$AXP option bears swipe for profits

It took only a week for bearish option traders to turn big gains in American Express (AXP).

On Feb. 22, Market Rebellion’s Unusual Activity programs detected the the purchase of 4,300 April $170 puts for $2.56 to $2.93 with shares at $194.84. Volume was clearly above the previous open interest of 1,388 contracts, indicating that this was a new position.

Those puts have traded for as much as $5.75 this session, about 2 times their purchase prices. The stock fell 6.94% 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.

AXP was last at $182.29, down 6.3% on the session.