Option Investor

Daily Newsletter, Wednesday, 10/11/2000

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The Option Investor Newsletter                Wednesday 10-11-2000
Copyright 2000, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        10-11-2000        High      Low     Volume Advance/Decline
DJIA    10413.80 -110.60 10566.60 10350.90 1.39 bln    895/1984
NASDAQ   3168.49 - 72.05  3258.24  3103.53 2.34 bln   1237/2793
S&P 100   724.02 - 13.66   734.73   714.48   totals   2132/4777
S&P 500  1364.59 - 21.35  1381.97  1349.67           30.9%/69.1%
RUS 2000  474.74 -  6.89   481.63   469.19
DJ TRANS 2445.49 - 51.74  2497.48  2425.83
VIX        30.95 +  3.51    32.64    29.06
Put/Call Ratio       .91

Are We There Yet?

The question of whether we have put in a bottom goes unanswered
for another day.  It has become frustrating for investors as the
markets bounce all over the map, giving head fake after head fake.
This bottom seems so close that you can taste it.  We are all
waiting attentively, but in the meantime, trading has been
dizzying.  Why couldn't we have just blown through 3100 on the
NASDAQ and gone for the gusto with massive capitulation?  I wish
I had the answer.  The continued waning of the market is making
me wonder if we will get the capitulation that everyone is
talking about.  Ever since the Summer, everything that market
watchers expected, never really materialized.  Remember that
post-Labor Day rally?

Not all is gloom and doom on the market front.  Today is most
likely a precursor to a bottom in some way, shape, or form.  There
were many developments in today's session that went on behind the
scenes that indicates that we are, indeed, getting closer.  Most
notably, the VIX.X traded above the 30 level for the first time
since May 24th.  Now what's interesting about this is that
May 24th was the capitulatory bottom when the NASDAQ hit 3042.
The catch about the May 24th bottom is that it was the last day in
a period of about a month when the VIX.X was maintaining a level
above 30.  During that period from mid-April to mid-May, the
NASDAQ actually had several mini-bottoms that resulted in minor
rebounds and subsequent bull traps.  There was an April 17th
low that provide a bounce and looked like a bottom, yet the true
bottom would come until May 24th.  In relation to the current
market trend, this means that we are getting very close, but it
may take a series of volatile moves up and down to increase the
VIX.X and create the selling panic that is evident in capitulation.
Given the month of October, the search for a bottom may not take
as long as the one found in May.  The VIX.X spiked up to close at
30.95, hitting an intraday high of 32.64.

Another development is the ever-increasing OEX Put-Call Ratio.
The more bearish people get, the more puts they buy for downside
protection.  And as more puts are bought for every call, this
contrarian indicator begins to tell us that the panic bearishness
will result in bullish conditions.  This ratio is continuing to
increase each day, pointing toward a bottom in the near future.
While we all are wishing for a fast and furious, spike down and
back type of capitulation, finding a bottom is far more painful
and time-consuming than thought.  Did it really seem to linger
this long back in the Spring?  Probably.  It's amazing how quick
we forget.  The process has commenced.  Now, we must wait until
all the indicators point in the right direction at the right time.

The action on the NASDAQ certainly was volatile today.  The index
opened lower today, accounting for the YHOO's post-earnings
sell-off in after-hours yesterday and the LU warning.  Within the
first hours, the NASDAQ ran into resistance at 3200, and then
found strong support at 3100 shortly thereafter.  This support
level kicked off a 150 point rebound, a combination of buying and
short covering.  Volume today was robust, coming in at 2.3 bln
shares, the fourth heaviest day on the NASDAQ.  But, the true
conviction of this rebound certainly is questionable, especially
considering the selling into the close and the failure to close
above 3200.  With the downtrend still very much intact, a retest of
3100 is almost guaranteed.  The question is will we see a rebound
like we saw after April 19th, coaxing in a few more bulls before
the market capitulates?  It is a distinct possibility.  We will
be watching 3100 on the downside, and a break through to challenge
3042 will be welcomed.  While this sounds bearish, it is merely
a necessity that we get it out of the way in order to move on
with the long term uptrend which we are so accustomed to.  On the
upside, 3200 and 3250 will pose as resistance, as sellers have
appeared at those levels to take the NASDAQ lower.  Breadth
continues to be a concern on the NASDAQ as Decliners outpaced
Advancers 27 to 12.  However, the upside of this is that once an
extreme is met, a turnaround is imminent.

