Chiquita Brands (CQB) is up 21 cents to $7.75 and calls are active ahead of earnings due out after the closing bell. 2350 calls traded, or about 7X (680 percent) the expected for midday. Investors are showing interest in May 7.5 and 10 calls ahead of the news. With about 90 percent hitting ask-side, it looks like call buyers are dominating the action ahead of the earnings news.

SPDR Regional Bank Fund (KRE), an exchange-traded fund consisting of 50 regional banking names, sits unchanged at $21.55 per share midday. Options volume is running at 2X the normal levels, with June 20 puts leading the order flow. A block of 20K contracts traded this morning for $1.20 on the ISE and appears to be an opening put purchase. It might also be tied to shares, as a block of 293K KRE shares traded within minutes of the puts.

Allergan (AGN) has come under pressure in recent trade after Bloomberg reported that the FDA believes Botox can cause fatal butulism posioning. Shares are down $2.71 to $44.57 and one strategist might have anticipated some weakness in AGN, as the May 40 – 45 put ratio spread (2 X 1) traded 2500X earlier in the session, when AGN was $47.83. (However, it may have been a closing trade, as significant open interest exists in both contracts).

A large spread recently surfaced in Pfizer (PFE) Jan 2011 options. A player apparently bought 25000 Jan 15 – 20 call spreads and sold 25000 Jan 7.5 puts. They paid an average of 67.5 cents. The spread was tied to PFE shares, which were recently up 17 cents to $13.60.

Molson Coors (TAP) hares are up over $1.70 or 4.5% to $38.45 and its options have traded 4X the average daily volume. A good portion of that was in the June $40 call which saw 2,019 contracts trade at the $1.25 bid price. Prior open interest in the strike was 2089 contract and this was an opening sale. It appears to be tied to stock as part of buy-write. The sale has pushed IV down 10 percentage points to 35% on the day even as the company ?s earnings are slated for release next Tuesday, May 5.

Hartford Insurance (HIG) is rallying and calls are active ahead of earnings due out after the closing bell. Shares of the insurance company are up $1.29 to $12.17 and 27,000 calls traded, compared to 7,500 puts. May 12.5 calls are the most actives, with 9,700 traded and 81 percent hitting ask-side. About half of the call volume has been on the ISE, where sentiment data indicate only 20 percent is opening customer call buys. Nevertheless, judging by the share price, there seems to be some optimism about HIG heading into the report, which might also be related to a April 24 WSJ journal report that the company is looking to sell its profitable P/C insurance unit “pretty soon”.

Nvidia (NVDA) is up 60 cents to $11.48 and 11,000 puts traded, or about 9X (888 percent) the expected for this time of day. Put sellers are dominating the action after Deutsche Bank analysts raised estimtes on NVDA on expectations for a recovery in the desktop market. Heavy selling is being seen in June 7.5, June 11, Sept 10, Sept 12.5, Sept 11, and June 10 puts. Implied volatility is easing to 68, down from about 71 the day before.

ProShares UltraShort Russell 2000 Fund (TWM) hit a new record low of $46.62 per share and options volume is running at 4X the usual. Most of the volume is due to a block of 4500 May 54 calls sold for an average of $1.125 on the PHLX. It was marked Tied by the exchange and, since existing open interest is 51 contracts, the trade might be a buy-write. That is, the strategist is bullish on TWM (and therefore bearish on small caps) and is taking a long position in shares around $47. The cost of the shares is offset by the premium from selling calls (to simplify, assume $1.10 per contract.)
Therefore, if 1 call sold for every 100 shares, the cost basis of owning TWM drops to $45.90 and the upside through expiration is limited to the strike price of the short call (54), or 17.6 percent. A move to $54 or beyond by May expiration (15 days) and the calls will be assigned, requiring the buy-writer to sell shares at the strike price.

Dow Chemical (DOW) shares are up $2.27 to $15.78 after the company posted a suprise profit of 12 cents per share for the quarter. Analysts were looking for a 21-cent per share loss. The stock is rallying and calls are active, with 32K contracts already traded, compared to 7,900 puts. September 15 calls are the most actives and recent trades include a block of 6000 traded bd to bd for 65 cents.

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