Schaeffer's Midday Options Update Features General Motors, Tiffany & Co., Level 3 Communications, Hewlett-Packard, and NuCor.

CINCINNATI -- Today's Schaeffer's Midday Options Update features General Motors (NYSE:GM), Tiffany & Co. (NYSE:TIF), Level 3 Communications (NASDAQ:LVLT), Hewlett-Packard (NYSE:HPQ), and NuCor (NYSE:NUE). 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=PRMOU12M&PAGE=1 .

Options Update: Call Activity Jumps on Newmont Mining

Major market averages are continuing to languish around the breakeven point today as traders keep an eye on their watches, waiting for 2:15 p.m. to come around. The Federal Open Market Committee is on the schedule to report its interest-rate decision at that time. While the general consensus is for another 25-basis-point increase, the real focus will be on the statement that accompanies the rate decision. Eagle-eyed market watchers will also be looking for clues as to how new Chairman Ben Bernanke prefers to run the show.

General Motors Slims Down

I was sad (albeit not surprised) to see General Motors (NYSE:GM) appear on Thomson First Call's list of lowest-rated stocks this morning. Late yesterday, stories emerged that the company was looking to lay off part of its salaried workforce. This morning, a spokesman for GM said the cut will involve, at most, 500 white-collar workers. The Dow Jones Newswires reports that the company has about 36,000 salaried employees and has plans to reduce that number by seven percent this year, as announced last November. GM was up 0.92 percent at last check.

The Robin's-Egg Blues

Tiffany & Co. (NYSE:TIF) visited the earnings confessional today, reporting a fourth-quarter profit of $140.3 million, or 97 cents per share, above analysts' expectations of 84 cents per share. The Street is focusing on the luxury retailer's outlook; TIF officials said first-quarter earnings would be equal to or slightly higher than the 27 cents earned in the year-ago period. Analysts are currently targeting per-share results of 30 cents. TIF attributed this possible shortcoming to same-store sales that are slightly below last year's first-quarter results. The shares are currently trading in negative territory by nearly 1.0 percent.

The Next Level

Level-3 Communications (NASDAQ:LVLT) raised its first-quarter income guidance to the range of $140 million to $150 million, up from $105 million to $125 million. The stock gapped higher on the news and set a two-year high, so it's one to put on your radar screen this week.

Wall Street Calculates HP's Future

Hewlett-Packard (NYSE:HPQ) , the granddaddy of Silicon Valley, saw its stock slip this morning after Wall Street analysts turned their attention on the company's future. Since Mark Hurd took the helm from Carly Fiorino, the stock was fared well. Hurd took early steps to cut costs and reduced bureaucracy. But what happens next? In New York, analysts are starting to ask how the company can grow. It will be interesting to hear the answer from Palo Alto. The stock was down 1.8 percent at last check. To add a little perspective here, HPQ hit a five-year high last month, and the stock has spent the past six weeks consolidating onto the support of its rising 10-week moving average. Watch to see if that holds firm.

Most-Active Options Update

At 1:43 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 11,253.2) is up 0.03 percent. The S&P 500 Index (SPX - 1,303.70) has edged 0.16 percent higher, and the Nasdaq Composite (COMP - 2,321.0) is up 0.23 percent. At 1:43 p.m. Eastern time, 2,215,294 calls have changed hands compared to 1,593,228 puts, equaling a single-day put/call volume ratio of 0.71. The CBOE's equity put/call volume ratio weighed in at 0.93.

NuCor

Steel company NuCor (NYSE:NUE) is certainly seeing some interesting option trading today, so without hesitation let's dive right in. With the stock reaching a new all-time high of 106.57 earlier today, the following options were seeing notable volume at the time we pulled our figures:

--April 60 call (NUE DL) (46 points in the money): Volume of 13,227 on open interest (OI) of 1,468.

--April 65 call (NUE DM) (41 points in the money): Volume of 15,687 contracts on OI of 1,740

--April 70 call (NUE DN) (36 points in the money): Volume of 8,307 contracts on OI of 922

--April 80 call (NUE DP) (26 points in the money): Volume of 12,537 contracts on OI of 1,392

--April 85 call (NUE DQ) (21 points in the money): Volume of 13,468 contracts on OI of 1,494

These deep-in-the-money options aren't exactly cheap, and they expire on April 21st. At the last trading price, the value of today's volume on the 65 call totaled more than $64 million. So what's going on? That's the real $64 million question here. The facts are as follows:

1. All five options saw three blocks change hands in rapid
       succession between 12:07 p.m. and 12:14 p.m. Block sizes
       ranged in size from three blocks of 5,229 contracts (at the 65
       strike) to three blocks of 2,769 contracts (at the 70 strike).

    2. These options traded, for the most part, at or near the ask
       price, suggesting they were purchased. A peek at tomorrow's
       implied-volatility changes will confirm this.

    3. Today's volume is likely to translate, given the wide disparity
       between today's volume and existing open interest.

My investigation was aided by our fearless Trading Floor Blogger, Nick Perry, who pointed out that NUE goes ex-dividend tomorrow, two days before the record date. In other words, investors who buy the stock after tomorrow won't be entitled to the next available dividend, which will be paid on May 11 (yes, that's after these call options expire). The institutions buying these calls today are likely setting up a dividend-capture strategy, planning to sell their calls after the record date. For more information on this strategy, please refer to this oldie but goodie  (www.schaeffersresearch.com/commentary/observations.aspx?ID=5005).

Let's look at the backdrop of NUE:

Quick Facts on NUE

--Percent of analysts tracked by Zacks who rate the stock with a "buy": 36%

--Number of analysts tracked by Zacks: 11

--Short interest as a percent of float: 4.75

--Short-interest ratio: 2.41

--Schaeffer's put/call open interest ratio (SOIR): 1.30

--SOIR percent rank: 70%

--Overall Schaeffer's Equity Scorecard rating: 7.0

In short, analysts have yet to crowd the bullish bandwagon and short interest, while not overly impressive, increased by 12.6 percent during the March reporting period, suggesting increased pessimism from the stock-trading contingent. Elsewhere, options players remain fairly bearish, judging from the Schaeffer's put/call open interest ratio (SOIR) reading of 1.30, in the 70th annual percentile. But be mindful that today's rush to the call strikes could have a profound effect on this reading.

As I previously noted, NUE is in new-high territory, capping off a rally that has been in place since last summer. NUE shares have rallied more than 130 percent since late June, along the steady support of their 10-week and 20-week moving averages.

NUE is a tricky one, with the dividend excitement, the planned acquisition of privately held Connecticut Steel, and the unusual options activity. The steel sector overall, however, remains one of our favorite groups, and we don't expect a pullback anytime soon. If you are intrigued by NUE, I'd recommend an in-the-money May or July option to steer clear of the shenanigans in the April series. If you'd prefer something a little more quiet, perhaps A.K. Steel (AKS) or Oregon (OS) Steel would be a better fit.

Weekly Chart of NUE since June 2005 with 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=15653 .

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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 .