$MU bears score big intraday

Option traders who opened downside positions in Micron this morning were collecting exponential profits well before lunchtime.

Less than 15 minutes into today’s session, Investitute’s proprietary programs flagged the purchase of 3,000 Weekly $47 puts expiring tomorrow for $0.40 to $1.02 with shares at $47.03. Volume was well above the strike’s open interest of 1,436 contracts, showing that this was fresh buying.

Those puts sold for $2.87 barely an hour later, 4 times their average purchase price. The stock dropped 5.49% at the same time, illustrating how quickly options can far outperform moves 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.

MU fell 9.87% to $44.65 today. Baird cut its price target for the memory-chip maker to $75 from $100 this morning, citing valuation and peaking gross margins ahead of the company’s earnings report on Sept. 20 after the close.