Bearish bets in $SPY turn 3-fold

Bearish option traders collected huge gains as the SPDR S&P 500 Fund dropped today.

On Apr. 30, Investitute’s tracking systems found that 12,500 Weekly $283 puts expiring on 31May were purchased for $1.30, as part of a bearish spread, with shares at $293.13. Open interest before that trade occurred was only 2,108 contracts, indicating that this was a new position.

Those puts were traded for as much as $4.59 today, more than 3.5 times their purchase price. The stock fell 2.1% in the same time frame, underscoring how options can far outperform moves 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.

The SPDR S&P 500 Fund (SPY) was down 1.67% today to close at $287.93. Trade concerns between the U.S. and China have influenced downside volatility over the course of the past two sessions.