Your daily options trading update.

Bullish flow detected in Frontline (NYSE: FRO), with 10,592 calls trading, or seven times its recent average daily call volume.

Bearish activity detected in Genco Shipping and Trading (NYSE: GNK), with 17,606 puts trading, or 10times its recent average daily put volume.

Bearish activity detected in Novellus Systems (NASDAQ: NVLS), with 6162 puts trading, or nine times its recent average daily put volume.

Increasing volume is also being seen in Apache (NYSE: APA), Microsoft (NASDAQ: MSFT), and Amazon.com (NASDAQ: AMZN).

Sentiment

With one hour of trading left, stocks are holding gains in a day of relatively slow trading Thursday. Stocks struggled at the open after the Labor Department reported that weekly jobless claims jumped by 51,000 to 454,000 in the period ended January 22. Economists were looking for an increase of only 7,000. Separate data showed Durable Orders down 2.5% in December. The rocket scientists had that all wrong too. They were looking for an increase of 1.5%. The latest Pending Home Sales was a bright spot, improving 2% in November. Economists were looking for a decline of .5%. The market didn’t really react to the data and the focus seems to be primarily on earnings. While Procter & Gamble (NYSE: PG) and AT&T (NYSE: T) are weighing on the Dow with post-earnings losses, Caterpillar (NYSE: CAT) is up on better-than-expected results and one of 19 Dow stocks heading higher into the final half hour. The industrial average is up 8 points. The NASDAQ is extending this week’s four-day winning streak with an 18-point gain. The CBOE Volatility Index (VIX) slipped .26 to 16.38. Options volume is a bit lighter than normal, as another massive winter storm pounds the Northeast coast. 7.3 million calls and 6.7 million puts traded so far.

Bullish Flow

Prologis (NYSE: PLD) shares are up $1 to $15.70 on reports it is in merger talks with AMB Property (NYSE: AMB). Shares moved higher in pre-market action and touched a 52-week high of $16.52 in morning trading. A noteworthy options play in Prologis is a PLD Mar 14 – 16 risk reversal, 6800 times. Looks like 30 cents was collected to sell calls, buy puts, against a block of 680,000 shares at $15.83. Looks like a new collar position on the Denver-based industrial real estate company. Basically, in this strategy, the strategist is selling calls, buying puts against shares. The options combination (calls sold for 60 cents and puts bought for 30 cents) reduces the cost of owning shares. In this case, the stock was bought at $15.83 and the combo sold at 30 cents. So, the cost of the stock is $15.53 with upside to $16, or 3%, through the March expiration. The downside is limited by the $14 put. This is an institutional play where the investor probably sees a high probability of the stock holding above these levels due to the merger talks.

Bearish Flow

Options volume stats are interesting through midday, as 4.2 million puts and 4.1 million calls have traded so far. Higher volume in puts, relative to calls, strays from the recent pattern. The increase appears to be driven by action in the exchange-traded funds, where 1.8 million puts and 900,000 calls have traded. 179,000 calls and 441,000 puts across the index market and 2 million puts and 3 million calls across the equities.

Genco Shipping (NYSE: GNK) puts are busy, as the slide in the share price continues for another day. GNK touched a new 52-week low and is down 42 cents to $11.84 after Wells Fargo downgraded the stock to Market Perform. Shares are now down 22.9% since January 6 and took a hit on Tuesday after Deutsche Bank downgraded the stock to Hold from Buy. Meanwhile, today’s options action includes 13,000 puts and 1,000 calls. GNK March 10 Puts are the most active, with some buyers apparently paying 25 cents to open new positions. Feb 9, April 9 and April 10 puts are seeing interest as well. Implied volatility is up about 5% to 50. Earnings are expected mid-to-late February

Implied Volatility Mover

Netflix (NASDAQ: NFLX) touches a new 52-week high and is up $27 to $210.03 after the company reported a quarterly profit of 87 cents per share, which beat Street estimates by 16 cents. Netflix also raised guidance for the current quarter and said in its conference call that it will roll out a Facebook integration this year. Shares are up and the NFLX Weekly (Jan 28) 210 Calls, 215 calls, 200 puts and 205 puts are the most actives. Trading is heavy. 144,000 puts and 132,000 calls traded in Netflix, mostly in smaller sizes. The top trade is a block of 1000 NFLX Feb 160 Puts at the 37 cent asking price on Chicago Board Options Exchange. The next biggest trade: NFLX Mar 180 – 200 Put spread, apparently bought at $6.35, 711 times on International Stock Exchange. Meanwhile, implied volatility is down 31% to 42, compared to a 52-week high and low of 75 and 31.

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.