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Daily Newsletter, Sunday, 10/29/2000

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The Option Investor Newsletter                   Sunday 10-29-2000
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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
       WE 10-27         WE 10-20         WE 10-13          WE 10-6
DOW    10590.62 +364.03	10226.59 + 34.41 10192.18 -404.36  - 54.38
Nasdaq  3278.36 -204.78	 3483.14 +166.37  3316.77 - 44.27  -311.78
S&P-100  726.18 - 11.98	  738.16 +  9.15   729.01 - 21.96  -  8.86
S&P-500 1379.58 - 17.35	 1396.93 + 22.76  1374.17 - 34.82  - 27.52
W5000  12860.60 -196.80	13057.40 +253.90 12803.50 -338.60  -471.30
RUT      479.85 -  7.60	  487.45 +  7.06   480.39 - 10.63  - 30.35
TRAN    2528.97 + 59.90	 2469.07 + 38.89  2430.18 -113.47  + 22.01
VIX       30.15 +  2.73	   27.42 -  3.56    30.98 +  5.31  +  1.82
Put/Call    .59		     .50              .76              .75
******************************************************************

Everyone Take A Deep Breath

The week is finally over.  And what a week it was.  After CNBC
convinced the world that the entire future of the NASDAQ was
hinged upon one particular fiber-optic company's earnings, it's
nice to just have the event in the past.  All eyes were on JDSU
and fortunately they didn't disappoint.  So what should we make of
Friday's market action?  Well, putting in a bottom is a process,
not an event, and Friday was just another trading day.  Traders
sorted through earnings and economic numbers as the INDU soared
with strong confirmation and the NASDAQ just tried to stay in the
green.

During the course of the week, the NASDAQ tested the 3520 area
twice, establishing a double-top, and then went for a retest of
the recent lows.  The low this week: 3081.  A higher low I might
add.  This will be an essential level going forward.  I don't
think anyone will complain if we never see 3081 again, but a
break below this level in the near future will be reason for
concern.  When the NASDAQ hit this level on Thursday ahead of the
JDSU earnings after the bell, it performed a miraculous rally that
could only be orchestrated by...none other than Dick Arms.  Yes,
it must be true as Bob Pisani broke the news on CNBC.  I actually
got a chance to speak to Dick Arms, creator of the ARMS Index and
the Equivolume model, this weekend at our Advanced Option Seminar
in Denver.  "So Mr. Arms, how did you create such a forceful
rally?"  He was a pleasure to speak with and he chuckled about the
sensationalism of it all.  What really happened was Mr. Arms
advised some of his institutional clientele that his technical
analysis said "buy," but not bet the farm.  Well, Pisani got wind
of that from one of the institutional clients, broke that story
and bang!  We got ourselves a 180 point rally!  Amazing how
information and the market work.  More importantly, how investors
filter information through their minds.

But that was Thursday.  On Friday, the NASDAQ looked like it just
might rally after JDSU's better-than-expected earnings, but it
sold off throughout the morning.  Yet, it did manage to mount an
intraday uptrend before stumbling to the close.  Even though the
NASDAQ didn't rally hundreds of points on the comfort of JDSU, it
did close up 6.18 points to 3276.  In fact, a move like this is
more welcomed since it indicates an element of consolidation.
Especially considering volume was a robust 2 mln shares.  Just
another leg in the bottoming process.  We are now almost out of
the notorious month of October and the tax-loss selling that comes
along with it.  So that's positive number one.  Positive number
two is that we have, hopefully, endured the most difficult times
of the bottoming process.  Looking overhead, resistance near the
3520 area will be the breakout point where I'll back up the truck.
Until then, we should still see volatile trading as investors
determine which stocks will be given the honor of high valuations
after this recent shakeout.  How about CMTN at $10.75?  The VIX.X
closed the week at 30.15 as fear lingers in those option premiums.




The INDU had a very strong day on Friday with a 210 point gain,
further extending its rebound from the sub-10000 levels.  Friday's
trading activity was a breakout from resistance around 10430,
which continued to strengthen throughout the week.  The next level
of resistance will be 10600, previous support on the way down to
10000.  It would be likely that the INDU retraces to test the
breakout point of 10430.  Leading the INDU was JPM(+12.81).
Financials rallied after the GDP data released Friday morning
pointed toward a cooling economy with a 2.7% annual growth rate
for the 3rd quarter.  This is the slowest pace since April 1999.
It was expected that this headline number would be lower given
that 3rd quarter earnings reports from S&P 500 companies have
reflected a slowdown in revenues and profits.  Yet, most
economists expected a GDP growth rate in the range of 3% and 3.5%.
Probably more important to the markets, and Greenspan, was the GDP
Deflator.  This key measure of inflation tied to the GDP rose at
an annual rate of 2.2% in the 3rd quarter, versus 2.1% in the
previous quarter.  With clear signs of slower growth, it's unlikely
that the Fed will move on interest rates at their upcoming November
15th meeting.




Helping the INDU was MSFT's breakout over $65.  Finally coming
back to life after better-than-expected earnings on the 18th,
investors find themselves once again looking at the old favorite.
Even in the face of a hacker attack on the software giant
on Friday, MSFT climbed 5% to close at $67.69.  While it is still
unclear what intellectual property is at stake here, the company
assured investors that the stolen codes are not related to the
flagship Windows operating system, or the Office suite.  Yet,
security experts think that there may be more to this industrial
espionage that MSFT isn't speaking about.  Namely, the company's
recently announced .Net software.  Experts expect that any
stolen source codes will either show up on the Internet or be
sold off to the highest bidder, probably overseas.  MSFT officials
are still investigating how such a high-profile security breach
could have happened.

Looking eagerly ahead to November, the economic calendar is full
with Personal Consumption Expenditures(PCE) and Personal Income on
Monday.  Non-Farm Payrolls and the Unemployment numbers will
follow on Thursday and Friday, respectively.  Earnings are winding
down next week, highlighted by PG on Tuesday and QCOM on Thursday.
Once again, traders will be watching for 4th quarter guidance.
Global concerns with the Euro continue to linger and traders will
be watching to see the next move by the ECB.  With the bottoming
process in full swing, the NASDAQ will be in a volatile
consolidating mode.  If we take out Thursday's low of 3081, watch
out.  Otherwise, buying the dips can provide profitable
opportunities as we have seen many high fliers bounce 30 or 40
points.  It was nice meeting some of you this weekend at the
Seminar and I wish you continued good luck.

Matt Russ
Editor

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

The Eternal Question
By Austin Passamonte

No we don't mean why are you here; the question we're referring
to is, "Do we have a bottom in place?" Our honest answer at this
point would be yes and no.

Yes is the answer for "is the worst behind us"? First let's
define worst. The recent intraday low set two Wednesday's ago
should hold any retest and failure to do so will find strong arms
not far below. That means we are closer to the bottom than top.
Most of the pain from recent highs on September 1st until now has
been endured, absorbed and survived.

That being said, Market Sentiment is pretty sure a retest will
unfold and it will happen soon if this is the case. Analysts and
people on the street are all polarized in opinion and plenty of
facts could bolster either case. Here's our unbiased view of the
highest probability.

First of all, these markets remain quite weak and need to
stabilize before launching forward with follow through. If the
Dow didn't have several key components exhibiting strength each
day we would be at much lower market levels across the board
right now. It single-handedly is keeping a finger in the dike to
staunch unabashed selling.

NASDAQ charts are very weak and turning more bearish by the
minute. This of course is subject to change, but daily stochastic
and MACD values have stalled near 80% overbought zones and have
begun to roll over.

In addition to weak charts signals, two other big-money factors
have us on alert.

A huge block trade of 17,000+ QQQ Nov 81 Calls were in the
market by someone betting $6+ million in collected premium we
will see lower prices before higher. It takes solid information
to move money like that into risk.

Another player purchased 950 S&P 500 1350 puts @ 14.5 on Friday
for a multi-million $$ wager as well. Should we heed this action
or trade against it?

Friday's latest COT report shows S&P 500 commercial traders still
holding 10-year extreme net short positions in the futures arena.
The small spec players have added greatly to their net-longs
while the big boys haven't backed off a bit. We've been talking
about this for months now and many type-A traders long ago
dismissed its significance. Big mistake.

These traders are the giants in our game and they push the pile.
Apparently they feel odds are highest we will see lower prices
yet and we refuse to bet against them, ever! Their track record
is extremely good and one only need to look back at October 1997
and 1998 for a refresher.

These were the last two times they sat nearly this net-short, and
one look at a weekly chart of any index will tell you where the
market was when they covered in early November each time. They
are short to a greater degree now than either of those times.

What are they waiting for? Lower prices. When will they cover and
switch to the accumulation phase? When they feel a bottom is in
place and not a moment sooner. Neither should we.

Yes, all our raging bulls are pawing the ground and raring to go
but what will that get you? Try to hold calls too soon for too
long and the starting gate in front of you will turn to a squeeze
chute into the burger factory.

It's our opinion the highest-percentage likelihood is for the
major indexes to sell down at least once more before our next
really significant rally, which should be considered a strong buy
opportunity for bullish strategies of all types

Get ready for another profitable week of trading opportunity and
please be prepared to buy calls or puts with equal aplomb.

*****

VIX
Friday 10/27 close; 30.91

30-yr Bonds
Friday 10/27 close; 5.74%

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 10/28)
  (Open Interest)       Calls       Puts         Ratio
S&P 100 Index (OEX)
Resistance:
765 - 750               8,304       4,478         1.85
745 - 730              11,601       7,031         1.65

OEX close: 726.18

Support:
720 - 705               2,698       8,789         3.26
700 - 685                 189       6,728        35.60***

Maximum calls: 740/5,891
Maximum puts : 720/4,306

Moving Averages
 10 DMA  725
 20 DMA  734
 50 DMA  774
200 DMA  778


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 88 - 86              19,597       17,121         1.14
 85 - 83              28,273       40,899          .69
 82 - 80              40,970       24,851         1.65

QQQ(NDX)close: 79.90

Support:
 78 - 76               9,928       32,334         3.26
 75 - 73               4,921       43,123         8.76
 72 - 70               1,643       21,919         13.34***

Maximum calls: 80/14,975
Maximum  puts: 73/23,849

Moving Averages
 10 DMA 81
 20 DMA 81
 50 DMA 89
200 DMA 94


S&P 500 (SPX)
Resistance:
1450                  10,479         8,674         1.21
1425                   9,449        10,880          .87
1400                  25,833        23,353         1.11

SPX close: 1379.58

Support:
1350                   8,335        22,671         2.72
1325                   1,998        10,193         5.10
1300                   1,213        16,737        13.80***

Maximum calls: 1400/25,833
Maximum puts : 1400/23,353

Moving Averages
 10 DMA 1375
 20 DMA 1387
 50 DMA 1443
200 DMA 1442

*****

CBOT Commitment Of Traders Report: Friday 10/27
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              +89                   -483
Total Open
Interest %        (1.07% net-long)      (2.34% net-short)

NASDAQ 100
Open Interest
Net Value              -262                   +85
Total Open
Interest %        (1.48 net-short)       (.21% net-long)

S&P 500
Open Interest
Net Value             +57,031               -66,429
Total Open
Interest %        (31.05% net-long)      (10.72% net-short)

What COT Data Tells Us: Commercial positions in S&P 500 have held
their ten-year extreme short levels while small specs increased
their net-long positions as compiled Tuesday 10/24 by the CFTC.

Friday's data should give a clearer picture to Commercials
either covering some profitable shorts or holding fast into
next week.

Bullish:
Fed's finished
Benign government reports
Oversold market levels
Disparity in overhead call/put ratios
VIX above 30
Certain market leaders(MSFT,JDSU) showing strength

Bearish:
Oil Prices
COT reports
Recent pre-warnings, downgrades and shortfalls
Broad market's break of critical M/A support
Market leaders breakdown
Daily technical chart indicators


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

As of Market Close - Sunday, 10/29/2000

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

DOW   Industrials      10,590      10,000  10,600
SPX   S&P 500           1,379       1,305   1,420
COMPX NASD Composite    3,278       3,000   3,550
OEX   S&P 100             726         700     750
RUT   Russell 2000        479         455     500
NDX   NASD 100          3,175       2,950   3,550
MSH   High Tech           896         835     975

BTK   Biotech             710         640     780
XCI   Hardware          1,231       1,130   1,310
GSO.X Software            409         360     440
SOX   Semiconductor       685         600     805
NWX   Networking          982         925   1,180
INX   Internet            336         275     370

BIX   Banking             568         525     575
XBD   Brokerage           596         550     625
IUX   Insurance           782         720     805

RLX   Retail              740         715     775
DRG   Drug                421         395     440
HCX   Healthcare          873         840     900
XAL   Airline             138         124     140
OIX   Oil & Gas           298         296     320

No alerts were triggered on Friday, indicating a trading range is
beginning to develop.  Raising support (DOW, MSH, XCI, BIX,).
Lowering resistance (COMPX, MSH, INX, XBD, OIX).  We're
starting to see some strength from select indexes and sectors,
but there has been a tendency for the first test of resistance to
be met with selling.  Be patient, but not complacent.


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***************
ASK THE ANALYST
***************

Has The Tech Sector Come Asunder?
By Eric Utley

What ever happened to the New Economy dream?  You know the one,
with endlessly rising market caps and infinite earnings growth
for the likes of Cisco, Nortel, and JDS Uniphase.

A week ago, I wrote of the market bottom characteristics
the NASDAQ had displayed.  Last week's action in the
broader markets seemed to refute my claims.  Moreover,
several readers chimed in to say I was, well, quite wrong
about the NASDAQ's behavior two week's ago.  This upcoming
week is sure to reveal more about whether or not the
market has actually reached a bottom.  As my colleagues
continue to remind me, putting in a bottom is a process.