There was plenty of news today for the markets to digest, even
though the focus was on the selling itself.  Old favorite MSFT got
word that the Court of Appeals has set the schedule for the
preceding.  MSFT's briefs in the case will be due by November 27th.
The oral arguments will begin February 26th, after a series of
briefs are exchanged between the government and the software
giant.  Although this timetable is not as extended as MSFT would
have liked, it is by no means the fast-track schedule that the
government desired.  MSFT spokesman Jim Cullinan was pleased,
stating that it "is a fair and reasonable schedule."  MSFT bucked
the trend today and added $1.19 to $55.75.

Earnings continued to flow in today, with a couple notables being
AMD and AMCC, both Semi stocks.  AMD posted better-than-expected
earnings of $0.64 per share, beating the Street by two cents.
This was a great report compared to a loss of $0.36 for last
year's 3rd quarter.  AMD has been under pressure lately as the
concerns over the Semi cycle and growth rates in the sector have
been debated by analysts.  The stock was up in after-hours,
trading at $23.44, up $1.63 from the NY close.  Not to be outdone,
AMCC reported a 156% jump in year-over-year revenue on its way to
beating the Street by three cents with earnings of $0.26 per share.
The company said that demand for their high-bandwidth silicon
products remains "strong and robust" going forward.  In addition,
AMCC sweetened the report with a 2-1 split announcement that will
be ex-div "on or about October 30th."  AMCC was up $10 in
after-hours at $176.69.  The SOX.X was up 4.2% at one point during
the day, but sold off to close unchanged after Tuesday's

Over on the NYSE, the INDU lost 110 points in a volatile session
in part due to GE.  GE lost $1.44 to close at $56.63 even though
the market bellwether delivered in-line earnings of $0.32.  The
massive conglomerate's profits rose 20% which can be attributed
to double-digit growth in most of its businesses.  CEO Jack Welch
even said that the company is "comfortable" with projected
earnings estimates of $1.27 for fiscal year 2000.  GE has earned
$0.92 per share in the first three quarters.  Yet, investors sold
GE, evidence of the turbulent markets.  Also dragging down the
INDU were HWP(-3.88), IBM(-2.88), AA(-2.44), INTC(-2.19), and
C(-1.50), sparing few sectors.  You can see from the chart below
that the INDU has broken down after failing at 10850.  Today's
trade found support at 10350, about the same time that the NASDAQ
bounced at 3100.  However, the INDU rolled over late in the day,
managing to hold 10400.  We will be watching the 10350 support
level established today.  Below this, 10250 will be the next major
support level, which is the lows from May.

Motorola's(MOT) conference call this morning didn't help the
sentiment at the NYSE.  They lowered their guidance for the 4th
quarter, 2000, and 2001 estimates as the management cited
problems in their cell phone business.  Their cautious outlook
for handset sales paints a gloomy picture for the major cell
phone players, namely NOK and ERICY.  MOT cut its handset margins
going forward to 6.5% from 10%, foreseeing lower demand in 2001.
Shares of MOT lost a whopping 18%, or $4.81, to close at $21.44.

