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Daily Newsletter, Tuesday, 11/14/2000

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The Option Investor Newsletter                  Tuesday 11-14-2000
Copyright 2000, All rights reserved.                        1 of 2
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MARKET WRAP  (view in courier font for table alignment)
        11-14-2000        High      Low     Volume Advance/Decline
DJIA    10681.10 +163.80 10728.40 10528.30 1.12 bln   1839/ 976
NASDAQ   3138.27 +171.55  3145.30  3059.88 1.79 bln   2581/1373
S&P 100   729.67 + 17.51   734.67   718.62   totals   4420/2349
S&P 500  1382.95 + 31.69  1390.06  1361.66           65.3%/34.7%
RUS 2000  486.91 + 10.36   486.93   476.53
DJ TRANS 2823.08 + 49.87  2826.19  2773.21
VIX        30.24 -  1.65    31.09    29.09
Put/Call Ratio      0.68

The shorts covered but the election is not over!

It looks good on paper but how do you play a +100 point gap open?
You don't. Many of the big gains today were only made by those who
speculated on the dip to 2860 on Monday. If you did you profited
well but if you did not buy the dip then you probably sat on the
sidelines wondering if the bounce was real or just another election
trap. With the Nasdaq down -620 points on Monday's bottom from last
weeks high there was a really good chance for a relief rally even
if the judge today had called for a "do over election." We were just
too over sold. The bounce on Monday scared the shorts and they bought
the open today trying to cover. This is not a new event. The decision
by the Florida judge today was not earth shaking but the Dow soared
to an over +220 point gain while it was being announced. Sorry folks
but saying "the deadline for votes is 5:PM unless you have a good
reason for not getting them done by then" is not a decision. In any
event we will not know the final outcome until all the absentee votes
are tallied and announced on Saturday. With one county's recount
taking 90+ votes off the Bush lead it puts the difference at only
about +300 out of six million votes. With multiple counties now
claiming they will also recount, there is not a winner and we are
not close to a winner, period. Still we will take any market bounce
and put it into the winning column and contrary to the election
status, nobody can take it back.

I was encouraged by the renewed focus on actual stock news today
with upgrades, downgrades and earnings taking center stage. Wow,
a breath of fresh air! Retail Sales came in stronger than expected
showing that consumers are shaking off the higher oil prices and
the lower stock market and still spending their wages. Wal-Mart
announced earnings of $.31 and met analyst estimates and Home Depot
also met analyst's reduced estimates. Not exactly barn burners but
the sector is definitely not dead on arrival at the fourth quarter.
There is significant expectations that the 4Q will be a shot in the
arm for many.

If you are in need of a sugar high you could run out and pick up
a dozen Krispy Kreme donuts and help fuel not only your sugar fix
but also the dueling analysts war. Merrill Lynch initiated coverage
on KREM today with an "intermediate term - reduce", "long term
accumulate." Calling KREM a fad and poorly managed Merrill suggested
trimming holdings. Other analysts came to their defense saying the
company had been around 60 years and hardly qualified as a fad and
they were on track to open 28 new stores this year. KREM tripled
earnings on a +40% increase in revenue last quarter and a Deutsche
Bank Alex. Brown analyst said this "fad" has a lot of legs. While not
a tech stock much of the investing public can relate to KREM and while
they may not own a SUNW server or buy software from BVSN they can
really sink their teeth in Krispy Kreme. This has powered the stock
to a high of $110 since their IPO at $29. This has caused concern
on Wall Street since the business is so simple that even a child
or a broker can understand the business plan.

Other major news events today included NTAP which announced earnings
of $.10 per share which was double the prior years quarter. This
beat estimates by a penny with sales that more than doubled. Sounds
good to me but one analyst said it appeared their rate of growth
was slowing (sound familiar) and NTAP dropped almost -$10 in after
hours trading. On the opposite side of the ledger ADI also announced
earnings with $.54 per share compared to $.20 last year. Their
revenue also soared +87% to $806 million and said next year revenues
could be close to $4 billion. ADI gained almost +$6 in after hours.
SCMR also announced a profit of $.02 compared to a loss of -$.02 last
year. First quarter revenue soared more than +517% and they said they
expected it to grow more than 200% again in 2001. SCMR gained more
than $8 in after hours. BEAS also announced earnings of $.07 and beat
estimates by a penny. The growth comments were not as glowing as
SCMR or ADI and BEAS was flat in after hours trading.

Other market movers today included Abbey Joseph Cohen who went on
record that she was more bullish than ever. Calling the S&P-500
-15% undervalued she said the market was the most attractive it
had been all year. She recommended investors boosted their tech
holdings to 35% of their total portfolio. Let's see, did she go out
on a limb? The Nasdaq hit the low for the year on Monday so "the
most attractive it had been all year" was not a major risk statement.
With the S&P at 1361 when she made the statement that is -14% under
her 1575 target price for "fully valued" that she has been claiming
all year. So -15% undervalued appears to be a no brainer also. Abbey,
if you are reading this I am not taking aim at you. I actually
appreciate you going to bat for us bulls, constantly. I do object
to your very carefully scripted interviews with all the catch phrases
that allow you to be right if the market moves either way. I guess
that comes with being our most visible market bull. With Ralph
Acompora and Joe Battaglia getting hammered constantly for wrong
calls it is nice to have a bull that picks a target and sticks
with it. Just loosen up a little, it will not kill you!

The +171 gain on the Nasdaq today was the tenth largest gain in
history but given the -620 point drop you would have expected a
giant gain as well. It is the first positive day for the Nasdaq
since the election which is one week old today. It seems like
months since we sat and watched the returns and tried to guess
the results. We are still guessing and billions of words have
been spent and billions of dollars have been lost in the market
waiting for the outcome and we are really no closer. With the
outcome in question until after this weekend the odds of any
more huge gains may be slim. Volume was anemic on the Nasdaq
with only 1.7 billion shares. No conviction there. The NYSE
did better with over 1.1 billion. Advance declines finished
positive around 2:1 but the light Nasdaq volume bothers me.
Until we see 2.2-2.4 billion shares we will not know if it is
for real.

We have a Fed meeting tomorrow and with the big gains today
I don't see any way the Fed will cut rates. I was hoping that
a continued market in the tank would cause Alan Greenspan to
come out of that meeting with an olive branch rate cut to calm
the market and ease the crisis. With the gains today I think
that is almost impossible. There is no overwhelming reason for
him to do it.

The late news from Florida tonight was almost a line in the
sand for the Gore campaign. The Secretary of State certified
the results reported to her by 5:PM as required by law and
there was only an even 300 vote lead for Bush. She said she
had issued an ultimatum to the counties trying to recount
for the third or fourth time to respond to her by 2:PM EST
on Wednesday with a compelling reason of why she should allow
them to submit amended returns or those returns would be
ignored. By taking a stronger stand than expected the stakes
just got higher for the Gore camp. They now have less than
24 hours to press their case. Going to be a lot of midnight
oil burned by Democrats tonight. They not only have to find
301 crippled chad votes but enough to overcome the expected
Republican lead in the absentee votes as well. With the
stalemate crumbling with each passing minute we could actually
have a president elect by Monday. That will be freedom day for
the market. With no more critical earnings, Fed meetings or
election confusion we will only have daylight between us and
2001. We will then be able to rally or fall based solely on
the merits of the market and not outside interference. At
least that is the way it looks tonight. As long as Murphy's
Law is alive and well something unexpected is sure to pop up!

