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Daily Newsletter, Thursday, 10/12/2000

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The Option Investor Newsletter                 Thursday 10-12-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        10-12-2000        High      Low     Volume Advance/Decline
DJIA    10034.60 -379.20 10460.40 10023.50 1.37 bln    767/2143
NASDAQ   3074.68 - 93.81  3249.11  3071.25 2.12 bln   1119/2963
S&P 100   703.68 - 20.34   734.73   702.52   totals   1886/5106
S&P 500  1329.78 - 34.81  1381.97  1328.06           27.0%/73.0%
RUS 2000  462.97 - 11.77   481.63   462.21
DJ TRANS 2379.16 - 66.33  2452.55  2375.19
VIX        35.01 +  4.06    35.20    29.37
Put/Call Ratio       .87
******************************************************************

Middle East Explosions Felt On Wall Street

Events around the world took center stage as the markets went
from bad to worse.  The Dow Industrials had literally no chance
today as pre-market news put a damp cloud over trading.  Home
Depot bombed the Street with a major earnings warning.  Israeli
helicopter gun ships blasted targets near Yasser Arafat's offices
in two Palestinian-ruled cities after an angry mob killed two
captive Israeli soldiers.  Then word came of the terrorist act
against a U.S. Battleship docked in Yemen.  This was too much
for the equity markets to overcome and the selling was sharp
and lasting, culminating in a close near the day low for all
major indices.  As if October wasn't scary enough with Halloween
and a horrifying stock market, tomorrow is Friday the 13th and
may live up to its billing.

The Dow Industrials opened fractionally higher only to drop
over 300 points in the first hour.  After the mediocre attempt
to recoup some of the losses, the selling continued and the
final result was a 379.21 loss to 10,034.58.  This was only
eleven points off the day low.  Decliners beat advancers 3-1
on volume of 1.37 billion shares.  Home Depot easily accounted
for over 100 points of the loss due to the earnings warning,
but the real story was the lack of bids to support the index.
The chart looks horrific and sentiment is just as bad.  One
point to note is the support the DJIA should find at 9800, the
level at which the index bounced in March of this year.  And in
case you are wondering, today was the fifth biggest decline in
DJIA history.



The Nasdaq held up surprisingly well.  It spent most of the
day resisting the selling pressure and holding above 3100.  It
was in vain though as the Nasdaq eventually gave up and traded
down to close near the day low at 3074.68, down 93.81.  Volume
was heavy at 2.10 billion shares.  This is the second day of
volume over 2 billion shares for the first time since last
spring.  You have to applaud the efforts of the Nasdaq relative
to the negative news surrounding the overall markets.  So if
you left the market in May and took the summer off, then you
have officially missed nothing as the Nasdaq has returned to
those levels.



There is so much news to digest that one would hardly know where
to begin when assessing the market.  As option traders, the first
stop at this point should be a check of the VIX.  As Matt Russ
mentioned last night, it is now at the highest point since May.
At 34.36 we all know it is screaming for relief, but in April
it didn't find relief until it moved over 40.  With that said,
there is strong historical evidence that the markets are due
for a bounce at anytime.

Let's clear up some of the news items for the day so that we
can roll up our sleeves and really dissect this market.  Home
Depot was the earnings warning of the day, before market open.
HD said it would miss its earnings targets in the third quarter
and 2000 because of a drop in what it charged for lumber and
building materials.  The Atlanta-based company said Thursday
that its per-share earnings for the quarter ending Oct 31st
will be about $0.28 cents per share.  Wall Street analysts
surveyed by First Call had predicted earnings of $0.31 cents.
HD closed at $34.88, down $14.06, accounting for the biggest
portion of the DJIA decline by one stock.

Oil continued its rally with the developments in the Middle
East.  November crude gained $2.81 to $36.06 after peaking at
$37.00 following news that a U.S. Navy ship was struck and that
Israel had launched helicopter attacks on Palestinian leader
Yasser Arafat's headquarters.  This is not going to help the
inflation situation or the supply constraints.  "The market has
already weathered [an oil] price shock, but a supply shock is
another matter. It could result in an economic downturn and
government intervention to manage shortages," said William
Rhodes, chief investment strategist at Williams Capital Group.

Many companies reported earnings today, most after the close.
Fortunately, there were no major bombshells here.  Gateway
meet expectations and said the fourth quarter also looked
good.  Juniper almost doubled estimates by reporting $0.17
cents versus expectations of $0.09 as they continued to chip
away at Cisco's market share.  JNPR was extremely active after
hours.  Silicon Storage beat the street and is trading higher
to $24.  Doubleclick's revenues were a little light, but the
company did meet estimates at $0.03.  General Motors released
in the morning and did little to encourage buyers.  They
reported $1.55 versus the estimate of $1.54, but the future
is cloudy.  PMC-Sierra is another company that reported after
the close and is trading up $6 after-hours.

So did anyone else forget that the PPI and Retail Sales are
due out tomorrow morning?  What was the biggest news for the
week on Monday has now taken a back seat.  Now the question is,
do they even matter?  With such conflict around the world, the
Federal Reserve may be forced to ease, not raise.  This is
similar to the 1998 October where a failing stock market and
world crisis forced a series of three rate cuts in a short
period of time.  While I feel that is unlikely under current
circumstances, raising rates is absolutely out of the question,
regardless of the numbers tomorrow.  As for those numbers,
the PPI is expected to rise by 0.5%, with a core gain of 0.1%.
Retail Sales are expected to be up by 0.6%, with the ex-auto
number of 0.5%.  Anything lower than those numbers will be
beneficial for the Street.

With solid earnings by Gateway and Juniper after the close, we
could see a move higher on the open.  The trend I am watching
shows resistance at 3200.  We may have one last opportunity to
play puts back down from this resistance.  A move over that
could be the beginning of the relief rally.  I think many
analysts would agree that we are in the process of putting in
a bottom in this market.  Just remember that downdrafts this
swift usually take a few days to put in a solid floor.  With
the VIX over 35, the process has begun.  At such a high level,
a rebound is likely.  The markets do typically begin to bottom
mid-October.

