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Daily Newsletter, Wednesday, 10/18/2000

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The Option Investor Newsletter                Wednesday 10-18-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        10-18-2000        High      Low     Volume Advance/Decline
DJIA     9975.00 -114.70 10086.00  9654.60 1.43 bln    994/1891
NASDAQ   3171.56 - 42.40  3257.81  3026.11 2.51 bln   1451/2572
S&P 100   706.77 -  4.95   714.46   685.55   totals   2445/4463
S&P 500  1342.13 -  7.84  1356.65  1305.79           35.4%/64.6%
RUS 2000  466.21 -  4.67   470.88   455.63
DJ TRANS 2368.65 - 22.57  2391.22  2348.70
VIX        32.50 -  0.21    36.74    31.42
Put/Call Ratio      1.01
******************************************************************

Bounce Or A Bottom?

Today's incredible recovery gave credence to the bulls argument.
A combination of poor earnings reports and inflation-ridden
economic data caused the Dow Jones Industrial Average (INDU) to
fall as low at 9657 this morning - over 400 points lower than
yesterday's close.  The NASDAQ (COMPX) didn't look any better
this morning after the tech-heavy index dipped below its
near-term low.  But, that was all before the bargain hunters
stepped in.

Major market participants stepped into the Financial and Tech
sectors early this morning to scoop up bargains in old favorites
such as INTC, MSFT, and JPM.  The barging buying was induced by
two distinct schools of bullish thought.  The market technicians
argued that many leading stocks are showing improving technicals -
i.e. potential bottoms formed.  On the other side of the analyst
spectrum, many Wall Street fundamental pundits were pounding the
table about the attractive valuations of leading Tech stocks.
The two ideas were enough to spur a broad bargain buying bounce
this morning, but weren't enough to close the major indices in
positive territory.

The market's inability to finish in positive territory today stems
mostly from the concerns over the future of the US and world
economies, and specifically the impact on corporate profits.
Macro economic events, among other issues, are threatening the
long-term health of the US economy.  Wall Street is growing
increasingly concerned about the impact of a slowing economy on
corporate profits.  What's more, the high price of oil, which
closed at $33.48 on the NY Merc, continues to pump fear into
the market.  We certainly can't leave out the fact that the euro
fell to an all-time low today.

The ill-effects of the euro could be directly seen in Big Blue's
(IBM) third-quarter earnings report after the market close
yesterday.  The company reported third-quarter revenues that
fell short of expectations by $600 million.  IBM blamed its
revenue shortfall, in part, on a 3 percent drop in sales in
Europe.  IBM finished at $95.44, down -17.56 today, and obviously
weighed very, very heavily on the INDU.

IBM's woes spurred a slide in the INDU this morning that resulted
in the blue chip index closing below the critical 10,000 level.
Although, it could have been a lot worse!  The INDU recaptured
over 300 points in early trading to finish the day alive.
Contributing to the INDU's slide was the earnings miss by Chase
Manhattan Bank (CMB), who is acquiring JP Morgan (JPM), one of
the most influential Dow components because of its high price.
However, CMB, and subsequently JPM, rebounded after buyers
stepped up in a big way to carry the stocks higher throughout
the day.  The CPI also added to the INDU's misery.  Inflation
news hit Wall Street this morning after the Labor
Department reported consumer prices spiked 0.5 percent during
the month of September.  The CPI report caught many by
surprise, and increased the fear level this morning.  The
higher-than-expected CPI report could continue to weigh on
inflation-sensitive sectors of the market as concerns of
higher interest rates add to fears.




The INDU's close below 10,000 today really amplifies the index's
current downtrend.  It's painfully obvious the INDU has fallen
under the control of the bears since early September.  Although
the INDU's massive rebound was encouraging to witness, the close
below 10,000 could prove to be a significant psychological victory
for the bears, and detrimental to the INDU's long-term trend.
However, the INDU's dip below 10,000 could have trapped bears
and ultimately lead to a big rebound should the bulls gain
control.