Just after I typed that last line it was announced on CNBC
that the Bank of America has filed with the SEC a form that
shows they had significant loan losses in the last quarter
from a weakening economy. OOPS! Depending on how the market
interprets that on Wednesday the financial sector could
come under pressure which could hurt the Dow. First Union
had already taken a hit today for the same thing. If it
becomes an epidemic then look out below.

Good luck and don't buy too soon.

Jim Brown


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Abbey Said So
By Austin Passamonte

A quick phone call from Europe (MCI or GBLX lines?) by the
fifth most powerful figure on Wall Street sure had the
pre-market futures jumping this morning. "Dear Abbey" to
market bulls reiterated her projection of 1575 on the SPX
this year before we roll '01 and said everything now looked
cheap. It should, considering we're at new yearly lows... how
else would it seem in comparison?

Like manna from on high the buy orders poured in on numerous
issues treated like final-stage leprosy victims mere hours
before. The fall rally has begun.

Sounds good to us: that would be one powerful move 200 SPX
index points up the chart in seven weeks. Play that right
and we can take the rest of next year off!

By her own admission Abbey is not a market technician but a
fundamentalist who makes projections based on logic & reasoning.
Let's apply some technical tools to her (and our) favorite index.

Weekly/Daily Chart, SPX)

Weekly chart signals were in the midst of turning positive before
the latest big rally south. Neither of these chart signals would
have us loading up on long plays to hold until New Year's at this
point, personally speaking.

(Weekly/Daily charts: NDX)

The NASDAQs show signs of upside life here. We have the makings
of bullish stochastic/price divergence in both long-term views
with recent prices suffering lower-lows while stochastic signals
held higher-lows. This portends an upside move above previous
highs from the last extreme which are slightly over 4,000 level
on the weekly chart.

Daily signals are beginning to turn positive but no clear
confirmation yet. A close above 3,200 would be very bullish
from here.

Market Sentiment still believes we could see a powerful year-end
rally as well but highs may wait until Feb-March for the Dow and
SPX. New highs for the NASDAQ markets don't look favorable
anytime soon, to be kind for our bulls.

No surprise, the S&P 500 commercials held their record net-shorts
into last Tuesday. They held through lower prices than this
before but could begin to scale out any time now.

This saga has carried on for months now and with good reason.
They stubbornly held into two decent rallies and paid a price
for rolling into next-month contracts. By now massive profits
have accrued and it will soon be time to liquidate. This is a
process, not an event. We may not see such an occurrence again
for many years to come.

For the legions who've emailed asking where our source of data
is, rest assured you will receive it in plenty of time
(and no extra charge) to act upon it. Tapping into the data at
4:00pm on the dot every Friday will not let one catch the bottom
tick of this market. We will all know in plenty of time when any
change occurs.

Keep in mind the vast majority of equity traders don't even know
this situation exists and never will. It is our little secret
shared amongst futures traders and a few outside the pits as
well. Nice to be in the loop spying on the big boys, isn't it?

VIX is above 30 and backed off upper extreme, put/call ratio
soared and traders are raring to rally this thing once & for
all. Will it stick & stay?

Someone traded blocks of 2,000 and 5,000 QQQ Nov 75 Calls this
afternoon. They cleared between the bid/ask @ 2.5 and we cannot
find evidence that they were long or short so can't be sure which
way it went but they traded ATM. This could be a short sale as
most long plays happen in-the-money to capture delta or out-of-
money for gamma. ATM contracts are always the most inflated and
usually favored for selling short.

We don't know but $1.75 million changed hands on the trade and
they expect action soon. So does Market Sentiment. Pick your
directional trades with care, take profits and cut losses as
always. There's a small fortune to be made or lost each day,
depending on which direction you choose!


Tuesday 11/14 close; 30.10

30-yr Bonds
Tuesday 11/14 close; 5.86%

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.

  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
770 - 755               13,806        9,563         1.44
750 - 735               19,262        7,226         2.57

OEX close: 729.67

725 - 710                5,489       13,783         2.51
705 - 690                2,040       26,235        12.86
Maximum calls: 740/6,662
Maximum puts : 700/13,377

Moving Averages
 10 DMA  740
 20 DMA  735
 50 DMA  755
200 DMA  776

NASDAQ 100 Index (NDX/QQQ)
 85 - 83                49,317        30,971         1.59
 82 - 80                61,806        42,936         1.44
 79 - 77                15,532        55,895          .28

QQQ(NDX)close: 75.84


 74 - 72                30,410        56,186         1.85
 71 - 69                 7,769        27,866         3.58
 68 - 66                   657         8,542        13.00
Maximum calls: 82/25,298
Maximum puts : 77/27,317
Moving Averages
 10 DMA 77
 20 DMA 79
 50 DMA 84
200 DMA 93

S&P 500 (SPX)
1450                   23,436         8,634          2.71
1425                   11,646        14,210           .82
1400                   32,114        31,499          1.02

SPX close: 1382.95

1375                   13,773        16,761          1.22
1350                   10,238        22,175          2.17
1325                    2,704         9,514          3.52

Maximum calls: 1400/32,114
Maximum puts : 1400/31,499

Moving Averages
 10 DMA 1404
 20 DMA 1395
 50 DMA 1419
200 DMA 1441


CBOT Commitment Of Traders Report: Monday 11/13
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         -1105       -1066          -792        +657
Total Open
Interest %       (-14.39%)  (-11.56%)        (-3.33%)  (+2.84%)
                 net-short  net-short        net-short  net-long

NASDAQ 100      (Current)  (Previous)      (Current)  (Previous)
Open Interest
Net Value        -1999         -448          -293        -927
Total Open
Interest %       (-11.37%)    (-2.40%)      (-.60%)    (-1.89%)
                 net-short    net-short     net-short  net-short

S&P 500         (Current)   (Previous)     (Current)  (Previous)
Open Interest
Net Value       +58,260      +60,112         -67,783    -70,603
Total Open
Interest %      (+30.75%)    (+31.64%)      (-10.52%)   (-11.10%)
                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 11/07 by the CFTC.
Commercials have gone to a net-short position on the DOW,
while the small specs have increased their net-short positions
on the NASDAQ 100.


Please visit this link for Market Posture:



Here We Go Again!
By Lee Lowell

Arrgggg!!!!!!!!  Is anyone else feeling the same as me?  Angry,
frustrated, ticked off, etc., etc.  Why can't this market just go
up and keep going up?  We've endured these downmoves, now let's
see the reward.  I was really excited to see the presidential race
so close, but enough already!  It's wreaking havoc on the markets
and facilitating this bear move.  I guess the numbers from Dell
and HWP hasn't helped much either but...

Last week I got into some deep-in-the-money LEAP calls on stocks
that I've wanted for awhile and sold some near-term ATM calls
against them.  Some of the near-term calls were even slightly ITM.
Even so, I'm already in the red.  Jeez, at least give me a chance
to play awhile!  If I'm going to lose money in this market, at
least let me bleed for a few months instead of whacking all of me
in 2 days time!  You can see by all the exclamation marks that
I'm really in a mood.