My discussion with Dick Arms at the Denver Advanced Options
Seminar over the weekend kept a glimmer of, dare I say, hope
alive in that the markets have seen the worst.  Mr. Arms
explained that he felt the bottom was in place judging by
the climatic selling he witnessed last Thursday.  I hope
he's right!

Please send any stock request or general questions to
Contact Support.  As always, please put the
symbol of your stock requests in the subject line of the e-mail

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

General Electric - GE

Could you please give your long-term outlook on GE.  It is down
around its 200 day MA and looks to have good support in the low
50's.  Could this be a good long-term entry point? - Thanks, Jeff

General Electric is one of the most widely held and diverse
public corporations in the world.  GE's stock is considered a
bellwether for the broader financial markets because of the
company's diverse operations.  And, its operations became a
little more diverse last week with the acquisition of Honeywell.
GE is expected to grow earnings by a 15% clip over the next
several years, which is a little better than the average for
the S&P 500 (13%).  GE's earnings growth should actually be a
little higher given the Honeywell acquisition should add 10
cents in profits next year.

You mentioned that shares of General Electric are trading down
around the 200-dma, Jeff, which is a rare event indeed.  The
current level of GE's stock could present a compelling buying
opportunity for the long-term investor.  GE's stock fell
victim to the typical acquisition arbitrage selling last week,
which pushed shares below the 200-dma.  To put into perspective,
shares of GE have traded below the 200-dma, for a sustained
period of time, only once in the past two years.  With that
said, GE is probably a pretty good buy at current levels.




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

Aether Systems - AETH

I've been watching AETH for quite some time - after its recent
rebound and the fact that earnings are coming out shortly, could
this be a momentum play depending on the market? - Thanks for
your thoughts and insights, Mike

You bring up an excellent point, Mike, in that the market is
likely to dictate the future direction of Aether.  The company is
especially vulnerable due to its lack of earnings.  The third-
quarter earnings report you referred to, Mike, revealed that
Aether's losses continue to mount.  However, the company did
report a 1000% increase in sales over its third-quarter in 1999.
With those kind of numbers there's no denying the fact that Aether
is growing by leaps and bounds.  What's more, the company's
recent acquisitions have positioned Aether to capitalize on
government contracts for wireless applications.  Although Aether's
prospects appear promising, the lack of an E in the P/E ratio
could continue to hinder the stock, especially if the Tech sector
continues to stumble.

Aether's stock has drastically fallen from its loftly $300 levels
seen back in the spring, like nearly every other high-flying new
economy name.  The stock did spike up about two weeks ago, but has
since fallen back to its descending ways.  Moreover, volume
continues to remain robust during the stock's slide.  We can
conclude the institutions have been selling the stock.  And, it's
extremely difficult to trade against the prevailing downtrend,
unless, of course, you're shorting the stock.  Until the wireless
sector, and the broader Tech sector, stabilize it might be prudent
to sit on the sidelines and wait for a better buying opportunity.
For now, I don't see any upside momentum in shares of Aether.
However, that can change quickly.  Monitor the action in telecom
equipment leaders such as Redback, Juniper, and Cisco for upward
momentum in gaming Aether.



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

ImmunoGen - IMGN

A good stock - nice looking chart with fantastic products under
development in stage two trials - any hope that these products
will be on the market soon - what do you think of the technicals? -
Thanks for your considered opinions, Richard

The technicals for ImmunoGen look great, Richard.  The stock broke
out from its seven-month base in early September, and hasn't
looked back since.  ImmunoGen's recent outperformance is a
reflection of the viability of the company's cancer-fighting
products.  ImmunoGen is creating a cancerous cell-killing
antibody, which has had promising results thus far.  The
company has collaborated with biotech heavyweights Genentech
and Abgenix in an attempt to roll out its tumor-activated
prodrug technology.  The introduction of the aforementioned
should continue to bring in revenues in the form of licensing
agreements.  Although ImmunoGen's cancer fighting products
have yet to receive regulatory approval, many analyst agree
the FDA will give the company the go-ahead because of the
promising clinical trials thus far.  The fact that IMGN will
reach profitability before any of its products have been
approved bodes very well for its stock.  The company is
expected to earn 25 cents per share next year; over 100%
earnings growth.

ImmunoGen's stock is up by over 1000% in the last year alone.
Such an incredible run will inevitably bring the bears'
argument of valuation concerns into the forefront.
However, if the valuation concerns don't arise in this
fickle market, shares could keep on climbing.  The stock has
recently stalled around the $35 level, which may prove to be
the next base to propel IMGN higher.  Volume has been on the
rise since early September, when ImmunoGen received favorable
comments from several brokerages.  Noting the increase in
volume and share price, it's safe to say institutions have
been accumulating the stock with fervor.  With that said,
there are a lot of big players in IMGN ready to defend the
stock around the $25 to $30 levels.



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

Harmonic - HLIT

Please evaluate HLIT.  It seems like the stock has finished
descending, at least for now.  Time for leaps?  Two earnings
warnings killed the stock and I'm wondering if there is any hope
this one will ever come back?  Please comment on the gap from
$15 to $23. - Thanks, Brian

Harmonic is engaged in the broadband business.  The company is a
provider of technologies that enable communications providers to
deliver voice, video, and data to customers.  Harmonic provides
three distinct services to communications providers, which include
data products, digital video, and optical networking services.
The company did have an enviable earnings growth rate for the
past couple of years until the warnings surfaced, which you
alluded to, Brian.  The most recent warning came to light in early
October, when Harmonic warned of a loss from third-quarter
operations.  Analysts had been expecting the company to earn 12
cents per share for its third-quarter.  The company reported a
8 cent loss last week, which was blamed on a slowdown in its
Broadband Access Networks (BAN) division.  Harmonic's losses
are a reflection of the slowdown in capital spending by the likes
of AT&T, among other major telecom carriers.  What's even more
disconcerting is the fact that several other broadband cable
equipment makers have warned of slower earnings and sales
growth for the next several quarters.

The huge gap down, which you referred to, Brian, was a result
of Harmonic's earnings warning in early October.  Judging by the
volume that accompanied the plunge in price, it's safe to say a
lot of longs jumped ship along with several shorts entering
new positions.  Although shares of Harmonic have stabilized
around the $10 level, the chart still looks pretty ugly.  I
don't like the stock's overwhelming downtrend, which has
lasted for since early March.  Buying leaps down here at such
low levels might provide a good long-term trade if Harmonic
shares ever recover.  However, as I've stated before, I don't
like bottom fishing.  If Harmonic's business doesn't improve
very soon, the stock could head a lot lower.  Judging by
the stock's historical levels, as noted on the weekly chart
below, shares of Harmonic could continue falling towards the
$5 area.  To make it clear, Harmonic's earnings are
contracting, which makes it hard to justify owning the stock.







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

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 30, 2000

Monday
======

Personal Income        Sep  Forecast:  0.60%     Previous:  0.40%
PCE                    Sep  Forecast:  0.60%     Previous:  0.60%


Tuesday
=======

New Home Sales         Sep  Forecast:   900K     Previous:   893K
Chicago PMI            Oct  Forecast: 51.00%     Previous: 51.40%
Consumer Confidence    Oct  Forecast:   140      Previous:  141.9


Wednesday
=========

Auto Sales             Oct  Forecast:   6.8M     Previous:   6.8M
Truck Sales            Oct  Forecast:   7.9M     Previous:   8.0M
NAPM Index             Oct  Forecast: 49.50%     Previous: 49.90%
Construction Spending  Sep  Forecast:  0.50%     Previous:  1.40%
Fed Beige Book         ---  Forecast:  ---       Previous:  ---


Thursday
========

Productivity            Q3  Forecast:  3.50%     Previous:  5.70%
Initial Claims      28-Oct  Forecast:   305K     Previous:   305K
Leading Indicators     Sep  Forecast:  0.00%     Previous: -0.10%


Friday
======

Nonfarm Payrolls       Oct  Forecast:  190K      Previous:   252K
Unemployment Rate      Oct  Forecast:  4.00%     Previous:  3.90%
Hourly Earnings        Oct  Forecast:  0.30%     Previous:  0.20%
Average Workweek       Oct  Forecast:  34.4      Previous:  34.4
Factory Orders         Sep  Forecast:  0.40%     Previous:  2.00%
NAPM Services          Oct  Forecast: 61.00%     Previous: 62.00%


Week of November 6th
====================

7-Nov  Consumer Credit
8-Nov  Export Prices ex-ag.
8-Nov  Import Prices ex-oil
8-Nov  Wholesale Inventories
9-Nov  PPI
9-Nov  Core PPI
9-Nov  Initial Claims
10-Nov  Michigan Sentiment


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The Option Investor Newsletter                   Sunday 10-29-2000
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
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********************
THE PLAYS OF THE DAY
********************

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

MSFT - Microsoft Corp $67.68 (+2.50 last week)

See details in sector list




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

PVN - Providian Financial $94.56 (-8.50 last week)

See details in sector list




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

Index       Last    Week
Dow     10590.62  153.53
Nasdaq   3278.36 -204.78
$OEX      726.18  -11.98
$SPX     1379.58  -17.38
$RUT      479.85   -7.60
$TRAN    2528.97   22.83
$VIX       30.91    3.49

Calls

ADBE       74.81    4.78  New, continues to buck weakness in Tech
MSFT       67.69    2.50  Institutions stepping in and buying
LEH        62.00   -0.75  New, light shining in Financial shares
IDPH      184.88   -5.38  Dropped, sentiment in Biotech shifting
HAND       79.00  -10.31  Dropped, collapsed in last half-hour
EMC        88.81  -11.19  Back on the right side of the 50-dma
BRCM      227.06  -15.13  Upcoming addition to the NASDAQ 100
RIMM       99.94  -17.44  Dragged down by weak Canadian Tech
NTAP      123.00  -25.63  Stability at the $120 and $125 levels
BRCD      226.50  -25.94  Buyers stepped in and scooped up shares
CIEN      104.38  -45.13  Dropped, bruised fiber optics
JNPR      181.00  -51.00  All over the map last week

Puts

DGX        90.50  -22.44  New, sell the earnings news
VTSS       63.50  -13.38  Dropped, the one that got away
SNDK       52.13   -9.88  New, lawsuit keeping shares down
PVN        94.56   -8.50  Investors listened to the downgrade
TIBX       64.94   -5.13  Path of least resistance is downward
FCEL       70.75   -4.63  Change in sentiment for energy stocks
PHCC       50.25    1.88  Profit taking subsided, ready to roll?


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

IDPH $184.88 (-5.37) It appears now that sentiment in the Biotech
sector has turned for the negative.  On Thursday, Biotech giant
Amgen posted its third-quarter earnings.  While the report was
good, it guided analysts lower for the coming year on its
blockbuster drug Epogen.  Along with this, Gilead Sciences also
posted earnings, missing Street estimates, resulting in a rout in
Biotech issues on Friday.  The first signs of a rollover in
IDPH's chart are already apparent, with resistance from the 5 and
now 10-dma.  For candlestick analysts, the failed hammer reversal
is not a good sign.  Along with the Amex Biotech Index, now below
the 50-dma, and the Merrill Lynch Biotech HOLDR perched
precipitously on its 200-dma, we are no longer recommending this
play.

CIEN $104.38 (-45.13) The sizzling earnings report from JDS
Uniphase provided some relief to the bruised fiber optics on
Friday.  CIEN opened strong at $112, but failed to rally much
higher during the session.  If you were aggressively target
shooting, there were a couple opportunities for an entry off the
$100 level; although it was frustrating that CIEN continually
bumped into resistance around $110 and the 50-dma line
($112.87).  Due to the recent freefall within the sector and
more importantly, CIEN's inability to recover with any real
spunk on Friday, we're exiting the play this weekend.  The
strong momentum that we saw earlier in the month may return as
CIEN approaches its own earnings date.

HAND $79.00 (-10.31) HAND collapsed in the last half-hour of
trading on Friday.  The stock came out of the gate with a bang
and quickly tagged $98.94, just missing the 52-week record high
by a fraction.  It then settled in for rather flat day of
trading at the $88 and $90 levels.  Then with no warning, HAND
started to sink fast on accelerating volume.  On the day, the
stock lost 17%, or $16.47.  Volume in these devastating 30
minutes reached 250 K, or about 25% of the ADV!  Since there was
no bad news or other earth-shattering event to explain the
crash, it's possible that an institutional seller was taking
profits.  While it was fun to trade the recent volatility, it's
now time to find other lucrative plays.  HAND's sharp backslide
and the resurfacing concerns about stock valuations have,
without a doubt, killed the play.


PUTS

VTSS $63.50 (-13.38) We'll have to chalk up VTSS as the one
that got away.  When we added the play on Tuesday, we were
looking for a decline through $66 to trigger new entries.
The impact of NT's earnings report was more pronounced
throughout the technology sector than we could have guessed,
pushing our play below $60 at the open on Wednesday.  Although
it declined from there, tagging $52.56 on Thursday, most of
the potential profit in the trade was lost to the opening gap.
The late day recovery on Thursday continued into the open this
morning and VTSS rallied to tag $67.50 before fear of darkness
set in, pulling the stock down a bit at the end of the day.
Both this high and the close for the day were above 5-dma ($64),
and with VTSS holding above its opening price at the close, it
looks like we have seen the bottom.  Weakness on Monday should
be used as an opportunity to close out any positions that were
initiated on today's afternoon weakness, as it looks like the
bulls may have control of the stock going forward.


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

ADBE - Adobe Systems $74.81 (+4.78 last week, split adjusted)

A long-time leader in desktop publishing software, ADBE
provides graphic design, publishing, and imaging software
for Web and print production.  Offering a line of application
software products for creating, distributing, and managing
information of all types, the company generates nearly 75% of
sales through publishing software products such as Photoshop,
Illustrator, and PageMaker.  Its Acrobat Reader, which uses
portable document format (PDF) is popping up all over the
Internet, as businesses shift from print to digital
Communications.

