Options in Motion: Calling Lucent

Volatility in the option market was falling Friday as stocks caught another bid heading into the weekend.

The CBOE Market Volatility Index (VIX), which is based on the implied volatility of the S&P 500 options and is used as a gauge for fear in the market, was recently down 0.2% to 11.88. The CBOE Nasdaq Volatility Index, a yardstick for the implied volatility of the Nasdaq 100, was losing 2.5% to 14.24.

The Energy Select Sector (XLE Quote) ETF had the December 47 put trade 56,300 contracts. The open interest for the strike is 58,000 contracts. With oil prices continuing to fall, the puts could have been purchased to protect against a downside move in oil-related stocks. The ETF was up 31 cents, or 0.7%, to $47.40.

The Lucent (LU Quote) January 2007 calls striking at 5 traded 8,000 times. Considering the calls are trading at only 10 cents each, the buyer is taking a fairly cheap chance that Lucent will trade above $5 by the expiration, still more than a year away. Still, the stock would have to almost double for the calls to be in the money. The stock was unchanged at $2.77.

Valero Energy's (VLO Quote) November 100 calls traded 7,800 contracts. The calls are out-of-the-money with the stock up 67 cents, or 0.7%, at $96.11.

Activity was bullish in PortalPlayer (PLAY Quote) a day after the company said it withdrew a planned offering of 4.5 million shares. The November 22.50 calls have traded 4,900 times and were up $1.20. The December 22.50 calls have traded 3,600 contracts and gained $1.10. Shares of PortalPlayer were higher by $2.30, or 10.8%, to $23.54.

The Financial Select Sector (XLF Quote) ETF saw the December 31/32 call spread trade 6,250 times. In this case, a trader appears to have bought the 31 calls and sold the 32 calls. This is a moderately bullish position. The ETF was up a penny to $31.51.