Uneventful action, but volume picks up ahead of the expiration. VIX falls. Read More.

Some investors were betting that Carnival Cruise (CCL) shares will sink after the company releases earnings tomorrow morning before the bell. The stock finished the day up $0.53 to $23.05 and option volume ran 3X the daily average. Traders appeared to be placing bearish or protective bets ahead of the earnings report. For example, the June $23 – 22 put spread was purchase 4,000 times (buying June 23s and selling June 22 puts). It also looked like an outright purchase of 1,100 June $24 puts. Implied volatility rallied ahead of the news, finishing up 16% to 93.5% on the day.

An investor made a substantial bet on Lexmark (LXK) Wednesday. Shares of the printer-manufacturer are down 14 cents to $15.26 and a spread trader surfaced in the January (2010) 17.5 and 20 calls.

To be specific, it appears that the strategist bought a total of 4,000 January 17.5 calls for $1.35 while selling the same number of January 20 calls at 60 cents. If so, they paid 75 cents per spread ($1.35 – .60) and expect the stock to move higher. If held until expiration, this bullish spread pays off if LXK moves beyond the breakeven of $18.25 (19.6 percent) and has a maximum pay-off of $1.75 if shares rally beyond $20 (31 percent).

Therefore, it would take a substantial move higher for this LXK spread to yield a profit at expiration. Keep in mind, however, that 1) the spread can be closed at any time prior to expiration and 2) the stock was trading above $20 as recently as May 7.

Office Depot (ODP) is down 13 cents to $4.38 and 3,200 puts traded, compared to 370 calls. The top trade of the day is 900 July 5 puts for $1 on the ISE, which is an opening customer buy order. 1,658 contracts traded total, with 90 percent hitting ask-side. Looks like bearish traders are looking for a slide in ODP. No news today. The company’s CEO appeared on CNBC yesterday discussing small business impact on economic activity. Did he say something???

Juniper Networks (JNPR) is down 32 cents to $22.77 after Lazard Capital Markets analysts said recent checks indicate that business is weak. Bookings from AT&T and Verizon could be down from a weak first quarter and Google is a “no-show”. Put volume is picking up as the stock slips (click chart.) 29,000 contracts traded, which represents 7.5X (754 percent) the expected. The activity is scattered across June and July puts with strike prices ranging from 21 to 25. While some of the action is likely closing ahead of this week’s expiration, ISEE sentiment data point to 48 percent opening customer put buys today. Implied volatility is edging a bit higher, to 46.5. Earnings expected mid to late July.

Options traders are snacking on Sara Lee (SLE) calls. Shares are up 15 cents to $8.93 and the focus is on July and October 10 call options Tuesday, with more than 4000 traded (total). ISEE sentiment data points to heavy customer buying. 3,500 contracts have been bought-to-open on the ISE this morning. NY Post reported yesterday that SLE has blocked some bids from private equity companies for its household and personal care business (Link to story.) CL, CLX and SC Johnson have expressed interest. SLE hopes to get $3 bln for the business, which nearing the end of a long and winding auction. Today’s bullish order flow is probably in anticipation of an announcement.

Cigna (CI) shares are up $0.30 to $21.84 and option volume is running three times the average daily levels. The feature is call selling in the October $25 and $30 strikes, which have traded 3,500 and 1,700 contracts, respectively. While open interest is sufficient to cover this appears to be fresh positioning. Possible overwrite or buy-write strategy. Company reports earnings July 30.

CBOE Volatility Index (.VIX) is down 1.21 to 31.47 despite a third consecutive loss for the S&P 500. Maybe the options expiration is affecting the volatility index? Take a look at the unusual volume in SPX July out-of-the-money puts and calls today (Link). It appears to be heavy institutional activity, perhaps attempting to “tweak” the volatility index at expiration. VIX tracks the expected volatility priced into S&P 500 Index options and, unlike other index contracts, expires on Wednesday. VIX official settlement value for June is 31.03.

Debit: The premium paid for an options contract. The funds are debited from the traders account. If an investor opens a spread by purchasing Long Call A and selling Long Call B, where the premium paid for a Long Call A is greater than the premium received for Long Call B call, they have entered a call debit spread.

Credit: The premium received for selling or writing an options contract. If an investor opens a spread by selling Short Call A and buying Long Call B, where the premium paid for Long Call B is less than the premium received for Short Call A, they entered a call credit spread.

New to options? Click here for previous Options 101 stories.

Nordstrom (JWN) is off 58 cents to $18.41 and Oct 14 – 19 put spread trades 20000X for $2.20. Was bought along with 400K shares at $18.55. No news on the stock, but it came under pressure Tuesday as well, losing 6.8 percent.