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CINCINNATI -- Today's Schaeffer's Midday Options Update Features Kmart Holding (NASDAQ:KMRT), Sears (NYSE:S), Phillips-Van Heusen (NYSE:PVH), Hewlett-Packard (NYSE:HPQ), and Placer Dome (NYSE:PDG). 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=PROB1M&PAGE=1

Options Update: Mining Sentiment with Placer Dome

Wednesday has rolled around again with its fresh crude oil inventory data. The Department of Energy (DOE) announced that crude oil inventories rose again for the eighth straight week. The DOE's inventory data showed a gain of 800,000 barrels, pushing supplies to its current perch of 292.3 million barrels. However, the increase was lower than the expected one-million-barrel increase analysts were expecting. The data included bad news for consumers of distillate oil, as inventories slid one million barrels to 114.6 million barrels for the week of November 12. Analysts widely believed that there would be an increase in distillates for the week.

The American Petroleum Institute (API) painted a more optimistic picture for crude oil, reporting an increase of 3.0 million barrels. This put the API's inventory number at 294.4 million barrels. The API's news on distillates was not nearly as good, showing a decrease of 1.5 million barrels, putting the current inventory at 115.7 million barrels. Inventories of gasoline also saw a decline of 400,000 barrels to the 200.9-million-barrel mark. If you would like more information on the DOE's and the API's crude inventory data, read: "Distillate Supplies Drop . . . Again."

Extreme Makeover, Blue Light Special Edition

The morning greeted us with news that Sears (NYSE:S) and Kmart Holding (NASDAQ:KMRT) are going to create the nation's third-largest retailer in an $11-billion merger. The two retail concerns are going to melt into one, named Sears Holding Corp., which is expected to cash in $55 billion in revenue among its 3,500 stores. According to an article on theStreet.com, 2,350 of the stores will be full-line and off-mall stores and 1,100 will be specialty-retail stores. While a massive entity, Sears Holding Corp. will still rank behind Wal-Mart Stores and Home Depot.

Under terms of the merger, KMRT shareholders will receive one share of the new Sears Holding. S shareholders will be given a choice between $50 in cash or a half share of the new conglomerate, which is worth about $50.61.

Both of the companies have seen their stocks respond accordingly. Shares of KMRT have gained nearly 17 percent in trading, while S's shares have leaped ahead nearly 22.5 percent.

Nice Threads

Phillips-Van Heusen (NYSE:PVH) reported third-quarter earnings late yesterday, showing significant improvement over last year's third-quarter sales. The clothier reported net income of 52 cents per share, handily beating last year's 34 cents per share. The consensus estimate for the company's earnings was 50 cents per share. PVH attributes the jump in profits to the company's new Calvin Klein sportswear lines, and sales at its wholesale apparel business and retail outlets. The company also announced that it expects fourth-quarter earnings to fall in between 10 and 11 cents per share including restructuring charges. Full-year earnings are expected at 88-89 cents per share.

Hewlett-Profit

Computer company, Hewlett-Packard (NYSE:HPQ), announced impressive fourth-quarter profits yesterday. Excluding one-time charges, HPQ earned 41 cents per share, besting the consensus estimate of 37 cents per share. The company now hopes to find its way into the black, after swimming in a sea of red. The strong performance led HPQ to estimate that it would earn 72 to 74 cents per share for the first half of 2005.

Most-Active Options Update

At 1:18 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,595.9) is up 1.03 percent and the S&P 500 Index (SPX - 1187.77) is higher by 1.05 percent. The Nasdaq Composite (COMP - 2110.1) is up 1.52 percent. At 1:19 p.m. in the options pits, 2,651,144 calls and 1,360,053 puts traded for a composite put/call ratio across all five exchanges of 0.51. The CBOE put/call ratio for equity options weighed in at 0.49.

Placer Dome

With gold glittering brighter than it has in more than 16 years, it should come as no shocker that gold stocks have managed to capitalize on this surge higher in the commodity. Placer Dome (NYSE:PDG) is one such equity that has capitalized on the resurgence in investor interest in the gold sector. For a little background, Hoover's notes that PDG is the world's sixth-largest gold mining company, producing more than 3.5 million ounces of gold per year. The stock has undergone a stellar run higher in the past several months, rising more than 74 percent since setting a near-term low of 12.78 in May. The equity has been propelled higher along support at its rising 10-week moving average, with its 10-day and 20-day trendlines lending a hand. What's more, the security has even managed to outperform the SPX on a relative-strength basis since May.

Click on the following link to see a Daily Chart of PDG Since May 2005 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=11780&obspage=2 .

While the technical picture can say a thousand words, here at Schaeffer's, sentiment analysis is the punctuation that helps to give those words meaning. In the case of PDG, we find a moderately bearish sentiment backdrop, as it appears that pessimism has begun to flow back into the equity. On the options front, investors have decided to make a stand at the stock's January 22.50 strike today, sending more than 6,000 puts across the tape so far. With open interest of 1,680 contracts currently residing on this option, much of today's activity could translate into new positions. If so, then the options crowd will continue with its recent bearish trend toward PDG, as the equity's Schaeffer's put/call open interest ratio has risen from its October 29 low of 0.49 in the 34th percentile to its current perch at 0.57 in the middle of its annual range. While this reading is far from a bearish extreme, rising pessimism on a solid performing stock is viewed as a bullish indicator from our contrarian point of view.

Additional signs of rising pessimism can be found among the short selling camp, as short interest skyrocketed by 112 percent over the past month. This reading should also be taken with a grain of salt, as the resulting 6.8 million PDG shares sold short would take a modest 3.33 days to cover. Again, not an extremely bearish reading, but there could be enough fuel here for a slight pop if PDG continues its march higher.

Meanwhile, our one solidly bearish sentiment indicator lies with Wall Street. According to Zacks, brokerages have doled out four "buys," eight "holds," and one "sell" rating on the security, leaving plenty of room for potentially elevating upgrades from the group. Finally, our Equity Scorecard (available via Schaeffer's Gold) for PDG arrives at a heightened reading of 7.0, indicating that the equity could be a good bullish play as the stock continues its advance amid mounting pessimistic sentiment.

Click on the following link to see the Equity Scorecard for BVF: http://www.schaeffersresearch.com/wire?ID=11780&obspage=2 .

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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 .