that once had undeservedly high valuations.  For those
that watch for historical patterns, this should come as no great
surprise - this is the pattern that we witness every year at
this time.

It should now be painfully clear why we recommended exiting 2001
positions several months ago.  While there was still lots of
time value in these options in May or June, we are now in
October, and time decay has taken a big fat bite out of those
premiums.  This wouldn't be a problem in an up market, but
historically the markets do not move in that direction during
the summer and fall.  October has a high likelihood of setting
a bottom in place for the usual fall rally, and those of you
that have been patiently waiting, are likely to see some
attractive entry points materialize in the next few weeks.

Next week kicks off the October earnings cycle, with
heavyweights like YHOO, MOT, AMD, AMCC, and GE posting their
results.  The early earnings reports are likely to set the tone
for the remainder of the month - disappointments will likely be
met with renewed selling across the broader markets.  On the
other hand, a strong set of numbers from the industry leaders
could go a long ways towards setting a positive tone for the
market as we head toward the holidays.

The one bright point in the markets is our old buddy the VIX,
which finally found some life towards the end of the week.
While it hit a high of 26.67 and closed out Friday's session
at 25.67, it has yet to reflect the capitulation we need to see
in the market.  Recall that last year, the October lows were
accompanied by a VIX reading above 33, so there is definitely
not enough fear in this market yet.  It seems entirely possible
that we could see more selling before the necessary capitulation
event occurs.  Keep your eyes peeled and your cash safe as we
roll through the stormy October seas.

I have had a lot of email in recent weeks pertaining to when we
drop plays and what we advise in terms of stop losses on LEAPS.
While these issues have been addressed in prior articles, this
seems a good time to revisit them.

First, let's talk about the LEAPS playlist.  It should be
treated in the same way as the regular Call and Put playlist - a
list of possible plays to be considered, IF an entry point
presents itself.  If you read the LEAPS section each weekend and
then buy the new plays on the following Monday, you are missing
the point and are well on your way to running your account down
to zero.  It is not an actual portfolio, although I frequently
take positions that are listed in the playlist.  There are far
too many plays to manage responsibly in a single portfolio.  The
intent of the playlist is to provide a short list of possible
plays, with a description of a prudent entry strategy.  When we
drop a play, that is not the signal to close out a losing
position, as we are probably was past it by that point.  When we
drop a play, it indicates that we no longer advocate keeping the
play on your radar screen awaiting a new entry point.  It means
the play is broken or has run its course and it is time to move
on to more fertile ground.

What would have happened if you had bought LEAPS on LU or YHOO
the day after we added them as new plays?  Hopefully you would
have been stopped out for a loss, but judging from some of the
email I have received, you might still be holding onto losing
positions.  I highlight these two plays because they promptly
dropped through our critical support levels without providing an
entry point.  Nobody should have entered these positions, but I
know that some did.  Now I know that we all get caught by a
fickle market from time to time, and that is why we have to use
stop losses.

It doesn't matter whether you are trading front-month options,
LEAPS, or actually buying and selling stocks.  Stop losses are
the last line of defense between you and a position going to
zero.  Not every position goes up immediately after purchase, so
while we need to take steps to protect our capital, we also need
to provide some room for it to move.  I think any number between
20-30% provides a good level at which to place a stop loss,
although I stick to 25% for my own trading.  Another approach
would be to place a stop based on the movement of the stock.
For instance, our YHOO play was predicated on the stock holding
support at $100.  Let's assume you bought the 2002 $110 LEAP the
day after it was listed as a new play when the stock was trading
around $107.  If you had placed your stop loss just below
support, say $98, then you would have been taken out of the play
with a smaller loss than just using a 25% stop loss placed on
the option.  In either case, the decline that ensued, would have
triggered your stop and you would be free to take your cash and
employ it in other plays.

Given the turmoil in the markets this week, we have refrained
from adding any new plays, but we will be on the lookout for new
opportunities as the current earnings cycle gets underway.

Have a great week!


Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $50.75   434.21%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $28.88   -11.83%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $21.63    96.59%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $33.38   120.59%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $22.13   -19.55%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $39.25    78.41%
ERICY  01/30/00  JAN-2002 $16.3 WRY-AO   $ 6.75   $ 4.13   -38.89%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 3.38   -50.94%
NSM    02/27/00  JAN-2002 $ 70  WUN-AN   $24.25   $ 5.63   -76.80%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $11.60   -37.73%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $21.30    21.71%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $18.75   100.96%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $14.13   225.55%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $35.88   - 9.48%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $29.88   -45.93%
MOT    05/14/00  JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 4.25   -55.45%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 6.50   -62.32%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $ 9.88   -44.37%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $13.13    27.30%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $11.88   - 3.06%
AMGN   07/02/00  JAN-2002 $ 75  WQY-AO   $20.75   $13.13   -36.75%
                 JAN-2003 $ 70  VAM-AN   $28.75   $22.00   -23.48%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $67.88     2.45%
       09/03/00  JAN-2003 $190  OVS-AR   $86.63   $86.38   - 0.29%
DELL   07/09/00  JAN-2002 $ 55  WDQ-AK   $12.63   $ 1.25   -90.10%
                 JAN-2003 $ 60  VDL-AL   $15.38   $ 2.63   -82.93%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $16.75   - 2.22%
                 JAN-2003 $ 70  OZG-AN   $23.13   $22.50   - 2.72%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $15.63   -44.69%
                 JAN-2003 $120  VHP-AD   $32.63   $19.75   -39.47%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $13.63   -34.34%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $17.75   -30.06%
MFNX   08/06/00  JAN-2002 $ 40  WOF-AH   $13.75   $ 5.13   -62.73%
                 JAN-2003 $ 45  VKW-AI   $15.63   $ 6.75   -56.81%
GM     08/06/00  JAN-2002 $ 65  WGM-AM   $ 9.88   $10.63     7.54%
                 JAN-2003 $ 65  VGN-AM   $13.25   $14.38     8.49%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $36.50    16.32%
                 JAN-2003 $100  VFB-AT   $37.38   $41.63    11.36%
BRCD   08/27/00  JAN-2002 $220  YNU-AD   $65.38   $64.38   - 1.54%
                 JAN-2003 $220  OMW-AD   $86.50   $85.25   - 1.45%
INKT   08/27/00  JAN-2002 $130  XOR-AF   $50.13   $25.63   -48.88%
                 JAN-2003 $140  VFR-AH   $60.88   $35.38   -41.89%
VERT   09/03/00  JAN-2002 $ 60  YER-AL   $22.13   $ 5.88   -73.45%
                 JAN-2003 $ 60  OER-AL   $28.88   $ 8.50   -70.56%
CMRC   09/10/00  JAN-2002 $ 80  YCU-AP   $30.13   $21.38   -29.06%
                 JAN-2003 $ 80  OCU-AP   $38.75   $29.38   -24.19%
PHCM   09/10/00  JAN-2002 $ 90  YPH-AR   $45.75   $45.25   - 1.09%
                 JAN-2003 $ 90  OFO-AR   $52.50   $51.25   - 2.38%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $30.25    34.44%
                 JAN-2003 $ 70  VLM-AN   $29.63   $38.38    29.51%
BRCM   09/24/00  JAN-2002 $250  YRR-AJ   $77.13   $62.75   -18.64%
                 JAN-2003 $260  OYG-AL   $95.63   $81.25   -15.04%
COMS   10/01/00  JAN-2002 $ 20  WTH-AD   $ 6.38   $ 7.00     9.80%
                 JAN-2003 $ 25  VTH-AE   $ 7.13   $ 7.50     5.26%
WCOM   10/01/00  JAN-2002 $ 35  WQM-AG   $ 6.75   $ 4.25   -37.04%
                 JAN-2003 $ 35  VQM-AG   $ 9.88   $ 6.88   -30.38%

