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Daily Newsletter, Sunday, 12/17/2000

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The Option Investor Newsletter                   Sunday 12-17-2000
Copyright 2000, All rights reserved.                        1 of 5
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       WE 12-15          WE 12-8          WE 12-01         WE 11-24
DOW    10434.96 -277.95 10712.91 +339.37 10373.54 - 96.69  -159.64
Nasdaq  2653.27 -264.16  2917.43 +272.14  2645.29 -259.09  -122.81
S&P-100  689.48 - 37.58   727.06 + 31.07   695.99 - 15.17  - 13.93
S&P-500 1312.15 - 57.74  1369.89 + 54.66  1315.23 - 26.54  - 25.95
W5000  12093.90 -572.60 12666.50 +629.10 12037.40 -316.20  -306.30
RUT      458.03 - 21.04   479.07 + 22.23   456.84 - 15.03  - 10.74
TRAN    2698.68 -181.27  2879.95 +116.80  2763.15 - 86.74  + 32.59
VIX       31.20 +  5.07    26.13 -  5.46    31.59 +  2.01  +  1.73
Put/Call    .94              .59              .61              .59

The most important man in the U.S.,  Gore? Bush? ...Greenspan !!
By Jim Brown

Will the real Alan Greenspan please stand up! It appears Alan will
will get to wear the Superman suit, the Santa suit and even the
presidential seal if he wanted. The vote is in and if Alan cuts
rates on Tuesday he could run for president and we would not need
a recount. After the Microsoft meltdown on Friday it appears he is
our only hope for the rest of December. The markets did not rebound
after the Microsoft warning like the Intel bounce from last week.
There was no rebound or even a hint of one as MSFT, a major component
of the Dow, Nasdaq, S&P-100 and 500, was dumped by traders on all
sides. MSFT traded over 163 million shares and dropped over -$6 at
the close. Actually down over -$8 at the low of the day MSFT set
a new 52-week low at $47.75. By itself MSFT would have been bad
enough but persistent downgrades of other tech stocks helped fuel
the markets drop. EMC and SUNW were downgraded before the open and
SUNW hit a new 52-week low of $27.50 as well. Down -$4 or over -10%
at midday SUNW traded over 116 million shares but rallied back at
the close on bargain hunting. EMC dropped almost -$10 by midday on
the downgrade but rallied back to close only -6.50 which was bad

There was just nothing to cheer about until about 3:PM but even the
brief short covering rally was hammered by waves of selling at the
close. Volume was huge with 2.6 billion shares traded on the Nasdaq
and over 1.5 billion on the NYSE. Much of this volume was related
to the reshuffling of the S&P with 12 stocks being replaced. Triple
witching and short covering before the weekend also contributed to
the volume. Advances were severely beaten by decliners on the Nasdaq
all day with a 1:3 ratio which improved only slightly to 1:2 at the
close. The meltdown brought about by the first warning in a decade
by Microsoft rippled through the entire tech sector and there were
very few survivors. Intel and IBM added to the Dow drop with a -2.69
and -4.63 drop respectively. IBM is currently favored as the next
big warning target and investors are gun shy.

As if Microsoft warning for the first time in a decade was not enough
there is a strong rumor that the biggest company on the Dow may have
to take back recent earnings affirmations and warn. GE is said to
be experiencing problems across all its divisions and that conditions
have deteriorated in just the last two weeks. When it rains it pours!
Just last week GE said it was comfortable with estimates as long as
we only had a mild recession. Jack Welch predicted that there was a
20% chance of a recession in 2001. The Industrial Production report
today was yet another wake up call that things are bad on Main Street
as well as Wall Street. Industrial Production dropped -0.2% in Nov
compared to estimates of a gain of +0.1%. This is the third monthly
decline since a gain of +0.7% in August. Capacity Utilization fell
to 81.6% based entirely on weakness in manufacturing. The rate is
now below its 1967-99 average. Both these numbers are not yet alarming
but strong confirmation that the economy is falling faster than most
would like. The CPI report Friday met estimates of +0.2% on the
headline number but the core rate was slightly higher due to higher
tobacco taxes and medical care expenses. A positive new trend in oil
prices will help all of these numbers in future months. Oil dropped
from near $35 to the mid $27 range in the last three weeks and the
pricing pressure is starting to ease.

Cisco took a serious hit Friday dropping to $47.13 at midday on
news that the Executive Vice President of World Operations was
leaving and not to take another job. Rumors are rampant that CSCO
is losing market share and business is suddenly slowing at an alarming
rate. Talk about the kiss of death. The one point everyone keeps
coming back to is the growth of the Internet as the goose that is
laying the golden eggs of future profits. After all the existing
warnings of PC weakness, should CSCO warn of dropping Internet
equipment sales it would be lights out for any remaining tech hopes.
The warning by MSFT of lower corporate spending on a global basis
has set the stage for a new disaster. Oracle CEO Larry Ellison of
course adamantly denies the MSFT story saying it is not an Internet
slowdown but a MSFT slowdown. Hopefully he is right and CSCO will
not warn. The Bear Stearns downgrade of EMC and SUNW was based on
the corporate slow down worries since those vendors do not sell to
retail customers. A second blow to CSCO was a news report near
the close that they had increased loss reserves from $75 million
to $275 million to cover potential losses from customers who
cannot pay their bills. This almost four fold increase indicates
yet another tech risk factor.

The Microsoft meltdown on Friday was more critical in my opinion
due to the seriousness of the drop. The Nasdaq had closed at 3015
on Monday on hopes of a final election winner and a coming rate cut.
Once the warnings flood gates opened on Tuesday the index had already
dropped -300 points by Thursday's close. -300 points is a significant
drop and the Nasdaq was already in oversold territory. The -129 point
drop to the lows on Friday on top of the -300 prior points was a real
blow to the bulls. Confidence was shaken and there was not any midday
bounce. There were no buyers. Traders have no faith in the market
when a -400 point drop draws no buyers. On the Dow side the tech wreck
coupled with the JPM disaster knocked -461 points off the high of
10914 on Wednesday. A -461 point drop in three days. There was no
bounce and the Dow closed only +20 points off the low of the day.
When I say there was no bounce that is not entirely true. As we told
traders all day in the intraday alerts, we expected a short covering
rally after 3:PM as traders booked profits and went into the weekend
flat. Fears by the shorts that some Fed head would say something over
the weekend or before the open on Monday about cutting rates caused
many to cover. Once the shorts covered the market died another quick
death. Longs had the reverse fear that another big name would warn
after the close or before the open on Monday and gap them down
unexpectedly. When longs want out of the market after shorts have
already covered nothing good can happen. Even the massive buying at
the close by the S&P index funds to rebalance their portfolios could
not create a rally. Those twelve stocks all spiked up substantially
at the close but they were among the very few.

The only good side I can paint to this picture is the excessive
negative sentiment in front of the Fed meeting. Over 10% of the
Nasdaq-100 set new 52-week lows! These are the big caps of the
Nasdaq. There were 234 new lows in the Nasdaq Composite. This is
a real portfolio flush. Almost nothing is sacred. The +19% gain
the Nasdaq had from last week was almost completely erased at the
low of the day (2596) when we were only +73 points from the Nov-30th
2523 low. A +500 point gain in two weeks erased in only four days.
The volume was huge at 2.6 billion shares. Traders were questioning
whether we had a capitulation event but the answer kept coming up
no! Yes, stocks were down, lots of them. But, there were no big
losers. There were very few stocks down double digits. It is just
that almost everything was down some.

Dick Arms came out again with a market bottom call based on the
oversold conditions and this was repeated every five minutes on CNBC
to no effect. It probably helped the short covering bounce some but
it quickly died. He said the indicators showed the market to be at
the same levels of oversold as on the Oct-26th and Nov-30th bottoms.
Those bottoms produced +12% and +20% rebounds respectively. The
S&P-500 closed at a 52-week low of 1312 and far from Abbey Cohen's
1575 year end target.

There was widespread reporting of tax selling by funds and
institutions. With only nine trading days left in this year, no
rally in sight and more large cap warnings expected next week, the
race was on to dump losers and flush portfolios before the FOMC
meeting next week. If there is going to be a rate cut the funds
want to be ready to reposition themselves in winners and forget
the pain from this year. Nine days to clean the decks and dress
up those all important year end statements. Next year is shaping
up to be a mutual fund war with very few victors. It is going to
be a contest of "we lost less than the other guys" in promotional
advertising. Actually the market drop this week brought in +$8.4
billion into equity funds according to TrimTabs.com.  Investors
wanting to capture the cheaper prices are sending money in the
hope that averaging down still works.

So we are back to the same spot we were last Friday. Waiting on
the pivotal news event that could turn the market around. Only
this weekend it is not a court case or election results but
probably the most important FOMC meeting in many months. Alan
has pressure building from both sides. The hawks are still saying
the economy is easing smoothly and the doves are screaming fasten
your seatbelts. The numbers all point to a GDP of less than +2%
growth and depending on who you listen to even a negative growth.
Greenspan has said we will not have a crash landing on his watch
and it is time to put up or shut up. Many analysts feel that by
waiting until next year to start the cut process will be too late
and the Fed will have to play catch up and risk overheating the
economy on the rebound. Many are calling for a cut on Tuesday to
draw a line in the sand. Then wait for another month or two to
see what else is needed. Lyle Gramley said today he felt the
chances of a cut were better than 50/50 on Tuesday. Alice Rivlin
said she did not think the time was right yet. Fed follower and
Washing Post writer John Barry riled traders Friday morning with
an article saying the Fed would not cut next week. Obviously there
are as many opinions as there are analysts. The problem for us is
not so complicated. If the Fed does not cut rates there will not
be many presents in traders Christmas portfolios this year. There
are no major economic reports next week. Just the dribble of month
end stuff but with the FOMC meeting out of the way Tuesday nobody
will care. This boils our week down to one day. Make or break
Tuesday. Without a pre-Fed rally any rate cut SHOULD be met with
a relief rally. I shudder to think where we would be if we got
a sell the news event on a rate cut or no cut all.

Like Art Cashin said today, the Fed better wake up. Mob
psychology is heating up and there is an increasing fear that
somebody will start yelling fire in a crowded market and the
Fed will not be able to react quick enough. The good news was
that there was almost no bad news after the close today. ETYS
was the only name company to warn after the close and at $1.03
per share they are not likely to impact the market on Monday. JNJ
did affirm estimates after the close but they made an effort to
stress that they would not hit the top of their range. Sellers
did not stop at the close. There was a strong imbalance of sell
on close orders on the NYSE and that does not bode well for Monday.
Over 100 million Nasdaq shares traded after the regular session.
I did not see a large change in prices in after hours. I checked
a couple dozen fast movers like JNPR, BRCD, BRCM, SDLI, QCOM and
others and most closed after hours almost exactly where they closed
the regular session. Still after the huge day this does not lead
us to any positive or negative indications for Monday.

At this point Monday is a toss up. We are going to be at the mercy
of any pre-market news, continued tax selling and any comments from
Fed heads about impending policy. The VIX closed over 31 for only
the fourth time in the last two months. The last time it was this
high was the bottom on Nov-30th. Actually it spiked to almost 35
intraday on the 30th after closing at 30 the night before. The
put/call ratio spiked to .94 at the close and indicates a high
level of fear in the market. Both of these indicators can go higher,
much higher, but normally these levels indicate a bottom is near.
The TRIN spent most of the day over 2.0 indicating an oversold
condition. Nothing in these indicators prevent the market from
selling off even more on more negative news. What we need to look
for next week is a sign that not only the selling has stopped but
for a sign that funds are starting to buy again. One key will be
the large caps. Funds will buy them first due to their liquidity.
Easy in, easy out should the need arise. The Russell-2000 is showing
the strain. Only +12 points from a 52-week low there is no evidence
of fund buying.

The euphoria from the +500 point gains from the last two weeks was
smashed along with the gains. Traders pinning their hopes on the
election bounce were blindsided by almost 100 earnings warnings
this week ending with the Microsoft meltdown. The only thing we
have to look forward to is the Fed meeting and the realization
that tax sellers will eventually run out of stock. A small
consolation indeed! Traders are going to love next week just like
last week. Everybody else will be grabbing the Maalox. Stocks are
cheap but nothing says they can't get cheaper. PE ratios on the
leaders are mere shadows of their previous lofty levels. For
instance, MSFT 27, SUNW 45, DELL 25, INTC 19, ORCL 25. The
thought process goes like this. Is SUNW at $30 cheap? Sure but
Dell was cheap at $32 last month. It was cheaper at $17 last week.
Will SUNW set another new low on a warning next week? Who knows?
If your stock time horizon is years it should not matter and SUNW
is a screaming buy. If your option time horizon is four weeks then
I would be very cautious. We can be right on direction, UP, right
on distance, $50, and still lose on the play if our time horizon
is too short. A JAN $35 SUNW call option may be only -$5 out of
the money on Monday with four weeks to go and end the month being
$10 out of the money with only two weeks to go after a warning.
Once the tide turns positive everyone knows the big caps will
rally and stocks like SUNW have a huge following. My point here
today for call buyers is buy more time than normal. You don't have
to use it. If your option doubles after four weeks on a three month
option it is perfectly acceptable to close the position for a profit.
The extra time give you a little more safety. I did not say you
should let a $10 option decline to $1 just because you have time.
You should still practice safe trading by using stop losses. I
would simply give yourself a little more wiggle room than normal.
Successful traders take losses constantly. Small losses!

We already know January earnings will be a disaster. What we do not
know is how much of the disaster is already overstated. With the
new Reg FD (Full Disclosure) companies are actually overstating
possible problems. This is causing analysts to be overly cautious
with their forecasts. If January earnings turn out better than
expected then the March earnings period will benefit from increased
estimates. For option traders who have been beaten up trying to
trade this bear market a prudent choice would be a March or April
option on a stock like SUNW that has been beaten senseless. Give
yourself the gift of time for Christmas. You will save yourself a
lot of stress and possibly make more money. What have you got to

We have a new feature starting tonight. Many readers have asked
for a resource to help unravel the complexities of accounting
for your trading activities. Options trading can be very profitable
but also carries potential risk for serious tax problems if
you do not fully understand the rules. Jim Crimmons starts a
new series tonight to explain all the common problems and
solutions. As an added benefit he has agreed to answer any
tax question you have for subscribers to OIN. Check out his
first question and answer session in the Options-101 section

Also Preferred Trade has announced a new feature for
OptionInvestor subscribers, the availability of OCO, or
Order Cancels Order, through their new Preferred Trade Live
offering. They also offer complete management of Skybox trades
for active traders. Tell them what you want, Swing Trade,
Position Trade or Benchmark Trade and they will place and
manage all the orders for you. They will also place your
spreads, straddles and butterflys and monitor your positions.
Put the pros on your team and remove some stress from your life.
Check out the announcement from Preferred Trade Live in the
Options 101 section today.

Trade smart, don't buy too soon.

Jim Brown

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If you have been reading my commentary all week you know I
was waiting to buy the rebound off any post election dip.
Man! That was a long week!

I finally pulled the trigger Friday but only cautiously.
When the Nasdaq skidded to a stop at 2600 this afternoon
I was convinced that a -400 point drop would create a
relief rally and short covering before the close. With a
Fed meeting on Tuesday I was speculating the bargain hunters
would be out in force. Secondly the addition of 12 Nasdaq
stocks to the S&P could have helped spark a rally.

Yes, we got a bounce but it was really wimpy. I came real
close to closing all my open positions before the close
but greed got the best of me.

After watching off and on all week I wanted to play so bad
I decided to speculate in some cheap December calls after
the morning drop along with some naked puts for January.

Hoping for a bounce into next week I sold naked puts on

BRCD - Jan $250 Naked Put @ $59.62

Remember my strategy on selling naked puts is to sell deep in
the money to capture a 100% delta on any upward movement of
the stock. It is not my intention to wait for BRCD to reach
$250 or for January options to expire before closing the
position. My target on this play would be something in the
$225-$230 range which would provide about a $35 profit from
the launch point just above $190.

Any unused premium would simply be returned and I get an
interest credit for the time it is in my account.

BRCM - Jan $170 Naked Put @ 55.88

This play got a little more lift than BRCD. BRCM had bounced
off support at $110 at the open an then remained positive most
of the day. I sold the Jan-$170 put for $55.88 and my target
on this one is around $145 which could provide resistance again.
I launched the play on the bounce at around $115 and $145
would give me a $30 profit.

SCMR - Jan $100 Naked Put

Time will tell here but hopefully the market will cooperate
and the upgrade from Friday will help relaunch the stock.
This is more of a leap of faith than BRCM and BRCD since
there is no real support at $50. I sold the Jan-$100 put
for $47 and my target is something in the $70 range for
about a $20 profit if everything works out next week.

