Schaeffer's Midday Options Update Features AT&T, Ruby Tuesday, GlaxoSmithKline, AVI BioPharma, and Lamson & Sessions.

CINCINNATI -- Today's Schaeffer's Midday Options Update features AT&T (NYSE:T), Ruby Tuesday (NYSE:RI), GlaxoSmithKline (NYSE:GSK), AVI BioPharma (NASDAQ:AVII), and Lamson & Sessions (NYSE:LMS). 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: Trading Options on AT&T

The Dow Jones Industrial Average (DJIA) gave up ground this morning, while the S&P 500 Index (SPX) and the Nasdaq Composite Index (COMP) hovered near breakeven. Meanwhile, sell-off in bonds sent long-term interest rates to their highest level in nearly two years.

Lamson & Sessions has a Good Session

Lamson & Sessions (NYSE:LMS) might be a good name to put on your radar screen. This morning the company raised its first-quarter earnings and sales estimates, and the stock gapped higher. At last check, it was up more than nine percent on the day. According to Hoover's, the company has a diversified mix of thermoplastic and electrical products, and celebrates its 140th anniversary this year. The stock hit an all-time high last month, and I notice that the 10-month moving average is zooming up to lend a layer of support. The stock has not closed a month below this key trendline for two years. I also see that short interest increased by a hefty 70 percent last month, and almost 20 percent of the stock's float is sold short as the equities crowd bets that the stock is due for a drop. If LMS does fall, those short sellers will collect some cash, but it if picks up again, prepare for some short-covering action as these pessimists rush to buy.

Your Mission, Should You Choose To Accept It...

Pharmacopeia Drug Discovery (PCOP) announced this morning that it is on a mission to find active molecules. It must be lucrative work, because the stock gapped higher today, to explore territory it has not visited since December 2004. PCOP and GlaxoSmithKline (NYSE:GSK) have formed of a new drug discovery and development alliance "to deliver clinically validated therapeutic candidates to GSK's global research and development organization." Earlier this month, the stock dipped to $4.17, approaching the support of its 10-month moving average. I'd be inclined to see any revisit this region as a potential buying opportunity.

A Cure for Avian Flu?

AVI BioPharma (NASDAQ:AVII) is another pharma making news today. The Dow Jones Newswires reported that the firm's Neugene therapeutics showed promise in treating all strains of influenza A, including H5N1, also known as avian influenza. This is certainly enough to put AVII on your watch list for a while. AVII could stand to gain substantially here.

Ruby Tuesday has a Good Thursday

Ruby Tuesday (NYSE:RI) is another one that you might like to keep an eye on. The stock gapped higher after the company reported strong third-quarter earnings and raised its fourth-quarter earnings forecast. However, enthusiastic trading has failed to push the stock past its April 2004 all-time high price of $33, indicating that there are limits to the buyers strength, and suggesting the possibility of a short-term pullback. Nevertheless, I don't think I'd like to bet against this stock. The powerful 10-month and 20-month moving averages are making a bullish cross, which is a sign that further gains might be on the way. Also, there is massive short interest, with more than 23 percent of the float currently sold short and a short-interest ratio of almost six weeks to cover. This configuration provides gallons of fuel for a short-covering rally. In such a situation, options players might consider a straddle.

Most-Active Options Update

At 2:58 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 11,142.5) is down 0.65 percent. The S&P 500 Index (SPX - 1,299.36) has dropped 0.27 percent, and the Nasdaq Composite (COMP - 2,337.3) has declined 0.02 percent. At 2:58 p.m. Eastern time, 3,115,067 calls have changed hands compared to 2,209,096 puts, equaling a single-day put/call volume ratio of 0.70. The CBOE's equity put/call volume ratio weighed in at 0.72.

AT&T

Telecommunications behemoth AT&T (NYSE:T) is seeing some brisk long-term call trading this afternoon. The equity's January 2008 30 call has seen more than 8,500 contracts change hands on open interest of 105,578 contracts. A block of 6,970 contracts crossed the tape at 1:29 p.m. Eastern time at a bid price of $1.20. If the contracts were sold to open, the options speculator most likely expects the shares to close below the strike price of 30 when those options expire in roughly two years. On the other hand, with open interest far outweighing total volume, there is also a chance that the investor is closing out an existing long position.

Technically speaking, the shares have enjoyed a nice rally from their mid-October low, gaining more than 32 percent before finally peaking in February. Since hitting a near-term high, the equity has pulled back to support in the 27 region. This area served as staunch resistance on several occasions in the past and could now provide key support. Furthermore, the equity's 20-week moving average is climbing into the region to add another layer of potential support.

From a longer-term perspective, the stock remains locked in a sideways channel between resistance at 28 and support at 20. T has been trapped in this range since July 2002.

Let's look at the sentiment backdrop of T:

Quick Facts on T

Percent of analysts tracked by Zacks who rate the stock with a "buy": 48%

Number of analysts tracked by Zacks: 21

Short interest as a percent of float: 1.4

Short-interest ratio: 2.8

Schaeffer's put/call open interest ratio (SOIR): 0.50

SOIR percent rank: 76%

Overall Schaeffer's Equity Scorecard rating: 6.0

Overall, you'll find that optimism tends to reign supreme when it comes to investors' bias toward the shares. However, there is still ample room for potential upgrades from Wall Street. Of the 21 analysts following the blue-chip company, nine rate it a "hold" and two award it a "strong sell."

Weekly Chart of T since March 2003 with 20-Week Moving Average: http://www.schaeffersresearch.com/wire?ID=15676 .

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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 .