Schaeffer's Midday Options Update Features UBS AG, Exxon Mobil, Qwest Communications International, Verizon Communications, and MCI Inc.

CINCINNATI -- Today's Schaeffer's Midday Options Update features UBS AG (NYSE:UBS), Exxon Mobil (NYSE:XOM), Qwest Communications International (NYSE:Q), Verizon Communications (NYSE:VZ) and MCI Inc. (NASDAQ:MCIP). 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: MCI, Verizon, and Qwest

From Zurich to Beijing

UBS AG (NYSE:UBS) is one of the largest investment managers in the world, with offices in something like 50 countries and headquarters in the Swiss city of Zurich, Hoover's informs me. The newswires are buzzing today. First, UBS appears to be buying a 20-percent stake in Chinese brokerage, Beijing Securities. I hear on the Dow Jones Newswires and The Asian Wall Street Journal that an inside source values the deal at $210 million, adding that the World Bank's International Finance Corporation will take five percent stake while the municipal government of Beijing will have a 33 percent stake. Meanwhile, UBS revealed today that it will also take a 1.6-percent stake in the state-run Bank of China for $500 million.

Why Buy the Commodities When You Could Buy the Exchange?

The New York Mercantile Exchange, which usually makes headlines in the shadow of the latest change in the price of crude oil futures or gold futures, is in the spotlight today. News arrived that General Atlantic is to take a 10-percent stake in the Nymex, although the exchange's seatholders are not amused, I hear. The deal is seen as the first step in a move to prepare the Nymex for an IPO. "Since its founding more than 130 years ago, NYMEX has built a valuable franchise with a number of very attractive growth opportunities," said Bill Ford, President of General Atlantic. General Atlantic, based in Connecticut, is a private venture capital firm that focuses on technology companies such as priceline.com (PCLN) and E*Trade (ET), according to vault.com.

African Oilfields

Exxon Mobil (NYSE:XOM) is to double its investments in Africa by the year 2010, the company's president, Rex Tillerson, said today in a speech to the World Petroleum Congress in Johannesburg, South Africa. In the past five years XOM has invested $12 billion in the continent. Thirty percent of XOM's current worldwide crude-oil production comes from Africa, a spokesman revealed, and the company expects to increase its African oil production to one million barrels a day by 2010, from the current level of 730,000 barrels a day. In Angola alone, XOM produces more than 550,000 barrels of oil per day.

Most-Active Options Update

At 2:43 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,454.8) has added 0.11 percent. The S&P 500 Index (SPX - 1,215.36) is down 0.02 percent, and the Nasdaq Composite (COMP - 2,116.2) is down 0.25 percent. At 2:43 p.m. Eastern time, 2,084,824 calls have changed hands compared to 1,280,523 puts, equaling a single-day put/call volume ratio of 0.61. The CBOE's equity put/call volume ratio weighed in at 0.68.

MCI, Inc.

Fittingly enough, the love triangle between Qwest Communications International (NYSE:Q), Verizon Communications (NYSE:VZ) and MCI, Inc. (NASDAQ:MCIP) began back in February while we were all thinking of our own Valentines. VZ vied with Q for the affections of MCIP, and for a remarkably long period of time it remained unclear where Cupid's arrow would finally fall. Opinion was very definitely divided.

The lucky suitor turned out to be VZ, Q was spurned, and we all thought that was that. The deal's wheels started to turn, and MCIP's stock price flatlined.

Today we discover that Q might make one more attempt to court fair MCIP, even though the nuptials with VZ are almost complete. Bloomberg News reports that Q's directors discussed yesterday the lingering possibility of union with MCIP if the VZ wedding is rejected by MCIP shareholders, who are due to vote on October 6.

MCIP's October 25 calls (MQI JE) saw a volume of 38,000 contracts change hands by the time we collected our figures, and the October 27.5 calls (MQI JY) saw 20,000 contracts cross the tape. Open interest at those strikes was already substantial, at 118,309 and 81,286 contracts respectively. The stock was trading at 25.39 at last check.

The MQI JE option saw two large blocks, of 10,000 and 15,000 contracts trade on the electronic International Securities Exchange (ISE), transacting between the bid and the ask prices. The MQI JY option traded in four blocks of 5,000 on the American Stock Exchange (AMEX) and the Philadelphia Stock Exchange (PHLX) at nickel and dime money and, again, it's hard to determine if they were purchased or sold. Mostly, they crossed between the bid and the ask.

The stock's Schaeffer's put/call open interest ratio is 0.42, which is close to the middle of the range of readings taken during the past 52 weeks. Short interest is small, and fell by more than 27 percent in September. We monitor short interest because sometimes sudden good news comes along and pushes a stock's price up sharply. This might shake out some of the short sellers, who suddenly see that it will cost more money to buy their stocks back than they tucked under the mattress when they originally sold the positions. If these turncoat short sellers suddenly transform into buyers, they can push the stock price yet higher and perhaps provoke further short covering.

Wall Street has also made its feelings for the shares known. From Zacks I see that eight analysts rate the stock, awarding:

* 0 "strong buys"

* 0 "buy"

* 7 "holds"

* 1 "sell"

* 0 "strong sells"

This configuration leaves ample room for upgrades if and when MCIP's circumstances change.

I notice that the stock is trading in large volumes today. About 24 million shares had found new homes when I checked today, compared to just 2.9 million yesterday.

MCIP earns itself a Schaeffer's Equity Scorecard reading of 5.5 out of 10 suggesting, by a small margin, that the path of least resistance still lies to the upside. Any changes will likely be driven by news, so watch for stories. I thought we'd already read the final chapter in this romance.

Click on the following link to access a Daily Chart of MCIP since January 2005: http://www.schaeffersresearch.com/wire?ID=14224 .

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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 .