Microsoft Corp. (NASDAQ: MSFT), one of the equities consistently seeing the heaviest daily option volume, saw some heavy options activity right out of the gate Monday morning.

The January 2012 37.50-strike call is easily the site of heaviest call volume so far, with 39,660 contracts trading on open interest of just 521. Eleven minutes after the opening bell sounded, a block of 38,563 contracts crossed the tape, trading one penny off the ask price at $1.55 per contract.

After the opening bell, Nike (NYSE: NKE) will be reporting first-quarter earnings results. Analysts are looking for per-share results of 97 cents and revenue of $4.9 billion. Check out Michael Fowlkes' earnings preview for a complete look at this report.

On Monday, option players waved a bullish flag ahead of Nike's results, trading nearly 6,000 contracts at the October 65 strike. With the stock trading at $59.22, this front-month option (expiring in about two-and-a-half weeks) is out-of-the-money by nearly 10%. Open interest expanded from 2,696 to 7,116, meaning that most of these traded to open. The majority were in fact bought to open, trading for about 35 cents apiece.

FedEx Corp. (NYSE: FDX) is on the upswing after hiking its fiscal first-quarter earnings guidance. The parcel specialist said Friday morning that it expects first-quarter profits of 58 cents per share, up from its previous outlook of 30 cents to 45 cents per share. For the current quarter, FedEx predicts earnings of 65 cents to 95 cents per share.

Both figures compare favorably to analysts' consensus estimates, which call for a first-quarter profit of 44 cents per share and second-quarter earnings of 70 cents per share. Chief Financial Officer Alan Graf cited stronger-than-expected volume in FedEx's international priority-delivery service for the upbeat guidance, as well as strict internal cost management.

E*Trade Financial Corp. (NASDAQ: ETFC) has garnered three upgrades in as many days this week. On Monday, Fox-Pitt upped the equity from Underperform to In Line, while FBR on Tuesday raised its opinion from Underperform to Outperform. Raymond James rounded out the trifecta on Wednesday, hiking its rating on ETFC from Underperform to Market Perform.

Judging by this rush of analyst love, Wall Street seems to think the worst is over for E*Trade. However, most of this week's commentary falls under the category of "damning with faint praise." For example, Fox-Pitt said they now believe ETFC is more likely to be acquired by another firm than to file bankruptcy, and Raymond James observed that the stock has "limited downside" -- hardly a bold statement for an equity that settled Wednesday at $1.23.

Coal concern Alpha Natural Resources, Inc. (NYSE: ANR) has spiked more than 20% today on the heels of its first-quarter earnings report. The company reported a 61% improvement in net income, which rose to $41 million, or 58 cents per share, compared to $25.5 million, or 39 cents per share, in the first quarter of 2008.

Revenue for the period inched higher to $424.4 million. ANR's profit easily exceeded Wall Street's expectations; analysts were looking for a profit of 48 cents per share on $515.5 million.

ANR gapped higher with the sound of the opening bell today, extending its year-to-date advance of 56.4%. If the stock keeps climbing, it could soon have a chance to challenge resistance from its 10-month moving average, which is currently hovering in the $33 neighborhood.

As Jon Ogg reported, Allergan, Inc. (NYSE: AGN - option chain) rallied sharply on Tuesday amid rumors that GlaxoSmithKline (NYSE: GSK) was mulling a takeover bid. Speculative investors jumped all over the news, as option volume on AGN skyrocketed well beyond normal levels yesterday. Interestingly enough, it seems that some traders took advantage of the stock's surge to initiate new bearish positions.

Specifically, AGN on Tuesday saw 15,850 puts cross the tape, which represents about 14.5 times its average daily put trading volume. Meanwhile, 59,943 call contracts changed hands, marking 11.5 times the norm.

With Circuit City Stores, Inc. (NYSE: CC) flailing in the wind for the last two quarters, the company's shares are sitting in prime takeover territory. Best Buy, Inc. (NYSE: BBY) is not letting up on its death grip yet, and continues to out-sell and out-perform rival Circuit City at every turn. As I mused a few weeks ago, CEO Phil Schoonover may as well put his resume up for a peek. Well, if anyone wants to look at hiring him, anyway.

But, downtrodden times usually bring out the shorters, and of course this is the case with those shorting Circuit City shares right now. Shares in the consumer electronics retailer are already sitting in cherry-picking territory, closing yesterday at under $10 each. Do they have room to go even lower? Based on recent results and the guidance being given for a possibly poor-performing holiday retail season, Circuit City shares may head south even further.

Is it time to get in now? Only if you're into shorting -- or believing that a private equity buyout may soon happen to the retailer (a rumor for quarters now). Shares are sitting at a four-year low as of this week, and the opportunity vultures may be swooping in for several reasons. It's an opportunity with risk, but isn't everything? Almost 33 million shares were held short in September of this year, which comprises 19% of outstanding public shares. What does that tell you? To me, everything.