Spotlight Play

EXDS - Exodus Communications $45.31

Declining from its late August highs, EXDS was right back to
its ascending trendline a week and a half ago, looking like an
entry point could be close at hand.  Then the company announced
that it would be buying GBLX's Global Center web hosting
operations, and the stock promptly fell another 20%.  While
this acquisition will likely strengthen the company's market
position in the web hosting market, the current negative bias in
the Internet sector has served up what is looking like a tasty
entry point into our play.  Support is looking solid near $40,
and once the market is finished shaking out the weak hands, EXDS
could have a very nice run this fall.  Earnings are scheduled
for October 19th after the close, and cautious investors may
want to wait for any post-earnings weakness to play out before
initiating new positions.  After all, the market isn't showing
any signs of running away to the upside in the near future, so
we are unlikely to miss out on much of the stock's appreciation
by waiting.  Make sure the $40 level holds and then consider
initiating new positions as technical indicators like
Stochastics and MACD to head back into positive territory.

BUY LEAP JAN-2002 $50.00 WZZ-AJ at $15.00
BUY LEAP JAN-2003 $50.00 VTQ-AJ at $20.25


New Plays

None


Drops

DELL $25.31 The long slow decline in DELL's share price has been
both painful and amazing to witness.  AAPL's earnings warning
heaped more pressure on the stock's narrow shoulders, along with
other PC-related stocks.  We decided last weekend to give our
play one more chance, setting the $30 level as our maximum pain
threshold.  It was as though the bears were reading our column,
selling the stock right through that level on Monday morning.
Continued weakness on the NASDAQ pressured our play throughout
the week, and then the other shoe dropped as DELL warned of
their own earnings and revenue shortfall.  Pointing to weak
server sales and a soft European market, the #2 PC maker
promptly fell to the $25 level where it appears to be finding
some support.  While it is hard to imagine much more downside,
the company's once stellar reputation has been tarnished and
until conditions improve, we cannot recommend initiating new
positions.

VERT $21.75 Originally added based on its ascending wedge
pattern, and on optimism for a revival in the B2B Internet
space, VERT turned negative in early September, when it once
again failed to penetrate the $60 resistance level.  As it
declined near its ascending trendline (near $39), it looked
like we might get a decent entry point on our play.  Alas, it
wasn't to be, as continued selling pressure pushed VERT below
this support and in two shakes it was testing the spring lows
near $30.  As we held our breath wondering if we would have to
drop the play, the market made up our mind for us, pushing the
stock further into the basement.  Friday's sharp decline was
the final straw, as it came on the heels of analyst downgrades,
prompted by reports indicating that some of VERT's largest
customers are dissatisfied.  This is not the type of report
that sits well with investors in a down market, especially
when the company has yet to show a profit.  Until the company
can present evidence that analyst fears are unfounded, VERT has
no place on our play list.

INKT $91.00 The Internet stocks are having a rough time lately,
with even leading stocks like YHOO trading at new 52-week lows.
Like VERT, INKT had formed an ascending wedge pattern over the
past 6 months, and looked like it would find support near $95.
Unfortunately, the bears had other ideas on Friday, as they
pushed shares of the Internet software company as low as $90.13
on nearly double the ADV.  Sentiment on the NASDAQ and in the
Internet sector has deteriorated significantly in recent weeks,
and unless earnings are surprisingly strong, it looks like these
stocks will continue to languish.  Given the technical violation
on Friday, and the negative market sentiment, INKT no longer
looks like a viable play.


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

Time To Catch Up On Other Things
By Ryan Nelson

Without upside momentum, all we can do wait for the market to
find its footing.  If you have any hobbies, unfinished reading,
or travel plans, you may want to take care of those items now
while we patiently for some buyers.  Split runs are the furthest
thing from trader's minds right now as most would settle for
a some bids.  But, like always, the momentum will turn and we
need to be ready so stay tuned.  Once a bottom is in sight, we
will be ready to add some of the split runs.


Current Split Run Plays

ADBE - 10/25 ex-date


Current Split Candidate Plays

CHKP
SEBL
MERQ


Candidates That Are Not Current Plays

BRCD
NEWP
ARBA
EXTR
RIMM
CFLO
BRCM
MUSE
JNPR
VRTS
VRSN
AMCC
RBAK
SONS
PMCS


10 Most Recent Announcements We Predicted

DNA  - 10/05 (most recent announcement)
LEH  - 09/20
ORCL - 09/14
SUNW - 08/17
GLW  - 08/16
HWP  - 08/16
CIEN - 08/15
SEBL - 08/08
SAPE - 08/01
AMD  - 07/19


Major Announcements So Far This Month = 3

DNA      BEC      EMLX


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


Symbol  Company Name                Splits  Payable    Executable
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
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
DNA  Genentech, 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
PNS  Pinnacle Data Systems            2:1  10/31/2000  11/01/2000
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
BEC  Beckman Coulter, Inc.            2:1  12/07/2000  12/08/2000


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

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

The Option Investor Newsletter                   Sunday 10-08-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/100800_5.asp

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

Position Management...
By Mark Wnetrzak

One of our readers requested a review of the proper management of
"in-the-money" covered-call positions.

In a covered-write, if the share value rises substantially after
the initial position has been established, you have a number of
choices.  You can do nothing, get "called-out" and accept the
original return that was established when the play was opened.
If the option is priced near parity, you can close the position
early; or, you may also choose to adjust the position to match
the new outlook for the underlying issue by "rolling" the call up
(or up and forward) to a higher strike price.

In closing the position early, an experienced trader evaluates the
cost of commissions versus the increased annualized return.  A
"net" order (net credit) can be used in closing a covered write to
ensure a proper exit.  Similar to a "Buy-Write", you would place
an order to sell the stock and "buy-to-close" the sold call for a
specific net credit at a price relatively close to parity.

