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Daily Newsletter, Sunday, 11/26/2000

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The Option Investor Newsletter                   Sunday 11-26-2000
Copyright 2000, All rights reserved.                        1 of 5
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       WE 11-24         WE 11-17         WE 11-10         WE 11-03
DOW    10470.23 -159.64 10629.87 + 26.92 10602.95 -215.00  +227.33
Nasdaq  2904.38 -122.81  3027.19 -  1.80  3028.99 -422.59  +173.22
S&P-100  711.16 - 13.93   725.09 +  5.98   719.11 - 32.59  + 25.52
S&P-500 1341.77 - 25.95  1367.72 +  1.74  1365.98 - 60.71  + 47.11
W5000  12353.60 -306.30 12659.90 - 28.90 12688.80 -694.10  +522.30
RUT      471.87 - 10.74   482.61 +  1.71   480.90 - 26.85  + 27.90
TRAN    2849.89 + 32.59  2817.30 +113.08  2704.22 - 57.53  +232.78
VIX       29.58 +  1.73    27.85 -  4.65    32.50 +  6.19  -  3.84
Put/Call    .59              .89              .83              .57

Tempting but not convincing!
By Jim Brown

It looked good on paper, the +140 point gain by the Nasdaq on
Friday, but I was not convinced. Considering the markets have
only been down eleven times in the last 47 years, Friday's
performance was not unexpected. The extreme oversold condition
going into Thanksgiving only added to the probability. The same
statistics also show that the Monday after the holiday has been
down 25 times in the last 47 years. You cannot draw any real
conclusions from Friday's trading activity since the volume on
the Nasdaq was only 792 million and the NYSE just barely broke
400 million shares. The shortened trading day just teased
traders that stayed home instead of hitting the malls. It was
a positive day with advances beating decliners substantially
at better than 2:1 on both major exchanges.

So why am I cautious about the rally? Multiple reasons give
me cause for concern. I loved the fact that of the 300 stocks
I monitor on a daily basis only 14 were down for the day and
only 3 were down more than -$1. Can't complain about that!
After looking at the individual charts on all 300 I noticed
one thing. Many, and I mean many, had a big spike at the close.
What this is telling me is that there were a lot of traders
covering their shorts in front of the vote count deadline on
Sunday. Anybody short last week did very well but with the
possibility of the election reaching a new level of completion
and/or complexity over the weekend these same traders decided
to run for cover at the close and pocket profits instead of
leaving open positions at the mercy of the news.

Still the volume was very weak. This allowed the short covering
to artificially inflate the prices showing more strength than
we can really find. Another downside to this is the big gains
at the close. They will produce instant profit taking if the
weekend news is at all negative.

The election news remains at the forefront of the market noise.
The short version goes like this. Bush has asked the U.S.
Supreme Court to stop the recounts. Gore got slapped with a
loss when the Florida Supreme Court said they would not
intervene in the Miami-Dade decision to stop counting. Bush
went to court to try and force the acceptance of absentee
ballots that were rejected for technicalities. The current
deadline for vote submissions is still 5:PM ET on Sunday. You
can expect the Florida Secretary of State to certify the results
as soon as politically possible and at present count Bush would
still be the winner. This would set the stage for the next fight
which would be the formal "contest" of the vote.

The U.S. Supreme Court agreed to hear the Bush case on allowing
the selected recounts on Friday of next week. They took the case
based on the possibility that the Florida Supreme Court broke
Federal election laws by changing the rules after the election.
Federal laws allow much discretion by the states but only if the
law is changed before the election. After any election no law can
be changed if it impacts the current results. My view of this is
Bush can't lose anything else and only stands to gain. If they
say the Florida court acted correctly, nothing changes and Bush
is still ahead about +970 votes (as of 5:PM Friday). If the court
finds the Florida Supremes acted in error and reverses their ruling
then Bush still wins and all the pregnant chad counts get aborted.

I get a lot of mail saying "stay out of the election news, just
report on stocks and the market." I wish I could but that would
be the equivalent of burying our head in the sand. While everyone
has different feeling about their candidate and the entire process
the point remains that the election has impacted the markets and
a resolution of the problem will free the market to focus on the
real facts on hand which are earnings and economy. While a Bush
win will be more favorable for the broader market a Gore verdict
will also put this problem behind us and let us focus on the facts.
What will cause more trouble than we would ever want is any type
of event that causes this to drag out into a constitutional crisis
and prevent the normal dates for completing the election on a
national basis from passing. The Electoral College meets on
Dec-18th to formalize the election and anything that endangers
this date will cause severe instability in the markets. There is
a good possibility that traders will have a better idea of the
direction the election when the market opens on Monday.

Once the election is resolved or at least appears to be out of
reach by either party the markets will go back to the economic
facts at hand. This may not be a good thing. 180 companies have
already pre-announced earnings for this quarter with the majority
of these pre-announcements being warnings. This is not a strong
rally point. Another major market mover on Friday was the AT&T
announcement that inventory levels were too high for expected
sales the rest of this year and they put a halt to deliveries
for cable and broadband equipment. They said they do not want
to exceed their budget requirements for this quarter. Reading
between the lines investors saw slowing sales. ANTC, SFA, HLIT,
CTV and CCBL were all down on the news. AT&T accounts for over
40% of ANTC revenue. This is just another example of the slowing
economy and the impact on earnings. There was also news today
that focused on positive reports about strong retail sales on
so called "black Friday." This is good for retailers but bad for
Greenspan's inflation fighters. It means the consumers are still
charging, literally, and the economy may not be as weak as we

Next week has several key economic reports including Existing
Home Sales on Monday, Durable Goods on Tuesday, GDP** on
Wednesday and Personal Income/Spending on Thursday. The key
report here is the GDP report on Wednesday. The forecast is
+2.5% but after the rising trade deficit from last week there
is some discussion that it could fall under 2.0% and the Fed
would have to react quickly to avoid a recession. The next
Fed meeting is Dec-19th and most investors are hoping for a
bias change to neutral based on the reports over the next two
weeks. This would be very positive for the markets and since
the Electoral College meets on the 18th we have the possibility
for that to be a strong week.

We have strong prospects for a rally on good election news over
the weekend. There is always the possibility that the spike at
the close on Friday was not short covering but traders moving
into position for expected good news. Notice I said traders
not investors. Institutional investors will continue to wait
until the winner is named before spending millions on a sector
that may get whacked by the wrong victor. As traders we should
be exploring the universe of stocks for those we would like to
buy when the news is announced, not before. I asked several
traders here at OIN for a list of 20 stocks they thought would
bounce the most when the recovery began. I will be talking about
that list in the "Editor's Plays Section" today. You may be
surprised at some of the choices.

I wish I could with good conscience tell you to rush out and
buy calls for Christmas on Monday but we do not have a clear
trend as of 6:PM on Friday. The weekend news is going to move
the markets on Monday, up or down, and we do not know which.
As stated above, any resolution in the election is likely to
be only temporary and subject to more court decisions. When,
and only when, a clear winner is named and a concession by the
loser is in place can we rest easy about this problem. With
earnings warnings running ahead of normal already we can also
expect some more problems in that area as well. I am not
advocating that you sit on your hands on the sidelines, I am
only saying you should weigh all the facts before buying calls
next week. Depending on the recount news we could have a banner
week and we want to be able to capitalize on it when it happens.
I will not sugar coat it, the technicals are still very bad.
Several analysts this weekend went on record as saying it cannot
get any worse. I would not agree with that call. It can always
get worse. I do feel that most of the bad news is already priced
into the market and it would take a really bad turn of events
to take the markets down more than another couple hundred points.
Still that is just my opinion but I would bet an opinion shared
by many traders and investors today. Those people will start
buying stocks once the election is resolved. Period! Traders
will not buy bonds just because earnings are expected to be
down this quarter. I think that is a fallacy perpetrated by
the talking heads in the media. Five percent yields cannot hold
a candle to the market and short of a recession the market will
go up. The only question is when. We have to be vigilant in
watching for the bounce, the real bounce on real news. Now go
hit those malls and do your part to fuel this economy!

Trade smart, don't buy too soon.

Jim Brown


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Today I am going to focus on my top picks for when the market
turns around. There may be some stocks that will rebound faster
than these but we feel these stocks offer some level of protection
against another market setback. There are some notables missing,
SDLI, CIEN, GLW, CSCO, PMCS, AMCC. There are problems in these
sectors or stocks which prevent us from playing the favorites.

Let's get to it.  First I want you to look at this chart.
Would you play this stock based on this chart. I would not.
It has lost -33% in the last three months and is showing no
signs of a major recovery. The reason I want you to look at
this chart before going forward is to make a point. There is
no symbol on the chart. You can't apply your personal bias to
the decision process because you don't know who it is. You have
to focus on the chart pattern and make an objective decision.
Look at the chart now, would you play this chart?

Again, I would not. Most of you reading this newsletter would
play this in a heartbeat if I told you who it was. Confused?

This is how we began this exercise. I asked several people to
go through their stock list and tell me what their top 20 picks
would be for a December recovery. I pretty much got the same
symbols from everybody, including the ones I picked myself.
As I looked at the charts I realized that most of us were
picking based on our personal bias and not based on the
technicals of the trade. A quandary and a solution. I took
Qcharts and made a quote sheet from all the symbols everyone
submitted and then setup a daily chart and a 30/60 min chart.
I removed the symbol bar at the top of the page and covered
up the stock name on each chart. I took the quote sheet and
moved it off the page to where you could not see the symbols.
Next I called those same people into the room and asked them
to pick the charts they liked based purely on the chart without
the benefit of the stock symbol. It was amazing. Out of 75+
symbols only about seven made the initial cut. The majority
of the top-20 symbols contributed by the group looked like a
serious put candidate list and not a list of top performers.

Now, I have led you astray somewhat since we are looking for
rebound candidates not bullet proof stocks that survived the
recent correction. As such these rebound candidates should
have the potential for serious movement based on a serious
decline but still some redeeming qualities. When looked at
objectively stocks like SDLI, CIEN and GLW may be crowd
favorites but their charts all look the same. Sideways to
down with serious overhead resistance. Add in the earnings
announcement for CIEN on Dec-7th and you have the possibility
for further weakness in those stocks if investors fear CIEN
will miss or warn of slowing sales. Nortel has not rekindled
confidence in this sector.

CSCO is also absent since the continued news about JNPR taking
25-30% of their market share is sure to put a crimp in their
stock price. Good company, stock is at support but there is
no compelling reason to buy.

PMCS and AMCC, favorites of mine, just can't seem to mount
a recovery. They were on everybody's list but the charts just
do not provide any reason to bet on them.

The process we went through to determine this list is not
perfect and there is still a bias present. Hopefully this
same bias still exists in the market as well. I am not going
into a lot of detail on each AND I AM NOT SAYING RUSH OUT AND
BUY THESE ON MONDAY. This is simply a list of high percentage
possibles that should make a decent run MARKET PERMITTING in
the next couple weeks. You should do your own research to
decide which ones you like. Biotech stocks may react badly
to a Gore win.

Stock Price Target Reasoning

ADBE $ 76 $ 95 Good long term trend, currently at channel bottom.
ADI  $ 62 $100 Setup to rebound off support at $58
ADIC $ 17 $ 40 Bullish ledge near recent resistance high of $19
AGN  $ 88 $110 Great trend, resistance at $91 then breakout
BRCD $189 $250 Bounced off 200 DMA @ $168, great sentiment
BRCM $117 $180 Holding support at $115 but a long shot
CELG $ 60 $ 75 Strong bounce off 200 DMA @ 52
CTIC $ 45 $ 75 Good consolidation off support at $40, now moving
EXTR $ 79 $125 Strong bounce off 200 DMA @ 64 but resistance at $90
IDPH $176 $225 Good bounce off support at $160, fast mover
IVGN $ 76 $100 Good trend, good bounce off 30 DMA @ $70
JNPR $131 $225 Good bounce above support at $120, good news
NTAP $ 63 $120 Free fall stopped on May support of $60
PDLI $ 95 $145 Two week consolidation at 200DMA $80, now moving
QLGC $106 $130 Good trend, bounce off support @ 200DMA of $95
SUNW $ 85 $120 Unfairly beaten up, strong earnings, good news
VRTX $ 65 $100 Strong bounce off 200 DMA @ $53

Higher risk, less reason

ARBA $ 78 $125 Support @ $72, no congestion untl $125
EMLX $136 $175 Low end of rolling range, good sentiment
QCOM $ 85 $125 Ascending trend but must break $90 first
HGSI $ 68 $100 Strong bounce off support @ $60, resist @ $75
GLW  $ 67 $100 If you have to play fiber, Strong base @ $60
IDTI $ 44 $ 85 Consolidated on strong support @ $40
PMCS $113 $200 If you must play chips, strong support @ $109

None of these are sure winners but you can bet the majority
of them will take off with a Bush win. Less with a Gore win
since biotechs will suffer. Still, if you pick your entry
points on the next down day your risk is minimal since most
are at or slightly above good support.

As you are looking at the above charts remember the first
chart I showed you when we started. Stocks do not have to
go up just because of their symbol. I told you that almost
everyone of you were itching to play the stock represented
by the nameless chart even though it was a terrible chart.
If you disagreed with me look at the same chart below with
the name on it. Still disagree? What does that tell you about
your bias. If you did not want to play it nameless why do
you want to play it now? Don't trip over that sentiment
when deciding your entry points on the plays above.

Hope this helped!



We are in no hurry and we could wait all week on the sidelines.
Every time you jump into a play that busts out it costs you
capital and confidence. We can't afford to lose either.

Get 10 FREE Issues of Investor's Business Daily, the research
tool for self directed investors.


By Austin Passamonte

Could it be that time of year already? The turkey carcass was
barely cold while hordes of anxious shoppers mobbed the malls. A
local Wal-Mart here had those trendy new scooters as loss-leader
sale's bait for $24 and fewer than several hundred in stock. A
fist-fight broke out amongst early-bird women shoppers (men
wouldn't fight over the last $24 scooter; imported golf balls or
beer maybe) and police were called to make arrests. Merry
Christmas indeed!

That's our fundamental report for early action in the retail
sector. Now let's take in the big picture from here...

By now most traders have made acceptance of the fact that we are
mired in a bear market. This does not mean it is all downhill
from here with no rallies in our future. Far from it. This might
mean that new market highs and 1575 on the SPX anytime soon are
unrealistic dreams, even for famous market mavens.

With this in mind it's our opinion that a tradable rally lies
near but a long-term bottom does not. The ultimate multi-year
bottom likely resides below us at levels so far unseen.

What are the symptoms of a vicious bear market? Why, just the
opposite of a bullish speculative bubble. Disappointing corporate
earnings. Slowing economic conditions. Global turmoil. Persistent
selling with little relief. Prolonged oversold technical chart

Irrational fear. Capitulation where all stocks across the board
get dumped at any price. More money lost or given back by
overconfident traders than was made during the last bull-market
leg. Widespread perception that the market is now dead with no
hope of recovery anytime soon.

Followed by Fed intervention, eased interest rates and recovered
earnings. The ageless market cycle begins anew. Will we see all
this? Impossible to say. Will we see further downside pressure?
Odds are high.

Wednesday on CNBC Ralph Bloch was quoted that markets are now
putting in a bottom over the next several months and range-bound
volatility will persist. We agree. He suggests we stay in cash
until blue skies return. We vehemently disagree!

Stay in cash? In what form? Stuffed pillow cases? Beanie Babies?
5% annual money-markets? No thanks, I'll pass. How about call and
put credit-spreads for 5% MONTHLY? How about long puts instead of
calls? Rejoice that you are an options trader. Market bulls
sitting in cash until the bull run resumes in earnest may gather
cobwebs in the process.

Let's continue to look for two factors to call the next absolute

1. The first interest rate cut. This will unleash the hounds!
2. COT report shows S&P 500 commercials have covered historical
net-short and moved to flat or slightly long.

(For all of our recent fellow COT addicts, last week's data is
still unavailable from the source until Monday night. You will
see it here in OIN Market Sentiment but expect little change
overall from prior data.

The S&P 500 commercial's massive net-short liquidation will be a
process, not an event. Don't expect to see an instant reversal of
sentiment because it does not work that way. Instead we will see
a gradual shift from extreme short towards neutral and that is
our key that they are switching from net distribution over to
accumulation. Then we need to watch for short-term technical
signs of market reversal from there.)

Either or both of these factors will call a final bottom sometime
down the road. Does that mean there won't be rallies prior to? Of
course not. We will rally but not with lasting power to the
extent traders in the last two years were accustomed.

Looking back in market reflection from March until now, dial up
several charts of your favorite indexes and individual stocks. Do
you see any times where call options would have been wildly
profitable? Any other times where puts were an equally good idea?
How about credit spreads on both ends and flat times as well?

Is there still money to be made in markets that do anything but
rally straight to new highs? Tons of it as we've just proven to
ourselves. Now it's time for brushing up our approach to win.

We have five more trading weeks for this calendar year and money
will flow in all directions. It's up to us for choosing methods
that capture our share of the flow in harmony with market
direction. Let balance and focus be our mission from now until
then and beyond!


