UST (NYSE: UST) volatility Flat; UST down 6%; Altria Group (NYSE: MO) testing Marlboro Moist Smokeless tobacco. UST, a leading producer and marketer of moist smokeless tobacco products (Skoal, Copenhagen), is recently down $3.06 to $48.91. MO announced the introduction of Marlboro Moist Smokeless tobacco into test market. MO had been frequently mentioned as possibly interested in UST. UST has a market cap of $7.7 billion with quarterly March 2007 total revenue of $447 million. UST September option implied volatility of 26 is near its 26-week average of 23 according to Track Data, suggesting non-directional price risk.

Forest Labs (NYSE: FRX) volatility Elevated on patent challenge Appeal. FRX, a U.S. based pharmaceutical company, is recently down .48 to $37.74. FRX's Lexapro, an antidepressant accounting for 66% of FRX total revenue, is facing a patent challenge appeal.Buckingham Research says "LXP patent challenge appeal which we would expect to be resolved from an appellate decision over the next few months (we expect FRX to prevail in this case)." FRX call option volume of 9,195 contracts compares to put volume of 4,571 contracts. FRX September option implied volatility of 70 is above its 26-week average of 33 according to Track Data, suggesting larger price risks.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MAJOR PAPERS:

• According to an internal email, Countrywide Financial Corporation (NYSE: CFC) has begun laying off employees involved in originating loans, reported the Wall Street Journal (subscription required).

OTHER PAPERS:

• The New York Times reported that the market is having doubts about the deal for the Tribune Company (NYSE: TRB), despite confidence from those involved that the deal will be done.
• Just weeks after acquiring its first pension scheme, Citigroup Incorporated (NYSE: C) is looking for another; Citi is said to be looking at a European scheme that is worth about £200M, reported the U.K. Times.
• While the rugged cowboy has been the face for Altria Group Inc's (NYSE: MO) Philip Morris for many years now, the global brand could be fading, according to the U.K. Times.
• American Express Company (NYSE: AXP) has put its private banking business, which could be worth $400M-$500M, up for sale, according to the U.K. Times.
• The Telegraph reported that a subsidiary of HSBC Holdings (NYSE: HBC), the Hong Kong and Shanghai Banking Corporation, is in talks to buy a 51% controlling stake in Korea Exchange Bank, which would cost in the region of £2.5B.

Shares of Altria Group, Inc. (NYSE: MO) fell today after the cigarette maker disappointed Wall Street, missing analysts' expectations and cutting its earnings guidance for the year to $4.05 to $4.10 per share down from April's $4.20 to $4.25 level.

Earnings per share were $1.05, down from $1.29 last year and under the $1.13 of First Call estimates. Revenues grew almost 10% year-over-year to $18.8 billion, the company said. Bloomberg News notes that the U.S. business is declining at a faster rate than analysts expected.

Simultaneously, the company is acquiring a 30% stake in a Mexican tobacco business from Grupo Carso. CFO Dinyar S. Devitre noted that the international businesses are ready to be split up, although no timing has been given. And who said smoking is a dead-end business? Altria shares are actually up since the company completed its Kraft Foods (NYSE: KFT) spin-off, and shareholders still have the likely spin-off of Phillip Morris International coming down the pipe.

Many investors would have thought the company's future was in the ashtray, but the company has defied the skeptics, even though everyone knows that its products kill. Actually, shares are up considerably over the last 10-years and it has paid significant dividends. Even the states don't want the company to entirely disappear because cigarettes are responsible for generating huge amounts of tax revenue.

Investors may not all be tobacco fans, but they probably all will say "Keep Smoking!, thanks for the money."

Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in the companies he covers.

The Philip Morris USA unit of Altria Group (NYSE: MO) has decided to launch a smokeless product under the Marlboro name. It is a substantial risk.

Forty percent of the cigarettes sold (WSJ--subscription required) in the U.S. are Marlboros. The brand still evokes the tough cowboys who used to ride through its TV commercials. They rode the open American range, they were independent, and when they died of lung cancer, it was off-screen.

The new product can be used in offices and restaurants since it does not violate any of the smoking laws enacted in recent years. The product is not "wet" like certain other forms of smokeless tobacco. The users are not likely to spit juice all over the floor. Hitting a spitoon is a lost art.

But, smokeless tobacco can cause mouth and throat cancer, a particularly grim way to die.

Sucking nicotine in through a little pouch placed in the mouth would seem to erode the strong cowboy image. Of course, it will kill you all the same.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Oh boy, oh boy. This is not what anyone wanted to hear, I'm sure; not investors, not smokers and definitely not the general public. But we did hear it. A research from Harvard University's School of Public Health found that manufacturers increased the level of nicotine in major-brand cigarettes by 11% between 1997 and 2005.

Regardless of how you look at it or how the manufacturers achieved it, the end result is the same -- far more addictive cigarettes.

While a similar study by Massachusetts Department of Public Health with similar results was already published in the summer, cigarette companies complained about the methods. The Harvard study took cigarette makers complaints into account and still confirmed the state's results. The average rate of nicotine increase was 1.1% per year from 1997 to 2005.

And which brands, might you ask, have the highest level of nicotine? It seems that Camel and Doral, made by R.J. Reynolds Tobacco Holdings, and Newport, made by Loews Corp (NYSE:LTR) Carolina Group's (NYSE:CG) Lorillard Tobacco have the highest levels. Marlboro, the best-selling brand made by Altria Group Inc.'s (NYSE:MO) subsidiary Philip Morris USA , showed no overall change.

Gregory Connolly, director of the Harvard School of Public Health's Tobacco Control Research Program, did say: "Our findings call into serious question whether the tobacco industry has changed at all in its pursuit of addicting smokers since signing the Master Settlement Agreement."

Now, if I'm an Altria shareholder, am I happy Phillip Morris didn't increase nicotine in its Marlboros, or am I unhappy the company isn't doing more (like its rivals) to hook smokers? Well, Altria shares closed down 0.7% while Carolina Group's shares closed up 0.9% today. Perhaps it's just a coincidence.