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Daily Newsletter, Sunday, 12/03/2000

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The Option Investor Newsletter                   Sunday 12-03-2000
Copyright 2000, All rights reserved.                        1 of 5
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       WE 12-01         WE 11-24         WE 11-17         WE 11-10
DOW    10373.54 - 96.69 10470.23 -159.64 10629.87 + 26.92  -215.00
Nasdaq  2645.29 -259.09  2904.38 -122.81  3027.19 -  1.80  -422.59
S&P-100  695.99 - 15.17   711.16 - 13.93   725.09 +  5.98  - 32.59
S&P-500 1315.23 - 26.54  1341.77 - 25.95  1367.72 +  1.74  - 60.71
W5000  12037.40 -316.20 12353.60 -306.30 12659.90 - 28.90  -694.10
RUT      456.84 - 15.03   471.87 - 10.74   482.61 +  1.71  - 26.85
TRAN    2763.15 - 86.74  2849.89 + 32.59  2817.30 +113.08  - 57.53
VIX       31.59 +  2.01    29.58 +  1.73    27.85 -  4.65  +  6.19
Put/Call    .61              .59              .89              .83

I hate it when that happens!
By Jim Brown

A promising rally dies a slow death as every talking head over
analyzes each falling point. Still the day went just about the
way we had choreographed it. The bounce continued at the open
and the Nasdaq ran up about +130 points before falling back before
the Supreme Court event. Once it was apparent there was no clear
victor in court the rally continued once again but the fear of
weekend court announcements created a serious desire to go into
the weekend flat. It was a struggle and the Dow traded on both
sides of positive late in the day before finally succumbing to
selling pressure at the close. Bargain hunters that missed out
on some of the big gainers from the morning took the opportunity
to nibble at the close when most of those stocks came very close
to where they opened the day. The end of day bounce was weak but
provided a glimmer of hope for those wanting a Monday rebound.
The Nasdaq closed positive for the first time this week and that
makes two Fridays in a row buyers found oversold conditions too
tempting and they broke the down trend.

The day started with the NAPM report which at 47.7 was a decrease
of -0.6 from October and the third month in a row under 50 which
indicates a contraction in the economy. Only once since Greenspan
has been in power (1993) has the Fed failed to reduce rates after
the third month. However it does not always take place at the very
next meeting but the next change is a cut. The sentiment is building
for the meeting on the 19th to at least change the bias to neutral
and then follow with a rate cut in January when the political
climate has cooled somewhat. Hopefully Greenspan will give us
some indication of his thought process, that is of course assuming
we could understand it, when he speaks next week on Tuesday. The
speech will be televised and watched with rapt attention by most

The rumor mill was very active on Friday. The one that got the
most attention was that Tim Koogle was leaving Yahoo. When questioned
Yahoo made a statement that went something like, "if he was we would
be required to issue a press release and we have not issued one."
Say what? Eventually they just came out and denied the rumor but
not until YHOO had lost almost -$5 off the intraday high and the
rally had been blunted. Good going guys, you just cost your share
holders several million more dollars trying to be cute. The next
rumor involved a coming earnings warning from Dow component SBC.
After dropping almost -$4 intraday on the rumor SBC finally came
out and reaffirmed their estimates, although about two cents shy
of what the street consensus had been, and the stock firmed some.
The most sinister rumor came after a downgrade of Intel by CSFB.
The rumor was that Intel was going to warn in the next two weeks
and they were waiting for a market bounce before doing the deed.
Traders ran for cover and INTC dropped -4 to close at $34.12 which
was a new 52-week low. After considering the possibilities I bought
some DEC-30 puts for $.94 at the close as a lottery play. We also
featured that in the lottery play section of the newsletter this

There were a couple of strange earnings warnings on Friday. Ford
warned that they would miss estimates by a dime and said they were
cutting production by 145,000 units yet the stock gained +1.44 on
the news. The analysts said the automotive stocks were so beat up
that finally knowing the real numbers was almost a relief and the
stock was bought as a value play. Daimler Chrysler also said they
would cut production by -146,000 units and GM is expected to cut
production next week also. Just another sign of the falling economy
some analysts saying they could build as many as 2,000,000 more
light trucks than needed over the next three years. That is a lot
of heavy metal. The other warning was from Transocean (RIG) as
they said costs had exceeded estimates. However there was a major
upgrade of the oil drillers and service companies today even in
the face of Iraq threatening to cut off its oil. The combination
of events lifted RIG +$5 from the days low closing it positive.
Oil prices dropped -1.80 to close at $32.02 today. The U.S. said
it was considering tapping the strategic reserves if needed to
cover any Iraq shortfall.

One warning that did not end positive was Raytheon, the number
three defense contractor. They said earnings could run -.15 less
than expected in 2001 and the stock dropped -$8 at the open but
closed only -$5. Lockheed Martin and General Dynamics both lost
over -$2 on the news.

Compaq went head to head with the analysts downgrading their
stock. Saying their Thanksgiving sales were robust and their main
product, servers, was not even a consumer product. They felt the
stock was cheap. To emphasize this fact they announced a one billion
share buyback. CPQ was up +2.50 intraday but pulled back to close
only +1.30.

Xerox better get started making copies of their stock soon because
they are going to need it to pay creditors. Moodys downgraded their
debt to junk bond status and the stock closed at a new 52-week low
of $6.19. Somebody please buy them and put them out of their misery.

The Supreme Court heard the opposing lawyers debate the merits or
demerits of the action taken by the Florida Supreme Court and it
was clear from the start that they did not want the case and there
would not be a quick or clear decision. The court was broken evenly
in three camps, those that thought Florida might have strayed, those
that thought Florida did no wrong and those that did not care and
did not want to be put in the position of having to rule on the
complicated case. The ruling, when it comes, will probably be a
5:4 or 6:3 split decision or they could simply decide not to decide
and let the current ruling stand. The Florida Supreme Court did make
some rulings late Friday and Gore lost on all three counts. Basically
they denied another recount on a specific lot of ballots and said
the butterfly ballot would stand dismissing two cases in that genre.

The worst November ever for the Nasdaq is now history and December
has started a positive trend for the troubled index. Does this mean
that blue skies are ahead? We would all like to think so but the
facts are building that we are not out of the woods yet. The legal
landmines will continue to keep investors cautious and mostly on
the sidelines until the final result is known. Fortunately that is
only about seven more trading days at the most. On December 12th
that problem as we know it will be over one way or another. By then
that may be the least of our worries. The flood of earnings warnings
has drowned the Nasdaq in bad news but the worst news may be yet
to come. What if Intel warned? How about IBM, MSFT, JDSU, a fiber
optic stock or two, a B2B stock or two, YHOO? There are some big
names that are on the bubble and any of them could cause much more
stress in the market than Gateway. Hardly a day goes by that a
warning comes from an unexpected source. Take RIG on Friday. How
can an oil service company fail to make money when drilling is at
a ten year high and oil over $32 a barrel? We are hearing rumblings
from Asia about market turmoil. Oil and Euros are still a problem
for the big multinationals. Could JNJ or PG be next? Will retailers
start complaining about slow holiday sales by next weekend? The
point here is there are a lot more possibilities for problems over
the next two weeks.

The lack of a fall rally is causing many technical problems. There
is a lot of margin selling causing instability across the board.
Getting a margin call on SDLI for instance may cause investors to
sell other stocks instead. If investors believe strongly in SDLI
and they don't want to close their position at $200 if they bought
in at $300 then they sell GE or MOT or XYZ which will not cause
such a big tax loss and also not as big a real loss. For stock
investors it is not a loss until you sell it and true believers
always think their favorite tech stock will come back. Still to
raise money they must sell something. Multiply this by hundreds
of thousands of investors and thousands of favorite stocks and
you see the problem.

Another problem is simply the coming tax loss selling. With no
rally many investors will choose to sell the current losers to
offset the wins from the first quarter. The closer we get to year
end the stronger the selling will be if we have no rally to fuel
their hopes. Funds are now starting to stock pile cash for
redemptions expected when investors start getting their statements
showing disappointing losses and even tax bills. Many investors
will be pulling money out of the volatile stock market funds and
moving into the safety of money markets and bond funds after
suffering their biggest loss since becoming investors.

Margin calls, tax selling, earnings warnings are just the main reasons
the bloodshed may not be over. The light at the end of the tunnel
may not be until the Fed meeting on Dec-19th. The election will be
history and warning season will be half over. The big names may be
behind us and only the Fed ahead of us. Fed Governor, Edward Gramlich
said today that he personally felt the economy was heading for a
stronger than expected landing. If this view is typical of the rest
of the current Fed then relief should be on the way soon. Abby
Cohen was on CNBC late Friday night pounding the table on the
undervalued tech stocks and we appreciate her efforts but until
she gets out of the carefully scripted formats her message will
not carry as much weight as others in the past. Her words are
chosen with more care than Alan Greenspan's and at least we can
understand her. Come on Abby, loosen up. Make a real market call.
Where is Ralph Acompora when we need him? Ralph, a Nasdaq 2000/5000
call could really turn this market around right now!

The bounce from Thursday on strong volume did not carry through
on Friday. The volume was decent at 2.3B for the Nasdaq and 1.2B
for the NYSE but traders still sold into the rallies. Most big cap
stocks rose into their resistance and failed. Traders thought the
Thursday bounce was short covering and bargain hunting only and
the lack of follow through today was evidence. I disagree somewhat
since the urge to be flat over the extremely political weekend is
very strong. I was encouraged by the small bump at the end of the
day. However, it matters not whether I want a rally or a rout since
the market will give us what it wants anyway. It will be our task
next week to trade which ever trend appears. If the Nasdaq looks
like it wants to run then we should trade in that direction. If
we get more warnings and more selling then grab a couple puts and
hang on. It is not up to us to try and trade our bias when it
conflicts with the market bias. You don't go to play baseball with
a tennis racquet and you don't play calls in a down market. You
will get the same results and it will not be pretty. When we were
picking plays Friday night there were literally dozens of $10-$20
stocks on a vertical descent to zero which anyone who could afford
a $2 option could play puts with almost zero risk. There is no reason
for anyone to be missing out on the incredible profit opportunities
in this market. The only reason is personal choice. If you chose to
only play calls then that is your choice. Hey, my name is Jim Brown
and I made money shorting the QQQ today! If I can play both sides
anyone can!

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This was a fairly simple week as far as my trading went.
I was flat on my back since last Saturday night with the
flu bug. I only rolled out of bed to type my commentary
on Tuesday and then right back to bed again. On Thursday
when I woke and saw the Nasdaq headed to 2500 I struggled
to sort the cobwebs out of my head and decide what to buy
if it bounced. I only managed to pick three stocks and
sell some deep in the money puts before succumbing to the
bug again and going back to bed. Fortunately I had the
luck to have picked the almost exact bottom to climb out
of bed. It would not have made much difference what I
picked since almost everything went up from there.

I made a comment about having long plays that might last
more than 24 hours in the Thursday night commentary but it
did not happen. I guess I could have held over but when I
saw the market top on Friday I rolled out of bed again and
closed all my positions. As I sit there flat with an more
than an hour of trading to go I saw the QQQ start to roll
over. I was trying to decide which stock to buy puts on
for a short term play but the QQQ looked like a natural.
Remember I am still bullish and I just wanted something
to capture the end of day dive I was expecting. I wanted
to be flat for the weekend so I would not be handicapped
at the open on Monday by possibly being on the wrong side
of the market.

BRCD - DEC $220 Naked Put

My busted play for the week. It started off well but a profit
taking dip shortly after the open on Friday stopped me out
for about a $5 loss per share. I had sold the DEC $220 Naked
Put on Thursday and had I not placed the stops I would have
been ok. (this time) It is the price we pay to not get hammered
with a double digit drop when you are not looking. I will
gladly take the $5 loss compared with the possible rewards.

BRCM DEC $140 Naked Put

This was about as perfect as it could have been for a one day
play. I sold the $140 naked put on Thursday and closed it at
the roll over on Friday. I could have left the play open
since I was very profitable but without knowing when the
Friday drop might stop I elected to take the money off the
table. For a 24 hour play I netted about $15K.

JNPR DEC $175 Naked Put

I like Juniper and wanted really bad to jump back into this
trade in the $128 range when it bounced at the end of the day.
However, not knowing what the weekend would bring I elected
to wait patiently for another entry point next week.

When looking for tops I use the one minute real time chart and
as you can see $140 was definitely a challenge. By itself I
would probably have held longer but all my other charts were
showing the same thing on other stocks I was watching. The
Nasdaq was also starting to fail and that was the final
confirmation. Of course once I closed the play it started to
rally again and I could see it hitting $150 when it spiked
over $140 for a minute. Once it pulled back again it was all
over and I breathed easier. However, I will be leary of the
$140 barrier if I re-enter the play again on Monday. It has
resistance there and it might be a good spot to sell again.
I can always re-open the play if it breaks say $142.

INTC DEC $30 PUT @ $.94

This was just a lottery play at the close based on the rumor
that they were going to warn next week. It may be true or
not but for $.94 it is not much of a risk. If it does go against
me I can turn it into a credit spread by selling the Dec $35
put against my $30 puts and might even make a profit. We will

QQQ Short @ $65.75

I was just looking for something to buy puts on for the
afternoon drop and the QQQ popped up. Rather than buy puts
and then have premium spreads to deal with I shorted the
QQQ at $65.75 and rode them down. It was only about 45 min
but enough to make a couple bucks while I was watching the
market wind down.


My game plan for next week is to play the trend. I think
we have some really good calls and puts this weekend and
I am going to queue up some of both on Monday morning and
see which ones look best. It is terribly important to not
try and bet against the market right now. Moves are fast
and steep and surprises can come out of nowhere with the
rash of earnings warnings. Be patient, you will make more
money. I had a good week and I spent almost all of it sick
in bed. Is this a great country or what!


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Hot Porridge? Cold Porridge?
By Austin Passamonte

Just like Goldilocks in the "Three Bears" fable, we've been
tasting cold porridge at place settings for the Dow, Nasdaq and
S&P indexes once again all week. Late Thursday & early Friday
gave chance for one hot serving many hoped would last but lest we
forget, this is the bear's house we're in. Be careful choosing
which bed to sleep in overnight!

The recent trading approach to sell every rally has worked for
those who attempt it 100% of the time over the past several
weeks. Can such a repeatable pattern continue forever? No, but
buying puts on every feeble rally might be the easiest money
option traders have made since buying calls on feeble dips
exactly one year ago.

Signs of market strength? Not on our charts. For a long-term look
we visited our monthly/weekly charts again just for fun (?).
While we didn't expect to see outright bullish signals, a guess
at our worst-case downside support can be viewed by looking at
Bollinger band extremes. This fluctuating tool that measures
current market deviation values could indicate where downside
targets lie.

Most weekly charts have index price action pressing the lower B-
band already except for the Dow, so we will list values of all
index monthly-chart lower B-band values as they rest today:

Dow: 10,000
NDX:  1,642
Comp: 1,992
SPX:   1258
OEX:    639
QQQ:     41

We realize market bulls may find these numbers shocking. So do
western New Yorkers when TV weather reports forecast 24" of snow
overnight but reality is we can see that & more (40+ inches in
Buffalo, one storm this year). Watching meteorologists forecast
the possibility doesn't warm many hearts but does save lives

So too can these unbiased chart forecasts if we heed storm
warnings in each direction. A day will come when charts warn of a
pending heat wave that will melt any open shorts who remain
overdressed in thick bear coats. It works both ways, for now to
warn of more downside.

A number of MS articles ago (11/16) we posted similar charts when
the Comp was above 3,000 that warned of the Comp testing 2,000.
At that time CNBC reported unnamed technicians were forecasting
"rock-solid" support at the 2850 level. Hmm, define rock-solid

Speaking of market analysts, did Ralph Acampora (remember him?)
ever think we might see 2,000 before 6,000 on the Comp? Has Joe
Battapaglia been buying every dip since September 1st? Have Mary
Meeker and Dan Niles upgrades at the top and downgrades near the
bottom made much money? Will the SPX hit 1575 by year's end? Will
it reach 1650 in twelve months? Quite likely, but we may be able
to buy bullish plays from below 1250 first.

OIN's Molly Evans asked us to review some daily/hourly/30 min
charts of the DRG.X drug index and a couple of individual stocks
within the sector earlier this week. As noticed by her, we also
saw all chart symbols topped out and ready to roll over. She
bought puts, set stops and waited. We made a mental note to do
the same, which was worth the paper it was written on (none).

Very next day, analysts upgraded the entire sector across the
board. CNBC repeated this every 20 minutes for good measure.
Prices went up but chart signals did not. Retail was buying but
with no underlying strength. Who was selling? Now look where
prices went since then

We would never say that some analysts could have institutional
clients with vested interests to enter/exit positions, but how
does one explain a subsequent DOWNGRADE of this very same sector
on Friday? What happened in only two trading sessions that could
possibly cause several solid companies to warrant an upgrade on
Wednesday and downgrade on Friday in the very same week?

Market Sentiment would be the last on earth to suggest market
manipulation occurs; we merely claim inability to understand
conflicting facts behind public statements made in fair-
disclosure forums. The potential to adversely affect small
traders is what concerns us, as it is their interest we stand
100% behind. We support the approach of ignoring all non-
technical analysts without exception and trust our own chart
signals objectively drawn in front us.

Weekly COT data shows the S&P 500 commercials continued the
record pace of net-short positions and that was before Wednesday
and Thursday's action. They are collectively holding incredible
gains with probable vision of a sub 1,300 level on the SP00S in
mind real soon.

The VIX has spiked to 34 but released on the last failed rally.
It is easier to call a market top with the VIX below 20 than a
bottom above 30, as we can readily see 40+ or higher and have
done so before.