It's not like I just haphazardly picked any random stock to buy
LEAPs on and then threw some darts to see which near-term calls to
sell against them.  These were well thought-out plays, with
research done on support and resistance points, implied volatility
analysis and probability calculations to boot.  I guess we just
hit one of those times where all the research in the world won't
help with your selections.  There are lots of unnerving factors
at play here and they all spell uncertainty, which is something
that the markets don't like.  I need to remember that buying LEAPs
gives you the comfort of time working in your favor.  But what
should you do when you come very close to hitting your stop-loss
or even through your stop-loss level in 2 days time?  I have over
2 years to play with but I'm very close to losing as much money as
I care to on these trades.

This is the hardest part of options trading.  When you need to
make tough decisions.  I truly believe the stocks that I just
purchased were based on solid research, and knowing that there's
lots of time left, I'm going to ride it out a little longer.  I
have to believe that once the presidential fiasco is rectified,
we'll sense the stability and see the market stand on some solid
footing.  Emotions are running high and that's what causes these
extreme moves.  I know you set your stop-losses and stick to them,
but for me, I believe this is a special case of irrational selling
and I'm going to hold for a little longer.  Every trader reserves
the right to make these decisions.  We'll see how it plays out.
Look it, the Nasdaq has basically made a 100% retracement, there
are many individual stocks that have made 100% or more
retracements from last October's lows when we started the last
bull run.  The sentiment indicators that I use are at extremes for
a reversal - put/call ratios and VIX.  You have to believe
something.  As for newer picks right now, I'm staying on the
sidelines and will just try to manage what I've got so far.

What's there to do in the meantime?  Not much that we haven't done
already.  If you're here to trade, and by that I mean getting in
and getting out for a quick turn, then you must place your stops
and stick to them.  If you're here to trade long-term calls, then
I believe sticking it out a little longer is probably the right
move.  That's where I am right now.  I'm just going to keep selling
the near-term calls against my LEAPs to decrease my cost basis.
Mind you, these are my long-term holds.  I can take a little down-
side pain because I believe it will run up in the long-term.  But
to try to make back some of my recent hits, I'm going to sell some
front-month credit spreads on high implied volatility stocks.

As I finish writing this today 11/14, the Nasdaq has made quite a
nice comeback from yesterday's low of 2860.  We're trading right
around 3100.  Have we hit the bottom?  Maybe.  Some people were
saying that last week when we retraced the previous lows of 3087.
We're right at the level of last Oct/Nov when we started the last
good move.  I guess many of the stocks I bought late last year
which are basically at the same price now as they were then are
still a good buy?  Maybe.  If I still feel the same about the
company's prospects, then yes, they are still good buys.  I don't
think we'll see that incredible run-up as we did late last year
only because people are wiser now.  Investors who got in at the
top and got burned on the downdraft, will not bid prices up like
that again.  Or that don't have the money anymore even if they
wanted to try again.

I'm wiser now too.  From now on I won't trade any stock that
doesn't have options available.  Remember, options are a great
protection against existing positions.  You've heard this one
before - you buy life, car, home insurance, why not buy stock
insurance.  We pretty much accept life, car, home insurance as a
given and something that's done automatically.  After all, these
are the most precious assets.  If you don't insure yourself, you
risk the chance of losing everything in an unexpected event.  But
if you lose all your money in the market, you'll also end up with
nothing too, so why not use all available resources?  Buy some
puts and sell covered calls.  It's a few extra dollars spent in
the case of the puts and a few dollars brought in, in the case of
the calls.  You'll sleep a lot better at night knowing you're

I've gone into pretty good detail in previous articles on various
strategies you can create to hedge yourself on the downside.
Remember to check the volatility levels before applying any of the
methods.  Selling a covered call might be the better play than
buying the put if implied volatility is high.  Collars and debit
put spreads are also good candidates for protection.  Your choices
are almost limitless on the kinds of strategies you can construct.
Remember the key word - options!

Good luck.


What Now?
By Scott Martindale

Maria was sure chipper today.  But what a bummer we had last week.
Miraculously, I guess I spoke too soon last Tuesday in saying that
the election was over and at least one uncertainty was behind us.
Who could have predicted in advance what actually happened?  In
fact, the uncertainty got so bad that institutions, foreign
investors and even conservative buy-and-hold types have been
frantically pulling out their money in fear of political
instability in the formerly rock-solid U.S.A.  Of course, clearer
heads (i.e., those with their money in T-bills) dismiss the idea
of long-term instability in Washington.

Unfortunately, my strategy of loading up in anticipation of a
post-election rally hasn’t worked out very well so far.  Kudos to
those of you who bought puts.  [But did you sell them yesterday?]
I've been using this week's rally to buy back some November naked
puts I sold prior to the election.

Has the dearth of buyers been attributable to the Florida election
crisis?  If you will indulge me for a moment, I’d like to comment
on the crazy happenings down there.  First, there are always many
reasons why the "true" intentions of individual voters might not
be realized.  They might forget to re-register, be called out of
town for business, lose their absentee ballot, vote multiple
times, get sick, encounter bad weather, and so on.  Buying the
votes of the homeless and indigent also skews true voter
sentiment.  The issues of mis-punched ballots and Palm Beach voter
confusion that have received so much attention are just examples
of many problems inherent in a large-scale election.

Thus, to suggest that by scrutinizing each ballot over and over
again you can ever get a truly "fair and accurate count" of
overall voter sentiment in order to "maintain the integrity of our
democracy" is ridiculous.  Except for a situation of widespread
fraud, the initial count using the established procedure should
always be upheld without compromise.  But instead Florida decided
to open up Pandora’s Box.

I believe the country can find a way to prosper with either
candidate as President, but we are in scary territory when this
chaos is allowed to gain a foothold.  In fact, the political
uncertainty resulted in institutions, foreign investors and even
conservative buy-and-hold types frantically pulling their money
from the stock markets due to fear of instability in the normally
rock-solid U.S.A.  Capital spending, new projects and hiring get
put on hold.  Everyone suffers.

No one likes to see one candidate win the popular vote and the
other win in the Electoral College.  But when the vote is this
close it is evident that there is sufficient support for both
candidates such that either could perform the job acceptably.  So,
here’s a radical proposal to address these crazy situations,
although it will sound sacrilegious to many including my fellow
Republicans.  Let's ask both parties to agree that whenever they
fail to get a "clear mandate" in a Presidential election, e.g., a
margin of more than, say, 1% (or perhaps even a majority), then
they will concede the election to the party currently in office.
Why?  Because if the public is generally happy with the status quo
with no clear demand for change (and the vote is so tight that we
find ourselves holding individual ballots up to the light to try
to read a voter's mind), then just let it ride.

Do I really think a political party would do such a thing?  No,
not after spending so much money and effort.  So what's my point?
Take this year as an example.  The Republicans are proposing
change, particularly a scaling down of governmental intrusion in
our lives.  But if more than half the people aren't quite ready
for sweeping change, or if the candidate put forth doesn't command
sufficient public confidence, then perhaps it's best to wait until
a majority of the public is begging for a change.  It’s a better
outcome than allowing chaos to reign.

It’s just a thought.

Broadening the discussion a bit, was yesterday’s Nasdaq selloff to
2859 THE final capitulation?  Or could we be seeing confirmation
of a sustained bear market?  I hope not.  It’s certainly not the
basis for my current trading and investing strategies.