Looking ahead, volatility will be the name of the game.  Traders
will be watching as the contrarian indicators continue to move
toward extremes, indicating that the bottom is drawing near.
A VIX.X remaining above 30 and increasing will tell the markets
that fear is approaching the breaking point.  This capitulation
may take longer than we think or would like, but given the
historically exaggerated moves in October, it may be right around
the corner.  Tomorrow after the bell, we will hear from JNPR and
VRTS on the earnings front.  On Friday we have the PPI report.
Any sort of news that is perceived as negative could be the
catalyst that takes us to that breaking point.  All eyes will be
on 3100 for the NASDAQ, as it was established as intraday support.
The wild swings will continue so stay on top of those trades.
Today was a perfect example as I went into a meeting this morning
with a short position, only to return and see the NASDAQ near 3250.
Ouch.  Trade only what you can stomach and keep your eyes open
for that anticipated capitulation, whether it's tomorrow or next
week.  I might be asking next week, are we there yet?  Or maybe
not.  Good luck.

Matt Russ

DENVER - Oct 27-30th

Top Economist Predicts NASDAQ reaching 40,000 by 2008!*

There are always predictions and with enough time, many
prognosticators may become the next great GURU! The
projections for the NASDAQ and Dow may have some strong
validity. Demographic studies have shown that the economic
cycles of BOOM and BUST periods mirror demographic patterns.
If the economy's growth is based on spending and migration
patterns of population segments, then we can become
better traders by entering industries on strong trends
allowing us benefit from these patterns.  The key is to
enter before the masses and exit profitably when
the masses enter!

There will be many ebbs and flows to the markets over the
coming years, however the more educated you are as a
trader, the better you will be at profiting from the
ups and downs! The leading forecasters are calling for
a strong upward channel in both the NASDAQ and DOW over
the next 7-9 years.

Let's face it, the market has been brutal to the Bulls
since March.  We could be close to a bottom, but regardless
we need to be prepared for any market direction.

Professional traders continually educate themselves and
treat the market like a business.  Amateur traders treat
the market like a hobby. The difference is in the RESULTS!
We believe that you, our subscribers, are serious traders and
therefore we want to provide all the resources we can to
educate & equip you with the tools to succeed over both the
Long and Short run!  The Denver Options Expo is just one of
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vital techniques and strategies to protect capital and profit
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the costs for lost OPPORTUNITY or lack of proper education.
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*OptionInvestor makes no claims that the Nasdaq will reach any
specific level.  The projections are made by economists outside
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Lottery Week
By Austin Passamonte

Trading option contracts with a life expectancy best measured in
days or hours. Gunslingers only need apply? Better to buy all the
time one needs instead? Not so fast to dismiss, Sparky!

What is your time expectancy to hold a play you might purchase
tomorrow or Friday? If the answer is weeks, this ain't for you.
If the answer is "not long," "sell too soon" or "same-day sales,"
you need to be aware of our game.

I read somewhere not long ago that a Japanese option trader ran
his account from $100,000 to $4.2+ mln in less than two years
with a disciplined system. Purportedly he only played options
during expiration week, and bought near-money calls and puts on
stocks likely to move. Simple, isn't it?

We hear many of these fantastic riches stories and I'm waiting
for people to repeat legends like that about me. Are you waiting
for them to do the same about you? Cripes, what are we waiting

Anyways, the theory is sound. I have been trading front-month
contracts up to the afternoon they expire on since my option
career began and to be honest, if I only had one week per month
to trade this would be it.

Why? If I'm a short-term trader (and I am), what's the need for
useless time premium when I wish to buy today and sell tomorrow
or sooner? I'd rather pick up some cheap options in a market
that's moving and sell them several-hundred percent higher in
value within hours.

Said easy, done not so easy. There are a few pesky catches
between us and such lofty gains. Isn't there always? Gosh I hate

First of all, we have little time in which to be right. The way
markets are moving these days, just how much time do we need?
Could you have made some money yesterday & today on numerous
stock and index options? I would say the time-movement factor is
not a big problem.

Common mantra is to switch into November contracts and buy
yourself plenty of time premium to be right. That's great advice
on slow-moving issues. Are those the ones you target? Me neither.

How risky are front-month contracts about to expire? Risky as you
make them.

We need to begin by determining how much capital to risk on
short-life contracts. We're assuming you expect to be out before
expiration day. Here's how I figure things: pick your selected
market and determine how much November options would cost for the
trade you want to place. Then, what amount would you risk on a
stop? That amount willing to be risked is what you can spend on
near-death options without increasing downside risk.

