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Daily Newsletter, Sunday, 10/22/2000

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The Option Investor Newsletter                   Sunday 10-22-2000
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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
       WE 10-20         WE 10-13          WE 10-6          WE 9-29
DOW    10226.59 + 34.41 10192.18 -404.36 10596.54 - 54.38  -196.45
Nasdaq  3483.14 +166.37  3316.77 - 44.27  3361.04 -311.78  -130.94
S&P-100  738.16 +  9.15   729.01 - 21.96   750.97 -  8.86  - 14.25
S&P-500 1396.93 + 22.76  1374.17 - 34.82  1408.99 - 27.52  - 12.21
W5000  13057.40 +253.90 12803.50 -338.60 13142.10 -471.30  - 64.80
RUT      487.45 +  7.06   480.39 - 10.63   491.02 - 30.35  -  2.55
TRAN    2469.07 + 38.89  2430.18 -113.47  2543.65 + 22.01  - 75.50
VIX       27.42 -  3.56    30.98 +  5.31    25.67 +  1.82  -   .32
Put/Call    .50              .76              .75              .59
******************************************************************

Two days in a row! You can exhale now!
By Jim Brown

This was a week full of thrill, chills, excitement and drama. What
a week to be in the stock market. Capitalism is wonderful! Of
course it helps to have a +500 point gain from Wednesday's lows!
The Nasdaq high on Friday was +509 points off that low and the
Dow high was +573 points up from that low. There are entire months
that the market does not move that much and we saw it in three days.
Almost two weeks in a row! The real miracle was not the bounce from
the 3026 low on Wednesday but the failure to sell off late Friday
afternoon. With the Middle East flaring up again, and oil heading
for $35, traders would have loved to go flat for the weekend and
take some profit off the table from the big rebound. There was a
little pull back but the sentiment was so strong that the normal
flood of sellers did not show.





October is over, almost. Only one week left and historically this
is an up week. Options expiration week is over. Those weeks can be
extremely volatile and this week would qualify except none of it
was option related. The "teens" of October are typically the worst
third of the month due to earnings warnings and just plain missed
earnings reports like the Chase report on Wednesday. We got out
alive with the Nasdaq only a handful of points away from 3500.
3500, seems like forever since we were here last but in reality it
was only October 6th. That was a rough two weeks! If the low this
week on the 18th is really the bottom then that makes the fourth
year in a row for the low to occur on a day ending in 8. In 1997
it was the 8th, 1998 28th, 1999 18th, 2000 18th. Stop right here.
Just knowing that the low for the fourth quarter is in October,
and as you can see by those dates it is true, what are you going
to do next September? Do you wonder now why Austin Passamonte kept
telling you for the last eight weeks in the Market Sentiment that
the institutional traders were short the S&P at 10 year highs? They
have long memories and big bank accounts and they are seldom wrong.

Actually since 1945 the average drop to the October lows for the Dow
is -19.75%. This year from the September high to the Wednesday low
the Dow only dropped -15.3%. It just happened all at once and seemed
like -50%. As a point of note the average gain from those same Oct
lows to the December highs is only +12%. The VIX hit a high of close
to 36 and that is a range not hit but four times in the last three
years and three of those were in Octobers.

When the market opened Friday the tension was so thick you could
feel it in the air and in every commentary by market reporters.
Everyone, if given the chance would have simply opted to not open
and take the day off and resume trading on Monday. It was not to
be. The rally sellers showed up in force at the open and the Dow
dropped -80 points almost immediately only to race back into a
positive +40 and then back to negative in only minutes. Finally a
floor was found at 10085 and everybody held their breath. After
holding for two hours the momentum returned and both indexes headed
higher. With only one week left in October it appears the bottom
has been found. Money is coming back into the market even on a
Friday with violence in the Middle East.

Oil was not a real factor after Greenspan tried to talk it down
yesterday. Traders were still watching it creep towards $35 again
but if Greenspan is not worried why should traders be concerned.
This attitude may come back to bite them when they are not looking
but that was the sentiment today. The news reports were full of
increasing violence in Israel and every time they broke for an
update I kept expecting the market to crater again when the ticker
returned. It never happened and that shows you just how strong
the positive sentiment was. Having said that, the advance/declines
were not especially positive. The NYSE advances only beat declines
15:12 and the Nasdaq 23:16. That is not very comforting but it was
a Friday. There was some profit taking all day and that contributed
to the weak numbers.

It was all earnings and the winners were big winners as the focus
turned from warnings to those winners. SDLI was the big winner with
a $.45 earnings for the quarter and that was four times last year
and +.07 over analyst estimates. SDLI gained +49 on the news. Merck
gained +4.31 to a new 52 week high of 81.88 after beating estimates
by a nickel and posting a +25% gain in revenue. Microsoft continued
to add points with +3.31 to 65.19 after trading as low as $48.44
on Wednesday. That is a +$17 gain in two days from the low. EPNY
gained +$25 or +39% after beating estimates by +$.15 cents. You
would think being an earnings investor and holding over was a good
plan but the reason for the gigantic gains was the extreme pessimism
just the day before. It was not all rosy, Ericsson warned that sales
were weak and took a -16% drop at the open. The global mobile phone
winner is clearly Nokia by a mile! Leaps on NOK anyone?

The soap opera for the week was the Honeywell, United Technology, GE
saga. Evidently UTX made an offer for Honeywell of $50 in UTX stock
and then UTX stock got whacked pretty badly making the deal not so
appealing. The "done deal" then took a wrong turn when the bully on
the block showed up and kicked UTX back into reality. GE knocked on
the door on Friday and told UTX to pack up their marbles and go home.
We are buying HON and you can't compete with us. UTX picked up their
chips and left. End of story? After the market closed it was rumored
that a third company had made an offer. I doubt they have more money
than GE so that is a mute point. GE stock took a -$3 dive at the
close on the prospect of a bidding war but the match of the two
companies is almost perfect. It has been almost 100 years since
two Dow companies merged. In 1903 U.S. Steel merged with Illinois
Steel and Coal. UTX, HON and GE are all Dow stocks and should the
deal go through we will be needing a new Dow component. Suggestions
include the merged TWX/AOL combo. CSCO was also mentioned but the
recent addition of INTC and MSFT have already added a strong tech
component. Other possibilities include Lucent but after three
warnings in four quarters they may not be high on the list. Also,
since they were a spin off from AT&T they might not be politically
correct. We are planning a "Name the Dow stock" contest if the GE
offer is accepted. Put your thinking caps on and get ready to play.

Next week should be very interesting. We are not out of the woods
yet. The +500 point gains of the last three days still have to be
digested. There WILL BE some profit taking. This means that some
of the high flyers will sell off. We could see a -25% to -50% drop
or more from the THR/FRI gains. The hope of course is that buyers
on the sideline will see this as a buying opportunity to get stocks
they missed at a discount. There are still thousands of stocks that
have not seen buyers yet. The main focus of the rally was in the
highly liquid big caps. The cheaper stocks have not responded as
well. Some of the profit taking should be rotation out of the big
caps and into the broader market.

Not all big caps took part either. Buyers are being more particular
in their purchases. CSCO for example lost ground on Friday. There
is a lot more competition in that sector and many investors fear
the CSCO growth rate may be under pressure. This same thing is
happening in many places. Just throwing money at the same old
faithful tech stocks is not going to reap the same rewards this
time. Remember what happened to Dell last year when analysts and
investors woke up to the fact that Dell could not maintain a 50%
growth rate forever. It would have been heresy last year to say
Dell would hit $23. Dell has not traded at that price since Oct
1998 but it did again this week. The same "it will come back, it
always will" crowd bought the dip and ran it back up but it remains
to be seen if it will hold.

The Nasdaq support level should now be around 3350. Hopefully we
will not test that but another major warning from a big tech could
still cause the Nasdaq to stumble again. Fortunately most of the
big techs have announced. INTC, MSFT, EBAY, JNPR, ITWO, AOL, NOK,
IBM and EMLX headed the list. The rest of the crowd are less
important individually but could cause trouble if several miss at
one time. The next big tech problems will be DELL and CSCO who
both announce in November. We are approaching the warning period for
each of them and investors will be holding their breath. This should
keep them from posting any big gains the next two weeks and this
will slow the Nasdaq to some extent. The October tax loss selling
by fund managers should be about over but those hoping for one
more bounce in their loser stocks before biting the bullet and
dumping them have seven trading days left. This could also keep
the lid on the current rally. October is not over until it is
over and until then we can continue to see more huge moves both
up and DOWN. The Fed is still on hold and the economy is still
headed for that soft landing. The only major economic reports
next week are the Employment Cost Index on Thursday and the
GDP on Friday. Once out of October mutual fund inflows Like I
said last Sunday, use any dip this week as a buying opportunity.
If you followed my instructions you had a wildly profitable week.
Keep those stops tight and look for another entry point!

The October Options Workshop in Denver is next Friday, October 27th.
If you have not received your confirmation and directions please
contact the seminar staff. If you have not yet registered you
had better hurry. See you there!
http://www.OptionInvestor.com/workshop

Trade smart, sell too soon.

Jim Brown
Editor


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

It would have been tough not to have a profitable week if you
bought the dip on Wednesday. With the -438 point Dow drop at
the open almost every stock was instantly oversold and buyers
rushed into the market. Selling puts or buying calls at that
level would have been almost equally rewarding. I loaded the
truck on Wednesday and did pretty well. Anticipating a sell
off on Friday at the close I had set stop losses on all my
open plays at 1:PM and went into meetings for the rest of the
day. When I broke around 5:PM to go over the OIN plays for the
weekend with the guys I was astounded to see one of my winners
had not only gone negative but substantially negative. Fortunately
the stop loss saved me a huge amount of money and that is the
topic of this articles this week.

The stock was Research in Motion (RIMM)


I had sold a NOV-140 Naked put and it was looking very good
as RIMM hit $126 on Friday afternoon. What a perfect chart
above for a naked put seller. Near vertical performance with
no weakness in sight.




Had I been watching the dip I would have probably tried to
rationalize the beginning of the drop and held off closing
the play until it was too late and thousands of dollars had
been lost. There was no news out at this time.




After the close the stock continued to drop as the news
became public that they were going to issue an additional
six million shares of stock. The additional -$7 drop in
the stock price after hours would have been a disaster and
would probably have meant being put the stock over the
weekend. In reality it will probably come back, (famous
last words), but it would have tied up capital for several
days while I weighted for it to happen.




Fortunately I had set a stop loss based on the stock price at
$125 before I left to go into my meetings. This kept me out
of trouble and I was not even aware of it until too late.
Remember the commercial that used to be on TV with the actor
saying "Thank You Paine Webber?" Well, thank you Preferred Trade!

I know many brokers do not even allow stop losses on options
and some only allow stop losses based on an option price but
Preferred Trade allows you stop losses for your options based
on the stock price as well. As far as I am concerned this is
worth far more than the hassle of changing accounts. You can
look at a chart of your stock and plot support and resistance
levels and set your stops based on those levels NOT what the
option price MAY be if those levels are reached.

This feature works for closing losing or winning positions at
a predetermined point but ALSO works for opening positions at
a support or resisatance point as well. Look at this chart on
Ciena.




You could have used the contingent order function to open
a new position on CIEN based on the stock price several
different ways last week. If you wanted to buy calls on CIEN
only on a breakout over the previous top at $118 from last
week then you could have placed an order to BUY NOV-120 CALL
when CIEN =$120. This could have been a good till cancelled
order placed days in advance. When CIEN broke out on Friday
the 13th you would have been executed and very profitable.

If you missed the breakout or wanted to buy more IF CIEN
dropped again to $120 last week you could have placed the
same order when CIEN was over $130. BUY NOV-120 CALL if
CIEN hits $120. If CIEN only touches $120 at anytime before
you cancel the order then you are executed. It make no
difference what the price is at the time unless you want
to make it a limit order as well. Something like BUY NOV-120
CALLS @ $10.00 if CIEN hits $120. If CIEN hits $120 AND the
calls are less than or equal to $10.00 then you are executed.
You could also sell naked puts just as easily.

As a point of clarification, Preferred Trade does advertise
with us and the "stop on stock price" feature was written
by Preferred as a result of our input on what active option
traders wanted. I don't give my personal recommendation to
many products but Preferred is on the top of my list. For
more info on this and other features you can go to:
http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN

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

My other current plays for the week consisted of naked puts
on about a dozen stocks. The only ones that survived the
Friday dip are:

BVSN DEC-60 PUT, BVSN DEC-20 CALL (combo play)
ALTR JAN-60 PUT, ALTR JAN-30 CALL (combo play)
UVN DEC-50 PUT, UVN DEC-30 CALL (combo play)
QCOM JAN-125 PUT, JAN-60 CALL (combo play)
CELG JAN-90 PUT
EXTR NOV-130 PUT
PLXS DEC-90 PUT
SAPE JAN-70 PUT
VRTS-NOV-200 PUT

The reasoning for the combo plays is simple. The profit on
a naked put is capped to the amount of premium you receive.
By selling puts and buying calls on the same stock you
pay for the calls with the premium from the puts and you
have unlimited upside from the calls. It lets you get into
the play for free and any rise over the call strike price
is profit.

I will be waiting patiently for a dip on TUE/WED to open
some more naked puts for the next leg of the rally. This
way the time and high option prices are in my favor.

Good Luck


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

Christmas Rally?
By Austin Passamonte

Let's get through Halloween first. Don't you just hate it when
retailers push the action up way ahead of time these days? What
ever became of all things in due time?

It is our view that a firm market bottom is in place with a
strong rally likely to ensue from those levels. Straight up the
charts without volatility is probably a bit much to ask. Our
market future will most likely resemble that which we've come to
know since March; powerful moves in each direction.

That may worry stock players and call-option buyers but we are
option traders and revel in such action. Can you imagine what it'd
be like for the markets to move several hundred points in each
direction week after week? That is option-trading Nirvana!


And we just may have reached "one with ourselves." The three
session rally from Wednesday morning until Friday afternoon has
been one-way up the hill overall. We've covered plenty of bullish
pasture and green is once again a familiar color on our chart
feeds.

Market Sentiment expects the indexes to stutter-step this week...a
 breather may be in order. Massive gains are on the table for
those who bought this rally and tax-arbitrage selling from a
number of funds by month's end could trigger a round of
profit-taking.

That's good news to all of us waiting for the next entry into the
fray. We will view any pullback this week as an excellent
bull-play entry. Weekly/Daily chart technical signals indicate we
are setting up for a trend reversal to the upside from here.

We covered these charts extensively at IndexSkybox.com tonight for
 those who visited our Wrap. Let's hit the high-notes here to take
a glimpse of the intermediate future:

When market action is uncertain and our usual time-frame charts
begin to cloud up, the best approach is to step back and view
longer time-frames to see the big picture. We turn to the weekly
charts of major indexes to assess where highest odds of future
market direction lies.

S&P 500 is the pro's choice for gauging overall market health. Its
weekly chart shows stochastic and MACD signals starting to turn
positive from oversold extremes for the first time in months. Next
 overhead resistance lies near the 1460 range where the 20-week
moving average meets an ascending trendline of higher-lows dating
back since late February.

The NDX has a strong rally underway that may bump it's head around
the 3700 range, but that is 250+ index points and 6+ QQQ strikes
above current levels.

SOX Weekly/Daily charts indicate a big move is brewing here and
little stoppage until the 1,000 area or so.

Dow's weekly chart shows it's upside move has yet to begin but is
 flashing emergence. We expect rather clear sailing up to the
10,700 to 10,800 range - a long ways from where it rests tonight.

Does all this mean we can buy calls, LEAPs and blindly walk away?
Don't you dare! Those days are gone for now and maybe quite some
time in the future. Any & all markets can easily retest & retrace
from here, especially with global uncertainty in several key
areas.

We would like to see plenty of backing & filling of this price
action as markets move forward. V-bottoms are great to trade but
have little staying power. Several clear examples of this since
February point that out for themselves.

Don't be surprised if the markets move big in each direction
between now and next spring. Do not count on one major sustained
rally, although it can easily happen. Do count on plenty of
volatile swings as Market Sentiment and others here at OIN will
try our very best possible to help forecast the action!

*****

VIX
Friday 10/20 close: 27.42

30-yr Bonds
Friday 10/209 close: 5.73%

Support/Resistance Indicator
The Index Support/Resistance(S/R)Ratio is a formula used to
gauge possible support or resistance based on open-interest
disparity. Ratio listed is percentage of calls to puts or
puts to calls respectively.

Support is factored from dividing puts by calls at strike
levels beneath index closing price. Resistance is factored
from dividing calls by puts at strike levels above current
closing price.

                                   Saturday
                                 (10/21/2000)
  (Open Interest)        Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
775 - 760                3,600        2,810         1.28
755 - 740                5,592        3,827         1.46

OEX close: 738.16

Support:
735 - 720                3,013        4,469         1.48
715-  700                1,226        6,859         5.59

Maximum calls: 740/2,411
Maximum puts : 700/3,402

Moving Averages
 10 DMA  726
 20 DMA  745
 50 DMA  784
200 DMA  780


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 95 - 93                11,086         2,102         5.27
 92 - 90                15,735         8,295         1.90
 89 - 87                11,753        11,627         1.01

QQQ(NDX)close: 86.312
Support:

 85 - 83                19,698        23,214         1.18
 82 - 80                30,285        18,806          .62
 79 - 77                 3,137        27,461         8.75

Maximum calls: 81/15,125
Maximum puts : 78/18,590

Moving Averages
 10 DMA 80
 20 DMA 83
 50 DMA 90
200 DMA 94


S&P 500 (SPX)
Resistance:
1475                   17,116         4,747          3.61
1450                    9,393         8,158          1.15
1425                    5,355        10,678          0.50

SPX close: 1396.93

Support:
1375                    11,542       15,344          1.33
1350                     8,247       20,002          2.43
1325                     1,581        8,067          5.13


Maximum calls: 1475/17,116
Maximum puts : 1350/20,002

Moving Averages
 10 DMA 1370
 20 DMA 1401
 50 DMA 1453
200 DMA 1443

*****

CBOT Commitment Of Traders Report: Friday 10/20
Weekly 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              -91                     -5
Total Open
Interest %        (7.19% net-short)      (2.86% net-short)

NASDAQ 100
Open Interest
Net Value              +300                    -85
Total Open
Interest %        (1.73 net-long)       (.21% net-short)

S&P 500
Open Interest
Net Value            +55,273                 -66,352
Total Open
Interest %        (17.89% net-long)     (10.75% net-short)

What COT Data Tells Us: Commercial positions in S&P 500 added to
five-year extreme short levels while small specs added to
net-longs as compiled Tuesday 10/17 by the CFTC.

