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Daily Newsletter, Thursday, 12/07/2000

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The Option Investor Newsletter                 Thursday 12-07-2000
Copyright 2000, All rights reserved.                        1 of 2
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        12-07-2000        High      Low     Volume Advance/Decline
DJIA    10617.40 - 47.00 10689.00 10583.20 1.12 bln   1439/1386
NASDAQ   2752.66 - 43.84  2794.53  2707.96 1.75 bln   1551/2362
S&P 100   710.29 - 14.84   717.29   708.64   totals   2990/3748
S&P 500  1343.55 -  2.32  1353.50  1339.26           44.4%/55.6%
RUS 2000  461.10 -  2.44   463.54   459.88
DJ TRANS 2796.04 - 19.67  2815.34  2794.59
VIX        28.98 +  1.04    29.51    28.11
Put/Call Ratio      0.78
******************************************************************

Waiting to exhale

Traders and candidates alike held their collective breath on Thursday
waiting for decisions from three key court cases and the all important
Jobs report on Friday. Discretion was the better part of valor for
traders faced with multiple unknowns and another flurry of earnings
warnings. Volume was very light with only 1.7 billion shares traded
on the Nasdaq and 1.1 billion on the NYSE. It was clearly a standoff
between the bulls and bears as both decided to hold all bets until
the judges named the winner. With only four days left in the election
conflict the possibility of a wild card victory from left field just
provided more cautionary feelings than the recent sell off.







The leading warning from today was Motorola which said business was
still good but profits were going to be down for a variety of reasons.
After dropping -$2 at the open MOT actually closed near its high for
the day with only a -.06 loss. Costs were higher than expected but
sales are still strong. There was a lot of activity on Motorola as
institutional traders felt that $16 was about as low as it would go.
Why? At $16 it is trading below book value and the market cap is
below the estimated sales for next year. At those numbers it could
also be a take over target.

Other warnings included National Semi which beat the street by a
nickel but warned that excess inventory at customers locations
would reduce sales by -7% next quarter. NSM also closed well off
its lows on positive sentiment that the current 52-week low was
pretty much the bottom. Do you see a recurrent theme here?

Other not so fortunate included MSFT which had earnings cut and
was downgraded today. Claiming the soft PC sales could not help
but depress software sales analysts are running from MSFT. The
stock dropped -3.56 to $53.12 which is only $5 from the 52-week
low. The so called Bush premium has been flushed from the stock
based on recent Gore wins and the weaker earnings expectations.

Yahoo also was the recipient of more bad news as more analysts
climbed on the downgrade bandwagon. The Internet ad sales model
has deteriorated to almost all CPC (cost per click) or CPA (cost
per acquisition) pricing. With most banner ads ignored by readers
the CPM (cost per thousand impressions) model is dead. It is not
page views any more but qualified leads that draws advertising
revenue and that narrows the YHOO advantage. YHOO dropped to a
low of $31.50 intraday but rebounded by faithful buyers to close
at $34.94. A significant bounce but driven by those that remember
YHOO at $200 and are still in denial.

BVSN was hit by a rumor today that GE-Capital had pulled all its
business from BVSN and the stock dropped -2.75. Both GE and BVSN
publicly refuted the rumor but the stock did not recover. Seems
that investors hoping to get back to previous levels of $35 to
get out alive were not eager to buy the dip and average down again.

MANU announced that it would meet or exceed estimates going forward
but the stock still got hit with a -2.75 drop on questions about
an acquisition currently in progress.

BBY announced an acquisition of Musicland today and analysts dumped
the stock in waves. BBY dropped -5.88 or -20% on the news.

Three Five Systems (TFS) warned that sales of components were lower
than expected and earnings would suffer. The stock dropped -3.75 on
the news. CDWC warned after the close that sales were slumping and
earnings would drop to only +.40-42 cents compared to estimates of
$.50. CDWC dropped -3.42 on the news.

Banks were still weak along the lines of the cockroach theory.
Where one is having trouble others in the same business are
assumed to be having the same or worse results but have not felt
the need to make it public yet. JPM dropped almost -$4 again.

Mad cow again? Macdonald’s has been hit by the mad cow fears again
in Europe and analysts are cutting estimates. MCD has an analyst
meeting scheduled but the forecast is not expected to be positive.
The higher Euro has been a problem in the past and higher beef
prices for certified safe beef is sure to impact costs. Just
not any safe plays anymore.

Liar, liar pants on fire. After reaffirming estimates and saying
they were not going to warn, INTC went back on its word after the
close today with a warning that slowing sales would knock about
-4% to -6% off 4Q revenue. Saying that gross margins would remain
at 63% but revenue would be flat for the 4Q. Not only were chip
sales weak but orders are being cancelled world wide at an alarming
rate. Expenses are rising and capital equipment costs are up for
next year. Also the vaunted INTC investment stock portfolio was
down between -66% to -75% from prior levels. The bear market bites
big investors as well as small. Interest income from investments
is also going to be down to only $675 million from almost $950
million last quarter. Having trouble collecting those debts big
guy?

Remember last week, I warned that there were many more big cap
companies that could warn and MOT and INTC were only two. We
still have exposure to the likes of IBM, MSFT, YHOO, AA, AOL,
AXP, CSCO, C and dozens of others. This is not new news but each
new warning ripples through each sector as investors decide if
there is more downside or in the case of NSM and MOT the worst
news is already factored in. When INTC opened for trading in
after hours it dropped as low as $30 before bouncing on high
volume from bargain hunters thinking $30 was a real steal for
long term holders. If this bottom holds overnight then the impact
for tomorrow will be muted. Once the market decides that all
the bad news is priced in then everyone else can warn and we
will see no real impact. Come on now, did anyone not expect INTC
to warn after all the bad news from the last two weeks? Probably
not. This is just a follow through from the sector weakness.
Other box makers were flat in after hours after an initial dip
so there does not appear to be a major reaction. The QQQs dropped
to $65.27 on the news but rallied back to $67.50 shortly thereafter.

With the low volume on the Nasdaq today it is clearly apparent
that we are being held hostage by the payroll report and the
final election decisions. The employment report will be announced
at 8:30 Friday morning and it is widely expected to be market
friendly with only +150,000 new jobs and unemployment rising
slightly to 4% from 3.9%. The component the Fed will watch is the
average hourly earnings which are projected to rise by +0.3%.
Any strength in the jobs or wages numbers will put the Fed back
on inflation watch and endanger the hoped for neutral bias change.

As important as the employment report may be we will be more
influenced by the expected decisions on the election. The Florida
Supreme Court is expected to rule on the Gore appeal to reverse
the Circuit Court decision from Judge Sauls. A negative verdict
is expected to bring a concession speech but with the two counties
still in court with election winning absentee vote cases I doubt he
will concede until those cases conclude. The good news, all three
cases are expected to conclude on Friday. This is the make or
break day for Gore and Bush. One will win, one will lose but
the market will be free to trade without the cloud of uncertainty.
A favorable employment report and an early announcement on all
three cases could set the stage for another rally like we saw
on Tuesday. Negative results from the employment report and a
decision on the election that the market does not like and we
could be seeing another retest of the recent lows.

