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Daily Newsletter, Thursday, 11/09/2000

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The Option Investor Newsletter                 Thursday 11-09-2000
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MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        11-09-2000        High      Low     Volume Advance/Decline
DJIA    10834.30 - 72.80 10902.10 10618.50 1.11 bln   1088/1726
NASDAQ   3200.35 - 31.35  3230.00  3087.06 1.94 bln   1260/2606
S&P 100   739.21 -  4.11   743.32   721.79   totals   2348/4332
S&P 500  1400.14 -  9.14  1408.65  1369.68           35.2%/64.8%
RUS 2000  495.33 -  5.35   500.68   485.97
DJ TRANS 2751.34 - 25.73  2775.20  2719.33
VIX        29.64 +  1.36    31.68    28.62
Put/Call Ratio      0.78
******************************************************************

Ok here is the plan, heads its Bush, tails its Gore.

You know the story, you have heard it over and over all day until
you are almost to the point of wishing you had voted for Nader.
(I said almost!) As I write this 97% (65 of 67 precincts) have
been recounted and the Bush lead has slipped to only 225 votes.
Sheeesh! Talk about a nail biter. If it was only a matter of the
Florida recount being completed tonight and a winner named we
would almost be out of the woods. Unfortunately for traders the
outlook is still grim. Regardless of the final count tonight there
are numerous suits already filed and recounts underway in other
states besides Florida. The closer we get to a tie in the Florida
recount the more importance the absentee ballots will become. The
Bush camp says those ballots come from a lot of military personnel
and will add to the Bush totals but the Gore camp says a lot will
come from Israel and be for Gore after the Clinton effort to help
in the recent conflict. The bad news, they can come in up to ten
days after the election and still be counted as long as they were
postmarked on Nov 7th. The bottom line, we are not done having
fun yet.







Other than election news, yes there was some, the PPI report this
morning was mixed with a headline number increase of +0.4% which
was far more than the +0.1% that analysts expected. The major
reason was higher food and energy costs. The core rate which is
more important came in at -0.1% which was less than expected. The
mixed numbers had very little impact on the market with all the
real attention being focused on the election results. The Fed
meets next week and today's numbers were a non-event as far as
the Fed is concerned.

Dell did what everyone feared after hours tonight. Dell met
analyst's estimates with earnings of $.25 but guided analyst's
earnings lower for the future. Dell feels they will achieve a
+27% growth for the full year going forward which is decent
growth. The bind here is what we were worried about with CSCO
on Monday. They have been growing at a +50% clip for so long that
anything less than that is viewed as a negative. Dell dropped to
$26 in after hours trading from a close of $28.38. With Nasdaq
futures down -50 already for tomorrow you can bet Dell is a
substantial reason. Intel dropped -1.50 in after hours after
the Dell guidance. Fewer computers sold by Dell mean fewer
Pentiums sold by Intel. CSCO dropped about -.50 for no reason
we can find. MSFT lost about -$1.00 after the announcement and
SUNW only -.50. SUNW is likely to benefit from the impression
that they are getting more server business than Dell.

Today was tough for the Internets with YHOO dropping over -$6
as the leader by default of the Internet sector. After the
missed earnings and warnings from last night the carnage was
widespread and severe. CMGI -3.81, ICGE -5, SFE -2.69, DCLK
-3.25. Anything related to Internet advertising revenue took
a serious hit and many hit the lows for the year. The shock
wave from that bubble bursting is still being felt as investors
login to see that their Internet stocks which could not go any
lower actually did.

Even the largest profitable Internet company took a hit but
from a different source. AOL dropped -$4 after the government
said they were delaying the decision on the TWX/AOL merger.
AOL is not as susceptible to advertising revenue as most other
companies and the TWX merger will make them even stronger going
forward but there are many hurdles they must cross before that
happens.

If you were sitting in front of your PC today when the Gore
team started talking trash about the election and all the suits
and recounts and irregularities then you are well aware of the
intraday havoc they caused. The Nasdaq, which had been trading
sideways since the opening drop, promptly headed south to the
tune of -144 points and a low of 3087 before rebounding to close
dead on 3200. The low was about +6 points above the low of 3081
set on October 26th. In my book it was another successful retest
of the entire series of October lows from the 13th, 18th and 26th.
With any kind of resolution of the election crisis we should move
up from here. The Dow dropped almost -300 points to a low of
10618 and rebounded after the press conference to close at
10834. Volatility anyone? The prospect of the election crisis
dragging out days, weeks or even months had traders running for
the sidelines. Did you buy the dip like I suggested last night?
I did.

Here are my reasons which with $3.00 will buy you a cup of coffee
but they are my reasons. I think 3100 is strong support and 3000
even stronger. I think our downside from here is slim. Yes the
election news is grim. What is the worst case? One of them will
finally be declared the winner and the market will rebound. The
possibility of Gore being the winner has now been priced into the
market. If a possible Bush win had added several hundred points
to the indexes then the two day sell off has corrected that. This
does not mean new news cannot cause further problems but almost
every possibility has been priced in at this point. Then there is
the wildcard. The Fed. If the markets keep bouncing all over the
place could the Fed possibly be a little more open to a rate cut
next week to soothe the markets until the election is resolved?
Who knows but I would not put it past the current administration
to put pressure on Greenspan to cool the markets while the Gore
team goes about trying to find enough votes to claim victory.
Is that a conspiracy or just good politics? After all, you take
the pressure off the markets and you take pressure off the timing
of the results. Maybe I am just skeptical but Greenspan has been
known to ride in on his white horse in times of crisis in the past
and save the day. What is the worst case? They raise the rate again
next year if the economy is still growing too fast. Add to this
the high VIX at 30 and the put/call ratios near .80 and you have
a great possibility for a positive market on the right news.

What should you do tomorrow? If I knew the answer without a shadow
of a doubt Austin and Wendy would both be driving new Jaguars on
Monday. Nobody knows and nobody can predict due to the enormous
possibilities of more press conferences by the dueling election
teams and the possibility of each trying to grab the headlines
with multiple forms of sensationalism. What if Florida completes
the task and Bush is still the winner, by 50 votes? What is Gore
is the winner by 50? What about the absentee votes? What about
the suits? There is simply no way to know which way this election
will go and that could impact the market either way. If the Florida
recount is completed tonight then Friday could be a decent market
day. HOWEVER, any negative headlines that will lead to weeks of
uncertainty my cause a flight to cash before the close on Friday.
With two days of dueling headlines before the market opens again,
skittish traders will be looking for safety. What you do on Friday
depends on your risk profile and there may be a great opportunity
to profit from that risk. As I said before I think the downside
is between 3000 and 3100 but that is just my opinion. This event
has never happened before and there are no historical precedents.
Greed however is alive and well and will jump in when the outlook
is the worst. You can count on that! I am.

Good luck and don't buy too soon.

Jim Brown
Editor


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

Back To School
By Austin Passamonte

How many times will we need to retest these stupid market lows?
Our fellow bulls wonder why we can't retest recent highs a few
times around as well!

