Midday Options Update Highlights the Following Stocks: IDEC Pharmaceuticals, PepsiCo, Advanced Micro Devices, Altera, Applied Materials.

Business Editors

CINCINNATI--(BUSINESS WIRE)--Oct. 7, 2003

Today's Midday Options Update focuses on: IDEC Pharmaceuticals (NASDAQ:IDPH), PepsiCo (NYSE:PEP), Advanced Micro Devices (NYSE:AMD), Altera (NASDAQ:ALTR), and Applied Materials (NASDAQ:AMAT).

The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most active calls and puts for the day. The Midday Options Update is published every day at SchaeffersResearch.com . To receive observations similar to Midday, please click on the link below : http://www.schaeffersresearch.com/addinfo .

Midday Options Update

Traders are keeping one eye on the market and another eye on the political race in California this afternoon. Today is the day that voters in the West Coast state decide: (a) whether to recall Governor Gray Davis and if so (b) who the new governor will be. The major market indexes have yo-yoed in and out of positive territory today as investors take a little money off the table following their stellar race higher.

If it's not the race in California, earnings are on everyone's lips as hopes remain high for the third quarter. PepsiCo (NYSE:PEP) helped to get the season off to the right start. The company reported a profit that met the Street estimate of 62 cents per share. Alcoa is on deck to announce its earnings after the close this afternoon.

Analysts are working to fill the void left by a lack of economic news, with several upgrades blanketing the tech sectors. Advanced Micro Devices (NYSE:AMD) was lifted from "reduce" to "neutral" and Altera (NASDAQ:ALTR) was upgraded from "neutral" to "buy." Applied Materials (NASDAQ:AMAT) is also up more than one percent after being upgraded from "underperform" to "neutral." Not to leave the blue chips out; McDonald's was boosted to a "buy" from a "hold."

At 2:41 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 9612.8) is up 0.19 percent and the S&P 500 Index (SPX - 1034.86) is higher by 0.05 percent. The Nasdaq Composite (COMP - 1896.9) is up 0.18 percent. At 2:42 p.m. in the options pits, 1,723,459 calls and 1,011,318 puts traded for a composite put/call ratio across all five exchanges of 0.58. The CBOE put/call ratio for equity options weighed in at 0.67.

Calls have been briskly trading on IDEC Pharmaceuticals (NASDAQ:IDPH) this afternoon. The stock's October 35 strike has seen more than 11,600 contracts change hands on open interest of more than 20,200 contracts. Options players remain overwhelmingly optimistic toward the security. Its Schaeffer's put/call open interest ratio of 0.41 is lower than 99 percent of those taken over the past 52 weeks. However, short sellers have some reservations about the stock. The number of IDPH shares sold short skyrocketed 19 percent in September to 22.6 million. This is more than eight times its average daily trading volume, raising the potential for a covering rally. Wall Street is also hesitant, with 14 of the 21 analysts following the biotech company rating it a "hold" and one rating it a "strong sell."

From a technical perspective, the stock is struggling to hold onto support at its 10-month moving average and is moving into its declining 20-month trendline (which has capped the shares since March 2002). The security is also facing staunch resistance at the 38 level. The stock's performance has been less than impressive, with its relative-strength measure versus its peers in the AMEX Biotechnology Index sliding lower since November 2002. It looks like the equity has room for further weakness as options players unwind their bullish bets.

Click the following link to see the Monthly Chart of IDPH since February 2002 with 10-Month and 20-Month Moving Averages:

http://www.schaeffersresearch.com/wire?ID=8605 .