Schaeffer's Option Activity Watch Features Amylin Pharmaceuticals, J.P. Morgan Chase, and Kerr-McGee.

CINCINNATI -- Today's Schaeffer's Option Activity Watch Features Amylin Pharmaceuticals (NASDAQ:AMLN), J.P. Morgan Chase (NYSE:JPM), and Kerr-McGee (NYSE:KMG). The Option Activity Watch is a report that takes a closer look at three equities appearing in our most unusual option activity report from the previous day. The Option Activity Watch is published on 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=PROAW1M&PAGE=1 .

Schaeffer's Option Activity Watch: Amylin Pharmaceuticals, J.P. Morgan Chase, and Kerr-McGee

Amylin Pharmaceuticals

Amylin Pharmaceuticals (NASDAQ:AMLN) develops therapies to treat diabetes and associated disorders based on the hormone amylin. The security saw some heavy option trading yesterday on both the puts and calls side. The stock's May 20 call has nearly 6,000 new positions added. The option had a block of 3,000 contracts cross the tape just before noon at 3.40, which was between the bid and ask prices. A block of 2,125 contracts also changed hands at 10:56 a.m. at an ask price of 3.50. On the other hand, the security's June 20 put added more than 5,800 new contracts. At 11:55 a.m., two blocks of 1,500 changed hands between the bid and ask price, while a total of 2,125 contracts traded at the ask price around 10:56 a.m. It appears that a trader may have initiated a long straddle on the security. This strategy is used when an investor expects the security to make a sharp move, but is unsure of the exact direction.

Overall, sentiment is somewhat mixed toward the stock. AMLN's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.78 in the 54th percentile. On the other hand, short interest jumped 12 percent in February to 9.19 million shares. Not only does this buildup comprise more than nine percent of the stock's total float, but it is also more than eight times the stock's average daily trading volume. Meanwhile, Wall Street is optimistic about the firm's prospects. Zacks reports that 10 of the 17 analysts following the drug company rate it a "buy" or better.

Technically speaking, the security has been trapped between support in the 19 area and resistance at 24 since December 2003. Furthermore, the stock is trading below both its 10-month and 20-month moving averages. While this configuration looks rather bleak, this sideways movement could be just another consolidation period for the shares before starting the next leg of their uptrend. As shown in the chart below, the stock's long-term uptrend is still intact.

Click the following link to see the Monthly Chart of AMLN since August 1997 with 10-Mont and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=12807 .

J.P. Morgan Chase

Financial giant J.P. Morgan Chase (NYSE:JPM) was the center of some heavy call trading yesterday. The security's April 35 strike added more than 5,700 contracts to push its open interest up to 11,986. This front-month option is now the site of peak call open interest for the series. This pop in call activity pushed the equity's SOIR lower to 1.37. However, this reading is still higher than 97 percent of all those taken over the past 52 weeks. Short sellers are starting to grow weary of this bearish hoard. Short interest inched one percent lower in March to 23.7 million shares, or 0.68 percent of the stock's total float. With a short-interest ratio of only 2.12 days to cover, it is extremely unlikely the shares will benefit from any support on this front. Meanwhile, the Street maintains a lukewarm rating of the security. According to Zacks, eight analysts rate JPM a "buy" or better and nine rate it a "hold."

Checking in on the stock's technical performance, we find that JPM has declined under its 10-day and 20-day moving averages since the start of the year. Furthermore, the security is currently battling resistance at its descending 10-week and 20-week moving averages. From a long-term perspective, JPM is poised to close its third consecutive month below its 10-month and 20-month trendlines.

Click the following link to see the Daily Chart of JPM since December 2004 with 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=12807 .

Kerr-McGee

According to Hoover's, Kerr-McGee (NYSE:KMG) is an oil and gas company that has proven reserves of more than one billion barrels of oil equivalent. The firm explores for and produces oil and gas in the Gulf of Mexico and the U.K. North Sea, as well as in Africa, Asia, and Latin America. In addition, KMG is a major producer of titanium dioxide (a white pigment used in paint, plastics, and paper) and operates chemical plants in Australia, Europe, and the U.S.

In trading on Wednesday, KMG suffered its first close below its 10-day and 20-day moving averages since mid-January. It appears that the shares may be digesting their recent gains as they consolidate into rising support at their 10-week moving average. In fact, KMG has benefited from the tandem support of its 10-week and 20-week trendlines since December 2003. The stock also has support at its rising 10-month moving average. However, the equity would have to retreat more than 20 percent before tagging this trendline.

Click the following link to see the Weekly Chart of KMG since October 2003 with 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=12807 .

From a sentiment standpoint, KMG witnessed a spike in put trading yesterday. Open interest at its April 75 strike surged from 5,370 to 9,638 contracts overnight. Meanwhile, the security's SOIR of 0.61 is near the middle of its annual range with a percentile ranking of 48. On the other hand, short sellers reduced their bearish bets by almost five percent in March to 8.3 million shares, or 5.37 percent of the security's total float. In addition, Wall Street is still siding with the bears. Of the 15 analysts following KMG, eight rate it a "hold" and one rates it a "strong sell." This pessimistic configuration leaves ample room for potential upgrades should the shares manage to rebound off of long-term support.

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About Schaeffer's Investment Research (www.SchaeffersResearch.com)

Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is 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 .