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Daily Newsletter, Thursday, 12/14/2000

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The Option Investor Newsletter                 Thursday 12-14-2000
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************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        12-14-2000        High      Low     Volume Advance/Decline
DJIA    10675.00 -119.40 10799.00 10615.80 1.05 bln   1184/1695
NASDAQ   2728.51 - 94.26  2847.38  2727.26 1.77 bln   1216/2639
S&P 100   710.67 -  9.92   721.37   710.54   totals   2400/4334
S&P 500  1340.93 - 19.06  1359.68  1340.48           35.6%/64.4%
RUS 2000  461.82 -  8.09   469.91   461.33
DJ TRANS 2738.15 -109.26  2847.11  2733.52
VIX        28.27 +  1.40    28.37    27.00
Put/Call Ratio      0.97
*************************************************************

Just can't get a break with leaders falling left and right!

The futures rallied last night immediately after the final speeches
but the rally was short lived and evaporated completely by morning.
Any positive sentiment from the election resolution was eliminated
at the open by a major profit warning from Chase and JP Morgan.
Some days it just does not pay to get out of bed. Just when some
traders felt all the bad news had to be priced into the market we
get another round of seriously negative news. Even the positive
PPI report this morning was ignored after the JPM bombshell. Still
the Fed will not ignore the total lack of inflation as shown in the
PPI at +0.1% which was less than the consensus of +0.2%. Even the
core rate remained unchanged indicating that inflation pressures
are nonexistent. The market however was driven sharply lower by
a -$11 initial drop in JPM which is a Dow component.







Other notable warnings during the day included UPS which said that
shipments for December were weak. Weak shipments mean slower consumer
buying and the ripple down effect hit other shippers and retailers
as yet another indication of a slowing economy. The Fed certainly
has a lot on its plate to look at when it meets next Tuesday.

The worry for the week has been fear of impending warnings from
big cap tech stocks. This has pushed many to new lows and kept
investors from buying the dips until the news was out. Well one of
those worries came true tonight. Microsoft announced after hours
that a global economic slowdown coupled with a reduction in corporate
spending would reduce earnings from estimates of $.49 by up to three
cents. They said revenue estimates could drop by -5% as a result of
the weak PC sales. Let's see, did anyone know PC sales were slowing?
Sure, no new news here. Several analysts had already downgraded MSFT
over the last two weeks in anticipation of this announcement.
Initially MSFT dropped from a closing price of $55.50 to $52 in
after hours trading. There was an immediate bounce but then a slow
fade took over pulling the stock back under $52 as the session closed.
In reality a drop of only three cents in their earnings is not an
earthshaking event when it had been predicted for weeks. Remember
the Intel warning? Investors were so relieved that the warning was
not any worse that INTC traded up the next day. Remember Motorola?
Same thing. Whether MSFT will tank the Nasdaq on Friday or rally
the troops because of the very small change is yet to be seen.

Yet to warn but expected are Dell, IBM, SUNW and CSCO among others.
However these remaining companies are rapidly becoming the minority
with a dozen or so warnings daily now. With three weeks of warnings
season in front of us the prospects are not good. The only positive
sign I can point to was the news on SUNW today that server sales had
increased +60%. SUNW was the most active stock today with 80 million
shares changing hands. There are some big players taking some big
bets that either they will not warn or the warning will not be drastic.
Only time will tell who is right. Dell however was not so lucky and
dropped again under $20. After the Microsoft warning Dell traded as
low as $18.50. How much farther can it go? Will an eventual warning
have an APPL impact or an INTC result. One fell -25% the other gained.
IBM attempted to head off the naysayers by announcing a new mega-
processor and managed to rally slightly but the warning cloud
is still lingering in their future. Since IBM has had earnings
problems and currency problems in their recent past during good
times the possibility of a more serious event due to the soft
economy is looming. As a Dow component IBM could pull a JPM like
drop when we least need it.

For bulls there was some bright news after the bell with Oracle
posting earnings that beat the street and produced a rosy outlook
going forward. ORCL said stronger than expected management software
sales boosted net income +63%. Oracle said the next quarter should
come in at or above estimates. ORCL traded up after hours. Another
software company, Adobe Systems, also announced earnings that beat
the street and resulted in a +26% rise in sales. ADBE also affirmed
growth targets for next year and said they saw no slowdown in their
product sales. Ordinarily these two announcements would help power
the market tomorrow. No weakness, solid forecasts, good news for a
change. Unfortunately the MSFT warning will probably overshadow the
positive news. Do you think there is a possibility that MSFT planned
their warning to coincide with the earnings release from two of their
biggest competitors? Was this a spotlight grab by MSFT? That would
qualify as a conspiracy I think. Would Microsoft do that? I bet Larry
Ellison is boiling tonight on the thought that the MSFT warning may
hold his stock price back after they announced good news. He actually
stopped just short of accusing MSFT of making misleading statements
in their announcement when quizzed on CNBC.

Other good news that was ignored today was the positive guidance
from Corning and Nortel. Both reaffirmed estimates for the quarter
and 2001 saying that sales and growth continued to be strong. NT
finished the day up +2.31 but GLW closed down -2.44. JDSU did not
benefit from the news also dropping -3.19. CIEN dropped a whopping
-7.69. When two of the sectors major players say good things and
the sector still gets hammered that is a clear sign to stay away.

AOL got a call from the government today that they had approved
the AOL/TWX merger. Both gained several dollars on the news but
fell back to close only slightly positive as the market died at
the close. This will create an even larger Internet powerhouse
but analysts are still confused as to how to value the combination.
Publishers like TWX typically trade at low PE ratios and Internet
companies trade in the other extreme. Some consolidation of the
combined company is likely to occur until the free market
establishes the real value.

The Schwab warning yesterday and the CMB/JPM warning today provided
a sharp haircut for the brokerage sector in general. MWD led the
list with over a -$7 drop but MER, LEH, C and BSC were not far
behind. Lets see, if you take out banks, brokerages, PC, software,
retail, transportation, fiber, networking and manufacturing as
available sectors to trade then there is not much left. Several
drug stocks, some consumer stocks and a peppering of random news
events was about the only ones positive Thursday. All sectors are
back in the tank with no leadership in sight. The carnage in after
hours is severe. JNPR is down another -$7 in after hours, BRCM -5,
BRCD -6 and this is on top of the huge beating these stocks took
during regular trading. Sentiment has changed drastically again.
The Nasdaq came within 27 points of first line support at 2700.
Should that break we could definitely retest the 2523 low from
November-30th. The election bounce that didn't is history. Tax
selling is taking a serious toll on the high priced stocks. The
MSFT warning will take needed points off the Dow and the Nasdaq
at the open based on the after hours close at $52. S&P Futures
are down substantially at -7.50 and Nasdaq at -46. There is no
joy in Mudville tonight.

