Option Investor
Newsletter

Daily Newsletter, Wednesday, 11/08/2000

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Wednesday 11-08-2000
Copyright 2000, All rights reserved.                        1 of 1
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/110800_1.asp

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        11-08-2000        High      Low     Volume Advance/Decline
DJIA    10907.10 - 45.10 11002.20 10903.30  897 bln   1299/1478
NASDAQ   3231.70 -184.09  3429.12  3231.28 1.68 bln   1310/2512
S&P 100   743.32 - 12.98   760.45   742.98   totals   2609/3990
S&P 500  1409.28 - 22.59  1437.28  1408.78           39.5%/60.5%
RUS 2000  500.68 -  5.33   506.88   500.55
DJ TRANS 2777.07 - 16.15  2793.94  2746.72
VIX        28.28 +  1.47    28.44    27.30
Put/Call Ratio      0.68
******************************************************************

What election results?

When I spoke yesterday about a "buy the rumor, sell the fact"
event on Wednesday, I was not expecting it to be so drastic. Of
course I was expecting a new president elect by now as well. With
the election still in doubt and allegations of fraud, errors and
just plain confusion the markets expressed concern that the results
could be in doubt for days to come. Investors moved to the sidelines
on all but some energy and drug stocks which were still up slightly
on the hopes of a Bush victory. The Nasdaq traders wasted no time
in running for cover with the index selling off from shortly after
the open until closing at the low of the day. The Dow bounced off
resistance at 11000 again and traded lower but still in a narrow
range.







Instead of an election it looks more like a bloody overthrow if
you gauge the election by the market results. Traders are concerned
about many different possible outcomes. Tech traders expecting a
post election bounce were caught off guard by the possibility of
a Gore reversal and further worries that the tech sector growth
is slowing. The concern over CSCO comments about order growth
slowdown and increased inventory levels took another huge bite
out of the chips and networkers. Traders unsure about growth targets
and the election results dumped these stocks and moved back into
cash. There is nothing investors like less than uncertainty and
we had a serious bout of that today.

One analyst estimated that 30% of the market had been trading up
based on the expectation of a Bush win. He pointed to the +1000
point gain in the Dow when Bush was pulling away from Gore in the
polls and then the flat line since Nov-1st as the DUI news broke.
Whether you believe him or not the markets do have more to gain
from a Bush win with Drugs, Defense, Energy, Health Maintenance
Organizations as well as the infrastructure necessary to support
these sectors were expected to do well. These sectors have been
strong over the last three weeks and could give back some gains
if it appears the recount is going badly.

I kept hearing all day that we were going to have another retest
of the 3000 bottom on the Nasdaq. I am having a hard time believing
it but I would not complain in the least. I was flat for the CSCO
earnings, (glad I was), and I remained flat over the election due
to the possibility of a "sell the news" event. If you followed my
lead then we are faced with a really good buying opportunity and
from the news after the close today it may get better. After the
close ICGE announced earnings and warned that future prospects
would be grim with a -35% layoff. The stock dropped 35% in after
hours trading. Engage Technology (ENGA) also warned that there
would be an earnings shortfall going forward and they dropped -1.22
to $2.69 in after hours. 24/7 media also lost more than expected
and got a serious haircut after the close. DoubleClick, guilty by
association, dropped -$3 in after hours after the negative news
from the other Internets. All major Internet stocks are likely to
fall at the open as the Internet sector comes under pressure yet
again.

Even after saying positive things in their earnings conference
call CSCO was dropped by Morgan Stanley from their new Global
Cash recommendation list. The continued weakness in long term
outlook by investors in CSCO is rippling through the other tech
companies that feed off CSCO. The contract manufacturers like
FLEX, JBL, SLR and CLS took another hit as well as chip
manufacturers BRCM, AMCC, PMCS, AMAT, ATML, IDTI, ALTR and HIFN.
This was not a good day to hear Dan Niles say chip inventory
was building. With the life cycle of some of these chips measured
in 2-3 month periods any inventory oversupply can be critical.

Brokers and financial stocks also took hits on downgrades and
uncertainty. Bear Stearns took aim at Morgan Stanley as over
valued with mentions about GS and LEH as well. Sector after
sector experienced rotation as investors worried that the
results could go against them after the recount.

There are so many things I could write about tonight. The number
of stories which impacted the market today and will impact the
market tomorrow is more than I could write about over two days.
The major problems I see are these. The Internet incubator stocks
and advertising stocks are getting crushed in after hours trading
due to increased losses and earnings warnings. This is sure to
stop the Internet rally we have seen over the last week dead in
its tracks. Secondly, the chips and networkers have been absolutely
killed, over killed in my opinion, and there is a point where no
amount of negativity will push them any lower. JNPR for instance
has dropped -35 and is close to weak support at $184. Real support
is much stronger at $165 and buyers will come off the sidelines
in volume should we get anywhere close. This same scenario is
true for BRCD, EXTR, PMCS and all of the fast movers mentioned
above. There are billions in cash on the sidelines and it is just
waiting for the right opportunity.

