Bearish bets in $SPY turn 8-fold

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

On Feb. 6, our Unusual Activity Service found that 30,000 Daily $320 puts expiring tomorrow, Feb. 26, were bought for $0.97 to $1.00 above open interest of 465 shares with shares at $333.44. Market Rebellion founder Pete Najarian cited the activity on CNBC’s “Halftime Report” Feb. 6.

Those puts were traded for as much as $8.50 today, more than 8 times their average purchase price. The stock fell 6.51% 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 3.03% today to close at $312.65. Global economic concerns have been on the rise this week after reports, that the COVID-19 Coronavirus had spread to South Korea and Italy, were published this past weekend.