Friday 11/24 close: 29.58

30-yr Bonds
Friday 11/24 close: 5.67%

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)
750 - 735               11,858        3,168         3.74
730 - 715                7,172        6,066         1.18

OEX close: 711.16

710 - 695                 3,275       6,679          2.04
690 - 675                   128       8,171         63.84***
Maximum calls: 740/4,772
Maximum puts : 680/4,317

Moving Averages
 10 DMA  717
 20 DMA  731
 50 DMA  742
200 DMA  775

NASDAQ 100 Index (NDX/QQQ)
 80 - 78                48,211        41,714         1.16
 77 - 75                34,106        38,438          .89
 74 - 72                19,090        25,049          .76

QQQ(NDX)close: 70.43


 69 - 67                 12,086        13,417         1.11
 66 - 64                  6,723        29,804         4.43
 63 - 61                    496         4,702         9.48

Maximum calls: 80/37,775
Maximum puts : 80/35,884
Moving Averages
 10 DMA 71
 20 DMA 75
 50 DMA 81
200 DMA 92

S&P 500 (SPX)
1400                   62,490        56,641          1.10
1375                   32,280        24,794          1.30
1350                   14,082        33,416           .42

SPX close: 1341.77

1325                    4,529        19,861          4.39
1300                    7,041        20,225          2.87
1275                    1,798        16,583          9.22

Maximum calls: 1400/62,490
Maximum puts : 1400/56,641

Moving Averages
 10 DMA 1358
 20 DMA 1387
 50 DMA 1400
200 DMA 1439


CBOT Commitment Of Traders Report: Friday 11/17
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        +100        -1105           -2436       -792
Total Open
Interest %      (+1.42%)    (-14.39%)       (-9.60)     (-3.33%)
                net-long    net-short       net-short   net-short

Open Interest
Net Value         -733        -1999           -77        -293
Total Open
Interest %       (-3.58%)    (-11.37%)      (-.16%)     (-.60%)
                 net-short   net-short     net-short   net-short

S&P 500
Open Interest
Net Value        +61563       +58260        -72376       -67783
Total Open
Interest %       (32.17%)     (+30.75%)     (-10.91%)   (-10.52%)
                 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 and have increased their net-
short DOW positions.

Small specs held their net-long S&P positions while changing from
net-short to net-long in DOW positions as compiled Tuesday 11/14 by
the CFTC.

{Note: This data is compiled and included within our service. We
do not have referral to a cost-free source that provides such data
in a more timely fashion. You receive this compilation far ahead of
its ability to call future market direction as part of our
continued effort to provide complete market forecast information}


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By Eric Utley

If you didn't get your fill of food over the holiday, tonight's
helping of charts will complete the task.  It's a full load
crammed with trading opportunities.  While we're on the
subject of food, several readers responded to my review of
Krispy Kreme Doughnuts last week, and pointed out the flaws
in my ways.

Bill wrote, "I live near Richmond, Virginia and work two blocks
near Richmond's Krispy Kreme.  This location was one of the early
locations of the firm.  The place was old and run down but alwyas
busy.  Nine months ago they closed down and rebuilt a new and
larger one.  It opened at 5 AM Tuesday.  People began to line up
12 hours before.  Since opening you have not been able to get
near the place unless you take a day vacation.  Friday, on my way
home police were still directing traffic.  This Richmond fad is
probably 30 years old and not about to die."

Regarding the Merrill Lynch downgrade, Don wrote, "I think the
analyst took a cheap shot based solely on the extended
valuation of KREM knowing that most investors have done little
more homework than he/she had and would sell on the downgrade.
Given the lofty valuation, the downgrade is self-fulfilling."

Your comments are noted and appreciated, Bill and Don.  I thank
you for the time and effort in responding.  I always welcome
feedback in any shape or form.

Send your stock requests to Contact Support.
Please put the symbol of your requests in the subject line of
the e-mail.


Qualcomm - QCOM

I've been watching QCOM and I wonder if it might be forming a
cup and handle formation from 10-5-00 to now.  Would [you]
please review and report on this.  Could you explain why or why
not.  And if so when should we play it?  Thank you and Happy
Thanksgiving to you and all the staff and their families. -
Sincerely, Scott

My colleagues and I appreciate your comments, Scott, and wish
you and your close ones the same.

Shares of Qualcomm have been one of the few bright spots in the
tech sector recently.  You may have noticed the stock was on
the OI call list just recently, but we were forced to drop the
play after it closed below our stop.  It was a shame we had to
drop Qualcomm because it rebounded nicely last Friday, along
with the rest of the market.

Your observation is an excellent one, Scott, and shares of
Qualcomm may very well be tracing a cup and handle formation.
One could even argue that the stock has been building the
cup of the formation since last May.  Although, because of
the stock's volatile trading, it's hard to clearly define
its handle, and even the top of the cup.  There are several
possibilities for how to trade Qualcomm depending upon how
we define its support levels.  The $75 value area appears
to be a significant support level for the stock and may be
a good area to look for an entry if the stock pulls back.
If the stock doesn't pull back to the $75 area, an aggressive
strategy would be to enter on a bounce off the $80 level.
On the other hand, if the stock keeps on rising, the
safest way to trade it would be on a breakout above $90.  I
actually traded Qualcomm two weeks ago and noticed that after
the stock breaks out above a relative high it tends to
trade much higher, which probably stems from the fact that
momentum players still love the stock.  If Qualcomm breaks
through $90 it should trade up to $100.



Vignette - VIGN

I very much enjoy your column.  Living in Austin, Tx I see a
lot of positive news about Vignette (VIGN).  What are your
thoughts pertaining to the stock. - Paul

I greatly appreciate your kind comments, Paul, and will
focus on the positive aspects on Vignette you alluded to.
The company has gone in and out of profitability in its
last two quarters, earning one cent in the prior and losing
one cent in the last.  While its earnings have been
volatile in the past, Vignette is expected to establish
full profitability next year by earning 11 cents.  What's
more, that earnings growth is expected to explode in the
coming years by an average of 50% per annum.  And, the
company has $500 million of cash in its coffers with
zero debt on its books.  Since shares of Vignette have
tumbled along with the broader tech sector, its valuation
has come down considerably.  As measured by its trailing
four quarters of sales, shares of Vignette trade with a
price-to-sales multiple of less than 14.  That's
substantially lower than its rivals, Commerce One and
Ariba, who trade with revenue multiples of 26 and 54,
respectively.  In summary, Vignette's fundamental and
financial positions are very bullish.

In addition to Vignette's strong financials, I also like
the fact the company has been lining up contracts left
and right.  Most recently and notably, the company lined
up with the mega metal marketplace known as MetalSpectrum,
which includes competitors Ariba and I2 Technologies.  As long
as Vignette continues to line up key contracts and win
business, its earnings projections should be realized and
the stock should reward investors.

The real risk in the B-2-B space is whether the cost for
the software to run the multitude of marketplaces justifies
the potential savings among industrials such as those
involved with the above mentioned metals exchange.  However,
as it stands now, Vignette and other B-2-B players continue
to sign contracts and increase business.  The great thing
about the B-2-B sector (as with other software businesses)
is that once the software is created and in place, the
revenues keep streaming in with little in the way of
additional costs.  So while it's obvious that I'm bullish on
Vignette's future prospects, it's hard to say when the
market will return to its stock with bullish intentions.
Judging by Vignette's chart, it's hard to say when the stock
will stop falling.  It appears the stock is trying to
consolidate around the $20 level, but it could very well
continue falling if the bulls don't return soon.  There's
strong historical support at the $10 level, where shares of
Vignette traded in early 1999.  If the stock keeps falling,
look for a stabilization around $10.  Otherwise, wait for the
sentiment to shift in the B-2-B sector and look to enter
Vignette on a return of the tech bulls.



Ciena - CIEN

Shall I keep these stocks or get rid of them:  FDRY, NEWP,
for your cooperation. - Selim

My time and space is limited, Selim.  Unfortunately, I cannot
get into the charts of each of your requests.  I chose to
highlight Ciena for two reasons, which I'll delve into below.
But, before we get to Ciena, let's briefly touch upon each of
your requests.  I hope my brief reviews are helpful.

There's one thing in common with each of your requests, Selim;
they've all been whacked recently.  Of the group, it's in my
opinion that Foundry Networks, Newport, and Ciena have the
brightest prospects going forward becuase of their respective
business lines, which revolve around the build-out of high-speed
networks.  Although telecom spending has slowed, I feel these
three stocks will be long-term winners.  They're just suffering
from a case of the excessive valuation sickness right now.

I also feel that Celera Genomics is positioned to take advantage
of the boom we will witness in the Biotech business over the next
decade, and beyond.  The only problem with Celera is the company
has not yet turned a profit, which makes its stock susceptible
to further downside in the near-term.

As for Broadvision and Commerce One, they've been hammered by
the shakeout in the business-to-business sector.  Of the two,
Broadvision has a better business model as measured by the
company's strong earnings history, which may explain its stock's
recent rebound.  Commerce One is not yet profitable.

LSI Logic and Flextronics are both dependent on the cyclical
Semiconductor sector, which appears to be closer to trough than a
peak.  The chip stocks will rebound, it's just a matter of time.

Network Appliance is in the right business, which is of course
data storage.  The data storage business will blossom in the
coming years, but Network Appliance will have to fend off
the 800 pound gorilla in the industry in EMC.  The company
recently warned of contracting margins, hence slower
revenue growth, because of competition from EMC.  Network
Appliance's chart looks bad right now, and the company needs
to administer some damage control.

GlobeSpan is hurting from the slowdown in capital expenditures
by service providers, which potentially means fewer of its DSL
chips will be purchased.  However, the company has a solid
earnings history and bullish projections going forward.  As of
Friday's close, shares of GlobeSpan trade with a forward-looking
multiple of 54.  That's pretty cheap for a company expected to
grow earnings by 38% next year.  Of course, the concern in
GlobeSpan right now is that the company won't be able to meet
its estimates next year.  That said, it would take one or two
upticks in the telecom business for shares of Globespan to get
rolling higher again.

And now to digress from my fundamental jibberish, let's take a
look at Ciena's chart.  Ciena is one of the very few stocks that
hasn't been absolutely crushed by the recent downturn in the
NASDAQ.  Ciena's shares still trade with a trailing PE north of
400!  That, in itself, does present some risk.  However, I see a
compelling pattern developing in shares of Ciena over the past
month.  After gapping down to the $120 level in late October,
shares of Ciena have formed a textbook descending wedge with
solid support established at $84 (triple bottom).  As you will
see below, the stock closed right at its descending line at $102.
If (that's a big if) the NASDAQ rebounds early next week and
Ciena breaks above that line, I think the stock will easily
trade up to $115 if not $120 in short amount of time.  Conversely,
if the triple bottom at $84 is broken Ciena would turn into an
excellent short with possible downside to the $65 level.  In
contrast though, a pullback and fourth retest of the $84
level might provide additional trading opportunities to the
upside.  Ciena will be a great stock to watch in the coming weeks,
especially if it breaks to the upside.



WorldCom - WCOM, Covad Communications - COVD

We all know a stock can get cheaper!  We also know the Internet
and Net access demand is not going away in the near future.
With WCOM and T being hit hard and now appear to be cheap
might there be a bargain in the mix?  Or would selling $5 put
on COVD at $3.50+ be a better way?  Will COVD be delisted?
Looking for GREAT LONG TERM plays. - Thanks, Kevin

I unequivocally agree with both of your points, Kevin.  Stocks
can ALWAYS get cheaper and the Internet is NOT going away.
I would think the fact that the Internet will continue growing
would benefit WorldCom in the years to come, but Covad may
not be so fortunate.

For WorldCom's part, the company is one of the most diverse
global communications providers in the world.  WorldCom provides
a host of services ranging from managed networks, to complex Web
hosting, and long distance and local telephone services.  The
proliferation of the Internet should continue to boost WorldCom's
bottom-line, but as the company recently admitted, it's having a
hard time making money from running phone lines.  Nonetheless,
WorldCom is expected to earn $1.70 next year, which gives the
stock a very attractive valuation.  WorldCom is not going away
and may be a good bottom fishing play down here.  The only
question is whether or not there is a better place to put your
capital to work.  I think there exist better long-term

Covad, on the other hand, is a niche player in the communications
industry, who provides broadband equipment and high-speed
Internet access services to telecom carriers such as WorldCom.
As it turns out, as measured by Covad's stock performance
recently, the broadband business is far more competitive than
previously expected.  And, the slowdown in telecom spending by
the likes of WorldCom have only worsened matters for Covad.
Moreover, Moody's (a credit rating service) recently warned of
the potential for increased defaults by select communications
providers.  In a report issued last week, Moody's said the credit
quality of Covad's debt had fallen to "distressed" levels.  To be
perfectly blunt, I don't think selling naked puts on Covad at
current levels is a prudent long-term strategy.  But, that's just
my opinion.


WorldCom has gone from a classic growth story to a depressed
stock with a compelling valuation, relative to future earnings.
While WorldCom may carry a compelling valuation and look good for
a long-term investment, the question remains if there is a more
efficient company to deploy capital in for the long-term.  If
your looking for a way to capitalize on the long-term growth of
the Internet, I still believe the best way to play is through
the Optical business.  As I mentioned last week in the review
of Corning, the future of telecom (the Internet) is optical.



This column is an information service only.  The information
provided herein is not to be construed as an offer to buy or
sell securities of any kind.  The Ask the Analyst picks are not
to be considered a recommendation of any stock or option but an
information resource to aid the investor in making an informed
decision regarding trading in options.  It is possible at this
or some subsequent date, the editor and staff of The Option
Investor Newsletter may own, buy or sell securities presented.
All investors should consult a qualified professional before
trading in any security.  The information provided has been
obtained from sources deemed reliable, but is not guaranteed
as to its accuracy.


With the holiday season coming into full swing, traders will be
watching Tuesday's release of Consumer Confidence, then Q3 GDP-
Revised and the Chain Deflator on Wednesday.  The highlight will be
Personal Income and the PCE,along with Initial Jobless Claims on
Thursday.  NAPM Index is Friday.

For the week of November 27, 2000


Existing Home Sales    Oct  Forecast:   5.14M    Previous:  5.14M


Durable Orders         Oct  Forecast:  -0.70%    Previous:  1.80%
Consumer Confidence    Nov  Forecast:  136.5     Previous:  135.2


GDP-Revised             Q3  Forecast:   2.50%    Previous:  2.80%
GDP Chain Deflator      Q3  Forecast:   2.00%    Previous:  2.00%


Personal Income        Oct  Forecast:   0.20%    Previous:  1.10%
PCE                    Oct  Forecast:   0.20%    Previous:  0.80%
Initial Claims      25-Nov  Forecast:     NA     Previous:   336K
Chicago PMI            Nov  Forecast:  49.60%    Previous: 48.70%
Help-Wanted Index      Oct  Forecast:     NA     Previous:    78


Auto Sales             Nov  Forecast:     NA     Previous:   6.6M
Truck Sales            Nov  Forecast:     NA     Previous:   7.6M
NAPM Index             Nov  Forecast:  48.90%    Previous: 48.30%
Construction Spending  Oct  Forecast:   0.40%    Previous:  2.40%

Week of December 4th

4-Dec  New Home Sales
4-Dec  Leading Indicators
5-Dec  NAPM Services
5-Dec  Factory Orders
6-Dec  Productivity-Rev.
7-Dec  Initial Claims
7-Dec  Consumer Credit
8-Dec  Nonfarm Payrolls
8-Dec  Unemployment Rate
8-Dec  Hourly Earnings
8-Dec  Average Workweek

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The Option Investor Newsletter                   Sunday 11-26-2000
Copyright 2000, All rights reserved.                        2 of 5
Redistribution in any form strictly prohibited.

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Thanksgiving: A Time For Reflection
By Lynda Schuepp

After finally digesting my Thanksgiving Day meal, now seems like
a good time as any to review which option strategies are most
appropriate.  It can sound very complicated and seems that the
possibilities are endless, but there are really only a few
strategies you need to understand.  Simply focus on the key issues
and implement the proper strategy.  Get to know those strategies
intimately before branching out into the more exotic and complex

First, develop a basket full of stocks that you are familiar with.
They should be from various sectors.  Don't try to put too many
eggs in your basket.  It is better to really know how 20 to 50
stocks trade than to try to randomly trade the thousands of stocks
available.  Secondly, review charts of the stocks you wish to trade
and determine key support and resistance levels.  This step is
very important.  I like to set alarms at these levels in case I am
not focused on that stock on any given day.

Next it is very important to determine market direction (sector &
individual stock).  If your stock is up but the market and the
sector is down, be careful.  You are more likely to be successful
if the stock, sector and market are all going in the same
direction.  Once you have determined market direction, you can
eliminate half of the possible option strategies.  The old saying
"the trend is your friend" should be a trader's mantra.

Check Historical and Implied volatility to determine if options
are expensive or cheap.  This will also help you eliminate certain
option strategies.  For instance, if your stock is in a downtrend
and its sector and the market is down as well, you might be tempted
to simply buy a put.  However, if the options are expensive
(implied volatility is high), then you will be paying too much for
the option and you risk not making money even if you are right.
The reason is that the market makers can play two little games
worth noting.  They can overprice the option (high implied
volatility) and they can move the bid-ask spread wider.  In order
to make money in this scenario, the stock has to make a pretty big
move to overcome these pricing obstacles.

