Schaeffer's Midday Options Update Features Anheuser-Busch, Calpine, Harrah's Entertainment, Las Vegas Sands, and Dell.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Anheuser-Busch (NYSE:BUD), Calpine (NYSE:CPN), Harrah's Entertainment (NYSE:HET), Las Vegas Sands (NYSE:LVS), and Dell (NASDAQ:DELL). 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=PRMOU11M&PAGE=1 .

Options Update: Choosing an Options Strategy for Dell

Since last Wednesday, the 10,950 level has been just about as far as the strongest bulls could push, a signal that no one is quite ready even to tiptoe up to that 11,000 psychological barrier.

Yesterday morning's economic report from the National Association of Realtors brought news that sales of existing U.S. homes had dropped by more than economists had estimated. Yet, today we're hearing a slightly different story. In October, seasonally adjusted annual sales of new single-family homes jumped 13 percent to a record 1.42 million, the Commerce Department estimated. This clearly exceeded economists' forecast, which saw sales falling by 0.3 percent.

After-hours trading yesterday saw December gold futures move north of $500 an ounce, a threshold that has significant psychological impact, of course, and comes close to an 18-year high. Today, gold for December delivery trading finished with a gain of 80 cents at $499.10 an ounce. However, the contracts are still well away from the record high of $873 set in January 1980. Marketwatch reports strong physical demand from India and China for gold, central-bank buying, and demand from inflation-wary institutional investors.

Well, If They'll Pay Us to Drink It

To my simple way of thinking, beer is sold either on price or on taste, yet we hear today that Randy Baker, CFO at Anheuser-Busch (NYSE:BUD), thinks the firm "can outspend the competition" on advertising. BUD, he feels, has substantial advantages in the industry, including "a huge scale advantage." When I checked shortly before lunch, BUD was up 1.77 percent to $44.79. For comparison, Molson Coors Brewing (TAP) was up 0.69 percent to $66.97.

Did The Lights Just Flicker?

Power generator Calpine's (NYSE:CPN) founder, Peter Cartwright, announced today that he is leaving the company, a move that creates vacancies for chairman, president, and CEO. Cartwright was joined by chief financial officer, Robert Kelly, who is "no longer with the company." CPN stated that "the Board believes that these management changes are essential to better address Calpine's financial challenges and to provide a new direction for the company." On high volume, the shares fell as low as $0.69, and appear to be meeting resistance at the one level. Analyst warn that the company might face bankruptcy after the departures.

Harrah's New Hurrah

Harrah's Entertainment (NYSE:HET) is to expand to Europe, The Wall Street Journal reports. The company is gambling on two casino-resort projects, one in Spain, and the other in Slovenia, valued at $1.37 billion overall. The stock was ahead about one percent in early afternoon trading.

Cannibals! Run!

J.P. Morgan downgraded Las Vegas Sands (NYSE:LVS) to "neutral" from "overweight" today, citing potential cannibalization at Sands in Macau, the former Portuguese colony on the coast of China. Cannibalization, in this context, means that a company is in danger of stealing business from itself, I'm told.

Most-Active Options Update

At 2:07 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,907.3) has added 0.15 percent. The S&P 500 Index (SPX - 1,260.23) has gained 0.22 percent, and the Nasdaq Composite (COMP - 2,237.7) has shed 0.08 percent. At 2:07 p.m. Eastern time, 2,689,149 calls have changed hands compared to 1,873,633 puts, equaling a single-day put/call volume ratio of 0.69. The CBOE's equity put/call volume ratio weighed in at 0.86.

Dell

Dell (NASDAQ:DELL) saw some heavy activity at its January 32.50 call this morning, with 7,330 contracts changing hands by the time we grabbed our figures.

I'm going to take a look at DELL today, but first let's revisit Sirius Satellite Radio (SIRI), our featured stock yesterday. More than 12,000 of SIRI's January 2006 7.5 calls had changed hands, and open interest at that strike was more than 157,000 contracts. One large block of 10,000 contracts changed hands on the Philadelphia Stock Exchange at 11:18 a.m. and I notice today that open interest is more than 164,000 today, so we can see that buy-to-open or sell-to-open deals predominated.

DELL clung fiercely to the 40 level from May to August and, although I felt it would fall, and even paper traded some puts, it seemed disinclined to let go. In retrospect, though, I had the right idea. The excursion above 40 turned out to be an island reversal, when a stock gaps up, lingers a while, and then gaps right back down again. It's a sign of weakness, and the stock dutifully declined, all the way down to $28.62.

Let's take a look at the sentiment. We track a large number of sentiment indicators, but we frequently focus on three key areas:

--Analyst ratings, to gauge Street sentiment

--Equities sentiment, in the form of short selling

--Options sentiment, in the form of put/call ratios and trends, and peak open interest

From Zacks I see that analysts award:

--9 "strong buys"

--7 "buys"

--9 "holds"

--0 "sells"

--0 "strong sell"

There are nine supposedly rare "strong buy" ratings, and no "sells" of any kind. The worst thing we see is that nonet of cautious "holds." With brokerages recommending DELL this strongly to their clients, you can be sure that investors have already piled great wads of their cash into the stock. If there is little or no money left on the sidelines, where is further investment going to come from?

In the options pits, sentiment seems too optimistic, too. The stock's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.68 in the 29th percentile. In other words, this reading, which is lower than 71 percent of all those taken during the past year, is much closer to optimism than pessimism.

Short interest on the stock edged higher by a couple of percent in November but does not look placed to help the stock higher. The short-interest ratio is just 1.2 days to cover, and this is nowhere near enough to fuel any kind of short-covering rally. We monitor short interest because sometimes sudden good news comes along and pushes a stock's price up sharply. This might shake out some of the short sellers, who suddenly see that it will cost more money to buy their stocks back than they tucked under the mattress when they originally sold the positions. If these turncoat short sellers suddenly transform into buyers, they can push the stock price yet higher and perhaps provoke further short covering. We usually take note when the short-interest ratio passes five.

Overall, I'm worried that optimism is too prevalent. DELL is a solid company, of that there's little doubt, but it will have to do very well indeed to meet expectations.

Click on the following link to access a Daily Chart of DELL Since March 2005: http://www.schaeffersresearch.com/wire?ID=14690 .

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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 .