Option Investor

Daily Newsletter, Wednesday, 11/15/2000

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The Option Investor Newsletter                Wednesday 11-15-2000
Copyright 2000, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        11-15-2000        High      Low     Volume Advance/Decline
DJIA    10707.60 + 26.50 10799.40 10635.90 1.07 bln   1653/1188
NASDAQ   3165.49 + 27.22  3208.95  3104.57 1.70 bln   1839/2069
S&P 100   733.53 +  3.86   738.13   725.19   totals   3492/3257
S&P 500  1390.04 +  7.09  1395.96  1374.75           51.7%/48.3%
RUS 2000  491.79 +  4.88   493.04   485.61
DJ TRANS 2841.01 + 17.93  2842.53  2808.72
VIX        28.77 -  1.47    30.76    28.23
Put/Call Ratio      0.62

No knight in shining armor today!

Greenspan passed up the opportunity to swoop down from his FOMC
meeting on high and appear like a knight in shining armor and
save the markets from the election 2000 morass. But instead of
a knight he turned into the Thanksgiving turkey and announced
no change in policy and the markets ran for cover. The Fed said
that business demand was falling but the easing demand was not
sufficient to warrant a change in posture. The Fed still sees
the inflation monster under the bed even when almost every
earnings release this quarter has complained about slowing
demand. Could Alan be taking a parting shot at Bill Clinton
and his legacy? Did Bill tell him to keep the pressure on until
the election was resolved? There must be a conspiracy here
somewhere that will turn this slow news day into a tale of
mystery and deception. The truth is out there but we may never
know it. Where is Mulder when you need him. Back to reality,
the Fed nightmare is not over after all. You just thought you
woke up. While the Fed did not raise rates again we are still
laboring under the impact of the last six hikes. By carrying
the inflation worry forward we are still two meetings away from
a rate cut. One meeting to change the bias and then cut at the
next meeting. This scenario along with the prospect of a real
crash landing without preemptive Fed support knocked -217 points
off the Dow intraday sending us back down to 10582 or to almost
the -100 level at 3:PM.

Fortunately investors shook off the bad news and the Dow and Nasdaq
clawed their way back to positive territory just before the close.
Investors have grown so accustomed to bad news over the last
several weeks that this was just one more event to choke down
and then buy the dip. The election crisis deepened again today
with more than a dozen suits in progress and seemingly no end
in sight. The real deadline for the decision is still the
announcement of the tally for the absentee ballots which will
probably occur on Saturday. If the results are lopsided by
several thousand votes as expected then the multiple recounts
to gain a vote or two are likely to cease. Once we have a winner
we should be able to go back to business as usual.

Speaking of business as usual Bank of America said today that
they could charge off as much as double the amounts from last
quarter for loan losses. Are you listening Alan? The financial
sector, which had been sliding since the election, took another
dip with JPM the leader posting a -5 loss. BAC lost -3.88. With
banks increasing their loss reserves the outlook for the next
quarter should start dropping. Bankruptcies are expected to
increase and tax payments contributing to the surplus are going
to decrease also as a result of the bear market. Does this look
like an inflation risk Alan or the beginning of a recession?

Network Appliance suffered the fate of negative earnings guidance
with a -20 points drop to $76. After warning that gross margins
going forward could decrease and citing the law of large numbers
as the reason they could not continue to grow over +100% forever
Bear Stearns downgraded them to an attractive from buy. They
posted revenue of $261 million for last quarter and expect between
$285 and $300 million for this quarter. More important is the
worry by investors that the new EMC product code-named Chameleon
will impact the NTAP product sales. The market may be big enough
for both but it will take some time to prove that concept.

Today's earnings leader was Applied Materials which announced
earnings of $.77 beating estimates by a penny with revenue of
$664 million compared to $303 million last year. Sales rose
to $2.92 billion compared to $1.61 billion last year. All in
all a banner quarter for a chip stock in a month that chip stocks
have been beaten bloody. The AMAT CFO said that the fourth quarter
would also be strong but approximately the same pace. The same
pace would be less than current estimates but still a good quarter.
After spiking several dollars in after hours AMAT pulled back to
near the close as the session ended. With a market cap more than
the next 13 chip equipment makers combined AMAT needs a lot of
buyers to move it but closing today only +3 off the 52 week low
means there is a lot of room above and not much risk below. The
52 week high was $115, about $75 higher than today's close.