Analysts still feel the Nasdaq bottom from two weeks ago was the
bottom. However they do not call the market the great humiliator
for nothing. Analysts and newsletter writers are crucified daily
for making judgment calls based on all the available information
at hand every day only to have that information change before the
next market open. It is important to realize that this sentiment
change has occurred on very low volume. The Nasdaq had 35 new highs
to 211 new lows but only on volume of 1.7 billion shares. Decliners
did beat advancers better than 2:1. NYSE volume was only 1.1 billion
and new highs beat new lows 105:77. There is no conviction to this
move. That could change at any minute if investors feel the recent
bottom may be in jeopardy. As traders we need to focus on as many
of the market indicators as possible when deciding what to do.
If our bias is up but the market is moving down then we assume we
are either wrong about our bias or wrong about our timing. Every
day thousands of factors contribute to push the market around.
What is Fidelity selling today? How many ITM puts/calls are being
covered in front of triple witching Friday? Who warned today and
who will warn before the open tomorrow? What will the CPI report
show Friday? How much tax selling is left before funds start
reapplying those funds to dress up their portfolios before year
end? Nobody knows the answers to any of these questions with any
certainty. This dooms us to project, prognosticate, forecast,
surmise, speculate and just plain guess about each day as it
unfolds. Without clear direction the best course of action is
wait. We can't control the outcome of the markets any more than
we can control the weather otherwise we would have had a +500
point rally today and upstate New York would be basking in sunshine
instead of several feet of snow. If your bias for the weather
included sunbathing in New York today and you woke up to two
feet of snow I doubt you would don your bathing suit and head
for the back yard. Traders however take every word a market
forecaster says as gospel and plunge in at the open even when
there is a hundred point gap down. There is a disconnect when it
comes to trading and the stock market. Traders want to believe
without having to understand why.

Two people can look at the futures, down -8 now, and see totally
different prospects for the open. The bullish, glass half full,
trader is thinking buy the dip at the open, we are going to rally
out of this oversold condition. The bearish, glass half empty,
trader is thinking sell the dip we are going to 2000 on a hard
landing recession. Each will scan their favorite play candidates
into the wee hours of the morning and be ready to place their bets
come dawn. One will be wrong and one will be right. Both will risk
money based on their bias and then win/lose based on a thousand
things they cannot control. Others will simply sit out and wait
until a direction they like appears and then strike quietly from
their PC battle station like a sniper waiting for a target. The
point I am trying to make tonight is nobody has a lock on the
exact scenario that will come to pass.

I could build an equally convincing case for either direction. To
please those who say I am too bullish I could paint a bearish
picture of warnings and economy. The bulls would send me email.
I could paint a bullish picture based on my conclusions and the
bears would send me email like they have this week. What I feel
and the conclusions I draw are based on my market view. It is
intended to give you as much information as possible to form your
own conclusions. You are ultimately responsible for what you do
or not do. I get email that Austin and I should get on the same
page. He is bearish and you are bullish. Would it make any
difference if we were both saying the same thing? Not one bit.
The market will still move in the direction it wants. As writers
we examine hundreds of pieces of information daily and look at
hundreds of charts. We sometimes arrive at different conclusions
based on different viewpoints but then you get the benefit of
looking inside both our minds to decide which viewpoint you like.
If we can convince you to make a rational decision based on the
facts we present then we have done our job. If we were always right
the newsletter would cost $10,000 a month and be well worth it.
Until such time as we become infallible you are still responsible
for making your own decisions.

Austin painted the purely technical bearish picture in tonight's
market sentiment very well. Reading his charts and graphs
would have Abbey Joseph Cohen buying puts tomorrow. Me, I am a
sentiment player. Granted the sentiment the last several days
has put me on a serious diet but every negative event only makes
me think we are closer to a rate cut next Tuesday than previously
expected. Bottoms tend to form when everybody thinks there is no
bottom and if you listen to the analysts all predicting lower
markets tonight then today would qualify. That and $3 will buy
you a cup of coffee but not guarantee any market result. My
plan of action is still to buy any BOUNCE aggressively but that
would of course still require a bounce. Those have been very
scarce this week! Breaking 2700 at the open looks like a given
so stocks may get cheaper again. So many bargains, this is the
kind of Christmas shopping I like! Why can't Rolexes and Jaguars
go on sale like this once a year?

Good luck and don't buy too soon.

Jim Brown
Editor


********************
2001 Renewal Offer!!!
Our best offer ever!!
********************

Long time readers know that each December we offer our
subscribers an extra value package as a thank you for their
support. The package this year contains:

1.) Two of our 2001 Option Expiration Calendar Mousepads
     (one for home and one for your office)

2.) The expanded 2001 Stock Traders Almanac

3.) A one month subscription to www.IndexSkybox.com

4.) A three month subscription to www.SplitTrader.com

5.) And of course the annual subscription to OptionInvestor.com

This package has a retail value of almost $519 which includes
$169 of free merchandise in addition to the annual subscription
to the Option Investor Newsletter. The total price for this
offer is still only $349 which is the regular annual subscription
price for the newsletter. The additional $169 of merchandise and
subscriptions are free as an added value!

Click here for more info:

http://secure.sungrp.com/01renewal.asp

The terms of the offer are simple. Just renew your OptionInvestor
subscription for the annual rate of $349 ($29.08/mo) by Dec-31st
and you will get all the free stuff.

The supply of mousepads and almanacs is limited so renew now
to avoid any delay.

You know the newsletter is the best source for option plays,
timely market commentary and educational articles. Don't
wait until the supplies are gone! Renew now!

http://secure.sungrp.com/01renewal.asp


************************************
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
****************

Technically Speaking, It's Time For Downside Strategies
By Austin Passamonte

Many traders are looking for upside relief from ceaseless selling
pressure since September 4th or longer than anyone can remember,
whichever seems applicable. We'd better consult some mid-range
charts of the major indexes and see what the balance of December
may have in store.




The Pro's index cannot break above its long-term descending
resistance and looks destined for another bounce from the lower
Bollinger band near 1308 at least. Daily chart signals are at
their weakest point since mid-November near the 1400 level.




NASDAQ 100 is not poised to rally anytime soon. Clear bearish
divergence suggests we consider dialing up some distant-month,
OTM QQQ puts, set our stops and see what happens from there.




The Dow's been forming wedge after wedge for months now. Here we
go again. This is a neutral wedge with equal odds of breaking
either way on its face. Add in bearish stochastic/MACD values and
odds are tipped to the downside.