Right now the highs seem to have learned their lesson better.
It might take a bit more prodding before we're sure a firm bottom
sits beneath our feet.

The presidential debacle is our latest news event to give good
reason for traders to sell the farm. Any hint of weakness these
days results in a swift and immediate market drop. Such action
is swiftly met with vigorous buying at once. What does this tell
us?

More volatility ahead.

As noted in Tuesday's "Market Sentiment" daily charts, all major
indexes were (and still are) screaming of weakness with bearish
price/stochastic divergence clearly shown. Those who backed up
the truck and bought puts across the board (Molly Evans?) are
whistling their way to the bank less than two sessions later.
And so are those who bought calls this afternoon!

Why such market action occurred can be speculated, debated and
explained on a fundamental basis until the cows come home. All
of these may be valid but on a trade-entry basis, does it really
matter? We think not.

It's still our opinion that there will be further broad market
declines over the next several sessions or weeks before a major,
sustained rally can emerge. This is based on technical and
fundamental analysis to cover all bases.

Daily charts of all major equity indexes have turned decidedly
negative while respective weekly charts went neutral. This must
reverse before we can identify any uptrend in these markets.

Downside support is firm just above the most recent lows and
should hold but does not have to. Support is much easier to break
than resistance has been since August.

From a candlestick perspective we see the creation of bullish
hammers with long tails in the Dow, SPX and OEX with NASDAQ
markets closing their gap-down open and ending with bullish dojis
as well. These signs point to further strength tomorrow from
here.

Only the Dow rests above its major moving averages with the other
indexes still looking up at their M/A ceiling's overhead.

On the fundamental front, investors and traders need a solid
catalyst to drive these markets into a sustained rally. Who wins
Florida and the presidency would help but is far from the cause
or cure.

Market bulls need good news from leadership companies on fourth-
quarter earnings in order to justify strong buying. First we must
wash out all of the warnings from this quarter and survive the
next round of confessions and the dead space in between.

Eager buying ensues at prices lower than current but what will
cause the same buying volume to continue far above such
"bargains"?

S&P 500 commercials are still historically short as of last week
to be reviewed again tomorrow night. Their gamble to hold fast
through the deepest plunge so far is perplexing but worth noting.

Odds are we should see a tradable rally to continue today's
action on Friday. That does not negate the long-term view but it
may be best to make money on a daily basis for now and face the
long-term as it unfolds.

Today was another remarkable occurrence, which has become almost
common this year. It proves there is a plethora of willing buyers
out there but at what price levels? There are also many negative
forces to pressure more selling ahead, but to what depths?

We will play this market day by day. Puts and calls worked well
this session. Calls should do so tomorrow morning. After that,
only the charts will tell as we continue the eternal quest for
market direction with conviction!


*****

VIX
Thursday 11/09 close: 29.64


30-yr Bonds
Thursday 11/09 close: 5.84%

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

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

                                   Thursday
                                 (11/09/2000)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
780 - 765               13,145          708        18.57***
760 - 745               15,371        8,302         1.85

OEX close: 739.21

Support:
735 - 720                6,323       11,012         1.74
715 - 700                1,540       11,389         7.40
Maximum calls: 800/6,112
Maximum puts : 700/5,278

Moving Averages
 10 DMA  745
 20 DMA  735
 50 DMA  761
200 DMA  777


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 85 - 83                50,296        34,262         1.47
 82 - 80                60,159        47,041         1.28
 79 - 77                12,403        61,047          .20

QQQ(NDX)close: 76.25

Support:

 75 - 73                 5,694        53,542         9.40
 72 - 70                 1,689        21,803        12.91
 69 - 67                   193         5,784        29.97

Maximum calls: 84/25,633
Maximum puts : 80/31,301
Moving Averages
 10 DMA 80
 20 DMA 80
 50 DMA 86
200 DMA 93


S&P 500 (SPX)
Resistance:
1475                   14,801         4,767          3.10
1450                   11,305         8,561          1.32
1425                   10,261        13,102           .78

SPX close: 1400.14

Support:
1375                   13,343        19,259          1.44
1350                    8,395        23,014          2.74
1325                    2,467         9,774          3.96


Maximum calls: 1400/28,985
Maximum puts : 1400/31,761

Moving Averages
 10 DMA 1415
 20 DMA 1395
 50 DMA 1428
200 DMA 1441

*****

CBOT Commitment Of Traders Report: Friday 11/03
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    (Current)  (Previous)      (Current)  (Previous)
Open Interest
Net Value        -1066        +89            +657        -483
Total Open
Interest %       (11.56%)    (1.07%)        (2.84%)     (2.34%)
                net-short    net-long       net-long    net-short

NASDAQ 100
Open Interest
Net Value         -448        -262          -927          +85
Total Open
Interest %       (2.40%)      (1.48)        (1.89%)      (.21%)
                net-short   net-short     net-short    net-long

S&P 500
Open Interest
Net Value        +60112      +57,031        -70603     -66,429
Total Open
Interest %       (31.64%)    (31.05%)       (11.10%)    (10.72%)
                 net-long    net-long       net-short   net-short

What COT Data Tells Us: Commercial positions in S&P 500 remain at
their ten-year extreme short levels while small specs held their
net-long positions as compiled Tuesday 10/31 by the CFTC.

Commercials have reversed position albeit modestly on the DOW and
have now gone to a net-long position while the small specs have
turned to net-short positions. New data Friday night!


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

Please visit this link for Market Posture:

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

President or No President, It's Still The Economy
By Molly Evans

Last week - same time, same place, we began the revisit of "What
Moves the Markets" highlighting key economic reports that tell
the tales of the U.S. economy.  As I had alluded, the markets are
propelled in both directions by key market pillars: economy,
corporate earnings, interest rates and liquidity.  Today's
markets are quite volatile.  Oftentimes, they surge or they drop
so abruptly that investors are stunned with how quickly they've
appreciated or depreciated in net worth.  These past couple of
months have seen violent rallies but tops come quickly.  People
shake their heads and wonder why.  Why?  It's because the markets
are pretty smart.  They are quick to lead or at least react to
developments in these market pillars.

The small investor may often feel helpless and victim to the
volatile times.  They think they have no edge and are destined
to follow the coattails of the big money when they start to buy
again.  That's just not true.  You too can read what is going
on and anticipate the market's reactions.  You can be prepared
for those swings and you CAN make money on both up and down days.
If the Denver seminar attendees took nothing else away from their
time out there, hopefully they did learn that.  Puts in a bear
market (Nasdaq) are as golden as calls were in the fall's bull
market.  When people are trading their own money, they've got
to strive for objectivity in their interpretations of the key
market pillars.

