Schaeffer's Midday Options Update Features Take-Two Interactive Software.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Take-Two Interactive Software (NASDAQ:TTWO). 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: A Double Take on Take-Two

The major market indices continue to hover just below the break-even mark as we head into the latter half of the trading session. A fall in weekly crude supplies isn't helping matters any, pressuring crude prices higher and weighing on equities. Digging into the Energy Department's report, crude oil inventories fell for the second consecutive week, sliding by 1.1 million barrels to 339.7 million for the week of December 1. Motor gasoline supplies also fell 1.1 million barrels to 200 million. Distillate inventories stocks fell for a ninth-straight week, down 400,000 barrels to total 132.4 million barrels.

Meanwhile, a sneak peak at this week's nonfarm payrolls report arrived today when the ADP reported that private employers in the United States created 158,000 net new jobs in November. The ADP's employment index saw its largest gain since June's 368,000. Together with an estimated 15,000 government jobs that aren't included in the ADP index, the report suggests nonfarm payrolls likely grew by about 170,000 in November. The government's nonfarm payroll report will be released Friday morning. Analysts currently expect job growth of about 110,000 in November.

Most-Active Options Update

At 2:04 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 12,318.5) has slipped 13.1 points, while the S&P 500 Index (SPX - 1,414.43) has dropped 0.33 points. The Nasdaq Composite (COMP - 2,449.0) has given up 3.4 points. At 2:05 p.m. Eastern Time, 2,982,730 calls have changed hands compared to 2,068,896 puts, equaling a single-day put/call volume ratio of 0.69. The CBOE's equity put/call volume ratio stands at 0.81, while the ISE's ratio weighs in at 0.65.

Take-Two Interactive Software

While this controversial producer of console video games was not the first stock on our most active options list to catch my eye, a look at the equity's technical performance and sentiment backdrop quickly convinced me that it was definitely worth a double take. But before we dive into the nitty-gritty, let's take a look at the option activity that placed Take-Two Interactive Software (NASDAQ:TTWO) on our most active options listing for today.

On the surface, the stock's December 20 put has seen more than 14,000 contracts change hands so far today. Open interest at this front-month strike currently represents the peak put accumulation for December, resting at 28,520 contracts. Today's volume, should it translate into fresh positions, would further solidify the December 20 strike as the leading site of puts for the series.

Drilling down on this activity, there were two notable blocks of options that have crossed on the session so far. The first was a block of 1,000 contracts that crossed between the bid and the ask prices during the lunch hour at 12:24. However, since these options traded between the bid and the ask, we have no way of knowing if they were bought or sold.

Our next block is just as confusing when it comes to discerning the traders' intentions, but with 12,000 contracts changing hands, it is much more compelling. This rather sizeable block of contracts crossed at 10:56 a.m. at the bid price of $1.35, or $135 per contract. The total outlay for the trade was a hefty $1.62 million. Normally, when an option crosses at the bid, we can assume that it was sold. In this case, the most likely intention was a closeout of an existing position on TTWO.

If you like to speculate, however, this trade could also have been sold to open, in which the investor could have sold the 12,000 contracts and pocketed the $1.62 million in the hopes that TTWO would finish above the 20 strike by December expiration. There is a third possibility; an institution could have gotten a deal by buying so many contracts and actually bought these 12,000 contracts at a price of $1.35 per option. Quite intriguing, but we will have to wait until tomorrow for confirmation.

Why so much attention to the 20 level? This region has long been a sticking point for TTWO. In fact, the stock has not closed a week above this round-number resistance since late October. As a caveat, however, when TTWO last broke out above this region in July 2004, the shares quickly accelerated to the upside, tagging a new all-time high in the process.

On a monthly chart, you can see more clearly how pivotal the 20 level can be. You can also see that TTWO is poised to close its first month above its 10-month and 20-month moving averages since July 2005.

Returning to options for a moment, it is important to note that while the 20 strike is home to peak put open interest of 28,520 contracts, call open interest at the strike numbers a paltry 7,060 contracts. This lack of confidence from options players leaves little in the way of potential options-related resistance overhead. In fact, when you look TTWO's December open interest configuration, you can see a distinct skew to the put side of the coin, with very few investors looking for an upside move in the shares. This type of negativity amid the stock's solid technical performance is a prime bullish contrarian indicator.

Outside the options pits, pessimism is running willy-nilly on TTWO. More than 43 of the security's float is sold short, and it would take a lengthy 16 days to buy back this wealth of bearish bets. What this means is that should TTWO breakout above the 20 level like it did last time, the shares could be on a course to yet another all-time high as these investors rush to cover their positions and save their portfolios.

Finally, Wall Street is also showing no respect for the Heathcliff Earnshaw of the videogame world. According to Zacks, all nine of the analysts following TTWO rate it a "hold," leaving ample room for upgrades that could lend additional buying pressure to the equity.

As always, thank you very much for reading and good luck with your trading!

Click here to see a December open interest configuration for TTWO, a Monthly chart of TTWO since September 2002: http://www.schaeffersresearch.com/wire?ID=17830

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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.