As an investor I plan on buying any Intel induced dip at the open
ASSUMING the election news is also positive. Without positive
news I can afford to wait until Monday. Even a +200 point Nasdaq
day can be erased in a heartbeat if the election news turns
horribly negative. It is just not worth the risk in this market
to be long without a good reason. Is it a good reason just because
many analysts are claiming 2500-2700 the bottom? No! 2500 could
(and should) be the bottom but that does not mean we could not
visit it again with the wrong market/election news. It is good
business to wait for a trend not try and pick a bottom. We all
know how hard that task has been lately. Many investors have
blown up their accounts buying every dip since September. If
we are really going to have a Santa Claus rally then we can afford
to wait an extra day for all the news to settle. There will be
more warnings and you never know who will be next. Heck, Intel
said early this week they would not warn. Who are you going to
believe? We feel that we are at a bottom or very close. My
favorite stocks were up today and it took a lot of self control
to keep from betting on an outcome I can't control. I can't
control the employment report and I can't control the election
outcome. I can't control earnings warnings either but those are
less life threatening between now and tomorrow morning for the
stocks I follow. I make it a habit that I don't bet tens of
thousands of dollars on situations I cannot control like the
Friday morning news. The market could go either way. One way
you lose thousands, the other you make thousands. It is out
of your control. You might as well lay $10,000 on your desk
and flip a coin. Heads you put it in your pocket, tails you
burn it. That is the same risk you take when betting on news
events on which you have no control. Think about it!

As of 6:PM all of the Intel inspired after hours dips on stocks
like RMBS, IBM, DELL and MU have all recovered to the same
level where they closed. This bodes well for the open on Friday
assuming the news is also positive. This would confirm to me
that we are at a bottom when major companies can warn and have
no market impact. Of course we still have a lot of dark before
morning and anything can happen. After hours trading can be
only a vague hint of the morning direction but it appears to
be positive at this point. Intel is trading over its closing
price now and that is very bullish. Keep your fingers crossed
and start looking for Santa Claus.

Good luck and don't buy too soon.

Jim Brown
Editor


************************************
JOHN DESSAUER "Dream Seminar at Sea"
************************************

You have seen me write about John Dessauer, a newsletter editor
with a 20-year history. John spoke at our March Expo here in Denver
to about 600 attendees. John uses a common sense bottom up method
of stock picking and has been very successful. He has asked me to
speak at his "Dream Seminar at Sea" in March. The itinerary looks
more like a vacation than a seminar with stops in Aruba, Caracas,
Grenada, Dominica, St Thomas and San Juan but John will manage to
keep us busy. If you have interest in this event visit this link:

http://www.cruzproductions.com/dessauer/


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****************
MARKET SENTIMENT
****************

Is Anyone Making Money?
By Austin Passamonte

We don't mean traders... we're talking corporations! Should
we simply call off the fourth-quarter earnings season and
call it a loss? No pun intended but aptly fits.

Is there a technology company out there that made a dime
this year? Please stand up and be counted amongst the few &
proud. We'll leave our shoes and socks on for this one.

Plenty of smoke and mirror earning games that bias bulls
shrugged off over the last two years have now been blown
away. All that investment income MSFT, INTC and others
earned in tech portfolios got buried in their figures while
happy traders turned away heads. Wonder if anyone still owns
INTC above $70 from August?

This recent earnings washout has all the makings of a multi-
year bottom falling into place. The final pieces of a bear
market puzzle is depressed earnings across the board and
widespread capitulation and fear. We have yet to see total
capitulation regardless what talking heads try to purport.
There are more disappointments ahead beyond MSFT and INTC.

Traders may begin to shrug off these warnings and actually
consider it good news. Certainly it means that the Fed will
cut rates on December 19th. The only question is, will it be
25 or .50 basis points?

Should that come to pass we will indeed see the next bull-
market rally immediately begin. Should that not come to
pass, what might traders think about the weakened companies
they continue to hold? How might they feel about waiting
weeks and months before the next chance for interest rate
relief?

Many readers have recently asked how & why COT commercial
traders continue to short the SP00S futures index. Let's
share a scenario here for a moment: Say you were a large
institution and learned that major funds and investors
wanted or needed to begin dumping large blocks of stock. You
also realize that techs are seasonally weak during the
summer and interest rates coupled with the bubble burst may
result in considerable downside for weeks and months ahead.
What might you do?

Massive selling if it comes to pass would surely send the
broad indexes down, possibly to some unseen recent levels.
Why not go over to the Chicago Mercantile Exchange and sell
a few thousand S&P 500 futures contracts short? You know
this sell-off is about to begin because it flows through
you & your peers.

Scaling out of stocks at lowering prices is offset and then
some by the appreciation of those leveraged futures
contracts. Not a bad way to hedge at all!

When to cover these shorts? Why not wait until institutional
buying activity ensues to base the market and turn prices up
with strength? What's the rush in covering shorts if no one
with power to push the pile is interested in buying?

Does this give an idea why commercial activity is so
important to monitor for long-term direction? They literally
make the trends. Too bad when this current historical holding
breaks it will end our ability to utilize behavior afterwards
for at least a year. This is not a weekly tick-by-tick study;
relative comparison for the last twelve-month period or greater
is what we seek. Not who's doing what around the zero line each
week.

We're thankful for what we have... a true barometer of where
the next firm bottom lies. Market Sentiment's guess would be
closer ahead than the last market highs are behind.

December 20th may very well see Market Sentiment have a
shift in bias from cautiously bearish to expectedly
bullish. Rest assured we will trade each direction with
equal aplomb before, during and after. Let us strongly
suggest you consider the same!


*****

VIX
Thursday 12/07 close; 28.98

30-yr Bonds
Thursday 12/07 close; 5.55%

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.

                                   Thursday
                                 (12/07/2000)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
750 - 735               17,528        1,971         8.89***
730 - 715               16,540       10,607         1.56

OEX close: 710.29

Support:
705 - 690                3,449        9,792         2.84
685 - 670                  246       11,031        44.84
Maximum calls: 730/7,246
Maximum puts : 640/9,758

Moving Averages
 10 DMA  710
 20 DMA  715
 50 DMA  730
200 DMA  773


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 76 - 74                43,160        39,217         1.10
 73 - 71                28,202        19,691         1.43
 70 - 68               103,737        36,932         2.81

QQQ(NDX)close: 66.50

Support:

 65 - 63                 27,436       39,938          1.46
 62 - 60                 11,208       25,123          2.24
 59 - 57                  5,774        6,323          1.10

Maximum calls: 70/52,164
Maximum puts : 80/33,580
Moving Averages
 10 DMA 66
 20 DMA 69
 50 DMA 76
200 DMA 90


S&P 500 (SPX)
Resistance:
1425                   29,140        14,837          1.96
1400                   54,561        50,512          1.08
1375                   22,890        23,818           .96

SPX close: 1343.55

Support:
1325                    6,265        16,323          2.61
1300                    7,059        15,982          2.26
1275                    1,938        15,754          8.13


Maximum calls: 1400/54,651
Maximum puts : 1400/50,512

Moving Averages
 10 DMA 1339
 20 DMA 1351
 50 DMA 1381
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

NASDAQ 100
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. DJIA
sees 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.


**************
MARKET POSTURE
**************

Please visit this link for Market Posture:

http://members.OptionInvestor.com/marketposture/120700_1.asp


**************
TRADERS CORNER
**************

Oh Yes You Can!!!
By Austin Passamonte

Arrghh! I can't take this anymore... it's time I put my foot
down. There is a fallacy alive & thriving out there costing
good traders an absolute vulgar fortune and it must stop.