The biggest market moving news other than the election was simply
the Fed announcement. They cited unusually high unemployment and
higher energy prices as possible fuel for inflation going forward.
They also said that softer spending by businesses and consumers,
as well as declines in the stock market, suggest that the economy
could expand without causing inflation. Sounds like doublespeak
to me. With economic growth down to +2.7% in the July-Sept quarter
from the 5.6% growth rate in the second quarter, it is still below
the average rate of 4.4%. Looks like a calming to me but Alan
may have other things on his mind. Consumer sales have slowed
with a big decline in large items such as cars. The Beige book
survey showed that 10 of the central bank's 12 regions reported
slowing growth. Industrial production fell -0.1% in October as
well, only the second decline in this year. With inventory levels
growing and spending slowing Alan will have to be ready with the
defibrillator on a moments notice as we go forward. Investors
are concerned that waiting another 2-3 months before beginning
rate cuts will put the Fed behind the curve and chasing the
economy into a serious crash landing. Alan is rapidly approaching
reaction mode instead of preemption mode and that is what the
market is worried about.

Speaking of the market, the fact that we rebounded significantly
after the dip and finished positive bodes well for our chances
once the election crisis is over. Traders are ready to buy the
dip even in the face of the negative election news. This was
a good sign. With hundreds of billions of dollars on the sidelines
and only six weeks left in this year, mutual funds are starting
to sweat. They need to buy something but they would really like
to know who is going to be president before deciding what sectors
they should buy. A quandary, with verbal barbs from the political
parties thicker than mosquitoes in Minnesota and the race still too
close to call, there is no clear direction for them. But there
were still buyers. Not many with volume on the Nasdaq only 1.7 bil
again. The buyers were probably bottom fishers who are hoping to
get in ahead of the crowd. Our task is to decide if we should
join them or sit on the sidelines and watch. The easiest way to
solve this problem is to pick a benchmark and only trade if the
index is above that benchmark. The Dow has had a problem with
10800 dating back to June but most of our readers are not playing
Dow stocks anyway. The benchmark I would pick for the Nasdaq
is 3200. If we can trade and hold over 3200 I would go long. If
the market falls back under 3200 I would close those long positions.
We bounced off 3208 today so this is not that far away. The relief
rally from the Monday dip is over and where we go from here depends
on real buyers and sellers not dip traders. Advance declines on the
Nasdaq were almost dead even so there is still no conviction.
By using the benchmark system you save yourself the brain damage
of deciding when to get in and when to get out. I would also
caution you to wait until after amateur hour before making your
play. Trust me, the election will eventually go away and when it
does you want to have money available to invest. Right? Plan
your strategy and wait for the right time to execute your plan!

Good luck and don't buy too soon.

Jim Brown


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IDPH - IDEC Pharmaceuticals $181.81 +10.94 (-17.88 this week)

IDPH researches and develops therapies for the treatment of
cancer and autoimmune and inflammatory diseases. IDEC was the
first-ever to received FDA approval of a monoclonal antibody,
called Rituxan, that is now the most widely used treatment of
non-Hodgkin's lymphomas in the U.S. The company has two other
anti-cancer drugs in the approval process and five more are in
the pipeline.

A Barron's article over the weekend effectively shook the
beejeezis out of the biotechnology shares, which have held up
well in recent weeks as the broader tech arena tumbled.  As a
result, the latest "bulletproof" stock group received harsh
punishment on Monday.  Many Biotech indexes lost +10% of their
value in a mere session as the uncertainty of developmental drugs
getting FDA approval resurfaced amid broad earnings' concerns.
Sounds like an introduction to a put play, now doesn't it?  Well,
quite to the contrary.  After IDPH took it on the chin and fell to
the mat with a $30.19, or 15.2% cut, but the shares have shown
signs of a revival.  The encouraging action today was enticing -
IDPH rose $10.94, or 6.4%.  After the severe lashing on Monday,
the issue stabilized at a shorter-term support of $170 on Tuesday.
News of its cancer drug Rituxan, used in combination with
chemotherapy, effectively proved that patients could survive a
year without the non-Hodgkin's lymphoma progressing or relapsing.
This positive report perhaps boosted investors' confidence, too.
You might take a stake in this recovery play if gains can extend
into higher territory.  The immediate resistance is at today's
intraday high of 184.38.  A conclusive push through this level
would  warrant an entry.  The more aggressive looking to enter on
dips might use the 50-dma ($174.24) area as a launching pad.  OIN
considers the $170 level dangerous.  Our Stop is adamantly set at
$170 - a weak close at this level and we'll exit the play.

BUY CALL DEC-175 IHD-LO OI=  30 at $22.50 SL=16.75
BUY CALL DEC-180 IHD-LP OI=   5 at $19.75 SL=14.50
BUY CALL DEC-185*IHD-LQ OI=   6 at $17.50 SL=12.75
BUY CALL DEC-190 IHD-LR OI=1020 at $15.13 SL=11.00
BUY CALL JAN-190 IHD-AR OI= 807 at $23.63 SL=17.75
BUY CALL JAN-195 IHD-AS OI= 443 at $20.88 SL=14.75


AMGN - Amgen, Inc. $67.38 +3.25 (+2.81 this week)

The biggest of the Biotech big guns, AMGN makes and markets
therapeutic products for hematology, oncology, bone and
inflammatory disorders, as well as neuroendocrine and
neurodegenerative diseases.  Anti-anemia drug Epogen and immune
system stimulator Neupogen account for about 95% of sales.  Its
Infergen has been commercialized as a treatment for hepatitis C,
and Stemgen is approved for stem cell therapy in Australia,
Canada, and New Zealand.  The company has a strong pipeline of
new drugs in various stages of development as well as research
and marketing alliances with Hoffman-La-Roche and
Johnson & Johnson.