When you roll up (buy-back the current sold call and sell a higher
strike call), you increase the profit potential of the position.
The catch is, you surrender downside protection.  The new downside
break-even point will be increased by the amount of debit required
to complete the transaction; the cost of the closed position minus
the premium received for the new position.  Thus when one rolls up,
a debit is incurred and this is usually considered a negative move
(placing more money at risk) by many traders.  Usually, it is more
beneficial to roll to a future expiration date as it reduces the
debit required for the new position.  It is normally not advisable
to adjust to a higher strike if a 10% correction in the underlying
stock price cannot be withstood (though this percentage may not be
applicable to volatile stocks).

As expiration nears and the time value premium disappears from the
written option, you could also consider rolling forward to reduce
the likelihood of early assignment and increase the overall profit
potential of the position.  You can buy-back the short option and
sell a new, longer-term call at the same strike price or move to a
different series, consistent with your outlook for the underlying
issue.  With deep in-the-money calls, the time value premium often
vanishes long before expiration.  However, as long as there is time
premium left in the call, there is little risk of early assignment.
In addition, you are earning time premium by remaining with the
original position.  As the option price (bid) falls to parity or a
discount, there is a considerable probability of early exercise by
arbitrageurs; floor traders who do not pay commissions for trading.
When this situation occurs, you should endeavor to roll-forward or
adjust the position in some manner that prevents a monetary loss
through early assignment.

When the share price falls below the sold strike, an investor also
has several choices.  Since the covered-write strategy provides a
limited profit potential, it is imperative that action is taken to
limit losses.  Otherwise, one losing position could negate several
winning positions.  The simplest form of follow-up action to a
decline in the value of the underlying issue is to close out the
position.  This exit strategy can be triggered by a percentage
decline in the share value of the underlying issue or a move below
a pre-determined technical support level.

Rolling down is a technique often used to avoid potential loss and
reduce one's cost basis in the underlying issue.  Generally, an
investor buys back the original call (presumably at a profit as
the underlying stock has declined), and then sells a new call with
a lower striking price.  The idea is to provide more downside
protection against a further drop in the stock price and yet offer
the potential for additional income if the share value stabilizes.
Though rolling down generally reduces the maximum profit potential
of the covered write, obtaining additional downside protection
is often the more pressing concern.  The use of a more distant
expiration month should also be considered when rolling down and
aggressive investors may want to adjust only part of the covered
call position to allow for increased profit potential.  In all of
these situations, one generally has a bearish outlook for the
underlying issue and doesn't believe current prices will hold.
The problem is that by using a longer-term call, one is reducing
his profit potential for a longer period of time.  Again, that
could be of secondary concern.  A combination of the two; rolling
down half the current position near term and the other half to a
longer-term call allows an investor to obtain maximum protection
on at least part of his investment and still retain reasonable
upside potential.

In extreme cases, rolling down can only provide a locked-in loss.
Although it is not a pleasant experience, it may be beneficial to
make the adjustment to protect as much of the stock price decline
as possible.  Using near-term calls allows an investor to attempt
to recover the available premium in the sold call, in the least
amount of time.  This bearish strategy is difficult to implement
successfully, but as the overall cost basis in the position is
reduced each month, an astute investor may eventually achieve a
profitable outcome.

The key is to evaluate the risk-reward outlook of all the possible
scenarios and construct a position that fits your trading plan and
your future outlook for the underlying issue.

Good Luck!



SUMMARY OF PREVIOUS PICKS
*****
NOTE: Using Margin doubles the listed Monthly Return!

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

CCUR   19.00  18.19   OCT  17.50  2.38  *$  0.88   7.7%
IMGN   26.19  28.88   OCT  22.50  5.50  *$  1.81   7.6%
CTIC   50.13  60.63   OCT  40.00 12.50  *$  2.37   6.8%
GLGC   24.75  22.63   OCT  20.00  6.38  *$  1.63   6.4%
RCOT   15.81  15.63   OCT  15.00  1.44  *$  0.63   6.4%
EPTO   14.00  13.19   OCT  12.50  2.50  *$  1.00   6.3%
WDC     5.75   6.13   OCT   5.00  1.19  *$  0.44   6.2%
BCGI   20.00  18.75   OCT  17.50  3.38  *$  0.88   5.8%
LBRT   30.00  22.81   OCT  22.50  9.13  *$  1.63   5.7%
ASPX   12.38  12.25   OCT  10.00  2.75  *$  0.37   5.6%
GNSS   19.31  18.13   OCT  17.50  2.63  *$  0.82   5.3%
NIKU   24.38  17.75   OCT  17.50  7.50  *$  0.62   5.3%
IMGN   21.81  28.88   OCT  17.50  5.50  *$  1.19   5.3%
MSTR   31.38  25.44   OCT  25.00  8.25  *$  1.87   5.2%
WGAT   22.88  19.56   OCT  17.50  6.63  *$  1.25   5.0%
AAS    42.28  47.75   OCT  40.00  4.00  *$  1.72   4.9%
ISIP   11.50  10.78   OCT  10.00  1.81  *$  0.31   4.6%
TRIH   32.38  33.44   OCT  30.00  3.50  *$  1.12   4.2%
EFCX   11.88   9.63   OCT  10.00  2.63   $  0.38   3.6%
SYNM   20.75  16.75   OCT  17.50  4.38   $  0.38   2.0%
KOSP   19.75  16.94   OCT  17.50  2.81   $  0.00   0.0%
CYBS   12.69   8.94   OCT  10.00  3.13   $ -0.62   0.0%
WPZ     5.19   3.63   OCT   5.00  0.94   $ -0.62   0.0%
NEOF    5.81   2.88   OCT   5.00  1.94   $ -0.99   0.0%
PRST   20.13  15.50   OCT  17.50  3.63   $ -1.00   0.0%
NETS    6.25   3.25   OCT   5.00  1.75   $ -1.25   0.0%
NIKU   23.69  17.75   OCT  20.00  4.63   $ -1.31   0.0%
GSTRF  11.50   7.19   OCT  10.00  2.25   $ -2.06   0.0%
TIVO   26.88  16.50   OCT  22.50  6.13   $ -4.25   0.0%

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

Comments:

In this sea of red we call the "Market" there is no luck.  Silicon
Valley's (SVGI) buyout by ASM Lithography was announced Monday
before the open, thus we were unable to enter the play.  Again,
the current bearish conditions may exaggerate normal corrections,
but money management (and capital preservation) dictates exiting
issues that have broken down technically.  Long-term investors may
consider rolling down on the following issues:  EFCX, SYNM, KOSP,
CYBS, and PRST depending on their outlook for each issue.  Tivo
(TIVO) broke down on Friday and has been closed.  Globalstar
(GSTRF) continues to move lower and exiting should be considered.
NIKU, NETS, NEOF, and WPZ should be watched closely and possibly
closed on any rally.

Positions Closed:

Red Hat (RHAT), Ventro (VNTR), Wave Systems (WAVX)



NEW PICKS
*********

Sequenced by Company
*****

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

ENMD   26.38  OCT  22.50  QMA JX  4.63  10    21.75   14     7.5%
FFD    10.56  OCT  10.00  FFD JB  1.06  2098   9.50   14    11.4%
INCY   38.38  OCT  35.00  IPQ JG  4.50  1106  33.88   14     7.2%
PSFT   33.88  OCT  30.00  PQO JF  4.75  12069 29.13   14     6.5%
QHGI   15.00  OCT  15.00  HQG JC  0.88  475   14.12   14    13.5%
TKTX   45.38  OCT  35.00  UFT JG 12.00  225   33.38   14    10.5%

WDC     6.13  NOV   5.00  WDC KA  1.44  483    4.69   42     4.7%

Sequenced by Return
*****

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

QHGI   15.00  OCT  15.00  HQG JC  0.88  475   14.12   14    13.5%
FFD    10.56  OCT  10.00  FFD JB  1.06  2098   9.50   14    11.4%
TKTX   45.38  OCT  35.00  UFT JG 12.00  225   33.38   14    10.5%
ENMD   26.38  OCT  22.50  QMA JX  4.63  10    21.75   14     7.5%
INCY   38.38  OCT  35.00  IPQ JG  4.50  1106  33.88   14     7.2%
PSFT   33.88  OCT  30.00  PQO JF  4.75  12069 29.13   14     6.5%

WDC     6.13  NOV   5.00  WDC KA  1.44  483    4.69   42     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.

*****
ENMD - EntreMed  $26.38  *** Making the Silver Bullet! ***

EntreMed is a clinical-stage biopharmaceutical company emphasizing
antiangiogenesis therapeutics that inhibit abnormal blood vessel
growth associated with a broad range of diseases such as cancer,
blindness and arteriosclerosis.  EntreMed's strategy is to quicken
development of its core technologies through collaborations and
sponsored research programs with university medical departments,
research companies and government laboratories.  EntreMed gained
the spotlight when a preliminary research report showed that the
growth of the small blood vessel network feeding coronary artery
plaques in mice could be reduced by giving them an angiogenesis
inhibitor (Endostatin).  EntreMed plans to present the first
public presentation of the data from the on-going Phase I clinical
trials of Endostatin in the U.S at a symposium in Amsterdam that
is scheduled the week of November 7th.  This was announced at the
same time the company started its fourth Phase I clinical trial
to explore the continuous infusion and subcutaneous administration
of Endostatin.  We simply favor the stage I base with a cost basis
below long-term technical support.

OCT 22.50 QMA JX LB=4.63 OI=10 CB=21.75 DE=14 MR=7.5%


*****
FFD - Fairfield Communities  $10.56  *** Stealth Breakout! ***

Fairfield Communities is one of the largest vacation ownership
companies in North America. The Company markets vacation products
and manages resort properties that provide quality recreational
experiences at 33 locations in twelve states and the Bahamas, to
more than 303,000 vacation owning households.  No news to explain
the recent breakout that started with heavy call buying back in
September, though Fairfield was once a take-over target of cruise
line company Carnival.  We favor the bullish breakout supported
with heavy volume.  As I have said before, the tape tells all!
(Actually, Stan Weinstein should be credited with that quote.)

OCT 10.00 FFD JB LB=1.06 OI=2098 CB=9.50 DE=14 MR=11.4%


*****
INCY - Incyte Genomics  $38.38  *** Stage I Biotech ***

Incyte Genomics is the leading provider of an integrated platform
of genomic technologies designed to aid in the understanding of
the molecular basis of disease.  INCY develops and markets genomic
databases and partnership programs, genomic management software,
micro array-based gene expression services, related reagents and
services.  These products, programs and services assist pharma-
ceutical and biotechnology researchers with all phases of drug
discovery and development including gene discovery, understanding
disease pathways, identifying disease targets and the discovery
and correlation of gene sequence variation to disease.  Salomon
Smith Barney analyst Meirav Chovav recently started coverage on
Incyte with a "buy" rating and a price target of $54.  In August,
Motorola joined forces with Incyte to develop DNA chips.  Incyte,
which has recently split, has been in a stage I base for over 6
months.  The stock has recently been trading in a tight range
from $35 to $45 and the technicals suggest the current trend will
continue.

OCT 35.00 IPQ JG LB=4.50 OI=1106 CB=33.88 DE=14 MR=7.2%


*****
PSFT - PeopleSoft  $33.88  *** Nice Rebound! ***

PeopleSoft designs, develops, markets, and supports a family of
enterprise application software products for use throughout large
and medium sized organizations.  These organizations include
corporations, higher education institutions, and federal, state,
provincial and local government agencies worldwide.  The company
provides enterprise application software for customer management,
human resource management, financial accounting, distribution,
and supply chain management, along with a wide range of industry
solutions.  Its applications offer a high degree of flexibility,
rapid implementation, scalability across multiple databases and
operating systems, and low cost of ownership.  PeopleSoft has also
introduced several additions to its existing product lines, plus
industry specific software solutions including new products for
both manufacturing and public sector financial management.  The
company's earnings are due on or about October 17 and investors
are expecting positive results.  The stock has excellent technical
support near our cost basis and the favorable option premiums will
allow us to speculate, in a conservative manner, on the outcome of
the quarterly report.

OCT 30.00 PQO JF LB=4.75 OI=12069 CB=29.13 DE=14 MR=6.5%


*****
QHGI - Quorum Health Group  $15.00  *** Rally Mode! ***

Quorum Health owns and operates acute care hospitals nationwide
through its affiliates.  Quorum Health Resources, a subsidiary, is
the nation's largest manager of not-for-profit hospitals and also
provides consulting services to hospitals.  The recent rally in
Quorum Health appears to be the result of the company announcing
this week that it has reached understandings with the U.S. Dept.
of Justice to recommend agreements to settle two qui tam lawsuits.
The Hospital sector has been improving as investors have been
searching for safe havens during the recent Market maelstrom.
Hospital patient flows are increasing and managed-care company
pricing as well as Medicare reimbursements are also rising.
With the legal problems apparently behind it, Quorum Health
has broken out to a new 21-month high on heavy volume.

OCT 15.00 HQG JC LB=0.88 OI=475 CB=14.12 DE=14 MR=13.5%


*****
TKTX - Transkaryotic  $45.38  *** Waiting on the Judge! ***

Transkaryotic Therapies is a biopharmaceutical company that is
developing a broad and renewable product pipeline based on
several proprietary platforms.  Transkaryotic currently has four
products in clinical development, for conditions such as anemia
and hemophilia.  It has been over a month since Transkaryotic's
patent trial against rival Amgen was summed up in court.  U.S.
District Judge William Young still has not issued his ruling -
so much for being expeditious.  Will the decision be made
before the October expiration (two weeks away) and who will it
favor?  To add to the mix, Transkaryotic and Genzyme reported
this week that their rival experimental treatments for a rare
inherited disorder known as Fabry disease both proved successful
in late-stage clinical trials.  Transkaryotic filed a retaliatory
complaint against Genzyme in September regarding their Fabry
treatment, Replagal, stating that it does not infringe U.S.
Patent No. 5,356,804 and that the patent is invalid.  Replagal
could be the first and only treatment available for patients
who suffer from Fabry disease.  This play requires a high-risk
tolerance and extensive due diligence.