Adobe, it's not just about Photoshop anymore.  Many software
companies have made their name on just one or two "killer apps",
only to rest on their laurels and wake up one day to find
themselves with declining market share and an aging product, but
not so with ADBE.  While still catering to the high-end graphic
design crowd with products such as Illustrator and PageMaker,
they have been quietly positioning themselves to take advantage
of future trends in information technology.  The key to their
strategy is the PDF format, a multi-platform standard that was
designed originally so that desktop publishers could transport
their documents from one computer system to another, while
preserving all aspects of the original file.  The PDF format has
since become a highly popular choice for scaleable web-based
document transport.  More than that, ADBE has started licensing
its PDF technology, as Apple Computers' next-generation operating
system, Mac OS X, will base their Quartz graphics-rendering
engine on the PDF format.  This week, ADBE announced that it
would integrate PDF technology into its FirePublisher server
application to allow support for Palm devices.  The idea of
Adobe's PDF technology inside any and every web-enabled device is
an exciting prospect indeed, which likely helped the company
survive this week's onslaught on Tech stocks.  ADBE was able to
successfully test its 100-dma support, now at $66.09 and is now
above all its major moving averages.  In fact, with the 5, 10 and
50-dmas all sitting in the $69-70 area, support there is strong
indeed.  Aggressive traders will be watching for a bounce off this
area as an ideal entry point while conservative traders will want
to see a strong market bringing out the buyers to carry the stock
above $75 before initiating a play.

On Friday, Merrill Lynch mentioned ADBE in its new technology
strategy report as one of the top 10 stocks that are expected to
outperform over the next six to twelve months, naming the company
as one of the architects of the new "Knowledge Economy".

BUY CALL NOV-70 AXX-KN OI= 828 at $8.75 SL=6.00
BUY CALL NOV-75*AXX-KO OI=1477 at $6.00 SL=4.00
BUY CALL NOV-80 AXX-KP OI= 629 at $4.00 SL=2.50
BUY CALL DEC-75 AXX-LO OI=  25 at $9.13 SL=6.25
BUY CALL DEC-80 AXX-LP OI=  19 at $7.13 SL=5.00

Picked on Oct 29th at    $74.81    P/E = 61
Change since picked       +0.00    52-week high=$85.06
Analysts Ratings      4-7-2-0-0    52-week low =$26.69
Last earnings 09/14   est= 0.52    actual= 0.57
Next earnings   N/A   est= 0.29    versus= 0.46
Average Daily Volume = 2.01 mln



LEH - Lehman Brothers $62.00 (-0.75 last week, split-adjusted)

Lehman Brothers is a global investment firm that services high-
net-worth institutional investors.  They provide a vast array of
trading and financing services and are the lead underwriter of
global equity and fixed-income securities.  The firm is also
leading the charge into online bond offerings in the US.
They're regionally headquartered in New York, London, and Tokyo.

Is that a light shining at the end of the tunnel?  The DOW
cracked the longer term down trend line and closed above 10500!
This technical accomplishment coupled with decent economic data,
which may appease the Feds for another month, should bode well
for LEH.  Recently the company split its stock 2:1 on October
23rd and solid earnings are expected in mid-December.  In this
week's volatile marketplace, LEH didn't show any signs of post-
split depression or weakness.  Instead there was lots of
activity as it firmed a bottom at the $56 level and pushed its
resistance ceiling higher to $64 and $65.  With most of the big
caps showing signs of recovery and the rocky month of October
coming to a close, we're looking for buyers to take this
financial stock back to its previous highs.  The clean break on
Friday through the intersecting 5 and 10 DMAs at $60.11 and
$59.82, respectively, is a bullish sign.  It's reasonable to
consider taking entries on pullbacks to this level.  If your
style is not to buy on the dips, but instead to buy into
strength, then consider target shooting as LEH moves through the
upper resistance at $65 and challenges the $70 level.

Lehman Brothers received tops honors from the Institutional
Investor magazine.  The global investment bank's technology
research team ranked 2nd in the magazine's survey for equity
analysts covering the technology sector.  Within the industry,
there's a bit of poaching going on amongst the major players.
Deutsche Bank announced it lured 13 employees from Lehman last
week; meanwhile Lehman snatched one from Goldman Sachs.  This is
somewhat unusual this time of year because it's a time when
bankers and analysts receive their colossal annual bonuses.

BUY CALL NOV-55 LEH-KK OI= 70 at $8.75 SL=6.25
BUY CALL NOV-60*LEH-KL OI=409 at $5.38 SL=3.25
BUY CALL NOV-65 LEH-KM OI=923 at $3.00 SL=1.50
BUY CALL DEC-60 LEH-LL OI= 30 at $7.38 SL=5.25
BUY CALL DEC-65 LEH-LM OI= 25 at $2.88 SL=1.50

Picked on Oct 29th at    $62.00     P/E = 10
Change since picked       +0.00     52-week high=$80.50
Analysts Ratings      4-4-1-0-0     52-week low =$30.31
Last earnings 09/00   est= 2.69     actual= 3.37
Next earnings 12-20   est= 1.44     versus= 2.28
Average Daily Volume = 1.69 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 10-29-2000
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/102900_3.asp


************************Advertisement*************************
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**************************************************************


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

MSFT - Microsoft Corp $67.68 (+2.50 last week)

Microsoft is the largest and most successful software company
traded on the U.S. stock exchanges.  They develop, license,
manufacture and support many different software products for
various client applications.  Their best known products include
the widely successful Windows 2000 and Windows NT.  Their
business has three main divisions:  sales, marketing and support,
and business operations.  They also provide financing to their
customers.  MSFT continued to demonstrate their ability to
innovate last week with the introduction of new database software
for handheld devices.

Microsoft traded over 62 million shares on Friday, which is more
than double its average daily volume.  In addition, Reuters
reported that over 23 million shares were institutional orders.
Funds are taking in cash, and Microsoft is once again likely to
become a core holding, now that the trial seems to have become
a less significant issue.  MSFT's P/E was reduced to 37 from the
lofty levels it had last January.  This is a stock which seems to
have everything going for it.  On October 18th, Microsoft reported
their first fiscal quarter profits rose 18% to $2.5 billion, or
46 cents per share.  Their Windows 2000 software is more turned
out to be more successful than anticipated, and MSFT actually
reduced their operating expenses for the quarter.  The company has
no debt, and over $24 billion in cash.  They have a strong
return on equity of over 25%, and a profit margin of over 42%.
The market turbulence of this year has left investors and fund
managers looking for growth, stability, predictable earnings,
and profitability.  With a market cap of $340 billion and
annual revenues of over $23 billion, MSFT is a fund manager's
dream, at a price down almost 40% from its high of the year.
Microsoft is now strongly above the 50 DMA of $57.26 and the
10 dma at $59.6.  Microsoft opened to the upside, and remained
strong throughout the day, stopping to rest after lunch at $66.
The stock cleared $68, but couldn't hold and ended closing at
$67.6.  Traders might wait for a pullback to the support level
at $66, or to the 5 dma at $63.38, for a possible entry point.
A strong rally above $69 might provide an additional entry
point.

News sources reported early Friday that computer hackers were
able to break into MSFT's systems.  CEO Steven Ballmer stated
the hackers had not obtained access to any key programs, and
that their source codes remained intact.  The FBI is
investigating the attack.

BUY CALL NOV-60 MSQ-KL OI=26202 at $8.50 SL=$6.00
BUY CALL NOV-65*MSQ-KM OI=34387 at $4.75 SL=$2.88
BUY CALL NOV-70 MSQ-KN OI=36802 at $2.06 SL=$1.00
BUY CALL DEC-60 MSQ-LL OI=  549 at $9.63 SL=$6.50
BUY CALL DEC-65 MSQ-LM OI= 2809 at $6.13 SL=$4.00

SELL PUT NOV-65 MSQ-WM OI=11745 at $1.75 SL=$3.50
(see risk of selling puts in play legend)

Picked on Oct 26th at    $64.44    P/E = 38		
Change since picked       +3.24    52-week high=$119.94
Analyst Ratings      6-10-2-5-0    52-week low= $ 48.43
Last earnings 10/18   est= 0.40    actual= 0.46
Next earnings 01-18   est= 0.49    actual= 0.47
Average daily volume = 28.6 mln



JNPR - Juniper Networks $181.00 (-51.00 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.

A day-trader's delight, JNPR has been all over the map in the
past week.  It appears that the aftershocks of the NT earnings
report are beginning to diminish in the wake of a strong
earnings report by JDSU.  The entire Optical sector has been
whipsawed in recent days, and in the absence of any
company-related news, JNPR has just been going along for the
ride.  And what a wild ride it has been!  Unless you were
eating antacid tablets like they were candy, this was a tough
week to be position trading anything in the Optical group.  But
for those gun-slinging swing traders, there has been profit
galore in our play.  There was more than a $40 range between
Thursday's low ($159.38) and Friday's high ($201.69) and even
with the excessive volatility (and hence increased premiums)
there was money to be made in this trade.  However, our play
is still skating on thin ice.  JNPR gave up over $20 on Friday
after briefly scaling the $200 price barrier and unless it can
hold above its long-term ascending trendline (currently $176)
next week, we will have to cut it loose.  A strong bounce from
this area is buyable but only by those traders that can watch
the stock throughout the day.  Conservative traders should
think twice about entering this play at all, but the more
conservative entry strategy will be to look for a solid breakout
above the $200 level.  If it comes on heavy volume, it will be
a good sign that our play is on the mend.

The primary news of the week (NT and JDSU earnings) is covered
above, but there was a bright spot Friday morning as Banc of
America Securities initiated coverage on JNPR with a Buy rating.
While this alone won't stem the tide of selling in the sector,
it was a good start, and likely a principal catalyst for JNPR's
mid-day 20 point rally.

BUY CALL NOV-180 JUD-KQ OI= 347 at $21.00 SL=15.75
BUY CALL NOV-185 JUD-KP OI= 613 at $18.50 SL=13.50
BUY CALL NOV-190*JUD-KR OI=2109 at $16.00 SL=11.50
BUY CALL NOV-195 JUD-KS OI= 174 at $14.13 SL=10.50
BUY CALL DEC-195 JUD-LS OI=  57 at $22.50 SL=16.75

SELL PUT NOV-160 JUD-WL OI= 631 at $10.50 SL=14.00
(See risks of selling puts in play legend)

Picked on Oct 22nd at   $232.00     P/E = 740
Change since picked      -51.00     52-week high=$244.50
Analysts Ratings     16-4-0-0-0     52-week low =$ 42.17
Last earnings 10/00   est= 0.09     actual= 0.17
Next earnings 01-11   est= 0.15     versus= 0.01
Average Daily Volume = 9.79 mln



RIMM - Research In Motion Ltd. $99.94 (-17.44 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.

Is this the next wave of the computer revolution?  While shares
of traditional PC makers such as Apple and Dell have been
languishing near their 52-week lows, shares of mobile computing
device makers such as Handspring, Palm, and RIMM have flourished.
With the trend towards portable net-ready handheld devices,
people no longer need to be chained to their beige boxes or bulky
laptops to browse the Internet or receive their email.  The
ability to conduct eCommerce transactions anytime and anywhere is
also an exciting prospect.  Add to that the high growth rate of
these next-generation net appliance makers, at 90-100% compared
to the 28-30% growth rate of traditional PC makers and it is no
surprise that there has been so much excitement surrounding these
stocks.  One of the aspects of RIMM that make it especially
attractive however, is that the company derives revenue from two
sources.  First, they realize revenue from the sale of the actual
units, the Blackberry line of wireless handheld products as well
as a host of other wireless cards and adapters.  Second, they
charge a monthly fee to users, bringing in a steady stream of
cash flows.  To use the Superhighway analogy, not only does RIMM
build the cars, it also owns the tollbooth.  While the stock got
as high as $132.69 on Tuesday, weakness in Canadian Tech issues
has attracted sellers, but there is strong support from the
50-dma near $90.  A pullback to support at $95 or $90 would
provide aggressive traders with possible entry points but make
sure there are willing buyers to back the bounce before jumping
in.  A less aggressive play can be had if RIMM can move above
$100 but again, make sure there is serious buying volume before
initiating a play.  Overhead, resistance can be found at the 5-
and 10-dma at $110.21 and $113.06.

As one of the larger cap stocks in the Toronto Stock Exchange
(TSE), RIMM fell victim to the Nortel effect this week, putting
it right on its five month trend-line.  As a result, caution is
recommended on this play, with the increased risk profile.
Confirm direction with sentiment in the TSE before making a play
and keep your stops tight.

BUY CALL NOV- 95 RUL-KS OI= 44 at $13.75 SL=10.00
BUY CALL NOV-100*RUL-KT OI=396 at $10.63 SL= 7.50
BUY CALL NOV-105 RUL-KA OI=218 at $ 8.63 SL= 6.00
BUY CALL DEC-100 RUL-LT OI=306 at $16.13 SL=11.50
BUY CALL DEC-105 RUP-LA OI= 86 at $14.13 SL=10.50

SELL PUT NOV- 90 RUL-WR OI=264 at $ 6.13 SL= 8.50
(See risks of selling puts in play legend)

Picked on Oct 19th at   $122.44     P/E = 1708
Change since picked      -22.50     52-week high=$175.75
Analysts Ratings      6-6-1-0-0     52-week low =$ 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 = 1.66 mln



BRCD - Brocade Communications $226.50 (-25.94 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).