In the scary market environment that existed just before
Halloween, AMGN spooked investors with its earnings report on
October 26th.  While the company beat estimates for the third
quarter, they also warned that profit for the year will "be at
the low end of its previous guidance."  Investors wasted no
time selling the stock, slashing the price by as much as 25%
before buyers began to reappear for a little bargain hunting.
Since then the stock has consistently moved higher, helped by
persistent strength in Pharmaceutical stocks.  On November 8th,
AMGN hosted an analyst meeting in New York, outlining its
business strategy for its new product cycle, and pointed to
accelerating earnings growth in 2001 and beyond.  Apparently it
was what analysts were looking for, as the next day saw
positive comments from the likes of Chase H&Q, Lehman Brothers
and Robertson Stephens.  The subsequent investor reaction has
resulted in a sharp upward move in the past week, with the stock
moving decisively above the 200-dma ($65.38) in today's trading.
This puts the Biotech stock back above all of its moving
averages, and within a fraction of filling the post-earnings gap
from late October.  Aggressive traders can use any intraday dip
to support as attractive entry points, as long as the bounce
comes on solid volume.  Support is seen first at the 200-dma,
then $64, and finally $62.  The descending trendline connecting
the highs over the past several months is currently resting at $69,
and it will likely present some resistance going forward.  Once
the level is cleared, it will represent a solid breakout from the
recent bearish trend, and will clear the path for a run at
resistance at $72 and then $75.  Cautious investors will wait for
buyers to push AMGN through the $69 level before initiating new
positions.  A break down and close below $62 would stop us out of
this play.

BUY CALL DEC-65*YAA-LM OI=4447 at $7.13 SL=5.00
BUY CALL DEC-70 YAA-LN OI=2229 at $4.00 SL=2.50
BUY CALL DEC-75 YAA-LO OI=2566 at $2.50 SL=1.25
BUY CALL JAN-70 YAA-AN OI=8465 at $6.50 SL=4.50
BUY CALL JAN-75 YAA-AO OI=5934 at $4.75 SL=3.00

SELL PUT DEC-60 YAA-XL OI=3275 at $2.38 SL=3.75
(See risks of selling puts in play legend)



NEON - New Era Networks, Inc. $21.25 +2.06 (+3.38 this week)

NEON is a leading provider of e-Business integration software and
services for the New Economy.  Drawing on proven core technology
and years of experience, NEON integrates and automates e-Business
processes, helping companies bring end-to-end business
functionality to the Internet in the shortest possible time frame.
In addition, NEON products help companies establish direct,
electronic links with customers, suppliers and partners; build and
participate in Net markets; and distribute and access information
using wireless technology.

This lower priced B2B stock has come down a long way from $80 in
March.  For most of October, NEON managed to stay in a holding
pattern while the rest of the NASDAQ was getting clobbered.  NEON
has been building gradually, rounding out a nice bottom at $15.
What attracted us to this call play was NEON's break above its
50-dma at $20.71 on heavy volume.  Today's gain was 10% so look
to enter into this low volatility play on a pullback.  Look for
bounces from $20 or lower at $18, accompanied by good buying
volume.  If you look on the chart, during the month of November
NEON has made nice runs, pulled back slightly(about $2), and then
reenergizing with buyer support.  This pattern shows higher highs
and lower lows, indicating that an entry point may be just a day
away.  A pullback would provide an entry point near the 50-dma
at $18.88.  Resistance is overhead at $22.  We have set a stop
loss close of $18, as we view $18 as a key support area.

BUY CALL DEC-20*QNO-LD OI=240 at $3.38 SL=1.75
BUY CALL DEC-25 QNO-LE OI= 32 at $1.50 SL=0.75
BUY CALL JAN-20 QNO-AD OI=669 at $4.38 SL=2.75
BUY CALL JAN-25 QNO-AE OI=940 at $2.56 SL=1.25



RSAS $48.06 +1.13 (+2.06) As the broader markets moved higher
in advance of the results of this afternoon's FOMC meeting, RSAS
went along for the ride, creeping above the $49 level shortly
after the lunch hour.  The Fed left interest rates and their
bias unchanged, and the bubble of optimism promptly burst, with
the markets quickly giving up their early gains.  Despite the
sharp decline this afternoon in the broader markets, RSAS
refused to move back below $48.  Our play has now posted solid
gains for three days in a row, and the increasing volume is
eroding the case for a bearish bias.  Our stop at $50 has not
been violated yet, but it looks like it is only a matter of time,
so we will take this opportunity to close the play before it
turns sharply against us.