There was a broad based rally in the market today with the Dow Jones industrial Average pushing through the 14,000 level to close at 14,087.55.

The NYSE had volume of 3.3 billion shares with 2,503 shares advancing while 789 declined for a gain of 145.22 points to close at 10,184.5. On the NASDAQ, 2 billion shares traded, 2,144 advanced and 868 declined for a gain of 39.49 to 2,740.99.

Walgreen Company (NYSE: WAG) fell $7.08 (-15%) to $40.16 as fourth quarter profits fell on lower generic drug reimbursements. Hasbro, Inc. (NYSE: HAS) rose $1.93 (7%) to $29.81. CVS Caremark Corporation (NYSE: CVS) fell $2.48 (-6%) to $37.15 in sympathy with Walgreen's. Garmin Ltd. (NASDAQ: GRMN) fell $12.17 (-10%) to $107.23 as Nokia Corporation (NYSE: NOK) purchased Navtec, potentially integrating GPS into cell phones and making Garmin's popular dash top units obsolete.

In options there were 4.7 million puts and 5.6 million calls traded for a put/call open interest ratio of 0.83. General Electric Company (NYSE: GE) saw heavy volume on the December 40 calls (GELH) with over 34,400 options trading. American Tower Corporation (NYSE: AMT) saw heavy volume on the January 50 calls (AMTAJ) with over 20,900 options trading. AK Steel Holding Corporation (NYSE: AKS) saw heavy volume on the October 35 puts (AKSVG) with over 50,800 options trading but this may have also been related to the heavy volume on the November 40 puts (AKSWH) which moved a similar volume with 50,700 contracts moving.
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Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Market action stayed in a range falling into the red, pushing into the green then closing mixed. Oil prices ended the day higher and the Fed seemed to calm some fears with its speeches.

The NYSE had volume of 2.8 billion shares with 1,274 shares advancing while 2,022 declined for a loss of 28.8 points to close at 9,457.64. On the NASDAQ, 1.8 billion shares traded, 1,079 advanced and 1,949 declined for a loss of 6.59 to 2,559.11.

Stocks moving today included: Krispy Kreme Doughnuts (NYSE: KKD) fell $0.67 (-17%) to $3.24 hitting a new low after poor results. Countrywide Financial Corp (NYSE: CFC) lost $1.00 (-5%) to $17.21 after large shareholders left. Office Depot Inc (NYSE: ODP) traded lower $0.92 (-5%) to $18.88 continuing its slide after Goldman cut estimates Friday. RadioShack (NYSE: RSH) traded lower $1.00 (-5%) to $20.89 as retail stocks were weak. Netflix (NASDAQ: NFLX) fell $.64 (-4%) to $17.40.

In options there were 4.9 million puts and 4.9 million calls traded for an evenly balanced put/call open interest ratio of 0.99. CBOE S&P 500 Volatility Index (NASDAQ: $VIX) saw heavy volume on the September 30 calls (VIXIF) with over 34,500 options trading. Activity on the 30 calls could represent fear that the market may fall. Options can be both bought and sold, a market crash would cause the VIX to rise so a purchase of calls would represent an insurance policy against downward movement. The General Motors (NYSE: GM) saw heavy volume on the January 42.50 calls (GMAV) with over 25,000 options trading. Intel (NASDAQ: INTC) saw heavy volume on the September 25 calls (INQIE) with over 20,600 options trading. Citigroup (NYSE: C) saw heavy volume on the October 45 puts (CVI) with over 24,700 options trading. S&P Depositary Receipts Trust ETF (NYSE: SPY) saw heavy volume on the September 140 puts (SFBUJ) with over 21,400 options trading.

Kevin Kersten is an Options Analyst with InvestorsObserver.com.

Although they spent most of the day in the green the indexes gave up ground through most of the session to close just in the red.

The NYSE had volume of 3.6 billion shares with 1,612 shares advancing while 1,706 declined for a loss of 6.18 points to close at 9,428.86. On the NASDAQ, 2.2 billion shares traded, 1,426 advanced and 1,685 declined for a loss of -2.65 to 2,542.24.

EMC Corporation (NYSE: EMC) rose $1.33 (8%) to $19.05; ahead of it's subsidiary VMware making its debut on the NYSE tomorrow in an IPO that analysts are predicting will be big. EMC will retain 90% of the shares. This is likely the reason for the active calls as EMC Corp. (NYSE: EMC) saw heavy volume on the August 19 calls (EMCHT) with over 56,000 options trading.

Centex Corporation (NYSE: CTX) fell $2.78 (-7%) to $35.63. Lennar Corporation (NYSE: LEN) fell $2.53 (-7%) to $32.92. Brinker International (NYSE: EAT) rose $1.82 (7%) to $28.98. The Goodyear Tire & Rubber Company (NYSE: GT) rose $1.70 (6%) to $28.95.

