Schaeffer's Midday Options Update Features Boeing, General Motors, Caterpillar, and Citigroup.

CINCINNATI -- Today's Schaeffer's Midday Options Update features Boeing (NYSE:BA), General Motors (NYSE:GM), Caterpillar (NYSE:CAT), and Citigroup (NYSE:C). 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: Citigroup Banking on Success

In midday action, stocks are on the rise for the third consecutive day. The Street liked the April wholesale figures, which showed a 1.5-percent rise in sales, marking the largest gain in 13 months. Economists had predicted a more modest 0.5-percent increase. But the day is turning out to be a quiet one, as investors wonder what Federal Reserve Chairman Alan Greenspan will say when he addresses Congress tomorrow.

Jumbo Demand

Amid anxiety over struggling airlines and competition from Airbus, Boeing (NYSE:BA) released its 2005 Current Market Outlook today in London, and the news sounds good. "The long-term demand for new airplanes is going to remain very strong over the next 20 years," a BA Vice President commented. The report states that "Almost 26,000 passenger and cargo airplanes will be delivered over the next 20 years. About 60 percent of the deliveries will be single-aisle jets, making up about 39 percent of the 2.1 trillion delivery dollars (in 2004 numbers)." BA stock has gained almost 150 percent over the past two years, and it has been on a short-term run since April 19, on support of its 10-day and 20-day moving averages.

For the First Time in History

"For the first time in history, everyone in America gets a GM Employee Discount," is one of the week's major ad slogans. One way or another, General Motors (NYSE:GM) features in the news almost every day now. Credit Suisse First Boston reiterated its rating on the automaker to "outperform" today, a rather bold opinion, but one with which Kirk Kerkorian would probably concur. His Tracinda Corporation reported that its stake in GM is now 7.2 percent. On May 3, you may remember, news broke that Tracinda had offered to buy up to 28 million shares at $31 each. By the 5 p.m. deadline yesterday, Kerkorian had acquired about 18.9 million shares. If the offer had been fully subscribed, he would have brought his total holding to 8.84 percent. Meanwhile, GM has announced major layoffs in an attempt to reduce costs and utilize production capacity to the full.

It's Official: Caterpillars are Overweight

Prudential Equity Group upgraded its rating on Caterpillar (NYSE:CAT) to "overweight" from "neutral" this morning, and the stock duly rose. Prudential cited continued strong unit volume demand for most CAT equipment and expects strong margin improvement. The broker increased its target for the stock to $120 from $100. News also came through that CAT stock will undergo a 2-for-1 split, and the company announced an increase in its quarterly dividend of 22 percent to 50 cents per share (on a pre-split basis).

Most-Active Options Update

At 1:20 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,527.0) was up 0.42 percent, while the S&P 500 Index (SPX - 1200.33) gained 0.26 percent. The tech-heavy Nasdaq Composite (COMP - 2,068.9) added 0.08 percent. At 1:20 p.m., 1,514,877 calls and 1,093,706 puts had changed hands, for a composite put/call ratio (across all six options exchanges) of 0.72. The CBOE put/call volume ratio for equity options stood at 0.81.

Citigroup

Citigroup (NYSE:C) is our featured stock today thanks to some heavy put activity at the July 45 strike. Hoovers describes C as "the world's largest financial services firm" and "the first domestic bank with more than $1 trillion in assets," leaving out the awkward fact that the stock price has actually dropped since July 2000.

Since the beginning of April, C has been on a run, gaining more than nine percent. Nevertheless, it is still down on the year, and I can see a potential resistance at the 48 level, and definite resistance at 50. Face it, the all-time high set during August of 2000, is only 55.14, and I don't see that being erased from the record books any time soon.

Yet, C is much loved, and the Street ratings are outrageously optimistic. According to Zacks, 18 analysts rate the stock, and I see one "hold," four "buy" ratings, and 11 "strong buys." I'm supposed to throw in the adjective "rare" when I mention a "strong buy" but I just can't bring myself to do that on this occasion.

Short interest on C is tiny, with only 0.58 percent of the stock's float sold short. The short-interest ratio is 2.01 days to cover, which means that those shorted shares would take 2.01 days to buy back at the current average monthly trading volume. This tells us that there are very few pessimists, and without pessimists there is unlikely to be money waiting on the sidelines. If all the willing buyers are already committed to the stock, who's left to buy? What's more, the short interest actually decreased by 2.24 percent last month, suggesting that optimism is still growing.

Moving on to the options enthusiasts, we finally see a little pessimism, though not much. The Schaeffer's put/call open interest ratio (SOIR) for C is 1.09, indicating that puts outnumber calls very slightly in the front three months of options. This is more pessimistic than 79 percent of readings taken over the past year.

What does this tell us about the future for this stock? Remember, as contrarians we look for one of the following situations:

--Fundamental and technical strength amid pessimistic sentiment. This is a signal that upside movement could be on the way if any significant good news comes along.

--Fundamental and technical weakness amid optimistic sentiment. This is a signal that downside movement could be on the way if any significant bad news comes along.

That second bullet point really seems to fit C. If any bad news came along to shake confidence, the path of least resistance would be to the downside. On our Schaeffer's Equity Scorecard, the stock is rated today at 3.0 out of 10.

Click on the following link to see the Schaeffer's Equity Scorecard and Monthly Chart of C since June 2000: http://www.schaeffersresearch.com/wire?ID=13356 .

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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 .