Eli Lilly (LLY) options volume is running 3.5X the daily average, with 21,000 calls and 4,460 puts traded on the drug-maker so far. Shares are up 78 cents to $38 after the FDA approved Cialis for treatment of benign BPH. Apr 40 calls, which are now 5.3 percent OTM with a .37 delta, are the most actives. 10,075 traded (99 percent Ask) against 657 in open interest. The top trade is a 5,250-contract block at $1.58 on ISE and an opening buyer, according to sentiment data. October 38 and 39 calls on Lilly are seeing interest as well. Implied volatility in the options on the stock has eased 3 percent now at 25.5 percent. LLY is on a four-day 4.6 percent run higher and now testing a previous resistance level around $38. Today’s options order flow seems to reflect some expectations for a rally beyond that level and above $40 through the first quarter of 2012.

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

Sprint (S) shares ran to morning highs of $3.39 after CNBC highlighted items from a conference call and noted that iPhone sales will result in huge cash flow for the company. However, the stock came under pressure and was halted after an AP story indicated that the company will stop selling Clearwire (CLWR) compatible products and Reuters reported that Sprint might need to access the market to raise capital. Shares hit a low of $2.65 when trading resumed and were recently down 17 cents to $2.84. Trading in options on the stock is brisk, with 68,000 calls and 18,000 puts traded on the name through midday. Players were sprinting for Jan 3.5 calls in ealry trading and the flow included a morning buyer of 3,739 contracts at 50 cents on ISE. 9,100 traded and the marrket is now 35 to 38 cents. Oct 3.5, Oct 3, Jan 3, Weekly 3, Nov 3.5. and Nov 4 calls on Sprint are seeing interest as well. Meanwhile, implied volatility in the options is ripping 15.5 percent higher and is elevated at 112.5.

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

Illumina (ILMN) is under pressure and some players in the options market seem to be bracing for further fallout in shares of the San Diego biotech. ILMN tumbled $12.70 to $27.23 after the company slashed its third quarter revenue guidance. The stock was hit with multiple analyst downgrades on the news. Options volume in Illumina is now 18,700 contracts. By way of comparison, typical volume on the stock through the first two hours of trading is about 700 contracts. 14,000 puts and 4,700 calls traded in the name. The top trade is a 2,331 contract block of Nov 25 puts at $2.20 when the market was $1.80 to $2.05. The contract is now 8.2 percent OTM and expiring in six week. 3,888 now traded against 0 contracts of open interest. Nov 24 puts, Oct 35 puts and Oct 30 calls on ILMN are seeing interest as well. Meanwhile, implied volatility is moving — up 40 percent to 83 and well above the 52-week high of 68.5 set Monday.

Noteworthy put buying in Safeway this morning with an opening customer buyer paying 30cents for Oct 17puts to open what will be the largest block of open interest in the grocer. SWY is up nearly $2 from the $16 level over the past two weeks, and this trade may hedge a sale of about 10K oct 16 puts sold on Sep 20th for 30cents, putting the trader into a vertical put spread for zero.