This morning stocks, gold, and crude oil are all higher with VIX futures lower. This risk appetite is being driven by a report in the Financial Times that EU authorities are in “fresh talks” with the Spanish government to iron out details of a bailout before it is formally requested. This has helped the Euro regain the 1.3 level after selling off hard yesterday.

Prior to Oracle’s earnings report yesterday after the close, one trader bought 20,307 Oct. 32 puts for $0.79 and sold the same number of the Jan. 34 calls for $0.98. This spread, known as a collar, was put on for a net credit of $0.19 and was likely used to protect the downside risk of holding a long stock position through the earnings announcement. Spreads like these are useful when you are long stock and bullish over the long term but believe the stock could dip in the near-term. By buying the Oct. 32 puts the trade is able to eliminate risk below that level. However, by financing the puts by selling the Jan. 34 call the trader foregoes profits from owning the stock if the shares trade above 34 at Jan. expiration.

One unusual trade that caught our eye yesterday was the sale of 5,000 US Steel Jan ’14 5.0 puts for $0.34. The trade is unusual because X closed yesterday at 20.13, making these puts 75% out of the money. This stock is heavily shorted and was down 3.5% yesterday on another analyst downgrade. The company faces an unfavorable macroeconomic environment due to slowing demand in China and an inability to keep raw material costs at US plants low enough to be competitive globally. This put sale could be part of a covered put, in which a trader shorts the stock and then sells a put to generate income and hedge some risk on the upside.