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NEW YORK Reuters Investors are using options to brace for big swings next week as Wall Street enters the peak of the most volatile month for stocks historically.

Options on the CBOE Volatility Index .VIX, Wall Streets so-called fear gauge, were one of the top-traded contracts in the options market as investors made bets on a sharp jump in the index.

Next week "is the real start of a month to be nervous about," said Brian Overby, senior options analyst at online brokerage TradeKing in Charlotte, North Carolina.

"Especially, because the volatility has come off so much, there is a lot of complacency in the market. So if we get one item of bad news, that will cause a big jump."

September is typically a weak month for stocks, and volatility reaches its peak as traders are fully back to work from summer holidays.

The largest open interest on VIX options was on the Sept $45 calls, suggesting some investors were betting on the gauge to double the current level by next weeks expiration, said Ryan Detrick, senior technical analyst at Schaeffers Investment Research in Cincinnati, Ohio.

"With less than one more week to go, unless something tragic happens, it is unlikely that the VIX would double. But the bottom line is, people are hedging themselves a lot more, preparing themselves for big moves," he said.

On Friday, about 145,000 calls traded in VIX options, which are priced off of VIX futures, versus 46,000 puts, according to options analytic firm Trade Alert.

The VIX closed down 4 percent to 21.99, below its 200-day moving average. But the index was up 3.2 percent on the week, having fallen more than 12 percent in the previous week.

The index usually has an inverse relationship with the Standard & Poors 500 benchmark as it tracks option prices that investors are willing to pay as a protection on the underlying stocks.

BEARISH SENTIMENT CONTINUES

The Dow .DJI and S&P 500 .SPX closed the week with their seventh gain in eight sessions in a turnaround period for stocks that has seen investors worst fears about the economy start to dissipate.

But the gains were made on the second lightest trading volume of the year so far as investors remained on guard for more deterioration in the market.

Michael Shea, managing partner at Direct Access Partners in New York, said the bears continue to be more active at the high end of the range.

"Its Datapalooza next week... If all the data points in one direction, which is unlikely, you might see a more substantive shift in sentiment. But getting a mixed message is the more likely outcome, perpetuating this current inertia we are experiencing," he said.

Next weeks economic calendar includes retail sales due on Tuesday, industrial production and capacity utilization on Wednesday, the Producer Price Index and jobless claims on Thursday and then the Consumer Price Index and University of Michigan/Thomson Reuters consumer confidence on Friday.

Adding to volatility, Friday also marks the end of the "quadruple witching" period - the quarterly settlement and expiration of four different types of September equity futures and options contracts.

Expiration usually leads to greater volume and volatility as players adjust or exercise their derivative positions.

But the two-day event, which only happens four times a year in March, June, September and December, could stir up more sudden swings in the market as traders close hedging positions or roll them over at the last minute.

Reporting by Angela Moon; Additional Reporting by Doris Frankel; Editing by Kenneth Barry

WASHINGTON Reuters The Treasury Department has selected Patricia Geoghegan to replace Kenneth Feinberg as the "pay czar" overseeing compensation at companies bailed out by the government.

Geoghegan, who has been working with the pay czar office for about a year, will oversee the pay practices at American International Group Inc, General Motors Co, Chrysler Group LLC and Ally Financial, according to the Treasury Department.

Other companies such as Bank of America and Citigroup were released from the offices jurisdiction after repaying taxpayer money.

Feinberg left the post to administer BP Plcs $20 billion oil spill fund.

The office that Geoghegan, 63, takes over was established during the financial crisis to ensure that bailed-out companies were not using taxpayer money to pay out excessive bonuses.

Many of the companies have chafed under the scrutiny, arguing it hobbled them against private sector competitors not subject to similar restraints.

Geoghegan previously was a lawyer at Cravath, Swaine and Moore LLP in New York for 33 years.

