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Daily Newsletter, Wednesday, 11/29/2000

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The Option Investor Newsletter                Wednesday 11-29-2000
Copyright 2000, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        11-29-2000        High      Low     Volume Advance/Decline
DJIA    10629.10 +121.50 10646.20 10480.80 1.12 bln   1463/1397
NASDAQ   2706.93 - 28.05  2770.18  2642.89 2.05 bln   1388/2551
S&P 100   712.47 +  4.00   718.33   704.92   totals   2851/3948
S&P 500  1341.93 +  5.84  1352.38  1329.28           41.9%/58.1%
RUS 2000  454.60 -  4.42   459.86   451.55
DJ TRANS 2799.42 +  3.01  2812.86  2777.73
VIX        30.20 -  0.19    31.15    29.58
Put/Call Ratio      0.82

The Pain Has Begun

The late-day rebound in the NASDAQ and triple digit gains in the
Dow Jones Industrial Average gave the bulls a glimmer of hope near
the close of trading.  However, that hope was dashed after the
market closed when two earnings warnings rocked the tech sector in
the evening trading session.

The story is beginning to unfold.  The broader market indices have
been foreshadowing a slowdown in the US economy since late last
summer.  This morning, the Commerce Department reported downwardly
revised third-quarter gross domestic product (GDP) figures and
confirmed the market's suspicions.  Third-quarter growth in
domestic goods and services produced was lowered to 2.4% from the
previously reported 2.7%.  Take note that the 2.4% GDP growth
recorded during the third-quarter is the lowest rate of growth
since 1996.  I hope Doc Greenspan is content with his work!

The effects of the slowing US economy were immediately reflected
in the tech sector this evening.  Gateway warned that revenue
and profits for its fourth-quarter would fall well short of
Wall Street's previous estimates.  The PC maker cited weak
consumer spending on personal computers thus far in the holiday
shopping season.  Even more detrimental, Gateway said it
expected demand for its computers to remain weak for the next
12 to 18 months.  Shares of Gateway were hammered in the
evening session of trading.  The stock finished regular trading
at $29.02 - it was trading at $19.75 at time of writing.

It gets worse.  Altera (ALTR), a leading maker of programmable
chips, announced it would fall short of analysts' consensus
estimates for revenues during its fourth-quarter.  The chip
company said that sales in November were soft across all of
its business lines, which resulted from a slowdown in orders
from its digital subscriber line (DSL) customers.  Moreover,
Altera reported that inventory among its customers had built
up dramatically in the past months, which would result in
slower sales in the coming quarters.  Shares of Altera
settled at $25.94 in the regular session.  After the stock
was released from its halt in after hours trading it fell
to $18.50 at the time of writing.  The warning from Altera
will surely send a shock through the Philadelphia Semiconductor
Index (SOX.X) tomorrow as nearly every leading chip stock
fell in sympathy during after hours trading.  The SOX recently
broke below a significant support level at 600 and will most
likely see more downside on the heels of Altera's warning.

To digress from the doom, not all earnings news was bearish
after the close.  The once-high flying Brocade (BRCD) reported
bullish fourth-quarter numbers that edged past Wall Street's
consensus estimates by two cents.  The company said its business
remained strong and provided solid guidance going forward.
Despite the bullish tone to Brocade's conference call, the stock
bounced around in after hours trading, dipping as low as $143,
or $10 below its 4:00 EST close of $153.81.  However, at time of
writing, shares of Brocade had rebounded from its evening session
lows and had stabilized near its closing price.  Brocade could
provide a lift to select pockets of tech tomorrow if, and only if,
the bulls overpower the bears who have all but crushed the stock
over the past two weeks.  The fact is shares of Brocade are still
richly valued and the current market environment is not
favorable to such valuations.

Ahead of the earnings news this evening, the NASDAQ had an
impressive rebound off its intraday lows around the 2650 level.
Before the late-day rebound, the NASDAQ was inflicting increased
amounts of pain across several sectors.  A glance over several
charts this afternoon revealed that momentum and tech investors
are really beginning to feel the heat.  Take a look at the
charts of ITWO, CIEN, and VRTS.  All three stocks lost over
$10 today, and all three stocks share something in common: high
valuations.  These previous mentioned leaders of the COMPX are
weighing heavily on the tech-infested index and will continue to
drag it lower if the buyers don't step in soon.  Historical
support levels are giving way with increased frailty and the
bottom of the COMPX has not yet been found.  As much as I hate
to write it, the path of least resistance is still lower for the

The above chart presents three levels which are likely to provide
support for the COMPX.  Although the NASDAQ continues along its
path of relative lows, it doesn't mean you can't trade the
rallies off support.  A word of caution though, if you're going
to trade the upside in this market pick your trades with
scrutiny and practice professional money management.  That means
defining potential reward and clearly defining risks by setting
stop losses.  It's clearly evident that the NASDAQ is in a bear
market, and a common characteristic of bear markets are violent
and massive rallies over the course of two or three days.  To
reiterate, there is potential to make money on the upside but
it requires discipline.