Aside from the slide at the open, the bulls held control of the
INDU for the better part of trading.  Although, it was somewhat
disconcerting to see the INDU rollover and close below 10,000.
Nonetheless, the day's trend of relatively higher lows held.

The internals of both the NYSE and NASDAQ finished pretty ugly,
despite the rebound in the broader markets.  Decliners outpaced
advancers by nearly 2-to-1 on the NYSE, while over on the
NASDAQ decliners beat advances by a slightly narrower margin.
Volume was very robust with 2.49 billion shares trading hands
on the NASDAQ.  Also worth noting was the spike in the CBOE
Market Volatility Index (VIX) above 36, it's highest level
since last spring.  The level of fear continues to be high in
the options market, which is generally conducive to a market
bottom.

The b-word is on the tip every traders tongue.  The COMPX's
bounce off its low at 3026 this morning could have very well
been the retest that many market watchers have been calling
for.  The bears might argue that the COMPX traced a relatively
lower low today in an attempt to refute the bulls' talk about
a bottom.  Nonetheless, the COMPX's rebound off its lows was
encouraging.




The 3240 area appears to be the next major level of resistance
in the way of the COMPX's attempted rebound.  If the COMPX can
clear 3240, a quick retest at 3300 is not out of the question.

The mixed earnings reports after the bell today will most
likely make for another volatile session tomorrow, especially
with October options expiration a day away.  It's going to
be a case of whether the bullish earnings reports outweigh
the bearish reports.

A report that definitely felt bullish after the close was
that from Microsoft (MSFT).  The software giant reported 46
cents a share in profits; the analysts were expecting a 41
cent profit.  The 5 cent better report helped MSFT surge
in after hours trading.  At time of writing, MSFT was
trading at $55.75, up $4 from its regular session close.

Another bullish, but prematurely issued, profit report came
in from Sun Microsystems.  To make matters more interesting
this afternoon, SUNW reported its third-quarter results during
midday trading.  The hardware giant was scheduled to report
earnings after the bell today, but somehow, third-quarter
profits were accidentally posted on the company's Web site early
this afternoon.  Word quickly spread that SUNW earned $510
million, or 30 cents per share.  Analysts had forecasted a 26
cent per share profit.  SUNW held its official conference call
after market close, as previously scheduled before the
premature earnings release.  The company gave bullish guidance
and told analysts to expect high 40 percent revenue growth in
its next quarter.  The stock added $1 in after hours.

Internet heavyweight America Online (AOL) reported profits
that doubled from a year prior.  The company recorded earnings
of 14 cents per share, beating consensus estimates by one
penny.  AOL added nearly $3 in the after hours session.

Less than favorable earnings came from Apple Computer (AAPL),
who missed already lowered estimates.  The company cited
slower-than-expected sales of its Mac G4 Cube and soft sales
in the education market.

B-2-B giant Ariba (ARBA) surprisingly posted a break-even third
quarter; the company was expected to lose 5 cents.  Despite the
better-than-expected report, ARBA was whacked for $10 in
after hours trading.

Texas Instruments (TXN) posted third-quarter earnings in-line
with analysts' estimates of 33 cents per share.  During its
conference call with analysts, TXN said it expected growth in
the semiconductor business to continue into the fourth-quarter,
but by a lower margin than previously expected.

Among the notable earnings reports expected tomorrow are a host
from the drug companies.  Pharma heavyweights Bristol Myers (BMY),
Eli Lilly (LLY), and American Home Products (AHP), who have been
safe havens during the recent market downturn, will all report
profits tomorrow.  Also worth watching will be the numbers from
currency-sensitive companies such as Coca Cola (KO) and McDonalds
(MCD).  Internet bellwether EBAY will get a chance to defend its
stock and the bear attacks surrounding the Net sector resulting
from the decline in online advertising spending.