Next Fridays data should give a clearer picture to Commercials
either covering some profitable shorts or holding fast into next
Tuesday. We keep saying that as every Wednesday adds another big
sell-off to the previous!

Bullish:
Fed's finished
Thursday/Friday rally
Earnings season
Positive earnings begin

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


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

As of Market Close - Sunday, 10/22/2000

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

DOW   Industrials      10,226       9,650  10,600
SPX   S&P 500           1,396       1,305   1,420     **
COMPX NASD Composite    3,483       3,000   3,650     **
OEX   S&P 100             738         680     750
RUT   Russell 2000        487         455     500
NDX   NASD 100          3,456       2,950   3,700     **
MSH   High Tech           954         825     990     **

BTK   Biotech             727         630     740
XCI   Hardware          1,282       1,100   1,310
GSO.X Software            431         355     455     **
SOX   Semiconductor       752         600     800
NWX   Networking        1,152       1,010   1,170
INX   Internet            355         275     400

BIX   Banking             546         505     600
XBD   Brokerage           621         555     640
IUX   Insurance           768         720     790

RLX   Retail              752         695     830
DRG   Drug                411         395     425
HCX   Healthcare          855         825     875
XAL   Airline             131         124     140
OIX   Oil & Gas           314         304     328

Five alerts were triggered at resistance in the past session
(SPX. COMPX, NDX, MSH, AND GSO.X).  Raising support (OIX).
Raising resistance (SPX, COMPX, NDX, MSH, and GSO.X).  Many
of the indexes are considerably higher than support levels,
so snug those stops!


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Fear And Loathing On Wall Street
By Eric Utley

Is the bad trip over?  The NASDAQ's initial rally attempt two
Friday's ago (Friday the 13th) off its low of 3054 signaled
a change in sentiment.  Last Thursday (four days after the
initial rally attempt) the NASDAQ followed through by
gaining well over 200 points, on heavy volume to boot.
According to several technical theories, including that from
the infamous William O'Neil, the recent action in the major
market averages is indicative of a market bottom.  That's
not to say the NASDAQ won't pull back to digest its two-day
gains of more than 300 points.  A natural reaction to such
big rallies is, well... natural!

The NASDAQ's action last week could very well signal a bottom.
It's clearly obvious the market WANTS to move higher.  But,
a few major macro events could impede the rehabilitation of
the NASDAQ.

The unrest in Jerusalem has the potential to wreak havoc on
the price of oil.  The potential for crude oil futures to
trade above $30 for an extended period of time is somewhat
disconcerting.  Here's why.  Crude oil has traded above $30,
for an extended period, only three times in the last twenty
years.  Interestingly, the US economy has fallen into a
recession after each of the three times oil traded above $30
(1980, 1982, and 1990).  Now, according to many economists,
including Doc Greenspan, the high-price of oil is not
expected to have such an adverse impact on the "New Economy"
as was the case in 1980, 1982, and 1990.  However, I know an
executive in the oil industry who happens to think otherwise.

While the action in the markets last week may portend a rally
into the end of the year, the rising cost of energy could
imply less-than-favorable trading.  However, the uncertainty
surrounding the Middle East is sure to create volatility,
which is not necessarily a bad thing, as I explained last
week.

As trading commences next week, ask yourself two questions:
Which way is the market trying to go? and How easily is it
moving in that direction?  The answers to the two preceding
questions will reveal a lot about the market's tendencies,
and should dictate trading strategies.

Send in your stock requests, market opinions, questions,
comments, disagreements, and/or money-making tips to
Contact Support.  As always, please put the
symbol of your stock requests in the subject line of the e-mail.

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

Check Point Software - CHKP

Please evaluate CHKP.  I look forward to articles in OIN.  Keep
up the good work. - Thanks, Ben

Check Point Software is, by far, the leader in Internet security
solutions.  The company makes and markets software that secures
corporate intranets, Virtual Private Networks (VPNs), and
extranets.  Check Point faces competition from Tech-heavyweights
including Cisco Systems, Nortel, and 3Com.  However, judging by
Check Point's stock performance in the last year (+550%), it's
safe to say they're the leader in the Internet security space.
Check Point has a near pristine balance sheet with over $400
million in cash and no debt.  Plus, the company enjoys nearly
50% profit margins.  Those fat margins will help Check Point grow
earnings by more than 70% this year and at least 40% over the next
several years.  The stock is expensive, with a forward-looking PE
north of 100.  However, you pay for what you get.  And with CHKP,
you get quality in the form of high earnings growth.  The stock
could very well grow into one of the BIG Tech leaders in the
coming years.

Check Point reaffirmed its bullish prospects last week when the
company beat third-quarter earnings estimates by 8 cents.  What's
more, Check Point reported a 100% increase in sales over the same
time last year!  The strong earnings report from Check Point had
the bulls cheering last week, but there has been some recent fears
reflected in shares due to the conflict in the Middle East.  Check
Point is actually an Israeli-based company, but has operations in
Redmond, California and here in Denver, Colorado.  Check Point
along with other Israeli companies (Teva Pharmaceuticals (TEVA)
and Nice Systems (NICE), among others) dropped sharply two weeks
ago as tensions increased in Jerusalem.  I don't know how big of
an impact the fighting will have on Check Point's operations.  The
stock smartly rebounded last week after dropping as low as $120
the week prior.  The stock's ability to rebound so quickly amid
increased fighting last week tells me the company's operations
might not be troubled at all.  Any further dip due to hostilities
in the Middle East might prove to be an excellent entry into
shares of Check Point.  After all, the stock doesn't fall very
often as seen on its weekly chart below.




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

Exodus - EXDS

EXDS is a stock I've successfully traded for about two years now.
However, since its recent acquisition, it seems to have lost
momentum.  Please tell me this isn't another AOL!? - Thank you,
Tonay

Tonay, I hope you've been trading shares of Exodus from the
short-side recently.  The stock has taken a beating recently as
investors have lost patience with money-losing concerns, such
as Exodus.  The company reported a loss of 14 cents per share for
its third-quarter of operations late last Thursday.  Despite
reporting a 238% increase in revenues over the same period last
year, the stock sank on the news.  The biggest weight on Exodus'
stock is the company's massive expansion efforts, which have
resulted in exorbitant spending.  The company recently agreed to
acquire the Web hosting business of Global Crossing (GBLX) known
as Global Center.  The combination of Exodus' operations with
Global Center will create, by leaps and bounds, the largest Web
hosting outfit in the world.  Exodus' aim is to attract
international business through offering end-to-end services for
corporate Web sites.  It's a strategic move that could
potentially produce huge profits for Exodus, and investors as
well.  However, in order to pay for its many acquisitions, Exodus
has taken on an enormous amount of debt.  Exodus' highly
leveraged balance sheet makes the stock a very aggressive equity
to own, thus risky and volatile.  The stock's volatility can
create trading profits, though, as you well know, Tonay.

For the long-term investors, though, Exodus may prove to be an
attractive investment over the next couple of years.  Although
the company is walking a fine line with such a large debt burden,
revenues are growing at an unbelievable rate.  Once Exodus stops
spending money and turns revenues into profits, the stock should
react very well.  When that will happen, I don't know.  The
company is expected to lose money for several years to come.  But,
if Exodus continues to execute wisely, and doesn't weigh its stock
down too much, it should be a solid long-term performer.  If an
investor is looking for exposure to a company that will benefit
from the continued expansion of the Internet, Exodus is worth
considering.  Exodus is better positioned to reap rewards from
the Internet than the likes of CMGI, Double Click, or even Yahoo!




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

Research In Motion - RIMM

I am amazed at the gains in RIMM recently.  Is the revenue there?
I mean gee it is only a PDA.  Is the market cap a fantasy?
Maybe it will continue to buzz for the winter?  The fantasy looks
too good.  I believe a cell phone is a better device but that is
me.  I'm a technophobe so maybe that explains my inherent caution
in affirming the present market cap of RIMM.  Your thoughts? -
Thank you, Debra

Debra, I'll let the market answer whether or not Rim's $8.4
billion market cap is for real.  To be perfectly honest, I don't
know if Rim's market cap is justified.  But, judging by the
stock's recent performance, Rim's market cap could be headed a
lot higher.  The company reported revenues of $42.5 million in
late September.  Sales were 57% greater than its prior quarter
and a full 100% greater than the year-ago period.  Those
numbers were well received by the market.

To delve a little more into Rim's valuation, let's compare the
stock to another wireless-related company in Palm.  It may not
be the very best comparison, but it should serve our purposes.
Palm trades at 25 times last year's revenues, with an expected
earnings growth rate of 38%.  Rim, on the other hand, trades at
69 times revenues with estimated earnings growth at 54%.  So,
Rim's stock is more expensive, but the company's earnings
growth is expected to outperform.  As usual, you have to pay
extra for superior earnings growth.

The question, and risk, with Rim is how much of the company's
superior earnings growth has already been factored into its
stock price?  Judging by Rim's chart, the stock has been in
favorite with momentum investors since late May.  That momentum
can quickly disappear if the valuation concerns you wrote of,
Debra, come to light.  But, until they do, Rim might have
more upside in the near-term, especially with improving
conditions in the Tech sector.  Furthermore, long-term
investors might look closely into Rim's stock.  It's hard to
ignore 50% earnings growth.  Finally, take a look at other
hand-held companies, and note the recent strong performance
of their stock prices.  Have you seen Palm or Handspring
lately?  Even Microsoft said it made a lot of money in the
hand-held area last quarter, which may or may not have
helped Mr. Softee's rebound.




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

Cree Research - CREE

I'm wondering about CREE Research as a rebound candidate.  The
stock traded as high as 202 back in March.  It's a company that
continues to beat the street and has strong fundamentals.  Now
selling for less than 90.  - Thanks, Gregg

Cree is a very interesting and unique Chip company.  Cree makes
semiconductors using its proprietary silicon carbide (SiC)
technology, which are used in light emitting diodes (LEDs).
LEDs are the little gadgets that light up the dashboards in
automobiles, the screens on cell phones, and the displays on
radios, among a host of other electronic gadgets.  The company
also manufactures crystals, which are used in the production of
wafers used in research directed towards high-tech applications.
Cree's uniqueness somewhat shelters the company from the typical
cyclicality associated with the Semiconductor sector.  Although,
the stock did get whacked with the bearish sentiment in the
Chip sector over the last two months.

Cree was also adversely affected by a "false" press release
published by BridgeNews about a week ago.  BridgeNews reported
that Cree had "warned" analysts to not expect "such high margins"
going forward.  To confound matters, CNBC reported the so-called
warning from Cree as it crossed the wires.  Cree immediately
responded to the press release by stating such speculation was
false.  However, as I've mentioned in the past, rumors can be
detrimental to stock prices for an extended period of time.
Even if they are just rumors.

To expand on your point, Gregg, Cree has superior fundamentals
than many Chip company's envy.  The company is expected to grow
earnings by 32% over the next several years.  Plus, Cree has no
debt and, as reaffirmed by the company's CFO in light of the
rumors two weeks ago, enjoys 50% profit margins.  If the market
shrugs off the rumors in the coming weeks, Cree's stock will be
a solid rebound candidate and could provide traders with good
profits.  But, be cautious of the big downtrend!




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

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


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

For the week of October 23, 2000

Monday
======

None Scheduled


Tuesday
=======

None Scheduled


Wednesday
=========

Existing Home Sales    Sep  Forecast:  5.13M     Previous:  5.27M


Thursday
========

Employment Cost Index   Q3  Forecast:  1.00%     Previous:  1.00%
Initial Claims      21-Oct  Forecast:    NA      Previous:    NA
Help-Wanted Index      Sep  Forecast:    NA      Previous:    78


Friday
======

GDP                     Q3  Forecast:  3.40%     Previous:  5.60%
GDP Chain Deflator      Q3  Forecast:  2.40%     Previous:  2.40%
Durable Orders         Sep  Forecast:  0.60%     Previous:  2.90%
Michigan Sentiment     Oct  Forecast:    NA      Previous: 106.4


Week of October 30th
====================

30-Oct  Personal Income
30-Oct  PCE
31-Oct  New Home Sales
31-Oct  Chicago PMI
31-Oct  Consumer Confidence
1-Nov  Auto Sales
1-Nov  Truck Sales
1-Nov  NAPM Index
1-Nov  Construction Spending
1-Nov  Fed Beige Book
2-Nov  Productivity
2-Nov  Initial Claims
2-Nov  Leading Indicators
3-Nov  Nonfarm Payrolls
3-Nov  Unemployment Rate
3-Nov  Hourly Earnings
3-Nov  Average Workweek
3-Nov  Factory Orders
3-Nov  NAPM Services


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The Option Investor Newsletter                   Sunday 10-22-2000
Sunday                                                      2 of 5

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

If Your Spread Is Red, You Could Be Dead
By Lynda Schuepp

You've heard me preach about how safe spreads are.  Warning,
warning, don't hold an "out-of-the-money" spread on the OEX just
before expiration.  Let me tell you the scare I had this week.

On September 28th, I put on an "at-the-money" bull put spread on
the OEX, anticipating that we were bottoming out.  I bought
the November 760 put and sold the October 770 put for a cost
of $2.88.




According to my charts, I thought the OEX would continue up and
then do a reversal (the October syndrome).  My intent was to ride
the OEX up and buy back my October short put for a profit, and
then ride the OEX down for the October correction and profit from
my long November put.  If the market did not cooperate, then I
could simply buy back the October 770 put (at a loss) and then sell
the November 770 put for more money than I had to buy back the
October put for, but my plans backfired.

VIX climbed from 24 to over 34 during the period of September 28th
to the beginning of this past week.  The OEX went from 770 on
September 28th to 703 by October 12th.  Normally, I would roll
the short option out with such a drop.  With the severe drop in
the OEX, and the large increase in volatility, the market makers
made it impossible to buy back the put without taking a major hit.
The bid ask spread went from 50 cents to $3.50!  I had no way of
knowing how far in the spread they would be willing to negotiate,
since they were so far out of the money, hence no volume.

I played the wait and see game, taking my chances that the bid/ask
spread would close up and I could roll my option out.  Now many of
you probably don't know that OEX options are cash settled options.
What that means is this: the settlement is in cash.  Unlike a stock,
when if you are put the stock, you merely turn it around the morning
you are notified and sell the stock.  Usually, there isn't a major
difference between the close and the open and you have all day to
hold the stock and day trade it to your advantage, most of the time
without any serious cash consequences.  The OEX works differently.

I was put my short October 770 leg on October 16th.  The OEX closed
at 725.48.  What that means is that cash was taken out of my account.
The amount was the difference between the strike of 770 and the
closing price of 725.  Luckily I only had 5 contracts left, as I
had rolled out of 15 contracts earlier for a small profit.  If you
are assigned, you are supposed to be notified before the opening
the following day.  At that point, I would have had the option to
roll out and sell the November 770 puts or exercise my long November
760 put.  The real risk in this case would have been if the OEX
gapped up at the open and your long put was losing money with
each point increase on the OEX.   Your spread is no longer in tact.

I must have a guardian angel looking out for me, because I was
assigned on the 16th but my sheets from broker didn't get faxed
to me until the morning of the 18th.  I couldn't understand my
sheets, because the numbers didn't make any sense.  I was trying
to calculate from the closing of the 17th, which was 707 but the
calculation was based on a closing of 725.  I figured it must be
a mistake.  My broker couldn't explain the discrepancy, so he
called the head of the trading department.  I was panicking,
because I had received my sheet on the 18th so my assigned price
would have been the close on the 17th of 707 or 63 points per
contract for a total debit of $31,500.  I didn't want to wait to
figure out what was wrong with my sheets and have the OEX start
running upward, leaving me and my long puts in the dust.  All I
knew was, that I had to do something.  Trying to sell the
November 770 puts was disaster.  The market makers wouldn't
give me a break.  I couldn't get a fill between the spread, so
I exercised my 760 long put, even though it still had time value.
This is where I got lucky.  The OEX was falling, so my long put
was going up in value.  I finally got my act together and decided
to watch the OEX until the close and exercise.

The OEX closed at 706, so I received 54 points, the difference from
the strike and the close.  This is where I really got lucky.  I
actually made 9 points, but it really could have been disaster.
This is what they don't teach at the seminars about risk in spreads.
The OEX could just as easily run up 20 points and I would have
to either hold and sweat it out, hoping a praying for a crash, or
sold my put for a 20 point loss.

This was an invaluable lesson to me, which I felt I must share.
I really never stopped to think through what could happen in a
situation like this.  In hind sight, the safe thing to have done
would have to close out all my contracts and not to have let that
last 5 run or alternatively, roll out the short leg to November,
even though the bid/ask spread was really wide.  Better to take a
small loss than a big one.  I was very lucky to not only come out
alive but profitable.  The lesson is don't hold an OEX spread that
is deeply "out-of-the-money" unless you like playing with fire.


******

Volatility Changes After Earnings
By Mary Redmond

This week, several companies rallied after reporting earnings,
including Microsoft.  Usually a stock will rally going into
its earnings report and sell off somewhat afterwards, depending
on the earnings.  However, we have to consider that the market
has been very oversold for the last month.  This may impact
investors' expectations of earnings.  This earnings season should
be more volatile and unpredictable than most, due to the fact
that the Federal Reserve's cycle of rate hikes caused many
analysts to revise their earnings estimates downward.

It is generally a risky decision to hold call options over a
company's earnings report.  If the company's earnings were to come
in even one or two cents below the estimates, then the loss of
option premium could be huge.  In some cases, you can estimate
what the market's expectations may be by looking at the implied
volatility numbers for the options.

Microsoft's implied volatility was 58.2 on Wednesday before
the earnings were reported.  This could have been impacted by
many factors, including the extreme volatility in the major
market indexes this week.  Microsoft reported earnings which
were much higher-than-expected, and the stock rallied 10 points.
The MSFT Nov 50 calls were $5 on Wednesday, and moved up to $12.3
on Thursday.

However, once the earnings were released, the implied volatility
dropped to 48.2 on Thursday.  This can indicate that if the stock
had stayed flat after the earnings were released, the call option
could have lost value due to loss of implied volatility.

The additional profit which could be gained from holding over
earnings reports in most cases is not worth the risk, due to the
fact that the implied volatility of most options will increase as
earnings approach, and decrease after the earnings are released.