You are certainly free to draw your own conclusions from here.
Market Sentiment is not a crystal ball. Nor are we non-trading
television celebrities or analysts with an agenda. No bias on our
part; we are full-time traders down in the trenches (keyboards)
every session. It's our livelihood to trade the right direction
more often than not and we are thrilled to share with you what
little we know.

Technical studies and charting tools are not infallible, but they
do predict near-term market action far better than half the time.
Beyond that it is up to us for proper trade entry and account
management to remain profitable over time. We don't know any way
to survive and thrive in the markets beyond this simple approach.

Are you aware that many of the major market news online websites
and magazines prohibit their writers from owning stocks or trading
in the markets? While we certainly understand conflict of interest
issues, how valuable could broad-market forecast info be from
these sources?

We prefer our swing-coach in golf to at least play the game along
with us... hopefully sporting a two-digit score! How can we trust
his/her guidance in such a critical aspect as our golf handicap
otherwise?

It is our opinion that major weakness will prevail for some time
outside the chance of a surprise rate-cut at the FOMC meeting next
Tuesday 12/19. Anything short of this won't offset continued
warnings, downgrades and corporate under-performance. MSFT past
the bell may have been expected but is yet another example of
what's in store. How would CSCO disappointing the markets affect
future direction? Anything is possible.

Again, we continue to see weakness as the prevailing trend. Perhaps
that is stating the obvious but Market Sentiment keeps the fur coat
on for awhile. We'll consider switching from cave to pasture on a
surprise rate reduction next Tuesday but nothing short of that will
drag us into bullish terrain anytime soon.

Trade the right direction and prosper!

*****

VIX
Thursday 12/14 close: 28.27


30-yr Bonds
Thursday 12/14 close: 5.42%

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
                                 (12/14/2000)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
750 - 735               18,988        3,587         5.30
730 - 715               18,363       20,460          .90

OEX close: 710.67

Support:
705 - 690                5,640       11,553         2.05
685 - 670                   61       12,828       210.30***

Maximum calls: 730/10,144
Maximum puts : 725/9,867

Moving Averages
 10 DMA  717
 20 DMA  714
 50 DMA  726
200 DMA  773


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 75 - 73                63,297        41,161         1.54
 72 - 70                81,943        73,400         1.12
 69 - 67                41,978        33,250         1.26

QQQ(NDX)close: 65.37

Support:

 64 - 62                14,262        21,930          1.54
 61 - 59                 9,495        29,322          3.09
 58 - 56                 5,630         4,206           .75

Maximum calls: 70/47,317
Maximum puts : 71/33,237

Moving Averages
 10 DMA 68
 20 DMA 68
 50 DMA 75
200 DMA 90


S&P 500 (SPX)
Resistance:
1400                   51,440        50,813          1.01
1375                   21,312        22,702           .94
1350                   44,408        52,566           .84

SPX close: 1340.93

Support:
1325                    6,402        16,856          2.63
1300                    7,040        18,220          2.59
1275                    1,769        15,428           .11

Maximum calls: 1400/51,440
Maximum puts : 1350/52,566

Moving Averages
 10 DMA 1353
 20 DMA 1348
 50 DMA 1373
200 DMA 1437

*****

CBOT Commitment Of Traders Report: Friday 12/08
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         -283       +103            -770       -3136
Total Open
Interest %      (-3.13%)    (+1.14%)       (-2.64%)    (-11.59%)
                net-short   net-long       net-short   net-short

NASDAQ 100
Open Interest
Net Value        -3324       -1888           +2120       +673
Total Open
Interest %      (-13.52%)   (-8.21%)       (+3.23%)    (+1.17%)
                net-short   net-short      net-long    net-long

S&P 500
Open Interest
Net Value       +76502       +70473         -86468      -81,194
Total Open
Interest %      (+42.45%)   (+31.99)       (-12.36)    (-12.00%)
                net-long    net-long       net-short   net-short

What COT Data Tells Us: The disparity remains between the
Commercial positions and Small Specs on the S&P 500.  The
Commercials are showing a gradual increase in their net-long
positions on the NASDAQ 100 while the Small Specs have advanced
their net-short positions.

Data compiled as of Tuesday 12/05 by the CFTC.


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

Please visit this link for Market Posture:

http://members.OptionInvestor.com/marketposture/121400_1.asp


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

Planning For Success In 2001
By Molly Evans

As the end of the year draws near, we're all a-bustle with the
events and joys of the holiday season.  While Christmas and New
Years Day are generally happily anticipated, most people become
content to bid farewell to the disruption of normal, everyday
living by the time January 1st rolls around.  When I think of
Christmas and the New Year, I can't help but wrinkle my nose not
only at the thought of putting all the decorations away but at
the thought of tax season just around the corner.  All those
trades!  UGH!  Yes, it's time to ponder New Year's resolutions.
I will keep better track of these trades - even the five minute
ones, in the coming year.  This tabulating it at the end is for
the birds.  I'll still be writing them down come April 14th, I
just know it.  My accountant seems to think that this is all
very important.  I agree, but, man!  What a pain and a boring
topic!  I can't stand to even think about much less commit to
writing about it so I'm going to talk about my other big plan for
the new and upcoming trading year.

For year 2001, I am resolving to formulate, write and commit to a
business plan for trading.  Trading is a serious business and
a business plan is absolutely vital to one's success as a trader.
The plan must fit your personality and style of investing.  If
you are one that is committed to making trading a source of
income and building wealth, then you have to devise a viable and
realistic blueprint to light the path before you.  If you do not
approach your investing or trading methods as a serious profession
and rather liken it to a hobby or "dabbling" in the market, I
assure you, those who do take it seriously will gladly separate
you from your money.

Why You Should Make a Plan

I'm going to be perfectly honest with you.  I have many weaknesses
in my own trading life.  I have alluded to and written about the
many inner battles I face every single trading day.  Probably
my biggest vice is impulsiveness.  I jump on moving trains quickly
and often find myself short or going long at precisely the wrong
moment as I didn't bother to look at indicators or support/resistance
levels.  I just see a long candle getting longer and jump on.
Sometimes this serves me very well and other times, I get creamed.
It's a big enough problem that I need to address it.

Another problem is that I'm simply a contrarian.  I have always
been this way in life and now I regularly try to fall on my own
sword in trading.  When the market is screaming up, I'm looking at
put symbols.  When it's falling into the basement, I'm trying to
pick a bottom and go long.  I know this is the way the books
generally advise investors to be.  But let me tell you, when
you're playing options and you're doing short-term trades, this
attitude is a death wish.  While I may be right eventually, the
market doesn't give a darn that I have said, "That's enough now."
Consequently, options melt like ice in my hot little hands waiting
for the market to figure out what I already "knew" to be right.

