Schaeffer's Midday Options Update Features Sprint Nextel.CINCINNATI -- Today's Schaeffer's Midday Options Update features Sprint Nextel Sprint Nextel Corporation (NYSE: S) is one of the largest telecommunications companies in the world. With 55 million subscribers, Sprint Nextel operates the third largest wireless telecommunications network in the United States (based on total wireless customers), behind (NYSE NYSE See: New York Stock Exchange :S). 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 A flash-based digital music player from Apple, introduced in 2005. Like larger iPod models, the nano has a color screen. Although the nano name suggests ultra-small "nanotechnology," the iPod shuffle is actually smaller. See iPod. . http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&PAGE=1. Options Update: What's the Deal With Sprint Nextel? The market averages are trying to collect themselves for an afternoon press higher as they slowly recover from their early-morning pullbacks. The Dow Jones Industrial Average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. is being driven lower by Caterpillar (CAT), which has plunged dramatically on the heels of its earnings report. Leaving this one stock out of the equation, the Dow would actually be higher by approximately 55 points (enough to reach a new annual peak!) As it stands, however, the blue-chip index is down 20 points. Those of you savvy enough to do the math will see that CAT is contributing about 75 negative index points. In addition to high-profile earnings reports from CAT, market watchers are contending with production-cut news from OPEC OPEC: see Organization of Petroleum Exporting Countries. OPEC in full Organization of the Petroleum Exporting Countries Multinational organization established in 1960 to coordinate the petroleum production and export policies of its and a surprise finish to the National League Championship Series (or maybe that last one's just me - Go Cards.) Most-Active Options Update At 2:11 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA DJIA See Dow Jones Industrial Averager (DJIA). - 11,983.5) has shed 28 points while the S&P 500 Index (SPX (Sequenced Packet EXchange) The transport layer protocol in the NetWare operating system. Similar to the TCP layer in TCP/IP, it ensures that the entire message arrives intact. SPX uses NetWare's IPX as its delivery mechanism. - 1,365.60) is down about 1.4 points. The Nasdaq Composite The Nasdaq Composite is a stock market index of all of the common stocks and similar securities (e.g. ADRs, tracking stocks, limited partnership interests) listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. (COMP - 2,337.1) has retreated almost four points. At 2:12 p.m. Eastern Time, 4,186,881 calls have changed hands compared to 3,347,208 puts, equaling a single-day put/call volume ratio of 0.79. The CBOE's equity put/call volume ratio stands at 0.74, while the ISE's ratio weighs in at 0.76. Sprint Nextel Note: For a follow-up on yesterday's Devon Energy (DVN DVN Digital Video Network (Internet2) DVN Digital Value Network DVN Diploma in Veterinary Nursing DVN Device Number ) piece, please follow this link (http://www.schaeffersresearch.com/ commentary/observations.aspx?click=home&ID=17590) (Due to its length, this URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists). One of the most compelling entries on the notably active options charts this afternoon is Sprint Nextel (NYSE:S), a household name when it comes to telecomm providers. With people bailing out of October options ahead of tonight's closing bell (a death-knell for the front month), some speculators have found time to trade more than 17,000 puts on the S November 16 option (S WQ). Heading into today, this strike was home to just 2,575 contracts, so it is likely that today's volume will bolster open interest come Monday. The November series is currently dominated by the in-the-money 17.50 put, with nearly 71,000 contracts call home. Put open interest in the October series is not very exciting today, so the volume isn't a simple matter of rollouts to a later series. Looking at the time-and-quotes data, it looks as though one massive block of 10,000 contracts was executed at 10:54 a.m. Eastern time. The rest of the volume came from two fairly large blocks (of 2,500 contracts and 1,875 contracts) during the late morning, and a series of small and mid-sized transactions. The mother of all trades, the 10,000-contract block, traded at the ask price of $0.35 per contract, making the deal worth than a total of $350,000. Given the paltry open interest already at this strike, it is near-certain that this block (as well as the others) will translate into new positions. Why are traders today scooping up this out-of-the-money, short-term put position? Of course, strategy is anybody's guess, but the charts provide a possible clue. S reversed lower in mid-April and has failed to recover. The stock has not participated in the broad market's recent rally, and it continues to languish beneath resistance from its 20-week moving average, which thwarted an advance attempt in S earlier this month. The stock is also stifled beneath its 80-month and 160-month moving averages. The former of these long-term trendlines recently rolled into a downtrend downtrend A series of price declines in a security or the general market. Many analysts feel that investors should avoid securities in a downtrend until the pattern is broken. Compare uptrend. and bearishly crossed the equity's 160-month trendline, which can be a sign of future technical trouble for the shares. The sentiment indicators Sentiment indicators The general feeling of investors about the state of the market, such as whether they are bullish or bearish. are mixed for S on this expiration Friday expiration Friday The Friday once each quarter when stock index futures, index options, and stock options simultaneously expire. Investors tend to close out positions in futures, options, and stocks on expiration Friday with the result being extremely . New short-interest numbers reveal that the number of S shares sold short rose by more than 18 percent during the latest reporting period. Despite this increase, the short-interest ratio short-interest ratio A ratio that is used for market analysis and is calculated by dividing short interest by average daily volume. Technicians use the short-interest ratio as a tool to determine market direction. totals just 3.3 days to cover, which doesn't lay enough of a foundation for a short-covering rally. Elsewhere, analysts have given S eight "strong buy" ratings, 11 "holds," and one "strong sell." Finally, Schaeffer's put/call open interest ratio (SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways ) for S weighs in at 0.73, in the 84th annual percentile, but this could change dramatically on Monday, with October options no longer part of the equation. Schaeffer's Equity Scorecard ranks S as a 5.0 on its scale from zero to 10, but I personally think the outlook is skewed skewed curve of a usually unimodal distribution with one tail drawn out more than the other and the median will lie above or below the mean. skewed Epidemiology adjective Referring to an asymmetrical distribution of a population or of data a little more bearishly, especially from a technical perspective. Briefing.com indicates that S is scheduled to report third-quarter earnings before the open next Thursday (October 26). Reuters reports that analysts expect 32 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. and Zacks states that the consensus estimate is for 33 cents per share. In the year-ago period, S earned 29 cents per share. Click here to see monthly and weekly charts of S: http://www.schaeffersresearch.com/wire?ID=17598. 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. |
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