Pre-earnings action in McKesson (MCK) led by buyers of Feb 75 calls. The top trade is 3,480 at $1.75 when the market was $1.30 to $1.45. 6,113 now traded vs. 819 in open interest. Feb 72.5 puts are seeing some interest as well. 1,202 traded. Implied volatility is up 12.5 percent to 26.5 percent ahead of the results, after the close of trading today. Shares jumped 5.6 percent when earnings were last reported on 10/27.

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

Yahoo (YHOO) is trading up 24 cents to $16.07 and overall flow seems bullish today, a few days after shares fell 2.8 percent on earnings news. Shares have now recovered the losses and today’s options volume includes 61,000 calls and 16,000 puts traded. February 17 calls, which are 5.8 percent out-of-the-money with 18 days of life remaining, are the most actives. 16,200 traded. Another 12,200 July 20 calls have changed hands. The top trades are 3,478 July 15 – 17 risk-reversals at a nickel on ISE at 10:53 on ISE, where sentiment data indicate calls bought, puts sold. The same bullish risk-reversal traded at a nickel, 3230X on ISE about 5 minutes after the opening bell.

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

NPS Pharmaceuticals shares are soaring $2.35 to $9.30 after it reported favorable data from a Phase III study for its intestinal drug Gattex. Option volume is 4x the daily average with the most active strike being the May $10 where a 4,500 block traded at the $1.10 asking price; prior open interest was just 348 contracts so this translate into new positioning. Meanwhile the May $9 call trades 4,500 contracts as initially 2,285 contracts traded at the $1.10 bid and then later 2,500 contracts traded at the $1.55; the latter volume could have been done as part of a spread with the $10 calls.

Cisco (CSCO) loses .5 percent to $20.82 and is one of 12 Dow stocks heading lower Monday morning. Early options action includes 5,318 Feb 22 calls, which have traded 91 percent ask. It appears buyers are dominating the action and possibly eyeing earnings, due next Wednesday (2/9, after market). Shares tumbled 16.2 percent on 11/11 after earnings were last reported and fell another 7.4 percent before hitting a 52-week low of $19 on 12/3.

Massey energy saw very heavy upside call buying on chatter (Fly) today. More than 12,000 Feb 65 calls traded on the day, wit the largest block a 9069lot for 53cents on the ISE at 2:10 when shares were near $55.02. ISE data confirms that to be an opening customer. Similar flow was observed earlier this week when paper bought about 6000 Feb 57.5 calls up to $1.74 when shares were near $53.82. (Premium Story posted Jan 28, 16:07)