We all know of some fear-mongers who have been shrieking for a
long time that we are on the verge of a monumental economic
collapse due to Y2K, inflation, recession, P/E bubble, oil prices,
excessive investment in derivatives, and/or excessive leveraging
within mutual funds.  To them, this is only the beginning of the
slide, and they claim that this would be occurring even with no
election mess.  However, most of the more rational heads have
viewed the "worst case scenario" as a test of the 1999 mid-year
highs of roughly 2750-2900.  The good news is that we may have had
a successful test of it yesterday.  The bad news is that there is
no guarantee that this level will in fact hold.  I also might
mention that my charting service now views the "worst case
scenario" as the 1998 high of about 2200.  Some analysts believe
that we might have a modest post-election rally followed by more
weakness next year.

Questions continue to run rampant.  Will we have a final election
result this weekend, after the absentee ballots are counted in
Florida?  Will other states begin more exhaustive recounts?  Is
the economy in for a hard landing after all?  What will the Fed do
on Wednesday to help calm the markets?  What’s going to happen in
the Middle East?  Will the Asian recovery continue?  Can Europe
begin to recover?  Will earnings misses among the technology
"generals" continue?  Has anything really changed among the
upstart Nasdaq companies that only recently were deemed to have
outstanding business models and growth prospects?  Given the lack
of profitability of many new-technology companies, what will
investors ultimately decide is a fair valuation for them today?

Yes, there are lots of questions and few solid answers to build
upon.  But the scale of this week’s recovery indicates to me
that if a year-end rally is imminent, it could be explosive.

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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.


BRCM $158.88 -4.56 (-7.38) BRCM was purely a recovery play.
Last Tuesday and Wednesday, the stock fell over 30.6%, or $67.19
from a lofty price of $219 per share on news of $2+ bln stock
acquisition and concerns that its #2 customer, Cisco Systems
(CSCO) would order fewer chips.  Before this fall from grace,
BRCM had surged more that 36-fold since its 1998 IPO and our
intention was to gains as the share price recouped its previous
value.  Friday's action was encouraging - wary investors were
reevaluating the harsh sell-off and coming back around.  BRCM
saw $174.50 intraday and found some stability at the $159 and
$160 level - the lower of which we had set as our exit point.
Unfortunately, BRCM struggled at the short-term support and
transgressed amid its controversial earnings' projections.  The
violation of our $159 Stop under rallying conditions foreshadows
weakness.  We are exiting the play this evening.  The more
adventurous might buy into strength if BRCM bounces off the
current level and the trailing 5-dma ($160.60), but we'd rather
move on to more advantageous plays.


IDTI $39.88 +4.75 (+7.38) On Monday, IDTI managed to buck the
negative market trend.  Bouncing off support at $30, the stock
rallied from its oversold conditions to close up $2.63 or over 8
percent on 160% of ADV.  This was largely a sympathy move with
the chip sector, thanks to a rallying Philadelphia Semiconductor
Index (SOX).  Today the stock continued higher, lifted by
improving sentiment in the NASDAQ.  Moving up over 13.5 percent,
volume came in at 190% of ADV.  While IDTI found resistance today,
it did settle above our stop at $38 and we can not ignore the
strongly positive price/volume action indicating more potential
upside.  As such, we are closing out this play.

BLDP $91.50 +6.50 (+2.00) The broad weakness on Monday extended
BLDP's losses.  The share price quickly violated $85 and tagged
$81.75 as it challenged the next level of support at $80.  Today
however, the strength across the board prompted a resurgence and
BLDP finished on the topside of $90.  The bullish 7.6% increase
on respectable volume is not a good sign.  On one hand, the 5-
dma ($93.63) line is declining and is now converged with the
200-dma ($92.49), which is providing a line of upper resistance.
But nevertheless, we're not ignoring the bullish rebound.  The
bargain price and the longer-term recommendations on the stock
obviously attracted buyers as the marketplace rallied into the
positive today.  With BLDP at this precarious price level, we're
dropping the play this evening.  If you have open positions,
look for exits on any intraday weakness.  Take no chances if
BLDP moves through the $93 level.

PLCM $52.19 +4.34 (+4.88) Stopped out by a fraction, PLCM moved
up steadily all day, ending fractionally above our $52 stop.
The rally that commenced after yesterday's lunch hour, continued
this morning with PLCM gapping higher and quickly clearing the
$52 level.  Although the uptrend throughout today's session was
barely perceptible, the fact that the stock managed to stay
above our stop level forces us to move this one to the
sidelines.  PLCM seems to be moving with the broader markets,
and went along with their bullish trend today.  Now it is back
above the 200-dma and the day's gains came on more than double
the ADV.  With the technical pattern improving and a violated
stop, PLCM no longer fits our criteria for a healthy put play.

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The Option Investor Newsletter                  Tuesday 11-14-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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TLAB $55.56 +2.06 (+2.31) The respectable volume and recent
upgrades are promising, but the staunch resistance at $56 is
proving frustrating and quite honestly, putting a damper on the
play.  On the brighter side, TLAB received a Buy recommendation
for the second time this month.  Josephthal & Co issued the
rating and also attached a price target of $80.  On Wednesday,
Tellabs will participate in the UBS Warburg 5th Annual Global
Telecom Conference at 1:55 EST.  Perhaps some good will come out
this live presentation and launch TLAB out of the trading range
($52-$56).  Intraday, the 5-dma ($54.23) is towing the first
line of support, bolstered by the trailing 10-dma ($53.40).  An
entry off these technical marks might bode well for a more
aggressive trader AFTER TLAB demonstrates some conviction above
$56.  If you tend to enter with a more conservative approach,
wait for more upside confirmation.

SDLI $248.81 +30.94 (+28.25) SDLI started the week off with a
buying opportunity for aggressive traders.  Faced with a soft
NASDAQ and for Tech stocks, shares of SDLI dipped as low as
$207.50 on Monday.  Traders, sensing a bargain, eagerly bid up
the shares and while the stock closed down $2.69 or 1.22% on over
150% of ADV, most of that volume was to the buy side.  Today SDLI
continued to add to its gains, thanks to a bouncing Telecom
sector, starting the day above its 5-dma (now at $229.22) to
close up over 14 percent on 145% of ADV.  Aggressive traders
looking to buy a bounce off support can look to the 5-dma as well
as the 10-dma at $240 but make sure there are buyers to back the
bounce.  For conservative traders, a break through $250 with
conviction should allow for a safer entry.  In order to protect
our profits, we are moving our stop price up from $216 to $230.

CIEN $104.00 +13.19 (+12.13) Ciena moved down with the overall
market indexes on mid day Monday to $83.75, one point above its
200-dma.  Aggressive traders who dared to buy at this level
were very well rewarded, as the subsequent rally from the
market lows, coupled with Ciena's underlying strength boosted
the stock over 10 points to $95.  Overall market weakness and
uncertainty pulled Ciena down to close at $90.81 on Monday.
On Tuesday, the stock gapped up over 6 points at the open,
and proceeded to climb to $102.50 by mid day.  Ciena tried twice
on Tuesday to clear $103, and finally ended the day with a
very bullish candlestick pattern at $104.  Ciena reports earnings
Dec 7, so we could have the start of an earnings run developing.
Some profit taking is a possibility, particularly considering
overall market conditions, and investors impatience with the
continuing election saga.  It may be possible to take positions
on a bounce off the 5-dma of $93.  If Ciena can clear the 50-
dma of $107 on strong volume, it may be on its way to its
prior lofty levels of the year.  Remain cognizant of overall
market conditions, and close positions if Ciena closes below
$90, the site of our upwardly revised stop.