Now for the nitty gritty: pick your strategy.  If the market is
going up: implement bullish strategies.  There are really only
four main strategies - buy a call, sell a put, trade a bull call
spread, or trade a bull put spread.  Additionally, you can do
variations of these spreads such as calendar, butterflies, condors
etc.  But don't worry about using the more complicated strategies
until you have mastered the first four.  I discuss each of these

Buying a call is a simple strategy, but subject to time decay.
Buy as much time as you can afford, the more the better.  The
biggest -themistake people make is to buy OTM (out-of-money)
calls on stocks with no liquidity or too little time left.  As
a buyer, time is your enemy.  If I buy straight calls, and it
isn't too often, I try to buy with at least 2 months left with
some intrinsic value (in-the-money).  If implied volatility is low,
then I will buy straight calls.  The second bullish strategy is to
sell a put.  This, like the call, is a simple directional strategy,
but subject to larger margin requirements and greater risk.  I
like to write OTM (out-of-the-money) puts BELOW a support with
very little time left.  I am basically a chicken when it comes to
naked positions.  As a seller, time is your ally.  I would only
sell puts if implied volatility were high.  Both buying calls and
selling puts are dependent on the stock moving in the direction
you predicted.  You have a little more of chance of being right
with a naked put.  If the stock stays the same, goes down a little,
or goes up you'll make money.   However, you do have greater risk
if you are wrong.  With a call you can only lose the amount your
paid for the call, but with a naked put, your loss is theoretically

The next two bullish strategies (spreads) allow you to be right
when you are wrong about the direction of the stock.  Spreads
limit your profit, but they also limit your losses.  You have
more money to invest, so you can either take larger positions in
a stock or take more different positions therefore diversifying
your portfolio. You can either use calls or puts and you don't
have to worry about implied volatility, because you are buying
AND selling so if one is overpriced then you make it up by selling
one that is overpriced.

First, we'll discuss the bull call spread; you are buying a lower
strike call and selling a higher strike call.  Think of this
strategy as if it were a covered call, except that you are long a
call instead of owning the stock.  Your risk and reward are both
limited, but you can't have it all.  You can increase the
risk/reward by positioning your strikes.  For instance, using
Friday's prices on the QQQ's, you could buy a 60 call and sell
a 70 call for a 7.50 net debit.  Your breakeven would be 67.50;
your maximum profit would be $2.50 if the QQQ's closed at 70 or
above.  Your maximum loss would be 7.50 if the QQQ's closed at 60
or below.  Had you done the spread using 70 and 80 strikes, your
cost would be 3.75 with your breakeven at 73.75 and a maximum
profit of 6.25 if the QQQ's close at 80 or above by December's
expiration. Remember the greater the risk the greater the
potential reward.  Using these same numbers, are you more
confident that the QQQ's will close above 70 or 80 at expiration?
That answer will determine which strikes you would use.

The bull put spread means buying a lower strike put and selling a
higher strike ITM (in-the-money) put.  This will put money in your
pocket, which is why a lot of people like this strategy.  Like the
Bull Call spread, your risk and reward are both limited.  Using
Friday's prices on the QQQ's, you could buy a 60 put and sell a 70
put for a 2.6875 credit.  Compare that to the 60/70 call debit.
The maximum profit of the call spread was 2.50 (70-60-7.50) whereas,
the maximum profit of the 60/70 put spread would be 2.6875.  In
this case, it would be more advantageous to do the put spread.
Additionally, you have potentially fewer commissions with a
credit spread, because you are holding the maximum profit
(the credit).  If the stock closes above your higher strike
you simply get to keep the money.  The 70/80 put spread, based
on Friday's prices would give you a 6.25 credit.   Therefore, the
risk and reward for the 60/70 call or 60/70 put spreads are
identical.  Again, because of the possibility of fewer commissions,
my bet would be with the put spread.

If you are bearish, you would do the opposite of the above four
strategies: buy a put and sell a lower strike put or, buy a call
and sell a lower strike call.  These are called a bear put spread,
or a bear call spread.

Once you have determined your trade you must decide what your
exit will be, if the stock goes in the direction you want or if
it goes against you.  I keep a trading sheet on my desk and I
write the stock's price at the time I entered the trade, and I
write my target profit level and my stop.  I then set alarms
on my computer at those two levels.  I am learning to follow
these guidelines.  I say learning because fear and greed do
funny things to a logical person.  I can't emphasize enough
the need to know the precise exits points (good and bad) BEFORE
you put on the trade.  You are much more objective at that
point because your money isn't on the line.

Now here comes the easy part.  Put on the trade and monitor it.
Don't put all your eggs in one basket.   You should have at
least 4-5 different positions, hopefully not all in the same
sector.  That way, if one trade is a loser, chances are the
other 4 will be winners.   Don't forget to "sell too soon,"
and that is particularly true if you're losing!

Get 10 FREE Issues of Investor's Business Daily, the research
tool for self directed investors.


Call Play of the Day:

AMGN - Amgen, Inc. $66.06 (+0.94 last week)

See details in sector list

Put Play of the Day:

VRTS - Veritas Software $100.88 (-9.25 this week)

See details in sector list

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Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


TLAB $55.50 (+0.33) Trading earlier in the week showed promise
of a breakout above the resilient $58.56 top.  However, the
recent downswing back to its comfy zone at $55 and $56 tells us
otherwise.  In Wednesday's session, TLAB quickly violated the
200-dma ($57.34) and never resurfaced.  This lack of buyer's
enthusiasm and the stock's failure to rally with the NASDAQ on
Friday makes TLAB deadweight.  We're giving TLAB the heave-ho
this weekend to make room for more lucrative opportunities.


ARBA $78.44 (+2.38) It appears that shares of ARBA may have
bottomed, after bouncing off the $65 level three times this week.
Encountering resistance at $74 during that time, the stock was
able to move above that level on Friday, after a bounce off the
5-dma at $72.33.  Moving up $10.31 or over 15%, volume was
strong, considering the shortened trading session.  While the
stock did was unable to break through resistance at $80, today's
rally tripped our stop loss price of $75, allowing us to close
out this profitable play.


SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5
Analysts who follow each stock rate it and these rating are
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell"

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


A - Agilent Technologies Inc $50.94 (+3.56 last week)

Agilent is a diversified technology company that provides
solutions to high growth markets within the communications,
electronics, healthcare and life sciences industries.  They're a
leading maker of analysis equipment with 51% of sales deriving
from its Test and Measurement Unit.  Recently Philips
Electronics agreed to buy Agilent's Healthcare Solutions for
$1.7 bln.  Customers include AT&T, Cisco, and Pharmacia.

A strong breakout fueled by a stellar earnings report and
analyst upgrades put Agilent on our call list this weekend.
After hours on Monday, they reported fiscal 4Q profits of
$305 mln (including all items) and assured analysts that
earnings will rise to at least 20% this fiscal year.
Agilent benefited from its industry diversification and strong
test and measurement revenue, which led with 67 percent year-
over-year growth to $2.05 billion.  On Tuesday morning, A was
promptly rewarded.  Take note, too, that this in itself is quite
an achievement amid a marketplace that relentlessly punishes
companies for not being perfect.  The stock was charged up at
the bell and opened above the $47.50 near-term resistance.  It
quickly tackled the $50 level, setting a very bullish tone.  The
upgrade to an Outperform by the influential Salomon Smith Barney
and the $80 price target from MSDW also gave shares a much
needed infusion of adrenaline.  In subsequent trading on
Wednesday, $45 and $46 towed the line on intraday dips,
bolstered by the 10 and 30-dmas at $44.59 and $45.22.  If you're
adventurous, this is a fine level to target shoot an entry.  But
take heed, we'll jump ship if A closes below $44 on weakness;
although, Friday's action provided evidence that A is building
enough momentum to climb higher.  Volume was light during
Friday's post-holiday session, but A scaled $51.50 and managed
to keep the gains at the close.  While it's true that shares of
Agilent have suffered hard times of late, losing almost 72% of
its value since a $162 peak last March, Agilent had a very
strong quarter in a difficult operating environment and analysts
and investors took notice of its success.  And if you look at it
from a profit angle - that's a lot of upside potential!  As the
Election drama begins to wind down and investors begin to rally
into the holiday season, next week should be a prime environment
for A to move back into higher territory.  Some traders might
begin plays on bounces off the intersecting 5 and 50-dmas at
$47.91 and $47.36, respectively; but a more conservative
approach is to buy into a high-volume rally from the current
level.  Take profits quickly, you can always buy back in later.

BUY CALL DEC-45 A-LI OI=1908 at $7.13 SL=5.00
BUY CALL DEC-50*A-LJ OI=2952 at $3.88 SL=2.50
BUY CALL DEC-55 A-LK OI=2443 at $1.69 SL=1.00
BUY CALL JAN-50 A-AJ OI=5681 at $6.63 SL=4.75
BUY CALL JAN-55 A-AK OI=1633 at $4.63 SL=2.75



SUNW - Sun Microsystems $84.88 (+4.44 last week)

Incorporated in February 1982, Sun Microsystems, Inc. has long
been synonymous with leading edge technology.  Now, after 18
years of telling the world "The Network is the Computer," Sun is
poised to become the leader in the emerging network-driven
economy.  Forward thinking organizations are looking to Sun to
lead them into the dot com future.  Sun was founded with one
driving vision.  A vision of computers that talk to each other no
matter who built them. A vision in which technology works for
you, not the other way around.

The recently eclipsed SUNW has found its way back on the OI
call list.  The stock received a boost Friday after a research
firm reported an uptick in European sales of corporate
networking equipment.  Sales of SUNW's products across the
Atlantic have slipped in recent quarters due to the region's
sagging currency.  However, according to several analysts, the
recent stabilization of the euro should improve SUNW's outlook.
What's more, the company recently presented to Wall Street and
guided analysts to expect strong numbers for its fiscal
second quarter.  The analyst meeting resulted in a plethora of
brokerages reiterating their Buy ratings on SUNW.  The upbeat
guidance and improving outlook in Europe have combined to prop
SUNW up recently.  We're looking to take advantage of the
improved outlook for SUNW and its prospects going forward over
the next several months.  Look to enter new positions on a
breakout over resistance at $85 on strong volume.  However,
make sure to confirm strength in the NASDAQ before entering
new positions on strength.  Additionally, SUNW has established
(and tested) major support at the $80 level, which could be a
place to gain entry should the stock pullback.  We have
established our stop at $80 and would no longer initiate
positions should SUNW close below that level.

BUY CALL DEC- 85 SUX-LQ OI=3141 at $ 6.25 SL=4.25
BUY CALL DEC- 90 SUX-LR OI=9860 at $ 3.88 SL=2.50
BUY CALL JAN- 90*SUX-AR OI=5042 at $ 8.25 SL=6.00
BUY CALL JAN- 95 SUX-AS OI=3654 at $ 6.25 SL=4.25
BUY CALL APR-100 SUX-DJ OI=2644 at $10.00 SL=7.00


ENMD - EntreMed $26.00 (-1.13 last week)

EntreMed is a clinical-stage biopharmaceutical company
emphasizing antiangiogenesis therapeutics that inhibit
abnormal blood vessel growth associated with a broad range of
diseases such as cancer, blindness and atherosclerosis.  The
company's strategy is to accelerate development of its core
technologies through collaborations and sponsored research
programs with university medical departments, research
companies and government laboratories.

The bouncing Biotech sector has taken ENMD all over the map
recently.  Despite the recent volatility, the long-term
prospects for the company remain bullish.  ENMD recently
released clinical results on the safety of its developmental
cancer fighting drug known as endostatin.  The drug
successfully passed phase-one trials with no signs of
toxicity.  Although the drug is far off from being approved,
the prospect of approval and anticipation should continue
to drive ENMD higher over the next several months.
Furthermore, a rebound in the broader Biotech sector
would add to ENMD's momentum.  The stock has solid support
between the $22 and $24 range and a pullback to that area
would provide a solid entry into the play.  Also, new
entries could be taken if ENMD breaks above its current
level at $26 early next week.  However, before entering
on a breakout make sure to confirm strength in the
broader Biotech sector.  We have placed a protective stop
below ENMD's solid base at $22, and would exit positions
if the stock settled below that level.

BUY CALL DEC-25 QMA-LE OI=230 at $3.13 SL=1.50
BUY CALL DEC-30 QMA-LF OI=209 at $1.44 SL=0.75
BUY CALL DEC-25 QMA-AE OI= 35 at $4.63 SL=2.75
BUY CALL DEC-30*QMA-AF OI= 11 at $2.88 SL=1.50
BUY CALL FEB-30 QMA-BF OI=140 at $3.75 SL=2.00



SWY - Safeway Stores $60.88 (+3.06 last week)

Safeway is a Fortune 50 company and one of the largest food and
drug retailers in North America based on annualized sales of
over $32 billion.  The company currently operates 1,680 stores
in the United States and Canada, and currently has approximately
190,000 employees.

As toil and trouble continue to flood the Tech sector, traders
find solace and profits in SWY.  The major food stocks have
benefited recently from defensive positioning as Wall Street
awaits election results and indications of an easing Fed.  As
long as the nervousness continues, SWY's recent momentum could
continue to carry shares higher.  In addition to the defensive
buying boosting its stock, SWY recently announced it would
rehire some 300 workers recently laid off as business
conditions improve in stores spanning the Western United
States.  The bulls have recently carried the stock to a new
52-week high at $61.56, and positioned SWY to break above its
highs around the $62 level traced back in early 1999.  Entry
points can be found on a pullback to support at $60, or on
strength above the recently minted 52-week high at $61.56.
For those wanting more confirmation of momentum, wait for
SWY to break above its two-year high at $62.50.  We have
set our protective stop on SWY at the $57 level.  A close
below that level could signal an end to SWY's momentum.

BUY CALL DEC-55 SWY-LK OI=5207 at $6.88 SL=5.00
BUY CALL DEC-60*SWY-LL OI=1272 at $2.81 SL=1.50
BUY CALL JAN-60 SWY-AL OI=4969 at $4.50 SL=2.75
BUY CALL JAN-65 SWY-AM OI= 464 at $2.19 SL=1.00



CMGI - CMG Information $12.81 (+0.25 last week)

CMGI is a leading global Internet operating and development
company, who represents a network of 70 established and
emerging companies.  Companies in the CMGI network span a
range of vertical market segments including search and portals;
infrastructure and enabling technologies; e-business and
fulfillment; and Internet professional services.

Rumblings of consolidation in the Net incubator industry
sent shares of CMGI sailing in a holiday shortened session
last Friday.  Rival Internet Capital Group (ICGE) announced
it had adopted a shareholder right plan, which was designed
to encourage potential acquirers.  The potential for
consolidation combined with the prospects for an extended
rebound in the Internet sector have attracted us to CMGI.
The aim of our play is to attempt to take advantage of
CMGI's recently discounted options and the propensity
for the stock to move with great velocity.  This is a
high-risk play with the potential for a high reward with
possible upside to the $17 area, or even resistance at $20.
While the downside on CMGI is defined at the stock's recently
established relative low at $10, which is also the site of our
protective stop.  Aggressive traders might consider entering
new positions at current levels early next week if CMGI
extends its recent rebound and the broader Internet sector
continues to display strength.  A breakout above $13 would
provide additional entries.  However, should CMGI pullback
on light volume, watch for bounces off support at $12, or
lower near the $11 level.

BUY CALL DEC-10 QGC-LB OI= 728 at $4.00 SL=2.50
BUY CALL DEC-15*QGC-LC OI=3551 at $1.63 SL=0.75
BUY CALL JAN-10 QGC-AB OI= 616 at $4.50 SL=2.75
BUY CALL JAN-15 QGC-AC OI= 768 at $2.56 SL=1.25
BUY CALL MAR-15 QGC-CC OI= 371 at $3.25 SL=1.75


AOL - America Online $42.90 (-6.66 last week)

Founded in 1985, America Online is the world's leader in
interactive services, Web brands, Internet technologies, and
e-commerce services.  Through its strategic alliance with Sun
Microsystems, the company develops and offers easy-to-deploy,
end-to-end e-commerce and enterprise solutions for companies
operating in the Net Economy.

The premise of this play is to take advantage of the beaten down
price.  This is due to the recent news that AOL's mega merger with
TWX would take a few weeks longer than initially expected.  This
new timeline has the deal closing either late next month or in
early 2001.  The reason for the delay appears to stem from the
negotiation process with the FTC to preserve competition.  AOL/TWX
offered rival EarthLink Internet service via TWX's cable lines as
a concession.  Shares of AOL slumped this week on the news, trading
as low as $40.25 in Friday's session.  We believe that as the deal
draws closer to being completed, AOL's share price has the ability
to move back to $50, where it traded Friday Nov. 17th.  This is
a lottery play that has a good chance of success, given that the
FTC is close to approving the merger.  We will keep a stop of $39,
and a close below that level would result in a drop of the play.
Options on AOL are relatively low priced, making the play more

BUY CALL DEC-40 AOE-LH OI= 1690 at $4.90 SL=3.00
BUY CALL DEC-45*AOE-LI OI=10753 at $2.15 SL=1.00
BUY CALL JAN-40 AOE-AH OI= 9475 at $6.40 SL=4.50
BUY CALL JAN-45 AOE-AI OI= 7153 at $3.70 SL=1.75
BUY CALL APR-50 AOO-DJ OI= 4822 at $4.00 SL=2.50


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The Option Investor Newsletter                   Sunday 11-26-2000
Sunday                                                      3 of 5

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EXTR - Extreme Networks $79.19 (+5.88 last week)

Extreme Networks is a leading provider of high-performance,
broadband networking solutions designed for the Internet
economy.  Extreme's family of BlackDiamond, Alpine, and Summit
switching solutions are built on a unique combination of
ExtremeWare management software and an ASIC-based common
architecture that enables service providers, e-businesses and
enterprises to expand their businesses and be more competitive
by speeding traffic through a simplified, super scalable
network infrastructure.

