Schaeffer's Midday Options Update Features Morgan Stanley, Aetna, Ameritrade Holding, E*Trade Financial, and Adolor.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Morgan Stanley (NYSE:MWD), Aetna (NYSE:AET), Ameritrade Holding (NASDAQ:AMTD), E*Trade Financial (NYSE:ET), and Adolor (NASDAQ:ADLR). 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: Options Trading with Schaeffer's Gold

At 12:00 p.m. our Schaeffer's Gold Trading Floor Blog, which is normally available only to Schaeffer's Gold subscribers, threw its doors open to all, just for the weekend. Take a moment to sample the blog, one of my favorite resources, and try out the other Schaeffer's Gold services, too. Highly recommended reading.

After the market antics over the past few weeks, you might reasonably have expected Friday 13th to start off badly, but the Dow opened marginally higher thanks to declining commodity prices. On the New York Mercantile exchange, crude oil futures for June delivery slipped sharply back yesterday, marking an 18-percent drop from the peak of almost $60 per barrel set on April 4, and the trend continued this morning, with the price slipping below the 48 level.

Metals lost their shine yesterday too, with copper futures down more than four percent, gold and platinum down more than one percent, and silver showing almost two percent of tarnish. The falls continued into today on the back of a strong dollar.

Treasurys are still doing well, with prices rising and yields consequently falling. But the yields on the longer-term issues have consistently fallen the most, indicating that the longer maturities (the bonds) are the Treasurys of choice. Economists tell us this suggests that investors are wary of economic weakness. On March 21, the yield spread between the two- and 10-year bonds was 81 basis points. By April 1, it had fallen to 70. It closed yesterday at 52.3, and we had to throw in an extra decimal place, otherwise the incremental moves would have been lost.

It has been a week of rumor, starting with Tuesday's story that some hedge funds might be in distress. Today's popular belief is that funds are quietly selling corporate debt and shifting the money into Treasurys. Whether this is real or imagined, it neatly accounts for the healthy price action we're seeing.

A Labor Department report showed that U.S. import prices for April rose by 0.8 percent, which exceeded the estimated figure, due to elevated commodity prices.

After Eight

I reported yesterday on the Group of Eight, the dissident former executives of Morgan Stanley (NYSE:MWD) calling for the departure of Chairman and CEO Philip Purcell, the spinning off of MWD's institutional securities business, and the rehiring of key individuals to keep top talent in place. Today they group conceded that their goals are unlikely to be met in the short term.

A Healthy $400 Million

The Dow Jones Newswires reports that Aetna (NYSE:AET) has agreed to acquire health management and data analytics company ActiveHealth Management, which it intends to operate as a branded, standalone business that will continue to provide clinical data products. The price was $400 million. AET stock hit an all-time high on April 6, but it has been in decline since then. The stock was down 1.73 percent at last check.

Ameritrade Down

Ameritrade Holding (NASDAQ:AMTD) lowered full-year earnings guidance for the second time in a month, blaming lower demand caused by market performance that it called "lackluster." Remember that the company turned down a merger offer by competitor E*Trade Financial (NYSE:ET) earlier this week. AMTD was down fractionally at last check, and ET was trading fractionally higher.

Most-Active Options Update

At 1:25 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,195.5) has gained 0.06 percent, followed by the S&P 500 Index (SPX - 1,158.98), down 0.03 percent. The Nasdaq Composite (COMP - 1,982.5) has gained 0.98 percent. At 1:25 p.m., 1,849,368 calls and 1,369,597 puts had crossed the tape, for a composite put/call ratio (across all six options exchanges) of 0.74. The CBOE put/call volume ratio for equity options stood at 0.74.

Adolor

Adolor (NASDAQ:ADLR) wants to help you avoid pain. The Pensylvanian palliative provider has been working since 1994 on drugs for treating pain. The stock has seen some heavy call action this morning, making it worth a look.

The weekly chart shows ADLR's battle scars, and highlights the heavy resistance currently exerted by the 20-week moving average, above which the stock has not close a single week so far this year.

The daily chart shows more resistance, first at the 20-day moving average, and also in the 10.50 region, with an all-time low on February 18.

Sentiment on ADLR is mixed, and our Schaeffer's Equity Scorecard rates the stock at 5.0 out of 10.0, meaning we currently foresee no immediate move in either direction. Nevertheless, we recalculate the scorecard every day, and the stock has some interesting features that could provoke the score to change. Most notably is the short-interest ratio, which currently stands at 9.02 days to cover. This is very substantial. Currently, the stock is declining, so there is no reason for the short sellers to cover. But in the world of biopharmaceuticals, news can be sudden and dramatic, and if some were to come along, the short covering could fuel a spectacular rally. Remember, too, that a short-interest ratio this large can be supportive, helping, at the very least, to prevent further falls.

However, options players appear to be betting on a bounce. The Schaeffer's put/call open interest ratio (SOIR) for ADLR is 0.33, indicating three calls to every put in the front three months of options. This shows more positive sentiment than 85 percent of the readings taken over the past year. This optimistic reading of investor sentiment conflicts with the short interest, making it hard to read the stock right now. That could change soon, so ADLR could provide opportunities for the vigilant speculator. Further optimism comes from the broker community, which has one "buy" rating, one rare "strong buy" and four "holds" according to Zacks, leaving room for upgrades, and certainly leaving room for downgrades.

As contrarians we look for one of the following situations:

--Fundamental and technical strength amid pessimistic sentiment. This is a signal that upside movement could be on the way if any significant good news comes along.

--Fundamental and technical weakness amid optimistic sentiment. This is a signal that downside movement could be on the way if any significant bad news comes along.

The stars have not aligned for ADLR yet, but if you're the first person to notice when they do, there are possibilities here.

Click on the following link to see the Weekly Chart of ADLR since April 2002: http://www.schaeffersresearch.com/wire?ID=13185.

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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.