$M bears ring the register

Bearish option traders are seeing exponential gains on their downside positions in Macy’s (M) today.

Just after the company’s last earnings report on Feb. 25, Market Rebellion’s Unusual tracking systems detected the purchase of 14,000 March $14 puts for $0.25 to $0.40 with shares at $15.43. This was clearly a new position, as open interest in the strike was a mere 3,102 contracts before that session began.

Those puts traded for as much as $8.05 today, more than 20 times their purchase prices. The stock fell 60.99% in the same time frame, underscoring how 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.

M closed today down fractionally by 0.075% at $6.70 after making a new 52-Week low earlier. Th department-store operator announced earlier today that it would close its stores through the end of the month to help curb the spread of the COVID-19 coronavirus.