Additionally, I'm a big risk taker; not your average conservative
female investor.  I want the most bang for the buck and hence my
attraction to trading with options.  Unfortunately, I don't have a
money tree growing in my back yard and when I'm wrong, err - rather
when the market hasn't gotten in step with my assessment yet, I pay
dearly for the privilege of having dipped not just my toe, but my
entire leg into the icy pool.  I've GOT to stop that.

Everyone has his or her own obstacles.  Some are too fearful to
pull the trigger when they see something setting up.  Others let
losing positions escalate even further against them.  We all do
these things at sometime or another.  It's a tough business wrought
with difficult decisions and emotional susceptibilities.  Trading
attracts thrill-seekers for the drama, overachievers for the
challenges, and dreamers for the promises of something better
through wealth attainment.  Yet, whatever the psychological profile
and reasons to enter trading may be, all traders share one common
denominator, that of being only human.  No one was born with a
trading cap on his head.  The difference between those who make it
and those who don't comes down to just a few mannerisms.  One of
these, I would obviously contend, is the trading business plan.

Elements of the Trading Plan

A business plan needs to be comprehensive.  It should be very
personalized and encompass all pertinent aspects as related to
your trading.  You would want to address your own style of
investment, available assets, goals, resources and educational
pursuits among other details.  Think of your own questions you
develop while reading the newsletter.  "What type of trading
pattern should I follow?  What time frames catch the maximum
amount of a move?  Who is the best online broker for options?
Which markets should I trade?"  You should answer yourself in
your own plan.

Let me try to make this a little easier by listing ideas for
broader headings that you will then be able to fill in the
details.  In fact, Jim has graciously agreed to allow me to post
a model plan on the website in the coming weeks.  Now give me a
little time, I'm baking Christmas cookies and candy around here.
NOT!  But I promise that I'll get it out pretty soon.

Ok - here's the broad topics for you to be thinking about in the
meantime:

1)  What markets are you going to trade?
2)  What size trades will you be making?
3)  How will you enter into your trades?  Scale in?
4)  What's your profit objective?  Are you in a trade for a large
    scale movement or are you a scalper?  Do you scale out?
5)  What's your time frame for deciding whether to stick with the
    trade or not?  What situation will cause you to bail out?
6)  How will you evaluate yourself and the trades?
7)  What are your personal strengths?  What are your weaknesses?
    How can you maximize your potential and minimize your the
    risks that are inherent to yourself?
8)  What are the problems in your personal life?  What will you
    do about your trading when you can't be there to manage the
    accounts?
9)  At what point do you get a reward for good performance?  What
    is that reward?
10) How will you track your trades for tax purposes?
11) What's the punishment for failure?  When do you quit to
    take a break and clear your mind?  What are the draw down,
    shutdown and reevaluate rules?
12) What will you do to further your education in trading during
    the next year?
13) How do you gain your market insight?  What are the requirements
    for you to feel prepared for trading?
14) How is your physical environment for trading?  What charting
    and quote system are you using and is it the best you can
    afford?  Is it reliable for your markets and the indicators
    that you count on?
15) How will you leverage yourself?  What are your own rules for
    working with options?  Are you a call buyer, put seller, put
    buyer, spreads trader or a covered call writer?
16) What are your trade entries based upon?  Moving averages?
    Volume and candlesticks?  Stochastics on thirty minute charts?
    Daily or weekly charts?

So this is a start.  It doesn't matter how you put together your
plan, just so you do!  The hard part is to then live by it.  It
will help you to identify your weaknesses and where you are
susceptible to emotional mistakes.  You want the plan to guide you
into being organized, ritualistic, and structured.

Where I divulged my own vulnerabilities earlier, I can now say that
these are weaknesses only to the point that I let them be.  All the
aforementioned can be quite lucrative assets when channeled and
controlled.  They are marks of me.  I can't suppress them so I must
utilize them to my utmost advantage and minimize the harmful
potential inherent with each peculiarity.  It's only through
identification of one's own attributes and a plan of attack can a
trader have reasonable hope to survive the wars of the market.

My best wishes to you.  MKE


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index instead?

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market updates, plays, education and daily commentaries by
those who know.

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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:
*****

BRCM $117.25 -21.00 (-10.94) Up until yesterday, BRCM was still
holding strong.  Despite the downdraft in the NASDAQ, the stock's
uptrend was still firmly intact.  The 5 and 10-dmas have provided
support on BRCM's recovery but today, the weak hands won out as
the stock fell over 15 percent on 125% of ADV.  The break through
the 5 and 10-dmas (now at $133.51 and $122.85, respectively) as
well as firm support at $130, just above our stop price of $129,
resulted in a close below the stock's recent uptrend line.  Having
made substantial profits on this play, we wish to protect these
gains and with that, we are taking our money off the table for
future opportunities.

RSAS $47.81 -4.19 (-2.06) When we mentioned entry points for this
play, we strongly advised that entries should be confirmed with
direction in peers CHKP and VRSN as well as with the performance
of the NASDAQ.  Considering the weakness in those RSAS' sector,
there hasn't been much confirmation of strength to warrant an
entry recently.  The pullback yesterday, down $1.13 or 2.12
percent on lower than average volume, was not out of the ordinary
considering shaky day for the Techs in general but today, the
stock fell another 8 percent and while the volume was once again
light, the close below the 5, 10 and 50-dma (at $51.18, $49.55
and $50) is not a good sign.  That combined with the close below
our stop price of $48 made it an easy decision to drop this play.

CMVT $101.31 -10.81 (-0.19) Wednesday's close, down only $1.63 or
1.43 percent, was not a problem, considering the down day for the
NASDAQ, if not for the heavy volume, almost 165% of ADV.  The
stock was still holding its uptrend, with support from the 5 and
10-dmas.  But today, news of tensions in the Middle East combined
with additional earnings warnings on the Street suggesting even
more economic slowdown resulted in a drop of almost 10 percent on
120% of ADV.  With that, CMVT closed below its 5-dma support at
$109 as well as the converged 10 and 50-dma at $102.80 and our
stop price of $106.  The possibility of further downside and the
technical breakdown makes this a play we will longer follow.

JNPR $136.25 -18.75 (-29.88) Continued earnings warnings
have the bulls running for cover, as the NASDAQ is headed back
towards its recent lows.  JNPR has been caught in the stampede,
plunging through our $150 stop, the 200-dma, and $142 support
in today's session alone.  We harvested some nice gains during
last week's run above $160, and today's weakness should have
stopped out any open plays.  The strong technical violation
kicks JNPR off the playlist tonight, so we will patiently wait
for another opportunity to play this Networking leader in the
weeks ahead.