BRCD started the week by making a new all-time high.  Things were
going fine and well until Nortel Networks, a leader in the
equally fast-growing Networking sector, came in with their
earnings report.  While the report for the most part was stellar,
analysts expected more, as NT was about $300 million short on
their revenue numbers.  Fearing that this was a sign of slowing
demand, stocks in the Networking sector were punished on Tuesday,
taking the Storage sector along for the ride.  The damage was all
across the board, with EMC, MCDT, NTAP and VRTS all experiencing
a painful and severe price-to-earnings multiple compression.
This continued into Wednesday but something interesting happened
on Thursday.  At one point, down as low as $190, buyers stepped in
and heartily scooped up shares, and while BRCD did finish the day
down, the dramatic recovery on three and a half times the ADV
suggested that the worst was over.  While candlestick analysts
would note that Thursday's pattern was not a hammer reversal,
signaling a change in trend, BRCD obliged them with one on Friday
as the stock finished up $10.50 or 4.86% on over 155% of ADV.  It
goes without saying that this is a volatile and high-risk play,
making it an aggressive trader's dream.  At this point, support
can be found in increments of $5 at $225, $220, $215 and $210.
There is also support from the 100-dma, currently at $204.19.
When buying a bounce off of support, confirm with volume and
direction of the NASDAQ.  Conservative traders will want to wait
for BRCD to break through resistance from the 50-dma at $227.02
before making a play.

After a conference call on Thursday to deliver an update on the
state of the Storage Area Networking (SAN) space, they were given
a thumbs up on Friday by CE Unterberg.  This in conjunction with
the announcement of a new product, a 64-Port Integrated Fabric as
well as a roadmap on products for the next quarter will likely
bring the excitement back to the BRCD and the Storage sector.

BUY CALL NOV-220 GUF-KD OI= 364 at $21.50 SL=15.50
BUY CALL NOV-230*GUF-KF OI= 724 at $16.38 SL=12.00
BUY CALL NOV-240 GUF-KH OI= 171 at $12.00 SL= 9.00
BUY CALL DEC-230 GUF-LF OI=  88 at $24.25 SL=17.50
BUY CALL DEC-240 GUF-LH OI=  60 at $19.50 SL=14.00

SELL PUT NOV-210 GUF-WT OI=4377 at $ 4.88 SL= 7.00
(See risks of selling puts in play legend)

Picked on Oct 15th at   $239.53    P/E = 584
Change since picked      -13.13    52-week high=$267.44
Analysts Ratings      9-6-2-0-0    52-week low =$ 55.06
Last earnings 08/16   est= 0.13    actual= 0.16
Next earnings 11-15   est= 0.20    versus= 0.03
Average Daily Volume = 3.06 mln



EMC - EMC Corporation $88.81 (-11.19 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. To EMC's
customers, EMC is the caretaker of the world's information.

The list of mega cap Tech stocks which have disappointed
investors this summer is long indeed.  With AAPL, DELL, INTC,
ORCL and MSFT all well below their all-time highs, where is an
investor to turn to?  Throughout this time, stocks such as EMC
and NT have held up well, relative to their downtrodden peers.
Nestled safely in high growth areas, these stalwarts were
considered immune to a slowing economy.  But with their high
stock prices presenting a tempting target to the bears, all they
needed was an excuse.  Despite posting a fantastic earnings
report on Monday evening, NT gave the bears exactly what they
wanted.  Pouncing on the revenue number, $300 million lower than
the high-end analyst estimate, the sellers accused the Networking
and Storage stocks of being priced to perfection, leading to
three straight days of selling.  On Thursday, EMC broke below
support at $85, a level that had been strong for the greater part
of the month.  But bouncing off the $80 level, the stock made a
dramatic comeback and while it ended the day below it's 50-dma
(now at $87.82), the high volume suggested that the selling had
reached a climax.  On Friday, EMC put itself back on the right
side of the 50-dma, with the $85 level once again providing
support. At this point, we feel that the worst is over and with
improving sentiment in the NASDAQ and weak hands shaken out, EMC
appears poised to continue on its ascent.  Aggressive traders
looking for a pullback can target shoot a bounce off support at
the 50-dma, $85 and $80.  Conservative traders will be watching
the $90 level for a buy signal.  A break above that mark on
strong volume will be the green light to initiate a play.

On Thursday, Interstate Batteries, a recent high-profile
customer, sang its praises of EMC, calling the company a vital
infrastructure supplier to of eCommerce solutions, since secure
storage is a critical part of a successful Internet-driven
business model.

BUY CALL NOV-85 EMC-KQ OI=3666 at $8.38 SL=6.00
BUY CALL NOV-90*EMC-KR OI=4203 at $5.63 SL=3.50
BUY CALL NOV-95 EMC-KS OI=6114 at $3.50 SL=1.75
BUY CALL DEC-90 EMC-LR OI= 545 at $8.50 SL=6.00
BUY CALL DEC-95 EMC-LS OI= 495 at $6.25 SL=4.25

SELL PUT NOV-80 EMC-WP OI=4741 at $ 2.63 SL= 4.00
(See risks of selling puts in play legend)

Picked on Oct 22nd at    $100.00    P/E = 137
Change since picked       -11.19    52-week high=$104.94
Analysts Ratings     15-10-1-0-0    52-week low =$ 32.31
Last earnings 10/18    est= 0.19    actual= 0.20
Next earnings   N/A    est= 0.23    versus= 0.17
Average Daily Volume =  8.80 mln



BRCM - Broadcom Corp $227.06 (-15.13 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.  With
a highly motivated management team, and aggressive acquisition
policy, BRCM looks to continue its wide approach to this dynamic
broadband market.

It appears a little safer to get back into the water with
BRCM.  Signs of the stock's upcoming addition to the NASDAQ-100
index are really starting to come in now.  Remember that this is
one of the fundamental reasons that we are currently playing
the stock.  Volume is one of the key indicators of a change in
current, and BRCM closed the session Friday with a whopping 12
million shares trading!  Compare this to its ADV of 4.7 million,
and you'll see why we can officially call this climatic
volume.  Climatic volume of this magnitude can indicate BRCM
could head significantly higher in a new trend, all due to its
new position in the index.  The stock's stochastic cross-over
and MACD bounce off the target line also support this opinion.
Intraday you'll notice that a majority of this volume also
occurred in the last hour of trading.  This indicates that we
have a good deal of smart money support on the play.  We had
also mentioned in our last update, to look for BRCM to trade
above the $225-mark, to confirm that our 200-dma bounce was
valid.  This event occurred on a good daily trend, so we consider
this now a triple bottom and look for a strong trend off this
mark.  Expect continued positive momentum as BRCM should climb
to its upper channel at $260.  With continued positive market
support, the play should easily surpass this upper target.
Investors can continue a momentum entry with trades above the
current 10-dma at $228 now.

The momentum on the play that we have outlined could continue
to carry BRCM higher.  Just an example of the smart money
interest that occurred in the late day trading last week.

BUY CALL NOV-220 RDU-KD OI=1258 at $23.25 SL=$15.00
BUY CALL NOV-230*RDU-KF OI=1244 at $18.38 SL=$13.00
BUY CALL NOV-240 RDU-KH OI=3088 at $14.00 SL=$10.50
BUY CALL NOV-250 RDU-KJ OI=2693 at $10.50 SL=$ 7.50

SELL PUT NOV-220 RDU-WD OI=1080 at $14.25 SL=$20.00
(See risks of selling puts in play legend)

Picked on Oct 22nd at   $242.19    P/E = 412
Change since picked      -15.13    52-week high=$274.75
Analysts Ratings     8-11-1-0-0    52-week low =$ 54.25
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 $123.00 (-25.63 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.

It's been one of those weeks in the market for NTAP.  Right from
the get-go on Monday, NTAP got blind-sided by Robertson Stephens
with a downgrade from Strong Buy to Buy.  While the analyst
noted it wasn't due to any weakness in the current quarter or
future growth concerns, but rather rich valuation limiting
upside potential, the damage was done.  Profit taking was
expected early in the week due to the recent new 52-week record
($152.75) set on the previous Friday, October 20th, but let's
get real.  NTAP experienced some major destruction as a result
of Nortel's (NT) earnings' report and concerns about its own
valuation.  Storage companies got truly hammered on Thursday
amid worries that the stocks have gained too much given their
real prospects.  NTAP hit $102.38 before the tide turned and it
rebounded back into the vicinity of the 50-dma line ($120.16).
We held NTAP over despite the rough trading in light of JDS
Uniphase's strong earnings' report.  Now granted Friday's
performance wasn't exactly stellar, but the share price
demonstrated stability at the $120 and $125 levels.  Plus,
October is almost over and there's lots of money just sitting on
the sidelines.  If the NASDAQ rallies in November, NTAP should
undergo a profitable recovery.  Aggressive entries could be
found on strong bounces off $120 or even of deep dips at $115.
If you'd rather buy into an uptrend, target shoot for entries on
high-volume moves through $128 and $130.

Mark your earnings calendar.  Network Appliance is confirmed to
report in just a couple weeks on November 14th, after the
market.

BUY CALL NOV-120 ULM-KD OI= 400 at $14.25 SL=10.50
BUY CALL NOV-125*ULM-KE OI= 278 at $11.75 SL= 9.00
BUY CALL NOV-130 ULM-KF OI= 704 at $ 9.50 SL= 6.50
BUY CALL DEC-125 ULM-LE OI= 860 at $16.88 SL=12.25
BUY CALL DEC-130 ULM-LF OI= 536 at $14.75 SL=10.75

Picked on Oct 22nd at   $148.63    P/E = 658
Change since picked      -25.63    52-week high=$152.75
Analysts Ratings     15-7-0-0-0    52-week low =$ 15.92
Last earnings 06/00   est= 0.07    actual= 0.09
Next earnings 11-14   est= 0.09    versus= 0.05
Average Daily Volume = 7.00 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 10-29-2000
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/102900_4.asp


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

SNDK - SanDisk Corporation $52.13 (-9.88 last week)

Founded in 1988, SanDisk pioneered industry development of flash
memory cards for data storage and played a key role in setting
many flash industry standards.  It was the first company to
introduce a removable flash MultiMediaCard, an ultra-small size
form factor memory card.  SanDisk embedded flash data storage
devices also are widely used for numerous commercial and
industrial applications in various markets.  Market research
firms have concluded that SanDisk is the flash card market leader
with approximately 28% share of the market.

There's nothing like a lawsuit to keep a stock down.  On
September 7th, Lexar Media (LEXR) filed a patent infringement
complaint against SNDK, alleging that SNDK had violated one of
Lexar's key patents.  In a statement by Lexar's President, "Lexar
has core technology on flash products that we have to protect.
We tried to resolve our disputes with SanDisk outside of Court,
but as those efforts have failed, we are forced to defend our
intellectual property.  We are currently looking closely at a
number of other SanDisk products as well." In defense, SNDK
retorted, calling the lawsuit unfounded and lacking in merit.
This past Monday, SanDisk issued a statement in regards to a
separate patent infringement lawsuit filed by SanDisk against
Lexar.  In it, SanDisk charges Lexar with misrepresentation of
findings by the judge on October 17th.  Needless to say, the
battle has been going on back and forth, much to the detriment of
both companies.  So far, it appears that the only winners have
been the lawyers and those who have sold their shares.
Coincidentally, it was in early September that shares in SNDK
topped out, at the $95 level.  Since then, the stock has traded
lower in a downward sloping regression channel, and now well
below its 50, 100 and 200-dma.  SNDK was not helped by recent
weakness in the Semiconductor sector either.  At this point,
aggressive entries can be found on failed rallies above the 5-
and 10-dma, currently at $55.38 and $58.27 respectively.  For
conservative traders, a break below $50 back by strong selling
pressure will be the signal to enter.  Before making a play, make
sure to confirm with sentiment in the Semiconductor sector.

BUY PUT NOV-55 SWQ-WK OI=162 at $6.88 SL=5.00
BUY PUT NOV-50*SWQ-WJ OI=478 at $4.00 SL=2.50

Average Daily Volume = 2.38 mln



DGX - Quest Diagnostics $90.50 (-22.44 last week)

Quest Diagnostics is the nation's leading provider of diagnostic
testing, information and services. The testing performed on
human specimens helps doctors diagnose, treat and monitor
disease; enables employers to detect workplace drug abuse; and
supports pharmaceutical and biotechnology companies in clinical
trials of new therapeutics worldwide. Quest Informatics analyzes
laboratory and other medical data to help health care providers
improve the care of patients.

We've seen it time and time again.  A company reports strong
revenue and earnings growth only to be thrown to the wolves
following the announcement.  Adding insult to injury, DGX was
without a doubt a strong split candidate too.  It was trading
significantly higher than its historical split-level of $90 and
had plenty of shares to execute a 2:1 stock dividend.  While
investors shouted "sell, sell" on the news, the analysts were at
the other end hooting upgrades for DGX.  Deutsche Banc Alex
Brown started with new Buy coverage and a $165 price target.
USB Piper Jaffray and UBS Warburg together chimed in with Strong
Buy recommendations and price targets at $145 and $138,
respectively.  So what's the deal?  Simply put, it's profit
taking gone overboard.  The momentum took DGX down a whopping
$23.81, or 17% on Friday, October 20th and it the losses resumed
full-throttle going into last week.  On Monday, DGX saw another
session of devastation.  On the day, it lost $13.38, or 11.8% to
close at $99.56.  The rest of the week DGX failed to stabilize
and attempts to regain it previous highs found $109 a tough line
to penetrate.  DGX diverged from the DOW's upward path and sunk
lower on almost twice the ADV.  There was no company-specific
news to explain the extended sell-off.  No matter, the downtrend
line is intact and we want to capture profits if DGX breakdown
further.  As it is, there's no bottom support until the $80
level, which marks last July's resistance.   More
conservatively, you might take an entry and buy into weakness
from the current level if there's volume to back the decline.
Otherwise, consider the more aggressive approach and look for
entries on a high-volume rollover at the century mark.

BUY PUT NOV-95 DGX-WS OI= 12 at $12.75 SL=9.50
BUY PUT NOV-90*DGX-WR OI=261 at $ 9.38 SL=6.50
BUY PUT NOV-85 DGX-WQ OI=  8 at $ 6.88 SL=5.00

Average Daily Volume = 591 K



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

PVN - Providian Financial $94.56 (-8.50 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 credit 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.

