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Sentiment

Global equity markets are back under fire after both Standard & Poor's and Fitch downgraded Greek government issued debt, sending stock benchmarks sharply lower across Europe. Meanwhile, Dubai stocks tumbled after Moody's downgraded six government related-issuers. The credit rating agency also said that, due to deteriorating public finances, the US and the UK are testing the limits of triple-A sovereign ratings.

With no economic data to guide the market action, credit worries are once again dominating the headlines. Meanwhile, energy, metal and mining names are weak after crude oil lost $1.18 to $72.75 a barrel and gold shed $37 to $1127 an ounce. FedEx (NYSE:FDX) is a bright spot and helping to lift the Dow Jones Transportation Average after the shipping company offered a brighter earnings forecast.

However, the Dow Jones Industrial Average is down 113 points and the NASDAQ lost 14. With about an hour left to trade, the CBOE Volatility Index (.VIX) added 1.35 to 23.45. Trading in the options market is picking up, with approximately 5.3 million puts and 5.9 million calls traded so far (a ratio of .89, compared to a 22-day average of .76.)

Bullish Flow

YRC Worldwide (NASDAQ:YRCW) is down 12 cents to $1.02 on news Delta (NYSE:DAL) will replace YRCW in the Dow Jones Transportation Average. Yesterday, however, YRCW saw a morning spike to $1.28 amid talk of forced buy-ins in the top three names on the Regulation SHO Short List. Since YRCW is on that list, forced buy-ins would require shares to be bought-in at T+3. While the morning spike was short-lived, and YRCW finished with losses Monday, the order flow Tuesday seems to reflect expectations for a recovery over the next few months. Although probably not related to the Reg SHO speculation, 13.5K April 1 calls traded today and ISEE data indicates that 3,031 calls (or 74 percent of the volume on ISE) are opening customer buyers.

JP Morgan (NYSE:JPM) is unchanged at $41.25 and recent trades include a Jan11 45 - 65 (1X2) call ratio spread, 6000X on AMEX. Looks like a buyer pays $3.175. A similar trade surfaced in BofA (NYSE:BAC) Jan11 calls, when a strategist paid 92 cents for the 20 - 30 (1X2), 7500X. BAC is down 43 cents to $15.46.

Bearish Flow

Celgene (NASDAQ:CELG) is off $1.13 to $54.40, but is well off session lows of $53, and options volume is running 2X the average daily. Shares gapped lower after the biotech reported that there was no difference between the survival rates between cancer patients treated with Revlimid and chemotherapy patients during the induction phase of the treatment. Merriman analysts are out defending the stock, saying results were impressive and establish a new standard of care for the elderly population with multiple myeloma. Shares are rebounding from the morning gap. 14K calls and 14K puts traded, with most of the action in the front-month, as players react to the day's news. Dec 55 puts, Dec 52.5 puts, and Dec 55 calls are the most actives.

Implied Volatility Movers

HHGregg (NYSE:HGG), an Indianapolis-based electronics stores chain, slipped 2 pennies to $21.33 and at least one investor seems to expect an uptick in volatility in the weeks ahead. They bought 4300 Jan $20 puts at $1 each, against shares at $21.35, delta neutral. 5081 now traded vs. 104 in open interest. Implied vols (average) moving up 65, from about 62.8 late yesterday. No recent headlines on HGG. Next earnings expected early Feb, probably after the Jan expiration. So, this might be a play on holiday shopping sales numbers.

Unusual Volume Movers

Citigroup (NYSE:C) is seeing 2X average daily trading volume, with 541,000 contracts traded and call volume representing 65 percent of today's activity.

Vale (NYSE:VALE) is seeing 4X average trading volume, with 179,000 contracts traded and put volume representing 78 percent of today's trading activity.

Yahoo (NASDAQ:YHOO) is seeing 3X normal trading volume. 102,000 contracts have traded, with put options representing 59 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Kroger (NYSE:KR), Sprint (NYSE:S), and Transocean (NYSE:RIG).

Source: Tuesday Options Recap