$AZN puts score 3-fold gains

Bearish option traders posted big profits in AstraZeneca today.

On March 20, Investitute’s proprietary programs flagged the purchase of 5,600 18April $42.50 puts for $0.60 to $0.65 with shares at $42.93. This was clearly fresh buying, as open interest in the strike was only 634 contracts before the trades occurred.

Those puts sold for $2 today, more than 3 times their purchase prices. The stock fell 5.61% in the same time period, underscoring how 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.

AZN was down 0.42% to $40.59 today. The U.K. drug maker, which reports earnings before the market opens on April 26, was downgraded to “sell” from “neutral” at UBS on April 2.