apr 30 – 32.5 p/sprd vs 34.00 d=10 sax sld 20,000 @ .75 , x=all

Diebold (DBD) is seeing 21 times its normal daily traidng volume in the options market, with most of the action in the May 30 and May 25 puts. The activity seems to be part of bearish put spreads, or buying the May 30s for a $1.00 and selling the 25s for 20 cents a contract.

Shares of Merrill Lynch (MER) are trying to battle back from an early sell-off that was inspired by a JP Morgan earnings estimate revision. JPM now expects Merrill to post $2.75 for the fiscal year and a 68-cent loss for the first quarter, compared to an ambitious previous estimate of $5.00 and $1.05, respectively. After sinking to a low of $46.55 in early trading, MER is down 92 cents to $47.46. Put volume (45,000 contracts) is outpacing call volume by a margin of three-to-one and implied volatility is higher. Vol in the April at-the-money options is back in the mid-90s, compared to 58 percent for the October puts and calls.

Urban Outfitters (URBN) hit a new 52-week high yesterday, but the stock is down 63 cents to $31.88 today and volume is running three times greater than normal in the options market. Most of the action is selling of June 35 calls. Sentiment is 96 percent bearish.

Valero (VLO) continues to see action. The stock is down 70 cents to $49.38 on disappointing earnings guidance (see /color VLO for details). However, sentiment is leaning on the bullish side (43 percent) and the day?s most actives, the June 50 puts, are being sold in early trading. Hearing 11,000 contracts sold to open.

The Retail HOLDRS (RTH) are displaying relative weakness ahead of consumer confidence data. With the S&P 500 (.SPX) up three points in early trading, RTH is off 56 cents to $95.23 a share, with modest buying interest seen in RTH April puts and calls. Expectations are for a poor showing from the confidence report. Economists expect a decline to 73.4 in March, down from 75 the month before. Bonds are holding steady ahead of the data (due out in 10 min.), with the benchmark ten year Treasury up 7/32nd. The dollar, meanwhile, is giving some back on the euro (1.5568) and lower on the yen as well (100.21).

Vertical spreads in the April 50 and 52.5 calls were bought early in the day, as Valero (VLO) shook off early weakness and moved into positive territory. The stock is up 10 cents to $50.14 despite cautious first quarter earnings guidance. Valero now expects 10 to 35 cents a share for the quarter, compared to previous estimates of $1.17. Lehman says the degree of the miss is a surprise and that business conditions might be worse than previous indications suggest.

Shifting Sentiment. The CBOE Volatility Index (.VIX) finished the session yesterday at 25.73 and its lowest close since March 5. The Fear Gauge is now well below last Monday’s intra-day high of 35.60. Other indicators confirm that sentiment has seen a rather substantial shift over the past few days. The ISE Sentiment Index [ISEE], which tracks call purchases divided by put purchases, multiplied by 100, rose to 115 yesterday and its best levels since February 11. The total put-to-call ratio, for trading across all exchanges, fell to .79 yesterday and its lowest levels since February 1.

Geron Corp. (GERN) options are seeing three times their normal average daily volume and shares are up 10 percent to $4.78 in afternoon trading Monday. Most of the action is in GERN calls, with 3,138 contracts and only 292 puts trading in the day. There is no company specific news to explain the strength today, but stem cell stocks (STEM, ASTM) are higher after Bloomberg reported over the weekend that mice with a version of Parkinson’s had been cured with brain cells made from cloning their own skin cells. The findings were published yesterday in Nature Medicine and “offer a glimpse into how the cloning technique might one day be used to develop therapies, as opposed to making copies of individuals”

Sirius Satellite Radio (SIRI) calls are seeing heavy trading, as investors react to news that its merger with XM Satellite (XMSR) received US antitrust approval. Shares are up 23 cents to $3.13 and more than 70,000 SIRI calls have traded, compared to just 2,261 puts. XMSR is also seeing active trading, with total volume in the options market running two times normal. XMSR is up $2.24 to $14.18. The deal must also clear the FCC.