$EWZ bears score fast profits

Bearish option positions opened in the iShares MSCI Brazil Fund (EWZ) yesterday were already paying traders handsomely today.

On Jun. 10, our Unusual Activity Service found that 35,500 Weekly $30 puts expiring on Jun. 26 were bought for $0.80 to $0.86 above open interest of 1,891  contracts with shares at $32.30. Market Rebellion co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those puts traded for $2.36 this afternoon, well over 2.5 times their purchase prices. The stock dropped 10.34% 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.

EWZ moved down to close lower by 7.84% at $29.29 today. The exchange-traded-fund, which tracks a basket of Brazilian equities, gapped sharply lower this morning, extending its prior session losses after the Fed’s economic assessment of the U.S. yesterday.