Wells Fargo (WFC) loses 8 cents to $29.53 and options on the bank are actively traded today ahead of earnings. WFC reports Tuesday morning. 70,000 puts and 53,000 calls traded on the bank. Jan 30 calls, which are 1.6 percent OTM and expire at the end of next week, are the most actives. 20,574 traded and are possibly seeing some closing trades, as open interst is 93,167 and the second largest position in the name. Expiring Weekly and January 29 puts on the bank are also actively traded. Meanwhile, the top two trades in WFC today are part of a Feb 26 – 29 (2X1) put ratio spread, bought for 51 cents, 1520X on ISE. Data indicate a firm initiated the spread to open. It might be a bearish play on earnings. The stock has moved lower after three of the past four releases, moving an average of 5.1 percent on the day results are reported.

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

Sirius XM Radio (SIRI) sees increasing options activity ahead of next week’s expiration. Shares are up a nickel to $2.16 and outperforming today on heavy volume of 48 million shares. No headlines on the ticker and January 2 calls, which are now 15 cents in-the-money and expiring in 7 days, are the most actives. 22,250 traded and 61 percent traded at the ask. Some of the flow appears to be closing trades, as the total volume is only 11.2 percent of the existing open interest, which is 198,485 and the second largest position in SIRI behind the Jan 1 put. Jan 2.5. Mar 2, and Mar 2.5s are the next most actives in SIRI. 42,000 calls and 2,725 puts now traded on the stock and implied volatility is up 2.5 percent to 41.5. The company next reports earnings in mid-Feb.

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

Microsoft options (normally behind AAPL and BAC for volume) is leading the single stock space this morning, with a large spread executed on the AMEX at 11:33ET when shares were at 27.95. Initiator bought 80,000 Jan 26 calls for 1.90 and sold 117k July 28 calls for 1.48, netting a credit of about $2.1million. Trade history shows that the Jan 26s were opened last Nov when paper sold the 26-27.5 call spread for 46cents (traded at slight ratio) when MSFT was near 25.31. Trader appears to be taking losses but but continuing a view that MSFT will not see levels much above current $28 range.

CBOE Volatility Index (.VIX) jumps 1.04 pionts to 21.51 on reports S&P will downgrade several Eurozone countries. According to Reuters, “A senior euro zone source said S&P would announce the downgrades of several nations later Friday, adding that Germany was not one of them.” There hasn’t been much of a reaction in the VIX pit thus far, as 18,000 calls and 20,000 puts traded in the first 30 minutes. In fact, January 21 puts, which are expiring Wednesday and have only two trading days of life (including today) remaining due to the exchange holiday Monday, are the most actives. 10,660 traded (75 percent Ask). VIX is down 8.1 percent in 2012 despite the ongoing concerns about problems in the Eurozone and, at 21.51, doesn’t seem to reflect any grave concerns about another uptick in overall levels of market volatility going forward, as domestic economic news has improved and players now await a flood of Q4 earnings reports.