Question: What do games, carpets, computers, hams, contraceptive devices, octane boosters and waterbeds have in common? Answer: They are all products manufactured by Washington-area companies on the 1985 list of winners and losers.

For each of the 20 companies whose stocks gained or lost the most in 1985, there is an accompanying story of success or failure.

Perhaps the most unusual tale comes from Martin Processing Inc. of Martinsville, Va. It was the biggest gainer of 1985, moving up 342.4 percent. That followed a 61.4 percent rise in 1984. Martin Processing dyes carpet yarn, produces plastic film and was reported to be developing materials to make U.S. military aircraft invisible to enemy radar.

Martin Processing stock, which sold for $14.75 a share at the start of 1985, soared to $83, an increase of 463 percent. Since that peak, the stock has backed off to $65.25.

The heavy rush to buy Martin Processing shares began in April when the president, Julius Hermes, told stockholders he was suffering from lung cancer. His health, his age and his control of the company all pointed to a possible sale. When he died in September at 77, leaving the company in trust to his family, the thinly traded stock took off like a Phantom jet.

The company later hired Dillon, Read & Co. of New York to advise it on its future. That led to speculation that the company would be sold or that the present managers would seek a leveraged buyout -- in which buyers borrow money to pay for a company, pledging the firms' assets as collateral.

Proving that it helps to be in the right business at the right time, Schwartz Brothers Inc. of Lanham, Md., has watched its stock move from $2.25 at the beginning of the year to $8.50, a rise of 277.8 percent. In 1984, the firm sold its Harmony Hut record stores and became a distributor of videocassettes. That helped its bottom line, with the company recently reporting a 280 percent increase in nine-month profits.

Business is flowing smoothly for Insituform East of Landover, Md., a firm that repairs damaged sewer pipes without excavation. Sales increased 43 percent in fiscal 1985 and 36 percent in fiscal 1984. Insituform East, which was on the losers list last year when it dropped 63.8 percent, started this year at a split-adjusted price of $2.92. It closed Friday at $10.50, which is a 259.6 percent gain.

For curious tales, the rise of Monarch Avalon stock is a testimonial -- if one were needed -- to people's interest in sex. Monarch Avalon is a Baltimore board game manufacturer. At the end of 1984, Monarch Avalon stock was selling at $3.25, down 53.6 percent for the year. In June, word got out that the company was going to market a new board game called "Dr. Ruth's Game of Good Sex," named for Dr. Ruth Westheimer. Orders poured in, and the stock price climbed to $21.50, up 562 percent. Since then, the stock has retreated to $10.50, giving Monarch Avalon a 1985 gain of 223.1 percent.

Verdix Corp. a fledging Chantilly, Va., computer company, has hitched its star to a new computer language called "Ada" -- adopted by the Defense Department for use in weapons and communications systems. After several years of red ink, Verdix is moving into the black. Aerospace giant Martin Marietta owns 22 percent of Verdix. Verdix went public at $2 a share in 1983, began 1985 at $1.63 a share and closed at $5, up 206.8 percent.

Playing "merger mania," Smithfield Foods of Arlington, Va., one of the largest meatpackers in the East, joined the Fortune 500 four years ago by absorbing its rival, Gwaltney of Smithfield. It later acquired Patrick Cudahy Inc., a Wisconsin pork processor, and recently decided to buy the Esskay meatpacking company in Baltimore. Smithfield's operating profits have fattened and so has its stock price. From $7.63, Smithfield shares havering with some of his work. owes its 140.2 percent rise from a split-adjusted price of $24.88 to $59.75 to its decision to merge with Bank of Virginia Co. Recent moves in Union Trust stock have matched changes in Bank of Virginia stock because the merger will involve a stock swap.

Legg Mason Inc., a Baltimore brokerage firm, went public in July 1983 and has been growing rapidly. After some ups and downs, its shares have strengthened. Starting the year at a split-adjusted $8.75 a share, Legg Mason closed at $20.88, up 138.6 percent.

After several losing years, Universal Security Instruments Inc. of Owings Mills, Md., added video products to its line of telephones and security devices. Sales moved up 46 percent, and the firm recorded a profit for the first half of fiscal 1986. The stock responded by rising from $1.63 at the start of 1985 to $3.75, a boost of 130.1 percent.

International Bank of Washington (A shares) have risen from $7.13 to $16, a boost of 124.4 percent. International Bank, which once held USLICO, the Washington insurance company, as a subsidiary, has been engaged in a complicated maneuver in which USLICO will wind up as the parent and International Bank as the subsidiary.

On the losing side of the ledger, American Fuel Technologies Inc. stock had the poorest performance of the year, declining 89.3 percent from $1.50 to 16 cents. The Federalsburg, Md., firm manufactures ethanol, which can replace lead and be used to boost gasoline octane levels. After years of red ink, the company is hoping for a turnaround based on growth in the ethanol market.

Vector Automation Inc. of Baltimore, which develops computer systems, reported profits in 1981, 1982 and 1983, but showed losses in 1984 and in the first nine months of 1985. Its stock opened the year at $1.19, but fell off 68.1 percent to 38 cents a share.

At Genex Corp., a Rockville biotech company, hopes for a sweet future turned bitter when G. D. Searle & Co. canceled its multimillion-dollar contract for a key ingredient in the low-calorie sugar substitute, aspartame. Searle sells aspartame under the names NutraSweet and Equal. The cancellation helped send Genex stock plummeting from $5.38 to $1.75, a loss of 67.4 percent.

Caught in one of the worst steel recessions in history, Eastmet Corp. of Baltimore has seen both its earnings and its stock price fall. The firm, which recently laid off 450 workers, lost $14.5 million during the first nine months of this year, almost three times its losses in the same period a year ago. The stock has slid from $4.25 a share at the start of 1985 to $1.44, a 66.1 percent loss.

Caught in the computer industry shakeout, Entre' Computer Centers' stock fell this year from $13.75 to $6.75, down 50.9 percent. The computer retailer went public two years ago at $12 a share, saw its stock go to $19 and then decline as earnings gains slowed.

Cordatum Inc. of Bethesda, which develops computer software and educational videodisc systems for the government and private industry, has shown losses for some time. Its stock slid in 1985, with its shares dropping from 69 cents to 34 cents, a loss of 50.7 percent.

D.C. Trading & Development Corp., headed by O. Roy Chalk, is primarily a real-estate holding company. In 1984, it set up a high-tech center that will conduct research for the machine tool industry. In 1985, D.C. Trading stock fell from $3 to $1.50, down 50 percent.

U.S. Design Corp. of Lanham, Md., which manufactures high-capacity disk and tape storage systems for micro and mini computers, dropped off from $5.25 a share to $2.75, down 47.7 percent.

A. H. Robins of Richmond, deep in litigation over the Dalkon Shield contraceptive device, saw its stock drop from $20.13 to $11.13, a plunge of 44.7 percent.

After years of rapid growth, Vie de France Corp., a Vienna, Va., baking and restaurant company, recently saw its profits drop off as the firm made changes geared toward future market expansion. Its shares fell from $11.88 to $6.75, a loss of 43.2 percent.