Considering this visit's a fill-in for my little trading
buddy (and OIN's beloved) Molly Evans, I think it fitting to
discuss a topic she would aptly cover as well if not much
better.

Many times each week I get emails from traders who tell me
they've been very successful trading bull markets but have
no success playing the downside. It's hard, it's different
and they just can't seem to do it.

Let me respectfully state that this idea is 100% pure
bull...ish sentiment folly. Every trader with no exception
who ever profited consistently trading calls in a bull
market can make just as much if not slightly more in a bear
market. That's not my opinion; it is fact and I'll give you
solid proof for our case.

There are three basic trading methods for entering bullish
trades: S/R breakouts, chart oscillators and order flow.

Traders watching a market trend up the charts wait for it to
consolidate, pull back to support and resume the upward
trend by taking out recent resistance on rising volume.
Sound familiar? Anyone ever buy calls this way?

Traders watch for oscillator signals to line up in extreme
oversold range and wait for them to reverse and ascend
upwards before buying calls. Sound familiar? Anyone ever buy
calls like this?

Traders watching block trade order flow spot disparity in
buying or selling pressure by big players. They verify this
info with other market-timing tools and buy calls when heavy
flow trades on rising market prices at the "ask". Sound
familiar? Anyone ever buy calls like this?

These approaches work alone or in combination when markets
are moving up. Profits flow, accounts swell and all is well.

As this happens, life is good. Markets are rallying and
traders happy. Stocks, call options, put-credit spread
strategies - everything makes money. Our step-family at CNBC
is filled with glee. Maria's shrill voice is up several
octaves from normal.

And warmth is shared all around us. Family & friends see
their retirement funds explode. Even aunt Millie with the
mustache enjoys a 100% annual increase in her retirement
fund. Friends, co-workers and strangers on the street are
all talking stocks.

Internet chat rooms are filled with instant millionaires
bragging about recent tech-stock killings and all the
material toys they are accumulating. Competitive juices flow
- we want in!

This positive sentiment feeds on itself and life takes on a
glow. Everyone's happy, the sun now shines for all. Close
your eyes and think back for a moment to reflect on the
period from December 1998 until mid-March of 2000 if you
traded calls during that time. Does any of this feel
familiar? Does it feel good? Why?

There are three basic trading methods for entering bearish
trades: S/R breakouts, chart oscillators and order flow.

Traders watching a market trend down the charts wait for it
to consolidate, press against resistance and resume the
downward trend by taking out recent support on rising
volume. Sound familiar? Anyone ever buy puts like this?

Traders watch chart signals line up in extreme overbought
range and wait for them to reverse and descend downward
before buying puts. Sound familiar? Anyone ever buy puts
like this?

Traders watching block trade order flow spot disparity in
buying or selling pressure by big players. They verify this
info with other market-timing tools and buy puts when heavy
flow trades on falling market prices at the "bid". Sound
familiar? Anyone ever buy puts like this?

These approaches work alone or in combination when markets
are moving down. Profits flow, accounts swell and all is
well.

Or is it?

This time the sun doesn't shine for everyone - it hides
behind a blanket of clouds. At the time occurs, life is bad.
Markets tank and traders are depressed. Short stocks, put
options, call-credit spread strategies - everything makes
money. Still, our step-family at CNBC is filled with morose.
Maria's subdued voice is down several octaves from normal.

And the coldness spread all around us. Family & friends see
their retirement funds implode. Aunt Millie with the
mustache suffers a -30% annual decrease in her retirement
fund and has to pay taxes on that to boot. She can no longer
afford to have that pesky mustache waxed. Friends, co-
workers and strangers on the street are all talking about
pummeled stocks.

Internet chat rooms are filled with former millionaires
crying about recent tech-stocks getting killed and all the
material toys they're shedding. Sympathetic juices flow - we
want out!

This negative sentiment feeds itself and life takes on a
pallor. Everyone's depressed, the sun shines not at all.
Close your eyes and think back for moment to reflect on the
period from mid-March of 2000 until now if you traded calls
during that time. Does any of this feel familiar? Does it
feel bad? Why?

People act on emotions and traders are people. Massive
wealth flowed in equal directions with relative ease and
people had a blast capturing half. Many if not most of those
same traders sat like deer in headlights when the money flow
reversed, paralyzed by nothing more than emotion.

We often hear things like:
"I'm naturally bullish"
"I don't know how to play the downside"
"I don't like playing the downside"
"Puts never make money for me"
"I'm sitting on cash until things turn"

These are all incomplete statements. Let's finish the
thoughts and rationalize from there.

"I'm naturally bullish". No you aren't. That's not true at
all. You are naturally market-neutral. That was your bias
from birth until you discovered the markets. Before then you
were blissfully unaware and couldn't care less which way
they moved. What environmental factors caused you to create
a bullish bias since then? What has been the result by now?

"I don't know how to play the downside". Yes you do! It is
exactly the same as playing upside with no fundamental
difference. That statement really says the trader is
uncomfortable or unsure trying the exact reverse of what
worked in bull markets. The comfort zone is calls during
rallies and people become entrenched in personal comfort
zones.

"I don't like playing the downside". Why? What don't they
like? Do all the quick profits made and growing accounts
disturb them? Or is it a feeling of betrayal by making money
during a time when a majority is losing theirs. Is it
betrayal trading puts and profiting hand-over-fist while
watching the 401K or IRA plunge in value? What's betrayal to
small investors is merely hedging by market pros and large
institutions.

"Puts never make money for me". Why not? Does this trader
hit the same entry-point parameters via call-buying rules,
set stops and honor them? Or do they pull the plug early and
buy those old familiar calls on the first up-tick that moves
against?

Amazing how many traders will lower stops on calls to lose
more money but move stops up to crowd puts out of winning
trades. Why is this? Fear of loss. They fear missing out on
the next rally explosion certain to be just a tick or two
away.

"I'm sitting on cash until things turn". Why? If you are an
option trader it is equal-effort trading either direction.
None is harder/easier than the other. What we perceive it to
be does not equal reality. Reality is the description of
entry-point methods in both directions above. Do you see one
easier than the other? We copy/pasted the exact same
verbiage, merely changing "calls" for "puts". What do you
see that's different?

I didn't ask what you feel, the question was "what do you
see"? There is a monumental difference between seeing and
feeling. One can make you rich and the other can make you
broke. Guess which does what.

The recent bull-run arguably did as much or more harm than
good for most traders? How? It falsely led to believe that
trees grow to the sky and neveraprayerforprofits.com had a
chance because of x-number page hits. It led many to believe
that markets and profits run one direction more often than
another.

That temporary false-belief died as many have learned with
real money turned to dust since then. Markets move up, down
and sideways in equal measures over time. If you expect a
long trading career it's imperative to have methods that
work in at least two of three. One method for one direction
will not work long-term.

Tuesday within Indexskybox.com Swing Trade model we entered
plays on the QQQ, OEX and SPX to trigger above recent
support and below resistance. Markets rose to break
resistance, we bought calls across the board and made good
money within hours.

Wednesday we entered plays on the QQQ, OEX and SPX to
trigger above recent support and below resistance. Markets
fell to break support, we bought puts across the board and
made good money within hours.

