Virgin Media (VMED, news, chart) is seeing bearish order flow. Shares are down 32 cents to $11.06. In the options market, volume is running 19 times the usual, with 37,000 puts and just 3 calls trading on the day. Most of the volume is tied to spread trading in the December puts. At 10:30 Eastern time, 15,000 of the 10s traded offerside for $1.00 a contract and the same number of 7.5s traded bidside for 27 cents. With open interest of 2,000 contracts in the 7.5s and 1,127 in the 10s, the action appears to be the opening of bearish put spreads. In addition, another 4,300 of teh March 10 puts traded, with 95 percent on the offer. Buying also being seen in the March 12.5, January 10, October 10, March 7.5 and January 12.5 puts. There is no news to explain the bearish sentiment towards VMED Friday. A regulatory filing released yesterday showed SRM Global Fund cut its ownership stake in the company to 4.04 percent from 7.88 precent, which came a day after the fun dcut its ownership to 7.88 pecent from 9.01 pecent. Fund now holds 13.2 million shares.

SIRF Technology (SIRF, news, chart) is seeing bullish order flow. The stock is up 27 cents to $2.37 on talk of a possible settlement with Broadcom (BRCM), according to Briefing. A judge ruled on August 8 that SIRF infringed on six Broadcom patents. In the options market, trading is picking up. 1,775 SIRF calls have traded, comared to just 21 puts. Buying is being seen in the January 5s, December 5s and December 2.5s.

Activity in US Tobacco (UST, news, chart) options picked up yesterday morning when the company unexpectedly pulled out of an analyst conference. Stock spiked several dollars on speculation that something might be brewing, and call buyers emerged, paying 95cents for several thousand Oct 60 calls when the stock was at $56.25. On the day a total of 27,000 calls traded, putting total option volume at 57 times normal. Today’s report in the NYTimes that MO may pay close to $70 for UST has the stock up 25% to 67.50, and the Oct 60 calls are trading around $8, a possible one-day gain of $2 million for that savvy buyer.

Genentech (DNA, news, chart) September 100 and 105 calls are seeing some action early in the day on talk of a possible higher bid. Recall that Roche has made an offer to buy the shares of Genentech it doesn’t already own for $89 a share. DNA is trading down 38 cents to $96.12, but well above the offering price on expectations of a higher bid. On August 14, Reuters reproted that 13 industry analysts expect a final offer price ranging from just under than $100 to $125, with an average view of $107.5 per share as a final offer.

The CBOE Volatility Index (.VIX) is down .06 to 23.97 despite a 7.4 point decline in the S&P 500. VIX, which normally rises during equity market declines, is easing now that important event risk (monthly payroll data) has passed. In addition, the economic and earnings calendar are light during the first three trading sessions next week, with only pending home sales data Tuesday carrying much market moving potential.

Contagion?

Financial Tsunami?

The top two trades during the first 30 minutes of Friday’s session involved blocks of Chesapeake (CHK, news, chart) call options. At 9:45 Eastern time, 9,250 of the October 45 calls traded offerside for $3.50 a contract while 9,250 of the 52.5s traded bidside for $1.00. With high open interest in both contracts, the action could be closing. However, it seems more likely that, with CHK trading down a nickel to $44.61, and just below the lower strike price, this was an order to buy the October 45/52.5 bull call spread for a net debit of $2.50. If so, the strategist is putting the debit at risk for the potential of making $5.00 should shares rally to $52.50 and or beyond by October options expiration.

Puts on the iShares Biotech Fund (IBB) were active Thursday. 9,500 contracts traded, more that 10 times the number of call options. Shares finished the session trading for $83.00. Open interest in the October 80s increased by 2,448 and in the September 80s, by 3,734. While some of that increase is possibly due to hedging or put buying amid ongoing volatility in the equity market, some of it might also be part of a calendar spread strategy. In afternoon trading Thursday, a block of 2,000 IBB October 80 puts traded offerside for $1.55 a contract on the PHLX. At the same time, another 2,000 of the September 80s traded midmarket for 55 cents. In this case, the strategist might be looking for some downside protection through October, but also expects IBB to stay above $80 between now and September expiration (14 days). Therefore, the calendar spread is bought for a net debit of $1.00 a contract and, for this trade to work, the biotech fund will hold above $80 over the next two weeks and then begin a move below $79.00 a share between September and October options expiration.

Costco (COST, news, chart) saw double its normal trading volume Thursday, with 21,000 puts and 10,000 calls traded on the session. The October 67.5 and 62.5 puts saw the biggest increases in open interest (3,248 and 6,831 contracts, respectively). This appears to be due to a substantial ratio spread that traded on the CBOE just before 15:00. In this trade, the strategist apparently bought the 67.5s for $2.65 and sold twice as many 62.5s for $1.05, (and did this 7,000 times total). COST was trading at $67.89 at the time and just above the higher strike price. If so, the strategist is bearish and was willing to pay 55 cents (per 1 x 2) for the potential of making $4.45 should Costco shares fall to $62.5 by October options expiration. Profit range is between $67.05 and $58.05, with substantial losses possible if shares fall below the profit zone.

iShares MSCI Taiwan ETF (EWT) saw three times normal trading volume Thursday, as the exchange-traded fund fell to a new 52-week low. EWT is down 35 percent since mid May and set to open lower again Friday after shares fell in Taiwan. The TAIEX Index slid 105.35 points, or 1.65 percent, to 6,307. In the options market Thursday, some players seemed to be betting on a rebound. 9,750 EWT calls traded on the day, compared to 1,075 puts. The December 13 and 15 calls were the most actives, with 8,300 contracts traded and 75 percent of that volume trading offerside.