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SPDR Gold Trust (GLD) is up $1.28 to $97.47 and recent trades include the Dec 100 – 120 – 135 call butterfly trades 5500X. The investor paid $2.85 to buy the 100s and 135s, probably looking for a move towards $120 by the December expiration.

This is a lop-sided fly, because the difference in the first two strikes is 20 (100 – 120) and the next two is 15 (120 – 135). The result is a fly with a very bullish bias. In addition, since the body is 18.8 percent above the current market price, it’s relatively cheap. That is, they’re paying $2.85 for a potential $17.15 payoff if the gold fund settles for $120. Obviously, sentiment in the sector is very bullish after the two-day $37 run higher in gold.

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

Visa (V) is up 20 cents to $70.30 and the Jan11 70 put – 85 call risk reversal trades 12000X. An investor paid $5.30, according to an exchange floor contact, and the position was tied to shares at $70.50, delta neutral.

So, this looks like a long-term “collar”. That is, the strategist is buying shares for $70.50 and buying at-the-money puts for $11.30. The cost for owning shares and puts is therefore $81.80 (commissions excluded.) However, they also sold $85 calls for $6.0, which brings the cost basis down to $75.80, which is the break-even at expiration. If V fails to move beyond $75.80 at the January 2011 expiration, the trade losses money.

By purchasing at-the-money puts and selling out-of-the-money calls, they are in the hole on the trade (i.e. the stock must move 7.5 percent higher to breakeven), but they have a bullish and hedged position. The puts protect from further losses below $70.00 and the potential profit (at expiration) is to $85, or $9.20 above the breakeven. They are risking $5.80 (or -7.7 percent) to make $9.20 (or +12.1 percent).

Hecla Mining (HL), already mentioned this morning (see 9:40 color), continues to see active trading, with another 8,200 calls traded (6X the expected and almost 10X the number of puts). Shares are up 22 cents to $3.34 and investors are showing interest in Dec 4, Jan10 2.5, Sep 4, and Jan11 2.5 calls.

As noted this morning (see MCO 10:58 color), Moody’s (MCO) and McGraw Hills (MHP) are under pressure after a court ruled against the two companies. Bloomberg reports that a judge rejected arguments that investors can’t sue over deceptive ratings. MHP is now down $2.38 to $29.93 and options volume is running 9X the usual. Investors are looking for additional downside in Sep 30, Sep 25, and Oct 25 puts. Implied volatility in MHP options is up to 43.2, from 39.2 late Wednesday (52-week high and low = 138 and 35).

Interest in Yamana Gold (AUY) continues for a second day. Open interest in AUY calls increased by 20K after active trading yesterday (+4100 puts). Today, shares are up 30 cents to $10.49 after gold gained another $13 to $991.50 an ounce, pushing its two-day gain to more than $34. In the options market, players are focused on AUY Jan10 calls at the $12.5 strike, with 13.35K traded. The action includes blocks of 7500 and 2400 contracts, BOUGHT, for 85 and 80 cents, respectively.

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

BofA (BAC) is up 51 cents to $16.78 and 23.3K Sep 14 calls traded, compared to open interest of 17.6K. Recent trades include 15.2K bought for $2.90.