The election results are being touted as the reason for the drop
in the market but we feel it is just an excuse. I agree it is a
once in a lifetime event but we will survive. Gridlock is still
in force regardless who eventually wins. Some are saying now that
it could take days before the recount is over and as many as nine
days before the overseas absentee votes are counted. Suits have
been filed and will further complicate the process. It is still
just an excuse. Regardless of who wins the economy is still in
good shape, Greenspan is still in control and money is still
piling up on the sidelines. Actually it will start piling up
faster the closer we get to year end. Our consensus of opinion
tonight is not that there was an over abundance of sellers, there
was just no buyers today. The market makers pulled in their bids
because they did not know what was happening and when the results
would be known. Volume was light with only 897 million on the NYSE
and 1.68 billion on the Nasdaq. The NYSE advance decline line was
not bad with only a 13:15 ratio in favor of the declines. The
Nasdaq was slightly worse at almost 1:2 but we think it was
artificial. With the economy slowing the next rate move is likely
to be up and that is not a bad environment for the market. Bush
is expected to have two major bills on his desk the day he is
sworn in and both are tax cut measures. The death tax and the
marriage penalty will go the way of the dinosaurs. Some will say
that this will cut into the surplus but it will also give voters
more money in their pocket to put to work in businesses or spend
as they see fit. We could argue over the impact depending on your
economic views but consumers with more money in their pocket is
not a bad thing in my book.

It is my opinion that we could see some more volatility tomorrow
as market makers try to find a bottom and cooler heads prevail
in the election result scenario. The drop today was the result
of many factors many of which were exaggerated more than usual.
I said on Sunday that an election dip would be a buying opportunity
and I still believe it. We are only 150 points away from the last
bottom test at 3085 on the Nasdaq. This was back on October 26th.
We could easily plunge to that level in the morning depending on
the overnight news. Futures are actually up as I write this but
only slightly. With support at 3100 and even stronger support at
3000 the downside is minimal from here. Those institutional traders
who have been short for months will be deciding soon if the next
dip is the last one and that could coincide with the PPI in the
morning the anticipated 5:PM recount release on Thursday, and Dell's
earnings on Thursday night. With this triple threat on Thursday
the volatility could be huge but once all three events have passed
the glow on the horizon may be a market sunrise not a sunset. I
am going to be looking at charts and not redundant election news
tonight and I suggest you do the same. There are some real bargains
out there today and target shooting these stocks on any further
weakness on Thursday is my game plan. I have already planned for
our fall rally party on New Years Eve and I am not ready to start
changing my plans yet. Get those party hats ready and let's get
this market moving in the right direction! As always, wait for the
bounce!

Good luck and don't buy too soon.

Jim Brown
Editor


*************************
REGIONAL SEMINAR SCHEDULE
*************************

Only one seminar left. Here is your chance to learn from
the pros. The three day Technical Analysis Stock and Option
Fall Seminar Series. Three days of in-depth education.
Don't miss it!

Date      City

Dec 07-09 Philadelphia

Has the market been beating you up? Did you give back
your gains from April/August? Would you like to understand
all the technical indicators our writers use? Does
the alphabet soup of technical terms like RSI, DMA,
MACD, ROC, Stochastics, Bollinger bands, sound like
Greek to you?

You can learn from the experts how to interpret all
these indicators, read charts, pick stocks and which
option strategies to use on those stocks for less than
the cost of one bad trade.

Reserve your seat now for one of our regional seminars.

Click here for more info:

http://www.OptionInvestor.com/seminar/seminar.asp


********************************Advertisement********************
Option trades starting at only $15.50, stock trades as low as $9.95!

Mr. Stock provides key advantages to the serious option investor.
Along with complex option trading online, fast executions, advanced
charting capabilities and the ability to trade from any screen, we
now offer some of the best commissions on the Internet. Our staff
understands the sense of urgency required in today's market and
will respond quickly to your most important trading needs.

http://mojofarm.mediaplex.com/adserver/click_thru_request/565-58-1875-3
*****************************************************************


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

New Long Term Call Play

GE - General Electric $54.56 -0.38 (+1.25)

GE is a diversified services, technology and manufacturing company
with a commitment to achieving customer success and worldwide
leadership in each of its businesses. GE operates in more than 100
countries and employs nearly 340,000 people worldwide, including
197,000 in the United States. John F. Welch has been Chairman and
Chief Executive Officer of GE since 1981.

