Schaeffer's Options Center

Transocean (RIG) added $3.59 to $58.90 and options action is brisk Friday. After a two-day 4.2 percent gain, shares rallied at the open after FBR Capital analysts said that, after meeting with legal experts, RIG's liability from the Macondo Oil spill is likely to be a lot less than the $6 to $7 billion currently discounted in the stock price. Bubbling crude oil is also giving the driller's some support. Crude gained $2.25 to $76.50 a barrel Friday after IEA raised estimates for global oil demand. RIG shares are running higher and today's options volume includes approximately 84,000 calls and 50,000 puts. The top trade is block of 3000 Feb 50 puts at the $3.45 ask price, which might be a shareholder buying puts and looking to protect recent gains. Sep 55, 57.5, and 60 calls, which expire in one week, are the most actives. Implied volatility is up about 2.5 percent to 46, which compares to a 52 week high and low of 171 and 27.

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Philip Morris shares a $1.00 to $54.75 after the company raises its quarterly dividend by 10.38% 64c a share. Option volume is running 3.5x the daily average with the notable trade being in the October $52.50/$55 spread. This looks like a bearish r/r (calls sold and puts bought) but could be a collar against long stock as someone might have jumped on news to lock in some profits ahead of the October 7 ex-date.

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CBOE Vix call volume is heavy today, with nearly 130,000 calls trading by noon ET, or twice the avg daily pace of volume. Activity is concentrated in upside strikes, with a buyer of 10000 Oct 45 calls for 32.5cents earlier today, and a ratio spread trading in which a customer sold 5000 Oct 35 calls for 95cents against a buy of 10,000 Oct 42.5s for 40cents. VIX spot is near 22.25, the low end of the range since May.

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Hertz (HTZ) adds 19 cents to $10 after a Delaware Court denied an injunction to block the Hertz for Dollar Thrifty (DTG) deal. Some fund managers and other institutional investors were trying to block a vote, saying DTG breached their fiduciary duty by not conducting an auction and seeking a better premium for the company. The ruling clears the way for a shareholder vote and makes it less likely that HTZ will need to raise its bid. At least one investor seems to view this as bullish for Hertz and bought 10K Dec 12.5 calls at 57.5 in morning trading (but hearing they might have come back and sold 2,500...checking). Total volume in the contract is now 13.2K vs. 1,344 in open interest.

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Medivation (MDVN) sees an afternoon spike, now up $1.60 to $12, on 4X average daily volume. 6860 calls and 650 puts traded. Sep 10 calls are the most actives, with 2700 traded and 96 percent at the ask. Sep 12.5, Oct 11 and Oct 12 calls are seeing interest as well. Top trade is 500 of the Sep 10s at the 80 cent ask price about 25 minutes ago. It's now bid at $1.84. Not clear what is driving the action.

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Visa (V) shares are down $2.38 to $66.17 and more than 50K options contracts traded on Visa so far today. Shares notched a new 52-week low after the NY Times ran story saying credit card use among consumers is declining and the day after BofA analyst slashed the rating on the stock to Undperform from Neutral. The options action seems mixed. Sep 65 puts and 70 calls are the most actives and seeing two-way (buying and selling) through midday. The action has been mostly smaller lots. The biggest trade is 792 Sep 70 calls on the 66-cent bid. Meanwhile, implied volatility is up 3 percent to 33 today (+17 percent on the week), compared to a 52-week high and low of approximately 53 and 21.5.

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McDonald's (MCD) gapped lower and is easily the worst perforrmer in the Dow Jones Industrial Average on disappointing same store sales numbers. MCD is down almost 3 percent to $73.86 after reporting an increase in global same store sales of 4.9 percent in August. Maybe investors were looking for more. Shares are taking a hit. Options volume is 2X the average daily, with 37K contracts traded so far. The top trades were intiated by one investor -- selling the Jan 75 calls at $2.75, 9900X, and buying the Mar 80 calls at $1.58, 7500X. Looks like a roll out a few months and up 5 strikes. Beyond that, most of the action has been in smaller lots. The next biggest trade is 200 Oct 72.5 puts at the $1.18 ask. Implied volatility in MCD is up 5 percent to 20, compared to a 52-week high and low of 30 and 14.

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Adobe Systems (ADBE) shares are up $2.32 to $31.63 after Apple Computer (AAPL) is apparently relaxing its position on the use of Flash applications. In the past, Jobs has said that Flash is basically outdated and has been opposed to the software on iPods, iPads and iPhones. Apparently, Apple is easing these restricitions, which is giving ADBE shares a lift and driving 2X average daily volume in options market. About 8,000 calls and 2,000 puts traded so far. Sep 32 and 33 calls are the most actives. Implied volatility is up about 3 percent to 35.

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MGM adds 67 cents to $10.23 and options volume is running 3X the average daily, with 47,000 calls and 12,000 puts traded so far. The top trade is a buyer of 10,000 January 2012 calls at the 17.5 line at $1.10 per contract at 13:55 on AMEX. Looks like they came back for more and bought another 10K at $1.10. More than 20,000 now traded. Sep 9, 10 and 11 calls are busy as well. Implied volatility in MGM is down 3.5 percent to 54 today after Soleil upgraded the stock to Buy from Hold.

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Bullish flow detected in Micron Technology (MU), with 28216 calls trading, or 2x the recent avg daily call volume in the name. Shares are off 17 cents to $6.58 and top trade is a block of 17,500 April 9 calls at 42 cents on ISE, which is an opening buyer, according to ISEE data. In fact, data shows that 25K calls have been bought to open on the chipmaker so far today. April 9s are most actives, with 25K traded. Implied volatility is up 4 percent to 55. No news on the stock. Shares are down about 42 percent since April 14 and today's call buyers might be anticipating a recovery over the next two quarters.

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