Options volume jumps, but quiet trading sends VIX back to 30 “psyche” level. Read More.

Large blocks of put options traded on Whole Foods (WFMI) Thursday. Shares finished the day up 29 cents to $18.95 and 21,000 puts traded on the retailer, compared to 1700 calls. Most of the action hit the June 20 and July 19 puts, which both traded more than 10000X.

The activity appears to be an expiration related roll of puts from one month to the next. If so, it probably closes out a position in WFMI June puts opened on May 13 and 14, when the stock was near $20 and $21 per share (click chart.)

On May 13 and 14, the day before and after the company reported earnings, volume surged and open interest in the June 20 puts increased from 2,100 to 15,100 contracts. Now, with nearly 15,000 contracts still open and expiration looming, the June position is being closed for $1.05 a contract. Shares are down about 7.5 percent since that time, but it appears this trader is taking a loss, as the June contracts were bought for about $1.30. What happened? Shares didn’t fall enough to make up for time decay. The strategist hasn’t thrown in the towel, however. They appear to have initiated a new similar position in the July 20s, paying about $1.20 for 10000 contracts.

Bill Luby’s VIX and More takes volatility analysis to another level. The blog was created in early-2007 and at a time when investors seemed to have lost interest in the CBOE Volatility Index, or VIX. The index was mired in a long slump and even dipped into the single digits in late 2006.

According to Luby, the original goal in developing VIX and More was to fill a void by offering timely research and analysis of the volatility index. The timing was spot on. In February 2007, when VIX posted a record 64 percent one-day gain, interest soon resurfaced. Over the past two and half years, the blog has expanded to include, not just commentary on the VIX, but also discussions on technical analysis, market sentiment, and exchange-traded funds.

Luby relies heavily on charts and his analysis often goes beyond the basics–an effort to stimulate deeper thinking about the markets. He says that his trading approach has changed over recent years and is now focused more on exchange-traded funds and options. At the same time, while market calls and predictions are sometimes offered, the primary objective of VIX and More is primarly on education and idea generation. Indeed, it doesn’t take much time for readers to recognize Bill Luby has a sincere passion for the financial markets, as well as for sharing his many years of experience and knowlege.

Rock-Tenn (RKT), a Norcross, GA paper company, is seeing more volume than usual. 4400 calls and 280 puts traded today, which represents almost 80X the normal levels. With shares down a nickel to $37.66, most of the flow is in January 2010 calls at the $45 strike. More than 4000 traded. The top trade is 500 contracts for $2.95 on the ISE, an opening customer buy order, according to sentiment data. Implied volatility is up to 49, from about 47.5 Wednesday.

FTSE Xinhua China Index Fund (FXI) is an exchange-traded fund that holds holds 25 H and Red Chip stocks. Red chip shares are Hong Kong incorporated companies while H shares are companies incorporated in the Peoples Republic of China (Link to fund information.) One options strategist appears to like the idea. In morning trading Thursday, 20,000 July 38 calls traded for $1.29. These calls were sold against a position in FXI shares, as part of a covered call or buy-write strategy.

In most “buy-writes”, the strategist is selling 1 call for every 100 shares and has a moderately bullish view on the stock or exchange-traded fund. In this example, calls were sold for $1.29 against shares for $37.25. Since the multiplier of an options contract is 100, the sale of the calls reduces the cost of owning FXI to $35.96 per share (excluding commissions). $35.96 is now the downside breakeven through the July expiration and if the ETF falls below that level, the covered call will show a loss. On the other hand, if FXI moves higher, the trade becomes profitable. The maximum profit happens if the exchange traded fund closes at $38 or higher at July expiration (29 days). At that point, the shares will be “called away” for $38 and a 5.7 percent profit. If it fails to reach that level, the strategist can close the position or sell calls in a later expiration month, like August.

Click here for more examples of “buy writes”. For real-time examples of “buy-writes” and other more adavnced strategies, please click here.

Bears have been circling the wagons around Atheros Communications (ATHR). During the month of June, open interest in ATHR puts has increased from less than 11,000 to almost 58,000. A week ago, open interest in ATHR puts was about 20,000 (Click chart.) Trades this week include a buyer of 4,000 Sept 15 – 17.5 puts Tuesday–a bearish bet that yields its best profits if ATHR falls to $15 or less.