Speculative Calls

Please let there be a massive drop and rebound on every
option expiration Friday. The possibilities are endless!

While I was sitting waiting for the expected end of day
relief rally I picked out several stocks that I thought
might run for several dollars across the next strike price
and then I bought December calls at that strike for a
nominal amount of money. Cheap gambling to keep me from
losing a pile of money should the market turn down instead
of up.

Greed kept me from doubling these plays even more because
I did not close them at the first sign of the roll over
at 3:30. Just a dip, the Nasdaq is going positive. WRONG!
It easily cost me a dollar or two on each play. My positive
bias got in the way. Still I can't complain. I made a
ton on each. Just wish I had bought more!

BRCM - Dec-$120 calls - Average $1.19 each

NTAP - Dec-$65 calls @ $.69

CIEN - Dec $100 Calls @ $1.25

MUSE - Dec $115 Call @ $.88

My plan for Monday is hold my breath on the open and then watch
for any weakness and bail from my naked puts if I need to.
The closing sentiment on Friday was more negative than I had
hoped and now I find myself holding longs over a weekend. I
came very close to going flat but BRCM, BRCD and SCMR were
all closing at the high of the day. I hope it was not another
sucker punch. If the market cooperates and we don't get any
high profile warnings I will probably look for a few more
naked put plays. I am hoping a Fed rate cut is in the cards
and that will turn around the tax selling and cause funds
to start window dressing for year end. Possible wish full
thinking on my part I am sure. I wish SUNW would warn and
drop another -5 points so I can load up on some calls as well.
I am a believer, what can I say?

Good Luck, good trading

Jim Brown

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index instead?

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Dear Media: Please Stop Crying
By Austin Passamonte

Watching CNBC and other news programs is becoming very painful.
Their market bias is blatant and understandable considering where
viewership and advertising sentiment lies. Still, we have all we
can do not to scream each time one of the anchors laments the next
round of selling.

Enough already! Just go with the trend and BUY SOME PUTS!!!
Therein lies the problem; just a fraction of financial traders
even realize option trading even exists. What a shame. If most
actually knew the power options trading offers versus all else,
market celebrities and pundits may have a better outlook.

We don't forecast any sudden rallies to emerge just yet. A
wildcard many traders are hanging onto is the possibility of a
rate cut this Tuesday by the FOMC. We wouldn't be surprised for a
Monday/Tuesday rally into the event by bottom fishing hopefuls.
That would be a tradable rally indeed but only until 2:20pm EST on
Tuesday if no rate cut is announced. Then OTM puts would have more
value than platinum.

We are just at the brink of confession season now and the lineup
has turned hopeful bulls to ground chuck. The way things look from
here, market bears can forego a diet of salmon and to continue
fattening up on abundant beef instead.

Is all bullish hope lost? Never! We will rally long & hard one
fine day, rest assured. When will that happen? Beats us.

Market Sentiment will never have any market bias. We may have a
bullish, bearish or neutral sentiment as action progresses but
never care what the markets choose to do. It is not our job to
care; it is our job to profit from current market action along
with you.

That being said, a long-term bottom is closer than long-term top.
Where exactly is the question. Many leadership tech stocks have
been beaten down to the point becoming value stocks instead of
growth. There is a bottom to everything but perhaps everything has
not yet found a bottom.

Technically the charts are very bearish. As stated in the Thursday
edition here, all daily-chart signals are in the early stages of
rolling over. Does this mean they will for certain? No. Are the
chances far better than 50%? In our opinion; absolutely.

We trade full-time putting thousands of dollars at risk in the
markets in hopes of greater return as a result. What better way to
base trade entries on than simple, basic technical analysis? Tarot
cards? Tea leaves? Analyst recommendations who upgrade YHOO at
$235 and downgrade it at $35?

Our position this week is very clear: we will buy calls on
market strength after the FOMC meeting only if an actual rate
cut is announced. We will buy puts on everything with a symbol
at first sign of weakness if markets rally into the meeting and
no cut is announced. We will place tight stops on all plays and
take modest profits when offered. That is Market Sentiment's
best defensive hope with a clear downtrend in all major indexes.

Calls or puts - profit flows equally both ways. Please be careful
and trade the right direction as market action dictates.


Friday 12/15 close: 31.20

30-yr Bonds
Friday 12/15 close: 5.44%

Support/Resistance Indicator
The Index Support/Resistance(S/R)Ratio is a formula used to
gauge possible support or resistance based on open-interest
disparity. Ratio listed is percentage of calls to puts or
puts to calls respectively.

Support is factored from dividing puts by calls at strike
levels beneath index closing price. Resistance is factored
from dividing calls by puts at strike levels above current
closing price.

  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
730 - 715                4,518        2,642         1.71
710 - 695                5,951        3,387          .87

OEX close: 689.48

685 - 670                   30        7,774       259.13***
665 - 650                    9        3,104       344.89***

Maximum calls: 730/3,357
Maximum puts : 600/9,042

Moving Averages
 10 DMA  717
 20 DMA  713
 50 DMA  725
200 DMA  772

NASDAQ 100 Index (NDX/QQQ)
 73 - 71                33,173        10,198         3.25
 70 - 68                63,337        18,381         3.45
 67 - 65                17,736        21,353          .83

QQQ(NDX)close: 63.87


 62 - 60                 5,977        25,420          4.25
 59 - 57                 1,843         5,818          3.16
 56 - 54                   839         7,826          9.33

Maximum calls: 70/50,643
Maximum puts : 70/12,673

Moving Averages
 10 DMA 68
 20 DMA 67
 50 DMA 74
200 DMA 89

S&P 500 (SPX)
1375                    8,277        10,228           .81
1350                   28,778        36,004           .80
1325                    1,863         5,168           .36

SPX close: 1312.15

1300                    1,502        16,535         11.01
1275                      187         9,159         48.98
1250                      943         8,804          9.34

Maximum calls: 1350/28,778
Maximum puts : 1350/36,004

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


CBOT Commitment Of Traders Report: Friday 12/15
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         +179        -283           -2089      -770
Total Open
Interest %      (+2.24%)    (-3.13%)        (-5.50%)   (-2.64%)
                net-long    net-short       net-short  net-short

Open Interest
Net Value        -1438        -3324          +1316      +2120
Total Open
Interest %      (-4.45%)    (-13.52%)       (+2.11%)   (+3.23%)
                net-short   net-short       net-long   net-long

S&P 500
Open Interest
Net Value        +80633      +76502         -90398       -86468
Total Open
Interest %      (+29.41%)   (+42.45%)      (-11.61%)   (-12.36)
                net-long    net-long       net-short   net-short

What COT Data Tells Us: Disparity remains between Commercials and
Small Specs on the S&P 500. The historical holding of net-short
SP01H futures contracts by the biggest players continues and likely
for good reason.

Commercials have increased their net-short positions on the DOW while
Small specs have turned net-long.

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


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Tough Game
By Eric Utley

You're not alone.  It's been a tough year to trade and invest.

However, barring a major recession, I think the worst in the
equities markets is about over.  And, although I have a distaste
for Doc Greenspan right now, I don't think the Fed chief will let
the U.S. economy slip into a prolonged recession.  But I can't
place all the blame on the Maestro.  Greenspan couldn't foreshadow
the skyrocketing energy prices when he went on an interest rate
raising binge.  And he surely didn't see the election debacle,
which, in my very humble opinion, did afflict the U.S. capital
markets due to a flight or foreign capital.

I'm not calling the bottom in the NASDAQ - won't even attempt to
this weekend.  But stepping back, and viewing the bigger picture,
I think there are a few things both traders and investors should
make note of.  The recent action in the bond market suggests the
Fed will lower interest rates by at least 50 basis points by next
spring.  Whether those cuts begin next week or in January really
doesn't matter - that's not the point.  The point is the Fed
WILL begin lowering interest rates in the near future and that
alone will take the lid off equities.  A more favorable interest
rate environment will directly stimulate business and help
companies to boost earnings - the last of the dreadful e's.

What's a market participant to do?

I'll put it plainly: It's prudent to own equities ahead of
interest rate cuts!  Almost all equities will benefit from lower
money costs.  The obvious choice ahead of a rate cut are
financial shares that aren't exposed to the credit risks
recently exposed in the likes of Chase and JP Morgan.  But what
if you're looking for higher earnings growth?  Where are you
going the find it?  Well, historically speaking, the technology
sector has consistently generated the highest earnings growth
and highest return on investment.  And I don't see any
reason for that trend to not continue over the next several
years.  While earnings warnings may continue to plague the
NASDAQ in the near-term, I do feel that investors will be
rewarded a few years out for taking the risk in technology
shares now.

As this nasty and historical year comes to an end, know that the
recent pain in the NASDAQ will pass and investors will once
again reap rewards from technology shares.  Patience and
discipline will prevail over emotion and the bear.  And the
game will get easier.

The inbox reserved for stock requests has been growing thin
in the recent weeks, hence the two charts.  Let's fill it!
Send your stock requests to Contact Support.
Please put the symbol of your requests in the subject line of
the e-mail.


HomeStore.com - HOMS

Please advise us your views on HOMS.  Is this a good cyclical
play?  Can you name some similar cyclical plays which could be
easy to play for current market? - Thanks, Sunil

Thanks for the request, Sunil.

I don't know if HomeStore is your typical cyclical play, per se.
However, the company could benefit from an ease in interest
rates, which could stimulate the purchase of homes and real
estate.  And, as the leading provider of Web-based realty services,
HomeStore would like to see an increase in home buying.  HomeStore
operates some of the Web's best sites for locating and purchasing
real estate.  I regularly visit their Realtor.com site in search
of a ranch in the great state of Montana and have found it easy
to use and very helpful.

I think HomeStore is a good example of why the Internet is such
a great medium.  Unlike many of the already failed Internet
businesses, I sincerely believe that HomeStore is providing a
quality and highly valuable service to consumers.  They have
made it mush easier to locate, finance, and purchase real estate
to a consumer's exact specifications.  HomeStore has integrated
virtually every aspect of purchasing real estate into one concise
site.  Of course, you will still have to visit the property, but
you get the idea.

But enough with the fluff.  Let's get to the fundamental picture.
HomeStore turned a profit, for the first time, last quarter by
surprising analysts by two pennies.  The company was expected to
lose one cent, and actually earned one cent.  What's more, that
earnings growth is expected to blossom next year with consensus
estimate ranging between 30 and 37 cents.  It gets better.  The
company is expected to grow its bottom-line by about 38% over
the next few years.  Plus it has about $3.50 per share in cash,
and no debt!

HomeStore generates sales through selling subscriptions and
advertising on its site.  The subscriptions it sells to
professional realtors account for about 55% of the company's
revenues.  And during its last reporting quarter, which ended
September 30th, the company had grown its paying realtor base
by 54%.  If HomeStore can sustain that growth rate of subscribers,
the company should easily meet its long-term profit projections
and return handsome profits to patient investors.

In the near-term, though, HomeStore has to contend with the fact
it has .com attached to the end of its name.  And by that I mean
its shares have received undue pressure as a result from so many
Internet companies going under.  As it turns out, it's hard to
sell toys, furniture, and cars, among other items, over the
Internet.  And as long as the shakeout in the Internet sector
rolls on, I believe shares of HomeStore will remain suppressed.

But to be quite honest, I like HomeStore over the long-term.  To
reiterate, I believe they are providing a solid and valuable
service to consumers.  Furthermore, its shares are still in
double digits unlike those of CMGI, Etoys, Pets.com,
Mothernature.com, Webvan...anyway, that has to be a sign of a
lasting Internet company.

If you're looking to get into HomeStore for the long-term, it
may be prudent to wait a quarter or two and see if the company
can establish earnings credibility.  If it does, I believe it
to be a long-term winner on the Web.

And let's quickly address your question regarding cyclicals, Sunil.
Cyclical stocks fluctuate with the business cycle.  They go up when
business is robust and fall when growth slows.  Some examples of
cyclicals might include auto makers and consumer product makers,
among many others.  To be quite frank, I don't know how much of a
slowdown has been discounted into their share prices and conversely,
how much of a pickup in growth has already been discounted.  It's
important to keep in mind that the market tends to discount future
events out to six or nine months.  If there's an interest by our
readers in cyclicals, I could do some research in the coming week
and try to compile a list of likely winners when the economy picks
back up.  Let me know!


Global Crossing - GX

Hi there.  I was wondering if you could give me your short-term
outlook on Global Crossing. - Thank you, Denise

In light of my lengthy rambling about HomeStore, Denise, I'll try
to keep the review of Global Crossing more concise.

The short-term outlook for Global Crossing still looks a little
dicey.  Its shares are fighting a strong downtrend, which has
lasted since its peak last spring around the $60 level.  The
poor performance in shares of Global Crossing is a direct
reflection of the concerns over the high levels of debt in the
telecom industry, and the ability of issuers to meet its
requirements.  Global Crossing is no exception.  The company
took on a large amount of debt in order to build its undersea
network that is intended to connect the world at the speed of
light.  Global Crossing is the premier player in its space,
and if it succeeds in building its high-speed intercontinental
network, it should make a lot of money.  The company has the
potential to connect the world in ways never imagined.  But it
has a lot of hurdles to clear before achieving its goals and
profitability, for that matter.

The company is expected to continue to lose money from
operations well into the coming years.  And without profitability,
I think the stock will remain under pressure.  Of course, a quick
shift in sentiment in the telecom sector could lift shares of
Global Crossing from its recent mire.  In short, Denise, I would
expect Global Crossing to remain under pressure.  But, the long-
term prospects for the company are phenomenal, if and only if,
it can successfully implement its undersea network.

Because shares of Global Crossing were recently moved to the
NYSE from the NASDAQ, I've included two charts below to better
illustrate its recent price action.




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


For the week of December 18, 2000


None Scheduled


Trade Balance         Oct  Forecast:-$33.2B     Previous:-$34.3B
FOMC Meeting           NA  Forecast:    NA      Previous:    NA
NAHB Housing Index    Nov  Forcast:     65      Previous:    NA


Oil & Gas Inventory 8-Dec  Forecast:288.7MB     Previous:     NA
Housing Starts        Nov  Forecast: 1.550M     Previous:  1.532M
Building Permits      Nov  Forecast:    NA      Previous:  1.537M
Treasury Budget       Nov  Forecast:-$23.7B     Previous: -$27.0B
SEMI Book-to-Bill     Oct  Forecast:  1.17      Previous:     NA


GDP-Final              Q3  Forecast:  2.40%     Previous:   2.40%
GDP Chain Deflator     Q3  Forecast:  1.90%     Previous:   1.90%
Initial Claims     16-Dec  Forecast:    NA      Previous:    320K
Philadelphia Fed      Dec  Forecast:  4.00%     Previous:   5.20%
FOMC Minutes           NA  Forecast:    NA      Previous:     NA


Durable Orders        Nov  Forecast:  1.30%     Previous:  -5.50%
Personal Income       Nov  Forecast:  0.40%     Previous:  -0.20%
PCE                   Nov  Forecast:  0.30%     Previous:   0.20%
ECRI Weekly Index   8-Dec  Forecast:  -3.1%     Previous:     NA

Week of December 25th

Dec 26  Existing Home Sales
Dec 26  Consumer Confidence
Dec 27  Leading Indicators
Dec 28  Initial Claims
Dec 28  Help-Wanted Index
Dec 29  Chicago PMI
Dec 29  Michigan Sentiment

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The Option Investor Newsletter                   Sunday 12-17-2000
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
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Moving Day Luck?
By Lynda Schuepp

Moving before Christmas should only be allowed for the certifiable
nut cases or idiots like myself.  These past two weeks have been
crazy, to say the least.   We were having the floors in the new
house sanded and were hoping they'd be done before the movers came,
but alas, that was not to be.  On Wednesday and Thursday of the
previous week, the movers packed and transported the contents of
our old house to our new house.  I was computer-less until last
Sunday.  Not only was I computer-less, but I was also CNBC-less.
Since the day we moved in (December 7th), I have spent my time
moving boxes and furniture out of one room and into another, as
my floor guy proceeds through the house, making a layer of fine
wood dust as he goes.

Before the move, I had purchased December 70 calls on November 30th
for $1.13, based on my trading system that I wrote about on 12/03.
Needless to say it was difficult to follow my system without my
tools.  During this time of technical isolation, I kept in contact
with my broker several times a day, and wasn't really worried.
I was counting and "re-counting" on a final decision for president.
I figured the courts would have a hard time setting a precedent for
future elections, based on dimples, chads and "voter's intention."

