$INTC option bears triple money

Intel (INTC) is lower today, yielding substantial gains on downside option positions opened just over a week ago.

On Jul. 21, Market Rebellion’s Unusual Option Activity Service found that 2,500 Weekly $38.50 puts, expiring next Friday, were bought for $1.06 to $1.10 as part of a bearish spread with shares at $40.36. This was clearly fresh buying, as open interest in the contract was just 160 before the activity appeared.

Those puts have traded up to $3.60 this session, over 3 times their purchase prices. The stock fell 12.59% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

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.

INTC is currently lower by 5.72% at $47.13.