It is GE's ability to survive and thrive on its diversified
businesses that makes it one of the great companies of the
American economy.  No matter how big the conglomerate, this Old
Economy beast has proven that it can adapt to the environment of
the New Economy.  The recent HON merger announcement is just
another opportunity that GE CEO Jack Welch sees as a strategic
fit.  What attracted us to this long term play is its stability
in uncertain markets and their fair valued options.  Since dipping
below $50 on October 23rd, GE has put together a nice recovery.
Its pattern of higher lows and the ceiling at $55 is creating an
ascending wedge that is narrowing.  There are a couple of ways
to get into some of these low priced options.  A breakout over $55
would warrant entry, otherwise buying on the dips would provide a
good long term entry.  A close below our stop at $50 would make
us cautious.

BUY CALL DEC-55 GE-LK  OI=13617 at $2.56 SL=1.25
BUY CALL DEC-60 GE-WLL OI=19015 at $0.69 SL=0.00
BUY CALL JAN-60 GE-WAL OI=12761 at $1.44 SL=0.75
BUY CALL MAR-60*GE-WCL OI= 4288 at $2.69 SL=1.25
BUY CALL MAR-65 GE-WCM OI= 3182 at $1.38 SL=0.50

Average Daily Volume = 14 mln



New Low Volatility Call Play

CMTO - Com 21, Inc. $13.56 -0.19 (+1.69)

Com21, Inc. is a leading global supplier of system solutions for
the broadband access market. The Company's DOCSIS, DVB, and
ATM-based products enable cable operators and service providers to
deliver high-speed, cost-effective Internet and telephony
applications to corporate telecommuters, small businesses, home
offices, and residential users. To date, Com21 has shipped over
700,000 cable modems worldwide, along with over 1,200 headend
controllers. Com21 systems offer commercial service in cable
systems passing 16 million households worldwide.

Even as the tech growth model is being questioned by investors,
ultimately the demand will be there in the future in some way,
shape or form.  The demand for worldwide, high speed Internet will
not disappear, and CMTO is a key supplier to the broadband market.
We like this play for its low volatility and lower price.  The
fact that CMTO has recovered with a smooth saucer bottom during
the NASDAQ flux shows us that this play has limited downside risk
with nice upside potential.  The past two days taken CMTO higher
by about $2 on stronger-than-average volume.  To play this low
volatility play, look for pullbacks to the $12 area, or any
bounces above that level.  Resistance may lie at the most recent
top of $14.  A breakout above that will likely leave clearance to
$17, the local top from late August.  The stop loss is at $10, so
a close under will result in drop of the play.

***November contracts expire next week***

BUY CALL NOV-15    CQH-KC OI=532 at $0.63 SL=0.00  High Risk!
BUY CALL DEC-12.50 CQH-LV OI=385 at $2.50 SL=1.25
BUY CALL JAN-12.50*CQH-AV OI=852 at $3.25 SL=1.75
BUY CALL JAN-15    CQH-AC OI=304 at $2.19 SL=1.00

Average Daily Volume = 400 K



***********
DAILY DROPS
***********

Dropped Calls

ELNT $92.25 -15.56 (-23.63) The uncertainty over the presidential
election kept buyers sitting on their hands today, leaving the
fate of the Technology market in the hands (or paws) of the bears.
ELNT was mauled for the second day in a row, as the stock
continued to pull back from its upper channel line.  We were
looking for a continued recovery from yesterday's low near $103,
but it wasn't meant to be.  After less than an hour, the
indecision had given way to rampant selling and the stock plunged
though our $99 pain threshold shortly after the end of amateur
hour.  Support finally materialized near $87, but by that time
the damage was done.  Thankfully, we never got an entry point for
our call play, so given the decisive violation of our stop, we
have no choice but to drop it tonight.

ITWO $157.00 -19.19 (-13.44)  Roiling with the NASDAQ, ITWO got
hit hard by the sellers today.  The uncertainty of who will be the
next leader of the Free World kept the buyers away as investors
would rather be on the sidelines.  Uncertainty is the market's
worst enemy.  While the selling very well may be overdone, the
constant decline throughout the day took out our stop at $160,
forcing us to drop this call play.  There is a good chance that
a relief rally props up ITWO tomorrow, allowing a better exit.
This is a good example of the importance of stop loss orders for
option positions in a shaky market.

BRCD $231.00 -25.50 (-22.75)  Losing almost 10% today, BRCD
finally stopped bleeding at the site of its 50-dma.  The story is
the same for most of the tech stocks which fell victim to the
uncertainty of the Election.  It felt more like investors were
looking for an excuse to sell.  At any rate, this play that looked
healthy until today blew through support levels and our stop at
$235 on higher volume.  Therefore, we are dropping BRCD tonight,
so look for a relief bounce tomorrow for an exit.

CMVT $107.63 -9.88 (-10.19)  Same story, different tech stock.
CMVT was sold off today on slightly higher volume, sliding through
its previously reliable 10-dma support and also our stop loss at
at $110.  While the play provided some profitable trades up to the
$120 area, we must drop it tonight after our stop was taken out.