Because I didn't have a computer to read my charts, I missed my
sell signal on 12/07, thank God.  Had I been in touch, I would
have sold my options for about a one-point profit.  The QQQ's
closed at $66.50 but the next day they gapped up to 71 at the open.
Sometimes you just get lucky.  When my $1 option went to $5, I
sold; I didn't wait for any special confirming signs, not that I
could have seen them if I wanted to.  Again, I was lucky.  The
QQQ's traded as low as $67.63 that day.  The next day, however,
they gapped up at the open and closed near $74.38, the high of
the day.  Oh well, you can't have it all.  I'm very happy with my
measly 400% increase.

This past week has also been a bust for me for trading.  Although,
my computer is up and running, I have no furniture in place.
Kneeling on the floor and watching the screen which is sitting on
an empty cardboard box reminds me too much of a prayer position
and that certainly can't be a healthy sign, in my profession.

Let's take a look at a couple of charts and see if we can come to
any conclusions.

Looking at the weekly chart first, we can see that if the QQQ's
hold here at about $63.75, it would make a nice bottom because
there is lots of support at this level going back to September
and October 1999 where they met with lots of resistance.  This
level is VERY significant because these levels were held for such
a long time on weekly charts.

Based on Friday's candle, a doji, we may be close to another short-
term bottom.  But doji's ALWAYS need a confirmation, and I have
found that they are less reliable at bottoms.  I don't like the
increase in volume on Friday's trading because of the downside
pressure on prices.  I wish the volume had been much bigger then
maybe it would indicate a key reversal.  At best the signals say
to me--indecision and maybe sideways action for a while.

When looking at the OEX however, it looks worse that the QQQ's.
Note that Friday's close is lower than the lows on December 1st
and 4th.  I don't like that.  It could signal trouble.

Hey, I thought we knew who our next president is going to be?
Thought it was going to be off to the races.   Oh well, I guess
maybe we can now concentrate on mundane things like earnings,
sales growth, etc.  Maybe "value" stocks will be more in favor in
the future.

Based on these charts, my goal this weekend is to get my office
set up and all my clothes unpacked.  I can live without pots and
pans, but office furniture and underwear are definitely over the

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What You Need: Live Options Brokers And Preferred Trade
By Alan Knuckman

Many traders need Live Option Brokers at a reasonable price
to help them create the disciplined trading plan necessary
for trading success.  Both Alan Knuckman and Andrew Aronson
of Preferred Trade are Licensed Option Principals. Less than
4% of all stockbrokers are option principals, ready to help
you with your option trading. Most brokers do not have the
necessary experience or education in options to adequately
inform and assist their customers. What is important for us
is to facilitate our clients to have every opportunity for
success in trading options.

The ability to place stops AND OCO (One Cancels Other) exit
contingencies prior to entering a trade allows us to execute
your plan, and you the time to enjoy life.  Helping customers
better understand the probability analysis of different
expiration months and varying strike prices can dramatically
increase success rates.

Many newsletter writers and market educators prefer Live Option
Brokers to help customers implement and execute their ideas and
recommendations.  Many times the option picks must be customized
dependant upon the customers' objectives, suitability, and
experience.   A better understanding of option probability and
proper asset allocation can dramatically increase profitability
and limit losses.   Live Option Brokers can offer guidance and
implement a trading plan while helping to prevent emotional
reactions to market conditions.

Live Option Brokers educate and teach discipline, generally
facilitating the learning of option basics and to ease traders
into the dangerous waters of trading.  Fear of the markets can
lead to indecisiveness and inaction, many people quit even when
armed with the best market research.  Worse yet is when new
traders learn their lessons the hard way through repeated failure
to execute a trading plan.

Preferred Trade now offers Live Option Brokers to help address
one of the fastest growing segments of the financial community...
retail option traders.  The combination of professional assistance
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traders' hands so they have more time to address life's real
concerns.   Customer's graduate to different levels of broker
assistance based on need of service and market experience.  The
weaning process will lead to a breed of traders that are better
prepared to succeed.

The ability to trade online may lead to disastrous consequences
if not handled properly and respectfully.  Option trading is not
a game but a very serious venture not to be treated lightly.  Your
success depends on hard work and the ability to create and execute
a disciplined trading plan.

Option traders need explanation and assistance...

Newsletter writers need implementation, customization and
execution of their ideas...

Preferred Trade now offers Live Option Brokers to supplement
the electronic execution and to prepare customers for the
realities of online trading...

The tools are here; it is nice to be needed.

Please note that options are not suitable for all investors
and investing in options carries substantial risk.  To obtain
a copy of the Options Disclosure Document contact Alan Knuckman
at 1-888-281-9569

PREFERRED TRADE LIVE Toll Free 1-888-281-9569

Alan Knuckman and Andrew Aronson
Licensed Options Principals
Offered by Preferred Capital Markets, Inc.
Member NYSE, SIPC, MSRB and other principal exchanges


Tax Accounting Made Simple
By Jim Crimmons

Our new column having to do with the taxation of your trading
account begins today, and will be featured twice a month.
Since taxes are the largest expense an active successful
trader will have it is appropriate that we feature this
information for you to use.

Our tax column is written by TradersAccounting.com a tax and
accounting firm which specializes in preparing tax returns
for active traders.  In addition they have a department within
the company that does tax planning for all levels of traders.
To reach them you should go to their web site at
or email your tax questions to questions@tradersaccounting.com
for a free answer.  They feature some free items on the web site.
As with any general information you should not rely upon the
information given here to fit your own tax situation.  Always
consult with a professional on any tax matter.

Since this is the first of ongoing columns we will start with
the basics today.  The start of basics is insuring that we talk
in the future about options in the same manner.  Therefore,
while it may seem kindergartenish, we must start with a few
definitions, because the tax code is based around these
definitions.  To be a successful trader you have been taught
that the most important item is to have a trading plan.  Part
of your trading plan must be a plan that takes into consideration
your largest expense, that of the taxes you pay.  We will give
you the information over the next few weeks that will help you
to add tax strategies to your trading plan.

What is an Option?

For the purpose of the IRS, an option is a contract in which
an individual investor, a trader, or a business doing trading
within an entity, in return for consideration of some type,
grants for a specified time to a purchaser of the option, the
privilege of purchasing from or selling to certain specified
property at a fixed price to the grantor.  Under this contract,
only the grantor (or writer) is obligated to perform the
purchaser may choose to exercise the option, or may allow it
to lapse.  The property specified in the option is referred to
as the "underlying property, or security".

What is the difference between an option and a cash settlement

In a cash settlement option, the settlement may be settled
in cash or property, other than the underlying property.
For example, an option on a stock index, which contemplates
that cash rather than stock is transferred if the option
holder elects to exercise the option, is a cash settlement

How are options classified for purposes of the Federal Income

Options are categorized as listed or unlisted options, also
as equity or non-equity option.

LISTED OPTIONS-A listed option is an option that is traded on
or subject to the rules of (1) A national securities exchange
registered with the SEC; (2) a domestic board of trade which
has been designated as a contract market by the Commodities
Future Trading Commission (CFTC); or another exchange, board
of trade, or market designated by the Secretary of the Treasury.
A listed option covers 100 shares of a particular stock,
specifies a fixed (strike) price per share for exercise, and
has a fixed expiration date. The premiums paid by the purchaser
of the option and the transaction costs are not fixed.
NON-LISTED OPTIONS-All other options are considered unlisted,
and are traded over the counter.  They generally have no fixed
elements such as the number of shares covered, strike price
premium and expiration and each of these elements are negotiated
between the writer and purchaser.  Here is no intermediary
organization; therefore the writer and purchaser have the
contract between themselves until it is settled.
EQUITY OPTIONS-An option is an equity option, whether it is
listed or not, if it is an option to buy or sell a stock, or
its value is determined by reference to a particular stock.
NON-EQUITY OPTION-If the CFTC has designated a contract market
for trading such options or if the Treasury has determined that
the requirements for the CFTC designation have been met, then
the option is a non-equity option.

Each of the above  definitions will become important to our
study as each column is written.

Can Wash Sales be present when I am trading options?
What is an Wash Sale?

A wash sale is a sale in which the seller, within a 61-day
window, which begins 30 days before and ends 30 days after
the date of a sale of a stock or security for a loss, replaces
the stock or security by acquiring (purchase or exchange), or
enters into a contract or option to acquire substantially
identical stock or securities.

It therefore would seem that if you either sold an option or
a stock at a loss, and then replaced it with a similar or
identical security or option you would be saddled with the
wash sale rule.

As can be seen from the above table in transaction two we
would have a cumulative $10 per share loss because we sold
stock (or options) at $90 while we had purchased them at $100.
The next day our stock hit our technical entry point where we
believed we should buy in again.  At this point, because the
transactions, first a loss, then the re-purchase of the
identical stock, was within the window of time described
above, (a 61 day window)  we no longer have a loss to report,
we have only adjusted our basis.  You can see that if we
continue to trade the same stock or options throughout the
year that we possibly would never realize a loss, but would
be adding to our basis on each purchase.

CAUTION:  The wash sale rule can greatly influence the profit
or loss from your trading account.  I have had clients who have
thought they had a loss in their trading account for the year,
only to examine the wash sales they have had and realize that
they have had a paper gain, although their cash flow does not
show it.

REMEDY:  The only remedy, other than staying on the sideline
in our favorite stock(s) during the complete month of December,
for those of us who trade the same stocks and options throughout
the year is to claim the mark to market method of accounting.
This election can only be filed for by those of us who trade
as a business, either a sole proprietor (traders status) or
in a formalized business such as an LLC or partnership.  When
we use the mark to market method of accounting it does away
with the wash sales.  However, as in anything there are pros
and cons as to whether you want to take this election.

Next time we will go more in depth on both Traders Status and
Mark to Market.

If you have questions about your taxes with respect to your
trading, as a subscriber to this newsletter please send an
email to the address below, and you will receive a personal
answer within two business days.

Please go to questions@tradersaccounting.com.

Jim Crimmons



Call Play of the Day:

CIEN - CIENA Corporation $100.72 (-13.28 last week)

See details in sector list

Put Play of the Day:

KO - Coca-Cola Company $53.50 (-7.38 last week)

See details in sector list

Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at


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


AIG $95.75 (-7.94) We're reluctantly dropping coverage on AIG
this weekend after the stock closed below our protective stop at
the $96 level last Friday.  Albeit AIG just missed our stop by
$0.25, we're remaining disciplined.  The stock has briefly dipped
below its 50-dma on a few occasions this year, and if history is
any guide, may snapback rather quickly next week.  Existing
positions could be exited on a move back up to the $100 level.
However, if AIG does quickly rebound early next week, traders
might consider holding positions if the momentum buyers return
to the insurance sector.


BBOX $53.25 (+0.56) When a stock goes up on volume in a down
market, traders take notice.  Despite a soft NASDAQ and
shares of BBOX have found their way higher in the past trading
sessions.  On Friday, the stock ended the day up $1 on 180% of
ADV and in doing so, closed above resistance and our stop price of
$51.50.  With the possibility of further upside for BBOX if market
conditions improve, we are stepping aside, as fighting an up-trend
is no way to make money on a put play.  Look for a possible test
on Monday of support at $51.56 as an opportunity to exit.


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

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

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

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

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

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


SCMR - Sycamore Networks Inc.  $55.19 (-8.49 last week)

Founded in 1998 and headquartered in Chelmsford, MA, Sycamore
Networks is focused on developing the transport, switching and
management products required to create a flexible, intelligent,
end to end optical network.  Addressing the current limitations
of the public network infrastructure to grow bandwidth and
support new services, Sycamore leverages existing fiber optic
resources by bringing intelligence to the optical domain.

Sycamore has had a wild ride since it went public with much
fanfare in late 1999.  The shares hit a high of $200 last
March before falling with the Nasdaq to a low of $50 in April.
SCMR rebounded to $160 in late August, and made a 52-week low
of $39.25 on November 30.  Sycamore has released a continuous
stream of excellent news in the last month, and, if the market
conditions permit, the company should be poised for an excellent
rebound.  SCMR reported earnings above expectations on November
14th, and was one of the few stocks which actually rallied after
reporting.  Since then, SCMR has announced a significant
number of new contracts.  At a recent analyst meeting, Sycamore
announced a multi year $40 million contract with Vodafone, as
well as plans by 360Networks to deploy Sycamore's products
in support of their network build.  Last Thursday, the company
unveiled a new product based on Carrier-Class EtherOptic
technology to expand Ethernet connectivity across all segments
of the intelligent optical network.  Sycamore's chairman Desh
Deshpande reiterated the company's bullish outlook at an
interview on Dec 5th, and stated that the company saw no slowdown
in the demand for their optical networking products by
telecommunications carriers.  Most Wall Street analysts love
Sycamore.  CSFB has given SCMR a twelve month price target of
$150, as the shares trade at a lower multiple to 2001 sales
than its peers in the industry.  On Friday, Bank of America
Securities initiated coverage with a buy rating.  SCMR drifted
down from a high of $72 on Tuesday, as the Nasdaq and the
networking sector (NWX.X) slid.  However, the stock
rebounded from very strong support at $50 on Friday afternoon,
and, most importantly, held onto its gains although the Nasdaq
and many other stocks retreated in the last half hour of trading.
SCMR is resting above the 10-dma of $54.  Aggressive traders
might consider taking positions on a rebound from that level.
Conservative traders should wait for a break above resistance
at $60.  A break above this level on heavy volume could
lead SCMR past the 5-dma of $62.46, and up to light resistance
at $65, and strong resistance at the 50-dma of $69.85.  Watch
for strength in NWX.X, and others like JDSU and CIEN before
taking positions.  Critical support at $50 must be maintained,
so set stops at $49.

BUY CALL JAN-55 SMZ-AK OI=210 at $ 9.13 SL= 6.50
BUY CALL JAN-60*SMZ-AL OI=462 at $ 6.38 SL= 4.50
BUY CALL MAR-55 SMZ-CK OI=142 at $13.63 SL=10.25
BUY CALL MAR-60 SMZ-CL OI=325 at $11.87 SL= 9.00


CIEN - CIENA Corporation $100.72 (-13.28 last week)

Helping to satisfy our insatiable demand for bandwidth, CIEN
makes dense-wavelength division multiplexing (DWDM) systems for
use with long-distance fiber-optic communications networks.
CIEN offers optical transport, intelligent switching and multi-
service delivery systems that enable service providers to
deliver and manage high-bandwidth services to their customers.
The company's MultiWave DWDM systems allow optical fiber to
carry up to 40 times more data and voice information without
requiring more lines.

Amid a flood of earnings warnings and fears of a slowdown in
the Telecom industry, CIEN stands on high ground, continuing to
grow revenues at a breakneck pace.  Keeping that trend alive,
the company reported impressive earnings on December 7th,
beating estimates by 2 cents and increasing year-over-year
revenue growth to 103%.  If the sector is slowing down, it sure
is hard to see it by looking at the revenue and earnings growth
of the leading Optical stocks.  Like everything else with a
high valuation, CIEN came under pressure beginning with the NT
earnings report in late October, and since then has been trading
in a range between $85 (now the site of the 200-dma) and $120.
With the exception of the late November, pre-earnings dip to
$70, CIEN has a solid looking chart that holds out the promise
of a near-term return to the vicinity of $120.  The post
earnings rally drove CIEN up through its 6-week descending
trendline on a volume-backed recovery in Optical Networking
stocks.  Then the flood of high-profile earnings warnings
resumed, pulling our Optical hero back to earth, testing support
at the descending trendline again on Thursday and Friday.
Friday's strong gain in the face of severe weakness on the
NASDAQ certainly looks like a good sign to us, but the week
ahead is fraught with peril.  The bottom line is, this is a
high-risk play, but with high risk comes the possibility of high
rewards as well.  CIEN has substantial intraday support between
$90-94, and any solid intraday bounce in this region looks
attractive for new entries, but ONLY if the NASDAQ and
Networking sector (NWX.X) are also moving in a positive
direction.  We have set a fairly tight stop at $91, as any close
below the descending trendline will indicate a technical failure
and call into question the likelihood of a continued recovery.
Entering new positions on strength may be the more prudent
approach for now.  If that fits your trading style, look for CIEN
to trade through $105 on solid volume and sector strength.