While I'm on the topic of bear markets, it may behoove us to
review a history of the Ursa.  In the last century, the average
bear market lasted roughly 400 days.  The average bear market
over the last 100 years typically eroded 27% of the market.
The current bear in the NASDAQ is only 270 days old, but it
has taken away nearly 50% of the gains from the index's March
peak at 5132.  Judging by past bear markets, the current Ursa
is one of the most violent in recent times, and it's still
relatively young.  While much damage has already been done to
the NASDAQ, it could still trade lower until all the bad
news is discounted.  If you're holding on to big losses in
some of the bear targets remember that it's never too late to
sell and preserve capital - and stay alive to play the game!

But enough with the bearish talk for a moment.  There are
select areas of the market which continue to trade higher in
spite of the weakness in the broader markets.  If you're
searching for upside look no further than the drug and food
sectors.  The obvious defensive positioning resulting from
a slowdown in the US economy has sent several big drug and
food names to new 52-week highs recently.  Among some of the
notable names trading at new highs include shares of Abbot
Labs, Merck, Schering-Plough, Hershey, Wendy's, and WM Wrigley.
As long as the economy continues slowing and earnings
warnings stream from the tech sector, the aforementioned
groups of stocks should produce trading profits as they
provide a safer place to put capital to work.  Remember that
there's still a lot of capital sitting on the sidelines in
the form of money markets.  Professional money managers will
need to put that money to work before the end of the year
in order not to upset shareholders with such large cash
positions.  With the tech sector teetering, that capital
could continue to work its way in the drug and food stocks.

Speaking of money managers, the end of the month is upon us
tomorrow, which generally coincides with new cash coming
into funds.  Again, that cash will need to be put to work.
Furthermore, there exists the possibility for a window
dressing induced rally tomorrow despite the warnings from
Gateway and Altera.  Fund managers might try to administer
some damage control to their portfolios tomorrow by running
stocks up and improving their performance for the end of
November results sent to large shareholders.  As
contradictory as I might sound, it wouldn't be surprising
to see a rally tomorrow as November comes to an end.
Furthermore, the NASDAQ has fallen 300 points from its
intraday high at 3000 Monday and it's just plain ugly
out there.  One of the bear market rallies I mentioned
above might be in the mix in the coming days.

I know that our readers don't like hearing bearish commentary;
I don't like writing bearish commentary.  However, I must be
realistic.  The NASDAQ is hurting big time, US economy is
slowing, FED has not yet provided any relief, election is
still a mess, and fourth-quarter earnings warning season
is upon us.  The combination of these events is inflicting a lot
of pain in the tech sector to those who have bought dips and
fought the trend over the past 12 weeks (myself included).
The strategy here is defensive, which has been witnessed in the
food and drug sectors.  In a bear market, the name of the game
is survival and patience.  A bull will return and when it does
it's better to have capital than not.

While my bias is still obviously bearish, here are a few things
for the remaining bulls to think about.  The bottom-line for the
NASDAQ is that the pessimism is getting pretty thick, which is
a good thing.  Only when the maximum amount of pain is inflicted
in tech sector will the bull be ready to run again.  It may be
several more months before the sentiment in the tech sector
shifts and the bears start feeling pain and lose the valuation
debate.  Then again, it could be next week.  The key is to watch
for climatic selling in which EVERY stock gets taken out and shot.
A big whoosh down to the 2300 level for the NASDAQ could very
well be the bottom.  Also, pay heed to the levels of the CBOE
Market Volatility Index (VIX.X).  The VIX is commonly referred to
as the fear gauge of market participants and is a good tool to use
when attempting to spot the bottom.  A spike in the VIX above
35 or higher to the 40 level could very well be indicative of
a bottom in the NASDAQ.  And while I hesitate to use the word
bottom, the selling has got to stop somewhere.  Doesn't it?

Eric Utley
Assistant Editor

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LLY - Eli Lilly & Co $94.50 +2.75 (+5.81 this week)

Eli Lilly discovers, develops, and manufactures pharmaceutical
products for humans and animals.  They are the makers of the
best-selling anti-depressant drug, Prozac; however, it's set to
begin losing its US patent protection in 2001.  The company is
looking to its drug pipeline, which boasts 40+ potential
products) to produce another market winner.

