AK Steel (AKS) is down 52 cents to $6.02 and June 5 puts are seeing increasing interest. 2,635 traded and 95 percent hit ask-side. Looks like opening put buyers taking positions after AKS and a number of other steelmakers sold off this morning. Steel Dynamics (STLD) issued downside earnings guidance and JP Morgan analysts made cautious comments about carbon steel producers. The firm is joining the “stress test” bandwagon, saying it is creating a model to identify names in the steel sector at risk of violating debt covenants.

The PHLX Bank Sector Index (.BKX) is seeing more volume than usual. The index, which tracks the performance of two dozen different banking names, is up .95, or 4 percent, to 24.29. Most of the options activity is in the March 22.5/25 call spread, after an investor bought it 2500X for $1.45, perhaps expecting the index to close above 25 at next week’s expiration. (With significant existing open interest, it possibly a roll or closing trades.)

Bank of America shares up more than 8% this morning, near 5.34, and call volume well above normal, with March 5 call sellers likely taking gains as shares have lifted from the low $3 range in the past 5 sessions. Long term bullish view as a customer bought nearly 10000 Jan-11 5 strike calls for nearly $2.72.

Long calls being rolled in several airlines ahead of March expiry next wk. IN UAUA a cust appears to have rolled 5000 March 2.5s out to 10,000 April 5s for nearly even money on a 2:1 basis. Shares near 5.04 today, and the March 2.5s were bought last wk for 1.475 when shares were near 3.72. DAL March 5s rolled to April as well.

Sweep of 6600 Wells Fargo March 12 puts with buyer initiating, paying $1 for the block as shares trade near $12.27.

Intuitive Surgical (ISRG) is up 57 cents to $98.12 and 1,900 calls traded so far, compared to 340 puts. The stock caught a bid amid unsubstantiated takeover chatter, with J&J (JNJ) being mentioned as a possible acquirer. The options activity is scattered across March options with strike prices ranging from 100 to 125.

Genentech (DNA) Jun 95 call is the most actively traded equity options contracts. 25K traded so far. Shares are up $2.13 to $94.30 after Roche finalized its agreement to acquire DNA for $95 per share.

US Airways (LCC) is down 16 cents to $2.43 and the Apr/Mar 2.5 call spread trades 5100X. It looks like it was bought for 37 cents, perhaps part of a time spread or a roll from March to April ahead of next week’s expiration.

Early bearish put volume in SOHU, with customer buying a total of 3000 March 45 puts from 1.05 to 1.10 to open a new postion as shares trade down 1.26 to 47.80. Avg daily put volume in SOHU is 1390 contracts.

General Electric (GE) gapped up 4.25 percent to $8.85 per share after S&P downgraded its debt rating to AA+. The move was expected and already priced into the stock. Shares have since moved back to $8.49 and unchanged. In the options market, early sentiment seems defensive after a series of April 8/5 put spreads, totaling 15K (30K total) traded for 73 cents. The activity looks like a buyer taking a defensive position on the heels of the news.