Schaeffer's Options Center

Beth Gaston Moon (bgmoon@sir-inc.com)

9/27/2006 1:24:39 PM

With Howard Stern now reiterating (ad nauseam) that he isn't going anywhere now or ever (despite recent erroneous claims in the press to the contrary), investors feel confident in putting some additional speculative money into Sirius Satellite Radio (SIRI: sentiment, chart, options) . What's more, speculative players are looking long term, trading large blocks on the January 2008 5 strike (YFW AA) and the January 2009 5 strike (OAJ AA). More than 14,000 options have traded on each of these out-of-the-money strikes in today's trading. Prior to today, these long-term calls were home to 99,000 and 9,900 open positions, respectively.

Given the similarity in volume and strike price, it is likely that this volume is related. Sure enough, a quick check of the trade details reveals two blocks of 7,000 contracts apiece that crossed the tape shortly after 1:00 p.m. on the 2009 call position, trading near the bid price. These two blocks were each designated as a "spread." The 2008 position saw one block of 14,000 contracts go off between the bid and the ask price at the same time. Naturally, this was also flagged as a "spread."

SIRI shares have certainly seen better days; the stock has slumped more than 90 percent from its March 2000 peak. The stock continues to fight with resistance from its 10-week and 20-week moving averages. Options players aren't merely interested in LEAPS positions; the front-month series is home to more than 10,000 open calls at the out-of-the-money 4 strike, while the December series boasts heavy open interest on the 4 and 5 calls.

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Jocelynn Drake (jdrake@sir-inc.com)

8/31/2006 8:10:37 AM

Many of our observations are now available as audio presentations that you can hear on your computer or download from Apple's iTunes Music Store to play on a portable device such as an iPod. To see the full menu of observations, please visit http://www.schaeffersresearch.com/commentary/podcasts/ . Today's Opening View features news from AnnTaylor Stores and H.J. Heinz.

Futures are flat this morning ahead of the heavy list of economic reports that are slated for release today. In news around the Street, August sales figures are starting to pour in as well. AnnTaylor Stores (ANN: sentiment, chart, options) reported that August same-store sales increased 1.9 percent, missing the Street estimate for a 3.1-percent increase. Total sales for the month climbed 11.2 percent to $149.2 million.

Chico's FAS (CHS: sentiment, chart, options) reported same-store sales fell 2.6 percent in August, while total sales jumped 10.5 percent to $112.2 million. Analysts had expected same-store sales to decreased 2.8 percent.

In earnings news, H.J. Heinz (HNZ: sentiment, chart, options) posted fiscal first-quarter earnings of $194.1 million, or 58 cents per share, on sales of $2.06 billion. Analysts had forecast a profit of 54 cents per share on sales of $2.05 billion.

Meanwhile, Ciena (CIEN: sentiment, chart, options) suffered a third-quarter loss of $4.3 million, or a penny per share. Sales during the quarter rose 38 percent to $152.5 million. Excluding items, the firm banked a profit of $13.6 million, or two cents per share, beating the consensus estimate by a penny. Looking ahead, the company expects a sequential increase in revenue of as much as five percent for the fourth quarter. Furthermore, CIEN announced that it was implementing a one-for-seven reverse stock split in an effort to have its common stock appeal to a broader range of investors by raising the price. The reverse split will go into effect on September 22.

Economic News

The economic calendar explodes today with the release of July personal income, personal spending, and weekly initial jobless claims all due out before the open. Then at 10:00 a.m. Eastern time, July factory orders and the August Chicago Purchasing Managers Index (PMI) will hit the Street. The Energy Department will report weekly natural gas inventories at 10:30 a.m. Then later in the day, both the Kansas City and St. Louis Fed will speak.

Market Statistics

Equity option activity on the CBOE saw 478,803 put contracts traded on Wednesday compared to 738,104 call contracts. The resultant single-session put/call ratio slipped to 0.65, while the 21-day moving average pulled back to 0.68.

**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**

Overseas Trading

Overseas trading is mixed this morning, with only seven of the 19 markets that we follow in positive territory. The cumulative average return on the group stands at a gain of 0.11 percent. In Asia, stocks received a boost as Japanese exporters rallied on the back of a weaker yen. Furthermore, weaker-than-expected Japanese industrial production figures Thursday raised hopes that the Bank of Japan may refrain from raising interest rates further this year. Meanwhile, Hong Kong shares trekked higher on U.S. market gains and hopes for a pause in interest-rate hikes buoyed investor sentiment in the dollar-pegged economy. By the end of the session, the Japanese Nikkei closed with a gain of 1.7 percent and the Hong Kong Hang Seng added 0.6 percent.

