Schaeffer's Midday Options Update Features Intel and Boston Scientific.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Intel (NASDAQ:INTC) and Boston Scientific (NYSE:BSX). 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: The Boston-Scientific Options Party

A daily feature available on SchaeffersResearch.com is "Options Update." Every day, we'll give a brief market overview and focus on one stock that is the center of some heavy option trading. The focus of today's feature is Boston-Scientific.

The major market indices are shouldering robust gains in midday action, thanks to a weaker-than-expected Producer Price Index (PPI), which lessened inflation concerns and further reduced the odds of another Federal Reserve-sanctioned interest-rate hike at its next meeting. Now the true test of this market will be whether or not the indices can hold onto these gains throughout the afternoon. Oil futures are hovering near breakeven after a dip to multi-week lows in Monday's session. In electronic trading, the September crude contract was eight cents lower at $73.45 per barrel.

The Labor Department reported before the open that the PPI reading for finished goods rose by 0.1 percent in July, below the anticipated 0.3-percent gain. The core PPI, which excludes food and energy costs, dropped 0.3 percent, marking the first decline since October. Economists had expected the core rate to show a rise of 0.2 percent.

Most-Active Options Update

At 2:02 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 11,194.9) has added 0.85 percent, or nearly 92 points. The S&P 500 Index (SPX - 1,280.30) has gained 0.93 percent, and the Nasdaq Composite (COMP - 2,100.5) is topping the charts with its 1.52-percent increase. At 2:03 p.m. Eastern Time, 3,109,232 calls have changed hands compared to 2,198,045 puts, equaling a single-day put/call volume ratio of 0.70. The CBOE's equity put/call volume ratio stands at 0.77, while the ISE's ratio comes in at 0.84.

Boston Scientific

When we grabbed our figures this afternoon, medical-device manufacturer Boston Scientific (NYSE:BSX) was notable for its January 2008 15 put (WBX MC), where nearly 5,000 contracts have changed hands. The out-of-the-money position is unchanged in today's trading and will not expire for about 17 months. Before we take a look at the underlying stock, let's revisit Intel (NASDAQ:INTC), which was covered in yesterday's (http://www.schaeffersresearch.com/commentary/ observations.aspx?click=home&ID=17129)(Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) options update.

By the session's conclusion, more than 26,000 contracts had traded on the August 17.50 call (NQ HW). The net result was a slight increase in open interest at this front-month strike, to 59,674 contracts from 58,997. In other words, the volume was a mix of liquidations and new positions. Implied volatility on the option rose to 29.3 percent from 25.50 percent yesterday, suggesting that new positions were initiated on the buy side. In today's action, INTC shares are trading nearly one percent higher.

Now back to our featured stock today, which saw one block of 4,580 put contracts cross the tape around 11:30 this morning on its January 2008 15 put. The block traded off the ask price of 1.80 and was tagged as a "spread." Trading at the same time were 2,290 contracts on the January 2008 20 put, which also traded near the ask price. Open interest at the LEAPS 15 and 20 puts currently stands at 6,813 and 7,584 contracts respectively, so it is not guaranteed that today's volume is new positions. Given the time frame of the puts and the fact that they traded at the ask price, however, the likely scenario is that these will translate into fresh open interest tomorrow.

It's no wonder that BSX is seeing some attention from put traders; the stock has been in decline mode for well over two years. The aforementioned 20 put is already in the money, and a drop of less than 10 percent is required before the 15 put enters in-the-money territory. Since hitting double-top resistance near the 46 mark in April 2004, the stock has headed south, unraveling to the tune of 65 percent of its value while stifled beneath its 10-week and 20-week moving averages.

The shares are now attempting to hold above a final bastion of technical support. Having breached their 80-month moving average earlier this year, BSX is holding above its 160-month trendline. But this moving average grows more precarious as it is tested further, and a break of the trendline appears highly possible in the short term.

Optimism continues to prop up the shares, making them even less attractive from our contrarian viewpoint. For example, despite its years-long decline, the Street continues to bet on the shares. The latest Zacks (www.Zacks.com) information reveals 12 "buy" ratings, seven "holds," and just one "sell" designation. A violation of the 160-month could send the stock spiraling even lower, forcing some downgrades from this resolute bunch.

Equities traders are starting to catch on, boosting BSX short interest by nearly 30 percent during the latest reporting period. However, just 1.6 percent of the equity's available float is sold short, amounting to a short-interest ratio of 1.4 days to cover. This offers nothing in the way of short-covering support, and is nowhere near an "extreme" in pessimism we would generally like to see in order to mark a potential bottom.

While today's options volume suggests some long-sighted bearishness, short-term speculators are still in the bullish camp. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) reading of 0.37 is lower than 87 percent of the past year's worth of readings. In the August, September, and October series combined, there are just 37 open puts for every 100 calls, suggesting that the bulls are still a force to be reckoned with. As the love affair with BSX begins to wane, the stock could succumb to increased selling pressure. BSX currently earns a Schaeffer's Equity Scorecard rating of 2.0, indicating that its future path is likely pointed south.

Click here to see a Weekly chart of Boston Scientific since March 2004 with 10-week and 20-week moving averages and a Monthly chart of Boston Scientific since March 2002 with 80-month and 160-month moving averages: http://www.schaeffersresearch.com/wire?ID=17137 .

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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 .