Fast profits for $PENN option bears

Penn National Gaming (PENN) dealt bearish option traders a winning overnight hand today.

Yesterday afternoon on Jun. 14, Market Rebellion’s Unusual Activity Service identified the purchase of 4,000 June $81 puts for $1.61 to $1.99 as part of a bearish spread with shares at $82.61. These were clearly new positions, as open interest in the strike was a mere 230 contracts before the activity appeared.

Those puts have traded up to $3.20 already this morning, over 1.5 times their average purchase price. The stock declined 4.41% in the same time frame, illustrating the kind of leverage that can be achieved through 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.

PENN traded lower to $78.60 this morning but has traded back higher, last at $80.90, up 0.3% on the day.