DGIN $15.38 +2.13 (+1.88) Monday provided a nice trade, dipping
as low as $10.50.  But DGIN found relief with the rest of the
market and rallied the past two days on much heavier volume.
With a strong close today, the stock finished over our stop loss
at $15.  As a result, we are dropping the play tonight.


No stop-loss adjustments today.


Probability And Risk Management
By Mary Redmond

Most traders weight the risk/reward relationship every time they
buy a stock or option.  Usually, it is best to trade if the
potential reward at least equals the risk of the trade.

For example, if you buy a short term or expiring option then
the risk is usually equal to 100% of the option's price.  For
that reason, most traders would only buy a short term option if
the reward could potentially equal 100% of the amount at risk.

You need to consider the length of time you plan to hold the
option.  If you buy a short term option, and plan to hold it only
an hour or two then your risk may be limited under most
circumstances to between 20 to 50% of the price of the option.
It is also important to consider volatility when assessing the
risk and reward of a position.  The risk of an option is the
highest when its implied volatility is high as compared to the
historic volatility of the stock.

Many stocks, which are down significantly for the year have
options which may be considered overpriced strictly by a
volatility standpoint.

Straddles can be a great strategy to use when volatility is low.
Ideally, you would like to try to find a period when the VIX.X
is low, and the implied volatility of the options is low.

For example, consider the price of the OEX options in September
when the VIX was 21.  On September 11th, the Oct 820 OEX call
was $21.75 and the OEX Oct 820 put was $19.25.  The total cost
of this straddle was $41.  The maximum potential risk was $41,
and the probability of success was realistic, considering
that the VIX had not historically stayed under 22 for a long
period of time.

The OEX was 738 on the Friday before this straddle expired,
which means the profit would have been 41 points, or 100%.
The VIX.X spiked up to over 27 that week.

A straddle on the OEX at the current prices would have a
possibility of success, but a low probability of making any more
than a small profit.  The OEX Dec 730 calls are $26 and the
OEX Jan 730 puts are $19.25  If the OEX was over 778 by December,
then the spread would be successful.  However, it does not seem
realistic to risk the total cost of the straddle if the maximum
potential profit is less than the potential risk.

While volatility analysis is important for position trading,
it can also be useful for daily trading.  For example, Ciena
has had a beautiful move up over the last several days.
There were many excellent entry points, which yielded profits
of 20% or more with in an hour.

Ciena's options have an implied volatility of 97, which may
be high for some stocks, but is low compared to their historic
volatility last month of 127.  Since Ciena has not reported
earnings yet, the options are somewhat less risky than most
stocks which have reported earnings.  For example, NTAP and
SCMR both reported earnings yesterday after the close.  Both
stocks reported excellent earnings.  SCMR closed up $4, and
yet the Dec 65 option only increased by $0.50.

Today was an example of why it is a good idea to close open
option positions before a Fed announcement.  It is possible
that the investment community was anticipating a change to
a neutral bias.  When that was not announced, the disappointment
was obvious.  However, many more analysts are pointing to
evidence which indicates that a Fed rate cut is probable in

Today, Bank of America announced that they could suffer
higher losses than expected from net charge-offs.  The bank
is not alone.  First Union announced that their credit losses
could be up as much as 30% in the next quarter.   If the
financial stocks cannot rally then we may have a difficult
time in the market without an easing by the Fed.

To compound the problem, the IPO market has been very light.
This is no surprise, considering the public's anxiety with
the election uncertainty.  However, a weak IPO market may
mean weak earnings for the brokerage and investment banking
stocks in the coming quarters.

These issues may not be severe enough to cause an economic
recession.  Analysts are still divided on the issue of whether
we will see a "soft landing" for the economy or a "hard landing."
We have already seen a phenomenal slowing in the GDP if you
consider that it was over 7% in the beginning of 2000.  However,
it is highly likely that we could see a financial recession,
in which financing for small company stocks simply dries up.

Many analysts are trying to call a bottom in the market.  If we
are not at the bottom, it is terrifying to think where it could
be.  One indicator of a high level of fear in the market is
the continuing high flows of cash to money market funds.  Last
week the Investment Company Institute reported that money market
funds took in over $20 bln in total.  Under ordinary circumstances,
at least some of this cash would go into the market.

Some analysts have stated that Europeans may be withdrawing money
from the American markets because of political uncertainty.
However, this trend is not likely to continue.  The Euro remains
weak, and the election uncertainty has not weakened the dollar
by enough to make the American stock and bond markets
unattractive to foreigners.

