Schaeffer's Midday Options Update Features Advanced Micro Devices, ATI Technologies, Intel, and HCA Inc.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Advanced Micro Devices (NYSE:AMD), ATI Technologies (NASDAQ:ATYT), Intel (NASDAQ:INTC) and HCA Inc (NYSE:HCA). 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.

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Options Update: AMD in Graphic Detail

Merger and acquisition news has put Wall Street into buying mode, with the Dow Jones Industrial Average (DJIA) up more than 1.5 percent, lining it up for a triple-digit day and then some. Advanced Micro Devices (AMD) announced that it is to buy ATI Technologies (ATYT), and that story is featured below. Elsewhere, hospital operator HCA Inc. (NYSE:HCA) said it will be acquired by a group of investors for $33 billion, which includes $11.7 billion of assumed debt. HCA shareholders will receive $51 in cash for every HCA share owned, representing a 6.5-percent premium over Friday's closing level. The acquiring group includes Merrill Lynch Global Private Equity, Bain Capital, Kohlberg Kravis Roberts and HCA founder Thomas Frist Jr.

Most-Active Options Update

At 3:20 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 11,033.6) has added more than 1.5 percent. The S&P 500 Index (SPX - 1,260.13) has gained more than 1.6 percent, and the Nasdaq Composite (COMP - 2,056.9) has advanced more than 1.8 percent. At 3:20 p.m. Eastern Time, 3,929,971 calls have changed hands compared to 2,635,862 puts, equaling a single-day put/call volume ratio of 0.67. The CBOE's equity put/call volume ratio stands at 0.65, while the ISE's ratio comes in at 0.68.

Advanced Micro Devices

In our daily market blog this morning, Beth Gaston Moon commented that Advanced Micro Devices (NYSE:AMD) announced plans to acquire ATI Technologies (NASDAQ:ATYT) for $5.4 billion. The financial breakdown of the deal includes $4.2 billion in cash and 57 million shares, valuing ATYT at a 24-percent premium over Friday's close, at $20.47 per share. ATYT manufactures graphics processors and chipsets that support microprocessors. The company's products are used in a variety of products including computers, digital televisions, video-game consoles and cellular phones.

The deal launches a new salvo in the competitive war between AMD and its chief rival, Pentium parent Intel (NASDAQ:INTC). An analyst with RBC Capital Markets was quoted by MarketWatch as observing: "This combination offers AMD a broader and stronger product line in its competition with Intel." AMD officials said the acquisition will "slightly" lift 2007 earnings and will "meaningfully" boost earnings in the 2008 fiscal year.

There was a good deal of activity on AMD in the options pits this morning. Remember that July options traded for the final time on Friday and expired on Saturday, so August is now our shiny, new front month for options. AMD's August 17.50 call began the day with open interest of 7,497 contracts, but 21,579 had changed hands by the time we grabbed our figures. The August 17.50 put, which began the day with open interest of 4,197 contracts, saw 11,947 crossed the tape in the same period of morning trading. At last check, AMD stock was trading at $17.36, down almost five percent.

The stock made some decent gains during the second half of 2005, and hit a multi-year high in March 2006, but it has been in a steady decline since then, pulling its 10-week and 20-week moving averages into a bearish cross in late April.

Quick Sentiment Facts on AMD:

-- Percent of analysts tracked by Zacks who rate the stock with a "buy" or better: 27%

-- Number of analysts tracked by Zacks: 22

-- Schaeffer's put/call open interest ratio (SOIR): 0.66

-- SOIR percent rank: 55%

-- Overall Schaeffer's Equity Scorecard rating: 3.0

Analysts are rather bearish on AMD, which is actually a good thing from our contrarian perspective. AMD has been a weak performer for more than four months, falling through its 10-month and then 20-month moving averages recently. To see signs of lingering optimism would be disturbing. Yet the absence of "buy" ratings suggests that money is probably waiting on the sidelines, ready to leap in when the time is right.

When will that be? Well, the stock seems to have some historical support at the 15 level, so a dip to 15 might tempt investors in. But the 80-month and 160-month moving averages might be more significant, because those lie, respectively, just above and just below the current price. The 160-month trendline is at about 15.50 and might provide support, as it did in April 2005. But the bulls will be looking for a recovery back above the 80-month trendline at about 18.50. AMD is one to watch right now. It isn't a bullish pick yet, but I think it might turn into one.

Click here to see a Weekly Chart of AMD since July 2005 with 10-week and 20-week moving averages, and a Monthly Chart of AMD Since September 2004, with 80-month and 160-month moving averages.: http://www.schaeffersresearch.com/wire?ID=16478 .

The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU12M&PAGE=1 .

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 .