With the hammering of Telecom and Networking stocks subsiding,
EXTR has been able to mount a healthy rally off Monday's lows.
You may recall the stock gapped down on the open Monday thanks
to a price target reduction by MSDW.  Since that gap lower EXTR
has put together a series of nice higher-lows throughout the
week, culminating in healthy rally of over ten percent on
Friday.  Granted it was on light volume due to the post-holiday
conditions, but it has put us in a good position on our current
play.  Going forward may be interesting for EXTR and there are
multiple ways to play it (even without going into the whole
political wrangling hanging over the market).  After topping
out in the $120s in October, EXTR has been making lower-highs
on a longer-term chart.  With today's rally, EXTR sits right
at the top of the current trend, which would make us believe
some resistance is in order around $81.  It would be prudent
for those just joining the play to wait for a breakout over
this level first.  If on the other hand the market pulls back
some the first part of next week, you may get the opportunity
for a intraday bounce of $70, like we saw Friday.  Any close
under $70 though and we are abandoning the play.  It is most
likely that EXTR decides to consolidate a bit near resistance
after the big move Friday, but with the close over the 10-dma
at $76.50, the bias is for EXTR to continue higher soon.

BUY CALL DEC-70 EUT-LN OI=2143 at $14.63 SL=10.75
BUY CALL DEC-75 EXR-LO OI= 575 at $11.75 SL= 8.50
BUY CALL DEC-80*EXR-LP OI=3091 at $ 9.50 SL= 6.50
BUY CALL JAN-80 EXR-AP OI=  24 at $15.13 SL=11.25
BUY CALL JAN-85 EXR-AQ OI=   7 at $13.00 SL= 9.75


CELG - Celgene Corp. $60.38 (+8.25 last week)

Celgene is a pharmaceutical company with a major focus on the
discovery, development and commercialization of small molecules
for cancer and immunological diseases. Celgene's medical research
and development team is working to extend the boundaries in the
areas of small molecule immunotherapeutic and biocatalytic chiral
chemistry by developing pure versions of existing drugs.

Every great Biotech has a star drug and for Celgene, it's
Thalomid.  Although the company's fortunes currently rely heavily
on their cancer-fighting blockbuster, Thalomid is proving itself
to be a versatile drug indeed.  While many other cancer
treatments are aimed at specific forms of the disease, Thalomid
has been tested successfully with many different types of cancer.
As a result, this has helped sales to grow at a much higher than
expected rate, as new uses are found for the drug.  With over 75%
of CELG's revenues coming from Thalomid, strong growth in the
drug's sales have resulted in strong growth in revenues.  When
CELG reported earnings in late October, the Street expected the
company to lose 6 cents.  The company more than delivered by
breaking even for the quarter.  Considering that CELG puts 50% of
its revenues back into research and development, a positive EPS
would not be a problem.  But in the world of Biotechs, it's the
future that matters, as companies scramble to fatten their
pipelines.  That being said, the ability for a company to be cash
flow positive is a significant competitive advantage.
Technically, the chart looks healthy, with CELG's intermediate
uptrend firmly intact.  With the American Society of Hematology
Meeting starting on December 1st, the stock could move higher
ahead of this event.  For conservative traders, look for a break
on volume through the 50-dma at $60.72 to take a position.
Aggressive traders could target shoot a bounce off support at
$55, near the 5 and 10-dma as well as our stop price of $52 but
as always, make sure stock closes above this point.

BUY CALL DEC-55 LL-LK OI= 177 at $9.00 SL=6.25
BUY CALL DEC-60*LL-LL OI= 425 at $5.50 SL=3.50
BUY CALL DEC-65 LL-LM OI= 162 at $4.00 SL=2.50
BUY CALL JAN-60 LL-AL OI= 722 at $9.88 SL=7.00
BUY CALL JAN-65 LL-AM OI=3653 at $7.25 SL=5.00


TQNT - TriQuint Semiconductor $44.50 (+4.94 last week)

TriQuint's standard products include high-performance, low-cost
digital, analog and mixed signal GaAs RFICs which are used in a
wide variety of communications systems. The company also provides
applications-specific and custom circuit solutions for major
communications system original equipment manufacturers (OEMs).
Standard products offered by the TriQuint Texas facility cover a
range of DC to 35 GHz applications and include amplifiers,
attenuators, switches and discrete FET products with a history of
performance and reliability unmatched in the industry.

Despite recent weakness in the NASDAQ as well as the
Semiconductor sector, TQNT has been bucking the trend and moving
higher.  Ever since bouncing off support at the $25 level in
mid-November, the stock has come back strongly.  In less that two
weeks of trading, TQNT has put itself back above the 50 and
100-dmas (now at $36.13 and $41.19, respectively), thanks to
support from the 5 and 10-dmas.  Coverage initiated by analyst
Michael Masdea of Credit Suisse First Boston with a Buy rating
the previous week helped TQNT to power forward, citing that the
company is well positioned to take advantage of growth in the
next generation high-frequency communications boom.  Setting a
12-month price target of $36, the stock surpassed that level the
very next day.  With revenues growing 90 percent from last year
and profit margins of over 55 percent, it's no surprise that this
stock is a favorite, even in a slowing economy.  On Friday, the
stock managed to finish at its high of the day, gaining $2.38 or
5.64%.  At this point, TQNT has numerous support levels, at $42,
reinforced by the 5-dma at $42.18, the 100-dma at $41.19, as well
as at our stop price of $40.  A pullback to these levels could
provide aggressive entry points, but confirm the bounce with
volume.  There is also support from the 10-dma at $38.25 but make
sure TQNT closes above our stop price.  Just overhead is
resistance from the 200-dma at $45.  A break through this
important level will put TQNT back above all its major moving
averages, allowing conservative traders to take a position.  In
doing so, make sure the buyers are out in force before jumping in
as measured by strong volume to the upside.

BUY CALL DEC-40 TNN-LH OI=1283 at $7.25 SL=5.00
BUY CALL DEC-45*TNN-LI OI=1086 at $4.50 SL=2.75
BUY CALL DEC-50 TNN-LJ OI=1046 at $2.50 SL=1.25
BUY CALL JAN-45 TNN-AI OI= 166 at $7.25 SL=5.00
BUY CALL FEB-50 TNN-BJ OI=1202 at $7.00 SL=5.00


AMGN - Amgen, Inc. $66.06 (+0.94 last 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.

With the broader markets still reeling from election
uncertainty, AMGN started the week out on a negative note,
dropping sharply on Monday and narrowly avoiding a move to the
drop list.  After hitting a low of $61.69 in the morning,
buyers came to the stock's rescue, pushing it back above our
$62 stop level before the close.  The picture improved
throughout the week, as the Biotech giant resumed its uptrend,
managing to clear the 200-dma ($65.31) by the end of Friday's
holiday-shortened session.  We need to see support between
$64-65 hold this time, and with the 10, 50, and 200-dmas
clustered within less than $1 of each other, it is looking like
AMGN could manage to put together a sustainable rally this time.
With uncertainty in the political arena still unresolved, and
earnings warning season fast approaching, AMGN will need buyers
to show up in force to overcome the bearishness in the broader
markets.  This will take more than the anemic volume we saw on
Friday, and any sort of resolution to the Florida political
situation could be just the catalyst we are waiting for.
Intraday dips to support may provide attractive entry points,
but in this uncertain market environment, prudent investors will
want to wait for the return of strong buying volume before
initiating new positions.  Once the $68 resistance level can be
seen in the rear-view mirror, confirmed by solid volume,
consider jumping aboard as the bulls take aim on the next level
of resistance at $72.

BUY CALL DEC-65 YAA-LM OI=9443 at $4.75 SL=3.00
BUY CALL DEC-70*YAA-LN OI=6941 at $2.25 SL=1.50
BUY CALL DEC-75 YAA-LO OI=5098 at $0.81 SL=0.00
BUY CALL JAN-70 YAA-AN OI=9124 at $5.00 SL=3.00
BUY CALL JAN-75 YAA-AO OI=6415 at $3.00 SL=1.50

SELL PUT DEC-60 YAA-XL OI=4575 at $1.75 SL=3.50
(See risks of selling puts in play legend)


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The Option Investor Newsletter                   Sunday 11-26-2000
Sunday                                                      4 of 5

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MVSN - Macrovision Corporation $49.13 (-9.88 last week)

Macrovision Corporation was founded in 1983 to develop and market
innovative video and communications security technologies for
major motion picture studios and independent video producers.
During 1983-1984, Macrovision was granted several key patents
that laid the foundation for the company's future growth,
including a United States patent that described what is now
widely known as the Macrovision Copy Protection Process.

There's nothing like negative momentum to bring a good stock
down.  Ever since hitting a high of $108.25 on September 1st,
MVSN has been trading lower, so much so that in less than three
months, the stock has been cut by more than half.  Valuation
concerns have played a key role in MVSN's decline, despite an
impressive earnings report that easily beat Street estimates,
with net income growth of 90%.  Positive comments from Chase H&Q
and US Bancorp Pipe Jaffray have not helped either.  Nor has the
signing of new customers, most recently, Agilent Technologies.
The downtrend has recently accelerated, with the stock unable to
rally above the 5-dma.  As a leading supplier of copy-protection
services for software vendors, MVSN was not helped last week by
disappointing revenue growth numbers of PRSF.  After all, slowing
software sales means less revenue for MVSN.  Early this month,
the stock failed to hold its last line of moving average support,
the 200-dma at $70.  Breaking below the key support of $60, the
stock has since headed deeper into negative territory.  On
Friday, MVSN managed to bounce from its oversold conditions,
breaking a five-day losing streak to close up $2.13 or 4.52%.
Despite the positive day, the stock was unable to break through
resistance at the $50-51 level and close above the
psychologically important $50.  At this point, a failed rally
above resistance at the $50-51 level, as well as the 5-dma at
$52.10 could allow for an aggressive entry point.  In doing so,
be aware of our stop price, set at $53.  A close above this point
could suggest a break in the downtrend.  If the sellers return on
Monday however, a break below support at $47 with conviction
would allow for a conservative entry point.

BUY PUT DEC-55 MVU-XK OI=150 at $8.88 SL=6.25
BUY PUT DEC-50 MVU-XJ OI= 10 at $5.63 SL=3.50
BUY PUT DEC-45*MVU-XI OI= 10 at $2.94 SL=1.50



SLR - Solectron $34.25 (-0.19 last week)

Solectron Corp. is one of the world's largest supply chain
facilitators for customized electronics technology, manufacturing
and service solutions.  Founded in 1977, Solectron's integrated
technology solutions, materials, manufacturing and operations,
and global services offer customers competitive outsourcing
advantages, such as access to advanced manufacturing technologies,
shortened product time to market, and more effective asset

Solectron closed at $33.25 on the Wednesday before Thanksgiving,
and gapped open +0.63 with the market rally on Friday.  After a
valiant attempt to rally past the 10-dma at $34.75 around mid
morning, SLR made a classic pivot point and headed downward.
One of the keys here is volume.  There were very few buyers of
the stock at current levels, and the down days have had very
heavy volume as sellers step in.  Ideally, we want to see
selling on volume of around 10 million shares  daily, which is
the 10-day average volume, or at minimum higher than 5 million
shares daily, which is the three month moving average.
SLR did not really establish a firm trend the entire year,
as the yearly chart shows a zigzag pattern between $28 and
$48.  The 50-dma of $41.50 has almost converged with the 200-dma
of $41.07, and SLR looks as if it has low probability of
surpassing these levels in the near future.  Additional
heavy selling is likely to take the stock to the next support
level at $32, and after that to the yearly low of $28.  Overall
market conditions will obviously be a factor, as a strong rally
can lift even weak stocks.  Consider adding new positions on a
failed rally attempt at the 5-dma of $34, or the 10-dma of
$34.75.  Set stops at $37, as this could indicate a reversal of
a downtrend and an end to our play.

BUY PUT DEC-40 SLR-XH OI=2859 at $6.50 SL=4.50
BUY PUT DEC-35*SLR-XG OI= 730 at $2.94 SL=1.50


FCEL - Fuel Cell Energy $59.50 (+5.75 this week)

Fuel Cell Energy, formerly Energy Research Corporation, is a
world class leader in the development and commercialization of
clean, efficient fuel cell power plants for electric power
generation.  Fuel Cell Energy is headquartered in Danbury
Connecticut, and employs more than 150 people with scientific,
engineering, and manufacturing backgrounds.  The company's
direct fuel cell technology eliminates external fuel processing
to extract hydrogen from a hydro carbon fuel.

While FCEL moved up for the week, there were several good
opportunities for day traders to make a fast profit, as daily
highs were immediately followed by sharp drops.  For example,
on Tuesday FCEL hit a high of $60.81 mid day, and fell to close
at $52.  On Wednesday, the stock made a high of $58.63 early in
the day, and fell to $51.81 before closing at $53.93.  Each
attempted rally has been met by strong selling.  On Friday, the
stock closed up, but this could easily be a bull trap, as all
major market indexes were strongly higher.  FCEL is above the
200-dma of $49.14, but below the 50-dma of $69.07.  Since a fall
from its peak in mid October, FCEL's trend has been down.  In
order to completely reverse the trend, FCEL would need to clear
the critical level of $70, but a close over $61 could indicate
the start of a reversal, so set stops at $61.  The market did
not like news that FCEL is filing a shelf registration to offer
up to $250 million  in debt securities and preferred and common
stock.  Investors have been badly burned this year, and are
looking for profitable, undervalued companies.  FCEL had a
phenomenal ride up from  $19.44 in May to over $100 in October,
and its valuation is coming back to a realistic level.  This one
can be tricky to play, but highly profitable, as the moves down
are fast and sharp.  FCEL is perched right at the 10-dma of
$59.50, but looks like it is about to roll over to the 5-dma of
$57.31.   Watch the technical indicators, and if FCEL appears to
be moving  higher as the MACD and stochastics are moving lower,
a put could be highly profitable.

BUY PUT DEC-60 FQG-XL OI= 46 at $8.00 SL=5.75
BUY PUT DEC-55*FQG-XK OI=117 at $5.38 SL=3.38


YHOO - Yahoo Inc.  $40.88 (-10.38 last week)

Yahoo! is an industry leader in providing live audio and video
streaming media services for a wide range of customers, including
sports leagues, media and entertainment companies, television
and radio stations, corporations, advertisers and merchants.
Yahoo! delivers millions of hours of live and on demand
programming each month through a highly scalable streaming
distribution network designed to deliver high-quality audio
and video to large audiences accessing the Internet through
both dial-up and broadband connections.

There was finally some evidence today that buyers aren't extinct
on the Nasdaq.  This helped add nearly $3 to Yahoo's stock price
on Friday, but overall the rally was less than convincing.  In
fact, we mentioned in the original YHOO write-up on Tuesday to
watch for a low volume Nasdaq rally in search of an entry point
for new put plays.  That may be exactly what we saw today in
YHOO, which lends optimism for a further decline next week.
There is one big wild card with the Presidential election this
weekend that may throw this plan out of whack.  Any finality
to this process may cause a day or two of short-covering.  We
want to be cautious about this and lower our protective stop
price to $45.  Nevertheless, traders aren't likely to do much
in the way of covering unless there is absolute closure to this
political issue.  We are still in the black on this play despite
Friday's rally.  Most traders are surprised it didn't move even
higher based on the degree of sharp losses sustained in the
past two weeks.  This is showing that negative sentiment is
still in tact.  Technically, YHOO looks terrible on a longer-
term chart.  You would be hard-pressed to find any substantial
support until $25, and even then you have to use a weekly chart
to see it!  The increase in volume the past three sessions
does lend itself to a minor, short-term capitulation, but the
lack of a rebound mentioned above is more convincing.  If YHOO
moves over $42.50 (Friday's high), it would be wise to hold off
on new plays until sellers regain control of the stock.  In
other words, don't guess where a short-covering rally may top
out.  Let the stock rollover first.  It has been doing nothing
but rollover after a small rally for months and that trend is
likely to continue.  One final note, Yahoo received another
downgrade on Wednesday from a Strong Buy to a Buy from Thomas
Weisel Partners.

BUY PUT DEC-45 YHQ-XI OI=1913 at $7.38 SL=4.75
BUY PUT DEC-40*YHQ-XH OI=2553 at $4.50 SL=2.75
BUY PUT DEC-35 YHQ-XG OI=1133 at $2.50 SL=1.25


RATL - Rational Software Corp $35.63 (-0.12 last 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.