Example: you believe XYZ stock is about to rally or tank. A
November call or put option would cost you 10 points and you're
willing to risk 2 points on a stop. Very sensible. Do you expect
that trade to last more than the next seven full sessions? If
not, I suggest you buy the call or put nearest the current
resting price for the same 2 points instead.

What did we accomplish? Several things. You now have more staying
power. If the market moved against your November option and
stopped you out at 8, you are out. End of story. A move against
your 2 October contract and who cares, you're willing to risk the
entire 2 points to expire worthless same as if it stopped out.
You still have a chance for the market to move in your desired
direction where the point is moot with a stopped out November

This gives you much greater buying-power as well. Aggressive
traders can press things a bit and stretch their accounts and its
return to far greater measures.

Example: we have a modest account of $5,000. We are willing to
risk 10% of that on any given high-odds play, confident we can do
better than go 0 for 10 in the long-run. $1,000 can buy several
near-money October contracts compared to one or two (if that)
November contracts inflated with excess time.

Remember, time premium is only an asset if you plan to use it.
Too many traders think they can ride a $20 distant-month contract
through greater market declines because time is on their side.
Trust me, there are oodles of November call contracts purchased
weeks ago that have shriveled to a pittance of their original
cost. This has to be one of the top-five misconceptions option
traders have. Extra time is handy to have but used wrong, can
send us to broke in a big hurry.

Needless to say, we must choose our potential targets wisely.
Markets that move far enough to profit from are a must, as you
might guess.

I prefer index options for this approach myself. The inherently
have much less vega or volatility premium built-in, allowing for
using the same amount of money to get closer within striking

Of course, each month there are examples of several stocks that
really pop or drop on Thursday & Friday of expiration. Buy
options for $0.25 one day and they're valued at 20 the next. Great
if you're able to catch one but I've not been able to do so
enough to offset those that sputter. Doesn't mean I've quit
trying...every now & then I buy lotto tickets too. Perhaps one
or the other will pay off for the effort someday.

Meanwhile, back at the screens I'll take my chances with the OEX,
SPX & QQQs. Lower implied volatility coupled with excellent
movement and markets I am quite familiar with give me the best
odds for success.

Can equity traders win with their options? Of course! RMBS, PDLI,
SDLI, JNPR and a string of hundreds can cover plenty of ground in
no time flat. Options bought for 2 points this week can soar to
incredible heights by this time next week or sooner. Worst they
can do is expire worthless, no different than your stop being hit
on a wayward spike or wrong market guess. Let's not talk about
trading without stops!

Does this mean we can just go out and buy options willy-nilly to
hit the big time? Certainly not. This isn't throwing mud against
the wall to paint our house. We are talking about careful market
study, solid chance for market movement to inflate our options
with value enough to offset risk of loss.

If we're willing to risk the entire 2 points on a loss in short-
life options we either have to ask for 6 points or better that
the sale or 4 points at the sale or better and win/loss ratio
average at least 2/1 for long term profit success.

We'll follow this topic up next Monday in time to target one or
two possible moves before Friday spoils the fun. Meanwhile, feel
free to join us over at www.indexskybox.com for a nightly
discussion on the topic of short-term trades and daily live trade
examples of this approach at work.

See you soon & Best Trading Wishes,

Contact Support

Tired of waiting on trades to execute?
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Stop Losses based on the option price or the stock price.
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LLY - Eli Lilly & Co. $87.44 +2.94 (+4.50 this 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.

