$AAP bears score fast money

Bearish put positions opened yesterday in Advance Auto Parts (AAP) are already making quick gains this morning.

Yesterday on Nov. 11, Market Rebellion’s proprietary programs flagged the purchase of 1,500 November $160 puts for $2.60 as part of a bearish spread with shares at $169.13. Volume was well above the strike’s open interest of 150 contracts, showing that it was a new position.

Those puts have traded for as much as $6.00 so far today, more than 2 times their purchase price. The stock has declined 8.65% 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.

AAP is currently lower this session by 7.63% at $156.14. The aftermarket automotive parts provider reported earnings this morning, beating on its bottom line but lowering the upper end of its comparable stores sales forecast.