$AAL put prices gain altitude

It has taken just three sessions for bearish option traders to triple their money in American Airlines (AAL).

On Jun. 9, Market Rebellion’s Unusual Option Activity Service found that 7,900 June $16.50 puts were bought for $0.95 to $1.08 with shares at $15.89. This was clearly fresh buying, as open interest in the contract was just 3,167 before the activity appeared.

Those puts traded up to $3.67 this session, over 3 times their purchase prices. The stock fell 19.19% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

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.

AAL closed the session lower by 2.78% at $12.95.