Schaeffer's Midday Options Update Features Allstate, Cendant, Schering-Plough, Merck, and United Parcel Service.CINCINNATI -- Today's Schaeffer's Midday Options Update features Allstate (NYSE NYSE See: New York Stock Exchange :ALL), Cendant (NYSE:CD), Schering-Plough (NYSE:SGP SGP Singapore (ISO Country code) SGP Schering-Plough (stock symbol) SGP Stability and Growth Pact SGP Southern Great Plains SGP Staatkundig Gereformeerde Partij SGP Speedway Grand Prix ), Merck (NYSE:MRK MRK Merck & Company (stock symbol) MRK Mayer-Rokitansky-Kuster (anomaly) MRK Manual Remote Keying ), and United Parcel Service United Parcel Service, Inc. (NYSE: UPS), commonly referred to as UPS, is the world's largest package delivery company, delivering more than 15 million packages[1] a day to 6.1 million customers in over 200 countries and territories around the world. (NYSE:UPS). 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=PRMOU1M&PAGE=1 . Options Update: Optimism Spikes on United Parcel Service Leading today's rather barren list of headlines (barring a slew of earnings reports) is the pending nomination of White House Council of Economic Advisors Chairman Ben Bernanke as the replacement for current Federal Reserve Chief Alan Greenspan Alan Greenspan Dr. Greenspan is Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. . As many of you know, Greenspan's term is set to expire on January 31, 2006. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. reports, President Bush will announce Bernanke as his pick for replacing Greenspan in a speech planned for 1:00 p.m. Eastern time. In the oil pits, December crude futures were last seen down 58 cents at $60.10, after Hurricane Wilma Hurricane Wilma was the most intense hurricane ever recorded in the Atlantic basin. Exceeding the 21 storms of the 1933 season, Wilma was the twenty-second storm (including the subtropical storm discovered in reanalysis), thirteenth hurricane, sixth major hurricane, and fourth struck southwest Florida Southwest Florida is a region of Florida located along its gulf coast, south of the Tampa Bay area, west of Lake Okeechobee and mostly north of the Everglades. It consists of five coastal counties from Manatee County south to Collier County, although it sometimes is considered to , largely missing the Gulf of Mexico's oil producing and refining facilities. However, insurers are expected to take a beating from Wilma, with Allstate (NYSE:ALL) and St. Paul St. Paul as a missionary he fearlessly confronts the “perils of waters, of robbers, in the city, in the wilderness.” [N.T.: II Cor. 11:26] See : Bravery Travelers among those with the most exposure to the hurricane. Catastrophe modeling firm Eqecat said that Wilma may cost insurers $2 billion to $6 billion. Many of you remember that Hurricane Katrina, which smashed into Louisiana, Alabama, and Mississippi on Aug. 29, caused widespread damage that could end up costing the insurance industry more than $30 billion. Meanwhile, Hurricane Rita may cost the industry another $4 billion to $7 billion, according to catastrophe modeling firm Risk Management Solutions. Is Cendant Conceding? Cendant (NYSE:CD) shocked investors today when it stated that it intends to split the company into four separate publicly traded companies publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. , one for each of its main business lines. Currently, CD is the parent of hotel chains including Ramada ra·ma·da n. Southwestern U.S. 1. a. An open or semienclosed shelter roofed with brush or branches, designed especially to provide shade. b. An open porch or breezeway. 2. and Howard Johnson; real-estate brokers Century 21 and Coldwell Banker; travel businesses including the Galileo and Cheap Tickets brands; and car-rental firms Avis and Budget. "With these efforts complete, we have now concluded that it is in the best interests of our shareholders to establish pure-play enterprises, as we and our advisors believe the sum of the parts has a value in excess of our current share price," said CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Henry Silverman in a statement. The firm also noted that it will continue to pay its 11-cents-per-share quarterly dividend until the separation occurs, but that its previous $2 billion share buyback target is no longer in effect. Furthermore, this restructuring is expected to lower fourth-quarter earnings by three to four 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. , to a range of 23 cents to 26 cents, not including charges. For more on CD, check out today's edition of Street Chatter. Pharmaceuticals on Parade A pair of pharmaceutical firms slipped into the earnings confessional this morning. First off, Schering-Plough (NYSE:SGP) posted earnings of $43 million, or three cents per share, up from $14 million, or a penny per share, for the same period a year ago. The latest quarter's results include a charge of eight cents per share for a research payment, and a tax-related benefit of three cents per share. The Street had expected a gain of six cents per share. Sales for the quarter rose 15 percent to $2.28 billion. On an adjusted basis, revenue increased 21 percent to $2.6 billion. Analysts had predicted sales of $2.27 billion. Following SGP was blue-chip pharma Merck (NYSE:MRK), which