Option Traders See a Bottom in PMI Group

Earnings carnage continued in the insurance segment today, with PMI Group (PMI - commentary - Cramer's Take) reporting lower profits and hits on its investment portfolio. Early data from TradeAlerts suggests that 95% of the option activity in the country's second-largest mortgage insurer weighs in on the bullish end of the sale, with buying interest at the December 5.0 call strike at 35 cents per contract propelling volume to 14 times the normal level. This may simply be an indication of a hard-won bottom for a stock that has lost more than three-quarters of its value this year.

Unusual option activity manifested today in the form of Martek Biosciences (MATK - commentary - Cramer's Take), a maker of food products and supplements based on microalgae. While shares have held up respectably well this year with 5% positive returns, the stock is in a multiyear downtrend, and short interest has risen this year to constitute more than one-quarter of the float.

News emerged yesterday that Martek has secured a 10-year supply agreement with Wyeth Nutritionals (WYE - commentary - Cramer's Take), sending the stock up 4.5% to $31.37 and eliciting one trader to sell a 2,500-lot March put spread between strikes 20 and 30. The trader in this case took in a $3.15 premium in the expectation of shares remaining above the $30 line into next spring. The activity here sent overall volume to 17 times the normal level.

Options in CIT Group (CIT - commentary - Cramer's Take) are attracting double the normal level of activity today amid speculation about more extensive Treasury involvement in a number of financial companies. November 7.50 calls have attracted buying interest in excess of open interest following the bounce for the stock, with more than half the overall option volume in CIT Group tipped to bullish sentiment, according to data from Trade Alerts.

Options in Kinross Gold (KGC - commentary - Cramer's Take), due to report earnings tomorrow, are trading at triple the normal level today. Most active today have been the January calls at the 12.50 strike, with traders buying those for $2.25 apiece.

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At the time of publication, Darst had no positions in the stocks mentioned.

Rebecca Engmann Darst is the Portfolio Manager for TheStreet.com?s Options Alerts Portfolio newsletter and an equity options analyst for RealMoney Each Thursday at 6:30 a.m. EST, she delivers the early-morning lowdown on option volume and sector trends on CNBC's "Squawk Box." Prior to her work in the equity options market, she spent seven years in Scandinavia as a Copenhagen-based chief reporter for a European Commission news service, correspondent for Spanish daily El Mundo and Radio Netherlands, followed by stints at Nordea Bank and Saxo Bank.