The biggest factor though will be what happens in the Middle
East over night.  If we awake to more retaliations and bombings
then no one in their right minds will want to hold over the
weekend.  How would you like to come to work on Monday with
oil at $50 a barrel or Middle East war?  There is just too much
risk involved.  That may put the markets back underwater again
and nearing the crucial 3000 level on the Nasdaq and 9800 level
on the DJIA.  If anything, October strikes are for aggressive
traders only right now.  Jim is back in the office today and
already preparing weekend commentary.  The best bet may be to
let the markets work through the breaking news and re-evaluate
the situation on the weekend.

One final note, remember this is classic October woes and
beginning to dip into LEAPs on some of these oversold stocks
is historically a wise decision.


Ryan Nelson
Editor


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

Liftoff Or Meltdown?
Austin Passamonte

Count on one or the other. Or both. Real soon. Like tomorrow.

Where to begin; we'll stick to the high notes (or low notes) and
try to make sense of the state our markets are in. Bearish news
first. Bulls please stick around.

For those waiting for, expecting and/or sure of a fall rally to
emerge, this might be the year without Santa Claus. Eventually we
will enter a flat to bear market and no one can say that this
won't be it. Wanting or expecting another parabolic market-move
just because the last two years did so and we had lots of fun
buying calls doesn't ensure it will happen this time.

There is more uncertainty now than at any time we've seen since
October 1988 (my first anniversary of stock trading, should have
waited 13 months from when I began) and then the Gulf war era. Do
not discount a lingering effect this current drama can place on
any extended bovine party.

Oil prices are bad and getting worse. A cold winter in the
northeast will make these earnings look stellar compared to 4th
quarter and 1st quarter next year.

Stock prices are cheap but can get much cheaper. INTC was bought
on spiking volume from $65 to $75 not long ago. Seemed like a
great buy as it broke to new highs while a majority of momentum
traders now turned investors elbowed each other to the table.
Plenty of that could follow still.

The Dow broke it's diamond pattern to the upside but failed to
follow suit on strength. If it tests the downside target that
could take us to the low 9,000 levels or worse before we're
through.

The OEX is trading lower than any time this year and the SPX is
close. Those who think market's health is measured by the Comp are
mistaken, and it's behavior is no conciliation either.

The NDX might be completing a "C" wave in Elliott wave theory. The
next move from here would be a plunge to the 2,500 range if this
is true. I'm no wave expert (or even neophyte) but those who study
this stuff have been uncannily accurate before.

Now that 90% of all bulls who began this piece clicked away long
ago in disgust, let's examine the other side. We'll cheer
ourselves up without them!

I bought my first stocks in 1987 right after the markets CRASHED.
I didn't know a thing about stocks other than they were too cheap
and I had time & money on my side. I bought all the wrong stuff
and it didn't go anywhere fast but I made a pile of money before
long. Had I held until now or bought the right stuff I couldn't
afford to be here with you now; my wildlife ranch teeming with
trophy elk & whitetail deer would keep me too busy.

What does that have to do with today? Everything. Popular stocks
are cheap and getting cheaper. Waves of new buyers will step in
from all over the world to snap then up. Imagine what online
brokers would have done for late-eighties markets? We have them
now across the globe.

Too much money was made in the Great Game over the past few years
to be ignored. When the buying begins it will make the rush for
Yukon gold look anemic in comparison. Trillions have been lost but
trillions more will be made again by a fresh wave of eager buyers
pushing to the trough.

Don't think so? We respect your opinion. Think the put/call ratio
can stay through the roof forever? Will the VIX go to record
levels? Will the S&P 500 commercials sitting on vulgar amounts of
profit hold forever? Might they be the first to begin quietly
accumulating long positions while those they happily sold to on
the way up shed their massive losses in double-edged pain?

Will technology cease, department stores fold and durable goods
manufacturers cease production? Will Christmas find lumps of coal
in everyone's stocking forever?

Not long ago Market Sentiment called for a top in the markets
during a time when we received major heat from market bulls
scoffing at our prediction. We are on record as saying the day
will come when all is dark around us and the financial world seems
doomed to languish in depths of depravity.

We stated that would then be a time to sell all our earthly
possessions, mortgage the house and sell our blood to raise money
for every last LEAP and distant-month call we can afford.

Stop by our house and make some offers; we have sale tags on
everything. We're feeling a little faint right now... better have
another glass of orange juice.

For those who remember the last few times we've witnessed such
dark times, examine the charts soon after. History does repeat
itself because human action is driven by human nature and that
will never change.

Short term? We could plunge to unfamiliar index levels early as
tomorrow. However, this market is a giant short-squeeze tinderbox.
The first inkling of serious buying pressure will have short-
covering shoot this market up faster than it went down.

Will it stick & stay? Can't answer that but we sure don't want to
miss the next major ride and that is likely to the upside soon.
Fasten your seatbelts once again. It will get rocky and can go
both ways soon but liftoff will commence before we know it!

*****

VIX
Thursday 10/12 close; 35.01

30-yr Bonds
Thursday 10/12 close; 5.81%

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.

                                   Thursday
                                 (10/12/2000)
  (Open Interest)        Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
740 - 725                5,990       12,597          .46
720 - 705                  935       11,995          .08

OEX close: 703.59

Support:
700 - 680                   70       13,640       194.86***
670 - 640                    2       14,369      7184.50***

Maximum calls: 740/3,687
Maximum puts : 640/8,437

Moving Averages
 10 DMA  746
 20 DMA  760
 50 DMA  792
200 DMA  781


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 84 - 82                18,315       23,037          .80
 81 - 79                14,684       23,632          .62
 78 - 76                36,186       14,581         2.48

QQQ(NDX)close: 75.125
Support:

 74 - 72                 5,269        9,748         1.85
 71 - 69                 1,141        4,971         4.36
 68 - 66                    50        1,733        34.66***

Maximum calls: 78/25,131
Maximum puts : 80/13,764
Moving Averages
 10 DMA 82
 20 DMA 86
 50 DMA 91
200 DMA 94


S&P 500 (SPX)
Resistance:
1400                     4,017       10,220          .39
1375                     1,379       15,699          .09
1350                       562       18,170          .03

SPX close: 1329.79

Support:
1325                       654        7,292        11.15
1300                     1,385       29,352        21.19
1275                        58        3,630        62.59***


Maximum calls: 1425/9,704
Maximum puts : 1300/29,352

Moving Averages
 10 DMA 1406
 20 DMA 1426
 50 DMA 1465
200 DMA 1445

*****

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 build net-long.