posted third-quarter earnings of 65 cents per share, beating its year-ago gain by a nickel and the Street estimate by three cents per share. Sales tumbled to $5.42 billion from $5.54 billion, just shy of the $5.45 billion expected by analysts. Most-Active Options Update At 1:31 p.m. eastern time, the Dow Jones Industrial Average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. (DJIA DJIA See Dow Jones Industrial Averager (DJIA). - 10,325.7) has surged 1.08 percent. The S&P 500 Index (SPX (Sequenced Packet EXchange) The transport layer protocol in the NetWare operating system. Similar to the TCP layer in TCP/IP, it ensures that the entire message arrives intact. SPX uses NetWare's IPX as its delivery mechanism. - 1,192.00) is up 1.14 percent, and the Nasdaq Composite (COMP - 2,102.2) has jumped 0.97 percent. At 1:32 p.m. Eastern time, 2,643,040 calls have changed hands compared to 1,678,019 puts, equaling a single-day put/call volume ratio of 0.59. The CBOE's equity put/call volume ratio weighed in at 0.58. United Parcel Service On October 20, United Parcel Service (NYSE:UPS) posted a third-quarter profit of 86 cents per share, falling in line with the Street's expectations. The company went on to place fourth-quarter earnings at 90-96 cents per share, up from the prior year's adjusted income of 82 cents per share. The speculative options crowd joined forces with October options expiration on Friday, sending the stock's Schaeffer's put/call open interest ratio (SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways ) plunging from 0.99 in the 71st percentile to its current perch at 0.58 in the second percentile. Today's activity could rectify a bit of this optimistic glut, as UPS's November 65 put is receiving the lion's shares of the stock's options activity. In fact, more than 7,500 of these bearishly oriented options have crossed the tape so far today, with the vast majority of the trades crossing at the ask price, suggesting put buying from the group. Currently, peak put open interest for the front three months of options lies at the 70 strike, but if most of today's activity translates as new open interest, the 65 could claim this title tomorrow. Conversely, peak call open interest resides at the 75 strike. While the 70 level has been far from supportive for the equity in recent months, the 74-75 region has proven to be quite a wall of resistance. As you can see from the monthly chart below, UPS has been troubled by this region for quite some time. Adding to overhead resistance in the area is the stock's 20-month trendline. UPS has not bested this moving average on a monthly basis since February. Notice too that the 20-month trendline had previously acted as support for the shares. Often times, former levels of support, once breached, can act as staunch resistance for a security, making UPS's trek higher that much more difficult. Turning back to the stock's sentiment outlook, we find much the same opinion from our other quantitative indicators as that of the options crowd. For instance, UPS short interest continues to decline, logging an eight-percent decline in October after a 12-percent decline in September. The end result of this position covering from the group is a rather meager mea·ger also mea·gre adj. 1. Deficient in quantity, fullness, or extent; scanty. 2. Deficient in richness, fertility, or vigor; feeble: the meager soil of an eroded plain. 3. short-interest ratio short-interest ratio A ratio that is used for market analysis and is calculated by dividing short interest by average daily volume. Technicians use the short-interest ratio as a tool to determine market direction. of 4.65, indicating that while there could be some additional short covering from these bearish investors, it may not amount to much. On Wall Street, we find additional optimism toward the stock. According to Zacks, nine of the 18 analysts covering UPS rate the stock a "buy" or better, with no "sell" ratings to be found. This rather bullish configuration from the Street leaves UPS vulnerable to potential downgrades that could send the shares skipping lower. With the lingering fear of energy prices set to take its toll on the transportation industry, and a wealth of optimistic investor sentiment, UPS is in a rather precarious position. In fact, our Schaeffer's Equity Scorecard rates the shares a measly measly said of beef, pork and mutton because infected meat has a speckled appearance thought to resemble measles (1) in humans. See also cysticercus. 3.0 out of 10, indicating that should UPS be rejected once again in the 75 area, the fall could be quite hard for the stock. Click on the following link to access a Monthly Chart of United Parcel Service Since March 2003 With 20-Month Moving Average: http://www.schaeffersresearch.com/commentary/observations.aspx?click= home&ID=14452 . (Due to its length, this URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. may need to be copied/pasted into your Internet web browser's address field. Remove the space if one exists.) The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, 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/redirect.aspx?CODE=PRMOU1M&PAGE=1 . 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 . |
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