Most Recent Write-Up

Traders and investors alike are running to the drug stocks for
shelter, and for good reason.  This is one of the few sectors
which analysts are maintaining a positive outlook for earnings.
Analysts are bullish on the sector, with Parker Hunter analyst
Richard Lawrence recently noting that pharmaceuticals have a good
probability of achieving high growth objectives.  Merrill Lynch
also came out with positive comments, saying that it expects drug
companies to report earnings above Wall Street estimates.  Add to
that a stellar earnings report from Abbott Labs today as well as
comments from Chase H&Q analyst Alex Zisson on drug stocks as a
"safe place to be" and it's no wonder why drug stocks continue
bucking the downtrend.  At this point, conservative traders will
be watching for LLY to break above $85 on strong volume for an
entry.  Aggressive traders looking to enter on a pullback could
target shoot a bounce off the 5- or 10-dma (at $83.47 and $82.45).


What a breakout today!  LLY has been in an ascending wedge as
its 10-dma converged upon its 100-dma at $84.73.  The stock broke
above the 100-dma and did so on the strongest volume it has seen
since September 22nd when it broke out over $80.  Look for
pullbacks and bounces from $86 or the basing area at $85.  Under
this, the 100-dma should offer a bounce and an entry.

***October contracts expire next week***

BUY CALL OCT-80 LLY-JP OI=4767 at $8.00 SL=6.25
BUY CALL OCT-85 LLY-JQ OI=4420 at $3.63 SL=1.75
BUY CALL NOV-85*LLY-KQ OI= 636 at $5.63 SL=3.75
BUY CALL NOV-90 LLY-KR OI=1358 at $3.13 SL=1.50

Picked on Oct 5th at     $84.56     P/E = 31
Change since picked       +2.88     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


One of the OIN's new readers asked why we focus on "in the money"
options in our covered-writing strategy.

Each week we receive a number of questions regarding the various
approaches to the investment strategy of selling covered-calls.
In our personal portfolios, we utilize the "in-the-money" covered
write as a primary technique for consistent profits.  This method
is easy to master and works in harmony with a low maintenance,
low risk investing style.  The underlying philosophy behind the
strategy is to be "aggressively conservative."  This tactic is in
contrast to the more popular "conservatively aggressive" outlook
used by many traders, where the underlying position is bullish,
(based on OTM calls) and requires an upward movement from the
stock for profit.  In general we are conservative, long-term
investors with contempt for excessive risk and the potential for
large losses.  Studies suggest (and our results confirm) that the
average investor will make substantially greater returns through
the consistent profits from "in-the-money" covered writing than
he/she would using the high risk, high reward approach of more
aggressive positions.

Most traders think that this technique is far too conservative to
yield favorable returns however, the "magic" ingredient of the
strategy is the power of compound interest.  Covered call writing
allows investors to potentially compound their returns on stock
ownership each month of the year.  Unfortunately, while most
investors begin writing covered calls with the goal of compounding
their money on a monthly basis, many lose focus of the fundamental
outlook of the technique (consistent, low risk profits) and start
to concentrate on higher, single transaction returns.  This is a
common mistake and it can substantially increase risk and the
probability of loss.  Those who have endured the recent decline in
share values know this fact far too well.  The market historically
offers a 2-4% monthly (annualized) return for this conservative
strategy but with diligent research and analysis, and proper money
management, the profit margin can be increased.  In our personal
portfolios, we try to establish positions that offer, on average,
a 4-6% (8-12% on margin) monthly return on investment.  Even with
this meager profit, the long-term portfolio growth is excellent,
based on the simple mathematics of compounding.  Earning just 3%
per month in a personal portfolio, without compounding or margin
trading, equates to a 36% yearly return.  Obviously, most retail
option traders regard a 3% monthly return as far too low.  In fact,
why would anyone want such a paltry reward when the market offers
such great potential for wealth.  There is answer is quite simple:
RISK.  Any strategy that yields 10% will be riskier (on a purely
theoretical basis) than one offering a 3% return.  You know the
old adage, "The greater the risk, the greater the reward," and
with the recent market slump, the saying couldn't be more accurate.

Good Luck!