Our weekly forecast remains the same: more downside is the high
odds pick, possibly to new lows once again. It will take massive
amounts of good news to move us up and one or two bits of bad
news to continue the fall. A rally emerging from nowhere to
surprise one & all can never, ever be ruled out but signs of
lasting market strength are absent to our view at this time

Fortunes were made and lost last week as the markets offer equal
profits in both directions. Trade carefully and strive to follow
the daily trend!


Friday 12/01 close; 31.59

30-yr Bonds
Friday 12/01 close; 5.63%

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)
735 - 720               13,184        5,772         2.28
715 - 700                6,967        8,556          .81

OEX close: 695.99

690 - 675                   995       9,902          9.95
670 - 650                    23      10,594        460.61***
Maximum calls: 740/5,828
Maximum puts : 640/9,890

Moving Averages
 10 DMA  708
 20 DMA  722
 50 DMA  734
200 DMA  773

NASDAQ 100 Index (NDX/QQQ)
 73 - 71                21,379        20,721         1.03
 70 - 68                86,539        32,865         2.63
 67 - 65                40,199        32,832         1.22

QQQ(NDX)close: 64.00


 63 - 61                  8,702        8,696         1.00
 60 - 58                  9,568       18,263         1.91
 57 - 55                  5,551        1,733          .31

Maximum calls: 70/58,139
Maximum puts : 75/33,647
Moving Averages
 10 DMA 67
 20 DMA 72
 50 DMA 78
200 DMA 91

S&P 500 (SPX)
1375                   32,359        24,560          1.32
1350                   16,350        33,203           .49
1325                    6,185        16,913           .37

SPX close: 1315.23

1300                    7,471        22,480          3.01
1275                    1,938        16,965          8.75
1250                    7,283        31,536          4.33

Maximum calls: 1400/64,520
Maximum puts : 1400/50,971

Moving Averages
 10 DMA 1337
 20 DMA 1367
 50 DMA 1388
200 DMA 1437


CBOT Commitment Of Traders Report: Friday 12/01
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         +103       -138            -3136       2462
Total Open
Interest %      (+1.14%)     (-1.94%)       (-11.59%)   (-9.76%)
                net-long     net-short       net-short  net-short

Open Interest
Net Value         -1888       -363            +673       -223
Total Open
Interest %       (-8.21%)   (-1.76%)        (+1.17%)    (-0.42%)
                 net-short  net-short        net-long   net-short

S&P 500
Open Interest
Net Value        +70473       +68303        -81,194       -79145
Total Open
Interest %       (+31.99)     (+34.74%)     (-12.00%)   (-11.76%)
                  net-long     net-long      net-short  net-short

What COT Data Tells Us: The disparity remains between Commercial
positions and Small Specs on the S&P 500.

The DJIA sees the Commercials increasing their net-shorts while
the Small Specs turn net-long. The reverse is true on the NASDAQ
100 with the Commercials turning to a net-long position and the
Small Specs increasing their shorts.

Data compiled as of Tuesday 11/28 by the CFTC.


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It's All About The Charts
By Eric Utley

Let's forget about the fundamentals this weekend and turn to
the technicals for guidance through these perilous waters.
Buying and selling stocks based on fundamental research is
turning into a dangerous proposition.  And while the underlying
fundamentals of a company obviously matter over the long-term,
in the near-term, it's price that rules.

And with that, let's review some of our past triumphs and
tragedies.  This weekend's column will feature two stocks
we reviewed not too long ago, along with two new targets.

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


CIENA - CIEN (revisited)

Just last week, we reviewed CIEN.  The stock was trading above
$100 at the time and had formed a unique descending wedge
pattern.  Last week's review included the following:

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.

Last Week's Chart

Sure enough, CIEN gapped higher at the opening bell last Monday,
but that move proved to be a devious bull trap.  The stock
subsequently rolled over at the $105 level and didn't stop
falling until last Thursday, when it traced a near-term low at
$66.50 (pretty close to the $65 downside objective).  I may
have been a little too wishful for a breakout last week and I
sincerely hope none of our readers got trapped in the head fake.
Conversely, I do hope that a few of our readers capitalized on
CIEN's failure at $84, which could have produced some solid
profits from the short-side.

Not by coincidence, CIEN rolled over at its previous support at
$84 last Friday during the NASDAQ's rally attempt.  Given the
fact CIEN failed to move back above $84, I wouldn't be surprised
to see the stock retest its near-term lows around $66.  Should
the $66 level fail, CIEN could give put buyers an opportunity
to profit from a potential move down to the $60 mark.  On the
flip side, if the NASDAQ does actually advance next week, call
buyers might find profits if CIEN bursts back through $84,
which has now become resistance.


Research In Motion - RIMM (revisited)

We reviewed RIMM about a month ago, when the stock had traced a
near-perfect head-and-shoulders top.  As expected, RIMM has
fallen far below its month-ago levels.  Here's what I wrote of

The bears have brought the valuation question to the forefront
recently, which has snuffed out [RIMM's] momentum.  Despite
the company's bullish future and exponential growth, the stock
got ahead of itself and now looks poised for an extended
pullback.  How do we know a big pullback is in order?  Take
a look at the chart below and notice the peculiar pattern
formed over the past two months.  The big head-and-shoulders
top indicates lower prices.

Last Month's Chart

Substantial profits could have been had by put buyers after
RIMM broke below its neckline at roughly $85.  The stock came
very close to reaching the bearish price objective of $45,
which was calculated using my rudimentary numbers.  The
relative low traced by RIMM last Thursday was $51.75.  That's
not a bad move - $88 to $51 - if you'd bought puts.

RIMM made an impressive advance over the course of last
Thursday and Friday.  In fact, RIMM's counterparts in PALM
and HAND also followed suit.  If the trading late last week
in PALM, HAND, and RIMM truly signals a bottom in the
hand-held sector, RIMM could continue its rally, possibly back
up to the $85 level.  However, the stock will need to break
above its descending trend-line, which it rolled over at during
last Friday's rally.  If RIMM's recent rally attempt fails, the
stock will probably retest its near-term lows.


Schering Plough - SGP

I know a lot of drug stocks have been doing well, but what do
you think of the SGP chart? - Craig

Shares of SGP have had a nice rally since early September, when
the tech sector turned for the worse.  Despite the infinite
election uncertainty, the drug sector as a whole has been
providing profits from the long-side.  For its part, SGP had been
bouncing between $50 and $54 for about eight weeks and finally
broke from that base early last week.  The stock peaked last
Thursday at the $57.56 mark and then turned south as the tech
sector (NASDAQ) began its rebound.

It's obvious that the drug sector is a defensive play in times
of uncertainty in the broader equity markets, especially the
tech sector.  If the NASDAQ continues to decline, I see no
reason why SGP can't continue advancing.  Yes, the stock has
rallied quite a bit over the past three months.  However, the
fact remains that money has to be put to work in this market
and if the tech sector doesn't turn around any time soon that
capital will continue to flow into drug stocks.  People need
medicine in good times and bad (expansions and recessions).

Until the NASDAQ reaches a definitive bottom and rebounds, it's
highly likely that traders can take profits from SGP.  But, in
this type of market environment, I feel that it's best to let
the stock come to you instead of chasing it higher.  That means
letting SGP pull back to a strong support level and waiting for
a bounce higher.  SGP has serious congestion around the $52
level, which may be a good spot to look for a bounce.  Although,
it could fall to $50 before rebounding.  It was apparent last
Friday that investors we willing to let SGP fall so far before
stepping in and propping the stock up.  To reiterate, until the
NASDAQ conclusively rebounds, I think we'll continue to see the
buyers step into SGP.


Silicon Storage Technology - SSTI

Great job Eric.  Would you like to make any comments on SSTI? -
Thanks, Chris

I would like your viewpoints on EMC and SSTI.  SSTI has had
extremely strong numbers every quarter but continues to get
slammed.  I have to ask what good is [having] everything good
when you are only going to fall.  Also, please comment on the
large pool of shorts in the market.  The big players are
actually adding to their positions. - Shane

Before I get started on SSTI's chart, I'd like to thank Chris
for his kind compliments.  Feedback is always welcome!

In late 1998, during the last market drop, shares of Silicon
Storage were trading for less than $1, on a split adjusted
basis.  Why do I bring that up?  Well, the stock is currently
hovering around $13, and it could fall a lot further.

There are two things that I find disconcerting about SSTI.
The first is the stock's charts.  It's just plain ugly!  The
big rounding top traced over the course of this year may
foreshadow lower prices for the stock.  Plus, support levels
are breaking as if they were made of glass.  What's more,
as Shane pointed out, there is a huge amount of stock sold
short.  According to the most recent figures, a full 17 million
shares of SSTI have been sold short.  That equates to nearly
23% of the stock's float.  Those numbers only run through the
middle of October, and I'm sure they've increased as Shane

So where does it leave SSTI?  We know the stock is in a
definite downtrend and there are a bunch of traders in the
stock attempting to drive its price lower.  When a stock is
as heavily shorted as SSTI, two things can happen.  The
shorts can get squeezed, which would result in a massive
covering rally.  Or, the shorts hang tough and defend their
positions and sell the stock lower.  Barring a major reversal
in the NASDAQ, I don't see a massive short covering rally in
SSTI, other than the usual natural reaction that accompanies
a steep decline such as SSTI has experienced.


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.



Chain store sales reported heavy volume last week and now we'll
see how e-tailing sectors are holding up with next Tuesday's
Index of Online shopping data. Wednesday's Semiconductor Billings
could impact the sector, plus the Employment Situation and
Jobless Claims reports could provide the final insight into the
likelihood of a Fed rate cut.

For the week of December 4, 2000


New Home Sales         Oct  Forecast:    920K    Previous:   946K
Leading Indicators     Oct  Forecast:  -0.10%    Previous:  0.00%


NAPM Services          Nov  Forecast:     NA     Previous: 58.00%
Factory Orders         Oct  Forecast:  -0.30%    Previous:  1.60%
Vehicle Sales          Nov  Forecast:   16.8M    Previous:    NA
Online Shopping Index  Nov  Forecast:  150.2M    Previous:    NA


Productivity-Rev.       Q3  Forecast:   3.50%    Previous:  3.80%
Beige Book  2:00 pm     NA  Forecast:     NA     Previous:    NA
Oil and Gas Inv.     1-Dec  Forecast: 290.1MB    Previous:    NA
Semiconductor Billings Oct  Forecast:    1.9%    Previous:    NA


Initial Claims       2-Dec  Forecast:     NA     Previous:   358K
Consumer Credit        Oct  Forecast:   $7.2B    Previous:  $6.5B


Nonfarm Payrolls       Nov  Forecast:    150K    Previous:   137K
Unemployment Rate      Nov  Forecast:   4.00%    Previous:  3.90%
Hourly Earnings        Nov  Forecast:   0.30%    Previous:  0.40%
Average Workweek       Nov  Forecast:   34.3     Previous:  34.3

Week of December 11th

Dec 11  Wholesale Inventories
Dec 13  Retail Sales
Dec 13  Retail Sales ex-auto
Dec 13  Export Prices ex-ag.
Dec 13  Import Prices ex-oil
Dec 14  PPI
Dec 14  Core PPI
Dec 14  Initial Claims
Dec 14  Business Inventories
Dec 14  Current Account
Dec 15  CPI
Dec 15  Core CPI
Dec 15  Industrial Production
Dec 15  Capacity Utilization
Dec 15  Michigan Sentiment

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The Option Investor Newsletter                   Sunday 12-03-2000
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
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A Time for Change?
By Lynda Schuepp

This week has been a horrendous week for moves, especially to the
downside.  Vix has been steadily increasing, but you never know
when high is high enough to buy.  Next week we are moving into a
new house and have been packing non-stop for a week in advance of
the moving truck.  I keep peeking at CNBC and my screen to slip
in a trade or two, but it has been a tough week to make money.
Because I can't be watching the screen every minute, I have been
swing trading.  One system I use to trade the QQQ's is to use
volume reversal signals.  These signals are not long lasting,
and it's not like you can walk away and forget about everything,
but they have been working pretty well for me, so I thought I'd
like to share them with you.

Daily Chart of the QQQ's:

The first thing to look at is volume and average volume.  Note that
the average volume has been rising (using a 50 day simple moving
average) since the beginning of October.  During this time the QQQ's
have dropped from about 85 on October 5th (first candle on the chart
above) to about 62 on November 30th (second to the last candle).
During that time however, it hasn't been a straight line down.  There
have been some nice ranges you can trade.  These days I am reluctant
to buy puts because, being the ultimate optimist that I am, I am hard
pressed to believe we can go much lower.  Of course, I've been saying
that for quite a while, but one of these days it's got to be true.
My system is quite simple.

Buy Signals:
A buy signal is created by looking at extreme volume days and
buying current calls at the close with at least two weeks to
expiration.  An "extreme" volume day is when the volume is in
excess of 50 million shares and at least 20% greater volume than
the day before.  The volume must be at least as high as the
previous "extreme" volume day.  There were four such days in the
last 2 months: 10-18, 10-26, 11-13, and Thursday of this past
week (11-30).  Basically you can find one of these signals every
two weeks.

Strike Selection:
I usually select the next 10-band strike up at the close and buy
40 contracts, usually for a price between one and two dollars.  For
instance, if the QQQ's were closing at 62, I would buy the 70 calls,
as I did on Thursday.  They cost me a 1-1/8, or $4500 for 40
contracts plus commissions.  The holding period is generally only 2
to 5 days.  This is not a long-term strategy; it is simply a way to
swing trade inexpensively for a few points.  However those few
points translate to 100 to 400% returns!

Stop Loss Selection:
I use the low of the day I buy the calls as my stop.  On October
18th, 74.5 was the low; October 26th-73.625; November 13th-68.25
and Thursday the low was 60.  I purchased calls near the close on
Thursday for 1-1/8.  If the QQQ's drop below 60, the low on
Thursday, I would simply sell my calls at a loss and move on.
Although I have to admit, I haven't always done this, but I am
getting better.

Sell Signal:
A sell signal is generated when the volume of the QQQ's drops down
close to or below the 50 day moving average on volume, or at my
stop loss.  Looking at the chart above, you can see that sell
signals were created on 10-23 at a price of 86; 11-2 for 82 and
11-15 at 77-3/8.  The gains on these 3 trades were 4 points, 1
point, and 3 points.  My current trade was as high as 2-1/4 on
Friday.  Had I been watching, I might have been tempted to sell,
making a quick 100% in one day, buy I wasn't around when the
QQQ's peaked, so I am currently holding.  Volume dropped on Friday
but not anywhere near the moving average, so I will remain in the
trade until such time or a maximum of 5 days.  The reasoning is
this: if the QQQ's haven't moved in 5 days, my time value is
eroding any potential profit I might make, so it's better to go
home with half of my candy than none.

Extrapolating for the OEX:

OEX prices (bottom) and QQQ prices (top) and QQQ volume (middle):

For those of you who like to trade the OEX, you can see from the
chart above that the OEX is closely correlated to the QQQ's.
Using the QQQ's extreme volume signals to trade the OEX, similar
results could have been had.  The buy signal on 10-18 for the OEX
shows a close at 706 and the sell signal was given on 10-23 at 734.
Thursday the OEX closed at 697, it will be interesting to see if
these signals can be used to trade the OEX.  I'll keep you filled
in.  Happy Trading.

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Call Play of the Day:

JNPR - Juniper Networks $131.88 (-0.50 last week)

See details in sector list

Put Play of the Day:

ITWO - i2 Technologies $99.38 (-13.63 last 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.


AMGN $64.81 (-1.25) While it was encouraging to see AMGN bounce
at its ascending trendline 2 weeks ago, since then our play has
been as exciting as watching grass grow.  After three attempts
to break through the $69 resistance level, support for Drug
stocks fell apart over the past 2 days, dragging AMGN back below
the 200-dma.  This failure completes another lower high for
AMGN, and it now that it has broken south of its month-long
ascending trend, it looks like a good time to throw in the
towel.  After 2 weeks of being unable to sustain any upward
movement, we have simply lost patience with AMGN.  Rather than
wait for our stop to get taken out next week by further weakness
in the Drug sector, we'll drop it this weekend to make room for
more promising plays.

SGP $53.63 (+0.13) Drug stocks finally lost their lustre Friday,
and SGP followed the sector lower on volume 60% over the ADV.
Maybe Goldman Sachs can be used as the ultimate contrarian
indicator.  With many Drug stocks trading at or near 52-week
highs on Wednesday, the company initiated favorable coverage
on a basket of drug stocks including MRK, SGP, and MRK.  It
makes you wonder where they were 3 months ago, before these
stocks began their run.  As if in response to the upgrade, the
Drug Index (DRG.X) turned on a dime and headed lower for the
past 2 days.  Following the sector lower on Friday, SGP gave up
nearly 5%, and although our $52 stop is still intact, the
bullish trend suffered some serious damage.  The final straw
was Friday's UBS Warburg downgrade.  We don't want to play
Goldman's game anymore, so were are moving SGP to the drop list
this weekend.

LLY $90.06 (+5.25) LLY gave a great presentation at the
Robertson Stephens Medical Conference last week.  The positive
coverage added to LLY's already growing list of proponents.
While LLY's strong momentum took it through the $97 level on
Thursday and promised of more to come, the bullish sentiment
swirling around the drug sector changed tune overnight.  Friday
morning, LLY fell like a lead balloon.  The stock's current
position, almost smack on our $90 stop loss, and leaves us no
choice but to exit.  While this Bush play ended sooner than
expected, let's keep an eye on this split candidate for future
trading opportunities.


