Schaeffer's Midday Options Update Features Eli Lilly, PeopleSoft, Oracle, Pfizer, and Northwest Airlines.

CINCINNATI -- Today's Schaeffer's Midday Options Update Features Eli Lilly (NYSE:LLY), PeopleSoft (NASDAQ:PSFT), Oracle (NASDAQ:ORCL), Pfizer (NYSE:PFE), and Northwest Airlines (NASDAQ:NWAC). 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: Can Northwest Airlines Continue its Ascent?

On the last day of 2004, the major indices are hoping to end the year on a positive note. The Dow Jones Industrial Average (DJIA - 10,798.8) is on pace to mark a 3.3-percent gain for 2004, the S&P 500 Index (SPX - 1,213.17) is tracking toward a gain of more than nine percent, and the Nasdaq Composite (COMP - 2,178.0) looks like it will post a gain of nearly nine percent. These gains are lower than the gains seen in 2003 when the DJIA gained 25 percent, the SPX gained 26 percent, and the COMP surged 50 percent. In an article on CBS MarketWatch, Cantor Fitzgerald's U.S. market strategist Marc Pado stated that "markets are at or very close to closing highs in all the indexes." Pado also noted that the ability to finish 2004 on a high note will "depend on whether funds are saving some powder for a little window dressing activity."

Pros and Cons 

Today's edition of The Wall Street Journal was the harbinger of bad news for pharmaceutical producer, Eli Lilly (NYSE:LLY). According to an article in the Journal, the Food and Drug Administration (FDA) has perused the company's documents and found evidence that LLY's antidepressant Prozac may be linked to violent behavior. Apparently the documents were used in the 1989 case of Joseph Wesbecker. While being treated with Prozac, Wesbecker went on a shooting spree, killing eight people then himself. Supposedly, the documents disappeared but surfaced after an anonymous source sent them to the British Medical Journal, who then presented them to the FDA, according to The Wall Street Journal article.

You Da' Man

Late yesterday, PeopleSoft (NASDAQ:PSFT) announced Oracle's (NASDAQ:ORCL) plans to breakup its executive team. PSFT told the Securities and Exchange Commission (SEC) that co-president and chief financial officer (CFO) Kevin Parker was let go on Wednesday. ORCL CFO, Harry You, was named as Parker's replacement as CFO. Additionally, PSFT co-president Phillip Wilmington was terminated, to be replaced by ORCL President Safra Catz. ORCL co-president, Charles Phillips Jr., will also serve as co-president. You, Phillips, Catz, and Daniel Cooperman (ORCL senior vice president and general counsel) will replace ousted PSFT board members Aneel Bhusri, Frank Fanzilli Jr., Michael Maples, Cyril Yansouni, and David Duffield (who stepped down as chairman and chief executive on December 21). PSFT announced that there is still one vacancy, and expects George Battle and Steven Goldby, directors for PSFT, to resign after the close of the acquisition.

A Lyrica(l) Solution?

Pfizer (NYSE:PFE) announced that it received federal approval to market its Lyrica drug as a treatment for diabetic nerve pain and post-herpetic neuralgia. No timetable for the company's U.S. launch was provided, announcing that Lyrica would be made available in the "near future." UBS stated that the earlier-than-expected FDA approval is a "positive surprise" but that the fact that Lyrica will be a scheduled drug is a "modest disappointment." Lyrica did not receive FDA approval to treat epileptic nerve pain, but UBS believes that this will happen in the near future. PFE announced last month that the FDA will not require new clinical trials for Lyrica.

Most-Active Options Update

At 12:58 p.m. eastern time, the DJIA is down 0.01 percent and the SPX is lower by 0.03 percent. The COMP is down 0.0.01 percent. At 12:59 p.m. in the options pits, 791,097 calls and 458,288 puts traded for a composite put/call ratio across all six exchanges of 0.57. The CBOE put/call ratio for equity options weighed in at 0.50.

Northwest Airlines

Despite the labor union disputes, the chaotic nature of oil prices, and the ever increasing hassle of airport security, it has been a rather lackluster year for the shares of Northwest Airlines (NASDAQ:NWAC). Since January, the shares have struggled to maintain a positive bias, and are currently down 4.5 percent since closing January at 11.40. However, the stock has managed to reclaim its 10-month and 20-month moving averages in December - a feat not accomplished since January. Additionally, NWAC has also regained the support of its weekly and daily trendlines in recent weeks, riding tentatively higher along its 10-day and 20-day moving averages. What's more, these short-term trendlines are poised for a bullish cross, as the equity contends with long-term resistance in the 11-11.50 area

But investors aren't buying into the recent display of strength from the shares, as pessimism abounds in NWAC's sentiment indicators. For example, options players have expressed a preference for puts over calls, as the stock's Schaeffer's put call open interest ratio of 2.23 indicates that puts more than double calls in the front three months of options. What's more, this reading ranks higher than all but two percent of those taken in the past year. This bearish trend appears to be perpetuating in today's trading, as more than 2,500 of these bearishly oriented contracts have crossed the tape at the stock's February 10 strike. With open interest of just 700 contracts at this site, much of today's activity could translate into new open positions.

Short sellers are also calling for a top in the equity. The 19.5 million NWAC shares sold short accounts for more than 31 percent of the stock's total float and would take nearly 12 days to cover. This substantial accumulation of pessimistic positions could easily fuel a short-covering rally in the shares.

Wall Street analysts have also shunned NWAC's friendly skies. According to Zacks, four of the eight covering analysts rate the shares a "hold." Any change of heart from this grim bunch could spark the afterburners for NWAC and send it soaring higher.

Finally, the extreme pessimistic sentiment levied against the equity combined with its solid technical performance in recent weeks has earned NWAC a Schaeffer's Equity Scorecard rating of 9.5 out of 10.0. The elevated reading indicates that NWAC could climb even higher should the shares finally best overhead resistance in the 11 area.

Click on the following link to see an Equity Scorecard and Daily Chart of NWAC Since October 2004 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=12155&obspage=2.

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=PROB1M&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.