Salient Pharmaceuticals (SLXP) is down $2.40 to $25.71 and implied volatility is moving after the FDA released briefing documents ahead of a Feb 23 panel meeting on Xifaxanor. The documents “raised questions about the evidence of efficacy of the study,” which seems to be one of the reasons for the weakness in the share price. Meanwihle, options volume is running 10X the average daily. Some investors seemed to be swapping Feb 30 for Mar 30 calls in early trading. March 25 puts and calls, Mar 30 calls, and Mar 22.5 puts are also seeing action, as investors jockey for positoin ahead of the FDA news. Meanwhile, implied volatility rallied about 14 percent to 115.

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

Big print in Comcast as the July $14 put and $17 call strangle traded 35,162 times for a $1.16 for the strangle. This appears to be a purchase but could be closing a position opened in early Feb.

CBOE Volatility Index (.VIX) is down .62 and testing the “psyche” level, as the S&P 500 shakes off early weakness and heads a few points higher on options expiration Friday. A noteworthy trade in VIX options earlier today was an Apr 25 – 37.5 (1X2) call ratio spread. This looks like a backspread where an investor sold 25000 Apr 25s at $2.39 to buy 50000 April 37.5 calls at 62 cents. If so, they collected $1.15 and might be closing or rolling a position. On the other hand, if it’s an opening backspread, it’s a bet that VIX will either 1) stay below 25 or 2) see a dramatic spike towards 40 by the April expiration.

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

Kraft (KFT) is up 22 cents to $29.03 and the big prints in the June puts and calls are part of a strangle. The investor paid $1.10 for the June 25 – 30 strangle, 21000X. It might close a short position as open interest is sufficient to cover in both contracts.

Smith International (SII) gapped up, hit a new 52-week high, and was recently up $4.36 to $37.71 after the Wall Street Journal reported Schlumberger might be interested in making a bid for SII. Options action is heating up as well. 15K calls and 10K puts traded in the first hour, or about 24X the typical levels. The top trade is 1000 Mar 35 calls at $2.75 and it was marked “tied”. So, possibly part of a buy-write. Most of the other action has been in smaller lots. Implied volatility is up about 4 percent to 42.

BofA (BAC) is off 12 cents to $15.76 and Jan12 $15 calls are the most actively traded equity contract early after 10,800 traded. 91 percent traded on the bid. The top trade is 3068 contracts at $3.65. Some investors might be liquidating positions after the Federal Reserve raised the discount rate a quarter percentage point to .75 percent late Thursday. The discount rate is the rate the Fed charges banks for emergency loans and the timing of the move was somewhat unexpected.