The Sun Microsystems November 115 calls had an implied volatility
of 71.7 on Wednesday, and the calls were $7.25.  The day after
the earnings were released, the implied volatility fell to 62.9.
The Nov 115 calls went up only 2 points on Thursday, although the
stock increased over 7 points.  On Friday, the Nov 115 calls
actually lost 0.125 points although the stock increased one point.
In this case, the company blew away the earnings expectations,
and yet the calls increased very slightly afterwards.

The difference between the action of the Microsoft options and
the Sun Microsystems options after the earnings were released
can be attributed to many factors.  One factor is that MSFT
was on a downward trend for months, and was below the 50 and
200-DMA.  Sun Microsystems probably had higher expectations
priced in to the option, as it had been on a strong up trend
and was strongly above the 200 and 50-DMA.

The delta of an option generally estimates how much the option
will move for a one point move in the stock price.  Generally,
an at-the-money option will move approximately one half point
for every one point move in the stock.  This means the ATM
option has a delta of .50.  A deep in-the-money option will
generally move one point for every point move in the stock.
This means it has a delta of 1.  A deep out-of-the-money option
can have a delta of anything from .5 to almost zero depending
on how deep out-of-the-money it is.

However, the delta is only an estimate.  The actual movement
of an option can depend on many factors, including the change in
implied volatility, the demand for the option, the liquidity, and
the market's perception of whether the stock will continue to
move in the same direction at the same pace.

If you buy an at-the-money call option and the stock were to
drop precipitously, the option can lose more than one half
point for every point drop in the stock.  Most of us have had
the unfortunate experience of watching call options drop much
faster than they rise.

If you think a company will report earnings higher than the
predictions and rally afterward, you can sell the options and
buy the stock.  For example, I bought NT Dec 65 calls this
week at $5, and sold them Friday at $10.  NT reports earnings
Tuesday, and has beaten the expectations solidly for the
last several quarters. Suppose you put $5000 into calls and
sold them for $10,000. You could then buy $5000 worth of NT.
The risk would be more limited than holding the calls over
earnings.

Many analysts are stating that the earnings growth rate of
the S&P 500 companies will be about 17% higher than last year.
This is lower than the earnings projections and results for the
first quarter of this year.  However, this does not necessarily
mean that the performance of the index will be lower than
it was in the first quarter.  For example, in 1995, the earnings
year over year growth rate was 17%.  This was lower than the
earnings growth rate in 1993.  Yet, the S&P 500 rallied over
34% in 1995.  There is not always a direct correlation between
earnings growth rates and stock market performance.

It is interesting to note that the 30 year Treasury yield is
on an unmistakable downtrend.  This should benefit the market.
However, this may be a bad time to speculate on the direction
of interest rates.  We don't know if the Treasury will continue
to buy back government bonds next year.  In addition, it may be
too early to predict an interest rate cut in 2001, although there
is indication that it is likely.




We had seven new IPOs this week raising over $3 bln.  However,
there are still many more IPOs being cancelled than brought
public.  In addition, the issuance of high yield debt continues
to be tight.  Many small, unprofitable companies are not
participating in the rally due to the difficulties in obtaining
financing.

For example, Chase Manhattan reported that their earnings were
lower partly due to unforeseen losses on stock investments in
the internet and technology sectors.  This is significant
because it indicates part of the reason why creditors, venture
capitalists, banks, and investment banks are becoming wary
about lending money to developmental stage internet companies.
Ultimately, if small company stocks cannot get financing, our
rate of economic growth could slow considerably.

AMG Data reported a light inflow of $378 mln to equity funds
last week.  The flows have been light for several weeks.  However,
there is so much cash stored on the sidelines in money market
funds that it seems like the dam is about to burst.

It is not surprising that we saw a net outflow from money market
funds this week for the first time in weeks.  The Investment
Company Institute reported that retail money market funds
increased by $392 mln, and institutional money market funds
decreased by over $400 mln.  For the last several weeks,
investors have been depositing about $12 bln weekly to money
market funds and about $2 bln weekly to equity funds.  If
investors were started to deposit a few billion to the market
consistently, we could easily fuel a rally and still have money
left over for money market funds.


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

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

VRTS - Veritas Software $166.81 (+26.00 last week)

See details in sector list




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

FCEL - FuelCell Energy $75.38 (-8.56 last week)

See details in sector list




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

Index       Last   Week
Dow     10226.59 -49.20
Nasdaq   3483.14 166.37
$OEX      738.16   9.15
$SPX     1396.93  22.76
$RUT      487.45   7.06
$TRAN    2469.07  29.63
$VIX       27.42  -3.56

Calls

IDPH      190.25  27.75  The Biotech bulls are back in a big way
NTAP      148.63  27.19  New, booming data storage market
BRCM      242.19  26.88  New, beginning another upside run
VRTS      166.81  26.00  Bullish technical and momentum factors
CIEN      149.50  21.63  Bulls return, and another new 52-wk high
RIMM      117.38  17.88  Blossoming in the hand-held market
SEBL      113.00  14.13  Dropped, earnings on Tuesday
BRCD      252.44  12.81  Storage is hot, but SAN area is on fire
VRTX       79.75   9.50  Dropped, earnings on Tuesday
RSAS       57.75   5.81  Can't overlook cheap earnings growth
EMC       100.00   5.06  New, stealth Tech sector leader
JNPR      232.00   3.50  New, blowout earnings... ready to soar!
NT         68.31   2.88  Dropped, earnings on Tuesday
SCMR       84.94  -0.53  Change in sentiment with new contract

Puts

ANEN       90.50 -29.69  New, shaken from its pristine pedestal
PHCC       48.38 -19.25  New, profit taking gone mad
FCEL       75.38  -8.56  New, quickly losing power
PVN       103.06  -8.38  New, financial stocks taking a beating
INKT       80.00  -2.25  Dropped, upside break above 10-dma
NVDA       69.63   4.50  Dropped, can't fight new trend


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

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


CALLS

VRTX $79.75 (+9.50) In another time and place, we would not be
dropping the play.  In fact, if conditions last week were
similar to those of the last few, we would be holding on to
this one.  But as the markets change, new opportunities present
themselves and that's the reason we are exiting the play.  By
most measures, there is little wrong with the play. While the
close below $80 could be a cause of concern, and the stock has
been making lower lows, volume has been light.  As well, VRTX's
up-trend is still intact.  But with improving sentiment in the
NASDAQ, there are quite frankly, better plays out there.  What's
more, the company announces earnings next Tuesday.  All the more
reason to drop VRTX.

NT $68.31 (+2.88) Just when the markets are finally getting
healthy and NT is starting to really move, we've run out of time
on our play.  Remember that earnings are coming up on Tuesday
after the close and as always, we need to be out of any open
positions before that.  As it turned out, the final bounce at
$60 late Wednesday was the bears last desperate attempt to break
the back of NT's rock-solid support.  Gapping up at the open on
Thursday, NT has steadily marched higher, briefly flirting with
the $70 resistance level on Friday before profit taking took
hold.  Those looking for a quick play can consider new positions
on a solid bounce from the $68 support level, or a solid move
through the $70 resistance level, but don't get too comfortable.
This play turns into a pumpkin after the close on Tuesday.

SEBL $112.88 (+14.13) The SEBL rebound we had been gaming finally
materialized last week.  A bullish earnings report from
software giant Microsoft boosted SEBL above several key resistance
levels, after the bulls came charging back into the Software
sector.  The positive report from Microsoft might portend an
earnings surprise from SEBL when the company reports after the
bell this Tuesday.  Look to exit existing positions before the
close of Trading Tuesday.  In search for profitable exit points,
watch for SEBL to break above resistance at $115 early next
week and retest its 52-week high at $118.44.  Major support
levels can now be found just below at the $110 level and lower
near $105.


PUTS

INKT $80.00 (-2.25)  INKT offered several great opportunities
for us to profit due to its volatile bouncing between resistance
and support based on market conditions.  Now with general
conditions shaping up, and a temporary upside break above our
10-dma resistance at $81, it indicates that upside risk is
growing on the play.  Earnings are also confirmed for release next
Thursday, October 26th, which is increasing positive sentiment
on the play.  With good expectations on numbers, and rumors that
INKT would be a good takeover candidate, we ready to exit.
Traders should look to sell into any weakness offered, keeping in
mind that any breaks above the $81-resistance is our sell line in
the sand.

NVDA $69.63 (+4.50) As we were expecting, NVDA dropped to test
the 200-dma (then at $52.81), but unfortunately it did so on
Wednesday's huge gap-down open on the NASDAQ.  The solid bounce
prevented us from getting an entry into the play and improving
sentiment in the PC sector, due in large part to MSFT's blowout
earnings report, has propelled the stock sharply higher ever
since.  While mild signs of weakness began to appear at the end
of the day on Friday, the technical picture is now looking
decidedly bullish.  Rather than fight the emerging trend, we'll
cut NVDA loose and go in search of easier prey.


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

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

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

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

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

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

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


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

BRCM - Broadcom $242.19 (+26.88 last week)

Broad essentially means wide, and that's exactly what BRCM is
involved in.  A wide array of products that help customers
stream  vast amounts of data online at high speeds.  BRCM is the
company that provides the integrated circuitry that allows
cable, DSL, and satellite broadband communication to occur.  Now
with a fast growing broadband wireless market, things continue
to look promising for BRCM and their position.  Customers
include Motorola, 3Com, Cisco, and SFA just to name a few.

Since BRCM is in the business of broadband, they are very
familiar with wave lengths.  The companies stock is looking like
a familiar wavelength as well; it's beginning the upside run of
its third cycle since July.  A long term support has been seen
in the area of $204, and Oct. 13th basically tested the area for
the third time.  The test has commenced BRCM on its current
rebound rally.  It appears to have considerable potential due to
the bounce off the underlying 200-dma support at $196, then on
Oct. 13th.  Since that time, it has performed very well in its
rebound despite the recent market weakness.  BRCM's strength has
taken it above all the major dma's which could have served as
resistance, but didn't.  Most recently, Friday's strength took
the play above the critical 50-dma which should now serve as
support as BRCM aims for a $270-target.  BRCM blew away
estimates last Wednesday by 6 cents, which is helping to fuel the
current momentum and outlook on the play.  On the heels of the
earnings news, nine analysts issued very bullish Buy and Strong
Buy opinions on the stock.  There is currently a very high
positive sentiment in the IC communications sector that is
attracting new found interest.  Investors once having determined
market direction can enter plays from two points.  The most
prudent is to ride the momentum, letting BRCM trade above $245 on
volume.  The second is to look for a pull-back to the 20-dma at
$231 and watch for a rebound bounce.  In both instances look for
positive market support to avoid a head fake in this rally.

News that BRCM is poised to become the dominant end-to-end
silicon technology solution provider is allowing analysts to
raise their estimates and outlooks dramatically on the stock.
Revenues have been revised to expect $1.82 billion in 2001.  This
move from a broadband provider to a silicon solutions provider
opens the LAN, WAN, & SAN markets to them.

BUY CALL NOV-240 RDU-KH OI=2453 at $23.13 SL=16.50
BUY CALL NOV-250*RDU-KJ OI= 924 at $18.25 SL=13.00
BUY CALL NOV-260 YRL-KL OI=1323 at $14.50 SL=10.50
BUY CALL NOV-270 YRL-KN OI= 583 at $11.25 SL= 8.50
BUY CALL JAN-260 YRL-AL OI= 384 at $31.25 SL=23.50

SELL PUT NOV-220 RDU-WD OI= 717 at $10.38 SL=14.00
(See risks of selling puts in play legend)

Picked on Oct 22nd at   $242.19    P/E = 340
Change since picked       +0.00    52-week high=$297.94
Analysts Ratings     7-11-0-0-0    52-week low =$ 54.28
Last earnings 10/00   est= 0.24    actual= 0.30
Next earnings 01-17   est= 0.27    versus= 0.16
Average Daily Volume = 4.77 mln



NTAP - Network Appliance $148.63 (+27.19 last week)

The idea was inspired. Yet simple. Separate storage from an
application server and put all that data on a special
"appliance" tasked with serving data at high speeds. In 1992,
NETP originated this high-performance network appliance concept.
Today they're a recognized leader in data storage and access.
Corporations and ISPs, including 3Com, Adobe Systems, Tripod,
John Deere, NationsBanc, and GTE use NTAP's solutions to reduce
the cost and complexity of managing their mission-critical data.
With a network-centric economy pushing along expanding volumes
of information, an easily scaleable appliance solution couldn't
have come at a better time.

A booming storage market, positive momentum on the NASDAQ, and a
solid earnings report from industry rival, EMC, all played a
role in NTAP's run up this week.  It's a debate whether or not
the market's reached a bottom, but one thing's for sure,
investors have started nibbling on NTAP.  Once EMC reported a
respectable 55% increase in 3Q profits on Wednesday evening and
the Tech bulls incited a broad rally, NTAP really took off.
Investors quickly bid the share price through $140 and upwards to
the vicinity $146.19, challenging the $150 level.  The bullish
gains extended into Friday's session and NTAP tagged $152.75 for
a new 52-week record.  Continued strength and positive direction
in the NASDAQ could send NTAP to new heights next week.  If the
market maintains its current upward momentum and NTAP breaks above
$150, traders might look to target shoot an entry near
shorter-term support at $148, or lower at $144.  While support is
much firmer at $130-$135 and would be a premium entry, a return to
this level is dangerous.  A more moderate approach, and yet
aggressive, may be to enter new positions on a pullback to previous
resistance at the $140 level.  In just a few weeks on November
14th, NTAP is scheduled to report its own earnings numbers after
the market close.  Another booster, which may or may not affect
trading, is the fact that NTAP is currently trading at a historical
split-level of $150.  It's also interesting to note that the
triggers for NTAP's previous split announcements were earnings
releases.

This week, Network Appliance, together with Sybase Incorporated
(SYBS), a leading supplier of e-Business solutions, unveiled a
powerful integrated application that delivers a higher capacity
of storage scalability and simplifies manageability.

BUY CALL NOV-145 ULM-KI OI= 345 at $16.50 SL=12.00
BUY CALL NOV-150*ULM-KJ OI= 648 at $14.63 SL=10.75
BUY CALL NOV-155 ULM-KK OI= 654 at $12.25 SL= 9.25
BUY CALL DEC-150 ULM-LJ OI= 243 at $20.88 SL=14.50
BUY CALL DEC-155 ULM-LK OI= 143 at $18.75 SL=13.75

Picked on Oct 22nd at   $148.63    P/E = 795
Change since picked       +0.00    52-week high=$152.75
Analysts Ratings     16-3-0-0-0    52-week low =$ 15.64
Last earnings 06/00   est= 0.07    actual= 0.09
Next earnings 11-14   est= 0.09    versus= 0.05
Average Daily Volume = 6.66 mln



EMC - EMC Corporation $100.00 (+5.06 last week)

EMC is the leading builder of the world's most robust, secure
and trusted information storage infrastructures. Their storage
systems, software, networks and services ensure fast,
round-the-clock access to all of the information businesses
and individuals must have to prosper in the Information
Economy. EMC's wide range of hardware and software products
Enable organizations to create an electronic information
Infrastructure which EMC calls an E-Infostructure.

When people think of the Four Horsemen of the NASDAQ, Cisco,
Intel, Dell, and Microsoft come to mind.  Recently, the shake-up
in Tech stocks has been a point of contention, with companies
such as Dell, Oracle and Worldcom all laying claim to the
coveted position.  Yet all this time, EMC has been lurking in the
background, playing the role of the strong, silent type. Sporting
a market cap of $218 billion, the market has deemed the company
more valuable than DELL, ORCL, and WCOM.  Its recent strength
during the malaise that plagued the NASDAQ has proven the company
to be a stabilizing force in investors' portfolios.  While shares
of DELL, ORCL and WCOM are attempting to recover from steep
declines, EMC looks poised to challenge its all-time highs.  It's
no secret that Storage is clearly a high-growth sector, or is it?
While Fiber Optic, Broadband and Networking stocks have taken the
spotlight, the bulls have been less vocal about extolling the
virtues of the Storage sector.  Networkers may enable information
to travel vast distances at great speeds but at some point, that
information needs to be stored.  That's where EMC comes in.  The
stock having just successfully tested its 100-dma (now at $86),
broke back above its 50-dma at $95 and closing on Friday right on
the psychological $100 level, appears headed towards its all-time
highs at $104.94.  If the market moves higher on Monday, an entry
at current levels would not be a bad idea, but make sure the
buyers are in control before entering.  A pullback to the 5-dma
at $95.75 or the 50-dma are also possible targets to shoot for
while conservative traders looking to enter into strength will be
watching for EMC to break above $105 with conviction.

Reporting earnings last Wednesday, EMC said net income grew by
55%,  with earnings of 20 cents per share, beating Street estimates
by a penny.  While the company missed the whisper number of 21
cents, investors appear to be more interested in the revenue
figures and projected future growth in the storage space, which
can only bode well for EMC.

BUY CALL NOV- 95 EMC-KS OI=2648 at $ 9.13 SL=6.25
BUY CALL NOV-100*EMC-KT OI=8297 at $ 6.25 SL=4.25
BUY CALL NOV-105 EMC-KA OI=2583 at $ 4.13 SL=2.50
BUY CALL JAN-100 EMC-AT OI=8940 at $11.50 SL=8.50
BUY CALL JAN-105 EMC-AA OI=1918 at $ 9.50 SL=6.50

SELL PUT NOV- 90 EMC-WR OI= 751 at $ 2.38 SL= 4.00
(See risks of selling puts in play legend)

Picked on Oct 22nd at   $100.00    P/E = 216
Change since picked       +0.00    52-week high=$104.94
Analysts Ratings    17-10-1-0-0    52-week low =$ 30.00
Last earnings 10/18   est= 0.19    actual= 0.20
Next earnings   N/A   est= 0.23    versus= 0.17
Average Daily Volume = 8.51 mln



JNPR - Juniper Networks $232.00 (+3.50 last week)

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

Seasonal weakness derailed our JNPR play less than a month ago.
But, after its blowout earnings, the stock looks ready to soar
to new heights.  Investors willingly pushed the price up above
$230 in anticipation of an impressive earnings report, but our
play ended up being the proverbial helium-filled balloon in an
elevator headed for the basement.  As the NASDAQ headed down to
retest 3000, JNPR was dragged down for a retest of solid support
at $180, also the site of the 50-dma at the time.  Fortunately,
it held and, although volatile, the stock is back near its
all-time high of $244.50.  If investors liked JNPR before their
most recent earnings announcement with a PE north of 2600, then
they've got to absolutely love it now that the PE has dropped
below 1000.  The quickest way to make your PE ratio drop is to
double your earnings every quarter, and JNPR has done a nice
job, improving their results from a loss of 9 cents in the year
ago period to a profit of 17 cents in the most recent quarter.
Exponential growth is what momentum investors like to see, and
with revenue growth running in excess of 500% year-over-year,
this rocket ship looks to have plenty of fuel left.  The weakness
last week as the NASDAQ tested the 3000 level again could only
push JNPR down to about $213, just above the 10-dma (then at
$211.31), and the recovery was quick and decisive as buyers
emerged to push the stock back above the $230 resistance level.
Friday saw our play move as high as $239.50, before fear of
darkness took over and the stock fell back to close at $232.
The next level of support below $230 is $220, but it appears
unlikely that level will be tested unless profit taking appears
on the NASDAQ early next week.  Aggressive traders can use a
bounce from support as their entry trigger while a more cautious
approach will be to buy a breakout over $244.  Let volume be
your guide in either case.  This is a volatile momentum play,
and volume will likely lead the price action.

