$F bears are hauling profits

Option traders turned quick profits in Ford (F) today.

On Apr. 9, our Unusual Activity Service identified the purchase of 10,000 April $5.50 puts in one print for $0.23 with shares at $5.65. Volume was well above the strike’s open interest of 598 contracts, showing that this was a new position.

Those puts traded for as much as $0.61 today, more than 2.5 times their purchase price. The stock fell 13.1% at the same time, showing how quickly options can far outpace gains 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.

F was down 1.98% to $4.94 today. The auto maker has seen its shares trade lower as social distancing slows visits to showroom floors.