TERN $13.88 -1.63 (-2.38) While TERN showed promise at the
beginning of this week, its rollover at resistance at the $18
level and subsequent slide is disconcerting.  The continued
weakness in the NASDAQ and networking sector has brought an end
to our play as TERN closed below our recently raised protective
stop at $15.  If the stop didn't get you out, use any bounces
off support to exit existing positions.


PUTS:
*****

No dropped puts today


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The Option Investor Newsletter                 Thursday 12-14-2000
Copyright 2000, All rights reserved.                        2 of 2
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********************
PLAY UPDATES - CALLS
********************

A $59.25 +1.06 (-0.14) Close, but no cigar!  That's how it's
been this week in regard to Agilent's flirting with the $60
resistance.  The underlying strength exhibited during the
stock's recent climb is currently sustaining the higher trading
prices above the $57 near-term support, but again, a move
through the immediate resistance ($60) would herald better
confirmation.  With that in mind, the more judicious traders may
want to wait for a definitive breakout, backed by increased
trading volume, before initiating new plays.  However, if A can
crack the barrier and pulls back, an aggressive entry might be
found on a strong rebound off the 10-dma ($55.69) or a smidgen
higher off the rising 5-dma ($58.38).  Our current stop is set
at $53 to allow for some profit taking, although an entry at
this lower level is not recommended.

SGP $57.88 +0.00 (+2.63) In today's unstable marketplace, SGP
was a beacon of hope in the bull's arena.  A volume surge during
the last minutes of trading today lifted SGP upward to its third
52-week record, this week.  The price to beat now stands a
fraction higher at 58.56!  The stock also established the $57
mark as a shorter-term support level, which kept it a safe
distance above our $55 protective stop.  Our profit outlook is
based on continued sector strength and the likelihood of SGP's
current momentum to launch it through the immediate resistance
at $58-$59 in an advancing marketplace.  Consider taking more
enterprising entries on rebounds from the $55 and $57 levels or
else, take a backseat until there's bullish action above the $60
level.  Keep an eye on SGP's rival, Merck (MRK) to forecast any
ripples in trading.

MEDX $47.25 +0.00 (-1.00) Technically speaking, MEDX is
sandwiched between two intersected DMA lines; although the stock
is at the higher end of the spectrum.  Below the current price
level is the 10-dma ($43.98) and 200-dma ($43.84), which props
up our $45 protective stop.  And just overhead, is the 50-dma
($48.25).  Take a look at a daily chart for visual confirmation.
If you're looking for a more cautious approach into this play,
then consider taking entry as MEDX powers through the $50 level
and the comparative 50-dma ($51.95).  The next objective would
be for MEDX to surpass Monday's intraday high of $54 and then
challenge $60.  Basically, if you put all the technical details
to the wayside, what's essentially needed is an advancing market
place and a rush of volume to drive this biotech higher.  Others
in the sector such as Human Genome (HGSI) and Immunex (IMNX) are
also in an apparent holding pattern, but Biogen (BGEN) is
slipping fast.  Let's not only watch for stock-specific
developments to signal a breakout, but also be aware of sector
sentiment and direction before taking additional positions.


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

BBOX $52.25 +4.25 (-0.44) With Election uncertainly now largely
resolved, the markets have once again been left to focus on the
economy.  Earnings warnings have now taken center stage as the
continuing economic slowdown has resulted in lower than expected
revenue growth for companies across diverse sectors.  This has
translated into a weak NASDAQ, giving our put play a needed
jumpstart, or at least some much needed volatility.  Closing
below the key support level of $50 on Wednesday, the stock ended
the day down $3.81 or 7.36 percent on almost twice the ADV.
Today, BBOX bounced from oversold conditions but it continues to
encounter formidable resistance at our stop price of $53.  Look
for another failed rally above this point as an aggressive entry
point.  For the more conservative wait for BBOX to break below
$50 on volume before making a play, and confirm direction with
sentiment in the NASDAQ.

SBC $54.63 +1.19 (+2.94) Our patience is running thin on SBC.
The stock has been moving up slowly while the tech plays on
the Nasdaq have stumbled.  The only news to report lately has
been related to the FCC wireless auction that we mentioned in
depth during the last update.  SBC has not been a high bidder in
this auction, but the event has added life to this distressed
sector.  From here we will keep SBC on a very short leash.  If
the stock fails at resistance at $55 then we are still in
business.  This is the level in which sellers re-emerged last
week to pressure the stock.  Any close over that mark though and
we are closing up shop on this play.  A move under $54 on
increasing volume may prove to be a good entry point for new put
plays.

EMC $74.63 -3.25 (-12.31) A picture-perfect rollover got our
EMC play started early this week, and it is really starting to
shine.  After a last desperate attempt to break through the
$90 resistance level on Monday (providing a great aggressive
entry point), the bulls gave up and let the bears have their
way.  Resolution to the election has not provided any relief,
as investors are now free to focus on the never-ending string
of fourth quarter earnings warnings.  Violating the 200-dma
($79.44) yesterday on strong volume set the stage for today's
extension of the decline.  Resistance came in at $79 before the
selling resumed again, pushing our play to close below $75, and
the bears are now taking aim on support near $70.  Volume has
been rising all week and it topped the ADV by 50% in today's
session as all the major indices continued south.  To preserve
our profits we are lowering our stop to $80, and any rally near
the 200-dma looks like a good point for initiating new
positions.  Wait for buying volume to dissipate before taking a
position, and then jump aboard for the ride to new lows.
Continued weakness from current levels will also provide a
friendly environment for new plays as long as the sellers remain
in control on the NASDAQ.

IBM $92.44 +1.19 (-4.56) IBM may be "raising the bar" when it
comes to open storage systems, but it couldn't avoid the shock
waves and tremors that shook the PC and hardware sectors today.
IBM unveiled enhancements for its Enterprise Storage Server,
code-named Shark, which gives customers a leading-edge network
solution.  But despite positive company-specific news and IBM's
strong leadership position, the overall sentiment continues to
keep a dark cloud over the group.  Today's news that SUNW
delayed shipping its new product line doesn't illustrate a
healthy environment either.  Some analysts are of the opinion
that it's only a matter of time before other big caps including
IBM, DELL, SUNW, VRTS, and maybe even CSCO, confess their own
discouraging outlooks.  More earnings' warnings by the big caps
would not put profits into our individual hands (no pun
intended), but the ripple effect would be disastrous for the
marketplace.  Let's now re-focus on IBM's current conditions.
IBM's price is at precarious levels.  Recent action portends
that $91 and 92 may be forming a bottom.  The more conservative
approach then is to keep in cash until the share price breakdown
below these levels, with conviction.  A rollover near our exit
point of $95 does offer a premium entry for the aggressive
traders, but just make sure there's a strong sell-off in the
making before taking positions.