Dropped Puts

MNMD $62.00 -0.75 (-5.69)  This put play performed well for the
three days that it was on our list.  It gave us a great entry on
Monday morning and dropped since.  We did not get stopped out of
this play, rather we are taking the quick profits.  We expect MNMD
and other Biotechs to rebound if and when Bush is confirmed
President-elect.  Technically, MNMD bottomed around the $60 level
in mid-October so it may be near support.  A break of $60 would
be encouraging for put holders but we are taking the money and
running tonight.


*****************
STOP-LOSS UPDATES
*****************

RIMM - call play
Adjust from $99 up to $102

SLR - put play
Adjust from $48 down to $44

IDTI - put play
Adjust from $49 down to $44

ADI - put play
Adjust from $58 down to $56


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

The Uncertain Market Environment
By Mary Redmond

It is important to monitor the interest rate environment and
the money flows, as they are key to the action in the market.
The current spread between high yield corporate bonds and 30
year Treasuries is very high by historical standards.  High
yield debt rates went over 13% last month, and the spread
between Treasuries and high yield corporates has widened to
over 800 basis points.

This can be attributed to a lot of factors.  One is the fact
that the 30 year yield was over 6.5% in January before the
Treasury began a buy back program.  The treasury yield has
dropped at the same time as the Federal Reserve raised the
Fed Funds rate and short term yields.

Another factor could be the stock market's dramatic rise and
collapse this year, and the actions of the internet stocks.
For example, in 1999 and early 2000, the institutional and
retail public was highly enthusiastic about providing
financing to developmental stage internet companies, through
both stock and bond offerings.

Many fortunes had been made in such a fast period of time that
fund managers, creditors and investment bankers were almost
obligated to participate.  And, similarly, the collapse was
so severe and intense that borrowers and creditors have now
raised the cost of financing to the same type of companies
which are now perceived as high risk for default.

In the past, this type of credit spread scenario has predicted
a recession.  Most high yield analysts now feel that the
current situation is not necessarily indicative of an impending
recession yet, as there are many other factors involved.
However, it may be difficult for the market to rally strongly
with very high short term bond rates and a light flow of cash
to equity funds.

Despite the massive speculation we saw in internet stocks last
year, and the booming IPO market, most investors were
surprisingly cautious and conservative, and actually deposited
more money into money market funds than into equity funds.
From June of 1999 to June of 2000, over $350 bln went into
money market funds.  During the first ten months of 2000, an
average of $20 to $50 bln per month was deposited into
money market funds.

During October, the cash flows to equity funds were very light.
Last week it was estimated that between $5.5 and $7 bln was
deposited into equity funds.  In addition, the Investment
Company Institute reported that the net inflow to money market
funds was slightly over $1 bln net.  Retail money market
funds decreased by $7.26 bln, and institutional money market
funds increased by $8.41 bln.

The high liquidity flows to the U.S. stock market from U.S. and
overseas investors has helped to fuel the bull market of the
1990s.  It is important that this trend continue.

The money flow probably will not dry up unless we were to have
a recession, or a high unemployment rate.  High employment and a
growing economy means people have money to deposit.  If last
week is an indication, it can mean that the boom and bust cycle
of shoveling cash into equity funds, and then shoveling it into
money market funds may be shifting to more regular deposits of
roughly equal amounts of cash into both equity and money funds.

It will be equally important to monitor interest rates over the
coming months.  Interest rates can be impacted by the actions of
the Treasury Dept.  We don't know what programs a new Treasury
secretary would implement.  It is also unclear what tax legislation
will be passed in the House Ways and Means committee in Congress.
Most analysts think that the tight balance between parties
indicates that few drastic changes will be implemented.

We have to be extra careful when using technical indicators on
uncertain days.  It is usually best to go with the trend of the
index and sector you are trading.  It is sometimes possible to
make money from technology calls when the Nasdaq is falling, but
it is more difficult.  The chart below show that the stochastic
indicator gave some false buy signals today.










A day like today is rare, and it might take the markets some
time to adjust to the situation before a new trend develops.
The worst case scenario might be if the process were to drag on
for a period of time and cause continued uncertainty.  In the
meantime, we need to be careful to monitor the macro economic
indicators like interest rates, and the technical indicators
which guide our trading.


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at Preferred Capital Markets
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with Preferred Capital

Anything else is too slow!

http://www.sungrp.com/tracking.asp?campaignid=905
**************************************************************


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

IMCL - Imclone Systems $62.00 -0.31 (-5.32 this week)

Engaged in the research and development of novel cancer
treatments, IMCL focuses on growth factor inhibitors,
therapeutic cancer vaccines and angiogenesis inhibitors.  The
company's lead product candidate, IMC-C225, is a therapeutic
monoclonal antibody that inhibits stimulation of a receptor for
growth factors upon which certain tumors depend.  Phase I/II
clinical trials have been promising.  The lead candidate for
angiogenesis inhibition, IMC-1C11 is an antibody that binds
selectively and with high affinity to KDR, a principal
Vascular Endothelial Growth Factor (VEGF) receptor, thus
inhibiting angiogenesis.

