Schaeffer's Midday Options Update Features Oracle and Apple Computer.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Oracle (NASDAQ:ORCL) and Apple Computer (NASDAQ:AAPL). 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: Oracle Breaks Above 80-Month Trendline

Later this afternoon, the Federal Reserve Bank will hold its interest-rate meeting. Most analysts believe that the Fed will pause the tightening cycle for a second month in a row thanks to news that inflation is less of a threat and that economic growth is tamer. Last month, the central bank put an end to 17 straight interest-rate hikes, dating back to June 2004. Expect investors to pay quite a bit of attention to the accompanying statement (due at 2:15 pm Eastern time) to look for any hint on further rate hikes.

The U.S. Energy Department reported this morning that crude supplies fell for a third-straight week, down 2.8 million barrels to 324.9 million. Gasoline inventories rose for a fifth straight week, up 600,000 barrels to 207.6 million barrels.

Meanwhile, the American Petroleum Institute (API) said supplies of crude fell 4.1 million barrels to 321.2 million. According to the API, motor gasoline stocks showed a rise of 449,000 barrels, to 213.7 million barrels.

Most-Active Options Update

At 1:40 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 11,608.5) is currently up 0.59 percent and the S&P 500 Index (SPX - 1,326.72) has gained 0.64. Meanwhile, the Nasdaq Composite (COMP - 2,253.2) has added 1.39 percent. At 1:40 p.m. Eastern Time, 2,694,415 calls have changed hands compared to 1,964,615 puts, equaling a single-day put/call volume ratio of 0.72. The CBOE's equity put/call volume ratio stands at 0.63, while the ISE's ratio comes in at 0.77.

Option Activity Follow-Up

In this column yesterday, I looked at some heavy put action on Apple Computer's (NASDAQ:AAPL) October 80 call contract (QAA JP), which was seeing volume of 8,506 on open interest of 39,648. When all the day's transactions were netted up, open interest increased to 42,747. AAPL stock eased back 0.16 percent yesterday but at last check today, it was ahead about two percent to 75.26. Remember what I said yesterday: "Let's watch the 75 level; if it demolishes that wall of potential resistance too, and I think it might, then we're seeing considerable momentum that could carry AAPL on higher."

Oracle

Oracle (NASDAQ:ORCL) is looking interesting at the moment. That makes a change because the stock has been bouncing between the 10 and 15 levels, it seems, ever since Emperor Hadrian got interested in masonry. In June last year, I suggested that "ORCL's price performance is duller than the dullest dull thing you can bring to mind on a rainy Saturday when there's nothing good on television," and I still don't think I was exaggerating much.

In the options pits, ORCL fanciers were busy this morning. The October 17 call (ORQJR) had seen 12,226 contract cross the tape by the time we grabbed our figures. Open interest at the start of the day for that contract was 27,743. Meanwhile, the November 17 put traded a volume of 9,049 on initial open interest of 8,221.

At the end of August, Ryan Detrick wrote bullishly about the software group, and it does look as if the sector might be perking up at last. The stock was up more than 11 percent at last check, after the company reported a 29-percent rise in profit and a 30-percent jump in revenue late yesterday. ORCL was then upgraded by Citigroup (C), which noted that the results "bode well for a continued software rally in the second half of the year." The stock had been riding the support of its 10-day and 20-day moving averages, but today's gap higher carried it well above these trendlines.

In fact, today's gains carried ORCL back to levels it last visited in August 2001, when many of us thought the dot-com train was still on track. The stock has also moved above its powerful 80-month moving average, which it hasn't closed a month above since March 2002. ORCL has been probing this resistance level since September 11.

So, is it time to buy in? Let's look at the sentiment. Of the 23 covering analysts listed on Zacks, 11 see ORCL as a "strong buy" and I bet they're all say "See? See?" today. Additionally, there are three "buy" ratings, and seven "holds," but just one "sell" and one "strong sell." All in all, there's still room for upgrades, but there's plenty of room for downgrades if ORCL stumbles.

Furthermore, just 1.3 percent of the stock's float is sold short, so there isn't much fuel for a short-covering rally. It would take just 1.35 days to cover those short positions at the stock's average daily trading volume, so we're not hoping for any short-covering support.

However, sentiment in the options pits is more skeptical, a good sign from our contrarian perspective. The stock earns a Schaeffer's put/call open interest ratio (SOIR) of 1.02, telling us that puts and calls are more or less equally popular in the front three months of options. This ratio is at an annual high, indicating extreme pessimism, and suggesting that there might be some sideline money after all, waiting to pile in and push up the price further.

On our Schaeffer's Equity Scorecard, ORCL earns 8.0 out of 10 thanks to this mixed sentiment. Remember that scores close to zero suggest that the path of least resistance lies to the downside, and scores close to 10 point to the upside.

Click here to see a Daily Chart of Oracle Since January 2006 with 10-day and 20-day moving averages, and a Monthly Chart of Oracle Since July 2001 with 80-month and 160-month moving averages: http://www.schaeffersresearch.com/wire?ID=17379 .

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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 .