CBOE Volatility Index (.VIX) fell to multi-month lows of 16.1 Friday morning and was recently down .77 points to 17.10. Trading in the VIX pit is very busy today and included some sizable blocks. One noteworthy trade is a Feb 26 – Mar 35 call spread, apparently bought for 29 cents, 40000X, and might close a positoin opened a couple of weeks ago when the same diagonal spread was sold for 7.5 cents, 40000X (see 1/24 color). Separately, an investor bought 60,000 April 20 – May 26 strangles on VIX for $4.45 and seems to have opened a position in anticipaton of increased volatility in the volatility index before mid-May. A third noteworthy trade in the index today is an April 28 – 35 (1X2) call ratio spread for 20 cents, 15000X. April 28 calls were sold to buy twice as many April 35 puts — possibly roling up in strike prices, as open interest in the April 28s is over 67K. Total volume in VIX is 390,000 calls and 177,000 puts.

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

MIPS Technologies (MIPS) loses 10 cents to $6.41 and options volume on the Santa Clara, CA chipmaker is running 8X the daily average. 6840 puts and 630 calls traded in the name so far. The flow is concentrated in April 4 puts, which are 37.5 percent out-of-the-money. 5,825 traded, with almost three-quarters of the volume trading at the 15-cent asking price. Open interest is 1,476 and some investors might be buying the contract on the view shares will give up recent gains. The stock closed 2011 trading for $4.46 and is up 43.7 percent year-to-date. A 52-week low of $3.93 was recorded on 12/19. Earnings were announced on Jan 25.

Pioneer Natural Resources (PXD) is up $2.98 to $105.64 and has now rallied 8.4 percent this week. One player in the options market seems to be anticipating additional gains in the Irving, TX oil and gas company and sold 5,000 Feb 95 puts on the stock to buy 2,500 Feb 105 – 115 call spreads, paying $1.55 for the package. The position looks opening and tied to 168K shares at $104.68. Earnings due out Feb 6 and the company presents at a Credit Suisse conference on Feb 7.

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