Most Recent Write-Up

Consistent with its recent pattern, IMCL ran up to its upper
Bollinger band on Friday, only to pull back for some consolidation
early in the week.  Volume on the pullback has dropped off
considerably, clocking in right at the ADV over the past two
sessions. Recall that it had risen to more than triple the ADV in
Friday's session as the stock hit $68.38, its highest level since
early March.  Conservative traders will want to wait for the
buyers to return, propelling the stock back above Friday's high.
The stock has pulled back to our expected support level ($61-62).
The highs from late September and late October formed a double-top
at $61, which the stock broke through last Thursday, and a bounce
from this level looks like a good aggressive entry point.
Consistent with this support level, our stop level remains $59,
and a close below there will be cause for IMCL's expulsion from
the call list.  We are still playing IMCL for a run into earnings,
but we need to convey caution.  While the best information from
the company indicates the report SHOULD be out next week, they have
not provided a firm date.  The prudent approach will be to keep
those stops in place as we continue to endeavor to extract a firm
earnings date as the week continues.

Comments

We're looking for a confirmation of a Bush victory in FL and
the Presidency to give the biotechs a boost.  After heavy selling
on the NASDAQ today, a relief rally is expected.  Look to enter
on bounces from $60 or a break above $64.  The current stop is at
$59, so a breakdown below $60 without a bounce would raise a red
flag.

BUY CALL NOV-60 QCI-KL OI= 383 at $4.25 SL=2.75
BUY CALL NOV-65 QCI-KM OI=1521 at $1.88 SL=1.00
BUY CALL NOV-70 QCI-KN OI= 138 at $0.69 SL=0.00  High Risk!
BUY CALL DEC-70 QCI-LN OI= 158 at $3.38 SL=1.75

Average Daily Volume  = 769 K



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

Who will be the next President of the United States?

The stock market ended lower today as investors awaited the final
results of Tuesday's election.  Bush supporters helped the Dow
Industrials limit session losses with heavy buying interest in
many of the old-economy issues.  At the same time, technology
stocks were pummeled, and the Nasdaq extended its retreat as the
day progressed.  Merck (MRK) and Philip Morris (MO) topped the
industrial group on the upside amid strength in sectors that might
benefit from a George W. Bush Presidency.  Energy and drug stocks
also moved higher as investors bet that the Republican from Texas
would win the undecided election.  Bush has said he would back a
strictly private-sector plan for prescription drug insurance for
the elderly, a key campaign issue backed by large pharmaceutical
companies.  A Republican-controlled congress is also expected to
benefit major oil companies but trading activity was muted as
investors remained hesitant in the absence of a solid outcome.
On the downside, financial issues such as American Express (AXP),
Citigroup, (C) and J.P. Morgan (JPM) added to the Dow's demise.
Technology stocks suffered from a bout of profit-taking and every
major group slumped, with hardware, Internet and semiconductor
issues seeing the greatest selling pressure.  The index suffered
additional losses in the high-speed network chip makers that were
hammered earlier in the week after Cisco Systems (CSCO) warned of
a massive parts build-up.  Concerned investors see the inventory
problems as mounting evidence of a future slowdown in spending by
telecommunications carriers and an unavoidable slump in the chip
industry.  In the computer software sector, the perception that a
Bush regime would support a more hand-offs approach with major
corporations benefited Microsoft (MSFT) shares in early trading.
But, the belief that the software giant might receive more lenient
treatment from the new President could not hold back the flood of
supply, and the issue eventually retreated.  Inside the broader
market, tobacco, paper, biotech, and retail consumer shares were
the most productive stocks while brokerage, precious metals and
defense industry issues consolidated.


Summary of Previous Picks:

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

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

None - Waiting for favorable premiums...

Naked Puts:

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

PCYC    NOV    45    43.62  57.88    $1.38  14.2%
APWR    NOV    40    38.56  40.19    $1.44  10.8%
DCTM    NOV    50    48.44  77.06    $1.56   9.0% Splits 2-1 Nov 14
VRTX    NOV    70    68.81  93.25    $1.19   7.7%
MANU    NOV    60    59.06 110.00    $0.94   7.4%
HGSI    NOV    75    74.25  90.38    $0.75   7.1%
EPNY    NOV    60    59.31  82.06    $0.69   6.6% Splits 3-2 Nov 14
ELNT    NOV    75    74.25  92.25    $0.75   6.5%
HAND    NOV    50    48.75  83.31    $1.25   6.5%
KREM    NOV    65    64.06  96.56    $0.94   6.4%
AVCT    NOV    60    58.50  59.50    $1.00   6.4%
VRTS    NOV   110   108.13 144.50    $1.88   5.9%
PDLI    NOV   105   104.12 132.38    $0.88   5.8%
HGSI    NOV    70    68.94  90.38    $1.06   5.1%