Summary: "Smart money" insiders expect stock market to decline
and interest rates to rise. Small traders directly opposite,
creating diverse set up favoring commercial sentiment for
future market direction. *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
Historical recent disparity in overhead call/put ratios
Soaring VIX
Soaring put/call ratio

Bearish:
Middle-East tension fears
Oil Prices
COT reports
Recent pre-warnings, downgrades (brutal)
Broad market's break of critical M/A support
Market leaders breakdown
Total index sell offs


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

As of Market Close - Thursday, 10/12/2000

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

DOW   Industrials      10,034     9,850  10,600       **
SPX   S&P 500           1,329     1,325   1,400       **
COMPX NASD Composite    3,074     3,040   3,500       **
OEX   S&P 100             703       690     750       **
RUT   Russell 2000        462       445     500       **
NDX   NASD 100          3,004     2,897   3,350       **
MSH   High Tech           832       800     935       **

BTK   Biotech             642       600     740       **
XCI   Hardware          1,127     1,100   1,310       **
GSO.X Software            365       355     445       **
SOX   Semiconductor       689       650     870
NWX   Networking        1,024       950   1,210       **
INX   Internet            337       335     465       **

BIX   Banking             532       520     600       **
XBD   Brokerage           558       555     640
IUX   Insurance           726       705     790       **

RLX   Retail              712       695     810       **
DRG   Drug                416       370     425
HCX   Healthcare          855       825     875       **
XAL   Airline             130       129     148       **
OIX   Oil & Gas           327       310     332

Seventeen alerts were triggered in the past two sessions.
Sixteen alerts were at support and one alert (HCX) was at
resistance.  Lowering support (DOW, SPX, COMPX, OEX, RUT, NDX,
MSH, BTK, XCI, GSO.X, NWX, INX, BIX, IUX, RLX, XAL) Lowering
resistance (DOW, SPX, COMPX, OEX, RUT, NDX, MSH, NWX, BIX, RLX,
XAL) Raising support (OIX) Raising resistance (HCX).


**************
TRADERS CORNER
**************

No, That Wasn't It
By Molly Evans

We’re probably now well beyond the point that many want to know
"where and when is the bottom?"

Many think there has to be a capitulation.  Capitulation occurs
when the markets are the most bleak, when it appears that all
hope for a recovery is gone.  I would propose that our last
capitulation was not so very long ago and investors remember
well the opportunity that came in the following days.  The Nasdaq
started rolling over in mid March and topped out again on March
24th.  From there, a rapid descent ensued.  The Nasdaq lost nearly
1700 points in 16 trading days - twelve of which were down.  On
April 14th, panic selling was clearly the theme of the day.  The
Nasdaq dropped over 300 points intraday while the Dow came
tumbling down as much as 600 points.  Volume was tremendous.  The
time and sales tapes were whirring as fast as the data feed could
supply them.  Traders everywhere watched in stunned silence as the
numbers went deeper and deeper into the abyss. And then something
happened.  It just stopped.  Just like we've discussed in writings
here, first the losses must stop before the gains can come.  When
you're seeing a bottom, imagine a giant pendulum swinging; the arc
can go only so far one-way and then it pauses and falls (or rises
in this case) in the opposite direction.

Fear can be an investor's best friend or worst enemy.  If you’re
a fearful trader, GOOD!  At least have the fear early and get
yourself out of the way of falling oaks.  When the fear comes
late, it’s most likely too late.  That is the fear that is the
backbone of capitulation.  In April, that was textbook.  For
those safely on the sidelines watching that day, it was simply an
awe-inducing event.  Here was the textbook capitulation at work.
Of course it's easy to say that in retrospect.  Those who threw
in the towel that day, didn't know they were part of a wide
sweeping wave of selling that would result in a washout of shares.
From there, many of their stocks would go on to recover and
reach new highs within just a few months.  But they do know that
now.  Might it be fair to presume that fear is coming later this
time?  Today was a news-drenched day. Volume was heavy and the
results were ugly.  We can only wonder if today was the start of
a capitulation or the latest hard thrust down in a longer term
downtrend.  Did long-term investors get hurt much in the spring
melt?  I don't think so.  While the Nasdaq has certainly not come
close to approaching its March 10th high of 5132, it and the other
indices gave investors something to smile about again throughout
much of the summer.  Many investors have it in their minds that
this time they refuse to sell at a bottom, thus "bottom" eludes us
and the bleeding continues.

Where are we in this present decline?  Strictly speaking for the
Nasdaq, the decline in April was more severe.  In just 16 days,
34% had been shaved off the top.  In our present decline, it's
taken 29 trading days to lop off 28%.  And just the other day, I
heard Sue Herrera ask if the Nasdaq might be in a bear market!
With the Sue factor aside though, how about the health of this
market?  When you add the insult of this decline to that which we
had already suffered in the spring, it’s difficult to be upbeat
about the market.  In the last four of five trading days, volume
has been heavier than average daily volume.  That's shaking out
weak hands.  Plus, the VIX took a decisive jump into the thirty
territory just yesterday and got to a high of 34.65.  If you'll
throw some bollinger bands around that you'll see that the bodies
of these candles jumped right out of the envelope.  Good.

How about another clue?  Look at the Put/Call ratio.  The raw
put/call numbers are meaningless, but the trend tells tales.
Last night the put/call for U.S. equities closed at .91.  This
morning, the Nasdaq looked like it wanted it to go up for awhile
and traders cashed in their puts.  The low was .64 but during the
ensuing carnage throughout the afternoon, the Put/Call ratio
reached a high of 2.7 and closed the day at 2.3.  Bears are
getting confident.  However, they’re quick to run for cover when
rallies get underway.  If you chart these Put/Call ratios, you see
excessive spikes "out of bollinger bands" too.  In fact, the PVI,
Put Volume Indicator is flashing a buy signal for the third time
in a week.  It did so on Friday's trading day, yesterday and then
again today.

For those unfamiliar with the Put/Call ratio and indicator, here's
the scoop:  Like the VIX, which you've heard about numerous times
as being an indicator of extremes in sentiment, the P/C ratio is a
contrary indicator.  When there is excessive bearishness, which is
usually wrong at the extremes or ends of the run, options traders
become a bit overzealous in their put buying to capitalize on the
descent of individual equities or the OEX.  Historically, when the
ratio gets out of its range, a turning signal is rendered.  The
raw numbers mean little.  Instead, you should configure a ten-day
moving average of the put/call numbers for both the OEX and for
equities (reported on the CBOE site).  The approximate range for
this ratio since 1992 is 0.52 to 1.13 (Total), 0.35 to 0.75
(Equity), and 0.77 to 1.55 (OEX), according to Carl Swenlin.

