JP Morgan (JPM, news, chart, volatility) puts were active after Credit Suisse cut its earnings estimates and price targets on the stock Wednesday. Shares overcame early weakness to close up 85 cents to $30.62. In the options market, December 22.5 and 17.5 puts saw active trading and open interest in the two contracts increased by 11,924 and 17,464, respectively. Some of that is probably due to ratio spreads. For example, around 10:45 ET Wednesday, 10,000 December 17.5 puts traded bidside for 50 cents per contract and 5,000 December 22.5 puts traded mid-market for $1.15 on the AMEX.

An exchange-floor contact says a customer paid 15 cents for this spread. (Bought the 22.5s and sold twice as many 17.5s.) It was repeated again 1,000 times for .12 cents on the CBOE in afternoon traded. The activity in these out of the money puts is clearly bearish positioning, as the spread will yield its best results if JPM falls to $17.5 per share by December options expiration, or 42.1 percent from the levels seen Friday morning.

Medtronic (MDT, news, chart, volatility) options are active for a second day. Yesterday, the May 32.5 and May 35 calls saw action on spread trading. An increase in open interest of almost 3,000 contracts in both contracts suggests opening bull call spreads. Today, MDT is down 17 cents to $29.18 and off a 52-week low of $28.33 set ealier today. The trading again looks bullish, with the May 27.5 calls, May 40 calls, and May 25 puts leading the most actives. Most of the volume seems to be tied to one strategy, where an investor bought the 27.5/40 call spread and also sold May 25 puts.

Owens Corning (OC, news, chart, volatility) is down 26 cents to $14.39 and 4,700 puts have traded, compared to 280 calls. Today’s total volume represents 3 times the usual levels and comes after JP Morgan initiated the stock with a Neutral rating . Although puts are dominating the order flow, sentiment seems mixed. The day’s biggest trade on the day, 900 February 15 puts traded below the bid for $2.85, appears to be a put write. Open interest is 95 contracts and total volume is now 3,200, with an even split hitting on the bids and offers.

Four New Reports Reveal the Extent of the Damage

Rambus (RMBS, news, chart, volatility) calls are actively traded, as the stock rallies for a second day. RMBS is up $1.38 to $8.33 and up more than 40 percent since the chipmaker recevied a favorable pre-trial ruling in a patent case against other semiconductor companies. According to a document appearing on Rambus’ web site Monday, a US District judge in California issued a summary decision in the company’s favor, stating that competitors infringed on certain aspects of its patents. The two-day rally has stoked heavy trading in RMBS options, with 12,000 calls and 2,900 puts traded Wednesday. A lot of the action is spread in December, January, and February calls with strike prices ranging from 8 to 17.5.

Nexen (NXY, news, chart, volatility) calls are usually busy today, continuing a trend started last week when shares were nearly 30% below today’s $18 level. Call buyers are focused on the 20 strike in Dec and Jan, with nearly 4000 contracts trading and implied vols lifting several points. Over the past 10days more than 10,000 of the Jan 20 calls have traded, open interest has grown by nearly 6000 contracts, and shares have recoverd from lows near $11.50 to $18. Today’s flow suggests traders are positioning for further upside, despite a recent analyst downgrade.

Options activity in Rohm & Hass (ROH, news, chart, volatility) is running three times the usual. Shares are down $4.00 to $67.86 following a Reuters report yesterday that EU anti-trust watchdogs have extended the time to review (from December 15 to January 8 ) Dow Chemical’s (DOW) plan to acquire ROH . The companies announced in July that DOW will buy ROH for $78 per share and the Reuters report might have cast doubt on the deal. Sentiment in the options market seems mixed, with 6,800 calls and 1,400 puts traded. The January 75s are leading the order flow, as it seems investors are both buying and selling these calls based on their respective views regarding whether or not the deal will indeed go through at $78.

Lamar Advertising (LAMR, news, chart, volatility) put volume is outpacing call volume by a margin of more than 7-to-1. Shares are one of the best gainers in the NASDAQ 100 (.NDX) for a second day, up 69 cents to $13.88. More than 7,100 puts have traded. The December 12.5 and 10 puts are the most actives. 4,625 of 12.5s traded, with 53 percent trading offerside. 2,000 10s traded offerside. December puts also saw increasing volume Monday. No news. Earnings due out late February, after the December options expiration.

Southwest Energy (SWN, news, chart, volatility) is up $2.45 to $32.91, but sentiment in the options market is tilting towards the bearish side after a filing released yesterday showed the company’s CFO dumping 200K at $30.04. The December 30 puts are the most actives, with 3,400 traded and 83 percent trading offerside. Open interest is 1,723 contracts.

Call options on the iShares MSCI Brazil Fund (EWZ) are busy. 24,000 have traded, compared to 3,800 puts. With shares up $1.37 to $34.38, the top trade of the day is a block of 10,000 January 35 calls traded on the bid for 85 cents and tied to EWZ shares. It is possibly part of a buy-write or covered call strategy. Another player traded a substantial December 36/40 ratio spread on the exchange-traded fund. According to an exchange-floor contact, this customer bought the 36 calls and sold the 40s in a ratio of 1 to 2 (2000/4000) for 50 cents.