Even if you trade when the odds are in your favor, extraordinary
circumstances can arise.  For example, in a country of over 200 mln
people with over 100 mln voting, the odds of the race for President
coming to less than 500 votes is extraordinarily low, almost zero.
Would you have bet on that?

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QCOM - Qualcomm $84.19 +3.81 (+10.25 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.

Most Recent Write-Up

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.


The follow through to the break above $80 came today and held quite
nicely.  Volume was particularly strong as traders didn't want to
miss the technically significant move.  Resistance was encountered
at the $85 level.  Look for bounces from $80, or $75 on a bigger
pullback for entry.  If buyers come back in force tomorrow, look
for a breakout over $85 to attract more buyers.

BUY CALL DEC-75 AAF-LO OI=7675 at $13.38 SL=10.75
BUY CALL DEC-80*AAF-LP OI=5161 at $10.00 SL= 7.50
BUY CALL DEC-85 AAF-LQ OI=2766 at $ 7.50 SL= 5.75
BUY CALL JAN-80 AAF-AP OI=8112 at $13.50 SL=10.75
BUY CALL JAN-85 AAF-AQ OI=6732 at $11.13 SL= 8.75

SELL PUT DEC-70 AAO-XN OI=2638 at $ 2.06 SL= 3.25
(See risk of selling put in play legend)



The Market turns green after Mr. Greenspan stays the course...

The stock market edged higher today, after the Federal Reserve
announced it would keep key U.S. interest rates unchanged, but
warned inflation still poses a threat to the slowing economy.
The widely expected decision by the policy-setting Federal Open
Market Committee leaves the federal funds overnight lending rate
at 6.50%, where it has been since a half-percentage point hike
in May.  Immediately after the news, the major stock indexes
pulled back from sizable gains, returning to more neutral levels.
Technology stocks had led the market higher amid upbeat earnings
reports but as the day wore on, investors became worried about
higher interest rates as they ultimately cut into a company's
bottom line by increasing borrowing costs.  On the Nasdaq, chip
stocks bolstered the early advance, as did biotechnology issues.
Semiconductors were supported by a bullish report from Analog
Devices (ADI), which rallied after the company topped Wall Street
estimates, saying it believes 10% sequential revenue growth is
achievable in the upcoming quarter and that revenues are likely
to be constrained by supply, not demand.  The Biotech group also
recovered in the wake of positive comments from SG Cowen, after
witnessing a substantial sell-off on Monday.  While the sector's
advances were broad-based, the heaviest buying interest was seen
in genomics-related issues.  On the downside, computer hardware,
networking and Internet stocks all fell amid profit-taking.  On
the Dow, a range of issues enjoyed favorable activity with Walt
Disney (DIS), Wal-Mart (WMT), Philip Morris (MO), Intel (INTC),
Microsoft (MSFT) and Caterpillar (CAT) among the strongest issues.
In broader market, bank stocks extended their recent losses after
the Fed's announcement to retain a "tightening" bias.  The group
has been under pressure due to concerns over credit quality.  The
worries emerged late Tuesday, when First Union revealed that it
expected an increase in non-performing loans due to one large
syndicated credit exposure totaling about $500 million.

With the continued uncertainty over the outcome of the election
and the Fed remaining hawkish on inflation, it is unlikely that
we will see another significant rally like that which occurred
Tuesday.  However, there are still favorable opportunities in a
a number of specific issues and we will focus on conservative
positions that offer a high probability of profit in the current
uncertain market.

Summary of Previous Picks:

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

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

NTIQ    NOV    85    83.75 102.88    $1.25   5.0%

EMLX    DEC   120   113.56 159.50    $6.44   4.7%

Naked Puts:

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

PCYC    NOV    45    43.62  47.00    $1.38  14.2%
NTIQ    NOV    80    79.31 102.88    $0.69  10.7%
AVCT    NOV    60    58.50  60.13    $1.50   9.6%
CVTX    NOV    70    69.50  77.69    $0.50   9.1%
DCTM    NOV    25    24.22  41.94    $0.78   9.0% Adj 2-1 Split
AFFX    NOV    70    69.56  76.88    $0.44   8.2%
VRTX    NOV    70    68.81  73.63    $1.19   7.7%
MANU    NOV    60    59.06 113.22    $0.94   7.4% Splits 2-1 DEC 8
EMLX    NOV   120   119.31 159.50    $0.69   7.4%
HGSI    NOV    75    74.25  76.31    $0.75   7.1%
EPNY    NOV    40    39.54  56.69    $0.46   6.6% Adj 3-2 Split
ELNT    NOV    75    74.25  82.06    $0.75   6.5%
HAND    NOV    50    48.75  75.00    $1.25   6.5%
KREM    NOV    65    64.06  80.88    $0.94   6.4%
VRTS    NOV   110   108.13 129.69    $1.88   5.9%
HGSI    NOV    70    68.94  76.31    $1.06   5.1%
APWR    NOV    40    38.56  36.88   -$1.68   0.0% Key moment
PDLI    NOV   105   104.12  96.50   -$7.62   0.0% 150 dma bounce?