This market is down on fundamentals.  With the uprisings in the
Middle East, higher energy costs and growing consumer concern,
bottom is a relative term.  The technical indicators say that at
least in terms of what has happened historically that a bounce is
due.  However, closing on or near the lows of the day for all
of the broader markets, not just the susceptible tech heavy
Nasdaq, suggests that there will be more selling tomorrow before
the weekend.  Option traders have to be more vigilant in terms of
risk and money management.  Honestly, now is no time to try to be
a hero in picking this bottom.  Everyone wants to buy the bottom
and sell the top, but the middle run is often the sweetest and
safest.  Straddles are probably not the best play as the volatility
is premium would be high in most options.  Directional puts or
calls could be high reward if you’re right here but are very
risky at this point.  Spreads and covered calls appear to be the
safest way to trade this market.


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

Index       Last    Mon     Tue     Wed     Thu    Week
Dow     10034.58 -28.11  -44.03 -110.61 -379.21 -561.96
Nasdaq   3074.68  -5.45 -115.02  -72.05  -93.81 -286.33
$OEX      703.68  -6.74   -6.55  -13.66  -20.34  -47.29
$SPX     1329.78  -6.96  -16.09  -21.35  -34.81  -79.21
$RUT      462.97  -1.49   -7.90   -6.89  -11.77  -28.05
$TRAN    2379.16 -53.02    6.60  -51.74  -66.33 -164.49
$VIX       35.01   0.66    1.11    3.51    4.06    9.34

Calls

EMLX      115.00   9.75   -8.19    4.38    1.06    7.00  New
LLY        87.50  -0.25    1.81    2.94    0.06    4.56  Safety
CIEN      113.44  -0.25    4.34   -2.66    1.44    2.88  Leader
MRK        77.19  -0.75    1.56   -0.38    0.69    1.13  Solace
SEBL       92.13   7.75   -6.38   -2.19    0.50   -0.31  Rebound
NT         59.88   0.94   -3.25    0.94   -1.06   -2.44  Holding
SUNW       97.94  -0.69   -3.63   -1.31   -3.94   -9.56  Waiting
QCOM       64.38   1.56    0.31   -9.19   -6.13  -13.44  Dropped
CHKP      131.06   2.94   -6.50   -6.50  -16.69  -26.75  Dropped

Puts

JPM       136.00  -1.13   -5.13    0.06  -10.81  -17.00  Brutal
CRA        63.25  -8.06   -5.06   -0.50   -2.50  -16.13  Bad BTK
INKT       75.13   5.50   -5.88  -12.31   -3.19  -15.88  Momentum
JBL        44.00  -4.38   -4.81    0.69    1.25   -7.25  Entry???
AETH       75.56  -2.56   -3.88    7.38   -7.63   -6.69  It's Ugly!
CPTH       45.88   2.63   -3.69   -0.31   -3.50   -4.88  Critical
QLGC       72.25   3.13   -6.63    2.44   -0.94   -2.00  Tech Woes
AKAM       42.88   7.75   -2.19    3.81   -2.69    6.69  Dropped


PICKS WE DROPPED
****************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

CHKP $131.13 -16.63 (-26.69) The rising tensions in the Middle
East and subsequent political unrest have caused detrimental
damage to our CHKP play.  CHKP is actually one of several
Israeli-based companies publicly traded in US equity markets.
The unrest in Israel caused CHKP to close below its 50-dma today
for the first time since late July.  What's more, volume swelled
during CHKP's drop today which confirmed the market's concerns
over instability in the Middle East.  The growing political
uncertainty in Israel has prompted us to leave CHKP.  Consider
using any relief rally or bounce as an opportunity to exit
existing long positions if stops have not already done so.

QCOM $64.38 -6.13 (-13.44) The recent hopes of glitter and gold
vanished yesterday.  As the NASDAQ zig-zagged around 3200 and
Yahoo disappointed the Street, sellers started cashing in QCOM.
QCOM successfully tested its near-term support levels with bounces
off $75 and $77, but the axe fell later in the session.  The share
price slid to dangerous levels.  It eventually closed at $70.50,
in the vicinity of the 30-DMA.  Today's action was just as bad.
The international crisis sent the broad markets further into bear
territory and QCOM suffered the wrath.  The share price is
currently back near its lows and we have no choice but to exit
tonight.  If the broad markets find a bottom and rally, keep an
eye on QCOM.  There's lots of room for upside potential.  The
company is confirmed to report earnings on November 2nd, after
the market.


PUTS:
*****

AKAM $42.88 -2.69 (+6.69) As weak as it looked late last week,
AKAM appers like it has put in a bottom near $35.  Largely
ignoring the fact that the NASDAQ continues to weaken, our play
is gradually recovering, having managed to claw its way back
above the $40 level.  The selling in the Internet sector has
been fast and furious, with leaders like YHOO giving up over 20%
when their revenue numbers failed to impress investors.  What
did AKAM do in the wake of such a negative reaction?  It tacked
on a fairly impressive 9% on solid volume.  While it isn't
looking like a strong recovery is anywhere on the horizon, it
definitely looks like a bottom is in place.  We got a nice
little ride out of AKAM, and now that it appears to be over, we
will gratefully take our profits and await the next winning
play.


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The Option Investor Newsletter                 Thursday 10-12-2000
Copyright 2000, All rights reserved.                        2 of 2
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********************
PLAY UPDATES - CALLS
********************

SEBL $92.13 +0.50 (-0.31) Despite the bearish news in the broader
Software sector in the forms of earnings warnings and valuation
concerns, SEBL continues to trade above the critical $90 level.
As we reported last week, the $90 level marks a key area for
SEBL to trade above and maintain its pattern of higher lows
since last spring.  While a bullish catalyst has not yet induced
SEBL to rally, we're nonetheless encouraged by the fact the
stock has recently held above $90 and actually edged higher
today amid more losses on the NASDAQ.  What's more, SEBL will
report third-quarter earnings next Thursday.  While SEBL's
profit report next week might cut our play short, it could very
well provide the catalyst we've been waiting for.  As long as
SEBL doesn't fall below $90, aggressive traders could take bounces
off the level.  A more conservative entry might be found if SEBL
rallies back above its 10-dma at $97, or back above the $100
level.