MVSN $47.75 (-1.38) Continuing to trade in sympathy with the
NASDAQ, MVSN tagged along for the ride as the stock gapped up at
the open just above our stop price of $43.  Trading higher for
the remainder of the day, the stock closed to gain $6.25 or over
15 percent on strong volume, 145% of ADV.  The stock was also
helped by news of a new customer.  BBC Worldwide will license
MVSN's SafeCast copy protection technology as part of their
marketing plan for releasing digital content.  With a large back
catalog of highly popular TV shows to be released, the deal could
prove to be a significant windfall for MVSN.  While the stock
failed to close above its 10-dma at $47.92, a break through
resistance seems likely.  With our stop price triggered, we are
dropping coverage of this play.

NEWP $69.25 (-2.00) After making a presentation at CS First
Boston's annual Tech conference on Thursday night, analysts
apparently liked what the CEO and CFO had to say about the
company's prospects going forward.  Coverage was initiated by
First Union Securities with a Buy rating.  Along with a relief
rallying NASDAQ, the stock gained $12.25 or over 21 percent on
over 165% of ADV.  While the stock closed below our stop price of
$71, today's close above the 10-dma (currently at $66.42) for the
first time in over a month has us inclined to take our still
substantial gains on this highly successful put play.  With that,
we say so long and thanks for the profits.

HAND $52.06 (-6.06) It was certainly lucrative to play HAND's
steadfast decline from the $80 level, but the inevitable has
arrived.  Friday's strong 12%, or $5.56 bounce indicated that
HAND may have found a bottom during Thursday's very bearish
session.  That day, HAND saw a clean break of the $50 level and
an intraday low of $41.50 before buyers started nibbling.  While
it true that HAND didn't violate our stop loss of $58, we
believe the play is over.  Volume was 2.4 times the norm during
the strong upswing and HAND kept its bullish gains at Friday's
close.  Therefore, we've decided to drop HAND this weekend and
move on to more favorable opportunities.  If you have open
positions, consider exiting on any intraday weakness.

AGIL $49.63 (-2.31) The signs are unmistakable.  Two days of
advances on better-than-average volume and it's time to cut
bait.  In light of AGIL's swift decline to the $35 level - which
was certainly a nice reward! - we'd lowered our stop from $50 to
$48 to avoid getting snagged on an oversold bounce.  To our
dismay, there was a multitude of buyers lined up to take
advantage of AGIL's attractive share price.  And like a loyal
soldier, AGIL traced the NASDAQ in higher territory.  In
consideration of the powerful rebound and the violation of our
stop loss, we're exiting the play this weekend.


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.


NTAP - Network Appliance $53.94 (-9.06 last week)

The idea was inspired, yet simple.  Separate storage from an
application server and put all that data on a special "appliance"
tasked with serving data at high speeds.  In 1992, Network
Appliance originated this high-performance network appliance
concept.  Today, they are a recognized leader in data storage and
access.  Corporations and ISPs use their solutions to reduce the
cost and complexity of managing their mission-critical data.

Shares of Network Attached Storage (NAS) leader Network Appliance
have fallen sharply amidst valuation concerns and the possibility
of competition.  Down more than 50% in November, with the stock
now deep into oversold territory, a rebound in the NASDAQ could
see this stock moving up in sympathy, and for good reason.  At
present, Storage is with little doubt the fastest growing sector
in Technology.  According to recent estimates, 75% of all
information technology hardware budgets will consist of storage
hardware by the year 2003.  If these estimates hold, then growth
in the Storage sector could easily exceed that of the Fiber Optic
sector and at its peak, could be many times larger than the PC
boom of the 90's.  Most recently, EMC announced a new product,
code-named Chameleon, putting the company in direct competition
with NTAP.  While this has been a source of concern, analysts
have suggested that EMC's product cannot compete with NTAP on
price.  As well, NTAP recently announced support for IBM's
high-end mainframe computers and DB2 database software, putting
it in the higher margin turf of EMC.  It appears that the battle
lines are being drawn but considering the growth rate of the
sector as a whole, this town is certainly big enough for both
companies.  Now back above its 5-dma at $52, a bounce off
this level as well as $50 could provide aggressive traders with
an ideal entry.  Support can also be found at our stop price of
$45 but make sure the stock closes above this level.  For a safer
play, wait for NTAP to clear the 10-dma, currently at $57.41,
backed by strong buying before jumping in.  As NTAP's movements
are largely affected by the NASDAQ, we would recommend entering
only if there is strength in the Tech index.

***December contracts expire in two weeks***

BUY CALL DEC-50 NUL-LJ OI=1334 at $8.00 SL=5.75
BUY CALL DEC-55*NUL-LK OI=2032 at $5.13 SL=3.00
BUY CALL DEC-60 NUL-LL OI=2057 at $3.38 SL=1.75
BUY CALL JAN-55 NUL-AK OI= 217 at $9.25 SL=6.25
BUY CALL JAN-60 NUL-AL OI= 332 at $7.25 SL=5.00


RSAS - RSA Security $46.13 (+2.81 last week)

RSA Security Inc. helps organizations build secure, trusted
foundations for e-businesses through its RSA SecurID two-factor
authentication, RSA BSAFE encryption and RSA Keon public key
management systems.  With nearly a half billion RSA BSAFE-enabled
applications in use worldwide, more than seven million RSA
SecurID users and almost 20 years of industry experience, RSA
Security has the proven leadership and innovative technology to
address the changing security needs of e-business and bring trust
to the new, online economy.

Shares of RSA Security may have had a difficult month, but the
company itself has been making some positive moves.  With a
rebounding NASDAQ and a focus on valuation, shares of RSAS could
become in demand.  The company has been signing up large
customers, most notably Adobe, Electronic Data Systems, the
Swedish Municipal Workers' Union and Texas Instruments.  The
company's encryption keys have become pervasive, residing in a
variety of formats including smart cards, cable modems, ATM bank
machines, e-business software, smart phones, cross-platform
documents, email systems, and private networks.  In fact, a quick
glance in the preferences of your favorite web browser will
likely reveal the presence of RSAS encryption keys.  With over a
billion products shipped worldwide and alliances with Cisco and
Intel, the company has no shortage of high-profile customers.  In
early October, the company announced that it would repurchase up
to four million shares of stock over the next 12 months.  RSAS'
low PE, only 13.15, and lack of long-term debt makes this an
attractive alternative to peers such as CHKP and VRSN.  On
Friday, a rebounding NASDAQ helped RSAS close up on average
volume.  With the 5 and 10-dmas converged at the $43 mark, a
pullback to that level as well as support at our stop price of
$41 could give aggressive traders a target to shoot for.
If continued buying in the NASDAQ helps lift RSAS higher on
Monday, a break above $47 with conviction could allow for a
conservative entry, with the next level of resistance overhead
coming from the 50-dma at $48.83.  In entering this play make
sure there is strength in the NASDAQ to confirm upward momentum.

***December contracts expire in two weeks***

BUY CALL DEC-40 QSD-LH OI=  0 at $7.00 SL=5.00  Wait for OI!!
BUY CALL DEC-45*QSD-LI OI= 32 at $3.25 SL=2.50
BUY CALL DEC-50 QSD-LJ OI=399 at $1.31 SL=0.75
BUY CALL JAN-45 QSD-AI OI=324 at $5.75 SL=3.75
BUY CALL JAN-50 QSD-AJ OI=325 at $3.63 SL=1.75


IMCL - Imclone Systems $48.94 (+1.31 last week)

Engaged in the research and development of novel cancer
treatments, IMCL focuses on growth factor inhibitors,
therapeutic cancer vaccines and angiogenesis inhibitors.  The
company's lead product candidate, IMC-C225, is a therapeutic
monoclonal antibody that inhibits stimulation of a receptor for
growth factors upon which certain tumors depend.  Phase I/II
clinical trials have been promising.  The lead candidate for
angiogenesis inhibition, IMC-1C11 is an antibody that binds
selectively and with high affinity to KDR, a principal
Vascular Endothelial Growth Factor (VEGF) receptor, thus
inhibiting angiogenesis.

A rarity in the Technology sector, Biotech stocks are one of
the few groups that have not wiped out all of their gains from
last winter.  Sure they lead the decline in March, but since
then have held up rather well.  Mirroring the action of the
Biotechnology index (BTK.X), IMCL has been vacillating around
its 200-dma (currently $47.19) for the past 2 weeks as the
bulls and the bears duel for control.  If the NASDAQ is going
to hold the 2500 level and recover from there, the Biotechs
(as one of the strongest sectors) should lead the charge.
Although the company missed their earnings target for the third
quarter (reported on November 15th), investors seem to have
been encouraged by the revenue growth number, which came in at
460% year-over-year.  Ironically, one of the things that may be
helping Biotechs to maintain their current valuations is the
fact that their future revenue streams cannot yet be quantified.
Remember when future revenue for the Internets was unknown and
it seemed like the sky was the limit?  Biotechs seem to be in a
similar mode, with strong, but undefined future growth rates for
many of the industry leaders.  IMCL has targeted its research
and development efforts on the treatment of various cancers, an
area that seems to get investor's attention.  IMCL has solid
support at $44, backed up by the even stronger $40 level.
Resistance is equally well defined, sitting just overhead at
$51, and providing a good trigger point for conservative players
to establish new positions.  While aggressive investors can
consider buying the dips to support, make sure that both the
sector and the NASDAQ are moving in the positive direction
before pulling the trigger.

***December contracts expire in two weeks***

BUY CALL DEC-45 QCI-LI OI=198 at $6.63 SL=4.50
BUY CALL DEC-50*QCI-LJ OI=733 at $3.88 SL=2.50
BUY CALL DEC-55 QCI-LK OI=520 at $2.06 SL=1.00
BUY CALL JAN-50 QCI-AJ OI=141 at $6.38 SL=4.25
BUY CALL JAN-55 QCI-AK OI=107 at $4.38 SL=2.25


MLNM - Millennium Pharmaceuticals $53.50 (-0.56 last week)

Through an integrated approach called "gene to patient", MLNM
is engaged in the development of breakthrough drugs and
predictive medicine products for the treatment of major human
illnesses.  By discovering disease-related genes, the company
seeks to produce validated drug targets and develop new,
proprietary drugs to treat cancer, metabolic disease (including
obesity) and inflammation.  MLNM's LeukoSite subsidiary has
developed Campath, a potential leukemia treatment that has
received FDA fast-track status.  The company also has
significant programs in infectious diseases, cardiovascular
diseases and diseases of the central nervous system.  MLNM
derives its revenue from research and development alliances
with such companies as Bayer AG, Pharmacia and American Home

Although it looks like MLNM fell off a cliff the day after the
election, the picture is definitely starting to brighten for
this leading Biotechnology company.  At the Robbie Stephens
Medical Conference on Tuesday, the company's chief business
officer told investors that the company feels "very good about
the likelihood of approval" for Campath, which treats chronic
lymphocytic leukemia.  An advisory committee to the FDA is
scheduled to meet on December 14th to evaluate the application
submitted by MLNM.  While most Biotechs, including MLNM are
still not profitable, the market is valuing the stocks based on
the valuable intellectual property and patents that have a lot
of inherent value.  The benefits of genomics research are
beginning to be seen as drugs based on this information can be
targeted at the underlying genetic ailment, rather than just
treating the symptoms.  According to Banc of America securities
analyst James Reddoch, "If the worldwide market for all drugs is
$300 billion, genomics has the potential to double that."  With
Campath and 7 other drug candidates currently in the pipeline,
MLNM expects to capture its own piece of that pie.  After
hitting a low of $41 two weeks ago, MLNM has managed to recover
back above the $49-50 support level.  Stronger support sits at
$44, prompting us to pick that level to place our stop.  Make
no mistake, Biotechs are on thin ice along with the rest of the
NASDAQ.  But, given their superior performance relative to the
overall Technology sector, these stocks are likely to lead any
recovery in the near term.  Aggressive investors will want to
target shoot dips to support for initiating new positions, while
those with a lower risk tolerance will use a breakout above the
200-dma ($55.94) as their entry trigger.  In either case, make
sure that strong buying volume in MLNM is confirmed by positive
movement in the overall Biotech sector before taking the plunge.

***December contracts expire in two weeks***

BUY CALL DEC-50 QMR-LJ OI=366 at $7.88 SL=5.50
BUY CALL DEC-55*QMR-LK OI=304 at $5.25 SL=3.75
BUY CALL DEC-60 QMR-LL OI=434 at $3.38 SL=1.75
BUY CALL JAN-55 QMR-AK OI=135 at $9.50 SL=6.75
BUY CALL JAN-60 QMR-AL OI=132 at $7.75 SL=5.50

SELL PUT DEC-45 QMI-XR OI=523 at $1.75 SL=3.50
(See risks of selling puts in play legend)


MUSE - Micromuse $94.13 (+1.25 last week)

Founded as a network management solutions reseller, Micromuse
today is a leading provider of real-time fault and service-
level management software.  Its Netcool suite helps
telecommunications and Internet service providers ensure the
uptime of network-based customer services and applications.  The
company's software is used in the OSS and NOC centers of many of
the world's leading service providers such as AOL, Cellular One,
and Charles Schwab.

Micromuse's share price was launched off its devastating low of
$70 as the positive sentiment flowed from CSFB's Technology
Group Annual Technology Conference and the NASDAQ rose from the
trenches on Thursday.  While the NASDAQ powered higher into
Friday's session and ultimately managed to stay afloat of 2600,
the synergy of rallying markets combined with positive coverage
powered MUSE up a substantial 35%, or $24.13 over the two
trading sessions.  CSFB also reiterated a Strong Buy
recommendation and issued a $190 price target, to boot.  Indeed,
MUSE is positioned for a momentum run upwards of the century
mark; however, there's absolutely no question that OIN will only
look to begin new plays if the NASDAQ continues to strengthen.
Market corroboration and bullish moves within the networking
sector are essential if MUSE is to trend higher and maintain the
advances.  We have our stop currently set at $82, just above the
former $80 resistance.  On the low end of recent intraday
trading, $85 sustained the share price on dips; although it's
likely $90 should strengthen as the shorter-term support, if the
uptrend takes hold.  The cautious types will want to wait for a
raging NASDAQ to break MUSE out above the psychological $100
level before taking positions.

***December contracts expire in two weeks***

BUY CALL DEC- 90 QVM-LR OI= 43 at $14.88 SL=11.00
BUY CALL DEC- 95*QVM-LS OI= 27 at $12.38 SL= 9.25
BUY CALL DEC-100 QVM-LT OI= 71 at $10.50 SL= 7.50
BUY CALL JAN- 90 QVM-AR OI=236 at $25.00 SL=19.50
BUY CALL JAN- 95 QVM-AS OI= 11 at $22.13 SL=17.25
BUY CALL JAN-100 QVM-AT OI= 44 at $19.50 SL=14.00


MEDX - Medarex Inc $42.63 (+4.88 last week)

Medarex is a human monoclonal antibody-based company with
integrated discovery, development and manufacturing
capabilities, utilizing the Company's genetically engineered
mice to create fully human monoclonal antibodies.  Several of
their therapeutic products, which target cancers, tumors, and
leukemia, are in clinical trials.  Major clients include
Centacor, Merck, and Aventis Behring.

It's been rather dicey for MEDX in recent times.  A successful
split run brought shares upward to $75 before the tech woes
took MEDX off its pedestal.  Its sharp break under the
200-dma, near the $45 level a couple weeks ago, sent shares as
low as $30.  A narrow trading range followed the retraction
with MEDX finding a tough line of opposition at $40.  Friday's
breakout through this upper resistance, and its subsequent
bounces off it intraday, set MEDX up for a potential run into
next week.  Simply put, we're entering a play on MEDX for its
upward potential over the short-term.  It'll be essential for
the NASDAQ to establish a positive trend if we're to see
lucrative profits.  On the analyst front, MEDX rates well.  In
November the stock received a Buy from Josephthal & Co and
Strong Buy recommendations from Dain Rauscher Wessels and
SunTrust Equitable.  Nevertheless, take entries only if you
have a cooperating market!  Bullish confirmation would of
course be for MEDX to break to the upside of the 200-dma
($44.75) with intensity.  Although, some aggressive traders
might consider taking positions on high-volume bounces off the
$36 level, which is where we have our stop loss set.  An entry
of this kind can be quite risky, but offers more upside

***December contracts expire in two weeks***

BUY CALL DEC-40 MZU-LH OI= 73 at $6.63 SL=4.50
BUY CALL DEC-45*MZU-LI OI=210 at $4.00 SL=2.50
BUY CALL DEC-50 MZU-HJ OI=223 at $2.25 SL=1.00
BUY CALL JAN-45 MZU-AI OI= 30 at $6.88 SL=5.00
BUY CALL JAN-50 MZU-AJ OI=200 at $4.88 SL=3.00



COF - Capital One Financial $56.88 (+6.25 last week)

Capital One is one of the major financial service providers
on the Internet, with online account decisioning, real-time
account numbering, online retail deposits and a growing number
of customers serviced online.  Capital One's subsidiaries
collectively had 29.4 million accounts and $24.2 billion in
managed loans outstanding as of September 30th, 2000.

When the National Association of Purchasing Manager's number
was released Friday showing yet another contraction in the
manufacturing section, it paved the way for a move from the
Fed.  A reading under 50 signals a slowdown and this was the
fourth straight month that occurred.  Now, it isn't an exact
science trying to read the Greenspan tarot cards, but when
there has been three straight numbers under 50 in the past he
has always lowered rates (except for once in 1993 when rates
were already very low).  If you top this with the fact that
all the talk this past week was of a "hard landing" for our
economy and even the R-word (recession), you have to conclude
the December Fed meeting will be a big one.  This will be the
first time since June when the Fed hiked rates by 50-basis
points that there is real potential for action.  Whether it will
be directive bias back to neutral or an actual lowering of rates
is still uncertain, but either will be good for the economy and
stock market.  Who typically benefits most within the market on
this kind of Fed action?  Yep, Financials.  And they don't wait
for the outcome either.  Financial stocks are beginning to turn
now in anticipation of some degree of relief.  That is why we
are adding COF to our Long-term play list.  The stock has turned
back above the 5, 10 and 200-dmas.  The volume has begun to pick-
up and it's breaking out of a two month slumber.  Choose your
entry points on the dip and watch for a move above the 50-dma
at $62 to really confirm the move.  Also, we are setting a stop
loss at $53 to protect against a reversal.