CRGN    DEC    45    43.69  41.88   -$1.81   0.0%

Sell Straddles:

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

EXAR    NOV    42.5  40.50  38.38   -$2.12   0.0% Adj 2-1 Split
EXAR    NOV    62.5  65.19  38.38    $2.69  20.5% Adj 2-1 Split

Note: As a combined position, EXAR is at its break-even point.

Naked Calls:

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

RBAK    NOV   120   120.75  79.94    $0.75  14.1%
JNPR    NOV   230   231.50 177.50    $1.50  13.0%
NEWP    NOV   190   191.69  86.94    $1.69   8.9%
NEWP    NOV   165   166.00  86.94    $1.00   8.6%
JNPR    NOV   260   261.56 177.50    $1.56   7.8%
BRCM    NOV   280   282.19 169.69    $2.19   6.3%
JNPR    NOV   280   281.56 177.50    $1.56   5.1%

Credit Spreads:

Stock  Pick    Last     Position   Credit    C/B    G/L   Status

AFFX  $87.25  $76.88   DEC50P/60P  $1.12   $58.88  $1.12   OPEN
AGN   $90.75  $90.88   DEC70P/75P  $0.75   $74.25  $0.75   OPEN

Put-credit spreads are profitable if the stock price closes above
the sold option's strike price at expiration.  Call-credit spreads
are profitable if the stock price closes below the sold option's
strike price at expiration.

New Candidates:

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


BULLISH PLAYS - Covered Calls & Naked Puts & Combinations

ADBE - Adobe Systems  $81.19  *** Industry Leader! ***

Adobe Systems is a provider of graphic design, publishing, and
imaging software for Web and print production.  The company
offers a line of application software products for creating,
distributing, and managing information of all types.  Adobe
licenses its industry-standard technologies to major hardware
manufacturers, software developers, and service providers, and
offers integrated software solutions to businesses of all sizes.

Earlier this month, Adobe announced that product sales will rise
at least 25% in its fiscal fourth quarter and in 2001.  Chief
financial officer Murray Demo said Adobe's sales of publishing
software will rise 30% in fiscal 2001, while additional software
sales will increase 65%.  Also, Adobe System's operating margin,
a measure of profitability, is expected to reach 32% next year.
Analysts were bullish on the news, moving their estimates to the
higher end of the guidance provided by the company, based on the
belief that Adobe's guidance does not fully reflect the size and
growth of the digital media convergence and their unique ability
to profit from it.  In short, analysts believe that the company's
ability to benefit from the needs of publishers, corporations,
and consumers is still not fully reflected in the current share

Our opinion is simply that Adobe Systems is an industry leader
and a technology stock we would love to have in our long-term
growth portfolio.

ADBE - Adobe Systems  $81.19

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

Sell Call DEC 67.5 AXX LU  37       16.75    64.44     4.8% ***
Sell Call DEC 70   AXX LN  152      15.00    66.19     5.8%

Sell Put  DEC 55   AXX XK  265       1.00    54.00     5.9% ***
Sell Put  DEC 57.5 AXX XY  176       1.25    56.25     7.2%
Sell Put  DEC 60   AXX XL  151       1.69    58.31     9.6%
Sell Put  DEC 62.5 AXX XZ  453       2.00    60.50    11.1%
Sell Put  DEC 65   AXX XM  646       2.44    62.56    13.2%


AET - Aetna  $66.06  *** Health Sector Rally! ***

Aetna and its subsidiaries constitute one of the nation's largest
health benefits companies, based on membership, and one of the
nation's largest insurance and financial services organizations.
Aetna Incorporated, is the parent corporation of Aetna Services,
and Aetna U.S. Healthcare.  The company's business operations are
conducted in the following segments: Aetna Healthcare, Financial
Services (formerly Aetna Retirement Services), International and
Large Case Pensions.  Aetna Healthcare offers health products,
group life and disability insurance and long-term care insurance.
Aetna Financial Services provide financial services products.
Aetna International offers primarily life insurance, health
insurance and financial services products.  Large Case Pensions
involves retirement products.

The healthcare sector is performing well and Aetna is one of the
leading companies in the industry.  In addition, shares of most
heathcare companies have traded near recent highs on expectation
of a George Bush presidential victory and the recent election of
a Republican majority in congress.  A Republican congress is
viewed as more favorable by the industry because the group is
expected to favor managed care companies in legislation known as
the patient's "bill of rights;" a law that threatens to increase
an individual's right to sue health maintenance organizations
for improper denial of care.

We simply favor the bullish technical indications and our
conservative position offers a method to participate in the
future movement of the issue with relatively low risk.