MSFT opened lower on Monday, and fell to support at the 50-dma
of $64.50 when both market indexes collapsed.  This would have been
a good entry point for short-term traders, as the stock rebounded
to $68 by mid day, and closed at $66.44.  On Tuesday, MSFT rallied
with the market, but was unable to penetrate resistance at $70.
MSFT is now resting on support between the 5-dma of $68.50 and the
10-dma of $69.  The 200-dma is $73, and has provided tough
resistance in the last few weeks.  However, MSFT has a good chance
at passing this if the markets continue to rally.  Another intra
day bounce off the 50-dma might provide a good entry point.
Otherwise, continue to watch for a breakout above $70 when looking
for new entry points.  But, be sure to exit positions if MSFT
closes below our stop at $64.


NEWP $87.25 +7.25 (+1.50) Yesterday, NEWP declined on continued
weakness in Tech and especially Networking stocks.  Gapping down
at the open, the stock continued deeper into the red until
mid-day when it bounced off support at $75.  From there, NEWP
attempted a comeback, closing the morning gap, but end of day
selling had NEWP closing down $5.75 or 6.71% on 137% of ADV.
Today, lifted by Telecom sector bouncing from oversold
conditions, NEWP gained over 9 percent.  Despite the rally today,
volume was light, coming in at less than 90% of ADV.  As well,
NEWP found strong resistance at the $89-90 level and close below
its 5-dma at $88.34.  A failed rally above these resistance
levels tomorrow could allow for an aggressive entry point.  For
the more risk adverse, a break below support at $83.75, confirmed
by negative sector sympathy would be the target to shoot for.  We
are maintaining our stop price at $94.  A close above this level
will be a signal to exit this play.

LVLT $34.50 +4.25 (-1.56) The $35 level failed to buoy LVLT
yesterday after news that George Gilder's Technology Report
removed it from a list of companies poised to benefit from the
growth of the Internet.  The initial shock wave took LVLT to
$28.75 before it resurfaced.  On the day, the share price
finished down $5.81, or 16% at $30.25.  Volume was exceptional
at 3.5 times the ADV.  Today's volume was still heavy at almost
twice the norm, but the market action took LVLT to its upper
spectrum of resistance at the $35 mark.  Extended gains coupled
with a close above $36 and we'll quickly exit this put play.  If
the downside bias is to continue, we should see LVLT rollover
tomorrow.  Enterprising traders might consider buying into the
downward momentum if LVLT moves back through $33 and $34.  Else,
wait for further weakness to develop below the $32 level.  No
matter how you strategize your entry, keep stops in place.

SLR $35.13 -0.56 (-0.87)  Solectron fell to support just above
$35 on Monday, and rallied with the market to $37 in the
afternoon.  Fortunately for put buyers, the stock was unable
to clear $37, and fell back to close at $35.63.  On Tuesday, SLR
dropped as low as $34.50 in the morning, and failed at another
rally attempt in the afternoon.  The stock is making a consistent
pattern of lower highs and failed rallies.  Volume is heavier on
the downside.  Strong support seems to be at $34.50, however,
if sellers continue to persist, support may be found at $28.
Consider taking positions on a failed rally attempt at $36 on
weak volume.  However, consider exiting all positions if the
stock closes above $37, as we have move our stop down to that

RSAS $46.94 +1.63 (+0.94) Floated by the rising tide of the
relief rally on the NASDAQ, RSAS managed to extend its gains
today, but couldn't even get close to our $50 stop.  As a
matter of fact, $48 was as far as the buyers could push the
stock, before the return of sellers pressured RSAS into the
close.  The rollover this afternoon took place right at the
5-dma ($47.69), and further selling could easily push the
stock down to fill the gap between $39.50-43.50, which was
left in early October.  The Internet security stocks (VRSN,
CHKP, RSAS, ENTU) have a lot of work to do to break out of
their bearish trend, and we are more than happy to participate
in the weakness.  Aggressive traders can consider new positions
on any rally that runs out of steam below our stop.  Once the
rollover commences, more conservative traders will get their
chance as RSAS falls below $46.  Although the stock found solid
support at $44 last Friday, further weakness in Internet
Security stocks could open the door to fill the gap mentioned

VRSN $119.06 +10.56 (+5.88) Going along for the ride as the
broader markets rallied throughout the day, VRSN managed to
extend yesterday afternoon's relief rally.  The stock has now
moved up to rest just below the $120 resistance level.  As has
been the case for the past week, VRSN will likely be subject to
the whims of the broader Internet sector, which seems to be
following the ups and downs of the election tug-of-war.  While
it is far from over, investors seem to think the light can be
seen at the end of the tunnel, which helped our play to rally
right into the close on average volume.  Tomorrow will give us
the answer to whether this is an entry point or the end of our
put play.  Our stop is still sitting at $123, and a move over
this level will be a clear sign that our play is at an end.  If
the stock rolls over near this level however, consider it an
attractive level from which to launch new plays.  More
conservative players will want to wait for selling pressure to
drop the price below $114, indicating the stock is likely headed
back for a retest of the $108 level.

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QCOM - Qualcomm $80.38 +5.31 (+6.44 this week)

Qualcomm Incorporated is a leader in developing, delivering, and
enabling innovative digital wireless communications products and
services based on the Company's digital technologies.  As the
pioneer of Code Division Multiple Access (CDMA), the technology
of choice for next-generation wireless communications, Qualcomm
continues to lead the industry in the development of voice, data,
and wireless Internet products and solutions.  Qualcomm is also
transforming industries through its various satellite businesses
and technology partnerships.

To paraphrase Mark Twain, the reports of QCOM's demise have been
greatly exaggerated.  While shares of the CDMA giant have
languished over the summer months, hitting a low of $51.50 in
early July, the stock has since been making a comeback, with
higher lows and higher highs.  A number of factors have helped
QCOM to rebound, especially in the month of November.  A
well-received earnings report, a bright outlook from company
executives, positive comments from Deutsche Bank, a Buy rating
from Lehman Brothers and a Strong Buy from First Union Securities
all have helped the stock to push ever higher.  Today, QCOM shot
up over 7 percent on news that the company will form a venture
capital fund of $500 million.  The money will be used to buy
stakes in startup companies that use QCOM's patented CDMA
technology.  This has proven to be a highly profitable venture in
the past, as some of the companies QCOM has funded include
Handspring, RF Micro and Phone.com.  Because QCOM's main source
of revenue is through royalties generated from the sales of chips
and royalties from its CDMA patents, this move will likely
generate as well as increase demand for QCOM's goods and
services.  At one point well below all its major moving averages,
QCOM has been hard at work this month, putting itself back on the
right side of the 50 and 100-dma (now at $71 and $66.36
respectively).  With the 200-dma at $89.86 its last line of
moving average resistance, a break through $83 resistance on
volume could allow conservative traders to enter this play.  For
the more aggressive, an entry on a bounce off $80 is one
possibility.  Another entry possibility would be on a bounce off
the 5-dma at $74. There is strong support at $70, with the 10 and
50-dma converged at that point but make sure QCOM closes above our
stop price of $75.