We have, in fact, kept RATL on our put list in defiance of the
stock's rebound in the latter half of trading last week.  Our
rational is sound, however.  After the stock dived from the
topside of the $40 level the previous Thursday and landed at
$31.63 during Monday's session, it rebounded back above the
$35 level with help from holiday-happy buyers.  However, we
must remember that RATL was cut by roughly 25% the preceding
week - a bargain hunter's dream!  But as it turned out,
while RATL flirted with the $36 level Friday, it couldn't break
out with any real conviction.  What we're faced with now is the
narrow range the stock is traversing.  With the exception of
Wednesday's new intraday low of $31, RATL's been bouncing
between $32 and $34.  Friday's expansion to the $35 and $36
levels is however of concern as we head into next week.  But
nevertheless, we're holding the play over the weekend.
Remember, we first initiated this play based on RATL's technical
frailty.  Since the share price is still maintaining a position
under the 10-dma line ($38.09), a high-volume rollover from the
current level and through the corresponding 5-dma line ($34.05)
is certainly not out of the question, yet.  Keep RATL on a tight
leash if you do choose to take a risky entry on a rollover.  The
more cautious types should keep their pockets lined with cash
until RATL breaks down below $32 and the more historical support
at the $30 level.   We'll keep our stop set at the $38 level
and give RATL room to operate, but would close our play if the
stock settles above that level.

BUY PUT DEC-40 RAQ-XH OI=361 at $6.63 SL=4.75
BUY PUT DEC-35*RAQ-HG OI=116 at $3.50 SL=1.75
BUY PUT DEC-30 RAQ-HF OI= 22 at $1.44 SL=0.75


HAND - Handspring Inc $58.13 (-4.31 last week)

Handspring manufactures the Visor handheld computer.  The Visor
is a personal organizer that is enhanced by an expansion slot
for extra memory.  This unique design accommodates such add-ons
like wireless modems, books, games and digital cameras.  The co-
founders of Palm Computers created Handspring in 1998.
Currently, Hawkins and Dubinsky retain a 51% stake in the

HAND's downtrend line is steadfast and showing no signs of
letting up over the near-term.  Solid evidence of this came when
HAND encroached upon the $60 level and saw $52.38 on Wednesday.
The stock's feeble attempts to regain its position above $60 on
Friday further corroborated our downside speculation.  The new
Buy coverage and $90 price target given to HAND on Tuesday by
Lehman Brothers obviously had no positive effect on trading.
What may have a huge effect on the stock's price level comes
into play next month.  On December 17th, Handspring will unlock
115 million shares out of 126 million outstanding and this event
will likely create lots of price volatility.  Please don't be
under the assumption that the increase in the stock's float
automatically equals lowered price levels.  Indeed, it's typical
a stock may head lower in anticipation of the event, but it can
also rise significantly on the release date because fund
managers may begin buying shares.  In other words, volatility
will be the name of the game in the weeks ahead.  Since we began
covering HAND, we've seen the stock move from $80, to $70, and
now below $60.  The next landing zone is $50 before it heads
toward post-IPO resistance at the $40 level.  Even at that price
level, HAND is still at double the IPO price of $20, which is a
tidy sum for the company's executives and insiders to take to
the bank.  For now though, look for $63 to stand as our stop
loss and consider entering aggressively on continued weakness
from the 5-dma line ($60.32).  The more cautious approach into
this momentum play is to enter as HAND breaks $53 on strong

BUY PUT DEC-65 HQA-XM OI= 158 at $12.50 SL=9.50
BUY PUT DEC-60*HQA-XL OI=1550 at $ 9.38 SL=6.25
BUY PUT DEC-55 HQA-XK OI=  12 at $ 6.63 SL=4.50


ARTG - Art Technology Group $36.75 (-8.94 last week)

Art Technology Group offers an integrated suite of Internet
customer relationship management and e-commerce software
applications, as well as related application development,
integration and support services.  The Company's solution
enables businesses to understand, manage and build online
customer relationships and to market, sell and support products
and services over the Internet more effectively.  About 40% of
sales are derived from Web site design, consulting, and other
support services.  Global clientele include Forbes and General

ARTG hasn't seen these price levels since last spring!  The
re-test of support at $40 failed this week and ARTG
easily slide underneath the 5-dma line ($38.35), which had
previously buoyed the share price.  Stepping back in time for
our new readers, ARTG was one of those gold-speckled, pristine
tech stocks that could do no wrong.  Well you know how those
fairy tales have come to pass.  Back in July, ARTG saw a
pinnacle at the lofty price of $126.88 before it surrendered
it's fairy dust.  Last month on October 26th, the supportive $80
level disintegrated after the company announced earnings and a
$4 mln public stock offering.  The numbers were excellent, but
ARTG plunged on the news.  The real insult occurred on November
7th and 8th when news hit the Street that Art Technology Group
amended its 10-Q filing, disclosing the sale of $9.6 mln in
accounts receivables.  Investors were enraged and punished the
stock severely.  The incensed shareholders cut it down 33% in
in a mere two sessions!  This week, company officials postponed
the plans for the secondary offering due to the stock's
miserable performance.  This announcement and the nervous market
sentiment provided an optimum catalyst for the devastating
momentum to pick up pace once again.  ARTG quickly accelerated
its losses and violated the $40 level.  It proceeded to trace
the NASDAQ and tumbled to $30 by Wednesday.  If the powerful
momentum can move ARTG through the $30 level next week, there's
not much support below.  Given the extent of the selling the
past couple of days, our stop is set at $38 to protect against
an oversold bounce.  After Friday's mini rally, this is good
advice.  We're looking for ARTG to rollover from it's current
level or even a bit higher at the 5-dma ($38.35).  A definitive
move through $30 backed by strong volume would be a bearish
signal for the more conservative traders to buy into the
weakness and tighten stops.

BUY PUT DEC-45 AYQ-XI OI= 20 at $11.75 SL= 8.75
BUY PUT DEC-40 AYQ-XH OI=106 at $ 8.13 SL= 5.75
BUY PUT DEC-35*AYQ-XG OI= 23 at $ 4.25 SL= 2.50


NEWP - Newport Corporation $71.25 (+1.69 last week)

In research laboratories, product development departments and on
production lines around the world, scientists and engineers
depend on Newport Corporation.  The company is the leading
worldwide manufacturer and distributor of precision components
and systems used for development and application of laser and
optical technologies, supporting not only advanced research, but
also sophisticated new technology and industrial applications.

Once a favorite of momentum investors, this former high-flyer has
seen the value of its shares cut by almost 65 percent.  Hitting a
high of $192.06 in late September, the stock has since traded
lower in a downward trending regression channel, tumbling through
all its major moving averages, backed by resistance from the 5
and 10-dma.  As a major supplier of optical components, news of
Nortel's revenue miss as well as the build-up of Cisco's
inventory have clearly effected the stock, as investors have been
selling shares of all things Optical with abandon.  Volume to the
downside has been high, with brief rests before surging again.
Despite the bounce on Friday, the downtrend is firmly intact.
For aggressive traders, failed rallies above resistance at $75 as
well as the 10-dma at $76.36 are possible targets to shoot for.
In doing so, confirm the rollover with return of selling
pressure.  As well, we have placed a stop at $75 to protect our
profitable put play.  A close above this level could suggest a
break in the downtrend and with that, we would no longer
recommend this play.  A more conservative entry could be had on a
break below support at $70 but just to make sure, wait for the
selling to take NEWP below its 5-dma at $69.60 before initiating
a play.  There is strong support at $60, as that was the breakout
point that started the rally from June to September.  However,
with the downward regression channel heading ever lower to form a
bearish triangle formation, it could just be a matter of time
before that level is broken.

BUY PUT DEC-75 NZZ-XO OI=73 at $11.88 SL=9.00
BUY PUT DEC-70*NZZ-XN OI=16 at $ 9.00 SL=6.25
BUY PUT DEC-65 NZZ-XM OI= 1 at $ 6.50 SL=4.50


VRSN - VeriSign, Inc. $93.25 (-20.50 last week)

VeriSign is the leading provider of Internet trust services
and digital certificate solutions needed by Web sites,
enterprises and individuals in order to conduct secure
electronic commerce and communications over IP networks.  VRSN
has used its secure online infrastructure to issue over 100,000
of its Website digital certificates and over 3.5 million of its
digital certificates for individuals.  The company also offers
the VeriSign Onsite service, which allows an organization to
leverage the company's trusted service infrastructure to develop
and deploy customized digital certificate services for use by an
organization's employees, customers and business partners.  To
date, over 300 enterprises have subscribed to the OnSite service
and VRSN has strategic relationships with industry leaders
including Cisco, Microsoft ,RSA, Security Dynamics, and VISA.

The bears had a field day with VRSN last week as the NASDAQ
dropped to post 3 new consecutive 52-week lows.  With bearish
comments hitting the Internet sector in the form of earnings
concerns leveled at YHOO and EBAY, selling volume in the
Internet security stock increased, dropping our play to $78.31
on Wednesday, another lower low in the 8-week downtrend.  The
severity of the selloff this past week steepened the descending
trendline, and even Friday's relief rally couldn't put much of
a dent in the stock's losses.  After gapping above $90 at the
open on Friday, VRSN ran out of momentum before reaching $95,
despite the fact that the NASDAQ continued to move up into the
early close.  This looks like a classic sucker's rally, and
barring a continuation of the NASDAQ recovery on Monday, VRSN
should head lower again as the bears reassert their control.
Above current levels, VRSN has resistance between $100-102, so
we moved our stop down to $103 to insure that we keep the lion's
share of our profits.  Nothing has really changed, with election
and economic concerns sure to add further downside pressure in
the week ahead.  Use any failed rally as an opportunity to
initiate new positions with a better entry point.  Target shoot
to your level of risk tolerance as the stock rolls over and
heads back towards the lows seen last week.  More conservative
players will want to stand on the sidelines until the bears can
poke a hole in Friday's weak intraday support at $90 before
adding new positions.  Once the selling begins in earnest again,
VRSN should have little trouble challenging its lows from last

BUY PUT DEC-95 XVR-XS OI=241 at $13.38 SL=10.00
BUY PUT DEC-90*XVR-XR OI=758 at $10.63 SL= 7.75
BUY PUT DEC-85 XVR-XQ OI=641 at $ 8.63 SL= 6.00


VRTS - Veritas Software $100.88 (-9.25 this week)

As an independent supplier of storage management software,
VRTS develops and sells products that protect against data
loss and file corruption, allowing rapid recovery after disk
or computer system failure.  The company's products provide
continuous data availability in clustered computer systems with
shared resources. This enables IT managers to work efficiently
with large file systems, making it possible to manage data
distributed on large computer network systems without harming
productivity or interrupting users.  VRTS provides products for
most popular operating systems, including UNIX and Windows NT,
as well as a full range of services to assist its customers in
planning and implementing their storage management solutions.

It is amazing how quickly things can change.  Less than 3 weeks
ago, VRTS was taking another run at the $160 resistance level,
and now it is struggling to hold above $100, a level that
represents a loss of 38%.  The first wave of selling dropped
the stock through the $120 support level as well as the 200-dma
before the dip buyers showed up.  Although they managed to prop
the shares up for a couple days, the bears were obviously still
in control and spent the next five days pushing the price down
to levels not seen since early August.  Once the $110 level
failed as support, the selling intensified, and the stock
followed the NASDAQ lower, tagging a low of $91 on Wednesday.
Although there was renewed buying interest in the stock during
Friday's holiday-shortened session, it has all the earmarks of
a dead-cat bounce.  Even with the sharp bounce in price, VRTS
still closed below the $102-103 resistance level.  Volume was
near the ADV, but it was sharply below the levels seen over the
prior week when 2-3 times the ADV seemed to be the norm.  The
stock was due for a bounce, but with the election results still
up in the air and investor concerns about the economy alive and
well, our play looks like it could be ready to take another
nosedive.  Wednesday's lows at $91-92 describe the first level
of support, and a drop below that will be the trigger for
conservative players to initiate new positions.  Further support
exists at $85, and then $78.  Although current levels look
attractive for new aggressive entries, it is entirely possible
that the bulls will take a run at the $110 resistance level
before being turned back by the bears.  Target shoot new entries
to your level of risk tolerance and keep your eye on the volume.
If the stock is going to fall further, it will be accompanied
by heavy selling volume.  Our stop is still resting at $109, and
if the bulls are successful at scaling this level it will be a
clear indication to exit the play.

BUY PUT DEC-105 VUQ-XA OI= 456 at $11.88 SL=9.00
BUY PUT DEC-100*VUQ-XX OI=2037 at $ 9.00 SL=6.25
BUY PUT DEC- 95 VUQ-XW OI=2632 at $ 6.88 SL=5.00


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Looks Like Another Sucker's Rally To Me
By Mark Phillips
Contact Support

I know that sounds like the words of a pessimist, but after
buying the false bottom more than once in recent months, I
have set aside my rose-colored glasses and have begun to view
the market in a whole new light.  While I may not like what I
see (after all, I'm a raging bull at heart), I am benefiting
from the ability to see this market for what it is.  No matter
how you tilt your head or angle the charts, this is a bear
market.  It is looking like we will see one of the worst years
on record for the NASDAQ, and the DJIA has now been flat for 18

For those of you wondering about the underlying cause, let me
point out that there are many.  They have been covered in
exacting detail in the newsletter over recent weeks, but the
short version is Energy, Earnings, Economy, Euro and now the
Election.  The Commercial traders were right after all, and their
record net short positions presaged the persistent market
weakness that has decimated one sector after another since Labor
Day.  So, what's a raging bull to do?

First off, as LEAPS investors, we have time to wait for a trend
to emerge and then ride that trend over a period of months.
When there is no trend, it is hard to make money, and the
prudent investor will leave that money in cash until the trend
appears.  Notice that I said "prudent investor" not "I"?  It is
human nature to try and pick the bottom, and despite all the
signals to the contrary, I've gotten burned a few times for
leaping before looking.  Has that ever happened to you?
Believing that 3000 would be the bottom on the NASDAQ I jumped
into new positions too early and paid the price as the 2800
level fell victim to the bears on Wednesday.

In my mind, the question is not "Will we retest 2800?".  I think
the real question is, "When 2800 fails to hold as support, how
quickly will we drop to 2500 on the NASDAQ?".  Before you start
sending off that hate mail, let's focus on the light at the end
of the tunnel.  The markets WILL get healthy and rally again.
The critical issue (even more so for options traders) is timing.
Would you rather buy at 2800 and watch the decline down to 2500
while praying for a recovery, or wait for the bounce and buy at
2800 on the way back up?  Yeah, I know.  I want to be able to
buy right at the bottom of 2500 too, but unfortunately, we live
in the real world, where attempting to pick the bottom usually
results in lost fingers.

Here in LEAPS land, one of our favorite timing indicators is the
It was another rough week for the markets, and the VIX bears
this out with Friday's close at 29.58.  Typically, readings near
30 are classic "buy the dip" bottom signals, but it hasn't been
that simple lately.  The VIX has spent so much time north of 30
in the last 6 weeks that I'm starting to feel light headed.
Obviously there is more going on here, and we need to pay
attention to the wide variety of factors that are bound to
affect the success of our trades.

If we set our emotional biases aside and look at the facts in a
critical light, there are ample signals to tell us the nature
of the markets is changing.  Austin provides a great wealth of
information in the Market Sentiment section, and it would be
well worth your time to monitor his readings of the overall
market health before committing funds to new positions.

LEAPS give us the time to be right, but we still need to buy
AFTER the bottom has been put in place, not when we THINK it
should be in place.  Between the Market Sentiment information
and some basic technical analysis (MACD, Stochastics and
Bollinger Bands on Daily and Weekly charts), we should be able
to determine high odds entries on many of the stocks in the
play list.

The election problems will pass, and when they do, we will be
left with the actual facts of the market to deal with.  Traders
are still trying to sort out the impact of the slowing economy,
rising energy costs, and the plethora of earnings warnings.
Caution is still the word of the day.  Wait for the high odds
entry where all your signals line up.  You will miss some
winning plays, but you will also miss a lot of losers too.
Patience will be rewarded, and one of the first places where you
will feel that reward is in the self confidence you gain by
knowing you are following a disciplined trading plan.  Once you
know that your plan works, it is a straightforward process to
apply it repeatedly as we head into the next leg of the great
bull market.

Have a profitable week.

