By Chris McKhann, analyst at OptionMonster

Put options are trading heavily in Alcoa ( AA) as it continues to fall since slashing its dividend by 82% on Monday.

The stock gapped down to $5.41 on Tuesday's open and closed at $5.59, down 8.7% on the session and 12.7% from a high of $6.40 the day before. The aluminum giant is nearing its March 3 low of $4.97 after coming into 2009 above $12.

Options traders are buying the March 5 puts, in which more than 48,000 changed hands Tuesday against open interest of 11,580 contracts, according to OptionMonster's tracking systems. These were going off all day in mostly small trades, though there is some evidence of institutional action as well.

Almost 54,000 puts changed hands at the April 5 strike, though that is less than the open interest of 65,999 contracts and therefore could be closing positions.
At the time of publication, McKhann had no positions in any stocks mentioned.