In options there were 5.4 million puts and 5.8 million calls traded for a put/call open interest ratio of 0.92. The CBOE Volatility Index has been high closing today at 26.57. This is the fear indicator of the market. Not only is the index up, but options on the index are high with the CBOE S&P 500 Volatility Index (NASDAQ: $VIX) moving volume on the August 25 calls (VIXHE) with over 35,000 contracts.

Other stocks with active options include State Street Boston (NYSE: STT) saw heavy volume on the November 75 calls (STTKO) with over 60,000 options trading. Most of the active puts were on the indexes and the iShares Russell 2000 ETF (NYSE: IWM) had volume on the August 78 puts (IOWTZ) with over 86,000 options trading.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

The pesky little options that trade in Chicago, Philly, and Amex can provide quite a few insights for investors if you can pick out the important data early enough. It is always hard to judge the reasoning and intent of options traders, but it looks like there is growing conviction that there could be some large developments at Time Warner before mid-January.

Time Warner Inc. (NYSE:TWX) has gone back under $20 and that makes the further apart strikes more interesting to analyze. TWX Shares did well in 2006 because of activist-instigated strategies and the restructuring, but the recently released earnings and buyback announcement were trumped by the company backing off of previous growth expectations inside AOL. This unit is still far too valuable to just spin off entirely, but yesterday I laid out the scenario that seems the most likely -- AOL gets relaunched as the "AOL" ticker on NYSE as a tracking stock with Time Warner still holding the vast majority of shares.

Wendy's International Inc. (NYSE: WEN) overall implied volatility increases as WEN reviews strategic options.

• WEN is recently up $2.47 to $40.70.
  
• WEN announced "formation of a special committee of independent directors to review strategic options to enhance shareholder value on 4/26/07."
  
• WEN May option implied volatility is at 40 and June is at 39; above its 26-week average of 23 according to Track Data, suggesting larger risk.

IDM Pharma Inc. (NASDAQ: IDMI) options active and prices valued for Risk into 5/9 FDA outcome.

• IDMI is recently down $2.82 to $5.98.
  
• IDMI will hold a conference call on 5/9 to discuss the outcome of the U.S. Food and Drug Administration Oncologic Drugs Advisory Committee meeting for Junovan (treatment for non-metastatic respectable osteosarcoma).
  
• IDMI call option volume of 2,689 contracts compares to put volume of 2,364 contracts. IDMI May 5 straddle is priced at $3.60 according to Track Data, suggesting large price risks.

Option volume leaders today are: Dendreon Corp. (NASDAQ: DNDN), Elan Corp. (NYSE: ELN), Citigroup Inc. (NYSE: C) and Alcoa Inc. (NYSE: AA).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX up .02 to 10.25.

Compass Bancshares-(NASDAQ:CBSS) option volume heavy & implied volatility up to 24 from 15. CBSS is recently up $3.91 to $65.67. Compass Bancshares, a financial services firm based in Birmingham, Alabama, is up on unconfirmed chatter SunTrust-(NYSE:STI) is interested in a M&A transaction with CBSS. CBSS call option volume of 3,887 contracts compares to put volume of 999 contracts. CBSS daily average volume over the last ten business days is 424 contracts. CBSS March option implied volatility of 24 is above its 26-week average of 16 according to Track Data, suggesting larger price risks.

Option volume leaders today were: Bank of America (NYSE:BAC), Microsoft Corp. (NASDAQ:MSFT), Boston Scientific (NYSE:BSX), Alcoa (NYSE:AA), Qualcomm (NASDAQ:QCOM) and Bidu (NASDAQ: BIDU).

We noted earlier today in our Time Warner opening comments that we would probably see some of this month's options contracts that expire this coming Friday get rolled out to October at some point this week. We already saw that happen this morning on contract.

The September $15 Calls that expire Friday were rolled out; in other words, the holder of the call options moved the position to the same $15 strike price out to the October calls that expire on Friday, October 20, 2006. It looks like these were essentially 8,600 contracts that rolled. Before this, the open interest (contracts still outstanding) in the September $15 calls was listed as 11,601, but that will likely be listed tomorrow as under 2,500 contracts since this options transaction occurred.

That should leave just the September $17 Calls as the only product that has over 10,000 contracts in the open interest for all of the close strike prices expiring Friday. Since that is above the current stock price, those are going to be treated as speculative call option trades that may just expire worthless. Our crystal ball is in the shop and, assuming the stock is static and does not rise over $17.00, and you have to use a static snapshot based on a set time to expiration to determine the values there. Since the market is only $0.05 bid and $0.10 ask for the $17 Calls that expire this Friday, the street isn't expecting a major announcement or move in the TWX shares either.

The reason to point out that this was a roll-out was that virtually the same volume (8,615 contracts) has traded in the October $15 Calls, and the trade looks like it was done in between the bid-ask. That is about as close to the classic pattern traders would see for an options roll-out. The 8,615 contracts was also larger than the entire 8,274 listed open interest in the same contract, so if you used a static figure for this trading today you would expect to see a more than doubling of that open interest tomorrow.