BUY CALL DEC-75 AAF-LO OI=6518 at $10.75 SL=8.25
BUY CALL DEC-80*AAF-LP OI=2632 at $ 7.88 SL=5.75
BUY CALL DEC-85 AAF-LQ OI=2117 at $ 5.50 SL=3.50
BUY CALL JAN-80 AAF-AP OI=8182 at $11.13 SL=8.25
BUY CALL JAN-85 AAF-AQ OI=6680 at $ 9.00 SL=6.25

SELL PUT DEC-70 AAO-XN OI=1867 at $ 2.75 SL=4.50
(See risk of selling put in play legend)


JBL - Jabil Circuit $48.19 +2.50 (-8.06 this week)

Commonly referred to as a contract manufacturer, JBL is a
worldwide independent provider of electronic manufacturing
services (EMS).  The company designs and manufactures
electronic circuit board assemblies and systems for major
original equipment manufacturers in the communications,
computer peripherals, personal computer and consumer
products industries.  Its work cell business units are
capable of providing integrated design and engineering
services, component selection, sourcing and procurement,
automated assembly, product testing, parallel global
production, and direct order fulfillment services.

While everything was looking dark in the Technology sector
yesterday morning, Semiconductor stocks provided a ray of hope
and led the afternoon recovery.  This positive move continued
throughout today's session, with the SOX index gaining an
impressive 13.7% from its Monday low.  Most stocks in the sector
posted gains during the same period of time, but are so beaten
down that their moves look like the classic dead-cat bounce.
While most Semiconductor companies can see their stock prices
far below their respective 200-dmas, contract manufacturers like
JBL and CLS actually managed to move smartly above this
important technical level today.  Adding to the stock's
strength yesterday was Robertson Stevens, which upgraded the
stock from LT Attractive to Buy.  After putting in a nice
double-bottom near $42, it looks like the stock is ready to
recover with the broader markets.  While yesterday's gain came
on nearly double the ADV, today's volume dropped off to below
the ADV, and any sustained upward move will need the conviction
of strong buying volume.  The 200-dma is sitting at $46.75, with
stronger support resting at $44.  Aggressive traders can
consider new positions on a volume-backed bounce from either of
these support levels, but only if the Semiconductor sector is
looking positive as well.  With the fragile state of the
technology market, conservative investors will be best served
by waiting for a continuation of the rally before initiating
new positions.  The next level of resistance is sitting at $50,
and a rally through this level would be a good entry trigger for
the cautious bulls.  Our stop is sitting at $44, and a close
below there would be a strong indication that the stock is
likely to test its lows again.

BUY CALL DEC-45 JBL-LI OI= 973 at $7.00 SL=5.00
BUY CALL DEC-50*JBL-LJ OI=2404 at $4.50 SL=2.75
BUY CALL DEC-55 JBL-LK OI=1415 at $2.75 SL=1.50
BUY CALL MAR-50 JBL-CJ OI= 351 at $8.88 SL=6.25
BUY CALL MAR-55 JBL-CK OI= 503 at $7.00 SL=5.00

SELL PUT DEC-40 JBL-XH OI= 915 at $1.88 SL=3.50
(See risks of selling puts in play legend)



LUV - Southwest Airlines $29.88 +0.25 (+0.63 this week)

Southwest has expanded its low-cost, no-frills, no-reserved
seats approach to air travel to serve more than 55 cities in 29
US states.  To curb maintenance and training costs, the airline
uses only Boeing 737s; the company operates about 320 planes.
The airline boasts a highly participative corporate culture and
a strike-free string of 27 profitable years.

Amid the recent market turbulence, select airline issues
continue to fly high.  Ongoing consolidation in the airline
industry and easing fuel prices sent LUV to a new 52-week
high in Tuesday's trading.  We're looking for the stock to
breakout above the $30 level on strong volume as a sign of
lift-off and capitalize on such a move with LUV's low
cost options.  With that said, consider entering new positions
if LUV clears the $30 level with conviction.  Additionally,
entries might be taken on pullbacks to support at $29.50, or
lower near the $29 level.  We'll use the $28 mark as our stop
price, and exit all positions should LUV close below that

BUY CALL DEC-25 LUV-LE OI=4214 at $5.38 SL=$3.50
BUY CALL DEC-30*LUV-LF OI=3340 at $1.50 SL=$0.75
BUY CALL JAN-30 LUV-AF OI=1386 at $2.50 SL=$1.25
BUY CALL MAR-30 LUV-CF OI= 924 at $3.50 SL=$1.75



SUNW - Sun Microsystems $94.00 +8.69 (+4.75 this week)

Sun Microsystems is a leading maker of UNIX-based, number
crunching workstation computers, storage devices, and servers
for powering corporate networks and Web sites.  The company is
the largest to make computers that use its own chips and
operating systems.  Sun's most talked about product is Java, a
programming language intended to create software that can run
unchanged on any kind of computer.

An extension of the NASDAQ's recent rebound could send SUNW
into orbit.  With November options expiration just three days
away, we're adding SUNW as a lottery play in an attempt to
profit from its cheap front-month options and potential for an
extended rebound from its oversold conditions.  This is an
aggressive play, and intended for those willing to risk
capital.  Look to enter new positions if SUNW rallies above
resistance at $95 early tomorrow.  Make sure to confirm
strength in the NASDAQ before entering new positions.

BUY CALL NOV- 95*SUX-KS OI= 4372 at $2.38 SL=$1.25
BUY CALL NOV-100 SUX-KJ OI=13111 at $1.00 SL=$0.00  High Risk!!



RATL - Rational Software Corp $39.88 -5.00 (-6.69 this week)

Rational Software develops, markets and supports a comprehensive
suite of solutions that automate the software development
process.  The Company's global products and services help
organizations develop and deploy Web, e-business, enterprise-
wide, technical, and mission-critical software.  It serves
customers in three principal categories: e-business, e-
infrastructure, and e-devices.  Blue chip clients include
Merrill Lynch, Microsoft, and Nokia.

RATL was a true and faithful disciple of the NASDAQ's recent
downtrend line, but its failure to rebound amid the rallying
conditions was what caught our attention.  A critical break of
the $45 level and the corresponding 200-dma proved detrimental
to RATL this week.  This technical breach appears to be a
catalyst for the extended weakness.  Once RATL slid under $45,
the momentum picked up paced and the share price dipped to
$42.56 on Monday.  Further evidence of its downward momentum was
its failure to generate any enthusiasm amid a slew of product
announcements and the NASDAQ's late afternoon upswing.  A
subsequent test and breakthrough of the historical support at
$40 today impelled us to add RATL to our put list.  We're
playing RATL on its technical weakness alone.  The analysts have
mixed reviews about the company.  For instance, CSFB just
reiterated a Strong Buy and $69 price target on Monday; while
today, Wit Soundview downgraded RATL to a Buy from Strong Buy.
Neither firm offered additional comments.  Again, we're playing
RATL's current downtrend despite the positive long-term outlook
for this company.  Look for today's strong volume on the decline
to extend into tomorrow's session.  Further weakness below $40
would warrant an entry for those that like buying into the
decline.  More aggressive positions might be taken if there's a
high-volume roller near the $43 level.  Whatever method you
choose, consider keeping stops set at our $44 for protection
against a reversal.

BUY PUT DEC-50 RAQ-XJ OI=166 at $11.75 SL=8.75
BUY PUT DEC-45 RAQ-XI OI=286 at $ 7.88 SL=5.75
BUY PUT DEC-40*RAQ-XH OI= 72 at $ 4.75 SL=2.75



SDLI - SDL, Inc. $248.81 +30.94 (+28.25 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. Their goal is to replace both electronic-based
systems and conventional optics with more powerful and efficient
semiconductor laser solutions.