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index instead?

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those who know.

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IndexSkybox.com:
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**************
NEW CALL PLAYS
**************

AGGRESSIVE:

LH - Laboratory Corp. of America $157.00 +2.38 (+9.25 this week)

Laboratory Corporation of America Holdings (LabCorp) is the #2
clinical laboratory service in the world, behind Quest
Diagnostics.  LH performs 2000 types of tests for more than
100,000 clients, including health care providers, pharmaceutical
firms, physicians, government agencies and employers.  With 25
major laboratories and some 1200 service sites nationwide, the
company emphasizes specialty and niche testing such as allergy
tests, HIV tests, blood analyses, and substance abuse
screenings.

While the Technology sector continues to suffer from valuation
and slowing growth concerns, Medical stocks have had a stellar
year.  As more treatment options become available for our aging
population, the companies that provide health services are
continuing to find favor with investors.  As the #2 clinical
laboratory service in the world, LH has ridden this wave for a
nearly 300% gain since the April lows.  The new growth industry
seems to be anything tied to the Health Care industry, and LH
is winning big time, providing the tests necessary for
everything from blood tests to HIV testing.  The consistent
uptrend since mid-April is truly impressive, with the stock
trading in a picture-perfect ascending channel.  After bouncing
from the bottom of the channel near $133 in late November, LH
got moving again, gaining nearly $25 in the past 3 weeks.  The
30-dma ($142.75) has been providing solid support with the most
recent bounce occurring last Friday near $140.  Despite weakness
across the broader markets today, LH surged to a new intraday
high of $159.50 and posted a new closing high of $157.  We want
to ride this trend as long as it remains in place, so we are
placing our stop at $149, just below support at $150-151.
Consider new entries on a bounce from this support level, but
make sure buying volume remains strong.  More conservative
players will wait for the bulls to push LH through the $160
resistance level before opening new positions.  Watch LH's
primary competitors, Quest Diagnostics (DGX) and Pharmaceutical
Product Development (PPDI), for confirmation of strength in the
Medical Testing sector.

BUY CALL JAN-155 LH-AK OI=380 at $14.63 SL=10.75
BUY CALL JAN-160*LH-AL OI= 32 at $12.25 SL= 9.25
BUY CALL FEB-150 LH-BK OI= 50 at $21.13 SL=15.75
BUY CALL FEB-160 LH-BL OI=  1 at $18.38 SL=13.25

SELL PUT JAN-140 LH -MH OI= 50 at $ 5.63 SL= 7.75
(See risks of selling puts in play legend)

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


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

AGGRESSIVE:

CELG - Celgene Corp. $44.50 -8.50 (-19.56 this 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.

Considering that the NASDAQ is down over 30 percent for the year,
CELG's year-to-date gain of almost 100 percent is good news
indeed.  The bad news however, is that today's 16 percent drop on
over 4 times the ADV could be the beginning of a severe
technical breakdown, which could usher in further selling.
Drawing an uptrend line by connecting the lows since December
1999 puts the bottom of the channel between $51-52.  Falling
below that level today as well as the last line of moving average
support from the 200-dma (now at $52.93) is not a good omen of
things to come.  While still a relatively new line for CELG, the
200-dma has been a key support level for the stock, as bounces
off that level have been nothing short of dramatic.  Having now
fallen below this point, the old adage of support becoming
resistance will be most likely be in play.  In the past couple of
weeks, positive comments from the company as well as by
scientists at the American Society of Hematology meeting had
traders optimistic, but that optimism has now waned.  A possible
reason to explain today's drop is fear that an experimental
cancer drug, Campath, developed by ILXO and MLNM, could outshine
CELG's star drug Thalomid.  Now in deeply oversold territory, a
bounce from these levels is quite possible, allowing aggressive
traders to target-shoot an entry.  Look for a failed rally above
resistance at $45, $47 and our stop price of $49 to provide an
opportunity for entry.  If weakness continues tomorrow, look for
a break below today's lows, backed by strong selling volume.
When making a play, confirm momentum with sentiment in the
Biotech sector, using the Biotechnology Index (BTK) and Merrill
Lynch's Biotech HOLDR (BBH).

BUY PUT JAN-50 LL-MJ OI=183 at $9.00 SL=6.25
BUY PUT JAN-45*LL-MI OI=315 at $5.88 SL=4.00

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


ARBA - Ariba, Inc. $77.88 -14.13 (-22.63 this week)

As a leading provider of B2B solutions and services to leading
companies around the world, including more than 20 of the FORTUNE
100, Ariba helps companies cut through the complexity of
opportunities presented by the new economy.  Ariba provides the
most comprehensive and open commerce platform to build B2B
marketplaces, manage corporate purchasing, and electronically
enable suppliers and commerce service providers on the Internet.
Made up of a complete set of integrated commerce solutions and
open network-based commerce services, the Ariba B2B Commerce
Platform offers a single system for managing buying, selling,
and marketplace eCommerce processes.

With uncertainty in the outcome of the presidential election no
longer an issue, it's back to business as usual for the market.
But with wave after wave of earnings warnings, it appears that
business is not so good.  Capital spending continues to slow,
much to the detriment of B2B companies across the board.  Less
spending by businesses not only mean less purchases of B2B
software but also reductions in B2B transactions.  ARBA isn't
getting much support from analysts this week either.  On Tuesday,
Lehman Brothers initiated coverage on ARBA with a Neutral rating.
For such a high-flyer, anything less than a Buy or Strong Buy
rating could be perceived by investors as a slap in the face and
with that, traders have been running for the exits.  Two factors
that could impact trading tomorrow in ARBA are ORCL's earnings
report and MSFT's warning.  ORCL beat the Street by a penny,
posting revenue growth of 66% instead of the expected 50%.  While
this could be seen as good news, it could also suggest that ORCL
is beating its rivals, one of which is ARBA.  How this news is
taken tomorrow will be key in planning an entry point. Resistance
at the 5 and 10-dma (currently at $76.71 and $71.66 respectively)
should prove to be formidable.  As well, the $70 level as well as
our stop price at $73 could provide for additional resistance,
allowing aggressive traders to take a position.  A more
conservative play would be to wait for ARBA to break below $65,
backed by continued selling volume.  In both cases, confirm
ARBA's movement with that of peers such as BVSN, CMRC, ITWO or
better yet, with Merrill Lynch's B2B HOLDR (BHH), before
initiating a play.