Reporting by Dave Clarke; Editing by Gary Hill

SAN FRANCISCO Reuters Google Incs Android software will become the worlds second most popular operating system for cell phones this year, leapfrogging rival offerings from Microsoft Corp, Research in Motion and Apple Inc, according to a new report.

By 2014 Android will account for nearly 30 percent of all cell phone operating system sales, according to research firm Gartner, putting it in position to challenge Nokia Corps Symbian software, which has reigned as the top mobile operating system for years.

Symbian will have a 30.2 percent share of the global market in 2014, according to Gartner, compared to Androids 29.6 percent.

Gartner said it expects a variety of less-expensive Android devices shipping in the second half of 2010 to boost Androids growth, allowing Android to grab the No. 2 worldwide rank nearly two years sooner than the firm had initially expected.

The market for mobile phone software has become a prime battleground for technology companies, as consumers increasingly use their phones to access the Internet, listen to digital music and play video games.

Apple jump-started the market for high-end smartphones with the launch of its iPhone in 2007.

For Google, the worlds No. 1 Internet search engine, making the transition to mobile phones is key as it seeks to maintain and expand its nearly $24 billion online advertising business.

Googles Android software, which it offers free to cell phone vendors, has experienced dramatic growth since coming to market two years ago. More than 200,000 Android phones, from companies including Motorola Inc, HTC Corp and Samsung Electronics, are sold every day, Google CEO Eric Schmidt said recently.

Android became the No. 1 operating system for U.S. smartphones in the second quarter, according to a report last month by industry tracker NPD.

Nokias Symbian operating system has maintained the No. 1 spot worldwide, thanks to the companys broad distribution of its handsets. But Nokia has struggled to deliver a high-end smartphone to compete with the likes of the Apple iPhone or devices based on Googles Android.

On Friday, Nokia announced that Microsofts Stephen Elop would replace Olli-Pekka Kallasvuo as chief executive in a bid to revive the Finish handset companys fortunes. [nLDE68903W]

Gartner projected that Apples iOS software, which is only available on Apples iPhone, will add nearly 3 percentage points of market share to achieve a 17.1 percent slice of the global market by 2011, but will slip back to a 14.9 percent share in 2014.

Blackberry-maker Research in Motion will see its share fall from 19.9 percent in 2009 to 11.7 percent in 2014, Gartner said, while Microsofts Windows Phone software will decline to 3.9 percent in 2014 from 8.7 percent in 2009.

Reporting by Alexei Oreskovic; Editing by Richard Chang

WASHINGTON Reuters Wholesale inventories surged by the largest amount in two years in July, a government report said on Friday, in a sign firms were anticipating enough demand to boost stock this summer.

Inventories jumped 1.3 percent, the steepest gain since July 2008, and more than three times the 0.4 percent increase analysts had anticipated, a Commerce Department report showed.

A restocking of inventories has helped drive the economys recovery, but analysts say slowing demand has likely left businesses with ample stocks and they expect the boost from inventories to fade in the second half of the year.

A quickened pace of inventory accumulation accounted for 0.6 percentage points of the economys 1.6 percent annual growth rate during the second quarter.

Economic data suggest the recovery may have lost steam over the summer. Fridays report showed wholesale sales rose by a larger-than-expected 0.6 percent in July, suggesting inventories may not have been gathering too much dust on shelves.

But the sales rise followed declines in June and May, and analysts said sales would need to stay strong to support continued inventory building.

"In general there has been an increase in inventories at a time when the economy is slowing down," said Brian Bethune, an economist with IHS Global Insight in Lexington, Massachusetts. "Somethings gotta give here. Either the economy picks up or production has to be cut."

Markets paid little attention to the report.

The inventory-to-sales ratio, which measures how long it would take to clear shelves at the current sales pace, edged up to 1.16 months worth. It was the highest since February, but was down from 1.27 months worth a year ago.

Reporting by Mark Felsenthal, Editing by Andrea Ricci

NEW YORK Reuters Stock index futures rose slightly on Friday in low volume and were up for the seventh day in eight, buoyed by a jump in crude oil prices.