BUY CALL JAN-100 UEE-AT OI=7576 at $14.00 SL=10.50
BUY CALL JAN-105*UEE-AA OI=3063 at $11.75 SL= 8.75
BUY CALL JAN-110 UEE-AB OI=3044 at $10.13 SL= 7.00
BUY CALL APR-105 UEE-DA OI= 565 at $21.25 SL=16.00
BUY CALL APR-110 UEE-DB OI= 977 at $19.13 SL=13.75

SELL PUT JAN- 85 UEE-MQ OI=3946 at $ 6.25 SL= 9.00
(See risks of selling puts in play legend)


BRCM - Broadcom Corporation $123.13 (-5.06 last week)

Broadcom Corporation is a provider of highly integrated silicon
solutions that enable broadband digital transmission of voice,
video and data to and throughout the home and within the business
enterprise.  These integrated circuits permit the cost-effective
delivery of high-speed, high-bandwidth networking using existing
communications infrastructures that were not originally designed
for the transmission of broadband digital content.

Having just booked some substantial gains in our recent BRCM call
play, we are adding the stock back in based on the positive price
volume action on Friday as well as a bounce of its ascending
support line.  Our profit-taking was based on a close below our
stop price, which we may have set a little too tight, but this
conservative risk management strategy now affords us with the
capital to ride this stock again.  Connecting the highs and lows
since late November, we can see that BRCM bounced strongly off
its lower channel line on Friday, as it closed up $5.88 or over 5
percent on 170% of ADV, bucking the trend of a falling NASDAQ.
Adding a horizontal resistance line at $150 earlier in the week
reveals a bullish ascending triangle.  Resistance levels to watch
for are the 5 and 10-dma, currently at $132.50 and $124.68
respectively.  A break above the 10-dma with conviction could
allow conservative traders to enter on strength.  From there it
could be a quick trip to the 5-dma.  There is room in the
triangle for BRCM to pull back a little, allowing aggressive
traders to enter on bounces off support at $120 and $115 but make
sure the stock closes above our stop price at $113.  Considering
the buying interest in BRCM on Friday despite a red day for the
NASDAQ, if the Tech index finds some strength Monday and rallies,
BRCM could be one of the high-flyers leading the charge.  So
confirm direction with market sentiment as well as with the
Philadelphia Semiconductor Index (SOX) when making a play.
Continued positive comments from analysts, such as Banc of
America's reiteration of a Strong Buy rating on Tuesday, would
also be a welcome driver to BRCM's stock price.  With the top of
the stock's trading channel now at $158 and rising, a bouncing
NASDAQ could mean yet another highly successful BRCM call play.

BUY CALL JAN-120 RDW-AD OI= 314 at $20.50 SL=14.75
BUY CALL JAN-125 RDW-AE OI= 639 at $18.25 SL=13.00
BUY CALL JAN-130*RDW-AF OI= 522 at $16.00 SL=11.50
BUY CALL FEB-125 RDW-BE OI= 153 at $22.50 SL=16.25
BUY CALL FEB-130 RDW-BF OI= 374 at $20.38 SL=14.75

SELL PUT JAN-115 RDW-MC OI= 434 at $12.63 SL=17.50
(See risk of selling put in play legend)


RBAK - Redback Networks $83.00 (-10.75 last week)

Founded in 1996 and headquartered in Sunnyvale, Calif., Redback
Networks is a leading provider of advanced networking solutions
that enable carriers, cable operators, and service providers to
rapidly deploy broadband access and services.  The company's
market-leading Subscriber Management Systems (SMSs) connect and
manage large numbers of subscribers using any of the major
broadband access technologies such as Digital Subscriber Line
(DSL), cable, and wireless.

Companies in the Networking space are usually referred to in a
broad sense, yet this is a sector of intricacies and
distinctions, with companies competing in related yet different
categories.  To borrow from the Superhighway analogy, there are
firms that pour the concrete, others that install the lights,
signs, and even companies that paint the lines on the road.
While CSCO and JNPR battle it out for market share in the router
space, JDSU and GLW are going head-to-head in Fiber optics.
There are also a number of smaller niche players such as FDRY and
FFIV.  However, RBAK finds itself in a unique position.  As the
"last mile" in networking, it doesn't matter who wins the router
or Fiber Optics war because as the largest provider of DSL
equipment, RBAK has a high level of control over the end user
experience.  Recent forays into China have proven to be
successful and will most likely be a key area of growth going
forward.  While the decrease in capital spending has made traders
nervous, there are certain expenditures, which companies can't
afford not to spend money on.  With shortening life cycles of
products and continued demand, infrastructure remains an area of
growth.  On Friday, Banc of America Securities initiated coverage
of RBAK with a Buy rating and a price target of $100, helping the
stock close the day up $5.06 or 6.5 percent on almost twice the
ADV in a down market.  At this point, support for RBAK can be
found at $80 and $75, but make sure the stock closes above our
stop price of $74 when buying on a bounce.  Overhead, resistance
can be found at the 5 and 10-dma, at $88 and $85.43 respectively.
An entry on strength can be had if sustained buying pressure
lifts RBAK above the 10-dma.  When taking a position, make sure
that the NASDAQ is moving in your favor and confirm direction
with that of other Networking issues.

BUY CALL JAN-80 BUK-AP OI= 182 at $14.50 SL=10.50
BUY CALL JAN-85*BUK-AQ OI= 277 at $12.13 SL= 9.00
BUY CALL JAN-90 BUK-AR OI= 150 at $10.00 SL= 7.00
BUY CALL APR-85 BUK-DQ OI= 752 at $21.63 SL=15.50
BUY CALL APR-90 BUK-DR OI= 107 at $19.75 SL=14.50

SELL PUT JAN-75 BUK-MO OI= 215 at $ 8.00 SL=11.00
(See risk of selling put in play legend)



FRE - Freddie Mac $66.36 (+2.69 last week)

Freddie Mac is a shareholder-owned corporation whose people are
dedicated to improving the quality of life by making the American
dream of decent, accessible housing a reality.  They accomplish
this mission by linking Main Street to Wall Street - purchasing,
securitizing and investing in home mortgages, and ultimately
providing homeowners and renters with lower housing costs and
better access to home financing.

The premise behind this new play is quite simple.  The interest
rate environment is expected to become a lot more friendly in the
near future.  And Freddie Mac is a direct beneficiary of lower
interest rates.  Shares of Freddie Mac have been discounting a
rate cut for quite some time noting the stock's impressive rally
from its $40 base traced last summer.  The momentum driving
Freddie's shares higher has been very consistent for the last
four months, and we're looking to jump on the train and profit
from its cheap options.  New positions can be added on a pullback
to support at $65, or slightly lower at $64, which is also the
site of the 10-dma.  We have set our protective stop at $62,
slightly below the 10-dma, and would exit positions if shares
settled below that level.  If the stock continues plowing higher
early next week, look to enter on an advance past $66.75 - the
stock's intraday high last Friday.  But make sure to confirm
higher prices with heavy volume.

BUY CALL JAN-65*FRE-AM OI=3086 at $4.25 SL=2.50
BUY CALL JAN-70 FRE-AN OI=4444 at $1.94 SL=1.00
BUY CALL APR-70 FRE-DN OI= 323 at $5.00 SL=3.00
BUY CALL JUL-70 FRE-GN OI= 258 at $7.00 SL=5.00


WFC - Wells Fargo $50.44 (+1.00 last week)

Wells Fargo and Company is a $263.5 billion diversified financial
services company providing banking, insurance, investments,
mortgage and consumer finance services through 5,700 stores, its
Internet site and other distribution channels across North
America as well as internationally.

Wells Fargo represents another attempt to capitalize on the
expected lowering of interest rates.  Plus, the options on Wells
Fargo are quite cheap.  Shares of Wells Fargo have been trading
in what has amounted to a 15-month base since October of 1999
when the stock reached a peak of $50.  Just last Friday, shares
broke above the pivot point and closed above $50 - marking an
all-time high.  What's more, volume was extraordinarily high
during the stock's advance above the $50 level.  We're looking
to get in early on the breakout, and with that, new positions
could be added early Monday on continued strength in shares.
Additionally, a pullback to support at $50 or the 10-dma at $49
could provide for solid entry points.  We have set our stop at
the $48 level to provide the stock with room to operate.

BUY CALL JAN-45 WFC-AI OI=11196 at $6.25 SL=4.25
BUY CALL JAN-50*WFC-AJ OI=18005 at $2.63 SL=1.25
BUY CALL APR-50 WFC-DJ OI=23665 at $4.75 SL=3.00
BUY CALL JUL-55 WFC-GK OI= 3195 at $4.00 SL=2.50


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The Option Investor Newsletter                   Sunday 12-17-2000
Sunday                                                      3 of 5

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LH - Laboratory Corp. of America $157.06 (+9.31 last 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

Relative strength is the name of the game in this market.  While
the major indices cratered again on Friday, LH managed to eke
out a gain on the day.  Granted, it was only $0.06, but a gain
is a gain.  As the #2 clinical laboratory service in the world,
LH has ridden the wave of enthusiasm for Medical stocks 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.  Driving the increase in the
stock's value has been good old earnings.  The company has handily
beat estimates the last 2 quarters, and with the current demand
for medical testing and services, this looks like a trend that
will continue.  The up-trend that has been in place since the
April lows has continued to provide a predictable trading range,
and looks like it will continue to do so into the end of the
year.  The sharp drop in the broader markets on Friday dragged our
play down to test our $149 stop, from which it sharply rebounded,
gaining back all of its intraday losses, plus a little bit extra by
the close.  This was an ideal entry point for aggressive traders,
as the same pattern could be seen in the share prices of
competitors DGX and PPDI.  Additional intraday dips that are met
with strong buying look attractive for new entries in the week
ahead.  Watch LH's primary competitors, DGX and PPDI, for
confirmation of strength in the Medical Testing sector.  More
timid players will want to wait for LH to trade through the $160
resistance level before taking a position, and then ride the stock
up to the top of the channel, near $168.

BUY CALL JAN-155 LH -AK OI=877 at $14.38 SL=10.75
BUY CALL JAN-160*LH -AL OI= 33 at $12.13 SL= 9.00
BUY CALL FEB-150 LH -BK OI= 50 at $20.88 SL=15.50
BUY CALL FEB-160 LH -BL OI=  1 at $18.25 SL=13.25

SELL PUT JAN-140 LH -MH OI= 50 at $ 5.25 SL= 7.50
(See risks of selling puts in play legend)


SGP - Schering-Plough Corporation $57.94 (+2.69 last week)

Schering-Plough develops and markets pharmaceutical products and
treatment programs worldwide.  It operates in three principal
product lines: prescription drugs, animal health products, and
over-the-counter (OTC) drugs.  At the top of the company's
pharmaceutical inventory is the world's leading antihistamine,
Claritin.  Some OTC drugs that you may be familiar with include
brand names Afrin, Dr. Scholl's and Coppertone.

Along with Merck (MRK) and Pfizer (PFE), Schering-Plough (SGP)
is a leading developer and marketer of the world's principal
drugs.  During this last week of trading, SGP edged fractionally
higher for four out of five sessions, setting new 52-week
records.  Friday's action set the upper resistance at
$58.69.  In its entirety, the end to the election drama played
out quickly in the marketplace; although the ushering in of a
Republican administration bodes well for the drug makers.  The
issues of rising drug prices and Medicare reform can now be put
on the back burner.  Earnings for SGP and its rival, MRK, are
also expected to be sound and meet the financial forecasts next
month.  We're looking for continued strength in the sector and
for SGP to generate more upside momentum as it continues to
flirt with the $60 level.  Our protective stop is currently set
at $55, which parallels the 10-dma ($55.81).  If the negative
sentiment of the broader market managed to drag SGP below this
mark at the closing bell, we'd exit the play and move on to more
lucrative opportunities.  The more cautious bull traders will
want to see SGP blast through the upper ceiling at $60 before
taking positions.  If your preferred strategy is to enter on
dips, then look for strong bounces off $55, the above-mentioned
"break it or make it" point.

BUY CALL JAN-55*SGP-AK OI=9069 at $4.75 SL=2.75
BUY CALL JAN-60 SGP-AL OI=6358 at $2.00 SL=1.00
BUY CALL FEB-55 SGP-BK OI=3262 at $5.75 SL=3.75
BUY CALL FEB-60 SGP-BL OI=3340 at $3.00 SL=1.50
BUY CALL FEB-65 SGP-BM OI= 259 at $1.50 SL=0.75


A - Agilent Technologies Inc $56.88 (-2.56 last week)

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

I think can, I think can, or can I?  While the question of a
breakout above the critical $60 mark hangs over us, the outlook
appears promising.  The ascending wedge formation favors an
upside explosion through $60, if the bulls can generate enough
momentum to break out of the current consolidation range!  Look
for a more positive market environment to facilitate this bold
upside move.  Most certainly, there's no doubt this stock's been
consistently tacking on gains since mid-November, but we're at a
critical point in the play.  On the one side of the coin,
Friday's downdraft to $54.50 and subsequent close at $56.88 back
fills the sharp upward gap that occurred on December 7th.  Take
a look at a daily chart to visually confirm this statement.
Therefore, look at it from a technical perspective, Friday's
pullback offers great entry opportunities going into next week.
But the more conservative approach is still to wait for the
upside confirmation, then enter aggressively on dips or buy into
the strength as A moves into the higher trading realms of last
summer.  Good news for the sector came by way of Tektronix, the
#2 maker of electronics-testing equipment.  They set the tone
for the sector's earnings with solid numbers last week.  The
company saw 2Q profits from its continuing operations more than
double on soaring sales.

BUY CALL JAN-55 A-AK OI=2340 at $6.25 SL=4.25
BUY CALL JAN-60*A-AL OI=4257 at $4.00 SL=2.50
BUY CALL JAN-65 A-AM OI=3022 at $2.56 SL=1.25
BUY CALL FEB-60 A-BL OI= 891 at $5.75 SL=3.75
BUY CALL FEB-65 A-BM OI= 431 at $4.38 SL=2.75


MEDX - Medarex Inc $48.69 (+0.44 last week)

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

We initiated coverage on this biotech a couple weeks ago on its
strong recovery potential.  Traders have subsequently been amply
rewarded by its strength amid the market adversity and wide
variety of trading opportunities.  But going forward, MEDX needs
to shatter the immediate resistance lying at $50 and challenge
Monday's intraday high of $54.  A cautious trader might consider
waiting for a momentum-backed breakout above $54 before
strategizing additional plays.  Other more assertive traders
could look at Friday's transgression below our $45 protective
stop and subsequent rebound as a bullish forecast going into
next week.  Put another way,  MEDX moved off its own firmer
support at $43 as the NASDAQ bounced off its at 2600.  A
synchronized coincidence?  NO!  About 75% of all stock gyrations
are the result of broader market action and sentiment.
Therefore, high-rollers looking to cash in on a sharp upswing,
might take entries on intraday dips near the 30-dma ($46.73) or
even a bit lower, if your portfolio can handle the risk.  Three
influencial brokerage firms initiated positive coverage on MEDX
this week.  On Tuesday, UBS Warburg came forward with a new Buy
and on Friday, Chase H&Q and Goldman Sachs put in their two
cents.  The latter firms started MEDX with a Buy and Market
Outperform, respectively.  The Fed meeting is Tuesday.  This
event may be all the bulls need to jumpstart a rally.  But if a
true rally doesn't transpire, you might want to consider staying
in cash until there's more confidence in the markets.

BUY CALL JAN-45 MZU-AI OI= 112 at $11.75 SL=9.00
BUY CALL JAN-50*MZU-AJ OI=1235 at $ 8.63 SL=6.00
BUY CALL JAN-55 MZU-AK OI= 236 at $ 6.75 SL=4.75
BUY CALL FEB-50 MZU-BJ OI= 331 at $10.38 SL=7.50
BUY CALL FEB-55 MZU-BK OI= 329 at $ 8.50 SL=6.00


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The Option Investor Newsletter                   Sunday 12-17-2000
Sunday                                                      4 of 5

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KO - Coca-Cola Company $53.50 (-7.38 last week)

Coca-Cola is the world's top soft-drink company, commanding more
than 50% of the global market.  On the charts, the company takes
the #1 spot with Coke and the #3 slot with its diet Coke sales -
Pepsi is sandwiched in between.  Some other brands you may be
familiar with include Minute Maid, Fruitopia, or Dasani Water.
The firm manufactures, distributes, and markets its 230 brands
of soft drinks and syrups, but does no actual bottling of the
products.  About two-thirds of its sales revenue is derived
from outside the US.