Sell Straddles:

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

EXAR    NOV    42.5  40.50  35.13   -$5.37   0.0% Adj 2-1 Split
EXAR    NOV    62.5  65.19  35.13    $2.69  20.5% Adj 2-1 Split

Naked Calls:

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

NEWP    NOV   190   191.69  94.50    $1.69   8.9%
NEWP    NOV   165   166.00  94.50    $1.00   8.6%
JNPR    NOV   260   261.56 188.19    $1.56   7.8%
BRCM    NOV   280   282.19 151.81    $2.19   6.3%
JNPR    NOV   280   281.56 188.19    $1.56   5.1%


New Candidates:

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

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

BULLISH PLAYS - Covered Calls & Naked Puts

***************
AFFX - Affymetrix  $87.25  *** Successful Patent Appeal! ***

Affymetrix is engaged in the field of DNA chip technology.  The
company has developed and plans to establish its GeneChip system
as the platform of choice for acquiring, analyzing and managing
complex genetic information in order to improve the diagnosis,
monitoring and treatment of disease.  The GeneChip process
consists of disposable DNA probe arrays containing gene sequences
on a chip, certain reagents for use with the probe arrays, a
scanner and other instruments to process the probe arrays, and
software to analyze and manage genetic information from the probe
arrays.

Last week, Affymetrix won an appeal in a patent dispute with a
rival biotechnology firm, Oxford Gene Technology, concerning the
manufacture and use of specialized chips that analyze genes.
Both companies supply scientists with micro-arrays that are used
to determine which genes in DNA samples are active and which are
dormant.  The United Kingdom Court of Appeal overturned a lower
court ruling that held Affymetrix hadn't properly licensed the
technology for the chips.  The decision affirmed Affymetrix's
patent position for chip technology and removes uncertainty about
its ability to sell its gene chips world-wide.  In addition, the
decision means that Affymetrix has a better chance at winning a
similar patent dispute currently being tried by the U.S. District
Court in Delaware.

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

AFFX - Affymetrix  $87.25

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

Sell Put  NOV 70   FIQ WN  414       0.44    69.56     8.2% ***
Sell Put  NOV 72.5 FIQ WV  59        0.81    71.69    13.1%
Sell Put  NOV 75   FIQ WO  666       1.25    73.75    17.7%

- COMBINATION PLAY -

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-50  FIQ-XJ  OI=  A=$0.62
SELL PUT  DEC-60  FIQ-XL  OI=  B=$1.62
INITIAL NET CREDIT TARGET=$1.12  ROI(max)=12% B/E=$58.88



******

AGN - Allergan  $90.75  *** All-Time High! ***

Allergan is a provider of eye care and specialty pharmaceutical
products throughout the world with products in the eye care
pharmaceutical, ophthalmic surgical device, over-the-counter
contact lens care, movement disorder, and dermatological markets.
Allergan's worldwide-consolidated revenues are mostly generated
by prescription and non-prescription pharmaceutical products in
the unique areas of ophthalmology and skin care, neurotoxins,
intraocular lenses and other ophthalmic surgical products, and
contact lens care products.

Pharmaceutical and Biotechnology stocks moved higher Tuesday as
investors bet Republican George W. Bush would win the undecided
U.S. presidential election.  Allergan shares rallied $2.38 to an
all-time high near $90 and the optimism for the industry suggests
the trend will continue. In addition, the previous trading range
top near $85 should provide adequate support for any future
corrections.

With favorable premiums in the December options, this position
offers an excellent speculation play for traders who are bullish
on the issue.  However, the stock is slightly over-extended and
a brief consolidation is expected.  Target a higher premium in
the spread initially, and make adjustments as necessary to enter
the position.

AGN - Allergan  $90.75

- COMBINATION PLAY -

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-70  AGN-XN  OI=250  A=$0.88
SELL PUT  DEC-75  AGN-XO  OI=2    B=$1.50
INITIAL NET CREDIT TARGET=$0.75  ROI(max)=17%  B/E=$74.25


***************
CRGN - Curagen  $63.25  *** Own this One! ***

CuraGen is primarily a genomics drug discovery and development
company.  Curagen, in collaboration with other companies and
through its own internal programs, researches, develops and uses
technologies based on the discovery of genes and their functions
and relationships.  The use of genomics technologies is intended
to accelerate the discovery and development of consumer products
to improve human and animal health, and agricultural products.
The company's genomics technology and information systems have
three primary systems, each of which is fully operational and has
been commercialized.  These are SeqCalling for gene sequencing
and discovery of variations in gene sequences; GeneCalling, a
patented technology for gene discovery and comprehensive gene
expression analysis; and PathCalling for analyzing the function
and relationships between genes (and the proteins these genes
encode) in biological pathways.

