Spyders (SPY) lost a nickel to $109.72 and a large put ratio spread was initiated Tuesday morning. According to sources, an investor sold 120,000 March 100 puts to buy 240,000 Mar 85 puts. This backspread is an opening position at a 70 cent credit. It yields profits if the SPY holds above $100 or falls below $70.70 at the March expiration. (Risk graph courtesy thinkorswim. click to enlarge).

Apple Computer (AAPL) is flat at $203.07 after the co. reported first quarter earnings of $3.67 per share on $15.68 billion in revenues. Analysts were expecting $2.07 on $12.06 billion. The lackluster reaction in shares stems from uncertainty related to the impact of new accounting rules, which requires Apple to recognize revenue and costs for iPhones and Apple TV when those products are delivered to customers. It led to an acceleration of earnings and revenues. So, shares are flat despite the strong headline numbers. Feb 210 and 220 calls are among the most actively traded equity contracts early, with some premium sellers likely disappointed with the poor reaction in the share price.

Stocks are indicated lower following weakness in overseas markets and a round of mixed earnings news Tuesday. Less than thirty minutes before the opening bell, stock index futures hint at a possible 10 or 20 point early loss for the Dow Jones Industrial Average.

Major averages are mostly lower across Asia and Europe before the start of trading in New York. Disappointing economic data sent Japan’s Nikkei down 1.8 percent. Hong Kong’s Hang Seng took a 2.4 percent hit. UK’s FTSE, Germany’s DAX, and France’s CAC 40 are also suffering modest losses in Europe midday.

In the US, energy, metals, and mining names might see early weakness after crude oil lost 95 cents to $74.31 a barrel and gold gave up $8.7 to $1087 an ounce.

Meanwhile, the day’s economic news included the latest Case Shiller Home Price Index, which fell 5.32 percent in November and a bit more than the 5 percent economists had expected.

Attention turns to January consumer confidence numbers at 10:00 a.m. Eastern time. Economists expect a reading of 53.5, up modestly from the 53.3 the month before.

Bonds are seeing modest gains on falling global equities. The benchmark ten-year Treasury is up 11/32nd and, at 3.584 percent, its yield is once again probing December lows.

Meanwhile, the dollar is off .60 to 89.64 against the yen. The euro fell .0088 to 1.4061 against the buck.

Among the stocks to watch, Apple Computer (AAPL) is trading up 1.3 percent after the company reported a quarterly profit of $3.67 per share, which beat Street estimates by a whopping $1.60 per share. However, shares are only modestly higher, as it appears that a new accounting change was responsible for a good chunk of Apple’s better-than-expected earnings.

Dow component DuPont (DD) slipped .7 percent after posting better-than-expected earnings and revenues, but offering in-line guidance for the full year. J&J (JNJ) might also weigh on the Dow in early trading. Shares slipped 1 percent after reporting better-than-expected profits for the most recent quarter, but offered in-line guidance for the 2010 fiscal year.

Delta (DAL), Texas Instruments (TXN), and US Steel (X) are also seeing post-earnings weakness. Tellabs (TLAB), VM Ware (VMW) and ZION are seeing post-earnings gains. Finally, Yahoo (YHOO) might see action ahead of earnings, due out after the closing bell.

Some less actively traded names seeing bullish order flow: Micromet (MITI), Public Services Enterprises (PEG), Jaguar Mining (JAG) Bearish order flow: GMX Resources (GMXR), USG, Netsuite (N) Post Earnings: Halliburton (HAL), Private Bancorp (PVTB), Eaton (ETN), Quest Diagnostics (DGX), Ashland (ASH) Pre-Earnings: Texas Instruments (TXN), VM Ware (VMW), Atheros Communications (ATHR), SL Green Realty (SLG) Ex-Div: Vornado Realty (VNO), Clorox (CLX)

Dow component Dupont (DD) is up 37 cents to $32.87 and options are seeing some action ahead of earnings, due tomorrow before the bell. 9660 calls and 6020 puts traded so far. The top trade is a block of 3500 Feb 34 calls, bought at 45 cents per contract and tied to 133K shares at $32.80. Implied volatility is up about 1 percent, to 29, as investors brace for possible volatility around tomorrow’s earnings release.

*Scanning all single-stocks subject to 2500 contracts minimum call or put volume

Bank of America (BAC) is up a nickel to $14.95 and the BAC Feb 14 – 17 risk-reversal trades at 17 cents, 10000X. The strategist bought puts, sold calls against a position in shares at $15. So, basically, this is a “collar”. Recall that, in a collar, the strategist is buying shares and puts, while also selling calls. The premium for the calls (credit) finances the puts (debit) — which in turn provide downside protection. The upside is limited due to the short calls. In this case, the strategist pays $15.17 per share for the collar total (excluding commissions) and has downside protection at $14 (-7.7 percent). The upside is limited to $17 (12.1 percent). If the stock is trading above that level at the February expiration, the calls will be assigned and the strategist will sell the shares at $17.

*Scanning all single-stocks subject to 2500 contracts minimum call or put volume

Big Prints in Union Pacific (UNP) after an investor sold 15.4K May 67.5 puts at $6.20 and also bought the following: 10.4K May 62 puts $3.55, 19k May 60 puts at $2.60, 15.4K May 65 puts $4.80. Open interest is sufficient to cover in all four contracts and some or all of the activity might be closing (positions accumulated Jan 13, Jan 14 and Jan 21.)