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|Includes: ACN, AerCap Holdings N.V. (AER), ARO, BA, DHI, DISH, HON, JCP, NKE, NTRS, PNC, TER, TOL, WSM, XLU, YUM

Options Insight: After the rally, replace big beneficiaries with calls: Improvement in US macro data and a relaxation in global concerns led to a 7% rally in the S&P 500 and a 13% drop in average stock implied volatility over the past two weeks. We screen for those companies which benefitted most from the past two week’s rally and have lower implied volatility.  We recommend that holders of these stocks replace their stock positions with April/May out-of-the-money call options to maintain upside exposure while reducing risk. On average, these stocks rose 10% over the past 2 weeks and 3-month implied volatility fell 18%, now 6 points below 3-mth realized. Investors can buy the closest listed April/May 30 delta call (average 14% out-of-the-money call) for an average of 4% to replace their exposure in AEO, ARO, JCP, TOL, WSM, DHI, NTRS, BA, YUM, PNC, & TER.                                                                                                                                                                                                                                    Trade 1: Buy NKE Jan'12 $95/$97.5 strangle for earnings (or replace stock with options to gain directional exposure); all eyes on gross margin guidance on 20-Dec earnings. Options are attractive, implying a +/-4.5% move on earnings, lower than the 4Q median move of +/-7.5%. We see the potential for similar, if not more, volatility this earnings as guidance for orders and the gross margin outlook could begin to reflect some key drivers on the horizon that present 15% upside to Street 2012 estimates.

Trade 2: short DISH stock and sell Jun'12 $24-$32.5 strangles. Options are among the most expensive in the sector, but its spectrum base could result in lower volatility. With a higher value for spectrum helping offset the negative fundamental challenges, we see the potential for DISH implied volatility to decline, benefiting option sellers.

Trade 3: Buy HON Dec'11 options ahead of guidance update 15-Dec.

Trade 4: Collect 7% for XLU options; limited near-term catalysts.

Trade 5: Hedge ACN holdings with puts; risk to earnings 15-Dec.