U.S. crude approached a three-week high near $76 per barrel after record U.S. inventories were offset by a forced shutdown of the biggest pipeline supplying Canadian oil to refineries in the Midwest and to a key storage hub in Oklahoma.

"Higher oil prices have at least for now translated to higher stock prices," said Rick Meckler, president of LibertyView Capital Management in New York.

"The market has been looking to rally back from what was a very difficult August. The trend so far has been up, and with markets as quiet as this most people start the day with an upside bias," he said.

Technology shares could limit gains, however, after chipmakers National Semiconductor Corp NSM.N and Texas Instruments Inc TXN.N issued quarterly financial targets that stoked investor worries about a sluggish economy.

S&P 500 futures rose 4.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 20 points and Nasdaq 100 futures added 7.25 points.

U.S.-traded shares of Nokia Corp NOK1V.HENOK.N, the worlds top cellphone maker, surged 4.9 percent premarket after the company said it hired Microsoft Corps MSFT.O Stephen Elop to replace Nokias embattled chief executive.

Video game publishers will be in focus after data showed U.S. retail sales of video game equipment and software fell 10 percent in August, according to research group NPD, as the industry continued a months-long slump.

U.S. stocks rose on Thursday after stronger-than-expected jobs and trade data helped lift optimism about the economic recovery, although sentiment was fragile as investors fretted over European banks. Reports that Deutsche Bank DBKGn.DEDB.N plans to raise capital pressured European markets lower on Friday.

Editing by Padraic Cassidy

HELSINKI Reuters Nokia NOK1V.HE, the worlds top cellphone maker, brought in Microsofts MSFT.O Stephen Elop to replace its embattled chief executive and lead a renewed effort to compete in the smartphone market.

Canadian Elop, the head of Microsofts business division, will take over from Olli-Pekka Kallasvuo, whom Nokia has been looking to replace for several months, on September 21.

Nokia shares were up 5 percent to 8.13 euros at 0810 GMT. The stock has roughly halved since Kallasvuo took the helm in June 2006.

"It is good that something is happening," said Inge Heydorn, fund manager at Sentat Asset Management.

"They have had problems for a long time and have been behind the curve on trends for the past few years. I think it could be good to get new influences, thoughts and ideas," Heydorn said.

Hiring Elop is a major shift at the top of the company -- he is the first non-Finn to run the company in its 145-year history. Also, eight of the current 10 executive board members are Finns.

"His strong software background and proven record in change management will be valuable assets as we press harder to complete the transformation of the company," chairman Jorma Ollila said on Friday.

Under Kallasvuo, who has spent more than half of his life at the company, Nokia has struggled to keep up with new rivals like Apple AAPL.O and Google GOOG.O in the smartphone market.

Nokia said Kallasvuo would get a severance payment of 4.6 million euros $5.8 million.

When Kallasvuo took over in 2006 from long-time CEO Jorma Ollila, who is now chairman of the board, he promised to fix companys position in the U.S. market and started a strategic move into Internet services.

So far there is little evidence of success in either.

"Elop faces a daunting task. Nokia has lost its leadership in high tier phones and has struggled with the rise of Internet-led services. All eyes will be on what strategy he adopts to address this," said Ben Wood, head of research at CCS Insight.

Microsoft and Nokia are long-time collaborators, and in August last year formed an alliance to bring Office applications such as Outlook e-mail to Nokia devices.

The Finnish company has lacked a hit smartphone model since its 2006 launch of the N95, and has lost out in the top end of the market to Apples iPhone.

"Nokia has a communication problem. There is no doubt that Stephen Elop is a better communicator than Kallasvuo," said John Strand, head of telecoms consultancy Strand Consult.

Some analysts warned the move -- just a few days before companys key smartphone launch -- could be a sign of deeper than expected problems at the company.

"We would recommend to take the opportunity of the positive reaction of the market today to lower positions ahead of a likely difficult time for the company -- and possibly some kitchen sink in the very near term," Bernstein analyst Pierre Ferragu said in a research note.

