The firmly hawkish stance from Mr. Trichet lays the possibility of inflation as reason for withdrawing the exceptional stimulus measures. Still he also probably correctly points out that such lending practices to the private sector should be withdrawn promptly lest it becomes over reliant on the powers of the lender of the last resort. And we all know what moral hazards that can bring.

Micron Technology, Inc. (MU) – Options activity on the manufacturer of semiconductor devices suggests shares may recover slightly by expiration in December. Micron’s share price suffered significant declines throughout the latter portion of the trading week, and continued lower today by 1.25% to $7.03. Bank of America’s downgrade of the sector was largely responsible for a more than 4% slide on Thursday. A ratio bullish risk reversal by one investor offers a glimmer of optimism on the stock. It appears the trader sold 10,000 puts at the December 7.0 strike for 45 cents premium in order to offset the cost of buying 20,000 calls at the higher December 8.0 strike for 15 pennies apiece. The investor pockets a net credit of 15 cents per contract, which he retains in full as long as shares remain higher than $7.00 through expiration. Additional profits are available in the event that the stock rallies 14% from the current price to surpass the breakeven point at $8.00.

Mastercard Inc. (MA) – A GAO report concluded that lowering processing fees charge by card payment processors charged at stores might not save consumers money, who might also end up paying more for purchases. As we stare at a sea of red on our market scanners today, options activity at two companies stands out to display healthy call activity. Meanwhile both share prices have jumped higher as investors respond to the lower likelihood of reduced profits at Mastercard, whose shares are 3% higher at $234.15. Option traders proved just how treacherous such movements in the underlying can be in the context of soon-to-expire options. For example the premium on put options expiring at the weekend with a 230 strike price dropped from 7.0 to just 65 cents as investors exchanged more than 5,000 contracts. On the other side of the coin investors drove up the call premium at the 230 strike from 50 cents to 6.00. In perhaps bolder bets, the 240 strike calls rose from 15 cents to 85 cents at one point on volume of almost 5,000 lots.

Illumina Inc. (ILMN) – Shares in the company that develops the toolkit for genomic researchers slipped 7% Wednesday to $29.05 on a day when EraGen announced a strategic partnership with Illumina to access its molecular tools technology. Option activity of 21,000 lots was above normal at 14-times the typical average volume. In the short-term investors appeared to sell call options at the 30 strike expiring in December in favor of bearish puts at the 25 strike. That would indicate whatever the catalyst for today’s drop in its shares (we don’t think the alliance with EraGen ought to send them into reverse gear) is likely to remain a negative factor through year end. Last month Illumina not only disappointed at earnings but also revised its forecast down. Thereafter, however, investors appeared to expect better things from the company. More than 5,500 call options were eagerly sought as the share price shrank, with investors paying up to 1.90 per contract to lock into fixed buying rights on shares ahead of January expiration implying a 10% recovery from present. The activity caused option implied volatility to rise about 20% to 49% today.

The DIRECTV Group, Inc. (DTV) – The provider of subscription television services enticed one bullish trader to initiate a ratio call spread in the January 2010 contract. DTV’s shares are currently up 1% to $30.61 as of 12:05 pm (EDT). It appears the investor purchased 2,500 calls at the now in-the-money January 29 strike for 2.85 each, and shed 5,000 calls at the higher January 32 strike for 1.27 apiece. The net cost of the transaction amounts to 31 cents per contract. The financing provided by selling twice as many out-of-the-money calls lowers the effective breakeven point on the trade to $29.31. Thus, the investor stands to accrue maximum potential profits of 2.69 per contract if shares of DTV rally up to $32.00 by January’s expiration day.

Bristol Myers Squibb (BMY) – For its part shares surged to a one-year high after it jettisoned Mead Johnson, rising 5.7% to $24.47. The progress was slow throughout the morning that some call sellers were left wanting at the November 24 strike. Early sellers were forced to rethink as they tossed out calls at 27 cents per contract only to see buyers step in shortly after 10am to pay 34 cents before things really got interesting with call options currently commanding a 65 cent premium. Some 9,800 calls changed hands at this strike – almost equivalent to the 10,694 previously established calls. Put sellers were also in evidence using the same November contract and collected rich premiums in the expectation that the share price will rise despite the additional risk that the company has a less diversified product line in light of the Mead Johnson announcement. Option implied volatility rose, but only jumped from 21% to 23%.

