$BA bears score fast profits

Option traders who opened bearish positions in Boeing (BA) this past Friday were racking up large gains by this morning.

Less than 20 minutes after the opening bell on Friday, Market Rebellion’s Unusual Activity programs found that 3,200 Weekly $120 puts expiring this Friday, May 1, were bought for $2.50 to $3.40 with shares at $133.99. Volume was well above the strike’s existing open interest of 1,711 contracts, indicating that this was fresh buying.

Those puts traded for as much as $5.90 this morning, about double their average purchase price. The stock fell 7.4% at the same time, showing how quickly options can far outpace gains in their underlying shares.

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.

BA opened to trade as low as $123.83 earlier this morning before closing at $128.68 this afternoon, down by 0.23%. Shares fell lower after news this weekend that the aircraft manufacturer terminated its Master Transaction Agreement with Embraer (ERJ), under which the two companies sought to establish a joint venture comprising Embraer’s commercial aviation business and a second joint venture to develop new markets for the C-390 Millennium medium airlift and air mobility aircraft.