Schaeffer's Midday Options Update Features General Motors, Citigroup, Northrop Grumman, Intel, and Eyetech Pharmaceuticals.

CINCINNATI -- Today's Schaeffer's Midday Options Update features General Motors (NYSE:GM), Citigroup (NYSE:C), Northrop Grumman (NYSE:NOC), Intel (Nasdaq:INTC), and Eyetech Pharmaceuticals (Nasdaq:EYET). 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: Eyetech's Future

Stocks were mostly lower this morning, with the Nasdaq Composite (COMP) leading the retreat, but the S&P 500 500 Index (SPX) tumbling as well. The Dow Jones Industrial Average (DJIA) managed to hold on to breakeven at first, supported by a spike in General Motors (NYSE:GM), but by lunchtime, even the Dow was firmly in the red.

Citigroup Still Grabbing the Headlines

Citigroup (NYSE:C) appears in this column for the third successive day. On Wednesday it was our featured stock thanks to some heavy put activity. Yesterday we noted that the firm named Damian M. Kozlowski as chief executive officer of C's private banking business, and as a new member of the bank's management committee. Today the firm is grabbing the headlines again, on news that it has agreed to pay $2 billion to settle class-action litigation related to investors who suffered billions of dollars in losses as a result of Enron's collapse.

Northrop Grumman Guidance Systems Working Fine

Northrop Grumman (NYSE:NOC) sees itself on track to meet the 2005 earnings forecast that it issued on April 28, of $3.70 to $3.85 per share. It expects to confirm the financial guidance at meetings it will hold in conjunction with the Paris Air Show. NOC also announced that it has received a contract valued at $200 million over five years to provide the National Aeronautics and Space Administration (NASA) with services to verify and validate software. This is by no means the first work for NASA that the group has undertaken. Long Island-based Grumman built the Lunar Module, the machine that set men on the moon.

Panic in Detroit Subsides a Little

Stocks in the Big-Three automakers are climbing today after GM heard that the United Auto Workers union told local leaders yesterday that it will not reopen its contract with GM before 2007, but may ask workers to shoulder more of the troubled auto maker's health-care costs. This news came from several people who attended the meeting, and we have yet to hear official confirmation.

Intel Growing Faster than Expected

Last night Intel (Nasdaq:INTC) lifted its second-quarter guidance for revenue to $9.1-$9.3 billion from its prior forecast for revenue of $8.6-$9.2 billion. The average analysts estimate was $8.99 billion. The chip maker noted that it has seen strong demand for notebook products, and expects gross margin percentages to increase to 57 percent from its prior view of 56 percent. INTC received at least six reiterations today, including "neutral," "equal weight," "buy," and "outperform," and Pipar Jaffray raised its price target for the stock to $32 from $30.

Most-Active Options Update

At 1:30 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,467.9) was down 0.64 percent, while the S&P 500 Index (SPX - 1194.45) lost 0.54 percent. The tech-heavy Nasdaq Composite (COMP - 2,058.5) lost 0.88 percent. At 1:30 p.m., 1,909,005 calls and 1,189,499 puts had changed hands, for a composite put/call ratio (across all six options exchanges) of 0.64. The CBOE put/call volume ratio for equity options stood at 0.62.

Eyetech Pharmaceuticals

Eyetech Pharmaceuticals (Nasdaq:EYET) is our featured stock today thanks to some heavy put activity at the July 10 strike. This pharma, headquartered in the famous New York City location of Times Square, has a clear vision, to develop drugs that combat eye diseases. Hoovers mentions that the firm partnered with Pfizer (PFE: sentiment, chart, options) to develop a drug called Macugen, a treatment for age-related macular degeneration, which found enough favor with the Food and Drug Administration to win itself fast-track status.

On May 24, the shares gapped down on news that rival Genentech (DNA) has a similar product offering. As a result, EYET received downgrades from brokerages and closed the day with a loss of something like half its value, and it has yet to show any signs of recovery.

What can we say about the future for this stock? According to Zacks, analyst ratings are pessimistic, with six cautious "holds," a "sell" and a "strong sell." For a declining stock, this seems appropriate. But the short sellers are not as numerous as you might expect, since the short-interest ratio is only 3.51 days to cover. We often see higher short interest than this on stocks that are doing well! This means that short sellers might be waiting on the sidelines, and may yet step in, adding downward pressure on the price. Furthermore, the short interest reduced by more than six percent last month, so short sellers are actually drifting away from EYET.

If the short sellers are less pessimistic than we might expect, what about the options players? They show some clear signs of optimism, pushing the Schaeffer's put/call open interest ratio (SOIR) for the stock down to 0.67, a figure that lies in the 25th percentile, and tells us that sentiment lies toward the optimistic end of the spectrum.

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 might give investors reason for discomfort. For a stock that has lost about 77 percent of its value since December 20 last year, and which is still in decline, there looks to be too much optimism. The Schaeffer's Equity Scorecard reading for EYET is 2.0 out of 10.0, indicating that the path of least resistance is still to the downside.

Click on the following link to see the Schaeffer's Equity Scorecard and Weekly Chart of EYET since January 2004:

http://www.schaeffersresearch.com/wire?ID=13380 .

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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 .