DR Horton (DHI) sees an impressive rally Tuesday. Shares fell to a low of $9.4 early, but are now up $1.06 to $10.60 and moving to new session highs. The stock is up 12.8 percent off its lows of the day. Options action has been picking up as well. 16,000 calls and 2,260 puts traded on the homebuilder so far. October 9 calls, which are now $1.60 in-the-money, are the most actives. 11,030 traded. Some short call writers might be covering positions ahead of the expiration, as 100 percent of the volume has been at the ask. The top trade is 7,950 for $1.38 and open interest is 24,081 — the second largest position in DHI behind Jan $10 puts. Meanwhile, implied volatility in options on the stock is down 7 percent to 49 after data released today showed the NAHB Index of homebuilder sentiment (HMI) jumping to 18 this month, from 14 in September and much better than the 15 that was expected.

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

Sears Holdings (SHLD) jumps $1.77 to $74.32 and one strategist sells-to-close a position in 8,500 Jan 50 puts at $1.79 and buys-to-open a Nov 60 – 67.5 put spread for $1.94, 9500X. Looks like a roll of a bearish position or possibly a hedge after a 42.9 percent surge in shares in less than a month. SHLD traded for $52.04 at the closing bell on 9/22.

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

Human Genome Sciences (HGSI) adds $1.75 to $13 after the Daily Mail reported that Glaxo might bid $25 per share for the company. The article circulated late-Monday. HGSI is rallying around the story today and options volume on the biotech is 16,000 calls and 3,280 puts. Nov 15 calls, which are 16.5 percent OTM and expiring in 31 days, are the most actives. 1,700 traded. Oct 12, Nov 16, Nov 17, Jan 17.5 and Jan 24 calls on HGSI are seeing volume as well. Meanwhile, implied volatility in the options on the stock jumped 47 percent and is now elevated at 127.5.