Current Plays


EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $45.50   378.95%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $25.88   -20.99%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $18.38    63.64%
       11/26/00  JAN-2003 $ 60  VYC-AL   $16.63   $16.63     0.00%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $13.13   -13.25%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $ 6.75   -75.45%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $22.63     2.84%
       11/05/00  JAN-2003 $120  VSU-AD   $39.50   $21.63   -45.25%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 3.90   -79.07%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $10.00   -42.86%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $12.88    38.00%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $15.50   188.10%
       10/22/00  JAN-2003 $ 45  VWI-AI   $ 7.88   $ 9.75    23.81%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $18.38   -53.63%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $16.13   -70.81%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 8.38   -51.45%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $12.13   -31.69%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $ 9.13   -11.49%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $ 8.38   -31.63%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $27.63    61.27%
                 JAN-2003 $ 70  OZG-AN   $23.13   $34.38    48.62%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $ 3.63   -82.53%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $ 5.75   -77.34%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $49.38    57.35%
                 JAN-2003 $100  VFB-AT   $37.38   $55.25    47.81%
CMRC   09/10/00  JAN-2002 $ 80  YCU-AP   $30.13   $ 9.88   -67.23%
                 JAN-2003 $ 80  OCU-AP   $38.75   $15.75   -59.35%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $33.63    49.44%
                 JAN-2003 $ 70  VLM-AN   $29.63   $41.63    40.48%
COMS   10/01/00  JAN-2002 $ 20  WTH-AD   $ 6.38   $ 3.13   -50.98%
                 JAN-2003 $ 25  VTH-AE   $ 7.13   $ 4.00   -43.86%
INTC   10/15/00  JAN-2002 $ 45  WNL-AI   $ 9.50   $11.00    15.79%
                 JAN-2003 $ 45  VNL-AI   $13.38   $15.25    14.02%
TXN    10/22/00  JAN-2002 $ 50  WTN-AJ   $13.75   $11.13   -19.09%
                 JAN-2003 $ 50  VXT-AJ   $18.38   $15.63   -14.97%
ADBE   10/29/00  JAN-2002 $ 80  YEJ-AP   $23.50   $22.50   - 4.26%
                 JAN-2003 $ 80  VAE-AP   $30.75   $31.50     2.44%
BGEN   11/05/00  JAN-2002 $ 70  WGN-AN   $17.25   $13.50   -21.74%
                 JAN-2003 $ 70  VNG-AN   $25.00   $20.63   -17.50%

Spotlight Play

CSCO - Cisco Systems $52.69

After charging to new highs this past spring, CSCO has had a
rough year with the rest of the Technology sector.  Widely
viewed as an indicator of the NASDAQ's health, the pain this
index has suffered over the past 8 months is easy to see on
CSCO's daily chart.  Despite the company's continued stellar
performance, CSCO has come under persistent selling pressure
from any causes, the most recent of which is the valuation
collapse in Networking stocks.  While many of the high-flyers
in this sector have taken a 50% haircut in the past month, CSCO
has managed to hold its line of support between $48-50.  Even
with the NASDAQ tracing new yearly lows last week, CSCO failed
to dip below $50 again and it is looking like the worst may be
over. The economy is showing definite signs of slowing down,
which points to the possibility of a cut in interest rates in
the next few months.  Once the election crisis in Florida has
been sorted out, CSCO should lead the technology sector higher,
much as it did in 1995, after the end of the last series of
interest rate increases.  The one point of concern is the
persistent news stories pointing to JNPR taking large chunks
of CSCO's market share.  Despite our bullish bias, this will
have a negative effect on CSCO, likely hampering its rate of
ascent in the future.  Current levels look attractive for new
entries, although more conservative investors may want to wait
for the election to be resolved before initiating new positions.
While more aggressive players may want to target any intraday
dips for a better entry point, beware of any close below $48.
This would represent a failure at a major support level and
could open the door for further weakness.

BUY LEAP JAN-2002 $55.00 WIV-AK at $13.25
BUY LEAP JAN-2003 $60.00 VYC-AL at $16.63

New Plays

MU - Micron Technology $40.88

The slowdown in the PC sector hit the Semiconductor stocks right
between the eyes, and MU was one of the first to fall.  The
company is one of the leading manufacturers of DRAM products to
the PC sector, so it was sharply affected by the changing
supply/demand equation for these memory chips.  DRAM prices have
fallen significantly over the past several months, but according
to industry analysts, the worst may be over, with pricing
stabilizing and heading higher over the next 2-3 quarters.  If
MU's stock performance is any indicator, they may be right.  The
stock bottomed near $28 in October, and after confirming that
level as support a couple weeks ago, it has been moving higher
on solid buying volume.  Friday's trading session saw MU move up
through the $37 resistance level and close above the 50-dma
($39.63) for the first time since late August.  Although it is
encouraging to see such a sharp upward move, the overall
Technology sector is still weak.  Mild support is now sitting at
$37, with solid support near $30.  Look for a pullback to
support before initiating new positions and then pull the
trigger as buying volume picks up again.  Any severe selling
that violates the October lows would be cause for concern and a
strong sign to stand aside until the bulls come out to play

BUY LEAP JAN-2002 $45.00 WGY-AI at $13.13
BUY LEAP JAN-2003 $45.00 VGY-AI at $17.25


CMRC $39.25 Despite reassurances from the company, CMRC was
unable to overcome rumors of a revenue shortfall for the
current quarter.  After the rumors surfaced a little over a
week ago, the stock fell below the ascending trendline at $55.
The added weight of NASDAQ weakness prompted by concerns of a
slowing economy and the continuing election uncertainty drove
CMRC below our last line of defense at $40, closing on Wednesday
at a new 52-week low.  Even the rally on Friday couldn't bring
out enough buyers to allow the stock to regain the $40 level,
and with the technical failure, we can't justify keeping it on
our playlist.  While we may consider adding it again in the
future, we need to wait until the B2B sector reasserts itself
in a solid upward trend.


Holding Steady In A Thankful Week
By Matt Russ

Not a lot of news on the split front, in fact, there were no split
announcements at all this week.  The shortened trading week lacked
liquidity and brought subsequent volatile moves on Wednesday and
Friday.  Toss in the continuing Presidential battle, a Dick Cheney
heart attack, canvassing controversies and we got ourselves
uncertainty in the markets.  Just as earnings visibility is murky
at best, so are split predictions.  CFLO fell off the Candidate
list after the stock price was split in half by sellers after a
disappointing earnings report.  Taking its place is Laboratory
Corp.(LH), which has proved to be amazingly resilient.  We need a
market recovery to lift some of our favorite stocks back to split

Current Split Run Plays


Current Split Candidate Plays


Candidates That Are Not Current Plays


10 Most Recent Announcements We Predicted

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

Major Announcements So Far This Month = 19

TALX     SONC     AREA      AJG
 SYY      ILI      SGR

For our complete stock split calendar, click here...

Symbol  Company Name                Splits  Payable    Executable

TNL  - Technitrol, Inc.               2:1  11/27/2000  11/28/2000
ANEN - Anaren Microwave               2:1  11/27/2000  11/28/2000
MXC  - MATEC Corporation              3:2  11/27/2000  11/28/2000
ATK  - Alliant Techsystems            3:2  11/27/2000  11/28/2000
MWAV - M-Wave, Inc                    2:1  11/28/2000  11/29/2000
PVN  - Providian Financial Corp       2:1  11/30/2000  12/01/2000
SONC - Sonic Corp                     3:2  11/30/2000  12/01/2000
SHFL - Shuffle Master, Inc.           3:2  11/30/2000  12/01/2000
CHRW - C.H. Robinson                  2:1  12/01/2000  12/04/2000
PSC  - Philadelphia Suburban          5:4  12/01/2000  12/04/2000
ITWO - i2 Tech                        2:1  12/04/2000  12/05/2000
INOD - Innodata Corporation           2:1  12/01/2000  12/04/2000
TECH - Techne Corporation             2:1  12/01/2000  12/04/2000
SUNW - Sun Microsystems               2:1  12/05/2000  12/06/2000
SRDX - SurModics, Inc.                2:1  12/06/2000  12/07/2000
MANU - Manugistics Group              2:1  12/07/2000  12/08/2000
BEC  - Beckman Coulter, Inc.          2:1  12/07/2000  12/08/2000
CREE - Cree                           2:1  12/08/2000  12/11/2000
AREA - Area Bancshares Corp.          3:2  12/10/2000  12/11/2000
PENG - Prima Energy Corporation       3:2  12/11/2000  12/12/2000
ABK  - Ambac Financial                3:2  12/12/2000  12/13/2000
INFA - Informatica Corp.              2:1  12/13/2000  12/14/2000
SYY  - SYSCO Corporation              2:1  12/15/2000  12/18/2000
SGR  - Shaw Group                     2:1  12/15/2000  12/18/2000
COCO - Corinthian Colleges, Inc.      2:1  12/15/2000  12/17/2000
EMLX - Emulex Corp.                   2:1  12/15/2000  12/18/2000
SKYW - SkyWest, Inc.                  2:1  12/15/2000  12/18/2000
BARZ - BARRA, Inc.                    2:1  12/18/2000  12/19/2000
ILI  - Interlott Technologies         2:1  12/20/2000  12/21/2000
UNH  - UnitedHeath Group Inc.         2:1  12/22/2000  12/26/2000
SPIR - Spire Corporation              2:1  12/22/2000  12/26/2000
IWOV - Interwoven                     2:1  12/29/2000  01/02/2001
AJG  - Arthur J. Gallagher & Co.      2:1  01/18/2001  01/19/2001
SWWC - Southwest Water                5:4  01/19/2001  01/22/2000
TALX - TALX Corp.                     3:2  01/19/2001  01/22/2001

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The Option Investor Newsletter                   Sunday 11-26-2000
Sunday                                                      5 of 5

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Position Management: Learning Your Emotional Limits
By Mark Wnetrzak

When it comes to exiting a trade, there are a number of important
issues which have to be addressed prior to entering the position.
Perhaps the most critical concepts to examine are the risk/reward
outlook and the means to identify when the trade has gone astray.
Examining the potential profits and inherent loss limits of the
position helps you define the target exits and also provides a
mechanical basis for the determining the point at which you will
ultimately close a losing trade, often the most difficult task to
perform successfully on a consistent basis.

There are a number of reasons why it is so difficult to close a
losing trade and most of them are psychological.  When it comes
time to enter a position, almost everyone experiences the feeling
of optimism that the transaction will yield a profitable result.
Unfortunately, when the first indications of a negative outcome
surface, many traders fail to react in a timely manner and losses
are often incurred as a result of mental paralysis.  After the
initial failure to react, the trait becomes easier and in many
cases, the position is allowed to continue eroding portfolio value
until it eventually causes a major loss in capital.  Complacency
is just one of the evils that all traders must face but there is
also an opposing characteristic that can be equally dangerous:
The lack of patience, or an urgency to bail-out of a position too
early, when a much greater profit potential is available.  One of
the most common obstacles that traders encounter when trying to
take profits or limit losses is the tendency to covet a position.
We all have an affinity for particular stocks or industries and
occasionally that bond affects our decision-making ability.  This
characteristic is usually seen in buy-and-hold strategies, such as
owning LEAPS or long-term call options, where the trader begins to
identify closely with a company's products, or the specific sector
in which it operates.  In those unique situations, it's important
to watch for signs of a reluctance to close a position, especially
when the decision to hold is based on relatively shallow reasons.
The key is to focus on all your positions with the same degree of
objectivity, regardless of how much you like a specific issue or
its industry, products or management.

The art of exiting a position requires one to process and accept
information that substantially changes his or her past perception
of a particular trend or movement.  For many traders, this can be
difficult because successful position management always involves
a certain amount of contrarian thinking.  One problem that occurs
regularly in directional trading is that you must buy in a market
that is technically week and sell when the market exhibits strong,
bullish momentum.  In addition, there is little chance that you
will exit at precisely the right moment and even when the issue
trades for just a few pennies more than your selling price, it is
obvious that profits have been left on the table.  In some cases,
the market will move much higher before a substantial retreat and
that gives traders all the more reason to find fault with their
ability to execute a particular strategy.  The fact is, nobody is
perfect, and even the best traders rarely pick the absolute tops
or bottoms more than a few times in their careers.  That doesn't
mean you should accept regular losses because of poor technique or
improper placement of trading stops.  On the contrary, successful
participation in the market requires that you learn to correctly
manage portfolio positions; maximizing gains while limiting losses.

Market professionals establish pre-determined limits when entering
new positions, but retail traders are far less proficient in this
practice.  Using planned entry and exit points eliminates the risk
of emotional or reaction-based judgments in difficult situations
and removes fear, hope and greed from the equation.  Most traders
employ some form of trailing stop and the initial placement of
these simple exit orders requires a thorough knowledge of chart
analysis and primary market trends or cycles.  After the position
is open, a review of the trend-lines and regression channels will
provide the basic information for timely and accurate adjustments.
In this manner, the potential for profit is maintained without the
possibility of losing previous gains and the use of this technique
provides a mechanical and disciplined method for achieving profits.
With all of the intricate emotions that affect a human's judgement,
allowing the market to make the exit decision is much more precise
than relying on our complex intuition.

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return!

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

MTIC    8.13   7.97   DEC   7.50  1.38  *$  0.75  12.1%
AVID   15.94  19.88   DEC  15.00  2.19  *$  1.25   9.9%
ISIP   11.56  10.69   DEC  10.00  2.31  *$  0.75   8.8%
MTIC    6.00   7.97   DEC   5.00  1.44  *$  0.44   7.0%
SUPG   21.47  19.00   DEC  17.50  5.25  *$  1.28   6.9%
BCGI   26.31  24.63   DEC  22.50  5.38  *$  1.57   6.5%
LGTO   11.88  10.75   DEC  10.00  2.38  *$  0.50   5.7%
MME    17.75  20.25   DEC  17.50  1.31  *$  1.06   5.6%
MTSI   17.38  20.63   DEC  12.50  5.63  *$  0.75   5.5%
MU     33.75  40.88   DEC  27.50  7.50  *$  1.25   5.2%
HPC    18.44  18.56   DEC  17.50  1.88  *$  0.94   4.9%
TTN    20.94  18.94   DEC  17.50  4.13  *$  0.69   4.5%
PLNR   24.00  22.94   DEC  20.00  4.75  *$  0.75   4.2%

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


Mti Tech (MTIC) is correcting after its recent $5 rally and the
first test of support should be the September high.  Boston
Communications (BCGI) has moved to the bottom of it's current
price channel.  The 50 dma is the next level of support if BCGI
fails to bounce off the October high.  Micron Tech (MU) appears
ready to rally!  Hercules (HPC) looks worrisome after a weak
earnings report from CP Kelco (Hercules owns approximately 29%).
Monitor Planar Systems (PLNR) as it is acting suspicious and a
technical indicator has turned negative - indicating selling


Sequenced by Company
Stock  Last  Call  Strike Option  Last  Open  Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr  Basis Expiry  Return

DZTK    8.13  DEC   7.50  DEZ LU  1.06  63     7.07   21     8.9%
JDEC   29.00  DEC  22.50  QJD LX  7.25  63    21.75   21     5.0%
MRVT   16.88  DEC  15.00  SQD LC  2.56  85    14.32   21     6.9%
MU     40.88  DEC  35.00   MU LG  7.38  16887 33.51   21     6.5%
PSUN   20.94  DEC  17.50  PVQ LW  4.13  91    16.82   21     5.9%
SNWL   24.25  DEC  20.00  UWL LD  4.88  162   19.38   21     4.7%
VRTA   23.38  DEC  17.50  UFA LW  6.63  82    16.76   21     6.4%

Sequenced by Return
Stock  Last  Call  Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

DZTK    8.13  DEC   7.50  DEZ LU  1.06  63     7.07   21     8.9%
MRVT   16.88  DEC  15.00  SQD LC  2.56  85    14.32   21     6.9%
MU     40.88  DEC  35.00   MU LG  7.38  16887 33.51   21     6.5%
VRTA   23.38  DEC  17.50  UFA LW  6.63  82    16.76   21     6.4%
PSUN   20.94  DEC  17.50  PVQ LW  4.13  91    16.82   21     5.9%
JDEC   29.00  DEC  22.50  QJD LX  7.25  63    21.75   21     5.0%
SNWL   24.25  DEC  20.00  UWL LD  4.88  162   19.38   21     4.7%

Company Descriptions

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

DZTK - Daisytek  $8.13  *** The Flowers are Blooming ***

Daisytek is a leading distributor of computer supplies, office
products, and film and tape media.  Serving customers in more
than 50 countries, Daisytek distributes almost 20,000 products
from more than 150 manufacturers.  In early November, Daisytek
reported better-than-expected fiscal second-quarter earnings of
$4.1 million before charges, on a 16% increase in revenues.
Daisytek recently announced plans to expand its operations in
the Mexican market with two new facilities as the company seeks
further expansion into high-growth markets outside the U.S.
We simply favor the bullish breakout above a 4-month Stage I
base.  Daisytek spun off PFSweb (PFSW) in July, so due diligence
with regard to any potential obligation in that issue is a must!

DEC 7.50 DEZ LU LB=1.06 OI=63 CB=7.07 DE=21 MR=8.9%

JDEC - J.D. Edwards  $29.00  *** The Rally Continues! ***

J.D. Edwards develops, markets and supports enterprise software
and supply chain computing solutions that enable customers to
translate ideas into practical realities quickly and efficiently
using the company's software.  JDEC's integrated applications
deliver e-business solutions that give customers control over
their front office, manufacturing, logistics/distribution, human
resources, finance and customer service management processes for
the consumer products, industrial and services industries.  J.D.
Edwards recently announced the signing of a multi-million dollar
contract with the Sociiti des alcools du Quibec, one of North
America's largest liquor retailers and distributors.  Investors
appear to be pleased with the recent developments in the company's
products as the stock has rallied to a new 7-month high.  We favor
a conservative entry point closer to technical support.

DEC 22.50 QJD LX LB=7.25 OI=63 CB=21.75 DE=21 MR=5.0%

MRVT - Miravant Medical  $16.88  *** On The Rebound? ***

Miravant Medical is engaged in the integrated development of
drugs and medical device products for use in PhotoPoint, the
company's proprietary technology for photodynamic therapy.
Miravant is currently conducting trials in ophthalmology and
oncology testing its leading drug candidate, SnET2 (tin ethyl
etiopurpurin), and is developing products in collaboration with
its corporate partners, including subsidiaries of Pharmacia &
Upjohn.  The recent recovery in MRVT's share value began after
an announcement at the AMA meeting in New Orleans.  The company
announced that it has achieved positive results in studies of
its PhotoPoint therapy for both the prevention of restenosis
and the treatment of lesions arising from common procedures
such as angioplasty and stenting.  We favor the bullish move
above the early November high which completes a short-term
"double-bottom" formation.