Summary of Previous Picks:

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

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

OSIP    OCT    45    42.06  60.81    $2.94   5.7%
ALXN    OCT    85    80.25  94.00    $4.75   4.9%
VECO    OCT    85    82.75  73.88   -$8.87   0.0% Warned - Closing

Positions Closed:  NMSS

Naked Puts:

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

RIMM    OCT    85    83.63  95.81    $1.38  11.5%
ALXN    OCT    80    76.75  94.00    $3.25  11.4%
OSIP    OCT    40    38.56  60.81    $1.44  10.0%
EXTR    OCT    82.5  81.38 102.00    $1.13   9.5%
PPRO    OCT    60    59.19  61.94    $0.81   8.7%
CTIC    OCT    45    44.19  57.50    $0.81   8.4%
AGIL    OCT    60    58.56  71.25    $1.44   8.3%
VRTS    OCT   110   108.31 138.06    $1.69   7.5%
VRTS    OCT   110   107.94 138.06    $2.06   7.0%
EXTR    OCT    85    83.75 102.00    $1.25   7.0%
NTAP    OCT   115   112.81 121.69    $2.19   6.8%
MEDX    OCT    95    93.62  99.00    $1.38   6.8%
PDLI    OCT    72.5  70.87 100.38    $1.63   6.6%
RIMM    OCT    60    58.37  95.81    $1.63   6.4%
EXTR    OCT    82.5  81.06 102.00    $1.44   6.2%
PALM    OCT    40    39.12  46.94    $0.88   6.1% Strength!
RMBS    OCT    60    58.50  59.81    $1.31   5.9% Breaking down
JNPR    OCT   145   143.69 206.00    $1.31   5.8%
ELNT    OCT    80    78.62  79.50    $0.88   5.4% Key moment?
NMSS    OCT    55    53.00  52.38   -$0.62   0.0% Key moment?
BLDP    OCT    90    88.50  86.94   -$1.56   0.0% Time to go?
VECO    OCT    80    78.19  73.88   -$4.31   0.0% Warned - Closing

Positions Closed: METHA, RBAK, AVNX

Sell Straddles:

PMCS    OCT   165p  163.31 157.69   -$5.62   0.0% Did you cover?
PMCS    OCT   260c  261.38 157.69    $1.38   6.0%

Naked Calls:

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

TUTS    OCT   120   122.31  49.69    $2.31   9.8%
MRVC    OCT    85    86.00  43.38    $1.00   8.2%
AETH    OCT   145   146.31  83.19    $1.31   7.8%
RBAK    OCT   180   181.00 112.56    $1.00   6.6%

New Candidates:

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


BULLISH PLAYS - Covered Calls & Naked Puts

CMRC - Commerce One  $61.00  *** Entry Point! ***

Commerce One is a provider of global e-commerce solutions for
business.  Its solutions are designed to create a network of
interoperable marketplaces, trading communities and commerce
portals called the Global Trading Web.  The company has also
developed the Commerce One Solution to automate the procurement
cycle between multiple buyers and suppliers.  The Commerce One
Solution is comprised of enterprise e-procurement applications
consisting of BuySite Enterprise Edition and BuySite Portal
Edition, and the MarketSite Portal Solution.  Within CMRC's
MarketSite Portal Solution, business services such as auctions
and enhanced content solutions are offered, with others to be
added in the future.  The company also directs Commerce One
Ventures, which accelerates global participation in e-business
through strategic investments.

Commerce One and other leaders in B2B community have slumped in
recent sessions amid concerns over high valuations and worries
that slowing sales may lie ahead in the industry.  In spite of
that pessimistic outlook, investors in Commerce One have tried
to remain upbeat, reveling in the news that the company recently
announced three new marketplace customers and a new consulting
alliance.  Of course, the reports that Oracle beat out Commerce
One in a new online marketplace project for the medical-supply
industry didn't help matters.  Our opinion is simply that the
company is an industry leader and a great E-commerce stock to
have in our long-term growth portfolio.  This position provides
a perfect opportunity to own the issue at a reduced cost basis.

