Dell Computer is seeing relative strrength and calls are active for a second day. Open interest in DELL calls increased by 28000 (compared to -1126 puts) following a day of active trading Friday. Today, another 49K calls and 12K puts traded. Shares are up 23 cents to $13.47 and the top trade is a block of 2212 Feb 13 calls at 70 cents this morning on ISE, which is an opening buyer, according to ISEE data. 11k traded total. Another 16.2K Feb 14 calls also changed hands. The two days of increasing call volumes comes ahead of Dell’s Feb 18 earnings release, which is one day before the Feb contracts come off the board.

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

Options action is heating up in Electronic Arts (ERTS) ahead of earnings. There seems to be some optimism building. Shares are up 41 cents to $17.67 and call volume is outpacing put activity by almost three-to-one. More than 12K calls and 4790 puts changed hands so far. Feb 19 calls are the most actives and zero percent of today’s 7000+ contracts are on the bid (33% Mid / 66% Ask). Implied volatility is up about 7 percent to 52 and a skew between Feb (52.6 percent) and Mar (43 percent) hints at a possible earnings gap move of about $1.06, or 6 percent, when ERTS reports after the closing bell.

Calpine shares are up 10c to $11.05 and option volume is 3x the daily average being driven by block trade in LEAPs as the $12.50 calls Jan 2011 trade 5,000 contracts were bought for $1.10 and then in then 3,000 contracts (now total of 5,000) of the $12.50 calls with the 2012 expiry traded at $1.90 a contract. Both appear to be opening; checking as to whether this was spread sale.

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

CIT Group (CIT) is seeing relative strength and increasing options action (3X avg daily) on news it has hired John Thain as CEO. In his 30-year career, Thain has risen to top executive positions at Merrill, Goldman, and the NYSE. Shares are up $1.02 to $31.79 on the news and July 32 calls are being sold as part of buy-write trades. For example, a block of 3800 contracts near the bid, at $4.85, coincided with a block of 380K CIT shares at $32.05. 12.3K July 32 calls nows traded vs. 23 contracts in open interest.

So, in this example, a buy-write or covered call is created by selling 1 July 32 callsat $4.80 against 100 shares at $32.00. Doing so reduces the cost basis of owning shares to $27.20, which becomes the breakeven through the July expiration (or 158 days), excluding commissions. The upside is also limited by the strike price of the call, or $32. If shares are trading for $32 or more at expiration (or possibly before), the calls will be assigned at $32 and the investor will sell the shares at that price. The result is 17.65 percent profit. Importantly, the trade can be closed at any time prior to expiration and, if the calls are not assigned at or before expiration, the strategist can sell calls in a more distant expiration month or close the position by selling the shares at the prevailing market price.

First Solar shares $3.40 to $110.80 notable transaction looks to be a three way trade in which the initially sold 1,650 March $105/$80 puts spreads traded on CBOE (now 2,300) followed by the purchase of 1,500 of the March $140 calls on PHLX. All could be closing as open interest is sufficient to cover. Shares have declined some 20% in the past month an are at minor support at the $110 level.

Type @all into the box and hit enter. Then, type 4 to see the day’s 10 most active options. Then, type the + sign and hit enter, to see the next ten. You can do this five times to see the top 50 most actives. This is useful, especially early in the day, as it can alert you to some contracts that are seeing unusual volume. (Note: We are working on making the box bigger and that should make it much easier to see the results.)

Good Trading!