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Stocks are higher late Tuesday following a round of positive stock news and optimism that European regulators will help bail out beleaguered credit markets. While the major averages opened higher, the rally really gathered momentum midday amid conflicting reports European governments are poised to help support some troubled credit markets, including Greece.

Meanwhile, Caterpillar (NYSE:CAT) opened higher and is leading the Dow with a 5.7% rally after Morgan Stanley upgraded the stock to Overweight. Coca Cola (NYSE:KO) also helped after the beverage maker reported revenues that surpassed analyst estimates. KO is up 3.2% and one of 28 Dow stocks moving higher. Only 2 are lower and the industrial average is up 172 points. With 45 minutes left to trade, the NASDAQ added 28. Trading is active. In the options market, for example, approximately 6 million puts and 6.4 million calls traded (a ratio of .94, compared to a 22-day average of .83.)

Bullish Flow

Bullish flow was detected in Kinross Gold (NYSE:KGC) early Tuesday. Shares were up 70 cents to $15.35 after gold gained $8.30 to $1074.50 an ounce. In the options, 15K calls and 735 puts traded no the Toronto-based miner. Traders are most interested in the March 17 calls, where 13,710 contracts traded (22% Mid / 66% Ask) vs. only 416 contracts in open interest. Implied volatility is up 2.5% to 51.5 and ISEE data (79% or 1560) confirm that investors are buying to open positions, perhaps in anticipation of good news when the company releases earnings on Feb 17. (Note: the heightened activity was actually related to a newsletter recommended that investors Buy the March 17 call options.)

NASDAQ (NASDAQ:NDAQ) options volume is running 3X the average daily, driven by a bullish three-way where an investor apparently bought the June 19 - 21 call spread and sold June 17 puts, 5000X. If so, they collected 15 cents on the package and are now poised for the stock to move to $21 or beyond by the June expiration. NDAQ is up 21 cents to $18.26 today, the day after shares fell 4% on earnings.

Bearish Flow

Annaly Mortgage (NYSE:NLY) gapped down and is off 54 cents to $17.34 after the company announced an offering of convertible senior notes. Shares sank on the news and options volume is running 4X the average daily. 26K puts and 15K calls traded so far. While Jan12 7.5 puts are the most actives, some investors appear to be using the weakness to initiate bullish trades in February and March 18 calls. In fact, prior to the announcement this morning, FBR analysts were out with positive comments on NLY, saying they're buyers at current levels, with the stock trading at 1.05X book and offering a 16.5% div. yield.

Implied Volatility Movers

The CBOE Volatility Index (VIX) has been all over the place Tuesday. The index initially fell to 25.12 in morning trading, before rallying back to unchanged at 26.51 amid relative weakness in the financials. Shortly thereafter, however, VIX came under pressure amid reports the Euro governments were ready to lend support to credit markets in Greece. VIX again reversed course and is now down 1.01 to 25.50.