Early in October, CuraGen announced it will combine efforts with
Gemini Genomics, an English biotech firm, on a new drug target
discovery collaboration, which includes the application of the
company's "PathCalling" technology.  During the same week, CRGN
officials announced they had licensed five new drug targets to
Biogen, completing the research portion of the two companies'
collaboration.  This follows a long-term agreement with Abgenix,
in which the two companies have selected a number of antibody
drug targets for further evaluation and possible development as
therapeutics for cancer and inflammatory diseases.  As part of
the five-year collaboration, CuraGen and Abgenix are planning to
identify and develop up to 120 antibody drug candidates against
cancer, inflammation and autoimmune diseases.

Analysts say the speed at which these targets were identified
validates the company's ability to rapidly deliver high-quality,
novel drug targets and Lehman Bros. recently characterized the
company as a "premier" genomics-based drug company with a broad
range of technologies relating to genetic interpretation.  The
company's drug discovery partnerships are cost beneficial and
CuraGen's revenue strategy, a program focused on discovering
complex genetic diseases in oncology, inflammation and metabolic
areas, is expected to provide excellent earnings growth in the
coming years.

CRGN - Curagen  $63.25

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

Sell Put  DEC 45   CQX XI  8         1.31    43.69     7.7% ***
Sell Put  DEC 50   CQX XJ  5         2.25    47.75    12.4%



******

CVTX - Cv Therapeutics  $86.56  *** Biotech Binge! ***

CV Therapeutics is a biopharmaceutical company engaged in the
discovery and development of new small molecule drugs for the
treatment of cardiovascular diseases.  The company currently is
conducting clinical trials for two of its drug candidates,
including ranolazine, which is in its second Phase III trial.
In addition, the company has several research and pre-clinical
development programs designed to bring additional drug candidates
into human clinical testing.  Consistent with its unique business
strategy, the company currently retains United States marketing
rights to its two top clinical candidates, ranolazine and CVT-510.
Since its inception, substantially all of its resources have been
dedicated to research and development.  The company expect its
sources of revenue, if any, for the next several years to consist
of payments under corporate partnerships and interest income.

CV Therapeutics is simply one of our favorites for speculative
stock portfolios and the demand for new drug applications has
helped the issue remain relatively bullish in the midst of the
recent downtrend in Nasdaq issues.  The current technical trend
is favorable and today's slump may offer a potential entry point,
based on short-term price/volume indications.  Obviously, the
issue is prone to volatile activity with the biotechnology group
but a reasonable cost basis exists at the previous support area
near $80.

CVTX - Cv Therapeutics  $86.56

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

Sell Put  NOV 70   UXC WN  36        0.50    69.50     9.1% ***
Sell Put  NOV 75   UXC WO  4         1.13    73.87    15.8%



******

EMLX - Emulex  $154.06  *** Own This One! ***

Emulex is a designer, developer and supplier of a broad line of
Fibre Channel host adapters, hubs, application-specific computer
chips (ASICs), and software products that provide connectivity
solutions for Fibre Channel storage area networks (SANs), network
attached storage (NAS), and redundant array of independent disks
(RAID) storage.  Its products are based on internally developed
ASIC technology, and are deployable across a variety of SAN
configurations, system buses and operating systems, enhancing data
flow between computers and peripherals.  Emulex's products offer
customers a combination of critical reliability, scalability, and
high performance, and can be customized for mission-critical server
and storage system applications.

Earnings continue to have a major affect on share value of most
companies and in early October, data network equipment producer
Emulex reported quarterly net income of $12.85 million, easily
surpassing the Street forecasts, due to improved orders for its
fiber channel adapters.  The company said its net income was $0.33
per share, compared with $6.8 million, or $0.18 per share, in last
year's first quarter.  Analysts who follow the company had been
forecasting a profit of $0.26 per share.  Revenues for the company
rose to $55.5 million, up 92% from the $28.9 million reported in
the year-ago period and sequential revenue growth jumped 31% from
the previous quarter.

The growing demand for storage systems and the recent shortage of
information technology resources has boosted demand for Emulex's
products and the trend is expected to continue.  In addition, the
company is expected to make additional strategic investments in
upcoming months to partner with complementary technology leaders
which are focusing on storage networking solutions.  That bodes
well for the future share value of Emulex and these positions
offer a low risk cost basis with a reasonable expectation of
profit.

EMLX - Emulex  $154.06

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

Sell Call DEC 120  UMQ LD  76       40.50   113.56     4.7% ***
Sell Call DEC 125  UMQ LE  57       37.13   116.93     5.7%
Sell Call DEC 130  UMQ LF  106      32.88   121.18     6.0%

Sell Put  NOV 120  UMQ WD  326       0.69   119.31     7.4% ***
Sell Put  NOV 125  UMQ WE  113       1.38   123.62    13.7%
Sell Put  NOV 130  UMQ WF  490       1.69   128.31    14.6%



******

NTIQ - NetIQ  $98.25  ** Entry Point! ***

NetIQ is a provider of eBusiness infrastructures management
software that enables organizations to optimize the performance
and availability of Windows NT and Windows 2000-based systems
and applications.  The company's Administration, Operations and
Network Performance Management product lines are designed to
reduce the cost of daily business operations and increase the
security, performance and availability of eBusiness applications,
directories, servers and networks.