Third-quarter earnings reports, which were hoped to be the
bullish catalyst to turn this market around, have thus far proved
to be the root of more volatility and not the bulls savior.
Furthermore, the weak euro, high energy costs, and threats of a
slowing economy have weighed heavily on the broader markets since
early September.  Let's not forget, though, that we are entering
into the eighth week of this shakeout - correction - bear market.
There's been serious pain felt by investors and the fear levels are
near historic highs, indicated by the VIX above 30.  A lot of
excessive valuation and exuberance has been removed from the
marketplace, which makes it prime for a rebound.  As Jim suggested
last night, I too agree that we are in a stock picker's market,
where quality stocks will make you money.  Once the market turns,
the companies that are still growing profits will surge higher.
Trade smart, and sell too soon!

I look forward to meeting many of our OI readers at the upcoming
seminar in Denver and comparing recent battle wounds.

Eric Utley
Research Analyst


*****************************
OCTOBER OPTIONS WORKSHOP
DENVER - Oct 27-30th
*****************************

We May Be Close To A Bottom, Learn to take advantage of it.

Are you using the Power of LEAPS?  Did you know you can
generate Cash on a monthly basis writing calls against your
LEAPS? We will be teaching powerful LEAP strategies at the
Denver Options Workshop.  Are you watching for the early
reversal patterns with candlestick charting?  You can learn
how to spot these as Mr. Steve Nison presents his early
signal indicators. There is a great opportunity ahead of us
and it does not matter which direction the market goes!  What
really matters is whether you have the EDUCATION to take part
in the move! We are providing a Powerful four-day Workshop
that will fill in the gaps and provide a foundation for
greater achievement in the options arena.

Don't Wait To Register Seats are filling up fast!

To sign up click here:
http://www.OptionInvestor.com/workshop

There are ONLY 2 WEEKS LEFT until the Denver Options Workshop!
We have over a dozen speakers that will be filling you to the
brim with Knowledge on strategy, technical analysis and
preparing you to act on market moves.  Don't wait to enhance
your education, Come to the Denver Options Workshop and
associate with other traders and professionals.  The event
will be held on October 27-30 at the Inverness Hotel and Golf
Club.  We will see you there!

To register click here:
http://www.OptionInvestor.com/workshop

Check out an outline of events here:
http://www.OptionInvestor.com/workshop/outline


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

Near-Death Options Experience
By Austin Passamonte

Last week we spoke of trading current-month option contracts up
until the day of expiration. Is this for riverboat gamblers only?
I really don't think so.

Options primarily gain or lose value in direct relation to
underlying market movement. Yes I know all about the Greeks and
trading strategies that take advantage of apparent premium-price
disparity. This is a fine approach to take but not the one I
prefer to implement.

I buy calls and puts when trying to time the market. Simple as
that. It is not my only strategy but certainly the main one for
me. I'm guessing that's the case for a vast majority of
individual traders as well.

There is no additional risk to trading current options within
days or hours of expiration over distant-month contracts when
markets are moving sharply. Seen any conditions like that lately?
The only situation extra time-premium helps with is during quiet
markets or slow-developing plays. These are not what we target
now.

Step one is to quantify maximum loss capital we are willing to
risk. At this point we are buying options so cheap it's often
best to forgo stop loss orders and only buy what we are willing
to watch expire worthless.

If you choose to buy contracts at a cost above your maximum risk,
using a 50% below purchase stop-loss order on plays than can hit
100% or higher profit returns are fine as well. Believe me, when
the markets are moving this is not a problem if you pick the
right target!

Let's measure your trading account by increments of $10,000
units. You may choose to risk 5% of your account on high-risk,
high-odds plays. That gives you $500 to work with per $10,000
that you are prepared to lose 100% of. Good - that's where we
begin!

You need to target underlying markets that have the chance to
move far enough between now and Friday's close to inflate option
value if even for a little while. Remember, even OTM option
contracts will quickly inflate as the market moves in their
direction. We don't care where they finish by expiration, we only
want them to spike in value at some point along the way.

My preference is trading the indexes and for good reason. They
move exceptionally well on a frequent basis and options can be
purchased for relatively lower prices than equity options in
relation to strike distance from current price levels.

(60-minute chart, SXY-VJ)



For example, on Tuesday I traded SPX Oct 1350 put contracts that
sold from a low of 3.5 to a high of 10.75 so that session. Not
to say that we can buy the exact bottom but what if we entered
near 5 and exited at 10? Would that be a fair return for two
hour's trading effort in a single morning?