The big pharmaceuticals and biotechs are trading up this week on
Florida's  certification of Republican candidate George W. Bush
as winner of the presidential election in the Sunshine State.
When Bush was declared the winner, the concerns of price
controls were eased and buyers moved into the sector.  Recall
that Gore's healthcare platform condemned the climbing drug
prices and suggested Medicare reform, which would have adversely
effected the drug makers.  The political news and an upgrade to
Buy from Hold by ING Barings positioned LLY for a jump off its
lengthy trading channel on Monday. Trading activity kicked up
another gear as the momentum was also fueled by additional news
events and upgrades this week.  Yesterday, Eli Lilly reported
that Phase II data was presented for its impotence pill, Cialis,
in Australia at the 9th World Meeting on Impotence Research.
Eli Lilly, in a joint venture with Bayer AG, hopes Cialis will
become the challenger to Pfizer's (PFE) best-selling impotence
drug, Viagra.  The news was well received by the Street. After
nearly two months of being capped by the staunch resistance at
the $92 level, LLY broke out with a dash of momentum. Volume
topped the charts at 1.5 times the ADV and LLY saw an advance to
$92.81 at one point intraday.  Today's action bullishly extended
the gains beyond the $95 mark.  There was also a boost from
Goldman Sachs who upgraded LLY to their Recommend List today,
although no analyst's comments were available.  The century mark
may pose some opposition, so look for strong volume to move LLY
through this level.  Beyond July's 52-week high at $109 there
isn't anything to hold LLY back from entering new territory.
Traders might consider taking positions into this momentum play
as LLY moves through $95 with some conviction.  Or consider
buying on intraday dips or pullbacks to the $90 level, buoyed by
the intersecting 5 and 10-dmas at $89.31 and $88.79,
respectively.  But beware this type of entry is much more
risky than buying into the strength.  We have a stop set at the
above-mentioned $90 level in the event of a sharp reversal in
traders' sentiment.

BUY CALL DEC- 90 LLY-LR OI=3945 at $6.13 SL=4.00
BUY CALL DEC- 95*LLY-LS OI=4376 at $2.94 SL=1.50
BUY CALL DEC-100 LLY-LT OI=1738 at $1.13 SL=0.25
BUY CALL JAN- 90 LLY-AR OI=5167 at $8.75 SL=6.25
BUY CALL JAN- 95 LLY-AS OI=2907 at $6.00 SL=4.00
BUY CALL JAN-100 LLY-AT OI=5892 at $3.88 SL=2.50



SEBL - Siebel Systems $71.75 -5.75 (-14.69 this week)

Providing sales automation and customer service software through
its main product, Siebel Sales Enterprise, SEBL offers its
customers the ability to access client information and decision-
making support across a corporation's global computer network.
The company's e-commerce applications deliver the first entirely
Web-based, enterprise class family of sales, marketing and
customer service applications.  Among the company's heavyweight
clientele are Lucent Technologies, Glaxo Wellcome, and
Prudential Insurance.

Welcome to the exciting world of PE compression.  As the NASDAQ
continues to set new yearly lows, the few remaining
high-valuation stocks are coming under heavy selling pressure.
Of course it doesn't help that SEBL plays in both the Internet
and Software sectors, two of the biggest recent victims of the
Technology Bears.  This is the reverse of the technology run-up
that we saw last year at this time.  Then, it didn't matter what
the news or earnings were, investors could only find the BUY
button on their keyboards.  Now, it doesn't seem to matter how
good the news is, or how strong the earnings and revenue
projections are, investors only have a functional SELL button.
Investors seem to be targeting stocks that still have hefty
3-digit PE ratios, and with theirs sitting at 385, SEBL has
taken a beating over the past 3 weeks.  On election day (seems
like more than 3 weeks ago, doesn't it?) the bulls were trying
to push the stock through the $120 resistance level, and since
then the stock has given up 40%.  While not a direct cause for
the decline, the election uncertainty is keeping the buyers on
the sidelines.  The real problem is earnings and the economy,
and with the approach of earnings warning season, investors are
taking a wait and see attitude before jumping in to buy stocks,
even those that continue to impress the street.  Just this week
SEBL has given up nearly $15, and has crashed through the
200-dma ($80.25) for the first time since late 1998.  This is
despite beating October earnings estimates by 25% and posting
accelerating revenue growth north of 130% year-over-year.
Selling volume has been on the rise too, with today's session
seeing 14.5 million shares trade hands, nearly double the ADV.
The late-day NASDAQ recovery helped SEBL to bounce from the $69
support level, but given the current market weakness, this looks
like a waypoint on the stock's trip south.  Conservative entries
can be had as SEBL drops through the $68 level on continued
heavy volume.  Intraday resistance is solidifying between
$78-80, with the 200-dma looming just overhead.  $80 will be a
pivotal level; providing entry points for aggressive investors
on a failed rally, and stopping us out of the play if buyers
can penetrate this level on a closing basis.  Let the action of
the broader Technology sector be your guide, as the stock has
traded in tandem with the NASDAQ since early November.

BUY PUT DEC-75 SGW-XO OI= 948 at $9.00 SL=6.25
BUY PUT DEC-70*SGW-XN OI=1419 at $6.25 SL=4.25
BUY PUT JAN-70 SGW-MN OI= 805 at $9.75 SL=6.75
BUY PUT JAN-65 SGW-MM OI=1176 at $7.38 SL=5.25



HAND - put play
Adjust from $63 down to $58

AGIL - put play
Adjust from $50 down to $48

MVSN - put play
Adjust from $49 down to $43

VRTS - put play
Adjust from $109 down to $95

ITWO - put play
Adjust from $111 down to $100


SUNW $79.75 -1.50 (-5.13) Our latest attempt to capitalize on
SUNW was abruptly halted after the stock sank sharply for the
second consecutive session in sympathy with the NASDAQ.  Rumors
of weak sales for the fourth-quarter due to a slowdown in orders
from resellers sent shares of SUNW well below its critical
support at the $80 level in Wednesday's session.  Although the
stock rallied well off its intraday lows, the fact SUNW broke
below our stop at $80 and couldn't settle back above that level
has prematurely ended our play.  Use any strength or relief
rally to exit existing positions, and pay close attention to
how SUNW acts near the $80 level should the stock advance