The action continues today, with another 12,000 puts traded, or 9X the typical levels. Some of the activity might be closing trades, after Amtech and Roth Capital both upgraded ATHR to Buy this morning. Nevertheless, the surge in open interest in ATHR puts is certainly noteworthy, as it seems to reflect some anxiety about the near-term outlook for the Santa Clara, CA integrated circuit maker.

CBOE Volatility Index (.VIX) is down 1.23 to 30.31 and falling to session lows. VIX came under pressure around 10:00 eastern time after latest Philadelphia Fed Survey showed unexpected improvement, to -2.2 in June from -22.6 the month before. Econoimsts were looking for -17. Separately, the list of leading economic indicators, was also better than expected–increasing by 1.2 percent in May, compared to expectations for a 1 percent increase (Link to story.)

VIX is falling and, after hitting a high of 32.77 yesterday, is once again revisiting the 30 “psyche” level. In addition, the volatility index might remain subdued heading into the weekend. Although the Quadruple Witch expiration might affect the index, much of this week’s “event risk” has passed. No economic data or earnings are due Friday. Meanwhile, trading is mixed for a second day, with the Dow up 68 points and the NASDAQ down 2.7. Mixed trading results in lower volatility. In fact, the 20-day historical volatility of the S&P 500 is now only 22 percent. Since VIX gauges the expected volatility of the S&P 500, it isn’t suprising to see it sitting near 30 percent.

The options market expects a big move in Research In Motion (RIMM) when the Blackberry-maker reports earning after the closing bell today. Wednesday’s option flow was triple the normal levels and dominated by both put and call buyers. With shares closing the session around $77, the focus was on out-of-the-money June 80 calls and 75 puts. More than 25,000 of each contract traded, with players hoping for a significant move on today’s post-close earnings release.

The implied gap-move based on June implied volatility is approximately $6 and both options finished the day near $3, with nearly 5000 contracts of open interest growth in each contract. Meanwhile, total call OI grew 45,000 contracts, double the put total. RIM’s previous earnings report, released in April, resulted in a $13 spike in shares!

Stock index futures point to a steady open after the latest jobs data showed a substantial decline in filings for jobless benefits. Forty-five minutes before the opening bell on Wall Street, stock index futures indicate that both the Dow Jones Industrial Average and the NASDAQ will open with modest gains.

Weekly jobless claims rose by 3,000 to 608,000 in the week ended June 13. Economists were looking for a decline of 1,000.

However, the Labor Department also said that total insurance rolls decline by a 148,000 to 6.69 million. The decline in continuing claims was the biggest in more than seven years and breaks a streak of 21 consecutive increases.

Stock index futures edged higher on the news. Bonds fell. The benchmark ten-year Treasury is off 11/32nd and now yields 3.73 percent.

The dollar edged up .13 to 96 on the Japanese yen. The euro slipped .0014 to 1.3956 on the buck.

A report on manufacturing activity is due out at 10:00 a.m. eastern time. Economists expect the Philadelphia Fed Survey to improve to -17 in June, up from -22.6 the month before.

Treasury Secretary Tim Geithner will get some attention as well. He speaks about the financial industry regulatory overhaul outlined by the Obama administration yesterday. Geithner testifies to both the House and the Senate about the plan Thursday.

Meanwhile, crude oil is steady at $71 a barrel and gold gained $3.30 to $939.30 an ounce.

Among the stocks to watch, SLM is up more than 15 percent after the US Department of Education selected the company for a Student Loan Servicing Contract. Melco Crown Entertainment (MPEL) is seeing early strength after Deutsche upgraded the stock to Buy from Hold. Discover Financial (DFS) is trading higher on earnings. Research In Motion (RIMM) is likely to see action ahead of a profit report, due out after the closing bell.

A “roll”, in options parlance, is simply a position adjustment where an investor closes out a position in one options contract and opens a similar position in another contract. Rolling happens a lot around the expiration, as investors close out positions in contracts that will soon expire and open similar positions in later expiration months. Investors sometimes roll positions within the same expiration month to different strike prices. For example, if an investor buys a put with a $50 strike price and the stock falls from $50 to $45, they might bank a profit in the 50s by rolling to the puts at the 45 line. That is, they sell-to-close the 50s and buy-to-open the 45s. Many online brokers today offer tools to quickly roll positions with just one or two mouse clicks.