Schaeffer's Options Center

Microsoft (MSFT) is flat at $23.91 and recent trades include an Oct 25 - 27 call spread at 32 cents, 5000X on CBOE. Looks like a buyer initiating the trade and the spread has been repeated multiple times. Now volume in both contracts exceeds 9000. Another noteworthy trade in Microsoft today is a block of 9555 Jan 27.5 calls at the 44-cent ask price in afternoon trading. This morning, about 30 minutes after the bell, a block of 5,720 Jan 24 calls was bought to open at $1.60 on ISE, according to ISEE data. 81,000 call options now traded on the software giant, compared to 13,000 puts. The bullish trading comes ahead of a presentation at the Citi Global Tech Conference Tuesday at Noon ET.

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Mariner Energy (ME) shares sank in volatile morning trading on reports of an explosion on one the company's oil rigs in the Gulf of Mexico. ME sank to $19.62 and were recently down $1.04 to $22.31, and 13.7 percent off session lows. Meanwhile, options volume is running 145X the average daily, with about 23,000 puts and 3,190 calls traded. The top trade is a lot of 456 Sep 20 puts at 80 cents. It traded at 11:45 and thirty minutes after the news broke. 15.4K now traded and the contract is now bid at 40 cents. CNBC reports that no oil spilled as a result of the explosion and Dahlman Rose analysts say the explosion is likely a platform. Consequently, the fallout is likely to be consirably smaller. Still, implied volatility in the Houston-based oil driller is up sharply, almost 200 percent to 76.5.

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Momenta Pharmaceuticals (MNTA) loses 14 cents to $14.76 and one strategist pays 25 cents for the Jan 10 - 12.5 (2X1) put ratio spread, 4000X on PHLX. Looks like a new position and might be a hedge. The Food and Drug Administration is expected to rule on Momenta's generic drug M-Enoxaparin by the end of this year. Implied volatility is flat today, but elevated at 92.

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Bullish flow detected in Anadarko Petroleum (APC), with 23,850 calls trading, or 2x the recent avg daily call volume in the name. Shares are up $1.81 to $50.50 after The Australian published a story saying that APC is on BHP's radar screen as a possible acquisition target. 'A senior figure in the global energy industry is convinced that the "second target" for BHP is Anadarko Petroleum Corporation, telling The Australian he believed the US oil and gas independent was firmly on BHP's radar. BHP declined to comment for this article.' (Link). In options action, the focus is on APC Sep 50, 52.5 and 55 calls. Nov 55 calls are among the most actives as well.

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It's been one Whopper of a day for Burker King (BKC) shareholders. The stock gapped higher, near $19 at the open, on reports the fast food chain is considering putting itself up for sale. However, the early gains faded amid talk 3I Group, the interested party, denied it was in talks with BKC. Shares dropped to $17.13 mid-morning and about 10 percent from session highs. However, the WSJ then released a story suggesting that 3G is in talks with Burger King. CNBC also out saying that it might be 3G, not 3I Group interested in BKC (very confusing -- bottom line is: original speculation about 3I Group was incorrect. It should have been 3G and yet still, it's not confirmed).\n
\nShares rallied back beyond $19 and are up $2.45 to $18.90. Meanwhile, options volume is 7X the average daily, with speculative call buying driving a lot of action in Sep and Oct 20 calls. Looks like two-way flow in Sep 19 puts and calls. Some traders are likely liquidating positions as BKC saw a flurry of activity on 8/25 and 8/26 (see 8/26 color). IV up 23 percent to 53.

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Bullish flow detected in Ensco (ESV), with 5975 calls trading, or 3x the recent avg daily call volume in the name. Shares are up $3.28 to $44.06 on a good day for the oil drillers after crude rallied $2 to $73.92 a barrel. Oil Service HOLDRS (OIH) up nearly 5 percent. ESV is among the day's biggest gainers (RDC, PDE, NE, NBR, and DO also seeing relative strength). In ESV options, the focus is on Sep 43, 44, 45, and 47 calls, as well as Oct 45 and 46 calls. Overall sentiment based on the total order flow is 59 percent Bullish.

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Reserach In Motion (RIM) adds 65 cents to $43.49 and options action is brisk Wednesday morning. About 22,000 calls and 7960 puts traded in the first hour. Overall sentiment seems a lot more bullish than the day before. October 47.5 calls are the most actives, with 8000 traded and 61 percent trading at the ask. October 50 calls are also trading predominantly at the ask. Bernstein cut its price target on RIM yesterday to $40, citing incresing competition in the corporate segment. Also, Reuters reports yesterday that Research In Motion will allow the Indian government limited access to its user email correspondence, "increasing speculation that Research In Motion will allow other governments to have access to online correspondence." Shares fell 6 percent Tuesday and 25.5 percent during the month of August. Today's call buyers might believe much of the bad news is now baked in the cake and RIM will rally from now through mid-October. Implied volatility in RIMM is up 2 percent to 58, compared to a 52-week high and low of about 60 and 29.

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Saks (SKS) implied volatility surged after the Daily Mail, a British newspaper, said a consortium of investors might be looking to buy the retailer for $11 per share. Shares hit a morning high of $8.85 and were recently up $1.35 to $7.95. About 14,000 calls and 43,000 puts traded in the name so far, or 15X the average daily. Implied volatility is rallied 32 percent to 80.

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Cisco Systems (CSCO) touches a new 52-week low and was recently down 21 cents to $20.11. One strategist seems to be looking for a rebound and initiated an Oct 16 - 24 bullish risk reversal, collecting 2 cents, 5500X on CBOE. They bought calls, sold puts and might be offsetting an existing position. Both contracts have now traded more than 10000X. Implied volatility in CSCO is flat today at 33, compared to a 52-week high and low of about 45 and 20.

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Genzyme (GENZ) adds $2.50 to $70.12 and 37,000 calls traded in the biotech after the company rebuffs Sanofi's $69 per share cash offer. September 70 and 72.5 calls have both traded more than 11000X and are today's most actives. Some investors are active in the spread, possibly hoping for a revised offer above $72.50. The top trade of the day, however, is a block of 3756 Sep 70 puts at the $1.30 ask, which might be a shareholder looking for a hedge should the talks break off altogether. Meanwhile, implied volatility is down 37 percent to 26, as the market seems to now be bracing for a protracted battle between the two companies.

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