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By Jud Pyle, CFA, chief investment strategist for the Options News Network



) -- Heavy put activity hit the tape in the

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Wednesday ahead of the Federal Open Market Committee's rate decision, and it's interesting that we're seeing more buyers than sellers.

Out of the gate today, an investor bought 10,000 LQD March 93 puts for $1.10 cents with the ETF trading at $102.90 a share. More than 10,500 of these puts traded before midday versus current open interest of zero contracts, according to's option chain. The March 93 puts have climbed 32 cents so far on the day. This put price computes to an implied volatility of 11.9 compared to a 30-day realized volatility of 9.5.

LQD shares are up 20% from a 52-week low of $86.20 reached on Oct. 13 last year. The investor needs LQD stock to expire below $92.15 in the October expiration month to make money, or for the put premium to expand as a result of implied volatility rising.

With an implied volatility of just 11.9, it would not take very much fear and demand for options to push up implied volatility. LQD currently has a yield of roughly 5.6%. If investors begin to demand higher yields, than LQD could begin to slide. LQD shares are currently trading down 60 cents to $102.45.

The presence of put buyers such as this does not mean investors should run out and sell their LQD shares. However, it is interesting that some investors are buying downside protection after the rally LQD has experienced on a possible bet that shares will begin to drop following the outcome of the Fed meeting.

The Fed's policy chiefs decided at their meeting to leave the key interest rate untouched at a record-low level of nearly zero.

Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."