Exhibit 8.01

 
                      [SET LETTERHEAD OF SIDLEY & AUSTIN]



                                August 3, 1998



Merrill Lynch Investment Partners Inc.
General Partner of
  ML Principal Protection L.P.
Merrill Lynch World Headquarters
South Tower, 6th Floor
World Financial Center
New York, New York  10080-6106

     Re:  Registration Statement on Form S-1
          ----------------------------------

Dear Sir or Madam:

     We refer to the Registration Statement on Form S-1 filed by ML Principal 
Protection L.P. (the "Partnership") and ML Principal Protection Trading L.P. 
(the "Partnership") with the Securities and Exchange Commission under 
the Securities Act of 1933 (the "Securities Act") on or about August 4, 1998.

     We have reviewed such data, documents, questions of law and fact and other
matter as we have deemed pertinent for the purpose of this opinion. Based upon
the foregoing, we hereby confirm our opinions expressed under the caption
"Federal Income Tax Consequences" in the Prospectus that: (i) each of the
Partnership and the Trading Partnership in which the Partnership will invest
will be taxed as a partnership for federal income tax purposes (assuming that
Merrill Lynch Investment Partners Inc. makes a capital contribution to the
Trading Partnership in at least the amount contemplated by the Prospectus); (ii)
each Partner will be required to report on his tax return his allocable share of
the Partnership's income, gains, losses, and deductions; (iii) based upon the
contemplated trading activities of the Trading Partnership, the Trading
Partnership should be treated as engaged in the conduct of a trade or business
for federal income tax purposes, and, as a result, the ordinary and necessary
business expenses incurred by the Trading Partnership in conducting its
commodity futures trading business should not be subject to limitation under
section 67 of the Internal Revenue Code of 1986, as amended (the "Code") or
under section 68 of the Code; and (iv) based on the contemplated trading
activities of


 
the Trading Partnership of the Partnership, the income earned by the Partnership
will not constitute "unrelated business taxable income" under section 511 of the
Code to employee benefit plans and other tax-exempt entities which purchase 
Units; provided that such Units purchased by such plans and entities are not 
"debt-financed" within the meaning of section 514 of the Code.

     We also advise you that in our opinion the description set forth under the 
caption "Federal Income Tax Consequences" in the Prospectus correctly describes 
(subject to the uncertainties referred to therein) the material aspects of the 
federal income tax treatment to United States individual investors, as of the 
date hereof, of an investment in the Partnership.

     We hereby consent to the filing of this opinion as an Exhibit to the 
Registration Statement and to the inclusion in the Prospectus of our opinion 
set forth under the caption "Federal Income Tax Consequences."


                                  Very truly yours,


                                   SIDLEY & AUSTIN