As Memorial Day weekend draws near, it seems that individual investors are gearing up for family barbecues and tee times rather than putting their cash to work in the options market.

Individual investors largely have remained on the sidelines despite the fact that the

Chicago Board Options Exchange Volatility Index

, or VIX, has dropped 21% in the past two months, indicating that people are more comfortable with the market.

"There continues to be light volume and light participation on the part of retail investors," said Mike Schwartz, a strategist at

CIBC World Markets

.

One of the popular plays by institutions today was

AOL Time Warner

(AOL)

options, which were active on the

Philadelphia Stock Exchange

. The July 60 calls traded over 8,000 contracts on an open interest of 47,350, with the premium listed at $1.40 ($140.) The October 65 calls traded nearly 9,500 contracts on an open interest of 11,113. The premium on those calls rang in at $2 ($200). Schwartz characterized the bulk of the activity in these two options as being part of a large institutional spread, that is, the result of a large trade combining both long and short positions in the same underlying stock.

AOL Time Warner has been getting attention since its

American Online

service

announced Tuesday that it would raise its monthly subscription fee by $1.95 to $23.90 starting in July. The move likely will add $500 million in revenue and earnings before interest, taxes, depreciation and amortization in its first year, or $125 million per quarter, according to

Merrill Lynch

. That said, the firm isn't changing its estimates for AOL because it has already factored in a price increase.

AOL shares fell $1.96, or 3.4%, to $55.28 today.

On the other side of the coin, the June 55 puts also were active, trading over 10,000 contracts on open interest of 14,226. According to one floor trader on the CBOE, the put sellers consisted of momentum traders from three or four different firms selling volatility in the option.

Elsewhere, on the heels of its $147 million deal to acquire privately held

Freshwater Software

, software maker

Mercury Interactive

(MERQ)

was seeing plenty of interest in the options market today. The company, which makes test software for Web-based applications, expects the deal to strengthen its offerings, add to its subscriber base and boost future earnings.

Some investors tend to agree with that assessment, as they grabbed call options, betting that the stock will rise significantly in the coming months. The July 75 calls traded 2,000 contracts on open interest of 2,389, with a premium of $9 ($900.) The July 80 calls also traded 2,000 contracts on open interest of 2,518, with investors shelling out $7.10 ($710). But, surprisingly, the most active of Mercury options today was the October 90 calls, which traded 4,005 contracts on open interest of 372. The premium on those calls was listed at $9.10 on the CBOE.

Mercury shares fell $4.82, or 6.6%, to $68.68.