Schaeffer's Midday Options Update Features SanDisk, Reliant Energy, and Lowe's Companies.

CINCINNATI -- Today's Schaeffer's Midday Options Update features SanDisk (NASDAQ:SNDK), Reliant Energy (NYSE:RRI), and Lowe's Companies (NYSE:LOW). 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. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&PAGE=1 .

Options Update: Complacency is King for SanDisk

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 SanDisk.

Rising crude prices are continuing to put pressure on traders today, forcing the major market indices into a deepening decline as we head into the latter half of the session. Meanwhile, an Iranian foreign ministry spokesman reiterated that his country won't suspend its uranium enrichment program, defying a U.N. resolution calling on Tehran to suspend the program by August 31 or face sanctions.

In earnings news, Lowe's Companies (NYSE:LOW) weaker-than-expected second-quarter report is also having a draining effect on equities. Earlier this morning, LOW reported net income of $935 million, or 60 cents per share, missing the Street's expectations by a penny per share. The results acted as a catalyst to renew worries about the outlook for the home-improvement sector during a period of slowing economic growth.

Most-Active Options Update

At 12:58 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 11,347.7) has dropped 0.30 percent, or 34.5 points. The S&P 500 Index (SPX - 1,297.69) is down 0.35 percent, and the Nasdaq Composite (COMP - 2,145.9) has given back 18.1 points, or 0.84 percent. At 12:59 p.m. Eastern Time, 1,891,452 calls have changed hands compared to 1,641,899 puts, equaling a single-day put/call volume ratio of 0.89. The CBOE's equity put/call volume ratio stands at 0.83, while the ISE's ratio comes in at 0.93.

Option Activity Follow Up

On Friday, my colleague Beth Gaston Moon noted that Reliant Energy (NYSE:RRI) was experiencing some heavy call activity at its now expired August 12.50 call. Looking at the translation from Friday, it seems that Beth hit the nail on the head when she speculated that the more than 12,000 contracts in call volume on the session were likely the roll out of front-month positions into September. On Friday, the September 12.50 call held open interest of only 185 contracts. Following Friday's activity, this option now sports open interest of 11,351 contracts. In trading today, RRI is seeing very little activity in the options pits as the shares consolidate further into potential support at the 12.50 level and their rising 10-day moving average.

SanDisk

Flash memory guru SanDisk (NASDAQ:SNDK) is reportedly taking yet another stab at encroaching on Apple Computer's dominant iPod digital music player. According to The Wall Street Journal, The company is set to release a $250 music player with eight gigabytes of capacity, twice that of the comparable iPod. SNDK is also cutting prices on its other music players, and will introduce a model that costs less than $100, the paper said.

While shares of SNDK are up mildly on the news, it seems that options players have other feelings about taking on the 800-pound gorilla of the digital music world. So far today, nearly 10,000 puts have changed hands at the stock's September 50 strike (SWF UJ); nearly matching open interest that currently resides at this level. However, while this may seem like heavily slanted bearish activity, the majority of today's volume has changed hands nearer to the bid price, suggesting that these options were sold. However, we will have to wait until tomorrow for confirmation.

Turning to the technical picture for SNDK, I see that the shares have rallied nicely from their late-July bottom in the 37 region. In fact, the stock has added more than 37 percent during this time frame, garnering some support from its rising 10-day and 20-day moving averages. However, the shares have stalled in the 52 region - a level that acted as resistance for SNDK in mid- to late June. Could we be in for a repeat performance here?

Pulling back to a weekly chart of SNDK, you can see that the 52 region happens to be home to the stock's declining 20-week moving average. This intermediate-term trendline, in combination with its 10-week counterpart, had largely held SNDK in check since January. Furthermore, the weekly chart also highlights the technical downtrend that the security has been locked in since the beginning of the year. During this time frame, SNDK has dropped more than 35 percent.

Sentiment Rundown for SNDK:

--Percent of analysts tracked by Zacks who rate the stock with a "buy": 69%

--Number of analysts tracked by Zacks: 19

--Short interest as a percent of float: 7.66%

--Short-interest ratio: 1.68

--Schaeffer's put/call open interest ratio (SOIR): 0.84

--SOIR percent rank: 44%

--Schaeffer's Equity Scorecard: 5.0

After seeing that SNDK is in the midst of a fledgling uptrend, I was hoping to find a wealth of pessimistic sentiment levied against the shares. However, I have found a rather complacent sentiment backdrop instead. Short interest could give SNDK a bit of a boost, since more than seven percent of the stock's float is sold short; but with less than two days to cover, I don't see much help coming from this group. Meanwhile, options players are rather wishy-washy, and Wall Street poses more of a threat to the shares than any other indicator. With no "sell" ratings to be found, and 13 "buy" or better ratings, SNDK is very vulnerable to potential downgrades.

All in all, the security could very well continue in its uptrend. As they say, "the trend is your friend." However, the long-term downtrend is what worries me about SNDK. Combine that with the rather noncommittal stance from the investing public, and you arrive at a perfectly middle-of-the-road Schaeffer's Equity Scorecard rating of 5.0.

Click here to see a Weekly chart of SNDK since January 2006 with 10-week and 20-week moving averages and a Daily chart of SNDK since June 2006 with 10-day and 20-day moving averages: http://www.schaeffersresearch.com/wire?ID=17178 .

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. 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 .