$ARKK option bears double money

Bearish option traders are riding big gains today in the ARK Innovation ETF (ARKK).

On Aug. 18, Market Rebellion’s Unusual Option Activity Service found that 4,900 Weekly $48.50 puts, expiring this Friday, were bought for $2.08 to $2.37 as part of a bearish roll with shares at $47.26. This was clearly fresh buying, as open interest in the contract was just 681 before the activity appeared.

Those puts have traded for as much as $4.90 this session, over 4 times their purchase price. The stock fell 7.47% in the same time frame, illustrating the kind of leverage that can be achieved quickly with options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

ARKK was last lower on the session by 2.26% at $43.68.