Coke may be the "real thing" and top the list as the world's #1
soft-drink, but the company's stock is taking a pounding in the
marketplace.  KO is typically seen as a conservative, non-
cyclical play; so a $7.38, or 12.1% loss in five sessions
certainly raises eyebrows.  Last week, the share price slipped
under its higher support level of $60 and more importantly,
violated a November low of $55.25 on strong volume during
Friday's session.  The critical dive, which took KO to $53.50,
was amid phenomenal volume of 13.6 mln shares exchanging.  Even
last November's news of the company's $192.5 mln discrimination
settlement and collapsed acquisition deal for Quaker Oats (OAT)
couldn't effectively take KO below the $55 mark.  The negative
market conditions this week however, did.  We're looking for
more market uncertainty and negative sentiment, in conjunction
with the stock's own bearish technicals, to take it lower over
the short-term.  A potential pitfall is the upcoming Fed
meeting on Tuesday, which could incite some bullish action, so
let's keep our exit point set firmly at $56.  A high-volume
rollover at the recently violated 200-dma ($54.94) offers
riskier entries into the decline, yet offers more potential for
profit, if KO challenges historical support at the $50 level.

BUY PUT JAN-55 KO-MK OI= 7256 at $3.30 SL=1.75
BUY PUT JAN-50*KO-MJ OI=10468 at $1.25 SL=1.00
BUY PUT JAN-45 KO-MI OI= 3723 at $0.50 SL=0.00  High Risk!



SBC - SBC Communications $53.69 (+2.00 last week)

BellSouth Corporation is an integrated communications services
company headquartered in Atlanta, GA serving more than 41
million customers in the United States and 16 other countries.
BellSouth, consistently recognized for customer satisfaction,
provides residential, business and wholesale customers with
integrated voice, video and data services to meet their
communications needs.  BellSouth is a Fortune 100 company
with total revenues exceeding $26 billion.

A barrage of sellers at the close on Friday helped to breathe
life back into our put play.  In the last update we cautioned
that SBC had to stay below resistance at $55, and the stock
did just that.  This has been a tough level for SBC as traders
have clearly been selling it there.  The barrage of sellers at
the close came in the form of large blocks, knocking the bid
lower.  Trades of 60K, 173K and 231K forced the price down.
This is likely related to the triple-witching activity, but
SBC is now moving in the right direction.  The key will come
Monday as we will see if it was all option related or not.
If the selling continues, we are in good shape for both our
current plays and for new entries.  On the other hand, if SBC
bounces right back to the $54.50-$55.00 range it has been in
for the past few sessions, then we will be looking for an exit.
The 10-dma at $53.15 will be an important support level we
would like to see fail on Monday.  A close under that level
will bring new sellers into the stock.  Another interesting
fact to watch is to see if SBC starts to fail as the Nasdaq
recovers.  Many traders supporting the stock this week have
done so on a value basis and as a safe haven from the high-
techs.  The stop remains at $55 and we will wait for SBC to
make up its mind early next week.

BUY PUT JAN-55*SBC-MK OI=7955 at $3.88 SL=2.00
BUY PUT JAN-50 SBC-MJ OI=7177 at $1.69 SL=0.88


EMC - EMC Corporation $68.13 (-18.81 last 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.

This market environment is a bear's delight.  All you have to
do is find a solid high-valuation company that has been a
stellar performer over the past year and wait for the slightest
hint of weakness.  Then buy some front month puts and wait for
the seemingly-inevitable decline.  EMC has been a perfect
example of this over the past week as it declined from $91.25
Monday morning to an intraday low of $65 on Friday.  The leading
indicator for this play was the rollover the prior week at the
top of the 2-month descending channel.  The 200-dma (then at
$79) was looking vulnerable and boy, was it ever!  Dragged lower
by general technology weakness, prompted by the rapidly
expanding list of earnings warnings, EMC was the baby thrown out
with the bathwater last week.  The stock is being punished by
the poor performance of other technology titans like MSFT, and
headed sharply lower throughout the week.  The final blow was
delivered by Bear Stearns on Friday, as the firm downgraded EMC
from Buy to Attractive on concerns of a slowdown in corporate
IT spending.  Despite the fact that EMC reiterated its guidance
(unchanged, I might add) for the current quarter and all of
2001, investors jumped ship like lemmings, handing the stock a
$6.50 loss on volume nearly triple the 12 million share ADV.
While there may be more weakness in store (Stochastics have not
yet reached oversold), Friday's action penetrated both the lower
Bollinger band and the lower channel line, making a relief
bounce likely in the days ahead.  Accordingly, we have lowered
our stop to $72 - if the bulls can mount a recovery that clears
the bottom of Friday's gap, then it will be time to leave our
very profitable play.  While aggressive players can consider a
rollover from the $72 area for new entries, we think the best
approach right now is to watch for further weakness before
initiating new positions.  If $65 fails to hold as support, that
would be a good entry point for more conservative traders, as it
could indicate EMC is headed for its next level of support near
$60.  Remember the FOMC meeting on Tuesday, which could create
a positive market bias, and only trade with the broader
technology market.  If the NASDAQ is in rally mode, EMC is
likely to go along for the ride, making new put plays an unwise
choice until the bears regain control.

BUY PUT JAN-75 EMB-MO OI= 5722 at $11.63 SL=8.75
BUY PUT JAN-70*EMB-MN OI=13036 at $ 8.38 SL=6.00
BUY PUT JAN-65 EMB-MM OI= 3664 at $ 6.00 SL=4.00


IBM - Intl Business Machines Corp $87.81 (-9.19 last week)

IBM develops, manufactures, and sells advanced technology
processing products.  They are the world's top provider of
computer hardware including PCs, mainframes, and network
servers. IBM is also an industry leader in software and
peripherals, second only to Microsoft.  The company owns
software pioneer Lotus development, maker of Lotus Notes.

The increasing evidence of a slowing economy is clearly having
an effect on technology stocks.  Last week, three major players
lowered their earnings forecasts.  Compaq Computers (CPQ), the
biggest maker of PCs, Microsoft (MSFT), and chipmaker Advanced
Micro Devices (ADV) were the latest in a series of companies
that rocked the Street with warnings.  Moving forward, some
analysts believe it's only matter of time before other big caps
like IBM (we can wish!), DELL, or perhaps SUNW confess their own
discouraging outlooks.  If another round of companies announced
scaled-back projections, the impact would devastate the broader
markets.  Just take a look at the recent carnage of Big Blue.
IBM's shed a hefty 9.5% since slipping below $95 and the
underlying 10-dma ($95.13) last week.  That's quite a
significant amount for a company who's generally surrounded by
positive press and maintains a leadership position within the PC
and hardware sectors.   The increasing weakness exhibited in
Friday's session, which brought IBM down to $87.31 on the
decline, eased our concerns of an impending bottom at the $91
and $92 levels.  In light of Friday's breakdown, we've lowered
our stop to the $92 mark to protect against a buying frenzy.  A
strong rollover at near the 5-dma, currently at $92.09, offers
an aggressive entry into the downward momentum; although a break
of the near-term support at the $87 level would set a more
bearish tone.

BUY PUT JAN-90 IBM-MR OI=16394 at $7.50 SL=5.25
BUY PUT JAN-85*IBM-MQ OI=14196 at $5.50 SL=3.50
BUY PUT JAN-80 IBM-MP OI= 8152 at $3.75 SL=2.25


ARBA - Ariba, Inc. $67.13 (-15.38 last 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.

It's no surprise that when businesses suffer, so does B2B.  It's a
vicious circle that feeds upon itself.  A slowing economy means
less goods and services are demanded, leading to weaker-than-
expected sales, resulting in a lower bottom line causing earnings
multiple compressions, layoffs, cutbacks and the dreaded negative
wealth effect, thereby reducing customer purchasing power all
across the board.  This equates to less goods and services
demanded, which starts the cycle all over again.  With Election
uncertainty finally resolved, that was no longer an excuse for
the markets not to rally.  Yet ARBA hit resistance at $90 on
Monday and from there it's been almost straight down.  Coverage
initiated on the company by Lehman Brothers on Tuesday, a Neutral
rating, did not inspire confidence in this former high-flyer.  As
well, questions regarding ARBA's ability to compete based on its
product line, deemed a little too narrow by analysts, is also
weighing on the stock.  On Friday, ARBA got a small dose of
relief, as it closed up fractionally on 118% of ADV, helped by
Oracle's positive earnings report.  But at this point, it appears
that a re-test of recent lows in the low 50's is quite possible,
with resistance from the 5 and 10-dmas at $73.63 and $72.28,
respectively.  A failed rally above these levels as well as our
stop price at $73 could provide for an aggressive entry.  For the
conservative, wait for ARBA to break below $65 support on volume,
before making an entry.  In both cases, confirm sector sympathy
with Merrill Lynch's B2B HOLDR (BHH) and Tech market sentiment
with the NASDSAQ before taking a position.

BUY PUT JAN-70 IUR-MN OI= 728 at $13.00 SL=9.75
BUY PUT JAN-65*IUR-MM OI=1656 at $10.13 SL=7.00
BUY PUT JAN-60 IUR-ML OI= 816 at $ 7.75 SL=5.75


CELG - Celgene Corp. $44.75 (-19.31 last week)

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

One of the great risks of investing in a Biotech is that even in
the rare case where a company has successfully parlayed its
pipeline into a blockbuster treatment, over-reliance on just one
or two drugs as its revenue source can make for a volatile
situation.  It's a simple case of having too few eggs and too
much basket.  With that in mind, shares of CELG had been running
up all year long, based on the revenue growth of its star drug
Thalomid.  Touted as the do-it-all cancer drug, CELG has been
quickly gaining market share as it has been found to be
successful in treating numerous forms of cancer.  The stock had
been moving higher recently thanks to the annual American Society of
Hematology (ASH) meeting recently, where excitement of what could
happen at the show brought in traders and investors alike.
However, with the show now concluded, the news has all but dried
up for the company and with that, investor interest.  Not only
that but the prospect that Campath, a drug developed by IXLO and
MLNM, could cut deeply into the sales of Thalomid has investors
scared, as seen by the recent sell-off on high volume.  In fact,
the stock has now broken its up-trend line from late December
1999.  This could mean more downside but for now, with the 5-dma
all the way up at $51.61, the stock could take a little breather
before continuing lower.  Overhead resistance levels abound for
this stock at $45, $46, $47 and our stop price of $49, which is
also where the stock found a bottom on two occasions in
mid-November.  This level should be formidable.  Failed rallies
above resistance should provide aggressive traders with an entry
point.  For those looking to enter on weakness, look for CELG to
fall below $43 on volume for a possible entry.  Confirm sentiment
with the AMEX Biotech Index (BTK) or Merrill Lynch's Biotech
HOLDR (BBH) when making a play.

BUY PUT JAN-50 LL-MJ OI=193 at $9.00 SL=6.25
BUY PUT JAN-45*LL-MI OI=327 at $5.88 SL=4.00


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Do You Believe In Santa Claus?
By Mark Phillips
Contact Support

Remember the first time when doubts were raised in your mind
about whether the jolly old fat man was fact or fiction?  I
remember clearly when my younger brother and I snuck out of bed
one Christmas eve to peek down the stairs as we heard rustling
near the fireplace.  Sure enough, we could see the familiar
looking person filling the stockings with care, and it was
exactly who we expected to see.  My mother has always been Santa
in our family, and rightly so.  Nobody could possibly do the job
better!  Maybe it has something to do with the fact that she was
born on Christmas day, and her parents had the foresight to name
her Carol.  No matter what the cause, I want to take a moment to
say "Thanks for keeping the magic of Christmas alive."

Investors have been similarly questioning whether the Santa
Claus rally is really going to happen this year.  First they
looked to the resolution of the election to provide an upside
bias, but as we saw last week, that was not to be.  All the
major indices sold off sharply, driven primarily by the rapidly
growing list of high-profile earnings warnings.  Couple that
with downgrades of previously untouchable stocks like MSFT, EMC
and SUNW, and you can see why the bulls are having a hard time
making any headway.  Concerns are mounting that we could see a
warning from CSCO, an event that would definitely have a
negative effect on the markets as a whole.  After all, CSCO is
like the Energizer Bunny...it keeps going and going, and never
misses its earnings target.  While such an event does not seem
likely, 2 months ago it seemed unlikely that we would ever see
NT trading below $50, and now we are waiting for it to regain
that level.

As you can see from the Market Sentiment section, the
Commercials are continuing to add to the record net short
positions in the S&P500, and rightly so.  One sector after
another has fallen from grace, as the impact of the economic
slowdown is being felt throughout the markets.  Our last chance
for that year-end rally seems to hinge on the FOMC meeting on
Tuesday.  Given the consistent signs of slowing economic growth
and non-existent inflation, it is widely expected that Greenspan
and company will change their bias at that meeting.  That
outcome is likely already factored into the market.  What
investors want to see is an actual reduction in interest rates -
if he delivers that, it will be party hats and horns for
everyone, and we will likely see at least a tradable rally into
the end of the year.  The more likely scenario however, is that
the reduction in interest rates won't come until early next
year, and investor disappointment could result in a fresh batch
of selling as we wind down the year 2000.

The VIX is once again above 30, ending the week at 31.15.  This
has become very familiar territory over the past 2 months, and
clearly is insufficient to signal a market bottom in the absence
of a change in either economic conditions or policy.  While many
of the pundits on CNBC are still calling for the NASDAQ to have
solid support at the 2500 level, the action last week does not
bode well for the bulls' chances in the near term.

Now before you think I have gone crawling into Molly's bear cave
to hibernate for the winter, let me reassure you that nothing
could be further from the truth.  As a LEAPS investor, I see
opportunities for profit around nearly every corner.  We have
time on our side and when these leading stocks begin to recover,
the profits we gain could be truly impressive.  The catch is
that we MUST wait for the recovery to begin.  We can't be trying
to buy that next dip, just because the stock is soooo cheap now.
Not long ago, INTC was cheap at $50, and NT seemed cheap at $60.
How about the bargain of buying JDSU at the bargain basement
price of $85, only to see it hit $50 two weeks ago.  Buying
LEAPS at those levels turned into a disastrous exercise,
especially if you neglected to use stop losses.

As a LEAPS investor, Daily and Weekly charts are our friends.
When a solid stock begins to recover from selling that has
pushed Stochastics into oversold in both of those time frames,
it is a strong indication that a recovery is about to begin.
Couple that with positive sentiment in the broader market AND
the specific sector, you have a recipe for a great entry point
for the next leg to the upside.  Wait for the signals to
materialize, and don't try to force your trades.  In this
market, they will come to you, and it is highly unlikely that
the stock you want will run away from you.  This is not last
year's market, and we can't approach it like we did last year
unless we only want a lump of coal in our stocking next year.
Invest wisely over the coming weeks, and next year could prove

I still think the bottom on the NASDAQ is VERY close and I'm
watching carefully for entry points to buy my favorite stocks.
But I've been burned enough times in the past few months that
I am waiting for all the signals to align before pulling the
trigger.  I'd rather miss out on the first few points of the
move than get pulled into a play I never should have entered
in the first place.

While we are waiting to see whether we will get an early
Christmas present from Uncle Alan, take the time to reflect on
who has always been YOUR Santa Claus over the years.  Make sure
you let them know how much you appreciate them.  Sure, making
money in the markets is great, but what good is it if we
neglect the relationships that are TRULY important in our lives.

I'm keeping my fingers crossed for Greenspan to wear a big red
suit on Tuesday...that may be a more likely event than an
actual interest rate reduction.  But that doesn't mean I can't
hope...after all, Christmas is a magical season.  Anything can

Have a great week!