In Europe, stocks traded in a tight range as investors weighed mixed earnings from companies such as airline Air France and drinks giant Diageo. In addition, the European Central Bank kept interest rates unchanged at three percent as part of its go-slow campaign to stamp out inflation. However, the central bank is expected to hint of another rate hike in as little as one month's time. At last check, the French CAC 40 was down 0.2 percent and the German DAX was flat. The London FTSE 100 is down 0.1 percent.

The U.S. Dollar Index (DX/Y – 84.97) edged 0.07 percent higher on Wednesday, but was stopped by resistance at its 10-day and 20-day moving averages. The dollar moved higher against the yen and was little changed against the euro following the Gross Domestic Product report. In early trading, the dollar is weak, trading higher against only the Brazilian real.

The September futures contract on the 30-year bond (US/U6 – 110'10) increased 4/32 on Wednesday. Overall, Treasury prices edged higher yesterday, pushing the benchmark 10-year yield to its lowest level since March. The catalyst for the move was the slightly smaller-than-expected upward revision to second-quarter U.S. economic growth, which reinforced market expectations that the Fed may have ended its rate-raising cycle. Treasurys are expected to open steady this morning ahead of yet another downpour of U.S. data, including figures on inflation and manufacturing activity.

Commodity Corner

The December gold futures contract (GC/Z6 – 626.10) tacked on more than one percent yesterday due to concerns about a slowing U.S. economy, which hurt the dollar and boosted demand for the yellow metal. Furthermore, the impending U.N. deadline for Iran to halt its nuclear activities added luster to gold's safe-haven quality. Meanwhile, the Iranian president stated that he doesn't think the U.N. will take any action against Tehran. Today is the deadline set by the U.N. for Iran to stop enriching uranium.

The October crude oil contract (CL/V6 – 70.03) edged 0.46 percent higher on Wednesday despite an unexpected increase in crude oil supplies. The Energy Department reported that crude supplies increased 2.4 million barrels to 332.8 million for the week ending August 25. Analysts expected a decline in crude supplies. For a second-straight week, motor gasoline inventories rose, adding 400,000 barrels to total 206.2 million barrels. Distillate supplies increased by 1.3 million barrels to 136.8 million. According to the American Petroleum Institute (API) crude inventories increased by 3.5 million barrels and now stand at 337.1 million barrels.

Thursday, August 31, 2006

8:30 a.m. July Personal Income (previous: +0.6%)
8:30 a.m. July Personal Spending (previous: +0.4%)
8:30 a.m. Aug. 26 Initial Jobless Claims (previous: -1K)
10:00 a.m. Aug. 19 DJ-BTMU Business Barometer (previous: -0.2%)
10:00 a.m. July Factory Orders (previous: +1.2%)
10:00 a.m. Aug. Chicago PMI (previous: 57.9)
10:00 a.m. July Conference Board Help-Wanted Index (previous: 33)
10:30 a.m. Aug. 25 U.S. Energy Dept Natural Gas Stocks (previous: +57)
11:00 a.m. July Kansas City Fed Mfg Index (previous: 11)
1:00 p.m. St. Louis Fed Pres Poole speaks on "Understanding the Fed" in Dyersburg, Tenn.
4:30 p.m. Aug. 25 Money Supply
N/A Aug. Chain-Store Sales

Friday, September 1, 2006

8:30 a.m. Aug. Non-farm Payrolls (previous: +113K)
8:30 a.m. Aug. Unemployment Rate (previous: 4.8%)
9:40 a.m. Aug. ECRI Inflation Gauge (previous: 124.0)
9:45 a.m. Aug. University Of Michigan Consumer Sentiment Index, final (mid-Aug 78.7; previous: 84.7)
10:00 a.m. Aug. ISM Mfg Index (previous: 54.7)
10:00 a.m. July Construction Spending (previous: +0.4%)
10:00 a.m. July Pending Home Sales (previous: +0.4%)
2:00 p.m. Bond markets close early ahead of Labor Day Holiday
N/A Aug. Auto Sales

For an explanation of how to use this information, check out "StreeTools^TM- A Quick Reference Guide"

Earnings calendar with current estimates:

For a complete list of earnings for the week, check out Schaeffer's Looks Ahead.

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