***December contracts expire in two weeks***

BUY CALL DEC-55 COF-LK OI=627 at $3.88 SL=2.25
BUY CALL JAN-55 COF-AK OI=  3 at $6.00 SL=4.25
BUY CALL JAN-60*COF-AL OI=926 at $3.63 SL=2.00
BUY CALL MAR-60 COF-CL OI=383 at $5.75 SL=4.00



MFNX - Metromedia Fiber Network $13.75 (-0.50 last week)

Metromedia Fiber Network is a leading provider of end-to-end
optical network solutions.  By offering virtually unlimited,
unmetered bandwidth at a fixed cost, Metromedia Fiber Network
is eliminating the bandwidth barrier and redefining the way
broadband capacity is sold.  They are extending metropolitan
fiber-optic infrastructure to the end-user in strategic top-
tier markets, enabling its customers to implement the latest
data, video, Internet and multimedia applications.

Friday finally brought some relief to both the Nasdaq and the
Fiber-optics sector, which is what brings us to MFNX.  The
recent carnage in the Fiber sector may have finally reached a
stage of capitulation this past week.  MFNX did too as it traded
in the single-digits for the first time in nearly two years.
While that may sound bearish to some degree, a change in sentiment
is occurring.  The sector obviously has the potential to rally
with a vengeance based on a previous track record.  With Ciena
set to report earnings this Thursday, we have a catalyst for a
big move.  Throw in the fact that MFNX's CEO and COO bought one
million shares on the open market on Wednesday and we have some
momentum building.  That is why it has traded back up to the
10-dma at $14.00.  As it is still under that level, the risk
remains high, but it is called a lottery play for a reason.  A
close over $14 would be confirming, otherwise choose your entry
points selectively on the dips.  The DEC options are active and
should allow for good liquidity.  The stop loss is set at $9.50.

***December contracts expire in two weeks***

BUY CALL DEC-10 QFN-LL OI= 243 at $4.25 SL=2.50
BUY CALL DEC-12 QFN-LN OI= 354 at $2.50 SL=1.25
BUY CALL DEC-15*QFN-LC OI=1365 at $1.38 SL=0.50
BUY CALL JAN-15 QFN-AC OI=1028 at $2.75 SL=1.50


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The Option Investor Newsletter                   Sunday 12-03-2000
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:

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BRCM - Broadcom Corporation $104.75 (-12.38 last week)

Broadcom Corporation is a provider of highly integrated silicon
solutions that enable broadband digital transmission of voice,
video and data to and throughout the home and within the business
enterprise.  These integrated circuits permit the cost-effective
delivery of high-speed, high-bandwidth networking using existing
communications infrastructures that were not originally designed
for the transmission of broadband digital content.  Using unique
proprietary technologies and advanced design methodologies, the
company designs, develops and supplies integrated circuits for a
number of the most significant broadband communications markets.

Thanks to a smart acquisition, bullish comments from the CEO, a
rebounding NASDAQ and words of praise from a number of analysts,
Broadcom appears to have bounced off of support at $85.  Earlier
in the week, BRCM acquired Israeli-based video chipmaker
VisionTech using shares of its own stock.  Fear of dilution along
with weakness in the Tech sector caused BRCM to head lower but
analysts came out and applauded the deal, calling the acquisition
a good strategic fit.  In fact, the purchase of privately held
VisionTech signals BRCM's entrance to the important emerging
digital video industry.  Analyst Mark Edelstone from Morgan
Stanley Dean Witter upgraded the stock to a Strong Buy from an
Outperform rating, citing attractive valuation as well as strong
business conditions.  WR Hambrecht analyst Jim Liang reiterated
his Buy rating, based on the VisionTech acquisition and the
anticipation that BRCM would outperform its peer group over the
next 12 months.  On Friday, in sympathy with a relief rallying
NASDAQ, the stock closed up $7.25 or 7.44% on 265% of ADV.
Upbeat comments from CEO Henry Nicholas were well received, with
no inventory concerns and growth in demand for cable modem chip
sets for 2001, expected to exceed 2000 figures.  As well, a
faster than expected deployment of new interactive set top boxes,
containing three times the number of Broadcom chips as a standard
broadcast-only box will mean higher sales and revenue figures for
the company going forward.  For aggressive traders, a bounce off
support at $100 as well as the 5-dma at $96 are possible targets
to shoot for.  There is also support at $95 and $90 but keep in
mind our stop price, now at $89.  For a more conservative entry,
wait for momentum to carry BRCM over the 10-dma near $110.  In
either case, confirm direction with strength in the NASDAQ as
well as the Semiconductor Sector (SMH, SOX.X).

***December contracts expire in two weeks***

BUY CALL DEC-100 RDZ-LT OI=1208 at $14.13 SL=10.50
BUY CALL DEC-105 RDW-LA OI= 595 at $10.88 SL= 8.25
BUY CALL DEC-110*RDW-LB OI=1784 at $ 8.50 SL= 6.00
BUY CALL JAN-105 RDW-AA OI=2530 at $19.88 SL=14.50
BUY CALL JAN-110 RDW-AB OI= 288 at $18.25 SL=13.00

SELL PUT DEC- 95 RDZ-XS OI= 397 at $ 6.13 SL= 8.50
(See risk of selling put in play legend)


CELG - Celgene Corp. $62.02 (+1.64 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.

Trading last week in CELG has largely been focused on the
American Society of Hematology (ASH) meeting, which began last
Friday.  A shaky NASDAQ earlier in the week provided traders with
an ideal entry point as the stock bounced off strong support at
$55 to end the week with reversal pattern.  This is a bullish sign
and with the ASH meeting continuing until Tuesday December 5th,
positive comments from Biotech companies could result in a
sector-wide rally.  CELG will also be presenting scientific data
on their star drug Thalomid, and its use for treating multiple
myeloma and melanoma.  A large part of CELG's earnings growth can
be attributed to the diverse range of diseases that Thalomid has
effectively treated.  Aside from numerous forms of cancer,
Thalomid has also been used to treat certain types of skin
diseases including leprosy.  As well, it has also been effective
in some cases in treating AIDS patients.  New uses for the drug
have spurred earnings estimates going forward to higher than
expected levels, allowing CELG to not only break even in its most
recent earnings report, but to become cash flow positive.  Now
back above the $60 level, where the 5, 50 and 100-dmas currently
reside, a pullback to that level could provide aggressive traders
with a solid entry point.  Additional support can be found at the
10-dma ($57.52), $55 and $50 but confirm the bounce with volume
and make sure CELG closes above our stop price of $52.  If momentum
in the stock continues, a break through $64 on volume could allow
the more risk adverse to enter this play.  In doing so, confirm
momentum with sentiment in the Biotech sector, using the
Biotechnology Index (BTK) and Merrill Lynch's Biotech HOLDR (BBH).

***December contracts expire in two weeks***

BUY CALL DEC-60 LL-LL OI= 318 at $6.00 SL=4.00
BUY CALL DEC-65*LL-LM OI= 250 at $3.75 SL=2.75
BUY CALL DEC-70 LL-LN OI= 157 at $1.88 SL=1.00
BUY CALL JAN-65 LL-AM OI=3771 at $7.25 SL=5.00
BUY CALL JAN-70 LL-AN OI= 442 at $5.25 SL=3.25


JNPR - Juniper Networks $131.88 (-0.50 last week)

As a provider of Internet infrastructure solutions, JNPR serves
Internet service providers and other telecommunications service
providers, helping them to meet the demands resulting from the
rapid growth of the Internet.  The company delivers next
generation Internet backbone routers that are specifically
designed for service provider networks.  JNPR's flagship product
is the M40 Internet backbone router, which complements the
recently-introduced M20, which is a router built specifically
for emerging service providers.  The routers provided by the
company combine the features of the JUNOS Internet Software,
high performance ASIC-based packet forwarding technology and
Internet-optimized architecture into a purpose-built solution
for service providers.

Despite the NASDAQ's inability to hold onto most of its gains
Friday, the Networking sector (NWX.X) managed to post a solid
gain, validating our logic for adding JNPR to the call list on
Thursday night.  While still a high risk play, it seems the
valuation compression that this stock has suffered is excessive,
especially given the rate at which the company is growing
revenue and earnings.  Revenue growth in the most recent quarter
came in just shy of 600% year-over-year, and the company posted
earnings of 17 cents versus a loss of 9 cents in the year-ago
period.  That is rapid growth no matter how you slice it, and
once the NASDAQ starts to get healthy again, stocks like JNPR
should be favorites with the momentum investors.  The follow
through from Thursday's rally, pushed our play as high as
$140.50 before the profit taking set in.  Giving up nearly $9
in the final 90 minutes is not exactly encouraging, but there
are some bright points to consider.  The sector was positive,
JNPR closed back above the descending trendline ($128) and the
10-dma ($124.13) for the first time since the election, and the
gains came on volume 50% over the ADV.  Daily stochastics have
turned up and emerged from oversold territory, and even MACD
has crossed back into positive territory.  Resistance is now
clearly formed near $140, and the stock closed right in the
middle of the $131-132 resistance level we mentioned on
Thursday.  While aggressive traders can consider buying dips
near the $125 support level, anything below that will indicate
serious weakness, and we would advocate standing aside.  With
the recent volatility in the high-flying Networking stocks, it
wouldn't take long for the bears to push JNPR low enough to take
out our stop at $109.  Current levels look attractive for more
conservative entries, but don't fight the trend.  Wait for the
Networking stocks to re-enter rally mode before initiating any
new positions.

***December contracts expire in two weeks***

BUY CALL DEC-130 JUY-LF OI= 946 at $13.88 SL=10.50
BUY CALL DEC-135*JUY-LG OI= 383 at $10.63 SL= 7.50
BUY CALL DEC-140 JUY-LH OI= 891 at $ 9.00 SL= 6.25
BUY CALL JAN-135 JUY-AG OI= 681 at $22.38 SL=16.75
BUY CALL JAN-140 JUY-AH OI= 379 at $19.63 SL=14.25
BUY CALL JAN-145 JUY-AI OI= 446 at $18.00 SL=13.00

SELL PUT DEC-110 JUY-XB OI=1042 at $ 4.50 SL= 6.50
(See risks of selling puts in play legend)


A - Agilent Technologies $53.00 (+2.06 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.

Agilent's been a beacon of light in the gloomy tech sector of
late.  Coming from under the $44 level following a stellar
earnings report on November 16th, the stock has attracted lots
of investor interest and a list of rating upgrades.  The latest
coverage was initiated on Friday by First Union Securities with
a Buy.  Agilent started out the week with a major acquisition
announcement that forecasts accelerated growth projections over
the long-term.  The strategy to enhance its software offerings
through its cash acquisition of Objective Systems Integrated
(OSII) will however initially cut Agilent's earnings by about
$0.02 p/s in fiscal 2001.  The deal is valued at approximately
$665 mln and is expected to close in about 6 weeks.  The news
didn't effect A's bullish trading and the momentum continued to
edge the price level higher.  Volume's been moderate to strong
with robust activity attempting to bring A through the
formidable resistance at the $54 level.  With the potential of a
rebound in the tech sector continuing next week, A continues to
be a favorable trade.  But take note that some of the others in
this sector like Sanima (SANM) and Solectron (SLR) aren't faring
as well as A; therefore it's of the utmost importance to confirm
strength in the NASDAQ before you go long.  Additionally,
consider waiting for a breakout above resistance at $54 before
opening positions.  Aggressive traders might buy into strength
off the current levels, but this is more risky, particularly if
you don't have tight stops in place for protection.  We are
however, still maintaining a lower exit point at $44 to allow
for a significant intraday pullback.

***December contracts expire in two weeks***

BUY CALL DEC-50 A-LJ OI=2924 at $4.50 SL=2.75
BUY CALL DEC-55*A-LK OI=4397 at $1.94 SL=1.00
BUY CALL DEC-60 A-LL OI= 332 at $0.75 SL=0.00
BUY CALL JAN-50 A-AJ OI=5918 at $7.38 SL=5.25
BUY CALL JAN-55 A-AK OI=2021 at $5.13 SL=3.00
BUY CALL JAN-60 A-AL OI=3493 at $3.38 SL=1.75


BRCD - Brocade Communications $167.88 (-21.56 last week)

Brocade Communications Systems is a supplier of open Fibre
Channel Fabric solutions that provide the intelligent backbone
for Storage Area Networks (SANs).  Brocade's family of SilkWorm
switches enables a company to manage growth of its data storage
requirements, improve the data transfer performance, and
increase the size of its SAN.  Brocade's products are primarily
sold in the US with 70% of sales derived from Compaq, Data
General, Dell, McDATA, and Sequent.

We're looking for BRCD, along with the likes of JNPR and BRCM,
to lead the techs back into the limelight next week.  On
Thursday, traders took BRCD up $14.19, or 9.2% on the heels of
its solid earnings report and 2:1 stock split announcement.  4Q
results beat consensus estimates by two cents coming in with a
net profit of $27.2 mln, or $0.22 p/s, on sales of $132.1 mln.
CEO Greg Reyes commented that BRCD's market should grow to $7
bln by 2004 with the current SAN market accelerating faster than
expected.  The predicted sales growth was reported in excess of
150% for the 2001 fiscal year.  This favorable outlook coupled
with the upcoming 2:1 stock split, payable on December 22nd,
should generate additional momentum in the coming weeks.  Of
course, we'll only look to enter new positions only after
confirming strength in the NASDAQ.  While your entry point is
determined by your personal risk tolerance, keep in mind our
stop is set at $159.  A more enterprising entry could be found
on deep dips to $160, but the $165 level appears to be
developing as a solid launching point.  Friday's action saw BRCD
repeatedly bounce off this level as it challenged the immediate
resistance at $175.50.  Other traders might find a high-volume
move through $172 and higher, at $177, a more judicious level to
take entry.  Whatever your ultimate plan may be, take profits
quickly and remember to confirm direction and overall market
sentiment before jumping into this HIGH-RISK tech play.

***December contracts expire in two weeks***

BUY CALL DEC-165 GUF-LM OI= 101 at $13.88 SL=10.50
BUY CALL DEC-170*GUF-LN OI=2723 at $11.25 SL= 8.50
BUY CALL DEC-175 GUF-LO OI= 748 at $ 9.13 SL= 6.25
BUY CALL JAN-170 GUF-AN OI= 800 at $21.25 SL=16.25
BUY CALL JAN-175 GUF-AO OI=  81 at $18.88 SL=13.75
BUY CALL JAN-180 GUF-AP OI= 626 at $17.00 SL=12.25


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The Option Investor Newsletter                   Sunday 12-03-2000
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:

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CREE - Cree $61.94 (-26.56 last week)

Cree is the world leader in the development and manufacture of
Silicon Carbide (SiC), which is a base material used in the
fabrication of the company's blue light emitting diodes, wafers,
and gemstone materials.  The company was formed in 1987 by a
group of researchers from North Carolina State University, who
were pioneers in the development of a single crystal silicon
carbide.  Cree's vertical integration throughout the
manufacturing process from crystal growth to package device,
allows total control over all aspects of the production process.
Products currently under development include microwave
transistors, power devices and lasers.

CREE dropped below the 50-dma and 200-dma on November 17th, and
since that time, the chart has resembled a steep cliff.  Volume
has been heavy on the down days, and there have only been two
days in the last two weeks when the stock closed up.  The
selling could have been partly related to the news that CREE
will be purchasing UltraRF, a division of Spectrian Corporation,
for approximately $30 million in cash and an additional
portion of CREE stock.  At the time, CREE was trading at
$92, which means that the terms of the deal may have to be
reassessed.  The takeover was valued at approximately $100
million, which is slightly less than CREE's annual revenues, and
seen as an expensive takeover.  Since that time, the electronics,
semiconductor and equipment manufacturing sectors have taken a
big hit, with Altera being the latest company to warn of a
slowdown in sales.  Many analysts have downgraded the chip sector,
stating that inventories are at high levels, and only a few
semiconductor and chip-related stocks have been able to buck the
trend.  CREE may have to wait until its P/E drops from high values
to a more realistic level, as investors are seeking growth and
value these days.  CREE is well below the 200-dma of $109 and the
50-dma of $98.  While CREE closed up last Friday, the chart
actually shows that the stock attempted to reach its 5-dma of
$69.25, but only reached $66.94 before rolling over.  Consider
taking a position on another failed rally attempts past $66, and
set stops at $68.  Watch the semiconductor and electronics
components sector for weakness before taking positions.