CMRC - Commerce One  $61.00

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

Sell Put  OCT 45   RJC VI  517       0.56    44.44    14.9% ***
Sell Put  OCT 47.5 RJC VW  242       0.75    46.75    19.6%
Sell Put  OCT 50   RJC VJ  1569      1.19    48.81    27.5%


DCTM - Documentum  $71.75  *** Bracing For A Rally? ***

Documentum develops, markets and supports an open, scalable,
standards-based content management platform and application
suite for managing the content organizations rely on for global
operations and to bring their businesses online.  Documentum's
Internet-scale content management solutions facilitate e-business
connections with customers, business partners and employees.
These solutions enable customers to create, deliver, manage and
personalize all content from contributors within and outside the
enterprise, for key business process, in a targeted manner.

Documentum is another E-business leader that appears to be well
positioned to profit from the current Internet-based demand for
software.  Analysts say the company is transforming from a
document management vendor to a leading provider of Web content
management products.  Their rapidly maturing 4i product line is
scalable, technically solid and fully Web-based and as the Web
content management market expands to include B2E and B2B, the
company will leverage its enterprise document management skills
and customer base to emerge as one of the top vendors.

Earnings are due on or about October 19 and third quarter results
are expected to meet or exceed consensus.  Technically, the issue
appears to be successfully completing a consolidation phase and
we expect the share value to benefit significantly from the next
market rally.

DCTM - Documentum  $71.75

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

Sell Put  OCT 45   QDC VI  68        0.69    44.31    15.5% ***
Sell Put  OCT 50   QDC VJ  668       1.50    48.50    32.0%
Sell Put  OCT 55   QDC VK  350       2.13    52.87    43.7%


HAND - Handspring  $68.25  *** Earnings Play! ***

Handspring is a provider of handheld computers.  The company's
first product, the Visor handheld computer, is a personal
organizer that is enhanced by its Springboard platform, an open
expansion slot.  Since the Visor's introduction, more than 2,500
developers have registered with Handspring's developer program
to receive support in developing modules.  Examples of modules
commercially available or in development include a digital camera,
an MP3 player, a two-way pager, a global positioning system and
content such as books and games.

Handspring is set to capitalize on the emerging wireless market,
producing a unique, hand-held wireless device.  The company has
moved to the forefront of the PDA industry this quarter and the
introduction of its GSM module in mid-September, which enables
voice telephony on the Visor, has made the convergence of data
and wireless voice a reality.  The company has also aggressively
expanded its international exposure in recent months, introducing
the Visor in Europe, Hong Kong, Taiwan and Singapore.  As the
company continues to increase production, the Visor is expected
to be launched in other foreign markets later in the year.

Earnings are due next week and most of the other companies in
the small group have exceeded analysts' consensus estimates.
Our conservative position offers a method to participate in the
outcome of the report with relatively low risk.

HAND - Handspring  $68.25

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

Sell Call OCT 55   HQA JK  21       14.63    53.62     8.7% ***
Sell Call OCT 60   HQA JL  185      10.75    57.50    14.7%

Sell Put  OCT 45   HQA VI  25        0.69    44.31    16.3% ***
Sell Put  OCT 50   HQA VJ  156       1.06    48.94    24.4%
Sell Put  OCT 55   HQA VK  8         1.81    53.19    38.6%


ITWO - i2 Technologies  $176.00  *** Rebound In Progress! ***

i2 Technologies is a provider of intelligent eBusiness solutions
that help enterprises optimize business processes both internally
and among trading partners.  Its solutions enable enterprises to
operate more efficiently, more effectively collaborate with
suppliers and customers, and conduct business transactions over
the Internet.  They recently launched TradeMatrix, a robust
platform of business-to-business solutions, services and
marketplaces, which will allow customers, partners, suppliers and
service providers to do business together in real time.  Its
services include procurement, commerce, customer care, strategic
sourcing, product development, and more.

i2 Technologies is one of the leaders in the Internet B2B sector
and investors, as well as industry experts, are bullish on the
company's outlook.  i2 Technologies recently hosted a successful
analysts' day and user conference with over 7,000 attendees.  The
seminar included upbeat management and customer presentations, and
momentous announcements on the customer, partnership and product
front.  Most significantly, the company announced three major
customer wins, including the largest contract in i2's history with
Siemens, an expansion of the Ariba relationship announced in March,
and a range of partnership and new product previews.

