Williams (WMB, news, chart, volatility) has seen a burst in trading activity in recent trade. The stock is up $1.39 to $19.47 and outperforming in the natural gas sector. The AMEX Natural Gas Index is up 10.97 to 420.54. WMB rallied early and extended its gains in recent trade, up 50 cents in the past 30 minutes or so. The most recent run higher was accompanied by a jump in activity in WMB options, including a series of larger orders for January 17.5 and 22.5 calls traded on the offer as well as flurry of activity in the January 22.5, 20, and 17.5 puts as well, also trading on the offer.

Bank of America (BAC, news, chart, volatility) calls are active. The stock is up 18 cents to $20.30 and 48,000 contracts have traded, roughly double the number of puts. The top two trades of the day traded less than fifteen minutes ago when 3,300 November 25 calls traded offerside for 18 cents and 3,300 of the 27.5s for a nickel. It appears to be part of a spread and, given the high levels of open interest and the fact that both contracts are well out of the money, it could be closing trades. Nevertheless, the overall sentiment towards BAC seems bullish late Friday and it follows Bloomberg reports earlier today that Merrill, which was recently acquired by Bank of America, is selling $4 billion of distressed debt securities. A spokesperson for the company declined to comment, according to the report.

King Pharmaceuticals (KG, news, chart, volatility) is seeing 9 times normal trading volume, with most of the day’s trading concentrated in the November 10 calls. Implied volatility is up (to about 82 from 75 the day before) in KG ahead of an FDA Advisory Committee meeting next week. Cowen analysts said yesterday that they expect a ‘Yes’ vote on KG and Pain Therapeutics (PTIE) Remoxy on 11/13. They say positive reviews are critical for KG. Remoxy is an oxycodone gelatin capsule under developent with PTIE. Oxycodone is the active ingredient in OxyContin, a painkiller that with other generic oxycodone oral products generated annual sales of about $6 billion in 2007. IN the options market, more than 4,100of the November 10s have traded, but not all is bullish. At least 2,500 were bought and tied to a delta neutral trade on KG shares at $9.80.

Yahoo (YHOO, news, chart, volatility) was the subject of an interesting spread trade this morning. Shares are down $1.81 to $12.15 after Microsoft’s (MSFT) Steve Ballmer threw cold water on the idea of another takeover bid for Yahoo. In the options market, volume is running double the usual. The top four trades of the day: 7,000 April 10 calls traded on the offer for $4.03 a contract, 7,000 April 30 calls on the offer for 6 cents, and two blocks (7,000 each) of the April 20 calls traded bidside for $1.54 and a $1.55.

All four traded on the ISE at 10:58 ET and appear to be part of a substantial butterfly spread. If so, the strategist paid about $3.00 to enter the spread. The maximum profit is $7.00 if YHOO settles for $20 at April 2009 options expiration. The range of profitability is between $13.00 and $27.00, with the debit at risk if Yahoo fails to move inside the profit zone by expiration.

Goldman Sachs (GS, news, chart, volatility) hit a low of $75 a share early after JP Morgan lowered earnings estimates for the fourth quarter and 2009. The news triggered volatility in the stock price and also a flurry of activity in November puts with strike prices ranging from 90 to 50. The top two trades of the day seem to be bullish bets, however. At 11:23 ET, 8,400 GS January 100 calls traded offerside for $5.65 a contract and 8,400 January 120 calls on the bid for $1.65. It appears to be part of a substantial bullish spread, with exchange floor contacts confirming a customer initiated buy order, for $4.00. If so the potential payoff is $16.00 if GS recovers to $120 or more by January options expiration. The trade was repeated more than once until volume topped 10,000, which exceeds existing open interest in both contracts.

Las Vegas Sands (LVS, news, chart, volatility) implied volatility remains elevated, as the stock spends a second day behind the woodshed on concerns about its financial situation. Shares are down $1.15, or 14.65 percent, to $6.70. Implied volatility is up to 327 percent, from slightly less than 200 two days ago. Up from about 290 yesterday.

McDermott International (MDR, news, chart, volatility) is seeing bullish order flow for a second time. Thursday, shares fell to 3 years lows after the Houston, TX construction company posted earnings that fell short of expectations. More than 16,000 MDR calls traded on the day. The January 15s saw the most action. 5,500 traded, with more than two-thirds traded on the offer. Open interest increased by 4,600. Today, the December 10 and 12.5s are the most actives on ratio spread trading. According to exchange floor contact, a player bought this ratio spread 3,000 times for .15 cents. That is, the 10s were bought 3,000 times and 6,000 of the 12.5s were sold to create a trade with a very bullish risk graph. MDR is down 22 cents to $10.17.

General Motors (GM, news, chart, volatility) was halted, news pending, but has now resumed trading. The automaker posted a loss of $7.35 per share, which is $3.65 worse than estimates. Revenues also missed: $37.9 billion vs. $39.4 consensus. Stock is down 75 cents, or 15.6 percent, to $4.04 a share and falling to session lows post earnings. 29,000 GM puts and 8,715 calls have traded on the session.

Teva Pharmaceuticals (TEVA, news, chart, volatility) is seeing bullish order flow. Shares are up $1.35 to $41.84 after the company posted better than expected earnings Thursday morning. The stock didn’t react yesterday, down 6 cents, perhaps getting caught up in the broader market decline. Trading is decidedly more bullish today. Not only are shares higher, but 9,100 calls have traded, roughly 5 times the number of put options. The top three trades of the day all traded at or above the offer: 5,000 November 42.5 calls for $1.15, 2,500 January 45 calls for $2.95, and 2,000 December 52.5 calls for 10 cents a contract.

Disney (DIS, news, chart, volatility) is one of only three Dow stocks moving lower Friday morning. American Express (AXP) and JP Morgan (JPM) are the two others. Disney shares fell as much as 6 percent and recently traded down 60 cents to $22.21 after the company reported quarterly profits of 43 cents per share in the latest period, which missed Street estimates by 6 cents. In the options market, trading was active yesterday with investors focused on the front-month downside strikes. 15,231 November 20 puts and 10,967 November 22.5 puts traded and implied volatility lifted nearly 10 points. The majority of this flow was opening new positions. Implied vols have now eased back to 70, down from a little more than 80 the day before, as some of those short-term puts are now being sold.