Tiffany (TIF, news, chart, volatility) Jan20/Feb 25 put spread is seeing action late, with more than 20K traded. Appears to be the roll of (long) puts from Jan to Feb ahead of a conference call next Wednesday. Shares down $1.87 to $22.21.

Reports that Citi (C, news, chart, volatility) may be in talks to sell Smith Barney to Morgan Stanley has shares of both firms whipping around. Citi dipped 25cents to 6.70 but has since bounced slightly. Options flow in C is dominated by Put trading, with more than 100,000 Puts vs 58,000 calls on the tape with 20min to go. Feb 8 puts saw buying when share were near $7.05 this morning. MS shares are up 4% near 19.06 and calls outnumber puts there nearly 2 to 1. Jan 20 calls are most active in MS, with 10,200 on the tape and buyers currently paying 75cents.

iShares Xinhua China Index Fund (FXI) is down 94 cents to $27.84 and February puts are active after 5,000 at the 28 line traded for $2.62 while 5,000 of the Feb 22s traded for 69 cents. With the volume easily exceeding existing open interest, the activity looks like the opening of a substantial bear put spread and possibly based on the view that China’s equity markets might open lower on the heels of today’s decline in the US.

Homebuilders have been under pressure today on disappointing jobs data, an earnings miss from KB Homes (KBH) and a negative report (link: http://www.lenn-ron.com/docs/FDI-Lennar_Final.pdf) on Lennar posted on the Fraud Discovery Institute web site. The day’s news motivated aggressive put activity in a number of names including Toll Brothers (TOL, news, chart, volatility). Shares are down 36 cents to $21.34 and two of the top trades were in the June puts, when 2,218 20s traded askside for $3.90 while 2,218 15s traded bidside for $1.95. Looks like a roll of a bear put spread from the Jan 22.5/15s.

Ultra Petroleum Corp (UPL, news, chart, volatility) is seeing 10 times its normal options volume today, with shares off 20cents near $37.00 and a notably bullish sentiment to the flow. Early this afteroon when shares were near 36.35 the June 25 put – 45 call strangle was crossed on the ISE 10500x, with the seller collecting $5.20 to open this new position. 12 minutes later a CBOE buyer paid 7.20 for 7000 June 35 calls, also opening. Size suggests the same trader likely legging into the long 35-45 call spread with a slight ratio, and selling the 25 puts for a small net credit to the package.

Chicago Bridge & Iron (CBI, news, chart, volatility) is up $1.27 to $13.37 and making a run to session highs amid increasing call volume. One savvy trader highlighted call buying in CBI this morning (see comments after 9:05 ATVI update). and the pace has picked up since that time. While the focus was on the Feb 15s, it has expanded to other contracts including the May 17.5s, which are 30.9 percent out-of-the-money and perhaps being sold (against shares maybe). CBI calls have been active in three of the past four trading sessions. Company announced a new contract on the 7th.

Cemex (CX, news, chart, volatility) collar seems to be a popular strategy lately. The Feb 7.5 puts and Feb 12.5 calls are active again today, as it seems that some investors are selling the calls against protective puts. CX is up 9 cents to $10.38 and open interest in both contracts is approaching 30K.

Genentech (DNA, news, chart, volatility) is up $3.10 to $87.44 in active traded after a Financial Times story mentioning a $95 per share offer made the rounds.

$2 Million Per Resident?

Level Three (LVLT, news, chart, volatility) is up 28 cents to $1.60 and options volume is running at 6 times the average levels. Jan-10 calls at the $2.5 strike are the most actives. 4,100 traded, with 75 percent trading offerside. Some call buying is being seen. Call writing is also being seen in the Jan10 2.5s and March 2.5s. Some players might be writing calls against shares, as a significant number of blocks of LVLT shares also traded.