Thursday we entered plays on the QQQ, OEX and SPX to trigger
above recent support and below resistance. Markets traded
all session between the two as I write and we stand ready to
buy either calls or puts across the board and make money
within hours tomorrow.

What's the difference in this approach? We can buy calls or
puts with equal ease, as can everyone.

Can you trade the downside with equal success? Yes you can!
I know you can! I believe in you as a complete and versatile
trader. Go out there, prove us right and prosper wildly in
both directions for yourself.

austinp@OptionInvestor.com


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PICKS WE DROPPED
****************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

MFNX $11.06 -0.63 (-2.69) Despite the bullish earnings report
from competitor CIENA Thursday morning, MFNX continued its slide
toward its 52-week low.  Volume has remained robust this week,
which is a bit disconcerting considering the stock's continued
slide.  Although MFNX is still trading above our protective
stop at $9.50, we're dropping coverage on the play tonight.
Existing positions could be exited if the stock bounces higher
off support at the $11 level tomorrow.  If MFNX does rebound,
pay close attention to how the stock trades near resistance at
$11.50.


PUTS:
*****

CLX $41.00 +2.19 (-2.69) Although CLX didn't close above our stop
(it closed right at it) we're reluctantly dropping coverage on the
play in light of the stock's rebound Thursday.  After the violent
drop CLX experienced over the past two weeks a relief rally was
in order, but we didn't expect the short covering to produce such
a big move up.  That said, CLX may roll over in the coming
trading sessions and still provide put players with profits.
On the other hand, if the stock extends its rebound early tomorrow
traders might consider exiting existing positions.


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The Option Investor Newsletter                 Thursday 12-07-2000
Copyright 2000, All rights reserved.                        2 of 2
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********************
PLAY UPDATES - CALLS
********************

BRCM $110.63 -5.00 (+5.88) After five straight days of gains, a
little giveback could be considered a healthy move.  Yesterday,
after encountering resistance at $126 along with a soft NASDAQ,
traders took some money off the table.  With that, BRCM shed
$2.56 or 2.17 percent.  While volume was slightly above the ADV,
considering that the recent run up has been on twice the ADV,
what we are seeing appears to be orderly profit taking.  Today,
news of MOT issuing an earnings warning affected most of the
Semiconductor sector, with BRCM pulling back 4.32%.  Volume today
was once again light however, and the close above support at $110
was encouraging indeed.  Look for another bounce off $110 as well
as our stop price at $108 for a possible aggressive entry.  There
is also support at the 10-dma near $105 but confirm a bounce with
volume.  For an entry on strength, wait for BRCM to move back
above its 5-dma (now at $112.13) confirmed with a strong NASDAQ,
before making a play.

NTAP $75.38 -1.00 (+21.44) It's not surprising to see NTAP pull
back a little after Tuesday's 40 percent move.  With that, the
stock has been in digestion mode for the past couple of days.  On
Monday, moving in sympathy with the NASDAQ, NTAP fell $5.19 or
6.36 percent on 175% of ADV.  Today, US Bancorp Piper Jaffray had
kind words to say about the Network Attached Storage (NAS)
leader, reiterating their Buy rating and price target of $120.
While the stock closed down 1.31 percent today, it appears that
the selling volume from yesterday may have dried up.  With a
sharp drop in selling pressure, look for a bouncing NASDAQ to
lift the stock higher.  A conservative entry can be had on a
break through $80, but confirm with volume.  Aggressive traders
looking to get in early could find current levels attractive.
Bounces off $70 as well as the 5-dma at $69 are also possible
targets to shoot for.  Further down is additional support at
our stop price of $65 but make sure NTAP closes above this point.

QCOM $104.44 +5.06 (+21.44) QCOM is nothing if not volatile, as
can be seen in the fast and furious trading action of the past
two days.  On Monday, traders bid up the stock in the early going
but encountering resistance at $108, coupled with the drag of a
shaky NASDAQ, profits were taken as the stock ended the day down
fractionally on over twice the ADV.  Today, the stock found
support for its 5-dma near $95.  The stock traded in a tight
range most of the session, with news of an alliance with RFMD
having little effect in the early going.  But an end of day
buying panic helped propel the stock up 5.09 percent, with volume
clocking in at 140% of ADV.  We are moving our stop price up from
$90 to $95.  Bounces off the psychological $100 and $95 support,
confirmed with buying volume, could make for aggressive entries.
For the more conservative, wait until QCOM breaks through $105
with conviction to confirm upward momentum before considering an
entry.

RSAS $48.25 -0.56 (+2.13) Trading volume continues to be light
for RSAS, as the stock posted another couple of trading sessions
on below average volume.  On Wednesday, the company introduced
the RSA SecurID software for the Nokia 9210 Communicator.
Considering that the software will be shipped with every Nokia
phone, this is good news indeed.  Traders were indifferent
however, as the stock closed the day down $1.06 or 2.13 percent
on 80% of ADV.  Today, the company announced more good news on
the wireless front, as mobile e-business company EZOS selected
RSAS’ RSA BSAFE security software for use with its EzWAP web
browser.  Trading today was even less brisk, as the stock fell
fractionally on less than 50 percent of ADV.  In doing so, RSAS
has drifted back below its 50-dma at $49.06 but managed to find
support from the 5-dma at $47.91.  Another bounce off 5-dma
support could provide an aggressive entry as can a bounce off our
stop price of $46.  The more risk adverse will want to see buying
strength return to RSAS, carrying the stock back above its 50-dma
on volume before taking a position.

ADBE $63.00 -4.19 (-4.31) Just barely avoiding a quick trip to
the drop list, ADBE fell throughout today's session, before
finding support right at the 200-dma ($62.75).  Although the
selling seemed to abate towards the close, volume for the day
still came in at 5.6 million shares, more than double the ADV.
We need to see the stock hold above the $62 support level to
keep our play alive, but given the earnings warning from INTC
this evening, that may be a tough trick in tomorrow's session.
While ADBE has started to distance itself from the PC market by
moving more heavily into Internet-related growth areas, the
guilt-by-association could be too much for the bulls to bear
(pardon the pun).  Wait for the stock to bounce and hold above
the 200-dma on strong volume before initiating new positions.
More conservative players may even want to wait for ADBE to
trade above the $65-66 resistance level before taking the
plunge.  Of course, all bets (and plays) will be off if the
NASDAQ can't move in the positive direction tomorrow and ADBE
closes below our stop at $62.

JNPR $148.88 +8.59 (+17.00) Despite news that Ericsson sold a
big stake in JNPR to fund its 3G efforts, our play bucked the
broader technology trend today.  Even the Networking Index
(NWX.X) closed in negative territory for the second day in a
row, but JNPR managed to move up for a modest gain.  After the
gap down open, the bulls quickly came charging back, pushing the
stock back above the $142 support level.  Following a
consolidation above the $142 level, we saw our play again rally
to the $149 resistance level, right at the 200-dma, before the
sellers returned near the close.  If it sounds like rangebound
trading, you hit the nail on the head.  There just hasn't been
enough bullish sentiment to really get the stock moving, as
investors continue to worry about what will be the next big
earnings warning to appear.  After the close today, INTC warned,
which comes on the heels of warnings from MOT and NSM during
the regular session.  This has the potential to affect the
entire technology sector tomorrow, so verify market and sector
strength before adding new positions.  Bargain hunters can
consider new entries on a bounce from $142 or $138.  Our stop
is still resting at $136, and a close below that level will kick
JNPR out of its tenuous recovery trend.  At this point, the
conservative approach may be best; if that fits your risk
profile, you'll want to wait for buying volume to push the
stock through $150 before playing.

