Schaeffer's Midday Options Update Features Google, Yahoo!, TASER International, El Paso, and Caterpillar.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Google (NASDAQ:GOOG), Yahoo! (NASDAQ:YHOO), TASER International (NASDAQ:TASR), El Paso (NYSE:EP), and Caterpillar (NYSE:CAT). 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=PRMOU11M&PAGE=1 .

Options Update: Caterpillar

The markets stayed in a tight range for much of this morning. Before the open, futures were pointing higher, but the S&P 500 Index (SPX) and the Nasdaq Composite (COMP) went under water fairly early, and at 10:20 a.m. Eastern time, I watched the Dow Jones Industrial Average (DJIA) sink. Just before 11:00 a.m., the bulls finally got their act together and started, very slowly, to advance.

Crude was down today, dropping below the $59 level this morning and continuing a downtrend that began when prices peaked on August 29 at 71.57. Over the weekend I noticed that pump prices for regular unleaded had fallen to the 2.15 region, and careful shoppers could buy gas for less than two dollars per gallon.

Enterprise

That trilling sound from Captain Kirk's communicator gently instilled itself into the collective conscience of a generation. Everyone knew that such a device was make-believe yet, at last, we're reaching the stage where we can finally make 1967 look old fashioned. The Wall Street Journal reported today that Google (NASDAQ:GOOG) and Yahoo! (NASDAQ:YHOO) are both "set to roll out new wireless services, taking advantage of advanced networks and cell phones to provide features similar to those available on computers." While the earliest cell phones were too big to fit into your pocket, this year's models are designed to boldly offer more features than you'll ever remember how to use: music, web browsing, e-mail, GPS, photography, and even television. We could watch Star Trek.

Set Your Taser to Stun. And Film

TASER International (NASDAQ:TASR) has added a new feature to its line of electric stun devices. The Taser Cam is intended to "add another layer of accountability for any officer who would abuse the weapon." It is an audio and video recorder that allows the key moments to be reviewed after the event. TASR stock surged this morning, but it was trading near the bottom of its intraday range by the time Wall Street traders sat down to eat their designer sandwiches.

Houston, We Have a Problem

Based in Houston, Texas, El Paso (NYSE:EP) specializes in natural gas pipelines and "provides natural gas and related energy products," according to the firm's Website. Before the bell this morning, EP 'fessed up that third-quarter losses widened to $321 million, or 50 cents per share. Analysts at Thomson First Call had expected earnings of 15 cents per share. The stock fell sharply this morning, but found support at the 11 level. Year-ago figures were $214 million, or 33 cents per share. Revenue suffered a 43-percent decline to $810 million.

Guidant Light

Guidant (GDT) is to sue Johnson & Johnson (JNJ) in an attempt to compel JNJ to complete its planned acquisition of GDT. Third-quarter profits at GDT fell by more than half and JNJ says that product recalls have had a 'material adverse effect.'

Most-Active Options Update

At 3:00 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,587.3) has gained 0.54 percent. The S&P 500 Index (SPX - 1,223.61) is up 0.28 percent, and the Nasdaq Composite (COMP - 2,180.3) has increased 0.50 percent. At 3:00 p.m. Eastern time, 2,814,087 calls have changed hands compared to 1,744,703 puts, equaling a single-day put/call volume ratio of 0.61. The CBOE's equity put/call volume ratio weighed in at 0.68.

Caterpillar

According to Hoover's, Caterpillar (NYSE:CAT) is number one at making the earth move. When I grabbed figures for this observation, volume on the company's January 60 calls (CAT AL) was exactly 4000. Meanwhile, exactly 5,000 of the January 50 puts (CAT MJ) had transacted. Since puts, in sufficient numbers can be supportive and calls can be resistive, let's look at these data in conjunction with the stock's daily chart.

The stock made an all-time high on September 13 at 59.88 following Hurricane Katrina, perhaps on optimism that the big CATs would play a continuing role in the cleanup. It made a second assault on October 4 and came within four cents of the September peak, but the bulls ran out of steam. The stock made a double top and then retreated.

The 80-week moving average has been supportive, but now it lies way back in the 46 region, and the powerful 160-day moving average is down at 38 or so.

Let's take a look at the sentiment. We regularly track three areas:

-- Analyst ratings, to gauge Street sentiment

-- Equities sentiment, in the form of short selling 

-- Options sentiment, in the form of put/call ratios and trends, and peak open interest

From Zacks I see that analysts award:

-- 4 "strong buys"

-- 1 "buy"

-- 9 "holds"

-- 0 "sells"

-- 0 "strong sells"

Those nine cautious "holds" allow room for upgrades or downgrades, but I tend to think of the "hold" rating as rather negative, so there is more upside than downside, potentially beneficial for the stock. However, those four "strong buys" could be downgraded if the stock fails to maintain its current momentum.

There is little short selling going on for CAT. Just 1.5 percent of the float is shorted, so there is little prospect of any short-covering support here. The Schaeffer's put/call open interest ratio (SOIR) is 0.54, a figure that lies in the 8th percentile, close to an optimistic extreme. This information suggests that buyers have already bought. The trend is still your friend, as the saying goes, but if it ceases to be to the upside, it doesn't take a rocket scientist to figure out the alternative.

This mix of sentiment and performance results in a Schaeffer's Equity Scorecard rating of 4.5 out of 10. This is a very neutral reading, and does not predict an immediate move for the stock. But that double-top formation has me watching the 60 level carefully. Another rejection there would signal increasingly strong resistance.

Click on the following link to access a Daily Chart of Caterpillar Since February 2005: http://www.schaeffersresearch.com/wire?ID=14543 .

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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 .