Schaeffer's Midday Options Update Features Boeing, palmOne, Research in Motion, MBNA, and eBay.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Boeing (NYSE:BA), palmOne (NASDAQ:PLMO), Research in Motion (NASDAQ:RIMM), MBNA (NYSE:KRB), and eBay (NASDAQ:EBAY). 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: eBay Powerselling

In the week ending June 25, initial jobless claims declined by 6,000 to a seasonally adjusted 310,000. This was the second drop in two weeks, and the news boosted Wall Street confidence, propelling the Dow Jones Industrial Average above 10,400 within minutes of the open. Analysts expected claims to rise by 11,000 after the steep drop the prior week.

U.S. personal income was reported today, with the seasonally adjusted annual rate up 0.2 percent in May. In surveys by Dow Jones Newswires and CNBC, economists' consensus was for an increase of 0.4 percent. The price index for personal consumption expenditures excluding food and energy show a 0.2-percent increase in May compared to April.

The Federal Open Market Committee (FOMC) announced this afternoon another quarter-percent increase in interest rates. Though the rise was widely expected, the Dow Jones Industrial Average greeted with news with a sharp plunge into negative territory. This is the ninth straight meeting to result in an increase in interest rates.

The Frequent Hire Club

Boeing (NYSE:BA) is welcoming its third CEO in 18 months, the Dow Jones Newswires reports. James McNerney has accepted the role of chairman, president and CEO at BA, moving to the company after serving as 3M's (MMM) CEO for the past four years. BA stock took off this morning, but then eased back, and was up 7.28 percent at last check. MMM was down 3.64 percent.

Climbing Treo's

PalmOne (NASDAQ:PLMO) announced fourth-quarter earnings this morning, with profit up 33 percent. Excluding items, PLMO earned 37 cents per share, topping estimates of 31 cents per share. The company makes handheld personal organizers and Treo smartphones, and strong sales of the smartphones appear to have helped propel revenue growth. PLMO stock gapped up this morning, and stood up 3.26 percent at last check.

RIMM in Motion

Research in Motion (NASDAQ:RIMM) announced that its first-quarter net income more than doubled to $132.5 million as revenue soared 68 percent to $453.9 million. Excluding items, the earnings came in at 56 cents per share, better than the Wall Street estimate. Nevertheless, the share fell this morning, perhaps because the number of new subscribers to the BlackBerry wireless-email service increased by only 592,000, a figure that was lower than expected.

Acquisition on the Cards

Bank of America (BAC) announced that it plans to buy credit-card-issuer MBNA (NYSE:KRB) in a $35 billion deal in cash and stock. BAC is the largest U.S. retail bank and credit-card concern. KRB has 40 million accounts and $143 billion in outstanding balances. KRB is an increasingly rare company, a credit card firm that is not affiliated with a bank. The acquisition will bring BAC a new customer base, noted for its low risk of default, high expenditure, and low aversion to interest payments. At last check, BAC stock was down 2.66 percent and KRB was up 24.30 percent.

Most-Active Options Update

At 2:30 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,342.0) has lost 0.31 percent, and the S&P 500 Index (SPX - 1197.49) has shed 0.20. The Nasdaq Composite (COMP - 2,069.2) has fallen 0.01 percent. At 2:30 p.m., 1,753,205 calls have traded hands compared to 1,206,605 puts, for a total put/call single-day volume ratio of 0.68 across all six options exchanges. The CBOE's put/call volume ratio stands at 0.66 today.

eBay

Online auctioneer eBay (NASDAQ:EBAY) is our featured stock today, thanks to some heavy put buying at the August 32.5 strike (XBA TZ) this morning. A block of 5,000 contracts went off at 10:20 at the ask price, suggesting they were purchases.

EBAY's opportunities seem inexhaustible. For instance, the Pennsylvania Department of General Services' State Surplus Property Division has attained the rank of "powerseller," after eBaying $120,181 worth of pocket knives and scissors surrendered by travelers at Transportation Security Administration airport checkpoints. Nevertheless, the stock has slipped from a near-term high of 59.21 at the end of December to its current perch at 33.10 thanks to resistance from its 10-week and 20-week moving averages, and the daily counterparts. On June 16, the 10-day and 20-day moving averages made a bearish cross, a signal to watch for further price declines.

The weekly chart shows how the stock tested the 50-percent retracement level, and breached potential support, a signal that the downside beckons.

Despite the poor performance and forbidding technicals, Wall Street remains insouciantly optimistic. From Zacks I see that just 20 analysts express a preference, and ten of them rate EBAY a "strong buy" against just one "strong sell." The remaining rankings are "holds." This seems way too optimistic and leaves ample room for downgrades, which would do the stock no good at all.

Equities players show optimism, too. There is little short selling of EBAY stock, and the short-interest ratio is 2.3 days to cover, which makes a short-covering rally most unlikely. If short sellers step in, watch for a move south.

What about the options pits? The Schaeffer's put/call open interest ratio (SOIR) for the stock is 0.52, which is more optimistic than 92 percent of readings taken over the past year. Peak front-month put open interest lies at the 35 strike, with 27,361 contracts. There are 26,550 contracts at the 32.50 strike, so the 32.50 area is clearly a place to watch for options-related support. However, calls are very numerous too. At the 35 strike, calls outweigh puts, and at the 32.50 strike, calls are accumulating.

Remember, as contrarians we look for one of the following situations:

--Fundamental and technical strength amid pessimistic sentiment. This is a signal that upside movement could be on the way if any significant good news comes along.

--Fundamental and technical weakness amid optimistic sentiment. This is a signal that downside movement could be on the way if any significant bad news comes along.

That second bullet is the one to look at. On our Schaeffer's Equity Scorecard the stock earns itself 2.0 out of 10.0, indicating today that the path of least resistance is to the downside. On June 21, we recommended subscribers of our Schaeffer's Players Series alert service to buy eBay July 37.50 puts (XBASU). We have already closed out the first half of the position for a profit in excess of 100 percent, ensuring that the overall trade cannot now show a loss. The remaining half is still open and shows a profit of almost 250 percent.

Click on the following link to see a Daily Chart for EBAY with 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=13527 .

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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 .