Bears double their money in $XLV

Bearish option traders have doubled their money in the SPDR Health Care Fund (XLV).

On Jan. 13, Market Rebellion’s activity scanners identified the purchase of 15,000 March $100 for $1.37 to $1.39 as part of a bearish spread with shares at $102.60. This was clearly fresh buying, as volume dwarfed the previous open interest of 60 contracts.

Those puts traded for $4.00 this afternoon, more than 2.5 times their purchase prices. The stock fell 5.46% in the same time frame, illustrating the kind of leverage that can be achieved with options.

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.

XLV closed down one penny on the day at $97.12. The exchange-traded-fund, which tracks a basket of Health Care equities, has fallen this week along with the rest of the market as concerns surrounding the COVID-19 Coronavirus rise.