Your daily options trading wrap up.

Sentiment

Stocks are trading mixed on a relatively slow news day Monday. With no economic data or earnings of importance, some of the early focus was on deal news after Endo Pharmaceuticals (NASDAQ: ENDO) bid for American Medical Systems (NASDAQ: AMMD) and Level 3 (NASDAZQ: LVLT) said it was buying Global Crossing (NASDAQ: GLBC). The Dow Jones Industrial Average opened steady. However, a modest wave of selling pressure surfaced mid-morning and both the Dow and NASDAQ were in the red at midday. The tone of trading then took a wait-and-see attitude ahead of earnings from Alcoa (NYSE: AA). The aluminum maker and component of the Dow unofficially starts the first quarter earnings-reporting season after the closing bell. The earnings calendar is relatively light until next week, however, and then investors will digest a flood of reports in the weeks that followed. Some pre-earnings jitters might be setting in. The Dow Jones Industrial Average is down 15 points and the NASDQ has lost 17. The CBOE Volatility Index (CBOE: VIX) is down 1.08 to 16.79 amid light volume in the options market. 6.7 million calls and 6.1 million puts traded so far.

Bullish Flow

Yahoo (NASDAQ: YHOO) loses 36 cents to $16.41 and calls on the Internet search giant have been active today. 94,000 traded, which is more than double the typical volume and compares to 18,000 puts. The top trades of the day are part of a call ratio spread, in which the investor bought 5,000 YHOO Jan 20 Calls at $1 and sold 10,000 YHOO January 25 Calls at 25 cents. Meanwhile, the April 17 – May 18 call spread has traded multiple times today, as it appears that one or more investors is rolling out of bullish positions in the soon-to-expire April 17 calls and possibly taking new ones in the May 18s. Both contracts have now traded more than 20,000. Yahoo has been underperforming lately, down 1% year-to-date. Earnings will come into play on the afternoon of April 19.

29,000 calls and 3,480 puts traded in MGM Resorts (NYSE: MGM) so far. Shares of the casino-operator are down 40 cents to $12.75 and the top trade is a 10,000-contract block of MGM Jan 12.5 Calls bought at $2.45 per contract. The next biggest trades are two 5,500-contract blocks of MGM April 14 Calls at 2 and 3 cents. While they traded separately from the Jan 12.5 calls, the activity might be by one player — selling the position in the out-of-the-money April 14 calls and taking a new position in the in-the-money Jan 12.5 calls. MGM hit a new 52-week high in mid-January, but has been grinding lower since that time — down 24.5% from its Jan. 18 high. Next earnings due early-May.

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Bearish Flow

Dow Jones Industrial Index (CBOE: DJX), which is the pint-sized version of the Dow equal to 1/100th of the industrial average, is up .50 to 124.30. Options volume is running 3.5 times its average daily for DJX, being driven by a DJX June 120 – 129 Strangle, bought at $2.65, 8200 times. The increased activity comes ahead of earnings from Alcoa. The Dow component unofficially kicks off the first-quarter earnings reporting season after the closing bell today. The strangle (buying June 120 puts and June 129 calls) is not a straight bearish play, but rather a bet that the Dow will see increasing volatility in the weeks ahead. Separately, DJX May 124 Puts are being bought at $2.30 per contract.

Implied Volatility Mover

Community Health (NYSE: CYH) is under fire this morning and options are actively traded after Tenet Healthcare (NYSE: THC) filed a lawsuit alleging that CYH inflated admissions and overstated growth statistics. Shares are down $6.96 to $33.34 and CYH April 34 Puts are the most actives. Looks like buyers are opening new positions and bracing for further losses in shares, as 2237 traded (91% on the Ask) versus 31 contracts of open interest. Apr 35, Apr 38 and May 35 puts are seeing interest as well. Implied volatility surged 160% to 87.

Options Flow

Bullish flow detected in Rare Element Resources (NYSE: REE), with 19,095 calls trading, or two times its recent average daily call volume.

Bearish activity detected in Longtop Financial Technologies (NYSE: LFT), with 4947 puts trading, or four times its recent average daily put volume.

Bearish activity detected in AMR Corp. (NYSE: AMR) with 18,563 puts trading, or three times its recent average daily put volume.

Increasing volume is also being seen in Tenet Healthcare, Baidu (NASDAQ: BIDU), and Alcoa.

Frederic Ruffy is the Senior Options Strategist at Whatstrading.com, a site dedicated to helping traders make sense of the complex and fragmented nature of listed options trading.