Bears bank profits in $BAC

Big gains are being banked today by bearish option traders in Bank of America (BAC) puts.

On Jun. 9, Market Rebellion’s Unusual Activity Service detected the purchase of 7,500 June $42.50 puts as part of a bearish spread for $0.69 with shares at $42.40. Volume was well above the strike’s previous open interest of just 3,274 contracts, showing that this was a new position.

Those puts have traded for as much as $2.79 today, more than 4 times their purchase price. The stock fell by 6.18% in the same time period, underscoring how options can far outperform 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.

BAC was last lower on the session by 4.49% at $39.75. The bank is next estimated to report earnings on Jul. 15, before the opening bell.