DESIGN PEDIGREE

The 46-year old Elop, who joined Microsoft in 2008 from Juniper Networks JNPR.N, was credited with successfully managing the launch of Microsofts Office 2010 suite of applications earlier this year.

Elop helped steer Microsoft toward online versions of programs such as Word, Outlook and Excel which users could access from anywhere and even use on mobile devices, a major step for Microsoft, whose fortune has been founded on installed software.

Microsofts Business Division has traditionally been one of two biggest and most profitable units, along with the Windows division. Last fiscal year, it was Microsofts biggest-selling unit, generating $18.6 billion in sales, almost 30 percent of the companys total sales.

Elop should bring to Nokia an understanding of the design principles that have driven Apples AAPL.O success, as well as of the telecoms network industry in which Nokias troubled Nokia Siemens Networks NSN.UL plays.

Before joining Microsoft from Juniper, he spent several years in Silicon Valley, rising to become chief executive during seven years at Macromedia, a San Francisco software maker whose graphics and Web development tools were favored by Apple developers.

Macromedia made the Flash video and Dreamweaver software that are near ubiquitous on the Web, and were retained by Adobe ADBE.O as key products when Adobe bought Macromedia for $3.4 billion in 2005.

Elop is no stranger to steep promotions: At the time of its acquisition by Adobe, Macromedia had about 1,500 employees and annual revenue of $422 million. At Juniper, he became an executive of a company with $3.3 billion sales and 7.200 staff.

His Canadian upbringing may also mean he is less daunted by Finlands forbidding long and harsh winters than others might have been.

$1=.7882 Euro

Additional reporting by Olaf Swahnberg in Stockholm, Bill Rigby in Seattle, Terhi Kinnunen in Helsinki and Georgina Prodhan in London; Editing by Dan Lalor and Hans Peters

DUBAI Reuters State-owned conglomerate Dubai World has come to a formal agreement with over 99 percent of its creditors to restructure around $24.9 billion of liabilities, the government of Dubai said on Friday.

In a separate statement Dubai World said it is well-positioned to close the restructuring in "the coming weeks."

"The agreement formalizes a strong consensus about a fair and balanced restructuring proposal and is a key step to putting Dubai World on a sound and stable financial footing," Sheikh Ahmad Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee said in a statement.

The government of Dubai remains a supportive and committed shareholder, the statement added.

"The government of Dubai continues to focus on Nakheel and is pleased with the significant progress achieved by the company to date in discussions with its creditors," it added.

Dubai Worlds target date for completion, assuming consensual agreement reached with creditors, is October 1, a final restructuring proposal presented to creditors on July 22 and obtained by Reuters in August, showed. The date for lenders to return the signed lock-up agreement and get paid the consent fee was September 9.

Dubai World, plans to sell its prized assets over a period of eight years to generate as much as $19.4 billion to pay off creditors, according to the document.

It said in the document asset disposals over an eight-year period will help generate up to a maximum of $19.4 billion, while similar sales based on current prices would be worth a maximum of $10.4 billion.

The document also showed Dubai developer Nakheel has $10.9 billion of bank debt and will receive key assets from Dubai World, its parent company, after separation.

Concerns about the overall debt burden of Dubais state-linked companies mounted after Dubai announced a standstill on repaying $26 billion in debt as it restructured Dubai World. It unveiled a $9.5 billion rescue plan for the firm in March.

BEIJING Reuters Chinas imports leapt in August, boding well for a strengthening of domestic demand in an economy that has become a major driver of global growth.

The unexpectedly big increase in imports also dented Chinas politically contentious trade surplus ahead of U.S. Congressional hearings next week on whether to punish Beijing for what many in Washington see as an unfairly undervalued yuan.

Wang Hu, an economist with Guotai & Junan Securities in Shanghai, said the import figures along with robust car sales data suggested that Chinas economy had touched bottom in August.

