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

U.S. stocks closed mixed Tuesday, as the Producer Price Index rose unexpectedly. The Dow Jones rallied to another new all time record. The Dow closed up 0.23%, NASDAQ 100 closed 0.28%, S&P 500 closed up 0.21%, and the 10-year bond rates rose to 4.5990%. The CBOE VIX closed down 0.25 to 10.35.

First Data-FDC January Call Volume Heavy, Implied Volatility Spikes To 30 From 23

First Data (NYSE:FDC), which operates electronic commerce, payment services and customer account management business, closed Tuesday up 11 cents to $24.81. FDC is often subject to LBO & break up chatter. FDC January 25 calls have traded 129 times on transaction volume of 8,680 contracts, above its open interest of 3,991 contracts. FDC January 27.5 calls have traded 152 times on transaction volume of 5,785 contracts, above its open interest of 251 contracts. FDC January option implied volatility of 30 is above a level of 23 this morning and above its 26-week average of 23, suggesting larger risk reward movement.

Northfield Labs Puts More Active Than Calls: January Straddle Pricing A $7.20 Move

Northfield Labs (NASDAQ:NFLD) closed down $2.90 to $11.42. NFLD will host a conference call and provide an update on the company's pivotal Phase III clinical trial Tuesday night. NFLD is developing an oxygen-carrying red blood cell substitute for the treatment of life-threatening blood loss called PolyHeme. NFLD call option volume of 29,775 contracts compares to put volume of 43,638 contracts, according to Track Data. Heavy put volume indicates hedging for downside price risks.

Option volume leaders Tuesday were: Wal-Mart Stores Inc. (NYSE:WMT), Apple Computer Inc. (NASDAQ:AAPL), Oracle Corp. (NASDAQ:ORCL) and Best Buy (NYSE:BBY).

MOST NOTEWORTHY: Apple Computer, Inc. (NASDAQ:AAPL), First Data (FDC) and ASM International (ASMI) top today's extensive downgrade list.

• Apple was downgraded to Hold from Buy at Citigroup, citing valuation and the unlikely introduction of the new video iPod before the holiday season.
• First Data was downgraded to Neutral from Overweight at J.P. Morgan based on valuation and expectations of a Q3 miss.
• CIBC downgraded ASM International to Sector Performer from Sector Outperform based on checks that indicated Intel (INTC) is pushing out adoption of ASMI's atomic layer disposition tool for high-k at 45mn. They note a delay would be positive for Applied Materials (AMAT).

OTHER DOWNGRADES:

• Due to the change in management and lowered guidance, both Credit Suisse and KeyBanc/McDonald downgraded IT service provider Keane (KEA).
• ThinkEquity downgraded CryptoLogic (CRYP) to Source of Funds from Accumulate based on the ratification of the Internet gambling bill that will impact earnings.
• Boston Beer (SAM) was downgraded to Neutral from Overweight on valuation.
• USA Truck (USAK) was downgraded by Stephens to Underweight from Equal Weight, citing a less certain 2007 trucking environment and the recent stock offering.

Ratings summary provided courtesy of TheFlyOnTheWall.com.