MEDX $41.88 +2.13 (-0.75) CSFB rewarded Medarex's conference
call on Wednesday with a new Buy rating and a lofty $81 target
price.  The positive coverage prompted MEDX to deliver gains it
had failed to deliver during Tuesday's mammoth rally.  Amid a
tough marketplace that was filled with more uncertainty and
earnings woes, MEDX broke through first line of opposition at
$40 and climbed higher to challenge the next level of resistance
at $43 and $44.  The immediate resistance is reinforced by the
200-dma technical line ($44.55) and represents quite a
formidable obstacle.  The potential is there for MEDX to break
to the upside.  However, there's no question that it'll be
necessary for the NASDAQ to rally into the holidays or another
type of shake'em up event to act as a catalyst for MEDX to make
significant gains.  Some traders might consider looking for
aggressive entry's on bounces off the $37 and $38 levels, if the
moves are backed by bullish volume; while others looking for a
more judicious entry should wait for the upward confirmation.
We're maintain the protective stop at $36, and would exit
positions if MEDX settled below that level.

A $54.00 +2.00 (+1.00) Moderate to strong volume continues to
drive A towards the objective of moving back through $60 and
and into the higher trading realms seen earlier in the
millennium.  Tuesday's bullish action extended into the early
hours of Wednesday's session and A scaled $56.94; but
unfortunately, the issue couldn't defend its advances against
the profit takers taking their fill of gold.  A close at the
intraday low of $52 was nerve-wracking yesterday, but
nonetheless, offered a premium entry point into today's trading
session, if you're more enterprising and your portfolio can
handle the risk.  News that privately-held Verano, also a pre-
IPO company, will acquire Agilent's Automation Integration
Software (AIS) business helped bolstered the share price in
today's shaky market.  As a result of the transaction, Agilent
will take an equity stake in Verano; although financial details
weren't disclosed.  In another turn of events today, Agilent
Technologies announced it reached an agreement to acquire ATN
Microwave, a company specializing in microwave measurement
solutions for wireless and high-speed data communication
applications.  Although terms weren't available, the addition of
new products and expertise will allow Agilent to maintain its
leading-edge position in the industry.   The current news is
positive and gives reason for investors to take additional
positions, but it'll be critical for the NASDAQ to rise in the
coming days before going long with A over the short-term.
Intraday dips at the converged 5 and 10 dmas at $53.01 and
$52.33, respectively, offer a level of entry for the more
aggressive.  If however, you're on the sidelines patiently
waiting for better confirmation, look for A to shatter the
above-mentioned $56.94 and for buyers to drive the share price
through the $60 level.  At this point in time, our protective
stop is set tight at the $51 mark.

BRCD $201.00 +10.00 (+33.13) After showing exceptional strength
in Tuesday's tech rebound, BRCD's gains continued to accumulate
in the following sessions.  The impressive performance amid the
last two days of adversity in the marketplace emphasizes its
building fervor.  The recurring tests of the $200 resistance
and its ultimate break through this level today further depicts
bullish behavior.  In today's session, the bulls took BRCD
upwards to $201.50, effectively finishing on the upside at $201.
Extended gains above this significant mark would, of course, be
consequential and represents a critical point of passage.
Buying into strength as BRCD continues to rally warrants an
entry for the more cautious players and importantly, the upswing
should attract additional momentum traders.  When the buyers
return to the tech sector in force, BRCD is poised to lead the
charge higher as it runs into its scheduled 2:1 stock split.
The company's paydate of December 22nd is coming up quickly, so
plan accordingly.  Because the risk-reward odds aren't generally
stacked in our favor, OIN doesn't recommend holding over the
split date.  If there's a bit of profit taking intraday or a
period of consolidation, enterprising entries might be found if
BRCD bounces off $185, or even lower near $180 (but that's
pretty risky!).  Take note that the shorter-term support is
evolving at higher levels near $193 and $195.  We're tightening
our bottom-line and raising our protective stop to $181.  With
that in mind, be careful of taking entries on a deep pullback,
which may portend overall weakness.  Whether BRCD launches off
the current level like a rocket or bobs & weaves under the $200
level, it'll be essential in coming sessions to make sure the
buyers step in with volume before beginning new plays.

MUSE $117.81 -1.56 (+23.69) Playing these HIGH-RISK and VOLATILE
techs really takes a disciplined trader and one without a
faint heart!  Our early entry into MUSE was aggressive, but
returned lavish profits on Tuesday.  MUSE shot up 38%, or $33.50
during the NASDAQ's biggest ever one-day gain!  The explosive
gains in the NASDAQ didn't sustain in the following days, but
MUSE demonstrated credible soundness.  The issue, which
typically swings violently with the market, bucked its
historical pattern and maintained Tuesday's impressive gains.
Please, the latter comment is by no means an invitation to begin
new call plays without considering the overall market direction
and sentiment!  For confirmation that MUSE's momentum trend is
intact, look for strength in the NASDAQ to move MUSE back
through the $120 level.  Better evidence of the stock's
intensity would be a high-volume break of the resistance at the
30-dma, near $125.  In light of today's report that the BoD
finalized the dates for its previously announced 2:1 stock
split, we're anticipating the initial excitement will drive the
share price higher over the near-term.  And in response to the
recent advances, we've raised our stop to the $105 level.  MUSE
will begin trading on a split-adjusted basis on the morning of
December 20th.  Montgomery Scott LLC certified its bullish
position on MUSE today with a Buy reiteration and a $205 price
target.


*******************
PLAY UPDATES - PUTS
*******************

PAYX $44.88 +1.13 (+0.75) Paychex has been making a series of
lower highs and failed rallies on a weekly and intraday basis.
This started with a failed attempt to clear $48 on Tuesday.  PAYX
attempted to rally from $44 Wednesday morning, but rolled off a
key resistance level at the 5-dma of $46.37 around mid-morning
as the Nasdaq started to lose strength.  From there, it closed at
support just above the 200-dma at $43.55.  On Thursday, PAYX
failed at three attempted rallies at critical levels.  The stock
spiked to the 10-dma of $47, and immediately dropped to the 5-dma
of $46.31.  After spending most of the afternoon at support at
$45.50, PAYX tried again to clear $46.31 and failed, this time
rolling over to $45.75.  At this point, a heavy level of selling
volume pushed the stock below support at $45.50 to close at the
low of the day at $44.88, with a very bearish red candlestick
pattern.  Intraday resistance is at $47, and intraday support is
strong at $45.50.  The critical support level is at the 200-dma
of $43.55.  A conservative entry point could be taken on a move
below $43.50 on strong volume, which could lead the stock to its
previous low of $41.75 in September.  An aggressive entry point
could be taken on a failed attempt to rally past $46.50.  CSFB
started coverage on Thursday with a lukewarm Hold rating.  It is
wise to follow the overall market trend before initiating new
positions, and set stops at $48, as this would indicate the start
of a trend reversal.

