Schaeffer's Midday Options Update Features General Motors, Verizon Communications, Motorola, Lucent Technologies, and Intel.

CINCINNATI -- Today's Schaeffer's Midday Options Update features General Motors (NYSE:GM), Verizon Communications (NYSE:VZ), Motorola (NYSE:MOT), Lucent Technologies (NYSE:LU), and Intel (NASDAQ:INTC). 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=PRMOU12M&PAGE=1 .

Options Update: Intel Enters into a Joint Venture

According to the Commerce Department, outlays for U.S. construction projects increased 0.8 percent in February. Economists had expected a gain of roughly 0.6 percent. January's outlays were revised to show a gain of 0.4 percent compared to the originally estimated gain of 0.2 percent. Since last February, construction outlays have increased 7.4 percent at a seasonally adjusted annual rate of $1.19 trillion. In other home news, pending home sales fell in February and came in lower than a year ago. This news indicates that the housing market is stabilizing. The pending home-sales index dropped 0.8 percent in February to 117.7. Year-over-year pending home sales dropped 5.2 percent.

The Institute for Supply Management (ISM) reported that its index dropped to 55.2 percent in March from February's reading of 56.7 percent. Economists were expecting the index to rise to 57.3 for the month. Initially, the stock market advanced on the belief that the moderation may allow the Federal Reserve Bank to shelve interest-rate hikes sooner rather than later. The price index increased to 66.5 percent in March, which is its highest level since November.

General Motors to Sell a Stake in GMAC 

This morning, General Motors (NYSE:GM) announced that it will sell a 51-percent stake in General Motors Acceptance Corp. (GMAC) to an investor group led by Cerberus Capital Management. GMAC is GM's most profitable unit and the automaker expects to generate roughly $14 billion in cash from the deal during the next three years. This sale will give GM a boost in liquidity at a time when it has agreed to a turnaround plan involving the buyout of union employees. Chief Executive Rick Wagoner said that this agreement "is another important milestone in the turnaround of General Motors."

VZ Does It

This morning, Verizon Communications (NYSE:VZ) announced that it will sell its Caribbean and Latin American telecommunications operations. The sale will take place in three transactions valued at $3.7 billion. According to the report, the purchasers include America Movil (AMX) and Telefonos de Mexico (TMX).

Motorola Gives Up Control

Reportedly, Motorola (NYSE:MOT) has agreed to sell its automotive electronics business for roughly $1 billion in cash to German automotive company Continental AG. Continental will receive MOT's controls, sensor, interior electronics, and telematics businesses; which will be integrated into its Automotive Systems division. After clearing the customary closing and regulatory conditions, the transaction is expected to close in the first half of 2006.

Not-So-Silent Lucent-ity

New surfaced this morning that France's Alcatel SA (ALA) agreed to acquire Lucent Technologies (NYSE:LU) for $13.45 billion in stock. This deal increases ALA's share of the U.S. market and ranks it among the world's top two producers of communications equipment. On Friday, LU closed at $3.05 per share, today's deal values it at a slightly lower $3.01 per share (which is seven percent greater than LU's price the day before the merger talks were revealed). LU shareholders will own 40 percent of the combined company, and will receive 0.1952 shares of an ALA American Depositary Receipt for each share of LU. The two companies will have equal representation on the board and will eliminate roughly 8,800 jobs in the two years after the transaction closes (in approximately six to 12 months).

Most-Active Options Update

At 1:27 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 11,230.1) is up 1.08 percent. The S&P 500 Index (SPX - 1,307.17) has added 0.96 percent, and the Nasdaq Composite (COMP - 2,351.1) has tacked on 0.48 percent. At 1:25 p.m. Eastern time, 2,118,407 calls have changed hands compared to 1,505,000 puts, equaling a single-day put/call volume ratio of 0.71. The CBOE's equity put/call volume ratio weighed in at 0.59.

Intel

In a day with heavy news on the merger and acquisition front, Intel (NASDAQ:INTC) stepped into the fray announcing that it is forming a wireless operator joint venture with Pipex Communications. INTC will contribute $25 million to the venture, which will deploy WiMAX technology for long-distance Internet access. This venture will kick off initially in London and Manchester in 2007, then will be rolled out to other U.K. population centers.

INTC's April 22.50 call (NQ DX) and its May 20 put (NQ QD) have both seen decent action this morning. In the April and May series, the 20 strike is far and away the site of peak put open interest with roughly 170,000 contracts. However, this strike is also the site of peak call open interest with roughly 187,000 contracts, which could act as resistance.

Technically, INTC has not performed well of late. The equity finished March below the 20 level, which was the first time that happened in nearly three years. While the shares have rallied a bit today, that 20 level is looking like a rather solid level of resistance (INTC's intraday high currently stands at 19.70). Furthermore, INTC's 10-month moving average is poised to make an attempt at a bearish crossover of its 20-month moving average. More often than not, a bearish cross signals a continued downtrend.

The picture doesn't get any prettier when we dial up a weekly chart for INTC. Again, it has been roughly three years since INTC finished a week below the 20 level, but that streak came to an end the week of March 10. This move should be a bit disconcerting to INTC bulls, as this was the site of potential put-related support and is now the site of peak call-related resistance. If this resistance isn't enough, the stock's 10-week moving average is descending into the picture. The shares have not battled above this trendline's resistance since moving below it after the first week of January 2006.

Let's look at the sentiment backdrop of INTC:

--Percent of analysts tracked by Zacks who rate the stock with a "buy": 50%

--Number of analysts tracked by Zacks: 32

--Short interest as a percent of float: 1.27

--Short-interest ratio: 0.79

--Schaeffer's put/call open interest ratio (SOIR): 0.60

--SOIR percent rank: 54%

--Overall Schaeffer's Equity Scorecard rating: 2.0

My issue with this sentiment backdrop is two-fold. The first facet that I do not like is that there is little in the way of short-covering support for the shares. In fact, short interest increased a hint more than 35 percent in the past month, and it couldn't brighten the picture at all. It would take less than one day to cover the 72 million shorted INTC shares. What's more, this accumulation accounts for less than 1.5 percent of the equity's total float.

The second issue I have comes from analyst rankings. According to Zacks, 16 of the 32 analysts covering INTC rate it a "buy" or better. Should this group have a change of heart, the downside pressure could be sizeable. What really concerns me is that 15 of the remaining analysts rate it a "hold." The trip from a "hold" to a "buy" is sometimes assumed and may have little effect, but a drop from "hold" to "sell" could add to the downside pressure.

Monthly chart of INTC Since January 2000 With 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=157000 .

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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 .