Schaeffer's Midday Options Update Features Apple Computer, Cypress Semiconductor, Microsoft, Time Warner, and Google.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Apple Computer (NASDAQ:AAPL), Cypress Semiconductor (NYSE:CY), Microsoft (NASDAQ:MSFT), Time Warner (NYSE:TWX), and Google (NASDAQ:GOOG). 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 Cypress Semiconductor Through the Trees

The major market indices continue to advance heading into the latter half of the session, as traders were emboldened by news of the strongest productivity rise in two years and contained labor costs. Elsewhere, strong earning from Sears Holding and speculation surrounding Time Warner's AOL division are also providing fodder for the Street.

Time Warner is a Changing

Time Warner (NYSE:TWX) was the focus of much attention this morning after the company appeared in a pair of media reports. The company is currently in talks with Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG) about a number of possible deals that apparently don't involve either company buying a stake in AOL, according to The New York Times. The deals reportedly center on web search, ad sales, and other fields. Meanwhile, The Wall Street Journal reported that TWX will drop GOOG as its primary Internet search provider and opt for MSN instead. MSFT and TWX are considering creating a joint advertising sales force to sell ads across AOL and MSN, the report added.

Blue Light Special in Aisle Six

In earnings news, Sears Holdings (SHLD) reported that third-quarter earnings arrived at 35 cents per share on a pro forma basis, down from 93 cents per share last year. Revenue fell five percent from the year prior to $12.8 billion. Analysts were looking for earnings of 28 cents per share on revenue of $12.95 billion. Same-store sales at Sears eponymous stores fell 10.8 percent, while Kmart same-store sales declined 2.8 percent.

Mama Do You Think They'll Like this Song?!

In an announcement this morning, up and coming Internet search company Mamma.com (MAMA) reported that it has agreed with Copernic Technologies to extend the deadline to conclude the agreement for the acquisition of Copernic to December 31. MAMA had previously agreed to an extension to December 6 at the request of Copernic, a Web and desktop search technology company. In August, the company signed a letter of intent to acquire Copernic in a cash-and-stock deal.

The Tonight Show with Apple Computer!

Continuing in its quest to provide more content for its iPod Video and iTunes Music Store, Apple Computer (NASDAQ:AAPL) has inked a deal with General Electric's (GE) NBC Universal to provide a line up of NBC shows for iTunes customers. The deal includes shows like "Law & Order" and "The Tonight Show with Jay Leno." In other news, brokerage firm UBS raised its 2006 earnings estimates for AAPL to $2.10 from $1.85 per share, citing a positive shift mix toward video iPods. UBS also lifted its target price to $86 from $74.

Most-Active Options Update

At 1:06 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,908.9) is up 0.69 percent. The S&P 500 Index (SPX - 1,271.35) has advanced 0.74 percent, and the Nasdaq Composite (COMP - 2,275.4) has jumped 0.79 percent. At 1:07 p.m. Eastern time, 2,211,895 calls have changed hands compared to 1,319,124 puts, equaling a single-day put/call volume ratio of 0.59. The CBOE's equity put/call volume ratio weighed in at 0.65.

Cypress Semiconductor

According to Hoover's, Cypress Semiconductor (NYSE:CY) makes more than 400 types of integrated circuits. The company's non-memory products include programmable logic devices, clock and timing chips, Universal Serial Bus (USB) microcontrollers, and specialty products for the computer and data communications markets. It also makes memory chips, especially static random-access memories (SRAMs), and silicon solar cells.

Shares of CY have fallen more than three percent so far today at the hands of an analyst downgrade. Early this morning, UBS lowered its rating on the firm to "neutral" from "buy." Prior to this brokerage activity, Zacks reported that there were four "buys" and eight "holds" levied against CY. Now this lack of "sells" concerns me a little here, but this configuration still lends itself to the potential for more upgrades than downgrades, leading me to believe that analysts rankings are still weighted in CY's favor from a contrarian point of view.

Turning to the stock's technical performance for a moment, I see that CY has breached its 10-day and 20-day moving averages, as well as long-term support at the 15 level. This could pose a problem for the shares, as the 15 level is home to peak call and put open interest for the front three months of options. However, the stock remains in an uptrending channel of lower lows and higher highs. Furthermore, this uptrend is loosely centered around support at the stock's 10-week and 20-week moving averages. The shares are attempting to cling to support at their 10-week trendline in today's session.

Returning to CY's sentiment outlook, options players continue to pile on the puts. In today's session, more than 15,000 of these bearishly oriented options have changed hands at the December 15 strike, which is already home to 23,408 contracts. This continued bearish attitude toward CY has pushed the stock's Schaeffer's put/call open interest ratio (SOIR) higher in recent weeks, as this ratio has risen from its November 7 reading of 0.40 in the fourth percentile to today's perch at 0.51 in the 28th percentile. Now I know you are thinking that this is far from a bearish reading, but CY has a tendency of moving in the direction of its SOIR, so a continued advance from this ratio is a positive development for the shares.

Potentially providing the biggest punch for CY is the short-selling community. With a 12-percent increase in the number of CY shares sold short during November, the 21.2 million shorted shares now account for nearly 16 percent of the stock's total float. Furthermore, this reading ranks at its highest reading taken in the past four years, indicating that there could be ample fuel for a short-covering rally for CY.

Finally, this long-term advance from the shares combined with rising pessimism has earned CY a Schaeffer's Equity Scorecard rating of 6.5 out of 10.

Click on the following link to access a Weekly Chart of CY Since December 2004 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=14738 .

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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 .