PowerShares DB US Dollar Bullish Fund (UUP) – Once again options action in the dollar index fund catches our eye. The dollar index itself is down 0.3% at 75.45, while this ETF, which allegedly tracks its performance, is down 1.9% at $22.36. No one ever told me this was a leveraged fund, but its own volatility lives in a world of its own. However, the soon-to-expire November options that saw swollen open interest the size of a small African nation last week, are heavily offered this morning and are being sold actively at just five cents. So far it looks like longs are ditching about 23,000 lots of a massive 261,000 established positions for fear that shares in the fund don’t stage a rally that would lift them above $23 by this time next week. Given the recent shenanigans, that may or may not require a rise in the value of the dollar index. It also appears that the pessimism spread to the same strike in the December contract where the action appears to have been inspired by sellers. Some 40,000 calls have changed hands, while open interest is 250,000 lots.

First Solar, Inc. (FSLR) – Bullish options activity appeared in the November contract despite the 2.5% decline in shares of the semiconductor company today to $116.98. A bull call spread on FSLR suggests one investor doubts shares will continue much lower. The trader purchased approximately 2,300 calls at the in-the-money November 115 strike for 4.75 each, spread against the sale of roughly the same number of calls at the higher November 120 strike for 2.44 apiece. The net cost of the transaction amounts to 2.31 per contract. Shares must recover through $117.31 in order for the contrarian trader to breakeven by expiration next Friday. Maximum potential profits of 2.69 per share are available to the call spreader if the stock rebounds up to $120.00. We note that FSLR traded as high as $120.14 during yesterday’s trading session.

DryShips, Inc. (DRYS) – Investors initiated bullish positions on the Greek drybulk shipping company. Shares of the firm rallied 1.5% to $6.32. Option traders favored the call spread today and utilized the strategy in the January 2010 contract to position for continued upward movement in the price of the underlying by expiration. Approximately 25,000 calls were purchased at the January 7.5 strike for an average premium of 45 cents each, spread against the sale of roughly the same number of calls at the higher January 9.0 strike for 15 cents apiece. The average net cost of the bullish transaction amounts to 31 cents per contract. DryShips’s shares must rally 23% in order for call-spreaders to breakeven at $7.81. Investors stand ready to accumulate maximum potential profits of 1.19 per contract if the stock surges 42% over the current price to $9.00 by expiration in January.

Priceline.com, Inc. (PCLN) – Third-quarter sales and profit at online travel agency, Priceline.com, exceeded analyst expectations and sent shares up 19% today to a new 52-week high of $206.78. PCLN posted earnings of $3.45 per share whereas previous forecasts averaged around $2.92 per share. Priceline raked in 30% higher sales of $730.7 million for the quarter. Investors initiated bullish stances on the stock by purchasing 3,200 calls at the November 210 strike for an average premium of 2.72 apiece. Traders will profit if shares of PCLN continue to rally another 4% and surpass the breakeven price of $212.72 by expiration this month. Nearly 1,000 call options were purchased at the November 230 strike for approximately 64 cents premium each. Investors long the November 230 strike calls could already reel in short term profits by selling the contracts, which now tote an asking price of 1.15 per contract. Option implied volatility imploded following earnings, falling 24%, to an intraday low of 42%.

AMR Corp. (AMR) – The operator of American Airlines attracted bullish option traders today as shares of the firm rallied approximately 1.5% to $5.74. Investors expecting shares to appreciate by expiration in December purchased call options. Approximately 7,000 calls were picked up at the December 6.0 strike for an average premium of 60 cents apiece. Traders also purchased about 4,000 calls at the higher December 7.0 strike for 30 cents premium each. Call-buyers at the higher strike may accumulate profits by expiration if shares of AMR increase at least 27% to surpass the breakeven price of $7.30.