Visa (V) call options are seeing heavy trading. The stock is up $3.66 to 85.58 and almost 100,000 calls have traded, compared to 15,000 puts. The gains in the stock and the surge in call volume appears to be in reaction to gains in Mastercard (MA). Shares ran higher midday Tuesday during its Analyst day.

Defensive trading is being seen in the iShares Long-Term Government Bond fund (TLT) amid another round of selling in the Treasury market. The benchmark ten-year Treasury note is down 26/32nd and off 1 1/2 points over the past two days. It yield has risen from 3.9 percent to 4.1 percent, a five month high. Bonds are falling on inflation jitters and a rebound in the equity markets. Now, traders are on the defensinve and 43,000 TLT puts have traded today, compared to just 1,850 call options. More than half of todays trade is in the July 88 puts, where 97 percent of the action is on the offer.

The Select Sector Basic Materials (XLB) fund is seeing three times its normal trading volume amid increasing activity in the June put options. 82,000 puts have traded in all, compared to 14,000 call options. XLB, which is dominated by chemical and metals companies like Monsanto (MON), Freeport McMoran (FCX), DuPont (DD), Dow Chemal (DOW), and Alcoa (AA), is underperforming today, down 37 cents to $44.39 a share. The decline comes amid weakness in some commodities markets including gold. The yellow metal was recently down $23.80 to $876.30 an ounce.

Humana (HUM) continues to see action. Yesterday, shares and options were active on chatter Aetna (AET) is eyeing the company. Today, HUM is up $1.35 to $51.48 and volume in the options market is running three times the usual. Most of the activity is confined to spread trading in the July 50/55 call spread and the November 50/55 call spread.

Hershey Company (HSY) is seeing two times its normal trading volume on renewed takeover chatter. The stock rallied on Tuesday amid talks of a possible strategic alliance with Nestle. After a pullback yesterday, HSY is up another $1.38 to $40.22 and 10,000 calls have traded, compared to 3,700 puts. Speculative call buying is being seen in the June and July 45 call options. The July 40s are the most actives. More than 5,000 contracts have traded, with some players opening new psoitoins and others closing on profit taking.

Masco (MAS) options are seeing volume for a second day. Volume is running two times the usual. Yesterday, more than 4,000 of the Jan 25 calls traded after the companys chairman disclosed a purchase of 300,000 shares between $17.80 and $17.99. Today, the stock is trading down 11 cents to $18.20 and the October 25 calls are active. 6,400 contracts have traded, compared to open interest of 583, with 100 percent hitting on the offer.

The CBOE Volatility Index (.VIX) is down .31 to 19.33 and near the lows of the day after the market was able to shake off some energy-related jitters and make a run back towards session highs. The day was a choppy one, but volatility was tame, with the S&P 500 (.SPX) trading in a narrow 12 point range. There was a noticable uptick in M&A chatter, with a variety of names including AKAM, EXPE, BRL, HUM, and BYD seeing a jump in call volume on takeover talk. Crude oil overcame early weakness to add $1.92 to $130.77 a barrel. Gold is down $8.00 to $900 an ounce. The buck bounced back to 104.60 on the yen and to 1.565 on the European currency. The benchmark ten-year Treasury bond slid 3/4 of a point, bringing its yield back up to 4 percent.

Bank of America (BAC) is seeing two times its normal trading volume, with active trading in short-term call options. A total of 75,000 calls have traded, compared to 59,000 puts. The June 35s are the most actives. 38,000 have traded, with 63 percent trading on the bid. Although the stock is down 73 cents to $33.44, some investors seem to be leaning on the bullish side of the trade following several news items today: 1) the bank has increased its stake in China Construction Bank, 2) Countrywide CEO David Sambol will step down once the merger is complete, 3) BAC has announced a new consumer banking management structure and 4) Countrywide will settle lawsuits against shareholders who claimed the terms of its merger with BAC were unfair.

Archer Daniels Midland (ADM) puts are seeing an uptick in volume, as shares slide $1.80 towards the lows of the trading session ($40.14). The stock fell and players bought put options on news the company will sell 35 million equity units worth a total of $2 billion. The June 40 puts are the most actives. 4,900 contracts have traded, with 80 percent of that trading on the offer. Directional sentiment, as indicated by todays total options volume is 67 percent bearish.

Ligand Pharmaceuticals (LGND) options are seeing 49 times its average volume, as shares sink $1.36 to $2.23. Some players are bracing for more pain to come with active buying seen in the June, July, and August 2.5 put options. Meanwhile, todays top trade, 1,550 of the November 2.5 calls was sold for 40 cents early in the trading day. The weakness in the share price and bearish trading in the options market comes after an FDA advisory committee said that GlaxoSmithKlines blood clotting disorder drug, which it developed with partner Ligand, is no more effective than a Placebo. LGND is trading at new lows on the news.