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The market struggled on Wednesday after reports that a bailout fund from Europe was supposed to double was denied by Germany, according to Bloomberg. That news set the tone for the day. Coming off a weak start, the market did move into the green but flirted between green and red for most of the day. The VIX moved to the upside despite neutral movement, and the market had the feeling of being once again on the verge of losing confidence once again in Europe.

At home, crude inventories were up 1.3M barrels, exceeding expectations that they would drop 800K. Economic data was limited, though, on the day. It was all about Europe into Friday's meeting. The S&P put 15 banks on watch from the EU as well as the EU itself to go on top of the AAA-rated countries from yesterday. The market was able to take the news with a grain of salt, however. European looks quite scary right now, and the market is staying steady ... we are building for something extreme.

Unknown ObjectThere were several significant upgrades and downgrades that were impactful on the day. Dollar General (NYSE:DG) was upraded to Buy by Deutsche Bank. Aon Corp. (NYSE:AON) was upgraded to Outperfrom by RBC Capital. Talbots (NYSE:TLB), which is on the brink of bankruptcy, got a vote of confidence from Wedbush as they were upgraded to Neutral from Underperform. Sprint (NYSE:S) was downgraded to Sector Perform by RBC Capital.

We had another good day in the marketplace. We were able to lock in 7.5% in gain on Smithfield Foods $21 puts we had sold last week before earnings tomorrow morning. We held some stock into the report as we are bullish on the company. Our position in CarMax (NYSE:KMX) continued to hold steady. We are holding a 300/290 bull put spread in AutoZone (NYSE:AZO) for Jan21 expiration that is looking good after a pretty strong earnings report from AZO. We entered some sold $39 puts for Jan21 in Starbucks (NASDAQ:SBUX) that are performing well. Sina (NASDAQ:SINA) continues to perform weakly, and our 85/90 bear call spread is looking good. Our Nike (NYSE:NKE) 85/82.50 bull put spread is looking very strong to expire worthless on Dec17. Our 87.50/85 bull put spread on Visa (NYSE:V) is still looking good to expire worthless as Visa bounced back.

We entered three new positions on the day. We were able to buy and sell puts on United States Oil (NYSEARCA:USO) for a 43.75% gain after we entered before inventories and sold when oil broke $100. We got short on Research In Motion (RIMM) by selling a 19/20 bear call spread on the company for Dec17 expiration. We also shorted Rockwood Holdings (NYSE:ROC).

Moving into tomorrow, it still remains wholly about Europe. How does another round of S&P threats affect the continent? Will there be more concrete ideas about what will come out Friday? Does risk creep back in or do investors look for more gains? It seems pretty much in the air. We are trying to stay fairly neutral right now to help account for this as we honestly are not sure how this plays out tomorrow and Friday.

There are three positions we are looking at right now that seem to have some solid option plays. We like the 575/570 Google (NASDAQ:GOOG) bull put spread for January expiration. The 50-day MA is now near 580, and that has held since earnings for the company. We do not see that breaking, and that spread is offering over 20% right now if it expires worthless. UPS has been on a tear as of late, and it should hold onto the key 70 level moving forward. We like selling the 67.50/65 put spread, which is offering over 20% as well. Coinstar (CSTR) has not moved up with the market strongly during this rally. It has been held back by selling, and we think the company will not break 50 by the end of the year. We like selling the 50/52.50 bear call spread for Jan21 for 13.5% max gain.

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Disclosure: I am long RL, AAPL, NKE, V, SBUX, AZO, SFD, KMX.

Additional disclosure: I am short SINA, ROC, RIMM.