***December contracts expire in two weeks***

BUY PUT DEC-60*CQR-XLE OI= 4 at $7.00 SL=5.00
BUY PUT DEC-55 CQR-XKE OI=57 at $4.63 SL=2.87


AKAM - Akamai Technologies $27.00 (-8.06 last week)

Akamai Technologies enables businesses to prosper in a
competitive Web-centric marketplace by providing solutions that
optimize Web site performance, deliver broadcast-caliber
streaming media, and provide interactive application services.
Akamai's mission is to transform the delivery of Internet content
so that Web congestion is a thing of the past. Akamai provides
businesses with dependable, high-performance delivery of
streaming media, rich Web content and Internet applications
through services that are scalable, easily implemented and easily

Faster than the company can serve up rich media to its end-users,
shares of Akamai have been heading deeper into negative
territory.  A failure to hold the 50-dma in the early part of
November has left the stock to bleed ever lower on the backs of
the 5 and 10-dmas now at $30.46 and $33.43, respectively.
Valuation concerns in the Internet sector have played a large
role in AKAM's decline, especially in four letter dot com stocks
with losses instead of earnings.  With shares of the company down
92% from its all-time highs and competitor Digital Island (ISLD)
down 97%, overhead resistance is formidable and any strength in
the stock has been heavily sold into.  Most recently, analysts
have been defending the stock.  Robertson Stephens initiated
coverage with a Buy rating and a price target of $52.  First
Union Securities reiterated their Strong Buy rating and $65
price target.  Dain Rauscher Wessels initiated coverage with a
Buy Aggressive rating and Lazard Freres a Buy.  On Friday UBS
Warburg initiated coverage with a Buy rating.  Despite all the
positive comments, AKAM continues to be weak, as the stock lost
another $1.75 or over 6 percent on 110% of ADV to end the week.
For aggressive traders, failed rallies above our stop price of
$31 as well as the 5-dma could be a target to shoot for.  AKAM
has found support at $26.75 in the past couple of trading
sessions.  A break below this level on strong volume could be a
safer bet.  When taking a position, confirm sentiment with the
NASDAQ and sector sympathy with Merrill Lynch's Internet HOLDR
(HHH) when initiating a play.

***December contracts expire in two weeks***

BUY PUT DEC-30*RUG-XF OI=854 at $4.88 SL=3.00
BUY PUT DEC-25 RUG-XE OI=182 at $1.94 SL=1.00


BLDP - Ballard Power Systems $70.00 (-7.88 last week)

Doing their part to make gas-guzzlers a thing of the past,
BLDP makes emission-free proton exchange membrane (PEM) fuel
cells and fuel cell systems designed to be quiet, efficient
alternatives to internal combustion engines.  A fuel cell is
an environmentally clean power generator that combines hydrogen
fuel with oxygen, without combustion, to produce electricity,
with pure water and heat as the only by-products.  The company
is currently developing PEM fuel cells for use in
transportation, stationary power generation and portable

Along with everything Technology-related, BLDP had an amazing
runup early in the year, culminating with a blowoff top in early
March.  Since then, we have seen a persistent and violent bear
market develop on the NASDAQ, and until recently, it has been
encouraging to see BLDP's resilience.  Recovering from the
spring lows near $60, driven by enthusiasm for anything that
promised to alleviate our dependence on foreign oil, BLDP began
posted a series of higher lows, culminating with the early
October bounce at the 200-dma.  Unfortunately, that is where the
good news ends, as the highs described a picture perfect
head-and-shoulders top by the time we went to the polls to elect
a new president.  The election uncertainty seems to have been
the straw that broke the camel's back, as it took less than a
week for the bears to cut through both the ascending trendline
(which began last December) and the 200-dma (then at $92.25).
Ever since its March highs, BLDP has performed much better than
the other fuel cell stocks (FCEL and PLUG), due in large part to
its significant alliances with the major auto manufacturers.
Unfortunately, these alliances work both ways and in a slowing
economic environment, the weakness of the automakers is turning
out to be an albatross around the stock's neck.  The low on
Thursday came within striking distance of taking out the $60
support level, and given the anemic nature of the recovery, it
looks very likely that this support level will fail.  Intraday
resistance near $74 capped the enthusiasm of the bulls on
Friday, and the selling volume picked up right into the close.
We have placed our stop up at $76, as we think it will take a
serious change in sentiment (not just short-covering) to
challenge that level.  Tenuous support at $70 is going to have a
hard time holding up next week, and conservative traders will
want to consider new positions as the stock falls below $67 on
continued strong volume.  More aggressive players can attempt to
target shoot new entries on any failed rallies to resistance,
but confirm weakness in the broader Technology market as well
as increased selling volume on BLDP before jumping into new

***December contracts expire in two weeks***

BUY PUT DEC-70*DFQ-XN OI= 95 at $5.38 SL=3.25
BUY PUT DEC-65 DFQ-XM OI=256 at $2.88 SL=1.50
BUY PUT JAN-70 DFQ-MN OI=102 at $8.75 SL=6.25
BUY PUT JAN-65 DFQ-MM OI=425 at $6.25 SL=4.25


FMKT - FreeMarkets Inc $28.81 (-5.31 last week)

FreeMarkets creates B2B online auctions for buyers of industrial
parts, raw materials and commodities and services, providing
access to the online auction marketplace to industrial buyers
and suppliers. Its BidWare software links buyers with sellers in
reverse auctions in which suppliers place bids to fill an order
in more than 70 other categories. Blue chip clients include
Quaker Oats and SmithKline Beecham.

Earlier in the week, B2B enablers rose on the back on Commerce
One's announcement that it would build a new e-marketplace in
Korea.  The likes of FreeMarket (FMKT) and its sidekicks Ariba
(ARBA), VerticalNet (VERT), and PurchasePro (PPRO) all saw some
gains, however the sector failed to maintain any upward
momentum.  Chase H&Q also started new coverage on FMKT at the
beginning of the week.  They cited strong business momentum and
growing revenues along with a new Buy rating and $100 price
target.  Baird & Co's followed-up with a bit more conservative
price target of $45, but nonetheless started FMKT with a Market
Outperform.  While Chase's positive comments likely helped take
shares higher to the $36 and $38 levels, they had no sustaining
effect on trading later in the week.  On Thursday, FMKT fought
to rise off the $28 and $29 levels as the NASDAQ rallied late
afternoon.  But even though the small gains extended into
Friday's session, FMKT hit a wall at $34 quicker than the
NASDAQ's strength faded into the weekend close.  Granted FMKT's
break under the $30 level is bearish and forecasts possible
weakness going into next week; however it's imperative to
confirm not only the stock's direction, but also a bearish
marketplace before beginning new put plays.  Aggressive entries
on rollovers at the 5 and 10-dmas lines at $32.21 and 33.28 are
certainly viable; although, buying into continued weakness from
Friday's new 52-week low of $28.69 may be a better approach for
others.  The markets are no doubt struggling for direction, so
keep stops tight and take profits quickly.  If FMKT demonstrates
bullish behavior, we'll exit at the above-mentioned $34 level.

***December contracts expire in two weeks***

BUY PUT DEC-40 FAQ-XH OI= 14 at $11.63 SL=8.75
BUY PUT DEC-35 FAQ-XG OI=112 at $ 7.00 SL=5.00
BUY PUT DEC-30*FAQ-XF OI=230 at $ 3.25 SL=1.50


IBM - International Business Machines $95.63 (-4.31 last week)

International Business Machines Corporation uses advanced
information technology to provide customer solutions.  The
company operates primarily in a single industry using several
segments that create value by offering a variety of solutions
that include, either singularly or in some combination,
technologies, systems, products, services, software and
financing.  Organizationally, the company's major operations
comprise three hardware product segments, Technology, Personal
Systems and Server; a Global Services segment; a Software
segment; a Global Financing segment and an Enterprise
Investment segment.

Shares of Big Blue have left investors feeling blue lately.
Having failed twice to break through resistance at $105 in the
month of November, the stock has since traded lower.  Falling
below its ascending channel support (connecting the lows since
mid-October) this past Thursday, rumors that IBM could warn of
lower than expected earnings next week could lead to further
downward pressure.  The goal of this play is to take advantage of
the low put prices and strong overhead resistance, thanks to the
5-dma ($97.05), the psychological $100, our stop price of $102
and the 10-dma ($103.59).  Just the idea of IBM warning could
send traders scrambling towards the exits, making for quick and
significant gains.  As always, the possibility of high reward
goes hand in hand with high risk.  Aggressive traders might
consider entering new positions on a failed rally above the
aforementioned resistance levels.  A break below $95, backed by
strong selling volume could see the stock testing the low 90's in
a hurry.

***December contracts expire in two weeks***

BUY PUT DEC-95*IBM-XS OI=4389 at $3.50 SL=$1.75
BUY PUT DEC-90 IBM-XR OI=5299 at $1.88 SL=$1.00


INTC - Intel Corporation $34.13 (-9.81 last week)

Intel Corporation, a semiconductor chip maker, supplies the
computing and communications industries with chips, boards,
systems and software that are integral in computers, servers and
networking and communications products.  The company's major
products include microprocessors, chipsets, flash memory
products, networking and communications products, embedded
processors and micro controllers, and digital imaging and other
PC-peripheral products.  Intel sells its products to original
equipment manufacturers, PC and computing appliance users,
industrial and communications equipment manufacturers, and
businesses, schools and state and local governments.

The PC Sector continues to struggle.  This past Thursday, box
maker Gateway warned that holiday sales would be weaker than
expected, citing lower demand for new personal computers.  What's
more, it appears that consumers are gravitating towards wireless
handheld computing devices.  As the leading supplier of chips for
PCs, this can only be bad news for Intel.  Rumors that the
company could warn next week caused the stock to drop below the
critical support level of $35 on Friday, a level that had held
up, even in the darkest days of October.  Continuing negative
sentiment in the PC and Semiconductor sectors could drive the
stock much lower, especially if the rumors of the earnings
warning come to pass.  The low option prices makes this an
especially attractive but also risky play that could yield a high
return in a short amount of time.  We are setting our stop at $39,
with strong resistance from the 5, 10 and 50-dmas near this level.
There is also resistance at $36 and $35, giving aggressive
traders a number of possible entry points.  Continued weakness
leading to a break below $32 with volume could be the signal to
take a position but confirm sector sympathy with the Philadelphia
Box Maker Index (BMX.X) and the Semiconductor Index (SOX.X) before
jumping in.

***December contracts expire in two weeks***

BUY PUT DEC-35*INQ-XG OI=14867 at $3.00 SL=$1.50
BUY PUT DEC-30 INQ-XF OI= 1347 at $1.00 SL=$0.00



IRF - International Rectifier $30.69 (-8.19 last week)

International Rectifier is a world leader in power management
devices and systems that enable information technology and other
end products to improve functionality, speed, compactness, and
portability.  IR is the pioneer and market leader in the $3.5
billion power MOSFET industry, and more than 20 companies are
licensed under its power MOSFET patents.

As long as the broader chip sector remains in its funk, shares
of IRF are likely to head lower.  The stock has been
precipitously dropping since early September, taking out one
key support level after another.  After rolling over at the $33
level last Friday, IRF now sits just above yet another key
support level at the $30 mark.  Should the $30 level fail, like
it did last Thursday, IRF could very well head to its 52-week low
at the $20 level.  With its modestly priced options, we're looking
to take advantage of IRF's technical weakness and the bearish
sentiment surrounding semi sector.  New positions could be
added on a move below $30 on volume exceeding two million shares
for the day.  Make sure to confirm weakness in the broader chip
sector by monitoring the trading in IRF's competitors.  Confirm
weakness in AMCC, PMCS, and VTSS before entering new plays.  The
more aggressive traders might consider entering new put
positions upon another failed rally attempt.  Watch for IRF to
rollover at resistance near the $33 level or lower around $32.
We've established a protective stop at $34, and would drop the
play if IRF settled above that level.

***December contracts expire in two weeks***

BUY PUT DEC-35 IRF-XG OI=5334 at $5.50 SL=3.50
BUY PUT DEC-30*IRF-XF OI= 244 at $2.50 SL=1.25
BUY PUT DEC-35 IRF-MG OI=  45 at $7.13 SL=5.00
BUY PUT DEC-30 IRF-MF OI= 268 at $4.00 SL=2.50



SLR - Solectron $29.00 (-5.25 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

While Solectron moved up one point on Friday, it did not break
the strong down trend the stock has exhibited over the last few
weeks.  The daily chart shows an attempt to rally to the 5-dma of
$31.50 in the morning, when all the major indexes were up strongly,
then a rollover at $30.50 and a long slow decline in the afternoon.
On balance  volume spiked up slightly in the morning, but is still
very weak.  SLR has been on a decline for weeks, and the stock
would need a major turnaround accompanied by heavy volume in order
to break the trend.  Another failed attempt to clear the 5-dma
might be a possible entry point, but set stops at $32, as this
could indicate the stock was starting to gain momentum.  Pay
particular attention to the electronics components sector,
and other stocks in the original equipment manufacturers
sector for market direction.  This sector has been weak
lately, however, if we see a major turnaround in the chip
sector, this could change.  Other stocks in this sector include
JBL and FLEX, which, like SLR, are far below the 50 and 200
dmas.  If we see a major market rally, as some analysts are
expecting, it is wise to enter puts only if the sector and
stock are declining.  That said, another possible entry
point might be provided if SLR falls below its near-term
support at $28, which happens to be the stock's 52-week low.

***December contracts expire in two weeks***

BUY PUT DEC-35 SLR-XG OI= 802 at $6.63 SL=4.50
BUY PUT DEC-30*SLR-XF OI=1834 at $2.69 SL=1.50


YHOO - Yahoo $38.94 (-1.94 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.

With one of the worst months ever for Net stocks behind us, it
is time to see if Yahoo continues its fall during December.  It
started the month off on the right foot by dropping in the face
of a healthy Nasdaq rally.  Granted, it was mostly short-covering,
but you have to wonder why Yahoo didn't participate.  The blame
for Friday's action likely rests on SG Cowen Securities analyst
Scott Reamer.  He opened the day by lowering his revenue estimates
for Web portal Yahoo and advertising network DoubleClick in the
fiscal year 2001, largely because of a deflation in online ad
spending.  This is the same broken record story we have heard
from every other analyst in the past month, but it keeps any
YHOO rally in check.  While it works out nicely for our play, we
need to be cautious due to what was essentially a week of
consolidation for Yahoo.  In fact, SG Cowen's comments probably
stopped YHOO from trading above our stop on Friday.  That stop
loss remains at $40 and the 10-dma is not far above that at
$41.75.  The support is obvious at $36 and you may want to allow
YHOO to fall through that level before initiating any new plays.

***December contracts expire in two weeks***

BUY PUT DEC-45 YHQ-XI OI=2638 at $7.75 SL=4.75
BUY PUT DEC-40*YHQ-XH OI=3022 at $4.38 SL=2.75
BUY PUT DEC-35 YHQ-XG OI=1927 at $2.13 SL=1.00


ITWO - i2 Technologies $99.38 (-13.63 last week)

ITWO is a global provider of intelligent eBusiness solutions for
supply chain management and enhanced business applications.  On
June 12, 2000 ITWO merged with Aspect Development (ASDV) to
create one of the largest software providers for eBusiness and
eMarketplace solutions.  TradeMatrix, its Internet marketplace,
provides an open digital community powered by i2's advanced
optimization and execution capabilities that help manufacturers
plan production and other related operations.  Clients include
3M, Compaq, Ford and Nokia.

Even with news of shareholder approval for a 2-for-1 stock split
for December 5th, shares of leading Internet supply chain
management software maker ITWO have been continuing lower.  The
stock has already had a split of its own, as share value has been
more than cut in half for the month of November.  A failure to
hold the 50-dma, now all the way up at $155.53, has led to
sustained selling pressure on increasing volume, with resistance
from the 5 and 10-dmas, now at $100.23 and $107.75, respectively.
Negativity in Tech stocks, especially Internet stocks across the
board, has been a driving force to the downside.  The likely
deterioration of ITWO's alliance with Ariba and IBM has also
weighed on the stock, as has news of COO Bob Evans resigning.
Merrill Lynch and Credit Suisse First Boston's efforts to defend
the stock have had little effect in curbing ITWO's slide.  Now
well below all its major moving averages, any rally for the stock
will likely be met with strong overhead resistance.  The downtrend
for ITWO is strong indeed.  Despite Friday's positive close, up
$2.88 or almost 3 percent 164% of ADV, resistance at the 10-dma
and failure to close above the 5-dma as well as the psychological
$100 level, also our current stop price, suggests further selling
ahead.  A failed rally above these levels on Monday could allow
aggressive traders to take advantage, but make sure the sellers
return before initiating a play.  If the stock opens lower to
start the week, a break below $95 on volume would allow for a
more conservative play.  When making a play, keep an eye on Merrill
Lynch's B2B HOLDR (BHH) to confirm sector sympathy.  Also make
note that we'll be dropping coverage on ITWO ahead of its stock
split next Tuesday as to minimize risk holding over the actual
stock dividend.  Aggressive traders may consider holding over the
split event if the NASDAQ and B-2-B sector show signs of weakness
early next week.  However, the split may cause a brief reprieve
in shares of ITWO, which does present some risk.

***December contracts expire in two weeks***

BUY PUT DEC-105 QYJ-XA OI=351 at $13.63 SL=10.00
BUY PUT DEC-100 QYJ-XT OI=864 at $10.50 SL= 7.25
BUY PUT DEC- 95*QYJ-XS OI= 89 at $ 8.25 SL= 5.75


SEBL - Siebel Systems $74.38 (-12.06 last 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.

The bears scored another victory on Friday, as they dragged the
bulls back from thoughts of a quick recovery.  Resistance at $80
held firm, and vigilant put players were rewarded with a great
entry point on SEBL as buyers were turned back right at the
200-dma ($80.38).  The bounce from Thursday's lows ran out of
buyers, and the bears rushed in to reassert their control as the
NASDAQ failed to hang on to its gains on Friday.  The bearish
trend is obviously still intact, and if the NASDAQ heads down to
test the 2500 level again, we would look for SEBL to test the
$60 support level, and possibly post another lower low.  The
stock is one of those still retaining a relatively high
valuation with a PE of 400, making a test of the $50 support
level entirely possible.  Even that doesn't necessarily
constitute an absolute bottom, as SEBL's April low is south of
$38, a level that would still represent a PE ratio above 200.
Although buying volume was heavy during Thursday's recovery, the
volume declined on Friday, right up until the final 90 minutes
of trading when the stock began to sell off.  Although there was
plenty of positive company and sector specific good news over
the past week, the only items that seem to have any staying
power in this market are those pointing to the slowing economy
and fears of more earnings warnings by leading technology
companies.  The trend is still our friend, and continued
weakness in the NASDAQ and other B2B stocks will be a strong
confirmation of any weakness in SEBL.  Don't fret if you missed
the entry point on Friday afternoon, as there will likely be
more opportunities in the week ahead.  Conservative players will
jump into the play as the stock drops below the $69 intraday
support level, while more aggressive players will wait for
another failed rally in the vicinity of $78-80 before taking
the plunge.  Don't jump the gun though - a rally that clears our
stop at $80 would represent a definite change in sentiment and
would prompt us to stand aside from the play.

