Schaeffer's Midday Options Update Features American International Group, Aetna, Morgan Stanley, Best Buy, and Altria Group.

CINCINNATI -- Today's Schaeffer's Midday Options Update features American International Group (NYSE:AIG), Aetna (NYSE:AET), Morgan Stanley (NYSE:MS), Best Buy (NYSE:BBY), and Altria Group (NYSE:MO). 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=PRMOU12M&PAGE=1 .

Options Update: Trading Options on Altria Group

Positive earnings guidances helped steer U.S. markets higher on Thursday, putting the Dow Jones Industrial Average (DJIA) into potential contact with the 11,000 mark. The market rally was lifting many ships, as advancers outpaced decliners by a margin of two to one on the Big Board, while the Nasdaq Exchange saw 16 advancers for every 11 issues in negative territory. Treasury prices were on the rise as well, as bond watchers await the auction of $14 billion worth of newly reintroduced 30-year T-bills.

Meanwhile, first-time jobless claims rose by 4,000 last week, dwarfing the 12,000-claims increase expected on Wall Street. The four-week average of seasonally adjusted new claims dropped to 276,500, the lowest reading since April 2000. An economist with Moody's opined that "the labor market is expanding at a solid pace ... the economy has been strong enough to absorb higher energy costs."

In the commodities markets, natural gas for March delivery dropped to an intraday low of $7.30 per million British Thermal Units, its lowest reading since February 23, 2005. This morning, the Energy Department said that natural-gas supplies dropped to 38 billion cubic feet last week; economists were expecting a decline of about 50 billion. The average decline for this time of year is 158 billion over the past five years. Total stocks now stand at 2.368 trillion cubic feet, up 437 billion cubic feet from last year at this time. Crude oil futures moved slightly lower in initial response to this news, but quickly rebounded higher. At last check, March futures were up 55 cents to $63.10 a barrel.

Insurance Intelligence

The insurance sector is a newsworthy bunch today, claiming two of the top stories. First up is American International Group (NYSE:AIG), the largest insurance firm in the U.S. The company will shell out more than $1.6 billion in settlement charges to resolve charges of fraud, bid-rigging, and improper accounting. In addition to the financial pain, AIG officials will need to admit "misconduct" and initiate some reform from within. The deal puts an end to various probes launched by New York Attorney General Eliot Spitzer, the Securities Exchange Commission, and the U.S. Justice Department. With the turmoil now behind them, AIG shares have risen more than one percent today.

Aetna (NYSE:AET) posted fourth-quarter profit of $423 million, or $1.42 per share, 41 percent higher than year-ago numbers. Excluding items, the health insurance firm banked $1.26 per share, or three cents above analysts' expectations. Revenue spiked up 14 percent during the period to $5.87 billion, topping analysts' consensus view of $5.78 billion. Looking ahead to the future, AET boosted its 2006 operating earnings guidance to $5.57 to $5.63 per share, up from its previous per-share range between $5.45 and $5.50. The shares have jumped more than three percent higher today to reach a new 52-week peak.

Simply the Best

Best Buy (NYSE:BBY) has gapped up more than eight percent today to achieve a new all-time high, overcoming its July 2005 peak. The catalyst for this news was strong earnings guidance. The electronics retailer now expects profits of $1.25-$1.30 per share for the fourth quarter, up from an earlier projection in the $1.06-$1.16 range. Analysts were forecasting per-share results of $1.16. Furthermore, BBY lifted its fourth-quarter same-store sales growth projection to six-seven percent from three-five percent. A strong sales environment, superior expense controls, and better promotional success were all responsible for this upgraded guidance. The official fourth-quarter earnings announcement is expected on March 30.

Cruz and Scully

Late yesterday afternoon, brokerage giant Morgan Stanley (NYSE:MS) said Zoe Cruz and Robert Scully would take the helm together as co-presidents of the organization. The company's press release noted that: "Ms. Cruz and Mr. Scully will work together on Firm-wide issues, while each focuses on specific areas of the business." Formerly head of MS's fixed-income division before assuming the temporary role of acting president, Ms. Cruz was named as one of Forbes 16 most powerful businesswomen of 2005. She came in at number 16 on that list, but I'm willing to bet she'll go up a couple of notches in 2006. Mr. Scully served as a senior investment banker for the firm, dealing with major clients such as General Motors and Kohlberg Kravis Roberts & Co. More recently, he held the title as vice chairman of investment banking.

Most-Active Options Update

At 1:19 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,924.4) was higher by 0.6 percent, or 66 points. The S&P 500 Index (SPX - 1,271.73) had gained half a percent, while the Nasdaq Composite (COMP - 2,279.8) was up 0.56 percent. At 1:20 p.m. Eastern time, 2,685,029 calls have changed hands compared to 1,603,237 puts, equaling a single-day put/call volume ratio of 0.59. The CBOE's equity put/call volume ratio weighed in at 0.57.

Altria Group

Nothing tops off a baloney sandwich lunch better than a long drag from a post-meal cigarette and a hearty cup of joe. Or so Altria Group (NYSE:MO) hopes. The Manhattan-based Dow component controls 85 percent of Kraft Foods (KFT), the number-two food company in the world. Additionally, under the firm's Philip Morris subsidiary is Marlboro, the world's top-selling brand of cigarettes for the past 33 years. MO watchers continue to play the waiting game on Thursday, as the Florida Supreme Court again delays an opinion on the Engle Tobacco Case.

In options trading, speculators have taken to the MO put pits today, circling around the out-of-the-money February 70 strike (MO NN). At last check, nearly 14,000 contracts have changed hands on this option, which will expire one week from tomorrow. Looking back over the day's action, there were four block trades of 1,000 or more contracts, all of which traded between 11:00 a.m. and 12:30 p.m. These all went off at or near the bid price, suggesting the blocks were sold. Tomorrow's open-interest translations will provide a better idea of whether these were sold to open or sold to close.

Generally speaking, MO options players have taken a neutral stance on the stock, evidenced by the Schaeffer's put/call open interest ratio (SOIR) of 0.65, which resides in the 45th annual percentile. But this is the only sentiment indicator which doesn't pick a side. Wall Street, for example, is decidedly bullish toward MO, awarding five "strong buy" ratings, three "buys," three "holds," and no outright "sells." This landscape leaves plenty of room for downgrades, should the bearish breeze begin to blow.

What's more, complacency is evidenced by the equities crowd, as the short-selling stock trading strategy has been all but overlooked. In fact, only 0.85 percent of the equity's float is even sold short; the short-interest ratio of 1.55 days to cover offers little hope of a covering rally.

So what do the charts have to say? MO has enjoyed a slow and gradual uptrend off its late-2004 bottom, rising about 75 percent during this time frame. The stock has shuffled sideways of late, but has recently come into contract with its rising 40-week moving average, which could serve as support. The stock's previous tryst with this trendline occurred last July and preceded a short-term rally in the shares.

Click the following link to see a weekly chart of Altria Group: http://www.schaeffersresearch.com/wire?ID=15251 .

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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 .