CGP $78.94 -4.56 (-3.25) A report on rising inventories of
oil sent fears streaming through the futures markets that the
price of crude will crash.  Additionally, news from China
revealed the country was exporting far more oil than the
market had previously discounted.  The fears of a collapse in
oil prices hammered the broader energy sector and ended our
attempt to capitalize on CGP's low volatility.  The stock
crashed from the open of trading this morning and continued
falling throughout the session, closing just off its day
lows.  With CGP falling back below our stop at $80 we are
dropping coverage on the play.


No dropped puts today


Implied Volatility In Calls and Leaps
By Mary Redmond

The real winners in this election have been the TV networks.
They have been airing non-stop top-notch court room and
political drama all day long on every channel.  Their ratings
and fees for commercials are probably soaring. Some channels
are probably going to try to put this on pay per view and charge
for re-runs. Viewers are going to be disappointed to have to
go back to watching Judge Judy and The People's Court for

We have an interesting interplay between the stock and bond
markets' favorite candidates.  While the stock market seems to
favor a Bush win at the present time, the bond market favors
a Gore win, as news of Gore victories in the last few weeks have
sent the 30 year Treasury yield down.  A Bush victory would
probably mean that a new Treasury secretary no longer continue
to repurchase government bonds.  Either way, the levels of
partisan animosity and divisiveness are unprecedented, and
most analysts agree that we will have four years of gridlock.

The election uncertainty has undoubtedly contributed to market
fear and uncertainty.  The VIX has been high for the last couple
of weeks.  This signals fear in the market, and has historically
been a sign of a impending bottom.

In addition, the implied volatility of many stocks’ options is
relatively high, as individual implied volatility tends to
rise when the overall market volatility rises.  This doesn't
necessarily mean that the options would be poor candidates
for those who are anticipating a market rebound.

However, most of the time, it is best to try to find call
options which have an implied volatility which is lower than
the historic volatility of the stock, and lower than the
historic implied volatility of the option.

Volatility almost always rises in the market after a sell off.
This is because market sell-offs are almost always sharper
than bull markets.  Fear is stronger than greed.  In addition,
buyers have the luxury of time whereas selling frequently
occurs very quickly when people panic.  The call options of many
oversold stocks like JNPR, PMCS, and BRCM have high implied

Ideally, we would like to buy options when the VIX.X is high,
and we can find options which have low implied volatility.
This is difficult to find.  However, an option with a high
implied volatility can still increase if the stock rises
substantially enough.

There is no mathematical formula to show exactly how much an
option will rise or fall if the implied volatility increases
or decreases.  There are many other factors to consider.  For
example, we need to consider overall market trends, good and
bad news which is reported on a company, economic reports which
could indicate future Fed action, and many unpredictable

We need to consider the fact that the GDP was increasing at a
rate of 8.3% at this time last year.  It is currently growing
at a rate of 2.4%.  The Fed actually decreased the rate of
economic growth by 71% year over year.  This is a phenomenal
decrease for any economy.  In addition, earnings forecasts have
been revised to 10% earnings growth in 2001 from 14% five
months ago.

The stock market can still rally in an environment of decreasing
earnings, as long as inflation is decreasing, and interest rates
stay low.  However, it is a jolt to investors, many of whom had
not experienced a bear market before this year.

An option's implied volatility is a reflection of the market's
expectations of how much the stock will move over the life of the
option.  If the stock has been very active, the IV will tend to
rise.  For example, PMCS has sold off over 140 points in the last
few weeks.  The stock may be undervalued, but the options are
very expensive, as the implied volatility of the Dec 100 calls
is 165% and the implied volatility of the Dec 100 puts is 175%.

The options may still be possible day trading candidates, as the
calls went up a few points when PMCS jumped from $97 to $104 on
Wednesday morning.  However, they seem over valued from a
practical standpoint.  The options expire in 2 weeks and 2 days,
and the calls are $15.8.  In this market, we would have to have
an incredible rebound for the stock to be higher than $116 in
two weeks.  In addition, the options would probably lose about
a dollar a day in time value for the next two weeks.

However, if you examine the Jan 02 100 leaps, you will see a
change in implied volatility to 95% from 165%.  The Jan 02 100
calls are $41.  This may be a more realistic bet, as the stock
could easily be 41 points higher in a year.

Generally, leaps have lower implied volatility than short term
options.  This is partly because the stock does not have to move
as quickly in order for the leaps to become profitable.  The
implied volatility of the PMCS Dec 100 calls is implying that
this option is priced so that the stock will have to move at
a rate of 165% annually or higher in order for it to become
profitable.  The leap’s implied volatility is lower, as the
leap could be profitable if the stock moved at a much lower
annual rate.