Current Plays


EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $32.63   243.42%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $16.75   -48.85%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $14.50    31.82%
       11/26/00  JAN-2003 $ 60  VYC-AL   $16.63   $13.63   -18.05%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $12.88   -14.90%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $ 6.75   -75.45%
SUNW   12/19/99  JAN-2002 $ 90  WJX-AR   $22.00   $ 9.88   -55.11%
       11/05/00  JAN-2003 $120  VSU-AD   $39.50   $ 5.25   -86.71%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 5.70   -69.40%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $13.30   -24.00%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $15.25    63.45%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $20.25   276.39%
       10/22/00  JAN-2003 $ 45  VWI-AI   $ 7.88   $12.88    63.49%
JDSU   04/16/00  JAN-2002 $ 80  YJU-AP   $39.63   $14.00   -64.67%
       08/27/00  JAN-2003 $130  VEQ-AF   $55.25   $12.38   -77.60%
NOK    05/21/00  JAN-2002 $ 50  IWX-AJ   $17.25   $10.50   -39.13%
       07/30/00  JAN-2003 $ 50  VOK-AJ   $17.75   $15.00   -15.49%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $ 9.50   - 7.86%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $ 8.38   -31.63%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $37.88   121.10%
                 JAN-2003 $ 70  OZG-AN   $23.13   $46.13    99.42%
EXDS   08/06/00  JAN-2002 $ 55  WZZ-AK   $20.75   $ 7.00   -66.27%
                 JAN-2003 $ 60  VTQ-AL   $25.38   $10.38   -59.12%
FRX    08/13/00  JAN-2002 $ 95  WRT-AS   $31.38   $52.00    65.71%
                 JAN-2003 $100  VFB-AT   $37.38   $58.75    57.17%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $29.50    31.11%
                 JAN-2003 $ 70  VLM-AN   $29.63   $37.63    26.98%
TXN    10/22/00  JAN-2002 $ 50  WTN-AJ   $13.75   $12.75   - 7.27%
                 JAN-2003 $ 50  VXT-AJ   $18.38   $17.63   - 4.08%
ADBE   10/29/00  JAN-2002 $ 80  YEJ-AP   $23.50   $15.50   -34.04%
                 JAN-2003 $ 80  VAE-AP   $30.75   $22.63   -26.42%
BGEN   11/05/00  JAN-2002 $ 70  WGN-AN   $17.25   $10.25   -40.58%
                 JAN-2003 $ 70  VNG-AN   $25.00   $16.63   -33.50%
MU     11/26/00  JAN-2002 $ 45  WGY-AI   $13.13   $ 9.75   -25.71%
                 JAN-2003 $ 45  VGY-AI   $17.25   $13.88   -19.57%
A      12/03/00  JAN-2002 $ 55  YA -AK   $16.88   $19.25    14.07%
                 JAN-2003 $ 60  OAE-AL   $19.88   $22.50    13.21%
ORCL   12/10/00  JAN-2002 $ 35  WOK-AG   $ 7.75   $ 7.00   - 9.68%
                 JAN-2003 $ 35  VOR-AG   $11.13   $10.25   - 7.91%
QQQ    12/10/00  JAN-2002 $ 70  WNQ-AR   $15.13   $12.38   -18.21%
                 JAN-2003 $ 75  VZQ-AW   $19.25   $16.13   -16.23%

Spotlight Play

AOL - America Online $48.96

The news we have all been breathlessly awaiting finally arrived
this week.  No, I'm not talking about the election results.  The
Federal Trade Commission (FTC) finally granted their approval of
the AOL/TWX merger, removing the cloud of uncertainty that
surrounded the creation of a true media giant.  With that hurdle
out of the way, investors are now left to try to figure out how
to value shares of the combined company.  This is no small feat,
given the wide disparity between valuations normally assigned to
Internet companies (AOL) and mainstream media companies (TWX).
AOL has built a solid base near $40, from which it began a solid
recovery in early December.  Moving up during the past week has
been no small feat, given the abuse that has been heaped on just
about any technology-related stock.  News of the FTC merger
approval gave the bulls one more shot in the arm, allowing them
to push AOL briefly above the $50 level on Thursday.
MSFT-induced technology weakness caused the stock to gap down at
the open on Friday, but then the stock managed to rally right
into the close.  Recall that our play appeared to have
rock-solid support between $48-51 from February through
September, but when the NASDAQ cratered in October, AOL got
dragged down as well, hitting an intraday low of $37.  More
volatility in the last two weeks of the year could provide
aggressive traders with an attractive entry on a bounce at
either the $45 or $40 support levels.  If you are going to
target shoot these dips, wait for the stock to bounce on solid
volume before playing and keep those stops in place.  If AOL
falls out of favor and violates the $40 level then this play
will be history.  Buying on strength is definitely a safer way
to play, especially in this market - a breakout above $52 looks
like a good conservative entry point.

BUY LEAP JAN-2002 $50.00 WAN-AJ at $10.80
BUY LEAP JAN-2003 $55.00 VAN-AK at $13.30

New Plays



SUNW $30.44 Leading the way in what turned out to be another
dismal week on the NASDAQ, SUNW fell through major support at
$35 on Monday amidst extremely heavy volume.  Investors
responded to rumors of accounting irregularities (the death
sentence for any stock in this market) by selling the stock
first and asking questions later.  Despite the company's
assertion that the rumors were false, the stock continued to
fall throughout the week on very heavy volume.  Hobbled by
downgrades from Banc of America Securities and Bear Stearns
early in the week, the selling frenzy was just getting started.
Next came Merrill Lynch, removing SUNW from their Techfolio
amidst concerns of slowing growth.  Continued earnings warnings
(most notably MSFT on Thursday) overwhelmed the positive
earnings reports from ORCL and ADBE to drive the NASDAQ below
2600 on Friday, and SUNW suffered as well, hitting a new 52-week
low of $27.50 before the bargain hunters began to show up.
While it was a relief to finally see the stock bounce near the
close, the technical damage was done, making SUNW the latest
casualty on our playlist.  Support at $35 is now going to act
as resistance, and the next historical support level to provide
some relief is down below $25.  In the year that SUNW has been
on our playlist, the stock soared from below $40 to over $60,
before succumbing to the overall technology weakness.  The
stock's 50% decline in the past 5 weeks is just the latest
reminder of why we must always play with stop losses.  Juicy
profits were on the table, but unless we "sold too soon" to lock
them in, they evaporated in the recent market sell off, leaving
us nothing but the memories.


Can Greenspan Set Stock Prices Free?
By Matt Russ

Oh, how the markets are waiting for the Fed meeting on Tuesday!
Even a shift in bias to Neutral would be welcomed.  It is the only
real remedy to the market's primary concern:  earnings.  After the
Microsoft warning, it is apparent that even the untouchables of
the market are vulnerable to the slowing economy.  It is widely
expected that the Fed does shift their bias as a precursor to an
anticipated rate cut in late January.  The combination of these
two events will likely set stock prices free;  free from the fear
of a slowing economy and free from downward trading pressure.  It
ought to make for an interesting 2001, but we're not out of the
woods yet.  In the meantime, we'll keep our eyes open for those
stealth split candidates.

Current Split Run Plays


Current Split Candidate Plays


Candidates That Are Not Current Plays


10 Most Recent Announcements We Predicted

BRCD - 11/29 (most recent announcement)
MANU - 11/08
MUSE - 10/25
AMCC - 10/11
DNA  - 10/05
LEH  - 09/20
ORCL - 09/14
SUNW - 08/17
GLW  - 08/16
HWP  - 08/16

Major Announcements So Far This Month = 11

SCHL     GGG      EAT

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

Symbol  Company Name                Splits  Payable    Executable

BARZ - BARRA, Inc.                    2:1  12/18/2000  12/19/2000
MUSE - Micromuse, Inc.                2:1  12/19/2000  12/20/2000
ILI  - Interlott Technologies         2:1  12/20/2000  12/21/2000
BRCD - Brocade Comm                   2:1  12/21/2000  12/22/2000
UNH  - UnitedHeath Group Inc.         2:1  12/22/2000  12/26/2000
SPIR - Spire Corporation              2:1  12/22/2000  12/26/2000
IWOV - Interwoven                     2:1  12/29/2000  01/02/2001
CRY  - CryoLife                       3:2  12/27/2000  12/28/2000
HOTT - Hot Topic Inc.                 2:1  12/27/2000  12/28/2000
USPH - U.S. Physical Therapy          2:1  01/05/2001  01/08/2001
SANM - Sanmina Corp.                  2:1  01/08/2001  01/09/2001
HWEN - Home Financial Bancorp         2:1  01/10/2001  01/11/2001
GMCR - Green Mountain Coffee          2:1  01/11/2001  01/12/2001
DFXI - Direct Focus, Inc.             3:2  01/15/2001  01/16/2001
EAT  - Brinker International          3:2  01/16/2001  01/17/2001
SCHL - Scholastic Corp.               2:1  01/16/2001  01/17/2001
IDPH - IDEC Pharmaceuticals            3:1  01/17/2001  01/18/2001
AJG  - Arthur J. Gallagher & Co.      2:1  01/18/2001  01/19/2001
SWWC - Southwest Water                5:4  01/19/2001  01/22/2001
TALX - TALX Corp.                     3:2  01/19/2001  01/22/2001
GGG  - Graco Inc.                     3:2  02/06/2001  02/07/2001

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The Option Investor Newsletter                   Sunday 12-17-2000
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
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Trading Strategies: More Q&A with the Covered-calls Editor
By Mark Wnetrzak

This week's questions concern long-term portfolio diversity
with covered-calls and strategy selection for new traders.


As a conservative investor who uses covered-calls as part of a
long-term growth strategy, I have often wondered if there is an
advantage to selling different strike options on my portfolio
stocks, to achieve a better risk/reward balance overall.  In
those cases where I have enough shares to make the technique
viable, should I divide the sold options among various strikes,
such as half of the calls "at-the-money" and half of the calls
"out-of-the-money" to allow for increased profit potential at
the risk of further downside loss?


There is definitely something to be said for diversity, even with
regard to combined covered-write positions in a single portfolio.
The goal of the covered-call writer is to have a good combination
of high potential returns and adequate downside protection.  The
problem is; selling an out-of-the-money call may offer higher
returns but affords only a modest amount of downside protection.
Selling an in-the-money call will provide more downside cushion
but generally offers a lower return.  Some traders try to overcome
this dilemma by writing out-of-the-money calls on some stocks and
in-the-money calls on others.  This may work occasionally but will
not produce superior results on a consistent basis.  Conservative
traders may do best by choosing a favorable issue and writing half
of the position in-the-money and the other half out-of-the-money.
By spreading out the options, the writer may be able to acquire a
favorable return potential as well as adequate downside protection.
Investors that hold large positions in a specific stock can choose
even greater diversification by spreading the sold calls over time
as well as different strike prices.  One can gain several benefits
by writing a portion of the calls near-term and the remaining calls
further in the future.  In the event of significant stock price
movement, all of the various positions will not need to be adjusted
at the same time.  This may include either having the stock called
away, or buying back one written call and selling another.  Another
advantage is that the level of option premiums may become more
favorable than when the original series of calls were written.  At
worst, only one group of options would be sold when the premiums
are low and hopefully they would increase in value before the next
expiration period.  This type of diversification will also allow you
to own various positions at different strike prices, smoothing the
portfolio balance as the market fluctuates cyclically.  This also
prevents all of one's stock from being committed at a single price.
It's obvious that the "combined" write offers an excellent balance
between potential return and favorable downside protection.


I'm a relatively seasoned investor but an absolute novice when
it comes to option trading.  Almost every trading article I have
read suggests that buying stock and selling "covered" calls is
one of the most conservative strategies available with options.
The OIN offers a number of different approaches to trading, but
I want to find a specific technique that generates reasonable
returns over the long haul, is easy to understand and requires
relatively little maintenance.  Are covered-calls for me?


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

Investors usually write covered-calls to generate monthly income,
collecting the premium for the sale of an option against a stock
position in his or her portfolio.  This conservative strategy can
be used effectively on all type of stocks as long as the outlook,
fundamental or technical, for the issue is favorable.  One of the
advantages to this approach is that it allows new investors to
learn successful trend-trading techniques with a small margin of
safety while managing the combined position for upside profit and
downside risk.  The underlying basis for this strategy is a high
probability of limited profit.  The major advantage to a novice
trader is the technique is easy to use and the resultant position
is more conservative than outright stock ownership.  In writing an
option on the stock, the investor has insured the issue against a
future drop in value.  Regrettably, the downside risk in ownership
is not eliminated, only reduced.  In addition, the actual cost of
opportunity loss or potential upside movement can be substantial.
There are other, more subtle benefits and disadvantages but these
are the most common reasons that investors choose (or avoid) this

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return!

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

BSTE   40.00  36.94   DEC  35.00  6.75  *$  1.75  11.4%
AVID   15.94  18.63   DEC  15.00  2.19  *$  1.25   9.9%
CPRT   18.00  18.69   DEC  17.50  1.06  *$  0.56   7.2%
MTIC    6.00   5.56   DEC   5.00  1.44  *$  0.44   7.0%
SUPG   21.47  19.56   DEC  17.50  5.25  *$  1.28   6.9%
BCGI   26.31  28.38   DEC  22.50  5.38  *$  1.57   6.5%
PSUN   20.94  23.50   DEC  17.50  4.13  *$  0.69   5.9%
LNCR   45.25  51.81   DEC  42.50  3.88  *$  1.13   5.9%
ADSK   27.00  27.63   DEC  25.00  2.63  *$  0.63   5.6%
MME    17.75  18.75   DEC  17.50  1.31  *$  1.06   5.6%
MPPP    6.13   4.81   DEC   5.00  1.44   $  0.12   5.6%
MTSI   17.38  20.94   DEC  12.50  5.63  *$  0.75   5.5%
MU     33.75  35.88   DEC  27.50  7.50  *$  1.25   5.2%
JDEC   29.00  25.63   DEC  22.50  7.25  *$  0.75   5.0%
HPC    18.44  17.63   DEC  17.50  1.88  *$  0.94   4.9%
PLNR   24.00  27.13   DEC  20.00  4.75  *$  0.75   4.2%
ISIP   11.56   9.50   DEC  10.00  2.31   $  0.25   2.9%
LGTO   11.88   9.50   DEC  10.00  2.38   $  0.00   0.0%
DZTK    8.13   7.00   DEC   7.50  1.06   $ -0.07   0.0%
MRVT   16.88  13.25   DEC  15.00  2.56   $ -1.07   0.0%
TTN    20.94  15.69   DEC  17.50  4.13   $ -1.12   0.0%

GLGC   21.25  17.88   JAN  17.50  5.25  *$  1.50   6.8%
EXFO   32.00  26.44   JAN  22.50 11.25  *$  1.75   6.1%
EDGW    5.63   6.06   JAN   5.00  1.00  *$  0.37   5.8%
ARQL   33.75  27.25   JAN  25.00 10.00  *$  1.25   3.8%
QTRN   18.38  16.69   JAN  17.50  2.06   $  0.37   1.6%
CVD    11.38   9.50   JAN  10.00  2.00   $  0.12   0.9%
MRVT   17.94  13.25   JAN  15.00  4.13   $ -0.56   0.0%
RFMD   36.38  27.25   JAN  30.00  8.50   $ -0.63   0.0%

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


A very volatile week indeed!  Re-evaluate your long-term outlook
on any issues that will be added to your portfolio on Monday and
act accordingly.  Miravant Medical (MRVT) has weakened quickly in
front of Monday's Healthcare Conference - a key moment.  Covance
(CVD) is meeting some selling pressure and has moved down to its
150 dma.  Rf Micro Devices (RFMD) appears to be suffering some
collateral damage on the Qualcomm (QCOM) slump and is nearing
support at the November high.

Positions Closed:


Murphy's Law is alive and well as several of the previously
closed positions have rallied into profitable territory.


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

GZMO   14.19  JAN  12.50  QGG AV  2.69  34   11.50   35     7.6%
CRK    11.44  JAN  10.00  CRK AB  2.19  338   9.25   35     7.0%
BCGI   28.38  JAN  22.50  QGB AX  7.25  2    21.13   35     5.6%
CPRT   18.69  JAN  17.50  KQJ AW  2.19  3    16.50   35     5.3%
HSIC   30.63  JAN  30.00  HQE AF  2.31  126  28.32   35     5.2%
AVID   18.63  JAN  17.50  AQI AW  2.06  80   16.57   35     4.9%
WMS    19.69  JAN  17.50  WMS AW  3.00  1030 16.69   35     4.2%

Company Descriptions

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

AVID - Avid Technology  $18.63  *** Breakout Coming?  ***

Avid Technology is an industry-leading provider of digital media
creation and distribution solutions.  The company gives customers
the power to communicate to multiple audiences with creativity
and ease.  Avid solutions, which span a wide range of markets and
price points, are used for Web, special effects, video, audio,
film, television, broadcast news, corporate communications, music,
the Internet and games.  Avid recently won an Emmy award for
pioneering development of full motion broadcast-quality PC video
and compression plug-in cards for the manufacture of non-linear
editing systems or video servers.  Several recent alliances will
fortify Avid's attempt to deliver a scalable, high performance
streaming media hosting services.  Investors were pleased with
Avid's strong 3rd-quarter results as the stock has continued
to rally even during a general market decline.  We favor the
bullish up-trend with technical support near our cost basis.

JAN 17.50 AQI AW LB=2.06 OI=80 CB=16.57 DE=35 MR=4.9%

BCGI - Boston Communications  $28.38  *** New High! ***

Boston Communications Group operates in the following segments:
Prepaid Wireless Services, Teleservices, Roaming Services, and
Systems Divisions.  Quarterly earnings were reported in October
and the numbers were favorable.  BCGI recently sold its customer
care division to TeleTech in a cash transaction valued at $15
million with options for additional $20 million.  This month,
the Company was added to the S&P SmallCap 600 Index as well as
the S&P SmallCap 600 Telecommunications (Cellular/Wireless)
industry group.  The technical outlook remains bullish as BCGI
continues to rally to new highs.  We prefer a more conservative
entry point with a cost basis near technical support.

