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Stock market averages opened lower after the Commerce Department reported that the US deficit rose 7.4 percent to $39.7 billion in February, and wider than the $38.5 billion economists had predicted. A separate report showed import prices rising 0.7 percent in March, and less than the 1 percent increase that economists had expected. Meanwhile, Alcoa (NYSE:AA) shares stumbled after the company reported a 10-cent per share quarterly profit, which matched analyst estimates, but revenues fell short of expectations. AA is down 3 percent and the biggest loser in the Dow Jones Industrial Average late Tuesday.

However, after the early dip, trading turned mixed by midday. Trading in the options market is active, with 7.6 million calls and 5.9 million puts traded so far.

Bullish Flow

Standard Pacific (NYSE:SPF) is seeing relative strength and increasing options action Tuesday. Shares are up 71 cents to $5.71 and recently made a run to session highs on increasing volume. Options volume is 2X the average daily. 1138 calls and 388 puts traded. September and June 7.5 calls are seeing interest, as are May 7.5 puts. Implied volatility is up 1.5 percent to 65, with no news to explain the 10 percent jump in shares of the homebuilder. Earnings due out April 19. (Note: SPF also saw bullish flow on the day before its earnings release. Shares fell on the news, but quickly recovered in the days that followed and are up 44 percent since that time.)

Crocs (NASDAQ:CROX) gapped higher and is up 71 cents to $9.60 after Thomas Weisel upgraded the stock to Overweight from Market Weight. Shares hit a new 52-week high and 3,900 options already traded, or more than double the recent average daily volume. 97 percent of the flow is on the call side of the options chain, with some players looking for additional upside in the May and June $10 calls. Implied volatility eased about 1.5 percent to 59.5.

Bearish Flow

MBIA (NYSE:MBI) has given up early gains and is down 30 cents to $7.80 in sympathy with rival bond insurer Ambac (ABK). Shares of Ambac hit a high of $3.39 early Tuesday and extended a recent winning streak triggered by better than expected earnings last Thursday. However, ABK has since buckled under the weight of negative JP Morgan comments. The firm says the company has little value. ABK is now down 28 cents to $1.97 and 41.9 percent off morning highs. MBI is down 30 cents to $7.80 and 8.5 percent from its best levels. One options player appears to be bracing for additional losses. In recent trade, they collected 45 cents on the August 6 - 9 risk-reversal, 5000X on CBOE. Looks like they bought puts, sold calls to open a new position -- possibly a collar of MBI shares.

Implied Volatility Movers

Avon Products (NYSE:AVP) shares are under pressure and implied volatility is higher on AP reports that the company has put four executives on leave amid bribery allegations. Shares are down $2.84 to $31.92 and not far from session lows of $31.86. Options volume is running 8X the recent average daily. 14K calls and 13K puts traded. April 33 calls are the most actives and are likely seeing some closing trades. 4256 traded vs. 7444 in open interest. Looks like premium buyers in May 33 puts, May 33 calls, Oct 39 puts, and April 32 calls. Implied volatility raced up about 22 percent to 38.

Unusual Volume Movers

Ambac (ABK) options volume is running 45X the usual, with 626,000 contracts traded and call activity representing about 63 percent of the activity.

Intel (NASDAQ:INTC) options activity is running 3X the usual, with 340,000 contracts traded and call volume representing 66 percent of the volume.

Palm (PALM) options volume is running 2X the usual, with 202,000 traded and put volume representing 53 percent of the activity.

Unusual volume is also being seen in Alcoa (AA), Popular (NASDAQ:BPOP), and Accenture (NYSE:ACN).

Source: Tuesday Options Recap