Sprint Nextel (S, news, chart) puts are active and implied volatility is elevated heading into an earnings report due out Wednesday before the start of trading. 24 analysts offer coverage on Sprint and the range of estimates is between a loss of 3 cents a share to a profit of 8 cents for the most recent quarter. Consensus is 3 cents per share. The stock is up 32 cents to $8.45 in morning trading Tuesday, but the options activity seems cautious or defensive. 26,000 S puts have traded, compared to 3,900 calls. Implied volatility in the August options is now moving above 100 percent, compared to 61.5 percent for the September contracts. The high implied volatility in the short-term options suggests that Sprint could potentially see a gap move of $1.00 per share, or 12 percent, when it releases earnings tomorrow morning.

Monster Worldwide (MNST, news, chart) is seeing bullish order flow for a second time in three trading sessions. Friday, we noticed increasing buying interest in the January 17.5 calls. Today, volume is running double the usual, with 7,150 calls and 300 puts trading on the day. The stock is up $1.03 to $18.37 on no company specific news and players are stepping in to buy August 17.5 calls. 5,700 contracts have already traded (62 percent offerside), compared to open interest of 2,679.

All 30 components of the Dow Jones Industrial Average are trading higher early Tuesday and American International Group (AIG, news, chart) is leading the way. AIG is up $1.65 or 6.2 percent to $28.34 after UBS upgraded the stock to Buy and raised its price target to $41 a share based on valuation. The company is due to report earnings tomorrow after the close of trading and host a conference call Thursday morning.

Implied volatility in AIG options is elevated heading into the news, which is probably due to the uncertainty surrounding AIG earnings. Of 18 analysts covering the stock, the range of estimates is between a loss of 31 cents a share for the quarter to a profit of $1.30. Consensus is for a profit of 63 cents. In the August options, implied vols are in the mid-90s, compared to mid-70s for the Septembers. The skew hints at a possible earnings gap move of more than 9 percent, or roughly $2.50 a share, when AIG releases its earnings results on Wednesday.

Kings Pharmaceuticals (KG, news, chart) is seeing bullish order flow early on renewed takeover chatter. Pfizer (PFE) is once again being mentioned as a possible suitor. KG is trading up 33 cents to $11.93 and volume in the options market is running 5 times the usual. The August 12.5s, which have just ten days of life remaining, are the most actives. 2,200 contracts have traded, with almost 90 percent of today’s volume trading offerside.

The decline in the commodities markets, especially in the oils and metals, triggered a noticeable reaction in the exchange-traded fund [ETF] market Monday. 1.7 million ETF puts and 1.4 million calls traded on the day. Morevoer, many of the exchange-traded funds that hold shares of commodity-related companies saw increasing volume.

The list of ETFs that saw unusual volume Monday (2 times average daily volume or greater) includes: The SPDR Gold Trust (GLD), the Oil Service HOLDRS (OIH), the Market Vectors Gold Mining ETF (GDX), the SPDR Metals and Mining ETF (XME), the US Natural Gas Fund (UNG), the PowerShares Agricultural ETF (DBA), the Ultra Oil and Gas Proshares (DIG), and SPDR Oil and Gas Exploration and Production ETF (XOP).