RMBS $47.69 +0.38 (+4.25) Expectant bears were rewarded this
afternoon after the market close.  The other shoe dropped, as
INTC released its rumored earnings warning, confirming the
weakness in PC sector that has been highlighted by warnings
from the likes of GTW, APPL, and DELL recently.  Joined at the
hip to the PC sector, RMBS will likewise feel the effect of
slowing PC sales.  During today's regular session, our play on
RMBS was struggling for direction, locked in a tight range
between $45-49, mirroring the rangebound NASDAQ trading.  The
stock has begun to trace a series of higher highs and higher
lows over the past week, so it could be that the bears are
running out of conviction.  After the initial drop in the after
hours session, INTC and RMBS both traded up, and this could
mean that the bad news is already factored into the stock
prices.  Resistance at $50 and $52 should cap any upside moves,
but just to be safe, we are moving our stop down to $52.  New
positions can be considered if the stock rolls over at
resistance, but only if accompanied by strong selling volume.
The prudent approach may be to wait for renewed selling before
initiating new positions.  A drop below the $45 support level
will make for a good entry trigger, especially if confirmed by
more selling in the Semiconductor Index (SOX.X).

AES $45.50 -2.13 (-6.19) The market uncertainty, earnings woes,
and an election drama make for a great environment to play AES.
The continued losses have provided a multitude of opportunities
for traders to lock in profits.  Although, it can't be ignored
that a bottom may be in site.  Today, AES crashed through the 5-
dma at $48.48, which is certainly welcome; however the
repeated bounces off the $45 level raised our radar antennae. As
a result of the significant decline this week, we've lowered our
stop from $51 to $48.50 and are signaling caution.  Keep stops
tight to protect against a buying spree at these attractive
price levels.  If however, you have the opportunity to buy into
further weakness, AES might find some historical support near
the $40 level.


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**************
NEW CALL PLAYS
**************

AGGRESSIVE:

IDPH - IDEC Pharmaceuticals $203.06 +4.56 (+24.06 this week)

IDEC Pharmaceuticals focuses on the commercialization and
development of targeted therapies for the treatment of cancer
and autoimmune diseases.  IDEC's antibody products act chiefly
through immune system mechanisms, exerting their effect by
binding to specific, readily targeted immune cells in the
patient's blood or lymphatic systems.

In a market where it has been difficult to find much in the
way of positive developments, IDEC seems to have an unlimited
supply.  The trend in this stock for the past four months is
tough to beat anywhere else.  After sellers finally took the
stock lower into a capitulating move by November 20th, IDPH
came right back on multiple developments.  The strongest of
which may be the 3-1 stock split announced on Nov 30th.  This
is the second split announced this year.  The record date is
set for Dec 26th (a nice Christmas present) followed by the
ex-date on Jan 17th.  IDPH's stock price has benefited as a
split-run is emerging.  Another positive news announcement came
Tuesday out of 42nd Annual Meeting of the American Society of
Hematology early this week.  IDEC revealed the final results of
two pivotal Zevalin trials in Radioimmunotherapy for B Cell Non-
Hodgkins Lymphoma.  The stock jumped up over $10 that day.  In
the most recent sessions, IDPH has found good support near $195,
and began rallying off that level this afternoon to close right
near the day high.  This should clear the road for a run to the
all-time high at $220 before running into resistance.  Note the
highest level of open interest in DEC calls is also at the 220-
strikes, confirming the potential for profit-taking if IDPH
trades that high in the short-term.  It is prudent to keep an
eye on that, but there is plenty of room for profit until then.
If support at $196 doesn't hold, look for a bounce off the
10-dma at $186.25 before re-entering as we have set our stop
at $187 and would drop coverage if IDPH closed below that
level.

***December contracts expire next week***

BUY CALL DEC-200*IHD-LT OI= 832 at $13.25 SL= 9.50
BUY CALL DEC-210 IHD-LB OI=1498 at $ 7.50 SL= 5.00
BUY CALL JAN-200 IHD-AT OI= 252 at $25.88 SL=19.50
BUY CALL JAN-210 IHD-AB OI= 628 at $20.63 SL=15.25
BUY CALL JAN-220 IHD-AD OI= 498 at $16.50 SL=12.00

http://www.premierinvestor.net/oi/profile.asp?ticker=IDPH


*************
NEW PUT PLAYS
*************

AGGRESSIVE:

CTIC - Cell Therapeutics $32.63 -2.63 (-10.75 this week)

Cell Therapeutics is a development-stage company that researches
small-molecule drugs to create more effective and less toxic
treatments for various forms of cancer.  In May 2000, the FDA
accepted the company's New Drug Application for Arsenic TriOxide
(ATO), its lead product, which is targeted at certain types of
leukemia, as well as aggressive lymphomas and other cancers.
Other drugs being developed include Apra, a treatment for
cancers that resist chemotherapy, and an agent based on Taxol,
the successful cancer fighter from Bristol-Myers.  CTIC's
PanGenex subsidiary airs to sift through the human genome data
in hopes of identifying other possible drug applications.

Leading the slide in Biotech stocks on Thursday, CTIC has been
in a persistent downtrend for the past month.  After completing
a head-and-shoulders top in early November, the stock plunged
through numerous support levels, including every one of its
moving averages.  Hopeful bulls stepped in to support the price
near the $39 level, but their hopes were quickly swept aside as
the recovery barely lasted a week.  The descending trendline
capped the recovery at $49 on November 27th, and has provided
consistent resistance ever since.  Kicking the decline back into
high gear on Monday, CTIC fell more than 21%, and plunged
through the 200-dma ($35.50).  Selling volume has been on the
rise since the stock rolled over, and today hit 1.3 million
shares, nearly double the ADV.  Unless the Biotechs can find a
way to change their losing ways, it looks like CTIC will break
the $30 support level, and with the next support level sitting
at $23-24, there is still plenty of room to fall.  After such
a sharp drop in the past week, a relief bounce is not out of
the question, and we may have seen the beginning of this today
as the stock managed to recover into the close.  Aggressive
traders can use a failed rally at the 200-dma as an opportunity
to jump into the play at as better price.  We have placed our
stop at $37, so any move above that will be an indication that
the bears have run out of energy.  More conservative players
will want to wait for CTIC to fall through the $30 support level
before playing, and all traders will confirm negative movement
in the Biotech Index (BTK.X) before opening new positions.

***December contracts expire next week***

BUY PUT DEC-35*CUC-XG OI= 98 at $3.88 SL=2.25
BUY PUT DEC-30 CUC-XF OI=180 at $1.44 SL=0.75
BUY PUT JAN-35 CUC-MG OI= 30 at $6.50 SL=4.50

http://www.premierinvestor.net/oi/profile.asp?ticker=CTIC


LOW VOLATILITY:

IMGN - ImmunoGen, Inc. $21.94 -2.06 (-4.06 this week)

ImmunoGen, Inc. develops innovative biopharmaceuticals, primarily
for cancer treatment. The Company creates potent tumor-activated
prodrugs (TAPs), consisting of small molecule, cytotoxic drugs
coupled to monoclonal antibodies for delivery to and destruction
of cancer cells.

