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Sentiment

The major averages slipped at the open, but battled back into midday and are showing modest gains late Tuesday. The table was set for early weakness following declines in overseas equity and commodities markets. But, although the Dow Jones Industrial Average slipped early, it found a floor before mid-morning and was back into positive territory midday. It's been a slow week of news so far, with a dwindling earnings calendar and no economic data to guide the action.

The Dow Jones Industrial has traded in another narrow 78 point range and is up 25 heading into the final hour of trading. The NASDAQ added 10. The CBOE Volatility Index (.VIX) has battled back from early losses and is up .05 to 17.84. Trading in the options market is picking up from Monday's slow pace, with about 7.9 million calls and 5 million puts traded so far.

Bullish Flow

Citi (NYSE:C) calls were seeing heavy trading as shares gained 22 cents to $3.78, session highs and their best levels of 2010. 165.6K April 4 calls traded (37% Mid / 52% Ask), 138.5K Mar 4 calls (78% Ask), and 54.8K Jun 4 calls traded (27% Mid / 55% Ask). An impressive 581K Citi calls traded so far and trading is still brisk. Implied volatility is down about 2.5 percent to 49. The bullish flow comes amid mixed action in the financials Monday, but seems to reflect some optimism that the worst might be over for Citi shareholders.

AIG (NYSE:AIG) shares rallied beginning about 13:00 eastern time on heavy volume. Shares are up $2.35 to $31.45 and 57K calls now traded. Action is scattered across March calls with strike prices ranging from 28 to 40. Looks like a short squeeze is on. No news on the stock today. AIG confirmed plans to sell its American Life Insurance biz to MetLife yesterday.

Bearish Flow

Home Depot (NYSE:HD) is up 14 cents to $31.86 and the April 29 - 30 put spread trades at 15 cents, 5000X on PHLX. Looks like a buyer opening a new position and possibly setting up a short-term hedge on the home improvement retailer.

Implied Volatility Movers

Navistar (NYSE:NAV) is up $1.21 to $44.63 and calls are seeing interest ahead of earnings, due out after the closing bell. Shares moved higher Tuesday morning after the company announced a US financing alliance with GE (NYSE:GE). Under the agreement, GE Capital becomes NAV's preferred provider of financing to support sales of trucks and school buses. Shares are up and 2560 calls traded, or about twice the recent daily average. March 45 and 50 calls are the most actives. March 40 puts and April 45 calls seeing interest as well. Implied volatility is up about 3.5 percent to 51 ahead of the earnings news.

Unusual Volume Movers

Citi (C) is seeing 5X average daily trading volume, with 1.4 million contracts traded and call volume representing about 84 percent of today's activity.

Chesapeake (NYSE:CHK) is seeing 3X average trading volume, with 104,000 contracts traded and calls representing 80 percent of today's trading activity.

Cisco (NASDAQ:CSCO) is seeing 4X normal trading volume. 352,000 contracts traded, with call options representing about 72 percent of today's volume.

Unusual volume (two times or more than normal average volume) is also being seen in Gamestop (NYSE:GME), Commercial Metals (NYSE:CMC), and AT&T (NYSE:T).

Source: Tuesday Options Recap