Let's consider this:  In the words of the great George Soros,
"Economic history is a never-ending series of episodes based
on falsehoods and lies, it represents the path to big money.
The object is to recognize a trend whose premise is false, ride
that trend and step off before it is discredited."  That's a
very strong statement!  Think about that!  First you have to
believe there exists a false premise; then you must consciously
discredit that premise with the truth but you have to accept
it as truth so that you can act upon it.  So, to come into the
big money, you have to study and understand the basics of
economics, look around to identify trends denying the truths;
ride the trend, and then get out when it appears that the lot
of other market participants are about to realize they've been
conned! The markets are smart but opportunity lurks in many,
many corners.  Austin has shown you how to spot divergences
in stock price versus technical indicators.  Lee has taught you
to recognize mispricings in options.  I've been trying to show
you that economics are important, valuations do matter, and
the markets don't have to climb to the sky for you to make money.
These are just a smattering of the brainpower printed here.
You have the tools if you'll just use them.

So what is the present ill of the markets?  It's still the
economy.  It's still the valuations of tech stocks.  The
presidential hoopla does nothing to add to the optimistic side
for the bulls but it's just an excuse to sell. Once the ball
starts rolling, it gains momentum down the mountain.  "But
we've already come down so far!  It's the time for the fall
rally that we get every year!" you say?  Historically, maybe so.
That doesn't mean that it's a guaranteed thing.  Folks are still
queasy about oil prices and their heating bills this winter.  No,
the extra oil hasn't shown up in the reserves yet.  OPEC promised
and the market has priced it in but it's still not here yet.
Consider the retail sector.  The last three years, retail stocks
have rallied from October into the first quarter.  Will they this
year?  So far, no.  Are consumers gearing up to be full of holiday
cheer and in a spending sort of mood?  You tell me.  Consumer
spending has been a big part of the economic expansion we've
enjoyed these past several years.  Monetary ease and booming
markets made the consumer feel rich.  Yet now, consumer debt is
at staggering, nosebleed levels.  The safety net of real savings is
down to all time lows and lo and behold, consumer confidence is
grinding down.  The government's consumer confidence report for
October dropped 7.3 points, a big one-month drop and consequently
the lowest reading in over a year.  Ills of October again?
Retailers will hope so.

The economy reigns supreme in determining market performance.
However, corporate earnings, which are certainly intertwined
with economic reality, are still an independent pillar of market
moving events.  There are many, many great companies who have
magnificent growth prospects and real earnings.  That's
undisputed. The trick is to be proactive and smart.  Find those
companies that are consistently surprising to the upside, become
intimate with their tape action through the daily cycles and then
apply your favorite long investment strategies during market
pullbacks.

As Dick Arms asserted, we've moved into a cycle of trading ranges.
There are still great corporate earnings, the problem is that
share price had gotten ahead of fair valuation in so many stocks.
That's awfully easy for me to say now that we know how the market
has chopped them up recently.  But, what we should consider going
forward is that in the coming quarters, might year ago comparisons
become difficult?  Economic conditions were generous in late 1999
and early 2000, allowing earnings per share (EPS) for the S&P 500
to grow 20%.  However, cost pressures from the tight labor market,
transportation costs and adverse market conditions (for corporate
investment portfolios) conjoined with higher interest rates
and tightened lending by banks might just serve to slow the EPS
growth into the next year.  This year has certainly witnessed more
earnings disappointments than surprises.  The shakeouts are
serving to compress valuations.  It's buyer beware.  If you buy,
be sure you hedge, sell premium and take profits when presented
with such gifts.

Next pillar...interest rates.  The Fed meets to decide fiscal
direction on the 15th.  What's it going to be?  I can't count the
number of times I've heard the pundits on CNBC say that the Fed's
next move is to ease their tightening bias at the very least, if
not lower rates.  I'm no expert but...I don't think so!  The
latest reported average hourly earnings for payroll workers is at
the highest level it's been in over eight years.  The picture is
splashed with mixed signals.  It would be pretty surprising to see
them raise rates but the mixture of inflation, deflation and
stagflation indicators must signal to them that they've mastered
a "just right" slowing of the economy and thus will remain guard
dog vigilant.  Indeed, the Fed's own minutes reflect that very
sentiment as evidenced from the minutes of their last committee
meeting, "many members emphasized that the Committee needed to
be prepared to act promptly should inflationary pressures appear
to be intensifying."

The last pillar is liquidity.  Liquidity is probably the least
understood entity of market moving factors.  The analysis of
liquidity is tracking the change of the float of stock and the
movement of cash.  Mary Redmond has been so good about keeping
you informed of cash flow to and from mutual funds and money
market accounts.  We all keep hearing it, "Money is piling up
on the sidelines!"  Maria shouts it every single day.  How
come we keep testing this bottom then?  How come the big boys
are ten year extreme net short?  Show me the money.  They are
right though.  It may be lighter inflow than in years past but
nonetheless, inflows are still greater than outflows.  Continue
to follow Mary's information.

This past week has been very interesting.  I'm listening to
Chris Matthews on Hardball as I type this.  He says we're in a
crisis as we don't know who's going to lead this country over
the next four years.  I don't know if it's a real crisis but I
did think that there was one precious moment the other night
as I watched the election returns.  Bob Pisani was taking emails
from viewers and in a true sign of the times, one befuddled
viewer wrote in, "Watching these events unfold tonight is much
like watching my internet stocks during the day."  There's never
a dull moment in this world.  Stay tuned, be very suspicious
of just where that elusive bottom lies and be trigger happy if
the trade turns on you.  There's always another one out there.


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


CALLS:
*****

RIMM $70.50 +1.00 (+1.82) While portable computing and wireless
net-ready appliances are still considered the wave of the future,
the tide has turned for net appliance stocks, at least for now.
While RIMM held up well in yesterday's stormy markets, the stock
dropped almost 11% today over 150% of ADV.  The Nortel effect is
a factor that also continues to weigh heavily on RIMM.  As both
stocks are large caps in the Toronto Stock Exchange (TSE), Index
players can have a dramatic influence on the stock price,
regardless of strong fundamental factors or technical support
levels.  With that, RIMM has fallen below our stop at $99.  As a
result we are no longer recommending this play.

PKI $110.44 -5.81 (-5.50) Ongoing election jitters contributed
to heavy selling in the broader markets and finally broke the
back of PKI's narrow trading range.  Recall that our play was
struggling to clear resistance near $120, after setting a new
high last week.  The consolidation had been taking place in a
fairly narrow range ($115-119), as we awaited the catalyst which
would propel the stock higher. Alas, a different catalyst
arrived in the form of more market weakness, and PKI investors
went along for the ride today, subjecting the stock to nearly
a $6 loss on the day, clearly violating our $113 stop and
bringing our play to a decisive close.

LXK $41.50 -3.06 (-2.75) Our attempt to capitalize on LXK's
extended rebound and low volatility in options came to an end
today as the stock gapped below support at the $44 level.
Unfortunately, the stock's slide continued past our stop at
$43.  The broad weakness in the markets today was too much for
recent bulls in LXK.  As such, we are no longer initiating new
positions in the stock.  However, LXS's slide lower in the past
two days came on extremely light volume, which could lead to a
snap-back rally should the bulls return with strength.  We'd
use any strength in the coming trading days to exit
existing positions.

