Bears gobble up gains in $TSN

Bears who opened downside option positions in Tyson Foods (TSN) at the beginning of this week were seeing their bets pay off today.

Market Rebellion’s Unusual Option Activity Service flagged bearish option activity in the name on two consecutive sessions early this week:

–On Jun. 8, 4,300 12June 65 puts were purchased for $0.65 to $0.90 above open interest of 13 contracts with shares at $66.94.
–On Jun. 9, 2,000 12June $64.50 puts were bought for $0.40 in one print above open interest of 102 contracts with shares at $66.91.

Today those puts traded up to $3.21 and $3.00, respectively, more than 3 and 7.5 times their respective purchase prices. The stock fell as much as 8.04% in the same time period, a significant move but nowhere near that of its 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.

TSN was up 3.93% to close at $62.20 today after printing an intraday low of $60.22. The meat producer is currently in an ongoing probe with the DOJ with regards to price fixing of broiler chickens.