***December contracts expire in two weeks***

BUY PUT DEC-75*SGW-XO OI= 676 at $7.50 SL=5.25
BUY PUT DEC-70 SGW-XN OI=1746 at $5.00 SL=3.00
BUY PUT JAN-70 SGW-MN OI=1348 at $9.38 SL=6.50
BUY PUT JAN-65 SGW-MM OI=1197 at $7.25 SL=5.00


VRSN - VeriSign, Inc. $84.88 (-8.38 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.

Anyone operating under the assumption that there would be a
swift recovery for Technology stocks was in for a rude awakening
Friday afternoon.  The short-covering rally that began on
Thursday had run its course, and with a lack of buyers willing
to step up to the plate, VRSN faced the fate of many other
four-letter stocks.  Our play actually headed lower while the
NASDAQ was attempting to rally, heading south even before the
end of amateur hour and closing very near the low of the day.
Resistance at $94 (right at the descending trendline) capped
the recovery, creating yet another lower high on the daily
chart, and pointing to a likely test of Thursday's $76 low in
the week ahead.  In the Internet security space, VRSN is
definitely having a hard time relative to it peers.  CHKP
actually posted a small gain on Friday, with RSAS looking strong
enough the past 2 days for the stock to show up on our Call list
this weekend.  What's the difference, you ask?  Profitability.
While VRSN has yet to fill in the missing 'E' in PE ratio, CHKP
has a PE north of 100, and RSAS' ratio is a measly 14.  I guess
profits do matter.  As long as the NASDAQ continues to languish
from economic slowdown and earnings warning concerns, look for
stocks like VRSN to continue their bearish trends.  The
descending trendline is now resting at $91 (coincident with the
level of our stop), and any rally that fails near this level
looks attractive for new entries.  While we can still enter new
positions on any weakness that pushes the stock back below the
$84 intraday support level, keep in mind that the lower VRSN
drops, the harder new lows will be to come by.  This makes a
good case for waiting for failed rallies before initiating new
positions.  In either case, only play with a declining NASDAQ
that corresponds to an increase in VRSN's selling volume.

***December contracts expire in two weeks***

BUY PUT DEC-90 XVR-XR OI=444 at $12.25 SL= 9.25
BUY PUT DEC-85*XVR-XQ OI=510 at $ 9.75 SL= 6.75
BUY PUT DEC-85 XVR-MQ OI= 33 at $14.25 SL=10.50
BUY PUT DEC-80 XVR-MP OI=312 at $11.38 SL= 8.50


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How Cheap Is Cheap?
By Mark Phillips
Contact Support

Where have all the buyers gone?  Have you found yourself asking
that question lately.  This has been a truly amazing turn of
events with the NASDAQ giving up 770 points since the election.
Don't look now, but that is a whopping 22.5%!  Without debating
how much of the current weakness can be attributed to the
election or the economy, suffice to say it has been a swift and
merciless decline.  Every time the bulls gingerly step in to buy
"the bottom", they get mauled by the bears who are not ready to
go into hibernation just yet.  While the DJIA has held up better
due to its defensive nature, the bears have had a field day
there as well, slashing the "old economy" index by nearly 600
points, or 5% in the same period of time.

As the title of my article points out, I find myself asking on a
daily basis, "How low can some of these stocks go?"  I think the
answer lies in whether or not the economy is headed for a hard
landing.  The evidence for a significant slowdown is in plain
view for all to see, but Alan Greenspan has been eerily silent.
Let's hope that he and the Fed gang are ready to come forward
with at least a change in their bias towards interest rates when
they meet later this month.  The consensus seems to be that
their next move will be to drop interest rates, but will it be
soon enough to prevent even more damage in the markets?  I don't
know, but you can bet I'm being very careful with my long-term

There really is no concrete relief in sight for what is ailing
our markets, and rather than take up space here, I'd like to
point you to Austin's Market Sentiment.  He covers the details
of the larger factors driving the markets up and down.  If you
are investing in LEAPS and not reading the information he
provides, you are missing out on an invaluable tool.

After failing to hold above 3000 on Monday, the NASDAQ was ripe
for more bad news and GTW and ALTR delivered it in spades.
Taking a huge swipe at the PC sector, GTW announced that holiday
sales would be soft and warned that earnings for the fourth
quarter would be 25 cents below the consensus estimates.  That's
quite an about face considering the bullish comments the company
made a couple weeks ago, as they touted the merits of their
"beyond the box" strategy.  I guess it isn't quite ready for
prime time yet.  ALTR's earnings warning was the other shoe that
investors were waiting for, and they dumped shares of anything
silicon-related for the remainder of the week.

So how does this affect our portfolio?  Check out the drops this
week.  Technology giants INTC and MSFT were both taken out and
shot by investors, and while these stocks may be approaching an
attractive entry point, we don't want to stick around to find

Barring some sort of miracle like a surprise cut in interest
rates or a $10 drop in the price of crude oil, or even a
resolution to the election follies, things do not look good for
our markets.  If you have open positions, please use stop
losses.  No matter how cheap a stock is, it can ALWAYS get
cheaper.  Look at WCOM, now sitting at $16.  Is it a bottom yet?
Only time will tell.  How about ATHM?  Did anyone else think it
was a screaming Buy at any point over the past 6 months?  Solid
support formations at $18, $13, and $9 all failed to hold.  Will
$6 be the magic number, or does it lie somewhere below?  If you
are sitting on cash, wait for some consolidation and signs of
positive movement (notably strong buying volume) on your
favorite plays before dipping back into the market to establish
new positions.

This is the type of market that can make you wealthy IF you can
wait for the solid entry points to form.  It can also wipe you
out if you repeatedly try to catch a falling knife.  This is not
the same situation we were presented with last fall, and even if
we do get a year-end rally, it will not take off to the moon.
Economic growth and liquidity injections from the Fed are
notably absent this year.  Technology stocks WILL rise again,
like a phoenix from the ashes, and our job is to intelligently
position ourselves in select positions AFTER it is clear that
the bears are getting sleepy.  Given the action over the past 2
weeks, it is clear that they are still on a rampage.

As I have said many times before, LEAPS give us the time to be
right, but it does us no good to buy before the bottom is in
place, and a positive trend begins to emerge.  Exercise patience
and if you want to play technology stocks (don't we all?), wait
for the NASDAQ to establish a solid bottom.  It seems a pretty
safe bet that we will test 2500 again this week.  The $64,000
question is whether that will be the bottom or if it still lies
somewhere below.

Until the bottom appears, cash is king.

Current Plays


EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $41.25   334.21%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $23.13   -29.39%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $15.00    36.36%
       11/26/00  JAN-2003 $ 60  VYC-AL   $16.63   $14.00    15.79%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $12.50   -17.38%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $ 6.38   -76.82%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $17.75   -19.32%
       11/05/00  JAN-2003 $120  VSU-AD   $39.50   $17.13   -56.65%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 3.70   -80.14%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $ 9.50   -45.71%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $15.13    62.11%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $17.88   232.25%
       10/22/00  JAN-2003 $ 45  VWI-AI   $ 7.88   $11.38    44.44%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $12.63   -68.14%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $11.50   -79.19%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $ 9.00   -47.83%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $13.00   -26.76%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $10.13   - 1.79%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $ 9.13   -25.51%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $31.63    84.62%
                 JAN-2003 $ 70  OZG-AN   $23.13   $38.63    66.99%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $ 4.38   -78.92%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $ 6.13   -75.87%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $52.38    66.91%
                 JAN-2003 $100  VFB-AT   $37.38   $57.88    54.83%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $32.25    43.33%
                 JAN-2003 $ 70  VLM-AN   $29.63   $40.50    36.69%
COMS   10/01/00  JAN-2002 $ 20  WTH-AD   $ 6.38   $ 2.50   -60.78%
                 JAN-2003 $ 25  VTH-AE   $ 7.13   $ 3.38   -52.63%
INTC   10/15/00  JAN-2002 $ 45  WNL-AI   $ 9.50   $ 6.13   -35.53%
                 JAN-2003 $ 45  VNL-AI   $13.38   $ 9.63   -28.04%
TXN    10/22/00  JAN-2002 $ 50  WTN-AJ   $13.75   $ 7.63   -44.55%
                 JAN-2003 $ 50  VXT-AJ   $18.38   $12.00   -34.69%
ADBE   10/29/00  JAN-2002 $ 80  YEJ-AP   $23.50   $18.63   -20.74%
                 JAN-2003 $ 80  VAE-AP   $30.75   $25.88   -15.85%
BGEN   11/05/00  JAN-2002 $ 70  WGN-AN   $17.25   $11.50   -33.33%
                 JAN-2003 $ 70  VNG-AN   $25.00   $17.88   -28.50%
MSFT   11/19/00  JAN-2002 $ 75  WMF-AO   $12.63   $ 6.25   -50.51%
                 JAN-2003 $ 75  VMF-AO   $17.88   $11.13   -37.78%
MU     11/26/00  JAN-2002 $ 45  WGY-AI   $13.13   $ 7.25   -44.76%
                 JAN-2003 $ 45  VGY-AI   $17.25   $10.88   -36.96%

Spotlight Play

NOK - Nokia $43.56

As the only wireless handset maker that didn't trace new 52-week
lows last week, NOK is standing head-and-shoulders above the
competition.  Continuing to grow revenues at a 50% rate, the
Finnish phone maker is a favorite among investors and
institutions and has held up fairly well in the recent
technology-related selloff.  Although a bit messy due to the
recent market volatility, the inverse head-and-shoulders
formation that has appeared over the past 4 months points to a
solid recovery in the months ahead.  As it upgrades its network
in the U.S., AT&T Wireless (AWE) has turned to NOK and its
Nordic rival, ERICY, for the latest in mobile phone technology.
This move will give NOK an even stronger foothold on this side
of the Atlantic, as AWE migrates to a GSM network from their
current TDMA dinosaur.  Resistance is pretty solid at $44-45,
but given its recent strength, NOK should lead any recovery in
the Technology sector.  There is plenty of volatility and
uncertainty left in the market though, and we would not
recommend buying a breakout above resistance at this time.  We
would prefer to wait for a pullback to support, and the $40 area
should serve nicely in that respect.  Wait for the bounce before
initiating new positions, and then enjoy the ride higher as
technology investors return from hibernation.

BUY LEAP JAN-2002 $45.00 IWX-AI at $10.75
BUY LEAP JAN-2003 $50.00 VOK-AJ at $13.00

New Plays

A - Agilent Technologies $53.00

Spun off from technology giant Hewlett Packard just over a year
ago, Agilent is a stealth player in the Optical Networking
market.  The company provides fiber optic communications
devices and assemblies, integrated circuits for wireless
applications, opto-electronics and image sensors.  As a part
of its efforts to focus on its technology business, A announced
on November 17th that it would sell its Healthcare Solutions
Group to Philips Medical Solutions for $1.7 billion, and then
followed up 3 days later with a stellar earnings report.
Investors were impressed (which is saying a lot in this market)
by the company's ability to beat consensus estimates by 16
cents, and have been rewarding the company ever since.  Salomon
Smith Barney was impressed by the earnings as well, and did its
part for the bulls by upgrading the stock from Neutral to
Outperform.  Last Monday, A announced that it will pay $665
million in cash to acquire Objective Systems Integrators (OSI),
a provider of operation-system-support software for
communications providers.  Even the company's admission that
the acquisition will cut its earnings by 2 cents a share in
2001, before becoming accretive in the out years couldn't
dampen investor enthusiasm for the stock.  First Union
Securities threw their 2 cents in on Friday, starting coverage
of the stock with a Buy rating.  Ever since its earnings warning
in July, A has been confined to a descending wedge, with
rock-solid support at $40.  Breaking above the descending
trendline ($50) a week ago was the first sign that things were
improving, and shares advanced another 4% last week in defiance
of the 9% loss on the NASDAQ.  Stochastics are starting to roll
over in the overbought zone, so we would expect a bit of
consolidation before the stock heads higher.  Support at $48-50
looks like a good area for targeting new entries, but wait for
buying volume to shore up support before playing.  If the buyers
can't keep A above its descending trendline (currently $48),
stand aside from the play.  This would represent a failed
breakout, signaling the possibility of another test of $40

BUY LEAP JAN-2002 $55.00 YA -AK at $16.88
BUY LEAP JAN-2003 $60.00 OAE-AL at $19.88


INTC $34.13 Believing that the perceived slowdown in the PC
sector was already factored in to the stock price, we invited
INTC onto our LEAPS play list 6 weeks ago.  Twice we watched
the stock recover from rock-solid (or so we thought) support at
$35, and test resistance near $47, only to run out of steam and
head back towards our entry point.  We think things are
different this time though.  GTW's huge earnings warning last
Wednesday is obviously the culprit in the most recent decline,
as it confirmed the slowdown in PC sales was affecting all the
box-makers and INTC sold off in sympathy right from the open on
Thursday.  Proving that cheap can always get cheaper, INTC then
proceeded to give up over 10% on Friday while volume soared to
more than 100 million shares.  Breaking through support on huge
volume is a bad sign, but it could portend even more problems.
Earnings warning season is upon us, and if INTC warns (entirely
possible with the solid evidence of slowing orders) it is
entirely possible the stock could test the $25 level, not seen
since spring of 1999.  While it is possible that current prices
will turn out to be a great entry point, we don't want to take
the chance.  That falls into the category of "catching a falling
knife" and it's a game we don't want to play.

MSFT $56.63 Another victim of slowing PC sales, and specifically
the warning from GTW, MSFT shares fell off a cliff again this
week, giving up nearly 20%.  Investors figured out that the
next occupant of the White House will have far less effect on
the company's share price than the reality of sharply slowing PC
demand.  Less PCs means less copies of Windows shipping to end
users, plain and simple.  Shares of the software giant had
already begun to fall from grace when GTW warned of sharply
lower sales (and hence, earnings) Wednesday night.  Investors
ran first and asked questions later, creating the same effect
as shouting "Fire" in a crowded theatre.  MSFT got trampled in
the process, falling through the $61 support level as though it
didn't exist.  With Friday's losses, it looks like Mr. Softee is
headed down to fill the gap left behind in mid-October when the
company impressed investors with its third quarter earnings
report.  That means a downside objective of $52 (possibly lower)
and we don't want to be along for the ride.  We'll jettison the
stock from our play list this weekend and consider it again when
the PC sector is well enough to leave the Intensive Care Unit.


The Return Of The Split
By Eric Utley

Several high-profile stock splits were declared last week amid
continued market volatility.  Most notably was the 2-for-1 split
set by Brocade, who reported exceptional fiscal fourth-quarter
profits and raised 2001 revenue estimates.  Brocade's declaration
marks the third time since the spring of 1999 the company has
split its shares.  The split announcement also helped to land
BRCD on the OI call play list last week.  The confidence
displayed by Brocade's management in its stock price may very
well portend a rebound in tech shares over the coming weeks,
which could lead to an increased number of split announcements.
Also making the headlines last week was biotech heavyweight,
IDEC Pharmaceuticals, who's stock has held up remarkably well
amid the recent turmoil in the market.

Current Split Run Plays


Current Split Candidate Plays


Candidates That Are Not Current Plays


10 Most Recent Announcements We Predicted

BRCD - 11/29 (most recent announcement)
MANU - 11/08
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 = 1


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

Symbol  Company Name                Splits  Payable    Executable

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
BRCD - Brocade Comm                   2:1  12/21/2000  12/22/2000
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
CRY  - CryoLife                       3:2  12/27/2000  12/28/2000
HOTT - Hot Topic Inc.                 2:1  12/27/2000  12/28/2000
IDPH - IDEC Phamaceuticals            3:1  01/17/2001  01/18/2001
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

Attention Online Traders:

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offer both Direct Access Trading, and web based trading to its
customers. Trade Direct using any ECN, SOES, and SelectNet, or
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Please read our disclaimer at:

The Option Investor Newsletter                   Sunday 12-03-2000
Sunday                                                      5 of 5


Trading Basics: Q&A with the Covered-Calls editor
by Mark Wnetrzak

This week, we discuss some of the more common questions from our
new subscribers.

Question:  Why do you sell "in-the-money" options in the majority
of your covered-call selections?

Answer:  The strategy we use in selecting these positions is a
based on a conservative covered write using the "total return"
concept that Lawrence McMillan adeptly describes in his book,
"Options: As a Strategic Investment."  With this conservative
approach, an investor considers the covered write as a single
entity and is not interested so much in stock ownership or
bullish movement, but in obtaining a consistent (annual) return
on investment.  In other words, with an in-the-money covered
write, the maximum profit potential is established when the
position is opened.  Some investors worry about the sold option
being assigned early, but that's not a problem with our plays,
as it simply means you will earn the maximum profit in a shorter
amount of time.  Of course there are situations where that may be
a problem.  Some investors have tax considerations with specific
portfolio issues or they may simply want to retain the stock for
longer periods.  Generally, if there is any time value premium in
the sold call, the issue will not be called away until expiration.
Once the call begins to trade at parity (the issue moves deep ITM)
or trades at a discount, the probability that the option will be
assigned early rises significantly as arbitrageurs (floor traders
who pay little or no commissions) move to take advantage of the
situation.  At expiration, if the stock is trading $0.25 or more
above the sold strike, it will generally be called away.

