Schaeffer's Midday Options Update Features Berkshire Hathaway, Microsoft, MCI Inc., Neiman Marcus Group, and Hewlett-Packard.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Berkshire Hathaway (NYSE:BRK), Microsoft (NASDAQ:MSFT), MCI Inc. (NASDAQ:MCIP), Neiman Marcus Group (NYSE:NMGA, NMGB), Hewlett-Packard (NYSE:HPQ). 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=PRMOU1M&PAGE=1 .

Options Update: HP, One Month after the Upgrade

Stocks rose during the first 30 minutes of trading this morning, continuing the trend set on Friday. But the major market indexes leveled off by 10:00 a.m Eastern time, with the market unwilling to push the Dow above 10,250. Crude oil continued to drop in price and, thankfully, good news on supplies seems to arrive daily. Kuwait's Oil Minister just announced that the country's output capacity increased from 2.5 to 2.7 million barrels per day. Meanwhile the Organization of Petroleum Exporting Countries (OPEC) revealed that total OPEC current output is expected to increase to 30 million barrels a day, from 29.7 million. The American Automobile Association calculated the national average for regular gasoline at $2.238 on Friday, up almost 23 percent against the year-ago average.

Coinciding with the 10 a.m. market slowdown was the Institute for Supply Management (ISM) report for April. The ISM index, which tracks factory activity in the U.S., fell to 53.3 percent in April from 55.2 percent in March, the lowest level in almost two years. Any figure over 50 indicates overall expansion, but the April result came in a little shy of consensus estimates, marking the fifth consecutive month of decline.

The dollar was up against the euro, the Japanese yen and the British pound. A North Korean missile, on a test launch, landed in the Sea of Japan, causing the drop in the yen. In Britain, the markets are closed today, and the general election on Thursday makes this an unusual week. Many commentators expect Prime Minister Tony Blair to be reelected with a reduced majority. The possibility of a powerless premier is unlikely to generate warm feelings towards sterling.

Finally, the New York Times reports that the "R word" is becoming more popular. The newspaper stresses that economists and analysts are not actually predicting a recession, just discussing the possibility that we are heading towards one. "With Federal Reserve policy makers scheduled to meet on Tuesday..." the paper reports, "... this could be a pivotal week for the R word, even if it is still being tossed about as black humor, not stark reality."

Microsoft Berkshire Hathaway?

Berkshire Hathaway (NYSE:BRK) seems to like big numbers. The price of one share of the company will set you back $84,850. A dozen of them would make you a millionaire. At the firm's annual meeting in Omaha, 19,000 investors listened to the latest news, that Bill Gates, personally worth more than $40 billion, is to join the BRK board. "You've got a person who wants very much to help during my life and beyond my life," Buffett said. Microsoft (NASDAQ:MSFT) was down 13 cents on the news. At last check, BRK was up $1,650.

VZ, Phone Home

The MCI Inc. (NASDAQ:MCIP) takeover saga would almost make a movie. Qwest Communications (Q) and Verizon Communications (VZ) were vying to gain control of MCI. The lucky MCI stockholders liked the look of Q's offer (because it's bigger) but the MCI board seems to see VZ as the better suitor. Thus there was something of a conflict, and the history has become rather checkered. Although MCI favored VZ's, to the agitation of stockholders, it recognized Q's April 23 bid of $9.74 billion, or $30-a-share, as 'superior.' But now MCI says that Verizon's revised bid, of at least $26, or $8.44 billion is even more superior! Currently 26 of VZ's dollars are more attractive than 30 of Q's, but the final credits haven't rolled yet.

Neiman Marcus Summer Sale

There's a new sale at Neiman Marcus Group (NYSE:NMGA, NMGB) this week. The company's board has agreed on a $5.1 billion acquisition by an investment group consisting of Texas Pacific Group and Warburg Pincus, which values NMGA at $100 per share. The announcement continues the recent trend of change in the retail landscape, focusing investor attention on a sector that faded in the lead-up to 2004 holiday season and has been in decline since the first trading day of the year. Texas Pacific Group and Warburg Pincus will own equal stakes in their new purchase, including 35 Neiman Marcus stores and two Bergdorf Goodman stores in New York.

Most-Active Options Update

At 2:09 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,195.0) has moved ahead by 0.02 percent, followed by the S&P 500 Index (SPX - 1,155.56), which has lost 0.11 percent. The Nasdaq Composite (COMP - 1,917.2) has lost 0.23 percent. At 2:09 p.m., 1,496,460 calls and 1,192,882 puts had crossed the tape, for a composite put/call ratio (across all six options exchanges) of 0.83. The CBOE put/call volume ratio for equity options stood at 0.92.

Hewlett-Packard

Mark Hurd has completed his first month at the helm of Hewlett-Packard (NYSE:HPQ) so it's a good moment to take a look at the grandfather of Silicon Valley entrepreneurship. Hurd moved to HPQ from NCR Inc. (NCR) and, since the March 29 announcement of his new appointment, HPQ stock has added about 5.5 percent and NCR has shed 11.5 percent.

Technically, HPQ stock has trended sideways for the past six months and, though it is very sad to observe, there has been little impetus behind the equity since its fall from grace after the "dot com" meltdown in 2000 and early 2001. The security has been trapped beneath its descending 10-day moving average for the past two weeks. Though this trendline has given way in today's session, the closing bell has not rung yet, and the 20-day trendline still lies dangerously in wait. The overall price trend since late 2001 is shown on the chart, and indicates virtually no appreciation in value.

Yet, sentiment is still positive toward the company, something that's hard to understand. Twenty analysts rank the stock, according to Zacks, and only two would advise you to "sell." The short-interest ratio is a miserly 1.99 days to cover, a level that denies any possibility of short-covering action, and the short interest is less than 29 million shares out of the 2.9 billion in circulation. Short interest increased by 1.18 million during April, but it is still only about a percent of float which. Elsewhere, the Schaeffer's put/call open interest ratio (SOIR) for HPQ stands at 0.82, which tells me that puts outnumber calls, but not by any great margin, a sign of complacency.

There is almost nothing pessimistic in the sentiment, yet HPQ's technical performance is lackluster, to say the least. While optimism toward a stock that is performing well is entirely appropriate, optimism of this level toward HPQ seems disproportionate, and the path of least resistance looks to be to the downside.

Click on the following link to see the Weekly Chart HPQ since November 2001: http://www.schaeffersresearch.com/wire?ID=13087 .

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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 .