"As European and U.S. economic growth has slowed since the second quarter, China may again lead the global recovery," Wang said.

Imports jumped 35.2 percent in August compared with a year earlier, easily beating Julys 22.7 percent rise and market forecasts of a 26.1 percent increase, the General Administration of Customs said on Friday.

Annual export growth slowed to 34.4 percent in August from 38.1 percent in July but was close to expectations of a 35.0 percent rise.

That left China with a trade surplus of $20.0 billion, still eye-popping but down from $28.7 billion in July and well below the median forecast of $27.1 billion.

Economic growth had slowed over the first half of the year in response to government steps to rein in bank lending, deter property speculation and close obsolete, energy-guzzling plants in sectors such as steel and cement.

Such heavy industries have been running down their inventories, further dampening growth, but the import figures suggest this trend was petering out somewhat, said Qian Wang, an economist with J.P. Morgan in Hong Kong.

YUAN UNDER SCRUTINY

Financial markets were unimpressed by the resilience shown by China, which by some estimates has already overtaken Japan as the worlds second-largest economy.

Chinas export performance indicates global demand remains strong, for now, but investors remain worried about a sharp slowdown in the United States and anemic growth in much of Europe.

Asian stocks outside Japan .MIAPJ0000PUS were flat after surrendering early gains, while the Australian dollar, which is sensitive to Chinese growth prospects, retreated from a four-month high. Shanghai stocks .SSEC ended the morning 0.63 percent lower.

Dong Xianan, chief macroeconomist with Industrial Securities in Beijing, said the data implied a strong rebound in domestic demand.

"A possible reason is that China increased imports of raw materials in the last week of August driven by political pressure as well as low global commodity prices," he said.

U.S. lawmakers will hold hearings next week on whether to punish Beijing for what many in Washington see as an unfairly undervalued yuan.

Larry Summers, President Barack Obamas chief economic adviser, visited Beijing this week for talks with President Hu Jintao and other high-ranking Chinese officials.

After the meetings, China and the United States both put an optimistic face on ties that have been jolted by economic and security tensions as well as disagreements over the yuans exchange rate.

Coincidentally or not, the Chinese central bank let the yuan climb on Friday to its highest level since it was depegged from the dollar on June 19. Still, the yuan has gained less than 1 percent against the U.S. currency since then.

Moreover, Chinas rolling 12-month trade surplus widened in August to $177.1 billion from $172.8 billion, handing ammunition to critics who say the country is fixated on exports and is fueling unhealthy global economic imbalances.

"Chinas strong export growth and high trade surpluses weakens the argument that China cannot cope with currency appreciation, and should reinforce the case of those policymakers who argue that such a move would help address Chinas domestic policy challenges while also reducing the potential for trade tensions," Brian Jackson, an economist with Royal Bank of Canada in Hong Kong, said in a note. Additional reporting by Langi Chiang; Writing by Alan Wheatley; Editing by Ken Wills & Kim Coghill

LONDON Reuters BP Plc said it would delay the release of its third quarter results by a week because of added complexities in its accounts due to costs associated with the Gulf of Mexico oil spill.

BP said in a statement that its third quarter results, normally reported on the last Tuesday of the month after the end of a calendar quarter, would now be released on November 2, rather than October 26.

A spokesman said the decision followed the company finding the preparation of its previous quarterly results challenging to complete within the normal timeline, and denied it was related to the discovery of any new liabilities.

On Wednesday, BP produced an internal investigation into the explosion on the Deepwater Horizon drilling rig, which exploded on April 20, and sunk, leading to the United States worst ever oil spill.

The spokesman said the team compiling the report, which laid most of the blame on the companies BP hired to drill the well, had been supported by internal and external lawyers.

However, he said the lawyers had been "ring-fenced" from the rest of BP and denied their role was to frame the report -- much criticized by the contractors and U.S. politicians -- so as to help BP fend off lawsuits.

"Their role was to make sure everything in the report was legally watertight," spokesman Andrew Gowers said.

Editing by David Cowell