Schaeffer's Midday Options Update Features Texas Instruments, Microsoft, General Motors, Pfizer, Honeywell International.

CINCINNATI -- Today's Schaeffer's Midday Options Update Features Texas Instruments (NYSE:TXN), Microsoft (NASDAQ:MSFT), General Motors (NYSE:GM), Pfizer (NYSE:PFE), and Honeywell International (NYSE:HON). 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. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1M&PAGE=1

Schaeffer's Midday Options Update: Hang 'Em High with Texas Instruments

It was a moderately mixed session today, with the Nasdaq Composite slouching lower as its brethren headed for higher ground. A bouquet of positive earnings data within the blue-chip sector and comments from Fed Chair Alan Greenspan had the Dow soaring higher just before midday. While it is unlikely that you missed the numerous articles detailing Greenspan's comments, I feel that a quick recap is in order. The Fed Chair raised hopes for a more aggressive series of interest-rate hikes when he stated that the Fed would do all that is necessary to contain inflationary pressures in the economy. He also repeated the message that the interest rates would continue rising at a "measured" pace, in his address to the Senate Banking Committee late Tuesday, citing that there are greater risks to the economy from the current low-rate environment than from a transition to higher rates.

Elsewhere on the market, it was all Dow all the time, with Microsoft (NASDAQ: MSFT) announcing that it would make a $32 billion special payout to investors. This payout arrives as a one time dividend of $3 per share and an increased quarterly dividend. The software giant also announced the initiation of a $30 billion stock buyback plan to take place over the next four years.

The automotive sector rejoiced today, as Big Three member General Motors (NYSE: GM) posted a second quarter profit of $1.3 billion, or $2.36 per share. The results compare with last year's performance of $879 million, or $1.57 per share, and the Street's view of $2.24 per share. Revenue for the Dow component rose 7.1 percent over the prior quarter to $49.1 billion. GM also reiterated its 2004 earnings outlook.

Rolling on with blue chips, Honeywell International (NYSE: HON) slipped into the earnings confessional to post second-quarter earnings of 42 cents per share, besting the consensus view for 38 cents. Meanwhile, J.P. Morgan Chase narrowed its second-quarter losses to $548 million, or 27 cents per share. Excluding items, earnings for the quarter rose to $1.81 billion, or 85 cents per share, slipping past the Street's expectations by two cents.

Dow pharmaceuticals also sparkled in the earnings limelight today. Merck's second-quarter figure of $1.77 billion, or 79 cents per share, fell in step with both its results from last year and the consensus estimate. Looking forward, the company projected third-quarter earnings of 80-84 cents per share and full-year earnings of $3.11-$3.17 per share, also in line with current projections. Fellow drug giant Pfizer (NYSE: PFE) edged slightly higher today after releasing second-quarter earnings of $2.9 billion, or 38 cents per share. Excluding special items, earnings rose to 47 cents per share, matching the Street's view. However, the company warned that a more challenging business environment and lower-than-expected currency gains prompted it to lower its full-year guidance to $52.5-$53 billion from its prior estimate of $54 billion.

At 2:28 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10152.3) is up 0.03 percent and the S&P 500 Index (SPX - 1104.28) is lower by 0.39 percent. The Nasdaq Composite (COMP - 1893.1) is down 1.25 percent. At 2:39 p.m. in the options pits, 2,236,208 calls and 1,425,418 puts traded for a composite put/call ratio across all five exchanges of 0.63. The CBOE put/call ratio for equity options weighed in at 0.63.

Proving that you just can't escape the earnings tidal wave this week. Semiconductor concern Texas Instruments (NYSE: TXN), our focus stock for midday's most-active options, reported a second-quarter profit of 25 cents per share just after yesterday's close. The results matched the Street's expectations, while the firm's third-quarter guidance of 26-29 cents per shares surrounded expectations for 28 cents per share.

Sentiment coming into the report was relatively mixed. Yesterday's Schaeffer's put/call open interest ratio (SOIR) stood at 0.93 in the 87th percentile of the past year's worth of readings. However, the SOIR plunged overnight to 0.84 (in the 68th percentile), and investors are snatching up calls on the security in today's session. TXN's August 22.50 call has seen more than 13,667 contracts cross the tape so far today on open interest of 30,234. While this might suggest that the SOIR could continue its recent nosedive, we will have to wait until tomorrow to see if today's activity will translate into new positions.

Short sellers indicated a shift toward the bearish camp during the latest reporting period, increasing their positions by a hefty 26 percent. However, the resulting 21.9 million TXN shares sold short could be covered in a miniscule 1.69 days and represents a paltry 1.28 percent of the stock's total float. Despite the potential shift over the past month, this relatively scant accumulation of bearish bets would offer up little to no support from a short-covering rally. Wall Street is stalwartly defending its bullish position, as Zacks reports that there are 18 "buys," eight "holds," and a mere three "sells" on the security. Any downgrades from this bunch could add to the stock's recent technical decline.

Speaking of technicals, TXN has been a laggard since the beginning of the year, declining nearly 40 percent since setting a near-term high in January. Not only has the equity underperformed the SPX during this time frame, but TXN's relative-strength measure versus its peers in the struggling PHLX Semiconductor Index has also been a veritable downward slope. Despite yesterday's positive earnings announcement, the security remains capped by its declining 10-day moving average. TXN is even in danger of closing its first month in below its 20-month trendline since July 2003. Long-term support lies beneath the shares at the round-number 20 level, but given the elevated levels of investor optimism on this underperformer, this level may not be enough to stem TXN's decline.

Click the following link to see the Monthly Chart of TXN since June 2003 with 20-Month Moving Average: http://www.schaeffersresearch.com/wire?ID=10630.

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=PROB1M&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.