7,100 puts have traded on Dollar Tree (DLTR, news, chart, volatility) today, or roughly ten times the number of call options. Most of the volume is due to a three-legged strategy where an investor bought the December 40/37.5 puts 3,000 times and sold 1,000 December 35 puts. With shares up 16 cents to $40.25, the trade has a bearish risk graph and comes as rival Big Lots (BIG) sinks $1.36 to $14.92 on disappointing earnings news. Meanwhile, Dollar Tree is due to present at the 9th Annual Wedbush Morgan California Dreamin Conference on December 10.

Goldfields (GFI, news, chart, volatility) options volume is running two times the average daily levels, with 15,000 calls and just 200 puts traded. Shares are down 31 cents to $6.92 after gold erased early gains and fell $17.70 to $747.70 an ounce. Nevertheless, bullish trading is being seen in GFI. January 10 calls are the most actives. 14,480 have traded and three-quarters are hitting offerside. ISE Sentiment data confirms opening customer call buying.

Bear Put Spread. USG (USG, news, chart, volatility) puts are active, with 10,000 traded, compared to just 29 call options. Shares are down 40 cents to $7.50 on news the company has amended its existing shareholder rights plan to protect the value of its net operating loss carryforwards and related tax benefits. The action in the options market seems to suggest some investors are worried about further downside and buying bearish put spreads. The top two trades of the day account for most of the volume after 5,000 USG December 7.5 puts traded on the offer for 90 cents per contract while 5,000 December 5 puts traded on the bid for 15 cents.

Trading in Safeway (SWY, news, chart, volatility) calls is active for a second day. Midday yesterday, volume was “running four times the usual: 13,000 calls and 630 puts traded. With shares up $1.05, most of the action is in the December 25s and appears to be mostly selling-to-close these out of the money calls.” Today’s open interest, which showed a decline of 11,538 confirms yesterday’s action was closing. Bad timing, as SWY is up $1.23 to $22.66 after UBS upgraded the stock to Buy. Again, volume is running three times the usual and December 25 calls are leading the order flow. 12,453 have traded, with 97 percent hitting on the bid. Perhaps the the remaining 13,666 contracts are being sold-to-close.

Collar. Archer Daniels Midland (ADM, news, chart, volatility) January 2010 options are active. 3,700 calls with the 40 strike price traded bidside for $2.15 and 3,700 puts at the 20 line hit offerside for $4.80. Both traded on the NYSE at 10:22 ET when ADM was sitting near $23.80. A block of 222K shares of Archer Daniels Midland traded 4 minutes later for $24.18. Taken together, the activity looks like a collar, where the strategist bought shares and puts, wrote calls. If so, assuming 100 shares for every call and put, they paid $26.83. Downside is limited by the put (25.46 percent) and upside capped by the call (49.09 percent) through the January 2010 options expiration.

Bull Call Spread: The CBOE Volatility Index (.VIX) is up 2.81 to 66.45 and making a run to session highs, as General Motors (GM) erases early gains and helps lead the Dow to session lows. In VIX options trading, the January 65 and 75 calls are the most actives after a player bought the spread 3,000 times earlier today for $2.25. Total volume is now more than 3,600.

Ratio Spread. Aflac (AFL, news, chart, volatility) shares are up 55 cents to $42.32. Insurance stocks are broadly higher after Hartford Financial (HIG) raised its fiscal year earnings guidance and also said it is well-capitalized with sufficient liquidity. The tone of trading in AFL was decidedly different yesterday, however, as shares fell 4.2 percent and 3,600 puts traded, compared to 940 calls. Most of the action was in the January puts after 900 Jan 45s traded offerside for $6.00 and 1,800 Jan 25s for $1.05. Both traded at 11:50 on the AMEX. Today’s open interest suggest new opening positions in both and therefore a bearish 1 x 2 ratio spread with a max payoff if AFL is at $25 per share at January options expiratation.

Bear Put Spread. Zions Bancoporation (ZION, news, chart, volatility) saw bearish order flow ahead of a presentation at the JP Morgan SMid-cap Conference later today (1:30 ET). 11,000 puts and 2,700 calls traded. Most of the put volume was in the December contracts after, with ZION trading at $28.10 per share, 5,000 December 25s traded offerside for $2 per contract while 5,000 December 20s traded bidside for 60 cents. With open interest increasing by 5,000 in both the 20s and the 25s, the activity looks like a bearish spread and positioning for possible short-term weakness in ZION. December options come off the board two weeks from today.

Bull Call Spread. Liz Claiborne (LIZ, news, chart, volatility) calls saw action Thursday. 3,180 contracts traded, compared to 200 puts. The top two trades of the day: 1,150 April 2.5 calls for $1.25 and 1,150 April 7.5 calls for 15 cents. With shares at $2.75, the action looks like a bullish spread, where the strategist paid $1.10 in exchange for a potential payoff of $3.90 if LIZ rallies to $7.50 or more by April options expiration. The trade was repeated several times and open interest increased by approximately 1,500 in both contracts.