DEC 15.00 SQD LC LB=2.56 OI=85 CB=14.32 DE=21 MR=6.9%

MU - Micron  $40.88  *** Chip Sector Bottom Fishing! ***

Micron, and its subsidiaries manufacture and market DRAMs, very
fast SRAMs, Flash, other semiconductor components, memory modules,
graphic accelerators, and personal computer systems.  The chip
sector appears to be putting in a bottom.  A week ago, Prudential
Securities cut Micron's fiscal 2001 EPS estimates from $2.60 to
$2.30, on fears of weak DRAM pricing and high OEM inventories.
Micron refused to move lower on the negative news and is even
staging a rally - sure looks like a change of character.  This
position offers a favorable cost basis for those investors who
have a long-term bullish outlook on the company.

DEC 35.00 MU LG LB=7.38 OI=16887 CB=33.51 DE=21 MR=6.5%

PSUN - Pacific Sunwear  $20.94  *** Retail Rally ***

Pacific Sunwear of is a specialty retailer of everyday casual
apparel, accessories and footwear designed to meet the needs of
active teens and young adults.  The company operates nationwide,
primarily mall-based, chains of retail stores that specialize in
board-sport inspired casual-wear.  PSUN's Internet site markets
merchandise online and provides content and community for its
target customers.  Pacific Sunwear reported that third quarter
earnings increased 1.9% to $0.39 from $0.38 last year, $0.01
ahead of consensus estimates and in line with company guidance.
The results were respectable, if not outstanding, and with the
recent positive outlook for the industry, this position offers
favorable risk/reward potential for three weeks.

DEC 17.50 PVQ LW LB=4.13 OI=91 CB=16.82 DE=21 MR=5.9%

SNWL - SonicWALL  $24.25  *** Recovering Strength! ***

SonicWALL is the leading provider of Internet security solutions
for broadband customers in the small to medium size enterprise,
branch office, telecommuter and education markets.  The SonicWALL
Internet security appliance is a high-performance, solid-state
product that provides a reliable, easy-to-use and affordable
Internet security solution.  In October, SonicWALL reported
record revenues and profits for its third quarter.  Revenues
for the quarter increased 254% to $18.4 million and net income
increased 708% to $6.1 million.  SonicWALL continues to expand,
adding new products and recently acquiring privately held Phobos.
The stock has rallied strongly off its October low and has now
moved above its 50 dma.  This position offers a reasonable entry
point for those investors with a bullish outlook for the issue.

DEC 20.00 UWL LD LB=4.88 OI=162 CB=19.38 DE=21 MR=4.7%

VRTA - Virata  $23.38  *** Is it time to buy? ***

Virata provides communications software and semiconductors to
manufacturers of DSL, wireless, and other broadband networking
equipment.   Virata's suite of processor-independent software
products provide developers with complete, field-proven tools
of networking functions, including ATM, MPLS, and web servers,
removing the need to write and validate new software code.
VRTA also pre-integrates its extensive suite of communications
software with its powerful and cost-effective communications
processors to create "integrated software on silicon" (ISOS)
products.  Virata reported strong earnings but sank after
being downgraded by UBS Warburg on fears of an inventory
buildup problem in the next quarter.  A software license
agreement to integrate Virata's EmWeb HTTP Server and Client
software into Cisco IOS. software appears to have arrested
the downfall.  As the semiconductor sector is showing signs
of life, Virata offers a reasonable risk-reward entry point
for those who wish to bottom-fish in the group.

DEC 17.50 UFA LW LB=6.63 OI=82 CB=16.76 DE=21 MR=6.4%



The following group of issues is a list of additional 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
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Return
Stock  Last  Call  Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

SMSC   24.00  DEC  22.50  OMQ LX  2.44  10   21.56   21    6.3%
MME    20.25  DEC  20.00  MME LD  1.06  74   19.19   21    6.1%
SAFC   25.06  DEC  25.00  SAQ LE  1.00  116  24.06   21    5.7%
ATRX   18.56  DEC  17.50  OQF LW  1.69  49   16.87   21    5.4%
XTO    23.56  DEC  22.50  XTO LX  1.88  109  21.69   21    5.4%
TRY    25.44  DEC  25.00  TRY LE  1.13  0    24.31   21    4.1%

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Naked Put Percentage List
By Matt Russ

Stock  Stock  Strike Option  Option Margin Percent Support
Symbol Price  Price  Symbol  Price  At 25% Return  Level

ALXN   81.00     70  XQN-XN    3.25   2025   16%      70
CIEN  102.13     90  UEE-XR    5.88   2553   23%      90
DGX   104.38     95  DGX-XS    3.75   2610   14%      95
EMLX  136.25    120  UMQ-XD    9.50   3406   28%     120
IDPH  176.88    160  IDK-XL    7.63   4422   17%     160
IVGN   76.50     70  IUV-XN    3.88   1913   20%      70
LH    139.06    130   LH-XF    4.50   3477   13%     129
PDLI   95.00     80  RPV-XP    3.25   2375   14%      80
PMCS  113.44    100  SDL-XT    6.75   2836   24%     100
QCOM   84.50     80  AAF-XP    3.25   2113   15%      80
RBAK   78.75     65  BUK-XM    3.38   1969   17%      68
SCMR   58.88     50  SMZ-XJ    2.44   1472   17%      50
SDLI  235.50    210  QZL-XB    8.00   5888   14%     205
SEIC   95.13     90  QEI-XR    3.50   2378   15%      85
SUNW   84.88     75  SUX-XO    2.25   2122   11%      80
VTSS   64.19     55  VQT-XK    2.75   1605   17%      58


Trading Systems: A Blueprint for Success!
By Ray Cummins

Developing a profitable trading plan is the key to succeeding in
any market condition.  Regardless of how they generate entry and
exit signals, most professional traders use a systematic plan to
select their positions.  These sophisticated participants, who
often manage funds worth millions of dollars, have no margin for
faulty judgment or excessive capital exposure.  A trading system
helps prevents these problems by taking the human element out of
the transaction.  In addition, a trader that uses a well designed
plan can be wrong about the market more often than not and still
be successful.  Of course nobody wants to be wrong, but it's the
size of your portfolio at the end of the month that matters most.

The first step in developing a practical method for participating
in the market is to determine your comfort threshold and stress
level.  Think about the unique emotional effects of your trading
activities and managing an investment portfolio.  Are you usually
a cautious person or do you feel comfortable traveling at warp
speed?  How will a specific type of trading affect you mentally?
Can you handle the volatility of day-trading options or are you
happier with conservative, longer-term plays.  After you identify
the appropriate trading attitude, it is important to decide what
type of market activity is most favorable to your personal style.
Some traders prefer strategies that profit from trending markets
such as those characterized by a sustained advance or decline.
Techniques that benefit from this type of movement include Put or
Call buying and high potential spreads or combinations.  Another
tactic might be to focus on changes in volatility.  Traders using
this approach buy or sell premium in an attempt to profit from
transitions in market character.  Some utilize neutral positions
such as calendar or ratio spreads when the technical outlook for
the underlying issue is range-bound or static.  Regardless of the
method you prefer, each category of price action demands a unique
type of trading system.  The key to success is to specialize in a
specific kind of market activity and utilize trading strategies
that perform well in that particular environment.

A successful trading plan will limit losses, maximize profits and
yield favorable returns over extended periods in varying market
conditions.  A complete system generally includes several parts:
a specified period or time frame, the proper setup, signals for
both entry and exit points, and any additional components that
make the plan more efficient and easy to use.  All systems begin
with a target time frame, which establishes the specific period
used in the technical indicators to generate individual trading
signals.  You should choose a time frame that fits your personal
portfolio outlook and risk tolerance.  The proper setup entails a
group of circumstances that clearly define the overall condition
in which the trade can be initiated.  For those who use technical
indicators explicitly, this portion of the system identifies the
type of chart pattern that must be observed before the position
is viable.  While the setup defines the basic parameters for the
position, the entry signal actually triggers the initial buy or
sell transaction.  Once the opening trade has occurred, the exit
point determines when the position will be liquidated.  Orders
to close portions of the position at predetermined targets are
placed immediately after the opening transaction and a "trailing"
method is used to adjust these in a timely and effective manner.

The study of historical charts and basic technical analysis can
be used to correctly position the trailing stops and the primary
price support areas and short-term (18 - 40 dma) moving averages
are the main indicators that determine the initial target exits.
After a trend had been established with the stock price above the
moving average, the sell-stop is simply adjusted higher with each
successive rally.  As long as the stock price remains above its
rising moving average, the trend is intact.  As the moving average
begins to level, the effects of short-term weakness become more
apparent and the consolidation period begins.  When the issue
enters this high-risk area, the complexity of decision-making
increases exponentially.  Rather than trying to distinguish the
differences between a healthy dip and a full-scale reversal, an
experienced trader will focus on the positioning of the sell-stop,
exiting the position when it becomes apparent that it is not
performing as expected.

A common trait among new traders is they lose money because they
they do not have a plan for when and how to exit their positions.
Maximizing profits from winning trades is critical to successful
trading and that task is very difficult without a well-defined
system for locking-in gains.  In addition, a trading plan helps
you avoid the pitfalls of emotion-based decision-making and it
also allows you to review entry/exit techniques and evaluate the
performance of specific strategies.  Of course, the best trading
system is only as good as its execution.  If you enter a position
that does not fit your risk/reward profile, or you initiate a
trade before the appropriate setup criteria is in place, you have
obviously not followed the plan.  While these oversights may seem
like minor infractions, they can seriously impact the performance
of your portfolio.  Regardless of the type of trading system you
favor, the best methods are those that achieve consistency with a
high percentage of profitable trades and at the same time, prevent
winners from turning into losers.

Good Luck!

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


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

AVID   15.31  19.88   DEC  12.50  0.56  *$  0.56  12.6%
ECLP   22.75  22.00   DEC  17.50  0.63  *$  0.63  10.6%
IMG    27.63  22.88   DEC  22.50  0.81  *$  0.81  10.5%
IDXC   29.38  26.63   DEC  22.50  0.75  *$  0.75   9.8%
CTXS   30.88  27.75   DEC  25.00  0.63  *$  0.63   9.6%
VLNC   17.31  14.75   DEC  12.50  0.31  *$  0.31   8.9%
PSUN   22.19  20.94   DEC  17.50  0.38  *$  0.38   8.6%
MTON   18.94  17.94   DEC  15.00  0.38  *$  0.38   7.9%
HNT    22.25  21.44   DEC  20.00  0.50  *$  0.50   7.6%
BVSN   36.00  30.81   DEC  25.00  0.50  *$  0.50   7.1%
SMSC   25.00  24.00   DEC  20.00  0.44  *$  0.44   7.0%
OXHP   37.38  36.13   DEC  30.00  0.56  *$  0.56   6.0%
TLB    49.81  50.19   DEC  40.00  0.50  *$  0.50   5.1%
KMI    43.25  42.44   DEC  40.00  0.56  *$  0.56   4.2%

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


Forget selling puts on Avid Tech (AVID) - we should have bought
calls instead!  Eclipsys (ECLP) has filed to sell an additional
5 million shares to the public and they cancelled an upcoming
investor meeting.  It may be time to consider exiting the play,
or rolling down, depending on your outlook.  A move towards $20
appears likely for Intermagnetics (IMG) as the stock has closed
below its 50 dma.  Is that a short-term "rounded top" on Idx
Systems (IDXC)?  Hopefully, the 50 dma will provide technical


Sequenced by Company
Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

AEOS   40.94  DEC  35.00  AQU XG  1.06  314  33.94   21    13.4%
AMZN   28.94  DEC  17.50  ZQN XO  0.63  2589 16.87   21    14.2%
ANF    28.94  DEC  25.00  ANF XE  0.50  336  24.50   21     8.9%
ARQL   25.38  DEC  17.50  ARQ XW  0.50  8    17.00   21    13.0%
CAR    30.06  DEC  25.00  CAR XE  0.38  0    24.62   21     7.5%
CMOS   20.88  DEC  15.00  CQS XC  0.38  198  14.63   21    11.9%
WGR    25.69  DEC  22.50  WGR XX  0.31  4    22.19   21     6.1%

Sequenced by Return
Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

AMZN   28.94  DEC  17.50  ZQN XO  0.63  2589 16.87   21    14.2%
AEOS   40.94  DEC  35.00  AQU XG  1.06  314  33.94   21    13.4%
ARQL   25.38  DEC  17.50  ARQ XW  0.50  8    17.00   21    13.0%
CMOS   20.88  DEC  15.00  CQS XC  0.38  198  14.63   21    11.9%
ANF    28.94  DEC  25.00  ANF XE  0.50  336  24.50   21     8.9%
CAR    30.06  DEC  25.00  CAR XE  0.38  0    24.62   21     7.5%
WGR    25.69  DEC  22.50  WGR XX  0.31  4    22.19   21     6.1%

Company Descriptions

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

AEOS - American Eagle Outfitters  $40.94  *** Hot Sector! ***

American Eagle Outfitters is a specialty retailer of all-American
casual apparel, accessories and footwear for men and women between
the ages of 16 and 34.  The company sources, designs and markets a
versatile line of timeless and relaxed clothing classics under the
American Eagle Outfitters and AE brand names for exclusive sale in
American Eagle Outfitters stores.  The stores market fashionable
items that reflect a lifestyle-based retail branding strategy and
their designers interpret fashion trends and develop merchandise
that has fresh, collegiate appeal.  Their merchandise: sweaters,
jeans, khakis, T-shirts, woven shirts, and fleece is regularly
updated with new styles, colors and fabrics.  Regardless of the
bearish economic outlook, analysts say there is a green Christmas
in store for most specialty clothing retailers and based on the
technical indications, investors believe AEOS will be one of the
more profitable companies.

DEC 35.00 AQU XG LB=1.06 OI=314 CB=33.94 DE=21 MR=13.4%

AMZN - Amazon.com  $28.94  *** E-tailer Rally! ***

Amazon.com is an online retailer that serves over million of
customers in over 150 countries.  The company directly offers for
sale millions of unique items in categories such as books, music,
DVDs, videos, toys, electronics, software, video games and home
improvement products.  Through its marketplace services such as
Amazon.com Auctions, zShops and sothebys.amazon.com, the company
has created Web-based marketplaces where buyers and sellers can
enter into transactions with respect to a wide range of products.
In addition to its US web site, the company currently has two
international Internet sites and they have developed strategic
commercial relationships with a number of e-commerce companies.
Amazon shares surged Friday as investors scooped up technology
bargains, despite a brief crash of the online retailer's Web site
during the busy post-Thanksgiving shopping session.  Even with the
technical difficulties, Amazon.com opened the holiday season with
a big jump in online retail business and the trend is expected to
continue for the next few weeks.

DEC 17.50 ZQN XO LB=0.63 OI=2589 CB=16.87 DE=21 MR=14.2%

ANF - Abercrombie & Fitch  $28.94  *** Time To Shop! ***

Abercrombie & Fitch is engaged in the purchase, distribution and
sale of men's, women's and kids' casual apparel.  The company's
retail activities are conducted under the Abercrombie & Fitch
trade names through retail stores, a catalogue, and a website.
ANF's merchandise is targeted to appeal to customers in specialty
markets who have distinctive consumer characteristics.  ANF is
another great retail clothing issue and analysts say the stock
is modestly undervalued relative to its mall-based, youth-focused
peers.  The company's long-term earnings prospects are excellent
and this conservative position provides a great entry point for
those who wouldn't mind owning the issue.

DEC 25.00 ANF XE LB=0.50 OI=336 CB=24.50 DE=21 MR=8.9%

ARQL - ArQule  $25.38  *** Second Chance Entry! ***

ArQule designs and produces molecules for the medicines of the
future.  ArQule offers chemistry-based products and services
that improve the efficiency and effectiveness of the discovery
process including accelerated lead optimization services, novel,
diverse screening libraries and access to its high-throughput
parallel synthesis platform technology.  In addition, ArQule
ArQule seeks to bridge the gap between genomic and clinical
development by applying its proprietary technology platform and
world class chemistry capabilities to drug discovery.  A recent
filing to sell 2.5 million shares of common stock had a brief
negative affect on the issue but Friday's bullish move suggests
there is further upside potential for the share value of this
unique company.

DEC 17.50 ARQ XW LB=0.50 OI=8 CB=17.00 DE=21 MR=13.0%

CAR - Carter-Wallace  $30.06  *** On The Move! ***

Carter-Wallace manufactures and markets a diversified line of
products in the Domestic Consumer Products, Domestic Health Care
and International segments.  Their products include deodorants
and anti-perspirants, condoms, at-home pregnancy and ovulation
test kits, hair removal products, tooth whitening products and
various pet products.  CAR also provides health care products
including prescription pharmaceuticals as well as professional
diagnostic kits.  Their international products include many of
the same health care products that are sold domestically.  CAR
has long been known as a potential take-over candidate and with
the improving fundamental outlook for the company, the issue is
certain to command a favorable valuation.  The stock is also
performing well technically and it appears poised for further
upside activity.

