$ARCC put prices rise 5-fold

Bearish option traders are collecting big profits in downside put positions on Ares Capital Corporation (ARCC) today.

On Apr. 25, Market Rebellion’s Unusual Option Activity Service found that 10,000 June $20 puts were bought for $0.45 with shares at $21.35. This was clearly fresh buying, as open interest in the contract was just 5,600 before the activity appeared.

Those puts have traded up to $2.55 this session, over 5.5 times their purchase prices. The stock fell 17.99% 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.

ARCC is currently lower by 0.26% at $17.60.