ETFC – Shares in parched brokerage E*Trade found temporary relief in news of a $2.5 billion cash infusion from Citadel Investment Group, gaining 1.52% to register $5.36 this afternoon. The 148,000 contracts circulating this afternoon have made E*Trade the day’s most liquid option family by a long shot. Traders are showing a propensity to sell risk reversals in the January contract between the 5 and 7.50 strikes, writing the puts at around $0.75 apiece while buying into upside price exposure at the $7.50 for about $0.35 per contract. These contracts traded on a volume of more than 30,000 lots, 3 times the existing open interest. Premiums on both calls and puts are sharply lower than was the case yesterday, as implied volatility in E*Trade options plummeted nearly 22% overnight on news of the cash infusion. Front-month action has indicated willingness to buy December calls at the 5.0 strike, while the 6.0 calls have traded actively to buyers and sellers.

ASCA – Ameristar Casinos Inc. Options activity in Ameristar flew onto the Interactive Brokers scanners Thursday with unusual volume trading in its call options in the March series. The activity looks pretty bullish and is accompanied by a 5.6% jump in the share price to $31.70 on no notable news on the company. However, it’s the second such jump in activity in the shares in under a month. There is uncertainty surrounding the outcome of a 55% majority stake in the gaming company, which is controlled by the estate of deceased founder, Craig Neilsen. Since his November 2006 demise speculation has surrounded the prospects for the company and the estate has floated the notion that it may sell some or part of its holding or indeed merge with another entity. The prospect was also filed with the SEC in October. While existing management has no comment on the activities of the estate, investors reacted in October with a 14% surge in the share price. Management has also noted that it intends to continue a recent strategy of acquiring other companies such that its size might double. Most recently the company bought an Indiana riverboat casino and reported a 3.5% contribution to quarterly revenues thanks to just 12 days of operations at the riverboat. Today’s option trading in the company stuck out like a sore thumb. The number of current positions exhibited in the options market is a meager 8,324 lots. So options volume today of more than half that number sends our screens flashing red. The existing bulk of open interest stands at the December 30 strike where a 3,500 lot positions backs the hope that shares will remain buoyant above there by next month’s expiration. In trading today, buyers bought almost 2,000 calls at the March 30 strike and a further 1,000 calls at the 35 strike. The size of options in play today coupled with the jump in implied volatility to 52% signals to us that an unexpected event known perhaps only to a few investors close to a pending event might be in the works.