Schaeffer's Midday Options Update Features Cisco Systems and Juniper Networks.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Cisco Systems (NASDAQ:CSCO) and Juniper Networks (NASDAQ:JNPR). 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.

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Options Update: Speculators Scoff and Juniper's Jump

While pharmaceutical stocks are dragging the Dow Jones Industrial Average lower following the return to power of Democrats in the House and potentially the Senate, Cisco Systems (NASDAQ:CSCO) is leading the networking sector's charge higher, boosting the tech-laden Nasdaq Composite in the process. Meanwhile, the Commerce Department reported that U.S. wholesaler inventories climbed to their highest level in relation to sales in more than a year in September, while the Labor Department announced that initial jobless claims plunged by 20,000 to 308,000, and that import prices dropped by two percent in October, matching the largest decline in three years. All in all, it's been a pretty mixed day on the Street.

Most-Active Options Update

At 1:44 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 12,133.1) has given up 0.35 percent, while the S&P 500 Index (SPX - 1,383.69) is 0.15 percent lower. The Nasdaq Composite (COMP - 2,388.6) has edged 0.16 percent higher. At 1:45 p.m. Eastern Time, 3,490,027 calls have changed hands compared to 2,722,193 puts, equaling a single-day put/call volume ratio of 0.77. The CBOE's equity put/call volume ratio stands at 0.73, while the ISE's ratio weighs in at 0.69.

Juniper Networks

While CSCO earnings report has instilled a bit of confidence in the networking sector today, it seems (at least from the options activity) that one of the coattail riders in today's rally is an unwelcome guest. Juniper Networks (NASDAQ:JNPR), a competitor in the same market as CSCO, has rallied more than five percent following CSCO's earnings report. However, the activity in the options pits indicates that many investors don't believe that JNPR can hold its newfound gains. Currently, only 2,961 puts reside at the stock's November 19 put, but this pile of bearish bets could be set for a few new additions; about 11,000 new additions. More than 11,600 puts have crossed the tape at JNPR's November 19 strike today, and with the vast majority of these contracts crossing near the ask price (which suggests put buying), we could see an increase in open interest at this level come tomorrow.

Despite today's activity, pessimism is not something that has been common place for options players when it comes to JNPR. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.38 indicates that calls more than double puts in the front three months of options, while this ratio ranks below 90 percent of all those taken during the past year. Furthermore, a look at the stock's November open interest configuration reveals a preponderance of call activity in the front month. Note, however, that JNPR's recent sympathy rally with CSCO has pushed the shares though some potentially staunch options-related resistance at the 18 level. This is either a testament to the power of CSCO's ability to move the networking sector all by itself, or JNPR's rally actually has some legs.

Other sentiment indicators aren't quite as clearly cut as JNPR's options data. In fact, the waters are pretty muddy from here on out. While the equity's short-interest ratio stands at a measly 1.94 days to cover, short interest still accounts for more than four percent of the stock's total float. Elsewhere, JNPR garners 10 "buys," 13 "holds," and one "sell" rating. I hesitate to call this analyst activity bullish or bearish, as there is ample room for movement in either direction from the brokerage bunch. While analysts may decide that since CSCO is doing well, then all networkers will follow suit and upgrade JNPR, they just as likely may decide that the stock has no business rallying with the group and downgrade the shares.

Turning to the technical aspect of JNPR, the stock has not been a bad performer lately. With the CSCO-induced run up during the past couple of sessions, JNPR has managed to take out some key technical resistance at the 19 level while pulling its 10-day and 20-day moving averages into a bullish cross. What's more, since bottoming out in mid-August, JNPR has advanced more than 62 percent.

Additionally, the security is poised to close its second consecutive month above its 10-month trendline - a feat last achieved in June 2005. However, there is still some pretty staunch technical resistance at the 20 level, with the stock's 20-month trendline taking up residence in this round-number region.

On a final technical note, JNPR has managed to best the AMEX Networking Index (NWX - 249.19) on a daily relative-strength basis since August, lending more credence to the equity's uptrend. However, despite this seemingly solid technical backdrop, I can't bring myself to recommend a position in JNPR. Today's build in pessimism is promising, but I would like to see more negativity levied against the shares before springing on a long position. Furthermore, I would really like to see JNPR rally of its own accord, and not on the coattails of CSCO. Maybe that would make me a bull on this stock.

As always, thank you for reading, and good luck in your trading.

Click here to see the following charts: Monthly Chart of JNPR Since April 2005 With 10-month and 20-month moving averages, Daily Chart of JNPR Since March 2006 With 10-day and 20-day moving averages, and a November open interest configuration for JNPR: http://www.schaeffersresearch.com/wire?ID=17712

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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.