Schaeffer's Market Observation Features Time Warner.Business Editors CINCINNATI--(BUSINESS WIRE)--April 29, 2004 Today's Market Observation features Time Warner (NYSE NYSE See: New York Stock Exchange :TWX (TeletypeWriter eXchange Service) A U.S. and Canadian dial-up communications service that became part of Telex. In 1971, the Bell System sold TWX to Western Union. TWX transmitted 5-bit Murray code or 7-bit ASCII code at up to 150 bps. See Telex. ). Schaeffer's Market Observations are market-based reports that provide insight and analysis from a unique and unbiased perspective. Market Observations are published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. To receive a free email notification each time a new commentary is written about one of the featured stocks or any of your favorite stocks, click on the following link. http://www.schaeffersresearch.com/addinfo . Time Warner: Pinned to 17 Time Warner (NYSE:TWX) reported earnings after the bell last night. The company stated that net income more than doubled on sharply higher revenues. Earnings came in at 15 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. versus the First Call estimate of nine cents per share. The stock reacted very favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to this news, trading as high as 17.65 this morning on the open before pulling back to 17.10. TWX is currently up 3.63 percent on the news. Click the following link to see the Daily Chart of TWX since January 2004: http://www.schaeffersresearch.com/wire?ID=10026 . Click the following link to see the Intraday Intraday Another way of saying "within the day." Notes: This term is often used for the new highs and lows of a security. For example, "a new intraday high" means a security reached a new all-time high throughout the trading day, but then fell by closing. Chart of TWX: http://www.schaeffersresearch.com/wire?ID=10026 . After this morning's initial bullish Bullish Word used to describe an investor's attitude. Bullish refers to an optimistic outlook, while bearish means a pessimistic outlook. bullish gap higher, the stock has been hugging the 17 level. This strike is particularly significant because of the heavy front-month call and put open interest that resides there. The strike is heavily slanted slant v. slant·ed, slant·ing, slants v.tr. 1. To give a direction other than perpendicular or horizontal to; make diagonal; cause to slope: towards the call side, with 50,837 call contracts in residence. Furthermore, total open interest at the strike increased by nearly 2,800 calls, as investors chose to make bullish bets ahead of the company's earnings report. In addition, there was some moderate interest in the 17-strike put, and the out-of-the-money 16 put from options speculators. Click the following link to see the Open Interest Configuration for TWX: http://www.schaeffersresearch.com/wire?ID=10026 . Today's price action is an excellent example what is referred to as pinning or overhead call resistance. This large chunk of open interest is potentially helping to cap today's rally. The call writers at the 17 strike do not want these call positions to go significantly in the money with so much time until expiration Time until expiration The time remaining until a financial contract expires. Also called time to maturity. . The other aspect of the equation is the potential for a delta-covering rally. If TWX begins to push higher above the strike, the delta on front-month 17 call will increase. Because of this increasing delta, market makers will have to buy more TWX shares in order to be delta neutral Delta Neutral A portfolio consisting of positions with offsetting positive and negative deltas. The deltas balance out to bring the net change of the position to zero. Notes: As a result, you neutralize the response to market movements for a certain range. and fully hedged. For now, it appears that the buyers and sellers are locked in battle over the 17 strike, but this may be a situation that is worth watching as we move closer to expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created . The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Midday Report, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/addinfo. About Schaeffer's Investment Research (www.SchaeffersResearch.com) Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. 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