BUY PUT JAN-80 IUR-MP OI=1086 at $19.50 SL=14.50
BUY PUT JAN-75*IUR-MO OI=1084 at $16.13 SL=11.50
BUY PUT JAN-70 IUR-MN OI= 715 at $13.13 SL= 9.75

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


*********************
PLAY OF THE DAY - PUT
*********************

EMC - EMC Corporation $74.63 -3.25 (-12.31 this week)

EMC wants to be your storage solution.  The company designs,
manufactures and markets a wide range of enterprise storage
systems, software, networks, and services.  The company’s
products store, retrieve, manage, protect and share information
from all major computing environments including mainframe, UNIX,
and Windows NT.  With offices around the world and a 35% growth
rate for the first 9 months of the year, EMC is effectively
filling its role as the worldwide storage leader.

Most Recent Write-Up

A picture-perfect rollover got our EMC play started early this
week, and it is really starting to shine.  After a last desperate
attempt to break through the $90 resistance level on Monday
(providing a great aggressive entry point), the bulls gave up and
let the bears have their way.  Resolution to the election has not
provided any relief, as investors are now free to focus on the
never-ending string of fourth quarter earnings warnings.  Violating
the 200-dma ($79.44) yesterday on strong volume set the stage for
today's extension of the decline.  Resistance came in at $79 before
the selling resumed again, pushing our play to close below $75,
and the bears are now taking aim on support near $70.  Volume has
been rising all week and it topped the ADV by 50% in today's
session as all the major indices continued south.  To preserve
our profits we are lowering our stop to $80, and any rally near
the 200-dma looks like a good point for initiating new
positions.  Wait for buying volume to dissipate before taking a
position, and then jump aboard for the ride to new lows.
Continued weakness from current levels will also provide a
friendly environment for new plays as long as the sellers remain
in control on the NASDAQ.

Comments

EMC found itself drifting downward throughout the day.  The
stock closed on the low of day and is down in after-hours on the
news of MSFT's downward revision of earnings.  On a intraday chart,
you can see EMC trending lower in a rolling fashion today.  Look
for entry into this put play on a break below $70 or on rollovers
from resistance at $75 or $76.

BUY PUT JAN-80 EMB-MO OI=7767 at $10.38 SL=3.00
BUY PUT JAN-75*EMC-MQ OI=5611 at $ 7.75 SL=5.00
BUY PUT JAN-70 EMC-MP OI=8977 at $ 5.75 SL=3.00

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


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

Another Dismal Day...

Technology stocks slumped for a third consecutive session amid
renewed concerns over the future slowdown in corporate earnings.


Wednesday, December 13, 2000

Technology stocks retreated today amid a slew of revenue warnings
and negative analyst comments about the semiconductor equipment
sector.  The Nasdaq closed down 109 points at 2,822.  The slump
in leading technology companies also weighed on the Dow, limiting
its gains to 26 points and a close at 10,794.  The S&P 500 Index
fell 11 points to 1,359.  Activity on the Nasdaq was moderate at
2.03 billion shares exchanged, with declines beating advances by
2,329 to 1,596.  Trading volume on the NYSE reached 1.18 billion
shares, with declines beating advances by 1,491 to 1,403.  In the
U.S. bond market, the 30-year Treasury was up 1 2/32, pushing its
yield down to 5.46%.


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

Aksys    AKSY   JAN17C/JAN15P   $16.38   debit   collar
Waters   WAT    JAN60C/JAN70C   $9.00    debit   bull-call
AT&T     T      J0225C/JAN25C   $3.00    debit   calendar

All of our new combination positions were available at or near
the target entry prices.


Portfolio Plays:

Wednesday's activity was somewhat strange, as technology stocks
rallied at the open but quickly faded with hardware companies
retreating on concerns about the outlook for corporate earnings.
Compaq Computer (CPQ) was partly to blame, announcing that its
fourth-quarter profits would be well below consensus estimates.
At the same time, semiconductor stocks moved lower amid a string
of negative earnings pre-announcements and a downgrade on the
chip equipment sector from Salomon Smith Barney.  The software
group suffered as well, with Microsoft (MSFT) shares leading the
decline after Prudential Securities cut its rating on the stock,
saying the demand environment for PCs may be changing rapidly.
With all of the bearish activity, the Spreads/Combos portfolio
had little chance of finishing in positive territory.  However,
a number of positions finished "in the black" as traders bid up
stocks that are expected to benefit from a Bush administration.
Cardinal Health (CAH) and Johnson & Johnson (JNJ) moved higher
after news of a Supreme Court decision that virtually ended the
presidential hopes of the Democratic candidate Al Gore.  In the
Food and Beverage group, Quaker Oats (OAT) drifted upwards and
merger speculation in lower-priced food industry shares helped
Kellogg (K) and Ralston Purina (RAL) recover from recent slumps.
Beyond those issues, there was not much bullish activity in our
section as worries about slowing economic growth and dwindling
corporate profits resurfaced among investors.  The adage, "buy
the rumor - sell the news" was prevalent in all major sectors
and in most cases, the George W. Bush Presidential victory and
a potential interest rate cut have already been priced into the
market.  Until the earnings outlook improves, we will continue
to experience failed rallies and a range-bound market, not the
most favorable outlook for those of us who thought the bottom
had finally arrived.


Thursday, December 14

Technology stocks slumped for a third consecutive session amid
renewed concerns over the future slowdown in corporate earnings.
The Nasdaq closed down 94 points at 2,728.  The Dow also posted
significant losses after profit warnings from J.P. Morgan (JPM)
and Chase Manhattan (CMB).  The blue-chip average dropped 119
points to 10,674.  The S&P 500 Index fell 19 points to 1,340.
Activity on the Nasdaq was light at 1.76 billion shares traded,
with declines beating advances 2,645 to 1,215.  Exchange volume
on the NYSE was 1.05 billion shares, with declines outpacing
advances 1,706 to 1,185.  In the bond market, the U.S. 30-year
Treasury was up 17/32, pushing its yield down to 5.43%.


