First Data, the first of the large PE deals seeking financing following the meltdown of the credit markets, placed $9.4 billion in loans yesterday. Supposedly, the amount of debt sold was nearly double the $5 billion banks targeted.

Also, Oaktree Capital Management, BlackRock and Eaton Vance are forming funds to buy up some of this debt. The 400 bps banks have had to add on to yields are beginning to pique investor's interest.

What should also begin to be seen is that the amount of debt that needs to be placed should start coming down. News reports cite as much as $330 to $370 billion in loans need to be placed. However, this number seemed to grow as the credit-market meltdown fears hit the markets. Prior to the panic hitting a crescendo, $200 billion in leveraged loans and some $75 to $100 billion of high yield bonds were the target that needed to be sold.

However, take away First Data and TXU Corporation (NYSE: TXU), the two large deals being financed, and add to that Harman International Industries Incorporated (NYSE: HAR) and Sallie Mae that look like they might not get financed, and this number drops rather quickly. Plus add all the smaller deals that are not household names that will not get done and next thing you know this problem is being resolved.

Once again, free markets are correcting the problem that they created.

Following the Dow's steepest one-day climb in four years, stock futures were flat Tuesday ahead of the Federal Reserve's 2:15 p.m. decision on interest rates. The Fed is expected to maintain its benchmark federal funds rate at 5.25%.

Also Tuesday morning, the Labor Department will report on second-quarter productivity and costs; moderated labor costs and increased productivity are expected.

Companies reporting earnings today include Cisco Systems (NASDAQ: CSCO), TXU Corp. (NYSE: TXU), and Harrah's Entertainment (NYSE: HET). Cisco is expected to match earnings estimates of 35 cents a share.

Overseas, the Nikkei eked out a 0.04% rise to close at 16,921.77, while the FTSE 100 rallied following Wall Street's gains Monday.

David Bonderman, the top man at private equity firm Texas Pacific Group, is pitching the idea of not proceeding with the construction of eight coal-fired power plants as part of his bid for TXU Corp (NYSE: TXU). Bonderman supposedly made the offer to appease environmental activists and hold off one potential obstacle to closing the deal.

However, is this Bonderman's environmental soft side or is it about making more money? By not proceeding with eight power plants, that is a lot of future supply of power that will not be available to the marketplace. Believe it or not, power consumption is a pretty good growth business, growing about 6% to 8%, if memory serves me correctly.

Bonderman has a long history of participating in environmental causes, serving on boards of the Grand Canyon Trust and the Wild Life Fund. However, one must question what will happen to power prices when a huge future supply of power is eliminated. It most likely means big green profits for Bonderman and Texas Pacific.

While private equity firms pay bubble prices for bubble assets, Sirius Satellite Radio's (NASDAQ: SIRI) Mel Karmazin is in front of Congress attempting to consolidate an industry whose outlook is not as bad as most perceive. Mel is essentially going for the kill by getting control of an asset that will turn into a free cash flow machine in the next few years.

Financial news reports are filled with Mel in front of Congress battling for his XM Satellite Radio (NASDAQ: XMSR). As a reminder, Mel, over his long tenure as a radio executive, has made a lot of money for Howard, for Mel and for shareholders. Mel loves to make money for people.

On the opposite end of the spectrum, we have private equity firms battle for TXU Corp (NYSE: TXU), a company that was selling for $5 per share in 2002 and is now at $69. TXU is fraught with problems. The deal has to get regulatory approval in Texas and it has to address environment concerns due to its coal-fired power generation plants. In addition, there are reports this morning of a potential rival bid for the company.

Mel is consolidating an industry that is out of favor and few investors care about. The large private equity firms are paying peak prices in desperation to put their money to work.

Advice: Go with Mel and let the private equity bubble-head firms lose a fortune.

Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

TXU Corp (NYSE:TXU) option implied volatility was elevated on Expectations of Event Risk.
- TXU, a manager of a portfolio of energy business in Texas, will be acquired for $69.25 by KKR, Texas Pacific, GS, C, LEH, and MS. TXU announced a 10% price decrease for residential consumers. TXU will reorganize into 3 independently operated businesses. Former U.S. Secretary of State James A. Baker will serve as an advisory chairman. Donald L. Evans, former U.S. Secretary of Commerce will join the board of directors. TXU was expected to announce EPS on 2/27/07.
- TXU March at the money option implied volatility was at 40, above its 26-week average of 27 according to Track Data, suggesting larger near term event risk.
- TXU was mentioned by www.theflyonthewall.com Paul Foster on Friday afternoon; 2/23/07; as having "event risk".

Dow Chemical (NYSE:DOW) volatility suggested low Risk; DOW rallies in pre-open on Report.
- DOW, a diversified chemical company with long-term debt of $8 billion & 2006 sales of $49.1 billion is recently trading at $46.50 in pre-open trading, above its close of $43.45.
- The Sunday Express reported a private equity-LBO bid of up to $54 billion that is valued at $60 is expected.
- DOW March option implied volatility of 19 is below its 26-week average of 22 according to Track Data, suggesting decreasing price risk. Paul Foster of www.theflyonthewall.com reported unconfirmed LBO chatter on Friday 2/23/07.

Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX up .50 to 10.68.

NewAlliance Bancshares-(NYSE:NAL) implied volatility spikes on heavy call volume. NAL, a bank holding company with assets of approximately $8 billion operating 88 branches in Connecticut & western Massachusetts, will be presenting at Keefe Bruyette & Woods bank conference on 2/28. NAL annual shareholder meeting is on 4/24/07. NAL has a market cap of $1.8 billion with a P.E. of 33. NAL call option volume of 1,318 contracts compares to put volume of 374 contracts. NAL March option implied volatility of 49 is above its 26-week average of 27 according to Track Data, suggesting larger fluctuations.

Hyperion Solutions-(NASDAQ:HYSL) low option implied volatility & volume discounts chatter. HYSL, a provider of business performance management software, is recently up .84 to $42.22. HYSL is up on ORCL takeover chatter. BAMO has a 12-month target of $40. HYSL over all option implied volatility of 30 is below its 26-week average of 32 according to Track Data, suggesting decreasing price risk.

TXU Corp-(NYSE:TXU) March option implied volatility of 38 suggests EPS event risk. TXU, manager of a portfolio of energy business in Texas, is recently up $1.45 to $59.09. TXU is expected to announce EPS of $1.20 on 2/27/07. The Texas State Office of Administrative Hearings will begin on June 27th according to press reports. TXU call option volume of 13,019 contracts compares to put volume of 3,916 contracts according to Track Data. TXU at the money option implied volatility is at 38, April is at 28 above its 26-week average of 27 according to Track Data, suggesting larger near term event risk.

Option volume leaders today were: General Electric (NYSE-GE), Qualcomm (NASDAQ:QCOM), Apple Inc. (NASDAQ: AAPL) and Amgen (NASDAQ: AMGN).