Shares of IMGN continue to sink lower as buyers are non-existent.
Since running into resistance at $26 on Monday, buying has dried
up and the descent has been quick.  On an intraday chart, the
limited buying is light and short-lived, indicating short
covering.  We are adding IMGN as a Low Volatility put which
appears likely to test the $20 level and maybe even further.  The
200-dma lies at $18.05.  Many stocks that have been hit by selling
during the past few months have retraced back to their 200-dma
and IMGN seems to be on its way.  This play is straight technicals.
Ideal entry into this Low Volatility put play is when the shorts
begin to cover and the light buying stalls the dominate downtrend.
Look for a rollover from intraday resistance at $22.50 or $23.25,
the site of today's rollover.  If weakness continues tomorrow
morning, a test of the $20 isn't far off and would warrant entry.
Resistance at the $25 is strong and it happens to be our stop
loss level on the play.  A close above this price and we would
not initiate new positions.

***December contracts expire next week***

BUY PUT DEC-110*MMM-XB OI= 26 at $1.38 SL=0.75
BUY PUT DEC-105 MMM-XA OI=405 at $0.69 SL=0.00  High Risk!
BUY PUT JAN-110 MMM-MB OI= 61 at $3.38 SL=1.75

http://www.premierinvestor.net/oi/profile.asp?ticker=IMGN


**********************
PLAY OF THE DAY - CALL
**********************

MEDX - Medarex, Inc. $41.94 +2.19 (-0.69 this 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.

Most Recent Write-Up

CSFB rewarded Medarex's conference call on Wednesday with a new
Buy rating and a lofty $81 target price.  The positive coverage
prompted MEDX to deliver gains it had failed to deliver during
Tuesday's mammoth rally.  Amid a tough marketplace that was filled
with more uncertainty and earnings woes, MEDX broke through first
line of opposition at $40 and climbed higher to challenge the
next level of resistance at $43 and $44.  The immediate resistance
is reinforced by the 200-dma technical line ($44.55) and represents
quite a formidable obstacle.  The potential is there for MEDX to
break to the upside.  However, there's no question that it'll be
necessary for the NASDAQ to rally into the holidays or another
type of shake'em up event to act as a catalyst for MEDX to make
significant gains.  Some traders might consider looking for
aggressive entry's on bounces off the $37 and $38 levels, if the
moves are backed by bullish volume; while others looking for a
more judicious entry should wait for the upward confirmation.
We're maintain the protective stop at $36, and would exit
positions if MEDX settled below that level.

Comments

MEDX has been building a nice ascending wedge since bouncing
from $30.  While it has been somewhat choppy trading, the stock
has powered higher above $40.  Resistance lies at $44, with the
200-dma at $44.56.  This wedge is very close to breaking out from
this technical development.  Look for pullbacks to $40 along with
a bounce for entry.  If the Biotechs pull back further tomorrow,
watch for the 10-dma at $38.56 to provide support.  A breakout
above $44 on strong volume would also give an entry signal.

***December contracts expire next week***

BUY CALL DEC-40*MZU-LH OI=110 at $5.00 SL=3.25
BUY CALL DEC-45 MZU-LI OI=203 at $2.75 SL=1.50
BUY CALL DEC-50 MZU-LJ OI=222 at $1.31 SL=0.75
BUY CALL JAN-45 MZU-AI OI= 63 at $6.63 SL=4.75
BUY CALL JAN-50 MZU-AJ OI=218 at $5.13 SL=3.25

http://www.premierinvestor.net/oi/profile.asp?ticker=MEDX


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************************
COMBOS/SPREADS/STRADDLES
************************

Profit Warnings Continue...

The stock market slumped again today as investors continued to
fret over the outlook for corporate earnings.


Wednesday, December 6

The market fell sharply today amid profit warnings from a number
of industry leading companies.  Bank of America (BAC) and Apple
Computer (AAPL) were the two biggest burdens on the market with
the Nasdaq closing down 93 points at 2,796 and the Dow finishing
234 points lower at 10,664.  The S&P 500 index was down 25 points
at 1,351.  Trading volume on the Nasdaq hit 2.31 billion shares,
with declines beating advances by 2,395 to 1,544.  Volume on the
NYSE reached 1.36 billion shares, with declines beating advances
1,674 to 1,230.  In the bond market, the 30-year Treasury jumped
1 4/32, pushing its yield down to 5.51%.


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

Magnetek   MAG   JAN15C/JAN12P   $13.75   debit   collar
Timken     TKR   MAR17C/MAR12P   $0.25    debit   synthetic
Pactiv     PTV   FEB10C/JAN12C   $2.06    debit   diagonal

Our new speculation positions were not very cooperative during
the bearish session.  However, all of the plays were available
near the target prices and we will monitor each position for
additional entry opportunities in the coming sessions.


Portfolio Plays:

Stocks moved lower today amid profit taking in the broader
market and renewed selling in the technology group.  Computer
hardware stocks led the losers after Apple warned of a $600
million revenue shortfall in its first quarter.  Apple expects
revenue of $1 billion; a net loss of between $225 million and
$250 million and the magnitude of the shortfall surpassed even
the lowest expectations.  CS First Boston subsequently lowered
its rating on Apple, Gateway (GTW), Dell Computer (DELL) and
also sliced estimates on IBM (IBM) and Hewlett-Packard (HWP).
Shares of Intel (INTC) also weighed heavily on both the Dow and
the Nasdaq, falling to $31 after Salomon Smith Barney lowered
its revenue estimates saying Intel's fourth quarter is likely
to be its worst in over a decade.  J.P. Morgan also issued a
cautionary note on the chip sector, saying valuations are still
inflated.  On the bright side, wireless telecom stocks rallied
on speculation the group will be one the better growth sectors
the coming months.  On the Dow, financial stocks also slid late
in the day after Bank of America (BAC) issued a profit warning
citing credit problems and a slowdown in activity in capital
markets.  In the broader market, retail, brokerage, consumer
products, major drug and oil service shares all moved lower.

The Spreads portfolio experienced bullish activity even as the
broad market retreated.  Our new synthetic position in Safeco
(SAFC) is off to a great start, achieving a $1.75 profit in just
three days as the issue rose $1.50 to a recent high near $30.
In the retail sector, Home Depot (HD) continued to rally, ending
up $1.31 at $45 after naming a new CEO from the ranks of General
Electric (GE).  Home Depot, which has struggled lately in the
wake of a profit warning, named Robert Nardelli, the former CEO
of General Electric's power systems unit to succeed co-founder
Arthur Blank.  The new chief was quick to assure investors that
the #1 home improvement retailer will have a smooth transition
of power and that he is committed to expanding the chain's global
reach, possibly through new acquisitions.  Among transportation
companies, US Air (U) was a popular stock, finishing up $2.50 at
$42.44 on speculation that the upcoming merger with United (UAL)
will eventually be approved by the European Commission.  In the
healthcare sector, Cardinal Health (CAH) rebounded over a $1 to
$96.56 but there remains some potential for further downside and
it may be time to close the bullish spread at less than maximum
profit.  One of our recent winners in the straddles category,
Advanced Fibre (AFCI) traded as low as $16.50 on Tuesday, and
the overall credit for the straddle reached $18, a 35% return
after one month in the position.  That's a favorable early-exit
profit to close the play.

Thursday, December 7

The stock market slumped again today as investors continued to
fret over the outlook for corporate earnings.  The Nasdaq ended
down 43 points at 2,752 and the Dow finished down 47 points at
10,617.  The S&P 500 closed 7 points lower at 1,343.  Volume on
the Nasdaq reached 1.74 billion shares, with declines outpacing
advances 2,364 to 1,554.  Volume on the NYSE reached 1.1 billion
shares, with declines leading advances 1,451 to 1,390.  In the
bond market, the 30-year Treasury rose 6/32, pushing its yield
down to 5.50% ahead of Friday's all-important employment report.

