Bears score big gains in $EFA

Bearish option traders have made exponential returns on their money in downside positions in the global iShares MSCI EAFE Fund (EFA).

On Aug. 16, Market Rebellion’s Unusual Activity Service flagged the purchase of 10,000 Weekly $64 puts, expiring this Friday, as part of a complex bearish spread for $1.00 with shares at $66.05. This was clearly a new position, as open interest in the strike was a mere 4,569 contracts before that session began.

Those puts traded for $7.40 today, more than 7 times their purchase price. The stock declined 14.31% in the same time frame, 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.

EFA was down 1.48% to close at $55.92 today.