It is also interesting to note that the price of the short-term
option is approximately 40% of the price of the leap.  You
might think that a six month option would be priced at 40% of
the leap’s price.  However, if you look at the prices of many
oversold stocks, you will see a disparity between the prices
of near term options and leaps.  The odds in most cases strongly
favor leap buyers for people who anticipate a market turn around.

While the liquidity has improved in the market from several weeks
ago, the money does not yet seem to be going into the Nasdaq.
It is not always possible to obtain a precise estimate of the
amount of cash which goes into equity funds each week, however
the flows have averaged around $4 to $5 billion weekly.  The
IPO schedule has moderated significantly from last year’s
pace.  In addition, the Investment Company Institute reported
that money market funds took in over $15 billion last week,
and the Federal Reserve reported that savings accounts and CDs
took in $64 billion from the beginning of October through
November.  Savings accounts and money market funds have nearly
$4.7 trillion in investor’s cash.

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Pfizer "Bear-Call Spread" From 11/26 Combos
By Ray Cummins

Dear OIN,

I'm sure that I am overlooking a simple factor that is causing me
to misunderstand the trade. Reel me back in. The trade is a
"bearish position," so I don't understand why the breakeven is at
45.31 when the price of the stock is 42.31. I should think the B/E
would be somewhere below 45.31, because profits are taken as
the stock moves down.

Thanks for your explanation...


Concerning the Pfizer Bear-Call (call-credit) Spread:

The bear-call spread involves the purchase of one call (higher
strike) and the sale of a lower strike price call. An investor
would use this strategy when he believes that the stock
price will remain below the strike price sold at the end of the
strike period. The position will yield a credit and this is the
maximum amount of profit the investor can earn with this
strategy. Because the spread is a "credit" spread, a broker
will require the investor to provide collateral for the transaction.
The spread is at maximum profit if the underlying security closes
below the lower strike price and the objective is for both options
to expire worthless.

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

Our original plan was to open the position with a $0.38 target,
but with the Presidential election activity (Sunday's vote
certification) favoring George W. Bush, we had to adjust our
target slightly higher - as drug stocks are expected to perform
well initially under a Republican controlled Congress and White
House.  The credit we achieved was $0.50 against a collateral of
$2.00.  That produces a 25% return if the stock finishes below
$45.  Our break-even is now $45.50 - the cost to buy back the
sold option would be $0.50 if the stock finished at $45.50 on
expiration day.  If the stock breaks above the resistance area
near $45 on increasing volume, we will buy back the short option
and hold the long option until the rally begins to fade, with the
hope of achieving a small profit on the roll-out.


To roll-out of a bearish credit spread, place an order to close
the short option anytime the stocks trades (and preferably closes)
above technical resistance or a well-established trend line
(moving average) on heavy volume.  There are other, more precise
signals that can be used but the technique is based on the
probability that the stock should continue to move in that
direction.  After the sold (short) position is repurchased, wait
for the stock to lose momentum and sell the long position to close
the entire play.  It is a difficult technique to perform when
emotion enters the formula but it works well once you become
experienced at it.  The key to success is using the method at
known support levels or after obvious reversal signals, otherwise
you are simply speculating about the stock's next move.

The great thing about spreads; once you understand them, you can
turn many losing plays into winning ones with the effective use of
STOPS and by rolling out-of/into new positions when the stock
moves against you.  When you do lose, at least you have reduced
your losses by leveraging against another position.  In all cases
where an attempt to recover a losing position is made, you must be
prepared for further draw-downs and have thorough knowledge of the
strategy.  As with any technique, it must also be evaluated for
portfolio suitability and reviewed with regard to your basic
approach and trading style

Here are my suggestions for the best books on the subject.  The
rules haven't changed in years and the bibles remain the same;
"Options as a Strategic Investment" (McMillan), and "Option Pricing
and Volatility" (Natenburg), both available in the OIN bookstore.

Good Luck!


MVSN - Macrovision Corporation $39.22 -3.28 (-9.91 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.

Most Recent Write-Up

It's been very quiet on the news front
lately for MVSN and with that, the stock has traded in sympathy
with the NASDAQ.  Gapping up at the open on Monday morning, the
stock encountered resistance at $54.  From there, the sellers
took control, moving the stock lower for the rest of the day,
closing the morning gap and then some.  At the end, MVSN closed
down $1.38 on heavy trade.  The selling continued today as MVSN
encountered resistance at the 5-dma, now at $47.47.  From there,
the stock headed deeper into the red but found support just below
the $40 level.  Despite a slight bounce at the end of the day,
the stock closed down almost 11 percent on above average volume.
Another failed test of the 5-dma could provide aggressive traders
with an entry as well as a failed rally above resistance at $47
and $50 but be aware that our stop price has been moved down to
$49.  A break below $40 on strong selling volume would allow
traders to jump in for a solid entry.


No news continues to be bad news for MVSN.  The stock traced
yet another relative low in Wednesday's trading by falling
through critical support at the $40 level.  Additionally,
MVSN closed just off its intraday low at $38.50, unlike many
of its NASDAQ counterparts who rallied into the close of
trading.  New entries could be taken if MVSN rolls over at
previous support near the $40 level.  Otherwise, look to
enter new positions if the stock falls below its intraday
low at $38.50.  Take note that we have lowered our protective
stop down from $48 to $43, and would close existing positions
if the MVSN settled above that level.