NT $59.88 -1.06 (-2.44) As selling continues to be the rule on
all the major indices, exacerbated by renewed tensions in the
Middle East, NT is doing a pretty good job of holding its
ground.  Although every rally is being sold into, support near
$58 is holding up nicely.  Even the heavy NASDAQ selling hasn't
been able to crack the low of $57.94 that NT posted on September
28th.  Earnings season is really getting started now, and our
play will have its day in the sun on October 24th after the
close.  While it is encouraging to see support holding near
current levels, we need to continue to exercise caution in
initiating new positions.  The recent market action has made it
clear that even excellent stocks can get caught in a downdraft.
If you decide to buy the bounce from support near $58, make
sure that buying volume is strong, and the NASDAQ is headed in
the positive direction.  While the investing public is still
holding its breath, a more prudent approach may be to wait for
a strong move over the $63 resistance level before playing.

SUNW $97.94 -3.94 (-9.56) Like an Olympic sprinter set in the start
gate for a race, SUNW is also set to run into earnings.  SUNW is
just waiting for the market rally gun to go off.  SUNW has shown us
for the past two days that the 200-dma at $96 is the point for its
start.  This mark has prevented SUNW from declines below $96 in
this weak tech market, and has provided a good entry point for
buyers in anticipation of a rebound.  The same $96 support line
extends from August 3rd, which started SUNW into its rally to $130,
so we'll look for investors to remember this key level to help
SUNW start a run again.  Today, overall market weakness was the
weight on the stock, and it basically stemmed from investor fears.
of Mid-East tension, earnings, and local economics.  Traders can
play off this fear by correctly assessing the turn.  However, due
to market volatility, it would be wise for traders to wait for an
hour of market activity, and watch for SUNW to rally off of
support and trade above $100 before entry.

LLY $87.50 +0.06 (+4.56)  As fear in the market is reaching a
peak, investors continue to run to the drug stocks for sanctuary
from the bears.  This flight to safety culminated in yesterday's
breakout above $85 resistance.  LLY spent most of Wednesday
morning drifting higher.  At mid day, when it surpassed the $85
mark, a buying frenzy ignited as the bulls ran into the stock,
with LLY ending the day up $2.94.  While it may not seem like
much to traders used to big swings in volatile tech issues, the
low premiums on LLY options make it a profitable move.  Today,
LLY continued to buck the market downtrend.  While closing only
fractionally higher, we'll take the gains in light of a 379 point
down day for the DOW.  Aggressive traders looking to enter on a
pullback will find strong support at $85, with the 5-dma converged
with the 100-dma.  Conservative traders will want to make sure LLY
can make it above $90 before initiating a play.

MRK $77.19 +0.69 (+1.13) Investors continue to flee the tech
sector and move into more defensive stocks as profit warnings
and disappointing quarterly earnings from the bellwethers plague
the market.  We added MRK to our call list this week when it
demonstrated strength above the former resistance at $75.
More importantly, MRK didn't suffer any backsliding in recent
sessions.  The sector rotation coupled with the floundering
market provides a nurturing environment for our defensive play.
MRK is currently edging higher and near-term support is
developing at $76 and $77.  The converged 5 and 10 dmas at
$76.39 and $75.33, respectively, still offer reasonable entry
points.  We're anticipating some upward movement ahead of the
company's earnings report, which is confirmed for October 20th,
before the bell.  Look for good volume to continue to move the
stock higher, but be prepared for strong opposition at $80 and
$81.13, the 52-week high.

CIEN $113.44 +1.44 (+2.88) CIEN was one of the few stocks trading
in the positive today.  While the share price is still channeling
between the supportive $110 level and overhead resistance at $120,
it demonstrated strength and a bit of spunk in recent sessions,
particularly on Wednesday.  CIEN continually flirted with $117 and
$118, topping out at $118.31 intraday.  The stock managed to
override that intraday high during amateur today, but then it
succumbed to the negative sentiment and kept hitting a ceiling
around $115.  A pretty darn good effort considering the broad market
conditions.  Let's give thanks to the new Strong Buy and $150 price
target put out yesterday by SG Cowen, which surely helped pump up
activity.  SG Cowen also commented on Ciena's "remarkable recovery"
and cited "sales growth is accelerating thanks to several new
products and customers."  They further added that "CIEN has evolved
from a point-product company to a well-diversified optical systems
vendor."  An analyst for William Blair & Co also initiated Buy
coverage on CIEN today.  And yes, there's a fly in the pie.  We
can't overlook the fact that the markets are without a doubt in
bear territory and CIEN has failed to crack the first line of
resistance at $120.  Therefore, consider taking the more
conservative route and wait for a conclusive breakout.  If you
have open positions or are strategizing more aggressive entries,
please keep the stops tight.


*******************
PLAY UPDATES - PUTS
*******************

INKT $75.13 -3.19 (-15.88) INKT continues to meet expectations
and provide profits on the short side.  It's apparent the one-time
support at $90 has become resistance, as it served as a ceiling on
both Wednesday and today.  We see INKT's negative momentum gaining
energy as the MACD has greatly diverged from its target line.
Also, our negative trend line, which can be tracked using the
10-dma at $96, has developed a downward slope.  For short players,
this is very positive and makes it difficult for INKT to reverse
course.  However, we can expect a relief rally due to the extreme
oversold position of INKT.  This should be short-term however, and
trailing stops can hedge such an event.  Earnings are now confirmed
for October 26th, after the market close.  INKT is expected to show
3 cents better than the previous quarter, but continued warnings
from the sector should make this a neutral event.  JP Morgan
released a report today stating that INKT looks promising as an
Internet infrastructure company.  They initiated coverage with a
Buy rating but, due to the overwhelming negative breadth in the
market, this had no effect on the price today.  However, it could
benefit INKT with a market rally so use caution.  Investors can
continue to play the negative momentum and or rollovers off the
new $90 resistance level.

CPTH $45.88 -3.50 (-4.88) The situation remains critical for
CPTH.  With parent company CMGI continuing to make new 52-week
lows, weakness in Internet stocks post-Yahoo earnings, and
generally negative sentiment in all things Tech, our put play has
been heading ever deeper into profitable territory.  The $50
resistance level has been holding strong for the past couple of
days.  A morning sell-off on Wednesday was followed by a bounce
off support at the $45-46 area, leading to an end of day recovery
to close down fractionally.  This gave CPTH a glimmer of hope
that perhaps a bottom had been reached.  However, a weak attempt
to rally in early amateur hour trading today was quickly swept
aside by macro economic concerns leading the markets lower and
taking CPTH along for the ride.  While volume was light, the
stock lost over 7% today.  The 5-dma at $49.61 continues to offer
aggressive entry points while a break below $45 with conviction
would provide a more conservative entry.

CRA $63.25 -2.50 (-16.13) Volume to the downside continues to be
heavy for CRA.  Finding a bottom near $62, CRA rallied into mid
day but hit resistance at the $70 level, which attracted the
bears, who sold the stock into the close.  CRA announced this
morning it had sequenced over 95% of the mouse genome, which had
traders excited in the early going but as broader economic fears
took control of the markets, the bulls scurried away, leaving
the bears full control.  Resistance at $70, reinforced by the
5-dma, also helped our put play, as any attempts to the level
have brought in the sellers.  A bounce off the 5-dma continues
to provide aggressive entry opportunities while a more
conservative play could be had if CRA breaks $60 on volume.  With
the Merrill Lynch Biotech HOLDR (BBH) now well below its 200-dma,
sentiment continues to be on our side.  Continue to confirm
direction in BBH and the Biotech Index (BTK.X) before entering
new positions.

JBL $44.00 +1.25 (-7.25) After JBL broke below its last line of
moving average support on Tuesday, the 200-dma (now at $44.55)
has since become resistance.  On Wednesday, JBL began the day
lower but found support at the $40 level, then staged a recovery
attempt.  While the stock closed up fractionally on over twice
the ADV, resistance at the 200-dma held and JBL failed to close
above that level.  Today, the stock traded in a narrow range of
just over 2 points.  A gap up at the open above the 200-dma was
met eagerly by sellers as JBL touched resistance at the 5-dma
(now at $45.35).  From there, the stock traded in a narrow range
for the rest of the day to close up on heavy volume.  Despite the
positive close, JBL once again finished below its 200-dma.
At this point, aggressive traders could find entry points on a
bounce off the 5-dma or 200-dma.  The more risk averse may want
to wait for JBL to break below $40 convincingly before making a
play.

JPM $136.00 -10.81 (-17.00) Yesterday, JPM gave the Finance sector
something to hope for.  An early morning sell-off found the
stock bouncing off support at $140, leading to an end of day
recovery.  JPM closed up fractionally, with buying volume
accelerating into the close.  Today, those hopes were brutally
dashed as fundamental and political fears eased into our put play.
JPM, as a major DOW component, was responsible for more than 30
points of the index's 379 point loss.  Credit quality fears
continue to weigh on the stock, as does the possibility of
inflation.  The word of the day was "sell", as the stock spent the
entire day moving south, closing near its lows of the day.  While
JPM did find  support at $135, a break below the point with
conviction would provide a conservative entry point while a failed
rally above resistance at $140 and $145 could provide for an
aggressive entry.  Conservative traders may want to see JPM break
below its 200-dma at $132 before entering.

AETH $75.56 -7.63 (-6.69) It's gotten even uglier on the NASDAQ.
AETH is primed to move to $70, but err on the side of caution.
Before jumping in headlong, wait for a clean break below $75 on
good volume.  The near-term bottom is currently at $72.  If
you're more adventurous, you could take positions on a high-
volume roll-over.  It'd sure be a nice entry if the play goes
your way!  But if buyers move in like they did yesterday, they
could rally the share price through the upper trading band at
$85.  You don’t want to be caught up the creek without any
paddles, use stop losses.

QLGC $72.25 -0.94 (-2.00)  More tech woes drive the NASDAQ lower
and effectively pressure QLGC's share price.  The lashing out
behind the shed continues for QLGC.  Trading activity remains
strong with today's exchange running above the ADV.  The near-
term bottom is now lower at $66.50.  Intraday swings are no longer
taking QLGC to its previous resistance level at the 100-dma
($78.99).  In the past two sessions, $77.50 has served as the
upper opposition. Instead of taking a more aggressive entry on a
roll-over, consider playing this put play on a break of $70 with
good volume.


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

EMLX - Emulex Corporation $115.00 +1.06 (+7.00 this week)

A leading networking company, EMLX designs, builds and
distributes three types of connectivity products: network
access servers, printer servers, and high-speed fibre channel
products.  It's fibre channel products, which are based on
internally developed ASIC technology, are deployable across
a variety of network configurations and operating systems to
support increasing volumes of stored data.  EMLX sells its
products directly throughout the world to OEMs and end users,
as well as through system integrators and industrial
distributors.

Who can forget the high-profile hoax that was foisted on
investors less than two months ago?  Well apparently, some
investors have forgiven and forgotten.  After all, it really had
nothing to do with the company, and was just the brainchild of
someone with too much time on their hands.  So after the
requisite cooling-off period, investors have started dipping
their feet in the pool, and the approach of earnings is likely
to quicken their pace.  The company is set to report its first
quarter results on October 19th, after the close.  Despite the
fact that the technology sector is continuing to plunge lower,
after the emotional roller coaster they endured in late August,
EMLX investors seem unwilling to release their shares for less
than $100.  In fact, the lows are getting higher, and the highs
are getting higher on an intraday basis, as buyers are showing
up at higher and higher levels.  What we really have is a
consolidation zone between $104 and $121, and earnings seem as
good a breakout catalyst as any.  Intraday dips to support look
buyable, as long as volume is strong on the bounce and the
technology sector is positive.  Support is found first at $112,
and $110, but is stronger at $103-104.  You may have to wait a
little longer, but the more prudent approach may be to wait for
buying interest to propel EMLX through the $121 resistance level
before opening new long positions.  While this is an earnings
play, keep in mind that it is an aggressive one.  The fuse is
very short, and we only have one week to play this one before
our mandatory pre-release exit.  Truly nimble-footed players can
even take advantage of the current consolidation, buying near
the $104 support level and exiting near the $121 resistance.
Just keep in mind that this strategy is not for position
traders, as the swings from one extreme to the other are taking
barely more than a day - lots of entries, but only if you can
pick them out and have the guts to pull the trigger under fire.

