Bears ring up gains in $XRT

Bearish option traders are ringing up gains as their downside positions have tripled in the SPDR S&P Retail Fund (XRT).

On May 8, Investitute’s proprietary programs flagged the purchase of 2,778 Weekly $44.50 puts, expiring tomorrow, for $0.92 as part of a bearish spread with shares at $44.71. This was clearly fresh buying, as open interest in the strike was only 32 contracts before that session began.

Those puts closed marked $3.30 today, more than thrice their purchase price. The stock dropped 9.21% 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.