NetIQ provides services for a unique area of cyber-space.  The
Internet and Intranets are best known for providing information
and allowing communication.  NetIQ's solutions help improve the
quality of these activities for networks and their customers.
They deliver the most comprehensive solutions for managing both
Windows- and non-Windows-based platforms, applications and other
devices and their services are utilized by a number of top-tier
businesses and communications companies.  In addition, they also
recently announced a major license, development and marketing
agreement with Microsoft, which positions NetIQ as Microsoft's
Premier Independent Software Vendor for solutions built on MSFT's
operations management technology.

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

NTIQ - NetIQ  $98.25

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

Sell Call NOV 85   CQT KQ  8        14.50    83.75     5.0% ***

Sell Put  NOV 80   CQT WP  27        0.69    79.31    10.7%
Sell Put  NOV 85   CQT WQ  5         1.50    83.50    18.4%


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

BEARISH PLAYS - Naked Calls

The issues are excellent candidates in the premium-selling
category of options trading.  Based on analysis of historical
option pricing and the underlying stock's technical background,
these positions meet our fundamental criteria for profitable
naked-calls.  Each issue has robust option premiums, a well
defined resistance area and a high probability of remaining
below the target strike prices.  As with any recommendations,
these positions should be carefully evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and personal trading style.  Many traders may favor a more
aggressive approach, selling options that are closer to the
current price of the issue, to produce a higher initial return.
While that technique may be more attractive, it also increases
the theoretical risk of loss.  Only you can know what plays are
suitable for your personal risk-reward tolerance and portfolio
outlook.

***************
JNPR - Juniper Networks  $188.19  *** Sector Slump! ***

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

Technology stocks dropped again today, weighed down by some of
the same networking chip companies that were slammed Tuesday
after Cisco Systems warned of a massive parts build-up.  The
unexpected announcement re-ignited concerns about slower sales
for high-speed Internet access equipment.  Juniper's shares
moved lower in sympathy with several other high-speed Internet
component makers and service providers, which declined when
Cisco announced that it planned to reduce its inventory in the
coming months.  The weakness spread to a number of bellwether
companies in the technology group, especially in the networking
sector.  Juniper was just one of the many stocks affected by
the news and the company's share value dropped precipitously
during the session.

Even with the recent slide, investors are speculating on the
future upside potential of many of the networking issues and
we will use that interest, and the overpriced option premiums,
to our advantage with these relatively conservative, bearish
positions.

JNPR - Juniper Networks  $188.19

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

Sell Call NOV 220  JUD KD  10808     2.63   222.63    19.3%
Sell Call NOV 230  JUD KF  4845      1.50   231.50    13.0% ***
Sell Call NOV 240  JUD KH  2951      0.81   240.81     7.1%



******

RBAK - Redback Networks  $86.19  *** Technicals Only! ***

Redback Networks is a provider of advanced networking systems
that enable carriers, cable operators and service providers to
rapidly deploy high-speed access to the Internet and corporate
networks.  Their Subscriber Management System (SMS) connects and
manages large numbers of subscribers using any of the major high
speed access technologies including digital subscriber line,
cable and wireless.  Redback sells its products through a direct
sales force,resellers and distribution partners.

Since the beginning of the recent sell-off in the technology
group, this company's share value has fallen substantially and
today the issue moved to a 6-month low.  Redback is a volatile,
price-momentum stock and based on the negative near-term outlook,
we are going to initiate a bearish position with a conservative
risk/reward perspective.  We will use the overpriced premiums to
enter the play with a small theoretical edge.  The probability of
the share value reaching our sold strikes appears rather low, but
there is always the possibility of a recovery rally so monitor
the position daily for changes in technical character.

RBAK - Redback Networks  $86.19

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

Sell Call NOV 115  BUK KC  205       1.00   116.00    18.5%
Sell Call NOV 120  BKK KD  959       0.75   120.75    14.1% ***
Sell Call NOV 125  BKK KE  1154      0.44   125.44     8.4%




**************************************************************
TRADING SECRET - FREE REPORT 1-800-776-7966

OBSCURE IRS RULE GIVES
TAX ADVANTAGE TO TRADERS - PLUS -

LIVE STOCK PICKS --- TWO WEEK FREE TRIAL

Instant Messenger Alerts on Every Buy/Sell
Opportunity from our Top Trader.
834% return since 2/97 (Day/Swing Trading)
Click on http://www.sungrp.com/tracking.asp?campaignid=927
**************************************************************


*******************
FREE TRIAL READERS
*******************

If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


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

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

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives