Bullish flow detected in Pep Boys – Manny Moe and Jack (NYSE: PBY), with 2440 calls trading, or 174 times its recent average daily call volume.

Bullish flow detected in PharmAthene (AMEX: PIP), with 5211 calls trading, or four times its recent average daily call volume.

Bearish activity detected in China-Biotics (NASDAQ: CHBT), with 5197 puts trading, or nine times its recent average daily put volume.

Increasing volume is also being seen in General Electric (NYSE: GE), Google (NASDAQ: GOOG), and Yahoo (NASDAQ: YHOO).

Sentiment

Stocks were trading mixed heading into the final 40 minutes of trading on options expiration Friday. With no economic data to guide trading, the focus is on earnings. GE is up nearly 8% and leading the Dow Jones Industrial Average to higher ground after reporting earnings and revenues that beat Street estimates. Google however, gave up early gains and is trading lower after the company reported results late-Thursday and said that founder Larry Page was returning to become chief executive. Bank of America (NYSE: BAC) is also seeing post-earnings weakness and is one of 11 Dow stocks trading lower late-Friday. GE and 18 other Dow stocks are trading higher, however, and the industrial average is up 60 points on the day. The tech-heavy NASDAQ lost 5.9 points. The CBOE Volatility Index (VIX) is flat at 18. Trading is active due to the options expiration with 10.3 million calls and 7.8 million puts traded so far.

Bullish Flow

Pfizer (NYSE: PFE) adds a penny to $18.25 and 18,500 PFE Jan 15 Calls sold at $3.20 per contract. It traded at about 10:00 on the PHLX. Then, about 20 minutes later, 16,000 PFE January 2013 25 Calls were bought at 48 cents each. It might be the same investor, closing a position in the in-the-money (ITM) Jan 15 calls before they expire, then opening a new position in deep out-of-the-money (OTM) Jan 2013 call options.

GE adds $1.03 to $19.46 and led the Dow Jones Industrial Average to a 58-point gain in the first hour of trading Friday. GE shares rallied at the open after the company reported a 36-cent per share quarterly profit on $41.38 billion in revenues. Results easily topped analyst estimates of 32 cents on $39.9 billion. Trading in the options market is brisk as well, with 206,000 calls and 45,000 puts traded so far. A lot of the action is in the January contracts with closing trades ahead of tomorrow’s options expiration. However, the top trade is a GE Feb – Mar 19 Call spread, bought at 15 cents, 4000 times, and probably rolls a bullish position in ITM calls from one month to the next.

Bearish Flow

The top options trade so far today is a block of 65,162 Citi (NYSE: C) Jan 2012 7.5 calls at 12 cents. Hearing it was sold and possibly closing, as open interest is 2.07 million contracts. Citi has added 6 cents to $4.86 Friday, but down 5.3% since earnings were reported Monday. Consequently, the C Jan 2012 7.5 Calls are 54.3% OTM with one year of life remaining.

Implied Volatility Mover

The VIX adds .04 to 18.03 and has added 16.6% in an abbreviated week of trading. VIX fully recovered the 9.8% loss suffered the week before and has been heading higher ahead of some event risk next week, which includes another flood of earnings reports, Consumer Confidence, New Homes Sales, Durable Goods, and GDP Data, as well as an FOMC meeting on rates Tuesday.

This article is by Frederic Ruffy, 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.