BUY PUT DEC-45*MVU-XI OI=24 at $8.00 SL=5.75
BUY PUT DEC-40 MVU-XH OI= 0 at $4.38 SL=2.75  Wait for OI!!



Zero isn't that far away (for many stocks)...

The technology sell-off continued today as investors demonstrated
their affection for old economy issues.  The Nasdaq fell to yearly
lows amid a slew of downgrades and speculation that it will now
take many months to repair the damage from the recent free-fall.
Fiber-optic stocks were among the biggest losers with Ciena (CIEN)
leading the way on concerns that Sprint, a major customer, may add
a second supplier.  Similar companies in the group endured notable
losses and the selling pressure quickly spread to other sectors.
Strangely enough, semiconductor shares were among the strongest
performers after Merrill Lynch said longer-term investors should
be comfortable owning high quality communications chip companies
at the current prices.  UBS Warburg also commented that demand for
communications semiconductors continues to be healthy and current
valuations in the group are attractive.  On the Dow, industrial
stocks managed solid gains as investors focused on an economic
report that suggested the Fed will leave interest rates unchanged
at its December meeting.  A revised report regarding the nation's
gross domestic product (GDP) offered evidence that the economy is
slowing, but not as much as analysts had feared.  The news led to
some excellent advances in drug, retail and consumer stocks, and
the financial sector also rebounded, with banking shares among the
top performers.  In the broader market, oil and oil service issues
moved lower in sympathy with crude prices while favorable advances
were seen in the chemical industry.

Summary of Previous Picks:

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

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

ADBE    DEC    67.5  64.44  64.31   -$0.13   0.0% Time to go?
EMLX    DEC   120   113.56 110.50   -$3.06   0.0% Exit on Rally?

Naked Puts:

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

FNSR    DEC    22.5  21.94  27.81    $0.56  10.7%
CHIR    DEC    35    34.31  43.75    $0.69   9.6%
PWAV    DEC    40    39.00  51.50    $1.00   8.3%
SAWS    DEC    35    34.12  53.63    $0.88   8.0%
CMVT    DEC    85    83.37  89.69    $1.63   6.7% Key moment!
QCOM    DEC    65    63.81  82.63    $1.19   6.7%
ADBE    DEC    55    54.00  64.31    $1.00   5.9%
SCMR    DEC    40    39.31  46.75    $0.69   4.9% New Low?!?

CRGN - Position closed.

Sell Straddles:

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

CFLO    DEC   165   172.13  46.50    $7.13  23.2%
CLFO -  short-put covered by shorting stock.

Naked Calls:

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

MANU    DEC   135   136.75  72.00    $1.75  13.0%
EMLX    DEC   185   187.19 110.50    $2.19  10.9%
CIEN    DEC   140   141.25  73.00    $1.25   8.3%

Credit Spreads:

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

AFFX  $87.25  $62.06   DEC50P/60P  $1.12   $58.88  $0.88   Alert
AGN   $90.75  $92.31   DEC70P/75P  $0.75   $74.25  $0.75   Open
AET   $66.06  $67.13   DEC55P/60P  $0.56   $59.44  $0.56   Open
APA   $62.44  $57.00   DEC50P/55P  $0.63   $54.43  $0.63   Alert
BMY   $67.94  $72.19   DEC60P/65P  $0.88   $64.13  $0.88   Open

Alert - Be ready to close (or offset) the position on further

New Candidates:

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


BULLISH PLAYS - Combination/Spreads

ELN - Elan  $53.38  ** On The Rebound! ***

Elan is a worldwide specialty pharmaceutical company.  Elan's
principal research and development, manufacturing and marketing
facilities are located in Ireland, the United States and Israel.
Elan has focused mainly on the development and commercialization
of products for pharmaceutical industry clients utilizing its
proprietary drug delivery systems.  In recent years, Elan has
continued to focus on drug delivery systems, but has embarked on
a strategy to expand its therapeutic focus through the development
and commercialization of new pharmaceutical products for selected
target markets, including the areas of neurology, pain management
and oncology.

There's not much news on ELN to explain today's continued rally
but the technical indications suggest the issue has successfully
completed a recent consolidation and is poised for future gains.
In addition, the fundamental outlook for the company is excellent
and the drug sector is performing very well; both factors that
lead us to a bullish position in the issue.  The premiums in the
spread also help provide a low risk cost basis with a reasonable
expectation of profit.

