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

Ryland Group's


March 17.50 puts have traded more than 10,000 times vs. open interest of 363, according to the Sidewinder report at These puts are only part of the story though. The March 15, Feb 17.5 and Feb 12.5 puts also traded over 10,000 times each.

The motivation for this volume was a customer selling to close Feb puts and buying to open puts in March. The March 17.5 puts were bought for around $1.95 while the Feb 17.5 puts were simultaneously sold for 85 cents. So the customer paid $1.10 to roll the protection out a month. The customer also bought 10,000 of the March 15 puts for around 85 cents while selling 12,500 of the Feb 12.5 puts for 5 cents. So the customer rolled out and up, but now has fewer units.

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What makes this action really interesting, however, is that outside of RYL, there was also a put roll in

Meritage Homes

(MTH) - Get Report

as well. There, the investor sold to close 10,000 of the Feb 12.5 puts for around 50 cents, and bought to open 9,000 of the March 12.5 puts for around $1.65. At the time of this posting, there are 19,000 on the tape, but I believe some of those are in error and could get cleaned up.

The presence of these put rolls where the investor is moving out protection does not mean that investors should run out and sell their shares. It could be a long holder who is willing to give up some upside for the reduced risk. Bullish investors who want to bet against the put-buyer should also be aware that this buyer increased the implied volatility in these stocks. In RYL, for example, the March 15 puts closed at $1 last night, and closed at $1.05 today, despite the stock being


over 50 cents. Puts are not supposed to go up when the stock does, unless implied volatility rises.

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."