Impressive burst of put buying in SO just after 3pm, as August 35 puts were swept on numerous exchanges for $1.05, making total volume nearly 6000 contracts on the day

Xilinx (XLNX) calls are seeing some buying interest Monday. Shares are up 24 cents to $25.08 and 8,580 of the June 25 calls have traded, with 100 percent hitting on the ask. Directional sentiment according to today’s total volume is 92 percent bullish. The stock came under pressure last Thursday on disappointing earnings news. No obvious company specific news today.

The CBOE Volatility Index (.VIX) is drifting to its lows of the trading session, down .13 to 19.46, but should soon find a floor ahead of important event risk throughout the remainder of the week. The economic calendar is chock full of market moving data, including monthly payroll data on Friday. A first peek at the April jobs situation comes courtesy ADP on Wednesday. GDP numbers, Chicago PMI, energy inventory data, and the FOMC announcement on rates are also slated for Wednesday. Consumer confidence data on tap tomorrow.

The PHLX Japanese Yen US Dollar Settled Trust (.XDN) is seeing four times its normal trading volume, with active trading in the June and September put options. The fund is holding steady after three consecutive days of losses, as the dollar rallied Wednesday through Friday of last week. Today, 7,000 of the XDN September 85.5 puts, todays most actives, were being bought to open. The June 100.5 and 97.5 puts were hitting mostly on the bid side. After seeing gains early, the dollar was recently trading down .05 to 104.35 on the yen. Cosnequently, XDN is up 7 cents to $95.82 a share.

Yahoo (YHOO) calls are seeing early action Monday. Bloomberg reported that, after Yahoo let the merger deadline pass without agreeing to a deal, Microsofts Balmer is weighing the possibility of fighting to oust Yahoos Board and pave the way for a takeover. The offer expired over the weekend. Meanwhile, Reuters noted that Google (GOOG) thinks that regulators would not move to bar a potential business deal with Yahoo because it falls short of an outright merger. It would be non-exclusive. 18,000 YHOO calls have traded, more than double the number of puts. With the stock down 10 cents to $26.70, most of the action is in the May and June 30 calls.

Ford Motor (F) June 8 calls are todays second most actively traded contract following reports that Tracinda announced a cash tender offer for up to 20 million Ford shares at a price of $8.50, or a 13.3 percent premium to Fridays closing price.

Bear Stearns (BSC) implied volatility is coming down following news the company will, on May 29, hold a shareholder meeting to consider approval and adoption of the merger with JP Morgan. IV of at-the-money options has gapped down 33 percent this morning.

Continental Airlines (CAL) calls are seeing a modest increase in interest after Reuters reported that the company is in advanced talks with United Airlines (UAUA). Meanwhile, Reuters is also reporting that AMR (AMR) is in early stage merger talks with US Airways (LCC).

Zzzzzz. The CBOE Volatility Index (.VIX) is drifting lower as the afternoon yields a few hours of uninspired trade. The major averages are mixed, with weakness in the Dow and the NASDAQ, but modest gains for the S&P 500. VIX is down .26 to 19.80 and possibly set to close below 20 for the first time in 2008. The “fear gauge” has been drifting lower this week, as risk perceptions ease amid relatively upbeat earnings news (well, not as bad as feared). Meanwhile, crude oil continues to run higher, up $2.44 to $118.50, but that news seems to be getting little play with more focus on the rallying buck. After breaking through 1.60 on the euro Tuesday, the dollar has seen three days of green and hit a low today of 1.554 earlier today.

The Select Sector Financials (XLF) June 24 puts are the most actively traded options contract today. 55,700 contracts have traded thus far, with almost 80 percent on the offer. The sector is showing relative strength. Citi (C), American Express (AXP), and JP Morgan (JPM) are helping the Dow. The XLF, which holds all of the financial-related components of the S&P 500, is up 13 cents to $26.58 and towards the upper end of its two-week range.