ELN - Elan  $53.38

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-$47.50  ELN-XW  OI=786  A=$0.62
SELL PUT  DEC-$50.00  ELN-XJ  OI=584  B=$1.00
INITIAL NET CREDIT TARGET=$0.43-$0.50  ROI(max)=20%


XL - Xl Capital  $80.00  *** New Trading Range? ***

XL Capital is an insurance and financial services company.  The
company's operations are organized into four main underwriting
segments: insurance, reinsurance, Lloyd's Syndicates and other
inancial services.  Xl Capital provides both excess and primary
insurance globally through these subsidiaries: XL Insurance, XL
Europe, XL Insurance Company of New York, Greenwich Insurance,
Indian Harbor Insurance, ECS and Intercargo.  The company, with
NAC Re and XL Mid Ocean Re, provides a broad range of property
and casualty reinsurance products on a global basis.  Business
is written on both a proportional and excess of loss basis.  The
company's Lloyd's operations are primarily conducted by Brockbank
and Denham.  XL Capital Products also provides credit enhancement
coverages in the form of financial guaranty insurance and credit
default swaps and reinsurance on asset-backed, municipal and
select corporate risk obligations.

Xl Capital is widely recognized as a leading provider of many
types of non-life insurance, which includes various property and
casualty segments, and other lines of personal and commercial
insurance.  Companies in this industry assume property or third
party risk, such as liability insurance or workers' compensation
insurance, rather than mortality risk or health risk and the size
of the market is fairly substantial.  In addition, revenues for
Xl Capital benefit as prices increase in these segments and the
balance sheet for the company has historically been very good.
The company is very innovative and they are moving into other
growth opportunities such as financial-related products.

The technical outlook for XL is favorable and our conservative
position offers an excellent way to participate in the future
movement of the issue with relatively low risk.

XL - Xl Capital  $80.00

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-70  XL-XN  OI=10  A=$0.43
SELL PUT  DEC-75  XL-XO  OI=0   B=$0.93
INITIAL NET CREDIT TARGET=$0.56-$0.62  ROI(max)=12%



FRX - Forest Laboratories  $139.00  *** Rally Underway! ***

Forest Laboratories develops, manufactures and sells both branded
and generic ethical drug products that require a physician's
prescription, as well as non-prescription pharmaceutical products
sold over the counter.  Forest's most important United States
products consist of branded ethical drug specialties marketed
directly, or detailed, to physicians by Forest Pharmaceuticals,
Forest Therapeutics and Forest Specialty Sales forces.  Their
products include Celexa, for the treatment of depression; the
respiratory products Aerobid, Aerochamber and Tessalon; Tiazac,
Forest's once-daily diltiazem for the treatment of hypertension
and angina; Infasurf, a lung surfactant for the treatment and
prevention of respiratory distress syndrome in premature infants,
and Cervidil, used for the initiation or continuation of cervical

There's little news to explain the recent bullish activity in
FRX but today the issue moved above the current trading range
amid continued buying pressure and excellent volume.  Traders
say the rally may be related to the recent announcement that
Forest Laboratories will replace Seagate Technology (SEG) on the
widely tracked S&P 500 Index.  Seagate is being bought by Veritas
Software (VRTS), which is already part of the S&P 500 Index, but
the date for the index exchange has not been set.  The S&P 500 is
tracked by fund managers and changes to the index are generally
followed by heavy trading in shares of the companies affected as
funds holdings are adjusted to match the popular market gauge.

Regardless of the reason, FRX is once again established in a
bullish trend and those who favor the drug manufacturing sector
can use this position to speculate conservatively on the future
movement of the issue.

FRX - Forest Laboratories  $139.00

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

Sell Put  DEC 125  FRX XE  32        1.31   123.69     5.8% ***
Sell Put  DEC 130  FRX XZ  67        2.38   127.62     9.2%


GENZ - Genzyme General  $89.31  *** On The Move! ***

Genzyme General develops and markets therapeutic products and
diagnostic products and services, with an emphasis on therapies
for genetic diseases.  Genzyme General primarily consists of two
business units, Therapeutics and Diagnostics.  The Therapeutics
business unit focuses on developing and marketing products for
genetic diseases, including a family of unique diseases known as
lysosomal storage diseases, and specialty therapeutics.  The
Therapeutics business unit has three therapeutics products on
the market and several other products in varying stages of
development.  The Diagnostics business unit develops, markets
and distributes in vitro diagnostic products and genetic testing
services.  Genzyme General is a division of Genzyme Corporation
and has its own common stock intended to reflect its value and
track its financial performance.

Genzyme General and BioMarin Pharmaceutical recently announced
they are beginning a pivotal Phase III study of Aldurazyme
(laronidase), and expect to treat the first patient in the trial
by early December.  The product, recombinant alpha-L-iduronidase,
is an enzyme replacement therapy for patients with MPS-I, also
known as Hurler, Hurler-Scheie and Scheie diseases.  Genzyme and
BioMarin have received Orphan Drug designation and Fast-Track
status for Aldurazyme from the U.S. FDA.  In an initial clinical
trial, Aldurazyme has shown safety and promising results and if
the trial confirms the initial profile of the drug, the companies
will submit the compound for marketing approval, to provide a new
therapy to the thousands of patients who currently suffer from
the life-threatening disease.  In addition, Genzyme General just
announced that it has entered into a license agreement for a
class of small-molecule compounds that may be useful in treating
lysosomal storage disorders.  The agreement with the University
of Michigan covers a series of U.S. and foreign patents and other
patent applications related to certain ceramide-based compounds
and their therapeutic use.

