Schaeffer's Midday Options Update Features Tyco International, D.R. Horton, Daktronics, Boeing, and Network Appliance.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Tyco International (NYSE:TYC), D.R. Horton (NYSE:DHI), Daktronics (NASDAQ:DAKT), Boeing (NYSE:BA), and Network Appliance (NASDAQ:NTAP). 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=PRMOU11M&PAGE=1 .

Options Update: Stock Strategy for Network Appliance Ahead of Earnings

A mix of inflation worries and declining crude stockpiles has traders on their heels today. Meanwhile, solid earnings reports from Tyco International and D.R. Horton were not enough to spur the major market indices into positive territory. Should this apathy continue throughout the week, it could end what has been a four-week rally for the market. At last check, all three of the major indices were trading in negative territory.

5.6v Earnings Power

Tyco International (NYSE:TYC) posted fourth-quarter earnings of $917 million, or 44 cents per share, versus year-ago gains of $454 million, or 22 cents per share. Excluding items, earnings came in at 42 cents per share, falling short of the Street estimate of 46 cents per share. Looking ahead, the company said earnings for continuing operations (excluding special items) should see a 10-percent increase in fiscal 2006, with first-quarter continuing operations before items in a range of 40 cents to 42 cents per share. At last check, the shares were up nearly six percent despite the seemingly lackluster news.

Horton Hears a Who?

Meanwhile, D.R. Horton (NYSE:DHI) boosted its earnings forecast for the 2006 fiscal year after reporting a 61-percent spike in fourth-quarter net income to $564 million, or $1.77 per share. Sales for the quarter soared 45 percent to $5.1 billion on a 38-percent increase in homes closed. The Street had expected earnings of $1.63 on sales of $4.7 billion. Looking ahead, DHI expects fiscal year 2006 earnings to be in a range of $5.22 to $5.32 per share on revenue of more than $15.5 billion. However, it kept its earnings forecast for the first quarter unchanged at between 90 cents and 95 cents a share.

Boeing Bounces on Agreement

Boeing (NYSE:BA) received a boost in trading today as the company reached a tentative agreement with the Society of Professional Engineering Employees in Aerospace. The deal centers on a new three-year contract covering 18,000 employees in Washington and Oregon.

Alone in the Dark

Daktronics (NASDAQ:DAKT) reported second-quarter net income of $5.2 million, or 26 cents per share, topping the Street's forecast for earnings of 23 cents per share. Sales rose to $75.8 million from $59.5 million. The figure also bested analyst expectations for sales of $73.2 million. DAKT projected third-quarter net income of 15-25 cents per share on revenue of $65-$72 million.

Most-Active Options Update

At 1:44 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,669.70) has slipped 0.16 percent. The S&P 500 Index (SPX - 1,228.96) is down 0.01 percent, and the Nasdaq Composite (COMP - 2,183.3) has declined 0.16 percent. At 1:45 p.m. Eastern time, 2,496,598 calls have changed hands compared to 1,811,898 puts, equaling a single-day put/call volume ratio of 0.72. The CBOE's equity put/call volume ratio weighed in at 0.73.

Network Appliance

According to Hoover's, Network Appliance (NASDAQ:NTAP) is a leading vendor of network-attached storage (NAS) systems designed for medium-sized to large enterprises; its filers can also be deployed in Fibre Channel and IP-based storage area network (SAN) configurations. The company's NetCache Web caching appliances help enterprises and service providers deliver content more quickly by storing information physically closer to users.

NTAP is slated to slip into the earnings confessional on November 16 after the market close. Currently the Street is expecting a profit of 18 cents per share from the tech company, an 11-percent improvement over the same quarter last year. The firm has been a rather steady performer in the earnings limelight, matching the consensus estimate in three of the past four periods and besting in the remaining period by more than 14 percent.

Options players appear to be banking on a continuation of the status quo from NTAP, as the speculative group is piling into the stock's November 30 call today, with more than 7,600 contracts crossing the tape. Open interest at this front-month out-of-the-money strike currently stands at 6,476 contracts, indicating that there is a good chance that some of today's activity could be the initiation of new positions.

Despite today's activity, however, the group has grown steadily bearish toward NTAP during the past several weeks. The security's Schaeffer's put/call open interest ratio (SOIR) has risen from its October 25 reading of 0.61 in the 0.04 percentile to today's perch at 0.86 in the 40th percentile. Now this is far from what I would consider a bearish reading from this ratio, but the increase in put activity heading into the company's earnings report bodes well for a positive reaction to the release as it signals that investor expectations could be on the low side.

Switching gears to the technical aspects of NTAP, I see that the shares have solidly performed for some time. The equity has risen along the support of its 10-day and 20-day trendlines since mid-October, and has drawn its 10-week and 20-week moving averages into a bullish cross. Furthermore, the security has recently reclaimed the support of its 10-month moving average. However, I do see a bit of a problem in the 28.50 area, as this region appears to be exerting a fair amount of resistance on NTAP.

As if that wasn't enough, the stock has outperformed its peers in the Nasdaq Composite (COMP) on a relative strength basis since early October.

Switching back to the sentiment picture, short interest edged higher by two percent during October. While the resulting short-interest ratio for NTAP is a meager 3.29 days to cover, the 14.3 million shares sold short still account for more than four percent of the stock's total float. Should the equity manage another solid trip to the earnings realm, it could experience a bit of a lift from short-covering support.

However, NTAP stands to gain the most from the brokerage bunch on Wall Street. According to Zacks, 12 of the 20 covering analysts rate the shares a "hold" or worse. Naturally, any upgrades from this bunch as a result of NTAP's earnings report could lend further strength to the shares' rally.

While the sentiment looks OK, and the stocks' technical picture appears to be solid, I feel that there is just some flair missing for NTAP. Fundamentally, NTAP seems solid, but none of this data (fundamental, technical, or sentiment) really blows my skirt up. It would seem that our Schaeffer's Equity Scorecard agrees with this assessment, issuing a rating of 5.5 out of 10 for the shares. With this lack of driving force behind NTAP, I am really worried about short-term resistance in the 28.50 area. But who knows, a solid report could spur the equity past this region and lend NTAP a much needed boost of confidence.

Click on the following link to access a Daily Chart of NTAP since October 2005 with 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=14616 .

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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 .