$EWJ put prices triple

Bearish option positions opened in the iShares MSCI Japan Fund (EWJ) last week were paying traders handsomely this session.

On Apr. 28, Market Rebellion’s Unusual Tracking Systems detected the purchase of 4,489 Weekly $52.50 puts expiring on May 8 for $0.72 and $0.73 as part of a bearish spread with shares at $52.49. These were clearly new positions, as there was no open interest in the strike before the trade occurred.

Those puts traded for $2.31 today, more than 3 times their purchase prices. The stock fell 4.34% 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.

EWJ ended the session lower by 0.49% at $50.60 today. The exchange-traded-fund, which tracks a basket of Japanese equities, has declined since its recent Apr. 29 highs.