Is Ryland's Run Done?

Shares of The Ryland Group

are trading lower on the session by 0.61%, at $18.00. The stock was trading higher, touching an intra-day high of $18.49, but has since sold off and pushed lower. The Ryland Group has been consolidating lower over the past week, following a top on February 15th when shares touched a high of $21.15. With share now sitting on the 50-day moving average, you have to wonder if they will hold or break. Traders seem to be worried about a break here. Put volume is running at 16x normal volume with all contracts being purchases on the offer. The heaviest action can be seen on the April 2012 $18.00 put, where 12,938 contracts have traded on open interest of only 4.434 contracts. The majority of the action stems form a 11,271 contract block of April $18 puts that was purchased for $1.15. This traded indicates that RYL could trade lower still to the tune of 6.2% (where the trade's breakeven is). Given the current overall implied and historical volatilities (40% and 39%, respectively), the trader is paying a small premium for the puts, which are trading at 44% vol. Traders looking to play the downside might look to short shares here and sell the Apr2012 $17.00 put for $0.75-0.80 (47% vol). This play would take advantage of the short side, as well as the increased implied volatility on that strike. The Ryland Group, Inc. is a homebuilders and a mortgage-finance company. As of December 31, 2010, the company had built approximately 290,000 homes.