Remember the old E.F. Hutton commercials with the line, "When
E.F. Hutton talks, people listen."  It seems that Kenneth
Posner, an analyst with Morgan Stanley Dean Witter has a
similar level of respect.  When he cut his ratings on the
Consumer Finance sector from Overweight to Market Weight
(whatever that means), PVN got hit for more than a 10% loss,
plunging below both the 200-dma ($93.50) and the $92 support
level.  After hitting a low of $86.75, shares of the credit
card issuer rebounded sharply, managing to eke out a close
fractionally above the 200-dma.  The bears took another run
at the stock on Friday, but were only able to drive the price
down to $90.81, giving the appearance that Thursday's low may
be all the stock is willing to give up.  But resistance is
holding firm at the 5-dma (now at $97.19), which still gives
a nice tradable range from which to profit.  Selling volume has
been strong the past 2 days, with 4.2 million shares trading
hands on Thursday and 2.4 million on Friday.  Aggressive traders
can use a volume-backed rollover from the 5-dma as their trigger
to enter new positions, with another penetration of the 200-dma
being their confirmation of more weakness ahead.  A more
cautious entry strategy will be to wait for a violation of the
$92 support level before initiating new positions.  In either
case, tighten up your stops as PVN approaches Thursday's lows,
especially if the selling volume begins to diminish.  If we get
the good fortune to see the stock decline to those levels again,
there is no sense in giving the profits back if the bulls step
in to support the price.

BUY PUT NOV-95*PVN-WS OI= 31 at $7.38 SL=5.25
BUY PUT NOV-90 PVN-WR OI=958 at $5.13 SL=3.00

Average Daily Volume = 1.12 mln



TIBX - Tibco Software $64.94 (-5.13 last week)

Tibco Software helps companies get a ride on The Information
Bus (TIB).  Tibco's software products enable businesses to
link internal operations, business partners and customer
channels in real-time. The Company's software products allow
multiple distinct applications, Web sites, databases and other
content sources to be integrated and managed within a common
framework.  By licensing their software, TIBX enables
enterprises to extend their information technology
infrastructures and business processes across the Internet to
conduct all forms of electronic business.  Tibco's customers
include companies in the Telecom (Vodaphone, Airtouch),
Technology (NEC), Energy (Mobil), Financial Services (Nasdaq),
and Internet (Yahoo!) sectors.

Running out of gas late in the day Friday, TIBX could be giving
us a nice entry point.  But, we won't know until the opening bell
rings on Monday.  The bounce from the lower edge of the 4-month
descending channel on Thursday afternoon continued right through
the majority of Friday's session, adding nearly $8 to the stock
price before the bulls ran out of enthusiasm in the final 90
minutes.  It is particularly interesting that the rally paused
right at the 10-dma ($66.94), also the location of the center
line on the regression channel (which has been acting as
resistance all month) and the site of significant historical
resistance.  If our play is going to head south, it will have
to do so from very near this level.  Breaking through this level
will be a strong indication that TIBX is on the mend, and will
probably open the door for a run at the next resistance levels
of $70 and then $75.  At this point, down appears to be the
path of least resistance, with the chain of lower peaks on the
daily Stochastics and MACD charts.  Look to initiate new
positions on a rollover from resistance, or if you prefer a
more cautious entry strategy, wait for selling volume to push
our play back below $64.  More selling in the technology sector
could very well push TIBX down to fill Friday's opening gap
between $57-59.  Since the lower end of this gap may provide
support, consider tightening up your stops as the price
approaches this level.

BUY PUT NOV-65*PAV-WM OI= 80 at $6.75 SL=4.75
BUY PUT NOV-60 PAV-WL OI=122 at $4.25 SL=2.50

Average Daily Volume = 1.72 mln



FCEL - FuelCell Energy, Inc. $70.75 (-4.63 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.  FuelCell has developed
this technology and is now focused on commercialization.

A change in season usually leads to a change in sentiment for
energy stocks.  The prevailing mantra has always been, buy the
energy stocks in the summer and sell them in the fall.  It
appears that with Halloween just around the corner, FCEL is
poised to take a fall.  But it's not giving up without a fight.
When we started this play, we mentioned the head and shoulders
formation in FCEL's chart, with the shoulders at the $94 level
and the head at the $108-109 area.  With the neckline at the $70
level, that was the area to watch for.  This week, FCEL did
indeed drop below the neckline but it is has become a more
news-driven issue, providing it with a stay of execution.  With
tensions in the Middle East continuing to be a factor, oil prices
have inched higher this week.  What's more, supply has remained
tight.  The market was expecting a big build-up, as OPEC began
producing an extra 800,000 barrels a day since October 1st.
However, the build so far has been half of what was expected.  As
if that weren't enough, Iraq came out with their sabers rattling,
and stirred fear into the oil market.  However, there is news on
Monday that should help out put play.  Friday marked the 20th
straight day that oil prices have held above the $28 per barrel
level.  As a result, OPEC President Ali Rodriguez reiterated that
the cartel is ready and willing to raise its daily production by
500,000 barrels as early as Monday.  The extra production could
help relieve pricing pressure in oil and let the technicals take
over. For aggressive traders, a failed rally above resistance at
the 10 and 50-dma at $77.26 and $75 are possible targets to shoot
for.  Conservative traders will be watching for a move below $70,
backed by strong selling volume before jumping in.

BUY PUT NOV-75 FQG-WO OI=257 at $12.13 SL=9.00
BUY PUT NOV-70*FQG-WN OI=157 at $ 9.13 SL=6.25
BUY PUT NOV-65 FQG-WM OI= 40 at $ 6.75 SL=4.75

Average Daily Volume = 790 K



PHCC - Priority Healthcare Corp $50.25 (+1.88 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.

The profit taking that ensued following PHCC's recent earnings
report subsided a bit last week.  Currently, PHCC is channeling
between $50 and $52 with pressure building at the lower end of
the trading spectrum.  The $52 mark served as a strong level
of resistance on attempted breakouts, but the rollovers just
didn't generate enough downside momentum to take the share
price lower.  This pattern is frustrating.  To play this put
play in a modest fashion, wait for PHCC to shatter its near-term
bottom at $50 and make a definitive move towards the recent
intraday low of $47.50.  If your strategy is jump in on
intraday spikes in anticipation of money moving into the techs
next week, look for the rollover at $52 and $53.  Keep the
stops tight for protection.  However, if you decide to play PHCC,
it's imperative that you wait for the open interest to build on
the new at and out-of-money November contracts before taking
positions.

BUY PUT NOV-60 UHP-WL OI= 2 at $10.25 SL=7.25
BUY PUT NOV-55 UHP-WK OI= 0 at $ 6.63 SL=4.75  Wait for OI!!
BUY PUT NOV-50*UHP-WJ OI=12 at $ 4.00 SL=2.50

Average Daily Volume = 258 K



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*****
LEAPS
*****

Will The Real Bottom Please Stand Up?
By Mark Phillips
Contact Support

Thanks to disappointing earnings reports this week from NSM and
NT this week, volatility spiked and the NASDAQ retested the
3000 level again.  The bulk of the blood-letting this week was
confined to the Optical Networking sector (and any stock
affiliated with it).  Considering the fact that NT beat earnings
estimates and shifted their forward-looking guidance upwards,
the loss of market capitalization in the sector was stunning.
This was the one sector that had managed to dance between the
raindrops as one sector after another (Semiconductors, PCs,
Biotechs, Drugs, and Financials) have taken their respective
turns in the penalty box.  Perhaps it was necessary to shake out
this last refuge of the terminally bullish before there is
enough conviction to power the next leg of the long-term bull
market.

Fortunately JDSU came to the rescue on Thursday after the market
closed and their stellar earnings report seems to have stemmed
the tide of selling seen in the Optical stocks.  Whether
Thursday's lows will hold remains to be seen, but if JDSU is to
be believed, there is no slowdown in the demand for optical
products.  Due to their positive report and bullish outlook,
JDSU makes into as the Spotlight play this weekend.

You'll notice that even with the large drop this week that was
prompted by their earnings report, NT still remains on our
playlist.  The primary reason is that the "problem" of growing
optical revenues at "only" 90% looks to be a temporary situation
due to an inventory buildup and the company (and several
analysts) expect it to be resolved in the near future.

Although more severe than we have seen in quite some time, the
selling of quality stocks on seemingly minor news happens every
year at this time.  We have been anticipating a market bottom
sometime in the month of October, and as painful as it has been,
it is encouraging to see the bottoming formation.  In the past
week, market pundits have become bolder, stating that the bottom
IS in, instead of saying that it MAY be in, but we need to come
back and retest the lows.  After testing 3000 on the NASDAQ
three times in less than two weeks, conviction is building that
this level will provide the springboard for a solid rally into
the fall.

This isn't to say that there won't be more volatility ahead, but
now that the VIX has spent some serious time north of 30 (and
didn't drop off nearly as sharply this last time), and the last
of the holdout sectors (Opticals) have been shaken up, it looks
like we are finally there.  What really gave me conviction on
Thursday was watching the old NASDAQ generals.  While the
high-flyers were being cut off at the knees, stocks like MSFT,
INTC, DELL and CSCO cooperated to help support the tech index.
With selling primarily confined to the last remaining unpunished
stocks, it was encouraging to see the rest of the market hold
up fairly well.  Did you notice the DJIA all last week?  Don't
look now, but it is up nearly 1000 points since the panic
selloff on October 18th.

You'll notice that there are three more stocks on our drop list
this weekend as we continue to purge the non-performing plays to
make room for those we think will soar in the year ahead.  Aside
from those that got the axe this weekend, there is one more that
is skating on thin ice.  That's right, VRSN has had a nasty
technical breakdown, violating the long-term support at
$135-140.  What keeps the stock on our list is the stellar
earnings report from the company.  Clearly there is nothing
wrong with their business, and we are betting on a nice recovery
as the markets get healthy again.  However, if the next level of
support at $108 fails to hold, it will be hard to make a case
for keeping it on the playlist.

The VIX is right where we want it, closing out the week at
30.53, providing yet one more indication that the market is
putting in a bottom.  Now is the time to find those plays with
the solid bottoming formations and put your action plan into
motion.  This is the buying opportunity we have been waiting for
these past several months, and it is unlikely to get much better
until this time next year.  Congratulations to those of you
sitting on cash in anticipation of the recent market events.
Your biggest challenge has become which LEAPS to buy, as many of
them are looking very attractive at current levels.  Keep your
wits about you and put that money to work wisely.

Have a Happy Halloween!

Current Plays

SYMBOL  SINCE     LEAPS         SYMBOL   PICKED   CURRENT  RETURN

EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $50.50   431.58%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $28.25   -13.74%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $17.25    56.82%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $16.38     8.23%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $ 9.75   -64.55%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $35.38    60.80%
NSM    02/27/00  JAN-2002 $ 70  WUN-AN   $24.25   $ 1.69   -93.04%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 6.20   -66.72%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $13.40   -23.43%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $16.63    78.19%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $17.38   222.96%
       10/22/00  JAN-2003 $ 45  VWI-AI   $ 7.88   $11.13    41.27%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $26.63   -32.82%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $21.75   -60.63%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 7.25   -57.97%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $10.75   -39.44%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $11.38    10.33%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $ 9.88   -19.39%
AMGN   07/02/00  JAN-2002 $ 75  WQY-AO   $20.75   $10.88   -47.59%
                 JAN-2003 $ 70  VAM-AN   $28.75   $19.00   -33.91%
VRSN   07/02/00  JAN-2002 $190  YVS-AR   $66.25   $29.13   -56.04%
       09/03/00  JAN-2003 $190  OVS-AR   $86.63   $44.00   -49.21%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $22.00    28.43%
                 JAN-2003 $ 70  OZG-AN   $23.13   $28.13    21.60%
HWP    07/30/00  JAN-2002 $110  WPW-AB   $28.25   $15.25   -46.02%
                 JAN-2003 $120  VHP-AD   $32.63   $19.50   -40.24%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $ 6.00   -71.08%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $ 9.38   -63.06%
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   $52.88    68.50%
                 JAN-2003 $100  VFB-AT   $37.38   $58.00    55.16%
BRCD   08/27/00  JAN-2002 $220  YNU-AD   $65.38   $72.88    11.46%
                 JAN-2003 $220  OMW-AD   $86.50   $94.63     9.39%
CMRC   09/10/00  JAN-2002 $ 80  YCU-AP   $30.13   $22.75   -24.49%
                 JAN-2003 $ 80  OCU-AP   $38.75   $31.38   -19.03%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $27.13    20.56%
                 JAN-2003 $ 70  VLM-AN   $29.63   $35.38    19.39%
COMS   10/01/00  JAN-2002 $ 20  WTH-AD   $ 6.38   $ 5.13   -19.61%
                 JAN-2003 $ 25  VTH-AE   $ 7.13   $ 6.13   -14.04%
WCOM   10/01/00  JAN-2002 $ 35  WQM-AG   $ 6.75   $ 3.00   -55.56%
                 JAN-2003 $ 35  VQM-AG   $ 9.88   $ 5.38   -45.57%
INTC   10/15/00  JAN-2002 $ 45  WNL-AI   $ 9.50   $13.00    36.84%
                 JAN-2003 $ 45  VNL-AI   $13.38   $17.00    27.10%
TXN    10/22/00  JAN-2002 $ 50  WTN-AJ   $13.75   $11.88   -13.64%
                 JAN-2003 $ 50  VXT-AJ   $18.38   $16.38   -10.88%


Spotlight Play

JDSU - JDS Uniphase $77.25

Thanks to cautionary comments from NT in their earnings report
Tuesday night, any stock that was even remotely tied to the
Optical Networking sector was taken out and severely whipped
this week.  JDSU was no exception, dropping from the $94 area
to as low as $62, simply because of guilt by association.  Part
of the problem was the strong business relationship between JDSU
and NT, and investors assumed any problem that affected the
latter, would also impact the former.  JDSU's own stellar
earnings report on Thursday diminished those fears somewhat,
allowing the stock to trade as high as $84.50 on Friday.  It is
hard to imagine such a drastic affect on an entire sector from a
single company failing to hit its top-end revenue target, but it
seems the Optical stocks are just the latest group to get hit
by concerns about slowing growth.  That's the bad news.  The
good news is that JDSU's earnings were stellar and the company
raised their estimates for revenue and earnings growth for 2001.
The stock managed to recover today to close above the $73
support level (formed by the spring lows), but not until after
the panic selling on Thursday that  managed to test the $60-62
support level (not seen since last December).  What this tells
us is that the lower level is likely very strong support, and
short of more panic selling, we are unlikely to visit it again.
Target shooters will want to look for an intraday dip to the
$71-73 level to provide attractive entries, while more
conservative traders will want to wait for JDSU to move above
$86 and hold its gains before playing.  In either case,
volatility will likely be the name of the game - make sure any
positive move is accompanied by strong volume and improving
sentiment in the Optical sector before putting your cash to
work.