CFLO $120.88 -15.13 (-15.69) The post-election decline was
sharp and CFLO got whipsawed.  The sellers far outweighed the
buyers amid the so-called uncertainty.  Today, CFLO saw the
underside of the 10-dma ($124.58) and an intraday low of $117.75
before it resurfaced above the $120 level.  Our $134 stop was
clearly violated and we're dropping the play this evening.
There is support at the current level, so look for a relief
rally if you failed to exit open positions and are looking to
repair losses.

VRTS $139.25 -5.25 (-14.69) Investors took more than a few
profits off the stock's recent gains.  The definitive slide
under $150 kept even the more aggressive call traders at bay
yesterday.  The weakness extended today.  Buyers didn't start
nibbling on VRTS until it hit the $135 level.  The transgression
through our $139 stop and the strong inclination for further
losses amid the jittery marketplace places VRTS on our drop
list.  If by chance you have open call plays, it might be wise
to consider selling into any intraday strength.  The next level
of support is quite a ways down near the $120 mark.


PUTS:
*****

GSPN $55.13 +3.25 (-18.34) Showing amazing relative strength
over the past 2 days, GSPN has refused to break down further,
even in the face of the weakness seen in the broader markets.
While we saw the NASDAQ challenge its October lows today, our
play recovered almost immediately from a minor gap down open,
managing to chalk up a $3.25 gain by the closing bell.  Although
we got a great ride from GSPN when it cratered earlier this
week, it looks like the selling pressure has diminished
significantly.  We're more than happy to take our profits off
the table and bid a fond farewell to GSPN tonight.


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The Option Investor Newsletter                 Thursday 11-09-2000
Copyright 2000, All rights reserved.                        2 of 2
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********************
PLAY UPDATES - CALLS
********************

MSFT $70.88 +1.44 (+2.19) MSFT demonstrated tremendous strength
in a weak and uncertain market environment over the last two days.
Excellent profits could have been taken Wednesday morning when the
stock popped over the $72 level before dropping on election
uncertainty back to support at $68.  MSFT's 5 and 10-dmas are
almost converging, with the former at $69.75 and the latter at
$69.31.  It is a sign of technical strength that MSFT was able to
stay above support at $69 today, even when the market weakened.
Volume came in above average at 45 million shares, above the three
month average.  MSFT is on its way to clear the 200-dma of $73.44,
and, if it is successful, could be on its way to July's high of
$80.  Remain cognizant of continuing election uncertainty, which
could persist for longer than expected, and continue to use the
$64 level as a stop should MSFT close below that level.
Aggressive entries might be found should MSFT rally above the
$71 level early tomorrow, while a strong move above resistance
at $72 could provide a more conservative play.

ADBE $83.19 +2.94 (+2.50) Yesterday, ADBE received a double-dose
of positive comments.   First, Montauk Securities issued a
report in which it described ADBE as a fundamentally strong
company with tremendous growth opportunity.  As well, Robertson
Stephens analysts Aleksandar Sasa Zorovic and Lowell Singer
reiterated their Buy rating, stating, "The company is uniquely
positioned to capture on the needs of publishers, corporations,
and consumers to publish seamless across media and devices and
(we) believe this opportunity is still not fully reflected in
the stock price."  Kind words were little help as the stock fell
$2 on a shaky day for the market overall.  Or perhaps there
was a delayed reaction as today, ADBE bucked the downtrend and
rallied on over 150% of ADV.  For conservative traders, look
for a stronger market to carry ADBE above $85 with volume before
entering.  Aggressive traders may try target shooting the 5-dma
at $81.90 and the 10-dma near our stop at $79, but make sure the
stock closes above this level as it remains our stop.

EMC $85.00 -3.63 (-12.75) Election uncertainly and general market
weakness, especially in the land of the big cap Tech stocks
yesterday led to EMC declining $8.94 on 125% of ADV.  Today, the
selling continued but upon hitting the rock-solid support level
of $80, the stock bounced strongly as bargain hunters stepped in
to bid shares back up to close right on support at $85.  Despite
closing below our stop of $86, we are keeping this call play for
a number of reasons.  First, the bounce off support today was
convincing, with high volume suggesting that a bottom was found.
Second, candlestick analysts will note that EMC has formed what
could be a morning doji star pattern.  A strong move up tomorrow
would complete this pattern.  If so, a recovering market tomorrow
with continued buying in EMC could make current levels an
attractive entry.  A more aggressive entry could be had on another
test of $80.  For the risk averse, wait for EMC to break through
its 100-dma at near $90 before initiating a new position.
However, further weakness in the stock would result in an end to
our play.

IMGN $41.88 -1.94 (+3.81) Yesterday, in the face of a declining
broader market and uncertainty in the macroeconomic and political
landscape, IMGN bucked the trend to close up $2.25 or 5.41%, with
volume clocking in at twice the ADV.  This was largely thanks to
an announcement from the company, reporting favorable results of
one of their Tumor-Activated Prodrugs (TAP).  The drug, used to
treat small-cell lung cancer, was successful and well-tolerated,
not only in monkeys but in mice as well.  While this is a long
way from FDA approval or even Phase 3 trials, it is a step in the
right direction.  While IMGN did give some of its gains back
today, the up-trend remains intact.  A bounce off the 5 and
10-dmas at $40.82 and $38.51, respectively, are possible
aggressive entry points while a break through resistance at $45
on volume would allow for a safer entry.  At present, we are
keeping our stop at $37 so make sure IMGN closes above this
point when entering on a bounce.

PSFT $45.94 -0.63 (-0.81) As Bill Clinton remarked yesterday, the
People have spoken - we just don't know what they are saying yet.
With a market that doesn't like uncertainty, traders took profits
on PSFT yesterday, after encountering resistance at $50, closing
the stock down $3.13 or 6.29% on less than 75% of ADV.
Considering the low volume, we were not concerned.  Today, with
continued weakness in the NASDAQ, PSFT offered what could turn
out to be a rare and ideal entry point, bouncing strongly above
our stop at $42.  Despite closing down fractionally, the strong
buying conviction this morning has us thinking that there is
strong buying interest in this stock.  With volume coming in at
about 115% of ADV, most of it was to the upside.  There is
support at $45 and on a bounce backed by volume, this could allow
for an aggressive entry.  Another test of $42 support is not very
likely but if it happens, make sure PSFT closes about this level
when considering a play.  For traders who want to enter on
strength, wait for PSFT to break through its 5-dma at $42.29 with
conviction before jumping in.  However, since PSFT closed ever
so slightly below our stop we would view continued weakness
tomorrow as a sign PSFT's run is over.

