Your daily option trading wrap up.

Market Sentiment

Stocks are broadly higher late-Friday. After a three-day 322-point slide, the Dow Jones Industrial Average opened with modest gains on decreasing concerns about the recent spike in crude oil prices. After rallying 8% in a week, crude is up 84 cents to $98.12 late-Friday and 5.1% off the highs seen Thursday morning. Meanwhile, the day’s economic news was mixed. While fourth quarter GDP was a weaker than expected 2.8% annual rate (consensus was 3.3%), the University of Michigan Consumer Sentiment Index hit a three-year high of 77.5 (versus 75.1 consensus). Still, the data didn’t matter too much, as the focus is on overseas events. The Dow Jones Industrial Average is up 64 points. The tech-heavy NASDAQ has added 41.6. Trading in the options market is on the light side, with 7.6 million calls and 6.1 million puts traded so far.

Bullish Flow

CBOE Holdings (NASDAQ: CBOE) is trading up $1.83 to $29.35 and call activity is heating up in the owner of the Chicago Board Options Exchange Friday. CBOE March 30 Calls are the most actives with 2,845 traded (73% on the Ask) versus 2,746 in open interest. Similar action is being seen in the Mar 28, 29 and 32 calls. Seems that buyers are dominating the action. 12,000 calls traded so far. Implied volatility is up 8% to 41. CBOE rallied around earnings earlier this month and also saw a lift on takeover speculation last week after Deutsche Borse made a move to acquire NYSE-Euronext (NYSE: NYX). The theory goes that NASDAQ might now seek to increase its market share by purchasing CBOE, operator of the oldest options exchange and one of the largest exchanges.

The top equity options trade so far today is in Ford (NYSE: F). It’s a block of 11,000 F Jun 20 Calls at 11 cents per contract. The trade coincided with a 5,500-contract block of F Jun 17 Calls at 48 cents. Both traded on the PHLX division of the NASDAQ OMX (NASDAQ: NDAQ), and looks like a One X Two at 26 cents. Separately, a F March 15 – 16 One X Two Call Ratio Spread traded at 17 cents, 3500 times on the International Securities Exchange, where data indicate the March 15 leg was bought-to-open. Both spreads appear to be bullish plays on the automaker, as the stock tries to stabilize from 21.8% swoon suffered since earnings were reported on Jan. 28. Ford is up 22 cents to $14.92 today.

Bearish Flow

SPDR Financial Select Sector (NYSE: XLF) adds 24 cents to $16.78 and one investor sells 50,000 XLF Mar 15 Puts at a nickel and buys 25,000 XLF June 15 Puts at 36 cents. This Two X One time-spread, for a net debit of 26 cents, might be rolling out of a hedge from March to a position half the size in June.

Implied Volatility Mover

CBOE Volatility Index (CBOE: VIX) is down 2.24 to 19.08, but thanks to the big gap Tuesday morning, is up 2.51 points on the week. 175,000 calls and 117,000 puts traded on the volatility index. By way of comparison, 425,000 calls and 285,000 puts traded in the VIX pit Wednesday when it rallied to 23.22. VIX is now nearly 18% from Wednesday’s peak levels. Still, at 19.08, the index seems to have priced in a fair amount of macro-economic risk. The 60-day statistical volatility of the S&P 500 Index Options (CBOE: SPX) is just 10.6%. The fourth quarter earnings have now largely been discounted and the S&P 500 trades at 13.5 times forward earnings. Interest rates remain low and economic data is taking a backseat to events overseas. The main concern appears to be earnings risk from global macroeconomic uncertainties — China, Europe debt crisis and now spiking crude oil prices — and this might explain why VIX is 80% higher than SPX 60-day actual volatility.

Option Trading Flow

Bullish flow detected in National Semiconductor (NYSE: NSM), with 8248 calls trading, or 15 times its recent average daily call volume.

Bullish flow detected in Range Resources (NYSE: RRC), with 19,823 calls trading, or seven times its recent average daily call volume.

Bullish flow detected in Stone Energy (NYSE: SGY), with 2618 calls trading, or three times its recent average daily call volume.

Increasing volume is also being seen in Sara Lee (NYSE: SLE), Petrohawk (NYSE: HK), and Potash (NYSE: POT).

Frederic Ruffy is the Senior Options Strategist at Whatstrading.com, a site dedicated to helping trader