BUY LEAP JAN-2002 $80.00 YJU-AP at $26.63
BUY LEAP JAN-2003 $80.00 OVU-AP at $34.38


New Plays

ADBE - Adobe Systems $74.81

A long-time leader in desktop publishing software, ADBE
provides graphic design, publishing, and imaging software
for Web and print production.  Offering a line of application
software products for creating, distributing, and managing
information of all types, the company generates nearly 75% of
sales through publishing software products such as Photoshop,
Illustrator, and PageMaker.  Its Acrobat Reader, which uses
portable document format (PDF) is popping up all over the
Internet, as businesses shift from print to digital
communications.  The stock has been a stellar performer all
year, virtually ignoring the broad market weakness we have
seen since March.  It hasn't touched its 200-dma (currently
$57.63) in over 18 months and it looks unlikely that it will
do so anytime soon.  The bears have a hard time keeping ADBE
below the 50-dma (currently $69.81), but even if they do manage
it in the short term, $65 support looks rock solid.  Having
just completed its most recent 2-for-1 split, some near term
weakness could emerge, especially if we see more investor
nervousness.  Use any such weakness as a buying opportunity
and target the afore-mentioned support levels for new entries.
Don't jump the gun though - make sure that strong buying
volume accompanies the bounce.

BUY LEAP JAN-2002 $80.00 YEJ-AP at $23.50
BUY LEAP JAN-2003 $80.00 VAE-AP at $30.75


Drops

AMGN $59.31 Enthusiasm for Drug stocks over the past few months
has been insufficient to help AMGN through the $76 resistance
level.  Although our play peeked it's head above there in late
July, that appears to have been the bulls last desperate rally
attempt.  Since then, our play has been putting in lower highs
and lower lows, and the normal October weakness allowed the
bears to smash through the 200-dma ($65.75).  Although there was
a short recovery from the $60 support level, the stock rolled
over again to retest the 200-dma yesterday.  AMGN tipped the
scales in the bears favor by posting a disappointing earnings
report after the close.  Although beating estimates by 2 cents,
the company made the cardinal sin of guiding growth rates
downwards and the stock suffered this morning.  The culprit
behind the lowered growth rates was slowing sales of the
company's flagship drugs Epogen and Neupogen.  With declining
technicals and fundamentals, we can no longer recommend new
positions on this unhealthy stock.

NSM $22.31 Dashing the bulls hopes last Monday after the close,
NSM warned of lower sales and earnings for the next 2 quarters.
In this volatile and nervous market, investors shoot first and
ask questions later, and NSM promptly gave up 35% as it fell
through the $31 and $27 support levels.  For the remainder of
the week, our play continued to deteriorate, ending the week at
levels not seen since June of 1999.  Plays initiated near the
lows from early August had yielded a nice profit when NSM rolled
over in early September, and the subsequent decline should have
stopped out any open plays before this week's negative news.
While the downside going forward is limited, the negative sector
sentiment combined with bearish comments from the company leaves
dim hopes for any kind of upside move in the near future.

WCOM $22.06 Negative sentiment continues to dominate the Telecom
sector as investors worry about declining voice revenues.
Reporting earnings on Thursday that only met estimates was not
what investors wanted to hear, and even news that WCOM and T
will be restructuring their companies could not assuage investor
fears.  Add in downgrades from the likes of ING Barings and AG
Edwards, and investors are not enthusiastic about holding the
stock.  Even after declining more than 50% from its July highs,
there is a dearth of value investors willing to support the
stock at current levels.  Since we added the play in early
October, the stock has been unable to clear the $30 resistance
level, the trigger for our conservative entry strategy, and it
looks highly unlikely that it will do so in the near future.
With the technicals continuing to weaken, and selling volume on
the rise, it is time to kick WCOM off our list of plays.


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

The Jury Is Still Out
By Ryan Nelson

The markets decided not to settle down this week after all.
Fortunately, there are only two October days left.  Maybe
November will be more kind to the split plays.  Right now you
would be hard pressed to find momentum among this group as
even the announcements have done little to spur buyers.  At
this point, it would be wise to stay away from split plays
until the upside momentum returns.  Hopefully, the market can
gain its footing without any Halloween scare next week.


Current Split Run Plays

None


Current Split Candidate Plays

BRCD
JNPR
BRCM
NTAP


Candidates That Are Not Current Plays

ARBA
RIMM
CFLO
VRTS
VRSN
PMCS
SEBL
VRTX


10 Most Recent Announcements We Predicted

MUSE - 10/25 (most recent announcement)
AMCC - 10/11
DNA  - 10/05
LEH  - 09/20
ORCL - 09/14
SUNW - 08/17
GLW  - 08/16
HWP  - 08/16
CIEN - 08/15
SEBL - 08/08


Major Announcements So Far This Month = 18

DNA      BEC      EMLX     AMCC
IWOV     TLB      ITWO     CDIS
ABK      PHCC     PVN      DCTM
EPNY     CHRW     MUSE     UNH
CPN      SHFL


Please check out the split calendar on the left margin under Research


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

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

The Option Investor Newsletter                   Sunday 10-29-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/102900_5.asp

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

Option Pricing Basics: Pricing and Volatility
By Mark Wnetrzak

Each week we receive a number of emails concerning the basics of
pricing theory and how we determine which options are favorable.
Most new traders that enter the derivatives market are quickly
overwhelmed by the incredible number of choices to be made when
selecting a position for a specific strategy.  Even when we limit
the candidates to short-term positions (90-days or less), there
are still a large assortment of contracts from which to choose.
The choices are so numerous that many beginning traders give up
long before they learn how to select the correct position (with
the highest probability of profit) for the underlying instrument.

The successful option trader must be able to identify potentially
profitable strategies given the current market conditions.  Before
he can accurately assess a position's value, a trader must fully
understand the components of theoretical option pricing.  Two of
the most common statistical measurements; implied and historical
volatility, can help a trader determine if an option is cheap or
expensive.

The volatility component of option valuation is a measure of the
range the underlying security is expected to change over a given
period of time.  The measurement of volatility is the standard
deviation of the daily price changes in the security.  In simpler
terms, the more volatile the stock, the greater the price of the
option.

Historical volatility estimates volatility based on past prices.
Because it can be so erratic from one day to the next, moving
averages are generally used in pricing models to determine the
fair value of an option.  Once again, the larger the statistical
volatility, the more an option is worth.

Implied volatility starts with the current option price and works
backward to calculate the theoretical value of volatility that is
equal to the market price minus intrinsic value.  It is a computed
value that has more to do with the option price rather than the
underlying asset.  The simple definition: Implied volatility is
the volatility value that makes an option's fair value equal to
its actual market price.

Most traders refer to implied volatility as "premium" even though
the word premium refers to the option price relative to the price
of the underlying security.  What the trader is really referring
to is the implied volatility.  The moral of the story: when the
implied volatility is low, options are effectively under-priced.
When the implied volatility is high, options are effectively
overpriced.

Next week, we will discuss how to select the correct time frame
when assessing volatility.

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

MTSI    9.38   8.88   NOV   7.50  2.81  *$  0.93  15.4%
AVID   14.75  14.00   NOV  12.50  3.63  *$  1.38  10.8%
FFD    12.00  12.50   NOV  10.00  2.75  *$  0.75   8.8%
ANSR   18.31  17.00   NOV  12.50  6.63  *$  0.82   7.6%
CTXS   21.44  20.94   NOV  17.50  4.88  *$  0.94   6.2%
RDRT    7.94   6.63   NOV   5.00  3.25  *$  0.31   5.7%
FIBR   32.50  30.69   NOV  20.00 13.50  *$  1.00   5.7%
BPUR   17.38  22.50   NOV  15.00  3.25  *$  0.87   5.4%
UAXS   15.31  14.88   NOV  12.50  3.38  *$  0.57   5.2%
ECLP   21.38  25.31   NOV  17.50  4.63  *$  0.75   4.9%
WDC     6.13   6.00   NOV   5.00  1.44  *$  0.31   4.8%

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

Comments:

So far so good!  The technicals are weakening on Read-Rite (RDRT)
but for now, the issue appears to be holding above its 150 dma.
Monitor closely in the coming sessions.


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

TSIX   16.75  NOV  12.50  IXQ KV  5.00  5    11.75   21     9.2%
ANSR   17.00  NOV  12.50  QRA KV  5.13  1550 11.87   21     7.7%
ENTU   29.25  NOV  25.00  QYE KE  5.50  672  23.75   21     7.6%
BCGI   23.13  NOV  20.00  QGB KD  4.00  343  19.13   21     6.6%
VMSI   25.63  NOV  22.50  QMP KX  4.00  9    21.63   21     5.8%
PROX   58.75  NOV  50.00  WQG KJ 10.50  170  48.25   21     5.3%
ENMD   32.56  NOV  25.00  QMA KE  8.25  92   24.31   21     4.1%


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  $17.00  *** IBM Buyout Target? ***

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.  ANSR
recently reported that net revenues for the third quarter were up
22% to $84.1 million from $69.0 million last year.  Net income
increased to $6 million, or $0.15 per share, from $4 million, or
$0.10 per share, in the third quarter of 1999.  ANSR's earnings
demonstrate that the company continues to strengthen and recent
alliances should enhance their ability to deliver strategic
technology-enabled solutions to new clients.  In addition, IBM is
rumored to be buying the company and traders say an announcement
may be forthcoming in the next week.

NOV 12.50 QRA KV LB=5.13 OI=1550 CB=11.87 DE=21 MR=7.7%


*****
BCGI - Boston Communications  $23.13  *** 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.  No change in the outlook since
we featured this candidate last week.

NOV 20.00 QGB KD LB=4.00 OI=343 CB=19.13 DE=21 MR=6.6%


*****
ENMD - EntreMed  $32.56  *** Symposium on the Silver Bullet! ***

EntreMed is a clinical-stage biopharmaceutical company emphasizing
antiangiogenesis therapeutics that inhibit abnormal blood vessel
growth associated with a broad range of diseases such as cancer,
blindness and arteriosclerosis.  EntreMed's strategy is to quicken
development of its core technologies through collaborations and
sponsored research programs with university medical departments,
research companies and government laboratories.  EntreMed gained
the spotlight when a preliminary research report showed that the
growth of the small blood vessel network feeding coronary artery
plaques in mice could be reduced by giving them an angiogenesis
inhibitor (Endostatin).  EntreMed plans to present the first
public presentation of the data from the on-going Phase I clinical
trials of Endostatin in the U.S at a symposium in Amsterdam that
is scheduled the week of November 7th.  This was announced at the
same time the company started its fourth Phase I clinical trial
to explore the continuous infusion and subcutaneous administration
of Endostatin.  This week, market-makers at the CBOE commented on
the recent spike in implied volatility of EntreMed's options as
speculators moved in ahead of the symposium.  We favor taking
advantage of the high option premiums to speculate conservatively
with a cost basis near technical support.  It appears, based on
the recent spike in price, somebody knows something.

NOV 25.00 QMA KE LB=8.25 OI=92 CB=24.31 DE=21 MR=4.1%


*****
ENTU - Entrust Technologies  $29.25  *** 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.  Two weeks ago, ENTU
reported that its third-quarter results beat analysts' 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 Merrill Lynch recently upgraded the stock.  We favor a cost
basis near technical support as ENTU forges a Stage I base.

NOV 25.00 QYE KE LB=5.50 OI=672 CB=23.75 DE=21 MR=7.6%


*****
PROX - Proxim  $58.75  *** Earnings Rally? ***

Proxim designs, manufactures and sells high performance wireless
local area networking and building-to-building network products
based on radio frequency technology.  Proxim's highly integrated
wireless client adapters and network infrastructure systems
seamlessly extend existing enterprise LANs to enable mobility
driven applications in a variety of in-building, campus area and
building-to-building network environments.  Their wireless LAN
technology has been adopted by a number of major mobile computer
system and handheld data terminal manufacturers and many leading
wireless solution providers for data collection applications in
manufacturing, warehousing, transportation and retailing, as well
as for point-of-service networks in healthcare, hospitality,
education and financial services.  Proxim reported favorable
earnings this quarter with an EPS of $0.13 on revenue of $29.3
million, a 19% increase from last quarter.  Investors appear to
be pleased as the share value has rallied from it's October low.
Technically, Proxim has been consolidating in a trading range
from $40 to $62, and this position offers a conservative entry
point from which to speculate on a potential upside breakout.

NOV 50.00 WQG KJ LB=10.50 OI=170 CB=48.25 DE=21 MR=5.3%


*****
TSIX - 360networks  $16.75  *** Bottom Fishing! ***

360networks offers broadband network and co-location services to
telecommunications and data-centric organizations.  360networks
is developing one of the largest and most technologically advanced
fiber optic mesh networks in the world. By mid-2002, the planned
network will span 131,500 kilometers (81,530 miles) and link more
than 100 major cities with terrestrial routes and undersea cables
in North America, South America, Europe, and Asia.  360networks
reversed a severe downtrend this month after reporting a five-year
agreement with FiberNet Telecom.  This will allow 360networks to
interconnect its global network with other major carriers and is
expected to generate revenues of $20 million.  This week, a new
agreement with T-Cubed paved the way for 360networks to expand
its existing North American network along high demand routes in
the eastern U.S.  We simply favor the strong technical reversal
and the move back above historical support.