IMCL $59.44 -2.88 (-8.19) Our earnings play is apparently
running out of time, as IMCL is expected to release its results
in the first half of next week.  Although the company is still
not providing an exact date, investor relations is guiding us
to expect its report by the middle of next week.  The price
action in IMCL has continued to reflect investor nervousness,
with the stock trading below $56 today before bouncing at the
30-dma ($56.25) and recovering with the rest of the Biotechs
this afternoon.  Volume is continuing to increase with more
than 200% of the ADV trading hands today.  Ending the day
fractionally above our $59 stop level, IMCL is skating on thin
ice, and a close below that level tomorrow will mean it gets
dropped this weekend.  While an aggressive entry could have
been had when the stock bounced near $56 this morning, we
would recommend waiting for the stock to clear $62 (the top of
today's opening gap) before initiating new positions.

MANU $109.06 -0.94 (-11.44) Alright, don't go running to your
keyboard with allegations of treachery.  Yes it's true, MANU
is still on our call list in despite of the STOP violation.  Our
position on MANU remains the same - if the share price
demonstrates more weakness tomorrow and conclusively moves to
the underside of $110 at the close, we'll exit the play.  In
this particular case, we kept MANU because it made a valiant
attempt to move to the topside of $110 in the last hour of
trading today.  This behavior coupled with the oversold
conditions present the possibility of a relief rally.  There's
plenty of room for upside action tomorrow.  A moderate approach
is to buy into strength as MANU moves through the 5 and 10-dmas
at $118.30 and $115.84, respectively.  If you're more cautious
in these markets, look for MANU to rally above the $120 level on
strong volume before starting new plays.

MLNM $75.50 -7.56 (-9.56) Let's give a cheer for MLNM!
Yesterday's strong trading action at the $88 and $89 level
provided convincing sentiment that the stock is well positioned
for a break through the $90 resistance.  A more cooperative
market would, of course, provide the propulsion to launch MLNM
through its 52-week record of $84.25.  Today however, was quite
a different story.  Talk about a close encounter of the worst
kind!  The wobbly market, lots of money moving to the sidelines,
and investors growing anxiety over the recent election stripped
MLNM down to bare bones.  MLNM saw the low $70s before a late-
day upswing brought the share price back above our $75 Stop!  We
remain bullish on the issue and believe MLNM will rise to the
occasion in coming sessions.  However, trade smart.  Wait for
the uptrend to resume before jumping back into positions.


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

IDTI $36.13 -3.56 (-14.25) There's nothing like a down market to
help a put play.  To use the classic balloon in an elevator
analogy, not only was the balloon a lead one, but the elevator
was going down as well.  Downward momentum continued for IDTI on
Wednesday as the stock opened at its high of the day, and
proceeded to head lower to close down $2.56 or 6.07% on stronger
than average volume.  The move below $40 gave conservative
traders entry points.  Today, the selling picked up as the stock
gapped down at the open and continued lower on high volume.  With
help from negative sector sympathy, IDTI closed down 8.89% on
over twice the ADV.  For conservative traders, a break through $35
could allow for an entry point while aggressive traders could
watch for a failure to rally above resistance at $40 before making
a play.  In both cases, confirming direction with sentiment in the
Chip sector before entering would not be a bad idea, and be aware
that we have moved our stop lower to $41.

SLR $40.00 -0.88 (-4.19)  Shares of original equipment
manufacturers got slammed this week as Cisco reported a high
inventory level for certain electronic components.  This worked
out beautifully for our SLR put.  SLR receives about 10% of its
sales from Cisco, and was already weak from the investment
community's disappointment with its takeover of NatSteel.  The
Cisco earnings report and the general market environment served
to push SLR off a cliff below support at the 200-dma of $41.69.
SLR is now situated well below the 50-dma at $44.86, the 10-dma
at $43.98 and the 5-dma at $42.27.  Volume is heavier on down
days.  It looks as if SLR may be in for a fairly prolonged sell
off.  However, the stock shows a consistent pattern of gradual
one and two point daily moves.  Consider taking new positions on
a failed attempt to clear $40, and consider closing all positions
if the stock closes above our stop at $44.

ADI $45.88 -1.06 (-16.44) Heaping even more misery on the already
beleaguered Semiconductor sector this morning, Banc of America
Securities analyst, Rick Whittington, cut his ratings on nearly
a dozen chip stocks, including ADI.  Pointing to supply and
demand coming into parity due to slowing demand, Whittington
lowered his price target for ADI from $110 to $60, and the
sellers piled on again, extending yesterday's losses.  The stock
finally found some support after the lunch hour, bouncing from
the day's low of $42.63 to close out the day with a loss of only
$1.06.  Volume has been heavy the past 3 days, hitting more than
double the ADV today.  The pattern changed a bit today however,
with heavier volume coming on the buy side, than the sell side.
This points to a possible bottoming pattern, so to preserve our
profits, we are moving our stop loss down to $49.  Aggressive
players can consider new entries on a rollover from intraday
resistance either at $45 or $49-50.  More cautious players will
want to wait for further weakness to materialize though.  In
this case, wait for ADI to penetrate today's low, and then jump
aboard as the stock heads down to challenge its next support
level near $37.

LVLT $38.38 -1.19 (-1.44) Growing concerns about tech growth and
the general uncertainty in the markets added more pressure to
LVLT's share price.  The weakness was certainly visible in
today's session.  A mini rally during amateur hour failed to
push the share price through $40, and subsequent attempts to
gain upward momentum quickly lost steam around the $39 level.  A
high-volume decline through the 5-dma ($38.14) would portend
that LVLT could see the underside of $35 once again.  If that
scenario transpires, aggressive traders might consider taking
positions into the downward momentum.  A definitive slide under
today's intraday support at $36.50 would however provide better
confirmation of further weakness.  Take entries according to
your risk portfolio.  Any bullish close above $41 and we will
exit the play - currently, the 10-dma ($41.03) is in-line with
our stop loss.  Although it had no effect on trading, be advised
that Deutsche Ban Alex Brown reiterated a Buy recommendation on
LVLT today.


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

AGGRESSIVE:

SDLI - SDL, Inc. $238.31 +19.00 (-24.19 this week)

SDLI was the first company in the world to successfully
commercialize the integration of multiple lasers on a single
semiconductor chip and ever since, has been a leader in
integrating lasers with other optical or optoelectronic elements
such as lenses, mirrors and light amplifiers.  Their
technological leadership is illustrated by the more than 125
patents held, backed by an emphasis on continued research and
development.

Ever since Nortel's earnings report, stocks in the Optical
Networking sector have taken it on the chin.  While the report
was fantastic for the most part, analysts focused on the revenue
number, which fell short of the high side of Street estimates,
much to the chagrin of traders who were long Networking issues.
Since then, SDLI has twice tested what appears to be a rock-solid
support level at the $200 level.  Today's early-morning bounce,
backed by strong buying volume, to close near the highs of the
day, up 8.66% on over 125% of ADV, suggests that the worst may be
over.  Fans of candlestick analysis will note the bullish
piercing pattern on the daily chart.  As Jim Brown mentioned this
past Sunday, SDLI is really a play on JDSU.  With a 3.8-to-1
share exchange, any move on JDSU will result in 3.8 times that
move in SDLI.  This makes SDLI a highly leveraged play, and with
intra-day swings of over 20 points more often than not a daily
occurrence, this is a highly tradable stock indeed.  But make no
mistake.  This is a high-risk, high-reward recovery play.  While
SDLI has strong support at $200 and $220, allowing for an
aggressive entry if it bounces off those levels again, we are
setting our stop at $216 to compensate for the wide swings in
volatility.  If SDLI closes below this point, it could signal the
possibility for more downside and as a result, we would no longer
recommend this play.  However, a break through resistance at $245,
backed by strong buying volume could be a sign that positive
momentum has returned to the stock, allowing for a conservative
entry point.  From there, it could be a quick trip up to $260,
where SDLI will meet its next challenge in the form of its
200-dma.

