Schaeffer's Midday Options Update Features General Motors, Yahoo!, Microsoft, Transocean, and Citigroup

Business Wire, May 12, 2006

CINCINNATI -- Today's Schaeffer's Midday Options Update features General Motors (NYSE:GM), Yahoo! (NASDAQ:YHOO), Microsoft (NASDAQ:MSFT), Transocean (NYSE:RIG), and Citigroup (NYSE:C). 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: Heavy Options Activity on Citigroup

News was abundant this morning, some good, some disappointing. The Commerce Department announced that the nation's trade deficit shrank by 5.6 percent to $62 billion during March. This is the lowest deficit since August which featured the spate of hurricane damage to refineries along the Gulf Coast. Furthermore, this is the first time that the deficit has declined for two straight months since October and November 2003. According to the report, the U.S. exported a record amount of goods to Canada, Mexico, the European Union, China, and the South/Central America region in March. Economists expected the deficit to widen to $67.5 billion.

Elsewhere, the Labor Department announced that the prices of goods imported into the U.S. increased by 2.1 percent in April. The spike in prices was spurred by an increase of 11.5 percent in the price of imported petroleum, which is the largest since March 2005. Excluding the rise in petroleum, import prices were flat. According to a survey by MarketWatch, economists expected import prices to increase one percent in April.

Finally, the University of Michigan consumer sentiment index fell to 79.0 in May from April's reading of 87.4. May's reading is the lowest since October's reading of 74.2. The rate of the drop was the fastest in "at least 28 years" according to media reports. The current conditions index, which tracks gasoline prices and unemployment, marked its largest one-month decline in the survey's history, dropping 13 points to 96.2. The expectations index dropped to 68.0 from 73.4. Both of these readings are at their lowest since October. Consumer sentiment peaked at 91.5 in December and has fallen in four of the past five months, reflecting a surge in gas prices (according to some analysts).

Shifting Into High Gear

This morning, General Motors (NYSE:GM) has shifted into overdrive, rallying more than two percent. The move higher was prompted by an upgrade from KeyBanc Capital Markets from "hold" to "buy." The brokerage stated that the move reflects "growing optimism" that Delphi, the company's largest parts maker, will reach a new labor contract with its union workers. If this move happens, the company would avoid a rather damaging strike. KeyBanc also predicted that GM's earnings will continue to improve in 2006 and 2007 thanks to strength in its new truck and SUV lineup.

Denied

According to a report in the Financial Times this morning, Yahoo! (NASDAQ:YHOO) Chairman and CEO Terry Semel stated that the company turned down Microsoft's (NASDAQ:MSFT) offer to buy a stake in the search firm. The revelation came at a question-and-answer session at Syracuse University. Semel told the gathering that the company discussed search and MSFT owning some of YHOO's search and stated, "I will not sell a piece of search -- it is like selling your right arm while keeping your left. It does not make any sense."

Big Rig

Transocean (NYSE:RIG) slipped this morning, after announcing that its board of directors has raised the company's buyback program to $4 billion from $2 billion. RIG stated that it has already repurchased $600 million, or 8.6 million of its shares. The firm expects to buy back roughly $3.6 billion of its shares by the end of 2007, which includes the $600 million shares repurchased. The board of directors has also authorized an expansion of RIG's revolving credit facility from $500 million to $1 billion.

Most-Active Options Update

At 1:30 p.m. Eastern time, the Dow Jones Industrial Average (DJIA- 11,412.6) has lost 0.77 percent, and is edging ever closer to a triple-digit loss. The S&P 500 Index (SPX - 1,294.98) is 0.84 percent lower, while the Nasdaq Composite (COMP - 2,249.4) is 1.03 percent lower. At 1:32 p.m. Eastern time, 3,099,562 calls have changed hands compared to 3,441,133 puts, equaling a single-day put/call volume ratio of 1.11. The CBOE's equity put/call volume ratio weighed in at 1.30.

Citigroup

Citigroup (NYSE:C) is one of the world's largest financial services firms, and is one of the first U.S. banks with more than $1 trillion in assets (thanks Hoover's). Today, C was mentioned in an article noting that it expects to double its number of traders, thanks to pressure from U.S. investors and their thirst for commodities and exchange-traded funds. C makes our midday most-active options list thanks to heavy activity on its June 50 call (CFJ) and its June 47.50 put (CRW). As a result of this action, the 50 strike is the site of peak call open interest in June (which could provide resistance), and the 47.50 strike is the residence of heavy put open interest in the same month (which could provide support).