Schaeffer's Midday Options Update Features Tiffany & Co. and CONSOL Energy.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Tiffany & Co. (NYSE:TIF), and CONSOL Energy (NYSE:CNX). 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.

Options Update: Request for CONSOL

The U.S. market has fought its way back to the break-even point in midday action on Wednesday, defying a few factors working against it. Disappointing economic results and continued fears about the ultimate fallout from Hurricane Katrina catalyzed some selling pressure shortly after the open, but declining oil prices and government intervention may be helping keep stocks afloat. Also aiding matters is the silver lining surrounding lackluster economic news; the hopes that the Federal Reserve will subsequently slow (or curb) its rate-hike agenda.

Early this morning, U.S. Energy Department secretary Samuel Bodman said the U.S. agreed to access the Strategic Petroleum Reserve (SPR) as soon as Thursday to offer one loan of crude supplies. Eight major refineries are currently shut down, leading analysts to speculate a near future with $3-per-gallon unleaded prices. At noon, oil prices were down one percent at $69.15, after notching a new high of $70.65 in earlier trading.

The Gross Point

The second-quarter's gross domestic product (GDP) was finalized on Wednesday morning to reflect a 3.3-percent annual growth rate. This compares to an initially reported increase of 3.4 percent, and a 3.8-percent growth rate during the first quarter of 2005. Analysts were caught slightly off guard, as they expected the final figure to be in line with the initial estimate. Economic growth slowed in the second quarter due to decreased consumer spending and higher-than-expected imports. On the upside, GDP growth has exceeded three percent for the past nine consecutive quarters, the longest growth spurt since early 1986.

Chicago Dashes Hope

At 10:00 a.m. today, the Purchasing Management Association of Chicago issued its monthly index measuring business activity in the Northern Illinois/Northwestern Indiana region. The reading took a notable tumble, dropping to 49.2 in August from 63.5 in July. Readings below 50 indicate a contraction in the manufacturing sector, and this marked the first just reading in 27 months. Additionally, Marketwatch reported that this is the biggest single-month drop in the index's history. Other details from the report included:

--The new-orders index saw the biggest drop on record, plunging to 46.5 from 69.6.

--The production index slipped to 56.2 from 70.5 the previous month.

--Order backlogs dropped to 45.7 from 56.1, its worst month-over-month decline sine September 1974.

--Prices paid rose to 62.9 percent from 61.3 percent.

--The employment-growth reading stepped back to 51.7 percent from 56.1 percent in July.

On the heels of this announcement, bond yields reached their lowest point since June 9, 4.01 percent, while the U.S. dollar headed lower. Some economists look to the Chicago PMI as a good gauge for the Institute for Supply Management report, which will be released tomorrow morning, while others doubt any correlation between the two indices.

What About Earnings at Tiffany's?

Retailer of fine jewelry and trinkets, Tiffany & Co. (NYSE:TIF) , glided into its own silver-plated earnings confessional on Wednesday morning. The company said second-quarter profit rose 53 percent to $50.6 million, or 35 cents per share. This number trumped analysts' expectations of 24 cents per share. Improved retail sales and a helpful tax break from the prior year are credited with the positive earnings figures. Sales were up 11 percent to $526.7 million, while same-store sales gained six percent during the three-month period. Looking forward, TIF officials boosted their full-year 2005 earnings projection to $1.55 to $1.65 per share, up from earlier estimates of $1.45 to $1.55. Additionally, TIF hopes for an eight-to-10 percent increase in net sales for the year, with same-store sales growth targeted in the mid-to-high single- digit range.

Most-Active Options Update

At 1:31 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,422.8) has edged 0.09 percent higher, which is enough to lift the blue-chip index over the 10,400 level. The S&P 500 Index (SPX - 1,211.38) is up 0.25 percent on the day, while the Nasdaq Composite (COMP - 2,135.80) is higher by 0.28 percent. At 1:32 p.m. Eastern time, 1,857,032 calls have changed hands compared to 1,440,489 puts, for a single-day put/call volume ratio of 0.77. The CBOE's equity put/call volume ratio stands at 0.65, significantly lower than yesterday's reading.

CONSOL Energy

CONSOL Energy (NYSE:CNX) is a leading coal-mining operation. According to Hoover's, the company boasts 4.5 billion tons of proven reserves and produces about 60 million tons of coal on an annual basis. Among the firm's clients are the electric utilities and steel-mill industries. The shares have surged more than two percent today to notch a new all-time high. The stock has increased nearly seven-fold in value since October 2002 and is fresh from a retest of support off its ascending 10-week moving average.

While CNX looks like a "sure thing" from a technical basis, it's important to remember the very important sentiment variable of Expectational Analysis(R) (http://www.schaeffersresearch.com/shop/smp_faq.aspx). The stock earns only a 5.0 on the Schaeffer's Equity Scorecard, and here's why:

--Price action is strong, earning the stock four positive green arrows.

--The Equity Volatility Index rating for CNX, however, is a blemish on the stock's record. Currently, the reading stands at 0.30, just three-tenths of a point away from its annual low. A below-average Equity VIX reading suggests blissful complacency on the part of options players, which is not encouraging for contrarian bulls.

--Insider-transaction activity has been slanted to the bearish side.

--Analyst ratings are discouraging, in terms of providing room for future upgrades. While optimism on the stock is not surprising, we would prefer to see the evidence of more skeptics. Currently, Zacks (www.Zacks.com) indicates six "strong buy" ratings, one "buy," three "holds," and one "strong sell." In other words, 64 percent of the analysts' ratings are "buys" or better.

--Other sentiment factors (Schaeffer's put/call open interest ratio (SOIR), short-interest readings) are relatively average, providing little for the Schaeffer's Equity Scorecard generation process.

For example, the number of shorted CNX shares dropped 24 percent last month to 2.8 million, the lowest reading since June 2004. Regardless of this pullback, three percent of the stock's float remains sold short, with a ho-hum short-interest ratio of 2.3. Calls and puts are at parity in the front three months, as evidenced by the stock's SOIR of 1.00, which ranks in the 31st annual percentile of all readings measured during the past year.

In today's action, the CNX September 70 call (CNX IN) has seen more than 3,200 contracts cross the tape. Most notably was a solitary block of 3,000 contracts, which went off at 1.70 (near the ask price) at 10:18 a.m. This trade was indicated as a "spread," and was likely paired with the October 75 call (CNX JO), which saw a block of 3,000 trade at the same time at 1.55 (near the bid price). Assuming the trader was an institution, and therefore able to get a better deal than John Q. Investor, then this may have been a diagonal spread, where the near-term, newly in-the-money position was sold, and the longer-term position was purchased, allowing for a net credit in the account. Investors employing a diagonal spread typically think the underlying will remain flat or rise only slightly in the near term, but will fall over the longer term.

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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 .