***November contracts expire next week***

BUY CALL NOV-230 QJV-KF OI= 549 at $20.88 SL=15.00
BUY CALL NOV-240*QJV-KH OI= 385 at $15.63 SL=11.25
BUY CALL NOV-250 QJV-KJ OI= 595 at $11.13 SL= 8.25
BUY CALL DEC-240 QJV-LH OI=2812 at $29.00 SL=21.00
BUY CALL DEC-250 QJV-LJ OI= 574 at $24.75 SL=18.00

SELL PUT NOV-220 QZL-WD OI=171 at $ 6.63 SL= 6.50
(See risk of selling put in play legend)

Average Daily Volume = 4.84 mln



TLAB - Tellabs Inc $55.56 +2.31 (+2.00 this week)

Tellabs is an optical networking firm.  Its equipment is used
throughout the world to manage and transmit data, voice, and
voice signals.  Customers include telecommunication companies,
cable operators, corporations and government agencies.  Baby
Bells account for nearly one-third of sales with another third
generated outside the US.

TLAB just might be the archetypal under-valued stock.  This
networking issue toppled from its July pinnacle of $77.25 as the
summer doldrums took hold of the marketplace.  While of the
stocks in the communications equipment market, like Ciena
(CIEN), went on a tear, TLAB continued to drift lower.  When the
networking equipment market showed signs of slowing, it was more
salt on the open wound.  The relentless punishment saw TLAB hit
lows of $37 and $38 in October.  But as is the cycle of most
things, there was a turnaround in sentiment.  As the dust
settled following Nortel's (NT) warning and the resulting sell-
off in the sector, many investors seized the opportunity to
bargain hunt.  During the past two weeks, shares of TLAB have
seen a significant rise from recent lows.  It wasn't a trick on
Halloween when TLAB broke the $50 resistance.  TLAB is currently
channeling between $52 and $56 on respectable volume - we will
use the low end of that channel at $52 for our stop.  The
steady action this week points to another potential breakout, if
the markets head higher in the near-term.  We're looking for a
break above $56 and the 200-dma ($57.55) over the short-term to
confirm an uptrend.  A conservative approach is to wait TLAB to
move through the resistance before beginning a play.  On the
analyst front, Robinson-Humphrey reiterated a Buy recommendation
and issued an $85 price target.

***November contracts expire next week***

BUY CALL NOV-50 TEQ-KJ OI=3014 at $6.13 SL=4.00
BUY CALL NOV-55 TEQ-KK OI=3124 at $2.44 SL=1.25
BUY CALL DEC-55*TEQ-LK OI=1350 at $4.88 SL=3.00
BUY CALL DEC-60 TEQ-LL OI=3829 at $2.75 SL=1.25
BUY CALL JAN-60 TEQ-AL OI=2605 at $4.88 SL=3.00
BUY CALL JAN-65 TEQ-AM OI= 688 at $3.25 SL=1.50

Average Daily Volume = 5.39 mln



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

AGGRESSIVE:

RSAS - RSA Security $48.00 -4.25 (-9.44 this week)

RSA Security Inc. is a trusted name in e-security, helping
organizations build secure, trusted foundations for e-business
through its two-factor authentication, encryption and public
key management systems.  As the global integration of Security
Dynamics and RSA Data Security, RSA Security has the market
reach, proven leadership and unrivaled technical and systems
experience to address the changing security needs of e-business
and bring trust to the new, online economy.

Feeling the pressure of renewed selling in the Internet sector,
RSAS is accelerating its rollover from the double top completed
last week.  Despite other stocks in the Internet Security space
finding support and tenuously moving higher, RSAS is continuing
to head lower due to a bearish imbalance between selling volume
and buying volume, and has now given up nearly 20% over the past
week.  On above average volume, the stock plunged through both
the 30-dma ($51.56) and the 50-dma ($51.06) today, as it headed
down to close at $48, fractionally above the day's low.
Positive news like new and enhanced products, as well as the
company's penetration into new market areas is being ignored,
with investor nervousness still the dominant factor.  This
nervousness is being fueled by concerns about revenue in the
Internet space, as well as apprehension about the results of
the presidential election.  As long as this uncertainty remains
unresolved, RSAS is likely to continue downwards, with support
at $39-40 a likely target.  Today's candle pierced the lower
Bollinger band, so an oversold bounce is possible.  Consider a
failed rally to the $51-52 level as an attractive, but
aggressive entry point.  We have placed our stop at $52, near
the top of today's opening gap, and a close above this level
will indicate that our play is on the mend.  If the stock
continues to decline from today's lows, use a move below $47
as a conservative entry point.

***November contracts expire next week***

BUY PUT NOV-50*QSD-WJ OI= 180 at $3.63 SL=1.75
BUY PUT NOV-45 QSD-WI OI=  32 at $1.06 SL=0.00
BUY PUT DEC-55 QSD-XK OI= 605 at $9.13 SL=6.25
BUY PUT DEC-50 QSD-XJ OI=   0 at $5.63 SL=3.50  Wait for OI!!

Average Daily Volume = 462 K



*********************
PLAY OF THE DAY - PUT
*********************

IDTI - Integrated Device $36.13 -3.56 (-14.25 this week)

The company's high-performance semiconductor products and modules
are found in computers, peripherals, and communications and
networking devices.  About 70% of sales are from communications
and high-performance logic components, specialty memory, clock
management circuits, and networking devices.  IDTI also makes
static random-access memories (SRAMs).

Most Recent Write-Up

There's nothing like a down market to help a put play.  To use the
classic balloon in an elevator analogy, not only was the balloon a
lead one, but the elevator was going down as well.  Downward
momentum continued for IDTI on Wednesday as the stock opened at its
high of the day, and proceeded to head lower to close down $2.56
or 6.07% on stronger than average volume.  The move below $40 gave
conservative traders entry points.  Today, the selling picked up
as the stock gapped down at the open and continued lower on high
volume.  With help from negative sector sympathy, IDTI closed down
8.89% on over twice the ADV.  For conservative traders, a break
through $35 could allow for an entry point while aggressive
traders could watch for a failure to rally above resistance at $40
before making a play.  In both cases, confirming direction with
sentiment in the Chip sector before entering would not be a bad
idea, and be aware that we have moved our stop lower to $41.

