AIG is up $1.45 to $10.93 and trying to recover some of the $3.63 loss from the day before. The stock has been under pressure since declaring a reverse stock split on July 1 (making it easier for short sellers to borrow shares and launch an attack). Today’s action seems technical in nature. Trading in the options market remains active, with 74,000 puts and 29,000 puts traded. It appears that put sellers are dominating the action and perhaps taking some profits. July 7.5 puts and August 7.5 puts are the most actives and implied volatility is falling to 168, from almost 200 the day before.

Some of the homebuilders are seeing bullish flow ahead of housing starts data due out next week–on options expiration Friday, to make things interesting. Hovnanian (HOV) is down a penny and the focus is on Jan (2010) calls at the 2.5 strike, with 2050 traded (10X expected) and almost all of the trades hitting at the offer. Beazer Homes (BZH) is up 7 cents to $1.71 and 2300 calls traded, or about 11X the normal. Like HOV, Jan 2.5 calls are the most actives, with buyers dominating the flow. Meanwhile, Standard Pacific (SPF) is down 7 cents to $1.89 and 2000 January 2. 5 calls traded, with about two third hitting ask-side. The volume in these three builders might be by one player, taking positions in out of the money calls and hoping that a big gain in at least one will produce a profit for the entire basket.

Call volume in Microsoft running 3x normal with a large ratio spread trading on the CBOE ealier today. Initiator sold 50,000 Jan 22.5 Calls and bought 25,000 front term July 19 calls, collecting a net 80cents on the trade. Shares currently trading near 22.24, and 19s likely close an existing short call position. Selling twice as many 22.5s results in a short gamma trade that pays off best if MSFT doesnt move far above current level.

Stocks are trading mixed, with slumping crude oil prices and mixed economic data keeping a lid on investor enthusiasm midday Friday.

The Dow Jones Industrial Average traded lower with help from Chevron Texaco (CVX), which is down 3 percent and the biggest loser in the Dow. Shares fell after the company said poor profits at refineries and a weaker dollar are taking a toll on earnings.

Meanwhile, falling crude oil prices are taking a toll on share prices in the energy sector as a whole. Crude oil is down another 51 cents to $59.50 a barrel. Gold slipped $3 to $913.

Meanwhile, bonds are rallying and the benchmark ten-year Treasury bond is near session highs on the heels of weak consumer confidence data. The University of Michigan’s Sentiment Index, this week’s last economic stat, showed a surprise drop to 64.6 in July, down from 70.8 the month before and well below economist estimates of 70.

The benchmark ten-year Treasury bond was recently up roughly a point and its yield has backed off to only 3 percent.

In the options market, trading is likely to slow heading into the summer weekend. Approximately 1.5 million puts and 1.6 million calls traded so far, a ratio of .89 (compared to a 22-day average of .78).

Mosaic (MOS) is seeing relative strength and calls are active Friday. Shares are up $1.15 to $43.91, even as the “ag” stocks (POT, AGU, IPI, TRA, MON) deliver a mixed performance. In the options market, 27K MOS calls traded, compared to 4,355 puts. Today’s call volume represents 13X the expected for midday action. July 45 and 50 calls are the most actives, with buyers driving the flow. It’s not clear why, as there is no obvious news on the stock. Implied volatility is up to 67.5 from 65.5 yesterday.

LDK Solar (LDK), which stumbled early in the week on cautious guidance, is up 3 cents to $8.92 and August 10 calls are busy. More than 5,000 traded, compared to open interest of 2,913. 96 percent traded ask-side and ISEE sentiment data confirm that customers are buying to open positions in LDK calls Friday. Meanwhile, implied volatility is up to 104, from about 100 the day before.

Virgin Media (VMED) shares are up 23c to $10.07 and have gained 10% in the past two days and there was a buyer of the July $10 calls this morning. A block of 5,500 traded at opening and 6,300 total against prior open interest of 4,500. But IV is off some 10% to 67% level.