Schaeffer's Midday Options Update Features Dell, Hewlett-Packard, Red Robin Gourmet Burgers, Dreamworks Animation, and Apple Computer.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Dell (NASDAQ:DELL), Hewlett-Packard (NYSE:HPQ), Red Robin Gourmet Burgers (NASDAQ:RRGB), Dreamworks Animation (NYSE:DWA) and Apple Computer (NASDAQ:AAPL). 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: Apple Might Just be the Teacher

Traders seem to be closing out positions to book profits, sending the markets spiraling toward a negative finish for the week. After a rather positive reaction to the FOMC report on Tuesday and yesterday's firm rally in the face of record crude prices, Sir Isaac Newton seems to be in the driving seat just now.

The U.S. trade deficit for June was $58.8 billion, compared to the economists' estimate of a deficit of $57.5 billion. A preliminary reading of The University of Michigan's consumer sentiment index for August came in at 92.7.

The Dow Jones Newswires reported today that the number of homes available for sale has increased sharply in some of the nation's hottest real-estate markets, "one of several recent signs suggesting that air may be seeping out of the frenzied U.S. housing market." I'm hearing comments from realtors that houses seem to remain unsold for unusually long periods of time just now. Glance at MLS numbers on a realtor's website for your neighborhood and see for yourself; there are plenty of new numbers, but there are plenty of very old ones, too, and it isn't hard to find "motivated" sellers.

Downgrade your Dell

Dell (NASDAQ:DELL) reported second-quarter net income of $1.02 billion, well ahead of the year-ago figure of $799 million. Excluding items DELL earned 38 cents per share, in line with the consensus estimate of analysts surveyed by Thomson First Call. Revenue showed a 15-percent increase to $13.43 billion, but fell short of Wall Street expectations of $13.7 billion.

Silicon Valley Visits the Med

Hewlett-Packard (NYSE:HPQ) has announced that it is to buy the assets of Scitex Vision, a unit of Scitex Corporation, which makes very-large-format printers. The devices are used, according to The Wall Street Journal, "to create billboards and banners and other signage." Scitex Vision is based in the Mediterranean beach resort of Netanya in Israel, a town that was named in honor of philanthropist Nathan Straus, the owner of Macy's department store at the turn of the century. The deal is valued at $230 million, and all 560 employees at Scitex Vision are expected to join the payroll of Silicon Valley's founding father.

Gourmet Burgers and the High Life

If you want "high-end hamburgers," Red Robin Gourmet Burgers (NASDAQ:RRGB) seems to be the place to go, though you might not see many Wall Street folks there today. The company actually lives up to its "gourmet" name, serving up a Royal Red Robin Burger which is topped with an egg, just like the French do it. The stock was down 20 percent within half an hour of the open after the company reported second-quarter results late yesterday. The net income of $7.4 million, or 45 cents per share, beat expectations of 43 cents per share. Revenue showed a 13-percent gain to $114.1 million, from $92.5 million a year earlier. But the company put third-quarter and full-year guidance below expectations.

Dreamworks Gaps Up on Bad News?

Dreamworks Animation (NYSE:DWA) reported a net loss of $3.7 million, or four cents per share, down from a year-ago profit of $146 million. Revenue fell to $35.4 million from $300.3 million. Nevertheless, the results were better than analysts had expected and the stock gapped up, gaining something like four percent this morning. The Dow Jones Newswires reported today that DVDs of television shows such as Buffy the Vampire Slayer seem to fly off shelves faster than Shrek 2 and Shark Tale. We're not keen on sharks, but we like stories about vampires.

Most-Active Options Update

At 2:15 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,585.0) has lost 0.95 percent. The S&P 500 Index (SPX - 1,227.94) is down 0.80 percent, and the Nasdaq Composite (COMP - 2,148.6) has shed 1.20 percent. At 2:15 p.m. Eastern time, 1,897,733 calls have changed hands compared to 1,631,933 puts, equaling a single-day put/call volume ratio of 0.66. The CBOE's equity put/call volume ratio weighed in at 0.61.

Apple Computer

Apple Computer (NASDAQ:AAPL) saw some heavy options activity today. Volume of more than 6,300 August 42.50 puts (QAA TV) crossed the tape.

AAPL's surprise announcement arrived that, in the future, Mac designs will use Intel CPUs, had me convinced that the stock would plummet, as buyers play a wait and see game. But it didn't. I got that wrong or, at the very least, I timed it wrong, which is just as bad.

The stock did not fall, but it has definitely stopped rising, halted by resistance in the 45 area. The 40-week moving average struggled for a long time to catch up with the equity price, but the race is looking closer and closer. On the daily chart we see clear resistance at 44 and 45, despite the gap upward on July 14 when the company announced further-quarter earnings.

The important question is: what's going to happen next? Take a look at the options configuration:

1. Go to www.schaeffersresearch.com

2. Call up the quote for NVDA by typing the ticker into the box near the top left corner and hit the GET QUOTE button

3. Click on the Indicators tab and choose Open Interest Configuration

You should now see a chart of front-month open interest for AAPL. Armed with the knowledge that calls might exert overhead options-related resistance if they are present in sufficient numbers and, conversely, puts might give options-related support, we can immediately see potential resistance at the 40, 42.5 and 45 levels. The red bars are clearly outnumbered by the blue ones. Remember, though, that August options expire on August 20. So, this options configuration, which can change every day, is apt to show major changes once a month.

Turning to the sentiment, I see that short interest is a paltry 1.40 days to cover. As contrarians, we like to see high levels of short interest, and this level of complacency does not bode well for price rises at AAPL. The Schaeffer's put/call open interest ratio (SOIR) for the stock is 0.70, indicating 10 calls for every seven puts in the front three months of options. This lies in the 77th percentile, telling us that sentiment in the options pits is pessimistic.

On Wall Street, there is optimism. According to Zacks, 20 analysts express a preference. There are:

--Seven "strong buy" ratings and five "buys"

--Seven "holds"

--One "strong sell" rating

AAPL earns itself a Schaeffer's Equity Scorecard rating of 5.0 out of 10. Be careful, though. A reading of 0.0 warns of potential downside movement, and a reading of 10.0 warns of upside movement. But a 5.0 score does not indicate the stock will remain at the current level; it just says that we don't see a preferred direction right now for a move.

But perhaps there is something more to be said. Some of the largest tech companies have been channeling sideways for considerable periods of time. Perhaps AAPL is joining them. Perhaps AAPL has something to teach us about itself. Take a look at the sideways-trending charts for Microsoft (MSFT), Oracle (ORCL), Cisco Systems (CSCO), and Hewlett-Packard (HPQ).

Click on the following link to see a Weekly Chart of AAPL since January 2002: http://www.schaeffersresearch.com/wire?ID=13882 .

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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 .