Comments

With DELL down in after-hours and the Presential Election being
contested, it looks like uncertainty will prevail once again
tomorrow.  IDTI fell well below the $40 level today and continues
sliding lower in its downtrend.  To play this put, look for entries
on any bounces up to resistance at $39, or even lower at $37,
accompanied by a rollover.  With the NASDAQ futures down in after
hours, watch for IDTI to break down again.  A break through today's
low near $34 on strong volume would warrant even a conservative
entry.

***November contracts expire next week***

BUY PUT NOV-40*ITQ-WH OI=646 at $5.75 SL=4.00
BUY PUT NOV-35 ITQ-WG OI=481 at $2.69 SL=1.50

Average Daily Volume = 4.10 mln



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

Another day of waiting...

Stocks closed lower today amid concerns over corporate earnings
and uncertainty about the outcome of the Presidential election.

Wednesday, November 8

Technology stocks fell precipitously today as investors worried
that valuations in the group are too high given the slowdown in
corporate earnings.  In addition, uncertainty over the outcome
of the presidential elections dragged the broader market lower.
The Nasdaq closed down 184 points at 3,231 and the Dow finished
down 45 points at 10,907.  The S&P 500 ended down 22 points at
1,409.  Activity on the Nasdaq was light at 1.6 billion shares,
with declines beating advances 2,516 to 1,316.  Trading volume
on the NYSE reached 895 million shares, with losers outpacing
winners 1,477 to 1,307.  In the bond market, U.S. the 30-year
Treasury rose 9/32, pushing its yield down to 5.87%.


Tuesday's "Reader's Request" plays (positions/opening prices):

AT&T      T      J02-30C/J30C    $2.38   debit   calendar
Genesco   GCO    DEC15C/DEC17C   $2.00   debit   bull-call
Island    ISLD   DEC17C/DEC10P   $0.12   credit  synthetic

The downward trend in technology issues provided favorable entry
opportunities in each of the new "Reader's Request" positions.
AT&T (T) was in the news, with officials announcing that the
company is mulling several major, non-strategic asset sales over
the next few months to pay off corporate debt and increase
shareholder value.


Portfolio Plays:

The broad market slumped today as investors became consumed by
uncertainty over the outcome of the presidential election.  The
Oval Office position hangs in the balance pending a vote recount
in the state of Florida and election officials said the results
are unlikely to be determined until late Thursday.  The Nasdaq
ended sharply lower due to weakness in Internet, semiconductor,
and networking stocks.  Analysts said Cisco Systems (CSCO) was
the primary cause of the decline as traders expressed concern
about the company's inventory buildup and its implications for
demand in the semiconductor sector.  The sell-off spilled over
to suppliers of advanced gear for data transmission and most of
the companies in that group endured substantial losses.  In the
Internet sector, EBay (EBAY) slid to $51 after the Wall Street
Journal reported that the auction house laid-off about 15% of
its staff.  Priceline.com (PCLN) slumped to $3 on news the head
of the auto sales division has left the company.  On the Dow,
Merck (MRK) led the gainers, rising $4 to $90 after analysts at
Lehman Brothers upgraded the company.  Exxon-Mobil (XOM) edged
higher and Philip Morris (MO) also rallied in anticipation that
Republican George W. Bush would become the next U.S. president.
Pharmaceutical giants Merck (MRK) and Johnson & Johnson (JNJ)
led the drug sector, limiting blue-chip losses but Intel (INTC),
J.P. Morgan (JPM) and American Express (AXP) pulled the index
lower.  Financial stocks slumped after Bear Stearns downgraded
Morgan Stanley Dean Witter (MWD) and also cut future estimates
for Lehman Brothers (LEH) and Goldman Sachs (GS).  Traders said
healthcare, drug and tobacco stocks are responding well because
the House and Senate stayed in Republican hands.

Our portfolio experienced the same outcome as the broad market
with a rally in healthcare and drug companies, and a slump in
technology issues.  Curagen (CRGN), Glaxo-Wellcome (GLX), and
Pharmacyclics (PCYC) were the winners in the pharmaceutical
group and in the case of GLX, we may need to make an adjustment
if the issue breaks above the current resistance area near $60.
Our bearish credit spread is profitable with the stock price
below $61, but a continued rally in GLX's share value may occur
if George W. Bush is named President.  Unitedhealth (UNH) also
continued higher as investors learned that the House and Senate
would remain in Republican hands.  A GOP-controlled congress is
seen as favorable to healthcare companies because they support
limiting the industry's exposure to lawsuits and are also less
inclined to enact a healthcare "bill of rights."  In technology
issues, the scene was horrid in almost every sector.  Although
the networking group has been the focus of many negative news
items, other sectors are performing poorly and the majority of
new economy stocks have retreated substantially in the past few
sessions.  Analysts believe that the recent recovery rally may
be a short-lived technical rebound in a fundamentally bearish
market and that doesn't bode well for technology investors in
the coming months.


Thursday, November 9

Stocks closed lower today amid concerns over corporate earnings
and uncertainty about the outcome of the Presidential election.
The Nasdaq ended down 31 points at 3,200 and the Dow closed down
72 points at 10,834.  The S&P 500 index finished down 9 points at
1,400.  Trading volume on the NYSE reached 1.1 billion shares,
with losers outpacing winners 1,732 to 1,092.  Activity on the
Nasdaq was extreme at 2.34 billion shares traded, with declines
beating advances 2,608 to 1,265.  In the bond market, the 30-year
Treasury rose 9/32, pushing its yield down to 5.85%.


Portfolio Plays:

The stock market extended its recent losses today with technology
issues pacing the decline as investors struggled with a slew of
disappointing earnings reports.  Groups that rallied on Wednesday
in anticipation of a Bush Presidency also retreated as uncertainty
over the election results continued to escalate.  Apparently, the
delayed outcome will extend for a greater period than Wall Street
had expected as the Democrats have reportedly asked for additional
measures in the tally of Florida voters.  The news plagued traders
and analysts alike, and the market languished for most of the day
before recovering from early losses.  Among the Dow stocks, Walt
Disney (DIS) led on the downside, sliding $5 to $33 in response to
a Merrill Lynch downgrade.  The entertainment giant had announced
better than expected quarterly results but the revenue outlook was
disappointing to analysts.  Retail stocks fell after a 35% plunge
in shares of Best Buy (BBY).  The supplier of name-brand consumer
electronics, home office equipment and appliances was the primary
culprit behind the losses in the group after the company said it
would miss third quarter earnings.  Gap (GPS) also took a beating,
losing almost $2 after reporting earnings that matched consensus
expectations, but were lower compared to last year's numbers.

