$LOW bears builds big profits

Option traders have built big profits on bearish contracts bought in Lowe’s (LOW) just under two weeks ago.

On Aug. 4, Market Rebellion’s Unusual Activity Service detected the purchase of 3,000 Weekly $190 puts, expiring next Friday, Aug. 27, for $4.80 as part of a bearish spread with shares at $192.50. Open interest in the strike was a mere 76 contracts before that session began, showing that this was fresh buying.

Those puts traded for as much as $9.15 today, nearly double their purchase price.  The stock fell 5.39% in the same time period, a huge move but still nowhere near that of its options 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.

LOW settled at $182.26, down 5.8% today. The home-improvement retailer is expected to report earnings tomorrow before the opening bell.