Schaeffer's Midday Options Update Features Xilinx, Northrop Grumman, Analog Devices, General Motors, and Ford Motor.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Xilinx (NASDAQ:XLNX), Northrop Grumman (NYSE:NOC), Analog Devices (NYSE:ADI), General Motors (NYSE:GM), and Ford Motor (NYSE:F). 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: Call Volume Pops on Analog Devices

Trading is rather lackluster this dreary Monday afternoon. The bond market is closed today due to the Columbus Day holiday (those lucky dogs!) and no economic reports were released this morning. The major market indices are hovering close to breakeven this afternoon as they struggle to break into positive territory.

Breakdown in the Auto Sector

Delphi (DPH) announced over the weekend that it is going to file for bankruptcy. DPH blames the filing on high wage and benefit expenses. The filing is the largest in the history of the domestic automobile industry. At the moment, DPH is down 57 percent. Naturally, this has sent a number of auto stocks lower, with General Motors (NYSE:GM) retreating 4.5 percent and Ford Motor (NYSE:F) tumbling 3.7 percent.

Earnings Warning

Meanwhile, Xilinx (NASDAQ:XLNX) gapped down this morning to tag a new annual low. The company slashed its fiscal 2006 September quarter sales guidance to a sequential decline of one to two percent, versus its prior outlook of flat to four-percent growth. The firm stated that "Turns business during the month of September was less than forecast." The gross margin is still expected to be in line with prior guidance. At last check, the shares were down almost 15 percent to $22.97.

Elsewhere, Northrop Grumman (NYSE:NOC) announced that its Gulf Coast shipbuilding operations are not yet back up at full strength. However, 12,500 of its 19,800 workers in Louisiana and Mississippi on the job in the wake of Hurricanes Katrina and Rita. During a conference call this morning, NOC CEO Ron Sugar lowered the firm's financial outlook for 2005 and reported that 700 workers remain unaccounted for but that others are still on leave. Furthermore, CFO Wes Bush also said that the company is in dispute with its insurer over costs above $500 million related to storm damage.

Merger Monday

In merger news, Lincoln National (LNC) announced that it will buy Jefferson-Pilot (JP) for $55.48 per share in cash. According to these terms, LNC will dish out nine percent more than JP's Friday close of $50.79. LNC will come out of this deal as one of the largest public life insurance companies, offering a "broad, balanced product mix" of retirement income, fixed and variable- asset protection, accumulation and transfer products and other investments. The Philadelphia-based insurer expects the deal to close in the first quarter of 2006 and add to earnings during the first year .

Most-Active Options Update

At 1:42 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,304.0) has tacked on 0.11 percent. The S&P 500 Index (SPX - 1,193.69) is down 0.18 percent, and the Nasdaq Composite (COMP - 2,090.2) has declined 0.01 percent. At 1:43 p.m. Eastern time, 1,943,567 calls have changed hands compared to 1,636,773 puts, equaling a single-day put/call volume ratio of 0.84. The CBOE's equity put/call volume ratio weighed in at 0.85.

Analog Devices

According to Hoover's, Analog Devices (NYSE:ADI) is a leading maker of analog (linear and mixed-signal) and digital integrated circuits, including digital signal processors. Its linear integrated circuits translate real-world phenomena such as pressure, temperature, and sound into digital signals. ADI's thousands of chip designs are used in industrial applications, medical and scientific instrumentation, communications equipment, computers, and consumer electronics devices.

The security is seeing some brisk call trading this afternoon. The equity's November 35 call has had more than 10,000 contracts cross the tape on open interest of 6,643. At 9:47 a.m. Eastern time, a block of 2,416 contracts changed hands at 0.90, which was between the bid and ask prices. A block of 2,500 contracts also traded at 0.90 (between the bid and ask) at 10:41 a.m. Another block of 2,500 crossed the tape at 1:14 p.m. at an ask price of 0.90, indicating that contracts were most likely purchased.

Overall, options speculators have been rather optimistic. The equity's Schaeffer's put/call open interest ratio has dropped to 0.27, which is lower than all but four percent of those taken during the past 52 weeks. Short sellers have also unloaded their bearish bets. In September, the number of ADI shares sold short dropped five percent to an annual low of 7.2 million. At the stock's average daily trading volume, it would take less than three days to buy back these pessimistic positions. Such a paltry accumulation of bearish bets reduces the chances of the stock benefiting from a short-covering rally.

Wall Street is also smitten with the tech company. Zacks reports that nine of the 15 analysts following ADI rate it a "buy" or better. Any downgrades from this optimistic group could spell trouble for the shares.

Technically speaking, the stock has underperformed the tech-rich Nasdaq Composite (COMP) on a monthly basis since May 2004. In fact, the security has shed more than 19 percent since its July 14 peak of 41.40. Furthermore, the equity has struggled with resistance at its 10-month and 20-month moving averages, which it has not logged a monthly above since June 2004.

This combination of technical weakness and lingering optimism has earned the security a Schaeffer's Equity Scorecard ranking of 2.0 out of 10. Such a low ranking indicates that the shares may still have additional downside as this optimism unwind in the form of fresh selling pressure.

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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 .