Schaeffer's Midday Options Update Features Bayer, Intel, Advanced Micro Devices, SanDisk, and Newmont Mining.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Bayer (NYSE: BAY), Intel (NASDAQ:INTC), Advanced Micro Devices (NYSE:AMD), SanDisk (NASDAQ:SNDK), and Newmont Mining (NYSE:NEM). 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.

Take advantage of the timely Schaeffer commentaries by signing up for 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 .

Options Update: Options Trading on Newmont Mining

According to the Labor Department, the Consumer Price Index (CPI) increased 0.4 percent during May, putting pressure on the Federal Reserve to keep raising interest rates. The Labor Department said that the increase was led by higher energy and housing costs. Core prices rose 0.3 percent, faster than the 0.2 percent expected by economists. The core rate was boosted by a 0.6-percent gain in owners' equivalent rent, which accounts for nearly one-fourth of the CPI. In the past year, the CPI has risen 4.2 percent, and the core has risen 2.4 percent, the fastest year-over-year growth since February 2005.

Our weekly crude inventory updates have arrived, and we see a bit of a difference of opinion. According to the government, crude inventories dropped 900,000 barrels. However, the American Petroleum Institute (API) posted an increase of 3.3 million barrels in crude inventories. Another area of disagreement between the two agencies came in distillates. The API saw distillate inventories drop 181,000 barrels; the government reported an increase of 2.1 million barrels. The Energy Department announced that motor gasoline supplies increased 2.8 million barrels, slightly lower than the 2.9-million-barrel increase the API reported, at least they can almost agree on something.

Holding Others at BAY

Bayer (NYSE:BAY) announced this morning that it agreed to pay Merck KGaA $4.6 billion to gain the necessary control of Schering (SHR). BAY will pay $112.45 per share to secure control over the 21.8-percent stake in SHR that Merck built up last week. The deal was reached before a midnight deadline, and pushed BAY's control over SHR past the 80-percent mark needed to achieve day-to-day control of SHR.

Chips Ahoy!

The chip sector is active today, thanks to Goldman Sachs upgrading the semiconductor production equipment sector to "neutral" from "cautious." This move was accompanied by upgrades of several chip concerns. One of those companies is Intel (NASDAQ:INTC), which was upgraded to "outperform" from "in line." The brokerage recommended INTC after its "imminent" earnings disappointment, given that the margins have "likely" bottomed, market share is expected to rise, and INTC's valuation is attractive.

The brokerage also upgraded INTC's rival, Advanced Micro Devices (NYSE:AMD) to "in line" from "underperform." Goldman's analyst noted that the stock has fallen to his "fair-value" estimate of $25. SanDisk (NASDAQ:SNDK) was also upgraded to "in line" from "underperform." The upgrade was attributed to the belief that the worst is behind the company.

The brokerage noted that sales in the sector could decline further, and that investors should not buy the sector until companies "capitulate" on the cycle and margins approach trough levels. The firm's analysts added that "we would cover (short sales after) the sell-off."

Most-Active Options Update

At 1:44 p.m. Eastern Time, the Dow Jones Industrial Average (DJIA - 10,733.1) is 0.26 percent higher. The S&P 500 Index (SPX - 1,220.71) has shed 0.22 percent, and the Nasdaq Composite (COMP - 2,068.4) is 0.20 percent lower. At 1:45 p.m. Eastern Time, 2,988,204 calls have changed hands compared to 2,695,447 puts, equaling a single-day put/call volume ratio of 0.90. The CBOE's equity put/call volume ratio was slanted toward the put side, weighing in at 0.81.

Newmont Mining

To say that gold has hit a bit of a rough spot would be a bit of an understatement. Since last Monday's close, the malleable metal has shed roughly 12 percent of its overall value. Understandably, those companies centered on the precious metal have fallen into favor with the bears. One of those companies is Newmont Mining (NYSE:NEM), which has seen heavy activity on its June 47.50 put (NEM RW) and the July 47.50 put (NEM SW).

Technically, NEM is a solid performer. The equity has recently pulled back to the support of its 20-month moving average. This trendline has steadily guided the firm higher since May 2001. I am a bit concerned about the 55 level, as it has acted as resistance recently. However, I may be more concerned with the 50 level. Notice that it was the reason that the stock set a double-top formation in December 2003 and November 2004. Should this level reclaim its role as resistance, we could see the shares squeezed a bit.

While NEM has found the going rough of late, there does appear to be a bit of support waiting at the 48 level. In the past, this level acted as resistance. However, as often happens it has stepped up and acted as support recently. Watch for this trend to continue; if it does, the shares could reclaim their winning ways. I am a little bothered by the fact that the 50 level did not act as support, as it was an area of strong resistance in 2003 and 2005.

Let's take a look at how the sentiment stacks up on NEM:

-- Percent of analysts tracked by Zacks who rate the stock with a "buy" or better: 58%

-- Number of analysts tracked by Zacks: 12

-- Short-interest ratio: 1.62

-- Schaeffer's put/call open interest ratio (SOIR): 0.86

-- SOIR percent rank: 93%

-- Overall Schaeffer's Equity Scorecard rating: 5.0

There is little in the way of short-covering support to help boost the stock if needed. I don't like that, as a breach of 48 will have the shares scrambling to find any possible level of support. What I do like is the fact that the speculative options crowd is rather pessimistic when it comes to NEM. Should this sentiment shift, the equity could move higher amidst a bit of buying pressure.

Upgrades from the analyst community could help boost the shares a bit, but the opposite could happen with downgrades. According to Zacks, analyst coverage is nearly evenly split between "hold" or worse and "buy" or better rankings. As a result of this witch's brew of sentiment and performance, NEM earns a Schaeffer's Equity Scorecard ranking of 5.0 out of a possible 10.

If you are interested in trying to capitalize on NEM, wait and see if there is a noticeable shift in the performance of gold. If so, it might be nice to catch NEM in a decent buying opportunity. If the support at 48 gives way, you may be able to catch a bearish play at the right time.

Click here to see a Monthly Chart of NEM Since October 2000 With 20-Month Moving Average and a Weekly Chart of NEM Since July 2003: http://www.schaeffersresearch.com/wire?ID=16226 .

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 .