Schaeffer's Midday Options Update Features General Motors, Adobe Systems, KB Home, Carnival, and Rambus

Business Wire, March 23, 2006

CINCINNATI -- First graph, first sentence of release the ticker symbol for General Motors should read (NYSE:GM) (sted (NYSE:GE)).

The corrected release reads:

SCHAEFFER'S MIDDAY OPTIONS UPDATE FEATURES GENERAL MOTORS, ADOBE SYSTEMS, KB HOME, CARNIVAL, AND RAMBUS

Today's Schaeffer's Midday Options Update features General Motors (NYSE:GM), Adobe Systems (NASDAQ:ADBE), KB Home (NYSE:KBH), Carnival (NYSE:CCL), and Rambus (NASDAQ:RMBS). 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: An Options Trading Strategy on Rambus

The major market indices are tripping lower this morning, with the Dow Jones Industrial Average (DJIA) losing its hold on the 11,300 level. The Dow is currently down 40 points while the Nasdaq Composite (COMP) has shed 3.5 points. Meanwhile, the S&P 500 Index (SPX) is testing the tenacity of the 1,300 mark, tumbling roughly 2.5 points.

It's a Gas, Gas, Gas!

April natural gas futures are higher this morning after the Energy Department announced that supplies fell by 23 billion cubic feet last week. Total stocks now stand at 1.809 trillion cubic feet. At last check, natural gas for April delivery was up almost nine cents at $7.04 per million British Thermal Units.

This is Not My Beautiful Home

In economic news, February U.S. home sales jumped 5.2 percent to a seasonally adjusted annualized rate of 6.91 million. Analysts had expected sales to come in at 6.52 million. The supply of unsold homes rose 5.2 percent in February to 3.03 million. Median prices are now up 10.6 percent on a year-over-year basis to $209,000.

Elsewhere in the housing market, KB Home (NYSE:KBH) reported first-quarter net earnings of $174.5 million, or $2.02 per share, up 42 percent from $122.7 million, or $1.41 per share, last year. Revenue arrived at $2.19 billion. Analysts were expecting a profit of $1.96 per share on revenue of $2.17 billion.

You're Motoring!

General Motors (NYSE:GM) is on the rise again today after the carmaker sold a majority stake in GMAC Commercial Holding. GM reported that its GMAC unit sold 78 percent of its equity in GMAC Commercial Holding for more than $1.5 billion. The company had previously said it was targeting the sale of a 60 percent stake. Also, at the closing, GMAC Commercial Holding re-paid GMAC about $7.3 billion in inter-company loans, bringing its total proceeds from the deal to nearly $9 billion.

My Name is Mud

Leading document software firm Adobe Systems (NASDAQ:ADBE) said that net profit fell to $105.1 million, or 17 cents per share, from $151.9 million, or 30 cents per share, a year ago. Excluding charges, profit would have risen to 32 cents per share. Revenue for the period increased to $655.5 million from $472.9 million. Wall Street was expecting earnings of 29 cents per share on revenue of $650.3 million.

Titanic Results at Carnival

Carnival (NYSE:CCL) reported first-quarter earnings of $280 million, or 34 cents per share. Excluding items, earnings came in at 36 cents per share, matching the consensus estimate. Sales for the three-month period rose to $2.46 billion, missing the Street estimate of $2.53 billion. Looking ahead, the firm expects second-quarter earnings of 48 to 50 cents per share and 2006 earnings of $2.90 to $3 per share. Both estimates are below the consensus estimates of 57 cents per share and $3.09 per share, respectively.

Most-Active Options Update

At 1:57 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 11,270.1) is down 0.42 percent. The S&P 500 Index (SPX - 1,301.66) has dropped 0.26 percent, and the Nasdaq Composite (COMP - 2,298.4) has slipped 0.22 percent. At 1:58 p.m. Eastern time, 2,084,715 calls have changed hands compared to 1,600,567 puts, equaling a single-day put/call volume ratio of 0.76. The CBOE's equity put/call volume ratio weighed in at 0.77.

Rambus

Regular readers of this column may remember that I covered Rambus (NASDAQ:RMBS) about a month ago on February 23 in this space. At the time, the shares had just rallied sharply higher on positive news from the legal front, briefly overtaking the round-number 30 level. However, with a bit of technical resistance, and heavy front month call and put open interest residing at this level, RMBS was unable to hold above this threshold, and pulled back for the ensuing weeks to hover just below 30.

Here's the interesting part to this story; on March 17, when March options expired, the shares shot quickly higher on news that the company had signed a pact with IBM. With the 30 level now removed from the equation on two fronts, both technical and options related (with the expiration of March options), RMBS was free to range even higher. Furthermore, the shares gained enough momentum to breach the 35 level, which I noted on February 23 was the next point of potential options-related resistance for the shares.