Analysts, as well as individual investors, are drawn to companies
with strong earnings and revenue growth, as seen by the ratings
of the 19 who follow JNPR.  All except for 3 rate the stock a
Strong Buy, with the remainder giving it a thumbs up Buy rating.
The most recent convert was Morgan Stanley Dean Witter,
initiating coverage with a Strong Buy on October 13th, the day
after the company's stellar earnings report.

BUY CALL NOV-230 JUD-KF OI=1674 at $22.88 SL=17.25
BUY CALL NOV-240*JUD-KH OI=1719 at $18.00 SL=13.00
BUY CALL NOV-250 JUD-KJ OI=1724 at $13.88 SL=10.50
BUY CALL JAN-250 JUD-AJ OI=2585 at $31.38 SL=23.50
BUY CALL JAN-260 JUD-AL OI= 342 at $28.38 SL=21.25

SELL PUT NOV-210 JUD-WB OI= 495 at $10.75 SL=14.50
(See risks of selling puts in play legend)

Picked on Oct 22nd at   $232.00     P/E = 905
Change since picked       +0.00     52-week high=$244.50
Analysts Ratings     16-3-0-0-0     52-week low =$ 39.50
Last earnings 10/00   est= 0.09     actual= 0.17
Next earnings 01-11   est= 0.13     versus= 0.01
Average Daily Volume = 9.20 mln



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

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


The Option Investor Newsletter                   Sunday 10-22-2000
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/102200_3.asp


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

VRTS - Veritas Software $166.81 (+26.00 last week)

Truthfully, as its name applies, Veritas is the worlds best when
it comes to data storage and backup systems. They lead the
market in this ever critical component of data storage, and
management to help their customers avoid errors and crashes with
their network systems.  If a crash does occurs, VRTS' management
software allows for very quick and efficient recoveries,
minimizing down time.  So effective is VRTS at what they do,
that Microsoft and Hewlett-Packard are principle clients and
reasons for this companies success.

The technical and momentum factors that have presented
themselves as our reasons for playing VRTS have come through
with shining colors.  Riding on the back of renewed optimism in
the general market, and a possible short-term turnaround, VRTS
profited investors nicely.  Once again, the stock powered ahead
to hit a new 13-week high of $166.88.  Not only that, but it
basically closed at that high providing VRTS with a very bullish
bar on the chart for the day.  This is definitely the type of
formation and momentum we like to see in plays, as it was also
done on above ADV close to 10 million shares.  VRTS started as a
resistance breakout play above the $150-mark.  Now this same
level will be looked to as resistance.  Currently it stands on
its own, based on the extended resistance line from Sept. 28th,
but the 10-dma is quickly approaching, and should add support to
our rise very soon.  With a current bullish divergence taking
place in the MACD, and the new trend for VRTS steepening in its
slope, the play should continue to profit investors as it now
sets its target on taking out the 52-week high at $174 set back
in March.  Investors should continue to take advantage of the
upside momentum, waiting for VRTS to trade above $167 with
positive market support and good upside volume.

It appears VRTS is having to go in a round about way to acquire
some of the assets of Seagate Tech.  The sale of Seagate's
operating assets are being sold to a group of private equity
firms, among which is Silver Lake Partners.  Then the sale
between Seagate and a subsidiary of VRTS can take place.  This
procedure was officially approved on Friday by the SEC as they
stated the S-4 registration is effective.

BUY CALL NOV-160 VUQ-KL OI= 661 at $17.88 SL=13.00
BUY CALL NOV-165 VUQ-KM OI= 621 at $15.25 SL=11.00
BUY CALL NOV-170*VUQ-KN OI= 831 at $12.88 SL= 9.75
BUY CALL NOV-175 VUQ-K0 OI=2287 at $10.63 SL= 8.25
BUY CALL FEB-175 VUQ-B0 OI=1285 at $25.88 SL=19.50

SELL PUT NOV-150 VUQ-WJ OI=864  at $ 6.88 SL=10.00
(See risks of selling puts in play legend)

Picked on Oct 19th at   $160.38     P/E = n/a
Change since picked       +6.43     52-week high=$174.00
Analysts Ratings    11-10-1-0-0     52-week low =$ 35.31
Last earnings 10/00   est= 0.14     actual= 0.16
Next earnings 01-11   est= 0.16     versus= 0.12
Average Daily Volume = 6.01 mln



CIEN - Ciena Corp $149.50 (+21.63 last week)

CIENA Corporation's market-leading optical networking systems
form the core for the new era of networks and services
worldwide. CIENA's LightWork architecture enables next-
generation optical services to transmit signals simultaneously
over the same circuit.  This multiplexing system changes the
fundamental economics of service-provider networks by
simplifying the network and reducing the cost to operate it.
About 45% of sales come from outside the US markets.

Three times must be a charm!  The return of the Tech bulls
lifted CIEN up to the $151 level on Friday as it traced its
third new 52-week high last week.  CIEN's building momentum is
also demonstrated by its strong pattern of higher lows.  Earlier
in the week the share price got a boost after Warburg Dillon
Read reiterated its Buy rating on CIEN and raised its price
target to $175 from $108.  Warburg commented that CIENA is the
only company that is either number one or two in all three key
next-generation optical systems products.  Other key events that
directly impacted Friday's stellar performance included the
blowout numbers from SDL Incorporated (SDLI) and better-than-
expected results for the 3Q from Nokia (NOK).  We'll want to pay
close attention to this week's earnings reports from the likes
of GLW, JDSU, and NT and their effects on our CIEN play.  CIENA
itself is expected to announce its numbers around November 16th.
A confirmed date is not yet available.  Aggressive traders might
consider an entry into the momentum on a deep pullback back to
support near the $137 level or the 5-dma line ($139.39).  A more
conservative approach would be to consider target shooting if
CIEN rallies above $150 on strong volume.  A favorable buying
climate and continued strength in the NASDAQ will certainly be
conducive to additional gains in the coming weeks.

CIENA's CEO Patrick H. Nettles was recently named as the
Chairman of the BoD.  The company also announced that COO Gary
B. Smith will assume an additional role as President as well as
take a seat on the BoD.

BUY CALL NOV-145 UEZ-KI OI=1733 at $16.50 SL=11.75
BUY CALL NOV-150 UEZ-KJ OI=1576 at $14.13 SL=10.50
BUY CALL NOV-155*UEZ-KK OI= 398 at $11.38 SL= 8.50
BUY CALL NOV-160 UEZ-KL OI= 916 at $ 9.50 SL= 6.50
BUY CALL JAN-160 UEZ-AL OI= 793 at $19.88 SL=14.50

Picked on Sep 24th at   $120.75    P/E = 736
Change since picked      +28.75    52-week high=$151.00
Analysts Ratings      9-9-0-0-1    52-week low =$ 15.13
Last earnings 06/00   est= 0.17    actual= 0.19
Next earnings 11-16   est= 0.24    versus= 0.03
Average Daily Volume = 8.57 mln



IDPH - IDEC Pharmaceuticals Corp $190.25 (+27.75 last week)

Based in San Diego, IDEC Pharmaceuticals Corporation is a
biopharmaceutical company engaged primarily in the research,
development and commercialization of targeted therapies for the
treatment of cancer and autoimmune and inflammatory diseases. The
Company's first commercial product, Rituxan, and its most
advanced product candidate, Zevalin (ibritumomab tiuxetan,
formerly IDEC-Y2B8), are for use in the treatment of certain
B-cell non-Hodgkin's lymphomas.

The Biotechs are back!  After a steep decline in the early part
of the month, it appears the Biotechs have not only bounced, but
are poised to head toward higher ground.  With the NASDAQ largely
driven by movements in the Biotechs and the Semiconductors, the
recent declines of both leading sectors have put much fear into
the heart of Tech bulls.  Last week, the NASDAQ came through with
an amazing turnaround and while the Semis played a role moving the
index higher, the Biotechs did a larger part of the heavy lifting.
With the Merrill Lynch Biotech HOLDR (BBH) now back above its
200-dma and the Amex Biotech Index (BTK) firmly above its major
moving averages, Biotechs led the NASDAQ turnaround as early as
the previous week, with the Semis arriving later, lending support
at the end of this past week.  The earlier turnaround was likely
helped by the Pharmaceutical sector.  With investors running to
the sector for cover, drug stocks quickly approached their
all-time highs.  This led to a spillover effect to the battered
Biotechs as bargain hunters bought the beaten-down shares,
leading to the bounce.  Throughout the month of October, IDPH had
been in a trading range, spanning 30 points from top to bottom,
with support at $150 and resistance at $180.  With resistance
broken, thanks to a stellar earnings report, the stock has been
moving higher on the back of the 5-dma, now at $183.75.  With
support also in increments of $5 at $190, $185 and $180, a bounce
off support, backed by buying volume, would provide for an
aggressive entry point.  Conservative traders may wait to make
sure that IDPH can break past $195 with conviction before taking
a position.

Tuesday's rally was helped by a triple dose of positive comments
from Bank of America Securities, US Bancorp Piper Jaffray and
Prudential Securities, showering IDPH with upward price target
revisions and upgrades.  This was followed by an upgrade on
Wednesday by Adam Harkness.  Sector sympathy and analyst
bullishness will be the key to success with this play.  Confirm
direction with the BBH and BTK when considering an entry.

BUY CALL NOV-185 IHD-KQ OI=990 at $19.75 SL=14.25
BUY CALL NOV-190*IHD-KR OI=336 at $17.13 SL=12.25
BUY CALL NOV-195 IHD-KS OI= 71 at $14.75 SL=11.00
BUY CALL JAN-190 IHD-AR OI=523 at $30.88 SL=22.25
BUY CALL JAN-195 IHD-AS OI=  1 at $28.50 SL=20.25

SELL PUT NOV-180 IHD-WP OI= 10 at $10.25 SL=14.00
(See risks of selling puts in play legend)

Picked on Oct 19th at   $188.63     P/E = 241
Change since picked       +1.63     52-week high=$196.13
Analysts Ratings      5-6-0-0-0     52-week low =$ 42.75
Last earnings 10/16   est= 0.28     actual= 0.30
Next earnings   N/A   est= 0.36     versus= 0.15
Average Daily Volume  =   917 K



RIMM - Research In Motion $117.38 (+17.88 last week)

Based in Waterloo, Ontario, Canada, Research In Motion Limited is
a leading designer, manufacturer and marketer of innovative
wireless solutions for the mobile communications market.  Through
development and integration of hardware, software and services,
RIMM provides solutions for seamless access to time-sensitive
information including email, messaging, Internet and
intranet-based applications.  RIMM technology also enables a
broad array of third party developers and manufacturers in North
America and around the world to enhance their products and
services with wireless connectivity.

While fears of a slowdown in PC sales have caused shares of
companies such as Apple and Dell to wilt, shares of mobile
computing net-ready device makers such as Handspring, Palm and
RIMM have been blossoming.  While on the surface, both types of
companies are very similar, closer inspection reveals some
fundamentally important differences.  The most important
difference of all is growth rate, as investors are willing to pay
a premium for high growth.  While the 30% year-over-year revenue
growth rates in Apple and Dell are good, it pales in comparison
to the 90 to over 100% growth rates offered by the likes of Palm
and RIMM.  As well, in a trend-driven economy, the trend towards
sexy, portable, wireless, handheld devices is a key driver for
strong future demand.  With high profile clients such as Bill
Gates and Michael Dell sporting RIMM pagers, the company is
difficult to ignore.  While RIMM's products are still in the
early-adoption stage, with high prices to cover research and
development costs, the good news is, people are buying.  The need
for portable computing and Internet appliances has, so far, been
unquenchable and appears to be just beginning.  It's been a great
week for RIMM as the stock moved ever-higher, with bounces off
the 5-dma (now at $116.42) providing aggressive entries into this
play and as long as the current up-trend holds, will continue to
do so.  There is further support at previous resistance at $115,
$110 and the 10-dma at $108.47.  The past few days, RIMM has
encountered resistance in the $126-127 area.  If RIMM can close
above $125, this would set the stock up for a break above that
level, confirming continued upward momentum and providing
conservative traders with a safer entry.

On Friday, RIMM announced it had filed to sell six million
shares of its stock.  The company did not state how the proceeds
would be used, and this uncertainty likely led to Friday's
decline.  As details become clearer, look for the news to drive
RIMM's price.  Considering the large number of high profile
investment banks involved in the offering, including Goldman
Sachs, Merrill Lynch ,and US Bancorp Piper Jaffray, as well as an
option for an additional 900,000 more shares available for
over-allotments, there should be great demand for this offering.

BUY CALL NOV-110 RUL-KB OI=146 at $16.63 SL=12.00
BUY CALL NOV-115 RUP-KC OI=240 at $14.00 SL=10.50
BUY CALL NOV-120*RUP-KD OI= 48 at $10.88 SL= 8.25
BUY CALL DEC-120 RUP-LD OI=133 at $15.88 SL=11.50
BUY CALL DEC-125 RUP-LE OI=135 at $13.75 SL=10.50

SELL PUT NOV-110 RUL-WB OI=246 at $ 7.75 SL=10.50
(See risks of selling puts in play legend)

Picked on Oct 19th at   $122.44     P/E = 2041
Change since picked       -5.07     52-week high=$175.75
Analysts Ratings      6-7-1-0-0     52-week low =$ 23.25
Last earnings 09/28  est= -0.03     actual= -0.02
Next earnings   N/A  est= -0.02     versus=  0.05
Average Daily Volume = 1.51 mln



BRCD - Brocade Communications $252.44 (+12.81 last week)

Brocade is leading the way in a new category of networking:
providing a scalable, reliable foundation for storage
environments.  They are the market leader in Fibre Channel Fabric
switches-the essential framework for networking servers and
storage systems.  Brocade switches deliver the flexible and
secure "Fabric" that supports the tremendous information and
storage demands of today's leading companies.  Brocade Fibre
Channel fabric switches and software provide a networking
foundation for storage area networks (SANs).

Storage is hot.  Stellar earnings reports this past week from
companies such as EMC and McData (MCDT) confirm bullish
sentiment.  While EMC posted a year-over-year revenue growth rate
of 47%, its Storage Area Network (SAN) division posted revenues
over 5 times that of last year's.  EMC's SAN spin-off MCDT also
posted strong results, with revenue growth of over 215%.  This
can only be good news for BRCD, as it currently dominates the SAN
space, commanding over 80% market share.  So while storage is
hot, the SAN space is even hotter, with BRCD clearly sitting in
the sweet spot, ready to capture a large portion of the rewards.
While this has helped BRCD hold up recently in a weak market
for Tech stocks, a bouncing market has given fresh legs to BRCD's
run.  As we mentioned last week, if BRCD could hold up well in
adverse conditions, then a strong market would likely lead to the
stock challenging its all-time highs.  This is exactly what
happened last week, but not without a number of buying
opportunities.  While aggressive traders have had much success
buying bounces off the 5-dma (now at $246.17), Wednesday provided
an even better deal as the stock bounced above its 10-dma,
currently sitting at $238.37.  From there, the stock has moved
higher, breaking strong resistance at $250.  With that hurdle now
passed, BRCD appears poised to challenge its all-time high at
$256.50.  At this point, there are a number of support levels for
BRCD, most notably at $250, the 5-dma, $245, $240.  A bounce off
support could be a buy signal for aggressive traders while
conservative traders may want to wait until BRCD clears its
previous all-time high and enter on strength.  In both cases,
make sure there are buyers supporting the move up in the form of
heavy volume.

Alliances were the theme last week for BRCD.  On Tuesday, the
company expanded its partnership with software storage giant
Veritas.  That was followed by an OEM partnership on Wednesday
with MTI Technology Corp (MTIC), in order to produce next
generation SAN products.  The alliances only serve to
strengthen BRCD's leading position on the Storage Area
Networking space.

BUY CALL NOV-240 GUF-KH OI= 227 at $27.63 SL=20.00
BUY CALL NOV-250*GUF-KJ OI= 373 at $21.75 SL=16.50
BUY CALL NOV-260 ULF-KL OI= 439 at $16.50 SL=12.00
BUY CALL JAN-250 GUF-AJ OI=6380 at $36.75 SL=26.75
BUY CALL JAN-260 ULF-AL OI=4813 at $32.75 SL=23.75

SELL PUT NOV-240 GUF-WH OI= 104 at $12.38 SL=17.00
(See risks of selling puts in play legend)

Picked on Oct 15th at   $239.53    P/E = 661
Change since picked      +12.81    52-week high=$259.81
Analysts Ratings      9-6-2-0-0    52-week low =$ 52.81
Last earnings 08/16   est= 0.13    actual= 0.16
Next earnings 11-15   est= 0.20    versus= 0.03
Average Daily Volume = 2.87 mln



RSAS - RSA Security $57.75 (+5.81 last week)

RSA Security Inc. is a trusted name in e-security, helping
organizations build secure, trusted foundations for e-business
through its two-factor authentication, encryption and public
key management systems.  As the global integration of Security
Dynamics and RSA Data Security, RSA Security has the market
reach, proven leadership and unrivaled technical and systems
experience to address the changing security needs of e-business
and bring trust to the new, online economy.  A global company
with more than 5,000 customers, RSA Security is renowned for
providing technologies that help organizations conduct
e-business with confidence.

