Teva Pharmaceuticals (TEVA, news, chart, volatility) saw bearish order flow ahead of its earnings report. The stock closed down 12 cents to $42.83 Tuesday, and 13,000 TEVA puts and 4,257 calls traded. The top trade of the day: 5,000 November 37.5 puts traded bidside for 40 cents a contract. That trade (at 15:34 on the PHLX) coincided with two 2,500 contract blocks of November 40 puts traded for $1.05 and $1.00. The activity appears to be bearish spread trading, where the strategist bought the 40s and sold the 37.5s for a net debit of about 60 cents (looks opening, as the volume easily exceeds existing open interest). If so, the potential payoff from the spread is $1.90 if TEVA falls to $37.5 or less when the November options expiration rolls around. No news on the stock today. Earnings due out Thursday before the opening bell.

The iShares MCSI Mexico Fund (EWW) rose $2.01 to $33.51 Tuesday and 12,000 calls traded on the exchange-traded fund, compared to 2,620 puts. The top two trades of the day printed at 12:30 ET on the CBOE when 2,500 December 34 calls traded on the offer for $2.75 and 2,500 of the 40s mid market for 70 cents. The trade was repeated two more times until volume in both contracts rose to more than 5,000 (compared to open interest of 97 in the 34s and 940 in the 40 calls). The activity looks like bullish spread trading, where the strategist bought the strike price the nearest to the current share price and sold the same number of 40s. In this case, the strategist paid $2.05 for a potential payoff of $3.95 (excluding commissions) if the Mexican fund andares up to $40 or more by December options expiration (45 days).

Yahoo (YHOO, news, chart, volatility) calls are active. 28,000 contracts have traded, more than four times the number of put options. The stock is up 43 cents to $13.18 and hit session highs of $13.49 about 90 minutes ago. The jump in call volume and spike in the shares coincided with a Bloomberg report that said Bernstein expects the Google (GOOG)-Yahoo deal to falter and that Microsoft (MSFT) will step in with a $20 per share bid for Yahoo some time in 2009.

Boeing (BA, news, chart, volatility) is seeing double normal options trading volume. 35,000 puts have traded, more than 7 times the number of call options. With shares up 49 cents to $53.34, the May 50 and May 35 puts are the most actives, with more than 15,000 traded in each. The action looks a lot like bearish spread trading. For example, at 11:53 ET on the AMEX, 5,000 of the 50s traded offerside for $6.60 and 5,000 of the 35s on the bid for $2.05 a contract. In this case, it looks like the spread was bought for a net debit of $4.55. The potential payoff is $10.45 (excluding commissions) if BA falls to $35 or less by May options expiration. The company says today that its 787 won’t have its first flight until the fourth quarter. The news comes the day after the stock was downgraded and put on Goldman Sachs’ Conviction Sell List yesterday.

Calls in Schering Plough (SGP, news, chart, volatility) are seeing a burst of trading this afternoon, with shares more than 5% higher, near $15.26, and multiple sweep buyers in upside 20 strike calls in Nov, Dec, and Jan expiries. Nearly 15,000 Nov 20 calls have traded in the past 20 minutes, priced at 10cents and possibly initiated to close a short call position at the strike, where open interest stands near 42,000 contracts.

Accenture (ACN, news, chart, volatility) puts are active, with 5,175 contracts traded, compared to just 208 call options. The top two trades of the day: 2,500 December 30 puts traded on the offer for $1.65 and 2,500 December 25 puts bidside for 55 cents. With shares up 95 cents to $33.14, the action appears to be bearish spread trading, where the strategist paid $1.10 to buy the 30s and sell the 25s. If so, the potential payoff is $3.90 if shares of the management consulting company fall to $25 or less by December options expiration (45 days). No news on the stock today. Earnings due out mid to late December, perhaps before the expiration. The company holds an investor and analyst conference on November 12.

F5 Networks (FFIV, news, chart, volatility) is seeing heavy trading. Shares are up $1.38 to $25.53 and volume in the options market is running three times the usual. 7,500 calls have traded, roughly three times the number of puts, with active buying seen in the November 22.5 calls and Novmeber 22.5 puts. The November 20 puts are the most actives, with 5,000 traded mid-market and tied to a block of FFIV shares. Outside of that, the volume has come in blocks of 700 contracts or less and seems to include a lot of buying, probably in reaction to comments at the company’s F5 Networks Analyst/Investor meeting taking place today between 11:00 and 15:00 ET.

Luminex (LMNX, news, chart, volatility) is seeing a jump in put volume ahead of its earnings release. Volume in this thinly traded name is running 99 times the usual today, with 2,570 puts and 10 calls traded. Shares of the Austin, TX medical instruments company are down 12 cents to $18.91 and the November 17.5 puts are the most actives. 2,560 have traded (97 percent on the offer), compared to open interest of 100 contracts. It appears to be put buying and perhaps some hedging activity ahead of the profit report due out November 6 after the close.

Shares of bond insurer PMI Group (PMI, news, chart, volatility) are up nearly 15% today to $2.97 at the broad market climbs and a number of sub $5 financials show significant strength (see CIT, ABK). PMI options flow is extremely bullish, with call buyers dominating the action, and driving prices from 20 cents to 40cents for more than 4000 Dec 5 calls.

Implied volatility is getting crushed. The CBOE Volatility Index (.VIX) is down 8.66 to 45.02 and falling to session lows. VIX has now erased a significant amount of the gains from October, when it opened at 39.39, and retraced more than 61.8 percent of the gains from August 22 to October 24. The plunge in the VIX comes amid an election day rally that has the S&P 500 (.SPX) up 38 points and back above the 1,000 level. 183,000 SPX puts and 137,000 calls have traded on the day. Actual levels of market volatility remain very high, however, with the 20-day statistical volatility of the S&P 500 at 84.2 percent. The big difference between the 20-day actual volatility and the current readings from the VIX seems to reflect a sense of growing optimism among investors, which is probably due to the fact that the months of November and December are historically a lot less volatile than the month of October.