SOURCE: Schaeffer's Investment Research

June 29, 2005 17:32 ET

Schaeffer's Midday Options Update Features Oracle, General Motors, Jarden, and Monsanto

CINCINNATI, OH -- (MARKET WIRE) -- June 29, 2005 -- Today's Schaeffer's Midday Options Update features Oracle (NASDAQ: ORCL), General Motors (NYSE: GM), Jarden (NYSE: JAH), and Monsanto (NYSE: MON). 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 -- 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: .

Options Update: Monsanto Calls

The U.S. gross domestic product showed a first-quarter increase of 3.8 percent, boosted by strong performance in the housing sector and by overseas sales. In surveys conducted by Dow Jones Newswires and CNBC, economists' consensus was for a 3.7-percent increase. The report indicated that inflation is under control, and Treasurys benefited this morning as a result, since inflation erodes the value of bonds.

The Federal Open Market Committee is meeting today and tomorrow, in its regular attempt to steer the economy toward fair weather. The Street seems to be expecting another quarter-percent increase in interest rates to combat inflation. The increase, if it comes, will be the ninth in the past year.

Mortgage Bankers Association's home purchase index slipped 0.4 percent to 477.4 in the week ended June 24 after setting a record two weeks earlier. The refinance index also showed a 1.8-percent fall to 2,529.2.

The Oracle Speaks

There used to be a time when the Oracle said some pretty momentous stuff. Before planning an attack, army commanders would dutifully visit Delphi to seek sage advice, and the Oracle would respond with something clever, like: "When the fierce noonday sun shines down upon the bronzed helmets of the Athenian warriors, then should you attack." Nowadays, Oracle (NASDAQ: ORCL) speaks once a quarter, usually before the bell, and this morning it declaimed good news. First-quarter results show a 26-percent increase in revenue to $3.88 billion, helped by the acquisition of PeopleSoft. Earnings came in at $1.02 billion, or 26 cents per share excluding items, beating analyst expectations of 23 cents per share. For fiscal 2006 ORCL forecasts earnings in the range 78 cents to 81 cents per share, against the consensus estimate for earnings of 78 cents per share. First quarter guidance is inline.

No mention of Athenian warriors at all.

The Merchants and the Traders

Stock in Chicago Mercantile Exchange Holdings surged above $300 for the first time, after gapping up this morning. At 1:00 pm Eastern time, the Dow Jones Newswires reported "intensified speculation about a potential merger with the Chicago Board of Trade." At last check, the shares held a 13-percent gain.

General Motors Sets a New Fashion

General Motors' (NYSE: GM) June promotion, which offers the company's employee discount to all comers, seems to have sparked summer sales. The deal is due to end on July 6, but there is speculation that the GM might extend the promotion, a move that could force Ford Motor and DaimlerChrysler to make similar price concessions. But there will always be exclusions. Yesterday, on the trading floor, Bernie mentioned that the 2005 Mustang is currently so far on backorder, the sales force has been advised to push the 2006 model. Auto makers will report U.S. sales for June on Friday, so watch for price moves then.

Jarden Party

Jarden (NYSE: JAH) manufactures a diverse set of branded consumer products including Sunbeam appliances, Coleman outdoor gear, First Alert home safety products. Earlier this morning, JAH announced that it has agreed to acquire The Holmes Group, a manufacturer and distributor of home environment and small kitchen electrics, for roughly $625 million. The firm expects to see annualized sales of roughly $3.4 billion. JAH also announced that it intends to buy back up to one million shares of common stock in the second half of 2005. On the news, JAH surge higher by more than nine percent, allowing the equity to set a fresh all-time high.

Most-Active Options Update

At 3:00 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,367.9) has lost 0.36 percent, and the S&P 500 Index (SPX - 1199.11) has shed 0.17. The Nasdaq Composite (COMP - 2,067.5) has fallen 0.12 percent. At 3:00 p.m., 2,050,524 calls have traded hands compared to 1,381,632 puts, for a total put/call single-day volume ratio of 0.67 across all six options exchanges. The CBOE's put/call volume ratio stands at 0.67 today.


Based in Saint Louis, Missouri, Monsanto (NYSE: MON) made the news today with its third-quarter results, which revealed that earnings fell by 81 percent as the bioengineering specialist took a $248 million write-off. The Dow Jones Newswires said that the earnings report "may reflect unexpected but short-term problems as it [MON] integrates two recent acquisitions into its biotechnology and agricultural products business." The stock gapped down this morning, swapping the support of its 10-day moving average for the resistance of its 20-day moving average. Today saw enough put activity at the July 65 strike (MON SM) to push MON onto our most active options list.

The stock has shown some healthy gains, and the weekly chart shows how the trendlines have shepherded the stock safely higher, giving stockholders a gain of 369 percent since March 2003.

Wall Street does not appear to be overwhelmed by MON. From Zacks I see that just seven analysts express a preference, and five of them rate the stock a cautious "hold" or worse. There are two "strong buy" ratings but no "buys," and I see a degree of pessimism here, with room for upgrades.

Equities players show some optimism. They have sold just 2.97 million MON shares short, and the short interest came down by 17.2 percent since last month, so it is clear that optimism is growing. The short-interest ratio is 1.61 days to cover, which makes a short-covering rally most unlikely.

What about the options pits? The Schaeffer's put/call open interest ratio (SOIR) for the stock is 0.81, indicating about four calls for every five puts in the front three months of options. This is more pessimistic than 67 percent of readings taken over the past year. There is little front-month open interest, so options-related support or resistance are not factors at the moment.

Remember, as contrarians we look for one of the following situations:

* Fundamental and technical strength amid pessimistic sentiment. This is a signal that upside movement could be on the way if any significant good news comes along.

* Fundamental and technical weakness amid optimistic sentiment. This is a signal that downside movement could be on the way if any significant bad news comes along.

Sentiment toward MON is mixed, but I think that first bullet point is the one to watch. The stock has done consistently well, and it shows a lot of strength. Though equities players are optimistic, the analysts and options players are certainly not, and there is plenty of opportunity for MON to win new friends.

On our Schaeffer's Equity Scorecard the stock earns itself 5.5 out of 10.0, indicating, by a small margin, that the path of least resistance is to the upside. I'm inclined to agree. Take a look at the longer term daily moving averages. The 160-day trendline is serving MON well today. I'm going to do a little more research, into Monsanto calls.

Click on the following link to see a Daily Chart for MON with 80-Day and 160-Day Moving Averages: .

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About Schaeffer's Investment Research ( )

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, , 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: .

The Above Is an Investment Opinion Being Issued by Schaeffer's Investment Research.

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