Bears triple their money in $XLI

Option traders scored big gains in downside positions on the SPDR Industrial Fund today.

On March 14, Investitute’s market scanners found that 5,000 Weekly $76 puts expiring on March 29 were purchased for $0.84 as part of a bearish spread with shares at $76.73. This was clearly a new position, as open interest in the strike was only 867 contracts before the activity appeared.

Those puts traded for $2.80 today, more than 3 times their purchase price. The stock fell 3.8% in the same time frame, illustrating the kind of leverage options can provide over moves in 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.

XLI was down 3.3% to close this afternoon at $73.82. The exchange-traded fund pulled back with the broader market today.