By Doris Frankel

CHICAGO (Reuters) - Many option traders scooped up puts and calls in Merck & Co Inc (MRK.N: Quote, Profile, Research) on Monday to position themselves to take advantage of any further turmoil in the shares of the drugmaker, analysts said.

The shares of Schering-Plough Corp (SGP.N: Quote, Profile, Research) and Merck sank to multi-year lows on fears new recommendations critical of the companies' cholesterol drugs would hurt sales.

Schering-Plough shares closed nearly 26 percent lower at $14.41, while Merck shares shed 14.74 percent to $37.95 after a panel at a major meeting of cardiologists on Sunday recommended the use of older cholesterol drugs before Vytorin and Zetia, which the two companies sell in a venture.

In Merck, roughly 70,000 puts, which give investors the right to sell its stock and 89,000 calls, enabling them to buy its shares, changed hands. That was six times Merck's combined normal volume, according to option analytics firm Trade Alert.

"Because we are seeing a lot of activity in both Merck calls and puts today even after disappointing news on its cholesterol drug, it suggests that traders are looking for a big share move, but are mixed on the direction," said Richard Sparks, senior equities analyst at options research firm Schaeffer's Investment Research in Cincinnati, Ohio.

The action in both Merck's out-of-the-money calls and puts is very heavy as people foresee greater share price volatility as they expect more news to come out on cholesterol drugs, said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Inc in Chicago.

Kinahan noted investors purchased both the April Merck $40 calls and $37.50 puts in a trade called a strangle, a volatility bet that entails a call and a put with the same expiration date and different strike prices. Traders entered that position at between $1.90 and $2, he said.

More than 6,000 of these strangles changed hands late in the session. By buying the strangle, the crowd would benefit regardless of which direction the shares move, as long as they go above $41.90 or below $35.60 by the April expiration date, Kinahan said.