I purposely left out today's market action because it was quite
an anomaly from the norm. However, both the SPX 1350 Call and Put
options traded above 400% returns within the session. You had to
buy the puts yesterday before the close and the calls this
morning prior to 10:40am EST but each swing ranged from $3.5 to
$16+.

Was it reasonably possible to catch both moves in their entirety?
I sure didn't, but can you see how easy it is to pick off 100%
returns from the middle when premiums are so cheap and "common"
moves these days see 100+ to 300+% gains in one or two sessions?

(60-minute chart, YQQ-VZ)



Let's not rub salt into the equation talking about all the money
rushing by within the indexes today. I know, I know - we should
have talked about this last week to get you all prepared. Boy,
you sure are an impatient one!

If you aren't already a veteran of aggressive Swing Trading,
today was no time to cut your teeth. I know how easy it looks
from here because I'm looking at the same things you are. Real
money and live fire have a way of changing perspective in a hurry
and I can vouch for that in a big way!

Let's use this month's action as our training wheels and prepare
for the same conditions next month. Hey, 25% of the weeks we
trade are expiration weeks so there's no need to force the
action. The markets will wait for us until we're good 'n ready, I
promise.

A few key things to keep in mind:

1: Pick one or two of the best targets you can. Really whittle it
down to one or two plays at the most. Trying to spread out your
risk among several trades will usually just churn the account and
not result in solid gains.

2: Buy the nearest strike you can that has good open interest.
You need the target to be liquid so you can easily enter & exit.

3: When in doubt, buy closer to money strike option contracts
than distant OTM ones. Distant contracts won't appreciate much in
value unless the market makes a large move. Better to be one or
two strikes away instead.

4. Set your risk/return targets at 2/1 or better ratio. This
means if you enter a high-odds trade using $500, you should have
the chance to sell the position for $1,500 or better. This will
allow you to win only 50% of your plays but losing 100% while
gaining 200% every two trades equals 100% profit per two trades
on average.

5. Utilize moving stops while watching the market like a hawk! If
your $500 play goes up to $800 in value, immediately place a stop
at $500 to lock-in a "free trade". Be willing to risk the entire
$500 if you guess wrong and the market moves against you from the
onset, but protect capital and lock in profits without fail when
they move in your favor.

Our actual trading approach doesn't vary this week from any other
time via short-term or "Swing Trading". The only difference is
our risk/return parameters.

This is no time to be a hero risking massive account percentages
on "high-odds" trades. They may be high odds but never a sure
thing, and I can assure you from personal experience there is no
way to tell the difference.

This does give you an excellent chance to take the same amount of
risk capital your are willing to lose 100% of on distant month
option contracts and earn much greater percentage returns. Same
downside risk, much greater upside potential. Sounds like a
winner to me! Try that twelve times a year while managing to win
more than half the time will swell your account greatly.

Contact Support


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

VRTX - Vertex Pharmaceuticals $80.38 +1.50 (+10.13 this week)

Vertex Pharmaceuticals Incorporated discovers, develops and
markets small molecule drugs that address major unmet medical
needs.  The Company has eight product candidates in clinical
development to treat viral diseases, inflammation, cancer,
autoimmune diseases and neurological disorders.  Vertex has
created its pipeline using a proprietary approach,
information-driven drug design, that integrates multiple
technologies in biology, chemistry, and biophysics to increase
the speed and success rate of drug discovery.  Vertex's first
approved product is Agenerase, an HIV protease inhibitor that
Vertex co-promotes with Glaxo Wellcome.

