Volatility picks up on first trading day of September. Read More.

212K puts traded on Wells Fargo (WFC) today. Shares are down $1.20 to $26.32, but have come off session lows ($25.81) in the 10 minutes before close after Bloomberg reported that CEO Stumpf said the bank won’t raise capital to pay back TARP. Will pay back TARP soon–link to headline.

Sequenom (SQNM) rallied 21 percent yesterday on talk of favorable data from Brown University independent researchers related to prenatal tests for Down syndrome. However, SQNM is down 93 cents to $5.46 today and given back most of the gains after SignOnSanDiego, a San Diego paper, said the chatter is unfounded. The article quotes a research associate at Brown University, “We’ve done no study and we’re not releasing any interim data in the near future” — link to article. Another 16K calls and 3150 puts traded today. Implied vols are down to 130, from about 147 Monday.

FAZ is back. After weeks of rather quiet trading, the financials faltered Tuesday and the Direxion Financial 3X Bear ETF (FAZ) is up $2.43 to $25.60. Options volume picked up to 2X the average daily, with 42K FAZ calls and 19K puts traded so far. Short-term players are looking for additional upside in Sep calls with strike prices ranging from 22 to 28. Implied volatility in the leveraged fund is up to 108, from about 95 Monday (52 week high and low = 616 and 79).

*Scanning all single-stocks subject to 2500 contracts minimum call or put volume

Rena Sola (SOL) is down 44 cents to $5.19 and an investor bought 7200 Sep 5 calls for $1.20 against a position in 600K SOL shares for $5.16.

CBOE Volatility Index (.VIX) is up 2.57 to 28.58 and making a run to session highs. Some of today’s activity in the options market reflects expectations for additional gains in the VIX: 1) One player bought Nov 40 – 50 call (1X2) ratio spreads this morning for 25 cents, 2500X, 2) another bought 8000 Sep 32.5 calls for $1.10, 3) One strategist paid $4.65 for the Oct 30 put – 35 call strangle, 10000X. 4) Finally, not a bullish trade, but the VIX Sep 45 – 50 – 55 call “tree” was sold 6500X (sold 45s, bought other two for even) and likely closed out an exiting position.

*Scanning all single-stocks subject to 2500 contracts minimum call or put volume

Etrade (ETFC) is down 18 cents to $1.58 and options volume is running 6X the usual. The top trades of the day include a massive Apr10 call ratio spread, where an investor apparently bought 34K April 2s for 40 cents and sold 68K Apr 3 calls for 20 cents. If so, they came out even on the (1X2) spread and expect a move to $3, but not significantly higher, by the April 2010 options expiration. Jan10 2.5 calls are actively traded as well — 20K recently traded for 22.5 cents.