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

Shares of regional bank SunTrust ( STI) reached a 52-week closing low of $6.70 on Feb. 19. Since that time, the shares are up over 70% to around $11.50.

The shares have rallied along with other regional banks as fears of negative outcomes from the stress tests that the Treasury will run have abated for now. Today we saw some option activity in SunTrust that is a microcosm of how investors are selling option premium, which is helping to drive down the CBOE Volatility Index (VIX) as well.

Looking at STI options, an investor sold 7,000 of the Oct. 10-20 strangles for around $4.80. That means that the investor is selling the Oct. 10 put and the 20 call simultaneously. In this case, they are selling the 10 put for around $2.95 and the 20 call for around $1.85.

So why might the investor be selling this strangle? Well, for starters, they have maximum profit of $4.80 if the stock is between 10 and 20 at October expiration. Since Jan. 16, when the stock first closed below 20, the stock was only below $10 for about two weeks in February.

Another thing that is interesting in this trade is that the investor is showing no fear of the recent volatility in the shares of SunTrust. The price of $4.80 for that strangle with the stock at $11.50 is an implied volatility of 110. Comparing that to the realized volatility of 157 over the past day means that the investor is betting that shares of STI will be less volatile going forward. After the bumpy ride in any bank shares, a little less volatility might be a welcome occurrence for bank stock investors.

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

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."

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