Total option volume today exceeded 20 million contracts making it the busiest non-expiration day since May 2009. The three day 5% decline in the broad market (and 55% jump in VIX!) helped put volume, with more than 10.8 million contracts trading today, the greatest put volume seen in more than a year.

Acorda Therapeutics (ACOR) launches higher about 15 minutes ago and is up $1.88 to $27.50 after FDA approves Ampyra to improve walking in adults with multiple sclerosis. Interesting action in ACOR options ahead of the news. At about 1:15 ET a Feb 20 -22.5 put spread was apparently sold and Feb 26 calls bought. Looks like they paid $1.90, 1500X on ISE. ISEE sentiment data are consitent with customer call buyers, put spread sellers (half the puts bought to open).

Note: This is one reason why we analyze “smart money” trades. In this example, the strategist stepped in about two hours before the announcement and bought a very bullish spread (effective selling the Feb 22.5 put, buying Feb 26 calls — a risk-reversal — plus buying Feb 20 puts as a hedge.)

Was this insider trading? Not necessarily, it might be an intelligent investor with research on the company and making an educated guess. Regardless, by understanding how to interpret the order flow, we can position ourselves to find good trades and not just strategies that make money in rising markets. We highlight bearish trading ideas as well.

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

Pop in Rambus shares a moment ago as many eyes were on S&P500 futures breaking 1100. On more than a million shares, RMBS spiked from 23.75 to 25.75 before settling back near $25.25. The company won decision in trade fight with NVDA – Bloomberg.

UAL Corp. (UAUA) is up 48 cents to $13.61 and two blocks totaling 21K Jan11 $15 calls traded at $3 and $3.10. The action might close a position from December 18 when an investor sold 11,500 Jan11 $10 calls (probably closing) to buy 20,000 Jan11 $15 calls (discussed here — Premium.) If so, they’re banking a profits on the 15s, as they were bought at $2.20 when the stock was just under $11 per share. The airliner is due to expect earnings on Jan 27.

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

Big Print in the SPDR Retail Trust (XRT) after an investor buys 115K Mar 28 puts at an average of 12.5 cents per contract. Shares are off 8 cents to $35.18 and this premium purchase is likely to create the biggest open interest position in the exchange-traded fund.

Update from Henry Schwartz (11:00): A burst of nearly 400,000 contracts traded near 10am today in downside puts on the XLY, XLB, KRE, and XRT ETFs covering Consumer, Materials, Banks, and Retail sectors. Data shows the trades were buyer-initiated, opening, and non-customer, and are struck about 20% out of the money. Each put was priced below 25c, making total premium outlay just $6.2million, but the notional value these positions may hedge totals nearly $1.2Billion. (Note: Hearing this was a hedge for a variance trade.)

CBOE Volatility Index (.VIX) is up 1.46 to 23.73 and made a run to its mid-December resistance highs just above 24.00. VIX hit a high of 24.16 after the S&P 500 extended its 3-day losing streak. The S&P is down 6 points to 1110.5 today and off 2.5 percent since Tuesday. In the options, one notable trade in the VIX is 7000 Feb 20 calls bought this morning at an average of $3.55 per contract. 44K calls and 11K puts traded on the VIX in the first hour.