Trading is very heavy in the ETF market as the options expiration, ex-div trading and morning put selling have conspired to drive volume higher. 9.2 million calls and 4.2 million puts traded across all products today. SPY calls with strike prices ranging from 112 to 118 are the most actives due to ex-div activity (see 2:33 color). Eight of the nine SPDR Select Sector Funds are seeing volume well above the average daily today. 368K options traded in XLU, for example, which is 24X the daily average for the product. In addition to ex-div activity, a number of funds are seeing adjustments ahead of tomorrow’s expiration as well. Finally, there were some large sales of October out-of-the-money puts across a number of sector ETFs today — XLF, XOP, XRT, XME, XLI, XLY. The flow was apparently being driven by liquidating sales and likely closes positions accumulated before the Labor Day weekened (on 8/30 and 9/2). For example, a 73000-contract block of Oct 11 puts at 18 cents on XLF was sold-to-close on ISE (corrected, as it was initially indicated as an opening traded). One or more players might be exiting positions on diminishing concerns about the risk of equity market losses during the historically volatile month of October.

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

Yahoo (YHOO) sees a spike about an hour ago and is trading up 57 cents to $15.12 on reports the 16-year old Internet company has been approached by potential buyers. According to Dow Jones, private equity firm Silver Lake has called Yahoo Board members. The news comes one day after the company held a meeting to discuss leadership at the executive level and after Yahoo ousted CEO Carol Bartz last Wednesday. Trading in YHOO options is brisk as well. Sep 15 and Oct 16 calls are the most actives and have both traded more than 15K. The top trade is an Oct 14 – 16 call spread, 1500X on ISE and apparently a liquidating trade for a 91-cent credit, according to sentiment data. 104,000 calls and 20,000 puts traded in YHOO so far.

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

Dollar Tree (DLTR) touches new all-time highs today and is up $1.12 to $75.88. In options action, one strategist sold 6,645 Oct 18 calls on the retailer at $1.15. The block traded on ISE, where data confirm a customer sold-to-open. 7,598 traded against 199 in open interest. Deutsche Bank initiated the stock with a Buy and $81 price target today.

UBS is falling to new 52-week lows and options on the bank are seeing brisk trading on news a rogue trader racked up roughly $2 billion in losses at the Swiss bank. Shares hit $11.4 in morning trading and are down $1.14 to $11.54. Options volume is 1,285 calls and 3,310 puts. By way of comparison, typical volume in UBS through the first forty minutes is about 280 contracts. The top trade is a 1,400-contract block of Dec $12 puts at $1.65 when the market was $1.60 to $1.75 and is possibly liquidating of in-the-money puts. Beyond that, the action has been in smaller lots and the next largest trade is a 161-lot of Sep $11 calls at 55 cents. 704 traded. Oct 12 puts, Sep 12 calls, and Sep $11 calls on UBS are seeing interest as well.