$AMZN puts deliver profits

On Jun. 27, Market Rebellion’s Unusual Option Activity Service found that 9,000 Weekly $113 puts, expiring tomorrow, were bought for $1.13 to $1.79 with shares at $114.47. This was clearly fresh buying, as the open interest in the contract before the activity appeared was just 988.

Those puts have sold for as much as $10.21 today, over 5.5 times their purchase prices. The stock fell 10.21% 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.