Schaeffer's Midday Options Update Features Alltel, News Corp., Movie Gallery, American Pharmaceutical Partners, Williams-Sonoma.

CINCINNATI -- Today's Schaeffer's Midday Options Update Features Alltel (NYSE:AT), News Corp. (NYSE:NWS), Movie Gallery (NASDAQ:MOVI), American Pharmaceutical Partners (NASDAQ:APPX), and Williams-Sonoma (NYSE:WSM). 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: Epi-Curious on Williams-Sonoma

After a week of heavy selling pressure, the market is attempting a rebound today, with the major market indexes inching moderately higher. However, the road higher has not been a smooth one, as higher crude oil prices and a wave of merger and acquisition news threatened to rein in trading early this morning. Crude is once again rearing its ugly head, as the February contract has rallied some $1.67 to $47.10 per barrel so far today.

Another Dose of Merger Mania

Leading the wave of merger and acquisition data this morning is a stock-and-cash deal by Alltel (NYSE:AT) to acquire Western Wireless (WWCA) for approximately $6 billion. According to the terms of the deal, shareholders of WWCA will receive 0.535 shares of AT and $9.25 in cash for each share of WWCA. Furthermore, WWCA shareholders may choose an all-stock or all-cast election.

This week's coupe de grace comes from Movie Gallery (NASDAQ:MOVI), whose $1.2-billion bid for Hollywood Entertainment (HLYW) beat out a recent hostile takeover bid from Blockbuster (BBI). According MOVI representatives, the deal values HLYW shares at $13.25 each, a 1.5-percent premium over Friday's closing price of $13.05 and a 15-percent premium over BBI's recent offer for the company.

Out Foxed

News Corp. (NYSE:NWS) perpetuated the wheeling and dealing today by offering 1.9 of its class "A" shares for each of the remaining shares in the Fox Entertainment Group (FOX). The deal represents a 7.4-percent premium to FOX's close on Friday. NWS currently owns about 82.1 percent of FOX.

Drugs on Parade

Several pharmaceutical firms are soaring today following positive trial data and an FDA approval. American Pharmaceuticals Partners (NASDAQ:APPX) has skyrocketed more than 50 percent so far today after the FDA approved its Abraxane drug for injectable suspension in metastatic breast cancer. A pair of solid Phase II results has Dyax (DYAX) and Genaera (GENR) higher by more than eight percent and 11 percent, respectively. DYAX reported positive results from its Phase II clinical trial of DX-88, its treatment for hereditary angioedema. The company now plans to launch a Phase III trial of DX-88 during the first half of 2005. Meanwhile, GENR announced positive Phase II results of squalamine for the treatment of choroidal neovascularization, a condition associated with age-related macular degeneration. According to GENR, all six patients in the trial experienced improved or preserved vision at three, five, and one month intervals.

Most-Active Options Update

At 1:33 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,656.9) is up 0.50 percent and the S&P 500 Index (SPX - 1,194.24) is up by 0.68 percent. The Nasdaq Composite (COMP - 2,109.9) is up 1.02 percent. At 1:34 p.m. in the options pits, 1,752,924 calls and 1,156,580 puts traded for a composite put/call ratio across all six exchanges of 0.65. The CBOE put/call ratio for equity options weighed in at 0.75.

Williams-Sonoma

According to Hoover's, Williams-Sonoma (NYSE:WSM) is a leading retailer of goods for kitchens, bedrooms, and baths. The firm's home products include bath and storage products, bedding, cookware, furniture, and tableware. The company's retail chains, Williams-Sonoma, Grande Cuisine, Pottery Barn, Design Studio, and Hold Everything sell wares through more than 500 stores in 42 states, Washington, D.C., and Canada.

Today, WSM has sparked a "call-ing" interest from the options crowd, with a heavy dose of call activity arriving at the stock's January 35 strike. So far, more than 4,300 of these bullishly oriented contracts have changed hands at this front-month strike, and with open interest of merely 390 contracts coming into today, much of this activity could translate into new open positions. Today's rather bullish activity notwithstanding, the speculative options group has had largely bearish things to say about the stock recently. In fact, WSM's Schaeffer's put/call open interest ratio (SOIR) has risen sharply from its December 15 reading of 0.93 in the 59th percentile to its current perch at 1.66 in the 96th percentile.

Short sellers have also jumped into WSM's bearish pressure cooker, with short interest rising by 12 percent during the most recent reporting period. The resulting 4.28 million WSM shares sold short now accounts for more than four percent of the stock's total float and would take four days to buy back. This sizeable accumulation of pessimism could provide a nice short-covering rally should WMS manage to continue with today's rebound.

Wall Street is also dubious of the equity's strength. According to Zacks, 10 of the 16 covering analysts rate the shares a "hold" or worse. Any upgrades from this bunch of naysayers could also provide a pop for WSM.

Looking at a short-term chart of the security, it is easy to see why investors have become so entrenched in their bearish ways toward WSM. The stock has pulled back more than 16 percent since hitting an all-time high of 41.72 in November, falling under the resistance of its declining 10-day and 20-day moving averages. However, pulling back to a longer-term view, we find that WSM remains in a solid uptrend (bound by a series of higher highs and higher lows) which began in November 2000. Furthermore, the stock still maintains support at its rising 10-month and 20-month moving averages. WMS has only logged one breach of these long-term trendlines since November 2001.

Additionally, WSM is rebounding sharply off long-term support in the 34 area today, jumping approximately 2.5 percent. Since August, the stock has not closed a session below this region. Lending a hand to the rebound is the security's 10-month moving average, which is also situated in the area and could offer up a second layer of potential support. Investors will want too keep a close eye on WSM going forward, as a rebound off of support could prompt an unwinding of built-up bearish sentiment and send the stock skipping higher.

Click on the following link to see a Monthly Chart of WSM Since November 2000 With 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=12236&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 .