Most Recent Write-Up

Market fears are mounting.  Consider the concerns of a slowing
economy, the weak Euro, Internet business models questioned,
semiconductor slowdown, deteriorating credit quality and a host
of other worries.  As a result of the increasing worries on
Wall Street, many investors have fallen back on the good
old reliable drug stocks as a safe haven.  After all, those with
illness care little that oil is over $30 a barrel or that credit
quality in high-yield corporate bonds are trending toward
recession-level default rates.  They just want their medicine,
at almost any cost, as long as they get better.  It is with this
inelastic demand in mind that analysts such as Chase B&Q's Alex
Zisson have described the drug sector as "a safe place to be".
With Merrill Lynch's Pharmaceutical HOLDR (PPH) poised to challenge
new highs, the positive sentiment in drug stocks appears to be
spreading to the battered Biotech issues, which have bounced
strongly since their lows of last week.  Finding support at the
100-dma (now at $63.53), VRTX has rallied back above it's 50-dma
(at $75.93), a level that served as formidable resistance last
week.  As well, it put itself back on the right side of the 5 and
10-dma, now converged in the $72.75 area.  With a down NASDAQ
today, VRTX was able to buck the trend, thanks to a strong day for
the Biotech sector.  The stock did however, encounter resistance
at $80.  A break through this level on volume would be the signal
for conservative traders to take a position while aggressive
traders may watch for a pullback to the 50-dma or the 5 and 10-dma
for an entry.

Comments

True to form, VRTX tacked on a modest gain despite today's
tumultuous market.  Shares continue to advance as investors
seek solace in the Drug sector.  Aggressive traders could
target shoot for entries on bounces off support levels.
Look first for VRTX to bounce off support at $80, or lower
near $79.50, if the stock pulls back on profit taking.  Buying
into strength could provide a more conservative entry.  Watch
for a momentum-based rally above resistance at $83.

BUY CALL NOV-75 VQZ-KO OI= 30 at $11.75 SL= 9.00
BUY CALL NOV-80*VQZ-KP OI=262 at $ 8.88 SL= 6.25
BUY CALL NOV-85 VQZ-KQ OI= 56 at $ 6.63 SL= 4.50
BUY CALL JAN-80 VQZ-AP OI= 19 at $14.25 SL=10.50
BUY CALL JAN-85 VQZ-AQ OI= 26 at $12.25 SL= 9.00

Picked on Oct 17th at    $78.88     P/E = N/A
Change since picked       +1.50     52-week high=$96.00
Analysts Ratings      2-7-0-0-0     52-week low =$11.69
Last earnings 06/00  est=  0.20     actual=  0.22
Next earnings 10-24  est= -0.33     versus= -0.28
Average Daily Volume  =   916 K



*****************************************
BIG CAP COVERED CALLS & NAKED PUT SECTION
*****************************************

One day doesn't make a bottom...

Stocks went on a wild ride in today's session, with both major
indices enduring triple digit swings.  The market opened with a
precipitous decline but bargain-hunting buyers stepped in to
produce an incredible recovery from the morning sell-off.  The
euphoria didn't last long however, as institutional traders used
the bounce to offload portfolio laggards under the guise of tax
selling.  Public investors eventually joined the trend, dumping
all but the most popular issues amid fears that a slowing economy
will take a bite out of corporate revenues in the coming quarters.
The Dow was pummeled from the start on weakness from International
Business Machines (IBM) and Chase Manhattan (CMB).  IBM's third
quarter sales fell short of analyst's expectations and the world's
largest computer maker scaled back its outlook for future revenues.
At the same time, Chase Manhattan announced disappointing earnings,
sending the financial sector into a downward spiral and adding to
the concerns about top-line growth in large-cap industrial issues.
In the technology group, semiconductors, Internet E-commerce and
computer software stocks were the best performers but there were
few issues that advanced significantly during the session.  The
Nasdaq's midday turnaround was bolstered by a rally in shares of
Sun Microsystems (SUNW) and Intel (INTC), and the latter enjoyed a
substantial recovery from recent losses.  In the broader market,
paper, biotechnology and retail issues made the strongest moves but
all was for naught as stocks eventually succumbed to widespread
selling pressure.


