Another major hurricane, corporate earnings and inflation worries are driving volatility higher in the options market.

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 up 1.7% to 15.59. The CBOE Nasdaq Volatility Index, which measures the implied volatility of the Nasdaq 100, was recently up 2.2% to 16.84.

Yahoo! ( YHOO) options were active after the company released better-than expected earnings Tuesday afternoon. Ahead of those earnings, investors were anticipating strong results and buying the 35-line calls in most months. The buying continued Wednesday as the stock traded higher.

The October 35 calls have traded 18,500 contracts and were up 30 cents on the day. The November 35 calls have traded 6,500 times so far. As the stock rose on the earnings news, traders sold the October 35 puts 12,800 times.

The seller of the puts is expecting Yahoo!'s stock to close above $35 a share at Friday's expiration. The puts were lower by $1.55. The November 35 puts have traded 3,400 times and were down $1.35. Yahoo! shares were up $1.96, or 5.8%, to $35.66.

Chipmaker Intel ( INTC) released solid earnings last evening, but its guidance failed to excite investors. The October 22.50 calls have traded 5,400 contracts. Even though the calls are in the money, traders would have sold them at the open because of the premium priced into the options ahead of Intel's earnings.

Traders often price the front-month options higher heading into an earnings release because of the uncertainty of how a stock will react to the report. The October 22.50 puts have traded 4,800 times. With the stock trading above $23, these puts are worthless right now. The seller of the puts believes Intel will continue to trade above $22.50 at the expiration.

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