Most Recent Write-Up

SDLI started the week off with a buying opportunity for aggressive
traders.  Faced with a soft NASDAQ and for Tech stocks, shares of
SDLI dipped as low as $207.50 on Monday.  Traders, sensing a
bargain, eagerly bid up the shares and while the stock closed down
$2.69 or 1.22% on over 150% of ADV, most of that volume was to the
buy side.  Today SDLI continued to add to its gains, thanks to a
bouncing Telecom sector, starting the day above its 5-dma (now at
$229.22) to close up over 14 percent on 145% of ADV.  Aggressive
traders looking to buy a bounce off support can look to the 5-dma
as well as the 10-dma at $240 but make sure there are buyers to
back the bounce.  For conservative traders, a break through $250
with conviction should allow for a safer entry.  In order to
protect our profits, we are moving our stop price up from $216 to


We're making SDLI the Play of the Day based on the solid
performance of JDSU, the acquirer of SDLI.  JDSU finished at its
high as increasing volume drove the stock into the close.  The
$230 level looks like good support.  If the momentum carries into
tomorrow, look for entries on a move through $250, or from a bounce
at $230.  Remember that the Fed meets tomorrow afternoon and its
tone in the statement(bias) will be essential to the markets.

BUY CALL DEC-240 QJV-LH OI=2829 at $33.13 SL=22.50
BUY CALL DEC-250*QJV-LJ OI= 598 at $28.38 SL=20.50
BUY CALL DEC-260 QJV-LL OI= 527 at $23.75 SL=17.00
BUY CALL MAR-260 QJV-CL OI= 192 at $47.00 SL=34.00
BUY CALL MAR-280 QJV-CP OI= 317 at $39.75 SL=31.00


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Investors anticipate a decision!

Stocks rallied today amid optimism of a final resolution in the
presidential election.

Monday, November 13

The stock market slumped today as shares of Hewlett-Packard (HWP)
plummeted after a disappointing earnings report.  However, both
the Nasdaq and the Dow ended well off the worst levels for the
day as bargain hunters emerged late in the session.  The Nasdaq
closed down 62 points at 2,966 and the Dow ended down 85 points
at 10,517.  The S&P 500 index finished down 14 points at 1,351.
Trading volume on the NYSE hit 1.12 billion shares, with losers
beating winners 1,655 to 1,209.  Activity on the Nasdaq exchange
was heavy at 2 billion shares traded, with declines outpacing
advances 2,569 to 1,394.  In the bond market, the U.S. 30-year
Treasury rose 15/32, pushing its yield down to 5.83%.

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

Safeway           SWY   JAN65C/JAN50P  $0.25   credit  synthetic
Johnson&Johnson   JNJ   DEC85P/DEC90P  $1.00   credit  bull-put
Sepracor          SEPR  NOV80C/NOV60P  $2.38   credit  strangle
British Telecom   BTY   APR100C/A100P  $23.00  debit   straddle

Our new plays offered relatively favorable entry opportunities,
considering today's precipitous slump.  Sepracor was the only
position that didn't help with the initial price, as the issue
fell at the open, limiting the credit in the sold call.

Portfolio Plays:

The market tumbled sharply Monday, but bargain-hunting buyers
brought the major indices back from the gloomy depths in late
trading.  The slide occurred after disappointing earnings from
Hewlett-Packard (HWP) surprised investors already consumed by
uncertainty over who will become the next president of the U.S.
Almost every technology sector was affected by the announcement
and the early going looked rough as the Nasdaq Composite Index
plunged below 3,000 points, to levels not seen since late 1999.
In the wake of Dell Computer's weak forecast, Hewlett-Packard's
lower than expected earnings heightened concerns that the days
of exponential growth in the computer hardware industry may be
at an end.  Other leading sectors also slumped on the news and
biotech issues plunged after an article in Barron's suggested
that the group could suffer the same cruel fate as the dot-coms.
On the Dow, J.P. Morgan (JPM) fell $4 to $153 after Wasserstein
Perella cut its rating on the company and industrial bellwethers
Honeywell (HON) and General Electric (GE) also moved lower.  The
upside leaders were International Business Machines (IBM), Intel
(INTC), Wal-Mart (WMT), and Home Depot (HD).  Among broad market
issues, semiconductors, retail and transportation shares were
some of the stronger groups while pharmaceutical stocks slumped
after recent gains as traders speculated on a victory by George
W. Bush.  Healthcare and major drug issues have rallied lately
amid the belief that Republicans are less likely to pursue new
legislation to collar these industries, thus curtailing their
potential for future expansion.

Our portfolio looked somewhat similar to a battlefield, with a
crimson stain scattered over a vast amount of wreckage.  Most of
the carnage came in the technology group, but there was also a
trail of bloodshed in the pharmaceutical sector.  Analysts said
that uncertainty surrounding the political election amplified
Monday's bearish activity and evidence of that affect was seen
in the selling of Bush-friendly issues.  The losers included a
number of major drug development stocks including Curagen (CRGN)
and Vertex Pharmaceuticals (VRTX), and our bullish positions in
those two issues are now in need of a downside adjustment.  If
you agree with most experts that a Republican victory is still
the likely outcome, you might consider a transition to December
options at a lower strike price.  In the case of CRGN and VRTX,
we will target a roll-out to the DEC-$40 Puts and DEC-$65 Puts
respectively, for a credit in each position.  In the technology
sector, Hewlett Packard (HWP) was the most active issue, down $5
to $34, and it is now a negative position in our portfolio.  The
original diagonal spread was based on earnings speculation and
the company's revenues fell far short of the most pessimistic
outlook, one that would have provided at least a break-even exit
in the JAN-$40 call option.  Our choices at this point are very
limited because the issue gapped down at the open.  However, as
a new trading range is established during the next few sessions,
we may be able to offset a portion of the loss with the sale of
call options in December, possibly at the $37.50 or $40 strike.
Tomorrow's activity will allow us to evaluate the situation more

Thankfully, many investors funneled their money into old economy
companies that offer good long-term growth potential and some of
that buying was evident in the Spreads section.  BellSouth (BLS),
Delta Airlines (DAL), Intel (INTC), Home Depot (HD) and Mattel
(MAT) were among the leaders in that category and our positions
in those issues have provided favorable profits.

Tuesday, November 14

Stocks rallied today amid optimism of a final resolution in the
presidential election.  In addition, traders noted indications
that suggest a near-term technical bottom has been established.
The Nasdaq closed up 171 points at 3,138 on widespread strength
in technology issues.  The Dow also rebounded, ending 163 points
higher at 10,681.  Bullish speculation on retail companies gave
the broad market a boost, with the S&P 500 index up 31 points to
1,382.  Trading volume on the NYSE hit 1.1 billion shares, with
advances beating declines 1,846 to 976.  Activity on the Nasdaq
was moderate with 1.77 billion shares exchanged, and technology
advances beat declines 2,587 to 1,376.  In the bond market, the
30-year Treasury rose 9/32, pushing its yield down to 5.81%.