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

HAND    OCT    55    53.62  91.56    $1.38   8.7%
OSIP    OCT    45    42.06  68.97    $2.94   5.7%
ALXN    OCT    85    80.25  98.00    $4.75   4.9%

Positions Closed:  NMSS, VECO

Naked Puts:

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

HAND    OCT    45    44.31  91.56    $0.69  16.3%
DCTM    OCT    45    44.31  79.88    $0.69  15.5%
CMRC    OCT    45    44.44  59.19    $0.56  14.8%
PWER    OCT    55    54.44  70.00    $0.56  13.2%
RIMM    OCT    85    83.63 116.94    $1.38  11.5%
ALXN    OCT    80    76.75  98.00    $3.25  11.4%
ITWO    OCT   135   133.88 179.00    $1.13  10.5%
OSIP    OCT    40    38.56  68.97    $1.44  10.0%
VRTS    OCT   105   104.19 152.94    $0.81   9.6%
EXTR    OCT    83    81.38 107.13    $1.13   9.5%
PPRO    OCT    30    29.60  32.56    $0.41   8.8% Adj 2-1 Split
ELNT    OCT    80    78.62  87.06    $1.38   8.5%
CTIC    OCT    45    44.19  68.38    $0.81   8.4%
AGIL    OCT    60    58.56  61.63    $1.44   8.3%
VRTS    OCT   110   108.31 152.94    $1.69   7.5%
VRTS    OCT   110   107.94 152.94    $2.06   7.0%
EXTR    OCT    85    83.75 107.13    $1.25   7.0%
NTAP    OCT   115   112.81 133.50    $2.19   6.8%
MEDX    OCT    95    93.62 110.31    $1.38   6.8% 2-1 Split 10/19
PDLI    OCT    73    70.87 115.81    $1.63   6.6%
RIMM    OCT    60    58.37 116.94    $1.63   6.4%
EXTR    OCT    83    81.06 107.13    $1.44   6.2%
BLDP    OCT    90    88.50  91.75    $1.50   6.2%
PALM    OCT    40    39.12  57.44    $0.88   6.1%
JNPR    OCT   145   143.69 213.88    $1.31   5.8%
RMBS    OCT    60    58.50  58.75    $0.25   1.1%

Positions Closed:  NMSS, AVNX, METHA, RBAK, VECO

Sell Straddles:

PMCS    OCT   165   163.31 172.50    $1.69   7.4%
PMCS    OCT   260   261.38 172.50    $1.38   6.0%


Naked Calls:

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

GMST    OCT    90    90.50  64.25    $0.50  13.0%
TUTS    OCT   120   122.31  37.44    $2.31   9.8%
MRVC    OCT    85    86.00  38.25    $1.00   8.2%
AETH    OCT   145   146.31  77.94    $1.31   7.8%
RBAK    OCT   180   181.00 120.56    $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 - Naked Puts

Today's activity might be classified as "Extreme Volatility" and
you just have to love it - or at least enjoy the over-priced
option premiums it creates.  If you bought calls or puts and
didn't sell quickly, you may even hate it.  Only when the market
corrects sharply can one appreciate the value of a conservative
positions.  The current high-volatility conditions do offer the
potential for tremendous profit, but at great risk and with the
deflated premiums for call options, we prefer to focus on a high
probability of profit through the sale of deep-out-of-the-money
Naked Puts.

***************
APWR - AstroPower  $60.38  *** Short Squeeze? ***

AstroPower develops, manufactures, markets and sells a range of
solar electric power products for the global marketplace.  The
company currently sells five classes of products: solar cells,
modules, panels, systems and solar electricity.  The company's
products are used to generate electricity for users not connected
to the utility grid.  These applications include electrification
of rural homes and villages, and power supply for equipment in
the communications and transportation industries.  AstroPower's
products are also used by customers already connected to the
utility grid as a clean, renewable source of alternative or
supplemental electricity.  Additionally, the company recently
expanded a joint venture agreement with GPU International to
generate wholesale solar electric power.

AstroPower is the first of the New Energy Technology companies
to offer the residential market a relatively low cost premium
power system with multi-mode control electronics.  Electricity
prices are also stimulating demand, and with over 400 roof-top
systems sold to date, the company has decided to initiate an
increase in marketing and hire additional management.  The new
demand for multi mode (grid connected, standalone, or backup)
premium power systems is being driven by deregulation, reduced
power quality and reliability, and environmental issues, and
Astropower is poised to benefit from these factors.

