Martek Biosciences (MATK, news, chart, volatility) options volume is running 17 times the usual levels, with 5,100 puts and 1,300 calls traded on the day. The stock is up $1.08 to $31.05 after the company said late yesterday that it has entered into a supply agreement with Wyeth Nutritiaonals Ireland. Under the agreement, Martek becomes Wyeth Nutritionals sole supplier of docosahexaeonic acid and arachidonic acid for all infant formulas. In the options market, the reaction to the news seems less bullish. The top two trades of the day include 2,500 March 30 puts traded offerside for $3.80 and 2,500 March 20 puts on the bid for 65 cents. A block of 1,250 March 40 calls traded bidside for $1.25 at the same time. The action looks bearish, as it appears that this strategist bought the March 30/20 put spread 2,500 times and also sold half as many of the 40 calls.

Solarfun (SOLF, news, chart, volatility) is seeing a second day of bullish trading. Yesterday, 13,000 calls and 1,000 puts traded, with players focused on the November 7.5 and November 10 calls. Today, shares are up $1.03, or 12.5 percent, and volume in the options market is running three times the typical levels. Almost 10,000 calls and 1,240 puts have traded. The November 10s are the most actives, with 2,788 traded and roughly half trading on the offer. Another 2,400 December 7.5 calls traded. Open interest in that contract is 1,938 and 77 percent is trading on the offer, suggesting possible opening buy orders in anticipation of additional strength in shares of the Qidong, China-based alternative energy company.

Ambac Financial (ABK, news, chart, volatility) November 5 calls are active, with 6,300 traded early and 79 percent traded on the offer. Implied volatility is off the charts (250 percent) heading into an earnings report tomorrow before the opening bell. ABK is up 13 cents to $3.21 a share.

Marvell Technology (MRVL, news, chart, volatility) is seeing bullish order flow early Tuesday. The stock is up 76 cents to $7.46 after the company preannounced third quarter results yesterday after the closing bell. The company expects a 6 to 7 percent decline in sequential revenues citing “the slowing of the worldwide economy” and “a great deal of uncertainty in the current demand environment”. Jeffries analysts say drop off in September/October ordering is consistent with peers and not a surprise. Friedman Billings says echoes the comments, saying, it’s not surprising the company guided third quarter lower given many chip companies have noted a slowdown in the late September and October.

Investors seem relieved that the news wasn’t worse and MRVL is up 11.3 percent. 12,000 MRVL calls have traded, compared to only 330 puts. The January 10 and May 7.5 calls are the most actives, with more than 9,000 traded and almost all traded offerside. Consequently, directional sentiment based on the early options order flow in MRVL is 92 percent bullish.

Pfizer (PFE, news, chart, volatility) shares were little changed on Monday, closing up 5cents to 17.76 in moderate trading of 70million shares and a price range of 17.57 to 18.01. Put activity was nearly twice normal, with a large block of 10,000 long-dated Jan 2010 15 strike puts bought for $2.42 to create new open interest. Given the 52w range of 14.31 to 24.50, this long-dated hedge suggests a protective put strategy to hedge a long-term stock position. If so, the buyer appears willing to spend nearly 13.6% of the value of the shares to maintain full upside exposure, with downside limited to the $12.58 level, or 29% below the close. PFE shares are trading at $18 today, with early flow involving downside put sellers and 20 strike call buyers in Jan 09.

Interest in McKesson (MCK, news, chart, volatility) January 40 calls continues. Yesterday, 9,578 traded and open interest increased by 8,666 contracts. Today, with open interest of 9,059, another 2,000 have traded on the offer. Looks like speculative call buying. No news on the stock. Shares of the San Francisco, California-based pharmaceutical wholesaler are up 78 cents to $37.29.

CIT Group (CIT, news, chart, volatility) call options are seeing buying interest early Tuesday. The stock is up $1.07 to $5.59 after the Wall Street Journal reported that the US Treasury Department might deploy some of its $700 billion rescue package to buy stakes in a broad range of financial companies that provide financing to the broad economy. The group is not limited to banks and insurers but includes specialty finance firms and bond insurers. CIT and GE’s Capital Unit mentioned specifically. In the options market, some players seem to be positioning for some short-term upside gains in CIT with early buying interest in the November 5 and 7.5 call options.

Amgen (AMGN, news, chart, volatility) saw active trading Monday ahead of its first Business Review meeting in several years, which is scheduled to take place Friday in New York. Shares traded up $1.66 to $61.55 Monday and the November 65 calls were the day’s most actives. More than 22,000 traded (29 percent bidside, 69 percent mid market) and open interest increased by 18,365. The activity seemed to include some opening sell orders and perhaps some buy writes on AMGN after a 25 percent rally in the share price since mid October.

Two of the top three trades appear to be bearish bets on the biotech giant. At 1:25 ET, 5,500 January 60 puts traded on the offer for $4.35 a contract while 5,500 January 50 puts traded on the bid for $1.50. The action looks like bearish put spreads (Open interest increased by more than 4,000 in both). If so, the strategist paid $2.85 and has a possible profit potential of $7.15 if AMGN gives up its recent gains and falls to $50 or less by January options expiration (73 Days).

Mohawk Industries (MHK, news, chart, volatility) saw bearish trading ahead of its earnings release. Late in the day Monday, with shares trading down $3.06 to $45.32, a block of 3,000 November 40 puts traded on the offer for $1.35 a contract. Another 3,000 November 35 puts traded bidside for 35 cents. Open interest in both contracts has increased by 3,000, which leads to the conclusion the activity was part of an opening bear put spread. If so, the strategist paid $1.00 in exchange for a potential $4.00 payoff if MHK slides to $35 or less by November options expiration (17 days). The trade is off to a good start. Shares are down 14.8 percent this morning after the Georgia-based maker of floor coverings (carpets, tiles, rugs, etc) reported third quarter earnings that missed estimates and issued in-line guidance for the fourth.