JAN 22.50 QGB AX LB=7.25 OI=2 CB=21.13 DE=35 MR=5.6%

CPRT - Copart  $18.69  *** Earnings Rally! ***

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

JAN 17.50 KQJ AW LB=2.19 OI=3 CB=16.50 DE=35 MR=5.3%

CRK - Comstock Resources  $11.44  *** Oil Sector Hedge ***

Comstock Resources is a growing independent energy company based
in Frisco, Texas and is engaged in oil and gas acquisitions,
exploration, and development primarily in Texas, Louisiana and
the Gulf of Mexico.  Comstock reported strong 3rd-quarter earnings
with revenues up almost 100%, driven by increased production and
higher oil and gas prices.  Comstock's board of directors just
authorized a stock repurchase plan providing for the purchase of
shares of its common stock in the open market, with an aggregate
purchase price of up to $10 million.  The move should enhance
shareholder value over the long term and this position offers an
excellent Energy sector hedge.

JAN 10.00 CRK AB LB=2.19 OI=338 CB=9.25 DE=35 MR=7.0%

GZMO - Genzyme Molecular Oncology  $14.19  *** Stage I Base ***

Genzyme Molecular Oncology, a division of Genzyme Corp., is
developing a new generation of cancer products focusing on cancer
vaccines and angiogenesis inhibitors.  It is shaping these new
therapies through the integration of its genomics, gene and cell
therapy, small-molecule drug discovery, and protein therapeutic
capabilities.  GZMO currently has a licensing agreement with
Purdue Pharma related to the discovery and product development of
up to 20 cancer antigens.  This agreement has the potential to
provide GZMO with more than $330 million provided all 20 antigens
are ultimately developed and approved for sale.  Genzyme Molecular
Oncology has been forming a Stage I base for 9 months with signs
of strong accumulation.  A reasonable cost basis for those who
maintain a bullish outlook and have performed their due diligence.
Genzyme will release 2001 financial guidance for GZMO on Thursday,
December 21.

JAN 12.50 QGG AV LB=2.69 OI=34 CB=11.50 DE=35 MR=7.6%

HSIC - Henry Schein  $30.63  *** Stage II Up-trend ***

Henry Schein is the largest distributor of healthcare products and
services to office-based healthcare practitioners in the combined
North American and European markets.  The Company serves more than
400,000 customers worldwide, including dental practices and labs,
physician practices and veterinary clinics, as well as government
and other institutions.  This month, the Company's ProRepair.
Division achieved ISO 9002 and EN 46002 certification for the
repair of dental handpieces, and other small dental, medical and
veterinary equipment.  Analysts have stated that the company's
acquisitions and increased systems interface with its customer
should continue to boost its business profit profile.  Both
Lehman Brothers and UBS Warburg have recently upgraded their
recommendations on Henry Schein to a "Buy" and we favor the
bullish Stage II chart.

JAN 30.00 HQE AF LB=2.31 OI=126 CB=28.32 DE=35 MR=5.2%

WMS - WMS Industries  $19.69  *** On The Rebound! ***

WMS Industries designs, manufactures and markets video and reel-
spinning gaming machines and video lottery terminals.  Its gaming
machines are installed in all of the major gaming jurisdictions
in the U.S. and in numerous foreign jurisdictions.  WMS conducts
its gaming machine business through its subsidiary, WMS Gaming.
Talk about a post-earnings drop!  WMS dropped almost 50% after
posting strong earnings November 1st, as analysts worried over
deceleration in sold units and installed game base.  The stock
has since rallied back above its 150 dma and Bear Stearns has
recently upgraded their recommendation.  Last Thursday, WMS
reported that it continues to outpace its internal sales goal
of 4,000 units for fiscal 2001 due to high customer acceptance
of its products, resulting in rapid penetration of the California
marketplace.  A conservative entry point for traders who have a
bullish outlook and believe the sell-off was overdone.

JAN 17.50 WMS AW LB=3.00 OI=1030 CB=16.69 DE=35 MR=4.2%



The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

PCLE    8.91  JAN   7.50  PUC AU  2.19  165   6.72   35    10.1%
QTRN   16.69  JAN  15.00  QRT AC  3.13  671  13.56   35     9.2%
GETY   30.50  JAN  25.00  QGT AE  7.13  200  23.37   35     6.1%
CNC     9.00  JAN   7.50  CNC AU  1.94  9072  7.06   35     5.4%
CRUS   20.19  JAN  15.00  CUQ AC  6.00  1035 14.19   35     5.0%

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Naked Put Percentage List
By Matt Russ

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

ADBE   62.44     55  AXX-MK    4.13   1561   26%      55
BRCD  200.00    190  GUF-MR   13.75   5000   28%     190
BRCM  124.06    110  RDW-MB   10.88   3102   35%     110
CIEN  100.69     90  UEE-MR    8.13   2517   32%      94
DNA    79.56     70  DNA-MN    2.88   1989   14%      72
EXTR   72.50     60  EUT-ML    5.13   1813   28%      60
GLW    70.00     60  GRJ-ML    2.69   1750   15%      60
IDPH  209.44    195  IHD-MS   13.88   5236   27%     195
JNPR  128.88    105  JUY-MA    8.75   3222   27%     118
JPM   160.00    150  JPM-MJ    5.25   4000   13%     150
MERQ   95.06     80  RQB-MP    7.63   2377   32%      82
PDLI   87.00     75  RPV-MO    6.50   2175   30%      76
PMCS  103.38     90  SDL-MR    8.38   2585   32%      95
QCOM   79.56     75  AAF-MO    5.88   1989   30%      75
RBAK   82.50     70  BUK-MN    6.25   2063   30%      70
RIMM   85.81     75  RUL-MO    6.50   2145   30%      75
SCMR   55.19     45  SMZ-MI    3.50   1380   25%      50
SEBL   77.25     65  SGW-MM    4.75   1931   25%      70
SEPR   74.56     65  ERQ-MM    3.88   1864   21%      67
TLGD   54.00     50  TQK-MJ    5.13   1350   38%      50


Market Terms: This Triple Witching Day is scarier than most...
By Ray Cummins

One of our new subscribers asked for an explanation of the
volatility that is associated with the simultaneous expiration
of stock, stock index and futures options.

"Triple Witching Day" occurs every quarter on the third Friday
of March, June, September and December, when investors rush to
unwind their positions in stock, index and futures options, all
of which are expiring on the same day.  The final trading hour
of that day is also known as the "Triple Witching Hour" and that
period often produces some major price swings as institutional
investors buy and sell both the derivatives and the underlying
securities.  For those who are unaware of the volatile activity
that can occur during these sessions, "Triple Witching" can seem
like a trader's worst nightmare.

Most professional traders use options to enhance their portfolio
returns or decrease the risk of their investments losing value
over time.  There are basically three types of options: Equity
Options, Index Options, and Futures Options (on commodities and
currencies).  These instruments are available to the public but
the most common index option and futures traders in the market
are institutions (insurance companies, banks, and brokerages)
that need to protect large positions in stocks and mutual funds.
The portfolios for these types of investors generally include
positions in many different instruments.  By diversifying their
stock holdings, they hedge the risk of loss if one issue drops
in value.  The gains on other components in the portfolio are
used to offset such a loss.  The problem with this practice is
the lack of protection for a market-wide or across-the-board
loss, in which the majority of the securities in a portfolio
are affected by a major downturn.  This is where index futures
are most useful.  Institutions purchase futures contracts on
the indexes whose composition resembles the mix of stocks in
their portfolio.  The futures contract provides the necessary
downside protection without exposing the stock portfolio to
excessive risk and is used as a hedge against the loss of
inventory value.  In addition to the institutional "insurance"
buyers, speculators and other position traders will attempt to
profit by taking outright long or short positions in futures
contracts.  This type of activity helps maintain a mechanism of
risk transfer for investments in farming, industry, and other
financial instruments.

Computerized trading systems originated in the early 1980s, when
personal computers began to offer access to trading information
in real time.  Clearly, this technology has made the market more
efficient; portfolio managers, institutional traders and retail
investors are able utilize the very latest information.  Hedgers,
arbitrageurs, and speculators can trade with the most up-to-date
prices and forecasts.  The reaction time to market-influencing
news and events has been reduced to mere seconds.  In addition,
computers allow brokers and institutional traders to manage their
portfolios effectively.  Using today's technology, fund managers
can compose complex profit strategies that are less affected by
market unknowns.  They can engineer scenarios that limit downside
risk with precise options management and portfolio manipulation.
The design and implementation of these complex schemes is often
called "winding" a position and as with any systematic approach,
the potential success of these trading programs may be enhanced
or weakened by the market cycle and changing economic conditions.
Because options expire on a regular basis, portfolio managers are
required to make periodic adjustments and close or cover specific
positions as conditions dictate.  When an equity or index option
is closed or covered, it is generally described as "unwinding" a
position.  Thus, "Triple Witching" sessions will almost always
undergo substantially increased volatility and transaction volume
because institutional traders must exit or adjust their positions
in expectation of options expiration.  For retail traders, the
key is to realize that the market will be influenced briefly, in
a variety of ways, but the activity has few lasting results.

Good Luck!

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


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

QTRN   17.00  16.69   DEC  15.00  0.50  *$  0.50  20.5%
AMZN   28.94  22.88   DEC  17.50  0.63  *$  0.63  14.2%
ARQL   25.38  27.25   DEC  17.50  0.50  *$  0.50  13.0%
AVID   15.31  18.63   DEC  12.50  0.56  *$  0.56  12.6%
CMOS   20.88  21.13   DEC  15.00  0.38  *$  0.38  12.1%
ECLP   22.75  21.50   DEC  17.50  0.63  *$  0.63  10.6%
IDXC   29.38  27.94   DEC  22.50  0.75  *$  0.75   9.8%
QCOM   83.00  79.56   DEC  65.00  0.75  *$  0.75   9.4%
PSUN   22.19  23.50   DEC  17.50  0.38  *$  0.38   8.6%
PWAV   56.38  60.19   DEC  40.00  0.44  *$  0.44   8.2%
MTON   18.94  23.00   DEC  15.00  0.38  *$  0.38   7.9%
HNT    22.25  21.13   DEC  20.00  0.50  *$  0.50   7.6%
CAR    30.06  29.81   DEC  25.00  0.38  *$  0.38   7.5%
WGR    25.69  24.50   DEC  22.50  0.31  *$  0.31   6.1%
OXHP   37.38  37.56   DEC  30.00  0.56  *$  0.56   6.0%
WLL    49.38  47.25   DEC  45.00  0.38  *$  0.38   5.2%
TLB    49.81  42.00   DEC  40.00  0.50  *$  0.50   5.1%
KMI    43.25  48.81   DEC  40.00  0.56  *$  0.56   4.2%
AEOS   40.94  33.88   DEC  35.00  1.06   $ -0.06   0.0%
CTXS   30.88  24.25   DEC  25.00  0.63   $ -0.12   0.0%

NEM    16.25  16.19   JAN  15.00  0.88  *$  0.88   8.9%
AEIS   24.38  23.31   JAN  20.00  0.69  *$  0.69   8.2%
SPF    25.44  22.56   JAN  22.50  0.69  *$  0.69   6.3%
CORR   48.94  37.50   JAN  32.50  0.81  *$  0.81   5.5%
TXCC   47.88  43.44   JAN  25.00  0.75  *$  0.75   5.3%
KLAC   35.94  30.38   JAN  22.50  0.56  *$  0.56   5.2%
SNPS   42.13  40.25   JAN  35.00  0.88  *$  0.88   5.2%
CCR    41.69  45.50   JAN  35.00  0.75  *$  0.75   5.1%
FNSR   37.50  35.06   JAN  22.50  0.56  *$  0.56   5.0%
OXY    22.56  21.19   JAN  20.00  0.56  *$  0.56   4.9%

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


Both Citrix Systems (CTXS) and American Eagle Outfitters (AEOS)
offer the opportunity to roll down to a January covered-write
position.  With the weakening Retail sector and the deteriorating
technicals in AEOS, a quick exit might be a more prudent move.
Cor Therapeutics (CORR) reversed course rather quickly this
week and should be monitored closely.  Standard Pacific (SPF)
is testing its 30 dma after falling four days in a row to a key
support area.

Positions Closed:



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

CHTR   22.00  JAN  20.00  CUJ MD  0.81  353  19.19   35     9.3%
ADVP   39.50  JAN  30.00  QVD MF  0.81  15   29.19   35     8.1%
MU     35.88  JAN  25.00   MU ME  0.69  6330 24.31   35     7.6%
LFG    38.38  JAN  35.00  LFG MG  1.00  0    34.00   35     6.7%
BSTE   36.94  JAN  22.50  BQS MX  0.50  0    22.00   35     5.5%
BCHE   28.38  JAN  25.00  BQX ME  0.50  3929 24.50   35     5.1%
ADLAC  40.81  JAN  30.00  ADU MF  0.50  57   29.50   35     5.0%

Company Descriptions

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

ADLAC - Adelphia Communications  $40.81  *** On The Move! ***

Adelphia Communications is a leader in the telecommunications
industry with cable television and local telephone operations.
Adelphia's operations consist of providing telecommunications
services primarily over networks, which are commonly referred
to as broadband networks because they can transmit quantities
of voice, video and data by way of digital or analog signals.
After hinting about several important strategic initiatives at
investor conferences last week, the company announced that its
Adelphia Business Solutions (ABIZ) will significantly scale
back its network expansion.  Adelphia also formalized plans to
divest its cable systems in Puerto Rico and explore the sale of
other non-strategic systems.   Investors appear to favor the
announcement and a recent upgrade has helped propel the stock
to a 6-month high.  Target a higher premium to open the play.

JAN 30.00 ADU MF LB=0.50 OI=57 CB=29.50 DE=35 MR=5.0%

ADVP - AdvancePCS  $39.50  *** Recovery In Progress! ***

AdvancePCS is the nation's largest independent provider of health
improvement services, touching the lives of 75 million Americans
and managing over $18 billion annually in health care spending.
The company offers health plans a comprehensive array of highly
effective pharmacy benefit and health benefit management services
designed to build better health.  ADVP's capabilities include
integrated mail service and retail pharmacy networks, innovative
clinical services, disease management programs, clinical trials
and outcomes research, information management, and prescription
drug services for the uninsured.  Fortune magazine recently named
AdvancePCS to its list of the 100 fastest growing companies and
Forbes listed the company in its Platinum series of the nation's
fastest growing and top earning corporations.  The consolidation
has taken its course and now ADVP is ready to resume a long-term
up-trend.  Investors who favor the Health Services group can use
this play to speculate conservatively on its future performance.

JAN 30.00 QVD MF LB=0.81 OI=15 CB=29.19 DE=35 MR=8.1%

BCHE - BioChem Pharma  $28.38  *** Buyout Announced! ***

BioChem Pharma is an international biopharmaceutical company
involved in the research, development, and manufacturing of
products for the prevention, detection and treatment of human
diseases.  Their most advanced therapeutic product candidates
are being developed principally for use in the treatment of
cancers and infectious diseases.  BioChem is also engaged in
the research, development and production of vaccines for human
use.  Last week, Shire Pharmaceuticals Group plc and BioChem
Pharma announced that they have entered into an agreement to
merge the two groups to form a leading global pharmaceutical
company.  The merger will be achieved through an exchange of
shares, which values each BioChem share at $37 or 0.7839 of
the Shire ADS price, depending on the average closing value of
a Shire ADS during the last fifteen trading days ending on the
third trading day prior to the closing of the deal.  The merger
is expected to close in the second quarter of 2001.

JAN 25.00 BQX ME LB=0.50 OI=3929 CB=24.50 DE=35 MR=5.1%

BSTE - Biosite Diagnostics  $36.94  *** FDA Approval! ***

Biosite Diagnostics serves clinical needs in emergency medicine
by speeding the flow of critical diagnostic information.  Through
its integrated discovery and diagnostics businesses, Biosite is
developing rapid diagnostic tests that improve clinical outcomes
for acute diseases.  Biosite's Triage. products are used in 45%
of U.S. hospitals and in 40 international markets.  On November
22, Biosite announced that it had received FDA clearance to market
the Triage. BNP Test in the U.S.  This is the first blood test to
be cleared in the U.S. as an aid in the diagnosis of congestive
heart failure.  Investors cheered this news as the stock rallied
above its 150 dma on strong volume.  A brief consolidation took
the issue back to a recent support level and now it appears the
up-trend is ready to resume.  This position offers a favorable
risk/reward outlook for traders who are interested in drug sector

JAN 22.50 BQS MX LB=0.50 OI=0 CB=22.00 DE=35 MR=5.5%

CHTR - Charter Communications  $22.00  *** A New High! ***

Charter Communications is the fourth largest operator of cable
systems in the United States, serving over 6 million customers.
The company offers its customers a full array of cable television
services and programming and it has begun to offer advanced, high
bandwidth services such as high-speed Internet access.  Charter
plans to continually enhance and upgrade these services, along
with adding new programming and other telecommunications services,
and will continue to position cable television as an essential
service.  Friday's move to a new 6-month high on increasing volume
suggests this issue may have further upside potential and our
position offers a cost basis near technical support.