Analysts agree with the company's positive future and investors
have pushed the issue up $15 in just one week.  In addition, the
recent trading range support near $75 defines this position as a
relatively safe entry into the volatile biotechnology sector and
our cost basis allows a conservative entry in an issue with a
bullish technical outlook.

GENZ - Genzyme  $89.31

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

Sell Put  DEC 75   GZQ XO  3392      0.81    74.19     6.9% ***
Sell Put  DEC 80   GZQ XP  152       1.69    78.31    11.4%


PVN - Providian Financial  $93.00  *** Blue-Chip Play! ***

Providian Financial, operating through its subsidiaries, is a
leading provider of lending and deposit products to customers
throughout the United States and offers credit cards in various
countries around the world.  The company also serves a broad,
diversified market with its loan products, which include other
financial and membership services products.  The company, with
its more than $27 billion in assets under management, also
offers a number of unique financial services to over 15 million
customers.  Providian Financial was also recently named one of
America's Most Admired Companies by Fortune magazine, the
nation's top financial institution by U.S. Banker magazine and
one of the most technologically innovative companies in the U.S.
by Information Week magazine.  With a commitment to customer
satisfaction, Providian helps customers build, protect and
responsibly use credit.

The big financial services companies have been under-performing
the broader market as of late but in recent sessions, the group
is starting to show some life.  Providian is one of the leaders
in the sector and their recent quarterly earnings reflect that
dominance.  In early October, Providian announced record third
quarter net income of $200 million, or $1.36 per diluted share,
representing an increase in net income of 33% for the quarter.
The Board of Directors also announced a two-for-one stock split
in the form of a stock dividend, and increased its quarterly
cash dividend by 20% to $0.06 per share, payable on a pre-split
basis.  For each Providian Financial share held at the close of
business on the record date, one additional share will be issued.
Both the distribution of the additional shares and the payment
of the cash dividend will be made on December 1, to shareholders
of record at the close of business on November 15, 2000.

A pre-split rally is the likely cause of the recent upward trend
and traders who agree with the bullish potential of the company
can use this position to speculate on the future movement of its
share value.

PVN - Providian Financial  $93.00

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

Sell Put  DEC 70   PVN XN  963       0.50    69.50     5.0% ***
Sell Put  DEC 75   PVN XO  177       0.88    74.13     8.3%
Sell Put  DEC 80   PVN XP  383       1.50    78.50    11.1%



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

CIEN - Ciena  $73.00  *** Networking Sector Blues! ***

Ciena is engaged in the optical networking equipment market.
The company offers products for tele- and data-communications
service providers worldwide.  The company's customers include
long-distance carriers, competitive local exchange carriers,
Internet service providers and wholesale carriers.  Ciena also
offers optical transport, intelligent switching and some unique
multi-service delivery systems that enable service providers to
provision, manage and deliver high-bandwidth services to their
customers.  The company has pursued a strategy to develop and
leverage the power of disruptive technologies to change the
fundamental economics of building carrier-class communications
networks, thereby providing its customers with a competitive

Ciena shares slid lower today as investors worried about new
financial problems with a large customer, European carrier
Global TeleSystems Group (GTS) and the possibility of lower
sales to Sprint (FON).  French equipment maker Alcatel (ALA)
told analysts it had recently become a supplier for Sprint,
one of Ciena's main customers.  Ciena has been affected by
financial problems with another customer.  In September, the
company said it would record a fourth-quarter charge for up to
$28 million in debt payments it may be unable to collect from
UK-based iaxis Ltd.  The news was untimely for investors in the
technology group and much of the drop in Ciena's shares can be
attributed to comments from a BlueStone Capital telecom analyst
who said the decision to lower the company's price target was
based on a deteriorating financial condition at some carriers,
as revenue growth is subsiding and cash flow is being reduced.
The analyst also indicated that the overall health of telecom
companies, especially long-distance carriers, is in a rapid

CIEN - Ciena  $73.00

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

Sell Call DEC 100  UEE LT  1623      1.94   101.94    22.3%
Sell Call DEC 105  UEE LA  1378      1.44   106.44    17.0%
Sell Call DEC 110  UEE LB  2716      1.00   111.00    12.2% ***


EMLX - Emulex  $110.50  *** Technicals Only! ***

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

This play is simply based on the current price or trading range
of the underlying stock and its recent technical history.  The
near-term EMLX price trend is bearish and reflects a pronounced
negative divergence from an intermediate-period moving average.
In addition, the decline has come on increasing selling pressure
and a recent support level near $125 has been violated.  With the
failure at $170 early in November, a short-term "triple top"
formation is in place and due to the heavy overhead supply at
that price, the share value has little chance of reaching our
target position in two weeks.

EMLX - Emulex  $110.50

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

Sell Call DEC 160  UEL LL  291       2.06   162.06    16.2%
Sell Call DEC 165  UEL LM  264       1.69   166.69    13.5%
Sell Call DEC 170  UEL LN  653       1.38   171.38    11.1%
Sell Call DEC 175  UEL LO  365       1.06   176.06     8.7% ***

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