NOV 12.50 IXQ KV LB=5.00 OI=5 CB=11.75 DE=21 MR=9.2%


*****
VMSI - Ventana  $25.63  *** Catfish Anyone? ***

Ventana develops, manufactures and markets instrument/reagent
systems that automate tissue preparation and slide staining in
clinical histology and drug discovery laboratories worldwide.
Ventana's clinical systems used in the diagnosis and treatment
of cancer and infectious diseases.  Ventana's drug discovery
systems are used to accelerate the discovery of new drug targets
and evaluate the safety of new drug compounds.  Ventana reported
3rd quarter results last week which were in line with consensus
expectations, but noted that the manufacturing issues that
adversely impacted their 2nd and early 3rd quarter results are
now resolved.  Ventana is also expecting to receive final FDA
approval for their Her-2/neu breast cancer diagnostic late in
the 4th quarter.  We favor the improving technical signals on a
Stage I stock and the reasonable cost basis.

NOV 22.50 QMP KX LB=4.00 OI=9 CB=21.63 DE=21 MR=5.8%




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

Option Trading Basics: Limit risk with position trading
By Ray Cummins

Option pricing is a complex and often misunderstood subject that
usually requires a great deal of study to understand completely.
The trader who perseveres will find there is a simple logic to
most of the concepts.  These knowledgeable traders earn the right
to have less money at risk and greater potential for profits.  As
one becomes familiar with the components of pricing theory, he
can he begin to formulate potentially profitable strategies.

One of the primary considerations for most traders is risk versus
reward.  In the derivatives market, buyers of options have limited
risk and unlimited reward while sellers of options have limited
reward and unlimited risk.  With this single perspective in mind,
it's obvious why most retail traders simply 'buy' options.  Most
investors would never consider a position with unlimited risk and
yet few understand that almost any trade that isn't fully hedged
entails enormous speculation.  A violent adverse move, which does
not allow for timely adjustments, can quickly reduce any position
to a fraction of its initial value.  With this in mind, it's hard
to understand why traders would take outright long or short
positions under any circumstances.  The only possible explanation
is that they believe the probability of catastrophic loss is very
small and the potential for profit is worth the risk.

The average investor will normally do well with a position that
has limited risk and the potential for large profits because one
successful trade can easily overcome a series of limited losses.
An aggressive investor who is willing to take larger risks for the
opportunity of making greater profits might buy and sell index or
equity options.  The conservative investor would not want to be an
outright buyer of options.  For him, a covered-call position with
moderate profit potential and reduced risk would be more appealing.
The wealthy investor may be attracted to methods that offer the
opportunity to earn regular income against portfolio collateral.
Writing out-of-the-money naked puts may solve his needs.  Some
investors just want low maintenance plays with the chance to make
reasonable profits without risking excessive amounts of money.
Conservative combination positions would probably appeal to this
group.

The most important issue successful option traders understand is
that the risk/reward characteristics of a position are not the only
considerations.  Equally important is the probability of profit or
loss.  When one evaluates a prospective position, the likelihood of
each possible outcome must be factored into the assessment.  Is the
reward, even a limited one, sufficient to offset the risk?

In option trading, risk comes in many forms.  Luckily, there are
also many ways to trade.  To increase the probability of profit,
the majority of successful option traders engage in some form of
combination, position or spread trading.  These methods are simply
a way of enabling an option trader to take advantage of miss-priced
options, while at the same time reducing the effects of short-term
changes in market conditions so that he can safely hold an option
position to maturity.  While there is no perfect position for the
option trader, successful investors learn to hedge their risk in
as many different ways as possible, thereby minimizing the effects
of short-term bad luck.  You may not be able completely eliminate
risk, but you can reduce it to much less than that of a novice
trader who does not utilize all of the available strategies.

Good Luck!


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


SUMMARY OF PREVIOUS PICKS
*****

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

BCGI   23.94  23.13   NOV  17.50  0.56  *$  0.56  11.4%
CYTC   50.25  59.25   NOV  40.00  1.13  *$  1.13  11.0%
STAT   22.72  20.38   NOV  20.00  0.69  *$  0.69  10.6%
RNBO   23.50  24.88   NOV  17.50  0.44  *$  0.44   9.3% 2-1 Split
ENTU   29.00  29.25   NOV  20.00  0.50  *$  0.50   8.6%
PATH   17.63  17.81   NOV  15.00  0.38  *$  0.38   8.6%
OCR    16.88  16.38   NOV  15.00  0.63  *$  0.63   8.3%
CHTR   19.38  18.56   NOV  17.50  0.63  *$  0.63   7.0%
VICR   49.38  47.69   NOV  40.00  0.88  *$  0.88   6.8%
ICN    40.19  36.81   NOV  35.00  0.56  *$  0.56   5.3%
HSIC   22.56  20.63   NOV  20.00  0.50  *$  0.50   5.2%
VPI    25.50  20.56   NOV  22.50  0.50   $ -1.44   0.0%

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

Comments:

Cytyc's (CYTC) downward move early in the week provided a great
put-selling opportunity.  I-Stat (STAT) is a bit worrisome though
it did make a successful test of its 150 dma.  Keep an eye on
that issue!  Charter Communications (CHTR) gave us a scare on
Wednesday, and though it has since recovered, it warrants close
attention.  Oil stocks are fading and Vintage Petroleum (VPI),
our oil sector hedge, is a candidate for early exit - especially
if the issue breaks below its 150 dma on a closing basis.


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

ANSR   17.00  NOV  12.50  QRA WV  0.63  55   11.88   21    22.5%
ECLP   25.31  NOV  20.00  IQV WD  0.50  5    19.50   21    13.0%
APWR   55.63  NOV  35.00  PUW WG  1.06  11   33.94   21    12.6%
CERN   60.31  NOV  50.00  CQN WJ  0.75  20   49.25   21     7.5%
AMZN   35.63  NOV  22.50  ZQN WS  0.38  3250 22.13   21     7.2%
ACXM   40.25  NOV  35.00  UQA WG  0.56  25   34.44   21     7.1%
PLMD   57.50  NOV  45.00   PM WI  0.50  11   44.50   21     6.0%


Company Descriptions

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

*****
ACXM - Acxiom  $40.25  *** New Trading Range! ***

Acxiom is engaged in customer data integration in support of
customer relationship management and they have three primary
business lines: Services, Data Products and IT Management.  The
Services segment provides solutions that integrate and manage
customer, consumer and business data using its information
management skills and technology.  The InfoBase data products
include both business and consumer data.  The IT Management
division offers technology services in such areas as mainframe
computing operations, client server management, network Web
hosting and content change management, help desks and others.
Acxiom recently reported that its second-quarter earnings rose
a higher-than-expected 33% and that it expects the rest of the
fiscal year to beat year-earlier results by at least 25%.  The
results were boosted by sales of Acxiom's new database software
and the completion of 15 new contracts totaling $40 million.
Our position is based solely on the move to a new trading range.

NOV 35.00 UQA WG LB=0.56 OI=25 CB=34.44 DE=21 MR=7.1%


*****
AMZN - Amazon.com  $35.63  *** Cheap Speculation! ***

Amazon.com is an online retailer that serves over millions of
customer accounts in over 150 countries.  The company directly
offers for sale millions of distinct items in categories such as
books, music, DVDs, videos, toys, electronics, software, video
games and home improvement products.  Amazon also has invested
in and developed strategic commercial relationships with many
e-commerce companies.  Amazon.com recently surprised Wall Street
by saying it lost less and sold more than expected in its third
quarter.  But, Lehman Brothers warned investors that the company's
cash level is low and there is a potential for a cash squeeze
from its vendors.  Lehman also said it is concerned about the
outcome of an SEC review of the company's accounting matters
relating to the ACN.  In response, the company's CEO said he is
very confident that the accounting disclosure is correct and AMZN
has about $900 million in cash and marketable securities.  Jeetil
Patel, an equities analyst with Deutsche Banc Alex. Brown, said
Amazon.com's business is improving and it looks fairly solid.  We
will speculate on the company's future with a deep-OTM position.

NOV 22.50 ZQN WS LB=0.38 OI=3250 CB=22.13 DE=21 MR=7.2%


*****
ANSR - answerthink  $17.00  *** IBM Buyout Target? ***

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.  ANSR
recently reported that net revenues for the third quarter were up
22% to $84.1 million from $69.0 million last year.  Net income
increased to $6 million, or $0.15 per share, from $4 million, or
$0.10 per share, in the third quarter of 1999.  ANSR's earnings
demonstrate that the company continues to strengthen and recent
alliances should enhance their ability to deliver strategic
technology-enabled solutions to new clients.  In addition, IBM is
rumored to be buying the company and traders say an announcement
may be forthcoming in the next week.

NOV 12.50 QRA WV LB=0.63 OI=55 CB=11.88 DE=21 MR=22.5%


*****
APWR - AstroPower  $55.63  *** Earnings Play! ***

AstroPower develops, manufactures, markets and sells a range of
solar electric power products for the global marketplace.  The
company currently sells five classes of products: solar cells,
modules, panels, systems and solar electricity.  The company's
products are used to generate electricity for users not connected
to the utility grid.  The company also recently expanded a joint
venture agreement with GPU International to generate wholesale
solar electric power.  Lots of news on the issue in recent weeks,
including a lawsuit by the Fed over past R&D funding.  However,
the most important event in the near future is APWR's earnings
report, due out next Tuesday.  Our conservative position offers
a favorable way to speculate on the outcome of the announcement.

NOV 35.00 PUW WG LB=1.06 OI=11 CB=33.94 DE=21 MR=12.6%


*****
CERN - Cerner Corporation  $60.31  *** New Trading Range? ***

Cerner designs, develops, markets, and supports information
technology, and content solutions for healthcare organizations
and consumers.  These solutions are implemented on individual,
combined or enterprise-wide systems and are accessible on the
Internet by consumers, physicians and healthcare providers. The
company's integrated suite of solutions enable providers to
improve operating effectiveness, reduce costs, and improve the
quality of care as measured by clinical outcomes.  Cerner's
solutions are designed to provide the appropriate information
and knowledge to care givers, clinicians, and consumers the
correct management information to healthcare administration on
a real-time basis, allowing secure access to data by clinical
and administrative users in organized settings of care and by
consumers from their home.  Some bullish forecasts have boosted
this issue to a new trading range and we favor the opportunity
to own the stock at a lower cost basis.

NOV 50.00 CQN WJ LB=0.75 OI=20 CB=49.25 DE=21 MR=7.5%


*****
ECLP - Eclipsys  $25.31  *** Post-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.  The company's quarterly earnings results included a
return to operational profitability one quarter earlier than
expectations, nearly 30-percent sequential bookings growth and a
sales funnel above $1 billion for the first time in the company's
history.  Banc of America and Merrill Lynch commented favorably
on the report and now the issue is continuing its recent Stage II
breakout on heavy volume.

NOV 20.00 IQV WD LB=0.50 OI=5 CB=19.50 DE=21 MR=13.0%


*****
PLMD - PolyMedica  $57.50  *** Up, Up and Away! ***

PolyMedica is a provider of direct-to-consumer specialty medical
products and services, conducting business in the Chronic Care,
Professional Products and Consumer Healthcare markets.  The
company markets diabetes supplies and adult nutrition supplies
through its Chronic Care segment.  The company's AZO brand
participates in the over-the-counter urinary health market and it
distributes a broad range of other medical products, including
digital thermometers and compliance products, primarily to food
and drug retailers and mass merchandisers nationwide, through its
Consumer Healthcare segment.  PolyMedica also manufactures and
distributes a line of prescription urological and suppository
products and provide direct-to-consumer prescription respiratory
supplies and services to Medicare-eligible seniors suffering from
chronic obstructive pulmonary disease through its Professional
Products segment.  PolyMedica recently reported third quarter
net income that more than doubled last year's results and the
issue responded favorably, climbing to the $50 range as traders
speculated on the future of the company.  Based on the technical
indications, the share value may soon achieve an all-time high.

NOV 45.00 PM WI LB=0.50 OI=11 CB=44.50 DE=21 MR=6.0%




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

Industrial Stocks Surge Amid Cautious Optimism...


Friday, October 27

The Dow Jones industrial average rallied Friday on news of benign
economic data and bullish earnings reports.  The blue-chip gauge
ended 210 points higher at 10,590.  In contrast, the Nasdaq closed
almost unchanged at 3,278 as investors continued to be wary of the
technology sector after recent weakness.  The S&P 500 index was up
15 points to 1,379.  Trading volume was moderate on the NYSE with
1.08 billion shares exchanged.  Broad market advances led declines
1,809 to 1,025.  Trading volume on the Nasdaq was slightly above 2
billion shares, with advances beating declines 2,063 to 1,843.  In
currency trade, the Euro rose against the dollar amid new signs of
moderation in U.S. economic growth.  In the U.S. bond market, the
30-year Treasury fell 5/32, pushing its yield up to 5.74%.


