Bears make big gains in the $XLU

Bearish put positions opened in the SPDR Utilities Fund (XLU) are turning sizable profits amid the market volatility.

On Jan. 23, Market Rebellion’s Unusual Activity programs flagged the purchase of 10,000 June $64 puts for $0.86 as part of a bearish spread with shares at $67.83. Volume was above the strike’s open interest of 2,163 contracts, showing that it was a new position.

Those puts traded for $6.10 today, more than 7 times their purchase price. The stock has declined 9.29% 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.

XLU ended higher today by 0.93% at $64.05. The exchange-traded-fund, which tracks a basket of utility equities, retested its lows from mid-November of last year for the second time in recent sessions today, making an intraday low of $61.20 before pulling back higher into the closing bell.