Portfolio Plays:

Stocks slumped again today in the wake of profit warnings from
Motorola (MOT) and National Semiconductor (NSM), and negative
analysts' comments on Microsoft (MSFT).  Among technology issues,
Internet and software companies were the biggest losers and chip
stocks plunged after Motorola said that it won't meet quarterly
revenue and earnings expectations due to market conditions in
the semiconductor industry as well as delays in achieving cost
reductions in wireless phone production.  National Semiconductor
was also bearish on the upcoming quarter, pre-announcing a sales
decline of up to 10% due to the impact of continued inventory
adjustments in the distribution channel, a gradual stabilization
of sales in the cell phone market, and seasonal weakness in the
PC market.  The announcements were the latest in a string of
reports suggesting that chip inventories will be a major reason
for profit shortfalls.  Software shares retreated on news that
Goldman Sachs lowered earnings estimates for Microsoft based on
evidence of sluggish retail PC demand and Internet issues fell
after WR Hambrecht lowered its rating on Yahoo (YHOO) due to a
persistent weakness in the online advertising market.  On the
bright side, Ciena (CIEN) reported a fourth-quarter profit of
$0.14 a share, beating consensus estimates by two cents.  In
addition, company officials said they expect Ciena's business to
grow faster than the overall market, creating higher revenues.
On the Dow, poor performances by Alcoa (AA), J.P. Morgan (JPM),
AT&T (T) and International Business Machines (IBM) weighed on
the industrial average.  Inside the broad market, oil service,
major drug, retail, utility and consumer stocks gained ground
and financial shares also recovered after Wednesday's drubbing
following the Bank of America (BAC) earnings warning.  Lehman
Brothers continued its cautious outlook for the sector however,
saying that while interest rates appear to be favorable, asset
quality is suspect and many banks are revenue challenged.  In
other S&P 500 groups, paper, chemical, airline and cyclical
issues generally moved lower.

Our portfolio saw declines in a number of categories but overall,
the day was relatively uneventful.  There were a few issues with
excellent performances in the midst of renewed selling pressure
including Juniper Networks (JNPR), which moved up $9 to $149 and
Fiserve (FISV) with a $2.50 rally to close at a recent high near
$59.  Other notable performances were seen in safe-haven sectors
with Forest Laboratories (FRX) and Baxter (BAX) leading the drug
and medical equipment categories, and Quaker Oats (OAT) topping
the issues in the Food and Beverage group.  Among lower-priced
stocks, Kellogg (K) edged higher on continued merger speculation
in the sector and Biochem (BCHE) rebounded to the middle of a
recent trading range as selling pressure faded.  In the Reader's
Request section, Sabre Holdings (TSG) has begun to consolidate
from gains earlier in the week and Skywest (SKY) dropped after
the company was downgraded by analysts at Raymond James and UBS
Warburg.  The reports suggested that quarterly estimates would be
reduced and that a formal earnings warning would likely be issued
in several days.  Another popular OIN issue, Microsoft (MSFT) was
the target of new downgrades and the company's share value slid
to its lowest level in two months after a well known analyst cut
MSFT's earnings estimates due to lower PC demand.  Goldman Sachs'
Rick Sherlund, who has been following the company since it went
public, said in a report that personal computer software sales
were likely to slump for the second quarter.  Where have I heard
that before?  Microsoft responded by saying that concerns over
lackluster personal computer sales were not likely to affect the
company's earnings substantially, given its diverse businesses.
Those of you in the bullish LEAPS/CCs position will need to make
a judgment concerning the technical outlook of the issue before
adjusting the diagonal spread at December options expiration.

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

We received a positive comment on yesterday's speculative debit
straddle in the "Big-Cap" section and a request for additional
candidates in that group.  Here are two positions with different
time frames that offer favorable risk/reward opportunities.  Both
of these plays meet our criteria for favorable straddles; cheap
option premiums, a history of adequate price movement and future
events or activities that may generate volatility in the issue
or its industry.  This selection process provides the foremost
combination of low risk and potentially high reward.  As with
any recommendations, they should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.

******************************************************************
AC - Alliance Capital  $49.06  *** Probability Play! ***

Alliance Capital is a leading global investment management firm
best known for its growth style of equity investing.  Alliance
Capital manages retirement assets for many of the largest public
and private employee benefit plans (including a number of U.S.
Fortune 100 companies), for public employee retirement funds in
31 out of the 50 U.S. states, and for foundations, endowments,
banks, an insurance companies worldwide.  Assets under management
total more than $400 billion and Alliance Capital is also one of
America's largest mutual fund sponsors, with approximately 5.8
million shareholder accounts and a family of diversified fund
portfolios that are distributed globally.  Alliance Holding owns
approximately 42% of Alliance Capital Management, the operating
private partnership.  AXA Financial owns interests in Alliance
Holding and Alliance Capital, amounting to an approximate 57%
economic interest in Alliance Capital.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  JAN-50  AC-AJ  OI=180  A=$1.62
BUY  PUT   JAN-50  AC-MJ  OI=253  A=$2.62
INITIAL NET DEBIT TARGET=$4.00 TARGET ROI=25%

Note: There is also a short-term position (DEC-$50) available for
approximately $2.12 debit.


******************************************************************
JP - Jefferson Pilot  $71.94  *** Cheap Speculation! ***

Jefferson-Pilot is a holding company engaged in the business of
writing life and accident and disability insurance policies;
writing annuity policies and selling other investment products;
operating radio and television facilities; and producing sports
programming.  The company's principal subsidiaries, which are
wholly-owned include: Jefferson-Pilot Life Insurance Company (JP
Life), Jefferson Pilot Financial Insurance Company (JPFIC),
Jefferson Pilot LifeAmerica Insurance Company (JPLA), Alexander
Hamilton Life Insurance Company of America (AH Life), Guarantee
Life Insurance Company (GLIC), Jefferson Pilot Securities, a
full service NASD registered broker/dealer, and Jefferson-Pilot
Communications Company (JPCC).


PLAY (speculative - neutral/debit strangle):

BUY  CALL  DEC-75  JP-LO  OI=60  A=$0.50
BUY  PUT   DEC-70  JP-XN  OI=50  A=$0.62
INITIAL NET DEBIT TARGET=$1.00 TARGET ROI=25%


******************************************************************
     - TECHNICALS ONLY -

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.

******************************************************************
QCOM - Qualcomm  $104.44  *** An OIN Favorite! ***

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

Over the past few weeks, Qualcomm has been listed in almost every
bullish play category on the OIN's home page and with the recent
break-out above a previous trading range near $85-$90, the issue
appears poised for further gains.  Traders who missed the run-up
can speculate conservatively on the future movement of the stock
with this bullish spread position.  Target a higher spread credit
initially, to allow for consolidation from the recent rally.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JAN-75  AAF-MO  OI=5096  A=$1.88
SELL PUT  JAN-80  AAF-MP  OI=5890  B=$2.38
INITIAL NET CREDIT TARGET=$0.62-$0.75  ROI(max)=14% B/E=$79.38




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