Schaeffer's Daily Market Blog Features: Genzyme, PepsiCo, Kinder Morgan, McDonald's, and Microsoft.

CINCINNATI -- Among the stocks featured in the October 13 edition of Schaeffer's Market Blog are Genzyme (NASDAQ:GENZ), PepsiCo (NYSE:PEP), Kinder Morgan (NYSE:KMI), McDonald's (NYSE:MCD), and Microsoft (NASDAQ:MSFT). Schaeffer's Market Blog is just one of the many free market commentaries written every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. The Market Blog is written throughout every trading day by Schaeffer's financial analysts and traders. They are quick insights to the day's most notable market activity from an options perspective. To have this report delivered to you free via email every day click on the following link and you'll also get an opportunity to win an iPod Nano. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB13M&PAGE=1 .

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9:52 AM Genzyme (GENZ) Earnings Report Attracts Options Players

Thursday, Genzyme (NASDAQ:GENZ) reported third-quarter earnings of six cents per share, down from 43 cents per share in the year-earlier period. Excluding various items, the company banked 73 cents per share, or two cents better than analysts' expectations. Revenue rose 14 percent during the period to $808.6 million. The stock dropped 1.6 percent in yesterday's trading, despite the strong broader market, although options players were notably active on the shares. GENZ made our list of unusual option volume for the session; nearly 26,000 calls changed hands on the day compared to the usual call volume of 2,753 contracts. Not to be left out, put buyers were also notably active. More than 19,700 contracts crossed the tape during the session, up from the average of 3,231 put contracts the equity sees change hands during a typical day.

Most active were the October 65 call (GZQ JM) and put (GZQ VM), which each saw more than 2,000 contracts added to open interest, and the October 70 call (GZQ JN), which saw its open-interest reading drop by more than 2,000 contracts. Additionally, the November 60 put (GZQ WL) saw more than 2,100 contracts added as new open interest.

12:12 PM Call Pop on PepsiCo

PepsiCo (NYSE:PEP) is the focus of some heavy call trading this afternoon. More than 4,000 contracts have crossed the tape on the security's January 2007 62.50 call, which has open interest of nearly 5,500 contracts. A total of 3,916 contracts changed hands in two blocks at 9:43 a.m. Eastern time at an ask price of $0.30.

Technically speaking, the shares have pulled back to former support in the 62 area. However, the equity is currently poised to notch its first weekly close below both its 10-week and 20-week moving averages since the beginning of May.

12:40 PM A Spread on Kinder Morgan?

Kinder Morgan (NYSE:KMI) is seeing some heavy call trading this afternoon. Both the stock's November 105 and January 2007 105 calls had a block of 9,500 contracts cross the tape at 11:07 a.m. Eastern time. At first, it looked like a calendar spread, which I discussed yesterday when I looked at American Express (AXP). As a refresher, a calendar spread is where an investor will sell a short-term call (or put) and then buy a longer-term call (or put) at the same strike.

However, with KMI, it appears that a trader may be closing out a short position in the November 105 calls and rolling out the position to the January 2007 105 calls. The block of 9,500 contracts on the back-month option crossed at an ask price of $1.00. Furthermore, open interest at this strike comes in at 20,041 contracts, indicating that the hefty block could represent existing positions. Meanwhile, the block of 9,500 contracts on the January call crossed at closest to the bid price at $2.05. Open interest for this option sits at only 3,332 contracts, indicating that today's volume is likely to be new positions.

Technically speaking, the shares have been grinding slowly higher along the support at their 10-day moving average and have taken out resistance at the 105 level during the past few sessions. The company is also in the middle of a management-led buyout, where the offer-per-share currently stands at $107.50.

1:08 PM Would You Like Fries With Your Straddle?

With about a week until October options expire, McDonald's (NYSE:MCD) is seeing what appears to be a straddle cross the tape today. The fast-food behemoth that rallied to consecutive new annual highs this week has seen about 10,000 contracts trade on the near-the-money October 42.50 call (MCD JV) and put (MCD VV) today. On the call, one block of 8,500 contracts traded at the ask price of 0.45 per contract at 12:53 p.m.; another block of 1,500 contracts changed hands at the bid price of 0.40 at about the same time. Checking on the put option, 10,000 contracts came across the tape in one fell swoop at 12:52, trading at the bid price of 0.75 per contract.

Assuming that these positions may have been sold to option, this could be a short straddle, which is a bet on low volatility between now and options expiration next Friday. A short straddle position's maximum profit is limited to the premium collected from both options sold, or just over $1.00 per contract in this case.

1:24 PM Microsoft Near Top of Four-Year Range

Microsoft (NASDAQ:MSFT) has been on a tear recently, and is up more than 30 percent from its June low. I'm not necessarily advocating fighting the current trend, but the shares are near the top of their four-year trading range and optimism seems a bit high. Call option volume on the stock is outpacing respective put option volume by a ratio of about five-to-one today. If you're long the stock it might not be a bad idea to take a few chips off the table right here.

For more information on these stocks or any stock in your portfolio, feel free to visit our Schaeffer's Equity Scorecard feature. Click here to read all of today's Market Blog: http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB13C&PAGE=1.

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