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

Shares of cigarette manufacturer heavy hitter Lorillard ( LO) traded around $63.59 Tuesday afternoon, up more than 2.2%, or $1.41 from yesterday's close.

This rally for the maker of Newport cigarettes follows the company's first-quarter earnings announcement, which was issued ahead of the opening bell Monday. LO announced per-share results of $1.09 and a 5.7% spike in profit, but fell short of analyst estimates of $1.15 for the quarter.

The company said it lowered its average number of shares outstanding in the first quarter due to the share repurchase program completed during fourth-quarter 2008. Busy put activity in the January 2010 40 puts could suggest investors are seeking some protection in case of a potential pullback in LO shares.

The puts are currently trading for around $1.30, with the stock near $63.60. Current open interest in the puts is just 87, while volume so far today is 10,000 contracts. So it's apparent that today's volume will translate into new open interest come tomorrow. The majority of the volume has been one buyer of these options.

Shares of LO have been hovering around $63 of late, up from their Jan. 8 intraday low of $53.03. The presence of a put buyer, such as this, does not mean people should run out and sell their shares. But it is noteworthy that at least one investor is buying downside protection after the rally share that LO has seen. Investors could be purchasing some puts for downside protection, in case the stock gives back some of its gains from the last few months of positive momentum.

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."