Whatever he had to say at the Fibre Channel Technology
Conference this week, EMLX's Director of Product Marketing,
Mike Kane, sure didn't scare investors.  Focusing on the growing
demand for 2Gb/sec solutions and future needs for 10Gb/sec
solutions, he painted a rosy picture for the future of Fibre
Channel technology and EMLX's place in it.  In addition, the
company demonstrated its LightPulse Sbus host adapter and its
PCI-based 2Gb/sec LP9002 host adapter, highlighting the
company's auto speed negotiation capability.

***October contracts expire next week***

BUY CALL OCT-110 UMQ-JB OI=656 at $11.75 SL= 8.75
BUY CALL OCT-115*UMQ-JC OI=452 at $ 9.13 SL= 6.25
BUY CALL NOV-120 UMQ-KD OI=501 at $15.88 SL=11.50
BUY CALL NOV-125 UMQ-KE OI=100 at $14.00 SL=10.50
BUY CALL JAN-120 UMQ-AD OI=280 at $25.63 SL=19.25

SELL PUT OCT-105 UMQ-VA OI=183 at $ 3.50 SL= 5.50
(See risks of selling puts in play legend)

Picked on Oct 12th at   $115.00     P/E = 133
Change since picked       +0.00     52-week high=$225.50
Analysts Ratings      3-7-0-0-0     52-week low =$ 35.50
Last earnings 08/00   est= 0.21     actual= 0.25
Next earnings 10-19   est= 0.26     versus= 0.13
Average Daily Volume = 2.03 mln



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

No new puts today

**********************
PLAY OF THE DAY - CALL
**********************

CIEN - Ciena Corp $113.44 +1.44 (+2.69 this 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.

Most Recent Write-Up

CIEN was one of the few stocks trading in the positive today.
While the share price is still channeling between the supportive
$110 level and overhead resistance at $120, it demonstrated
strength and a bit of spunk in recent sessions, particularly on
Wednesday.  CIEN continually flirted with $117 and $118, topping
out at $118.31 intraday.  The stock managed to override that
intraday high during amateur today, but then it succumbed to the
negative sentiment and kept hitting a ceiling around $115.  A
pretty darn good effort considering the broad market conditions.
Let's give thanks to the new Strong Buy and $150 price target put
out yesterday by SG Cowen, which surely helped pump up activity.
SG Cowen also commented on Ciena's "remarkable recovery" and cited
"sales growth is accelerating thanks to several new products and
customers."  They further added that "CIEN has evolved from a
point-product company to a well-diversified optical systems
vendor."  An analyst for William Blair & Co also initiated Buy
coverage on CIEN today.  And yes, there's a fly in the pie.  We
can't overlook the fact that the markets are without a doubt in
bear territory and CIEN has failed to crack the first line of
resistance at $120.  Therefore, consider taking the more
conservative route and wait for a conclusive breakout.  If you
have open positions or are strategizing more aggressive entries,
please keep the stops tight.

Comments

Staying resilient, CIEN bucked the trend today as the NASDAQ
slipped below 3100.  The stock gapped higher on the open along
with the tech index, finding resistance around $118.  The bounce
today came at $110 and offered a nice entry point.  CIEN actually
climbed higher while the NASDAQ sold off into the close.  Look
for bounces from the $110 level on a pullback for an entry.  A
breakout over $116 on strong volume could also provide entry.

***October contracts expire next week***

BUY CALL OCT-110 UEE-JB OI=2844 at $ 8.63 SL=6.00
BUY CALL OCT-115*UEE-JC OI=4355 at $ 6.13 SL=4.50
BUY CALL OCT-120 UEE-JD OI=3236 at $ 3.75 SL=4.50
BUY CALL NOV-115 UEE-KC OI= 573 at $12.88 SL=8.50
BUY CALL NOV-120 UEZ-KD OI=2737 at $10.38 SL=6.75

Picked on Sep 24th at   $120.75    P/E = 546
Change since picked       -7.31    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



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

Is This Capitulation?

Thursday, October 12

The Dow industrials plunged today amid concerns over a profit
warning from blue-chip retailer Home Depot.  At the same time,
the Nasdaq closed at its lowest level since last November as
investors worried about valuations in technology stocks.  The
price of oil spiked on news of escalating tension in the Middle
East, further exacerbating the potential for inflation due to
the rising cost of energy.  The Dow closed down 379 points at
10,034 and the Nasdaq ended 93 points lower at 3,074.  The S&P
500 index ended down 34 points at 1,329.  Trading volume on the
broad market NYSE reached 1.37 billion shares, with declines
ousting advances 2,140 to 787.  Activity on the Nasdaq exchange
was heavy at 2.1 billion shares traded, with declines tripling
advances 2,970 to 1,126.  In the currency and credit markets,
the Euro fell to its lowest level since mid-September while the
U.S. 30-year Treasury rose 6/32, pushing its yield up to 5.80%
amid a flight to quality.


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

Delta      DAL    NOV45C/OCT50C    $3.50   debit    diagonal
Symantec   SYMC   OCT55P/OCT50P    $3.75   debit    bear-put
Filenet    FILE   OCT22C/OCT20C    $0.00   credit   bear-call
Verisign   VRSN   OCT240C/140P     $2.75   credit   strangle


Based on Monday's time and sales data, there were few favorable
opportunities to participate in our new positions.  Delta opened
over $1 lower and the initial price for the diagonal spread was
better than our target entry.  In contrast, Symantec spiked to
$45.75 early in the session, but the entry debit was slightly
lower than our target price.  The Filenet premium disparity was
gone at the open and the Versign credit strangle did not trade
above $2.75 (on a simultaneous order basis).  Did anyone achieve
favorable entries in these positions later in the week?


Portfolio Plays:

It appears that I picked a great time to be away from the market.
On my return I discover that the bears have gained total control
and the antagonists were correct about a complete capitulation in
equities.  Remember my comments from last week:


"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."