Question:  I have used your "in-the-money" strategy with some of
my long-term portfolio stocks and occasionally the issue will
move well above the sold strike, putting my position at risk of
assignment.  How do I handle this situation?

Answer:  Unfortunately, there are no magic answers to this common
problem.  You do have several choices, but none of them are very
popular.  You can do nothing, accept the assignment, and collect
the initial profit.  You can also choose to close the sold option;
obviously the call is trading near parity, so you simply evaluate
the cost of additional commissions versus an increased annualized
return.  And finally, you may choose to roll the position up to a
higher strike price and/or forward to a future expiration.  If the
stock is fairly volatile, a "net credit" order should be used in
closing the covered write to ensure a proper exit.  In that case,
you would place an order to sell the stock and buy (to close) the
call for a net credit value that is reasonably close to parity.

Remember, when you roll up (buy back your current call and sell
a higher strike), the profit potential is increased, but you give
up downside protection.  The downside "break-even" point will be
raised by the amount of debit required to roll up (the cost of the
call closed minus the premium of the new position).  When rolling
to a higher strike, a debit is incurred and this is considered by
many to be an unfavorable transaction (putting more money on the
table).  It may be better to roll to a more distant expiration as
it reduces the debit required and the overall cost basis.  It is
usually not advisable to roll up if a 10% correction in the stock
price cannot be withstood (the percentage may be even higher in
volatile issues).  In all cases, you must evaluate the risk-reward
ratio for each adjustment scenario and make a decision that fits
your trading plan and your outlook for the underlying issue.

Question: Some of the stocks you have selected in the past few
weeks are trading below the sold strike and may not get called
away.  What do I do in that situation?

Answer:  If a stock from one of our current covered-call plays is
not called-away at expiration, its technical character has likely
changed, and the new outlook for the issue must be evaluated.  If,
after careful review of the recent chart patterns (and any other
issues affecting the company or its sector/industry group), your
outlook for the issue is neutral-to-bullish, you could simply sell
a new call for the next month (or a longer time frame), lowering
your cost basis and establishing a higher profit potential.  Of
course you could also sell the stock, taking the current loss (or
profit when it's available) and move on to a new issue.  Another
possibility would be to roll down, or down and further out, to a
lower strike (a defensive strategy), if the option premiums and
the possibility of a future recovery justify holding the issue.
In most cases, if your outlook is even slightly bearish, exiting
the position now (selling the stock) is usually is best answer.

Remember, you do not have to wait until expiration to exit a
covered write position.

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

AVID   15.94  18.25   DEC  15.00  2.19  *$  1.25   9.9%
DZTK    8.13   7.75   DEC   7.50  1.06  *$  0.43   8.8%
ISIP   11.56  10.00   DEC  10.00  2.31   $  0.75   8.8%
MTIC    6.00   5.44   DEC   5.00  1.44  *$  0.44   7.0%
MRVT   16.88  17.94   DEC  15.00  2.56  *$  0.68   6.9%
SUPG   21.47  17.75   DEC  17.50  5.25  *$  1.28   6.9%
BCGI   26.31  22.63   DEC  22.50  5.38  *$  1.57   6.5%
PSUN   20.94  23.06   DEC  17.50  4.13  *$  0.69   5.9%
MME    17.75  21.00   DEC  17.50  1.31  *$  1.06   5.6%
MTSI   17.38  20.75   DEC  12.50  5.63  *$  0.75   5.5%
MU     33.75  30.94   DEC  27.50  7.50  *$  1.25   5.2%
JDEC   29.00  26.13   DEC  22.50  7.25  *$  0.75   5.0%
HPC    18.44  19.44   DEC  17.50  1.88  *$  0.94   4.9%
PLNR   24.00  22.50   DEC  20.00  4.75  *$  0.75   4.2%
LGTO   11.88   9.31   DEC  10.00  2.38   $ -0.19   0.0%
TTN    20.94  16.25   DEC  17.50  4.13   $ -0.56   0.0%
SNWL   24.25  18.25   DEC  20.00  4.88   $ -1.12   0.0%
MTIC    8.13   5.44   DEC   7.50  1.38   $ -1.31   0.0%
VRTA   23.38  15.00   DEC  17.50  6.63   $ -1.75   0.0%
MU     40.88  30.94   DEC  35.00  7.38   $ -2.56   0.0%

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


Several of the above issues have broken through their technical
support areas and are displaying bearish candlestick patterns.
Evaluate your long-term outlook for the stock, as well as the
overall sector and market.  In the near-term, further downward
movement appears likely and exiting losing positions early may
turn out to be the most prudent move.  Next week, we will show
several of the above positions closed in the name of "capital


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

MPPP    6.13  DEC   5.00  PUM LA  1.44  475   4.69   14    14.2%
BSTE   40.00  DEC  35.00  BQS LG  6.75  40   33.25   14    11.4%
WATR   36.31  DEC  35.00  TQI LG  2.56  153  33.75   14     8.0%
CPRT   18.00  DEC  17.50  KQJ LW  1.06  67   16.94   14     7.2%
LNCR   45.25  DEC  42.50  LQN LV  3.88  5    41.37   14     5.9%
ADSK   27.00  DEC  25.00  ADQ LE  2.63  309  24.37   14     5.6%

MRVT   17.94  JAN  15.00  SQD AC  4.13  0    13.81   49     5.3%

Company Descriptions

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

ADSK - Autodesk  $27.00  *** Earnings Rally! ***

Autodesk, a leading design and digital content creation resource,
provides software and Internet portal services to help customers
drive business through the power of design.  Autodesk is one of
the largest software companies in the world with more than 4
million customers in over 150 countries.  Autodesk reported
favorable earnings this month, with a 31% jump in operating
profits for the 3rd-quarter.  Operating earnings were $21.9
million, or 38 cents a share, compared with $16.7 million, or
27 cents a year ago and sales rose 10%.  The tape has become
increasingly bullish, considering the overall market, and the
September high is the next challenge.

DEC 25.00 ADQ LE LB=2.63 OI=309 CB=24.37 DE=14 MR=5.6%

BSTE - Biosite Diagnostics  $40.00  *** FDA Approval! ***

Biosite Diagnostics serves clinical needs in emergency medicine
by speeding the flow of critical diagnostic information.  Through
its integrated discovery and diagnostics businesses, Biosite is
developing rapid diagnostic tests that improve clinical outcomes
for acute diseases.  Biosite's Triage. products are used in 45%
of U.S. hospitals and in 40 international markets.  On November
22, Biosite announced that it had received FDA clearance to market
the Triage. BNP Test in the U.S.  This is the first blood test to
be cleared in the U.S. as an aid in the diagnosis of congestive
heart failure.  Investors cheered this news as the stock has
rallied above its 150 dma on strong volume.  A favorable cost
basis for short-term momentum speculation.

DEC 35.00 BQS LG LB=6.75 OI=40 CB=33.25 DE=14 MR=11.4%

CPRT - Copart  $18.00  *** Earnings Rally ***

Copart provides vehicle suppliers, primarily insurance companies,
a full range of services to process and sell salvage vehicles
through auctions, principally to licensed dismantlers, rebuilders
and used vehicle dealers.  Copart just reported 1st quarter
earnings with net income of $8.9 million which generated a 45%
increase in earnings per share, on revenues of $57.1 million.
The results were ahead of expectations due to strong performance
from new and existing stores, and continued growth of Internet
sales.  We simply favor the strong rally above the September
high, which completes a short-term "double-bottom" formation.

DEC 17.50 KQJ LW LB=1.06 OI=67 CB=16.94 DE=14 MR=7.2%

LNCR - Lincare  $45.25  *** Blue Sky Territory! ***

Lincare is one of the nation's largest providers of oxygen and
other respiratory therapy services to patients in the home.  The
Company provides services and equipment to over 270,000 customers
in 44 states.  In November, Lincare announced record 3rd quarter
earnings which reflect a continued overall strong performance,
substantial improvements in their core business, and successful
integration of strategic acquisitions completed during the first
half of the year.  Investors were obviously pleased with the
results as they have now pushed the stock to a new all-time high.
We favor the near term support at our cost basis on a bullish
stock that is now in "Blue Sky Territory."

DEC 42.50 LQN LV LB=3.88 OI=5 CB=41.37 DE=14 MR=5.9%

MPPP - MP3.com  $6.13  *** Bottom Fishing! ***

MP3.com has created an infrastructure for the storage, management,
promotion and delivery of digital music.  The company's web site
hosts what it believes is the largest collection of digital music
available on the Internet, with more than 698,000 songs and audio
files posted from over 109,000 digital artists and record labels.
Universal, the last of the five largest record companies, has
signed a licensing pact with MP3.com.  This deal with Universal
will not affect its settlements with other labels, and MP3.com
has promised to restart its once-controversial My.MP3.com online
music service.  Analysts are cautiously enthusiastic about the
prospects for the company, cheered by the resolution of a year
long copyright infringement lawsuit.  Investors also appear to
be pleased as the stock has rallied strongly off its October low.
Short term speculation for those who agree on a bullish outlook.

DEC 5.00 PUM LA LB=1.44 OI=475 CB=4.69 DE=14 MR=14.2%

MRVT - Miravant Medical $17.94  *** The Recovery Continues! ***

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.

JAN 15.00 SQD AC LB=4.13 OI=0 CB=13.81 DE=49 MR=5.3%

WATR - Tetra Tech  $36.31  *** Technical Beauty ***

Tetra Tech is a leading provider of specialized management
consulting and technical services in three principal business
areas:  resource management, infrastructure, and communications.
The company's clients include a diverse base of public- and
private-sector organizations serviced through more than 150
offices located in the U.S. and internationally.  In November,
Tetra Tech reported 4th-quarter net income that rose 61% over a
year ago, beating forecasts, and said it expects strong revenue
growth next year.  This week, Tetra Tech announced that it has
been selected to provide Broadnet, a leading pan-European
provider of broadband wireless services, with turnkey network
development services for its broadband wireless networks.
We favor the bullish technicals and that fact that the stock
has been climbing since 1992.  Even in the face of a negative
market, the stock has rallied to a new all-time high.

DEC 35.00 TQI LG LB=2.56 OI=153 CB=33.75 DE=14 MR=8.0%



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

CAR    31.25  DEC  30.00  CAR LF  2.13  85   29.12   14     6.6%
DORL   20.06  DEC  20.00  QDL LD  0.63  0    19.43   14     6.4%
ELY    18.13  DEC  17.50  ELY LW  1.00  193  17.13   14     4.7%
INIT    8.56  DEC   7.50  IUT LU  1.50  107   7.06   14    13.5%
TGT    31.44  DEC  30.00  TGT LF  2.06  1101 29.38   14     4.6%

CVD    10.75  JAN  10.00  CVD AB  1.44  43    9.31   49     4.6%

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Put-Selling Strategies: Q&A regarding portfolio management
By Ray Cummins

It must be getting bad, because now the readers are asking me
what I think...

Question:  What do I do if I have limited capital and find it
impractical to participate in all of your recommendations?

Answer:  We recommend that new traders spread their portfolio
efficiently among a few positions in different industry groups.
By spreading out across industries, you can avoid the agony of
violent swings in a particular stock or sector and limit losses
when the unexpected occurs.  When your capital is limited, you
must manage your collateral effectively, and it has been our
experience that most of the candidates in a specific sector will
perform in a similar manner.  For example, if one or two of the
suggested issues in a given industry group perform as expected,
the rest of the recommended stocks in that category also have a
high probability of performing well.  In contrast, when a stock
performs poorly, the odds are high that the rest of the issues
in that sector will react in a comparable manner.  Some traders
say the ideal portfolio contains positions that react to market
changes in opposite ways.  We identify these plays as "hedge"
positions.  One way to clearly illustrate the idea involves the
oil sector.  A conservative investor might hedge a portfolio by
initiating positions in both an electric utility and a major oil
service company.  Higher fuel costs will have negative impact on
the utility, but will boost the value of the oil service issue.
Obviously the reverse is also true; lower oil prices will impact
the oil company negatively while improving the utility's outlook.
This strategy not only protects your portfolio against unexpected
downturns in a particular industry, it also enables you to take
greater risk with a few positions, which is likely to increase
your total return.

Regardless of the manner in which you diversify your portfolio,
it's important to remember that the activity is more than just a
one time event.  In all cases, you will need a precise and well
developed trading plan and you must adjust that process when it
is warranted by changing market conditions.

Question:  I notice you publish a warning concerning the sale
of naked puts and the use of trading stops;

"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."

I assume you mean "mechanical" as opposed to "mental" stops.  Do
you have a preference and is there a benefit to using one or the

Answer:  First, some definitions.  A mechanical stop loss is an
"order" to close a specific position any time it drops below a
specified price.  This order is placed electronically with your
online brokerage or a through a personal broker, but the physical
execution of the trade generally goes through a floor specialist
at one of the major exchanges.  A stop order to "buy" becomes a
market order when the option contract trades, or is bid at or
above, the stop price.  A stop order to "sell" becomes a market
order when the contract trades, or is offered at or below, the
stop price.  Using a mechanical stop order is generally the best
method to limit losses or protect profits as it does not require
the position to be monitored on a continuous basis.  In contrast,
using a mental stop loss places all of the responsibility on the
trader.  The investor determines a specific stop loss and closes
the position if the option trades above that price.  Considering
the market activity we have experienced over the past few weeks,
it's obvious one would need to constantly oversee the position.
There is another alternative for investors who use proprietary
systems (such as the one at Preferred Trade) that allow option
orders to be triggered by the price of the underlying issue.  In
that type of system, the guidelines for establishing protective
stops suggest that the initial or opening limit should be placed
at a point where important technical support (or a recent trading
range bottom) is evident.  Most often, this will be a relatively
small range reflecting the low of a basing pattern or trend-line
established prior to entering the position.  The most important
objective of this initial stop loss is to preserve one's capital
if the play goes badly and yet provide every opportunity for the
position to achieve its potential.

Good Luck!


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

AMZN   28.94  24.63   DEC  17.50  0.63  *$  0.63  14.1%
AEOS   40.94  40.06   DEC  35.00  1.06  *$  1.06  17.8%
ARQL   25.38  27.19   DEC  17.50  0.50  *$  0.50   6.6%
AVID   15.31  18.25   DEC  12.50  0.56  *$  0.56   7.2%
CMOS   20.88  21.13   DEC  15.00  0.38  *$  0.38   7.9%
ECLP   22.75  24.94   DEC  17.50  0.63  *$  0.63   6.7%
IDXC   29.38  28.63   DEC  22.50  0.75  *$  0.75  12.0%
CTXS   30.88  25.69   DEC  25.00  0.63  *$  0.63   8.9%
PSUN   22.19  23.06   DEC  17.50  0.38  *$  0.38   5.8%
MTON   18.94  17.13   DEC  15.00  0.38  *$  0.38   5.8%
HNT    22.25  22.88   DEC  20.00  0.50  *$  0.50   3.7%
CAR    30.06  31.25   DEC  25.00  0.38  *$  0.38   8.6%
WGR    25.69  24.69   DEC  22.50  0.31  *$  0.31   3.2%
OXHP   37.38  40.00   DEC  30.00  0.56  *$  0.56  16.1%
TLB    49.81  49.50   DEC  40.00  0.50  *$  0.50   6.3%
KMI    43.25  45.00   DEC  40.00  0.56  *$  0.56  12.6%
VLNC   17.31  11.56   DEC  12.50  0.31   $ -0.63   0.0%
SMSC   25.00  17.30   DEC  20.00  0.44   $ -2.26   0.0%
ANF    28.94  20.50   DEC  25.00  0.50   $ -4.00   0.0%
BVSN   36.00  20.13   DEC  25.00  0.50   $ -4.37   0.0%

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


Eclipsys (ECLP) has rallied after testing its early OCT high.
Broadvision (BVSN) and Abercrombrie & Fitch (ANF) have broken
down on negative news this week and will be closed on the next
rally.  Standard Microsystems (SMSC) has also broken down (no
news!) and will also be closed next week.  Many of the above
issues are testing near term support and should be monitored
closely.  Evaluate your long-term outlook for each issue and
act accordingly.

Positions Closed:

Intermagnetics General (IMG)


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

QTRN   17.00  DEC  15.00  QRT XC  0.50  42   14.50   14    20.5%
QCOM   83.00  DEC  65.00  AAO XM  0.75  3057 64.25   14     9.4%
PWAV   56.38  DEC  40.00  VFQ XH  0.44  1121 39.56   14     8.2%
WLL    49.38  DEC  45.00  WLL XI  0.38  2010 44.62   14     5.2%

NEM    16.25  JAN  15.00  NEM MC  0.88  8410 14.12   49     8.9%
SNPS   42.13  JAN  35.00  YPQ MG  0.88  0    34.13   49     5.1%
OXY    22.56  JAN  20.00  OXY MD  0.56  980  19.44   49     5.0%

Company Descriptions

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

NEM - Newmont Mining  $16.25   *** Gold is Good! ***

Newmont Mining Corporation is engaged in the production of gold,
the exploration for gold and the acquisition and development of
gold properties worldwide.  The company currently produces gold
from mines in Nevada and California, and, outside of the United
States from operations in Peru, Indonesia, Mexico and Uzbekistan.
The company also produces copper concentrates from a copper/gold
deposit at a location in Indonesia.  Shares of precious-metals
companies rose Friday, continuing on gains from earlier in the
week, as investors continued to worry about the future of the
equity market.  The gold market has rallied recently, helped by
slumping stocks and dollar weakness against the Euro amid further
signs of economic weakness in the U.S.  Gold is often used to
hedge losses in the equities market and we will do the same with
this position.

