Schaeffer's Midday Options Update Features Chiron, Telefonica, SPX Corp., Knight-Ridder, and Barrick Gold.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Chiron (NASDAQ:CHIR), Telefonica (NYSE:TEF), SPX Corp. (NYSE:SPW), Knight-Ridder (NYSE:KRI), and Barrick Gold (NYSE:ABX). 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: Puts Pop on Barrick Gold

Greeting the ghosts and ghoulies this morning was September's U.S. income and inflation news from the Commerce Department. According to the data, U.S. income increased 1.7 percent in September after dropping a revised 0.9 percent in August. Economists had been looking for incomes to increase 0.3 percent. The main reason for the rather large swing was the impact of the storms on rental income, which was held down in August thanks to uninsured losses from Hurricane Katrina. Taking this impact out of the mix, incomes rose 0.5 percent in September, after increasing 0.3 percent in August. The government also stated that other effects of the storm on income from wages or small-business ownership could not be separately identified. The personal consumption expenditure (PCE) price index increased 0.9 percent in September thanks to higher energy prices, the largest increase since February 1981. Excluding food and energy prices, the core PCE price index increased 0.2 percent, putting an end to three straight months of 0.1 percent gains. As in August, core prices increased two percent in the past year, which is at the top end of the Federal Reserve's "comfort zone." Speaking of the Federal Reserve, the Federal Open Market Committee meets Tuesday, pondering a 12th straight interest-rate increase. An increase would bring the federal funds rate to four percent, up from 3.75 percent.

A Little Halloween M&Adness

It wasn't just economic treats in the Street's goodie bag this morning. Shares of Chiron (NASDAQ:CHIR) have gained more than two percent after Novartis AG (NVS) upped the buy-out offer for the CHIR shares that it doesn't already own. The Swiss firm is now offering $5.1 billion, up from $4.5 billion, for the remaining CHIR shares.

In other merger and acquisition news, Spanish mobile phone operator, Telefonica (NYSE:TEF), has agreed to buy British mobile-phone operator, O2, in a deal worth $31.5 billion. TEF announced that it was paying 17.7 billion pounds, which translates to 200 pence per share in cash, in order to make itself a major mobile player in three of Europe's largest mobile markets. The British phone firm had a 23 percent market share in the U.K. as of the second quarter and an 11 percent share of the German market. This purchase will give TEF as many as 25 million customers in Britain, Ireland, and Germany. One brokerage told its clients that TEF's "recommended offer this morning could well lead to a higher offer from Deutsche Telekom."

Barrick Gold (NYSE:ABX) announced a hostile cash-and-stock takeover bid for Placer Dome (PDG) worth roughly $9.2 billion. ABX stated that it will pay up to $1.2 billion in cash and issue up to 303 million shares for PDG. This offer values the U.S.-traded shares of PDG at $20.50 per share, the Canadian mining firm finished Friday at $16.51 per share. PDG has gained more than 18 percent in trading today while ABX has lost nearly eight percent. Reportedly, ABX will formally request a list of PDG's shareholders later today in order to mail out a formal offer and takeover bid circular. Said offer will be open for acceptance for 35 days following the date the circular is mailed. The merged company would have 149.8 million ounces in proven and probable gold reserves.

I Got A Rock

In the true spirit of the Halloween classic, It's the Great Pumpkin Charlie Brown and good ole' Chuck's multi-eyed ghost, SPX Corp. (NYSE:SPW) and Knight-Ridder (NYSE:KRI) both received rocks from the analysts today. SPW dropped as much as 3.5 percent after Merrill Lynch downgraded the company to "neutral" from "buy." The brokerage cited SPW's raw materials exposure as well as concern that a second share buyback plan will not start until February 2006 as reasons for the downgrade. Even PigPen got candy on Halloween in the Peanuts special, but KRI wasn't as lucky, dropping more than one percent after being downgraded to "sell."

Most-Active Options Update

At 1:30 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,451.5) has rallied 0.47 percent. The S&P 500 Index (SPX - 1,206.05) is up 0.64 percent, and the Nasdaq Composite (COMP - 2,115.3) has added 1.22 percent. At 1:31 p.m. Eastern time, 2,477,642 calls have changed hands compared to 1,561,640 puts, equaling a single-day put/call volume ratio of 0.78. The CBOE's equity put/call volume ratio weighed in at 0.72.

Barrick Gold

I already went into some detail of the action that has put ABX into the news spotlight today, a hostile takeover bid of a fellow mining firm. This action has sent ABX plunging more than seven percent in today's action, and has landed the company on our midday most active options list.

Today, more nearly 7,000 of the company's November 25 put (VBX ME) have crossed the tape. Even without this activity, the 25 strike is far and away the site of peak put open interest. This is an important development because peak put open interest can provide a layer of support for a stock. The past three months have seen ABX finish above this level, and it certainly seems like history is going to repeat itself here.

Technically, the 25 level is significant. This level is also the site of ABX's 10-month moving average, which has served as support for the shares throughout the past two-plus years. I wouldn't call this the most solid of support, but when the shares have faltered and finished below this support, they have been bolstered by their 20-month trendline. Combine this with the open put interest at the 25 level and we have double-barreled support.

Long-term performance for ABX has been good thanks to the support of these trendlines. Versus the S&P 500 Index (SPX), ABX has outperformed since September 2000. At first glance, it would seem that the options pits agree. However, digging a bit below the surface, one will see that ABX's Schaeffer's put/call open interest ratio (SOIR) has steadily moved higher. ABX's SOIR comes in at 0.56, which ranks in the 42nd percentile. As I said, while this isn't a pessimistic reading, it is the highest reading taken during the past month.

While the options pits are growing more pessimistic toward ABX, short sellers haven't displayed the same action. Short interest decreased more than 14 percent during the past month for ABX, which is an optimistic development. Despite this decrease, it would still take more than four days to cover the 13.28 million shorted ABX shares. Should the bears need to vacate their pessimistic positions against the firm, we could see a bit of a short-covering pop.

Not only could ABX benefit from a short-covering pop, it could receive a boost from the analyst community. Zacks shows that half of the analysts covering ABX rate it a "hold" or worse (that would be eight of 16). Six of this group of eight rate the company a "hold," which is the most positive of the negative ratings, as "holds" can easily become "buy" ratings.

Bottom line, good news could send ABX higher, especially if it spooks the bears or causes some analysts to jump ship.

Click on the following link to access a Monthly Chart of Barrick Gold Since July 2002 With 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=14503 .

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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 .