AET - Aetna  $66.06

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-55  AET-XK  OI=322   A=$0.50
SELL CALL  DEC-60  AET-XL  OI=1546  B=$0.93
INITIAL NET CREDIT TARGET=$0.56  ROI(max)=12% B/E=$59.43


CMVT - Comverse Technology  $115.06  *** On The Move! ***

Comverse Technology designs, develops, manufactures, markets and
supports computer and telecommunications systems and software for
multimedia communications and information processing applications.
The company's products are used in a broad range of applications
by wireless and wireline telephone network operators, government
agencies, call centers, financial institutions and other public
and commercial organizations worldwide.  Comverse also provides
enhanced services platform products, digital monitoring and
recording systems for call centers, unique customer relationship
management applications, public networks and government agencies,
network signaling software for wireless, wireline and Internet
communication services known as Signalware, and other telecom
hardware and software products and services.

On Monday, CSFB analyst Susan Passoni initiated coverage of CMVT
with a "buy" rating and a 12-month target price of $128.  In the
commentary, Susan noted that Comverse is positioned to leverage
its leadership position in "traditional enhanced services" into
the emerging "next generation" wireless data services arena.  The
company also has high revenue visibility, with over 85% of its
business coming from existing customers upgrading capacity or
adding additional enhanced services.  Investors appear to agree
with the bullish assessment as the stock has moved up $10 in the
last two sessions.  Technically, the unique issue appears to be
successfully completing a consolidation phase and we expect the
share value to benefit significantly from the next market rally.

CMVT - Comverse Technology  $115.06

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

Sell Put  DEC 85   CQZ XQ  558       1.63    83.37     6.7% ***
Sell Put  DEC 90   CQZ XR  286       2.06    87.94     8.3%
Sell Put  DEC 95   CQZ XS  268       3.13    91.87    10.9%


PWAV - Powerwave  $56.00  *** New Trading Range? ***

Powerwave Technologies designs, manufactures and markets ultra
linear radio frequency power amplifiers for use in the wireless
communications market.  Powerwave manufactures both single and
multi-carrier RF power amplifiers for a variety of frequency
ranges and transmission protocols.  The company's products are
being utilized in both cellular and personal communications
services base stations in digital and analog-based networks.
Powerwave's products support a wide range of digital and analog
transmission protocols including CDMA, TDMA, GSM, AMPS and TACS.
The company also produces RF power amplifiers for the wireless
local loop market, which refers to wireless products designed
for fixed or non-mobile applications that provide and/or replace
traditional wireline telephone systems.

Powerwave is "on the move" and today's rally to a recent high
near $55 suggests there is further upside potential for the
issue.  The stock has excellent buying support near our cost
basis and the favorable option premiums will allow traders to
speculate, in a conservative manner, on the future movement of
the company's share value.

PWAV - Powerwave  $56.00

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

Sell Put  DEC 40   VFQ XH  1081      1.00    39.00     8.3% ***
Sell Put  DEC 45   VFQ XI  25        1.88    43.12    14.4%


QCOM - Qualcomm  $84.19  *** Bracing For A Rally! ***

Qualcomm is a leader in developing and delivering innovative
digital wireless communications products and services based on
the company's CDMA digital technology.  The company's business
areas include integrated CDMA chipsets and system software;
technology licensing; Eudora email software for Windows and
Macintosh computing platforms; satellite-based systems including
portions of the Globalstar system and wireless fleet management
systems, OmniTRACS and OmniExpress.  Qualcomm owns patents which
are essential to all of the CDMA wireless telecommunications
standards that have been adopted or proposed for adoption by
standards-setting bodies worldwide.  Qualcomm has licensed its
essential CDMA patent portfolio to more than 80 telecom equipment
manufacturers worldwide.

Earlier this week, Qualcomm announced a newly created venture
capital fund in which it will spend $500 million over the next
four years to acquire stakes in startups that use or promote
its patented digital wireless technology.  The venture capital
fund, Qualcomm Ventures, will make investments of $2 million to
$10 million in emerging companies worldwide to promote the
adoption of its CDMA technology.  Qualcomm has invested similar
amounts over the past three years in other companies, but the
creation of an investment fund certifies its role as a promoter
of CDMA technology.  In other news, Banc of America Securites
noted that subscriber additions in the company's Asian markets
were higher in October, and they raised their rating on QCOM's
stock based on the bullish outlook.

We simply favor the recent technical trends and these positions
offer a great way to speculate on the future movement of the
issue in a conservative manner.