In technology stocks, hardware and Internet issues saw the biggest
losses and across-the-board selling battered the Nasdaq for the
fourth session in a row.  A drop in shares of Dell Computer (DELL)
and International Business Machines (IBM) weighed heavily on many
computer hardware companies, driving the sector lower.  Dell's
earnings, due out after the close of trading, are expected to be
in the range of $0.25 a share but the PC giant has already warned
of slower sales growth in the third quarter.  IBM fell during the
session after reporting that per-share earnings would be up 19%
by year's-end if current projections are met.  At the same time,
company officials would not comment on how sales are progressing,
given the measly 3% growth rate in the third quarter.  In other
sectors, the business-to-business group was hammered on news of
unfavorable results from Internet Capital Group (ICGE) and the
majority of Internet advertising stocks fell following negative
reports from Engage Technology (ENGA) and 24/7 Media (TFSM).  CMG
Inc. (CMGI), which has a majority stake in Engage, also tumbled
during the session.  In the broader market, almost every industry
saw losses with the downtrend led by retail, biotech and cyclical
issues.

Our portfolio witnessed carnage in both Industrial and technology
issues.  However, there were some signs that a bottom is forming
and a number of analysts have suggested that any tests of recent
lows will likely be successful as trading volume during the
downward movement has been decreasing.  That trend is a bullish
signal for the market and once a support range is established,
any future rallies will have much greater strength.  There were
a number of surprising moves in today's session.  Broadcom (BRCM)
rebounded $10 to close at $162 after the semiconductor maker said
it was comfortable with analysts' fourth-quarter estimates of
$0.31 per share.  Officials also said they were comfortable with
analysts' estimates of a sequential quarterly percentage revenue
growth rate in the mid-teens, a level of growth representing a
revenue increase of 125% over last year's fourth quarter.  The
company said it made the statement in the wake of recent concerns
expressed by some analysts regarding potential reduced demand in
the current quarter for certain communications chips.  Another
slumping technology issue, JDS Uniphase (JDSU) recovered $5 to
$73 as investors began to speculate on networking companies and
providers of advanced fiber-optic components and modules.  Our
(staff contributed) credit spread has a cost basis near $76 and
the play may result in a profitable outcome if the technology
group begins to recover in the coming sessions.  Microsoft (MSFT)
continued higher today, and shareholders affirmed their outlook
for the company's future, voting to grant additional employee
stock options to offset the fall in MSFT's shares.  The measure
passed with 74% of the vote and shareholders also defeated new
proposals that would have forced the software giant to detail
political contributions and take a vocal stance on human rights
abuses in China.  Both of these actions were seen as positive
declarations by stock owners and based on the recent technical
indications, Microsoft's share value may be bracing for further
upside activity.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
BSC - Bear Stearns  $58.31  *** More Merger Speculation! ***

The Bear Stearns Companies through its subsidiaries, primarily
Bear, Stearns Securities and Bear, Stearns International Limited,
is an investment banking, securities trading and brokerage firm
serving corporations, governments, institutional and individual
investors worldwide.  The company operates in three principal
segments: Capital Markets, Execution Services and Wealth
Management.

The word on the Street is that it's just a matter of time before
Bear Stearns goes on the auction block and earlier this week,
the Financial Times reported that U.S. securities firm Lehman
Brothers Holdings (LEH) was considering a bid for the company.
Bear Stearns has a large securities clearing business and a
sizable operation advising companies on merger deals, making it
an attractive target for American financial institutions as well
as European banks who are prowling for U.S. acquisitions.  In
addition, Bear Stearns needs to find a buyer because it is not
large enough to keep up with powerful rivals such as Merrill
Lynch (MER) and Morgan Stanley Dean Witter (MWD) in a rapidly
consolidating industry.

The recent speculation has boosted activity in the company's
stock and options and the increased interest has generated some
excellent disparities in front-month option premiums.  The most
attractive option appears to be the NOV-$60 Call and with the
Implied Volatility in this position at record highs, we have
decided to offer a bullish speculation play on the popular issue.


PLAY (aggressive - bullish/diagonal spread):

BUY  CALL  DEC-50  BSC-LJ  OI=65    A=$10.50
SELL CALL  NOV-60  BSC-KL  OI=5223  B=$2.43
INITIAL NET DEBIT TARGET=$7.88-$8.00  INITIAL TARGET ROI(max)=25%


******************************************************************
RAL - Ralston Purina  $26.31  *** Premium Play! ***

Ralston Purina is a producer of dry dog and dry and soft-moist
cat foods.  The company is also a producer of other pet products
including cat box filler.  Ralston has a number of trademarks,
such as Purina, Ralston, the Checkerboard logo, Chow, Dog Chow,
Cat Chow, Golden Cat and Tidy Cat, among others, and the company
considers those assets of substantial importance and which it
uses individually or in conjunction with other trademarks.  The
company is presently comprised of three Business Segments: North
American Pet Foods, International Pet Foods, and Golden Products.
Early this year, the company completed the spin-off of Energizer
Holdings, the world's largest manufacturer of primary batteries
and flashlights and a global leader in the dynamic business of
providing portable power.

In early October, Pet food maker Ralston Purina said its fiscal
fourth quarter earnings from continuing operations were higher
than pro-forma results in the year-ago period.  The producer of
Puppy Chow and Cat Chow said it earned $79.8 million, or $0.28
per share, compared with $73.6 million, or $0.24, in the period
one year ago; an increase of 17%.  Analysts had expected the
company to earn $0.27 a share, so the results are hardly the
cause of the recent bullish activity.  Regardless of the reason
for new buying interest, traders are speculating on an upward
movement in the issue and the increased activity in the stock
and underlying options suggests their outlook may be correct.

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


PLAY (conservative - bullish/calendar spread):

BUY  CALL  MAR-30  RAL-CF  OI=123  A=$2.00
SELL CALL  DEC-30  RAL-LF  OI=780  B=$1.00
INITIAL NET DEBIT TARGET=$0.88  TARGET ROI=50%


******************************************************************
                         - STRADDLES -
******************************************************************
AFCI - Advanced Fibre  $35.50  *** Technicals Only! ***

Advanced Fibre Communications designs and manufactures end-to-end
distributed multi-service access solutions for the portion of the
telecommunications network between the carrier's central office
and its subscribers, often referred to as the "local loop."  The
company's Universal Modular Carrier 1000 is a global product
family consisting of a variety of multi-service access platforms
with integrated optics and unique customer premises equipment.
The platform utilizes a hybrid asynchronous transfer mode/time
division multiplexing (ATM/TDM) architecture, which provides a
variety of loop interfaces for narrow-band analog and digital
services including plain old telephone service (POTS), integrated
services digital network, high speed, point-to-point dedicated
digital circuit (T-1/E-1), high bit rate digital subscriber line
(HDSL/HDSL2), and asymmetric digital subscriber line (ADSL)
services.

This position meets our criteria for a favorable straddle; cheap
option premiums, a history of adequate price movement and future
events or activities that may generate volatility in the issue
or its industry.  This selection process provides the foremost
combination of low risk and potentially high reward.  As with
any recommendation, the play should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.


PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAR-35  AQF-CG  OI=171  A=$7.50
BUY  PUT   MAR-35  AQF-OG  OI=112  A=$6.25
INITIAL NET DEBIT TARGET=$13.25-$13.50  TARGET ROI=50%




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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.

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