OCT 35.00 UFT JG LB=12.00 OI=225 CB=33.38 DE=14 MR=10.5%


*****
November Positions
*****
WDC - Western Digital  $6.13  *** Cheap Speculation! ***

Western Digital is a manufacturer of hard drives used for
information storage in desktop computers and home entertainment
electronic products.  Their hard drives are designed for the
desktop PC market and the high-end hard drive market.  Recently
they have developed hard drives specially designed for audio-
visual applications, such as new video recording devices.  Disk
Drive manufacturers have rallied strongly buoyed by optimism
that companies in this sector may return to profitability in the
second half of the year.  Recent agreements between Western
Digital's subsidiary, Connex and SYNNEX should help Connex
penetrate into the Storage Area Network and Network Attached
Storage marketplace.  In late September, Western Digital
completed an agreement for a $125 million secured revolving
credit and this week Prudential upgraded its rating.  Maxtor's
acquisition of Quantum HDD should spark speculation on the
next company to be bought out.  We favor the recent bullish move
and the low risk entry point as WDC forges a stage I base.

NOV 5.00 WDC KA LB=1.44 OI=483 CB=4.69 DE=42 MR=4.7%




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

Naked Put Percentage List
By Matt Russ

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

ABGX   72.13     65  AXY-VM    2.00   1803   11%      65
AGIL   73.88     65  AUG-VM    2.56   1847   14%      60
AMCC  184.00    170  AZV-VN    7.13   4600   16%     170
ANEN  119.00    110  EUA-VB    3.75   2975   13%     110
ARBA  113.75    105  IUR-VA    7.25   2844   25%     105
ARTG   69.00     70  AYQ-VN    5.00   1725   29%      60
BRCD  213.56    200  GUF-VT    5.50   5339   10%     200
BRCM  227.31    220  RDU-VD    9.38   5683   17%     215
CHKP  157.81    150  KGE-VJ    5.38   3945   14%     145
CIEN  110.75    100  UEE-VT    3.13   2769   11%     100
EXTR   99.81     90  EXR-VR    4.13   2495   17%      90
IDPH  161.13    150  IDK-VJ    4.38   4028   11%     150
MEDX  100.88    100  MZU-VT    5.50   2522   22%     100
MERQ  143.00    130  RBF-VF    4.50   3575   13%     130
MUSE  168.81    160  UZQ-VL    6.63   4220   16%     160
NEWP  160.06    150  NOQ-VJ    8.63   4002   22%     150
PDLI   98.13     90  RPV-VR    3.75   2453   15%      90
QCOM   77.81     75  AAF-VO    2.63   1945   14%      75
SEBL   92.44     90  EZG-VR    5.13   2311   22%      90
SUNW  107.50    100  SUX-VJ    3.63   2688   14%     100
VRSN  188.03    175  QVZ-VO    7.50   4701   16%     175
VRTS  130.94    120  VUQ-VD    4.38   3274   13%     120
XLNX   81.94     75  XLQ-VO    2.06   2049   10%      75


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

Stick to the basics in volatile markets...
By Ray Cummins

Investing can be lots of fun and playing the market is the best
game there is, providing you study diligently, learn the rules
and acquire the necessary trading and analysis tools.  In this
unique competition, the education never ends, and since stocks
are dynamic, ever-changing entities, investors must continuously
improve their skills to be successful.  When the market becomes
unruly or difficult to forecast, it's important to focus on
historically proven methods that provide the most accurate means
of identifying primary directional trends and the character of
individual issues.  In most cases, the preferred technique for
experienced traders is charting or technical analysis.

The recent slump in technology and industrial issues highlights
the broad weakness now prevalent in the stock market.  It also
accounts for the widespread pessimism among investors, and the
rise of the doom-and-gloom analysts.  However, technical traders
should not be persuaded by the onslaught of profit warnings and
economic factors, such as the flagging Euro, that are fashioning
much of the current market sentiment.  Historical charts should
continue to guide your decisions and during periods of excessive
pessimism, the most important patterns to study are long-term.
Traders generally use daily charts for entry and exit signals but
the best way to determine major support and resistance levels is
through the analysis of weekly or monthly time frames.  Primary
support and resistance levels are especially significant during
periods when the market appears to be overextended or near a
potential climax and by carefully reviewing long-term cycles and
trends, a trader can identify areas where significant supply or
demand will likely be encountered.  In addition, major reversal
and continuation patterns found in daily charts also occur within
both weekly and monthly periods and the significance of these
formations is strikingly similar.

In the Covered-Call and Naked-Put sections, our methodology of
selecting stocks with chart analysis and option pricing models
has been very successful regardless of the market's condition.
In most cases, we take a purely technical view with regard to
each individual issue and our decision-making process is based
on the stock's past trading history along with its current share
value and primary directional trend.  We carefully analyze the
price action of each candidate using a wide range of technical
indicators to determine if the issue meets our minimum criteria
for a favorable position.  The secret is to identify relatively
strong issues early in a bullish cycle where there is far less
downside risk and longer time frames often provide more accurate
indications in that respect.  After we have compiled a list of
potential stocks, a thorough review of the option premiums is
conducted to determine if the overall position offers sufficient
downside protection, relative to the issue's technical history
and price support.  Once the minimum acceptable cost basis has
been established, it is relatively easy to select positions in
which the return on investment warrants our participation in a
play.

Most traders agree that technical analysis is an art and this
concept is even more apparent when we are in the throes of a
bearish market environment.  The best indicators can be highly
unreliable when extreme emotion dictates the daily movements in
stocks and it is far more difficult to earn consistent returns
under these conditions.  The best we can do is focus on methods
that have worked well in the past and simply let the technical
condition of each individual issue be our guide.  In short, we
use the more recent price action of the stock to alert us to
favorable opportunities while at the same time relying on the
longer-term patterns to determine if the movement is likely to
continue.  After the position is initiated, the performance of
the issue will determine our future actions.  If we are wrong
about the character of the underlying stock, we simply exit the
position and look for another potential play.  The worst outcome
that can occur with this approach is a modest loss in capital
and usually, that limited shortfall is more than offset by other
gains in the portfolio.  In fact, the primary reason that novice
investors achieve poor results with low risk, low return trading
strategies is not due to a deficiency in play selection, but
rather their inability to effectively manage failing positions
for minimum loss.  Of course, that's another subject entirely!

Good Luck!



