Schaeffer's Midday Options Update Features Advanced Micro Devices, Delphi, PeopleSoft, Micromuse, and Honeywell International.

CINCINNATI -- Today's Schaeffer's Midday Options Update Features Advanced Micro Devices (NYSE:AMD), Delphi (NYSE:DPH), PeopleSoft (NASDAQ:PSFT), Micromuse (NASDAQ:MUSE), and Honeywell International (NYSE:HON). 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 www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1M&PAGE=1

Options Update: Sticky Sentiment on Honeywell International

An unexpected spike in the November Producer Price Index (PPI) started the morning off. The PPI showed an increase of 0.5 percent, thanks to higher energy prices. The consensus was calling for a smaller increase of 0.1 percent. Excluding food and energy prices gives us the core PPI, which rose 0.2 percent, matching the Street's estimate. Prices for core immediate goods marked the worst inflation since 1981, jumping eight percent higher. The core immediate goods price is seen as a leading indicator of inflation.

Following the PPI was the University of Michigan's December Consumer Sentiment Index reading, November's reading came in at 92.8. Heading into the report, analysts expected the reading to inch ahead to 93.2. They were handed a surprise as the preliminary reading for December surged ahead to 95.7. Furthermore, the consumer expectations index moved from 85.2 in November to a reading of 88.8. The current conditions index increased from 104.7 in November to 106.3. More sentiment news can be had by reading "Consumer Sentiment Improves."

Slowing the Advance

Advanced Micro Devices (NYSE:AMD) had received some favorable coverage from brokerage analysts when one suggested that "new money" invested in chipmakers may be better spent on AMD than on Intel (INTC). An analyst with UBS cited that AMD's valuation may be limited by increasing competition between the two as reason for downgrading AMD to "reduce" from "neutral." UBS's analyst also stated that it may be harder for AMD to distinguish itself from INTC as its rival introduces more competitive products. While this is not the most positive news, AMD received an increase of its price target from $17 to $20.

Job Cuts at Delphi

Automotive parts maker Delphi (NYSE:DPH) announced this morning that it would undertake a restructuring plan that will cost the company 8,500 jobs. According to DPH, 2,300 of the jobs that will be cut are considered "high-wage reduction workforce" positions that will be reduced in a plan that will accelerate retirements. Roughly 3,000 jobs will give in to "normal attrition" and 5,500 jobs outside the U.S. will be eliminated. Additionally, DPH cut its fourth-quarter revenue forecast by $200 million. For the quarter, the company sees a loss of $123 million; this includes $45 million in restructuring charges along with an $8-million charge for reduced tax benefits. The consensus estimate for DPH's fourth quarter calls for a profit of seven cents a share on sales of $7.06 billion. The reduced range for the company's fourth-quarter revenue is $6.9 to $7.0 billion. In 2005, the company sees a pro forma loss of $200 million on revenue in the $28.5-to-$29 billion range.

Up With People

PeopleSoft (NASDAQ:PSFT) has been fighting numerous takeover bids from Oracle (ORCL), today PSFT received some much needed support from analysts. PSFT has rebuffed the attention from ORCL stating that the company's offers (one as high as $26 per share) are undervaluing PSFT's worth. Wells Fargo analyst Eric Upin elevated his estimates for PSFT's fourth quarter and 2005. Upin also stated that strong performance from the company could force ORCL to raise its bid for PSFT. Adam Holt, from J.P. Morgan also lifted his earnings estimates for PSFT's fourth quarter and 2005. According to CBS MarketWatch Holt believes PSFT has an "encouraging product roadmap." Holt still feels that PSFT's 2005 expectations are still "too aggressive," giving PSFT stock a "neutral" rating. The final analyst to jump on the PSFT bandwagon is John Torrey, from Adams Harkness. Stating that "the innovation engine at PeopleSoft remains alive and well," Harkness maintained his "buy" rating on the company's stock with a target price of $27. On an average, the consensus estimate for PSFT's fourth quarter stands at 20 cents per share. For 2005 the same analysts believe that the company will earn 85 cents per share. PSFT expects to earn between 20 and 22 cents per share for the fourth quarter and between $1.05 and $1.10 per share in 2005.

Inspired By MUSE

Early yesterday, Friedman, Billings, Ramsey gave an upgrade to Micromuse (NASDAQ:MUSE). Referring to a new chief financial officer, new product offering, expectations of an uptrend cycle in spending by large telecommunications companies, and valuation, the brokerage elevated MUSE from "market perform" to "outperform." According to Hoover's, MUSE monitors and manages information technology infrastructures. MUSE provides applications that allows operators to immediately resolve problems and to manage service levels.

Most-Active Options Update

At 1:33 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,546.3) is down 0.06 percent and the S&P 500 Index (SPX - 1,188.36) is down 0.08 percent. The Nasdaq Composite (COMP - 2,127.4) is down by 0.08 percent. At 1:33 p.m. in the options pits, 1,707,545 calls and 860,059 puts traded for a composite put/call ratio across all six exchanges of 0.50. The CBOE put/call ratio for equity options weighed in at 0.51.

Honeywell International

According to Hoover's, Honeywell International (NYSE:HON) has its hands in many different pots. The company's largest business segment is Honeywell Aerospace, which produces turbofan and turboprop engines as well as flight safety and landing systems. Coming in behind Honeywell Aerospace is HON's Automation and Control segment. This segment produces home and industrial heating, ventilation and manufacturing process products. HON also produces performance materials used in semiconductors, polymers for electronics and fibers, and specialty friction materials in its Specialty Materials segment. Finally, its Transportation Systems branch produces car-care products including Prestone and FRAM.

HON's December 35 call makes an appearance on our unusual intraday action chart, with more than 6,000 of the bullish contracts crossing the tape. This marks a 0.35-percent increase from an average trading day. As this shows bullish sentiment from options traders, the company's Schaeffer's put/call open interest ratio (SOIR) shows that there are roughly 20,000 more puts open than calls. HON's SOIR currently stands at 1.43, which is higher than 93 percent of the readings taken over the past year. While this is a sizeable ratio, the company's SOIR has fallen sequentially since resting at 1.58 on November 18. Additionally, HON sports a short-interest ratio that shows 1.45 days to cover, providing little support for a short-covering rally.

Analysts are rather bearish on the stock as, according to Zacks, nine analysts rate the company as a "buy," while five analysts give the stock a "hold" rating. This leaves plenty of room for downgrades that could drive the stock below its current perch.

On the technical front, HON finds itself riding on support at the 34 level. The stock has danced around this level since April, using it as both support and resistance. Providing further support for the stock is its 10-month moving average. Since May 2003, the stock has suffered only one monthly close below this trendline.

Click on the following link to see a Weekly Chart of HON Since April 2004: http://www.schaeffersresearch.com/wire?ID=11978&obspage=2.

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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. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .