Erasing the Losses By Steven Smith Director and Chief Strategist, Options Alerts 5/15/2008 4:50 PM EDT

Stocks just kept creeping up all day and finished near session highs. The major indices closed at or near their highest levels of the year and have now nearly erased all of the year-to-date losses.

While commodity and infrastructure plays are still garnering the bulk of attention, there has been a healthy expansion of breadth and rotation into other sectors. Most notable is the recent performance in the tech space. Today, chip stocks helped lead the advance.

Speaking of bulk, shares of DryShips (DRYS) floated up some 7% following a report that showed the Baltic Dry Index, which tracks commodity-shipping rates, hit a new record, as Chinese demand is driving up the cost of leasing ships. Option traders appeared to be getting very bullish ahead of DryShips earnings report scheduled for Monday, as over three calls traded for every put, and implied volatility rose some 18% on day.

Among the chip names moving higher with above-average option activity was Nvidia (NVDA) , whose shares jumped over 7% to $23.70 today and saw heavy call buying in the June $25 calls.

Options Abound With Nvidia

Sara Lee (SLE) saw unusual option trading activity in what appears to bet that the baker will eventually see its shares rise. Someone established a bullish position by purchasing a 6,500-contract block of the January 15 calls.

RELATED STORIES
What to Make of the Drop in Volatility
Retailers Earnings Could Drive Options Today
Will This Blast Last?

Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.

To read more of Steve Smith's options ideas take a free trial to TheStreet.com Options Alerts.

Read our conflicts and disclosure policy.