Schaeffer's Midday Options Update Features Intel and BP.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Intel (NASDAQ:INTC) and BP (NYSE:BP (ADR)). 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.

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Options Update: Microsoft in Technical Trouble

A daily feature available on SchaeffersResearch.com is "Options Update." Every day, we'll give a brief market overview and focus on one stock that is the center of some heavy option trading. The focus of today's feature is Intel.

The major market indices continue to move higher in midday activity, thanks in large part to an improving backdrop in the Middle East. A cease-fire imposed by the United Nations took effect at 1:00 a.m. Eastern time, halting the violence between Israel and Lebanon. In the early going, the agreement is being observed by both sides. Additionally, BP (NYSE:BP (ADR)) said it would be able to produce about 200,000 barrels of oil per day from its damaged Alaskan pipeline while it makes repairs. This essentially keeps the pipeline running at 50 percent, which is far better than earlier predictions. Crude futures are falling sharply, down $1.20 to $73.15 per barrel. In intraday trading, black gold reached its lowest point since June 28.

Most-Active Options Update

At 1:39 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 11,187.7) has added 0.90 percent, or nearly 100 points. The S&P 500 Index (SPX - 1,276.82) has gained 0.79 percent, and the Nasdaq Composite (COMP - 2,087.6) has advanced 1.45 percent. At 1:40 p.m. Eastern Time, 2,234,380 calls have changed hands compared to 2,111,440 puts, equaling a single-day put/call volume ratio of 0.94. The CBOE's equity put/call volume ratio stands at 0.76, while the ISE's ratio comes in at 0.79.

Intel

Owner of that familiar four-note scale and parent of the Pentium and Celeron microprocessors, Intel (NASDAQ:INTC) is a tech giant among tech giants (its market cap stands at $103.6 billion). The firm also manufactures flash memory and embedded semiconductor technology.

So it's no surprise that, from time to time, INTC appears on our listing of most-active options. When we grabbed our figures at midday, roughly 18,000 contracts had traded hand on the August 17.5 call, which is home to nearly 60,000 open contacts currently. Thanks to a broader-market rally, INTC has surged about three percent today, lifting it through the 17.50 mark and making these options in the money.

Included among today's volume were eight blocks of 1,000 contracts that went off at or near the bid price between the open and 12:30 p.m. My educated guess is that these were sold to close, given the stock's pop higher today and remembering that August options expire after the close on Friday. But only a check of open-interest translations and implied-volatility shifts tomorrow morning will confirm this suspicion.

As I previously noted, today's move higher in INTC brought it through the 17.50 strike. This now places the shares between two sites of heavy call open interest. In the August series, for example, there are about 60,000 open bets at the 17.50-strike call, but more than 77,000 calls reside at the still out-of-the-money 20 call strike. The September 17.50 call strike is the site of heaviest open interest in the series, with more than 33,600 positions in residence, but the October 20 call is quite the dominant force, home to almost 119,000 open call contracts. The move above 17.50 is notable, but the 20 level still looms large as potential options-related resistance. Overall, INTC scores a Schaeffer's put/call open interest ratio (SOIR) of 0.44, which ranks in the bottom one-third of the past year's worth of readings, suggesting optimism on behalf of the options crowd.

The stock-trading community is also complacent toward INTC, as suggested by the lack of short-covering attention. Currently, only about 1.23 percent of the stock's float has been sold short, amounting to a paltry short-interest ratio of 1.19 days to cover. Not only does this imply a degree of contentment with INTC shares, but it drastically dashes hopes for a short-covering rally.

Wall Street remains the most bullish contingent at all, awarding the following ratings:

--15 "strong buys"

--4 "buys"

--8 "holds"

--1 "sell"

--0 "strong sells"

With this backdrop, odds of a downgrade greatly outweigh the chances of an upgrade at the moment.

The equity's technical backdrop certainly doesn't warrant such optimism, making it an attractive choice from our Expectational Analysis (R) (http://www.schaeffersresearch.com/shop/smp_faq.aspx) perspective. The stock entered its latest decline last November, after a brief rally attempt. During the past nine months, the stock has shed nearly 35 percent of its value beneath the tandem resistance of its 10-week and 20-week moving averages. These intermediate-term trendlines continue to plague the stock, which has been unable to make any upward headway throughout 2006.

Panning out a bit wider, INTC is slumping toward the 16 level, which marked a low point for the shares in late 2002. This area could serve as a long-term double bottom but if violated, INTC could revisit levels not seen since the mid-1990s. As it is propped against an unsound wall of optimism, selling pressure could emerge on the shares at any time.

INTC earns a rating of 3.0 on our Schaeffer's Equity Scorecard, suggesting its next move may be lower. Watch for the 17.50 level to provide fragile support over the very short term and beyond that, the 16 mark.

Click here to see a Weekly chart of Intel since November 2005 with 10-week and 20-week moving averages and a Monthly chart of Intel since April 2002: http://www.schaeffersresearch.com/wire?ID=17129 .

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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 .