Elan (ELN) is the subject of some spread trading today. Shares are up 9 cents to $25.29 and 5,000 of the October 27/October 40 call spreads were sold for $3.40 a contract. It appears to be a bearish spread, perhaps on the view that a significant move above $27.00 between now and October expiration is unlikely. Earnings expected in mid to late-July.

Trader Tip. The ticker symbol for the European Style S&P 100 Index (.XEO) is OEX backwards. The .OEX is the ticker symbol for the S&P 100 Index (.OEX). What’s the difference? OEX options are one of the few cash indexes that settle American Style, which means that exercise and assignment can happen at any time prior to expiration. The XEO settle European style, which means that assignment is only a risk at expiration. Exercise isn’t possible prior to expiration.

CIT Group (CIT) is seeing four times its normal trading volume on large block trades in the January contract. 12,900 of the January 20 calls traded for 55 cents a contract, while the same number of January 10 puts traded for $2.35. It appears to be a large call buy along with put sale, which would reflect very bullish trading in CIT. However, it is probably part of a risk reversal trade (see The Lingo for details). In any case, the stock is down 43 cents to $10.50 a share a day after Moody’s cut its investment grade rating to Baa1 from A3. The credit rating agency says CIT is facing difficult market conditions amid disappearing liquidity in the financial markets. Today, CIT responded by saying it has made “significant progress” in bolstering its balance sheet and liquidity is improving. The company disagrees with the downgrade.

Masco (MAS) is seeing bullish trading for a third day. The action started on Wednesday and coincided with news that the company’s chairman disclosed purchases of 300,000 MAS shares between $17.80 and $17.99 a share. Today, the stock is up 4 cents to $18.62 and 9,000 calls have traded, compared to only 29 puts. The October 25s are the most actives. 6,059 have traded, with 100 percent trading on the ask side.

Monster Worldwide (MNST) is seeing a noticable increase in speculative call buying. The stock is up 22 cents to $24.59 and the action is focused on the June 25 and June 30 call options. In all, 5,300 contracts have traded, compared to just 50 put options. Trade Alert data shows directional sentiment based on today’s total volume as 83 percent bullish.

Marvell Technology (MRVL) is among the most actively traded names Friday morning. The stock is up $3.00 to $17.08 on the heels of an upbeat earnings report. 31,000 calls has traded, roughly double the number of put options. For the quarter, MRVL posted 24 cents a share, compared to a 9-cent loss a year ago. Revenues rose 27 percent to $804.1 million. Analysts were looking for 13 cents on $783.56 million. Cost cuts and better than expected wireless device sales helped drive the strong results. The Microchip design company provides chips to some of the most popular wireless devices including iPhones and Blackberrys. Marvell is expected to announce its entry into the flash memory market next week.

Broadcom (BRCM) is seeing two times its normal trading volume on active trading in its June 27.5 call options, one of Thursday’s most actively traded options contracts. More than 43,000 contracts have traded, compared to open interest of 28,771. The stock is up 46 cents to $27.18 and it appears that large blocks of these calls were the subject of selling interest today, perhaps on the view that the stock will not make a substantial move above $27.50 a share between now and June option expiration, or in 22 days.

With 15 minutes remaining in the trading session, the CBOE Volatility Index (.VIX) is down .91 to 18.16, as risk perceptions fell along with crude oil prices. Crude is off $4.28 to $126.75 a barrel despite today’s US stockpile report that showed a much bigger than expected draw of 8.8 million barrel. The reaction in the energy markets might suggest that the recent run higher in crude is a bit overdone. The tone of the market is clearly less bullish. Meanwhile, in equities, the financials led early rally after first quarter GDP numbers showed the economy growing at a .9 percent annual rate, which was revised higher from the intial .6 percent reading. Bonds took the news hard and the yield on the benchmark ten-year Treasury bond is back above 4.1 percent, and its highest levels of 2008. The buck rallied (1.55 vs euro), and gold sold off (down $24.50 to $876 an ounce). Fear is falling.

Amylin (AMLN) calls are active on renewed takeover chatter. Now, as before (see /color AMLN), Eli Lilly (LLY) has been mentioned as the interested party. The two companies already have an existing relationship with respect to Byetta, an injectable diabetes drug. Shares are reacting to todays chatter, up $1.42 to $32.40 Call volume is outpacing put volume by a margin of more than five to one.

Large straddles trading in this Canadian telephone company today with 12,500 July 35 straddles bought on the NYSE for a net $4.25 followed by a sale of 20,000 June 35 straddles on the CBOE for $2.75. Stock has been very volatile over the past week on legal issues and today’s flow appears to be a seller taking advantage of the short term implied volatility spike by selling June options. July straddle might possibly close a short option position from last week and signify a bet that the stock will settle back to typical realized volatility in the 30% range.