                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


SUMMARY OF PREVIOUS PICKS
*****

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

ASPX   12.25  12.25   OCT  10.00  0.50  *$  0.50  17.2%
ECLP   16.00  16.88   OCT  12.50  0.38  *$  0.38  15.4%
WGAT   23.31  19.56   OCT  17.50  0.56  *$  0.56  11.7%
CLTR   36.75  30.25   OCT  30.00  1.13  *$  1.13  10.8%
PLNR   19.75  16.06   OCT  15.00  0.69  *$  0.69  10.8%
NIKU   24.38  17.75   OCT  15.00  0.38  *$  0.38  10.5%
LBRT   32.44  22.81   OCT  22.50  0.63  *$  0.63   9.6%
GLGC   23.00  22.63   OCT  17.50  0.31  *$  0.31   9.1%
FNSR   48.38  42.31   OCT  40.00  0.69  *$  0.69   8.6%
ALLP   16.50  15.00   OCT  12.50  0.50  *$  0.50   8.5%
UNM    25.00  28.31   OCT  22.50  0.63  *$  0.63   8.4%
NERX   23.00  18.69   OCT  17.50  0.38  *$  0.38   8.3%
CMNT   21.00  27.25   OCT  17.50  0.56  *$  0.56   7.4%
PRBZ   29.44  28.38   OCT  25.00  0.50  *$  0.50   6.9%
WGR    26.25  24.56   OCT  22.50  0.56  *$  0.56   6.7%
DRXR   19.06  17.75   OCT  15.00  0.38  *$  0.38   6.6%
STAT   20.00  22.75   OCT  15.00  0.44  *$  0.44   6.4%
SCUR   26.25  23.13   OCT  17.50  0.50  *$  0.50   6.3%
NIKU   24.88  17.75   OCT  17.50  0.38  *$  0.38   6.2%
VITR   48.94  38.00   OCT  30.00  1.00  *$  1.00   6.0%
CTIC   50.13  60.63   OCT  35.00  0.56  *$  0.56   5.7%
CERN   46.44  46.69   OCT  40.00  0.50  *$  0.50   5.7%
CDN    27.13  24.63   OCT  25.00  0.81   $  0.44   4.0%
AND     8.88   6.88   OCT   7.50  0.31   $ -0.31   0.0%
CSTR   13.56  11.13   OCT  12.50  0.56   $ -0.81   0.0%
NITE   37.00  26.50   OCT  30.00  0.88   $ -2.62   0.0%
NITE   36.00  26.50   OCT  30.00  0.63   $ -2.87   0.0%

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

Comments:

Knight Trading (NITE) joined the crowd at the confessional this
week and suffered accordingly.  Both positions have been closed.
Coinstar's (CSTR) horrid move this week has broken through near
term support and it is another potential exit candidate.  Andrea
(AND) is testing support and is now at a "key" moment.  Cadence
Design (CDN) continues to act worrisome and a loss-cutting exit
should be considered on further downside movement.

Positions Closed:

Goto.Com (GOTO), Wave Systems (WAVX), Xerox (XRX)


NEW PICKS
*********

Sequenced by Company
*****

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

CERN   46.69  OCT  40.00  CQN VH  0.44  302  39.56   14     7.7%
HCR    16.00  OCT  15.00  HCR VC  0.38  73   14.62   14    14.3%
MDRX   17.56  OCT  15.00  HIQ VC  0.50  10   14.50   14    21.9%
PSFT   33.88  OCT  27.50  PQO VY  0.44  722  27.06   14    12.5%

CHTR   19.38  NOV  17.50  CUJ WW  0.63  34   16.88   42     7.0%
HSIC   22.56  NOV  20.00  HQE WD  0.50  0    19.50   42     5.2%
OCR    16.88  NOV  15.00  OCR WC  0.63  92   14.38   42     8.2%

Sequenced by Return
******

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

MDRX   17.56  OCT  15.00  HIQ VC  0.50  10   14.50   14    21.9%
HCR    16.00  OCT  15.00  HCR VC  0.38  73   14.62   14    14.3%
PSFT   33.88  OCT  27.50  PQO VY  0.44  722  27.06   14    12.5%
CERN   46.69  OCT  40.00  CQN VH  0.44  302  39.56   14     7.7%

OCR    16.88  NOV  15.00  OCR WC  0.63  92   14.38   42     8.2%
CHTR   19.38  NOV  17.50  CUJ WW  0.63  34   16.88   42     7.0%
HSIC   22.56  NOV  20.00  HQE WD  0.50  0    19.50   42     5.2%

Company Descriptions

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

*****
CERN - Cerner Corporation  $46.69  *** 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.

OCT 40.00 CQN VH LB=0.44 OI=302 CB=39.56 DE=14 MR=7.7%


*****
HCR - Manor Care  $16.00  *** Portfolio Position ***

Manor Care is a provider of a range of health care services,
including skilled nursing care, assisted living, sub acute medical
care, rehabilitation therapy, home health care and management
services for sub-acute care, rehabilitation therapy, vision care
and eye surgery.  Manor Care operates hundreds of skilled nursing
facilities and assisted living facilities across the nation.  A
positive earnings forecast by hospital operator Tenet Healthcare
gave a boost to industry stocks in early September and the trend
is expected to continue for the next two quarters.  Earnings are
predicted to be favorable based on growing (hospital) admissions
and continuing upward trends in pricing.  In addition, nursing
homes are expected to get $3 billion to $5 billion in Medicaid
reimbursements over the next five years and that bodes well for
Manor Care in the long-term.

OCT 15.00 HCR VC LB=0.38 OI=73 CB=14.62 DE=14 MR=14.3%


*****
MDRX - Allscripts  $17.56  *** Bottom Fishing! ***

Allscripts provides physicians with Internet and client/server
medication management solutions designed to improve the quality
and cost effectiveness of pharmaceutical healthcare. Allscripts
currently offers products in four main categories: point-of-care
medication management, Internet services, information products
and prepackaged medications.  The company's TouchScript software
enables electronic prescribing and provides prescription data at
the point of care.  The company's other e-commerce products and
services offer physicians and their patients medication-related
education and information and Allscripts also sells prepackaged
medications to physicians for onsite distribution.  An upgrade
from Banc of America Securities sparked the recent recovery and
positive comments from a Bears Stearns analyst brought subsequent
attention to the issue.  We simply favor the bullish technical
reversal.

OCT 15.00 HIQ VC LB=0.50 OI=10 CB=14.50 DE=14 MR=21.9%


*****
PSFT - Peoplesoft  $33.88  *** On The Move! ***

PeopleSoft designs, develops, markets, and supports a family of
enterprise application software products for use throughout large
and medium sized organizations.  These organizations include
corporations, higher education institutions, and federal, state,
provincial and local government agencies worldwide.  The company
provides enterprise application software for customer management,
human resource management, financial accounting, distribution,
and supply chain management, along with a wide range of industry
solutions.  Its applications offer a high degree of flexibility,
rapid implementation, scalability across multiple databases and
operating systems, and low cost of ownership.  PeopleSoft has also
introduced several additions to its existing product lines, plus
industry specific software solutions including new products for
both manufacturing and public sector financial management.  The
company's earnings are due on or about October 17 and investors
are expecting positive results.  The stock has excellent technical
support near our cost basis and the favorable option premiums will
allow us to speculate, in a conservative manner, on the outcome of
the quarterly report.