Investors looking for a lower risk play in the Internet security
space have a hard time overlooking RSAS.  With a PE ratio of only
17, and solid year-over-year earnings growth of almost 30%.
This is in contrast to stocks like Verisign (VRSN) and Entrust
(ENTU) which are growing revenues at a faster rate, but have yet
to receive a PE ratio, due to their continuing habit of losing
money on a quarterly basis.  Things were looking pretty grim for
RSAS investors just over 2 weeks ago, as their stock reached a
nearly 2-year intraday low on October 4th.  The company threw
investors a lifeline the same day, announcing that revenues for
the third-quarter rose 29% and announcing that it would report
better-than-expected results on October 12th.  Icing on the cake
was the company's statement that it would buy back up to 4
million shares of its stock - always a sign of confidence for
the future.  The announcement helped the stock recover from its
lows and the next day's $5 gap up was just the start of what has
been a consistent recovery ever since.  True to its word, RSAS
reported solid earnings less than a week ago and investors have
shown their approval by continuing to drive the price higher.
Support has been solidifying at the $55 level, and target
shooters got another shot at an entry at this level when RSAS
dropped at the open on Friday.  Bucking the trend of taking
profits at the end of the day, investors continued to buy right
into the close, propelling the stock up to close near its high
of the day.  While support is solidifying, so is resistance,
first at $58, and then $60, also the site of the 200-dma.  The
action over the past two weeks has kept our play in a narrow
channel between the 5-dma (currently $55.31) and the upper
Bollinger band (now at $59).  If the bulls can take over next
week, our play looks ready to charge through the $60 level, and
such an event would be the trigger for conservative players to
open new positions.  The next level of resistance sits between
$64-66, and a move through the level will clearly require a
positive mood in the broader technology markets.

Helping to fuel the move higher in the past week is a long list
of positive press items.  Among them, RSAS has teamed with CSCO
on e-business security, and Global Network Privacy has selected
RSAS for its digital certificate and authentication
capabilities.  And then on Thursday, RSAS announced that
Rainfinity, the maker of Internet Reliability Software, has
licensed RSA BSAFE SSL-C software to encrypt and authenticate
the communication between its browser-based management console
and other products.

BUY CALL NOV-55 QSD-KK OI= 95 at $6.50 SL=4.50
BUY CALL NOV-60*QSD-KL OI= 24 at $4.13 SL=2.50
BUY CALL JAN-60 QSD-AL OI= 79 at $7.88 SL=5.50
BUY CALL JAN-65 QSD-AM OI= 47 at $6.13 SL=4.00
BUY CALL JAN-70 QSD-AN OI=168 at $4.63 SL=2.75

Picked on Oct 17th at   $55.00    P/E = 17
Change since picked      +2.75    52-week high=$93.06
Analysts Ratings     6-5-1-0-0    52-week low =$29.88
Last earnings 10/00  est= 0.24    actual= 0.24
Next earnings 01-11  est= 0.26    versus= 0.23
Average Daily Volume   = 465 K



SCMR - Sycamore Networks $84.94 (-0.53 last week)

Sycamore Networks develops and markets intelligent optical
networking products that transport voice and data traffic.  The
company combines its significant experience in data networking
with expertise in optics to develop intelligent optical
networking solutions for network service providers.  Based on
a common software foundation, SCMR's products enable the company
to concentrate on the delivery of services and end-to-end
optical networking.  Among the company's offerings are optical
transport, access and switching systems and end-to-end optical
network management solutions.

Suffering the indignity of having its share price cut by nearly
60% in the past two months, SCMR looks like it is on the road to
recovery.  The change in sentiment is due in no small part to its
deal to provide optical switches and equipment to BellSouth for
its planned Internet gateway service center in Florida.
Announced a little over a week ago, the positive development
helped SCMR to halt its slide and it began probing tentatively
to the upside.  Resistance is in place at the $87-88 level,
followed by $93 and then $98, but with earnings just around
the corner on November 14th, it looks like the recovery may be
just about to get under way.  Stochastics and MACD have turned
positive, with volume clocking in at nearly 50% above the ADV,
as SCMR has now climbed back above the $80 level.  Then after
the close on Friday, the company announced it is requesting
approval from shareholders to increase the number of authorized
shares from 1.5 billion to 2.5 billion.  Do you think management
might be contemplating another split?  Recall that the last one
was a 3-for-1, announced in late January when the stock was
trading near $200.  The vote will take place at the annual
shareholder meeting, scheduled for December 14th.  Splits tend
to be announced when management has a positive outlook, so even
though there is nothing definite, this looks like a good sign
going forward.  Consider new positions on a renewed bounce from
support between $80-82, but make sure that buying volume
confirms the bounce.  Although an intraday dip to the $77 level
would provide a better entry point, the risk associated with
such an entry strategy is higher, as it would indicate potential
weakness in the stock.  While support at $70 is rock solid,
having been tested several times recently, only high-risk
players should consider entries at this level, should the
opportunity arise.  More conservative players may want to wait
for bullish enthusiasm to drive SCMR through resistance at $88
before playing.

Grabbing investors attention on Thursday, SCMR announced it had
expanded its portfolio of intelligent optical switches to
extend the flexibility and value of switching from the core to
the edge of the optical network.  With the introduction of the
SN 3000 Optical Access Switch and the SN 4000 Optical Edge
Switch, SCMR becomes on of the first vendors to provide service
providers the ability to re-architect their networks to take
advantage of the bandwidth-on-demand, end-to-end restoration,
and scaling capabilities of optical switching.

BUY CALL NOV- 85 QSM-KQ OI= 345 at $12.50 SL= 9.50
BUY CALL NOV- 90*QSM-KR OI= 443 at $ 9.75 SL= 6.75
BUY CALL NOV- 95 QSM-KS OI= 614 at $ 8.00 SL= 5.75
BUY CALL DEC- 95 QSM-LS OI= 152 at $13.88 SL=10.50
BUY CALL DEC-100 QSM-LT OI=2764 at $12.38 SL= 9.25

SELL PUT NOV- 70 SMZ-WN OI= 291 at $ 4.63 SL= 6.50
(See risks of selling puts in play legend)

Picked on Oct 15th at    $85.47     P/E = 1204
Change since picked       -0.53     52-week high=$199.50
Analysts Ratings      9-3-2-0-0     52-week low =$ 47.25
Last earnings 08/00   est= 0.06     actual=  0.08
Next earnings 11-14   est= 0.02     versus= -0.19
Average Daily Volume = 6.56 mln



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**********
DISCLAIMER
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The Option Investor Newsletter                   Sunday 10-22-2000
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/102200_4.asp


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

PVN - Providian Financial $103.06 (-8.38 last week)

As one of the top ten US credit card companies, PVN issues
mainly secured credit cards to more than 12 million customers,
many of whom have spotty credit histories.  The company also
offers standard and premium crecit cards to those with better
credit.  In addition to credit card products, the company also
offers a suite of loan products and membership services.
Soliciting new customers via direct mail, phone calls, and
online advertising, PVN has more than $27 billion in assets
under management and over 14 million customers.

Financial stocks have been taking it on the chin lately, and
PVN is no exception.  After failing to penetrate the $135
resistance level earlier this month, the stock has given up over
$30 and is sitting just above major support between $100-103.
The interest rate environment has turned more friendly lately,
with no hikes expected for the remainder of the year and talk
of interest rates dropping next year.  The company reported its
most recent quarterly results last Thursday, and although it
came in a penny ahead of estimates, the stock continued to come
under selling pressure.  In the past two days, PVN has given up
over 8% on volume approaching triple the ADV, and the picture
continues to look negative.  Adding to the downward pressure in
the past two days were a couple of influential analysts
downgrading the stock.  On Thursday, First Union Securities cut
the stock from Strong Buy to Buy, and on Friday, AG Edwards
dropped the stock from Accumulate to Maintain.  That last one
sounds suspiciously like a veiled Sell rating.  The stock is
now below all of its shorter term moving averages and the 5-dma
($110.75) and 10-dma ($111.44) will likely conspire to create
some formidable resistance in the days ahead.  The only moving
average that PVN hasn't violated yet is the 200-dma, which is
sitting at $93.31, right at a major support level.  While it
would be nice to get a more attractive entry as our play fails
to penetrate resistance near $110, we may have to settle for
entering new positions on continuing weakness.  If $100 fails
to support PVN, and the selling volume is strong, that looks
like a good time for conservative traders to enter the play.

BUY PUT NOV-105*PVN-WA OI=189 at $8.13 SL=5.75
BUY PUT NOV-100 PVN-WT OI=101 at $5.75 SL=3.75

Average Daily Volume = 1.01 mln



FCEL - FuelCell Energy $75.38 (-8.56 last week)

FuelCell Energy, Inc. is headquartered in Danbury, Connecticut.
The Company employs more than 150 people with scientific,
engineering and manufacturing backgrounds.  FuelCell is a
developer and manufacturer of fuel cells.  A fuel cell is a
device that electrochemically converts the chemical energy of a
fossil fuel into electricity without the combustion of fuel.
FuelCell's fuel cells are clean, efficient electric power
generators that operate on a variety of fuels including natural
gas, coal-gas, ethanol and landfill gas.

Traditionally, Energy stocks have always done well during the
slow summer trading season.  This year, with oil prices rising to
over $30 a barrel and more recently, tensions in the Middle East,
stocks in the Energy sector have rocketed upwards, with shares of
FCEL more than tripling since the beginning of June.  But now
with the Autumn season rapidly approaching, it appears the
money is rotating out of Energy stocks and into the battered, yet
more exciting Tech stocks.  This can clearly be seen as trading
volume in FCEL has been steadily declining.  It appears the
momentum in the stock is quickly losing power.  Technically, the
chart does not look too healthy either, as FCEL appears to have
formed a head and shoulders formation over the past couple of
months.  Such a pattern usually foretells a definitive end to an
intermediate-term up-trend and a strong move in the opposite
direction.  Drawing a line across the $94 level on a 2-month
daily chart, the shoulder tops can clearly be seen, with the
first in mid-September and the most recent this past week.  The
head can be seen in late September/early October when the stock
topped out at the $108-109 area.  Drawing a line across the $70
mark reveals the neckline.  If FCEL breaks below this support
level, it could be a quick trip to the 100-dma at $52.62.
Conservative traders will be watching for a break below $70 on
volume for an entry point, while traders who are willing to take
on more risk may want to get in early and buy failed rallies
above the 5 and 10-dmas, currently at $85.13 and $83.46,
respectively.  Another aggressive entry could be found on a
break below the 50-dma, currently at $72.07.

BUY PUT NOV-80 FQG-WP OI= 67 at $13.50 SL=10.00
BUY PUT NOV-75*FQG-WO OI=312 at $10.88 SL= 8.25
BUY PUT NOV-70 FQG-WN OI= 99 at $ 8.25 SL= 6.00

Average Daily Volume = 732 K



PHCC - Priority Healthcare Corp $48.38 (-19.25 last week)

Priority Healthcare distributes specialty pharmaceuticals and
other medical supplies to healthcare industry.  They also offer
disease treatment programs and self-injectable pharmaceuticals
to the individual.  The company's Priority Distribution process
serves over 2,000 customers across the US and Puerto Rico.

Here's another case of profit taking getting out of hand in
dangerous market conditions.  And, magnified by further selling on
earnings news.  On October 12th, PHCC experienced an incredible
collapse in its share price.  While it's true that CSFB's new Hold
recommendation wasn't a ringing endorsement, a 4.8% drop in price
the following day is a bit extreme.  PHCC did find support at the
50 & 100 DMAs at $63.08 and $62.28, respectively.  Then the axe
fell last Thursday.  PHCC announced solid earnings and a 2:1
stock dividend (payable on November 22nd) before the opening bell.
Traders sold off the issue on more than six times the ADV!  The
rush resulted in a $5.69, or 8.8% cut by the close.  The critical
downslide was a clear divergence from the rest of the sector,
which was basking in the glow of great earnings from industry
leader, Merck (MRK).  To boot, the market was in rally mode and
PHCC received a Buy reiteration from Southwest Securities!  This
is a prime example of "selling the news".  The losses snowballed
in Friday's session with volume again at incredible levels.  A
downgrade by First Union Securities to a Buy from Strong Buy
effectively pressured the share price lower and under the 200-DMA
($53.38).  Next week, confirm the weakness before taking new
positions.  Look for high-volume moves through the recent
intraday low of $47.50 and a challenge of the light support at
$46 and $43.  If you're more adventurous, consider taking entries
on roll-overs at the $53 and $54 level.  Look for new at and
out-of-money November contracts to be issued next week, and wait
for open interest to build.

BUY PUT NOV-65 UHP-WM OI=75 at $17.13 SL=12.25
BUY PUT NOV-60*UHP-WL OI= 0 at $12.75 SL= 9.50  Wait for OI!!
BUY PUT NOV-55 UHP-WK OI= 0 at $ 8.75 SL= 6.25  Wait for OI!!

Average Daily Volume = 234 K



ANEN - Anaren Microwave $90.50 (-29.69 last week)

Anaren manufactures and supplies microwave components and
subassemblies for the satellite communications, defense
electronics, and wireless industries.  Anaren's breakthrough in
lightweight multi-layer packaging technology has allowed for
innovative compact, lightweight designs at affordable costs.
U.S. customers account for nearly 80% of total sales.

Yet another tech player shaken from its pristine pedestal.  ANEN
reached a pinnacle of success at $144.06 on October 2nd, only to
get kicked to the curb during the NASDAQ correction.  The share
price steadily lost value until it found recent support just
above the $109 level at the 100-dma line.  However, ANEN's new
bottom was essentially well, virtual.  Last Tuesday evening,
the company reported 1Q earnings numbers that were riddled with
record results.  Net sales increased a whopping 78% and there
was also a 70% increase in EPS of $0.34 versus $0.20.  Even
considering the adjustments for acquisitions, the "real growth"
was a positive 34% for the same quarter last year.  Pretty solid
numbers.  Still the old clichi of "take your money and run" came
into play on Wednesday.  ANEN sold off at an incredible rate.
Volume levels were at 21 times the ADV and reached 1.58 mln
shares exchanging.  ANEN lost $18.94, or in percentage terms, a
devastating 17.1% in just one session.  You'd have expected
buyers to return after that backslide and honestly, some did.
The Tech Bulls charged back into the arena on Thursday and
there was an attempted recovery, but it was to no avail.  An
overhead barrier around the $97 level stopped the progress in
its tracks.  The sharp sell-off near Friday's close also
indicated that ANEN was on shaky ground.  A confirming move to
the underside of $90 would warrant entry into the put play.
Look for robust volume to back the decline and expect some
resistance at $87.13, Wednesday's intraday low.

BUY PUT NOV-95*EUA-WS OI=3 at $14.25 SL=10.50
BUY PUT NOV-90 EUA-WR OI=0 at $11.13 SL= 8.25  Wait for OI!!
BUY PUT NOV-85 EUA-WQ OI=0 at $ 8.75 SL= 6.00  Wait for OI!!

Average Daily Volume = 334 K



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

No put updates today


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*****
LEAPS
*****

If That Isn't Capitulation, I Don't Know What Is
By Mark Phillips
Contact Support

Proving that V-bottoms are unconvincing patterns from which to
launch a recovery, the markets got another jolt this week as IBM
and CMB disappointed investors.  The result was a retest of the
3000 level on the NASDAQ and a violation of 10000 on the DJIA.
This decline had all the earmarks of the capitulation selling we
have been waiting for with heavy volume, a spike in the Put/Call
ratio and the VIX shooting deep into oversold territory.

For those that doubt the utility of the VIX, look at a daily
chart of this indicator and you can see a beautiful double-top
at 36.74.  Doesn't this pattern look an awful lot like the
pattern seen in October of the past 3 years?  Sure, the numbers
are different, but every year we see the VIX drift into the
lower end of its range during September and early October, only
to reverse sharply and hit extreme readings on the opposite end
of the scale in short order.  Even Ralph Bloch showed up on CNBC
this past week calling this the market bottom due to the
capitulation selling indicated by heavy volume, a spike in the
Put/Call ratio and the VIX moving deep into overbought
territory.

While the VIX can spend extended periods of time below 20 before
reversing towards the other extreme, it rarely spends much time
north of 30.  The fear indicated by such a high VIX reading
quickly shakes out the weak hands and allows us to get on with
the business of buying LEAPS for the next leg up in our
long-term bull market.  For the final stats, the VIX finished
forming its double-top at 36.74 on Wednesday, and as the markets
recovered throughout the rest of the week, it declined sharply
to close out the week at 26.85.

This is what we have been waiting for throughout the summer and
early fall, and it looks like it is time to put those dusty
acquisition plans into action.  Although there is likely to
still be some more collateral damage to individual issues as we
move through the rest of the October earnings cycle, it looks
unlikely that the NASDAQ will retest the 3000 level.  Even the
DJIA managed to claw its way back over the 10200 level,
indicating that the worst may be over for this index as well.

The VIX has come off of its extreme readings and has settled
nicely into the mid-20's so premiums should not be exorbitantly
expensive.  The recent volatility has shaken out many of the
weaker stocks in the market, leaving the winners sitting in an
even stronger leadership position as we head into the end of
the year.  These leaders will outperform those stocks that have
been disappointing over the past year, as investors have learned
the painful lesson that cheap stocks are not always a bargain.
A perfect example is the wireless handset trio, NOK, ERICY, and
MOT.  The dust has settled and it looks like there is one clear
winner (see the details below).

So fire up your action plan and start putting your money to
work - just don't spend it all at once.  If the past is any
indication of what to expect in the future, we are likely to
have a series of attractive entry points in the weeks ahead.

The upcoming seminar in Denver is less than a week away.  I look
forward to meeting many of you there and comparing stories from
the front lines.

As always, choose your plays carefully and follow your plan.


Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $60.75   539.47%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $35.63     8.78%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $22.13   101.14%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $38.63   155.29%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $26.25   - 4.55%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $47.25   114.77%
ERICY  01/30/00  JAN-2002 $16.3 WRY-AO   $ 6.75   $ 2.25   -66.67%
       07/23/00  JAN-2003 $ 25  VYD-AE   $ 6.88   $ 1.88   -72.75%
NSM    02/27/00  JAN-2002 $ 70  WUN-AN   $24.25   $ 5.88   -75.77%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 5.50   -70.48%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $12.80   -26.86%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $17.13    83.55%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $12.63   134.67%
       10/22/00  JAN-2003 $ 45  VWI-AI   $ 7.88   $ 7.88     0.00%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $44.50    12.29%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $37.00   -33.03%
MOT    05/14/00  JAN-2002 $36.6 WMA-AZ   $ 9.54   $ 2.81   -70.52%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 7.00   -59.42%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $10.88   -38.73%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $11.88    15.18%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $10.38   -15.31%
AMGN   07/02/00  JAN-2002 $ 75  WQY-AO   $20.75   $16.25   -21.69%
                 JAN-2003 $ 70  VAM-AN   $28.75   $25.88   -10.00%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $59.75   - 9.81%
       09/03/00  JAN-2003 $190  OVS-AR   $86.63   $78.50   - 9.38%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $21.88    27.70%
                 JAN-2003 $ 70  OZG-AN   $23.13   $28.13    21.60%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $19.88   -29.65%
                 JAN-2003 $120  VHP-AD   $32.63   $24.63   -24.53%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $ 7.50   -63.86%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $10.75   -57.64%
MFNX   08/06/00  JAN-2002 $ 40  WOF-AH   $13.75   $ 3.63   -73.64%
                 JAN-2003 $ 45  VKW-AI   $15.63   $ 5.13   -67.21%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $51.25    63.32%
                 JAN-2003 $100  VFB-AT   $37.38   $56.38    50.82%
BRCD   08/27/00  JAN-2002 $220  YNU-AD   $65.38   $90.50    38.42%
                 JAN-2003 $220  OMW-AD   $86.50   $114.00   31.79%
CMRC   09/10/00  JAN-2002 $ 80  YCU-AP   $30.13   $27.25   - 9.56%
                 JAN-2003 $ 80  OCU-AP   $38.75   $37.00   - 4.52%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $28.13    25.00%
                 JAN-2003 $ 70  VLM-AN   $29.63   $36.38    22.76%
COMS   10/01/00  JAN-2002 $ 20  WTH-AD   $ 6.38   $ 6.63     3.92%
                 JAN-2003 $ 25  VTH-AE   $ 7.13   $ 7.38     3.51%
WCOM   10/01/00  JAN-2002 $ 35  WQM-AG   $ 6.75   $ 4.63   -31.48%
                 JAN-2003 $ 35  VQM-AG   $ 9.88   $ 7.50   -24.05%
INTC   10/15/00  JAN-2002 $ 45  WNL-AI   $ 9.50   $11.00    15.79%
                 JAN-2003 $ 45  VNL-AI   $13.38   $15.00    12.15%

Spotlight Play

WM - Washington Mutual $39.69

For those of you just tuning in, WM has been a great sleeper
play since we added it at $25.  Recovering from its lows over
the past 7 months, our play has significantly outperformed the
Financial sector.  Tracing a nice series of higher highs and
higher lows, our play has cleared one level of resistance after
another, and is now within striking distance of its all-time
high of $45.75.  The company's most recent earnings report added
to the bullish picture, beating estimates by a penny.
Technically it is hard to find fault with the stock as it
continues to find support between the 30-dma (currently $38.56)
and the 50-dma (currently $36.75).  Volume has been a solid
indicator of near-term direction, increasing during the upward
moves and falling off during periods of profit taking.  Even the
recent volatility in the broader markets has been unable to
shake WM out of its consistent upward stair step pattern.  With
solid support at $37-38, nestled right between the two moving
averages mentioned above, our play looks like it could be
setting up to provide one more attractive entry point before
taking another run at the $42 resistance level.  Daily MACD and
Stochastics have turned south in recent days and volume has been
declining, indicating normal consolidation is taking place.
Wait for the technicals to turn positive, and then take your
position as WM confirms support and heads back up.

BUY LEAP JAN-2002 $40.00 WWI-AH at $6.88
BUY LEAP JAN-2003 $45.00 VWI-AI at $7.88


New Plays

TXN - Texas Instruments $47.50

Back from its travels in bear country, TXN is showing promise
for a nice recovery as the Semiconductor industry recovers.
Thoroughly abused with the rest of the stocks in its sector,
the DSP (Digital Signal Processing) chip leader finally found a
bottom on Wednesday's decline and appears to have put in a solid
bottom at $35.  TXN is a major supplier of chips to the handset
makers, and perceptions of a slowdown in the industry had added
to the downside pressure.  With NOK's impressive results and
forward-looking statements, it became clear that there was not
an industry-wide slowdown in handset sales, although it sure
seems that way to MOT and ERICY as they lose market share to the
Finnish handset maker.  While there are still concerns about a
slowdown in the PC-related Semiconductor industry, TXN's
exposure to this market segment is limited.  In its most recent
quarter, TXN managed to meet estimates and post solid revenue
growth of 25%, keeping alive the notion that specialized
Semiconductors are still a hot commodity.  Although the worst
appears to be over for our play, a retest of the $40 support
level is not out of the question, especially if the bears manage
to pressure the technology sector one more time before the fall
rally begins in earnest.  A milder retracement to the $45 level
looks like a good level for initiating new positions as long as
the buyers step up to the plate.  Stochastics and MACD have
turned decidedly positive, adding credence to the theory that
TXN has turned the corner, but that doesn't rule out a bit more
weakness as we slog our way through the remainder of the spooky
month of October.  Conservative investors will want to wait for
the bulls to scale the $52 resistance level before jumping into
the play.

BUY LEAP JAN-2002 $50.00 WTN-AJ at $13.75
BUY LEAP JAN-2003 $50.00 VXT-AJ at $18.38



Drops

ERICY $11.69 Given the concerns about the Wireless sector and
the stock's weak performance, we put ERICY on probation a few
weeks ago, listing $14 as the critical support level it needed
to hold.  It looks like the company definitely doesn't have its
house in order as demonstrated by its disappointing earnings
results posted on Friday.  Their guidance for the future didn't
inspire confidence, and it is clear from NOK's positive earnings
announcement and bullish comments that ERICY is losing market
share to their Nordic rival.  Apparently First Union Securities
saw this coming, as they downgraded the stock on October 11th
from Buy to Market Perform.  After the lackluster earnings
report, Lehman Brothers cut their rating from Buy to Outperform
and Josephthal & Co dropped their view of the stock from Buy to
Hold.  While the drop on Friday may represent a near-term
bottom, it is entirely possible that the stock will retest major
support in the $8-9 range before recovering its footing.  There
are too many quality plays out there to waste any more time with
ERICY.

MOT $23.38 The results of the wireless handset companies are now
out in the open and it is clear that the problems seen by MOT
are the same problems seen by ERICY.  A slowdown in demand for
handsets is NOT the problem, as NOK once again posted impressive
results and had glowing comments about the immediate future.
The problem for MOT and ERICY is that NOK is eating their lunch,
taking over more market share, while continuing to maintain a
nice fat profit margin.  MOT's disappointing results from
earlier in the month dropped the stock to the $20 level before
buyers were willing to step in.  Just for historical reference,
the stock hasn't seen that level since December of 1998.  We've
seen a minor recovery in the past several days, but since
plunging below the $28 support level, MOT will encounter major
resistance at that level.  This just isn't the type of play that
belongs on the LEAPS playlist, so we are giving it the boot this
weekend.


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

When Have I Seen This Before?
By Ryan Nelson

A mid-October turn for the tech stocks came in right on schedule.
It almost makes you wonder what the markets were fearing last
week.  It's not like we haven't seen this before, as in the
past three years.  Nevertheless, the momentum seems to be on
the way back.  That will give us opportunity was we play the
split runs for the coming weeks.  Adobe appears to be turning
higher and could be considered for an entry.  Other split runs
may be materializing in stocks like AMCC and HWP.


Current Split Run Plays

None


Current Split Candidate Plays

VRTS
BRCD
IDPH
JNPR
BRCM
NTAP


Candidates That Are Not Current Plays

ARBA
RIMM
CFLO
MUSE
VRTS
VRSN
PMCS
NUAN
SEBL
VRTX
PWER


10 Most Recent Announcements We Predicted

AMCC - 10/11 (most recent announcement)
DNA  - 10/05
LEH  - 09/20
ORCL - 09/14
SUNW - 08/17
GLW  - 08/16
HWP  - 08/16
CIEN - 08/15
SEBL - 08/08
SAPE - 08/01


Major Announcements So Far This Month = 13

DNA      BEC      EMLX     AMCC
IWOV     TLB      ITWO     CDIS
ABK      PHCC     PVN      DCTM
EPNY


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


Symbol  Company Name                Splits  Payable    Executable
MSS  - Measurement Specialties, Inc.  2:1  10/20/2000  10/23/2000
LEH  - Lehman Brothers Holdings, Inc. 2:1  10/20/2000  10/23/2000
BSYS - Bisys Group, Inc.              2:1  10/20/2000  10/23/2000
NUHC - Nu Horizons Electronics        3:2  10/23/2000  10/24/2000
RNBO - Rainbow Technologies, Inc.     2:1  10/23/2000  10/24/2000
ADBE - Adobe Systems, Inc             2:1  10/24/2000  10/25/2000
DNA  - Genentech, Inc.                2:1  10/24/2000  10/25/2000
CMRO - Comarco, Inc.                  3:2  10/27/2000  10/30/2000
HWP  - Hewlett-Packard Company        2:1  10/27/2000  10/30/2000
AMCC - Applied Micro Circuits         2:1  10/30/2000  10/31/2000
PNS  - Pinnacle Data Systems          2:1  10/31/2000  11/01/2000
TEK  - Tektronix, Inc.                2:1  10/31/2000  11/01/2000
TLB  - Talbots, Inc.                  2:1  11/07/2000  11/08/2000
PKE  - Park Electrochemical Corp.     3:2  11/08/2000  11/09/2000
CDIS - Cal Dive Intl Inc              2:1  11/13/2000  11/14/2000
EPNY - E.piphany, Inc.                3:2  11/13/2000  10/31/2000
DCTM - DOCUMENTUM                     2:1  11/13/2000  11/14/2000
EV   - Eaton Vance Corp               2:1  11/13/2000  11/14/2000
AZA  - ALZA Corporation               2:1  11/15/2000  11/16/2000
BEIQ - BEI Technologies, Inc.         2:1  11/21/2000  11/22/2000
PHCC - Priority Healthcare Corp.      2:1  11/22/2000  11/24/2000
PVN  - Providian Financial Corp       2:1  11/30/2000  12/01/2000
PSC  - Philadelphia Suburban          5:4  12/01/2000  12/04/2000
ITWO - i2 Tech                        2:1  12/04/2000  12/05/2000
SUNW - Sun Microsystems               2:1  12/05/2000  12/06/2000
BEC  - Beckman Coulter, Inc.          2:1  12/07/2000  12/08/2000
ABK  - Ambac Financial                3:2  12/12/2000  12/13/2000
IWOV - Interwoven                     2:1  12/29/2000  01/02/2000


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

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http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html

The Option Investor Newsletter                   Sunday 10-22-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/102200_5.asp

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

The Bargain Hunting Begins...
By Mark Wnetrzak

With the recent uncertainty in the market, we have received an
increasing number of requests for information on covered-calls
with LEAPS.  Here is an explanation of the basic concepts and
common trading techniques that will help you profit from this
conservative, long-term strategy.

LEAPS can be an ideal investment tool for the option trader who
expects future growth in an underlying stock but does not want
to make the substantial capital outlay required for entering an
outright position in the issue.  With expiration dates months or
even years in the future, time decay occurs very slowly for LEAPS
and these unique instruments offer an effective way to benefit
from a stock's appreciation without incurring the risk associated
with the actual purchase of shares.  Buying LEAPS is an excellent
strategy that finds the happy medium between aggressive, short-
term option trading and the outright purchase of the underlying
issue.

Covered call writing is a stock options trading strategy that some
investors use when they are looking for a conservative risk/return
profile, while maintaining a meaningful profit potential in either
bullish or bearish market environments.  An investor will usually
write a covered call to generate income, collecting a premium for
the sale of an option against a stock in his or her portfolio.
This strategy can also be used with LEAPS options, but it differs
because it does not involve the direct ownership of shares of the
underlying stock; LEAPS are substituted for the long position.
There is the added benefit that comes from writing calls against
the long position on a regular basis, lowering the overall cost
of the LEAPS as each short-term option expires.

One of the best and most popular strategies associated with LEAPS
is writing a covered call on the long-term option.  The technique
is similar to a calendar spread (or time spread).  The strategy
generally consists of the sale of one call and the simultaneous
purchase of another call, both on the identical underlying stock,
with the same strike price but one option near-term and the other
option further out.  The theory behind calendar spread profits is
based on a neutral philosophy in which time erodes the value of
the near-term option at a faster rate than the far-term option.
The most common type of time spread is bullish, where the price
of the underlying issue is some distance below the strike price of
the options.  This position is speculative with low initial cost
and large potential profits, and two favorable outcomes can occur:
The stock rallies in the short-term and the position is closed
for a profit as time value erosion in the short option produces
a net gain or; the underlying stock consolidates, allowing the
sold option to expire and then eventually rallies above the long
option's strike price.

Covered-calls with LEAPS positions can be constructed for any
market outlook or bias on both volatile and stagnant positions.
The strategy is best initiated when the front-month options are
trading at a premium with respect to longer-term volatility.
Most investors prefer to establish these positions at least 8-12
months before the LEAPS expire, capitalizing on the ability to
sell a number of short-term options.  The basic concept in this
type of spread is selling time value in the options when they
are overpriced (high implied volatility) and buying it back, if
necessary, when the options return to intrinsic value.  Ideally,
the trader would like to have the stock finish just below the
sold strike when the near-term option expires.  However, when
the short-term position is in-the-money on the last day of the
strike period, you must buy it back so that you don't have to
exercise the LEAPS to cover your obligation; that would defeat
the purpose of the strategy.  At the beginning of each strike
period, you simply sell the next month's call to further reduce
the cost basis of the LEAPS.

Larry McMillan's book, "Options as a Strategic Investment" has
some excellent information on calendar spreads and other time
selling strategies.  It is available in the OIN bookstore.

Good Luck!


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

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

PRGN   20.94  20.75   OCT  17.50  4.00  *$  0.56  14.4%
FFD    10.56  12.00   OCT  10.00  1.06  *$  0.50  11.4%
GALT   29.13  31.50   OCT  25.00  4.75  *$  0.62  11.1%
TKTX   45.38  39.94   OCT  35.00 12.00  *$  1.62  10.5%
CCUR   19.00  19.31   OCT  17.50  2.38  *$  0.88   7.7%
IMGN   26.19  38.19   OCT  22.50  5.50  *$  1.81   7.6%
ENMD   26.38  24.13   OCT  22.50  4.63  *$  0.75   7.5%
CTIC   50.13  73.50   OCT  40.00 12.50  *$  2.37   6.8%
MCKC   23.69  21.19   OCT  20.00  4.00  *$  0.31   6.8%
PSFT   33.88  40.63   OCT  30.00  4.75  *$  0.87   6.5%
GLGC   24.75  21.94   OCT  20.00  6.38  *$  1.63   6.4%
WDC     5.75   5.25   OCT   5.00  1.19  *$  0.44   6.2%
BCGI   20.00  23.94   OCT  17.50  3.38  *$  0.88   5.8%
LBRT   30.00  23.56   OCT  22.50  9.13  *$  1.63   5.7%
ASPX   12.38  11.81   OCT  10.00  2.75  *$  0.37   5.6%
IMGN   21.81  38.19   OCT  17.50  5.50  *$  1.19   5.3%
WGAT   22.88  19.00   OCT  17.50  6.63  *$  1.25   5.0%
AAS    42.28  44.69   OCT  40.00  4.00  *$  1.72   4.9%
KOSP   19.75  19.56   OCT  17.50  2.81  *$  0.56   4.8%
ISIP   11.50  10.19   OCT  10.00  1.81  *$  0.31   4.6%
SYNM   20.75  17.06   OCT  17.50  4.38   $  0.69   3.7%
MSTR   31.38  24.19   OCT  25.00  8.25   $  1.06   3.0%
GNSS   19.31  16.75   OCT  17.50  2.63   $  0.07   0.5%
RCOT   15.81  14.31   OCT  15.00  1.44   $ -0.06   0.0%
TRIH   32.38  28.75   OCT  30.00  3.50   $ -0.13   0.0%
EFCX   11.88   8.88   OCT  10.00  2.63   $ -0.37   0.0%
PRST   20.13  16.13   OCT  17.50  3.63   $ -0.37   0.0%
QHGI   15.00  13.38   OCT  15.00  0.88   $ -0.74   0.0%
OSUR   14.00  10.50   OCT  12.50  2.50   $ -1.00   0.0% (EPTO)
CYBS   12.69   6.38   OCT  10.00  3.13   $ -3.18   0.0%

AVID   14.75  15.38   NOV  12.50  3.63  *$  1.38  10.8%
RDRT    7.94   8.31   NOV   5.00  3.25  *$  0.31   5.7%
BPUR   17.38  19.50   NOV  15.00  3.25  *$  0.87   5.4%
WDC     6.13   5.25   NOV   5.00  1.44  *$  0.31   4.8%

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

Comments:

Purchasepro.Com (PPRO) was unplayable this week as the gap-up
open on Monday deflated the over-priced call option we were
targeting.  It is again that time to re-evaluate your outlook
on those stocks that were not called away and act accordingly.

Positions Closed Early:

Red Hat (RHAT), Ventro (VNTR), Wave Systems (WAVX), Tivo (TIVO),
Worldpages.Com (WPZ), Neoforma.Com (NEOF), Globalstar (GSTRF),
Niku (NIKU), and Youthstream Media (NETS).


NEW PICKS - Sequenced by Return
*****

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

ANSR   18.31  NOV  12.50  QRA KV  6.63  330  11.68   28     7.6%
CTXS   21.44  NOV  17.50  XSQ KW  4.88  206  16.56   28     6.2%
ECLP   21.38  NOV  17.50  IQV KW  4.63  90   16.75   28     4.9%
FFD    12.00  NOV  10.00  FFD KB  2.75  1460  9.25   28     8.8%
FIBR   32.50  NOV  20.00  QFW KD 13.50  18   19.00   28     5.7%
MTSI    9.38  NOV   7.50  TQM KU  2.81  20    6.57   28    15.4%
UAXS   15.31  NOV  12.50  QXX KV  3.38  10   11.93   28     5.2%


Company Descriptions

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

*****
ANSR - answerthink  $18.31  *** Second Chance Entry! ***

answerthink provides comprehensive eBusiness strategy, marketing
and technology-enabled solutions focused on the emerging digital
marketplace.  As an eBusiness leader, the company offers a range
of integrated solutions, including best practices benchmarking,
eBusiness strategy and architecture, interactive marketing and
design, business applications and technology integration.  On
Tuesday, answerthink reported net revenues for the third quarter
increased 22% to $84.1 million from $69.0 million last year.  Net
income increased to $6 million, or $0.15 per diluted share, from
$4 million, or $0.10 per diluted share, in the third quarter of
1999.  The company was recently upgraded and downgraded and the
current weakness may offer a second chance to own this issue at
a reasonable cost basis.  The solid earnings demonstrate that the
company continues to strengthen and their recent alliances should
enhance their ability to deliver strategic technology-enabled
solutions to their clients.

