Schaeffer's Midday Options Update Features RadioShack, Apple Computer, Walt Disney, Murphy Oil, and Motorola.

CINCINNATI -- Today's Schaeffer's Midday Options Update features RadioShack (NYSE:RSH), Apple Computer (NASDAQ:AAPL), Walt Disney (NYSE:DIS), Murphy Oil (NYSE:MUR), and Motorola (NYSE:MOT). 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 Motorola

The bull/bear debate today seems to be going in favor of the bears, and it's possible that we could see a 100-point fall on the Dow before the closing bell rings. Very few of the stocks that appear on my screens right now are in positive territory, and the advance/decline ratio at the New York Stock Exchange is coming in at just 0.62. At the NASDAQ, things are a little better, with the ratio at 0.70.

The Shack Falls

RadioShack's (NYSE:RSH) president and chief executive David Edmondson said today that fourth-quarter same-store sales rose by four percent, but the gain was largely driven by lower-margin products. The retailer does not expect to reach its 2005 earnings guidance. In addition, RSH's transition to sell Cingular Wireless products rather than cell phones from Verizon Wireless was more "painful" than the company expected. At last check, RSH was down 1.79 percent at $21.41.

Apple Challenges Consumer Electronics Show?

Next year's Macworld show will start on January 8, the same day that the Consumer Electronics Show opens in Las Vegas. This is an interesting decision, because it presents attendees, especially journalists and investors, with an either/or choice. The Dow Jones Newswires reports that the producer of Macworld says the shows have "mostly different" exhibitors and attendees. Meanwhile, Bear Stearns upgraded Apple Computer (NASDAQ:AAPL) to "outperform" from "peer perform." "To us, Apple is at the center of the digital lifestyle revolution, and is best positioned to capitalize on it," the brokerage says. Caris & Co reiterated the stock at "above average."

Makes No Difference Who You Are

Michael Eisner, Walt Disney's (NYSE:DIS) former CEO, is to receive about $10 million in salary and bonus for fiscal 2005, including a cash bonus of $9.1 million. Meanwhile, the company's current CEO Robert Iger will receive a similar amount including a $7.7 million cash bonus.

Murphy Oil Could Hit or Miss

Murphy Oil (NYSE:MUR) has issued fourth-quarter earnings guidance in the range of 75 cents to 95 cents, compared to the Wall Street consensus of 89 cents per share. In a press release, the company says that "this range includes significant exploration exposure still pending offshore Peninsular Malaysia. The earnings include one-time income tax benefits of approximately $30 million." The stock was up 0.44 percent at last check, at $57.20.

Most Active Options

At 1:58 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,978.3) has shed 0.59 percent. The S&P 500 Index (SPX - 1,289.15) is 0.39 percent lower, and the Nasdaq Composite (COMP - 2,322.9) has lost 0.36 percent. At 1:58 p.m. Eastern time, 2,971,677 calls have changed hands compared to 1,807,598 puts, equaling a single-day put/call volume ratio of 0.60. The CBOE's equity put/call volume ratio weighed in at 0.54.

Motorola

With all the attention being paid to Apple Computer (AAPL) this week, it's fitting that our featured stock today is Motorola (NYSE:MOT), the chipshop responsible for the 68000-series of CPUs that went into the first Macs (those cute little dumpy ones that looked as if they wanted to be R2D2 when they grew up). Nowadays, MOT is known primarily as a cell phone maker, and it has been doing very nicely. Since early 2003, MOT has logged a gain of more than 250 percent.

The stock is in an uptrending channel and it currently looks to be bumping against the upper rail. Nevertheless, the 25 level set in as resistance last November, and the stock needs to maintain momentum to break through this barrier. Zooming out to the monthly view, I'm a little concerned that one of the key Fibonacci retracement levels (38.2 percent, 50 percent, and 61.8 percent) might cause MOT problems. Just above the 25 level lies the 38.2-percent retracement line: I calculate it to be located at $25.19. This adds a further layer of resistance that it would pay us to watch.

As if to emphasize that the 25 level is where the action is, options players had traded 16,402 of the MOT January 25 call (MOT AE) by the time we grabbed our figures. With open interest at 68,052 at the start of the day, this new trading might make a big difference. Remember, calls can present options-related resistance if present in sufficient numbers and if they are above the stock's price. MOT was trading at $23.83 at last check. However, remember that these options expire next Friday, so any potential resistance they might offer is short-term resistance.

Let's turn to sentiment for MOT. Regular readers of this space know that we employ an Expectational Analysis(R) investment approach that seeks out equities that have sound fundamental and technical backdrops but still have pessimism present in their sentiment background.

We track a diverse range of sentiment measures, but three of the popular ones are:

-- Analyst ratings, to gauge Street sentiment

-- Equities sentiment, in the form of short selling 

-- Options sentiment, in the form of put/call ratios and trends, and peak open interest

According to Zacks T receives:

-- 14 "strong buys"

-- 7 "buy"

-- 8 "holds"

-- 0 "sells"

-- 1 "strong sell"

This sentiment is clearly optimistic and the stock's growth trend justifies it, but remember that the gains must continue, other the justified optimism will turn into lingering optimism, which is a more dangerous beast.

During December, MOT's short interest plunged more than 28 percent to leave less than one percent of the float sold short. The short-interest ratio now stands at a mere 1.35 days to cover. We monitor short interest because sometimes good news comes along and pushes a stock's price up sharply. This might shake out some of the short sellers, who suddenly see that it will cost more money to buy their stocks back than they tucked under the mattress when they originally sold the positions. If these turncoat short sellers suddenly transform into buyers, they can push the stock price yet higher and perhaps provoke further short covering. We usually take note when the short-interest ratio passes five.

How about the options bunch? How do they feel about MOT? Calls outnumber put positions in the front three months of options activity by a ratio of four-to-three. As a result, its Schaeffer's put/call open interest ratio comes in at 0.75, higher than 64 percent of readings taken during the past year. This is close to a middle-of-the-road reading, neither optimistic nor particularly pessimistic.

MOT earns itself a Schaeffer's Equity Scorecard rating of 6.0 out of a possible 10. I think the next key event to look for is a clear break above 25.

http://www.schaeffersresearch.com/wire?ID=14982 .

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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 .