JAN 15.00 NEM MC LB=0.88 OI=8410 CB=14.12 DE=49 MR=8.9%

OXY - Occidental Petroleum  $22.56   *** Oil Sector Hedge ***

Occidental Petroleum Corporation explores for, develops, produces
and markets crude oil and natural gas and manufactures and markets
a variety of basic chemicals, including chlorine, caustic soda,
and ethylene dichloride, as well as specialty chemicals and vinyls,
including polyvinyl chloride resins and vinyl chloride monomer.
Occidental conducts its principal operations through its oil and
gas and chemical subsidiaries and the company also has an interest
in petrochemicals through its 29% stake in the Equistar Chemicals,
LP petrochemical limited partnership.  On Friday, Merrill Lynch
raised its earnings estimates on several oil companies, including
Occidental, citing an upward revision to its oil price forecast.
The analyst said they continue to recommend an "over-weighted"
portfolio position in a number of oil shares because of a belief
that higher oil prices will persist longer than generally expected.
We simply view this position as an excellent energy sector hedge.

JAN 20.00 OXY MD LB=0.56 OI=980 CB=19.44 DE=49 MR=5.0%

PWAV - Powerwave Technologies  $56.38  *** Ride the Wave! ***

Powerwave designs, manufactures and markets ultra-linear radio
frequency power amplifiers for use in the wireless communications
market.  Powerwave manufactures both single and multi-carrier RF
power amplifiers for a large variety of frequency ranges and
transmission protocols.  The company's products currently are
being utilized in cellular and personal communications services
base stations in digital and analog-based networks.  Powerwave's
products support a wide range of digital and analog transmission
protocols and also produces RF power amplifiers for the wireless
local-loop market.  Powerwave announced that they have recently
been named to Deloitte & Touche's Technology Fast 500, a ranking
of the 500 fastest-growing technology companies in North America.
In addition, Chase H&Q reiterated a "buy" rating on the company
with $75 price target, based on a record level of backlog and a
potential for higher than expected revenues in the coming quarter.

DEC 40.00 VFQ XH LB=0.44 OI=1121 CB=39.56 DE=14 MR=8.2%

QCOM - Qualcomm  $83.00  *** Big Cap Play! ***

Qualcomm is a leader in developing and delivering innovative
digital wireless communications products and services based on
the company's CDMA digital technology.  Their business areas
include integrated CDMA chipsets and system software; technology
licensing; email software for Windows and Macintosh computing
platforms; satellite-based systems, OmniTRACS and OmniExpress.
Qualcomm owns patents which are essential to all of the CDMA
wireless telecommunications standards that have been adopted or
proposed for adoption by standards-setting bodies worldwide.
Qualcomm is simply one of the OIN's favorites in the big-cap
technology group and this position provides a favorable entry
point for investors who are interested in owning the issue.

DEC 65.00 AAO XM LB=0.75 OI=3057 CB=64.25 DE=14 MR=9.4%

QTRN - Quintiles Transnational  $17.00  *** Healthcare ***

Quintiles Transnational provides full-service contract research,
sales, marketing and healthcare policy consulting and health
information management services to the global pharmaceutical,
biotechnology, medical device and healthcare industries.  QTRN
provides a broad range of contract services to help its clients
reduce the length of time from the beginning of development to
peak sales of a new drug or medical device.  Quintiles said it
is experiencing strong demand for its services from mid-size
pharmaceutical companies, biotechnology companies, and emerging
markets.  In addition, Quintiles recently agreed to purchase a
Swedish clinical development unit from Pharmacia, that includes
a contract with the company for a specified number of services
over a multi-year period, guaranteeing more than four years of
revenues to Quintiles.  The new company is expected to enhance
Quintiles expertise in pharmacology, research, bio-statistics
and data management, with a particular focus in the areas of
ophthalmology, growth hormones, cardiovascular medicine, and

DEC 15.00 QRT XC LB=0.50 OI=42 CB=14.50 DE=14 MR=20.5%

SNPS - Synopsis  $42.13  *** On The Move! ***

Synopsys is a supplier of electronic design automation software
to the global electronics industry.  Synopsis develops, markets
and supports integrated circuit design products that are used by
designers of advanced ICs, including system-on-a-chip ICs, and
the electronic products that use such ICs.  Their products and
services offer its customers the opportunity to reduce the time
to market for new products and reduce manufacturing costs by
improving the productivity of their IC designers and enhancing
their design quality of results.  Last week, Synopsis posted a
loss of $21 million, or $0.33 a share, on sales of $133 million
after implementing its new licensing model.  Analysts expected
the software developer to lose $0.45 a share in the quarter and
the post-earnings reaction was very optimistic.  The share value
jumped 20% in two days and with solid support near the cost basis,
this position offers an excellent opportunity to speculate on the
future movement of the issue.

JAN 35.00 YPQ MG LB=0.88 OI=0 CB=34.13 DE=49 MR=5.1%

WLL - Williamette  $49.38  *** Hostile Takeover! ***

Willamette Industries is a diversified, integrated forest product
company that manufactures and sells lumber, plywood, particleboard,
fiberboard, laminated beams and a wide variety of paper products.
Willamette's paper mills, saw mills and manufactured lumber mills
contribute a major portion of the industry's U.S. production.  The
company is the target of a buyout from Weyerhauser, who recently
launched a hostile cash tender offer for Williamette, valuing the
rival paper company at $48 a share, or $5.4 billion.  The hostile
bid comes in the wake of Willamette's rejection of Weyerhaeuser's
original unsolicited offer, and it is a method for Weyerhaeuser to
take its case directly to shareholders.  Most analysts believe the
deal will be consummated in the next few weeks at a price slightly
higher than the current offer.

DEC 45.00 WLL XI LB=0.38 OI=2010 CB=44.62 DE=14 MR=5.2%



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

FNSR   25.88  DEC  20.00  FQY XD  0.50  314  19.50   14    19.1%
PALM   40.69  DEC  25.00  UPY XE  0.38  297  24.62   14     9.7%
RHD    23.25  DEC  22.50  RHD XX  0.38  0    22.12   14     9.2%

IGT    45.38  JAN  40.00  IGT MH  0.63  15   39.38   49     2.9%
IR     41.88  JAN  37.50   IR MU  0.69  10   36.81   49     3.3%
MHK    24.69  JAN  22.50  MHK MX  0.50  0    22.00   49     3.8%
SAFC   27.75  JAN  25.00  SAQ ME  0.50  44   24.50   49     3.5%

Get 10 FREE Issues of Investor's Business Daily, the research
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Searching for a bottom...

The market closed mixed Friday with the Nasdaq rebounding from a
string of negative sessions and the Dow falling on profit-taking
after recent gains.

Friday, December 1

The market closed mixed Friday with the Nasdaq rebounding from a
string of negative sessions and the Dow falling on profit-taking
after recent gains.  The technology index ended well off its best
levels for the day, closing up 47 points at 2,645.  The blue-chip
average finished down 40 points at 10,373.  The S&P 500 index was
relatively unchanged at 1,315.  Trading volume on the Nasdaq was
heavy for a second straight day at 2.2 billion shares exchanged,
with advances beating declines 2,467 to 1,493.  Trading volume on
the NYSE reached a light 1.18 billion shares, with broad market
advances beating declines 1,903 to 984.  In the bond market, the
30-year Treasury fell 16/32, pushing its yield up to 5.64%.

Thursday’s new plays (positions/opening prices/strategy):

Fiserv   FISV   DEC45P/DEC50P   $0.50   credit   bull-put
Skywest  SKYW   DEC55C/DEC60C   $2.93   debit    bull-call

Both of our "Reader's Request" positions pulled back during the
session, allowing entries at favorable prices.

Portfolio Plays:

Technology stocks closed higher today as investors looked for
bargains in the wreckage of the recent sell-off.  The Nasdaq
advanced 150 points during the morning session while the Dow
industrials managed a 110 point gain in early trading.  But the
optimism soon gave way to renewed selling pressure as investors
remained skeptical about the Nasdaq's ability to sustain any
rally given the recent indications that the economy is slowing
faster than most economists had expected.  In addition, rumors
of a potential earnings warning from Motorola (MOT) and Intel
(INTC) eroded the market's gains late in the day and a number
of leading technology issues slumped after CS First Boston cut
its outlook for the semiconductor group.  The brokerage lowered
revenue estimates on Applied Materials (AMAT), KLA-Tencor (KLAC),
Novellus (NVLS) and Lam Research (LRCX) saying capital spending
growth for the industry will be flat in the coming quarters.  On
the upside, Internet stocks edged higher and computer hardware
issues recovered from Thursday's precipitous slide.  Compaq (CPQ)
rebounded to a mid-day high near $24 after announcing it would
buy back over $1 billion in stock and Hewlett-Packard (HWP) and
International Business Machines (IBM) also experienced upside
activity.  On the Dow, Boeing (BA) led industrial stocks lower
and SBC Communications (SBC) slumped amid rumors it would issue
a negative profit warning.  Pharmaceutical stocks also retreated
after a recent bullish streak and UBS Warburg downgraded a number
of stocks in the group due to their rich valuations.  Among broad
market issues, oil shares were weaker as crude futures fell to
$32.05 a barrel on Saudi Arabia's assurances it would offset any
shortfall from Iraq's halt of exports and U.S. threats of more
Strategic Petroleum Reserve oil pushed the market sharply lower.

The on-again, off-again buyout of Quaker Oats (OAT) was back in
the news as reports surfaced that PepsiCo (PEP) is now in talks
to buy the U.S. sports-drink and cereals maker.  The deal could
be worth as much as $14 billion and Quaker's shares rallied to
$88 after the announcement.  Our bullish credit spread at $80 is
expected to finish at maximum profit.  In the technology group,
Vertex (VRTX) was the leading issue in our portfolio, closing up
$10 at $65 as investors speculated on the potential of a recent
pact with Glaxo Wellcome to sell the company's protease inhibitor.
Among big-cap issues, Juniper Networks (JNPR) was a popular play,
closing up $7 at $131 in a third consecutive day of gains.  Drug
manufactures were among the bullish stocks in our portfolio with
Pharmacyclics (PCYC) up $1.75 to $45 and Carter Wallace (CAR) up
$1.25 to $31.25.  Both of these positions are at maximum profit.
In lower-priced issues, our speculation plays have performed very
well and today Medquist (MEDQ) rallied another $1.50 to close at
a recent high near $19.50.  The bullish synthetic position is now
trading at a $1.75 profit.  Miravant (MVRT) also moved higher, up
$0.75 to $17.94 and our bullish play is yielding a $0.50 return.
Premium selling positions have provided favorable results and the
calendar spread in Englehard (EC) benefited from today's $1.12
rally to $20.81.  The position returns maximum profit with the
stock price near the sold strike at $22.50.  Mattel (MAT) eased
back down to a recent comfort zone near $12.50 and the neutral
spread is trading at maximum profit.  We will plan to roll the
neutral, time-selling position to the $12.50 strike for January.
In addition, our bearish plays in Pfizer (PFE) and Phillips (P),
and our recent downside adjustment in Micron (MU) are performing

Questions & comments on spreads/combos to Contact Support
                         - NEW PLAYS -
ABS - Albertsons  $24.69  *** Earnings Due! ***

Albertson's is one of the largest retail food-drug chains in the
United States.  They operate 2,492 stores in 37 Northeastern,
Western, Midwestern, and Southern states.  These stores consist
of 1,326 combination food-drug stores, 802 stand-alone drug
stores, 335 conventional supermarkets, 28 warehouse stores, and
one e-commerce retail site.  Retail operations are supported by
21 major distribution centers.  Their distribution centers also
provide product exclusively to its retail stores.  Albertson's
stores operate primarily under the names of Albertson's, Acme
Markets, Jewel Food Stores, Seessel's, Super Saver, Max, Osco
Drug, and Sav-On.

Earnings are driving the market and investors are betting that
Albertsons' earnings will be less than favorable when the company
reports quarterly numbers on Monday after the market close.  The
implied volatility in Albertson's options rose substantially last
week amid heavy put buying and there are a number of excellent
premium disparities for traders who wish to speculate on the
outcome of the report.

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-30.00  ABS-LF  OI=159  A=$0.25
SELL CALL  DEC-27.50  ABS-LY  OI=488  B=$0.50
INITIAL NET CREDIT TARGET=$0.31-$0.38  ROI(max)=14% B/E=$27.81

Note: This position is based on increased activity in the stock
and underlying options.  In this case, the premiums for the (OTM)
call options are inflated and the potential for a successful
(technical) recovery is significantly affected by the resistance
at the sold strike price; a good situation for a bearish credit
spread.  Although the play offers favorable risk versus reward
potential, it should also be evaluated for portfolio suitability
and reviewed with regard to your strategic approach and trading
style.  In addition, there is also a DEC-30P/DEC-27P debit spread
with similar risk/reward characteristics.


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.

SAFC - Safeco  $27.75  *** Recovery In Progress! ***

Safeco owns operating subsidiaries in segments of insurance and
other financially related businesses.  The company's insurance
subsidiaries engage in two principal lines: property and casualty
(including surety), and life insurance.  Safeco property and
casualty insurance operations is one of the largest in the United
States.  Through independent agents, the company's property and
casualty subsidiaries write personal, commercial and surety lines
of insurance.  Coverages include automobile, homeowners, fire and
allied lines, workers' compensation, commercial multi-peril,
miscellaneous casualty, surety and fidelity.  Products are sold
in all states and the District of Columbia.  Safeco's businesses
operate on a nationwide basis.  The insurance subsidiaries engage
in property and casualty insurance, surety and life insurance,
and generated approximately 95% of the company's revenues.

Based on the recent technical trend, our outlook for the issue
is bullish and the current upward momentum should propel the
share value to a profitable range before the options expire.  In
the event of further consolidation, this company would also be an
excellent candidate for any long-term portfolio.  Target a lower
debit (possibly even a credit) in the position initially, as the
underlying issue will likely retrace some of its recent gains in
the coming sessions.

PLAY (conservative - bullish/synthetic position):

BUY  CALL  JAN-30  SAQ-AF  OI=995  A=$0.93
SELL PUT   JAN-25  SAQ-ME  OI=44   B=$0.62

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $885 per contract.

TSG - Sabre Holdings  $37.50  *** Reader's Request! ***

Sabre Holdings Corporation is the world leader in the electronic
distribution of travel through its SABRE computer reservations
system.  In addition, Sabre provides information technology
solutions to the travel and transportation industries and also
ulfills substantially all of the data processing, network and
distributed systems needs of American Airlines and AMR other
subsidiaries, Canadian Airlines International, US Airways, and
industry customers.  The SABRE global distribution systems are
the principal means of air travel distribution in the United
States and a growing means of air travel distribution in many
international markets.  Through the SABRE system, all travel
agencies, corporate travel departments and individual consumers
can access information about and book reservations with airlines
and other providers of travel and travel-related products and

One of our subscribers was kind enough to point out the bullish
activity in this issue and he requested that we identify some
favorable spread positions with an aggressive outlook.  The
easiest way to profit from any future upside movement usually
involves the most common forms of spreads and with favorable
disparities in the December premiums, this position offers a
great speculation play for those who are bullish on the issue.

PLAY (conservative - bullish/debit spread):

BUY  CALL  DEC-35.00  TSG-LG  OI=134  A=$2.88
SELL CALL  DEC-37.50  TSG=LU  OI=1    B=$1.00
INITIAL NET DEBIT TARGET=$1.62-$1.75  ROI(max)=42% B/E=$36.75

                         - STRADDLES -

I received another request for debit straddles this week and for
new investors, this strategy is a conservative, low risk option
trading technique when the positions are established based on
solid statistical analysis.

RDA - Reader's Digest  $39.25  *** Probability Play! ***

Readers Digest Association is engaged in publishing and direct
marketing, and the creation and delivery of products that inform,
enrich, entertain and inspire, including magazines, books,
recorded music collections and home videos.  The company is best
known for publishing its flagship Reader's Digest magazine.
Reader's Digest is a general interest magazine consisting of
original articles, previously published articles in condensed
form and a condensed version of a published (or soon-to-be
published) full-length book.  Reader's Digest has a worldwide
circulation of about 24 million and over 100 million readers
each month.  Reader's Digest is published in 48 editions and 19
languages.  The company has four primary operating segments:
Global Books and Home Entertainment, United States Magazines,
International Magazines and Other Businesses.

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 always,
review the position with regard to your strategic approach and
trading style.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  JAN-40  RDA-AH  OI=560  A=$1.88
BUY  PUT   JAN-40  RDA-MH  OI=34   A=$2.38

CBSS - Compass Bancshares  $20.50  *** On The Move! ***

Compass Bancshares is an $18.9 billion Sunbelt-based financial
services company with 323 full-service banking offices and more
than 6,800 employees in Alabama, Arizona, Colorado, Florida,
New Mexico and Texas.  With the recently completed acquisition
of Founders Bank of Arizona and the pending acquisition of
FirsTier Corporation, Compass would have assets of more than
$20 billion and operate 342 banking offices in the seven states.
Through wholly owned subsidiaries, the company is engaged in
providing insurance products to customers of its subsidiary
banks and owning real estate for bank premises.  The company's
primary operating segments are Corporate Banking, Retail Banking,
Community Banking, Asset Management and Treasury.

Although this position may not rank near the top of list as far
as option pricing, we feel that the overall risk/reward outlook
is favorable due to the relatively unique nature of the stock's
recent movement (increasing volatility in the rolling pattern)
and the potential for substantial activity in the banking sector
when the Fed releases its interest rate policy at the upcoming
FOMC meeting on December 19.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  APR-20.00  JQK-DD  OI=209  A=$1.93
BUY  PUT   APR-20.00  JQK-PD  OI=976  A=$1.06

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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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