Uninspired market action continues. Dow falls 8 points. Read More.

Bonds opened on solid footing, as bank shares buckled due to capital adequacy concerns and investors were fed another hefty dose of swine flu headlines. However, the early gains quickly faltered after consumer confidence data released at 10:00 eastern time showed a suprise uptick (39.2 in April vs. 29.7 consensus). Stocks found a floor and bonds sold off. The benchmark ten-year Treasury closed down 27/32nd and the iShares Long-Term Bond Fund (TLT) lost $1.64 to $99.36. TLT options volume rose to 5X the typical levels. Almost 50K May 99 puts traded, compared 43.9K of open interest. About 85 percent traded on the ISE, where sentiment data indicate that 85 percent are opening customer buy orders. Looks very defensive, or bearish, and seems to reflect expecations for further weakness in Treasurys between now and May expiration (17 days).

Citi options flow approaching 1.4million contracts today with volume concentrated in June 5 and 10 combos, used as a substitute for short-selling shares to arb the impending convertible preferred arb. Just after 3pm 125,000 June 10 combos traded for 7.40 between two broker-dealers, and volume shows well over 175,000 each of the June 5 calls and puts, suggesting a professional may have rolled-up to a higher strike to avoid the risk of uncertain exercise in case shares were to approach the $5 strike (last seen Jan 14th).

Lowe’s (LOW) June 20 put/22 call strangle trades 2800 on AMEX this morning. Looks like a seller opening a new position, collects $2.20. LOW up 57 cents to $21.38.

ITT Corp. (ITT) is unchanged at $40.76 and one strategist seems to expect rangebound trading in the shares of the White Plains, NY-based machinery company–apparently sold 4,800 July 40 straddles on ISE and collected $5.70. Looks like new positions in both puts and calls.

Dow Chemical (DOW) is up 57 cents to $13.18 and DOW call options are seeing action for a second day ahead of earnings (April 30, before market). December 16 calls are the most actives today, with 276.4K traded. The activity includes 18.6K contracts bought for $1.40, delta neutral vs shares at $12.90.

Capital Source (CSE), a Chevy Chase, MD-based credit services company, is flat at $2.50 per share and 10K July 2.5 calls traded. Looks like sellers, possibly buy-writes, collecting 40 cents to open new positions.

Dendreon (DNDN) hit a new two-year high of $25 a share today, but has since been slammed and is halted. Shares were down $9.74 to $11.81 before being halted. Options volume is running about 3X the expected for midday, with 107K calls and 56K puts traded. Players aggressively took positions in DNDN options ahead of the company’s presentation today at an AUA meeting. Implied volatility is up to 223, up from about 170 the day before.

Pfizer (PFE) is down 17 cents to $13.32 and one of 16 Dow stocks under water midday Tuesday. Shares slipped after the drug company reported quarterly earnings of 54 cents per share, which beat Street estimates by a nickel, but revenues fell 8.7 percent to $10.87 bln and below the $11.08 bln analysts were expecting. Trading in PFE options is active and the top trade of the day seems to reflect a bullish long-term view after an investor bought 27.8K Jan 2011 calls at the $22.5 strike for 45 cents.

JDS Uniphase (JDSU) is up 22 cents to $5.16 and puts are actively traded ahead of earnings (April 29, after market). 8,500 puts and 870 calls traded so far. Looks like some investors might be concerned about post-earnings weakness and buying June and Sept 5 calls. Sellers seen in September and December 6 puts. Interestingly, implied volatility appears to be falling, down to six-month lows around 65, down from about 72 the day before.