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

Looking at options in


(MCD) - Get Report



(CAT) - Get Report

, intraday declines in the share prices of both companies caused puts to rise and bullish investors in each name used that bounce as a chance to bottom-fish by selling puts instead of buying stock.

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Shares in the world's largest restaurant company dropped $1.15 or 1.75% to $58.72 today, while Caterpillar shares rose about 10 cents to $38.57. The Dec. 50 put options in McDonalds traded more than 10,100 times vs. current open interest of 622, according to's Sidewinder report. The bulk of the puts traded in the first 90 minutes of the day for $2 when the stock was around $58.50.

These puts eventually declined from that level and closed the day at 1.88. Implied volatility declined as the bulk of the volume was initiated by sellers. Current implied volatility of the McDonalds Dec. 50 puts is 31, down from 32 at the close Friday night.

A customer also sold 20,000 Caterpillar Aug. 30 puts at $1 around 12:30 p.m. EDT today when the stock was around $37.80. As the day wore on, shares of Caterpillar rallied up to close in the black. As the stock rose, the puts fell to close at 84 cents, down 16 cents on the day.

The fact that these out-of-the-money puts declined by more than the stock did is an intuitive way to understand that implied volatility fell because most of the volume was initiated by sellers. Today's closing price computes to an implied volatility of 56 for the Caterpillar Aug. 30 puts, down from 60 at Friday's close.

Caterpillar did not release any significant news, but McDonalds was selling off today because they announced that same-store sales were up 2.8% in May. This was less than analyst estimates of 3.8%. However, McDonalds managed to close well off of its intraday lows of $57.75.

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Heavy put-selling such as this does not mean investors should buy up McDonalds and Caterpillar shares. Instead, it could suggest that the investors in question are not absolutely bullish on the names, but they might see a limit to how low the shares will go. The investor does not need the shares to rally to make money on these put sales; they just need the stocks to not close below the strike price at expiration by more than the premium they collected.

Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for

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."