It's hard to determine the reason this stock keeps going up but
somebody is buying the issue and the technicals are clearly
bullish.  Our conservative positions simply offer a choice of
favorable entries into this increasingly popular stock.

APWR - AstroPower  $60.38

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

Sell Put  NOV 40   PUW WH  38        1.44    38.56    10.8% ***
Sell Put  NOV 45   PUW WI  42        2.25    42.75    15.9%



******

DCTM - Documentum  $79.88  *** Earnings Rally Underway! ***

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 but
we will approach the position from a conservative viewpoint with
a deep-in-the-money cost basis.

DCTM - Documentum  $79.88

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

Sell Put  NOV 50   QDC WJ  20        1.56    48.44     9.0% ***
Sell Put  NOV 55   QDC WK  10        2.19    52.81    12.2%
Sell Put  NOV 60   QDC WL  50        3.38    56.62    17.7%



******

HAND - Handspring  $91.56  *** Up, Up and Away! ***

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 on or about October 21 and most of the other
companies in the small group have exceeded analysts' consensus
estimates.  However, the issue is now slightly over-extended and
a post-announcement consolidation is expected.  Our conservative
position offers a method to participate in the outcome of the
report with relatively low risk.

HAND - Handspring  $91.56

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

Sell Put  NOV 50   HQA WJ  51        1.25    48.75     6.5% ***
Sell Put  NOV 55   HQA WK  38        2.06    52.94    10.3%
Sell Put  NOV 60   HQA WL  111       2.69    57.31    13.0%



******

HGSI - Human Genome Sciences  $100.94  *** On The Move! ***

Human Genome Sciences researches and develops novel compounds
for treating and diagnosing human diseases based on the discovery
and understanding of the medical usefulness of genes.  The unique
company has used automated, high speed technology to discover the
sequences of chemicals in genes and generate a large collection
of partial human gene sequences.  The company believes that its
collection includes most of the genes responsible for producing
proteins in the human body. Human Genome possesses one of the
largest databases of the genes of humans and microbes, which the
company refers to as its genomic database.  It has created a base
of product opportunities based on its genomic technology.  The
company is now focused primarily on the research and development
of proteins for the treatment of human disease.

Biotech stocks recovered from today's early morning sell-off to
post reasonable gains, even as the broad market faltered.  Human
Genome Sciences was again one of the leaders in the group, adding
to recent advances on momentum from Monday's announcement that
pharmaceutical giant SmithKline Beecham exercised an option to
jointly develop and commercialize repifermin, a wound-healing
agent.  Repifermin is currently the subject of three phase II
clinical trials and it has the potential to treat a number of
afflictions, including diabetic ulcers and inflammatory bowel
diseases.  The two companies have agreed to share the costs of
phase III as well as development costs beyond those studies and
US Bancorp Piper Jaffray analyst Thomas Hancock estimated that
potential revenues for repifermin could reach $1 billion.

Based on the favorable reaction to the announcement and the
positive technical outlook for the issue, this play provides an
excellent opportunity to speculate on the success of the venture.

HGSI - Human Genome Sciences  $100.94

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

Sell Put  NOV 70   HHA WN  412       1.06    68.94     5.1% ***
Sell Put  NOV 72.5 HHA WV  6         1.19    71.31     5.6%
Sell Put  NOV 75   HHA WO  264       1.56    73.44     7.3%



******

SEPR - Sepracor  $120.81  *** Bracing For A Rally? ***

Sepracor is a specialty pharmaceutical company focused on the
cost-effective development of safer, purer and more effective
drugs that are improved versions of widely-used pharmaceutical
compounds.  The company develops and markets these drugs by
leveraging its expertise in chiral chemistry and pharmacology,
and experience in conducting new clinical trials and seeking
regulatory approvals for new drugs.  SEPR's Improved Chemical
Entities pharmaceutical development program has yielded an
extensive portfolio of drug candidates intended to treat a
broad range of indications in respiratory care, urology,
gastroenterology, psychiatry and neurology.  The company is
also broadening its development focus to include discovery and
development of new chemical entities.  Most recently, Sepracor
introduced Xopenex, a single-isomer form of the bronchodilator,
albuterol.  Xopenex is the first pharmaceutical product to be
developed and commercialized by Sepracor.

