Radioshack (RSH, news, chart, volatility) November 12.5 calls are seeing action early on takeover chatter. The stock is up 6 cents to $11.32 and 3,900 have traded. 71 percent are trading offerside and open interest is only 809 contracts. It appears that some investors are buying these cheap calls on talk Dell Computer (DELL) might be eyeing Radioshack as a way to bolster its retail activity, with a possible announcement over the weekend. Seems unlikely since the electronics retailers are facing serious pricing pressure. Circuit City announced this week that it will offer discount prices on electronics in the 155 stores it is now closing (see yesterday’s BBY story). Nevertheless, the speculation does seem to be driving some of the trading activity in RSH calls that expire in just two weeks.

Interesting upside in National City (NCC, news, chart, volatility) today, with buyers in January 5 and 6 strike calls for 5cents. Yesterday’s buyer of the same calls 6000x turned out to be opening a new position and may indicate a view to maintain upside through acquisition by PNC. Shares are up slightly, at 2.50 and more than 1400 Jan 6 strike calls have traded in the first hour.

KBR Inc. (KBR, news, chart, volatility) is seeing double normal options order flow after a player seems to have opened an ambitious vertical spread on the construction and engineering company. 11,000 KBR calls have traded, compared to 800 puts. Most of the action is in the March contracts, after 5,000 calls on the 17.5 line traded on the offer for $2.00 a contract and 5,000 of the 25s on the bid for 50 cents. With shares up 49 cents to $14.82 and today’s volume in those two contracts easily exceeding existing open interest, it looks like opening of a bull call spread, where the strategist paid $1.50 for a potential $6.00 payoff if KRB rallies to $25 or more by March options expiration.

Nvidia (NVDA, news, chart, volatility) has seen active trading this week leading up to its earnings release. Shares are up 9 percent today after the company reported quarterly earnings of 20 cents per share, which beat Street estimates by 8 cents. Yesteday, however, some pre-earnings jitters and a downdraft in the tech sector inspired by a revenue warnings from Cisco (CSCO) sent NVDA down 10 percent. Call sellers dominated the order flow, with more than 16,000 of both the November 7.5 and 10 calls. Closing bidside activity seemed to drive a lot of the trading, as buyers were active in these contracts just a few days ago when shares of of the chipmaker were near $9.

Seeing relative weakness in Goldman Sachs (GS, news, chart, volatility) after JP Morgan cut fourth quarter and 2009 EPS estimates on both GS and Morgan Stanley (MS). Shares of Goldman are down $2.27 to $78.45 in active trading. Volume beginning to pick up in the November puts, with the November 75 leading the most actives. 2,300 traded in the first 15 minutes, with 90 percent trading on the offer. Implied volatility remains elevated around 125 percent.

Visa (V, news, chart, volatility) June 50 puts and June 55 calls both saw increases in open interest of more than 7,500 contracts. Most of the volume happened at 12:52 ET Thursday when a block of 7,250 June 50 puts traded on the offer for $8.55 a contract and two blocks totaling 7,250 (5,800 and 1,450) June 55 calls traded bidside for $7.72 and $7.71 a contract. A block of 690K Visa shares also traded at 12:52. The shares traded for $51.60. It appears to be a collar, where the investor wants to take ownership of the shares, but wants to downside protection. The short calls will limit the upside. The cost basis of the position is about $52.45 with a possible gain of 4.9 percent (plus dividends, excluding commissions) if Visa moves up to $55.00 or more by June options expiration.

Dow Jones DIAMONDS (DIA), an exchange-traded fund that holds the thirty components of the Dow Jones Industrial Average, November puts saw action on possibe butterfly spread trading. Just before 2:00 ET Thursday, 2,730 lots of November 80, 84, and 88 puts traded. The 84s traded twice. These were the top four trades of the day in DIA. If it is a put fly, the strategist sold the 84s for $3.15, bought half as many of the 80s for $2 and the 88s for $4.86. Total net debit is 56 cents with a potential payoff of $3.44 if the Dow settles at 8,400 at November options expiration (two weeks). The range of profitability is between $87.44 and $80.56, with the debit at risk if DIA falls outside of that range. DIA is up a few pennies to $87.14 in pre-market trading.

Yahoo (YHOO, news, chart, volatility) is down 9.7 percent in pre-market trading after Microsoft’s (MSFT) Steve Ballmer said his company has no interest in renewing its bid for the company. He did suggest a search engine partnership is possible. According to Ballmer, speaking at a business lunch in Sydney, “We made an offer, we made another offer, and it was clear that Yahoo didn’t want to sell the business to us and we moved on…We are not interested in going back and re-looking at an acquisition