Portfolio Plays:

The market rallied Tuesday, with industrial and technology stocks
enjoying sizable gains as investors viewed the recent decline as
a buying opportunity.  The bullish activity continued through the
entire session, helping the Nasdaq end its recent losing streak
as Computer-related and Internet issues led the recovery.  Oracle
(ORCL) was one of the technology group's biggest movers, climbing
over $3 to $28 after Goldman Sachs announced the company's sales
pipeline is reported to be very robust.  Cisco Systems (CSCO) and
Sun Microsystems (SUNW) were also among the bellwether companies
supporting the recovery, and the heavy trading volume during the
upside activity was seen as positive confirmation of a genuine
rebound.  Biotechnology shares recovered after Monday's sell-off
on optimism from SG Cowen.  The brokerage said it doesn't believe
the group will unravel anytime soon.  On the blue-chip average,
retail components dominated the advance with Home Depot (HD) and
Wal-Mart (WMT) rallying to recent highs.  Intel Corp. (INTC) and
Microsoft (MSFT) also rose and Hewlett-Packard (HWP) rebounded $3
to finish near $37, after Monday's disappointing earnings report.
Brokerage stocks paced the advance in the financial group and the
sector's winners included Morgan Stanley Dean Witter (MWD) and
Lehman Brothers (LEH).  In the broader market, most sectors were
in the black, with retail, oil and financial issues seeing much
of the buying interest.  As you might expect, sectors viewed as
defensive areas, such as consumer products, utility and precious
metals, generally consolidated.

Our portfolio relished the bullish activity and issues in almost
every category recovered significantly.  Most of the big movers
were in the technology group and outstanding performances were
seen in high growth areas such as networking and wireless telecom.
Juniper Networks (JNPR) led the portfolio, recovered $20 to close
near $183 as telecommunications equipment makers bounced back from
weakness on Monday.  Handspring (HAND) jumped $8 to $80, one day
after announcing Wal-Mart Stores would begin selling its products,
allowing Handspring to expand its customer base.  Under the deal
with the world's largest retailer, Handspring's handheld computers
and accessories will be sold in 500 stores nationwide.  Handspring
said its products will also be available on Wal-Mart's Web site.
Seagate (SEG) led the data storage group, up $5 to $61 as traders
returned to the recently beleaguered industry.  The company also
announced the sale of $400 million of seven-year notes with Chase
Securities, Goldman Sachs and Merrill Lynch managing the offering.
Today's rally provided a great opportunity to adjust our current
bullish in the issue and we decided to move forward and down to
the DEC-$50 options (short) for a $1.00 credit.  Our new basis in
the stock is near $48.50.  The activity also provided excellent
premiums in a number of calendar spread positions and we used the
increased volatility to transition to December options in Biochem
Pharmaceuticals (BCHE) and Englehard (EC).  Both adjustments were
favorable, each providing a credit of $0.50 toward the cost of the
long position.  Microsoft (MSFT) was also on the move, up over $3
to $68.81 amid strength in computer software shares.  Once again,
those of you with short positions at $65 (in our LEAPS w/CCs play)
will need to monitor the issue closely.  One final note; traders
in the Glaxo Wellcome (GLX) call-credit spread could have closed
the play for a tidy $0.50 profit during the session.

Questions & comments on spreads/combos to Contact Support
                      - SPECULATION PLAYS -

With today's volatile activity and the recent indecision over the
Presidential election, it's difficult to determine how the market
will perform in the near-term.  However, the "January Effect," a
trend in which small-cap issues outperform their larger brethren
during the early part of the year, is expected to occur as usual.
These positions offer a way to speculate on the performance of
lower-priced issues in the coming months and hopefully, there is
a play that suits your personal risk/reward outlook.

LNY - Landry's Seafood Restaurants  $9.69  *** A Big Day! ***

Landry's Seafood Restaurants owns and operates full-service,
mid-priced, casual dining seafood restaurants located in 26
states, under the names Joe's Crab Shack, Landry's Seafood
House and Crab House.  Landry's operates hundreds of full-service
restaurants, and in addition, the company operates limited-menu
take-out service units.  The company's restaurants offer a wide
variety of broiled, grilled and fried seafood items at moderate
prices, including red snapper, shrimp, crawfish, lump crabmeat,
lobster, oysters, scallops, flounder and other seafood items,
many with a choice of unique seasonings and toppings.

Landry's shares soared today, after the company issued its fiscal
2001 outlook, forecasting favorable revenues with the assumption
it will complete the acquisition of Rainforest Cafe in the next
few weeks.  Landry's is currently the majority shareholder of
Rainforest Cafe, and the buyout could be completed as early as
December.  Landry's said it sees revenue of $710 million to $720
million in the coming year, as long as certain factors are met,
and investors appear to favor the outlook.  Traders who agree
with the bullish potential of the company can use this position
to speculate on the movement of its share value.

Note: Target a higher premium in the position initially, as the
underlying issue will likely consolidate in the coming sessions

PLAY (aggressive - bullish/synthetic position):

BUY  CALL  APR-10.00  LNY-DB  OI=60  A=$1.31
SELL PUT   APR-10.00  LNY-PB  OI=27  B=$1.38

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $550 per contract.

MTIC - MTI Technology  $7.50  *** Data Storage Speculation! ***

MTI provides high-availability, fault-tolerant solutions for the
enterprise storage marketplace.  The company designs, develops,
manufactures, sells and supports a complete line of integrated
products and services that provide customers with a full range
of hardware, software and networking components, as well as many
sophisticated professional services, which it combines into one
solution to provide continuous access to online information.
Its products include server products consist of RAID storage
subsystems, high-performance storage servers and solid state disk
database accelerators, tape library systems and data management
software.  MTI Technology has historically sold its products and
services to Global 2000 companies for their data center computing
environments.  Its markets have expanded to include e-commerce
and Internet-related businesses such as content providers, online
retailers and Web-based advertisers.

MTI Technology is moving forward with product development and
anticipates introducing new data storage solutions in the near
future.  The company has recently focused on replacing business
that has been lost as a result of the dramatic slowdown in the
dot.com market.  As MTI works on rebuilding and diversifying its
customer base, the strength in the storage industry should help
the company accomplish its goals.  Traders who have a bullish
outlook for the company can use this position to speculate on the
future movement of the issue with a conservative cost basis near
technical support.  We will begin the play with a limit order of
$0.25, to allow for a brief pullback in the underlying issue.

PLAY (conservative - bullish/synthetic position):

BUY  CALL  JAN-10.00  QTX-AB  OI=114  A=$0.88
SELL PUT   JAN-5.00   QTX-MA  OI=276  B=$0.38

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $180 per contract.

CENT - Central Garden & Pet  $9.00  *** On The Rebound? ***

Central Garden & Pet offers a broadening array of proprietary
branded lawn and garden and pet products including Pennington,
Four Paws, Zodiac, Kaytee, Nylabone and Grant's.  Central also
is the leading national distributor of lawn and garden and pet
supply products.  Central's operations are grouped into three
business segments: lawn and garden branded products, product
distribution, and branded pet products.

In this case, the premiums for the near-term call options are
slightly inflated and with the recent rally and earnings due
next month, there will be plenty of opportunities to achieve
a favorable position entry.  In addition, the potential for a
continued rally is significantly affected by the resistance just
above the sold strike; a great situation for a bullish calendar
spread.  The company is expected to report quarterly earnings on
or about December 15, just before the (short) options expire,
and we plan to use the volatility prior to that date to adjust
the position, relative the current technical outlook.

PLAY (aggressive - bullish/calendar spread):

BUY  CALL  MAY-10.00  EQH-EB  OI=50  A=$1.75
SELL CALL  DEC-10.00  EQH-LB  OI=20  B=$0.43

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