QCOM - Qualcomm  $84.19

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

Sell Put  DEC 65   AAO XM  2419      1.19    63.81     6.7% ***
Sell Put  DEC 70   AAO XN  2638      2.06    67.94     9.7%


SAWS - Sawtek  $51.50  *** Solid Company! ***

Sawtek designs, develops, manufactures and markets a range of
electronic signal processing components based on surface acoustic
wave (SAW) technology. Its primary products are custom-designed,
high performance band-pass filters, resonators, delay lines,
oscillators and SAW-based subsystems.  These products are used in
a variety of microwave and radio frequency systems, such as Code
Division Multiple Access and Global System for Mobile telecom
digital wireless systems, digital microwave radios, wireless local
area networks, cable television equipment, various defense and
satellite systems and chemical sensors.  Its products offer key
advantages such as lower distortion, reduced size and weight, high
reliability and precise frequency control compared to products
based on alternative technologies, and address rapidly growing
needs in communications, data communications, video transmission,
military and space systems and other markets.

In early October, Sawtek posted fourth quarter profits more than
double the year-ago quarter, and said it sees continued strong
growth in fiscal year 2001.  The company reported net income of
$41 million, or $0.95 per share, compared with $14 million, or
$0.34 per share in the year-ago period.  Analysts expected Sawtek
to earn $0.37 per share during the quarter, well below the actual
results.  Sawtek foresees revenue growth of between 25% and 35%
during fiscal year 2001 and the company expects profits to come
from its handsets, data communications and broadband access
segments.  Based on the recent bullish technicals, investors agree
that SAWS is one of the leading issues in the Electronics group
and this company would certainly be a candidate for any long-term

SAWS - Sawtek  $51.50

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

Sell Put  DEC 35   QWS XG  113       0.88    34.12     8.0% ***
Sell Put  DEC 40   QWS XH  164       1.56    38.44    13.3%


SCMR - Sycamore Networks  $68.44  *** Bottom Fishing! ***

Sycamore Networks develops and markets intelligent optical
networking products that transport voice and data traffic over
wavelengths of light.  Sycamore combines significant experience
in data networking with expertise in optics to develop unique
intelligent optical networking solutions for network service
providers.  Sycamore's products are based on a common software
foundation, enabling concentration on the delivery of services
and end-to-end optical networking.  Sycamore's products and
product plans include optical transport, access and switching
systems and end-to-end optical network management solutions.

Regardless of the recent slump in share value, Sycamore is one
of the top companies in the Networking Group and among many
institutional investors, it is also one of the core holdings.
The current technical outlook is recovering and our position
offers an excellent reward potential at the risk of owning this
industry-leading issue at a favorable cost basis.

SCMR - Sycamore Networks  $68.44

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

Sell Put  DEC 40   SMZ XH  0         0.69    39.31     4.9% ***
Sell Put  DEC 45   SMZ XI  0         1.31    43.69     8.9%



CFLO - Cacheflow  $120.25  *** Premium Selling Play! ***

CacheFlow designs, develops and markets Internet caching tools
that are purpose-built to accelerate and optimize the flow of
information over the Internet.  Their products are deployed by
its customers throughout network infrastructures to improve the
performance of their networks and reduce network costs, while
enhancing network security.  Customers for CFLO's products
include large and small Internet service providers and corporate
enterprises.  All of the company's products are designed as
integrated appliances, which are specialized hardware platforms
coupled with the Company's CacheOS operating system.  CacheFlow
has specialized its products around several attributes including
type of content (traditional Web or streaming), type of customer
(service provider, enterprise or e-commerce), and the type of
deployment (content provider or content consumer).

CFLO is certainly a volatile issue, having moved through a $50
range three times over the past two months.  Cacheflow's most
recent activity started when the company made an unexpected
acquisition, purchasing privately held Entera for $440 million
in stock.  Entera makes software that speeds the delivery of
streaming audio and video files over the Web.  The slump in
technology stocks was the reason for the decline in October, but
strong demand for caching products, particularly streaming media
solutions, reversed the downtrend and produced a major rally in
the group.  Last week, concerns about valuations resurfaced and
most technology stocks are now searching for a technical bottom
after precipitous declines.  Cacheflow has performed relatively
well, considering the selling pressure among Nasdaq issues and
with the company's earnings due next week, the stock will likely
rally in the short-term.  Traders that employ premium-selling
strategies can use the recent volatility and the overpriced
options to initiate a neutral position with a favorable credit.
The probability of the share value reaching our sold strikes is
rather low, but there is always the possibility of a break-out
from the recent trading range, so monitor the position daily for
changes in technical character.

CFLO - Cacheflow  $120.25


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

Sell Put  DEC 75   FUJ XO  14        3.13    71.87    11.7% ***
Sell Call DEC 165  FJO LM  30        7.13   172.13    23.2% ***

Sell Put  DEC 80   FUJ XP  35        3.63    76.37    13.3%
Sell Call DEC 160  FUJ LZ  161       8.38   168.38    26.2%

Sell Put  DEC 85   FUJ XQ  4         5.00    80.00    17.5%
Sell Call DEC 155  FUJ LY  30        9.38   164.38    28.4%

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