VIX hit a morning high of 43.84, but has come down sharply after Federal Reserve Chairman Ben Bernanke said the FOMC will meet for two days instead of one at the September meeting to discuss policy options. Although the S&P 500 is off 7.7 points on the day, VIX is down 1.80 to 37.96 and 13.4 percent off session highs now that the event risk has passed. Action is brisk in the pit, with 107,000 puts and 51,000 calls traded in VIX so far. Sep 27.5, Feb 17, Jan 17 and Nov 22.5 puts are among the most actives.

32,000 calls and 11,000 puts traded in Harbin Electric (HRBN) today. Shares are down a nickel to $17.15 and lost 6.9 percent yesterday after a blog post on Seeking Alpha suggested the company doctored SAIC reports. Executives of the Chinese company were out defending the company yesterday and reiterated plans to take Harbin private at $24 per share. In today’s options action, the top trade is a 6000-contract block of Dec 17.5 calls bought at $3.4 and tied to 115K shares at $17. It’s possibly a bet that the buyout will happen before the December expiration. Another noteworthy trade in HRBN today is a Sep – Dec 20 call spread, bought at $1.35, 3400X. The timespread is probably a bet that shares will remain below $20 through the September expiration (22 days) and then rally thereafter. It might be rolling action.

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

Altria (MO) loses 46 cents to $26.01 and 17,036 Oct 26 puts traded on the tobacco company. 76 percent traded at the Ask and open interest is 214 contracts. The Oct 26 put on MO is at-the-money with a delta of -.5 and expiring in 57 days. No news on the ticker today, but implied volatility is up 13 percent to 25. Today’s bearish trading is perhaps hedging activity related to regulatory headwinds in the tobacco industry. Shares have been under pressure in recent months, but the decline has been orderly. MO is down 7.3 percent since May.

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

Collective Brands (PSS) adds $2.04 to $12.32 and options on the Topeka, KS footwear retailer are busy after the company reported better-than-expected earnings, announced plans to shut 475 stores, and said it has hired advisory firms to review strategist alternatives. Options volume in PSS so far is 16,000 puts and 5,820 calls. Sep 12 puts, which are now 2.6 percent OTM and expiring in 22 days, are the most actives. 7,260 traded (46 percent bid) and some investors might be selling premium on the day’s news. Implied volatility is down 15 percent to 60.5. Sep 12 calls, Sep 11 puts, Oct 13 calls, Dec 13 puts, Dec 14 puts, Dec 15 puts and Dec 16 puts on Collective Brands are busy today as well. PSS was the subject of increased options activity ahead of the news as well (see 8/22 color).

Pfizer (PFE) loses 18 cents to $18.21 and early options trades in the drug-maker include a Jan13 12.5 – 20 (2X1) ratio risk-reversal, 7500X on CBOE. 35 cents was collected to sell two puts, buy one call and apparently open a new longer-term bullish position in Pfizer. Shares are down 11.7 percent since June, but up 9.2 percent from the multi-month lows set on Aug 8.