NOV 12.50 QRA KV LB=6.63 OI=330 CB=11.68 DE=28 MR=7.6%


*****
CTXS - Citrix Systems  $21.44  *** Stage I Base ***

Citrix Systems is a global leader in application server software
and services that offer "Digital Independence(TM)" - the ability
to run any application on any device over any connection, wireless
to Web.  Its products, including MetaFrame(TM) application server
software, NFuse(TM) application portal software and Independent
Computing Architecture (ICA), a core application-server technology,
have been widely adopted by the corporate mainstream to achieve key
business goals.  Citrix was one of the first stocks to receive a
"haircut" back in the Spring after the company issued a warning and
lost its CEO.  Analysts appear to favor Citrix's technology and
market niche, but are waiting to see if the company can deliver
solid results.  On Wednesday, Citrix reported net revenues for the
third quarter of $113.5 million, up 7% from $105.8 million and net
income of $27.5 million or $0.14 per share beating estimates by
$0.02.  The results seem to have pleased investors as the stock
rallied on strong volume and closed above its 50 dma.  We simply
favor the improving technically pattern and bullish outlook.

NOV 17.50 XSQ KW LB=4.88 OI=206 CB=16.56 DE=28 MR=6.2%


*****
ECLP - Eclipsys Corporation  $21.38  *** Earnings Rally! ***

Eclipsys is a leading healthcare information technology provider.
The company provides, on an integrated basis, enterprise-wide,
clinical management, access management, patient financial
management, health information management, strategic decision
support, resource planning management and enterprise application
integration solutions to healthcare organizations.  Additionally,
the company provides other information solutions including remote
hosting, outsourcing, networking technologies and other related
services.  This month, Eclipsys shares have been in rally mode
after receiving favorable ratings from Jefferies & Co. and
Raymond James.  Eclipsys recently released a Linux version of
its eWebIT, a Web-based enterprise application integration (EAI)
product.  On Wednesday, HEALTHvision (created through a merger
of Eclipsys and VHA Inc.), announced an agreement with Cox Health
Systems to deploy a comprehensive e-health strategy.  This is a
first step in providing a service that addresses the varied needs
of key constituents with a single Web-based platform.  We favor
the Stage II breakout on heavy volume as investors speculate on
next Tuesday's earnings report.

NOV 17.50 IQV KW LB=4.63 OI=90 CB=16.75 DE=28 MR=4.9%


*****
FFD - Fairfield Communities  $12.00  *** Buyout-Merger? ***

Fairfield Communities sells vacation ownership interests (VOIs),
commonly known as timeshares, through its points-based vacation
system, Fairshare Plus.  The company also offers financing for
VOI purchasers and other related services.  Fairfield recently
announced that it is engaged in preliminary discussions concerning
a possible merger or other transaction between Fairfield and an
undisclosed company.  They emphasized that there can be no assurance
that these discussions will lead to a definitive agreement and the
company is not expected to issue any further public statements
regarding the discussions until an agreement is signed or the
discussions are terminated.  We simply favor the bullish breakout
on high volume and the ability to speculate conservatively on the
outcome of the rumors.

NOV 10.00 FFD KB LB=2.75 OI=1460 CB=9.25 DE=28 MR=8.8%


*****
FIBR - Osicom Technologies  $32.50  *** New Deal! ***

Osicom Tech is a developer and marketer of metropolitan optical
networking systems, through its optical networking subsidiary
Sorrento Networks.  Sorrento Networks has been a provider of all
optical networking solutions that are used in both interoffice
and access networks since 1997.  Last week, Sorrento announced
a sweeping agreement with Atlanta-based Cox Communications to
provide optical transport solutions nationwide, with immediate
installations in Virginia, California, Arizona and Louisiana.
They will build a next-generation network with scaleable band-
width capabilities allowing Cox to deliver these broadband
capabilities in these locations more efficiently.  After posting
rather dismal earnings in September, this 4-year deal worth up
to $40 million could be just what the doctor ordered.  Osicom
appears to be undergoing a change of character and Friday's
move on heavy volume offers a chance to enter this issue at a
reasonable cost basis.

NOV 20.00 QFW KD LB=13.50 OI=18 CB=19.00 DE=28 MR=5.7%


*****
MTSI - MicroTouch Systems  $9.38  *** What's Up? ***

MicroTouch Systems is a leader in the manufacture of computer
touchscreen display products incorporating the two most popular
touch technologies; analog capacitive and resistive membrane.  The
company applies these technologies in a variety of products, and
markets them under the ClearTek and TouchTek brand names.  No news
to explain MicroTouch's recent spike in price though Bloomberg.com
states that Texas investor Edward W. Rose III and his affiliates
acquired a 7.1 percent stake in Microtouch, spending $6.2 million
to buy 460,300 Microtouch shares from Sept. 27 to Oct. 11.  That
still doesn't account for the recent three day surge.  Is someone
else interested in this stock?  Why?  Maybe it's an earnings run?
(Earnings are due next Thursday).  Remember, the "Tape" tells all
and this play offers cheap speculation at a reasonable cost basis.

NOV 7.50 TQM KU LB=2.81 OI=20 CB=6.57 DE=28 MR=15.4%


*****
UAXS - Universal Access  $15.31  *** Internet Speculation ***

Universal Access is an Internet network infrastructure services
provider that provisions, interconnects and manages high-capacity
multiple-carrier networks in the most efficient, timely and cost-
effective manner.  By combining information and facilities
management, it provides the only solution in the marketplace today
that delivers end-to-end network connections to ISPs, application
service providers, and telecommunications service providers with
the speed to market required to accelerate revenue growth and meet
the Internet-driven demand for bandwidth.   Universal Access has
been named to the Deloitte & Touche's prestigious "Fast 50" program
for Greater Chicagoland, a ranking of the 50 fastest growing tech-
nology companies in the area.  The company was recognized as number
1 in the "Rising Star" category of the awards.  This week Universal
Access was raised to a "strong buy" by analyst Jonathan Atkin at
Dain Rauscher Wessels with a 12-month target of $55.00 per share.
The technical picture also continues to improve as Universal Access
forges a stage I base.  This position offers a favorable cost basis
for investors who have a bullish outlook on the company.

NOV 12.50 QXX KV LB=3.38 OI=10 CB=11.93 DE=28 MR=5.2%




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

Naked Put Percentage List
By Matt Russ

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

ADBE  140.06    130  AXX-WF    7.63   3502   22%     130
AETH  106.88     90  HIZ-WR    6.88   2672   26%      90
ARBA  129.81    120  RBU-WD    9.75   3245   30%     120
ARTG   88.50     80  AYQ-WP    5.13   2213   23%      80
AVNX  118.75    100  UYN-WT    5.63   2969   19%     100
BEAS   85.56     75  BUC-WO    4.00   2139   19%      75
BRCD  252.44    230  GUF-WF    8.88   6311   14%     235
BRCM  242.19    220  RDU-WD   10.38   6055   17%     220
CHKP  170.00    150  KGE-WJ    6.75   4250   16%     160
CRA    68.75     60  CRA-WL    4.13   1719   24%      60
CREE   90.50     80  CQR-WP    5.00   2263   22%      80
ELNT  104.63     95  UET-WS    5.75   2616   22%      95
EMLX  160.25    140  UEL-WH    8.50   4006   21%     135
EXTR   99.44     90  EXR-WR    6.88   2486   28%      90
GSPN   82.63     65  GHY-WM    5.25   2066   25%      65
IDPH  190.25    175  IHD-WO    8.13   4756   17%     175
INKT   80.00     70  KYQ-WN    5.50   2000   28%      70
ITWO  186.88    175  QYI-WO   10.25   4672   22%     175
IWOV  119.81    105  IQG-WA    5.25   2995   18%     105
JNPR  232.00    220  JUD-WD   14.38   5800   25%     220
MUSE  195.25    180  UZQ-WP   15.63   4881   32%     180
NEWP  162.00    140  NOQ-WH    8.63   4050   21%     140
NTAP  148.63    130  ULM-WF    6.00   3716   16%     130
PDLI  121.31    110  RPV-WB    5.38   3033   18%     110
QLGC   95.38     85  QLC-WQ    4.50   2385   19%      85
SCMR   84.94     75  SMZ-WM    6.50   2124   31%      75
SDLI  339.00    300  QJV-WT   14.75   8475   17%     300
VRSN  177.31    160  XVR-WL   10.13   4433   23%     160
VRTS  166.81    145  VUQ-WI    5.25   4170   13%     145


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

October is almost over, so lets get ready for the next rally!
By Ray Cummins

Today we begin a series of regular reviews of the most common
questions asked by new traders.  Our subject for this session
is "Option Pricing Concepts."


Question:

Why is it so important to understand option pricing and fair
value?  Why can't I just buy an option and wait for the market
to move in the right direction?

Answer:

The most important factors in option trading are market movement,
option volatility (with regard to pricing and probability), and
time decay.  The knowledge of these concepts is paramount to
profitable trading and without a suitable basis, you will likely
enter the market at a theoretical disadvantage.  The primary
requirement is familiarity with option pricing.  In volatile
issues, the emotional optimism of traders can cause prices to
vary widely from their true worth.  Without a realistic estimate
of the value of an option, you will often pay an excessive amount
for the rights inherent in the contract and that usually results
in a much lower return (if any) when the issue finally makes the
expected move.  As intelligent traders, we have the ability to
measure the value of an option through mathematical evaluation,
but if you aren't partial to formulas, pricing models will help
you determine the fair market value of an option.  Many of the
established tools for pricing options are free and they should be
used before opening any new position.  Remember, in the majority
of trading techniques, the end result is almost always a product
of what you know, and how well you act upon it.

There are option pricing and volatility calculators at various
sites on the Internet.  One of the most popular (free) tools is
available at the CBOE's web-site (www.cboe.com).  In addition,
there is a great freeware program that downloads data from the
CBOE web-site and displays a quote montage along with the Greek
values available from Rocky Point Software (www.rpsw.com).


Question:

What are the "Greeks" and why is "Delta" (or the hedge ratio) so
important when buying and selling options?


Answer:

An option's price is determined by mathematical equations that
use variables from all of the factors affecting its value.  Each
aspect of option pricing is a separate component of the formula
and they have Greek titles; Delta, Gamma, Theta, Vega, and Rho.
The primary influence on an option's price is the movement of the
underlying security.   This concept relates directly to the first
and most important of the Greeks; Delta.  Delta measures the rate
of change in an option's price compared to a one point movement
in the underlying security.  It can be thought of as a percentage
of the movement of the stock price.  If the stock price moves up
$2 while the option on that stock gains $1, it has a delta of 50
(or 50%).  An at-the-money (ATM) call option will typically have
a delta of 50.  In-the-money (ITM) calls will have higher deltas;
a greater percentage move, based on the change in the underlying
issue.  The opposite is true for out-of-the-money (OTM) call
options; their deltas are lower.  A deeply out-of-the-money call
option will have a delta very close to zero.

Call deltas are positive; put deltas are negative, reflecting the
fact that the put option price and the underlying stock price
are inversely related.  The delta of an option is also occasionally
called the "hedge ratio" and it can be used to determine the
number of calls one would need to be short to create a risk-less
hedge; a position which would be worth the same whether the stock
price rose by a very small amount or fell by a very small amount.
In such a "delta neutral" portfolio, any gain in the value of the
shares held due to a rise in the share price would be exactly
offset by a loss on the value of the calls written.  Of course,
as the delta changes with the stock price and time to expiration,
the number of shares would need to be adjusted to maintain the
hedge.  How quickly the delta changes with regard to the stock
price is given by gamma, one of the lesser known "Greeks."

Gamma is sometimes considered the "delta" of the delta.  Market
makers use this component almost exclusively in the management of
large option accounts.  Specialists who hedge portfolios using the
delta technique try to keep gamma as small as possible to help
limit the adjustments necessary to maintain a risk-free position.
If the position gamma is too large, a small change in stock price
can devastate the hedge.  Adjusting gamma can be difficult, thus
computers are used to monitor portfolio positions and alert the
specialists when corrections are needed to maintain the complex
ratios.

Vega is the change in option price given a one-percentage point
change in volatility.  Similar to delta and gamma, Vega is also
used for hedging.

Theta is the change in option price given a one-day decrease in
time to expiration.  This component is basically a measure of
time decay.  Time value and time decay are actually two of the
easiest aspects of option pricing to understand.  The time value
of any option can be simply viewed as everything but the intrinsic
value.  Time costs money and more time equals more money.  The
amount of time value in an option's price decays each day it is in
existence.  The closer the option gets to expiration, the faster
it decays.  In a strictly mathematical sense, time value decays at
its square root and this rate of decay is known as Theta.

Rho, while not commonly used by retail traders, is the change in
option price given a one percentage point change in the risk-free
interest rate.

Next week, we review another complex subject in the realm of
option pricing; "Historical Volatility."

Good Luck!


SUMMARY OF PREVIOUS PICKS
*****

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

PSFT   34.44  40.63   OCT  27.50  0.44  *$  0.44  26.1%
CRUS   39.19  45.00   OCT  30.00  0.50  *$  0.50  26.1%
MDRX   17.56  15.88   OCT  15.00  0.50  *$  0.50  21.9%
ASPX   12.25  11.81   OCT  10.00  0.50  *$  0.50  17.2%
ECLP   16.00  21.38   OCT  12.50  0.38  *$  0.38  15.4%
PROX   48.63  58.00   OCT  40.00  0.38  *$  0.38  14.7%
PSFT   33.88  40.63   OCT  27.50  0.44  *$  0.44  12.6%
PALM   53.19  59.38   OCT  45.00  0.38  *$  0.38  12.3%
WGAT   23.31  19.00   OCT  17.50  0.56  *$  0.56  11.7%
CLTR   36.75  35.31   OCT  30.00  1.13  *$  1.13  10.8%
PLNR   19.75  17.75   OCT  15.00  0.69  *$  0.69  10.8%
LBRT   32.44  23.56   OCT  22.50  0.63  *$  0.63   9.6%
GLGC   23.00  21.94   OCT  17.50  0.31  *$  0.31   9.1%
ALLP   16.50  13.88   OCT  12.50  0.50  *$  0.50   8.5%
UNM    25.00  27.00   OCT  22.50  0.63  *$  0.63   8.4%
CERN   46.69  53.06   OCT  40.00  0.44  *$  0.44   7.7%
CMNT   21.00  30.56   OCT  17.50  0.56  *$  0.56   7.4%
HCR    16.00  14.81   OCT  15.00  0.38   $  0.19   7.1%
PRBZ   29.44  31.81   OCT  25.00  0.50  *$  0.50   6.9%
WGR    26.25  25.13   OCT  22.50  0.56  *$  0.56   6.7%
DRXR   19.06  17.63   OCT  15.00  0.38  *$  0.38   6.6%
STAT   20.00  22.72   OCT  15.00  0.44  *$  0.44   6.4%
SCUR   26.25  24.50   OCT  17.50  0.50  *$  0.50   6.3%
VITR   48.94  37.25   OCT  30.00  1.00  *$  1.00   6.0%
CTIC   50.13  73.50   OCT  35.00  0.56  *$  0.56   5.7%
CERN   46.44  53.06   OCT  40.00  0.50  *$  0.50   5.7%
NERX   23.00  17.38   OCT  17.50  0.38   $  0.26   5.7%
FNSR   48.38  37.00   OCT  40.00  0.69   $ -2.31   0.0%

OCR    16.88  15.81   NOV  15.00  0.63  *$  0.63   8.3%
CHTR   19.38  18.63   NOV  17.50  0.63  *$  0.63   7.0%
VICR   49.38  50.50   NOV  40.00  0.88  *$  0.88   6.8%
VPI    25.50  23.75   NOV  22.50  0.50  *$  0.50   5.6%
HSIC   22.56  20.69   NOV  20.00  0.50  *$  0.50   5.2%

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

Comments:

Noven Pharma (NOVN) gapped-up on Monday's open and moved higher
all week, thus no entry was available.  Many of the issues closed
early (listed below), rebounded strongly on Friday and actually
would have provided a positive return - Murphy's Law in action!

Positions Closed Early:

Goto.Com (GOTO), Wave Systems (WAVX), Xerox (XRX), Knight Trading
(NITE), Coinstar (CSTR), Cadence Design (CDN), Andrea Electronics
(AND), Niku Corp. (NIKU)



NEW PICKS - Sequenced by Return
******

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

BCGI   23.94  NOV  17.50  QGB WW  0.56  0    16.94   28    11.4%
CYTC   50.25  NOV  40.00  YQK WH  1.13  214  38.87   28    11.0%
STAT   22.72  NOV  20.00  TAQ WD  0.69  0    19.31   28    10.6%
RNBO   47.00  NOV  35.00  BQO WG  0.88  40   34.12   28     9.3%
ENTU   29.00  NOV  20.00  EXH WD  0.50  61   19.50   28     8.6%
PATH   17.63  NOV  15.00  AQE WC  0.38  70   14.62   28     8.6%
ICN    40.19  NOV  35.00  ICN WG  0.56  313  34.44   28     5.3%


Company Descriptions

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

*****
BCGI - Boston Communications  $23.94  *** Solid Earnings! ***

Boston Communications Group operates in the following segments:
Prepaid Wireless Services, Teleservices, Roaming Services, and
Systems Divisions.  The Prepaid Wireless Services Division offers
prepaid wireless service that allows carriers to access BCGI's
prepaid C2C platform.  The Teleservices segment provides customer
support teleservices to wireless carrier's customers.  Their
Roaming Services Division provides services that give carriers
the ability to generate revenues from subscribers who are not
covered under traditional roaming agreements by arranging payment
for roaming calls.  The Systems Division manufactures and markets
voice processing platforms to wireless and wire-line carriers;
sells prepaid systems to international carriers; and manufactures
the voice nodes used to support BCGI's C2C network.  Quarterly
earnings were reported last week and the numbers were favorable.
In addition, the technical breakout above $21 suggests the issue
has additional upside potential.

