Schaeffer's Midday Options Update Features Nokia and Texas Instruments.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Nokia (NYSE:NOK) and Texas Instruments (NYSE:TXN). 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.

Take advantage of the timely Schaeffer commentaries by signing up for 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 and get entered to win an iPod Nano. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&PAGE=1 .

Options Update: Deep In the Heart of Texas Instruments

The major market indices are struggling to contain their losses as we head into the latter half of the trading session. Today's influx of economic data has largely been overlooked in due to the wave of earnings warnings plaguing the housing sector. Both KB Home and Beazer Homes USA lowered their 2006 earnings guidance, placing pressure on an already ailing housing market. Meanwhile, an earnings warning from handset maker Palm is providing additional pressure on technology stocks. All in all, it's a pretty grim day on the Street.

Most-Active Options Update

At 1:29 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 11,360.3) is currently 0.40 percent lower. The S&P 500 Index (SPX - 1,295.90) has dropped 0.34 percent, and the Nasdaq Composite (COMP - 2,163.3) has given up 0.21 percent. At 1:30 p.m. Eastern Time, 2,364,480 calls have changed hands compared to 2,240,468 puts, equaling a single-day put/call volume ratio of 0.94. The CBOE's equity put/call volume ratio stands at 0.75, while the ISE's ratio comes in at 1.22.

Option Activity Follow-Up

Yesterday, I took a closer look at telecommunications and portable handset concern Nokia (NYSE:NOK). The stock was the target of some heavy put activity yesterday at its October 20 strike. The shares gapped below this region yesterday on news that slowing economic growth could have a greater impact on NOK. When yesterday's activity finally translated, open interest at the back-month October 20 put had increased to 37,984 contracts from the prior session's reading of 25,383 contracts. Despite this heavily bearish activity, calls remain the option of choice for NOK traders, as the stock's Schaeffer's put/call open interest ratio (SOIR) continues to decline. With NOK's habit of trending in the direction of this ratio, a renewed interest in call activity could be the harbinger of further decline in the shares.

Click here to see a SOIR chart for NOK since September 2005: http://www.schaeffersresearch.com/wire?ID=17292 .

Texas Instruments

Amid the wash of selling pressure taking hold of the market today, it would appear the Texas Instruments (NYSE:TXN) has found a bit of support to help stem its losses. The shares have pulled back nearly one percent so far, but are being buoyed by the 30.50 level. There isn't any option open interest at the strike, but there is a considerable build-up in put open interest at the 30 level that could lend a hand. In fact, due to today's rather bearish mood on the Street, investors are piling into TXN's September 30 put, with more than 9,000 contracts crossing the tape on open interest of 19,042 contracts.

Looking at a daily chart, I can see several layers of technical support that could make or break TXN depending on how the short-term plays out for the security. Currently, the 30.50 level itself seems to be quite supportive. This region had previously capped the shares from June through mid-October - regular readers of Schaeffer's Research know that former resistance levels can switch roles and provide support when given the chance. Lending an additional hand is the stock's 80-day moving average. This trendline is also the site of former resistance and could now prove supportive for the shares.

However, not everything is rosy on the technical side for TXN. The security has declined more than 15 percent since peaking in April. Furthermore, the equity must now contend with overhead resistance at its 160-day moving average and chart congestion in the 31 region.

Sentiment Rundown for TXN:

--Percent of analysts tracked by Zacks who rate the stock with a "buy": 63%

--Number of analysts tracked by Zacks: 27

--Short interest as a percent of float: 2.12%

--Short-interest ratio: 2.27

--Schaeffer's put/call open interest ratio (SOIR): 0.91

--SOIR percent rank: 97%

--Schaeffer's Equity Scorecard: 5.0

Sentiment toward TXN is rather noncommittal. On the surface, it seems that brokerage firms are firmly in the bullish camp for the shares. However, a closer inspection reveals that 10 of the 27 analysts covering TXN rate it a "hold," leaving ample room for moves to either side of the bull/bear coin. Short sellers have also shied away from the equity, but a lack of short interest doesn't necessarily mean that the stock will decline. It does however indicate that should the shares continue to pullback that there is very little potential for short-covering support.

Option speculators are the only group to definitely pick a side, going heavily bearish on the security, and I can't really blame them given the bad press and performance that the semiconductor sector has received recently. However, the stock's SOIR has been on the rise lately, hinting that TXN could be the recipient of some short-term buying pressure since the shares tend to move in the direction of this ratio.

Getting down to brass tacks, TXN is not a very pretty stock for those buy-and-hold traders out there. For those looking for a more aggressive move, the shares have the potential for a sharp breakout in either direction, but predicting that direction with the indicators above could pose a bit of a problem. However, seasoned options players know that there are strategies that don't require you to pick the right direction, like straddles and strangles. Furthermore, if you are convinced that TXN is hemmed in by technical resistance and that the current sentiment picture doesn't offer up much evidence of a sharp move, there is also the credit-spread strategy. Personally, I get the feeling that TXN is set for a move in one direction or the other, and if I was forced to pick one, I would place my money on the downside. But I'll leave the actual decision up to you. As always, good luck in your trading, and I'll see you again tomorrow.

Click here to see a SOIR chart for TXN since September 2005 and Daily chart of TXN since May 2006 with 80-day and 160-day moving averages: http://www.schaeffersresearch.com/wire?ID=17292 .

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 and get entered to win an iPod Nano. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&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 .