OCT 27.50 PQO VY LB=0.44 OI=722 CB=27.06 DE=14 MR=12.5%


*****
November Positions
*****
CHTR - Charter Communications  $19.38  *** Entry Point! ***

Charter Communications is the fourth largest operator of cable
systems in the United States, serving approximately 6.2 million
customers.  The company offers its customers a full array of
traditional cable television services and programming and has
begun to offer new and advanced high bandwidth services such as
high-speed Internet access.  The company plans to continually
enhance and upgrade these services, including new programming
and other telecommunications offerings.  With products such as
high-speed Internet access, video-on-demand, and cable telephony
complementing their basic and digital offerings, cable companies
are expected to achieve excellent revenues in next few quarters.
Charter is one of the leading companies in the group and the
issue rallied this week after a Merrill Lynch analyst upped the
short-term rating on the stock with new target price of $27.
The analyst said Charter's share value will be helped by cash
flow growth; the upcoming launch of video-on-demand service on
its Los Angeles systems; and the rollout of a Web portal next
month.  The company's fortunes should also improve on the launch
of a TV set-top box-based platform next year that will allow
e-mail, chat, instant messaging, streaming video and other
features.

NOV 17.50 CUJ WW LB=0.63 OI=34 CB=16.88 DE=42 MR=7.0%


*****
HSIC - Henry Schien  $22.56  *** New Patent! ***

Henry Schein is a distributor of healthcare products and services
to office-based healthcare practitioners in the combined North
American and European markets. The company markets products and
services to over 400,000 customers, primarily dental practices
and dental laboratories, physician practices, veterinary clinics
and institutions. Through its comprehensive catalogs and direct
marketing programs, the company offers a broad product selection
of unique medical items.  Last week, Henry Schein announced that
it has been awarded a U.S. Patent its new digital motion video
technology.  The patent effectively makes Henry Schein the only
source for this digital motion video technology used in intra-oral
photography and furthers the company's lead in the development of
the clinical workstation of the future.  Henry Schein plans to
advance the technology, and as next generation PC capabilities
expand to real time recordable MPEG II and DVD formats, the patent
will enhance intra-oral photography, the quality of treatment, and
dental archiving.

NOV 20.00 HQE WD LB=0.50 OI=0 CB=19.50 DE=42 MR=5.2%


*****
OCR - Omnicare  $16.88  *** Bracing for a rally? ***

Omnicare is a provider of pharmacy services to long-term care
institutions such as skilled nursing facilities, assisted living
communities and other institutional health care facilities.  The
company's Pharmacy Services segment provides distribution of
pharmaceuticals, related pharmacy consulting, data management
services and medical supplies to long-term care facilities.  OCR's
CRO Services segment provides comprehensive product development
services globally to client companies in the pharmaceutical,
biotechnology, medical devices and diagnostics industries.  The
healthcare sector continue to be one of the few bullish areas in
the market and Omnicare is a leader in their niche industry.  The
fundamental outlook for the company is excellent and based on the
recent technical indications, the issue is poised for a test of
the 52-week high.

NOV 15.00 OCR WC LB=0.63 OI=92 CB=14.38 DE=42 MR=8.2%




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

Halloween was never this scary!

Friday, October 6

The market was pummeled today as profit warnings and new interest
rate fears weighed heavily on investors.  The Dow closed down 128
points at 10,596 and the Nasdaq ended 111 points lower at 3,361.
The S&P 500 index was down 27 points to 1,408.  Trading volume on
the NYSE reached 1 billion shares, with declines beating advances
1,982 to 852.  Activity on the Nasdaq was moderate at 1.8 billion
shares exchanged, with declines beating advances 2,899 to 1,088.
In the bond market, the 30-year Treasury rose 22/32, pushing its
yield down to 5.84% in a classic flight-to-quality.

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


Hershey    HSY    FEB55C/FEB50P   $5.12   debit   straddle
Ligand     LGND   NOV17C/NOV12P   $0.12   debit   synthetic
Kellogg    K      MAR30C/NOV30C   $0.68   debit   calendar

Today's market activity provided little opportunity to enter our
new positions at favorable prices.  The only play that might have
been initiated at our target was the Kellogg calendar spread but
the best observed debit (on a simultaneous order basis) was $0.68.
We will monitor LGND and HSY for potential entry points in the
coming sessions.

Haunted by a seemingly endless stream of profit-warnings, the
market fell precipitously today as investors worried that most
companies won't be able to deliver the remarkable revenues they
have become accustomed to in recent quarters.  The widespread
perception is the inflation-fighting Fed and the increasing cost
of energy are finally taking their toll on corporate America's
bottom line.  In addition, the employment report released this
morning ended the prospect of the FOMC adopting a neutral bias
in the near future, adding to the negative bias.  Analysts say
the belief that technology companies won't be able to deliver
the kind of growth that justifies their current valuations is
starting to have a pronounced negative affect on the market, a
condition that may be difficult to reverse in the near term.
On the Dow, J.P. Morgan (JPM) and American Express (AXP) led the
losers in the finance group while Home Depot (HD) was toppled in
the retail sector.  HD slumped after Lowe's (LOW) reported that
same-store sales for the fiscal third quarter would come in well
below the previous estimates.  Meanwhile, AT&T (T) trampled the
telecoms, falling to $27 after Salomon Smith Barney slashed its
rating on the issue due to weakness in the long distance market.
On the Nasdaq, Internet stocks retreated with Amazon.com (AMZN)
leading the way while biotechnology, semiconductor and networking
stocks also slumped.  In the broader market, oil and oil service
shares rebounded slightly along with utilities while retail
issues retreated and brokerage stocks fell steeply amid rumors
that Morgan Stanley Dean Witter had suffered huge losses from its
junk bond operations.

Portfolio Plays:

There was little positive movement in today's session and the
performance of our portfolio mirrored the overall activity of
the stock market; bullish plays suffered while bearish plays
profited.  Regardless of the optimism one might feel, it would
be almost impossible to put a positive spin on the grim summary
of the day's trading, so I won't bother trying.  In short, the
market is at a key moment and with many analysts now calling for
total capitulation before a recovery can begin, it appears there
is further downside potential in the near term.  With that in
mind, it's important that we manage every position for minimum
loss, to reduce the potential for a catastrophic depletion of
trading capital (something that can occur very quickly when the
market suffers a serious correction).  Traders should consider
taking profits in any bullish plays that have positive returns
and at the same time, any positions that have substantial risk
should be closed to limit possible losses.  In addition, every
portfolio play should be reevaluated to determine if it meets
the original criteria for a favorable position.  It's obvious
that each person has a different risk-reward tolerance (and
portfolio outlook) and every position adjustment should be based
on one's individual perspective.