NOV 17.50 QGB WW LB=0.56 OI=0 CB=16.94 DE=28 MR=11.4%


*****
CYTC - CYTYC Corporation  $50.25  *** Earnings Rally? ***

CYTYC Corporation designs, develops, manufactures and markets a
sample preparation system for medical diagnostic applications.
Their ThinPrep System allows for the automated preparation of
cervical cell specimens on microscope slides for use in cervical
cancer screening, as well as for the automated preparation of
cell specimens on slides for use in non-gynecological testing
applications.  The ThinPrep System is designed to reduce the
incidence of false negative diagnoses, improve slide quality and
enable a single sample to be used for additional testing.  The
company also sells ThinPrep Microscope Slides which improve cell
adhesion to the slide.  Earnings are due next week and based on
the recent bullish activity, investors believe the results will
be favorable.  We will speculate on the outcome of the report
with this deep OTM position.

NOV 40.00 YQK WH LB=1.13 OI=214 CB=38.87 DE=28 MR=11.0%


*****
ENTU - Entrust Technologies  $29.00  *** On The Rebound! ***

Entrust is a global provider of public-key infrastructure (PKI)
products and services to e-businesses and other organizations.
Their solution is a comprehensive, end-to-end PKI framework
designed to assure the security of electronic transactions and
communications over advanced networks, including the Internet.
Its open, scalable software solution operates across multiple
platforms, network devices and applications.  The products that
constitute the core of the company's PKI solution are unique
alternatives to current industry offerings.  Last week, Entrust
reported that its third-quarter results beat analyst estimates
by two cents a share while showing a turnaround from a loss the
previous period.  Analysts agree with the company's new outlook
and the cost basis for this position is a favorable price at
which to own this issue.

NOV 20.00 EXH WD LB=0.50 OI=61 CB=19.50 DE=28 MR=8.6%


*****
ICN - ICN Pharmaceuticals  $40.19  *** For Sale! ***

ICN Pharmaceuticals is a global, research-based pharmaceutical
company that develops, manufactures, distributes and sells
pharmaceutical, research and diagnostic products.  The products
treat viral and bacterial infections, diseases of the skin,
neuromuscular disorders, cancer, cardiovascular disease, diabetes
and psychiatric disorders.  On Friday, ICN said it would consider
strategic transactions including a sale of the company prior to
undertaking its restructuring.  Under the restructuring, ICN will
spin off two of its divisions into separate publicly traded units
to its current shareholders: Ribapharm, which encompasses ICN's
research and development activities and ICN International, which
comprises the company's operations in Western Europe and Asia.  It
will also create a third publicly traded entity made up of its
existing operations in North and South America.  The bullish chart
suggests that investors favor the company's strategy.

NOV 35.00 ICN WG LB=0.56 OI=313 CB=34.44 DE=28 MR=5.3%


*****
PATH - AmeriPath  $17.63  *** Earnings Rally! ***

AmeriPath is an integrated physician group practice and laboratory
management company that is focused on providing anatomic pathology
diagnostic services in the United States.  Since inception, the
company has acquired or affiliated with a large number of physician
practices across America.  The hundreds of pathologists employed by
the company provide medical diagnostic services in laboratories
owned and operated by AmeriPath, in addition to hospitals, and
outpatient ambulatory surgery centers.  Earnings are due next week
and investors are confident about the outcome of the report.  The
issue has rallied above a recent trading range to a 52-week high
and based on the current technical strength, there is additional
upside potential if the earnings report is favorable.

NOV 15.00 AQE WC LB=0.38 OI=70 CB=14.62 DE=28 MR=8.6%


*****
RNBO - Rainbow Technologies  $47.00  *** Earnings/Stock Split! ***

Rainbow Technologies is a developer and supplier of computer
network security products that secure the rights to software and
other digital content, and that provide privacy and security for
computer network and Internet communications and commerce.  The
company's products include software protection products against
piracy, license management and tracking, and software distribution
over the Internet; information security products for network and
satellite communications; and Internet security products for
Internet transaction capabilities in a secure environment, access
controls for computer networks including Virtual Private Networks.
A bullish chart, a stock split and upcoming earnings...what more
could you want in a speculation play?  Plan to "target shoot" a
higher premium initially, as the issue consolidates from recent
gains.

NOV 35.00 BQO WG LB=0.88 OI=40 CB=34.12 DE=28 MR=9.3%


*****
STAT - I-Stat  $22.72  *** On The Move Again! ***

I-STAT develops, manufactures and markets medical diagnostic
products for blood analysis that provide health professionals
with immediate and accurate critical diagnostic information at
the point of patient care.  The company's current products,
known as the I-STAT System, consist of portable, hand-held
analyzers and single-use, disposable cartridges, each of which
simultaneously performs different combinations of commonly
ordered blood tests. The I-STAT System uses a simple, one-step
procedure, and the results can be easily linked by infrared
transmission to a health care provider's information system.
The Medical Instruments and Appliances group has performed very
well over the past few months and STAT is poised to become one
of the premier companies in the industry.  While there are a
number of positive fundamental aspects in this company, the
technical strength of the recent rally suggests there may be
additional upside potential in the future of the stock and a
cost basis near historical support will suit us just fine.

NOV 20.00 TAQ WD LB=0.69 OI=0 CB=19.31 DE=28 MR=10.6%




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

The Market Recovery Continues...

******************************************************************
- MARKET RECAP -
******************************************************************
Friday, October 20

Stocks moved higher today as bargain hunters emerged after a new
batch of positive earnings reports.  The Nasdaq ended 64 points
higher at 3,483 and the Dow was up 83 points at 10,226.  The S&P
500 index finished up 8 points at 1,396.  Trading volume on the
NYSE reached 1.19 billion shares, with advances beating declines
1,595 to 1,230.  Activity on the Nasdaq was heavy at 2.12 billion
shares exchanged, with advances beating declines 2,357 to 1,594.
In the bond market, the 30-year Treasury rose 12/32, pushing its
yield down to 5.73%.


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

Human Genome   HGSI   NOV75P/NOV80P   $1.50   credit  bull-put
Human Genome   HGSI   JAN100C/J105C   $2.38   debit   bull-call
EMC Inc.       EMC    LJAN50C/J110C   $52.00  debit   LEAPS/CCs
Advent         ADVS   NOV80C/NOV40P   $1.12   credit  strangle
Fairfield      FFD    JAN12C/JAN10P   $0.62   debit   synthetic

Today's market volatility provided some excellent opportunities
to participate in our new combination positions.


Portfolio Plays:

The market rally continued Friday as investors gained confidence
in the recent recovery amid strong earnings reports.  Trading was
volatile due to the "double witching" expiration of options on
stocks and stock indexes and both major averages experienced
triple-digit swings.  Honeywell (HON) led the Dow higher, surging
$10 to $46 after United Technologies (UTX) said it has terminated
merger discussions with the company and that Honeywell received an
alternative merger proposal, possibly from General Electric (GE).
Hewlett-Packard (HWP), Merck (MRK), Microsoft (MSFT) and AT&T (T)
were among the leading blue-chip issues.  Semiconductor giant SDL
Inc. (SDLI) led the Nasdaq, rising $50 to $339 after reporting
third-quarter profits that beat consensus estimates by $0.07.
SDLI's merger partner JDS Uniphase (JDSU) also rallied, finishing
up $12 at $102.  Customer analysis software maker E.Piphany (EPNY)
rose $25 to $90 after beating third-quarter earnings estimates and
announcing a bullish outlook for the future.  In addition, several
analysts raised their price targets on the company.  Vitria (VITR)
was another big winner, up $10 to $37 after posting third quarter
profits that beat First Call's estimates.

The Spreads/Combos portfolio enjoyed a number of favorable moves
during the session and this week's broad market rally boosted the
majority of our October positions to a profitable finish.  The
top performers in the technology group were Commerce One (CMRC),
Ballard Power (BLDP), Manugistics (MANU), Qlogic (QLGC), Verisign
(VRSN), and Virata (VRTA).  Market bellwethers have dominated the
recovery and our new bottom-fishing position in Intel (INTC) has
exceeded all expectations.  The downtrodden issue has rallied 20%
since the bull-call debit spread was initiated and the long call
option is over $10 in-the-money.  Applied Micro Circuits (AMCC)
was also one of the leaders this week, but today the issue went
too far after analysts at J.P. Morgan started coverage on the
company with a "buy" rating and a 12-month target price of $265.
The bearish portion of our credit-spread strangle was short at
$200 and those of you that didn't close the position Friday
morning (at a favorable profit) were left with a small loss
at the close of trading.  The unpredictable market activity has
produced a number of great volatility opportunities and our new
positions in Globix (GBIX), Nice Systems (NICE), and SCM Micro
(SCMM) all returned favorable short-term profits.  The recent
Nasdaq-100 (QQQ) straddle also provided excellent profits for
those that traded the position during expiration week.  In the
financial sector, shares of Bear Stearns (BSC) soared to $61.50
amid new strength in brokerage issues and continued speculation
of a potential takeover.  Buyout rumors have boosted activity in
the stock and its options over the past few weeks and Friday was
another big day as traders surmised that a deal would finally be
consummated over the weekend and announced before the market opens
on Monday.  Our one-week bullish diagonal spread yielded a 17%
return and there is additional potential for those of you that
rolled to November options in the short position.  Knight Trading
Group (NITE) was also a popular issue, up almost $3 to $29.38 and
our recent downward adjustment to the NOV-$25 Put may yet produce
a profitable outcome.

Overall, it was a good month for the Spreads/Combos section, and
considering the recent slump in the market, we were happy to end
the expiration period "in the black."  Looking forward, we have a
number of improvements planned for the section and with the new
addition to our staff, we expect to provide a wider variety of
strategies to the OIN's many dedicated readers.  Those of you
with suggestions on how the section can be improved should send
your comments to: Contact Support

******************************************************************
                         - NEW PLAYS -
******************************************************************
EYE - VISX Incorporated  $23.00   *** Speculation Play! ***

VISX develops products and procedures to improve people's eyesight
with lasers.  The company's principal product, the VISX STAR S2
Laser System (VISX System), is designed to correct the shape of a
person's eyes to reduce or eliminate their need for eyeglasses or
contact lenses.  The VISX System ablates, or removes, submicron
layers of tissue from the surface of the cornea to reshape the eye,
thereby improving vision.  The Food and Drug Administration has
approved the VISX System for use in the treatment of most types of
vision problems including nearsightedness, farsightedness, and
astigmatism.  The company sells VisionKey cards to control the use
of the VISX System and to collect license fees for the use of its
patents.

VISX has its eye on the top spot in the field of laser-corrected
vision.  They earn profits primarily through the collection of a
license fee for every completed Lasik procedure.  Several months
ago they reduced their $500 per-eye fee to help increase demand
for the procedure.  The immediate impact hurt the stock, which was
once a Wall Street darling.  However, the demand for the procedure
is now growing at an incredible pace, and it seems everybody that
has undergone the procedure, including myself, loves the outcome.
In addition, the company reported outstanding earnings last week,
beating the Street estimates by a penny.  Of course, fundamentals
can make a great company but they won't guarantee a great stock.
(Review a one year chart of the issue for a great example of that
fact.)

There is a twist in this play.  The legendary corporate raider
Carl Icahn had accumulated approximately 10% of the outstanding
VISX shares.  The FTC granted him antitrust approval to buy up to
15% of the float back in August, however VISX shareholders adopted
a "poison pill" to stop him.  The company's poison pill prevents
Icahn (or others) from holding more than 10% of the outstanding
shares.  Icahn is currently in close talks with VISX President
and COO concerning strategic options for the company.  History
tells us that Icahn will not rest till he shores up the value of
the company's sagging shares, thus a short-term bullish position
is definitely in order!


PLAY (speculative - bullish/diagonal spread):

BUY  CALL  DEC-20  EYE-LD  OI=434  A=$4.62
SELL CALL  NOV-25  EYE-KE  OI=131  B=$1.25
INITIAL NET DEBIT TARGET=$3.25 INITIAL TARGET ROI=53% B/E=$23.25


There are several possible outcomes for this play.  One scenario
would be for the stock to close just under $25 at expiration in
November.  In that case, we would sell the DEC-$22.50 or DEC-$25
call, reducing our cost basis in the long position and creating a
bullish debit spread.   Of course, the issue could simply finish
above our sold strike in November and the play would return a 53%
profit for one month.  There are other, more complex alternatives
and those will be discussed as the play progresses.


******************************************************************
HON - Honeywell International  $46.00  *** Takeover Target! ***

Honeywell is a diversified technology and manufacturing company
serving customers worldwide with aerospace products and services,
control technologies for buildings, homes and industry, automotive
products, power generation systems, specialty chemicals, fibers,
plastics and electronic and advanced materials.  Operations are
conducted by strategic business units that have been aggregated
under four reportable segments: Aerospace Solutions, Automation
and Asset Management, Performance Materials and Transportation
and Power Products.  Late last year, AlliedSignal and Honeywell
completed a merger and as a result, the former Honeywell became
a subsidiary of AlliedSignal.  In short, AlliedSignal was renamed
Honeywell International.

Honeywell was in the news late last week as United Technologies
(UTX) made a bid for the company.  The share value soared $10 on
Friday, closing near $46 on heavy volume.  In almost any other
circumstance, this would be a classic "short" opportunity as the
chart pattern is not very strong and the short-term Stochastic is
approaching overbought territory.  However, when significant news
produces the rally, all bets on technical analysis are off.  The
spike in share value increased Honeywell's market cap to almost
$28 billion and considering that United Technologies' offer was
rumored to be somewhere around $40 Billion (and General Electric
upping the ante), the stock could be in for a nice upward ride.

Technically, the issue held up reasonably well (in the mid-30's)
before the merger news became public and it should have little
difficulty remaining in the $40 range.  If it falls below the
sold strike, the position risk is limited to less than $2.  At
the same time, you could simply take assignment of this popular
Dow component (at a discount) and sell covered calls to recover
any losses.


PLAY (speculative - bullish/credit spread):

BUY  PUT  NOV-37.50  HON-WU  OI=250  A=$1.00
SELL PUT  NOV-40.00  HON-WH  OI=79   B=$1.63
INITIAL NET CREDIT TARGET=$0.75-$0.88  ROI(max)=42%


******************************************************************
BCHE - Biochem Pharma  $24.50  *** Increased Options Activity! ***

BioChem Pharma is an international biopharmaceutical company
dedicated to the research, development and commercialization of
innovative products for the prevention, detection and treatment
of human diseases, with a focus on the anticancer and other
nti-infective areas.  Its products include 3TC, a nucleoside
analog with a novel heterocyclic surrogate sugar ring, various
lines of vaccines, and diagnostic systems and products.

BCHE has been very active in recent sessions and traders say the
upcoming earnings report is the likely culprit.  Whatever the
reason, the new option interest has created a number of favorable
premium disparities and based on your outlook for the issue, the
opportunities to construct profitable positions are excellent.


Note: This play is based on increased activity in the stock and
underlying options.  Although the position offers a favorable
risk/reward potential, it must also be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.


PLAY (conservative - bullish/calendar spread):

BUY  CALL  APR-30  BQX-DF  OI=40   A=$1.88
SELL CALL  NOV-30  BQX-KF  OI=207  B=$0.38
INITIAL NET DEBIT TARGET=$1.31-$1.38  TARGET ROI(max)=50%


The strategy is best initiated when the front-month options are
trading at a premium with respect to longer-term volatility.
Most investors prefer to establish these positions at least 3-5
months before the long options expire, to allow the sale of a
number of short-term options.  The basic concept in this type of
spread is selling time value in the call options when they are
overpriced (high implied volatility) and buying it back, if
necessary, when the options return to intrinsic value.  Ideally,
the trader would like to have the stock finish just below the
sold strike when the near-term option expires.  However, when
the short-term position is in-the-money on the last day of the
strike period, you must buy it back so that you don't have to
exercise the long-term options to cover your obligation; that
would defeat the purpose of the strategy.  At the beginning of
each expiration period, you simply sell the next month's call to
further reduce the cost basis of the long position.


******************************************************************
HAND - Handspring  $89.31  *** A Big Mover! ***

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.

Handspring announced record earnings last week and just like all
the other companies in the small group, their numbers exceeded
analysts' consensus estimates.  However, the stock is now slightly
overbought and a post-announcement consolidation is expected.
Our conservative position offers a great method to participate in
the future movement of the issue with relatively low risk.  Target
a higher spread credit initially, to allow for a brief pullback in
the issue.


PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-50  HQA-WJ  OI=66  A=$1.43
SELL PUT  NOV-55  HQA-WK  OI=43  B=$2.00
INITIAL NET CREDIT TARGET=$0.68-$0.75  ROI(max)=16%


******************************************************************
                   - STRADDLES AND STRANGLES -
******************************************************************
BRCM - Broadcom Corporation  $242.19  *** Probability Play! ***

Broadcom Corporation is a provider of highly integrated silicon
solutions that enable broadband digital transmission of voice,
video and data to and throughout the home and within the business
enterprise.  These integrated circuits permit the cost-effective
delivery of high-speed, high-bandwidth networking using existing
communications infrastructures that were not originally designed
for the transmission of broadband digital content.  Using unique
proprietary technologies and advanced design methodologies, the
company designs, develops and supplies integrated circuits for a
number of the most significant broadband communications markets,
including the markets for digital cable set-top boxes, cable
modems, high-speed office networks, home networking, direct
broadcast satellite and terrestrial digital broadcast, and
digital subscriber lines.

BRCM is an excellent candidate in the neutral, premium-selling
category of options trading.  Based on analysis of the historical
option pricing and technical background, this position meets our
fundamental criteria for a potential credit-strangle.  The issue
has good option premiums, a relatively well-defined trading range,
and with the company's quarterly earnings announced last week,
there should be little news to produce additional volatility in
the underlying stock.  The probability of profit from this play
is higher (80%-90%) than other plays in the same strategy based
on historical option pricing.  As with any recommendation, the
position should be carefully evaluated for portfolio suitability
and reviewed with regard to your strategic approach and personal
trading style.  Many of you may favor an aggressive position,
selling options that are closer to the current price of the issue,
to produce a higher initial return.  While that technique may
appear more profitable, it also increases the theoretical risk of
loss.  Only you can know what positions are suitable for your
risk-reward tolerance and portfolio outlook.


PLAY (conservative - neutral/credit strangle):

SELL CALL  NOV-320  YRL-KD  OI=438  B=$2.50
SELL PUT   NOV-185  RDU-WQ  OI=296  B=$2.88
INITIAL NET CREDIT TARGET=$5.50-$5.75  ROI(max)=10%
UPSIDE B/E=$325.50 DOWNSIDE B/E=$179.50


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


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