Earnings are driving the market and companies in the major drug
industry have enjoyed substantial rallies prior to announcing
the actual results.  Sepracor is next on the list to issue its
quarterly numbers and the results are expected to beat consensus
estimates.  In addition, Sepracor is expected to announce several
positive achievements in the coming months including developments
in its product pipeline.  The company's major pharmaceuticals in
late stage development include Fluoxetine, Norastemizole and
Zopliclone, and Fluoxetine, the company's improved formulation of
Prozac (now in Phase III trials) has shown a significant advantage
over the currently marketed version.  Norastemizole and Zopliclone
are also exhibiting beneficial traits and along with their other
formulations, Sepracor has one of the most compelling pipelines
in the specialty pharmaceutical industry.

With favorable premiums in the November options, this position
offers an excellent speculation play for traders who are bullish
on the issue.

SEPR - Sepracor  $120.81

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

Sell Put  NOV 90   ERU WR  34        1.13    88.87     4.5%
Sell Put  NOV 95   ERU WS  4         1.88    93.12     7.3% ***
Sell Put  NOV 100  ERU WT  523       2.94    97.06     9.8%



******

VRTS - Veritas  $152.94  *** 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.  In the evolving Storage
Area Network (SAN) industry, Veritas is well positioned because
of its relationships with core equipment manufactures and its
unique products, which help control the entire architecture.
The current technical trend is favorable and we offer these
positions as potential entry points, based on the bullish chart
indications.  Obviously, the issue is prone to volatile activity
with the technology group but a reasonable cost basis exists at
the previous support area near $120-$125.

VRTS - Veritas  $152.94

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

Sell Put  NOV 110  VUQ WB  876       1.69   108.31     5.3% ***
Sell Put  NOV 115  VUQ WC  367       2.38   112.62     7.3%
Sell Put  NOV 120  VUQ WD  1124      3.13   116.87     9.4%



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

NEUTRAL PLAYS - SELL STRANGLES

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

EXAR - Exar Corporation  $104.44  *** Premium Play! ***

Exar Corporation designs, develops and markets high-performance,
high-bandwidth mixed-signal (analog and digital) silicon solutions
for the worldwide communications infrastructure.  The company uses
its high-speed, analog and mixed-signal design expertise, system
level knowledge and standard CMOS process technologies to offer
integrated circuits, or ICs, for the communications markets that
address asynchronous transmission standards, such as T/E carrier
and ATM.  The company is leveraging this expertise to develop
products based on current optical transmission standards, such as
SONET/SDH.  Additionally, Exar provides solutions for the serial
communications market as well as the video and imaging markets.

EXAR is certainly a volatile issue, having moved through a $30
range almost three times in October.  The slump in technology
stocks was the reason for the decline earlier in the month but
earnings speculation reversed the downtrend and quickly produced
a major rally.  Then the company's quarterly report became public
and the issue was downgraded by Prudential Securities.  Now the
question is how much activity can we expect in the near-term with
little or news anticipated, regarding the company.

EXAR - Exar Corporation  $104.44

NEUTRAL CREDIT-STRANGLE (sell naked call & sell naked put)

This play is simply based on the current price or trading range
of the underlying stock and its recent technical history.  The
probability of profit from these positions is also higher than
other plays in the same strategy based on disparities in option
pricing.  We will use the recent volatility and the overpriced
options to initiate a neutral position with a favorable premium.
The probability of the share value reaching our sold strikes is
rather low, but there is always the possibility of a break-out
from the recent trading range, so monitor the position daily for
changes in technical character.

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

Sell Call NOV 125  EQC KE  16        5.38   130.38    20.5% ***
Sell Put  NOV 85   EQC WQ  2         4.00    81.00    15.4% ***




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