Amazingly, there was some favorable activity in the technology
portion of the Spreads/Combos section.  Agile Software (AGIL)
bounced back from recent losses, closing up almost $7 at $74.
The move bodes well for our put-credit spread at $60.  BellSouth
(BLS) performed well this week but today's downgrade of AT&T (T)
had a bearish affect on the sector.  Our new position in BLS is
offering a $1.00 profit with less than one week in the play and
that's a favorable, early exit profit.  Our credit strangles in
Gemstar (GMST) and Brocade (BRCD) are now profitable and Ariba
(ARBA) held up well considering the precipitous decline in the
Nasdaq.  Positions in American Home Products (AHP), Covad (COVD),
International Business Machines (IBM), Halliburton (HAL), Smith
International (SII) and Microchip (MCHP) are expected to finish
at maximum profit and Caremark (CMX) continued to edge higher on
momentum from a recent technical break-out.  Another calendar
spread issue, St. Jude Medical (STJ) has fallen back to the $50
area (our sold strike), providing a great week of premium erosion
for those of you remaining in the long-term position.

Veeco Instruments (VECO) was the big loser today, falling $35 to
$67 after warning third-quarter profits would be well below the
First Call estimate of $0.40 per share.  At the same time, the
firm's president and chief operating officer, Christine Whitman,
resigned.  The stock dropped to $59 at the open and then traded
as high as $76 in the morning session before slumping to $68 at
the close.  Obviously, there was a great opportunity to trade the
initial bounce but there is no way to speculate on when (and at
what price) our spread might have been closed.  The maximum loss
in the play was near $4 and the position traded at a $4.75 debit
(on a simultaneous order basis) for much of the session.  There
was a $10 swing in the option prices during the period that we
monitored the spread for closing prices.  For the record, our
portfolio exit was a respectable $3.25 loss, based on a $4.00
debit minus the initial credit in the position.


Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
DAL - Delta Airlines  $47.69  *** Potential Buyout? ***

Delta's goal is to become the #1 airline in the eyes of all its
customers, flying passengers and cargo from anywhere to everywhere.
Passengers already choose to fly Delta more often than any other
airline in the world on 5,244 flights each day to 339 cities in
48 countries on Delta, Delta Express, Delta Shuttle, the Delta
Connection carriers, and Delta's Worldwide Partners.  Delta is
a founding member of SkyTeam, a global airline alliance which
provides customers with extensive worldwide destinations, flights
and services.

Delta Air Lines' shares have rallied over the last few days on
news of a possible buyout offer.  Business Week magazine cited
unnamed industry insiders as saying two former airline executives
and a major buyout group were looking for bank financing for a
$7.5 billion bid, which would amount to $61 per Delta share.  The
potential suitors were not named but the rumors propelled Delta's
to the top of its recent price channel on heavy volume.  Though
the technical picture is improving with this quick-term reversal,
Delta may still need to do some work as it approaches near-term
resistance near $50.  This conservative position offers a great
way to speculate on the outcome of the rumors with relatively low
risk.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  NOV-45  DAL-KI  OI= A=$6.50
SELL CALL  OCT-50  DAL-JJ  OI= B=$1.56
INITIAL NET DEBIT TARGET=$3.81-$3.88  INITIAL TARGET ROI(max)=28%


******************************************************************
    - TECHNICALS ONLY -

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.
******************************************************************
SYMC - Symantec  $44.44  *** Going Down! ***

Symantec, a world leader in Internet security technology, offers
a broad range of content and network security solutions to both
individuals and enterprises.  Symantec is a leading provider of
virus protection, risk management, Internet content and e-mail
filtering, as well as remote management and mobile code detection
technologies.  Symantec's Norton AntiVirus software is the best-
selling virus protection software for personal computers.

Symantec is in a stage IV downtrend and has broken the neckline
of a long-term head-n-shoulders top (look at a 1 year chart).
The current oversold movement has shown very little strength and
the head-n-shoulders neckline near $50 should be difficult to
overcome.  The stock has rallied several times over the last
couple months only to fail at its 50 dma, which is currently at
$47.50.  In addition, earnings are expected near the 18th of
October.


PLAY (aggressive - bearish/debit spread):

BUY  PUT  OCT-55  SYQ-VK  OI=168   A=$11.38
SELL PUT  OCT-50  SYQ-VJ  OI=5363  B=$8.00
INITIAL NET DEBIT TARGET=$3.12-$3.25  ROI(max)=60%


******************************************************************
FILE - FileNET  $16.75  *** Trading Range! ***

FileNET develops, markets, and services Web-based management and
eBusiness applications that help corporations and government
organizations build Intranets, business-to-business and other
business-to-consumer portals to manage their ongoing business
information and work processes more productively.  The company's
Panagon software products allow users to create, access, edit,
process, organize, secure, store and archive digital content of
all types for Web-based applications, as well as client/server
environments.  The company also offers professional services
relative to the implementation of these software products and
24x7 customer support.  Additionally, the company manufactures
and sells a line of 12-inch optical storage and retrieval
libraries (OSARs).

Filenet made an excellent rally attempt back in late August but
profit-taking and the bearish market environment presented too
much downward pressure to overcome.  The issue has performed well
in the past and it will likely recover in the future however, the
current indications are slightly negative and with this quarter's
earnings approaching, the bearish activity is likely to continue.
We will utilize the current downward trend and the small premium
disparity to profit from this relatively conservative position.


PLAY (conservative - bearish/credit spread):

BUY  CALL  OCT-22.50  ILQ-JX  OI=345  A=$0.31
SELL CALL  OCT-20.00  ILQ-JD  OI=597  B=$0.62
INITIAL NET CREDIT TARGET=$0.43-$0.50  ROI(max)=20%


******************************************************************
                   - STRADDLES AND STRANGLES -
******************************************************************
VRSN - Verisign  $188.06  *** Probability Play! ***

Verisign is a provider of Internet-based trust services,
including authentication, validation and payment, needed by
websites, enterprises, electronic commerce service providers
and individuals to conduct trusted and secure electronic
commerce and communications over wired and wireless Internet
protocol (IP) networks.  The company has established strategic
relationships with industry leaders, including BT, Cisco,
Microsoft, Netscape, and RSA Security to enable widespread
utilization of its digital certificate services and to assure
their interoperability with a wide variety of applications and
network equipment.  The company has used its secure online
infrastructure to issue over 215,000 of its website digital
certificates and over 3.9 million of its digital certificates
for individuals.

Here is another candidate in the neutral, premium-selling
category of options trading.  Based on analysis of historical
option pricing and technical background, this position meets
our fundamental criteria for a potential credit-strangle.  The
issue has overpriced options and a relatively well-defined
trading range.  The probability of profit from this position
is higher (80%-85%) than other plays in the same strategy based
on historical option pricing.  As with any recommendation, the
play should be evaluated for portfolio suitability and reviewed
with regard to your strategic approach and trading style.


PLAY (conservative - neutral/credit strangle):

SELL CALL  OCT-240  QVZ-JH  OI=351  B=$1.38
SELL PUT   OCT-140  XVR-VH  OI=672  B=$1.38
INITIAL NET CREDIT TARGET=$3.00 MONTHLY ROI=15%
UPSIDE B/E=$243.00 DOWNSIDE B/E=$137.00




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