Schaeffer's Midday Options Update Features Tyco International, Sirius Satellite Radio, Coventry Health Care, Chevron, and Unocal.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Tyco International (NYSE:TYC), Sirius Satellite Radio (NASDAQ:SIRI), Coventry Health Care (NYSE:CVH), Chevron (NYSE:CVX), and Unocal (NYSE:UCL). 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=PRMOU1M&PAGE=1 .

Options Update: Get Thee to Coventry?

The market continues to exude strength heading into the second part of the day. Bolstered by waning crude prices, solid economic reports, and positive earnings reports, traders had bid all three of the major market indices into positive territory by lunchtime. There was a pair of solid economic reports lending a hand on the Street. According to the Commerce Department, U.S. consumer spending grew 0.8 percent in June, outpacing a 0.5-percent rise in personal income. However, the personal savings rate fell to zero percent, its lowest level since October 2001. Elsewhere, factory orders reinforced last week's ISM Manufacturing report, as orders increased one percent in June, falling relatively in line with forecasts for gain of 1.1 percent.

Slippery When Wet

Crude prices are taking a hit today, as traders prepare for another update on the status of U.S. petroleum supplies, scheduled for release tomorrow. At last check, crude for September delivery was last seen down 42 cents at $61.15 per barrel, lending a bit of resolve to the session's trading. In currencies, the U.S. dollar remains under pressure. Adding weight to the old greenback was an announcement by Toshihiko Fukui, the governor of the Japanese central bank, that retail inflation may turn positive by the end of 2005 or early 2006. Elsewhere, the euro received a lift from the Russian Central Bank's decision to raise the weighting of euros in its dual currency basket.

CNOOC Withdraws

With much reluctance, China-base CNOOC (CEO) withdrew its $18.5 billion bid for Unocal (NYSE:UCL) earlier today. The company blamed what it called a hostile political environment in the U.S. for the withdrawal. The move now clears the way for Chevron (NYSE:CVX) to acquire UCL for $17.5 billion. UCL shareholders are scheduled to vote on the CVX offer on August 10. On the news, CEO has rallied more than five percent, while UCL remains relatively flat and CVX has added nearly two percent.

Less Parties, More Earnings

In earnings news, Tyco International (NYSE:TYC) reported that third-quarter earnings arrived at $1.19 billion, or 56 cents per share. Excluding special items, earnings dipped to 50 cents per share, edging past the Street's view by a penny. However, revenue rose to $10.56 billion, but missed analyst projections of $10.67 billion. Furthermore, TYC forecast fourth-quarter earnings, excluding non-recurring items, of 45 to 47 cents per share, below the consensus estimate for 52 cents.

Getting Sirius

Sirius Satellite Radio (NASDAQ:SIRI) posted a second-quarter loss that arrived wider than last year, however, the commercial-free radio company upped its year-end subscriber and revenue guidance. SIRI reported that it lost 13 cents per share, but saw its revenue increase to $52.2 million. The company added 365,931 subscribers on a net basis, bringing the total number of SIRI subscribers to 1.81 million. The firm upped its subscriber forecast for the end of the year to three million from 2.7 million.

Most-Active Options Update

At 1:39 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,683.4) has added 0.57 percent. The S&P 500 Index (SPX - 1,242.70) is higher by 0.59 percent, and the Nasdaq Composite (COMP - 2,213.3) has added 0.82 percent. At 1:39 p.m. Eastern time, 2,073,515 calls have changed hands compared to 1,497,266 puts, equaling a single-day put/call volume ratio of 0.72. The CBOE's equity put/call volume ratio weighed in at 0.88.

Coventry Health Care

Early this morning, Coventry Health Care (NYSE:CVH) slipped into the earnings confessional to post second-quarter net income of $129.5 million, or $1.19 per share, besting the Street's forecast by five cents per share. Revenue for the period climbed 26.2 percent to $1.65 billion. Looking forward, CVH forecast third-quarter earnings of $1.20-$1.22 per share on sales between $1.66 billion and $1.70 billion. Furthermore, CVH placed 2005 revenue between $5.7 billion and $5.8 billion.

Being a member of the healthcare sector, CVH finds itself in the rather storied company of the Morgan Stanley Healthcare Providers Index (RXH). While this may not seem too impressive, the RXH has outperformed the S&P 500 Index on a weekly basis since September 2004 - no small feat I assure you. What's more, CVH has emerged as a star among stars, as the stock has easily outperformed its peers in the RXH since October 2004.

Technically speaking, CVH has rallied more than five percent so far today, taking out former short-term resistance in the 75 area and hitting a new all-time high. However, today's strong price action in the shares is nothing new for CVH, as the stock has rallied more than 74 percent along the stalwart support of its 10-week and 20-week moving averages since November 2004.

Today's options activity has, not surprisingly, been skewed heavily toward the call side of the spectrum. So far, the stock's October 75 and 80 calls have seen the bulk of the activity, with 7,579 and 6,224 contracts crossing the tape, respectively. While the 75 strike is the site of peak call open interest in the front three months of options, I find it more interesting to focus on the 80 strike, as CVH blew past the 75 level in today's session. Open interest at the October 80 strike currently numbers a mere 618 contracts, and today's heavy volume could radically change that number. This becomes a concern for the equity, as sizeable accumulations of call open interest can act as options-related resistance to the stock's advance. On the put side, peak open interest lies at the 65 level, some 17 percent below the shares, and not a level that CVH wants to pull back to for support.

Delving deeper into CVH's sentiment backdrop, we find that optimism has grown toward the security for quite some time. The stock's Schaeffer's put/call open interest ratio (SOIR) has plunged from its near-term high on June 12 of 1.34 (in the 72nd percentile) to today's reading of 0.42 in the 15th percentile. While rising optimism on a technically sound stock is to be expected, investors should be careful that this bullishness doesn't reach extreme levels.

In the short-selling camp, we find that a bit of pessimism may be creeping back into the picture, as the number of CVH shares sold short increased by 12 percent during July. But despite this increase, it would still take less than two days to cover the roughly two million shorted shares, leaving little fuel for a covering rally on today's (or any future) positive news.

There is some room for improvement on Wall Street, and this could give the shares that bit of contrarian hope they have been waiting for. According to Zacks, CVH has earned four "buys," six "holds," and one "sell." Any upgrades resulting from today's positive earnings announcement could bode well for the shares over the short term. However, with optimism showing no signs of abating, investors may want to find another stock in this red-hot sector with similar technical performance, but a more pessimistic sentiment backdrop, as CVH's Schaeffer's Equity Scorecard arrives at a mediocre 5.0 out of 10.

Click on the following link to see a Weekly Relative Strength Chart of CVH vs. RHX since October 2004: http://www.schaeffersresearch.com/wire?ID=13776 .

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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 .