JAN 20.00 CUJ MD LB=0.81 OI=353 CB=19.19 DE=35 MR=9.3%

LFG - LandAmerica Financial Group  $38.38  *** Rally Mode! ***

LandAmerica Financial Group is engaged in the business of issuing
title insurance policies and performing other real estate-related
services for residential and commercial real estate transactions.
The company issues title insurance policies through its various
title underwriting subsidiaries.  The company provides escrow and
closing services to a broad-based customer group that includes
lenders, developers, real estate agents, attorneys and homebuyers
and sellers.  They also offer a range of residential real estate
services to the national and regional mortgage lending community
through its LandAmerica OneStop operation.  LFG has been "on the
move" over the past two weeks and the rally has shown very little
indication of weakness.  Since the issue is well above its 30-dma,
we will target a higher premium initially, to allow for a brief
consolidation in the upward trend.

JAN 35.00 LFG MG LB=1.00 OI=0 CB=34.00 DE=35 MR=6.7%

MU - Micron  $35.88  *** Chip Sector Bottom Fishing! ***

Micron, and its subsidiaries manufacture and market DRAMs, very
fast SRAMs, Flash, other semiconductor components, memory modules,
graphic accelerators, and personal computer systems.  The chip
sector appears to be putting in a bottom.  Last month, Prudential
Securities cut Micron's fiscal 2001 EPS estimates from $2.60 to
$2.30, on fears of weak DRAM pricing and high OEM inventories.
Chase H&Q followed that report with additional bearish comments
but the stock has refused to move below $30 on the negative news
and is trying to stage a pre-earnings rally.  We know that next
week's earnings will be lackluster, but this position offers a
favorable cost basis for those investors who have a long-term
bullish outlook on the company.

JAN 25.00 MU ME LB=0.69 OI=6330 CB=24.31 DE=35 MR=7.6%


The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

VICL   21.75  JAN  17.50  VAQ MW  0.81  0    16.69   35    13.4%
GETY   30.50  JAN  22.50  QGT MX  0.94  100  21.56   35    11.6%
FNSR   35.06  JAN  25.00  FQY ME  0.69  88   24.31   35     7.8%
ORCL   28.56  JAN  20.00  ORQ MD  0.44  9317 19.56   35     6.2%
PBG    42.25  JAN  40.00  PBG MH  1.13  14   38.87   35     6.2%
CCR    45.50  JAN  40.00  CCR MH  0.75  421  39.25   35     4.8%

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Evil spirits come forth on Triple Witching Day...

The market was crushed today as both industrial and technology
issues succumbed to selling pressure amid growing worries of an
economic recession.

Friday, December 15

The market was crushed today as both industrial and technology
issues succumbed to selling pressure amid growing worries of an
economic recession.  The Nasdaq dropped for a fourth consecutive
session while Dow registered triple-digit losses after analysts
slashed future earnings estimates on a slew of technology stocks.
The Nasdaq closed down 75 points at 2,653 and the Dow ended down
240 points at 10,434.  The S&P 500 index fell 28 points to 1,312.
Trading volume on the NYSE was the heaviest on record, reaching
1.55 billion shares, due to the "triple-witching" expiration of
options on stocks, indexes and futures.  Declines edged advances
by 1,607 to 1,309.  Activity on the Nasdaq was the third highest
on record, with over 2.6 billion shares exchanged.  Technology
declines beat advances 2,514 to 1,383.  In the U.S. bond market,
the 30-year Treasury was up 6/32, pushing its yield down to 5.43%.

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

PepsiCo      PEP     JAN42P/JAN45P   $0.43   credit   bull-put
Sepracor     SEPR    JAN120C/JA57P   $2.25   credit   strangle
Globo Cabo   GLCBY   FEB12C/FEB10P   $0.25   credit   synthetic

The broad market sell-off provided favorable entries in all of the
new combination positions.  The Sepracor credit strangle traded
well beyond the suggested premium and the PepsiCo credit spread
reached our target entry price in the afternoon session.  The new
synthetic play in Globo Cabo did not see any trading activity but
the recommended credit was easily achieved.

Portfolio Plays:

The "triple-witching" (simultaneous) expiration of options on
individual stocks, stock indexes and futures did not have its
usual bullish affect on the market today.  Although volume was
extreme, the majority of activity occurred on the supply side as
investors continued to unload sluggish issues in the wake of new
downgrades and sagging revenue forecasts.  Within the technology
group, hardware, networking and semiconductor stocks endured the
worst selling pressure while the overall market saw losses among
the retail, financial, drug, consumer and cyclical groups.  The
Dow tumbled on weakness in Microsoft (MSFT), which fell below $50
after the company said it expects second-quarter earnings to be
well below analysts' estimates.  Microsoft blamed a slowdown in
personal computer and information technology spending as well as
weakness in consumer online services and advertising.  A number
of other top-tier technology issues slumped during the session
and the worst blue-chip performers were International Business
Machines (IBM), Intel (INTC), Citigroup (C), Coca-Cola (KO) and
Honeywell (HON).  Disney (DIS), J.P. Morgan (JPM), Caterpillar
(CAT) and Minnesota Mining & Manufacturing (MMM) were the Dow's
only gainers.  In the broader sectors, defensive issues such as
gold and utility shares gained ground and oil service companies
also advanced, as January crude futures rebounded from a recent

Today's bearish activity left little room for optimism in the
market.  However, there were a few favorable moves during the
session and the Spreads/Combos portfolio enjoyed a relatively
successful month, considering the poor performance of the major
indices.  Once again, the most popular section, Credit Spreads,
was also the most profitable.  Over 90% of the (new) positions
expiring in December were successful.  The Pfizer (PFE) spread
was the only play that did not profit, but it did offer a number
of favorable exit opportunities, and ended almost exactly at the
break-even basis, with the last trade at $43.38.  Of the plays
that were carried forward from last month, Pharmacyclics (PCYC),
Seagate (SEG), Juniper Networks (JNPR), and Vertex (VRTX) all
expired successfully, while Curagen (CRGN) was rolled to January
with a cost basis of $33.43.  Another common trading strategy
that is gaining popularity among our readers is the "synthetic"
position and this month we enjoyed outstanding results in that
category.  Safeway (SWY), Safeco (SAFC), Medquist (MEDQ), MTI
Technology (MTIC) and Miravant Medical (MRVT) provided excellent
short-term profits.  The neutral-outlook strategies provided a
number of winning selections with outstanding returns seen in
debit straddles on Alliance Capital (AC), Advanced Fibre (AFCI),
Compass Bancshares (CBSS), Jefferson Pilot (JP), Unibanco (UBB),
and potentially profitable results in Flowers Industries (FLO),
Scm Microsystems (SCMM), and TD Waterhouse (TWE).  Our solitary
credit strangle in Voicestream (VSTR) closed at maximum profit
and last month's adjusted position in Broadcom (BRCM) is near
the (January) break-even price of $121.  Carter Wallace (CAR)
and Federal Express (FDX) were the top performing diagonal plays
and among the conservative debit positions, Genesco (GCO) led
the "bull-call" section and Pioneer Resources (PXD) was a close
second with a 25% profit.  Favorable calendar spreads have been
hard to find with the lackluster call option premiums but we
managed to identify a big winner with Biochem Pharma (BCHE) and
positions in Mattel (MAT), Kellogg (K) and Ralston Purina (RAL)
also provided profitable opportunities.

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

Today's 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.
OCR - Omnicare  $18.38  *** Bracing for a Rally? ***

Omnicare is a provider of pharmacy services to long-term care
institutions such as skilled nursing facilities, assisted living
communities and other institutional health care facilities.  The
company's Pharmacy Services segment provides distribution of
pharmaceuticals, related pharmacy consulting, data management
services and medical supplies to long-term care facilities.
Omnicare's CRO Services segment provides comprehensive product
development services globally to many client companies in the
pharmaceutical, biotechnology, medical devices and diagnostics

Omnicare reported favorable earnings in the most recent quarter,
generating $58 million in cash flow from operations, an all-time
quarterly high, and year-to-date cash flow reached $118 million,
85% higher than the $63 million generated over the same period
in 1999.  The CEO said the sequential improvement in results was
a testament to the value of the company's unique franchise in the
geriatric pharmaceutical marketplace and their financial strength.
Their continuing priority is to generate strong, positive cash
flow and to maintain a solid financial position, and investors
appears to favor that attitude.  On Friday, Omnicare rallied to
a new test of the 52-week high near $19 and if the recent bullish
activity is any indication of its technical strength, this issue
has excellent upside potential.

PLAY (conservative - bullish/debit spread):

BUY  CALL  JAN-15.00  OCR-AC  OI=41  A=$4.00
SELL CALL  JAN-17.50  OCR-AW  OI=93  B=$2.00
INITIAL NET DEBIT TARGET=$1.88  ROI(max)=32% B/E=$16.88

PBG - Pepsi Bottling Group  $39.88  *** Reader's Request!  ***

The Pepsi Bottling Group consists of bottling operations located
in the United States, Canada, Spain, Greece and Russia.  These
bottling operations manufacture, sell and distribute Pepsi-Cola
beverages including Pepsi-Cola, Diet Pepsi, Mountain Dew and
other brands of carbonated soft drinks and other ready-to-drink
beverages.  Pepsi-Cola beverages sold by the company include
ICED TEA, 7UP outside the United States, PEPSI MAX, PEPSI ONE,
Bottling Group also has the exclusive right to manufacture, sell
and distribute Pepsi-Cola beverages in all or a portion of 41
states, the District of Columbia, eight Canadian provinces,
Spain, Greece and Russia.

One of our faithful readers pointed out this stock after we
offered the bullish position in PepsiCo (PEP) last week.  He
noted that the issue is in a well established upward trend, but
the options have little premium for disparity plays.  However,
there is a method that offers favorable speculation for traders
who are bullish on the issue and the options are priced correctly
for the strategy.  Target a higher premium initially, to allow
for a brief consolidation in the upward trend.

PLAY (conservative- bullish/synthetic position):

BUY  CALL  JAN-45  PBG-AI  OI=65  A=$1.18
SELL PUT   JAN-40  PBG-MH  OI=14  B=$1.12

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $1,575 per contract.

BOW - Bowater  $52.69  *** Trading Range! ***

Bowater Incorporated is engaged in the manufacture, sale and
distribution of newsprint, uncoated groundwood specialties,
coated groundwood paper, market pulp, lumber and timber.  The
company operates facilities in the United States, Canada and
South Korea and manages or possesses cutting rights for over 16
million acres of timberlands to support these facilities.  The
company markets and distributes its various products in North
America, South America and overseas.  Including the company's
Mersey, Dalhousie and Ponderay Operations, Bowater's annual
production capacity of newsprint and uncoated groundwood
specialties is approximately 2.7 million metric tons.  With the
South Korean newsprint mill, the company's annual production
capacity of these products is approximately 3 million metric
tons, or approximately 6% of the worldwide capacity total.

The market for newsprint production and supply is a competitive
arena and profit margins are expected to be very tight throughout
the coming months.  Analysts say the recent forecasts of slower
advertising growth could significantly affect the outlook for
companies in the group and Bowater would likely be one of the
first issues to suffer from the slowdown.  The technical history
of the company's shares suggests that the stock has little buying
interest above $55 and any negative news could drive the issue
back to the bottom of a recent range near $45.  Traders who agree
with this outlook can use the favorable call option premiums to
speculate on this outcome.

PLAY (aggressive - bearish/credit spread):

BUY  CALL  JAN-60  BOW-AL  OI=80  A=$1.06
SELL CALL  JAN-55  BOW-AK  OI=16  B=$2.43
INITIAL NET CREDIT TARGET=$1.50  ROI(max)=42% B/E=$56.50

This position was discovered with one of our primary scan/sort
techniques; identifying potentially failed rallies on issues
with bullish options activity.  In this case, the premiums for
the (OTM) call options are slightly inflated and the potential
for a successful (technical) recovery is significantly affected
by the resistance at the sold strike price; a perfect condition
for a bearish credit spread

                         - STRADDLES -

These positions have cheap option premiums and upcoming events
or activities that may generate volatility in the underlying
issues or their industries.  As with any recommendations, they
should be evaluated for portfolio suitability and reviewed with
regard to your strategic approach and trading style.

AXF - AXA Financial  $58.63  *** Cheap options! ***

AXA Financial, with approximately $400 billion in assets under
management, is one of the world 's premier financial services
organizations through its strong brands: The Equitable Life
Assurance Society, AXA Advisors, Equitable Distributors, Inc.,
Alliance Capital Management and Sanford C. Bernstein.  AXA
Financial is a member of the global AXA Group, which has
operations in approximately 60 countries and has more than $900
billion in assets under management.

Since the early part of November, AXA Financial has been
consolidating or perhaps putting in a top.  The volume picked
up a bit last week as the financial services company began to
see its price rollover.  Some of the technical indicators are
now approaching the oversold area.  However, without something
to keep the bulls interested, we could see AXF pullback to
support near $50.  If that's the case and $50 fails to hold,
$45 could be the next rest stop.  Whether the bulls return or
profit taking continues, the option premiums are favorable and
the April expiration should give this one time to grow.

PLAY (conservative - neutral/debit straddle):

BUY CALL  APR-55  AXF-DK  OI=2176  A=$1.88
BUY PUT   APR-55  AXF-PK  OI=364   A=$1.81

EQR - Equity Residential Properties Trust  $53.25

Equity Residential Properties Trust (EQR) is America's number one
apartment company.  With more than 1,000 properties across 35
states, it is the largest publicly traded owner and operator of
multifamily properties in the United States.  The company seems
to be building value for their shareholders, residents and
employees by combining the resources of a large company and a
national presence with strong local management and expertise.

If you've owned stock in EQR since its run that began in late
October, congratulations!  In that time, shares of EQR have moved
from $44.50 to a new high this past Tuesday at $54.75.  On Friday,
EQR gapped down at the open, losing as much as $1.75 intra-day,
but managed to recover to $53.25 for a $1.13 loss.  The volume
was fairly light especially for an expiration day.  We could soon
see a retest of the last week's high and a technical filling of
the gap.  However some profit taking could certainly be in order
after the nice $10 run up the chart.  The pricing on the April
options was simply too much to pass up this weekend.  Whether
EQR resumes its ascent to higher prices or the bottom begins to
fall out we feel this new play could be in a position to profit
quite handsomely from further movement in either direction.

PLAY (speculation - neutral/debit strangle):

BUY CALL  APR-55  EQR-DK  OI=5   A=$1.56
BUY PUT   APR-50  EQR-PJ  OI=76  A=$1.00

                      - PREMIUM SELLING -
COST - Costco  $34.88  *** Range-bound! ***

Costco Wholesale Corporation operates membership warehouses based
on the concept that offering members very low prices on a limited
selection of nationally branded and selected private label
products in a wide range of merchandise categories will produce
high sales volumes and rapid inventory turnover.  This rapid
inventory turnover, when combined with the operating efficiencies
achieved by volume purchasing, efficient distribution and reduced
handling of merchandise in no-frills, self-service warehouse
facilities, enables Costco to operate profitably at significantly
lower gross margins than most traditional wholesalers, discount
retailers and supermarkets.  Costco's warehouses usually operate
on a seven-day, 68-hour week, and are open somewhat longer during
the holiday season.

Costco Wholesale posted earnings last week and their quarterly
net income was essentially flat, matching analysts' expectations
as sales rose by 10%.  Net income in the period came in at $129.5
million, or $0.28 a share, compared with $129.3 million or $0.28
per share, in the same period a year ago.  Analysts polled by
First Call had expected the warehouse operator to report a profit
of $0.28 a share, and it appears they were "on the mark" with
respect to the company's financial performance.  Investors had no
opinion on the earnings announcement, as Costco's shares ended
only $0.06 below Thursday's closing price.  With that kind of
indifference to the current outlook for the company, the stock
should experience the same type of range-bound trading as it has
over the past few months.

PLAY (conservative - neutral/credit strangle):

SELL CALL  JAN-40  PRQ-AH  OI=1849  B=$0.69
SELL PUT   JAN-30  PRQ-MF  OI=2158  B=$0.63
UPSIDE B/E=$41.38 DOWNSIDE B/E=$28.63

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