Schaeffer's Midday Options Update Features Martha Stewart Living Omnimedia, Saks, and Ligand Pharmaceuticals.

CINCINNATI -- Today's Schaeffer's Midday Options Update Features Martha Stewart Living Omnimedia (NYSE:MSO), Saks (NYSE:SKS), and Ligand Pharmaceuticals (NASDAQ:LGND). 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: Does Ligand Have a Leg to Stand On?

The U.S. equity market has been buoyed higher on Friday thanks to a monthly nonfarm payrolls report that managed to exceed expectations without stirring the specter of inflationary pressures. The Dow Jones Industrial Average has scurried above the 10,900 mark for the first time since June 2001, while the S&P 500 Index has managed to achieve a new 52-week peak. The Nasdaq Composite didn't want to be left out of the action, rising more than half a percent but continuing to struggle beneath its colliding 10-week and 20-week moving averages.

Oil futures are starting off to a rocky day. The April contract swallowed an early loss of 47 cents per share as gasoline and heating oil futures both dipped into the red. By lunchtime, however, black gold had returned to its uptrending ways, up 33 cents to $53.90 a barrel.

Take These Jobs and Shove It

One of the most highly anticipated economic reports of the month crossed newswires at 8:30 a.m. Eastern time today. Nonfarm payrolls for February rose by 262,000, a pleasant surprise to economists who had forecast an increase of 220,000. This was the highest rate of job-growth in four months, according to the Bureau of Labor Statistics. The month's unemployment rate moved to 5.4 percent, above the consensus estimate of 5.2 percent, while hourly earnings were unchanged at $15.90. This last nugget of data was a relief to those market-watchers searching for hints of inflation risks. Also unchanged was the nation's average overall workweek, which remains at 33.7 hours. Making adjustments for the previous report, January payrolls were revised slightly lower to reflect an increase of 132,000, down from 146,000 as initially declared. The unemployment rate for the first month of 2005, however, was left untouched at 5.2 percent.

Michigan Seems Like a Dream to Me Now

The University of Michigan announced solid results for its February sentiment index. After preliminary findings of 94.2, the final reading totaled 94.1, down slightly from January's figure of 95.5. The official reading was near analysts' expectations of 94.3. The expectations index in February dropped to 84.4 from 85.7, while the current conditions index edged lower to 109.1 from 110.9.

How to Bedazzle an Ankle Bracelet in 150 Days

Martha Stewart, the eponymous founder of Martha Stewart Living Omnimedia (NYSE:MSO), was released on schedule today after a five-month stint at a federal women's prison in Alderson, West Virginia. Paparazzi and federal authorities followed her return via private jet and chauffeured car to her $16 million New York estate. For the next five months, Ms. Stewart must endure house-arrest status, wearing an electronic ankle bracelet so authorities can track her movements. But in addition to enjoying the comforts of home, Martha can draw her salary of $900,000 and leave her home for up to 48 hours each week to work or run errands approved by her supervisors. Shares of MSO, which have impressively gained about 250 percent since early August, didn't offer Martha the greatest homecoming, as the stock is lower by 2.2 percent in midday activity.

Sitting in the Lap of Luxury 

Upscale department-store chain Saks (NYSE:SKS) reported fourth-quarter earnings per share of 67 cents on Friday morning. This matches analysts' consensus forecast and compares to year-ago figures of 56 cents per share. The company's net grew by 18 percent during the three-month reporting period, while fourth-quarter sales increased 4.9 percent to $2.07 billion. In other news, SKS officials announced plans to being an internal inquiry into the alleged improper collections of vendor markdown allowances. This activity has prompted an informal investigation by the Securities Exchange Commission. On Thursday, the retailer says it will restate earnings results for the past six years due to roughly $21.5 million worth of these allowances. The company's officials took time to look into the future as well as into the past. SKS expects capital spending to total between $250 million and $300 million in 2005. The firm forecasts same-store sales growth in the low single-digit range for its department stores and mid-single-digit range for its Saks Fifth Avenue chain.

Most-Active Options Update

At 1:16 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,921.8) was up 0.82 percent, or 88 points, to a new 52-week high, while the S&P 500 Index (SPX - 1,220.89) had rallied 0.86 percent, taking out an annual high as well. The Nasdaq Composite (COMP - 2,072.4) is lower by 0.61 percent. At 1:16 p.m. in the options pits, 1,883,025 calls and 1,154,361 puts traded for a composite put/call ratio across all six exchanges of 0.61. The CBOE put/call volume ratio for equity options weighed in at 0.57.

Ligand Pharmaceuticals

Ligand Pharmaceuticals (NASDAQ:LGND) is a biotherapeutic and biopharmaceutical concern that specializes in what Hoover's describes as "small-molecule drugs that interact with hormone-activated intracellular receptors."

On August 3, the stock dropped almost 40 percent after steeply missing analysts' earnings expectations for the second quarter and announcing the surprise departure of its independent auditor. Since this one-day drubbing, LGND shares have failed to recover, struggling to break through the glass ceiling into double-digit territory. This week, the stock declined below potential double-bottom support in the 9.5 region to reach a new four-month low.

There are signs of skepticism brewing on LGND, but this is not a surprise given the security's poor price action. As such, the contrarian implications are not as strong as they might be if pessimism was prevalent on an outperforming issue.

For example, Schaeffer's put/call open interest ratio (SOIR) for LGND weighs in at 0.42, which is higher than 84 percent of all of the past year's worth of SOIR readings. This reading could experience a decline come Monday morning, however, as both out-of-the-money May 12.50 and May 17.50 calls have seen notable activity cross the tape in today's session. The May 12.50 call has seen more than 10,000 contracts trade on open interest of nearly 19,000 contracts, while the 17.50 strike has seen almost 25,000 contracts cross the tape on open interest of only 6,899 contracts. Popular theory would suggest that many of these would translate as new open interest on Monday.

Skepticism is also rearing its head among the short-selling community. Last month, the number of shorted LGND shares rose 27 percent to its highest reading since July 2003, representing 16.7 percent of the equity's float. What's more, the current short-interest ratio on LGND stands at 8.9 days to cover. But remember that for a short-covering rally to ensue, the stock must give the bears a reason to wish for an exit.

Click on the following link to see the Daily Chart of LGND since December 2004 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=12657&obspage=2.

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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