Well, if only I had been one of the many (brilliant) traders that
participated in the continued downward movement.  Unfortunately,
I was unable to monitor the market's daily progress, due to other
commitments, thus I did not profit from the activity.  In addition,
I was unable to track the Spreads portfolio and make the necessary
adjustments (or exits) in the critically affected positions.  One
consolation is that the majority of "in-the-money" positions were
easily exited for profits while those that were less attractive
provided a number of opportunities to initiate favorable closing
transactions.  Readers who have questions about specific plays can
contact me through E-mail and I will happily discuss the potential
adjustment techniques for individual plays.

This is a unique dilemma, which has increased exponentially over
the past few months, as my time to produce this section becomes
more limited due to other responsibilities.  The problem is the
enormous time involved in trying to track hundreds of portfolio
positions and provide insightful coverage of the stocks on which
they are based.  The goal of the daily narrative has always been
to point out significant changes or events in the active issues
and offer suggestions concerning the required maintenance of their
associated option positions.  In recent months, the task has grown
to staggering proportions and the assignment is far too laborious
for one person to perform effectively.  As you know, we recently
began a search for qualified researchers and a new Spreads/Combos
section editor but that yielded no candidates.  Until the staffing
issue can be successfully resolved, I must decide how to best use
the time available to offer the readership a beneficial product.
In short, is it more important to track the portfolio and provide
daily accounts of the current positions or should we focus on play
research and new spread candidates?  The needs of our subscribers
are very difficult to determine, thus I would like to hear your
suggestions regarding this subject.

Please send your comments and questions to: Contact Support
******************************************************************
                    - STRADDLES & STRANGLES -

During my absence, I received two requests for neutral positions.
Based on the fact that option premiums remain relatively cheap,
option buying strategies are a favorable approach to profitable
volatility trading.  The effect of premium discounting can be
seen in a large number of equity options and with the earnings
season upon us, a number of issues will experience violent moves
without warning.  In many cases, stock-option premiums do not
accurately reflect this capability for increased volatility and
that can provide excellent opportunities for astute investors.

A simple and effective method to benefit from this condition is
through the purchase of straddles or strangles.  The straddle is
initiated with the hopes of a significant move in the underlying
issue, where either position, the put or call, rises in value
enough to offset the premium originally paid for both options.
These positions meet our criteria for favorable straddles: cheap
option premiums, a history of adequate price movement and future
events or activities that may generate volatility in the issue
or its industry.  This selection process provides the foremost
combination of low risk and potentially high reward.  As with
any positions, they should be evaluated for portfolio suitability
and reviewed with regard to your strategic approach and trading
style.

******************************************************************
NICE - Nice Systems  $50.88  *** Big Mover! ***

Nice develops, designs, manufactures, markets and services major
Computer Telephony Integrated (CTI) products that provide logging,
monitoring, quality measurement and workflow solutions for voice,
fax and data.  Nice's CTI products are utilized by a broad range
of users such as financial institutions, air traffic control, call
centers, public safety, transportation and utility organizations
and intelligence agencies.  Nice intends to continue to leverage
its technological leadership and system-engineering expertise to
provide a range of recording and quality measurement solutions for
the rapidly growing call center market.  The company also provides
communication intelligence systems that are used by government
agencies to detect, identify, locate, monitor and record radio
transmissions from a variety of sources.

Nice Systems has been one of the more active issues in recent
trading, affected by both the slump in technology stocks and the
violence in the Middle East.  With the current activity in these
areas expected to continue for the next few days, this ADR issue
should experience additional volatility in the coming sessions.


PLAY (aggressive - neutral/debit straddle):

BUY  CALL  OCT-50  QIC-JJ  OI=55  A=$1.69
BUY  PUT   OCT-50  QIC-VJ  OI=95  A=$2.56
INITIAL NET DEBIT TARGET=$3.50-$3.62 TARGET ROI=15%


******************************************************************
GBIX - Globix  *** Looking For A Bottom! ***

Globix is a provider of sophisticated Internet solutions to
business enterprises.  Its solutions include secure and fault
tolerant Internet data centers, high performance connectivity
networks for the Internet, and support for Web applications.
These three major elements of its total Internet solution
provide customers with the ability to scale their Internet
operations in a cost efficient manner.  Its customers primarily
use its products and services to maintain complex computer
equipment in a secure fault tolerant environment with network
connectivity to a high speed, high capacity, direct link to the
Internet and also to support complex Websites solutions.  Globix
also provides its customers the ability to outsource maintenance
and other services for their Websites.  Its products are flexible
and scalable, allowing the company to modify the size and breadth
of the services provided.

There's not much news on this issue but the chart tells a story
all its own.  The issue exhibits a relatively volatile history
and has clearly demonstrated the ability to reach the position's
break-even points in the necessary time frame.  The options are
also theoretically undervalued, providing a perfect opportunity
for a favorable debit straddle.


BUY  CALL  JAN-17.50  GUI-AW  OI=5   A=$2.93
BUY  PUT   JAN-17.50  GUI-MW  OI=30  A=$3.25
INITIAL NET DEBIT TARGET=$6.00 TARGET ROI=50%


******************************************************************
TWE - Td Waterhouse  $15.12  *** Brokers Going Broke? ***

TD Waterhouse is a global online broker and a provider of online
investing services and related financial products.  The company
has over 3 million customer accounts worldwide and a substantial
international presence with operations in the United States,
Canada, Australia, the United Kingdom and Hong Kong, with over
200 branches.  In addition to securities trading services, the
company also provides its customers with banking, mutual fund and
other consumer financial products and services on an integrated
basis, including investment information, quote data and clearing
and execution services to correspondents and other broker-dealers.

Online brokerages have taken it on the chin recently as the drop
in trading volumes and increased advertising costs continue to
weigh on profits.  An estimated 6 million people in the United
States buy and sell stocks over the Internet, and although that
number is expected to more than double by 2003, trading volumes
have fallen sharply in the past few months, reducing the profit
margins for most companies in the group.  One way that online
brokers attempt to offset that effect is through the acquisition
of new clients.  Marketing spending accounts for a huge portion
of the online brokers' overall costs, as companies try to win
customers through expensive advertising.  Td Waterhouse has been
relatively successful in that venue and they are one of the few
online brokers that actually have positive earnings.  However,
until the market recovers, they are likely to drift lower with
the overall trend in the industry.


PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAR-15  TWE-CC  OI=166  A=$2.25
BUY  PUT   MAR-15  TWE-OC  OI=157  A=$1.62
INITIAL NET DEBIT TARGET=$3.62-$3.75 TARGET ROI=75%




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