Portfolio Plays:

The stock market retreated again today, with financial stocks
leading the way lower after a revenue warning from new partners
Chase Manhattan (CMB) and J.P. Morgan (JPM).  Technology stocks
also slumped amid a new offering of negative pre-announcements.
With the election uncertainty now removed, investors are again
being subjected to the reality of a slowing economy and growth
rates below the long-term average.  The Spreads portfolio fought
another losing battle with the overall market trend but in some
cases, the movement was favorable.  Our bearish adjustment in
Micron (MU) is apparently safe for now and both the Phillips (P)
and Albertsons (ABS) "bear-call" credit spreads are at maximum
profit.  In addition, the conservative Pfizer (PFE) spread has
provided a number of exit (and adjustment) opportunities with
the issue cycling back and forth across the sold strike at $45.
The eventual outcome of the original bearish position, whether
successful or not, will be easily offset by a transition to new
options in January.  Those of you with a bullish outlook and
concerns of a possible assignment could simply buy the stock to
cover any potential obligation.  The worst that could happen is
the issue might return to the bottom of a recent trading range
and you would then sell "at-the-money" covered calls to offset
any losses.  Another position that enjoyed favorable downside
movement today was our speculative debit straddle in Jefferson
Pilot (JP).  The issue traded as low as $67.62 during the day,
providing an overall credit of $1.75-$1.88 for the position.
That's a minimum of $0.75 returned on $1.00 invested for less
than one week; a 300% monthly profit.  Unfortunately, there was
little upside activity in remainder of the section.  A few of
the pharmaceutical stocks and some specific technology issues
enjoyed bullish moves but overall, it was a dismal performance.
However, tomorrow is the December options' expiration and the
bias is expected to be to the upside as traders move to cover
and adjust their current positions.  With any luck, the market
will recover from today's post-election selling pressure and
we can get back to the business of profitable option trading.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -
******************************************************************
PEP - PepsiCo  $49.75   *** Record High! ***

PepsiCo is engaged in the snack food, drink and juice businesses.
PepsiCo's operations are conducted through Frito-Lay, Pepsi-Cola
Company, and Tropicana Products.  The company's Frito-Lay snack
food business units manufacture, market, sell and distribute a
varied line of salty and sweet snack foods throughout the U.S.
and Canada and in 118 countries outside North America through
company-owned facilities and affiliated companies.  Pepsi-Cola's
soft drink business units manufacture and market concentrates to
be used in Pepsi-Cola Beverages.  Their Tropicana business units
manufacture, market, sell and distribute citrus juice products
under trademarks as Tropicana Pure Premium, Tropicana Season's
Best and Dole.

We have been waiting for an opportunity to enter a bullish play
in Pepsi after the recent Quaker Oats (OAT) buy-out.  However,
the issue has failed to cooperate, moving higher almost every
day since we began tracking the upward trend last week.  Now the
stock is trading at a new "all-time" high and we fear there may
not be many more chances to find a conservative position in the
issue.  Fortunately, today's rally did not substantially change
the premium for our target spread at $45 and with any pullback
in tomorrow's session, there should be another opportunity to
enter this play at a favorable credit.  Target a higher premium
initially, to allow for a brief consolidation in the stock price.


PLAY (conservative - bullish/credit spread):

BUY  PUT  JAN-42.50  PEP-MV  OI=3606  A=$0.50
SELL PUT  JAN-45.00  PEP-MI  OI=7323  B=$0.75
INITIAL NET CREDIT TARGET=$0.38-$0.43  ROI(max)=18% B/E=$44.62


******************************************************************
     - 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.

******************************************************************
GLCBY - Globo Cabo S.A.  $10.94  *** On The Rebound! ***

Globo Cabo S.A. is the largest multiple system operator of pay-TV
in Brazil.  With 18 cable TV operations and one MMDS operation
(microwave), the company operates under the brand name NET in
major Brazilian cities.  With close to 1 million subscribers,
Globo Cabo's cable network extends over 25,000 km and passes
approximately 5 million homes.  In addition to traditional pay
television services, Globo Cabo provides Broadband, high-speed
Internet access through its Vmrtua service, which was launched
at the end of 1999.  Virtua also encompasses the VICOM unit,
which provides data communications and multimedia services for
corporate networks.

Latin American stocks moved higher last week after U.S. Federal
Reserve Chairman Alan Greenspan said the economy has become more
sustainable.  Investors, who interpreted the remarks as meaning
that our monetary policy would include interest rate reductions
next year, went on a "blue-chip" buying spree of Brazilian stocks
and GLCBY was one of the more popular issues.  Globo Cabo S.A. is
fundamentally sound and has excellent upside potential with last
quarter's organic growth reaching 19%, almost double the number
that analysts forecast.  Subscriber organic growth is often seen
as the critical measurement of a subscription-based companies'
performance.  Globo Cabo also reported that Virtua broadband has
15,000 subscribers and is adding up to 300 new customers a day.
Forecasts are for 45,000 subscribers by year-end and potentially
250,000 total broadband customers by the close of the year 2003.
Analysts say the company is a great long-term investment and
momentum traders have recently moved back into the issue.  The
recent spike in volume and Wednesday's successful test of the
30-DMA suggests there is potential for further upside movement.


PLAY (conservative- bullish/synthetic position):

BUY  CALL  FEB 12.50  GYU-BV  OI=215  A=$0.62
SELL PUT   FEB-10.00  GYU-NB  OI=20   B=$0.68
INITIAL NET CREDIT TARGET=$0.12-$0.25 TARGET ROI=50%

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $370 per contract.


******************************************************************
                    - STRADDLES & STRANGLES -
******************************************************************
SEPR - Sepracor  $82.56  *** Premium Selling! ***

Sepracor is a specialty pharmaceutical company focused on the
cost-effective development of safer, purer and more effective
drugs that are improved versions of prescribed pharmaceutical
compounds.  The company develops and markets these drugs by
leveraging its expertise in chiral chemistry and pharmacology,
and experience in conducting trials and seeking regulatory
approvals for new drugs.  Sepracor's Improved Chemical Entities
pharmaceutical development program has yielded an extensive
portfolio of drug candidates intended to treat a broad range
of indications in respiratory care, urology, gastroenterology,
psychiatry and neurology.  The company is also broadening its
development focus to include discovery and development of new
chemical entities.  Recently, Sepracor introduced Xopenex, a
single-isomer form of the leading bronchodilator, albuterol.
Xopenex is the first pharmaceutical product developed and
commercialized by Sepracor.

Based on the analysis of historical option pricing and technical
trading patterns, this position meets our basic criteria for a
potential credit-strangle.  The underlying issue has a relatively
well-defined support area near $60 and heavy supply at the sold
option strike of $120.  The volatility in October continues to
have an effect on the near-term option premiums and traders can
use the inflated prices to their advantage with this relatively
conservative, neutral position.  As with any recommendation, the
position should be carefully evaluated for portfolio suitability
and reviewed with regard to your strategic approach and personal
trading style.


PLAY (conservative - neutral/credit strangle):

SELL CALL  JAN-120.00  ERU-AD  OI=1246  B=$1.00
SELL PUT   JAN-57.50   ERQ-MS  OI=241   B=$1.00
INITIAL NET CREDIT TARGET=$2.00-$2.25  ROI(max)=11%
DOWNSIDE B/E=$55.50 UPSIDE B/E=$122.00


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




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