The current technical outlook is favorable and our position offers
an excellent reward potential at the risk of owning this leading
issue at a favorable cost basis.

ITWO - i2 Technologies  $176.00

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

Sell Put  OCT 135  QYJ VG  398       1.13   133.88    10.5% ***
Sell Put  OCT 140  QYJ VH  502       1.44   138.56    13.3%
Sell Put  OCT 145  QYJ VI  340       1.81   143.19    14.9%


PWER - Power-One  $68.75  *** On The Rebound! ***

Power-One is a leading manufacturer of power conversion products
designed primarily for communications applications.  Their DC rack
power systems are sold directly to Internet service providers and
telecom central offices.  The company's embedded OEM power products
include AC/DC and DC/DC products and are sold to manufacturers of
datacom and telecom equipment.  Power-One also supports customers
in the automated/semiconductor test equipment industry and other
high-end industrial markets.  The company is comprised of AC&DC
Power Systems, High Density-Board Mounted Power, Compact Power
Systems, Telecom Systems, and the Powec division.

The recovery in Power One began earlier this month after Morgan
Stanley Dean Witter raised its rating on the power products maker
to a "strong buy" with a $90 price target.  The upgrade had a very
positive effect on the company's share value and investors appear
to be anticipating positive results in the upcoming earnings report.
The current technical outlook is favorable and our position offers
an excellent reward potential at the risk of owning this unique
issue at a favorable cost basis.

PWER - Power-One  $68.75

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

Sell Put  OCT 55   OGU VK  222       0.56    54.44    13.3% ***
Sell Put  OCT 57.5 OGU VY  85        0.81    56.69    16.0%
Sell Put  OCT 60   OGU VL  306       1.25    58.75    21.1%


VRTS - Veritas  $138.06  *** An OIN Favorite! ***

Veritas is an independent supplier of storage management
software.  Their products help to improve the levels of control,
automation and manageability in computing environments. Their
products provide protection against data loss and corruption,
allow rapid recovery after disk or computer system failure,
enable IT managers to work efficiently with large numbers of
files, and make it possible to manage data distributed on large
networks without harming productivity or interrupting users.
Veritas develops and sells products for most popular operating
systems, including UNIX and Windows NT.

This company is simply one of our favorites for long-term stock
portfolios and the demand for Application Software Providers
has helped the issue remain relatively bullish in the midst of
catastrophic failures of a number of industry-leading stocks.
The fundamental outlook is very positive; revenues are expected
to grow substantially in the coming year and the company should
see higher share values in the future.  The current technical
trend is favorable and we offer this position as an entry point,
based on the chart indications.  Obviously, the issue is prone
to a correction in the technology group but a reasonable cost
basis exists near the previous support area at $115.

VRTS - Veritas  $138.06

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

Sell Put  OCT 105  VUQ VA  328       0.81   104.19     9.6% ***
Sell Put  OCT 110  VUQ VB  978       1.31   108.69    15.3%
Sell Put  OCT 115  VUQ VC  836       1.81   113.19    18.0%



GMST - Gemstar/TV Guide  $62.31  *** Technical Collapse! ***

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

This play is simply based on the current price or trading range
of the underlying stock and its recent technical history.  The
near-term GMST price trend is bearish and reflects a pronounced
negative divergence from an intermediate-period moving average.
In addition, the decline has come on increasing selling pressure
and a major support level has been violated.  With the failure
at $90, a "double top" formation is in place and it appears the
share value has little chance of reaching our sold positions in
one week.

GMST - Gemstar/TV Guide  $62.31

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

Sell Call OCT 80   GST JP  12726     1.19    81.19    29.5%
Sell Call OCT 85   GST JQ  2826      0.75    85.75    19.2%
Sell Call OCT 90   GST JR  10726     0.50    90.50    13.0% ***

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