Portfolio Plays:

Blue-chips stocks led the Dow to a substantial rally Friday as
benign economic news boosted investor optimism concerning the
Fed's upcoming meeting.  U.S. economic growth slowed markedly in
the third quarter, falling to a 2.7% annual rate, the lowest in
five quarters, and below analysts' expectations of a 3.6% rise.
With inflation under control, the Fed will likely leave interest
rates unchanged and that could bode well for the stock market in
the first quarter of 2001.  Traders expressed confidence that the
FOMC may be more upbeat in their bias for the U.S. economy after
today's report and the bullish attitude was evident in companies
that are interest-rate sensitive.  J.P. Morgan (JPM) led the Dow,
soaring almost $13 to $158 after analysts commented that a "soft
landing" may be in store for the market.  Procter & Gamble (PG),
General Motors (GM) and Microsoft (MSFT) also participated in
the upside activity.  At the same time, technology issues edged
lower as investors avoided the group amid fears of another sharp
sell-off.  A positive earnings report from JDS Uniphase (JDSU)
was one of the few favorable events and the announcement gave
the networking sector a boost.  The company posted profits that
more than doubled last year's results and exceeded the Street's
estimates by $0.02.  Telecom stocks also recovered with Nextel
(NXTL) rebounding $6 to $35 after a precipitous drop earlier in
the week.  Biotechnology issues were a disappointment with the
sector retreating after Amgen (AMGN) warned of lower earnings
in the coming quarters.  In the broader market, bank, brokerage,
utility and airline shares lent support while heavy losses in
the oil sector reined in additional gains as December crude slid
to the $32 range.

Bellwether issues led the Combos portfolio in today's session
and our recent play in Microsoft (MSFT) is off to a good start.
Shares of the software giant rallied over $3 to $67, even after
company officials said hackers had broken into the main computer
system.  Microsoft's Chief Executive Steve Ballmer said that the
hackers did not do any damage, nor did they find the source code
to any of the company's key programs.  Microsoft's shares have
recovered significantly since the beleaguered software company
posted profits that exceeded consensus expectations and analysts
issued an upbeat note on future revenues.  The software industry
giant, whose Windows operating system powers the vast majority
of PC's, said profits rose 18%, handily beating the Wall Street
estimates.  Although much of the gain came from Microsoft's vast
investment portfolio, the company said it also saw strong sales
of its flagship product, the Windows 2000 operating system for
corporate networks, and of the new Millenium Edition for home
users.

Intel (INTC) has also been a top performer since we initiated a
bullish debit spread, before the company's recent earnings report.
Today the upward movement continued after the company's CEO said
Intel's long-awaited Pentium 4 microprocessor would be launched
in about one month, just ahead of its original year-end target.
The Pentium 4 chip will help the company regain bragging rights
for the world's fastest microprocessor, running at speeds up to
1.5 ghz.  Advanced Micro Devices (AMD) began shipping its 1.2 ghz
Athlon chip earlier this month.  Human Genome Sciences (HGSI) was
another big mover Friday, up over $6 to $88, after officials at
the company said they had priced a public offering of 11 million
shares at $75 a share and would use the $825 million of proceeds
for research and development.  The company also announced plans
to pursue patent coverage for the firm's genes and other products.
Analysts saw the news as favorable and CIBC World Markets started
coverage of the genome issue with a "strong buy" rating.  On the
downside, shares of Handspring (HAND) fell sharply in the last
half hour of trading with little news to explain the slide.  The
stock was trading near $88 with 30 minutes to go before dropping
precipitously on accelerating volume to close near $79.  Traders
said that selling by an institutional holder was behind the move
and that might explain fact that more than 250,000 shares changed
hands in the last half hour; nearly one-quarter of Handspring's
average daily volume.

Our big winner in the small-cap category was Globix (GBIX).  The
stock fell $2.44 to $10 in a third consecutive session of losses
and our recent debit straddle achieved an $8.50 credit overall.
That's a $2.50 profit on $6.00 originally invested in less than
one month.  Leaders in the mid-cap group included Allstate (ALL),
BellSouth (BLS) and Home Depot (HD) and one of the portfolio's
slumping positions, Delta Airlines (DAL) has started to recover
after a week of downward movement.  The move came amid strength
in the airline group and we will use any upcoming rally in DAL's
share value to exit the bullish position near break-even, or at
a small loss.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
MCLD - McLeodUSA  $17.63  ** Reader's Request! ***

McLeodUSA provides communications services to business and
residential customers in the US Midwestern and Rocky Mountain
regions.  The company offers local, long distance, Internet
access, data and voice mail, all from a single company on a
single bill. McLeodUSA derives most of its revenue from its
core business of providing competitive local, long distance and
related communications services in competition with the existing
telephone companies; sale of advertising space in telephone
directories; traditional local telephone company services in east
central Illinois and southeast South Dakota; and communications
facilities and services dedicated for a particular customer's use.
MCLD also derives revenue from communications network maintenance
services; telephone equipment sales, leasing, service and other
installations; video services; telemarketing services; computer
networking services; and communications services, including
cellular, operator, payphone, and paging services.

McLeodUSA, one of the nation's top telecommunications companies,
recently reported outstanding earnings for the quarter.  Total
revenues were a record $366 million, compared to $241 million
for the same period one year ago, an increase of 52%.  McLeodUSA
experienced a surprisingly solid quarter, exceeding expectations
for both revenue and EBITDA.  Most notably, their revenue total
in sequential quarters rose 10% on sales of more than 117,000
new lines.  The CEO commented that the company's ability to
integrate voice and data networks, along with improvements in
their competitive margins, contributed very positively to the
results.

One of our subscribers was kind enough to point out the recent
bullish activity in the Telecom Services Group and in the share
value of MCLD.  He also requested that we identify a favorable
spread position in the issue.  Based on the technical outlook
and increased option interest, the easiest way to profit from
any future upside movement may involve one of the most common
forms of debit spreads.


PLAY (conservative - bullish/debit spread):

BUY  CALL  DEC-15.00  QMD-LC  OI=50  A=$3.62
SELL CALL  DEC-17.50  QMD-LP  OI=59  B=$2.12
INITIAL NET DEBIT TARGET=$1.38  ROI(max)=81% B/E=$16.38


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

The healthcare sector has been extremely bullish in recent weeks
and Friday's blue-chip rally suggests that investors are going to
be very selective in the stocks they choose during the upcoming
quarter.  Here are two top companies in this powerful group that
would certainly be a great addition to any long-term portfolio.
These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues.  Review each play individually and make
your own decision about the future outcome of the position.

******************************************************************
WLP - WellPoint  $114.00  *** Up, Up, and Away! ***

WellPoint Health Networks is a managed health care company with
over 7 million medical members and 32 million specialty members.
The company offers a broad spectrum of quality network-based
managed care plans, including preferred provider organizations,
health maintenance organizations and point-of-service and other
hybrid plans and traditional indemnity plans.  In addition, the
company offers managed care services, including underwriting,
actuarial services, network access, medical cost management and
claims processing.  WellPoint also provides a broad array of
specialty and other products, including pharmacy, dental,
utilization management, life insurance, preventive care,
disability insurance, behavioral health, COBRA and flexible
benefits account administration.


PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-95   WLP-WS  OI=245  A=$0.75
SELL PUT  NOV-100  WLP-WT  OI=2    B=$1.25
INITIAL NET CREDIT TARGET=$0.62-$0.69  ROI(max)=14% B/E=$99.38


******************************************************************
UNH - UnitedHealth Group  $109.69  *** Solid Earnings! ***

UnitedHealth Group forms and operates markets for the exchange
of health and wellbeing services.  The company provides a broad
spectrum of resources to help people improve their health and
well being through all stages of life.  The company's Health
Care Services segment consists of the UnitedHealthcare and
Ovations businesses.  UnitedHealthcare coordinates network-based
health and well-being services on behalf of local employers and
consumers in six broad regional U.S. markets.  Ovations is a
business dedicated to advancing the health and well-being goals
of Americans in the second half of life, age 50 and older.  The
company's Uniprise business is devoted to serving the needs of
large organizations.  UNH's Specialized Care Services is a
portfolio of specialized health and well-being companies.  The
company's Ingenix business operates in the field of health care
data and information, analysis and application.


PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-95   UNH-WS  OI=855  A=$1.00
SELL PUT  NOV-100  UNH-WT  OI=100  B=$1.69
INITIAL NET CREDIT TARGET=$0.75-$0.88  ROI(max)=17% B/E=$99.25


******************************************************************
                   - STRADDLES AND STRANGLES -
******************************************************************
RCOT - Recoton  $12.44  *** Volatility Play! ***

Recoton is a global leader in the development, manufacturing and
marketing of branded home and mobile audio products, video and
computer game accessories and consumer electronic accessories
for aftermarket use by consumers.  The company offers diverse
lines of products that include accessories for audio, video, car
audio, camcorder, multi-media/computer, home office, cellular
and standard telephone, music and video game products and 900
Megahertz (MHz) wireless technology headphones and speakers.
Recoton classifies its business into three principal segments:
Audio, Video and Computer Game, and Consumer Electronics.

Over the past few weeks, we have received a number of requests
for candidates in the premium-selling category of options
trading.  Based on analysis of historical option pricing and
technical trading patterns, this position meets our fundamental
criteria for a potential credit-strangle.  The underlying issue
has a relatively well-defined trading range and the recent
earnings-related volatility has inflated the near-term option
premiums.  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.


PLAY (aggressive - neutral/credit strangle):

SELL CALL  NOV-17.50  ROQ-KW  OI=40  B=$0.75
SELL PUT   NOV-10.00  ROQ-WB  OI=70  B=$0.88
INITIAL NET CREDIT TARGET=$1.62-$1.75  ROI(max)=38%
UPSIDE B/E=$19.12 DOWNSIDE B/E=$8.38


******************************************************************
                    - STAFF CONTRIBUTIONS -
******************************************************************
JDSU - JDS Uniphase  $77.25  *** Poised to Rise! ***

JDS Uniphase is a provider of advanced fiberoptic components and
modules.  The company's components and modules are basic building
blocks for fiberoptic networks and perform both  ptical-only
(passive) and optoelectronic (active) functions within these
networks.  The company's products include semiconductor lasers,
high-speed external modulators, transmitters, amplifiers,
couplers, multiplexers, circulators, tunable filters, optical
switches and isolators for fiberoptic applications.  The company
also supplies its OEM customers with test instruments for both
system production applications and network installation.  In
addition, the company designs, manufactures and markets laser
subsystems for a broad range of commercial applications which
include biotechnology, industrial process control and measurement,
graphics and printing and semiconductor equipment manufactured by
its customers.

JDS Uniphase is a big player in the optical arena, and it just
keeps getting bigger!  Via internal growth and a strategy of
mergers and acquisitions, the company has propelled its market
cap to rival those of the biggest corporations on the Nasdaq and
in the S&P 100 index (OEX).  However, JDSU is not stopping there
as it plans to acquire SDL Inc. (SDLI) in the coming months and
there will likely be more surprises down the road.  JDSU's growth
strategies are often compared to another Wall Street darling,
Cisco Systems (CSCO).

The recent market turmoil and the extremely harsh reaction to
Nortel's earnings (NT) cost JDSU (and the optical sector in
general) a large chunk of their market cap.  But, JDSU itself
reported good earnings and that will bode well for the issue in
the coming sessions.  If you favor the company and would like to
own the stock, now would be a good time to purchase it.  However,
if you are bullish on the outlook but would like to buy the issue
at a discount, a deep-in-the-money bullish (put) spread may be in
order.


PLAY (speculative - bullish/credit spread):

BUY  PUT  NOV-60  UQD-WL  OI=7922  A=$1.88
SELL PUT  NOV-90  XXZ-WR  OI=6237  B=$14.50
INITIAL NET CREDIT TARGET=$12.25-$12.50  JDSU COST BASIS=77.75


JDSU was trading well above $100 before the October slump but
even with the recent woes, it was bullish until Nortel (NT)
surprised the street with good earnings and poor forecasts.
The idea here is to be "put" the stock and then ride it back
north of $90.  If the stock remains at its current level, no
harm is done, you will be assigned the stock at a cost basis
slightly better than Friday's closing price.


******************************************************************
                     - INDEX OPTION SPREADS -
******************************************************************
As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time. The buyer has the rights and the seller
the obligations. With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
market industry or on the market as a whole. Spread strategies can
be made with index options similar to those made with individual
stock options. Many professional traders employ index spreads as a
hedge strategy. We favor debit positions on the SPX for momentum
and hedge or longer-term plays and OTM credit spreads on the OEX
when the risk/reward is favorable. Low ROI disparity spreads will
be listed (when available) for the conservative index trader.
******************************************************************
SPX - S&P 500 Index  $1379.58   *** Hedge Your Longs! ***

Composed of 500 stocks selected by the analysts at Standard &
Poor's, this index represents the best stocks, not necessarily
the largest, stocks taken from all the exchanges and the NASDAQ.
(The NASDAQ is not technically an exchange because it doesn't have
a central clearing floor like the NYSE and the AMEX.) This is the
best index to follow larger capitalization stocks.

In a turbulent market (like the one we are in today) one needs to
hedge long positions.  One way to do so is to buy Puts on the
stocks you own, or to sell-short others that are poised to fall.
There is no shortage of theories on how to best hedge your
positions.  Since I try to go long only in equities that I
am strongly interested in owning (for a long time), I have little
inclination to bet against my choices by buying puts against them.
Also, I typically sell covered calls against my long positions.
For hedging, I like to play a more diversified index or a HOLDR
such as the QQQ, OEX, or the SPX.  The advantage of using the SPX
is that its options are European style, thus they can not be
exercised except on expiration.  This is important because its
options are also cash settled.

Instead of buying straight puts, we will buy a put-debit spread.
After all, this is a hedge play and not a directional bet.  If the
market takes off from here, we would like to limit our loss in
this position.


PLAY (speculative - bearish put spread):

BUY  PUT  NOV-1400  SXZ-WT  OI=23354  A=$33.50
SELL PUT  NOV-1375  SXY-WO  OI=17819  B=$21.63
INITIAL NET DEBIT TARGET=$11.50-$12.00 TARGET ROI=110%
B/E=$1388.13


If the market rallies, both options will expire worthless and we
will lose the premium initially paid.  If the market falters and
the SPX closes below 1375 at expiration, our spread will be worth
$25; over a 100% return.  That is not an unlikely possibility,
considering that the SPX spent most of October below 1380.
Playing these particular strikes also offers the possibility
of making some money even if the market stays flat or makes a
slight upward movement.




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