DEC 25.00 CAR XE LB=0.38 OI=0 CB=24.62 DE=21 MR=7.5%

CMOS - Credence Systems  $20.88 *** Bottom Fishing! ***

Credence Systems designs, manufactures, sells and services
automatic equipment used for testing semiconductor integrated
circuits.  The company also develops, licenses and distributes
related software products.  Credence serves the semiconductor
industry's testing needs through a range of products that test
a number of digital logic, mixed-signal and other non-volatile
memory semiconductors.  One analyst recently said CMOS has been
unjustly discounted by investors in the face of enormous growth
potential and with the company's earnings report due next week,
that view will certainly be put to the test.  Those of you who
favor the recent recovery pattern near $20 can speculate on the
outcome of the announcement with this conservative position.

DEC 15.00 CQS XC LB=0.38 OI=198 CB=14.63 DE=21 MR=11.9%

WGR - Western Gas Resources  $25.69  *** Energy Sector! ***

Western Gas Resources is an independent gatherer and processor,
transporter, producer and energy marketer providing a full range
of services to its customers from the wellhead to the delivery
point.  The company designs, constructs, and operates natural
gas gathering, processing and treating facilities in major gas
producing basins in the Rocky Mountain, Mid-Continent, Gulf Coast
and Southwestern regions of the United States.  Western recently
reported outstanding quarterly earnings and the company is well
positioned to improve its cash flows as their core gathering and
processing business continues to expand.  In addition, Western's
equity gas reserves are growing steadily and with the increased
demand for natural gas in the winter months, the company's share
value should increase as well.  Use this position as a hedge for
bearish moves in the broader market.

DEC 22.50 WGR XX LB=0.31 OI=4 CB=22.19 DE=21 MR=6.1%



The following group of issues is a list of additional 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
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Return
Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

ATSN   39.00  DEC  30.00  UAT XF  0.44  20   29.56   21    7.7%
SBUX   48.00  DEC  45.00  SQX XI  0.81  595  44.19   21    6.9%
EDS    51.50  DEC  47.50  EDS XW  0.81  139  46.69   21    6.8%
SRCL   34.38  DEC  30.00  URL XF  0.38  3    29.62   21    5.6%
BMET   38.41  DEC  35.00  BIQ XG  0.44  28   34.56   21    5.1%
GMT    46.56  DEC  40.00  GMT XH  0.44  43   39.56   21    5.1%

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Investors Give Thanks...

Stocks rallied Friday as bargain hunters dominated the shortened
holiday session.

Wednesday, November 22

The stock market slid lower today amid the political uncertainty
and persistent worries over the slowdown in the economy.  The
Nasdaq closed down 116 points at 2,755 and the Dow ended down 95
points at 10,399.  The S&P 500 index was down 24 points to 1,322.
Trading volume on the NYSE hit 967 million shares, with declines
beating advances 1,836 to 942.  Activity on the Nasdaq exchange
was moderate at 1.8 billion shares traded, with declines beating
advances 2,884 to 1,071.  In the U.S. treasury market, the long
bond rose 27/32, pushing its yield down to 5.67%.

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

Medquist   MEDQ   DEC17C/DEC12P   $0.25   debit   synthetic
Miravant   MRVT   DEC20C/DEC12P   $0.12   debit   synthetic
Pioneer    PXD    DEC12C/DEC15C   $1.62   debit   bull-call

Our speculation plays did not offer the target entry prices,
but there were a few favorable opportunities to enter the new
positions with individual orders.

Portfolio Plays:

The market fell precipitously today as investors continued to
worry about shrinking revenue growth and the outcome of the
Presidential election.  The slowing pace of economic expansion
is expected to reduce corporate America's bottom line and the
stock market is now experiencing a transition from exponential
growth to more stable and realistic returns.  Confirmation of
that trend has been overwhelming in recent weeks, with every
major industry showing signs of declining profits and today's
data from companies in both technology and consumers products
suggested the slowdown is well underway.  On the Dow, General
Electric (GE), Boeing (BA), and J.P. Morgan (JPM) were among
the biggest losers.  Blue-chip issues in the drug and tobacco
groups were hit by concern that Republican candidate George W.
Bush's lead in the election may be in doubt.  Bush is seen as
more favorable to such companies with his promise to bring in
less government and regulation.  On the Nasdaq, Novell (NOVL)
and Intuit (INTU) led the losers as investors expressed their
disappointment with the companies' earnings reports.  Software
giant Oracle (ORCL), the most active stock on the Nasdaq, also
moved lower and other technology bellwethers slumped including
networking firm Cisco Systems (CSCO), telecom equipment maker
Qualcomm (QCOM) and computer hardware designer Sun Micro (SUNW).
Internet companies slumped on worries of declining advertising
revenues and business software issues retreated after a number
of analysts downgraded the sector.  Despite broad-based selling
pressure, biotech stocks carved out meager gains but the once
high-flying financial services group fell for the fifth day in
a row amid worries that a weaker stock market will hurt future

In the industrial group, Coca-Cola (KO) gave the Dow a boost,
rebounding to $60 after dropping its bid for Quaker Oats (OAT).
Late Tuesday evening, the company recanted its bid to buy the
breakfast cereal maker and owner of the Gatorade brand for $15
billion, a price analysts had said was too high.  Quaker stock
dropped over $7 to $87, putting our recent bullish position at
at $80 in jeopardy.  However, the good news is French food and
drink concern Groupe Danone SA is likely to make a $14 billion
offer for the company.  Another leader in the Food and Beverage
group, Safeway (SWY) continued its recent rally, closing at a
new high above $60.  Our bullish synthetic position in January
is offering a favorable early-exit profit of $1.38.  The drug
sector also enjoyed upside activity with Cardinal Health (CAH)
adding $4 to close at an all-time high near $100.  Our bullish
credit spread is at maximum profit with the issue above $90.
Carter Wallace (CAR) was another big mover in the category of
drug-related issues, climbing to a record high at $29.38.  The
JAN25C/DEC30C diagonal spread is approaching a 100% return with
after only two months in the position.  In the straddles section,
British Telecom (BTY) is making a sharp downward move and our
recent neutral play is now profitable.  In addition, there is a
good chance the bearish portion of the play (APR-$100 Put) will
pay for the entire position, leaving the APR-$100 call option
free to achieve unlimited returns on any future recovery.

Thursday, November 23


Friday, November 24

Stocks rallied Friday as bargain hunters dominated the shortened
holiday session.  The Nasdaq jumped 148 points to 2,904 and the
the Dow closed up 70 points at 10,470.  The S&P 500 index was up
19 points to 1,341.  Trading activity on the Nasdaq was light at
804 million shares exchanged, with advances outpacing declines
2,477 to 1,067.  Trading volume on the NYSE was just 405 million
shares, with declines beating advances 1,808 to 792.  In the bond
market, the 30-year Treasury rose 4/32, pushing its yield down to

Portfolio Plays:

Technology stocks led the rally today amid light trading volume
and a belief that the outcome of the Presidential election will
be determined in the next few days.  On the Nasdaq, gains were
broad-based but Internet, computer software and semiconductor
shares topped the leader board.  E-tailer stocks were among the
favorites as traders welcomed the start of the holiday shopping
period.  Telecom issues also rallied and biotechnology shares
moved higher after SG Cowen suggested the recent weakness in the
group represents a buying opportunity.  On the Dow, J.P. Morgan
(JPM) jumped over $4 after receiving approval from the SEC for
its merger with Chase Manhattan (CMB).  Technology bellwethers
Intel (INTC), Hewlett-Packard (HWP), and Microsoft (MSFT) also
led the blue-chips higher.  Johnson & Johnson (JNJ), Procter &
Gamble (PG) and SBC Communications (SBC) were among the weakest
performers.  In the broader market, financial shares rebounded,
with brokerage stocks leading the upside activity.  Oil service,
airline and paper shares also advanced while drug, retail and
consumer issues generally retreated.

The big movers in our portfolio came from the biotechnology group
and Curagen (CRGN), Invitrogen (IVGN) and Vertex Pharmaceuticals
(VRTX) were among the top performers.  BioChem Pharma (BCHE) was
also a standout, rising $2.43 to a recent high near $26 on news
that its marketing partner Glaxo Wellcome has launched sales of
BioChem's Zeffix tablets in Japan for the treatment of chronic
hepatitis B.  The new territory will produce increased revenues
and exposure for the drug, which continues to sell very well in
other parts of the world.  Our bullish calendar spread at $30 is
once again profitable, and there may be an opportunity for early
exit in the coming sessions.  Carter Wallace (CAR) edged higher
during the session and in the Food and Beverage group, Safeway
(SWY) reached a new record near $61.  Among technology issues,
the classics were popular with Microsoft (MSFT), Hewlett-Packard
(HWP) and Intel (INTC) leading that category of portfolio plays.
Small-cap stocks also benefited from the bullish activity and our
new play in Miravant (MRVT) was prosperous as the issue moved up
$0.93 to a recent high near $17.  Those who entered the synthetic
position should monitor the option prices closely for a profitable
early-exit opportunity.

In the ongoing Quaker Oats (OAT) saga, French food and drinks
firm Groupe Danone SA reported it has decided not to pursue a
buyout of the company, saying that the financial terms of such
a deal would not be in the best interests of its shareholders.
Quaker shares slumped after the announcement, and there will
likely be further consolidation in the coming sessions.  Traders
participating in the bullish position at $80 should define their
exit strategies and be ready to act on Monday's movement.  The
recent support near the sold strike (at $80) will be the first
major test of technical strength of the underlying issue and we
expect the outcome (and follow-through) to be decisive.

Questions & comments on spreads/combos to Contact Support
                         - NEW PLAYS -
MU - Micron Technology  $40.88  *** Chip Sector Recovery! ***

Micron Technology and its subsidiaries design, develop, market
and manufacture semiconductor memory products, primarily DRAM,
principally for use in personal computers (PCs).  The company's
semiconductor operations focus primarily on design, development
and manufacture of leading edge semiconductor memory products.
The company's primary semiconductor memory product, Dynamic
Random Access Memory (DRAM), is a high density, low-cost, random
access memory component that stores digital information in the
form of bits, and provides high-speed storage and retrieval of
data.  The DRAM market is diversifying, with major customers
demanding specific memory solutions to meet their particular
memory needs.  The company is committed to offering customers
multiple DRAM solutions and maintaining long-term support of
those solutions.  Through Micron Electronics, its 63%-owned
subsidiary, the company offers PC systems and servers.

The chip sector is starting to regain its strength and a number
of analysts are speculating that a technical bottom could be in
place with most of the downward revisions now priced into the
current share values.  In addition, Semiconductor Equipment and
Materials International recently announced that North American
chip-gear orders reached $3 billion in October, with a current
book-to-bill ratio of 1.17.  The ratio shows that orders were 17%
higher than shipments for the month; a very favorable indication.
Micron is one of the leaders in the group and if DRAM inventories
and prices begin to stabilize, the company's stock will recover

We found this position while researching for Covered-calls and it
has a favorable risk/reward ratio when reviewed with regard to
the current price of the underlying issue and its recent technical
trend.  Traders who favor conservative debit positions can use
this spread to speculate on the short-term movement of MU's share

PLAY (conservative - bullish/debit spread):

BUY  CALL  DEC-32.50  MU-LS  OI=617    A=$9.38
SELL CALL  DEC-35.00  MU-LG  OI=16887  B=$7.38
INITIAL NET DEBIT TARGET=$1.88-$2.00  ROI(max)=25% B/E=$34.50


These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues.  Review each play individually and make
your own decision about the future outcome of the position.

ECIL - ECI Telecom  $23.94  *** Bottom Fishing! ***

ECI Telecom is a provider of integrated network solutions for
digital communications and data transmission systems.  They
design, develop, manufacture, market and support end-to-end
digital telecommunications solutions for new services and
converging networks.  The company's products create bandwidth
and enhance the capabilities of existing networks to support
voice, data, video and multimedia services.  ECI's equipment
supports traffic in more than 500 service networks in over 145
countries.  In March 1999, ECI completed a merger with Tadiran
Telecommunications, an Israeli-based company that designed,
developed, manufactured, distributed and supported advanced
telecommunications and systems worldwide.  Internationally, TTL
focused primarily on developing and providing digital cross
connect, wireless local loop, wireline access and business
systems.  ECI has now grouped its product lines into three
categories: Access, Transport and Other.

ECI has suffered the fate of most telecoms in recent months
and with the company's recent plans to segregate into multiple
divisions, a labor dispute is now underway.  The argument, which
affects former employees of Tadiran Communications, involves
proposed layoffs as the company moves to divide into five major
entities; Optics, Access, Transport, Innowave and NGTS.  Under
the merger agreement with Tadiran, ECI must honor a collective
bargaining agreement which specifies that management may not
dismiss more than 180 employees over the next six years.  No one
has suggested that the company intends to forego this covenant
but the issue has the potential to create a major distraction.

Strangely enough, ECIL appears to have established a short-term
technical bottom and the potential for a rally from this area
is excellent.  Our position is conservatively optimistic with
little downside and a favorable risk/reward ratio.

PLAY (conservative - bullish/collar):

SELL CALL   DEC-25.00  ECQ-LE  OI=138  B=$1.62
BUY  PUT    DEC-22.50  ECQ-XX  OI=35   A=$0.68
TARGET COST BASIS=$23.00 ROI(max)=8% DOWNSIDE RISK(max)=$0.50

PFE - Pfizer  $42.31  *** Trading Range! ***

Pfizer is one of the world's largest pharmaceutical and consumer
healthcare companies.  The new company was formed in June 2000,
following the pooling of interests merger between Pfizer and
Warner-Lambert (WLA) and it now represents a significantly larger
consumer business encompassing many of the world's best-known
brands including Halls, Tetra, Benadryl, Sudafed, Listerine,
Desitin, Schick, Visine, Ben Gay, Lubriderm, Zantac 75 and
Cortizone.  Pfizer operates through four main operating units:
Pfizer Pharmaceuticals Group, Warner-Lambert Consumer Division,
Pfizer Animal Health Group and Global Research and Development.

The drug sector has performed relatively well over the past few
weeks, even as stock values tumbled amid concerns of shrinking
corporate revenues and problems with the Presidential election.
Unfortunately, Pfizer has not participated in any of the sector
rallies and Friday's move to a recent low suggests a new bearish
trend may be starting.  The previous highs near the sold (short)
strike at $45 should provide adequate resistance for any future
rallies and the substantial open interest will provide plenty of
opportunity to achieve the target credit.

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-47.50  PFE-LM  OI=6094   A=$0.25
SELL CALL  DEC-45.00  PFE-LI  OI=19112  B=$0.50
INITIAL NET CREDIT TARGET=$0.31-$0.38  ROI(max)=14% B/E=$45.31

                    - STRADDLES & STRANGLES -
UBB - Unibanco-Uniao de Banco  $25.25  *** Probability Play! ***

UBB is a full-service financial institution engaged in retail
banking, wholesale banking, insurance and asset management
throughout Brazil.

Brazil's bank privatization continues to create volatility in
the Latin American financial group and Unibanco is one of nine
banks registered to bid in Monday's government auction of a
controlling stake in Banco de Estado de Sao Paulo, or Banespa.
Unibanco will go up against its two top native rivals, Banco
Bradesco SA and Banco Itau
type=usstock+usfund&profile-end=quote-lookup> SA, and some other
heavyweights.  The auction is really a battle for supremacy
in the struggle to reshape Brazil's retail banking landscape
and all of the primary contenders are tenacious opponents.
Whatever the outcome, the effect on UBB's shares should be
favorable and with the statistically low premiums, we expect
a profitable result.

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

PLAY (conservative - neutral/debit straddle):

BUY  CALL  JAN-25  UBB-AE  OI=92  A=$2.12
BUY  PUT   JAN-25  UBB-ME  OI=26  A=$1.62

VSTR - VoiceStream Wireless  $116.69  *** Range-Bound? ***

VoiceStream Wireless through its subsidiaries, provides personal
communications services (PCS) under the VoiceStream brand name
in a number of urban markets, and VSTR is currently constructing
systems in San Antonio and Austin.  The company holds broadband
PCS licenses covering approximately 62 million persons and their
services include rate plans, prepaid services, wireless e-Mail,
wireless data, and text messaging.  In addition to offering home
coverage in the aforementioned markets, VoiceStream also provides
national and global roaming.

Based on the analysis of historical option pricing and technical
trading patterns, this position meets our basic criteria for a
potential credit-strangle.  The underlying issue has a relatively
well-defined trading range between $100 and $125 and heavy supply
at the sold option strike of $130.  The recent volatility has
inflated the near-term option premiums and we will use the higher
prices to our advantage with this relatively conservative, neutral
position.  As with any recommendation, the position should be
carefully evaluated for portfolio suitability and reviewed with
regard to your strategic approach and personal trading style.

PLAY (conservative - neutral/credit strangle):

SELL CALL  DEC-130  BWU-LF  OI=3413  B=$1.69
SELL PUT   DEC-105  UVT-XA  OI=656   B=$2.50
DOWNSIDE B/E=$100.75 UPSIDE B/E=$134.25

Note: Many traders may favor a more aggressive approach, selling
options that are closer to the current price of the issue, to
produce a higher initial return.  While that technique may be
more attractive, it also increases the theoretical risk of loss.
Only you can know what plays are suitable for your risk-reward
tolerance and experience level.

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

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